UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K/A

AMENDMENT NO. 1

(Mark One)

þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2005

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 0-25826

HARMONIC INC.

(Exact name of Registrant as specified in its charter)

Delaware		77-0201147
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes o No þ

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes o No þ

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer”(as defined in Rule 12b-2 of the Exchange Act). (Check one):

Large accelerated filer o           Accelerated filer þ           Non-accelerated filer o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Based on the closing sale price of the Common Stock on the NASDAQ National Market System on July 1, 2005, the aggregate market value of the voting Common Stock held by non-affiliates of the Registrant was $357,244,182. Shares of Common Stock held by each officer and director and by each person who owns 5% or more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

The number of shares outstanding of the Registrant’s Common Stock, $.001 par value, was 74,163,348 on April 17, 2006.

None.

 

 

EXPLANATORY NOTE

Harmonic Inc. (the “Company”) is filing this Amendment No. 1 to Form 10-K for the sole purpose of timely providing certain information required by Part III of Form 10-K. No other changes are being made to the Company’s Annual Report on Form 10-K filed March 14, 2006.

PART III

Item 10. Directors and Executive Officers of Registrant

(a)		Executive Officers – See the section entitled “Executive Officers” in Part I, Item 1 of the Company’s Annual Report on Form 10-K, filed on March 14, 2006.
(b)		Directors – The names of the directors and certain information about each of them are set forth below.

Name		Age				Principal Occupation
Anthony J. Ley			67			Chairman, President and CEO, Harmonic Inc.
E. Floyd Kvamme			68			Partner Emeritus, Kleiner Perkins Caufield & Byers
William F. Reddersen			58			Retired, former Executive Vice President, BellSouth
Lewis Solomon			72			Chairman, G&L Investments
Michel L. Vaillaud			74			Retired, former Chairman and CEO, Schlumberger Limited
David R. Van Valkenburg			64			Chairman, Balfour Associates, Inc.

Except as indicated below, each 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 Harmonic’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, Limited both in Europe and the U.S., 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 Institute of Technology. He is also named as an inventor in 29 patents, is a Fellow of the I.E.E. (U.K.) and a senior member of the I.E.E.E.

E. Floyd Kvamme has been a director of the Company since 1990. Since 1984, Mr. Kvamme has been a general partner and now serves as a partner emeritus of Kleiner Perkins Caufield & Byers, a venture capital firm. Mr. Kvamme is also a director of National Semiconductor Corporation and Power Integrations, Inc., as well as several private companies. Mr. Kvamme holds a B.S.E.E. from the University of California, Berkeley and an M.S.E. from Syracuse University.

William F. Reddersen has been a director of the Company since July 2002. Now retired, Mr. Reddersen spent 31 years at BellSouth and AT&T. From 1998 to 2000, Mr. Reddersen was Executive Vice President of Corporate Strategy at BellSouth, and from 1991 to 1998, he was responsible for BellSouth’s broadband strategy and business market operations. Mr. Reddersen serves as a director of several private companies. He holds a B.S. in Mathematics from the University of Maryland and an M.S. in Management from the Massachusetts Institute of Technology, where he was a Sloan fellow.

Lewis Solomon has been a director of the Company since January 2002. He is Co-Founder and Chairman of G&L Investments, a consulting firm specializing in technology. Mr. Solomon also co-founded and was Chief Executive Officer of Broadband Services, Inc. (BSI), an outsource provider of supply chain management, network planning, and fulfillment services from 1999 to 2004. From 1983 to 1988, he served as the Executive Vice President of Alan Patricof Associates, a global venture capital firm. Mr. Solomon also spent 14 years at General Instrument Corporation, ultimately as Senior Vice President and Assistant to the Chief Executive Officer. Mr. Solomon is a director of Anadigics Inc., Artesyn Technologies Inc, Terayon Communications and several private companies.

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 is an Honorary Trustee of the Institute of Advanced Studies in Princeton, New Jersey.

David R. Van Valkenburg has been a director of the Company since October 2001. Mr. Van Valkenburg currently serves as Chairman of Balfour Associates, Inc., a firm providing counsel to chief executive officers, boards of directors and private equity funds and Chairman and President of privately-held Zero Point Corporation, a computer network engineering company. From 1995 to 2000, he was Executive Vice President of MediaOne Group, Inc. While at MediaOne Group, Mr. Van Valkenburg was seconded to Telewest Communications where he served as Chief Executive Officer and Chief Operating Officer from 1997 to 1999. He has also held the position of President at both Multivision Cable TV Corporation and Cox Cable Communications Inc. Mr. Van Valkenburg serves on the board of Moscow Cablecom Corporation, and several private companies. He holds a B.A. degree from Malone College, an M.S. degree from the University of Kansas, and an M.B.A. from Harvard University.

