DEF 14A of Harmonic Inc.
Filed Apr 29, 2024 · FY20230001140361-24-023022
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| ☒ | No fee required. | | ☐ | Fee paid previously with preliminary materials. | | ☐ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD AT 9:00 A.M. PACIFIC TIME ON TUESDAY, JUNE 11, 2024 Dear Stockholders of Harmonic Inc: You are cordially invited to attend the 2024 annual meeting of stockholders (the “Annual Meeting”) of Harmonic Inc., a Delaware corporation (the “Company”), which will be held on Tuesday, June 11, 2024, at 9:00 a.m., Pacific Time. The Annual Meeting will be a virtual meeting held over the Internet. You will be able to attend the Annual Meeting, vote your shares electronically and submit your questions during the live webcast of the meeting by visiting www.virtualshareholdermeeting.com/HLIT2024 and entering your 16-digit control number located on your proxy card. The meeting will address the following items of business:
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| | | By Telephone: By Internet: By Mail: By Scanning: | | 1. | To elect seven (7) directors to serve until the earlier of the 2025 annual meeting of stockholders or until their successors are elected and qualified or until their earlier resignation or removal; | | | 2. | To hold an advisory vote to approve named executive officer compensation; | | | 3. | To approve an amendment to the 2002 Employee Stock Purchase Plan to increase the number of shares of common stock reserved for issuance thereunder by 400,000 shares; | | | 4. | To approve an amendment to the 1995 Stock Plan to (i) increase the number of shares of common stock reserved for issuance thereunder by 5,000,000 shares and (ii) extend the term of the 1995 Stock Plan to March 1, 2030; | | | 5. | To ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm of the Company for its fiscal year ending December 31, 2024; and | | | 6. | To transact such other matters as may properly come before the Annual Meeting or any adjournment, postponement or other delay thereof. | |
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The foregoing items of business are more fully described in the Proxy Statement accompanying this notice. All stockholders of record at the close of business on Monday, April 15, 2024, are entitled to notice of and to vote at the Annual Meeting and any adjournment or postponement thereof. On or about April 29, 2024, we expect to send to our stockholders a Notice of Internet Availability of Proxy Materials containing instructions on how to access our proxy materials. Unless you have previously requested to receive our proxy materials in paper form or by email, you will receive a Notice of Internet Availability of Proxy Materials. Stockholders who continue to receive paper copies of proxy materials may elect to receive future proxy materials via electronic delivery by enrolling at www.proxyvote.com.
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| By Order of the Board of Directors, | | | | Timothy C. Chu | | Corporate Secretary |
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San Jose, California April 29, 2024 YOUR VOTE IS IMPORTANT. Whether or not you plan to attend the virtual meeting we urge you to submit your vote via the Internet, telephone or mail as soon as possible to ensure your shares are represented. Please refer to your proxy card for additional instructions on voting via the Internet or by telephone. Even if you have voted by proxy, you may still vote in person by attending the virtual meeting. PROXY STATEMENT TABLE OF CONTENTS
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| | Page | | General Information | 1 | | Proposal 1: Election of Directors | 5 | | Corporate Governance and ESG | 10 | | Board Leadership | 10 | | Board Meetings and Committees | 10 | | Meetings of Non-Employee Directors | 11 | | Corporate Governance Guidelines | 11 | | Code of Business Conduct and Ethics | 11 | | Role of the Board in Risk Oversight | 12 | | Considerations in Evaluating Director Nominees | 12 | | Director Recommendations and Nominations from Stockholders | 13 | | Director Compensation | 14 | | Non-Employee Director Stock Ownership Policy | 16 | | Communication with the Board of Directors | 16 | | Environment, Social and Governance Practices | 16 | | Proposal 2: Advisory Vote on Named Executive Officer Compensation | 20 | | Proposal 3: Approval of Amendment to 2002 Employee Stock Purchase Plan | 21 | | Proposal 4: Approval of Amendment to 1995 Stock Plan | 27 | | Proposal 5: Ratification of Appointment of Independent Registered Public Accounting Firm | 35 | | Independent Registered Public Accounting Firm Fees | 35 | | Audit Committee Report | 36 | | Executive Officers | 37 | | Compensation Discussion and Analysis | 38 | | Compensation Philosophy and Programs | 38 | | Elements of Compensation | 39 | | Change of Control Agreements | 45 | | Stock Ownership Guidelines and Hedging Policy | 46 | | Financial Restatements and Clawback Policy | 46 | | Compensation Committee Report | 47 | | Executive Compensation | 48 | | Pay Versus Performance | 54 | | CEO Pay Ratio | 58 | | Security Ownership of Certain Beneficial Owners and Management | 59 | | Certain Relationships and Related Transactions | 60 | | Other Matters | 61 | | Appendix A: Amended and Restated 2002 Employee Stock Purchase Plan | A-1 | | Appendix B: Amended and Restated 1995 Stock Plan | B-1 |
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GENERAL INFORMATION PROXY STATEMENT 2024 ANNUAL MEETING OF STOCKHOLDERS To Be Held at 9:00 A.M. Pacific Time on Tuesday, June 11, 2024 This proxy statement and the enclosed form of proxy card are furnished in connection with the solicitation of proxies by and on behalf of the Board of Directors (the “Board of Directors” or the “Board”) of Harmonic Inc., a Delaware corporation (“Harmonic,” “we” or the “Company”), for use at the 2024 Annual Meeting of Stockholders and any adjournment(s), postponement(s) or other delays thereof (the “Annual Meeting”) to be held virtually on Tuesday, June 11, 2024, at 9:00 a.m. Pacific Time, for the purposes set forth herein and in the accompanying Notice of Annual Meeting of Stockholders. You will be able to attend the Annual Meeting, vote your shares electronically and submit your questions during the live webcast of the meeting by visiting www.virtualshareholdermeeting.com/HLIT2024 and entering your 16-digit control number located on your proxy card. Internet Availability of Proxy Materials Under rules adopted by the U.S. Securities and Exchange Commission (the “SEC”), we are furnishing proxy materials to our stockholders primarily via the Internet, instead of mailing printed copies of those materials to each stockholder. On or about April 29, 2024, we expect to send to our stockholders (other than those who previously requested electronic or paper delivery) a Notice of Internet Availability of Proxy Materials (the “E-Proxy Notice”) containing instructions on how to access our proxy materials, including our proxy statement (the “Proxy Statement”) and our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “2023 Annual Report”). The E-Proxy Notice also instructs you on how to access your proxy card to vote through the Internet or by telephone. Who Can Vote at the Annual Meeting Stockholders as of the close of business on April 15, 2024 (the “Record Date”) are entitled to notice of and to vote at the Annual Meeting. As of the Record Date, 111,955,920 shares of the Company’s common stock, $0.001 par value per share (the “Common Stock”), were issued and outstanding. Stockholder of Record – Shares Registered in Your Name. If, on the Record Date, your shares were registered directly in your name with our transfer agent, Computershare Investor Services, then you are considered the stockholder of record with respect to those shares. As a stockholder of record, you may vote at the Annual Meeting or vote by proxy. Whether or not you plan to attend the virtual Annual Meeting, we urge you to vote over the Internet or by telephone, or if you received paper proxy materials by mail, by filling out and returning the proxy card in the enclosed postage-paid envelope. A list of stockholders eligible to vote at the Annual Meeting will be available for review during our regular business hours at our principal executive offices for the ten days prior to the Annual Meeting for any purpose related to the Annual Meeting. If you would like to view the list, please contact our corporate secretary to schedule an appointment by writing to Harmonic Inc., 2590 Orchard Parkway, San Jose, California 95131, Attention: Corporate Secretary. Beneficial Owner – Shares Registered in the Name of a Broker or Nominee. If, on the Record Date, your shares were held in an account with a brokerage firm, bank or other nominee, then you are the beneficial owner of the shares held in street name. As a beneficial owner, you have the right to direct your nominee on how to vote the shares held in your account, and it has enclosed or provided voting instructions for you to use in directing it on how to vote your shares. However, the organization that holds your shares is considered the stockholder of record for purposes of voting at the Annual Meeting. Because you are not the stockholder of record, you may not vote your shares at the Annual Meeting unless you request and obtain a valid proxy from the organization that holds your shares giving you the right to vote the shares at the Annual Meeting. How to Vote If you are a stockholder of record you may vote by proxy or electronically at the Annual Meeting. To vote by proxy, you may vote via the Internet or by telephone by following the instructions provided on the E-Proxy Notice or proxy card, or if you received a paper proxy card and voting instructions by mail, you should sign, date and return the enclosed proxy card in the enclosed postage-paid envelope before the Annual Meeting.
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If you are a beneficial owner and not the stockholder of record, please refer to the voting instructions provided by your nominee to direct it on how to vote your shares. Revocability of Proxies Any proxy may be revoked by the person giving it at any time before its use at the Annual Meeting by delivering to the Secretary of the Company, at the Company’s principal offices at 2590 Orchard Parkway, San Jose, California 95131, a written notice of revocation or a signed proxy bearing a later date, or by voting on a later date by telephone or via the Internet. If you attend the virtual Annual Meeting and vote electronically, any previously submitted proxy will be revoked. Please note, however, that if you are a beneficial owner and you wish to change or revoke your proxy, you may change your vote by submitting new voting instructions to your broker, bank or other nominee in accordance with their operating procedures or, if you have obtained a legal proxy from your broker, bank or other nominee giving you the right to vote your shares at the Annual Meeting, by attending the virtual Annual Meeting and voting electronically. Quorum Each stockholder is entitled to one vote for each share of Common Stock held as of the Record Date on all matters presented at the Annual Meeting. Stockholders do not have the right to cumulate their votes in the election of directors. The holders of a majority in voting power of the Common Stock issued and outstanding and entitled to vote at the Annual Meeting, present in person or represented by proxy, constitutes a quorum for action at the Annual Meeting. Shares that reflect abstentions and broker non-votes count as present at the Annual Meeting for the purposes of determining a quorum. Voting Requirements Proposal 1 – Majority vote for a Director’s election. The Company’s amended and restated bylaws (the “Bylaws”) provide that, in the case of an uncontested election (i.e., an election where the number of director nominees is not greater than the number of directors to be elected), a nominee shall be elected by the affirmative vote of the majority of the votes cast by holders of Common Stock having voting power present in person or represented by proxy at a meeting for the election of directors at which a quorum is present. For this purpose, the “affirmative vote of the majority of the votes cast” means the number of shares voted “FOR” a director’s election exceeds the number of shares “AGAINST” with respect to that director’s election. In a contested election (i.e., an election where the number of nominees is greater than the number of directors to be elected), a nominee shall be elected by a plurality of the votes cast. Proposals 2, 3, 4 and 5 – Majority vote. The advisory vote on named executive officer compensation (Proposal 2 in this Proxy Statement), the amendment to the Company’s 2002 Employee Stock Purchase Plan (Proposal 3 in this Proxy Statement), the amendment to the Company’s 1995 Stock Plan (Proposal 4 in this Proxy Statement) and the ratification of the appointment of the Company’s independent registered public accounting firm (Proposal 5 in this Proxy Statement) each require the affirmative vote of the holders of a majority of the Common Stock having voting power present in person or represented by proxy and entitled to vote on the proposal. Treatment of abstentions and broker non-votes. In the election of directors (Proposal 1 in this Proxy Statement), abstentions and broker non-votes will be disregarded and have no effect on the outcome of the vote. With respect to Proposals 2, 3, 4 and 5 in this Proxy Statement, abstentions will have the same effect as voting against the proposal and broker non-votes, if any, will be disregarded and have no effect on the outcome of the vote. Meaning of “broker non-votes.” If you hold shares beneficially in street name (that is, in an account at a bank or broker) and do not provide your bank or broker with voting instructions, your shares may constitute “broker non-votes.” Broker non-votes occur on a matter when a bank or broker is not permitted to vote on that matter without instructions from the beneficial owner and instructions are not given. These matters are referred to as “non-routine” matters. All of the matters scheduled to be voted on at the Annual Meeting are “non-routine,” except for the ratification of the appointment of the Company’s independent registered public accounting firm (Proposal 5 in this Proxy Statement).
