<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Harmonic Lightwaves, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee.
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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(4) Proposed maximum aggregate value of transaction:
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Set forth the amount on which the filing fee is calculated and state how
it was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
HARMONIC LIGHTWAVES, INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 30, 1997
------------------------
TO THE STOCKHOLDERS OF HARMONIC LIGHTWAVES, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Harmonic
Lightwaves, Inc., a Delaware corporation (the "Company"), will be held on
Wednesday, April 30, 1997 at 8:00 a.m., local time, at The Stanford Park Hotel,
100 El Camino Real, Menlo Park, California, 94025, for the following purposes:
1. To elect six directors to serve for the ensuing year or until their
successors are elected and duly qualified.
2. To approve an amendment to the 1995 Stock Plan to increase the
number of Common shares reserved for issuance thereunder by 480,000 shares.
3. To ratify the appointment of Price Waterhouse LLP as independent
auditors of the Company for the fiscal year ending December 31, 1997.
4. To transact such other business as may properly come before the
meeting and any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on March 11, 1997 are
entitled to notice of and to vote at the meeting and any adjournment thereof.
All stockholders are cordially invited to attend the meeting in person.
However, to ensure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if such stockholder has returned a proxy.
By Order of the Board of Directors
Jeffrey D. Saper,
Secretary
Sunnyvale, California
March 28, 1997
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YOUR VOTE IS IMPORTANT
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE AND RETURN
IT IN THE ENCLOSED ENVELOPE.
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<PAGE> 3
HARMONIC LIGHTWAVES, INC.
549 BALTIC WAY
SUNNYVALE, CALIFORNIA 94089
------------------------
PROXY STATEMENT
------------------------
INFORMATION CONCERNING SOLICITATION VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of
Harmonic Lightwaves, Inc., a Delaware corporation (the "Company"), for use at
the Annual Meeting of Stockholders (the "Annual Meeting") to be held April 30,
1997 at 8:00 A.M., local time, or at any adjournment thereof, for the purposes
set forth herein and in the accompanying Notice of Annual Meeting of
Stockholders. The Annual Meeting will be held at The Stanford Park Hotel, 100 El
Camino Real, Menlo Park, California, 94025. The telephone number of the
Company's principal offices is (408) 542-2500.
These proxy solicitation materials and the Company's Annual Report to
Stockholders for the year ended December 31, 1996, including financial
statements, were mailed on or about March 28, 1997 to all stockholders entitled
to vote at the meeting.
RECORD DATE AND VOTING SECURITIES
Stockholders of record at the close of business on March 11, 1997 (the
"Record Date") are entitled to notice of and to vote at the meeting. At the
Record Date, 10,215,677 shares of the Company's Common Stock, $0.001 par value
per share, were issued and outstanding.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a later
date or by attending the meeting and voting in person.
VOTING AND SOLICITATION
Each stockholder is entitled to one vote for each share of Common Stock on
all matters presented at the Annual Meeting. Stockholders do not have the right
to cumulate their votes in the election of directors.
The Company will bear the cost of soliciting proxies. In addition, the
Company may reimburse brokerage firms and other persons representing beneficial
owners of shares for their expenses in forwarding solicitation material to such
beneficial owners. Solicitation of proxies by mail may be supplemented by
telephone, telegram, facsimile or personal solicitation by directors, officers
or employees of the Company. No additional compensation will be paid to such
persons for such services.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting
is a majority of the votes eligible to be cast by holders of shares of Common
Stock issued and outstanding on the Record Date. Shares that are voted "FOR,"
"AGAINST," "WITHHELD" or "ABSTAIN" are treated as being present at the meeting
for purposes of establishing a quorum and are also treated as shares entitled to
vote at the Annual Meeting (the "Votes Cast") with respect to such matter.
While there is no definitive statutory or case law authority in Delaware as
to the proper treatment of abstentions, the Company believes that abstentions
should be counted for purposes of determining both (i) the presence or absence
of a quorum for the transaction of business and (ii) the total number of Votes
Cast
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with respect to a proposal (other than the election of directors). In the
absence of controlling precedent to the contrary, the Company intends to treat
abstentions in this manner. Accordingly, abstentions will have the same effect
as a vote against the proposal.
The Delaware Supreme Court has held that, while broker non-votes should be
counted for purposes of determining the presence or absence of a quorum for the
transaction of business, broker non-votes should not be counted for purposes of
determining the number of Votes Cast with respect to the particular proposal on
which the broker has expressly not voted. The Company intends to treat broker
non-votes in a similar manner. Thus, a broker non-vote will not affect the
outcome of the voting on a proposal.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be presented
by such stockholders at the Company's 1998 Annual Meeting must be received by
the Company no later than November 28, 1997 in order that they may be considered
for inclusion in the proxy statement and form of proxy relating to that meeting.
PROPOSAL ONE:
ELECTION OF DIRECTORS
NOMINEES
The Company has authorized a Board of six directors and six directors are
to be elected at the Annual Meeting. Each of the directors elected at the Annual
Meeting will hold office until the Annual Meeting of Stockholders in 1998 or
until his successor has been duly elected and qualified.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the Company's six nominees named below, all of whom are
currently directors of the Company. 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 proxy holders will vote the proxies for any substitute nominee who
is designated by the current Board of Directors 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 names of the nominees for director and certain information about each
of them are set forth below.
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION
- ----------------------- ---- -------------------------------------------------------------
<S> <C> <C>
Anthony J. Ley......... 58 Chairman of the Board of Directors, President and Chief
Executive Officer, Harmonic Lightwaves, Inc.
Moshe Nazarathy........ 45 Senior Vice President, General Manager Israel R&D Center,
Harmonic Lightwaves, Inc.
E. Floyd Kvamme........ 59 General Partner, Kleiner Perkins Caufield & Byers
David A. Lane.......... 38 General Partner, Alpine Technology Ventures
Barry D. Lemieux....... 57 Retired; former President of American Cablesystems
Corporation
Michel L. Vaillaud..... 65 Retired; former Chairman and CEO of Schlumberger, Limited
</TABLE>
Except as indicated below, each nominee or incumbent director 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.
Anthony J. Ley has served as the Company's President and Chief Executive
Officer since November 1988. Mr. Ley was elected Chairman of the Board of
Directors in February 1995. From 1963 to 1987, Mr. Ley was employed at
Schlumberger Technologies, Inc., both in Europe and the United States, holding
various senior business management and research and development positions, most
recently as Vice President, Research and Engineering at Fairchild
Semiconductor/Schlumberger in Palo Alto, California. Mr. Ley holds an M.A. in
mechanical sciences from the University of Cambridge and an S.M.E.E. from the
Massachusetts
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Institute of Technology, is named as an inventor on 28 patents and is a Fellow
of the I.E.E. (U.K.) and a senior member of the I.E.E.E.
Moshe Nazarathy, a founder of the Company, has served as Senior Vice
President, General Manager of Israel R&D Center, since December 1993 and as a
director of the Company since the Company's inception. Dr. Nazarathy served as
Vice President, Research, from the Company's inception through December 1993.
From 1985 to 1988, Dr. Nazarathy was employed in the Photonics and Instruments
Laboratory of Hewlett-Packard Company, most recently serving as Principal
Scientist from 1987 to 1988. From 1982 to 1984, Dr. Nazarathy held post-doctoral
and adjunct professor positions at Stanford University. Dr. Nazarathy holds a
B.S. and a Ph.D. in electrical engineering from Technion-Israel Institute of
Technology and is named as an inventor on twelve patents.
E. Floyd Kvamme has been a director of the Company since January 1990.
Since 1984, Mr. Kvamme has been a general partner of Kleiner Perkins Caufield &
Byers, a venture capital firm. Mr. Kvamme is also a director of Prism Solutions,
Inc., Photon Dynamics, Inc., TriQuint Semiconductor, Inc., and several private
companies. Mr. Kvamme holds a B.S.E.E. from the University of California,
Berkeley and an M.S.E.E. from Syracuse University.