Audit Committee

The Audit Committee currently consists of Messrs. Kvamme, Reddersen and Vaillaud, each of whom is independent under Rule 10A-3 of the Securities Exchange Act of 1934 and under applicable Nasdaq listing standards. The Audit Committee of the Board of Directors of Harmonic serves as the representative of the Board of Directors for general oversight of the quality and integrity of Harmonic’s financial accounting and reporting process, system of internal control, audit process, and process for monitoring the compliance with related laws and regulations. The Audit Committee engages the Company’s independent registered public accounting firm and approves the scope of both audit and non-audit services. Harmonic’s management has primary responsibility for preparing financial statements and the financial reporting process. The Audit Committee held ten meetings during 2005.

The Company’s Board of Directors has determined that Mr. Kvamme is an “audit committee financial expert” as defined by the current rules of the Securities and Exchange Commission. The Board of Directors believes that Mr. Kvamme’s experience as general partner of a major venture capital firm since 1984 qualifies him as a “audit committee financial expert” because he has acquired relevant expertise and experience from the analysis and evaluation of financial statements of both public and private companies.

Section 16(a) Beneficial Ownership Reporting Compliance

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 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 2005, all filing requirements applicable to its officers, directors and ten percent stockholders were complied with, except in one instance. Dr. Yaron Simler, a former executive officer of the Company, sold 1,000 shares in February 2005 and subsequently filed a Form 4 report two days late.

Code of Ethics

Harmonic has adopted a Code of Business Conduct and Ethics for Senior Operational and Financial Leadership (the “Code”) which applies to its Chairman and Chief Executive Officer, its Chief Financial Officer, its Corporate Controller and other senior operational and financial management. The Code is available on the Company’s website at www.harmonicinc.com.

Harmonic intends to satisfy the disclosure requirement under Item 10 of Form 8-K regarding an amendment to, or waiver from, a provision of this Code of Ethics by posting such information on our website, at the address specified above, and to the extent required by the listing standards of the Nasdaq Stock Market, by filing a Current Report on Form 8-K with the Securities and Exchange Commission disclosing such information.

Item 11. Executive Compensation

The following Summary Compensation Table sets forth certain information regarding the compensation of the Chief Executive Officer of the Company and each of the executive officers of the Company (collectively, the “Named Executive Officers”) for services rendered in all capacities to the Company during the fiscal years ended December 31, 2003, December 31, 2004 and December 31, 2005.

Summary Compensation Table

		Annual Compensation
														Long Term
														Compensation
														Securities
														Underlying
Name and Principal Position		Year				Salary				Bonus				Options
Anthony J. Ley			2005			$	500,000			$	—				80,000
Chairman of the Board of Directors,			2004				467,308				525,366				200,000
President & Chief Executive Officer			2003				450,000				30,938				80,000
Robin N. Dickson			2005			$	330,000			$	—				50,000
Chief Financial Officer			2004				311,538				262,683				40,000
			2003				300,000				20,625				50,000
Patrick Harshman			2005			$	275,000			$	—				50,000
Executive Vice President			2004				259,615				158,416				50,000
			2003				250,000				—				50,000
Israel Levi			2005			$	275,000			$	—				40,000
Senior Vice President,			2004				270,000				227,659				40,000
Operations & Quality			2003				260,000				17,876				55,000

Option Grants in Last Fiscal Year

		Individual Grants
																		Potential Realizable Value at
																		Assumed Annual Rates of Stock
																		Price Appreciation for Option
																		Term(2)
		Number of				Percent of
		Securities				Total Option
		Underlying				Granted to
		Options				Employees in				Exercise Price				Expiration
Name		Granted(1)				Fiscal Year				($/share)				Date				5%				10%
Anthony J. Ley			80,000				5.9	%		$	5.86				5/3/2015				294,826				747,146
Robin N. Dickson			50,000				3.7	%			5.86				5/3/2015				184,266				466,967
Patrick Harshman			50,000				3.7	%			5.86				5/3/2015				184,266				466,967
Israel Levi			40,000				2.9	%			5.86				5/3/2015				147,413				373,573

The following table provides information with respect to the exercise of stock options during 2005 and the value of stock options held as of December 31, 2005 by each of the Named Executive Officers.

