pre14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by
the Registrant
ý
Filed by
a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy
Statement
¨ Definitive Proxy Statement
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¨ Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)) |
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¨ Definitive Additional Materials |
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¨ Soliciting Material Pursuant to §240.14a-12 |
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AVAGO TECHNOLOGIES LIMITED
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Per unit price or other underlying value of transaction computed pursuant to Exchange
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Fee paid previously with preliminary materials. |
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Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify
the previous filing by registration statement number, or the Form or Schedule and the date of
its filing. |
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AVAGO TECHNOLOGIES LIMITED
(Incorporated in the Republic of Singapore)
(Company Registration Number 200510713C)
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
To Be Held on March 30, 2011
To our shareholders:
You are cordially invited to attend, and NOTICE IS HEREBY GIVEN
of, the 2011 Annual General Meeting of Shareholders (the
2011 AGM) of Avago Technologies Limited
(Avago or the
Company), which will be held at the offices of
Avagos principal U.S. subsidiary, Avago Technologies
U.S. Inc., 350 West Trimble Road, San Jose,
California 95131, U.S.A., at 11:00 a.m., Pacific Time, on
Wednesday, March 30, 2011, for the following purposes:
As
Ordinary Business
1. To re-elect each of the following directors to the
board of directors (the Board):
(a) Mr. Hock E. Tan;
(b) Mr. Adam H. Clammer;
(c) Mr. James A. Davidson;
(d) Mr. James V. Diller;
(e) Mr. Kenneth Y. Hao;
(f) Mr. David Kerko;
(g) Ms. Justine F. Lien;
(h) Mr. Donald Macleod; and
(i) Mr. Bock Seng Tan.
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2.
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To approve the re-appointment of PricewaterhouseCoopers LLP to
serve as the Companys independent registered public
accounting firm and independent Singapore auditor for the fiscal
year ending October 30, 2011 (Fiscal Year
2011), and to authorize the Audit Committee of the
Board to fix PricewaterhouseCoopers LLPs remuneration for
services provided through our 2012 Annual General Meeting of
Shareholders (the 2012 AGM).
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As
Special Business
3. To pass the following as an Ordinary Resolution:
RESOLVED THAT, approval be and is hereby given for the Company
to provide the following cash compensation to directors for
service on the Board and its committees during the period from
March 31, 2011 through the date on which our 2012 AGM is
held, and for each
12-month
period thereafter:
(a) annual cash compensation of $50,000 to each of our
non-employee directors, other than the Chairperson of the Board,
and cash compensation of $80,000 to the independent Chairperson
of the Board;
(b) additional annual cash compensation of $25,000 to the
chairperson of the Audit Committee, provided that such person is
an independent director;
(c) additional annual cash compensation of $15,000 to the
chairperson of the Compensation Committee, provided that
such person is an independent director;
(d) additional annual cash compensation of $12,500 to the
chairperson of the Nominating and Corporate Governance
Committee, provided that such person is an independent director;
(e) additional annual cash compensation of $10,000 to each
of our independent directors in respect of each of the foregoing
committees of the Board on which they serve, other than service
as chairperson of any such committee of the Board; and
(f) appropriate pro rata cash compensation, based on the
annual cash compensation set forth in (a) to
(e) above, as applicable, to any new non-employee director
who is appointed by the Board, any independent director who is
appointed to the position of Chairperson of the Board or
chairperson of any such committee of the Board, provided that
such person is an independent director, or any independent
director who is appointed to serve on any such committee of the
Board, in each case, after the date of our 2011 AGM, for their
services rendered as directors
and/or
committee members for any period less than 12 months.
4. To consider and put to a non-binding, advisory
vote, the following resolution:
RESOLVED THAT shareholders approve the compensation of the
Companys named executive officers, as disclosed pursuant
to Item 402 of
Regulation S-K
promulgated by the U.S. Securities and Exchange Commission,
set forth in Compensation Discussion and Analysis
and in the compensation tables and accompanying narrative
disclosure under Executive Compensation in the
Companys proxy statement relating to the 2011 AGM.
This resolution is being proposed to shareholders as required
pursuant to Section 14A of the U.S. Securities
Exchange Act of 1934, as amended. The shareholders vote on
this resolution is advisory and non-binding in nature, will have
no legal effect and will not be enforceable against the Company
or the Board.
5. To consider and put to a non-binding, advisory
vote the following resolution:
RESOLVED THAT the shareholders recommend that a non-binding,
advisory vote to approve the compensation of the Companys
named executive officers be put to shareholders for their
consideration with one of the following three frequencies:
(a) every one year;
(b) every two years; or
(c) every three years.
This resolution is being proposed to shareholders as required
pursuant to Section 14A of the U.S. Securities
Exchange Act of 1934, as amended. The shareholders vote on
this resolution is advisory and non-binding in nature, will have
no legal effect and will not be enforceable against the Company
or the Board.
6. To pass the following as an Ordinary Resolution:
RESOLVED THAT, pursuant to the provisions of Section 161 of
the Companies Act, Chapter 50 of Singapore (the
Singapore Companies Act), and also subject to
the provisions of that Act and our Articles of Association,
authority be, and hereby is, given to our Board to:
(a) at any time to
and/or with
such persons and upon such terms and conditions and for such
consideration as our directors may in their sole discretion deem
fit, and with such rights or restrictions as our directors may
think fit to impose, to:
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(i)
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allot and issue ordinary shares in our capital; and/or
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(ii)
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make or grant offers, agreements, options or other instruments
(including the grant of awards or options pursuant to our
equity-based incentive plans in effect as at the date of this
resolution) that might or would require ordinary shares to be
allotted and issued, whether
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such allotment or issuance would occur during or after the
expiration of this authority (including, but not limited to, the
creation and issuance of warrants, rights, units, purchase
contracts, debentures or other instruments (including debt
instruments) convertible into ordinary shares); and
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(b) allot and issue ordinary shares in our capital pursuant
to any offer, agreement, option or other agreement made, granted
or authorized by our directors while this resolution was in
effect, regardless of whether the authority conferred by this
resolution may have ceased to be in effect at the time of the
allotment and issuance and that such authority, if approved by
our shareholders, shall continue in effect until the earlier of
the conclusion of our 2012 AGM or the expiration of the period
within which our 2012 AGM is required by law to be held.
