<PAGE> 1
As filed with the Securities and Exchange Commission on August 6, 1998
Registration No. 333-___________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
BROADCOM CORPORATION
(Exact name of registrant as specified in its charter)
CALIFORNIA 33-0480482
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
16251 LAGUNA CANYON ROAD
IRVINE, CALIFORNIA 92618
(Address of principal executive offices) (Zip Code)
BROADCOM CORPORATION
1998 STOCK INCENTIVE PLAN
1998 EMPLOYEE STOCK PURCHASE PLAN
(Full title of the Plans)
--------------------------
HENRY T. NICHOLAS, III, PH.D.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
BROADCOM CORPORATION
16251 LAGUNA CANYON ROAD
IRVINE, CALIFORNIA 92618
(Name and address of Agent for service)
(949) 450-8700
(Telephone number, including area code, of agent for service)
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=====================================================================================================================
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered(1) per Share Price Fee
=====================================================================================================================
<S> <C> <C> <C> <C>
1998 STOCK INCENTIVE PLAN:
Class A Common Stock, $0.0001 par value 15,948,439 shares $58.6875(2) $935,974,013.81(2) $276,112.33
Class B Common Stock, $0.0001 par value 7,948,228 shares $5.21(3) $41,410,267.88(3) $12,216.03
- ---------------------------------------------------------------------------------------------------------------------
1998 EMPLOYEE STOCK PURCHASE PLAN:
Class A Common Stock, $0.0001 par value 750,000 shares $58.6875(2) $44,015,625.00(2) $12,984.61
- ---------------------------------------------------------------------------------------------------------------------
REGISTERING SHAREHOLDER:
Class A Common Stock, $0.0001 par value 225,000 shares(4) $58.6875(2) $13,204,687.50(2) $3,895.38
- ---------------------------------------------------------------------------------------------------------------------
TOTAL $1,034,604,594.19 $305,208.35
=====================================================================================================================
</TABLE>
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the Broadcom Corporation 1998
Stock Incentive Plan by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without the
Registrant's receipt of consideration which results in an increase in
the number of the outstanding shares of the Registrant's Common Stock.
(2) Calculated solely for purposes of this offering under Rule 457(h) of the
Securities Act of 1933, as amended (the "Securities Act"), on the basis
of the average of the high and low selling prices per share of the
Registrant's Class A Common Stock on August 5, 1998, as reported on the
Nasdaq National Market.
(3) Calculated on the basis of the weighted average exercise price of the
outstanding options to purchase shares of Class B Common Stock under the
Registrant's 1998 Stock Incentive Plan. The Class B Common Stock is not
listed on the Nasdaq National Market.
(4) Such shares are being registered for the convenience of the Shareholder.
All of such shares are currently subject to an underwriters' lock-up
agreement that expires on or about October 13, 1998. In addition, as of
August 3, 1998, 187,812 of such shares were subject to repurchase by the
Company, at the Company's option and at a price equal to the original
purchase price paid by Shareholder, in the event the Shareholder ceases
to remain in Service with the Company as provided under the terms
of a Stock Purchase Agreement between Shareholder and the Company dated
as of December 29, 1997. The number of shares subject to repurchase will
decline hereafter on a ratable basis in accordance with a monthly
vesting schedule tied to shareholder's continued Service with the
Company. Unvested shares are subject to transfer restrictions under the
Stock Purchase Agreement.
<PAGE> 2
225,000 SHARES
BROADCOM CORPORATION
Class A Common Stock
($0.0001 PAR VALUE)
-----------------
This Prospectus relates to the offer and sale of up to 225,000 shares
of the Class A Common Stock(1), par value $0.0001 per share (the "Shares"), of
Broadcom Corporation, a California corporation (the "Company"), by one of the
Company's shareholders (the "Shareholder"). The Shareholder is an executive
officer of the Company who serves as Vice President of Worldwide Sales, and the
Shares were acquired by him under the Company's 1994 Amended and Restated Stock
Option Plan (the "1994 Plan"). The Shares were issued pursuant to an exemption
from the registration requirements of the Securities Act of 1933, as amended
(the "Securities Act"), provided by Section 4(2) of the Securities Act.
The Shares may be offered by the Shareholder from time to time in
broker-dealer transactions effected through the Nasdaq National Market at market
prices prevailing at the time of the sale. For further information concerning
such sales, see the section below entitled "Plan of Distribution." The Company
will not receive any of the proceeds from the sale of the Shares offered hereby.
The Shares offered by the Shareholder involve a high degree of risk.
Investors should carefully consider the information set forth under the heading
"Risk Factors" and other cautionary language set forth in this Prospectus.
The Company's Class A Common Stock is quoted on the Nasdaq National
Market under the symbol BRCM. On August 5, 1998 the average of the high and low
selling prices of the Class A Common Stock was $58.6875 per share.
-----------------
SEE "RISK FACTORS" COMMENCING ON PAGE 3 FOR A DISCUSSION OF FACTORS
THAT SHOULD BE CONSIDERED CAREFULLY IN EVALUATING AN INVESTMENT IN THE CLASS A
COMMON STOCK OFFERED HEREBY.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------------
THE DATE OF THIS PROSPECTUS IS AUGUST 6, 1998
- ------------------
(1) The shares are currently shares of the Company's Class B Common Stock, par
value $.0001 per share. However, each such share of Class B Common Stock is
convertible, at the option of the holder, into one share of Class A Common
Stock and will convert automatically into one share of Class A Common Stock
upon the sale of the Class B Common Stock pursuant to this Prospectus. The
two classes of Common Stock are substantially identical, except that the
holders of the Class A Common Stock are entitled to one vote per share and
the holders of the Class B Common Stock are entitled to ten votes per share
on matters submitted to a shareholder vote.
<PAGE> 3
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements, information statements and
other information with the Securities and Exchange Commission (the
"Commission"). Reports, proxy statements and other information filed by the
Company may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices located at 75 Park Place,
New York, New York 10007 and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material can be obtained by mail from the
Public Reference Branch of the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. In addition, the Commission
maintains an Internet web site at http://www.sec.gov that contains the Company's
reports, proxy materials and other information filed with the Commission. The
Class A Common Stock of the Company is quoted on the Nasdaq National Market, and
such material may also be inspected at the offices of Nasdaq Operations, 1735 K
Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a registration statement on
Form S-8 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act with respect to the Class A
Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information regarding the Company and the Class A Common Stock offered
hereby, reference is hereby made to the Registration Statement and to the
exhibits and schedules filed therewith. The Registration Statement, including
the exhibits and schedules thereto, may be inspected at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and copies of all or any part thereof may be obtained
from such office upon payment of the prescribed fees. The Commission's web site
at http://www.sec.gov also contains the Registration Statement, including the
exhibits and schedules thereto.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFERING MADE HEREBY, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, ANY SHAREHOLDER OR BY ANY OTHER PERSON. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES COVERED
BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO OR SOLICITATION OF ANY
PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION MAY NOT LAWFULLY
BE MADE.
THE COMPANY
The Company is a leading developer of highly integrated silicon
solutions that enable broadband digital data transmission to the home and within
the business enterprise. The Company is organized and existing under the laws of
the State of California and its principal executive offices are located at 16251
Laguna Canyon Road, Irvine, California 92618. The Company's telephone number is
(949) 450-8700.
2
<PAGE> 4
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the Class
A Common Stock offered hereby. This Prospectus contains forward-looking
statements that involve risks and uncertainties. The Company's actual results
may differ materially and adversely from the results discussed in the
forward-looking statements. The factors that may affect the Company's business,
financial condition and results of operations include, but are not limited to,
the following:
Fluctuations in Results of Operations. The Company's quarterly results
of operations have fluctuated significantly in the past and may continue to
fluctuate in the future based on a number of factors, many of which are not in
the Company's control, including, but not limited to, the volume of product
sales and pricing concessions on volume sales; the timing, rescheduling and
cancellation of significant customer orders; the gain or loss of a significant
customer; the timing of customer qualification and industry interoperability
certification of new products; the rate of adoption by customers and end users
of new and emerging technologies in the high-speed data networking, cable
set-top box, cable modem, direct broadcast satellite, terrestrial wireless and
digital subscriber line (xDSL) markets; the rate of adoption and acceptance of
new industry standards in the foregoing markets; the qualification, availability
and pricing of competing products and technologies from other vendors; delays in
the specification or design of new products; fluctuations in manufacturing
yields and other problems or delays in the fabrication, assembly, testing or
delivery of products; uncertainties associated with international operations;
the Company's ability to retain and hire key executives, technical personnel and
other employees in the numbers and with the capabilities needed to implement its
business and product plans; problems or delays in migrating product designs to
smaller geometry processes; changes in product and customer mix; intellectual
property disputes; the Company's ability to develop, introduce and market new
products and technologies on a timely basis; the amount and timing of
recognition of development revenue; general business conditions in the
semiconductor industry and the broadband communications markets; availability of
foundry capacity and raw materials; the quality of the Company's products; the
timing of investments in, and the results of, research and development; the
Company's ability to expand and implement its sales and marketing programs; the
level of orders received that can be shipped in a quarter; the effects on
operations and management of facility relocations; currency fluctuations; and
general economic conditions. The Company intends to continue to increase its
operating expenses significantly in 1998. Because a large portion of the
Company's operating expense, including rent, salaries and capital lease
expenses, is fixed and difficult to reduce or modify, if total revenue does not
meet the Company's expectations, the effect of any revenue shortfall will be
magnified by the fixed nature of these operating expenses. Based on the
foregoing or other factors, it is possible that in some future periods the
Company's reported or anticipated operating results will fail to meet or exceed
the expectations of analysts or investors. In such event, the price of the
Company's Class A Common Stock would likely be materially and adversely
affected.
Customer Concentration. A relatively small number of customers have
accounted for a significant portion of the Company's total revenue to date, and
the Company expects that this trend will continue for the foreseeable future. In
particular, sales to three of the Company's key customers (including sales to
their respective manufacturing subcontractors) accounted for approximately
41.6%, 23.4% and 10.2% of the Company's total revenue in the three months ended
June 30, 1998. Sales to two of these customers accounted for approximately 31.8%
and 36.8% of total revenue in the six months ended June 30, 1998 and 31.9% and
14.6% of total revenue in fiscal year 1997. Moreover, sales to the Company's
five largest customers (including sales to their respective manufacturing
subcontractors) represented approximately 81.1% and 81.7% in the three and six
months ended June 30, 1998, respectively, and accounted for approximately 61.7%
of the Company's total revenue in fiscal year 1997. Accordingly, the Company's
future results of operations will continue to be substantially dependent on the
success of its largest customers and on the Company's success in selling its
existing and future products to those customers in significant quantities. Any
reduction or delay in sales of the Company's products to one or more of these
key customers could have a material adverse effect on the Company's business,
financial condition and results of operations. There can be no assurance that
the Company will retain its largest customers or that it will be able to obtain
additional key customers. The loss of one or more of the Company's largest
customers or the inability of the Company to successfully develop relationships
with additional key customers could have a material adverse effect on the
Company's business, financial condition and results of operations.
Most of the Company's customers can cease incorporating the Company's
products in their own products with limited notice to the Company and with
little or no penalty. The Company's agreements with its customers typically do
not require minimum purchases. In addition, certain of the Company's customers
offer or may offer products (designed by themselves or third parties) that
compete with those offered by the Company. Many of the
3
<PAGE> 5
Company's customers have pre-existing relationships with current or potential
competitors of the Company, which may affect such customers' purchasing
decisions. In addition, the Company's longstanding relationship with certain of
its larger customers may affect the purchasing decisions of other potential
customers who compete with these customers. The Company's customers face intense
competition from other manufacturers that do not use the Company's products.
Further, some of the Company's customers have "most favored nation" pricing
arrangements which could materially and adversely affect the Company's average
selling prices and gross margins in the event of product pricing decisions that
trigger such arrangements.
Rapid Technological Change; Dependence on Emerging Markets and Evolving
Standards. The semiconductor industry and the broadband communications markets
are characterized by rapidly changing technology, frequent new product
introductions and evolving industry standards. Substantially all of the
Company's current product revenue is derived from sales of products for the
high-speed networking, cable set-top box and cable modem markets. These markets
are characterized by intense competition, rapid technological change and short
product life cycles. In particular, the high-speed networking, cable set-top box
and cable modem markets continue to undergo a period of rapid growth and
consolidation. The Company's business, financial condition and results of
operations would be materially and adversely affected in the event of a
significant slowdown in these or other broadband communications markets. The
Company's success will depend on the ability of its customers to develop new
products and enhance existing products for the broadband communications markets
and to successfully introduce and promote such products. There can be no
assurance that the broadband communications markets will develop to the extent
or in the timeframes anticipated by the Company. The failure of new markets to
develop as anticipated or the failure of the Company's products in these markets
to gain widespread acceptance could have a material adverse effect on the
Company's business, financial condition and results of operations. Products for
broadband communications applications are generally based on industry standards,
which are continually evolving. The emergence of new industry standards could
render products of the Company or its customers unmarketable or obsolete and may
require the Company to incur substantial unanticipated costs to comply with any
such new standards. Moreover, the Company's past sales and profitability have
resulted, to a significant extent, from its ability to anticipate changes in
technology and industry standards and to develop and introduce new and enhanced
products. The Company's continued ability to adapt to such changes and to
anticipate future standards, and the rate of adoption and acceptance of those
standards, will be a significant factor in maintaining or improving the
Company's competitive position and its prospects for growth. The Company has in
the past invested substantial resources in emerging technologies, such as
100Base-T4 for high-speed networking, for which the market did not ultimately
meet the Company's expectations. There can be no assurance that the Company will
be able to anticipate the evolving standards in the semiconductor industry and,
in particular, the broadband communications markets, or that the Company will be
able to successfully develop and introduce new products into such markets. The
failure of the Company to anticipate technological change and introduce new
products that achieve market acceptance could materially and adversely affect
the Company's business, financial condition and results of operations.
Dependence on Development of New Products. The Company's future success
will depend upon its ability to develop new silicon solutions for existing and
new markets, introduce such products in a timely and cost-effective manner and
have such products selected for design into new products of leading equipment
manufacturers ("design wins"). The development of these new devices is highly
complex, and from time to time the Company has experienced delays in completing
the development and introduction of new products. Successful product development
and introduction depends on a number of factors, including, among other things,
accurate prediction of market requirements and evolving standards, accurate new
product definition, timely completion and introduction of new product designs,
timely qualification and industry interoperability certification of the
Company's products and the products into which the Company's products will be
incorporated, availability of foundry capacity, achievement of high
manufacturing yields, and market acceptance of the Company's and its customers'
products. Furthermore, there can be no assurance that the Company will be able
to introduce new products in a timely and cost-effective manner or in sufficient
quantities to meet customer demand or that such products will satisfy customer
requirements or achieve market acceptance. The Company's quarterly results have
in the past been and are expected in the future to continue to be dependent upon
the introduction of a relatively small number of new products and the timely
completion and delivery of those products to customers. The Company's or its
customers' failure to develop and introduce new products successfully and in a
timely manner would materially and adversely affect the Company's business,
financial condition and results of operations. The Company's new products are
generally incorporated into customers' products or systems at the design stage.
Achieving a design win often requires significant expenditures by the Company
without any assurance of success. Moreover, design wins frequently precede the
generation of volume sales, if any, by six to nine months or more. The value of
any design win largely depends upon
4
<PAGE> 6
the commercial success of the customer's product and on the extent to which the
design of the customer's electronic system accommodates components manufactured
by the Company's competitors. There can be no assurance that the Company will
continue to achieve design wins or that the products for which the Company
achieves design wins will be commercially successful.
Dependence on Key Personnel. The Company's success depends to a
significant extent upon the continued service of its executive officers and
other key management and technical personnel and on its ability to continue to
attract, retain and motivate qualified personnel, particularly experienced
mixed-signal circuit designers and systems applications engineers. The
competition for such employees is intense, and the Company may not be able to
attract as many qualified new personnel as it was able to employ prior to its
initial public offering. The loss of the services of one or more of the
Company's key employees or the Company's failure to attract, retain and motivate
qualified personnel could have a material adverse effect on the Company's
business, financial condition and results of operations. In particular, the loss
of the services of Dr. Henry T. Nicholas, III, the co-founder, President and
Chief Executive Officer, or Dr. Henry Samueli, the co-founder, Vice President of
Research & Development and Chief Technical Officer, could materially and
adversely affect the Company. The Company does not have employment contracts
with its employees.
Competition. The broadband communications markets and semiconductor
industries are intensely competitive and are characterized by rapid
technological change, evolving standards, short product life cycles and price
erosion. The Company competes with a number of major domestic and international
suppliers of equipment in the markets for cable set-top boxes, cable modems,
high-speed networking, DBS and terrestrial digital broadcast, and xDSL. This
competition has resulted and may continue to result in declining average selling
prices for the Company's products. The Company currently competes in the cable
television set-top box market with Rockwell, Philips, LSI Logic and VLSI
Technology for communication devices and with ST Microelectronics, LSI Logic and
C-Cube in the MPEG segment. The Company expects other major semiconductor
manufacturers to enter the market as the digital broadcast television and other
digital cable television markets become more established. A number of companies,
including Rockwell, Libit Signal Processing Ltd. and STI, have announced that
they are developing and plan to introduce MCNS/DOCSIS compliant products in
1998, which could result in significant competition in the cable modem market.
In the high-speed networking market, the Company principally competes with
established suppliers including Lucent Technologies and Level One
Communications. The Company's principal competitors in the DBS market include
LSI Logic, Philips, Rockwell, ST Microelectronics and VLSI Technology, and the
Company's principal competitors in the xDSL market include Analog Devices,
Alcatel, Motorola and Globespan. The Company also may face competition from
suppliers of products based on new or emerging technologies. Many of the
Company's competitors operate their own fabrication facilities and have longer
operating histories and presence in key markets, greater name recognition,
access to larger customer bases and significantly greater financial, sales and
marketing, manufacturing, distribution, technical and other resources than the
Company. As a result, such competitors may be able to adapt more quickly to new
or emerging technologies and changes in customer requirements or devote greater
resources to the promotion and sale of their products than the Company. Current
and potential competitors have established or may establish financial or
strategic relationships among themselves or with existing or potential
customers, resellers or other third parties. Accordingly, it is possible that
new competitors or alliances among competitors could emerge and rapidly acquire
significant market share. In addition, existing or new competitors may in the
future develop technologies that more effectively address the transmission of
digital information through existing analog infrastructures at a lower cost.
There can be no assurance that the Company will be able to compete successfully
against current or potential competitors, or that competition will not have a
material adverse effect on the Company's business, financial condition and
results of operations.
Management of Growth. The Company has experienced a period of rapid
growth, expanding from 164 employees in June 1997 to 378 employees (including
temporary and contract employees) in June 1998. This expansion has placed, and
continues to place, significant strain on the Company's resources. To
accommodate this growth, the Company will be required to implement a variety of
new and upgraded operational and financial systems, procedures and controls,
including the improvement of its accounting and other internal management
systems, all of which may require substantial management effort. There can be no
assurance that such efforts can be accomplished successfully. The Company's
rapid growth and expansion, as well as its product development and selling,
general and administrative activities, have necessitated the increase in the
number of employees as well as increased responsibilities for the Company's
management. To support its growth, the Company is in final negotiations to lease
and improve new facilities that will allow all of its Irvine employees and
operations to be centralized on one campus. This relocation of the Company's
headquarters and Irvine operations could result in a
5
<PAGE> 7
temporary disruption of the Company's operations or a temporary diversion of
management attention and resources. From time to time the Company engages in
other relocations of employees or operations. If the Company sustains its growth
in the future, it will need to continue to implement and improve its
operational, financial and management information systems and to hire, train,
motivate and manage its expanding employee base. There can be no assurance that
the Company's systems, procedures and controls will be adequate to support the
Company's operations. Any difficulties resulting from relocation of employees or
operations or any failure to improve the Company's operational, financial and
management information systems, or to hire, train, motivate or manage its
employees could have a material adverse effect on the Company's business,
financial condition and results of operations.
Dependence on Independent Foundries. The Company does not own or
operate a fabrication facility, and substantially all of its semiconductor
device requirements are currently supplied by two outside foundries, Taiwan
Semiconductor Manufacturing Corporation ("TSMC") in Taiwan and Chartered
Semiconductor Manufacturing ("Chartered") in Singapore. There are significant
risks associated with the Company's reliance on outside foundries, including the
lack of ensured wafer supply, limited control over delivery schedules, quality
assurance and control, manufacturing yields and production costs, and the
unavailability of or delays in obtaining access to key process technologies. In
addition, the manufacture of ICs is a highly complex and technologically
demanding process. Although the Company works closely with its foundries to
minimize the likelihood of reduced manufacturing yields, the Company's foundries
have from time to time experienced lower than anticipated manufacturing yields,
particularly in connection with the introduction of new products and the
installation and start-up of new process technologies.
The Company provides its foundries with rolling forecasts of its
production requirements; however, the ability of each foundry to provide
semiconductor devices to the Company is limited by the foundry's available
capacity. Although the Company has entered into contractual commitments to
supply specified levels of products to certain of its customers, the Company
does not have a long-term volume purchase agreement or a guaranteed level of
production capacity with TSMC or Chartered because the Company believes excess
foundry capacity is currently available. The Company places its orders on a
purchase order basis, and these foundries may allocate capacity to the
production of other companies' products while reducing deliveries to the Company
on short notice. In particular, foundry customers that are larger and better
financed than the Company or that have long-term agreements with the Company's
foundries may cause such foundries to reallocate capacity in a manner adverse to
the Company. In addition, if the Company chooses to use a new foundry, several
months are typically required to complete the qualification process before the
Company can begin shipping the new foundry's products. Although the Company
primarily utilizes two independent foundries, most of the Company's components
are not manufactured at both foundries at any given time. Any inability of one
of the foundries to provide the necessary components could result in significant
delays and could have a material adverse effect on the Company's business,
financial condition and results of operations. In the event either foundry
experiences financial difficulties (whether as a result of the Asian economic
crisis or otherwise) or suffers any damage or destruction to its respective
facilities, or in the event of any other disruption of foundry capacity, the
Company may not be able to qualify alternative manufacturing sources for
existing or new products in a timely manner. Even the Company's current outside
foundries would need to have certain manufacturing processes qualified in the
event of disruption at another foundry, which the Company may not be able to
accomplish in a timely enough manner to prevent an interruption in supply of the
affected products. There can be no assurance that any such sources would be able
to produce ICs with acceptable manufacturing yields. Furthermore, there can be
no assurance that the Company's foundries will continue to deliver sufficient
quantities of semiconductor devices on a timely basis, will not experience lower
than expected manufacturing yields in the future, or will continue to have
excess capacity, any of which events could materially and adversely affect the
Company's business, financial condition and results of operations.
Dependence on Third-Party Subcontractors for Assembly and Test.
Substantially all of the Company's products are assembled and tested by one of
two third-party subcontractors, ASAT Ltd. ("ASAT") in Hong Kong and ST Assembly
Test Services ("STATS") in Singapore. The Company does not have long-term
agreements with either of these suppliers and typically procures services from
such suppliers on a per order basis. The availability of assembly and testing
services from these subcontractors could be aversely affected in the event
either subcontractor experiences financial difficulties (whether as a result of
the Asian economic crisis or otherwise) or suffers any damage or destruction to
its respective facilities, or in the event of any other disruption of assembly
and testing capacity. As a result of this reliance on third-party subcontractors
for assembly and testing of its products, the Company cannot directly control
product delivery schedules, which has in the past, and could in the future
result in
6
<PAGE> 8
product shortages or quality assurance problems that could increase the costs of
manufacture, assembly or testing of the Company's products. Due to the amount of
time normally required to qualify assemblers and testers, if the Company is
required to find alternative manufacturing assemblers or testers of its
components, shipments could be delayed. Any problems associated with the
delivery, quality or cost of the Company's products could have a material
adverse effect on the Company's business, financial condition and results of
operations.
Risks Associated with Potential Acquisitions. As part of its business
strategy, the Company expects to review acquisition prospects that would
complement its existing product offerings, augment its market coverage or
enhance its technological capabilities. Although the Company has no current
agreements or negotiations underway with respect to any material acquisitions,
the Company may make acquisitions of businesses, products or technologies in the
future. However, there can be no assurance that the Company will be able to
locate suitable acquisition opportunities or to consummate any such acquisitions
on terms and conditions acceptable to the Company. Future acquisitions by the
Company could result in potentially dilutive issuances of equity securities,
large one-time write-offs, the incurrence of debt and contingent liabilities or
amortization expenses related to goodwill and other intangible assets, any of
which could materially adversely affect the Company's results of operations or
the price of the Company's Class A Common Stock. Furthermore, acquisitions
entail numerous risks, including difficulties in the assimilation and
integration of operations, personnel, technologies, products and the information
systems of the acquired companies, diversion of management's attention from
other business concerns, risks of entering geographic or business markets in
which the Company has no or limited prior experience and the potential loss of
key employees. Since the Company has not made any material acquisitions in the
past, no assurance can be given as to the ability of the Company to successfully
integrate any businesses, products, technologies or personnel that might be
acquired in the future, and the failure of the Company to do so could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Risks Associated with Expansion of International Business Activities.
The Company currently procures substantially all of its manufacturing, assembly
and test services from suppliers located outside the United States and may
expand its manufacturing activities abroad. Approximately 15.1% and 13.1% of the
Company's total revenue in the three and six months ended June 30, 1998,
respectively, was derived from sales to independent customers based outside the
United States. In calendar year 1997, approximately 15.4% of the Company's total
revenue was derived from sales to independent customers based outside of the
United States. In addition, the Company often ships products to its domestic
customers' international manufacturing divisions and subcontractors.
Accordingly, the Company is subject to risks inherent in international
operations, which include, but are not limited to, political, social and
economic instability, trade restrictions, the imposition of governmental
controls, exposure to different legal standards (particularly with respect to
intellectual property), burdens of complying with a variety of foreign laws,
import and export license requirements, future import and export restrictions,
unexpected changes in regulatory requirements, foreign technical standards,
changes in tariffs, difficulties in staffing and managing operations,
difficulties in collecting receivables and potentially adverse tax consequences.
In particular, certain Asian countries have recently experienced significant
economic difficulties, including currency devaluation and instability, business
failures and a generally depressed business climate, particularly in the
semiconductor industry. In view of the Company's reliance on Asian foundries and
assemblers, and the Company's expanded international operations, the Asian
economic crisis may have a material adverse effect on the Company's business,
financial condition and results of operations.
In addition, certain of the Company's products contain encryption or
other features that are subject to various government export regulations,
pursuant to which the Company has applied for export licenses. If such licenses
are not granted, the Company may be unable to manufacture such products at its
foreign foundries or to ship such products to certain customers located outside
the United States. There can be no assurance that the Company will obtain such
licenses or any licenses applied for in the future or that the failure to obtain
such licenses will not have a material adverse effect on the Company's business,
financial condition and results of operations. Moreover, demand for the
Company's products could be adversely affected by seasonality of international
sales and economic conditions in the Company's primary overseas markets. All of
the Company's international sales to date have been denominated in U.S. dollars.
As a result, an increase in the value of the U.S. dollar relative to foreign
currencies could make the Company's products less competitive in international
markets. There can be no assurance that the risks associated with the Company's
international operations will not materially adversely affect the Company's
business, financial condition and results of operations in the future or require
the Company to modify significantly its current business practices.
7
<PAGE> 9
Reliance on Strategic Relationships. The Company has relied on in the
past, and intends to continue to form in the future, strategic relationships
with certain of its customers who are technology leaders in the Company's target
markets. These relationships often involve the proposed development by the
Company of new products involving significant technological challenges. Since
the proposed product under development may offer potential competitive
advantages to the strategic partner, considerable pressure is frequently placed
on the limited resources of the Company to meet development schedules. While an
essential element of the Company's strategy involves establishing such
relationships, these projects utilize substantial amounts of the Company's
limited resources, and could materially detract from or delay the completion of
other important development projects. Delays in development could impair the
relationship between the Company and its strategic partners. Moreover, there can
be no assurance that customers of the Company will not develop their own
solutions for products currently supplied by the Company, which could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Transition to Smaller Geometry Process Technologies. The Company
continuously evaluates the benefits, on a product-by-product basis, of migrating
to smaller geometry process technologies in order to reduce costs and has
commenced migration of certain products to smaller geometry processes. The
Company believes that the transition of its products to increasingly smaller
geometries will be important for the Company to remain competitive. The Company
has in the past experienced difficulty in migrating to new manufacturing
processes, which has resulted and could continue to result in reduced yields,
delays in product deliveries and increased expense levels. Moreover, the Company
is dependent on its relationships with its foundries to migrate to smaller
geometry processes successfully. No assurance can be given that the Company's
future process migrations will be achieved without difficulties, delays or
increased expenses. The Company's business, financial condition and results of
operations could be materially and adversely affected if any such transition is
substantially delayed or inefficiently implemented.
