Broadcom Corporation
5300 California Avenue
Irvine, California 92617-3038, U.S.A.
Broadcom Corporation 2007 International Employee Stock Purchase Plan,
as amended and restated (the "IESPP")
Prospectus for the employees of certain subsidiaries in the United Kingdom
of Broadcom Corporation, subject to the applicable local legislation
Pursuant to articles L. 412-1 and L. 621-8 of the Code Monétaire et Financier and its General
Regulation, in particular articles 211-1 to 216-1 thereof, the Autorité des marchés financiers
(“AMF”) has attached visa number 15-173 dated April 30, 2015, onto this prospectus. This
prospectus was established by the issuer and incurs the responsibility of its signatories. The
visa, pursuant to the provisions of Article L. 621-8-1-I of the Code Monétaire et Financier, was
granted after the AMF verified that the document is complete and comprehensible, and that the
information it contains is consistent. The visa represents neither the approval of the worthiness
of the operation nor the authentication of the financial and accounting information presented.
This prospectus will be made available in printed form to employees of certain subsidiaries in the United
Kingdom of Broadcom Corporation in which the offering under the IESPP is considered a public offering,
subject to applicable legislation in the United Kingdom, at the head offices in the United Kingdom. In
addition, this prospectus will be posted on Broadcom Corporation’s intranet and free copies will be
available to the employees upon request by contacting the human resources departments of their
employers. This prospectus will also be available on the website of the AMF, www.amf-france.org.
1301972-v8\NYCDMS
NOTE TO THE PROSPECTUS
This prospectus, which contains material information concerning Broadcom Corporation, was established
pursuant to articles 211-1 to 216-1 of the AMF General Regulation. Pursuant to Article 25 of Commission
Regulation (EC) No 809/2004 of 29 April 2004 as amended by Commission Delegated Regulations (EU)
No 486/2012 of 30 March 2012, No 862/2012 of 4 June 2012 and No 759/2013 of 30 April 2013 (the
“Prospectus Regulation”), this prospectus is composed of the following parts in the following order:
(1)
a table of contents,
(2)
the summary provided for in Article 5(2) of Directive 2003/71/EC of the European Parliament and
of the European Council of 4 November 2003, as amended by Directive 2010/73/EU and
Directive 2014/51/EU (the “Prospectus Directive”) (Part I constitutes the prospectus summary),
(3)
the risk factors linked to the issuer and the type of security covered by the issue, and
(4)
excerpts from Annexes I and III of the Prospectus Regulation which, by application of Articles 3,
4, and 6 of the Prospectus Regulation and question 71 of the European Securities and Markets
1
Authority (“ESMA”) Q&A, are required for this offering of equity securities to employees of
Broadcom Corporation and its affiliates.
This prospectus also contains supplemental information concerning the IESPP (Part II - Section B) as well
as the following documents (Exhibits):
-
Broadcom Corporation 2007 International Employee Stock Purchase Plan, as amended and
restated; and
-
Current Report on Form 8-K furnished by Broadcom Corporation to the United States Securities
and Exchange Commission (the “SEC”) on April 21, 2015.
When used in this prospectus, the terms “we,” “us” or “our” mean Broadcom Corporation and its
subsidiaries and affiliates.
All references to “$” in this prospectus refer to U.S. dollars.
1
Frequently Asked Questions, Prospectuses: Common positions agreed by ESMA Members 22nd updated version – October
2014 (21 October 2014 | ESMA/2014/1279).
1301972-v8\NYCDMS
2
TABLE OF CONTENTS
Part I Constitutes the Prospectus Summary
Page
PART I — PROSPECTUS SUMMARY .........................................................................................................................5
SECTION A — INTRODUCTION AND WARNINGS ......................................................................................5
SECTION B — ISSUER..................................................................................................................................5
SECTION C — SECURITIES .........................................................................................................................9
SECTION D — RISKS .................................................................................................................................. 11
SECTION E — OFFER ................................................................................................................................. 12
PART II — PROSPECTUS ......................................................................................................................................... 15
SECTION A — RISK FACTORS (AS OF MARCH 31, 2015) ....................................................................... 15
I.
RISKS RELATED TO BROADCOM CORPORATION’S BUSINESS AND INDUSTRY (AS
OF MARCH 31, 2015) .................................................................................................................... 15
II.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (AS OF
MARCH 31, 2015) .......................................................................................................................... 25
SECTION B — SUPPLEMENTAL INFORMATION CONCERNING BROADCOM CORPORATION
AND THE IESPP ............................................................................................................................ 26
I.
THE OUTLINE ................................................................................................................................ 26
II.
ELIGIBILITY ................................................................................................................................... 28
III.
DELIVERY AND SALE OF THE SHARES OF COMMON STOCK ................................................ 30
IV.
RIGHTS RELATED TO THE SHARES ........................................................................................... 31
V.
STATEMENT OF CAPITALIZATION AND INDEBTEDNESS (AS OF MARCH 31, 2015) ............. 35
VI.
MAXIMUM DILUTION AND NET PROCEEDS ............................................................................... 37
VII.
DIRECTORS AND EXECUTIVE OFFICERS.................................................................................. 38
VIII.
EMPLOYEES ................................................................................................................................. 52
IX.
WORKING CAPITAL STATEMENT ............................................................................................... 56
X.
SELECTED FINANCIAL INFORMATION ....................................................................................... 56
XI.
LEGAL PROCEEDINGS (AS OF MARCH 31, 2015) ..................................................................... 58
XII.
DOCUMENTS ON DISPLAY .......................................................................................................... 60
XIII.
UNITED KINGDOM TAX CONSEQUENCES ................................................................................. 60
EXHIBITS
.................................................................................................................................................... 62
EXHIBIT I BROADCOM CORPORATION 2007 INTERNATIONAL EMPLOYEE STOCK
PURCHASE PLAN, AS AMENDED AND RESTATED ......................................................................I
EXHIBIT II CURRENT REPORT ON FORM 8-K FURNISHED BY BROADCOM CORPORATION
TO THE SEC ON APRIL 21, 2015 ...................................................................................................II
CROSS-REFERENCE LISTS ........................................................................................................................................ i
ANNEX I MINIMUM DISCLOSURE REQUIREMENTS FOR THE SHARE REGISTRATION
DOCUMENT (SCHEDULE) ............................................................................................................... i
ANNEX III MINIMUM DISCLOSURE REQUIREMENTS FOR THE SHARE SECURITIES NOTE
(SCHEDULE)................................................................................................................................... vi
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3
COMPANY REPRESENTATIVE FOR PROSPECTUS
1.1
Eric K. Brandt, Executive Vice President and Chief Financial Officer (Principal Financial Officer),
acting for and on behalf of Broadcom Corporation.
1.2
To my knowledge, after having taken all reasonable measures for this purpose, the information
contained in this prospectus fairly reflects the current situation and no material omission has been
made.
1.3
Broadcom Corporation has obtained a letter from its independent registered public accounting
firm in relation to this prospectus. The independent registered public accounting firm has, in
accordance with the professional standards and interpretations applicable to it under the
standards of the Public Company Accounting Oversight Board (United States) pursuant to AU
Section 550, Other Information in Documents Containing Audited Financial Statements, read the
information pertaining to the financial condition and selected financial information pertaining to the
consolidated financial statements of Broadcom Corporation contained in this prospectus and read
the prospectus.
/s/ Eric K. Brandt
Eric K. Brandt, Executive Vice President and Chief
Financial Officer (Principal Financial Officer) of
Broadcom Corporation
Irvine, California, U.S.A., April 29, 2015
4
1301972-v8\NYCDMS
PART I — PROSPECTUS SUMMARY
PART I — PROSPECTUS SUMMARY
VISA NUMBER 15-173 DATED APRIL 30, 2015 OF THE AMF
Summaries are made up of disclosure requirements known as "Elements." These Elements are
numbered in Sections A – E (A.1 – E.7).
This summary contains all the Elements required to be included in a summary for this type of securities
and Issuer. Because some Elements are not required to be addressed, there may be gaps in the
numbering sequence of the Elements.
Even though an Element may be required to be inserted in the summary because of the type of securities
and Issuer, it is possible that no relevant information can be given regarding the Element. In this case a
short description of the Element is included in the summary with the mention of "not applicable."
SECTION A — INTRODUCTION AND WARNINGS
A.1
Warning to the
reader
This summary should be read as an introduction to the prospectus. Any
decision to invest in the securities should be based on consideration of the
prospectus as a whole by the investor. Where a claim relating to the
information contained in a prospectus is brought before a court, the
plaintiff investor might, under the national legislation of the Member States
of the European Union or States party to the European Economic Area
("EEA") Agreement, have to bear the costs of translating the prospectus
before the legal proceedings are initiated. Civil liability attaches to those
persons who have presented the summary and applied for its notification,
but only if the summary is misleading, inaccurate or inconsistent when
read together with the other parts of the prospectus or it does not provide,
when read together with the other parts of the prospectus, key information
in order to aid investors when considering whether to invest in such
securities.
A.2
Consent to use of
the prospectus
Not applicable. There is no subsequent resale or final placement of
securities by financial intermediaries.
SECTION B — ISSUER
B.1
Legal and
commercial name
of the issuer
Broadcom Corporation (“Broadcom” or the “Corporation”).
B.2
Domicile and legal
form of
Broadcom, the
legislation under
which it operates
and its country of
incorporation
Broadcom's principal offices are located at 5300 California Avenue,
Irvine, California 92617-3038, U.S.A. Broadcom is a corporation
incorporated under the laws of the State of California, U.S.A.
1301972-v8\NYCDMS
5
PART I — PROSPECTUS SUMMARY
B.3
Description of the
nature of
Broadcom's
current
operations and its
principal activities
Broadcom is a global leader and innovator in semiconductor solutions for
wired and wireless communications. Broadcom provides one of the
industry’s broadest portfolio of highly-integrated system-on-a-chip
solutions ("SoCs") that seamlessly deliver voice, video, data and
multimedia connectivity in the home, office and mobile environments.
Broadcom's solutions are used globally by leading manufacturers and are
embedded in an array of communications products. Because Broadcom
leverages its technologies across different markets, certain of its
integrated circuits may be incorporated into products used in multiple
platforms. Broadcom utilizes independent foundries and third-party
subcontractors to manufacture, assemble and test all of its semiconductor
products. Broadcom's business is structured around two reportable
segments: (i) Broadband and Connectivity; and (ii) Infrastructure and
Networking.
In 2014, in connection with the wind-down of Broadcom's cellular
baseband business, the Corporation underwent certain organizational
changes that resulted in the elimination of its former Mobile and Wireless
reportable segment and combined its Broadband Communications
reportable segment with substantially all of the remaining portion of its
Mobile and Wireless reportable segment. The new combined segment is
the Broadband and Connectivity reportable segment.
The following table presents the net revenue of Broadcom’s reportable
2
3
segments, and the “Cellular Baseband” and “All Other” categories:
Year Ended December 31,
2014
2013
2012
(In millions)
Broadband and Connectivity
Infrastructure and Networking
Total reportable segments
Cellular Baseband
All Other
Total net revenue
B.4a
2
3
Recent trends
$
5,535
2,525
8,060
368
—
$
5,430
2,155
7,585
634
86
$
5,232
1,911
7,143
677
186
$
8,428
$
8,305
$
8,006
On April 21, 2015, Broadcom reported unaudited financial results for its
first quarter ended March 31, 2015. Net revenue for the first quarter of
2015 was $2.06 billion. This represents a decrease of 4.0% compared
with the $2.14 billion reported for the fourth quarter of 2014 and an
increase of 3.7% compared with the $1.98 billion reported for the first
quarter of 2014. Net income computed in accordance with U.S. generally
accepted accounting principles ("U.S. GAAP") for the first quarter of 2015
was $209 million, or $0.34 per share (diluted), compared with U.S. GAAP
net income of $390 million, or $0.64 per share (diluted), for the fourth
quarter of 2014 and U.S. GAAP net income of $165 million, or $0.28 per
share (diluted), for the first quarter of 2014.
“Cellular Baseband” represents the operations of the cellular baseband business that is currently winding down (please see
details in Element B.4a below).
“All Other” is comprised of (i) income from the "Qualcomm Agreement" that was entered into with Qualcomm Incorporated in
April 2009 and (ii) other licensing revenue, since they are principally the result of corporate efforts.
6
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PART I — PROSPECTUS SUMMARY
In July 2014 Broadcom decided to pursue a wind-down of the cellular
baseband business. As of March 31, 2015 Broadcom has recognized
$159 million of restructuring charges related to the exit from the cellular
baseband business. These charges are comprised of (i) $131 million for
employee termination benefits for 2,300 employees and (ii) $28 million for
certain non-cancelable contract costs and other costs to close and
consolidate 15 locations facilities. Broadcom expects to record additional
restructuring charges of up to $10 million over the next 12 months,
primarily for costs associated with the closure of three additional facilities.
The wind-down of the cellular baseband business and associated cost
saving initiatives are currently expected to result in up to approximately
$650 million in reduced annualized research and development and
selling, general and administrative expenses, of which up to
approximately $50 million relates to estimated reductions in stock-based
compensation. Broadcom currently expects to organically reinvest
approximately $50 million of these savings on an annualized basis into
projects in its Broadband and Connectivity; and Infrastructure and
Networking reportable segments. This incremental spending is currently
expected to strengthen and accelerate Broadcom's plans in the area of
small cells, Ethernet switches and low-power connectivity.
B.5
Organizational
structure
B.6
Interests in Broadcom's capital or voting rights
Broadcom is the head of the Broadcom group. Broadcom holds, directly
or indirectly, 100% of the capital and voting rights of each of its
subsidiaries. As of December 31, 2014, Broadcom had seven (7)
significant subsidiaries.
The following table shows, as of March 16, 2015, beneficial owners known to Broadcom holding more
than 5% of Broadcom's shares of Class A common stock, par value US $0.0001 per share ("Class A
Common Stock") and Class B common stock, par value $0.0001 per share ("Class B Common Stock"
and collectively with Class A Common Stock, "Common Stock") or voting rights. The rights of the
holders of Class A Common Stock and Class B Common Stock are identical, except that holders of the
Class A Common Stock are entitled to one vote per share and holders of the Class B Common Stock
are entitled to ten votes per share. For the purpose of computing the percentage of Class A Common
Stock beneficially owned by each person who holds Class B Common Stock, each share of Class B
Common Stock is deemed to have been converted into a share of Class A Common Stock.
Class B
Common Stock
Class A
Percent
Percentage
of Total
Voting
Power
136,509
22,798,490
4.01%
21.89%
BlackRock, Inc.
55 East 52nd Street
New York, NY 10022, U.S.A.
30,437,353
0
5.54%
2.92%
Clearbridge Investments, LLC
620 8th Avenue
New York, NY 10018 ,U.S.A.
Clearbridge LLC
100 International Drive
Baltimore, MD 21202, U.S.A.
26,765,845
0
5.01%
2.57%
Amount and Nature of Beneficial Ownership
Beneficial Owner
Henry Samueli, Ph.D.
5300 California Avenue
Irvine, CA 92617-3038, U.S.A.
Class A
Common Stock
7
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PART I — PROSPECTUS SUMMARY
FMR LLC
245 Summer Street
Boston, MA 02210, U.S.A.
42,043,161
0
7.23%
4.04%
47,973
26,170,868
4.55%
25.12%
28,256,499
0
5.14%
2.71%
Henry T. Nicholas III, Ph.D.
15 Enterprise, Suite 550
Aliso Viejo, CA 92656, U.S.A.
Vanguard Group Inc.
100 Vanguard Blvd.
Malvern, PA 19355, U.S.A.
B.7
Financial information concerning Broadcom for the fiscal years ended December 31,
2014, 2013 and 2012 and for the quarters ended March 31, 2015 and 2014
The selected financial data of Broadcom set out in this prospectus have been prepared in accordance
with U.S. GAAP.
SELECTED THREE-YEAR FINANCIAL DATA
Year Ended December 31,
(1)
(2)
(3)
2014
2013
2012
(In millions, except per share data)
Consolidated Statement of Income Data
(4)
Net revenue
Income from operations
Net income
Net income per share (diluted)
Dividends per share
$
$
$
Consolidated Balance Sheet Data
Cash and cash equivalents and short-term and long-term
marketable securities
Working capital
Goodwill and purchased intangible assets
Total assets
Total debt
Total shareholders’ equity
$
8,428
694
652
1.08
0.48
$
5,989
3,522
4,374
12,471
1,593
9,051
$
$
$
8,305
472
424
0.73
0.44
$
4,371
2,419
4,937
11,495
1,394
8,371
$
$
$
8,006
676
719
1.25
0.40
3,722
2,099
5,512
11,208
1,693
7,839
(1)
Includes impairment of long-lived assets of $404 million, restructuring costs of $158 million related to our exit of the cellular
baseband business, other gains of $60 million and settlement costs of $16 million.
(2)
Includes impairment of long-lived assets of $511 million, settlement gains of $69 million, restructuring costs of $29 million and
a charitable contribution of $25 million.
(3)
Includes impairment of long-lived assets of $90 million, settlement costs of $79 million, and restructuring costs of $7 million.
In addition, includes the impact of the NetLogic Microsystems, Inc. acquisition in February 2012.
(4) Includes income relating to the Qualcomm Agreement of $86 million and $186 million, for 2013 and 2012, respectively.
Income from this agreement terminated in April 2013.
8
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PART I — PROSPECTUS SUMMARY
SELECTED QUARTERLY FINANCIAL DATA
Three Months Ended March 31,
2015
2014
(In millions, except per share data)
Unaudited Consolidated Statement of Income Data
Net revenue
Income from operations
Net income
Net income per share (diluted)
Dividends per share
$
2,058
223
209
0.34
0.14
$
$
$
1,984
170
165
0.28
0.12
March 31, 2015
December 31, 2014
(In millions)
Unaudited Consolidated Balance Sheet Data
Cash and cash equivalents and short-term and longterm marketable securities
Total assets
Total liabilities
Total shareholders’ equity
*
$
5,484
12,062
3,060
9,002
$
5,989
12,471
3,420
9,051
Derived from audited consolidated balance sheet.
B.8
Pro forma
financial
information
Not applicable. Pursuant to its Q&A, ESMA considers that Item 20.2 of
Annex I of the Prospectus Regulation is generally not pertinent for offers
of shares to employees and can thus be omitted from the prospectus in
accordance with Article 23.4 of the Prospectus Regulation.
B.9
Profit forecast
Not applicable. This prospectus does not contain any profit forecast.
B.10
Qualifications in
the audit report
on the historical
financial
information
Not applicable. There are no such qualifications in the auditors' report.
B.11
Working capital
statement
Not applicable. Broadcom's working capital is sufficient for its present
requirements.
SECTION C — SECURITIES
C.1
Type and class of
the securities
being offered,
including the
security
identification
code
Broadcom's Class A Common Stock offered pursuant to this prospectus
will be newly issued shares.
The Class A Common Stock is or will be, after its issuance, listed on the
NASDAQ Global Select Market (the "Nasdaq") under the symbol "BRCM."
The CUSIP for the Class A Common Stock is 111320107.
The Class B Common Stock is not listed on any stock market or
exchange.
9
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PART I — PROSPECTUS SUMMARY
C.2
Currency of the
securities issue
The United States Dollar is the currency of the securities issue.
C.3
Number of shares
issued
As of March 31, 2015, Broadcom was authorized to issue 2,500,000,000
shares of Class A Common Stock, 400,000,000 shares of Class B
Common Stock, and 6,432,161 shares of preferred stock, par value
$0.0001 per share. As of the same date, there were 548,404,747 shares
of Class A Common Stock outstanding and 49,220,551 shares of Class B
Common Stock outstanding and no shares of preferred stock outstanding.
C.4
Rights attached to
the securities
Eligible employees may enroll in the IESPP, thereby becoming
“Participants” by executing an enrollment form and any other required
documents prescribed by a committee of two or more board members
(the “Plan Administrator”) appointed by Broadcom's Board of Directors
(the "Board").
No Participant shall have any voting, dividend, or other shareholder rights
with respect to any offering under the IESPP until the shares of Class A
Common Stock have been purchased and delivered to the Participant.
Following such purchase and delivery, the Participant shall be entitled to
the rights attached to the Class A Common Stock, as further described
below:
Dividend Rights. The Board, subject to restrictions contained in (a) the
Corporations Code of the State of California (USA) (the "Cal. Corp.
Code"), and (b) Broadcom’s Second Amended and Restated Articles of
Incorporation (the "Articles of Incorporation"), may declare and pay
dividends upon the Common Stock.
Voting Rights. Holders of the shares of Class A Common Stock and
Class B Common Stock have identical rights, except that holders of the
Class A Common Stock are entitled to one vote per share and holders of
the Class B Common Stock are entitled to ten votes per share.
Conversion. Each share of Class B Common Stock, at the option of its
holder, may at any time be converted into one fully paid and
nonassessable share of Class A Common Stock and in most instances
automatically converts upon sale or other transfer.
Right to Receive Liquidation Distributions. Subject to the prior rights
of holders of all classes of stock at that time outstanding having prior
rights as to liquidation, upon a liquidation, dissolution or winding up of the
Corporation, the assets and funds of the corporation legally available for
distribution shall be distributed ratably among the holders of shares of
Class A Common Stock and Class B Common Stock in proportion to the
amount of such stock owned by each such holder.
No Preemptive or Redemptive Provisions. The shares of Class A
Common Stock are not entitled to preemptive rights and are not subject to
redemption.
C.5
Transferability
restrictions
Not applicable. The shares of Class A Common Stock in this offering are
registered on Form S-8 with the SEC and are generally freely
transferable.
C.6
Admission to
trading on a
regulated market
Not applicable. As noted in Element C.1 above, the shares of Class A
Common Stock are listed on the Nasdaq.
10
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PART I — PROSPECTUS SUMMARY
C.7
Dividend policy
In January 2010, the Board adopted a dividend policy pursuant to which
Broadcom intends to pay quarterly cash dividends on its Common Stock.
The Board declared quarterly cash dividends of $0.12, $0.11, and $0.10
per common share payable to holders of its Common Stock in each
quarter of 2014, 2013 and 2012, respectively. In 2014, 2013 and 2012,
Broadcom paid $283 million, $254 million and $224 million, respectively,
in dividends to holders of its Class A and Class B common stock.
In November 2014, the Board adopted an amendment to its existing
dividend policy pursuant to which it intends to increase the quarterly cash
dividend by 17% to $0.14 per share for each quarter of 2015 ($0.56 per
share on an annual basis). Pursuant to this plan, on January 28, 2015,
Broadcom declared a quarterly cash dividend of $0.14 per share. In the
three months ended March 31, 2015, Broadcom paid $84 million in
dividends to holders of its Common Stock.
The cash dividend policy and the payment of future cash dividends under
that policy are subject to the Board's continuing determination that the
dividend policy and the declaration of dividends thereunder are in the best
interests of Broadcom's shareholders and are in compliance with all laws
and agreements of Broadcom applicable to the declaration and payment
of cash dividends.
SECTION D — RISKS
D.1
Key risks related
to Broadcom or
its industry
Set forth below are summaries of the key risks, uncertainties and other
factors that may affect Broadcom's future results. The risks and
uncertainties described below are not the only ones facing Broadcom.
• Broadcom depends on a few significant customers for a substantial
portion of its revenue. Sales to Broadcom's five largest customers
represented 42.1%, and 45.5% of its total net revenue in the three
months ended March 31, 2015 and 2014, respectively. Sales to two
significant customers represented 26.9% and 30.2% of its total net
revenue in the three months ended March 31, 2015 and 2014,
respectively.
• Broadcom manufactures and sells complex products and may be
unable to successfully develop and introduce new products.
• Broadcom is exposed to risks associated with its international
operations. Products shipped to destinations outside the United States,
primarily in Asia, represented 95.4% and 95.7% of Broadcom's product
revenue in the three months ended March 31, 2015 and 2014,
respectively.
• Broadcom’s operating results may be adversely impacted by worldwide
economic uncertainties and specific conditions in the markets
Broadcom addresses.
• Broadcom may be required to defend against alleged infringement of
intellectual property rights of others and/or may be unable to
adequately protect or enforce its own intellectual property rights.
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PART I — PROSPECTUS SUMMARY
• Broadcom faces risks associated with its acquisition strategy.
• Broadcom depends on third parties to fabricate, assemble and test its
products. As a fabless semiconductor company, Broadcom does not
own or operate fabrication, assembly or test facilities.
• Broadcom's systems are subject to security breaches and other
cybersecurity incidents.
• Government regulation may adversely affect Broadcom's business.
D.3
Key risks related
to the shares
• Broadcom's stock price is highly volatile.
• Broadcom's future ability to return capital to shareholders in the form of
dividends or share repurchases may be impacted by the availability of
U.S. cash.
• Broadcom’s articles of incorporation and bylaws contain anti-takeover
provisions.
• Broadcom's co-founders and their affiliates may strongly influence the
outcome of matters that require the approval of its shareholders.
• Participants assume the risk of any currency fluctuations from the time
of their contributions to the IESPP by payroll deductions through the
selling of their Common Stock purchased under the IESPP.
SECTION E — OFFER
E.1
Net proceeds
Assuming that the 308 eligible employees in the United Kingdom would
purchase the maximum amount of shares of Class A Common Stock
under the IESPP offered pursuant to this prospectus, that is, a total of
$42,467.20 each, then the gross proceeds of Broadcom in connection
with the offer under the IESPP pursuant to this prospectus would be
$13,079,898. After deducting legal and accounting expenses in
connection with the offer, the net proceeds would be approximately
$13,039,898.
E.2a
Reasons for the
offer and use of
proceeds
The IESPP was established to promote the interests of Broadcom by
providing eligible employees of certain of its foreign subsidiaries and
affiliates with the opportunity to acquire a proprietary interest in the
Corporation through participation in a payroll-deduction based employee
stock purchase plan and to purchase shares of Class A Common Stock at
a discount.
The net proceeds will be used for general corporate purposes.
12
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PART I — PROSPECTUS SUMMARY
E.3
Description of the
terms and
conditions of the
offer
Broadcom will offer eligible employees of Broadcom and certain of its
subsidiaries and affiliates the right to purchase shares of the Class A
Common Stock under the IESPP.
The offering of the IESPP may be considered a public offering of
securities pursuant to the Prospectus Directive in the United Kingdom,
subject to the applicable local legislation, as the offering is made to at
least 150 employees in the United Kingdom and the total amount of the
offering of the IESPP in the EEA is more than €5 million over a 12-month
period. This prospectus will be made available in printed form to eligible
employees of the subsidiaries or affiliates of Broadcom based in the
United Kingdom at the respective head offices of their employers and will
be published on Broadcom’s intranet.
An offering of the IESPP may also be made in the following additional
EEA countries: Belgium, Denmark, Finland, France, Germany, Greece,
Ireland, Italy, the Netherlands, Spain and Sweden. However, such
offering is not considered a public offering of securities and/or the
obligation to publish a prospectus does not apply to the offering under the
legislation implementing the Prospectus Directive in such countries.
The IESPP is a sub-plan of the Broadcom Corporation 1998 Employee
Stock Purchase Plan, as amended and restated (the "U.S. ESPP") and
draws its shares of Class A Common Stock from the share reserve
available under the U.S. ESPP. The IESPP is administered by the Plan
Administrator.
The IESPP is comprised of a series of successive 24-month long offering
periods ("Offering Periods") unless the Plan Administrator determines that
a shorter period, or longer period not to exceed 27 months will apply.
Each Offering Period contains four successive six-month purchase
intervals commencing on the first U.S. business day in May and
November of each year and ending on the last business day of April and
October of each year ("Purchase Intervals"). The first day of each Offering
Period is the "Start Date."
To be eligible to participate in the IESPP, employees must be employed
by a foreign subsidiary of the Corporation (unless such subsidiary has
been excluded by the Plan Administrator) (each a "Participating
Corporation").
Each employee who is an eligible employee on the Start Date of any
Offering Period may enroll in the IESPP prior to such Start Date. Each
employee that becomes eligible to participate after the Start Date of any
applicable Offering Period may enroll prior to any subsequent quarterly
entry date commencing on the first business day of February, May,
August and November of each year within that Offering Period (each a
“Quarterly Entry Date”) on which he or she is an eligible employee.
Eligible employees may enroll in the IESPP, thereby becoming
Participants by executing an enrollment form and any other required
documents prescribed by the Plan Administrator (the "Enrollment
Documents"). The date the eligible employee enrolls in the IESPP is
referred to as the "Entry Date." In order to enroll in the IESPP on the
Quarterly Entry Date beginning August 3, 2015, eligible employees must
enroll before August 3, 2015 and in order to participate in the Purchase
Interval beginning November 2, 2015, eligible employees must enroll
before November 2, 2015.
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PART I — PROSPECTUS SUMMARY
Participants authorize payroll deductions (between 1% and 15% of the
Participants’ Cash Earnings) which are used to purchase shares of Class
A Common Stock on the last business day of each Purchase Interval (the
"Purchase Date"). The purchase price per Share is generally 85% of the
4
lower of (1) the "Fair Market Value" per share of Class A Common Stock
on the Entry Date or (2) the Fair Market Value per share of Class A
Common Stock on the Purchase Date (the "Purchase Price"). No
employee may purchase shares of Class A Common Stock under the
IESPP having a Fair Market Value as of the Entry Date of more than
$25,000 per calendar year. The maximum number of shares purchasable
per Participant shall not exceed 9,000 shares of Class A Common Stock
with respect to the applicable Purchase Date or 5,000,000 shares of
Class A Common Stock in the aggregate by all Participants in the IESPP
and the U.S. ESPP with respect to the applicable Purchase Date. Certain
other limitations apply.
As of March 31, 2015, there were approximately 5,198,602 shares of
Class A Common Stock available for issuance under the IESPP on a
worldwide basis (out of a maximum of 12,868,134 shares of Class A
Common Stock available since its inception).
E.4
Description of
material interest
to the offer
including conflict
of interests
Not applicable. There are no such interests.
E.5
Name of the entity
offering to sell the
security
Broadcom Corporation.
