-----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, FrZYCWIL4jTfC/YgLoIPomZWDUq0RhIdGiIlKxuWHhoIQObrwGHkPZywEyNsoOkH BJIHUyRBgkYTun2QZNtYuw== 0000931763-99-001726.txt : 19990518 0000931763-99-001726.hdr.sgml : 19990518 ACCESSION NUMBER: 0000931763-99-001726 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 22 CONFORMED PERIOD OF REPORT: 19990402 FILED AS OF DATE: 19990517 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: SEC FILE NUMBER: 001-05517 FILM NUMBER: 99628215 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 FORM 10-Q 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 April 2, 1999 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 jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) One Technology Parkway, South Norcross, Georgia 30092-2967 (Address of principal executive offices) (Zip Code) 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 April 30, 1999, Scientific-Atlanta, Inc. had outstanding 76,479,753 shares of common stock. 1 of 12 PART I - FINANCIAL INFORMATION SCIENTIFIC-ATLANTA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EARNINGS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
Three Months Ended Nine Months Ended ---------------------------------- ----------------------------------- April 2, March 27, April 2, March 27, 1999 1998 1999 1998 ---------------- --------------- --------------- ---------------- SALES $ 320,019 $ 288,714 $ 888,244 $ 877,739 COSTS AND EXPENSES Cost of sales 228,635 197,442 638,669 610,222 Sales and administrative 37,589 39,761 119,261 120,047 Research and development 27,914 27,316 86,967 80,717 Interest expense 209 101 731 370 Interest income (1,702) (1,315) (5,641) (3,650) Other (income) expense, net (2,360) 928 (30,309) 814 ------- -------- -------- ------- Total costs and expenses 290,285 264,233 809,678 808,520 EARNINGS BEFORE INCOME TAXES 29,734 24,481 78,566 69,219 PROVISION (BENEFIT) FOR INCOME TAXES Current 4,060 8,549 25,772 21,565 Deferred 4,860 (1,205) (2,202) (799) ------- -------- -------- ------- NET EARNINGS $ 20,814 $ 17,137 $ 54,996 $ 48,453 ======= ======== ======== ======= EARNINGS PER COMMON SHARE BASIC $ 0.27 $ 0.22 $ 0.71 $ 0.62 ======= ======== ======== ======= DILUTED $ 0.27 $ 0.22 $ 0.71 $ 0.62 ======= ======== ======== ======= WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING BASIC 75,859 78,725 76,783 78,619 ======= ======== ======== ======= DILUTED 78,226 79,664 78,302 79,913 ======= ======== ======== ======= DIVIDENDS PER SHARE PAID $ 0.015 $ 0.015 $ 0.045 $ 0.045 ======= ======== ======== =======
SEE ACCOMPANYING NOTES 2 of 12 SCIENTIFIC-ATLANTA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED)
In Thousands ---------------------------------------- April 2, June 26, 1999 1998 --------------- --------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 174,623 $ 175,392 Marketable securities 61,043 95,947 Receivables, less allowance for doubtful accounts of $9,804,000 at April 2 and $10,052,000 at June 26 283,571 254,419 Inventories 178,178 159,545 Deferred income taxes 16,665 18,062 Other current assets 23,817 13,133 ---------- ---------- TOTAL CURRENT ASSETS 737,897 716,498 ---------- ---------- PROPERTY, PLANT AND EQUIPMENT, at cost Land and improvements 21,467 20,621 Buildings and improvements 35,867 37,316 Machinery and equipment 197,787 193,894 ---------- ---------- 255,121 251,831 Less-Accumulated depreciation and amortization 90,275 91,804 ---------- ---------- 164,846 160,027 ---------- ---------- COST IN EXCESS OF NET ASSETS ACQUIRED 8,125 8,825 ---------- ---------- OTHER ASSETS 63,937 54,792 ---------- ---------- TOTAL ASSETS $ 974,805 $ 940,142 ========== ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current maturities of long-term debt $ 444 $ 726 Accounts payable 111,408 103,629 Accrued liabilities 137,289 139,011 Income taxes currently payable 10,049 15,302 ---------- ---------- TOTAL CURRENT LIABILITIES 259,190 258,668 ---------- ---------- LONG-TERM DEBT, less current maturities 612 983 ---------- ---------- OTHER LIABILITIES 55,437 48,495 ---------- ---------- STOCKHOLDERS' EQUITY Preferred stock, authorized 50,000,000 shares; no shares issued -- -- Common stock, $0.50 par value, authorized 350,000,000 shares; issued 79,616,712 shares at April 2 and 79,207,004 shares at June 26 39,808 39,604 Additional paid-in capital 212,767 195,446 Retained earnings 451,214 399,678 Accumulated other comprehensive income (loss) 371 (204) ---------- ---------- 704,160 634,524 Less - Treasury stock, at cost (3,196,246 shares at April 2 and 122,418 shares at June 26) 44,594 2,528 ---------- ---------- 659,566 631,996 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 974,805 $ 940,142 ========== ==========
SEE ACCOMPANYING NOTES 3 of 12 SCIENTIFIC-ATLANTA, INC., AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
Nine Months Ended ----------------- April 2, March 27, 1999 1998 ------------ --------------- NET CASH PROVIDED BY OPERATING ACTIVITIES $ 14,800 $ 46,211 --------- ------- INVESTING ACTIVITIES: Proceeds from the sale of marketable securities 64,450 -- Purchases of property, plant, and equipment (41,360) (29,967) Proceeds from the sale of a business unit -- 27,059 Other 298 (28) --------- ------- Net cash provided (used) by investing activities 23,388 (2,936) --------- ------- FINANCING ACTIVITIES: Principal payments on long-term debt (653) (552) Dividends paid (3,460) (3,538) Issuance of common stock 30,384 11,472 Treasury shares acquired (65,228) (7,511) --------- ------- Net cash used by financing activities (38,957) (129) --------- ------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (769) 43,146 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 175,392 107,143 --------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 174,623 $ 150,289 ========= ======= SUPPLEMENTAL CASH FLOW DISCLOSURES Interest paid $ 678 $ 320 ========= ======= Income taxes paid, net $ 22,642 $ 19,294 ========= =======
SEE ACCOMPANYING NOTES 4 of 12 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 company's 1998 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. The company's fiscal year ends on the Friday closest to June 30 of each year. Fiscal 1999 includes fifty-three weeks. The three and nine months ended April 2, 1999 include thirteen and forty weeks, respectively. C. Basic earnings per share were computed based on the weighted average number of shares outstanding. Diluted earnings per share were computed based on the weighted average number of dilutive shares of common stock outstanding. See Exhibit 11. D. Other (income) expense for the quarter ended April 2, 1999 included a gain of $1,375 from the adjustment of the company's investment in Broadcom Corp (Broadcom) to market value as required by generally accepted accounting principles. Other (income) expense for the nine months ended April 2, 1999 included a $39,750 gain from the adjustment of the company's investment in Broadcom to market value, a $10,880 loss on the sale of one million shares of the company's investment in Broadcom, and a gain of $6,250 from the cancellation of a contract under which the company was obligated to supply equipment which, upon resale, the company had estimated losses would be incurred. In addition, during the nine months ended April 2, 1999, the company decided to dispose of a business unit, Control Systems, which produces devices to monitor and manage utility service usage, because the business unit did not fit with the company's core strategy. The company recorded a charge of $6,225 to adjust the carrying value of the assets to be sold to fair value, less costs to sell, to adjust the estimated profitability on certain contracts to allow the purchaser to achieve reasonable margins, to provide for indemnification to the purchaser and to provide for other miscellaneous expenses associated with the sale. There have been no charges to the reserve through April 2, 1999. The company anticipates completing the sale of Control Systems during the first half of fiscal 2000. Other (income) expense for the quarter ended March 27, 1998 included a gain from the sale of certain assets of the interdiction business unit and charges from the discontinuance of development of coaxiom systems. During the quarter ended March 27, 1998, the company sold the inventory, manufacturing assets and intellectual property of the interdiction business to Blonder Tongue Laboratories, Inc. (Blonder Tongue) for $19,000 cash, Blonder Tongue stock valued at $1,000 and an option to acquire additional shares of Blonder Tongue stock, and the company recorded a pre-tax gain of approximately $9,080. At April 2, 1999, the company had a reserve of approximately $3,618 for potential post-closing sales price adjustments and other miscellaneous expenses related to the sale. During fiscal 1997, the company decided to decrease its research and development efforts related to coaxiom products because the markets for these products had not developed as quickly as the company previously anticipated. During the quarter ended March 27, 1998, the company decided to discontinue its efforts to develop coaxiom systems and recorded a pre-tax charge of approximately $9,000. The charge related to the disposal of inventory and fixed assets which were associated with the development of coaxiom systems, research and development costs incurred during fiscal 1998 and other miscellaneous expenses. At April 2, 1999, the company had disposed of the fixed assets and anticipates disposal of the inventory by the end of the 1999 fiscal year. The company had a reserve of approximately $1,030 related to the discontinuance of coaxiom products at April 2, 1999. The company will continue to develop applications and technology for telephony on cable using IP (Internet protocol) telephony which will be used in the company's networks and Explorer(R) 2000 digital interactive set-tops. 5 of 12 NOTES: (Amounts in thousands, except share data) There were no other significant items in other (income) expense for the three and nine months ended March 27, 1998. Other (income) expense for the three and nine months ended April 2, 1999 and March 27, 1998 also included the results of foreign currency transactions and partnership activities and net gains from rental income and other miscellaneous items. E. Inventories consist of the following: April 2, June 26, 1999 1998 ---------- ---------- Raw materials and work-in-process $ 116,785 $ 113,703 Finished goods 61,393 45,842 ---------- ---------- Total inventory $ 178,178 $ 159,545 ========== ========== F. During fiscal 1997, the company decided to dispose of two business units, microwave and mobile, because these businesses were not aligned with the company's core business strategies and recorded a pre-tax charge of $5,526. During the nine months ended March 27, 1998, the company sold the majority of the net assets of the microwave business unit for $8,059 of cash. No gain or loss was recognized on the transaction. At April 2, 1999, the company had a reserve of approximately $3,428 to adjust the carrying amount of the net assets of the mobile business unit and for potential losses on contracts of the microwave business which were retained by the company, severance costs, and other miscellaneous expenses related to the sale of the microwave business unit. The company anticipates disposal of the net assets of the mobile business by the end of this fiscal year. G. During the nine months ended April 2, 1999, the company acquired 4,648,000 shares of its common stock pursuant to a stock buyback program for an aggregate cost of $65,228 and acquired an additional 75,880 shares from the payment in stock rather than cash by employees of tax withholdings on restricted stock which vested and the cancellation of unvested, restricted stock. During the nine months ended March 27, 1998, the company purchased 500,000 shares of its common for an aggregate cost of $7,511. The company obtained an additional 73,240 shares of its common stock, primarily from the cancellation of unvested, restricted stock grants. The company re- issues these shares under the company's stock option plans, 401(k) plan, employee stock purchase plan and other stock-based employee compensation arrangements. H. The company adopted Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income" in fiscal 1999. SFAS No. 130 requires the reporting of a measure of all changes in equity of an entity that result from recognized transactions and other economic events other than transactions with owners in their capacity as owners. Other comprehensive income (loss) for each period presented includes only foreign currency translation adjustments. The calculation of comprehensive income is as follows:
Three Months Ended Nine Months Ended --------------------------- ---------------------------- April 2, March 27, April 2, March 27, 1999 1998 1999 1998 ------------ ------------ ----------- ------------ Net earnings $ 20,814 $ 17,137 $ 54,996 $ 48,453 Other comprehensive income (loss) (1,219) (79) 575 (349) -------- ------- ------- -------- Comprehensive income $ 19,595 $ 17,058 $ 55,571 $ 48,104 ======== ======= ======= ========
I. During the fourth quarter of fiscal 1999, the company sold its remaining one million share investment in Broadcom and realized a gain of $12,459. The company also exercised warrants during the fourth quarter of fiscal 1999 to purchase 720,000 shares of common stock of Harmonic Inc. simultaneously sold the 720,000 shares of Harmonic Inc. and realized a gain of $16,646. 6 of 12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION - ------------------- Scientific-Atlanta had stockholders' equity of $660.0 million and cash on hand was $174.6 million at April 2, 1999. Cash decreased $0.8 million from June 26, 1998 as expenditures for the acquisition of shares of the company's common stock, increases in inventory levels and accounts receivable and expenditures for equipment exceeded proceeds from the sale of marketable securities and cash generated from earnings, increases in payables and the issuance of common stock. The current ratio was 2.8:1 at April 2, 1999, approximately the same as June 26, 1998. At April 2, 1999, total debt was $1.5 million or less than one percent of total capital invested. 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 in the company's Juarez, Mexico facility. RESULTS OF OPERATIONS - --------------------- Sales for the quarter ended April 2, 1999, were $320.0 million, up 11 percent over the prior year. Strong North American sales growth in Transmission Network Systems' and Subscriber Systems' products and services were offset in part by declines in sales of Satellite products. The growth in Transmission Network Systems was driven by the North American rebuild cycle. The significant increase in sales of digital products was the primary factor in the year-to-year increase in Subscriber Systems. Satellite sales declined in fiscal 1999 as this sector, which relies significantly on international markets, continues to be impacted by the weak economic conditions in Eastern Europe and the Asia Pacific region. International sales were 22 percent of total sales in the quarter ended April 2, 1999 as compared to 25 percent of total sales for the same quarter last year. Sales for the nine months ended April 2, 1999 were $888.2 million, up slightly over the prior year. The strong growth in North American sales of Transmission Network Systems' and Subscriber Systems' products described in the preceding paragraph was offset partially by continued weak economic conditions in the Asia Pacific, Eastern Europe and Latin American regions, which negatively impacted Satellite sales. International sales were 22 percent of total sales in the nine months ended April 2, 1999 as compared to 35 percent of total sales last year. As anticipated and announced previously, sales of analog set-tops declined in response to the introduction of two-way digital technology. The company expected a decline in analog sales as cable operators establish the ideal mix of analog and digital services in each cable system. The GainMaker(TM) product was previously announced as being available for purchase in the third fiscal quarter of 1999, but such product is now expected to be available for purchase in the fourth fiscal quarter of 1999. Gross margins were 28.6 percent and 28.1 percent for the three and nine months ended April 2, 1999, 3.0 percentage points and 2.4 percentage points lower than the comparable periods of the prior year. Margins on digital set- tops, which were lower than the company average, offset gains from cost reductions from the transfer of RF (radio frequency) production to Juarez, Mexico from Norcross, Georgia. 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. Increases in operating expenses relative to last year are due in part to the fact that the nine months ended April 2, 1999 included forty weeks, as compared to the normal thirty-nine week period in the prior year. Research and development expenses were $27.9 million and $87.0 million for the three and nine months ended April 2, 1999, respectively, reflecting the company's continued investment in research and development programs to support new product initiatives, particularly digital products. The company capitalized software development costs of $1.0 million and $2.4 million during the three and nine months ended April 2, 1999, respectively. There were no non-recurring engineering costs capitalized during the nine months ended April 2, 1999. During the three and nine months ended March 27, 1998, the company capitalized software development costs of $0.4 million and $1.8 million and capitalized non-recurring engineering costs of $6.2 million during the nine months ended March 27, 1998. Research and development spending, including capitalized software development costs and non-recurring engineering, was approximately $30 million in each of the three month periods ended April 2, 1999 and March 27, 1998 and approximately $90 million in each of the nine month periods ended April 2, 1999 and March 27, 1998. 7 of 12 Sales and administrative expenses were $2.2 million lower in the three months ended April 2, 1999 as compared to the same quarter of the prior year due primarily to the benefits realized in the third quarter of fiscal 1999 from the previously announced re-sizing of the Satellite businesses. These lower expenses were offset partially by increased marketing efforts related to digital video products and Prisma(TM) Digital Transport products. Sales and administrative expenses for the nine months ended April 2, 1999 were flat as compared to the prior year. Benefits from the re-sizing of the Satellite businesses were offset by increased marketing efforts related to digital video products and Prisma Digital Transport products and an additional week in the nine month period ended April 2, 1999 as compared to the prior year. Other (income) expense for the quarter ended April 2, 1999 included a gain of $1.4 million from the adjustment of the company's investment in Broadcom Corp (Broadcom) to market value as required by generally accepted accounting principles. Other (income) expense for the nine months ended April 2, 1999 included a $39.7 million gain from the adjustment of the company's investment in Broadcom to market value, a $10.9 million loss on the sale of one million shares of the company's investment in Broadcom, and a gain of $6.2 million from the cancellation of a contract under which the company was obligated to supply equipment which, upon resale, the company had estimated losses would be incurred. In addition, during the nine months ended April 2, 1999, the company decided to dispose of a business unit, Control Systems, which produces devices to monitor and manage utility service usage, because the business unit did not fit with the company's core strategy. The company recorded a charge of $6.2 million to adjust the carrying value of the assets to be sold to fair value, less costs to sell, to adjust the estimated profitability on certain contracts to allow the purchaser to achieve reasonable margins, to provide for indemnification to the purchaser and to provide for other miscellaneous expenses associated with the sale. There have been no charges to the reserve through April 2, 1999. The company anticipates completing the sale of Control Systems during the first half of fiscal 2000. Other (income) expense for the quarter ended March 27, 1998 included a gain from the sale of certain assets of the interdiction business unit and charges from the discontinuance of development of coaxiom systems. During the quarter ended March 27, 1998, the company sold the inventory, manufacturing assets and intellectual property of the interdiction business to Blonder Tongue Laboratories, Inc. (Blonder Tongue) for $19.0 million cash, Blonder Tongue stock valued at $1.0 million and an option to acquire additional shares of Blonder Tongue stock, and the company recorded a pre-tax gain of approximately $9.1 million. At April 2, 1999, the company had a reserve of approximately $3.6 million for potential post-closing sales price adjustments and other miscellaneous expenses related to the sale. During fiscal 1997, the company decided to decrease its research and development efforts related to coaxiom products because the markets for these products had not developed as quickly as the company previously anticipated. During the quarter ended March 27, 1998, the company decided to discontinue its efforts to develop coaxiom systems and recorded a charge of approximately $9.0 million. The charge related to the disposal of inventory and fixed assets which were associated with the development of coaxiom systems, research and development costs incurred during fiscal 1998 and other miscellaneous expenses. At April 2, 1999, the company had disposed of the fixed assets and anticipates disposal of the inventory by the end of the fiscal year. The company had a reserve balance of approximately $1.0 million related to the discontinuance of coaxiom products at April 2, 1999. The company will continue to develop applications and technology for telephony on cable using IP (Internet protocol) telephony which will be used in the company's networks and Explorer(R) 2000 digital interactive set-tops. There were no other significant items in other (income) expense for the three and nine months ended March 27, 1998. Other (income) expense for the three and nine months ended April 2, 1999 and March 27, 1998 also included the results of foreign currency transactions and partnership activities and net gains from rental income and other miscellaneous items. During fiscal 1997, the company decided to dispose of two business units, microwave and mobile, because these businesses were not aligned with the company's core business strategies and recorded a pre-tax charge of $5.5 million. During the nine months ended March 27, 1998, the company sold the majority of the net assets of the microwave business unit for $8.1 million of cash. No gain or loss was recognized on the transaction. At April 2, 1999, the company had a reserve of approximately $3.4 million to adjust the carrying amount of the net assets of the mobile business unit and for potential losses on contracts of the microwave business which were retained by the company, severance, and other miscellaneous expenses related to the sale of the microwave business unit. The company anticipates disposal of the net assets of the mobile business by the end of this fiscal year. 8 of 12 In the fourth quarter of fiscal 1998, the company recorded charges of $23.4 million in connection with a restructuring plan. These charges included $10.2 million and $3.2 million for fixed assets to be abandoned and expenses related to the cancellation of leases, respectively, as a result of the consolidation of operations, $5.2 million for severance, and $4.8 million for impairment of certain assets and other miscellaneous expenses. The company began implementation of the restructuring plan during fiscal 1998. The company incurred severance costs of $1.0 million and other miscellaneous expenses of $0.2 million related to the restructuring plan which were charged to the reserve in the fourth quarter of fiscal 1998. During fiscal 1999, the company continued the implementation of its restructuring plan. Production of the RF amplifier was transferred to the company's high volume, low cost manufacturing facility in Juarez, Mexico from Norcross, Georgia; the consolidation of the production of headend equipment from Vancouver, British Columbia to Norcross, Georgia was substantially completed. The Melbourne, Florida satellite services Network Operations Center (NOC) and research and development facility were relocated to Norcross, Georgia; Satellite Networks and Communications and Tracking Systems business units were combined and re-sized downward, and the consolidation of operations in Norcross, Georgia was substantially completed. During fiscal 1999, the company incurred expenses of $0.7 million related to the cancellation of leases, severance costs of $3.0 million, and $1.4 million of miscellaneous expenses related to the implementation of its restructuring plan. These expenses were charged to the restructuring reserves recorded in the fourth quarter of fiscal 1998. The company had a balance of $4.7 million related to the restructuring plan at April 2, 1999. The company anticipates that the restructuring plan will be substantially completed by the end of fiscal 1999. The company's effective income tax rate was 30 percent for the quarter and nine months, unchanged from the prior year. Net earnings for the three months ended April 2, 1999 were $20.8 million, up $3.7 million over the prior year. Higher sales volume and lower operating expenses year-over-year were offset in part by lower gross margins on digital products. Net earnings for the nine months ended April 2, 1999 were $55.0 million, up $6.5 million over the prior year. An after-tax gain of $20.2 million from the company's investment in Broadcom was partially offset by lower gross margin rates and increased operating expenses. YEAR 2000 - --------- The company, like most other major companies, is currently addressing a universal problem commonly referred to as "Year 2000 Compliance," which relates to the ability of computer programs and systems to properly recognize and process date sensitive information before and after January 1, 2000. The following discussion is based on information currently available to the company. The company has analyzed and continues to analyze its internal information technology ("IT") systems ("IT systems") to identify any computer programs that are not Year 2000 compliant and implement any changes required to make such systems Year 2000 compliant. The company believes that its critical IT systems currently are capable of functioning without substantial Year 2000 Compliance problems. Of the non-critical, but important, IT systems that are not currently Year 2000 Compliant, the company believes such IT systems will be Year 2000 compliant in a time frame that will avoid any material adverse effect on the company. Also, the company does not believe that the expenditures related to replacing or upgrading any of its IT systems to make them Year 2000 compliant will have a material adverse effect on the financial condition of the company. The company has identified only two IT systems (E-mail and electronic calendar) that must be replaced due to Year 2000 concerns, and the company already had plans to replace these IT systems with one system providing increased functionality. The company has evaluated its critical equipment and critical systems that contain embedded software, such as microcontrollers ("Non-IT systems"), and the company believes that all of its critical Non-IT systems are capable of functioning without substantial Year 2000 Compliance problems. The company commenced testing of its IT systems and Non-IT systems in the first calendar quarter of 1999. To date, such testing has not revealed any significant Year 2000 issues. Certain products currently sold by the company contain computer programs that perform date functions or date calculations. The company has evaluated its products and is continuing to evaluate its products, and, based on its investigation to date, the company believes that the products it currently sells (except third party software included in the company's digital network control system) are Year 2000 9 of 12 compliant, provided that they are upgraded to include all recommended and available engineering changes. However, the company's products are often used by its customers in systems that contain third party products or products supplied by the company in prior years. Therefore, even though the company's current products may be Year 2000 compliant, the failure of such third party products or historical company-supplied products to be Year 2000 compliant, or to properly interface with the company's current products, may result in a system failure. Certain products that the company no longer offers for sale are not Year 2000 compliant, and the company has no plans to upgrade them. However, the company does have a plan for helping its customers upgrade their System Manager products and related components to System Release 4.6 (and higher versions) software which is currently available for purchase. Additionally, the company is actively working with its third party software provider to remedy the Year 2000 issues in the software included in the company's digital network control system. Such System Release 4.6 (and higher versions) software is expected to remedy the Year 2000 problems of System Manager products historically sold by the company to its customers. Because some customers may be using obsolete versions of the System Manager products, they may also need to purchase equipment to solve their Year 2000 problems. A customer's failure to upgrade its System Manager products and related equipment to System Release 4.6 (or higher version) software and related equipment may result in such customer having critical Year 2000 problems. Under certain limited circumstances, the company may incur expense to help remedy such customer's critical Year 2000 failure. The company is investigating each of its significant vendors, suppliers, financial service organizations, service providers and customers to confirm that the company's operations will not be materially adversely affected by the failure of any such third party to have Year 2000 compliant computer programs. Regardless of the responses that the company receives from such third parties, the company is establishing contingency plans to reduce the company's exposure resulting from the non-compliance of third parties. First, the company plans to build inventories of critical and/or important components prior to January 1, 2000, and thereby decrease the company's dependence on suppliers that are not Year 2000 compliant. Second, the company plans to send hard copies of "Schedules of Ordered Products and Delivery Dates" to its major customers, commencing in the third calendar quarter of 1999. Such Schedules should enable customers to accept ordered products after January 1, 2000, even if their internal computer systems are not operating properly. The company expects the costs related to remediating Year 2000 issues not to be material. All of such expenditures are included in the budgets of the various departments of the company tasked with various aspects of the Year 2000 project. No IT projects have been deferred due to IT's Year 2000 efforts. The company has approached the Year 2000 project in phases. Phase I of the project involved identification of all software used or sold by the company, identification of all significant vendors, and establishment of a senior management committee (composed of the General Counsel, the Chief Financial Officer and the Chairman of the Corporate Operating Committee) to oversee the project. Phase I was completed in the second calendar quarter of 1998. Phase II of the project involves (a) evaluation of each significant vendor and evaluation of major customers through letters and questionnaires (b) communication with customers concerning any products currently or recently sold by the company that have Year 2000 issues, and (c) evaluating the company's most reasonably likely worst case Year 2000 scenarios and contingency planning related thereto. Phase II is almost completed and is expected to be totally completed during the second calendar quarter of 1999. Phase III involves testing of the company's IT systems and Non-IT systems to confirm Year 2000 compliance and/or discover any overlooked Year 2000 problems. Phase III is under way and is expected to be completed in the second or third calendar quarter of 1999. Last, Phase IV involves implementation of the company's contingency plans. Several contingency plans are currently being implemented and will continue to be implemented through the remainder of calendar year 1999. The company does not currently believe that any of the foregoing will have a material adverse effect on its financial condition or its results of operations. However, the process of evaluating the company's products and third party products and systems is ongoing. Although not expected, failures of critical suppliers, critical customers, critical IT systems, critical Non-IT systems, or products sold by the company (including any delay in the deployment of software releases related to either the System Manager upgrades or the upgrade of the third party software included in the digital network control system) could have a material adverse effect on the company's financial condition or results of operations. As widely publicized, Year 2000 Compliance has many issues and aspects, not all of which the company is able to accurately forecast or predict. There is no way to assure that Year 2000 Compliance will not have adverse effects on the company, some of which could be material. Many of the company's statements related to Year 2000 are forward-looking statements and actual results could differ materially from those anticipated above. The company is relying on the investigations and statements of many employees, consultants and third parties in making the above forward-looking statements and such investigations or statements may not be accurate. 10 of 12 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. Prisma and GainMaker are trademarks of Scientific-Atlanta, Inc. and Explorer is a registered trademark of Scientific-Atlanta, Inc. ITEM 3. QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS - ------- --------------------------------------------------------- The company enters into foreign exchange forward contracts to hedge certain firm commitments and assets denominated in currencies other than the U.S. dollar, primarily Japanese yen. These contracts are for periods consistent with the exposure being hedged and generally have maturities of one year or less. To qualify as a hedge, the item to be hedged must expose the company to inventory pricing or asset devaluation risk and the related contract must reduce that exposure and be designated by the company as a hedge. Gains and losses on foreign exchange forward contracts, including cost of the contracts, are deferred and recognized in income in the same period as the hedged transactions. The company's foreign exchange forward contracts do not subject the company's results of operations to risk due to exchange rate fluctuations because gains and losses on these contracts generally offset losses and gains on the exposure being hedged. The company does not enter into any foreign exchange forward contracts for speculative trading purposes. If a foreign exchange forward contract did not meet the criteria for a hedge, the company would recognize unrealized gains and losses as they occur. Firmly committed purchase exposure and related derivative contracts through April 2, 2000 are as follows: Japanese Canadian Yen Dollar --------- -------- (In thousands, except per dollar amounts) Firmly committed purchase contracts 5,000,000 3,920 Notional amount of forward exchange contracts 3,976,000 3,920 Average contract amount (Foreign currency/ United States dollar) 119.79 1.494 The company has no derivative exposure beyond April 2, 2000. 11 of 12 PART II - OTHER INFORMATION Item 4 - ------ Item 6 Exhibits and Reports on Form 8-K - ------ -------------------------------- (a) Exhibits. Exhibit No. Description ----------- ----------- 3.1 By-Laws of Scientific-Atlanta, Inc. 10.1 Scientific-Atlanta, Inc. 1996 Employee Stock Option Plan 10.2 Long-Term Incentive Plan of Scientific-Atlanta, Inc. 10.3 Form of First Amendment to Severance Protection Agreement by and between Scientific-Atlanta, Inc. and Certain Executives 10.4 Scientific-Atlanta, Inc. Retirement Plan for Non-Employee Directors 10.5 Scientific-Atlanta, Inc. Annual Incentive Plan for Key Employees 10.6 Scientific-Atlanta, Inc. Senior Officer Annual Incentive Plan 10.7 Deferred Compensation Plan for Non-Employee Directors of Scientific- Atlanta, Inc. 10.8 1985 Executive Deferred Compensation Plan of Scientific-Atlanta, Inc. 10.9 Scientific-Atlanta Executive Deferred Compensation Plan 10.10 Scientific-Atlanta, Inc. Supplemental Executive Retirement Plan 10.11 Letter Amendment to Credit and Investment Agreement among Scientific-Atlanta, Inc., Wachovia Bank, N.A. and Wachovia Capital Markets, Inc. 10.12 Amendment to Credit and Investment Agreement among Scientific-Atlanta, Inc., Wachovia Bank, N.A. and Wachovia Capital Markets, Inc. 10.13 Second Amendment to Credit and Investment Agreement among Scientific-Atlanta, Inc., Wachovia Bank, N.A. and Wachovia Capital Markets, Inc. 10.14 Fourth Amendment to Credit Agreement between Scientific-Atlanta, Inc. and NationsBank, N.A. and other lenders 10.15 Non-Employee Directors Stock Option Plan 10.16 First Amendment to Lease Agreement between Scientific-Atlanta, Inc. and Wachovia Capital Markets, Inc. 10.17 Second Amendment to Lease Agreement between Scientific-Atlanta, Inc. and Wachovia Capital Markets, Inc. 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 April 2, 1999. Date: May 17, 1999 ------------- /s/ Wallace G. Haislip ------------------------------------- Wallace G. Haislip Senior Vice President - Finance, Chief Financial Officer and Treasurer (Principal Financial Officer and duly authorized signatory of the Registrant) 12 of 12 EX-3.1 2 BY-LAWS EXHIBIT 3.1 BY-LAWS OF SCIENTIFIC-ATLANTA, INC. (as amended November 12, 1997) ARTICLE I OFFICES ------- Section 1. Registered Office. The registered office shall be in the state ----------------- of Georgia, County of Gwinnett. Section 2. Other Offices. The corporation may also have offices at such ------------- other places both within and without the state of Georgia as the board of directors may from time to time determine and the business of the corporation may require or make desirable. ARTICLE II SHAREHOLDERS' MEETINGS ---------------------- Section 1. Annual Meetings. The annual meeting of the shareholders of the --------------- corporation shall be held at such place and time in the United States as may be determined by the board of directors, for the purpose of electing directors and transacting such other business as may properly be brought before the meeting. To be properly brought before the meeting, business must be either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the board of directors, (b) otherwise properly brought before the meeting by or at the direction of the board of directors, or (c) otherwise properly brought before the meeting by a shareholder. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a shareholder, the shareholder must have given timely notice thereof in writing to the Secretary of the corporation. To be timely, a shareholder's notice must be delivered to or mailed and received at the principal executive offices of the corporation, no earlier than 90 days and no later than 60 days prior to the date of such meeting, regardless of any postponements, deferrals or adjournments of such meeting to a later date; provided, however, that if less than 70 days' notice or prior public disclosure of the date of the meeting is given or made, notice by a holder of record must, to be timely, be so delivered or received not later than the close of business on the tenth day following the day on which such notice of the date of the meeting is mailed or the day on which such public disclosure was made; provided that, in the case of an annual meeting, notice by a holder of record, to be timely, must be so delivered or received not later than the close of business 60 days prior to the anniversary of the date of the previous year's annual meeting. A shareholder's notice to the Secretary shall set forth as to each matter the shareholder proposes to bring before the annual meeting (i) a brief 1 description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and record address of the shareholder proposing such business, (iii) the class and number of securities of the corporation which are beneficially owned by the shareholder, and (iv) any material interest of the shareholder in such business. Notwithstanding anything in the By-Laws to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this Section 1, provided, however, that nothing in this Section 1 shall -------- ------- be deemed to preclude discussion by any shareholder of any business properly brought before the annual meeting. The presiding officer at an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 1, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. Section 2. Special Meetings. (a) Special meetings of the shareholders ---------------- shall be held at the principal office of the corporation or at such other place in the United States as may be designated in the notice of such meetings, and shall be called by the chief executive officer or the secretary only when so directed by the board of directors or when so requested in writing by the holders of at least 75 percent of the issued and outstanding capital stock of the corporation entitled to vote in an election of directors. (b) Anything in these by-laws to the contrary notwithstanding, the following procedures shall apply to the call of any special meeting of shareholders, or a special meeting in lieu of the annual meeting of shareholders, at the request of holders of the outstanding capital stock of the corporation: (i) Every written request for the call of a special meeting shall bear the signature and date of signature of each shareholder who signs the request and shall state the purpose or purposes for which the meeting is to be called. (ii) The record date for the determination of shareholders entitled to request the corporation to call a special meeting shall be the date which is 45 calendar days prior to the date (the "Filing Date") that written requests complying with the requirements of law and these by-laws signed by a sufficient number of record holders to request a special meeting in accordance with this Section 2 have been received by the corporation (the "Minimum Request Condition"). (iii) Promptly after receipt of a written request or requests for the call of a special meeting, the corporation shall engage nationally recognized independent inspectors of election for the purpose of determining the validity of the request or requests and any revocations thereof. Within 15 2 calendar days of the Filing Date, such independent inspectors shall deliver to the corporation a written report stating whether the Minimum Request Condition has been satisfied. If such written report states that the Minimum Request Condition has been satisfied, or if no report is delivered by independent inspectors within 15 calendar days of the Filing Date, the chief executive officer or the secretary of the corporation shall call the special meeting by mailing notice thereof not later than 45 calendar days after the Filing Date. (iv) The date, time and place of the special meeting shall be determined by the board of directors and shall be set forth in the notice of meeting, which notice shall comply with the provisions of Section 3 of this Article II. (v) The record date for the determination of shareholders entitled to notice of and to vote at the special meeting shall be set by the board of directors in accordance with the provisions of Section 4 of Article V of these by-laws. Section 3. Notice of Meetings. Written notice of every meeting of ------------------ shareholders, stating the place, date and hour of the meeting, shall be given personally or by mail to each shareholder of record entitled to vote at such meeting not less than 10 nor more than 60 days before the date of the meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail with first class postage thereon prepaid (except as hereinafter provided) addressed to the shareholder at his address as it appears on the corporation's record of stockholders. The corporation may utilize a class of mail other than first class if the notice of the meeting is mailed, with adequate postage prepaid, not less than 30 days before the date of the meeting. Attendance of a shareholder at a meeting of shareholders (1) waives objection to lack of notice or defective notice of the meeting, unless the shareholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting, and (2) waives objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the shareholder objects to considering the matter when it is presented. Notice need not be given to any shareholder who signs a waiver of notice either before or after the meeting. Section 4. Quorum. The holders of a majority of the stock issued and ------ outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the shareholders except as otherwise provided by statute, by the articles of incorporation, or by these by-laws. If a quorum is not present or represented at any meeting of the shareholders, the holders of a majority of the voting shares, present in person or represented by proxy, may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than 120 days, or if a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder of record entitled 3 to vote at the meeting. Section 5. Voting. When a quorum is present at any meeting, action on a ------ matter (other than the election of directors) is approved if the votes cast favoring the action exceed the votes cast opposing the action, unless the question is one upon which by express provision of law, of the articles of incorporation or of these by-laws, a different vote is required, in which case such express provision shall govern and control the decision of the question. Except as otherwise required by the Articles of Incorporation, each shareholder shall at every meeting of the shareholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power registered in his name on the books of the corporation, but no proxy shall be voted or acted upon after eleven months from its date, unless otherwise provided in the proxy. Section 6. Consent of Shareholders. Any action required or permitted to ----------------------- be taken at any meeting of the shareholders may be taken without a meeting if all of the shareholders consent thereto in writing, setting forth the action so taken, and such writing is delivered to the corporation for inclusion in the minutes or filing with the corporate records. Such consent shall have the same force and effect as a unanimous vote of shareholders. Section 7. List of Shareholders. The corporation shall keep at its -------------------- registered office or principal place of business, or at the office of its transfer agent or registrar, a record of its shareholders, giving their names and addresses and the number, class and series, if any, of the shares held by each. The officer who has charge of the stock transfer books of the corporation shall prepare and make, before every meeting of shareholders or any adjournment thereof, a complete list of the shareholders entitled to vote at the meeting or any adjournment thereof, arranged in alphabetical order, with the address of and the number and class and series, if any, of shares held by each. The list shall be produced and kept open at the time and place of the meeting and shall be subject to inspection by any shareholder during the whole time of the meeting for the purposes thereof. The said list may be the corporation's regular record of shareholders if it is arranged in alphabetical order or contains an alphabetical index. ARTICLE III DIRECTORS --------- Section 1. Powers. Except as otherwise provided or authorized by law, the ------ property, affairs and business of the corporation shall be managed and directed by its board of directors, which may exercise all powers of the corporation and do all lawful acts and things which are not by law, by any legal agreement among shareholders or by the articles of incorporation, directed or required to be exercised or done by the shareholders. Section 2. Meetings and Notice. The board of directors of the corporation ------------------- may hold meetings, both regular and special, either within or without the state of Georgia. Regular meetings of the board of directors may be held without notice at such time and place as shall from time to time be determined by resolution of the board. Special meetings of the board may be called by the chairman of the board or the chief executive officer or by any three directors on 4 one day's oral, telegraphic or written notice duly given or served on each director personally, or three days' notice deposited, first class postage prepaid, in the United States mail. Such notice shall state a reasonable time, date and place of meeting, but the purpose need not be stated therein. Notice need not be given to any director who signs a waiver of notice either before or after the meeting. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting and waiver of all objections to the place and time of the meeting, or the manner in which it has been called or convened, except when the director states, at the beginning of the meeting, any such objection or objections to the transaction of business. Section 3. Quorum. At all meetings of the board a majority of directors ------ shall constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board, except as may be otherwise specifically provided by law, by the articles of incorporation, or by these by-laws. If a quorum shall not be present at any meeting of the board, a majority of the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 4. Consent of Directors. Unless otherwise restricted by the -------------------- articles of incorporation or these by-laws, any action required or permitted to be taken at any meeting of the board of directors or of any committee thereof may be taken without a meeting, if all members of the board or committee, as the case may be, consent thereto in writing, setting forth the action so taken, and the writing or writings are delivered to the corporation for inclusion in the minutes of the proceedings of the board or committee or filing with the corporate records. Such consent shall have the same force and effect as a unanimous vote of the board. Section 5. Committees. The board of directors may by resolution designate ---------- from among its members one or more committees, each committee to consist of one or more directors. The board may designate one or more directors as alternate members of any committee, who may replace any absent member at any meeting of such committee. Any such committee, to the extent provided in the resolution, shall have and may exercise all of the authority of the board of directors in the management of the business and affairs of the corporation, except that it shall have no authority to (1) approve or propose to shareholders action which the Georgia Business Corporation Code requires to be approved by shareholders; (2) fill vacancies on the board of directors or any of its committees; (3) amend the articles of incorporation; (4) adopt, amend or repeal by-laws; or (5) approve a plan of merger not requiring shareholder approval. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors. The provisions of Sections 2 and 3 of this Article III shall apply to committees and their members as well as to the board of directors. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required. Section 6. Compensation of Directors. Directors shall be entitled to such ------------------------- reasonable compensation for their services as directors or members of any committee of the board as shall be fixed from time to time by resolution adopted by the board, and shall also be entitled to 5 reimbursement for any reasonable expenses incurred in attending any meeting of the board or any such committee. Section 7. Nominations of Directors. Nominations of candidates for ------------------------ election at any meeting of the shareholders of the corporation as directors of the corporation may be made (i) by, or at the direction of, the board of directors or (ii) by any holder of record entitled to vote at such meeting in an election of directors who complies with the notice procedures set forth in this Section 7. Nominations, other than those made by, or at the direction of, the board of directors, shall be made pursuant to timely notice in writing to the secretary of the corporation as set forth in this Section 7. To be timely, any such notice must be delivered to, or mailed and received at, the principal executive offices of the corporation not less than 60 days nor more than 90 days prior to the date of such meeting, regardless of any postponements, deferrals or adjournments of such meeting to a later date; provided, however, that if less than 70 days' notice or prior public disclosure of the date of the meeting is given or made, notice by a holder of record must, to be timely, be so delivered or received not later than the close of business on the tenth day following the day on which such notice of the date of the meeting is mailed or the day on which such public disclosure was made; provided that, in the case of an annual meeting, notice by a holder of record, to be timely, must be so delivered or received not later than the close of business 60 days prior to the anniversary of the date of the previous year's annual meeting. Such notice by a holder of record must set forth (i) as to each person whom such holder proposes to nominate for election as a director, all information relating to such person that would be required to be disclosed, or otherwise required, pursuant to Sections 13 or 14 of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the "Exchange Act"), in connection with any acquisition of shares and the solicitations of proxies with respect to nominees for election of directors pursuant to the Exchange Act, regardless of whether such person is subject to such provisions of such Exchange Act, and (ii) as to the holder of record giving such notice, (a) the name and address, as they appear on the records of the corporation, of such holder, together with the name and address of any other shareholder of the corporation who is a record or beneficial owner of securities of the corporation and who is known by such holder to be supporting such nominee(s) and (b) the class and number of securities which are beneficially owned and owned of record by such holder on the date of such holder's notice and the class and number of securities of the corporation beneficially owned and owned of record by any person known by such holder to be supporting such nominee(s). At the request of the board of directors, any person nominated by, or at the direction of, the board of directors for election as a director shall furnish to the secretary of the corporation that information that would be required to be set forth in any holder's notice of nomination pertaining to such nominee. Ballots bearing the names of all the persons who have been nominated for election as directors at any meeting of shareholders in accordance with the procedures set forth in this Section 7 shall be provided for use at such meeting. The board of directors of the corporation may reject any nomination by a holder of record not timely made in accordance with the procedures set forth in this Section 7. If the board of directors determines that the information provided in a holder's notice of nomination does not 6 satisfy the informational requirements of this Section 7 in any material respect, the secretary of the corporation shall promptly notify such holder of the deficiency in such notice. The holder shall have an opportunity to cure the deficiency by providing additional information to the secretary within such period of time, not to exceed five days, from the date such notice of deficiency is given to such holder, as the board of directors shall determine. If the deficiency is not cured within such period, or if the board of directors reasonably determines that the additional information provided by such holder, together with previously provided information, does not satisfy the requirements of this Section 7 in any material respect, then the board of directors may reject such holder's nomination. The secretary of the corporation shall notify in writing any holder making a nomination whether such nomination has been made in accordance with the time and informational requirements of this Section 7. Notwithstanding the procedures set forth herein, if the board of directors does not make a determination as to the validity of any nomination by a holder of record, the presiding officer at the meeting of shareholders shall determine and declare at such meeting whether a nomination was or was not made in accordance with the procedures set forth in this Section 7. If the presiding officer determines that a nomination was not made in accordance with the procedures set forth in this Section 7, he shall so declare at such meeting of shareholders and the defective nomination shall be disregarded. ARTICLE IV OFFICERS -------- Section 1. Number. The officers of the board of directors shall be chosen ------ by the board of directors and shall consist of a chairman of the board and, if the board of directors desires, a vice chairman. The officers of the corporation shall be chosen by the board of directors and shall consist of a chief executive officer, a vice president, a secretary, and a treasurer. The board of directors may also choose additional vice presidents, one or more assistant secretaries and assistant treasurers. Any number of offices may be held by the same person. The board of directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board of directors. Section 2. Compensation. The salaries of all officers and agents of the ------------ corporation shall be fixed by the board of directors or a committee or officer appointed by the board. As used herein the term "salaries" shall include any bonus, incentive payments, or other plans or programs involving remuneration to officers. Section 3. Term of Office. Unless otherwise provided by resolution of the -------------- board of directors, the officers of the board of directors and the principal officers of the corporation shall be chosen annually by the board at the first meeting of the board following the annual meeting of shareholders of the corporation, or as soon thereafter as is conveniently possible. Subordinate officers may be elected from time to time. Each officer shall serve until his successor shall have been chosen and qualified, or until his death, resignation or removal. Section 4. Removal. Any officer may be removed from office at any time, ------- with or 7 without cause, by the board of directors whenever in its judgment the best interest of the corporation will be served thereby. Section 5. Vacancies. Any vacancy in an office resulting from any cause --------- may be filled by the board of directors. Section 6. Powers and Duties. Except as hereinafter provided, the ----------------- officers of the corporation shall each have such powers and duties as generally pertain to their respective offices, as well as such powers and duties as from time to time may be conferred by the board of directors. At the annual meeting at which officers are elected, the board shall by resolution designate a chief executive officer, who will be responsible to the board for the general management of the company. (a) Chairman of the Board. The chairman of the board shall preside at --------------------- all meetings of the stockholders and directors, and shall see that all orders and resolutions of the board are carried into effect. He shall have such powers and perform all such other duties as the board may direct. The chairman of the board of directors may delegate to any other officer of the corporation the power to preside at any meeting of the shareholders. (b) Vice Chairman of the Board. The vice chairman shall have such -------------------------- duties, responsibilities and authority as the board of directors may prescribe, subject to the limitations expressed or implied by these by- laws. In the absence of the chairman or in the event of his inability or incapacity to act, the vice chairman shall perform the duties and exercise the powers of the chairman. (c) President and Chief Executive Officer. The president and chief ------------------------------------- executive officer shall be responsible for the operation and management of the company and shall be responsible for the proper utilization and security of the company's assets and resources. He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, within such limitations as the board by resolution may establish. The president and chief executive officer may delegate his powers to other officers and agents of the company; provided, however, that such delegation shall be reported to the board of directors no less frequently than once a year at the annual meeting, or at such other time as a significant change is made to a previously reported delegation. (d) Vice Presidents. The vice presidents shall have such duties, --------------- responsibilities and authority as the chief executive officer shall delegate, subject to any limitations imposed by the board and subject to the limitations expressed or implied by these by-laws. The Board may designate one or more vice presidents as senior vice president. In the absence of the chief executive officer or in the event of his inability or incapacity to act, the person designated as the Chairman of the Operating Committee shall perform the duties of the chief executive officer and, when so acting, shall have all the powers of and be subject to all the restrictions upon the chief executive officer. 8 (e) Secretary. The secretary shall attend all meetings of the board --------- of directors and all meetings of the shareholders and record all the proceedings of the meetings of the corporation and of the board of directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors or chief executive officer, under whose supervision he shall be. He shall have custody of the corporate seal of the corporation and he, or an assistant secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature or by the signature of such assistant secretary. The board of directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his signature. (f) Assistant Secretary. The assistant secretary, or if there be more ------------------- than one, the assistant secretaries in the order determined by the board of directors (or, if there be no such determination, then in the order of their election), shall, in the absence of the secretary or in the event of his inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. (g) Treasurer. The treasurer shall, subject to the direction of a --------- vice president designated by the chief executive officer, have general custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all monies and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the board of directors. The treasurer shall disburse the funds of the corporation as may be ordered by the board of directors, taking proper vouchers for such disbursements. If required by the board of directors, the treasurer shall give the corporation a bond (which shall be renewed every six years) in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of the treasurer's office and for the restoration to the corporation, in case of death, resignation, retirement, or removal from office, of all books, papers, vouchers, money, and other property of whatever kind in the possession or under control of the treasurer and belonging to the corporation. (h) Assistant Treasurer. The assistant treasurer, or if there shall ------------------- be more than one, the assistant treasurers in the order determined by the board of directors (or if there be no such determination, then in the order of their election), shall, in the absence of the treasurer or in the event of his inability or refusal to act, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. (i) Controller. The controller shall be the chief accounting officer ---------- of the corporation. Subject to the direction of a vice president designated by the chief executive 9 officer, the controller shall maintain adequate records of all assets, liabilities, and transactions of the corporation in the conduct of its business. The controller shall require reports from the other officers and agents of the corporation who receive or disburse funds for its account, at such time and in such form as the controller may deem advisable. The controller shall compile and maintain such accounting and statistical records and data as may be required, and shall prepare and submit to the executive officers, including the treasurer, and to the board of directors such periodical and special financial statements as may be called for by them. In conjunction with other officers and heads of divisions, the controller shall initiate and enforce rules and regulations, budgets, and other measures and procedures for the purpose of enhancing the efficiency, economy, and profit with which the business of the corporation is conducted. The controller shall see that adequate internal audits of the financial records of the corporation are currently and accurately made. Section 7. Staff and Operating Unit Officers. The chief executive --------------------------------- officer may from time to time designate one or more "officers" for any function or operating unit, but such persons shall not be officers of the corporation. Any such appointee shall serve at the pleasure of the chief executive officer. Section 8. Voting Securities of the Corporation. Unless otherwise ordered ------------------------------------ by the board of directors, the chief executive officer shall have full power and authority on behalf of the corporation to attend and to act and vote at any meetings of security holders of corporations in which the corporation may hold securities, and at such meetings shall possess and may exercise any and all rights and powers incident to the ownership of such securities which the corporation might have possessed and exercised if it had been present. The chief executive officer from time to time may delegate like powers upon any other officer or agent of the corporation. ARTICLE V CERTIFICATES OF STOCK --------------------- Section 1. Form of Certificate. Every holder of fully-paid stock in the ------------------- corporation shall be entitled to have a certificate in such form as the board of directors may from time to time prescribe. Section 2. Lost Certificates. A new certificate may be issued in place of ----------------- any certificate theretofore issued by the corporation and alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When issuing such new certificate, the officer of the corporation responsible for such issuance may, in his discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or his legal representative, to advertise the same in such manner as he shall require and/or to give the corporation a bond in such sum as he may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed. 10 Section 3. Transfers. --------- (a) Transfers of shares of the capital stock of the corporation shall be made only on the books of the corporation by the registered holder thereof, or by his duly authorized attorney, or with a transfer clerk or transfer agent appointed as in Section 5 of this Article provided, and on surrender of the certificate or certificates for such shares properly endorsed and the payment of all taxes thereon. (b) The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and for all other purposes, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law. (c) Shares of capital stock may be transferred by delivery of the certificates therefor, accompanied either by an assignment in writing on the back of the certificates or by separate written power of attorney to sell, assign and transfer the same, signed by the record holder thereof, or by his duly authorized attorney in fact, but no transfer shall affect the right of the corporation to pay any dividend upon the stock to the holder of record as the holder in fact thereof for all purposes, and no transfer shall be valid, except between the parties thereto, until such transfer shall have been made upon the books of the corporation as herein provided. (d) The board may, from time to time, make such additional rules and regulations as it may deem expedient, not inconsistent with these by-laws or the articles of incorporation, concerning the issue, transfer, and registration of certificates for shares of the capital stock of the corporation. Section 4. Record Date. In order that the corporation may determine the ----------- shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than 70 days prior to the date on which the particular action requiring such determination of shareholders is to be taken. If no record date is fixed for the determination of shareholders entitled to notice of and to vote at any meeting of shareholders, the record date shall be at the close of business on the day next preceding the day on which the notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. If no record date is fixed for determining shareholders entitled to take action without a meeting, the record date shall be the date the first shareholder signs the consent. If no record date is fixed for other purposes, the record date shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto. A determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting unless the 11 board of directors shall fix a new record date for the adjourned meeting. Section 5. Transfer Agent and Registrar. The board of directors may ---------------------------- appoint one or more transfer agents or one or more transfer clerks and one or more registrars, and may require all certificates of stock to bear the signature or signatures of any of them. ARTICLE VI GENERAL PROVISIONS ------------------ Section 1. Dividends. Dividends upon the capital stock of the --------- corporation, subject to the provisions of the articles of incorporation, if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the corporation's capital stock, subject to the provisions of the articles of incorporation. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. Section 2. Fiscal Year. The fiscal year of the corporation shall be fixed ----------- by resolution of the board of directors. Section 3. Seal. The corporate seal shall have inscribed thereon the name ---- of the corporation, the year of its organization and the words "Corporate Seal" and "Georgia." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. In the event it is inconvenient to use such a seal at any time, the signature of the corporation followed by the word "Seal" enclosed in parentheses shall be deemed the seal of the corporation. Section 4. Annual Statements. Not later than four months after the close ----------------- of each fiscal year, and in any case prior to the next annual meeting of stockholders, the corporation shall prepare: (1) A balance sheet showing in reasonable detail the financial condition of the corporation as of the close of its fiscal year, and (2) A profit and loss statement showing the results of its operations during its fiscal year. Upon written request the corporation promptly shall mail to any shareholder of record a copy of the most recent such balance sheet and profit and loss statement. Section 5. Fair Price to Shareholders; Business Combinations. All of the ------------------------------------------------- 12 requirements of Part 2 of Article 11 and all of the requirements of Part 3 of Article 11 of the Georgia Business Corporation Code shall be applicable to the corporation. Section 6. Inspection of Records by Shareholders. A shareholder of the ------------------------------------- corporation may not inspect and copy the records described in Section 14-2- 1602(c) of the Georgia Business Corporation Code, or a successor or replacement subsection, unless such shareholder owns more than two percent (2%) of the shares of the company's common stock outstanding on the date of receipt by the corporation of a request from such shareholder. ARTICLE VII INDEMNIFICATION --------------- Section 1. Definitions. As used in this Article, the term ----------- (a) "change of control", for purposes of this Article VII, means (1) an acquisition by a person of beneficial ownership of 20% or more of the combined voting power of the corporation's then outstanding voting securities, provided that any such securities acquired directly from the corporation shall be excluded from the determination of such person's beneficial ownership (but shall be included in calculating total outstanding securities); or (2) the individuals who are members of the incumbent board (as defined below) cease for any reason to constitute two- thirds of the Board of Directors; or (3) approval by the shareholders of the corporation of (i) a merger or consolidation involving the corporation if the shareholders of the corporation, immediately before such merger or consolidation, do not own, immediately following such merger or consolidation, more than 80% of the combined voting power of the outstanding voting securities of the corporation in substantially the same proportion as their ownership of 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 substantially all of the assets of the corporation. Notwithstanding the foregoing, a change of 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 shareholders of this corporation in the same proportion as their ownership of shares in this corporation immediately prior to such acquisition. Moreover, notwithstanding the foregoing, a change of 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 of -------- control would occur (but for 13 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 of control shall occur. (b) "corporation" includes any domestic or foreign predecessor entity of the corporation or a corporation in a merger or other transaction in which the predecessor's existence ceased upon consummation of the transaction. (c) "director" means an individual who is or was a director of the corporation or an individual who, while a director of the corporation, is or was serving at the corporation's request as a director, officer, partner, trustee, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise. A director is considered to be serving an employee benefit plan at the corporation's request if his duties to the corporation also impose duties on, or otherwise involve services by, him to the plan or to participants in or beneficiaries of the plan. Director includes, unless the context requires otherwise, the estate or personal representative of a director. (d) "expenses" include attorneys' fees. (e) "incumbent board" includes the individuals who as of May 11, 1994 are members of the Board of Directors and any individual becoming a director subsequent to May 11, 1994 whose election, or nomination for election by the corporation's shareholders 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 of Directors shall become a member of the incumbent board upon the completion of two full years as a member of the Board of Directors; provided further, -------- ------- however, that notwithstanding the foregoing, no individual shall be ------- considered a member of the incumbent board if such individual initially assumed office (1) as a result of either an actual 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 of Directors (a "Proxy Contest") or (2) with the approval of the other members of the Board of Directors, but by reason of any agreement intended to avoid or settle a Proxy Contest. (f) "liability" means the obligation to pay a judgment, settlement, penalty, fine (including an excise tax assessed with respect to an employee benefit plan), or reasonable expenses incurred with respect to a proceeding. (g) "party" includes an individual who was, is, or is threatened to be made a named defendant or respondent in a proceeding. 14 (h) "proceeding" means any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative and whether formal or informal. Section 2. Indemnification of Directors, Officers and Employees - ------------------------------------------------------ General. (a) Subject to the terms and conditions of this Article VII, the corporation shall indemnify an individual made a party to a proceeding because he is or was a director or officer of the corporation against liability incurred in connection with a proceeding to the fullest extent permitted by the Georgia Business Corporation Code (the "GBCC"), as the same now exists or may hereafter be amended (but only to the extent any such amendment permits the corporation to provide broader indemnification rights than the GBCC permitted the corporation to provide prior to such amendment). (b) The termination of a proceeding by judgment, order, settlement, or conviction, or upon a plea of nolo contendere or its equivalent is not, of itself, determinative that the director or officer did not meet the standard of conduct set forth in the GBCC. (c) To the extent that a director or officer has been successful, on the merits or otherwise, in the defense of any proceeding to which he was a party, or in defense of any claim, issue, or matter therein, because he is or was a director or officer of the corporation, the corporation shall indemnify the director or officer against reasonable expenses incurred by him in connection therewith regardless of whether the director or officer has met the standards set forth in the GBCC and without any action or determination under Section 4 of this Article VII. (d) Subject to the approval of the chief executive officer and the general counsel for the corporation, the officers of the corporation may indemnify an individual who is an employee of the corporation and who is made a party to a proceeding because he is or was an employee of the corporation against liability incurred in connection with a preceding to the fullest extent permitted under the GBCC, as the same now exists or may hereafter be amended (but only to the extent any such amendment permits the corporation to provide broader indemnification rights than the GBCC permitted the corporation to provide prior to such amendment). Section 3. Advance for Expenses. -------------------- (a) The corporation shall pay for or reimburse the reasonable expenses incurred by a director or officer who is a party to a proceeding in advance of final disposition of the proceeding if: (1) The director or officer furnishes the corporation a written 15 affirmation of his good faith belief that he has met the standard of conduct set forth in the GBCC; and (2) The director or officer furnishes the corporation a written undertaking, executed personally or on his behalf, to repay any advances if it is ultimately determined that he is not entitled to indemnification under this Article (b) The undertaking required by paragraph (2) of subsection (a) of this Section 3 must be an unlimited general obligation of the director or officer but need not be secured and may be accepted without reference to financial ability to make repayment. Section 4. Limitations on Indemnification. ------------------------------ (a) The corporation shall not indemnify a director under Section 2 of this Article VII unless a determination has been made in the specific case that indemnification of the director is permissible in the circumstances because he has met the standard of conduct set forth in the GBCC. (b) The corporation shall indemnify an officer under Section 2 of this Article VII unless a determination has been made in the specific case that indemnification of the officer is precluded in the circumstances because he has failed to meet the standard of conduct set forth in the GBCC. (c) In either paragraph (a) or (b) above, such determination shall be made within 60 days of the request for indemnification: (i) By the Board of Directors by majority vote of a quorum consisting of directors not at the time parties to the proceeding; (ii) If a quorum cannot be obtained under paragraph (i) of this subsection, by majority vote of a committee duly designated by the Board of Directors (in which designation directors who are parties may participate), consisting solely of two or more directors not at the time parties to the proceeding; (iii) By special legal counsel: (A) Selected by the Board of Directors or its committee in the manner prescribed in paragraph (i) or (ii) of this subsection; or (B) If a quorum of the Board of Directors cannot be obtained under paragraph (i) of this subsection and a committee cannot be designated under paragraph (ii) of this subsection, selected by majority vote of the full Board of Directors (in which selection directors who are parties may participate); or 16 (iv) By the shareholders, but the shares owned by or voted under the control of the officers and directors who are at the time parties to the proceeding may not be voted on the determination; provided, however, that following a change of control of the corporation, with respect to all matters thereafter arising out of acts, omissions or events prior to the change of control of the corporation concerning the rights of any person seeking indemnification under this Article VII, such determination shall be made by special legal counsel selected by such person and approved by the Board of Directors or its committee in the manner described in Section 4(c)(iii) above (which approval shall not be unreasonably withheld), which counsel has not otherwise performed services (other than in connection with similar matters) within the five years preceding its engagement to render such opinion for such person or for the corporation or any affiliates (as such term is defined in Rule 405 under the Securities Act of 1933, as amended) of the corporation (whether or not they were affiliates when services were so performed) ("Independent Counsel"). Unless such person has theretofore selected Independent Counsel pursuant to this Section 4 and such Independent Counsel has been approved by the corporation, legal counsel approved by a resolution or resolutions of the Board of Directors of the corporation prior to a change of control of the corporation shall be deemed to have been approved by the corporation as required. Such Independent Counsel shall determine as promptly as practicable whether and to what extent such person would be permitted to be indemnified under applicable law and shall render its written opinion to the corporation and such person to such effect. In making a determination under this Section 4, the special legal counsel and Independent Counsel referred to above shall determine that indemnification is permissible unless clearly precluded by this Article VII or the applicable provisions of the GBCC. The corporation agrees to pay the reasonable fees of the Independent Counsel referred to above and to fully indemnify such Independent Counsel against any and all expenses, claims, liabilities and damages arising out of or relating to this Article or its engagement pursuant hereto. (d) Authorization of indemnification or an obligation to indemnify and evaluation as to reasonableness of expenses shall be made as set forth in paragraph (c) above. (e) Indemnification under this Article VII in connection with a proceeding by or in the right of the corporation shall be limited to reasonable expenses incurred in connection with the proceeding. Section 5. Enforceability. The provisions of this Article shall be -------------- applicable to all proceedings commenced after its adoption, whether such arise out of events, acts, omissions or circumstances which occurred or existed prior or subsequent to such adoption, and shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such person. This Article shall be deemed to grant each person who is entitled to indemnification hereunder rights against the corporation to enforce the 17 provisions of this Article, and any repeal or other modification of this Article or any repeal or modification of the GBCC or any other applicable law shall not limit any rights of indemnification then existing or arising out of events, acts, omissions, circumstances occurring or existing prior to such repeal or modification, including, without limitation, the right to indemnification for proceedings commenced after such repeal or modification to enforce this Article with regard to acts, omissions, events or circumstances occurring or existing prior to such repeal or modification. Section 6. Severability. If this Article or any portion hereof shall be ------------ invalidated on any ground by any court of competent jurisdiction, then the corporation shall nevertheless indemnify each director or officer of the corporation as to liabilities incurred in connection with any proceeding, including an action by or in the right of the corporation, to the full extent permitted by any applicable portion of this Article that shall not have been invalidated and to the full extent permitted by applicable law. Section 7. Statements to Shareholders. If the corporation indemnifies or -------------------------- advances expenses to an officer or director under this Article VII in connection with a proceeding by or in the right of the corporation, the corporation shall report the indemnification or advance in writing to the shareholders with or before the notice of the next shareholders' meeting. 18 EX-10.1 3 1996 EMPLOYEE STOCK OPTION PLAN EXHIBIT 10.1 SCIENTIFIC-ATLANTA, INC. 1996 EMPLOYEE STOCK OPTION PLAN As amended by the Board of Directors on November 11, 1998 SCIENTIFIC-ATLANTA, INC. ------------------------ 1996 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), but who is not an officer of the Corporation. (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 Composite 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 closing price as reported on the New York Stock Exchange Composite on the last business day preceding the date of valuation shall be utilized. (k) "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. (l) "Option Agreement" shall mean a written stock option agreement ---------------- evidencing a particular Option. (m) "Optionee" shall mean an Employee who has received an Option. -------- (n) "Plan" shall mean this Scientific-Atlanta, Inc. 1996 Employee ---- Stock Option Plan, as it may be amended from time to time. (o) "Purchase Price" shall mean the Exercise Price times the number -------------- of Shares with respect to which an Option is exercised. (p) "Retirement" shall mean voluntary termination of employment ---------- after the date on which the Employee (i) has completed five (5) years of service with the Corporation, and (ii) the sum of the Employee's age and years of service with the Corporation is equal to sixty-five (65). (q) "Share" shall mean one (1) share of Common Stock, adjusted in ----- accordance with Section 9 of this Plan (if applicable). (r) "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 November 13, 1996. This Plan shall terminate as provided in Section 8 below. 2 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 set the terms of the 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 Three Million (3,000,000). 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 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 9 hereof upon the occurrence of an event specified in Section 9. 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. 3 (b) Option Exercisable. 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. (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 9 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 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; 4 (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; and (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. (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 5 (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 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 substantially 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 6 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 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. 7 (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 canceled. (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 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 8 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(i), 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 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. (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 9 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. 9 (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). (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. TERM OF PLAN. ------------ Options may be granted pursuant to this Plan until the expiration of this Plan on November 13, 2001. 9. RECAPITALIZATIONS. ----------------- 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. 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. 10 Except as expressly provided in this Section 9, 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. 10. 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. 11. 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. 11 12. 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. 13. EXECUTION. --------- To record the adoption of this Plan by the Board on November 13, 1996, and its most recent amendment on November 11, 1998, the Corporation has caused this Plan to be executed by its authorized officers. SCIENTIFIC-ATLANTA, INC. By: /s/ Brian C. Koenig -------------------------------- Brian C. Koenig, Senior Vice President - Human Resources By: /s/ William E. Eason, Jr. -------------------------------- William E. Eason, Jr. Senior Vice President, General Counsel and Corporate Secretary 12 EX-10.2 4 LONG-TERM INCENTIVE PLAN EXHIBIT 10.2 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 most recently on November 11, 1998 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 most recently on November 11, 1998, 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 sale price of such Shares on the New York Stock Exchange Composite on the date(s) in question, or, if the Shares shall not have been traded on any such date(s), the closing sale price on the New York Stock Exchange Composite 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. 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 4 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 5 determine the Employees to whom 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. 6 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 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 7 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 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 8 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 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. 10 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 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 11 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. 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 12 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 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 13 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, 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 14 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. 