David A. Lane has been a director of the Company since June 1992. Since
December 1994, Mr. Lane has been a general partner and co-founder of Alpine
Technology Ventures, a venture capital firm. From August 1987 to December 1994,
he was a Vice President at the Harvard Private Capital Group, the investment
affiliate through which the Harvard Management Company makes private and direct
investments. Mr. Lane is also a director of several private companies. Mr. Lane
holds a B.S.E.E. from the University of Southern California and an M.B.A. from
Harvard University.
Barry D. Lemieux has been a director of the Company since January 1996. Now
retired, from 1978 to 1988 Mr. Lemieux was with American Cablesystems
Corporation, most recently as President and Chief Operating Officer. In addition
to marketing and general management positions with the New York Telephone
Company and Continental Cablevision, Mr. Lemieux has served on numerous cable
television industry committees, is a former director of the Cable Advertising
Bureau (CAB) and past Chairman of the Cable Television Administration and
Marketing Society (CTAM). Mr. Lemieux holds a B.A. in history from Hofstra
University and an M.A.T. from Harvard University.
Michel L. Vaillaud has been a director of the Company since March 1997. Now
retired, from 1973 to 1986 Mr. Vaillaud was with Schlumberger, Limited, most
recently as Chairman and Chief Executive Officer. He is a graduate of Ecole
Polytechnique in Paris and Ecole Nationale Superieure des Mines in Paris. He
serves as a Trustee of the Institute of Advanced Studies in Princeton, New
Jersey.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of four meetings during
the fiscal year ended December 31, 1996. No incumbent director attended fewer
than 75% of the meetings of the Board of Directors or the committees upon which
such director served during 1996.
The Board of Directors has an Audit Committee and a Compensation Committee.
The Board of Directors has no nominating committee or any committee performing
similar functions.
The Audit Committee currently consists of Messrs. Kvamme and Lemieux. The
Audit Committee principally reviews the scope and results of the annual audit of
the financial statements and other services provided by the Company's
independent auditors. In addition, the Audit Committee reviews the information
provided to stockholders and the Company's systems of internal controls. The
Audit Committee held four meetings during 1996.
The Compensation Committee currently consists of Messrs. Kvamme and
Lemieux. The Compensation Committee is responsible for reviewing and approving
the Company's compensation policies and the compensation paid to executive
officers. This committee held three meetings during 1996.
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<PAGE> 6
COMPENSATION OF DIRECTORS
During 1996, directors received no cash remuneration for serving on the
Board of Directors, except for Mr. Lemieux, who was paid a retainer of $2,000
per annum and $1,000 for attendance at each Board meeting, plus reasonable
expenses. The 1995 Director Option Plan provides for the grant of nonstatutory
stock options to certain non-employee directors of the Company who are not
representatives or beneficial owners of certain affiliated investment funds, by
means of to an automatic, non-discretionary grant mechanism. Each eligible
outside director is granted an option to purchase 2,000 shares of Common Stock
upon election to the Board of Directors and a further option of 2,000 shares on
the date of re-election to the Board if on such date, he shall have served on
the Board for at least six months.
In 1997, each non-employee director will be paid a retainer of $6,000 per
annum and $1,000 for attendance at each Board meeting, plus reasonable expenses.
VOTE REQUIRED AND RECOMMENDATION
The six nominees receiving the highest number of affirmative votes of the
shares entitled to vote on this matter shall be elected as directors. Votes
withheld from any director will be counted for purposes of determining the
presence or absence of a quorum but are not counted as affirmative votes. A
broker non-vote will be counted for purposes of determining the presence or
absence of a quorum, but, under Delaware law, it will have no other legal effect
upon the election of directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE NOMINEES SET
FORTH ABOVE.
PROPOSAL TWO:
AMENDMENT OF 1995 STOCK PLAN
At the Annual Meeting, the stockholders are being asked to approve an
amendment of the Company's 1995 Stock Plan (the "Plan") to increase the number
of shares of Common Stock reserved for issuance thereunder by 480,000 shares to
a total of 1,045,000 shares. The adoption of the Plan was approved by the Board
of Directors in March 1995 and became effective upon the Company's initial
public offering in May 1995. As of March 11, 1997, options to purchase an
aggregate of 536,070 shares of the Company's Common Stock were outstanding under
the Plan, with a weighted average exercise price of $13.77 per share, and 18,248
shares (excluding the 480,000 shares subject to stockholder approval at this
Annual Meeting) were available for future grant. In addition, 10,682 shares have
been issued upon exercise of stock options granted under the Plan. A copy of the
Plan is attached to this Proxy Statement as Appendix A.
The Plan authorizes the Board of Directors to grant stock options to
eligible employees and consultants of the Company. The Plan is structured to
allow the Board of Directors to create equity incentives 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 Committee
believes that the Plan is an essential tool to link the long-term interests of
stockholders and employees and serves to motivate executives 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. This
practice has enabled the Company to attract and retain the employees that it
continues to require in an increasingly competitive market for managerial and
technical talent.
The Board of Directors believe that the remaining shares available for
grant under the Plan are insufficient to accomplish the purposes of the Plan
described above. In order to support its continued growth, the Company currently
intends to hire additional employees at all levels during fiscal 1997 and will
be required to offer equity incentives to attract and motivate these
individuals. Additionally, in order to retain the services of valuable employees
as the Company matures and its employee base grows larger, it will be necessary
to grant additional options to current employees as older options become fully
vested.
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SUMMARY OF THE PLAN
General. The Plan authorizes the Board of Directors (the "Board"), or one
or more committees which the Board may appoint from among its members (the
"Committee"), to grant options and rights to purchase Common Stock. Options
granted under the Plan may be either "incentive stock options" as defined in
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
nonstatutory stock options, as determined by the Board or the Committee.
Administration. The Plan may be administered by the Board or the
Committee. Subject to the other provisions of the Plan, the Board has the
authority to: (i) interpret the plan and apply its provisions; (ii) prescribe,
amend or rescind rules and regulations relating to the Plan; (iii) select the
persons to whom options and rights are to be granted; (iv) determine the number
of shares to be made subject to each option and right; (v) determine whether and
to what extent options and rights are to be granted; (vi) prescribe the terms
and conditions of each option and right (including the exercise price, whether
an option will be classified as an incentive stock option or a nonstatutory
option and the provisions of the stock option or stock purchase agreement to be
entered into between the Company and the grantee); (vii) amend any outstanding
option or right subject to applicable legal restrictions; (viii) authorize any
person to execute, on behalf of the Company, any instrument required to effect
the grant of an option or right; and (ix) take any other actions deemed
necessary or advisable for the administration of the Plan. All decisions,
interpretations and other actions of the Committee shall be final and binding on
all holders of options or rights and on all persons deriving their rights
therefrom.
Eligibility. The Plan provides that options and rights may be granted to
the Company's employees and independent consultants. Incentive stock options may
be granted only to employees. Any optionee who owns more than 10% of the
combined voting power of all classes of outstanding stock of the Company (a "10%
Stockholder") is not eligible for the grant of an incentive stock option unless
the exercise price of the option is at least 110% of the fair market value of
the Common Stock on the date of grant.
Terms and Conditions of Options. Each option granted under the Plan is
evidenced by a written stock option agreement between the optionee and the
Company and is subject to the following terms and conditions:
(a) Exercise Price. The Board or the Committee determines the
exercise price of options at the time the options are granted. However,
excluding options issued to 10% Stockholders, the exercise price of an
incentive stock option must not be less than 100% of the fair market value
of the Common Stock on the date the option is granted, and the exercise
price under a nonstatutory option shall be determined by the administrator
of the Plan. As the Company's Common Stock is listed on the Nasdaq, the
fair market value is the closing sale price for the Common Stock (or the
closing bid if no sales were reported) on the date the option is granted.
