Document:

exv10w39

 

Exhibit 10.39

FILED

SUPERIOR COURT OF CALIFORNIA

COUNTRY OF ORANGE

CENTRAL JUSTICE CENTER

NOV 01 2004

ALAN SLATER, Clerk of the Court

/s/ J. Frausto

BY J. FRAUSTO

 

1 

 

2 

 

3 

 

4 

 

5 

 

6 

 

7 

 

8 

 

9 

 

10

 

11

 

12

 

13

 

14

 

15

 

16

 

17

 

18

 

19

 

20

 

21

 

22

 

23

 

24

 

25

 

26

 

27

 

28

 

 

 

 

 
IRELL & MANELLA LLP

David Siegel (Bar No. 101355)

Daniel P. Lefler (Bar No. 151253)

Harry A. Mittleman (Bar No. 172343)

Stephen Hasegawa (Bar No. 198472)

1800 Avenue of the Stars, Suite 900

Los Angeles, California 90067-4276

Telephone: (310) 277-1010

Facsimile: (310) 203-7199
 

IRELL
& MANELLA LLP

Layn R. Phillips (103854)

840 Newport Center Drive, Suite 500

Newport Beach, California 92660-6324

Telephone: (949) 760-0991

Facsimile: (949) 760-5200
 

Attorneys
for Defendants HENRY T. NICHOLAS,

III, HENRY SAMUELI, WILLIAM J. RUEHLE,

AURELIO E. FERNANDEZ, DAVID A. DULL,

TIMOTHY LINDENFELSER, MARTIN J.

COLOMBATTO, and VAHID MANIAN, and

Nominal Defendant BROADCOM

CORPORATION

 
SUPERIOR COURT OF THE STATE OF CALIFORNIA

 

FOR THE COUNTY OF ORANGE

  

 

	 	 	 	 
	KIM DAVID, et al.,

	 	 	Case No. 01-CC-03930
	 
	 	 	 
	          Plaintiffs,

	 	 	Assigned To: Judge Ronald L. Bauer
	 
	 	 	 
	     v.

	 	 	STIPULATION OF SETTLEMENT
	 
	 	 	 
	WERNER F. WOLFEN, et al.,
	 	 	 
	 
	 	 	 
	          Defendants,
	 	 	 
	 
	 	 	 
	     – and –
	 	 	 
	 
	 	 	 
	BROADCOM CORPORATION, a California

corporation,
	 	 	 
	 
	 	 	 
	          Nominal Defendant.
 
	 	 	 
	 
	 	 	 
	This Document Relates To:
	 	 	 
	 
	 	 	 
	     ALL ACTIONS.

 
	 	 	 
	 
	 	 	 

 

 

STIPULATION OF SETTLEMENT

 

 

1 

 

2 

 

3 

 

4 

 

5 

 

6 

 

7 

 

8 

 

9 

 

10

 

11

 

12

 

13

 

14

 

15

 

16

 

17

 

18

 

19

 

20

 

21

 

22

 

23

 

24

 

25

 

26

 

27

 

28

 

 

     This Stipulation of Settlement (the “Stipulation”), dated as of October 25, 2004, is
made

 and entered into by and among the following Settling Derivative Parties (as defined
further in

 Section III hereof): (i) William Aiken, Kim David, Susan Bollinger, William
Lester and Margaret 

Schumann, derivatively on behalf of Broadcom Corporation and its
subsidiaries (“Broadcom”), 

and (ii) Werner F. Wolfen, Henry T. Nicholas, III, Henry
Samueli, Alan E. Ross, William J. 

 Ruehle, Aurelio E. Fernandez, David A. Dull, Timothy
Lindenfelser, Martin J. Colombatto, 

Vahid Manian and Myron Eichen, Deceased (the
“Settling Derivative Defendants”) and Nominal 

Defendant Broadcom. The Stipulation is
intended by the Settling Derivative Parties to fully, 

finally and forever release,
discharge and settle the Released Claims (as defined in ¶ 1.6), 

upon and subject to the
terms and conditions hereof.

I.  
SETTLING DERIVATIVE PLAINTIFFS’ CLAIMS IN THE DERIVATIVE 

     ACTIONS AND THE
SETTLING DERIVATIVE DEFENDANTS’ DENIALS OF 

     WRONGDOING AND LIABILITY

     On or after March 22, 2001, Kim David, Kevin Carroll, Susan Bollinger, William Lester

and Margaret Schumann filed derivative actions in the Superior Court of the State of
California, 

County of Orange (the “State Court”), entitled Kim David, et al., On
Behalf of Broadcom 

Corporation v. Werner F. Wolfen, et al., and Broadcom
Corporation, a California Corporation, 

Case No. 01-CC-03930; Bollinger v.
Nicholas,  et al., Case No. 01-CC-4065;  

Lester v. Nicholas, et al.,
Case No. 01-CC-6029; and Schumann v. Nicholas, et al., Case No. 01-CC-7282

(the “State Court Derivative Actions”). On June 21, 2001, the State Court Derivative Actions were

consolidated by the State Court as David v. Wolfen, et al., Lead Case No.
01-CC-03930 (the 

“David Action”). On March 8, 2002, Kim David, Kevin Carroll,
Susan Bollinger, William Lester 

and Margaret Schumann filed a Consolidated Amended Shareholder Derivative Complaint (the

 “David Complaint”) in the
David Action.

     On April 11, 2001, William Aiken filed a Verified Shareholder Derivative Complaint (the

“Aiken Complaint”) in the United States District Court for the Central District
of California (the

 “Federal Court”) on behalf of Broadcom, entitled Aiken v.
Nicholas, et al., Case No. SACV 01-

407 GLT (the “Aiken Action”).

-2-

STIPULATION OF SETTLEMENT

 

 

1 

 

2 

 

3 

 

4 

 

5 

 

6 

 

7 

 

8 

 

9 

 

10

 

11

 

12

 

13

 

14

 

15

 

16

 

17

 

18

 

19

 

20

 

21

 

22

 

23

 

24

 

25

 

26

 

27

 

28

 

 

     The Aiken Complaint and the David Complaint are referred to together
herein as the 

 “Complaints.” The Aiken Action and the David
Action are referred to together herein as the 

 “Derivative Actions.”

     The Complaints allege causes of action against the Settling Derivative Defendants for

 breach of fiduciary duty, abuse of control, waste of corporate assets, gross
mismanagement, unjust 

 enrichment, and violations of California Corporations
Code §§ 25402 and 25502.5. The 

 Complaints also allege causes of action against
Ernst & Young LLP (“E&Y”) for aiding and 

 abetting breaches of fiduciary duty,
breach of contract and professional negligence. This 

 Stipulation does not
settle, resolve, release or otherwise impact the claims asserted against E&Y or

 its partners and employees.
 

 
     The Settling Derivative Defendants have denied and continue to deny each and all of the

 claims and contentions alleged against them by the Settling Derivative
Plaintiffs in the Derivative 

 Actions. The Settling Derivative Defendants
expressly have denied and continue to deny all 

 charges of wrongdoing or
liability against them arising out of any of the conduct, statements, acts 

 or
omissions alleged, or that could have been alleged, in the Derivative Actions. The
Settling 

 Derivative Defendants also have denied and continue to deny, inter
alia, the allegations that the 

 Settling Derivative Plaintiffs or Broadcom
or Broadcom shareholders have suffered damage, that 

 the price of Broadcom
securities was artificially inflated by reason of alleged misrepresentations,

 non-disclosures or otherwise, or that the Settling Derivative Plaintiffs or
Broadcom or Broadcom 

 shareholders were harmed by the conduct alleged in the
Derivative Actions. The Settling 

 Derivative Defendants have further asserted
that, at all relevant times, they acted in good faith and 

 in a manner they
reasonably believed to be in the best interests of Broadcom and Broadcom

 shareholders.
 

II. BENEFITS OF SETTLEMENT 

     The Settling Derivative Plaintiffs believe that the claims asserted in the Derivative
Actions 

 have merit. However, Settling Derivative Plaintiffs recognize and
acknowledge the expense and 

 length of continued proceedings necessary to prosecute the Derivative
Actions against the Settling 

 Derivative Defendants through trial and through
appeals. Settling Derivative Plaintiffs have taken

-3-

STIPULATION OF SETTLEMENT

 

 

1 

 

2 

 

3 

 

4 

 

5 

 

6 

 

7 

 

8 

 

9 

 

10

 

11

 

12

 

13

 

14

 

15

 

16

 

17

 

18

 

19

 

20

 

21

 

22

 

23

 

24

 

25

 

26

 

27

 

28

 

 

 

into account the uncertain outcome and the risk of any litigation, especially in complex actions 

 such as
the Derivative Actions, as well as the difficulties and delays inherent in such litigation.

