UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
October 21, 2015
Date of Report (Date of earliest event reported)
HARMONIC INC.
(Exact name of Registrant as specified in its charter)
Delaware | 000-25826 | 77-0201147 |
(State or other jurisdiction of incorporation or organization) | Commission File Number | (I.R.S. Employer Identification Number) |
4300 North First Street
San Jose, CA 95134
(408) 542-2500
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 | Results of Operations and Financial Condition. |
On October 27, 2015, Harmonic Inc. (“Harmonic”) issued a press release regarding its preliminary unaudited financial results for the quarter ended October 2, 2015. In the press release, Harmonic also announced that it would be holding a conference call on October 27, 2015 to discuss its financial results for the quarter ended October 2, 2015. A copy of the press release is furnished as Exhibit 99.1 hereto, and the information in Exhibit 99.1 is incorporated herein by reference.
The information in this Item 2.02 of this Current Report on Form 8-K and Exhibit 99.1 attached hereto is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, and this Item 2.02 of this Current Report on Form 8-K and Exhibit 99.1 furnished herewith shall not be incorporated by reference into any filing by Harmonic under the Securities Act of 1933, as amended (the “Securities Act”), or under the Exchange Act.
Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory. |
On October 22, 2015, Harold Covert, a member of Harmonic’s Board of Directors (the “Board”), notified Harmonic of his intention to resign from the Board and the Audit Committee of the Board (the “Audit Committee”), effective October 26, 2015. In connection with Mr. Covert’s resignation, Susan G. Swenson was appointed to serve on the Audit Committee and Nikos Theodospoulos was appointed as chairman of the Audit Committee, effective upon Mr. Covert’s resignation. In connection with Ms. Swenson’s appointment to the Audit Committee and Mr. Theodospoulos’ appointment as chairman of the Audit Committee, respectively, the Board determined that Ms. Swenson was financially literate and that Mr. Theodospoulos was an audit committee financial expert in accordance with federal securities laws and the rules and regulations promulgated thereunder by the Securities and Exchange Commission and the rules and regulations promulgated by The NASDAQ Stock Market.
On October 23, 2015, Carolyn V. Aver resigned as the Chief Financial Officer of Harmonic, effective October 27, 2015. Ms. Aver will remain available to Harmonic in an advisory capacity until December 31, 2015 to assist with the transition of her responsibilities and other related matters. Subject to the approval of Harmonic’s Board, Ms. Aver’s existing vested stock options will be exercisable until May 1, 2016.
In connection with Ms. Aver’s resignation, Mr. Covert was appointed as Harmonic’s Chief Financial Officer and Principal Financial and Accounting Officer, effective October 27, 2015. On October 22, 2015, Harmonic entered into an offer letter agreement with Mr. Covert (the “Offer Letter”) regarding his appointment as Harmonic’s Chief Financial Officer, effective October 27, 2015. Pursuant to the Offer Letter, Mr. Covert will be paid an annual base salary of $390,000. Mr. Covert will be eligible for an annual discretionary bonus of 65% of his annual base salary. Mr. Covert will also be provided with up to $25,000 of relocation assistance. Additionally, subject to the approval by the Board and upon commencement of his employment, Mr. Covert will be granted (i) a stock option to purchase 220,000 shares of Harmonic’s common stock, one-third of which will vest on the one year anniversary of the commencement of his employment, with the remainder vesting in equal monthly installments for two years thereafter, in each case subject to Mr. Covert’s continued employment on those dates and (ii) 110,000 restricted stock units, one-third of which will vest on the one year anniversary of the commencement of his employment, with the remainder vesting in equal installments every six months thereafter, in each case subject to Mr. Covert’s continued employment on those dates.
Mr. Covert and Harmonic have also entered into a Change of Control Severance Agreement, effective October 27, 2015 (the “Change of Control Severance Agreement”), pursuant to which, in the event of termination of Mr. Covert other than for cause (as defined in the Change of Control Severance Agreement) within 18 months following a change in control of Harmonic, Mr. Covert will be entitled to receive a lump-sum payment of one year’s salary, an amount equal to the greater of 50% of Mr. Covert’s then annual target bonus or the average of the actual bonus paid to Mr. Covert in each of the two prior years, and a continuation of Mr. Covert’s health, dental and life insurance benefits for up to one year after the change of control. The Change of Control Severance Agreement also provides for outplacement assistance and the full acceleration of any unvested stock options and restricted stock unit awards held by Mr. Covert in the event of such termination, subject to certain limitations.
The foregoing description of each of the Offer Letter and the Change of Control Severance Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Offer Letter and the Change of Control Severance Agreement, respectively, copies of which are filed as Exhibits 10.1 and 10.2 to this Current Report on Form 8-K, and are incorporated herein by reference.
Mr. Covert has served on Harmonic’s Board since June 2007. From April 2014 through September 2014, he served as an advisor to Lumos Networks Corporation, a fiber-based service provider. From September 2011 through March 2014, Mr.
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Covert served as Executive Vice President and Chief Financial Officer of Lumos Networks. From September 2010 to September 2011, he was an independent business consultant. From October 2007 until September 2010, Mr. Covert was an executive of Silicon Image, Inc., a semiconductor company, serving as Chief Financial Officer from October 2007 until January 2010 and also as its President from September 2009 through September 2010. From 2005 to 2007, Mr. Covert was Executive Vice President and Chief Financial Officer of Openwave Systems Inc., a software applications and infrastructure company. Prior to Openwave, Mr. Covert was Chief Financial Officer at Fortinet Inc. from 2003 to 2005, and Executive Vice President and Chief Financial Officer of Extreme Networks, Inc. from 2001 to 2003. Mr. Covert has been a Director and Chairman of the Audit Committee for Lumentum Holdings, Inc. since August 2015. Mr. Covert was a Director and Chairman of the Audit Committee at JDS Uniphase Corporation from January 2006 until August 2015. Mr. Covert was a director at Solta Medical, Inc. from June 2007 until January 2014 and was a director of Silicon Image from January 2010 until September 2010. Mr. Covert holds a B.S. in Business Administration from Lake Erie College and an M.B.A. from Cleveland State University and is also a Certified Public Accountant and Chartered Global Management Accountant.
Mr. Covert has no family relationships with any of Harmonic’s directors or executive officers, and he has no direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.
On October 21, 2015, George Stromeyer resigned as the senior vice president, worldwide sales, of Harmonic, effective October 30, 2015.
A copy of the press release relating to these announcements is attached hereto as Exhibit 99.2. The information in the press release attached hereto as Exhibit 99.2 attached hereto is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that Section, and Exhibit 99.2 furnished herewith shall not be incorporated by reference into any filing by Harmonic under the Securities Act or under the Exchange Act.
Item 5.03 | Amendment to Articles of Incorporation or Bylaws; Change in Fiscal Year. |
On October 26, 2015, the Board adopted an amendment to Article III, Section 3.2 of Harmonic’s bylaws (the “Bylaws”) to decrease the number of directors of the Board from eight (8) to seven (7). Set forth below is the text of the revised Bylaw provision:
“3.2 NUMBER OF DIRECTORS
The board of directors shall consist of seven (7) members. The number of directors may be changed by an amendment to this bylaw, duly adopted by the board of directors or by the stockholders, or by a duly adopted amendment to the certificate of incorporation. No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires. If for any cause, the directors shall not have been elected at an annual meeting, they may be elected as soon thereafter as convenient at a special meeting of the stockholders called for that purpose in the manner provided in these Bylaws.”
The foregoing description of the amendment to the Bylaws does not purport to be complete and is qualified in its entirety by reference to the full text of the Bylaws, a copy of which is filed as Exhibit 3.2 to this Current Report on Form 8-K, and is incorporated herein by reference.
Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits
Exhibit No. | Description |
3.2 | Amended and Restated Bylaws of Harmonic Inc. |
10.1 | Offer Letter Agreement with Harold Covert, dated October 22, 2015. |
10.2 | Change of Control Severance Agreement between Harmonic Inc. and Harold Covert, dated October 27, 2015. |
99.1 | Press release of Harmonic Inc. dated October 27, 2015, entitled “Harmonic Announces Third Quarter 2015 Results.” |
99.2 | Press release of Harmonic Inc. dated October 27, 2015, entitled “Harmonic Appoints Harold Covert as New Chief Financial Officer.” |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: October 27, 2015 | HARMONIC INC. | |||||
By: | /s/ Timothy C. Chu | |||||
Timothy C. Chu | ||||||
Vice President, General Counsel and Secretary | ||||||
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EXHIBIT INDEX
Exhibit No. | Description |
3.2 | Amended and Restated Bylaws of Harmonic Inc. |
10.1 | Offer Letter Agreement with Harold Covert, dated October 22, 2015. |
10.2 | Change of Control Severance Agreement between Harmonic Inc. and Harold Covert, dated October 27, 2015. |
99.1 | Press release of Harmonic Inc. dated October 27, 2015, entitled “Harmonic Announces Third Quarter 2015 Results.” |
99.2 | Press release of Harmonic Inc. dated October 27, 2015, entitled “Harmonic Appoints Harold Covert as New Chief Financial Officer.” |
EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
OF
HARMONIC INC.
(a Delaware corporation)
TABLE OF CONTENTS
Page | |||
ARTICLE I CORPORATE OFFICES | 1 | ||
1.1 | REGISTERED OFFICE | 1 | |
1.2 | OTHER OFFICES | 1 | |
ARTICLE II MEETINGS OF STOCKHOLDERS | 1 | ||
2.1 | PLACE OF MEETINGS | 1 | |
2.2 | ANNUAL MEETING | 1 | |
2.3 | SPECIAL MEETING | 2 | |
2.4 | NOTICE OF STOCKHOLDERS’ MEETINGS | 2 | |
2.5 | ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS | 2 | |
2.6 | MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE | 5 | |
2.7 | QUORUM | 6 | |
2.8 | ADJOURNED MEETING; NOTICE | 6 | |
2.9 | VOTING | 7 | |
2.10 | VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT | 7 | |
2.11 | STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING | 7 | |
2.12 | RECORD DATE FOR STOCKHOLDER NOTICE; VOTING | 8 | |
2.13 | PROXIES | 8 | |
2.14 | ORGANIZATION | 9 | |
2.15 | LIST OF STOCKHOLDERS ENTITLED TO VOTE | 9 | |
2.16 | INSPECTORS OF ELECTION | 9 | |
ARTICLE III DIRECTORS | 10 | ||
3.1 | POWERS | 10 | |
3.2 | NUMBER OF DIRECTORS | 10 | |
3.3 | ELECTION AND TERM OF OFFICE OF DIRECTORS | 10 | |
3.4 | RESIGNATION AND VACANCIES | 11 | |
3.5 | REMOVAL OF DIRECTORS | 12 | |
3.6 | PLACE OF MEETINGS; MEETINGS BY TELEPHONE | 12 | |
3.7 | FIRST MEETINGS | 12 | |
3.8 | REGULAR MEETINGS | 12 | |
3.9 | SPECIAL MEETINGS; NOTICE | 13 | |
3.10 | QUORUM | 13 | |
3.11 | WAIVER OF NOTICE | 13 | |
3.12 | ADJOURNMENT | 14 | |
3.13 | NOTICE OF ADJOURNMENT | 14 | |
3.14 | BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING | 14 | |
3.15 | FEES AND COMPENSATION OF DIRECTORS | 14 | |
3.16 | APPROVAL OF LOANS TO OFFICERS | 14 | |
3.17 | SOLE DIRECTOR PROVIDED BY CERTIFICATE OF INCORPORATION | 14 | |
ARTICLE IV COMMITTEES | 15 | ||
4.1 | COMMITTEES OF DIRECTORS | 15 | |
4.2 | MEETINGS AND ACTION OF COMMITTEES | 15 | |
4.3 | COMMITTEE MINUTES | 16 | |
ARTICLE V OFFICERS | 16 | ||
5.1 | OFFICERS | 16 | |
5.2 | ELECTION OF OFFICERS | 16 | |
5.3 | SUBORDINATE OFFICERS | 16 | |
5.4 | REMOVAL AND RESIGNATION OF OFFICERS | 17 | |
5.5 | VACANCIES IN OFFICES | 17 | |
5.6 | CHAIRMAN OF THE BOARD | 17 | |
5.7 | PRESIDENT | 17 | |
5.8 | VICE PRESIDENTS | 18 | |
5.9 | SECRETARY | 18 | |
5.10 | CHIEF FINANCIAL OFFICER | 18 | |
5.11 | ASSISTANT SECRETARY | 19 | |
5.12 | ADMINISTRATIVE OFFICERS | 19 | |
5.13 | AUTHORITY AND DUTIES OF OFFICERS | 19 | |
ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS | 19 | ||
6.1 | INDEMNIFICATION OF DIRECTORS AND OFFICERS | 19 | |
6.2 | INDEMNIFICATION OF OTHERS | 20 | |
6.3 | INSURANCE | 21 | |
ARTICLE VII RECORDS AND REPORTS | 21 | ||
7.1 | MAINTENANCE AND INSPECTION OF RECORDS | 21 | |
7.2 | INSPECTION BY DIRECTORS | 21 | |
7.3 | ANNUAL STATEMENT TO STOCKHOLDERS | 21 | |
7.4 | REPRESENTATION OF SHARES OF OTHER CORPORATIONS | 22 | |
7.5 | CERTIFICATION AND INSPECTION OF BYLAWS | 22 | |
ARTICLE VIII GENERAL MATTERS | 22 | ||
8.1 | RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING | 22 | |
8.2 | CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS | 22 | |
8.3 | CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED | 23 | |
8.4 | STOCK CERTIFICATES; TRANSFER; PARTLY PAID SHARES | 23 | |
8.5 | SPECIAL DESIGNATION ON CERTIFICATES | 24 | |
8.6 | LOST CERTIFICATES | 24 | |
8.7 | TRANSFER AGENTS AND REGISTRARS | 24 | |
8.8 | CONSTRUCTION; DEFINITIONS | 24 | |
ARTICLE IX AMENDMENTS | 25 | ||
ARTICLE X DISSOLUTION | 25 | ||
ARTICLE XI CUSTODIAN | 26 | ||
11.1 | APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES | 26 | |
11.2 | DUTIES OF CUSTODIAN | 26 | |
AMENDED AND RESTATED
BYLAWS
OF
HARMONIC INC.
