EXHIBIT 10.1
LONG-TERM INCENTIVE PLAN
OF
SCIENTIFIC-ATLANTA, INC.
As adopted by the Board of Directors on
August 25, 1994,
by the stockholders on
November 11, 1994,
and as amended and restated by the Board on
November 8, 1995
and on
November 13, 1996
LONG-TERM INCENTIVE PLAN
OF
SCIENTIFIC-ATLANTA, INC.
1. PURPOSE OF THE PLAN. This Long-Term Incentive Plan of Scientific
Atlanta, Inc., as adopted on August 25, 1994, and as amended and restated on
November 8, 1995 and November 13, 1996, is intended to encourage officers and
key employees of the Company and its Subsidiaries to acquire or increase their
ownership of common stock of the Company on reasonable terms, to provide
compensation opportunities for superior financial results and outstanding
personal performance, to foster in participants a strong incentive to put forth
maximum effort for the continued success and growth of the Company and its
Subsidiaries, and to assist in attracting and retaining the best available
individuals to the Company and its Subsidiaries.
2. DEFINITIONS. When used herein, the following terms shall have the
meaning set forth below:
2.1 "Affiliate" means, with respect to any specified person or entity, a
person or entity that directly or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the person or entity specified.
2.2 "Award" means an SAR, an Option, an Option granted in tandem with an
SAR, a Restricted Stock Award, a Performance Share, a Performance Unit, a
Performance Award, or any or all of them.
2.3 "Award Letter" means a written letter in such form as may from time
to time be hereafter approved by the Committee, which Award Letter shall set
forth the terms and conditions of an Award under the Plan.
2.4 "Board" means the Board of Directors of the Company.
2.5 "Change in Control" shall mean the occurrence of any of the
following events:
(a) The acquisition in one or more transactions by any "Person" (as
the term person is used for purposes of Section 13(d) or 14(d) of the
Exchange Act of "Beneficial Ownership" (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of twenty percent (20%) or more of
the combined voting power of the Company's then outstanding voting
securities (the "Voting Securities"), provided, however, that for
purposes of this paragraph (a), the Voting Securities acquired directly
from the Company by any Person shall be excluded from the determination
of such Person's Beneficial Ownership of Voting Securities (but such
Voting Securities shall be included in the calculation of the total
number of Voting Securities then outstanding); or
(b) The individuals who are members of the Incumbent Board cease for
any reason to constitute at least two-thirds of the Board; or
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(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.
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2.11 "Fair Market Value" means, with respect to the Shares, the closing
price on the New York Stock Exchange - Composite Tape of such Shares on the
date(s) in question, or, if the Shares shall not have been traded on any such
date(s), the closing price on the New York Stock Exchange -Composite Tape on the
first day prior thereto on which the Shares were so traded or if the Shares are
not traded on the New York Stock Exchange, such other amount as may be
determined by the Committee by any fair and reasonable means. Fair Market Value
determined by the Committee in good faith shall be final, binding and conclusive
on all parties.
2.12 "Incumbent Board" means the individuals who as of August 20, 1990
were members of the Board and any individual becoming a director subsequent to
August 20, 1990 whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least two-thirds of the directors
then comprising the Incumbent Board; provided, however, that any individual who
is not a member of the Incumbent Board at the time he or she becomes a member of
the Board shall become a member of the Incumbent Board upon the completion of
two full years as a member of the Board; provided, further, however, that
notwithstanding the foregoing, no individual shall be considered a member of the
Incumbent Board if such individual initially assumed office (i) as a result of
either an actual or threatened "election contest" (within the meaning of Rule
14a-11 promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board (a "Proxy Contest"), or (ii) with the approval of the other Board members,
but by reason of any agreement intended to avoid or settle a Proxy Contest.
2.13 "Incentive Stock Option" means an Option meeting the requirements
and containing the limitations and restrictions set forth in Section 422 of the
Code.
2.14 "Non-Qualified Stock Option" means an Option other than an Incentive
Stock Option.
2.15 "Option" means the right to purchase, at a price and for a term
fixed by the Committee in accordance with the Plan, and subject to such other
limitations and restrictions as the Plan and the Committee impose, the number of
Shares specified by the Committee. An Option may be either an Incentive Stock
Option or a Non-Qualified Stock Option.
2.16 "Parent" means any corporation, other than the employer corporation,
in an unbroken chain of corporations ending with the Company if each of the
corporations other than the employer corporation owns stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in the chain.
2.17 "Participant" means any Employee to whom a grant of an Award has
been made and is outstanding under the Plan.
2.18 "Performance Award" means Performance Units, Performance Shares or
either or both of them.
