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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K/A
AMENDMENT NO. 1
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO. 0-25826
HARMONIC LIGHTWAVES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 77-0201147
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
549 BALTIC WAY
SUNNYVALE, CA 94089
(408) 542-2500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: Common Stock,
par value $.001 per share
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Based on the closing sale price of the Common Stock on the Nasdaq National
Market System on March 11, 1997, the aggregate market value of the voting stock
held by non-affiliates of the Registrant was $156,102,407. Shares of Common
Stock held by each officer and director and by each person who owns 5% or more
of the outstanding Common Stock have been excluded in that such persons may be
deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.
The number of shares outstanding of the Registrant's Common Stock, $.001
par value, was 10,215,677 at March 11, 1997.
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The undersigned Registrant hereby amends its Annual Report on Form 10-K/A,
originally filed with the Securities and Exchange Commission on March 28, 1997,
to replace Exhibits 10.17 and 10.18.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant, Harmonic Lightwaves, Inc., a Delaware
corporation, has duly caused this Report on Form 10-K/A to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Sunnyvale,
State of California, on April 30, 1997.
HARMONIC LIGHTWAVES, INC.
By: /s/ ANTHONY J. LEY
------------------------------------
Anthony J. Ley, Chairman of the
Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this amendment has been signed by the following persons in the capacities and on
the date indicated.
SIGNATURE TITLE DATE
- ------------------------------------------ --------------------------------- ---------------
/s/ ANTHONY J. LEY Chairman of the Board, President April 30, 1997
- ------------------------------------------ and Chief Executive Officer
(Anthony J. Ley) (Principal Executive Officer)
/s/ ROBIN N. DICKSON Chief Financial Officer April 30, 1997
- ------------------------------------------ (Principal Financial and
(Robin N. Dickson) Accounting Officer)
* Director April 30, 1997
- ------------------------------------------
(Barry Lemieux)
* Director April 30, 1997
- ------------------------------------------
(E. Floyd Kvamme)
* Director April 30, 1997
- ------------------------------------------
(David A. Lane)
* Director April 30, 1997
- ------------------------------------------
(Moshe Nazarathy)
* Director April 30, 1997
- ------------------------------------------
(Michel L. Vaillaud)
* Director April 30, 1997
- ------------------------------------------
(Josef Berger)
* /s/ ANTHONY J. LEY April 30, 1997
- ------------------------------------------
(Anthony J. Ley, Attorney-in-Fact)
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EXHIBIT INDEX
The following Exhibits to this report are filed herewith, or if marked with
an asterisk (*) or double asterisk (**), are incorporated herein by reference.
EXHIBIT
NUMBER DESCRIPTION
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3.1* Certificate of Incorporation of Registrant
3.2* Form of Restated Certificate of Incorporation of Registrant
3.3* Bylaws of Registrant
4.1* Form of Common Stock Certificate
10.1*+ Form of Indemnification Agreement
10.2*+ 1988 Stock Option Plan and form of Stock Option Agreement
10.3*+ 1995 Stock Plan and form of Stock Option Agreement
10.4*+ 1995 Employee Stock Purchase Plan and form of Subscription Agreement
10.5*+ 1995 Director Option Plan and form of Director Option Agreement
10.6* Registration and Participation Rights and Modification Agreement dated as of July
22, 1994 among Registrant and certain holders of Registrant's Common Stock
10.7* Distributor Agreement dated June 15, 1994 by and between Registrant and
Scientific- Atlanta, Inc.
10.8* Warrant to purchase Common Stock of Registrant issued to Scientific-Atlanta, Inc.
on June 15, 1994
10.10* Warrant to purchase Series D Preferred Stock of Registrant issued to Comdisco,
Inc. on February 10, 1993
10.14** Business Loan Agreement, Commercial Security Agreement and Promissory Note dated
August 26, 1993, as amended on September 14, 1995, between Registrant and Silicon
Valley Bank
10.15** Facility lease dated as of January 12, 1996 by and between Eastrich No. 137
Corporation and Company
10.16** Loan Modification Agreement dated September 13, 1996 between Registrant and
Silicon Valley Bank
10.17+ Change of Control Severance Agreement dated March 27, 1997 between Registrant and
Anthony J. Ley
10.18+ Form of Change of Control Severance Agreement between Registrant and certain
executive officers of Registrant
11.1** Computation of Net Income (Loss) Per Share
13.1** 1996 Annual Report (to be deemed filed with the Securities and Exchange Commission
only to the extent required by the instruction to exhibits for reports on Form
10-K)
21.1** Subsidiaries of Registrant
23.1** Consent of Independent Accountants
24.1** Power of Attorney
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* Previously filed as an Exhibit to the Company's Registration Statement on
Form S-1 [No. 33-90752].
** Previously filed as an Exhibit to the Company's 10-K for the year ended
December 31, 1995.