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 11, 1998, 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: Senior Vice President-Human Resources ------------------------------------------ By: /s/ William E. Eason, Jr. --------------------------------------------- Name: William E. Eason, Jr. ------------------------------------------- Title: Senior Vice President, General Counsel ------------------------------------------ and Corporate Secretary ------------------------------------------ [Seal] 15 EX-10.3 5 AMENDMENT TO SEVERANCE PROTECTION AGREEMENT EXHIBIT 10.3 FORM OF FIRST AMENDMENT TO SEVERANCE PROTECTION AGREEMENT BY AND BETWEEN SCIENTIFIC-ATLANTA, INC. AND (NAME_OF_EXECUTIVE) This First Amendment (this "Amendment") is entered into this ____ day of January, 1999, by and between Scientific-Atlanta, Inc. ("S-A") and (Name_of_Executive) ("Executive"). WHEREAS, S-A and Executive entered into that certain Severance Protection Agreement, dated (Date) (the "Agreement"); and WHEREAS, S-A and Executive desire to amend the Agreement; NOW, THEREFORE, in consideration of the foregoing and the agreements set forth below, the parties agree as follows: 1. Section 2.3 of the Agreement is hereby amended to read in its entirety as follows: 2.3 Disability. For purposes of this Agreement, "Disability" shall ---------- mean (i) a physical or mental infirmity which has been determined to be a total and permanent disability under and in accordance with the provisions of the Company's Long Term Disability Plan (the "LTD Plan") or (ii) in the event the Company does not maintain the LTD Plan at the time of the determination of the Executive's Disability, a physical or mental infirmity which impairs the Executive's ability to substantially perform duties of the type performed by the Executive prior to the onset of the infirmity, which impairment continues for a period of at least one hundred eighty (180) consecutive days. 2. Section 3.2(b)(ii) of the Agreement is hereby amended to read in its entirety as follows: (ii) except if the Executive's employment with the Company shall be terminated by the Executive for Good Reason by reason of relocation as described in Section 2.4(a)(3) and such relocation is in connection with a relocation affecting more than one-half of the employees employed at the same metropolitan area as the Executive ("Good Reason for Company Relocation"), the Company shall pay the Executive as severance pay and in lieu of any further compensation for periods subsequent to the Termination Date, in a single payment an amount in cash (the "Severance Amount") equal to two (2) times the sum of (A) the highest rate of the Executive's annual base salary as in effect at any time within ninety (90) days preceding a Change in Control or at any time thereafter ("Base Salary"), (B) the "Bonus Amount" (as defined below) and (C) the "Perquisite Amount" (as defined below). If the Executive's employment with the Company shall be terminated by the Executive for Good Reason for Company Relocation, the Severance Amount shall equal one (1) times the sum of (A) Base Salary, (B) the Bonus Amount and (C) the Perquisite Amount. The term "Bonus Amount" shall mean the highest of the total cash bonuses earned by the Executive pursuant to the Annual Plan in any of the three fiscal years of the Company immediately preceding the fiscal year in which the Termination Date occurs (or such lesser number of full fiscal years during which the Executive was employed by the Company); provided, that the Bonus Amount shall not be less -------- than an amount equal to the Executive's target bonus pursuant to the Annual Plan for the fiscal year in which the Termination Date occurs. The "Perquisite Amount" shall equal the highest amount paid to the Executive in the calendar year ending prior to the Change in Control or in any calendar year thereafter in respect of perquisites provided to the Executive, including, but not limited to, car allowance, financial counseling, annual physical examination and airline membership clubs and shall be in lieu of the Company providing such perquisites to the Executive. 3. Section 3.2(b)(iii) of the Agreement is hereby amended to read in its entirety as follows: (iii) for a number of months equal to 24 (12 if the Executive's employment with the Company shall be terminated by the Executive for Good Reason for Company Relocation) (the "Continuation Period"), the Company shall at its expense continue on behalf of the Executive and his dependents and beneficiaries (to the same extent provided to the dependents and beneficiaries prior to the Change in Control) the life insurance, disability, medical, dental and hospitalization benefits provided (x) to the Executive at any time within ninety (90) days preceding a Change in Control or at any time thereafter, or (y) to other similarly situated executives who continue in the employ of the Company during the Continuation Period. The coverage and benefits (including deductibles and costs) provided in this Section 3.2(b)(iii) during the Continuation Period shall be no less favorable to the Executive and his dependents and beneficiaries, than the most favorable of such coverages and benefits during any of the periods referred to in clauses (x) and (y) above. The Company's obligation hereunder with respect to the foregoing benefits shall be limited to the extent that the Executive obtains any such benefits pursuant to a subsequent employer's benefit plans, in which case the Company may reduce the coverage of any benefits it is required to provide the Executive hereunder as long as the aggregate coverages and benefits of the combined benefit plans is no less favorable to the Executive than the coverages and benefits required to be provided hereunder. This Subsection (iii) shall not be interpreted so as to duplicate any benefits to which the Executive or his dependents may be entitled (without having to pay additional charges) under any of the Company's employee benefit plans, programs or practices following the Executive's termination of employment, including without limitation, retiree medical and life insurance benefits. 4. Section 3.2(b)(iv) of the Agreement is hereby amended to read in its entirety as follows: (iv) the Company shall pay in a single payment an amount in cash equal to the excess of (A) the actuarial equivalent of the aggregate retirement benefit the Executive would have been entitled to receive under the SERP, the Scientific-Atlanta, Inc. Retirement Plan and Trust (the "Retirement Plan") and the Scientific-Atlanta, Inc. Restoration Retirement Plan (the "Restoration Plan") had (w) the Executive remained employed by the Company for an additional two (2) complete years of credited service (one (l) complete year of credited service if the Executive's employment with the Company shall be terminated by the Executive for Good Reason for Company Relocation) and his age had increased by the such two (2) years (one (1) year if the Executive's employment is terminated by the Executive for Good Reason for Company Relocation), (x) he retired at such increased age, (y) his annual compensation during such period been equal to his Base Salary and the Bonus Amount (but only to the extent that the bonuses which are included in the Bonus Amount are includible in compensation for purposes of the Retirement Plan, the SERP and the Restoration Plan), and (z) he been fully (100%) vested in his benefit under each such retirement plan, over (B) the actuarial equivalent of the aggregate retirement benefit the Executive is actually entitled to receive under such retirement plans. For purposes of this Subsection (iv), "actuarial equivalent" shall be determined as of the Executive's date of termination of employment, based on the 1983 Unloaded Group Annuity Mortality Table weighted 50% male and an interest rate of 8.0%. 5. Section 6 of the Agreement is hereby amended to read in its entirety as follows: 6. Gross-Up. --------- (a) Whether or not the Executive becomes entitled to the Severance Amount, if any of the payments or benefits received or to be received by the Executive in connection with a Change in Control or the Executive's termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any Person whose actions result in a Change in Control or any Person affiliated with the Company or such Person) (such payments or benefits, excluding the Gross-Up Payment, being hereinafter referred to as the "Total Payments") will be subject to any excise tax (the "Excise Tax") under Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), the Company shall pay to the Executive an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive, after deduction of any Excise Tax on the Total Payments and any federal, state and local income and employment taxes and Excise Tax upon the Gross- Up Payment, shall be equal to the Total Payments. (b) For purposes of determining whether any of the Total Payment will be subject to the Excise Tax and the amount of such Excise Tax, (i) all of the Total Payments shall be treated as "parachute payments" (within the meaning of section 280G(b)(2) of the Code) unless, in the opinion of tax counsel ("Tax Counsel") reasonably acceptable to the Executive and selected by the accounting firm which was, immediately prior to the Change in Control, the Company's independent auditor (the "Auditor"), such payments or benefits (in whole or in part) do not constitute parachute payments, including by reason of section 280G(b)(4)(A) of the Code, (ii) all "excess parachute payments" within the meaning of section 280G(b)(4)(1) of the Code shall be treated as subject to the Excise Tax unless, in the opinion of Tax Counsel, such excess parachute payments ( in whole or in part) represent reasonable compensation for services actually rendered (within the meaning of section 280G(b)(4)(B) of the Code) in excess of the "base amount" (as defined in section 280G(b)(3) of the Code) allocable to such reasonable compensation, or are otherwise not subject to the Excise Tax, and (iii) the value of any noncash benefits or any deferred payment or benefit shall be determined by the Auditor in accordance with the principles of sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income tax at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence on the Termination Date (or if there is no Termination Date, then the date on which the Gross-Up Payment is calculated for purposes of this Section 6), net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. (c) In the event that the Excise Tax is finally determined to be less than the amount taken into account hereunder in calculating the Gross- Up Payment, the Executive shall repay to the Company, within five (5) business days following the time that the amount of such reduction in the Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local income and employment taxes imposed on the Gross-Up Payment being repaid by the Executive), to the extent that such repayment results in a reduction in the Excise Tax and a dollar-for-dollar reduction in the Executive's taxable income and wages for the purposes of federal, state and local income and employment taxes, plus interest on the amount of such repayment at 120% of the rate provided in section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder in calculating the Gross-Up Payment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest, penalties or additions payable by the Executive with respect to such excess) within five (5) business days following the time that the amount of such excess is finally determined. The Executive and the Company shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Total Payments. (d) In the event that the Company is party to a transaction which is otherwise intended to qualify for "pooling of interests" accounting treatment, then (i) this Section 6 shall, to the extent practicable, be interpreted so as to permit such accounting treatment, and (ii) to the extent that this Section 6 disqualifies the transaction as a "pooling" transaction, this Section 6 shall be null and void as of the date hereof and the Board shall make all reasonable efforts to establish an alternative method of providing the Executive with the same benefit provided in this Section 6 (or a lesser benefit, if the same benefit is not feasible). All determinations under this Section 6(d) shall be made by the accounting firm whose opinion with respect to "pooling of interests" is required as a condition to the consummation of such transaction. 6. Capitalized terms used in the Amendment but not defined herein shall have the meanings ascribed to them in the Agreement. 7. Except as set forth above, all other provisions of the Agreement, remain in full force and effect as if this Amendment had never been executed. IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed as of the date first set forth above. EXECUTIVE SCIENTIFIC-ATLANTA, INC. By:_______________________ By:____________________________ (Name_of_Executive) Title:_________________________ EX-10.4 6 RETIREMENT PLAN FOR NON-EMPLOYEE DIRECTORS EXHIBIT 10.4 SCIENTIFIC-ATLANTA, INC. RETIREMENT PLAN FOR NON-EMPLOYEE DIRECTORS ------------------------------------------ As Amended, Effective February 6, 1999 1. PURPOSE The purpose of this plan ("Plan") is to enhance the ability of Scientific- Atlanta, Inc. ("Company") to attract and retain the service of experienced, able and knowledgeable persons to serve as members of the Company's board of directors ("Board") over a substantial period of years during which the full benefit of their capabilities can be realized to further the growth and profitability of the Company and return to the shareholders. 2. ADMINISTRATION The Plan shall be administered by a Plan Administrator, who shall be appointed by the Board. In addition to the duties stated elsewhere in the Plan, the Plan Administrator shall have full authority, consistent with the Plan, to interpret the Plan and to make all determinations necessary or desirable for the administration of the Plan. 3. ELIGIBLE PARTICIPANTS Each person who is or becomes a member of the Board on or after the effective date of this Plan but before January 1, 1997, and who has never been a participant in an employee retirement plan of the Company shall be deemed a participant in this Plan after having been a member of the Board for thirty-six consecutive months (a "Participant"). Each person who was a Participant in the Plan as of January 1, 1997 (the "Conversion Date"), and who was not already receiving retirement benefits under the Plan as of the Conversion Date, shall, on or before September 1, 1997, make an election as to whether he or she desires (a) to continue as a Participant under this Plan, or (b) to discontinue participation in this Plan and to receive in lieu thereof (1) annual grants of retirement awards (currently 1,500 shares of the Company's common stock), under the terms of the Stock Plan for Non-Employee Directors, and (2) a lump sum --- distribution equal to the greater of either (i) the present value, actuarially ------ determined by the Company as of the Conversion Date, of the retirement benefits of such Participant under this Plan through the Conversion Date, reduced by the ---------- present value, actuarially determined by the Company, as of the Conversion Date, of the stream of annual grants of retirement awards described under clause (1) above through such Participant's Normal Retirement Date, or (ii) an amount equal -- to the value of 750 shares of the Company's common stock. $.50 par value (at the closing price on the Conversion Date) multiplied by such Participant's total ------------- years of service as a director, as of the Conversion Date, which lump sum distribution shall be converted, under the terms of the Stock Plan for Non- Employee Directors, into shares of the Company's common stock, $.50 par value, at the fair market value on the Conversion Date. Participants electing to receive a lump sum distribution shall be also entitled to receive a further distribution in the form of shares to be issued under the Stock Plan for Non-Employee Directors, upon the death of such Participant, such further distribution to be equal to the difference, if any, between (a) the value of the spousal benefits otherwise payable to the spouse of a Participant under the provisions of paragraph 7 below, and (b) the assumed value (as defined in the assumptions approved by the --- Board) of the lump sum distribution to such Participant described above plus the ---- annual retirement awards granted to such Participant under the Stock Plan for Non-Employee Directors prior to his or her death. Except to the extent otherwise provided in the preceding sentence, individuals who are Participants under this Plan as of the Conversion Date, and who elect on or before September 1, 1997, to receive the lump sum distribution described above, shall cease to be Participants under this Plan, effective as of the Conversion Date. 4. RETIREMENT DATES (a) A Participant's "Normal Retirement Date" is the first day of the calendar month in which a Participant attains the age of sixty-five (65) years and is no longer a member of the Board or any subsequent month designated by a Participant in accordance with paragraph 6 below. (b) A Participant's "Early Retirement Date" is the first day of the calendar month designated by a Participant in accordance with paragraph 6 below, prior to the Normal Retirement Date, on or after the month in which a Participant attains the age of fifty-five (55) years. 5. RETIREMENT BENEFIT (a) The annual retirement benefit payable to any Participant who retires on the Normal Retirement Date, or any date thereafter, will be an amount equal to (i) the regular annual retainer paid by the Company to each director for the last fiscal year of the Company that the Participant served as a director, plus (ii) the value, as of the date of grant, of the shares of the Company's Common Stock granted to the Participant as a "Stock Award" under the Company's Stock Plan for Non-Employee Directors during the last fiscal year of the Company that the Participant served as a director. The "regular annual retainer" as used in the preceding sentence means the annual retainer received by each director of the Company, excluding any committee chair annual retainer, meeting fees and other fees received by a director; and, if the Participant elects to receive all or a portion of his or her annual retainer in the form of shares of the Company's common stock under the Company's Stock Plan for Non-Employee Directors, any portion of such annual retainer received in shares shall be included in the definition of "regular annual retainer." 2 (b) The annual early retirement benefit payable to any Participant who retires on the Early Retirement Date will be the amount specified in 5(a) above, reduced by the following early retirement factors: Age at Commencement Factor ------------------- ------ 64 .933 63 .867 62 .800 61 .733 60 .667 59 .633 58 .600 57 .567 56 .533 55 .500 If a Participant's age at the Early Retirement Date falls between any two of these ages, these factors shall be adjusted by straight-line interpolation. (c) No retirement benefit will be payable to any person who is a member of the Board for less than thirty-six (36) consecutive months. 6. BENEFIT PAYMENTS A Participant may retire by written notice to the Plan Administrator or the Secretary of the Company, designating a retirement date in accordance with paragraph 4 above. Retirement benefit payments will be payable on the first day of each calendar quarter following retirement or in accordance with such other schedule of payments as may be requested by the Participant and approved by the Board. Benefit payments will continue to be paid to the Participant for the remainder of the Participant's life. Notwithstanding the foregoing, in lieu of the normal form of payment otherwise provided under this Plan, the Plan Administrator may direct, in its sole and absolute discretion, that benefits shall be paid in a single sum that is the Actuarial Equivalent of the annual benefit payable to the Participant or, in the event of the Participant's death, to his or her surviving spouse. 7. SPOUSAL BENEFITS Should a Participant die before retirement benefits have begun to be paid to the Participant under this Plan, the Participant shall be deemed to retire on the later of (i) the day before his/her death, or (ii) the first day of the first calendar month thereafter in which the Participant would have attained the age of fifty-five (55), and the Participant's surviving spouse, if any, shall be entitled to a benefit equal to the benefit that would have been paid to the 3 Participant. If the Participant dies after retirement benefits have commenced, the Participant's surviving spouse shall be entitled to annual benefit payments equal to the annual benefit previously payable to the Participant. In each case, the benefit shall continue for the lesser of (i) ten years or (ii) a number of years equal to the number of years that the Participant was a member of the Board; provided, however, that payments shall not continue after the death of the spouse. 8. DISABILITY Should a Participant become totally and permanently disabled prior to retirement for a period of six (6) consecutive months while a member of the Board and the Board determines that such disability will continue, the Participant will be deemed to have retired on the first day of the calendar month following the month in which the Board makes such determination and the age of the Participant on such retirement date shall be deemed the older of (i) fifty-five (55), or (ii) the Participant's actual age on that date. Payments will be made on the same basis as described in Sections 5, 6, and 7 above. 9. CHANGE OF CONTROL Notwithstanding anything contained in this Plan to the contrary, the provisions of this paragraph 9 shall apply to any Participant whose membership on the Board ends before a Change of Control occurs or who is a member of the Board on the date that a Change of Control occurs and who ceases within twenty- four (24) months after a Change of Control to be a member of the Board for any reason. (a) Each such Participant shall be immediately vested in his or her retirement benefit payable under this Plan. (b) The Company shall contribute to the trust maintained pursuant to the Scientific-Atlanta, Inc. Benefits Protection Trust Agreement a lump sum amount equal to the Actuarial Equivalent of the Participant's retirement benefit. This lump sum payment to the trust shall be due on the later of (i) the date when the Change of Control occurs or (ii) the date the Participant ceases to be a member of the Board. The retirement benefit of a Participant who ceases to be a member of the Board within twenty-four (24) months after a Change of Control shall be computed as if the Participant would retire on the first day that he or she is eligible to retire (whether an Early Retirement Date or a Normal Retirement Date) following the Change of Control and the end of his or her membership on the Board. Any retirement benefits to which the Participant is entitled under the terms of this Plan shall be payable from the trust, except to the extent that the benefits are paid from the general assets of the Company. (c) Notwithstanding the foregoing, in lieu of the form of payment otherwise provided for in this paragraph 9, the Plan Administrator may direct, in its sole and absolute discretion, that upon a Change of Control benefits under this Plan shall be paid in a single lump sum that is the 4 Actuarial Equivalent of the annual benefits payable to the Participant or, in the event of the Participant's death, to his or her surviving spouse. (d) "Change of Control" means a change of twenty-five percent (25%) or more of the membership of the Board (excluding membership changes resulting from normal retirement of directors) within a twenty-four (24) month period following the acquisition of beneficial ownership by any person or entity, or group of persons or entities and their affiliates acting in concert, of twenty percent (20%) or more of the voting securities of the Company. "Affiliates" and "beneficial ownership" shall be defined in accordance with Rules 12b-2 and 13d-3 of the Securities and Exchange Commission, as the same may from time to time be amended. (e) "Actuarial Equivalent" means the present value of future payments based on the 1983 Unloaded Group Annuity Mortality Table weighted 50% male and an interest rate of 8%. 10. TERMINATION AND AMENDMENT OF THE PLAN The Board may terminate the Plan at any time and may amend the Plan from time to time but no such termination and amendment shall adversely affect the rights of Participants under the Plan, which shall be deemed fully vested and irrevocable on the date that a director becomes a Participant in accordance with paragraph 3 above. 11. EFFECTIVE DATE The effective date of this Plan was February 15, 1989. To record the adoption of the Plan (as amended and restated) by the Board, effective as of February 6, 1999, 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: Senior Vice President - Human Resources By: /s/ William E. Eason, Jr. ------------------------- Name: William E. Eason, Jr. Title: Senior Vice President, General Counsel and Corporate Secretary 5 EX-10.5 7 ANNUAL INCENTIVE PLAN FOR KEY EMPLOYEES EXHIBIT 10.5 SCIENTIFIC-ATLANTA, INC. ANNUAL INCENTIVE PLAN FOR KEY EMPLOYEES AS AMENDED AND RESTATED ON FEBRUARY 6, 1999 SCIENTIFIC-ATLANTA, INC. ANNUAL INCENTIVE PLAN FOR KEY EMPLOYEES 1. PURPOSE OF THE PLAN. The purpose of this Plan is to improve the return to the Company's stockholders by providing incentive compensation awards to selected Key Employees of the Company for superior performance and by attracting and retaining individuals of outstanding skills, experience and ability. Quantitative and qualitative objectives, i.e., standards of performance, are set at such a level as to require the key employees to excel in order to attain them. To these ends, the Plan provides a means of rewarding those who contribute through their individual performance to the objectives of the Company. 2. DEFINITIONS. When used herein, the following terms shall have the meaning set forth below: 2.1 "Board" - The Board of Directors of the Company. 2.2 "Business Unit" - An organizational unit, i.e., business unit, region, function, division, group or sector. 2.3 "Company" - Scientific-Atlanta, Inc. and its subsidiaries or affiliates. 2.4 "Committee" - The Human Resources and Compensation Committee of the Board of Directors. 2.5 "Key Employee" - A corporate officer or other executive employee of the Company who has a significant impact, directly or indirectly, on profits and Company performance, as determined by the Company and approved by the Committee. 2.6 "Participant" - A Key Employee selected in accordance with paragraph 4 of the Plan to receive an incentive compensation award in accordance with this Plan. 2.7 "Plan" - This Annual Incentive Plan for Key Employees. 2.8 "Plan Year" - A fiscal year of the Company. 2.9 "Retire" - Voluntary termination of employment with the Company by a Participant after the date on which: (i) the Participant has completed five (5) years of Credited Service under the Retirement Plan, and (ii) the sum of such Participant's age and years of Credited Service equal sixty-five (65). 2.10 "Retirement Plan" - The Scientific-Atlanta, Inc. Retirement Plan and Trust. 2.11 "Target" - Incentive compensation award, expressed as a percentage of Participant's base salary, payable to a Participant upon meeting: (i) one hundred percent (100%) of quantitative and qualitative objectives and (ii) all other eligibility criteria under the Plan. 1 3. ADMINISTRATION AND INTERPRETATION OF THE PLAN. The Committee shall have the sole and exclusive discretionary power to (i) approve eligible Participants, (ii) approve awards and payments under the Plan, (iii) interpret and construe the Plan, (iv) adopt, amend and rescind rules and regulations relating to the Plan, and (v) make all other determinations and take all other actions necessary or desirable for the Plan's administration. The Committee may delegate any of these powers to the Chief Executive Officer of the Company or to other officers of the Company in the Committee's discretion. The decision of the Committee on any question concerning the interpretation and administration of the Plan shall be final and conclusive. The Committee's determinations may differ in the Committee's sole discretion between different Participants, irrespective of whether they are similarly situated. Subject to paragraph 7, nothing in the Plan shall give any employee, his/her legal representative or assigns, any right to a payment or otherwise to participate in the Plan, except as the Committee may determine after the conclusion of a Plan Year. 4. ELIGIBLE PARTICIPANTS. 4.1 DESIGNATION AND APPROVAL. Participants will be designated from the Key Employees by the Chief Executive Officer of the Company and approved by the Committee in order to be eligible to receive an incentive compensation award under the Plan; provided, however, that -------- ------- if a Change in Control (as defined in paragraph 7) occurs prior to the time Participants are determined for the Plan Year in which the Change in Control occurs, all persons who were Participants in the prior Plan Year and who are active employees of the Company as of the date of the Change in Control shall be Participants for such Plan Year. 4.2 REQUIREMENT OF ACTIVE EMPLOYMENT AS OF DATE WHICH COMMITTEE APPROVES AWARDS. Except as the Committee may otherwise determine or as provided in paragraph 7, in order to be eligible to earn and receive an incentive compensation award under the Plan, a Participant for any Plan Year must be an active employee of the Company on the date which the Committee meets and approves incentive compensation awards under this Plan after the end of the Plan Year. Accordingly, if a Participant voluntarily terminates his/her employment or if the Company involuntarily terminates a Participant's employment prior to the date upon which the Committee meets after the end of the Plan Year to approve incentive compensation awards for that Plan Year, the Participant does not earn and is not eligible to receive an incentive compensation award under the Plan. 4.3 PRORATED AWARDS. The Committee may decide to award a prorated award to a Participant who is newly hired during the Plan Year or who is transferred from one Business Unit within the Company to another during a Plan Year, based on each Business Unit's results. Prorated awards may also be given to Participants who Retire during a Plan Year and to the estates of Participants who die during a Plan Year. 2 5. DETERMINATION OF INCENTIVE COMPENSATION AWARDS 5.1 TARGETS. Each Participant will have a Target established for him/her by the Company for the Plan Year. 5.2 FACTORS TO BE USED IN DETERMINATION OF AWARDS. Incentive Compensation awards under the Plan shall be calculated using a quantitative factor and a qualitative factor. These factors will be established as early in the Plan Year as practicable. 5.2.1 The quantitative factor shall be determined using Company, Business Unit or Function results, as appropriate. 5.2.2 The qualitative factor shall be determined by assessing the Participant's individual accomplishment of qualitative objectives established for the Participant for the Plan Year. The following procedure will be used in making appraisals of individual performance: (a) At the beginning of the Plan Year, each person eligible to be a Participant and his superior will mutually establish individual performance objectives. These objectives should be specific and committed to writing. Copies of agreed-to objectives for all Participants should be forwarded to the respective Human Resources Director or the Senior Vice President of Human Resources. (b) If during the year objectives are modified, deleted or added, an amended list of objectives should be prepared, agreed and forwarded to the office of the respective Human Resources Director or the Senior Vice President of Human Resources. (c) At the end of the Plan Year, eligible Participants and their superiors will be asked to assess the degree to which the stated performance objectives were achieved. These assessments will be combined with the quantitative performance results and translated into incentive compensation awards to be recommended by the Chief Executive Officer of the Company and approved by the Committee. The Committee reserves the authority to exercise its judgment and approve justifiable exceptions to award levels determined solely by strict application of weightings and calculations under Plan provisions. 5.3 WEIGHTING OF FACTORS. The weighting of the quantitative and qualitative objectives for any fiscal year in which the Plan is in effect will be determined by the Company in its discretion. 3 6. PAYMENT OF INCENTIVE COMPENSATION AWARDS. Except as provided in paragraph 7, incentive compensation awards under this Plan will be fully paid in cash within ninety (90) days after the end of the Plan Year, or deferred in whole or in part based on a written request for deferral submitted by the Participant and approved by the Company in accordance with procedures established by the Company. 7. CHANGE IN CONTROL OF THE COMPANY 7.1 CONTRARY PROVISIONS. Notwithstanding anything contained in the Plan to the contrary, the provisions of this paragraph 7 shall govern and supersede any inconsistent terms or provisions of the Plan. 7.2 CHANGE IN CONTROL. For purposes of the Plan, Change in Control shall mean any of the following events: 7.2.1 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 Company's then outstanding voting securities (the "Voting Securities"); provided, however, that for purposes of this paragraph 8(b)(1), -------- ------- 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 7.2.2 The individuals who are members of the Incumbent Board (as defined below) cease for any reason to constitute at least two- thirds (2/3) of the Board. The "Incumbent Board" shall include the individuals who as of August 23, 1993 are members of the Board and any individual becoming a director subsequent to August 23, 1993 whose election, or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) 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 (2) 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 of any agreement intended to avoid or settle a Proxy Contest; or 4 7.2.3 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 Company 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. 7.2.4 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 Company 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. 7.2.5 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 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. 7.2.6 Notwithstanding anything contained in this Plan to the contrary, if a Participant's employment is terminated prior to a 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 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 Participant shall mean the date immediately prior to the date of termination of such Participant's employment. 5 7.3 PAYMENT UPON A CHANGE IN CONTROL. Upon a Change in Control, the following incentive compensation awards shall be paid: 7.3.1 Upon a Change in Control, the incentive compensation award for a Plan Year ending prior to the date of the Change in Control for which payment has not previously been made shall be unconditionally payable in cash to each Participant. 7.3.2 If a Change in Control occurs with approval of the Board granted prior to any such Change in Control, incentive compensation awards for the Plan Year during which the Change in Control occurs shall be unconditionally payable to each Participant, such awards to be the Target percentage of each Participant's base salary or such higher percentage as may be approved by the Committee. 7.3.3 If a Change in Control occurs without approval of the Board granted prior to any such Change in Control, incentive compensation awards for the Plan Year during which the Change in Control occurs shall be unconditionally payable to each Participant, such awards to be two (2) times the Target percentage of each Participant's base salary; provided, -------- however, that in any case, if a Change in Control occurs before ------- Target percentages shall have been established for a Plan Year, the Target percentages for such Plan Year shall be no less favorable to the Participants than the Target percentages for the prior Plan Year. Unless the Committee directs an earlier payment, incentive compensation awards payable in accordance with this paragraph 7.3 shall be paid in cash on or before the earlier of the date which is five (5) days following the date of the Change of Control or the date determined in accordance with paragraph 6 above. 7.4 CONTINUATION OF THE PLAN. For a period of two (2) Plan Years following the Plan Year in which a Change of Control occurs, the Plan shall not be terminated or amended in any way (including, but not limited to, restricting or limiting the right to participate in the Plan of any person who is a Participant on the day prior to the date of the Change in Control), nor shall the manner in which the Plan is administered be changed in a way that adversely affects the level of participation or reward opportunities of any Participant; provided, -------- however, that the Plan shall be amended as necessary to make ------- appropriate adjustments for (i) any negative effect that the costs of expenses incurred by the Company in connection with the Change in Control may have on the benefits payable under the Plan and (ii) any changes to the Company (including, but not limited to, changes in corporate structure or capitalization, acquisitions or dispositions and increased interest expense as a result of the incurrence or assumption by the Company of acquisition indebtedness) following the Change in Control so as to preserve the reward opportunities and performance targets for comparable performance under the Plan as in effect on the date immediately prior to the Change in Control. 6 7.5 NO AMENDMENT OR TERMINATION OF CHANGE IN CONTROL PROVISION. This paragraph 7 shall not be amended or terminated at any time. Any amendment or termination of the Plan prior to a Change in Control which (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 or (ii) otherwise arose in connection with or in anticipation of a Change in Control shall be null and void and shall have no effect whatsoever. 7.6 TRUST ARRANGEMENT. All benefits under the Plan shall be paid by the Company. The Plan shall be unfunded, and the benefits hereunder shall be paid only from the general asset of the Company; provided, however, -------- ------- 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. 8. NON-ASSIGNABILITY. No payment awarded under this Plan nor any right or benefit under this Plan shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge the same shall be void and shall not be recognized or given effect by the Company. 9. AMENDMENT OF PLAN. Subject to the restrictions set forth in Section 7.5, the Committee has the authority to amend or modify this Plan at any time in its discretion. 10. TERMINATION OF PLAN. Subject to the restrictions set forth in Section 7.5 and in this Section 10, the Committee also has the authority to terminate this Plan at any time. At its August meeting in each Plan Year, the Committee may terminate the Plan for that Plan Year in its discretion. In the event of termination at the August meeting, no Participant will be entitled to any incentive compensation award under the Plan for that Plan Year. If the Committee terminates the Plan at any time other than the August meeting, such termination may only be prospective and Participants will be entitled to receive a pro-rata incentive compensation award calculated under the terms and conditions of the Plan for the Plan Year in which the termination occurs. 11. NO RIGHT TO EMPLOYMENT. Nothing in the Plan or in any notice of award pursuant to the Plan shall confer upon any person the right to continue in the employment of the Company nor affect the Company's right to terminate the employment of any person. 12. GOVERNING LAW. This Plan and the rights of all persons claiming rights under the Plan shall be governed by and interpreted in accordance with the laws of the State of Georgia, excluding its provisions regarding conflicts of laws. 7 To record adoption of this amended and restated Plan by the Board on February 6, 1999, the Company has caused its authorized officers to execute this Plan in the space designated below. Scientific-Atlanta, Inc. By: /s/ Brian C. Koenig --------------------------- Brian C. Koenig Senior Vice President Human Resources By: /s/ William E. Eason, Jr. --------------------------- William E. Eason, Jr. Senior Vice President, General Counsel and Corporate Secretary 8 EX-10.6 8 SENIOR OFFICER ANNUAL INCENTIVE PLAN EXHIBIT 10.6 SCIENTIFIC-ATLANTA, INC. SENIOR OFFICER ANNUAL INCENTIVE PLAN As adopted by the Board of Directors on June 22, 1994 and by the Stockholders on October 3, 1994 and amended by the Board of Directors on August 20, 1998 and on February 6, 1999 SCIENTIFIC-ATLANTA, INC. SENIOR OFFICER ANNUAL INCENTIVE PLAN 1. PURPOSE The purpose of this Plan is to improve the return to the Company's stockholders by providing incentive compensation to the Chief Executive Officer (and any other Plan Participants) of the Company for superior performance. Performance Objectives, i.e., standards of performance, are set at such a level as to require the Participants to excel in order to attain them. To these ends, the Plan provides a means of rewarding the Participants for contributing through their individual performance to the objectives of the Company. 2. DEFINITIONS. When used herein, the following terms shall have the meaning set forth below: 2.1 "Board" - The Board of Directors of the Company. 2.2 "Business Unit" - An organizational unit, i.e., business unit, region, function, division, group or sector. 2.3 "Code" - 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. 2.4 "Company" - Scientific-Atlanta, Inc. and its subsidiaries and affiliates. 2.5 "Committee" - The Human Resources and Compensation Committee of the Board of Directors or any other committee appointed by the Board whose members meet the requirements for eligibility to serve set forth in paragraph 3 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 Human Resources and Compensation Committee of the Board who participate in decisions relative to Performance Objectives and awards and payments under this Plan shall be deemed to be part of the "Committee" for purposes of this Plan. 2.6 "Exchange Act" - The Securities Exchange Act of 1934, as amended. 2.7 "Participant" - A person selected in accordance with paragraph 4 of the Plan to receive an incentive compensation award in accordance with this Plan. 2.8 "Performance Objectives" - The specific targets and objectives established by the Committee under any or all of the following four categories: profit before taxes, return on net assets, revenue growth and gross margin. Performance Objectives 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. 1 2.9 "Plan" - This Senior Officer Annual Incentive Plan. 2.10 "Plan Year" - A fiscal year of the Company. 2.11 "Retire" - Voluntary termination of employment with the Company by a Participant after the date on which: (i) the Participant has completed five (5) years of Credited Service under the Retirement Plan, and (ii) the sum of such Participant's age and years of Credited Service equal sixty-five (65). 2.12 "Retirement Plan" - The Scientific-Atlanta, Inc. Retirement Plan and Trust. 2.13 "Target" - Incentive compensation award, expressed as a percentage of Participant's base salary, payable to a Participant upon meeting: (i) one hundred percent (100%) of quantitative and qualitative objectives and (ii) all other eligibility criteria under the Plan. 3. ADMINISTRATION AND INTERPRETATION OF THE PLAN. The Board shall appoint the Committee, which shall consist of not less than two (2) members of the Board. 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. The Committee shall have the power to (i) approve eligible Participants, (ii) approve awards and payments under the Plan, (iii) interpret and construe the Plan, (iv) adopt, amend and rescind rules and regulations relating to the Plan, and (v) make all other determinations and take all other actions necessary or desirable for the Plan's administration. The decision of the Committee on any question concerning the interpretation and administration of the Plan shall be final and conclusive. Subject to paragraph 7 hereof, nothing in the Plan shall give any employee, his/her legal representatives or assigns, any right to a payment or otherwise to participate in the Plan, except as the Committee may determine after the conclusion of a Plan Year. 4. ELIGIBLE PARTICIPANTS. 4.1 DESIGNATION AND APPROVAL. Participants will be the Chief Executive Officer and any other senior officers who are designated and are approved by the Committee to receive an incentive compensation award under the Plan, provided, however, that if a Change in Control (as -------- ------- defined in paragraph 7) occurs prior to the time Participants are determined for the Plan Year in which the Change in Control occurs, all persons who were Participants in the prior Plan Year and who are active employees of the Company as of the date of the Change in Control shall be Participants for such Plan Year. 4.2 REQUIREMENT OF ACTIVE EMPLOYMENT AS OF DATE WHICH COMMITTEE APPROVES AWARDS. Except as the Committee may otherwise determine or as provided in paragraph 7, in order to be eligible to earn and receive an incentive compensation award under the Plan, a Participant for any Plan Year must be an active employee of the Company on the date which the 2 Committee meets and approves incentive compensation awards under this Plan after the end of the Plan Year. Accordingly, if a Participant voluntarily terminates his/her employment or if the Company involuntarily terminates a Participant's employment prior to the date upon which the Committee meets after the end of the Plan Year to approve incentive compensation awards for that Plan Year, the Participant does not earn and is not eligible to receive an incentive compensation award under the Plan. 4.3 PRORATED AWARDS. The Committee may decide to award a prorated award to a Participant who is newly hired during the Plan Year. Prorated awards may also be given to Participants who Retire during a Plan Year and to the estates of Participants who die during a Plan Year. 5. DETERMINATION OF INCENTIVE COMPENSATION AWARDS. 5.1 TARGETS. Each Participant will have a Target established for him/her by the Company for the Plan Year. 5.2 PERFORMANCE OBJECTIVES. The Committee shall establish one or more specific Performance Objectives for a Plan Year, and such Performance Objectives shall be established within ninety (90) days of the beginning of the Plan Year. The Committee shall also establish a schedule or schedules setting forth the amount to be paid based on the extent to which the Performance Objectives are actually achieved as determined by the Committee. The Committee may at any time adjust the Performance Objectives and any schedules of payments related thereto or adjust the way Performance Objectives are measured, provided that this provision shall not apply to any payment 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 payment from so qualifying. The Committee shall have the right to reduce or eliminate the compensation payable upon the attainment of a Performance Objective but shall not have the discretion to increase a payment upon the attainment of a Performance Objective. 