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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO.___)
Filed by the Registrantþ
Filed by a Party other than the Registranto
Check the appropriate box:
o | Preliminary Proxy Statement | |
þ | Definitive Proxy Statement | |
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
o | Definitive Additional Materials | |
o | Soliciting Material Pursuant to §240.14a-12 |
Broadcom Corporation
Payment of Filing Fee (Check the appropriate box):
þ | Fee not required. | ||||
o | Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. | ||||
(1) | Title of each class of securities to which transaction applies: | ||||
(2) | Aggregate number of securities to which transaction applies: | ||||
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | ||||
(4) | Proposed maximum aggregate value of transaction: | ||||
(5) | Total fee paid: | ||||
o | Fee paid previously with preliminary materials. | ||||
o | 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: | ||||
(2) | Form, Schedule or Registration Statement No.: | ||||
(3) | Filing Party: | ||||
(4) | Date Filed: |
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Sincerely, | ||
Henry Samueli, Ph.D. | Scott A. McGregor | |
Chairman of the Board and Chief Technical Officer | President and Chief Executive Officer and Director |
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1. | To elect nine directors to serve on our Board of Directors (the “Board”) until the next annual meeting of shareholders and/or until their successors are duly elected and qualified. The nominees for election are George L. Farinsky, Maureen E. Grzelakowski, Nancy H. Handel, John Major, Scott A. McGregor, Alan E. Ross, Henry Samueli, Ph.D., Robert E. Switz and Werner F. Wolfen. | |
2. | To approve Second Amended and Restated Articles of Incorporation of Broadcom to (i) increase the aggregate number of authorized shares of Class A common stock from 800,000,000 shares to 2,500,000,000 shares, and (ii) eliminate all statements referring to the rights, preferences, privileges and restrictions of Series A preferred stock, Series B preferred stock, Series C preferred stock, Series D preferred stock and Series E preferred stock. | |
3. | To approve an amendment to our Bylaws, as previously amended and restated, to increase the authorized number of directors from a range of five (5) to nine (9) to a range of six (6) to eleven (11) directors. | |
4. | To approve an amendment and restatement of Broadcom’s 1998 Stock Incentive Plan, as previously amended and restated, which revises the automatic equity grant program in effect for new and continuing non-employee Board members and makes certain technical revisions and improvements. | |
5. | To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2006. | |
6. | To transact such other business as may properly come before the Annual Meeting or any adjournment(s) or postponement(s) thereof. |
BY ORDER OF THE BOARD OF DIRECTORS | |
David A. Dull | |
Senior Vice President, Business Affairs, | |
General Counsel and Secretary |
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* | These items are not considered proxy solicitation material and are not deemed filed with the Securities and Exchange Commission. |
† | Appendices B and C to this proxy statement are filed with the Securities and Exchange Commission but are not printed as part of the proxy solicitation materials. Any shareholder who wishes to obtain a copy of either Appendix may do so by accessing the Securities and Exchange Commission’s website atwww.sec.gov. |
©2006 Broadcom Corporation. All rights reserved. | This proxy statement is printed on recycled paper. |
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Director | ||||||||||
Name | Age | Since | Positions with Broadcom | |||||||
George L. Farinsky(1) | 70 | 2002 | Director | |||||||
Maureen E. Grzelakowski | 51 | 2005 | Director | |||||||
Nancy H. Handel | 54 | 2005 | Director | |||||||
John Major(2) | 60 | 2003 | Director | |||||||
Scott A. McGregor(3) | 49 | 2005 | President, Chief Executive Officer and Director | |||||||
Alan E. Ross | 71 | 1995 | Director | |||||||
Henry Samueli, Ph.D.(4) | 51 | 1991 | Chairman of the Board and Chief Technical Officer | |||||||
Robert E. Switz(5) | 59 | 2003 | Director | |||||||
Werner F. Wolfen(6) | 75 | 1994 | Lead Independent Director |
(1) | Chairman of the Audit Committee, Member of the Nominating & Corporate Governance Committee. | |
(2) | Member of the Compensation and Nominating & Corporate Governance Committees. | |
(3) | Chairman of the Equity Award Committee. | |
(4) | Member of the Equity Award Committee. | |
(5) | Chairman of the Nominating & Corporate Governance Committee and Member of the Audit Committee. | |
(6) | Chairman of the Compensation Committee, Member of the Audit and Equity Award Committees. |
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(1) | Mr. Farinsky also served as member of the Compensation Committee through April 28, 2005. | |
(2) | Mr. Major also served as a member of the Audit Committee through April 28, 2005. | |
(3) | Mr. Switz also served as a member of the Compensation Committee through April 28, 2005. | |
(4) | Mr. Wolfen also served as a member of the Nominating & Corporate Governance Committee through April 28, 2005. |
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• | independence from management; | |
• | depth of understanding of technology, manufacturing, sales and marketing, finance and/or other elements directly relevant to Broadcom’s business; | |
• | education and professional background; | |
• | judgment, skill, integrity and reputation; | |
• | existing commitments to other businesses as a director, executive or owner; | |
• | personal conflicts of interest, if any; and | |
• | the size and composition of the existing Board. |
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• | documentation supporting that the writer is a shareholder of Broadcom and has been a beneficial owner of shares representing more than one percent (1%) of Broadcom’s then outstanding shares of common stock for at least one year, and a statement that the writer is recommending a candidate for nomination as a director; | |
• | a resume of the candidate’s business experience and educational background that also includes the candidate’s name, business and residence addresses, and principal occupation or employment and an explanation of how the candidate’s background and qualifications are directly relevant to Broadcom’s business; | |
• | the number of shares of Broadcom’s common stock beneficially owned by the candidate; | |
• | a statement detailing any relationship, arrangement or understanding, formal or informal, between or among the candidate, any affiliate of the candidate, and any customer, supplier or competitor of Broadcom, or any other relationship, arrangement or understanding that might affect the independence of the candidate as a member of the Board; | |
• | detailed information describing any relationship, arrangement or understanding, formal or informal, between or among the proposing shareholder, the candidate, and any affiliate of the proposing shareholder or the candidate; | |
• | any other information that would be required under SEC rules in a proxy statement soliciting proxies for the election of such candidate as a director; and | |
• | a signed consent of the candidate to serve as a director, if nominated and elected. |
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Cash Compensation |
Equity Compensation |
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“3.2 NUMBER OF DIRECTORS | |
The authorized number of directors of the corporation shall be not less than six (6) nor more than eleven (11), and the exact number of directors shall be set from time to time within the limits specified above, by a resolution amending such exact number, duly adopted by the Board of Directors or by the shareholders. The minimum and maximum number of directors may be changed, or a definite number may be fixed without provision for an indefinite number, by a duly adopted amendment to the Articles of Incorporation or by an amendment to this Bylaw duly adopted by vote or written consent of holders of a majority of the voting power of the outstanding shares entitled to vote. | |
No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires.” |
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(i) restructure the Director Automatic Grant Program in effect for new and continuing non-employee Board members to |
(a) revise the number of shares of Class A common stock that will be subject to the combined stock option grant and restricted stock unit award made to each non-employee Board member at each annual meeting of shareholders, beginning with this Annual Meeting, | |
(b) provide for the proration of that combined award for any non-employee Board members who commence service on a date that is not the day of an annual meeting of shareholders, and | |
(c) eliminate the initial awards of stock options and restricted stock units that would be made under the current program to newly appointed or elected non-employee Board members as well as the renewal awards that would otherwise be made under the current program every four years to continuing non-employee Board members; and |
(ii) revise the cash flow performance goal under the Stock Issuance Program to allow certain adjustments (similar to that currently permitted for earnings or net income per share; and net income or operating income) to be made in calculating whether that performance goal has been met with respect to any future awards contingent in whole or in part upon the achievement of specific objectives related to attainment of such goal. |
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• | Should shares of Class A common stock (or Class B common stock, as applicable) otherwise issuable under the 1998 Plan be withheld in satisfaction of the withholding taxes incurred in connection with the issuance, exercise or vesting of an Equity Award, the number of shares of Class A common stock (or Class B common stock, as applicable) available for issuance under the 1998 Plan will be reduced only by the net number of shares issued pursuant to that Equity Award. The withheld shares will not reduce the share reserve. | |
• | Upon the exercise of any stock appreciation right granted under the 1998 Plan, the share reserve will only be reduced by the net number of shares actually issued upon such exercise, and not by the gross number of shares as to which such stock appreciation right is exercised. |
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• | Tandem stock appreciation rights, which provide the holders with the right to surrender their options for an appreciation distribution in an amount equal to the excess of (i) the fair market value of the vested shares of Class A common stock subject to the surrendered option over (ii) the aggregate exercise price payable for those shares. | |
• | Standalone stock appreciation rights, which allow the holders to exercise those rights as to a specific number of shares of Class A common stock and receive in exchange an appreciation distribution in an amount equal to the excess of (i) the fair market value of the shares of Class A common stock as to which those rights are exercised over (ii) the aggregate base price in effect for those shares. The base price per share may not be less than the fair market value per share of the Class A common stock on the date the standalone stock appreciation right is granted, and the right may not have a term in excess of ten years. | |
• | Limited stock appreciation rights, which may be included in one or more grants made under the Discretionary Grant Program. Upon the successful completion of a hostile takeover for more than fifty percent (50%) of Broadcom’s outstanding voting securities or a change in a majority of the Board as a result of one or more contested elections for Board membership, each outstanding option with such a limited stock appreciation right may be surrendered in return for a distribution per surrendered option share equal to the excess of (i) the fair market value per share at the time the option is surrendered or, if greater, the highest price paid per share in the transaction over (ii) the exercise price payable per share under such option. |
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• | Initial Award. Each individual who first became a non-employee member of the Board after March 10, 2005 and before February 24, 2006 received, at the time of his or her initial election or appointment to the Board, an option grant to purchase 75,000 shares of Class A common stock and an award of RSUs covering 25,002 shares of Class A common stock, provided that such individual had not previously been in the employ of Broadcom or any of its parents or subsidiaries. | |
• | Annual Award. On the date of each annual meeting of shareholders, beginning with the 2005 Annual Meeting of Shareholders, each non-employee Board member would automatically be granted an option to purchase 11,250 shares of Class A common stock and an award of RSUs covering an additional 3,750 shares of Class A common stock. | |
• | Renewal Award. Each non-employee Board member would also, immediately upon completion of each consecutive four-year period of continuous service in such capacity, receive a renewal automatic award consisting of an option to purchase 75,000 shares of Class A common stock and an award of RSUs covering an additional 25,002 shares of Class A common stock;provided, however, that for each non-employee director who had already completed a consecutive four-year period of continuous service in such capacity as of April 25, 2002 the first such renewal grant under the revised Director Automatic Grant Program would not be made until his completion of four years of continuous Board service measured from that April 25, 2002 date (the “Renewal Award”). |
• | Annual Award. On the date of each annual meeting of shareholders, beginning with this Annual Meeting, each individual who is to continue to serve as a non-employee Board member will automatically be granted an option to purchase 10,000 shares of Class A common stock and an award of RSUs covering 5,000 shares of Class A common stock. There will be no limit on the number of such option grants and RSU awards any one non-employee Board member may receive over his or her period of Board service, and non-employee Board members who have previously been in our employ will be eligible to receive one or more such annual option grants and RSU awards over their period of continued Board service. |
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• | Initial Grant. Each individual who is first elected or appointed as a non-employee Board member at any time on or after February 24, 2006, other than at an annual meeting of shareholders, will, on the date of he or she commences service as a non-employee Board member, automatically be granted the following awards, provided such individual has not previously been in our employ: |
(i) an option for that number of shares of Class A common stock determined by multiplying the normal10,000-share automatic annual option grant by a fraction, the numerator of which is the number of months (including any partial month, expressed as a fraction) that will elapse between the date he or she commences service as a non-employee Board member and the first May 5th next succeeding such service commencement date, and the denominator of which is 12 months; and | |
(ii) an RSU award covering the number of shares of Class A common stock determined by multiplying the normal5,000-share automatic annual restricted stock unit award by a fraction, the numerator of which is the number of months (including any partial month, expressed as a fraction) that will elapse between the date he or she commences service as a non-employee Board member and the first May 5th next succeeding such service commencement date, and the denominator of which is 12 months. |
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Number of Shares | Weighted Average | ||||||||
Underlying | Exercise Price | ||||||||
Name and Position | Options Granted(#) | Per Share($) | |||||||
