EXHIBIT 10.4
October 25, 2004 BROADCOM CONFIDENTIAL
Mr. Scott A. McGregor
Dear Scott,
It is my pleasure to present you with this offer of employment to join Broadcom
Corporation ("Broadcom" or the "company") in the position of President and Chief
Executive Officer, reporting directly to the Broadcom Board of Directors (the
"Board of Directors"). The specifics of our offer follow below. Certain
capitalized terms not defined in this letter agreement (the "Letter Agreement")
shall have the meanings defined in Appendix II. Appendices I and II are hereby
incorporated as though set forth in full herein.
DUTIES & RESPONSIBILITIES
During your employment as President and Chief Executive Officer, you will be
responsible for the general supervision, direction and control of the business
and affairs of Broadcom and shall have such other duties and responsibilities as
the Board of Directors and the Chairman of the Board shall designate that are
consistent with your position as the most senior executive officer of Broadcom.
As an employee, you will also serve without additional compensation as a member
of the Board of Directors, as a member of any committee of the Board of
Directors to which you may be appointed, and in any position as an officer
and/or a member of the board of directors of any Broadcom subsidiary to which
you may be appointed or elected, as the case may be. You will devote
substantially all of your business time (excluding periods of vacation and
absences made necessary because of illness or other traditionally approved leave
purposes), energy and skill in the performance of your duties for Broadcom.
You agree to abide at all times by Broadcom's policies and procedures as the
same may be revised and updated from time to time, including, without
limitation, the Code of Ethics and Corporate Conduct (the "Code of Conduct"),
Conflicts of Interest Policy, and Policy on Insider Trading and Unauthorized
Disclosures.
Notwithstanding your commitment to devote substantially all of your business
time, energy and skill in the performance of your duties for Broadcom, you may
(i) participate in charitable, civic, educational, professional, community or
industry affairs of your choosing, (ii) serve on the board of directors or
advisory board of up to three other companies, of which one may be a
publicly-held company during the first twelve months of your employment and of
which two may be publicly-held companies after the first twelve months of your
employment, subject in each instance to the prior approval of the Board of
Directors or the designated committee of the Board of Directors (which may be
withheld for any reason or no reason in its sole discretion), and (iii) manage
your and your family's personal investments; provided that (i) the time that you
commit
Mr. Scott A. McGregor BROADCOM CONFIDENTIAL
October 25, 2004
Page 2
to such activities is reasonable, individually and in the aggregate, (ii) in all
such activities and at all times you comply with Broadcom's Code of Conduct and
Conflicts of Interest Policy as the same may be revised and updated from time to
time, and (iii) unless otherwise specifically approved by the Board of
Directors, your involvement in such activities shall be in a personal capacity
only and not as a representative or delegate of Broadcom.
BASE SALARY AND BONUS
Your base salary will be $23,076.92 paid bi-weekly (equivalent to a $600,000
annualized rate).
In 2005 the Compensation Committee of the Board of Directors (the "Committee")
will consider establishing an annual cash and/or equity bonus program for
Broadcom that you will help the Committee define. You will be eligible to
participate annually in any so established bonus program so that there is an
incentive and reward structure for achieving successful performance of company
objectives. The Committee is not obligated to establish any bonus program, and
the Committee shall be free to change, revise, amend or cancel any bonus program
that may be established from time to time.
STOCK OPTIONS AND RESTRICTED STOCK UNITS
Upon the commencement of your services as President and Chief Executive Officer
of Broadcom on a full-time basis (the "Start Date"), you will receive a stock
option grant to purchase two million (2,000,000) shares of Broadcom Class A
Common Stock with an exercise price equal to the closing price of our Class A
Common Stock on the NASDAQ National Market as of the Start Date. This option to
purchase stock will vest with respect to 25% of the underlying shares upon the
first anniversary of the Start Date. The remaining 75% of shares subject to this
option will vest in equal monthly installments, on each monthly anniversary of
the Start Date that occurs during the period of thirty-six months following the
first anniversary of the Start Date. The stock option shall have a ten year
term.
On or about the first anniversary of the Start Date, and provided that you are
still employed as Chief Executive Officer of Broadcom or its highest parent
entity, if any, on the grant date, you will receive an additional stock option
grant to purchase five hundred thousand (500,000) shares of Broadcom Class A
Common Stock with an exercise price equal to the closing price of our Class A
Common Stock on the Nasdaq National Market on the grant date. The shares subject
to this option will vest in equal monthly installments, on each monthly
anniversary of the Start Date that occurs during the period of forty-eight
months following the first anniversary of the Start Date. The stock option shall
have a ten year term.
The foregoing grants will be made by the Committee pursuant to Broadcom's 1998
Stock Incentive Plan, as amended and restated. We have provided you with a copy
of the 1998 Stock Incentive Plan together with our current forms of notice of
grant of stock option and stock option agreement. The terms and conditions set
forth therein are subject to change from time to time. Except as otherwise
specifically provided herein, the stock option grants described above will
Mr. Scott A. McGregor BROADCOM CONFIDENTIAL
October 25, 2004
Page 3
have the same terms and conditions as those made generally available to
newly-hired Broadcom executives at the time that your respective grants are
made, and will be evidenced by agreements substantially in the forms provided to
you. Such grants and any shares acquired pursuant to such grants shall also be
subject to the restrictions provided in the settlement of Broadcom's shareholder
derivative securities litigation (David v. Wolfen, et al).
On the Start Date, the Committee will award you a grant under the 1998 Stock
Incentive Plan of two hundred thousand (200,000) restricted stock units to
acquire, with no cash payment on your part (other than applicable income and
employment taxes), an equal number of shares of Broadcom Class A Common Stock.
These restricted stock units will generally vest in equal quarterly
installments, on each quarterly date that is generally utilized by Broadcom for
the vesting of restricted stock units issued to other Broadcom employees, or if
no such quarterly date is generally utilized by Broadcom then on each quarterly
anniversary of the Start Date, over the period of thirty-six months following
the Start Date. Vesting of such restricted stock units shall not be subject to
performance criteria other than continued service as an employee. The applicable
number of shares of Class A Common Stock, which unless otherwise agreed shall be
issued to you upon each vesting date of the restricted stock units, will be
vested and unrestricted, except for any applicable restrictions under the
securities laws.