6. PAYMENT OF INCENTIVE COMPENSATION AWARDS 6.1 TIME OF PAYMENT. Except as provided in paragraph 7, incentive compensation awards under this Plan will be fully paid in cash within ninety (90) days after the end of the Plan Year, or deferred in whole or in part based on a written request for deferral submitted by the Participant and approved by the Company in accordance with procedures established by the Company. 6.2 TREATMENT OF AWARD AS COMPENSATION. Any amounts paid as incentive compensation under this Plan shall be considered as compensation to the Participant for purposes of the Retirement Plan and disability and life insurance programs, unless and to the extent that such compensation is expressly excluded by the provisions of the Retirement Plan or the instruments establishing such programs, but such amounts shall not be considered as compensation for purposes of any other incentive plan or other benefits unless 3 the written instrument establishing such other plan or benefits expressly includes compensation paid under this Plan. 6.3 MAXIMUM AWARD. The maximum dollar value with respect to payments under this Plan to any Participant in any single Plan Year shall be $600,000. 7. CHANGE IN CONTROL OF THE COMPANY 7.1 CONTRARY PROVISIONS. Notwithstanding anything contained in the Plan to the contrary, the provisions of this paragraph 7 shall govern and supersede any inconsistent terms or provisions of the Plan. 7.2 CHANGE IN CONTROL. For purposes of the Plan, Change in Control shall mean any of the following events: 7.2.1 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 Company's then outstanding voting securities (the "Voting Securities"); provided, however, that for purposes of this paragraph -------- ------- 8(b)(1), 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 7.2.2 The individuals who are members of the Incumbent Board (as defined below) cease for any reason to constitute at least two-thirds (2/3) of the Board. 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 Company's stockholders was approved by a vote of at least two-thirds (2/3) 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 (2) 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 of any agreement intended to avoid or settle a Proxy Contest; or 4 7.2.3 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 Company 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. 7.2.4 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 Company 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. 7.2.5 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 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, the a Change in Control shall occur. 7.2.6 Notwithstanding anything contained in this Plan to the contrary, if a Participant's employment is terminated prior to a 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 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 Participant shall mean the date immediately prior to the date of termination of such Participant's employment. 5 7.3 PAYMENT UPON A CHANGE IN CONTROL. Upon a Change in Control, the following incentive compensation awards shall be paid: 7.3.1 Upon a Change in Control, the incentive compensation award for a Plan Year ending prior to the date of the Change in Control for which payment has not previously been made shall be unconditionally payable in cash to each Participant. 7.3.2 If a Change in Control occurs with approval of the Board granted prior to any such Change in Control, incentive compensation awards for the Plan Year during which the Change in Control occurs shall be unconditionally payable to each Participant, such awards to be the Target percentage of each Participant's base salary or such higher percentage a may be approved by the Committee. 7.3.3 If a Change in Control occurs without approval of the Board granted prior to any such Change in Control, incentive compensation awards for the Plan Year during which the Change in Control occurs shall be unconditionally payable to each Participant, such awards to be two (2) times the Target percentage of each Participant's base salary; provided, -------- however, that in any case, if a Change in Control occurs before ------- Target percentages shall have been established for a Plan Year, the Target percentages for such Plan Year shall be no less favorable to the Participants than the Target percentages for the prior Plan Year. Unless the Committee directs an earlier payment, incentive compensation awards payable in accordance with this paragraph 7.3 shall be paid in cash on or before the earlier of the date which is five (5) days following the date of the Change of Control or the date determined in accordance with paragraph 6 above. 7.4 CONTINUATION OF THE PLAN. For a period of two (2) Plan Years following the Plan Year in which a Change of Control occurs, the Plan shall not be terminated or amended in any way (including, but not limited to, restricting or limiting the right to participate in the Plan of any person who is a Participant on the day prior to the date of the Change in Control), nor shall the manner in which the Plan is administered be changed in a way that adversely affects the level of participation or reward opportunities of any Participant; provided, -------- however, that the Plan shall be amended as necessary to make ------- appropriate adjustments for (i) any negative effect that the costs of expenses incurred by the Company in connection with the Change in Control may have on the benefits payable under the Plan and (ii) any changes to the Company (including, but not limited to, changes in corporate structure or capitalization, acquisitions or dispositions and increased interest expense as a result of the incurrence or assumption by the Company of acquisition indebtedness) following the Change in Control so as to preserve the reward opportunities and performance targets for comparable performance under the Plan as in effect on the date immediately prior to the Change in Control. 6 7.5 NO AMENDMENT OR TERMINATION OF CHANGE IN CONTROL PROVISION. This paragraph 7 shall not be amended or terminated at any time. Any amendment or termination of the Plan prior to a Change in Control which (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 or (ii) otherwise arose in connection with or in anticipation of a Change in Control shall be null and void and shall have no effect whatsoever. 7.6 TRUST ARRANGEMENT. All benefits under the Plan shall be paid by the Company. The Plan shall be unfunded, and the benefits hereunder shall be paid only from the general asset of the Company; provided, however, -------- ------- 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. 8. NON-ASSIGNABILITY. No payment awarded under this Plan nor any right or benefit under this Plan shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge the same shall be void and shall not be recognized or given effect by the Company. 9. AMENDMENT OF THE PLAN. This Plan may be amended at any time and from time to time by the Board, provided that no amendment to the Plan 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 shall be made without the approval of the stockholders of the Company, unless the Board determines that such approval: (i) is not necessary to avoid loss of a deduction under Section 162(m) of the Code, (ii) will not avoid such a loss of deduction or (iii) is not advisable. 10. NO RIGHT TO EMPLOYMENT. Nothing in this Plan or in any notice of award pursuant to this Plan shall confer upon any person the right to continue in the employment of the Company or affect the Company's right to terminate the employment of any person. 11. PERFORMANCE-BASED COMPENSATION. This Plan is intended to give the Committee the authority, in its discretion, to make payments that qualify as performance-based compensation under Code Section 162(m)(4)(C). 12. GOVERNING LAW. This Plan and the rights of all persons claiming rights under the Plan shall be governed by and interpreted in accordance with the laws of the State of Georgia, excluding its provisions regarding conflicts of laws. 7 To record the adoption of this amended and restated Plan by the Board on February 6, 1999, the Company has caused its authorized officers to execute this Plan in the space designated below. SCIENTIFIC-ATLANTA, INC. By: /s/ Brian C. Koenig ----------------------------------------- Brian C. Koenig Senior Vice President - Human Resources By: /s/ William E. Eason, Jr. ----------------------------------------- William E. Eason, Jr. Senior Vice President, General Counsel and Corporate Secretary 8 EX-10.7 9 DEFERRED COMPENSATION PLAN EXHIBIT 10.7 DEFERRED COMPENSATION PLAN FOR [LOGO] NON-EMPLOYEE DIRECTORS OF SCIENTIFIC-ATLANTA, INC. --------------------------------------------------- As Amended and Restated, Effective May 12, 1999 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 Company") the opportunity to defer receipt of cash compensation and compensation in the form of stock payable to them for services to the Company as directors. 1.3 Restatement of Plan ------------------- This document amends and restates the Plan effective as of February 6, 1999. All deferral elections made before or after February 6, 1999, shall be governed 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 the Company who elects to participate in this Plan. 1 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. 2.4 Compensation ------------ The total of a Participant's Annual Retainer, Meeting Fees, and Committee Chair Retainer payments paid to the Participant, by the Company 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 the Company. 2.6 Meeting Fees ------------ The amounts paid to a non-employee member of the Board of Directors of the Company 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, an Elective Grant, a Retirement Award, or a Lump Sum Distribution made pursuant to the Stock Plan for Non-Employee Directors, as such terms are defined in that plan. 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, as the same may be amended or revised as herein permitted. 2.10 Compensation Deferral Election ------------------------------ Each election made by a Participant to defer a portion of his or her Compensation and/or Awards by executing and submitting an Election Form. 2 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 the Company for each Compensation Deferral Election made by a Participant under this Plan. 2.12 Deferred Benefit Commencement Date ---------------------------------- The date 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 amount of Compensation (and right to a certain number of shares of Scientific-Atlanta Common Stock under an Award, 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 plan currently or most recently maintained by the Company for the benefit of its employees who are totally disabled. 2.18 Plan Committee -------------- The Human Resources and Compensation Committee of the Board of Directors of the Company 3 2.19 Determination Date ------------------ The last day of each Plan Year. 2.20 Plan Interest Rate ------------------ An annual rate of interest equal to the average of Moody's Long Term Industrial Bond Rate for the ninety (90) day period ending on the March 1st preceding the commencement of each Plan Year (rounded to the next highest one- half (1/2) percentage point), plus 1%, which shall be credited to a Participant's Deferred Benefit Accounts during such 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 $.50 par value common stock of the Company 2.23 Deferral Period --------------- The period commencing on the date that an Election Form becomes effective for a Compensation Deferral Election and continuing until the Deferred Benefit Commencement Date. ARTICLE III - ELIGIBILITY AND PARTICIPATION - ------------------------------------------- 3.1 Eligibility ----------- Directors who are not employees of the Company and who are actively serving on the Board of Directors of the Company 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 quarter immediately preceding the quarter 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 quarter. 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, the Company shall defer Election Amounts deferred from the Participant's Awards and Compensation at the time Compensation would have been paid (or at the time the right to receive shares of Scientific-Atlanta Common Stock was granted, as applicable). Awards may only be deferred into an Award Sub-Account and Compensation may not be deferred into an Award Sub-Account. Each Election Amount shall be deferred for the Deferral Period specified with respect to the particular Compensation Deferral Election in the Election Form, provided, however, that the Participants shall not be entitled to defer Retirement Awards or Lump Sum Distributions (as such terms are defined in the Stock Plan for Non- Employee Directors) for Deferral Periods that are shorter than the minimum Deferral Periods for such Awards that are set forth in the Stock Plan for Non- Employee Directors. All Compensation Deferral Elections shall apply solely to Compensation and/or Awards which will be paid (or granted) to a Participant beginning with the first day of the calendar quarter commencing subsequent to the calendar quarter in which the Compensation Deferral Election is received; provided, however, the Participant must submit the Election Form at least thirty - -------- ------- (30) days prior to the quarter in which the Participant desires to commence a deferral. Any Compensation Deferral Election will apply only to Compensation and/or Awards paid (or granted) during the Plan Year in which the election becomes effective. A Participant may revise or change any election contained in any Election Form, other than the Election Amount, by submitting to the Plan Committee a request for such a revision or change and obtaining the Plan Committee's approval of such revision or change at least ninety (90) days prior to the effective date of such revision or change. 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 Compensation 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. Awards may only be credited into an Award Sub-Account, and Compensation may not be credited into an Award Sub-Account. 5 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. In the case of Awards which have minimum Deferral Periods that are required under the terms of the Stock Plan for Non-Employee Directors, the above limitations shall apply, and the Participant shall also be required to elect a Deferral Period that complies with the minimum Deferral Periods required under the Stock Plan for Non-Employee Directors. 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 the Company 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 or a Phantom Stock 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 6 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 method of issuance of shares) selected, which method was selected pursuant to the terms of subsection (a) or subsection (b) above, as applicable, with respect to a Compensation Deferral Election by submitting a request in writing to the Plan Committee. Prior to a change in the method of payment or a change in the method of issuance of shares becoming effective, the Plan Committee must approve such change. Participants may not move Deferred Benefits from one Sub-Account to another Sub-Account, except that Participants may move Deferred Benefits from an Interest Sub-Account to a Split-Dollar Insurance Sub-Account by notifying the Plan Committee in writing and designating in such notification the date upon which such Deferred Benefits are to be moved. 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 ------------------------- The Company 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. The Company 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 until it is paid to the Participant, and shall be credited and compounded weekly. 7 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 the New York Stock Exchange, for the 20 business days immediately preceding the last day of the month prior to 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. 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 the New York Stock Exchange 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 the Company 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"). Upon accrual, such Accrued Dividends will be placed in an Interest Sub-Account. A Participant shall not have any rights as a shareholder of the Company while an Award is held in an Award Sub-Account. 8 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. The Company 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 the Company. 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 Common Stock, determined as set forth in Section 5.3(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 9 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. 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, pursuant to Section 4.5(c) hereof. 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: 10 (a) Upon termination of service as a director prior to the Participant's Retirement: (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) the Company 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) Upon termination of service as a director on the date of the Participant's Retirement, the Company will pay (or issue) to such a Participant all amounts in his or her Deferred Benefit Accounts in accordance with Section 6.1 hereof. 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 the Company 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. 11 (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 the Company. (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. 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, the Company 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, the Company 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, the Company 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 12 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. 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 the Company 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, the Company shall pay all Participants their Deferred Benefits as provided in Section 6.1 and in the Participant's Election Form; provided, however, if this ----------------- Plan is terminated within two (2) years after a Change in Control (as defined in Section 9.4 hereof), each Participant's Deferred Benefits shall be paid in accordance with either (a) each Participant's "Change in Control Election Form" (as defined in Section 9.3 hereof), provided such Participant has completed and submitted such Change in Control Election Form, as required by Section 9.3 hereof, or (b) Participant's original Election Form and in accordance with Section 6.1 hereof, but only if a Participant has not validly completed and submitted a Change in Control Election Form. Upon termination of the Plan, amounts credited to the Deferred Benefit Accounts of each Participant shall continue to earn interest at the Plan Interest Rate until such amounts are paid to the Participant. 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 the Company. Any asset acquired or held by the Company or funds allocated by the Company in connection with the liabilities 13 assumed by the Company 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 the Company's obligations hereunder but shall be and remain a general asset of the Company. 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 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 the Company by furnishing any and all information reasonably requested by the Company in order to facilitate the payment of Deferred Benefits hereunder and by taking any such other actions as the Company or the Plan Committee may reasonably request. ARTICLE IX - CHANGE IN CONTROL - ------------------------------ 9.1 Applicability ------------- Notwithstanding any provision in this Plan to the contrary, the terms of this Article IX shall apply to any Participant, whether active or inactive. 9.2 Effect of Change in Control --------------------------- Upon a Change in Control the following shall immediately occur: (a) The Company shall contribute to the trust maintained pursuant to the Scientific-Atlanta, Inc. Benefits Protection Trust Agreement a lump sum amount equal to each Participant's Deferred Benefit Accounts. The Company shall assign to such trust (i) any split-dollar life insurance policies held by the Company, pursuant to Section 5.5 hereof, for the benefit of a Participant's beneficiaries; and (ii) any Endorsement Split-Dollar Agreements between the Company and a Participant. (b) All Participants shall be deemed to have satisfied the age and service requirements in the definition of Retirement in this Plan. 14 (c) For any Participant who is a member of the Board on the date that a Change in Control occurs and who ceases, within twenty-four (24) months after a Change in Control, to be a member of the Board for any reason, the Company shall pay such Participant his or her Deferred Benefits in accordance with such Participant's Change in Control Election Form, if completed and returned pursuant to Section 9.3. If a Participant has not completed and returned such Change in Control Election Form, such Participant's Deferred Benefits shall be paid in accordance with his original Election Form and Article VI hereof. (d) All amounts held in an Interest Sub-Account shall remain in such Interest Sub-Account and shall earn interest at the Plan Interest Rate until all amounts in such Interest Sub-Account are fully paid. (e) All amounts held in a Participant's Phantom Stock Sub-Account shall be valued as of the date of the Change in Control, based on the conversion method utilized in Section 5.3(a) hereof, and such amounts shall be automatically transferred to an Interest Sub-Account for such Participant (and shall earn interest in accordance with Section 9.2(d)). (f) All Awards held in an Award Sub-Account shall be automatically converted into the cash value of such Awards on the date of the Change in Control and such cash value shall be automatically transferred to the Interest Sub-Account (and earn interest in accordance with Section 9.2(d)). The cash value of such Awards on the date of the Change in Control shall be determined by multiplying the closing price of one (1) share of Scientific- Atlanta Common Stock on the business day immediately prior to the date of the Change in Control times the number of shares of Scientific-Atlanta ----- Common Stock that the Participant has a deferred right to receive under his Award Sub-Account. (g) All amounts, if any, held in a Participant's Split-Dollar Insurance Sub-Account shall be automatically transferred to an Interest Sub-Account for such Participant (and shall earn interest in accordance with Section 9.2(d)). The trust described in Section 9.2(a) shall withdraw from a Participant's Interest Sub-Account the amounts required to pay the premiums for the split-dollar life insurance held by the trust (pursuant to Section 9.2(a)) for the benefit of such Participant's beneficiaries. 9.3 Change in Control Election Form ------------------------------- At any time at least ninety (90) days prior to a Change in Control, each Participant may elect to have his Deferred Benefits paid out after a Change in Control in a manner different from the manner he previously elected in his original Election Form. Each Participant may complete and submit a Change in Control Election Form and thereby elect to have his or her Deferred Benefits paid as follows if the Plan is terminated or a Participant's service on the Board is terminated, within twenty-four (24) months after a Change in Control: (a) have his Deferred Benefits paid as a lump sum payment, payable within five (5) days after the date of termination of the Plan or the date of Participant's termination of service on the Board (whichever occurs 15 first); or (b) have his Deferred Benefits paid as though his Deferred Benefit Commencement Date were the date of termination of the plan or the date of Participant's termination of service on the Board (whichever occurs first); or (c) have his Deferred Benefits paid as of a specified date (the "Change in Control Election Form"). As with the original Election Form, Participant may elect, in his Change in Control Election Form, to have his Deferred Benefits paid in a lump sum, or in installments over a 5-year period, a 10-year period, or a 15-year period. For a Change in Control Election Form to be validly submitted by a Participant, it must be received by the Corporate Secretary of the Company prior to the deadline specified in the first sentence of this Section 9.3. 9.4 Definition of 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 Company's then outstanding voting securities (the "Voting Securities"); provided, however, that for purposes of this Section 8.4, 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 (as defined below) cease for any reason to constitute at least two-thirds (2/3) of the Board. 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 Company stockholders was approved by a vote of at least two-thirds (2/3) 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 (2) 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 of any agreement intended to avoid or settle a Proxy Contest; or (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 16 merger or consolidation, more than eight 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 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 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 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 Company, which acquisition, by reducing the number of Voting Securities outstanding, increases the proportional number of shares Beneficially Owned by the Subject Person, provided that if, after a Change in Control would occur (but for the -------- operation of this sentence) as a result of such 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. ARTICLE X - MISCELLANEOUS - ------------------------- 10.1 Amendments and Modifications ---------------------------- The Board of Directors of the Company may amend this Plan in any respect at any time, except that the Board of Directors may not amend this Plan for the two (2) year period commencing on the date of a Change in Control. 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. 17 10.2 Inurement --------- This Plan shall be binding upon and shall inure to the benefit of the Company and each Participant hereto, and their respective beneficiaries, heirs, executors, administrators, successors and assigns. 10.3 Governing Law ------------- This Plan is made in accordance with and shall be governed in all respects by the laws of the state of Georgia. 10.4 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 withholding requirements. A Participant receiving shares of Scientific- Atlanta 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 May 12, 1999, the Company has caused its authorized officers to execute this Plan. SCIENTIFIC-ATLANTA, INC. By: /s/ Brian C. Koenig ---------------------------------- Name: Brian C. Koenig Title: Senior Vice President - Human Resources By: /s/ William E. Eason, Jr. --------------------------------- Name: William E. Eason, Jr. Title: Corporate Secretary 18 EX-10.8 10 1985 EXECUTIVE DEFERRED COMPENSATION PLAN EXHIBIT 10.8 1985 EXECUTIVE DEFERRED COMPENSATION PLAN OF SCIENTIFIC-ATLANTA, INC. As Amended Through April 1, 1992 This Plan is adopted by Scientific-Atlanta, Inc. as of December 1, 1985, in order to provide specified benefits to certain selected key executive employees who contribute materially to the success of the Company and its subsidiaries. Article 1 - Definitions ----------------------- The following definitions apply to this Plan: 1.1 "Administrator" means a person designated by the Company to administer the performance of the Plan and Plan Agreements. 1.2 "Basic Compensation" means the total of (i) a Participant's annual gross salary payable in regular, equal, bi-weekly increments, before any deductions for amounts deferred under this Plan or other deductions whatsoever and (ii) a Participant's annual cash bonus, if any. Bonuses based on multi-year criteria, commissions, and other extraordinary payments, whether discretionary or pursuant to a Company plan, are not considered as part of Basic Compensation for the purposes of this Plan. 1.3 "Beneficiary" means the person or persons designated in accordance with paragraph 5.3 hereof to receive benefits under this Plan upon the death of a Participant. 1.4 "Committee" means the Human Resources and Compensation Committee of the Board of Directors of the Company or such other committee as may from time to time be authorized by the Company to manage and interpret this Plan. 1.5 "Company" means Scientific-Atlanta, Inc. and any subsidiary of Scientific-Atlanta, Inc. that adopts this Plan by resolution of the subsidiary's board of directors. 1.6 "Deferral Period" means the four Plan Years specified in the Plan Agreement, which must be within the first seven Plan Years following the date of the Plan Agreement, during which a portion of Participant's Basic Compensation is to be deferred. 1 1.7 "Deferred Compensation Account" or "DCA" means the account established on the books of the Company for each Participant showing the cumulative deferred compensation and interest equivalent credited to him or her. 1.8 "Effective Date of Plan" or "EDP" means December 1, 1985. 1.9 "Participant" means any executive employee with whom the Company has entered into a written Plan Agreement and who has not withdrawn from the Plan or received all amounts which he or she is entitled to receive in accordance with the provisions of the Plan Agreement and this Plan. 1.10 "Plan" means the Scientific-Atlanta, Inc. Executive Deferred Compensation Plan evidenced by this instrument, as it may be amended in writing from time to time. 1.11 "Plan Agreement" means the written agreement entered into by and between the Company and a Participant providing for a portion of a Participant's Basic compensation to be deferred pursuant to this Plan. 1.12 "Plan Year" means each calendar year beginning on January 1. 1.13 "Retirement Plan" means the Company's Retirement Plan and Trust in effect on EDP, as it may be amended, and any successor plan as it may be amended. 1.14 "Total Disability" means the inability of a Participant to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment. The Committee shall have full and absolute discretion to determine whether a Participant is totally disabled and may secure such medical and other evidence as the Committee considers necessary or appropriate. Article 2 - Eligibility ----------------------- 2.1 The Committee shall have full and absolute discretion to select the key executive employees of the Company who will be offered an opportunity to become Participants in the Plan. 2.2 In order to become a Participant, a selected person must execute and return to the Administrator a Plan Agreement in the form tendered by the Company and otherwise comply with conditions established by the Committee. 2 Article 3 - Deferral Commitments -------------------------------- 3.1 The amount to be deferred shall be determined by agreement of the Company and the Participant. However, no Plan Agreement shall provide for less than $5,000 nor more than 50% of Basic Compensation to be deferred for each Plan Year in a Deferral Period. 3.2 A Participant may make a written request to the Committee to increase the portion of the Participant's Basic Compensation to be deferred for future services but any such increase shall be at least $5,000 per future Plan Year. If approved by the Committee, the increase shall be reflected in a written amendment to the Plan Agreement which shall be executed by the Participant and the Company. 3.3 A Participant may make a written request to the Committee to reduce future deferrals or withdraw from participation in the Plan. Any request to reduce deferrals that, if granted, would result in less than $5,000 being deferred in each Plan Year of the Deferral Period shall be deemed a request to withdraw from participation in the Plan. Committee approval shall be required for the reduction or withdrawal to be effective. Article 4 - Deferred Compensation Account ----------------------------------------- 4.1 Each Participant's deferred compensation and the interest equivalent provided for in paragraph 4.2 below shall be credited on the books of the Company to his or her Deferred Compensation Account ("DCA"). Except as provided in the following sentences of this paragraph 4.1, a prorata portion of the Participant's annual deferred compensation shall be credited to the Participant's DCA as of each regular bi-weekly payday. A Participant may elect to have all or a portion of his or her deferred compensation for a Plan Year withheld from any annual cash bonus awarded to the Participant during the year. If the entire amount specified in a Plan Agreement to be deferred in a Plan Year has not been credited to a Participant's DCA on or before the second regular bi-weekly payday in September of that year, the amount yet to be deferred shall be deducted from the Participant's current compensation and credited to the Participant's DCA in prorata increments as of each regular bi-weekly payday during the remainder of the Plan Year. 4.2 As of the last day of each Plan Year, the amount in a Participant's DCA shall be increased by an interest equivalent equal to 14% of the amount in such account; provided, however, that if a Participant's employment by Scientific-Atlanta or participation in the Plan terminates within less than thirty-six (36) months after the 3 commencement of the Deferral Period for any reason other than death or retirement under a Retirement Plan of the Company, the interest equivalent credited to that Participant's account shall be reduced for each Plan Year to the applicable percentage specified below: (a) Twelve percent (12%) if such termination or withdrawal occurs after twenty-four (24) months and prior to thirty-six (36) months of the Deferral Period; (b) Ten percent (10%) if such termination or withdrawal occurs after twelve (12) months but prior to twenty-four (24) months of the Deferral Period; (c) Zero percent (0%) if such termination or withdrawal occurs within the first twelve (12) months of the Deferral Period. 4.3 The interest equivalent percentage shall not be reduced if termination of employment occurs because of death or retirement under a Retirement Plan of the Company. Article 5 - Payments -------------------- 5.1 Subject to paragraph 5.2 below, the amount in a Participant's DCA shall be paid in approximately equal semi-annual installments following the Deferred Payment Commencement Event ("DPCE") specified below or in accordance with such other payment schedule, such as monthly or quarterly, as may be specified in a Plan Agreement or requested in writing by Participant and approved by the Committee: (a) If the Participant retires under the Company's Retirement Plan, the DPCE (Deferred Payment Commencement Event) shall be (i) the Participant's actual retirement date, (ii) the date that deferred payments are actually made from the Company's Retirement Plan, (iii) the Participant's tenth anniversary of participation in the Plan or (iv) the Participant's 65th birthday. (b) If the Participant's employment is terminated for any reason other than retirement under the Company's Retirement Plan and such termination occurs after the end of the Deferral Period, the DPCE shall be the first to occur of (i) the Participant's death, (ii) the Participant's sixty-fifth (65th) birthday or (iii) the date following the Participant's fifty-fifth (55th) birthday on which Participant retires from his or her principal occupation or employment (which date shall be established on the basis of an 4 affidavit executed by Participant and such other supporting documentation as the Company may reasonably request). (c) If a Participant withdraws from the Plan or if the Participant's employment is terminated for any reason other than retirement under the Company's Retirement Plan and such withdrawal or termination occurs before the end of the Deferral Period, the DPCE shall be the effective date of such withdrawal or termination. 5.2 After the occurrence of the Participant's DPCE, the Company shall make payments as follows until the entire amount in the Participant's DCA is paid: (a) If the total amount in the DCA is less than $10,000 on the date of the DPCE, the entire amount shall be paid in a lump sum; (b) If the total amount in the DCA on the date of the DPCE is $10,000 or more but less than $25,000, equal payments shall be made over a five- year period. (c) If the total amount in the DCA on the DPCE is $25,000 or more but less than $50,000, equal payments shall be made over a ten-year period. (d) If the total amount in the DCA on the DPCE is $50,000 or more, equal payments shall be made over a fifteen-year period. Balances remaining in a Participant's DCA on the last day of each calendar year shall continue to be credited with an interest equivalent as provided herein. 5.3 In the event the Participant dies before receiving the entire amount credited to the Participant's DCA, the balance of the DCA at the time of his or her death shall be paid to the Participant's Beneficiary. A Participant's Beneficiary shall be the person or persons designated by written notice, in a form acceptable to the Committee, delivered to the Company prior to Participant's death. A Participant may change a designation of Beneficiary from time to time by subsequent written notices to the Company, in a form acceptable to the Committee, delivered prior to Participant's death. If the Participant is an employee of the Company or a retiree under the Company's Retirement Plan at the time of his or her death and has not designated a Beneficiary pursuant to this Agreement, the Beneficiary under this Agreement shall be deemed to be the same as 5 the beneficiary under the Company-provided life insurance then covering Participant as a Scientific-Atlanta employee or retiree. In the absence of such designation, payment shall be made to the Participant's personal representative for distribution as an asset of Participant's estate in accordance with applicable law. The time and form of payments specified elsewhere herein shall not be altered on account of Participant's death, provided, however, that at the request of Participant's Beneficiary or -------- ------- personal representative, the Committee may authorize and direct an acceleration of such payments, including a lump sum payment, if it should choose in its absolute discretion to do so. Article 6 - Death Benefits -------------------------- 6.1 If a Participant dies while an employee of the Company and prior to withdrawal from the Plan, or after retirement under the Company's Retirement Plan and prior to the receipt of any payments under Article 5 above, the Participant's DCA will be credited as of the date of his or her death with an amount, if any, necessary to cause the balance in the DCA after such credit to be equal to five times the average of the four annual amounts specified in the Participant's Plan Agreement to be deferred during the Deferral Period; provided, however, that if the deceased Participant's employment by the Company had terminated by reason of Participant's retirement under the Company's Retirement Plan prior to the end of the Deferral Period, the amount credited under this Article 6 shall not exceed five times the Participant's annual average compensation actually deferred pursuant to this Plan during the Plan Years preceding the termination of Participant's employment. 6.2 No amount will be credited to the Participant's DCA under this Article 6 if: (a) the balance in the Participant's DCA on the date of his or her death is equal to or exceeds five times the average of the four annual amounts specified in the Participant's Plan Agreement to be deferred during the Deferral Period; (b) prior to death, the Participant had withdrawn from the Plan, the employment of Participant had been terminated by the Company for any reason other than retirement under the Company's Retirement Plan, or payments under Article 5 above have commenced; 6 (c) the Participant's death is the result of suicide within two years after execution of the Plan Agreement: (d) the Participant's death is determined to have resulted from a bodily or mental cause or causes, information about which was withheld, knowingly concealed, or falsely provided by the Participant in response to a request by the Company to furnish evidence of good health; or (e) proof of death in a form determined acceptable by the Committee is not furnished. Article 7 - Total Disability ---------------------------- 7.1 If a Participant has entered into a Plan Agreement prior to his or her sixtieth (60th) birthday and becomes Totally Disabled while an employee of the Company and prior to withdrawal from the Plan or the receipt of any payments under Article 5 of the Plan, the Participant shall be entitled to receive under the Plan, for so long as such Total Disability shall continue, annual disability benefits at a rate equal to one and one-half (1-1/2) times the average of the four annual amounts specified in the Participant's Plan Agreement to be deferred during the Deferral Period; provided, however, that the disability benefit shall not continue after the Participant's sixty-fifth (65th) birthday. 7.2 During the continuation of a Participant's Total Disability that commences prior to termination of Participant's employment for any reason, a Participant who has not requested withdrawal from the Plan shall continue to be deemed a Participant and an employee of the Company and the Company shall continue to credit the Participant's DCA with the applicable amount of deferred compensation in accordance with the Plan Agreement at each pay period as if the Participant were not Totally Disabled. Article 8 - Leave of Absence ---------------------------- 8.1 If a Participant is authorized by the Company for any reason to take a temporary leave of absence with Basic Compensation continuation throughout the period of absence, the Plan Agreement shall continue in full force and effect as if the Participant were not on leave of absence. 8.2 If a Participant is authorized by the Company for any reason to take a temporary leave of absence without pay at any time during 7 the Deferral Period, the Plan Year in which the leave of absence begins and the Deferral Period shall be deemed suspended and no amounts shall be credited to the Participant's DCA during such leave of absence. The calendar year in which the Participant returns to regular employment by the Company shall be deemed a resumption of the Plan Year in which the leave of absence began and during the balance of that year a sufficient amount of the Participant's Basic Compensation shall be deferred, in approximately equal increments on each regular pay day, to cause the amount deferred for the Plan Year, as so continued, to be equal to the amount specified in the Plan Agreement for that Plan Year. Notwithstanding the foregoing, the Company may deem the Participant to have withdrawn from the Plan at such time as (i) the Participant's leave of absence continues beyond the period authorized by the Company; or (ii) the Company determines that the Deferral Period will not be completed within the first seven Plan Years after execution of the Plan Agreement. 8.3 For the purposes of this Plan, a Participant's employment by the Company shall be deemed to continue throughout the authorized period of any leave of absence, paid or unpaid. Article 9 - Termination of the Plan ----------------------------------- 9.1. The Company shall have the right to terminate this Plan and any Plan Agreement at any time by written notice to each Participant to that effect; provided, however, that no such termination shall affect the rights of any Participant who is Totally Disabled on the effective date of termination nor the entitlement of any Beneficiary to receive a benefit payable on account of the death of any Participant occurring prior to the effective date of termination. 9.2 The termination of this Plan or a Plan Agreement by the Company shall be deemed a Deferred Payment Commencement Event within the meaning of Article 5 above. Article 10 - Restriction on Alienation of Benefits -------------------------------------------------- 10.1 No right or benefit under this Plan or a Plan Agreement shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge the same shall be void. No right or benefit hereunder shall in any manner be liable for or subject to the debts, contracts, liabilities, or torts of the person entitled to such benefit. 8 Article 11 - Limitation of Rights and Obligations ------------------------------------------------- 11.1 A Participant's rights and the Company's sole obligations to a Participant or the Participant's Beneficiaries with respect to this Plan are as expressly set forth in this Plan and the Plan Agreement entered into between the Company and the Participant. No other rights or obligations shall be inferred. 11.2 The Participant and Beneficiaries must cooperate with the Company in furnishing all information requested by the Company related to the payment of benefits or any other action within the scope of the Company's responsibilities under this Plan. Such information may include the taking of a physical examination by Participant. Article 12 - Unsecured General Creditor --------------------------------------- 12.1 Amounts payable to a Participant shall be paid from the general assets of the Company exclusively; provided, however, 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. Article 13 - Administration of the Plan --------------------------------------- 13.1 The general administration of this Plan, as well as construction and interpretation thereof, shall be vested in the Committee, the members of which shall be appointed from time to time by, and serve at the pleasure of, the Board of Directors of the Company. An administrator designated by the Company will assist the Committe. 