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Solicitation of Proxies The Company will bear the cost of soliciting proxies, including the preparation, assembly, Internet hosting, printing and mailing of the E-Proxy Notice, this Proxy Statement, the proxy card and any other proxy materials furnished to stockholders by the Company in connection with the Annual Meeting. In addition, the Company may reimburse brokerage firms and other persons representing beneficial owners of shares for their expenses in forwarding the proxy materials to such beneficial owners. Solicitation of proxies by mail may be supplemented by telephone, facsimile, email, Internet or personal solicitation by directors, officers, employees or independent contractors of the Company. Other than for any such independent contractors, no additional compensation will be paid to such persons for such services. If You Receive More Than One Proxy Card or E-Proxy Notice If you receive more than one proxy card or E-Proxy Notice, your shares are registered in more than one name or are registered in different accounts. To make certain all of your shares are voted, please follow the instructions included on the E-Proxy Notice on how to access each proxy card and vote each proxy card over the Internet or by telephone. If you received paper proxy materials by mail, please complete, sign and return each proxy card to ensure that all of your shares are voted. Stockholder Proposal Procedures and Deadlines Proposals of stockholders of the Company that are intended to be presented by such stockholders at our 2025 annual meeting of stockholders and that stockholders desire to have included in the Company’s proxy materials relating to such meeting pursuant to Rule 14a-8 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), must be received by Harmonic at its principal offices at 2590 Orchard Parkway, San Jose, California 95131, Attention: Corporate Secretary, no later than December 30, 2024. Any such proposals of stockholders must be in compliance with applicable laws and regulations in order to be considered for possible inclusion in the Company’s proxy materials for that meeting. Proposals of stockholders of the Company that are intended to be presented by such stockholders at our 2025 annual meeting of stockholders and that such stockholders do not desire to have included in the Company’s proxy materials for that meeting must be received in writing by Harmonic at its principal offices at 2590 Orchard Parkway, San Jose, California 95131, Attention: Corporate Secretary, no earlier than February 11, 2025 and no later than March 13, 2025. However, if the date of our 2025 annual meeting of stockholders occurs more than 25 days before or after June 11, 2025, then notice of a stockholder proposal that is not intended for inclusion in our proxy statement under Rule 14a-8 must be received by the Company no earlier than the 120th day before our 2025 annual meeting of stockholders and no later than the close of business on the later of (i) the 90th day prior to date of our 2025 annual meeting of stockholders or (ii) if the first public announcement of our 2025 annual meeting of stockholders is less than 100 days prior to the date of such annual meeting, the 10th day following the day on which public announcement of the date of our 2025 annual meeting of stockholders is first made. Furthermore, any stockholder’s notice of business to be brought before an annual meeting must set forth, as to each proposed matter, the information required for such proposed matter under Section 2.5(a)(iii) of the Bylaws. In addition, to be timely and in proper written form, a stockholder’s notice to the Secretary of the Company must be updated and supplemented, if necessary, so that the information provide or required to be provided in such notice by the Bylaws is true and correct as of the Record Date, within the time period as described in Section 2.5(a)(iii) of the Bylaws. A copy of the pertinent provisions of the Bylaws is available upon request to Harmonic Inc., 2590 Orchard Parkway, San Jose, California 95131, Attention: Corporate Secretary, or can be accessed from the Company’s filings with the SEC at www.sec.gov. If a stockholder gives notice of such a proposal after the deadlines described above, the Company’s designated proxy holders will be allowed to use their discretionary voting authority to vote against the stockholder proposal when and if the proposal is raised at our 2025 annual meeting of stockholders.
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Multiple Stockholders Sharing One Address In some instances, we may deliver to multiple stockholders of record sharing a common address only one copy of the E-Proxy Notice or, if you received paper proxy materials by mail, only one copy of this Proxy Statement and our 2023 Annual Report. If requested orally or in writing, we will promptly provide a separate copy of the E-Proxy Notice or paper proxy materials to a stockholder sharing an address with another stockholder. Requests should be directed to: Harmonic Inc., 2590 Orchard Parkway, San Jose, California 95131, Attention: Corporate Secretary, or to 1-408-542-2500. Beneficial holders sharing a common address and who desire separate copies should contact their brokerage firm or bank. Stockholders of record sharing an address who currently receive multiple copies of proxy materials or the E-Proxy Notice, and wish to receive only a single copy, should send a signed, written request to the Company at the address noted above. Beneficial holders should contact their brokerage firm or bank. If You Plan to Attend the Annual Meeting The Annual Meeting will be a virtual meeting held over the Internet. You will be able to attend the Annual Meeting, vote your shares electronically and submit your questions during the live webcast of the meeting by visiting www.virtualshareholdermeeting.com/HLIT2024 and entering your 16-digit control number located on your proxy card.
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ELECTION OF DIRECTORS Seven (7) directors are to be elected at the Annual Meeting. Each of the directors elected at the Annual Meeting will hold office until the earlier of our 2025 annual meeting of stockholders or until such director’s successor has been elected and qualified or until such director’s earlier resignation or removal. Sophia Kim and Susan Swenson, current members of the Board, will not stand for reelection at the Annual Meeting. The Board thanks Mmes. Kim and Swenson for their service to the Company and its stockholders. Unless otherwise instructed, the designated proxy holders will vote the proxies received by them “FOR” the Company’s seven nominees named below, all of whom are currently directors of the Company, except Stephanie Copeland and Dana Crandall. Each of the nominees was recommended for election by the Company’s Corporate Governance and Nominating Committee of the Board of Directors (the “Corporate Governance and Nominating Committee”) and the Board of Directors. In the event that any nominee of the Company becomes unable or declines to serve as a director at the time of the Annual Meeting, the designated proxy holders will vote the proxies for any substitute nominee who is designated by the Corporate Governance and Nominating Committee to fill the vacancy. It is not expected that any nominee listed below will be unable or will decline to serve as a director. The process undertaken by the Corporate Governance and Nominating Committee in recommending qualified director candidates is described below under “Considerations in Evaluating Director Nominees” on page 12 of this Proxy Statement. Director Nominees The names of the nominees for director and certain information about each of them are set forth below. The information presented includes age as of April 1, 2024, positions held, principal occupation and business experience for at least the past five years, and the names of other publicly-held and select privately-held companies of which the nominee currently serves as a director or has served as a director during the past five years. In addition to the information presented below regarding the nominee’s specific experience, qualifications, attributes and skills that led our Board to the conclusion that each nominee is qualified to serve as a director, we also believe that all of our director nominees have a reputation for integrity, honesty and adherence to high ethical standards. Our incumbent director nominees each have demonstrated knowledge of our industry, an ability to exercise sound judgment, and a commitment to the Company and the Board. Finally, with respect to our director nominees who have not been officers of the Company, we value their experience on other company boards of directors and board committees and as senior officers of other companies. Each of the nominees has consented to being named in this Proxy Statement and to serve as a director if elected.
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| Name | Director Since | Independent | Principal Occupation | | Patrick Gallagher | 2007 | Yes | Board Director | | New Director Nominee: Nimrod Ben-Natan(1) | n/a | No | Senior Vice President and General Manager, Broadband Business, Harmonic Inc. | | Deborah L. Clifford | 2018 | Yes | Chief Financial Officer, Autodesk Inc. | | New Director Nominee: Stephanie Copeland(2) | n/a | Yes | Managing Partner, Four Points Funding LLC | | New Director Nominee: Dana Crandall(2) | n/a | Yes | Founder, Crandall Consulting | | David Krall | 2018 | Yes | Strategic Advisor, Roku, Inc. | | Mitzi Reaugh | 2012 | Yes | Vice President, Finance and Strategy, Ads, Netflix, Inc. |
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| (1) Mr. Ben-Natan will be appointed as the Company’s President and CEO as of the Annual Meeting, effective upon the resignation of Patrick Harshman as the Company’s President and CEO. |
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| (2) In April 2024, our Board of Directors, at the recommendation of the Corporate Governance and Nominating Committee, nominated each of Ms. Copeland and Ms. Crandall to be elected as members of our Board at the Annual Meeting. |
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Except as indicated below, each nominee has been engaged in the principal occupation set forth above during the past five years. There are no family relationships between any directors or executive officers of the Company.