+ Management Contract or Compensatory Plan or Arrangement required to be filed
as an exhibit to this report on Form 10-K pursuant to Item 14(c) of this
report.
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EXHIBIT 10.17
HARMONIC LIGHTWAVES, INC.
CHANGE OF CONTROL SEVERANCE AGREEMENT
This Change of Control Severance Agreement (the "Agreement") is made and entered
into by and between Anthony J. Ley (the "Employee") and Harmonic Lightwaves,
Inc. (the "Company"), effective as of the latest date set forth by the
signatures of the parties hereto below.
R E C I T A L S
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.
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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 and fifty percent (150%) of the Employee's Annual Compensation;
(2) 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 dependents shall
also be covered at Company expense. Company-Paid Coverage shall continue until
the earlier of (i) one and one-half years 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 that
provide Employee and his dependents with comparable benefits and levels of
coverage. For purposes of Title X of the Consolidated Budget Reconciliation Act
of 1985 ("COBRA"), the date of the "qualifying event" for Employee and his
dependents shall be the date upon which the Company-Paid Coverage terminates.
(3) Option and Restricted Stock Accelerated Vesting. One
Hundred percent (100%) of the unvested portion of any stock option or restricted
stock held by the Employee shall automatically be accelerated in full so as to
become completely vested; provided, however, that if such potential vesting
acceleration would cause a contemplated Change of Control transaction that was
intended to be accounted for as a "pooling-of-interests" transaction to become
ineligible for such accounting treatment under generally accepted accounting
principles, as determined by the Company's independent public accountants (the
"Accountants") prior to the Change of Control, Employee's stock options and
restricted stock shall not have their vesting so accelerated.
(4) 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 payments to which Employee is
entitled under Sections 3(a)(i)(1) and 5 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.
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(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. Excise Tax Payments. In the event that the severance and other
benefits provided for in this Agreement or otherwise payable to the Employee
constitute "parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code") and will be subject to
the excise tax imposed by Section 4999 of the Code, then the Employee shall
receive (a) a payment from the Company sufficient to pay such excise tax, and
(b) an additional payment from the Company sufficient to pay the excise tax and
federal and state income taxes arising from the payments made by the Company to
Employee pursuant to this sentence. Unless the Company and the Employee
otherwise agree in writing, the determination of Employee's excise tax liability
and the amount required to be paid under this Section 5 shall be made in writing
by the Accountants. In the event that the excise tax incurred by Employee is
determined by the Internal Revenue Service to be greater or lesser than the
amount so determined by the Accountants, the Company and Employee agree to
promptly make such additional payment, including interest and any tax penalties,
to the other party as the Accountants reasonably determine is appropriate to
ensure that the net economic effect to Employee under this Section 5, on an
after-tax basis, is as if the Code Section 4999 excise tax did not apply to
Employee. 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 interpretations of the Code for which there is
a "substantial authority" tax reporting position. 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
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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 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 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.
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(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 a by
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.
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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.
(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
shall be directed 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.
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(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. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California.
(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.
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 LIGHTWAVES, INC.
By:
-----------------------------------
Title:
-----------------------------------
Date:
-----------------------------------
EMPLOYEE
------------------------------------------
Anthony J. Ley
Date:
-------------------------------------
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EXHIBIT 10.18
HARMONIC LIGHTWAVES, INC.
CHANGE OF CONTROL SEVERANCE AGREEMENT
This Change of Control Severance Agreement (the "Agreement") is made and entered
into by and between ________ (the "Employee") and Harmonic Lightwaves, Inc. (the
"Company"), effective as of the latest date set forth by the signatures of the
parties hereto below.
R E C I T A L S
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.
1
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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) 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 dependents 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 that provide Employee
and his dependents with comparable benefits and levels of coverage. For purposes
of Title X of the Consolidated Budget Reconciliation Act of 1985 ("COBRA"), the
date of the "qualifying event" for Employee and his dependents shall be the date
upon which the Company-Paid Coverage terminates.
(3) Option and Restricted Stock Accelerated Vesting.
One Hundred percent (100%) of the unvested portion of any stock option or
restricted stock held by the Employee shall automatically be accelerated in full
so as to become completely vested; provided, however, that if such potential
vesting acceleration would cause a contemplated Change of Control transaction
that was intended to be accounted for as a "pooling-of-interests" transaction to
become ineligible for such accounting treatment under generally accepted
accounting principles, as determined by the Company's independent public
accountants (the "Accountants") prior to the Change of Control, Employee's stock
options and restricted stock shall not have their vesting so accelerated.
(4) 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.
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(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 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
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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 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 represented by the voting securities of
the Company or such surviving entity outstanding immediately after such merger
or consolidation;
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(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 a by
final judgment, order or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no
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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.
(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
shall be directed 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.
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(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. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California.
(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.
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.
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COMPANY HARMONIC LIGHTWAVES, INC.
By:
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Title:
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Date:
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EMPLOYEE
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Date:
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