7. To pass the following resolution as an Ordinary
Resolution:
RESOLVED THAT, pursuant to the provisions of Sections 76C
and 76E of the Singapore Companies Act and also subject to the
provisions of that Act and our Articles of Association:
(a) authority be, and hereby is, given to our Board to
cause to be purchased or otherwise acquired issued ordinary
shares in the capital of the Company, not exceeding in aggregate
the number of issued ordinary shares representing 10% (or such
other higher percentage as the Minister may by notification
prescribe pursuant to the Singapore Companies Act) of the total
number of ordinary shares in the capital of the Company
outstanding as of (x) March 31, 2010 (the date of our
last Annual General Meeting of Shareholders) or (y) the
date of the passing of this resolution, whichever is greater, at
such price or prices as may be determined by our Board from time
to time up to the maximum purchase price described in paragraph
(c) below, by way of:
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(i)
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market purchases on the Nasdaq Global Select Market or any other
stock exchange on which our ordinary shares may for the time
being be listed and quoted; and/or
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(ii)
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off-market purchases (if effected other than on the Nasdaq
Global Select Market or, as the case may be, any other stock
exchange on which our ordinary shares may for the time being be
listed and quoted) in accordance with any equal access scheme(s)
as may be determined or formulated by our Board as they consider
fit, which scheme(s) shall satisfy all the conditions prescribed
by the Singapore Companies Act, and otherwise in accordance with
all other laws as may for the time being be applicable, and the
regulations and rules of the Nasdaq Global Select Market, or, as
the case may be, any other stock exchange on which our ordinary
shares may for the time being be listed and quoted;
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(b) unless varied or revoked by our shareholders in a
general meeting, the authority conferred on our Board pursuant
to the mandate contained in paragraph (a) above may be
exercised by our Board at any time and from time to time during
the period commencing from the date of the passing of this
resolution and expiring on the earlier of:
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(i)
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the date on which our 2012 AGM is held; or
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(ii)
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the date by which our 2012 AGM is required by law to be held;
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(c) the maximum purchase price (excluding brokerage,
commission, applicable goods and services tax and other related
expenses) which may be paid for an ordinary share purchased or
acquired by us pursuant to the mandate contained in paragraph
(a) above, shall not exceed:
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(i)
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in the case of a market purchase of ordinary shares, the highest
independent bid per share or the last independent transaction
price per share, whichever is higher, of our ordinary shares
quoted or reported on the Nasdaq Global Select Market at the
time the purchase is effected; and
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(ii)
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in the case of an off-market purchase pursuant to an equal
access scheme, 150% of the Prior Day Close Price, and for the
above purposes, the term Prior Day Close Price means
the closing price per share of our ordinary shares as quoted on
the Nasdaq Global Select Market or, as the case may be, any
other stock exchange on which our ordinary shares may, for the
time being, be listed and quoted on the day immediately
preceding the date of the making
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of the offer pursuant to the off-market purchase. The date of
the making of the offer refers to the date on which we announce
our intention to make an offer for the purchase or acquisition
of our ordinary shares from holders of our ordinary shares,
stating therein the purchase price (which shall not be more than
the maximum purchase price calculated on the foregoing basis)
for each ordinary share and the relevant terms of the equal
access scheme for effecting the off-market purchase; and
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(d)
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our directors
and/or any
of them be and are hereby authorized to complete and do, or
cause to be completed or done, all such acts and things
(including executing such documents as may be required) as one
or more may consider expedient or necessary to give effect to
the transactions contemplated
and/or
authorized by this resolution.
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As
Ordinary Business
8. To transact any other business as may properly be
transacted at the 2011 AGM.
Notes
About the 2011 Annual General Meeting of Shareholders
Singapore Financial Statements. At the 2011 AGM, our
shareholders will have the opportunity to discuss and ask
questions regarding our Singapore audited accounts for the
fiscal year ended October 31, 2010, together with the
reports of the directors and auditors thereon, in compliance
with the laws of Singapore. Shareholder approval of our audited
accounts is not being sought by the proxy statement for the 2011
AGM (the Proxy Statement) and will not be
sought at the 2011 AGM.
Eligibility to Vote at Annual General Meeting of
Shareholders; Receipt of Notice. The Board has fixed the
close of business on February 9, 2011, as the record date
for determining those shareholders who will be entitled to
receive copies of this notice and accompanying Proxy Statement.
However, only shareholders of record on March 30, 2011,
will be entitled to vote at the 2011 AGM. If you have sold or
transferred all of your ordinary shares of the Company, you
should immediately forward this Proxy Statement and the
accompanying proxy card to the purchaser or transferee, or to
the bank, broker or agent through whom the sale was effected,
for onward transmission to the purchaser or transferee.
Quorum. The attendance, in person or by proxy, of at
least a majority of our outstanding ordinary shares at the 2011
AGM is required to constitute a quorum. Accordingly, it is
important that your shares be represented at the 2011 AGM,
either in person or by proxy.
Proxies. A registered shareholder, or shareholder of
record, entitled to attend and vote at the 2011 AGM is entitled
to appoint a proxy to attend the meeting and vote on his or her
behalf. A proxy need not also be a shareholder. Whether or
not you plan to attend the meeting, please complete, date and
sign the enclosed proxy card and return it in the enclosed
envelope. If not delivered in person at the 2011 AGM, a
proxy card must be received by us
c/o Proxy
Services,
c/o Computershare
Investor Services LLC, P.O. Box 43101, Providence, RI
02940-5067,
not less than 48 hours before the time appointed for
holding the 2011 AGM. By completing and submitting your proxy,
you are legally designating the individuals named in the proxy
cardHock E. Tan, Douglas R. Bettinger and
Patricia H. McCall (together, the Proxy
Holders)to vote your shares in accordance with
the instructions you have indicated on the proxy. If you sign
and return your proxy but do not indicate how your shares are to
be voted, then the Proxy Holders will vote as the Board
recommends on each proposal. It is not expected that any
additional matters will be brought before the 2011 AGM, but if
other matters are properly presented at the 2011 AGM or any
adjournment thereof, the Proxy Holders will vote your shares in
their discretion on such matters. A shareholder of record may
revoke his or her proxy at any time prior to the time it is
voted. Shareholders of record who are present at the meeting may
revoke their proxies and vote in person or, if they prefer, may
abstain from voting in person and allow their proxies to be
voted.
If your shares are held in street name through a broker, bank or
other nominee, you are considered the beneficial owner of those
shares and you have the right to instruct your broker, bank or
other nominee, who is the registered shareholder of those
shares, on how to vote the shares in your account. Your broker,
bank or nominee will send you a voting instruction form for you
to use to direct how your shares should be voted.