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| Patrick Gallagher Age: 69 Board Chair Board Committees: Compensation Committee Corporate Governance & Nominating Committee | Experience Mr. Gallagher has been a director since October 2007 and was elected Board Chair in April 2013. Mr. Gallagher is currently the lead independent director of Ciena Corporation, a supplier of networking equipment, software and services, where he serves on the compensation committee and is chair of the governance and nominations committee. Until January 2022, Mr. Gallagher was board chair of Intercloud SAS and previously, he served as board chair of Marco 4 plc, vice chair of Golden Telecom Inc., and Executive Vice Chair and Chief Executive Officer of FLAG Telecom Group. Earlier in his career, Mr. Gallagher held senior management positions at BT Group, including Group Director of Strategy & Development, President of BT Europe and as a member of the BT executive committee. Mr. Gallagher holds a B.A. in Economics with honors from Warwick University. Qualifications We believe that Mr. Gallagher’s qualifications to serve on our Board include his more than 30 years of experience in the global telecom, Internet and media industries, with a strong track record in building international businesses. He brings particular strategic and operational insight to Harmonic’s international business and has significant experience in chairing both public and private companies. |
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| Nimrod Ben-Natan (New Director Nominee and Harmonic CEO Designee) Age: 56 | Experience Mr. Ben-Natan joined the Company in 1996, was named Vice President of Product Marketing, Solutions and Strategy in 2007, and was appointed Senior Vice President and General Manager, Cable Products, in June 2012. Mr. Ben-Natan will be appointed Chief Executive Officer of the Company at the Annual Meeting. From 1993 to 1997, Mr. Ben-Natan served as an Embedded Software Engineer at Orckit Communications Ltd., a digital subscriber line developer. Previously, he worked on wireless communications systems while he was with the Israeli Defense Signal Corps from 1988 to 1993. Mr. Ben-Natan holds a B.A. in Computer Science from Tel Aviv University. Qualifications We believe that Mr. Ben-Natan’s qualifications to serve on our Board include his many years of industry experience and extensive customer relationships, his management and operational experience, and his strong background in driving Harmonic’s market-leading broadband and video technologies |
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| Deborah L. Clifford Age: 50 Board Committees: Audit Committee (Chair) | Experience Ms. Clifford has been a director since October 2018. Ms. Clifford currently serves as the Chief Financial Officer of Autodesk, a leading 3D design, engineering and entertainment software company, where she is responsible for all aspects of finance including accounting, tax and treasury, procurement, financial planning and analysis, investor relations, corporate development and sustainability. From July 2019 to March 2021, she served as the Chief Financial Officer of SurveyMonkey, a leading global survey software company. Previously, from September 2005 to June 2019, Ms. Clifford held a variety of finance positions of increasing scope and responsibility at Autodesk, including as Vice President of Financial Planning and Analysis, and was a lead architect of Autodesk’s financial transformation from selling perpetual licenses to becoming a SaaS provider. Prior to Autodesk, Ms. Clifford held positions at Virage, Inc. and Ernst & Young. Ms. Clifford holds a B.A. in Political Science with a business specialization from the University of California, Los Angeles, and an M.B.A. from the Stanford Graduate School of Business. She is a certified public accountant (inactive) in the state of California. Qualifications We believe that Ms. Clifford’s qualifications to serve on our Board include her extensive finance, operational and business transformation leadership experience at technology companies. |
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| Stephanie Copeland (New Director Nominee) Age: 56 | Experience Ms. Copeland is the founder and managing partner of Four Points Funding LLC, a real estate investment and development firm. From January 2017 to January 2019, she served as the Executive Director for the Colorado Office of Economic Development and International Trade. From February 2012 to January 2016, she was a Senior Vice President and then President of Zayo Group, a communications infrastructure services firm. Prior to Zayo Group, Ms. Copeland was Chief Operating Officer of WildBlue, a ViaSat company, after spending over 10 years at Qwest Communications as a senior executive and four years at Level 3 Communications, where she held executive leadership positions in the U.S. and the U.K. Earlier in her career, Ms. Copeland worked at Cable & Wireless Communications in St. Petersburg, Russia, and MFS Communications Company. Ms. Copeland currently serves on the board of directors of Tilson Technology Management, Inc., a privately-held telecommunications services firm. Ms. Copeland holds a B.A. in German and Commercial Studies from the University of Illinois. Qualifications We believe that Ms. Copeland’s qualifications to serve on our Board include her over 30 years of global operating and executive leadership experience in the telecom and broadband industries. |
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| Dana Crandall (New Director Nominee) Age: 59 | Experience Ms. Crandall is the founder of Crandall Consulting, an advisory and consulting company. From July 2021 to June 2023, Ms. Crandall served as Executive Vice President and Chief Operating Officer of Sky Deutschland GmbH, a German media company. Prior to Sky, from November 2013 to July 2021, she served as Senior Vice President, Customer Experience and Call Center Operations, of the Comcast West division of Comcast Corporation. Previously, she was the Managing Director and Chief Information Officer of BT Operate, a division of British Telecom. Earlier in her career, Ms. Crandall held various leadership positions at Qwest Communications and at US West. She served on the board of First Interstate BancSystem, Inc. from March 2014 to September 2021, where she chaired the technology committee and was a member of both the audit and risk committees. Ms. Crandall holds a Bachelor of Science degree in Electrical Engineering from the University of Denver and an M.B.A. from the Kellogg School of Management at Northwestern University. Qualifications We believe that Ms. Crandall’s qualifications to serve on our Board include her more than 30 years of global operating and technology leadership experience, and her extensive knowledge of the broadband and telecom industries. |
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| David Krall Age: 63 Board Committees: Compensation Committee Corporate Governance & Nominating Committee | Experience Mr. Krall has been a director since February 2018. Mr. Krall has served as a strategic advisor to Roku, Inc., a leading manufacturer of media players for streaming entertainment, since December 2010, and to Universal Audio, Inc., a manufacturer of audio hardware and software plug-ins, since August 2011. Previously, he served as President and Chief Operating Officer of Roku, President and Chief Executive Officer of QSecure, Inc. and President and Chief Executive Officer of Avid Technology, Inc. Earlier in his career, Mr. Krall worked in engineering and project management at several companies. Mr. Krall currently serves on the board of directors of Progress Software Corporation, where he is the chair of the compensation committee, and of Audinate Pty Ltd., where he is the board chair. Mr. Krall holds a B.S. and M.S. in Electrical Engineering from the Massachusetts Institute of Technology and an M.B.A., with distinction, from Harvard Business School. Qualifications We believe that Mr. Krall’s qualifications to serve on our Board include his many years of executive leadership and board experience at technology companies, and particularly his extensive experience in the digital and streaming media industries. |
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| Mitzi Reaugh Age: 46 Board Committees: Compensation Committee (Chair) | Experience Ms. Reaugh has been a director since July 2012. She is currently Vice President, Finance and Strategy, Ads, at Netflix, Inc., a streaming media company. From March 2020 to March 2021, Ms. Reaugh served as a consultant to Verizon Communications Inc., a multinational telecommunications company. From September 2018 to March 2020, she was the Chief Executive Officer and President at Jaunt Inc., where she was previously Vice president, Global Business Development and Strategy. Previously, Ms. Reaugh was the co-founder and Chief Executive Officer of GoodLooks, LLC, Executive-in-Residence at The Chernin Group, Senior Vice President of Strategy and Business Development at Miramax, Senior Vice President of Client Solutions at The Nielsen Company, and held various leadership roles at NBC Universal. Earlier in her career, she worked as a management consultant at McKinsey & Company. Ms. Reaugh served as a non-executive director on the board of Entertainment One Ltd., from November 2016 to December 2019, where she also served on the audit, nomination, disclosure and remuneration committees. Ms. Reaugh holds an M.B.A. from the University of Pennsylvania Wharton School of Business and a B.A. in Economics from Claremont McKenna College. Qualifications We believe that Ms. Reaugh’s qualifications to serve on our Board include being a senior digital media executive and having been at the leading edge of the growth of the digital media industry for over twenty years. She also brings extensive strategic experience and insight to the Board. |
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| THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING “FOR” EACH OF THE DIRECTOR NOMINEES SET FORTH ABOVE. |
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CORPORATE GOVERNANCE AND ESG Board Leadership We separate the roles of Chief Executive Officer (“CEO”) and Chair of the Board in recognition of the differences between the two roles. The CEO is responsible for setting the strategic direction of the Company and for its operational management, leadership and performance, while the independent Chair of the Board provides guidance to the CEO and sets the agenda for, and presides over, meetings of the full Board. The Board believes that this structure of a separate Chair of the Board and CEO results in the proper balancing of responsibilities, experience, and independent perspectives that meets the current corporate governance needs and oversight responsibilities of the Board. The Board also believes that this structure benefits the Company by enabling our CEO to focus on strategic matters, operational management, leadership and performance. This leadership structure also allows the Company and the Board to benefit from Patrick Gallagher’s insights in the global telecom and media industries, and significant experience in chairing public company boards. Board Meetings and Committees The Board of Directors held a total of eleven (11) meetings during the fiscal year ended December 31, 2023. No director attended fewer than 90 percent of the meetings of the Board, or 100 percent of the meetings of the Board committees upon which such director served, in 2023. Mr. Whalen attended all of the meetings of the Board until his resignation from the Board in June 2023. Although we do not have a formal policy regarding attendance by members of our Board of Directors at the Annual Meeting, we strongly encourage, but do not require, our directors to attend. The Board has determined that Mmes. Clifford, Kim, Reaugh and Swenson, and Messrs. Gallagher and Krall, as well as new director nominees Stephanie Copeland and Dana Crandall, are “independent” as that term is defined under the applicable rules and regulations of the SEC and under applicable NASDAQ listing standards. In making this determination, the Board considered the current and prior relationships that each non-employee director and new director nominee has with Harmonic and all other facts and circumstances the Board deemed relevant in determining their independence, including the beneficial ownership of the Company’s capital stock by each non-employee director and new director nominee. The independent directors and new director nominees have no relationships with the Company which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Mmes. Kim and Swenson will not be standing for re-election at the Annual Meeting. The Board has an Audit Committee, a Compensation Committee and a Corporate Governance and Nominating Committee.
Corporate Governance and Nominating Committee
| Director Compensation Elements | 2023 Compensation | | Annual cash retainers: | | | Board service: | $50,000 | | Board chair: | Additional $50,000 | | Committee service:(1) | | | Audit Committee chair: | $25,000 | | Audit Committee member: | $10,000 | | Compensation Committee chair: | $19,500 | | Compensation Committee member: | $9,000 | | Corporate Governance & Nominating Committee chair: | $11,000 | | Corporate Governance & Nominating Committee service: | $5,000 | | Annual equity grant: | $150,000 in restricted stock units, 1 year cliff vest | | New director initial equity grant: | $150,000 in restricted stock units, prorated to director’s start date |
Corporate Governance and Nominating Committee
Equity Compensation. The 2002 Director Stock Plan, as amended (the “2002 Plan”), currently provides for grants of stock options or restricted stock units (“RSUs”) to be made in three ways:
Corporate Governance and Nominating Committee
| • | Initial Grants. Each new non-employee director who joins the Board (excluding a former employee director who ceases to be an employee, but who remains a director) is entitled to receive stock options or RSUs, or a mix thereof, on the date that the individual is first appointed or elected to the Board, as determined by the Board in its sole discretion. As outlined above, under the current director compensation program, a new non-employee director would receive a standard annual grant that is prorated to his or her Board appointment date during the current February-to-February one year vesting period for Board grants. |
Corporate Governance and Nominating Committee
| • | Annual Grants. Each non-employee director who has served on the Board for at least six months, as of the date of grant, will receive an annual grant of stock options or RSUs, or a mix thereof, as determined by the Board in its sole discretion. Annual grants have historically been made in the first quarter of each fiscal year and have been comprised of only RSUs. Under the existing director compensation program, non-employee directors received an RSU award in the first quarter of 2023 in an amount determined by dividing $150,000 by the 30-trading day average closing price of the Company’s common stock prior to the grant date, and that vested in full after 1 year. |
Corporate Governance and Nominating Committee
| • | Discretionary Grants. The Board may make discretionary grants of stock options or RSUs, or a mix thereof, to any non-employee director. |
Corporate Governance and Nominating Committee
We maintain a policy that enables our non-employee directors to elect to defer the receipt of RSUs granted as Initial Grants or Annual Grants. If so elected, 100% of the RSUs subject to such Initial Grant or Annual Grant (as applicable), to the extent vested, will be deferred and paid within 60 days following the earliest to occur of (i) a change in control (as defined within the policy), (ii) the director’s separation from service (as defined under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”)), and (iii) the director’s death, subject to any required six-month delay required under Section 409A of the Code. Non-employee directors may elect to defer their Annual Grants before the end of the calendar year to which such grants relate. Unless revoked under the policy’s terms, a deferral election will remain in effect with respect to Annual Grants made in future years. 2023 Director Compensation
Corporate Governance and Nominating Committee
| Name | Fees Paid in Cash ($) | Stock Awards ($)(1)(2) | Total ($) | | Patrick Gallagher | 114,000 | 141,752 | 255,752 | | Deborah L. Clifford | 75,000 | 141,752 | 216,752 | | Sophia Kim | 60,000 | 141,752 | 201,752 | | David Krall | 64,000 | 141,752 | 205,752 | | Mitzi Reaugh | 69,500 | 141,752 | 211,252 | | Susan G. Swenson | 71,000 | 141,752 | 212,752 | | Dan Whalen | 29,500(3) | 141,752 | 171,252 |
Corporate Governance and Nominating Committee
| (1) The amounts in this column represent the aggregate grant date fair value of awards for grants of RSUs to each listed non-employee director in 2023, computed in accordance with applicable accounting guidance. These amounts do not represent the actual amounts paid to or realized by the directors during 2023 or thereafter. The grant date fair market value of the RSUs is based on the closing market price of the Common Stock on the date of grant. |
Corporate Governance and Nominating Committee
| (2) Grants of RSUs under our 2002 Plan were made on February 17, 2023, to each of the Company’s non-employee directors. Each RSU grant covered 10,446 shares and vested in full on February 15, 2024, subject to continued service on the Board through such date; provided, however, Mr. Whalen’s RSU grant was canceled when he did not stand for reelection at the Company’s 2023 annual meeting of stockholders and resigned from the Board in June 2023. Mr. Gallagher and Ms. Clifford elected to defer the receipt of the shares issuable on settlement of the vested RSUs granted in 2023 in accordance with the deferral election described above. |
Corporate Governance and Nominating Committee
Outstanding Equity Awards as of December 31, 2023 The following table provides the number of shares of Common Stock subject to RSUs held by non-employee directors of the Company as of December 31, 2023, with no stock options outstanding.
