HARMONIC INC. ANTHONY LEY TRANSITION AGREEMENT
Exhibit #10.1
▇▇▇▇▇▇▇ ▇▇▇ TRANSITION AGREEMENT
THIS AGREEMENT is effective as of May 5, 2006 (the “Effective Date”), by and between Harmonic
Inc. (the “Company”) and ▇▇▇▇▇▇▇ ▇▇▇ (“Executive”).
RECITALS
A. Executive is employed by the Company and is a member of the Board of Directors of the
Company (the “Board”).
B. On the Effective Date, Executive will resign his officer positions with the Company but
remain as Executive Chairman and employee.
C. On July 1, 2006 (the “Transition Date”), Executive will assume the role of Non-Executive
Chairman of the Board (“Chairman”) and consultant and shall cease to be an employee of the Company.
D. Executive has agreed to serve as Chairman until the Company’s 2007 annual meeting of
stockholders or such other time as is determined by the Board (the “Transition Term”).
E. Executive has agreed to provide consulting services to the Company from the Transition Date
and for period of two years thereafter (the “Consulting Term”).
F. Accordingly, pursuant to this Agreement, the Company desires to retain Executive’s services
as Executive Chairman and employee through the period ending June 30, 2006, (the “Employment
Term”), and afterwards as non-Executive Chairman through the Transition Term and as a consultant
through the Consulting Term, upon the terms set forth herein.
NOW THEREFORE, the parties agree as follows:
1. Term. The term of this Agreement shall commence on the Effective Date and shall
continue until all the payments due and all other obligations of the parties hereunder have been
made or satisfied.
2. Duties
of Executive.
a. Employment Term. From the Effective Date through June 30, 2006 (the “Employment
Term”), Executive will remain as Executive Chairman and employee of the Company. During the
Employment Term, Executive’s compensation and other benefits shall be as provided in Section 3(a).
b. Transition Term. During the Transition Term, Executive agrees to serve as Chairman
and shall receive no additional cash compensation for such services, including retainers and
meeting fees, equity compensation and other compensation scheduled to be paid to the Company’s
non-employee members of the Board (except he shall be reimbursed for the expenses of attending
Board meetings), but shall receive a stock option for such services as set forth in Section 3(b).
c. Consulting Term. During the Consulting Term, Executive agrees to perform services
as a consultant on an as-needed basis. During the Consulting Term, Executive shall also comply
with his obligations under Section 4 hereof. During the Consulting Term, Executive’s compensation
shall be as provided in Section 3(c). Executive shall be reimbursed for reasonable business
expenses incurred in discharging his consulting duties.
3. Compensation.
a. Employment Term.
i. Cash Compensation. While employed by the Company during the Employment Term,
Executive shall be paid at his current base salary rate. Executive shall also receive, promptly
following the termination of the Employment Term, full payment for all accrued wages, including but
not limited to, unused vacation days to which he is entitled pursuant to Company policy.
ii. Benefits. While employed by the Company during the Employment Term, Executive
shall be eligible to participate in the employee benefit plans maintained by the Company applicable
to other key executives of the Company, including (without limitation) retirement plans, savings or
profit sharing plans, life, disability, health, accident and other insurance programs, paid
vacations, and similar plans or programs, subject, in each case, to the generally applicable terms
and conditions of the applicable plan or program in question and to the determination of any
committee administering such plan or program.
iii. 2006 Executive Compensation Plan. Subject to Executive signing and not revoking
a release of claims substantially in the form attached hereto as Exhibit A (the “Release”),
Executive shall be entitled to receive any payments under the Company’s 2006 Executive Compensation
Plan based upon the achievement of the performance milestones set forth in such plan, pro-rated to
reflect Executive’s employment through June 30, 2006, and payable when other participants are paid
pursuant to such plan.
b. Transition Term. In consideration of his performing services as Consultant, and
subject to his signing a Release on the Effective Date and not thereafter revoking such Release,
Executive shall be granted, effective on the Transition Date, a stock option covering 100,000
shares of Company common stock, which shall vest as to 1/12th of the covered shares on a monthly
basis, so as to be 100% vested on June 30, 2007, subject to Executive continuing to perform
services as Chairman and Consultant through each applicable vesting date. The stock option will
have a term of four years from the grant date, shall be granted with an exercise price equal to
100% of the Fair Market Value (as such term is defined in the Company’s 1995 Stock Plan) of the
underlying shares on the grant date, and will accelerate vesting 100% in the event of a Change of
Control or Executive’s death or Disability, as such terms are defined in the Change of Control
Severance Agreement by and between Executive and the Company dated March 11, 2004 (the “Change of
Control Agreement”).