Mandatory Disclosure Regarding Share Purchase Mandate
Funds. Only funds legally available for purchasing or
acquiring ordinary shares in accordance with our Articles of
Association and applicable laws of Singapore will be used to
repurchase our ordinary shares if Proposal 7 (the
2011 Share Purchase Mandate) is approved. In
the event that we elect to purchase or acquire any of our
ordinary shares, depending on the number of ordinary shares
repurchased or acquired and then current market, business and
other relevant conditions, we may use our internal sources of
funds and/or
external borrowings to finance any such purchases or
acquisitions.. The amount of funds required for us to purchase
or acquire our issued ordinary shares, and the impact on our
financial position will depend on the number of ordinary shares
we purchase or acquire and the price at which we make such
purchases. Our directors do not propose to exercise the
2011 Share Purchase Mandate in a manner and to such an
extent that would materially affect our working capital
requirements and those of our subsidiaries.
Important
Notice Regarding the Internet Availability of Proxy Materials
for the Annual Meeting of
Shareholders to be held on March 30, 2011:
The proxy statement and annual report to shareholders are
available at
http://phx.corporate-ir.net/phoenix.zhtml?c=203541&p=proxy.
By Order of the Board,
Hock E. Tan
Director, Chief Executive Officer and President
February [ ], 2011
You
should read the entire accompanying Proxy Statement carefully
prior to voting.
AVGO
TECHNOLOGIES LIMITED
PROXY STATEMENT
FOR
2011 ANNUAL GENERAL MEETING OF SHARHEOLDERS
TABLE OF
CONTENTS
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1
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ELECTION OF DIRECTORS
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14
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APPROVAL OF THE RE-APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM AND INDEPENDENT SINGAPORE AUDITOR FOR FISCAL
YEAR 2010 AND AUTHORIZATION OF THE AUDIT COMMITTEE TO FIX ITS
REMUNERATION
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ORDINARY RESOLUTION TO APPROVE NON-EMPLOYEE DIRECTORS CASH
COMPENSATION
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NON-BINDING, ADVISORY VOTE ON EXECUTIVE COMPENSATION
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NON-BINDING, ADVISORY VOTE ON THE FREQUENCY OF SHAREHOLDERS VOTE
ON EXECUTIVE COMPENSATION
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ORDINARY RESOLUTION TO AUTHORIZE ORDINARY SHARE ALLOTMENTS AND
ISSUANCES
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ORDINARY RESOLUTION TO APPROVE THE 2011 SHARE PURCHASE MANDATE
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DRIVING DIRECTIONS
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ELECTRONIC
DELIVERY OF OUR SHAREHOLDER COMMUNICATIONS
We strongly encourage our shareholders to conserve natural
resources, as well as significantly reduce our printing and
mailing costs, by signing up to receive your shareholder
communications via
e-mail.
With electronic delivery, we will notify you when our annual
reports and proxy statements are available on the Internet.
Electronic delivery can also help reduce the number of bulky
documents in your personal files and eliminate duplicate
mailings. To sign up for electronic delivery:
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1.
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If you are a registered holder (i.e. you hold your Avago
ordinary shares in your own name through our transfer agent,
Computershare Investor Services), visit:
www-us.computershare.com/investor/ to enroll.
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2.
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If you are a beneficial holder (i.e. your shares are held by a
brokerage firm, a bank or a trustee), the voting instruction
form provided by most banks or brokers will contain instructions
for enrolling in electronic delivery.
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Your electronic delivery enrollment will be effective until you
cancel it. If you have questions about electronic delivery,
please call our Investor Relations department at
(408) 435-7400.
INTERNET
AVAILABILITY OF PROXY MATERIALS
Important
Notice Regarding the Internet Availability of Proxy Materials
for the Annual Meeting of Shareholders to be held on
March 30, 2011:
The
notice of meeting, proxy statement and annual report to
shareholders are available at
http://phx.corporate-ir.net/phoenix.zhtml?c=203541&p=proxy.
i
PROXY
STATEMENT
for the
2011 ANNUAL GENERAL MEETING
of
SHAREHOLDERS
of
AVAGO TECHNOLOGIES LIMITED
To Be
Held on Wednesday, March 30, 2011
11:00 a.m. (Pacific Time)
at the offices of Avagos principal U.S. subsidiary, Avago
Technologies U.S. Inc.,
350 West Trimble Road, San Jose, California 95131,
U.S.A.
We are making this Proxy Statement available in connection with
the solicitation by the board of directors of Avago (the
Board) of proxies to be voted at the 2011
Annual General Meeting of Shareholders (the 2011
AGM), or at any adjournments or postponements thereof,
for the purposes set forth in the accompanying Notice of Annual
General Meeting of Shareholders (the Notice).
Unless the context otherwise requires, references in this Proxy
Statement to Avago, the
Company, we,
our, us and similar terms
are to Avago Technologies Limited.
Proxy Mailing. This Proxy Statement, the enclosed Proxy
Card and the Notice were first made available on or about
February [ ], 2011 to shareholders of record as
of February 9, 2011.
Costs of Solicitation. The entire cost of soliciting
proxies will be borne by us. We
and/or our
agents may solicit proxies by mail, telephone,
e-mail, fax
or in person. Certain of our officers and employees may solicit
the submission of proxies authorizing the voting of shares in
accordance with the Boards recommendations. Such
solicitations may be made by telephone, facsimile transmission
or personal solicitation. No additional compensation will be
paid to such officers, directors or regular employees for such
services. We will reimburse banks, brokerage firms and other
custodians, nominees and fiduciaries for reasonable
out-of-pocket
expenses incurred by them in sending proxy materials to
shareholders.
Our Registered Office. The mailing address of our
registered office is 1 Yishun Avenue 7, Singapore 768923. Please
note, however, that any shareholder communications should be
directed to the attention of our General Counsel at the offices
of Avago Technologies U.S. Inc., 350 W. Trimble
Road, Building 90, San Jose, California 95131, U.S.A.
Financial Statements; Presentation. We have prepared, in
accordance with the laws of Singapore, Singapore statutory
financial statements, which are included with this Proxy
Statement. Except as otherwise stated herein, all monetary
amounts in this Proxy Statement have been presented in
U.S. dollars.