Scott A. McGregor | 3,250,000 | $ | 22.1651 | ||||||
President and Chief Executive Officer (effective January 3, 2005) | |||||||||
Alan E. Ross | 11,250 | 19.7067 | |||||||
(President and Chief Executive Officer until January 3, 2005) | |||||||||
Henry Samueli, Ph.D. | 0 | N/A | |||||||
Chairman of the Board and Chief Technical Officer | |||||||||
David A. Dull | 58,500 | 21.4733 | |||||||
Senior Vice President, Business Affairs, General Counsel and Secretary | |||||||||
George L. Farinsky | 11,250 | 19.7067 | |||||||
Director | |||||||||
Maureen E. Grzelakowski | 75,000 | 30.7133 | |||||||
Director | |||||||||
Nancy H. Handel | 75,000 | 31.9467 | |||||||
Director | |||||||||
John Major | 11,250 | 19.7067 | |||||||
Director | |||||||||
Vahid Manian | 58,500 | 21.4733 | |||||||
Senior Vice President, Global Manufacturing Operations | |||||||||
Andrew J. Pease | 58,500 | 21.4733 | |||||||
Senior Vice President, Global Sales | |||||||||
William J. Ruehle | 67,500 | 21.4733 | |||||||
Senior Vice President and Chief Financial Officer | |||||||||
Robert E. Switz | 11,250 | 19.7067 | |||||||
Director | |||||||||
Werner F. Wolfen | 11,250 | 19.7067 | |||||||
Director | |||||||||
All current executive officers as a group (7 persons) | 3,533,500 | 22.1096 | |||||||
All current non-employee directors as a group (7 persons) | 206,250 | 28.1600 | |||||||
All employees, including current officers who are not executive officers, as a group | 29,265,617 | 23.1133 |
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Number of | |||||
Name and Position | Underlying Shares | ||||
Scott A. McGregor | 424,999 | ||||
President and Chief Executive Officer (effective January 3, 2005) | |||||
Alan E. Ross | 3,750 | ||||
(President and Chief Executive Officer until January 3, 2005) | |||||
Henry Samueli, Ph.D. | 0 | ||||
Chairman of the Board and Chief Technical Officer | |||||
David A. Dull | 19,500 | ||||
Senior Vice President, Business Affairs, General Counsel and Secretary | |||||
George L. Farinsky | 3,750 | ||||
Director | |||||
Maureen E. Grzelakowski | 25,002 | ||||
Director | |||||
Nancy H. Handel | 25,002 | ||||
Director | |||||
John Major | 3,750 | ||||
Director | |||||
Vahid Manian | 19,500 | ||||
Senior Vice President, Global Manufacturing Operations | |||||
Andrew J. Pease | 19,500 | ||||
Senior Vice President, Global Sales | |||||
William J. Ruehle | 22,500 | ||||
Senior Vice President and Chief Financial Officer | |||||
Robert E. Switz | 3,750 | ||||
Director | |||||
Werner F. Wolfen | 3,750 | ||||
Director | |||||
All current executive officers as a group (7 persons) | 519,499 | ||||
All current non-employee directors as a group (7 persons) | 68,754 | ||||
All employees, including current officers who are not executive officers, as a group | 8,623,258 |
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• | Stock Withholding: The election to have Broadcom withhold, from the shares otherwise issuable upon the issuance, exercise or vesting of such Equity Award, a portion of those shares with an aggregate fair market value equal to the percentage of the withholding taxes (not to exceed one hundred percent (100%)) designated by the holder and make a cash payment equal to such fair market value directly to the appropriate taxing authorities on such individual’s behalf. The shares so withheld will not reduce the number of shares authorized for issuance under the 1998 Plan. | |
• | Stock Delivery: The election to deliver to Broadcom certain shares of Class A common stock previously acquired by such holder (other than in connection with the issuance, exercise or vesting that triggered the withholding taxes) with an aggregate fair market value equal to the percentage of the withholding taxes (not to exceed one hundred percent (100%)) designated by the holder. The shares of Class A common stock so delivered shall not be added to the shares of Class A common stock authorized for issuance under the 1998 Plan. |
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Incentive Stock Options. No taxable income is recognized by the optionee at the time of the option grant, and, if there is no disqualifying disposition at the time of exercise, no taxable income is recognized for regular tax purposes at the time the option is exercised, although taxable income may arise at that time for alternative minimum tax purposes equal to the excess of the fair market value of the purchased shares at such time over the exercise price paid for those shares. | |
The optionee will recognize taxable income in the year in which the purchased shares are sold or otherwise made the subject of certain dispositions. For federal tax purposes, dispositions are divided into two categories: (i) qualifying and (ii) disqualifying. A qualifying disposition occurs if the sale or other disposition is made more than two years after the date the option for the shares involved in such sale or disposition was granted and more than one year after the date the option was exercised for those shares. If either of these two requirements is not satisfied, a disqualifying disposition will result. | |
Upon a qualifying disposition, the optionee will recognize long-term capital gain in an amount equal to the excess of (i) the amount realized upon the sale or other disposition of the purchased shares over (ii) the exercise price paid for the shares. If there is a disqualifying disposition of the shares, the excess of (i) the fair market value of those shares on the exercise date over (ii) the exercise price paid for the shares will be taxable as ordinary income to the optionee. Any additional gain or any loss recognized upon the disposition will be taxable as a capital gain or capital loss. | |
If the optionee makes a disqualifying disposition of the purchased shares, Broadcom will be entitled to an income tax deduction, for our taxable year in which such disposition occurs, equal to the excess of (i) the fair market value of such shares on the option exercise date over (ii) the exercise price paid for the shares. If the optionee makes a qualifying disposition, we will not be entitled to any income tax deduction. | |
Non-Statutory Stock Options. No taxable income is recognized by an optionee upon the grant of a non-statutory option. The optionee will, in general, recognize ordinary income, in the year in which the option is exercised, equal to the excess of the fair market value of the purchased shares on the exercise date over the exercise price paid for the shares, and Broadcom will be required to collect certain withholding taxes applicable to such income from the optionee. | |
Broadcom will be entitled to an income tax deduction equal to the amount of any ordinary income recognized by the optionee with respect to an exercised non-statutory option. The deduction will in general be allowed for our taxable year in which such ordinary income is recognized by the optionee. | |
If the shares acquired upon exercise of the non-statutory option are unvested and subject to repurchase in the event of the optionee’s cessation of service prior to vesting in those shares, the optionee will not recognize any taxable income at the time of exercise but will have to report as ordinary income, as and when Broadcom’s repurchase right lapses, an amount equal to the excess of (i) the fair market value of the shares on the date the repurchase right lapses over (ii) the exercise price paid for the shares. The optionee may elect under Section 83(b) of the Internal Revenue Code to include as ordinary income in the year of exercise of the option an amount equal to the excess of (i) the fair market value of the purchased shares on the exercise date over (ii) the exercise price paid for such shares. If a timely Section 83(b) election is made, the optionee will not recognize any additional income as and when the repurchase right lapses. |
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2005 | 2004 | |||||||
Audit Fees | $ | 2,414,000 | $ | 2,596,000 | ||||
Audit-Related Fees | 132,000 | 250,000 | ||||||
Tax Fees | 195,000 | 254,000 | ||||||
All Other Fees | 0 | 0 | ||||||
Total Fees | $ | 2,741,000 | $ | 3,100,000 | ||||
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Shares Beneficially Owned(1) | Percentage | |||||||||||||||
of Total | ||||||||||||||||
Class A | Class B | Class A | Voting | |||||||||||||
Beneficial Owner | Common Stock | Common Stock | Percent(2) | Power(1)(2) | ||||||||||||
Directors and Named Executive Officers | ||||||||||||||||
David A. Dull(3) | 835,739 | 249,544 | * | % | * | % | ||||||||||
George L. Farinsky(4) | 151,500 | 0 | * | * | ||||||||||||
Maureen E. Grzelakowski(5) | 75,000 | 0 | * | * | ||||||||||||
Nancy H. Handel(6) | 75,000 | 0 | * | * | ||||||||||||
John Major(7) | 76,500 | 0 | * | * | ||||||||||||
Vahid Manian(8) | 305,453 | 38,649 | * | * | ||||||||||||
Scott A. McGregor(9) | 490,389 | 0 | * | * | ||||||||||||
Andrew J. Pease(10) | 74,893 | 0 | * | * | ||||||||||||
Alan E. Ross(11) | 63,852 | 0 | * | * | ||||||||||||
William J. Ruehle(12) | 1,826,183 | 729,897 | * | * | ||||||||||||
Henry Samueli, Ph.D.(13) | 750,006 | 37,195,597 | 7.53 | 30.13 | ||||||||||||
Robert E. Switz(14) | 114,000 | 0 | * | * | ||||||||||||
Werner F. Wolfen(15) | 190,000 | 240,107 | * | * | ||||||||||||
All current directors and executive officers as a group (14 persons)(16) | 5,048,771 | 38,453,794 | 8.55 | 31.27 | ||||||||||||
5% Holders Not Listed Above | ||||||||||||||||
The AXA Group(17) | 75,551,797 | 0 | 16.22 | 6.11 | ||||||||||||
Nicholas Family Trust(18) | 0 | 36,781,064 | 7.32 | 29.76 |
(1) | Except as indicated in the footnotes to this table, and subject to applicable community property laws, the persons listed have sole voting and investment power with respect to all shares of our common stock beneficially owned by them. In some instances, the beneficially owned shares include unvested shares subject to currently exercisable options. If unvested shares are in fact purchased under those options, Broadcom will have the right to repurchase those shares, at the exercise price paid per share, should the optionee’s service terminate prior to vesting in those shares. | |
(2) | The percentage of shares beneficially owned is based on 465,813,596 shares of Class A common stock outstanding as of February 28, 2006. Beneficial ownership is determined in accordance with the rules and regulations of the SEC. Shares of common stock subject to options that are currently exercisable or exercisable within 60 days after February 28, 2006 and shares of common stock subject to RSUs that will vest and be issued within 60 days after February 28, 2006 are deemed to be outstanding and beneficially owned by the person holding such options or RSUs for the purpose of computing the number of shares beneficially owned and the percentage ownership of such |
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person, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. On February 28, 2006 there were 77,029,173 shares of Class B common stock outstanding. Each share of Class B common stock is immediately convertible into one share of Class A common stock. Accordingly, for the purpose of computing the percentage of Class A shares beneficially owned by each person who holds Class B common stock, each share of Class B common stock is deemed to have been converted into a share of Class A common stock, but such shares of Class B common stock are not deemed to have been converted into Class A common stock for the purpose of computing the percentage ownership of any other person. |
Holders of Class A common stock are entitled to one vote per share and holders of Class B common stock are entitled to ten votes per share. Holders of common stock vote together as a single class on all matters submitted to a vote of shareholders, except (i) as otherwise required by law; and (ii) in the case of a proposed issuance of additional shares of Class B common stock, which issuance requires the affirmative vote of the holders of the majority of the outstanding shares of Class B common stock voting separately as a class, unless such issuance is approved by at least two-thirds of the members of the Board then in office. |
(3) | Includes 12,024 shares of Class B common stock held by Mr. Dull as custodian for his children. Also includes (i) 786,560 shares of Class A common stock; and (ii) 61,866 shares of Class B common stock issuable upon exercise of options that are currently exercisable or will become exercisable within 60 days after February 28, 2006. | |
(4) | Includes (i) 1,500 shares of Class A common stock held by a family trust as to which shares Mr. Farinsky, as co-trustee of such trust, shares voting and dispositive power; (ii) 146,250 shares of Class A common stock issuable upon exercise of options held by such family trust that are currently exercisable; and (iii) 3,750 shares of Class A common stock that will vest and become issuable within 60 days after February 28, 2006 pursuant to restricted stock units held by Mr. Farinsky. | |
(5) | Includes 75,000 shares of Class A common stock issuable upon exercise of options that are currently exercisable. | |
(6) | Includes 75,000 shares of Class A common stock issuable upon exercise of options that are currently exercisable. | |
(7) | Includes (i) 71,250 shares of Class A common stock issuable upon exercise of options that are currently exercisable; and (ii) 3,750 shares of Class A common stock that will vest and become issuable within 60 days after February 28, 2006 pursuant to restricted stock units held by Mr. Major. | |
(8) | Includes 750 shares of Class A common stock held by Mr. Manian as custodian for his children. Also includes 227,743 shares of Class A common stock issuable upon exercise of options that are currently exercisable or will become exercisable within 60 days after February 28, 2006. | |
(9) | Includes 431,978 shares of Class A common stock that are currently exercisable or will become exercisable within 60 days after February 28, 2006. |
(10) | Includes 72,987 shares of Class A common stock that are currently exercisable or will become exercisable within 60 days after February 28, 2006. |
(11) | Includes (i) 48,750 shares of Class A common stock that are currently exercisable; and (ii) 3,750 shares of Class A common stock that will vest and become issuable within 60 days after February 28, 2006 pursuant to restricted stock units held by Mr. Ross. |
(12) | Includes 1,125 shares of Class B common stock held by Mr. Ruehle as custodian for his grandchildren. Also includes (i) 1,804,060 shares of Class A common stock; and (ii) 375,000 shares of Class B common stock issuable upon exercise of options that are currently exercisable or will become exercisable within 60 days after February 28, 2006. |
(13) | Includes (i) 1,850,473 shares of Class B common stock owned by HS Management, L.P., which is beneficially owned by Dr. Samueli; (ii) 5,426,725 shares of Class B common stock beneficially owned by Dr. Samueli and his spouse, as co-trustees and co-beneficiaries of SHILOH Trust; (iii) 24,989,602 shares of Class B common stock held by HS Portfolio L.P., which is beneficially owned by Dr. Samueli; (iv) 1,762,500 shares of Class B common stock held by HS Portfolio II, L.P., which is beneficially owned by Dr. Samueli; and (v) 3,166,297 shares of Class B common stock held by H&S Investments I, L.P., which is beneficially owned by Dr. Samueli. Dr. Samueli disclaims beneficial ownership of the shares held by HS Management, L.P. and HS Portfolio L.P., except to the extent of his pecuniary interest therein. Also includes 750,000 shares of Class A common stock issuable upon exercise of options that are currently exercisable and 6 shares of Class A common stock that are directly held by Dr. Samueli. The address for Dr. Samueli is 16215 Alton Parkway, Irvine, California 92618-3616. |
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(14) | Includes (i) 108,750 shares of Class A common stock issuable upon exercise of options that are currently exercisable; and (ii) 3,750 shares of Class A common stock that will vest and become issuable within 60 days after February 28, 2006 pursuant to restricted stock units held by Mr. Switz. |