13.2 Subject to the Plan, the Committee shall from time to time establish rules, forms and procedures for the administration of the Plan. Except as otherwise expressly provided, the Committee shall have the exclusive right to interpret the Plan and to decide any and all matters arising thereunder. The Committee's decisions shall be conclusive and binding upon all persons having or claiming to have any right or interest under the Plan. 13.3 No member of the Committee shall be liable for any act of omission of any other member of the Committee, nor for any act or omission 9 on his own part, excepting his own wilful misconduct. The Company shall indemnify and save harmless the Administrator and each member of the Committee against any and all expenses and liabilities arising out of or related to his or her acts and omissions related to this Plan, with the exception of expenses and liabilities arising out of his or her own wilful misconduct. 13.4 To enable the Committee to perform its functions, the Company and, on request, each Participant shall supply full and timely information to the Committee on all matters relating to the compensation of Participants, their retirement, death or other cause for termination of employment, and such other pertinent facts as the Committee may require. 13.5 The Administrator, the members of the Committee and the officers and directors of the Company shall be entitled to rely on all certificates and reports made by any duly appointed accountants and on all opinions given by any duly appointed legal counsel. Such legal counsel may be counsel for the Company. 13.6 In addition to the powers hereinabove specified, the Committee shall have the power to compute and certify under the Plan the amount and kind of benefits from time to time payable to Participants and their Beneficiaries and to authorize all disbursements for such purposes. Article 14 - General and Miscellaneous -------------------------------------- 14.1 Nothing in this Plan or in any Plan Agreement shall be construed as a contract of continuing employment or as obligating a Participant in any way to continue in the employ of Company or the Company to continue to employ a Participant. 14.2 Any notice permitted or required under this Plan or a Plan Agreement shall be in writing and shall be effective when actually received by the Participant or the Secretary of the Company or on the third business day after posting in the United States mails, postage prepaid, by certified mail, return receipt requested, addressed as follows: TO PARTICIPANT: TO COMPANY: Most recent Human Resources and address shown in Compensation Committee Company's personnel c/o Corporate Secretary records. Scientific-Atlanta, Inc. P.O. Box 105600 Atlanta, Georgia 30348 10 Notice of address changes shall be effective as aforesaid. 14.3 This Plan and Plan Agreements shall be binding upon the Company, its successors and assigns and upon Participant and Participant's Beneficiaries, assigns, heirs executors and administrators. 14.4 This Plan and all Plan Agreements shall be interpreted in accordance with and governed by the laws of the State of Georgia; provided, however, that nothing in this paragraph shall be construed as limiting the discretion of the Committee or its power to render final and binding judgments and interpretations as provided herein and in Plan Agreements. 14.5 The Article headings are set forth only for convenience and are entitled to no weight in interpreting this Plan. The gender of pronouns used in this Plan has no significance. Singular pronouns shall be deemed to include plural pronouns. 14.6 If any provision of this Plan should be deemed illegal or invalid for any reason, the remaining provisions of the Plan shall remain in full force and effect and the Plan shall be construed and administered as if the illegal or invalid provision had never been included; provided, however, that if the essential purpose of the Plan would be frustrated by the invalidity or illegality of any provision, the Company may, by written notice to Plan Participants, add a replacement provision that is valid, conforms to applicable law and has a substantially similar effect to the provision determined to be invalid but if the Company deems the addition of such a replacement provision to be impossible, the Company shall terminate the Plan. Article 15 Change in Control ---------------------------- 15.1 Contrary Provisions. Nothwithstanding anything contained in the Plan ------------------- to the contrary, the provisions of this Article 15 shall govern and supersede any inconsistent terms or provisions of the Plan. 15.2 Change in Control. For purposes of this Plan, a "Change in Control" ----------------- shall mean any of the following events: (a) The aquisition in one or more transactions by any "Person" (as the term person is used for purposes of Section 11 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 Company's then outstanding voting securities (the "Voting Securities"), provided, however, that for -------- ------- purposes of this Paragraph 15.2(a), the Voting Securities acquired directly from the Company by any Person's 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 defined below), cease for any reason to constitute at least two-thirds of the Board. 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 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 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 of any agreement intended to avoid or settle a Proxy Contest; or (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 12 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 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 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 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 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. Notwithstanding anything contained in this Plan to the contrary, if a Participant's employment is terminated prior to a 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 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 Participant shall mean the date immediately prior to the date of termination of such Participant's employment. No act, nor failure to act, on the Participant's part, shall be considered "willful" unless the Participants has acted, or failed to 13 act, with an absence of good faith and without a reasonable belief that action or failure to act was in the best interest of the Company. 15.3 Termination of Employment. Notwithstanding any other provision of this ------------------------- Plan to the contrary, if a Participant's employment with the Company or participation in the Plan terminates other than for Cause (as defined in paragraph 15.4), and such termination occurs within two years following a Change in Control or 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 or (ii) otherwise occurs in connection with or in anticipation of a Change in Control: (a) The interest equivalent credited to such Participant's DCA shall equal fourteen percent (14%) of the amount in his DCA at the close of each Plan Year ending prior to such termination plus a pro rata interest equivalent at such rate for the portion of the Plan Year in which such termination occurs based on the number of days elapsed through the date of termination. This paragraph 15.3(a) shall not be applicable if a Paritcipant's employment with the Company or participation in the Plan is terminated for Cause and the provisions of paragraph 4.2 shall govern the interest equivalent payable to such Participant. (b) The amount in the Participant's DCA including the interest equivalent determined under paragraph 15.3(a) shall be unconditionally payable in cash to the Participant. Unless the Committee directs as earlier payment, such amount shall be paid in cash on or before the date which is five (5) days following the Termination Date. 15.4 Cause. For purpose of this Plan, a termination for "Cause" is a ----- termination evidenced by a resolution adopted in good faith by two- thirds of the Board that the Participant (i) has been convicted of a felony, or (ii) has engaged in conduct which constitutes (A) willful neglect in carrying out his duties to the Company or (B) willful misconduct, in either case, which is demonstrably and materially injurious to the Company monetarily or otherwise. 15.5 Continuation of the Plan. For a period of two (2) Years following a ------------------------ Change of Control, The Plan shall not be terminated or 14 amended in any way (including, but not limited to, restricting or limiting the right to participate in the Plan of any person who is a Participant on the day prior to the date of the Change of Control), nor shall the manner in which the Plan is administered be changed in a way that adversely affects the level of participation or the benefits accruing to any Participant. 15.6 Amendment or Termination. ------------------------ (i) This Article 15 shall not be amended or terminated at any time. (ii) Any amendment or termination of the Plan prior to a Change in Control which (l) 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. To record the adoption of the Plan (as amended and restated) by the Board, effective as of February 6, 1999, the Company has caused its authorized officers to execute this Plan. SCIENTIFIC-ATLANTA, INC. By: /s/ Brian C. Koenig By: /s/ William E. Eason, Jr. -------------------- ------------------------- Name: Brian C. Koenig Name: William E. Eason, Jr. Title: Senior Vice President- Title: Senior Vice President Human Resources and General Counsel 15 EX-10.9 11 EXECUTIVE DEFERRED COMPENSATION PLAN EXHIBIT 10.9 SCIENTIFIC-ATLANTA EXECUTIVE DEFERRED COMPENSATION PLAN AMENDED AND RESTATED MAY 12, 1999 Article I - Introduction ------------------------ 1.1 Name of the Plan ---------------- This Plan shall be known as the Scientific-Atlanta Executive Deferred Compensation Plan. 1.2 Purpose of Plan --------------- The purpose of the Plan is to provide eligible executives of Scientific- Atlanta, Inc., a Georgia corporation, and its subsidiaries the opportunity to defer cash compensation payable to them for services to Scientific-Atlanta, Inc. and its subsidiaries. 1.3 Date of Plan ------------ This Scientific-Atlanta Executive Deferred Compensation Plan was originally made at Norcross, Georgia, on the 19th day of May, 1993, for the benefit of certain employees of Scientific-Atlanta, Inc. and its subsidiaries. Article II - Definitions ------------------------ For purposes of this Plan, the following words and phrases shall have the meanings and applications set forth below: 2.1 Annual Incentive Plan Payment ----------------------------- The short-term executive incentive payment, if any, earned by a Participant in the year preceding a Plan Year and payable by the Employer to the Participant in the Plan Year. 2.2 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. 1 2.3 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. 2.4 Compensation ------------ The total of a Participant's Salary, Annual Incentive Plan Payment, Long- Term Incentive Plan Payments, any other incentive payments approved by the Plan Committee ("Other Incentive Compensation"), amounts to be received by the Participant under the Executive Deferred Compensation Plan of Scientific- Atlanta, Inc. originally adopted on December 1, 1985 ("1985 Plan Payments") and any amounts to be received by the Participant under any Severance Protection Agreement with, or Severance Protection Plan of, Scientific-Atlanta, Inc. ("Severance Payments"), which are payable to the Participant by the Employer during a Plan Year. Compensation shall be calculated before reduction for taxes or for compensation deferred pursuant to this Plan. 2.5 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 the Employer for each Compensation Deferral Election made by a Participant under this Plan. 2.6 Deferred Benefit Commencement Date ---------------------------------- The date irrevocably designated by a Participant with respect to each Compensation Deferral Election as the date on which the payment of the Deferred Benefits that accumulate as a result of such elections are to begin. 2.7 Deferred Benefits ----------------- The amounts payable pursuant to this Plan to a Participant or to his or her Beneficiary or estate following the Participant's termination of employment, the Deferred Benefit Commencement Date, determination of Total Disability, or death. 2.8 Determination Date ------------------ The last day of each Plan Year. 2.9 Election Amount --------------- The amount of Salary, Annual Incentive Plan Payment, Long-Term Incentive Plan Payment, Other Incentive Compensation, 1985 Plan Payments or Severance Payments to be 2 deferred pursuant to a single Compensation Deferral Election. 2.10 Election Form ------------- The form completed by a Participant in order to make one or more Compensation Deferral Elections, as the same may be amended or revised as herein permitted. 2.11 Employer -------- Scientific-Atlanta, Inc. or any of its majority owned subsidiaries. 2.12 Employment Termination Date --------------------------- The date of a Participant's termination of employment, determination of Total Disability, or death, whichever is applicable. 2.13 Long-Term Incentive Plan Payment -------------------------------- The long-term performance payment, if any, earned by a Participant during the performance period immediately preceding the Plan Year and payable by the Employer to the Participant in the Plan Year. 2.14 Participant ----------- An employee of the Employer who is eligible to participate in this Plan according to the criteria adopted from time to time by the Plan Committee and who elects to participate in this Plan. 2.15 Plan ---- This Scientific-Atlanta Executive Deferred Compensation Plan, as amended from time to time. 2.16 Plan Committee -------------- The Human Resources and Compensation Committee of the Board of Directors of Scientific-Atlanta, Inc. or such other committee as shall be designated by the Board of Directors from time to time. 2.17 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. 3 2.18 Plan Interest Rate ------------------ An annual rate of interest equal to the average of Moody's Long Term Industrial Bond Rate for the ninety (90) day period ending on the March 1st preceding the commencement of each Plan Year (rounded to the next highest one- half (1/2) percentage point), plus 1%, which shall be credited to a Participant's Deferred Benefit Accounts during such Plan Year. Provided, however, that with respect to any 1985 Plan Payments deferred under this Plan, the Plan Interest Rate to be credited to each Deferred Benefit Account established for any such deferral shall be 14% per annum. 2.19 Salary ------ The base salary, including any raises in salary, earned by a Participant in connection with his or her employment with the Employer and payable to a Participant by the Employer in a Plan Year. 2.20 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 the Employer for the benefit of the Participant claiming to be totally disabled. Article III - Eligibility and Participation ------------------------------------------- 3.1 Eligibility ----------- Employees who are eligible to participate in this Plan will be identified by the Plan Committee according to criteria adopted from time to time by the Plan Committee. Such identification shall be conclusive and binding upon all persons. 3.2 Participation ------------- The Plan Committee shall notify in writing each employee who becomes eligible to participate in this Plan of his or her eligibility. Eligible employees may participate in this Plan by submitting an Election Form in accordance with Section 4.1 hereof. Such election to participate shall be effective upon the receipt and acceptance by the Plan Committee of such Election Form. 3.3 Additional Compensation ----------------------- A Participant shall receive the Deferred Benefits provided for herein in addition to any compensation or other benefits paid or provided to the Participant by the Employer. In the event 4 that a Participant's participation in this Plan shall cause the Participant to receive a reduced benefit under any pension plan maintained by the Employer for the benefit of the Participant, then the Employer shall pay the Participant, at the same time and in the same manner as would have been paid under such pension plan, the additional pension benefits that the Participant would have received under such pension plan if the Participant had not participated in this Plan, unless the Participant is entitled to receive such additional pension benefits under some other plan maintained by the Employer for the benefit of the Participant. Article IV - Compensation Deferral ---------------------------------- 4.1 Compensation Deferral Election ------------------------------ A Participant shall make a Compensation Deferral Election by executing and submitting to the Plan Committee an Election Form. The Election Form shall specify the Election Amount, the Deferred Benefit Commencement Date, the manner of payment of the Deferred Benefits attributable to the election, the Beneficiary selected by the Participant to receive such Deferred Benefits in the event of the Participant's death and any optional payment instructions for involuntary termination of employment, disability and death. An election to defer future Salary may be made either before or during the Plan Year, provided, however, that any such election must be submitted to the Plan Committee at least thirty (30) days prior to the applicable fiscal quarter and must apply to at least the entire fiscal quarter. An election to defer all or a portion of the payment of any Annual Incentive Plan Payment, a Long-Term Incentive Plan Payment, Other Incentive Compensation, 1985 Plan Payments or Severance Payments must be made at least ninety (90) days prior to the date the Participant is entitled to receive such payment. A Participant may revise or change any election or instruction contained in any Election Form, other than the Election Amount, by submitting to the Plan Committee a revised Election Form at least ninety (90) days prior to the effective date of such revision or change. 4.2 Election Amounts ---------------- Each Election Amount shall be selected as follows: (a) With respect to Salary, a participant may defer a specified percentage of the Salary which the Participant will earn and receive during the balance of the Plan Year, provided, however, that no deferral election with respect to the current Plan Year may be made after March 31. Percentage deferral must be an increment of five percentage points and shall not exceed fifty percent. (b) With respect to an Annual Incentive Plan Payment, a Long-Term Incentive Plan Payment, Other Incentive Compensation, 1985 Plan Payments or Severance Payments, a Participant may defer either a specified percentage of the entire payment or a specified percentage of the payment above a stated dollar amount; provided, however, that any such percentage must be an increment of five percentage points. 5 4.3 Reduction of Compensation ------------------------- The Employer shall deduct Election Amounts deferred from a Participant's Salary ratably over each remaining pay period in the Plan Year. The Employer shall deduct Election Amounts deferred from an Annual Incentive Plan Payment, a Long-Term Incentive Plan Payment, Other Incentive Compensation, 1985 Plan Payments or Severance Payments at the time such payment is otherwise payable. 4.4 Deferred Benefit Commencement Date ---------------------------------- Except as otherwise provided in Article VI hereof, a Participant may elect to defer receipt of an Election Amount until the Deferred Benefit Commencement Date selected by the Participant. The permissible Deferred Benefit Commencement Dates are (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 Employment Termination Date, or (iii) a date which is either the fifth or tenth anniversary of the Participant's Employment Termination Date. The term "Retirement" used as a designation on any Election Form for a Deferred Benefit Commencement Date shall mean the Participant's Employment Termination Date. 4.5 Manner of Payment ----------------- Except as otherwise provided in Article VI hereof, the Participant may elect to receive payment of the Deferred Benefits attributable to a Compensation Deferral Election pursuant to one of the following methods: (a) Annual, semiannual or quarterly installments payable over a five, ten or fifteen year period, and commencing on the respective Deferred Benefit Commencement Date; or (b) 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. 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 a revised Beneficiary designation in writing reflecting the change to the Plan Committee. Article V - Deferred Benefit Accounts ------------------------------------- 5.1 Deferred Benefit Accounts ------------------------- The Employer shall cause to be established and maintained a separate Deferred Benefit Account with respect to each Compensation Deferral Election. The Employer shall credit the 6 Election Amount deferred pursuant to each such election to the Participant's appropriate Deferred Benefit Account as of the date deferred from the Participant's Compensation as provided in Section 4.3 hereof. The amount credited to a Participant's Deferred Benefit Account shall equal the Election Amount deferred reduced by the amount, if any, that the Employer may be required from time to time to withhold from such Election Amount pursuant to any federal, state or local law. 5.2 Accrual of Interest ------------------- Except as otherwise provided by Section 6.2(b) hereof, interest shall accrue, at the Plan Interest Rate in effect from time to time, on any amounts credited to a Deferred Benefit Account from the date on which the amount is credited until it is paid to the Participant, and shall be credited and compounded weekly. 5.3 Determination of Account Balance -------------------------------- As of each Determination Date, the current balance of a Participant's Deferred Benefit Account shall equal (A) the sum of (i) the balance of such Deferred Benefit Account as of the immediately preceding Determination Date, (ii) any Compensation deferred by such Participant to such Deferred Benefit Account since the previous Determination Date and (iii) the amount of interest credited to such Deferred Benefit Account since the preceding Determination Date, minus (B) any payments to or withdrawals by the Participant from the Deferred Benefit Account since the previous Determination Date. 5.4 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 maintained for the Participant as of the Determination Date. Article VI - Payment of Deferred Benefits ----------------------------------------- 6.1 General ------- Except as otherwise provided herein, Deferred Benefits in each Deferred Benefit Account shall be payable to a Participant upon the Deferred Benefit Commencement Date for such Account and pursuant to the manner of payment selected by the Participant on the applicable Election Form 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 in effect for such first year. Thereafter, the amount payable 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 7 years in the aforesaid five, ten, or fifteen year installment period based on the Plan Interest Rate for such succeeding year. 6.2 Termination of Employment ------------------------- Deferred benefits shall be paid to a Participant upon his or her termination of employment, as follows: (a) Upon the involuntary termination of a Participant's employment by the Employer, the amount in each Deferred Benefit Account shall be payable to the Participant either (i) in the manner specified by the Participant in his or her Election Form to apply in the event of his or her involuntary termination by the Employer; or (ii) if no such specification is made, on the Deferred Benefit Commencement Date that applies to such Deferred Benefit Account, pursuant to the method requested by the Participant in his or her Election Form. (b) Upon the voluntary termination of employment by a Participant prior to attaining fifty-five years of age: (1) the amounts in each of the Participant's Deferred Benefit Accounts shall cease to earn interest and the balance of each Deferred Benefit Account shall be determined as of the nearest pay date following the Participant's Employment Termination Date determined in accordance with Article V hereof; and (2) the Employer shall pay the Participant the balance of each such Deferred Benefit Account 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 (60) days of the Participant's voluntary termination. (c) Upon the voluntary termination of employment with the Employer by a Participant who is fifty-five years or older the Employer will pay out to such Participant all amounts in his or her Deferred Benefit Account in accordance with the instructions in the applicable Election Form. (d) Other provisions of this Plan to the contrary notwithstanding, in the event that a Participant's employment with the Employer is terminated for any reason, voluntarily or involuntarily, within two (2) years after a "Change in Control" of Scientific-Atlanta, Inc., the Employer shall pay the Participant the amounts in the Participant's Deferred Benefit Accounts according to the terms of Section 6.2(a) hereof as if the Participant had been terminated involuntarily. For purposes of this Plan, a "Change in Control" shall mean any of the following events: (1) 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 8 Company's then outstanding voting securities (the "Voting Securities"), provided, however, that for purposes of this Section 6.2(d)(1), 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 (2) The individuals who are members of the Incumbent Board (as defined below), cease for any reason to constitute at least two-thirds of the Board. 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 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 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 of any agreement intended to avoid or settle a Proxy Contest; or (3) 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 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 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 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 Company which, by reducing the number of Voting Securities outstanding, increases the proportional number of shares Beneficially Owned by the Subject 9 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 be deemed to have occurred. (e) Other provisions of this Plan to the contrary notwithstanding, this Plan may not be modified, amended or terminated within two (2) years after a Change in Control. 6.3 Total Disability ---------------- Deferred Benefits shall be paid to a Participant upon his or her becoming Totally Disabled, as follows: (a) Upon the determination that a Participant is Totally Disabled. (1) No further deferrals will be made from his or her Compensation: and (2) the Employer shall pay the Participant the balance in each of the Participant's Deferred Benefit Accounts as if the Participant had been terminated involuntarily, as set forth in Section 6.2(a), unless the Participant has specified in his or her Election Form a different manner of payment. (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 the Employer. (c) In the event that a Totally Disabled Participant recovers and resumes active employment with the Employer 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 that are then being paid pursuant to the terms of this Plan. 6.4 Death ----- Deferred Benefits shall be paid upon the death of a Participant, as follows: (a) Upon the death of a Participant, the Employer shall pay the amounts 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 his or her Employment Termination Date, the 10 Employer 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, in the same manner as for the Participant who has been terminated involuntarily, as set forth in Section 6.2(a). (c) If the Participant dies following his or her Employment Termination Date but prior to his or her receiving the full payment of all Deferred Benefits payable to him or her, the Employer shall pay to each of the respective Beneficiaries or to the Participant's estate, as the case may be, the same Deferred Benefit in the same manner as it otherwise would have paid 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 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 - Hardship Withdrawals ---------------------------------- 7.1 Hardship Withdrawals. A participant may request a Hardship Withdrawal --------------------- of all or a portion of his or her Deferred Benefits before the Deferred Benefit Commencement Date, as follows: (a) The request for withdrawal must be to meet an "unforeseeable emergency." (b) For purposes of this Article VII, an unforeseeable emergency is a severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or a dependent of the Participant, loss of Participant's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. The circumstances that will constitute an unforeseeable emergency will depend upon the facts of each case, but, in any case, a hardship withdrawal may not be made to the extent that such hardship is or may be relieved: (1) Through reimbursement or compensation by insurance or otherwise, (2) By liquidation of the participant's assets, to the extent the liquidation of such assets would not itself cause severe financial hardship, or 11 (3) By cessation of deferrals under the Plan. (c) The request for a Hardship Withdrawal must be made in writing to the Plan Committee and shall state the amount requested, the unforeseeable emergency to which the amount will be applied and shall also affirm that no other assets are reasonably available to meet the emergency. (d) The Plan Committee shall consider applicable regulatory standards in assessing whether to grant a request for a Hardship Withdrawal. Article VIII - Plan Administration ---------------------------------- 8.1 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 resolve all questions arising in the administration, interpretation and application of this Plan. Any such determination by the Plan Committee shall be conclusive and binding on all persons. 8.2 Claim Procedures ---------------- Any Participant or Beneficiary claiming a benefit, or requesting an interpretation, any information, or a ruling under this Pan shall present the request, in writing, to the Plan Committee, which shall respond in writing within thirty (30) days from the date on which it receives the claim or request. Article IX - Participant's Rights --------------------------------- 9.1 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. 9.2 Termination of Plan ------------------- Subject to the provisions of Section 6.2(e) of this 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, the Employer shall pay all active Participants their Deferred Benefits as provided in Section 6.2(a) as if the employment of the Participant by the Company had been involuntarily 12 terminated. Upon termination of the Plan, amounts credited to the Deferred Benefit Accounts of each Participant shall continue to earn interest at the Plan Interest Rate until such amounts are paid to the Participant. 9.3 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 the Employer. Any asset acquired or held by the Employer or funds allocated by the Employer in connection with the liabilities assumed by the Employer 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 the Employer's obligations hereunder but shall be and remain a general asset of the Employer. Provided, however, that nothing herein shall affect the rights of the Participant with regard to this Plan under that certain Benefits Protection Trust, between Scientific-Atlanta, Inc. and Wachovia Bank & Trust Co., N.A., dated February 13, 1991, as amended from time to time. 9.4 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 it 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 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 or be transferable by operation of law in the event of a Participant's or any such other person's bankruptcy or insolvency. 9.5 Plan Not An Employment Agreement -------------------------------- This Plan shall not be deemed to constitute an employment agreement between the Employer and any Participant, and no provision hereof shall restrict the right of the Employer to discharge a Participant as an employee of the Employer or the right of a Participant to voluntarily terminate his or her employment with the Employer. 9.6 Cooperation ----------- Each Participant will cooperate with the Employer by furnishing any and all information reasonably requested by the Employer in order to facilitate the payment of Deferred Benefits hereunder and by taking any such other actions as the Employer or the Plan Committee may reasonably request. 13 9.7 Offset ------ If a Participant or his or her Beneficiary, as the case may be, shall be indebted to the Employer at any time that Deferred Benefits are to be paid to a Participant or his or her Beneficiary under this Plan, then the Employer may reduce such Deferred Benefits by the amount of such indebtedness prior to the payment of the Deferred Benefits. Article X - Miscellaneous ------------------------- 10.1 Amendments and Modifications ---------------------------- Subject to the provisions of Section 6.2(e) of this Plan, 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 materially adversely 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 10.1 in which event the date of such election shall be deemed to be such Participant's Deferred Benefit Commencement Date. 10.2 Inurement --------- This Plan shall be binding upon and shall inure to the benefit of the Employer and each Participant hereto, and their respective beneficiaries, heirs, executors, administrators, successors and assigns. 10.3 Governing Law ------------- This Plan shall be interpreted and administered in accordance with the Employee Retirement Income Security Act of 1974, as amended. To the extent that state law is applicable, however, the laws of the State of Georgia shall apply. 14 To record the adoption of the Plan (as amended and restated) by the Board on May 12, 1999, the Company has caused its authorized officers to execute this Plan. SCIENTIFIC-ATLANTA, INC. By: /s/ Brian C. Koenig ---------------------------- Name: Brian C. Koenig Title: Senior Vice President - Human Resources By: /s/ William E. Eason, Jr. ---------------------------- Name: William E. Eason, Jr. Title: Corporate Secretary 15 EX-10.10 12 SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN EXHIBIT 10.10 SCIENTIFIC-ATLANTA, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN Amended and Restated on February 6, 1999 SCIENTIFIC-ATLANTA, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN PREAMBLE -------- This Scientific-Atlanta, Inc. Supplemental Executive Retirement Plan is designed to provide supplemental retirement benefits to certain key executive employees of Scientific-Atlanta, Inc. and its subsidiaries (the "Company"). This Plan is not intended to qualify under Section 401(a) of the Internal Revenue Code, but is an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees. The Plan constitutes an unfunded, unsecured contractual obligation of the Company to pay certain retirement benefits to Participants out of the general assets of the Company. ARTICLE I DEFINITIONS For purposes of this Plan, each term defined below, when capitalized, shall have the meaning specified below: 1.1 "Accrue" shall mean the rate at which the benefits under this Plan are credited to a Participant. Benefits which Accrue under this Plan do not Vest in the employee except as provided in Section 3.3 and Articles VII and VIII hereof. 1.2 "Accrued Benefit" shall mean that percentage of a Participant's Final Average Earnings which has Accrued pursuant to Section 3 hereof, as determined from time to time. Accrued Benefits are not earned by or payable to a Participant unless such Benefits have Vested as provided in Section 3.3 and Articles VII and VIII hereof. 1.3 "Cause" shall have the meaning set forth in Section 1.17. 1.4 "Change in Control" shall have the meaning set forth in Section 8.4 hereof. 1.5 "Committee" shall mean the Human Resources and Compensation Committee of the Board of Directors of Scientific-Atlanta, Inc. 1.6 "Company" shall mean Scientific-Atlanta, Inc. and any of its majority- owned subsidiaries. 1 1.7 "Compensation" shall mean a Participant's base salary and any bonus payments received by the Participant pursuant to the Scientific-Atlanta, Inc. Annual Incentive Plan and the Senior Officer Annual Incentive Plan. Compensation shall include any amounts deferred under the Scientific-Atlanta, Inc. Executive Deferred Compensation Plan. The year that such deferred amounts will be included in compensation for purposes of this Plan will be the year in which the amount would have been paid but for the deferral election. 1.8 "Continuous Service" shall mean the period of time during which a Participant is continuously employed by the Company. A Participant shall be credited with a month of Continuous Service if he or she is employed by the Company on any day during a calendar month. In addition, if an employee is re- employed by the Company after a break in service, the employee's prior service shall be treated as Continuous Service if the break in service was less than twelve (12) months or if service prior to the break was of a longer duration than the break in service. 1.9 "Early Retirement Date" shall mean either (a) the first day of the calendar month in which a Participant is at least fifty-five (55) years of age and has completed ten (10) years of Continuous Service, or (b) the first day of the calendar month in which the Participant is at least sixty (60) years of age, regardless of years of service. 1.10 "Eligible Employee" shall have the meaning set forth in Section 2.1 1.11 "Final Average Earnings" shall mean the average annual Compensation of a Participant for each of the three (3) calendar years in which such Compensation was the highest during each of the ten (10) calendar years preceding and including the calendar year in which the date of the Participant's retirement, death or termination of employment occurs. 1.12 "Normal Retirement Date" shall mean the first day of the calendar month in which a Participant is at least sixty-five (65) years of age and has completed ten (10) years of Continuous Service. 1.13 "Participant" shall mean any Eligible Employee selected to participate in the Plan pursuant to Section 2.2 hereof. 1.14 "Plan" shall mean the Scientific-Atlanta, Inc. Supplemental Executive Retirement Plan, as it may be amended from time to time. 1.15 "Reduced Retirement Benefit" shall have the meaning set forth in Section 4.2. 1.16 "Reduced Service Period" shall mean, in the case of a Participant who is first employed by the Company after the first day of the month in which the Participant attains forty-five (45) years of age, the period between the first day of the calendar month during which the 2 Participant's employment commences and the first day of the calendar month during which the Participant would attain age sixty-five (65), provided, -------- however, that if the Participant is fifty-five years of age or older at the date - ------- of his employment, the Reduced Service Period shall mean the ten (10) year period commencing on the first day of the calendar month during which the Participant's employment commences. 1.17 "retire" or "retirement" shall include any voluntary termination of the Participant's employment by the Participant or any involuntary termination of the Participant's employment by the Company without "Cause." For purposes of this Plan, a termination for "Cause" is a termination evidenced by a resolution adopted in good faith by two-thirds (2/3) of the Board of Directors of the Company that the Participant (i) has been convicted of a felony, or (ii) has engaged in conduct which constitutes (A) willful neglect in carrying out his duties to the Company or (B) willful misconduct, in either case which is demonstrably and materially injurious to the Company, monetarily or otherwise; provided, however, that no termination of the Participant's employment shall be - -------- ------- for Cause as set forth in clause (ii) above until (x) there shall have been delivered to the Participant a copy of the written notice setting forth that the Participant was guilty of the conduct set forth in clause (ii) and specifying the particulars thereof in detail, and (y) the Participant shall have been provided an opportunity to be heard by the Board (with the assistance of the Participant's counsel if the Participant so desires). No act, or failure to act, on the Participant's part shall be considered "willful" unless he has acted, or failed to act, with an absence of good faith and without a reasonable belief that this action or failure to act was in the best interest of the Company. Notwithstanding anything contained in this Plan to the contrary, no benefits shall be paid under this Plan to any Participant when such Participant's employment is terminated by the Company for Cause. 1.18 "Vest" shall mean that the benefits Accrued under this Plan for a Participant are payable to the Participant at the times and in the amounts provided for herein. Benefits under this Plan Vest only as provided in Section 3.3 and Articles VII and VIII hereof. ARTICLE II PARTICIPATION 2.1 Eligible Employees. ------------------ The class of eligible employees from which Participants may be selected is limited to officers, both elected and appointed, and other key executives of the Company ("Eligible Employees"). 2.2 Selection of Participants. ------------------------- From time to time, the Committee shall select from among the class of Eligible Employees one or more individuals for admission to the Plan. The Committee's determinations 3 shall be made in its sole discretion and shall be conclusive and binding on all persons. The Committee shall notify in writing each Participant of his or her selection as a Participant. ARTICLE III BENEFIT ACCRUALS AND VESTING 3.1 General. ------- Except as provided in Sections 3.2 and 4.2 hereof, benefits shall Accrue under this Plan at an annual rate of three and one-half percent (3 1/2%) of Final Average Earnings for each of the Participant's first ten (10) years (or partial years computed on a monthly basis (expressed in decimal form)) of Continuous Service and at an annual rate of one and one-half percent (1 1/2%) of Final Average Earnings for each of the next ten (10) years (or partial years computed on a monthly basis (expressed in decimal form)) of Continuous Service. The maximum Accrued Benefit to which a Participant may be entitled under the Plan shall be equal to fifty percent (50%) of the Participant's Final Average Earnings. 3.2 Reduced Service Period. ---------------------- In the event a Participant is first employed by the Company after the first day of the month in which the Participant attains the age of forty-five (45) years, benefits shall Accrue under this Plan over the Participant's Reduced Service Period as follows: (a) For each full or partial year of Continuous Service during the first half of the Reduced Service Period, benefits shall Accrue under this Plan at an annual rate determined by dividing thirty-five percent (35%) of Final Average Earnings by one-half ( 1/2) of the number of years (including any partial year computed on a monthly basis (expressed in decimal form)) contained in the Reduced Service Period; and (b) For each full or partial year of Continuous Service during the second half of the Reduced Service Period, benefits shall Accrue under this Plan at an annual rate determined by dividing fifteen percent (15%) of Final Average Earnings by one-half ( 1/2) of the number of years (including any partial year computed on a monthly basis (expressed in decimal form)) contained in the Reduced Service Period. 3.3 Vesting. ------- Except as provided in Articles VII and VIII hereof, a Participant shall Vest in his or her Accrued Benefit hereunder on the earlier of the completion of ten (10) years of Continuous Service or the attainment of age sixty (60), regardless of service. Notwithstanding the foregoing, a Participant who (a) terminates employment with the Company prior to completing ten (10) years of Continuous Service and (b) has not vested in any of his or her Accrued Benefit as a 4 result of a Change in Control, shall be vested in an amount equal to the benefit he or she would be entitled to receive if he or she had participated in the Scientific-Atlanta, Inc. Restoration Retirement Plan during the period he or she was a Participant in this Plan. ARTICLE IV RETIREMENT BENEFITS 4.1 Normal Retirement. ------------------ A Participant who retires from the Company on or after his or her Normal Retirement Date shall be entitled to receive an annual retirement benefit (the "Normal Retirement Benefit") for life, equal to the excess of: (a) the Participant's Accrued Benefits determined under Sections 3.1 or 3.2 hereof; over (b) the sum of: (i) the annual retirement benefits payable to the Participant as a life annuity pursuant to the defined benefit retirement plan of the Company (as such plan might be amended, supplemented or superseded from time to time) which is the actuarial equivalent (as defined in Section 5.3) of such Participant's Pension Equity Account as defined in such plan; (ii) the annual retirement benefits payable to the Participant pursuant to any employer-funded defined benefit plan maintained by a prior employer of the Participant, assuming that such benefits are payable in the form of a single life annuity for the life of the Participant; and (iii) the Participant's annual primary insurance amount under the Federal Social Security Act as in effect on the Participant's Normal Retirement Date or, if applicable, his date of death. In determining such amount under Section 4.2 below for a Participant who severs from service prior to his Normal Retirement Date, it shall be assumed that the Participant will continue to receive, until his Normal Retirement Date, annual compensation (which would be treated as wages for purposes of the Federal Social Security Act) at the same rate which is in effect immediately prior to his termination of employment. 