2.19 "Performance Objectives" means the specific targets and objectives
established by the Committee under the following four factors: earnings per
share of the Company's common stock, return on average stockholders' equity,
return on capital, and total stockholder returns of the Company compared to a
peer group of comparable companies established by the Committee. Earnings per
share, return on average stockholders' equity, return on capital and total
Company stockholder returns shall be determined and measured in accordance with
generally accepted accounting principles as utilized by the Company in its
reports filed under the Exchange Act.
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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.
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2.32 "Successor" means the legal representative of the estate of a
deceased Employee or the person or persons who shall acquire the right to
exercise an Award by bequest or inheritance or by reason of the death of the
Employee.
2.33 "Ten-Percent Stockholder" means an individual who "owns" as defined
in Section 425 of the Code, stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of: (i) the Company; (ii)
if applicable, a Subsidiary, or (iii) if applicable, the Parent.
2.34 "Term" means the period during which a particular Award may be
exercised.
3. STOCK SUBJECT TO THE PLAN.
3.1 MAXIMUM NUMBER OF SHARES TO BE AWARDED. The maximum number of
Shares in respect for which Awards may be granted under the Plan in each fiscal
year of the Company during any part of which the Plan is effective shall be one
and one-half percent (1-1/2%) of the number of Shares of the Company outstanding
as of the first day of such fiscal year; and commencing in the Company's 1995
fiscal year and in each fiscal year thereafter, subtracting from such maximum
number of Shares the number of Shares subject to options, if any, granted
pursuant to the Company's 1992 Employee Stock Option Plan. The maximum number
of Shares available for which Awards may be granted in any particular fiscal
year pursuant to the previous sentence may be increased by an amount of up to
one-half of one percent (.5%) of the number of Shares outstanding as of the
first day of such fiscal year, provided that the number of Shares which would
otherwise be available for Awards in the next fiscal year shall be decreased by
the increased number of Shares made available pursuant to this sentence. Such
Shares may be in whole or in part, as the Board shall from time to time
determine, authorized but unissued Shares, or issued Shares which shall have
been reacquired by the Company. Notwithstanding anything to the contrary
contained in this Section 3.1, in no event shall more than four million
(4,000,000) Shares be cumulatively available for Awards of Incentive Stock
Options under this Plan. The number of SARs payable in cash and the number of
units payable in cash under the Plan shall be counted when computing the total
number of Shares available for Awards under the Plan. Any unused portion of the
percentage limit for any year shall be carried forward and made available for
Awards in succeeding years.
3.2 CERTAIN LIMITATIONS. The maximum number of Shares with respect to
which Options and SARs payable in Shares which may be granted during any fiscal
year to any Employee shall not exceed 400,000. The maximum dollar value with
respect to which Awards (other than Options and SARs payable in Shares) that are
intended to qualify as performance-based compensation under Code Section
162(m)(4)(C) which may be paid to any Employee for any particular Performance
Period shall be Four Million Dollars ($4,000,000).
3.3 SHARES UNDERLYING EXPIRED, CANCELLED OR UNEXERCISED AWARDS. Any
Shares subject to issuance upon exercise of an Option or SAR, but which are not
issued because of a surrender, lapse, expiration or termination of any such
Option or SAR prior to issuance of the Shares, or any Shares subject to an SAR
paid in cash, shall once again be available for issuance in satisfaction of
Awards. Similarly, any Shares issued or issuable pursuant to a Restricted Stock
Award or Performance Award which are subsequently forfeited or not issued
pursuant to the terms of the grant shall once again be available for issuance in
satisfaction of Awards.
4. ADMINISTRATION OF THE PLAN. The Board shall appoint the Committee, which
shall consist of not less than two (2) members of the Board, each of whom is a
"Non-Employee Director" as defined in Rule 16b-3. Unless the Board determines
otherwise, the Committee shall be comprised solely of "outside" directors within
the meaning of Section 162(m)(4)(C)(i) of the Code. Subject to the provisions
of the Plan, the Committee shall have full authority, in its discretion, to
determine the Employees to whom
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Awards shall be granted, the number of Shares, units or SARs to be covered by
each of the Awards, and the terms (including restrictions) of any such Award; to
amend or cancel Awards (subject to Section 21 of the Plan); to accelerate the
vesting of Awards; to require the cancellation or surrender of any options,
stock appreciation rights, units or restricted stock awards (to the extent the
restrictions have not yet lapsed) previously granted under this Plan or any
other plans of the Company as a condition to the granting of an Award; to
interpret the Plan; and to prescribe, amend, and rescind rules and regulations
relating to it, and generally to interpret and determine any and all matters
whatsoever relating to the administration of the Plan and the granting of Awards
hereunder. The Board may, from time to time, appoint members to the Committee in
substitution for or in addition to members previously appointed and may fill
vacancies, however caused, in the Committee. The Committee shall make such
rules and regulations for the conduct of its business as it shall deem
advisable. All determinations and decisions by the Committee in the exercise of
its powers shall be final, binding and conclusive. No member of the Committee
shall be liable, in the absence of bad faith, for any act or omission with
respect to his service on the Committee.