(b) Form of Consideration. The means of payment for shares issued
upon exercise of an option is specified in each option agreement and
generally may be made by cash, check, a full-recourse promissory note,
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 or loan proceeds, or by
a combination thereof.
(c) Exercise of the Option. Each stock option agreement will specify
the term of the option and the date when the option is to become
exercisable. However, in no event shall an option granted under the Plan be
exercised more than 10 years after the date of grant. Moreover, in the case
of an incentive stock option granted to a 10% Stockholder, the term of the
option shall be for no more than five years from the date of grant. To
date, all options granted under the Plan have vested 25% on the first
anniversary from the date of grant and 1/48 per month thereafter.
(d) Termination of Employment. If an optionee's employment terminates
for any reason (other than death or permanent disability), then all options
held by such optionee under the Plan expire upon the earlier of (i) such
period of time as is set forth in his or her option agreement (but not to
exceed three months after the termination of his or her employment in the
event of an incentive stock option) or (ii) the expiration date of the
option. The optionee may exercise all or part of his or her option at any
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time before such expiration to the extent that such option was exercisable
at the time of termination of employment.
(e) Permanent Disability. If an employee is unable to continue
employment with the Company as a result of permanent and total disability
(as defined in the Code), then all options held by such optionee under the
Plan shall expire upon the earlier of (i) 12 months after the date of
termination of the optionee's employment or (ii) the expiration date of the
option. The optionee may exercise all or part of his or her option at any
time before such expiration to the extent that such option was exercisable
at the time of termination of employment.
(f) Death. If an optionee dies while employed by the Company, his or
her option shall expire upon the earlier of (i) 12 months after the
optionee's death or (ii) the expiration date of the option. The executors
or other legal representative or the optionee may exercise all or part of
the optionee's option at any time before such expiration to the extent that
such option was exercisable at the time of death.
(g) Termination of Options. Each stock option agreement will specify
the term of the option and the date when all or any installment of the
option is to become exercisable. Notwithstanding the foregoing, however,
the term of any incentive stock option shall not exceed 10 years from the
date of grant. No options may be exercised by any person after the
expiration of its term.
(h) Nontransferability of Options. During an optionee's lifetime, his
or her option(s) shall be exercisable only by the optionee and shall not be
transferable other than by will or laws of descent and distribution.
(i) Limitations. If the aggregate fair market value of all shares of
Common Stock subject to an optionee's incentive stock option which are
exercisable for the first time during any calendar year exceeds $100,000,
the excess options shall be treated as nonstatutory options. In addition,
no employee shall be granted in any fiscal year of the Company options and
rights to purchase more than 300,000 shares.
(j) Other Provisions. The stock option agreement may contain such
terms, provisions and conditions that are inconsistent with the Plan as may
be determined by the Board or the Committee.
Stock Purchase Rights. The Plan permits the Company to grant rights to
purchase Common Stock either alone or in tandem with other awards granted under
the Plan and/or cash awards made outside of the Plan. The offer of a right must
be accepted within six months of its grant by the execution of a restricted
stock purchase agreement between the Company and the offeree and the payment of
the purchase price of the shares. Unless the Board or the Committee determines
otherwise, the restricted stock purchase agreement shall grant the Company a
repurchase option exercisable upon termination of the purchaser's employment or
consulting relationship with the Company. The purchase price for any shares
repurchased by the Company shall be the original price paid by the purchaser.
The repurchase option shall lapse at such rate as the Board or the Committee may
determine.
Adjustment Upon Changes in Capitalization, Corporate Transactions. In the
event that the stock of the Company is changed by reason of any stock split,
reverse stock split, stock dividend, recapitalization or other change in the
capital structure of the Company, appropriate proportional adjustments shall be
made in the number and class of shares of stock subject to the Plan, the number
and class of shares of stock subject to any option or right outstanding under
the Plan, and the exercise price of any such outstanding option or right. Any
such adjustment shall be made upon approval of the Board and, if required, the
stockholders of the Company, whose determination shall be conclusive.
Notwithstanding the above, in connection with any merger, consolidation,
acquisition of assets or like occurrence involving the Company, each outstanding
option and right may be assumed or an equivalent option or right may be
substituted by a successor corporation. The Administrator may, in lieu of such
assumption or substitution, provide (i) for the Optionee to have the right to
exercise the Option or Stock Purchase Right as to all or a portion of the
Optioned Stock, including Shares as to which it would not otherwise be
exercisable, and (ii) for any Restricted Stock held by an Optionee to become
fully vested.
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Amendment, Suspensions and Termination of the Plan. The Board may amend,
suspend or terminate the 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 any similar rule or statute. In any event, the
Plan will terminate automatically in 2005.
Federal Tax Information. Options granted under the 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. Upon
the sale or exchange of the shares more than two years after grant of the option
and one year after exercising the option, any gain or loss will be treated as
long-term capital gain or loss. If these holding periods are not satisfied, the
optionee will recognize ordinary income at the time of sale or exchange equal to
the difference between the exercise price and the lower of (i) the fair market
value of the shares at the date of the option exercise or (ii) the sale price of
the shares. A different rule for measuring ordinary income upon such a premature
disposition may apply if the optionee is also an officer, director, or 10%
stockholder of the Company. The Company will be entitled to a deduction in the
same amount as the ordinary income recognized by the optionee. Any gain or loss
recognized on such a premature disposition of the shares in excess of the amount
treated as ordinary income will be characterized as long-term or short-term
capital gain or loss, depending on the holding period.
All other options which do not qualify as incentive stock options are
referred to as nonstatutory options. An optionee will not recognize any taxable
income at the time he is granted a nonstatutory option. However, upon its
exercise, 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. Any taxable income recognized in connection with an option exercise by an
optionee who is also an employee of the Company will be subject to tax
withholding by the Company. 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.
The Company will be entitled to a tax deduction in the same amount as the
ordinary income recognized by the optionee with respect to shares acquired upon
exercise of a nonstatutory option.
A recipient of restricted stock will have ordinary income equal to the fair
market value of the shares at the time if and when the share restrictions lapse.
Under current federal tax law, however, the employee may elect to include as
ordinary income for the year of the award the fair market value of the shares on
the grant date. The restrictions on the shares will not affect fair market value
for purposes of such an election. If the election is made, the recipient will
not incur additional tax liability until the sale or disposition of the shares.
The Company is entitled to a federal tax deduction in the same amount and at the
same time as the employee realizes ordinary income.
The foregoing is only a summary of the effect of federal income taxation
upon the optionee and the Company with respect to the grant and exercise of
options under the Plan, does not purport to be complete, and does not discuss
the tax consequences of the optionee's death or the income tax laws of any
municipality, state or foreign country in which an optionee may reside.
VOTE REQUIRED AND RECOMMENDATION
The affirmative vote of a majority of the Votes Cast will be required to
approve the amendment to the Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE APPROVAL OF
THE AMENDMENT TO THE PLAN.
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PROPOSAL THREE:
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Price Waterhouse LLP, independent
accountants, to audit the financial statements of the Company for the year
ending December 31, 1997. Price Waterhouse LLP has served as the Company's
independent accountants since 1989. In the event of a negative vote on the
ratification of Price Waterhouse LLP, the Board of Directors will reconsider its
selection. Representatives of Price Waterhouse LLP are expected to be present at
the Annual Meeting and will have the opportunity to make a statement if they so
desire. The representatives also are expected to be available to respond to
appropriate questions from stockholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE RATIFICATION
OF THE APPOINTMENT OF PRICE WATERHOUSE LLP AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997.