c. Consulting Term. In consideration of his rendering consulting services to the
Company during the Consulting Term, and subject to his signing a Release on the Effective Date and
not thereafter revoking such Release, Executive shall be paid at a rate of $225,000 per annum for
his services as a Consultant hereunder. Executive shall be responsible for payment of all federal,
state and local taxes with respect to such Consultant compensation. Subject to Executive timely
electing coverage under COBRA and Cal-COBRA, the Company will reimburse Executive for COBRA and
Cal-COBRA premiums for Executive and his eligible dependents through the lesser of (i) 36 months
following the Transition Date, or (ii) such time as Executive ceases to be a Consultant. Following
Executive’s vacating his offices at the Company’s headquarters, the Company will provide Executive,
at its reasonable expense (but not to exceed $25,000 per year), with off-site executive office
space and part-time secretarial assistance.
d. Change of Control Agreement Amendments. Subject to Executive signing a Release on
the Effective Date and not thereafter revoking such Release, Executive’s Change of Control
Agreement shall be amended and restated in its entirety on the Transition Date as set forth in
Exhibit A hereto.
e. Outstanding Option Agreements. Consistent with their terms, Executive’s
outstanding stock option agreements with the Company shall continue to vest and remain exercisable
while Executive remains a Consultant, and shall remain exercisable for such time following
termination of his consulting relationship as is specified in such agreements.
4. Covenants
Not to Compete and Not to Solicit.
a. Covenant Not to Compete. Executive agrees that, during the Employment Term, the
Transition Term and the Consulting Term, Executive will not directly engage in (whether as an
employee, consultant, proprietor, partner, director or otherwise), or have any ownership interest
in, or participate in the financing, operation, management or control of, any company whose
business competes with the Company’s business. Ownership of less than 1% of the outstanding voting
stock of any such competing company will not constitute a violation of this provision.
b. Covenant Not to Solicit. Executive agrees that, during the Employment Term, the
Transition Term and the Consulting Term, he will not directly or indirectly solicit any individuals
to leave the Company’s employ for any reason or interfere in any other manner with the employment
relationships at the time existing between the Company and its current or prospective employees.
c. Representations. The parties intend that the covenants contained in Section 4(a)
and (b) shall be construed as a series of separate covenants, one for each county, city and state
(or analogous entity) and country of the world. If, in any judicial proceeding, a court shall
refuse to enforce any of the separate covenants, or any part thereof, then such unenforceable
covenant, or such part thereof, shall be deemed eliminated from this Agreement for the purpose of
those proceedings to the extent necessary to permit the remaining separate covenants, or portions
thereof, to be enforced.
d. Reformation. In the event that the provisions of this Section 4 should ever be
deemed to exceed the time or geographic limitations, or scope of this covenant, permitted by
applicable law, then such provisions shall be reformed to the maximum time or geographic
limitations, as the case may be, permitted by applicable laws.
5. Reasonableness of Covenants. Executive represents that he (i) is familiar with the
covenant not to compete and the covenant not to solicit, and (ii) is fully aware of his obligations
hereunder, including, without limitation, the reasonableness of the length of time, scope and
geographic coverage of these covenants.
6. Arbitration.
a. Executive agrees that any dispute or controversy arising out of, relating to, or in
connection with this Agreement, or the interpretation, validity, construction, performance, breach,
or termination thereof, shall be finally settled by binding arbitration to be held in Santa ▇▇▇▇▇
County, California under the Commercial Arbitration Rules, supplemented by the Supplemental
Procedures for Large Complex Disputes, of the American Arbitration Association as then in effect
(the “Rules”). The arbitrator(s) may grant injunctions or other relief in such dispute or
controversy. The decision of the arbitrator(s) shall be final, conclusive and binding on the
parties to the arbitration, and judgment may be entered on the decision of the arbitrator(s) in any
court having jurisdiction.