(a Delaware corporation)
ARTICLE I
CORPORATE OFFICES
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be fixed in the certificate of incorporation of the corporation.
1.2 OTHER OFFICES
The board of directors may at any time establish branch or subordinate offices at any place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place within or outside the State of Delaware designated by the board of directors. In the absence of any such designation, stockholders’ meetings shall be held at the principal executive office of the corporation.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date and at a time designated by the board of directors. In the absence of such designation, the annual meeting of stockholders shall be held on the first Tuesday in May in each year at 9:00 a.m. However, if such day falls on a legal holiday, then the meeting shall be held at the same time and place on the next succeeding full business day. At the meeting, directors shall be elected, and any other proper business may be transacted.
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2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by the board of directors, the chairman of the board of directors, or by the president, but such special meetings may not be called by any other person or persons except as otherwise required by General Corporation Law of Delaware or Section 3.4 herein. Only such business shall be considered at a special meeting of stockholders as shall have been stated in the notice for such meeting.
2.4 NOTICE OF STOCKHOLDERS’ MEETINGS
All notices of meetings of stockholders shall be sent or otherwise given in accordance with Section 2.5 of these bylaws not less than ten (10) nor more than sixty (60) days before the date of the meeting. The notice shall specify the place, date and hour of the meeting and (i) in the case of a special meeting, the purpose or purposes for which the meeting is called (no business other than that specified in the notice may be transacted) or (ii) in the case of the annual meeting, those matters which the board of directors, at the time of giving the notice, intends to present for action by the stockholders (but any proper matter may be presented at the meeting for such action). The notice of any meeting at which directors are to be elected shall include the name of any nominee or nominees who, at the time of the notice, the board intends to present for election. Any previously scheduled meeting of the stockholders may be postponed, and (unless the certificate of incorporation otherwise provides) any special meeting of the stockholders may be cancelled, by resolution of the board of directors upon public notice given prior to the date previously scheduled for such meeting of stockholders.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS
(a) To be properly brought before an annual meeting or special meeting, nominations for the election of directors or other business must be (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the board of directors, (ii) otherwise properly brought before the meeting by or at the direction of the board of directors or (iii) otherwise properly brought before the meeting by a stockholder who (x) is a stockholder of record at the time of the giving of notice required by this Section 2.5 and on the record date for the determination of stockholders entitled to vote at the meeting and (y) has timely complied in proper written form with the notice procedures set forth in this Section 2.5. In addition, for business to be properly brought before an annual meeting by a stockholder, such business must be a proper matter for stockholder action pursuant to these bylaws and applicable law. Except as otherwise required by General Corporation Law of Delaware or Section 3.4 herein, stockholders may not bring business before a special meeting of stockholders.
(b) For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in proper written form to the Secretary of the corporation. To be timely, a stockholder’s notice must be received by the Secretary at the principal executive offices of the corporation not less than sixty (60) calendar days nor earlier than ninety (90) calendar days before the one-year anniversary of the date of the preceding year’s
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annual meeting of stockholders; provided, however, that in the event that no annual meeting was held in the preceding year or the date of the annual meeting has been changed by more than thirty (30) days from the date of the preceding year’s annual meeting , then notice by the stockholder to be timely must be so received not later than the close of business on the later of (i) ninety (90) calendar days prior to such annual meeting, or (ii) ten (10) calendar days following the day on which Public Announcement (as defined below) of the date of such annual meeting is first made. In no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period for the giving of a stockholder’s notice as described in this Section 2.5. “Public Announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or a comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended, or any successor thereto (the “1934 Act”). To be in proper written form, a stockholder’s notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting: (1) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (2) the name and address, as they appear on the corporation’s books, of the stockholder proposing such business and any Stockholder Associated Person (as defined below), (3) the class and number of shares of the corporation which are held of record or are beneficially owned by the stockholder or any Stockholder Associated Person and any derivative positions held or beneficially held by the stockholder or any Stockholder Associated Person, (4) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of such stockholder or any Stockholder Associated Person with respect to any securities of the corporation, and a description of any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares), the effect of which is to mitigate loss to, or manage the risk or benefit from share price changes for, or increase or decrease the voting power of, such stockholder or any Stockholder Associated Person with respect to any securities of the corporation, (5) any material interest of the stockholder or a Stockholder Associated Person in such business and (6) a statement whether either such stockholder or any Stockholder Associated Person will deliver a proxy statement and form of proxy to holders of at least the percentage of the corporation’s voting shares required under applicable law to carry the proposal (such information provided and statements made as required by clauses (1) through (6) constitute a “Business Solicitation Statement”). In addition, to be in proper written form, a stockholder’s notice to the Secretary must be supplemented not later than ten (10) calendar days following the record date to disclose the information contained in clauses (3) and (4) above as of the record date (the “Supplement”). For purposes of this Section 2.5, a “Stockholder Associated Person” of any stockholder shall mean (x) any person controlling, directly or indirectly, or acting in concert with, such stockholder, (y) any beneficial owner of shares of stock of the corporation owned of record or beneficially by such stockholder and on whose behalf the proposal or nomination, as the case may be, is being made, or (z) any person controlling, controlled by or under common control with such person referred to in the preceding clauses (x) and (y). Without exception, no business proposed by a stockholder shall be conducted at any annual meeting except in accordance with the procedures set forth in this Section 2.5. In addition, business proposed to be brought by a stockholder may not be brought before the annual meeting if such stockholder or a Stockholder Associated Person, as applicable, takes action contrary to the representations made in the Business Solicitation Statement
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or if the Business Solicitation Statement contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein not misleading. The chairperson of the annual meeting shall, if the facts warrant, determine and declare at the meeting that business was not properly brought before the meeting and in accordance with the provisions of this Section 2.5, and, if the chairperson should so determine, he or she shall so declare at the meeting that any such business not properly brought before the meeting shall not be transacted.
(c) Only persons who are nominated in accordance with the procedures set forth in this Section 2.5(c) shall be eligible for election as directors. Nominations of persons for election to the board of directors of the corporation may be made at an annual meeting of stockholders by or at the direction of the board of directors or by any stockholder of the corporation entitled to vote in the election of directors at the meeting who timely complies with the notice procedures set forth in this paragraph 2.5(c). To be timely, such nominations, other than those made by or at the direction of the board of directors, shall be made pursuant to the notice provisions of Section 2.5(b), and shall be in proper written form as set forth in this Section 2.5(c). Nominations of persons for election to the board of directors of the corporation may be made at a special meeting of stockholders by a stockholder (if the business to be conducted at such meeting, as specified in the notice described in Section 2.4(i), includes the election of directors) if the notice required by this Section 2.5(c) shall be delivered to the Secretary of the corporation not later than the close of business on the later of ninety (90) calendar days prior to such special meeting or ten (10) calendar days following the day on which Public Announcement (as defined above) is first made of the date of the special meeting and of the nominees proposed by the board of directors to be elected at such meeting. To be in proper written form, a stockholder’s notice delivered pursuant to this Section 2.5(c) shall set forth (i) as to each person (a “nominee”) whom the stockholder proposes to nominate for election or re-election as a director: (A) the name, age, business address and residence address of the nominee, (B) the principal occupation or employment of the nominee, (C) the class and number of shares of the corporation which are held of record or are beneficially owned by the nominee and any derivative positions held or beneficially held by the nominee, (D) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of the nominee with respect to any securities of the corporation, and a description of any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares), the effect or intent of which is to mitigate loss to, or manage the risk or benefit from share price changes for, or increase or decrease the voting power of the nominee with respect to any securities of the corporation, (E) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by the stockholder, (F) a written statement executed by the nominee acknowledging that as a director of the corporation, the nominee will owe fiduciary duties under Delaware law with respect to the corporation and its stockholders, and (G) any other information relating to the nominee that would be required to be disclosed about such nominee if proxies were being solicited for the election of the nominee as a director, or is otherwise required, in each case pursuant to Regulation 14A under the 1934 Act (including without limitation the nominee’s written consent to being named in the proxy statement, if any, as a nominee and to serving as a director if elected); and (ii) as to such stockholder giving notice, (x) the information required to be provided in a stockholder’s notice pursuant to clauses (2) through (5) of Section 2.5(b) and the Supplement
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referenced in Section 2.5(b) (except that the references to “business” in such Section 2.5(b) shall instead refer to nominations of directors for purposes of this Section 2.5(c)), and (y) a statement whether either such stockholder or Stockholder Associated Person will deliver a proxy statement and form of proxy to holders of a number of the corporation’s voting shares reasonably believed by such stockholder or Stockholder Associated Person to be necessary to elect such nominee(s) (such information provided and statements made as required by preceding clauses (i) and (ii) above constitute a “Nominee Solicitation Statement”). At the request of the board of directors, any person nominated by a stockholder for election as a director shall furnish to the Secretary of the corporation (1) that information required to be set forth in the stockholder’s Nominee Solicitation Statement as of a date subsequent to the date on which the notice of such person’s nomination was given and (2) such other information as may reasonably be required by the corporation to determine the eligibility of such proposed nominee to serve as independent director of the corporation or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee; in the absence of the furnishing of such information if requested, such stockholder’s nomination shall not be considered in proper form pursuant to this Section 2.5(c). Without exception, no person nominated by a stockholder shall be eligible for election or re-election as a director of the corporation unless nominated in accordance with the procedures set forth in this Section 2.5(c). In addition, a nominee shall not be eligible for election or re-election if a stockholder or Stockholder Associated Person, as applicable, takes action contrary to the representations made in the Nominee Solicitation Statement or if the Nominee Solicitation Statement contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein not misleading. The chairperson of the meeting shall, if the facts warrants, determine and declare at the meeting that a nomination was not made in accordance with the procedures prescribed by these bylaws, and if the chairperson should so determine, he or she shall so declare at the meeting, and the defective nomination shall be disregarded.