All of the above equity grants and underlying shares of common stock and any
other compensatory equity awards subsequently provided to you will be fully
covered by an effective registration statement on Form S-8 (or other applicable
registration statement) filed by Broadcom with the Securities and Exchange
Commission (the "SEC"). The Committee granting your compensatory equity awards
will be constituted in such a manner that such equity grants are exempt from
liability under Section 16(b) of the Securities Exchange Act of 1934 (the
"Exchange Act"), provided that an applicable exemption from liability continues
to exist under the Exchange Act and applicable regulations promulgated
thereunder.
To the extent permitted from time to time by applicable law, and subject to the
restrictions provided in the settlement of Broadcom's shareholder derivative
securities litigation (David v. Wolfen, et al), you will be able to exercise any
stock options granted to you through a same day sale program established with a
nationally recognized securities brokerage firm of your choice that is
reasonably acceptable to Broadcom.
For your restricted stock units and any other restricted stock or equity awards
that create taxable income to you at the time of vesting, if you are precluded
by law at the time of vesting from selling Broadcom equity in an amount
sufficient to result in proceeds at least equal to the tax obligation created by
such vesting, then you shall, to the extent permitted from time to time by
applicable law, be permitted to satisfy the applicable tax withholding
obligations arising from the vesting of such awards through share withholding by
Broadcom.
To the extent permitted from time to time by applicable law, you will also be
permitted to implement and maintain, at your discretion, an exercise and selling
trading plan covering your Broadcom equity in accordance with Rule 10b5-1 of the
Exchange Act (a "10b5-1 Plan"). To the
Mr. Scott A. McGregor BROADCOM CONFIDENTIAL
October 25, 2004
Page 4
extent permitted from time to time by applicable law, you will be permitted to
have an operational 10b5-1 Plan commencing at the time you select (provided that
Broadcom must approve any commencement date that is within the first 90 days
after the Start Date) and continuing during the entire time that you render
services to Broadcom and you may, in your discretion, keep a 10b5-1 Plan active
through the date that is 24 months after cessation of all your services to
Broadcom. Any such plan will be in a form reasonably acceptable to Broadcom and
will be established with a nationally recognized securities brokerage firm of
your choice that is reasonably acceptable to Broadcom.
ANNUAL COMPENSATION REVIEW
Commencing in 2006, your total compensation for services rendered to the company
will be reviewed by the Committee no later than the end of the second fiscal
quarter of each year for possible increases considering the total compensation
of chief executive officers of similarly situated companies and your performance
as President and Chief Executive Officer of Broadcom. The Committee has no
obligation to make any such increase, and you acknowledge that in any event the
mix of your total compensation among salary, bonus and equity components may
well differ from that of such other chief executive officers.
BENEFITS
As a Broadcom employee you will be eligible to participate in our employee
benefits plan, which includes comprehensive medical, dental, vision, life and
both short- and long-term disability insurance. In addition, you may participate
in Broadcom's employee stock purchase plan, which allows employees to purchase a
limited amount of Broadcom Class A Common Stock at a discounted price, a 401(k)
savings program, ten (10) paid holidays, and paid vacation of 10 work days per
year plus an additional work day for each completed year of service, up to a
maximum of 20 work days.
The above benefits shall accrue in accordance with our stated policies and may
change from time-to-time at Broadcom's discretion. We have provided you with a
copy of our current benefits information for your convenience. Effective on your
Start Date, or such other date as may be specified with regard to any particular
benefit, you will be eligible for our current, comprehensive benefits package.
Although the summary plan descriptions and other information from the Human
Resources Department are designed to assist employees, the underlying plan
documents themselves, which are available through the Human Resources
Department, are the controlling documents with regard to these benefits. Should
any questions relating to our benefits package arise, please feel free to
discuss them with our benefits representative when you join Broadcom. At that
time you will be asked to make a decision as to which of the medical plans best
suit your needs.
Mr. Scott A. McGregor BROADCOM CONFIDENTIAL
October 25, 2004
Page 5
INDEMNIFICATION AND LIABILITY INSURANCE
You will be covered under Broadcom's insurance policies for directors and
officers liability and will be provided indemnification (covering your services
as an officer, director and/or employee) to the maximum extent permitted by
Broadcom's bylaws and Articles of Incorporation, with such insurance coverage
and indemnification to be on terms no less favorable than those provided as
Broadcom's standard practice for senior executive officers and directors.
RELOCATION AND TEMPORARY LIVING EXPENSES
Broadcom will arrange for and pay for the movement of your household goods and
storage thereof for up to six (6) months. Broadcom will also provide rental
reimbursement for temporary housing for you and your family in the Orange
County, California area for up to six (6) months. To the extent that Broadcom's
payment of moving, storage or rental expenses results in federal or state
taxable income to you, upon your certification to Broadcom of the state and
federal tax rates applicable to you for the applicable period(s), Broadcom will
make a cash payment to you equal to the amount of the additional federal and
state income taxes payable according to such tax rates. Such payment will be
made within thirty (30) days after you provide such certification.
Meals, phone services, utilities and miscellaneous expenses while staying in the
temporary housing are not reimbursable unless otherwise reimbursable as regular
business expenses.
TERMINATION
Employment with Broadcom is at-will. Broadcom may terminate your employment with
or without "Cause" or in the event of your "Disability." You may terminate your
employment with or without "Good Reason," and your employment automatically
terminates upon your death. Any termination of your employment by Broadcom or
you shall only be effective if communicated by a "Notice of Termination."
If Broadcom terminates your employment other than for Cause or Disability, or
you terminate your employment for Good Reason, Broadcom agrees to make the
payments and provide the benefits to you described in Appendix II (the
"Severance Program"). Furthermore, Broadcom will pay certain "Accrued
Obligations" and provide certain "Other Benefits" upon any termination of
employment.