E.6
Maximum dilution
Assuming that the shares of Class A Common Stock offered under the
IESPP pursuant to this prospectus to the 308 eligible employees in the
United Kingdom would all be newly issued, a shareholder of Broadcom
currently holding 1% of the total outstanding shares of Class A Common
Stock of Broadcom as of March 31, 2015, i.e., 5,484,047 shares, and who
would not participate in the offer would be diluted as indicated in the
following dilution table:
E.7
4
Estimated
expenses charged
to the investor
Percentage of the
total outstanding
shares of Class A
Common Stock
Total number of
outstanding
shares of Class A
Common Stock
Before the offering (as of
March 31, 2015)
1.00%
548,404,747
After issuance of 355,432
shares of Class A Common
Stock under the IESPP
0.999%
548,760,179
Not applicable. There are no such expenses.
The Fair Market Value is the closing price of a share of Class A Common Stock on the Nasdaq at the close of regular trading
hours on the date of determination as reported by the Nasdaq on its website (www.nasdaq.com) or such other source the Plan
Administrator deems reliable.
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PART II — PROSPECTUS
SECTION A — RISK FACTORS (AS OF MARCH 31, 2015)
Before deciding to purchase, hold or sell our Class A Common Stock, you should carefully consider the
risks described below in addition to the other information contained in Broadcom's Quarterly Report on
Form 10-Q for the quarter ended March 31, 2015, filed with the SEC on April 21, 2015 ("Broadcom’s
Form 10-Q") and in our other filings with the SEC, including Broadcom’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2014, filed with the SEC on January 29, 2015 ("Broadcom’s Form 10K") and subsequent reports on Forms 10-Q and 8-K. The risks and uncertainties described below are not
the only ones we face. Additional risks and uncertainties not presently known to us or that we currently
deem immaterial may also affect our business. If any of these known or unknown risks or uncertainties
actually occurs with material adverse effects on Broadcom, our business, financial condition, results of
operations and/or liquidity could be seriously harmed. In that event, the market price for our Class A
Common Stock will likely decline, and you may lose all or part of your investment.
I.
RISKS RELATED TO BROADCOM CORPORATION’S BUSINESS AND INDUSTRY (AS OF
MARCH 31, 2015)
Our quarterly operating results may fluctuate significantly.
Our quarterly net revenue and operating results have fluctuated significantly in the past and may vary
from quarter to quarter. Variability in the nature of our operating results may be attributed to the factors
identified throughout this “Risk Related to Broadcom Corporation's Business and Industry (as of March
31, 2015)” section, many of which may be outside our control, including:
•
changes in economic conditions in the markets we address, including the continuing volatility in
the technology sector and semiconductor industry;
•
our dependence on a few significant customers and/or design wins for a substantial portion of our
revenue;
•
our exit or entry into various markets and our ability to align our resources to areas of strategic
focus;
•
changes in customer product needs and market acceptance of our products;
•
seasonality in sales of consumer and enterprise products in which our products are incorporated;
•
timing, rescheduling or cancellation of significant customer orders and our ability, as well as the
ability of our customers, to manage inventory;
•
competitive pressures and other factors such as the qualification, availability and pricing of
competing products and technologies and the resulting effects on sales and pricing of our
products;
•
goodwill and other purchased intangible impairment charges;
•
the impact of a significant natural disaster, such as an earthquake, severe weather, tsunami or
other flooding, or a nuclear crisis, as well as interruptions or shortages in the supply of utilities
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such as water and electricity, in a key location such as our corporate headquarters or our
Northern California facilities, both of which are located near major earthquake fault lines, in our
Singapore distribution center or in a key location of one of our suppliers, foundries or customers;
•
the impact of enterprise system failures or network disruptions, the lack of system redundancies,
and the potential failure of our disaster recovery planning to cover various unanticipated
occurrences; and
•
the impact of tax examinations.
We depend on a few significant customers for a substantial portion of our revenue.
We derive a substantial portion of our revenue from sales to a relatively small number of customers.
Sales to our five largest customers represented 42.1%, and 45.5% of our total net revenue in the three
months ended March 31, 2015 and 2014, respectively. Sales to two significant customers represented
26.9% and 30.2% of our total net revenue in the three months ended March 31, 2015 and 2014,
respectively. We expect that our largest customers will continue to account for a substantial portion of
our total net revenue for the foreseeable future. The loss of any significant customer could materially and
adversely affect our financial condition and results of operations. Also, as our significant customers
become larger relative to our business and the industry, they may be able to leverage pricing pressure
through the supply chain, vertical integration or other avenues, thereby adversely affecting our gross
margins. In addition, we may face onerous remedies to one or more of our largest customers if we fail to
meet our supply commitments or otherwise fail to perform our contractual obligations.
A significant portion of our revenue in any period may also depend on a single product design win with a
large customer. As a result, the loss of any such key design win or any significant delay in the ramp of
volume production of the customer’s products into which our product is designed could materially and
adversely affect our financial condition and results of operations. We may not be able to maintain sales to
certain of our key customers or continue to secure key design wins for a variety of reasons, including:
•
agreements with our customers typically do not require them to purchase a minimum quantity of
our products; and
•
our customers can stop incorporating our products into their own products with limited notice to
us and suffer little or no penalty.
Additionally, in markets where we have a strong presence, our future growth will not necessarily be
dependent on or correlate to our technical or design win success, but rather, may be dependent on (and
may be constrained by) the growth rate of the overall market for the end product devices.
The loss of a key customer or design win, a reduction in sales to any key customer, a significant delay or
negative development in our customers’ product development plans, or our inability to attract new
significant customers or secure new key design wins could seriously impact our revenue and materially
and adversely affect our results of operations.
We may fail to appropriately adjust our operations in response to changes in our strategy or
market demand.
We significantly modified the scope of our operations and workforce in recent years. In response to
changes in industry and market conditions, we may from time to time strategically realign our resources.
These circumstances could cause the need to implement restructuring actions and other cost saving
measures. Our operations are characterized by a high percentage of costs that are fixed or difficult to
reduce in the short term, such as research and development expenses related to our highly skilled
workforce.
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During other periods, our growth has placed a significant strain on our management personnel, systems
and resources. To respond to such periods of increased demand, we would need to expand, train,
manage and motivate our workforce, and to upgrade or enhance our existing IT systems. For example, in
response to prior periods of growth, we began upgrading our enterprise resource planning system and
expect to continue to do so during 2015. We may not be successful in implementing new systems,
including our new enterprise resource planning system, which could involve business disruptions,
including impeding the shipment of our products, short-term impacts to working capital and cash flow, and
potential increases to excess and obsolete inventory. If we are unable to effectively manage expanding
operations during growth periods, we may be unable to adjust our business quickly enough to meet
competitive challenges or exploit potential market opportunities.
Any of these circumstances could materially and adversely affect our current or future business.
We face intense competition.
The semiconductor industry and the wired and wireless communications markets are intensely
competitive. We expect competition to continue to increase as new markets develop, as industry
standards become well known and as other competitors enter our business. We also expect to encounter
further consolidation in the markets in which we compete.
Some of our competitors have longer operating histories and presences in key markets, greater name
recognition, larger customer bases, and significantly greater financial, research and development, sales
and marketing, manufacturing, distribution, technical and other resources than we do, and in some cases
operate their own fabrication facilities. These competitors may be able to adapt more quickly to new or
emerging technologies and changes in customer requirements. They may also be able to devote greater
resources to the promotion and sale of their products. We also face competition from newly established
competitors, suppliers of products, and customers who choose to develop their own semiconductor
solutions.
Existing or new competitors may develop technologies that more effectively address our markets with
products that offer enhanced features and functionality, lower power requirements, lower cost or greater
levels of integration. The trend of increasingly integrated SoCs and chipset solutions in particular could
pose a risk to various lines of our business, especially with respect to our connectivity products, as
customers may opt for a solution that includes functionality that was previously sourced from us on a
standalone basis.
Increased competition also has resulted in and is likely to continue to result in increased expenditures on
research and development, a decline in average selling prices, reduced gross margins and loss of market
share in certain markets. These factors in turn create increased pressure to consolidate. We cannot
provide assurance that we will be able to continue to compete successfully against current or new
competitors. If we do not compete successfully, we may lose market share in our existing markets and
our revenues may fail to increase or may decline.
We manufacture and sell complex products and may be unable to successfully develop and
introduce new products.
We expect that a high percentage of our future sales will come from sales of new products. We sell
products in markets that are characterized by rapid technological change, evolving industry standards,
frequent new product introductions and sometimes short product life cycles. The markets for some of
these products are new to us and may be immature and/or unpredictable. These markets may not
develop into profitable opportunities and we have in the past invested substantial resources in emerging
technologies that did not achieve the market acceptance or commercial success that we had expected.
As a result, it is difficult to anticipate our future revenue streams from, or the sustainability of, our new
products.
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Our industry is dynamic and we are required to devote significant resources to research and development
to remain competitive. Such costs increase with the advancement of technologies and manufacturing in
smaller geometry processes, which can adversely affect our operating margin. The development of new
silicon devices is highly complex, and due to supply chain cross-dependencies and other issues, we may
experience delays in completing the development, production and introduction of our new products. We
may choose to discontinue one or more products or product development programs to dedicate more
resources to other products. The discontinuation of an existing or planned product may adversely affect
our relationship with one or more of our customers and/or cause other negative consequences.
Our ability to successfully develop and deliver new products will depend on various factors, including our
ability to:
•
effectively identify and capitalize upon opportunities in new markets;
•
timely complete and introduce new integrated products;
•
transition our semiconductor products to increasingly smaller line width geometries;
•
obtain sufficient foundry capacity (including at smaller geometry processes) and packaging
materials;
•
license any desired third party technology or intellectual property rights; and
•
qualify and obtain industry interoperability certification of our products.
If we are not able to develop and introduce new products in a cost effective and timely manner, we will be
unable to attract new customers or to retain our existing customers which would materially and adversely
affect our results of operations.
We have experienced hardware and software defects and bugs associated with the introduction of our
highly complex products. If any of our products contain defects or bugs, or have reliability, quality,
security or compatibility problems, our reputation may be damaged and customers may be reluctant to
buy our products. These problems could interrupt or delay sales and shipments of our products to
customers. To alleviate these problems, we may have to divert our resources from other development
efforts. In addition, these problems could result in claims against us by our customers or others, including
possible claims for consequential damages and/or lost profits. As we transition to manufacturing our
products in smaller geometry processes, such as 28 nanometers and below, these risks are enhanced.
We are exposed to risks associated with our international operations.
We currently obtain substantially all of our manufacturing, assembly and testing services from suppliers
located outside the United States. Products shipped to destinations outside the United States, primarily
in Asia, represented 95.4% and 95.7% of our product revenue in the three months ended March 31, 2015
and 2014, respectively. Substantially all of our products are shipped through our logistical facilities in
Singapore. An increasing portion of our product sales is made through distributors, which increases our
exposure to the risks described below. In addition, we undertake various sales and marketing activities
through regional offices in a number of countries. We intend to continue expanding our business activities
outside the United States and to open other design and operational centers abroad.
International operations are subject to many inherent risks, including but not limited to:
•
political, social and economic instability;
•
exposure to different business practices and legal and compliance standards;
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•
continuation of overseas conflicts and the risk of terrorist attacks and resulting heightened
security;
•
the imposition of governmental controls and restrictions and unexpected changes in regulatory
requirements;
•
nationalization of business and blocking of cash flows;
•
logistical delays or disruptions;
•
changes in taxation and tariffs; and
•
difficulties in staffing and managing international operations.
Our operations are subject to increasingly complex foreign and U.S. laws and regulations, including but
not limited to anti-corruption laws, such as the Foreign Corrupt Practices Act and the UK Bribery Act and
equivalent laws in other jurisdictions, antitrust or competition laws, and data privacy laws, among others.
Violations of these laws and regulations could result in fines and penalties, criminal sanctions against us,
our officers, or our employees, prohibitions on the conduct of our business and on our ability to offer our
products and services in one or more countries, and could also materially affect our reputation, our
expansion efforts, our ability to attract and retain employees, our business, and our operating results.
Although we have implemented policies, procedures and training designed to ensure compliance with
these laws and regulations, there can be no complete assurance that any individual employee, contractor,
or agent will not violate our policies. Additionally, the costs of complying with these laws (including the
costs of investigations, auditing and monitoring) could also adversely affect our current or future business.
Economic conditions in our primary markets, particularly in Asia, may negatively impact the demand for
our products in those geographies. Also, all of our sales to date have been denominated in U.S. dollars.
Accordingly, an increase in the value of the U.S. dollar relative to foreign currencies could make our
products less competitive in foreign markets or require us to assume the risk of denominating certain
sales in foreign currencies. We anticipate that these factors will impact our business to a greater degree
as we further expand our business activities.
Our operating results may be adversely impacted by worldwide economic uncertainties and
specific conditions in the markets we address.
We operate primarily in the semiconductor industry, which is cyclical and subject to rapid change and
evolving industry standards. From time to time, the semiconductor industry has experienced significant
downturns characterized by decreases in product demand, excess customer inventories and accelerated
erosion of prices. The semiconductor industry also periodically experiences increased demand and
production capacity constraints, which may affect our ability to ship products. Economic volatility can
cause extreme difficulties for our customers and vendors in accurately forecasting and planning future
business activities. This unpredictability could cause our customers to reduce spending on our products
and services, which would delay and lengthen sales cycles. Furthermore, during challenging economic
times our customers and vendors may face challenges in gaining timely access to sufficient credit, which
could impact their ability to make timely payments to us. As a result, we may experience growth patterns
that are different than the demand for our customers’ products, particularly during periods of high
volatility.
We cannot predict the timing, strength or duration of any economic slowdown or recovery or the impact of
such events on our customers, our vendors or us. The combination of our lengthy sales cycle coupled
with challenging macroeconomic conditions and supply chain cross-dependencies could have a
compound impact on our business. The impact of market volatility is not limited to revenue but may also
affect our gross margins and other financial metrics. Any downturn in the semiconductor industry may be
severe and prolonged, and any failure of the industry or wired and wireless communications markets to
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fully recover from downturns could seriously impact our revenue and harm our business, financial
condition and results of operations.
We may be unable to attract, retain or motivate key personnel.
Our future success depends on our ability to attract, retain and motivate senior management and qualified
technical personnel. Competition for these employees is intense. If we are unable to attract, retain and
motivate such personnel in sufficient numbers and on a timely basis, we will experience difficulty in
implementing our current business and product plans. In that event, we may be unable to successfully
meet competitive challenges or to exploit potential market opportunities, which could adversely affect our
business and results of operations. Our recent and any future restructuring plans may adversely impact
our ability to attract and retain key employees.
Our stock price is highly volatile.
The market price of our Class A Common Stock has fluctuated substantially in the past and is likely to
continue to be highly volatile and subject to wide fluctuations. From January 1, 2012 through March 31,
2015 our Class A Common Stock has traded at prices as low as $23.25 and as high as $46.31 per share.
Fluctuations have occurred and may continue to occur in response to various factors, many of which we
cannot control.
In addition, the market prices of securities of semiconductor and other technology companies have been
and remain volatile. 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. If our operating results do not meet the expectations of securities analysts or investors, who
may derive their expectations by extrapolating data from recent historical operating results, our financial
forecasts, or company presentations, then the market price of our Class A Common Stock will likely
decline. Accordingly, you may not be able to resell your shares of Common Stock at or above the price
you paid. In the past, we, and other companies that have experienced volatility in the market price of their
securities, have been the subject of securities class action litigation.
Due to the nature of our compensation programs, most of our executive officers sell shares of our
Common Stock periodically, often pursuant to trading plans established under Rule 10b5-1 of the
Securities Exchange Act of 1934, as amended. As a result, sales of shares by our executive officers may
not be indicative of their respective opinions of Broadcom’s performance at the time of sale or of our
potential future performance. Nonetheless, the market price of our stock may be affected by sales of
shares by our executive officers.
Our business is subject to potential tax liabilities.
We are subject to income taxes in the United States and various foreign jurisdictions. The amount of
income taxes we pay is subject to our interpretation and application of tax laws in jurisdictions in which we
file. Changes in current or future laws or regulations, the imposition of new or changed tax laws or
regulations or new related interpretations by taxing authorities in the U.S. or foreign jurisdictions, or
changes in our tax planning strategies could adversely affect our results of operations and could lead to
volatility with respect to tax expenses and liabilities from period to period. We are subject to examinations
and tax audits. There can be no assurance that the outcomes from these audits will not have an adverse
effect on our net operating loss and research and development tax credit carryforwards, our financial
position, or our operating results.
We may be required to defend against alleged infringement of intellectual property rights of others
and/or may be unable to adequately protect or enforce our own intellectual property rights.
Companies in the semiconductor industry, particularly those in the wired and wireless communications
markets, aggressively protect and pursue their intellectual property rights. From time to time, we receive
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notices from competitors and other operating companies, as well as notices from “non-practicing entities”
("NPEs"), that claim we have infringed upon, misappropriated or misused other parties’ proprietary rights.
We may also be required to indemnify some customers and strategic partners under our agreements if a
third party alleges or if a court finds that our products or activities have infringed upon, misappropriated or
misused another party’s proprietary rights. We have received requests from certain customers and
strategic partners to include increasingly broad indemnification provisions in our agreements with them.
Additionally, our products may contain technology provided to us by other parties such as contractors,
suppliers or customers. We may have little or no ability to determine in advance whether such technology
infringes the intellectual property rights of a third party. Our contractors, suppliers and licensors may not
be required to indemnify us in the event that a claim of infringement is asserted against us, or they may
be required to indemnify us only up to a maximum amount, above which we would be responsible for any
further costs or damages.
Furthermore, our success and future revenue growth will depend, in part, on our ability to protect our
intellectual property. It is possible that competitors or other unauthorized third parties may obtain, copy,
use or disclose our technologies and processes, or confidential employee, customer or supplier data. Any
of our existing or future patents may be challenged, invalidated or circumvented. We engage in litigation
to enforce or defend our intellectual property rights, protect our trade secrets, or determine the validity
and scope of the proprietary rights of others, including our customers. We also enter into confidentiality
agreements with our employees, consultants and strategic partners and control access to and distribution
of our technologies, documentation and other proprietary information. Despite these efforts, internal or
external parties may attempt to copy, disclose, obtain or use our products, services or technology without
our authorization. If we cannot adequately protect our technology, our competitors may be able to offer
products similar to ours.
Intellectual property litigation can be expensive, time consuming and distracting to management. An
adverse determination in any of these types of disputes could prevent us from manufacturing or selling
some of our products or could prevent us from enforcing our intellectual property rights. Settlements can
involve royalty or other payments that could reduce our profit margins and adversely affect our financial
results. Additionally, identifying unauthorized use of our products and technologies is difficult and time
consuming. The initiation of litigation may adversely affect our relationships and agreements with certain
customers that have a stake in the outcome of the litigation proceedings.
We face risks associated with our acquisition strategy.
An important element of our business strategy involves expansion through the acquisition of businesses,
assets, products or technologies. The expansion of our business through acquisitions allows us to
complement our existing product offerings, expand our market coverage, increase our engineering
workforce and/or enhance our technological capabilities. We may not be able to identify or consummate
future acquisitions or realize the desired benefit from these acquisitions.
We face a number of challenges associated with our acquisition strategy that could disrupt our ongoing
business and distract our management team, including:
•
lower revenue, gross margins and operating income than originally anticipated at the time of
acquisition and other financial challenges;
•
delays in the timing and successful integration of an acquired company’s technologies and/or
launch of products;
•
the loss of key personnel;
•
challenges in obtaining necessary transition services; and
•
becoming subject to intellectual property or other litigation.
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Acquisitions can result in increased debt or contingent liabilities. While we believe we will be able to
service any additional debt issued in connection with acquisitions, our ability to make principal and
interest payments when due depends upon our future performance, which is subject to general economic
conditions, industry cycles, and business and other factors affecting our operations, including the other
risk factors described in this section, many of which are beyond our control. Acquisitions can also result in
adverse tax consequences, warranty or product liability exposure related to acquired assets, additional
stock-based compensation expense, write up of acquired inventory to fair value, and the recording and
later amortization of amounts related to certain purchased intangible assets, all of which can adversely
affect our reported results on a U.S. GAAP basis. Furthermore, we have in the past and may in the future
record goodwill and other purchased intangible assets in connection with an acquisition and incur
impairment charges.
We are subject to order and shipment uncertainties.
It is difficult to accurately predict demand for our semiconductor products. We typically sell products
pursuant to purchase orders rather than long-term purchase commitments. Customers can generally
cancel, change or defer purchase orders on short notice without incurring a significant penalty. Our ability
to accurately forecast customer demand is further impaired by delays inherent in our lengthy sales cycle.
We operate in a dynamic industry and use significant resources to develop new products for existing and
new markets. After we have developed a product, there is no guarantee that our customers will integrate
our product into their equipment or devices and, ultimately, bring those equipment and devices
incorporating our product to market. In these situations, we may never produce or deliver a significant
number of our products, even after incurring substantial development expenses. From the time a
customer elects to integrate our solution into their product, it is typically six to 24 months before high
volume production of that product commences. After volume production begins, we cannot be assured
that the equipment or devices incorporating our product will gain market acceptance.
Our products are incorporated into complex devices and systems, creating supply chain crossdependencies. Accordingly, supply chain disruptions affecting components of our customers’ devices
and/or systems could negatively impact the demand for our products, even if the supply of our products is
not directly affected.
Our product demand forecasts are based on multiple assumptions, each of which may introduce error into
our estimates. In the event we overestimate customer demand, we may allocate resources to
manufacturing products that we may not be able to sell. As a result, we could hold excess or obsolete
inventory, which would reduce our profit margins and adversely affect our financial results. Conversely, if
we underestimate customer demand or if insufficient manufacturing capacity is available, we could forego
revenue opportunities and potentially lose market share and damage our customer relationships. Also,
due to our industry’s use of “just-in-time” inventory management, any disruption in the supply chain could
lead to more immediate shortages in product or component supply. Additionally, any enterprise system
failures, including in connection with implementing our new enterprise resource planning system and/or
other new systems, could impact our ability to fulfill orders and interrupt other processes.
A portion of our inventory is maintained under hubbing and distribution arrangements whereby products
are delivered to a customer or third party warehouse based upon the customer’s projected needs. Under
these arrangements, we do not recognize product revenue until the customer reports that it has removed
our product from the warehouse to incorporate into its end products. Our ability to effectively manage
inventory levels may be impaired under such arrangements, which could increase expenses associated
with insurance costs, excess and obsolete product inventory and negatively impact our cash flow.
We depend on third parties to fabricate, assemble and test our products.
As a fabless semiconductor company, we do not own or operate fabrication, assembly or test facilities.
As a result, we face competition for manufacturing capacity in the open market. We rely on third parties
to manufacture, assemble and test substantially all of our semiconductor devices. Accordingly, we cannot
directly control our product delivery schedules and quality assurance. This lack of control could result in
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product shortages or quality assurance problems. These issues could delay shipments of our products or
increase our assembly or testing costs. In addition, the consolidation of foundry subcontractors, as well as
the increasing capital intensity and complexity associated with fabrication in smaller process geometries
has limited our diversity of suppliers and increased our risk of a “single point of failure.” Specifically, as
we move to smaller geometries, we have become increasingly reliant on TSMC (Taiwan Semiconductor
Manufacturing Company) for the manufacture of product at and below 40 nanometers. The lack of
diversity of suppliers could also drive increased wafer prices and adversely affect our results of
operations, including our gross margins.
We do not have long-term agreements with any of our direct or indirect suppliers, including our
manufacturing, assembly or test subcontractors. We typically procure services from these suppliers on a
per order basis. In the event our third-party foundry subcontractors experience a disruption or limitation of
manufacturing, assembly or testing capacity, we may not be able to obtain alternative manufacturing,
assembly and testing services in a timely manner, or at all. Furthermore, our foundries must have new
manufacturing processes qualified if there is a disruption in an existing process, which could be timeconsuming. We could experience significant delays in product shipments if we are required to find
alternative manufacturers, assemblers or testers for our products. We are continuing to develop
relationships with additional third-party subcontractors to assemble and test our products.
Because we rely on outside foundries and other third party suppliers, we face several significant risks in
addition to those discussed above, including:
•
a lack of guaranteed supply of wafers and other components and potential higher wafer and
component prices due to supply constraints;
•
the limited availability of, or potential delays in obtaining access to, key process technologies; and
•
the location of foundries and other suppliers in regions that are subject to earthquakes, tsunamis
and other natural disasters.
The manufacture of integrated circuits is a highly complex and technologically demanding process. Our
foundries have from time to time experienced lower than anticipated manufacturing yields. This often
occurs during the production of new products or the installation and start-up of new process technologies.
In addition, we are dependent on our foundry subcontractors to successfully transition to smaller
geometry processes.
Our systems are subject to security breaches and other cybersecurity incidents.
We experience cyber attacks of varying degrees on a regular basis, and as a result, unauthorized parties
have obtained, and may in the future obtain, access to our computer systems and networks. Such cyber
attacks could result in the misappropriation of our proprietary information and technology or interrupt our
business. The reliability and security of our information technology infrastructure and software and our
ability to expand and continually update technologies in response to our changing needs is critical to our
business. To the extent that any disruptions or security breaches result in significant loss or damage to
our data, or inappropriate disclosure of significant proprietary information, it could cause damage to our
reputation and affect our relationships with our customers and ultimately harm our business.
Government regulation may adversely affect our business.
The effects of regulation on our customers or the industries in which they operate may materially and
adversely impact our business. For example, regulatory policies of the Federal Communications
Commission that affect the ability of cable or satellite operators or telephone companies to offer certain
services to their customers could impede sales of our products in the United States. We and our
customers are also subject to various import and export laws and regulations that apply to the encryption
or other features contained in some of our products. If we fail to continue to comply with these
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regulations, we may be unable to manufacture the affected products at foreign foundries or ship these
products to certain customers, or we may incur penalties or fines.
As described above under the risk factor entitled “We are exposed to risks associated with our
international operations,” our business is also increasingly subject to complex foreign and U.S. laws and
regulations, including but not limited to, anti-corruption laws, such as the Foreign Corrupt Practices Act
and the UK Bribery Act and equivalent laws in other jurisdictions, antitrust or competition laws, and data
privacy laws, among others. Foreign governments may also impose tariffs, duties and other import
restrictions on components that we obtain from non-domestic suppliers and may impose export
restrictions on products that we sell internationally. These tariffs, duties or restrictions could materially and
adversely affect our business, financial condition and results of operations.
Our product or manufacturing standards could also be impacted by new or revised environmental rules
and regulations or other social initiatives. For instance, the SEC requires disclosures relating to the
sourcing of certain minerals from the Democratic Republic of Congo and adjoining countries. Those rules,
or similar rules that may be adopted in other jurisdictions, could adversely affect our costs, the availability
of minerals used in our products and our relationships with customers and suppliers.
Our future ability to return capital to shareholders in the form of dividends or share repurchases
may be impacted by the availability of U.S. cash.
Given that the majority of our cash is generated overseas, we may be limited in our ability to consistently
increase or maintain the level of capital return in the form of dividends or share repurchases. In January
2010, our Board adopted a dividend policy pursuant to which Broadcom would pay quarterly dividends on
our Common Stock. From 2011 through 2014 and again in 2015 our Board of Directors increased the
quarterly dividend payment. We cannot provide assurance that we will continue to increase our dividend
payment or declare dividends in any particular amounts or at all.
Our Board has also approved various share repurchase programs, including a program authorizing the
repurchase of up to $1 billion in 2015.
Future dividends and the amount of share repurchases may be affected by, among other factors:
•
use of cash to consummate various transactions;
•
our views on potential future capital requirements for investments in acquisitions and the funding
of our research and development;
•
changes in federal and state income tax laws or corporate laws; and
•
changes to our business model.
A reduction in our dividend payments or amount of shares repurchased could have a negative effect on
our stock price.
Our articles of incorporation and bylaws contain anti-takeover provisions.
Our articles of incorporation and bylaws contain provisions that could make it more difficult for a third
party to acquire a majority of our outstanding voting stock. For example, our Board may issue shares of
Class B Common Stock in connection with certain acquisitions, which shares have superior voting rights
entitling the holder to ten votes for each share held on matters that we submit to a shareholder vote (as
compared to one vote per share in the case of our Class A Common Stock). Furthermore, our Board has
the authority to fix the rights and preferences of shares of our preferred stock and to issue shares of
common or preferred stock without a shareholder vote. These provisions, among others, may discourage
certain types of transactions involving an actual or potential change in our control.
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Our co-founders and their affiliates may strongly influence the outcome of matters that require the
approval of our shareholders.
As of March 31, 2015 our co-founders, directors, executive officers and their respective affiliates
beneficially owned 8.7% of our outstanding Common Stock and held 47.3% of the total voting power held
by our shareholders. As a result, the voting power of these shareholders may strongly influence the
outcome of matters that require the approval of our shareholders, including the election of our Board of
Directors and certain significant corporate transactions. In particular, as of March 31, 2015 our two
founders, Dr. Henry T. Nicholas III and Dr. Henry Samueli, beneficially owned a total of 8.2% of our
outstanding Common Stock and held 47.1% of the total voting power held by our shareholders. Because
of their significant voting stock ownership, we may not be able to engage in certain transactions, and our
shareholders may not be able to effect certain actions or transactions, without the approval of one or both
of these shareholders. In addition, repurchases of shares of our Class A Common Stock under our share
repurchase program would result in an increase in the total voting power of our co-founders, directors,
executive officers and their affiliates, as well as other continuing shareholders.
II.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (AS OF MARCH
31, 2015)
2.1
Interest Rate Risk
We manage our total portfolio to encompass a diversified pool of investment-grade securities to preserve
principal and maintain liquidity. The average credit rating of our marketable securities portfolio by major
credit rating agencies was Aa3/AA-. Investments in both fixed rate and floating rate instruments carry a
degree of interest rate risk. Fixed rate securities may have their market value adversely impacted due to
an increase in interest rates, while floating rate securities may produce less income than expected if
interest rates fall. Due in part to these factors, our future investment income, net, may fall short of
expectations due to changes in interest rates or if the decline in fair value of our publicly traded fixed
income investments is judged to be other-than-temporary. We may suffer losses in principal if we are
forced to sell securities that have declined in market value due to changes in interest rates. However,
because any fixed income securities we hold are classified as available-for-sale, no gains or losses are
realized in the income statement due to changes in interest rates unless such securities are sold prior to
maturity or unless declines in value are determined to be other-than-temporary. These securities are
reported at fair value with the related unrealized gains and losses included in accumulated other
comprehensive loss, a component of shareholders’ equity, net of tax.