(d) In addition to the foregoing provisions of this Section 2.5, a stockholder must also comply with all applicable requirements of state law and of the 1934 Act and the rules and regulations thereunder with respect to the matters set forth in this Section 2.5, including with respect to business such stockholder intends to bring before the annual meeting that involves a proposal or nomination that such stockholder requests to be included in the corporation’s proxy statement, the requirements of Rule 14a-8 (or any successor provision) under the 1934 Act. Nothing in this Section 2.5 shall be deemed to affect any right of the corporation to omit a proposal from the corporation’s proxy statement pursuant to Rule 14a-8 (or any successor provision) under the 1934 Act.
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders shall be given either personally or by first-class mail or by telegraphic or other written communication. Notices not personally delivered shall be sent charges prepaid and shall be addressed to the stockholder at the address of that stockholder appearing on the books of the corporation or given by the stockholder to the corporation for the purpose of notice. Notice shall be deemed to have been given at the time when delivered personally or deposited in the mail or sent by telegram or other means of written communication. If any notice
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addressed to a stockholder at the address of that stockholder appearing on the books of the corporation is returned to the corporation by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the notice to the stockholder at that address, then all future notices or reports shall be deemed to have been duly given without further mailing if the same shall be available to the stockholder on written demand of the stockholder at the principal executive office of the corporation for a period of one (1) year from the date of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of any stockholders’ meeting, executed by the secretary, assistant secretary or any transfer agent of the corporation giving the notice, shall be prima facie evidence of the giving of such notice.
2.7 QUORUM
The holders of a majority in voting power of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy at the meeting, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum is not present or represented at any meeting of the stockholders, then either (i) the chairman of the meeting or (ii) the holders of a majority of the shares represented at the meeting and entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting in accordance with Section 2.8 of these bylaws.
When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which, by express provision of the laws of the State of Delaware or of the certificate of incorporation or these bylaws, a different vote is required, in which case such express provision shall govern and control the decision of the question.
If a quorum be initially present, the stockholders may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum, if any action taken is approved by a majority of the stockholders initially constituting the quorum.
2.8 ADJOURNED MEETING; NOTICE
Any stockholders’ meeting, annual or special, whether or not a quorum is present, may be adjourned from time to time by (i) the chairman of the meeting or (ii) the stockholders by the vote of the holders of a majority of the shares represented at that meeting and entitled to vote thereat, either in person or by proxy. In the absence of a quorum, no other business may be transacted at that meeting except as provided in Section 2.7 of these bylaws.
When a meeting is adjourned to another time and place, unless these bylaws otherwise require, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. In no event shall the public announcement of an adjournment of a stockholders meeting commence a new time period for the
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giving of a stockholder’s notice as described in Section 2.5(b) or 2.5(c) herein. At the adjourned meeting the corporation may transact any business that might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
2.9 VOTING
The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.12 of these bylaws, subject to the provisions of Sections 217 and 218 of the General Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners, and to voting trusts and other voting agreements).
Except as may be otherwise provided in the certificate of incorporation or these bylaws, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder. Any stockholder entitled to vote on any matter may vote part of the shares in favor of the proposal and refrain from voting the remaining shares or, except when the matter is the election of directors, may vote them against the proposal; but, if the stockholder fails to specify the number of shares which the stockholder is voting affirmatively, it will be conclusively presumed that the stockholder’s approving vote is with respect to all shares which the stockholder is entitled to vote.
2.10 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT
The transactions of any meeting of stockholders, either annual or special, however called and noticed, and wherever held, shall be as valid as though they had been taken at a meeting duly held after regular call and notice, if a quorum be present either in person or by proxy, and if, either before or after the meeting, each person entitled to vote, who was not present in person or by proxy, signs a written waiver of notice or a consent to the holding of the meeting or an approval of the minutes thereof. The waiver of notice or consent or approval need not specify either the business to be transacted or the purpose of any annual or special meeting of stockholders. All such waivers, consents, and approvals shall be filed with the corporate records or made a part of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of notice of and presence at that meeting, except when the person objects at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Attendance at a meeting is not a waiver of any right to object to the consideration of matters required by law to be included in the notice of the meeting but not so included, if that objection is expressly made at the meeting.
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken at any annual or special meeting of stockholders may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing setting forth the action so taken shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action
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at a meeting at which all shares entitled to vote thereon were present and voted. Such consents shall be delivered to the corporation by delivery to it registered office in the state of Delaware, its principal place of business, or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to a corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested.
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING
For purposes of determining the stockholders entitled to notice of any meeting or to vote thereat or entitled to give consent to corporate action without a meeting, the board of directors may fix, in advance, a record date, which shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors and which shall not be more than sixty (60) days nor less than ten (10) days before the date of any such meeting, and in such event only stockholders of record on the date so fixed are entitled to notice and to vote, notwithstanding any transfer of any shares on the books of the corporation after the record date.
If the board of directors does not so fix a record date:
(a) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the business day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held; and
(b) the record date for determining stockholders entitled to give consent to corporate action in writing without a meeting, (i) when no prior action by the board is required, shall be the day on which the first written consent is delivered to the corporation as provided in Section 2.3(b) of the General Corporation Law of Delaware, or (ii) when prior action by the board is required, shall be at the close of business on the day on which the board adopts the resolution relating to that action.
A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting unless the board of directors fixes a new record date for the adjourned meeting, but the board of directors shall fix a new record date if the meeting is adjourned for more than thirty (30) days from the date set for the original meeting.
The record date for any other purpose shall be as provided in Section 8.1 of these bylaws.
2.13 PROXIES
Every person entitled to vote for directors, or on any other matter, shall have the right to do so either in person or by one or more agents authorized by a written proxy signed by the person and filed with the secretary of the corporation, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. A proxy shall be deemed signed if the stockholder’s name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission, telefacsimile or otherwise) by the stockholder or the stockholder’s
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attorney-in-fact. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212(e) of the General Corporation Law of Delaware.
2.14 ORGANIZATION
The president, or in the absence of the president, the chairman of the board, shall call the meeting of the stockholders to order, and shall act as chairman of the meeting. In the absence of the president, the chairman of the board, and all of the vice presidents, the stockholders shall appoint a chairman for such meeting. The chairman of any meeting of stockholders shall determine the order of business and the procedures at the meeting, including such matters as the regulation of the manner of voting and the conduct of business. The secretary of the corporation shall act as secretary of all meetings of the stockholders, but in the absence of the secretary at any meeting of the stockholders, the chairman of the meeting may appoint any person to act as secretary of the meeting.
2.15 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.
2.16 INSPECTORS OF ELECTION
Before any meeting of stockholders, the board of directors may appoint an inspector or inspectors of election to act at the meeting or its adjournment. If no inspector of election is so appointed, then the chairman of the meeting may, and on the request of any stockholder or a stockholder’s proxy shall, appoint an inspector or inspectors of election to act at the meeting. The number of inspectors shall be either one (1) or three (3). If inspectors are appointed at a meeting pursuant to the request of one (1) or more stockholders or proxies, then the holders of a majority of shares or their proxies present at the meeting shall determine whether one (1) or three (3) inspectors are to be appointed. If any person appointed as inspector fails to appear or fails or refuses to act, then the chairman of the meeting may, and upon the request of any stockholder or a stockholder’s proxy shall, appoint a person to fill that vacancy.
Such inspectors shall:
(a) determine the number of shares outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, and the authenticity, validity, and effect of proxies;
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(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in any way arising in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
(g) do any other acts that may be proper to conduct the election or vote with fairness to all stockholders.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware and to any limitations in the certificate of incorporation or these bylaws relating to action required to be approved by the stockholders or by the outstanding shares, the business and affairs of the corporation shall be managed and shall be exercised by or under the direction of the board of directors. In addition to the powers and authorities these bylaws expressly confer upon them, the board of directors may exercise all such powers of the corporation and do all such lawful acts and things as are not by the General Corporation Law of Delaware or by the certificate of incorporation or by these bylaws required to be exercised or done by the stockholders.
3.2 NUMBER OF DIRECTORS
The board of directors shall consist seven (7) members. The number of directors may be changed by an amendment to this bylaw, duly adopted by the board of directors or by the stockholders, or by a duly adopted amendment to the certificate of incorporation. No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires. If for any cause, the directors shall not have been elected at an annual meeting, they may be elected as soon thereafter as convenient at a special meeting of the stockholders called for that purpose in the manner provided in these Bylaws.
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these bylaws, directors shall be elected at each annual meeting of stockholders to hold office until the next annual meeting. Each director, including a director elected or appointed to fill a vacancy, shall hold office until the expiration of the term for
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which elected and until such director’s successor has been elected and qualified or until such director’s earlier resignation or removal.
3.4 RESIGNATION AND VACANCIES
Any director may resign effective on giving written notice to the chairman of the board, the president, the secretary or the board of directors, unless the notice specifies a later time for that resignation to become effective. If the resignation of a director is effective at a future time, the board of directors may elect a successor to take office when the resignation becomes effective.
Vacancies in the board of directors may be filled by a majority of the remaining directors, even if less than a quorum, or by a sole remaining director; however, a vacancy created by the removal of a director by the vote of the stockholders or by court order may be filled only by the affirmative vote of a majority of the shares represented and voting at a duly held meeting at which a quorum is present (which shares voting affirmatively also constitute a majority of the required quorum). Each director so elected shall hold office until the next annual meeting of the stockholders and until a successor has been elected and qualified.
Unless otherwise provided in the certificate of incorporation or these bylaws:
(i) Vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director.
(ii) Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected.
Any directors chosen pursuant to this Section 3.4 shall hold office for a term expiring at the next annual meeting of stockholders and until such director’s successor shall have been duly elected and qualified.
If at any time, by reason of death or resignation or other cause, the corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of the certificate of incorporation or these bylaws, or may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created directorship, the directors then in office constitute less than a majority of the whole board (as constituted immediately prior to any
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such increase), then the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent (10%) of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office as aforesaid, which election shall be governed by the provisions of Section 211 of the General Corporation Law of Delaware as far as applicable.
3.5 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the certificate of incorporation or by these bylaws, any director or the entire board of directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors; provided, however, that, if and so long as stockholders of the corporation are entitled to cumulative voting, if less than the entire board is to be removed, no director may be removed without cause if the votes cast against his removal would be sufficient to elect him if then cumulatively voted at an election of the entire board of directors.
3.6 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
Regular meetings of the board of directors may be held at any place within or outside the State of Delaware that has been designated from time to time by resolution of the board. In the absence of such a designation, regular meetings shall be held at the principal executive office of the corporation. Special meetings of the board may be held at any place within or outside the State of Delaware that has been designated in the notice of the meeting or, if not stated in the notice or if there is no notice, at the principal executive office of the corporation.
Any meeting of the board, regular or special, may be held by conference telephone or similar communication equipment, so long as all directors participating in the meeting can hear one another; and all such participating directors shall be deemed to be present in person at the meeting.
3.7 FIRST MEETINGS
The first meeting of each newly elected board of directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting. In the event of the failure of the stockholders to fix the time or place of such first meeting of the newly elected board of directors, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the board of directors, or as shall be specified in a written waiver signed by all of the directors.
