-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QUjnJgmDrzP819JMV0rGEZfQuGl8pmWuhgkfJzah5UwIdekntAsDo/980QvMHZSC Fe0UjeqAv48cTVpJOKj7TQ== 0000931763-97-000096.txt : 19970211 0000931763-97-000096.hdr.sgml : 19970211 ACCESSION NUMBER: 0000931763-97-000096 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19961227 FILED AS OF DATE: 19970207 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCIENTIFIC ATLANTA INC CENTRAL INDEX KEY: 0000087777 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 580612397 STATE OF INCORPORATION: GA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05517 FILM NUMBER: 97519785 BUSINESS ADDRESS: STREET 1: ONE TECHNOLOGY PKWY S CITY: NORCROSS STATE: GA ZIP: 30092-2967 BUSINESS PHONE: 7709035000 MAIL ADDRESS: STREET 1: ONE TECHNOLOGY PKWY S CITY: NORCROSS STATE: GA ZIP: 30092-2967 FORMER COMPANY: FORMER CONFORMED NAME: SCIENTIFIC ASSOCIATES INC DATE OF NAME CHANGE: 19671024 10-Q 1 QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 27, 1996 --------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO -------------- ---------------- COMMISSION FILE NUMBER 1-5517 SCIENTIFIC-ATLANTA, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) GEORGIA 58-0612397 (STATE OR OTHER (I.R.S. EMPLOYER JURISDICTION OF IDENTIFICATION NUMBER) INCORPORATION OR ORGANIZATION) ONE TECHNOLOGY PARKWAY, SOUTH NORCROSS, GEORGIA 30092-2967 (ADDRESS OF PRINCIPAL (ZIP CODE) EXECUTIVE OFFICES) 770-903-5000 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] NO [ ] AS OF JANUARY 24, 1997, SCIENTIFIC-ATLANTA, INC. HAD OUTSTANDING 77,305,019 SHARES OF COMMON STOCK. 1 PART I - FINANCIAL INFORMATION SCIENTIFIC-ATLANTA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EARNINGS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
Three Months Ended Six Months Ended ----------------------------- --------------------------- December 27, December 29, December 27, December 29, 1996 1995 1996 1995 ------------ ------------ ------------ ------------ SALES $282,184 $261,100 $543,848 $503,293 COSTS AND EXPENSES Cost of sales 196,847 193,383 379,741 374,499 Sales and administrative 37,624 33,663 73,057 66,389 Research and development 29,108 23,871 57,141 46,638 Interest expense 120 220 254 367 Interest (income) (1,112) (223) (1,651) (974) Other (income) expense, net (626) 479 (815) 658 -------- -------- -------- -------- Total costs and expenses 261,961 251,393 507,727 487,577 EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 20,223 9,707 36,121 15,716 PROVISION (BENEFIT) FOR INCOME TAXES Current 9,480 4,331 (734) 4,881 Deferred (3,009) (1,225) 12,293 148 -------- -------- -------- -------- NET EARNINGS FROM CONTINUING OPERATIONS 13,752 6,601 24,562 10,687 LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX -- -- -- (1,038) GAIN (LOSS) ON SALE OF DISCONTINUED OPERATIONS, NET OF TAX -- -- 3,400 (12,172) -------- -------- -------- -------- NET EARNINGS (LOSS) $ 13,752 $ 6,601 $ 27,962 $ (2,523) ======== ======== ======== ======== EARNINGS (LOSS) PER COMMON SHARE AND COMMON EQUIVALENT SHARE PRIMARY CONTINUING OPERATIONS $ 0.18 $ 0.09 $ 0.32 $ 0.14 DISCONTINUED OPERATIONS -- -- 0.04 (0.17) -------- -------- -------- -------- NET EARNINGS (LOSS) $ 0.18 $ 0.09 $ 0.36 $ (0.03) ======== ======== ======== ======== FULLY DILUTED $ 0.18 $ 0.09 $ 0.36 $ (0.03) ======== ======== ======== ======== WEIGHTED AVERAGE NUMBER OF COMMON SHARES AND COMMON EQUIVALENT SHARES OUTSTANDING PRIMARY 77,907 76,379 77,788 76,699 ======== ======== ======== ======== FULLY DILUTED 77,956 76,379 77,917 76,699 ======== ======== ======== ======== DIVIDENDS PER SHARE PAID $ 0.015 $ 0.015 $ 0.03 $ 0.03 ======== ======== ======== ========
SEE ACCOMPANYING NOTES 2 SCIENTIFIC-ATLANTA, INC., AND SUBSIDIARIES CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED)
In Thousands -------------------------- December 27, June 28, 1996 1996 ------------ -------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 96,021 $ 20,930 Receivables, less allowance for doubtful accounts of $3,808,000 at December 27 and $3,826,000 at June 28 226,156 252,882 Inventories 178,580 215,767 Deferred income taxes 37,155 50,979 Other current assets 10,315 22,413 -------- -------- TOTAL CURRENT ASSETS 548,227 562,971 -------- -------- PROPERTY, PLANT AND EQUIPMENT, at cost Land and improvements 20,592 18,173 Buildings and improvements 37,790 38,628 Machinery and equipment 188,120 162,073 -------- -------- 246,502 218,874 Less-Accumulated depreciation and amortization 83,942 68,275 -------- -------- 162,560 150,599 -------- -------- COST IN EXCESS OF NET ASSETS ACQUIRED 5,816 6,191 -------- -------- OTHER ASSETS 53,160 43,561 -------- -------- TOTAL ASSETS $769,763 $763,322 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Short-term debt and current maturities of long-term debt $ 250 $ 1,600 Accounts payable 97,629 106,542 Accrued liabilities 117,930 127,546 Income taxes currently payable 23,377 26,229 -------- -------- TOTAL CURRENT LIABILITIES 239,186 261,917 -------- -------- LONG-TERM DEBT, less current maturities 400 400 -------- -------- OTHER LIABILITIES 41,258 37,353 -------- -------- STOCKHOLDERS' EQUITY Preferred stock, authorized 50,000,000 shares; no shares issued -- -- Common stock, $0.50 par value, authorized 350,000,000 shares; issued 77,372,128 shares at December 27 and 77,255,528 shares at June 28 38,686 38,628 Additional paid-in capital 162,405 163,143 Retained earnings 289,852 264,206 Accumulated translation adjustments 770 740 -------- -------- 491,713 466,717 -------- -------- Less - Treasury stock, at cost (200,616 shares at December 27 and 265,640 shares at June 28) 2,794 3,065 -------- -------- 488,919 463,652 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $769,763 $763,322 ======== ========
SEE ACCOMPANYING NOTES 3 SCIENTIFIC-ATLANTA, INC., AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
Six Months Ended ------------------------------ December 27, December 29, 1996 1995 ------------ ------------ NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: $ 91,073 $(22,661) ------- ------- INVESTING ACTIVITIES: Purchases of property, plant, and equipment (29,626) (29,704) Proceeds from sale of discontinued operations 18,369 -- Other 1,197 (1,973) ------- ------- Net cash used by investing activities (10,060) (31,677) ------- ------- FINANCING ACTIVITIES: Net short-term borrowings (repayments) (1,350) 10,083 Principal payments on long-term debt -- (31) Dividends paid (2,316) (2,299) Issuance of common stock 717 1,487 Treasury shares acquired (2,973) (12,411) ------- ------- Net cash used by financing activities (5,922) (3,171) ------- ------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 75,091 (57,509) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 20,930 80,311 ------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $96,021 $22,802 ======= ======= SUPPLEMENTAL CASH FLOW DISCLOSURES Interest paid $ 229 $ 306 ======= ======= Income taxes paid, net $ 5,810 $ 3,580 ======= =======
SEE ACCOMPANYING NOTES 4 NOTES: (Amounts in thousands except share data). A. The accompanying consolidated financial statements include the accounts of the company and all subsidiaries after elimination of all material intercompany accounts and transactions. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. These condensed financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the 1996 Form 10-K. The financial information presented in the accompanying statements reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the periods indicated. All such adjustments are of a normal recurring nature. B. Earnings per share for the three and six months ended December 27, 1996 and December 29, 1995, were computed based on the weighted average number of shares outstanding and equivalent shares derived from dilutive stock options. See Exhibit 11. C. Inventories consist of the following:
December 27, June 28, 1996 1996 ------------ -------- Raw materials and work-in-process.. $107,616 $131,762 Finished goods................. 70,964 84,005 -------- -------- Total inventory................ $178,580 $215,767 ======== ========
D. During the quarter ended September 29, 1995, the company decided to discontinue its defense-related businesses in San Diego, California, because these businesses were not aligned with the company's core business strategies. A one-time charge of $12,172, net of a tax benefit of $5,728, for the estimated loss on sale of discontinued operations was recorded in the quarter ended September 29, 1995. During the quarter ended September 27, 1996, the company completed negotiations with a prime contractor, for whom the defense-related businesses had performed work as a subcontractor, to settle issues related to the pricing of unexercised options for additional products. The company also completed the sale of its defense-related businesses to Global Associates, Ltd. (Global) for cash of $13,142 and secured and unsecured notes aggregating approximately $4,700. The net realizable value of the assets of the defense-related businesses and the settlement with the prime contractor were more favorable than the company had anticipated when it decided to exit these businesses; accordingly, the company recognized a pre-tax gain of $5,000 from these transactions in the first quarter of fiscal 1997. At December 27, 1996, the company had a reserve of approximately $7,700 for potential sales price adjustments, indemnifications provided to Global, legal, severance and other miscellaneous expenses related to the sale and the settlement with the prime contractor. 5 Sales and earnings (loss) from discontinued operations were as follows:
Three Months Ended Six Months Ended -------------------------- ----------------------------- December 27, December 29, December 27, December 29, 1996 1995 1996 1995 ------------ ------------ ------------- ------------ Sales.............................. $ -- $7,425 $1,920 $12,445 Earnings (loss) from discontinued operations, net of tax $ -- $ 259 $ (817) $ (779) Tax expense (benefit).............. $ -- $ 122 $ (385) $ (366)
At June 28, 1996, the net assets of the discontinued operations included inventory, accounts receivable, machinery and equipment, accounts payable, and accrued expenses and were included in other current assets in the Consolidated Statement of Financial Position. E. The company purchased 225,000 shares of its common stock at an aggregate cost of $2,973 during the six months ended December 27, 1996, and 1,010,000 shares at an aggregate cost of $12,411 during the six months ended December 29, 1995, under a stock buyback program for the purchase of up to 5,000,000 shares of its common stock. The company re-issues these shares under the company's stock option plan, 401(k) plan, employee stock purchase plan and other stock-based employee compensation plans. 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION - ------------------- Scientific-Atlanta had stockholders' equity of $488.9 million and cash on hand was $96.0 million at December 27, 1996. Cash increased $75.1 million during the six months ended December 27, 1996 as cash generated from earnings, accounts receivable collections, reductions in inventory levels and the sale of discontinued operations exceeded expenditures for equipment, expansion of manufacturing capacity and reductions in payables. The current ratio was 2.3:1 at December 27, 1996, compared to 2.1:1 at June 28, 1996. At December 27, 1996, total debt was $0.6 million or less than one percent of total capital invested. Short-term debt at June 28, 1996 consisted primarily of borrowings by the company's international operations to support their working capital requirements. There was no short-term debt at December 27, 1996. The company believes that funds generated from operations, existing cash balances and its available senior credit facility will be sufficient to support growth and planned expansion of manufacturing capacity. RESULTS OF OPERATIONS - --------------------- Sales for the quarter and six months ended December 27, 1996, were $282.2 million and $543.8 million, respectively, up 8 percent over the prior year. Higher sales volume of transmission products was the primary factor in the year- to-year sales increases. Sales volume of Sega game adapters declined as compared to the prior year. Increased sales of satellite systems, primarily PowerVu/TM/ digital video systems and VSAT (Very Small Aperture Terminal) data networks, also contributed to the year-to-year increases. International sales for the quarter increased by 13 percent over the prior year and accounted for 42 percent of total sales. International sales for the six months ended December 27, 1996, accounted for 38 percent of total sales, as compared to 37 percent of total sales in the prior year. Gross margins of 30.2 percent and 30.1 percent, for the three and six months ended December 27, 1996, improved 4.3 and 4.6 percentage points, respectively, over the prior year, reflecting the impact of internal programs to improve quality and reduce cost, the ramp-up of the Juarez, Mexico manufacturing facility, favorable exchange rates on Japanese yen compared to the prior year and favorable product mix. The company expects gross margins during the second half of fiscal 1997 to continue at approximately the same level as the first half of fiscal 1997. Certain material purchases are denominated in Japanese yen and, accordingly, the purchase price in U.S. dollars is subject to change based on exchange rate fluctuations. The company has forward exchange contracts to purchase yen to hedge a portion of its exposure on purchase commitments for a period of approximately twelve months. Research and development costs increased $5.2 million and $10.5 million, or 22 percent, for the three and six months ended December 27, 1996, respectively, over the comparable periods of the prior year reflecting the company's continued investment in research and development programs to support new product initiatives. The company plans to launch three major digital system categories during fiscal 1997: high speed data including cable modems, cable telephony and digital video including broadcast and interactive set-tops. The company expects to continue significant research and development investments and anticipates start-up costs as these new products are rolled out. Selling and administrative expense increased $4.0 million, or 12 percent, and $6.7 million, or 10 percent, for the three and six months ended December 27, 1996, respectively, over the comparable periods of the prior year. Increased selling expenses reflect costs associated with higher sales volumes, ongoing investments to support expansion into international markets and to support the introduction of new products and a build-up in the infrastructure to handle the growth the company is experiencing. Administrative expenses increased as higher consulting fees, administrative expenses of ATx Telecom Systems, Inc. acquired in June 1996 and other miscellaneous items more than offset cost reductions from internal processes and systems improvements. 7 Other (income) expense for the three and six months ended December 27, 1996 and December 29, 1995, included the results of foreign currency transactions and partnership activities and net gains from rental income and other miscellaneous items. There were no significant items in other (income) expense. The company's effective income tax rate was 32 percent, unchanged from the prior year. Net earnings from continuing operations were $13.8 million for the quarter ended December 27, 1996, up $7.2 million or 108 percent over the prior year. Net earnings from continuing operations were $24.6 million for the six months ended December 27, 1996, up $13.9 million or 130 percent over the prior year. Higher sales volume and improved gross margins were offset partially by increased research and development expenses and selling and administrative expenses. Net earnings from continuing operations were $6.6 million and $10.7 million for the three and six months ended December 29, 1995, respectively. Net earnings in the quarter and for the first half of fiscal 1996 were negatively impacted by the exchange rate for the yen, higher spending for research and development and investment in sales and marketing to support the company's international growth. The company periodically evaluates the contribution of its business units and products to the company's overall strategic direction. During the quarter ended September 29, 1995, the company decided to discontinue its defense-related businesses in San Diego, California because these businesses were not aligned with the company's core business strategy of being a provider of satellite and terrestrial based networks and applications. In October 1995, the company announced its intent to sell its defense-related businesses and recorded a one- time, after-tax charge of $13.2 million in the quarter ended September 29, 1995. During the quarter ended September 27, 1996, the company completed negotiations with a prime contractor, for whom the defense-related businesses had performed work as a subcontractor, to settle issues related to the pricing of unexercised options for additional products. The company also completed the sale of its defense-related businesses to Global Associates, Ltd. for cash of $13.1 million and secured and unsecured notes aggregating approximately $4.7 million. The net realizable value of the assets of the defense-related businesses and the settlement with the prime contractor were more favorable than the company had anticipated when it decided to exit these businesses; accordingly the company recognized a pre-tax gain of $5.0 million from these transactions in the quarter ended September 27, 1996. Net earnings for the three months ended December 27, 1996 were $13.8 million, up $7.2 million over the prior year. Net earnings for the six months ended December 27, 1996 were $28.0 million, including an after-tax gain of $3.4 million related to the sale of discontinued operations, compared to a net loss in the prior year of $2.5 million, which included an after-tax charge of $13.2 million related to discontinued operations. Any of the above statements that are not statements about historical facts are forward-looking statements. Such forward-looking statements are based upon current expectations but involve risks and uncertainties. Investors are referred to the Cautionary Statements contained in Exhibit 99 to this Form 10-Q for a description of the various risks and uncertainties that could cause the company's actual results and experience to differ materially from the anticipated results or other expectations expressed in the company's forward- looking statements. Such Exhibit 99 is hereby incorporated by reference into Management's Discussion and Analysis of Financial Condition and Results of Operations. PowerVu is a trademark of Scientific-Atlanta, Inc. 8 PART II - OTHER INFORMATION Item 4 Submission of Matters to a Vote of Security Holders - ------ --------------------------------------------------- The following information is furnished with respect to matters submitted to a vote of security holders through the solicitation of proxies: (a) The matters described below were submitted to a vote of security holders at the Annual Meeting of Shareholders held on November 13, 1996. (b) Election of directors: Votes For Withhold Authority ------------ ------------------ Marion H. Antonini 64,478,877 396,535 William E. Kassling 64,484,798 390,614 Mylle Bell Mangum 64,495,256 380,156 Wilbur B. King, Alonzo L. McDonald, James F. McDonald, David J. McLaughlin, James V. Napier and Sidney Topol continue as directors. (c) (i) Selection of Arthur Andersen LLP as independent auditors Votes For Votes Against Abstain ---------- ------------- ------- 64,038,116 672,978 164,318 Item 6 Exhibits and Reports on Form 8-K - ------ -------------------------------- (a) Exhibits. Exhibit No. Description ----------- ----------- 10.1 Long-Term Incentive Plan of Scientific-Atlanta, Inc., as amended and restated by the Board on November 13, 1996 10.2 Stock Plan for Non-Employee Directors, as amended and restated by the Board on November 13, 1996 10.3 Scientific-Atlanta, Inc. 1992 Employee Stock Option Plan, as amended and restated by the Board on November 13, 1996 10.4 Amendment Number Two to the Non-Employee Directors Stock Option Plan 10.5 Deferred Compensation Plan for Non-Employee Directors of Scientific-Atlanta, Inc., as amended and restated by the Board on November 13, 1996 10.6 Non-Qualified Stock Option Agreement between Scientific-Atlanta, Inc. and James F. McDonald, incorporated by reference to the registrant's Form S-8 Registration Statement, filed on December 27, 1996, and amended by Post-Effective Amendment No. 1, filed on January 7, 1997 11 Computation of Earnings Per Share 27 Financial Data Schedule 99 Cautionary Statements (b) No reports on Form 8-K were filed during the quarter ended December 27, 1996. Date: February 7, 1997 /s/ Harvey A. Wagner ---------------- -------------------- Harvey A. Wagner Senior Vice President, Finance Chief Financial Officer and Treasurer (Principal Financial Officer and duly authorized signatory of the Registrant) 9 EX-10.1 2 LONG TERM INCENTIVE PLAN EXHIBIT 10.1 LONG-TERM INCENTIVE PLAN OF SCIENTIFIC-ATLANTA, INC. As adopted by the Board of Directors on August 25, 1994, by the stockholders on November 11, 1994, and as amended and restated by the Board on November 8, 1995 and on November 13, 1996 LONG-TERM INCENTIVE PLAN OF SCIENTIFIC-ATLANTA, INC. 1. PURPOSE OF THE PLAN. This Long-Term Incentive Plan of Scientific Atlanta, Inc., as adopted on August 25, 1994, and as amended and restated on November 8, 1995 and November 13, 1996, is intended to encourage officers and key employees of the Company and its Subsidiaries to acquire or increase their ownership of common stock of the Company on reasonable terms, to provide compensation opportunities for superior financial results and outstanding personal performance, to foster in participants a strong incentive to put forth maximum effort for the continued success and growth of the Company and its Subsidiaries, and to assist in attracting and retaining the best available individuals to the Company and its Subsidiaries. 