ADDITIONAL INFORMATION
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth certain information
regarding the compensation of the Chief Executive Officer of the Company and the
other four most highly compensated executive officers of the Company whose
salary plus bonus exceeded $100,000 in the last fiscal year (collectively, the
"Named Executive Officers") for services rendered in all capacities to the
Company during the fiscal years ended December 31, 1994, December 31, 1995 and
December 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION
COMPENSATION(1) ---------------------
-------------------- SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS
- ------------------------------------------------ ---- -------- -------- ---------------------
<S> <C> <C> <C> <C>
Anthony J. Ley.................................. 1996 $230,000 $100,000 25,000
Chairman of the Board, President & 1995 205,000 53,198 45,000
Chief Executive Officer 1994 205,000 36,000 16,667
Josef Berger(2)................................. 1996 150,000 65,000 12,000
Senior Vice President, 1995 135,000 43,465 25,000
International Operations 1994 135,000 36,000 16,667
Moshe Nazarathy................................. 1996 149,141 49,000 12,000
Senior Vice President, 1995 131,594 35,465 25,000
General Manager of Israel R&D Center 1994 135,000 36,000 16,667
Michael Yost.................................... 1996 143,000 45,000 11,450
Vice President, Operations 1995 130,000 37,435 --
1994 130,000 36,000 20,000
Robin N. Dickson................................ 1996 127,000 46,000 10,200
Chief Financial Officer 1995 115,000 37,435 --
1994 100,000 36,000 13,333
</TABLE>
- ---------------
(1) Other than compensation described above, the Company did not pay any Named
Executive Officer any compensation, including incidental personal benefits,
in excess of 10% of such executive officer's salary.
(2) Dr. Berger resigned as an executive officer in January 1997 and left the
employment of the Company in March 1997.
8
<PAGE> 11
OPTION GRANTS AND EXERCISES
The following table sets forth certain information with respect to stock
option grants during the fiscal year ended December 31, 1996 to the Named
Executive Officers.
OPTION GRANTS IN FISCAL 1996
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
----------------------------------------------------- ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK PRICE
SECURITIES TOTAL APPRECIATION
UNDERLYING OPTIONS GRANTED FOR OPTION TERM(2)
OPTIONS TO EMPLOYEES IN EXERCISE OR EXPIRATION -------------------
NAME GRANTED(1) FISCAL YEAR BASE PRICE DATE 5% 10%
- ------------------------------- ---------- --------------- ----------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Anthony J. Ley................. 25,000 7.4% $ 10.00 1/24/06 $157,270 $398,605
Josef Berger................... 12,000 3.5% 10.00 1/24/06 75,493 191,330
Moshe Nazarathy................ 12,000 3.5% 10.00 1/24/06 75,493 191,330
Michael Yost................... 11,450 3.4% 10.00 1/24/06 72,033 182,561
Robin N. Dickson............... 10,200 3.0% 10.00 1/24/06 64,169 162,631
</TABLE>
- ---------------
(1) The options were granted pursuant to the Company's 1995 Stock Plan, which is
attached as Appendix A, and become exercisable at a rate of 1/4 of the
shares subject to the option one year after the date of grant and an
additional 1/48 of the shares at the end of each month thereafter, subject
to continued service as an employee. The term of each option is ten years.
(2) Potential gains are net of the exercise price but before taxes associated
with the exercise. The 5% and 10% assumed annual rates of compounded stock
appreciation are mandated by the rules of the Securities and Exchange
Commission and do not represent the Company's estimate or projection of the
future Common Stock price. Actual gains, if any, on stock option exercises
will depend on the future financial performance of the Company, overall
market conditions and the option holders' continued employment through the
vesting period.
AGGREGATE OPTION EXERCISES IN FISCAL 1996 AND YEAR-END VALUES
The following table provides information with respect to the exercise of
stock options during 1996 and the value of stock options held as of December 31,
1996 by each of the Named Executive Officers under the 1988 Stock Option Plan
and the 1995 Stock Plan.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT 12/31/96 OPTIONS AT 12/31/96(2)
ACQUIRED ON VALUE --------------------------- --------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- ----------- ----------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Anthony J. Ley............. -- -- 156,144 55,522 $2,068,067 $ 252,558
Josef Berger............... 60,000 $ 877,000 70,728 31,272 898,421 161,589
Moshe Nazarathy............ -- -- 38,888 31,272 422,209 161,589
Michael Yost............... 16,666 221,658 47,083 17,700 689,151 146,392
Robin N. Dickson........... 4,000 49,300 37,500 14,367 549,813 111,397
</TABLE>
- ---------------
(1) Value realized represents the difference between the exercise price of the
options and the fair market value of the underlying securities on the date
of exercise.
(2) Calculated by determining the difference between the fair market value of
the Common Stock as of December 31, 1996 and the exercise price of the
underlying options.
EMPLOYMENT AGREEMENTS
The Company has entered into agreements with each of Mr. Ley, Dr.
Nazarathy, Mr. Yost and Mr. Dickson which provide that in the event of
termination within eighteen months of a change in control of the Company, Mr.
Ley will receive a lump-sum payment of eighteen months' salary and benefits, and
9
<PAGE> 12
Dr. Nazarathy, Mr. Yost and Mr. Dickson will each receive a lump-sum payment of
one year's salary and benefits. These agreements also provide for the
acceleration of unvested stock options held by the Named Executive Officer,
subject to certain conditions.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors currently consists of
Messrs. Kvamme and Lemieux. No member of the Compensation Committee or executive
officer of the Company has a relationship that would constitute an interlocking
relationship with executive officers or directors of another entity.
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The members of the Compensation Committee of the Board of Directors are
Messrs. Kvamme and Lemieux, neither of whom is an employee of the Company.
The Compensation Committee is responsible for the approval of the Company's
executive compensation policies. The Committee reviews and approves the base
salary and incentive compensation paid to executive officers and administers the
Company's Stock Option and Stock Purchase Plans. The Company's Board of
Directors reviews and approves all stock option grants.
Compensation Philosophy
The Company's executive compensation programs are designed to attract,
motivate and retain executives who will contribute significantly to the
long-term success of the Company and the enhancement of stockholder value. In
addition to base salary, certain elements of total compensation are payable in
the form of variable incentive plans tied to the performance of the Company and
the individual, and in equity-based plans designed to closely align executive
and stockholder interests.
The three key components of executive compensation in 1996 were:
- Base Salary
- Incentive Bonus Plan
- Stock Option Plan
Base Salary
Base salary for executives, including that of the chief executive officer,
is set according to the responsibilities of the position, the specific skills
and experience of the individual and the competitive market for executive
talent. In order to evaluate the competitive position of the Company's salary
structure, the Committee makes reference to compensation surveys of comparable
companies in the high-technology sector, the Company's industry and the
Company's geographic location. Executive salary levels are set to approximate
average rates, with the intent that superior performance under incentive bonus
plans will enable the executive to elevate his total cash compensation to levels
that are above the average of comparable companies. The Committee reviews
salaries annually and adjusts them as appropriate to reflect changes in market
conditions and individual performance and responsibilities.
Incentive Bonus Plan
The Company's annual incentive bonus plan reflects the Committee's belief
that a meaningful component of executive compensation should be contingent on
the performance of the Company and the individual executive officer. In 1996,
the Company's incentive bonus plan was based upon the attainment of certain
revenue and profit goals. Target bonuses of approximately 40-45% of base salary
were established for each individual. The Committee retained the discretion to
adjust a portion of the actual bonus according to the Committee's evaluation of
each individual's performance. The Company's financial performance for 1996, in
which net sales grew 55% over the previous year and net income was $5.9 million,
compared to $4.2 million in 1995, generated bonus payments for executives as
shown in the Summary Compensation Table.