(15) | Includes (i) 210,106 shares of Class B common stock held by a family trust as to which shares Mr. Wolfen, as co-trustee of such trust, shares voting and dispositive power; and (ii) 30,001 shares of Class B common stock owned by the Lawrence P. Wolfen Testamentary Trust, of which Mr. Wolfen serves as trustee and as to which Mr. Wolfen disclaims beneficial ownership. Also includes (i) 186,250 shares of Class A common stock issuable upon exercise of options that are currently exercisable; and (ii) 3,750 shares of Class A common stock that will vest and become issuable within 60 days after February 28, 2006 pursuant to restricted stock units held by Mr. Wolfen. |
(16) | Includes (i) 4,802,883 shares of Class A common stock; and (ii) 436,866 shares of Class B common stock issuable upon exercise of options held by the current directors and executive officers as a group that are currently exercisable or will become exercisable within 60 days after February 28, 2006. Also includes 18,750 shares of Class A common stock that will vest and become issuable within 60 days after February 28, 2006 pursuant to restricted stock units held by Messrs. Farinsky, Major, Ross, Switz and Wolfen. |
(17) | The information provided with respect to the holdings of AXA Group is based on their SEC filing on Schedule 13G. |
According to a Schedule 13G filed with the SEC on February 14, 2006 by (i) AXA Assurances I.A.R.D. Mutuelle, AXA Assurances Vie Mutuelle, and AXA Courtage Assurance Mutuelle (collectively, the “Mutuelles AXA”), (ii) AXA, and (iii) AXA Financial, Inc. (“AXA Financial”). Mutuelles AXA controls AXA, which is the parent holding company of AXA Rosenberg Investment Management LLC (“AXA Rosenberg”) and of AXA Financial, which is the parent holding company of Alliance Capital Management L.P. (“Alliance”), an investment adviser, and AXA Equitable Life Insurance Company (“Equitable”), an insurance company and an investment adviser. Includes 73,285,743 shares held by Alliance on behalf of client discretionary investment advisory accounts, as to which Alliance has sole power to dispose of 73,212,435 shares and shared power to dispose of 73,308 shares, and sole power to vote 48,880,026 shares and shared power to vote 230,830 shares. Also includes: (a) 1,522,936 shares held by Equitable (with sole power to dispose of all such shares and to vote 640,333 shares); and (b) 743,118 shares held by AXA Rosenberg (with sole power to dispose of all such shares and to vote 407,330 shares). The addresses are: Mutuelles AXA – 26, rue Drouot, 75009 Paris, France; AXA – 25, avenue Matignon, 75008 Paris, France; and AXA Financial – 1290 Avenue of the Americas, New York, New York 10104. | |
The Schedule 13G filed by AXA Group contained information as of December 31, 2005 and may not reflect current holdings of our Class A common stock. |
(18) | Includes (i) 36,778,994 shares of Class B common stock held by Dr. Nicholas and his spouse, as co-trustees and co- beneficiaries of the Nicholas Family Trust, and (ii) 2,070 shares of Class B common stock held by Dr. Nicholas as custodian for his children. The address for Dr. Nicholas is 15 Enterprise, Aliso Viejo, California 92656. |
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A | B | C | |||||||||||||||
Number of Shares of | |||||||||||||||||
Common Stock | |||||||||||||||||
Number of Shares of | Remaining Available | ||||||||||||||||
Common Stock to be | for Future Issuance | ||||||||||||||||
Issued upon Exercise | Weighted-Average | under Equity | |||||||||||||||
of Outstanding | Exercise Price of | Compensation Plans | |||||||||||||||
Class of | Options, Warrants | Outstanding Options, | (Excluding Securities | ||||||||||||||
Plan Category | Common Stock | and Rights | Warrants and Rights | Reflected in Column A) | |||||||||||||
Equity Compensation Plans Approved by Shareholders(1) | Class A | 141,252,332 | (2) | $ | 19.93 | (3) | 60,414,536 | (4)(5) | |||||||||
Class B | 4,050,548 | 1.01 | 0 | ||||||||||||||
Equity Compensation Plans Not Approved by Shareholders(6) | Class A | 368,346 | 10.61 | 0 | |||||||||||||
Total(7) | Class A | 141,620,678 | 19.90 | 60,414,536 | |||||||||||||
Total(7) | Class B | 4,050,548 | 1.01 | 0 |
(1) | Consists of the 1998 Plan, as amended and restated, and Broadcom’s 1998 Employee Stock Purchase Plan, as amended and restated (the “Purchase Plan”). |
(2) | Includes 6,980,796 shares of Class A common stock subject to RSUs that will entitle each holder to one share of Class A common stock for each such unit that vests over the holder’s period of continued service. Excludes purchase rights accruing under the Purchase Plan. Under the Purchase Plan, each eligible employee may purchase up to 9,000 shares of Class A common stock at each semi-annual purchase date (the last business day of April and October each year), but not more than $25,000 worth of such stock (determined on the basis of the fair market value per share on the date or dates such rights are granted) per calendar year his or her purchase right remains outstanding. The purchase price payable per share will be equal to eighty-five percent (85%) of the lower of (i) the closing selling price per share of Class A common stock on the employee’s entry date into the two-year offering period in which that semi-annual purchase date occurs and (ii) the closing selling price per share of Class A common stock on the semi-annual purchase date. |
(3) | Calculated without taking into account 6,980,796 shares of Class A common stock subject to outstanding RSUs that will become issuable as those units vest, without any cash consideration or other payment required for such shares. |
(4) | Includes shares of Class A common stock available for future issuance under the 1998 Plan and the Purchase Plan. As of December 31, 2005, 55,670,622 shares of Class A common stock were available for issuance under the 1998 Plan. Shares reserved for issuance under the 1998 Plan may be issued upon the exercise of stock options or stock appreciation rights, through direct stock issuances or pursuant to restricted stock awards or RSUs that vest upon the attainment of prescribed performance milestones or the completion of designated service periods. For further information concerning the 1998 Plan, see Proposal Four: Approval of Amendment and Restatement of the 1998 Stock Incentive Plan. As of December 31, 2005, 4,743,913 shares of Class A common stock were available for issuance under the Purchase Plan. |
(5) | Both the 1998 Plan and the Purchase Plan contain annual automatic share renewal provisions. Accordingly, the number of shares of Class A common stock reserved for issuance under the 1998 Plan will automatically increase on the first trading day of January each calendar year by an amount equal to four and one-half percent (4.5%) of the total number of shares of Class A common stock and Class B common stock outstanding on the last trading day of the immediately preceding calendar year, but in no event will any such annual increase exceed 37,500,000 shares. The share reserve under the Purchase Plan will automatically increase on the first trading day of January each calendar year by an amount equal to one percent (1%) of the total number of shares of Class A common stock and Class B |
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common stock outstanding on the last trading day of the immediately preceding calendar year, but in no event will any such annual increase exceed 4,500,000 shares. | |
(6) | Consists solely of the 1999 Special Stock Option Plan, as amended and restated (the “Special Plan”), described below. Options under the Special Plan cannot be granted to directors or executive officers. By resolution adopted February 23, 2005, the Board decided not to grant any additional stock options under the Special Plan. This resolution also granted the plan administrator continued authority to make any changes to the terms and provisions of the options currently outstanding under the Special Plan at any time which the plan administrator may deem appropriate. |
(7) | The table does not include information with respect to equity compensation plans or option agreements that were assumed by us in connection with our acquisitions of the companies that originally established those plans or agreements. As of December 31, 2005, 3,376,548 shares of Class A common stock and 148,545 shares of Class B common stock were issuable upon exercise of outstanding options under those assumed plans. The weighted average exercise price of the outstanding options to acquire shares of Class A common stock is $5.19 per share and the weighted average exercise price of the outstanding options to acquire shares of Class B common stock is $3.11 per share. No additional options may be granted under any of those assumed plans. |
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Name | Age | Positions with Broadcom | ||||
Executive Officers | ||||||
David A. Dull | 57 | Senior Vice President, Business Affairs, General Counsel and Secretary | ||||
Bruce E. Kiddoo | 45 | Vice President and Corporate Controller | ||||
Vahid Manian | 45 | Senior Vice President, Global Manufacturing Operations | ||||
Scott A. McGregor | 49 | President, Chief Executive Officer and Director | ||||
Andrew J. Pease | 55 | Senior Vice President, Global Sales | ||||
William J. Ruehle | 63 | Senior Vice President and Chief Financial Officer | ||||
Henry Samueli, Ph.D. | 51 | Chairman of the Board and Chief Technical Officer | ||||
Other Elected Officers | ||||||
Yossi Cohen | 41 | Senior Vice President & General Manager, Mobile Platforms Group | ||||
Dianne Dyer-Bruggeman | 56 | Senior Vice President, Global Human Resources | ||||
Edward H. Frank, Ph.D. | 49 | Vice President, Research & Development | ||||
Neil Y. Kim | 47 | Senior Vice President, Central Engineering | ||||
Thomas F. Lagatta | 48 | Senior Vice President & General Manager, Enterprise Computing Group | ||||
Daniel A. Marotta | 45 | Senior Vice President & General Manager, Broadband Communications Group | ||||
Robert A. Rango | 48 | Senior Vice President & General Manager, Wireless Connectivity Group | ||||
Ford G. Tamer, Ph.D. | 44 | Senior Vice President & General Manager, Networking Infrastructure Group | ||||
Kenneth E. Venner | 43 | Senior Vice President and Chief Information Officer |
Executive Officers |
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Other Elected Officers |
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Long Term | |||||||||||||||||||||||||
Compensation Awards | |||||||||||||||||||||||||
Annual Compensation | |||||||||||||||||||||||||
Restricted | Securities | ||||||||||||||||||||||||
Other Annual | Stock | Underlying | |||||||||||||||||||||||
Name and Principal Positions | Year | Salary($)(1) | Bonus($) | Compensation($) | Awards($) | Options(#) | |||||||||||||||||||
Scott A. McGregor | 2005 | $ | 600,000 | $ | 431,425 | $ | 264,632 | (2) | $ | 6,393,900 | (3) | 3,000,000 | |||||||||||||
President and Chief Executive Officer (effective January 3, 2005) | |||||||||||||||||||||||||
Alan E. Ross | 2005 | 2,000 | 0 | 32,012 | (4) | 0 | (5) | 0 | (5) | ||||||||||||||||
President and Chief Executive Officer | 2004 | 524,000 | 250,000 | 443,115 | (6) | 2,724,000 | (7) | 375,000 | |||||||||||||||||
(during 2003, 2004 and until | 2003 | 522,000 | 250,000 | 173,729 | (8) | 0 | 375,000 | ||||||||||||||||||
January 3, 2005) | |||||||||||||||||||||||||
Henry Samueli, Ph.D. | 2005 | 1 | (9) | 0 | 0 | 0 | 0 | ||||||||||||||||||
Chairman of the Board | 2004 | 1 | (9) | 0 | 0 | 0 | 0 | ||||||||||||||||||
and Chief Technical Officer | 2003 | 1 | (9) | 0 | 0 | 0 | 0 | ||||||||||||||||||
David A. Dull | 2005 | 244,885 | 150,800 | 0 | 418,730 | (10) | 58,500 | ||||||||||||||||||
Senior Vice President, Business Affairs, | 2004 | 175,310 | 55,000 | 0 | 0 | 0 | |||||||||||||||||||
General Counsel and Secretary | 2003 | 149,194 | 0 | 0 | 0 | 543,750 | (11) | ||||||||||||||||||
Vahid Manian | 2005 | 245,250 | 155,000 | 0 | 418,730 | (10) | 58,500 | ||||||||||||||||||
Senior Vice President, Global | 2004 | 184,423 | 55,000 | 0 | 0 | 0 | |||||||||||||||||||
Manufacturing Operations | 2003 | 143,923 | 0 | 0 | 0 | 456,250 | (12) | ||||||||||||||||||
Andrew J. Pease(13) | 2005 | 244,885 | 185,000 | 0 | 418,730 | (10) | 58,500 | ||||||||||||||||||
Senior Vice President, Global Sales | 2004 | 178,269 | 95,000 | 0 | 0 | 0 | |||||||||||||||||||
2003 | 74,539 | 40,000 | 0 | 0 | 465,000 | ||||||||||||||||||||
William J. Ruehle | 2005 | 254,154 | 150,800 | 483,150 | (14) | 67,500 | |||||||||||||||||||
Senior Vice President and | 2004 | 175,310 | 60,000 | 0 | 0 | 0 | |||||||||||||||||||
Chief Financial Officer | 2003 | 149,194 | 0 | 0 | 0 | 353,125 | (15) |
(1) | Includes amounts deferred under Broadcom’s tax-qualified employee savings plan under Section 401(k) of the Internal Revenue Code (the “401(k) Plan”). |
(2) | Includes (i) $155,921 paid to Mr. McGregor for relocation expenses, (ii) $108,081 of tax reimbursement for income realized upon payment of such relocation expenses, and (iii) $630 of income attributable to life insurance coverage paid by Broadcom. |
(3) | Represents RSUs for 300,000 shares of Class A common stock that had a fair market value of $21.3133 per share when those units were awarded January 3, 2005. At December 31, 2005 Mr. McGregor held 216,665 unvested RSUs. At December 31, 2005 the fair market value per share of our Class A common stock was $31.4333. Accordingly, the value of the shares underlying Mr. McGregor’s unvested RSUs at December 31, 2005 was $6,810,496. Such shares will vest and become issuable in a series of quarterly installments over the three-year period of service measured from the award date. |
(4) | Includes (i) $21,399 paid to Mr. Ross for certain transitional benefits, including expenses related to temporary housing, a rental car and health insurance coverage, (ii) $10,280 of tax reimbursement for income realized upon |
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payment of such transitional benefits, and (iii) $333 of income attributable to life insurance coverage paid by Broadcom. | |
(5) | Excludes RSUs and stock options granted to Mr. Ross in April 2005 in his capacity as a non-employee Board member. |
(6) | Includes (i) $225,143 paid to Mr. Ross as reimbursement for use of his private airplane, (ii) $70,578 paid to Mr. Ross for housing and travel expenses, (iii) $142,060 of tax reimbursement for income realized upon payment of the amounts reported in (i) and (ii) above, and (iv) $5,334 of income attributable to life insurance coverage paid by Broadcom. |
(7) | Represents RSUs for 150,000 shares of Class A common stock that had a fair market value of $18.16 per share when those units were awarded September 9, 2004. At December 31, 2004 Mr. Ross’ held 141,666 unvested RSUs. At December 31, 2004 the fair market value per share of our Class A common stock was $21.52. Accordingly, the value of the shares underlying Mr. Ross’ unvested RSUs at December 31, 2004 was $3,048,652. Pursuant to the terms of Mr. Ross’ RSU award agreement, the unvested portion of all Mr. Ross’ RSUs vested in full upon the election of Mr. McGregor as Chief Executive Officer in January 2005. |
(8) | Includes (i) $74,672 paid to Mr. Ross as reimbursement for use of his private airplane, (ii) $38,940 paid to Mr. Ross for housing and travel expenses, (iii) $54,578 of tax reimbursement for income realized upon payment of the amounts reported in (i) and (ii) above, and (iv) $5,539 of income attributable to life insurance coverage paid by Broadcom. |
(9) | In November 2002 Dr. Samueli voluntarily reduced his annual salary to $1.00 per year. |
(10) | Represents RSUs for 19,500 shares of Class A common stock that had a fair market value of $21.4733 per share when those units were awarded February 5, 2005. At December 31, 2005 Messrs. Dull, Manian and Pease each held 15,846 unvested RSUs. Accordingly, the value of the shares underlying the unvested RSUs at December 31, 2005 (when the fair market value per share of our Class A common stock was $31.4333) was $498,092 for each of Messrs. Dull, Manian and Pease. Such shares will vest and become issuable in quarterly installments over the four-year period of service measured from the award date. |