4.2 Early Retirement. ---------------- (a) A Participant who retires from the Company on or after his or her Early Retirement Date but prior to his or her Normal Retirement Date shall be entitled to receive his or her Normal Retirement Benefit commencing on the date of his or her retirement; provided, however, that such date of commencement may, -------- ------- at the election of the Participant pursuant to 5 Section 4.3 (or, if the Participant has not made an election, at the election of the Committee), be deferred to the date that the Participant attains age sixty (60). If the Participant retires prior to age sixty (60) and begins to receive benefits under this Plan prior to age sixty (60), such Participant shall be entitled to receive only a Reduced Retirement Benefit (determined as hereinafter provided) commencing at his or her date of retirement. "Reduced Retirement Benefit" shall mean the amount equal to that percentage of the Participant's Normal Retirement Benefit determined by subtracting from one hundred percent (100%) the aggregate of 6.67% for each year (prorated over any partial year based on completed months of service) between the Participant's retirement date and the date on which the Participant would reach age sixty (60). If a Participant retires prior to age sixty (60) but does not begin receiving benefits under this Plan until he or she is at least age sixty (60), there shall be no reduction in the Participant's Normal Retirement Benefit. For purposes of determining the amount of the Normal Retirement Benefit or the Reduced Retirement Benefit, as the case may be, for a Participant who retires after August 1, 1996, and prior to age sixty-five (65), each of the offset amounts under paragraphs (i), (ii) and (iii) of Section 4.1(b) shall be calculated by: (i) determining the value of the projected amount such Participant would receive if he or she began receiving the benefits described in such paragraphs beginning on the earliest date such benefits become payable and (ii) converting this amount to an actuarially equivalent (determined in accordance with Section 5.3) single life annuity beginning on the date such Participant begins receiving benefits under this Plan. (b) If a Participant retires prior to his or her Early Retirement Date, the Participant shall be entitled to receive any of his or her Normal Retirement Benefit which is then Vested. Such Normal Retirement Benefit shall be payable, at the election of the Participant pursuant to Section 4.3 (or, if the Participant has not made an election, at the election of the Committee), as follows: (1) beginning at the time the Participant becomes age fifty-five (55) (or at Participant's current age if he is age fifty-five (55) or older), with a Reduced Retirement Benefit determined as provided in subparagraph (a) above, or (2) beginning at the time the Participant becomes age sixty (60), with no reduction in the Normal Retirement Benefit, or (3) if Participant is under fifty-five (55) years of age when he or she retires, as a single lump sum payment at the time of retirement equal to the present value of his or her Normal Retirement Benefit, determined using the actuarial equivalent, as defined in Section 5.3. 4.3 Elections Related to Early Retirement. ------------------------------------- For a Participant retiring after his Early Retirement Date but prior to his Normal Retirement Date pursuant to Section 4.2(a), he may elect, by a written election delivered to the Corporate Secretary of the Company at least thirty (30) days prior to his retirement, whether he wishes to receive: (1) a Reduced Retirement Benefit which will begin being paid immediately pursuant to the payment terms of Article V (not applicable if Participant is age sixty (60) or older), or (2) a Normal Retirement Benefit that will not begin being paid until age sixty (60) (or his current age if he is age sixty (60) or older). For a Participant retiring prior to his Early Retirement Date pursuant to Section 4.2(b), he may elect, by a written election delivered to the Corporate Secretary of the Company at least thirty (30) days prior to his retirement, whether he 6 wishes to receive: (1) a Reduced Retirement Benefit which will become payable, per the payment terms of Article V, at age fifty-five (55) (or his current age if he is age fifty-five (55) or older), or (2) a Normal Retirement Benefit which will become payable, per the payment terms of Article V, at age sixty (60), or (3) if a Participant is under age fifty-five (55), the actuarial equivalent, determined in accordance with Section 5.3, of his Normal Retirement Benefit, paid as a lump sum payment. For each Participant electing either option (1) or option (2) above, such Participant may elect an optional form of payment under the terms of Section 5.4. ARTICLE V FORM OF PAYMENT 5.1 Normal Form of Payment. ---------------------- Unless an optional form of payment is elected by the Participant in accordance with Section 5.4 (or by the Committee in accordance with Section 4.2 or Section 5.2 hereof), all retirement benefits payable pursuant to this Plan will be paid in the form of a single life annuity, payable monthly, for the life of the Participant. Except as otherwise provided in this Plan, the first monthly payment shall be made on the first day of the calendar month following the Participant's retirement date. 5.2 Other Forms of Payment. ---------------------- Each Participant may elect, pursuant to Section 5.4, to receive payment of his retirement benefits via one of the following optional forms of payment, rather than via the form of payment described in Section 5.1: (a) A one hundred percent (100%) joint and survivor annuity, pursuant to which an annuity is payable for the life of the Participant with a survivor's annuity for the life of the Participant's spouse, which annuity is equal to one hundred percent (100%) of the amount of the annuity payable during the joint lives of the Participant and his or her spouse. (b) A fifty percent (50%) joint and survivor annuity, pursuant to which an annuity is payable for the life of the Participant with a survivor's annuity for the life of the Participant's spouse, which annuity is equal to fifty percent (50%) of the amount of the annuity payable during the joint lives of the Participant and his or her spouse. (c) A ten (10) year certain installment payment, pursuant to which a fixed monthly benefit is payable to the Participant for the lesser of ten (10) years or the life of the Participant, with the continuation of the same benefit to the Participant's designated beneficiary for any remaining portion of the ten (10) year certain period if the Participant dies prior to the end of such period. 7 (d) A five (5) year certain installment payment, pursuant to which a fixed monthly benefit is payable to the Participant for the lesser of five (5) years or the life of the Participant, with the continuation of the same benefit to the Participant's designated beneficiary for any remaining portion of the five (5) year certain period if the Participant dies prior to the end of such period. (e) A single lump sum payment. If a Participant does not make a timely election to receive payment of his retirement benefits via one of the optional forms of payment described in Subsections (a) through (e) above, the Committee may elect one of the above- described optional forms of payment for such Participant, but only with his written consent. 5.3 Actuarial Equivalent. -------------------- Any optional form of payment described in Section 5.2 shall be the actuarial equivalent of the normal form of payment specified in Section 5.1 hereof. All determinations of actuarial equivalency will be based on the 1983 Unloaded Group Annuity Mortality Table weighted fifty percent (50%) male and an interest rate of eight percent (8.0%). The lump sum amount will equal the present value of future payments under this Plan, assuming payment of benefits commenced immediately (or age fifty-five (55) for a Vested termination on or before the Participant's 55th birthday). 5.4 Election of Form of Payment. ---------------------------- If a Participant does not make a written election to the contrary at least thirty (30) days prior to his retirement, such Participant's retirement benefits under this Plan shall be payable in the form of a single life annuity, paid pursuant to the terms of Section 5.1, unless the Committee (with the consent of such Participant) elects to pay the retirement benefits pursuant to one of the other forms of payment set forth in Section 5.2. If a Participant makes a written election at least thirty (30) days prior to his retirement, he may elect one of the forms of payment described in Sections 5.2(a) through 5.2(e), and the Committee must comply with such payment election. Participant may modify his election at any time by making another written election, provided such written election is received by the Company's Corporate Secretary at least thirty (30) days prior to his retirement. For a written election to be validly made, Participant must deliver such a written election to the Corporate Secretary of the Company and such election shall be deemed made on the date on which the Corporate Secretary receives it. 8 ARTICLE VI SPOUSAL BENEFIT In the event a Participant who is Vested shall die while actively employed, or after his or her Early Retirement Date but prior to the commencement of payment of retirement benefits, the Participant shall be deemed to have retired for purposes of this Plan on the later of (i) the day immediately preceding his or her death, or (ii) the first day of the first calendar month thereafter in which the Participant would have attained age fifty-five (55), and the Participant's surviving spouse, if any, shall be entitled to a benefit equal to fifty percent (50%) of the retirement benefit the Participant would have received if he or she had actually retired on such deemed retirement date. Such benefit shall be payable in the form of a single life annuity for the life of the surviving spouse. ARTICLE VII DISABILITY In the event a Participant becomes disabled and is eligible for benefits under the Scientific-Atlanta, Inc. Long Term Disability Plan, such Participant shall continue to receive credit, for Vesting purposes only, toward the Participant's years of Continuous Service during the period of such disability. ARTICLE VIII CHANGE IN CONTROL 8.1 Immediate Vesting and Continued Vesting. --------------------------------------- In the event of a Change in Control of the Company, a Participant shall be immediately Vested in his Accrued Benefits hereunder as of the date of such Change in Control. Participant also shall be automatically vested in any Accrued Benefits that are accrued after a Change in Control, regardless of the terms of Section 3.3. 8.2 Termination Following Change in Control. --------------------------------------- If a Participant's employment with the Company is terminated by the Company or by the Participant following a Change in Control for any reason other than Cause, the Participant shall receive retirement benefits in accordance with the terms of Articles III, IV and V of this Plan. 9 8.3 Continuation of the Plan ------------------------ For a period of two (2) years following a Change in Control, the Plan shall not be terminated or amended in any way nor shall the manner in which the Plan is administered be changed in a way that adversely affects the level of retirement benefits received by a Participant under the Plan. 8.4 Definition of 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 Company's then outstanding voting securities (the "Voting Securities"); provided, however, that -------- ------- for purposes of this Section 8.4, 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 (as defined below) cease for any reason to constitute at least two-thirds (2/3) of the Board. 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 Company stockholders was approved by a vote of at least two-thirds (2/3) 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 (2) 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 of any agreement intended to avoid or settle a Proxy Contest; or (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 eight percent (80%) of the combined voting power of the outstanding 10 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 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 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 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 Company, which acquisition, by reducing the number of Voting Securities outstanding, increases the proportional number of shares Beneficially Owned by the Subject Person, provided that if, after a Change in Control would occur (but for the -------- operation of this sentence) as a result of such 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. ARTICLE IX PLAN ADMINISTRATION 9.1 Committee. --------- This Plan and all matters related to it shall be administered by the Committee. The Committee shall have the authority to interpret the provisions of this Plan and to resolve all questions arising in the administration, interpretation and application of this Plan. Any such determination by the Committee shall be conclusive and binding on all persons. 9.2 Claim Procedures. ---------------- Any Participant claiming a benefit, or requesting an interpretation, any information, or a ruling under this Plan, shall present the request, in writing, to the Committee, which shall respond in writing within thirty (30) days from the date on which it receives the claim or request. 11 ARTICLE X MISCELLANEOUS 10.1 Termination or Amendment of the Plan. ------------------------------------ Except as provided in Section 8.3 hereof, the Committee may, at any time and from time to time, modify, amend, suspend or terminate the Plan in any respect; provided, however, that any modification, amendment, suspension, or -------- ------- termination of the Plan shall not reduce or otherwise adversely affect any Participant's Vested rights under any terms, provisions or conditions of the Plan on the date of any modification, amendment, suspension or termination, without the consent of the Participant. 10.2 Non-Assignability. ----------------- No benefit payable pursuant to this Plan, nor any other right under this Plan, shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge the same shall be void and shall not be recognized or given effect by the Company. 10.3 No Right to Employment. ---------------------- Nothing in the Plan shall confer upon any Participant the right to continue in the employment of the Company nor does participating in the Plan obligate the Participant to continue in the employ of the Company. 10.4 Effective Date. -------------- The Plan became effective on June 21, 1993, and Participants may be designated at any time on and after that date. 10.5 Governing Law. ------------- This Plan is made in accordance with and shall be governed in all respects by the laws of the state of Georgia, to the extent not preempted by federal law. 12 The Company has caused the following officers to execute this Plan to evidence that this Plan, as amended and restated by the Board on February 6, 1999, accurately reflects the Plan approved by the Board. Scientific-Atlanta, Inc. By: /s/ Brian C. Koenig -------------------------------- Brian C. Koenig Senior Vice President- Human Resources By: /s/ William E. Eason, Jr. -------------------------------- William E. Eason, Jr. Senior Vice President, General Counsel & Corporate Secretary 13 EX-10.11 13 CREDIT AND INVESTMENT AGREEMENT DATED JULY 30,1997 EXHIBIT 10.11 As of September 30, 1997 Scientific-Atlanta, Inc. One Technology Parkway, South, Norcross, Georgia 30092-2967 RE: Credit and Investment Agreement dated as of July 30, 1997 (the "Credit Agreement"; capitalized terms have the meanings given in the Credit Agreement unless otherwise defined herein) Dear Sirs: The undersigned Agent, Lessor and the Company, by their signatures below, hereby agree that the reference to "September 30, 1997," contained in the last paragraph of Section 6.03 of the Credit Agreement is amended to be "October 10, 1997." Except as set forth expressly hereinabove, all terms of the Credit Agreement and the other Operative Documents shall be and remain in full force and effect, and shall constitute the legal, valid, binding and enforceable obligations of the Company, the Agent and the Lessor. The Agent, the Company and the Lessor each restates, ratifies and reaffirms each and every term, covenant and condition to which it is obligated under the terms of the Credit Agreement and the other Operative Documents effective as of the date hereof. This letter agreement may be executed in multiple counterparts constituting one agreement. Yours truly, WACHOVIA BANK, N.A., as Agent By: /s/ Karen H. McClain ----------------------------- Title: Senior Vice President WACHOVIA CAPITAL MARKETS, INC., (SEAL) as the Lessor By: /s/ Joseph J. Thomas ----------------------------- Title: Senior Vice President AGREED TO AS OF THE DATE FIRST WRITTEN ABOVE: SCIENTIFIC-ATLANTA, INC., as the Company By: /s/ Harvey A. Wagner (SEAL) --------------------------- Harvey A. Wagner Title: Senior Vice President, ----------------------- Chief Financial Officer ----------------------- and Treasurer ----------------------- EX-10.12 14 AMENDMENT TO CREDIT AND INVESTMENT AGREEMENT EXHIBIT 10.12 AMENDMENT TO CREDIT AND INVESTMENT AGREEMENT THIS AMENDMENT TO CREDIT AND INVESTMENT AGREEMENT (this "Amendment") is dated as of the 30th day of November, 1997 among SCIENTIFIC-ATLANTA, INC. (the "Company"), WACHOVIA BANK, N.A. (the "Agent"), and WACHOVIA CAPITAL MARKETS, INC., (the "Lessor"); W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Company, the Agent and the Lessor executed and delivered that certain Credit and Investment Agreement, dated as of the 30th day of July, 1997 (the "Credit Agreement"); WHEREAS, the Company has requested and the Agent and the Lessor have agreed to certain amendments to the Credit Agreement, subject to the terms and conditions hereof; NOW, THEREFORE, for and in consideration of the above premises and other good and valuable consideration, the receipt and sufficiency of which hereby is acknowledged by the parties hereto, the Company, the Agent and the Lessor hereby covenant and agree as follows: 1. Definitions. Unless otherwise specifically defined herein, each term ----------- used herein which is defined in the Credit Agreement shall have the meaning assigned to such term in the Credit Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby" and each other similar reference and each reference to "this Agreement" and each other similar reference contained in the Credit Agreement shall from and after the date hereof refer to the Credit Agreement as amended hereby. 2. Amendments to Schedule 1.02. (a) The definition of "Basic Rent" --------------------------- contained in Schedule 1.02 to the Credit Agreement is amended in its entirety as set forth below: "Basic Rent": (a) for any Rental Period (1) during the Lease Term from ---------- the Commencement Date up to and including January 30, 1999, or (2) after July 30, 2004, if any, the sum of (i) all liabilities of the Lessor for interest on the Loans and LI Yield (excluding Accrued Construction Period LI Yield but including, without limitation, all LI Yield accruing during the Basic Term on the Lessor Investment) accruing during such Rental Period pursuant to and in accordance with the Credit Agreement, and (ii) all liabilities for fees accruing during such Rental Period pursuant to the Credit Agreement, and (b) for each Rental Period commencing on and after January 31, 1999 and ending on or before July 30, 2004, (i) all LI Yield (excluding Accrued Construction Period LI Yield but including, without limitation, all LI Yield accruing during the Basic Term on the Lessor Investment) accruing at the Fixed Funding Rate during such Rental Period, and (ii) all liabilities for fees accruing during such Rental Period pursuant to the Credit Agreement. (b) The following new definition is added to Schedule 1.02 to the Lease in proper alphabetical order: "Fixed Funding Rate": (x) a per annum fixed rate equal to 6.51%, plus ------------------ (y) the Applicable Margin for the Adjusted LIBO Rate. 3. Restatement of Representations and Warranties. The Company hereby --------------------------------------------- restates and renews each and every representation and warranty heretofore made by it in the Credit Agreement and the other Operative Documents as fully as if made on the date hereof and with specific reference to this Amendment and all other Operative Documents executed and/or delivered in connection herewith. 4. Effect of Amendment. Except as set forth expressly hereinabove and in ------------------- that certain Second Amendment to Lease Agreement of even date herewith (the "Lease Agreement"), all terms of the Credit Agreement and the other Operative Documents shall be and remain in full force and effect, and shall constitute the legal, valid, binding and enforceable obligations of the Company. The amendments contained herein shall be deemed to have prospective application only, unless otherwise specifically stated herein. 5. Ratification. The Company hereby restates, ratifies and reaffirms each ------------ and every term, covenant and condition set forth in the Credit Agreement and the other Operative Documents effective as of the date hereof. 6. Counterparts. This Amendment may be executed in any number of ------------ counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same instrument. 7. Section References. Section titles and references used in this ------------------ Amendment shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreements among the parties hereto evidenced hereby. 2 8. No Default. To induce the Agent and the Lessor to enter into this ---------- Amendment and to continue to make advances pursuant to the Credit Agreement, the Company hereby acknowledges and agrees that, as of the date hereof, and after giving effect to the terms hereof, there exists (i) no Default or Event of Default and (ii) no right of offset, defense, counterclaim, claim or objection in favor of the Company arising out of or with respect to any of the Loans or other obligations of the Company owed to the Lessor under the Credit Agreement. 9. Further Assurances. The Company agrees to take such further actions ------------------ as the Agent shall reasonably request in connection herewith to evidence the amendments herein contained to the Company. 10. Governing Law. This Amendment shall be governed by and construed and ------------- interpreted in accordance with, the laws of the State of Georgia. 11. Conditions Precedent. This Amendment shall become effective only -------------------- upon execution and delivery (i) of this Amendment by each of the parties hereto, and (ii) of the Lease Amendment. IN WITNESS WHEREOF, each of the Company, the Agent and the Lessor has caused this Amendment to be duly executed, under seal, by its duly authorized officer as of the day and year above written. COMPANY: SCIENTIFIC-ATLANTA, INC. By: /s/ Harvey A. Wagner ------------------------------------ Printed Name: Harvey A. Wagner --------------------------- Printed Title: Senior Vice President, -------------------------- Chief Financial Officer -------------------------- & Treasurer -------------------------- [CORPORATE SEAL] LESSOR: WACHOVIA CAPITAL MARKETS, INC. By: /s/ Joseph J. Thomas ---------------------------------------- Printed Name: Joseph J. Thomas ------------------------------ Printed Title: Senior Vice President ---------------------------- 3 AGENT: WACHOVIA BANK, N.A. By: /s/ Karen H. McClain --------------------------------- Printed Name: Karen H. McClain ----------------------- Printed Title: Senior Vice President ---------------------- 4 EX-10.13 15 SECOND AMENDMENT TO CREDIT AND INVESTMENT AGREEMENT EXHIBIT 10.13 SECOND AMENDMENT TO CREDIT AND INVESTMENT AGREEMENT THIS SECOND AMENDMENT TO CREDIT AND INVESTMENT AGREEMENT dated as of November 9, 1998, by and among SCIENTIFIC-ATLANTA, INC. (the "Company"), each of the financial institutions party hereto (the "Lenders"), WACHOVIA BANK, N.A., as agent for the Lenders (the "Agent"), and WACHOVIA CAPITAL INVESTMENTS, INC., formerly known as WACHOVIA CAPITAL MARKETS, INC., as Lessor (the "Lessor"). WHEREAS, the Company, the Lenders, the Agent and the Lessor are parties to that certain Credit and Investment Agreement dated as of July 30, 1997, as amended prior to the date hereof (the "Credit Agreement"); and WHEREAS, the parties hereto desire to amend certain provisions of the Credit Agreement on the terms and conditions contained herein. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, the parties hereto hereby agree as follows: Section 1. Specific Amendment to Credit Agreement. The definition of the -------------------------------------- term "Consolidated Net Income" contained in Schedule 1.02 of the Credit Agreement is hereby deleted in its entirety and the following substituted in its place: "Consolidated Net Income" means, with respect to the Company and its ----------------------- Subsidiaries for any period of computation thereof, the net income (or loss) of the Company and its Subsidiaries on a consolidated basis for such period, provided, however, that the following shall be excluded when -------- ------- determining Consolidated Net Income: (i) any item of gain or loss resulting from sale, conversion or other disposition of assets other than in the ordinary course of business; (ii) net gains or losses on the acquisition, retirement, sale or other disposition of capital stock and other securities of, or owned by, the Company and its Subsidiaries; (iii) net gains or losses on the collection of proceeds of life insurance policies; (iv) any write-up or write-down of any investment in equity securities; (v) any write-up of any asset other than investments in equity securities; and (vi) any other net gains or losses of an extraordinary nature as determined in accordance with GAAP. The one-time charge in the amount of $76,233,000 to the Company's earnings taken in the fourth fiscal quarter of the Company's 1998 Fiscal Year shall be disregarded when determining Consolidated Net Income. Section 2. Representations of Company. The Company represents and -------------------------- warrants to the Lessor, the Agent and the Lenders that: (a) Authorization. The Company has the right and power, and has taken all ------------- necessary action to authorize it, to execute and deliver this Amendment and to perform its obligations under the Credit Agreement as amended by this Amendment, in accordance with its terms. This Amendment has been duly executed and delivered by a duly authorized officer of the Company and the Credit Agreement, as amended by this Amendment, is a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms. (b) Compliance with Laws, etc. The execution and delivery by the Company -------------------------- of this Amendment and the performance by the Company of the Credit Agreement as amended by this Amendment, in accordance with its terms, do not and will not, by the passage of time, the giving of notice or otherwise: (i) require any governmental approval or violate any applicable law relating to the Company; (ii) conflict with, result in a breach of or constitute a default under the articles of incorporation or the bylaws of the Company; (iii) conflict with, result in a breach of or constitute a default under any indenture, agreement or other instrument to which the Company is a party or by which it or any of its properties may be bound, which conflict, breach or default would have a Material Adverse Effect; or (iv) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by the Company other than in favor of the Agent or Lessor for the benefit of the Lenders. Section 3. Certain References. Each reference to the Credit Agreement in ------------------ any of the documents related to the Credit Agreement shall be deemed to be a reference to the Credit Agreement as amended by this Amendment. Section 4. Benefits. This Amendment shall be binding upon and shall inure -------- to the benefit of the parties hereto and their respective successors and assigns. Section 5. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND ------------- CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA. Section 6. Effect. Except as expressly herein amended, the terms and ------ conditions of the Credit Agreement shall remain in full force and effect. Section 7. Effectiveness of Amendment. This Amendment shall not be -------------------------- effective until its execution and delivery by all of the parties hereto whereupon it shall be deemed effective as of June 26, 1998. Section 8. Counterparts. This Amendment may be executed in any number of ------------ counterparts, each of which shall be deemed to be an original and shall be binding upon all parties, their successors and assigns. 2 Section 9. Definitions. All capitalized terms not otherwise defined ----------- herein are used herein with the respective definitions given them in the Credit Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to Credit and Investment Agreement to be executed as of the date first above written. SCIENTIFIC-ATLANTA, INC. By: /s/ Wallace G. Haislip --------------------------------------------- Name: Wallace G. Haislip ---------------------------------------- Title: Senior Vice President, Chief Financial --------------------------------------- Officer & Treasurer --------------------------------------- WACHOVIA BANK, N.A., as Agent By: /s/ Karen H. McClain -------------------------------------------- Name: Karen H. McClain --------------------------------------- Title: Senior Vice President -------------------------------------- WACHOVIA CAPITAL INVESTMENTS, INC., formerly known as WACHOVIA CAPITAL MARKETS, INC., as Lessor By: /s/ Joseph J. Thomas -------------------------------------------- Name: Joseph J. Thomas --------------------------------------- Title: Senior Vice President -------------------------------------- 3 EX-10.14 16 FOURTH AMENDMENT TO CREDIT AGREEMENT EXHIBIT 10.14 FOURTH AMENDMENT TO CREDIT AGREEMENT THIS FOURTH AMENDMENT TO CREDIT AGREEMENT dated as of November 6, 1998, by and among SCIENTIFIC-ATLANTA, INC. (the "Borrower"), each of the financial institutions party hereto (the "Lenders"), THE BANK OF NEW YORK and ABN AMRO BANK N.V., acting through its Atlanta Agency, as Co-Agents (the "Co-Agents"), and NATIONSBANK, N.A., successor to NationsBank, N.A. (South), formerly known as NationsBank of Georgia, National Association, as Agent (the "Agent"). WHEREAS, the Borrower, the Lenders, the Co-Agents and the Agent are parties to that certain Credit Agreement dated as of May 11, 1995, as amended prior to the date hereof (the "Credit Agreement"); and WHEREAS, the parties hereto desire to amend certain provisions of the Credit Agreement on the terms and conditions contained herein. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, the parties hereto hereby agree as follows: Section 1. Specific Amendment to Credit Agreement. The definition of the -------------------------------------- term "Consolidated Net Income" contained in Section 1.1 of the Credit Agreement is hereby deleted in its entirety and the following substituted in its place: "Consolidated Net Income" means, with respect to the Borrower and its ----------------------- Subsidiaries for any period of computation thereof, the net income (or loss) of the Borrower and its Subsidiaries on a consolidated basis for such period; provided, however, that the following shall be excluded when determining - -------- ------- Consolidated Net Income: (i) any item of gain or loss resulting from sale, conversion or other disposition of assets other than in the ordinary course of business; (ii) net gains or losses on the acquisition, retirement, sale or other disposition of capital stock and other securities of, or owned by, the Borrower and its Subsidiaries; (iii) net gains or losses on the collection of proceeds of life insurance policies; (iv) any write-up or write-down of any investment in equity securities; (v) any write-up of any asset other than investments in equity securities; and (vi) any other net gains or losses of an extraordinary nature as determined in accordance with GAAP. The one-time charge in the amount of $76,233,000 to the Borrower's earnings taken in the fourth fiscal quarter of the Borrower's 1998 Fiscal Year shall be disregarded when determining Consolidated Net Income. Section 2. Representations of Borrower. The Borrower represents and --------------------------- warrants to the Agent and the Lenders that: (a) Authorization. The Borrower has the right and power, and has ------------- taken all necessary action to authorize it, to execute and deliver this Amendment and to perform its obligations under the Credit Agreement as amended by this Amendment, in accordance with its terms. This Amendment has been duly executed and delivered by a duly authorized officer of the Borrower and the Credit Agreement as amended by this Amendment, is a legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms. (b) Compliance with Laws, etc. The execution and delivery by the ------------------------- Borrower of this Amendment and the performance by the Borrower of the Credit Agreement as amended by this Amendment, in accordance with its terms, do not and will not, by the passage of time, the giving of notice or otherwise: (i) require any Governmental Approval or violate any Applicable Law relating to the Borrower or any other Loan Party; (ii) conflict with, result in a breach of or constitute a default under the articles of incorporation or the bylaws of the Borrower or the organizational documents of any other Loan Party; (iii) conflict with, result in a breach of or constitute a default under any indenture, agreement or other instrument to which the Borrower or any other Loan Party is a party or by which it or any of its properties may be bound, which conflict, breach or default would have a Material Adverse Effect; or (iv) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by the Borrower or any other Loan Party other than in favor of the Agent for the benefit of the Lenders. Section 3. Certain References. Each reference to the Credit Agreement in ------------------ any of the Loan Documents shall be deemed to be a reference to the Credit Agreement as amended by this Amendment. Section 4. Benefits. This Amendment shall be binding upon and shall inure -------- to the benefit of the parties hereto and their respective successors and assigns. Section 5. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND ------------- CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA. Section 6. Effect. Except as expressly herein amended, the terms and ------ conditions of the Credit Agreement shall remain in full force and effect. Section 7. Effectiveness of Amendment. This Amendment shall not be -------------------------- effective until its execution and delivery by all of the parties hereto whereupon its shall be deemed effective as of June 26, 1998. Section 8. Counterparts. This Amendment may be executed in any number of ------------ counterparts, each of which shall be deemed to be an original and shall be binding upon all parties, their successors and assigns. Section 9. Definitions. All capitalized terms not otherwise defined ----------- herein are used herein with the respective definitions given them in the Credit Agreement. [Signatures on Next Page] -2- IN WITNESS WHEREOF, the parties hereto have caused this Fourth Amendment to Credit Agreement to be executed as of the date first above written. SCIENTIFIC-ATLANTA, INC. By: /s/ Wallace G. Haislip ------------------------------------------ Name: Wallace G. Haislip ------------------------------------- Title: Senior Vice President-Finance ----------------------------------- Chief Financial Officer & Treasurer ----------------------------------- NATIONSBANK, N.A., individually and as Agent By: /s/ Pamela S. Kurtzman ------------------------------------------ Name: Pamela S. Kurtzman ------------------------------------- Title: Vice President ------------------------------------ THE BANK OF NEW YORK, individually and as Co-Agent By: /s/ R.R. Reedy ------------------------------------------ Name: Ronald R. Reedy ------------------------------------- Title: Vice President ------------------------------------ ABN AMRO BANK N.V., acting through its Atlanta Agency, individually and as Co-Agent By: /s/ Larry K. Kelley ----------------------------------------- Name: Larry K. Kelley ------------------------------------- Title: Group Vice President ------------------------------------ By: /s/ Robert A. Budnek ----------------------------------------- Name: Robert A. Budnek ------------------------------------- Title: Vice President ------------------------------------ [Signatures Continued on Next Page] -3- [SIGNATURE PAGE TO FOURTH AMENDMENT TO CREDIT AGREEMENT DATED AS OF NOVEMBER 6, 1998 WITH SCIENTIFIC-ATLANTA, INC.] AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED By:___________________________________ Name:______________________________ Title:_____________________________ WACHOVIA BANK, N.A. By: /s/ Karen H. McClain ----------------------------------- Name: Karen H. McClain ------------------------------ Title: Senior Vice President ----------------------------- THE BANK OF TOKYO LIMITED, ATLANTA AGENCY By: /s/ Gary L. England ----------------------------------- Name: Gary L. England ------------------------------ Title: Vice President and Manager ----------------------------- -4- EX-10.15 17 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN EXHIBIT 10.15 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN 1. PURPOSE. The purposes of the plan ("Plan") are to advance the interests of Scientific-Atlanta, Inc. ("Company") and its shareholders by (i) encouraging increased share ownership by members of the Board of Directors ("Board") of the Company who are not employees of the Company or any of its subsidiaries, (ii) enhancing the Company's ability to attract and retain the services of experienced, able and knowledgeable persons to serve as directors, and (iii) providing additional incentive for directors to contribute their best efforts to the Company's success. 2. ADMINISTRATION. The Plan shall be administered by the Board. The Board shall have full authority, consistent with the Plan, to interpret the Plan, to promulgate such rules and regulations with respect to the Plan as it deems desirable and to make all other determinations necessary or desirable for the administration of the Plan. All decisions, determinations and interpretations of the Board shall be binding upon all persons. 3. SHARES TO BE ISSUED. Shares of the Company's common stock ("Common Stock") delivered on the exercise of stock options ("Options") granted under the Plan may be authorized, but previously unissued, shares or previously issued shares reacquired by the Company. 4. GRANTING OF OPTIONS. (a) Eligible Directors. "Eligible Directors" are all members of the Board ------------------ who are not employees of the Company. (b) Initial Grant. Each Non-Employee Director will receive an initial ------------- grant of 20,000 shares upon approval by the Board of this Plan or upon his or her initial appointment or election to the Board. (c) Automatic Grants. An Option to purchase 5,000 shares of Common Stock ---------------- shall be granted at the annual meeting of the Board held on the date of the Annual Meeting of Shareholders beginning in 1995 and at each succeeding Board meeting held on that date, provided the Non-Employee Director continues in office after the Board meeting date on which the Option is granted. (d) Option Agreement. Each Option shall be evidenced by a written ---------------- instrument which shall state the terms and conditions of the grant, not inconsistent with the Plan, as the Board in its sole discretion shall determine and approve. (e) Option Price. The purchase price for each share of Common Stock ------------ subject to an Option shall be the fair market value of the Common Stock on the date the Option is granted. For this purpose, as well as other purposes under the Plan, fair market value shall be deemed to be the closing selling price of a share of Common Stock as reported on the New York Stock Exchange Composite on the date on which the Option is granted or, if there is no trade on such Exchange on that date, then on the next preceding date on which there was a trade of Common Stock on such Exchange. (In the event the Company's Common Stock is not listed on the New York Stock Exchange on the date of 1 an Option grant, the fair market value shall be determined as stated above but with reference to trades on the largest stock exchange on which the Common Stock is then traded.) (f) Nontransferability. An Option shall be nonassignable and ------------------ nontransferable other than by will or the laws of descent and distribution. An Option shall be exercisable during the Eligible Director's lifetime only by him or, in the event of his incompetence, by a duly appointed guardian. 5. OPTION EXERCISES. (a) Exercise Timing. Except as provided in Sections 5(c) and 6 below, --------------- each Option shall become exercisable for twenty-five percent (25%) of the shares of Common Stock covered by the Option after the expiration of one (1) year following the date of grant and for an additional twenty-five percent (25%) of the shares after the expiration of each of the succeeding three (3) years following the date of grant. (b) Method of Exercise. Options may be exercised by delivery of written ------------------ notice of exercise to the Secretary of the Company, accompanied by the full purchase price of the shares being purchased. The price shall be paid at the time of exercise (i) in cash, (ii) by the transfer to the Company of shares of the Company's Common Stock acquired by the option holder prior to the exercise of the Option, or (iii) by any combination of cash or such shares of the Company's Common Stock. Each such share so transferred in full or part payment of the option price shall be deemed to have a value equal to the closing price of a share of the Common Stock of the Company, as traded on the New York Stock Exchange (or the largest stock exchange on which it is then traded), on the date of transfer to the Company, or if there is no trade on such Exchange on that date, on the nearest date preceding the date of transfer on which a trade on such Exchange was made, and each such share at the time of such transfer shall be free and clear of any and all claims, pledges, liens and encumbrances, or any restrictions which would in any manner restrict the transfer of such shares to the Company in full or part payment of the Option price. (c) Effect of Change of Control. In the event of "Change of Control" of --------------------------- the Company, all Options held by Eligible Directors on the date of Change of Control shall be immediately exercisable in full, irrespective of the amount of time that has elapsed from the date of grant. "Change of Control" means a change of twenty-five percent (25%) or more of the membership of the Board (excluding membership changes resulting from normal retirement of directors) within a twenty-four (24) month period following the acquisition of beneficial ownership by any person or entity, or group of persons or entities and their affiliates acting in concert, of twenty percent (20%) or more of the voting securities of the Company. "Affiliates" and "beneficial ownership" shall be defined in accordance with Rules 12b-2 and 13d-3 of the Securities and Exchange Commission, as the same may from time to time be amended. 6. EXPIRATION OF OPTIONS. Except as hereinafter provided, all Options shall expire on the earlier of (i) the last day of the tenth (10th) year after the date of grant or (ii) the date that an Eligible Director ceases to be a member of the Board; provided, however, that to the extent any unexpired Options are otherwise exercisable on the date that an Eligible Director ceases to be a member of the Board for any reason other than Cause (as defined below), death, Early 2 Retirement (as defined below) or Mandatory Retirement (as defined below), such Options shall remain exercisable for one (1) year following the last day of the Eligible Director's Board membership and shall expire if not exercised within said one (1) year period. If Board membership ceases on account of death or Mandatory Retirement, all unexpired Options held by the Eligible Director on the last day of Board membership, whether exercisable or not exercisable, shall be immediately exercisable and remain exercisable for three (3) years following the last day of the Eligible Director's Board membership and shall expire at the end of such three (3) year period if not exercised within said three (3) year period. If Board membership ceases on account of Early Retirement, all unexpired Options held by the Eligible Director on the last day of Board membership, which are then exercisable or would have become exercisable had the Director continued as a member of the Board for one (1) additional year, whether exercisable or not exercisable, shall be immediately exercisable and remain exercisable for one (1) year following the last day of the Eligible Director's Board membership and shall expire if not exercised within said one (1) year period. To the extent any otherwise unexpired Options are not exercisable in accordance with the immediately preceding sentence, they shall expire as of the effective date of such Eligible Director's Early Retirement. All Options held by an Eligible Director whose membership on the Board ends after the occurrence of Cause shall expire immediately on his or her last day of Board membership. "Cause," for the purposes of this Section 6, means any act or omission for which indemnification of the Director is prohibited by the Georgia Business Corporation Code (Sections 14-2-171 of the Code until July 1, 1989 and Section 14-2-856, as amended, on and after July 1, 1989). "Mandatory Retirement," for the purposes of this Section 6, means an Eligible Director's ineligibility to be re-elected to the Board due to the terms of the retirement policy adopted by the Board (as amended from time to time), provided such ineligibility occurs after at least thirty-six (36) consecutive months of service on the Board. "Early Retirement," for the purposes of this Section 6, means an Eligible Director's voluntary resignation from the Board after at least thirty-six (36) consecutive months of service on the Board. 