Risks Associated with Intellectual Property Protection. The Company's
success and future revenue growth will depend, in part, on its ability to
protect its intellectual property. The Company relies primarily on patent,
copyright, trademark and trade secret laws, as well as nondisclosure agreements
and other methods to protect its proprietary technologies and processes. There
can be no assurance that such measures will provide meaningful protection for
the Company's proprietary technologies and processes. The Company has been
issued three United States patents and has filed fourteen United States patent
applications. There can be no assurance that any patent will issue as a result
of these applications or future applications or, if issued, that any claims
allowed will be sufficiently broad to protect the Company's technology. In
addition, there can be no assurance that any existing or future patents will not
be challenged, invalidated or circumvented, or that any right granted thereunder
would provide meaningful protection to the Company. The failure of any patents
to provide protection to the Company's technology would make it easier for the
Company's competitors to offer similar products. In connection with its
participation in the development of various industry standards, the Company may
be required to agree to license certain of its patents to other parties,
including its competitors, that develop products based upon the adopted
standards. The Company also generally enters into confidentiality agreements
with its employees and strategic partners, and generally controls access to and
distribution of its documentation and other proprietary information. Despite
these precautions, it may be possible for a third party to copy or otherwise
obtain and use the Company's products, services or technology without
authorization, develop similar technology independently or design around the
Company's patents. In addition, effective copyright, trademark and trade secret
protection may be unavailable or limited in certain foreign countries. Certain
of the Company's customers have entered into agreements with the Company
pursuant to which such customers have the right to use the Company's proprietary
technology in the event the Company defaults in its contractual obligations,
including product supply obligations, and fails to cure the default within a
specified period of time. Moreover, the Company often incorporates the
intellectual property of its strategic customers into its designs, and the
Company has certain obligations with respect to the non-use and non-disclosure
of such intellectual property. There can be no assurance that the steps taken by
the Company to prevent misappropriation or infringement of the intellectual
property of the Company or its customers will be successful. Moreover,
litigation may be necessary in the future to enforce the Company's intellectual
property rights, to protect the Company's trade secrets or to determine the
validity and scope of proprietary rights of others, including its customers.
Such litigation could result in substantial costs and diversion of management's
efforts and other Company resources and could have a material adverse effect on
the Company's business, financial condition and results of operations.
The semiconductor industry is characterized by vigorous protection of
and pursuit of intellectual property rights. From time to time, the Company has
received, and may continue to receive in the future, notices of claims of
8
<PAGE> 10
infringement of other parties' proprietary rights. The Company has received a
letter from counsel for BroadCom, Inc. asserting rights in the "Broadcom"
trademark and demanding that the Company cease and desist from any further use
of the Broadcom name. The Company and BroadCom, Inc. have exchanged
correspondence outlining their respective positions on the matter. In addition,
the Company is currently involved in litigation with Stanford
Telecommunications, Inc. ("STI") concerning the alleged infringement of one of
STI's patents by one or more of the Company's modem products and with Sarnoff
Corporation and Sarnoff Digital Communications, Inc. (collectively, "Sarnoff")
concerning the alleged misappropriation and misuse of certain Sarnoff trade
secrets by the Company. There can be no assurance that the Company will prevail
in these actions, or that other actions alleging infringement by the Company of
third-party patents, misappropriation or misuse by the Company of third-party
trade secrets or the invalidity of one or more patents held by the Company will
not be asserted or prosecuted against the Company, or that any assertions of
infringement, misappropriation or misuse or prosecutions seeking to establish
the invalidity of Company-held patents will not materially and adversely affect
the Company's business, financial condition and results of operations. For
example, in a patent or trade secret action, an injunction could issue against
the Company requiring that the Company withdraw certain products from the market
or necessitating that certain products offered for sale or under development be
redesigned; the Company has also entered into certain indemnification
obligations in favor of its customers and strategic partners that could be
triggered upon an allegation or finding of the Company's infringement,
misappropriation or misuse of other parties' proprietary rights. Irrespective of
the validity or successful assertion of such claims, the Company would likely
incur significant costs and diversion of its management and personnel resources
with respect to the defense of such claims, which could also have a material
adverse effect on the Company's business, financial condition and results of
operations. If any claims or actions are asserted against the Company, the
Company may seek to obtain a license under a third party's intellectual property
rights. There can be no assurance that under such circumstances a license would
be available on commercially reasonable terms, if at all.
Lengthy Sales Cycle. The Company's sales cycle involves test and
evaluation of its products by the potential customer and design of the
customer's equipment to incorporate the Company's products. The sales cycle for
the test and evaluation of the Company's products can range from three to six
months or more, and it can take an additional six to nine months or more before
a customer commences volume production of equipment that incorporates the
Company's products. Because of this lengthy sales cycle, the Company may
experience a delay between increasing expenses for research and development,
sales and marketing, and general and administrative efforts, as well as
increasing investments in inventory, and the generation of revenues, if any,
from such expenditures. In addition, the delays inherent in such lengthy sales
cycle raise additional risks of customer decisions to cancel or change product
plans, which could result in the loss of anticipated sales by the Company.
Achieving a design win provides no assurance that such customer will ultimately
ship products incorporating the Company's products. The Company's business,
financial condition and results of operations could be materially adversely
affected if a significant customer curtails, reduces or delays orders during the
Company's sales cycle or chooses not to release products employing the Company's
products.
Order and Shipment Uncertainties. The Company's sales are generally
made pursuant to individual purchase orders that may be canceled or deferred by
customers on short notice without significant penalty. Cancellation or deferral
of product orders could result in the Company holding excess inventory, which
could have a material adverse effect on the Company's profit margins and
restrict its ability to fund its operations. The Company recognizes revenue upon
shipment of products to the customer. Refusal of customers to accept shipped
products or delays or difficulties in collecting accounts receivable could
result in significant charges against income, which could have a material
adverse effect on the Company's business, financial condition and results of
operations.
Product Complexity. Products as complex as those offered by the Company
frequently contain errors, defects and bugs when first introduced or as new
versions are released. The Company has in the past experienced such errors,
defects and bugs. Delivery of products with production defects or reliability,
quality or compatibility problems could significantly delay or hinder market
acceptance of such products, which could damage the Company's reputation and
adversely affect the Company's ability to retain its existing customers and to
attract new customers. Moreover, such errors, defects or bugs could cause
problems, interruptions, delays or a cessation of sales to the Company's
customers. Alleviating such problems may require significant expenditures of
capital and resources by the Company. There can be no assurance that, despite
testing by the Company, its suppliers or its customers, errors, defects or bugs
will not be found in new products after commencement of commercial production,
resulting in additional development costs, loss of, or delays in, market
acceptance, diversion of technical and other resources from the Company's other
development efforts, product repair or replacement costs, claims by the
9
<PAGE> 11
Company's customers or others against the Company, or the loss of credibility
with the Company's current and prospective customers. Any such event could have
a material adverse effect on the Company's business, financial condition and
results of operations.
Cyclicality of the Semiconductor Industry. The Company provides
semiconductor devices to the broadband communications markets. The semiconductor
industry is highly cyclical and subject to rapid technological change and has
been subject to significant economic downturns at various times, characterized
by diminished product demand, accelerated erosion of average selling prices and
production overcapacity. The semiconductor industry also periodically
experiences increased demand and production capacity constraints. As a result,
the Company may experience substantial period-to-period fluctuations in future
results of operations due to general semiconductor industry conditions, overall
economic conditions or other factors.
Limited Operating History. The Company was incorporated in August 1991
but did not begin shipping products until 1994. Accordingly, the Company has a
limited operating history upon which investors may evaluate the Company and its
prospects. The Company's recent revenue growth may not be sustainable and should
not be considered indicative of future revenue growth, if any. There can be no
assurance that the Company will be profitable in any future period. The
Company's prospects must be considered in light of the risks, challenges and
difficulties frequently encountered by companies in their early stage of
development, particularly companies in intensely competitive and rapidly
evolving markets such as the semiconductor industry and the broadband
communications markets. To address these risks, the Company must, among other
things, successfully increase the scope of its operations, respond to
competitive and technological developments, continue to attract, retain and
motivate qualified personnel and continue to commercialize products
incorporating innovative technologies. There can be no assurance that the
Company will be successful in addressing these risks and challenges.
Risks Associated with Government Regulation. The Federal Communications
Commission (the "FCC") has broad jurisdiction over each of the Company's target
markets. Although the Company's products are not directly subject to current
regulations of the FCC or any other federal or state communications regulatory
agency, much of the equipment into which the Company's products are incorporated
is subject to direct government regulation. Accordingly, the effects of
regulation on the Company's customers or the industries in which they operate
may, in turn, adversely impact the Company's business, financial condition and
results of operations. FCC regulatory policies affecting the ability of cable
operators or telephone companies to offer certain services and other terms on
which these companies conduct their businesses may impede sales of the Company's
products. For example, the Company has in the past experienced delays when
products incorporating its chips failed to comply with FCC emissions
specifications. In addition, the Company's business, financial condition and
results of operations may also be adversely affected by the imposition of
certain tariffs, duties and other import restrictions on components that the
Company obtains from non-domestic suppliers or by the imposition of export
restrictions on products that the Company sells internationally. The Company may
also be subject to regulation by countries other than the United States. Changes
in current laws or regulations or the imposition of new laws and regulations in
the United States or elsewhere, could materially and adversely affect the
Company's business, financial condition and results of operations.
Control by Directors, Executive Officers and Their Affiliates. As of
June 30, 1998, the Company's directors and executive officers beneficially owned
approximately 54.5% of the outstanding Common Stock and 60.3% of the total
voting control of the Company. In particular, as of June 30, 1998, the two
founders of the Company, Dr. Henry T. Nicholas, III and Dr. Henry Samueli,
beneficially owned an aggregate of approximately 49.5% of the outstanding Common
Stock and 54.8% of the total voting control of the Company. Accordingly, such
persons will have sufficient voting power to control the outcome of matters
(including the election of a majority of the Board of Directors, and any merger,
consolidation or sale of all or substantially all of the Company's assets)
submitted to the shareholders for approval and will also have control over the
management and affairs of the Company. As a result of such control, certain
transactions may not be possible without the approval of such shareholders.
These transactions include proxy contests, mergers involving the Company, tender
offers, open market purchase programs or other purchases of Class A Common Stock
that could give shareholders of the Company the opportunity to realize a premium
over the then prevailing market price for their shares of Class A Common Stock.
Year 2000 Compliance. Many existing computer systems and applications,
and other control devices, use only two digits to identify a year in the date
field, without considering the impact of the upcoming change in the century.
Others do not correctly process "leap year" dates. As a result, such systems and
applications could fail or create erroneous results unless corrected so that
they can correctly process data related to the year 2000 and beyond,
10
<PAGE> 12
but there can be no assurance that such upgrades will be completed on a timely
basis or without incurring substantial costs. The Company is evaluating its
products for material year 2000 compliance and will consider making any changes
to its current or future products required to achieve such compliance. There can
be no assurance, however, that the Company will make any such changes or that
any of the Company's products are or will be year 2000 compliant. The Company
relies on its systems, applications and devices in operating and monitoring all
major aspects of its business, including financial systems (such as general
ledger, accounts payable and payroll modules), customer services,
infrastructure, embedded computer chips, networks and telecommunications
equipment and end products. Although the Company is in the process of upgrading
its software to address the year 2000 issue, there can be no assurance that such
upgrades will be completed on a timely basis at reasonable costs, or that such
upgrades will be able to anticipate all of the problems triggered by the actual
impact of the year 2000. The Company also relies, directly and indirectly, on
external systems of suppliers for the management and control of fabrication,
assembly and testing of substantially all of the Company's products and of
business enterprises such as customers, suppliers, creditors, financial
organizations, and of governmental entities, both domestic and international,
for accurate exchange of data. The Company could be affected through disruptions
in the operation of the enterprises with which the Company interacts or from
general widespread problems or an economic crisis resulting from noncompliant
year 2000 systems. Despite the Company's efforts to address the year 2000 impact
on its internal systems and business operations, there can be no assurance that
such impact will not result in a material disruption of its business or have a
material adverse effect on the Company's business, financial condition or
results of operations.
Future Capital Needs; Uncertainty of Additional Funding. The Company
believes that the aggregate net proceeds from its initial public offering and
sale of shares to Cisco Systems, together with cash generated from its
operations and funds available under its credit facility, will be sufficient to
meet its capital requirements for at least the next twelve months. Nonetheless,
the Company may elect to sell additional equity securities or to obtain
additional credit facilities. The Company's future capital requirements may vary
materially from those now planned and will depend on many factors, including,
but not limited to, the levels at which the Company maintains inventory and
accounts receivable, the market acceptance of the Company's products, the levels
of promotion and advertising required to launch such products and attain a
competitive position in the marketplace, volume pricing concessions, the
Company's business, product, capital expenditure and research and development
plans and technology roadmap, capital improvements to new and existing
facilities, technological advances, the response of competitors to the Company's
products and relationships with suppliers and customers. In addition, the
Company may require an increase in the level of working capital to accommodate
planned growth, hiring, infrastructure and facility needs, including the lease
of new facilities to centralize all Irvine employees and operations on one
campus, which lease is currently in final negotiations. Additional capital may
be required for consummation of any acquisitions of businesses, products or
technologies. To the extent the Company's existing resources and any future
earnings are insufficient to fund the Company's activities, the Company may need
to raise additional funds through public or private financing. No assurance can
be given that additional financing will be available or that if available, any
such financing can be obtained on terms favorable to the Company and its
shareholders. If adequate funds are not available, the Company may be required
to curtail its operations significantly or to obtain funds through arrangements
with strategic partners or others that may require the Company to relinquish
rights to certain of its technologies or potential markets. If additional funds
are raised through the issuance of equity securities, the percentage ownership
of the then existing shareholders of the Company would be reduced. Such equity
securities may have rights, preferences or privileges senior to those of the
holders of the Company's Common Stock.
Stock Price Volatility. The trading price of the Company's Class A
Common Stock has been and could continue to be subject to wide fluctuations in
response to quarter to quarter variations in results of operations,
announcements of technological innovations or new products by the Company or its
competitors, general conditions in the semiconductor, telecommunications and
data communications equipment markets, changes in earnings estimates or buy/sell
recommendations by analysts, investor perceptions and expectations regarding the
products, plans and strategic position of the Company, its competitors and its
customers, or other events or factors. In addition, the public stock markets
have experienced extreme price and trading volume volatility, particularly in
high technology sectors of the market. This volatility has significantly
affected the market prices of securities of many technology companies for
reasons frequently unrelated to the operating performance of the specific
companies. These broad market fluctuations may adversely affect the market price
of the Company's Class A Common Stock.
Potential Effect of Anti-Takeover Provisions. The Company's Articles of
Incorporation and Bylaws contain provisions that may discourage or prevent
certain types of transactions involving an actual or potential change in
11
<PAGE> 13
control of the Company, including transactions in which the shareholders might
otherwise receive a premium for their shares over then current market prices,
and may limit the ability of the shareholders to approve transactions that they
may deem to be in their best interests. In addition, the Company has outstanding
Class B Common Stock, which entitles each holder thereof to ten votes per share
on all matters presented for a shareholder vote. The Board of Directors also has
the authority to fix the rights and preferences of shares of the Company's
Preferred Stock and to issue such shares without a shareholder vote. It is
possible that the provisions in the Company's Articles of Incorporation and
Bylaws, the existence of super voting rights held by insiders and the ability of
the Board of Directors to issue Preferred Stock may have the effect of delaying,
deferring or preventing a change of control of the Company without further
action by the shareholders, may discourage bids for the Company's Class A Common
Stock at a premium over the market price of the Class A Common Stock and may
adversely affect the market price of the Class A Common Stock and the voting and
other rights of the holders of Class A Common Stock.
SHAREHOLDER
The table below sets forth (i) the number of shares of Class A Common
Stock owned by the Shareholder as of August 3, 1998, (ii) the number of Shares
to be sold pursuant to this offering, (iii) the number of shares of Class A
Common Stock to be retained by the Shareholder if all the Shares offered hereby
are in fact sold and (iv) the percentage of the outstanding Class A Common Stock
that the Shareholder will own if all the Shares are sold. The Shareholder is the
Company's Vice President of Worldwide Sales. The Shares were issued to the
Shareholder in connection with his exercise of a stock option granted under the
Company's 1994 Plan. The Shareholder paid for the Shares by delivering to the
Company a $1,800,000 full-recourse promissory note due in December 2002. The
note bears interest at the rate of 6.5% per annum, compounded semi-annually.
The Shares offered by this Prospectus may be offered from time to time
by the Shareholder named below:
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF OUTSTANDING
NUMBER OF NUMBER OF SHARES TO CLASS A
SHARES OWNED SHARES OFFERED BE OWNED COMMON STOCK
NAME OF BEFORE FOR SALE AFTER OWNED AFTER
SHAREHOLDER OFFERING(1) HEREBY(2) OFFERING(1) SALE(3)
- -------------------- ----------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
Aurelio E. Fernandez 255,000 225,000 30,000 *
</TABLE>
- -------------------
* Less than 1%.
(1) The Shareholder holds an immediately exercisable stock option for 30,000
shares of Class B Common Stock in addition to the 225,000 Shares of which he
is the beneficial owner.
(2) This Registration Statement covers any additional shares of Class A Common
Stock which become issuable in connection with the Shares by reason of any
stock divided, stock split, recapitalization or other similar transaction
effected without the Company's receipt of consideration which results in an
increase in the number of the Company's outstanding shares of Class A Common
Stock.
(3) The shares of Class B Common Stock purchasable under the Shareholder's
option will automatically convert on a one-for-one basis into shares of
Class A Common Stock upon the sale of those Class B shares.
12
<PAGE> 14
PLAN OF DISTRIBUTION
The Company will receive no proceeds from the sale of the Shares
pursuant to this offering. The Shares offered hereby may be sold by Shareholder
from time to time through broker-dealer transactions effected on the Nasdaq
National Market at market prices prevailing at the time of sale. The
broker-dealers participating in such transactions may act as agent or may
acquire the Shares as principal. Any broker-dealer acting as agent may receive
commissions from the Shareholder and/or the purchasers of the Shares for whom
such broker-dealer is acting as agent. Usual and customary brokerage fees will
be paid by the Shareholder. Broker-dealers may agree with the Shareholder to
sell a specified number of Shares at a stipulated price per Share and, to the
extent such broker-dealer is unable to do so as agent for the Shareholder, to
purchase as principal any unsold Shares at the price required to fulfill the
broker-dealer commitment to the Shareholder. Broker-dealers who acquire the
Shares as principal may subsequently resell such Shares from time to time
(including sales to or through other broker-dealers) in transactions effected on
the Nasdaq National Market or through negotiated transactions or otherwise, at
market prices prevailing at the time of sale or at negotiated prices. In
connection with such resales, the broker-dealer may pay to or receive from the
purchasers of the Shares compensation in the form of discounts, concessions or
commissions, which may, as to a particular broker-dealer, be in excess of
customary commissions.
The Shareholder and any broker-dealers who participate with the
Shareholder in the distribution of the Shares may under certain circumstances be
deemed to be "underwriters" within the meaning of the Securities Act. In such
event, the Shareholder may indemnify any such broker-dealer against certain
liabilities, including liabilities arising under the Securities Act. Any
commissions received by the broker-dealers participating in the distribution and
any profit on the resale of the Shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the Shares may not simultaneously engage
in market making activities with respect to the Class A Common Stock of the
Company for a period of two (2) business days prior to the commencement of such
distribution. In addition, and without limiting the foregoing, the Shareholder
will be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, Regulation M, which may
limit the timing of purchases and sales of shares of the Company's Class A
Common Stock by the Shareholder.
The Shareholder will furnish each broker-dealer through whom the Shares
offered hereby may be sold such copies of this Prospectus as such person may
require.
13
<PAGE> 15
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission pursuant to the
Exchange Act are incorporated herein by reference:
(a) The Company's Registration Statement No. 333-45619 on Form S-1
filed with the Commission on February 5, 1998, together with the
amendments thereto on Forms S-1/A filed with the Commission on
February 27, 1998, March 10, 1998, March 23, 1998, April 8, 1998,
April 15, 1998 and April 16, 1998, respectively.
(b) The Company's prospectus filed with the Commission on April 17,
1998 pursuant to Rule 424(b) promulgated under the Securities Act
in connection with the Company's Registration Statement No.
333-45619 on Form S-1, in which there is set forth the Company's
audited financial statements for the fiscal year ended December 31,
1997.
(c) The Company's Quarterly Reports on Form 10-Q for the fiscal
quarters ended March 31, 1998 and June 30, 1998 filed with the
Commission on May 15, 1998 and August 4, 1998, respectively.
(d) The Company's Registration Statement No. 000-23993 on Form 8-A
filed with the Commission on April 6, 1998, in which there is
described the terms, rights and provisions applicable to the
Company's outstanding Class A Common Stock.
(e) All other documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of the offering of the
Shares.
Any statement contained in a document incorporated by reference herein
shall be deemed to be incorporated by reference in this Prospectus and to be
part hereof from the date of filing of such documents. Any statement modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus. The Company will provide without charge to
each person to whom a copy of this Prospectus is delivered, upon the request of
any such person, a copy of any or all of the documents which are incorporated
herein by reference (other than exhibits to such information, unless such
exhibits are specifically incorporated by reference into the information this
Prospectus incorporates). Requests should be directed to Broadcom Corporation,
16251 Laguna Canyon Road, Irvine, California, 92618, Attention: William J.
Ruehle, Vice President and Chief Financial Officer; telephone number: (949)
450-8700.
14
<PAGE> 16
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
Broadcom Corporation (the "Registrant") hereby incorporates by
reference into this Registration Statement the following documents previously
filed with the Securities and Exchange Commission (the "Commission"):
(a) The Registrant's Registration Statement No. 333-45619 on Form S-1
filed with the Commission on February 5, 1998, together with the
amendments thereto on Forms S-1/A filed with the Commission on
February 27, 1998, March 10, 1998, March 23, 1998, April 8, 1998,
April 15, 1998 and April 16, 1998, respectively;
(b) The Registrant's prospectus filed with the Commission on April 17,
1998 under Rule 424(b) promulgated under the 1933 Act, in
connection with Registrant's Registration Statement No. 333-45619,
in which there is set forth the audited financial statements for
the Registrant's fiscal year ended December 31, 1997;
(c) The Registrant's Quarterly Reports on Form 10-Q for the fiscal
quarters ended March 31, 1998 and June 30, 1998, filed with the
Commission on May 15, 1998 and August 4, 1998, respectively; and
(d) The Registrant's Registration Statement No. 000-23993 on Form 8-A
filed with the Commission on April 6, 1998, in which there is
described the terms, rights and provisions applicable to the
Registrant's outstanding Class A Common Stock.
All reports and definitive proxy or information statements filed
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
Exchange, as amended (the "Exchange Act") after the date of this Registration
Statement and prior to the filing of a post-effective amendment which indicates
that all securities offered hereby have been sold or which de-registers all
securities then remaining unsold shall be deemed to be incorporated by reference
into this Registration Statement and to be a part hereof from the date of filing
of such documents. Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Registration Statement to the extent that a
statement contained herein or in any subsequently filed document which also is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Registration
Statement.
Item 4. Description of Securities
The terms, rights and provisions applicable to the Class A Common Stock
are set forth in the Registrant's Registration Statement No. 000-23993 on Form
8-A which is incorporated by reference into this Registration Statement pursuant
to Item 3(d). The shares of the Class B Common Stock are substantially identical
to the shares of Class A Common Stock, except that the holders of Class A Common
Stock are entitled to one (1) vote per share and the holders of the Class B
Common Stock are entitled to ten (10) votes per share on all matters submitted
to shareholder vote. In addition, each share of Class B Common Stock is
convertible at the option of the holder into one (1) share of Class A Common
Stock and will automatically convert into one (1) share of Class A Common Stock
upon the sale of the Class B Common Stock by the original holder.
II-1
<PAGE> 17
Item 5. Interests of Named Experts and Counsel
Not Applicable.
Item 6. Indemnification of Directors and Officers
The Registrant's Articles of Incorporation limit the personal liability
of its directors for monetary damages to the fullest extent permitted by the
California General Corporation Law (the "California Law"). Under the California
Law, a director's liability to a company or its shareholders may not be limited
with respect to the following items: (i) acts or omissions that involve
intentional misconduct or a knowing and culpable violation of law, (ii) acts or
omissions that a director believes to be contrary to the best interests of the
company or its shareholders or that involve the absence of good faith on the
part of the director, (iii) any transaction from which a director derived an
improper personal benefit, (iv) acts or omissions that show a reckless disregard
for the director's duty to the company or its shareholders in circumstances in
which the director was aware, or should have been aware, in the ordinary course
of performing a director's duties, of a risk of a serious injury to the company
or its shareholders, (v) acts or omissions that constitute an unexcused pattern
of inattention that amounts to an abdication of the director's duty to the
company or its shareholders, (vi) contacts or transactions between the company
and a director within the scope of Section 310 of the California Law or (vii)
improper dividends, loans and guarantees under Section 316 of the California
Law. The limitation of liability does not affect the availability of injunctions
and other equitable remedies available to the Company's shareholders for any
violation by a director of the director's fiduciary duty to the company or its
shareholders.
The Registrant's Articles of Incorporation also include an
authorization for the Registrant to indemnify its "agents" (as defined in
Section 317 of the California Law) through bylaw provisions, by agreement or
otherwise, to the fullest extent permitted by law. Pursuant to this provision,
the Registrant's Bylaws provide for indemnification of the Registrant's
directors, officers and employees. In addition, the Registrant may, at its
discretion, provide indemnification to persons whom the Registrant is not
obligated to indemnify. The Bylaws also allow the Registrant to enter into
indemnity agreements with individual directors, officers, employees and other
agents. These indemnity agreements have been entered into with all directors and
executive officers and provide the maximum indemnification permitted by law.
These agreements, together with the Registrant's Bylaws and Articles of
Incorporation, may require the Registrant, among other things, to indemnify
these directors or executive officers (other than for liability resulting from
willful misconduct of a culpable nature), to advance expenses to them as they
are incurred, provided that they undertake to repay the amount advanced if it is
ultimately determined by a court that they are not entitled to indemnification,
and to obtain directors' and officers' insurance if available on reasonable
terms. Section 317 of the California Law and the Registrant's Bylaws make
provision for the indemnification of officers, directors and other corporate
agents in terms sufficiently broad to indemnify such persons, under certain
circumstances, for liabilities (including reimbursement of expense incurred)
arising under the Securities Act.
Item 7. Exemption from Registration Claimed
Not Applicable.
Item 8. Exhibits
<TABLE>
<CAPTION>
Exhibit Number Exhibit
- -------------- -------
<S> <C>
4.1 Instruments Defining the Rights of Shareholders. Reference is
made to Registrant's Registration Statement No. 000-23993 on
Form 8-A, together with the exhibits thereto, which is
incorporated herein by reference pursuant to Item 3(d).
5.1 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Independent Auditors.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in
Exhibit 5.1.
24.1 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.
99.1 Broadcom Corporation 1998 Stock Incentive Plan.
99.2 Form of Notice of Grant of Stock Option.
99.3 Form of Stock Option Agreement.
</TABLE>
II-2
<PAGE> 18
<TABLE>
<CAPTION>
Exhibit Number Exhibit
- -------------- -------
<S> <C>
99.4 Form of Addendum to Stock Option Agreement (Involuntary
Termination Following Change In Control).
99.5 Form of Addendum to Stock Option Agreement (Limited Stock
Appreciation Right).
99.6 Form of Stock Issuance Agreement.
99.7 Form of Addendum to Stock Issuance Agreement (Involuntary
Termination Following Change in Control).
99.8 Form of Stock Purchase Agreement
99.9 Form of Notice of Grant of Automatic Stock Option (Initial
Grant).
90.10 Form of Notice of Grant of Automatic Stock Option (Annual
Grant).
99.11 Form of Automatic Stock Option Agreement.
99.12 Broadcom Corporation 1998 Employee Stock Purchase Plan,
as amended.
99.13 Form of Enrollment/Change Form.
99.14 Form of ESPP Stock Purchase Agreement.
</TABLE>
Item 9. Undertakings
A. The undersigned Registrant hereby undertakes: (1) to file, during
any period in which offers or sales are being made, a post-effective amendment
to this Registration Statement (i) to include any prospectus required by Section
10(a)(3) of the Securities Act, (ii) to reflect in the prospectus any facts or
events arising after the effective date of this Registration Statement (or the
most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in this
Registration Statement and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in this
Registration Statement or any material change to such information in this
Registration Statement; provided, however, that clauses (1)(i) and (1)(ii) shall
not apply if the information required to be included in a post-effective
amendment by those clauses is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference into this Registration Statement; (2) that for the
purpose of determining any liability under the Securities Act each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
Registrant's 1998 Stock Incentive Plan or 1998 Employee Stock Purchase Plan.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference into this Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or controlling persons of
the Registrant pursuant to the indemnification provisions summarized in Item 6
or otherwise, the Registrant has been advised that, in the opinion of the
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-3
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Act of Securities, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-8, and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Irvine, State of California on this
3rd day of August, 1998.
BROADCOM CORPORATION
By: /s/ Henry T. Nicholas, III, Ph.D.
