Annual Limit. The 2002 Plan includes a limit of SARs granted under the 1995 Plan, provided, however,$600,000 that (i) no SAR may be granted with a per share exercise price less than 100% fair market value on the date of grant, and (ii) no SAR may be repriced, including by means of an exchange for another award, without stockholder approval, including by means of an exchange for another award. However, SARs may be granted with a per share less than 100% fair market value on the date of grant pursuant to a mergerpaid, issued or other corporate transaction.
Payment of Stock Appreciation Right Amount. Upon exercise of a SAR, the holder of the SAR shall be entitled to receive payment from the Company in an amount determined by multiplying (i) the amount by which the fair market value of a share on the date of exercise exceeds the exercise price multiplied by (ii) the number of shares with respect to which the SAR is exercised.
Payment upon Exercise of Stock Appreciation Right. At the discretion of the Compensation Committee, and as specified in the agreement evidencing the SAR, payment to the holder of a SAR may be in cash, shares of our common stock or a combination thereof. In the event that payment to the holder of a SAR is settled in cash, the shares available for issuance under the 1995 Plan shall not be diminished as a result of the settlement.
Stock Appreciation Right Agreement. Each SAR grant shall be evidenced by an agreement that specifies the exercise price, the term of the SAR, the conditions of exercise, and such other terms and conditions as the Compensation Committee, in its sole discretion, shall determine.
Expiration of SARs. SARs granted under the 1995 Plan expire as determined by the Compensation Committee, but in no event later than seven years from the date of grant (ten years in the case of options granted prior to 2012). No SAR may be exercised by any person after its expiration.
Termination of Employment or Service. If a participant’s employment or service terminates for any reason (other than death or permanent disability), then all SARs held by such participant under the 1995 Plan expire upon the earlier of (i) such period of time as is set forth in his or her SAR agreement, or (ii) the expiration date of the SAR. In the absence of a specified time in the SAR agreement, the SAR, to the extent exercisable, shall remain exercisable for three months following the participant’s termination of employment or service. The participant may exercise all or part of his or her SARs at any time before such expiration to the extent that such option was exercisable at the time of termination of employment or service.
Permanent Disability. If a participant is unable to continue employment or service with the Company as a result of permanent and total disability (as defined in the Code), then all SARs, to the extent exercisable, held by such participant under the 1995 Plan shall expire upon the earlier of (i) 12 months after the date of termination of the participant’s employment or service, or (ii) the expiration date of the SAR. The participant may exercise all or part of his or her SARs at any time before such expiration to the extent that such option was exercisable at the time of termination of employment or service.
Death. If a participant dies while employed by the Company, then all SARs to the extent exercisable held by such participant under the 1995 Plan shall expire upon the earlier of (i) 12 months after the date of termination of the participant’s employment or service, or (ii) the expiration date of the SARs. The executors or other legal representative of the optionee may
exercise all or part of the participant’s SARs at any time before such expiration to the extent that such option was exercisable at the time of death.
Terms and Conditions of RSUs
Grant of RSUs. The Compensation Committee, subject to the provisions of the 1995 Plan, shall have complete discretion to determine the terms and conditions of RSUs granted under the 1995 Plan. Each RSU will count against the share reserve under the 1995 Plan as 1.5 shares for every unit granted. RSU to acquire shares of common stock. The Compensation Committee shall have complete discretion to determine (i) the number of shares subject to a RSUs granted to any participant, and (ii) the conditions that must be satisfied (typically based principally or solely on continued provision of services, but may include a performance-based component) for the grant or vesting of RSUs. However, no participant shall be granted RSUs covering more than 200,000 sharesnon-employee director in any of the Company’s fiscal years. Until the shares are issued, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the underlying shares.
RSU Agreement. Each RSU shall be evidenced by an agreement that shall specify the purchase price (if any) and such other terms and conditions as the Compensation Committee shall determine; provided; however, that if the RSU grant has a purchase price, such purchase price must be paid no more than 10 years following the date of grant.