GENERAL TERMS
Please carefully review and consider the entire contents of this Letter
Agreement, including the attached Appendix I, which outlines some of the most
important terms and conditions of employment with Broadcom, and the attached
Appendix II, which contains the terms of the Severance Program. This Letter
Agreement, including the attached Appendices and any agreements relating to
confidentiality and proprietary rights between you and Broadcom, sets forth the
terms of your employment and constitutes the entire agreement between the
parties, and
Mr. Scott A. McGregor BROADCOM CONFIDENTIAL
October 25, 2004
Page 6
supersedes all previous communications, representations, understandings, and
agreements, whether oral or written, between the parties or any official or
representative thereof, relating to the subject matter hereof. This Letter
Agreement may not be modified or amended except by a written amendment signed by
the parties hereto.
To indicate your acceptance of Broadcom's offer of employment, please sign and
date this Letter Agreement in the space provided below acknowledging your
acceptance and anticipated employment date, initial the last pages of Appendix I
and Appendix II where indicated, and return all three to me. Please feel free to
contact me if you need additional information or to discuss this offer further.
This offer of employment and Letter Agreement are subject to and conditioned
upon your commencing services as President and Chief Executive Officer on a
full-time basis no later than January 3, 2005.
Scott, the entire Board of Directors and I believe that you will make
significant contributions to Broadcom. We look forward to your joining our
company and contributing to our shared vision and future success.
Sincerely,
BROADCOM CORPORATION
/s/ Henry Samueli
- ------------------------------------
Henry Samueli, Ph.D.
Chairman of the Board
ACCEPTANCE:
I accept Broadcom Corporation's offer of employment on the terms and conditions
set forth in this Letter Agreement, including the Appendices hereto.
Signed: /s/ Scott A. McGregor
-----------------------------
Scott A. McGregor
Date: October 25, 2004
BROADCOM CONFIDENTIAL
APPENDIX I - ADDITIONAL TERMS AND CONDITIONS
This Appendix I sets forth terms and conditions of the offer of employment made
by Broadcom Corporation ("Broadcom") to Scott A. McGregor. This Appendix I is to
be construed in conjunction with, and is made a part of, the Letter Agreement
offering employment with Broadcom. Capitalized terms not defined in this
Appendix I shall have the meanings defined elsewhere in the Letter Agreement.
1. Immigration, Examinations and Absence of Conflicts. The IMMIGRATION AND
CONTROL ACT of 1986 requires employers to verify that every new employee is
eligible for employment in the US. This offer of employment is conditional upon
the verification of valid US employment eligibility within three (3) days of
your hire date. An information sheet that outlines various documents you may use
to confirm work eligibility has been provided to you. This offer is also
conditional upon the completion of a comprehensive pre-employment medical
examination and background investigation of you with results satisfactory to
Broadcom in its sole discretion. By accepting Broadcom's offer, you consent to
such examination and investigation by professionals employed for that purpose by
Broadcom and to permit the material results thereof to be released to and
discussed with the Board of Directors, and you agree to complete any information
statements and execute any consents required to facilitate the same.
By accepting Broadcom's offer, you represent that you have satisfied any
obligation you may have to provide notice to any previous employer and that your
employment will not constitute a breach of or contravene the terms of any other
employment agreement or other agreement to which you are a party or otherwise
bound (including but not limited to any agreement that prohibits or restricts
your employment as a result of Broadcom's competition with any entity) thereby
preventing you from performing your duties pursuant to the Letter Agreement, and
this offer and your employment are conditional upon the absence of any such
breach or contravention that would prevent you from performing your duties
pursuant to the Letter Agreement. A breach of these representations shall, if so
elected by Broadcom within one year of the Start Date, render the Letter
Agreement null and void as if it had never existed, and shall, if so elected by
Broadcom within one year of the Start Date, constitute grounds for your
immediate termination. Such election by Broadcom shall be communicated to you
by written notice. In the event Broadcom elects to render the Letter Agreement
null and void and to terminate your employment as set forth in the prior
sentence, and notwithstanding anything to the contrary provided elsewhere in the
Letter Agreement, you shall be entitled to retain the compensation and benefits
that had been actually paid or delivered to you prior to the date that Broadcom
provides written notice of such election to you, to the extent the same are
fully earned and vested as of that date, but you shall not be entitled to
receive or retain any other or further compensation or benefits (whether or not
vested) of any sort whatsoever. Upon such election, and except as and then only
to the extent provided in the immediately preceding sentence, Broadcom shall
have no further obligation whatsoever with respect to your employment or the
Letter Agreement and shall not be liable for damages of any kind or type
resulting from its good faith election to terminate your employment and to treat
the Letter Agreement as null and void pursuant to this Section 1.
2. Policies and Procedures; Confidentiality and Invention Assignment
Agreement. You will be expected to abide by all Broadcom policies and
procedures, including the Code of Conduct, Conflicts of Interest Policy, and
Policy on Insider Trading and Unauthorized Disclosures, and including signing
and complying with the Broadcom Confidentiality and Invention Assignment
Agreement (the "CIAA"). The CIAA (a copy of which has been provided to you)
prohibits, both during and after your employment with Broadcom, unauthorized use
or disclosure to anyone outside of Broadcom of the proprietary or trade secret
information of Broadcom, its customers and its clients, as well as the
disclosure to Broadcom of the proprietary or trade secret information of others.
In addition, this agreement provides for the assignment of employee inventions
to Broadcom and prohibits employees for a period of one year after their
employment from inducing employees or consultants to sever their relationship
with Broadcom. Of course, this description is only a summary, and your actual
obligations will be governed by the CIAA itself.
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BROADCOM CONFIDENTIAL
3. Key Man Life Insurance. You agree that at any time during your employment,
at the request of the Board of Directors or a committee thereof and without
additional compensation, you will provide information, complete and sign
applications, and submit to reasonable physical examinations for the purpose of
qualifying for so-called "key man" life insurance to be paid for by and owned by
Broadcom for its own benefit. Broadcom shall have no obligation to apply for or
to obtain such insurance or to maintain in effect any such insurance that may
issue for any specific period after its issuance. You understand and agree that
neither you nor any of your beneficiaries shall have any pecuniary, ownership or
beneficial interest in such insurance whatsoever, or to require that Broadcom
maintain any such insurance in effect, except that if any such insurance is in
effect at the date of termination of your employment for any reason other than
your death or Disability, you shall have the right to have assigned to you any
such policies of insurance that are so assignable, as provided pursuant to
Subsection 1(e) of Appendix II or as otherwise provided by the policies or
practices of Broadcom then in effect, upon payment by you to Broadcom of the
cash surrender value, if any, and any prepaid premiums.