---------------------------------
Henry T. Nicholas, III, Ph.D.,
Co-Chairman, President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned officers and directors of Broadcom Corporation, a
California corporation, do hereby constitute and appoint Henry T. Nicholas, III
and Henry Samueli and each of them, the lawful attorneys-in-fact and agents with
full power and authority to do any and all acts and things and to execute any
and all instruments which said attorneys and agents, and any one of them,
determine may be necessary or advisable or required to enable said corporation
to comply with the Securities Act of Securities, as amended, and any rules or
regulations or requirements of the Securities and Exchange Commission in
connection with this Registration Statement. Without limiting the generality of
the foregoing power and authority, the powers granted include the power and
authority to sign the names of the undersigned officers and directors in the
capacities indicated below to this Registration Statement, to any and all
amendments, both pre-effective and post-effective, and supplements to this
Registration Statement, and to any and all instruments or documents filed as
part of or in conjunction with this Registration Statement or amendments or
supplements thereof, and each of the undersigned hereby ratifies and confirms
that all said attorneys and agents, or any one of them, shall do or cause to be
done by virtue hereof. This Power of Attorney may be signed in several
counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated. Pursuant to the requirements of the
Securities Act of Securities, as amended, this Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Henry T. Nicholas, III, Ph.D. Co-Chairman, President and August 3, 1998
- ----------------------------------- Chief Executive Officer
Henry T. Nicholas, III, Ph.D. (Principal Executive Officer)
/s/ Henry Samueli, Ph.D. Co-Chairman, Vice President of August 3, 1998
- ----------------------------------- Research & Development and Chief
Henry Samueli, Ph.D. Technical Officer
</TABLE>
II-4
<PAGE> 20
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ William J. Ruehle Vice President and Chief Financial August 3, 1998
- ----------------------------------- Officer (Principal Financial
William J. Ruehle and Accounting Officer)
/s/ Alan E. Ross Director August 3, 1998
- -----------------------------------
Alan E. Ross
/s/ Myron S. Eichen Director August 3, 1998
- -----------------------------------
Myron S. Eichen
</TABLE>
II-5
<PAGE> 21
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
EXHIBITS
TO
FORM S-8
UNDER
SECURITIES ACT OF 1933
BROADCOM CORPORATION
<PAGE> 22
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Exhibit
- -------------- -------
<S> <C>
4.1 Instruments Defining the Rights of Shareholders. Reference is
made to Registrant's Registration Statement No. 000-23993 on
Form 8-A, together with the exhibits thereto, which is
incorporated herein by reference pursuant to Item 3(d).
5.1 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Independent Auditors.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in
Exhibit 5.1.
24.1 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.
99.1 Broadcom Corporation 1998 Stock Incentive Plan.
99.2 Form of Notice of Grant of Stock Option.
99.3 Form of Stock Option Agreement.
99.4 Form of Addendum to Stock Option Agreement (Involuntary
Termination Following Change In Control).
99.5 Form of Addendum to Stock Option Agreement (Limited Stock
Appreciation Right).
99.6 Form of Stock Issuance Agreement.
99.7 Form of Addendum to Stock Issuance Agreement (Involuntary
Termination Following Change in Control).
99.8 Form of Stock Purchase Agreement
99.9 Form of Notice of Grant of Automatic Stock Option (Initial
Grant).
90.10 Form of Notice of Grant of Automatic Stock Option (Annual
Grant).
99.11 Form of Automatic Stock Option Agreement.
99.12 Broadcom Corporation 1998 Employee Stock Purchase Plan,
as amended.
99.13 Form of Enrollment/Change Form.
99.14 Form of ESPP Stock Purchase Agreement.
</TABLE>
<PAGE> 1
EXHIBIT 5.1
OPINION AND CONSENT OF BROBECK, PHLEGER & HARRISON LLP
August 3, 1998
Broadcom Corporation
16251 Laguna Canyon Road
Irvine, California 92618
Re: Broadcom Corporation -
Registration Statement on Form S-8
Ladies and Gentlemen:
We have acted as counsel to Broadcom Corporation, a California
corporation (the "Company") in connection with the registration on Form S-8 (the
"Registration Statement") under the Securities Act of 1933, as amended, of (i)
15,948,439 shares of Class A Common Stock and 7,948,228 shares of Class B Common
Stock and related stock options for issuance under the Company's 1998 Stock
Incentive Plan (the "Incentive Plan"), (ii) 750,000 shares of Class A Common
Stock under the Company's 1998 Employee Stock Purchase Plan (the "Purchase
Plan"), and (iii) 225,000 shares of Class A Common Stock held by a selling
shareholder (the "Shareholder"). All of such shares are collectively referred
to herein as the "Shares."
This opinion is being furnished in accordance with the requirements of
Item 8 of Form S-8 and Item 601(b)(5)(i) of Regulation S-K.
We have reviewed the Company's charter documents and the corporate
proceedings taken by the Company in connection with the establishment of the
Incentive Plan and the Purchase Plan. Based on such review, we are of the
opinion that, (i) if, as and when the Shares have been issued and sold (and the
consideration therefor received) pursuant to (a) the provisions of option
agreements duly authorized under the Incentive Plan and in accordance with the
Registration Statement, or (b) duly authorized direct stock issuances in
accordance with the Incentive Plan and Purchase Plan and in accordance with the
Registration Statement, such Shares will be duly authorized, legally issued,
fully paid and nonassessable and (ii) the 225,000 Shares held by the
Shareholder, when sold in accordance with the Registration Statement and the
related reoffer prospectus (as amended and supplemented through the date of
sale), will be legally issued, fully paid and nonassessable.
We consent to the filing of this opinion letter as Exhibit 5.1 to the
Registration Statement. In giving this consent, we do not thereby admit that we
are within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission promulgated thereunder, or Item 509 of
Regulation S-K.
This opinion letter is rendered as of the date first written
above and we disclaim any obligation to advise you of facts, circumstances,
events or developments which hereafter may be brought to our attention and which
may alter, affect or modify the opinion expressed herein. Our opinion is
expressly limited to the matters set forth above and we render no opinion,
whether by implication or otherwise, as to any other matters relating to the
Company, the Incentive Plan, Purchase Plan or the Shares.
Very truly yours,
BROBECK, PHLEGER & HARRISON LLP
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference of our reports dated
January 16, 1998, except for Notes 7 and 9, as to which the date is March 31,
1998, in the Registration Statement (Form S-8) pertaining to the 1998 Stock
Incentive Plan and the 1998 Employee Stock Purchase Plan of Broadcom Corporation
and the prospectus dated August 6, 1998 prepared pursuant thereto, with respect
to the financial statements and schedule of Broadcom Corporation included in the
Registration Statement (Form S-1 No. 333-45619) for the year ended December 31,
1997, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Orange County, California
July 31, 1998
<PAGE> 1
EXHIBIT 99.1
BROADCOM CORPORATION
1998 STOCK INCENTIVE PLAN
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1998 Stock Incentive Plan is intended to promote the interests of
Broadcom Corporation, a California corporation, by providing eligible persons
with the opportunity to acquire a proprietary interest, or otherwise increase
their proprietary interest, in the Corporation as an incentive for them to
remain in the service of the Corporation.
Capitalized terms shall have the meanings assigned to such terms in
the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into five separate equity programs:
- the Discretionary Option Grant Program under which eligible
persons may, at the discretion of the Plan Administrator, be granted options to
purchase shares of Common Stock,
- the Salary Investment Option Grant Program under which eligible
employees may elect to have a portion of their base salary invested each year in
special option grants,
- the Stock Issuance Program under which eligible persons may, at
the discretion of the Plan Administrator, be issued shares of Common Stock
directly, either through the immediate purchase of such shares or as a bonus for
services rendered the Corporation (or any Parent or Subsidiary),
- the Automatic Option Grant Program under which eligible
non-employee Board members shall automatically receive option grants at periodic
intervals to purchase shares of Common Stock, and
- the Director Fee Option Grant Program under which non-employee
Board members may elect to have all or any portion of their annual retainer fee
otherwise payable in cash applied to a special option grant.
B. The provisions of Articles One and Seven shall apply to all equity
programs under the Plan and shall govern the interests of all persons under the
Plan.
<PAGE> 2
III. ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive authority to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to Section 16 Insiders. Administration of the Discretionary Option Grant
and Stock Issuance Programs with respect to all other persons eligible to
participate in those programs may, at the Board's discretion, be vested in the
Primary Committee or a Secondary Committee, or the Board may retain the power to
administer those programs with respect to all such persons. However, any
discretionary option grants or stock issuances for members of the Primary
Committee shall be authorized and approved by a disinterested majority of the
Board.
B. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time. The Board may also at any time terminate the functions of
any Secondary Committee and reassume all powers and authority previously
delegated to such committee.
C. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for proper administration of the Discretionary Option Grant and
Stock Issuance Programs and to make such determinations under, and issue such
interpretations of, the provisions of such programs and any outstanding options
or stock issuances thereunder as it may deem necessary or advisable. Decisions
of the Plan Administrator within the scope of its administrative functions under
the Plan shall be final and binding on all parties who have an interest in the
Discretionary Option Grant and Stock Issuance Programs under its jurisdiction or
any option or stock issuance thereunder.
D. The Primary Committee shall have the sole and exclusive authority
to determine which Section 16 Insiders and other highly compensated Employees
shall be eligible for participation in the Salary Investment Option Grant
Program for one or more calendar years. However, all option grants under the
Salary Investment Option Grant Program shall be made in accordance with the
express terms of that program, and the Primary Committee shall not exercise any
discretionary functions with respect to the terms and provisions of the option
grants made under that program.
E. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.
F. Administration of the Automatic Option Grant and Director Fee
Option Grant Programs shall be self-executing in accordance with the terms of
those programs, and no Plan Administrator shall exercise any discretionary
functions with respect to any option grants or stock issuances made under those
programs.
2.
<PAGE> 3
IV. ELIGIBILITY
A. The persons eligible to participate in the Discretionary Option
Grant and Stock Issuance Programs are as follows:
(i) Employees,
(ii) non-employee members of the Board or the board of directors of
any Parent or Subsidiary, and
(iii) consultants who provide services to the Corporation (or any
Parent or Subsidiary).
B. Only Employees who are Section 16 Insiders or other highly compensated
individuals shall be eligible to participate in the Salary Investment Option
Grant Program.
C. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine,
(i) with respect to the option grants under the Discretionary Option Grant
Program, which eligible persons are to receive option grants, the time or times
when such option grants are to be made, the number of shares to be covered by
each such grant, the status of the granted option as either an Incentive Option
or a Non-Statutory Option, the time or times when each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain outstanding and (ii) with
respect to stock issuances under the Stock Issuance Program, which eligible
persons are to receive stock issuances, the time or times when such issuances
are to be made, the number of shares to be issued to each Participant, the
vesting schedule (if any) applicable to the issued shares and the consideration
for such shares.
D. The Plan Administrator shall have the absolute discretion either to
grant options in accordance with the Discretionary Option Grant Program or to
effect stock issuances in accordance with the Stock Issuance Program.
E. The individuals who shall be eligible to participate in the
Automatic Option Grant Program shall be limited to (i) those individuals who
first become non-employee Board members after the Underwriting Date, whether
through appointment by the Board or election by the Corporation's shareholders,
and (ii) those individuals who continue to serve as non-employee Board members
at one or more Annual Shareholders Meetings held after the Underwriting Date,
including any individuals who first became non-employee Board members prior to
such Underwriting Date. A non-employee Board member who has previously been in
the employ of the Corporation (or any Parent or Subsidiary) shall not be
eligible to receive an option grant under the Automatic Option Grant Program at
the time he or she first becomes a non-employee Board member, but shall be
eligible to receive periodic option grants under the Automatic Option Grant
Program while he or she continues to serve as a non-employee Board member.
3.
<PAGE> 4
F. All non-employee Board members shall be eligible to participate in
the Director Fee Option Grant Program.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized but
unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. The maximum number of shares of Common Stock
initially reserved for issuance over the term of the Plan shall not exceed
15,980,563 shares,1 which shall consist of (i) the number of shares which
remained available for issuance, as of the Plan Effective Date, under the
Predecessor Plans as last approved by the Corporation's shareholders, including
the shares reserved for issuance pursuant to outstanding options under that
Predecessor Plans, and (ii) an additional increase of approximately 3,000,000
shares authorized by the Board and the shareholders prior to the Section 12
Registration Date. To the extent any unvested shares of Common Stock outstanding
under the Predecessor Plans as of the Plan Effective Date are subsequently
repurchased by the Corporation, at the option exercise price paid per share, in
connection with the holder's termination of service prior to vesting in the
shares, those repurchased shares shall be added to the reserve of Common Stock
available for issuance under the Plan. In addition, the number of shares of
Common Stock reserved for issuance under the 1998 Plan will automatically be
increased on the first trading day of each calendar year, beginning in calendar
year 1999, by an amount equal to three percent (3%) of the total number of
shares of Common Stock outstanding on the last trading day of the preceding
calendar year.
B. No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances or
share right awards for more than 1,500,000 shares of Common Stock in the
aggregate per calendar year, beginning with the 1998 calendar year.
C. Shares of Common Stock subject to outstanding options (including
options incorporated into this Plan from the Predecessor Plans) shall be
available for subsequent issuance under the Plan to the extent (i) those options
expire or terminate for any reason prior to exercise in full or (ii) the options
are cancelled in accordance with the cancellation-regrant provisions of Article
Two. Unvested shares issued under the Plan (or under one of the Predecessor
Plans) and subsequently cancelled or repurchased by the Corporation, at the
original exercise or issue price paid per share, pursuant to the Corporation's
repurchase rights under the Plan shall be added back to the number of shares of
Common Stock reserved for issuance under the Plan and shall accordingly be
available for reissuance through one or more subsequent option
- --------
(1) The number of shares reserved has been adjusted to reflect the Company's
three-for-two stock split, which was approved by the Board of Directors on
February 3, 1998, and is expected to be effected prior to the Plan Effective
Date. The stock issued under the Plan shall be the Corporation's Class A common
stock, except to the extent such stock is issued upon exercise of outstanding
options incorporated from the Predecessor Plans, in which case it shall be the
Corporation's Class B common stock.
4.
<PAGE> 5
grants or direct stock issuances under the Plan. All shares which become so
available for reissuance under the Plan, including shares of Class B common
stock subject to outstanding options incorporated into this Plan from the
Predecessor Plans which expire or terminate unexercised and any unvested shares
of Class B common stock repurchased by the Corporation pursuant to its
repurchase rights, shall be issuable solely as shares of Class A common stock.
In addition, should the exercise price of an option under the Plan be paid with
shares of Common Stock or should shares of Common Stock otherwise issuable under
the Plan be withheld by the Corporation in satisfaction of the withholding taxes
incurred in connection with the exercise of a stock option or the vesting of a
stock issuance under the Plan, then the number of shares of Common Stock
available for issuance under the Plan shall be reduced only by the net number of
shares of Common Stock issued to the holder of the exercised option or the stock
issuance, and not by the gross number of shares for which the option is
exercised or which vest under the stock issuance. However, the shares of Common
Stock underlying one or more stock appreciation rights exercised under Section
IV of Article Two of the Plan shall NOT be available for subsequent issuance
under the Plan.
D. If any change is made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, appropriate adjustments shall be
made to (i) the maximum number and/or class of securities issuable under the
Plan, (ii) the number and/or class of securities for which any one person may be
granted stock options, separately exercisable stock appreciation rights and
direct stock issuances and share right awards under the Plan per calendar year,
(iii) the number and/or class of securities for which grants are subsequently to
be made under the Automatic Option Grant Program to new and continuing
non-employee Board members, (iv) the number and/or class of securities and the
exercise price per share in effect under each outstanding option under the Plan
and (v) the number and/or class of securities and price per share in effect
under each outstanding option incorporated into this Plan from the Predecessor
Plans. Such adjustments to the outstanding options are to be effected in a
manner which shall preclude the enlargement or dilution of rights and benefits
under such options. The adjustments determined by the Plan Administrator shall
be final, binding and conclusive.
ARTICLE TWO
5.
<PAGE> 6
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; provided, however, that each such document
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than eighty-five percent (85%) of the Fair
Market Value per share of Common Stock on the option grant date.
2. The exercise price shall become immediately due upon exercise of
the option and shall, subject to the provisions of Section I of Article Six and
the documents evidencing the option, be payable in one or more of the forms
specified below:
(i) cash or check made payable to the Corporation,
(ii) shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date, 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 Corporation-designated brokerage firm 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 in order to complete
the sale.
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable at
such time or times, during such period and for such number of shares as
shall be determined by the
6.
<PAGE> 7
Plan Administrator and set forth in the documents evidencing the option.
However, no option shall have a term in excess of ten (10) years measured from
the option grant date.
C. EFFECT OF TERMINATION OF SERVICE.
1. The following provisions shall govern the exercise of any options
held by the Optionee at the time of cessation of Service or death:
(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, 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
subsequently be 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 in accordance with the
laws of descent and distribution.
(iii) Should the Optionee's Service be terminated for
Misconduct, then all outstanding options held by the Optionee shall
terminate immediately and cease to be outstanding.
(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 the option is exercisable on the
date of the Optionee's cessation of Service. 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 vested shares for which the option has not been
exercised. However, the option shall, immediately upon the Optionee's
cessation of Service, terminate and cease to be outstanding to the
extent the option is not otherwise at that time exercisable for vested
shares.
2. The Plan Administrator shall have complete discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:
(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
7.
<PAGE> 8
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.
D. SHAREHOLDER RIGHTS. The holder of an option shall have no
shareholder rights with respect to the shares subject to the option until
such person shall have exercised the option, paid the exercise price and
become a holder of record of the purchased shares.
E. REPURCHASE RIGHTS. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of
Common Stock. Should the Optionee cease Service while holding such unvested
shares, the Corporation shall have the right to repurchase, at the exercise
price paid per share, any or all of those unvested shares. The terms upon
which such repurchase right shall be exercisable (including the period and
procedure for exercise and the appropriate vesting schedule for the
purchased shares) shall be established by the Plan Administrator and set
forth in the document evidencing such repurchase right.
F. LIMITED TRANSFERABILITY OF 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 by the laws
of descent and distribution following the Optionee's death. Non-Statutory
Options shall be subject to the same transfer restrictions, except that a
Non-Statutory Option may, in connection with the Optionee's estate plan, be
assigned in whole or in part during the Optionee's lifetime to one or more
members of the Optionee's immediate family or to a trust established
exclusively for one or more such family members. 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.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Seven shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options
when issued under the Plan shall not be subject to the terms of this
Section II.
A. ELIGIBILITY. Incentive Options may only be granted to Employees.
B. EXERCISE PRICE. The exercise price per share shall not be less
than one hundred percent (100%) of the Fair Market Value per share of
Common Stock on the option grant date.
C. DOLLAR LIMITATION. The aggregate Fair Market Value of the shares
of Common Stock (determined as of the respective date or dates of grant)
for which one or more options granted to any Employee under the Plan (or
any other option plan of the Corporation or any Parent or Subsidiary) may
for the first time become exercisable as Incentive Options during
8.
<PAGE> 9
any one calendar year shall not exceed the sum of One Hundred Thousand
Dollars ($100,000). To the extent the Employee holds two (2) or more such
options which become exercisable for the first time in the same calendar
year, the foregoing limitation on the exercisability of such options as
Incentive Options shall be applied on the basis of the order in which such
options are granted.
D. 10% SHAREHOLDER. If any Employee to whom an Incentive Option is
granted is a 10% Shareholder, then the exercise price per share shall not
be less than one hundred ten percent (110%) of the Fair Market Value per
share of Common Stock on the option grant date, and the option term shall
not exceed five (5) years measured from the option grant date.
III. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. Each option outstanding at the time of a Change in Control shall
NOT become exercisable on an accelerated basis if and to the extent: (i)
such option is, in connection with the Change in Control, to be 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 or (ii) such option is to be replaced with a cash
incentive program of the successor corporation which preserves the spread
existing at the time of the Change in Control on any shares for which the
option is not otherwise at that time exercisable and provides for
subsequent payout in accordance with the same exercise/vesting schedule
applicable to those option shares or (iii) the acceleration of such option
is subject to other limitations imposed by the Plan Administrator at the
time of the option grant. However, if none of the foregoing conditions
apply, an outstanding option shall automatically accelerate so that each
such option shall, immediately prior to the effective date of the Change in
Control, become exercisable for all the shares of Common Stock at the time
subject to that option and may be exercised for any or all of those shares
as fully vested shares of Common Stock.
B. All outstanding repurchase rights shall automatically terminate,
and the shares of Common Stock subject to those terminated rights shall
immediately vest in full, in the event of any Change in Control, except to
the extent: (i) those repurchase rights are to be assigned to 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
or (ii) such accelerated vesting is precluded by other limitations imposed
by the Plan Administrator at the time the repurchase right is issued.
C. Immediately following the consummation of the Change in Control,
all outstanding options 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.
D. Each option which is assumed in connection with a Change in
Control shall be appropriately adjusted, immediately after such Change in
Control, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Change in Control had
the option been exercised immediately prior to such Change in Control.
Appropriate adjustments to reflect such Change in Control shall also be
made to (i) the exercise price payable per share under each outstanding
option, provided the aggregate exercise
9.
<PAGE> 10
price payable for such securities shall remain the same, (ii) the maximum
number and/or class of securities available for issuance over the remaining
term of the Plan and (iii) the maximum number and/or class of securities
for which any one person may be granted stock options, separately
exercisable stock appreciation rights and direct stock issuances or share
right awards under the Plan per calendar year.
E. The Plan Administrator shall have full power and authority,
exercisable either at the time the option is granted or at any time while
the option remains outstanding, to structure one or more options under the
Discretionary Option Grant Program so that those options shall, immediately
prior to the occurrence of a Change in Control, vest and become exercisable
for all the option shares on an accelerated basis, whether or not those
options are to be assumed or otherwise continued in full force and effect
pursuant to the express terms of the Change in Control transaction. In
addition, the Plan Administrator may structure one or more of the
Corporation's repurchase rights under the Discretionary Option Grant
Program so that those rights shall immediately terminate at the time of a
Change in Control and shall not be assignable to the successor corporation
(or parent thereof), and the shares subject to those terminated repurchase
rights shall accordingly vest in full at the time of such Change in
Control.
F. The Plan Administrator shall have full power and authority,
exercisable either at the time the option is granted or at any time while
the option remains outstanding, to structure one or more outstanding
options under the Discretionary Option Grant Program so that those options
shall vest and become immediately exercisable for all the option shares on
an accelerated basis in the event the Optionee's Service is subsequently
terminated by reason of an Involuntary Termination within a designated
period (not to exceed eighteen (18) months) following the effective date of
any Change in Control in which those options do not otherwise accelerate.
Any options so accelerated shall remain exercisable for fully vested shares
until the expiration or sooner termination of the option term. In addition,
the Plan Administrator may structure one or more of the Corporation's
outstanding repurchase rights under the Discretionary Option Grant Program
so that those rights will immediately terminate at the time of such
Involuntary Termination, and the shares subject to those terminated
repurchase rights shall accordingly vest in full.
G. The Plan Administrator shall have the discretionary authority to
structure one or more outstanding options under the Discretionary Option
Grant Program so that those options shall, immediately prior to the
occurrence of a Hostile Take-Over, vest and become exercisable for all the
option shares on an accelerated basis. In addition, the Plan Administrator
shall have the discretionary authority to structure one or more of the
Corporation's repurchase rights under the Discretionary Option Grant
Program so that those rights shall terminate automatically upon the
consummation of such Hostile Take-Over, and the shares subject to those
terminated rights shall thereupon vest in full. Alternatively, the Plan
Administrator may condition the automatic acceleration of one or more
outstanding options under the Discretionary Option Grant Program and the
termination of one or more of the Corporation's outstanding repurchase
rights under such program upon the Involuntary Termination of the
Optionee's Service within a designated period (not to exceed eighteen (18)
months) following the effective
10.
<PAGE> 11
date of such Hostile Take-Over. Each option so accelerated shall remain
exercisable for fully vested shares until the expiration or sooner
termination of the option term.
H. The portion of any Incentive Option accelerated in connection
with a Corporate Transaction or Change in Control shall remain exercisable
as an Incentive Option only to the extent the applicable One Hundred
Thousand Dollar ($100,000) limitation is not exceeded. To the extent such
dollar limitation is exceeded, the accelerated portion of such option shall
be exercisable as a Nonstatutory Option under the Federal tax laws.
I. The outstanding options shall in no way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any
time and from time to time, with the consent of the affected option
holders, the cancellation of any or all outstanding options under the
Discretionary Option Grant Program (including outstanding options
incorporated from the Predecessor Plan) and to grant in substitution new
options covering the same or different number of shares of Common Stock but
with an exercise price per share based on the Fair Market Value per share
of Common Stock on the new grant date.
V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and authority to
grant to selected Optionees tandem stock appreciation rights and/or limited
stock appreciation rights.
B. The following terms shall govern the grant and exercise of tandem
stock appreciation rights:
(i) One or more Optionees may be granted the right,
exercisable upon such terms as the Plan Administrator may establish,
to elect between the exercise of the underlying option for shares of
Common Stock and the surrender of that option in exchange for a
distribution from the Corporation in an amount equal to the excess of
(a) 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 (b) the
aggregate exercise price payable for such shares.
(ii) 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 be
entitled 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.
11.
<PAGE> 12
(iii) 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 the later of (a) five (5) business days after the
receipt of the rejection notice or (b) the last day on which the
option is otherwise exercisable in accordance with the terms of the
documents evidencing such option, but in no event may such rights be
exercised more than ten (10) years after the option grant date.
C. The following terms shall govern the grant and exercise of
limited stock appreciation rights:
(i) One or more Section 16 Insiders may be granted
limited stock appreciation rights with respect to their outstanding
options.
(ii) Each individual holding one or more options with
such a limited stock appreciation right shall have the unconditional
right, exercisable for a thirty (30)-day period immediately following
a Hostile Take-Over, to surrender each such option to the Corporation
for a cash distribution in an amount equal to the excess of (A) the
Take-Over Price of the shares of Common Stock at the time subject to
each surrendered option (whether or not the option is otherwise vested
and exercisable for those shares) over (B) the aggregate exercise
price payable for such shares. Such cash distribution shall be paid
within five (5) days following the option surrender date.
(iii) The grant of such limited stock appreciation
right shall automatically constitute pre-approval by the Plan
Administrator of any subsequent exercise of that right in accordance
with the terms of this Paragraph C. Accordingly, no further approval
of the Plan Administrator or the Board shall be required at the time
of the actual option surrender and cash distribution.
(iv) The balance of the option (if any) shall remain
outstanding and exercisable in accordance with the documents
evidencing such option.
ARTICLE THREE
12.
<PAGE> 13
SALARY INVESTMENT OPTION GRANT PROGRAM
I. OPTION GRANTS
The Primary Committee shall have the sole and exclusive authority to
implement the Salary Investment Option Grant Program for one or more
calendar years and to select the Section 16 Insiders and other highly
compensated Employees eligible to participate in the Salary Investment
Option Grant Program for those calendar years. Each selected individual who
elects to participate in the Salary Investment Option Grant Program must,
prior to the start of each calendar year of participation, file with the
Plan Administrator (or its designate) an irrevocable authorization
directing the Corporation to reduce his or her base salary for that
calendar year by an amount not less than Ten Thousand Dollars ($10,000.00)
nor more than Fifty Thousand Dollars ($50,000.00). The Primary Committee
shall have complete discretion to determine whether to approve the filed
authorization in whole or in part. To the extent the Primary Committee
approves the authorization, the individual who filed that authorization
shall automatically be granted an option under the Salary Investment Grant
Program on the first trading day in January of the calendar year for which
the salary reduction is to be in effect.
II. OPTION TERMS
Each option shall be a Non-Statutory Option evidenced by one or more
documents in the form approved by the Plan Administrator; provided,
however, that each such document shall comply with the terms specified
below.
A. EXERCISE PRICE.
1. The exercise price per share shall be thirty-three and one-third
percent (33-1/3%) of the Fair Market Value per share of Common Stock on the
option grant date.
2. The exercise price shall become immediately due upon exercise of
the option and shall be payable in one or more of the alternative forms
authorized under the Discretionary Option Grant Program. Except to the extent
the sale and remittance procedure specified thereunder is utilized, payment of
the exercise price for the purchased shares must be made on the Exercise Date.
B. NUMBER OF OPTION SHARES. The number of shares of Common Stock subject
to the option shall be determined pursuant to the following formula (rounded
down to the nearest whole number):
X = A / (B x 66-2/3%), where
X is the number of option shares,
13.
<PAGE> 14
A is the dollar amount of the approved reduction in the Optionee's
base salary for the calendar year, and
B is the Fair Market Value per share of Common Stock on the option
grant date.
C. EXERCISE AND TERM OF OPTIONS. The option shall become exercisable in a
series of twelve (12) successive equal monthly installments upon the Optionee's
completion of each calendar month of Service in the calendar year for which the
salary reduction is in effect. Each option shall have a maximum term of ten (10)
years measured from the option grant date.