(11) | Includes replacement options to purchase 243,750 shares of Class A common stock granted November 10, 2003 in exchange for an equal number of unvested options with a higher exercise price that were surrendered and cancelled May 5, 2003 in connection with the 2003 Option Exchange Program. |
(12) | Includes replacement options to purchase 306,250 shares of Class A common stock granted November 10, 2003 in exchange for an equal number of unvested options with a higher exercise price that were surrendered and cancelled May 5, 2003 in connection with the 2003 Option Exchange Program. |
(13) | Mr. Pease commenced employment with Broadcom in July 2003. |
(14) | Represents RSUs for 22,500 shares of Class A common stock that had a fair market value of $21.4733 per share when those units were awarded on February 5, 2005. On December 31, 2005 Mr. Ruehle held 18,283 unvested RSUs. Accordingly, the value of the shares underlying the unvested RSUs at December 31, 2005 (when the fair market value per share of our Class A common stock was $31.4333) was $574,695. Such shares will vest and become issuable in quarterly installments over the four-year period of service measured from the award date. |
(15) | Includes replacement options to purchase 203,125 shares of Class A common stock granted November 10, 2003 in exchange for an equal number of unvested options with a higher exercise price that were surrendered and cancelled May 5, 2003 in connection with the 2003 Option Exchange Program. |
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Potential Realizable Value at | ||||||||||||||||||||||||
Individual Grants | Assumed Annual Rates | |||||||||||||||||||||||
Number of | % of Total | of Stock Price | ||||||||||||||||||||||
Securities | Options | Exercise | Appreciation for | |||||||||||||||||||||
Underlying | Granted to | Price Per | Option Terms(1) | |||||||||||||||||||||
Options | Employees | Share | Expiration | |||||||||||||||||||||
Name | Granted(#) | in 2005 | ($/SH) | Date | 5%($) | 10%($) | ||||||||||||||||||
Scott A. McGregor | 3,000,000 | (2) | 9.5158 | $ | 21.3133 | 01/02/15 | $ | 40,197,538 | $ | 101,860,433 | ||||||||||||||
Henry Samueli | 0 | 0 | 0 | N/A | N/A | N/A | ||||||||||||||||||
David A. Dull | 58,500 | (3) | 0.1856 | $ | 21.4733 | 02/04/15 | 789,736 | 2,001,190 | ||||||||||||||||
Vahid Manian | 58,500 | (3) | 0.1856 | $ | 21.4733 | 02/04/15 | 789,736 | 2,001,190 | ||||||||||||||||
Andrew J. Pease | 58,500 | (3) | 0.1856 | $ | 21.4733 | 02/04/15 | 789,736 | 2,001,190 | ||||||||||||||||
William J. Ruehle | 67,500 | (3) | 0.2141 | $ | 21.4733 | 02/04/15 | 911,234 | 2,309,065 |
(1) | The 5% and 10% assumed rates of appreciation are prescribed by the rules and regulations of the SEC and do not represent our estimate or projection of the future trading prices of our common stock. The calculations assume annual compounding and continued retention of the options or the underlying common stock by the optionee for the full option term of ten years. Unless the market price of the common stock actually appreciates over the option term, no value will be realized by the optionee from these option grants. Actual gains, if any, on stock option exercises are dependent on numerous factors, including, without limitation, the future performance of Broadcom, overall business and market conditions, and the optionee’s continued employment throughout the entire vesting period and option term, which factors are not reflected in this table. |
(2) | The option vested and became exercisable for 25% of the shares on January 3, 2006. The option will vest and become exercisable for the remaining option shares in a series of 36 monthly installments measured from February 3, 2006. The option will vest on an accelerated basis upon the optionee’s termination of employment under certain prescribed circumstances. Additional information regarding features applicable to all Equity Awards granted to Mr. McGregor is included in this proxy statement under the heading “Executive Compensation and Other Information — Employment Contracts, Termination of Employment and Change in Control Arrangements.” |
(3) | The stock options granted to each of Messrs. Dull, Manian, Pease and Ruehle vest and become exercisable in 48 successive monthly installments upon such optionee’s completion of each month of service over the four-year period measured from February 5, 2005. These options will vest on an accelerated basis upon the optionee’s termination of employment under certain prescribed circumstances. Additional information regarding features applicable to all Equity Awards granted to Messrs. Dull, Manian, Pease and Ruehle is included in this proxy statement under the heading “Executive Compensation and Other Information — Employment Contracts, Termination of Employment and Change in Control Arrangements.” |
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Number of Securities | Value of Unexercised | |||||||||||||||||||||||
Underlying Unexercised | In-the-Money Options | |||||||||||||||||||||||
Shares | Value | Options at Fiscal Year End(#) | at Fiscal Year End($)(2) | |||||||||||||||||||||
Acquired on | Realized | |||||||||||||||||||||||
Name | Exercise(#) | ($)(1) | Exercisable | Unexercisable | Exercisable | Unexercisable | ||||||||||||||||||
Scott A. McGregor | 0 | $ | 0 | 0 | 3,000,000 | $ | 0 | $ | 30,360,000 | |||||||||||||||
Alan E. Ross(3) | 705,000 | 3,569,260 | 0 | 48,750 | 0 | 434,924 | ||||||||||||||||||
Henry Samueli, Ph.D. | 0 | 0 | 1,468,750 | 31,250 | 11,838,125 | 251,875 | ||||||||||||||||||
David A. Dull | 206,250 | 3,397,144 | 872,674 | 265,067 | 11,586,790 | 3,121,280 | ||||||||||||||||||
Vahid Manian | 300,576 | 5,525,560 | 407,755 | 256,995 | 4,786,338 | 2,674,447 | ||||||||||||||||||
Andrew J. Pease | 138,000 | 1,422,456 | 52,937 | 290,376 | 669,750 | 3,354,855 | ||||||||||||||||||
William J. Ruehle | 135,000 | 3,816,098 | 2,222,811 | 184,688 | 41,362,140 | 2,350,617 |
(1) | Based on the market price of the purchased shares on the exercise date less the option exercise price paid for those shares. |
(2) | Determined on the basis of the closing selling price per share of Class A common stock on the NASDAQ National Market on the last trading day of 2005 ($31.4333 per share), less the option exercise price payable per share. |
(3) | Includes 135,000 shares acquired, and $717,300 realized, upon the exercise of options granted to Mr. Ross in his capacity as a non-employee director. All 48,750 options unexercised at the end of 2005, having a value of $434,924, are attributable to options granted to Mr. Ross in his capacity as a non-employee director. |
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Werner F. Wolfen, Chairman | |
John Major |
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George L. Farinsky, Chairman | |
Robert E. Switz | |
Werner F. Wolfen |
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BY ORDER OF THE BOARD OF DIRECTORS | ||
David A. Dull | ||
Irvine, California | Senior Vice President, Business Affairs, | |
March 27, 2006 | General Counsel and Secretary |
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I. | General Purpose and Authority; Role of Management and Auditors |
II. | Committee Membership |
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III. | Committee Meetings |
IV. | Key Responsibilities |
1. Have the direct responsibility for the appointment, evaluation, compensation, retention and oversight of the work of the Company’s outside auditors and, where appropriate, the dismissal of the Company’s outside auditors. The Company’s outside auditors shall report directly to the Committee, and the Committee’s responsibility includes the resolution of disagreements between management and the outside auditors regarding financial reporting. | |
2. Report its findings regularly to the Board, including any issues that arise with respect to the quality or integrity of the Company’s financial statements, the Company’s compliance with legal or regulatory requirements, and the performance and independence of the Company’s outside auditors. |
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3. Consider and pre-approve all audit and non-audit services provided by the Company’s outside auditors. All non-audit services permitted pursuant to law to be provided by the outside auditors must be considered and pre-approved by the Committee and such approvals must be disclosed in the Company’s Annual Report on Form 10-K. The Committee may delegate the authority to grant pre-approvals to one or more members of the Committee, whose decisions must be presented to the full Committee at its scheduled meetings. | |
4. Consider and review with the Company’s outside auditors and management: (i) the adequacy and effectiveness of the Company’s disclosure controls and procedures and internal controls; (ii) all significant deficiencies in the design or operation of the Company’s internal controls that could adversely affect the Company’s ability to record, process, summarize and report financial data; (iii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls; (iv) the adequacy and effectiveness of those portions of the Company’s Code of Ethics and Corporate Conduct that relate to the integrity of the Company’s financial reporting; and (v) the related findings and recommendations of the Company’s outside auditors together with management’s responses. | |
5. Consider and review with management, the Chief Financial Officer (the “CFO”) and/or the Controller, and the Company’s outside auditors: (i) significant findings during the year, including the status of previous audit recommendations; (ii) any audit problems or difficulties encountered in the course of audit work including any restrictions on the scope of activities or access to required information; (iii) any changes required in the planned scope of the audit plan; (iv) the overall scope and plans for the audit (including the audit budget and the adequacy of compensation and staffing); and (v) the coordination of audit efforts to monitor completeness of coverage, reduction of redundant efforts, and the effective use of audit resources. | |
6. Inquire of management, the CFO and/or the Controller, and the Company’s outside auditors, about significant risks or exposures and assess the steps management has taken to minimize such risks. Discuss with management, the CFO and/or the Controller, and the Company’s outside auditors the Company’s systems and policies with respect to risk monitoring, assessment and management. | |
7. Establish and maintain procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submissions by employees of concerns regarding questionable accounting or auditing matters. | |
8. Inquire about the Company’s outside auditors’ view of the accounting treatment related to significant new transactions or other significant matters or events not in the ordinary course of business. | |
9. Review periodically with the Company’s General Counsel any legal and regulatory matters that may have a material impact on the Company’s financial statement compliance policies and programs. | |
10. Review periodically with senior management the provisions of the Company’s Code of Ethics and Corporate Conduct (including the Company’s policies and procedures with regard to trading by Company personnel in securities of the Company and use in trading of proprietary or confidential information) bearing on the integrity of financial reporting including any waivers provided under such code since the last review. | |
11. Review and discuss with management and the Company’s outside auditors the accounting policies that may be viewed as critical, and review and discuss any significant changes in the accounting policies of the Company and any accounting and financial reporting proposals that may have a significant impact on the Company’s financial reports. Inquire about the Company’s outside auditors’ views of management’s choices among alternative accounting principles and the quality, not just the acceptability, of the Company’s accounting principles as applied in its financial reporting. | |
12. The Committee shall review and discuss with management and the independent auditors any material off-balance sheet transactions, arrangements, obligations (including contingent obligations) and other relationships of the Company with entities of which the Committee is made aware whose accounts are not consolidated in the financial statements of the Company and that may have a material current or future effect on the Company’s financial condition, results of operations, liquidity, capital expenditures, capital resources or significant components of revenues or expenses. | |
13. Prior to any public disclosure thereof, the members of the Committee shall review and discuss (or otherwise have the opportunity to comment on) earnings press releases, as well as financial information and earnings guidance provided to analysts. |
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14. Review with the independent auditors (i) all of their significant findings during the year, including the status of previous audit recommendations, (ii) any significant unadjusted audit differences, and (iii) any “management” or “internal control” letter issued by the independent auditors to the Company. | |
15. (a) Review the Company’s financial statements, and, as part of that review, (i) review with management and the independent auditors, prior to public release, (A) the Company’s annual and quarterly financial statements to be filed with the SEC, (B) the Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” (C) any certifications regarding the financial statements or the Company’s internal accounting and financial controls and procedures and disclosure controls or procedures by the Company’s Chief Executive Officer or CFO that will be filed with or furnished to the SEC; and (ii) discuss with the independent auditors the matters that the independent auditors inform the Committee are required to be discussed under applicable auditing standards; (b) with respect to the independent auditors’ annual audit report and certification, before release of the annual audited financial statements, meet separately with the independent auditors without any management member present and discuss the adequacy of the Company’s system of internal accounting and financial controls and the appropriateness of the accounting principles used in and the judgments made in the preparation of the Company’s audited financial statements and the quality of the Company’s financial reports; and (c) make a recommendation to the Board of Directors regarding the inclusion of the audited annual financial statements in the Company’s Annual Report on Form 10-K to be filed with the SEC. | |
16. Periodically obtain and review a report by the Company’s outside auditors describing: (i) the firm’s internal quality-control procedures; (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, regarding one or more independent audits carried out by the firm, and any steps taken to deal with any such issues; and (iii) all relationships between the Company and its outside auditors (to be set out in the formal written statement described in Item 17 below). | |
17. On an annual basis, request from the Company’s outside auditors a formal written statement delineating all relationships between the outside auditors and the Company, consistent with Independence Standards Board Standard No. 1. The Committee shall actively engage in a dialogue with the Company’s management and outside auditors with respect to any disclosed relationships or services that may impact the objectivity and independence of the outside auditors from management and the Company and take appropriate action in response to the outside auditors’ report to satisfy itself of the outside auditors’ objectivity and independence. The Committee shall also (i) confirm with the independent auditors that the independent auditors are in compliance with the partner rotation requirements established by the SEC, (ii) consider whether, in the interest of assuring continuing independence of the Company’s outside auditors, the Company should regularly rotate its outside auditors; (iii) set clear policies for the Company’s hiring of employees or former employees of the Company’s outside auditors; and (iv) if applicable, consider whether the independent auditors’ provision of any permitted non-audit services to the Company is compatible with maintaining the independence of the independent auditors. | |