 Settling Derivative Plaintiffs also are mindful of the inherent problems of
proof under and possible 

 defenses to the causes of action asserted against the
Settling Derivative Defendants in the 

 Derivative Actions.

     The Settling Derivative Defendants and Broadcom have also concluded that further

 conduct of the claims against the Settling Derivative Defendants would be
protracted and 

 expensive, and that it is desirable that those claims be fully
and finally settled in the manner and 

 upon the terms and conditions set forth
in this Stipulation. The Settling Derivative Defendants 

 and Broadcom also have
taken into account the uncertainty and risks inherent in any litigation,

 especially in complex cases like the Derivative Actions. The Settling
Derivative Defendants have, 

 therefore, determined that it is desirable and
beneficial to them that the claims asserted against 

 them in the Derivative
Actions be settled in the manner and upon the terms and conditions set 

 forth in
this Stipulation.

     Settling Derivative Plaintiffs, the Settling Derivative Defendants, and their counsel believe

 that the settlement set forth in this Stipulation confers substantial benefits
upon Broadcom. 

 Settling Derivative Plaintiffs, the Settling Derivative
Defendants, and their counsel have 

 determined that the settlement set forth in
the Stipulation is in the best interests of Broadcom.

II. TERMS OF STIPULATION AND AGREEMENT OF SETTLEMENT 

     NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED by and among

 Settling Derivative Plaintiffs (derivatively on behalf of Broadcom), Broadcom
and the Settling 

 Derivative Defendants, that, subject to the approval of the
State Court, the Released Claims shall 

 be finally and fully compromised,
settled and released, and the Derivative Actions shall be 

 dismissed with
prejudice as to all Settling Derivative Parties, upon and subject to the terms and

 conditions of the Stipulation, as follows:

     1. Definitions 

     As used in the Stipulation, the following terms have the meanings specified below:

-4-

STIPULATION OF SETTLEMENT

 

 

1 

 

2 

 

3 

 

4 

 

5 

 

6 

 

7 

 

8 

 

9 

 

10

 

11

 

12

 

13

 

14

 

15

 

16

 

17

 

18

 

19

 

20

 

21

 

22

 

23

 

24

 

25

 

26

 

27

 

28

 

 

 

          1.1 “Settling Derivative Defendants” means Werner F. Wolfen, Henry T.

 Nicholas, III, Henry Samueli, Alan E. Ross, William J. Ruehle, Aurelio E.
Fernandez, David A. 

 Dull, Timothy Lindenfelser, Martin J. Colombatto, Vahid
Manian and Myron Eichen, deceased, 

 whether through his personal
representative, executor, administrator, trustee, or otherwise 

 (collectively,
“Myron Eichen, Deceased”), or any of them.

          1.2 “Settling Derivative Plaintiffs” means William Aiken, Kim David, Susan

 Bollinger, William Lester and Margaret Schumann, or any of them.

          1.3 “Settling Derivative Parties” means, collectively, each of the Settling

 Derivative Defendants, the Settling Derivative Plaintiffs and Broadcom.

          1.4 “Settling Derivative Plaintiffs’ Counsel” means Lerach Coughlin Stoia

 Geller Rudman & Robbins LLP, and Schiffrin & Barroway, LLP.

          1.5 “Effective Date” means the first date by which all of the events and

 conditions specified in ¶ 6.1 of the Stipulation have been met and have
occurred.

          1.6 “Released Claims” shall collectively mean all claims (including “Unknown

 Claims” as defined herein), demands, rights, liabilities, obligations,
promises, acts, agreements, 

 damages, actions and causes of action of every
nature and description whatsoever, known or 

 unknown, suspected or unsuspected,
fixed or contingent, whether or not concealed or hidden, 

 asserted or that
might have been asserted by Settling Derivative Plaintiffs on behalf
of 

 Broadcom, or by Broadcom, against the Settling Derivative Defendants, based
upon the facts, 

 transactions, events, occurrences, acts, disclosures,
statements, omissions or failures to act which 

 were or could have been alleged
in the Derivative Actions. However, “Released Claims” shall 

 not include (a)
any right by Broadcom to recover amounts advanced on behalf of any Settling

 Derivative Defendant if it is determined in accordance with California law
that the Settling 

 Derivative Defendant was not legally entitled to advancement
or indemnification; or (b) any 

 claims or rights, including rights of
indemnification or advancement, of any Settling Derivative 

 Defendant against Broadcom under California law, Broadcom’s Articles of Incorporation or

 Bylaws, or any agreement between Broadcom and such Settling Derivative
Defendant.

-5-

STIPULATION OF SETTLEMENT

 

 

1 

 

2 

 

3 

 

4 

 

5 

 

6 

 

7 

 

8 

 

9 

 

10

 

11

 

12

 

13

 

14

 

15

 

16

 

17

 

18

 

19

 

20

 

21

 

22

 

23

 

24

 

25

 

26

 

27

 

28

 

 

 

          1.7 “Unknown Claims” means any Released Claims which any Settling

 Derivative Party does not know or suspect to exist in his, her or its favor at
the time of the release 

 of the other Settling Derivative Parties which, if
known by him, her or it, might have affected his, 

 her or its settlement with
the release of the other Settling Derivative Parties, or might have 

 affected
his, her or its decision not to object to this settlement. With respect to any and all

 Released Claims, the Settling Derivative Parties stipulate and agree that,
upon the Effective Date, 

 the Settling Derivative Parties waive the
provisions, rights and benefits of California Civil Code 

 § 1542, which
provides:

      A general release does not extend to claims which the creditor does not know or

      suspect to exist in his favor at the time of executing the
release, which if known 
      by him must have materially affected
his settlement with the debtor.

The Settling Derivative Parties waive any and all provisions, rights and benefits conferred by any

 law of any state or territory of the United States, or principle of common law,
which is similar, 

 comparable or equivalent to Civil Code § 1542. Each of the
Settling Derivative Parties may 

 hereafter discover facts in addition to or
different from those which he, she or it now knows or 

 believes to be true with
respect to the subject matter of the Released Claims, but each shall be 

 deemed
to have fully, finally, and forever settled and released any and all Released Claims, known

 or unknown, suspected or unsuspected, contingent or non-contingent, whether or
not concealed or 

 hidden, which now exist, or heretofore have existed upon any
theory of law or equity now existing 

 or coming into existence in the future,
including, but not limited to, conduct which is negligent, 

 intentional, with or
without malice, or a breach of any duty, law or rule, without regard to the

 subsequent discovery or existence of such different or additional facts. The
Settling Derivative 

 Parties acknowledge that the foregoing waiver was
separately bargained for and a key element of 

 the settlement of which this
release is a part.

     2. Settlement Of The Derivative Actions 

          2.1 The Derivative Actions are hereby settled by, between, and among the

 Settling Derivative Parties, on the following terms.

          2.2 Broadcom has adopted or will adopt the corporate governance and

 accounting control measures as set forth in Exhibit A hereto, by amendment to
Broadcom’s

-6-

STIPULATION OF SETTLEMENT

 

 

1 

 

2 

 

3 

 

4 

 

5 

 

6 

 

7 

 

8 

 

9 

 

10

 

11

 

12

 

13

 

14

 

15

 

16

 

17

 

18

 

19

 

20

 

21

 

22

 

23

 

24

 

25

 

26

 

27

 

28

 

 

 

bylaws or other means as appropriate, in response to the derivative claims prosecuted and raised

 in the Derivative Actions, to reduce the probability that any improprieties of
the type alleged in 

 the Complaints will occur.

          2.3 Broadcom shall pay to Settling Derivative Plaintiffs’ Counsel fees and

 expenses in the amount of $5.3 million as compensation for professional
services rendered by 

 Settling Derivative Plaintiffs’ Counsel in the
prosecution of the Derivative Actions, as set forth in 

 Section 5 below, as
said services have conferred substantial benefits on Broadcom.

          2.4 Broadcom and its Board of Directors warrant that they are satisfied that the

 foregoing constitutes reasonably equivalent value for the release of the
Released Claims and is a 

 fair, reasonable and adequate resolution of the
Released Claims on Broadcom’s behalf and is in 

 the best interests of Broadcom
and Broadcom shareholders.