4. Governing Law. The laws of California shall govern the validity and
interpretation of the Letter Agreement and the Severance Program, without regard
to the conflicts of law principles applicable in California or any other
jurisdiction.
5. Captions. The captions of the Letter Agreement (including the captions of
its Appendices) are not part of the provisions of this agreement or the
Severance Program and shall have no force or effect.
6. Notices. All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party, by overnight courier
prepaid, or by registered or certified mail, return receipt requested, postage
prepaid, addressed (if to you) at the address you last provided in writing to
Broadcom, and if to Broadcom, as follows:
Broadcom Corporation
16215 Alton Parkway
Irvine, California 92618
Attention: Chairman of the Board
or to such other address as either party may specify to the other from time to
time by notice in writing.
Notices and communications shall be effective when actually received by the
addressee. Neither your failure to give any notice required hereunder, nor
defects or errors in any notice given by you, shall relieve Broadcom of any
corresponding obligation under the Severance Program unless, and only to the
extent that, Broadcom is actually and materially prejudiced thereby.
7. Severability. The invalidity or unenforceability of any provision of this
agreement shall not affect the validity or enforceability of any other
provision.
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BROADCOM CONFIDENTIAL
8. Withholding Taxes. Broadcom may withhold from any amounts payable to you
such Federal, state, local or foreign taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
9. No Waiver. Your failure or Broadcom's failure to insist upon strict
compliance with any provision hereof or the failure to assert any right you or
Broadcom may have hereunder, including, without limitation, your right to
terminate employment for Good Reason, shall not be deemed to be a waiver of the
application of such provision or right with respect to any subsequent event or
the waiver of any other provision or right, including any provision or right
under the Severance Program.
10. Breach and Remedies. Notwithstanding the provisions of Appendix II setting
forth certain payments and benefits that may be made upon the termination of
your employment, you and Broadcom retain any and all of your rights to assert
that the other party has breached the Letter Agreement (or any of the
compensatory equity agreements) by virtue of some action or inaction that does
not constitute "Cause" or "Good Reason" (as defined in Appendix II) and which,
if true, would thereby entitle you to damages or other appropriate relief;
provided, however, that any such action or inaction which is cured within 30
days after notice thereof shall not constitute a breach of the Letter Agreement;
further provided that the measure of your damages for any such breach by the
Company shall be your actual damages resulting therefrom and shall not be
determined with reference to the payments or benefits set forth in Subsections
1(a), 1(b) or 1(e) of Appendix II; and further provided that your resignation
(with or without "Good Reason") or your termination by Broadcom (with or without
"Cause") shall not be deemed a breach of the Letter Agreement.
11. Execution and Counterparts. The Letter Agreement may be executed in
counterparts, each of which shall be deemed an original as against any party
whose signature appears thereon, and all of which together shall constitute one
and the same instrument. The Letter Agreement shall become binding when one or
more counterparts hereof, individually or taken together, bearing the signatures
of both you and Broadcom's representative are exchanged (including an exchange
of counterparts via confirmed facsimile transmission; provided, however, that if
the initial exchange of counterparts is via confirmed facsimile transmission, we
shall also exchange signed originals as soon thereafter as feasible).
Photographic copies of such signed counterparts may be used in lieu of the
originals for any purpose.
12. Mandatory Arbitration. ANY AND ALL DISPUTES OR CONTROVERSIES BETWEEN YOU
AND BROADCOM ARISING OUT OF, RELATING TO OR OTHERWISE CONNECTED WITH YOUR
EMPLOYMENT, THE LETTER AGREEMENT, THE BENEFITS PROVIDED UNDER THE SEVERANCE
PROGRAM AS SET FORTH IN APPENDIX II OR THE VALIDITY, CONSTRUCTION, PERFORMANCE
OR TERMINATION OF THIS AGREEMENT SHALL BE SETTLED EXCLUSIVELY BY BINDING
ARBITRATION TO BE HELD IN ORANGE COUNTY, CALIFORNIA. THE ARBITRATION PROCEEDINGS
SHALL BE GOVERNED BY (i) THE NATIONAL RULES FOR THE RESOLUTION OF EMPLOYMENT
DISPUTES THEN IN EFFECT OF THE AMERICAN ARBITRATION ASSOCIATION AND (ii) THE
FEDERAL ARBITRATION
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BROADCOM CONFIDENTIAL
ACT. TO THE EXTENT YOU ASSERT A CLAIM IN THE ARBITRATION THAT WOULD OTHERWISE BE
REQUIRED TO BE FILED WITH A GOVERNMENTAL AGENCY, BROADCOM SHALL NOT ASSERT AS A
DEFENSE THE FAILURE TO EXHAUST ADMINISTRATIVE REMEDIES WITH RESPECT TO SUCH
CLAIM.
THE ARBITRATOR SHALL HAVE THE SAME, BUT NO GREATER, REMEDIAL AUTHORITY AS WOULD
A COURT HEARING THE SAME DISPUTE. THE DECISION OF THE ARBITRATOR SHALL BE FINAL,
CONCLUSIVE AND BINDING ON THE PARTIES TO THE ARBITRATION AND SHALL BE IN LIEU OF
THE RIGHTS THOSE PARTIES MAY OTHERWISE HAVE TO A JURY TRIAL; PROVIDED, HOWEVER,
THAT SUCH DECISION SHALL BE SUBJECT TO CORRECTION, CONFIRMATION OR VACATION IN
ACCORDANCE WITH THE PROVISIONS AND STANDARDS OF APPLICABLE LAW GOVERNING THE
JUDICIAL REVIEW OF ARBITRATION AWARDS.