Section 162(m) Performance Restrictions. For purposes of qualifying grants of RSUs as “performance-based compensation” under Section 162(m) of the Internal Revenue Code, the Compensation Committee, in its discretion, may set restrictions based on the achievement of performance goals and the Compensation Committee will follow any procedures determined by it from time to time to be necessary or appropriate to ensure qualification of the RSUs under Section 162(m).
Terms and Conditions of Performance Shares and Units
Grant of Performance Shares. The Compensation Committee, subject to the provisions of the 1995 Plan, shall have complete discretion to determine the terms and conditions of Performance Shares and Performance Units granted under the 1995 Plan. The Compensation Committee shall have complete discretion to determine (i) the number of shares of our common stock subject to a Performance Share award granted to any participant, and (ii) the conditions that must be satisfied (typically based principally or solely on achievement of performance milestones, but may include a service-based component) for the grant or vesting of Performance Shares. However, no participant shall be granted a Performance Share award covering more than 200,000 shares in any of the Company’s fiscal years. No participant shall receive Performance Units having an initial value greater than $1,000,000, except that such participant may receive Performance Units in a fiscal year of the Company pursuant to cash compensation and equity awards (including awards issued under the 2002 Plan). For purposes of calculating this limit, the value of equity awards will be based on grant date fair value in whichaccordance with generally accepted accounting principles. Any compensation paid or granted to an individual with respect to his or her serviceservices as a participant first commences with an initial value no greater than $2,000,000.
Performance Share Award Agreement. Each Performance Share grant shall be evidenced by an agreement that shall specify such other terms and conditions as the Compensation Committee, in its sole discretion, shall determine.
Grant of Performance Units. Performance Units are similar to Performance Shares, except that they shall be settled in cash in an amount equivalent to the fair market valueemployee or consultant will not count for purposes of the underlying shares of common stock, determined as of the vesting date. The shares available for issuance under the 1995 Plan shall not be diminished as a result of the settlement of a Performance Unit.annual limit.
Performance Unit Award Agreement. Each Performance Unit grant shall be evidenced by an agreement that shall specify such terms and conditions as the Compensation Committee shall determine. However, no participant shall be granted a Performance Unit award covering more than one million dollars in any of the Company’s fiscal years, except that a newly hired participant may receive a Performance Unit award covering up to two million dollars.
Section 162(m) Performance Restrictions. For purposes of qualifying grants of Performance Shares and Performance Units as “performance-based compensation” under Section 162(m) of the Internal Revenue Code, the Compensation Committee, in its discretion, may set restrictions based on the achievement of performance goals and the Compensation Committee will follow any procedures determined by it from time to time to be necessary or appropriate to ensure qualification of the Performance Shares and Performance Units under Section 162(m).
Terms and Conditions of Deferred Stock Units
Grant of Deferred Stock Units. Deferred Stock Units shall consist of an RSU, Performance Share or Performance Unit Award that the Compensation Committee permits to be paid out in installments or on a deferred basis, in accordance with rules and procedures established by the Compensation Committee. Deferred Stock Units are subject to the individual annual limits that apply to each type of awards and the annual 162(m) limits applicable to underlying awards.
Non-Transferability of Awards
Unless determined otherwise by the Compensation Committee, an award granted under the 1995 Plan may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the recipient, only by the recipient. If the Compensation Committee makes an award granted under the 1995 Plan transferable, such award shall contain such additional terms and conditions as the Compensation Committee deems appropriate. In no event may an award be transferred to any third party for value, unless separately approved by our stockholders in advance.