     3. Dismissals 
 

          3.1 Promptly after execution of this Stipulation, but in no event later than five

 (5) days after this Stipulation is signed (unless such time is extended by
the written agreement of 

 Settling Derivative Plaintiffs’ Counsel and counsel
for the Settling Derivative Defendants), 

 Settling Derivative Plaintiffs’
Counsel shall submit this Stipulation to the State Court and request 

 that the
State Court hold a hearing and grant final approval of this Stipulation and the settlement

 contained herein, and dismiss the David Action with prejudice as
against the Settling Derivative 

 Defendants, substantially in the form attached
hereto as Exhibit B (the “Final State Approval 

 Order”). The Settling
Derivative Parties shall jointly move that the State Court enter the
Final 

 State Approval Order. Upon receiving a copy of the Final State Approval
Order executed and 

 filed by the State Court, Settling Derivative Plaintiffs’ Counsel shall immediately file a notice of 

 entry of
the Final State Approval Order, and serve all counsel of record in the Derivative Actions.

          3.2 Promptly upon entry of the Final State Approval Order, Plaintiffs’ Counsel

 in the Aiken Action and Settling Derivative Defendants’ Counsel shall
jointly submit to the 

 Federal Court a Motion for Dismissal pursuant to FRCP
23.1 and 41(a) to obtain an Order 

 dismissing the Aiken Action,
substantially in the form attached hereto as Exhibit C (the “Federal 

 Dismissal
Order”). Upon receiving a copy of the Federal Dismissal Order executed and filed by

-7-

STIPULATION OF SETTLEMENT

 

1 

 

2 

 

3 

 

4 

 

5 

 

6 

 

7 

 

8 

 

9 

 

10

 

11

 

12

 

13

 

14

 

15

 

16

 

17

 

18

 

19

 

20

 

21

 

22

 

23

 

24

 

25

 

26

 

27

 

28

 

 

the Federal Court, Plaintiffs’ Counsel in the Aiken Action shall immediately file a
notice of entry 

of the Federal Dismissal Order, and serve all counsel of
record in the Derivative Actions.

     4. Releases

          4.1 Upon the Effective Date, as defined in ¶ 1.5 and ¶ 6.1, Settling Derivative

Plaintiffs, individually and derivatively on behalf of Broadcom, and Broadcom,
shall be deemed 

to have fully, finally, and forever released, relinquished and
discharged all Released Claims and 

any and all claims arising out of, relating
to, or in connection with the settlement or resolution of 

the Litigation of
the Released Claims, against each of the Settling Derivative Defendants and

their respective representatives, executors, attorneys, agents, investigators,
insurers, partners, 

successors, assigns, heirs and beneficiaries. For the
avoidance of doubt, this paragraph shall not 

operate to release any right by
Broadcom to recover amounts advanced on behalf of any Settling 

Derivative
Defendant if it is determined in accordance with California law that the Settling

Derivative Defendant was not legally entitled to advancement or
indemnification.

          4.2 Upon the Effective Date, as defined in ¶ 1.5 and ¶ 6.1, each of the Settling

Derivative Defendants shall be deemed to have fully, finally, and forever
released, relinquished 

and discharged all Released Claims and any and all
claims arising out of, relating to, or in 

connection with the settlement or
resolution of the Litigation of the Released Claims, against the 

Settling
Derivative Plaintiffs, individually and derivatively on behalf of Broadcom, and Settling

Derivative Plaintiffs’ Counsel and their respective representatives,
executors, attorneys, agents, 

investigators, insurers, partners, successors,
assigns, heirs and beneficiaries. Notwithstanding 

anything to the contrary
herein, this paragraph shall not operate to release any claims or rights,

including rights of indemnification or advancement, of any Settling Derivative
Defendant against 

Broadcom under California law, Broadcom’s Articles of
Incorporation or Bylaws, or any 

agreement between Broadcom and such
Settling Derivative Defendant.

          5. Settling Derivative Plaintiffs’ Counsels’ Attorneys’ Fees And
Reimbursement

              Of Expenses

          5.1 Broadcom agrees that Settling Derivative Plaintiffs’ Counsel shall be paid

fees and expenses of $5.3 million (the “Derivative Fee and Expense Amount”).
The Derivative

-8-

STIPULATION OF SETTLEMENT

 

 

1 

 

2 

 

3 

 

4 

 

5 

 

6 

 

7 

 

8 

 

9 

 

10

 

11

 

12

 

13

 

14

 

15

 

16

 

17

 

18

 

19

 

20

 

21

 

22

 

23

 

24

 

25

 

26

 

27

 

28

 

 

Fee and Expense Amount shall be made payable to the “Lerach
Coughlin Stoia Geller Rudman & 

Robbins LLP Trust Account” or a designated
interest bearing account, as compensation for 

professional services rendered
by Settling Derivative Plaintiffs’ Counsel in the prosecution of the

Derivative Actions. The Derivative Fee and Expense Amount shall be paid
within ten (10) 

business days after entry of the Final State Approval Order
and the Federal Dismissal Order, but 

in no event earlier than November 20,
2004. Settling Derivative Plaintiffs’ Counsel shall be 

responsible for
allocating any compensation amongst any derivative plaintiffs’ counsel of record

in the Derivative Actions for attorneys’ fees and expenses from the Derivative
Fee and Expense 

Amount. The allocation of compensation amongst derivative
plaintiffs’ counsel is solely a matter 

amongst derivative plaintiffs’ counsel.
Broadcom and Settling Derivative Defendants shall have 

no liability or
responsibility therefor whatsoever.

          5.2 In the event that the Effective Date does not occur, the approval of this

Stipulation by the State Court is reversed pursuant to any appeal, or the
Stipulation is canceled or 

terminated for any other reason, and in the event
that the Derivative Fee and Expense Amount 

has been paid to any extent, then
Settling Derivative Plaintiffs’ Counsel shall, within five (5) days 

from
receiving notice from the Settling Derivative Defendants’ counsel or from the State Court,

return to Broadcom or the Settling Derivative Defendants’ counsel the fees,
expenses and costs 

previously paid to Settling Derivative Plaintiffs’ Counsel,
plus interest on that amount at the rate 

of 4.5% per annum, simple interest.
Each of the Settling Derivative Plaintiffs Counsel, as a

condition for receiving the Derivative Fee and Expense Amount, on behalf
of itself and each 

partner, member and/or stockholder of it, agrees that the
law firm and its partners, members 

and/or stockholders are subject to the
jurisdiction of the State Court for the purpose of enforcing 

this ¶ 5.2 of
this Stipulation. Without limitation, each such law firm and its partners, members

and/or stockholders agrees that the State Court may, upon application of the
Settling Derivative 

Defendants, or Settling Derivative Plaintiffs’ Counsel,
summarily issue orders, including but not 

limited to, judgments and attachment
orders, and may make appropriate findings of or sanctions 

for contempt,
against them, or any of them, should such law firm fail timely to repay fees and

expenses pursuant to this ¶ 5.2 of this Stipulation.

-9-

STIPULATION OF SETTLEMENT

 

 

1 

 

2 

 

3 

 

4 

 

5 

 

6 

 

7 

 

8 

 

9 

 

10

 

11

 

12

 

13

 

14

 

15

 

16

 

17

 

18

 

19

 

20

 

21

 

22

 

23

 

24

 

25

 

26

 

27

 

28

 

 

          6.  
Conditions Of Settlement, Effect Of Disapproval, Cancellation Or

                 Termination

          6.1 The Effective Date of the Stipulation shall be conditioned on the
occurrence

 of all of the following events: 

               a. Approval of this Stipulation by Broadcom’s Board of Directors, in

accordance with applicable law; 

               b. Payment of the Derivative Fee and Expense Amount, as required by 

¶¶ 5.l
and 5.2 above; 

               c. Entry by the State Court of the Final State Approval Order, which

includes dismissal with prejudice by the State Court of the claims asserted
against the Settling 

Derivative Defendants in the David Action, in
substantially the form attached hereto as Exhibit B; 

and

               d. Entry by the Federal Court of the Federal Dismissal Order, 

dismissing
the claims asserted against the Settling Derivative Defendants in the Aiken Action, in

substantially the form attached hereto as Exhibit C. 

          6.2 If all of the conditions specified in ¶ 6.1 are not met by March 1, 2005, then

the Stipulation shall be canceled and terminated subject to ¶ 6.3 unless
Settling
Derivative 

Plaintiffs’ Counsel and counsel for the Settling Derivative
Defendants mutually agree in writing 

to proceed with the Stipulation.