THE PREVAILING PARTY IN SUCH ARBITRATION, AS DETERMINED BY THE ARBITRATOR, AND
IN ANY ENFORCEMENT OR OTHER COURT PROCEEDINGS, SHALL BE ENTITLED, TO THE EXTENT
PERMITTED BY LAW, TO REIMBURSEMENT FROM THE OTHER PARTY FOR ALL OF THE
PREVAILING PARTY'S COSTS (EXCLUDING THE ARBITRATOR'S COMPENSATION AND OTHER
ARBITRATION FEES AND COSTS, WHICH SHALL BE PAID BY BROADCOM IN ACCORDANCE WITH
APPLICABLE LAW), EXPENSES AND ATTORNEY'S FEES. JUDGMENT SHALL BE ENTERED ON THE
ARBITRATOR'S DECISION IN ANY COURT HAVING JURISDICTION OVER THE SUBJECT MATTER
OF SUCH DISPUTE OR CONTROVERSY. NOTWITHSTANDING THE FOREGOING, EITHER PARTY MAY
IN AN APPROPRIATE MATTER APPLY TO A COURT PURSUANT TO CALIFORNIA CODE OF CIVIL
PROCEDURE SECTION 1281.8, OR ANY COMPARABLE STATUTORY PROVISION OR COMMON LAW
PRINCIPLE, FOR PROVISIONAL RELIEF, INCLUDING A TEMPORARY RESTRAINING ORDER OR A
PRELIMINARY INJUNCTION. TO THE EXTENT PERMITTED BY LAW, THE PROCEEDINGS AND
RESULTS, INCLUDING THE ARBITRATOR'S DECISION, SHALL BE KEPT CONFIDENTIAL.
Initials: /s/ SM
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BROADCOM CONFIDENTIAL
APPENDIX II - SEVERANCE PROGRAM
This Appendix II sets forth terms and conditions of a Severance Program which is
part of the offer of employment made by Broadcom to Scott A. McGregor. This
Appendix II is to be construed in conjunction with, and is made a part of, the
Letter Agreement offering employment with Broadcom. Capitalized terms not
defined in this Appendix II shall have the meanings defined elsewhere in the
Letter Agreement.
1. Severance Benefits upon Certain Terminations. If your employment by
Broadcom is terminated by you in a Notice of Termination specifying Good Reason,
or by Broadcom in a Notice of Termination specifying no reason or a reason other
than (i) Cause or (ii) your Disability, and your employment has not terminated
automatically as a result of your death, Broadcom agrees, subject to the
conditions and requirements set forth in this Appendix II, to make the payments
and provide the benefits described below (the "Severance Program"):
(a) Salary Continuation. Broadcom shall continue to pay your base
salary for a period of one (1) year following the "Date of Termination"
(using your then current rate of base salary or, if you terminated your
employment for Good Reason pursuant to Subsection 5(b) of this Appendix II
due to an excessive reduction in base salary, then your rate of base salary
immediately before the reduction).
(b) Options and other Equity Awards. Notwithstanding any less
favorable terms of any stock option agreement or plan, any outstanding
options to purchase shares of Broadcom's common stock or other equity
awards granted to you by the Committee (including the restricted stock
units granted to you) shall (i) immediately on the Date of Termination,
vest as if you had completed an additional twenty-four (24) months of
employment after the Date of Termination, and (ii) be exercisable for no
less than twenty-four (24) months after the Date of Termination (or, if
earlier, the date the option or other equity award would have expired had
you remained employed by Broadcom during the entire 24 month period).
(c) Bonuses Not Yet Earned. Broadcom shall pay you (i) a cash bonus,
if any, which was not vested because of a requirement of continued
employment had not been satisfied by you as of the Date of Termination, but
with respect to which the applicable performance period had been fully
completed as of the Date of Termination (for the avoidance of doubt, a
bonus shall be payable under this Subsection 1(c)(ii) only to the extent
that any performance criteria with respect to such bonus had been satisfied
during the applicable performance period), plus (ii) a pro-rata share of
any cash bonus with respect to any period used for calculating bonuses that
had been partially completed by you as of the Date of Termination
(calculated as if you had fully satisfied the performance criteria (if any)
used to calculate such cash bonuses). Such pro-rata share shall equal the
fraction of the period for calculating such cash bonuses which preceded the
Date of Termination and shall be reduced dollar-for-dollar by any related
bonus payments previously made to you for any portion of your service
during the same period; provided, however, that in the event that as of the
Date of Termination it is manifestly apparent that all or part of the
applicable performance criteria cannot be satisfied for the period for
calculating such cash bonuses, the pro-rata share of cash bonus payable
hereunder
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BROADCOM CONFIDENTIAL
attributable to the part(s) of the performance criteria that cannot be
satisfied shall be reduced or eliminated, as the case may be. A bonus
described in this Subsection 1(c) shall be payable to you only if, prior to
the Date of Termination, the Committee had specifically designated the
amount of bonus for which you would be eligible (or had specified your
percentage participation in an executive bonus pool) as well as the
performance criteria and any other conditions required to be satisfied in
order for you to earn the bonus, either in whole or in part.
(d) Accrued Salary, Vacation Pay, Expenses, Earned Bonuses and
Deferred Compensation. Broadcom shall, upon your Date of Termination, pay
you a lump sum amount equal to the sum of (i) your full base salary through
the Date of Termination at the rate in effect during such period, (ii) your
accrued vacation pay, (iii) any unreimbursed business expenses incurred by
you, (iv) any cash bonus which had been fully earned and vested (i.e., for
which the applicable performance period and any service requirements for
vesting had been fully completed) on or before the Date of Termination, but
which had not been paid as of the Date of Termination (for the avoidance of
doubt, any such bonus shall be payable only to the extent the applicable
performance criteria had been satisfied during the applicable performance
period), and (v) to the extent permissible under applicable law, any vested
compensation previously deferred by you (including without limitation any
contributions to the Broadcom 1998 Employee Stock Purchase Plan, as amended
and restated, together with any accrued earnings or interest thereon), in
each case to the extent not theretofore paid. Any vested deferred
compensation that cannot in accordance with applicable law be paid to you
on your Date of Termination shall be paid at such time and in such manner
as set forth in the applicable plan or agreement governing the payment of
that compensation. The amounts referred to in this Subsection 1(d) shall be
referred to collectively as "Accrued Obligations."