7. 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 or shares of Common Stock of the Company occurs, the number and kind of shares authorized by this Plan, and the number, Option price and kind of shares covered by the Options granted hereunder, shall be automatically adjusted as required in order to prevent an unfavorable effect upon the value of the shares covered by then outstanding Options and shares covered by Options subsequently granted. 8. TAX WITHHOLDING. Any exercise of an Option pursuant to the Plan shall be subject to withholding of state and federal income taxes, FICA tax or other taxes to the extent required by applicable law. 9. LAWS AND REGULATIONS. The Plan, the grant and exercise of Options, and the obligation of the Company to sell or deliver shares of Common Stock under the Plan shall be subject to all applicable laws, regulations and rules. In the event that the shares of Common Stock to be issued under this Plan are not registered under the Securities Act of 1933 and any applicable state securities laws prior to the delivery of such shares, the Company may require, as a condition to the issuance thereof, that the persons 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 own account and not with a view to, for resale in connection with, or with an intent of participating directly or indirectly in, any distribution of such shares within the 3 meaning of that Act, and a legend to that effect may be placed on the certificates representing such shares. 10. TERMINATION AND AMENDMENT OF THE PLAN. The Board may at any time terminate the Plan or may at any time or times amend the Plan or amend any outstanding Options 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: (i) no amendment of any outstanding Option shall contain terms or conditions inconsistent with the provisions contained in the Plan at the time the respective Option was granted, as determined by the Board; and (ii) except as provided in Section 7, no such amendment shall, without the approval of the shareholders of the Company: (a) increase the number of shares of Common Stock for which each Option may be granted under the Plan; (b) increase the frequency of Option grants; (c) reduce the price at which Options may be granted or exercised below the price provided for in Section 4(e); (d) extend the period during which any outstanding Option may be exercised; (e) materially increase in any other way the benefits accruing to Eligible Directors; (f) expand Plan eligibility beyond Eligible Directors as defined herein, or (g) disqualify an Eligible Director from being a "disinterested" administrator, within the meaning of Rule 16b-3 (or any successor rule) of the Securities and Exchange Commission, of any stock option plan or other stock-based plan of the Company. 11. EFFECTIVE DATE. The Plan shall become effective on the date of approval by the Board; provided, however, that the Plan shall be submitted to the shareholders of the Company for approval, and if not approved by the shareholders within one (1) year from the date of approval by the Board, the Plan shall be of no force and effect. Options granted under the Plan before approval of the Plan by the shareholders shall be granted subject to such approval and shall not be exercisable before such approval. To record the adoption of this Plan (as amended and restated) by the Board as of May 12, 1999, the Company has caused its authorized officers to execute this Plan in the space below. SCIENTIFIC-ATLANTA, INC. By: / s / Brian C. Koenig ---------------------------------- Name: Brian C. Koenig Title: Senior Vice President - Human Resources By: / s / William E. Eason, Jr. ----------------------------- Name: William E. Eason, Jr. Title: Senior Vice President, General Counsel and Corporate Secretary [Corporate Seal] 4 EX-10.16 18 FIRST AMENDMENT TO LEASE AGREEMENT EXHIBIT 10.16 AFTER RECORDING RETURN TO: CROSS REFERENCE TO: Michelle A. Hickerson, Esq. Deed Book 14848, Page Jones, Day, Reavis & Pogue ----- 3500 SunTrust Plaza 1, Gwinnett County, 303 Peachtree Street, N.E. -- Atlanta, Georgia 30308-3242 Georgia Records FIRST AMENDMENT TO LEASE AGREEMENT THIS FIRST AMENDMENT TO LEASE AGREEMENT ("Amendment") dated as of --------- October _____, 1997 is between WACHOVIA CAPITAL MARKETS, INC., a Georgia corporation ("Lessor") and SCIENTIFIC-ATLANTA, INC., a Georgia corporation ------ ("Lessee"). -------- WHEREAS Lessor and Lessee executed that certain Lease Agreement ("Lease") ----- dated as of July 30, 1997 and filed for record on October 9, 1997 in Deed Book 14848 , Page 1 , Records of Gwinnett County, Georgia; - ------- ----- WHEREAS Schedule 1(b) was inadvertently omitted from the Lease at the time of recording and Lessor and Lessee wish to attach said Schedule 1(b) to the Lease; NOW, THEREFORE, for and in consideration of the sum of Ten and No/100 Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lessor and Lessee hereby agree as follows with respect to the Lease: 1. Schedule 1(b). Schedule 1(b), attached hereto and by this reference ------------- made a part hereof, is hereby attached to and made a part of the Lease. 2. Continued Validity. Lessor and Lessee hereby acknowledge and agree ------------------ that, except as expressly modified hereby, the Lease has not been modified or amended, is in full force and affect in accordance with the terms and provisions thereof as modified hereby, and is hereby ratified and confirmed by both Lessor and Lessee. 3. Binding Effect. This Amendment shall insure to the benefit of and be -------------- binding upon Lessor and Lessee and their respective successors, legal representatives and permitted assigns. 4. Defined Terms. All initially-capitalized terms used but not defined ------------- herein shall have the meaning ascribed thereto in the Lease. IN WITNESS WHEREOF, the Lessor and Lessee have caused this Amendment to be executed under seal as of the date first above written. LESSOR: Signed, sealed and delivered WACHOVIA CAPITAL MARKETS, in the presence of: INC., a Georgia corporation /s/ Signature Illegible - ------------------------ By: /s/ Joseph J. Thomas Unofficial Witness ---------------- Printed Name: Joseph J. Thomas ---------------- Printed Title: Senior Vice President --------------------- /s/ Nadine Crawford [CORPORATE SEAL] - ------------------- Notary Public My Commission Expires: [Notary Seal] Notary Public-DeKalb County, Georgia My Commission Expires August 2, 1998 2 LESSEE: Signed, sealed and delivered in the presence of: SCIENTIFIC-ATLANTA, INC., a Georgia corporation /s/ William E. Eason, Jr. - ------------------------- Unofficial Witness By: /s/ H. A. Wagner ---------------- Printed Name: Harvey A. Wagner ---------------- Printed Title: Senior Vice President-Finance, Chief Financial Officer & Treasurer ---------------------------- /s/ Loretta J. Radcliff - ----------------------- [CORPORATE SEAL] Notary Public My Commission Expires: Notary Public, Fulton County, Georgia [Notary Seal] My Commission Expires Sept. 11, 2001 3 SCHEDULE 1(b) ------------- The following terms shall have the following meanings when used in the "Credit Agreement", the "Lease", the "Agency Agreement" and all other "Operative Documents" (as those terms are defined below) (all terms defined in the singular to have the same meanings when used in the plural and vice versa); provided, however, certain terms defined below are modified in accordance with - --------- ------- Section 2.10 of the Credit Agreement with respect to circumstances occurring prior to the Syndication Effective Date: "Accrued Construction Period LI Yield": as defined in Section 3.03(a) ------------------------------------ of the Credit Agreement. "Acquisition/Construction Agent": the Company, as acquisition and ------------------------------ construction agent for the Lessor with respect to the Facility pursuant to the Agency Agreement. "Adjusted LIBO Rate": with respect to any Interest Period or LI Yield ------------------ Period, a rate per annum equal to the quotient obtained (rounded upwards, if necessary, to the next higher 1/100th of 1%) by dividing (i) the applicable LIBO Rate for such Interest Period or LI Yield by (ii) 1.00 minus the Eurodollar Reserve Percentage. "Advance Notice": in connection with any Borrowing or LI Funding, -------------- notice given by telecopy or telephone (and if by telephone, confirmed promptly by telecopier) to be received by the Agent not later than 12:00 noon, Atlanta, Georgia time, on the third (3rd) Business Day before the requested date of such Borrowing, or LI Funding or continuation. "Affiliate": with respect to the Company, (i) any Person that, --------- directly or indirectly, through one or more intermediaries, controls the Company (a "Controlling Person"), (ii) any Person (other than the Lessor, the Company or ------------------ a Subsidiary) which is controlled by or is under common control with a Controlling Person, or (iii) any Person (other than a Subsidiary) of which the Company owns, directly or indirectly, 20% or more of the common stock or equivalent equity interests. As used herein, the term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Agent": Wachovia Bank, N.A., a national banking association, in its ----- capacity as agent for the Lenders, together with its successors in such capacity. "Agency Agreement": the Acquisition, Agency, Indemnity and Support ---------------- Agreement, dated as of the Closing Date, between the Lessor and the Company, as Acquisition/Construction Agent, as amended, supplemented or otherwise modified from time to time. "Aggregate Construction Costs": the aggregate amount of all Facility ---------------------------- Costs, including all acquisition costs for the Improvements and Capitalized Expenses, excluding, however, the cost of the acquisition of the Site. --------- ------- "Aggregate Loan Commitments": the sum of the Aggregate Tranche A Loan --------------------------- Commitments and the Aggregate Tranche B Loan Commitments, as the same may be reduced at the request of the Company in accordance with Section 2.03 of the Credit Agreement. "Aggregate Tranche A Loan Commitments": the lesser of (i) an amount ----------------------------------- equal to 85% of the Facility Cost, or (ii) $30,600,000, as the same may be reduced at the request of the Company in accordance with Section 2.03 of the Credit Agreement. "Aggregate Tranche B Loan Commitments": the lesser of (i) an amount ------------------------------------ equal to 12% of the Facility Cost, or (ii) $4,320,000, as the same may be reduced at the request of the Company in accordance with Section 2.03 of the Credit Agreement. "Applicable Funding Office": for each Lender and the Lessor, ------------------------- respectively, the funding office of such Lender or the Lessor (or an affiliate of such Lender or the Lessor) designated for any Loan or LI Funding on the signature pages of the Credit Agreement (or in an Assignment and Acceptance executed by such Lender pursuant to Section 11.06 or the Credit Agreement) or such other offices of such Lender or the Lessor (or of an affiliate of such Lender or the Lessor) as such Lender or the Lessor may from time to time specify to the Agent, the Lessor (for notices by a Lender) and the Company as the office by which its Loans or Lessor Investments are to be made and maintained. "Applicable Margin": with respect to the Tranche A Loans and the ----------------- Tranche B Loans, or LI Fundings, the applicable rate per annum determined in accordance with the Pricing Schedule. "Applicable Permit": any Permit that is or may be necessary to own, ----------------- renovate, construct, install, start-up, test, maintain, modify, expand, remove, operate, lease or use all or any part of the Facility (including, without limitation, the Site or any business conducted on or related to the Facility or the Site) in accordance with the Operative Documents and the failure to obtain or maintain which would have a Material Adverse Effect. "Approved Appraisal": any appraisal, ordered by the Agent, but at ------------------ the Company's cost, from an appraiser or appraisers reasonably acceptable to the Agent, which: (i) complies with Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989, as amended, 12 U.S.C. 3331, et -- seq., and The Regulations and Statements of General Policy on Appraisals - --- promulgated by the Federal Deposit Insurance Corporation, 12 C.F.R. Part 32, as amended, (ii) is performed by a state-certified real estate appraiser certified under the laws of any State, (iii) reflects the Market Value of the Facility on an "as completed" basis, and (iv) estimates the Market Value of the Facility as of the expiration of the Basic Term. "Assignment and Acceptance": an Assignment and Acceptance Agreement, ------------------------- in the form of Exhibit D to the Credit Agreement entered into by a Lender and --------- an Eligible Assignee. "Authorized Officers": with respect to the Company, the officers ------------------- whose signatures and incumbency shall have been certified to the Agent and the Lessor in a certificate certified by the Secretary or an Assistant Secretary of the Company, in form and substance reasonably satisfactory to the Agent that are authorized to sign the Lease and the other Operative Documents to which the Lessee is a party and, until replaced by another Authorized Officer duly authorized for that purpose, to act as its respective representative for the purposes of signing documents and giving notices and other communications in connection with the Lease and the Operative Documents to which it is a party. "Banking Authority": as defined in Section 5.02 of the Credit ----------------- Agreement. "Base Rate": for any day, the rate per annum equal to the higher as --------- of such day of (i) the Prime Rate, and (ii) one-half of one percent above the Federal Funds Rate. For purposes of determining the Base Rate for any day, changes in the Prime Rate shall be effective on the date of each such change. "Basic Rent": for any Rental Period during the Lease Term the sum of ---------- (i) all liabilities of the Lessor for interest on the Loans and LI Yield (excluding Accrued Construction Period LI Yield but including, without limitation, all LI Yield accruing during the Basic Term on the Lessor Investment) accruing during such Rental Period pursuant to and in accordance with the Credit Agreement, and (ii) all liabilities for fees accruing during such Rental Period pursuant to the Credit Agreement. "Basic Term": with respect to the Lease, and subject to the terms and ---------- conditions set forth therein and in the other Operative Documents, the period commencing on the Lease Commencement Date and ending on the earlier to occur of (i) the Option Date, (ii) the Cancellation Date, or (iii) the Scheduled Lease Termination Date. "Borrowing": a borrowing consisting of Loans to the Lessor made on --------- the same day by the Lenders. "Building(s)": each building (singular and plural) to be constructed ----------- on the Site and certain improvements and enhancements to the foregoing in accordance with the Facility Plan. "Business Day": (i) for all purposes other than as set forth in ------------ clause (ii) below, any day except Saturday, Sunday or other day on which commercial banks in Atlanta, Georgia are authorized or required by law or other government action to close, and (ii) with respect to all notices and determinations in connection with, and payments of principal of and interest on, the Loans and payments of, any day that is a Business Day described in clause (i) above and that is also a day for trading by and between banks in the London interbank eurodollar market. "Cancellation Date": as defined in Section 15(b) of the Lease. ----------------- "Cancellation Event": as defined in Section 15(b) of the Lease, and ------------------ shall include a Loss Event. "Capitalized Expenses": all acquisition, design and construction -------------------- costs and all legal, architectural, engineering, and other professional fees and expenses, brokerage fees, appraisal fees, environmental assessment fees, title insurance, survey expenses, mortgage recording fees and taxes, intangible taxes, and other "soft costs" of a nature ordinarily and reasonably incurred in connection with the acquisition, design, engineering, construction, assembly, installation, testing, improvement and completion of property substantially similar to the Facility (including soft and hard costs previously incurred not to exceed 10% of all Facility Cost) and all Basic Rent (as defined below), commitment and other fees accrued prior to the Completion Date. "Capitalized Expenses" shall not include fixtures, furniture or equipment included in, attached to or otherwise relating to the Site or the Facility. "Capitalized Lease Obligations": all obligations under a lease that ----------------------------- is required to be capitalized for financial reporting purposes in accordance with GAAP, and the amount of Capitalized Lease Obligations shall be the capitalized amount of such obligations determined in accordance with such principles. "Capital Stock": any nonredeemable capital stock of the Company or ------------- any Consolidated Subsidiaries (to the extent issued to a Person other than the Company) whether common or preferred. "Casualty Occurrence": any of the following events in respect of the ------------------- Facility, (i) any material loss of the Facility or material loss of use thereof which does not constitute a Loss Event, or (ii) the condemnation, confiscation or seizure of, or requisition of title to or use of, any material part of the Facility which action does not constitute a Loss Event, or (iii) any damage to the Facility which results in an insurance settlement with respect to the Facility. "CERLA": the Comprehensive Environmental Response Compensation and ----- Liability Act, 42 U.S.C. Section 9601 et. seq. and its implementing regulations and amendments. "CERCLIS": the Comprehensive Environmental Response Compensation and ------- Liability Inventory System established pursuant to CERCLA. "Change of Control": any Person or two or more Persons acting in ----------------- concert shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 20% or more of the outstanding shares of the voting stock of the Company by virtue of a hostile tender offer for, other hostile acquisition of, such beneficial ownership. "Change of Law": as defined in Section 5.02 of the Credit Agreement. ------------- "Closing Date": July 30, 1997. ------------ "Closing Documentation": as defined in Section 6.01 of the Credit --------------------- Agreement. "Code": the Internal Revenue Code of 1986, as amended, and any ---- successor Federal tax code. "Collateral": as defined in Section 26 of the Lease. ---------- "Co-Lessee": as defined in Section 21(b) of the Lease. --------- "Commerical Paper": any negotiable draft having a maturity at the ---------------- time of issuance not exceeding 270 days and which is exempt from the registration requirements of the Securities Act under Section 3(a)(3) thereof. "Commercial Paper Program": any one arrangement among the Company, ------------------------ a Placement Agent and a Paying Agent regarding the issuance by the Company of Commercial Paper. "Commitment": as to each Lender or the Lessor, respectively, an ---------- amount equal to such Lender's Loan Commitment then in effect or the Lessor Investment Commitment then in effect. "Commitment Fee": as defined in Section 2.04(a) of the Credit -------------- Agreement. "Commitment Fee Rate": as defined in the Pricing Schedule. ------------------- "Company": as defined in the preamble hereto, and its successors. ------- "Completion": the occurrence and satisfaction of all of the events ---------- and conditions (with respect to all Buildings) described on Schedule 1.02(a) ---------------- to the Credit Agreement on a single date to the reasonable satisfaction of the Required Lenders. "Completion Certificate": a certificate of the Acquisition/ ---------------------- Construction Agent in substantially the form of Exhibit A to the Agency --------- Agreement, certifying that Completion of all Buildings constituting the Facility has occurred. "Completion Costs": at any time the sum of (x) the aggregate amount ---------------- of Construction Costs (including acquisition costs, except with respect to the Site, and soft costs) expended or incurred as of the time of a Non-Completion Event and which it will be necessary thereafter to expend in order to achieve Completion, plus (y) all Impositions thereon. "Completion Costs Payment": an amount, which is payable upon the ------------------------ occurrence of a Non-Completion Event, equal to the sum of (i) the acquisition cost of the ground lease of the Site, (ii) the aggregate amount of all Completion Costs, up to but not in excess of the Completion Costs Payment Limitation, and (iii) all Supplemental Rent and other amounts owing by the Company under the Operative Documents (other than any Completion Costs in excess of the Completion Costs Payment Limitation). "Completion Costs Payment Limitation": means an amount equal to 89% ----------------------------------- of the Aggregate Construction Costs. "Completion Date": the earlier to occur of (i) the date on which the --------------- Company, as Acquisition/Construction Agent for the Lessor, delivers the Completion Certificate and (ii) the date that is 24 months after the Lease Commencement Date (unless there shall have occurred Casualty Occurrence during the Construction Period, in which event such 24-month period shall be extended for an additional period ending 6 months from the date of the occurrence of such Casualty Occurrence). "Compliance Certificate": as defined in Section 8.01(c) of the ---------------------- Credit Agreement. "Consolidated Current Maturities": with respect to the Company and ------------------------------- its Subsidiaries for any period of computation thereof, the aggregate amount of all regularly scheduled payments of principal to be made during such period with respect to the long-term debt portion of Consolidated Funded Debt of the Borrower and its Subsidiaries. "Consolidated Debt": at any date the Debt of the Company and its ----------------- Consolidated Subsidiaries, determined on a consolidated basis as of such date. "Consolidated EBITDA": with respect to the Company and its ------------------- Subsidiaries for any period of computation thereof, the sum of, without duplication, (i) Consolidated Net Income plus (ii) Consolidated ---- Interest Expense for such period plus (iii) taxes on income accrued during such ---- period plus (iv) amortization for such period plus (v) depreciation for such ---- ---- period. "Consolidated Funded Debt": at the time of computation thereof, all ------------------------ of the following of the Company and its Subsidiaries as determined on a consolidated basis (without duplication): all Debt less (a) all reimbursement obligations under standby letters of credit and acceptances (whether or not the same have been presented for payment) and less (b) obligations arising under Guarantees. "Consolidated Interest Expense": with respect to the Company and its ----------------------------- Subsidiaries for any period of computation thereof, the total interest expense (including, without limitation, interest expense attributable to Capitalized Lease Obligations in accordance with GAAP) of the Company and its Subsidiaries on a consolidated basis and in any event shall include (i) the amortization of debt discounts and (ii) amortization of all fees payable in connection with the incurrence of Debt to the extent included in interest expense. "Consolidated Net Income": with respect to the Company and its ----------------------- Subsidiaries for any period of computation thereof, the net income (or loss) of the Company and its Subsidiaries on a consolidated basis for such period; provided, however, that the following shall be excluded when determining - -------- ------- Consolidated Net Income: (i) any item of gain or loss resulting from sale, conversion or other disposition of assets other than in the ordinary course of business; (ii) net gains or losses on the acquisition, retirement, sale or other disposition of capital stock and other securities of the Company and its Subsidiaries; (iii) net gains or losses on the collection of proceeds of life insurance policies; (iv) any write-up of any asset; (v) any other net gains or losses of an extraordinary nature as determined in accordance with GAAP, (vi) the amount of $9,916,000 representing in-progress research and development costs expensed by the Company for the fourth Fiscal Quarter of the Fiscal Year ending on June 28, 1996, in connection with its acquisition of Atx Telecom Systems, Inc. from Amoco Technology Company, and (vii) the amount of $19,516,000 representing the charge to the Company's earnings incurred during the relevant Fiscal Quarter in effect on July 24, 1996. "Consolidated Operating Lease Expense": for any period of computation ------------------------------------ thereof, the aggregate of all amounts paid or accrued (whether or not constituting rental expense) during such period by the Company and its Subsidiaries under all leases other than leases giving rise to Capitalized Lease Obligations), as determined on a consolidated basis. "Consolidated Subsidiary": a Subsidiary, the accounts of which are ----------------------- customarily consolidated with those of the Company for the purpose of reporting to stockholders of the Company or to the Agent and each of the Lenders, or, in the case of a recently acquired Subsidiary, the accounts of which would, in accordance with the Company's regular practice, be so consolidated for that purpose. "Consolidated Tangible Net Worth": means, as at any date, (a) the ------------------------------- total shareholder's equity (including capital stock, additional paid-in capital and retained earnings, after deducting treasury stock) of the Company and its Subsidiaries determined on a consolidated basis (without duplication) which would appear as such on a consolidated balance sheet of the Company and its Subsidiaries prepared in accordance with GAAP minus (b) all intangible items ----- reflected therein, including all intangible plant expansion costs, all unamortized debt discount and expense, unamortized research and development expense, unamortized deferred charges, goodwill, patents, trademarks, service marks, trade names, copyrights, unamortized excess cost of investment in Subsidiaries over equity at dates of acquisition, and all similar items which should properly be treated as intangibles in accordance with GAAP. "Construction Period": the period commencing on the Lease ------------------- Commencement Date and ending on the Completion Date. "Construction Period LI Yield": as defined in Section 3.03(a) of ---------------------------- the Credit Agreement. "Controlled Group": all members of a controlled group of corporations ---------------- and all trades or businesses (whether or not incorporated) under common control which, together with the Company, are treated as a single employer under Section 414 of the Code. "Credit Agreement": the Credit Agreement, dated as of the Closing ---------------- Date, among the Company, the Lessor, the Agent and the Lenders, as amended, supplemented, renewed, extended or otherwise modified from time to time. "Debt": means with respect to a Person, at the time of computation ---- thereof, all of the following (without duplication): (a) obligations of such Persons in respect of money borrowed; (b) obligations of such Person (other than trade debt incurred in the ordinary course of business), whether or not for money borrowed (i) represented by notes payable, or drafts accepted, in each case representing extensions of credit, (ii) evidenced by bonds, debentures, notes or similar instruments, or (iii) constituting purchase money indebtedness, conditional sales contracts, title retention debt instruments or other similar instruments, upon which interest charges are customarily paid or that are issued or assumed as full or partial payment for property; (c) Capitalized Lease Obligations of such Person; (d) all reimbursement obligations of such Person under any standby letters of credit or acceptance (whether or not the same have been presented for payment); and (e) all Debt of other Persons which (i) such Person has Guaranteed or (ii) are secured by a Lien on any property of such Person. "Default": any condition or event that constitutes an Event of ------- Default or that with the giving of notice or the lapse of time or both would, unless cured or waived, become an Event of Default. "Default Rate": with respect to any Loan, LI Funding or any other ------------ amount payable under any Operative Document, on any day, the sum of 2.0% plus the rate otherwise in effect for such Loan or LI Funding, or in the case of any other amount, the Adjusted LIBO Rate. "Dollars" and "S": dollars in lawful currency of the United States ------- - of America. "Eligible Assignee": with respect to any particular assignment under ----------------- Section 11.06 of the Credit Agreement, any bank or other financial institution consented to by the Company and the Agent if such bank of other financial institution is not already a Lender or an affiliate of a Lender; provided that -------- neither the Agent's nor the Company's consent shall be unreasonably withheld and, provided, further that such consent of the Company shall not be required if an Event of Default is in existence. "Environmental Assessment": collectively, a Phase 1 report conducted ------------------------ by an independent engineering firm reasonably acceptable to the Lessor and the Agent in scope and substance satisfactory to the Lessor and the Agent, and in any event satisfying the minimum standards set forth in ASTME 1527-94 (and, if recommended in or indicated by the Phase 1 report, a Phase 2, environmental soil test or other environmental report or reports), reflecting compliance of the Facility in all material respects with all applicable Environmental Requirements. "Environmental Authority": any foreign, federal, state, local or ----------------------- regional Governmental Authority that exercises any form of jurisdiction or authority under any Environmental Requirement. "Environmental Authorizations": all licenses, permits, orders, ---------------------------- approvals, notices, registrations or other legal prerequisites for conducting the business of the Company or any Subsidiary, or for the uses and activities of, on or relating to the Facility, required by any Environmental Requirement. "Environmental Closing Certificate": as defined in Section 6.02(k). --------------------------------- "Environmental Damages": any and all claims, losses, costs, damages, --------------------- penalties and expenses which are incurred at any prior or subsequent time as a result of the existence or release of Hazardous Materials upon, about or beneath the Facility or migrating or threatening to migrate to or from the Facility, or the existence of a violation of Environmental Requirements pertaining to the Facility, regardless of whether the existence of such Hazardous Materials or the violation of Environmental Requirements arose prior to the present ownership or operation of the Facility. "Environmental Judgments and Orders": all Judgments arising from or ---------------------------------- in any way associated with any Environmental Requirements, whether or not entered upon consent or written agreements with an Environmental Authority or other entity arising from or in any way associated with any Environmental Requirement, whether or not incorporated in a Judgment. "Environmental Liabilities": any liabilities or Liens, whether ------------------------- accrued, contingent or otherwise, arising from and in any way associated with any Environmental Requirements. "Environmental Notices": notice from any Environmental Authority or --------------------- by any other Person, of possible or alleged noncompliance with or liability under any Environmental Requirement, including without limitation any complaints, citations, demands or requests from any Environmental Authority or from any other person or entity for correction of any violation of any Environmental Requirement or any investigations concerning any violation of any Environmental Requirement. "Environmental Proceedings": any judicial or administrative ------------------------- proceedings arising from or in any way associated with any Environmental Requirement. "Environmental Release": any actual or threatened release defined in --------------------- CERCLA or under any state or local environmental law or regulation. "Environmental Requirements": any statue, rule, regulation, -------------------------- ordinance, permit, license administration or judicial decision or order (whether by consent or otherwise) or the requirement of law with respect to: (i) the protection of human health and/or the environment; (ii) the existence, handling, use, generation, treatment, storage, packaging, labelling, removal or Environmental Release of Hazardous Materials on, under, about and/or from any real property, including the Facility; and (iii) the effects on the environment of any activity now, previously, or hereinafter conducted on any real property, including the Facility. The Environmental Requirements shall include, but not be limited to, the following: CERCLA; the Superfund Amendments and Reauthorization Act, Public Law 99-499, 100 Stat. 1613; the Resource Conservation and Recovery Act, 42 U.S.C. (S)(S) 6901, et seq.; the Toxic Substances Control Act, 15 -- --- U.S.C. (S)(S) 2601, et seq.; the Federal Water Pollution Control Act, 33 U.S.C. ------ (S)(S) 1251, et seq.; the Clean Air Act, 42 U.S.C. (S)(S) 7401, et seq.; the ------ ------ Occupational Safety and Health Act, 29 U.S.C. (S)(S) 651, et seq.; the -- --- Emergency Planning and Community Right-To-Know Act of 1986, 42 U.S.C. (S)(S) 11001, et seq.; the state and local analogies thereto, all as amended or -- --- superseded from time to time; and any common-law doctrine, including but not limited to, negligence, nuisance, strict liability, trespass, personal injury, or property damage related to or arising out of the presence, Environmental Release or exposure to a Hazardous Material; and all federal, state and local ordinances, regulations, orders, writs and decrees. "ERISA": the Employee Retirement Income Security Act of 1974, as ----- amended from time to time, or any successor law and the regulations promulgated and rulings issued from time to time thereunder. Any reference to any provision of ERISA shall also be deemed to be a reference to any successor provision or provisions thereof. "Eurocurrency Liabilities": as defined in Regulation D of the Board ------------------------ of Governors of the Federal Reserve System, as in effect from time to time. "Eurodollar Reserve Percentage": for any day the percentage ----------------------------- (expressed as a decimal) that is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in respect of Eurocurrency Liabilities (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on loans made at the LIBO Rate is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Lender to United States residents). The Adjusted LIBO Rate shall be adjusted automatically on and as of the effective date of any change in the Eurodollar Reserve Percentage. "Event of Default": as defined in Section 9.01 of the Credit ---------------- Agreement or in Section 17 of the Lease. "Facility": the collective reference to (i) the Lessor's leasehold -------- interest in the Site, (ii) the Buildings and the other Improvements, and (iii) all plans, specifications, warranties and related rights and operating, maintenance and repair manuals related thereto and all replacements of any of the above. "Facility Cost": an aggregate amount equal to the lessor of: (i) ------------- the sum of (a) all costs associated with the Lessor's acquisition of a ground lease of the Site and title to the Improvements and any refinancing thereof, and (b) all of the capitalized costs and expenses of any kind or character incurred to design, construct, install and implement the Facility, including, without limitation, all Capitalized Expenses to be provided by the Lenders; and (ii) $38,000,000. "Facility Plan": the architectural and engineering plans and ------------- specifications for the Facility and list of Facility Plan documents, as the same may be amended, supplemented or otherwise modified form time to time in accordance with applicable laws and the Permitted Use, and, solely during the existence of an Event of Default, after the prior written consent of the Agent. "Federal Funds Rate": for any day, the rate per annum (rounded ------------------ upward, if necessary, to the next higher 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions, with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that (i) if the day for which such rate is to be -------- determined is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day, and (ii) if such rate is not so published for any day, the Federal Funds Rate for such day shall be the average rate charged to the Agent on such day on such transactions, as determined by the Agent. "Final Rent Payment": an amount determined as of the date payment ------------------ thereof is required equal to the sum of (i) the aggregate outstanding principal amount of the Tranche A Loans, plus (ii) all accrued and unpaid interest on the ---- Tranche A Loans and Tranche B Loans accrued through the end of the Lease Term, plus (iii) all unpaid LI Yield (including, without limitation, all Accrued - ---- Construction Period Yield) accrued through the end of the Lease Term, plus (iv) ---- all other amounts owing by the Lessee under the Operative Documents (including in any event all unpaid Impositions accrued, arising or payable in connection with the Facility or otherwise pursuant to the Lease through or as at the end of the Lease Term, but excluding in any event the unpaid principal amount of the Tranche B Loans and the unpaid principal amount of the Lessor Investment). "Fiscal Quarter": any fiscal quarter of the Company. -------------- "Fiscal Year": the 52 or 53 week period, as the case may be, ending ----------- on the Friday closest to June 30 of each year. "Four-Quarter Period": a period of four full consecutive fiscal ------------------- quarters of the Company, taken together as one accounting period, and unless set forth herein to the contrary, shall mean the four full consecutive fiscal quarters of the Company most recently ending before the day of any computation of any given financial ratio or covenant contained herein. "Funded Amount": the aggregate amount of principal, interest, LI ------------- Fundings, LI Yield, expenses and indemnities owing or to be owing by the Lessor to the Lenders, plus Commitment Fees, expenses and indemnities owing or to be owing by the Lessor to the Agent or the Lenders pursuant to the Credit Agreement or any other Operative Document. "GAAP": generally accepted accounting principles in the United States ---- of America applied on a basis consistent with those which, in accordance with Section 1.03 of the Credit Agreement, are to be used in making the calculations for purposes of determining compliance by the Company with the provisions of the Operative Documents applicable thereto. "Governmental Authority": to include the country, state, county, city ---------------------- and political subdivisions in which any Person or any such Person's property is located or that exercises valid jurisdication over any such Person or any such Person's property, any court, agency, department, commission, board, bureau or instrumentality of any of them including monetary authorities that exercise valid jurisdiction over any such Person or any such Person's property. Unless otherwise specified, all references to Governmental Authority herein shall mean a Governmental Authority having jurisdiction over, where applicable, the Company, the Site, the Facility, the Lessor, the Agent, any Lender, any Applicable Funding Office or any Operative Document. "Governmental Requirement": any law, statute, code, ordinance, order, ------------------------ determination, rule, regulation, Judgment, injunction, franchise, permit, certificate, license, authorization or other direction or requirement (whether or not having the force of law), including, without limitation, Environmental Requirements, and occupational, safety and health standards or controls, or any Governmental Authority. "Ground Lease": the Ground Lease, dated as of even date with the ------------ Credit Agreement, pertaining to the Sites between the Company as ground lessor and the Lessor as ground lessee. "Guarantee": with respect to any Person, any obligation, contingent --------- or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to secure, purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation of such other Person (whether arising by virtue of partnership arrangements, by agreement to keep- well, to purchase assets, goods, securities or services, to provide collateral security, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided that the term Guarantee shall not include endorsements for collection - -------- or deposit in the ordinary course of business. The term "Guarantee used as a verb has a corresponding meaning. "Guaranty": the Guaranty, dated as of the Closing Date, from the -------- Company to the Agent for the benefit of the Agent and the Lenders, pursuant to which the Company guarantees, as primary obligor, all obligations of (but in no event obligations greater than those of) the Lessor to the Agent and the Lenders under the Credit Agreement, the Notes, as amended, supplemented or otherwise modified from time to time. "Hazardous Materials": to include, without limitation, (i) solid or ------------------- hazardous waste, as defined in the Resource Conservation and Recovery Act of 1980, 42 U.S.C. (S) 6901 et seq. and its implementing regulations and amendments, or in any applicable state or local law or regulation, (ii) "hazardous substance", "pollutant", or "contaminant", as defined in CERCLA, or in any applicable federal, state or local law or regulation, (iii) gasoline, or any other petroleum product or by-product, including, crude oil or any fraction thereof, (iv) insecticides, fungicides, or rodenticides, as defined in the Federal Insecticide, Fungicide, and Rodenticide Act of 1975, or in any applicable federal, state or local law or regulation, as each such Act, statute or regulation may be amended from time to time, or (v) any toxic or hazardous materials, wastes, polychlorinated biphenyls ("PCBs"), lead-containing materials, asbestos or asbestos-containing materials, urea formaldehyde, radioactive materials, pesticides, the discharge of sewage or effluent, or any other materials or substances defined as or included in the definition of "hazardous materials," "hazardous waste," "contaminants" or similar terms under any Environmental Requirement. "Hedging Obligations": with respect to a Person, any and all ------------------- obligations and liabilities, whether absolute or contingent and whether now owed or hereafter arising, of such Person under or with respect to (a) Interest Rate Agreements and (b) agreements or other arrangements intended to protect such Person or any other Person a party thereto from fluctuations of currency exchange rates or forward rates applicable to a Person's assets, liabilities, or exchange transactions. The term "Hedging Obligations" shall in no event include any obligations or liabilities in respect of any reasonable and customary provision in any agreement regarding the sale or purchase of goods which provision provides for adjustments in the sale or purchase price to reflect changes in currency exchange rates. "Highest Lawful Rate": with respect to each Lender and the Lessor, ------------------- the maximum non-usurious interest rate or yield, as applicable, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the Notes, or on other amounts owing hereunder under laws applicable to such Lender or the Lessor which are presently in effect or, to the extent allowed by law, under such applicable laws which may hereafter be in effect and which allow a higher maximum non-usurious interest rate than applicable laws now allow. "Impositions": without duplication, as to any Person, (i) all Taxes, ----------- assessments, levies, fees, water and sewer rents and charges, inspection fees and other authorization fees and all other governmental charges, general and special, ordinary and extraordinary, foreseen and unforeseen, of every character (including all penalties and interest thereon) that, at any time prior or subsequent to the Closing Date, are imposed or levied upon or assessed against or may be or constitute a Lien upon such Person or such Person's Property, or that arise in respect of the ownership, operation, occupancy, possession, use, non-use, condition, leasing or subleasing of such Person's Property; (ii) all charges, levies, fees, rents or assessments for or in respect of utilities, communications and other services rendered or used on or about such Person's Property; (iii) payments required in lieu of any of the foregoing; but excluding any penalties or fines imposed on the Lessor, the Agent of any Lender, respectively, for violation by it of any banking laws or securities law; and (iv) any and all taxes, recording fees and other charges (including penalties and interest) relating to or arising out of the execution, delivery, or recording of any of the Operative Documents for the amounts evidenced, secured or referred to be paid thereby, including without limitation, documentary stamp taxes, intangible taxes, recording fees and sales and rent taxes. "Improvements": collectively, each of the Buildings, together with ------------ all accessions thereto and replacements thereof, and together with all accessories, equipment, parts and devices necessary to achieve Completion, and all fixtures now or hereafter included in or attached to the Site, such buildings and such enhancements and improvements and modifications, and such