Aggregate Option Exercises in Last Fiscal Year and Year-End Values

										Number of Securities
										Underlying Unexercised								Value of Unexercised In-the-
										Options at 12/31/05								Money Options at 12/31/05(2)
		Shares
		Acquired on				Value
Name		Exercise				Realized(1)				Exercisable				Unexercisable				Exercisable				Unexercisable
Anthony J. Ley			90,000			$	431,999				592,498				207,502			$	81,083			$	30,117
Robin N. Dickson			22,972				113,404				237,880				85,148				32,646				18,823
Patrick Harshman			10,000				5,511				210,478				90,522				50,677				18,823
Israel Levi			—				—				224,644				76,356				37,675				20,705

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

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 common stock; (ii) each director; (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.

Name and Address of Beneficial Owner		Number of Shares				Percent of Total
Barclay’s Global Investors, NA (1) 45 Fremont Street San Francisco, CA 94015			3,720,553				5.0	%
Anthony J. Ley(2)			936,042				1.3	%
E. Floyd Kvamme(3)			528,684				0.7	%
William F. Reddersen(4)			60,000				0.1	%
Lewis Solomon(5)			64,000				0.1	%
Michel L. Vaillaud(6)			100,000				0.1	%
David R. Van Valkenburg(7)			74,000				0.1	%
Robin N. Dickson(8)			339,311				0.5	%
Patrick Harshman(9)			235,372				0.3	%
Israel Levi(10)			246,051				0.3	%
All directors and executive officers as a group (9 persons)(11)			2,583,460				3.4	%

Employment Agreements

The Company has entered into change-of-control severance agreements with each of Mr. Ley, Mr. Dickson, Dr. Harshman and Mr. Levi. Under the terms of the respective Named Executive Officer’s agreement, 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 twice his annual salary, bonus and benefits, and Mr. Dickson, Dr. Harshman and Mr. Levi will each receive a lump-sum payment of one year’s salary, bonus and benefits. These agreements also provide for the acceleration of unvested stock options held by a Named Executive Officer in the event of such Named Executive Officer’s termination, subject to certain limitations.

Equity Compensation Plan Information

(c)

Number of securities

remaining available

(a)

(b)

for future issuance

Number of securities to be

Weighted-average

under equity

issued upon exercise of

exercise price of

compensation plans

outstanding options,

outstanding options,

(excluding securities

Plan Category

warrants and rights(2)

warrants and rights(3)

reflected in column(a))

Equity plans approved by security holders(1)(4)

8,520,896

$

11.18

5,279,113

Item 13. Certain Relationships and Related Transactions

Except for the compensation agreements and other arrangements that are described under “Change of Control and Severance Agreements,” there was not during fiscal year 2005, nor is there currently proposed, any transaction or series of similar transactions to which the Company was or is to be a party in which the amount involved exceeds

$60,000 and in which any director, executive officer, 5% stockholder or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest.

Item 14. Principal Accounting Fees and Services

Aggregate fees for professional services rendered for the Company by PricewaterhouseCoopers LLP for the years ended December 31, 2005 and 2004 were:

($ Thousands)		2005				2004
Audit		$	1,966			$	1,949
Audit Related			477				138
Tax Fees			129				193
All Other			5				2
Total		$	2,577			$	2,282

Audit Fees

The audit fees for the years ended December 31, 2005 and 2004 were for professional services rendered for the audits of the consolidated financial statements of the Company and statutory and subsidiary audits, issuance of comfort letters, consents, and assistance with the review of documents filed with the SEC.

Audit Related Fees

The audit related fees for the years ended December 31, 2005 and 2004 were for due diligence assignments and consultations concerning financial accounting and reporting standards.

Tax Fees

The tax compliance fees for the years ended December 31, 2005 and 2004 were for services related to the preparation of tax returns, discussions with tax authorities, claims for tax refunds and the establishment of foreign entities, and for tax planning and tax advice, including consulting services related to indirect taxes and assistance with tax audits and appeals.

All Other Fees

All other fees for the years ended December 31, 2005 and 2004 were for license fees for various technical accounting reference software.

Our Audit Committee pre-approves all audit and non-audit services.

The Audit Committee has considered whether the services provided by PricewaterhouseCoopers LLP are compatible with maintaining the independence of PricewaterhouseCoopers LLP and has concluded that the independence of PricewaterhouseCoopers LLP is maintained and is not compromised by the non-audit services provided.

The Audit Committee has engaged PricewaterhouseCoopers LLP as its independent registered public accounting firm for the fiscal year ending December 31, 2006.