To assess the interest rate risk associated with our investment portfolio, we performed a sensitivity
analysis to determine the impact a change in interest rates would have on the value of the investment
portfolio assuming a 100 basis point parallel shift in the yield curve. Based on investment positions as of
March 31, 2015, a 100 basis point increase in interest rates across all maturities would result in a $36
million incremental decline in the fair market value of the portfolio. Such losses would only be realized if
we sold the investments prior to maturity.
Actual future gains and losses associated with our investments may differ from the sensitivity analysis
performed as of March 31, 2015 due to the inherent limitations associated with predicting the changes in
the timing and level of interest rates and our actual exposures and positions.
A hypothetical increase of 100 basis points in short-term interest rates would not have a material impact
on our revolving credit facility, which bears a floating interest rate. This sensitivity analysis assumes all
other variables will remain constant in future periods.
Our senior unsecured notes bear fixed interest rates, and therefore, would not be subject to interest rate
risk.
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2.2
Exchange Rate Risk
We consider our direct exposure to foreign exchange rate fluctuations to be minimal. Currently, sales to
customers and arrangements with third-party manufacturers provide for pricing and payment in United
States dollars and, therefore, are not subject to exchange rate fluctuations. Increases in the value of the
United States’ dollar relative to other currencies could make our products more expensive, which could
negatively impact our ability to compete. Conversely, decreases in the value of the United States dollar
relative to other currencies could result in our suppliers raising their prices to continue doing business with
us. Our direct exposure to foreign exchange rate fluctuations is limited primarily to employee costs for
employees based outside of the U.S, as well as financial assets denominated in foreign currencies.
Fluctuations in currency exchange rates could affect our business in the future.
SECTION B — SUPPLEMENTAL INFORMATION CONCERNING BROADCOM CORPORATION AND
THE IESPP
I.
THE OUTLINE
1.1
Purpose of IESPP
The purpose of the IESPP is to promote the interests of Broadcom by providing eligible employees of
certain of its foreign subsidiaries and affiliates with the opportunity to acquire a proprietary interest in the
Corporation through participation in a payroll-deduction based employee stock purchase plan.
1.2
Common Stock Offered under the IESPP
The IESPP share reserve is shared with the U.S. ESPP. A total of 2,500,000 shares of Class A Common
Stock were reserved for issuance under the IESPP when originally adopted. Since the IESPP was
originally adopted an additional 10,368,134 shares of Class A Common Stock have been reserved for
issuance under the IESPP.
On the first trading day of January of each calendar year, the aggregate number of shares of Class A
Common Stock reserved for issuance under the IESPP and the U.S. ESPP is automatically increased
under an evergreen provision by an amount equal to one and a quarter percent (1.25%) of the aggregate
number of shares of Class A Common Stock and Class B Common Stock outstanding on the last trading
day of December of the immediately preceding calendar year, but in no event shall any such annual
increase exceed 10,000,000 shares of Class A Common Stock in the aggregate. The number of shares of
Class A Common Stock increased by the evergreen provision are either earmarked for the U.S. ESPP or
the IESPP each year (or both). On January 2, 2015 the number of shares of Class A Common Stock was
increased under the evergreen provision and 1,497,269 shares of Class A Common Stock were
earmarked for the IESPP.
1,555,759 shares of Class A Common Stock were purchased under the IESPP in 2014 and as of March
31, 2015, an aggregate amount of 7,669,532 shares of Class A Common Stock had been purchased
under the IESPP since its inception bringing the total number of shares of Class A Common Stock
reserved for future issuance to 5,198,602. The current number of shares of Class A Common Stock
reserved under the IESPP 12,868,134 represents approximately 2.15% of the 597,625,298 shares of
Common Stock outstanding as of March 31, 2015. Such number is subject to adjustments effected in
accordance with the IESPP. Each share of Class A Common Stock has a par value of $0.0001.
Enrollment by an eligible employee in the IESPP with respect to an Offering Period will constitute the
grant (as of the Start Date or the Quarterly Entry Date) by the Corporation to such employee of a right to
purchase on the Purchase Date up to that number of shares of Class A Common Stock determined by
dividing (a) the amount accumulated in such Participant’s payroll deduction account (as defined in
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Section 1.4 below) during such Purchase Interval by (b) the lower of (i) eighty-five percent (85%) of the
Fair Market Value of a share of Class A Common Stock on the Entry Date (but in no event less than the
par value of a share), or (ii) eighty-five percent (85%) of the Fair Market Value per share of Class A
Common Stock on the Purchase Date (but in no event less than the par value of a share). However, the
number of shares of Class A Common Stock subject to any purchase right granted pursuant to the IESPP
shall not exceed $25,000 in Fair Market Value, determined as of the Entry Date (or such other limit as
may be imposed by the U.S. Internal Revenue Code) for each calendar year in which the right is
outstanding. The maximum number of shares purchasable per Participant shall not exceed 9,000 shares
of Class A Common Stock with respect to the applicable Purchase Date or 5,000,000 shares of Class A
Common Stock in the aggregate by all Participants in the IESPP and the U.S. ESPP with respect to the
applicable Purchase Date.
Subject to any required action by the shareholders of the Corporation, the number of shares of Class A
Common Stock covered by each purchase right under the IESPP which has not yet been exercised and
the number of shares of Class A Common Stock which have been authorized for issuance under the
IESPP but have not yet been issued, as well as the price per share covered by each purchase right under
the IESPP which has not yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued and outstanding shares of Class A Common Stock resulting from a
stock split, stock dividend, recapitalization, combination of shares, change of shares or other changes
affecting the outstanding Class A Common Stock as a class without receipt of any consideration by the
Corporation. Such adjustment shall be made by the Plan Administrator, whose determination shall be
final, binding and conclusive. Except as expressly provided in the IESPP, no issue by the Corporation of
shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price of shares of Class A
Common Stock subject to a purchase right.
1.3
Purchase Interval
The IESPP is comprised of a series of successive 24-month long Offering Periods unless the Plan
Administrator determines that a shorter period, or longer period not to exceed 27 months will apply with
respect to one or more Offering Periods. Each Offering Period is comprised of four successive six month
Purchase Intervals commencing on the first U.S. business day in May and November of each year and
ending on the last business day of April and October of each year. During each Purchase Interval, payroll
deductions or contributions of the Participants are accumulated under the IESPP. The Plan Administrator
has the power to change the duration of Offering Periods; however no Offering Period shall exceed 24
months except as otherwise provided in the IESPP.
Should the Fair Market Value (as defined in Section 1.4 below) on any Purchase Date within an Offering
Period be less than the Fair Market Value per share of Class A Common Stock on the Start Date of that
particular Offering Period, then such Offering Period will automatically terminate after the Purchase Date
and a new Offering Period will begin on the next business date following such Purchase Date.
Any funds accumulated in the Participants’ account during the Purchase Interval will be applied to the
purchase of shares of Class A Common Stock on the Purchase Date. The Participant will not need to file
any additional forms with the Corporation to be automatically enrolled in the subsequent Purchase
Interval and/or Offering Period.
1.4
Purchase Price
The Purchase Price per share at which a share will be purchased in any Offering Period shall be eightyfive percent (85%) of the lesser of: (a) the Fair Market Value on the applicable Entry Date; or (b) the Fair
Market Value on the Purchase Date.
For purposes of the IESPP, the term “Fair Market Value” on a given date (assuming the shares of Class A
Common Stock are quoted on the Nasdaq) is the closing price of a share of Class A Common Stock on
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the Nasdaq at the close of regular trading hours on the date of determination as reported by the Nasdaq
on its website (www.nasdaq.com) or such other source the Plan Administrator deems reliable.
1.5
Purchase of Common Stock
On each Purchase Date, so long as the IESPP remains in effect and provided that the Participant has
not, in the time and manner prescribed by the Corporation, withdrawn from the IESPP (either expressly or
by reducing his or her payroll deductions to zero percent (0%) (in which case all funds accumulated in the
account maintained on behalf of the Participant will promptly be returned to the Participant), the
Corporation will apply the Participant’s payroll deductions (as converted into U.S. dollars) for the
Purchase Interval ending on such Purchase Date to the purchase of whole shares of Class A Common
Stock at the Purchase Price in effect for Participant on that Purchase Date. The Purchase Price per
share is as specified in Section 1.4 above. Any payroll deductions remaining in a Participant’s account
after such purchase of shares of Class A Common Stock will be refunded to such Participant in the
currency in which it was paid by the Participant’s employer, without interest unless local law requires the
payment of interest. In the event that the IESPP has been oversubscribed, all funds not used to purchase
shares of Class A Common Stock on the Purchase Date will be returned to the Participant, without
interest unless local law requires the payment of interest. No shares of Class A Common Stock will be
purchased on a Purchase Date on behalf of any employee whose participation in the IESPP has
terminated prior to such Purchase Date.
1.6
Term of the IESPP
The IESPP will continue until the earlier to occur of (a) termination by the Board (which termination may
be effected by the Board at any time), (b) the date on which all shares available for issuance under the
IESPP and the U.S. Plan shall have been sold pursuant to purchase rights exercised under the Plan or,
(c) the date in which all the purchase rights are exercised with respect to a Change of Control (as defined
in the IESPP) or (d) May 15, 2022.
1.7
Termination or Amendment of the IESPP
The Board may alter, amend, suspend or terminate the IESPP at any time, provided that any amendment
or alteration shall not adversely affect the rights and obligations with respect to purchase rights previously
granted under the IESPP unless the Participant consents to such amendment or alteration. However, in
no event may the Board effect any amendments or revisions to the IESPP without the approval of the
Corporation’s shareholders to the extent any such amendment or revision would require shareholder
approval under any applicable law, rule or regulation.
II.
ELIGIBILITY
2.1
Eligible Employees
Any employee of one of the Corporation’s foreign subsidiaries (unless such subsidiary is excluded by the
Plan Administrator or its delegate) is eligible to participate in an Offering Period under the IESPP
excepting employees who own stock or hold purchase rights to purchase Class A Common Stock
possessing five percent (5%) or more of the total combined voting power or value of all classes of
common stock of the Corporation or any of its subsidiaries.
2.2
Participation of Eligible Employees
Eligible employees may become Participants in an Offering Period under the IESPP by completing the
Enrollment Documents and filing such documents with the Plan Administrator before the next Quarterly
Entry Date. Eligible Employees may submit Enrollment Documents to the Plan Administrator at any time
but such Enrollment Documents will not become effective and the eligible employee will not become a
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Participant until the next Quarterly Entry Date. Once an employee becomes a Participant in an Offering
Period, such Participant will automatically participate in the Offering Period commencing immediately
following the last day of the prior Offering Period unless the Participant withdraws or is deemed to
withdraw from the IESPP or terminates further participation in the IESPP as set forth in Section 2.4 below.
Such Participant is not required to file any Enrollment Documents in order to continue participation in the
IESPP.
2.3
Payroll Deductions
The contributions used to pay the Purchase Price for the shares of Class A Common Stock generally are
accumulated by regular payroll deductions made during each Purchase Interval. In locations where local
law prohibits payroll deductions, an eligible employee may elect to participate through contributions to his
account under the IESPP in a form acceptable to the Plan Administrator. The deductions or contributions
are made as a percentage of the Participant’s Cash Earnings in one percent (1%) increments not less
than one percent (1%), nor greater than fifteen percent (15%) or such lower limit set by the Plan
Administrator.
“Cash Earnings” for purposes of the IESPP means the base salary payable to a Participant by one or
more Participating Corporations during such individual’s participation in one or more Offering Periods
under the IESPP plus such additional items of compensation as the Plan Administrator may deem
appropriate.
Payroll deductions or contributions will commence on the first payday of the Purchase Interval and shall
continue to the end of the Offering Period unless sooner altered or terminated as provided in the IESPP.
Payroll deductions shall be collected in the currency in which paid by the Participating Corporation and
converted into U.S. Dollars on each Purchase Date on the basis of the exchange rate in effect for such
date. The Plan Administrator has the absolute discretion to determine the applicable exchange rate to be
in effect for each Purchase Date by any reasonable method. Any changes or fluctuation in the exchange
rate at which the payroll deductions collected on the Participant’s behalf are converted into U.S. Dollars
shall be borne solely by the Participants.
2.4
Withdrawal from IESPP/Termination of Purchase Right
Each Participant may withdraw from a Purchase Interval under the IESPP by either reducing his or her
payroll deductions to zero percent (0%) or by expressly withdrawing from the IESPP, in either case, by
filing the appropriate form with the Plan Administrator (or its designate). The withdrawal will be deemed to
occur on the date the Participant files the appropriate form with the Plan Administrator (or its designate).
Such withdrawal may be elected at any time. The accumulated payroll deductions shall at the
Participant’s election be promptly refunded without interest unless local law requires the payment of
interest, and the employee’s participation in the IESPP will terminate. In the event a Participant voluntarily
elects to withdraw from the IESPP, he or she may not resume his or her participation in the IESPP during
the same Purchase Interval, but he or she may participate in any Purchase Interval under the IESPP
which commences on a date subsequent to such withdrawal by executing a new authorization for payroll
deductions and submitting new Enrollment Documents to the Plan Administrator before the next Quarterly
Entry Date. If a Participant reenrolls in the Offering Period during which he or she withdrew from the
IESPP, the Quarterly Entry Date on which the Participant reenrolls in the IESPP will be the Participant’s
new Entry Date for the Offering Period, and the Fair Market Value per shares of Class A Common Stock
on the new Entry Date will be used to determine the maximum price per share for any shares acquired by
such Participant in the Offering Period subsequent to such Entry Date.
A Participant may decrease the rate of payroll deductions or contributions during an Offering Period at
any time by filing the appropriate form with the Plan Administrator. The reduced rate shall become
effective on the first payday of the month following the month in which such form is filed, or if later, the
first payday that is at least seven days after the date on which such form is filed. There is no limit as to
the number of reductions a Participant may effect during a Purchase Interval. The Participant may not
increase his or her rate of payroll deduction to be in effect for an Offering Period at any time after the
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Start Date of such Offering Period. The Participant can only increase his or her rate of payroll deductions
prior to the Start Date of the next Offering Period. The increased rate shall become effective on the Start
Date of the new Offering Period, provided, however, that if a Participant withdraws from an Offering
Period and later reenrolls in that same Offering Period, the Participant can reenroll with a higher (or
lower) payroll deduction rate than that applicable to the original participation.
All payroll deductions or contributions are credited to the Participant’s account under the IESPP and are
deposited with the general funds of the Participating Corporation, unless otherwise required by local law.
No interest accrues on the payroll deductions or contributions unless local law requires that payroll
deductions or contributions be held in an interest-bearing account. All payroll deductions or contributions
received or held by the Participating Corporation may be used by the Participating Corporation for any
corporate purpose, and the Participating Corporation will not be obligated to segregate such payroll
deductions or contributions unless segregation of accounts is required by local law.
2.5
Termination of Employment of Participants
Termination of a Participant’s employment for any reason, including death, disability or a change of
status, with the Corporation or a Participating Corporation immediately terminates his or her participation
in the IESPP. In such event, the funds credited to the Participant’s account will be returned to him or her
or, in the case of his or her death, to his or her legal representative, without interest unless local law
requires the payment of interest. For purposes of this Section 2.5, an employee will not be deemed to
have terminated employment or failed to remain in the continuous employ of the Corporation or of a
Participating Corporation by reason of an approved unpaid leave of absence; provided that such leave is
for a period of not more than three months, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute or unless provided otherwise pursuant to formal policy adopted from
time to time by the Corporation. Participants who take such a leave and who do not formally withdraw
from the IESPP shall be considered to remain enrolled in the Offering Period in which they take such
leave, unless and until such Participant withdraws from the IESPP. During such period of unpaid leave,
the Participant may, upon his or her election, withdraw all the payroll deductions collected to date on his
or her behalf or have such funds held for the purchase of Class A Common Stock on the next Purchase
Date; however, in no event shall further payroll deductions be collected on his or her behalf during such
leave unless required to comply with local law. Upon the Participant’s return to service within three
months following the commencement of such leave or prior to the expiration of any longer period the
Participant is guaranteed by either statute or contract, his or her payroll deductions under the IESPP will
automatically resume at the rate in effect at the time of the leave unless the Participant withdraws or
reduces the rate of deductions prior to his or her return. If the Participant does not make an election, as a
default, the Corporation will use the funds accumulated at the time of the leave to purchase shares of
Class A Common Stock on his or her behalf on the next Purchase Date unless the Participant withdraws
from the IESPP prior to the Purchase Date.
III.
DELIVERY AND SALE OF THE SHARES OF COMMON STOCK
As promptly as practicable after the Purchase Date, the Corporation will issue shares of Class A Common
Stock for the Participant’s benefit representing the Class A Common Stock purchased on the applicable
Purchase Date.
During a Participant’s lifetime, his or her purchase rights under the IESPP is exercisable only by him or
her. The Participant will have no interest or voting right in shares of Class A Common Stock covered by
his or her purchase right until such purchase right has been exercised.
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IV.
RIGHTS RELATED TO THE SHARES
4.1
Type and the Class of the Securities Being Offered, Including the Security Identification
Code
As of March 31, 2015, Broadcom was authorized to issue 2,500,000,000 shares of Class A Common
Stock, 400,000,000 shares of Class B Common Stock, and 6,432,161 shares of preferred stock, par
value $0.0001 per share. As of the same date, there were 548,404,747 shares of Class A Common
Stock outstanding and 49,220,551 shares of Class B Common Stock outstanding and no shares of
preferred stock outstanding.
Broadcom’s Class A Common Stock including any Class A Common Stock that may be issued or
purchased pursuant to the IESPP, is listed on the Nasdaq under the symbol “BRCM.” The CUSIP
number for the Class A Common Stock is 111320107. The Class B Common Stock is not listed on any
stock market or exchange.
4.2
Legislation Under Which the Securities Have Been Created
The shares of Class A Common Stock were created under the Cal. Corp. Code. Except as otherwise
expressly required under the laws of a country, the IESPP and all rights thereunder shall be governed by
and construed in accordance with the laws of the State of California, United States of America (except its
choice of law provisions) and applicable U.S. Federal laws.
4.3
Form of Securities, Name and Address of the Entity in Charge of Keeping the Records
In general, shareholders may hold shares of Class A Common Stock either in certificated, direct
registration or street name form, that is held in the name of a brokerage firm, bank or other nominee. The
records are kept by Broadcom’s transfer agent and registrar, Computershare Trust Company, N.A.
Computershare can be contacted through the internet at: www.computershare.com/investor, by telephone
at 1-800-962-4284 or for international callers at +1-781-575-2000, or by first class/registered/certified mail
at: P.O. Box 30170, College Station, TX 77842-3170, U.S.A. or by courier services at 211 Quality Circle,
Suite 210, College Station, TX 77845, U.S.A.
Broadcom’s designated IESPP broker is Merrill Lynch, Pierce, Fenner & Smith, Incorporated. Merrill
Lynch, Pierce, Fenner & Smith, Incorporated can be contacted by telephone at 1-877-494-2726 or for
international callers at +1-609-818-8894, or by mail at: 1400 Merrill Lynch Drive, Pennington, NJ 08534,
U.S.A.
Participants of the IESPP are informed of the number of shares of Class A Common Stock through a
mailing distributed by Merrill Lynch, Pierce, Fenner & Smith, Incorporated.
Commissions
There is no charge to Participants for the acquisition or holding of the shares of Class A Common Stock
under the IESPP. Merrill Lynch, Pierce, Fenner & Smith, Incorporated imposes a fee of $0.03 per share of
Class A Common Stock, subject to a $10.00 minimum with a $5.35 service handling fee upon the sale or
transfer of the Class A Common Stock.
In addition, the SEC imposes a fee on the transfer of the Class A Common Stock. This fee is paid to the
SEC at the time of sale and is required for all equity trades. Upon selling the Class A Common Stock,
Participants will be charged a fee equal to $0.0000184 multiplied by the total principal amount of the sale
proceeds. The SEC will publish a revised fee rate 30 days after the SEC’s regular appropriation for fiscal
year 2016 is enacted, and this new fee rate will become effective 60 days after the appropriation is
enacted.
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4.4
Currency of the Securities Issue
The United States Dollar is the currency of the securities issue. Participants assume the risk of any
currency fluctuations from the time of their contributions to the IESPP by payroll deductions through the
selling of their Class A Common Stock purchased under the IESPP.
4.5
Rights Attached to the Securities
No Participant shall have any voting, dividend, or other shareholder rights with respect to any offering
under the IESPP until the shares of Class A Common Stock have been purchased and delivered to the
Participant as provided in Section III above. Following such purchase and delivery, the Participant shall
be entitled to the rights attached to the Class A Common Stock, as further described below:
Dividend Rights. The Board, subject to restrictions contained in (a) the Cal. Corp. Code, and (b) the
Articles of Incorporation, may declare and pay dividends upon the Common Stock.
Under the Cal. Corp. Code, subject to preferences that may apply to shares of Broadcom preferred stock
outstanding at the time, Broadcom, or any of its subsidiaries, is entitled to make a distribution to the
holders of outstanding Common Stock if the Board has determined in good faith either of the following:
(1) The amount of retained earnings of the corporation immediately prior to the distribution equals or
exceeds the sum of (A) the amount of the proposed distribution plus (B) the amount, if any, of
cumulative dividends in arrears on all shares of Broadcom preferred stock outstanding at the time
(“preferential dividends arrears amount”), provided that if the Articles of Incorporation provide that
a distribution can be made without regard to preferential dividends arrears amount, then the
preferential dividends arrears amount shall be zero; or
(2) Immediately after the distribution, the value of the corporation's assets would equal or exceed the
sum of its total liabilities plus the amount that would be needed if the corporation were to be
dissolved at the time of the distribution to satisfy the preferential rights, including accrued but
unpaid dividends, of other shareholders upon dissolution that are superior to the rights of the
holders of outstanding Common Stock (“preferential rights amount”), provided that if the Articles
of Incorporation provide that a distribution can be made without regard to any preferential rights,
then the preferential rights amount shall be zero.
The Board’s determination may be based on financial statements prepared on the basis of accounting
practices and principles that are reasonable under the circumstances, a fair valuation, or any other
method that is reasonable under the circumstances. (See Cal. Corp. Code § 500)
Further, neither Broadcom nor any of its subsidiaries shall make any distribution to the corporation's
shareholders if Broadcom or the subsidiary making the distribution is, or as a result thereof would be,
likely to be unable to meet its liabilities (except those whose payment is otherwise adequately provided
for) as they mature. (See Cal. Corp. Code § 501)
Under the Articles of Incorporation, subject to the preferences applicable to preferred stock outstanding at
any time, the holders of Class A Common Stock and the holders of Class B Common Stock shall be
entitled to receive such dividends, payable in cash or otherwise, as may be declared thereon by the
Board from time to time out of assets or funds of the corporation legally available therefor, provided that
the holders of Class A Common Stock and Class B Common Stock shall be entitled to share equally, on a
per share basis, in such dividends, subject to the limitations described in Article III of the Articles of
Incorporation.
In January 2010, the Board adopted a dividend policy pursuant to which Broadcom intends to pay
quarterly cash dividends on its Common Stock. The Board declared quarterly cash dividends of $0.12,
$0.11, and $0.10 per common share payable to holders of its Common Stock in each quarter of 2014,
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PART II — PROSPECTUS
2013 and 2012, respectively. In 2014, 2013 and 2012, Broadcom paid $283 million, $254 million and
$224 million, respectively, in dividends to holders of its Class A and Class B common stock.
In November 2014, the Board adopted an amendment to its existing dividend policy pursuant to which it
intends to increase the quarterly cash dividend by 17% to $0.14 per share for each quarter of 2015 ($0.56
per share on an annual basis). Pursuant to this plan, on January 28, 2015, Broadcom declared a
quarterly cash dividend of $0.14 per share. In the three months ended March 31, 2015, Broadcom paid
$84 million in dividends to holders of its Common Stock.
The cash dividend policy and the payment of future cash dividends under that policy are subject to the
Board's continuing determination that the dividend policy and the declaration of dividends thereunder are
in the best interests of Broadcom's shareholders and are in compliance with all laws and agreements of
Broadcom applicable to the declaration and payment of cash dividends.
Voting Rights. Holders of the shares of Class A Common Stock and Class B Common Stock have
identical rights, except that holders of the Class A Common Stock are entitled to one vote per share and
holders of the Class B Common Stock are entitled to ten votes per share. Holders of the shares of Class
A Common Stock and Class B Common Stock shall vote together as one class on all matters submitted
to a vote of Broadcom’s shareholders, except (i) as otherwise required by applicable law; and (ii) in the
case of a proposed issuance of Class B Common Stock, which issuance shall require the affirmative vote
of the holders of a majority of the outstanding Class B Common Stock voting separately as a class;
provided, however, that such approval shall not be required if the proposed issuance of Class B Common
Stock has been approved by at least two-thirds (2/3) of the members of the Board then in office.
An annual meeting of shareholders shall be held each year on a date and at a time designated by the
Board. At that meeting, directors shall be elected. Any other proper business may be transacted at the
annual meeting of shareholders. Special meetings of the shareholders may be called at any time, for the
purpose of taking any action permitted by the shareholders under the Cal. Corp. Code, by the Board or,
subject to the provisions of Sections 2.4 and 2.5 of the Bylaws (as defined below), the Chairman of the
Board, the President or the holders of Shares entitled to cast not less than ten percent (10%) of the votes
at that meeting.
Nominations of persons for election to the Board may be made at a meeting of shareholders by or at the
direction of the Board or by any shareholder of the Corporation entitled to vote in the election of directors
at the meeting who complies with the notice procedures set forth in the Bylaws.
On December 4, 2014, the Board approved and adopted an amendment and restatement of Broadcom’s
Bylaws (the “Bylaws”) with effect upon adoption by the Board. Sections 2.6, 2.10, 3.3, and 3.5 have been
amended to implement a majority voting standard in uncontested elections of directors in accordance with
Section 708.5 of the Cal. Corp. Code, superseding the previous plurality voting standard.
The shareholders entitled to vote at any meeting of shareholders shall be determined in accordance with
the provisions of Section 2.13 of the Bylaws, subject to the provisions of Sections 702 through 704 of the
Cal. Corp. Code (relating to voting shares held by a fiduciary, in the name of a corporation, or in joint
ownership). Elections for directors and voting on any other matter at a shareholders’ meeting need not
be by ballot unless a shareholder demands election by ballot at the meeting and before the voting begins.
In order that the Corporation may determine the shareholders entitled to notice of any meeting or to vote
or entitled to give consent to corporate action without a meeting, the Board may fix, in advance, a record
date, which shall not be more than sixty (60) days nor less than ten (10) days prior to the date of such
meeting nor more than sixty (60) days before any other action. Only shareholders at the close of
business on the record date are entitled to notice and to vote or give consents, as the case may be,
notwithstanding any transfer of any Common Stock on the books of the Corporation after the record date,
except as otherwise provided in the Articles of Incorporation or the Cal. Corp. Code.
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PART II — PROSPECTUS
Under California law, the articles of incorporation of a corporation may be amended to contain any
provisions that might lawfully be included in original articles filed at the time of filing the amendment, and,
if a change in shares or the rights of shareholders or an exchange, reclassification or cancellation of
shares or rights of shareholders is to be made, such provisions as may be necessary to effect such
change, exchange, reclassification or cancellation (See Cal. Corp. Code § 900). Subsequent to the
issuance of shares, the articles of incorporation may be amended if approved by the board of directors
and, subject to limited exceptions, the shareholders (See Cal. Corp. Code § 902).
The following amendments to the articles of a corporation must be approved by the outstanding shares of
a class, whether or not such class is entitled to vote thereon by the provisions of the articles, as well as
the outstanding voting shares, if the amendment would: (1) increase or decrease the aggregate number
of authorized shares of such class, other than an increase relating to an approved issuance of options to
purchase shares or approved grant of conversion rights, or a stock split; (2) effect an exchange,
reclassification, or cancellation of all or part of the shares of such class, including a reverse stock split but
excluding a stock split; (3) effect an exchange, or create a right of exchange, of all or part of the shares of
another class into shares of such class; (4) change the rights, preferences, privileges or restrictions of the
shares of such class; (5) create a new class of shares, or increase the rights, preferences or privileges or
the number of authorized shares of an existing class of shares, having rights, preferences or privileges
senior to such class; (6) if such class is preferred, divide, or authorize the board to divide, that class into
series having different rights, preferences, privileges or restrictions; or (7) cancel or otherwise affect
accrued but unpaid dividends on the shares of that class (See Cal. Corp. Code § 903).
The board of directors of a California corporation which has issued shares may amend the articles of
incorporation without shareholder action in the following limited circumstances:
(a)
The authorized number of shares can be increased to satisfy the exercise of options or the
conversion of convertible securities if the grant of such options or convertible securities had
already been approved by shareholder action (see Cal. Corp. Code § 405(b));
(b)
The authorized number of shares of a class or series can be eliminated or reduced, and any
related provisions designating the rights, preferences, privileges, and restrictions of any
eliminated series or class of stock deleted, to reflect the effects of share reacquisitions by a
corporation where its articles prohibit reissuing reacquired shares or prohibit reissuing them
as shares of the same series (see Cal. Corp. Code § 510(f));
(c)
Where the corporation has only one class of shares outstanding, a stock split may be
effected (including an increase in the authorized number of shares in proportion thereto) (see
Cal. Corp. Code § 902(c))
(d)
The name of a corporation can be changed in connection with a short-form merger in which
the corporation merges into itself a subsidiary corporation of which it owns 100% of the
outstanding shares or at least 90 percent of the outstanding shares of each class (see Cal.
Corp. Code § 1110(d)).
Other than in the case of a merger, amendments to the articles of incorporation are effected by filing a
certificate of amendment with the Secretary of State. (See Cal. Corp. Code § 905, 908).
Conversion. Each share of Class B Common Stock, at the option of its holder, may at any time be
converted into one fully paid and nonassessable share of Class A Common Stock and in most instances
automatically converts upon sale or other transfer. Such right shall be exercised by the surrender of the
certificate representing such Class B Share to be converted in the manner provided in Article III, Section
(B) (4) of the Articles of Incorporation.