D. EFFECT OF TERMINATION OF SERVICE. Should the Optionee cease Service
for any reason while holding one or more options under this Article Three, then
each such option shall remain exercisable, for any or all of the shares for
which the option is exercisable at the time of such cessation of Service, until
the earlier of (i) the expiration of the ten (10)-year option term or (ii) the
expiration of the three (3)-year period measured from the date of such cessation
of Service. Should the Optionee die while holding one or more options under this
Article Three, then each such option may be exercised, for any or all of the
shares for which the option is exercisable at the time of the Optionee's
cessation of Service (less any shares subsequently purchased by Optionee prior
to death), 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 in accordance with the laws of descent and distribution. Such right of
exercise shall lapse, and the option shall terminate, upon the earlier of (i)
the expiration of the ten (10)-year option term or (ii) the three (3)-year
period measured from the date of the Optionee's cessation of Service. However,
the option shall, immediately upon the Optionee's cessation of Service for any
reason, terminate and cease to remain outstanding with respect to any and all
shares of Common Stock for which the option is not otherwise at that time
exercisable.
III. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Change in Control while the Optionee remains in
Service, each outstanding option held by such Optionee under this Salary
Investment Option Grant Program shall automatically accelerate so that each such
option shall, immediately prior to the effective date of the Change in Control,
become exercisable for all the shares of Common Stock at the time subject to
that option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. Each such outstanding option shall remain in full force
and effect following such Change in Control and shall be assumed by any
successor corporation (or parent thereof). The assumed or continuing option
shall remain exercisable for the fully-vested shares until the earlier of (i)
the expiration of the ten (10)-year option term or (ii) the expiration of the
three (3)-year period measured from the date of the Optionee's cessation of
Service.
B. In the event of a Hostile Take-Over while the Optionee remains in
Service, each outstanding option held by such Optionee under this Salary
Investment Option Grant Program shall automatically accelerate so that each such
option shall, immediately prior to the effective date of the Hostile Take-Over,
become exercisable for all the shares of Common Stock
14.
<PAGE> 15
at the time subject to such option and may be exercised for any or all of those
shares as fully-vested shares of Common Stock. The option shall remain so
exercisable until the earliest to occur of (i) the expiration of the ten
(10)-year option term, (ii) the expiration of the three (3)-year period measured
from the date of the Optionee's cessation of Service or (iii) the surrender of
the option in connection with that Hostile Take-Over.
C. The Optionee shall have a thirty (30)-day period following the Hostile
Take-Over in which to surrender to the Corporation each outstanding option
granted him or her under the Salary Investment Option Grant Program. The
Optionee 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 shares of
Common Stock at the time subject to the surrendered option (whether or not the
option is otherwise at the time exercisable for those shares) over (ii) the
aggregate exercise price payable for such shares. Such cash distribution shall
be paid within five (5) days following the surrender of the option to the
Corporation. The Primary Committee shall, at the time the option with such
limited stock appreciation right is granted under the Salary Investment Option
Grant Program, pre-approve any subsequent exercise of that right in accordance
with the terms of this Paragraph C. Accordingly, no further approval of the
Primary Committee or the Board shall be required at the time of the actual
option surrender and cash distribution.
D. The grant of options under the Salary Investment Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
IV. REMAINING TERMS
The remaining terms of each option granted under the Salary Investment
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.
ARTICLE FOUR
15.
<PAGE> 16
STOCK ISSUANCE PROGRAM
I. PROGRAM TERMS
Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below. Shares of Common Stock may also be
issued under the Stock Issuance Program pursuant to share right awards which
entitle the recipients to receive those shares upon the attainment of designated
performance goals.
A. PURCHASE PRICE.
1. The purchase price per share of Common Stock subject to direct
issuance shall be fixed by the Plan Administrator, but shall not be less than
one hundred percent (100%) of the Fair Market Value per share of Common Stock on
the issuance date.
2. Shares of Common Stock may be issued under the Stock Issuance
Program for any of the following items of consideration which the Plan
Administrator may deem appropriate in each individual instance:
(a) cash or check made payable to the Corporation, or
(b) past services rendered to the Corporation (or any
Parent or Subsidiary).
B. VESTING/ISSUANCE PROVISIONS.
1. The Plan Administrator may issue shares of Common Stock under the
Stock Issuance Program which are fully and immediately vested upon issuance or
which are to vest in one or more installments over the Participant's period of
Service or upon attainment of specified performance objectives. Alternatively,
the Plan Administrator may issue share right awards under the Stock Issuance
Program which shall entitle the recipient to receive a specified number of
shares of Common Stock upon the attainment of one or more performance goals
established by the Plan Administrator. Upon the attainment of such performance
goals, fully-vested shares of Common Stock shall be issued in satisfaction of
those share right awards.
2. Any new, substituted or additional securities or other property
(including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to his or her unvested
shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of
16.
<PAGE> 17
consideration shall be issued subject to (i) the same vesting requirements
applicable to the Participant's unvested shares of Common Stock and (ii) such
escrow arrangements as the Plan Administrator shall deem appropriate.
3. The Participant shall have full stockholder rights with respect
to any shares of Common Stock issued to the Participant under the Stock Issuance
Program, whether or not the Participant's interest in those shares is vested.
Accordingly, the Participant shall have the right to vote such shares and to
receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while holding
one or more unvested shares of Common Stock issued under the Stock Issuance
Program or should the performance objectives not be attained with respect to one
or more such unvested shares of Common Stock, then those shares shall be
immediately surrendered to the Corporation for cancellation, and the Participant
shall have no further stockholder rights with respect to those shares. To the
extent the surrendered shares were previously issued to the Participant for
consideration paid in cash or cash equivalent (including the Participant's
purchase-money indebtedness), the Corporation shall repay to the Participant the
cash consideration paid for the surrendered shares and shall cancel the unpaid
principal balance of any outstanding purchase-money note of the Participant
attributable to the surrendered shares.
5. The Plan Administrator may in its discretion waive the surrender
and cancellation of one or more unvested shares of Common Stock (or other assets
attributable thereto) which would otherwise occur upon the cessation of the
Participant's Service or the non-attainment of the performance objectives
applicable to those shares. Such waiver shall result in the immediate vesting of
the Participant's interest in the shares of Common Stock as to which the waiver
applies. Such waiver may be effected at any time, whether before or after the
Participant's cessation of Service or the attainment or non-attainment of the
applicable performance objectives.
6. Outstanding share right awards under the Stock Issuance Program
shall automatically terminate, and no shares of Common Stock shall actually be
issued in satisfaction of those awards, if the performance goals established for
such awards are not attained. The Plan Administrator, however, shall have the
discretionary authority to issue shares of Common Stock in satisfaction of one
or more outstanding share right awards as to which the designated performance
goals are not attained.
II. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. All of the Corporation's outstanding repurchase rights under the Stock
Issuance Program shall terminate automatically, and all the shares of Common
Stock subject to those terminated rights shall immediately vest in full, in the
event of any Change in Control, except to the extent (i) those repurchase rights
are to be assigned to the successor corporation (or parent thereof) or are
otherwise to continue in full force and effect pursuant to the express terms of
the Change in Control transaction or (ii) such accelerated vesting is precluded
by other limitations imposed in the Stock Issuance Agreement.
17.
<PAGE> 18
B. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase rights remain outstanding under the Stock Issuance
Program, to structure one or more of those rights so that such rights shall
automatically terminate upon the occurrence of a Change in Control and shall not
be assignable any successor corporation (or parent thereof), and the shares of
Common Stock subject to those terminated rights shall immediately vest at the
time of such Change in Control.
C. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase rights remain outstanding under the Stock Issuance
Program, to provide that those rights shall automatically terminate, and the
shares of Common Stock subject to those terminated rights shall immediately
vest, upon the Involuntary Termination of the Participant's Service within a
designated period (not to exceed eighteen (18) months) following the effective
date of any Change in Control in which those repurchase rights do not otherwise
terminate.
D. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase rights remain outstanding under the Stock Issuance
Program, to structure one or more of those rights so that such rights shall
automatically terminate upon the occurrence of a Hostile Take-Over, and the
shares of Common Stock subject to those terminated rights shall accordingly vest
at the time of such Hostile Take-Over.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held in
escrow by the Corporation until the Participant's interest in such shares vests
or may be issued directly to the Participant with restrictive legends on the
certificates evidencing those unvested shares.
ARTICLE FIVE
18.
<PAGE> 19
AUTOMATIC OPTION GRANT PROGRAM
I. OPTION TERMS
A. GRANT DATES. Option grants shall be made on the dates specified below:
1. Each individual serving as a non-employee Board member on the
Underwriting Date shall automatically be granted on that date a Non-Statutory
Option to purchase 40,000 shares of Common Stock.
2. Each individual who is first elected or appointed as a
non-employee Board member at any time after the Underwriting Date shall
automatically be granted, on the date of such initial election or appointment, a
Non-Statutory Option to purchase 40,000 shares of Common Stock, provided that
individual has not previously been in the employ of the Corporation or any
Parent or Subsidiary.
3. On the date of each Annual Shareholders Meeting held after the
Underwriting Date, 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, shall automatically be granted a
Non-Statutory Option to purchase 3,000 shares of Common Stock, provided such
individual has served as a non-employee Board member for at least six (6)
months. There shall be no limit on the number of such 3,000-share option grants
any one Eligible Director may receive over his or her period of Board service,
and non-employee Board members who have previously been in the employ of the
Corporation (or any Parent or Subsidiary) or who joined the Board prior to the
Underwriting Date shall be eligible to receive one or more such annual option
grants over their period of continued Board service.
B. EXERCISE PRICE.
1. The exercise price per share shall be equal to one hundred
percent (100%) of the Fair Market Value per share of Common Stock on the option
grant date.
2. The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
C. OPTION TERM. Each option shall have a term of ten (10) years measured
from the option grant date.
D. EXERCISE AND VESTING OF OPTIONS. Each option shall be immediately
exercisable for any or all of the option shares. However, any shares purchased
under the option
19.
<PAGE> 20
shall be subject to repurchase by the Corporation, at the exercise price paid
per share, upon the Optionee's cessation of Board service prior to vesting in
those shares. Each initial 40,000-share grant shall vest, and the Corporation's
repurchase right shall lapse, in a series of four (4) successive equal annual
installments upon Optionee's completion of each year of service as a Board
member over the four (4)-year period measured from the option grant date. Each
annual 3,000-share automatic option shall vest, and the Corporation's repurchase
right shall lapse, upon the Optionee's completion of one (1) year of Board
service measured from the grant date.
E. TERMINATION OF BOARD SERVICE. The following provisions shall govern
the exercise of any options held by the Optionee at the time the Optionee ceases
to serve as a Board member:
(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 in accordance with the laws of descent and distribution) 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, then 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 the option 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
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
A. In the event of any Change in Control, the shares of Common Stock
at the time subject to each option outstanding under the Automatic Option
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 of the shares of Common Stock
at the time subject to that option and may be exercised for all or any
portion of those shares as fully-vested shares of Common Stock. Immediately
following the consummation
20.
<PAGE> 21
of the Change in Control, all outstanding options 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.
B. In the event of a Hostile Take-Over, the shares of Common Stock
at the time subject to each option outstanding under the Automatic Option
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 of the shares of Common Stock
at the time subject to that option and may be exercised for all or any
portion of those shares as fully-vested shares of Common Stock. 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.
C. All outstanding repurchase rights under the Automatic Option
Grant Program shall automatically terminate, and the shares of Common Stock
subject to those terminated rights shall immediately vest in full, in the
event of any Change in Control or Hostile Take-Over.
D. The Optionee shall have a thirty (30)-day period immediately
following the Hostile Take-Over in which to surrender to the Corporation
each of his or her outstanding automatic option grants. The Optionee 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 shares of
Common Stock at the time subject to each surrendered option (whether or not
the Optionee is otherwise at the time vested in those shares) over (ii) the
aggregate exercise price payable for such shares. Such cash distribution
shall be paid within five (5) days following the surrender of the option to
the Corporation. No approval or consent of the Board or any Plan
Administrator shall be required in connection with such option surrender
and cash distribution.
E. Each option which is assumed in connection with a Change in
Control shall be appropriately adjusted, immediately after such Change in
Control, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Change in Control had
the option been exercised immediately prior to such Change in Control.
Appropriate adjustments to reflect such Change in Control shall also be
made to the exercise price payable per share under each outstanding option,
provided the aggregate exercise price payable for such securities shall
remain the same.
F. The grant of options under the Automatic Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to
merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
21.
<PAGE> 22
III. REMAINING TERMS
The remaining terms of each option granted under the Automatic
Option Grant Program shall be the same as the terms in effect for option
grants made under the Discretionary Option Grant Program.
ARTICLE SIX
22.
<PAGE> 23
DIRECTOR FEE OPTION GRANT PROGRAM
I. OPTION GRANTS
The Plan Administrator shall have the discretionary authority to
implement the Director Fee Option Grant Program for one or more calendar
years. Should such program be implemented, then each non-employee Board
member may elect to apply all or any portion of the annual retainer fee
otherwise payable in cash for his or her service on the Board to the
acquisition of a special option grant under this Director Fee Option Grant
Program. Such election must be filed with the Corporation's Chief Financial
Officer prior to first day of the calendar year for which the annual
retainer fee which is the subject of that election is otherwise payable.
Each non-employee Board member who files such a timely election shall
automatically be granted an option under this Director Fee Option Grant
Program on the first trading day in January in the calendar year for which
the annual retainer fee which is the subject of that election would
otherwise be payable in cash.
II. OPTION TERMS
Each option shall be a Non-Statutory Option governed by the terms
and conditions specified below.
A. EXERCISE PRICE.
1. The exercise price per share shall be thirty-three and one-third
percent (33-1/3%) of the Fair Market Value per share of Common Stock on the
option grant date.
2. The exercise price shall become immediately due upon exercise of
the option and shall be payable in one or more of the alternative forms
authorized under the Discretionary Option Grant Program. Except to the extent
the sale and remittance procedure specified thereunder is utilized, payment of
the exercise price for the purchased shares must be made on the Exercise Date.
B. NUMBER OF OPTION SHARES. The number of shares of Common Stock subject
to the option shall be determined pursuant to the following formula (rounded
down to the nearest whole number):
X = A / (B x 66-2/3%), where
X is the number of option shares,
A is the portion of the annual retainer fee subject to the
non-employee Board member's election, and
23.
<PAGE> 24
B is the Fair Market Value per share of Common Stock on the option
grant date.
C. EXERCISE AND TERM OF OPTIONS. The option shall become exercisable in a
series of twelve (12) equal monthly installments upon the Optionee's completion
of each month of Board service over the twelve (12)-month period measured from
the grant date. Each option shall have a maximum term of ten (10) years measured
from the option grant date.
D. TERMINATION OF BOARD SERVICE. Should the Optionee cease Board service
for any reason (other than death or Permanent Disability) while holding one or
more options under this Director Fee Option Grant Program, then each such option
shall remain exercisable, for any or all of the shares for which the option is
exercisable at the time of such cessation of Board service, until the earlier of
(i) the expiration of the ten (10)-year option term or (ii) the expiration of
the three (3)-year period measured from the date of such cessation of Board
service. However, each option held by the Optionee under this Director Fee
Option Grant Program at the time of his or her cessation of Board service shall
immediately terminate and cease to remain outstanding with respect to any and
all shares of Common Stock for which the option is not otherwise at that time
exercisable.
E. DEATH OR PERMANENT DISABILITY. Should the Optionee's service as a
Board member cease by reason of death or Permanent Disability, then each option
held by such Optionee under this Director Fee Option Grant Program shall
immediately become exercisable for all the shares of Common Stock at the time
subject to that option, and the option may be exercised for any or all of those
shares as fully-vested shares until the earlier of (i) the expiration of the ten
(10)-year option term or (ii) the expiration of the three (3)-year period
measured from the date of such cessation of Board service.
Should the Optionee die after cessation of Board service but while
holding one or more options under this Director Fee Option Grant Program, then
each such option may be exercised, for any or all of the shares for which the
option is exercisable at the time of the Optionee's cessation of Board service
(less any shares subsequently purchased by Optionee prior to death), 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 in accordance
with the laws of descent and distribution. Such right of exercise shall lapse,
and the option shall terminate, upon the earlier of (i) the expiration of the
ten (10)-year option term or (ii) the three (3)-year period measured from the
date of the Optionee's cessation of Board service.
III. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Change in Control while the Optionee remains a
Board member, each outstanding option held by such Optionee under this Director
Fee Option Grant Program shall automatically accelerate so that each such option
shall, immediately prior to the effective date of the Change in Control, become
exercisable for all the shares of Common Stock at the time subject to that
option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. Each such outstanding option shall remain in full force
and effect following the Change in Control and shall be assumed by any successor
corporation (or
24.
<PAGE> 25
parent thereof). The assumed or continuing option shall remain exercisable for
the fully-vested shares until the earlier of (i) the expiration of the ten
(10)-year option term or (ii) the expiration of the three (3)-year period
measured from the date of the Optionee's cessation of Board service.
B. In the event of a Hostile Take-Over while the Optionee remains a Board
member, each outstanding option held by such Optionee under this Director Fee
Option Grant Program shall automatically accelerate so that each such option
shall, immediately prior to the effective date of the Hostile Take-Over, become
exercisable for all the shares of Common Stock at the time subject to such
option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. The option shall remain so exercisable until the
earliest to occur of (i) the expiration of the ten (10)-year option term, (ii)
the expiration of the three (3)-year period measured from the date of the
Optionee's cessation of Board service or (iii) the surrender of the option in
connection with that Hostile Take-Over.
C. The Optionee shall have a thirty (30)-day period following the Hostile
Take-Over in which to surrender to the Corporation each outstanding option
granted him or her under the Director Fee Option Grant Program. The Optionee
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 shares of Common
Stock at the time subject to the surrendered option (whether or not the option
is otherwise at the time exercisable for those shares) over (ii) the aggregate
exercise price payable for such shares. Such cash distribution shall be paid
within five (5) days following the surrender of the option to the Corporation.
No approval or consent of the Primary Committee or the Board shall be required
at the time of the actual option surrender and cash distribution.
D. The grant of options under the Director Fee Option Grant Program shall
in no way affect the right of the Corporation to adjust, reclassify, reorganize
or otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
IV. REMAINING TERMS
The remaining terms of each option granted under this Director Fee Option
Grant Program shall be the same as the terms in effect for option grants made
under the Discretionary Option Grant Program.
ARTICLE SEVEN
25.
<PAGE> 26
MISCELLANEOUS
I. FINANCING
The Plan Administrator may permit any Optionee or Participant to pay the
option exercise price under the Discretionary Option Grant Program or the
purchase price of shares issued under the Stock Issuance Program by delivering a
full-recourse, interest bearing promissory note payable in one or more
installments. The terms of any such promissory note (including the interest rate
and the terms of repayment) shall be established by the Plan Administrator in
its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price or purchase price payable for the purchased shares plus (ii) any Federal,
state and local income and employment tax liability incurred by the Optionee or
the Participant in connection with the option exercise or share purchase.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock upon
the exercise of options or the issuance or vesting of such shares under the Plan
shall be subject to the satisfaction of all applicable Federal, state and local
income and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options or unvested shares of Common Stock under the
Plan (other than the options granted or the shares issued under the Automatic
Option Grant or Director Fee Option Grant Program) with the right to use shares
of Common Stock in satisfaction of all or part of the Taxes incurred by such
holders in connection with the exercise of their options or the vesting of their
shares. Such right may be provided to any such holder in either or both of the
following formats:
Stock Withholding: The election to have the Corporation withhold,
from the shares of Common Stock otherwise issuable upon the exercise of such
Non-Statutory Option or the vesting of such shares, a portion of those shares
with an aggregate Fair Market Value equal to the percentage of the Taxes (not to
exceed one hundred percent (100%)) designated by the holder.
Stock Delivery: The election to deliver to the Corporation, at the
time the Non-Statutory Option is exercised or the shares vest, one or more
shares of Common Stock previously acquired by such holder (other than in
connection with the option exercise or share vesting triggering the Taxes) with
an aggregate Fair Market Value equal to the percentage of the Taxes (not to
exceed one hundred percent (100%)) designated by the holder.
26.
<PAGE> 27
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective immediately at the Plan Effective
Date. However, the Salary Investment Option Grant Program and the Director Fee
Option Grant Program shall not be implemented until such time as the Primary
Committee may deem appropriate. Options may be granted under the Discretionary
Option Grant at any time on or after the Plan Effective Date. However, no
options granted under the Plan may be exercised, and no shares shall be issued
under the Plan, until the Plan is approved by the Corporation's shareholders. If
such shareholder approval is not obtained within twelve (12) months after the
Plan Effective Date, then all options previously granted under this Plan shall
terminate and cease to be outstanding, and no further options shall be granted
and no shares shall be issued under the Plan.
B. The Plan shall serve as the successor to the Predecessor Plans, and no
further option grants or direct stock issuances shall be made under the
Predecessor Plans after the Section 12 Registration Date. All options
outstanding under the Predecessor Plans on the Section 12 Registration Date
shall be incorporated into the Plan at that time and shall be treated as
outstanding options under the Plan. However, each outstanding option so
incorporated shall continue to be governed solely by the terms of the documents
evidencing such option, and no provision of the Plan shall be deemed to affect
or otherwise modify the rights or obligations of the holders of such
incorporated options with respect to their acquisition of shares of Common
Stock.
C. One or more provisions of the Plan, including (without limitation) the
option/vesting acceleration provisions of Article Two relating to Corporate
Transactions and Changes in Control, may, in the Plan Administrator's
discretion, be extended to one or more options incorporated from the Predecessor
Plans which do not otherwise contain such provisions.
D. The Plan shall terminate upon the earliest to occur of (i) January 31,
2008, (ii) the date on which all shares available for issuance under the Plan
shall have been issued as fully-vested shares or (iii) the termination of all
outstanding options in connection with a Change in Control. Should the Plan
terminate on January 31, 2008, then all option grants and unvested stock
issuances outstanding at that time shall continue to have force and effect in
accordance with the provisions of the documents evidencing such grants or
issuances.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect the rights and obligations with respect to
stock options or unvested stock issuances at the time outstanding under the Plan
unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require shareholder approval
pursuant to applicable laws or regulations.
B. Options to purchase shares of Common Stock may be granted under the
Discretionary Option Grant and Salary Investment Option Grant Programs and
shares of
27.
<PAGE> 28
Common Stock may be issued under the Stock Issuance Program that are in each
instance in excess of the number of shares then available for issuance under the
Plan, provided any excess shares actually issued under those programs shall be
held in escrow until there is obtained shareholder approval of an amendment
sufficiently increasing the number of shares of Common Stock available for
issuance under the Plan. If such shareholder approval is not obtained within
twelve (12) months after the date the first such excess issuances are made, then
(i) any unexercised options granted on the basis of such excess shares shall
terminate and cease to be outstanding and (ii) the Corporation shall promptly
refund to the Optionees and the Participants the exercise or purchase price paid
for any excess shares issued under the Plan and held in escrow, together with
interest (at the applicable Short Term Federal Rate) for the period the shares
were held in escrow, and such shares shall thereupon be automatically cancelled
and cease to be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares of
Common Stock under the Plan shall be used for general corporate purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock option under
the Plan and the issuance of any shares of Common Stock (i) upon the exercise of
any granted option or (ii) under the Stock Issuance Program shall be subject to
the Corporation's procurement of all approvals and permits required by
regulatory authorities having jurisdiction over the Plan, the stock options
granted under it and the shares of Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or delivered
under the Plan unless and until there shall have been compliance with all
applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
Common Stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the Participant any
right to continue in Service for any period of specific duration or interfere
with or otherwise restrict in any way the rights of the Corporation (or any
Parent or Subsidiary employing or retaining such person) or of the Optionee or
the Participant, which rights are hereby expressly reserved by each, to
terminate such person's Service at any time for any reason, with or without
cause.
28.
<PAGE> 29
APPENDIX
The following definitions shall be in effect under the Plan:
A. AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option grant
program in effect under the Plan.
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 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 its successors.
G. DIRECTOR FEE OPTION GRANT PROGRAM shall mean the special stock
option grant in effect for non-employee Board members under Article Six of
the Plan.
H. DISCRETIONARY OPTION GRANT PROGRAM shall mean the discretionary
option grant program in effect under the Plan.
I. ELIGIBLE DIRECTOR shall mean a non-employee Board member eligible
to participate in the Automatic Option Grant Program in accordance with the
eligibility provisions of Articles One and Five.
A-1
<PAGE> 30
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 on the date in
question, as such price is reported by the National Association of
Securities Dealers on the Nasdaq National Market. 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.
(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 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.
(iii) For purposes of any option grants made on the
Underwriting Date, the Fair Market Value shall be deemed to be equal
to the price per share at which the Common Stock is to be sold in the
initial public offering pursuant to the Underwriting Agreement.
M. 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
which 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,
A-2
<PAGE> 31
by reason of one or more contested elections for Board membership,
to be comprised 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.
N. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
O. INVOLUNTARY TERMINATION shall mean the termination of the Service
of any individual which 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 which
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.
P. 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 be deemed to be inclusive of all
the acts or omissions which the Corporation (or any Parent or Subsidiary)
may consider as grounds for the dismissal or discharge of any Optionee,
Participant or other person in the Service of the Corporation (or any
Parent or Subsidiary).
Q. 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.
R. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.
S. OPTIONEE shall mean any person to whom an option is granted under
the Discretionary Option Grant, Salary Investment Option Grant, Automatic
Option Grant or Director Fee Option Grant Program.
T. 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
A-3
<PAGE> 32
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.
U. PARTICIPANT shall mean any person who is issued shares of Common
Stock under the Stock Issuance Program.
V. 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 Automatic
Option Grant and Director Fee Option Grant Programs, Permanent Disability
or Permanently Disabled shall mean the inability of the non-employee Board
member 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.
W. PLAN shall mean the Corporation's 1998 Stock Incentive Plan, as
set forth in this document.
X. PLAN ADMINISTRATOR shall mean the particular entity, whether the
Primary Committee, the Board or the Secondary Committee, which is
authorized to administer the Discretionary Option 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 under its jurisdiction.
Y. PLAN EFFECTIVE DATE shall mean April 8, 1998.
Z. PREDECESSOR PLANS shall mean collectively the Corporation's
pre-existing 1994 Amended and Restated Stock Option Plan and the Special
Stock Option Plan, both as in effect immediately prior to the Plan
Effective Date hereunder.
AA. PRIMARY COMMITTEE shall mean the committee of two (2) or more
non-employee Board members appointed by the Board to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to
Section 16 Insiders and to administer the Salary Investment Option Grant
Program solely with respect to the selection of the eligible individuals
who may participate in such program.
AB. SALARY INVESTMENT OPTION GRANT PROGRAM shall mean the salary
investment option grant program in effect under the Plan.
AC. SECONDARY COMMITTEE shall mean a committee of one or more Board
members appointed by the Board to administer the Discretionary Option Grant
and Stock Issuance Programs with respect to eligible persons other than
Section 16 Insiders.
A-4
<PAGE> 33
AD. SECTION 12 REGISTRATION DATE shall mean the date on which the
Common Stock is first registered under Section 12 of the 1934 Act.
AE. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of
the 1934 Act.
AF. SERVICE shall mean the performance of services for the
Corporation (or any Parent or Subsidiary) by a person in the capacity of an
Employee, a non-employee member of the board of directors or a consultant
or independent advisor, except to the extent otherwise specifically
provided in the documents evidencing the option grant or stock issuance.
AG. STOCK EXCHANGE shall mean either the American Stock Exchange or
the New York Stock Exchange.
AH. 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.
AI. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in
effect under the Plan.
AJ. 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.
AK. TAKE-OVER PRICE shall mean the greater of (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 the 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.
AL. TAXES shall mean the Federal, state and local income and
employment tax liabilities incurred by the holder of Non-Statutory Options
or unvested shares of Common Stock in connection with the exercise of those
options or the vesting of those shares.
AM. 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).
AN. UNDERWRITING AGREEMENT shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
A-5
<PAGE> 34
AO. UNDERWRITING DATE shall mean the date on which the Underwriting
Agreement is executed and priced in connection with an initial public
offering of the Common Stock.
A-6
<PAGE> 1
EXHIBIT 99.2
BROADCOM CORPORATION
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following option grant (the "Option") to
purchase shares of the Common Stock of Broadcom Corporation (the "Corporation"):
Optionee:________________________________________________________________
Grant Date:______________________________________________________________
Vesting Commencement Date:_______________________________________________
Exercise Price: $______________________________________________ per share
Number of Option Shares:__________________________________________ shares
Expiration Date:_________________________________________________________
Type of Option: _________ Incentive Stock Option
_________ Non-Statutory Stock Option
Exercise Schedule: The Option shall become exercisable for twenty-five
percent (25%) of the Option Shares upon Optionee's completion of one (1)
year of Service measured from the Vesting Commencement Date and shall
become exercisable for the balance of the Option Shares in thirty-six
(36) successive equal monthly installments upon Optionee's completion of
each additional month of Service over the thirty-six (36) month period
measured from the first anniversary of the Vesting Commencement Date. In
no event shall the Option become exercisable for any additional Option
Shares after Optionee's cessation of Service.