Corporate Governance and Nominating Committee
| Name | Number of Unvested Restricted Stock Units Outstanding | | Patrick Gallagher | 10,446 | | Deborah L. Clifford | 10,446 | | Sophia Kim | 10,446 | | David Krall | 10,446 | | Mitzi Reaugh | 10,446 | | Susan G. Swenson | 10,446 | | Dan Whalen | 0 |
Cybersecurity
| • | Our Compensation Committee retains an independent compensation consultant to assist it in the evaluation of appropriate cash and equity compensation for executive management. |
Cybersecurity
| • | The compensation philosophy of our Compensation Committee includes tying incentive bonus payments to the achievement of objective performance parameters. |
Cybersecurity
| • | The compensation philosophy of our Compensation Committee includes reflecting competitive market requirements and strategic business needs in determining the appropriate mix of cash and non-cash, and short-term and long-term, compensation. |
Cybersecurity
purchase date to occur before merger or change of control, and any offering period then in progress under the ESPP is terminated before the date of the proposed merger or change of control. The Administrator will notify each participant in writing at least ten business days prior to the new purchase date that her or his option will be automatically exercised on the new purchase date, unless prior to such date the participant has withdrawn from the offering period. Amendment or Termination. The ESPP Administrator may, at any time and for any reason, terminate or amend the ESPP, except that no terminations can affect options previously granted, other than certain terminations specified in the ESPP. However, the ESPP Administrator may terminate an offering period on any exercise date if the ESPP Administrator determines that the termination of the Offering Period or the ESPP is in the best interests of the Company or its stockholders. The ESPP will continue in effect until terminated by the ESPP Administrator. Without stockholder approval and without regard to whether any participant rights may be considered to have been adversely affected, the ESPP Administrator is entitled to:
Cybersecurity
APPROVAL OF AMENDMENT TO 1995 STOCK PLAN The Company’s stockholders are being asked to approve an amendment to the 1995 Stock Plan (the “1995 Plan”) which would (i) increase the number of shares of common stock reserved for issuance under the 1995 Plan by 5,000,000 shares and (ii) extend the term of the 1995 Plan to March 1, 2030. The 1995 Plan is the only equity plan of the Company available for granting equity awards to employees of the Company (aside from participation in the ESPP). If this share increase is not approved, then the remaining shares available for grants under the 1995 Plan will be insufficient to meet the Company’s grant needs through 2025. The 1995 Plan currently permits us to grant a broad range of equity awards to eligible employees and consultants of the Company. We established the 1995 Plan in order to assist the Company in attracting, retaining and motivating the best available personnel for the successful conduct and growth of the Company’s business. The Company believes that the 1995 Plan is an essential tool to link the long-term interests of stockholders and employees and serves to motivate its officers and other employees to make decisions that will, in the long run, give the best returns to stockholders. The Company has, therefore, consistently included equity incentives as a significant component of compensation for a broad range of the Company’s employees. In addition, the Company believes this practice is critical to the Company’s ability to attract and retain employees in highly competitive markets for managerial and technical talent. The Company’s key sites in California (Silicon Valley), Israel, Hong Kong, France and certain other locations expose it to particularly intense competition in the labor market from both private and public companies. Equity incentives are offered by most companies with which the Company competes for employees, and the Company believes it is essential to provide equity awards to both new and existing employees. In April 2024, our Board of Directors approved amending the 1995 Plan, subject to stockholder approval at the Annual Meeting. The proposed amendment would increase the number of shares reserved for issuance under the 1995 Plan by 5,000,000 shares and based on the data available as of April 1, 2024, the additional shares would increase the total number of shares available for grant under the 1995 Plan to 9,223,442. The NEOs have an interest in this proposal as they may receive awards under the 1995 Plan from time to time. Equity Plan Information as of April 1, 2024
Cybersecurity
| | Amount | | Shares available for grant under all active equity plans (i.e., 1995 Plan and 2002 Director Stock Plan): | 4,612,323 | | Stock options outstanding under all active and inactive equity plans: | — | | Weighted average term of outstanding stock options under all active and inactive equity plans: | — | | Weighted average exercise price of outstanding options under all active and inactive equity plans: | — | | Outstanding and unvested RSUs under all active and inactive equity plans | 3,282,937 |
Cybersecurity
| | Amount | | Shares available for future grant: | 4,223,442 | | Stock options outstanding: | — | | Weighted average term of outstanding stock options: | — | | Weighted average exercise price of outstanding options: | — | | Outstanding and unvested RSUs, including PRSUs (at target performance):(1) | 3,075,931 |
Cybersecurity
| (1) Based on maximum performance with respect to PRSUs, the total number of outstanding and unvested RSUs would equal 3,375,737. |
(in thousands)
| | Stock Options | Time-based RSUs | Performance-based RSUs | | Outstanding as of December 31, 2022 | — | 2,775 | 622 | | Granted | — | 1,942 | 505 | | Exercised | — | — | — | | Vested | — | (1,973) | (543) | | Forfeited, canceled or expired | — | (231) | (60) | | Outstanding as of December 31, 2023 | — | 2,513 | 524 | | Outstanding as of December 31, 2021 | 388 | 3,140 | 735 | | Granted | — | 2,086 | 582 | | Exercised | (388) | — | — | | Vested | — | (2,295) | (695) | | Forfeited, canceled or expired | — | (156) | — | | Outstanding as of December 31, 2022 | — | 2,775 | 622 | | Outstanding as of December 31, 2020 | 1,453 | 2,694 | 574 | | Granted | — | 2,601 | 1,018 | | Exercised | (1,065) | — | — | | Vested | — | (2,079) | (834) | | Forfeited, canceled or expired | — | (76) | (23) | | Outstanding as of December 31, 2021 | 388 | 3,140 | 735 |
(in thousands)
Based on the data shown above, if grants during 2024 are made according to the historical average, it is likely that there would be insufficient shares available in the 1995 Plan to meet our regular grant needs through 2025. DESCRIPTION OF 1995 PLAN The following is a summary of the principal features of the 1995 Plan and its operation. This summary is qualified in its entirety by reference to the 1995 Plan, a copy of which is appended as Appendix B. Purposes The purposes of the 1995 Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to employees and consultants, and to promote the success of the Company’s business. Term The 1995 Plan is set to expire on March 1, 2025. However, if the proposed amendment is approved, the 1995 Plan would expire on March 1, 2030. Types of Awards The 1995 Plan provides for the grant of options to purchase shares of our Common Stock, stock appreciation rights (“SARs”), restricted stock (which under the 1995 Plan are units to acquire shares) (“RSUs”), performance shares (“Performance Shares”), performance units (“Performance Units”) and deferred stock units (“Deferred Stock Units”). Options granted under the 1995 Plan may either be “incentive stock options”, as defined in Section 422 of the Code (to employees only), or nonstatutory stock options. Shares Subject to the Plan Subject to the adjustment provisions of the 1995 Plan, the maximum number of shares of our common stock that may be issued pursuant to awards under the 1995 Plan is 54,900,000 shares of our common stock, plus (i) up to an additional maximum of 1,800,000 shares subject to options under our 1999 Non-Statutory Stock Plan that were outstanding as of May 27, 2004, that expired unexercised. Pursuant to the proposed amendment to the 1995 Plan, our stockholders are being asked to approve an increase of 5,000,000 shares to the maximum number of shares that may be issued pursuant to awards granted under the 1995 Plan. If our stockholders approve this proposed amendment, then the maximum number of shares that may be issued pursuant to awards under the 1995 Plan will be increased to 59,900,000 shares, plus the number of shares described in clause (i) above.
(in thousands)
Each full value award (i.e. awards granted with an exercise price less than the fair market value on the date of grant) granted on or after June 5, 2019 will count against the share reserve under the 1995 Plan as one share for every share or unit granted. However, historically, full value awards granted prior to June 5, 2019, were counted against the share reserve under the 1995 Plan as 1.5 shares for every one share or unit granted. Full value awards granted prior to June 5, 2019, that debited 1.5 shares against the 1995 Plan share reserve for every share or unit return 1.5 shares to the 1995 Plan reserve for each forfeited share or unit. If an award under the 1995 Plan expires or becomes unexercisable without having been exercised in full or, with respect to RSUs, Performance Shares, Performance Units or Deferred Stock Units, is forfeited or repurchased by virtue of it not vesting, the unpurchased shares (or for Awards other than options and SARs, the forfeited or repurchased shares) which were subject thereto will become available for future grant or sale under the 1995 Plan (unless the 1995 Plan has terminated). Upon exercise of a SAR settled in shares, the gross number of shares covered by the portion of the SAR so exercised will cease to be available under the 1995 Plan. Shares that have actually been issued under the 1995 Plan under any award will not become available for future awards under the plan; provided, however, that if unvested shares of RSUs, Performance Shares, Performance Units or Deferred Stock Units are repurchased or are forfeited by virtue of their not vesting, such shares will become available for future grant under the 1995 Plan. Shares used to pay the withholding tax related to an award or to pay for the exercise price of an award will not become available for future grant or sale under the 1995 Plan. To the extent an award under the 1995 Plan is paid out in cash rather than shares, such cash payment will not reduce the number of shares available for issuance under the plan. Notwithstanding the foregoing, subject to the adjustment provisions of the 1995 Plan, the maximum number of shares that may be issued upon the exercise of incentive stock options will equal the maximum share reserve stated in the first paragraph of this section above, plus, to the extent allowable under Section 422 of the Code, any shares that become available for issuance under the 1995 Plan under the provisions summarized in this paragraph. Shares issued under the 1995 Plan may be authorized, but unissued, or reacquired common stock of the Company. As of April 1, 2024, the closing price of a share of our common stock on The Nasdaq Stock Market was $13.06. Administration The 1995 Plan may be administered by our Board or a designated committee of members of the Board. The Board has designated the Compensation Committee as administrator of the 1995 Plan (the “Plan Administrator”). Subject to the other provisions of the 1995 Plan, the Plan Administrator has the authority to: (i) construe and interpret the 1995 Plan and awards and apply their provisions; (ii) prescribe, amend or rescind rules and regulations relating to the 1995 Plan, including rules and regulations relating to sub-plans established for the purpose of qualifying for preferred tax treatment under foreign tax laws; (iii) select the consultants and employees to whom awards are to be granted; (iv) subject to the per-participant annual limits for different types of awards specified in the 1995 Plan, determine the number of shares to be made subject to each award; (v) determine whether and to what extent awards are to be granted; (vi) prescribe the terms and conditions of each award (including the provisions of the award agreement to be entered into between the Company and the grantee) including any restrictions, provided that such terms and conditions may not be inconsistent with the terms of the 1995 Plan; (vii) determine the fair market value of the common stock; (viii) allow participants to satisfy required withholding tax obligations by electing to have the Company withhold from the shares or cash issued upon exercise or vesting of an award not in excess of the maximum statutory amount; (ix) amend any outstanding award subject to applicable legal restrictions, subject to the prohibition on the reduction of the exercise price of an option or SAR as described further below; and (x) subject to certain limitations, make any other determinations deemed necessary or advisable for the administration of the 1995 Plan. All decisions, determinations and interpretations of the Plan Administrator shall be final and binding on all holders of awards, to the maximum extent permitted by applicable law. Eligibility The 1995 Plan provides that awards may be granted to the Company’s employees and consultants, including employees and consultants of the Company's subsidiaries and any parent of the Company. Incentive stock options may be granted only to employees. As of April 1, 2024, there were 1,305 employees (including officers) and 0 consultants eligible to participate in the 1995 Plan. Limitations Annual Per-Participant Award Limits. Subject to the adjustment provisions of the 1995 Plan, the 1995 Plan provides that no participant may be granted, in any fiscal year of the Company, options and SARs to purchase more than 800,000 shares of our common stock, and no participant may be granted, in any fiscal year of the Company, awards of RSUs and performance shares covering more than 800,000 shares of our common stock. No Repricing or Exchange Program. No option or SAR granted under the 1995 Plan may be repriced, including by means of an exchange for cash or another award, without stockholder approval.