VOTING
RIGHTS AND SOLICITATION OF PROXIES
The close of business on February 9, 2011, is the record
date for shareholders entitled to notice of the 2011 AGM. All of
our ordinary shares issued and outstanding on March 30,
2011, are entitled to be voted at the 2011 AGM, and shareholders
of record on March 30, 2011 will have one vote for each
ordinary share so held on the matters to be voted upon. As of
February 9, 2011, we had
[ ]
ordinary shares issued and outstanding.
Proxies. Ordinary shares represented by proxies in
the accompanying form, which are properly executed and received
by us in accordance with the instructions set forth in the
Notice, will be voted by the individuals named
therein Hock E. Tan, Douglas R. Bettinger and
Patricia H. McCall (together, the Proxy
Holders) at the 2011 AGM in accordance
with the shareholders instructions set forth in the proxy.
A proxy holder need not also be a shareholder.
If you sign and return your proxy but do not indicate how
your shares are to be voted, then shares represented by proxies
will be voted by the Proxy Holders in accordance with the
Boards recommendations, as follows:
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FOR the election of the Board nominees named in
Proposal 1;
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FOR Proposals 2, 3, 4, 6 and 7; and
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every 3 YEARS for Proposal 5.
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Management does not know of any matters to be presented at the
2011 AGM other than those set forth in this Proxy Statement and
in the Notice accompanying this Proxy Statement, nor have we
received notice of any matter by the deadline prescribed by
Securities and Exchange Commission (SEC)
Rule 14a-4(c).
Without limiting our ability to apply the advance notice
provisions in our Articles of Association with respect to the
procedures which must be followed for a matter to be properly
presented at an annual general meeting, if other matters should
properly come before the 2011 AGM, the Proxy Holders will vote
on such matters in accordance with their best judgment.
Any shareholder of record entitled to attend and vote at the
2011 AGM, has the right to revoke his or her proxy at any time
prior to voting at the 2011 AGM by (i) submitting a
subsequently dated proxy, which, if not delivered in person at
the meeting, must be received by us
c/o Proxy
Services,
c/o Computershare
Investor Services LLC, P.O. Box 43101, Providence, RI
02940-5067,
no later than 48 hours before the appointed time of the
meeting, or (ii) by attending the meeting and voting in
person.
If your ordinary shares are held in street name through a
broker, bank, or other nominee, you are considered the
beneficial owner of those shares and you have the right to
instruct your broker, bank or other nominee, who is the
registered shareholder of those shares, on how to vote the
shares in your account. Your broker, bank or nominee will send
you a voting instruction form for you to use to direct how your
shares should be voted. If you wish to change or revoke your
voting instructions, you will need to contact the registered
holder of your ordinary shares and follow their instructions. If
you are not the shareholder of record, you may not vote your
shares in person at the 2011 AGM unless you obtain a legal proxy
from the broker, bank or other nominee that holds your shares,
giving you the right to vote the shares instead of the broker,
bank or other nominee holding your shares. If your shares are
held in the name of a broker, trust, bank or other nominee, in
order to be admitted to the 2011 AGM you will also need to bring
a letter or recent account statement from that broker, bank or
other nominee that confirms that you are the beneficial owner of
those shares, as well as a picture identification, such as a
valid drivers license or passport, for purposes of
personal identification.
Quorum. Representation at the 2011 AGM, in person or by
proxy, of at least a majority of all issued and outstanding
ordinary shares is required to constitute a quorum.
Abstentions and Broker Non-Votes. If a shareholder
abstains from voting, including brokers that cause abstentions
to be recorded upon the instructions of their customers whose
shares they hold as of record, or if a broker may not vote
ordinary shares held by it because the broker (1) has not
received voting instructions from its customer who beneficially
owns those shares and (2) lacks discretionary voting power
to vote those shares (a broker non-vote),
these shares are considered present and entitled to be voted at
the 2011 AGM, and, therefore, are considered for purposes of
determining whether a quorum is present. Under our Articles of
Association, for a proposal being voted on as an ordinary
resolution, abstentions will have the same effect as a vote
against the proposal. A broker non-vote is treated as not being
entitled to vote on the relevant proposal and is not counted for
purposes of determining whether a proposal has been approved.
A broker is entitled to vote shares held for a beneficial owner
on routine matters, which include all of the proposals to be
voted on at the 2011 AGM, other than Proposal 1 (the
election of directors), Proposal 4, (non-binding, advisory
vote on executive compensation) and Proposal 5,
(non-binding, advisory vote on the frequency of
shareholders vote on executive compensation), without
instructions from the beneficial owner of those shares. Without
instructions from the beneficial owner, a broker will not be
entitled to vote shares held for a beneficial owner on
Proposals 1, 4 and 5, which are non-routine matters.
2
Required Vote. With respect to Proposal 1 (the
election of directors), nominees receiving the highest number of
affirmative votes of the ordinary shares present in person or
represented by proxy at the 2011 AGM and entitled to vote shall
be elected, provided that such number of affirmative votes shall
not be less than at least a majority of the ordinary shares held
by the shareholders present in person or represented by proxy at
the 2011 AGM and entitled to vote on the proposal.
The affirmative vote of shareholders holding at least a majority
of the ordinary shares held by the shareholders present in
person or represented by proxy at the 2011 AGM and entitled to
vote is required to approve Proposal 2 (the re-appointment
of PricewaterhouseCoopers LLP as the independent registered
public accounting firm and independent Singapore auditor), to
approve the ordinary resolutions contained in Proposals 3
(directors compensation), 6 (authorization of ordinary
share allotments and issuances) and 7 (approval of the
2011 share purchase mandate), and to approve
Proposal 4 (non-binding, advisory vote on executive
compensation). With respect to Proposal 5 (non-binding,
advisory vote on the frequency of shareholders vote on
executive compensation), the frequency alternative receiving the
greatest number of votes, even if not a majority of the ordinary
shares held by the shareholders present in person or represented
by proxy at the 2011 AGM and entitled to vote, will be
considered the frequency that has been recommended by
shareholders.
Proposals 4 and 5 are being proposed to shareholders as
required pursuant to Section 14A of the Securities Exchange
Act of 1934, as amended (the Exchange Act).
Shareholders votes on Proposals 4 and 5 are advisory
and non-binding in nature, will have no legal effect and will
not be enforceable against the Company or the Board.