5. EMPLOYEES TO WHOM AWARDS MAY BE GRANTED. Awards may be granted in each
year or portion thereof while the Plan is in effect to such of the Employees as
the Committee, in its discretion, shall determine. In determining the Employees
to whom Awards shall be granted, the amount of the Award, the number of Shares
to be granted or subject to purchase under such Awards and the number of SARs to
be granted, the Committee shall take into account the duties of the respective
Employees, their present and potential contributions to the success of the
Company and its Subsidiaries, and such other factors as the Committee shall deem
relevant in connection with accomplishing the purposes of the Plan. No Award
shall be granted to any member of the Committee so long as his or her membership
on the Committee continues or to any member of the Board who is not also an
Employee.
6. STOCK OPTIONS.
6.1 TYPES OF OPTIONS. Options granted under this Plan may be (i)
Incentive Stock Options, (ii) Non-Qualified Stock Options, or (iii) a
combination of the foregoing. The Award Letter shall designate whether an
Option is an Incentive Stock Option or a Non-Qualified Stock Option. Any Option
which is designated as a Non-Qualified Stock Option shall not be treated by the
Company or the Participant to whom the Option is granted as an Incentive Stock
Option for federal income tax purposes.
6.2 OPTION PRICE. The option price per Share of any Option granted
under the Plan shall not be less than the Fair Market Value of the Shares
covered by the Option on the date the Option is granted. Notwithstanding
anything herein to the contrary, in the event an Incentive Stock Option is
granted to an Employee who, at the time such Incentive Stock Option is granted,
is a Ten-Percent Stockholder, then the option price per Share of such Incentive
Stock Option shall not be less than one hundred ten percent (110%) of the Fair
Market Value of the Shares covered by the Incentive Stock Option on the date the
Incentive Stock Option is granted.
6.3 TERM OF OPTIONS. Options granted hereunder shall be exercisable for
a Term of not more than ten (10) years from the date of grant and shall be
subject to earlier termination as hereinafter provided. Each Award Letter
issued hereunder shall specify the Term of the Option, which Term shall be
determined by the Committee in accordance with its discretionary authority
hereunder. Notwithstanding anything herein to the contrary, in the event an
Incentive Stock Option is granted to an Employee who, at the time such Incentive
Stock Option is granted, is a Ten-Percent Stockholder, then such Incentive Stock
Option shall not be exercisable more than five (5) years from the date of grant
and shall be subject to earlier termination as hereinafter provided.
7. LIMIT ON FAIR MARKET VALUE OF INCENTIVE STOCK OPTIONS. In any calendar
year, no Employee may be granted an Incentive Stock Option hereunder to the
extent that the aggregate fair market value (such fair market value being
determined as of the date of grant of the Option in
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question) of the Shares with respect to which Incentive Stock Options first
become exercisable by the Employee during any calendar year (under all such
plans of the Employee's employer corporation, its Parent, if any, and its
Subsidiaries, if any) exceeds the sum of One Hundred Thousand Dollars ($
100,000). For purposes of the preceding sentence, Options shall be taken into
account in the order in which they were granted. Any Option granted under the
Plan which is intended to be an Incentive Stock Option, but which exceeds the
limitation set forth in this Section 7, shall be a Non-Qualified Stock Option to
the extent that a portion of the Option exceeds this limitation.
8. STOCK APPRECIATION RIGHTS.
8.1 GRANT OF SAR. The Committee, in its discretion, may grant an
Employee an SAR in tandem with an Option or may grant an Employee an SAR on a
stand alone basis. The Committee, in its discretion, may grant an SAR in tandem
with an Option either at the time the Option is granted or at any time after the
Option is granted, so long as the grant of the SAR is made during the period in
which grants of SARs may be made under the Plan. The Committee, in its
discretion, may grant an SAR in tandem with an Option, which is exercisable
either in lieu of, or in addition to, exercise of the related Option.