Right to Receive Liquidation Distributions. Subject to the prior rights of holders of all classes of stock
at that time outstanding having prior rights as to liquidation, upon a liquidation, dissolution or winding up
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PART II — PROSPECTUS
of the Corporation, the assets and funds of the corporation legally available for distribution shall be
distributed ratably among the holders of shares of Class A Common Stock and Class B Common Stock in
proportion to the amount of such stock owned by each such holder. (See Article III, Section (B)(1) of the
Articles of Incorporation).
No Preemptive or Redemptive Provisions. The shares of Class A Common Stock are not entitled to
preemptive rights and are not subject to redemption.
4.6
Transferability
The shares of Class A Common Stock in this offering under the IESPP are registered on a registration
statement on Form S-8 with the SEC and are generally freely saleable. However, Participants may not
transfer the shares of Class A Common Stock acquired at purchase under the IESPP from their personal
Merrill Lynch, Pierce, Fenner & Smith, Incorporated accounts unless the shares of Class A Common
Stock are sold, gifted, transferred by title, or otherwise transferred.
4.7
General Provisions Applying to Business Combinations
Pursuant to California case law, a shareholder that controls a California corporation and the management
of its business, by virtue of majority stock ownership or otherwise, will be held liable to the other
shareholders if such controlling shareholder uses the corporation or its assets for its own benefit or
without regard to the interests of the corporation or the minority shareholders.
California law authorizes the board of directors of a California corporation that owns 90% or more of the
outstanding shares of each class of stock of a subsidiary to effect a short-form merger whereby the
subsidiary is merged into the parent or the parent is merged into the subsidiary. A short-form merger can
be effected by a resolution of the Board of the parent corporation (together with, in certain circumstances,
the Board of the subsidiary), without the vote of the shareholders of either corporation, followed by the
filing of a certificate of ownership with the Secretary of State. (See Cal. Corp. Code § 1110.) However, if
pursuant to a downstream short-form merger the holders of any class of the parent corporation’s shares
are to receive shares of the surviving subsidiary corporation having different rights, preferences,
privileges or restrictions than those surrendered, the vote of that class of shareholders would be required.
(See Cal. Corp. Code §1110).
V.
STATEMENT OF CAPITALIZATION AND INDEBTEDNESS (AS OF MARCH 31, 2015)
5.1
Capitalization and Indebtedness (in millions - unaudited)
Total Current debt
- Guaranteed
- Secured
- Unguaranteed / Unsecured
-
Total Non-Current debt (excluding current portion of long-term debt)
- Guaranteed
- Secured
- Unguaranteed / Unsecured
Stockholders’ equity
a. Share Capital and Additional Paid-in Capital
b. Legal Reserve
c. Total Other Reserves
$
$
$
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1301972-v8\NYCDMS
$
1,593
1,593
12,352
(3,350)
PART II — PROSPECTUS
- Accumulated deficit
- Accumulated other comprehensive loss
Total
5.2
$
$
$
(3,246)
(104)
9,002
Net Indebtedness (in millions - unaudited)
A.+ B.
C.
D.
Cash and cash equivalents
Short-term marketable securities
Liquidity (A) + (B) + (C)
E.
F.
G.
H.
I.
Current Financial Receivable
Current Bank debt
Current portion of non-current debt
Other current financial debt
Other Financial Debt (F) + (G) + (H)
J.
Net Current Financial Indebtedness (I) – (E) – (D)
$
(2,951)
K.
L.
M.
Non-current Bank loans
Bonds Issued
Other non-current loans
$
1,593
-
N.
Non-current Financial Indebtedness (K) + (L) + (M)
$
1,593
O.
Net Financial Indebtedness (J) + (N)
$
(1,358)
5.3
$
$
$
1,677
1,274
2,951
-
Indirect and Contingent Indebtedness
The following table presents details of our commitments and other contractual obligations as of December
31, 2014, which are estimated to be paid in 2015 and thereafter:
2015
Operating leases
Inventory and related
purchase obligations
Other obligations
Long-term debt and related
interest
$
197 $
725
155
50
$ 1,127 $
Payment Obligations by Year
2017
2018
2019
Thereafter
(In millions)
2016
142 $
—
36
49
227 $
Total
95 $
56 $
24 $
23 $
537
—
4
—
—
—
—
—
—
725
195
49
550
36
1,368
2,102
606 $
60 $
1,391 $
3,559
148 $
Facilities rent expense in 2014, 2013 and 2012 was $106 million, $97 million, and $90 million,
respectively.
Inventory and related purchase obligations represent purchase commitments for silicon wafers and
assembly and test services. We depend upon third party subcontractors to manufacture our silicon wafers
and provide assembly and test services. Due to lengthy subcontractor lead times, we must order these
materials and services from subcontractors well in advance. We expect to receive and pay for these
materials and services within the ensuing six months. Our subcontractor relationships typically allow for
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PART II — PROSPECTUS
the cancellation of outstanding purchase orders, but require payment of all expenses incurred through the
date of cancellation.
Other obligations represent purchase commitments for lab test equipment, computer hardware,
information systems infrastructure, mask and prototyping costs, intellectual property licensing
arrangements and other commitments made in the ordinary course of business.
For purposes of the table above, obligations for the purchase of goods or services are defined as
agreements that are enforceable and legally binding and that specify all significant terms, including: fixed
or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate
timing of the transaction. Our purchase orders are based on current manufacturing needs and are
typically fulfilled by our vendors within a relatively short time horizon. We have additional purchase orders
(not included in the table above) that represent authorizations to purchase rather than binding
agreements. We do not have significant agreements for the purchase of inventories or other goods
specifying minimum quantities or set prices that exceed our expected requirements.
Unrecognized tax benefits were $364 million, of which $62 million would result in potential cash payment
of taxes and $302 million would result in a reduction in certain net operating loss and tax credit
carryforwards. We are not including any amount related to uncertain tax positions in the table presented
above because of the difficulty in making reasonably reliable estimates of the timing of settlements with
the respective taxing authorities. In addition to the unrecognized tax benefits, we have also recorded a
liability for potential tax penalties and interest of $27 million and $6 million, respectively, at December 31,
2014.
In November 2014 we signed an agreement to purchase land for the construction of a new corporate
campus in Orange County, California, totaling up 2 million square feet to meet the requirements projected
in our long-term business plan. The cost of the land is $128 million and is not included in the table above
as the purchase is currently anticipated to close in the three months ending March 31, 2015, subject to
closing conditions.
VI.
MAXIMUM DILUTION AND NET PROCEEDS
6.1
Maximum Dilution
The shares of Class A Common Stock under the IESPP are offered pursuant to this prospectus to 308
eligible employees in the United Kingdom. As indicated in Section 1.2 above, the maximum rate at which
Participants may purchase shares of Class A Common Stock may not exceed $25,000 of the Fair Market
Value of shares of Common Stock (determined as of the Entry Date) per calendar year in which the right
is outstanding. However, as noted above, there are other limitations on share purchases (such as no
more than 9,000 shares of Class A Common Stock may be purchased on any Purchase Date) which may
result in employees not being able to purchase $25,000 worth of shares of Class A Common Stock in a
calendar year.
Assuming that (i) the Fair Market Value of the shares of Class A Common Stock on April 30, 2015 is less
than the Fair Market Value of the shares of Class A Common Stock on the Start Date (November 3, 2014)
such that the Offering Period automatically terminated after the Purchase Date and a new Offering Period
begins on May 1, 2015 (ii) no other IESPP limitations are exceeded; and (iii) all of the eligible employees
enroll in the IESPP for the first time in a new Offering Period on May 1, 2015, each Participant would be
able to purchase a maximum of 577 whole shares of Class A Common Stock on October 30, 2015 for a
maximum of $21,233.60 in contributions per person. These amounts assume that on May 1, 2015 (i.e.,
the first business day of the Offering Period, at which time the $25,000 limit is calculated) the price of the
shares of Class A Common Stock will be $43.295 (i.e., the closing price of the shares of Class A
Common Stock on March 31, 2015), and that this will be equal to the price of the shares of Class A
Common Stock on October 30, 2015 (i.e., the last business day of the Purchase Interval), resulting in a
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PART II — PROSPECTUS
hypothetical Purchase Price of $36.80 (85% of $43.295). No additional purchases will be permitted in
calendar year 2015.
However, Participants would be able to purchase additional Class A Common Stock during the next
Purchase Interval (from November 2, 2015 – April 29, 2016), and assuming (i) all eligible employees do
so; (ii) no other IESPP contribution limits are exceeded; and (iii) the automatic reset feature described in
Part II - Section B, Section 1.3 above is not triggered, on April 29, 2016 each Participant would be able to
purchase a maximum of 577 whole shares of Class A Common Stock for a maximum of $21,233.60 in
contributions per person. These amounts assume that the price of the shares of Class A Common Stock
on May 1, 2015 (i.e., the first business day of the Offering Period) will be $43.295 (i.e., the closing price of
the of the shares of Class A Common Stock on March 31, 2015), and that this will be equal to the price of
the shares of Class A Common Stock on April 29, 2016 (i.e., the last business day of the Purchase
Interval), and resulting in a hypothetical Purchase Price of $36.80 (85% of $43.295).
Assuming that all eligible employees participate in the IESPP and each Participant purchases 1,154
shares of Class A Common Stock in the Purchase Intervals beginning in May 2015 and November 2015,
the maximum number of shares of Class A Common Stock offered pursuant to this prospectus amounts
to 355,432 shares of Class A Common Stock.
Based on the above assumptions, a shareholder of Broadcom currently holding 1% of the total
outstanding shares of Class A Common Stock Broadcom of as of March 31, 2015, i.e., 5,484,047 shares,
and who would not participate in the offer would be diluted as indicated in the following dilution table:
Percentage of the total
outstanding shares of Class A
Common Stock
Total number of outstanding
shares of Class A Common
Stock
Before the offering (as of March
31, 2015)
1.00%
548,404,747
After issuance of 355,432
shares of Class A Common
Stock under the IESPP
0.999%
548,760,179
6.2
Net Proceeds
Assuming that the 308 eligible employees in the United Kingdom would purchase the maximum amount
of shares of Class A Common Stock under the IESPP offered pursuant to this prospectus, that is, a total
of $42,467.20 each, then the gross proceeds of Broadcom in connection with the offer under the IESPP
pursuant to this prospectus would be $13,079,898. After deducting legal and accounting expenses in
connection with the offer, the net proceeds, based on the above assumptions, would be approximately
$13,039,898.
VII.
DIRECTORS AND EXECUTIVE OFFICERS
7.1
Board of Directors as of March 16, 2015
Name
Age
Director Since
Robert J. Finocchio, Jr.
63
2011
Director
Nancy H. Handel
63
2005
Director
Eddy W. Hartenstein
64
2008
Director
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Position with Broadcom
PART II — PROSPECTUS
Name
Age
Director Since
Position with Broadcom
Maria M. Klawe, Ph.D.
63
2011
Director
John E. Major
69
2003
Director
Scott A. McGregor
58
2005
President, Chief Executive Officer and
Director
William T. Morrow
55
2008
Director
Henry Samueli, Ph.D.
60
2011
Co-Founder, Chairman of the Board and
Chief Technical Officer
Robert E. Switz
68
2003
Lead Independent Director
Robert J. Finocchio, Jr. has been a director since December 2011. Mr. Finocchio is chair of the Board of
Trustees at Santa Clara University and has been a Dean’s Executive Professor at the University’s Leavey
School of Business since September 2000. From July 1997 to September 2000, he served as Chairman
of Informix Corporation and from July 1997 to July 1999, he served as its Chief Executive Officer and
President where he led the reconstruction and return to growth and profitability of the enterprise database
software company. From December 1988 to May 1997, Mr. Finocchio held several positions at 3Com
Corporation, including President of 3Com Systems, Executive Vice President of Network Systems
Operations and Executive Vice President of Field Operations. Prior to 3Com, from December 1978 to
June 1987, he held various executive positions in sales and service at ROLM Corporation and IBM
Corporation, which acquired ROLM in 1984. Mr. Finocchio also was Vice President of ROLM Systems
Marketing for IBM. Mr. Finocchio holds a B.S. in Economics from Santa Clara University and an M.B.A.
from Harvard Business School where he was a Baker Scholar.
Mr. Finocchio brings more than 30 years of operating experience in software, Internet and infrastructure
markets to the Board. His extensive operational experience and industry knowledge in the network
infrastructure markets in particular make him a valuable contributor to our Board. Having served as Chief
Executive Officer and President of Informix Corporation, Mr. Finocchio offers significant leadership skills,
management experience and business perspective. In addition, such extensive public company
leadership experience positions him well as a member of the Board’s Audit Committee. Given his
expertise in finance and accounting, Mr. Finocchio has been determined to be an Audit Committee
financial expert by our Board. Mr. Finocchio also brings considerable directorial and governance
experience to the Board having held numerous director positions, including serving on the boards of
directors of Altera Corporation, Sun Microsystems, Inc. and Informix Corporation as Chairman. Further,
Mr. Finocchio currently serves on the board of directors of Echelon Corporation.
Public Company Directorships During the Past Five Years
•
Echelon Corporation (energy control networking solutions provider) — 1999 to present
•
Altera Corporation (semiconductor company) — January 2002 to December 2011
•
Sun Microsystems, Inc. (network computing infrastructure solutions company) — 2006 to January
2010
Nancy H. Handel has been a director since November 2005. Ms. Handel was the Senior Vice President,
Chief Financial Officer of Applied Materials, Inc., a supplier of equipment and services to the global
semiconductor, flat panel and solar industries, from October 2004 through November 2006. From
November 2006 to January 2007, Ms. Handel served as Senior Vice President, Finance at Applied
Materials and assisted in the transition with its new chief financial officer. She retired from Applied
Materials in January 2007. From 1985 to October 2004 she served in various key financial leadership
positions at Applied Materials, including four years as Deputy Chief Financial Officer, Corporate Controller
and Principal Accounting Officer, and 13 years as Treasurer. Ms. Handel played a significant role in
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PART II — PROSPECTUS
managing Applied Materials’ success on a global basis. At Applied Materials, Ms. Handel provided
direction on operations finance and public reporting, major financial transactions, such as global
acquisitions and divestitures and capital markets activity, as well as major financial processes in the
company, including establishing the financial risk management committee and providing leadership for
various restructurings and ERP related business process engineering. Ms. Handel set the “tone at the
top” for a high integrity management culture and exercised broad responsibility for Sarbanes-Oxley
compliance. In 2006, Ms. Handel was named one of the “Best CFOs in America” by Institutional Investor
magazine and Applied Materials was named among the “100 Best Corporate Citizens” by Business Ethics
magazine. Prior to joining Applied Materials, Ms. Handel held various financial management positions
with Raychem Corporation, an electronics manufacturer, Crown Zellerbach Corporation, a paper
manufacturing company, and two private early stage companies. She received a B.S. in Economics from
Purdue University and an M.B.A. from The Ohio State University and is a graduate of the Stanford
Executive Program.
Ms. Handel has more than two decades of financial experience in key leadership roles at Applied
Materials, including two years as Chief Financial Officer and four years as Deputy Chief Financial Officer,
Corporate Controller and Principal Accounting Officer and 13 years as Treasurer. Her financial
experience combined with her understanding of the global semiconductor industry, provides Ms. Handel
with the knowledge, skills and perspective necessary to lead our Audit Committee and provide important
insights to our Board. Ms. Handel’s positions have provided her with a wealth of knowledge in dealing
with financial, accounting and compliance matters. Given her expertise in finance and accounting, Ms.
Handel has been determined to be an Audit Committee financial expert by our Board. Her work
experience, education and training help her understand the complexities of operating a public company.
Ms. Handel also brings directorial and governance experience to the Board having served on the board of
directors of the Trizetto Group, the board of the private company Santur and various non-profit
organizations.
Eddy W. Hartenstein has been a director since June 2008. Mr. Hartenstein was Publisher and Chief
Executive Officer of the Los Angeles Times from August 2008 to August 2014. In addition, he served as
Co-President of the Tribune Company from October 2010 to May 2011 and as President and Chief
Executive Officer from May 2011 to January 2013. Previously, Mr. Hartenstein was Vice Chairman and a
member of the board of directors of The DIRECTV Group, Inc. (formerly Hughes Electronics Corporation),
a television service provider, from December 2003 until his retirement in December 2004. He served as
Chairman and Chief Executive Officer of DIRECTV, Inc. from late 2001 through 2004 and as President of
DIRECTV, Inc. from its inception in 1990 to 2001. Under Mr. Hartenstein’s leadership DIRECTV became
one of the largest multi-channel television providers growing from zero to more than 13.5 million
customers in ten years. Previously, Mr. Hartenstein served in various capacities for Hughes
Communications, Inc., a provider of satellite-based communications, Equatorial Communications
Services Company, a provider of telephony and data distribution services, and NASA’s Jet Propulsion
Laboratory, the lead U.S. center for robotic exploration of the solar system. Mr. Hartenstein is a Member
of the National Academy of Engineering, was inducted into the Broadcasting and Cable Hall of Fame in
®
2002, received an Emmy Award for lifetime achievement from the National Academy of Television Arts
and Sciences in 2007, and was inducted into the Consumer Electronics Hall of Fame in 2008. Mr.
Hartenstein received B.S. degrees in Aerospace Engineering and Mathematics from California State
Polytechnic University, Pomona, and an M.S. in Applied Mechanics from the California Institute of
Technology. Mr. Hartenstein also received an honorary Doctor of Science degree from California State
Polytechnic University, Pomona in 2014.
Mr. Hartenstein’s leadership and passion in forming the direct broadcast satellite business has provided
him with a unique understanding of new market creation. Mr. Hartenstein’s business acumen and drive for
innovation, as evidenced by his tenure at DIRECTV, combined with his knowledge of the consumer
marketplace, make him a valuable contributor to our Board. Having served as Publisher and Chief
Executive Officer of the Los Angeles Times and as Chairman and Chief Executive Officer of DIRECTV,
Inc., Mr. Hartenstein offers a wealth of management experience and business understanding and frontline exposure to many of the issues facing public companies. Mr. Hartenstein’s engineering and science
background also provides important insights to our Board and an understanding of Broadcom’s
40
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operations. Mr. Hartenstein also brings considerable directorial and governance experience to the Board
currently serving on the boards of directors of SanDisk Corporation; SIRIUS XM Radio Inc., where he has
served as Chairman of the Board and is currently its Lead Independent Director; and Tribune Publishing
Company, where he serves as non-executive chairman. Previously, he served as Vice Chairman and
Chairman of the board of directors of The DIRECTV Group, Inc.
Public Company Directorships During the Past Five Years
•
SanDisk Corporation (supplier of flash memory devices) — November 2005 to present
•
SIRIUS XM Radio Inc. (satellite radio service company, formerly known as XM Satellite Radio,
Inc.) — April 2005 to present
•
Tribune Publishing Company — August 2014 to present
Maria M. Klawe, Ph.D., has been a director since 2011. Since 2006, Dr. Klawe has been President of
Harvey Mudd College, a private liberal arts college in Claremont, California that focuses on engineering,
science, and mathematics. From 2003 to 2006, Dr. Klawe served as Dean of Engineering and a Professor
of Computer Science at Princeton University, and from 1988 to 2002 she held several positions at the
University of British Columbia, including Dean of Science, Vice President of Student and Academic
Services, and head of the Department of Computer Science. Dr. Klawe has also worked at IBM Research
in California, the University of Toronto, and Oakland University. She received her doctorate and Bachelor
of Science degrees in mathematics from the University of Alberta.
Dr. Klawe has made significant research contributions in several areas of mathematics and computer
science including functional analysis, discrete mathematics, theoretical computer science, and the design
and use of interactive-multimedia for mathematics education. Her current research interests include
discrete mathematics, serious games and assistive technologies. As a leading figure in the advancement
of the role of women in science and engineering, Dr. Klawe was the first woman to serve on the board of
the Computing Research Association and she co-founded CRA-W, the highly acclaimed Committee on
the Status of Women in Computing Research. She served on the board of the Anita Borg Institute for
Women and Technology from 1997 to 2011 and as chair from 2003 to 2008. From 1997 to 2002 she was
the IBM-NSERC Chair for Women in Science and Engineering for British Columbia and the Yukon where
she led several research studies and projects related to increasing the participation of women in
computing. Dr. Klawe is a past president of the Association of Computing Machinery (ACM), a trustee of
the Mathematical Sciences Research Institute at Berkeley, and a member of the board of Math for
America. She is a fellow of the Association for Computing Machinery, the American Mathematical Society,
and the Canadian Information Processing Society and the recipient of numerous awards including the
Computing Research Association’s Nico Habermann Award. Dr. Klawe holds several honorary doctorate
degrees in the areas of science and mathematics.
Dr. Klawe is a valuable contributor to our Board as a distinguished academic leader in the field of
computer science and mathematics. Given the critical importance of scientific and engineering innovation
to our business, her understanding of scientific research and the STEM talent pipeline provides valuable
insight to our Board and our management. As a leader at a number of renowned colleges and
universities, Dr. Klawe has a deep understanding of the management and operations of large
organizations. In addition, Dr. Klawe brings valuable public company directorial experience, having served
on the board of directors of Microsoft Corporation since 2009, where she is a member of the regulatory
and public policy committee and the compensation committee. Her experience with Microsoft and her
research work in serious games and assistive technologies also provide added perspective on the uses
and users of our technology.
Public Company Directorships During the Past Five Years
•
Microsoft Corporation (software and services company) — March 2009 to present
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John E. Major has been a director since January 2003. From May 2008 until May 2012 he served as our
Chairman of the Board and as Lead Independent Director from May 2008 until May 2014. In January
2003 he founded MTSG, a strategic consulting and investment company for which he serves as
President. From April 2004 to October 2006, Mr. Major served as Chief Executive Officer of Apacheta
Corporation, a privately-held mobile, wireless software company whose products are used to manage
retail inventory, service and deliveries. From August 2000 until January 2003, Mr. Major was Chairman
and Chief Executive Officer of Novatel Wireless, Inc., a wireless data access solutions company.
Previously, Mr. Major was Chairman and Chief Executive Officer of Wireless Knowledge, a joint venture
of Qualcomm Incorporated and Microsoft Corporation that developed a unique solution to allow all
Internet-enabled devices, including cell phones, to access critical corporate information such as email,
contacts and calendar entries in a convenient and secure manner. Prior to joining Wireless Knowledge,
Mr. Major served as corporate executive vice president of Qualcomm and president of its Wireless
Infrastructure Division where he managed the high growth rate and global expansion of the company’s
infrastructure business. Under his leadership, the division achieved a leading position in open interface,
wireless systems and developed a new line of extremely compact base stations. Prior to that, for
approximately 18 years, he held various executive and leadership positions at Motorola, Inc., the most
recent of which was Senior Vice President and Chief Technology Officer, where he directed a broad
range of research initiatives and led Motorola’s efforts to develop world-class excellence in software. Mr.
Major received a B.S. in Mechanical and Aerospace Engineering from the University of Rochester, an
M.S. in Mechanical Engineering from the University of Illinois, an M.B.A. from Northwestern University
and a J.D. from Loyola University. Mr. Major is a named inventor in 11 U.S. patents.
Mr. Major is a past chairman of the Telecommunications Industry Association (TIA) and the Electronic
Industries Association (EIA). He served on the University of California President’s Board on Science and
Innovation. He serves as Chairman of the Dean’s Advisory Committee of the University of Rochester
Hajim School of Engineering and Applied Science and as Chairman of the University of Illinois at
Chicago-Engineering School Advisory Board. Mr. Major also serves as Chairman of the Board of La Jolla
Institute.
Mr. Major’s distinguished career and successes in a range of areas, including his senior management
leadership at both large and startup technology companies, as well as his drive for innovation, as
evidenced by his achievements at Wireless Knowledge, Qualcomm and Motorola, make Mr. Major a
valuable contributor to our Board. Mr. Major also brings considerable directorial, financial and governance
experience to the Board, currently serving on the boards of directors and several board committees of
Lennox International, Inc., Littelfuse Inc., ORBCOMM Inc., and Resonant Inc.
Public Company Directorships During the Past Five Years
•
Lennox International, Inc. (provider of climate control solutions) — April 1993 to present
•
Littelfuse Inc. (provider of circuit protection solutions) — December 1991 to present
•
ORBCOMM Inc. (global satellite data communications company) — April 2007 to present
•
Resonant Inc. (provider of filter designs for radio frequency front-ends for the mobile device
5
industry) — December 2013 to present
Additionally, Mr. Major has served on the Board of Pulse Electronics Corporation since May 2013. On
December 29, 2014 Pulse ceased its status as a public company.
Scott A. McGregor has served as our President and Chief Executive Officer and as a director since
January 2005. In this role, Mr. McGregor is responsible for guiding the strategic direction of the company,
business development and day-to-day operations. He also serves as a director and officer of certain
5
Resonant Inc. held its initial public offering in May 2014.
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Broadcom subsidiaries. Under Mr. McGregor’s leadership as CEO, Broadcom has experienced
tremendous growth, successfully ventured into new markets, transitioned to smaller geometry process
technologies, and improved its corporate image through increased financial management, increased
transparency and decreased dilution related to equity programs. During Mr. McGregor’s tenure as CEO,
Broadcom has grown its revenues from $2.401 billion in 2004 to $8.428 billion in 2014, its staff from
approximately 3,250 to approximately 10,650, its geographic footprint from 13 countries to 26 and its
patent portfolio from over 4,800 U.S. and foreign patents and applications in 2004 to over 20,450 by the
end of 2014.
Mr. McGregor joined Broadcom in January 2005 after serving since September 2001 as President and
CEO of the Philips Semiconductors division of the Netherlands-based Royal Philips Electronics. At Philips
Mr. McGregor oversaw one of the world’s largest semiconductor suppliers, with 34,000 employees in over
50 countries and nearly US$6 billion in sales in 2004. In addition to his CEO role, he was also a member
of the Group Management Committee of Royal Philips Electronics. He joined Philips Semiconductors in
February 1998 as head of its Emerging Business unit, focusing on fast growing markets for smart cards,
RFID, networking, digital media processing and computing, and leading the group to profitability and
nearly US$1 billion in sales. Before joining Philips, from 1990 to 1998 Mr. McGregor served in various
senior management positions, most recently as Senior Vice President and General Manager, at Santa
Cruz Operation Inc. (SCO), a provider of network computing solutions. From 1985 to 1990 he served in
senior positions at Digital Equipment Corporation (now part of HP) where he led the UNIX workstation
software group and was one of the architects of the X Window System. Prior to joining Digital Equipment
Corporation, he worked at Microsoft, where he was the Director of the Interactive Systems Group and the
®
®
architect and development team leader of the original version of Microsoft Windows . Prior to Microsoft,
Mr. McGregor spent over six years in various positions at the Xerox Corporation’s Palo Alto Research
Center (PARC), where he was involved in designing software for the first personal computers employing
graphical user interfaces. Mr. McGregor received a B.A. in Psychology and a M.S. in Computer Science
and Computer Engineering from Stanford University.
Mr. McGregor’s knowledge of all aspects of the business, combined with his drive for innovation and
excellence, and his leadership in successfully growing Broadcom, position him well to serve as our
President and Chief Executive Officer and as a director. Mr. McGregor also brings directorial and
governance experience to the Board currently serving on the board of Ingram Micro and having served on
the board of Progress Software Corporation from 1998 to 2008.
Public Company Directorships During the Past Five Years
•
Ingram Micro Inc. (IT distributor) — June 2010 to present
William T. Morrow has been a director since June 2008. Mr. Morrow is the Chief Executive Officer and a
member of the Board of NBN Co., an Australian telecommunications company that provides broadband
services. From March 2012 to March 2014, Mr. Morrow was Chief Executive Officer of Vodafone
Hutchinson Australia, a mobile telecommunications company that operates various brands in Australia.
Previous to his position with Vodafone Hutchinson Australia, he was Chief Executive Officer of Clearwire
Corporation, a provider of wireless broadband networks in the U.S. and internationally, from March 2009
to March 2011. From July 2007 to September 2008, Mr. Morrow served as President, Chief Executive
Officer and director of Pacific Gas & Electric Company, a public utility company and subsidiary of PG&E
Corporation and from August 2006 to June 2007, he served as its President and Chief Operating Officer.
Prior to Pacific Gas and Electric, he served in a number of senior executive positions at international
mobile communications group Vodafone Ltd. and Vodafone Group PLC, including Chief Executive Officer
of Vodafone, Europe, from May 2006 to July 2006, and President of Vodafone KK in Japan, from April
2005 through April 2006. Mr. Morrow also served in senior executive positions in Europe and Japan for
wireless telecommunications carrier Airtouch International, including a Brussels-based assignment as
Chief Technology Officer for AirTouch’s Belgacom Mobile-Proximus. Mr. Morrow is a veteran of the U.S.
Navy and a graduate of Condie College, where he received an A.S. degree in Electrical Engineering, and
National University in San Diego, California, where he received a B.A. degree in Business Administration.
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Mr. Morrow has a distinguished and international career as a telecom executive with a diversified
background heading up wireline and wireless communications companies in the U.S., Europe and Asia
Pacific. His more than 30 years of management experience in the telecommunications industry provides
Mr. Morrow with a keen understanding of the operations of Broadcom and an in depth knowledge of our
industry. Serving as Chief Executive Officer of numerous telecommunications companies around the
world, Mr. Morrow offers a wealth of management experience and business understanding. Mr. Morrow
also brings considerable directorial and governance experience to the Board having served on the board
of directors of both public and privately owned companies.
Public Company Directorships During the Past Five Years
•
Clearwire Corporation (communications company) — November 2009 to March 2011
•
Openwave Systems, Inc. (software applications and infrastructure company) — July 2007 to
December 2010
Henry Samueli, Ph.D. has been a director since May 2011 and serves as the Chairman of our Board. He
is also our co-founder and since December 2009 has served as our Chief Technical Officer. The Office of
the CTO is responsible for driving the vision of Broadcom’s research and development activities as well
as helping coordinate corporate-wide engineering development strategies. Since our inception, Dr.
