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
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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
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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.
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(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:_________________________