8.2 LIMITATIONS ON EXERCISE. Each SAR granted in tandem with an Option
shall be exercisable to the extent, and only to the extent, the related Option
is exercisable and shall be for such Term as the Committee may determine (which
Term, which is not to exceed ten (10) years, may expire prior to the Term of the
related Option). Each SAR granted on a stand alone basis shall be exercisable
to the extent, and for such Term, as the Committee may determine. The SARs
shall be subject to such other terms and conditions as the Committee, in its
discretion, shall determine and which are not otherwise inconsistent with the
Plan. The terms and conditions may include Committee approval of the exercise
of the SAR, limitations on the time within which and the extent to which such
SAR shall be exercisable, and limitations, if any, on the amount of appreciation
in value which may be recognized with regard to such SAR. The Company's
obligation to any Participant exercising an SAR may be paid in cash or Shares,
or partly in cash or Shares, at the sole discretion of the Committee. The
Committee shall have at all times final control and authority over the form of
payment of any SAR. If, and to the extent that, Shares are issued in
satisfaction of amounts payable on exercise of an SAR, the Shares shall be
valued at their Fair Market Value on the date of exercise.
8.3 SARS IN TANDEM WITH INCENTIVE STOCK OPTIONS. With respect to SARs
granted in tandem with Incentive Stock Options, the following shall apply:
(a) No SAR shall be exercisable unless the Fair Market Value of the
Shares on the date of exercise exceeds the option price of the related
Incentive Stock Option.
(b) In no event shall any amounts paid pursuant to the SAR exceed the
difference between the Fair Market Value of the Shares on the date of
exercise and the option price of the related Incentive Stock Option.
(c) The SAR must expire no later than the last date the related
Incentive Stock Option can be exercised.
8.4 SURRENDER OF OPTION OR SAR GRANTED IN TANDEM. If the Award Letter
related to the grant of an SAR in tandem with an Option provides that the SAR
can only be exercised in lieu of the related Option, then, upon exercise of such
SAR, the related Option or portion thereof with respect to which such SAR is
exercised shall be deemed surrendered and shall not thereafter be exercisable
and, similarly, upon exercise of the Option, the related SAR or portion thereof
with respect to which such Option is exercised shall be deemed surrendered and
shall not thereafter be exercisable. If the Award Letter related to the grant of
an SAR in tandem with an Option provides that
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the SAR can be exercised in addition to the related Option, then, upon exercise
of such SAR, the related Option or portion thereof with respect to which such
SAR is exercised shall not be deemed surrendered and shall continue to be
exercisable and, similarly, upon exercise of the Option, the related SAR or
portion thereof with respect to which such Option is exercised shall not be
deemed surrendered and shall continue to be exercisable.
9. EXERCISE OF RIGHTS UNDER OPTION OR SAR AWARDS.
9.1 NOTICE OF EXERCISE. An Employee entitled to exercise an Option or
SAR may do so by delivery of a written notice to that effect specifying the
number of Shares with respect to which the Option or SAR is being exercised and
any other information the Committee may prescribe. Except as provided in Section
9.2 below, the notice shall be accompanied by payment in full of the purchase
price of any Shares to be purchased, which payment may be made in cash or, in
Shares valued at Fair Market Value at the time of exercise or, a combination
thereof. No Shares shall be issued upon exercise of an Option until full
payment has been made therefor. All notices or requests provided for herein
shall be delivered to the Company as determined by the Committee.
9.2 CASHLESS EXERCISE PROCEDURES. The Committee, in its sole
discretion, may establish procedures at the time of each grant of an Option or
SAR whereby an Employee, subject to the requirements of Rule 16b-3, Regulation
T, federal income tax laws, and other federal, state and local tax and
securities laws, can exercise an Option or a portion thereof without making a
direct payment of the option price to the Company. If the Committee so elects
to establish a cashless exercise program, the Committee shall determine, in its
sole discretion, and from time to time, such administrative procedures and
policies as it deems appropriate and such procedures and policies shall be
binding on any Employee wishing to utilize the cashless exercise program.
10. RIGHTS OF OPTION AND SAR HOLDERS. The holder of an Option or SAR shall
not have any of the rights of a stockholder with respect to the Shares subject
to purchase or issuance under such Award, except to the extent that one or more
certificates for such Shares shall be delivered to the holder upon due exercise
of the Option or SAR.
11. RESTRICTED STOCK AWARDS. Restricted Stock Awards granted under the Plan
shall be subject to such terms and conditions as the Committee may, in its
discretion, determine. Restricted Stock Awards issued under the Plan shall be
evidenced by an Award Letter in such form as the Committee may from time to time
determine. Restricted Stock Awards may be subject to restrictions which lapse
over time with or without regard to Performance Objectives for a specific
Performance Period. Unless the Committee decides otherwise in its sole and
absolute discretion based upon the circumstances existing at the time of the
grant of any Restricted Stock Award, Restricted Stock Awards which are subject
solely to time-based restrictions shall vest over a period of not less than
three years and Restricted Stock Awards which are subject to restrictions based
on Performance Objectives shall vest over a period of not less than one year.
