Harmonic Inc. Change Of Control Severance Agreement
Exhibit 10.1
Change Of Control Severance Agreement
This Change of Control Severance Agreement (the “Agreement”) is made and entered into by and
between Xxxxxxx Xxxx, (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:
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.
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.
Severance Benefits.
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:
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:
Severance Payment. A cash payment in an amount equal to one hundred percent (100%) of
the Employee’s Annual Compensation;
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.
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.
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.
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.
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.
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.
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.
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.
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.
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
delivered in full, or
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.
Definition of Terms. The following terms referred to in this Agreement shall have the
following meanings:
Annual Compensation. “Annual Compensation” means an amount equal to Employee’s
Company base salary for the twelve months preceding the Change of Control.
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.
Change of Control. “Change of Control” means the occurrence of any of the following
events:
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;
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);
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;
The consummation of the sale or disposition by the Company of all or substantially all the
Company’s assets.
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.
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.
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.
Successors.
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.
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.
Notice.
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.
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.
Miscellaneous Provisions.
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.
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.
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.
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.
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.
Withholding. All payments made pursuant to this Agreement will be subject to
withholding of applicable income and employment taxes.
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 INC. | |||
| By: | /s/ Xxxxxxx X. Xxxxxxxx | |||
| Title: | President & CEO | |||
| Date: | October 1, 2007 | |||
EMPLOYEE
|
Name: | /s/ Xxxxxxx Xxxx | ||
| Date: | October 1, 2007 | |||