(in thousands)
Terms and Conditions of Options The Plan Administrator, subject to the provisions of the 1995 Plan, will have complete discretion to determine the terms and conditions of options granted under the 1995 Plan. Each option granted under the 1995 Plan is evidenced by a written stock option agreement between the optionee and the Company and is subject to the terms and conditions as provided under the 1995 Plan. Exercise Price. The Plan Administrator determines the exercise price of options at the time the options are granted. However, the exercise price of any option must not be less than 100% of the fair market value of the underlying shares on the grant date. Options may be granted with a per share exercise price of less than 100% of the fair market value per share on the date of grant pursuant to a merger or other corporate transaction. Further, the exercise price of any incentive stock option granted to an employee who, at the time the option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any parent or subsidiary of the Company (a “ten percent owner”), the exercise price must be no less than 110% of the fair market value of the underlying shares on the grant date. Form of Consideration. The Plan Administrator determines the means of payment for shares issued upon exercise of an option, which may be by cash, check, other shares of common stock of the Company owned by the optionee, delivery of an exercise notice together with irrevocable instructions to a broker to deliver the exercise price to the Company from sale proceeds, by a combination thereof, or by any other consideration and method of payment for the issuance of shares to the extent permitted by applicable laws. Exercise and Vesting of the Option. Each option agreement will specify when the option may become exercisable and any conditions that must be satisfied before an option becomes exercisable (including for example, service requirements). No Dividends or Other Stockholder Rights. Until the shares are actually issued following the exercise of an option granted under the 1995 Plan, no right to receive dividends, to vote, or any other rights as a stockholder will exist with respect to the shares relating to such option. Termination of Employment or Service. If an optionee’s employment or service terminates for any reason (other than the optionee’s death or disability, as defined in the Code), then all options, to the extent exercisable, held by such optionee under the 1995 Plan will remain exercisable until the earlier of (i) such period of time as is set forth in his or her option agreement (or, in the absence of a stated period, three months following termination of the optionee’s employment or service), or (ii) the expiration date of the option. Death or Disability. If an optionee is unable to continue employment or service with the Company as a result of disability or dies while providing employment or other service to the Company, then all options, to the extent exercisable, held by such optionee under the 1995 Plan will remain exercisable until the earlier of (i) 12 months after the date of termination of the optionee’s employment or service, or (ii) the expiration date of the option. Termination of Options. Each option agreement will specify the term of the option. However, in no event will an option granted under the 1995 Plan be exercised more than seven years after the date of grant. Further, in no event will an incentive stock option granted under the 1995 Plan, to an employee who at the time the option is granted is a ten percent owner, be exercised more than five years after the grant date. No options may be exercised by any person after the expiration of its term. Limitations. If the aggregate fair market value of all shares of common stock subject to an optionee’s incentive stock options granted by the Company that are exercisable for the first time during any calendar year exceeds $100,000, the excess options will be treated as nonstatutory options. Terms and Conditions of SARs Each SAR granted under the 1995 Plan is evidenced by a written SAR agreement between the recipient and the Company and is subject to the other terms and conditions as provided under the 1995 Plan. Each SAR granted under the 1995 Plan will 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 Plan Administrator, in its sole discretion, will determine, subject to the terms and conditions as provided under the 1995 Plan. Exercise Price. The Plan Administrator, subject to the provisions of the 1995 Plan, will have complete discretion to determine the terms and conditions of SARs granted under the 1995 Plan. No SAR may be granted with a per share exercise price less than 100% fair market value of an underlying share on the date of grant, provided, that SARs may be granted with a per share less than 100% fair market value on the date of grant pursuant to a merger or other corporate transaction. As described further above, the exercise price for the shares or cash to be issued under a SAR granted under the 1995 Plan may not be changed without stockholder approval. Dividends. No dividends are payable prior to the vesting of a SAR.
(in thousands)
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 Plan Administrator, 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 will not be diminished as a result of the settlement. Expiration of SARs. SARs granted under the 1995 Plan expire as determined by the Plan Administrator, but in no event later than seven years from the date of grant. 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 the participant’s death or disability), then all SARs, to the extent exercisable, held by such participant under the 1995 Plan will remain exercisable until the earlier of (i) such period of time as is set forth in his or her SAR agreement (or, in the absence of a stated period, three months following the termination of the participant’s employment or service), or (ii) the expiration date of the SAR. Death or Disability. If a participant is unable to continue employment or service with the Company as a result of disability or dies while providing employment or other service to the Company, then all SARs, to the extent exercisable, held by such participant under the 1995 Plan will remain exercisable until 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. Terms and Conditions of RSUs Grant of RSUs. The Plan Administrator, subject to the provisions of the 1995 Plan, will have complete discretion to determine the terms and conditions of RSUs granted under the 1995 Plan, which uses the defined term “Restricted Stock” to refer to RSUs. The Plan Administrator will determine the number of shares subject to 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. No Dividends or Other Stockholder Rights. Until the shares are issued under the RSUs, no right to vote or receive dividends or any other rights as a stockholder will exist with respect to the underlying shares. RSU Agreement. Each RSU will be evidenced by an agreement that shall specify such terms and conditions as the Plan Administrator will 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. Terms and Conditions of Performance Shares and Performance Units Grant of Performance Shares. The Plan Administrator, subject to the provisions of the 1995 Plan, will have complete discretion to determine the terms and conditions of Performance Shares granted under the 1995 Plan. The Plan Administrator will 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. Performance Share Award Agreement. Each Performance Share grant will be evidenced by an agreement that will specify the terms described in the preceding paragraph and such other terms and conditions as the Plan Administrator, in its sole discretion, will determine. Grant of Performance Units. Performance Units are similar to Performance Shares, except that they will be settled in cash in an amount equivalent to the fair market value of the underlying shares of common stock, determined as of the vesting date. Each Performance Unit will be granted in the form of units or rights to acquire shares of common stock, provided that such unit or right will be the cash equivalent of one share of common stock. The Plan Administrator, subject to the provisions of the 1995 Plan, will have complete discretion to determine the terms and conditions of Performance Units granted under the 1995 Plan. The Plan Administrator will determine 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 Units. The shares available for issuance under the 1995 Plan will not be diminished as a result of the settlement of a Performance Unit in cash.
(in thousands)
Performance Unit Award Agreement. Each Performance Unit grant will be evidenced by an agreement that will specify such terms and conditions as the Plan Administrator will determine. The Plan Administrator determines the number of Performance Units to be granted to a Participant, provided that during any fiscal year of the Company, no participant will receive Performance Units having an initial value greater than one million dollars, except that a participant may receive Performance Units in a fiscal year of the Company in which his or her service as a participant first commences with an initial value no greater than two million dollars. No Dividends or Other Stockholder Rights. Until the shares are issued under the Performance Shares, no right to vote or receive dividends or any other rights as a stockholder will exist with respect to the underlying shares. No right to vote or receive dividends or any other rights as a stockholder will exist with respect to Performance Units or the cash payable under any Performance Units. Terms and Conditions of Deferred Stock Units Grant of Deferred Stock Units. Deferred Stock Units will consist of an RSU, Performance Share or Performance Unit award that the Plan Administrator permits to be paid out in installments or on a deferred basis, in accordance with rules and procedures established by the Plan Administrator. Deferred Stock Units are subject to the individual annual limits that apply to each type of awards and the annual limits applicable to underlying awards. Non-Transferability of Awards Unless determined otherwise by the Plan Administrator, 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 Plan Administrator makes an award granted under the 1995 Plan transferable, such award will contain such additional terms and conditions as the Plan Administrator deems appropriate. In no event may an award granted under the 1995 Plan be transferred to any third party for value, unless approved by our stockholders in advance. Adjustment Upon Changes in Capitalization; Corporate Transactions Subject to any required action by the stockholders of the Company, in the event of any increase or decrease in the common stock of the Company by reason of any stock split, reverse stock split, stock dividend, combination, reclassification or other increase or decrease in the number of issued shares of our common stock effected without receipt of consideration by the Company, appropriate proportional adjustments will be made in the number of shares of stock authorized for issuance under the 1995 Plan, the individual fiscal year limits applicable to RSUs, Performance Share awards, SARS and options, the number of shares of stock subject to any award outstanding under the 1995 Plan, and the exercise price of any such outstanding option, RSU or other award. Any such adjustment will be made upon approval of the Compensation Committee, whose determination will be conclusive. In the event that we are acquired in any merger of the Company with or into another corporation or the sale of substantially all of the assets, each outstanding award granted under the 1995 Plan will be assumed or an equivalent right substituted by a successor corporation. If such awards granted under the 1995 Plan are not assumed or substituted, they become fully vested (and, if applicable, fully exercisable) prior to the closing of such merger or sale of assets. Holders of options or SARs that are not assumed or substituted will be notified in advance and provided with fifteen days from the date of such notice to exercise their options or SARs, after which the options or SARs will terminate. In the event of the proposed dissolution or liquidation of the Company, the Plan Administrator will notify each holder of an award under the 1995 Plan as soon as practicable prior to such proposed transaction, and, in its discretion may allow options or SARs to be exercised until ten days prior to such transaction as to all covered shares. In addition, the Plan Administrator may provide that any repurchase option or forfeiture rights applicable to any award granted under the 1995 Plan will lapse 100%, and that any vesting will accelerate 100% upon consummation of such proposed action. To the extent it has not been previously exercised (with respect to options and SARs) or vested (with respect to other awards), each award under the 1995 Plan will terminate immediately prior to the consummation of such proposed transaction. Amendment, Suspensions and Termination of the 1995 Plan Our Board of Directors may amend, suspend or terminate the 1995 Plan at any time; provided, however, that stockholder approval is required for any amendment to the extent necessary to comply with Rule 16b-3 promulgated under the Securities Exchange Act of 1934 (“Rule 16b-3”) or Section 422 of the Code, or other applicable law, rule or regulation, including the requirements of any exchange or quotation system on which the Company’s common stock is listed or quoted. No amendment, alteration, suspension or termination of the 1995 Plan will impair the rights of any participant, unless mutually agreed otherwise in writing between the participant and the Plan Administrator.