3.8 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice at such time as shall from time to time be determined by the board of directors. If any regular meeting day shall fall on a
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legal holiday, then the meeting shall be held at the same time and place on the next succeeding full business day.
3.9 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes may be called at any time by the chairman of the board of directors, the president, any vice president, the secretary or any two directors.
The person or persons authorized to call special meetings of the board of directors may fix the time and place of the meetings. Notice of the time and place of special meetings shall be delivered personally or by telephone to each director or sent by first-class mail, courier service or telegram, telecopy or other electronic or wireless means, charges prepaid, addressed to each director at that director’s address as it is shown on the records of the corporation. If the notice is by mail, such notice shall be deposited in the United States mail at least four (4) days before the time of the holding of the meeting. If the notice is by courier service, telegram, overnight mail, telecopy or other electronic or wireless means, such notice shall be deemed adequately delivered when the notice is transmitted at least twenty-four (24) hours prior to the time set for such meeting. If the notice is by telephone or by hand delivery, such notice shall be deemed adequately delivered when the notice is given at least twenty-four (24) hours prior to the time set for such meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose or the place of the meeting, if the meeting is to be held at the principal executive office of the corporation.
3.10 QUORUM
A majority of the authorized number of directors shall constitute a quorum for the transaction of business, except to adjourn as provided in Section 3.12 of these bylaws. Every act or decision done or made by a majority of the directors present at a duly held meeting at which a quorum is present shall be regarded as the act of the board of directors, subject to the provisions of the certificate of incorporation and applicable law.
A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the quorum for that meeting.
3.11 WAIVER OF NOTICE
Notice of a meeting need not be given to any director (i) who signs a waiver of notice, whether before or after the meeting, or (ii) who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to such directors. All such waivers shall be filed with the corporate records or made part of the minutes of the meeting. A waiver of notice need not specify the purpose of any regular or special meeting of the board of directors.
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3.12 ADJOURNMENT
A majority of the directors present, whether or not constituting a quorum, may adjourn any meeting of the board to another time and place.
3.13 NOTICE OF ADJOURNMENT
Notice of the time and place of holding an adjourned meeting of the board need not be given unless the meeting is adjourned for more than twenty-four (24) hours. If the meeting is adjourned for more than twenty-four (24) hours, then notice of the time and place of the adjourned meeting shall be given before the adjourned meeting takes place, in the manner specified in Section 3.9 of these bylaws, to the directors who were not present at the time of the adjournment.
3.14 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken by the board of directors may be taken without a meeting, provided that all members of the board individually or collectively consent in writing to that action. Such action by written consent shall have the same force and effect as a unanimous vote of the board of directors. Such written consent and any counterparts thereof shall be filed with the minutes of the proceedings of the board of directors.
3.15 FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if any, for their services and such reimbursement of expenses as may be fixed or determined by resolution of the board of directors. This Section 3.15 shall not be construed to preclude any director from serving the corporation in any other capacity as an officer, agent, employee or otherwise and receiving compensation for those services.
3.16 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or any of its subsidiaries, including any officer or employee who is a director of the corporation or any of its subsidiaries, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the corporation. The loan, guaranty or other assistance may be with or without interest and may be unsecured, or secured in such manner as the board of directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing contained in this section shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute.
3.17 SOLE DIRECTOR PROVIDED BY CERTIFICATE OF INCORPORATION
In the event only one director is required by these bylaws or the certificate of incorporation, then any reference herein to notices, waivers, consents, meetings or other actions by a majority or quorum of the directors shall be deemed to refer to such notice, waiver, etc., by such sole director,
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who shall have all the rights and duties and shall be entitled to exercise all of the powers and shall assume all the responsibilities otherwise herein described as given to the board of directors.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution adopted by a majority of the authorized number of directors, designate one (1) or more committees, each consisting of two or more directors, to serve at the pleasure of the board. The board may designate one (1) or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. The appointment of members or alternate members of a committee requires the vote of a majority of the authorized number of directors. Any committee, to the extent provided in the resolution of the board, shall have and may exercise all the powers and authority of the board, but no such committee shall have the power or authority to (i) amend the certificate of incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the board of directors as provided in Section 151(a) of the General Corporation Law of Delaware, fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the corporation), (ii) adopt an agreement of merger or consolidation under Sections 251 or 252 of the General Corporation Law of Delaware, (iii) recommend to the stockholders the sale, lease or exchange of all or substantially all of the corporation’s property and assets, (iv) recommend to the stockholders a dissolution of the corporation or a revocation of a dissolution or (v) amend the bylaws of the corporation; and, unless the board resolution establishing the committee, the bylaws or the certificate of incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock, or to adopt a certificate of ownership and merger pursuant to Section 253 of the General Corporation Law of Delaware.
4.2 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and taken in accordance with, the following provisions of Article III of these bylaws: Section 3.6 (place of meetings; meetings by telephone), Section 3.8 (regular meetings), Section 3.9 (special meetings; notice), Section 3.10 (quorum), Section 3.11 (waiver of notice), Section 3.12 (adjournment), Section 3.13 (notice of adjournment) and Section 3.14 (board action by written consent without meeting), with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the board of directors and its members; provided, however, that the time of regular meetings of committees may be determined either by resolution of the board of directors or by resolution of the committee, that special meetings of committees may also be called by resolution of
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the board of directors, and that notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The board of directors may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws.
4.3 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required.
ARTICLE V
OFFICERS
5.1 OFFICERS
The Corporate Officers of the corporation shall be a president, a secretary and a chief financial officer. The corporation may also have, at the discretion of the board of directors, a chairman of the board, one or more vice presidents (however denominated), one or more assistant secretaries, one or more assistant treasurers and such other officers as may be appointed in accordance with the provisions of Section 5.3 of these bylaws. Any number of offices may be held by the same person.
In addition to the Corporate Officers of the Company described above, there may also be such Administrative Officers of the corporation as may be designated and appointed from time to time by the president of the corporation in accordance with the provisions of Section 5.12 of these bylaws.
5.2 ELECTION OF OFFICERS
The Corporate Officers of the corporation, except such officers as may be appointed in accordance with the provisions of Section 5.3 or Section 5.5 of these bylaws, shall be chosen by the board of directors, subject to the rights, if any, of an officer under any contract of employment, and shall hold their respective offices for such terms as the board of directors may from time to time determine.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or may empower the president to appoint, such other Corporate Officers as the business of the corporation may require, each of whom shall hold office for such period, have such power and authority, and perform such duties as are provided in these bylaws or as the board of directors may from time to time determine.
The president may from time to time designate and appoint Administrative Officers of the corporation in accordance with the provisions of Section 5.12 of these bylaws.
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5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of a Corporate Officer under any contract of employment, any Corporate Officer may be removed, either with or without cause, by the board of directors at any regular or special meeting of the board or, except in case of a Corporate Officer chosen by the board of directors, by any Corporate Officer upon whom such power of removal may be conferred by the board of directors.
Any Corporate Officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the Corporate Officer is a party.
Any Administrative Officer designated and appointed by the president may be removed, either with or without cause, at any time by the president. Any Administrative Officer may resign at any time by giving written notice to the president or to the secretary of the corporation.
5.5 VACANCIES IN OFFICES
A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in these bylaws for regular appointments to that office.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if present, preside at meetings of the board of directors and exercise such other powers and perform such other duties as may from time to time be assigned to him by the board of directors or as may be prescribed by these bylaws. If there is no president, then the chairman of the board shall also be the chief executive officer of the corporation and shall have the powers and duties prescribed in Section 5.7 of these bylaws.
5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the board of directors to the chairman of the board, if there be such an officer, the president shall be the chief executive officer of the corporation and shall, subject to the control of the board of directors, have general supervision, direction and control of the business and the officers of the corporation. He or she shall preside at all meetings of the stockholders and, in the absence or nonexistence of a chairman of the board, at all meetings of the board of directors. He or she shall have the general powers and duties of management usually vested in the office of president of a corporation, and shall have such other powers and perform such other duties as may be prescribed by the board of directors or these bylaws.
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5.8 VICE PRESIDENTS
In the absence or disability of the president, and if there is no chairman of the board, the vice presidents, if any, in order of their rank as fixed by the board of directors or, if not ranked, a vice president designated by the board of directors, shall perform all the duties of the president and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the board of directors, these bylaws, the president or the chairman of the board.
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal executive office of the corporation or such other place as the board of directors may direct, a book of minutes of all meetings and actions of the board of directors, committees of directors and stockholders. The minutes shall show the time and place of each meeting, whether regular or special (and, if special, how authorized and the notice given), the names of those present at directors’ meetings or committee meetings, the number of shares present or represented at stockholders’ meetings and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive office of the corporation or at the office of the corporation’s transfer agent or registrar, as determined by resolution of the board of directors, a share register or a duplicate share register, showing the names of all stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates evidencing such shares and the number and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of the stockholders and of the board of directors required to be given by law or by these bylaws. He or she shall keep the seal of the corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the board of directors or by these bylaws.
5.10 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings and shares. The books of account shall at all reasonable times be open to inspection by any director for a purpose reasonably related to his position as a director.
The chief financial officer shall deposit all money and other valuables in the name and to the credit of the corporation with such depositaries as may be designated by the board of directors. He or she shall disburse the funds of the corporation as may be ordered by the board of directors, shall render to the president and directors, whenever they request it, an account of all of his or her transactions as chief financial officer and of the financial condition of the corporation, and shall have
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such other powers and perform such other duties as may be prescribed by the board of directors or these bylaws.
5.11 ASSISTANT SECRETARY
The assistant secretary, if any, or, if there is more than one, the assistant secretaries in the order determined by the board of directors (or if there be no such determination, then in the order of their election) shall, in the absence of the secretary or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.
5.12 ADMINISTRATIVE OFFICERS
In addition to the Corporate Officers of the corporation as provided in Section 5.1 of these bylaws and such subordinate Corporate Officers as may be appointed in accordance with Section 5.3 of these bylaws, there may also be such Administrative Officers of the corporation as may be designated and appointed from time to time by the president of the corporation. Administrative Officers shall perform such duties and have such powers as from time to time may be determined by the president or the board of directors in order to assist the Corporate Officers in the furtherance of their duties. In the performance of such duties and the exercise of such powers, however, such Administrative Officers shall have limited authority to act on behalf of the corporation as the board of directors shall establish, including but not limited to limitations on the dollar amount and on the scope of agreements or commitments that may be made by such Administrative Officers on behalf of the corporation, which limitations may not be exceeded by such individuals or altered by the president without further approval by the board of directors.
5.13 AUTHORITY AND DUTIES OF OFFICERS
In addition to the foregoing powers, authority and duties, all officers of the corporation shall respectively have such authority and powers and perform such duties in the management of the business of the corporation as may be designated from time to time by the board of directors.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner permitted by the General Corporation Law of Delaware as the same now exists or may hereafter be amended, indemnify any person against expenses (including attorneys’ fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred in connection with any threatened, pending or completed action, suit, or proceeding in which such person was or is a party or is threatened to be made a party by reason of the fact that such person is or was a director or officer of the corporation. For purposes of this Section 6.1, a “director” or “officer” of the corporation shall mean any person (i) who is or was a director or officer of the corporation, (ii) who is or was serving at the request of the corporation as a
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director or officer of another corporation, partnership, joint venture, trust or other enterprise or (iii) who was a director or officer of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation.
The corporation shall be required to indemnify a director or officer in connection with an action, suit, or proceeding (or part thereof) initiated by such director or officer only if the initiation of such action, suit, or proceeding (or part thereof) by the director or officer was authorized by the board of Directors of the corporation.