18. Prepare a report to be included in the Company’s annual proxy statement stating whether or not the Committee (i) has reviewed and discussed the audited financial statements with management; (ii) has discussed with the Company’s outside auditors the matters (if any) that the Company’s outside auditors have informed the Committee are required to be discussed under applicable auditing standards; (iii) has received the written disclosure and letter from the outside accountants (delineating all relationships they have with the Company) and has discussed with them their independence; and (iv) based on the review and discussions referred to above, the members of the Committee recommended to the Board that the audited financials be included in the Company’s Annual Report on Form 10-K for filing with the SEC. | |
19. Conduct an annual self-evaluation of the performance of the Committee and its members, including its and their effectiveness and the Committee’s compliance with its Charter. | |
20. Review and reassess, at least annually, the adequacy of this Charter and submit any recommended changes to the Board for its consideration. |
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a. Each share of Class A Common Stock shall entitle the holder thereof to one (1) vote on all matters submitted to a vote of the shareholders of the corporation. | |
b. Each share of Class B Common Stock shall entitle the holder thereof to ten (10) votes on all matters submitted to a vote of the shareholders of the corporation. | |
c. The holders of shares of Class A Common Stock and the holders of shares of Class B Common Stock shall vote together as one class on all matters submitted to a vote of shareholders of the corporation, except (i) as otherwise required by applicable law; and (ii) in the case of a proposed issuance of shares of Class B Common Stock, which issuance shall require the affirmative vote of the holders of a majority of the outstanding shares of Class B Common Stock voting separately as a class;provided, however,that such approval shall not be required if the proposed issuance of Class B Common Stock has been approved by at least two-thirds (2/3) of the members of the Board of Directors then in office. |
a. Except as provided in Section 3(b) or Section 4 of this Article III.B, no person holding shares of Class B Common Stock or any beneficial interest therein (a “Class B Holder”) may voluntarily or involuntarily transfer (including without limitation the power to vote such shares of Class B Common Stock by proxy or otherwise except for proxies given to any Permitted Transferee of the Class B Holder), sell, assign, devise or bequeath any of such Class B Holder’s interest in his Class B Common Stock, and the corporation and the transfer agent for the Class B Common Stock, if any (the “Transfer Agent”), shall not register the transfer of such shares of Class B Common Stock, whether by sale, grant of proxy, assignment, gift, devise, bequest, appointment or otherwise, except to a “Permitted Transferee” of such Class B Holder, which term shall include the corporation and shall have the following additional meanings in the following cases: |
(i) In the case of a Class B Holder who is a natural person holding record and beneficial ownership of the shares of Class B Common Stock in question, “Permitted Transferee” means: (a) the spouse of such Class B Holder (the “Spouse”); (b) a lineal descendant, or the spouse of such lineal descendant (collectively, “Descendants”), of such Class B Holder or of the Spouse; (c) the trustee of a trust (including a voting trust) for the benefit of such Class B Holder, the Spouse, other Descendants, or an organization contributions to which are deductible for federal income, estate or gift tax purposes (a “Charitable Organization”), and for the benefit of no other person;providedthat such trust may grant a general or special power of appointment to the Spouse or to the Descendants and may permit trust assets to be used to pay taxes, legacies and other obligations of the trust or of the estate of such Class B Holder payable by reason of the death of such Class B Holder or the death of the Spouse or a Descendant, and that such trust (subject to the grant of a power of appointment as provided above) must prohibit transfer of shares of Class B Common Stock or a beneficial interest therein to persons other than Permitted Transferees as defined in subparagraph (ii) of this Section 3(a) (a “Trust”); (d) a Charitable Organization established by such Class B Holder or a Descendant; (e) an Individual Retirement Account, as defined in Section 408(a) of the Internal Revenue Code, of which such Class B Holder is a participant or beneficiary,providedthat such Class B Holder is vested with the power to direct the investment of funds deposited into such Individual Retirement Account and to control the voting of securities held by such Individual Retirement Account (an “IRA”); (f) a pension, profit sharing, stock bonus or other type of plan or trust of which such Class B Holder is a participant or beneficiary and which satisfies the requirements for qualification under Section 401 of the Internal Revenue Code,providedthat such Class B Holder is vested with the power to direct the investment of funds deposited into such plan or trust and to control the voting of securities held by such plan or trust, (a “Plan”); (g) a corporation all of the outstanding capital stock of which is owned by, or a partnership all of the partners of which are, such Class B Holder, his or her Spouse, his or her Descendants, any Permitted Transferee of the Class B Holder and/or any other Class B Holder or its Permitted Transferee determined pursuant to this subparagraph (i) of this Section 3(a),providedthat if any share (or any interest in any share) of capital stock of such a corporation (or of any survivor of a merger or consolidation of such corporation), or any partnership interest in such a partnership, is acquired by any person who is not within such class of persons, all shares of Class B Common Stock then held by such corporation or partnership, as the case may be, shall be deemed without further act on anyone’s part to be converted into shares of Class A Common Stock and stock certificates |
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formerly representing such shares of Class B Common Stock shall thereupon and thereafter be deemed to represent the like number of shares of Class A Common Stock in the manner set forth in Section 4(b) of this Article IIIB; (h) another Class B Holder or such Class B Holder’s Permitted Transferee determined pursuant to this subparagraph (i) of this Section 3(a); and (i) in the event of the death of such Class B Holder, such Class B Holder’s estate. | |
(ii) In the case of a Class B Holder holding the shares of Class B Common Stock in question as trustee of an IRA, a Plan or a Trust other than a Trust described in subparagraph (iii) of this Section 3(a), “Permitted Transferee” means: (a) any participant in or beneficiary of such IRA, such Plan or such Trust, or the person who transferred such shares of Class B Common Stock to such IRA, such Plan or such Trust, and (b) a Permitted Transferee of any such person or persons determined pursuant to subparagraph (i) of this Section 3(a). | |
(iii) In the case of a Class B Holder holding the shares of Class B Common Stock in question as trustee pursuant to a Trust which was irrevocable on the Record Date (as defined below), “Permitted Transferee” means any person as of the Record Date to whom or for whose benefit principal may be distributed either during or at the end of the term of such Trust whether by power of appointment or otherwise. For purposes of these Articles of Incorporation, there shall be one “Record Date,” which date shall be the date that is the record date for determining the persons to whom the Class B Common Stock is first distributed by the corporation. | |
(iv) In the case of a Class B Holder holding record (but not beneficial) ownership of the shares of Class B Common Stock in question as nominee for the person who was the beneficial owner thereof on the Record Date, “Permitted Transferee” means such beneficial owner and a Permitted Transferee of such beneficial owner determined pursuant to subparagraph (i), (ii), (iii), (v) or (vi) of this Section 3(a), as the case may be. | |
(v) In the case of a Class B Holder that is a partnership holding record and beneficial ownership of the shares of Class B Common Stock in question, “Permitted Transferee” means any partner of such partnership, provided that such partner was a partner in the partnership at the time it first became a Class B Holder, or any Permitted Transferee of such partner determined pursuant to subparagraph (i) of this Section 3(a). | |
(vi) In the case of a Class B Holder that is a corporation, other than a Charitable Organization described in clause (d) of subparagraph (i) of this Section 3(a), holding record and beneficial ownership of the shares of Class B Common Stock in question (a “Corporate Holder”), “Permitted Transferee” means (a) any shareholder of such Corporate Holder, provided that such shareholder was a shareholder of the Corporate Holder at the time it first became a Class B Holder, or any Permitted Transferee of any such shareholder determined pursuant to subparagraph (i) of this Section 3(a); and (b) the survivor (the “Survivor”) of a merger or consolidation of such Corporate Holder, so long as such Survivor is controlled, directly or indirectly, by those shareholders of the Corporate Holder who were shareholders of the Corporate Holder at the time the Corporate Holder first became a Class B Holder or any Permitted Transferees of such shareholders determined pursuant to subparagraph (i) of this Section 3(a). | |
(vii) In the case of a Class B Holder that is the estate of a deceased Class B Holder, or that is the estate of a bankrupt or insolvent Class B Holder, and provided such deceased, bankrupt or insolvent Class B Holder, as the case may be, held record and beneficial ownership of the shares of Class B Common Stock in question, “Permitted Transferee” means a Permitted Transferee of such deceased, bankrupt or insolvent Class B Holder as determined pursuant to subparagraphs (i), (v) or (vi) of this Section 3(a), as the case may be. | |
(viii) In the case of any Class B Holder who desires to make a bona fide gift, “Permitted Transferee” means any other Class B Holder or its Permitted Transferee determined pursuant to subparagraph (i) of this Section 3(a). | |
(ix) In the case of any Class B Holder, “Permitted Transferee” means any person or entity that will hold record (but not beneficial) ownership of the shares of Class B Stock in question as nominee for the Class B Holder or its Permitted Transferee determined pursuant to subparagraph (i), (ii), (iii), (v) or (vi) of this Section 3(a), as the case may be. |
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b. Notwithstanding anything to the contrary set forth herein, any Class B Holder may pledge such holder’s shares of Class B Common Stock to a pledgee pursuant to a bona fide pledge of such shares as collateral security for indebtedness due to the pledgee, provided that such shares shall not be transferred to, registered in the name of or voted by the pledgee and shall remain subject to this Section 3. In the event of foreclosure or other similar action by the pledgee, such pledged shares of Class B Common Stock may only be transferred to a Permitted Transferee of the pledgor or converted into shares of Class A Common Stock, as the pledgee may elect. | |
c. For purposes of this Section 3: |
(i) The relationship of any person that is derived by or through legal adoption shall be considered a natural relationship. | |
(ii) Each joint owner of shares (if a Permitted Transferee) or owner of a community property interest in shares (if a Permitted Transferee) of Class B Common Stock shall be considered a “Class B Holder” of such shares. | |
(iii) A minor for whom shares of Class B Common Stock are held pursuant to a Uniform Transfer to Minors Act or similar law shall be considered a Class B Holder of such shares. | |
(iv) Unless otherwise specified, the term “person” means and includes natural persons, corporations, partnerships, unincorporated associations, firms, joint ventures, trusts and all other entities. | |
(v) The conversion of Class B Common Stock into securities of another corporation in connection with a merger effected for the purpose of reincorporating the corporation in another state shall not constitute a transfer of such Class B Common Stock. |
d. Except as otherwise provided in Section 4(b), any purported transfer of shares of Class B Common Stock not permitted hereunder shall be void and of no effect, and the purported transferee shall have no rights as a shareholder of the corporation and no other rights against or with respect to the corporation. The corporation may, as a condition to the transfer or the registration of transfer of shares of Class B Common Stock to a purported Permitted Transferee, require the furnishing of such affidavits or other proof as it deems necessary to establish that such transferee is a Permitted Transferee. The corporation may require that each certificate representing shares of Class B Common Stock shall be endorsed with a legend that states that shares of Class B Common Stock are not transferable other than to certain transferees and are subject to certain restrictions as set forth in the Articles of Incorporation filed by the corporation with the Secretary of State of the State of California. |
a. Each share of Class B Common Stock, at the option of its holder, may at any time be converted into one (1) fully paid and nonassessable share of Class A Common Stock. Such right shall be exercised by the surrender of the certificate representing such share of Class B Common Stock to be converted to the corporation at any time during normal business hours at the principal executive offices of the corporation or at the office of the Transfer Agent, accompanied by a written notice of the election by the holder thereof to convert and (if so required by the corporation or the Transfer Agent) by instruments of transfer, in form satisfactory to the corporation and to the Transfer Agent, duly executed by such holder or such holder’s duly authorized attorney, and transfer tax stamps or funds therefor, if required pursuant to Section 4(e). | |
b. If the beneficial ownership (as determined under Rule 13d-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended) of any share or any interest in any share of Class B Common Stock changes, voluntarily or involuntarily, such that each new beneficial owner of such share is not a “Permitted Transferee” (as defined in Section 3(a) of this Article IIIB) of the beneficial owner of such share of Class B Common Stock immediately prior to such change in beneficial ownership, then each such share shall thereupon be converted automatically into one (1) fully paid and nonassessable share of Class A Common Stock. A determination by the Secretary of the corporation that a change in beneficial ownership requires conversion under this paragraph shall be conclusive. Upon making such determination, the Secretary of the corporation shall promptly request of the holder of record of each such share that each such holder promptly deliver, and each such holder shall promptly deliver, the certificate representing each such share to the corporation for documentation of such conversion, together with instruments of transfer, in form satisfactory to the corporation and Transfer Agent, |
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duly executed by such holder or such holder’s duly authorized attorney, and together with transfer tax stamps or funds therefor, if required pursuant to Section 4(e) of this Article IIIB. | |