Optionee understands and agrees that the Option is granted subject to and
in accordance with the terms of the Broadcom Corporation 1998 Stock Incentive
Plan (the "Plan"). Optionee further agrees to be bound by the terms of the Plan
and the terms of the Option as set forth in the Stock Option Agreement attached
hereto as Exhibit A. Optionee hereby acknowledges receipt of a copy of the
official prospectus for the Plan in the form attached hereto as Exhibit B. A
copy of the Plan is available upon request made to the Corporate Secretary at
the Corporation's principal offices.
<PAGE> 2
No Employment or Service Contract. Nothing in this Notice or in the
attached Stock Option Agreement or in the Plan shall confer upon Optionee any
right to continue in Service for any period of specific duration or interfere
with or otherwise restrict in any way the rights of the Corporation (or any
Parent or Subsidiary employing or retaining Optionee) or of Optionee, which
rights are hereby expressly reserved by each, to terminate Optionee's Service at
any time for any reason, with or without cause.
Definitions. All capitalized terms in this Notice shall have the meaning
assigned to them in this Notice or in the attached Stock Option Agreement.
DATED:,________________________________, 199__
BROADCOM CORPORATION
By:_________________________________
Title:______________________________
____________________________________
OPTIONEE
Address:____________________________
____________________________
ATTACHMENTS
EXHIBIT A - STOCK OPTION AGREEMENT
EXHIBIT B - PLAN SUMMARY AND PROSPECTUS
2.
<PAGE> 1
EXHIBIT 99.3
BROADCOM CORPORATION
STOCK OPTION AGREEMENT
RECITALS
A. The Board has adopted the Plan for the purpose of retaining the
services of selected Employees, non-employee members of the Board or of the
board of directors of any Parent or Subsidiary and consultants and other
independent advisors who provide services to the Corporation (or any Parent or
Subsidiary).
B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as of
the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.
2. OPTION TERM. This option shall have a maximum term of ten (10)
years measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6.
3. LIMITED TRANSFERABILITY. This option shall be neither
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee. However, if this option is designated a
Non-Statutory Option in the Grant Notice, then this option may, in connection
with the Optionee's estate plan, be assigned in whole or in part during
Optionee's lifetime to one or more members of the Optionee's immediate family or
to a trust established for the exclusive benefit of one or more such family
members. The assigned portion shall be exercisable only by the person or persons
who acquire a proprietary interest in the option pursuant to such assignment.
The terms applicable to the assigned portion shall be the same as those in
effect for this option immediately prior to such assignment.
4. DATES OF EXERCISE. This option shall become exercisable for the
Option Shares in one or more installments as specified in the Grant Notice. As
the option becomes exercisable for such installments, those installments shall
accumulate, and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.
<PAGE> 2
5. CESSATION OF SERVICE. The option term specified in Paragraph 2
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:
(a) Should Optionee cease to remain in Service for any
reason (other than death, Permanent Disability or Misconduct) while
holding this option, then Optionee shall have a period of three (3)
months (commencing with the date of such cessation of Service) during
which to exercise this option, but in no event shall this option be
exercisable at any time after the Expiration Date.
(b) Should Optionee die while holding this option, then
the personal representative of Optionee's estate or the person or
persons to whom the option is transferred pursuant to Optionee's will
or in accordance with the laws of inheritance shall have the right to
exercise this option. Such right shall lapse, and this option shall
cease to be outstanding, upon the earlier of (i) the expiration of the
twelve (12)-month period measured from the date of Optionee's death or
(ii) the Expiration Date.
(c) Should Optionee cease Service by reason of
Permanent Disability while holding this option, then Optionee shall
have a period of twelve (12) months (commencing with the date of such
cessation of Service) during which to exercise this option. In no
event shall this option be exercisable at any time after the
Expiration Date.
(d) During the limited period of post-Service
exercisability, this option may not be exercised in the aggregate for
more than the number of vested Option Shares for which the option is
exercisable at the time of Optionee's cessation of Service. Upon the
expiration of such limited exercise period or (if earlier) upon the
Expiration Date, this option shall terminate and cease to be
outstanding for any vested Option Shares for which the option has not
been exercised. However, this option shall, immediately upon
Optionee's cessation of Service for any reason, terminate and cease to
be outstanding with respect to any Option Shares in which Optionee is
not otherwise at that time vested or for which this option is not
otherwise at that time exercisable.
(e) Should Optionee's Service be terminated for
Misconduct, then this option shall terminate immediately and cease to
remain outstanding.
6. SPECIAL ACCELERATION OF OPTION.
(a) This option to the extent outstanding at the time of a
Change in Control but not otherwise fully exercisable, shall not become
exercisable on an accelerated basis if and to the extent: (i) this option is, in
connection with the Change in Control, to be assumed by the successor
corporation (or parent thereof) or (ii) this option is to be replaced with a
cash incentive program of the successor corporation which preserves the spread
existing at the time of the Change in Control on the Option Shares for which
this option is not otherwise at that time
2.
<PAGE> 3
exercisable (the excess of the Fair Market Value of those Option Shares over the
aggregate Exercise Price payable for such shares) and provides for subsequent
payout in accordance with the same option exercise/vesting schedule set forth in
the Grant Notice. However, if none of the foregoing conditions apply, an
outstanding option shall automatically accelerate so that each such option
shall, immediately prior to the effective date of the Change in Control, become
exercisable for all the shares of Common Stock at the time subject to that
option and may be exercised for any or all of those shares as fully vested
shares of Common Stock.
(b) Immediately following the Change in Control, this option
shall terminate and cease to be outstanding, except to the extent this option is
assumed by the successor corporation (or parent thereof) in connection with the
Change in Control or is otherwise to continue in full force and effect pursuant
to the terms of the Change in Control transaction.
(c) If this option is assumed in connection with a Change in
Control or is otherwise to continue in full force and effect, then this option
shall be appropriately adjusted, immediately after such Change in Control, to
apply to the number and class of securities which would have been issuable to
Optionee in consummation of such Change in Control had the option been exercised
immediately prior to such Change in Control, and appropriate adjustments shall
also be made to the Exercise Price, provided the aggregate Exercise Price shall
remain the same.
(d) This Agreement shall not in any way affect the right of
the Corporation to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
7. ADJUSTMENT IN OPTION SHARES. Should any change be made to the Common
Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.
8. SHAREHOLDER RIGHTS. The holder of this option shall not have any
shareholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.
9. MANNER OF EXERCISING OPTION.
(a) In order to exercise this option with respect to all or
any part of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take the
following actions:
(i) Execute and deliver to the Corporation a Notice of
Exercise for the Option Shares for which the option is exercised.
3.
<PAGE> 4
(ii) Pay the aggregate Exercise Price for the purchased
shares in one or more of the following forms:
(A) cash or check made payable to the Corporation;
(B) a promissory note payable to the Corporation, but
only to the extent authorized by the Plan Administrator in accordance
with Paragraph 13;
(C) shares of Common Stock held by Optionee (or any
other person or persons exercising the option) for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date; or
(D) through a special sale and remittance procedure
pursuant to which Optionee (or any other person or persons exercising
the option) shall concurrently provide irrevocable instructions (I) to
a Corporation-designated brokerage firm 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 (II) to the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in order to complete
the sale.
Except to the extent the sale and remittance procedure
is utilized in connection with the option exercise, payment of the
Exercise Price must accompany the Notice of Exercise delivered to the
Corporation in connection with the option exercise.
(iii) Furnish to the Corporation appropriate documentation
that the person or persons exercising the option (if other than Optionee) have
the right to exercise this option.
(iv) Make appropriate arrangements with the Corporation (or
Parent or Subsidiary employing or retaining Optionee) for the satisfaction of
all Federal, state and local income and employment tax withholding requirements
applicable to the option exercise.
(b) As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares,
with the appropriate legends affixed thereto.
4.
<PAGE> 5
(c) In no event may this option be exercised for any
fractional shares.
10. COMPLIANCE WITH LAWS AND REGULATIONS.
(a) The exercise of this option and the issuance of the
Option Shares upon such exercise shall be subject to compliance by the
Corporation and Optionee with all applicable requirements of law relating
thereto and with all applicable regulations of any stock exchange (or the Nasdaq
National Market, if applicable) on which the Common Stock may be listed for
trading at the time of such exercise and issuance.
(b) The inability of the Corporation to obtain approval from
any regulatory body having authority deemed by the Corporation to be necessary
to the lawful issuance and sale of any Common Stock pursuant to this option
shall relieve the Corporation of any liability with respect to the non-issuance
or sale of the Common Stock as to which such approval shall not have been
obtained. The Corporation, however, shall use its best efforts to obtain all
such approvals.
11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided
in Paragraphs 3 and 6, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its successors and assigns
and Optionee, Optionee's assigns and the legal representatives, heirs and
legatees of Optionee's estate.
12. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.
13. FINANCING. The Plan Administrator may, in its absolute
discretion and without any obligation to do so, permit Optionee to pay the
Exercise Price for the purchased Option Shares by delivering a full-recourse
promissory note payable to the Corporation. The terms of any such promissory
note (including the interest rate, the requirements for collateral and the terms
of repayment) shall be established by the Plan Administrator in its sole
discretion.
14. CONSTRUCTION. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under the Plan or this Agreement shall
be conclusive and binding on all persons having an interest in this option.
15. GOVERNING LAW. The interpretation, performance and enforcement
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.
5.
<PAGE> 6
16. EXCESS SHARES. If the Option Shares covered by this Agreement
exceed, as of the Grant Date, the number of shares of Common Stock which may
without shareholder approval be issued under the Plan, then this option shall be
void with respect to those excess shares, unless shareholder approval of an
amendment sufficiently increasing the number of shares of Common Stock issuable
under the Plan is obtained in accordance with the provisions of the Plan.
17. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE OPTION. In the event
this option is designated an Incentive Option in the Grant Notice, the following
terms and conditions shall also apply to the grant:
(a) This option shall cease to qualify for favorable
tax treatment as an Incentive Option if (and to the extent) this
option is exercised for one or more Option Shares: (A) more than three
(3) months after the date Optionee ceases to be an Employee for any
reason other than death or Permanent Disability or (B) more than
twelve (12) months after the date Optionee ceases to be an Employee by
reason of Permanent Disability.
(b) No installment under this option shall qualify for
favorable tax treatment as an Incentive Option if (and to the extent)
the aggregate Fair Market Value (determined at the Grant Date) of the
Common Stock for which such installment first becomes exercisable
hereunder would, when added to the aggregate value (determined as of
the respective date or dates of grant) of the Common Stock or other
securities for which this option or any other Incentive Options
granted to Optionee prior to the Grant Date (whether under the Plan or
any other option plan of the Corporation or any Parent or Subsidiary)
first become exercisable during the same calendar year, exceed One
Hundred Thousand Dollars ($100,000) in the aggregate. Should such One
Hundred Thousand Dollar ($100,000) limitation be exceeded in any
calendar year, this option shall nevertheless become exercisable for
the excess shares in such calendar year as a Non-Statutory Option.
(c) Should the exercisability of this option be
accelerated upon a Change in Control, then this option shall qualify
for favorable tax treatment as an Incentive Option only to the extent
the aggregate Fair Market Value (determined at the Grant Date) of the
Common Stock for which this option first becomes exercisable in the
calendar year in which the Change in Control occurs does not, when
added to the aggregate value (determined as of the respective date or
dates of grant) of the Common Stock or other securities for which this
option or one or more other Incentive Options granted to Optionee
prior to the Grant Date (whether under the Plan or any other option
plan of the Corporation or any Parent or Subsidiary) first become
exercisable during the same calendar year, exceed One Hundred Thousand
Dollars ($100,000) in the aggregate. Should the applicable One Hundred
Thousand Dollar ($100,000) limitation be exceeded in
6.
<PAGE> 7
the calendar year of such Change in Control, the option may nevertheless be
exercised for the excess shares in such calendar year as a Non-Statutory
Option.
(d) Should Optionee hold, in addition to this option,
one or more other options to purchase Common Stock which become
exercisable for the first time in the same calendar year as this
option, then the foregoing limitations on the exercisability of such
options as Incentive Options shall be applied on the basis of the
order in which such options are granted.
7.
<PAGE> 8
EXHIBIT I
NOTICE OF EXERCISE
I hereby notify Broadcom Corporation (the "Corporation") that I
elect to purchase _____________________ shares of the Corporation's Common
Stock (the "Purchased Shares") at the option exercise price of
$_____________ per share (the "Exercise Price") pursuant to that certain
option (the "Option") granted to me under the Corporation's 1998 Stock
Incentive Plan on _____________________, 199 .
Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for
the Purchased Shares in accordance with the provisions of my agreement with
the Corporation (or other documents) evidencing the Option and shall
deliver whatever additional documents may be required by such agreement as
a condition for exercise. Alternatively, I may utilize the special
broker-dealer sale and remittance procedure specified in my agreement to
effect payment of the Exercise Price.
________________________, 199
Date
____________________________________
Optionee
Address:____________________________
____________________________________
Print name in exact manner ____________________________________
it is to appear on the
stock certificate:
Address to which certificate is to be ____________________________________
sent, if different from address above:
____________________________________
Social Security Number: ____________________________________
Employee Number: ____________________________________
<PAGE> 9
APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Option Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. COMMON STOCK shall mean shares of the Corporation's Class A
common stock.
D. CODE shall mean the Internal Revenue Code of 1986, as amended.
E. CHANGE IN CONTROL shall mean a change in ownership or control of
the Corporation effected through any of the following transactions:
(i) a 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,
(ii) the 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 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.
F. CORPORATION shall mean Broadcom Corporation, a California
corporation.
G. 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.
H. EXERCISE DATE shall mean the date on which the option shall have
been exercised in accordance with Paragraph 9 of the Agreement.
I. EXERCISE PRICE shall mean the exercise price per Option Share as
specified in the Grant Notice.
J. EXPIRATION DATE shall mean the date on which the option expires
as specified in the Grant Notice.
A-1
<PAGE> 10
K. 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 deemed
equal to the closing selling price per share of Common Stock on the
date in question, as the price is reported by the National Association
of Securities Dealers on the Nasdaq National Market. 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.
(ii) If the Common Stock is at the time listed on any
Stock Exchange, then the Fair Market Value shall be deemed equal to
the closing selling price per share of Common Stock 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.
L. GRANT DATE shall mean the date of grant of the option as
specified in the Grant Notice.
M. GRANT NOTICE shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of
the basic terms of the option evidenced hereby.
N. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
O. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by Optionee, any unauthorized use or disclosure
by Optionee of confidential information or trade secrets of the Corporation
(or any Parent or Subsidiary), or any other intentional misconduct by
Optionee adversely affecting the business or affairs of the Corporation (or
any Parent or Subsidiary) in a material manner. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions which the
Corporation (or any Parent or Subsidiary) may consider as grounds for the
dismissal or discharge of Optionee or any other individual in the Service
of the Corporation (or any Parent or Subsidiary).
P. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.
Q. NOTICE OF EXERCISE shall mean the notice of exercise in the form
attached hereto as Exhibit I.
A-2
<PAGE> 11
R. OPTION SHARES shall mean the number of shares of Common Stock
subject to the option as specified in the Grant Notice.
S. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.
T. 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.
U. PERMANENT DISABILITY shall mean the inability of Optionee to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which is expected to result in
death or has lasted or can be expected to last for a continuous period of
twelve (12) months or more.
V. PLAN shall mean the Corporation's 1998 Stock Incentive Plan.
W. PLAN ADMINISTRATOR shall mean either the Board or a committee of
the Board acting in its capacity as administrator of the Plan.
X. SERVICE shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or
independent advisor.
Y. STOCK EXCHANGE shall mean the American Stock Exchange or the New
York Stock Exchange.
Z. 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.
A-3
<PAGE> 1
EXHIBIT 99.4
ADDENDUM
TO
STOCK OPTION AGREEMENT
The following provisions are hereby incorporated into, and are
hereby made a part of, that certain Stock Option Agreement (the "Option
Agreement") by and between Broadcom Corporation (the "Corporation") and
____________________________________ ("Optionee") evidencing the stock
option (the "Option") granted this date to Optionee under the terms of the
Corporation's 1998 Stock Incentive Plan, and such provisions shall be
effective immediately. All capitalized terms in this Addendum, to the
extent not otherwise defined herein, shall have the meanings assigned to
them in the Option Agreement.
INVOLUNTARY TERMINATION FOLLOWING
CHANGE IN CONTROL
1. To the extent the Option is, in connection with a Change in
Control, to be assumed or otherwise continued in full force and effect in
accordance with Paragraph 6 of the Option Agreement, the Option shall not
accelerate upon the occurrence of that Change in Control, and the Option
shall accordingly continue, over Optionee's period of Service after the
Change in Control, to become exercisable for the Option Shares in one or
more installments in accordance with the provisions of the Option
Agreement. However, immediately upon an Involuntary Termination of
Optionee's Service within eighteen (18) months following such Change in
Control, the assumed Option, to the extent outstanding at the time but not
otherwise fully exercisable, shall automatically accelerate so that the
Option shall become immediately exercisable for all the Option Shares at
the time subject to the Option and may be exercised for any or all of those
Option Shares as fully vested shares.
2. The Option as accelerated under Paragraph 1 shall remain so
exercisable until the earlier of (i) the Expiration Date or (ii) the
expiration of the one (1)-year period measured from the date of the
Optionee's Involuntary Termination.
3. For purposes of this Addendum the following definitions shall be
in effect:
(i) An INVOLUNTARY TERMINATION shall mean the
termination of Optionee's Service by reason of:
(A) Optionee's involuntary dismissal or discharge
by the Corporation for reasons other than Misconduct, or
(B) Optionee's voluntary resignation following (A)
a change in Optionee's position with the Corporation (or Parent or
Subsidiary employing Optionee) which materially reduces Optionee's
duties and responsibilities or the level of management to which
Optionee reports, (B) a reduction in Optionee's level of compensation
(including base salary, fringe benefits and target bonus under any
corporate
<PAGE> 2
performance based bonus or incentive programs) by more than
fifteen percent (15%) or (C) a relocation of Optionee'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
Optionee's consent.
4. The provisions of Paragraph 1 of this Addendum shall govern the
period for which the Option is to remain exercisable following the
Involuntary Termination of Optionee's Service within eighteen (18) months
after the Change in Control and shall supersede any provisions to the
contrary in Paragraph 5 of the Option Agreement.
IN WITNESS WHEREOF, Broadcom Corporation has caused this Addendum to
be executed by its duly-authorized officer as of the Effective Date
specified below.
BROADCOM CORPORATION
By:_________________________________
Title:______________________________
EFFECTIVE DATE: _____________, 199__
2.
<PAGE> 1
EXHIBIT 99.5
ADDENDUM
TO
STOCK OPTION AGREEMENT
The following provisions are hereby incorporated into, and are hereby
made a part of, that certain Stock Option Agreement (the "Option Agreement") by
and between Broadcom Corporation (the "Corporation") and
______________________________ ("Optionee") evidencing the stock option (the
"Option") granted on this date to Optionee under the terms of the Corporation's
1998 Stock Incentive Plan, and such provisions shall be effective immediately.
All capitalized terms in this Addendum, to the extent not otherwise defined
herein, shall have the meanings assigned to them in the Option Agreement.
LIMITED STOCK APPRECIATION RIGHT
1. Optionee is hereby granted a limited stock appreciation right
exercisable upon the following terms and conditions:
(i) Optionee shall have the unconditional right,
exercisable at any time during the thirty (30)-day period immediately
following a Hostile Take-Over, to surrender the Option to the
Corporation, to the extent the Option is at the time exercisable for
one or more shares of Common Stock. In return for the surrendered
Option, Optionee shall receive a cash distribution from the
Corporation in an amount equal to the excess of (A) the Take-Over
Price of the shares of Common Stock for which the surrendered option
(or surrendered portion) is at the time exercisable over (B) the
aggregate Exercise Price payable for such shares.
(ii) To exercise this limited stock appreciation right,
Optionee must, during the applicable thirty (30)-day exercise period,
provide the Corporation with written notice of the option surrender in
which there is specified the number of Option Shares as to which the
Option is being surrendered. Such notice must be accompanied by the
return of Optionee's copy of the Option Agreement, together with any
written amendments to such Agreement. The cash distribution shall be
paid to Optionee within five (5) business days following such delivery
date. The exercise of the limited stock appreciation right in
accordance with the terms of this Addendum is hereby approved by the
Plan Administrator, in advance of such exercise, and no further
approval of the Plan Administrator or the Board shall be required at
the time of the actual option surrender and cash distribution. Upon
receipt of such cash distribution, the Option shall be cancelled with
respect to the Option Shares for which the Option has been
surrendered, and Optionee shall cease to have any further right to
acquire those Option Shares under the Option Agreement. The Option
shall, however, remain outstanding and exercisable for the balance of
the Option Shares (if any) in accordance with the terms of the Option
Agreement, and the Corporation shall issue a replacement
<PAGE> 2
stock option agreement (substantially in the same form of the surrendered
Option Agreement) for those remaining Option Shares.
(iii) In no event may this limited stock appreciation
right be exercised when there is not a positive spread between the
Fair Market Value of the Option Shares subject to the surrendered
option and the aggregate Exercise Price payable for such shares. This
limited stock appreciation right shall in all events terminate upon
the expiration or sooner termination of the Option term and may not be
assigned or transferred by Optionee, except to the extent the Option
is transferable in accordance with the provisions of the Option
Agreement.
2. For purposes of this Addendum, the following definitions shall be
in effect:
(i) A HOSTILE TAKE-OVER be deemed to occur upon 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 which the Board does not
recommend such shareholders to accept or (B) 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
comprised of individuals who either (aa) have been Board members
continuously since the beginning of such period or (bb) 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 (aa)
who were still in office at the time the Board approved such election
or nomination.
(ii) TAKE-OVER PRICE shall mean the greater of (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 the 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.
2.
<PAGE> 3
IN WITNESS WHEREOF, Broadcom Corporation has caused this Addendum to
be executed by its duly-authorized officer as of the Effective Date
specified below.
BROADCOM CORPORATION
By:_________________________________
Title:______________________________
EFFECTIVE DATE: __________________, 199__
3.
<PAGE> 1
EXHIBIT 99.6
BROADCOM CORPORATION
STOCK ISSUANCE AGREEMENT
AGREEMENT made this _______ day of _______________ 19_____, by and
between Broadcom Corporation, a California corporation, and
_________________________________, a Participant in the Corporation's 1998 Stock
Incentive Plan.
All capitalized terms in this Agreement shall have the meaning assigned
to them in this Agreement or in the attached Appendix.
A. PURCHASE OF SHARES
1. PURCHASE. Participant hereby purchases shares of Common Stock (the
"Purchased Shares") pursuant to the provisions of the Stock Issuance Program at
the purchase price of $______ per share (the "Purchase Price").
2. PAYMENT. Concurrently with the delivery of this Agreement to the
Corporation, Participant shall pay the Purchase Price for the Purchased Shares
in cash or check payable to the Corporation and shall deliver a duly-executed
blank Assignment Separate from Certificate (in the form attached hereto as
Exhibit I) with respect to the Purchased Shares.
3. SHAREHOLDER RIGHTS. Until such time as the Corporation exercises the
Repurchase Right, Participant (or any successor in interest) shall have all the
rights of a shareholder (including voting, dividend and liquidation rights) with
respect to the Purchased Shares, subject, however, to the transfer restrictions
of this Agreement.
4. ESCROW. The Corporation shall have the right to hold the Purchased
Shares in escrow until those shares have vested in accordance with the Vesting
Schedule.
5. COMPLIANCE WITH LAW. Under no circumstances shall shares of Common
Stock or other assets be issued or delivered to Participant pursuant to the
provisions of this Agreement unless, in the opinion of counsel for the
Corporation or its successors, there shall have been compliance with all
applicable requirements of Federal and state securities laws, all applicable
listing requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock is at the time listed for trading and all
other requirements of law or of any regulatory bodies having jurisdiction over
such issuance and delivery.
B. TRANSFER RESTRICTIONS
1. RESTRICTION ON TRANSFER. Except for any Permitted Transfer,
Participant shall not transfer, assign, encumber or otherwise dispose of any of
the Purchased Shares which are subject to the Repurchase Right.
<PAGE> 2
2. RESTRICTIVE LEGEND. The stock certificate for the Purchased Shares
shall be endorsed with the following restrictive legend:
"The shares represented by this certificate are unvested and
subject to certain repurchase rights granted to the Corporation and
accordingly may not be sold, assigned, transferred, encumbered, or in any
manner disposed of except in conformity with the terms of a written
agreement dated , 199 between the Corporation and the registered
holder of the shares (or the predecessor in interest to the shares). A copy
of such agreement is maintained at the Corporation's principal corporate
offices."
3. TRANSFEREE OBLIGATIONS. Each person (other than the Corporation)
to whom the Purchased Shares are transferred by means of a Permitted
Transfer must, as a condition precedent to the validity of such transfer,
acknowledge in writing to the Corporation that such person is bound by the
provisions of this Agreement and that the transferred shares are subject to
the Repurchase Right to the same extent such shares would be so subject if
retained by Participant.
C. REPURCHASE RIGHT
1. GRANT. The Corporation is hereby granted the right (the
"Repurchase Right"), exercisable at any time during the ninety (90)-day
period following the date Participant ceases for any reason to remain in
Service, to repurchase at the Purchase Price all or any portion of the
Purchased Shares in which Participant is not, at the time of his or her
cessation of Service, vested in accordance with the Vesting Schedule or the
special vesting acceleration provisions of Paragraph C.5 of this Agreement
(such shares to be hereinafter referred to as the "Unvested Shares").
2. EXERCISE OF THE REPURCHASE RIGHT. The Repurchase Right shall be
exercisable by written notice delivered to each Owner of the Unvested
Shares prior to the expiration of the ninety (90)-day exercise period. The
notice shall indicate the number of Unvested Shares to be repurchased and
the date on which the repurchase is to be effected, such date to be not
more than thirty (30) days after the date of such notice. The certificates
representing the Unvested Shares to be repurchased shall be delivered to
the Corporation on or before the close of business on the date specified
for the repurchase. Concurrently with the receipt of such stock
certificates, the Corporation shall pay to Owner, in cash or cash
equivalent (including the cancellation of any purchase-money indebtedness),
an amount equal to the Purchase Price previously paid for the Unvested
Shares to be repurchased from Owner.
3. TERMINATION OF THE REPURCHASE RIGHT. The Repurchase Right shall
terminate with respect to any Unvested Shares for which it is not timely
exercised under Paragraph C.2. In addition, the Repurchase Right shall
terminate and cease to be exercisable with respect to any and all Purchased
Shares in which Participant vests in accordance with the following Vesting
Schedule:
2.
<PAGE> 3
(i) Upon Participant's completion of one (1) year of
Service measured from ______________, 199__, Participant shall acquire
a vested interest in, and the Repurchase Right shall lapse with
respect to, twenty-five percent (25%) of the Purchased Shares.
(ii) Participant shall acquire a vested interest in,
and the Repurchase Right shall lapse with respect to, the remaining
Purchased Shares in a series of thirty six (36) successive equal
monthly installments upon Participant's completion of each additional
month of Service over the thirty-six (36)-month period measured from
the initial vesting date under subparagraph (i) above.
4. RECAPITALIZATION. Any new, substituted or additional securities
or other property (including cash paid other than as a regular cash
dividend) which is by reason of any Recapitalization distributed with
respect to the Purchased Shares shall be immediately subject to the
Repurchase Right and any escrow requirements hereunder, but only to the
extent the Purchased Shares are at the time covered by such right or escrow
requirements. Appropriate adjustments to reflect such distribution shall be
made to the number and/or class of securities subject to this Agreement and
to the price per share to be paid upon the exercise of the Repurchase Right
in order to reflect the effect of any such Recapitalization upon the
Corporation's capital structure; provided, however, that the aggregate
purchase price shall remain the same.
5. CHANGE IN CONTROL.
(a) Immediately prior to the consummation of any Change in Control,
the Repurchase Right shall automatically lapse in its entirety and the Purchased
Shares shall vest in full, except to the extent the Repurchase Right is to
continue in full force and effect pursuant to the terms of the Change in Control
transaction.
(b) To the extent the Repurchase Right remains in force and effect
following a Change in Control, such right shall be assigned to any successor
corporation (or parent thereof) in the Change in Control transaction and shall
apply to the new capital stock or other property (including any cash payments)
received in exchange for the Purchased Shares in consummation of the Change in
Control, but only to the extent the Purchased Shares are at the time covered by
such right. Appropriate adjustments shall be made to the price per share payable
upon exercise of the Repurchase Right to reflect the effect of the Change in
Control upon the Corporation's capital structure; provided, however, that the
aggregate purchase price shall remain the same. The new securities or other
property (including cash payments) issued or distributed with respect to the
Purchased Shares in consummation of the Change in Control shall immediately be
deposited in escrow with the Corporation (or the successor entity) and shall not
be released from escrow until Participant vests in such securities or other
property in accordance with the same Vesting Schedule in effect for the
Purchased Shares.
3.
<PAGE> 4
(c) The Repurchase Right may also be subject to termination in whole
or in part on an accelerated basis, and the Purchased Shares subject to
immediate vesting, in accordance with the terms of any special Addendum attached
to this Agreement.