          6.3 In the event that the Stipulation is not approved by the State Court or the

settlement set forth in the Stipulation is terminated or fails to become
effective in accordance with 

its terms, the Settling Derivative Parties shall
be restored to their respective positions as of July 

20, 2004. In such event,
the terms and provisions of the Stipulation, with the exception of ¶¶ 1.1-

1.7,
5.2, 6.2-6.3, 7.3-7.13 herein, shall have no further force and effect with respect to the Settling

Derivative Parties and shall not be used in the Derivative Actions or in any
other proceedings for 

any purpose, and any Order entered by the State Court in
accordance with the terms of the 

Stipulation shall be treated as vacated,
nunc pro tunc. 

-10-

STIPULATION OF SETTLEMENT

 

 

1 

 

2 

 

3 

 

4 

 

5 

 

6 

 

7 

 

8 

 

9 

 

10

 

11

 

12

 

13

 

14

 

15

 

16

 

17

 

18

 

19

 

20

 

21

 

22

 

23

 

24

 

25

 

26

 

27

 

28

 

 

     7. Miscellaneous Provisions

          7.1 The Settling Derivative Parties: (a) acknowledge that it is their intent to

consummate this agreement; and (b) agree to cooperate to the extent reasonably
necessary to 

effectuate and implement all terms and conditions of the
Stipulation and to exercise their best 

efforts to accomplish the foregoing
terms and conditions of the Stipulation. 

          7.2 The Settling Derivative Parties intend this Stipulation to be a final and

complete resolution of all disputes between them with respect to the
Derivative Actions. The 

Stipulation compromises claims which are contested
and shall not be deemed an admission by 

any Settling Derivative Party as to
the merits of any claim, allegation or defense. While retaining 

their right
to assert or deny that the claims advanced in the Derivative Actions were meritorious,

the Settling Derivative Parties in any statement made to any media
representative (whether or not 

for attribution) will not deny that the
Derivative Actions and related responses and defenses were 

filed in good faith
and are being settled voluntarily after consultation with competent legal

counsel. The Final State Approval Order and the Federal Dismissal Order will
each contain a 

statement that during the course of the Derivative Actions, the
Settling Derivative Parties and 

their respective counsel at all times
complied with the requirements of Sections 128.5 and 128.7 

of the California
Code of Civil Procedure and Rule 11 of the Federal Rules of Civil Procedure,

respectively. 

          7.3 Neither the Stipulation nor the settlement, nor any act performed or

document executed pursuant to or in furtherance of the Stipulation or the
settlement: (a) is or 

may be deemed to be or may be used as an admission of,
or evidence of, the validity of any 

Released Claim, or of any wrongdoing or
liability of the Settling Derivative Defendants; or (b) is 

or may be deemed to
be or may be used as an admission of, or evidence of, any fault or omission 

of
any of the Settling Derivative Defendants in any civil, criminal or administrative proceeding in

any court, administrative agency or other tribunal. The Settling Derivative
Defendants or 

Broadcom may file the Stipulation and/or the Final State
Approval Order in any action that may 

be brought against them to support a
defense or counterclaim based on principles of res judicata,

-11-

STIPULATION OF SETTLEMENT

 

 

1 

 

2 

 

3 

 

4 

 

5 

 

6 

 

7 

 

8 

 

9 

 

10

 

11

 

12

 

13

 

14

 

15

 

16

 

17

 

18

 

19

 

20

 

21

 

22

 

23

 

24

 

25

 

26

 

27

 

28

 

 

collateral estoppel, release, good faith settlement, judgment bar or reduction
or any other theory 

of claim preclusion or issue preclusion or similar defense
or counterclaim. 

          7.4 All agreements made and orders entered during the course of the Derivative

Actions relating to the confidentiality of information shall survive this
Stipulation. 

          7.5 All of the Exhibits to the Stipulation are material and integral parts hereof

and are fully incorporated hereby by this reference. 

          7.6 The Stipulation may be amended or modified only by a written instrument

signed by or on behalf of all Settling Derivative Parties or their respective
successors-in-interest. 

          7.7 The Stipulation and the Exhibits attached hereto constitute the entire

agreement between the Settling Derivative Plaintiffs and the Settling
Derivative Defendants, and 

no representations, warranties or inducements have
been made to any Settling Derivative Party 

concerning the Stipulation or its
Exhibits other than the
representations, warranties and covenants 

contained and memorialized in
such documents. Except as otherwise provided herein, each 

Settling Derivative
Party shall bear its own costs. 

          7.8 Settling Derivative Plaintiffs’ Counsel is expressly authorized by the

Settling Derivative Plaintiffs to take all appropriate action required or
permitted to be taken 

pursuant to the Stipulation to effectuate its terms and
also is expressly authorized to enter into 

any modifications or amendments to
the Stipulation on behalf of the Settling Derivative Plaintiffs 

which they
deem appropriate. 

          7.9 Each counsel or other person executing the Stipulation or any of its Exhibits

on behalf of any party hereto hereby warrants that such person has the full
authority to do so. 

          7.10 The Stipulation may be executed in one or more counterparts. All executed

counterparts and each of them shall be deemed to be one and the same
instrument. A complete 

set of original executed counterparts shall be filed
with the State Court. 

          7.11 The Stipulation shall be binding upon, and inure to the benefit of, the

successors and assigns of the parties hereto. 

          7.12 The Stipulation and the Exhibits hereto shall be considered to have been

negotiated, executed and delivered, and to be wholly performed, in the State
of California, and 

-12-

STIPULATION OF SETTLEMENT

 

 

1 

 

2 

 

3 

 

4 

 

5 

 

6 

 

7 

 

8 

 

9 

 

10

 

11

 

12

 

13

 

14

 

15

 

16

 

17

 

18

 

19

 

20

 

21

 

22

 

23

 

24

 

25

 

26

 

27

 

28

 

 

the rights and obligations of the parties to the
Stipulation shall be construed and enforced in 

accordance with, and governed
by, the internal substantive laws of the State of California without 

giving
effect to that State’s choice of law principles.
 

          7.13 This Stipulation and the Exhibits hereto are the product of good faith
arm’s-

length negotiations among all of the Settling Derivative Parties, during
which each of the parties 

was represented by competent counsel, each of whom
have drafted, reviewed or commented 

upon the terms of the Stipulation.
Accordingly, the contract rule of strict interpretation against 

the drafter of
a document shall not apply to any of the parties to this Stipulation. 

     IT IS SO STIPULATED. 

	 	 	 	 	 	 	 
	Dated: 10/25/04	 	LERACH COUGHLIN STOIA GELLER RUDMAN 	 	 
	 	 	& ROBBINS LLP	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	By:
	 	/s/ Darren J. Robbins	 	 
	

	 	 	 	 	 	 
	

	 	 	 	DARREN J.ROBBINS	 	 
	

	 	 	 	Counsel for Derivative Plaintiffs	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Dated: 10-25-04	 	SOLTAN & ASSOCIATES	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	By:
	 	/s/ Venus Soltan	 	 
	

	 	 	 	 	 	 
	

	 	 	 	VENUS SOLTAN	 	 
	 	 	Counsel for Derivative Plaintiffs	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Dated: 10/23/04	 	MILBERG WEISS BERSHAD & SCHULMAN LLP	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	By:
	 	/s/ Jeff S. Westerman	 	 
	

	 	 	 	 	 	 
	

	 	 	 	JEFF S. WESTERMAN	 	 
	 	 	Counsel for Derivative Plaintiffs	 	 
	

	 	 	 	 	 	 
	

	 	 	 	 	 	 
	

	 	 	 	 	 	 
	

	 	 	 	 	 	 
	

	 	 	 	 	 	 

-13-

STIPULATION OF SETTLEMENT

 

 

1 

 

2 

 

3 

 

4 

 

5 

 

6 

 

7 

 

8 

 

9 

 

10

 

11

 

12

 

13

 

14

 

15

 

16

 

17

 

18

 

19

 

20

 

21

 

22

 

23

 

24

 

25

 

26

 

27

 

28

 

 

	 	 	 	 	 	 	 
	Dated: 10/21/04	 	SCHIFFRIN & BARROWAY, LLP	 	 
	 
	 	 	 	 	 	 
	

	 	By:
	 	/s/ Robert B. Weiser	 	 
	

	 	 	 	 	 	 
	

