Arthur
Chong
Senior Vice President, General Counsel and Secretary
Broadcom Corporation
5300 California Avenue
Irvine, California 92617
Broadcom
Corporation considers it essential to its best interests and those
of its shareholders that you be encouraged to remain with the
company and continue to devote your full attention to
Broadcom’s business, notwithstanding the possibility that
your employment with Broadcom might end in connection with or
following a Change of Control event defined in Section (14) of
the revised Appendix II set forth below (“ Change in
Control ”). Accordingly, the Compensation Committee of
the Broadcom Board of Directors (the “ Compensation
Committee ”) has decided to continue your participation
in the special change in control severance benefit program (the
“ Program ”) for an additional one-year period
ending August 18, 2010. The purpose of this new letter
agreement (the “ New Agreement ”) is to restate
the terms and conditions that will govern your continued
participation in the Program. Your prior participation in the
Program was initially governed by the October 27, 2008 letter
agreement between you and Broadcom at the time you first became a
participant in the Program (the “ Original Letter
Agreement ”). Except for a few changes necessary to
comply with developments in the laws and regulations applicable to
the Program and to clarify certain provisions governing
post-employment coverage under certain Broadcom employee benefit
plans, the terms and conditions set forth in this New Agreement are
substantially the same as those in effect under the
Appendix II to your Original Letter Agreement.
Appendix II
as currently in effect under your Original Letter Agreement is
hereby superseded by new Appendix II set forth below and shall
cease to have any force or effect upon your execution of this New
Agreement. All the other terms and provisions of your Original
Letter Agreement governing your employment with Broadcom shall
remain in full force and effect and shall not in any way be
revised, modified or amended by any provision of this New
Agreement.
REVISED APPENDIX II —
CHANGE IN CONTROL SEVERANCE BENEFIT PROGRAM
Your
participation in the Program will continue under this New Agreement
from August 19, 2009 through August 18, 2010 (such term,
together with any renewals thereof, to constitute the “
Term ”). On August 19 of each calendar year,
beginning with the 2010 calendar year, the Term shall, without any
action by Broadcom or the Compensation Committee,
automatically
be extended for one (1) additional year unless, before any
such automatic renewal date, the Compensation Committee, by a
majority vote, expressly determines that the automatic extension
for such year shall not apply.
Employment
with Broadcom is at-will, and Broadcom may unilaterally 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 will automatically
terminate upon your death. Any termination of your employment by
Broadcom or you during the Term (or, if your employment extends
beyond the Term, during the first twenty-four (24) months
following a Change in Control that occurs during the Term) shall be
communicated by a “ Notice of Termination
.”
If
a Change in Control is effected during the Term and within
twenty-four (24) months after the effective date of that
Change in Control:
(i) Broadcom
unilaterally terminates your employment other than for Cause or
Disability, or
(ii) you
terminate your employment for Good Reason,
Broadcom
shall make the payments and provide the benefits described below,
provided you were employed on a full-time basis by Broadcom
immediately prior to such termination and, with respect to certain
of those benefits, there is compliance with each of the following
requirements (the “ Severance Benefit Requirements
”):
(i) you
deliver the general release required under Section (25) (the
“ Required Release ”) within the applicable time
period following your Date of Termination,
(ii) the
Required Release becomes effective in accordance with applicable
law following the expiration of any applicable revocation
period,
(iii) you
comply with each of the restrictive covenants set forth in Section
(9), and
(iv) you
are and continue to remain in material compliance with your
obligations to Broadcom under your Confidentiality and Invention
Assignment Agreement.