b. The arbitrator(s) shall apply California law to the merits of any dispute or claim, without
reference to rules of conflicts of law, and the arbitration proceedings shall be governed by
federal arbitration law and by the Rules, without reference to state arbitration law.
c. The Company shall pay the costs and expenses of such arbitration, and each party shall pay
its own counsel fees and expenses.
d. EMPLOYEE HAS READ AND UNDERSTANDS THIS SECTION 6, WHICH DISCUSSES ARBITRATION. EXECUTIVE
UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, EXECUTIVE AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF,
RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION,
PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, AND THAT THIS ARBITRATION CLAUSE
CONSTITUTES A WAIVER OF EXECUTIVE’S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL
DISPUTES RELATING TO EXECUTIVE’S RELATIONSHIP WITH THE COMPANY.
7. Indemnification and Insurance. The standard form of indemnification agreement for
officers and directors that Executive has entered into and any fiduciary insurance maintained by
the Company shall remain in effect to the same extent that said indemnification or fiduciary
insurance remains in effect for all officers and directors of the Company.
8. General
Provisions.
a. Entire Agreement. This Agreement (including Exhibits A and B hereto), the stock
option agreements by and between the Company and Executive and the Proprietary Information
Agreement previously entered into by and between the Company and Executive represents the entire
agreement and understanding between the parties with respect to Executive’s performance of services
for the Company following the Effective Date, and supersede all prior or contemporaneous
agreements, whether written or oral. No waiver, alteration, or modification, if any, of the
provisions of this Agreement shall be binding unless in writing and signed by duly authorized
representatives of the parties hereto.
b. Successors.
i. Company Successors. Any successor to the Company (whether direct or indirect and
whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or
substantially all of the Company’s business and/or assets shall assume the obligations under this
Agreement and agree expressly to perform the obligations under this Agreement in the same manner
and to the same extent as the Company would be required to perform such obligations in the absence
of a succession. For all purposes under this Agreement, the term “the Company” shall include any
successor to the Company’s business and/or assets that agrees to assume the Company’s obligations
hereunder or which becomes bound by the terms of this Agreement by operation of law.
ii. Executive’s Successors. The terms of this Agreement and all rights of Executive
hereunder shall inure to the benefit of, and be enforceable by, Executive’s personal or legal
representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
c. Conflicting Obligations. Executive represents that he has not entered into, and
will not enter into, any oral or written agreement in conflict herewith.
d. Counterparts. This Agreement may be executed by either of the parties hereto in
counterparts, each of which shall be deemed to be an original, but all such counterparts shall
together constitute one and the same instrument.
e. Governing Law; Consent to Personal Jurisdiction. This Agreement shall be governed
by and construed in accordance with the internal substantive laws, but not the choice of law rules,
of the State of California. Executive hereby consents to the personal jurisdiction of the state
and federal courts located in California for any action or proceeding arising from or relating to
this Agreement or relating to any arbitration in which the parties are participants.
f. Code Section 409A. Notwithstanding any contrary provision of the Agreement, if the
Company determines, in its good faith judgment, that Section 409A of the Code shall result in the
imposition of additional tax to an earlier payment of any payment or benefit otherwise due to the
Executive under this Agreement during the six (6) month period following the Executive’s
“Separation From Service,” as such term is defined under Section 409A and the proposed or final
Treasury Regulations thereunder, such payments or benefits shall accrue during the six (6) month
period and shall become payable in a lump sum payment on the date six (6) months and one (1) day
following the Executive’s separation from service date. All subsequent payments or benefits, if
any, shall be paid as provided in the Agreement. In addition, and notwithstanding any contrary
provision of the Agreement, the Company reserves the right to amend the Agreement as it deems
necessary or advisable, in its sole discretion and without the consent of the Executive, to comply
with Section 409A of the Code or to otherwise avoid income recognition or imposition of income tax
under Section 409A of the Code, provided that to the extent reasonably practicable, any such
amendments shall be designed not to result in a material diminution of the benefits provided by the
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the date set
forth above.
| ▇▇▇▇▇▇▇ ▇▇▇ | ||
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ |
/s/ ▇▇▇▇▇▇▇ ▇▇▇ | |
Date: May 5, 2006
|
Date: May 5, 2006 |
EXHIBIT A
HARMONIC INC./▇▇▇▇▇▇▇ ▇▇▇
RELEASE OF CLAIMS
This Release of Claims (“Agreement”) is made by and between Harmonic Inc. (the “Company”), and
▇▇▇▇▇▇▇ ▇▇▇ (“Employee”), (together, the “Parties”).