	 	 	 	ROBERT B. WEISER	 	 
	 	 	Counsel for Derivative Plaintiffs	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Dated: 10/26/04	 	IRELL & MANELLA LLP	 	 
	 
	 	 	 	 	 	 
	

	 	By:
	 	/s/ David Siegel	 	 
	

	 	 	 	 	 	 
	

	 	 	 	DAVID SIEGEL	 	 
	 	 	Counsel for Defendants	 	 
	 	 	Henry T. Nicholas, III, Henry	 	 
	 	 	Samueli, William J. Ruehle,	 	 
	 	 	Aurelio E. Fernandez, David A.	 	 
	 	 	Dull, Timothy Lindenfelser, Martin	 	 
	 	 	J. Colombatto, Vahid Manian and	 	 
	 	 	Nominal Defendant Broadcom	 	 
	 	 	Corporation	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Dated: 10/26/04	 	GRAY CARY WARE & FREIDENRICH LLP	 	 
	 
	 	 	 	 	 	 
	

	 	By:
	 	/s/ Shirli Fabbri Weiss	 	 
	

	 	 	 	 	 	 
	

	 	 	 	SHIRLI FABBRI WEISS	 	 
	 	 	Counsel for Defendants	 	 
	 	 	Werner F. Wolfen, Alan E. Ross and Myron Eichen, Deceased	 	 

-14-

STIPULATION OF SETTLEMENT

 

 

EXHIBIT A

 

 

EXHIBIT A

CORPORATE GOVERNANCE

     Upon final approval of the settlement by the Superior Court (the “Court”), Broadcom
Corporation (“Broadcom” or the “Company”) shall adopt (to the extent not previously
adopted) the Corporate Governance Enhancements described below, each to remain in effect for at
least four years (except as otherwise provided) from the date the settlement is approved by the
Court:

     1.       Shareholder Nominated Director. The Broadcom Board of Directors shall start the
process to identify and designate one new director no later than 120 days after final court
approval of the settlement, which director shall be selected via the process detailed below.
Defendants agree not to oppose or otherwise resist the election of the new director at the next
annual meeting of shareholders following the director’s appointment to the Broadcom Board;
provided, however, that, as set forth in clause (d), below, the Broadcom Board of Directors may
under the circumstances described therein select a substitute nominee utilizing the procedure
described below. In addition, the Board, through its bylaws or otherwise, shall establish a
procedure for shareholders to nominate the new director as detailed below:

               (a)       Initial Review Process. As soon as reasonably practicable after court approval
of the settlement, the Nominating and Corporate Governance Committee of Broadcom’s Board of
Directors (the “Nominating Committee”) and a consultant (the “Consultant”)
acceptable to plaintiff’s counsel and Broadcom shall seek to identify potential directors. The
Nominating Committee and the Consultant shall work cooperatively and in good faith to have
Qualifying Shareholders (as defined below) identify potential candidates to serve on the Board. In
undertaking this process, the Nominating Committee (or its designee) shall, jointly with the
Consultant, attempt to contact individuals or entities which hold more than 1% (but less than 20%)
of Broadcom’s common stock (and which have held a minimum of 1% for at least nine months) (a
“Qualifying Shareholder”) for the purpose of requesting that such shareholder provide the
name or names of potential candidates for Broadcom’s Board of Directors. A Qualifying Shareholder
may also contact the Nominating Committee directly with the name or names of potential candidates.
From the potential candidates proposed by Qualifying Shareholders, the Nominating Committee (or its
designee) shall consult with the Consultant to jointly prepare a list of candidates for
consideration as potential nominees to the Board. In connection with such process, the Nominating
Committee shall consider each candidate identified by a Qualifying Shareholder who, upon request,
provides the Nominating Committee (or its designee) with his or her resume, any other background
materials regarding the candidate which the candidate desires to submit or which may be requested
by the Nominating Committee and the written consent of the individual to serve as a director, if
selected. The Nominating Committee shall conduct an appropriate review of these candidates
(including, to the extent deemed advisable or desirable by the Nominating Committee, background
information and interviews of prospective candidates), which review shall be substantially similar
to the review undertaken by the Nominating Committee generally for new potential board nominees.

 

 

               (b)      Initial Selection Process. Broadcom’s Nominating Committee shall review each of
the candidates submitted to it as provided in paragraph (a). The Nominating Committee shall
consider the candidates using the same criteria that it uses to evaluate candidates generally and,
in the exercise of its business judgment, recommend to the full Board a candidate from among those
it has considered. The Broadcom Board of Directors shall retain full authority, subject to its
business judgment and its fiduciary duties, to designate any new director. If the Nominating
Committee or the full Board rejects all of the proposed candidates, the process described in
paragraph (a) will be repeated.

               (c)      Vacancy of Selected Director. Should a director selected pursuant to paragraphs
(a) and (b) hereof cease to be on the board prior to being included on the Company’s slate of
nominees at a shareholders meeting because of death, resignation, disability or removal, the
Consultant shall have the right to participate in the selection of a replacement director following
the procedure set forth in paragraphs (a) and (b) above.

               (d)       Additional Term of Selected Director. After his or her initial election to the
board, a Qualifying Shareholder-identified director nominee shall be nominated by the Board of
Directors at the next annual election at which directors are elected to serve for an additional one
year term; provided, however, that in the event any such director dies, resigns or is disabled or
removed, or if the Board of Directors determines reasonably and in good faith that he or she should
not be nominated, then the Consultant shall have the right to participate in the selection of a
replacement director following the procedures set forth in paragraphs (a) and (b) above. Any such
Qualifying Shareholder-identified replacement director nominee who is elected to the Board of
Directors to replace a director who has died, resigned or is disabled or removed shall serve for
the remainder of the term of the replaced director and shall, subject to the limitations of this
clause, be re-nominated at the next annual election if the replaced Qualifying
Shareholder-identified director nominee would have been so eligible pursuant to this clause for
nomination. For purposes of clarity, nothing in this clause shall extend the time period during
which the Company is required to maintain the policy described in this Section 1.

               (e)      The policy described in this Section 1 shall be required to remain in effect only until
the second annual meeting of shareholders of the Company after the policy is adopted (which may be
prior to final approval of the settlement).

     2.       Director Independence. Each Director standing for election shall stand for a
one-year term; provided, however, that the Company may adopt a staggered board with the approval of
a majority of the independent directors, in addition to any other vote that may be required by
applicable law, including required approval by shareholders. At least a majority of the Board
shall be “independent directors,” as defined below. To be deemed “independent” in any calendar
year, in addition to any requirements for independence applicable to Nasdaq National Market
companies, a director could not be a partner in, or a controlling shareholder or an executive
officer of, any organization to which Broadcom made, or from which Broadcom received, payment that
exceeded 4% of the recipient’s consolidated gross revenues or $150,000, whichever is more, for the
current or any of the past three fiscal years, but in no event more than $40,000,000.

 - 2 -

 

     3.       Director Stock Ownership. Broadcom’s Corporate Governance Guidelines will be
revised to the extent necessary to provide that a meaningful portion of director compensation
should be in equity of the Company.

     4.       Meetings In Executive Session. The Board shall hold an executive session at
least twice each year at which employee directors are not present.

     5.       Formation of Nominating and Corporate Governance Committee. In part as a
response to the Derivative Litigation, the Board of Directors has adopted a resolution broadening
the mandate of the Nominating Committee to make it the Nominating and Corporate Governance
Committee. In addition to or replacement of the provisions currently contained in its charter, the
Committee’s functions shall include:

               (a)       The Nominating and Corporate Governance Committee, in consultation with the
Chairman of the Board and the Chief Executive Officer, shall be responsible for periodic review and
interpretation of the Company’s Corporate Governance Guidelines and the Nominating and Corporate
Governance Committee Charter, as well as consideration of other corporate governance issues that
may, from time to time, merit consideration by the entire Board;

               (b)       The Nominating and Corporate Governance Committee, in consultation with the
Chairman of the Board and the Chief Executive Officer, shall consider and make recommendations to
the Board concerning the appropriate size and needs of the Board;

               (c)       The Nominating and Corporate Governance Committee, in consultation with the
Chairman of the Board and the Chief Executive Officer, shall consider candidates to fill vacant
Board positions. Candidates shall be selected for, among other things, their character, judgment,
business experience, time commitment, and acumen. Final approval of a candidate shall be
determined by the full Board;

               (d)       The Nominating and Corporate Governance Committee shall consider policies
relating to the Board and directors, including committee structure and size, equity ownership, and
retirement and resignation; and

               (e)       The Nominating and Corporate Governance Committee shall review annually the
compensation of Directors.