10
<PAGE> 13
Stock Option Plan
The Committee believes that the Company's 1995 Stock Plan (the "Option
Plan") is an essential tool to link the long-term interests of stockholders and
employees, especially executive management, and serves to motivate executives to
make decisions that will, in the long run, give the best returns to
stockholders. Stock options are generally granted when an executive joins the
Company, and on at least a bi-annual basis thereafter. These options typically
vest over a four year period and are granted at an exercise price equal to the
fair market value of the Company's Common Stock at the date of grant. The size
of initial option grants is based upon the position, responsibilities and
expected contribution of the individual, with subsequent grants also taking into
account the individual's performance and the vesting status of previously
granted options. This approach is designed to maximize stockholder value over a
long term, as no benefit is realized from the option grant unless the price of
the Company's Common Stock has increased over a number of years.
In addition to the Option Plan, executive officers are eligible to
participate in the Company's 1995 Employee Stock Purchase Plan. This Plan allows
eligible employees to purchase the Company's Common Stock at a price equal to
85% of the lower of the fair market value at the beginning of the offering
period or the fair market value at the end of the purchase period, with the
amount of discount limited to 10% of base salary.
Other elements of executive compensation include life and long-term
disability insurance, medical benefits and a 401(k) deferred compensation plan.
Effective January 1, 1997, the Company makes matching contributions to the
401(k) plan up to $750 per annum per participant. All such benefits are
available to all regular, full-time U.S. employees of the Company.
The compensation of the chief executive officer in 1996 was determined in a
manner substantially consistent with that of other executive officers.
Compensation Committee
E. Floyd Kvamme
Barry D. Lemieux
11
<PAGE> 14
PERFORMANCE GRAPH
Set forth below is a line graph comparing the annual percentage change in
the cumulative return to the stockholders of the Company's Common Stock with the
cumulative return of the Standard & Poor's 500 Index and of a peer group of
cable television industry equipment suppliers for the period commencing May 22,
1995 (the date of the Company's initial public offering) and ending on December
31, 1996. The graph assumes that $100 was invested in the Company's Common Stock
on May 22, 1995 at the initial public offering price and in the S&P 500 and a
peer group index on May 22, 1995. Historic stock price performance is not
necessarily indicative of future stock price performance.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD 'HARMONIC
(FISCAL YEAR COVERED) LIGHTWAVES, INC.' PEER GROUP INDEX S&P 500 INDEX
<S> <C> <C> <C>
5/22/95 100 100 100
12/31/95 81.48 75.8 117.11
12/31/96 113.93 71.59 144
</TABLE>
The information contained above under the captions "Report of the Board of
Directors on Executive Compensation" and "Performance Graph" shall not be deemed
to be "soliciting material" or to be "filed" with the Securities and Exchange
Commission, nor shall such information be incorporated by reference into any
future filing under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, except to the extent that the Company
specifically incorporates it by reference into such filing.
12
<PAGE> 15
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company
with respect to beneficial ownership of the Company's Common Stock as of the
Record Date by (i) each beneficial owner of more than 5% of the Company's Common
Stock, (ii) each director and each nominee, (iii) each Named Executive Officer
and (iv) all directors and executive officers as a group. Except as otherwise
indicated, each person has sole voting and investment power with respect to all
shares shown as beneficially owned, subject to community property laws where
applicable.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF TOTAL
- ---------------------------------------------------------------- ---------------- ----------------
<S> <C> <C>
Columbia Special Fund, Inc.(1).................................. 540,000 5.3
1300 SW Sixth Avenue
P.O. Box 1350
Portland, OR 97207
Anthony J. Ley(2)............................................... 293,317 2.8
Josef Berger(3)................................................. 222,564 2.2
Moshe Nazarathy(4).............................................. 147,767 1.4
E. Floyd Kvamme(5).............................................. 30,732 *
David A. Lane(6)................................................ 6,833 *
Barry Lemieux(7)................................................ 2,000 *
Michel L. Vaillaud.............................................. -- *
Michael Yost(8)................................................. 52,745 *
Robin N. Dickson(9)............................................. 51,806 *
All directors and executive officers as a group (10
persons)(10).................................................. 854,717 8.0
</TABLE>
- ---------------
* Percentage of shares beneficially owned is less than one percent of total.
(1) Based solely on a review of Schedule 13G filings with the Securities &
Exchange Commission.
(2) Includes 169,442 shares which may be acquired upon exercise of options
exercisable within 60 days of March 11, 1997.
(3) Includes 69,048 shares which may be acquired upon exercise of options
exercisable within 60 days of March 11, 1997.
(4) Includes 46,457 shares which may be acquired upon exercise of options
exercisable within 60 days of March 11, 1997.
(5) Includes shares beneficially owned or held of record by entities associated
with Kleiner Perkins Caufield & Byers. Mr. Kvamme, a director of the
Company, is a general partner of Kleiner Perkins Caufield & Byers V and
KPCB Zaibatsu Fund I and, as such, may be deemed to own beneficially shares
owned by Kleiner Perkins Caufield & Byers V and KPCB Zaibatsu Fund I.
(6) Includes 3,833 shares which may be acquired upon exercise of options
exercisable within 60 days of March 11, 1997.
(7) Mr. Lemieux has been granted options to purchase 2,000 shares of common
stock, all of which may be acquired upon exercise of options exercisable
within 60 days of March 11, 1997.
(8) Includes 52,744 shares which may be acquired upon exercise of options
exercisable within 60 days of March 11, 1997.
(9) Includes 42,076 shares which may be acquired upon exercise of options
exercisable within 60 days of March 11, 1997.
(10) Includes 429,553 shares which may be acquired upon exercise of options
exercisable within 60 days of March 11, 1997.
13
<PAGE> 16
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's executive officers and directors and
persons who own more than ten percent of a registered class of the Company's
equity securities to file an initial report of ownership on Form 3 and changes
in ownership on Form 4 or Form 5 with the Securities and Exchange Commission
(the "SEC") and the National Association of Securities Dealers, Inc. Executive
officers, directors and greater than ten percent stockholders are also required
by SEC rules to furnish the Company with copies of all Section 16(a) forms they
file. Based solely on its review of the copies of such forms received by it or
written representations from certain reporting persons, the Company believes
that, with respect to 1996, all filing requirements applicable to its officers,
directors and ten percent stockholders were complied with.
OTHER MATTERS
The Company knows of no other matters to be submitted at the meeting. If
any other matters properly come before the meeting or any adjournment or
postponement thereof, it is the intention of the persons named in the enclosed
form of Proxy to vote the shares they represent as the Board of Directors may
recommend.
Dated: March 28, 1997 By Order of the Board of
Directors
Jeffrey D. Saper,
Secretary
14
<PAGE> 17
APPENDIX A
HARMONIC LIGHTWAVES, INC.
1995 STOCK PLAN
1. PURPOSES OF THE PLAN
The purposes of this Stock 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.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. DEFINITIONS
As used herein, the following definitions shall apply:
"Administrator" means the Board or any of its Committees as shall be
administering the Plan, in accordance with Section 4 of the Plan.
"Applicable Laws" means the legal requirements relating to the
administration of stock option plans under state corporate and securities laws
and the Code.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means a Committee appointed by the Board in accordance with
Section 4 of the Plan.
"Common Stock" means the Common Stock of the Company.
"Company" means Harmonic Lightwaves, Inc., a Delaware corporation.
"Consultant" means any person, including an advisor, engaged by the
Company or a Parent or Subsidiary to render services and who is compensated for
such services. The term "Consultant" shall not include Directors who are paid
only a director's fee by the Company or who are not compensated by the Company
for their services as Directors.