11.1 RECEIPT OF SHARES. Each Award Letter shall set forth the number of
Shares issuable under the Restricted Stock Award evidenced thereby. Subject to
the restrictions of Sections 11.2, 11.3 and 11.4 of the Plan and as set forth in
the related Award Letter, the number of Shares granted under a Restricted Stock
Award shall be issued to the recipient Employee thereof on the date of grant of
such Restricted Stock Award or as soon as may be practicable thereafter and
deposited into escrow, if applicable. If the Committee determines that a
Restricted Stock Award is intended to qualify as performance-based compensation
under Code Section 162(m)(4)(C), then such Restricted Stock Award shall be
subject to the attainment of Performance Objectives for a Performance Period.
Such specific Performance Objectives shall be established in writing no later
than ninety (90) days after the commencement of the Performance Period to which
the Performance Objectives relate, but in no event after twenty-five percent
(25%) of the Performance Period has elapsed. In establishing the Performance
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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.
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12. PERFORMANCE AWARDS.
12.1 PERFORMANCE PERIODS. The Committee shall establish Performance
Periods applicable to Performance Awards. There shall be no limitation on the
number of Performance Periods established by the Committee and more than one
Performance Period may encompass the same fiscal year.
12.2 PERFORMANCE OBJECTIVES. If the Committee determines that a
Performance Award is intended to qualify as performance-based compensation under
Code Section 162(m)(4)(C), then such Performance Award shall be subject to the
attainment of Performance Objectives for a Performance Period. Such specific
Performance Objectives shall be established in writing no later than ninety (90)
days after the commencement of the Performance Period to which the Performance
Objectives relate, but in no event after twenty-five percent (25%) of the
Performance Period has elapsed. In establishing the Performance Objective or
Performance Objectives, the Committee shall also establish a schedule or
schedules setting forth the portion of the Performance Award which will be
earned or forfeited based on the degree of achievement of the Performance
Objectives actually achieved or exceeded as determined by the Committee. The
Committee may at any time adjust the Performance Objectives and any schedules
and portions of payments related thereto, adjust the way Performance Objectives
are measured, or shorten any Performance Period if it determines that conditions
or the occurrence of events warrant such actions; provided, that this provision
shall not apply to any Performance Award that is intended to qualify as
performance-based compensation under Code Section 162(m)(4)(C) if and to the
extent that it would prevent the Award from so qualifying. The Committee shall
have the right to reduce or eliminate the compensation or Award payable upon the
attainment of a Performance Objective but shall not have the discretion to
increase an Award upon the attainment of a Performance Objective with respect to
a Participant whose compensation for the particular year is subject to the
limits on tax deductibility in Code Section 162(m).
12.3 GRANTS OF PERFORMANCE AWARDS. Performance Awards may be granted
under the Plan in such form and to such Employees as the Committee may from time
to time approve. Performance Awards may be granted alone, in addition to or in
tandem with other Awards under the Plan. Subject to the terms of the Plan, the
Committee shall determine the amount or number of Performance Awards to be
granted to a Participant and the Committee may impose different terms and
conditions on any particular Performance Award granted to any Participant. Each
grant of a Performance Award shall be evidenced by a written instrument stating
the number of Performance Shares or Performance Units granted, the Performance
Period, the Performance Objective or Performance Objectives, the proportion of
payments for performance between the minimum and full performance levels, if
any, restrictions applicable to Shares receivable in settlement, if any, and any
other terms, conditions, restrictions and rights with respect to such grant as
determined by the Committee. The Committee may determine that the Participant
forfeit such Performance Awards back to the Company upon termination of
employment for any reason or for specified reasons. The Committee may provide,
in its sole discretion, that during a Performance Period, a Participant shall be
paid cash amounts, with respect to each Performance Share or Performance Unit
held by such individual in the same manner, at the same time, and in the same
amount paid, as a dividend on any Share.
12.4 NON-TRANSFERABILITY OF PERFORMANCE AWARDS. Until such time as the
Performance Objectives as determined by the Committee have been met and until
any restrictions upon the Shares issued pursuant to any Performance Awards have
lapsed, Performance Awards and any rights related thereto may not be sold,
exchanged, transferred, pledged, hypothecated or otherwise disposed of by any
Participant.
12.5 PAYMENT OF AWARDS. As soon as practicable after the end of the
applicable Performance Period as determined by the Committee, the Committee
shall determine the extent to which
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the Performance Objectives have been met and the extent to which Performance
Awards are payable. Payment and settlement of a Performance Award shall be as
follows:
(a) In the case of Performance Shares, one or more stock certificates
representing the number of Shares payable shall be delivered to the
Participant, free of all restrictions except those established by the
Committee at the time of the grant of the Performance Shares; and
(b) In the case of Performance Units, entirely in cash, entirely in
Shares, or in such combination of Shares and cash as the Committee may
determine, in its discretion, at any time prior to such payment. If
payment is to be made in the form of cash, the amount payable for each
Performance Unit earned shall be equal to the dollar value of each
Performance Unit (as determined by the Committee) times the number of
earned Performance Units.