Adjustment UponAdjustments upon Changes in Capitalization; Corporate Transactions
Subject to any required action by the stockholders of the Company, inCapitalization, Dissolution, Merger or Change-in-Control. In the event that the stock of the Company is changed by reason of anya stock split, reverse stock split, stock dividend, recapitalizationor any combination or reclassification of the Common Stock, or other similar change in theour capital structure effected without receipt of the Company, appropriate proportionalconsideration by us, proportionate adjustments shallwill be made into the number and class of shares of stock subject to the 1995 Plan, the individual fiscal year limits applicable to RSUs, Performance Share awards, SARS and options,covered by each outstanding award, the number and class of shares of stock subjectauthorized for issuance that remain available to any award outstandingbe granted under the 19952002 Plan, and the exercise price of each outstanding stock option. For this purpose, any such outstanding option, RSU or other award. Any such adjustment shall be made upon approvalconversion of the Compensation Committee of the Board of Directors, whose determination shall be conclusive. convertible securities is not considered effected without our receiving consideration.
In the event that we are acquired inof a proposed dissolution or liquidation of the Company, any unexercised options and unvested RSUs will terminate prior to the consummation of such proposed action.
If a successor corporation assumes or substitutes the options under the 2002 Plan as a result of a merger of the Company with or into another corporation or the sale of substantially alla change-in-control of the assets, each outstanding award granted underCompany, as defined in the 19952002 Plan shall be assumed or an equivalent right substituted(a “Change-in-Control”), such options will remain exercisable in accordance with the 2002 Plan. In the event of a Change-in-Control, all options and RSUs held by a successor corporation. If such awards granted under the 1995 Plan are not assumed, theynon-employee directors immediately become fully vested prior to the closing of such merger or sale of assets.vested.
Amendment Suspensions and Termination of the 19952002 Plan
. The Board of Directors may at any time amend, alter, suspend, or terminatediscontinue the 19952002 Plan at any time; provided, however, that stockholder approval is required for any amendment to the extent such actions do not impair the rights of any recipient of awards under the 2002 Plan, unless he or she consents. To the extent necessary and desirable to comply with Rule 16b-3 promulgated underany applicable law, regulation or stock exchange rule, the Securities Exchange ActCompany must obtain stockholder approval of 1934 (“Rule 16b-3”)any 2002 Plan amendment in the manner or Section 422 ofto the Code, or any similar rule or statute.degree required.
Certain Federal Income Tax Information
Stock OptionsOptions. . Options granted under the 19952002 Plan may be either “incentive stockare nonstatutory options” as defined in Section 422 of the Code, or nonstatutory options.
An optionee who is granted an incentive stock option will not recognize taxable income either at the time the option is granted or upon its exercise, although the exercise may subject the optionee to alternative minimum tax. Upon the sale or exchange of the shares more than two years after grant of an incentive stock option and one year after exercising the option, any gain or loss will be treated as long-term capital gain or loss. If these holding periods are not satisfied, the optionee will recognize ordinary income at the time of sale or exchange equal to the difference between the exercise price and the lower of (i) the fair market value of the shares at the date of the option exercise, or (ii) the sale price of the shares. A different rule for measuring ordinary income upon such a premature disposition may apply if the optionee is also an officer or director of the Company. Any gain or loss recognized on such a premature disposition of the shares in excess of the amount treated as ordinary income will be characterized as long-term or short-term capital gain or loss, depending on the holding period.
All options that do not qualify as incentive stock options are referred tounder Section 422 of the Internal Revenue Code of 1986, as nonstatutory options.amended ( the “Code”). An optionee will not recognize any taxable income at the time the optionee is grantedof grant of a nonstatutory option. However, upon theits exercise, of a nonstatutory option, the optionee will recognize taxableordinary income generallyfor tax purposes measured asby the excess of the then fair market value of the shares purchasedon the date of exercise over the purchaseexercise price. Any taxable income recognized in connection with the exercise of a nonstatutory option by an optionee who is also an employee of theThe Company will be subjectentitled to a tax withholding bydeduction in the Company. Upon resale of such shares byamount and at the time that the optionee any difference between the sale price and the optionee’s purchase price, to the extent not recognized as taxable income as described above, will be treated as long-term or short-term capital gain or loss, depending on the holding period.