D. SPECIAL TAX ELECTION
1. SECTION 83(b) ELECTION. Under Code Section 83, the excess of the fair
market value of the Purchased Shares on the date any forfeiture restrictions
applicable to such shares lapse over the Purchase Price paid for such shares
will be reportable as ordinary income on the lapse date. For this purpose, the
term "forfeiture restrictions" includes the right of the Corporation to
repurchase the Purchased Shares pursuant to the Repurchase Right. Participant
may elect under Code Section 83(b) to be taxed at the time the Purchased Shares
are acquired, rather than when and as such Purchased Shares cease to be subject
to such forfeiture restrictions. Such election must be filed with the Internal
Revenue Service within thirty (30) days after the date of this Agreement. Even
if the fair market value of the Purchased Shares on the date of this Agreement
equals the Purchase Price paid (and thus no tax is payable), the election must
be made to avoid adverse tax consequences in the future. THE FORM FOR MAKING
THIS ELECTION IS ATTACHED AS EXHIBIT II HERETO. PARTICIPANT UNDERSTANDS THAT
FAILURE TO MAKE THIS FILING WITHIN THE APPLICABLE THIRTY (30)-DAY PERIOD WILL
RESULT IN THE RECOGNITION OF ORDINARY INCOME AS THE FORFEITURE RESTRICTIONS
LAPSE.
2. FILING RESPONSIBILITY. PARTICIPANT ACKNOWLEDGES THAT IT IS
PARTICIPANT'S SOLE RESPONSIBILITY, AND NOT THE CORPORATION'S, TO FILE A TIMELY
ELECTION UNDER CODE SECTION 83(b), EVEN IF PARTICIPANT REQUESTS THE CORPORATION
OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF.
E. GENERAL PROVISIONS
1. ASSIGNMENT. The Corporation may assign the Repurchase Right to any
person or entity selected by the Board, including (without limitation) one or
more shareholders of the Corporation.
2. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement or in the
Plan shall confer upon Participant any right to continue in Service for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Corporation (or any Parent or Subsidiary employing or
retaining Participant) or of Participant, which rights are hereby expressly
reserved by each, to terminate Participant's Service at any time for any reason,
with or without cause.
3. NOTICES. Any notice required to be given under this Agreement shall be
in writing and shall be deemed effective upon personal delivery or upon deposit
in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party entitled to such notice at the address indicated below
such party's signature line on this Agreement or at such other
4.
<PAGE> 5
address as such party may designate by ten (10) days advance written notice
under this paragraph to all other parties to this Agreement.
4. NO WAIVER. The failure of the Corporation in any instance to exercise
the Repurchase Right shall not constitute a waiver of any other repurchase
rights that may subsequently arise under the provisions of this Agreement or any
other agreement between the Corporation and Participant. No waiver of any breach
or condition of this Agreement shall be deemed to be a waiver of any other or
subsequent breach or condition, whether of like or different nature.
5. CANCELLATION OF SHARES. If the Corporation shall make available, at
the time and place and in the amount and form provided in this Agreement, the
consideration for the Purchased Shares to be repurchased in accordance with the
provisions of this Agreement, then from and after such time, the person from
whom such shares are to be repurchased shall no longer have any rights as a
holder of such shares (other than the right to receive payment of such
consideration in accordance with this Agreement). Such shares shall be deemed
purchased in accordance with the applicable provisions hereof, and the
Corporation shall be deemed the owner and holder of such shares, whether or not
the certificates therefor have been delivered as required by this Agreement.
6. PARTICIPANT UNDERTAKING. Participant hereby agrees to take whatever
additional action and execute whatever additional documents the Corporation may
deem necessary or advisable in order to carry out or effect one or more of the
obligations or restrictions imposed on either Participant or the Purchased
Shares pursuant to the provisions of this Agreement.
7. AGREEMENT IS ENTIRE CONTRACT. This Agreement constitutes the entire
contract between the parties hereto with regard to the subject matter hereof.
This Agreement is made pursuant to the provisions of the Plan and shall in all
respects be construed in conformity with the terms of the Plan.
8. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California without resort to that
State's conflict-of-laws rules.
9. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
10. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall inure
to the benefit of, and be binding upon, the Corporation and its successors and
assigns and upon Participant, Participant's assigns and the legal
representatives, heirs and legatees of Participant's estate, whether or not any
such person shall have become a party to this Agreement and have agreed in
writing to join herein and be bound by the terms hereof.
5.
<PAGE> 6
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first indicated above.
BROADCOM CORPORATION
By:_________________________________
Title:______________________________
Address:____________________________
____________________________________
____________________________________
PARTICIPANT
Address:____________________________
____________________________________
6.
<PAGE> 7
SPOUSAL ACKNOWLEDGMENT
The undersigned spouse of the Participant has read and hereby approves
the foregoing Stock Issuance Agreement. In consideration of the Corporation's
granting the Participant the right to acquire the Purchased Shares in accordance
with the terms of such Agreement, the undersigned hereby agrees to be
irrevocably bound by all the terms of such Agreement, including (without
limitation) the right of the Corporation (or its assigns) to purchase any
Purchased Shares in which the Participant is not vested at the time of his or
her termination of Service.
____________________________________
PARTICIPANT'S SPOUSE
Address:____________________________
____________________________________
7.
<PAGE> 8
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED _____________ hereby sell(s), assign(s) and
transfer(s) unto Broadcom Corporation (the "Corporation"),______________ ( )
shares of the Common Stock of the Corporation standing in his or her name on the
books of the Corporation represented by Certificate No. ________________
herewith and do(es) hereby irrevocably constitute and appoint
___________________ Attorney to transfer the said stock on the books of the
Corporation with full power of substitution in the premises.
Dated:_________________
Signature___________________________
INSTRUCTION: Please do not fill in any blanks other than the signature
line. Please sign exactly as you would like your name to appear on the
issued stock certificate. The purpose of this assignment is to enable the
Corporation to exercise the Repurchase Right without requiring additional
signatures on the part of Participant.
<PAGE> 9
EXHIBIT II
SECTION 83(b) TAX ELECTION
This statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name:
Address:
Taxpayer Ident. No.:
(2) The property with respect to which the election is being made is _______
shares of the common ___________ stock of Broadcom Corporation.
(3) The property was issued on __________, 199__. _____________
(4) The taxable year in which the election is being made is the calendar year
199__.
(5) The property is subject to a repurchase right pursuant to which the
issuer has the right to acquire the property at the original purchase
price if for any reason taxpayer's employment with the issuer is
terminated. The issuer's repurchase right lapses in a series of
installments over a four (4)-year period ending on ___________.
(6) The fair market value at the time of transfer (determined without regard
to any restriction other than a restriction which by its terms will never
lapse) is $_________ per share.
(7) The amount paid for such property is $___________ per share. ____________
(8) A copy of this statement was furnished to Broadcom Corporation for whom
taxpayer rendered the services underlying the transfer of property.
(9) This statement is executed on ___________, 199__. _______________________
__________________________________ ____________________________________
Spouse (if any) Taxpayer
This election must be filed with the Internal Revenue Service Center with which
taxpayer files his or her Federal income tax returns and must be made within
thirty (30) days after the execution date of the Stock Purchase Agreement. This
filing should be made by registered or certified mail, return receipt requested.
Optionee must retain two (2) copies of the completed form for filing with his or
her Federal and state tax returns for the current tax year and an additional
copy for his or her records.
<PAGE> 10
APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Issuance Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. COMMON STOCK shall mean the Corporation's Class A common stock.
D. CODE shall mean the Internal Revenue Code of 1986, as amended.
E. CHANGE IN CONTROL shall mean a change in ownership or control of the
Corporation affected through any of the following transactions:
(i) a 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) the 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 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
offer or exchange offer made directly to the Corporation's
shareholders.
F. CORPORATION shall mean Broadcom Corporation, a California
corporation.
G. OWNER shall mean Participant and all subsequent holders of the
Purchased Shares who derive their chain of ownership through a Permitted
Transfer from Participant.
H. 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.
I. PARTICIPANT shall mean the person to whom the Purchased Shares
are issued under the Stock Issuance Program.
A-1.
<PAGE> 11
J. PERMITTED TRANSFER shall mean (i) a gratuitous transfer of the
Purchased Shares, provided and only if Participant obtains the
Corporation's prior written consent to such transfer, (ii) a transfer of
title to the Purchased Shares effected pursuant to Participant's will or
the laws of intestate succession following Participant's death or (iii) a
transfer to the Corporation in pledge as security for any purchase-money
indebtedness incurred by Participant in connection with the acquisition of
the Purchased Shares.
K. PLAN shall mean the Corporation's 1998 Stock Incentive Plan.
L. PLAN ADMINISTRATOR shall mean either the Board or a committee of
Board acting in its administrative capacity under the Plan.
M. PURCHASE PRICE shall have the meaning assigned to such term in
Paragraph A.1.
N. PURCHASED SHARES shall have the meaning assigned to such term in
Paragraph A.1.
O. RECAPITALIZATION shall mean any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration.
P. REPURCHASE RIGHT shall mean the right granted to the Corporation
in accordance with Article C.
Q. SERVICE shall mean Participant's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an employee,
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, a
non-employee member of the board of directors or a consultant.
R. STOCK ISSUANCE PROGRAM shall mean the Stock Issuance Program
under the Plan.
S. 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.
T. VESTING SCHEDULE shall mean the vesting schedule specified in
Paragraph C.3, subject to the special vesting acceleration provisions of
Paragraph C.5.
U. UNVESTED SHARES shall have the meaning assigned to such term in
Paragraph C.1.
A-2.
<PAGE> 1
EXHIBIT 99.7
ADDENDUM
TO
STOCK ISSUANCE AGREEMENT
The following provisions are hereby incorporated into, and are hereby
made a part of, that certain Stock Issuance Agreement (the "Issuance Agreement")
by and between Broadcom Corporation (the "Corporation") and ______
("Participant") evidencing the stock issuance made on this date to Participant
under the terms of the Corporation's 1998 Stock Incentive Plan, and such
provisions shall be effective immediately. All capitalized terms in this
Addendum, to the extent not otherwise defined herein, shall have the meanings
assigned to such terms in the Issuance Agreement.
INVOLUNTARY TERMINATION FOLLOWING
CHANGE IN CONTROL
1. To the extent the Repurchase Right is continue in full force and
effect pursuant to the terms of the Change in Control transaction, no
accelerated vesting of the Purchased Shares shall occur upon that Change in
Control, and the Repurchase Right shall be assigned to the successor corporation
(or parent thereof) in the Change in Control transaction. Accordingly, the
Participant shall, over his or her period of Service following the Change in
Control, continue to vest in the Purchased Shares in one or more installments in
accordance with the provisions of the Issuance Agreement.
2. Immediately upon an Involuntary Termination of Participant's Service
within eighteen (18) months following the Change in Control, the Repurchase
Right shall terminate automatically and all the Purchased Shares shall vest in
full.
3. For purposes of this Addendum, the following definitions shall be in
effect:
An INVOLUNTARY TERMINATION shall mean the termination of
Participant's Service by reason of:
(i) Participant's involuntary dismissal or discharge by
the Corporation for reasons other than Misconduct, or
(ii) Participant's voluntary resignation following (A)
a change in Participant's position with the Corporation (or Parent or
Subsidiary employing Participant) which materially reduces
Participant's duties and responsibilities or the level of management
to which Participant reports, (B) a reduction in Participant's 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
Participant'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 Participant's consent.
<PAGE> 2
MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Participant, any unauthorized use or
disclosure by the Participant of confidential information or trade secrets
of the Corporation (or any Parent or Subsidiary), or any other intentional
misconduct by the Participant adversely affecting the business or affairs
of the Corporation (or any Parent or Subsidiary) in a material manner. The
foregoing definition shall not be deemed to be inclusive of all the acts or
omissions which the Corporation (or any Parent or Subsidiary) may consider
as grounds for the dismissal or discharge of the Participant or other
person in the Service of the Corporation (or any Parent or Subsidiary).
IN WITNESS WHEREOF, Broadcom Corporation has caused this Addendum to
be executed by its duly-authorized officer as of the Effective Date
specified below.
BROADCOM CORPORATION
By:_________________________________
Title:______________________________
EFFECTIVE DATE:__________________, 199__
2.
<PAGE> 1
EXHIBIT 99.8
BROADCOM CORPORATION
STOCK PURCHASE AGREEMENT
AGREEMENT made as of this __________ day of _______ 19__, by and between
Broadcom Corporation, a California corporation and ____________________________,
the holder of an outstanding option under the Corporation's 1998 Stock Incentive
Plan (the "Optionee").
All capitalized terms in this Agreement shall have the meaning assigned
to them in this Agreement or in the attached Appendix.
A. EXERCISE OF OPTION
1. EXERCISE. Optionee hereby purchases _______________ shares of Common
Stock (the "Purchased Shares") pursuant to that certain option (the "Option")
granted Optionee on ____________________, 199__ (the "Grant Date") to purchase
up to _______________ shares of Common Stock under the Plan at the exercise
price of $______ per share (the "Exercise Price").
2. PAYMENT. Concurrently with the delivery of this Agreement to the
Corporation, Optionee shall pay the Exercise Price for the Purchased Shares in
accordance with the provisions of the Option Agreement and shall deliver
whatever additional documents may be required by the Option Agreement as a
condition for exercise, together with a duly-executed blank Assignment Separate
from Certificate (in the form attached hereto as Exhibit I) with respect to the
Purchased Shares.
3. SHAREHOLDER RIGHTS. Until such time as the Corporation exercises the
Repurchase Right, Optionee (or any successor in interest) shall have all the
rights of a shareholder (including voting, dividend and liquidation rights) with
respect to the Purchased Shares, subject, however, to the transfer restrictions
of Article B.
B. TRANSFER RESTRICTIONS
1. RESTRICTION ON TRANSFER. Except for any Permitted Transfer, Optionee
shall not transfer, assign, encumber or otherwise dispose of any of the
Purchased Shares which are subject to the Repurchase Right.
2. RESTRICTIVE LEGEND. The stock certificates for the Purchased Shares
shall be endorsed with the following restrictive legend:
"The shares represented by this certificate are
unvested and are subject to a repurchase right granted to the
Corporation and accordingly may not be sold, assigned, transferred,
encumbered, or in any manner disposed of except in conformity with the
terms of a written agreement dated ______, 199__ between the
Corporation and the registered holder of the shares (or the
predecessor in
<PAGE> 2
interest to the shares). A copy of such agreement is
maintained at the Corporation's principal corporate offices."
3. TRANSFEREE OBLIGATIONS. Each person (other than the Corporation)
to whom the Purchased Shares are transferred by means of a Permitted
Transfer must, as a condition precedent to the validity of such transfer,
acknowledge in writing to the Corporation that such person is bound by the
provisions of this Agreement and that the transferred shares are subject to
the Repurchase Right to the same extent such shares would be so subject if
retained by Optionee.
C. REPURCHASE RIGHT
1. GRANT. The Corporation is hereby granted the right (the
"Repurchase Right"), exercisable at any time during the sixty (60)-day
period following the date Optionee ceases for any reason to remain in
Service or (if later) during the sixty (60)-day period following the
execution date of this Agreement, to repurchase at the Exercise Price all
or any portion of the Purchased Shares in which Optionee is not, at the
time of his or her cessation of Service, vested in accordance with the
Vesting Schedule (such shares to be hereinafter referred to as the
"Unvested Shares").
2. EXERCISE OF THE REPURCHASE RIGHT. The Repurchase Right shall be
exercisable by written notice delivered to each Owner of the Unvested
Shares prior to the expiration of the sixty (60)-day exercise period. The
notice shall indicate the number of Unvested Shares to be repurchased and
the date on which the repurchase is to be effected, such date to be not
more than thirty (30) days after the date of such notice. The certificates
representing the Unvested Shares to be repurchased shall be delivered to
the Corporation prior to the close of business on the date specified for
the repurchase. Concurrently with the receipt of such stock certificates,
the Corporation shall pay to Owner, in cash or cash equivalents (including
the cancellation of any purchase-money indebtedness), an amount equal to
the Exercise Price previously paid for the Unvested Shares which are to be
repurchased from Owner.
3. TERMINATION OF THE REPURCHASE RIGHT. The Repurchase Right shall
terminate with respect to any Unvested Shares for which it is not timely
exercised under Paragraph C.2. In addition, the Repurchase Right shall
terminate and cease to be exercisable with respect to any and all Purchased
Shares in which Optionee vests in accordance with the Vesting Schedule.
4. AGGREGATE VESTING LIMITATION. If the Option is exercised in more
than one increment so that Optionee is a party to one or more other Stock
Purchase Agreements (the "Prior Purchase Agreements") which are executed
prior to the date of this Agreement, then the total number of Purchased
Shares as to which Optionee shall be deemed to have a fully-vested interest
under this Agreement and all Prior Purchase Agreements shall not exceed in
the aggregate the number of Purchased Shares in which Optionee would
otherwise at the time be vested, in accordance with the Vesting Schedule,
had all the Purchased Shares (including those acquired under the Prior
Purchase Agreements) been acquired exclusively under this Agreement.
2.
<PAGE> 3
5. RECAPITALIZATION. Any new, substituted or additional securities
or other property (including cash paid other than as a regular cash
dividend) which is by reason of any Recapitalization distributed with
respect to the Purchased Shares shall be immediately subject to the
Repurchase Right and any escrow requirements hereunder, but only to the
extent the Purchased Shares are at the time covered by such right or escrow
requirements. Appropriate adjustments to reflect such distribution shall be
made to the number and/or class of Purchased Shares subject to this
Agreement and to the price per share to be paid upon the exercise of the
Repurchase Right in order to reflect the effect of any such
Recapitalization upon the Corporation's capital structure; provided,
however, that the aggregate purchase price shall remain the same.
6. CORPORATE TRANSACTION.
(a) Immediately prior to the consummation of any Corporate
Transaction, the Repurchase Right shall automatically lapse in its entirety,
except to the extent the Repurchase Right is to be assigned to the successor
corporation (or parent thereof) in connection with the Corporate Transaction.
(b) To the extent the Repurchase Right remains in effect following a
Corporate Transaction, such right shall apply to the new capital stock or other
property (including any cash payments) received in exchange for the Purchased
Shares in consummation of the Corporate Transaction, but only to the extent the
Purchased Shares are at the time covered by such right. Appropriate adjustments
shall be made to the price per share payable upon exercise of the Repurchase
Right to reflect the effect of the Corporate Transaction upon the Corporation's
capital structure; provided, however, that the aggregate purchase price shall
remain the same. The new capital stock or other property (including any cash
payments) issued or distributed with respect to the Purchased Shares in
consummation of the Corporate Transaction shall be immediately deposited in
escrow with the Corporation (or successor corporation) and shall not be released
from escrow until Optionee vests in such capital stock or other property in
accordance with the same Vesting Schedule in effect for Purchased Shares.
D. SPECIAL TAX ELECTION
The acquisition of the Purchased Shares may result in adverse tax
consequences which may be avoided or mitigated by filing an election under Code
Section 83(b). Such election must be filed within thirty (30) days after the
date of this Agreement. A description of the tax consequences applicable to the
acquisition of the Purchased Shares and the form for making the Code Section
83(b) election are set forth in Exhibit II. OPTIONEE SHOULD CONSULT WITH HIS OR
HER TAX ADVISOR TO DETERMINE THE TAX CONSEQUENCES OF ACQUIRING THE PURCHASED
SHARES AND THE ADVANTAGES AND DISADVANTAGES OF FILING THE CODE SECTION 83(b)
ELECTION. OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE'S SOLE RESPONSIBILITY, AND
NOT THE CORPORATION'S, TO FILE A TIMELY ELECTION UNDER CODE SECTION 83(b), EVEN
IF OPTIONEE REQUESTS THE
3.
<PAGE> 4
CORPORATION OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF.
E. GENERAL PROVISIONS
1. ASSIGNMENT. The Corporation may assign its Repurchase Right to any
person or entity selected by the Board, including (without limitation) one or
more shareholders of the Corporation.
2. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement or in the
Plan shall confer upon Optionee any right to continue in Service for any period
of specific duration or interfere with or otherwise restrict in any way the
rights of the Corporation (or any Parent or Subsidiary) or of Optionee, which
rights are hereby expressly reserved by each, to terminate Optionee's Service at
any time for any reason whatsoever, with or without cause.
3. NOTICES. Any notice required to be given under this Agreement shall be
in writing and shall be deemed effective upon personal delivery or upon deposit
in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party entitled to such notice at the address indicated below
such party's signature line on this Agreement or at such other address as such
party may designate by ten (10) days' advance written notice under this
paragraph to all other parties to this Agreement.
4. NO WAIVER. The failure of the Corporation (or its assignees) in any
instance to exercise the Repurchase Right shall not constitute a waiver of any
other repurchase rights that may subsequently arise under the provisions of this
Agreement or any other agreement between the Corporation and Optionee. No waiver
of any breach or condition of this Agreement shall be deemed to be a waiver of
any other or subsequent breach or condition, whether of like or different
nature.
5. CANCELLATION OF SHARES. If the Corporation (or its assignees) shall
make available, at the time and place and in the amount and form provided in
this Agreement, the consideration for the Purchased Shares to be repurchased in
accordance with the provisions of this Agreement, then from and after such time,
the person from whom such shares are to be repurchased shall no longer have any
rights as a holder of such shares (other than the right to receive payment of
such consideration in accordance with this Agreement). Such shares shall be
deemed purchased in accordance with the applicable provisions hereof, and the
Corporation (or its assignees) shall be deemed the owner and holder of such
shares, whether or not the certificates therefor have been delivered as required
by this Agreement.
F. MISCELLANEOUS PROVISIONS
1. OPTIONEE UNDERTAKING. Optionee hereby agrees to take whatever
additional action and execute whatever additional documents the Corporation may
deem necessary or advisable in order to carry out or effect one or more of the
obligations or restrictions imposed on either Optionee or the Purchased Shares
pursuant to the express provisions of this Agreement.
4.
<PAGE> 5
2. AGREEMENT IS ENTIRE CONTRACT. This Agreement constitutes the entire
contract between the parties hereto with regard to the subject matter hereof.
This Agreement is made pursuant to the provisions of the Plan and shall in all
respects be construed in conformity with the express terms and provisions of the
Plan.
3. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California without resort to that
State's conflict-of-laws rules.
4. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
5. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall inure
to the benefit of, and be binding upon, the Corporation and its successors and
assigns and Optionee and Optionee's legal representatives, heirs, legatees,
distributees, assigns and transferees by operation of law, whether or not any
such person shall have become a party to this Agreement and have agreed in
writing to join herein and be bound by the terms and conditions hereof.
5.
<PAGE> 6
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first indicated above.
BROADCOM CORPORATION
By:_________________________________
Title:______________________________
Address:____________________________
____________________________________
____________________________________
OPTIONEE
Address:____________________________
____________________________________
6.
<PAGE> 7
SPOUSAL ACKNOWLEDGEMENT
The undersigned spouse of Optionee has read and hereby approves the
foregoing Stock Purchase Agreement. In consideration of the Corporation's
granting Optionee the right to acquire the Purchased Shares in accordance with
the terms of such Agreement, the undersigned hereby agrees to be irrevocably
bound by all the terms of such Agreement, including (without limitation) the
right of the Corporation (or its assigns) to purchase any Purchased Shares in
which Optionee is not vested at time of his or her cessation of Service.
____________________________________
OPTIONEE'S SPOUSE
Address:____________________________
____________________________________
7.
<PAGE> 8
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED _________________ hereby sell(s), assign(s) and
transfer(s) unto Broadcom Corporation (the "Corporation"), ________________
(_______) shares of the Common Stock of the Corporation standing in his or her
name on the books of the Corporation represented by Certificate No. ____________
herewith and does hereby irrevocably constitute and appoint __________________
Attorney to transfer the said stock on the books of the Corporation with full
power of substitution in the premises.
Dated:_____________________________
Signature___________________________
INSTRUCTION: Please do not fill in any blanks other than the signature line.
Please sign exactly as you would like your name to appear on the issued stock
certificate. The purpose of this assignment is to enable the Corporation to
exercise the Repurchase Right without requiring additional signatures on the
part of Optionee.
<PAGE> 9
EXHIBIT II
FEDERAL INCOME TAX CONSEQUENCES AND
SECTION 83(b) TAX ELECTION
I. FEDERAL INCOME TAX CONSEQUENCES AND SECTION 83(b) ELECTION FOR
EXERCISE OF NON-STATUTORY Option. If the Purchased Shares are acquired pursuant
to the exercise of a Non-Statutory Option, as specified in the Grant Notice,
then under Code Section 83, the excess of the fair market value of the Purchased
Shares on the date any forfeiture restrictions applicable to such shares lapse
over the Exercise Price paid for such shares will be reportable as ordinary
income on the lapse date. For this purpose, the term "forfeiture restrictions"
includes the right of the Corporation to repurchase the Purchased Shares
pursuant to the Repurchase Right. However, Optionee may elect under Code Section
83(b) to be taxed at the time the Purchased Shares are acquired, rather than
when and as such Purchased Shares cease to be subject to such forfeiture
restrictions. Such election must be filed with the Internal Revenue Service
within thirty (30) days after the date of the Agreement. Even if the fair market
value of the Purchased Shares on the date of the Agreement equals the Exercise
Price paid (and thus no tax is payable), the election must be made to avoid
adverse tax consequences in the future. The form for making this election is
attached as part of this exhibit. FAILURE TO MAKE THIS FILING WITHIN THE
APPLICABLE THIRTY (30)-DAY PERIOD WILL RESULT IN THE RECOGNITION OF ORDINARY
INCOME BY OPTIONEE AS THE FORFEITURE RESTRICTIONS LAPSE.
II. FEDERAL INCOME TAX CONSEQUENCES AND CONDITIONAL SECTION 83(b)
ELECTION FOR EXERCISE OF INCENTIVE OPTION. If the Purchased Shares are acquired
pursuant to the exercise of an Incentive Option, as specified in the Grant
Notice, then the following tax principles shall be applicable to the Purchased
Shares:
(i) For regular tax purposes, no taxable income will be
recognized at the time the Option is exercised.
(ii) The excess of (A) the fair market value of the
Purchased Shares on the date the Option is exercised or (if later) on
the date any forfeiture restrictions applicable to the Purchased
Shares lapse over (B) the Exercise Price paid for the Purchased Shares
will be includible in Optionee's taxable income for alternative
minimum tax purposes.
(iii) If Optionee makes a disqualifying disposition of
the Purchased Shares, then Optionee will recognize ordinary income in
the year of such disposition equal in amount to the excess of (A) the
fair market value of the Purchased Shares on the date the Option is
exercised or (if later) on the date any forfeiture restrictions
applicable to the Purchased Shares lapse over (B) the Exercise Price
paid for the Purchased Shares. Any additional gain recognized upon the
disqualifying disposition will be either short-term or long-term
capital
II-1.
<PAGE> 10
gain depending upon the period for which the Purchased Shares are held
prior to the disposition.
(iv) For purposes of the foregoing, the term
"forfeiture restrictions" will include the right of the Corporation to
repurchase the Purchased Shares pursuant to the Repurchase Right. The
term "disqualifying disposition" means any sale or other disposition(1)
of the Purchased Shares within two (2) years after the Grant Date or
within one (1) year after the exercise date of the Option.
(v) In the absence of final Treasury Regulations
relating to Incentive Options, it is not certain whether Optionee may,
in connection with the exercise of the Option for any Purchased Shares
at the time subject to forfeiture restrictions, file a protective
election under Code Section 83(b) which would limit (A) Optionee's
alternative minimum taxable income upon exercise and (B) Optionee's
ordinary income upon a disqualifying disposition to the excess of the
fair market value of the Purchased Shares on the date the Option is
exercised over the Exercise Price paid for the Purchased Shares.
Accordingly, such election if properly filed will only be allowed to
the extent the final Treasury Regulations permit such a protective
election. Page 2 of the attached form for making the election should
be filed with any election made in connection with the exercise of an
Incentive Option.
- --------
(1) Generally, a disposition of shares purchased under an Incentive Option
includes any transfer of legal title, including a transfer by sale, exchange or
gift, but does not include a transfer to the Optionee's spouse, a transfer into
joint ownership with right of survivorship if Optionee remains one of the joint
owners, a pledge, a transfer by bequest or inheritance or certain tax free
exchanges permitted under the Code.
II-2.
<PAGE> 11
SECTION 83(b) ELECTION
This statement is being made under Section 83(b) of the Internal
Revenue Code, pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name:
Address:
Taxpayer Ident. No.:
(2) The property with respect to which the election is being made is
_____________ shares of the Class B common stock of Broadcom
Corporation.
(3) The property was issued on ____________, 199__.
(4) The taxable year in which the election is being made is the calendar
year 199 .
(5) The property is subject to a repurchase right pursuant to which the
issuer has the right to acquire the property at the original
purchase price if for any reason taxpayer's employment with the
issuer is terminated. The issuer's repurchase right lapses in a
series of installments over a ____(__)-year period ending on _________,
199__.
(6) The fair market value at the time of transfer (determined without
regard to any restriction other than a restriction which by its
terms will never lapse) is $_____ per share.
(7) The amount paid for such property is $__________ per share.
(8) A copy of this statement was furnished to Broadcom Corporation for
whom taxpayer rendered the services underlying the transfer of
property.
(9) This statement is executed on _______________________, 199__.