The corporation shall pay the expenses (including attorney’s fees) incurred by a director or officer of the corporation entitled to indemnification hereunder in defending any action, suit or proceeding referred to in this Section 6.1 in advance of its final disposition; provided, however, that payment of expenses incurred by a director or officer of the corporation in advance of the final disposition of such action, suit or proceeding shall be made only upon receipt of an undertaking by the director or officer to repay all amounts advanced if it should ultimately be determined that the director or officer is not entitled to be indemnified under this Section 6.1 or otherwise.
The rights conferred on any person by this Article shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the corporation’s certificate of incorporation, these bylaws, agreement, vote of the stockholders or disinterested directors or otherwise.
Any repeal or modification of the foregoing provisions of this Article shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification.
6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the maximum extent and in the manner permitted by the General Corporation Law of Delaware as the same now exists or may hereafter be amended, to indemnify any person (other than directors and officers) against expenses (including attorneys’ fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred in connection with any threatened, pending or completed action, suit, or proceeding, in which such person was or is a party or is threatened to be made a party by reason of the fact that such person is or was an employee or agent of the corporation. For purposes of this Section 6.2, an “employee” or “agent” of the corporation (other than a director or officer) shall mean any person (i) who is or was an employee or agent of the corporation, (ii) who is or was serving at the request of the corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise or (iii) who was an employee or agent of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation.
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6.3 INSURANCE
The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify him or her against such liability under the provisions of the General Corporation Law of Delaware.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive office or at such place or places as designated by the board of directors, keep a record of its stockholders listing their names and addresses and the number and class of shares held by each stockholder, a copy of these bylaws as amended to date, accounting books and other records of its business and properties.
Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation’s stock ledger, a list of its stockholders, and its other books and records and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person’s interest as a stockholder. In every instance where an attorney or other agent is the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing that authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in Delaware or at its principal place of business.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation’s stock ledger, a list of its stockholders and its other books and records for a purpose reasonably related to his or her position as a director.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
The board of directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation.
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7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, if any, the president, any vice president, the chief financial officer, the secretary or any assistant secretary of this corporation, or any other person authorized by the board of directors or the president or a vice president, is authorized to vote, represent and exercise on behalf of this corporation all rights incident to any and all shares of the stock of any other corporation or corporations standing in the name of this corporation. The authority herein granted may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.
7.5 CERTIFICATION AND INSPECTION OF BYLAWS
The original or a copy of these bylaws, as amended or otherwise altered to date, certified by the secretary, shall be kept at the corporation’s principal executive office and shall be open to inspection by the stockholders of the corporation, at all reasonable times during office hours.
ARTICLE VIII
GENERAL MATTERS
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
For purposes of determining the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not precede the date upon which the resolution fixing the record date is adopted and which shall not be more than sixty (60) days before any such action. In that case, only stockholders of record at the close of business on the date so fixed are entitled to receive the dividend, distribution or allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date so fixed, except as otherwise provided by law.
If the board of directors does not so fix a record date, then the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the board of directors adopts the applicable resolution.
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
From time to time, the board of directors shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the corporation, and only the persons so authorized shall sign or endorse those instruments.
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8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED
The board of directors, except as otherwise provided in these bylaws, may authorize and empower any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation; such power and authority may be general or confined to specific instances. Unless so authorized or ratified by the board of directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.
8.4 STOCK CERTIFICATES; TRANSFER; PARTLY PAID SHARES
The shares of the corporation shall be represented by certificates, provided that the board of directors of the corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Notwithstanding the adoption of such a resolution by the board of directors, every holder of stock represented by certificates and, upon request, every holder of uncertificated shares, shall be entitled to have a certificate signed by, or in the name of the corporation by, the chairman or vice-chairman of the board of directors, or the president or vice-president, and by the treasurer or an assistant treasurer, or the secretary or an assistant secretary of such corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue.
Certificates for shares shall be of such form and device as the board of directors may designate and shall state the name of the record holder of the shares represented thereby; its number; date of issuance; the number of shares for which it is issued; a summary statement or reference to the powers, designations, preferences or other special rights of such stock and the qualifications, limitations or restrictions of such preferences and/or rights, if any; a statement or summary of liens, if any; a conspicuous notice of restrictions upon transfer or registration of transfer, if any; a statement as to any applicable voting trust agreement; if the shares be assessable, or, if assessments are collectible by personal action, a plain statement of such facts.
Upon surrender to the secretary or transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.
The corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, or upon the books and records of the corporation in the case of uncertificated partly paid shares, the total amount of the consideration to
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be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.
8.5 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the corporation shall issue to represent such class or series of stock a statement that the corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.
8.6 LOST CERTIFICATES
Except as provided in this Section 8.6, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation and cancelled at the same time. The board of directors may, in case any share certificate or certificate for any other security is lost, stolen or destroyed, authorize the issuance of replacement certificates on such terms and conditions as the board may require; the board may require indemnification of the corporation secured by a bond or other adequate security sufficient to protect the corporation against any claim that may be made against it, including any expense or liability, on account of the alleged loss, theft or destruction of the certificate or the issuance of the replacement certificate.
8.7 TRANSFER AGENTS AND REGISTRARS
The board of directors may appoint one or more transfer agents or transfer clerks, and one or more registrars, each of which shall be an incorporated bank or trust company — either domestic or foreign, who shall be appointed at such times and places as the requirements of the corporation may necessitate and the board of directors may designate.
8.8 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of construction and definitions in the General Corporation Law of Delaware shall govern the construction of these bylaws. Without limiting the generality of this provision, as used in these bylaws, the singular number includes the plural, the plural number includes the singular, and the term “person” includes both an entity and a natural person.
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ARTICLE IX
AMENDMENTS
The original or other bylaws of the corporation may be adopted, amended or repealed by the stockholders entitled to vote; provided, however, that the corporation may, in its certificate of incorporation, confer the power to adopt, amend or repeal bylaws upon the directors. The fact that such power has been so conferred upon the directors shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal bylaws.
Whenever an amendment or new bylaw is adopted, it shall be copied in the book of bylaws with the original bylaws, in the appropriate place. If any bylaw is repealed, the fact of repeal with the date of the meeting at which the repeal was enacted or the filing of the operative written consent(s) shall be stated in said book.
ARTICLE X
DISSOLUTION
If it should be deemed advisable in the judgment of the board of directors of the corporation that the corporation should be dissolved, the board, after the adoption of a resolution to that effect by a majority of the whole board at any meeting called for that purpose, shall cause notice to be mailed to each stockholder entitled to vote thereon of the adoption of the resolution and of a meeting of stockholders to take action upon the resolution.
At the meeting a vote shall be taken for and against the proposed dissolution. If a majority of the outstanding stock of the corporation entitled to vote thereon votes for the proposed dissolution, then a certificate stating that the dissolution has been authorized in accordance with the provisions of Section 275 of the General Corporation Law of Delaware and setting forth the names and residences of the directors and officers shall be executed, acknowledged, and filed and shall become effective in accordance with Section 103 of the General Corporation Law of Delaware. Upon such certificate’s becoming effective in accordance with Section 103 of the General Corporation Law of Delaware, the corporation shall be dissolved.
Whenever all the stockholders entitled to vote on a dissolution consent in writing, either in person or by duly authorized attorney, to a dissolution, no meeting of directors or stockholders shall be necessary. The consent shall be filed and shall become effective in accordance with Section 103 of the General Corporation Law of Delaware. Upon such consent’s becoming effective in accordance with Section 103 of the General Corporation Law of Delaware, the corporation shall be dissolved. If the consent is signed by an attorney, then the original power of attorney or a photocopy thereof shall be attached to and filed with the consent. The consent filed with the Secretary of State shall have attached to it the affidavit of the secretary or some other officer of the corporation stating that the consent has been signed by or on behalf of all the stockholders entitled to vote on a dissolution; in addition, there shall be attached to the consent a certification by the secretary or some other officer
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of the corporation setting forth the names and residences of the directors and officers of the corporation.
ARTICLE XI
CUSTODIAN
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
The Court of Chancery, upon application of any stockholder, may appoint one or more persons to be custodians and, if the corporation is insolvent, to be receivers, of and for the corporation when:
(i) at any meeting held for the election of directors the stockholders are so divided that they have failed to elect successors to directors whose terms have expired or would have expired upon qualification of their successors; or
(ii) the business of the corporation is suffering or is threatened with irreparable injury because the directors are so divided respecting the management of the affairs of the corporation that the required vote for action by the board of directors cannot be obtained and the stockholders are unable to terminate this division; or
(iii) the corporation has abandoned its business and has failed within a reasonable time to take steps to dissolve, liquidate or distribute its assets.
11.2 DUTIES OF CUSTODIAN
The custodian shall have all the powers and title of a receiver appointed under Section 291 of the General Corporation Law of Delaware, but the authority of the custodian shall be to continue the business of the corporation and not to liquidate its affairs and distribute its assets, except when the Court of Chancery otherwise orders and except in cases arising under Sections 226(a)(3) or 352(a)(2) of the General Corporation Law of Delaware.
Effective October 26, 2015
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Exhibit 10.1
October 22, 2015
Harold Covert
2217 Crimson King Drive
Braselton, GA 30517
Dear Hal,
I am pleased to offer you the position of Chief Financial Officer reporting to me.
You will receive a starting bi-weekly salary of $15,000.000 which equates to $390,000.00 on an annualized basis (for computational purposes only). In addition, you will have an annual cash incentive target of 65% of your annual salary (prorated from your employment start date), which will be dependent upon Harmonic’s achievement of certain corporate financial objectives and your direct contributions toward achieving these objectives as will be set forth in our executive incentive plan. All of the above amounts are subject to federal and state tax withholdings.
Harmonic will provide you relocation assistance up to $25,000.00 (portions of which may be subject to tax withholdings). This amount may be used to cover certain costs associated with house hunting trips to California, temporary housing, car rental, and shipping of household goods. All relocation expenses must be supported by receipts and approved by me. If you voluntarily terminate from Harmonic before the completion of one year of employment, you will be required to repay any portion of the relocation assistance that has been utilized, on a pro-rata basis.
Upon commencement of employment with Harmonic, you will be eligible to receive a stock option grant entitling you to purchase 220,000 shares of Harmonic Common Stock. The exercise price will be the closing market price of Harmonic’s shares on the grant approval date. The options will vest incrementally over a three (3) year period subject to your continued service with Harmonic, with 1/3 vesting upon the first anniversary of your employment commencement date and the remaining balance of the options vesting over the following two (2) year period with vesting occurring in equal monthly installments. Also, upon commencement of employment, you will be eligible to receive 110,000 restricted stock units (RSUs), each unit representing one share of Harmonic Common Stock. These RSUs will vest over a three (3) year period subject to your continued service with Harmonic, with 1/3 vesting upon the first anniversary of your employment commencement date and approximately 16.66% of the remaining RSUs vesting every six (6) months thereafter. These option and RSU grants will be subject to the terms and conditions of Harmonic’s 1995 Stock Plan, as amended, and the form of award agreements approved for making option and RSU grants thereunder. The option and RSU grants described above are subject to approval by the Compensation Committee of the Board of Directors of Harmonic.
Additionally, you will be offered to become a party to Harmonic’s standard executive Change of Control Severance Agreement. Details of this agreement will be communicated to you under separate cover.
Harmonic offers a comprehensive benefits package which includes health and welfare plans, 401(k) thrift savings plan, and an employee stock purchase plan. We reserve the right to modify or change our benefits at any time in our sole discretion. We will provide you with additional information regarding our complete list of our current fringe benefits during your orientation session.
If you decide to accept this offer of employment with the Company, you are required to sign and comply with the Company’s At-Will Employment, Confidential Information, Invention Assignment, and Arbitration Agreement (“Confidentiality Agreement”). A copy of the Confidentiality Agreement is included with this letter.