13. AWARD TERMS AND CONDITIONS. Each Award Letter setting forth an Award
shall contain such other terms and conditions not inconsistent herewith as shall
be approved by the Board or by the Committee. The Committee shall from time to
time adopt policies and procedures applicable to Awards that will govern the
lapse or non-lapse of restrictions and the rights of Participants and
beneficiaries in the event of death, disability, termination of employment, or
retirement of Participants or upon the occurrence of any other event determined
by the Committee, in its sole discretion, to be appropriate. The Committee
shall have authority to define disability and retirement and other terms, and
the Committee's policies and procedures may differ with respect to Awards
granted at different times. A Participant's rights in the event of death,
disability, termination of employment, or retirement or such other events shall
be set forth in the Award Letter that evidences an Award to the Participant.
14. NONTRANSFERABILITY OF AWARDS. No Award under the Plan and no rights and
interests therein, including the right to any amounts or Shares payable, may be
assigned, pledged, hypothecated or otherwise transferred by a Participant except
to the extent so permitted under the terms of the Award Letter. During the
lifetime of a Participant, Options and SARs are exercisable only by, and
payments in settlement of Awards will be payable only to, the Participant or his
or her legal representative.
15. VESTING OF AWARDS. The Committee may, in its sole discretion, grant
Awards which vest over time and/or are based upon satisfaction of Performance
Objectives. The Committee may, in its discretion, modify or change any
Performance Objectives concerning any Award or accelerate the vesting of any
Award; provided that the Committee shall not modify or change any Performance
Objective or accelerate the vesting of any Award that is intended to qualify as
performance-based compensation under Code Section 162(m)(4)(C) if and to the
extent that such modification, change or acceleration would prevent the Award
from so qualifying.
16. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event of changes in
all of the outstanding Shares by reason of stock dividends, stock splits,
recapitalizations, mergers, consolidations, combinations, or exchanges of
shares, separations, reorganizations or liquidations or similar events or in the
event of extraordinary cash or non-cash dividends being declared with respect to
outstanding Shares or other similar transactions, the number and class of Shares
available under the Plan in the aggregate, the number and class of Shares
subject to Awards theretofore granted, the number of SARs therefore granted,
applicable purchase prices, applicable Performance Objectives for the
Performance Periods not yet completed and performance levels and portion of
payments related thereto, and all other applicable provisions, shall, subject to
the provisions of the Plan, be equitably adjusted by the Committee. The
foregoing adjustment and the manner of application of the foregoing provisions
shall be determined by the Committee in its sole discretion. Any such
adjustment may provide for the elimination of any fractional Share which might
otherwise become subject to an Award.
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17. CHANGE IN CONTROL.
17.1 EFFECT ON AWARDS. In the event of a Change in Control, then (i) all
Options, SARs and Options in tandem with SARs then outstanding shall become
fully exercisable as of the date of the Change in Control, whether or not then
exercisable, (ii) all restrictions and conditions of all Restricted Stock Awards
then outstanding shall be deemed satisfied as of the date of the Change in
Control, and (iii) all Performance Shares and Performance Units shall be deemed
to have been fully earned as of the date of the Change in Control. Moreover, the
Committee, in its sole discretion, may at any time, and subject to the terms and
conditions as it may impose: (a) grant Awards that become exercisable only in
the event of a Change in Control, (b) provide for Awards to be exercised
automatically and only for cash in the event of a Change in Control, and (c)
provide in advance or at the time of a Change in Control for cash to be paid in
settlement of any Award in the event of a Change in Control.
17.2 TERMINATION OF EMPLOYMENT. Notwithstanding anything contained in
this Plan to the contrary, in the event a Change in Control takes place and a
Participant's employment is terminated prior to the Change in Control and the
Participant reasonably demonstrates that such termination (i) was at the request
of a third party who has indicated an intention or taken steps reasonably
calculated to effect a Change in Control and who effectuates the Change in
Control or (ii) otherwise occurred in connection with or in anticipation of a
Change in Control which actually occurs, then for all purposes of this Plan, the
date of the Change in Control in respect of such Participant shall mean the date
immediately prior to the date of termination of such Participant's employment.