     6.       Performance Criteria and Annual Review. The Board shall establish performance
criteria for itself and evaluate itself and individual members on an annual basis. Board
evaluation shall include an assessment of whether the Board has the necessary diversity of skills,
backgrounds, experiences, and other qualifications, to meet the Company’s ongoing needs.
Individual director evaluations shall consider past attendance and participation at Board and
committee meetings and the director’s contributions to their respective activities.

     7.       Adoption of Compensation Principles. In part as a response to the Derivative
Litigation, the Board of Directors has expanded the charter for the Compensation Committee. In
addition, the Compensation Committee Charter will be revised to state that,

 - 3 -

 

in approving executive compensation, the recent compensation history of the executive,
including special or unusual compensation, will be taken into consideration.

     8.       Committee Composition. The Nominating and Corporate Governance Committee, the
Compensation Committee and the Audit Committee of the Board of Directors shall each be composed
entirely of independent directors.

     9.       Expansion of Audit Committee Charter. In part as a response to the Derivative
Litigation, the Board of Directors has adopted a new charter for the Audit Committee which provides
expanded oversight responsibilities relating to the preparation of Broadcom’s financial results and
filings and oversight of Broadcom’s independent auditors.

     10.      Executive Compensation. The Compensation Committee Charter will provide that
the Compensation Committee will review and approve corporate goals and objectives relevant to the
compensation of the Chief Executive Officer and other executive officers, including annual
performance objectives, and will evaluate the Chief Executive Officer’s and other executive
officers’ performance against those corporate goals and objectives, and determine the compensation
level for each such person based on this evaluation. During its consideration of the compensation
of the Chief Executive Officer, the Compensation Committee shall meet in executive session, without
the Chief Executive Officer.

     11.       Committee Authorization for Retention of Counsel. The Board’s Committees shall
have standing authorization, on their own decision and, other than in the case of the Audit
Committee, subject to the concurrence of the Lead Independent Director, to retain legal and/or
other advisors of their choice, which advisors shall report directly to the Committee.

     12.       Lead Independent Director. Broadcom’s Corporate Governance Guidelines will
provide that if the Chairman of the Board is not independent, then one of the independent directors
will be designated by a majority of the independent directors to be the “Lead Independent
Director.” The Lead Independent Director will be responsible for periodically scheduling and
conducting separate meetings, and coordinating the activities, of the independent directors,
providing input into agendas for Board meetings and performing various other duties as may be
appropriate, including advising the Chairman of the Board. The Lead Independent Director will also
participate in connection with the scheduling of Board meetings. In addition, the Lead Independent
Director shall:

               (a)      assess the quality, quantity, and timeliness of the flow of information from the
Company’s management that is necessary for the independent directors to effectively and responsibly
perform their duties, and although the Company’s management is responsible for the preparation of
materials for the Board, the Lead Independent Director may specifically request the inclusion of
certain material;

               (b)       confirm that the Nominating and Corporate Governance Committee oversees
compliance with and implementation of the Company’s corporate governance policies and confirm that
the Chairman of the Nominating and Corporate Governance

 - 4 -

 

Committee oversees the process to recommend revisions to Broadcom’s corporate governance
policies;

               (c)       coordinate and moderate executive sessions of the Board’s independent directors,
and act as principal liaison between the independent directors and the Chairman of the Board and/or
Chief Executive Officer on sensitive issues;

               (d)       evaluate, along with members of the Compensation Committee and the full Board,
the Chief Executive Officer’s performance and meet with the Chief Executive Officer to discuss the
Board’s evaluation; and

               (e)       if the Lead Independent Director so desires, make recommendations regarding the
composition and chairpersons of Board committees.

     In addition, the Lead Independent Director and the independent directors as a group may each
retain and have access to independent legal, financial or other advisors of their choice with
respect to any issue relating to their activities at the Company’s expense.

     13.       CFO Quarterly Financial Review. At each regularly scheduled Board of Directors
meeting coinciding with the release of quarterly or annual financial information , the Company’s
Chief Financial Officer or his designee shall provide a report that includes year-to-date financial
results and quarterly financial results that include the Company’s financial condition and
prospects, including as appropriate under the circumstances, a discussion of the principal reasons
for material changes in expenses and liabilities, if any, and material changes in revenue and
earnings, if any, including any material modifications or adjustments of reserve accounts or
contingencies.

     14.       Internal Audit Function. Within two fiscal quarters following the end of the
fiscal quarter in which the Effective Date occurs, Broadcom will implement an internal audit
function. The person in charge of such internal audit function will, in conjunction with personnel
in the internal control function, monitor Broadcom’s internal control environment to ensure that
appropriate financial reporting procedures are in place and that Broadcom is in compliance with
Section 404 of the Sarbanes-Oxley Act of 2002. The internal auditor will report to the Audit
Committee at least twice a year.

     15.       Option Share Holding. Any director or senior executive officer (i.e., CEO, COO
or equivalent (e.g., president), CFO and CTO) who acquires Company shares via option exercise, of
options granted after November 10, 2003, must retain one-third (1/3) of the net shares acquired on
exercise for at least nine months or such earlier time as the individual ceases to be a director of
or an executive officer of the Company as a result of death, resignation, termination or any other
reason. Net shares excludes shares sold to cover the aggregate exercise price, applicable
transfer, income and withholding taxes and commissions and fees.

     16.       Stock Options. Broadcom will submit an option repricing for options granted
prior to final approval of the settlement of the Derivative Actions to its shareholders for
approval if options held by directors would be included in the repricing.

- 5 -

 

     17.       Change in Control. Any executive compensation plan adopted by Broadcom after
the date of final approval of the settlement will not provide that a vote in favor of a merger or
sale constitutes a change in control.

     18.       Shareholder Rights Plan. The Board of Directors will adopt a policy to require
shareholder approval for the adoption of any shareholder rights or “poison pill” provision.
However, the Board shall not be precluded from implementing such a plan without shareholder
approval if a majority of the individual members of the board in the exercise of their fiduciary
responsibilities deem it to be in the best interests of the Company and its shareholders to adopt a
rights plan without the delay in adoption that would come from the time that might be required to
seek shareholder approval. In the event a shareholder rights plan or “poison pill” provision is
implemented prior to obtaining shareholder approval thereof, such plan shall be null and void and
of no effect if a majority of the votes cast do not vote in favor of such shareholder rights plan
at the earlier of (i) the next scheduled shareholder meeting; or (ii) nine months from the date of
implementation of the plan.

- 6 -

 

EXHIBIT B

 

 

1 

 

2 

 

3 

 

4 

 

5 

 

6 

 

7 

 

8 

 

9 

 

10

 

11

 

12

 

13

 

14

 

15

 

16

 

17

 

18

 

19

 

20

 

21

 

22

 

23

 

24

 

25

 

26

 

27

 

28

 

 

 

 

FILED

SUPERIOR COURT OF CALIFORNIA

COUNTY OF ORANGE

CENTRAL JUSTICE CENTER

NOV 01 2004

ALAN SLATER, Clerk of the Court

/s/ J. Frausto

BY J. FRAUSTO

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF ORANGE

	 	 	 	 	 	 
	KIM DAVID, et al.

	 	 	 
	 	Case No. 0l-CC-03930
	 
	 	 	 	 	 
	               Plaintiffs,

	 	 	 	 	Assigned To: Judge Ronald L. Bauer
	 
	 	 	 	 	 
	           v.
	 	 	 	 	 
	 
	 	 	 	 	 
	 	 	 	 	 	[PROPOSED] ORDER GRANTING

	WERNER F. WOLFEN, et al,

	 	 	 	 	APPROVAL OF STIPULATION OF

SETTLEMENT, AND ORDER OF

DISMISSAL
	 
	 	 	 	 	 
	                Defendants,
	 	 	 	 	 
	 
	 	 	 	 	 
	          
-  and -
	 	 	 	 	 
	 
	 	 	 	 	 
	BROADCOM CORPORATION, a California

corporation,
	 	 	 	 	 
	 
	 	 	 	 	 
	                Nominal Defendant.
	 	 	 	 	 
	 
	 	 	 	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 
	 
	 	 	 	 	 
	This Document Relates To:
	 	 	 	 	 
	 
	 	 	 	 	 
	          ALL ACTIONS.
	 	 	 	 	 