(e) Benefit Continuation. For one (1) year after your Date of
Termination, or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, Broadcom shall, subject to
your payment of the employee portion of the premiums for coverage at the
rate generally applicable to other senior executives of Broadcom whose
employment with Broadcom has not terminated, continue to provide welfare
benefits (including, without limitation, health, life and disability
insurance), fringe benefits, and other perquisites to you and your family
at least equal to those which would have been provided to them if your
employment had not been terminated in accordance with the most favorable
plans, practices, programs or policies of Broadcom and its affiliated
companies applicable generally to other senior executives of Broadcom and
their families immediately preceding the Date of Termination; provided,
however, that if you become re-employed with another employer and are
eligible to receive medical or other welfare benefits under another
employer-provided plan, the medical and other welfare benefits otherwise
payable to you hereunder shall be coordinated with the benefits provided
under such other plan during such applicable period of eligibility such
that there shall be no duplication of benefits, and for purposes of such
coordination, the medical and welfare benefits otherwise payable to you
hereunder shall be secondary to the benefits provided under such other
plan.
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BROADCOM CONFIDENTIAL
Following the one-year period of continued benefits referred to in
this Subsection 1(e), you and your family shall be given the right to elect
to continue benefits in all group medical plans for an additional period of
two (2) years, subject to your payment of the employee portion of the
premium for such coverage at the rate generally applicable to other senior
executives of Broadcom whose employment with Broadcom has not terminated.
The medical coverage provided pursuant to this Subsection 1(e) shall
satisfy Broadcom's obligation to provide continued coverage under Section
601 of the Employee Retirement Income Security Act (commonly called "COBRA
continuation") and Broadcom's obligations (if any) under similar state
laws. At the end of the period of coverage, you shall have the option to
have assigned to you any assignable insurance policy owned by Broadcom and
relating specifically to you, upon payment by you to Broadcom of the cash
surrender value, if any, and any prepaid premiums. At the end of the period
of coverage, you will also retain any conversion or continued participation
rights that you may have under any insurance policies applicable to you,
which rights you may exercise in your discretion but at your own expense.
In the event that your participation in any of the plans, programs,
practices or policies of Broadcom referred to in this Subsection 1(e) is
barred by the terms of such plans, programs, practices or policies,
Broadcom shall provide you with benefits substantially similar to those to
which you would be entitled as a participant in such plans, programs,
practices or policies. Notwithstanding the foregoing, in no event shall you
be allowed to participate in the Broadcom Employee Stock Purchase Plan or
the 401(k) savings plan following your Date of Termination or to receive
any substitute benefits hereunder in replacement of those particular
benefits, but you shall be paid the full value of any vested benefits
accrued to your benefit under such plans prior to the Date of Termination.
(f) Other Benefits. To the extent not theretofore paid or provided,
Broadcom shall timely pay or provide to you any other amounts or benefits
required to be paid or provided, or which you are eligible to receive,
under any plan, program, policy, practice, contract or agreement of
Broadcom and its affiliated companies, including but not limited to any
benefits payable to you under a plan, policy, practice, etc., referred to
in Section 10 of this Appendix II (all such other amounts and benefits
being hereinafter referred to as "Other Benefits"), in accordance with the
terms of such plan, program, policy, practice, contract or agreement.
2. Parachute Payments. In the event that any payments or benefits to which you
become entitled in accordance with the provisions of the Severance Program would
otherwise constitute a parachute payment under Section 280G of the U.S. Internal
Revenue Code, then such payments and benefits will be subject to reduction to
the extent necessary to assure that you receive only the greater of (i) the
amount of those payments or benefits which would not constitute such a parachute
payment or (ii) the amount which yields you the greatest after-tax amount of
benefits after taking into account any excise tax imposed on the payments and
benefits provided to you under this letter (or on any other benefits to which
you may be entitled in connection with a change in control or ownership of
Broadcom or the subsequent termination of your employment with Broadcom) under
Section 4999 of the U.S. Internal Revenue Code. To the extent any such reduction
is required, the dollar amount of your salary continuation payments under
Subsection
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BROADCOM CONFIDENTIAL
1(a) will be reduced first, then the number of options or other equity awards to
be modified pursuant to Subsection 1(b) shall be reduced in such order as shall
be agreed upon by the Committee and you, and then finally your remaining
benefits will be reduced.
3. Other Terminations. Notwithstanding the provisions of Section 1 of this
Appendix II, if your employment is terminated by reason of your death or by
Broadcom for Cause or for your Disability, or you terminate your employment
without Good Reason, you shall not be entitled to participate in the Severance
Program and your participation in the Severance Program shall terminate without
further obligations to you or your legal representatives under the Severance
Program; provided, however, that Broadcom shall timely pay the Accrued
Obligations and shall timely pay or provide the Other Benefits to you, your
legal representative or your designated beneficiaries, as the case may be, and
further provided, that in the event your employment is terminated by reason of
your death or Disability, then Broadcom shall also timely pay the bonuses
described in Subsection 1(c) above, if any, to you or your legal representative
and, notwithstanding any less favorable terms in any stock option or other
equity award agreement or plan or this Severance Program or the Letter
Agreement, any unvested portion of any stock options or equity awards granted to
you by Broadcom (including the restricted stock units) on or after the date of
the Letter Agreement shall immediately vest in full on the Date of Termination
and remain exercisable by you or your legal representative for 12 months after
the Date of Termination.