WHEREAS, Employee has agreed to enter into a release of claims in favor of the Company upon
certain events specified in the transition agreement by and between Company and Employee (the
“Transition Agreement”) to which this is attached as Exhibit A.
NOW THEREFORE, in consideration of the mutual promises made herein, the Parties hereby agree
as follows:
1. Termination. Employee’s employment from the Company terminated on June 30, 2006.
2. Confidential Information. Employee shall continue to maintain the confidentiality
of all confidential and proprietary information of the Company and shall continue to comply with
the terms and conditions of the Proprietary Information Agreement between Employee and the Company.
Employee shall return all the Company property and confidential and proprietary information in his
possession to the Company on the Effective Date of this Agreement, except as is necessary to
discharge his duties as Consultant and Chairman.
3. Payment of Salary. Employee acknowledges and represents that the Company has paid
all salary, wages, bonuses, accrued vacation, commissions and any and all other benefits due to
Employee.
4. Release of Claims. Employee agrees that the foregoing consideration represents
settlement in full of all outstanding obligations owed to Employee by the Company. Employee, on
behalf of himself, and his respective heirs, family members, executors and assigns, hereby fully
and forever releases the Company and its past, present and future officers, agents, directors,
employees, investors, shareholders, administrators, affiliates, divisions, subsidiaries, parents,
predecessor and successor corporations, and assigns, from, and agrees not to ▇▇▇ or otherwise
institute or cause to be instituted any legal or administrative proceedings concerning any claim,
duty, obligation or cause of action relating to any matters of any kind, whether presently known or
unknown, suspected or unsuspected, that he may possess arising from any omissions, acts or facts
that have occurred up until and including the Effective Date of this Agreement including, without
limitation,
• any and all claims relating to or arising from Employee’s employment
relationship with the Company and the termination of that relationship;
• any and all claims relating to, or arising from, Employee’s right to
purchase, or actual purchase of shares of stock of the Company, including, without limitation, any
claims for fraud, misrepresentation, breach of fiduciary duty, breach of duty under applicable
state corporate law, and securities fraud under any state or federal law;
• any and all claims for wrongful discharge of employment; termination in
violation of public policy; discrimination; breach of contract, both express and implied; breach of
a covenant of good faith and fair dealing, both express and implied; promissory estoppel; negligent
or intentional infliction of emotional distress; negligent or intentional misrepresentation;
negligent or intentional interference with contract or prospective economic advantage; unfair
business practices; defamation; libel; slander; negligence; personal injury; assault; battery;
invasion of privacy; false imprisonment; and conversion;
• any and all claims for violation of any federal, state or municipal statute,
including, but not limited to, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of
1991, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act of
1990, the Fair Labor Standards Act, the Employee Retirement Income Security Act of 1974, The Worker
Adjustment and Retraining Notification Act, the California Fair Employment and Housing Act, and
Labor Code section 201, et seq. and section 970, et seq. and all amendments to each such Act as
well as the regulations issued thereunder;
• any and all claims for violation of the federal, or any state, constitution;
• any and all claims arising out of any other laws and regulations relating to
employment or employment discrimination; and
• any and all claims for attorneys’ fees and costs.
Employee agrees that the release set forth in this section shall be and remain in effect in
all respects as a complete general release as to the matters released. This release does not
extend to any obligations due Employee under Sections 3 and 7 of the Transition Agreement. Nothing
in this Agreement waives Employee’s rights to indemnification or any payments under any fiduciary
insurance policy, if any, provided by any act or agreement of the Company, state or federal law or
policy of insurance.