Before starting, you must sign the Confidentiality Agreement and bring documentation for completion of the I-9 (employment verification) form. Your employment with Harmonic is at will, which means either party can choose to terminate the relationship at any time for any reason whatsoever, with or without cause.
Harmonic Inc. 4300 North First Street, San Jose, CA 95134 • T +1 408 542 2500 F +1 408 542 2511 • www.harmonicinc.com 
This offer of employment is valid until the close of business on October 26, 2015.
Hal, we believe you will play a key role in the growth and success of Harmonic going forward; we are very much looking forward to working with you. Please let me know of your acceptance by signing a copy of this offer letter and returning to me via scan or confidential direct fax to 408.490.6352.
Sincerely,
/s/ Patrick Harshman |
Patrick Harshman |
President & CEO |
Harmonic Inc. |
Accepted and Anticipated Start Date: | ||||
/s/ Harold Covert | 10/22/2015 | |||
Harold Covert | Date | |||
Anticipated Start Date: | ||||
Exhibit 10.2
HARMONIC INC.
CHANGE OF CONTROL SEVERANCE AGREEMENT
This Change of Control Severance Agreement (the "Agreement") is made and entered into by and between Harold Covert, (the "Employee") 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 Employee and can cause the Employee to consider alternative employment 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 Employee, 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 Employee with an incentive to continue his employment and to motivate the Employee 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 Employee with certain severance benefits upon Employee's termination of employment following a Change of Control which provides the Employee with enhanced financial security and provides incentive and encouragement to the Employee 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. At-Will Employment. The Company and the Employee acknowledge that the Employee's employment is and shall continue to be at-will, as defined under applicable law. If the Employee's employment terminates for any reason, including (without limitation) any termination prior to a Change of Control, the Employee shall not be entitled to any payments, benefits, damages, awards or compensation other than as provided by this Agreement, or as may otherwise be available in accordance with the Company's established employee plans and practices or pursuant to other agreements with the Company.
3. Severance Benefits.
(a) Termination Following a Change of Control. If the Employee's employment terminates at any time within eighteen (18) months following a Change of Control, then, subject to Section 5, the Employee shall be entitled to receive the following severance benefits:
(i) Involuntary Termination. If the Employee's employment is terminated as a result of Involuntary Termination other than for Cause, then the Employee shall receive the following severance benefits from the Company:
(1) Severance Payment. A cash payment in an amount equal to one hundred percent (100%) of the Employee's Annual Compensation;
(2) Bonus Payment. A cash payment in an amount equal to either 50% of the established annual target bonus or the average of the actual bonus paid in each of the two prior years, whichever is greater.
(3) Continued Employee Benefits. One hundred percent (100%) Company-paid health, dental and life insurance coverage at the same level of coverage as was provided to such employee immediately prior to the Change of Control (the "Company-Paid Coverage"). If such coverage included the Employee'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) one year from the date of the Change of Control, or (ii) the date that the Employee and his dependents become covered under another employer's group health, dental or life insurance plans. For purposes of Title X of the Consolidated Budget Reconciliation Act of 1985 ("COBRA"), the date of the "qualifying event" for Employee and his dependent shall be the date upon which the Company-Paid Coverage terminates.
(4) 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 Employee shall automatically be accelerated in full so as to become completely vested and all such outstanding stock options shall be exercisable for a period of one year after such termination.
(5) Outplacement Assistance. If desired by Employee, Company will pay up to five thousand dollars ($5,000.00) for outplacement assistance selected by Company and approved by Employee.
(b) Timing of Severance Payments. Any severance payment to which Employee is entitled under Section 3(a)(i)(1) shall be paid by the Company to the Employee (or to the Employee's successors in interest pursuant to Section 7(b)) in cash and in full, not later than thirty (30) calendar days following the Termination Date or within twelve (12) months of Termination Date at the election of the Employee.
(c) Voluntary Resignation; Termination For Cause. If the Employee's employment terminates by reason of the Employee's voluntary resignation (and is not an Involuntary Termination), or if the Employee is terminated for Cause, then the Employee shall not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company's then existing severance and benefits plans and practices or pursuant to other agreements with the Company.
(d) Disability; Death. If the Company terminates the Employee's employment as a result of the Employee's Disability or such Employee's employment is terminated due to the death of the Employee then the Employee shall not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company's then existing severance and benefits plans and practices or pursuant to other agreements with the Company.
(e) Termination Apart from Change of Control. In the event the Employee's employment is terminated for any reason, either prior to the occurrence of a Change of Control or after the eighteen (18)-month period following a Change of Control, then the Employee shall be entitled to receive severance and any other benefits only as may then be established under the Company's existing severance and benefits plans and practices or pursuant to other agreements with the Company.
4. Attorney Fees; Costs and Expenses. The Company shall promptly reimburse Employee, on a monthly basis, for the reasonable attorney fees, costs and expenses incurred by the Employee in connection with any action brought by Employee to enforce his rights hereunder, regardless of the outcome of the action.
5. Limitation on Payments. In the event that the severance and other benefits provided for in this Agreement or otherwise payable to the Employee (i) constitute "parachute payments" within the meaning of
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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 Employee's severance 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 Employee 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 Employee 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 Employee 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 Employee 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.
6. Definition of Terms. The following terms referred to in this Agreement shall have the following meanings:
(a) Annual Compensation. "Annual Compensation" means an amount equal to Employee's
Company base salary for the twelve months preceding the Change of Control.
(b) Cause. "Cause" shall mean (i) any act of personal dishonesty taken by the Employee in connection with his responsibilities as an employee and intended to result in substantial personal enrichment of the Employee, (ii) the conviction of a felony) (iii) a willful act by the Employee which constitutes gross misconduct and which is injurious to the Company, and (iv) following delivery to the Employee of a written demand for performance from the Company which describes the basis for the Company's belief that the Employee has not substantially performed his duties, continued violations by the Employee of the Employee's obligations to the Company which are demonstrably willful and deliberate on the Employee's part.
(c) Change of Control. "Change of Control" means the occurrence of any of the following events:
(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 within a two-year period, 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
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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.
(d) Disability. "Disability" shall mean that the Employee has been unable to perform his Company duties as the result of his incapacity due to physical or mental illness, and such inability, at least 26 weeks after its commencement, is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Employee or the Employee's legal representative (such Agreement as to acceptability not to be unreasonably withheld). Termination resulting from Disability may only be effected after at least 30 days written notice by the Company of its intention to terminate the Employee's employment. In the event that the Employee resumes the performance of substantially all of his duties hereunder before the termination of his employment becomes effective, the notice of intent to terminate shall automatically be deemed to have been revoked.
(e) Involuntary Termination. "Involuntary Termination" shall mean (i) without the Employee's express written consent, the significant reduction of the Employee's duties authority or responsibilities relative to the Employee's duties, authority or responsibilities as in effect immediately prior to such reduction, or the assignment to Employee of such reduced duties, authority or responsibilities; (ii) without the Employee's express written consent, a substantial reduction, without good business reasons, of the facilities and perquisites (including office space and location) available to the Employee immediately prior to such reduction; (iii) a reduction by the Company in the base salary of the Employee as in effect immediately prior to such reduction; (iv) a material reduction by the Company in the kind or level of employee benefits, including bonuses, to which the Employee was entitled immediately prior to such reduction with the result that the Employee's overall benefits package is significantly reduced; (v) the relocation of the Employee to a facility or a location more than twenty-five (25) miles from the Employee's then present location, without the Employee's express written consent; (vi) any purported termination of the Employee by the Company which is not effected for Disability or for Cause, or any purported termination for which the grounds relied upon are not valid; (vii) the failure of the Company to obtain the assumption of this Agreement by any successors contemplated in Section 7(a) below; or (viii) any act or set of facts or circumstances which would, under California case law or statute constitute a constructive termination of the Employee.
(f) Termination Date. "Termination Date" shall mean (i) if this Agreement is terminated by the Company for Disability, thirty (30) days after notice of termination is given to the Employee (provided that the Employee shall not have returned to the performance of the Employee's duties on a full-time basis during such thirty (30)-day period), (ii) if the Employee's employment is terminated by the Company for any other reason, the date on which a notice of termination is given, provided that if within thirty (30) days after the Company gives the Employee notice of termination, the Employee notifies the Company that a dispute exists concerning the termination or the benefits due pursuant to this Agreement, then the Termination Date shall be the date on which such dispute is finally determined, either by mutual written agreement of the parties, or by a final judgment, order or decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected), or (iii) if the Agreement is terminated by the Employee, the date on which the Employee delivers the notice of termination to the Company.
7. 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.
4
(b) Employee's Successors. The terms of this Agreement and all rights of the Employee hereunder shall inure to the benefit of, and be enforceable by, the Employee's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
8. Notice.
(a) General. 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 Employee, 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.
(b) Notice of Termination. Any termination by the Company for Cause or by the Employee as a result of a voluntary resignation or an Involuntary Termination shall be communicated by a notice of termination to the other party hereto given in accordance with Section 8(a) of this Agreement. Such notice shall indicate the specific termination provision in this Agreement relied upon, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and shall specify the termination date (which shall be not more than 30 days after the giving of such notice). The failure by the Employee to include in the notice any fact or circumstance which contributes to a showing of Involuntary Termination shall not waive any right of the Employee hereunder or preclude the Employee from asserting such fact or circumstance in enforcing his rights hereunder.
9. Miscellaneous Provisions.
(a) No Duty to Mitigate. The Employee 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 Employee 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 Employee and by an authorized officer of the Company (other than the Employee). 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 have been made or entered into by either party with respect to the subject matter hereof. This Agreement represents 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) Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable income and employment taxes.
(g) 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.
5
IN WITNESS WHEREOF, each of the parties has executed this 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/ Peter Hilliard | |||
Title: | Senior Vice President, Human Resources | |||
Date: | 10/27/2015 | |||
EMPLOYEE | Name: | /s/ Harold Covert | ||
Date: | 10/27/2015 | |||
6
Exhibit 99.1
|  |
FOR IMMEDIATE RELEASE
Harmonic Announces Third Quarter 2015 Results
SAN JOSE, Calif.-October 27, 2015-Harmonic Inc. (NASDAQ: HLIT), the worldwide leader in video delivery infrastructure, announced today its preliminary and unaudited results for the third quarter of 2015.
Net revenue for the third quarter of 2015 was $83.3 million, compared with $103.1 million for the second quarter of 2015 and $108.1 million for the third quarter of 2014.
Bookings for the third quarter of 2015 were $74.6 million, compared with $99.3 million for the second quarter of 2015 and $97.8 million for the third quarter of 2014.
Total backlog and deferred revenue was $110.8 million as of October 2, 2015, compared to $120.6 million as of July 3, 2015.
GAAP net loss for the third quarter of 2015 was $(4.8) million, or $(0.05) per diluted share, compared with a GAAP net loss for the second quarter of 2015 of $(1.0) million, or $(0.01) per diluted share, and a GAAP net income of $1.1 million, or $0.01 per diluted share, for the third quarter of 2014.
Non-GAAP net loss for the third quarter of 2015 was $(0.2) million, or $0.00 per diluted share, compared with a non-GAAP net income for the second quarter of 2015 of $4.2 million, or $0.05 per diluted share, and a non-GAAP net income of $5.1 million, or $0.06 per diluted share, for the third quarter of 2014. See “Use of Non-GAAP Financial Measures” and “GAAP to Non-GAAP Reconciliations” below.
GAAP gross margin was 55.5% and GAAP operating margin was (7.5)% for the third quarter of 2015, compared with 52.7% and (0.3)%, respectively, for the second quarter of 2015, and 49.4% and (3.3)%, respectively, for the same period in 2014.
Non-GAAP gross margin was 56.3% and non-GAAP operating margin was (0.5)% for the third quarter of 2015, compared with 53.2% and 5.1%, respectively, for the second quarter of 2015, and 53.6% and 6.2%, respectively, for the same period in 2014. See “Use of Non-GAAP Financial Measures” and “GAAP to Non-GAAP Reconciliations” below.