Voting Procedures and Tabulation. We have appointed a
representative of Computershare Investor Services LLC as the
inspector of elections to act at the 2011 AGM and to make a
written report thereof. Prior to the 2011 AGM, the inspector
will sign an oath to perform his or her duties in an impartial
manner and according to the best of his or her ability. The
inspector will ascertain the number of ordinary shares
outstanding and the voting power of each, determine the ordinary
shares represented at the 2011 AGM and the validity of proxies
and ballots, count all votes and ballots, and perform certain
other duties. The determination of the inspector as to the
validity of proxies will be final and binding.
3
PROPOSAL 1:
ELECTION OF DIRECTORS
General
Pursuant to the Companies Act, Chapter 50 of Singapore (the
Singapore Companies Act) and our Articles of
Association, our Board must have at least one director who is
ordinarily resident in Singapore and may consist of no more than
13 directors, as determined from time to time by the Board.
Each of our directors is elected annually.
Shareholder
Agreement
We are party to a Second Amended and Restated Shareholder
Agreement (the Shareholder Agreement), dated
as of August 11, 2009, with investment funds affiliated
with Kohlberg Kravis Roberts & Co.
(KKR), and investment funds affiliated with
Silver Lake Partners (Silver Lake, and
together with KKR, the Sponsors), Bali
Investments S.àr.l. (Bali), an entity
controlled by investment funds affiliated with KKR and Silver
Lake, Seletar Investments Pte Ltd (Seletar),
Geyser Investment Pte. Ltd. (Geyser) and
certain other persons, (collectively referred to as the
Equity Investors). As of
February [ ], 2011, the Equity Investors
together owned approximately [ ]%
of our outstanding share capital.
Under the terms of the Shareholder Agreement, our Board must
consist of 11 members, unless otherwise agreed upon by the
Sponsors. Currently our Board is comprised of nine members, with
two vacancies. The Board has the power to appoint directors to
fill any vacancies on the Board. KKR and Silver Lake each
currently have the right to designate two of the members of our
Board one member must be our Chief Executive Officer. and three
of the remaining members must be mutually agreed upon by KKR and
Silver Lake. Each of KKR and Silver Lake also has the right to
designate one member to each committee of the Board for as long
as they have the right to designate one or more director
nominees to the Board, and subject to compliance with federal
securities laws and the requirements of the Nasdaq Stock Market.
The terms of the Shareholder Agreement further require the
Equity Investors to vote their ordinary shares in a manner that
gives effect to the provisions of the Shareholder Agreement, at
any annual or special meeting of shareholders.
See Certain Relationships and Related Party
Transactions Second Amended and Restated Shareholder
Agreement on page 55 for more information regarding
the Shareholder Agreement.
Director
Nominees
Directors are elected at each annual general meeting of
shareholders and hold office until their successors are duly
elected or qualified. Upon the recommendation of the Nominating
and Corporate Governance Committee, the Board has nominated the
nine individuals below for election as directors, each of whom
is currently a director of the Company. The Board expects that
each of the nominees listed below will be available to serve as
a director. Shareholders may not vote their proxies for a
greater number of persons than the number of nominees named
below.
In considering whether the director nominees have the
experience, qualifications, attributes and skills, taken as a
whole, to serve as directors of the Company, in light of the
Companys business and structure, the Nominating and
Corporate Governance Committee and the Board focused primarily
on the information discussed in each of the director
nominees biographical information set forth below. The
Board believes that each nominee has relevant experience,
personal and professional integrity, the ability to make
independent, analytical inquiries, experience with and
understanding of our business and business environment and
willingness and ability to devote adequate time to Board duties.
We also believe that our directors together have the skills and
experience to form a board that is well suited to oversee the
Company.
4
The following table sets forth certain information concerning
the nominees for directors of the Company as of
February [ ], 2011.
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Hock E. Tan
Age 59
President, Chief
Executive Officer
Director since
March 2006
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Mr. Tan has served as our President, Chief Executive Officer and
a director since March 2006. From September 2005 to January
2008, he served as chairman of the board of directors of
Integrated Device Technology, Inc. (IDT). Prior to
becoming chairman of IDT, Mr. Tan was the President and Chief
Executive Officer of Integrated Circuit Systems, Inc.
(ICS), from June 1999 to September 2005. Prior to
ICS, Mr. Tan was Vice President of Finance with Commodore
International, Ltd. from 1992 to 1994, and previously held
senior management positions with PepsiCo, Inc. and General
Motors Corporation. Mr. Tan served as managing director of
Pacven Investment, Ltd., a venture capital fund in Singapore
from 1988 to 1992, and served as managing director for Hume
Industries Ltd. in Malaysia from 1983 to 1988. Mr. Tans
qualifications to serve on the Board include his role as the
Chief Executive Officer of the Company, his extensive career in
the technology industry in general and in the semiconductor
industry in particular, including service as the chairman of the
board of directors of a publicly-traded semiconductor company,
and his extensive knowledge of the Companys business
developed over the course of his career at Avago.
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Adam H. Clammer
Age 40
Director since
September 2005
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Since October 2009, Mr. Clammer has been a Member of KKR
Management L.L.C., which is the general partner of KKR &
Co. L.P. From January 2006 to September 2009, he was a Member of
KKR & Co. L.L.C., which during that time was the general
partner of Kohlberg Kravis Roberts & Co. L.P. Mr. Clammer
was a Director of Kohlberg Kravis Roberts & Co. L.P. from
December 2003 to December 2005. Prior to that he was a Principal
of Kohlberg Kravis Roberts & Co. L.P. between 1998 and
2003, having begun his career at Kohlberg Kravis Roberts &
Co. in 1995. From 1992 to 1995, Mr. Clammer was in the Mergers
and Acquisitions Department at Morgan Stanley & Co. Mr.
Clammer also serves as a director of Eastman Kodak Company and
NXP B.V. and previously served as a director of Medcath
Corporation from May 2002 to April 2008 and of Jazz
Pharmaceuticals, Inc. from February 2004 to October 2007. Mr.
Clammer was nominated and elected to the Board as a KKR nominee
pursuant to our Shareholder Agreement. Mr. Clammer has
experience managing and advising enterprises like the Company
and is familiar with corporate finance, strategic business
planning activities, risk management and corporate governance.
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James A. Davidson
Age 51
Director since
December 2005
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Mr. Davidson is a Managing Director and Co-Chief Executive of
Silver Lake, a private investment firm that he co-founded in
1999. From June 1990 to November 1998, he was an investment
banker with Hambrecht & Quist LLC, most recently serving as
a Managing Director and Head of Technology Investment Banking.