Samueli has been instrumental in leading the direction of our innovations and developing and
implementing strategies that secured the company’s position as a major technology innovator and a
global leader in semiconductors for wired and wireless communications. Dr. Samueli served as a
technology advisor to Broadcom from May 2008 through December 2009. He previously served as a
director and as Chief Technical Officer from Broadcom’s inception in 1991 through May 2008, as
Chairman of our Board from May 2003 through May 2008, and as Co-Chairman of the Board from
inception until May 2003. He served as Vice President of Research & Development from our inception
until March 2003.
Since 1985 Dr. Samueli has been a professor in the Electrical Engineering Department at the University
of California, Los Angeles, where he has supervised advanced research programs in broadband
communications circuits and digital signal processing, and he has published over 100 technical papers in
these areas. Dr. Samueli has been on a leave of absence from UCLA since 1995. Dr. Samueli is also a
Distinguished Adjunct Professor in the Electrical Engineering and Computer Science Department at the
University of California, Irvine. He was the Chief Scientist and one of the founders of PairGain
Technologies, Inc., a telecommunications equipment manufacturer, and he consulted for PairGain from
1988 to 1994. From 1980 until 1985 he was employed in various engineering management positions in
the Electronics and Technology Division of TRW, Inc. Dr. Samueli received a B.S., M.S. and Ph.D. in
Electrical Engineering from the University of California, Los Angeles. Dr. Samueli is a named inventor in
74 U.S. patents. He is a Fellow of the Institute of Electrical and Electronics Engineers (IEEE), a Fellow of
the American Academy of Arts and Sciences, and a Member of the National Academy of Engineering.
Election to the National Academy of Engineering is amongst the highest professional distinctions
accorded to an engineer. In 2012 he was awarded the Marconi Society Prize and Fellowship for
pioneering development and commercialization of analog and mixed signal circuits for cable modems and
other communications applications.
Dr. Samueli has over 35 years of advanced engineering and leadership experience in the fields of
communications systems and digital signal processing and has helped drive Broadcom’s growth from a
start-up enterprise to a Fortune 500 company. As our co-founder and having served as our Chief
Technical Officer for over two decades and as our Vice President of Research & Development for over 11
years, Dr. Samueli has a unique and deep understanding of our operations, technologies and industry,
which provides invaluable insights to our Board. Serving as an Adjunct Professor in the Electrical
Engineering and Computer Science Department at the University of California, Irvine, as a Fellow of the
Institute of Electrical and Electronics Engineers (IEEE) and as a Member of the National Academy of
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Engineering, Dr. Samueli’s network of engineering, technical and university contacts are a valuable
source to Broadcom for new innovations and recruiting.
Robert E. Switz has been a director since May 2003 and was elected as our Lead Independent Director
in May 2014. From August 2003 until its acquisition by Tyco Electronics in December 2010, Mr. Switz
served as President and Chief Executive Officer of ADC Telecommunications, Inc., a supplier of
broadband network equipment and software. Mr. Switz played an instrumental role in transforming ADC,
developing and implementing strategies that secured the company’s position as one of the leading global
providers of fiber connectivity and wireless coverage and capacity solutions for communications service
providers prior to its acquisition by Tyco Electronics. From 1994 until August 2003 he served in various
senior management positions at ADC, including Chief Financial Officer, Executive Vice President and
Senior Vice President. Mr. Switz was appointed a director of ADC in August 2003 and was appointed
Chairman of the Board in June 2008. Mr. Switz was President of ADC’s former Broadband Access and
Transport Group from November 2000 until April 2001. Throughout his ADC career, Mr. Switz held
leadership responsibilities for numerous critical functions including strategic planning, business
development, corporate technology, marketing communications, sales operations, and information
systems. Prior to joining ADC, Mr. Switz was employed by Burr-Brown Corporation, a manufacturer of
precision microelectronics, as Vice President, Chief Financial Officer and Director, Ventures & Systems
Business. At Burr-Brown, he had management responsibilities for five start-up ventures and seven
European manufacturing and distribution subsidiaries. He also held responsibility for corporate finance,
legal, MIS, accounting, purchasing, physical resources, facilities, investor relations and business
development. Mr. Switz received a B.S. in Business Administration from Quinnipiac University and an
M.B.A. from the University of Bridgeport. Mr. Switz received recognition as a Finalist in American
Business Awards for Best Executive in 2004 through 2008 and Best Turnaround Executive in 2005
through 2008. In 1999, he was a recipient of the CFO Excellence award from CFO Magazine.
Mr. Switz’s extensive operations, finance and international experience provide him with a keen
understanding of Broadcom’s operations and make him a valuable contributor to our Board. Having
served as President and Chief Executive Officer of ADC Telecommunications, Inc., Mr. Switz offers a
wealth of management experience and business understanding and front-line exposure to many of the
issues facing public companies. Given his expertise in finance and accounting, Mr. Switz has been
determined to be an Audit Committee financial expert by our Board. Mr. Switz also brings considerable
directorial and governance experience to the Board through his past service on the board of directors of
ADC Telecommunications, Inc., and his current service on the boards of directors of GT Advanced
Technologies, Inc., Micron Technology, Inc., where he serves as Chairman of the Board, and Cyan Inc.
Public Company Directorships During the Past Five Years
6
•
ADC Telecommunications, Inc. (supplier of broadband network equipment and software) —
August 2003 to December 2010
•
Micron Technology, Inc. (semiconductor company) — February 2006 to present
•
Leap Wireless International, Inc. (wireless communications provider) — July 2011 to March 2014
•
GT Advanced Technologies Inc. (supplier of polysilicon production technology) — May 2011 to
present
•
Cyan Inc. (provider of software — defined networking and packet — optical solutions) — March
6
2011 to present
Cyan Inc. held its initial public offering in May 2013.
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7.2
Executive Officers as of March 16, 2015
Name
Age
Positions with Broadcom
Eric K. Brandt
52
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Arthur Chong
61
Executive Vice President, General Counsel and Secretary
Michael E. Hurlston
48
Executive Vice President, Worldwide Sales
Neil Y. Kim
56
Executive Vice President, Operations and Central Engineering
Daniel A. Marotta
54
Executive Vice President and General Manager, Broadband
Connectivity Group
Scott A. McGregor
58
President, Chief Executive Officer and Director
(Principal Executive Officer)
Nancy R. Philips
47
Executive Vice President, Human Resources
Rajiv Ramaswami, Ph.D.
49
Executive Vice President and General Manager, Infrastructure
and Networking Group
Henry Samueli, Ph.D.
60
Co-Founder, Chairman of the Board and Chief Technical Officer
Eric K. Brandt joined Broadcom as Senior Vice President and Chief Financial Officer in March 2007. He
became Executive Vice President and Chief Financial Officer in February 2010. He also serves as a
director and officer of certain Broadcom subsidiaries. From September 2005 until March 2007, Mr. Brandt
served as President and Chief Executive Officer of Avanir Pharmaceuticals. Prior to Avanir, Mr. Brandt
was Executive Vice President – Finance and Technical Operations, Chief Financial Officer of Allergan,
Inc., a global specialty pharmaceutical company, where he also held a number of other senior positions
after joining Allergan in 1999. Previously, Mr. Brandt spent ten years with The Boston Consulting Group, a
privately-held global business consulting firm, most recently serving as Vice President and Partner and as
a senior member of the firm’s heath care practice. In addition, while at Boston Consulting Group he led
the North American operations practice and had experience advising computer and telecommunications
clients. He is also a director of Dentsply International, Inc., a publicly held dental products company and
Lam Research Corporation, a publicly held wafer fabrication equipment company. Mr. Brandt received a
B.S. in Chemical Engineering from the Massachusetts Institute of Technology and an M.B.A. from
Harvard Business School.
Arthur Chong joined Broadcom as Senior Vice President, General Counsel and Secretary in October
2008. He became Executive Vice President, General Counsel and Secretary in February 2010. He also
serves as a director of a Broadcom subsidiary. From November 2005 until October 2008 Mr. Chong
served as Executive Vice President and Chief Legal Officer of Safeco Corporation, a property and
casualty insurance company that was acquired by Liberty Mutual Group in September 2008. Previously,
Mr. Chong spent over 20 years at McKesson Corporation, a healthcare services and information
technology company, most recently serving as Deputy General Counsel from 1999 to October 2005. Mr.
Chong received a B.A from the University of California, Berkeley and a J.D. from Harvard Law School.
Michael E. Hurlston joined Broadcom in October 2001 as the Director of Wireless Business
Development. He was appointed as Vice President and General Manager, Wireless LAN in May 2005,
was promoted to Senior Vice President and General Manager, Wireless LAN in April 2010, became
Senior Vice President and General Manager, Wireless Connectivity Combo in April 2012 and was again
promoted to Executive Vice President, Worldwide Sales in April 2013. He also serves as a director and
officer of certain Broadcom subsidiaries. Prior to joining Broadcom, Mr. Hurlston served in senior
marketing positions at Radia Communications and Oren Semiconductor for approximately four years. He
received a B.S.E.E., M.S.E.E. and a M.B.A. from the University of California, Davis.
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Neil Y. Kim joined Broadcom as Director of Engineering in January 2000 and became Vice President of
Central Engineering in October 2001. He became Senior Vice President, Central Engineering in April
2005, Senior Vice President, Operations and Central Engineering in May 2009 and Executive Vice
President, Operations and Central Engineering in February 2010. Prior to joining us, from 1993 to 2000
Mr. Kim held a series of progressively senior technical and management positions at Western Digital
Corporation, a data storage manufacturer, where his last position was Vice President of Engineering. Mr.
Kim received a B.S.E.E. from the University of California, Berkeley.
Daniel A. Marotta joined Broadcom in October 2002 and became Vice President & General Manager of
the Broadband Communications Business Unit in January 2003. In September 2003 Mr. Marotta became
Group Vice President, Broadband Communications Group, in April 2005 he became Senior Vice
President & General Manager, Broadband Communications Group, in February 2010 he became
Executive Vice President & General Manager, Broadband Communications Group, and in June 2014 he
became Executive Vice President & General Manager, Broadband and Connectivity Group. He also
serves as a director and officer of certain Broadcom subsidiaries. Previously, from March 1999 to April
2002 Mr. Marotta served in various senior management positions in the Digital Information Division at
Conexant Systems, Inc., a semiconductor manufacturer, the most recent of which was Senior Vice
President and General Manager. In May 2002, Mr. Marotta was promoted to Chief Operating Officer of
the Broadband Communications Segment at Conexant, where he served until October 2002. Prior to
joining Conexant, from 1996 to 1999 Mr. Marotta served as Director of Engineering at Brooktree
Corporation, a semiconductor manufacturer, and later as Vice President of Engineering at Rockwell
Semiconductor Systems, a semiconductor manufacturer, after Rockwell Semiconductor acquired
Brooktree in 1996. Mr. Marotta received a B.S.E.E. from the State University of New York at Buffalo.
Scott A. McGregor – For information regarding Mr. McGregor, please see Section 7.1 above.
Nancy R. Phillips joined Broadcom in September 2014 as Executive Vice President, Human Resources.
She also serves as a director of a Broadcom subsidiary. Previously, from February 2010 to June 2014,
Ms. Phillips was held various human resources positions at Hewlett-Packard Company, most recently as
Senior Vice President, Human Resources, Enterprise Services. Prior to joining Hewlett-Packard
Company, from April 2008 to February 2010 Ms. Phillips was employed by Fifth Third Bancorp as
Executive Vice President and Chief Human Resources Officer. Prior to that, Ms. Phillips spent 11 years at
General Electric Company, holding various human resources and legal positions. Ms. Phillips received a
B.A. from the University of Delaware and a J.D. from Samford University, Cumberland School of Law.
Rajiv Ramaswami, Ph.D. joined Broadcom in February 2010 as Executive Vice President and General
Manager, Enterprise Networking Group. The Enterprise Networking Group became the Infrastructure and
Networking Group in July 2010. He also serves as a director and officer of certain Broadcom subsidiaries.
From October 2009 through January 2010, he served as Vice President and General Manager of the
Cloud Services and Switching Technology Group of Cisco Systems, Inc. Previously, from September
2002 to October 2009, he served as Vice President and General Manager for a variety of Cisco’s
Business Units in Optical, Switching, and Storage Networking. Prior to joining Cisco, Dr. Ramaswami held
various technical and leadership positions at Xros, Tellabs, Inc., and IBM’s T.J. Watson Research Center.
He is also a director of NeoPhotonics Corporation, a publicly held optical components, modules and
subsystems company. Dr. Ramaswami holds M.S. and Ph.D. degrees in Electrical Engineering from the
University of California, Berkeley, and a B. Tech. degree from the Indian Institute of Technology in
Madras. He is a named inventor in 34 U.S. patents.
Henry Samueli, Ph.D. – For information regarding Dr. Samueli, please see Section 7.1 above.
7.3
Fraudulent Offences and Bankruptcy, Etc.
For at least the last five years, none of the current directors or executive officers of Broadcom has:
(a)
been convicted in relation to fraudulent offenses;
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(b)
been associated with any bankruptcies, receiverships or liquidations when acting in their capacity
of directors or executive officers of Broadcom; or
(c)
been subject to any official public incrimination and/or sanctions by statutory or regulatory
authorities (including designated professional bodies) or ever been disqualified by a court from
acting as a member of the administrative, management or supervisory bodies of an issuer or from
acting in the management or conduct of the affairs of any issuer.
There is no family relationship among any Broadcom executive officers or directors.
7.4
Conflicts of Interest
Director Independence
Our Corporate Governance Guidelines provide that a majority of the Board and all members of the Audit,
Compensation and Nominating & Corporate Governance Committees of the Board will be independent.
On an annual basis, each director and executive officer is obligated to complete a director and officer
questionnaire that requires disclosure of any transactions with Broadcom in which a director or executive
officer, or any member of his or her immediate family, has a direct or indirect interest. Following
completion of these questionnaires, the Board, with the assistance of the Nominating & Corporate
Governance Committee, makes an annual determination as to the independence of each director using
the current standards for “independence” established by Nasdaq, additional criteria set forth in our
Corporate Governance Guidelines, and consideration of any other material relationship a director may
have with Broadcom.
In February 2015, the Board determined that all of its then current directors and all of its nominees for
election at the Annual Meeting are independent under these standards, except for Mr. McGregor, who
serves full-time as our President and Chief Executive Officer, and Dr. Samueli, who serves full-time as
our Chief Technical Officer and beneficially owns approximately 22% of the voting power of our Common
Stock.
Severance and Change in Control Arrangements with Named Executive Officers
None of our named executive officers ("NEOs," as listed on page 36 of Broadcom’s Definitive Proxy
Statement, filed with the SEC on March 27, 2015 (“Broadcom’s Proxy Statement”)) has an employment
agreement specifying a term of employment, and their employment may be terminated at any time.
However, we have entered into agreements with all our executive officers that provide certain severance
benefits upon the termination of their employment under certain prescribed circumstances. Those
agreements are summarized below.
McGregor Agreement. In October 2004 we entered into an offer letter agreement with Mr. McGregor. The
severance benefits portion of that letter agreement was amended in August 2008. Minor amendments to
that section were also made to the agreement in 2009 to (i) comply with changes made to Section 162(m)
of the Internal Revenue Code; and (ii) address certain ambiguities regarding post-employment coverage
under our employee benefit plans. Additional minor amendments were made in 2010 to address
interpretations under Section 409A of the Internal Revenue Code. The agreement provides that if we
terminate Mr. McGregor’s employment other than for cause or disability or if Mr. McGregor terminates his
employment for good reason (each a “qualifying termination”), he will receive the following severance
benefits:
•
Cash severance equal to three times the sum of (i) his then current annual base salary and (ii)
the average of his annual bonuses for the three years immediately preceding the year in which
the qualifying termination occurs. The cash severance will be paid in regular payroll installments
over a 36 month period.
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•
Payment of any cash bonuses as to which the applicable performance goals have been attained
at the time of the qualifying termination but not the applicable service vesting requirements.
•
One or more discretionary cash bonuses based on his performance for the year prior to the
qualifying termination, to the extent such bonuses have not already been paid for that year.
•
Twenty-four months of service vesting credit of all his outstanding unvested stock options,
restricted stock units and any other equity awards, with continued vesting of the remaining
unvested portion of those awards generally over a 24 month period and an extended post-service
exercise period (generally not to exceed 24 months) in which to exercise his outstanding stock
options (but not beyond the expiration of their respective maximum terms).
•
A one time lump sum payment equal to (i) 36 times the amount by which his monthly cost for
Consolidated Omnibus Budget Reconciliation Act continuation coverage under our group health
plans exceeds the monthly cost payable by a similarly-situated executive in our active employ for
the same health care coverage and (ii) 12 times the amount by which his monthly cost for
continued life and disability insurance coverage under our group plans exceed the monthly cost
payable by a similarly-situated executive in our active employ for the same coverage.
•
Should any of the severance benefits constitute a parachute payment under Section 280G of the
Internal Revenue Code, then Mr. McGregor will receive a full tax gross-up with respect to the
excise tax he would incur on such parachute payment under Section 4999 of the Internal
Revenue Code, provided that such parachute payment is more than 20% greater than the dollar
amount of severance benefits or other parachute payments that could be provided to Mr.
McGregor without his incurrence of such excise tax.
Mr. McGregor will receive all of the foregoing severance benefits upon his satisfaction of the following
severance benefit requirements:
•
Delivery of a general release of all claims against Broadcom and our affiliates.
•
Continued compliance with his obligations under his Confidentiality and Invention Assignment
Agreement.
•
Continued compliance with the non-solicitation, non-competition and non-disparagement
provisions of the agreement for the duration of the cash severance period.
Should Mr. McGregor satisfy the release condition but fail to comply with the remaining severance benefit
requirements, then the dollar amount of his cash severance payments and the number of shares that vest
on an accelerated basis under his outstanding equity awards would be reduced, and he would no longer
be entitled to any Section 4999 tax gross-up.
The agreement also provides that if Mr. McGregor’s employment is terminated by reason of his death or
disability, then,
•
he or his legal representative may become entitled to certain cash bonuses that may vest and
become payable upon such event,
•
his outstanding stock options, restricted stock units and any other equity awards will immediately
vest in full, and
•
his stock options will remain exercisable for 12 months after the date of such termination (but not
beyond the expiration of their respective maximum terms).
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Change in Control Severance Benefit Program. We are a party to Change in Control Severance Benefit
Agreements with Messrs. Brandt and Marotta entered into in August 2008. Dr. Samueli has voluntarily
declined to participate in this program. Minor amendments were made to the agreements in 2009 and in
2010 as discussed above for Mr. McGregor’s agreement. In connection with his hiring in February 2010,
we also entered into a Change in Control Severance Benefit Agreements with Dr. Ramaswami. Each
agreement provides that if such officer’s employment is terminated by us other than for “cause” or
disability, or is terminated by the officer for “good reason” (as such terms are defined in the respective
agreements and summarized below), within 24 months following a change in control (a “qualifying
termination”), such officer will be eligible for the same severance benefits summarized above for Mr.
McGregor, except that (A) with respect to the cash severance component, such officer will receive two
times the sum of (i) his then current annual base salary and (ii) the average of his annual bonuses for the
three years (or such fewer number of years of employment with us) immediately preceding the year in
which the qualifying termination occurs; and (B) the agreement with Dr. Ramaswami does not include a
tax gross-up provision. The cash severance will be paid in regular payroll installments over a 24 month
period. In November 2014, the Compensation Committee adopted a policy whereby we will not enter into
new agreements with our NEOs that include excise tax-gross up provisions with respect to payments
contingent upon a change in control.
Each officer’s receipt of such severance benefits under his Change in Control Severance Benefit
Agreement is subject to his compliance with the same severance benefit requirements as in effect for Mr.
McGregor (including compliance with non-solicitation, non-competition and non-disparagement provisions
for two years). As with Mr. McGregor, the cash severance payments and accelerated vesting of
outstanding equity awards for which such officer is eligible under his Change in Control Severance
Benefit Agreement will also be reduced and the Section 4999 tax gross-up (if applicable) eliminated in the
event such officer does not comply with all of the severance benefit requirements.
Each of the Change in Control Severance Benefit Agreements also provides that if the officer’s
employment is terminated by reason of his death or disability, he will receive the same level of death and
disability benefits summarized above for Mr. McGregor.
Each Change in Control Severance Benefit Agreement will continue in effect until August 18, 2015.
However, on August 19 of each year, the term of that agreement will automatically be extended for an
additional one-year period, unless the Compensation Committee expressly determines that the automatic
one-year extension will not apply.
The definitions of “change in control,” “cause,” and “good reason” can be found on page 70 of
Broadcom’s Proxy Statement.
Other Programs. Under our form Stock Option Agreement and form Restricted Stock Unit Issuance
Agreement for our 1998 Stock Incentive Plan and our 2012 Stock Incentive Plan, in the event a change in
control occurs, each outstanding stock option and restricted stock unit will automatically accelerate in full
unless (i) the equity award is assumed by the successor corporation or otherwise continued in effect or (ii)
the equity award is replaced with a cash retention program that preserves the spread existing on the
unvested shares subject to that equity award (the excess of the fair market value of those shares over the
exercise price in effect for the shares) and provides for the subsequent vesting and payout of that spread
in accordance with the same vesting schedule that would otherwise be in effect for those shares in the
absence of such change in control. Under the 1998 Stock Incentive Plan and the 2012 Stock Incentive
Plan, a change in control is generally defined as one of the following: (i) an acquisition of us by a
shareholder-approved merger or consolidation; (ii) a shareholder-approved sale of all or substantially all
of our assets; (iii) the successful completion of a tender or exchange offer for securities possessing more
than fifty percent (50%) of the total combined voting power of our outstanding securities; or (iv) any other
acquisition by any party or group of securities possessing more than fifty percent (50%) of the total
combined voting power of our outstanding securities.
In May 2010, the Compensation Committee approved a policy regarding accelerated vesting of
outstanding equity awards under our stock incentive plans upon the employee’s death or permanent
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disability. Under the policy, an employee (other than Mr. McGregor and the officers participating in the
Change in Control Severance Benefit Program) who dies or becomes permanently disabled will become
entitled to full acceleration of vesting with respect to the number of shares subject to any of his or her
outstanding equity awards.
In addition to the severance agreements described above in June 1, 2010, the Committee adopted a
severance benefit plan (the “Plan”) for employees who hold the title of Vice President; Senior Vice
President or Executive Vice President. The Plan was amended on December 16, 2011. All NEOs other
than Mr. McGregor and Dr. Samueli would be eligible to receive benefits under the Plan if their
employment is terminated under certain termination circumstances. Under the Plan, if Broadcom
terminates an eligible employee’s employment other than for “cause” (as defined in the Plan) or the
employee terminates his or her employment for “good reason” (as defined in the Plan), the NEO may be
entitled to receive certain compensation and benefits, including the following:
•
a severance payment equal to 12 months base salary (in the case of Executive Vice Presidents),
nine months base salary (in the case of Senior Vice Presidents) or six months base salary (in the
case of Vice Presidents);
•
a bonus payment equal to 100% of the participant’s target bonus opportunity (in the case of
Executive Vice Presidents), 75% of target bonus opportunity (in the case of Senior Vice
Presidents) or 50% of target bonus opportunity (in the case of Vice Presidents);
•
a payment equal to the value of equity awards that would have vested during a period of 12
months (in the case of Executive Vice Presidents), nine months (in the case of Senior Vice
Presidents) or six months (in the case of Vice Presidents) immediately following termination,
based (i) in the case of stock options, on the excess, if any, of fair market value on the date of
termination over the applicable exercise price, and (ii) in the case of restricted stock units and
other full value stock awards, on the fair market value of our Common Stock on the date of
termination; and
•
certain lump sum payment for 12 months of health insurance-related benefits and outplacement
services for six months.
Information regarding “Calculation of Potential Payments upon Termination or Change in Control” can be
found on pages 71 – 72 of Broadcom’s Proxy Statement.
Policies and Procedures for Approval of Related Party Transactions
We have adopted a written policy for approval of transactions between Broadcom and its executive
officers, directors, director nominees, beneficial owners of more than 5% of our Common Stock, and their
respective immediate family members, each referred to as a Related Party, where the amount involved in
the transaction exceeds or is expected to exceed $100,000. This policy provides that the Nominating &
Corporate Governance Committee of the Board has the responsibility to review certain transactions
subject to this policy and to decide whether or not to approve or ratify those transactions. In making its
determination, the Nominating & Corporate Governance Committee takes into account the following
factors, among other factors it may deem appropriate:
•
Whether the transaction is on terms comparable to those that could be obtained in arm’s length
negotiations with an unrelated third party;
•
The availability of other sources for comparable services or products;
•
The extent of the Related Party’s interest in the transaction;
•
The conflicts of interest and corporate opportunity provisions of our Code of Ethics;
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PART II — PROSPECTUS
•
The benefits of the transaction to Broadcom; and
•
The impact or potential impact on a director’s independence, in the event the Related Party is a
director, an immediate family member of a director, or an entity in which a director is a partner,
shareholder or executive officer.
To the extent such transactions are ongoing business relationships, the transactions are reviewed
annually and such relationships will be on terms not materially less favorable to Broadcom than what
would be usual and customary in similar transactions between unrelated persons dealing at arm’s length.
The Nominating & Corporate Governance Committee intends to approve only those related party
transactions that are in the best interests of Broadcom and our shareholders.
The Nominating & Corporate Governance Committee has adopted standing pre-approvals under the
policy for compensation paid to directors and executive officers provided that such compensation is either
reported under SEC rules or the Compensation Committee or other independent Board committee
approved (or recommended to the Board to approve) such compensation.
Other than as described below or elsewhere in Broadcom's Proxy Statement, since January 1, 2014 there
has not been a transaction or series of related transactions to which Broadcom was or is a party involving
an amount in excess of $120,000 and in which any director, nominee for director, executive officer, holder
of more than five percent (5%) of any class of our voting securities, or any member of the immediate
family of any of the foregoing persons, had or will have a direct or indirect material interest.
Indemnification Agreements with Directors and Officers. In addition to the indemnification provisions
contained in our Articles of Incorporation and Bylaws, we have entered into indemnification agreements
with each of our directors and executive officers. These agreements require Broadcom, among other
things, to indemnify each director or officer against expenses (including attorneys’ fees), judgments, fines
and settlements (collectively, “liabilities”) paid or incurred by such individual in connection with certain
actions, suits or proceedings arising out of the individual’s status or service as a director or officer (subject
to certain exceptions, including liabilities arising from willful misconduct, conduct knowingly contrary to the
best interests of Broadcom, or conduct that is knowingly fraudulent or deliberately dishonest or conduct
that results in improper personal benefit) and to advance or reimburse expenses incurred by the individual
in connection with any proceeding against the individual with respect to which he or she may be entitled
to indemnification by Broadcom.
Honda Center Arena Suite License Agreement
In January 2011, we purchased a corporate arena suite license to use a private enclosed luxury suite
during events at the Honda Center, referred to as the Suite License, from Anaheim Arena Management,
LLC and Anaheim Ducks Hockey Club, LLC, entities controlled (directly or indirectly) by Dr. Samueli. The
Suite License commenced January 20, 2011 and runs for an initial five-year term. The 2014 fees were
$393,905. The transaction was approved by the Nominating & Corporate Governance Committee of the
Board. The Committee members unanimously agreed with disinterested members of senior management
that the arena suite license affords Broadcom an appropriate opportunity to conduct business, reward
employee contributions and build employee morale.
VIII.
EMPLOYEES
8.1
Directors’ and Executive Officers’ Holdings of Shares and Stock Options
The following table sets forth certain information with respect to the beneficial ownership of our Common
Stock as of March 16, 2015 by (i) the NEOs, including Robert. Rango who ceased employment with
Broadcom in September 2014, (ii) each current director/director nominee, (iii) all of our current directors
and executive officers as a group, and (iv) all persons known to us to beneficially own more than five
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percent (5%) of either class of our Common Stock. Unless otherwise noted below, the address of each
beneficial owner listed in the table is c/o Broadcom Corporation, 5300 California Avenue, Irvine, California
92617-3038, U.S.A.
Shares Beneficially Owned(1)
Class B
Class A
Common
Class A
Common Stock(3)
Stock
Percent(2)
Beneficial Owner
2015 Named Executive Officers
Eric K. Brandt
Daniel A. Marotta
Scott A. McGregor
Rajiv Ramaswami, Ph.D.
Robert A. Rango (former Executive Vice President)
(4)
Henry Samueli, Ph.D.
Directors Not Listed Above
Robert J. Finocchio, Jr.
Nancy H. Handel
Eddy W. Hartenstein
Maria M. Klawe, Ph.D.
John E. Major
William T. Morrow
Robert E. Switz
All current directors and executive officers as a group (16
persons)
5% Holders Not Listed Above
(5)
BlackRock, Inc.
Clearbridge Investments, LLC;
(6)
Clearbridge, LLC;
(7)
FMR LLC
(8)
Henry T. Nicholas, III, Ph.D.
(9)
Vanguard Group Inc.
*
*%
*
*
*
*
4.01
Percentage
of Total
Voting
Power(1)(2)
211,081
106,200
1,902,307
69,169
32,805
136,509
0
0
0
0
0
22,798,490
*%
*
*
*
*
21.89
35,945
61,622
70,916
36,154
54,925
17,644
33,819
0
0
0
0
0
0
0
*
*
*
*
*
*
*
*
*
*
*
*
*
*
3,130,456
22,798,490
4.52
22.15
30,437,353
0
5.54
2.92
26,765,845
42,043,161
47,973
28,256,499
0
0
26,170,868
0
4.87
7.65
4.55
5.14
2.57
4.04
25.12
2.71
Less than one percent.
(1)
Except as indicated in the footnotes to this table, and subject to applicable community property laws, the persons listed have
sole voting and investment power with respect to all shares of our Common Stock beneficially owned by them.