c. As promptly as practicable following the surrender for conversion of a certificate representing shares of Class B Common Stock in the manner provided in paragraphs a or b, as applicable, of this Section 4 and the payment in cash of any amount required by the provisions of Section 4(e) of this Article IIIB, the corporation will deliver or cause to be delivered at the office of the Transfer Agent to or upon the written order of the holder of such certificate, a certificate or certificates representing the number of full shares of Class A Common Stock issuable upon such conversion, issued in such name or names as such holder may direct. In the case of a conversion under Section 4(a) of this Article IIIB, such conversion shall be deemed to have been made immediately prior to the close of business on the date of the surrender of the certificate representing shares of Class B Common Stock. In the case of a conversion under Section 4(b), such conversion shall be deemed to have been made on the date that the beneficial ownership of such share has changed as set forth in Section 4(b). Upon the date any conversion under Section 4(a) is made, all rights of the holder of such shares as such holder shall cease, and the person or persons in whose name or names the certificate or certificates representing the shares of Class A Common Stock are to be issued shall be treated for all purposes as having become the record holder or holders of such shares of Class A Common Stock;provided, however, that any such surrender and payment on any date when the stock transfer books of the corporation shall be closed shall constitute the person or persons in whose name or names the certificate or certificates representing shares of Class A Common Stock are to be issued as the record holder or holders thereof for all purposes immediately prior to the close of business on the next succeeding day on which stock transfer books are open. Upon the date any conversion under Section 4(b) is made, all rights of the holder of such share as such holder shall cease, and the new beneficial owner or owners of such shares shall be treated for all purposes as having become the record holder or holders of such shares of Class A Common Stock. | |
d. The corporation covenants that it will at all times reserve and keep available, solely for the purpose of issue upon conversion of the outstanding shares of Class B Common Stock, such number of shares of Class A Common Stock as shall be issuable upon the conversion of all such outstanding shares of Class B Common Stock. The corporation covenants that if any shares of Class A Common Stock required to be reserved for purposes of conversion hereunder require registration with or approval of any governmental authority under any federal or state law before such shares of Class A Common Stock may be issued upon conversion, the corporation will cause such shares to be duly registered or approved, as the case may be. The corporation will endeavor to list the shares of Class A Common Stock required to be delivered upon conversion prior to such delivery upon each national securities exchange or automated quotation system upon which the outstanding Class A Common Stock is listed at the time of such delivery. The corporation covenants that all shares of Class A Common Stock that shall be issued upon conversion of the shares of fully paid and nonassessable Class B Common Stock will, upon issue, be fully paid and nonassessable. | |
e. The issuance of certificates for shares of Class A Common Stock upon conversion of shares of Class B Common Stock shall be made without charge for any stamp or other similar tax in respect of such issuance. However, if any such certificate is to be issued in a name other than that of the holder of the share or shares of Class B Common Stock converted, then the person or persons requesting the issuance thereof shall pay to the corporation the amount of any tax that may be payable in respect of any transfer involved in such issuance or shall establish to the satisfaction of the corporation that such tax has been paid. |
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I. | Purpose of the Plan |
II. | Structure of the Plan |
• | the Discretionary Grant Program, under which eligible persons may, at the discretion of the Plan Administrator, be granted options to purchase shares of Common Stock or stock appreciation rights tied to the value of such Common Stock, | |
• | the Stock Issuance Program, under which eligible persons may be issued shares of Common Stock pursuant to restricted stock or restricted stock unit awards or other stock-based awards, made by and at the discretion of the Plan Administrator, that vest upon the completion of a designated service period and/or the attainment of pre-established performance milestones, or under which shares of Common Stock may be issued through direct purchase or as a bonus for services rendered the Corporation (or any Parent or Subsidiary), and | |
• | the Director Automatic Grant Program, under which Eligible Directors shall automatically receive option grants and restricted stock units at designated intervals over their period of Board service. |
III. | Administration of the Plan |
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IV. | Eligibility |
(i) Employees, | |
(ii) non-employee members of the Board or the board of directors of any Parent or Subsidiary, and | |
(iii) consultants and other independent advisors who provide services to the Corporation (or any Parent or Subsidiary). |
V. | Stock Subject to the Plan |
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I. | Option Terms |
(i) cash or check made payable to the Corporation, | |
(ii) shares of Common Stock valued at Fair Market Value on the Exercise Date and held for the period (if any) necessary to avoid any additional charges to the Corporation’s earnings for financial reporting purposes, or | |
(iii) to the extent the option is exercised for vested shares, through a special sale and remittance procedure pursuant to which the Optionee shall concurrently provide irrevocable instructions to (a) a brokerage firm (designated by the Corporation) to effect the immediate sale of the purchased shares and remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased shares plus all applicable federal, state and local income and employment taxes required to be withheld by the Corporation by reason of such exercise and (b) the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm to complete the sale. |
(i) Any option outstanding at the time of the Optionee’s cessation of Service for any reason shall remain exercisable for such period of time thereafter as shall be determined by the Plan Administrator and set forth in the documents evidencing the option or as otherwise specifically authorized by the Plan Administrator in its sole discretion pursuant to an express written agreement with Optionee, but no such option shall be exercisable after the expiration of the option term. | |
(ii) Any option held by the Optionee at the time of death and exercisable in whole or in part at that time may be subsequently exercised by the personal representative of the Optionee’s estate or by the person or persons to whom the option is transferred pursuant to the Optionee’s will or the laws of inheritance or by the Optionee’s designated beneficiary or beneficiaries of that option. | |
(iii) Should the Optionee’s Service be terminated for Misconduct or should the Optionee otherwise engage in Misconduct while holding one or more outstanding options under this Article Two, all those options shall terminate immediately and cease to be outstanding. |
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(iv) During the applicable post-Service exercise period, the option may not be exercised in the aggregate for more than the number of vested shares for which that option is at the time exercisable. No additional shares shall vest under the option following the Optionee’s cessation of Service, except to the extent (if any) specifically authorized by the Plan Administrator in its sole discretion pursuant to an express written agreement with Optionee. Upon the expiration of the applicable exercise period or (if earlier) upon the expiration of the option term, the option shall terminate and cease to be outstanding for any shares for which the option has not been exercised. |
(i) extend the period of time for which the option is to remain exercisable following the Optionee’s cessation of Service from the limited exercise period otherwise in effect for that option to such greater period of time as the Plan Administrator shall deem appropriate, but in no event beyond the expiration of the option term, and/or | |
(ii) permit the option to be exercised, during the applicable post-Service exercise period, not only with respect to the number of vested shares of Common Stock for which such option is exercisable at the time of the Optionee’s cessation of Service but also with respect to one or more additional installments in which the Optionee would have vested had the Optionee continued in Service. |
(i) Incentive Options. During the lifetime of the Optionee, Incentive Options shall be exercisable only by the Optionee and shall not be assignable or transferable other than by will or the laws of inheritance following the Optionee’s death. | |
(ii) Non-Statutory Options. Non-Statutory Options shall be subject to the same limitation on transfer as Incentive Options, except that the Plan Administrator may structure one or more Non-Statutory Options so that the option may be assigned in whole or in part during the Optionee’s lifetime to one or more Family Members of the Optionee or to a trust established exclusively for the Optionee and/or one or more such Family Members, to the extent such assignment is in connection with the Optionee’s estate plan or pursuant to a domestic relations order. The assigned portion may only be exercised by the person or persons who acquire a proprietary interest in the option pursuant to the assignment. The terms applicable to the assigned portion shall be the same as those in effect for the option immediately prior to such assignment and shall be set forth in such documents issued to the assignee as the Plan Administrator may deem appropriate. | |
(iii) Beneficiary Designations. Notwithstanding the foregoing, the Optionee may designate one or more persons as the beneficiary or beneficiaries of his or her outstanding options under this Article Two (whether Incentive Options or Non-Statutory Options), and those options shall, in accordance with such designation, automatically be transferred to such beneficiary or beneficiaries upon the Optionee’s death while holding those options. Such beneficiary or beneficiaries shall take the transferred options subject to all the terms and conditions of the applicable agreement evidencing each such transferred option, including (without limitation) the limited time period during which the option may be exercised following the Optionee’s death. |
II. | Incentive Options |
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III. | Stock Appreciation Rights |
1. One or more Optionees may be granted a Tandem Right, exercisable upon such terms and conditions as the Plan Administrator may establish, to elect between the exercise of the underlying stock option for shares of Common Stock or the surrender of that option in exchange for a distribution from the Corporation in an amount equal to the excess of (i) the Fair Market Value (on the option surrender date) of the number of shares in which the Optionee is at the time vested under the surrendered option (or surrendered portion thereof) over (ii) the aggregate exercise price payable for such vested shares. | |
2. No such option surrender shall be effective unless it is approved by the Plan Administrator, either at the time of the actual option surrender or at any earlier time. If the surrender is so approved, then the distribution to which the Optionee shall accordingly become entitled under this Section III may be made in shares of Common Stock valued at Fair Market Value on the option surrender date, in cash, or partly in shares and partly in cash, as the Plan Administrator shall in its sole discretion deem appropriate. | |
3. If the surrender of an option is not approved by the Plan Administrator, then the Optionee shall retain whatever rights the Optionee had under the surrendered option (or surrendered portion thereof) on the option surrender date and may exercise such rights at any time prior to thelaterof (i) five (5) business days after the receipt of the rejection notice or (ii) the last day on which the option is otherwise exercisable in accordance with the terms of the instrument evidencing such option, but in no event may such rights be exercised more than ten (10) years after the date of the option grant. |
1. One or more individuals eligible to participate in the Discretionary Grant Program may be granted a Standalone Right not tied to any underlying option under this Discretionary Grant Program. The Standalone Right shall relate to a specified number of shares of Common Stock and shall be exercisable upon such terms and |
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conditions as the Plan Administrator may establish. In no event, however, may the Standalone Right have a maximum term in excess of ten (10) years measured from the grant date. Upon exercise of the Standalone Right, the holder shall be entitled to receive a distribution from the Corporation in an amount equal to the excess of (i) the aggregate Fair Market Value (on the exercise date) of the shares of Common Stock underlying the exercised right over (ii) the aggregate base price in effect for those shares. | |
2. The number of shares of Common Stock underlying each Standalone Right and the base price in effect for those shares shall be determined by the Plan Administrator in its sole discretion at the time the Standalone Right is granted. In no event, however, may the base price per share be less than the Fair Market Value per underlying share of Common Stock on the grant date. | |
3. Standalone Rights shall be subject to the same transferability restrictions applicable to Non-Statutory Options and may not be transferred during the holder’s lifetime, except to one or more Family Members of the holder or to a trust established exclusively for the holder and/or such Family Members, to the extent such assignment is in connection with the holder’s estate plan or pursuant to a domestic relations order covering the Standalone Right as marital property. In addition, one or more beneficiaries may be designated for an outstanding Standalone Right in accordance with substantially the same terms and provisions as set forth in Section I.F of this Article Two. | |
4. The distribution with respect to an exercised Standalone Right may be made in shares of Common Stock valued at Fair Market Value on the exercise date, in cash, or partly in shares and partly in cash, as the Plan Administrator shall in its sole discretion deem appropriate. | |
5. The holder of a Standalone Right shall have no shareholder rights with respect to the shares subject to the Standalone Right unless and until such person shall have exercised the Standalone Right and become a holder of record of shares of Common Stock issued upon the exercise of such Standalone Right. |
1. One or more Section 16 Insiders may, in the Plan Administrator’s sole discretion, be granted Limited Rights with respect to their outstanding options under this Article Two. | |
2. Upon the occurrence of a Hostile Take-Over, the Section 16 Insider shall have the unconditional right (exercisable for a thirty (30)-day period following such Hostile Take-Over) to surrender each option with such a Limited Right to the Corporation. The Section 16 Insider shall in return be entitled to a cash distribution from the Corporation in an amount equal to the excess of (i) the Take-Over Price of the number of shares in which the Optionee is at the time vested under the surrendered option (or surrendered portion thereof) over (ii) the aggregate exercise price payable for those vested shares. Such cash distribution shall be made within five (5) days following the option surrender date. | |