5. Acknowledgment of Waiver of Claims under ADEA. Employee acknowledges that he is
waiving and releasing any rights he may have under the Age Discrimination in Employment Act of 1967
(“ADEA”) and that this waiver and release is knowing and voluntary. Employee and the Company agree
that this waiver and release does not apply to any rights or claims that may arise under the ADEA
after the Effective Date of this Agreement. Employee acknowledges that the consideration given for
this waiver and release Agreement is in addition to anything of value to which Employee was already
entitled. Employee further acknowledges that he has been advised by this writing that (a) he
should consult with an attorney prior to executing this Agreement; (b) he has at least twenty-one
(21) days within which to consider this Agreement; (c) he has seven (7) days following the
execution of this Agreement by the parties to revoke the Agreement; (d) this Agreement shall not be
effective until the revocation period has expired; and (e) nothing in this Agreement prevents or
precludes Employee from challenging or seeking a determination in good faith of the validity of
this waiver under the ADEA, nor does it impose any condition precedent, penalties or costs for
doing so, unless specifically authorized by federal law. Any revocation should be in writing and
delivered to the Vice-President of Human Resources at the Company by close of business on the
seventh day from the date that Employee signs this Agreement.
6. Civil Code Section 1542. Employee represents that he is not aware of any claims
against the Company other than the claims that are released by this Agreement. Employee
acknowledges that he has been advised by legal counsel and is familiar with the provisions of
California Civil Code 1542, below, which provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO
EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR.
Employee, being aware of said code section, agrees to expressly waive any rights he
may have thereunder, as well as under any statute or common law principles of similar
effect.
7. No Pending or Future Lawsuits. Employee represents that he has no lawsuits,
claims, or actions pending in his name, or on behalf of any other person or entity, against the
Company or any other person or entity referred to herein. Employee also represents that he does
not intend to bring any claims on his own behalf or on behalf of any other person or entity against
the Company or any other person or entity referred to herein.
8. Application for Employment. Employee understands and agrees that, as a condition
of this Agreement, he shall not be entitled to any employment with the Company, its subsidiaries,
or any successor, and he hereby waives any right, or alleged right, of employment or re-employment
with the Company.
9. No Cooperation. Employee agrees that he will not counsel or assist any attorneys
or their clients in the presentation or prosecution of any disputes, differences, grievances,
claims, charges, or complaints by any third party against the Company and/or any officer, director,
employee, agent, representative, shareholder or attorney of the Company, unless under a subpoena or
other court order to do so.
10. No Admission of Liability. Employee understands and acknowledges that this
Agreement constitutes a compromise and settlement of disputed claims. No action taken by the
Company, either previously or in connection with this Agreement shall be deemed or construed to be
(a) an admission of the truth or falsity of any claims heretofore made or (b) an acknowledgment or
admission by the Company of any fault or liability whatsoever to the Employee or to any third
party.
11. Costs. The Parties shall each bear their own costs, expert fees, attorneys’ fees
and other fees incurred in connection with this Agreement.
12. Arbitration. The Parties agree that any and all disputes arising out of the terms
of this Agreement, their interpretation, and any of the matters herein released, including any
potential claims of harassment, discrimination or wrongful termination shall be subject to binding
arbitration, to the extent permitted by law, as specified in the Transition Agreement.
13. Authority. Employee represents and warrants that he has the capacity to act on
his own behalf and on behalf of all who might claim through him to bind them to the terms and
conditions of this Agreement.
14. No Representations. Employee represents that he has had the opportunity to
consult with an attorney, and has carefully read and understands the scope and effect of the
provisions of this Agreement. Neither party has relied upon any representations or statements made
by the other party hereto which are not specifically set forth in this Agreement.
15. Severability. In the event that any provision hereof becomes or is declared by a
court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue
in full force and effect without said provision.
16. Entire Agreement. This Agreement, along with the Transition Agreement, the
Proprietary Information Agreement and Employee’s written stock option agreements with the Company,
represents the entire agreement and understanding between the Company and Employee concerning
Employee’s separation from the Company.
17. No Oral Modification. This Agreement may only be amended in writing signed by
Employee and the Compensation Committee of the Board of Directors of the Company.
18. Governing Law. This Agreement shall be governed by the internal substantive laws,
but not the choice of law rules, of the State of California.
19. Effective Date. This Agreement is effective eight (8) days after it has been
signed by both Parties.
20. Counterparts. This Agreement may be executed in counterparts, and each
counterpart shall have the same force and effect as an original and shall constitute an effective,
binding agreement on the part of each of the undersigned.