(2)
The percentage of Common Stock beneficially owned is based on 549,718,073 shares of Class A Common Stock outstanding
as of March 16, 2015. Beneficial ownership is determined in accordance with the rules and regulations of the SEC. Shares of
Common Stock subject to options that are currently exercisable or exercisable within 60 days after March 16, 2015 and shares
of Common Stock subject to restricted stock units that will vest and be issued within 60 days after March 16, 2015 are deemed
to be outstanding and beneficially owned by the person holding such options or restricted stock units for the purpose of
computing the number of shares beneficially owned and the percentage ownership of such person, but are not deemed to be
outstanding for the purpose of computing the percentage ownership of any other person. On March 16, 2015 there were
49,220,551 shares of Class B Common Stock outstanding. Each share of Class B Common Stock is immediately convertible
into one share of Class A Common Stock. Accordingly, for the purpose of computing the percentage of Class A shares
beneficially owned by each person who holds Class B Common Stock, each share of Class B Common Stock is deemed to
have been converted into a share of Class A Common Stock, but such shares of Class B Common Stock are not deemed to
have been converted into Class A Common Stock for the purpose of computing the percentage ownership of any other person.
(3)
Holders of Class A Common Stock are entitled to one vote per share and holders of Class B Common Stock are entitled to ten
votes per share. Holders of Common Stock vote together as a single class on all matters submitted to a vote of shareholders,
except (i) as otherwise required by law; and (ii) in the case of a proposed issuance of additional shares of Class B Common
Stock, which issuance requires the affirmative vote of the holders of the majority of the outstanding shares of Class B Common
Stock voting separately as a class, unless such issuance is approved by at least two-thirds of the members of the Board then in
office. For the purpose of computing the percentage of total voting power, each share of Class B Common Stock is deemed not
to have been converted into a share of Class A Common Stock, and thus represents 10 votes per share.
(4)
Includes (i) Class A Common Stock issuable upon exercise of options that are currently exercisable or will become exercisable
within 60 days of March 16, 2015 and (ii) shares of Class A Common Stock that will vest and become issuable within 60 days
after March 16, 2015 pursuant to restricted stock units, each as set forth below:
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2014 Named Executive Officers
Eric K. Brandt
Daniel A. Marotta
Scott A. McGregor
Rajiv Ramaswami, Ph.D.
Robert A. Rango (former Executive Vice President)
Henry Samueli, Ph.D.
Directors Not Listed Above
Robert J. Finocchio, Jr.
Nancy H. Handel
Eddy W. Hartenstein
Maria M. Klawe, Ph.D.
John E. Major
William T. Morrow
Robert E. Switz
All Current Directors and Executive Officers as a Group
Shares of Class A
Common Stock
Issuable Upon the
Exercise of Stock
Options
0
0
970,000
0
0
0
Shares of Class A
Common Stock
Issuable Pursuant
to Restricted Stock Units
36,552
29,898
93,970
29,898
0
44,918
0
10,000
0
0
20,000
0
0
1,207,882
2,509
2,509
2,509
2,509
2,509
2,509
2,509
323,646
(5)
Includes the following shares of Common Stock which are deemed indirectly owned by Dr. Samueli: (i) 913,473 shares of
Class B Common Stock owned by HS Management, L.P.; (ii) 14,172,992 shares of Class B Common Stock held by HS
Portfolio L.P.; (iii) 1,050,000 shares of Class B Common Stock held by H&S Portfolio II, L.P.; and (iv) 56,912 shares of Class A
Common Stock and 6,662,025 shares of Class B Common Stock held by H&S Investments I, L.P. Dr. Samueli disclaims
beneficial ownership of the shares held by HS Management, L.P. and HS Portfolio L.P., except to the extent of his pecuniary
interest therein. H&S Ventures LLC is the general partner of HS Management, L.P., HS Portfolio L.P., H&S Portfolio II, L.P and
H&S Investments I, L.P. As the indirect owner of H&S Ventures LLC, Dr. Samueli has sole voting and dispositive power over
these shares. Also includes 34,679 shares of Class A Common Stock that are directly held by Dr. Samueli. The address for Dr.
Samueli is 5300 California Avenue, Irvine, California 92617-3038, U.S.A.
(6)
The information with respect to the holdings of BlackRock, Inc. (“BlackRock”) is based solely on the Schedule 13G filed
February 3, 2015 by BlackRock, as the parent holding company or control person of a number of BlackRock entities.
BlackRock beneficially owns 30,437,353 shares of Common Stock and has the sole power to vote 25,589,456 shares of
Common Stock and sole dispositive power over 30,437,353 shares of Common Stock. The address for BlackRock is 55 East
52nd Street, New York, NY 10022, U.S.A.
(7)
The information with respect to the holdings of Clearbridge Investments, LLC and ClearBridge, LLC is based on the Schedule
13G/A filed February 17, 2015 by Clearbridge Investments, LLC and ClearBridge, LLC, which indicates that the two entities are
acting as a “group.” Clearbridge Investments, LLC beneficially owns 24,247,943 shares of Common Stock and has the sole
power to vote 23,639,408 shares of Common Stock and sole dispositive power over 24,247,943 shares of Common Stock.
ClearBridge, LLC beneficially owns 2,517,902 shares of Common Stock and has the sole power to vote 1,798,492 shares of
Common Stock and sole dispositive power over 2,517,902 shares of Common Stock. The address for Clearbridge Investments,
LLC is 620 8th Avenue, New York, New York 10018, U.S.A. and the address for ClearBridge, LLC is 100 International Drive,
Baltimore, Maryland 21202, U.S.A.
(8)
The information with respect to the holdings of FMR LLC (“FMR”) is based on the Schedule 13G/A filed February 13, 2015 by
FMR. FMR, Edward C. Johnson 3d and Abigail P. Johnson have reported beneficial ownership of 42,043,161 shares of
Common Stock. FMR has the sole power to vote 2,254,035 shares of Common Stock, and each of FMR, Edward C. Johnson
3d and Abigail P. Johnson has the sole dispositive power over 42,043,161 shares of Common Stock. Edward C. Johnson 3d is
a director and the chairman of FMR and Abigail P. Johnson is a director, the vice chairman, the chief executive officer and the
president of FMR. Members of the family of Edward C. Johnson 3d, including Abigail P. Johnson, are the predominant owners,
directly or through trusts, of Series B voting common shares of FMR, representing 49% of the voting power of FMR. The
Johnson family group and all other Series B shareholders of FMR have entered into a shareholders’ voting agreement under
which all Series B voting common shares of FMR will be voted in accordance with the majority vote of Series B voting common
shares of FMR. Accordingly, through their ownership of voting common shares and the execution of the shareholders’ voting
agreement, members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling
group with respect to FMR. Neither FMR nor Edward C. Johnson 3d nor Abigail P. Johnson has the sole power to vote or direct
the voting of the shares owned directly by the various investment companies registered under the Investment Company Act
(“Fidelity Funds”) advised by Fidelity Management & Research Company (“FMR Co”), a wholly owned subsidiary of FMR LLC,
which power resides with the Fidelity Funds’ Boards of Trustees. Fidelity Management & Research Company carries out the
voting of the shares under written guidelines established by the Fidelity Funds’ Boards of Trustees. The information with
respect to the holdings of FMR includes securities beneficially owned, or that may be deemed to be beneficially owned, by
FMR, certain of its subsidiaries and affiliates, and other companies (collectively, the “FMR Reporters”) and does not reflect
securities, if any, beneficially owned by certain other companies whose beneficial ownership of securities is disaggregated from
that of the FMR Reporters. The address for FMR is 245 Summer Street, Boston, Massachusetts 02210, U.S.A.
(9)
Includes the following shares of Class B Common Stock known by us to be beneficially held by Dr. Henry T. Nicholas III: (i)
26,168,798 shares of Class B Common Stock held by the Nicholas Technology Holding Trust and (ii) 2,070 shares of Class B
Common Stock held by Dr. Nicholas as custodian for his children. Also includes 47,973 shares of Class A Common Stock held
by Nicholas Investment Holdings, LLC. Dr. Nicholas has sole voting and dispositive power over the shares held by the Nicholas
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Technology Holding Trust, in the shares he holds as custodian for his children, and in the shares held by Nicholas Investment
Holdings, LLC. The principal business address for Dr. Nicholas is 15 Enterprise, Suite 550, Aliso Viejo, California 92656,
U.S.A..
(10) The information with respect to the holdings of The Vanguard Group (“Vanguard”) is based solely on the Schedule 13G filed
February 11, 2015 by Vanguard. Vanguard beneficially owns 28,256,499 shares of Common Stock and has the sole power to
vote 927,403 shares of Common Stock, sole dispositive power over 27,380,357 shares of Common Stock and shared
dispositive power over 876,142 shares of Common Stock. The address for Vanguard is 100 Vanguard Blvd., Malvern,
Pennsylvania 19355, U.S.A.
8.2
Employee Benefit Plans
Employee Stock Purchase Plan
We have an employee stock purchase plan, or U.S. ESPP, for all eligible employees. The U.S. ESPP is
substantially similar to the IESPP. Under the U.S. ESPP, employees may purchase shares of our Class A
Common Stock at six-month intervals at 85% of Fair Market Value (calculated in the manner provided in
the U.S. ESPP). Employees purchase such stock using payroll deductions, which may not exceed 15% of
their total cash compensation. Shares of Class A Common Stock are offered under the ESPP through a
series of successive Offering Periods, generally with a maximum duration of 24 months, subject to an
additional three-month extension under certain circumstances. The plan imposes certain limitations upon
an employee’s right to acquire Class A Common Stock, including the following: (i) no employee may
purchase more than 9,000 shares of Class A Common Stock on any one purchase date, (ii) no employee
may be granted rights to purchase more than $25,000 worth of Class A Common Stock for each calendar
year that such rights are at any time outstanding, and (iii) the maximum number of shares of Class A
Common Stock purchasable in total by all participants in the U.S. ESPP on any purchase date is limited
to 5 million shares. The number of shares of Class A Common Stock reserved for issuance under the
plan automatically increases in January each year. The increase is equal to 1.25% of the total number of
shares of Common Stock outstanding on the last trading day of the immediately preceding year, subject
to an annual share limit.
In 2014, 2013 and 2012, 6 million, 6 million and 5 million shares, respectively, were issued under the U.S.
ESPP and the IESPP at average per share prices of $22.89, $24.92, and $28.32, respectively. At
December 31, 2014, 19 million shares were available for future issuance under the U.S. ESPP and the
IESPP.
The per share fair values of rights granted in connection with the employee stock purchase plan have
been estimated with the following weighted average assumptions:
Employee Stock Purchase Rights
2014
Expected life (in years)
Implied volatility
Risk-free interest rate
Expected dividend yield
Weighted average fair value
$
0.88
0.26
0.13%
1.51%
7.28
$
2013
1.60
0.35
0.25%
1.58%
7.80
$
2012
1.43
0.39
0.23%
1.19%
9.61
Stock Incentive Plans
We have in effect stock incentive plans under which incentive stock options have been granted to
employees and restricted stock units and non-qualified stock options have been granted to employees
and non-employee members of the Board. Our 2012 Stock Incentive Plan, as amended and restated (the
"2012 Plan"), is the successor equity incentive plan to our 1998 Stock Incentive Plan. The number of
shares of Class A Common Stock reserved for issuance under the 2012 Plan automatically increases in
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January each year. The increase is equal to 4.5% of the total number of shares of Common Stock
outstanding on the last trading day of the immediately preceding year, subject to an annual share limit.
The Board or the Plan Administrator determines eligibility and vesting schedules for all equity awards
granted under the plans and, for stock options, exercise prices. We grant restricted stock units to certain
employees as part of our regular annual employee equity compensation review program as well as to
selected new hires and to non-employee members of the Board. Restricted stock units are share awards
that entitle the holder to receive freely tradable shares of our Class A Common Stock upon vesting.
Generally, restricted stock units vest ratably on a quarterly basis over 16 quarters from the date of grant.
On a limited basis, we grant certain restricted stock units that vest in their entirety after 3 years.
In January 2011 the Compensation Committee of our Board adopted a performance restricted stock units
program (the "PRSU Program"). Under the PRSU Program, if the performance goals established by the
Compensation Committee for a specific one-year performance cycle are achieved, our participating
executive officers have the opportunity to receive grants of PRSUs (which thereafter vest quarterly over
four years following the grant). These grants are at the sole discretion of the Compensation Committee.
We granted 0.7 million, 0.6 million, 0.4 million under this program in 2014, 2013 and 2012, respectively.
These PRSU grants were included in both the computation of stock-based compensation expense and
diluted net income per share.
Beginning in 2011, we stopped granting and currently have no plans to grant stock options, other than in
connection with acquisitions and currently have no outstanding stock options that are unvested.
Shares Reserved For Future Issuance
We had the following shares of Class A Common Stock reserved for future issuance upon the exercise or
issuance of equity instruments:
Number of Shares
(In millions)
Stock options outstanding
Authorized for future grants under stock incentive plans
Authorized for future issuance under stock purchase plan
Restricted stock units outstanding
20
131
19
20
Balance at December 31, 2014
190
IX.
WORKING CAPITAL STATEMENT
Broadcom believes that its existing cash, cash equivalents and marketable securities, together with cash
generated from operations, will be sufficient to cover its working capital needs, capital expenditures,
investment requirements, commitments (including debt service), repurchases of its Class A Common
Stock and quarterly dividends for at least the next 12 months.
X.
SELECTED FINANCIAL INFORMATION
10.1
Selected Financial Data
The selected financial data of Broadcom set out in this prospectus have been prepared in accordance
with U.S. GAAP. They are derived in part from and should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations and Broadcom’s consolidated
financial statements and notes thereto appearing respectively on pages 24 – 43 and F-3 – F-40 of
Broadcom’s Form 10-K, and its condensed consolidated financial statements and related notes thereto
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PART II — PROSPECTUS
and Management's Discussion and Analysis of Financial Condition and Results of Operations appearing
respectively on pages 2 – 18 and 19 – 30 of Broadcom’s Form 10-Q.
SELECTED THREE-YEAR FINANCIAL DATA
Year Ended December 31,
(1)
(2)
(3)
2014
2013
2012
(In millions, except per share data)
Consolidated Statement of Income Data
(4)
Net revenue
Income from operations
Net income
Net income per share (diluted)
Dividends per share
$
$
$
Consolidated Balance Sheet Data
Cash and cash equivalents and short-term and long-term
marketable securities
Working capital
Goodwill and purchased intangible assets
Total assets
Total debt
Total shareholders’ equity
$
8,428
694
652
1.08
0.48
$
5,989
3,522
4,374
12,471
1,593
9,051
$
8,305
472
424
0.73
0.44
$
4,371
2,419
4,937
11,495
1,394
8,371
$
$
$
$
$
8,006
676
719
1.25
0.40
3,722
2,099
5,512
11,208
1,693
7,839
(1)
Includes impairment of long-lived assets of $404 million, restructuring costs of $158 million related to our exit of the cellular
baseband business, other gains of $60 million and settlement costs of $16 million.
(2)
Includes impairment of long-lived assets of $511 million, settlement gains of $69 million, restructuring costs of $29 million and a
charitable contribution of $25 million.
(3)
Includes impairment of long-lived assets of $90 million, settlement costs of $79 million, and restructuring costs of $7 million. In
addition, includes the impact of the NetLogic Microsystems, Inc. acquisition in February 2012.
(4) Includes income relating to the Qualcomm Agreement of $86 million and $186 million, for 2013 and 2012, respectively. Income
from this agreement terminated in April 2013.
SELECTED QUARTERLY FINANCIAL DATA
Three Months Ended March 31,
2015
2014
(In millions, except per share data)
Unaudited Consolidated Statement of Income Data
Net revenue
Income from operations
Net income
Net income per share (diluted)
Dividends per share
57
1301972-v8\NYCDMS
$
$
2,058
223
209
0.34
0.14
$
$
1,984
170
165
0.28
0.12
PART II — PROSPECTUS
March 31, 2015
December 31, 2014
(In millions)
Unaudited Consolidated Balance Sheet Data
Cash and cash equivalents and short-term and longterm marketable securities
Total assets
Total liabilities
Total shareholders’ equity
*
10.2
$
5,484
12,062
3,060
9,002
$
5,989
12,471
3,420
9,051
Derived from audited consolidated balance sheet.
Independent Registered Public Accounting Firm
The independent registered public accounting firm of Broadcom is KPMG LLP, Irvine, California, U.S.A.
KPMG LLP is registered with the Public Company Accounting Oversight Board (United States) and is a
member of the American Institute of Certified Public Accountants.
XI.
LEGAL PROCEEDINGS (AS OF MARCH 31, 2015)
Claims and Litigation
We and certain of our subsidiaries are involved in various intellectual property and other proceedings,
claims and litigation arising in the ordinary course of our business. We will disclose the nature of any such
matters we believe to be material, along with (i) any accrual for loss contingencies associated with such
legal proceedings; (ii) any determination by us that an unfavorable outcome is probable or reasonably
possible; and (iii) the amount or range of any possible loss or a statement that we cannot reasonably
estimate an amount or a range of possible loss.
In addition to asserted claims, from time to time we are approached by holders of intellectual property,
including NPES, to engage in discussions about obtaining licenses to their intellectual property. We will
disclose the nature of these unasserted claims if we determine that (i) it is probable an intellectual
property holder will assert a claim of infringement; (ii) there is a reasonable possibility the outcome
(assuming assertion) will be unfavorable; and (iii) the resulting liability would be material to our financial
condition or results of operations.
While there can be no assurance, we believe that the ultimate outcome of current asserted and
unasserted claims will not have a material adverse effect on our operating results, liquidity or financial
position. However, our assessment of materiality may be impacted by limited information (particularly in
the early stages of intellectual property proceedings), including, for example, about the patents-in-suit and
Broadcom products against which the patents are being asserted. Accordingly, our assessment of
materiality may change in the future based upon availability of discovery and further developments in the
proceedings at issue. The results of legal proceedings are inherently uncertain, and material adverse
outcomes are possible.
From time to time we may enter into confidential discussions regarding the potential settlement of
pending intellectual property or proceedings, claims or litigation. There are a variety of factors that
influence our decisions to settle and the amount we may choose to pay, including the strength of our
case, developments in the litigation, the behavior of other interested parties, the demand on management
time and the possible distraction of our employees associated with the case and/or the possibility that we
may be subject to an injunction or other equitable remedy. In light of the numerous factors that go into a
settlement decision, it is difficult to predict whether any particular settlement is possible, the appropriate
terms of a settlement or the opportune time to settle a matter. The settlement of any pending litigation or
other proceedings could require us to make substantial settlement payments and result in us incurring
substantial costs. Furthermore, the settlement or resolution of any intellectual property proceeding may
58
1301972-v8\NYCDMS
PART II — PROSPECTUS
require us to grant a license to certain of our intellectual property rights to the other party under a crosslicense agreement or could prevent us from manufacturing or selling some of our products or limit or
restrict the type of work that employees may perform for us.
Settled Intellectual Property Proceedings
In September 2009 we filed a complaint against Emulex Corporation, or Emulex, alleging patent
infringement. On July 3, 2012, Broadcom and Emulex entered into a partial settlement and license
agreement for various asserted patents. Emulex received a license and release related to several
Broadcom patents for certain products for certain fields of use and Emulex was required to make a
payment of certain amounts to Broadcom.
In November 2009 we filed a complaint against the Commonwealth Scientific and Industrial Research
Organisation, or CSIRO, seeking a declaratory judgment that a certain U.S. patent number is invalid,
unenforceable and not infringed. CSIRO counterclaimed for infringement. In March 2012 Broadcom and
CSIRO entered into a settlement agreement resolving the litigation and the Court dismissed the parties’
claims with prejudice. The terms of the settlement agreement included a full release from liability for all
asserted claims, the grant of a perpetual license under the asserted patent and all related patents to
Broadcom, and the payment of certain amounts by Broadcom.
Settled Other Proceedings
In April 2008 we delivered a Notice of Arbitration and Arbitration Claim to our former independent
registered public accounting firm Ernst & Young LLP, or EY, and certain related parties. The arbitration
relates to the issues that led to the restatement of our financial statements for the periods from 1998
through March 31, 2006, as disclosed in an amended Annual Report on Form 10-K/A for the year ended
December 31, 2005 and an amended Quarterly Report on Form 10-Q/A for the three months ended
March 31, 2006, each filed with the SEC on January 23, 2007. In May 2008 EY delivered a Notice of
Defense and Counterclaim. The arbitration hearing occurred in January 2013. In July 2013 we entered
into a confidential settlement agreement with EY pursuant to which the parties mutually dismissed all
claims, deny liability and EY paid a settlement amount to Broadcom.
Settlement Costs (Gains) and Other Related Items
In 2014 we recorded settlement costs of $16 million related to the settlement of patent infringement
claims. In 2013 we received a payment of $75 million, net of contingent legal fees, related to Settled
Other Proceedings, and recorded this as a gain on settlement. In addition, we recorded settlement costs
of $6 million primarily related to patent infringement claims in 2013.
In 2012 we recorded net settlement costs of $79 million, which was comprised of $88 million of settlement
costs related to patent infringement claims, offset by settlement gains of $9 million (primarily related to the
resolution of certain employment tax matters). In 2012 we also received a payment of $58 million related
to a partial settlement and license agreement. We accounted for this transaction as a multiple element
arrangement and immediately recognized a $2 million gain on settlement of litigation and allocated the
remaining $56 million to the licensing of intellectual property. The licensing portion will be recorded as net
revenue over the ten year term of the license. See Note 1 for an additional discussion of our accounting
policy under “Litigation and Settlement Costs” included in Broadcom's Form 10-K.
For an additional discussion of certain risks associated with legal proceedings, see I. Risks Related to
Broadcom Corporation’s Business and Industry in Part II - Section A of this prospectus.
59
1301972-v8\NYCDMS
PART II — PROSPECTUS
XII.
DOCUMENTS ON DISPLAY
Broadcom’s Internet address is www.broadcom.com. The inclusion of Broadcom’s Internet address in this
prospectus does not include or incorporate by reference into this prospectus any information on its
website. Broadcom’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K, amendments to those reports and other SEC filings are available free of charge through the
investor relations section of its website as soon as reasonably practicable after such reports are
electronically filed with, or furnished to, the SEC. The SEC also maintains a website, www.sec.gov, that
contains reports, proxy and information statements, and other information regarding issuers that file
electronically with the SEC.
Broadcom’s Form 10-K, Broadcom’s Form 10-Q and Broadcom’s Proxy Statement, referred to in this
prospectus, may be obtained free of charge upon request by an employee.
Broadcom expects to issue, after market close, in or around late July 2015, its earnings release for the
quarter ending June 30, 2015. The quarterly report on Form 10-Q for such quarter will be filed with the
SEC no later than August 10, 2015. The annual report on Form 10-K for the fiscal year ending December
31, 2015 will be filed with the SEC no later than February 29, 2016. These documents will be available
on the websites of Broadcom and the SEC indicated above.
XIII.
UNITED KINGDOM TAX CONSEQUENCES
This summary has been prepared to provide Participants with an overview of the tax consequences of
participation in the IESPP.
This summary is based on the tax and other laws concerning purchase rights in effect in the United
Kingdom (the “UK”) as of April 2015. Such laws are often complex and change frequently. As a result,
the information contained in this summary may be out of date at the time Participants purchase shares or
sell shares of Class A Common Stock acquired under the IESPP.
In addition, this summary applies only to employees of a Broadcom subsidiary, who qualify as resident,
ordinarily resident and domiciled in the UK from the date of grant through and including the date of sale of
the underlying shares. If the Participant is a citizen or resident of another country for local tax law
purposes, or if they are not treated as resident, ordinarily resident and domiciled in the UK during the life
of the award(s), the income and social tax information below may not be applicable. Furthermore, this
information is general in nature and does not discuss all of the various laws, rules and regulations that
may apply. It may not apply to a Participant’s particular tax or financial situation, and Broadcom is not in
a position to assure any particular tax result. Accordingly, Participants are strongly advised to seek
appropriate professional advice as to how the tax or other laws in the UK apply to their specific situation.
IESPP
Enrollment in the IESPP
The Participant is not subject to income tax or national insurance contributions (“NICs”) when he or she
enrolls in the IESPP or a new Purchase Interval begins.
Purchase of Common Stock
When shares of Class A Common Stock are purchased under the IESPP, the Participant will be subject to
income tax on the discount. In addition, the Participant will be subject to employee NICs on the discount.
60
1301972-v8\NYCDMS
PART II — PROSPECTUS
Sale of Common Stock
The subsequent sale of the shares of Class A Common Stock acquired under the IESPP may result in a
taxable capital gain (or allowable capital loss). The taxable capital gain is the difference between the
market value of the shares on the Purchase Date and the sale proceeds. Capital gains tax is payable at
a flat rate on gains where the total of the Participant’s chargeable gains for the year, when aggregated
with the Participant’s taxable income for the year, does not exceed the basic income tax band plus his or
her available income tax personal allowance and any other income tax relief. To the extent the
Participant’s chargeable gains, when added to the Participant’s taxable income for the year, exceed the
basic rate income tax band, capital gains tax will be due at a higher rate. Capital gains tax is only
payable on gains from all sources in excess of the annual personal exemption in any tax year.
The Participant will need to take into account the share identification rules in calculating his or her capital
gains liability.
Further, the Participant should consult with his or her personal tax advisor if the Participant received a
return of capital payment on the shares of Class A Common Stock acquired on the Purchase Date as the
taxable amount of the capital gain may be different.
Withholding and Reporting
The Participant’s employer is required to withhold and report the income tax and NICs due when shares
of Class A Common Stock are purchased under the IESPP and is required account for these amounts to
the HM Revenue & Customs (“HMRC”). Broadcom may refuse to deliver the Participant’s shares of
Common Stock until all such amounts have been repaid or covered.
If, for any reason, income tax is not withheld by the Participant’s employer, the Participant is required to
reimburse the income tax due to the Participant’s employer within 90 days of the end of the UK tax year
in which the event giving rise to such income tax liability occurs or such other period specified in Section
222(1)(c) of the UK Income Tax (Earnings and Pensions) Act 2003 (the “Due Date”). If payment is not
made by the Due Date, the amount of any uncollected income tax due from the Participant will constitute
a loan owed by him or her to the Participant’s employer, it will be immediately due and repayable by the
Participant, and Broadcom and/or the Participant’s employer may recover it from the Participant at any
time thereafter by any of the means referred to in the IESPP or the Participant’s subscription agreement.
Notwithstanding the foregoing, in the event that the Participant is a director or an executive officer of the
Broadcom (within the meaning of such terms for purposes of Section 13(k) of the U.S. Securities
Exchange Act of 1934, as amended), the Participant will not be eligible for such a loan to cover his or her
income tax liability. In this case, the amount of any uncollected income taxes may constitute a benefit to
the Participant on which additional income tax and NICs may be payable. The Participant will be
responsible for reporting and paying any income tax due on this additional benefit directly to HMRC under
the self-assessment regime and for reimbursing Broadcom or his or her employer (as appropriate) for the
value of any employee NICs due on this additional benefit, which may be recovered by Broadcom and/or
the Participant’s employer at any time the thereafter by any of the means referred to in the IESPP or the
Participant’s subscription agreement.
The Participant is responsible for reporting all income resulting from his or her participation in the IESPP.
The Participant will be responsible for paying and reporting any taxes due as a result of the sale of shares
of Class A Common Stock acquired under the IESPP.
61
1301972-v8\NYCDMS
EXHIBITS
62
1301972-v8\NYCDMS
EXHIBIT I
BROADCOM CORPORATION
2007 INTERNATIONAL EMPLOYEE STOCK PURCHASE PLAN,
AS AMENDED AND RESTATED
I
BROADCOM CORPORATION
2007 INTERNATIONAL EMPLOYEE STOCK PURCHASE PLAN
(as amended and restated February 16, 2012)
I.
PURPOSE OF THE PLAN
This International Employee Stock Purchase Plan is intended to promote the
interests of Broadcom Corporation by providing eligible employees of its Foreign Subsidiaries
with the opportunity to acquire a proprietary interest in the Corporation through participation in a
payroll-deduction based employee stock purchase plan.
Capitalized terms herein shall have the meanings assigned to such terms in the
attached Appendix.
This February 16, 2012 amendment and restatement shall become effective
immediately upon the close of the Purchase Interval in effect as of the date of approval of the
amendment and restatement of the U.S. Plan by the Corporation’s shareholders at the 2012
Annual Meeting of Shareholders. In the event such shareholder approval of the U.S. Plan is not
obtained, then the revisions to the Plan effected by this amendment and restatement shall have no
force and effect; however, the 2007 International Employee Stock Purchase Plan shall continue
in effect in accordance with the terms and provisions of the plan in effect immediately prior to
this amendment and restatement.
II.
ADMINISTRATION OF THE PLAN
A.
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 to comply with the requirements of applicable law. Decisions of the Plan
Administrator shall be final and binding on all parties having an interest in the Plan.
B.
The Plan Administrator shall have the discretionary authority to require (i)
that the shares purchased on behalf of each Participant be deposited directly into a brokerage
account which the Corporation shall establish for the Participant at a Corporation-designated
brokerage firm; and (ii) that any shares deposited in such account remain in that account, and not
be transferred to another brokerage account, including another account with the same brokerage
firm, until the date those shares are to be sold, transferred by gift or otherwise transferred.
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. As of February 16, 2012, the maximum number of shares of Common Stock
NYCDMS/1211015.1
reserved for issuance in the aggregate over the term of the Plan and the U.S. Plan is 59,264,053
shares. Each share of Common Stock issued under this Plan or the U.S. Plan shall automatically
reduce on a one-for-one basis the aggregate number of shares of Common Stock available for
issuance under this Plan and the U.S. Plan.
B.
The number of shares of Common Stock available for issuance in the
aggregate under this Plan and the U.S. Plan shall automatically increase on the first trading day
of January each calendar year during the term of the Plan by an amount equal to one and one
quarter percent (1.25%) of the aggregate number of shares of Class A Common Stock and Class
B Common Stock outstanding on the last trading day in December of the immediately preceding
calendar year, but in no event shall any such annual increase exceed 10,000,000 shares, in the
aggregate.
C.
Should any change be made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of shares, spin-off
transaction or other change affecting the outstanding Common Stock as a class without the
Corporation’s receipt of consideration or should the value of outstanding shares of Common
Stock be substantially reduced as a result of a spin-off transaction or an extraordinary dividend
or distribution, then equitable adjustments shall be made by the Plan Administrator to (i) the
maximum number and class of securities issuable in the aggregate under the Plan and the U.S.