3. The Plan Administrator shall pre-approve, at the time such Limited Right is granted, the subsequent exercise of that right in accordance with the terms of the grant and the provisions of this Section III. No additional approval of the Plan Administrator or the Board shall be required at the time of the actual option surrender and cash distribution. Any unsurrendered portion of the option shall continue to remain outstanding and become exercisable in accordance with the terms of the instrument evidencing such grant. |
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IV. | Change in Control/ Hostile Take-Over |
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V. | Exchange/ Repricing Programs |
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I. | Stock Issuance Terms |
(i) cash or check made payable to the Corporation; | |
(ii) past services rendered to the Corporation (or any Parent or Subsidiary); or | |
(iii) any other valid form of consideration permissible under the California Corporations Code at the time such shares are issued. |
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C-11
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II. | Change in Control/ Hostile Take-Over |
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I. | Terms |
1. On the date of each annual meeting of shareholders, beginning with the 2006 Annual Meeting of Shareholders, each individual who is to continue to serve as an Eligible Director, whether or not that individual is standing for re-election to the Board at that particular annual meeting of shareholders, shall automatically be granted a Non-Statutory Option to purchase 10,000 shares of Common Stock and restricted stock units covering 5,000 shares of Common Stock. There shall be no limit on the number of such annual option grants and restricted stock unit awards any one Eligible Director may receive over his or her period of Board service, and Eligible Directors who have previously been in the employ of the Corporation (or any Parent or Subsidiary) shall be eligible to receive one or more such annual option grants and restricted stock unit awards over their period of Board service. | |
2. Each individual who is first elected or appointed as an Eligible Director at any time on or after February 24, 2006, other than at an annual meeting of shareholders, shall, on the date he or she commences Service as an Eligible Director, automatically be granted the following Awards, provided such individual has not previously been in the employ of the Corporation (or any Parent or Subsidiary): |
(i) a Non-Statutory Option to purchase that number of shares of Common Stock determined by multiplying the normal10,000-share automatic annual option grant by a fraction the numerator of which is the number of months (including any partial month, expressed as a fraction) that will elapse between the date he or she commenced Service as an Eligible Director and the first May 5th next succeeding such Service commencement date and the denominator of which is 12 months; and | |
(ii) a restricted stock unit award covering the number of shares of Common Stock determined by multiplying the normal5,000-share automatic annual restricted stock unit award by a fraction the numerator of which is the number of months (including any partial month, expressed as a fraction) that will elapse between the date he or she commenced Service as an Eligible Director and the first May 5th next succeeding such Service commencement date and the denominator of which is 12 months. |
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(i) The Optionee (or, in the event of Optionee’s death, the personal representative of the Optionee’s estate or the person or persons to whom the option is transferred pursuant to the Optionee’s will or the laws of inheritance or the designated beneficiary or beneficiaries of such option) shall have a twelve (12)-month period following the date of such cessation of Board service in which to exercise each such option. | |
(ii) During the twelve (12)-month exercise period, the option may not be exercised in the aggregate for more than the number of vested shares of Common Stock for which the option is exercisable at the time of the Optionee’s cessation of Board service. | |
(iii) Should the Optionee cease to serve as a Board member by reason of death or Permanent Disability, all shares at the time subject to the option shall immediately vest so that such option may, during the twelve(12)-month exercise period following such cessation of Board service, be exercised for all or any portion of those shares as fully-vested shares of Common Stock. | |
(iv) In no event shall the option remain exercisable after the expiration of its term. Upon the expiration of the twelve (12)-month exercise period or (if earlier) upon the expiration of the option term, the option shall terminate and cease to be outstanding for any vested shares for which the option has not been exercised. However, the option shall, immediately upon the Optionee’s cessation of Board service for any reason other than death or |
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Permanent Disability, terminate and cease to be outstanding to the extent the option is not otherwise at that time exercisable for vested shares. |
II. | Change in Control/ Hostile Take-Over |
(i) The shares of Common Stock at the time subject to each outstanding option held by such Eligible Director under the Director Automatic Grant Program but not otherwise vested shall automatically vest in full so that each such option shall, immediately prior to the effective date of the Change in Control, become exercisable for all the option shares as fully-vested shares of Common Stock and may be exercised for any or all of those vested shares. Immediately following the consummation of the Change in Control, each automatic option grant shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation (or parent thereof) or otherwise continued in full force and effect pursuant to the express terms of the Change in Control transaction. | |
(ii) The shares of Common Stock which are at the time of such Change in Control subject to any outstanding restricted stock units awarded to such Director under the Director Automatic Grant Program shall, immediately prior to the effective date of the Change in Control, vest in full and be issued to such individual as soon as administratively practicable thereafter, but in no event later than fifteen (15) business days. |
(i) The shares of Common Stock at the time subject to each option outstanding option held by such Eligible Director under the Director Automatic Grant Program but not otherwise vested shall automatically vest in full so that each such option shall, immediately prior to the effective date of the Hostile Take-Over, become exercisable for all the option shares as fully-vested shares of Common Stock and may be exercised for any or all of those vested shares. Each such option shall remain exercisable for such fully-vested option shares until the expiration or sooner termination of the option term or the surrender of the option in connection with that Hostile Take-Over. | |
(ii) The shares of Common Stock which are at the time of such Hostile Take-Over subject to any outstanding restricted stock units awarded to such Eligible Director under the Director Automatic Grant Program shall, immediately prior to the effective date of the Hostile Take-Over, vest in full and be issued to such individual as soon as administratively practicable thereafter, but in no event later than fifteen (15) business days. |
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III. | Remaining Terms |
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I. | Tax Withholding |
Stock Withholding: The election to have the Corporation withhold, from the shares of Common Stock otherwise issuable upon the issuance, exercise or vesting of those Awards a portion of those shares with an aggregate Fair Market Value equal to the percentage of the Withholding Taxes (not to exceed one hundred percent (100%)) designated by the Optionee or Participant and make a cash payment equal to such Fair Market Value directly to the appropriate taxing authorities on such individual’s behalf. The shares of Common Stock so withheld shallnotreduce the number of shares of Common Stock authorized for issuance under the Plan. | |
Stock Delivery: The election to deliver to the Corporation, at the time the Award is issued, exercised or vests, one or more shares of Common Stock previously acquired by such the Optionee or Participant (other than in connection with the issuance, exercise or vesting triggering the Withholding Taxes) with an aggregate Fair Market Value equal to the percentage of the Withholding Taxes (not to exceed one hundred percent (100%)) designated by such holder. The shares of Common Stock so delivered shall not be added to the shares of Common Stock authorized for issuance under the Plan. |
II. | Share Escrow/ Legends |
III. | Effective Date and Term of the Plan |
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IV. | Amendment of the Plan |
V. | Use of Proceeds |
VI. | Regulatory Approvals |
VII. | No Employment/ Service Rights |
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A. Award shall mean any of the following stock or stock-based awards authorized for issuance or grant under the Plan: stock option, stock appreciation right, direct stock issuance, restricted stock or restricted stock unit award or other stock-based award. | |
B. Board shall mean the Corporation’s Board of Directors. | |
C. Change in Control shall mean a change in ownership or control of the Corporation effected through any of the following transactions: |
(i) a shareholder-approved merger or consolidation in which securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation’s outstanding securities are transferred to a person or persons different from the persons holding those securities immediately prior to such transaction, or | |
(ii) a shareholder-approved sale, transfer or other disposition of all or substantially all of the Corporation’s assets in complete liquidation or dissolution of the Corporation, or | |
(iii) the acquisition, directly or indirectly by any person or related group of persons (other than the Corporation or a person that directly or indirectly controls, is controlled by, or is under common control with, the Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the “1934 Act”)) of securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation’s outstanding securities pursuant to a tender or exchange offer made directly to the Corporation’s shareholders. |
D. Code shall mean the Internal Revenue Code of 1986, as amended. | |
E. Common Stock shall mean the Corporation’s Class A Common Stock. | |
F. Corporation shall mean Broadcom Corporation, a California corporation, and any corporate successor to all or substantially all of the assets or voting stock of Broadcom Corporation that shall by appropriate action adopt the Plan. | |
G. Director Automatic Grant Program shall mean the director automatic grant program in effect under Article Four of the Plan for the Eligible Directors. | |
H. Discretionary Grant Program shall mean the discretionary grant program in effect under Article Two of the Plan pursuant to which stock options and stock appreciation rights may be granted to one or more eligible individuals. | |
I. Eligible Director shall mean a Board member who is not, at the time of such determination, an employee of the Corporation (or any Parent or Subsidiary) and who is accordingly eligible to participate in the Director Automatic Grant Program in accordance with the eligibility provisions of Articles One and Four. | |
J. Employee shall mean an individual who is in the employ of the Corporation (or any Parent or Subsidiary), subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance. | |
K. Exercise Date shall mean the date on which the Corporation shall have received written notice of the option exercise. | |
L. Fair Market Value per share of Common Stock on any relevant date shall be determined in accordance with the following provisions: |
(i) If the Common Stock is at the time traded on the NASDAQ National Market, then the Fair Market Value shall be the closing selling price per share of Common Stock at the close of regular hours trading (i.e., before after- hours trading begins) on the NASDAQ National Market on the date in question, as such price is reported by the National Association of Securities Dealers. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. |
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(ii) If the Common Stock is at the time listed on any Stock Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock at the close of regular hours trading (i.e., before after-hours trading begins) on the date in question on the Stock Exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. |
M. Family Member means, with respect to a particular Optionee or Participant, any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,mother-in-law,father-in-law,son-in-law,daughter-in-law,bother-in-law orsister-in-law. | |
N. Hostile Take-Over shall mean either of the following events effecting a change in control or ownership of the Corporation: |
(i) the acquisition, directly or indirectly, by any person or related group of persons (other than the Corporation or a person that directly or indirectly controls, is controlled by, or is under common control with, the Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation’s outstanding securities pursuant to a tender or exchange offer made directly to the Corporation’s shareholders that the Board does not recommend such shareholders to accept, or | |
(ii) a change in the composition of the Board over a period of thirty-six (36) consecutive months or less such that a majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be composed of individuals who either (A) have been Board members continuously since the beginning of such period or (B) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (A) who were still in office at the time the Board approved such election or nomination. |
O. Incentive Option shall mean an option that satisfies the requirements of Code Section 422. | |
P. Involuntary Termination shall mean the termination of the Service of any individual that occurs by reason of: |
(i) such individual’s involuntary dismissal or discharge by the Corporation for reasons other than Misconduct, or | |
(ii) such individual’s voluntary resignation following (A) a change in his or her position with the Corporation that materially reduces his or her duties and responsibilities or the level of management to which he or she reports, (B) a reduction in his or her level of compensation (including base salary, fringe benefits and target bonus under any corporate-performance based bonus or incentive programs) by more than fifteen percent (15%) or (C) a relocation of such individual’s place of employment by more than fifty (50) miles, provided and only if such change, reduction or relocation is effected by the Corporation without the individual’s consent. |
Q. Misconduct shall mean the commission of any act of fraud, embezzlement or dishonesty by the Optionee or Participant, any unauthorized use or disclosure by such person of confidential information or trade secrets of the Corporation (or any Parent or Subsidiary), or any other intentional misconduct by such person adversely affecting the business or affairs of the Corporation (or any Parent or Subsidiary) in a material manner. The foregoing definition shall not in any way preclude or restrict the right of the Corporation (or any Parent or Subsidiary) to discharge or dismiss any Optionee, Participant or other person in the Service of the Corporation (or any Parent or Subsidiary) for any other acts or omissions, but such other acts or omissions shall not be deemed, for purposes of the Plan, to constitute grounds for termination for Misconduct. | |
R. 1934 Act shall mean the Securities Exchange Act of 1934, as amended. | |
S. Non-Statutory Option shall mean an option not intended to satisfy the requirements of Code Section 422. | |