21. Voluntary Execution of Agreement. This Agreement is executed voluntarily and
without any duress or undue influence on the part or behalf of the Parties hereto, with the full
intent of releasing all claims. The Parties acknowledge that:
• They have read this Agreement;
• They have been represented in the preparation, negotiation, and execution of
this Agreement by legal counsel of their own choice or that they have voluntarily declined to seek
such counsel;
• They understand the terms and consequences of this Agreement and of the
releases it contains;
• They are fully aware of the legal and binding effect of this Agreement.
22. Non-Disparagement. The Parties hereto agree to refrain from disparagement,
criticism, defamation or slander of each other or of the Company’s employees, officers, directors,
agents, products or services to anyone, including, but not limited to, other employees and past,
present or prospective customers and/or employees of the Company and prospective employers of
Employee.
IN WITNESS WHEREOF, the Parties have executed this Agreement on the respective dates set forth below.
| Harmonic Inc. | ||||
Dated: May 5, 2006
|
By | /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ | ||
Dated: May 5, 2006
|
By | /s/ ▇▇▇▇▇▇▇ ▇▇▇ | ||
| ▇▇▇▇▇▇▇ ▇▇▇, an individual | ||||
EXHIBIT B
AMENDED AND RESTATED CHANGE OF CONTROL AGREEMENT
This Amended and Restated Change of Control Agreement (the “Agreement”) is made and entered
into by and between ▇▇▇▇▇▇▇ ▇▇▇, (the “Consultant”) and Harmonic, Inc. (the “Company”), effective
as of the latest date set forth by the signatures of the parties hereto below.
RECITALS
A. It is expected that the Company from time to time will consider the possibility of an
acquisition by another company or other Change of Control. The Board of Directors of the Company
(the “Board”) recognizes that such consideration can be a distraction to the Consultant and can
cause the Consultant to consider alternative opportunities. The Board has determined that it is in
the best interests of the Company and its shareholders to assure that the Company will have the
continued dedication and objectivity of the Consultant, notwithstanding the possibility, threat or
occurrence of a Change of Control (as defined below) of the Company.
B. The Board believes that it is in the best interests of the Company and its shareholders to
provide the Consultant with an incentive to continue his consulting relationship and to motivate
the Consultant to maximize the value of the Company upon a Change of Control for the benefit of its
shareholders.
C. The Board believes that it is imperative to provide the Consultant with certain benefits
upon the Company entering into a definitive agreement contemplating a Change of Control which
provides the Consultant with enhanced financial security and provides incentive and encouragement
to the Consultant to remain with the Company notwithstanding the possibility of a Change of
Control.
D. Certain capitalized terms used in the Agreement are defined in Section 6 below.
The parties hereto agree as follows:
1. Term of Agreement. This Agreement shall terminate upon the date that all
obligations of the parties hereto with respect to this Agreement have been satisfied.
2. Change of Control Benefits.
(a) Benefits Upon Entering into a Definitive Agreement Regarding a Change of Control.
If the Company enters into a Definitive Change of Control Agreement prior to July 1, 2007, and
Consultant has remained as a consultant to the Company through such date, then Consultant shall
receive the following benefits:
(i) Severance Payment. A cash payment in an amount equal to two hundred percent
(200%) of the Consultant’s Annual Compensation;
(ii) Bonus Payment. For a Definitive Change of Control Agreement entered into by the
Company on or prior to December 31, 2006 only, a cash payment in an amount equal to twice either:
a) 50% of the established annual target bonus for 2006, or b) the average of the actual bonuses
paid in each of the two prior years, whichever is greater.
(iii) Continued Consultant Benefits. One hundred percent (100%) Company-paid health,
dental and life insurance coverage at the same level of coverage as was provided to Consultant
immediately prior to entering into the Definitive Change of Control Agreement (the “Company-Paid
Coverage”). If such coverage
included the Consultant’s dependents immediately prior to the Change of Control, such
dependent shall also be covered at Company expense. Company-Paid Coverage shall continue until the
earlier of (i) two years from the date of entering into the Definitive Change of Control Agreement,
or (ii) the date that the Consultant and his dependents become covered under another employer’s
group health, dental or life insurance plans.