The
payments and benefits to which you will become entitled if all the
Severance Benefits Requirements are satisfied are as
follows:
(1) Cash
Severance . Broadcom will pay you cash severance (“
Cash Severance ”) in an amount equal to two
(2) times the sum of (A) your annual rate of base salary
(using your then current rate or, if you terminate your employment
for Good Reason pursuant Section (16) due to an excessive reduction
in your base salary, then your rate of base salary immediately
before such reduction) and (B) the average of your actual
annual bonuses for the three calendar years (or such fewer number
of calendar years of employment with Broadcom) immediately
preceding the calendar year in which such termination of employment
occurs. Such Cash Severance shall be payable over a
twenty-
2
four (24)-month
period in successive equal bi-weekly or semi-monthly installments
in accordance with the payment schedule in effect for your Base
Salary on your Date of Termination. Subject to the deferral
provisions of Section (8) below, the Cash Severance payments
will begin on the first regular pay day, within the sixty
(60) day period measured from the date of your Separation from
Service, on which your Required Release is effective following the
expiration of the maximum review/delivery period and all applicable
revocation periods, but in no event shall such initial payment be
made later than the last business day of such sixty (60)-day period
on which the Required Release is so effective. The installment
payments shall cease once you have received the full amount of your
Cash Severance. The installment payments shall be treated as a
series of separate payments for purposes of the final Treasury
Regulations under Section 409A (“
Section 409A ”) of the Code. However, the amount
of Cash Severance to which you may be entitled pursuant to the
foregoing provisions of this Section (1) shall be subject to
reduction in accordance with Section (9) in the event you breach
your restrictive covenants under Section (9).
(2) Options and
Other Equity Awards . Notwithstanding any less favorable terms
of any stock option or other equity award agreement or plan, any
options to purchase shares of Broadcom’s common stock or any
restricted stock units or other equity awards granted to you by
Broadcom, that are outstanding on your Date of Termination and not
otherwise fully vested shall be subject to accelerated vesting in
accordance with the following provisions:
(i) On the date
your timely executed and delivered Required Release becomes
effective following the expiration of the maximum review/delivery
period and any applicable revocation period (the “ Release
Condition ”), you will receive twenty-four
(24) months of service vesting credit under each of your
outstanding stock options, restricted stock units and other equity
awards.
(ii) The portion
of each of your outstanding stock options, restricted stock units
and other equity awards that remains unvested after your
satisfaction of the Release Condition will vest in a series of
twenty-four (24) successive equal monthly installments over
the twenty-four (24)-month period measured from your Date of
Termination (the “Additional Monthly Vesting”),
provided that during each successive month within that twenty-four
(24)-month period (x) you must comply with all of your
obligations under your Confidentiality and Invention Assignment
Agreement with Broadcom that survive the termination of your
employment with Broadcom and (y) you must comply with the
restrictive covenants set forth in Section (9). In the event that
you violate the Confidentiality and Invention Assignment Agreement
or engage in any of the activities precluded by the restrictive
covenants set forth in Section (9), you shall not be entitled to
any Additional Monthly Vesting for and after the month in which
such violation or activity (as the case may be) occurs.
In addition, the
period for exercising each option that accelerates in accordance
with subparagraph (i) or (ii) above shall be extended
from the limited post-termination period otherwise provided in the
applicable stock option agreement until the earlier
of (A) the end of the twenty-four (24)-month period measured
from your Date of
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Termination or
(if later) the end of the one-month period measured from each
installment vesting date of that option in accordance herewith or
(B) the applicable expiration date of the maximum ten
(10)-year or shorter option term. Upon your satisfaction of the
Release Condition, the limited post-termination exercise period for
any other options granted to you by Broadcom and outstanding on
your Date of Termination shall also be extended in the same manner
and to the same extent as your accelerated options.
The shares of
Broadcom Class A common stock underlying any restricted stock
unit award that vests on an accelerated or Additional Monthly
Vesting basis in accordance with this Section (2) shall be
issued as follows: The shares subject to that award that vest upon
the satisfaction of the Release Condition shall be issued within
the sixty (60) day period measured from the date of your
Separation from Service, but in no event later than the next
regularly-scheduled share issuance date for that restricted stock
unit award (currently, the 5th day of February, May, August and
November each year) following the date of your Separation from
Service on which the Release Condition is satisfied, unless subject
to further deferral pursuant to the provisions of Section
(8) below the (“ Initial Issuance Date ”),
and each remaining share subject to such restricted stock unit
award shall be issued on the next regularly-scheduled share
issuance date for that restricted stock unit award (currently, the
5th day of February, May, August and November each year) following
the prescribed vesting date for that share in accordance with this
Section (2), but in no event earlier than the Initial Issuance
Date.