2. DEFINITIONS. When used herein, the following terms shall have the meaning set forth below: 2.1 "Affiliate" means, with respect to any specified person or entity, a person or entity that directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, the person or entity specified. 2.2 "Award" means an SAR, an Option, an Option granted in tandem with an SAR, a Restricted Stock Award, a Performance Share, a Performance Unit, a Performance Award, or any or all of them. 2.3 "Award Letter" means a written letter in such form as may from time to time be hereafter approved by the Committee, which Award Letter shall set forth the terms and conditions of an Award under the Plan. 2.4 "Board" means the Board of Directors of the Company. 2.5 "Change in Control" shall mean the occurrence of any of the following events: (a) The acquisition in one or more transactions by any "Person" (as the term person is used for purposes of Section 13(d) or 14(d) of the Exchange Act of "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty percent (20%) or more of the combined voting power of the Company's then outstanding voting securities (the "Voting Securities"), provided, however, that for purposes of this paragraph (a), the Voting Securities acquired directly from the Company by any Person shall be excluded from the determination of such Person's Beneficial Ownership of Voting Securities (but such Voting Securities shall be included in the calculation of the total number of Voting Securities then outstanding); or (b) The individuals who are members of the Incumbent Board cease for any reason to constitute at least two-thirds of the Board; or 1 (c) Approval by stockholders of the Company of (i) a merger or consolidation involving the Company if the stockholders of the Company immediately before such merger or consolidation do not own, directly or indirectly, immediately following such merger or consolidation, more than eighty percent (80%) of the combined voting power of the outstanding voting securities of the corporation resulting from such merger or consolidation in substantially the same proportion as their ownership of the Voting Securities immediately before such merger or consolidation, or (ii) a complete liquidation or dissolution of the Company or an agreement for the sale or other disposition of all or substantially all of the assets of the Company. Notwithstanding anything in this Section 2.5 to the contrary, a Change in Control shall not be deemed to occur solely because twenty percent (20%) or more of the then outstanding Voting Securities is acquired by (i) a trustee or other fiduciary holding securities under one or more employee benefit plans maintained by the Company or any of its subsidiaries, or (ii) any corporation which, immediately prior to such acquisition, is owned directly or indirectly by the stockholders of the Company in the same proportion as their ownership of stock in the Company immediately prior to such acquisition. Moreover, notwithstanding anything in this Section 2.5 to the contrary, a Change in Control shall not be deemed to occur solely because any Person (the "Subject Person") acquired Beneficial Ownership of more than the permitted amount of the outstanding Voting Securities as a result of the acquisition of Voting Securities by the Company which, by reducing the number of Voting Securities outstanding, increases the proportional number of shares Beneficially Owned by the Subject Person, provided, that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of Voting Securities by the Company, and after such share acquisition by the Company, the Subject Person becomes the Beneficial Owner of any additional Voting Securities which increases the percentage of the then outstanding Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur. 2.6 "Code" means the Internal Revenue Code of 1986, as amended from time to time, and reference to any specific provisions of the Code shall refer to the corresponding provisions of the Code as it may hereafter be amended or replaced. 2.7 "Committee" means the Human Resources and Compensation Committee of the Board or any other committee appointed by the Board whose members meet the requirements for eligibility to serve set forth in Section 4 of the Plan and which is vested by the Board with responsibility for the administration of the Plan; provided, however, that only those members of the committee of the Board who participate in decisions relative to Awards under this Plan shall be deemed to be part of the "Committee" for purposes of this Plan. 2.8 "Company" means Scientific-Atlanta, Inc. 2.9 "Employees" means officers (including officers who are members of the Board) and other key salaried employees of the Company or any of its Subsidiaries. 2.10 "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, and reference to any specific provisions of the Exchange Act shall refer to the corresponding provisions of the Exchange Act as it may hereafter be amended or replaced. 2 2.11 "Fair Market Value" means, with respect to the Shares, the closing price on the New York Stock Exchange - Composite Tape of such Shares on the date(s) in question, or, if the Shares shall not have been traded on any such date(s), the closing price on the New York Stock Exchange -Composite Tape on the first day prior thereto on which the Shares were so traded or if the Shares are not traded on the New York Stock Exchange, such other amount as may be determined by the Committee by any fair and reasonable means. Fair Market Value determined by the Committee in good faith shall be final, binding and conclusive on all parties. 2.12 "Incumbent Board" means the individuals who as of August 20, 1990 were members of the Board and any individual becoming a director subsequent to August 20, 1990 whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least two-thirds of the directors then comprising the Incumbent Board; provided, however, that any individual who is not a member of the Incumbent Board at the time he or she becomes a member of the Board shall become a member of the Incumbent Board upon the completion of two full years as a member of the Board; provided, further, however, that notwithstanding the foregoing, no individual shall be considered a member of the Incumbent Board if such individual initially assumed office (i) as a result of either an actual or threatened "election contest" (within the meaning of Rule 14a-11 promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board (a "Proxy Contest"), or (ii) with the approval of the other Board members, but by reason of any agreement intended to avoid or settle a Proxy Contest. 2.13 "Incentive Stock Option" means an Option meeting the requirements and containing the limitations and restrictions set forth in Section 422 of the Code. 2.14 "Non-Qualified Stock Option" means an Option other than an Incentive Stock Option. 2.15 "Option" means the right to purchase, at a price and for a term fixed by the Committee in accordance with the Plan, and subject to such other limitations and restrictions as the Plan and the Committee impose, the number of Shares specified by the Committee. An Option may be either an Incentive Stock Option or a Non-Qualified Stock Option. 2.16 "Parent" means any corporation, other than the employer corporation, in an unbroken chain of corporations ending with the Company if each of the corporations other than the employer corporation owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in the chain. 2.17 "Participant" means any Employee to whom a grant of an Award has been made and is outstanding under the Plan. 2.18 "Performance Award" means Performance Units, Performance Shares or either or both of them. 2.19 "Performance Objectives" means the specific targets and objectives established by the Committee under the following four factors: earnings per share of the Company's common stock, return on average stockholders' equity, return on capital, and total stockholder returns of the Company compared to a peer group of comparable companies established by the Committee. Earnings per share, return on average stockholders' equity, return on capital and total Company stockholder returns shall be determined and measured in accordance with generally accepted accounting principles as utilized by the Company in its reports filed under the Exchange Act. 3 2.20 "Performance Period" means a period of time established by the Committee for which Performance Objectives have been established, of not less than one nor more than ten consecutive Company fiscal years. 2.21 "Performance Share" means a right, granted to a Participant under Section 12 of the Plan, that may be paid out as a Share. 2.22 "Performance Unit" means a right, granted to a Participant under Section 12 of the Plan, that may be paid entirely in cash, entirely in Shares, or such combination of cash and Shares as the Committee in its sole discretion shall determine. 2.23 "Plan" means this Long-Term Incentive Plan. 2.24 "Regulation T" means Part 220, Chapter II, Title 12 of the Code of Federal Regulations, issued by the Board of Governors of the Federal Reserve System pursuant to the Exchange Act, as amended from time to time, or any successor regulation which may hereafter be adopted in lieu thereof. 2.25 "Restricted Stock Award" means the right to receive Shares, but subject to forfeiture and/or other restrictions set forth in the related Award Letter and the Plan. Restricted Stock Awards may be subject to restrictions which lapse over time with or without regard to Performance Objectives as the Committee in its sole discretion shall determine. 2.26 "Rule 16b-3" means Rule 16b-3 of the General Rules and Regulations of the Exchange Act (or any successor rule or regulation). 2.27 "SAR" means a stock appreciation right, which is a right to receive an amount in cash, or Shares, or a combination of cash and Shares, as determined or approved by the Committee in its sole discretion, no greater than the excess, if any, of (i) the Fair Market Value of a Share on the date the SAR is exercised, over (ii) the SAR Base Price. 2.28 "SAR Base Price" means the Fair Market Value of a Share on the date an SAR was granted, or if the SAR was granted in tandem with an Option (whether or not the Option was granted on a different date than the SAR), in the Committee's discretion, the option price of a Share subject to the Option. 2.29 "Securities Act" means the Securities Act of 1933, as amended from time to time, and reference to any specific provisions of the Securities Act shall refer to the corresponding provisions of the Securities Act as it may hereafter be amended or replaced. 2.30 "Share" or "Shares" means a share or shares of the Company's $0.50 par value common stock, any security of the Company issued in lieu of or in substitution of such common stock or, if by reason of the adjustment provisions contained herein any rights under an Award under the Plan pertain to any other security, such other security. 2.31 "Subsidiary" or "Subsidiaries" means any corporation other than the employer corporation in an unbroken chain of corporations beginning with the employer corporation if each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent(50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. 4 2.32 "Successor" means the legal representative of the estate of a deceased Employee or the person or persons who shall acquire the right to exercise an Award by bequest or inheritance or by reason of the death of the Employee. 2.33 "Ten-Percent Stockholder" means an individual who "owns" as defined in Section 425 of the Code, stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of: (i) the Company; (ii) if applicable, a Subsidiary, or (iii) if applicable, the Parent. 2.34 "Term" means the period during which a particular Award may be exercised. 3. STOCK SUBJECT TO THE PLAN. 3.1 MAXIMUM NUMBER OF SHARES TO BE AWARDED. The maximum number of Shares in respect for which Awards may be granted under the Plan in each fiscal year of the Company during any part of which the Plan is effective shall be one and one-half percent (1-1/2%) of the number of Shares of the Company outstanding as of the first day of such fiscal year; and commencing in the Company's 1995 fiscal year and in each fiscal year thereafter, subtracting from such maximum number of Shares the number of Shares subject to options, if any, granted pursuant to the Company's 1992 Employee Stock Option Plan. The maximum number of Shares available for which Awards may be granted in any particular fiscal year pursuant to the previous sentence may be increased by an amount of up to one-half of one percent (.5%) of the number of Shares outstanding as of the first day of such fiscal year, provided that the number of Shares which would otherwise be available for Awards in the next fiscal year shall be decreased by the increased number of Shares made available pursuant to this sentence. Such Shares may be in whole or in part, as the Board shall from time to time determine, authorized but unissued Shares, or issued Shares which shall have been reacquired by the Company. Notwithstanding anything to the contrary contained in this Section 3.1, in no event shall more than four million (4,000,000) Shares be cumulatively available for Awards of Incentive Stock Options under this Plan. The number of SARs payable in cash and the number of units payable in cash under the Plan shall be counted when computing the total number of Shares available for Awards under the Plan. Any unused portion of the percentage limit for any year shall be carried forward and made available for Awards in succeeding years. 3.2 CERTAIN LIMITATIONS. The maximum number of Shares with respect to which Options and SARs payable in Shares which may be granted during any fiscal year to any Employee shall not exceed 400,000. The maximum dollar value with respect to which Awards (other than Options and SARs payable in Shares) that are intended to qualify as performance-based compensation under Code Section 162(m)(4)(C) which may be paid to any Employee for any particular Performance Period shall be Four Million Dollars ($4,000,000). 3.3 SHARES UNDERLYING EXPIRED, CANCELLED OR UNEXERCISED AWARDS. Any Shares subject to issuance upon exercise of an Option or SAR, but which are not issued because of a surrender, lapse, expiration or termination of any such Option or SAR prior to issuance of the Shares, or any Shares subject to an SAR paid in cash, shall once again be available for issuance in satisfaction of Awards. Similarly, any Shares issued or issuable pursuant to a Restricted Stock Award or Performance Award which are subsequently forfeited or not issued pursuant to the terms of the grant shall once again be available for issuance in satisfaction of Awards. 4. ADMINISTRATION OF THE PLAN. The Board shall appoint the Committee, which shall consist of not less than two (2) members of the Board, each of whom is a "Non-Employee Director" as defined in Rule 16b-3. Unless the Board determines otherwise, the Committee shall be comprised solely of "outside" directors within the meaning of Section 162(m)(4)(C)(i) of the Code. Subject to the provisions of the Plan, the Committee shall have full authority, in its discretion, to determine the Employees to whom 5 Awards shall be granted, the number of Shares, units or SARs to be covered by each of the Awards, and the terms (including restrictions) of any such Award; to amend or cancel Awards (subject to Section 21 of the Plan); to accelerate the vesting of Awards; to require the cancellation or surrender of any options, stock appreciation rights, units or restricted stock awards (to the extent the restrictions have not yet lapsed) previously granted under this Plan or any other plans of the Company as a condition to the granting of an Award; to interpret the Plan; and to prescribe, amend, and rescind rules and regulations relating to it, and generally to interpret and determine any and all matters whatsoever relating to the administration of the Plan and the granting of Awards hereunder. The Board may, from time to time, appoint members to the Committee in substitution for or in addition to members previously appointed and may fill vacancies, however caused, in the Committee. The Committee shall make such rules and regulations for the conduct of its business as it shall deem advisable. All determinations and decisions by the Committee in the exercise of its powers shall be final, binding and conclusive. No member of the Committee shall be liable, in the absence of bad faith, for any act or omission with respect to his service on the Committee. 5. EMPLOYEES TO WHOM AWARDS MAY BE GRANTED. Awards may be granted in each year or portion thereof while the Plan is in effect to such of the Employees as the Committee, in its discretion, shall determine. In determining the Employees to whom Awards shall be granted, the amount of the Award, the number of Shares to be granted or subject to purchase under such Awards and the number of SARs to be granted, the Committee shall take into account the duties of the respective Employees, their present and potential contributions to the success of the Company and its Subsidiaries, and such other factors as the Committee shall deem relevant in connection with accomplishing the purposes of the Plan. No Award shall be granted to any member of the Committee so long as his or her membership on the Committee continues or to any member of the Board who is not also an Employee. 6. STOCK OPTIONS. 6.1 TYPES OF OPTIONS. Options granted under this Plan may be (i) Incentive Stock Options, (ii) Non-Qualified Stock Options, or (iii) a combination of the foregoing. The Award Letter shall designate whether an Option is an Incentive Stock Option or a Non-Qualified Stock Option. Any Option which is designated as a Non-Qualified Stock Option shall not be treated by the Company or the Participant to whom the Option is granted as an Incentive Stock Option for federal income tax purposes. 6.2 OPTION PRICE. The option price per Share of any Option granted under the Plan shall not be less than the Fair Market Value of the Shares covered by the Option on the date the Option is granted. Notwithstanding anything herein to the contrary, in the event an Incentive Stock Option is granted to an Employee who, at the time such Incentive Stock Option is granted, is a Ten-Percent Stockholder, then the option price per Share of such Incentive Stock Option shall not be less than one hundred ten percent (110%) of the Fair Market Value of the Shares covered by the Incentive Stock Option on the date the Incentive Stock Option is granted. 