"Continuous Status as an Employee or Consultant" means that the employment
or consulting relationship with the Company, any Parent, or Subsidiary, is not
interrupted or terminated. Continuous Status as an Employee or Consultant shall
not be considered interrupted in the case of (i) any leave of absence approved
by the Company or (ii) transfers between locations of the Company or between the
Company, its Parent, any Subsidiary, or any successor. A leave of absence
approved by the Company shall include sick leave, military leave, or any other
personal leave approved by an authorized representative of the Company. For
purposes of Incentive Stock Options, no such leave may exceed 90 days, unless
reemployment upon expiration of such leave is guaranteed by statute or contract.
If reemployment upon expiration of a leave of absence approved by the Company is
not so guaranteed, on the 91st day of such leave any Incentive Stock Option held
by the Optionee shall cease to be treated as an Incentive Stock Option and shall
be treated for tax purposes as a Nonstatutory Stock Option.
"Director" means a member of the Board.
"Disability" means total and permanent disability as defined in Section
22(e)(3) of the Code.
15
<PAGE> 18
"Employee" means any person, including Officers and Directors, employed by
the Company or any Parent or Subsidiary of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, as of any date, the value of Common Stock
determined as follows:
i. If the Common Stock is listed on any established stock exchange or
a national market system, including without limitation the Nasdaq National
Market of the National Association of Securities Dealers, Inc. Automated
Quotation ("Nasdaq") System, the Fair Market Value of a Share of Common
Stock shall be the closing sales price for such stock (or the closing bid,
if no sales were reported) as quoted on such system or exchange (or the
exchange with the greatest volume of trading in Common Stock) on the day of
determination, as reported in The Wall Street Journal or such other source
as the Administrator deems reliable;
ii. If the Common Stock is quoted on the Nasdaq System (but not on the
Nasdaq National Market thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market
Value of a Share of Common Stock shall be the mean between the high bid and
low asked prices for the Common Stock on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable;
iii. In the absence of an established market for the Common Stock, the
Fair Market Value shall be determined in good faith by the Administrator.
"Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
"Non-statutory Stock Option" means an Option not intended to qualify as an
Incentive Stock Option.
"Notice of Grant" means a written notice evidencing certain terms and
conditions of an individual Option or Stock Purchase Right grant. The Notice of
Grant is part of the Option Agreement.
"Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
"Option" means a stock option granted pursuant to the Plan.
"Option Agreement" means a written agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.
"Option Exchange Program" means a program whereby outstanding options are
surrendered in exchange for options with a lower exercise price.
"Optioned Stock" means the Common Stock subject to an Option or Stock
Purchase Right.
"Optionee" means an Employee or Consultant who holds an outstanding Option
or Stock Purchase Right.
"Parent" means a "parent corporation", whether now or hereafter existing,
as defined in Section 424(e) of the Code.
"Plan" means this Harmonic Lightwaves, Inc. 1995 Stock Plan.
"Restricted Stock" means shares of Common Stock acquired pursuant to a
grant of Stock Purchase Rights under Section 11 below.
"Restricted Stock Purchase Agreement" means a written agreement between
the Company and the Optionee evidencing the terms and restrictions applying to
stock purchased under a Stock Purchase Right. The Restricted Stock Purchase
Agreement is subject to the terms and conditions of the Plan and the Notice of
Grant.
16
<PAGE> 19
"Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to Rule
16b-3, as in effect when discretion is being exercised with respect to the Plan.
"Section 16(b)" means Section 16(b) of the Securities Exchange Act of
1934, as amended.
"Share" means a share of the Common Stock, as adjusted in accordance with
Section 13 of the Plan.
"Stock Purchase Right" means the right to purchase Common Stock pursuant
to Section 11 of the Plan, as evidenced by a Notice of Grant.
"Subsidiary" means a "subsidiary corporation", whether now or hereafter
existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN
Subject to the provisions of Section 13 of the Plan, the maximum aggregate
number of Shares which may be optioned and sold under the Plan is 1,045,000
Shares. The Shares may be authorized, but unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
the Plan, whether upon exercise of an Option or Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company at
their original purchase price, and the original purchaser of such Shares did not
receive any benefits of ownership of such Shares, such Shares shall become
available for future grant under the Plan. For purposes of the preceding
sentence, voting rights shall not be considered a benefit of Share ownership.
4. ADMINISTRATION OF THE PLAN
(a) PROCEDURE
i. Multiple Administrative Bodies. If permitted by Rule 16b-3, the
Plan may be administered by different bodies with respect to Directors,
Officers who are not Directors, and Employees who are neither Directors nor
Officers.
ii. Administration With Respect to Directors and Officers Subject to
Section 16(b). With respect to Option or Stock Purchase Right grants made
to Employees who are also Officers or Directors subject to Section 16(b) of
the Exchange Act, the Plan shall be administered by (A) the Board, if the
Board may administer the Plan in a manner complying with the rules under
Rule 16b-3 relating to the disinterested administration of employee benefit
plans under which Section 16(b) exempt discretionary grants and awards of
equity securities are to be made, or (B) a committee designated by the
Board to administer the Plan, which committee shall be constituted to
comply with the rules under Rule 16b-3 relating to the disinterested
administration of employee benefit plans under which Section 16(b) exempt
discretionary grants and awards of equity securities are to be made. Once
appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board
may increase the size of the Committee and appoint additional members,
remove members (with or without cause) and substitute new members, fill
vacancies (however caused), and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent permitted by the
rules under Rule 16b-3 relating to the disinterested administration of
employee benefit plans under which Section 16(b) exempt discretionary
grants and awards of equity securities are to be made.
iii. Administration With Respect to Other Persons. With respect to
Option or Stock Purchase Right grants made to Employees or Consultants who
are neither Directors nor Officers of the Company, the Plan shall be
administered by (A) the Board or (B) a committee designated by the Board,
which committee shall be constituted to satisfy Applicable Laws. Once
appointed, such Committee shall serve in its designated capacity until
otherwise directed by the Board. The Board may increase the size of the
17
<PAGE> 20
Committee and appoint additional members, remove members (with or without
cause) and substitute new members, fill vacancies (however caused), and
remove all members of the Committee and thereafter directly administer the
Plan, all to the extent permitted by Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the Plan,
and in the case of a Committee, subject to the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:
i. to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(n) of the Plan;
ii. to select the Consultants and Employees to whom Options and Stock
Purchase Rights may be granted hereunder;
iii. to determine whether and to what extent Options and Stock
Purchase Rights or any combination thereof, are granted hereunder;
iv. to determine the number of shares of Common Stock to be covered by
each Option and Stock Purchase Right granted hereunder;
v. to approve forms of agreement for use under the Plan;
vi. to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any award granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the time or
times when Options or Stock Purchase Rights may be exercised (which may be
based on performance criteria), any vesting acceleration or waiver of
forfeiture restrictions, and any restriction or limitation regarding any
Option or Stock Purchase Right or the shares of Common Stock relating
thereto, based in each case on such factors as the Administrator, in its
sole discretion, shall determine;
vii. to reduce the exercise price of any Option or Stock Purchase
Right to the then current Fair Market Value if the Fair Market Value of the
Common Stock covered by such Option or Stock Purchase Right shall have
declined since the date the Option or Stock Purchase Right was granted;
viii. to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;
ix. to prescribe, amend and rescind rules and regulations relating to
the Plan, including rules and regulations relating to sub-plans established
for the purpose of qualifying for preferred tax treatment under foreign tax
laws;
x. to modify or amend each Option or Stock Purchase Right (subject to
Section 15(c) of the Plan), including the discretionary authority to extend
the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan;
xi. to authorize any person to execute on behalf of the Company any
instrument required to effect the grant of an Option or Stock Purchase
Right previously granted by the Administrator;
xii. to institute an Option Exchange Program;
xiii. to determine the terms and restrictions applicable to Options
and Stock Purchase Rights and any Restricted Stock; and
xiv. to make all other determinations deemed necessary or advisable
for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on
all Optionees and any other holders of Options or Stock Purchase Rights.