(in thousands)
Summary of U.S. Federal Income Tax Consequences The following summary is intended only as a general guide to the material U.S. federal income tax consequences of participation in the 1995 Plan. The summary is based on existing U.S. federal income tax laws and regulations, and there can be no assurance that those laws and regulations will not change in the future. The summary does not purport to be complete and does not discuss the tax consequences upon a participant’s death, or the provisions of the tax laws of any municipality, state or non-U.S. jurisdiction to which the participant may be subject. As a result, tax consequences for any particular participant may vary based on individual circumstances. Options. Options granted under the 1995 Plan may be either “incentive stock 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 or may affect the determination of the optionee’s alternative minimum tax (unless the shares are sold or otherwise disposed of in the same year). Upon the sale or exchange of the shares more than two years after grant of an incentive stock option and more than one year after exercising the option, any gain or loss relative to the exercise price 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 excess if any of 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, over the exercise price of the shares. Any additional gain or loss recognized on such a premature disposition of the shares relative to such lower price will be characterized as long-term or short-term capital gain or loss, depending on the holding period. For purposes of the alternative minimum tax, the difference between the option exercise price and the fair market value of the shares on the exercise date is treated as an adjustment item in computing the optionee’s alternative minimum taxable income in the year of exercise. In addition, special alternative minimum tax rules may apply to certain subsequent premature dispositions of the shares or provide certain basis adjustments or tax credits for alternative minimum tax purposes. All options that do not qualify as incentive stock options are referred to as nonstatutory options. An optionee will not recognize any taxable income at the time the optionee is granted a nonstatutory option. However, upon the exercise of a nonstatutory option, the optionee will recognize taxable income generally measured as the excess of the then fair market value of the shares purchased over the purchase price. For employees, such taxable income recognized in connection with the exercise of a nonstatutory option will be subject to tax withholding. Upon resale of such shares by 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 recognize ordinary income in 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 received would be taxed as capital gain or loss, which will be treated as long-term or short-term capital gain or loss, depending on the holding period. RSU, Performance Units and Performance Shares. A participant will not have taxable income upon grant of RSU, Performance Units or Performance Shares. Instead, he or she will recognize ordinary income at the time of vesting and settlement equal to the fair market value of the vested shares or cash received, minus any amount paid for the vested shares of common stock. Medicare Surtax. A participant’s annual “net investment income,” as defined in Section 1411 of the Code may be subject to a 3.8% federal surtax (generally referred to as the “Medicare Surtax”). Net investment income may include capital gain and/or loss arising from the disposition of shares subject to a participant’s awards under the 1995 Plan. Whether a participant’s net investment income will be subject to the Medicare Surtax will depend on the participant’s level of annual income and other factors. Section 409A. Section 409A of the Code (“Section 409A”) provides certain requirements for nonqualified deferred compensation arrangements with respect to an individual’s deferral and distribution elections and permissible distribution events. Awards granted under the 1995 Plan with a deferral feature will be subject to the requirements of Section 409A. If an award is subject to and fails to satisfy the requirements of Section 409A, the recipient of that award may recognize ordinary income on the amounts deferred under the award, to the extent vested, which may be prior to when the compensation is actually or constructively received. Also, if an award that is subject to Section 409A fails to comply with Section 409A’s provisions, Section 409A imposes an additional 20% federal income tax on compensation recognized as ordinary income, as well as interest on such deferred compensation. Certain states, such as California, have enacted laws similar to Section 409A that impose additional taxes, interest and penalties on nonqualified deferred compensation arrangements in the event of failure to comply with the applicable state requirements. The Company will have withholding and reporting requirements with respect to such amounts.
(in thousands)
Tax Effect for the Company. 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 participant at the time the participant recognizes such income (for example, the exercise of a nonqualified stock option). Special rules limit the deductibility of compensation paid to our CEO and certain other current and former officers of the Company that qualify as “covered employees” within the meaning of Section 162(m) of the Code (the “Covered Employees”). Under Section 162(m) of the Code, the annual compensation paid to any of these Covered Employees will be deductible only to the extent that it does not exceed $1,000,000. Grants to NEOs, Executive Officers and Other Employees The Company is unable to predict the amount of benefits that will be received by, or allocated to, any participant under the 1995 Plan. The table that follows shows the RSUs granted under the 1995 Plan during 2023 to the NEOs, all current executive officers as a group and all other employees as a group. No member of our Board of Directors who is not also an executive officer is eligible for awards under the 1995 Plan. The Company did not grant any other types of awards under the 1995 Plan during 2023. Plan Benefits: 1995 Stock Plan
(in thousands)
| | Time-Based RSUs(1) | | Performance-Based RSUs(1) | | Total RSUs | | | Name and Position | Number of Shares | Grant Date Fair Value | Number of Shares | Grant Date Fair Value | Number of Shares | Grant Date Fair Value | | Patrick J. Harshman President & CEO | 149,722 | $2,031,728 | 149,722 | $1,962,855 | 299,444 | $3,994,583 | | Walter Jankovic Chief Financial Officer | 118,343 | $1,759,472 | 59,172 | $1,161,546 | 177,515 | $2,921,018 | | Jeremy Rosenberg Former Interim Chief Financial Officer | 34,819 | $472,494 | — | — | 34,819 | $472,494 | | Sanjay Kalra Former Chief Financial Officer | — | — | — | — | — | — | | Nimrod Ben-Natan Senior Vice President and General Manager, Broadband Business | 69,638 | $944,988 | 34,819 | $459,680 | 104,457 | $1,404,668 | | Neven Haltmayer Senior Vice President, Video R&D | 60,585 | $822,138 | — | — | 60,585 | $822,138 | | Ian Graham Senior Vice President, Global Sales | 45,265 | $614,246 | — | — | 45,265 | $614,246 | | All current executive officers, as a group (5 persons) | 443,553 | $6,172,572 | 243,713 | $3,584,081 | 687,266 | $9,756,653 | | All employees who are not executive officers, as a group | 1,760,335 | $24,455,059 | — | — | 1,760,335 | $24,455,059 |
(in thousands)
| (1) See the “Grant of Plan-Based Awards” table on page 49 of this proxy statement for equity award grant dates and footnotes (2)-(6) to the table for vesting and other details of the awards to the NEOs. The number of shares subject to performance-based RSUs shown assumes achievement of the applicable performance goals at the target level of achievement. The maximum number of shares that may vest under the performance-based RSUs is 150% of the target number of shares |
The Audit Committee
| • | relate total compensation for each executive, consisting of base salary, annual cash bonus and equity awards, to overall Company performance and, in the case of base salary and equity awards, to individual performance; |
The Audit Committee
| • | tie incentive bonus compensation to the Company’s achievement of objective performance parameters; |
The Audit Committee
| • | reflect competitive market requirements and strategic business needs in determining the appropriate mix of cash and non-cash compensation and short-term (base salary and annual cash bonus) and long-term compensation (equity awards); |
The Audit Committee
| • | put at risk a significant portion of each executive’s total target direct compensation (base salary, annual cash bonus, and equity awards), with the intent to reward superior performance by the Company; and |
The Audit Committee
| Name | 2023 Salary Earned | Target 2023 Bonus as % of Annual Salary | Applicable 2023 Incentive Bonus Plan | | Patrick Harshman | $697,455 | 125% | Corporate Bonus Plan | | Walter Jankovic(1) | $262,308 | 75% | Corporate Bonus Plan | | Jeremy Rosenberg(2) | $330,447 | 60% | Corporate and Broadband Bonus Plans | | Sanjay Kalra(3) | $85,000 | 76% | Corporate Bonus Plan | | Nimrod Ben-Natan(4) | $371,045 | 60% | Broadband Bonus Plan | | Neven Haltmayer | $403,161 | 60% | Video Bonus Plan | | Ian Graham(5) | $325,929 | 100% | Corporate Bonus Plan |
The Audit Committee
| (1) Mr. Jankovic joined the Company as Chief Financial Officer in May 2023. His target bonus opportunity was negotiated between the Company and Mr. Jankovic in connection with his hire. |
The Audit Committee
| (2) Mr. Rosenberg was appointed Interim Chief Financial Officer in March 2023. His target bonus opportunity was unchanged in connection with his appointment. Mr. Rosenberg participated in the Corporate Bonus Plan for the first half of 2023 in connection with serving as Interim CFO of the Company, and then participated in the Broadband Bonus Plan for the second half of 2023 when he resumed his business development role in the Broadband business. |
2023 Bonus Plans, achievement and payouts
2023 Bonus Plans, achievement and payouts For 2023, the Compensation Committee agreed to incentivize performance based on financial performance goals established by the committee in February 2023 under three incentive bonus plans (the “Bonus Plans”) for our NEOs. The Compensation Committee approved the Bonus Plans to focus the NEOs and other incentive plan participants on revenue growth and improved profitability, which the committee believes are important indicators of the Company’s business growth and success. The Compensation Committee believed that the performance goals for the Bonus Plans were challenging but achievable, based on its review of the Company’s operating plan for 2023 when setting the goals, the experience of the members of the Compensation Committee with respect to the Company’s historical performance, and the business and industry outlook. Each performance goal was allocated a percentage weighting (with the sum of such weights totaling 100% under each Bonus Plan) and the extent to which the performance goal was achieved and the weighting for such goal determined the payout, if any, attributable to such goal. The Bonus Plans provided for mid-year payouts based on year-to-date achievement of the financial goals. Mid-year payouts, if any, additionally were limited to 100% of the NEO's mid-year target bonus opportunity. The Compensation Committee established a minimum threshold that had to be met in order for any mid-year and year-end payouts to be made under the Bonus Plans, as well as a maximum full-year payout cap, applicable to all performance goals under the Bonus Plans, as set forth in the table below.