__________________________________ ____________________________________
Spouse (if any) Taxpayer
This election must be filed with the Internal Revenue Service Center with which
taxpayer files his or her Federal income tax returns and must be made within
thirty (30) days after the execution date of the Stock Purchase Agreement. This
filing should be made by registered or certified mail, return receipt requested.
Optionee must retain two (2) copies of the completed form for filing with his or
her Federal and state tax returns for the current tax year and an additional
copy for his or her records.
<PAGE> 12
The property described in the above Section 83(b) election is
comprised of shares of common stock acquired pursuant to the exercise of an
incentive stock option under Section 422 of the Internal Revenue Code (the
"Code"). Accordingly, it is the intent of the Taxpayer to utilize this
election to achieve the following tax results:
1. The purpose of this election is to have the alternative minimum
taxable income attributable to the purchased shares measured by the amount
by which the fair market value of such shares at the time of their transfer
to the Taxpayer exceeds the purchase price paid for the shares. In the
absence of this election, such alternative minimum taxable income would be
measured by the spread between the fair market value of the purchased
shares and the purchase price which exists on the various lapse dates in
effect for the forfeiture restrictions applicable to such shares.
2. Section 421(a)(1) of the Code expressly excludes from income any
excess of the fair market value of the purchased shares over the amount
paid for such shares. Accordingly, this election is also intended to be
effective in the event there is a "disqualifying disposition" of the
shares, within the meaning of Section 421(b) of the Code, which would
otherwise render the provisions of Section 83(a) of the Code applicable at
that time. Consequently, the Taxpayer hereby elects to have the amount of
disqualifying disposition income measured by the excess of the fair market
value of the purchased shares on the date of transfer to the Taxpayer over
the amount paid for such shares. Since Section 421(a) presently applies to
the shares which are the subject of this Section 83(b) election, no taxable
income is actually recognized for regular tax purposes at this time, and no
income taxes are payable, by the Taxpayer as a result of this election.
3. The foregoing elections are to be effective to the full extent
permitted under the Code.
THIS PAGE 2 IS TO BE ATTACHED TO ANY SECTION 83(b) ELECTION FILED IN
CONNECTION WITH THE EXERCISE OF AN INCENTIVE STOCK OPTION UNDER THE FEDERAL
TAX LAWS.
2.
<PAGE> 13
APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Purchase Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's Class B common stock.
E. CORPORATE TRANSACTION shall mean either of the following
shareholder-approved transactions to which the Corporation is a party:
(i) a 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) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation
or dissolution of the Corporation.
F. CORPORATION shall mean Broadcom Corporation, a California
corporation.
G. EXERCISE PRICE shall have the meaning assigned to such term in
Paragraph A.1.
H. GRANT DATE shall have the meaning assigned to such term in
Paragraph A.1.
I. GRANT NOTICE shall mean the Notice of Grant of Stock Option
pursuant to which Optionee has been informed of the basic terms of the
Option.
J. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
K. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.
L. OPTION shall have the meaning assigned to such term in Paragraph
A.1.
M. OPTION AGREEMENT shall mean all agreements and other documents
evidencing the Option.
N. OPTIONEE shall mean the person to whom the Option is granted
under the Plan.
A-1.
<PAGE> 14
O. OWNER shall mean Optionee and all subsequent holders of the
Purchased Shares who derive their chain of ownership through a Permitted
Transfer from Optionee.
P. 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.
Q. PERMITTED TRANSFER shall mean (i) a gratuitous transfer of the
Purchased Shares, provided and only if Optionee obtains the Corporation's
prior written consent to such transfer, (ii) a transfer of title to the
Purchased Shares effected pursuant to Optionee's will or the laws of
intestate succession following Optionee's death or (iii) a transfer to the
Corporation in pledge as security for any purchase-money indebtedness
incurred by Optionee in connection with the acquisition of the Purchased
Shares.
R. PLAN shall mean the Corporation's 1998 Stock Incentive Plan.
S. PLAN ADMINISTRATOR shall mean either the Board or a committee of
Board members, to the extent the committee is at the time responsible for
administration of the Plan.
T. PRIOR PURCHASE AGREEMENT shall have the meaning assigned to such
term in Paragraph C.4.
U. PURCHASED SHARES shall have the meaning assigned to such term in
Paragraph A.1.
V. RECAPITALIZATION shall mean any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration.
W. REPURCHASE RIGHT shall mean the right granted to the Corporation
in accordance with Article C.
X. SERVICE shall mean Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an employee,
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, a
non-employee member of the board of directors or a consultant or
independent advisor.
Y. 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.
Z. VESTING SCHEDULE shall mean the vesting schedule specified in the
Grant Notice, pursuant to which Optionee shall vest in the Purchased Shares
in a series of one or more
A-2.
<PAGE> 15
installments over his or her period of Service, subject to the special
acceleration provisions of this Agreement.
AA. UNVESTED SHARES shall have the meaning assigned to such term in
Paragraph C.1.
A-3.
<PAGE> 1
EXHIBIT 99.9
INITIAL GRANT
BROADCOM CORPORATION
NOTICE OF GRANT OF NON-EMPLOYEE DIRECTOR
AUTOMATIC STOCK OPTION
Notice is hereby given of the following option grant (the "Option") to
purchase shares of the Common Stock of Broadcom Corporation (the "Corporation"):
Optionee:________________________________________________________________
Grant Date:______________________________________________________________
Exercise Price: $______________________________________________ per share
Number of Option Shares: 40,000 shares
Expiration Date:_________________________________________________________
Type of Option: Non-Statutory Stock Option
Date Exercisable: Immediately Exercisable
Vesting Schedule: The Option Shares shall initially be unvested and
subject to repurchase by the Corporation at the Exercise Price paid per
share. Optionee shall acquire a vested interest in, and the Corporation's
repurchase right shall accordingly lapse with respect to, the Option
Shares in a series of four (4) successive equal annual installments upon
Optionee's completion of each year of service as a member of the
Corporation's Board of Directors (the "Board") over the four (4) year
period measured from the Grant Date. In no event shall any additional
Option Shares vest after Optionee's cessation of Board service.
Optionee understands and agrees that the Option is granted subject to and
in accordance with the terms of the automatic option grant program under the
Broadcom Corporation 1998 Stock Incentive Plan (the "Plan"). Optionee further
agrees to be bound by the terms of the Plan and the terms of the Option as set
forth in the Automatic Stock Option Agreement attached hereto as Exhibit A.
Optionee hereby acknowledges receipt of a copy of the official prospectus
for the Plan in the form attached hereto as Exhibit B. A copy of the Plan is
available upon request made to the Corporate Secretary at the Corporation's
principal offices.
<PAGE> 2
REPURCHASE RIGHT. OPTIONEE HEREBY AGREES THAT ALL UNVESTED OPTION SHARES
ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO A REPURCHASE RIGHT
EXERCISABLE BY THE CORPORATION AND ITS ASSIGNS. THE TERMS OF SUCH RIGHT SHALL BE
SPECIFIED IN A STOCK PURCHASE AGREEMENT, IN FORM AND SUBSTANCE SATISFACTORY TO
THE CORPORATION, EXECUTED BY OPTIONEE AT THE TIME OF THE OPTION EXERCISE.
No Impairment of Rights. Nothing in this Notice or the attached Automatic
Stock Option Agreement or in the Plan shall interfere with or otherwise restrict
in any way the rights of the Corporation and the Corporation's shareholders to
remove Optionee from the Board at any time in accordance with the provisions of
applicable law.
Definitions. All capitalized terms in this Notice shall have the meaning
assigned to them in this Notice or in the attached Automatic Stock Option
Agreement.
_______________, 199__
Date
BROADCOM CORPORATION
By:_________________________________
Title:______________________________
____________________________________
OPTIONEE
Address:____________________________
____________________________________
ATTACHMENTS
Exhibit A - Automatic Stock Option Agreement
Exhibit B - Plan Summary and Prospectus
2.
<PAGE> 3
EXHIBIT A
AUTOMATIC STOCK OPTION AGREEMENT
<PAGE> 4
EXHIBIT B
PLAN SUMMARY AND PROSPECTUS
<PAGE> 1
EXHIBIT 99.10
ANNUAL GRANT
BROADCOM CORPORATION
NOTICE OF GRANT OF NON-EMPLOYEE DIRECTOR
AUTOMATIC STOCK OPTION
Notice is hereby given of the following option grant (the "Option") to
purchase shares of the Common Stock of Broadcom Corporation (the "Corporation"):
Optionee:________________________________________________________________
Grant Date:______________________________________________________________
Exercise Price: $________________________ per share
Number of Option Shares: 3,000 shares
Expiration Date:_________________________________________________________
Type of Option: Non-Statutory Stock Option
Date Exercisable: Immediately Exercisable
Vesting Schedule: The Option Shares shall initially be unvested and
subject to repurchase by the Corporation at the Exercise Price paid per
share. Optionee shall acquire a vested interest in, and the Corporation's
repurchase right shall accordingly lapse with respect to, the Option
Shares upon the Optionee's completion of one (1) year of service as a
member of the Corporation's Board of Directors (the "Board") measured
from the Grant Date. In no event shall any additional Option Shares vest
after Optionee's cessation of Board service.
Optionee understands and agrees that the Option is granted subject to and
in accordance with the terms of the automatic option grant program under the
Broadcom Corporation 1998 Stock Incentive Plan (the "Plan"). Optionee further
agrees to be bound by the terms of the Plan and the terms of the Option as set
forth in the Automatic Stock Option Agreement attached hereto as Exhibit A.
Optionee hereby acknowledges receipt of a copy of the official prospectus
for the Plan in the form attached hereto as Exhibit B. A copy of the Plan is
available upon request made to the Corporate Secretary at the Corporation's
principal offices.
<PAGE> 2
REPURCHASE RIGHT. OPTIONEE HEREBY AGREES THAT ALL UNVESTED OPTION SHARES
ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO A REPURCHASE RIGHT
EXERCISABLE BY THE CORPORATION AND ITS ASSIGNS. THE TERMS OF SUCH RIGHT SHALL BE
SPECIFIED IN A STOCK PURCHASE AGREEMENT, IN FORM AND SUBSTANCE SATISFACTORY TO
THE CORPORATION, EXECUTED BY OPTIONEE AT THE TIME OF THE OPTION EXERCISE.
No Impairment of Rights. Nothing in this Notice or the attached Automatic
Stock Option Agreement or in the Plan shall interfere with or otherwise restrict
in any way the rights of the Corporation and the Corporation's shareholders to
remove Optionee from the Board at any time in accordance with the provisions of
applicable law.
Definitions. All capitalized terms in this Notice shall have the meaning
assigned to them in this Notice or in the attached Automatic Stock Option
Agreement.
_______________, 199__
Date
BROADCOM CORPORATION
By:_________________________________
Title:______________________________
____________________________________
OPTIONEE
Address:____________________________
____________________________________
ATTACHMENTS
Exhibit A - Automatic Stock Option Agreement
Exhibit B - Plan Summary and Prospectus
2.
<PAGE> 3
EXHIBIT A
AUTOMATIC STOCK OPTION AGREEMENT
<PAGE> 4
EXHIBIT B
PLAN SUMMARY AND PROSPECTUS
<PAGE> 1
EXHIBIT 99.11
BROADCOM CORPORATION
AUTOMATIC STOCK OPTION AGREEMENT
RECITALS
A. The Corporation has implemented an automatic option grant program
under the Plan pursuant to which eligible non-employee members of the Board will
automatically receive special option grants at periodic intervals over their
period of Board service in order to provide such individuals with a meaningful
incentive to continue to serve as members of the Board.
B. Optionee is an eligible non-employee Board member, and this Agreement
is executed pursuant to, and is intended to carry out the purposes of, the Plan
in connection with the automatic grant of an option to purchase shares of Common
Stock under the Plan.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as
of the Grant Date, a Non-Statutory Option to purchase up to the number of Option
Shares specified in the Grant Notice. The Option Shares shall be purchasable
from time to time during the option term specified in Paragraph 2 at the
Exercise Price.
2. OPTION TERM. This option shall have a term of ten (10) years
measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5, 6 or 7.
3. LIMITED TRANSFERABILITY. This option may, in connection with
the Optionee's estate plan, be assigned in whole or in part during Optionee's
lifetime to one or more members of the Optionee's immediate family or to a trust
established for the exclusive benefit of one or more such family members. The
assigned portion shall be exercisable only by the person or persons who acquire
a proprietary interest in the option pursuant to such assignment. The terms
applicable to the assigned portion shall be the same as those in effect for this
option immediately prior to such assignment. Should the Optionee die while
holding this option, then this option shall be transferred in accordance with
Optionee's will or the laws of descent and distribution.
4.
<PAGE> 2
EXERCISABILITY/VESTING.
(a) This option shall be immediately exercisable for any
or all of the Option Shares, whether or not the Option Shares are at the time
vested in accordance with the Vesting Schedule, and shall remain so exercisable
until the Expiration Date or sooner termination of the option term under
Paragraph 5, 6 or 7.
(b) Optionee shall, in accordance with the Vesting
Schedule set forth in the Grant Notice, vest in the Option Shares in one or more
installments over his or her period of Board service. Vesting in the Option
Shares may be accelerated pursuant to the provisions of Paragraph 5, 6 or 7. In
no event, however, shall any additional Option Shares vest following Optionee's
cessation of service as a Board member.
5. CESSATION OF BOARD SERVICE. Should Optionee's service as a
Board member cease while this option remains outstanding, then the option term
specified in Paragraph 2 shall terminate (and this option shall cease to be
outstanding) prior to the Expiration Date in accordance with the following
provisions:
(a) Should Optionee cease to serve as a Board member for
any reason (other than death or Permanent Disability) while this option is
outstanding, then the period for exercising this option shall be reduced to a
twelve (12)-month period (commencing with the date of such cessation of Board
service), but in no event shall this option be exercisable at any time after the
Expiration Date. During such limited period of exercisability, this option may
not be exercised in the aggregate for more than the number of Option Shares (if
any) in which Optionee is vested on the date of his or her cessation of Board
service. Upon the earlier of (i) the expiration of such twelve (12)-month period
or (ii) the specified Expiration Date, the option shall terminate and cease to
be exercisable with respect to any vested Option Shares for which the option has
not been exercised.
(b) Should Optionee die during the twelve (12)-month
period following his or her cessation of Board service and hold this option at
the time of his or her death, then the personal representative of Optionee's
estate or the person or persons to whom the option is transferred pursuant to
Optionee's will or in accordance with the laws of descent and distribution shall
have the right to exercise this option for any or all of the Option Shares in
which Optionee is vested at the time of his or her cessation of Board service
(less any Option Shares purchased by Optionee after such cessation of Board
service but prior to death). Such right of exercise shall terminate, and this
option shall accordingly cease to be exercisable for such vested Option Shares,
upon the earlier of (i) the expiration of the twelve (12)-month period measured
from the date of Optionee's cessation of Board service or (ii) the specified
Expiration Date.
(c) Should Optionee cease service as a Board member by
reason of death or Permanent Disability, then all Option Shares at the time
subject to this option but not
2.
<PAGE> 3
otherwise vested shall vest in full so that this option may be exercised for any
or all of the Option Shares as fully vested shares of Common Stock at any time
prior to the earlier of (i) the expiration of the twelve (12)-month period
measured from the date of Optionee's cessation of Board service or (ii) the
specified Expiration Date, whereupon this option shall terminate and cease to be
outstanding.
(d) Upon Optionee's cessation of Board service for any
reason other than death or Permanent Disability, this option shall immediately
terminate and cease to be outstanding with respect to any and all Option Shares
in which Optionee is not otherwise at that time vested in accordance with the
normal Vesting Schedule or the special vesting acceleration provisions of
Paragraph 6 below.
6. CHANGE IN CONTROL/HOSTILE TAKE-OVER.
(a) All Option Shares subject to this option at the time
of a Change in Control but not otherwise vested shall automatically vest so that
this option shall, immediately prior to the effective date of such Change in
Control, become exercisable for all of the Option Shares at the time subject to
this option and may be exercised for all or any portion of such shares as
fully-vested shares of Common Stock. Immediately following the consummation of
the Change in Control, this option shall terminate and cease to be outstanding,
except to the extent this option is assumed by the successor corporation or its
parent company or is otherwise to continue in full force and effect pursuant to
the terms of the Change in Control transaction.
(b) All outstanding repurchase rights shall also terminate
automatically, and the unvested shares of Common Stock subject to those
terminated rights shall immediately vest in full, in the event of any Change in
Control.
(c) If this option is assumed in connection with a Change
in Control or is otherwise to continue in full force and effect pursuant to the
terms of the Change in Control transaction, then this option shall be
appropriately adjusted, immediately after such Change in Control, to apply to
the number and class of securities which would have been issuable to Optionee in
consummation of such Change in Control, and appropriate adjustments shall also
be made to the Exercise Price, provided the aggregate Exercise Price shall
remain the same.
(d) Optionee shall have an unconditional right,
exercisable at the time during the thirty (30)-day period immediately following
the consummation of a Hostile Take-Over to surrender this option to the
Corporation in exchange for a cash distribution from the Corporation in an
amount equal to the excess of (i) the Take-Over Price of the Option Shares at
the time subject to the surrendered option (whether or not those Option Shares
are otherwise at the time vested) over (ii) the aggregate Exercise Price payable
for such shares. This Paragraph 6(d) limited stock appreciation right shall in
all events terminate upon the expiration or sooner termination of the option
term and may not be assigned or transferred by Optionee.
3.
<PAGE> 4
(e) To exercise the Paragraph 6(d) limited stock
appreciation right, Optionee must, during the applicable thirty (30)-day
exercise period, provide the Corporation with written notice of the option
surrender in which there is specified the number of Option Shares as to which
the option is being surrendered. Such notice must be accompanied by the return
of Optionee's copy of this Agreement, together with any written amendments to
such Agreement. The cash distribution shall be paid to Optionee within five (5)
business days following such delivery date. The exercise of such limited stock
appreciation right in accordance with the terms of this Paragraph 6 has been
pre-approved pursuant to the express provisions of the Automatic Option Grant
Program, and neither the approval of the Plan Administrator nor the consent of
the Board shall be required at the time of the actual option surrender and cash
distribution. Upon receipt of the cash distribution, this option shall be
cancelled with respect to the shares subject to the surrendered option (or the
surrendered portion), and Optionee shall cease to have any further right to
acquire those Option Shares under this Agreement. The option shall, however,
remain outstanding for the balance of the Option Shares (if any) in accordance
with the terms and provisions of this Agreement, and the Corporation shall
accordingly issue a replacement stock option agreement (substantially in the
same form as this Agreement) for those remaining Option Shares.
7. ADJUSTMENT IN OPTION SHARES. Should any change be made to the
Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.
8. SHAREHOLDER RIGHTS. The holder of this option shall not have
any shareholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.
9. MANNER OF EXERCISING OPTION.
(a) In order to exercise this option with respect to all
or any part of the Option Shares for which this option is at the time
exercisable, Optionee (or any other person or persons exercising the option)
must take the following actions:
(i) To the extent the option is exercised for vested
Option Shares, execute and deliver to the Corporation a Notice of
Exercise for the Option Shares for which the option is exercised. To the
extent this option is exercised for unvested Option Shares, execute and
deliver to the Corporation a Purchase Agreement for those unvested Option
Shares.
4.
<PAGE> 5
(ii) Pay the aggregate Exercise Price for the purchased
shares in one or more of the following forms:
(A) cash or check made payable to the Corporation,
(B) shares of Common Stock held by Optionee (or
any other person or persons exercising the option) for the
requisite period necessary to avoid a charge to the
Corporation's earnings for financial reporting purposes and
valued at Fair Market Value on the Exercise Date, or
(C) to the extent the option is exercised for
vested Option Shares, through a special sale and remittance
procedure pursuant to which Optionee (or any other person or
persons exercising the option) shall concurrently provide
irrevocable instructions (I) to a Corporation-designated
brokerage firm 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 (II) to the Corporation to deliver the
certificates for the purchased shares directly to such brokerage
firm in order to complete the sale.
(iii) Furnish to the Corporation appropriate
documentation that the person or persons exercising the option (if other
than Optionee) have the right to exercise this option.
(b) Except to the extent the sale and remittance procedure
is utilized in connection with the option exercise, payment of the Exercise
Price must accompany the Notice of Exercise (or the Purchase Agreement)
delivered to the Corporation in connection with the option exercise.
(c) As soon after the Exercise Date as practical, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares,
with the appropriate legends affixed thereto. To the extent any such Option
Shares are unvested, the certificates for those Option Shares shall be endorsed
with an appropriate legend evidencing the Corporation's repurchase rights and
may be held in escrow with the Corporation until such shares vest.
(d) In no event may this option be exercised for any
fractional shares.
5.
<PAGE> 6
10. NO IMPAIRMENT OF RIGHTS. This Agreement shall not in any way
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise make changes in its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets. In addition, this Agreement shall not in any way be
construed or interpreted so as to affect adversely or otherwise impair the right
of the Corporation or the shareholders to remove Optionee from the Board at any
time in accordance with the provisions of applicable law.
11. COMPLIANCE WITH LAWS AND REGULATIONS.
(a) The exercise of this option and the issuance of the
Option Shares upon such exercise shall be subject to compliance by the
Corporation and Optionee with all applicable requirements of law relating
thereto and with all applicable regulations of any stock exchange (or the Nasdaq
National Market, if applicable) on which the Common Stock may be listed for
trading at the time of such exercise and issuance.
(b) The inability of the Corporation to obtain approval
from any regulatory body having authority deemed by the Corporation to be
necessary to the lawful issuance and sale of any Common Stock pursuant to this
option shall relieve the Corporation of any liability with respect to the
non-issuance or sale of the Common Stock as to which such approval shall not
have been obtained. The Corporation, however, shall use its best efforts to
obtain all such approvals.
12. SUCCESSORS AND ASSIGNS. Except to the extent otherwise
provided in Paragraph 3 or 6, the provisions of this Agreement shall inure to
the benefit of, and be binding upon, the Corporation and its successors and
assigns and Optionee, Optionee's assigns and the legal representatives, heirs
and legatees of Optionee's estate.
13. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.
14. CONSTRUCTION. This Agreement and the option evidenced hereby
are made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan.
15. GOVERNING LAW. The interpretation, performance and
enforcement of this Agreement shall be governed by the laws of the State of
California without resort to that State's conflict-of-laws rules.
6.
<PAGE> 7
EXHIBIT I
NOTICE OF EXERCISE
I hereby notify Broadcom Corporation (the "Corporation") that I
elect to purchase ____________ shares of the Corporation's Common Stock (the
"Purchased Shares") at the option exercise price of $_________ per share (the
"Exercise Price") pursuant to that certain option (the "Option") granted to me
under the Corporation's 1998 Stock Incentive Plan on _________________, 199__.
Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise. Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect payment of the Exercise
Price for any Purchased Shares in which I am vested at the time of exercise of
the Option.
__________________, 199__
Date
____________________________________
Optionee
Address:____________________________
____________________________________
Print name in exact manner
it is to appear on the
stock certificate: ____________________________________
Address to which certificate
is to be sent, if different
from address above: ____________________________________
____________________________________
Social Security Number: ____________________________________
<PAGE> 8
APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Automatic Stock Option Agreement.
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 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) the sale, transfer or other disposition of
all or substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.
(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 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, or
D. COMMON STOCK shall mean shares of the Corporation's Class A common
stock.
E. CODE shall mean the Internal Revenue Code of 1986, as amended.
F. CORPORATION shall mean Broadcom Corporation, a California
corporation.
G. EXERCISE DATE shall mean the date on which the option shall have been
exercised in accordance with Paragraph 10 of the Agreement.
H. EXERCISE PRICE shall mean the exercise price per share as specified
in the Grant Notice.
A-2.
<PAGE> 9
I. EXPIRATION DATE shall mean the date on which the option expires as
specified in the Grant Notice.
J. 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 on the date in
question, as the price is reported by the National Association of
Securities Dealers on the Nasdaq National Market. 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.
(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 on the date in question on
the Stock Exchange which serves as 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.
K. GRANT DATE shall mean the date of grant of the option as specified in
the Grant Notice.
L. GRANT NOTICE shall mean the Notice of Grant of Automatic Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.
M. HOSTILE TAKEOVER 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 which the Board does not recommend such
shareholders to accept, or
A-3.
<PAGE> 10
(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 comprised 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.
N. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
O. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
P. NOTICE OF EXERCISE shall mean the notice of exercise in the form of
Exhibit I.
Q. OPTION SHARES shall mean the number of shares of Common Stock subject
to the option.
R. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.
S. PERMANENT DISABILITY shall mean the inability of Optionee to perform
his or her usual duties as a member of the Board by reason of any medically
determinable physical or mental impairment which is expected to result in death
or has lasted or can be expected to last for a continuous period of twelve (12)
months or more.
T. PLAN shall mean the Corporation's 1998 Stock Incentive Plan.
U. PURCHASE AGREEMENT shall mean the stock purchase agreement (in form
and substance satisfactory to the Corporation) which grants the Corporation the
right to repurchase, at the Exercise Price, any and all unvested Option Shares
held by Optionee at the time of Optionee's cessation of Board service and which
precludes the sale, transfer or other disposition of any purchased Option Shares
while those shares are unvested and subject to such repurchase right.
V. STOCK EXCHANGE shall mean the American Stock Exchange or the New York
Stock Exchange.
A-4.
<PAGE> 11
W. TAKE-OVER PRICE shall mean the greater of (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 the 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.
X. VESTING SCHEDULE shall mean the vesting schedule specified in the
Grant Notice, pursuant to which the Option Shares will vest in one or more
installments over the Optionee's period of Board service, subject to
acceleration in accordance with the provisions of the Agreement.
A-5.
<PAGE> 1
EXHIBIT 99.12
BROADCOM CORPORATION
1998 EMPLOYEE STOCK PURCHASE PLAN
AS AMENDED JULY 24, 1998
I. PURPOSE OF THE PLAN
This Employee Stock Purchase Plan is intended to promote the
interests of Broadcom Corporation by providing eligible employees with the
opportunity to acquire a proprietary interest in the Corporation through
participation in a payroll-deduction based employee stock purchase plan designed
to qualify under Section 423 of the Code.
Capitalized terms herein shall have the meanings assigned to such
terms in the attached Appendix.
II. ADMINISTRATION OF THE PLAN
The Plan Administrator shall have full authority to interpret and
construe any provision of the Plan and to adopt such rules and regulations for
administering the Plan as it may deem necessary in order to comply with the
requirements of Code Section 423. Decisions of the Plan Administrator shall be
final and binding on all parties having an interest in the Plan.
III. STOCK SUBJECT TO PLAN
A. The stock purchasable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares of Common
Stock purchased on the open market. The maximum number of shares of Common Stock
which may be issued over the term of the Plan shall not exceed Seven Hundred
Fifty Thousand (750,000) shares.
B. Should any change be made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, then appropriate adjustments
shall be made to (i) the maximum number and class of securities issuable under
the Plan, (ii) the maximum number and class of securities purchasable per
Participant on any one Purchase Date, (iii) the maximum number and class of
securities purchasable in the aggregate on any one Purchase Date and (iv) the
number and class of securities and the price per share in effect under each
outstanding purchase right in order to prevent the dilution or enlargement of
benefits thereunder.
IV. OFFERING PERIODS
A. Shares of Common Stock shall be offered for purchase under the
Plan through a series of successive offering periods until such time as (i) the
maximum number of shares of Common Stock available for issuance under the Plan
shall have been purchased or (ii) the Plan shall have been sooner terminated.
B. Each offering period shall be of such duration (not to exceed
twenty-four (24) months) as determined by the Plan Administrator prior to the
start date of such
<PAGE> 2
offering period. However, the initial offering period shall commence at the
Effective Time and terminate on the last business day in April 2000. The next
offering period shall commence on the first business day in May 2000, and
subsequent offering periods shall commence as designated by the Plan
Administrator.
C. Each offering period shall be comprised of a series of one or
more successive Purchase Intervals. Purchase Intervals shall run from the first
business day in May each year to the last business day in October of the same
year and from the first business day in November each year to the last business
day in April of the following year. However, the first Purchase Interval in
effect under the initial offering period shall commence at the Effective Time
and terminate on the last business day in October 1998.
D. Should the Fair Market Value per share of Common Stock on any
Purchase Date within an offering period be less than the Fair Market Value per
share of Common Stock on the start date of that offering period, then that
offering period shall automatically terminate immediately after the purchase of
shares of Common Stock on such Purchase Date, and a new offering period shall
commence on the next business day following such Purchase Date. The new offering
period shall have a duration of twenty (24) months, unless a shorter duration is
established by the Plan Administrator within five (5) business days following
the start date of that offering period.
V. ELIGIBILITY
A. Each individual who is an Eligible Employee on the start date
of any offering period under the Plan may enter that offering period on such
start date or on any subsequent Semi-Annual Entry Date within that offering
period, provided he or she remains an Eligible Employee.
B. Each individual who first becomes an Eligible Employee after
the start date of an offering period may enter that offering period on any
subsequent Semi-Annual Entry Date within that offering period on which he or she
is an Eligible Employee.