5. ELIGIBILITY
Nonstatutory Stock Options and Stock Purchase Rights may be granted to
Employees and Consultants. Incentive Stock Options may be granted only to
Employees. If otherwise eligible, an Employee or Consultant
18
<PAGE> 21
who has been granted an Option or Stock Purchase Right may be granted additional
Options or Stock Purchase Rights.
6. LIMITATIONS
(a) Each Option shall be designated in the Notice of Grant as either an
Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding
such designations, to the extent that the aggregate Fair Market Value of Shares
subject to an Optionee's Incentive Stock Options granted by the Company, any
Parent or Subsidiary, which become exercisable for the first time during any
calendar year (under all plans of the Company or any Parent or Subsidiary)
exceeds $100,000, such excess Options shall be treated as Nonstatutory Stock
Options. For purposes of this Section 6(a), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time of grant.
(b) Neither the Plan nor any Option or Stock Purchase Right shall confer
upon an Optionee any right with respect to continuing the Optionee's employment
or consulting relationship with the Company, nor shall they interfere in any way
with the Optionee's right or the Company's right to terminate such employment or
consulting relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options and Stock
Purchase Rights to Employees:
i. No Employee shall be granted, in any fiscal year of the Company,
Options and Stock Purchase Rights to purchase more than 300,000 Shares.
ii. The foregoing limitations shall be adjusted proportionately in
connection with any change in the Company's capitalization as described in
Section 13.
iii. If an Option or Stock Purchase Right is canceled in the same
fiscal year of the Company in which it was granted (other than in
connection with a transaction described in Section 13), the canceled Option
or Stock Purchase Right will be counted against the limit set forth in
Section 6(c)(i). For this purpose, if the exercise price of an Option or
Stock Purchase Right is reduced, the transaction will be treated as a
cancellation of the Option or Stock Purchase Right and the grant of a new
Option or Stock Purchase Right.
7. TERM OF PLAN
Subject to Section 19 of the Plan, the Plan shall become effective upon the
earlier to occur of its adoption by the Board or its approval by the
stockholders of the Company as described in Section 19 of the Plan. It shall
continue in effect for a term of ten (10) years unless terminated earlier under
Section 15 of the Plan.
8. TERM OF OPTION
The term of each Option shall be stated in the Notice of Grant; provided,
however, that in the case of an Incentive Stock Option, the term shall be ten
(10) years from the date of grant or such shorter term as may be provided in the
Notice of Grant. Moreover, in the case of an Incentive Stock Option granted to
an Optionee who, at the time the Incentive Stock 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, the term of the Incentive
Stock Option shall be five (5) years from the date of grant or such shorter term
as may be provided in the Notice of Grant.
9. OPTION EXERCISE PRICE AND CONSIDERATION
(a) Exercise Price. The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
i. In the case of an Incentive Stock Option
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(A) granted to an Employee who, at the time the Incentive Stock
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, the per Share exercise price shall be no less than 110%
of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee described in
paragraph (A) immediately above, the per Share exercise price shall be no
less than 100% of the Fair Market Value per Share on the date of grant.
ii. In the case of a Nonstatutory Stock Option, the per Share exercise
price shall be determined by the Administrator.
(b) Waiting Period and Exercise Dates. At the time an Option is granted,
the Administrator shall fix the period within which the Option may be exercised
and shall determine any conditions which must be satisfied before the Option may
be exercised. In so doing, the Administrator may specify that an Option may not
be exercised until the completion of a service period.
(c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
i. cash;
ii. check;
iii. promissory note;
iv. other Shares which (a) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six
months on the date of surrender, and (b) have a Fair Market Value on the
date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised;
v. delivery of a properly executed exercise notice together with such
other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the
Company of the sale or loan proceeds required to pay the exercise price;
vi. a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
vii. any combination of the foregoing methods of payment; or
viii. such other consideration and method of payment for the issuance
of Shares to the extent permitted by Applicable Laws.
10. EXERCISE OF OPTION
(a) Procedure for Exercise; Rights as a Stockholder. Any Option granted
hereunder shall be exercisable according to the terms of the Plan and at such
times and under such conditions as determined by the Administrator and set forth
in the Option Agreement.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives: (i) written
notice of exercise (in accordance with the Option Agreement) from the person
entitled to exercise the Option, and (ii) full payment for the Shares with
respect to which the Option is exercised. Full payment may consist of any
consideration and method of payment authorized by the Administrator and
permitted by the Option Agreement and the Plan. Shares issued upon exercise of
an Option shall be issued in the name of the Optionee or, if requested by the
Optionee, in the name of the Optionee and his or her spouse. Until the stock
certificate evidencing such
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<PAGE> 23
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a stockholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock certificate
is issued, except as provided in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Employment or Consulting Relationship. Upon termination
of an Optionee's Continuous Status as an Employee or Consultant, other than upon
the Optionee's death or Disability, the Optionee may exercise his or her Option,
but only within such period of time as is specified in the Notice of Grant, and
only to the extent that the Optionee was entitled to exercise it at the date of
termination (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant). In the absence of a specified time
in the Notice of Grant, the Option shall remain exercisable for three months
following the Optionee's termination of Continuous Status as an Employee or
Consultant. In the case of an Incentive Stock Option, such period of time shall
not exceed three months from the date of termination. If, at the date of
termination, the Optionee is not entitled to exercise his or her entire Option,
the Shares covered by the unexercisable portion of the Option shall revert to
the Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified by the Administrator, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(c) Disability of Optionee. In the event that an Optionee's Continuous
Status as an Employee or Consultant terminates as a result of the Optionee's
Disability, the Optionee may exercise his or her Option at any time within
twelve (12) months from the date of such termination, but only to the extent
that the Optionee was entitled to exercise it at the date of such termination
(but in no event later than the expiration of the term of such Option as set
forth in the Notice of Grant). If, at the date of termination, the Optionee is
not entitled to exercise his or her entire Option, the Shares covered by the
unexercisable portion of the Option shall revert to the Plan. If, after
termination, the Optionee does not exercise his or her Option within the time
specified herein, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee, the
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant), by the Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent that the Optionee was entitled to exercise the Option at the
date of death. If, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall immediately revert to the Plan. If, after death, the
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance does not exercise the Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) Rule 16b-3. Options granted to individuals subject to Section 16 of
the Exchange Act ("Insiders") must comply with the applicable provisions of Rule
16b-3 and shall contain such additional conditions or restrictions as may be
required thereunder to qualify for the maximum exemption from Section 16 of the
Exchange Act with respect to Plan transactions.
11. STOCK PURCHASE RIGHTS
(a) Rights to Purchase. Stock Purchase Rights may be issued either alone,
in addition to, or in tandem with other awards granted under the Plan and/or
cash awards made outside of the Plan. After the Administrator determines that it
will offer Stock Purchase Rights under the Plan, it shall advise the offeree in
writing, by means of a Notice of Grant, of the terms, conditions and
restrictions related to the offer, including the number of Shares that the
offeree shall be entitled to purchase, the price to be paid, and the time within
which the offeree must accept such offer, which shall in no event exceed six (6)
months from the date upon
21
<PAGE> 24
which the Administrator made the determination to grant the Stock Purchase
Right. The offer shall be accepted by execution of a Restricted Stock Purchase
Agreement in the form determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines otherwise, the
Restricted Stock Purchase Agreement shall grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
employment with the Company for any reason (including death or Disability). The
purchase price for Shares repurchased pursuant to the Restricted Stock purchase
agreement shall be the original price paid by the purchaser and may be paid by
cancellation of any indebtedness of the purchaser to the Company. The repurchase
option shall lapse at a rate determined by the Administrator.