Plan, (ii) the maximum number and/or class of securities by which the share reserve under the
Plan and the U.S. Plan is to increase in the aggregate each calendar year pursuant to the
provisions of Section III.B, (iii) the maximum number and class of securities purchasable per
Participant on any one Purchase Date, (iv) the maximum number and class of securities
purchasable in total by all Participants on any one Purchase Date and (v) the number and class of
securities and the price per share in effect under each outstanding purchase right. The
adjustments shall be made in such manner as the Plan Administrator deems appropriate to
prevent the dilution or enlargement of benefits under the Plan and the outstanding purchase
rights thereunder, and such adjustments shall be final, binding and conclusive.
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.
Except as provided in Section IV.C, each offering period shall be twentyfour (24) months, unless the Plan Administrator determines that a shorter period, or longer period
not to exceed twenty-seven (27) months, should apply with respect to one or more offering
periods.
C.
Should the last scheduled Purchase Date in the offering period occur at a
time when the Corporation cannot effect an issuance of Common Stock under the Plan in
compliance with applicable securities laws, including (without limitation) the registration
requirements of the 1933 Act, then the duration of that offering period shall automatically be
NYCDMS/1211015.1
2
extended until the earlier of (a) the first date on which such issuance of Common Stock can be
effected in compliance with applicable securities laws, with such date to serve as the final
Purchase Date for that offering period, or (b) the expiration of the twenty-seven (27)-month
period measured from the start date of that offering period.
D.
Each offering period shall consist of a series of one or more successive
Purchase Intervals. Except as provided in Section IV.C, Purchase Intervals shall run from the
first U.S. business day in May each year to the last U.S. business day in October of the same year
and from the first U.S. business day in November each year to the last U.S. business day in April
of the following year.
E.
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 (subject to the
extension provisions of Section IV.C), 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 Quarterly Entry Date within that offering period, provided he or she remains an
Eligible Employee on such Quarterly Entry Date (and does not remain enrolled in such offering
period on such Quarterly Entry Date by virtue of a prior enrollment in such offering period).
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 Quarterly Entry Date
within that offering period on which he or she is an Eligible Employee (provided he or she does
not remain enrolled in such offering period on such Quarterly Entry Date by virtue of a prior
enrollment in such offering period).
C.
Each Foreign Subsidiary listed in attached Schedule A shall be a
participating Foreign Subsidiary in this Plan. Each corporation that becomes a Foreign
Subsidiary at any time after November 11, 2010 shall automatically become a participating
corporation in the Plan effective as of the first Quarterly Entry Date coincident with or next
following the date on which it becomes such a subsidiary, or such other time as determined by
the Plan Administrator.
The date on which an individual enters an offering period shall be
D.
designated his or her Entry Date for purposes of that offering period; provided however that if an
individual Withdraws from an offering period and then reenrolls in the same offering period, his
or her Entry Date will be the subsequent date on which the individual reenrolls in the offering
NYCDMS/1211015.1
3
period with respect to payroll deductions on or following such reenrollment in such offering
period.
E.
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) prior to the applicable Entry Date.
VI.
PAYROLL DEDUCTIONS
A.
Except to the extent otherwise determined by the Plan Administrator,
payment for shares of Common Stock purchased under the Plan shall be effected by means of the
Participant’s authorized payroll deduction.
B.
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%) of Cash Earnings during such
offering period, in the aggregate. The deduction rate so authorized 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 by filing the appropriate form with the
Plan Administrator. The reduced rate shall become effective on the first pay day
of the month following the month in which such form is filed or, if later, the first
pay day that is at least seven days after the date on which such form is filed, and
there shall be no limit on the number of such reductions a Participant may effect
during a Purchase Interval. If at any time during a Purchase Interval a Participant
reduces his or her rate of payroll deduction to zero percent (0%), then such
Participant shall be deemed to Withdraw from the Plan in accordance with and
subject to Section VII.F and all amounts previously deducted from such
Participant’s payroll during such Purchase Interval shall be promptly refunded to
the Participant in accordance with Section VII.F.(i).
(ii)
The Participant may not increase the payroll deduction rate
to be in effect for an offering period at any time after the start of that offering
period, provided, however, that if a Participant Withdraws from an offering period
and later reenrolls in that same offering period in accordance with Section VII.F,
the Participant can reenroll in such manner with a higher (or lower) payroll
deduction rate than that applicable to the original enrollment. If the Participant
does not Withdraw from an offering period, then the Participant can only increase
his or her rate of payroll deduction for a subsequent offering period (if any) by
filing the appropriate form with the Plan Administrator prior to the start of such
offering period (if any), and any such increased rate (which may not exceed the
NYCDMS/1211015.1
4
fifteen percent (15%) maximum) shall become effective with the start date of that
offering period.
C.
The payroll deduction authorized by the Participant shall be collected in
the currency in which paid by the Foreign Subsidiary and converted into U.S. Dollars on each
Purchase Date on the basis of the exchange rate in effect for such date. The Plan Administrator
shall have the absolute discretion to determine the applicable exchange rate to be in effect for
each Purchase Date by any reasonable method (including, without limitation, the exchange rate
actually used by the Corporation for its intra-company financial transactions for the month of
such conversion). Any changes or fluctuations in the exchange rate at which the payroll
deductions collected on the Participant’s behalf are converted into U.S. Dollars on each Purchase
Date shall be borne solely by the Participant.
D.
Payroll deductions shall begin on the first pay day following the
Participant’s applicable 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, initially in the currency in which paid by the Foreign Subsidiary until
converted into U.S. Dollars. Accordingly, all purchases of Common Stock under the Plan are to
be made with the U.S. Dollars into which the payroll deductions have been converted on each
applicable Purchase Date. No interest shall be paid on the balance from time to time outstanding
in such account. Except to the extent otherwise required by local law, 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 or the Foreign Subsidiary and
used for general corporate purposes.
E.
Payroll deductions shall automatically cease upon the termination of the
Participant’s purchase right in accordance with the provisions of the Plan.
F.
Other than as set forth in Section VIII.B.(ii), 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; provided, however, that if
a Participant Withdraws from an offering period and then reenrolls in that same offering period,
that Participant shall be granted a new purchase right for that offering period on the subsequent
Entry Date. The purchase right shall be granted on the applicable Entry Date 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 (or, if such enrollment occurs on or after
the commencement of the last Purchase Interval in an offering period, in one installment), upon
the terms set forth below. The Participant shall execute a stock purchase agreement embodying
NYCDMS/1211015.1
5
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
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 (as converted into U.S. Dollars) 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 U.S. Dollar 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 applicable Entry Date into such 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 (as converted
into U.S. Dollars) by the applicable U.S. Dollar 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 9,000 shares (36,000 shares per
twenty-four (24)-month offering period), subject to periodic adjustments in the event of certain
changes in the Corporation’s capitalization. In addition, the maximum number of shares of
Common Stock purchasable in the aggregate by all Participants in this Plan and the U.S. Plan on
any one Purchase Date in any offering period beginning on or after October 30, 2008 shall not
exceed 4,000,000 shares, subject to periodic adjustments in the event of certain changes in the
Corporation’s capitalization. However, the Plan Administrator shall have the discretionary
authority, exercisable prior to the start of any offering period under the Plan, to increase or
decrease the limitations to be in effect for the number of shares purchasable per Participant and
in total by all Participants on each Purchase Date during that offering period.
E.
Excess Payroll Deductions. To the extent payroll deductions cannot be
applied to the purchase of whole shares of Common Stock on any Purchase Date, those payroll
deductions shall be promptly refunded, unless the Plan Administrator determines that such
deductions are to be applied to the purchase of fractional shares of Common Stock on each
Purchase Date within the offering period. Any payroll deductions not applied to the purchase of
Common Stock by reason of the limitation on the maximum number of shares purchasable per
NYCDMS/1211015.1
6
Participant or in total by all Participants on such Purchase Date shall be promptly refunded. All
refunds shall be in the currency in which paid by the Foreign Subsidiary.
F.
Withdrawal from Plan/Termination of Purchase Right: The following
provisions shall govern the withdrawal or the termination of outstanding purchase rights:
(i)
A Participant may, at any time prior to the next scheduled
Purchase Date in the offering period, withdraw from the Plan (“Withdraw”)
whether by means of reducing payroll deductions to zero percent (0%) or
expressly Withdrawing from the Plan (each, a “Withdrawal”), in either case, by
filing the appropriate form with the Plan Administrator (or its designated
representative), and no further payroll deductions shall be collected from the
Participant with respect to the offering period in which such Withdrawal occurs
unless and until such Participant reenrolls in that offering period in accordance
with Section VII.F.(ii). Any Participant who Withdraws from the Plan shall
receive a prompt refund of amounts deducted from such Participant’s payroll
during the Purchase Interval in which the Withdrawal occurs. For all purposes of
the Plan, the Withdrawal will be deemed to occur on the date on which the
Participant files the appropriate form with the Plan Administrator (or its
designated representative).
(ii)
If a Participant Withdraws from the Plan, the Participant
may reenroll in the Plan effective as of any Quarterly Entry Date that follows such
Withdrawal in the offering period in which such Withdrawal occurs, or in any
subsequent offering period. To resume participation in the Plan, such individual
must reenroll in the Plan (by making a timely filing of the prescribed enrollment
forms). If a Participant reenrolls in the offering period during which he or she
withdrew from the Plan, the Quarterly Entry Date on which the Participant
reenrolls in the Plan will be the Participant’s new Entry Date in such offering
period, and the Fair Market Value per share of Common Stock on that new Entry
Date will be used to determine the maximum purchase price per share for any
shares acquired by such Participant in that offering period subsequent to such
Entry Date.
(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 promptly
refunded in the currency in which paid by the Foreign Subsidiary. 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 prior to the Purchase Date for the Purchase Interval in
which such leave commences, to elect (a) to Withdraw from the Plan in
accordance with and subject to Section VII.F and promptly be refunded (in the
same currency in which paid by the Foreign Subsidiary) amounts deducted from
NYCDMS/1211015.1
7
such Participant’s payroll during the Purchase Interval in which the Withdrawal
occurs or (b) have such funds held for the purchase of shares on his or her behalf
on the next scheduled Purchase Date. Participants who take a leave of absence
and do not formally Withdraw from the Plan shall be considered to remain
enrolled in the offering period in which they take such leave unless and until such
Participant withdraws from the Plan. If the Participant fails to make an election,
as a default the Corporation will apply such funds to 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 (x) within three months
following the commencement of such leave or (y) prior to the expiration of any
longer period for which such Participant had reemployment rights with the
Corporation provided 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.
An individual who returns to active employment following a leave of absence that
exceeds in duration the applicable time period set forth in (x) or (y) above shall be
deemed to Withdraw from the Plan upon the expiration of such applicable time
period and shall be treated as a new Employee for purposes of subsequent
participation in the Plan and must accordingly reenroll in the Plan (by making a
timely filing of the prescribed enrollment forms).
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 applicable 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. For this purpose, payroll deductions shall be converted from the
currency in which paid by the Foreign Subsidiary into U.S. Dollars on the exchange rate in effect
on the purchase date. 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 total
by all Participants in this Plan and the U.S. Plan.
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
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 and the U.S. 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
NYCDMS/1211015.1
8
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.
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 that 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.
NYCDMS/1211015.1
9
IX.
EFFECTIVE DATE AND TERM OF THE PLAN
A.
The Plan was adopted by the Board on December 20, 2006 and became
effective on February 1, 2007, the start date of the first offering period implemented under the
Plan. This amendment and restatement was adopted by the Board on February 16, 2012 and shall
become effective immediately upon the close of the Purchase Interval in effect as of the date of
approval of the amendment and restatement of the U.S. Plan by the Corporation’s shareholders at
the 2012 Annual Meeting of Shareholders. In no event, however, shall any payroll deductions be
collected or purchase rights be exercised, and no shares of Common Stock shall be issued,
pursuant to the Plan unless the Corporation is at the time in compliance with all applicable
requirements of the 1933 Act (including the registration of the shares of Common Stock issuable
under the Plan on an appropriate and effective registration statement filed with the Securities and
Exchange Commission), all applicable listing requirements of any stock exchange on which the
Common Stock is listed for trading and all other applicable requirements established by law or
regulation.
B.
Unless sooner terminated by the Board, the Plan shall terminate upon the
earliest of (i) May 15, 2022, (ii) the date on which all shares available for issuance under the Plan
and the U.S. 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,
provided that any amendment or alteration shall not adversely affect the rights and obligations
with respect to purchase rights previously granted under the Plan unless the Participant consents
to such amendment or alteration.
B.
In no event may the Board effect any amendments or revisions to the Plan
without the approval of the Corporation’s shareholders to the extent any such amendment or
revision would require shareholder approval under any applicable law, rule or regulation.
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 Foreign Subsidiary 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
NYCDMS/1211015.1
10
without cause, subject to applicable law and any employment agreement between the Foreign
Subsidiary and the Participant.
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 Foreign Subsidiary shall have the right to take
whatever steps the Plan Administrator deems necessary or appropriate to comply with all
applicable withholding requirements, and the Corporation’s obligations to deliver shares under
this Plan shall be conditioned upon compliance with all such withholding requirements. Without
limiting the generality of the foregoing, the Corporation and each Foreign Subsidiary shall have
the right to withhold the required amounts from any other compensation or other amounts that it
may owe to the Participant, or to require the Participant to pay to the Corporation or the Foreign
Subsidiary any such amounts that the Corporation or the Foreign Subsidiary may be required to
withhold with respect to such shares. In this connection, the Plan Administrator may require the
Participant to notify the Plan Administrator, the Corporation or a Foreign Subsidiary before the
Participant sells or otherwise disposes of any shares acquired under the Plan.
E.
The Plan Administrator may adopt such procedures and subplans and
make such modifications as may be necessary or advisable to comply with local laws including
favorable tax laws.
NYCDMS/1211015.1
11
Schedule A
Corporations Participating in
International Employee Stock Purchase Plan
As of February 16, 2012
1.
Broadcom Asia Distribution Pte. Ltd.
23.
Broadcom Netherlands B.V.
2.
Broadcom Asia, Limited
24.
Broadcom Networking Israel Ltd.
3.
Broadcom (B.C.) ULC
25.
Broadcom Networks Spain, S.L.
4.
Broadcom Canada Ltd.
26.
Broadcom SARL (France)
5.
Broadcom Communications Israel Ltd.
27.
Broadcom Semiconductors Hellas S.A.
(Greece)
6.
Broadcom Communications Korea, Ltd.
28.
Broadcom Singapore Pte. Ltd.
7.
Broadcom Communications Netherlands B.V.
29.
Broadcom Sweden AB
8.
Broadcom Communications Technologies
Pvt. Ltd.
30.
Broadcom Sydney Pty Ltd.
9.
Broadcom Danmark ApS
31.
Broadcom Technology Israel Ltd.
10.
Broadcom Europe Limited
32.
Broadcom UK Ltd.
11.
Broadcom Finland Oy
33.
Broadcom Wireline Home Networking Ltd.
12.
Broadcom Germany GMBH
34.
SC Squared Ltd.
13.
Broadcom GPS Spain, S.L.
35.
[NetLogic Semiconductor Pvt Ltd
14.
Broadcom India Private Limited
36.
NetLogic Processors India Pvt Ltd
15.
Broadcom India Research Private Limited
37.
NetLogic Microsystems Asia HK Ltd Taiwan
Branch
16.
Broadcom India Technologies Private Limited
38.
17.
Broadcom International LLC
NetLogic Microsystems Int’l Ltd Taiwan
Branch
18.
Broadcom International Pte. Ltd.
39.
NetLogic Microsystems Korea, Inc.
19.
Broadcom Israel Research Ltd.
40.
20.
Broadcom Korea Research Ltd.
41.
NetLogic Microsystems Europe BV (French
Branch)
NetLogic Microsystems International HK Ltd
21.
Broadcom Mexico, S de R.L. de C.V.
42.
22.
Broadcom Multimedia Israel Ltd.
NYCDMS/1211015.1
NLME Sweden Filial till Netl Microsysetms
BV, the Netherlands]
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) such additional items of compensation as the Plan
Administrator may deem appropriate. Such Cash Earnings shall be calculated before any
appropriate deductions, as determined by the Plan Administrator.
C.
Change in Control shall mean a change in ownership or control of the
Corporation effected through any of the following transactions:
(i)
a shareholder-approved merger or consolidation in which
securities possessing more than fifty percent (50%) of the total combined voting
power of the Corporation’s outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately prior to
such transaction, or
(ii)
a shareholder-approved sale, transfer or other disposition of
all or substantially all of the Corporation’s assets in complete liquidation or
dissolution of the Corporation, or
(iii) the acquisition, directly or indirectly by any person or
related group of persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of the
Securities Exchange Act of 1934, as amended) 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 pursuant to a private transaction or series of
transactions with one or more of the Corporation’s shareholders.
D.
Code shall mean the U.S. Internal Revenue Code of 1986, as amended.
E.
Common Stock shall mean the Corporation’s Class A common stock.
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 that shall by appropriate action adopt the Plan.
NYCDMS/1211015.1
A-1
H.
Eligible Employee shall mean, unless otherwise determined by the Plan
Administrator, any person who is an employee of a Foreign Subsidiary and, unless otherwise
mandated by local law, such person is employed 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).
I.
Entry Date shall mean the date on which an Eligible Employee first
commences participation in the offering period in effect under the Plan in accordance with the
terms of the Plan, provided, however, that if an Eligible Employee Withdraws and reenrolls in
the offering period from which the Participant withdrew, the date on which he or she reenrolls in
such offering period shall instead be his or her Entry Date with respect to any payroll dates
occurring during such offering period and upon or subsequent to such reenrollment. The earliest
Entry Date under the Plan shall be the Effective Time.
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
Global Select Market (or the Nasdaq Global Market), then the Fair Market Value
shall be the closing selling price per share of Common Stock at the close of
regular trading hours (i.e. before after-hours trading begins) on the Nasdaq Global
Select Market (or the Nasdaq Global Market) on the date in question, as such
price is reported by the Nasdaq Global Select Market (or the Nasdaq Global
Market) either as reported on the Nasdaq website (www.nasdaq.com), or
otherwise. 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 other
Stock Exchange, then the Fair Market Value shall be the closing selling price per
share of Common Stock at the close of regular trading hours (i.e. before afterhours trading begins) on the date in question on the Stock Exchange determined
by the Plan Administrator to be the primary market for the Common Stock, as
such price is officially quoted in the composite tape of transactions on such
exchange. If there is no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
K.
Foreign Subsidiary shall mean any Corporate Affiliate with non-U.S.
Employees, unless otherwise determined by the Plan Administrator, provided the offer of the
Plan to such employees is permitted under local law. The Foreign Subsidiaries participating in
the Plan as of the February 16, 2012 are listed in attached Schedule A. The Plan Administrator
shall have the authority to terminate any Corporate Affiliate’s status as a Foreign Subsidiary for
any reason, effective immediately following the close of any Purchase Interval. The Plan
Administrator shall have the authority to terminate any Corporate Affiliate’s status as a Foreign
Subsidiary at any time as may be necessary or advisable to comply with local laws.
NYCDMS/1211015.1
A-2
L.
1933 Act shall mean the U.S. Securities Act of 1933, as amended.
M.
Participant shall mean any Eligible Employee of a Foreign Subsidiary
who is actively participating in the Plan.
N.
Plan shall mean the Corporation’s 2007 International Employee Stock
Purchase Plan, as set forth in this document, and as may be amended from time to time.
O.
Plan Administrator shall mean the committee of two (2) or more Board
members appointed by the Board to administer the Plan.
P.
Purchase Date shall mean the last U.S. business day of each Purchase
Interval.
Q.
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.
R.
Quarterly Entry Date shall mean the first U.S. business day in February,
May, August and November each year on which an Eligible Employee may enter an offering
period.
S.
Stock Exchange shall mean either the American Stock Exchange, the
Nasdaq Global Select Market, the Nasdaq Global Market or the New York Stock Exchange.
T.
U.S. Plan shall mean the Broadcom Corporation 1998 Employee Stock
Purchase Plan, as amended and restated.
NYCDMS/1211015.1
A-3
BROADCOM CORPORATION
2007 INTERNATIONAL EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED AND RESTATED FEBRUARY 16, 2012)
AMENDMENT NO. 1
Effective October 18, 2013, the Broadcom Corporation 2007 International
Employee Stock Purchase Plan, as amended and restated February 16, 2012 (the "Plan")
is hereby further amended as follows:
1. Section VII.D. of the Plan is hereby deleted in its entirety and replaced with the
following new Section VII.D.:
“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 (as converted into U.S. Dollars) by the
applicable U.S. Dollar 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 9,000
shares (36,000 shares per twenty-four (24)-month offering period), subject to
periodic adjustments in the event of certain changes in the Corporation’s
capitalization. In addition, the maximum number of shares of Common Stock
purchasable in the aggregate by all Participants in this Plan and the U.S. Plan on
any one Purchase Date in any offering period beginning on or after November 1,
2013 shall not exceed 5,000,000 shares, subject to periodic adjustments in the
event of certain changes in the Corporation’s capitalization. However, the Plan
Administrator shall have the discretionary authority, exercisable prior to the start
of any offering period under the Plan, to increase or decrease the limitations to be
in effect for the number of shares purchasable per Participant and in total by all
Participants on each Purchase Date during that offering period
2. Except as modified by this Amendment No. 1, all the terms and provisions of the
Plan shall continue in full force and effect.
3. This Amendment No. 1 was duly approved by the Plan Administrator on
October 18, 2013.
EXHIBIT II
CURRENT REPORT ON FORM 8-K FURNISHED BY BROADCOM CORPORATION
TO THE SEC ON APRIL 21, 2015
II
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): April 21, 2015
BROADCOM CORPORATION
(Exact Name of Registrant as Specified in Charter)
California
000-23993
33-0480482
(State or Other Jurisdiction of
Incorporation)
(Commission
File Number)
(IRS Employer
Identification No.)
5300 California Avenue, Irvine, CA 92617
(Address of Principal Executive Offices)(Zip Code)
Registrant’s telephone number, including area code: (949) 926-5000
Not Applicable
(Former Name or Former Address, if Changed since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
The information in Item 2.02 of this Current Report, including Exhibit 99.1, is being furnished and shall not be deemed “filed” for the purposes of
Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this
Current Report shall not be incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933,
as amended, regardless of any general incorporation language contained in such filing.
On April 21, 2015 , Broadcom Corporation (the “Company” or “Broadcom”) issued a press release announcing unaudited financial results for the
three months ended March 31, 2015 . A copy of the press release is furnished herewith as Exhibit 99.1 and is incorporated by reference herein.
Discussion of Non-GAAP Financial Measures
Broadcom reports the following measures in accordance with U.S. Generally Accepted Accounting Principles, or GAAP and on a non-GAAP basis:
(i) cost of revenue, (ii) gross profit, (iii) gross margin, (iv) net income, and (v) diluted net income per share, referred to collectively as “non-GAAP
financial measures.” These non-GAAP financial measures exclude certain charges related to acquisitions and non-recurring, infrequent or unusual
charges and gains that are driven primarily by discrete events that management does not consider to be directly related to the Company’s core
operating performance. Non-GAAP net income per share is calculated by dividing non-GAAP net income by weighted average shares outstanding
(diluted).
Broadcom believes that the presentation of these non-GAAP financial measures provides important supplemental information to management and
investors regarding financial and business trends relating to the Company’s financial condition and results of operations. Broadcom’s management
believes that the use of these non-GAAP financial measures provides consistency and comparability among and between results from prior periods
or forecasts and future prospects, and also facilitates comparisons with other companies in the Company’s industry, many of which use similar nonGAAP financial measures to supplement their GAAP results. Broadcom’s management has historically used these non-GAAP financial measures
when evaluating operating performance, because Broadcom believes that the inclusion or exclusion of the items described below provides insight
into its core operating results, its ability to generate cash and underlying business trends affecting performance. Broadcom has chosen to provide
this information to investors to enable them to perform additional analysis of past, present and future operating performance and as a supplemental
means to evaluate the Company’s ongoing core operations. Externally, Broadcom believes that these non-GAAP financial measures, when used in
conjunction with the Company’s GAAP financial information, is useful to investors in their assessment of Broadcom’s operating performance and
the valuation of the Company.
Internally, these non-GAAP financial measures are significant measures used by management for purposes of:
•
supplementing the financial results and forecasts reported to the Company’s board of directors;
•
evaluating Broadcom’s operating performance;
•
managing and benchmarking performance internally across Broadcom’s businesses and externally against peers;
•
determining a portion of bonus compensation for executive officers and certain other key employees;
•
establishing internal operating budgets;
•
calculating return on investment for development programs and growth initiatives;
•
comparing performance with internal forecasts and targeted business models; and
•
evaluating and valuing potential acquisition candidates.
These Non-GAAP financial measures are adjusted for one or more of the following items:
•
Acquisition-related charges. Acquisition-related charges include the amortization of purchased intangible assets and the amortization of
acquired inventory valuation step-up (as well as the impairment of goodwill and purchased intangible assets primarily consisting of
developed technology and in-process research and development assets). These charges are not factored into management’s evaluation
of potential acquisitions, or of the Company’s performance after completion of acquisitions, because they do not affect the Company’s
current cash position, are not related to core operating performance and had Broadcom internally developed the technology acquired,
the amortization of intangible assets would have been expensed in prior periods. In addition, the frequency and amount of such charges
vary significantly based on the timing and magnitude of the
Company’s acquisition transactions, the maturities of the businesses being acquired, and depending on the nature of the consideration
paid in connection with acquisitions, the then fair market value of Broadcom’s Class A common stock.
•
Other charges and gains. Other charges and gains consist of impairment of other long-lived assets, settlement costs (gains),
restructuring costs (reversals), charitable contributions, gains on sale of assets and gains (losses) on strategic investments and certain
inventory charges relating to Broadcom's decision to exit from its cellular baseband business, all of which occur on a sporadic basis and
vary greatly in amount. Management excludes these items when evaluating the Company’s operating performance because these
amounts do not affect core operations and because the frequency and variability in the nature of the charges can vary significantly from
period to period. Excluding this data provides investors with a basis to compare the Company’s performance against the performance of
other companies without this variability.
•
Income tax expense (benefit). Represents the reversal of a portion of the Company's valuation allowance that was directly related to the
establishment of a deferred tax liability associated with the step-up of acquired identifiable intangible assets allocated to jurisdictions in
which the statutory tax rate is above zero, as well as tax benefits resulting from the reduction of certain foreign deferred tax liabilities
due to the impairment of long-lived assets.
Non-GAAP financial measures are not calculated in accordance with GAAP, and should be considered supplemental to, and not as a substitute for,
or superior to, financial measures calculated in accordance with GAAP. In addition, these non-GAAP measures are not based on any
comprehensive set of accounting rules or principles. Non-GAAP financial measures have limitations in that they do not reflect all of the costs
associated with the operations of Broadcom’s business as determined in accordance with GAAP. As a result, you should not consider these
measures in isolation or as a substitute for analysis of Broadcom’s results as reported under GAAP. Broadcom expects to continue to incur expenses
similar to the non-GAAP adjustments described above, and exclusion of these items from Broadcom’s non-GAAP financial measures should not be
construed as an inference that these costs are unusual, infrequent or non-recurring. Some of the limitations in relying on non-GAAP financial
measures are:
•
Although amortization and impairment of purchased intangible assets do not directly affect the Company’s current cash position, such
expense represents the declining value of the technology and other intangible assets that were acquired. These assets are amortized over
their respective expected economic lives or impaired, when appropriate. The expense associated with this decline in value is excluded
from these non-GAAP financial measures, and therefore these non-GAAP financial measures do not reflect the costs of acquired
intangible assets that supplement the Company’s research and development efforts.
•
Broadcom periodically acquires and assimilates other companies or businesses, and expects to continue to experience acquisitionrelated charges in the future. Broadcom also periodically enters into settlement agreements in connection with various litigation
matters. These costs can directly impact the amount of available funds or could be dilutive to shareholders in the future.
Item 9.01 Financial Statements and Exhibits.
(d)
Exhibits .
99.1 — Press Release dated April 21, 2015 of the Registrant.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BROADCOM CORPORATION,
a California corporation
April 21, 2015
By:
/s/ Eric K. Brandt
Eric K. Brandt
Executive Vice President and
Chief Financial Officer
Broadcom Reports First Quarter 2015 Results
IRVINE, Calif. – April 21, 2015 –
GAAP
$2.06 billion
$.34
(including $.23 of
impairment charges)
First Quarter 2015 Results
Net revenue
Net income per share
Non-GAAP
$.64
($.04 better than First Call
consensus)
Broadcom Corporation (NASDAQ: BRCM), a global innovation leader in semiconductor solutions for wired and wireless
communications, today reported unaudited financial results for its first quarter ended March 31, 2015 .
“Broadcom delivered better-than-expected results in the March quarter driven by strength in the high-end smartphone and broadband
access markets,” said Scott McGregor, Broadcom’s President and Chief Executive Officer. “Looking to the June quarter, we see
operating performance continuing to strengthen on tight operating expense discipline and strong margins, consistent with our objective
of driving profitable growth.”
Net revenue for the first quarter of 2015 was $2.06 billion . This represents a decrease of 4.0% compared with the $2.14 billion
reported for the fourth quarter of 2014 and an increase of 3.7% compared with the $1.98 billion reported for the first quarter of 2014 .
Net income computed in accordance with U.S. generally accepted accounting principles (GAAP) for the first quarter of 2015 was $209
million , or $0.34 per share (diluted), compared with GAAP net income of $390 million , or $0.64 per share (diluted), for the fourth
quarter of 2014 and GAAP net income of $165 million , or $0.28 per share (diluted), for the first quarter of 2014 .
GAAP net income for the first quarter of 2015 included impairment charges for long-lived assets of $143 million, or $0.23 per share.
GAAP net income for the fourth quarter of 2014 included charges for restructuring and the impairment of long-lived assets, primarily
related to Broadcom's decision to exit from its cellular baseband business, of $30 million, or $0.05 per share. GAAP net income for the
first quarter of 2014 included impairment charges for long-lived assets of $25 million, or $0.04 per share, and a net gain on sale of
assets $52 million, or $0.09 per share.