	 
	 	 	 	 	 
	 	 	 	 	 	 

EXHIBIT B

[PROPOSED] ORDER

 

 

 

1 

 

2 

 

3 

 

4 

 

5 

 

6 

 

7 

 

8 

 

9 

 

10

 

11

 

12

 

13

 

14

 

15

 

16

 

17

 

18

 

19

 

20

 

21

 

22

 

23

 

24

 

25

 

26

 

27

 

28

 

 

 

 

     The determination of approval of the settlement came before this Court on November

1,2004. Good cause appearing, IT IS HEREBY ORDERED as follows:

     1. The Approval of Stipulation of Settlement is hereby GRANTED. The Stipulation

of Settlement, attached hereto as Exhibit 1, and the terms thereof are approved by the Court as
fair,

adequate, reasonable and in the best interests of Broadcom Corporation and its shareholders. The

Settling Derivative Parties are hereby ordered to perform in accordance with the terms set forth
in

 the Stipulation of Settlement.

     2. The releases granted pursuant to the Stipulation of Settlement, Exhibit 1 hereto,

shall become effective on the Effective Date, as that term is defined in the Stipulation of

Settlement, except for those on-going obligations created by the Stipulation to carry out
the terms

of the Stipulation.

     3. The Court finds that during the course of the Derivative Actions, the parties and

their respective counsel, at all times, complied with the requirements of California Code of
Civil

Procedure §§ 128.5 and 128.7.

     4. Neither the Stipulation nor the settlement contained therein, nor any act
performed

or document executed pursuant to or in furtherance of the Stipulation or the settlement: (i) is
or

may be deemed to be or may be used as an admission of, or evidence of, the validity of any

Released Claim, or of any wrongdoing or liability of the Settling Derivative Defendants; or (ii)
is

or may be deemed to be or may be used as an admission of, or evidence of, any fault or omission

of any of the Settling Derivative Defendants in any civil, criminal or administrative proceeding
in

any court, administrative agency or other tribunal; or (iii) may be used in any other proceeding
in

the examination of a witnesses (including by way of impeachment) concerning the transactions or

occurrences alleged in the Complaints filed in the Derivative Actions, or any related
transactions

or occurrences.

     5. The entire action is hereby DISMISSED WITH PREJUDICE as to the Settling

Derivative Parties and all causes of action. This Order of Dismissal shall constitute a
dismissal

and judgment pursuant to California Code of Civil Procedure § 58 Id. It is the intent of this
Court

this Order of Dismissal shall fully and finally resolve all of the claims against the Settling

-2-

[PROPOSED] ORDER

 

 

 

1 

 

2 

 

3 

 

4 

 

5 

 

6 

 

7 

 

8 

 

9 

 

10

 

11

 

12

 

13

 

14

 

15

 

16

 

17

 

18

 

19

 

20

 

21

 

22

 

23

 

24

 

25

 

26

 

27

 

28

 

 

 

 

Derivative Defendants and that this Order may be used by any of them, or by, in any

other action that may be brought against them in order to support a defense or counterclaim
based

on principles of res judicata, collateral estoppel, release, good faith settlement, judgment bar
or

reduction or any other theory of claim preclusion or issue preclusion or similar defense or

counterclaim. The clerk shall note this Order of Dismissal as a judgment in the register of
actions,

pursuant to California Code of Civil Procedure § 581d.

	 	 	 	 	 
	Dated: NOV 1, 2004	 	     /s/ Judge Ronald L. Bauer
	
	 	

	

	 	 	 	Judge Ronald L. Bauer

-3-

[PROPOSED] ORDER

 

 

EXHIBIT C

 

	 	 	 	 	 	 	 	 	 	 
	1
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 
	2
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 
	3
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 
	4
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 
	5
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 
	6
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 
	7
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 
	8	 	 	UNITED STATES DISTRICT COURT

	 
	 	 	 	 	 	 	 	 	 
	9	 	 	CENTRAL DISTRICT OF CALIFORNIA

	 
	 	 	 	 	 	 	 	 	 
	10	 	 	SOUTHERN DIVISION

	 
	 	 	 	 	 	 	 	 	 
	11
	 	 	 	 	 	 	 	 	 
	

	 	 	WILLIAM AIKEN Derivatively On Behalf of
	 	 	)	 	 	Case No. SACV 01-407 GLT (MLGx)
	12

	 	 	BROADCOM CORPORATION,
	 	 	)	 	 	 
	

	 	 	 	 	 	)	 	 	 
	13

	 	 	                                          Plaintiff,
	 	 	)	 	 	[PROPOSED] ORDER OF DISMISSAL
	

	 	 	 	 	 	)	 	 	 
	14

	 	 	     vs.
	 	 	)	 	 	 
	

	 	 	 	 	 	)	 	 	 
	15

	 	 	HENRY T. NICHOLAS, III, et al.,
	 	 	)	 	 	 
	

	 	 	 	 	 	)	 	 	 
	16

	 	 	                                    Defendants,
	 	 	)	 	 	 
	

	 	 	 	 	 	)	 	 	 
	17

	 	 	     -and-
	 	 	)	 	 	 
	

	 	 	 	 	 	)	 	 	 
	18

	 	 	BROADCOM CORPORATION, a California
	 	 	)	 	 	 
	

	 	 	corporation,
	 	 	)	 	 	 
	19

	 	 	 	 	 	)	 	 	 
	

	 	 	                                      Nominal Defendant.

	 	 	)	 	 	 
	20

	 	 	 	 	 	)	 	 	 
	

	 	 	 	 	 	)	 	 	 
	21

	 	 	 	 	 	)	 	 	 
	

	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 
	22
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 
	23
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 
	24
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 
	25
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 
	26
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 
	27
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 
	28
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 
	 	 	 	EXHIBIT C

 

	 	 	 	 	 	 
	1	 	 	     Pursuant to Rules 23.1 and 41 (a) of the Federal Rules of Civil Procedure, and good cause
	 
	 	 	 	 	 
	2	 	 	appearing, IT IS HEREBY ORDERED as follows:
	 
	 	 	 	 	 
	3	 	 	     1. The entire action is hereby DISMISSED as to the Settling Derivative Parties, as
	 
	 	 	 	 	 
	4	 	 	that term is defined in the Stipulation of Settlement dated as of October 25, 2004, and all causes of
	 
	 	 	 	 	 
	5	 	 	action. Any claims of the Settling Derivative Plaintiffs in their individual capacities are
	 
	 	 	 	 	 
	6	 	 	DISMISSED WITH PREJUDICE.
	 
	 	 	 	 	 
	7	 	 	     2. The Court finds that during the course of the Derivative Actions, the parties and
	 
	 	 	 	 	 
	8	 	 	their respective counsel, at all times, complied with the requirements of Rule 11 of the Federal
	 
	 	 	 	 	 
	9	 	 	Rules of Civil Procedure.
	 
	 	 	 	 	 
	10
	 	 	 	 	 
	 
	 	 	 	 	 
	11

	 	 	Dated:                                         
	 	                                                            
	

	 	 	 	 	Hon. Gary L. Taylor
	 
	 	 	 	 	 
	12
	 	 	 	 	 
	 
	 	 	 	 	 
	13
	 	 	 	 	 
	 
	 	 	 	 	 
	14
	 	 	 	 	 
	 
	 	 	 	 	 
	15
	 	 	 	 	 
	 
	 	 	 	 	 
	16
	 	 	 	 	 
	 
	 	 	 	 	 
	17
	 	 	 	 	 
	 
	 	 	 	 	 
	18
	 	 	 	 	 
	 
	 	 	 	 	 
	19
	 	 	 	 	 
	 
	 	 	 	 	 
	20
	 	 	 	 	 
	 
	 	 	 	 	 
	21
	 	 	 	 	 
	 
	 	 	 	 	 
	22
	 	 	 	 	 
	 
	 	 	 	 	 
	23
	 	 	 	 	 
	 
	 	 	 	 	 
	24
	 	 	 	 	 
	 
	 	 	 	 	 
	25
	 	 	 	 	 
	 
	 	 	 	 	 
	26
	 	 	 	 	 
	 
	 	 	 	 	 
	27
	 	 	 	 	 
	 
	 	 	 	 	 
	28
	 	 	 	 	 

 -2-exv10w1

 

Exhibit 10.1

COVAD COMMUNICATIONS GROUP

2005 BONUS PLAN DOCUMENT

Plan Objectives:

	 	•  	Ensure market competitiveness and to attract, motivate, and retain talent
	 
	 	•  	Reinforce our high-performing, results-oriented culture (first as a company, and
secondarily as individuals)
	 
	 	•  	Drive employee behavior to work as one team to reach quarterly goals of profitability,
recurring revenue and customer satisfaction

Eligibility:

All employees are eligible (except sales and marketing employees who are on a separate commission
incentive plan).