2023 Bonus Plans, achievement and payouts
| Achievement | Payout | | < 80% | 0% | | 80% | 50% | | 100% | 100% | | 110% | 200% |
2023 Bonus Plans, achievement and payouts
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2023 Bonus Plans, achievement and payouts
The summary tables below set forth the achieved payouts under each of the components of the Bonus Plans, and the resulting earned payout to each of the NEOs under their applicable Bonus Plan, as a percentage of the NEO’s target bonus opportunity mid-year and for the full year. All amounts earned by the NEOs under the Bonus Plans were paid in cash, and year-end payouts were net of any amounts that were paid mid-year. Corporate Bonus Plan
2023 Bonus Plans, achievement and payouts
| | Target | | Actual | | Achievement | | Payout Result | | Weight Allocation (%) | Weighted Payout | | | Performance Goals | Mid-Year ($M) | Full-Year ($M) | Mid-Year ($M) | Full-Year ($M) | Mid-Year (%) | Full-Year (%) | Mid-Year (%) | Full-Year (%) | | Mid-Year (%) | Full-Year (%) | | Video Business Operating Profit | 0.0 | 16.5 | (0.8) | (7.5) | 0.0 | (45.4) | 0.0 | 0.0 | 25.0 | 0.0 | 0.0 | | SaaS Revenue | 22.6 | 50.9 | 25.2 | 50.9 | 111.4 | 101.4 | 100.0 | 113.7 | 25.0 | 25.0 | 28.4 | | Broadband Business Operating Profit | 37.5 | 86.6 | 37.6 | 63.8 | 100.2 | 73.7 | 100.0 | 50.0 | 32.5 | 32.5 | 16.3 | | Fiber-to-the-home (FTTH) Revenue | 18.1 | 37.6 | 6.8 | 27.7 | 37.5 | 73.6 | 0.0 | 0.0 | 17.5 | 0.0 | 0.0 | | Total payout for Messrs. Graham, Harshman, Jankovic and Rosenberg: * | | | | | | | | | | | 44.7 |
2023 Bonus Plans, achievement and payouts
| * Mr. Jankovic joined the Company in May 2023 and his 2023 bonus payout was therefore prorated to his start date. Mr. Kalra resigned from the Company in March 2023 and therefore did not receive any bonus payout in 2023. Mr. Rosenberg participated in the Corporate Bonus Plan for the first half of 2023 in connection with serving as Interim CFO of the Company, and then participated in the Broadband Bonus Plan for the second half of 2023 when he resumed his business development role in the Broadband business; he received 28.75% of his full-year target bonus opportunity under the Corporate Bonus Plan and did not receive any payout under the Broadband Bonus Plan. |
2023 Bonus Plans, achievement and payouts
Video Bonus Plan
2023 Bonus Plans, achievement and payouts
| | Target | | Actual | | Achievement | | Payout Result | | Weight Allocation (%) | Weighted Payout | | | Performance Goals | Mid-Year ($M) | Full-Year ($M) | Mid-Year ($M) | Full-Year ($M) | Mid-Year (%) | Full-Year (%) | Mid-Year (%) | Full-Year (%) | | Mid-Year (%) | Full-Year (%) | | Video Business Operating Profit | 0.0 | 16.5 | (0.8) | (7.5) | 0.0 | (45.4) | 0.0 | 0.0 | 50.0 | 0.0 | 0.0 | | SaaS Revenue | 22.6 | 50.9 | 25.2 | 50.9 | 111.4 | 101.4 | 100.0 | 113.7 | 50.0 | 50.0 | 56.8 | | Total payout for Mr. Haltmayer: | | | | | | | | | | | 56.8 |
2023 Bonus Plans, achievement and payouts
Broadband Bonus Plan
2023 Bonus Plans, achievement and payouts
| | Target | | Actual | | Achievement | | Payout Result | | Weight Allocation (%) | Weighted Payout | | | Performance Goals | Mid-Year ($M) | Full-Year ($M) | Mid-Year ($M) | Full-Year ($M) | Mid-Year (%) | Full-Year (%) | Mid-Year (%) | Full-Year (%) | | Mid-Year (%) | Full-Year (%) | | Broadband Business Operating Profit | 37.5 | 86.6 | 37.6 | 63.8 | 100.2 | 73.7 * | 100.0 | 50.0 | 65.0 | 65.0 | 32.5 | | Fiber-to-the-home (FTTH) Revenue | 18.1 | 37.6 | 6.8 | 27.7 | 37.5 | 73.6 | 0.0 | 0.0 | 35.0 | 0.0 | 0.0 | | Total payout for Mr. Ben-Natan:** | | | | | | | | | | | 32.5 |
2023 Bonus Plans, achievement and payouts
| * While full-year performance was below the 80% payout threshold, the Broadband business achieved its operating profit target for the first half of 2023 ($37.5 million), resulting in a full payout for first-half performance. |
2023 Bonus Plans, achievement and payouts
| ** Mr. Rosenberg participated in the Corporate Bonus Plan for the first half of 2023 in connection with serving as Interim CFO of the Company, and then participated in the Broadband Bonus Plan for the second half of 2023 when he resumed his business development role in the Broadband business. He did not receive any payouts under the Broadband Bonus Plan; he received 28.75% of his full-year target bonus opportunity under the Corporate Bonus Plan and did not receive any payout under the Broadband Bonus Plan. |
2023 Bonus Plans, achievement and payouts
| 42 | |
2023 Bonus Plans, achievement and payouts
Equity Compensation Plans The Compensation Committee believes that equity compensation is an essential tool to link the long-term interests of stockholders and employees, especially the CEO and executive management, and serves to motivate employees, and particularly executive management, to make decisions that will, in the long run, deliver the best returns to stockholders, thus rewarding excellent long-term performance. Consistent with 2022, for 2023, in light of a trend among the Company’s peer group as well as similarly situated publicly-listed technology companies favoring full-value awards, the Compensation Committee granted the Company’s NEOs and the Company’s other executives full-value awards and no stock options. These awards consisted of time-based RSUs, and in select cases, performance-based RSUs for our NEOs. The Compensation Committee believes RSUs promote more direct alignment between the interests of our NEOs and those of our stockholders (since the value of RSUs correlates more directly with the value of our stock) as compared to stock options while rewarding our NEOs for stockholder value creation, as well as serve as a useful retention tool through multi-year vesting requirements. Additionally, performance-based RSUs provide enhanced incentive value by rewarding our NEOs for achieving important financial, strategic, or other objectives of the Company, consistent with our pay for performance philosophy. The Compensation Committee may employ stock option grants in the future, either alone or in combination with RSUs and/or performance-based RSUs. Time-based Vesting RSUs. The 2023 timed-based RSUs granted to executives and NEOs vest over 3 years subject to their continued service. In 2023, Messrs. Harshman, Jankovic, Ben-Natan, Haltmayer, Graham and Rosenberg were awarded time-based RSUs covering 149,722, 118,343, 69,638, 60,685, 45,265 and 34,819 shares of Company Common Stock, respectively. TSR Awards. In 2023, Messrs. Harshman, Jankovic and Ben-Natan were also awarded performance-based RSUs (“PRSUs”) covering a target number of shares of 149,722, 59,172 and 27,855, respectively, with vesting based on the total stockholder return (“TSR”) to holders of Company Common Stock during a three-year performance period compared to the TSR of companies in the NASDAQ Telecommunications Index or any successor to that index (the “Index”) at both the beginning and end of the performance period (the “TSR Award”).
2023 Bonus Plans, achievement and payouts
| Key Terms | Description | | Performance Period | Messrs. Harshman and Ben-Natan TSR Awards: Three-year performance period, from February 15, 2023, through February 14, 2026. Mr. Jankovic TSR Awards: Three-year performance period, from May 22, 2023, through May 21, 2026. | | Calculation of TSR | The beginning price and ending price of the Company and each company in the Index are calculated based on the average trading price over 90 consecutive trading days, as adjusted to reflect dividends reinvested on each ex-dividend date during the applicable period (or, in the case of the ending price, the full performance period). | | Vesting | 100% of the target number of RSUs will vest if the Company’s TSR is equal to the Index TSR during the performance period. For each 1% that the Company TSR exceeds the Index TSR during the performance period, the percentage of the target number of RSUs that vest increases by 2%, from 100% up to a maximum of 150% (although this percentage is capped at 100% if the Company TSR is negative during the performance period). For each 1% that the Company TSR is less than the Index TSR, the percentage of the target number of RSUs that vest will decrease by 2%, from 100% down to a minimum of 50%. If the Company TSR is less than the Index TSR by 50% or more, no RSUs under the TSR Award will vest. | | Continuous service | Vesting is contingent upon the NEO remaining in service with us through the applicable performance period. | | Change of control | In the event of our “change in control” before the end of the performance period, performance will be measured by comparing the price being paid for a share of the Company’s Common Stock in such change in control to the TSR of the Index as of the day prior to the change in control, each as adjusted for any dividends during the performance period. Any earned RSUs as a result of performance achievement described in the previous sentence will vest as follows: a prorated amount of such earned RSUs will vest on the change in control based on the number of months served during the performance period and the remaining earned portion of the award will vest quarterly through the end of the original three-year performance period, subject to continued service, and further subject to any vesting acceleration under his change of control severance agreement. See “Change-of-Control Agreements” section below. |
2023 Bonus Plans, achievement and payouts
| | 43 |
2023 Bonus Plans, achievement and payouts
Upon vesting, shares are immediately issued and there are no additional time- or service-based conditions associated with the TSR Award or performance-based RSUs, other than the CEO stock ownership guidelines applicable to Mr. Harshman as further described below under “Stock Ownership Guidelines”. The Compensation Committee believes the TSR Awards appropriately incentivize Messrs. Harshman, Jankovic and Ben-Natan and provide a direct and effective means for more closely aligning these executive’s interests with those of our stockholders’ interests. Performance-based RSU Award. In 2023, Mr. Ben-Natan was also awarded 6,964 PRSUs, with vesting conditioned upon the Company and a key Broadband business customer executing a commercial agreement in 2023 with a commitment to purchase more than $200 million of products and services, as well as Mr. Ben-Natan’s continued service through the date of certification by the Compensation Committee of such performance achievement. Mr. Ben-Natan timely fulfilled the vesting condition and therefore vested 100% in the PRSU award. Equity Award Determinations. Consistent with past practice, the total equity pool (RSUs and PRSUs) for annual grants to be made to all employees in 2023, including NEOs, was determined principally by reference to industry-specific guidelines published by shareholder advisory firms and, in part, by historical practice. The guidelines generally refer to metrics such as total annual awards as a percentage of shares outstanding and total outstanding awards as a percentage of fully diluted shares. The Compensation Committee, in consultation with the CEO (except with respect to the CEO’s own compensation), determines the size and material terms of equity awards granted to the NEOs, taking into account the role and responsibility of the NEO, competitive factors including competition for technology executives; peer group data compiled by the Compensation Committee’s compensation consultant, the size and value of long-term equity compensation already held by each executive officer and the vested percentage; the proportion between RSUs, performance-based RSUs and stock options held by each NEO; the total target cash compensation opportunity for each NEO; and individual performance and retention objectives. See “Grant of Plan-based Awards” on page 49 of this proxy statement for a summary of all equity grants made to the NEOs in 2023. With respect to Mr. Jankovic, the value of his RSUs and PRSUs was based on market data and negotiated in connection with his hire in May 2023. With respect to Mr. Rosenberg, the value of his RSUs was based on his role as Senior Vice President of Business Development and he did not receive additional equity award value for serving as Interim Chief Financial Officer. See “Grant of Plan-based Awards” on page 49 of this proxy statement for a summary of all equity grants made to the NEOs in 2023. Achievement of 2020 PRSU Award. In 2020, Mr. Harshman was awarded RSUs covering a target number of shares of 182,830, with vesting based on the TSR to holders of Company common stock during the three-year performance period compared to the TSR of companies in the Index at both the beginning and end of the performance period. The performance period ended on February 14, 2023. The Compensation Committee determined that Company TSR during the performance period exceeded the Index TSR by 88%, resulting in maximum vesting of 150% of the target number of shares of Mr. Harshman’s PRSU award, or 274,245 shares. Equity Compensation Grant Practices The Compensation Committee approves all equity grants, except for certain grants made to non-executive employees in the ordinary course of business, for which it has delegated authority to the CEO, within parameters approved in advance by the Compensation Committee, pursuant to an employee equity issuance policy (the “Employee Equity Issuance Policy”). The Compensation Committee reviews all grants made pursuant to the Employee Equity Issuance Policy. Initial hire grants of RSUs are made on the second Friday of each month, and any other grants made by the CEO pursuant to authority granted by the Compensation Committee are made on the Friday of the week of such grant. Stock options, if issued, are granted at 100% of the closing price of our stock on the Nasdaq Stock Market on the date of grant. Initial hire awards that are granted to executives reporting to the CEO or awards that are above the CEO’s approved range are approved by the Compensation Committee, with the grant date being the day of approval by the Compensation Committee or a later date selected by the Compensation Committee and, if in the form of a stock option, the per share exercise price being the closing price of a share of Common Stock on the Nasdaq Stock Market on the grant date. The initial grants are effective as of the date of grant, with vesting generally beginning on the date of commencement of employment. Annual grants to NEOs and executives are usually made in the first half of the year, and, in 2023, these grants were made in February. This timing enables management and the Compensation Committee to consider performance by both the Company and the individual for the then most recently completed fiscal year and balance it against our expectations for the current year.