T. Optionee shall mean any person to whom an option is granted under the Discretionary Grant or Director Automatic Grant Program. |
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U. Parent shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation, provided each corporation in the unbroken chain (other than the Corporation) owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. | |
V. Participant shall mean any person who is issued shares of Common Stock or restricted stock units or other stock-based awards under the Stock Issuance Program, and any person who is issued restricted stock units under the Director Automatic Grant Program. | |
W. Permanent Disability or Permanently Disabled shall mean the inability of the Optionee or the Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment expected to result in death or to be of continuous duration of twelve (12) months or more. However, solely for purposes of the Director Automatic Grant Program, Permanent Disability or Permanently Disabled shall mean the inability of the Eligible Director to perform his or her usual duties as a Board member by reason of any medically determinable physical or mental impairment expected to result in death or to be of continuous duration of twelve (12) months or more. | |
X. Plan shall mean the Corporation’s 1998 Stock Incentive Plan, as set forth in this document. | |
Y. Plan Administrator shall mean the particular entity, whether the Primary Committee, the Board or a Secondary Committee, which is authorized to administer the Discretionary Grant and Stock Issuance Programs with respect to one or more classes of eligible persons, to the extent such entity is carrying out its administrative functions under those programs with respect to the persons then subject to its jurisdiction. | |
Z. Plan Effective Date shall mean February 3, 1998. | |
AA. Predecessor Plans shall collectively mean the Corporation’s 1994 Amended and Restated Stock Option Plan and the Special Stock Option Plan, as in effect immediately prior to the Plan Effective Date hereunder. | |
BB. Primary Committee shall mean the committee of two (2) or more Eligible Directors appointed by the Board to administer the Discretionary Grant and Stock Issuance Programs with respect to Section 16 Insiders. | |
CC. Secondary Committee shall mean a committee of two or more Board members appointed by the Board to administer the Discretionary Grant and Stock Issuance Programs with respect to one or more classes of eligible persons other than Section 16 Insiders. | |
DD. Section 16 Insider shall mean an officer or director of the Corporation subject to the short-swing profit liability provisions of Section 16 of the 1934 Act. | |
EE. Service shall mean the performance of services for the Corporation (or any Parent or Subsidiary) by a person in the capacity of an Employee, an Eligible Director or a consultant or independent advisor, except to the extent otherwise specifically provided in the documents evidencing the Award made to such person. For purposes of the Plan, an Optionee or Participant shall be deemed to cease Service immediately upon the occurrence of the either of the following events: (i) the Optionee or Participant no longer performs services in any of the foregoing capacities for the Corporation or any Parent or Subsidiary or (ii) the entity for which the Optionee or Participant is performing such services ceases to remain a Parent or Subsidiary of the Corporation, even though the Optionee or Participant may subsequently continue to perform services for that entity. | |
FF. Stock Exchange shall mean either the American Stock Exchange or the New York Stock Exchange. | |
GG. Stock Issuance Agreement shall mean the agreement entered into by the Corporation and the Participant at the time of issuance of shares of Common Stock under the Stock Issuance Program. | |
HH. Stock Issuance Program shall mean the stock issuance program in effect under Article Three of the Plan. | |
II. Subsidiary shall mean any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation, provided each corporation (other than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. |
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JJ. Take-Over Price shall mean thegreaterof (i) the Fair Market Value per share of Common Stock on the date the option is surrendered to the Corporation in connection with a Hostile Take-Over or, if applicable, (ii) the highest reported price per share of Common Stock paid by the tender offeror in effecting such Hostile Take-Over through the acquisition of such Common Stock. However, if the surrendered option is an Incentive Option, the Take-Over Price shall not exceed the clause (i) price per share. | |
KK. 10% Shareholder shall mean the owner of stock (as determined under Code Section 424(d)) possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Corporation (or any Parent or Subsidiary). | |
LL. Withholding Taxes shall mean the federal, state and local income and employment taxes to which the Optionee or Participant may become subject in connection with the issuance, exercise or vesting of the Award made to him or her under the Plan. |
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BROADCOM CORPORATION
CLASS A COMMON STOCK
PROXY FOR THE 2006 ANNUAL MEETING OF SHAREHOLDERS
APRIL 27, 2006
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF BROADCOM CORPORATION
The undersigned revokes all previous proxies, acknowledges receipt of the notice of the 2006 Annual Meeting of Shareholders (the “Annual Meeting”) to be held April 27, 2006 and the proxy statement, and appoints William J. Ruehle and Vahid Manian, and each of them, the proxy of the undersigned, with full power of substitution, to vote all shares of Class A common stock of Broadcom Corporation (the “Company”) that the undersigned is entitled to vote, either on his or her own behalf or on behalf of any entity or entities, at the Annual Meeting, to be held at the Fairmont Newport Beach Hotel, 4500 MacArthur Boulevard, Newport Beach, California 92660, April 27, 2006 at 10:00 a.m. local time, and at any adjournment(s) or postponement(s) thereof, with the same force and effect as the undersigned might or could do if personally present thereat. The shares represented by this proxy shall be voted in the manner set forth on the reverse side.
PLEASE COMPLETE, SIGN AND DATE ON REVERSE SIDE
THANK YOU FOR VOTING
Table of Contents
16215 ALTON PARKWAY
IRVINE, CALIFORNIA 92618-3616
VOTE OVER THE INTERNET: www.proxyvote.com
To use the Internet to transmit your voting instructions, go to the website address shown above and have your proxy card in hand. Follow the instructions to create and submit electronic voting instructions.
ELECTRONIC ACCESS TO FUTURE SHAREHOLDER COMMUNICATIONS
You can access future Broadcom annual reports and proxy statements in electronic form over the Internet through Broadcom’s online delivery service. By using this service, you will improve the speed and efficiency by which you can access these materials and help Broadcom reduce the printing and postage costs of distributing paper copies. To enroll in the online program, please follow the instruction above to vote over the Internet and, when prompted, indicate that you agree to access shareholder communications electronically in future years.
VOTE BY TELEPHONE: +1.800.690.6903
Use any touch-tone telephone to transmit your voting instructions. Have your proxy card in hand when you call and follow the directions given.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the enclosed postage-paid envelope or return it to Broadcom Corporation c/o ADP, 51 Mercedes Way, Edgewood, NY 11717.Please mail early to ensure that your proxy card is received prior to the Annual Meeting.
The Internet and telephone voting facilities will close at 11:59 P.M. Eastern Time on April 26, 2006. If you vote over the Internet or by telephone, you DO NOT need to return your proxy card.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | KEEP THIS PORTION FOR YOUR RECORDS |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | DETACH AND RETURN THIS PORTION ONLY |
BROADCOM CORPORATION
1. | To elect nine directors to serve on the Company’s Board of Directors until the next annual meeting of shareholders and/or until their successors are duly elected and qualified: | For All | Withhold For All | For All Except | ||||||||||||||
Director Nominees: | ||||||||||||||||||
01. | George L. Farinsky | 06. | Alan E. Ross | o | o | o | ||||||||||||
02. | Maureen E. Grzelakowski | 07. | Henry Samueli, Ph.D. | |||||||||||||||
03. | Nancy H. Handel | 08. | Robert E. Switz | |||||||||||||||
04. | John Major | 09. | Werner F. Wolfen | |||||||||||||||
05. | Scott A. McGregor |
To withhold authority to vote for any individual nominee while voting for other nominees, mark “For All Except” and write the name of the nominee(s) for whom authority iswithheld:
For | Against | Abstain | ||||||
2. | To approve Second Amended and Restated Articles of Incorporation of Broadcom to (i) increase the aggregate number of authorized shares of Class A common stock from 800,000,000 shares to 2,500,000,000 shares, and (ii) eliminate all statements referring to the rights, preferences, privileges and restrictions of Series A preferred stock, Series B preferred stock, Series C preferred stock, Series D preferred stock and Series E preferred stock. | o | o | o | ||||
3. | To approve an amendment to the Company’s Bylaws, as previously amended and restated, to increase the authorized number of directors from a range of five (5) to nine (9) to a range of six (6) to eleven (11) directors. | o | o | o | ||||
4. | To approve an amendment and restatement of Broadcom’s 1998 Stock Incentive Plan, as previously amended and restated, which revises the automatic equity grant program in effect for new and continuing non-employee Board members and makes certain technical revisions and improvements. | o | o | o | ||||
5. | To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2006. | o | o | o | ||||
6. | In accordance with the discretion of the proxy holders, to transact such other business as may properly come before the Annual Meeting or any adjournment(s) or postponement(s) thereof. | |||||||
The Board of Directors recommends a voteFOR the nominees listed above and a voteFOR each of the listed proposals. This proxy, when properly executed, will be voted as specified above. If no specification is made, this proxy will be voted FOR the election of the nominees listed above and FOR each of the other proposals. |
Signature[PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date |
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BROADCOM CORPORATION
CLASS B COMMON STOCK
PROXY FOR THE 2006 ANNUAL MEETING OF SHAREHOLDERS
APRIL 27, 2006
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF BROADCOM CORPORATION
The undersigned revokes all previous proxies, acknowledges receipt of the notice of the 2006 Annual Meeting of Shareholders (the “Annual Meeting”) to be held April 27, 2006 and the proxy statement, and appoints William J. Ruehle and Vahid Manian, and each of them, the proxy of the undersigned, with full power of substitution, to vote all shares of Class B common stock of Broadcom Corporation (the “Company”) that the undersigned is entitled to vote, either on his or her own behalf or on behalf of any entity or entities, at the Annual Meeting, to be held at the Fairmont Newport Beach Hotel, 4500 MacArthur Boulevard, Newport Beach, California 92660, April 27, 2006 at 10:00 a.m. local time, and at any adjournment(s) or postponement(s) thereof, with the same force and effect as the undersigned might or could do if personally present thereat. The shares represented by this proxy shall be voted in the manner set forth on the reverse side.
PLEASE COMPLETE, SIGN AND DATE ON REVERSE SIDE
THANK YOU FOR VOTING
Table of Contents
16215 ALTON PARKWAY
IRVINE, CALIFORNIA 92618-3616
VOTE OVER THE INTERNET: www.proxyvote.com
To use the Internet to transmit your voting instructions, go to the website address shown above and have your proxy card in hand. Follow the instructions to create and submit electronic voting instructions.
ELECTRONIC ACCESS TO FUTURE SHAREHOLDER COMMUNICATIONS
You can access future Broadcom annual reports and proxy statements in electronic form over the Internet through Broadcom’s online delivery service. By using this service, you will improve the speed and efficiency by which you can access these materials and help Broadcom reduce the printing and postage costs of distributing paper copies. To enroll in the online program, please follow the instruction above to vote over the Internet and, when prompted, indicate that you agree to access shareholder communications electronically in future years.
VOTE BY TELEPHONE: +1.800.690.6903
Use any touch-tone telephone to transmit your voting instructions. Have your proxy card in hand when you call and follow the directions given.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the enclosed postage-paid envelope or return it to Broadcom Corporation c/o ADP, 51 Mercedes Way, Edgewood, NY 11717.Please mail early to ensure that your proxy card is received prior to the Annual Meeting.
The Internet and telephone voting facilities will close at 11:59 P.M. Eastern Time on April 26, 2006. If you vote over the Internet or by telephone, you DO NOT need to return your proxy card.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | KEEP THIS PORTION FOR YOUR RECORDS |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | DETACH AND RETURN THIS PORTION ONLY |
BROADCOM CORPORATION
1. | To elect nine directors to serve on the Company’s Board of Directors until the next annual meeting of shareholders and/or until their successors are duly elected and qualified: | For All | Withhold For All | For All Except | ||||||||||||||
Director Nominees: | ||||||||||||||||||
01. | George L. Farinsky | 06. | Alan E. Ross | o | o | o | ||||||||||||
02. | Maureen E. Grzelakowski | 07. | Henry Samueli, Ph.D. | |||||||||||||||
03. | Nancy H. Handel | 08. | Robert E. Switz | |||||||||||||||
04. | John Major | 09. | Werner F. Wolfen | |||||||||||||||
05. | Scott A. McGregor |
To withhold authority to vote for any individual nominee while voting for other nominees, mark “For All Except” and write the name of the nominee(s) for whom authority iswithheld:
For | Against | Abstain | ||||||
2. | To approve Second Amended and Restated Articles of Incorporation of Broadcom to (i) increase the aggregate number of authorized shares of Class A common stock from 800,000,000 shares to 2,500,000,000 shares, and (ii) eliminate all statements referring to the rights, preferences, privileges and restrictions of Series A preferred stock, Series B preferred stock, Series C preferred stock, Series D preferred stock and Series E preferred stock. | o | o | o | ||||
3. | To approve an amendment to the Company’s Bylaws, as previously amended and restated, to increase the authorized number of directors from a range of five (5) to nine (9) to a range of six (6) to eleven (11) directors. | o | o | o | ||||
4. | To approve an amendment and restatement of Broadcom’s 1998 Stock Incentive Plan, as previously amended and restated, which revises the automatic equity grant program in effect for new and continuing non-employee Board members and makes certain technical revisions and improvements. | o | o | o | ||||
5. | To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2006. | o | o | o | ||||
6. | In accordance with the discretion of the proxy holders, to transact such other business as may properly come before the Annual Meeting or any adjournment(s) or postponement(s) thereof. | |||||||
The Board of Directors recommends a voteFOR the nominees listed above and a voteFOR each of the listed proposals. This proxy, when properly executed, will be voted as specified above.If no specification is made, this proxy will be voted FOR the election of the nominees listed above and FOR each of the other proposals. |
Signature[PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date |
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Sincerely, | |
William J. Ruehle | |
Senior Vice President and Chief Financial Officer |