Total cash, cash equivalents and short-term investments were $87.6 million at the end of the third quarter of 2015, down $17.5 million from $105.1 million at the end of the prior quarter. In the third quarter of 2015, the Company used approximately $5.0 million of cash from operations, and used approximately $7.8 million to repurchase approximately 1.3 million shares of common stock under its share repurchase program.
Business Outlook
For the fourth quarter of 2015, Harmonic anticipates:
•Net revenue in the range of $78 million to $88 million
•GAAP gross margins in the range of 53% to 54%
•GAAP operating expenses in the range of $52 million to $53 million
•Non-GAAP gross margins in the range of 54% to 55%
•Non-GAAP operating expenses in the range of $46 million to $47 million
See “Use of Non-GAAP Financial Measures” and “GAAP to Non-GAAP Reconciliations” below.
Conference Call Information
Harmonic will host a conference call to discuss its financial results at 2:00 p.m. Pacific (5:00 p.m. Eastern) on Tuesday, October 27, 2015. A listen-only broadcast of the conference call can be accessed either from the Company's website at www.harmonicinc.com or by calling +1.847.619.6397 or +1.800.708.4540 (passcode 40861736). A replay of the conference call will be available after 4:30 p.m. Pacific at the same website address or by calling +1.630.652.3042 or +1.888.843.7419 (passcode 40861736#).
About Harmonic Inc.
Harmonic (NASDAQ: HLIT) is the worldwide leader in video delivery infrastructure for emerging television and video services. Harmonic enables customers to produce, deliver, and monetize amazing video experiences, with unequalled business agility and operational efficiency, by providing market-leading innovation, high-quality service, and compelling total-cost-of-ownership. More information is available at www.harmonicinc.com.
Legal Notice Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements related to our expectations regarding: our final results for the third quarter ended October 2, 2015 and our expectations concerning quarter-on-quarter growth; and net revenue, GAAP gross margins, GAAP operating expenses, non-GAAP gross margins and non-GAAP operating expenses for the fourth quarter of 2015. Our expectations regarding these matters may not materialize, and actual results in future periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include, in no particular order, the following: the trends toward more high-definition, on-demand and anytime, anywhere video will not continue to develop at its current pace or will expire; a strong U.S. dollar may have a negative impact on our business in certain international markets; the possibility that our products will not generate sales that are commensurate with our expectations or that our cost of revenue or operating expenses may exceed our expectations; the mix of products and services sold in various geographies and the effect it has on gross margins; delays or decreases in capital spending in the cable, satellite and telco and broadcast and media industries; customer concentration and consolidation; the impact of general economic conditions on our sales and operations; our ability to develop new and enhanced products in a timely manner and market acceptance of our new or existing products; losses of one or more key customers; risks associated with our international operations, including in Ukraine; risks associated with our CCAP and VOS™ product initiatives, dependence on market acceptance of various types of broadband services, on the adoption of new broadband technologies and on broadband industry trends; inventory management; the lack of timely availability of parts or raw materials necessary to produce our products; the impact of increases in the prices of raw materials and oil; the effect of competition, on both revenue and gross margins; difficulties associated with rapid technological changes in our markets; risks associated with unpredictable sales cycles; our dependence on contract manufacturers and sole or limited source suppliers; the effect on our business of natural disasters; and the risk that our share repurchase program will not continue to result in material purchases of our common stock. The forward-looking statements contained in this press release are also subject to other risks and uncertainties, including those more fully described in Harmonic's filings with the Securities and Exchange Commission, including our most recent Quarterly Report on Form 10-Q for the quarterly period ended July 3, 2015 and our Current Reports on Form 8-K. The forward-looking statements in this press release are based on information available to the Company as of the date hereof, and Harmonic disclaims any obligation to update any forward-looking statements.
Use of Non-GAAP Financial Measures
In establishing operating budgets, managing its business performance, and setting internal measurement targets, we exclude a number of items required by GAAP. Management believes that these accounting charges and credits, most of which are non-cash or non-recurring in nature, are not useful in managing its operations and business. Historically, the Company has also publicly presented these supplemental non-GAAP measures in order to assist the investment community to see the Company “through the eyes of management,” and thereby enhance understanding of its operating performance. The non-GAAP measures presented here are: gross profit, operating expenses, income (loss) from operations and net income (loss) (including those amounts as a percentage of revenue), and net income (loss) per diluted share. The presentation of non-GAAP information is not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP, and is not necessarily comparable to non-GAAP results published by other companies. A reconciliation of the historical non-GAAP financial measures discussed in this press release to the most directly comparable historical GAAP financial measures is included with the financial statements provided with this press release. The non-GAAP adjustments described below have historically been excluded from our GAAP financial measures. These adjustments are restructuring and related charges, impairment of long-term investment and non-cash items, such as stock-based compensation expense, amortization of intangibles, and adjustments that normalize the tax rate. With respect to our expectations under “Business Outlook” above, reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available without unreasonable efforts on a forward-looking basis due to the high variability and low visibility with respect to the charges which are excluded from these non-GAAP measures. The effects of stock-based compensation expense specific to common stock options are directly impacted by unpredictable fluctuations in our stock price. We expect the variability of the above charges to have a significant impact on our GAAP financial results.
CONTACTS:
Harold Covert | Blair King |
Chief Financial Officer | Director, Investor Relations |
Harmonic Inc. | Harmonic Inc. |
+1.408.542.2500 | +1.408.490.6172 |
Harmonic Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
October 2, 2015 | December 31, 2014 | ||||||
(In thousands, except par value amounts) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 61,571 | $ | 73,032 | |||
Short-term investments | 25,990 | 31,847 | |||||
Accounts receivable, net | 64,128 | 74,144 | |||||
Inventories | 39,873 | 32,747 | |||||
Deferred income taxes, short-term | 3,375 | 3,375 | |||||
Prepaid expenses and other current assets | 31,709 | 17,539 | |||||
Total current assets | 226,646 | 232,684 | |||||
Property and equipment, net | 26,619 | 27,221 | |||||
Goodwill, intangibles and other assets | 213,643 | 220,613 | |||||
Total assets | $ | 466,908 | $ | 480,518 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 16,626 | $ | 15,318 | |||
Income taxes payable | 176 | 893 | |||||
Deferred revenue | 43,350 | 38,601 | |||||
Accrued liabilities | 29,139 | 35,118 | |||||
Total current liabilities | 89,291 | 89,930 | |||||
Income taxes payable, long-term | 4,296 | 4,969 | |||||
Deferred tax liabilities, long-term | 3,095 | 3,095 | |||||
Other non-current liabilities | 10,358 | 10,711 | |||||
Total liabilities | 107,040 | 108,705 | |||||
Stockholders' equity: | |||||||
Preferred stock, $0.001 par value, 5,000 shares authorized; no shares issued or outstanding | — | — | |||||
Common stock, $0.001 par value, 150,000 shares authorized; 87,477 and 87,700 shares issued and outstanding at October 2, 2015 and December 31, 2014, respectively | 87 | 88 | |||||
Additional paid-in capital | 2,259,757 | 2,261,952 | |||||
Accumulated deficit | (1,896,709 | ) | (1,888,247 | ) | |||
Accumulated other comprehensive loss | (3,267 | ) | (1,980 | ) | |||
Total stockholders' equity | 359,868 | 371,813 | |||||
Total liabilities and stockholders' equity | $ | 466,908 | $ | 480,518 | |||
Harmonic Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
Three months ended | Nine months ended | ||||||||||||||
October 2, 2015 | September 26, 2014 | October 2, 2015 | September 26, 2014 | ||||||||||||
(in thousands, except per share amounts) | |||||||||||||||
Net revenue | $ | 83,305 | $ | 108,061 | $ | 290,424 | $ | 325,682 | |||||||
Cost of revenue | 37,074 | 54,633 | 134,780 | 170,125 | |||||||||||
Gross profit | 46,231 | 53,428 | 155,644 | 155,557 | |||||||||||
Operating expenses: | |||||||||||||||
Research and development | 21,679 | 22,803 | 65,824 | 70,176 | |||||||||||
Selling, general and administrative | 28,966 | 32,114 | 91,443 | 98,640 | |||||||||||
Amortization of intangibles | 1,446 | 1,661 | 4,338 | 5,329 | |||||||||||
Restructuring and related charges | 397 | 388 | 626 | 821 | |||||||||||
Total operating expenses | 52,488 | 56,966 | 162,231 | 174,966 | |||||||||||
Loss from operations | (6,257 | ) | (3,538 | ) | (6,587 | ) | (19,409 | ) | |||||||
Interest and other income (expense), net | 178 | (214 | ) | (197 | ) | (185 | ) | ||||||||
Loss on impairment of long-term investment | — | — | (2,505 | ) | — | ||||||||||
Loss before income taxes | (6,079 | ) | (3,752 | ) | (9,289 | ) | (19,594 | ) | |||||||
(Benefit from) provision for income taxes | (1,268 | ) | (4,830 | ) | (827 | ) | 21,800 | ||||||||
Net income (loss) | $ | (4,811 | ) | $ | 1,078 | $ | (8,462 | ) | $ | (41,394 | ) | ||||
Net income (loss) per share: | |||||||||||||||
Basic | $ | (0.05 | ) | $ | 0.01 | $ | (0.10 | ) | $ | (0.44 | ) | ||||
Diluted | $ | (0.05 | ) | $ | 0.01 | $ | (0.10 | ) | $ | (0.44 | ) | ||||
Shares used in per share calculation: | |||||||||||||||
Basic | 87,991 | 90,618 | 88,359 | 94,113 | |||||||||||
Diluted | 87,991 | 91,800 | 88,359 | 94,113 | |||||||||||
Harmonic Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine months ended | |||||||
October 2, 2015 | September 26, 2014 | ||||||
(In thousands) | |||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (8,462 | ) | $ | (41,394 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Amortization of intangibles | 4,971 | 18,378 | |||||
Depreciation | 10,143 | 12,641 | |||||
Stock-based compensation | 11,845 | 12,720 | |||||
Loss on impairment of long-term investment | 2,505 | — | |||||
Deferred income taxes | — | 31,782 | |||||
Provision for excess and obsolete inventories | 1,234 | 2,013 | |||||
Allowance for doubtful accounts, returns and discounts | 576 | (116 | ) | ||||
Excess tax benefits from stock-based compensation | — | (194 | ) | ||||
Other non-cash adjustments, net | 354 | 1,108 | |||||
Changes in assets and liabilities: | |||||||
Accounts receivable | 9,440 | (472 | ) | ||||
Inventories | (7,936 | ) | 2,401 | ||||
Prepaid expenses and other assets | (13,817 | ) | (5,321 | ) | |||
Accounts payable | 1,772 | (786 | ) | ||||
Deferred revenue | 5,237 | 7,770 | |||||
Income taxes payable | (1,372 | ) | (8,292 | ) | |||
Accrued and other liabilities | (7,926 | ) | (4,717 | ) | |||
Net cash provided by operating activities | 8,564 | 27,521 | |||||
Cash flows from investing activities: | |||||||
Purchases of investments | (20,714 | ) | (26,599 | ) | |||
Proceeds from sales and maturities of investments | 26,534 | 50,644 | |||||
Purchases of property and equipment | (10,393 | ) | (8,859 | ) | |||
Purchases of long-term investments | (85 | ) | (5,867 | ) | |||
Restricted cash | (1,091 | ) | — | ||||
Net cash (used in) provided by investing activities | (5,749 | ) | 9,319 | ||||
Cash flows from financing activities: | |||||||
Payments for repurchase of common stock | (20,007 | ) | (86,407 | ) | |||
Net proceeds from common stock issued to employees | 5,967 | 1,241 | |||||
Excess tax benefits from stock-based compensation | — | 194 | |||||
Net cash used in financing activities | (14,040 | ) | (84,972 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | (236 | ) | (169 | ) | |||
Net decrease in cash and cash equivalents | (11,461 | ) | (48,301 | ) | |||
Cash and cash equivalents at beginning of period | 73,032 | 90,329 | |||||
Cash and cash equivalents at end of period | $ | 61,571 | $ | 42,028 | |||
Harmonic Inc.