From 1984 to 1990, Mr. Davidson was an attorney in private
practice with Pillsbury, Madison & Sutro. Mr. Davidson also
serves as a director of Flextronics International Ltd. Mr.
Davidson served as a director of Seagate Technologies plc
(formerly Seagate Technology) from November 2000 until December
2007. Mr. Davidson was nominated and elected to the Board
as a Silver Lake nominee pursuant to our Shareholder Agreement.
Mr. Davidson has been an active adviser to, and investor in,
technology industries for more than 25 years.
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James V. Diller
Age 75
Director since
April 2006
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Mr. Diller was a founder of PMC-Sierra, Inc., serving as
PMCs Chief Executive Officer from 1983 to July 1997 and
President from 1983 to July 1993. Mr. Diller has been a director
of PMC since its formation in 1983. Mr. Diller was Chairman of
PMCs board of directors from July 1993 until February
2000, when he became Vice Chairman. Mr. Diller also serves as a
director of Intersil Corporation. Mr. Dillers
qualifications to serve on the Board include his more than
50 years of experience in semiconductor company management
and oversight in positions such as Chief Executive Officer,
President and General Manager and chairman of the board of
directors, and his experience as a product development engineer.
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Kenneth Y. Hao
Age 42
Director since
September 2005
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Mr. Hao is a Managing Director of Silver Lake. Prior to joining
Silver Lake in 2000, Mr. Hao was an investment banker with
Hambrecht & Quist for 10 years, most recently serving
as a Managing Director in the Technology Investment Banking
group. Mr. Hao previously served as a director of NetScout
Systems, Inc. from November 2007 until September 2008. Mr. Hao
was nominated and elected to the Board as a Silver Lake nominee
pursuant to our Shareholder Agreement. Mr. Hao has spent
his career investing in and advising technology companies.
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David Kerko
Age 37
Director since
March 2008
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Since December 2006, Mr. Kerko has been a Director of Kohlberg
Kravis Roberts & Co. L.P. He was a Principal of Kohlberg
Kravis Roberts & Co. L.P. between 2002 and 2006, having
begun his career at Kohlberg Kravis Roberts & Co. in 1998.
Prior to joining KKR, Mr. Kerko was with Gleacher NatWest Inc.
Mr. Kerko also serves as a director of Trident Microsystems,
Inc. Mr. Kerko was nominated and elected to the Board as a KKR
nominee pursuant to our Shareholder Agreement. Mr. Kerko has
experience managing and advising enterprises like the Company
and in matters relating to strategic and financial planning,
corporate finance and risk management.
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Justine F. Lien
Age 48
Director since
June 2008
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Ms. Lien served as the Chief Financial Officer, Vice President
of Finance, Treasurer, and Secretary of Integrated Circuit
Systems, Inc., or ICS, after the companys recapitalization
on May 11, 1999 and served in these capacities through September
2005 when ICS merged with Integrated Device Technologies, Inc.,
following which Ms. Lien retired. She joined ICS in 1993 holding
titles including Director of Finance and Administration and
Assistant Treasurer. Ms. Lien served as a director of Techwell,
Inc. from January 2006 until July 2010, where she also served as
the chairperson of the audit committee. Ms. Lien holds a B.A.
degree in accounting from Immaculata College and an M.T. degree
in taxation from Villanova University, and is a certified
management accountant. Ms. Liens qualifications to serve
on the Board include her career in senior financial management
positions with, and on the board of directors of, semiconductor
companies, and her education and training as an accounting
professional.
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Donald Macleod
Age 62
Director since
November 2007
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Mr. Macleod joined National Semiconductor Corporation in
February 1978 and has served as its President and Chief
Executive Officer since November 2009. Prior to that, he served
as its President and Chief Operating Officer from the beginning
of 2005 until November 2009, and before that he held various
other executive and senior management positions at National
Semiconductor Corporation including Executive Vice President and
Chief Operating Officer and Executive Vice President, Finance
and Chief Financial Officer. Mr. Macleod has also served as the
Chairman of the board of directors of National Semiconductor
Corporation since May 2010. Mr. Macleods qualifications to
serve on the Board include his more than 30 years of
experience in senior management and executive positions in the
semiconductor industry, both in Europe and in the United States,
and his accounting and finance qualifications and experience.
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Bock Seng Tan
Age 67
Director since
April 2006
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Mr. Tan was the Chairman of ST Assembly and Test Services Ltd.
from 1998 until his retirement in 2003. Previously, Mr. Tan was
the President and Chief Executive Officer of Chartered
Semiconductor Manufacturing, Ltd. from 1993 to 1997.
Mr. Tan was the Managing Director for Fairchild
Semiconductor International, Inc. in Singapore from 1986 to
1988, and served as the Managing Director of National
Semiconductor Corporations Singapore operations until 1992
after Fairchilds merger with National Semiconductor. Mr.
Tan started his career at Texas Instruments in Singapore in
1969. Mr. Tan was nominated and elected to the Board as
Seletars nominee pursuant to our Shareholder Agreement.
Mr. Tans qualifications to serve on the Board include
his extensive experience in senior management and executive
positions at various companies in the semiconductor industry.
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Pursuant to the Shareholder Agreement, KKR has designated
Messrs. Clammer and Kerko to serve as members of our Board;
Silver Lake has designated Messrs. Davidson and Hao to
serve as members of our
6
Board. Mr. Bock Seng Tan was originally appointed to serve
as a member of our Board as the designee of Seletar, which,
under the Shareholder Agreement, had the right to designate one
member of the Board as long as they held at least 5.0% of our
outstanding ordinary shares. However, with effect from
January 21, 2011, Seletar ceased to own 5.0% of our
outstanding ordinary shares and no longer has the right to
designate a director to our Board. The Sponsors previously
approved the appointment of Messrs. Diller and Macleod and
Ms. Lien to the Board.
In the event that a director resigns from the Board or otherwise
becomes unwilling or unable to serve after the mailing of this
Proxy Statement but before the 2011 AGM, our intention would be
to make a public announcement of such resignation and either
leave such Board seat vacant or appoint a substitute nominee. If
such Board seat were left vacant, this would reduce the number
of director nominees to be elected at the 2011 AGM. Votes
received in respect of such director would not be counted in
such circumstances. In the event that we instead propose to
elect a different director nominee at the 2011 AGM to fill any
such vacancy, it is intended that the shares represented by the
proxy will be voted for such substitute nominee as may be
designated by the Board.