In addition to GAAP results, Broadcom reports adjusted net income and adjusted net income per share, referred to respectively as
“non-GAAP net income” and “non-GAAP diluted net income per share.” A discussion of Broadcom’s use of these and other non-GAAP
financial measures is set forth below. Reconciliations of GAAP to non-GAAP financial measures for the three months ended March 31,
2015 , December 31, 2014 and March 31, 2014 appear in the financial statements portion of this release under the heading
“Unaudited Schedule of Selected GAAP to Non-GAAP Adjustments.”
Non-GAAP net income for the first quarter of 2015 was $390 million , or $0.64 per share (diluted), compared with non-GAAP net
income of $463 million , or $0.76 per share (diluted), for the fourth quarter of 2014 and non-GAAP net income of $197 million , or
$0.33 per share (diluted), for the first quarter of 2014 .
Conference Call Information
As previously announced, Broadcom will conduct a conference call with analysts and investors to discuss its first quarter 2015
financial results and current financial prospects today at 1:45 p.m. Pacific Time (4:45 p.m. Eastern Time). The conference call will be
broadcast via webcast over the Internet. To listen to the webcast, or to view the financial and other statistical information required by
Securities and Exchange Commission (SEC) Regulation G relating to the conference call, please visit the Investors section of the
Broadcom website at www.broadcom.com/
-more-
investors . The webcast will be recorded and available for replay until 11:59 p.m. Pacific Time on Thursday, May 21, 2015 .
The financial results included in this release are unaudited. The audited financial statements of the company for the year ended
December 31, 2014 are included in Broadcom’s Annual Report on Form 10-K, filed with the SEC on January 29, 2015.
About Broadcom
Broadcom Corporation (NASDAQ: BRCM), a FORTUNE 500 ® company, is a global leader and innovator in semiconductor solutions
for wired and wireless communications. Broadcom ® products seamlessly deliver voice, video, data and multimedia connectivity in the
home, office and mobile environments. With one of the industry’s broadest portfolio of state-of-the-art system-on-a-chip solutions,
Broadcom is changing the world by Connecting everything ® . For more information, go to www.broadcom.com .
Note Regarding Use of Non-GAAP Financial Measures
Broadcom reports the following measures in accordance with GAAP and on a non-GAAP basis: (i) cost of revenue, (ii) gross profit,
(iii) gross margin, (iv) net income (loss), and (v) diluted net income (loss) per share (EPS). Broadcom's non-GAAP cost of revenue,
non-GAAP gross profit, and non-GAAP gross margin excludes certain charges related to acquisitions and certain inventory charges
relating to its decision to exit the cellular baseband business. Acquisition-related charges include the amortization of purchased
intangible assets and the amortization of acquired inventory valuation step-up. In addition to the exclusions noted above, Broadcom's
non-GAAP net income and diluted net income per share also exclude impairment of long-lived assets, settlement costs (gains),
restructuring costs (reversals), charitable contributions, gain on sale of assets, gains (losses) on strategic investments, other charges
(gains), tax benefits resulting from reductions in U.S. valuation allowance on certain deferred tax assets due to the recording of net
deferred tax liabilities for identifiable intangible assets under purchase accounting, and tax benefits resulting from the reduction of
certain foreign deferred tax liabilities due to the impairment of long-lived assets. Reconciliations of GAAP to non-GAAP financial
measures for the three months ended March 31, 2015 , December 31, 2014 and March 31, 2014 , respectively, appear in the financial
statements portion of this release under the heading “Unaudited Schedule of Selected GAAP to Non-GAAP Adjustments.” Some totals
or amounts may not add or conform to prior period presentations due to rounding.
Broadcom believes that the presentation of these non-GAAP measures provides important supplemental information to management
and investors regarding financial and business trends relating to its financial condition and results of operations. Broadcom’s
management believes that the use of these non-GAAP financial measures provides consistency and comparability among and
between results from prior periods or forecasts and future prospects, and also facilitates comparisons with other companies in its
industry, many of which use similar non-GAAP financial measures to supplement their GAAP results. Broadcom’s management has
historically used these non-GAAP financial measures when evaluating operating performance, because they believe that the inclusion
or exclusion of the items described above provides insight into core operating results, the ability to generate cash and underlying
business trends affecting performance. Broadcom has chosen to provide this information to investors to enable them to perform
additional analysis of past, present and future operating performance and as a supplemental means to evaluate ongoing core
operations. The non-GAAP financial information presented herein should be considered supplemental to, and not as a substitute for,
or superior to, financial measures calculated in accordance with GAAP.
For additional information on the items excluded by Broadcom from one or more of its non-GAAP financial measures, refer to the
Form 8-K regarding this release furnished today to the SEC.
Cautions Regarding Forward-Looking Statements:
All statements included or incorporated by reference in this release and the related conference call for analysts and investors, other
than statements or characterizations of historical fact, are forward-looking statements within the meaning of the federal securities
laws, including the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on Broadcom's
current expectations, estimates and projections about its business and industry, management’s beliefs, and certain assumptions made
by Broadcom, all of which are
-more-
subject to change. Forward-looking statements can often be identified by words such as “anticipates,” “expects,” “intends,” “plans,”
“predicts,” “believes,” “seeks,” “estimates,” “may,” “will,” “should,” “would,” “could,” “potential,” “continue,” “ongoing,” similar
expressions, and variations or negatives of these words. Examples of such forward-looking statements include, but are not limited to,
guidance provided on future revenue, product gross margin and operating expenses for the second quarter of 2015 (on both a GAAP
and non-GAAP basis). These forward-looking statements are not guarantees of future results and are subject to risks, uncertainties
and assumptions that could cause Broadcom's actual results to differ materially and adversely from those expressed in any forwardlooking statement.
These risks and uncertainties include, but are not limited to the following:
•
Broadcom's quarterly operating results may fluctuate significantly.
•
Broadcom depends on a few significant customers for a substantial portion of its revenue.
•
Broadcom may fail to appropriately adjust its operations in response to changes in its strategy or market demand.
•
Broadcom faces intense competition.
•
Broadcom manufactures and sells complex products and may be unable to successfully develop and introduce new
products.
•
Broadcom is exposed to risks associated with its international operations.
•
Broadcom's operating results may be adversely impacted by worldwide economic uncertainties and specific conditions in
the markets it addresses.
•
Broadcom may be unable to attract, retain or motivate key personnel.
•
Broadcom's stock price is highly volatile.
•
Broadcom's business is subject to potential tax liabilities.
•
Broadcom may be required to defend against alleged infringement of intellectual property rights of others and/or may be
unable to adequately protect or enforce its own intellectual property rights.
•
Broadcom faces risks associated with its acquisition strategy.
•
Broadcom is subject to order and shipment uncertainties.
•
Broadcom depends on third parties to fabricate, assemble and test its products.
•
Broadcom's systems are subject to security breaches and other cybersecurity incidents.
•
Government regulation may adversely affect Broadcom's business.
•
Broadcom's future ability to return capital to shareholders in the form of dividends or share repurchases may be impacted
by the availability of U.S. cash.
•
Broadcom's articles of incorporation and bylaws contain anti-takeover provisions.
•
Broadcom's co-founders and their affiliates may strongly influence the outcome of matters that require the approval of
Broadcom's shareholders.
Broadcom's Annual Report on Form 10-K for the year ended December 31, 2014 , subsequent Quarterly Reports on Form 10-Q,
recent Current Reports on Form 8-K, and other SEC filings, discuss the foregoing risks as well as other important risk factors that
could contribute to such differences or otherwise affect Broadcom's business, results of operations and financial condition. The
forward-looking statements used in this release and the related conference call for analysts and investors speak only as of the date
they are made. Broadcom undertakes no obligation to revise or update publicly any forward-looking statement to reflect future events
or circumstances.
Broadcom ® , the pulse logo, Connecting everything ® , and the Connecting everything logo are among the trademarks of Broadcom Corporation and/or its affiliates in
the United States, certain other countries and/or the EU. Any other trademarks or trade names mentioned are the property of their respective owners.
-more-
BROADCOM CORPORATION
Unaudited GAAP Condensed Consolidated Statements of Income
(In millions, except per share amounts)
Three Months Ended
Net revenue
Cost of revenue
Gross profit
Operating expenses:
Research and development
Selling, general and administrative
Amortization of purchased intangible assets
Impairments of long-lived assets
Restructuring costs, net
Settlement costs (gains)
Other gains, net
Total operating expenses
Income from operations
Interest expense, net
Other income, net
Income before income taxes
Provision for income taxes
Net income
$
March 31,
December 31,
2015
2014
2,058
972
1,086
$
March 31,
2014
2,143
1,012
1,131
$
1,984
1,004
980
$
539
177
1
143
7
—
(4)
863
223
(5)
—
218
9
209 $
530
173
3
14
16
(4)
—
732
399
(9)
5
395
5
390 $
636
185
9
25
5
2
(52)
810
170
(5)
3
168
3
165
Net income per share (basic)
$
0.35
$
0.65
$
0.28
Net income per share (diluted)
$
0.34
$
0.64
$
0.28
Weighted average shares (basic)
600
596
584
Weighted average shares (diluted)
613
610
590
Dividends per share
$
-more-
0.14
$
0.12
$
0.12
BROADCOM CORPORATION
Unaudited Condensed Consolidated Statements of Cash Flows
(In millions)
Three Months Ended
Operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Stock-based compensation expense
Acquisition-related items:
Amortization of purchased intangible assets
Impairments of long-lived assets
Loss (gain) on sale of assets and other
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net
Inventory
Prepaid expenses and other assets
Accounts payable
Deferred revenue
Other accrued and long-term liabilities
Net cash provided by (used in) operating activities *
Investing activities
Net purchases of property and equipment
Net cash paid for acquired companies
Proceeds from sale (purchases) of certain assets and other
Purchases of marketable securities
Proceeds from sales and maturities of marketable securities
Net cash provided by (used in) investing activities
Financing activities
Repurchases of Class A common stock
Dividends paid
Proceeds from issuance of common stock
Minimum tax withholding paid on behalf of employees for restricted stock units
Net cash used in financing activities
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
$
$
March 31,
December 31,
March 31,
2015
2014
2014
209
$
390
$
165
39
90
37
97
52
120
37
143
3
45
14
3
59
25
(49)
(12)
(99)
(65)
(58)
(6)
(306)
(25)
134
93
7
(176)
(11)
—
633
61
(5)
4
(8)
115
67
606
(156)
—
(15)
(937)
579
(529)
(48)
(5)
2
(2,003)
1,724
(330)
(78)
—
90
(477)
503
38
(335)
(84)
148
(43)
(314)
(868)
2,545
1,677 $
(104)
(72)
198
(34)
(12)
291
2,254
2,545 $
—
(70)
54
(31)
(47)
597
1,657
2,254
* Net cash used in operating activities reflects additional build of inventory and early payments of certain liabilities to ensure business continuity
during the Company's transition to a new enterprise resource planning system in April 2015. For further discussion, please see the Company's
quarterly report on Form 10-Q for the three months ended March 31, 2015, when it is filed.
-more-
BROADCOM CORPORATION
Unaudited Condensed Consolidated Balance Sheets
(In millions)
March 31,
2015
December 31,
2014
ASSETS
Current assets:
Cash and cash equivalents
Short-term marketable securities
Accounts receivable, net
Inventory
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Long-term marketable securities
Goodwill
Purchased intangible assets, net
Other assets
$
$
Total assets
1,677
1,274
821
630
154
4,556
620
2,533
3,695
490
168
12,062
$
431
172
37
565
1,205
1,593
262
$
$
2,545
1,061
804
531
131
5,072
516
2,383
3,710
664
126
12,471
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable
Wages and related benefits
Deferred revenue and income
Accrued liabilities
Total current liabilities
Long-term debt
Other long-term liabilities
Commitments and contingencies
Shareholders' equity
$
$
Total liabilities and shareholders’ equity
9,002
12,062
$
503
220
36
791
1,550
1,593
277
9,051
12,471
UNAUDITED SUPPLEMENTAL FINANCIAL INFORMATION
(In millions)
March 31,
2015
Cash and cash equivalents
Short-term marketable securities
Long-term marketable securities
$
Total cash, cash equivalents and marketable securities
$
Decrease from prior year end
$
-more-
1,677
1,274
2,533
5,484
(505)
December 31,
2014
$
$
2,545
1,061
2,383
5,989
BROADCOM CORPORATION
Unaudited Schedule of Selected GAAP to Non-GAAP Adjustments
(In millions)
Three Months Ended
Net revenue
GAAP cost of revenue
$
GAAP gross profit
$
GAAP gross margin
March 31,
December 31,
March 31,
2015
2014
2014
2,058
972
1,086
$
$
52.8%
GAAP cost of revenue
Adjustments:
Amortization of purchased intangible assets
Inventory charges related to the exit of the cellular baseband business
$
972
Non-GAAP cost of revenue
$
(36)
2
938
Net revenue
Non-GAAP cost of revenue
$
Non-GAAP gross profit
$
Non-GAAP gross margin
2,058
938
1,120
2,143
1,012
1,131
$
$
52.8%
$
$
$
$
54.4%
1,012
(42)
—
970
2,143
970
1,173
49.4%
$
$
$
$
54.7%
390
1,004
(50)
—
954
1,984
954
1,030
51.9%
GAAP net income
Adjustments:
Amortization of purchased intangible assets
Inventory charges related to the exit of the cellular baseband business
Impairment of long-lived assets
Settlement costs (gains)
Other gains, net
Restructuring costs, net
Other expense (income), net
Certain income tax benefit
Total GAAP to Non-GAAP adjustments
$
209
Non-GAAP net income
$
37
(2)
143
—
(4)
7
—
—
181
390 $
45
—
14
(4)
—
16
3
(1)
73
463 $
59
—
25
2
(52)
5
(2)
(5)
32
197
613
610
590
Shares used in calculation - diluted (GAAP and Non-GAAP)
$
1,984
1,004
980
$
165
GAAP diluted net income per share
$
0.34
$
0.64
$
0.28
Non-GAAP diluted net income per share
$
0.64
$
0.76
$
0.33
-more-
BROADCOM CORPORATION
Guidance for the Three Months Ending June 30, 2015
Net revenue
Three Months Ending
June 30, 2015
~$2.10 billion +/- $75 million
Gross margin (GAAP)
Gross margin (Non-GAAP)
54.5% +/- 75 basis points
56.0% +/- 75 basis points
Research & development, and selling, general &
administrative expenses
Down ~$15 million +/- $10 million from Q1'15
Broadcom has based the preceding guidance for the three months ending June 30, 2015 on expectations, assumptions and estimates
that it believes are reasonable given its assessment of historical trends and other information reasonably available as of April 21,
2015 . Broadcom's guidance consists of predictions only, however, and is subject to a wide range of known and unknown business
risks and uncertainties, many of which are beyond Broadcom's control. The forecasts and projections contained in the table above
should not be regarded as representations by Broadcom that the estimated results will be achieved. Projections and estimates are
necessarily speculative in nature and actual results may vary materially from the guidance provided today. The non-GAAP guidance
presented above is consistent with the presentation of non-GAAP results included elsewhere herein.
The guidance set forth in the above table should be read together with the information under the caption, “Cautions Regarding
Forward-Looking Statements” above, Broadcom's Annual Report on Form 10-K for the year ended December 31, 2014 , subsequent
Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, and Broadcom's other SEC filings. Broadcom undertakes no
obligation to publicly update or revise any forward-looking statements, including the guidance set forth herein, to reflect future events
or circumstances.
Corporate Communications
Karen Kahn
Vice President, Corporate Communications
415-297-5035
kkahn@broadcom.com
Investor Relations
T. Peter Andrew
Vice President, Treasury and Investor
Relations
949-926-6932
andrewtp@broadcom.com
-xxx-
Sameer Desai
Director, Investor Relations
949-926-4425
sameerd@broadcom.com
CROSS-REFERENCE LISTS
CROSS-REFERENCE LISTS
ANNEX I
MINIMUM DISCLOSURE REQUIREMENTS FOR THE SHARE REGISTRATION DOCUMENT
(SCHEDULE)
(Page numbering refers to the page contained in the relevant document)
Item #
Item contents
Chapter/Exhibit
Page
1.
Persons Responsible
1.1.
All persons responsible for the information given in
the prospectus
Prospectus
4 (Company
Representative
for Prospectus)
1.2.
A declaration
prospectus
Prospectus
4 (Company
Representative
for Prospectus)
2.
Statutory Auditors
Part II - Section B
58 (10.2
Independent
Registered Public
Accounting Firm)
Not applicable
Not applicable
by
those
responsible
for
the
2.1.
Names and addresses of the issuer’s auditors
2.2.
If auditors have resigned, been removed or not been
re-appointed during the period covered by the
historical financial information, indicate details if
material.
3.
Selected Financial Information
3.1.
Selected historical financial information
Part II - Section B
56 - 58 (10.1
Selected
Financial Data)
3.2.
Interim periods
Part II - Section B
56 - 58 (10.1
Selected
Financial Data)
4.
Risk Factors
Part II - Section A
15 - 26 (Risk
Factors (As of
March 31, 2015))
5.
Information about the Issuer
5.1.
History and Development of the Issuer
1301972-v8\NYCDMS
i
CROSS-REFERENCE LISTS
Item #
Item contents
5.1.1.
the legal and commercial name of the issuer;
12.
Trend Information
12.1.
Significant trends that affected production, sales and
inventory, and costs and selling prices since the end
of the last financial year to the date of the
prospectus.
12.2.
Trends, uncertainties or events that are likely to
affect the issuer for at least the current financial
year.
13.
Profit Forecasts or Estimates
14.
Administrative,
Management,
Bodies and Senior Management
Chapter/Exhibit
Page
Part I - Section B
5 (B.1 Legal and
Commercial
Name of the
Issuer)
Exhibit II
All pages
Part II - Section A
15 - 26 (Risk
Factors (As of
March 31, 2015))
Exhibit II
All pages
Not applicable
Not applicable
Supervisory
Names, business addresses and functions in the
issuer of the following persons and an indication of
the principal activities performed by them outside
the issuer where these are significant with respect to
that issuer:
a) members of the administrative, management or
supervisory bodies;
38 - 45 (7.1
Board of
Directors as of
March 16, 2015)
and
Part II - Section B
14.1.
52 - 55 (8.1
Directors’ and
Executive
Officers’ Holdings
of Shares and
Options)
b) partners with unlimited liability, in the case of a
limited partnership with a share capital;
Not applicable
Not applicable
c) founders, if the issuer has been established for
fewer than five years and
Not applicable
Not applicable
1301972-v8\NYCDMS
ii
CROSS-REFERENCE LISTS
Item #
Item contents
Chapter/Exhibit
d) any senior manager who is relevant to
establishing that the issuer has the appropriate
expertise and experience for the management of the
issuer’s business.
The nature of any family relationship between any of
those persons.
46 - 47 (7.2
Executive
Officers as of
March 16, 2015)
and
Part II - Section B
Part II - Section B
In the case of each member of the administrative,
management or supervisory bodies of the issuer
and each person mentioned in points (b) and (d) of
the first subparagraph, details of that person’s
relevant management expertise and experience and
the following information:
(a) the nature of all companies and partnerships of
which such person has been a member of the
administrative, management and supervisory bodies
or partner at any time in the previous five years,
indicating whether or not the individual is still a
member of the administrative, management or
supervisory bodies or partner. It is not necessary to
list all the subsidiaries of an issuer of which the
person is also a member of the administrative,
management or supervisory bodies or partner. It is
not necessary to list all the subsidiaries of an issuer
of which the person is also a member of the
administrative, management or supervisory bodies.
1301972-v8\NYCDMS
iii
Page
Part II - Section B
52 - 55 (8.1
Directors’ and
Executive
Officers’ Holdings
of Shares and
Options)
47 - 48 (7.3
Fraudulent
Offences and
Bankruptcy, Etc.)
38 - 45 (7.1
Board of
Directors as of
March 16, 2015)
and
46 - 47 (7.2
Executive
Officers as of
March 16, 2015)
CROSS-REFERENCE LISTS
Item #
Item contents
Chapter/Exhibit
Page
Part II - Section B
47 - 48 (7.3
Fraudulent
Offences and
Bankruptcy, Etc.)
Part II - Section B
48 - 52 (7.4
Conflicts of
Interest)
Part II - Section B
52 - 55 (8.1
Directors’ and
Executive
Officers’ Holdings
of Shares and
Options)
(b) any convictions in relation to fraudulent offences
for at least the previous five years;
(c) details of any bankruptcies, receiverships or
liquidations with which a person described in (a) and
(d) of the first subparagraph who was acting in the
capacity of any of the positions set out in (a) and (d)
of the first subparagraph was associated for at least
the previous five years;
(d) details of any official public incrimination and/or
sanctions of such person by statutory or regulatory
authorities (including designated professional
bodies) and whether such person has ever been
disqualified by a court from acting as a member of
the administrative, management or supervisory
bodies of an issuer or from acting in the
management or conduct of the affairs of any issuer
for at least the previous five years.
If there is no such information to be disclosed, a
statement to that effect is to be made.
14.2.
Administrative, management, and supervisory
bodies and senior management conflicts of
interests.
17.
Employees
17.2.
17.3
Shareholdings and stock options with respect to
each person referred to in points (a) and (d) of the
first subparagraph of item 14.1.
Description of any arrangements for involving the
employees in the capital of the issuer.
20.7.
Dividend policy, etc.
20.7.1
The amount of the dividend per share for each
financial year for the period covered by the historical
financial information
20.8.
Legal and arbitration proceedings
1301972-v8\NYCDMS
iv
Exhibit I
All sections
Part II - Section B
55 - 56 (8.2
Employee Benefit
Plans)
Part II - Section B
32 - 33 (Dividend
Rights)
Part II - Section B
58 - 59 (XI. Legal
Proceedings (As
of March 31,
2015))
CROSS-REFERENCE LISTS
Item #
Item contents
Chapter/Exhibit
Page
20.9.
Significant change in the issuer’s financial or trading
position since the end of the last financial period
Not applicable
Not applicable
23.
Third Party Information and Statement
Experts and Declarations of Any Interest
23.1.
Where a statement or report attributed to a person
as an expert is included in the Registration
Document, provide such person’s name, business
address, qualifications and material interest if any in
the issuer.
Not applicable
Not applicable
23.2.
Where information has been sourced from a third
party, provide a confirmation that this information
has been accurately reproduced.
Not applicable
Not applicable
24.
Documents on Display
Part II - Section B
60 (XII.
Documents on
Display)
1301972-v8\NYCDMS
v
by
CROSS-REFERENCE LISTS
ANNEX III
MINIMUM DISCLOSURE REQUIREMENTS FOR THE SHARE SECURITIES NOTE (SCHEDULE)
(Page numbering refers to the page contained in the relevant document)
Item #
Item contents
1.
Persons Responsible
1.1.
Chapter/Exhibit
Page
All persons responsible for the information given in
the prospectus.
Prospectus
4 (Company
Representative
for Prospectus)
1.2.
A declaration by those responsible for the prospectus
Prospectus
4 (Company
Representative
for Prospectus)
2.
Risk Factors
Part II - Section A
15 - 26 (Risk
Factors (As of
March 31, 2015))
3.
Key Information
3.1
Working capital statement
Part II - Section B
56 (IX. Working
Capital
Statement)
Part II - Section B
35 - 37 (V.
Statement of
Capitalization
and
Indebtedness as
of March 31,
2015)
Part II - Section B
26 (1.1 Purpose
of IESPP)
Exhibit I
Section 1.1
Part II - Section B
31 (4.1 Type and
the Class of the
Securities being
Offered, Including
the Security
Identification
Code)
Exhibit I
Section 2(t) and 4
3.2
Capitalization and indebtedness
3.4
Reasons for the offer and use of proceeds
4.
4.1
Information Concerning the Securities to be
Offered/ Admitted to Trading
Type and the class of the securities being offered,
including the security identification code.
1301972-v8\NYCDMS
vi
CROSS-REFERENCE LISTS
Item #
4.2
Item contents
Legislation under which the securities have been
created.
Chapter/Exhibit
Page
Part II - Section B
31 (4.2
Legislation Under
Which the
Securities Have
Been Created)
4.3
Form of securities, name and address of the entity in
charge of keeping the records.
Part II - Section B
31 (4.3 Form of
Securities, Name
and address of
the Entity in
Charge of
Keeping the
Records)
4.4
Currency of the securities issue.
Part II - Section B
32 (4.4 Currency
of the Securities
Issue)
4.5
Rights attached to the securities
Part II - Section B
32 - 35 (4.5
Rights Attached
to the Securities)
4.6
Statement of the resolutions, authorizations and
approvals by virtue of which the securities have been
or will be created and/or issued.
Part II - Section B
26 (1.1 Purpose
of IESPP)
Exhibit I
Subheader
Part II - Section B
27 (1.3 Purchase
Interval)
4.7
4.8
Expected issue date of the securities.
Description of any restrictions
transferability of the securities.
on
the
free
35 (4.6
Transferability)
4.9
Mandatory takeover bids and/or squeeze-out and
sell-out rules in relation to the securities.
4.11
Information on taxes on the income from the
securities withheld at source
1301972-v8\NYCDMS
Part II - Section B
30 (III. Delivery
and Sale of the
Shares of
Common Stock)
and
vii
Exhibit I
Sections 11 and
15
Part II - Section B
35 (4.7 General
Provisions
Applying to
Business
Combinations)
Part II - Section B
60 - 61 (XIII.
United Kingdom
Tax
Consequences)
CROSS-REFERENCE LISTS
Item #
Item contents
5.
TERMS AND CONDITIONS OF THE OFFER
5.1
Conditions, offer statistics, expected timetable and
action required to apply for the offer
5.1.1
5.1.2
5.1.3
Conditions to which the offer is subject.
Chapter/Exhibit
Page
Part II - Section B
26 - 30 (I. The
Outline, II.
Eligibility and III.
Delivery and Sale
of the Shares of
Common Stock)
Exhibit I
All sections
Part II - Section B
38 (6.2 Net
Proceeds)
Exhibit I
Section 4
Part II - Section B
26 - 30 (I. The
Outline, II.
Eligibility and III.
Delivery and Sale
of the Shares of
Common Stock)
Exhibit I
Sections 5, 6, 7,
8 and 11
Total amount of the issue/offer.
Time period during which the offer will be open and
description of the application process.
28 (1.7
Termination or
Amendment of
the IESPP) and
5.1.4
5.1.5
5.1.6
Circumstances under which the offer may be revoked
or suspended and whether revocation can occur after
dealing has begun.
Possibility to reduce subscriptions and the manner
for refunding excess amount paid by applicants.
Minimum and/or maximum amount of application.
1301972-v8\NYCDMS
viii
Part II - Section B
30 (2.5
Termination of
Employment of
Participants)
Exhibit I
Sections 12, 13,
14 and 22
Part II - Section B
29 - 30 (2.4
Withdrawal from
IESPP /
Termination of
Purchase Right)
Part II - Section B
26 - 27 (1.2
Common Stock
Offered Under
the IESPP) and
CROSS-REFERENCE LISTS
Item #
Item contents
Chapter/Exhibit
Page
28 - 29 (2.2
Participation of
Eligible
Employees)
5.1.7
Period during
withdrawn.
which
an
application
may
be
Exhibit I
Section 5
Part II - Section B
29 - 30 (2.4
Withdrawal from
IESPP/Terminati
on of Purchase
Right)
29 (2.3 Payroll
Deductions) and
5.1.8
Method and time limits for paying up the securities
and for delivery of the securities.
5.3
Pricing
5.3.1.
An indication of the price at which the securities will
be offered.
Part II - Section B
30 (III. Delivery
and Sale of the
Shares of
Common Stock)
Exhibit I
Sections 9, 10
and 11
Part II - Section B
27 - 28 (1.4
Purchase Price)
Exhibit I
Section 9
27 - 28 (1.4
Purchase Price)
and
Part II - Section B
5.3.2.
Process for the disclosure of the offer price.
31 (4.3 Form of
Securities, Name
and Address of
the Entity in
Charge of
Keeping the
Records)
Exhibit I
Section 9
5.3.3.
If the issuer’s equity holders have pre-emptive
purchase rights and this right is restricted or
withdrawn.
Part II - Section B
35 (No
Preemptive,
Redemptive or
Conversion
Provisions)
5.3.4
Where there is or could be a material disparity
between the public offer price and the effective cash
Not applicable
Not applicable
1301972-v8\NYCDMS
ix
CROSS-REFERENCE LISTS
Item #
Item contents
Chapter/Exhibit
Page
Part II - Section B
31 (4.3 Form of
Securities, Name
and Address of
the Entity in
Charge of
Keeping the
Records)
Part II - Section B
31 (4.1 Type and
Class of the
Securities being
Offered, Including
the Security
Identification
Code)
Part II - Section B
31 (4.1 Type and
Class of the
Securities being
Offered, Including
the Security
Identification
Code)
Part II - Section B
38 (6.2 Net
Proceeds)
cost to members of the administrative, management
or supervisory bodies or senior management, or
affiliated persons, of securities acquired by them in
transactions during the past year.
5.4.
Placing and Underwriting
5.4.2
Name and address of any paying agents and
depository agents in each country.
6.
Admission to Trading and Dealing Arrangements
6.1
Whether the securities offered are or will be the
object of an application for admission to trading.
6.2
Regulated markets or equivalent markets on which
securities of the same class of the securities to be
offered or admitted to trading are already admitted to
trading.
8.
Expense of the Issue/Offer
8.1.
The total net proceeds and an estimate of the total
expenses of the issue/offer.
9.
Dilution
9.1.
The amount and percentage of immediate dilution
resulting from the offer.
Part II - Section B
37 - 38 (6.1
Maximum
Dilution)
9.2.
In the case of a subscription offer to existing equity
holders, the amount and percentage of immediate
dilution if they do not subscribe to the new offer.
Not applicable
Not applicable
10.
Additional Information
10.1.
If advisors connected with an issue are mentioned in
the Securities Note, a statement of the capacity in
which the advisors have acted.
Not applicable
Not applicable
1301972-v8\NYCDMS
x
CROSS-REFERENCE LISTS
Item #
Item contents
Chapter/Exhibit
Page
10.3.
Where a statement or report attributed to a person as
an expert is included in the Securities Note, provide
such persons’ name, business address, qualifications
and material interest if any in the issuer.
Not applicable
Not applicable
10.4.
Where information has been sourced from a third
party.
Not applicable
Not applicable
1301972-v8\NYCDMS
xi