6.3 TERM OF OPTIONS. Options granted hereunder shall be exercisable for a Term of not more than ten (10) years from the date of grant and shall be subject to earlier termination as hereinafter provided. Each Award Letter issued hereunder shall specify the Term of the Option, which Term shall be determined by the Committee in accordance with its discretionary authority hereunder. Notwithstanding anything herein to the contrary, in the event an Incentive Stock Option is granted to an Employee who, at the time such Incentive Stock Option is granted, is a Ten-Percent Stockholder, then such Incentive Stock Option shall not be exercisable more than five (5) years from the date of grant and shall be subject to earlier termination as hereinafter provided. 7. LIMIT ON FAIR MARKET VALUE OF INCENTIVE STOCK OPTIONS. In any calendar year, no Employee may be granted an Incentive Stock Option hereunder to the extent that the aggregate fair market value (such fair market value being determined as of the date of grant of the Option in 6 question) of the Shares with respect to which Incentive Stock Options first become exercisable by the Employee during any calendar year (under all such plans of the Employee's employer corporation, its Parent, if any, and its Subsidiaries, if any) exceeds the sum of One Hundred Thousand Dollars ($ 100,000). For purposes of the preceding sentence, Options shall be taken into account in the order in which they were granted. Any Option granted under the Plan which is intended to be an Incentive Stock Option, but which exceeds the limitation set forth in this Section 7, shall be a Non-Qualified Stock Option to the extent that a portion of the Option exceeds this limitation. 8. STOCK APPRECIATION RIGHTS. 8.1 GRANT OF SAR. The Committee, in its discretion, may grant an Employee an SAR in tandem with an Option or may grant an Employee an SAR on a stand alone basis. The Committee, in its discretion, may grant an SAR in tandem with an Option either at the time the Option is granted or at any time after the Option is granted, so long as the grant of the SAR is made during the period in which grants of SARs may be made under the Plan. The Committee, in its discretion, may grant an SAR in tandem with an Option, which is exercisable either in lieu of, or in addition to, exercise of the related Option. 8.2 LIMITATIONS ON EXERCISE. Each SAR granted in tandem with an Option shall be exercisable to the extent, and only to the extent, the related Option is exercisable and shall be for such Term as the Committee may determine (which Term, which is not to exceed ten (10) years, may expire prior to the Term of the related Option). Each SAR granted on a stand alone basis shall be exercisable to the extent, and for such Term, as the Committee may determine. The SARs shall be subject to such other terms and conditions as the Committee, in its discretion, shall determine and which are not otherwise inconsistent with the Plan. The terms and conditions may include Committee approval of the exercise of the SAR, limitations on the time within which and the extent to which such SAR shall be exercisable, and limitations, if any, on the amount of appreciation in value which may be recognized with regard to such SAR. The Company's obligation to any Participant exercising an SAR may be paid in cash or Shares, or partly in cash or Shares, at the sole discretion of the Committee. The Committee shall have at all times final control and authority over the form of payment of any SAR. If, and to the extent that, Shares are issued in satisfaction of amounts payable on exercise of an SAR, the Shares shall be valued at their Fair Market Value on the date of exercise. 8.3 SARS IN TANDEM WITH INCENTIVE STOCK OPTIONS. With respect to SARs granted in tandem with Incentive Stock Options, the following shall apply: (a) No SAR shall be exercisable unless the Fair Market Value of the Shares on the date of exercise exceeds the option price of the related Incentive Stock Option. (b) In no event shall any amounts paid pursuant to the SAR exceed the difference between the Fair Market Value of the Shares on the date of exercise and the option price of the related Incentive Stock Option. (c) The SAR must expire no later than the last date the related Incentive Stock Option can be exercised. 8.4 SURRENDER OF OPTION OR SAR GRANTED IN TANDEM. If the Award Letter related to the grant of an SAR in tandem with an Option provides that the SAR can only be exercised in lieu of the related Option, then, upon exercise of such SAR, the related Option or portion thereof with respect to which such SAR is exercised shall be deemed surrendered and shall not thereafter be exercisable and, similarly, upon exercise of the Option, the related SAR or portion thereof with respect to which such Option is exercised shall be deemed surrendered and shall not thereafter be exercisable. If the Award Letter related to the grant of an SAR in tandem with an Option provides that 7 the SAR can be exercised in addition to the related Option, then, upon exercise of such SAR, the related Option or portion thereof with respect to which such SAR is exercised shall not be deemed surrendered and shall continue to be exercisable and, similarly, upon exercise of the Option, the related SAR or portion thereof with respect to which such Option is exercised shall not be deemed surrendered and shall continue to be exercisable. 9. EXERCISE OF RIGHTS UNDER OPTION OR SAR AWARDS. 9.1 NOTICE OF EXERCISE. An Employee entitled to exercise an Option or SAR may do so by delivery of a written notice to that effect specifying the number of Shares with respect to which the Option or SAR is being exercised and any other information the Committee may prescribe. Except as provided in Section 9.2 below, the notice shall be accompanied by payment in full of the purchase price of any Shares to be purchased, which payment may be made in cash or, in Shares valued at Fair Market Value at the time of exercise or, a combination thereof. No Shares shall be issued upon exercise of an Option until full payment has been made therefor. All notices or requests provided for herein shall be delivered to the Company as determined by the Committee. 9.2 CASHLESS EXERCISE PROCEDURES. The Committee, in its sole discretion, may establish procedures at the time of each grant of an Option or SAR whereby an Employee, subject to the requirements of Rule 16b-3, Regulation T, federal income tax laws, and other federal, state and local tax and securities laws, can exercise an Option or a portion thereof without making a direct payment of the option price to the Company. If the Committee so elects to establish a cashless exercise program, the Committee shall determine, in its sole discretion, and from time to time, such administrative procedures and policies as it deems appropriate and such procedures and policies shall be binding on any Employee wishing to utilize the cashless exercise program. 10. RIGHTS OF OPTION AND SAR HOLDERS. The holder of an Option or SAR shall not have any of the rights of a stockholder with respect to the Shares subject to purchase or issuance under such Award, except to the extent that one or more certificates for such Shares shall be delivered to the holder upon due exercise of the Option or SAR. 11. RESTRICTED STOCK AWARDS. Restricted Stock Awards granted under the Plan shall be subject to such terms and conditions as the Committee may, in its discretion, determine. Restricted Stock Awards issued under the Plan shall be evidenced by an Award Letter in such form as the Committee may from time to time determine. Restricted Stock Awards may be subject to restrictions which lapse over time with or without regard to Performance Objectives for a specific Performance Period. Unless the Committee decides otherwise in its sole and absolute discretion based upon the circumstances existing at the time of the grant of any Restricted Stock Award, Restricted Stock Awards which are subject solely to time-based restrictions shall vest over a period of not less than three years and Restricted Stock Awards which are subject to restrictions based on Performance Objectives shall vest over a period of not less than one year. 11.1 RECEIPT OF SHARES. Each Award Letter shall set forth the number of Shares issuable under the Restricted Stock Award evidenced thereby. Subject to the restrictions of Sections 11.2, 11.3 and 11.4 of the Plan and as set forth in the related Award Letter, the number of Shares granted under a Restricted Stock Award shall be issued to the recipient Employee thereof on the date of grant of such Restricted Stock Award or as soon as may be practicable thereafter and deposited into escrow, if applicable. If the Committee determines that a Restricted Stock Award is intended to qualify as performance-based compensation under Code Section 162(m)(4)(C), then such Restricted Stock Award shall be subject to the attainment of Performance Objectives for a Performance Period. Such specific Performance Objectives shall be established in writing no later than ninety (90) days after the commencement of the Performance Period to which the Performance Objectives relate, but in no event after twenty-five percent (25%) of the Performance Period has elapsed. In establishing the Performance 8 Objective or Performance Objectives, the Committee shall also establish a schedule or schedules setting forth the portion of the Award which will be earned or forfeited based on the degree of achievement of the Performance Objectives actually achieved or exceeded as determined by the Committee. The Committee may at any time adjust the Performance Objectives and any schedules and portions of payments related thereto, adjust the way Performance Objectives are measured, or shorten any Performance Period if it determines that conditions or the occurrence of events warrants such actions; provided, that this provision shall not apply to any Restricted Stock Award that is intended to qualify as performance-based compensation under Code Section 162(m)(4)(C) if and to the extent that it would prevent the Award from so qualifying. The Committee shall have the right to reduce or eliminate the Restricted Stock Award payable upon the attainment of a Performance Objective, but shall not have the discretion to increase an Award upon the attainment of a Performance Objective with respect to a Participant whose compensation for the particular year is subject to the limits on tax deductibility in Code Section 162(m). 11.2 RIGHTS OF RECIPIENT PARTICIPANTS. Shares received pursuant to Restricted Stock Awards shall be duly issued or transferred to the Participant, and a certificate or certificates for such Shares shall be issued in the Participant's name. Subject to the restrictions in Section 11.3 of the Plan and as set forth in the related Award Letter, the Participant shall thereupon be a stockholder with respect to all the Shares represented by such certificate or certificates and shall have all the rights of a stockholder with respect to such Shares, including the right to vote such Shares and to receive dividends and other distributions paid with respect to such Shares. As a condition to issuing Shares, the Committee may require a Participant to execute an escrow agreement and any other documents which the Committee may determine. In aid of such restrictions, certificates for Shares awarded hereunder, together with a suitably executed stock power signed by each recipient Participant, shall be held by the Company in its control for the account of such Participant (i) until the restrictions determined by the Committee, in its discretion, and as set forth in the related Award Letter, lapse pursuant to the Plan or the Letter Agreement, at which time a certificate for the appropriate number of Shares (free of all restrictions imposed by the Plan or the Award Letter except those established by the Committee at the time of grant of the Award) shall be delivered to the Participant, or (ii) until such Shares are forfeited to the Company and cancelled as provided by the Plan or the Award Letter. 11.3 NON-TRANSFERABILITY OF RESTRICTED STOCK AWARDS. Until such time as the restrictions determined by the Committee or otherwise set forth in the related Award Letter have lapsed, the Shares awarded to a Participant and held by the Company pursuant to Section 11.2 of the Plan, and the right to vote such Shares or receive dividends on such Shares, may not be sold, exchanged, transferred, pledged, hypothecated or otherwise disposed of; provided, however, that, if so provided in the Award Letter, such Shares may be transferred upon the death of the Participant to such of his legal representatives, heirs and legatees as may be entitled thereto by will or the laws of intestacy. 11.4 RESTRICTIONS. Shares received pursuant to Restricted Stock Awards shall be subject to the terms and conditions as the Committee may determine, including, without limitation, restrictions on the sale, assignment, transfer or other disposition of such Shares and the requirement that the Participant forfeit such Shares back to the Company upon termination of employment for any reason or for specified reasons. 9 12. PERFORMANCE AWARDS. 12.1 PERFORMANCE PERIODS. The Committee shall establish Performance Periods applicable to Performance Awards. There shall be no limitation on the number of Performance Periods established by the Committee and more than one Performance Period may encompass the same fiscal year. 12.2 PERFORMANCE OBJECTIVES. If the Committee determines that a Performance Award is intended to qualify as performance-based compensation under Code Section 162(m)(4)(C), then such Performance Award shall be subject to the attainment of Performance Objectives for a Performance Period. Such specific Performance Objectives shall be established in writing no later than ninety (90) days after the commencement of the Performance Period to which the Performance Objectives relate, but in no event after twenty-five percent (25%) of the Performance Period has elapsed. In establishing the Performance Objective or Performance Objectives, the Committee shall also establish a schedule or schedules setting forth the portion of the Performance Award which will be earned or forfeited based on the degree of achievement of the Performance Objectives actually achieved or exceeded as determined by the Committee. The Committee may at any time adjust the Performance Objectives and any schedules and portions of payments related thereto, adjust the way Performance Objectives are measured, or shorten any Performance Period if it determines that conditions or the occurrence of events warrant such actions; provided, that this provision shall not apply to any Performance Award that is intended to qualify as performance-based compensation under Code Section 162(m)(4)(C) if and to the extent that it would prevent the Award from so qualifying. The Committee shall have the right to reduce or eliminate the compensation or Award payable upon the attainment of a Performance Objective but shall not have the discretion to increase an Award upon the attainment of a Performance Objective with respect to a Participant whose compensation for the particular year is subject to the limits on tax deductibility in Code Section 162(m). 12.3 GRANTS OF PERFORMANCE AWARDS. Performance Awards may be granted under the Plan in such form and to such Employees as the Committee may from time to time approve. Performance Awards may be granted alone, in addition to or in tandem with other Awards under the Plan. Subject to the terms of the Plan, the Committee shall determine the amount or number of Performance Awards to be granted to a Participant and the Committee may impose different terms and conditions on any particular Performance Award granted to any Participant. Each grant of a Performance Award shall be evidenced by a written instrument stating the number of Performance Shares or Performance Units granted, the Performance Period, the Performance Objective or Performance Objectives, the proportion of payments for performance between the minimum and full performance levels, if any, restrictions applicable to Shares receivable in settlement, if any, and any other terms, conditions, restrictions and rights with respect to such grant as determined by the Committee. The Committee may determine that the Participant forfeit such Performance Awards back to the Company upon termination of employment for any reason or for specified reasons. The Committee may provide, in its sole discretion, that during a Performance Period, a Participant shall be paid cash amounts, with respect to each Performance Share or Performance Unit held by such individual in the same manner, at the same time, and in the same amount paid, as a dividend on any Share. 12.4 NON-TRANSFERABILITY OF PERFORMANCE AWARDS. Until such time as the Performance Objectives as determined by the Committee have been met and until any restrictions upon the Shares issued pursuant to any Performance Awards have lapsed, Performance Awards and any rights related thereto may not be sold, exchanged, transferred, pledged, hypothecated or otherwise disposed of by any Participant. 12.5 PAYMENT OF AWARDS. As soon as practicable after the end of the applicable Performance Period as determined by the Committee, the Committee shall determine the extent to which 10 the Performance Objectives have been met and the extent to which Performance Awards are payable. Payment and settlement of a Performance Award shall be as follows: (a) In the case of Performance Shares, one or more stock certificates representing the number of Shares payable shall be delivered to the Participant, free of all restrictions except those established by the Committee at the time of the grant of the Performance Shares; and (b) In the case of Performance Units, entirely in cash, entirely in Shares, or in such combination of Shares and cash as the Committee may determine, in its discretion, at any time prior to such payment. If payment is to be made in the form of cash, the amount payable for each Performance Unit earned shall be equal to the dollar value of each Performance Unit (as determined by the Committee) times the number of earned Performance Units. 13. AWARD TERMS AND CONDITIONS. Each Award Letter setting forth an Award shall contain such other terms and conditions not inconsistent herewith as shall be approved by the Board or by the Committee. The Committee shall from time to time adopt policies and procedures applicable to Awards that will govern the lapse or non-lapse of restrictions and the rights of Participants and beneficiaries in the event of death, disability, termination of employment, or retirement of Participants or upon the occurrence of any other event determined by the Committee, in its sole discretion, to be appropriate. The Committee shall have authority to define disability and retirement and other terms, and the Committee's policies and procedures may differ with respect to Awards granted at different times. A Participant's rights in the event of death, disability, termination of employment, or retirement or such other events shall be set forth in the Award Letter that evidences an Award to the Participant. 14. NONTRANSFERABILITY OF AWARDS. No Award under the Plan and no rights and interests therein, including the right to any amounts or Shares payable, may be assigned, pledged, hypothecated or otherwise transferred by a Participant except to the extent so permitted under the terms of the Award Letter. During the lifetime of a Participant, Options and SARs are exercisable only by, and payments in settlement of Awards will be payable only to, the Participant or his or her legal representative. 15. VESTING OF AWARDS. The Committee may, in its sole discretion, grant Awards which vest over time and/or are based upon satisfaction of Performance Objectives. The Committee may, in its discretion, modify or change any Performance Objectives concerning any Award or accelerate the vesting of any Award; provided that the Committee shall not modify or change any Performance Objective or accelerate the vesting of any Award that is intended to qualify as performance-based compensation under Code Section 162(m)(4)(C) if and to the extent that such modification, change or acceleration would prevent the Award from so qualifying. 16. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event of changes in all of the outstanding Shares by reason of stock dividends, stock splits, recapitalizations, mergers, consolidations, combinations, or exchanges of shares, separations, reorganizations or liquidations or similar events or in the event of extraordinary cash or non-cash dividends being declared with respect to outstanding Shares or other similar transactions, the number and class of Shares available under the Plan in the aggregate, the number and class of Shares subject to Awards theretofore granted, the number of SARs therefore granted, applicable purchase prices, applicable Performance Objectives for the Performance Periods not yet completed and performance levels and portion of payments related thereto, and all other applicable provisions, shall, subject to the provisions of the Plan, be equitably adjusted by the Committee. The foregoing adjustment and the manner of application of the foregoing provisions shall be determined by the Committee in its sole discretion. Any such adjustment may provide for the elimination of any fractional Share which might otherwise become subject to an Award. 11 17. CHANGE IN CONTROL. 17.1 EFFECT ON AWARDS. In the event of a Change in Control, then (i) all Options, SARs and Options in tandem with SARs then outstanding shall become fully exercisable as of the date of the Change in Control, whether or not then exercisable, (ii) all restrictions and conditions of all Restricted Stock Awards then outstanding shall be deemed satisfied as of the date of the Change in Control, and (iii) all Performance Shares and Performance Units shall be deemed to have been fully earned as of the date of the Change in Control. Moreover, the Committee, in its sole discretion, may at any time, and subject to the terms and conditions as it may impose: (a) grant Awards that become exercisable only in the event of a Change in Control, (b) provide for Awards to be exercised automatically and only for cash in the event of a Change in Control, and (c) provide in advance or at the time of a Change in Control for cash to be paid in settlement of any Award in the event of a Change in Control. 17.2 TERMINATION OF EMPLOYMENT. Notwithstanding anything contained in this Plan to the contrary, in the event a Change in Control takes place and a Participant's employment is terminated prior to the Change in Control and the Participant reasonably demonstrates that such termination (i) was at the request of a third party who has indicated an intention or taken steps reasonably calculated to effect a Change in Control and who effectuates the Change in Control or (ii) otherwise occurred in connection with or in anticipation of a Change in Control which actually occurs, then for all purposes of this Plan, the date of the Change in Control in respect of such Participant shall mean the date immediately prior to the date of termination of such Participant's employment. 18. FORM OF AWARDS. Nothing contained in the Plan nor any resolution adopted or to be adopted by the Board or the stockholders of the Company shall constitute the granting of any Award. An Award shall be granted hereunder at such date or dates as the Committee may determine, subject to the Plan. Whenever the Committee determines to grant an Award, the Secretary or the President of the Company, or such other person as the Committee appoints, shall send notice thereof to the Employee, in such form as the Committee approves, stating the number of Shares, units and SARs subject to the Award, its Term, and the other provisions, restrictions and conditions thereof. The notice shall be accompanied by a written Award Letter (and, in the case of a Restricted Stock Award, by a blank stock power and/or escrow agreement for execution by the Employee) which shall have been duly executed by or on behalf of the Company. If the surrender of previously issued Awards is made a condition of the grant, the notice shall set forth the pertinent details of such condition. Execution of an Award Letter by the recipient in accordance with the provisions of the Plan shall be a condition precedent to the exercise or settlement of any Award. 19. WITHHOLDING FOR TAXES. 19.1 COMPANY'S RIGHT TO PAYMENT FOR TAXES REQUIRED TO BE WITHHELD. The Company shall, before any payment is made or a certificate for any Shares is delivered or any Shares are credited to any brokerage account, deduct or withhold from any payment under the Plan any Federal, state, local or other taxes, including transfer taxes, required by law to be withheld or to require the Participant or his beneficiary or estate, as the case may be, to pay any amount, or the balance of any amount, required to be withheld. The Company may elect to deduct such taxes from any amounts payable then or any time thereafter in cash to the Employee and, in the Employee's sole discretion, the payment of such taxes may be made from Shares previously held by such Employee. If the Employee disposes of Shares acquired pursuant to an Incentive Stock Option in any transaction considered to be a disqualifying transaction under Sections 421 and 422 of the Code, the Employee must give the Company written notice of such transfer and the Company shall have the right to deduct any taxes required by law to be withheld from any amounts otherwise payable to the Employee. 19.2 EMPLOYEE ELECTION TO WITHHOLD SHARES. An Employee, in his sole discretion, may elect to satisfy his or her tax liability with respect to the exercise, vesting or settlement 12 of an Award, by having the Company withhold Shares otherwise issuable upon the exercise, vesting or settlement of the Award. 20. TERMINATION OF PLAN. The Plan shall terminate ten (10) years from the date hereof, and an Award shall not be granted under the Plan after that date although the terms of any Awards may be amended at any date prior to the end of its Term in accordance with the Plan. Any Awards outstanding at the time of termination of the Plan shall continue in full force and effect according to the terms and conditions of the Award and this Plan. 21. AMENDMENT OF THE PLAN. The Plan may be amended at any time and from time to time by the Board, but no amendment without the approval of the stockholders of the Company shall be made if stockholder approval under Section 422 of the Code or Rule 16b-3 would be required. Notwithstanding the previous sentence, no amendment to the Plan shall be made without the approval of the stockholders of the Company which would change the material terms of performance goals that were previously approved by the Company's stockholders within the meaning of Proposed Treasury Regulation Section 1.162-27(e)(4)(vi) or a successor provision, unless the Board determines that such approval is not necessary to avoid loss of a deduction under Section 162(m) of the Code, such approval will not avoid such a loss of deduction or such approval is not advisable. Notwithstanding the discretionary authority granted to the Committee in Section 4 of the Plan, no amendment of the Plan or any Award granted under the Plan shall impair any of the rights of any Participant, without his or her consent, under any Award theretofore granted under the Plan. 22. GOVERNING LAW; REGULATIONS AND APPROVALS. 22.1 GOVERNING LAW. This Plan and the rights of all persons claiming hereunder shall be construed and determined in accordance of the laws of the State of Georgia without giving effect to the conflicts of laws principles thereof, except to the extent that such laws are preempted by federal law. 22.2 DELIVERY OF SHARES. The obligation of the Company to issue, sell and deliver Shares with respect to any Awards granted under this Plan shall be subject to all applicable laws, rules and regulations, including all applicable federal and state securities laws, and the obtaining of all such approvals by governmental agencies as may be deemed necessary or appropriate by the Committee. 22.3 SECURITIES ACT REQUIREMENTS. No award shall be granted and no certificates for Shares pursuant to the grant or exercise of an Award shall be delivered pursuant to this Plan if the grant or delivery would, in the opinion of counsel for the Company, violate the Securities Act or any other Federal or state statutes having similar requirements as may be in effect at that time. As a condition of the issuance of any Shares pursuant to the grant or exercise of an Award under this Plan, the Committee may require the recipient to furnish a written representation that he or she is acquiring the Shares for investment and not with a view to distribution to the public. In the event that the disposition of Shares acquired pursuant to the Plan is not covered by a then current registration statement under the Securities Act, as amended, and is not otherwise exempt from such registration, such Shares shall be restricted against transfer to the extent required by the Securities Act and Rule 144 of the Securities Act or the regulations hereunder. 22.4 LISTING AND REGULATORY REQUIREMENTS. Each Award is subject to the further requirements that, if at any time the Committee shall determine, in its discretion, that the listing, registration or qualification of the Shares subject to the Award is required by any securities exchange or under any applicable law or the rule of any regulatory body, or is necessary or desirable as a condition of, or in connection with, the granting of such Award or the issuance of Shares thereunder, such Award will not be granted or exercised and the Shares may not be issued unless and until such listing, 13 qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Committee. 22.5 SECTION 16. With respect to persons subject to Section 16 of the Exchange Act, transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent any provision under the Plan or action by the Committee fails to so comply, it shall be deemed null and void to the extent permitted by law and deemed advisable by the Committee. 22.6 PERFORMANCE-BASED COMPENSATION. The Plan is intended to give the Committee the authority, in its discretion, to grant Awards that qualify as performance-based compensation under Code Section 162(m)(4)(C). 23. DEFERRAL ELECTIONS. The Committee may, pursuant to the terms of an Award Letter, permit any Participant receiving an Award to elect to defer his or her receipt of a payment of cash or the delivery of Shares that would be otherwise due such individual by virtue of the exercise, settlement, vesting or lapse of restrictions regarding any Award made under the Plan. If any such election is permitted, the Committee shall establish rules and procedures for such payment deferrals and include such rules and procedures in the Award Letter, including the possible payment or crediting of reasonable interest on such deferred amounts credited in cash and the payment or crediting of dividend equivalents in respect of deferrals credited in Shares. 24. MISCELLANEOUS. 24.1 EMPLOYMENT RIGHTS. Neither the Plan nor any action taken hereunder shall be construed as giving any Employee the right to participate under the Plan, and a grant of an Award under the Plan shall not be construed as giving any recipient of the grant any right to be retained in the employ of the Company. 24.2 NO TRUST OR FUND CREATED. Neither the Plan nor any grant made hereunder shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company and any recipient of a grant of an Award or any other person. To the extent that any person acquires a right to receive payments from the Company pursuant to a grant under the Plan, such right shall be no greater than the right of any unsecured general creditor of the Company. Nothing herein shall prevent or prohibit the Company from establishing a trust or other arrangement for the purpose of providing for the payment of the benefits payable under the Plan. 24.3 FEES AND COSTS. The Company shall pay all original issue taxes on the exercise of any Award granted under the Plan and all other fees and expenses necessarily incurred by the Company in connection therewith . 24.4 AWARDS TO FOREIGN NATIONALS. Without amending the Plan, Awards may be granted to participants who are foreign nationals or who are employed outside the United States or both, on such terms and conditions different than those specified in the Plan as may, in the judgment of the Committee, be necessary or desirable to further the purpose of the Plan. 24.5 OTHER PROVISIONS. As used in the Plan, and in Awards and other documents prepared in implementation of the Plan, references to the masculine pronoun shall be deemed to refer to the feminine or neuter, and references in the singular or the plural shall refer to the plural or the singular, as the identity of the person or persons or entity or entities being referred to may require. The captions used in the Plan and in such Awards and other documents prepared in implementation of the Plan are for convenience only and shall not affect the meaning of any provision hereof or thereof. 14 25. EFFECTIVENESS OF THE PLAN. The Plan shall become effective when approved by the Board. The Plan shall thereafter be submitted to the Company's stockholders for approval and unless the Plan is approved by the affirmative votes of the holders of shares having a majority of the voting power of all shares represented at a meeting duly held in accordance with Georgia law within twelve (12) months after being approved by the Board, the Plan and all Awards made under it shall be void and of no force and effect. To record the adoption of the Plan (as amended and restated) by the Board on November 13, 1996, the Company has caused its authorized officers to affix the corporate name and seal hereto. SCIENTIFIC-ATLANTA, INC. By: /s/ Brian C. Koenig ------------------------------------ Name: Brian C. Koenig -------------------------------- Title: Vice President Human Resources -------------------------------- By: /s/ William E. Eason, Jr. ------------------------------------ Name: William E. Eason, Jr. -------------------------------- Title: Secretary -------------------------------- [Seal] 15 EX-10.2 3 STOCK PLAN FOR NON-EMPLOYEE DIRECTORS EXHIBIT 10.2 SCIENTIFIC-ATLANTA, INC. STOCK PLAN FOR NON-EMPLOYEE DIRECTORS As Amended on November 13, 1996 1. PURPOSES The purposes of this Plan are to aid the Company in attracting and retaining highly qualified Non-employee Directors, to provide additional compensation as an incentive for Non-employee Directors to contribute their best efforts to the Company's success, and to emphasize and enhance the Company's policy of seeking to have Non-employee Directors maintain a significant investment in the stock of the Company and thus a strong commonality of interests with the shareholders. 2. DEFINITIONS As used in this Plan: (a) The term "Annual Meeting" means the annual meeting of shareholders of the Company. (b) The term "Award" means an Elective Grant or a Stock Award awarded under this Plan. (c) The term "Board" means the Board of Directors of the Company. (d) The term "Board Approval" means approval by a majority of the directors present at a Board meeting at which a quorum is present. (e) The term "Company" means Scientific-Atlanta, Inc., a Georgia corporation. 1 (f) The term "Committee" shall mean the Governance and Nominations Committee of the Board or any another committee comprised of directors of the Board which is vested by the Board with responsibility to administer this Plan. (g) The term "Elective Grant" shall mean the election by a Non-employee Director pursuant to Section 3(a) hereof to receive a portion of his or her Quarterly Compensation in the form of Shares. (h) The term "Eligible Directors" shall mean those Non-employee Directors who served on the Board for the entire period from the most recent Annual Meeting before the grant of a particular Stock Award until the Annual Meeting at which a Stock Award is granted. (i) The term "Fair Market Value Per Share" means the closing sale price of a Share on the New York Stock Exchange on the date such value is determined or, if there is no trade on such Exchange on that date, then the closing sale price on the next preceding date on which there is trade of the Company's Common Stock on such Exchange. In the event that the Company's Common Stock is not listed on the New York Stock Exchange on the determination date, the Fair Market Value shall be determined as stated above but with reference to trades on the largest stock exchange or other public market on which the Company's Common Stock is then traded. (j) The term "Non-employee Director" means any person who is elected to the Board and who has not been an employee of the Company or any of its subsidiaries at any time during the twelve (12) months preceding any election by such person under Section 3 hereof or the receipt of a Stock Award by such person under Section 4 hereof. (k) The term "Plan" means this Scientific-Atlanta, Inc. Stock Plan for Non-employee Directors, as amended from time to time. (l) The term "Quarterly Compensation" means the sum of all meeting fees, annual retainer fees, and Committee and Board Chairmanship fees for service as a director earned by a Non-employee Director during a fiscal quarter. Compensation paid to Non-employee Directors for their service to the Company in any other capacity, shall be excluded from the calculation of Quarterly Compensation. (m) The term "Share" means a share of the Company's Common Stock, $.50 par value. Shares delivered to the Non-employee Directors under this Plan may be either authorized but previously unissued shares or previously issued shares reacquired by the Company. 2 (n) The term "Shareholder Approval" means the affirmative vote of a majority of the shares of Common Stock present or represented and entitled to vote at a meeting of the shareholders of the Company at which a quorum is present. (o) The term "Stock Award" means an award consisting of 500 Shares (subject to adjustment as herein provided) granted to an Eligible Director pursuant to Section 4(a) hereof. 3. ELECTIVE GRANTS (a) Each Non-employee Director may make an election to receive up to 100 percent (100%) of his or her Quarterly Compensation (in increments of 5%) in the form of Shares pursuant to an Elective Grant made in accordance with this Section 3(a). The election by the Non-employee Director to receive an Elective Grant of Shares must be in writing and must be delivered to the Secretary of the Company before the start of the fiscal quarter during which services are to be rendered by the Non-employee Director giving rise to the Quarterly Compensation. The election made by a Non-employee Director pursuant to this Section 3(a) shall be in effect as to Quarterly Compensation payable for services rendered during the fiscal quarter of the Company covered by the election. The Committee shall, prior to the receipt by a Non-employee Director of shares under an Elective Grant, approve the issuance of such shares by resolution; however, if the Committee fails to adopt such an approving resolution, such shares may be issued to the electing Non-employee Director, but such shares cannot be sold or otherwise transferred by such Non-employee Director prior to the date which is six (6) months after the date of such issuance of shares. (b) The number of Shares to be granted to a Non-employee Director who makes an Elective Grant shall equal (i) the amount of the Quarterly Compensation earned during the Company's fiscal quarter subject to the Elective Grant, divided by (ii) the Fair Market Value Per Share on the last day of such fiscal quarter. In no event shall the Company be required to issue fractional Shares. Any fractional Share will be rounded to the nearest whole Share. (c) As soon as practicable after each Non-employee Director's Elective Grant of Shares is determined, the Company shall cause to be issued and delivered to such Non-employee Director a stock certificate registered in the name of the Non-employee Director evidencing his or her Elective Grant, less any Shares withheld by the Company pursuant to Section 6 below. (d) No right to an Elective Grant and no interest therein may be assigned, pledged, hypothecated, or otherwise transferred by a Non-employee Director except, in the event of the death of a Non-employee Director prior to the issuance of a stock certificate evidencing an Elective Grant, to the Non- employee Director's designated beneficiary or, in the absence of such designation, by will or the laws of descent and distribution. 