(c) Rule 16b-3. Stock Purchase Rights granted to Insiders, and Shares
purchased by Insiders in connection with Stock Purchase Rights, shall be subject
to any restrictions applicable thereto in compliance with Rule 16b-3. An Insider
may only purchase Shares pursuant to the grant of a Stock Purchase Right, and
may only sell Shares purchased pursuant to the grant of a Stock Purchase Right,
during such time or times as are permitted by Rule 16b-3.
(d) Other Provisions. The Restricted Stock Purchase Agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock Purchase Agreements need not be the
same with respect to each purchaser.
(e) Rights as a Stockholder. Once the Stock Purchase Right is exercised,
the purchaser shall have the rights equivalent to those of a stockholder, and
shall be a stockholder when his or her purchase is entered upon the records of
the duly authorized transfer agent of the Company. No adjustment will be made
for a dividend or other right for which the record date is prior to the date the
Stock Purchase Right is exercised, except as provided in Section 13 of the Plan.
12. NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS
An Option or Stock Purchase Right 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 Optionee, only by the Optionee.
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER OR ASSET
SALE
(a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Company, to the extent that an Option or Stock Purchase
Right has not been previously exercised, it will terminate immediately prior to
the consummation of such proposed action. The Board may, in the exercise of its
sole discretion in such instances, declare (i) that any Option or Stock Purchase
Right shall terminate as of a date
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<PAGE> 25
fixed by the Board and give each Optionee the right to exercise his or her
Option or Stock Purchase Right as to all or any part of the Optioned Stock,
including Shares as to which the Option or Stock Purchase Right would not
otherwise be exercisable, and (ii) that any Restricted Stock held by an Optionee
shall become fully vested as of such date.
(c) Merger or Asset Sale. In the event of a merger of the Company with or
into another corporation, or the sale of substantially all of the assets of the
Company, each outstanding Option and Stock Purchase Right may be assumed or an
equivalent option or right may be substituted by the successor corporation or a
Parent or Subsidiary of the successor corporation. The Administrator may, in
lieu of such assumption or substitution, provide (i) for the Optionee to have
the right to exercise the Option or Stock Purchase Right as to all or a portion
of the Optioned Stock, including Shares as to which it would not otherwise be
exercisable, and (ii) for any Restricted Stock held by an Optionee to become
fully vested. If the Administrator makes an Option or Stock Purchase Right
exercisable in lieu of assumption or substitution in the event of a merger or
sale of assets, the Administrator shall notify the Optionee that the Option or
Stock Purchase Right shall be fully exercisable for a period of fifteen (15)
days from the date of such notice, and the Option or Stock Purchase Right will
terminate upon the expiration of such period. For the purposes of this
paragraph, the Option or Stock Purchase Right shall be considered assumed if,
following the merger or sale of assets, the option or right confers the right to
purchase, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or property) received in
the merger or sale of assets by holders of Common Stock for each Share held on
the effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the merger or sale of assets was not solely common stock of the successor
corporation or its Parent, the Administrator may, with the consent of the
successor corporation, provide for the consideration to be received upon the
exercise of the Option or Stock Purchase Right, for each Share of Optioned Stock
subject to the Option or Stock Purchase Right, to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.
14. DATE OF GRANT
The date of grant of an Option or Stock Purchase Right shall be, for all
purposes, the date on which the Administrator makes the determination granting
such Option or Stock Purchase Right, or such other later date as is determined
by the Administrator. Notice of the determination shall be provided to each
Optionee within a reasonable time after the date of such grant.
15. AMENDMENT AND TERMINATION OF THE PLAN
(a) Amendment and Termination. The Board may at any time amend, alter,
suspend or terminate the Plan.
(b) Stockholder Approval. The Company shall obtain stockholder approval of
any Plan amendment to the extent necessary and desirable to comply with Rule
16b-3 or with Section 422 of the Code (or any successor rule or statute or other
applicable law, rule or regulation, including the requirements of any exchange
or quotation system on which the Common Stock is listed or quoted). Such
stockholder approval, if required, shall be obtained in such a manner and to
such a degree as is required by the applicable law, rule or regulation.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
16. CONDITIONS UPON ISSUANCE OF SHARES
(a) Legal Compliance. Shares shall not be issued pursuant to the exercise
of an Option or Stock Purchase Right unless the exercise of such Option or Stock
Purchase Right and the issuance and delivery of
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<PAGE> 26
such Shares shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules
and regulations promulgated thereunder, Applicable Laws, and the requirements of
any stock exchange or quotation system upon which the Shares may then be listed
or quoted, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of an
Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.
17. LIABILITY OF COMPANY
(a) Inability to Obtain Authority. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
(b) Grants Exceeding Allotted Shares. If the Optioned Stock covered by an
Option or Stock Purchase Right exceeds, as of the date of grant, the number of
Shares which may be issued under the Plan without additional stockholder
approval, such Option or Stock Purchase Right shall be void with respect to such
excess Optioned Stock, unless stockholder approval of an amendment sufficiently
increasing the number of Shares subject to the Plan is timely obtained in
accordance with Section 15(b) of the Plan.
18. RESERVATION OF SHARES
The Company, during the term of this Plan, will at all times reserve and
keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
19. STOCKHOLDER APPROVAL
Continuance of the Plan shall be subject to approval by the stockholders of
the Company within twelve (12) months before or after the date the Plan is
adopted. Such stockholder approval shall be obtained in the manner and to the
degree required under applicable federal and state law.
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PROXY
HARMONIC LIGHTWAVES, INC.
ANNUAL MEETING TO BE HELD ON APRIL 30, 1997 AT 8:00 A.M. PT
FOR HOLDERS AS OF MARCH 11, 1997
THIS FORM IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY.
PLEASE DO NOT USE IT FOR VOTING PURPOSES.
(Continued and to be signed on reverse side)
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FOLD AND DETACH HERE
<PAGE> 28
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Please mark
your vote as [ X ]
indicated in
this example.
WITHHOLD AUTHORITY TO
FOR WITHHOLD VOTE FOR ANY INDIVIDUAL
ALL ALL NOMINEE FOR WHOM
1. ELECTION OF DIRECTORS NOMINEES NOMINEES VOTE IS WITHHELD
[ ] [ ] [ ]
WRITE NUMBER(S) OF
NOMINEE(S) BELOW.
Nominees:
01 - ANTHONY J. LEY 02 - MOSHE NAZARATHY
03 - E. FLOYD KVAMME 04 - BARRY D. LEMEUX
05 - DAVID A. LANE 06 - MICHEL L. VAILLAUD ___________________________
THE BOARD RECOMMENDS A VOTE FOR ELECTION
OF THE FOLLOWING DIRECTORS
01 - ANTHONY J. LEY 02 - MOSHE NAZARATHY
03 - E. FLOYD KVAMME 04 - BARRY D. LEMEUX
05 - DAVID A. LANE 06 - MICHEL L. VAILLAUD
FOR AGAINST ABSTAIN
2. PROPOSAL TO VOTE FOR APPROVAL OF THE [ ] [ ] [ ]
AMENDMENT TO THE 1995 STOCK PLAN.
FOR AGAINST ABSTAIN
3. PROPOSAL TO RATIFY THE APPOINTMENT OF [ ] [ ] [ ]
PRICE WATERHOUSE LLP AS INDEPENDENT
AUDITORS OF THE COMPANY FOR THE FISCAL
YEAR ENDING DECEMBER 31, 1997.
"VOTE" SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR
ANY ADJOURNMENT THEREOF
PLACE "X" HERE IF YOU PLAN TO VOTE YOUR SHARES
AT THE MEETING [ ]
Signature(s) Date
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FOLD AND DETACH HERE