Revenue Information
(Unaudited)
Three months ended | Nine months ended | ||||||||||||||||||||||||||
October 2, 2015 | September 26, 2014 | October 2, 2015 | September 26, 2014 | ||||||||||||||||||||||||
(In thousands, except percentages) | |||||||||||||||||||||||||||
Product | |||||||||||||||||||||||||||
Video Products | $ | 48,629 | 59 | % | $ | 60,668 | 56 | % | $ | 153,439 | 53 | % | $ | 181,882 | 56 | % | |||||||||||
Cable Edge | 8,616 | 10 | % | 23,915 | 22 | % | 61,726 | 21 | % | 77,488 | 24 | % | |||||||||||||||
Services and Support | 26,060 | 31 | % | 23,478 | 22 | % | 75,259 | 26 | % | 66,312 | 20 | % | |||||||||||||||
Total | $ | 83,305 | 100 | % | $ | 108,061 | 100 | % | $ | 290,424 | 100 | % | $ | 325,682 | 100 | % | |||||||||||
Geography | |||||||||||||||||||||||||||
Americas | $ | 44,926 | 54 | % | $ | 60,007 | 56 | % | $ | 165,786 | 57 | % | $ | 184,959 | 57 | % | |||||||||||
EMEA | 19,269 | 23 | % | 27,430 | 25 | % | 71,302 | 25 | % | 83,136 | 25 | % | |||||||||||||||
APAC | 19,110 | 23 | % | 20,624 | 19 | % | 53,336 | 18 | % | 57,587 | 18 | % | |||||||||||||||
Total | $ | 83,305 | 100 | % | $ | 108,061 | 100 | % | $ | 290,424 | 100 | % | $ | 325,682 | 100 | % | |||||||||||
Market | |||||||||||||||||||||||||||
Service Provider | $ | 46,451 | 56 | % | $ | 67,497 | 62 | % | $ | 178,466 | 61 | % | $ | 214,055 | 66 | % | |||||||||||
Broadcast and Media | 36,854 | 44 | % | 40,564 | 38 | % | 111,958 | 39 | % | 111,627 | 34 | % | |||||||||||||||
Total | $ | 83,305 | 100 | % | $ | 108,061 | 100 | % | $ | 290,424 | 100 | % | $ | 325,682 | 100 | % | |||||||||||
Harmonic Inc.
Segment Revenue and Operating Income (Loss)
(Unaudited)
Three months ended | Nine months ended | ||||||||||||||
October 2, 2015 | September 26, 2014 | October 2, 2015 | September 26, 2014 | ||||||||||||
(In thousands) | |||||||||||||||
Net revenue: | |||||||||||||||
Video | $ | 71,889 | $ | 81,360 | $ | 219,378 | $ | 239,823 | |||||||
Cable Edge | 11,416 | 26,701 | 71,046 | 85,859 | |||||||||||
Total consolidated net revenue | $ | 83,305 | $ | 108,061 | $ | 290,424 | $ | 325,682 | |||||||
Operating income (loss): | |||||||||||||||
Video | $ | 3,575 | $ | 6,609 | $ | 8,386 | $ | 9,426 | |||||||
Cable Edge | (3,963 | ) | 120 | 2,582 | 3,178 | ||||||||||
Total segment operating income (loss) | (388 | ) | 6,729 | 10,968 | 12,604 | ||||||||||
Unallocated corporate expenses* | (510 | ) | (403 | ) | (739 | ) | (915 | ) | |||||||
Stock-based compensation | (3,827 | ) | (4,352 | ) | (11,845 | ) | (12,720 | ) | |||||||
Amortization of intangibles | (1,532 | ) | (5,512 | ) | (4,971 | ) | (18,378 | ) | |||||||
Loss from operations | (6,257 | ) | (3,538 | ) | (6,587 | ) | (19,409 | ) | |||||||
Non-operating income (expense) | 178 | (214 | ) | (2,702 | ) | (185 | ) | ||||||||
Loss before income taxes | $ | (6,079 | ) | $ | (3,752 | ) | $ | (9,289 | ) | $ | (19,594 | ) | |||
*Unallocated corporate expenses include certain corporate-level operating expenses and charges such as restructuring and related charges.
Harmonic Inc.
GAAP to Non-GAAP Reconciliations (Unaudited)
(In thousands, except percentages and per share data)
Three months ended | ||||||||||||
October 2, 2015 | ||||||||||||
Gross Profit | Total Operating Expense | Loss from Operations | Net loss | |||||||||
GAAP | $ | 46,231 | $ | 52,488 | $ | (6,257 | ) | $ | (4,811 | ) | ||
Stock-based compensation in cost of revenue | 433 | — | 433 | 433 | ||||||||
Stock-based compensation in research and development | — | (1,074 | ) | 1,074 | 1,074 | |||||||
Stock-based compensation in selling, general and administrative | — | (2,320 | ) | 2,320 | 2,320 | |||||||
Amortization of intangibles | 86 | (1,446 | ) | 1,532 | 1,532 | |||||||
Restructuring and related charges | 113 | (397 | ) | 510 | 510 | |||||||
Discrete tax items and tax effect of non-GAAP adjustments | — | — | — | (1,224 | ) | |||||||
Non-GAAP | $ | 46,863 | $ | 47,251 | $ | (388 | ) | $ | (166 | ) | ||
As a % of revenue (GAAP) | 55.5 | % | 63.0 | % | (7.5 | )% | (5.8 | )% | ||||
As a % of revenue (Non-GAAP) | 56.3 | % | 56.7 | % | (0.5 | )% | (0.2 | )% | ||||
Diluted net loss per share: | ||||||||||||
Diluted net loss per share-GAAP | $ | (0.05 | ) | |||||||||
Diluted net loss per share-Non-GAAP | $ | 0.00 | ||||||||||
Shares used to compute diluted net loss per share: | ||||||||||||
GAAP | 87,991 | |||||||||||
Non-GAAP | 87,991 | |||||||||||
Three months ended | ||||||||||||
July 3, 2015 | ||||||||||||
Gross Profit | Total Operating Expense | Income (loss) from Operations | Net Income (Loss) | |||||||||
GAAP | $ | 54,385 | $ | 54,728 | $ | (343 | ) | $ | (994 | ) | ||
Stock-based compensation in cost of revenue | 422 | — | 422 | 422 | ||||||||
Stock-based compensation in research and development | — | (1,027 | ) | 1,027 | 1,027 | |||||||
Stock-based compensation in selling, general and administrative | — | (2,435 | ) | 2,435 | 2,435 | |||||||
Amortization of intangibles | 86 | (1,446 | ) | 1,532 | 1,532 | |||||||
Restructuring and related charges | — | (185 | ) | 185 | 185 | |||||||
Discrete tax items and tax effect of non-GAAP adjustments | — | — | — | (393 | ) | |||||||
Non-GAAP | $ | 54,893 | $ | 49,635 | $ | 5,258 | $ | 4,214 | ||||
As a % of revenue (GAAP) | 52.7 | % | 53.1 | % | (0.3 | )% | (1.0 | )% | ||||
As a % of revenue (Non-GAAP) | 53.2 | % | 48.1 | % | 5.1 | % | 4.1 | % | ||||
Diluted net income (loss) per share: | ||||||||||||
Diluted net loss per share-GAAP | $ | (0.01 | ) | |||||||||
Diluted net income per share-Non-GAAP | $ | 0.05 | ||||||||||
Shares used to compute diluted net income (loss) per share: | ||||||||||||
GAAP | 88,426 | |||||||||||
Non-GAAP | 89,444 | |||||||||||
Three months ended | ||||||||||||
September 26, 2014 | ||||||||||||
Gross Profit | Total Operating Expense | Income (Loss) from Operations | Net Income | |||||||||
GAAP | $ | 53,428 | $ | 56,966 | $ | (3,538 | ) | $ | 1,078 | |||
Stock-based compensation in cost of revenue | 612 | — | 612 | 612 | ||||||||
Stock-based compensation in research and development | — | (1,219 | ) | 1,219 | 1,219 | |||||||
Stock-based compensation in selling, general and administrative | — | (2,521 | ) | 2,521 | 2,521 | |||||||
Amortization of intangibles | 3,851 | (1,661 | ) | 5,512 | 5,512 | |||||||
Restructuring and related charges | 15 | (388 | ) | 403 | 403 | |||||||
Discrete tax items and tax effect of non-GAAP adjustments | — | — | — | (6,198 | ) | |||||||
Non-GAAP | $ | 57,906 | $ | 51,177 | $ | 6,729 | $ | 5,147 | ||||
As a % of revenue (GAAP) | 49.4 | % | 52.7 | % | (3.3 | )% | 1.0 | % | ||||
As a % of revenue (Non-GAAP) | 53.6 | % | 47.4 | % | 6.2 | % | 4.8 | % | ||||
Diluted net income per share: | ||||||||||||
Diluted net income per share-GAAP | $ | 0.01 | ||||||||||
Diluted net income per share-Non-GAAP | $ | 0.06 | ||||||||||
Shares used to compute diluted net income per share: | ||||||||||||
GAAP | 91,800 | |||||||||||
Non-GAAP | 91,800 | |||||||||||
Exhibit 99.2
| |
Harmonic Appoints Harold Covert as New Chief Financial Officer
SAN JOSE, Calif.-October 27, 2015-Harmonic Inc. (NASDAQ: HLIT), the worldwide leader in video delivery infrastructure, today announced Carolyn Aver, chief financial officer, is leaving the company. Effective immediately, Harold “Hal” Covert is appointed to the position of chief financial officer. Ms. Aver will assist with the transition through the end of the year.
“We are delighted to have Hal join the Harmonic executive team,” said Patrick Harshman, Harmonic’s President and CEO. “Hal brings financial, strategic and executive leadership skills that will be a tremendous asset to Harmonic as we drive our next phase of growth and profitability.”
Mr. Covert, who has stepped down from Harmonic’s board to assume the CFO position, brings extensive public company financial and executive management experience. He has served as CFO of Lumos Networks, Silicon Image, Openwave and Adobe, and on the board of directors of several public companies including Lumentum, JDS Uniphase and Harmonic.
“I am excited to be joining the Harmonic management team at this dynamic time in the evolution of the company and the industry,” said Mr. Covert. “I believe Harmonic will be successful as we continue to move through the product transitions underway, and that I can have a timely and meaningful positive impact as the company works to capitalize on the opportunities in front of us to increase shareholder value.”
Carolyn Aver is leaving Harmonic to join her husband in running their family winery.
Separately, George Stromeyer, senior vice president of worldwide sales will be leaving the company to pursue other opportunities.
Patrick Harshman continued by saying “Carolyn and George have both made significant contributions to our business. I thank them and wish them well in their future endeavors.”
About Harmonic Inc.
Harmonic (NASDAQ: HLIT) is the worldwide leader in video delivery infrastructure for emerging television and video services. Harmonic enables customers to produce, deliver, and monetize amazing video experiences, with unequalled business agility and operational efficiency, by providing market-leading innovation, high-quality service, and compelling total-cost-of-ownership. More information is available at www.harmonicinc.com.
CONTACTS:
Harold Covert | Blair King |
Chief Financial Officer | Investor Relations |
Harmonic Inc. | Harmonic Inc. |
+1.408.542.2500 | +1.408.490.6172 |