C. The date an individual enters an offering period shall be
designated his or her Entry Date for purposes of that offering period.
D. To participate in the Plan for a particular offering period,
the Eligible Employee must complete the enrollment forms prescribed by the Plan
Administrator (including a stock purchase agreement and a payroll deduction
authorization) and file such forms with the Plan Administrator (or its
designate) on or before his or her scheduled Entry Date.
VI. PAYROLL DEDUCTIONS
A. The payroll deduction authorized by the Participant for
purposes of acquiring shares of Common Stock during an offering period may be
any multiple of one percent (1%) of the Cash Earnings paid to the Participant
during each Purchase Interval within that offering period, up to a maximum of
fifteen percent (15%). The deduction rate so authorized
2.
<PAGE> 3
shall continue in effect throughout the offering period, except to the extent
such rate is changed in accordance with the following guidelines:
(i) The Participant may, at any time during the
offering period, reduce his or her rate of payroll deduction to become
effective as soon as possible after filing the appropriate form with the
Plan Administrator. The Participant may not, however, effect more than
one (1) such reduction per Purchase Interval.
(ii) The Participant may, prior to the commencement of
any new Purchase Interval within the offering period, increase the rate
of his or her payroll deduction by filing the appropriate form with the
Plan Administrator. The new rate (which may not exceed the fifteen
percent (15%) maximum) shall become effective on the start date of the
first Purchase Interval following the filing of such form.
B. Payroll deductions shall begin on the first pay day following
the Participant's Entry Date into the offering period and shall (unless sooner
terminated by the Participant) continue through the pay day ending with or
immediately prior to the last day of that offering period. The amounts so
collected shall be credited to the Participant's book account under the Plan,
but no interest shall be paid on the balance from time to time outstanding in
such account. The amounts collected from the Participant shall not be required
to be held in any segregated account or trust fund and may be commingled with
the general assets of the Corporation and used for general corporate purposes.
C. Payroll deductions shall automatically cease upon the
termination of the Participant's purchase right in accordance with the
provisions of the Plan.
D. The Participant's acquisition of Common Stock under the Plan
on any Purchase Date shall neither limit nor require the Participant's
acquisition of Common Stock on any subsequent Purchase Date, whether within the
same or a different offering period.
VII. PURCHASE RIGHTS
A. GRANT OF PURCHASE RIGHT. A Participant shall be granted a
separate purchase right for each offering period in which he or she
participates. The purchase right shall be granted on the Participant's Entry
Date into the offering period and shall provide the Participant with the right
to purchase shares of Common Stock, in a series of successive installments over
the remainder of such offering period, upon the terms set forth below. The
Participant shall execute a stock purchase agreement embodying such terms and
such other provisions (not inconsistent with the Plan) as the Plan Administrator
may deem advisable.
Under no circumstances shall purchase rights be granted under the
Plan to any Eligible Employee if such individual would, immediately after the
grant, own (within the meaning of Code Section 424(d)) or hold outstanding
options or other rights to purchase, stock
3.
<PAGE> 4
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Corporation or any Corporate Affiliate.
B. EXERCISE OF THE PURCHASE RIGHT. Each purchase right shall be
automatically exercised in installments on each successive Purchase Date within
the offering period, and shares of Common Stock shall accordingly be purchased
on behalf of each Participant on each such Purchase Date. The purchase shall be
effected by applying the Participant's payroll deductions for the Purchase
Interval ending on such Purchase Date to the purchase of whole shares of Common
Stock at the purchase price in effect for the Participant for that Purchase
Date.
C. PURCHASE PRICE. The purchase price per share at which Common
Stock will be purchased on the Participant's behalf on each Purchase Date within
the offering period shall be equal to eighty-five percent (85%) of the lower of
(i) the Fair Market Value per share of Common Stock on the Participant's Entry
Date into that offering period or (ii) the Fair Market Value per share of Common
Stock on that Purchase Date.
D. NUMBER OF PURCHASABLE SHARES. The number of shares of Common
Stock purchasable by a Participant on each Purchase Date during the offering
period shall be the number of whole shares obtained by dividing the amount
collected from the Participant through payroll deductions during the Purchase
Interval ending with that Purchase Date by the purchase price in effect for the
Participant for that Purchase Date. However, the maximum number of shares of
Common Stock purchasable per Participant on any one Purchase Date shall not
exceed One Thousand Five Hundred (1,500) shares, subject to periodic adjustments
in the event of certain changes in the Corporation's capitalization. In
addition, the maximum aggregate number of shares of Common Stock purchasable in
the aggregate by all Participants on any one Purchase Date shall not exceed One
Hundred Fifty Thousand (150,000) shares, subject to periodic adjustments in the
event of certain changes in the Corporation's capitalization.
E. EXCESS PAYROLL DEDUCTIONS. Any payroll deductions not applied
to the purchase of shares of Common Stock on any Purchase Date because they are
not sufficient to purchase a whole share of Common Stock shall be held for the
purchase of Common Stock on the next Purchase Date. However, any payroll
deductions not applied to the purchase of Common Stock by reason of the
limitation on the maximum number of shares purchasable per Participant or in the
aggregate on the Purchase Date shall be promptly refunded.
F. TERMINATION OF PURCHASE RIGHT. The following provisions
shall govern the termination of outstanding purchase rights:
(i) A Participant may, at any time prior to the next
scheduled Purchase Date in the offering period, terminate his or her
outstanding purchase right by filing the appropriate form with the Plan
Administrator (or its designate), and no further payroll deductions
shall be collected from the Participant with respect to the terminated
purchase right. Any payroll deductions collected during the Purchase
Interval in which such termination occurs shall, at the Participant's
election, be immediately refunded or held for the purchase of shares on
the next Purchase Date. If no such election is made at the time such
purchase right is terminated, then the payroll deductions collected with
respect to the terminated right shall be refunded as soon as possible.
4.
<PAGE> 5
(ii) The termination of such purchase right shall be
irrevocable, and the Participant may not subsequently rejoin the Plan
for the Purchase Interval for which the terminated purchase right was
granted or for any subsequent Purchase Interval that commences 30 days
or less after the effective date of the termination. In order to resume
participation in the Plan for any subsequent Purchase Interval, such
individual must re-enroll in the Plan (by making a timely filing of the
prescribed enrollment forms) on or before his or her scheduled Entry
Date into that Purchase Interval.
(iii) Should the Participant cease to remain an Eligible
Employee for any reason (including death, disability or change in
status) while his or her purchase right remains outstanding, then that
purchase right shall immediately terminate, and all of the Participant's
payroll deductions for the Purchase Interval in which the purchase right
so terminates shall be immediately refunded. However, should the
Participant cease to remain in active service by reason of an approved
unpaid leave of absence, then the Participant shall have the right,
exercisable up until the last business day of the Purchase Interval in
which such leave commences, to (a) withdraw all the payroll deductions
collected to date on his or her behalf for that Purchase Interval or (b)
have such funds held for the purchase of shares on his or her behalf on
the next scheduled Purchase Date. In no event, however, shall any
further payroll deductions be collected on the Participant's behalf
during such leave. Upon the Participant's return to active service (i)
within ninety (90) days following the commencement of such leave or (ii)
the expiration of any longer period for which such Participant's right
to reemployment with the Corporation is guaranteed by either statute or
contract, his or her payroll deductions under the Plan shall
automatically resume at the rate in effect at the time the leave began,
unless the Participant withdraws from the Plan prior to his or her
return.
G. CHANGE IN CONTROL. Each outstanding purchase right shall
automatically be exercised, immediately prior to the effective date of any
Change in Control, by applying the payroll deductions of each Participant for
the Purchase Interval in which such Change in Control occurs to the purchase of
whole shares of Common Stock at a purchase price per share equal to eighty-five
percent (85%) of the lower of (i) the Fair Market Value per share of Common
Stock on the Participant's Entry Date into the offering period in which such
Change in Control occurs or (ii) the Fair Market Value per share of Common Stock
immediately prior to the effective date of such Change in Control. However, the
applicable limitation on the number of shares of Common Stock purchasable per
Participant shall continue to apply to any such purchase, but not the limitation
applicable to the maximum number of shares of Common Stock purchasable in the
aggregate.
The Corporation shall use its best efforts to provide at least
ten (10)-days prior written notice of the occurrence of any Change in Control,
and Participants shall, following the
5.
<PAGE> 6
receipt of such notice, have the right to terminate their outstanding purchase
rights prior to the effective date of the Change in Control.
H. PRORATION OF PURCHASE RIGHTS. Should the total number of
shares of Common Stock to be purchased pursuant to outstanding purchase rights
on any particular date exceed the number of shares then available for issuance
under the Plan, the Plan Administrator shall make a pro-rata allocation of the
available shares on a uniform and nondiscriminatory basis, and the payroll
deductions of each Participant, to the extent in excess of the aggregate
purchase price payable for the Common Stock pro-rated to such individual, shall
be refunded.
I. ASSIGNABILITY. The purchase right shall be exercisable only by
the Participant and shall not be assignable or transferable by the Participant.
J. SHAREHOLDER RIGHTS. A Participant shall have no shareholder
rights with respect to the shares subject to his or her outstanding purchase
right until the shares are purchased on the Participant's behalf in accordance
with the provisions of the Plan and the Participant has become a holder of
record of the purchased shares.
VIII. ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to acquire
Common Stock pursuant to any purchase right outstanding under this Plan if and
to the extent such accrual, when aggregated with (i) rights to purchase Common
Stock accrued under any other purchase right granted under this Plan and (ii)
similar rights accrued under other employee stock purchase plans (within the
meaning of Code Section 423) of the Corporation or any Corporate Affiliate,
would otherwise permit such Participant to purchase more than Twenty-Five
Thousand Dollars ($25,000) worth of stock of the Corporation or any Corporate
Affiliate (determined on the basis of the Fair Market Value per share on the
date or dates such rights are granted) for each calendar year such rights are at
any time outstanding.
B. For purposes of applying such accrual limitations to the
purchase rights granted under the Plan, the following provisions shall be in
effect:
(i) The right to acquire Common Stock under each
outstanding purchase right shall accrue in a series of installments on
each successive Purchase Date during the offering period on which such
right remains outstanding.
(ii) No right to acquire Common Stock under any
outstanding purchase right shall accrue to the extent the Participant has
already accrued in the same calendar year the right to acquire Common
Stock under one (1) or more other purchase rights at a rate equal to
Twenty-Five Thousand Dollars ($25,000) worth of Common Stock (determined
on the basis of the Fair Market Value per share on the date or dates of
grant) for each calendar year such rights were at any time outstanding.
6.
<PAGE> 7
C. If by reason of such accrual limitations, any purchase right
of a Participant does not accrue for a particular Purchase Interval, then the
payroll deductions which the Participant made during that Purchase Interval with
respect to such purchase right shall be promptly refunded.
D. In the event there is any conflict between the provisions of
this Article and one or more provisions of the Plan or any instrument issued
thereunder, the provisions of this Article shall be controlling.
IX. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan was adopted by the Board on February 3, 1998 and
shall become effective at the Effective Time, provided no purchase rights
granted under the Plan shall be exercised, and no shares of Common Stock shall
be issued hereunder, until (i) the Plan shall have been approved by the
shareholders of the Corporation and (ii) the Corporation shall have complied
with all applicable requirements of the 1933 Act (including the registration of
the shares of Common Stock issuable under the Plan on a Form S-8 registration
statement filed with the Securities and Exchange Commission), all applicable
listing requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock is listed for trading and all other
applicable requirements established by law or regulation. In the event such
shareholder approval is not obtained, or such compliance is not effected, within
twelve (12) months after the date on which the Plan is adopted by the Board, the
Plan shall terminate and have no further force or effect, and all sums collected
from Participants during the initial offering period hereunder shall be
refunded.
B. Unless sooner terminated by the Board, the Plan shall
terminate upon the earliest of (i) the last business day in April 2008, (ii) the
date on which all shares available for issuance under the Plan shall have been
sold pursuant to purchase rights exercised under the Plan or (iii) the date on
which all purchase rights are exercised in connection with a Change in Control.
No further purchase rights shall be granted or exercised, and no further payroll
deductions shall be collected, under the Plan following such termination.
X. AMENDMENT/TERMINATION OF THE PLAN
A. The Board may alter, amend, suspend or terminate the Plan at
any time to become effective immediately following the close of any Purchase
Interval. However, the Plan may be amended or terminated immediately upon Board
action, if and to the extent necessary to assure that the Corporation will not
recognize, for financial reporting purposes, any compensation expense in
connection with the shares of Common Stock offered for purchase under the Plan,
should the financial accounting rules applicable to the Plan at the Effective
Time be subsequently revised so as to require the recognition of compensation
expense in the absence of such amendment or termination.
B. In no event may the Board effect any of the following
amendments or revisions to the Plan without the approval of the Corporation's
shareholders: (i) increase the number of shares of Common Stock issuable under
the Plan or the maximum number of shares
7.
<PAGE> 8
purchasable per Participant on any one Purchase Date, except for permissible
adjustments in the event of certain changes in the Corporation's capitalization,
(ii) alter the purchase price formula so as to reduce the purchase price payable
for the shares of Common Stock purchasable under the Plan or (iii) modify the
eligibility requirements for participation in the Plan.
XI. GENERAL PROVISIONS
A. All costs and expenses incurred in the administration of the
Plan shall be paid by the Corporation; however, each Plan Participant shall bear
all costs and expenses incurred by such individual in the sale or other
disposition of any shares purchased under the Plan.
B. Nothing in the Plan shall confer upon the Participant any
right to continue in the employ of the Corporation or any Corporate Affiliate
for any period of specific duration or interfere with or otherwise restrict in
any way the rights of the Corporation (or any Corporate Affiliate employing such
person) or of the Participant, which rights are hereby expressly reserved by
each, to terminate such person's employment at any time for any reason, with or
without cause.
C. The provisions of the Plan shall be governed by the laws of
the State of California without resort to that State's conflict-of-laws rules.
D. The Corporation and each Participating Corporation shall have
the right to take whatever steps the Plan Administrator deems necessary or
appropriate to comply with all applicable federal, state, local and employment
tax withholding requirements, and the Corporation's obligations to deliver
shares under this Plan shall be conditioned upon compliance with all such
withholding tax requirements. Without limiting the generality of the foregoing,
the Corporation and each Participating Corporation shall have the right to
withhold taxes from any other compensation or other amounts which it may owe to
the Participant, or to require the Participant to pay to the Corporation or the
Participating Corporation the amount of any taxes which the Corporation or the
Participating Corporation may be required to withhold with respect to such
shares. In this connection, the Plan Administrator may required the Participant
to notify the Plan Administrator, the Corporation or a Participating Corporation
before the Participant sells or otherwise disposes of any shares acquired under
this Plan.
8.
<PAGE> 9
SCHEDULE A
CORPORATIONS PARTICIPATING IN
EMPLOYEE STOCK PURCHASE PLAN
AS OF THE EFFECTIVE TIME
Broadcom Corporation
<PAGE> 10
APPENDIX
The following definitions shall be in effect under the Plan:
A. BOARD shall mean the Corporation's Board of Directors.
B. CASH EARNINGS shall mean the (i) base salary payable to a
Participant by one or more Participating Companies during such individual's
period of participation in one or more offering periods under the Plan plus (ii)
all overtime payments, bonuses, commissions, current profit-sharing
distributions and other incentive-type payments. Such Cash Earnings shall be
calculated before deduction of (A) any income or employment tax withholdings or
(B) any pre-tax contributions made by the Participant to any Code Section 401(k)
salary deferral plan or any Code Section 125 cafeteria benefit program now or
hereafter established by the Corporation or any Corporate Affiliate. However,
Cash Earnings shall NOT include any contributions (other than Code Section
401(k) or Code Section 125 contributions) made on the Participant's behalf by
the Corporation or any Corporate Affiliate to any employee benefit or welfare
plan now or hereafter established.
C. CHANGE IN CONTROL shall mean either of the following
shareholder-approved transactions to which the Corporation is a party:
(i) a 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,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation 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 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.
A-1.
<PAGE> 11
F. CORPORATE AFFILIATE shall mean any parent or subsidiary
corporation of the Corporation (as determined in accordance with Code Section
424), whether now existing or subsequently established.
G. 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 which shall by appropriate action
adopt the Plan.
H. EFFECTIVE TIME shall mean the time at which the Underwriting
Agreement is executed and the Common Stock priced for the initial public
offering. Any Corporate Affiliate which becomes a Participating Corporation
after such Effective Time shall designate a subsequent Effective Time with
respect to its employee-Participants.
I. ELIGIBLE EMPLOYEE shall mean any person who is employed by a
Participating Corporation on a basis under which he or she is regularly expected
to render more than twenty (20) hours of service per week for more than five (5)
months per calendar year for earnings considered wages under Code Section
3401(a).
J. ENTRY DATE shall mean the date an Eligible Employee first
commences participation in the offering period in effect under the Plan. The
earliest Entry Date under the Plan shall be the Effective Time.
K. 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 on the date in question, as such
price is reported by the National Association of Securities Dealers on
the Nasdaq National Market. 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.
(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 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.
(iii)For purposes of the initial offering period which
begins at the Effective Time, the Fair Market Value shall be deemed to be
equal to the price per share at which the Common Stock is sold in the
initial public offering pursuant to the Underwriting Agreement.
A-2.
<PAGE> 12
L. 1933 ACT shall mean the Securities Act of 1933, as amended.
M. PARTICIPANT shall mean any Eligible Employee of a
Participating Corporation who is actively participating in the Plan.
N. PARTICIPATING CORPORATION shall mean the Corporation and such
Corporate Affiliate or Affiliates as may be authorized from time to time by the
Board to extend the benefits of the Plan to their Eligible Employees. The
Participating Corporations in the Plan are listed in attached Schedule A.
O. PLAN shall mean the Corporation's 1998 Employee Stock Purchase
Plan, as set forth in this document.
P. PLAN ADMINISTRATOR shall mean the committee of two (2) or more
Board members appointed by the Board to administer the Plan.
Q. PURCHASE DATE shall mean the last business day of each
Purchase Interval. The initial Purchase Date shall be October 30, 1998.
R. PURCHASE INTERVAL shall mean each successive six (6)-month
period within the offering period at the end of which there shall be purchased
shares of Common Stock on behalf of each Participant.
S. SEMI-ANNUAL ENTRY DATE shall mean the first business day in
May and November each year on which an Eligible Employee may first enter an
offering period.
T. STOCK EXCHANGE shall mean either the American Stock Exchange
or the New York Stock Exchange.
U. UNDERWRITING AGREEMENT shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
A-3.
<PAGE> 1
EXHIBIT 99.13
BROADCOM CORPORATION
1998 EMPLOYEE STOCK PURCHASE PLAN ("ESPP")
ENROLLMENT/CHANGE FORM
SECTION 1 Action Complete Sections:
[ ] New Enrollment 2, 3, 6, 7 and sign
attached Stock Purchase
Agreement
Payroll Deduction Change 2, 4, 7
Terminate Payroll Deductions 2, 5, 7
Leave of Absence 2, 6, 7
================================================================================
Name _________________________________________________________
Last First MI Dept.
Home Address _________________________________________________
Street
______________________________________________________________
City State Zip Code
Social Security #:________-________-_________
Effective with the Purchase
Interval Beginning: Payroll Deduction Amount:
_____% of cash earnings*
May 1, 199
November 1, 199__ * Must be a multiple of 1%
Initial Offering Period up to a maximum of 15% of
cash earnings
================================================================================
Effective with the I authorize the following new
Pay Period Beginning:_____________________ level of payroll deduction:
Month, Day and Year ____% of cash earnings*
* Must be a multiple of 1%
up to a maximum of 15% of
cash earnings
NOTE: You may reduce your rate of payroll deductions once per 6-month
purchase interval to become effective as soon as possible
following the filing of the change form. You may also increase
your rate of payroll deductions to become effective as of the
start date of the next 6-month purchase interval (May 1 or
November 1).
================================================================================
Effective with the Your election to terminate
Pay Period Beginning:____________ your payroll deductions for
Month, Day and Year the balance of the offering
period cannot be changed, and
you may not rejoin the
offering period at a later
date. You will not be able
to resume participation in
the ESPP until the start of
the next offering period.
In connection with my voluntary termination of payroll deductions (or an
approved leave of absence), I elect the following action regarding my ESPP
payroll deductions to date in the current purchase interval:
[ ] Purchase shares of Broadcom Corporation on next scheduled purchase date
OR
[ ] Refund ESPP payroll deductions collected
NOTE: If your employment terminates for any reason or your eligibility
status changes (less than 20 hrs/wk or less than 5 months/yr), you
will immediately cease to participate in the ESPP, and your ESPP
payroll deductions collected in that purchase interval will
automatically be refunded to you.
================================================================================
In connection with my leave of absence, I elect the following action
with respect to my ESPP payroll deductions to date:
Purchase shares of Broadcom Corporation on next scheduled purchase
date
OR
Refund ESPP payroll deductions
NOTE: If you take an unpaid leave of absence, your payroll deductions will
immediately cease. If you return to active status within 90 days
after the start of your leave, your payroll deductions will at that
time automatically resume at the rate in effect for you when your
leave began.
================================================================================
[ ] My certificate will be issued in street name and delivered to the
brokerage account designated by Broadcom Corporation
______________________________ ____________________________________
Date Signature of Employee
<PAGE> 1
EXHIBIT 99.14
BROADCOM CORPORATION
STOCK PURCHASE AGREEMENT
I HEREBY ELECT TO PARTICIPATE IN THE 1998 EMPLOYEE STOCK PURCHASE PLAN
(THE "ESPP") FOR THE OFFERING PERIOD SPECIFIED BELOW, AND I HEREBY SUBSCRIBE TO
PURCHASE SHARES OF COMMON STOCK OF BROADCOM CORPORATION (THE "CORPORATION") IN
ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT AND THE ESPP. I HEREBY
AUTHORIZE PAYROLL DEDUCTIONS FROM EACH OF MY PAYCHECKS FOLLOWING MY ENTRY INTO
THE OFFERING PERIOD IN THE 1% MULTIPLE OF MY ELIGIBLE CASH EARNINGS (NOT TO
EXCEED A MAXIMUM OF 15%) SPECIFIED IN MY ATTACHED ENROLLMENT/CHANGE FORM.
THE OFFERING PERIOD IS DIVIDED INTO A SERIES OF CONSECUTIVE PURCHASE
INTERVALS. WITH THE EXCEPTION OF THE INITIAL PURCHASE INTERVAL WHICH BEGINS AT
THE TIME OF THE INITIAL PUBLIC OFFERING OF THE COMMON STOCK, THOSE PURCHASE
INTERVALS WILL BE OF SIX MONTHS DURATION AND BEGIN ON THE FIRST BUSINESS DAY OF
MAY AND NOVEMBER EACH YEAR DURING THE OFFERING PERIOD. MY PARTICIPATION WILL
AUTOMATICALLY REMAIN IN EFFECT FROM ONE PURCHASE INTERVAL TO THE NEXT DURING THE
TERM OF THE ESPP IN ACCORDANCE WITH MY PAYROLL DEDUCTION AUTHORIZATION, UNLESS I
WITHDRAW FROM THE ESPP OR CHANGE THE RATE OF MY PAYROLL DEDUCTION OR UNLESS MY
EMPLOYMENT STATUS CHANGES. I MAY REDUCE THE RATE OF MY PAYROLL DEDUCTIONS ON ONE
OCCASION PER 6-MONTH PURCHASE INTERVAL, TO BECOME EFFECTIVE WITH THE FILING OF
THE CHANGE FORM, AND I MAY INCREASE MY RATE OF PAYROLL DEDUCTIONS TO BECOME
EFFECTIVE AT THE BEGINNING OF ANY SUBSEQUENT 6-MONTH PURCHASE INTERVAL (MAY 1 OR
NOVEMBER 1).
MY PAYROLL DEDUCTIONS WILL BE ACCUMULATED FOR THE PURCHASE OF SHARES OF
THE CORPORATION'S COMMON STOCK ON THE LAST BUSINESS DAY OF EACH PURCHASE
INTERVAL WITHIN THE OFFERING PERIOD. THE PURCHASE PRICE PER SHARE WILL BE EQUAL
TO 85% OF THE LOWER OF (I) THE FAIR MARKET VALUE PER SHARE OF COMMON STOCK ON MY
ENTRY DATE INTO THE OFFERING PERIOD OR (II) THE FAIR MARKET VALUE PER SHARE ON
THE PURCHASE DATE. I WILL ALSO BE SUBJECT TO ESPP RESTRICTIONS (I) LIMITING THE
MAXIMUM NUMBER OF SHARES WHICH I MAY PURCHASE PER PURCHASE INTERVAL AND THE
MAXIMUM NUMBER OF SHARES PURCHASABLE IN THE AGGREGATE BY ALL PARTICIPANTS ON ANY
ONE PURCHASE DATE AND (II) PROHIBITING ME FROM PURCHASING MORE THAN $25,000
WORTH OF COMMON STOCK FOR EACH CALENDAR YEAR MY PURCHASE RIGHT REMAINS
OUTSTANDING.
I MAY WITHDRAW FROM THE ESPP AT ANY TIME PRIOR TO THE LAST BUSINESS DAY
OF A PURCHASE INTERVAL AND ELECT EITHER TO HAVE THE CORPORATION REFUND ALL MY
PAYROLL DEDUCTIONS FOR THAT INTERVAL OR TO HAVE SUCH PAYROLL DEDUCTIONS APPLIED
TO THE PURCHASE OF COMMON STOCK AT THE END OF SUCH INTERVAL. HOWEVER, I MAY NOT
REJOIN THAT PARTICULAR OFFERING PERIOD AT ANY LATER DATE. UPON THE TERMINATION
OF MY EMPLOYMENT FOR ANY REASON (INCLUDING DEATH OR DISABILITY) OR MY LOSS OF
ELIGIBLE EMPLOYEE STATUS, MY PARTICIPATION IN THE ESPP WILL IMMEDIATELY CEASE
AND ALL MY PAYROLL DEDUCTIONS FOR THE PURCHASE INTERVAL IN WHICH MY EMPLOYMENT
TERMINATES OR MY LOSS OF ELIGIBILITY OCCURS WILL AUTOMATICALLY BE REFUNDED.
IF I TAKE AN UNPAID LEAVE OF ABSENCE, MY PAYROLL DEDUCTIONS WILL
IMMEDIATELY CEASE AND ANY PAYROLL DEDUCTIONS FOR THE PURCHASE INTERVAL IN WHICH
MY LEAVE BEGINS WILL, AT MY ELECTION, EITHER BE REFUNDED OR APPLIED TO THE
PURCHASE OF SHARES OF COMMON STOCK AT THE END OF THAT PURCHASE INTERVAL. IF I
RETURN TO ACTIVE SERVICE WITHIN 90 DAYS AFTER THE START OF MY LEAVE, THEN MY
PAYROLL DEDUCTIONS WILL AT THAT TIME AUTOMATICALLY RESUME AT THE RATE IN EFFECT
FOR ME WHEN MY LEAVE BEGAN.
THE CORPORATION WILL ISSUE A STOCK CERTIFICATE FOR THE SHARES PURCHASED
ON MY BEHALF AFTER THE END OF EACH PURCHASE INTERVAL AND THE CERTIFICATE WILL BE
DEPOSITED DIRECTLY IN THE CORPORATION-DESIGNATED BROKERAGE ACCOUNT ESTABLISHED
ON MY BEHALF. I WILL NOTIFY THE CORPORATION OF ANY DISPOSITION OF SHARES
PURCHASED UNDER THE ESPP AND I WILL SATISFY ALL APPLICABLE INCOME AND EMPLOYMENT
TAX WITHHOLDING REQUIREMENTS AT THE TIME OF SUCH DISPOSITION.
THE CORPORATION HAS THE RIGHT, EXERCISABLE IN ITS SOLE DISCRETION, TO
AMEND OR TERMINATE THE ESPP AT ANY TIME, WITH SUCH AMENDMENT OR TERMINATION TO
BECOME EFFECTIVE IMMEDIATELY FOLLOWING THE EXERCISE OF OUTSTANDING PURCHASE
RIGHTS AT THE END OF ANY CURRENT PURCHASE INTERVAL. SHOULD THE CORPORATION ELECT
TO TERMINATE THE ESPP, I WILL HAVE NO FURTHER RIGHTS TO PURCHASE SHARES OF
COMMON STOCK PURSUANT TO THIS AGREEMENT. I HAVE RECEIVED A COPY OF THE Q&A
SUMMARY IDENTIFYING THE MAJOR FEATURES OF THE ESPP. I HAVE READ THIS AGREEMENT
AND THE Q&A SUMMARY AND HEREBY AGREE TO BE BOUND BY THE TERMS OF BOTH THIS
AGREEMENT AND THE ESPP. THE EFFECTIVENESS OF THIS AGREEMENT IS DEPENDENT UPON MY
ELIGIBILITY TO PARTICIPATE IN THE ESPP.
____________________________________
DATE:________ ,199__ SIGNATURE OF EMPLOYEE
PRINTED NAME:_______________________
DURATION OF OFFERING PERIOD: FROM:__________________ , 1998 TO
APRIL 28, 2000
ENTRY DATE INTO OFFERING PERIOD:_______________________ , 1998