Stock Appreciation Rights. No taxable income is reportable when a stock appreciation right is granted to a participant. Upon exercise, the participant will recognizerecognizes ordinary income inwith respect to shares acquired upon exercise of an amount equal to the amount of cash received and the fair market value of any shares of common stock received. Any additional gain or loss recognized upon any later disposition of the shares of common stock would be capital gain or loss.option.
Restricted Stock UnitsRSU, Performance Units and Performance Shares. . A participant will not have taxable income upon grant of RSU, Performance Units or Performance Shares.an RSU. Instead, he or she will recognize ordinary income at the time of vestingsettlement equal to the fair market value (on the vesting date) of the vested shares or cash received, minus any amount paid for the shares of vested common stock.
Tax Effect for the Company. delivered shares. The Company generally will be entitled to a tax deduction in connection with an award under the 1995 Plan in an amount equal to the ordinary income realized by a participantand at the time that the participantnon-employee director recognizes suchordinary income (for example, the exercise of a nonqualified stock option). Special rules limit the deductibility of compensation paid to our CEO and to each of our four most highly compensated executive officers. Under Section 162(m) of the Code, the annual compensation paid to any of these specified executives will be deductible only to the extent that it does not exceed $1,000,000. However, we can preserve the deductibility of certain compensation in excess of $1,000,000 if the conditions of Section 162(m) are met with respect to awards. These conditions include stockholder approvalshares acquired upon settlement of the 1995 Plan and performance goals under the 1995 Plan, setting individual annual limits on each typean RSU.
The foregoing summary of award, and certain other requirements. The 1995 Plan has been designed to permit the Compensation Committee to grant awards that qualify as performance-based for purposes of satisfying the conditions of Section 162(m), thereby permitting us to continue to receive a federal income tax deduction in connection with such awards.
The foregoing is only a summaryconsequences of the effect of2002 Plan transactions is based on U.S. federal income taxation upontax laws in effect on the participant and the Company, doesdate of this Proxy Statement. This summary is not purportintended to be complete and does not discuss the tax consequences of the participant’s death or the income tax laws of any municipality,describe foreign, state, or foreign country in which a participant may reside.
Stock Issuances
The Company is unable to predict the amount of benefits that will be received by, or allocated to, any particular participant under the 1995 Plan. The table that follows shows, as to each of the Company’s named executive officers and the indicated groups, the RSUs and the options granted to purchase common stock under the 1995 Plan during 2015, together with the weighted average exercise price per share for stock options.
|
| | | | | | |
| Plan Benefits |
| Harmonic 1995 Stock Plan |
| Name and Position | | Restricted Stock Units | | Fair Market Value Stock Options | | Weighted Average Exercise Price Per Share ($/sh) |
| Patrick J. Harshman, | | 214,188 | | 266,667 | | $7.58 |
| President & CEO | | | | | | |
| Carolyn V. Aver, | | 44,429 | | 93,333 | | $7.58 |
| Former Chief Financial Officer (1) | | | | | | |
| Harold L. Covert | | 110,000 | | 220,000 | | $5.80 |
| Chief Financial Officer | | | | | | |
| Nimrod Ben-Natan | | 32,095 | | 80,000 | | $7.58 |
| Senior Vice President, Gen. Manager, Edge Business | | | | | | |
| Bart Spriester | | 26,222 | | 53,333 | | $7.58 |
| Senior Vice President, Video Products | | | | | | |
| George Stromeyer | | 26,543 | | 65,333 | | $7.58 |
| Senior Vice President, Worldwide Sales (2) | | | | | | |
| All executives officers as a group (6 persons) | | 393,477 | | 778,666 | | $7.08 |
| All employees and consultants, including current officers who are not executive officers, as a group (575 persons) | | 1,557,347 | | 569,582 | | $7.29 |
local tax consequences.
| | |
(1) | Ms. Aver retired from the Company as of November 2, 2015. | | THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING “FOR” THE AMENDMENT TO THE COMPANY’S 2002 DIRECTOR STOCK PLAN TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK RESERVED FOR ISSUANCE THEREUNDER BY 450,000 SHARES. | | | | |