3 4. STOCK AWARDS (a) Beginning with the 1995 Annual Meeting and at the Annual Meeting every year thereafter through and including the Annual Meeting held in 1999, every Eligible Director shall be granted a Stock Award. (b) Subject to the provisions of Sections 6 and 12 hereof, as soon as practicable after the applicable Annual Meeting, the Company shall cause to be issued and delivered to each Eligible Director receiving a Stock Award a stock certificate registered in the name of such Eligible Director evidencing the Stock Award, less any Shares withheld by the Company pursuant to Section 6 below. (c) Eligible Directors shall not be deemed for any purpose to be, or have any rights as, shareholders of the Company with respect to any Stock Award until the stock certificates are issued and then only from the date of the issuance of such stock certificates. Appropriate adjustments shall be made for dividends or distributions or other rights for which the record date is after an Annual Meeting and prior to the issuance of such stock certificates. (d) No right to a Stock Award and no interests therein may be assigned, pledged, hypothecated, or otherwise transferred by an Eligible Director except that in the event of the death of an Eligible Director after an Annual Meeting where such Eligible Director received a Stock Award and prior to the issuance of a stock certificate evidencing such Stock Award, to the Eligible Director's designated beneficiary or, in the absence of such designation, by will or by laws of descent and distribution. 5. ADJUSTMENT UPON CHANGES IN CAPITALIZATION If a reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation, rights offering, or any other change in the corporate structure of the Company or the Shares occurs, then the number and/or kind of shares to be awarded under the Plan shall be automatically adjusted as required in order to prevent an unfavorable effect upon the value of the Awards to be made under this Plan. 6. TAX WITHHOLDING/DEFERRAL (a) All Awards made pursuant to this Plan shall be subject to the withholding of state and federal income taxes, FICA tax or other taxes to the extent required by applicable law. The 4 Company shall, before delivery of a stock certificate evidencing an Award, require the recipient to make arrangements satisfactory to the Company to satisfy such withholding requirement, if any. A Non-employee Director receiving an Award may satisfy such withholding requirement by having the Company withhold Shares otherwise issuable to the director if such director makes a written election to do so, which election must be delivered to the Secretary of the Company. (b) The right to receive any Shares under this Plan, at the election of the Non-employee Director recieving an Award (without need for Committee approval), may be deferred under the provisions of the Company's Deferred Compensation Plan for Non-Employee Directors. 7. ADMINISTRATION The Plan shall be administered by the Committee. The Committee shall have full authority, consistent with the Plan, to interpret the Plan and to promulgate such rules and regulations with respect to the Plan as it deems desirable for the administration of the Plan. The Committee shall have authority to determine all matters relating to the administration and granting of Awards. All decisions, determinations and interpretations of the Committee shall be binding upon all persons. 8. COMPLIANCE WITH APPLICABLE LEGAL REQUIREMENTS The Plan, the Awards, and the obligation of the Company to deliver Shares under the Plan shall be subject to all applicable laws, regulations, and the requirements of the exchanges on which Shares may, at the time, be listed. In the event that the Shares to be issued under this Plan are not registered under the Securities Act of 1933 and/or any applicable state securities laws prior to the delivery of such Shares, the Company may require, as a condition to the issuance thereof, that each Eligible Director to whom such Shares are to be issued represent and warrant in writing to the Company that the Shares are being acquired by him or her for investment for his or her account and not for resale or with any intent of participating directly or indirectly in any distribution of such Shares and a legend to that effect may be placed on the stock certificates representing such Shares. 9. AMENDMENTS The Committee with Board Approval may amend this Plan or any provision thereof from time to time for the purpose of satisfying the requirements of any changes in applicable laws or regulations or for any other purpose which at the time may be permitted by law, provided that no amendment, except with shareholder Approval, shall: (i) change the calculation of the 5 Awards so as to increase the value of the award to the Non-employee Directors; (ii) increase the frequency of the Awards, (iii) materially increase in any other way the benefits to the Non-employee Directors, (iv) materially modify the definitions of Non-employee Director or Eligible Directors as defined herein, or (v) disqualify a Non-employee Director from being a "Non-Employee Director" administrator (within the meaning of Rule 16b-3 or any successor rule of the Securities and Exchange Commission) of any stock-based plan of the Company. Notwithstanding the foregoing, in no case may the Plan provisions pertaining to the amount or determination of a Stock Award or the determination of Eligible Directors be amended more than once every six months, other than to comport with changes in the Internal Revenue Code, the Employee Retirement Income Security Act, or the rules thereunder. 10. DISCONTINUANCE The Board may suspend or discontinue this Plan in whole or in part, but any such suspension or discontinuance shall not affect Awards granted under this Plan prior thereto. 11. GOVERNING LAW This Plan is made in accordance with and shall be governed in all respects by the laws of the State of Georgia. 12. EFFECTIVE DATE This Plan shall become effective on the date of Board Approval of the Plan; provided, however, that the Plan shall be submitted to the shareholders for Shareholder Approval and, if not approved by the shareholders within one year from the date of Board Approval, the Plan shall be of no force and effect. Awards which would otherwise be awarded hereunder before Shareholder Approval of the Plan is obtained shall be subject to such Shareholder Approval and no stock certificates for such Awards shall be issued to Eligible Directors before or until such Shareholder Approval is obtained. 6 13. TERM The term of this Plan shall be for the period commencing as of the date of Board Approval and ending with the Annual Meeting held in 1999. To record the adoption of the Plan by the Board on August 24, 1995, and by the shareholders on November 8, 1995, and to record the amendment of the Plan by the Board on November 13, 1996, the Company has caused its authorized officers to execute this Plan and affix the corporate name and seal hereto. SCIENTIFIC-ATLANTA, INC. By: /s/ Brian C. Koenig ------------------------------------ Name: Brian C. Koenig -------------------------------- Title: Vice President Human Resources -------------------------------- By: /s/ William E. Eason, Jr. ------------------------------------ Name: William E. Eason, Jr. -------------------------------- Title: Secretary -------------------------------- [Seal] 7 EX-10.3 4 1992 STOCK OPTION PLAN EXHIBIT 10.3 SCIENTIFIC-ATLANTA, INC. 1992 EMPLOYEE STOCK OPTION PLAN As adopted by the Board of Directors on September 15, 1992 and by the stockholders on November 11, 1992, and as amended by the Board of Directors on November 13, 1996. SCIENTIFIC-ATLANTA, INC. ------------------------ 1992 EMPLOYEE STOCK OPTION PLAN ------------------------------- 1. PURPOSE. ------- This Plan is intended to provide incentive to key Employees of the Corporation and its Subsidiaries, to encourage proprietary interest in the Corporation by its Employees, to encourage such key Employees to remain in the employ of the Corporation and its Subsidiaries, and to attract new Employees with outstanding qualifications. 2. DEFINITIONS. ----------- Unless otherwise defined herein or the context otherwise requires, the capitalized terms used herein shall have the following meanings: (a) "Administrator" shall mean the officer of the Corporation ------------- appointed by the Committee pursuant to Section 4 hereof. (b) "Board" shall mean the Board of Directors of the Corporation. ----- (c) "Code" shall mean the Internal Revenue Code of 1986, as amended. ---- (d) "Committee" shall mean the Human Resources and Compensation --------- Committee, a committee appointed by the Board. (e) "Common Stock" shall mean, unless otherwise specifically provided, ------------ the common stock of the Corporation and any class of common shares of the Corporation into which such common stock may hereafter be converted, exchanged or reclassified. (f) "Corporation" shall mean Scientific-Atlanta, Inc., a Georgia ----------- corporation. (g) "Disability" shall mean the condition of an individual who is ---------- unable to engage in any substantial gainful activity by reason of any physical or mental impairment which is classified as a disability in the Corporation's Long Term Disability Plan. (h) "Employee" shall mean an individual who is employed (within the -------- meaning of Section 3401 of the Code and the regulations thereunder) by the Corporation or a Subsidiary (i.e., an individual with respect to whom ---- income taxes must be withheld from compensation). (i) "Exercise Price" shall mean the price per Share of Common Stock, -------------- determined by the Committee, at which an Option may be exercised. (j) "Fair Market Value" shall mean the value of one (1) Share of ----------------- Common Stock, and shall be equal to the closing sale price as reported on the New York Stock Exchange on the date of valuation or, if no sale occurred on that date, then the mean between the closing bid and asked prices on such exchange on such date. If the Common Stock ceases to be listed on the New York Stock Exchange, then the Fair Market Value on the date of valuation shall be determined in good faith by the Committee, and such determination shall be conclusive and binding on all persons. If the date of valuation is not a business day, the price on the last business day preceding the date of valuation shall be utilized. (k) "Incentive Stock Option" shall mean an option described in Section ---------------------- 422(b) of the Code. (l) "Non-Qualified Stock Option" shall mean an option not described in -------------------------- Section 422(b), 423(b) or 424(b) of the Code. (m) "Option" shall mean any stock option granted pursuant to this ------ Plan. All Options shall be granted on the date the Committee takes the necessary action to approve the grant. However, if the minutes or other action of the Committee provide that an Option is to be granted as of another date, the date of grant shall be such other date. (n) "Option Agreement" shall mean a written stock option agreement ---------------- evidencing a particular Option. (o) "Optionee" shall mean an Employee who has received an Option. -------- (p) "Plan" shall mean this Scientific-Atlanta, Inc. 1992 Employee ---- Stock Option Plan, as it may be amended from time to time. (q) "Purchase Price" shall mean the Exercise Price times the number of -------------- Shares with respect to which an Option is exercised. (r) "Retirement" shall mean the voluntary cessation of employment by ---------- an Employee after qualifying for early or normal retirement under any pension plan or profit sharing or stock bonus plan of the Corporation or any Subsidiary. If an Employee is not covered by any such plan, "Retirement" shall mean voluntary termination of employment after the Employee either has attained age sixty-five (65) or has attained age fifty- five (55) and has attained the tenth (10th) anniversary of his or her seniority date. (s) "Share" shall mean one (1) share of Common Stock, adjusted in ----- accordance with Section 10 of this Plan (if applicable). -2- (t) "Subsidiary" shall mean any corporation at least fifty percent ---------- (50%) of the total combined voting power of which is owned by the Corporation or by another Subsidiary. 3. EFFECTIVE DATE. -------------- This Plan was adopted by the Board effective September 15, 1992, subject to the approval of the Corporation's stockholders pursuant to Section 14 hereof. This Plan shall terminate as provided in Section 9 below. 4. ADMINISTRATION. -------------- (a) Committee. Unless otherwise determined by the Board from time to --------- time, Option grants under this Plan shall be made by the Committee. Acts of a majority of the Committee at a meeting at which a quorum is present, or acts reduced to or approved in writing by the unanimous consent of the members of the Committee, shall be the valid acts of the Committee. The Committee shall from time to time at its discretion select the Employees who are to be granted Options, determine the number of Shares to be optioned to each Optionee and designate such Options as Incentive Stock Options or Non-Qualified Stock Options. No member of the Committee shall be liable for any action or determination made in good faith with respect to this Plan or any Option granted hereunder. (b) Administrator. The Committee shall appoint an officer of the ------------- Corporation as the Administrator of the Plan. The Administrator shall have full authority to construe, interpret and administer the Plan, and, except as to matters which are expressly reserved herein for determination by the Board or the Committee, the Administrator's decisions and determinations in the administration of the Plan shall be final, conclusive and binding on all persons, including, without limitation, the Corporation, the shareholders and directors of the Corporation and any persons having any interests in any Options granted under this Plan. 5. PARTICIPATION. ------------- The Optionees shall be those key Employees of the Corporation or the Subsidiaries to whom Options may be granted from time to time by the Committee. 6. STOCK. ----- The stock subject to Options granted under this Plan shall be Shares of the Corporation's authorized but unissued or reacquired Common Stock. The aggregate number of Shares which may be issued upon exercise of Options under this Plan shall not exceed One Million Five Hundred Thousand (1,500,000). The number of Shares subject to Options outstanding at any time shall not exceed the number of Shares remaining available for issuance under this Plan. Whenever an Optionee's rights to exercise an Option as to any Shares shall cease for any reason -3- before he or she has exercised such Option as to such Shares, the Option shall be deemed terminated to that extent and such Shares shall again be available for issuance under this Plan. The limitations established by this Section 6 shall be subject to adjustment in the manner provided in Section 10 hereof upon the occurrence of an event specified in Section 10. 7. TERMS AND CONDITIONS OF OPTIONS. ------------------------------- (a) Stock Option Agreements. Options shall be evidenced by written ----------------------- Option Agreements in such form as the Committee shall from time to time determine. Such Option Agreements shall comply with and be subject to the terms and conditions set forth herein. Each Option shall state whether it is an Incentive Stock Option or a Non-Qualified Stock Option. (b) Optionee's Undertaking. Each Optionee shall agree to remain in the ---------------------- employ of the Corporation or a Subsidiary and to render services for a period as shall be determined by the Committee, from the date of the granting of the Option, but such agreement shall not impose upon the Corporation or its Subsidiaries any obligation to retain the Optionee in their employ for any period. Except as otherwise provided in this Plan, Options held by an Optionee may be exercised only while the Optionee is employed by the Corporation or a Subsidiary. (c) Number of Shares. Each Option shall state the number of Shares to ---------------- which it pertains and shall provide for the adjustment thereof in accordance with the provisions of Section 10 hereof. (d) Exercise Price. Each Option shall state the Exercise Price, which -------------- shall not be less than the Fair Market Value on the date of grant. The Exercise Price shall be subject to adjustment as provided in Section 10 hereof. (e) Medium and Time of Payment. Upon the exercise of any Option, the -------------------------- Purchase Price shall be paid in full in United States dollars by certified check or other form of payment acceptable to the Administrator; provided, however, that if the applicable Option Agreement so provides, or the Committee, in its sole discretion otherwise approves thereof, the Purchase Price may be paid, (i) by the surrender of Shares, in good form for transfer, owned by the person exercising the Option and having a Fair Market Value on the date of exercise equal to the Purchase Price, or (ii) in any combination of cash and Shares, as long as the sum of the cash so paid and the Fair Market Value of the Shares so surrendered equals the Purchase Price. In the event the Corporation determines that it is required to withhold state or Federal income tax as a result of the exercise of an Option, as a condition to the exercise thereof an Optionee must make arrangements satisfactory to the Administrator to enable it to satisfy such withholding requirements. Payment of such withholding requirements may be made, at -4- the election of the Optionee, (i) in cash, (ii) by delivery of Shares registered in the name of Optionee, which Shares have a Fair Market Value at the time of exercise equal to the amount to be withheld, (iii) by the Corporation withholding Shares subject to the Option, which Shares have a Fair Market Value at the time of exercise equal to the amount to be withheld, or (iv) any combination of (i), (ii) and (iii) above. (f) Term and Time for Exercise. Each Option shall state the time or times -------------------------- when all or part thereof becomes exercisable. No Option shall be exercisable more than ten (10) years (or less, in the discretion of the Committee) from the date it was granted. If the Committee does not determine otherwise, any Option granted under this Plan: (1) Shall be exercisable as to not more than 25% of the total number of Shares covered by the Option immediately upon, and during the year following, the date of the grant; (2) Shall be exercisable as to not more than 50% of the total number of Shares covered by the Option on, and during the year following, the first anniversary of the date of grant; (3) Shall be exercisable as to not more than 75% of the total number of Shares covered by the Option on, and during the year following, the second anniversary of the date of grant; (4) Shall be fully exercisable on the third anniversary of the date of grant and thereafter prior to expiration of the Option. If the Committee does not determine otherwise with respect to any Option granted hereunder, in the event that the employment of the Optionee by the Corporation or any Subsidiary of the Corporation terminates for any reason whatsoever, other than death or Retirement, prior to the Option(s) held by that person becoming fully exercisable as provided above, such Option(s) shall automatically expire with respect to the unexercisable portion on the date of termination of employment without any further action or documentation. (g) Non-transferability of Options. During the lifetime of the Optionee, ------------------------------ the Option shall be exercisable only by the Optionee and shall not be assignable or transferable. In the event of the Optionee's death, the Option shall not be transferable by the Optionee other than by will or the laws of descent and distribution. Any other attempted alienation, assignment, pledge, hypothecation, attachment, execution or similar process, whether voluntary or involuntary, with respect to all or any part of any Option or right hereunder, shall be null and void and, at the Corporation's option, shall cause all of the Optionee's rights under the Option to terminate. -5- (h) Change in Control of the Corporation. ------------------------------------ (1) Contrary Provisions. Notwithstanding anything contained in this ------------------- Plan to the contrary, in the event of a Change in Control, the provisions of this Subsection 7(h) shall govern and supersede any inconsistent terms or provisions of this Plan. (2) Change in Control. For purposes of this Plan, a "Change in Control" ----------------- shall mean any of the following events: (a) The acquisition in one or more transactions by any "Person" (as the term person is used for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the "1934 Act")), of "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of twenty percent (20%) or more of the combined voting power of the Corporation's then outstanding voting securities (the "Voting Securities"), provided, however, that for purposes of this -------- ------- Subsection 7(h)(2)(a), the Voting Securities acquired directly from the Corporation by any Person shall be excluded from the determination of such Person's Beneficial Ownership of Voting Securities (but such Voting Securities shall be included in the calculation of the total number of Voting Securities then outstanding); or (b) The individuals who are members of the Incumbent Board (as hereinafter defined), cease for any reason to constitute at least two- thirds of the Board for purposes of this Subsection 7(h)(2)(b). The "Incumbent Board" shall include the individuals who as of August 20, 1990 are members of the Board and any individual becoming a director subsequent to August 20, 1990 whose election, or nomination for election by the Corporation's stockholders, was approved by a vote of at least two-thirds of the directors then comprising the Incumbent Board; provided, however, that any individual who is not a member of -------- ------- the Incumbent Board at the time he or she becomes a member of the Board shall become a member of the Incumbent Board upon the completion of two full years as a member of the Board; provided, further, however, that -------- ------- ------- notwithstanding the foregoing, no individual shall be considered a member of the Incumbent Board if such individual initially assumed office (i) as a result of either an actual or threatened "election contest" (within the meaning of Rule 14a-11 promulgated under the 1934 Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board (a "Proxy Contest"), or (ii) with the approval of the other Board members, but by reason -6- of any agreement intended to avoid or settle a Proxy Contest; or (c) Approval by stockholders of the Corporation of (i) a merger or consolidation involving the Corporation if the stockholders of the Corporation immediately before such merger or consolidation do not own, directly or indirectly, immediately following such merger or consolidation, more than eighty percent (80%) of the combined voting power of the outstanding voting securities of the corporation resulting from such merger or consolidation in substantially the same proportion as their ownership of the Voting Securities immediately before such merger or consolidation, or (ii) a complete liquidation or dissolution of the Corporation or an agreement for the sale or other disposition of all or subsequently all of the assets of the Corporation. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because twenty percent (20%) or more of the then outstanding Voting Securities is acquired by (i) a trustee or other fiduciary holding securities under one or more employee benefit plans maintained by the Corporation or any of its subsidiaries, or (ii) any corporation which, immediately prior to such acquisition, is owned directly or indirectly by the stockholders of the Corporation in the same proportion as their ownership of stock in the Corporation immediately prior to such acquisition. Moreover, notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the "Subject Person") acquired Beneficial Ownership of more than the permitted amount of the outstanding Voting Securities as a result of the acquisition of Voting Securities by the Corporation which, by reducing the number of Voting Securities outstanding, increases the proportional number of shares Beneficially Owned by the Subject Person, provided, that if a Change in -------- Control would occur (but for the operation of this sentence) as a result of the acquisition of Voting Securities by the Corporation, and after such share acquisition by the Corporation, the Subject Person becomes the Beneficial Owner of any additional Voting Securities which increases the percentage of the then outstanding Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur. Notwithstanding anything contained in this Plan to the contrary, if a Change in Control takes place and an Optionee's employment is terminated prior to the completed Change in Control and the Optionee reasonably demonstrates that such -7- termination (i) was at the request of a third party who has indicated an intention or taken steps reasonably calculated to effect a Change in Control and who effectuates a Change in Control or (ii) otherwise occurred in connection with or in anticipation of a Change in Control which actually occurs, then for all purposes of this Plan, the date of a Change in Control in respect of such Optionee shall mean the date immediately prior to the date of termination of such Optionee's employment. (3) Time for Exercise Upon a Change in Control. Upon a Change in ------------------------------------------ Control, all options granted under this Plan that are held by Employees at the time of such Change in Control shall become immediately exercisable in full, without regard to the years that have elapsed from the date of grant. (4) Termination of Employment Following Change in Control. If an ----------------------------------------------------- Optionee's employment terminates following a Change in Control other than for "cause" (as hereinafter defined), the applicable provisions of Subsection 7(i) of this Plan shall apply except that as of and after the date of the Change in Control, the Administrator shall not make any determination or take any action in connection with an Optionee's termination of employment which would cause any option granted under this Plan (i) to not be exercisable in full or (ii) to expire earlier than the latest date allowable under Subsection 7(i) as applicable. (5) Amendment or Termination. ------------------------ (a) Subsection 7(h) of this Plan shall not be amended or terminated at any time. (b) Any amendment or termination of this Plan prior to a Change in Control which (1) was at the request of a third party who has indicated an intention or taken steps reasonably calculated to effect a Change in Control, or (2) otherwise arose in connection with or in anticipation of a Change in Control, shall be null and void and shall have no effect whatsoever. (i) Cessation of Employment; etc. After an Optionee ceases to be an ---------------------------- Employee, his or her rights to exercise any unexercised Option then held by the Optionee shall be determined as provided in this Subsection 7(i). No Option may be exercised after its term expires or the Option is otherwise cancelled. (1) Retirement. If an Optionee ceases to be an Employee because of ---------- Retirement (and not on account of termination for "cause" (as hereinafter defined)), such Optionee may exercise the Option immediately with respect to (i) the Shares which he or she could have purchased at the time of Retirement, and (ii) any Shares which would -8- have become available for purchase under the Option if the Optionee's employment had continued for one year after the date of Retirement. To the extent unexercised, the Option shall expire two (2) years after the date of Retirement or the date of expiration of the Option as shown in the applicable Option Agreement, whichever shall occur first. (2) Death. If the Committee does not determine otherwise with respect ----- to any Option, upon the death of an Employee who at the time of his or her death holds an Option, the Option shall be exercisable immediately (by the executor or the administrator of the deceased Optionee's estate or by a person who acquired the right to exercise the option by bequest or inheritance or by reason of such death) with respect to (i) the Shares which could have been purchased by the deceased Optionee at the time of his or her death, and (ii) any Shares which would have become available for purchase under the Option if the Optionee's employment had continued for one year after the date of death. To the extent unexercised, the Option shall expire (i) one year after the date of such death, or (ii) in the event of death following termination of employment by reason of Retirement as described in Subsection 7(i)(1) immediately above, the expiration date of the Option after Retirement, whichever occurs last. Notwithstanding the foregoing, the Committee may, in a special case, permit a longer period for exercise of an Option after death of an Optionee, but in no event shall such period extend beyond the date of expiration of the Option as set forth in the Option Agreement. (3) Disability. If an Optionee ceases active service as an Employee by ---------- reason of Disability, such Optionee shall have the right to exercise the Option at any time within twelve (12) months after such cessation of employment, but except as provided in the applicable Option Agreement, only to the extent that, at the date of such cessation of employment, the Optionee's right to exercise such Option had accrued pursuant to the terms of the applicable Option Agreement and had not previously been exercised. (4) Termination for Cause. If an Optionee's employment is terminated --------------------- for "cause" (as hereinafter defined), such Optionee's Option(s) shall expire immediately upon the giving to such Optionee of the notice of such termination. "Cause," for purposes of this Subsection 7(h), shall mean dishonest or fraudulent conduct which would normally be considered as sufficient basis for discharging an employee from a management and/or a supervisory position, or negligence, inaction or misconduct which constitutes failure by the Optionee to meet such Optionee's obligations and perform such Optionee's duties of employment. (5) Other Reasons. If an Optionee ceases to be an Employee for any ------------- reason other than those mentioned above in -9- Subsections (1), (2), (3) or (4), the Optionee shall have the right to exercise the Option at any time within thirty (30) days following such cessation, discharge or termination, but, except as otherwise provided in the applicable Option Agreement, only to the extent that, at the date of cessation, discharge or termination, the Optionee's right to exercise such Option had accrued pursuant to the terms of the applicable Option Agreement and had not previously been exercised. (6) Leave of Absence. An Optionee's employment with the Corporation ---------------- shall not be considered as having been terminated while the Optionee is on military or sick leave or other bona fide leave of absence (such as temporary employment by the Government) if the period of such leave does not exceed ninety (90) days, or, if longer, so long as the Optionee's right to re-employment with the Corporation is guaranteed either by statute or by contract. Where the period of such leave exceeds ninety (90) days and where the Optionee's rights to re-employment is not guaranteed either by statute or by contract, the Optionee's employment will be deemed to have terminated on the ninety-first (91st) day of such leave. Notwithstanding the extended exercise periods permitted by the Plan in event of Retirement or death, an Incentive Stock Option will continue to qualify as such only if it is exercised within three (3) months after the date of Retirement or death. Any Option exercised more than three (3) months after the date of Retirement or death will be treated as a Non-Qualified Stock Option. (j) Rights as a Stockholder. No one shall have rights as a stockholder ----------------------- with respect to any Shares covered by his or her Option until the date of the issuance of a stock certificate for such Shares. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property), distributions or other rights for which the record date is prior to the date such stock certificate is issued, except as provided in Section 10 hereof. (k) Modification, Extension and Renewal of Options. Within the limitations ---------------------------------------------- of this Plan, the Committee may modify, extend or renew outstanding Options or accept the cancellation of outstanding Options (to the extent not previously exercised) for the granting of new Options in substitution therefor. The foregoing notwithstanding, no modification of an Option shall, without the consent of the Optionee, alter or impair any rights or obligations under any Option previously granted. (l) Other Provisions. The Option Agreements authorized under this Plan may ---------------- contain such other provisions not inconsistent with the terms of this Plan as the Committee shall deem advisable (including, without limitation, restrictions upon the exercise of the Option or subjecting the Shares issued pursuant to the exercise of an Option to rights of repurchase by the Corporation). -10- (m) Substitution of Option. Notwithstanding any inconsistent provisions or ---------------------- limits under this Plan, in the event the Corporation acquires (whether by purchase, merger or otherwise) all or substantially all of the outstanding capital stock or assets of another corporation by any reorganization or other transaction qualifying under Section 425 of the Code, the Committee may, in accordance with the provisions of that Section, substitute options under this Plan for options under the plan of the acquired company provided (i) the excess of the aggregate Fair Market Value of the Shares subject to an Option immediately after the substitution over the aggregate Option Price of such Shares is not more than the similar excess immediately before such substitution and (ii) the new Option does not give persons additional benefits, including any extension of the exercise period. 8. LIMITATION ON ANNUAL AWARDS. --------------------------- The aggregate Fair Market Value (determined as of the date the Option is granted) of the Shares with respect to which Incentive Stock Options are exercisable for the first time by any Optionee during any calendar year under this Plan and all other plans maintained by the Corporation and its parent and subsidiary corporations, shall not exceed $100,000. 9. TERM OF PLAN. ------------ Options may be granted pursuant to this Plan until the expiration of this Plan on September 14, 2002. 10. RECAPITALIZATIONS. ----------------- Subject to any required action by stockholders, the number of Shares covered by this Plan as provided in Section 6 hereof, the number of Shares covered by each outstanding Option and the Exercise Price thereof shall be proportionately adjusted for any increase or decrease in the number of issued Shares resulting from a subdivision or consolidation of Shares or the payment of a stock dividend (but only of Common Stock) or any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Corporation. Unless provisions are made for the continuance of this Plan or the assumption by, or the substitution for outstanding Options of new options covering the stock of, a successor employer corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices, in the event of any merger, consolidation, reorganization, liquidation or dissolution of the Corporation, or any exchange of Shares, each outstanding Option shall automatically be deemed to pertain to the securities and other property to which a holder of the number of Shares covered by the Option would have been entitled to receive in connection with any such event, and shall no longer pertain to the Shares. A dissolution or liquidation of the Corporation shall cause each outstanding Option to terminate. -11- To the extent that the foregoing adjustments relate to securities of the Corporation, such adjustments shall be made by the Committee, whose determination shall be conclusive and binding on all persons. Except as expressly provided in this Section 10, the Optionee shall have no rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class or by reason of any dissolution, liquidation, merger or consolidation or spin-off of assets or stock of another corporation, and any issue by the Corporation of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or Exercise Price of Shares subject to an Option. The grant of an Option pursuant to this Plan shall not affect in any way the right or power of the Corporation to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, to merge or consolidate or to dissolve, liquidate, sell or transfer all or any part of its business or assets. 11. SECURITIES LAW REQUIREMENTS. --------------------------- (a) Securities Act Requirements. No Option granted pursuant to this Plan --------------------------- shall be exercisable in whole or in part, and the Corporation shall not be obligated to sell any Shares subject to any such Option, if such exercise and sale would, in the opinion of counsel for the Corporation, violate the Securities Act of 1933 (or other Federal or State statutes having similar requirements) as it may be in effect at that time. As a condition to the issuance of any Shares upon exercise of an Option under this Plan, the Administrator may require the Optionee to furnish a written representation that he is acquiring the shares for investment and not with a view to distribution to the public. Such representations shall be required in cases where, in the opinion of the Administrator, they are necessary to enable the Corporation to comply with the provisions of the Securities Act of 1933, and any shareholder who gives such representation shall be released from it at such a time as the shares to which it applies are registered pursuant to the Securities Act of 1933. (b) Listing and Regulatory Requirements. Each Option shall be subject to ----------------------------------- the further requirements that if at any time the Committee shall determine in its discretion that the listing or qualification of the shares of stock subject to such Option under any securities exchange requirements or under any applicable law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of such Option or the issue of Shares thereunder, such Option may not be exercised in whole or in part unless and until such listing, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Committee. -12- 12. AMENDMENT OF THIS PLAN. ---------------------- The Board may from time to time, with respect to any Shares at the time not subject to Options, suspend or discontinue this Plan or revise or amend it in any respect whatsoever except that, without the approval of the Corporation's stockholders, no such revision or amendment shall: (a) Materially increase the benefits accruing to participants under this Plan; (b) Increase the number of Shares which may be issued under this Plan; (c) Materially modify the designation in Section 5 hereof with respect to the classes of persons eligible to receive Options; or (d) Amend this Section 12 to defeat its purpose. 13. APPLICATION OF FUNDS. -------------------- The proceeds received by the Corporation from the sale of Common Stock pursuant to the exercise of an Option will be used for general corporate purposes. 14. APPROVAL OF STOCKHOLDERS. ------------------------ This Plan shall be subject to approval by the affirmative vote of the holders of a majority of the outstanding Shares present and entitled to vote at the first annual meeting of stockholders of the Corporation following the adoption of this Plan, and in no event later than January 1, 1993. Prior to such approval, Options may be granted but shall not be exercisable. 