(3) Lump Sum
Benefit Payments . Provided you satisfy the Release Condition,
the following special payments shall be made to you to provide you
with a source of funding to cover a portion of the cost of any
health care, life insurance and disability insurance coverage you
obtain following your Date of Termination:
A.
Provided you and your spouse and eligible dependents elect to
continue medical care coverage under Broadcom’s group health
care plans pursuant to the applicable COBRA provisions, Broadcom
will make a lump sum cash payment (the “ Lump Sum Health
Care Payment ”) to you in an amount equal to thirty-six
(36) times the amount by which (i) the monthly cost
payable by you, as measured as of your Date of Termination, to
obtain COBRA coverage for yourself, your spouse and eligible
dependents under Broadcom’s employee group health plan at the
level in effect for each of you on such Date of Termination exceeds
(ii) the monthly amount payable at such time by a
similarly-situated executive whose employment with Broadcom has not
terminated to obtain group health care coverage at the same level.
Broadcom shall pay the Lump Sum Health Care Payment to you on the
earlier of (A) the first business day of the
first calendar month, within the sixty (60) day period
measured from the date of your Separation from Service, that is
coincident with or next following the date on which your Required
Release is effective following the expiration of the maximum
review/delivery period and all applicable revocation periods or
(B) the last business day of such sixty (60) day period
on which such Required Release is so effective. Notwithstanding the
foregoing, the Lump Sum Health Care Payment shall be subject to the
deferred payment provisions of Section (8) below, to the
extent such payment exceeds the applicable dollar amount under
section 402(g)(1) of the Code for the year in which your Separation
from Service occurs. In addition, Broadcom cannot provide any
assurances hereunder as to the
4
maximum period
for which you and your spouse and dependents may in fact be
entitled to COBRA health care coverage under the Broadcom group
health care plans, and it is expected that such coverage will cease
prior to the expiration of the thirty-six month period measured
from your Date of Termination, except under certain limited
circumstances.
B.
You shall also be entitled to an additional lump sum cash payment
(the “ Lump Sum Insurance Benefit Payment ”)
from Broadcom in an amount equal to twelve (12) times the
amount by which (i) the monthly cost payable by you, as
measured as of your Date of Termination, to obtain post-employment
continued coverage under Broadcom’s employee group term life
insurance and disability insurance plans at the level in effect for
you on such Date of Termination exceeds (ii) the monthly
amount payable at that time by a similarly-situated executive whose
employment with Broadcom has not terminated to obtain similar
coverage. Broadcom shall pay the Lump Sum Insurance Benefit Payment
to you concurrently with the payment of the Lump Sum Health Care
Benefit, provided, however, that the Lump Sum Insurance Benefit
Payment shall be subject to the deferred payment provisions of
Section (8) below, to the extent such payment, when added to
the Lump Sum Health Care Payment, exceeds the applicable dollar
amount under section 402(g)(1) of the Code for the year in which
your Separation from Service occurs.
Should
you wish to obtain such actual post-employment continued coverage
under Broadcom’s group term life insurance and disability
insurance plans, Broadcom shall serve as the agent for transmitting
your required monthly premium payments for such coverage to the
applicable insurance companies. Broadcom shall serve such agency
role solely to facilitate the payment of those monthly premiums to
the applicable insurance companies and shall not be responsible or
liable for any loss of coverage you may incur under such plans by
reason of (i) your failure to make the required monthly
premium payments to Broadcom on a timely basis so as to allow their
transmittal to such insurance companies by the applicable due dates
(including any applicable grace periods) or (ii) the failure
of the insurance companies to make such post-employment coverage
available under their applicable plans.
(4) Additional
Payments Broadcom shall, to the extent applicable, pay you the
following amounts, provided you satisfy the Release
Condition:
(i)
any cash bonus that was not vested on your Date of Termination
because a requirement of continued employment had not yet been
satisfied by you, but with respect to which the applicable
performance goal or goals had been fully attained as of your Date
of Termination (for the avoidance of doubt, a bonus shall be
payable under this clause (i) only to the extent that any
performance criteria with respect to such bonus had been satisfied
during the applicable performance period), and
(ii)
provided you were employed for the entire plan year immediately
preceding your Date of Termination and discretionary bonuses are
payable for that plan year to similarly-situated Broadcom
executives whose employment has not terminated, any discretionary
bonus the Compensation Committee may decide to award you for that
plan year on the basis of your individual performance and
contributions during that plan year.