Plan Funding:

All amounts paid pursuant to the bonus plan are paid out of Covad general assets. There is no
account, fund, trust, or other set-aside of funds for payment of awards. Estimates of amounts that
may become payable under the plan are provided to the Finance Team by the Compensation Team in
Organizational Transformation each quarter.

Performance Measures:

For 2005, the bonus plan results will be based on the following measures:

	 	 	 
	Measures for Quarters 1, 2, 3 & 4	 	Weight
	Recurring Revenue
	 	60%
	EBITDA
	 	30%
	Customer Satisfaction
	 	10%

The quarterly targets for Recurring Revenue, EBITDA and Customer Satisfaction shall be based on the
targets for those metrics that are set forth in the Company’s Operating Plan, as approved by the
Board of Directors.

	 	 	 
	Measures for Year End Quarter 5 – Individual Bonus	 	Weight
	Direct Manager Recommendation based on Individual Performance
compared to 2005 Accountability and Development Plan
	 	100%
	For all people managers 30% of their Individual Bonus is based on improvement
in the Employee Satisfaction Index
	 	 

Form and Timing of Awards:

The annual target bonus percentage, which is based on level is divided into five possible bonus
payments:

	 	•  	Four quarterly payments based on quarterly company performance.
	 
	 	•  	If the company misses a quarterly bonus target, there is no way to make up the lost
quarter’s bonus in the following quarter.
	 
	 	•  	One year-end (Q5) payment based on individual performance for the entire year, subject
to Compensation Team and Compensation Committee discretion and approval.

1

 

COVAD COMMUNICATIONS GROUP

2005 BONUS PLAN DOCUMENT

	 	•  	Year-end (Q5) individual bonuses are conditioned on continued employment,
compliance with Covad policies, and contribution to Company performance through the
last day of the payroll period prior to the payment date, as determined by the
Compensation Team in Organizational Transformation.

Award Opportunity (Targets):

Target bonus levels are determined annually and are based on our objectives for the coming year and
the external market (75th percentile). Employee target is based on role assignment
effective on the last day of the quarter or year for individual bonus. For role change to be
effective, Human Resources must have received an approved Change of Status by the last business day
of the quarter end. Below are target bonus amounts for 2005 based on level.

	 	 	 	 	 	 	 	 	 	 	 
	The 2005 annual bonus targets and guidelines are as follows:
	(as a % of actual earnings)
	 	Individual Contributors	 	Managers
	I1

	 	 	5	%	 	M1
	 	 	15	%
	I2

	 	 	8	%	 	M2
	 	 	20	%
	I3

	 	 	10	%	 	M3
	 	 	30	%
	I4

	 	 	15	%	 	M4 VP
	 	 	40	%
	I5

	 	 	20	%	 	M4 SVP
	 	 	50	%
	I6

	 	 	30	%	 	M5
	 	 	50	%
	

	 	 	 	 	 	M6
	 	 	100	%

Payout Calculation:

For the quarterly bonus to payout the Company must meet a threshold of 80% performance on all
measures. When performance is between 80% and 100% a decelerator is applied; when EBITDA and
recurring revenue performance exceeds target by 20% an accelerator is applied to an individual’s
award opportunity; when customer satisfaction performance exceeds target by 5% an accelerator is
applied.

	 	 	 
	Quarterly Performance	 	Accelerator/Decelerator
	80% to 99%

	 	-2.5% for each 1% of performance
	100% to 119%

	 	100% of award opportunity
	120% to 200%

	 	+2.5% for each 1% of performance up to a maximum of 200%
	(for Customer Satisfaction
accelerators kick in at 105%
of target)
	 	 

     Bonus payments are calculated based on actual earnings and as a result are automatically prorated
to reflect time on the plan

	 	•  	Earnings include: regular earnings, overtime, shift differential, jury leave pay, PTO,
floating holidays and bereavement leave pay.
	 
	 	•  	Please note that in 2005 bonus payments in Q3 and Q4 may be higher than that in Q1 and
Q2 since there are seven pay periods in Q3 and Q4 (versus six pay periods in Q1 and Q2)
per our payroll calendar.

2

 

COVAD COMMUNICATIONS GROUP

2005 BONUS PLAN DOCUMENT

Quarterly bonus payments would typically occur within two to four weeks after Covad’s earnings
announcement (earnings announcements are typically less than 45 days after the quarter ends).

Employment:

Nothing in this plan shall be construed as a guarantee of continued employment. All Employees are
employed by the Company at will.

Plan Duration:

The Plan will be in effect from January 1, 2005 until December 31, 2005, unless otherwise modified
or terminated in writing by the CEO.

Leaves of Absence and Transfers to Other Incentive Plans:

Payments for employees who are granted an approved leave of absence (other than for military leave
under USERRA), disability leave of absence, or who are transferred to a commission plan will be
prorated based on actual earnings during the time on bonus plan. Payments for employees who are
granted an approved leave of absence for military leave under USERRA and who return within the
prescribed period for guaranteed reinstatement under USERRA will be determined in accordance with
USERRA.

Terminations:

Employees who voluntarily or involuntarily terminate their employment on or after the last business
day of the quarter will be paid the quarterly bonus determined for such quarter, if any. Employees
who voluntarily or involuntarily terminate their employment prior to the last day of the payroll
period prior to the payment date for the year end (Q5) individual bonus forgo their rights to
payment of their individual year end bonus.

Plan Administration:

The CEO has the authority to interpret the Plan and to create, amend, or nullify any rules and
procedures as necessary for the proper plan administration. Any determination of the CEO is final
and binding on all participants. The Compensation Committee of the Board of Directors has
authority to approve and modify the plan for participants who are Executive Officers of the
company. The plan will be administered by the Compensation Team in Organizational Transformation in
accordance with all provisions stipulated in this Plan.

Audit and Approval Procedure:

Bonus payments will be calculated by the Compensation Team. The Employee earnings report will be
provided to Compensation by the Payroll Team within two weeks of quarter close. The Senior Vice
President, Organizational Transformation reviews and authorizes payment for all Employees under the
plan other than year end individual bonus amounts for Executive Officers. The Compensation
Committee of the Board of Directors reviews and authorizes individual performance and year end (Q5)
individual bonus amounts for Executive Officers covered under the plan.

3

 

COVAD COMMUNICATIONS GROUP

2005 BONUS PLAN DOCUMENT

Problem Resolution:

Issues or questions regarding bonus payments should be sent in writing via email to bonus@covad.com
the Compensation Team within two weeks of bonus payment. Employees who agree to this Plan hereby agree and understand that any and all disputes regarding
any alleged breach of this Plan shall be settled by final and binding arbitration in the County of
Santa Clara, California, in accordance with the National Rules for the Resolution of Employment
Disputes of the American Arbitration Association, or its successor, and judgment upon the award
rendered may be entered in any court with jurisdiction. Covad will be responsible for the
arbitration fees charged by the AAA or the arbitrator.

Plan Changes or Modifications:

The Company has developed the Plan based upon its current services and personnel assignments. If
changes occur at the Company which effect these service assignments, or conditions, the Company, by
the Compensation Committee for changes that affect Executive Officers or by the Compensation
Committee or CEO for all other employees, may add, amend or discontinue any portion of the Plan at
any time during the Plan year, provided that the action does not affect the amount of Bonus earned
before the date the change is effective.

Charles Hoffman

Chief Executive Officer

	 	 	 
	/s/ Charles Hoffman	 	Date: 2/23/05
	 

Deborah Perry

Senior Vice President, Organizational Transformation

	 	 	 
	/s/ Deborah Perry	 	Date: 2/23/05
	 

Larry Irving

Compensation Committee Chair

	 	 	 
	/s/ Larry Irving	 	Date: 2/23/05
	 

Hellene Runtagh

Compensation Committee Member

	 	 	 
	/s/ Hellene Runtagh	 	Date: 2/23/05
	 

Daniel Lynch

Compensation Committee Member

	 	 	 
	/s/ Daniel Lynch	 	Date: 2/23/05
	 

4

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00078-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00078-of-00352.parquet"}]]