2023 Bonus Plans, achievement and payouts
| 44 | |
2023 Bonus Plans, achievement and payouts
We do not time the granting of RSUs or stock options with any favorable or unfavorable news released by the Company. The timing of initial grants is driven by the date of hire of our new employees. The Board of Directors and Compensation Committee meeting schedules, for review and approval of annual grants, are usually established several months in advance for the calendar year. Proximity of any awards to an earnings announcement or other market events is coincidental. Retirement Benefits The Company does not provide pension benefits or deferred compensation plans to any of its U.S. employees, including NEOs, other than a 401(k) deferred compensation plan which is open to all regular, full-time U.S. employees. The Company has a matching contribution policy for the 401(k) plan, of up to $1,000 a year for each participant, for 2023. For employees resident in non-U.S. jurisdictions, including Messrs. Ben-Natan and Graham, the Company makes required contributions to statutory pension and retirement schemes and, in a few countries, offers supplemental pension benefits in accordance with customary market practices. Other Compensation Other elements of compensation available to the Company’s NEOs include life and long-term disability insurance and health benefits. These benefits are available to all regular, full-time U.S. employees of the Company on the same basis, and similar benefits are provided to most employees in other countries. In addition, the Company may provide for relocation expenses to recruit key executives living outside the San Francisco Bay Area. Management periodically reviews the level of benefits provided to all employees and adjusts those levels as appropriate. The values of the benefits received by the NEOs pursuant to these other elements of compensation in 2021, 2022 and 2023 are included in the “All Other Compensation” column in the Summary Compensation Table on page 48 of this Proxy Statement. Change-of-Control Severance Agreements The Company does not have employment agreements with any of its present NEOs, other than standard local employment agreements entered into with Mr. Graham in 2008 and Mr. Ben-Natan in 2012, and an offer letter entered into with Mr. Jankovic in May 2023. It has, however, entered into change of control severance agreements (the “Severance Agreements”) with its NEOs. The Severance Agreements are designed to incentivize continuing service to the Company by NEOs in the event that the Company may be in discussions regarding strategic transactions and to provide short-term benefits in the event that a NEO’s position is eliminated or responsibilities or compensation are reduced following a change of control. The Company believes that these Severance Agreements help to ensure that, if the Board of Directors believes a potential transaction is in the best interests of the Company’s stockholders, its NEOs will remain focused on the consummation of such a potential transaction, without significant distraction or concern regarding their personal circumstances, such as continued employment. Under the terms of each of the Severance Agreements, if within 18 months following a “change of control” of the Company (in each case, as defined in the relevant Severance Agreement), the NEO experiences an “involuntary termination” without “cause,” and not due to the NEO’s death or disability, then the NEO will receive:
2023 Bonus Plans, achievement and payouts
| • | a lump-sum cash payment of (i) in the case of Mr. Harshman, an amount equal to 200% of his base salary for the 12 months prior to the change of control; (ii) in the case of each of the other NEOs, an amount equal to 100% of the NEO’s base salary for the 12 months prior to the change of control; |
2023 Bonus Plans, achievement and payouts
| • | a lump-sum cash payment of (i) in the case of Mr. Harshman, an amount equal to the greater of (x) 200% of his then annual target bonus or (y) 200% of the average of the actual bonuses paid to him in each of the two prior years; (ii) in the case of each of the other NEOs, an amount equal to the greater of (x) 100% of the NEO’s then annual target bonus or (y) 100% of the average of the actual bonuses paid to the NEO in each of the two prior years; and |
2023 Bonus Plans, achievement and payouts
| • | Company-paid health, dental, and life insurance coverage for up to one year after termination of employment; |
2023 Bonus Plans, achievement and payouts
| • | vesting acceleration of 100% of the unvested portion of any outstanding stock option or restricted stock units held by the NEO and exercisability of all such outstanding stock options for a period of one year after such termination; and |
2023 Bonus Plans, achievement and payouts
| • | a lump-sum cash payment of $5,000 for outplacement assistance. |
2023 Bonus Plans, achievement and payouts
In the case of Mr. Haltmayer, his Severance Agreement further provides that he will receive the above-listed benefits for non-CEO NEOs and vesting acceleration if Mr. Haltmayer experiences an “involuntary termination” without “cause” upon or within 12 months following a sale of the Company’s Video business or Video SaaS business that is completed on or before December 31, 2024 (a “Video Transaction”). In addition, in the event a Video Transaction occurs and Mr. Haltmayer continues providing services to the Company through the date of the completion of the Video Transaction, then 50% of the then-unvested and outstanding portion of Mr. Haltmayer’s restricted stock units will accelerate vesting.
2023 Bonus Plans, achievement and payouts
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2023 Bonus Plans, achievement and payouts
Under the Severance Agreements, “cause” generally means (i) any act of personal dishonesty taken by the NEO in connection with his or her responsibilities as an employee and intended to result in his or her substantial personal enrichment, (ii) the conviction of a felony, (iii) a willful act by the NEO which constitutes gross misconduct and which is injurious to the Company, and (iv) following delivery to the NEO of a written demand for performance from the Company which describes the NEO’s failure to substantially perform his or her duties, continued violations by the NEO of the NEO’s obligations to the Company which are demonstrably willful and deliberate on the NEO’s part. Under the Severance Agreements, “change of control” generally means (i) any person becomes the beneficial owner of securities of the Company representing 50% or more of the total voting power represented by the Company’s then outstanding voting securities; (ii)a change in our Board composition within a two-year period, as a result of which fewer than a majority of the directors are “incumbent directors” (meaning generally directors who either (A) are directors of the Company as of the date of the Severance Agreement, 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 excluding 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) 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 at least 50% of the total voting power represented by the voting securities of the Company or the surviving entity outstanding immediately after such merger or consolidation; or (iv) the sale or disposition by the Company of all or substantially all the Company’s assets. Under the Severance Agreements, “Involuntary termination” generally means (i) without the NEO’s consent, the significant reduction of duties, authority or responsibilities, or assignment of such reduced duties, authority or responsibilities; (ii) without the NEO’s consent, a substantial reduction, without good business reasons, of the facilities and perquisites (including office space and location) available to the NEO; (iii) a reduction in base salary; (iv) a material reduction in the kind or level of employee benefits, including bonuses, with the result that the overall benefits package is significantly reduced; (v) without the NEO’s consent, relocation to a facility or location more than 25 miles from the then present location; (vi) purported termination 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 the Severance Agreement by any successors contemplated thereunder; or (viii) any act or set of facts or circumstances which would, under California case law or statute, constitute a constructive termination. In addition, the 2022 and 2023 TSR Awards for Mr. Harshman, and the 2023 TSR Awards for Messrs. Jankovic and Ben-Natan are subject to special treatment on a change of control. See “Equity Compensation Plans – TSR Award” above. Stock Ownership Guidelines and Hedging Policy The Company has adopted stock ownership guidelines applicable to its CEO, requiring the CEO to hold any shares issued, after withholding of shares for taxes resulting from the exercise of vested stock options granted in 2017 or later or settlement of vested RSUs granted in 2017 or later, for at least 36 months from the date of RSU settlement or stock option exercise, subject to release from these requirements upon his separation from service with the Company. The Corporate Governance and Nominating Committee reviews the CEO’s compliance under such guidelines and may grant any waivers or exceptions as it deems reasonably necessary and appropriate. Under our Insider Trading Policy, we prohibit our employees, including officers, and members of the Board of Directors from engaging in transactions involving pledging or hedging the risk associated with ownership of shares of our Common Stock. Financial Restatements and Compensation Recovery Policy During 2023, we adopted an updated clawback policy for compliance with the Nasdaq Listing Rules and Section 10D of the Exchange Act. The policy generally requires, if we are required to prepare an accounting restatement due to our material noncompliance with any financial reporting requirement under applicable securities laws, that we recover certain incentive-based compensation provided to our NEOs and certain other current or former executive officers (a “covered person”). Such incentive compensation generally includes compensation granted, earned or vested in whole or in part based on attaining performance goals relating to financial reporting measures, including any stock price and total stockholder return measures (with such attainment referred to in the policy as being “received”), which is received by a covered person on or after October 2, 2023, and during the three fiscal years completed immediately before the date the accounting restatement is determined to be required, and provided the covered person was an executive officer at any time during the applicable performance period for such compensation. The Company has never restated its financial statements.
2023 Bonus Plans, achievement and payouts
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2023 Bonus Plans, achievement and payouts
Section 162(m) We have considered the potential future effects of Section 162(m) of the Code on the compensation paid to our NEOs. Section 162(m) disallows a tax deduction for any publicly held corporation for individual compensation exceeding $1.0 million in any taxable year for our CEO and certain other current and former officers of the Company. While the Compensation Committee considers the deductibility of compensation as a factor in making compensation decisions, the Compensation Committee retains the flexibility to provide compensation that is consistent with our goals for our executive compensation program even if such compensation is not fully tax deductible. The Compensation Committee may make decisions that result in compensation that is not fully deductible under Section 162(m) of the Code. Compensation Committee Report The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis contained in this Proxy Statement. Based on the Compensation Committee’s review of, and the discussions with management with respect to, the Compensation Discussion and Analysis, our Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
The Compensation Committee
| Name & Principal Position | Year | Salary | Stock Awards(1) | Non-Equity Incentive Plan Compensation(2) | All Other Compensation(3) | Total | | Patrick J. Harshman, President and CEO | | | | | | | | | 2023 | $697,455 | $3,994,583 | $390,876 | $17,690 | $5,100,604 | | | 2022 | $567,246 | $3,116,592 | $1,126,214 | $21,519 | $4,831,571 | | | 2021 | $545,592 | $3,069,282 | $985,774 | $27,487 | $4,628,135 | | Sanjay Kalra(4) Former Chief Financial Officer | | | | | | | | | 2023 | $85,000 | — | — | $8,955 | $93,955 | | | 2022 | $441,673 | $861,110 | $532,711 | $25,765 | $1,861,259 | | | 2021 | $402,463 | $2,962,462 | $381,921 | $26,239 | $3,773,085 | | Jeremy Rosenberg(5) Former Interim Chief Financial Officer | | | | | | | | | 2023 | $330,447 | $472,494 | $57,054 | $53,295 | $913,290 | | Walter Jankovic(6) Chief Financial Officer | | | | | | | | | 2023 | $262,308 | $2,921,018 | $70,092 | $18,526 | $3,271,944 | | Nimrod Ben-Natan(7) Senior Vice President and General Manager, Broadband Business | | | | | | | | | 2023 | $371,045 | $1,404,668 | $71,374 | $42,482 | $1,889,569 | | | 2022 | $351,712 | $766,796 | $374,162 | $41,779 | $1,534,449 | | | 2021 | $389,640 | $820,691 | $324,323 | $48,489 | $1,583,143 | | Neven Haltmayer Senior Vice President, Video R&D | | | | | | | | | 2023 | $403,161 | $822,138 | $137,628 | $22,058 | $1,384,985 | | | 2022 | $383,643 | $790,325 | $334,510 | $26,307 | $1,534,785 | | | 2021 | $349,220 | $675,864 | $297,166 | $26,986 | $1,349,236 | | Ian Graham(8) Senior Vice President, Global Sales | | | | | | | | | 2023 | $325,929 | $614,246 | $145,595 | $42,210 | $1,127,980 | | | 2022 | $293,940 | $586,372 | $467,706 | $41,534 | $1,389,552 | | | 2021 | $308,724 | $627,586 | $536,572 | $47,327 | $1,520,209 |
The Compensation Committee
| Year | Summary Compensation Table Total PEO(1)(2) | Compensation Actually Paid to PEO(1)(3) | Average Summary Compensation Table Total for Non-PEO NEOs(4) | Average Compensation Actually Paid to Non-PEO NEOs(3) | Value of Initial Fixed $100 Investment Based On: | | Net Income (GAAP, in thousands)(7) | Operating Profit (GAAP, in thousands)(8) | | | | | | | Company Total Shareholder Return(5) | Peer Group Total Shareholder Return(6) | | | | 2023 | $5,100,604 | $4,973,390 | $1,446,954 | $1,336,943 | $167.18 | $90.96 | $83,994 | $22,172 | | 2022 | $4,831,571 | $7,726,443 | $1,580,011 | $1,887,872 | $167.95 | $82.21 | $28,182 | $45,519 | | 2021 | $4,628,135 | $10,868,485 | $2,056,418 | $2,966,573 | $150.77 | $112.44 | $13,254 | $18,809 | | 2020 | $3,498,333 | $2,928,232 | $1,280,848 | $1,275,324 | $94.74 | $110.08 | ($29,271) | ($12,449) |