5
Any bonus payment
to which you become entitled under clause (i) of this Section
(4) shall be paid to you at the same time you are paid your first
Cash Severance installment under Section (1), after taking into
account any required deferral under Section (8) and, provided
further that if such bonus is intended to qualify as
“performance-based compensation” under Code
Section 162(m), such payment shall also be subject to an
appropriate present value discount reasonably reflecting the time
value of money, in accordance with the Treasury Regulations under
Code Section 162(m), to the extent such payment is in fact
made earlier than the scheduled payment date for that bonus under
the applicable Broadcom bonus plan or arrangement. Any bonus
payment to which you may become entitled under clause (ii) of
this Section (4) shall also be paid to you at the same time or
(if later) the tenth business day following the date the
Compensation Committee awards you such discretionary bonus, subject
to any required deferral under Section (8).
The amounts set
forth in Sections (5) and (6) below shall be referred to
collectively as the “ Accrued Obligations ” and
shall not be subject to your delivery of the Required Release or
your compliance with the restrictive covenants set forth in Section
(9).
(5) Accrued
Salary, Expenses and Bonus . On your Date of Termination,
Broadcom shall pay you (i) any earned but unpaid base salary
through that date based on the rate in effect at the time the
Notice of Termination is given, (ii) any unreimbursed business
expenses incurred by you, and (iii) any cash bonus that 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 if such bonus is
intended to qualify as “performance-based compensation”
under Code Section 162(m), such payment shall be subject to an
appropriate present value discount reasonably reflecting the time
value of money, in accordance with the Treasury Regulations under
Code Section 162(m), to the extent such payment is in fact
made earlier than the scheduled payment date for that bonus under
the applicable Broadcom bonus plan or arrangement). However, any
vested amounts deferred by you under one or more Broadcom
non-qualified deferred compensation programs or arrangements
subject to Section 409A that remain unpaid on your Date of
Termination shall be paid at such time and in such manner as set
forth in each applicable plan or agreement governing the payment of
those deferred amounts, subject, however, to the deferred payment
provisions of Section (8) below.
(6) Vacation
and Deferred Compensation . Broadcom shall, upon your Date of
Termination, pay you an amount equal to your accrued but unpaid
vacation pay, if any (based on your then-current rate of base
salary). Any vested amounts deferred by you under one or more
Broadcom non-qualified deferred compensation programs subject to
Section 409A that remain unpaid on your Date of Termination
shall be paid at such time
6
and in such
manner as set forth in each applicable plan or agreement governing
the payment of those deferred amounts, subject, however, to the
deferred payment provisions of Section (8) below. Any other
vested amounts owed to you under any other compensation plans or
programs will be paid to you in accordance with the terms and
provisions of each such applicable plan or program.
(7) 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 that you are eligible
to receive under any plan, program, policy, practice, contract,
agreement, etc. of Broadcom and its affiliated companies, including
(without limitation) any benefits payable to you under a plan,
policy, practice, contract or agreement referred to in
Section 24 (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. However, the payment of such Other
Benefits shall be subject to any applicable deferral period under
Section (8) below to the extent such benefits constitute items
of deferred compensation subject to Section 409A.
Notwithstanding
the foregoing provisions of this Section (7), in no event shall you
be allowed to participate in the Broadcom Corporation 1998 Employee
Stock Purchase Plan, as amended and restated, or the 401(k)
Employee Savings Plan following your Date of Termination or to
receive any substitute benefits hereunder in replacement of those
particular benefits, but you shall be entitled to the full value of
any benefits accrued under such plans prior to your Date of
Termination.
(8) Delay in
Payment for Certain Specified Employees . The following special
provisions shall govern the commencement date of certain payments
and benefits to which you may become entitled under the
Program:
A.