There are no family relationships between any of our directors
or executive officers.
The Board recommends a vote FOR the re-election of each of
the director nominees listed above to the Board.
7
CORPORATE
GOVERNANCE
Board of
Directors and Independence of Directors
Our Articles of Association give our Board general powers to
manage our business. The Board oversees and provides policy
guidance on our strategic and business planning processes,
oversees the conduct of our business by senior management and is
principally responsible for the succession planning for our key
executives, including our President and Chief Executive Officer.
Our Board has undertaken a review of the independence of each
director and considered whether any director has a material
relationship with us that could compromise his or her ability to
exercise independent judgment in carrying out his or her
responsibilities. The Board has made the determination that
transactions or relationships between the Company and an entity
where a director of the Company serves as a non-employee
director
and/or is
the beneficial owner, directly or indirectly of less than 10% of
such entity, or where a director of the Company serves on a
non-employee advisory board of, or in a non-employee advisory
capacity to, such an entity are presumed immaterial for the
purposes of assessing a directors independence. As a
result of its review, our Board determined that
Messrs. Diller, Macleod and Bock Seng Tan and
Ms. Lien, representing four of our nine directors nominated
for re-election, are independent directors as
defined under the applicable rules and regulations of the SEC
and the Nasdaq Stock Market.
Currently, Mr. Hock E. Tan serves as President and Chief
Executive Officer and Mr. Diller, an independent director,
serves as Chairman of our Board. The Board believes that Avago
and its shareholders are best served by this leadership
structure because it is valuable to have strong independent
leadership to assist the Board in fulfilling its role of
overseeing the management of Avago and its risk management
practices, separate from the Chief Executive Officer position.
Our Board held a total of four meetings during the fiscal year
ended October 31, 2010 (Fiscal Year
2010). During Fiscal Year 2010, all directors attended
at least 75% of the aggregate of the total number of meetings of
our Board together with the total number of meetings held by all
committees of our Board on which he or she served, counting only
those meetings during which such person was a member of our
Board and of the respective committee, except for John R. Joyce,
who resigned from our Board effective March 26, 2010. All
committee members attended over 75% of the total number of
meetings held by the committees of our Board on which they
served, counting only those meetings during which such persons
were members of the respective committee. Our non-employee
directors and our independent directors meet at regularly
scheduled executive sessions without management participation.
Our Board has adopted a policy that encourages each director to
attend the annual general meeting of our shareholders. All but
one of our directors attended our 2010 Annual General Meeting of
Shareholders. Mr. Bock Seng Tan was unable to attend due to
a conflicting commitment.
Director
Retirement Age
Under Sections 153(2) and (6) of the Singapore
Companies Act, Cap. 50, the office of a director of a public
company becomes vacant at the conclusion of the annual general
meeting of shareholders first held after such director attains
the age of 70 years, and any re-appointment of such
director must be approved by our shareholders by ordinary
resolution.
Shareholder
Communications With Our Board
Shareholders may communicate with our Board at the following
address:
The Board of Directors
c/o General
Counsel
Avago Technologies U.S. Inc.
350 West Trimble Road, Building 90
San Jose, CA 95131
U.S.A.
8
Communications are distributed to the Board or to any individual
director, as appropriate, depending on the facts and
circumstances outlined in the communication. Communications that
are unduly hostile, threatening, illegal or similarly unsuitable
will be excluded, with the provision that any communication that
is excluded will be made available to any non-employee director
upon request.
Controlled
Company Status
Prior to December 10, 2010, we were a controlled
company within the meaning of the Nasdaq Stock Market
rules because Bali, Seletar and Geyser (together, the
Sponsor Group) owned more than 50% of our
outstanding voting securities and elected to file as a group
with the SEC, with respect to their collective ownership of our
shares. As of December 10, 2011 the Sponsor Group ceased to
own a majority of our outstanding voting securities and we
ceased to be a controlled company. As a result,
pursuant to the applicable transition periods provided by the
Nasdaq Stock Market rules, our Board will be required to be
composed of a majority of independent directors by
December 10, 2011 and our Compensation Committee and our
Nominating and Corporate Governance Committee will be required
to be comprised of a majority of independent directors by
March 10, 2011 and entirely of independent directors by
December 10, 2011, subject to certain exceptions prescribed
by the Nasdaq rules.
Risk
Management
The Board is responsible for overseeing the management of risks
facing the Company, both as a whole and through its committees.
The Board regularly reviews and discusses with management
information regarding our operations, liquidity and credit, as
well as the risks associated with each. The Audit Committee
reviews and discusses with management significant financial,
legal and regulatory risks and the steps management takes to
monitor, control and report such exposures. It also oversees the
Companys periodic enterprise-wide risk evaluations
conducted by management. The Compensation Committee oversees
management of risks relating to the Companys compensation
plans and programs for executives and employees in general. The
Nominating and Corporate Governance Committee oversees
management of risks associated with Board governance, director
independence and conflicts of interest. Additional details
regarding the responsibilities of each of these committees is
discussed in more detail below, under the heading Board
Committees. The committees report regularly to the Board
on matters relating to the specific areas of risk the committees
oversee.
Board
Committees
Our Board has an Audit Committee, a Compensation Committee, a
Nominating and Corporate Governance Committee and a Treasury
Strategy Committee. The table below provides the current
membership for each of the committees and the number of meetings
held by each committee during Fiscal Year 2010.
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Nominating
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and Corporate
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Treasury
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Audit
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Compensation
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Governance
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Strategy
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Director
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Committee
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Committee
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Committee
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Committee
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Adam H. Clammer
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X
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X
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X
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James A. Davidson
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X
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(C)
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James V. Diller(I)
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X
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X
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Kenneth Y. Hao
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X
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(C)
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X
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Donald Macleod(I)
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X
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X
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Justine F. Lien(I)
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X
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(C)
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Number of meetings in Fiscal Year 2010
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7
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4
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3
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(I) |
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Denotes an independent director. |
(C) |
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Denotes the Chairperson of the committee. |
Pursuant to the Shareholder Agreement, for as long as KKR or
Silver Lake owns at least 5% of our outstanding ordinary shares,
investment funds affiliated with KKR or Silver Lake, as
applicable, shall have the
9
right to designate a director to serve on any committee, subject
to compliance with federal securities laws and the requirements
of the Nasdaq Stock Market. Please see Certain
Relationships and Related Party TransactionsSecond Amended
and Restated Shareholder Agreement on page 55 for
more information regarding the Shareholder Agreement.