4. Cause. Broadcom may terminate your employment with or without Cause as
defined in this Section 4. For purposes of the Letter Agreement and the
Severance Program, "Cause" shall mean the reasonable and good faith
determination by a majority of Broadcom's Board of Directors that any of the
following events or contingencies exists or has occurred:
(a) You materially breached a fiduciary duty to Broadcom, materially
breached a material term of the Confidentiality and Invention Assignment
Agreement between you and Broadcom, or materially breached a material term
or policy set forth or described in Broadcom's Code of Conduct;
(b) You are convicted of a felony that involves fraud, dishonesty,
theft, embezzlement, and/or an act of violence or moral turpitude, or plead
guilty or no contest (or a similar plea) to any such felony; or
(c) You committed an act or an omission that constitutes fraud,
material negligence, or material misconduct in connection with your
employment by Broadcom, including but not limited to a material violation
of applicable material state or federal securities laws. Notwithstanding
the foregoing, an isolated or occasional failure to file or late filing of
a report required under Section 16 of the Exchange Act shall not be deemed
a material violation for purposes of this Subsection 4(c). Furthermore,
with respect to filing reports or certifications you are required to
provide under the Exchange Act, with respect to a transaction's compliance
with the requirements of Rule 144 under the Securities Act of 1933, or with
respect to the implementation of your 10b5-1 Plan, you shall not have
committed a material violation for purposes of this Subsection 4(c) if the
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BROADCOM CONFIDENTIAL
violation occurred because you relied in good faith on a certification or
certifications provided by Broadcom or an authorized employee or agent of
Broadcom, unless you knew or should have known after reasonable diligence
that such certification was inaccurate, or upon the processes or actions of
the securities brokerage firm handling your transactions in Broadcom
equities provided that you have used a nationally recognized securities
brokerage firm with substantial prior experience in and established regular
procedures for handling option and equity transactions by executive
officers of public companies in the United States.
The foregoing shall constitute an exclusive list of the events or
contingencies that may constitute Cause under the Letter Agreement.
No termination that is based exclusively upon your commission or alleged
commission of act(s) or omission(s) that are asserted to constitute material
negligence shall constitute Cause hereunder unless you have been afforded notice
of the alleged acts or omissions and have failed to cure such acts or omissions
within 30 days after receipt of such notice.
If, following the receipt of a Notice of Termination stating that your
termination is for Cause, you believe that Cause does not exist, you may, by
written notice delivered to the Board of Directors within three business (3)
days after receipt of such Notice of Termination, request that your Date of
Termination be delayed to permit you to appeal the Board of Directors'
determination that Cause for such termination existed. If you so request, you
will be placed on administrative leave for a period determined by the Board of
Directors (not to exceed 30 days), during which you will be afforded an
opportunity to request that the Board of Directors reconsider its decision
concerning your termination. If the Board of Directors or an appropriate
committee thereof has not previously provided you with an opportunity to be
heard in person concerning the reasons for termination stated in the Notice of
Termination, the Board of Directors will endeavor in good faith to provide you
with such an opportunity during such period of administrative leave. It is
understood and agreed that any change in your employment status that occurs in
connection with or as a result of such an administrative leave shall not
constitute Good Reason. The Board of Directors may, as a result of such a
request for reconsideration, reinstate your employment, revise the original
Notice of Termination, or affirm the original Notice of Termination. If the
Board of Directors affirms the original Notice of Termination or the period of
administrative leave ends before the Board of Directors takes action, the Date
of Termination shall be the date specified in the original Notice of
Termination. If the Board of Directors reinstates your employment or revises the
original Notice of Termination, then the original Notice of Termination shall be
void and neither its delivery nor its contents shall be deemed to constitute
Good Reason.
5. Good Reason. You may terminate your employment with or without Good Reason
as defined in this Section 5. For purposes of the Letter Agreement and the
Severance Program, "Good Reason" shall mean:
(a) Except as you may agree in writing and except as a result of an
administrative leave and the related procedure described in the definition
of Cause, a change in your
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BROADCOM CONFIDENTIAL
position (including status, offices, titles and reporting requirements)
with Broadcom that reduces your authority, duties or responsibilities as in
effect on the Start Date, or any other action by Broadcom which results in
a material diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial or
inadvertent action which is remedied by Broadcom reasonably promptly after
Broadcom receives your notice thereof; for purposes of this Subsection
5(a), it will be deemed to be a material reduction or diminution in your
position or duties if (i) you are not at all times Broadcom's Chief
Executive Officer and a member of the Board of Directors of Broadcom (or
its successor), or in lieu thereof if Broadcom (or its successor) has any
parent entities then you are not at all times the Chief Executive Officer
and a member of the board of directors of the highest such parent entity,
(ii) Broadcom (acting through its Board of Directors) or any individual who
has the right to vote securities representing more than 10% of the voting
power of all of Broadcom's common shares publicly and materially disparages
you through any oral or written communications to any third party
(provided, however, that in no event shall non-public communications by or
between you and Broadcom or any member of its Board of Directors, such as
performance reviews, be considered to constitute such public and material
disparagement), or (iii) Broadcom hires, appoints or promotes any person to
an executive officer position at Broadcom without your prior consent (which
you shall not unreasonably withhold);
(b) Any reduction in your base salary, as the same may be increased
from time-to-time, in each case; provided, however, that a reduction or
series of reductions in your base salary (not exceeding 15% in the
aggregate) that is part of a broad-based reduction in base salaries for
management employees and pursuant to which your base salary is not reduced
by a greater percentage than the reductions applicable to other management
employees shall not constitute Good Reason;
(c) The taking of any action by Broadcom (including the elimination
of benefit plans without providing substitutes therefor or the reduction of
your benefits thereunder) that would materially diminish the aggregate
value of your bonuses and other cash incentive awards and other fringe
benefits, including executive benefits and perquisites, from the levels in
effect on the Start Date, by more than fifteen percent (15%) in the
aggregate; provided, however, that (i) a reduction in your bonuses, cash
awards or benefits that is part of a broad-based reduction in corresponding
bonuses, awards or benefits for management employees and pursuant to which
your bonuses, awards or benefits are not reduced by a greater percentage
than the reductions applicable to other management employees, and (ii) a
reduction in your bonuses and other cash incentive awards occurring as a
result of your failure or Broadcom's failure to satisfy performance
criteria applicable to such bonuses or awards, shall not constitute Good
Reason;
(d) Broadcom's requiring you to be based at any office or location
which increases the distance from your home to the office or location by
more than fifty (50) miles from the distance in effect as of the date that
such requirement is imposed;
(e) Any purported termination by Broadcom of your employment
otherwise than pursuant to a Notice of Termination (for avoidance of doubt,
the delivery or contents of a
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BROADCOM CONFIDENTIAL
Notice of Termination that is revised or voided under the procedure
provided in the definition of Cause shall not constitute Good Reason); or
(f) Any failure by Broadcom (or any successor) to comply with and
satisfy Section 12 of this Appendix after receipt of written notice from
you of such failure and a reasonable cure period of not less than thirty
(30) days.