15. EXECUTION. --------- To record the adoption of this Plan by the Board on September 15, 1992, and the amendment of this Plan by the Board on November 13, 1996, the Corporation has caused its authorized officer to affix the corporate name and seal hereto. SCIENTIFIC-ATLANTA, INC. By: /s/ Brian C. Koenig ------------------------------------ Brian C. Koenig, Vice President-Human Resources [Seal] -13- EX-10.4 5 AMENDED NON-EMPLOYEE DIRECTORS STOCK PLAN EXHIBIT 10.4 AMENDMENT NUMBER TWO TO THE NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN WHEREAS, Section 10 of Scientific-Atlanta, Inc.'s (the "Corporation's") Non- Employee Directors Stock Option Plan (the "Option Plan") empowers the Board to make amendments to the Option Plan of the type set forth below; NOW, THEREFORE, Section 5(b) of the Option Plan is hereby amended to delete the last sentence thereof which sentence currently reads as follows: "Notwithstanding the foregoing, shares acquired by the exercise of an Option under this Plan may not be transferred to the Company in full or in partial payment of the option price of shares purchased upon the exercise of an Option under this Plan unless and until such previously-acquired shares have been owned by the option holder for at least 365 days." All other sections and provisions of the Option Plan shall remain in full force and effect as written, without further amendment. To record the adoption of this Amendment by the Board on November 13, 1996, the Company has caused its authorized officers to execute this Amendment and affix the corporate name and seal hereto. SCIENTIFIC-ATLANTA, INC. By: /s/ Brian C. Koenig ------------------------------------ Name: Brian C. Koenig -------------------------------- Title: Vice President Human Resources -------------------------------- By: /s/ William E. Eason, Jr. ------------------------------------ Name: William E. Eason, Jr. -------------------------------- Title: Secretary -------------------------------- [Seal] EX-10.5 6 DEFERRED COMPENSATION PLAN NON-EMPLOYEE DIRECTORS EXHIBIT 10.5 DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS OF SCIENTIFIC-ATLANTA, INC. --------------------------------------------------- As Amended November 13, 1996 ARTICLE I - INTRODUCTION - ------------------------ 1.1 Name of the Plan ----------------- This Plan shall be known as the Deferred Compensation Plan for Non-Employee Directors of Scientific-Atlanta, Inc. 1.2 Purpose of Plan --------------- The purpose of the Plan is to provide non-employee directors of Scientific- Atlanta, Inc. the opportunity to defer receipt of cash compensation and compensation in the form of stock payable to them for services to Scientific- Atlanta, Inc. as directors. 1.3 Restatement of Plan ------------------- This document amends and restates the Plan effective as of November 13, 1996. All deferral elections made on or after November 13, 1996, shall be governed by the terms of the Plan as amended and restated herein. In addition, deferral elections made before November 13, 1996, by an individual who is a non- employee member of the Board on November 13, 1996, shall be governed prospectively by the terms of the Plan as amended and restated herein. ARTICLE II - DEFINITIONS - ------------------------ For purposes of this Plan the following words and phrases shall have the meanings and applications set forth below: 2.1 Plan ---- This Deferred Compensation Plan for Non-Employee Directors of Scientific- Atlanta, Inc., as amended from time to time. 2.2 Participant ----------- A non-employee member of the Board of Directors of Scientific-Atlanta, Inc. who elects to participate in this Plan. 2.3 Plan Year --------- The period beginning on the first day of July of each calendar year and ending on and including the last day of June of the next calendar year. The first Plan Year began on July 1, 1993, and ended on June 30, 1994. 2.4 Compensation ------------ The total of a Participant's Awards granted, and a Participant's Annual Retainer, Meeting Fees, and Committee Chair Retainer payments paid to the Participant, by Scientific-Atlanta, Inc. during a Plan Year. 2.5 Annual Retainer --------------- The amount paid each year, in quarterly payments, to non-employee members of the Board of Directors of Scientific-Atlanta, Inc. 2.6 Meeting Fees ------------ The amounts paid to a non-employee member of the Board of Directors of Scientific-Atlanta, Inc. for each meeting of the Board and each meeting of a standing or special committee he or she attends. 2.7 Committee Chair Retainer ------------------------ The amount paid each year, in quarterly payments to a non-employee director who chairs a standing or special committee of the Board of Directors. 2.8 Awards ------ The right to receive shares of Scientific-Atlanta Common Stock, granted under a stock award or elective grant made pursuant to the Scientific-Atlanta, Inc. Stock Plan for Non-Employee Directors. 2.9 Election Form ------------- The form completed by a Participant in order to make one or more Compensation Deferral Elections for the next Plan Year. 2 2.10 Compensation Deferral Election ------------------------------ Each election made by a Participant to defer a portion of his or her Compensation by executing and submitting an Election Form. 2.11 Deferred Benefit Account ------------------------ An account maintained pursuant to and in accordance with the terms and conditions set forth in Article V hereof by or on behalf of Scientific-Atlanta, Inc. for each Compensation Deferral Election made by a Participant under this Plan. 2.12 Deferred Benefit Commencement Date ---------------------------------- The date irrevocably designated by a Participant with respect to each Compensation Deferral Election entered on an Election Form as the date on which the payment of the Deferred Benefits that accumulate as a result of each respective election is to begin. 2.13 Beneficiary ----------- A person or entity designated in accordance with the terms and conditions of this Plan to receive benefits upon the death of a Participant. 2.14 Election Amount --------------- The compensation amount (and right to a certain number of shares of Scientific-Atlanta Common Stock, if applicable) to be deferred pursuant to a single Compensation Deferral Election. 2.15 Service Termination Date ------------------------ The last day of the month immediately preceding the date of a Participant's Retirement, termination of service, determination of Total Disability, or death, whichever is applicable. 2.16 Retirement ---------- The discontinuation of service on the Board of Directors by a Participant who is fifty-five years of age or older with at least three years of Board service. 2.17 Total Disability ---------------- A physical or mental condition which is expected to be totally and permanently disabling as determined in accordance with the terms and conditions of the long-term disability insurance plan currently or most recently maintained by Scientific-Atlanta, Inc. for the benefit of its employees claiming to be totally disabled. 3 2.18 Plan Committee -------------- The Human Resources and Compensation Committee of the Board of Directors of Scientific-Atlanta, Inc. 2.19 Determination Date ------------------ The last day of each Plan Year. 2.20 Plan Interest Rate ------------------ An annual rate of interest that shall be determined by the Plan Committee prior to the start of each Plan Year and credited to a Participant's Deferred Benefit Account during the Plan Year. 2.21 Deferred Benefits ----------------- The amounts (and right to a certain number of shares of Scientific-Atlanta Common Stock, if applicable) payable to a Participant or to his or her Beneficiary or estate following the Participant's Retirement, termination of service as a non-employee member of the Board, determination of Total Disability, or death. 2.22 Scientific-Atlanta Common Stock ------------------------------- The common stock of Scientific-Atlanta, Inc. ARTICLE III - ELIGIBILITY AND PARTICIPATION - ------------------------------------------- 3.1 Eligibility ----------- Directors who are not employees of Scientific-Atlanta, Inc. and who are actively serving on the Board of Directors of Scientific-Atlanta, Inc. shall be eligible to participate in this Plan. 3.2 Participation ------------- The Plan Committee shall notify in writing each director who becomes eligible to participate in this Plan of his or her eligibility. Eligible directors may participate in this Plan by completing an Election Form on or before the end of the month immediately preceding the month in which he or she wants to begin deferring Compensation. If timely received, such election to participate shall be effective on the first day of the succeeding month. 4 ARTICLE IV - COMPENSATION DEFERRAL - ---------------------------------- 4.1 Compensation Deferral Election ------------------------------ A Participant shall effect a Compensation Deferral Election by executing and submitting to the Plan Committee an Election Form. Subsequently, Scientific-Atlanta, Inc. shall defer Election Amounts deferred from the Participant's Awards, Annual Retainer, Committee Chair Retainer or Meeting Fees at the time cash compensation would have been paid (or at the time the right to receive shares of Scientific-Atlanta Common Stock was granted, as applicable). Each Election Amount shall be deferred for the Deferral Period specified with respect to the particular Compensation Deferral Election in the Election Form. All Compensation Deferral Elections shall apply solely to Compensation which will be paid (or granted) to a Participant beginning with the first day of the month commencing subsequent to the month in which the Compensation Deferral Election is received. Any Compensation Deferral Election will apply only to Compensation paid (or granted) during the Plan Year in which the election becomes effective. 4.2 Election Amounts ---------------- Each Election Amount specified by a Participant on an Election Form with respect to any Plan Year shall state in percentages the amount (and, to the extent applicable, the right to receive a specific number of shares of Scientific-Atlanta Common Stock), if any, which the Participant wishes to defer. An election to defer Compensation must equal a minimum of five percent up to a maximum of one hundred percent, in increments of five percentage points, of the Annual Retainer and/or Committee Chair Retainer and/or Meeting Fees and/or Awards which the Participant may be paid during the Plan Year. As to Awards, the election must be in whole shares, with no right to receive fractional shares being deferred. 4.3 Investment Election ------------------- A Participant shall specify in his or her Compensation Deferral Election the percentage of the Election Amount to be credited to an Interest Sub-Account, a Phantom Stock Sub-Account or a Split-Dollar Insurance Sub-Account, and the number of shares to be credited to an Award Sub-Account. 4.4 Deferral Period --------------- With the exception of any amounts deposited into a Split-Dollar Insurance Sub-Account, a Participant shall irrevocably specify in his or her Compensation Deferral Election a Deferred Benefit Commencement Date for all of the Election Amount to be deferred pursuant to such Compensation Deferral Election, which date shall be (i) a set date which is no earlier than July 1 of the calendar year following the end of the Plan Year in which the Election Amount is deferred; (ii) the Participant's Retirement; or (iii) a date which is either the fifth or the tenth anniversary following the date of the Participant's Retirement. 5 4.5 Deferred Benefit Commencement Date; Method of Payment and Issuance ------------------------------------------------------------------ Except as otherwise provided in Article VI hereof, the Election Amounts that accumulate in a Deferred Benefit Account as a result of a Participant's making a Compensation Deferral Election will be paid (or issued, in the case of deferred Awards) by Scientific-Atlanta, Inc. to the Participant in the manner and commencing on the Deferred Benefit Commencement Date designated with respect to the Compensation Deferral Election in an Election Form. (a) Method of Cash Payments: Except as otherwise provided in Article VI ----------------------- hereof, the Participant may elect to receive payment of the Deferred Benefits held in the form of cash, which Deferred Benefits are attributable to a Compensation Deferral Election and which are held in an Interest Sub-Account, a Phantom Stock Sub-Account or an Award Sub-Account, pursuant to one of the following methods: (1) Annual, semi-annual or quarterly installments payable over a five, ten or fifteen year period, and commencing on the respective Deferred Benefit Commencement Date; or (2) A single lump sum payment of the entire balance of the respective Deferred Benefit Account, determined as of and payable on the Deferred Benefit Commencement Date. (b) Method of Issuance of Shares: Except as otherwise provided in ---------------------------- Article VI hereof, the Participant may elect to receive issuance of the Deferred Benefits held in the form of shares of Scientific-Atlanta Common Stock, which Deferred Benefits are attributable to a Compensation Deferral Election and which are held in an Award Sub-Account, pursuant to one of the following methods: (1) Annual, semi-annual or quarterly issuance of shares of Scientific- Atlanta Common Stock from an Award Sub-Account over a five, ten or fifteen year period, and commencing on the respective Deferred Benefit Commencement Date; provided, however, that no fractional shares of -------- ------- Scientific-Atlanta Common Stock will be issued; or (2) A single issuance of all shares subject to the specific Award Sub- Account, determined as of and payable on the Deferred Benefit Commencement Date. (c) Change in Payment or Issuance Method. A Participant may change the ------------------------------------ method of payment (or issuance of shares) selected with respect to a Compensation Deferral Election by submitting a request in writing to the Plan Committee on or before the December 31 immediately preceding the Deferred Benefit Commencement Date. 6 4.6 Designation of Beneficiaries ---------------------------- A Participant shall designate a Beneficiary with respect to each Compensation Deferral Election and may change the Beneficiary designation with respect to any Compensation Deferral Election at any time by submitting to the Plan Committee a revised Beneficiary designation in writing reflecting the change. ARTICLE V - DEFERRED BENEFIT ACCOUNTS - ------------------------------------- 5.1 Deferred Benefit Accounts ------------------------- Scientific-Atlanta, Inc. shall cause to be established and maintained a separate Deferred Benefit Account, and within each such Deferred Benefit Account an Interest Sub-Account, a Phantom Stock Sub-Account, a Split-Dollar Insurance Sub-Account and an Award Sub-Account with respect to each Compensation Deferral Election. Scientific-Atlanta, Inc. shall credit the Election Amount deferred pursuant to each such election to the Participant's appropriate Deferred Benefit Account, and to the Interest Sub-Account, Phantom Stock Sub-Account, a Split- Dollar Insurance Sub-Account and Award Sub-Account as specified in the Election, as of the date deferred from Participant's Compensation as provided in Section 4.1 hereof. 5.2 Interest Sub-Account -------------------- Except as otherwise provided by Section 6.2(a) hereof, interest shall accrue at the Plan Interest Rate on any amounts credited to an Interest Sub- Account from the date on which the amount is credited. 5.3 Phantom Stock Sub-Account ------------------------- If a Participant elects all or a portion of the Election Amount to be credited to the Phantom Stock Sub-Account, the amount so credited shall, solely for purposes of determining the value of the Phantom Stock Sub-Account, be deemed to be a number of shares of Scientific-Atlanta Common Stock determined as follows: (a) Conversion into Scientific-Atlanta Common Stock: The amount credited to ----------------------------------------------- the Phantom Stock Sub-Account shall be converted on the date of such credit into an equivalent number of hypothetical shares of Scientific-Atlanta Common Stock (including hypothetical fractional shares) by dividing the amount credited by the average closing price of Scientific-Atlanta Common Stock, as reported on the composite tape of New York Stock Exchange issues, for the 20 business days immediately preceding the last day of the month in which such amount is credited. (b) Deemed Reinvestment of Dividends: The number of hypothetical shares of -------------------------------- Scientific-Atlanta Common Stock credited to a Participant's Phantom Stock Sub-Account shall be increased on each date that a dividend is paid on Scientific-Atlanta Common Stock. 7 The number of additional hypothetical shares of Scientific-Atlanta Common Stock credited to a Participant's Phantom Stock Sub-Account as a result of such increase shall be determined, first, by multiplying the total number of hypothetical shares of Scientific-Atlanta Common Stock credited to such Sub-Account immediately before such increase by the amount of the dividend paid per share of Scientific-Atlanta Common Stock on the dividend payment date, and, then, by dividing the product so determined by the closing sale price of Scientific-Atlanta Common Stock on the composite tape of New York Stock Exchange issues on the dividend payment date (or if there was no reported sale of Scientific-Atlanta Common Stock on such date, on the next preceding day on which there was such a reported sale). (c) No Rights as Shareholder: At no time shall the hypothetical shares ------------------------ credited to a Phantom Stock Sub-Account be considered as actual shares of Scientific-Atlanta Common Stock, and a Participant shall have no rights as a shareholder of Scientific-Atlanta, Inc. by virtue of such hypothetical shares. 5.4 Award Sub-Account ----------------- If a Participant elects that an Award be deferred and credited to an Award Sub-Account, such Award will remain in such Award Sub-Account until the Deferred Benefit Commencement Date related to such Award Sub-Account occurs. No interest will accrue on the Award in such Award Sub-Account, but amounts equivalent to the dividends that would have been paid if the shares had been issued will accrue on such Awards ("Accrued Dividends"). A Participant shall not have any rights as a shareholder of Scientific- Atlanta, Inc. while an Award is held in an Award Sub-Account. 5.5 Split-Dollar Insurance Sub-Account ---------------------------------- Amounts credited to a Split-Dollar Insurance Sub-Account shall be used to pay premiums on life insurance insuring the life of the Participant, or, at the Participant's election, the lives of the Participant and his or her spouse on a joint and survivor basis, pursuant to such policies of insurance, and with such insurers, as the Plan Committee may determine from time to time. Scientific-Atlanta, Inc. shall be the owner of such insurance policy or policies, and the proceeds thereof shall be payable as provided in an Endorsement Split-Dollar Agreement to be entered into between the Participant and Scientific-Atlanta, Inc. 5.6 Determination of Account Balance -------------------------------- (a) As of each Determination Date, the current balance of a Participant's Deferred Benefit Account shall be the sum of (i) the balance credited to the Interest Sub-Account as of the immediately preceding Determination Date, plus any Compensation deferred by such Participant and credited to such Interest Sub-Account since the previous Determination Date, plus the amount of interest credited to such Interest Sub-Account since the preceding Determination Date, plus (ii) the value of the hypothetical ---- shares of Scientific-Atlanta 8 Common Stock, determined as set forth in Section 5.5(a) above, in the Phantom Stock Sub-Account at that time, including deferred amounts credited to that Sub-Account since the last Determination Date and deemed reinvestment, if any, of dividends since the last Determination Date, plus ---- (iii) the number of shares the Participant has the right to receive under Awards credited to the Award Sub-Account and the total Accrued Dividends credited to the Award Sub-Account, as of the immediately preceding Determination Date, plus the number of shares the Participant has the right to receive under additional Awards and additional Accrued Dividends credited to such Award Sub-Account since the previous Determination Date, minus any payments to or withdrawals by the Participant from the Deferred ----- Benefit Account since the previous Determination Date. (b) The dollar value of the hypothetical shares of Scientific-Atlanta Common Stock credited to a Participant's Phantom Stock Sub-Account on any date shall be determined by multiplying the number of hypothetical shares of Scientific-Atlanta Common Stock credited to such Sub-Account on that date by the average closing price of Scientific-Atlanta Common Stock, as reported on the composite tape of New York Stock Exchange issues for the 12 months immediately preceding that date, or for that number of whole months for which the hypothetical shares have been credited to such sub-account, if less than 12 months. (c) Effect of Recapitalization: In the event of a transaction or event -------------------------- described in this paragraph (c), the number of hypothetical shares of Scientific-Atlanta Common Stock credited to a Participant's Phantom Stock Sub-Account and the number of shares of Scientific-Atlanta Common Stock subject to Awards credited to a Participant's Award Sub-Account shall be adjusted in such a manner as the Plan Committee deems equitable. A transaction or event is described in this paragraph (c) if and only if (i) it is a dividend or other distribution (whether in the form of cash, shares, other securities, or other property), extraordinary cash dividend, recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, re-purchase, or exchange of shares or other securities, the issuance of warrants or other rights to purchase shares or other securities, or other similar corporate transaction or event, and (ii) the Plan Committee determines that such transaction or event affects the shares of Scientific-Atlanta Common Stock, such that an adjustment pursuant to this paragraph (c) is appropriate to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan. 5.7 Statement of Accounts --------------------- Within ninety (90) days after each Determination Date, the Plan Committee shall submit to each Participant a statement in such form as the Plan Committee shall deem desirable, setting forth a summary of the Compensation Deferral Elections made and the current balances of the Deferred Benefit Accounts and related Sub-Accounts maintained for the Participant as of the Determination Date. 9 ARTICLE VI - PAYMENT (AND ISSUANCE) OF DEFERRED BENEFITS - -------------------------------------------------------- 6.1 General ------- Except as otherwise provided herein, Deferred Benefits credited to the Interest Sub-Account, the Phantom Stock Sub-Account or the Award Sub-Account shall be payable (and issued, if applicable) to a Participant upon the Deferred Benefit Commencement Date and pursuant to the manner of payment (or issuance, if applicable) selected by the Participant on the applicable Compensation Deferral Election or any permitted modification thereof. If the Participant has elected to receive such Deferred Benefits in installments, the amount payable in the first year of such installments shall be an amount that will fully amortize the balance in the Participant's Deferred Benefit Account determined as of the Deferred Benefit Commencement Date over the five, ten or fifteen year period, based on assumed interest earnings at the Plan Interest Rate (to the extent applicable) in effect for such first year. Thereafter, the amount payable (or to be issued) in each succeeding year shall be adjusted to an amount that will fully amortize the remaining balance in such Deferred Benefit Account over the remaining years in the aforesaid five, ten, or fifteen year installment period based on the Plan Interest Rate (to the extent applicable) for such succeeding year. Proceeds of life insurance purchased with amounts credited to the Split- Dollar Insurance Sub-Account shall be payable as provided in the respective policy or policies and the applicable Endorsement Split-Dollar Agreement. 