18. FORM OF AWARDS. Nothing contained in the Plan nor any resolution adopted
or to be adopted by the Board or the stockholders of the Company shall
constitute the granting of any Award. An Award shall be granted hereunder at
such date or dates as the Committee may determine, subject to the Plan. Whenever
the Committee determines to grant an Award, the Secretary or the President of
the Company, or such other person as the Committee appoints, shall send notice
thereof to the Employee, in such form as the Committee approves, stating the
number of Shares, units and SARs subject to the Award, its Term, and the other
provisions, restrictions and conditions thereof. The notice shall be
accompanied by a written Award Letter (and, in the case of a Restricted Stock
Award, by a blank stock power and/or escrow agreement for execution by the
Employee) which shall have been duly executed by or on behalf of the Company.
If the surrender of previously issued Awards is made a condition of the grant,
the notice shall set forth the pertinent details of such condition. Execution
of an Award Letter by the recipient in accordance with the provisions of the
Plan shall be a condition precedent to the exercise or settlement of any Award.
19. WITHHOLDING FOR TAXES.
19.1 COMPANY'S RIGHT TO PAYMENT FOR TAXES REQUIRED TO BE WITHHELD. The
Company shall, before any payment is made or a certificate for any Shares is
delivered or any Shares are credited to any brokerage account, deduct or
withhold from any payment under the Plan any Federal, state, local or other
taxes, including transfer taxes, required by law to be withheld or to require
the Participant or his beneficiary or estate, as the case may be, to pay any
amount, or the balance of any amount, required to be withheld. The Company may
elect to deduct such taxes from any amounts payable then or any time thereafter
in cash to the Employee and, in the Employee's sole discretion, the payment of
such taxes may be made from Shares previously held by such Employee. If the
Employee disposes of Shares acquired pursuant to an Incentive Stock Option in
any transaction considered to be a disqualifying transaction under Sections 421
and 422 of the Code, the Employee must give the Company written notice of such
transfer and the Company shall have the right to deduct any taxes required by
law to be withheld from any amounts otherwise payable to the Employee.
19.2 EMPLOYEE ELECTION TO WITHHOLD SHARES. An Employee, in his sole
discretion, may elect to satisfy his or her tax liability with respect to the
exercise, vesting or settlement
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of an Award, by having the Company withhold Shares otherwise issuable upon the
exercise, vesting or settlement of the Award.
20. TERMINATION OF PLAN. The Plan shall terminate ten (10) years from the
date hereof, and an Award shall not be granted under the Plan after that date
although the terms of any Awards may be amended at any date prior to the end of
its Term in accordance with the Plan. Any Awards outstanding at the time of
termination of the Plan shall continue in full force and effect according to the
terms and conditions of the Award and this Plan.
21. AMENDMENT OF THE PLAN. The Plan may be amended at any time and from time
to time by the Board, but no amendment without the approval of the stockholders
of the Company shall be made if stockholder approval under Section 422 of the
Code or Rule 16b-3 would be required. Notwithstanding the previous sentence, no
amendment to the Plan shall be made without the approval of the stockholders of
the Company which would change the material terms of performance goals that were
previously approved by the Company's stockholders within the meaning of Proposed
Treasury Regulation Section 1.162-27(e)(4)(vi) or a successor provision, unless
the Board determines that such approval is not necessary to avoid loss of a
deduction under Section 162(m) of the Code, such approval will not avoid such a
loss of deduction or such approval is not advisable. Notwithstanding the
discretionary authority granted to the Committee in Section 4 of the Plan, no
amendment of the Plan or any Award granted under the Plan shall impair any of
the rights of any Participant, without his or her consent, under any Award
theretofore granted under the Plan.
22. GOVERNING LAW; REGULATIONS AND APPROVALS.
22.1 GOVERNING LAW. This Plan and the rights of all persons claiming
hereunder shall be construed and determined in accordance of the laws of the
State of Georgia without giving effect to the conflicts of laws principles
thereof, except to the extent that such laws are preempted by federal law.
22.2 DELIVERY OF SHARES. The obligation of the Company to issue, sell
and deliver Shares with respect to any Awards granted under this Plan shall be
subject to all applicable laws, rules and regulations, including all applicable
federal and state securities laws, and the obtaining of all such approvals by
governmental agencies as may be deemed necessary or appropriate by the
Committee.
22.3 SECURITIES ACT REQUIREMENTS. No award shall be granted and no
certificates for Shares pursuant to the grant or exercise of an Award shall be
delivered pursuant to this Plan if the grant or delivery would, in the opinion
of counsel for the Company, violate the Securities Act or any other Federal or
state statutes having similar requirements as may be in effect at that time. As
a condition of the issuance of any Shares pursuant to the grant or exercise of
an Award under this Plan, the Committee may require the recipient to furnish a
written representation that he or she is acquiring the Shares for investment and
not with a view to distribution to the public. In the event that the
disposition of Shares acquired pursuant to the Plan is not covered by a then
current registration statement under the Securities Act, as amended, and is not
otherwise exempt from such registration, such Shares shall be restricted against
transfer to the extent required by the Securities Act and Rule 144 of the
Securities Act or the regulations hereunder.