(iv) Option and Restricted Stock Accelerated Vesting. One hundred percent (100%) of
the unvested portion of any outstanding stock option or restricted stock held by the Consultant
shall automatically be accelerated in full so as to become completely vested and all such
outstanding stock options shall become exercisable for a period equal to the greater of (i)
December 31 of the year in which the stock option would otherwise terminate, or (ii) two and
one-half months after the stock option would otherwise terminate (or such greater period as is
provided for in such stock option agreements), but in no event longer than the original maximum
term of the stock options.
(v) Outplacement Assistance. If desired by Consultant, Company will pay up to five
thousand dollars ($5,000.00) for outplacement assistance selected by Company and approved by
Consultant.
(b) Timing of Payments. Any payment to which Consultant is entitled under Section
3(a)(i) shall be paid by the Company to the Consultant (or to the Consultant’s successors in
interest pursuant to Section 7(b)) in cash and in full, not later than thirty (30) calendar days
following the date upon which the Definitive Change of Control Agreement is entered into by the
Company.
3. Attorney Fees; Costs and Expenses. The Company shall promptly reimburse
Consultant, on a monthly basis, for the reasonable attorney fees, costs and expenses incurred by
the Consultant in connection with any action brought by Consultant to enforce his rights hereunder,
regardless of the outcome of the action.
4. Limitation on Payments. In the event that the benefits provided for in this
Agreement or otherwise payable to the Consultant (i) constitute “parachute payments” within the
meaning of Section 280G of the Internal Revenue Code of 1986 as amended (the “Code”) and (ii) but
for this Section 5, would be subject to the excise tax imposed by Section 4999 of the Code, then
the Consultant’s benefits under Section 3(a)(i) shall be either
(a) delivered in full, or
(b) delivered as to such lesser extent which would result in no portion of such severance
benefits being subject to excise tax under Section 4999 of the Code, whichever of the foregoing
amounts taking into account the applicable federal, state and local income taxes and the excise tax
imposed by Section 4999, results in the receipt by the Consultant on an after-tax basis, of the
greatest amount of severance benefits, notwithstanding that all or some portion of such severance
benefits may be taxable under Section 4999 of the Code. Unless the Company and the Consultant
otherwise agree in writing, any determination required under this Section 5 shall be made in
writing by the Company’s Accountants immediately prior to Change of Control, whose determination
shall be conclusive and binding upon the Consultant and the Company for all purposes. For purposes
of making the calculations required by this Section 5, the Accountants may make reasonable
assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith
interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and
the Consultant shall furnish to the Accountants such information and documents as the Accountants
may reasonably request in order to make a determination under this Section. The Company shall bear
all costs the Accountants may reasonably incur in connection with any calculations contemplated by
this Section 5.
5. Definition of Terms. The following terms referred to in this Agreement shall have
the following meanings:
(a) Annual Compensation. “Annual Compensation” means (i) with respect to a Definitive
Change of Control Agreement entered into by the Company on or prior to December 31, 2006,
Employee’s annual base salary as in effect on May 5, 2006, and (ii) with respect to a Definitive
Change of Control Agreement that was entered into by the Company on or after January 1, 2007 and
prior to July 1, 2007, $225,000.
(b) Change of Control. “Change of Control” means the occurrence of any of the
following events, which is pursuant to and contemplated by a definitive agreement entered into by
the Company prior to July 1, 2007:
(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended) becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act),
directly or indirectly, of securities of the Company representing fifty percent (50%) or more of
the total voting power represented by the Company’s then outstanding voting securities;
(ii) A change in the composition of the Board occurring on or prior to July 1, 2007, as a
result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent
Directors” shall mean directors who either (A) are directors of the Company as of the date hereof,
or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least
a majority of the Incumbent Directors at the time of such election or nomination (but shall not
include an individual whose election or nomination is in connection with an actual or threatened
proxy contest relating to the election of directors to the Company);
(iii) The consummation of a merger or consolidation of the Company with any other corporation,
other than a merger or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by remaining outstanding or
by being converted into voting securities of the surviving entity) at least fifty percent (50%) of
the total voting power represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation;
(iv) The consummation of the sale or disposition by the Company of all or substantially all
the Company’s assets.
(c) Definitive Change of Control Agreement. “ Definitive Change of Control Agreement”
means an agreement binding on the Company and the acquirer that contemplates a Change of Control of
the Company by the acquirer or its affiliates.