6.2 Service Termination ------------------- Deferred Benefits shall be paid (or issued, as appropriate) to a Participant after his or her termination, as follows: (a) Upon termination of service as a director by a Participant prior to the Participant's attaining fifty-five years of age: (1) the amounts in each of the Participant's Deferred Benefit Accounts shall cease to earn interest (to the extent applicable) and the balance of each Deferred Benefit Account shall be determined in accordance with Article V hereof, and (2) Scientific-Atlanta, Inc. shall pay (or issue, as appropriate) to the Participant the balance of each of the Participant's Deferred Benefit Accounts not according to the Participant's elections as specified in his or her Election Forms but in a lump sum, to be paid within sixty days of the termination. (b) For purposes of this Plan, termination of service as a director by a Participant who is fifty-five years or older with at least three years of Board Service will in all instances be construed to be and will be treated as Retirement by such a Participant, and Scientific-Atlanta, Inc. will pay (or issue) to such a Participant all amounts in his or her Deferred Benefit Accounts in accordance with Section 6.1 hereof. 10 6.3 Total Disability ---------------- Deferred Benefits shall be paid (or issued, as appropriate) to a Participant after his or her becoming Totally Disabled, as follows: (a) Upon the determination that a Participant is Totally Disabled, no further deferrals will be made from his or her Compensation, and Scientific Atlanta, Inc. shall pay (or issue, as appropriate) to the Participant the balance in each of the Participant's Deferred Benefit Accounts as follows: (1) the date of Total Disability shall be deemed to be (i) the Deferred Benefit Commencement Date, if the Deferred Benefit Commencement Date for one or more Deferred Benefit Accounts is a set date prior to the Participant's fifty-fifth birthday and the Total Disability occurs before such date, or (ii) the Participant's Retirement, for those Deferred Benefit Accounts, if any, for which the Deferred Benefit Commencement Date is the Participant's Retirement or later; (2) following Total Disability, the amounts in his or her Interest Sub- Account shall continue to earn interest, and the hypothetical shares in the Phantom Stock Sub-Account shall continue to earn dividends, as provided in the Plan, until paid out to the Participant as provided herein; and (3) the amount (including shares of Scientific-Atlanta Common Stock) in any Deferred Benefit Account shall be payable (or issued) to the Participant on the Deferred Benefit Commencement Date which applies to such Deferred Benefit Account, taking into consideration the aforesaid deemed dates (Section 6.3(a)(1)(i) and (ii)) pursuant to the method(s) requested by the Participant in his or her Election Form. (b) For purposes of this Plan, once a Participant is determined to be Totally Disabled, he or she will continue to be deemed Totally Disabled irrespective of the Participant's ceasing to be considered Totally Disabled for purposes of any other plan maintained by Scientific-Atlanta, Inc. (c) In the event that a Totally Disabled Participant resumes service with the Board following his or her Service Termination Date, such Totally Disabled Participant may resume participation in this Plan at the discretion of the Plan Committee; provided, however, that in any event the -------- ------- Totally Disabled Participant shall continue to receive payments of Deferred Benefits pursuant to the terms of this Plan. 11 6.4 Death ----- Deferred Benefits shall be paid (or issued, as appropriate) after the death of a Participant, as follows: (a) After the death of a Participant, Scientific-Atlanta, Inc. shall pay the amounts (or issue shares of Scientific-Atlanta Common Stock, if applicable) in each of the Participant's Deferred Benefit Accounts to the Beneficiary designated by the Participant with respect to each Compensation Deferral Election in each of his or her respective Election Forms, or, if the Participant fails to so designate a Beneficiary, to his or her estate. (b) If the Participant dies prior to Retirement, Scientific-Atlanta, Inc. shall pay to each respective Beneficiary or to the Participant's estate, as the case may be, the amounts in each of the Participant's respective Deferred Benefit Accounts (or issue the shares held in the Award Sub- Account), in the same manner as set forth in Section 6.3(a). (c) If the Participant dies following Retirement or being determined to be Totally Disabled but prior to his or her receiving the full payment of all Deferred Benefits payable to him or her, Scientific-Atlanta, Inc. shall pay (or issue, if appropriate) to the respective Beneficiaries or to the Participant's estate, as the case may be, the same Deferred Benefits in the same manner as it otherwise would have paid (or issued) to the Participant as if the Participant had not died, unless the Participant has specified in his or her Election Form a different manner of payment to a Beneficiary. (d) Notwithstanding the other provisions of Section 6.4, a Beneficiary may request a different payment schedule than what has been elected by the Participant, if such change does not further defer the scheduled payout, by submitting a request in writing to the Plan Committee. The granting of any such request shall be within the discretion of the Plan Committee. (e) If a Beneficiary who is receiving Deferred Benefits pursuant to this Plan dies, the remainder of the Deferred Benefits to which such Beneficiary was entitled at the time of his or her death shall continue to be payable to the Beneficiary or to beneficiaries designated by such Beneficiary in writing to the Plan Committee (or to the Beneficiary's estate or heirs if he or she fails to designate a beneficiary or beneficiaries). ARTICLE VII - PLAN ADMINISTRATION - --------------------------------- 7.1 Plan Committee -------------- This Plan and all matters related to it shall be administered by the Plan Committee. The Plan Committee shall have the authority to interpret the provisions of this Plan and to determine all questions arising in the administration, interpretation and application of this Plan. The Plan 12 Committee may, in its sole discretion, delegate any or all of its responsibilities relative to administration of this Plan to such officers of Scientific-Atlanta, Inc. as it designates. ARTICLE VIII - PARTICIPANT'S RIGHTS - ----------------------------------- 8.1 Ineligibility to Participate in Plan ------------------------------------ In the event that the Plan Committee determines that a Participant has become ineligible to continue to participate in this Plan, the Plan Committee may terminate Participant's participation in this Plan upon ten (10) days' prior written notice to the Participant. In such event, the Participant will not be entitled to make further Compensation Deferral Elections, but all current Compensation Deferral Elections shall continue in effect. All Deferred Benefit Accounts shall be payable as otherwise provided in Article VI hereof. 8.2 Termination of Plan ------------------- The Board of Directors of Scientific-Atlanta, Inc. may terminate this Plan at any time, and termination of this Plan shall be effective upon ten (10) days' written notice to all Participants in the Plan. Upon such termination of this Plan, Scientific-Atlanta, Inc. shall pay all active Participants their Deferred Benefits as provided in Section 6.1 as if each such Participant had actually reached the Deferred Benefit Commencement Date for all of his or her Deferred Benefit Accounts. 8.3 Participant's Rights -------------------- The right of a Participant or his or her Beneficiary or estate to receive any benefits under this Plan shall be solely that of an unsecured creditor of Scientific-Atlanta, Inc. Any asset acquired or held by Scientific-Atlanta, Inc. or funds allocated by Scientific-Atlanta, Inc. in connection with the liabilities assumed by Scientific-Atlanta, Inc. pursuant to this Plan shall not be deemed to be held under any trust for the benefit of any Participant or of any of Participant's Beneficiaries or to be security for the performance of Scientific Atlanta, Inc.'s obligations hereunder but shall be and remain a general asset of Scientific-Atlanta, Inc. 8.4 Spendthrift Provision --------------------- Neither a Participant nor any person claiming through a Participant shall have the right to commute, sell, assign, transfer, pledge, mortgage or otherwise encumber, transfer, hypothecate or convey any Deferred Benefit payable hereunder or any part thereof in advance of its actually having been received by a Participant or other appropriate recipient under this Plan, and the right to receive all such Deferred Benefits is expressly declared to be non-assignable and non-transferable. Prior to the actual payment (or issuance, if appropriate) thereof, no part of the Deferred Benefits payable hereunder shall be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any person claiming through a Participant 13 or be transferable by operation of law in the event of a Participant's or any such other person's bankruptcy or insolvency. 8.5 Cooperation ----------- Each Participant will cooperate with Scientific-Atlanta, Inc. by furnishing any and all information reasonably requested by Scientific-Atlanta, Inc. in order to facilitate the payment of Deferred Benefits hereunder and by taking any such other actions as Scientific-Atlanta, Inc. or the Plan Committee may reasonably request. ARTICLE IX - MISCELLANEOUS - -------------------------- 9.1 Amendments and Modifications ---------------------------- The Board of Directors of Scientific-Atlanta, Inc. may amend this Plan in any respect at any time. In addition, the Plan Committee may authorize the following types of amendments to the Plan without Board approval: (a) amendments required by law; (b) amendments that relate to the administration of the Plan and that do not materially increase the cost of the Plan; and (c) amendments that are designed to resolve possible ambiguities, inconsistencies or omissions in the Plan and that do not materially increase the cost of the Plan. All authorized amendments shall be effective upon ten (10) days' written notice to the Participants. If any such amendment affects a Participant's Deferred Benefits, such affected Participant may, within ninety (90) days after the effective date of such amendment, elect to terminate his or her participation in the Plan pursuant to this Section 9.1, in which event the date of such election shall be deemed to be such Participant's Deferred Benefit Commencement Date. 9.2 Inurement --------- This Plan shall be binding upon and shall inure to the benefit of Scientific-Atlanta, Inc. and each Participant hereto, and their respective beneficiaries, heirs, executors, administrators, successors and assigns. 9.3 Governing Law ------------- This Plan is made in accordance with and shall be governed in all respects by the laws of the state of Georgia. 9.4 Tax Withholding --------------- All payments (and issuances of shares) made pursuant to this Plan shall be subject to the withholding of state and federal income taxes, FICA tax or other taxes to the extent required by applicable law. The Plan Committee shall, before delivery of a cash payment or a stock certificate, require the Participant to make arrangements satisfactory to the Plan Committee to satisfy such 14 withholding requirements. A Participant receiving shares of Scientific-Atlanta, Inc. Common Stock may elect to satisfy such withholding requirements by having the Plan Committee withhold shares otherwise issuable to the Participant, with the Participant's election being made by delivering to the Plan Committee a written election stating his or her desire to so satisfy such withholding requirements. To record the adoption of the Plan (as amended and restated) by the Board on November 13, 1996, the Company has caused its authorized officers to execute this Plan and affix the corporate name and seal hereto. SCIENTIFIC-ATLANTA, INC. By: /s/ Brian C. Koenig ------------------------------------ Name: Brian C. Koenig -------------------------------- Title: Vice President Human Resources -------------------------------- By: /s/ William E. Eason, Jr. ------------------------------------ Name: William E. Eason, Jr. -------------------------------- Title: Secretary -------------------------------- [Seal] 15 EX-11 7 COMPUTATION OF EARNINGS PER SHARE Exhibit 11 SCIENTIFIC-ATLANTA, INC., AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
Three Months Ended Six Months Ended ---------------------------- -------------------------- December 27, December 29, December 27, December 29, 1996 1995 1996 1995 ------------ ------------ ------------ ------------ WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 77,205 76,379 77,166 76,699 Add - Additional shares of common stock assumed issued upon exercise of options using the "treasury stock" method as it applies to the computation of primary earnings per share 702 969 622 1,297 ------- ------- ------- ------- NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 77,907 77,348 77,788 77,996 Add - Additional shares of common stock assumed issued upon exercise of options using the "treasury stock" method as it applies to the computation of fully diluted earnings per share 49 50 129 20 ------- ------- ------- ------- NUMBER OF SHARES OUTSTANDING ASSUMING FULL DILUTION 77,956 77,398 77,917 78,016 ======= ======= ======= ======= NET EARNINGS (LOSS) FOR PRIMARY AND FULLY DILUTED COMPUTATION Continuing Operations $13,752 $ 6,601 $24,562 $10,687 ======= ======= ======= ======= Discontinued Operations -- -- 3,400 (13,210) ======= ======= ======= ======= Net Earnings (Loss) $13,752 $ 6,601 $27,962 $(2,523) ======= ======= ======= ======= EARNINGS (LOSS) PER COMMON SHARE AND COMMON EQUIVALENT SHARE PRIMARY Continuing Operations $ 0.18 $ 0.09 $ 0.32 $ 0.14 Discontinued Operations -- -- 0.04 (0.17) ------- ------- ------- ------- Net Earnings (Loss) $ 0.18 $ 0.09 $ 0.36 $ (0.03) ======= ======= ======= ======= FULLY DILUTED Continuing Operations $ 0.18 $ 0.09 $ 0.32 $ 0.14 Discontinued Operations -- -- 0.04 (0.17) ------- ------- ------- ------- Net Earnings (Loss) $ 0.18 $ 0.09 $ 0.36 $ (0.03) ======= ======= ======= =======
Note: In the three and six months ended December 29, 1995 the dilutive effect of equivalent shares derived from stock options was less than 3 percent and therefore, the equivalent shares were not included in the computation of earnings per share. EX-27 8 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q FOR THE QUARTER ENDED DECEMBER 27, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS JUN-27-1997 JUN-29-1996 DEC-27-1996 96,021 0 229,964 3,808 178,580 548,227 246,502 83,942 769,763 239,186 400 0 0 38,686 450,233 769,763 543,848 543,848 379,741 379,741 57,141 153 254 36,121 11,559 24,562 3,400 0 0 27,962 0.36 0.36
EX-99 9 CAUTIONARY STATEMENTS Exhibit 99 CAUTIONARY STATEMENTS From time to time, the company may publish, verbally or in written form, forward-looking statements relating to such matters as anticipated financial performance, business prospects, technological developments, new products, research and development activities and similar matters. In fact, this Form 10-Q (or any other periodic reporting documents required by the 1934 Act) may contain forward-looking statements reflecting the current views of the company concerning potential future events or developments. The Private Securities Litigation Reform Act of 1995 (the "Act") provides a "safe harbor" for forward-looking statements. These Cautionary Statements are being made pursuant to the provisions of the Act and with the intention of obtaining the benefits of the "safe harbor" provisions of the Act. In order to comply with the terms of the "safe harbor," the company cautions investors that any forward- looking statements made by the company are not guarantees of future performance and that a variety of factors could cause the company's actual results and experience to differ materially from the anticipated results or other expectations expressed in the company's forward-looking statements. The risks and uncertainties which may affect the operations, performance, development and results of the company's business include, but are not limited to, the following: uncertainties relating to the development and ownership of intellectual property; uncertainties relating to the ability of the company and other companies to enforce their intellectual property rights; uncertainties relating to economic conditions; uncertainties relating to government and regulatory policies; uncertainties relating to customer plans and commitments; the company's dependence on the cable television industry and cable television spending; signal security; the pricing and availability of equipment, materials and inventories; technological developments; performance issues with key suppliers and subcontractors; governmental export and import policies; global trade policies; worldwide political stability and economic growth; regulatory uncertainties; delays in testing of new products; rapid technology changes; the highly competitive environment in which the company operates; the entry of new, well-capitalized competitors into the company's markets; changes in the financial markets relating to the company's capital structure and cost of capital; and uncertainties inherent in international operations and foreign currency fluctuations. The words "believe," "expect," "anticipate," "project," "plan" and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. -----END PRIVACY-ENHANCED MESSAGE-----