roadways, utility lines and parking lots necessary to reach and use the Site, but excluding from the foregoing the Site. "Indemnified Party": as defined in Section 11.03(b) of the Credit ----------------- Agreement. "Indemnified Risks": as defined in Section 11.03(b) of the Credit ----------------- Agreement. "Initial Funding Date": the date on which the conditions precedent -------------------- set forth in Sections 6.01 and 6.02 of the Credit Agreement have been satisfied. "Initial Loans": the initial Loans made pursuant to Section 2.01 of ------------- the Credit Agreement on or after the Initial Funding Date. "Insurance Requirements": all terms of any insurance policy ---------------------- (including, without limitation, casualty and general liability) covering or applicable to the Facility or any portion thereof maintained in accordance with Section 14 of the Lease and all requirements of the issuer of any such policy. "Interest Period": with respect to each Loan, the period beginning --------------- on the date of such Loan and ending on the numerically corresponding date (or, if applicable, last calendar date) three months thereafter and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the numerically corresponding date (or, if applicable, last calendar date) three months thereafter; provided, however, -------- ------- that: (i) the duration of any Interest Period that commences before the Scheduled Lease Termination Date and would otherwise and after the Scheduled Lease Termination Date shall end on the Scheduled Lease Termination Date; (ii) the duration of the initial Interest Period with respect to each Loan shall end on the first Quarterly Date occurring after the date of such Loan; and (iii) if the last day of such Interest Period would otherwise occur on a day that is not a Business Day, such last day shall be extended to the next succeeding Business Day, except if such extension would cause such last ------ day to occur in a new calendar month, then such last day shall occur on the next preceding Business Day. "Interest Rate Agreement": any interest rate swap agreement, interest ----------------------- rate cap agreement, interest rate collar agreement or other similar agreement or arrangement intended to protect a Person against fluctuations in interest rates. "Interim Special Rent": as defined in Section 3(b) of the Lease. -------------------- "Investment": any investment in any Person, whether by means of ---------- purchase or acquisition of obligations or securities of such Person, capital contribution to such Person, loan or advance to such Person, capital contribution to such Person, loan or advance to such Person, making a time deposit with such Person, Guarantee or assumption of any obligation of such Person or otherwise. "Judgment": any judgment, decree, writ, order, determination, -------- injunction, rule or other direction or requirement of any arbitrator or any court, tribunal or other Governmental Authority. "Lease": the Lease Agreement, dated as of the Closing Date, as ----- amended, supplemented or otherwise modified from time to time, pursuant to which the Company, as Lessee, has agreed to lease the Facility on and after the Lease Commencement Date for the Permitted Use in accordance with the terms and conditions set forth in the Lease. "Lease Commencement Date": the date on which all conditions set ----------------------- forth in Sections 6.01 and 6.02 are satisfied. "Lease Term": the period of time commencing on the Lease Commencement ---------- Date and ending on the Lease Termination Date. "Lease Termination Date": the earlier to occur of (i) the Option Date, ---------------------- (ii) the Cancellation Date (iii) the date of termination as a result of a Termination Event and (iv) the Scheduled Lease Termination Date. "Lender": any Person who from time to time is or becomes a Tranche A ------ Lender or a Tranche B Lender; collectively, the "Lenders". ------- "Lessee": the Company in its capacity as Lessee under the Lease and ------ any successor or permitted assign in such capacity. "Lessor": Wachovia Capital Markets, Inc. and any successor permitted ------ by the terms of the Credit Agreement or the Lease. "Lessor Investment": as to the Lessor, the aggregate outstanding ----------------- amount from time to time of the equity investment in the Facility, which shall equal the sum of the unrecovered LI Fundings. "Lessor Investment Commitment": as to the Lessor, its commitment to ---------------------------- (a) make a Lessor Investment in an amount equal to $38,000,000 prior to the Syndication Effective Date, and (b) retain its Lessor Investment in an amount equal to $1,140,000 upon and after the Syndication Effective Date. "Lessor Mortgage": the Deed to Secure Debt, Assignment of leases and --------------- Security Agreement executed by the Lessor and delivered to the Agent, for the benefit of the Agent and the Lenders, as amended, supplemented, or otherwise modified from time to time. "Leverage Ratio": The ratio of (i) Total Debt at any time to (ii) -------------- Consolidated EBITDA. "LI Funding": any payment in respect of the Lessor Investment to be ---------- made by the Lessor pursuant to Section 2.01(b) of the Credit Agreement. "LI Yield": all yield accruing from time to time with respect to the -------- Lessor Investment, including all Accrued Construction Period LI Yield. "LI Yield Period": with respect to each LI Funding or the Lessor --------------- Investment, as applicable, the period beginning on the date of such LI Funding and ending on the numerically corresponding date (or, if applicable, last calendar date) three months thereafter and, thereafter, each subsequent period commencing on the last day of the immediately corresponding date (or, if applicable, last calendar date) three months thereafter, provided, -------- however, that: - ------- (i) The duration of any LI Yield Period that commences before the Scheduled Lease Termination Date and would otherwise end after the Scheduled Lease Termination Date shall end on the Scheduled Lease Termination Date; (ii) The duration of the initial LI Yield Period with respect to each LI Funding shall end on the first Quarterly Date occurring after the date of such LI Funding; and (iii) if the last day of such LI Yield Period would otherwise occur on a day that is not a Business Day, such last day shall be extended to the next succeeding Business Day, except if such extension would cause ------ such last day to occur in a new calendar month, then such last day shall occur on the next preceding Business Day. "LIBO Rate": with respect to any Loan for the applicable Interest --------- Period therefor, or any LI Funding for the applicable LI Yield Period therefor, or any other amount, the rate per annum determined on the basis of the offered rate for deposits of three months in Dollars of amounts equal or comparable to the principal amount of such Loan or LI Funding, as the case may be, or any such other amount, as applicable, which rates appear on Telerate Page 3750 as of 11:00 A.M., London time, two Business Days prior to the first day of such Interest Period, provided that will be the arithmetic average (rounded upward, -------- if necessary, to the next higher 1/16th of 1%) of such offered rates; (b) if no such offered rates appear on such page, the "LIBO Rate" for such Interest Period will be the arithmetic average (rounded upward, if necessary, to the next higher 1/16th of 1%) of rates quoted by not less than two major banks in New York City, selected by the Agent, at approximately 10:00 A.M., New York City time, two Business Days prior to the first day of such Interest or LI Yield Period, as applicable, Period for deposits in Dollars offered to leading European banks for a period comparable to such Interest Period or LI Yield Period, as applicable, in an amount comparable to the principal amount of such Loan or LI Funding or any such other amount. "Lien": with respect to any asset, any mortgage, deed to secure debt, ---- deed of trust, lien, pledge, charge, security interest, security title, preferential arrangement which has the practical effect of constituting a security interest or encumbrance, or encumbrance or servitude of any kind in respect of such asset to secure or assure payment of a Debt or a Guarantee, whether by consensual agreement or by operation of statute or other law, or by any agreement, contingent or otherwise, to provide any of the foregoing. For the purposes of this definition, each of the Company and any Subsidiary thereof shall be deemed to own subject to a Lien ant asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "Loan": any Tranche A Loan or Tranche B Loan made by the Lenders ---- pursuant to Section 2.01(a) of the Credit Agreement; the Tranche A Loans and/or Tranche B Loans; collectively, as the context shall require, "Loans." ----- "Loan Commitment": as to each Lender, an amount equal to the sum of --------------- such Lender's Tranche A Loan Commitment and Tranche B Loan Commitment then in effect. "Loan Percentage Share": as to each Lender, the percentage of the --------------------- Tranche A Loans and/or Tranche B Loans and the Tranche A Loan Commitment and/or Tranche B Loan Commitment, as applicable, to be provided by such Lender under the Credit Agreement as indicated on the counterpart agreement pursuant to which such Lender becomes a party to the Credit Agreement, as modified from time to time to reflect any assignments permitted by Section 11.06(b) of the Credit Agreement. "Long-Term Debt": at any date any Consolidated Debt which matures (or -------------- the maturity of which may at the option of the Lessee or any Consolidated Subsidiary be extended such that it matures) more than one year after such date. "Loss Event": any of the following events in respect of the Facility: ---------- the permanent condemnation, confiscation or seizure of, or requisition of title to or use of, all or substantially all of the Facility including, but not limited to, a permanent taking by eminent domain of such scope that the untaken part of the Facility is insufficient to permit the restoration of the Facility for continued use in the Company's business or that causes the remaining part of the Facility to be incapable of being restored to a condition that would permit the remaining portion of the Facility (without the portion of the Facility taken by eminent domain) to continue to have the capacity and functional ability to perform on a continuing basis (subject to normal interruptions in the ordinary course of business for maintenance, inspection, service, repair and testing) and in commercial operation, the function for which the Facility (as a whole) was designed as specified in the Facility Plan or a temporary taking of such nature for a period exceeding 180 consecutive days; or (iv) the occurrence of any event or the discovery of any condition in, on, beneath or involving the Facility or any portion thereof (including, but not limited to the presence of hazardous substances or the violation of any applicable Environmental Requirement) that would have a material adverse effect on the use, occupancy, possession, condition, value or operation of the Facility or any portion thereof, which event or condition requires remediation (A) the cost of which is anticipated, in the opinion of the Agent, in consultation with an independent environmental engineering firm, to exceed 15% of the Termination Value, and (B) that could not reasonably be expected to be completed substantially in its entirety prior to the date that is 30 days prior to the then-applicable Scheduled Lease Termination Date or is not actually completed substantially in its entirety on or before the date that is 30 days prior to the then-applicable Scheduled Lease Termination Date. "Margin Stock": "margin stock" as defined in Regulations U or G. ------------ "Market Value": as defined in (S) 323.2(f) of the Regulations ------------ and Statements of General Policy on Appraisals promulgated by the Federal Deposit Insurance Corporation, 12 C.F.R. (S) 323.2(f), as amended from time to time. "Material Adverse Effect": with respect to any event, act, condition ----------------------- or occurrence of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), whether singly or in conjunction with any other event or events, act or acts, condition or conditions, occurrence or occurrences, whether or not related, a material adverse change in, or a material adverse effect upon, any of (i) the financial condition, operations, business, or properties of the Company and its Consolidated Subsidiaries taken as a whole, (ii) the rights and remedies of the Agent or the Lenders under the Operative Documents, or the ability of the Lessor, the Company to perform its respective obligations under the Operative Documents to which it is a party, as applicable, (iii) the legality, validity or enforceability of any Operative Document, or (iv) the use, occupancy, possession, condition, value or operation of the Facility. "Material Subsidiary": as of the date of determination, a Subsidiary ------------------- that, as of the date of any determination thereof, accounts for 5% or more of the Consolidated Tangible Net Worth of the Company and its Subsidiaries determined in accordance with GAAP as of the last day of the Fiscal Quarter of the Company most recently ended as of such date of determination and for which financial statements have been delivered to the Agent and the Lenders pursuant to Sections 8.01 and 8.02 of the Credit Agreement. "Maturity Date": the earlier of (a) the Completion Date, in the event ------------- the Basic Term does not commence for any reason, or (b) following the commencement of the Basic Term, the earlier to occur of (i) the Option Date, (ii) the Cancellation Date, or (iii) the Lease Termination Date. "Multiemployer Plan": has the meaning set forth in Section 4001(a)(3) ------------------ of ERISA. "Net Income" means, as applied to any Person for any period, the ---------- aggregate amount of net income of such Person, after taxes, for such period, as determined in accordance with GAAP. "Non-Completion Event": the failure of both (i) Completion and (ii) -------------------- the commencement of the Basic Term to occur on or before the Completion Date. "Non-U.S. Domestic Lender": as defined in Section 4.06(b) of the ------------------------ Credit Agreement. "Notes": collectively, the Tranche A Notes and Tranche B Notes. ----- "Operative Documents": collectively, the Credit Agreement, the Lease ------------------- the Agency Agreement, the Guaranty, the Notes, the Lessor Mortgage and the other Security Instruments and any and all other agreements or instruments now or hereafter executed and delivered, or required to be executed and delivered, by the Lessor, the Company in connection with the Notes, or the Credit Agreement, as such agreements or instruments may be amended, supplemented, renewed, extended, increased or otherwise modified from time to time. "Option Date": as defined in Section 15(c) of the Lease. ----------- "Other Taxes": all taxes (other than Taxes), assessments, levies, ----------- fees, water and sewer rents and charges, inspection fees and other authorization fees and all other governmental charges, general and special, ordinary and extraordinary, foreseen and unforeseen, or every character (including all penalties and interest thereon) and all recording fees and other charges (including penalties and interest) relating to or arising out of (i) the execution, delivery, recording or enforcement of any of the Operative Documents, whether for the amounts evidenced, secured or referred to be paid thereby, or otherwise, or (ii) to the ownership, use, operation or transfer of the Facility or any other Property or (iii) any other event or circumstance, including without limitation, transfer taxes, documentary stamp taxes, intangible taxes, recording fees and sales, use and rent taxes. "Other Transaction Expenses": as defined in Section 3.05(a)(1) of -------------------------- the Credit Agreement. "PBGC": the Pension Benefit Guaranty Corporation or any successor ---- thereto. "Party": as defined in Section 11.13 of the Credit Agreement. ----- "Paving Agent": any Person engaged by the Company to accept delivery ------------ of Commercial Paper tendered by the holder thereof for payment and to make payment to such holder on behalf of the Company. "Permit": any approval, consent, waiver, exemption, variance, ------ franchise, order, permit, authorization, right or license of or from any Governmental Authority or other Person. "Permitted Claims": as defined in Section 11.14(b) of the Credit ---------------- Agreement. "Permitted Liens": (i) with respect to the Lease or the Facility --------------- (including without limitation, the Site) or any Property included in or comprising the Facility or any portion thereof, any of the following: (a) rights reserved to or vested in any Governmental Authority by the terms of any right, power, franchise, grant, license, permit or provision of law affecting the Facility to (1) terminate, or take any other action which has the effect of modifying, such right, power, franchise, grant, license, permit or provision of law, provided that such termination -------- or other action, when taken, shall not have resulted in a Loss Event and shall not have had a Material Adverse Effect, or (2) purchase, condemn, appropriate or recapture, or designate a purchaser of, the Facility; (b) any Liens thereon for Impositions or Taxes and any Liens of mechanics, materialmen and laborers for work or services performed or materials furnished which (1) are not overdue, or (ii) are being contested in good faith in the manner described in Section 13 of the Lease; (c) Liens of mechanics, materialmen and laborers for work or services performed or materials furnished (1) existing during the Construction Period and (2) in and aggregate amount not to exceed $4,500,000 at any time; (d) rights reserved to or vested in any Governmental Authority to control or regulate the use of such Property or to use the Facility in any manner; (e) in the case of the Site, encumbrances, easements, and other similar rights the existence or exercise of which do not have a Material Adverse Effect; and (f) any Liens created under the Operative Documents and any financing statements filed in connection therewith; and (ii), with respect to any other Property, any of the following: (a) Liens securing taxes, assessments and other charges or levies imposed by any Governmental Authority (excluding any Lien imposed pursuant to any of the provisions of ERISA) or the claims of materialmen, mechanics, carriers, warehousemen or landlords for labor, materials, supplies or rentals incurred in the ordinary course of business, which are not at the time required to be paid or discharged pursuant to the terms of the Credit Agreement; (b) Liens consisting of deposits or pledges made, in the ordinary course of business, in connection with, or to secure payment of, obligations under workmen's compensation unemployment insurance or similar applicable law; (c) Liens consisting of encumbrances in the nature of zoning restrictions, easements, and rights or restrictions of record on the use of real property, which do not materially detract from the value of such property or impair the use thereof in the business of such Person; (d) Liens in existence as of the Closing Date and otherwise permitted under the Revolving Credit Agreement; (e) Purchase Money Liens but only to the extent the Debt secured by such Liens is permitted under the Credit Agreement; (f) Liens securing other Debt of the Company in an aggregate amount not to exceed $1,000,000 at any time outstanding; and (g) Liens created under any of the Operative Documents. "Permitted Use": with respect to the Facility, the occupation and use ------------- of the Site and the Improvements for commercial office space and light assemblage in compliance with all applicable Governmental Requirements and Insurance Requirements. "Person": an individual, a corporation, a limited liability company, ------ a partnership, an unincorporated association, a trust or any other entity or organization, including, but not limited to, a government or political subdivision or other Governmental Authority. "Placement Agent": any Person engaged by the Company to act as the --------------- Company's placement agent in connection with the issuance and sale of Commercial Paper under a Commercial Paper Program. "Plan": at any time an employee pension benefit plan which is covered ---- by Title IV or ERISA or subject to the minimum funding standards under Section 412 of the Code and is either (i) maintained by a member of the Controlled Group for employees of any member of the Controlled Group or (ii) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which a member of the Controlled Group is then making or accruing an obligation to make contributions or has within the preceding 5 plan years made contributions. "Pricing Schedule": the Pricing Schedule attached as Schedule 1.02(b) ---------------- to the Credit Agreement. "Prime Rate": that rate of interest so denominated and set by ---------- Wachovia from time to time as an interest rate basis for borrowings. The Prime Rate is but one of several interest rate bases used by Wachovia, and is set by Wachovia as a general reference rate of interest, taking into account such factors as Wachovia may deem appropriate, it being understood that many of Wachovia's commercial or other loans are priced in relation to such rate, that it is not necessarily the lowest or best rate actually charged to any customer and that Wachovia may make various commercial or other loans at rates of interest having no relationship to such rate. "Principal Office": the principal office of the Agent and Wachovia ---------------- presently located at 191 Peachtree Street, N.E., Atlanta, Georgia 30303 or any other office designated by Wachovia. "Principal Officer": means any of the following officers of the ----------------- Company: Chairman, President, General Counsel, Executive Vice Presidents, Senior Vice Presidents, Chief Financial Officer, Treasurer, Assistant Treasurer and Corporate Controller. "Process Agent": as defined in Section 11.14(b) of the Credit ------------- Agreement. "Progress Report": a Progress Report reflecting a comparison of the --------------- actual renovation, construction and development of the Facility through the date of such Progress Report with the schedule for such renovation, construction and development set forth in the Facility Plan. "Property": any kind of property or asset, whether real, personal or -------- mixed, or tangible or intangible, and any interest therein. "Purchase Closing Date": as defined in Section 15(e) of the Lease. --------------------- "Purchase Money Lien": a Lien on any item of equipment acquired by the ------------------- Company or any Subsidiary after the Closing Date; provided, however, that: (a) -------- ------- such Lien attaches only to the equipment to be acquired; (b) if the purchase price of the equipment to be acquired exceeds $7,500,000, the Debt incurred in connection with such acquisition shall not be less that 60% nor greater than the purchase price of such item of equipment then being financed; and (c) such Lien shall secure only such Debt. "Purchase Price": at any time of determination, the sum of (i) the -------------- aggregate outstanding principal amount of the Loans and LI Fundings, plus (ii) ---- all accrued and unpaid interest and fees on or in respect of the Loans and all accrued and unpaid LI Yield (including, without limitation, all Accrued Construction Period LI Yield) and fees on or in respect of the LI Fundings through the Purchase Closing Date, plus (iii) all other amounts owing by the ---- Company under the Operative Documents (including in any event all unpaid Impositions accrued, arising or payable in connection with the Facility or otherwise pursuant to the Lease whether in connection with the purchase of the Facility pursuant to Section 14(d) of the Lease or pursuant to any provision of Section 15 of the Lease, or otherwise). "Quarterly Dates": means the last Business Day of each March, June, --------------- September and December, provided that if any such day is not a Business Day, -------- then such Quarterly Date shall be the next Business Day. "Real Property": as defined in Section 26 of the Lease. ------------- "Redeemable Preferred Stock": of any Person means any preferred sock -------------------------- issued by such Person (i) required (by the terms of the governing instruments or at the option of the holder thereof) to be mandatorily redeemed for cash at any time prior to the Maturity date (by sinking fund or similar payments or otherwise) or (ii) redeemable at the option of the holder thereof at any time prior to the Maturity Date. "Register": as defined in Section 11.06(d) of the Credit Agreement. -------- "Regulation A": Regulation A of the Board of Governors of the Federal ------------ Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "Regulation D": Regulation D of the Board of Governors of the Federal ------------ Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "Regulation G": Regulation G of the Board of Governors of the Federal ------------ Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "Regulation T": Regulation T of the Board of Governors of the Federal ------------ Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "Regulation U": Regulation U of the Board of Governors of the Federal ------------ Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "Regulation X": Regulation X of the Board of Governors of the Federal ------------ Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "Related Contract": any agreement, contract, bill of sale, receipt or ---------------- Vendor's warranty relating to or for the purchase, acquisition, design, engineering, testing, manufacture, renovation, assembly, construction or installation of the Facility or any part thereof or the provision of enhancements and improvements to the Facility, or otherwise in connection with the acquisition, ownership, use, operation or sale or other disposition of the Facility, made, entered into or received by the Acquisition/Construction Agent on behalf of the Lessor pursuant to the Agency Agreement or by the Company and assigned to the Lessor pursuant to the Agency Agreement, with or from one or more Vendors or other Persons, including, without limitation, all contracts, bills of sale, receipts and Vendor's warranties. "Rent": Basic Rent, Interim Special Rent, Supplemental Rent and the ---- Final Rent Payment, collectively. "Rental Period": with respect to Basic Rent, the period beginning on ------------- the Lease Commencement Date and ending on the first Rent Payment Date occurring after the Lease Commencement Date and, thereafter, each subsequent period commencing on each Rent Payment Date and ending on the next Rent Payment Date or on the Lease Termination Date. "Rent Payment Date": with respect to Basic Rent, each March 31st, June ----------------- 30th, September 30th and December 31st of each year, commencing on the first such date occurring after the Lease Commencement Date, and the Lease Termination Date. "Reported Net Income": for any period, the Net Income of the Company ------------------- and its Consolidated Subsidiaries determined on a consolidated basis. "Required Lenders": at any time while no Loans are outstanding, ---------------- Lenders having at least sixty-six and two-thirds (66 2/3%) of the aggregate amount of the Aggregate Loan Commitments, and without regard to any sale by a Lender of a participation in any Loan under Section 11.06(f) of the Credit Agreement). "Required Percentage Composition": (i) with respect to the ------------------------------ Commitments, a requirement that not less than 3% of the aggregate amount of the Lessor's Investment Commitment and the Loan Commitments be comprised of Lessor's Investment Commitment; (ii) with respect to the Lease Term, a requirement that not less than 3% of Facility Cost, and not less than 3% of the amount that is the sum of (a) the aggregate outstanding principal amount of the Loans and (b) the Lessor's Investment, be provided by or comprised of the Lessor Investment; (iii) with respect to each Borrowing, a requirement that no more than 85% (rounded) of such Borrowing, and 85% of Facility Cost, shall be comprised of Tranche A Loans, and no more than 12% rounded) of such Borrowing, and 12% of Facility Cost, shall be provided by or comprised of Tranche B Loans; (iv) with respect to each Borrowing, a requirement that after giving effect thereto, 3% of the amount that is the sum of (a) the aggregate outstanding principal amount of the Loans and (b) the Lessor Investment be comprised of the Lessor Investment; and (v) with respect to each Borrowing, a requirement that after giving effect thereto the aggregate outstanding amount of Loans shall not exceed the Aggregate Loan Commitments, and after giving effect to the LI Advances, the Lessor Investment shall not exceed the Lessor Investment Commitment. "Restoration Account": the interest bearing account maintained with ------------------- the Agent by the Lessor pursuant to Section 14(e) of the Lease and styled the "Restoration Account." "Restricted Payment": (i) any dividend or other distribution on any ------------------ shares of the Company's Capital Stock (except dividends payable solely in shares of its Capital Stock) or (ii) any payment on account of the purchase, redemption, retirement or acquisition of (a) any shares of the Company's Capital Stock (except shares acquired upon the conversion thereof into other shares of its Capital Stock) or (b) any option, warrant or other right to acquire shares of the Company's Capital Stock. "Revolving Credit Agent": the "Agent", as defined in the Revolving ---------------------- Credit Agreement. "Revolving Credit Agreement": the Credit Agreement dated as of May --------------------------- 11, 1995 by and among the Company, as borrower, the financial institutions party thereto as Lenders, The Bank of New York and ABN AMRO Bank N.V., Atlanta Agency, as Co-Agents, and NationsBank of Georgia, National Association, as Agent, as amended by First Amendment to Credit Agreement dated as of December 29, 1995. "Revolving Credit Lenders": the "Lenders", as defined in the Revolving ------------------------ Credit Agreement. "Scheduled Amount": as defined in Section 4(a) of the Lease. ---------------- "Scheduled Lease Termination Date": July 30, 2004 or such later date -------------------------------- to which it may be extended pursuant to Section 2(b) of the Lease. "Secured Amount": as defined in Section 26 of the Lease. -------------- "Secured Party": as defined in Section 26 of the Lease. ------------- "Security Instruments": collectively, the Lessor Mortgage and any and -------------------- all agreements or instruments, including, without limitation, financing statements, now or hereafter executed and delivered by the Company as security for the payment or performance of the Notes or the Credit Agreement, as such agreements or instruments may be amended, supplemented or otherwise modified from time to time. "Site": certain real property located in Gwinnett County, Georgia ---- described in greater detail in Exhibit A to the Credit Agreement and the Lease --------- limited to the portion of the 280+/- acres necessary for the operation of the Facility. "Soil Test Reports": soil test reports as to soil borings on the Site ----------------- by a soil testing firm satisfactory to the Lenders, including (a) the number and location of such borings shall be in accordance with the recommendations of the soil testing firm and also satisfactory to the Lenders and (b) the recommendations of the soil testing firm as to the preparation of the soil needed to adequately support the Facility. "Stockholders' Equity": at any time, the stockholders' equity of the -------------------- Company and its Consolidated Subsidiaries, as set forth or reflected on the most recent consolidated balance sheet of the Company and its Consolidated Subsidiaries prepared in accordance with GAAP; but excluding any Redeemable --- --------- Preferred Stock of the Company or any of its Consolidated Subsidiaries. Stockholders' Equity generally would include, but not be limited to: (i) the par or stated value of all outstanding Capital Stock, (ii) capital surplus, (iii) retained earnings, and (iv) various deductions such as (a) purchase of treasury stock, (b) valuation allowances, (c) receivables due from an employee stock ownership plan, (d) employee stock ownership plan debt guarantees and (e) translation adjustments for foreign currency transactions. "Sublease Rent": as defined in Section 3(a) of the Lease. ------------- "Subsidiary": any corporation or other entity of which securities or ---------- other ownership interests having ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions are at the time directly or indirectly owned by the Company. "Supplemental Rent": as defined in Section 3(d) of the Lease. ----------------- "Support Expenses": all (i) reasonable and necessary costs associated ---------------- with the continued normal operation, preservation and maintenance of the Site and the Facility incurred after the payment of the Final Rent Payment, and (ii) all payments of rent and other charges payable by Wachovia Capital Markets, Inc. under the Ground Lease during the period beginning on the first day of the Occupancy Period (defined in the Ground Lease) and ending on the last day of the 12th month after the commencement of the Occupancy Period. "Survey": a current ALTA-ACSM boundary survey of the Site and existing ------ improvements in form and substance satisfactory to the Agent, and containing such certifications as the Agent may request. "Syndication Effective Date": the date on which the conditions -------------------------- precedent set forth in Section 6.03 have been satisfied. "Taxes": as defined in Section 4.06(a) of the Credit Agreement. ----- "Termination Event": as defined in Section 15(a) of the Lease. ----------------- "Termination Value": at any time of determination, an amount equal to ----------------- the sum of (i) the Final Rent Payment, plus (ii) the aggregate outstanding ---- principal amount of the Tranch B Loans, plus (iii) the aggregate outstanding ---- principal amount of the Lessor Investment, plus (iv) without duplication of ---- amounts included in the Final Rent Payment, all unpaid Impositions payable in connection with the purchase of the Facility pursuant to Section 14(d) of the Lease or pursuant to any provision of Section 15 of the Lease. "Third Party": any Person other than (i) the Lessor, (ii) the Company ----------- or (iii) any Affiliate of any of the foregoing. "Total Debt": means, at the time of computation thereof, all of the ---------- following of the Company and its subsidiaries as determined on a consolidated basis (without duplication): (a) all Debt less (b) all reimbursement obligations under documentary letters of credit and acceptances (whether or not the same have been presented for payment). "Tranche A Lender": any person who from time to time becomes or has ---------------- agreed to become a holder of a Tranche A Note and is a signatory to a counterpart of the Credit Agreement as a Tranche A Lender or becomes a party thereto as provided in Section 11.06 thereof, and their respective successors and assigns; collectively, the "Tranche A Lenders." ----------------- "Tranche A Loan Commitment": as to any Tranche A Lender, the ------------------------- commitment of such Lender to make loans pursuant to Section 2.01(a) of the Credit Agreement in an amount equal to such Lender's Loan Percentage Share of the Tranche A Loans, as set forth in the counterpart agreement pursuant to which such Lender becomes a party to the Credit Agreement. "Tranche A Loans": collectively, all Loans make by the Tranche A --------------- Lenders to the Lessor pursuant to the Tranche A Loan Commitments in an aggregate principal amount not to exceed the Aggregate Tranche A Loan Commitments. "Tranche A Note" and "Tranche A Notes": as defined in Section 2.05(a) -------------- --------------- of the Credit Agreement. "Tranche B Lender": any person who from time to time becomes or has ---------------- agreed to become a holder of a Tranche B Note and is a signatory to a counterpart of the Credit Agreement as a Tranche B Lender or becomes a party thereto as provided in Section 11.06 thereof, and their respective successors and assigns; collectively, the "Tranche B Lenders." ----------------- "Tranche B Loan Commitment": as to any Tranche B Lender, the ------------------------- commitment of such Lender to make loans pursuant to Section 2.01(a) of the Credit Agreement in an amount equal to such Lender's Loan Percentage Share of the Tranche B Loans, as set forth in the counterpart agreement pursuant to which such Lender becomes a party to the Credit Agreement. "Tranche B Loans": collectively, all Loans make by the Tranche B --------------- Lenders to the Lessor pursuant to the Tranche B Loan Commitments in an aggregate principal amount not to exceed the Aggregate Tranche B Loan Commitments. "Tranche B Note" and "Tranche B Notes": as defined in Section 2.05(b) -------------- --------------- of the Credit Agreement, as the same may be amended, supplemented, renewed, extended for any period of time increased, rearranged or otherwise modified from time to time. "UCC": the Uniform Commercial Code as enacted in the State of Georgia --- and any other jurisdiction whose laws may be mandatorily applicable. "Vendor": any designer, supplier, manufacturer or installer of, or ------ provider of Property or services with respect to the Facility or any Property included therein or any party thereof. "Wachovia": Wachovia Bank, N.A., a national banking association, in -------- its individual capacity, and its successors. "Wholly Owned Subsidiary": any Subsidiary all of the shares of ----------------------- capital stock or other ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by the Company. EX-10.17 19 SECOND AMENDMENT TO LEASE AGREEMENT EXHIBIT 10.17 AFTER RECORDING RETURN TO: CROSS REFERENCE TO: Michelle A. Hickerson, Esq. Deed Book 14848, Page Jones, Day, Reavis & Pogue 0001, Gwinnett County, 3500 SunTrust Plaza Georgia Records 303 Peachtree Street, N.E. Atlanta, Georgia 30308-3242 SECOND AMENDMENT TO LEASE AGREEMENT THIS SECOND AMENDMENT TO LEASE AGREEMENT ("Amendment") dated as of --------- November ___, 1997 is between WACHOVIA CAPITAL MARKETS, INC., a Georgia corporation ("Lessor") and SCIENTIFIC-ATLANTA, INC., a Georgia corporation ------ ("Lessee"). ------ WHEREAS Lessor and Lessee executed that certain Lease Agreement (as amended, the "Lease") dated as of July 30,1997 and filed for record on October ----- 9, 1997 in Deed Book 14848, Page 0001, Records of Gwinnett County, Georgia; WHEREAS Lessor and Lessee wish to amend certain provisions of the Lease, subject to the terms set forth below; NOW, THEREFORE, for and in consideration of the sum of Ten and No/100 Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lessor and Lessee hereby agree as follows with respect to the Lease: 1. Amendments to Lease. (a) Section 3(d) is amended so that (A) the term ------------------- "and" located after the semicolon in paragraph (i) is deleted; (B) paragraph (ii) is renumbered as paragraph (iii), and (C) a new paragraph (ii) is added thereto as follows: (ii) the amount that the Lessor determines, in the exercise of its sole good faith discretion, to be its total losses and costs incurred in connection with the Fixed Funding Rate as a result of the termination of this Lease prior to July 30, 2004, such losses and costs to include, without limitation, any loss of bargain, cost of funding, or, at the election of the Lessor (but without duplication) losses or costs incurred as a result of the Lessor's terminating, liquidating, obtaining or re- establishing any hedge, interest rate swap, or similar or related trade position obtained by the Lessor with respect to the Loans and/or Lessor Investment; and (b) The following new definition is added to Schedule 1(b) to the Lease in proper alphabetical order: "Fixed Funding Rate": (x) a per annum fixed rate equal to 6.51%, plus ------------------ (y) the Applicable Margin for the Adjusted LIBO Rate. (c) The following definition contained in Schedule 1(b) to the Lease is amended in its entirety as set forth below: "Basic Rent": (a) for any Rental Period (1) during the Lease Term from ---------- the Commencement Date up to and including January 30, 1999, or (2) after July 30, 2004, if any, the sum of (i) all liabilities of the Lessor for interest on the Loans and LI Yield (excluding Accrued Construction Period LI Yield but including, without limitation, all LI Yield accruing during the Basic Term on the Lessor Investment) accruing during such Rental Period pursuant to and in accordance with the Credit Agreement, and (ii) all liabilities for fees accruing during such Rental Period pursuant to the Credit Agreement, and (b) for each Rental Period commencing on and after January 31, 1999 and ending on or before July 30, 2004, (i) all LI Yield (excluding Accrued Construction Period LI Yield but including, without limitation, all LI Yield accruing during the Basic Term on the Lessor Investment) accruing at the Fixed Funding Rate during such Rental Period, and (ii) all liabilities for fees accruing during such Rental Period pursuant to the Credit Agreement. 2. Binding Effect. This Amendment shall insure to the benefit of and -------------- be binding upon Lessor and Lessee and their respective successors, legal representatives and permitted assigns. 3. Defined Terms. All initially-capitalized terms used but not ------------- defined herein shall have the meaning ascribed thereto in the Lease. 2 IN WITNESS WHEREOF, the Lessor and Lessee have caused this Amendment to be executed under seal as of the date first above written. LESSOR: Signed, sealed and delivered WACHOVIA CAPITAL MARKETS, in the presence of: INC., a Georgia corporation /s/ Gloria J. O'Brien By: /s/ Joseph J. Thomas - ---------------------------- ------------------------------------ Unofficial Witness Printed Name: Joseph J. Thomas --------------------- Printed Title: Senior Vice President --------------------- /s/ Christie L. Steele - ---------------------------- [CORPORATE SEAL] Notary Public My Commission Expires Notary Public, Clayton County, Georgia My Commission Expires March 27, 1998. [NOTARIAL SEAL] LESSEE: SCIENTIFIC-ATLANTA, INC., a Georgia corporation Signed, sealed and delivered in the presence of: By:/s/ H. A. WAGNER ------------------------------------ Printed Name: Harvey A. Wagner ----------------------- /s/ William A. Mayer Printed Title: Senior Vice President- Finance, Chief Financial Officer & Treasurer - ---------------------------- ------------------------ Unofficial Witness [CORPORATE SEAL] /s/ Julia S. Keating - ---------------------------- Notary Public My Commission Expires: Notary Public: Gwinnett County, Georgia My Commission Expires: Sept. 26, 1999. [NOTARIAL SEAL] EX-11 20 COMPUTATION OF EARNING PER SHARE EXHIBIT 11 SCIENTIFIC-ATLANTA, INC., AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
Three Months Ended Three Months Ended April 2, 1999 March 27, 1998 --------------------------------------- -------------------------------------- PER SHARE PER SHARE EARNINGS SHARES AMOUNT EARNINGS SHARES AMOUNT -------- ------- ---------- -------- ------ --------- BASIC EARNINGS PER COMMON SHARE Earnings from continuing operations available to common stockholders $ 20,814 75,859 $ 0.27 $ 17,137 78,725 $ 0.22 EFFECT OF DILUTIVE SECURITIES Options -- 2,367 -- -- 939 -- ------- ------- ----- ------ ------- ------ DILUTED EARNINGS PER COMMON SHARE Earnings from continuing operations available to common stockholders and assumed conversions $ 20,814 78,226 $ 0.27 $ 17,137 79,664 $ 0.22 ======= ======= ====== ======= ======= ======
Nine Months Ended Nine Months Ended April 2, 1999 March 27, 1998 --------------------------------------- ------------------------------------- PER SHARE PER SHARE EARNINGS SHARES AMOUNT EARNINGS SHARES AMOUNT -------- ------ --------- -------- ------ --------- BASIC EARNINGS PER COMMON SHARE Earnings from continuing operations available to common stockholders $ 54,996 76,763 $ 0.71 $ 48,453 78,619 $ 0.62 EFFECT OF DILUTIVE SECURITIES Options -- 1,539 -- -- 1,294 -- ------- ------ ------ ------ ------- ------ DILUTED EARNINGS PER COMMON SHARE Earnings from continuing operations available to common stockholders and assumed conversions $ 54,996 78,302 $ 0.71 $ 48,453 79,913 $ 0.62 ======= ====== ====== ====== ======= ======
The following information pertains to options to purchase shares of common stock which were not included in the computation of Diluted Earnings per Common Share because the options' exercise price was greater than the average market price of the common shares:
April 2, 1999 March 27, 1998 ------------- -------------- Number of options outstanding 16 3,915 Weighted average exercise price $32.05 $21.67
EX-27 21 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q FOR THE QUARTER ENDED APRIL 2, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS JUL-02-1999 JUN-27-1998 APR-02-1999 174,623 61,043 293,375 9,804 178,178 737,897 255,121 90,275 974,805 259,190 612 0 0 39,808 619,758 974,805 888,244 888,244 638,669 638,669 86,967 (21) 731 78,566 23,570 54,996 0 0 0 54,996 0.71 0.71
EX-99 22 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 (including, but not limited to, the continued weak economic conditions in the Asia Pacific region and the Latin America region); 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 development and / or deployment of new products, including digital set-top products and the applications to be used on such digital set-top products; 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 as both competitors and customers; reliance on software programs used by the company or its suppliers containing problems related to computations that must be made in 1999, 2000, and beyond ("Year 2000 Problems"); Year 2000 Problems that may exist in products currently or historically sold to customers of the company; and delays in providing upgrades to customers to prevent Year 2000 problems in products sold by the company; 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-----