6. Successors.
(a) Company’s Successors. Any successor to the Company (whether direct or indirect
and whether by purchase, merger, consolidation, liquidation or otherwise) to all or substantially
all of the Company’s business and/or assets shall assume the obligations under this Agreement and
agree expressly to perform the obligations under this Agreement in the same manner and to the same
extent as the Company would be required to perform such obligations in the absence of a succession.
For all purposes under this Agreement, the term “Company” shall include any successor to the
Company’s business and/or assets which executes and delivers the assumption agreement described in
this Section 7(a) or which becomes bound by the terms of this Agreement by operation of law.
(b) Consultant’s Successors. The terms of this Agreement and all rights of the
Consultant hereunder shall inure to the benefit of, and be enforceable by, the Consultant’s
personal or legal representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.
(c) Notice. Notices and all other communications contemplated by this Agreement shall
be in writing and shall be deemed to have been duly given when personally delivered or when mailed
by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of
the Consultant, mailed notices shall be addressed to him at the home address which he most recently
communicated to the Company in writing. In the case of the Company, mailed notices shall be
addressed to its corporate headquarters, and all notices directed shall be to the attention of its
Secretary.
7. Miscellaneous Provisions.
(a) No Duty to Mitigate. The Consultant shall not be required to mitigate the amount
of any payment contemplated by this Agreement, nor shall any such payment be reduced by any
earnings that the Consultant may receive from any other source.
(b) Waiver. No provision of this Agreement shall be modified, waived or discharged
unless the modification, waiver or discharge is agreed to in writing and signed by the Consultant
and by an authorized officer of the Company (other than the Consultant). No waiver by either party
of any breach of, or of compliance with, any condition or provision of this Agreement by the other
party shall be considered a waiver of any other condition or provision or of the same condition or
provision at another time.
(c) Whole Agreement. No agreements, representations or understandings (whether oral
or written and whether express or implied) which are not expressly set forth in this Agreement and
the Transition Agreement entered into by an between the Company and Executive (the “Transition
Agreement”) have been made or entered into by either party with respect to the subject matter
hereof. This Agreement and the Transition Agreement represent the entire understanding of the
parties hereto with respect to the subject matter hereof and supersedes all prior arrangements and
understandings regarding same.
(d) Choice of Law. This Agreement shall be deemed to have been executed and delivered
within the State of California and the validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of California, without regard to choice
of law principles.
(e) Severability. The invalidity or unenforceability of any provision or provisions
of this Agreement shall not affect the validity or enforceability of any other provision hereof,
which shall remain in full force and effect..
(f) Counterparts. This Agreement may be executed in counterparts, each of which shall
be deemed an original but all of which together will constitute one and the same instrument.
(g) Code Section 409A. Notwithstanding any contrary provision of the Agreement, if
the Company determines, in its good faith judgment, that Section 409A of the Code shall result in
the imposition of additional tax to an earlier payment of any payment or benefit otherwise due to
the Executive under this Agreement during the six (6) month period following the Executive’s
“Separation From Service,” as such term is defined under Section 409A and the proposed or final
Treasury Regulations thereunder, such payments or benefits shall accrue during the six (6) month
period and shall become payable in a lump sum payment on the date six (6) months and one (1) day
following the Executive’s separation from service date. All subsequent payments or benefits, if
any, shall be paid as provided in the Agreement. In addition, and notwithstanding any contrary
provision of the Agreement, the Company reserves the right to amend the Agreement as it deems
necessary or advisable, in its sole discretion and without the consent of the Executive, to comply
with Section 409A of the Code or to otherwise avoid income recognition or imposition of income tax
under Section 409A of the Code, provided that to the extent reasonably practicable, any such
amendments shall be designed not to result in a material diminution of the benefits provided by the
Agreement.
IN WITNESS WHEREOF, each of the parties has executed this amended and restated Agreement, in the
case of the Company by its duly authorized officer, as of the day and year set forth below.
| COMPANY | HARMONIC, INC. | |||
| By: | /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ | |||
| Title: | Chief Financial Officer | |||
| Date: May 5, 2006 | ||||
CONSULTANT
|
Name: | /s/ ▇▇▇▇▇▇▇ ▇▇▇ | ||
| Date: May 5, 2006 | ||||