22.4 LISTING AND REGULATORY REQUIREMENTS. Each Award is subject to the
further requirements that, if at any time the Committee shall determine, in its
discretion, that the listing, registration or qualification of the Shares
subject to the Award is required by any securities exchange or under any
applicable law or the rule of any regulatory body, or is necessary or desirable
as a condition of, or in connection with, the granting of such Award or the
issuance of Shares thereunder, such Award will not be granted or exercised and
the Shares may not be issued unless and until such listing,
13
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Committee.
22.5 SECTION 16. With respect to persons subject to Section 16 of the
Exchange Act, transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under the Exchange Act. To
the extent any provision under the Plan or action by the Committee fails to so
comply, it shall be deemed null and void to the extent permitted by law and
deemed advisable by the Committee.
22.6 PERFORMANCE-BASED COMPENSATION. The Plan is intended to give the
Committee the authority, in its discretion, to grant Awards that qualify as
performance-based compensation under Code Section 162(m)(4)(C).
23. DEFERRAL ELECTIONS. The Committee may, pursuant to the terms of an Award
Letter, permit any Participant receiving an Award to elect to defer his or her
receipt of a payment of cash or the delivery of Shares that would be otherwise
due such individual by virtue of the exercise, settlement, vesting or lapse of
restrictions regarding any Award made under the Plan. If any such election is
permitted, the Committee shall establish rules and procedures for such payment
deferrals and include such rules and procedures in the Award Letter, including
the possible payment or crediting of reasonable interest on such deferred
amounts credited in cash and the payment or crediting of dividend equivalents in
respect of deferrals credited in Shares.
24. MISCELLANEOUS.
24.1 EMPLOYMENT RIGHTS. Neither the Plan nor any action taken hereunder
shall be construed as giving any Employee the right to participate under the
Plan, and a grant of an Award under the Plan shall not be construed as giving
any recipient of the grant any right to be retained in the employ of the
Company.
24.2 NO TRUST OR FUND CREATED. Neither the Plan nor any grant made
hereunder shall create or be construed to create a trust or separate fund of any
kind or a fiduciary relationship between the Company and any recipient of a
grant of an Award or any other person. To the extent that any person acquires a
right to receive payments from the Company pursuant to a grant under the Plan,
such right shall be no greater than the right of any unsecured general creditor
of the Company. Nothing herein shall prevent or prohibit the Company from
establishing a trust or other arrangement for the purpose of providing for the
payment of the benefits payable under the Plan.
24.3 FEES AND COSTS. The Company shall pay all original issue taxes on
the exercise of any Award granted under the Plan and all other fees and expenses
necessarily incurred by the Company in connection therewith .
24.4 AWARDS TO FOREIGN NATIONALS. Without amending the Plan, Awards may
be granted to participants who are foreign nationals or who are employed outside
the United States or both, on such terms and conditions different than those
specified in the Plan as may, in the judgment of the Committee, be necessary or
desirable to further the purpose of the Plan.
24.5 OTHER PROVISIONS. As used in the Plan, and in Awards and other
documents prepared in implementation of the Plan, references to the masculine
pronoun shall be deemed to refer to the feminine or neuter, and references in
the singular or the plural shall refer to the plural or the singular, as the
identity of the person or persons or entity or entities being referred to may
require. The captions used in the Plan and in such Awards and other documents
prepared in implementation of the Plan are for convenience only and shall not
affect the meaning of any provision hereof or thereof.
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25. EFFECTIVENESS OF THE PLAN. The Plan shall become effective when approved
by the Board. The Plan shall thereafter be submitted to the Company's
stockholders for approval and unless the Plan is approved by the affirmative
votes of the holders of shares having a majority of the voting power of all
shares represented at a meeting duly held in accordance with Georgia law within
twelve (12) months after being approved by the Board, the Plan and all Awards
made under it shall be void and of no force and effect.
To record the adoption of the Plan (as amended and restated) by the Board on
November 13, 1996, the Company has caused its authorized officers to affix the
corporate name and seal hereto.
SCIENTIFIC-ATLANTA, INC.
By: /s/ Brian C. Koenig
------------------------------------
Name: Brian C. Koenig
--------------------------------
Title: Vice President Human Resources
--------------------------------
By: /s/ William E. Eason, Jr.
------------------------------------
Name: William E. Eason, Jr.
--------------------------------
Title: Secretary
--------------------------------
[Seal]
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