The foregoing shall constitute an exclusive list of the events or
contingencies that may constitute Good Reason under the Letter Agreement.
Notwithstanding the above, an isolated or inadvertent action or inaction by
Broadcom that causes Broadcom to fail to comply with Subsections 5(b) or 5(c)
and which is cured within ten days of your notifying Broadcom of such action or
inaction shall not constitute Good Reason. Furthermore, no act, occurrence or
condition set forth in this Section 5 shall constitute Good Reason if you
consent in writing to such act, occurrence or condition, whether such consent is
delivered before or after the act, occurrence or condition comes to pass.
6. Death. Your employment shall terminate automatically upon your death.
7. Disability. If your Disability occurs while you are employed by Broadcom
and no reasonable accommodation is available to permit you to continue to
perform the essential duties and responsibilities of your position, Broadcom may
give you written notice of its intention to terminate your employment. In such
event, your employment with Broadcom shall terminate effective on the 30th day
after you receive such notice (the "Disability Effective Date"), provided that,
within the 30 days after such receipt, you shall not have returned to performing
your duties. For purposes of the Letter Agreement and the Severance Program,
"Disability" shall mean your absence from your duties with Broadcom on a
full-time basis for 120 consecutive business days as a result of incapacity due
to mental or physical illness which is both (i) determined to be total and
permanent by two (2) physicians selected by Broadcom or its insurers and
acceptable to you or your legal representative, and (ii) entitles you to the
payment of long-term disability benefits from Broadcom's long-term disability
plan commencing immediately upon the Disability Effective Date.
8. Notice of Termination. For purposes of the Severance Program, a "Notice of
Termination" means a written notice which (i) indicates the specific termination
provision relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
your employment under the provision so indicated, and (iii) if the Date of
Termination (as defined below) is other than the date of receipt of such notice,
specifies the termination date (which date, except in the case of a termination
by you without Good Reason, shall be not more than thirty days after the giving
of such notice). The basis for termination set forth in any Notice of
Termination shall constitute the exclusive set of facts and circumstances upon
which the party may rely to attempt to demonstrate that Cause or Good Reason (as
the case may be) for such termination existed.
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BROADCOM CONFIDENTIAL
9. Date of Termination. "Date of Termination" means (i) except as set forth in
the definition of Cause, if your employment is terminated by Broadcom or by you
for any reason other than death or Disability, the date of receipt of the Notice
of Termination or a later date (within the limit set forth in the definition of
Notice of Termination) specified therein, as the case may be, and (ii) if your
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of your death or the Disability Effective Date, as
the case may be.
10. Non-exclusivity of Rights. Nothing in the Severance Program shall prevent
or limit your continuing or future participation in any plan, program, policy or
practice provided by Broadcom or any of its affiliated companies and for which
you may qualify, nor shall anything herein limit or otherwise affect such rights
as you may have under any contract or agreement with Broadcom or any of its
affiliated companies. Amounts which are vested benefits or which you are
otherwise entitled to receive under any plan, policy, practice or program of or
any contract or agreement with Broadcom or any of its affiliated companies at or
subsequent to the Date of Termination shall be payable in accordance with such
plan, policy, practice or program or contract or agreement except as explicitly
modified by the Severance Program.
11. Full Settlement.
(a) Except as specifically set forth in this Appendix or the
accompanying Letter Agreement, Broadcom's obligation to make the payments
provided for in the Severance Program and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which Broadcom may have
against you or others, except only for any advances made to you or for
taxes that Broadcom is required to withhold by law. In no event shall you
be obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to you under any of the provisions of the
Severance Program and, except regarding certain medical and welfare
benefits as provided in Subsection 1(e), such amounts shall not be reduced
whether or not you obtain other employment.
(b) Except to the extent precluded by applicable law, to be eligible
to receive the payments and benefits under the Severance Program (other
than the Accrued Obligations and Other Benefits, the payment or provision
of which shall not be conditioned upon your execution of the separation
agreement described in this Subsection 11(b)), you must, following your
termination of employment, execute a separation agreement that includes (i)
a general release (in a form acceptable to Broadcom) in favor of Broadcom
and its subsidiaries, officers, directors, employees and agents which shall
cover all claims you may have relating to your employment with Broadcom and
the termination of that employment, other than claims relating to any
benefits to which you become entitled under the Severance Program, (ii)
mutual non-disparagement provisions, and (iii) a provision that precludes
you from soliciting or inducing Broadcom employees to work for yourself,
for an entity of which you are an employee or investor, or for any third
party for a period of two years from the later of the Date of Termination
or the date of execution of the separation agreement. To be eligible to
receive the payments and benefits under the Severance Program, you must
also be and remain in material
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BROADCOM CONFIDENTIAL
compliance with your obligations to Broadcom pursuant to the
Confidentiality and Invention Assignment Agreement during and subsequent to
your employment.
12. Successors.
(a) Any benefits payable under the Severance Program are personal to
you and without the prior written consent of Broadcom shall not be
assignable by you otherwise than by will or the laws of descent and
distribution. The benefits under the Severance Program shall inure to the
benefit of and be enforceable by your legal representatives.
(b) Any rights and obligations under the Severance Program shall
inure to the benefit of and be binding upon Broadcom and its successors and
assigns.
(c) Broadcom will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially
all of the business and/or assets of Broadcom to expressly assume and agree
in writing to perform its obligations under this agreement and the
Severance Program in the same manner and to the same extent that Broadcom
would be required to perform it if no such succession had taken place. As
used in the Severance Program, "Broadcom" shall include any successor to
all or substantially all of its business and/or assets, as aforesaid, which
assumes and agrees to perform the obligations created by the Severance
Program by operation of law, or otherwise.
Initials: /s/ SM
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