Notwithstanding any provision in this Appendix II to the
contrary other than Section (8)B below, no payment or benefit under
the Program that constitutes an item of deferred compensation under
Section 409A and becomes payable in connection with your
termination of employment will be made to you prior to the
earlier of (i) the first day of the seventh
(7th) month following the date of your Separation from Service or
(ii) the date of your death, if you are deemed to be a
Specified Employee at the time of such Separation from Service and
such delayed commencement is otherwise required to avoid a
prohibited distribution under Section 409A(a)(2) of the Code.
Any cash amounts to be so deferred shall immediately upon your
Separation from Service be deposited by Broadcom into a grantor
trust that satisfies the requirements of Revenue Procedure 92-64
and that will accordingly serve as the funding source for Broadcom
to satisfy its obligations to you with respect to the heldback
amounts upon the expiration of the required deferral period,
provided, however , that the funds deposited into such trust
shall at all times remain subject to the claims of Broadcom’s
creditors and shall be maintained and located at all times in the
United States. Upon the expiration of the applicable deferral
period, all payments and benefits deferred pursuant to this Section
(8)A (whether they would have otherwise been payable in a single
sum or in installments in the absence of such deferral) shall be
paid or provided to you in a lump sum, either from the grantor
trust or by Broadcom directly, on the first day of the seventh
(7th)
7
month after the
date of your Separation from Service or, if earlier, the first day
of the month immediately following the date Broadcom receives proof
of your death. Any remaining payments due under the Program will be
paid in accordance with the normal payment dates specified
herein.
B.
The portion of your Lump Sum Health Care Payment that is not in
excess of the applicable dollar amount in effect under
Section 402(g)(1)(B) of the Code for the calendar year in
which your Separation from Service occurs shall not be subject to
the Section (8)A deferred payment requirement. If the Lump Sum
Health Care Benefit does not exceed such dollar amount, then the
deferred payment provisions of Section (8)A shall not be applicable
to the Lump Sum Insurance Benefit Payment to the extent the dollar
amount of that payment, when added to the Lump Sum Health Care
Payment, does not exceed the applicable dollar amount in effect
under Section 402(g)(1)(B) of the Code for the calendar year
in which your Separation from Service occurs.
C.
It is the intent of the parties that the provisions of this
Appendix II comply with all applicable requirements of
Section 409A. Accordingly, to the extent there is any
ambiguity as to whether one or more provisions of this
Appendix II would otherwise contravene the applicable
requirements or limitations of Section 409A, then those
provisions shall be interpreted and applied in a manner that does
not result in a violation of the applicable requirements or
limitations of Section 409A and the applicable Treasury
Regulations thereunder.
(9) Restrictive
Covenants. You hereby acknowledge that your right and
entitlement to the severance benefits specified in Sections (1),
(2)(ii) and (10) of this Appendix II are, in addition to
your satisfaction of the Release Condition, also subject to your
compliance with each of the following covenants during the two
(2) year period measured from your Date of Termination, and
those enumerated severance benefits will immediately cease or be
subject to reduction in accordance herewith should you breach any
of the following covenants:
A. You shall not
directly or indirectly encourage or solicit any employee,
consultant or independent contractor to leave the employ or service
of Broadcom (or any affiliated company) for any reason or interfere
in any other manner with any employment or service relationships at
the time existing between Broadcom (or any affiliated company) and
its employees, consultants and independent contractors.
B. You shall not
directly or indirectly solicit or otherwise induce any vendor,
supplier, licensor, licensee or other business affiliate of
Broadcom (or any affiliated company) to terminate its existing
business relationship with Broadcom (or affiliated company) or
interfere in any other manner with any existing business
relationship between Broadcom (or any affiliated company) and any
such vendor, supplier, licensor, licensee or other business
affiliate.
C. You shall not,
whether on your own or as an employee, consultant, partner,
principal, agent, representative, equity holder or in any other
capacity, directly or indirectly render, anywhere in the United
States, services of any kind or
8
provide any
advice or assistance to any business, enterprise or other entity
that is engaged in any line of business that competes with one or
more of the lines of business that were conducted by Broadcom
during the Term of your employment or that are first conducted
after your Date of Termination but which you were aware were under
serious consideration by Broadcom prior to your Date
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