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Act of 1934, the Registrant, Harmonic Inc., a Delaware corporation, has duly caused this Annual Report on Form 10-K/A to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Sunnyvale, State of California, on April 26, 2006.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K, has been signed by the following persons on behalf of the Registrant in the capacities and on the dates indicated:

Signature		Title		Date
/s/ ANTHONY J. LEY		Chairman, President & Chief		April 26, 2006
(Anthony J. Ley)		Executive Officer
		(Principal Executive Officer)
/s/ ROBIN N. DICKSON		Chief Financial Officer		April 26, 2006
(Robin N. Dickson)		(Principal Financial and Accounting
		Officer)
/s/ E. FLOYD KVAMME		Director		April 26, 2006
(E. Floyd Kvamme)
/s/ WILLIAM REDDERSEN		Director		April 26, 2006
(William Reddersen)
/s/ LEWIS SOLOMON		Director		April 26, 2006
(Lewis Solomon)
/s/ MICHEL L. VAILLAUD		Director		April 26, 2006
(Michel L. Vaillaud)
/s/ DAVID R. VAN VALKENBURG		Director		April 26, 2006
(David Van Valkenburg)

EXHIBIT INDEX

The following Exhibits to this report are filed herewith, or if marked with a (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x), (xi) or (xii) are incorporated herein by reference.

Exhibit Number
2.1(v)		Agreement and Plan of Merger and Reorganization by and among C-Cube Microsystems, Inc. and the Registrant dated October27, 1999
3.1(ix)		Certificate of Incorporation of Registrant as amended
3.3(x)		Amended and Restated Bylaws of Registrant
4.1(i)		Form of Common Stock Certificate
4.2(x)		Preferred Stock Rights Agreement dated July 24, 2002 between the Registrant and Mellon Investor Services LLC
4.3(x)		Certificate of Designation of Rights, Preferences and Privileges of Series A Participating in Preferred Stock of Registrant
4.4(i)		Registration and Participation Rights and Modification Agreement dated as of July 22, 1994 among Registrant and certain holders of Registrant’s Common Stock
10.1(i)*		Form of Indemnification Agreement
10.2(i)*		1988 Stock Option Plan and form of Stock Option Agreement
10.3(i)*		1995 Stock Plan and form of Stock Option Agreement
10.4(i)*		1995 Employee Stock Purchase Plan and form of Subscription Agreement
10.5(i)*		1995 Director Option Plan and form of Director Option Agreement
10.7(ii)		Business Loan Agreement, Commercial Security Agreement and Promissory Note dated August 26, 1993, as amended on September 14, 1995, between Registrant and Silicon Valley Bank
10.8(ii)		Facility lease dated as of January 12, 1996 by and between Eastrich No. 137 Corporation and Company
10.9(xii)*		Change of Control Severance Agreement dated February 20, 2004 between Registrant and Anthony J. Ley
10.10(xii)*		Form of Change of Control Severance Agreement between Registrant and certain executive officers of Registrant
10.11(iv)*		1997 Nonstatutory Stock Option Plan
10.12(vi)*		1999 Nonstatutory Stock Option Plan
10.13(vii)		Lease Agreement for 603-611 Baltic Way, Sunnyvale, California
10.14(vii)		Lease Agreement for 1322 Crossman Avenue, Sunnyvale, California
10.15(vii)		Lease Agreement for 646 Caribbean Drive, Sunnyvale, California
10.16(vii)		Lease Agreement for 632 Caribbean Drive, Sunnyvale, California
10.17(vii)		First Amendment to the Lease Agreement for 549 Baltic Way, Sunnyvale, California
10.18(ix)		Restated Non-Recourse Receivables Purchase Agreement dated September 25, 2001 between Registrant and Silicon Valley Bank
10.19(ix)		Modification dated December 14, 2001 to the Restated Non-Recourse Receivables Purchase Agreement dated September 25, 2001, between Registrant and Silicon Valley Bank
10.21(xi)		Amendment to Loan Documents, dated September 26, 2003, by and between Silicon Valley Bank and Harmonic Inc.
10.22(xii)*		2002 Director Option Plan and Form of Stock Option Agreement
10.23(xii)*		2002 Employee Stock Purchase Plan and Form of Subscription Agreement
10.24(viii)		Supply License and Development Agreement, dated as of October 27, 1999, by and between C-Cube Microsystems and Harmonic
10.25(xiv)		First Amendment to Second Amended and Restated Loan and Security Agreement by and between Harmonic Inc., as Borrower, and Silicon Valley Bank, as Lender, dated as of December 16, 2005
21.1(xv)		Subsidiaries of Registrant
23.1(xv)		Consent of Independent Registered Public Accounting Firm
31.1		Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-

Exhibit Number
		Oxley Act of 2002
31.2		Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002