The functions performed by these committees, which are set forth
in more detail in their respective charters, are summarized
below. The charters of the Audit Committee, the Compensation
Committee and the Nominating and Corporate Governance Committee
are available in the InvestorsGovernance
section of our website
(http://phx.corporate-ir.net/phoenix.zhtml?c=203541&p=irol-govHighlights).
Shareholders may also request a copy in print from: Investor
Relations,
c/o Avago
Technologies U.S. Inc., 350 West Trimble Road,
Building 90, San Jose, CA 95131, U.S.A.
Audit
Committee
The Audit Committee is currently comprised of Ms. Lien and
Messrs. Diller and Macleod. The Audit Committee is
responsible for assisting our Board with its oversight
responsibilities regarding the following:
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the quality and integrity of our financial statements and
internal controls;
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the appointment, compensation, retention, qualifications and
independence of our independent registered public accounting
firm;
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the performance of our internal audit function and independent
registered public accounting firm;
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our compliance with legal and regulatory requirements; and
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related party transactions.
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The members of our Audit Committee meet the requirements for
financial literacy under the applicable rules and regulations of
the SEC and the Nasdaq Stock Market. Our Board has determined
that Mr. Macleod is an audit committee financial expert as
defined under the applicable rules of the SEC and has the
requisite financial sophistication as defined under the
applicable rules and regulations of the Nasdaq Stock Market.
Messrs. Diller and Macleod and Ms. Lien are
independent directors as defined under the applicable rules and
regulations of the SEC and the Nasdaq Stock Market. The Audit
Committee operates under a written charter that satisfies the
applicable standards of the SEC and the Nasdaq Stock Market.
Compensation
Committee
The Compensation Committee is currently comprised of
Messrs. Davidson, Clammer and Macleod. The Compensation
Committee is responsible for determining our executives
base compensation and incentive compensation, including
designing (in consultation with management or the Board) and
recommending to the Board for approval and evaluating, our
compensation plans, policies and programs, administering our
stock option and other equity based plans and approving the
terms of equity-based grants pursuant to those plans. The
Compensation Committee has the full authority to determine and
approve the compensation of our chief executive officer in light
of relevant corporate performance goals and objectives. The
Compensation Committee operates under a written charter that
satisfies the applicable standards of the SEC and the Nasdaq
Stock Market. Messrs. Davidson and Clammer are not
independent directors as defined under the applicable rules and
regulations of the SEC and the Nasdaq Stock Market.
In June 2010, the Compensation Committee conducted a process
independent of management, to identify and select a compensation
consultant to advise the committee on executives and
directors compensation and, as a result of this process,
the Compensation Committee retained Compensia, Inc.
(Compensia) as its compensation consultant.
The consultant has not provided and does not provide any other
services to the Company other than de minimis ministerial data
processing services.
10
Nominating
and Corporate Governance Committee
The Nominating and Corporate Governance Committee was
established in December 2009 and is currently comprised of
Messrs. Hao, Clammer and Diller. The Nominating and
Corporate Governance Committee is responsible for identifying
qualified candidates to become directors, recommending to the
Board candidates for all directorships, overseeing the annual
evaluation of the Board and its committees and taking a
leadership role in shaping the corporate governance of the
Company. The Nominating and Corporate Governance Committee
operates under a written charter that satisfies the applicable
standards of the SEC and the Nasdaq Stock Market.
Messrs. Hao and Clammer are not independent directors as
defined under the applicable rules and regulations of the SEC
and the Nasdaq Stock Market.
The Nominating and Corporate Governance Committee will consider
candidates for director who are recommended by its members, by
other Board members and members of our management, as well as
those identified by any third-party search firms retained by it
to assist in identifying and evaluating possible candidates. The
Nominating and Corporate Governance Committee will also consider
recommendations for director candidates submitted by our
shareholders if they meet the specific criteria set forth under
Shareholder Nominations to our Board of Directors
below. The Nominating and Corporate Governance Committee will
evaluate and recommend to the Board qualified candidates for
election, re-election or appointment to the Board, as
applicable, unless the Company is at any time legally required
by contract or otherwise to provide any third party with the
ability to nominate a director, in which case the committee need
not evaluate or propose such candidates, unless required by
contract or requested by the Board. Currently all of our Board
members are selected in accordance with the terms of the
Shareholder Agreement. See Certain Relationships and
Related Party TransactionsSecond Amended and Restated
Shareholder Agreement on page 55 for more information
regarding the Shareholder Agreement.
When evaluating director candidates, the Nominating and
Corporate Governance seeks to ensure that the Board has the
requisite expertise and that its members consist of persons with
appropriately diverse and independent backgrounds. The
Nominating and Corporate Governance Committee will consider
all aspects of a candidates qualifications in the context
of the needs of the Company, including: personal and
professional integrity, ethics and values; experience as an
officer in corporate management; experience in the
Companys industry and international business and
familiarity with the Company; experience as a board member of
another publicly traded company; and practical and mature
business judgment. However, the Nominating and Corporate
Governance Committee does not have any minimum criteria for
director candidates. Consideration of new director candidates
will typically involve a series of internal discussions, review
of information concerning candidates and interviews with
selected candidates.
Treasury
Strategy Committee
The Treasury Strategy Committee is currently comprised of
Messrs. Clammer and Hao, Mr. Douglas R. Bettinger, our
Senior Vice President and Chief Financial Officer, and
Mr. Desmond Lim, our Vice President and Treasurer. The
Treasury Strategy Committee is responsible for the oversight of
treasury strategy and operations, reporting to our Board on an
as-needed basis. The Treasury Strategy Committee meets on an ad
hoc basis, as business needs necessitate.
Shareholder
Nominations to Our Board of Directors
Under our Articles of Association, no person other than a
director retiring at a general meeting is eligible for
appointment as a director at any general meeting of
shareholders, without the recommendation of the Board for
election, unless (a) in the case of a member or members who
in aggregate hold(s) more than 50% of the total number of our
issued and
paid-up
shares (excluding treasury shares), not less than 10 days,
or (b) in the case of a member or members who in aggregate
hold(s) more than five percent of the total number of our issued
and paid-up
shares (excluding treasury shares), not less than 120 days,
before the date of the notice provided to members in connection
with the general meeting, a written notice signed by such member
or members (other than the person to be proposed for
appointment) who (i) are qualified to attend and vote at
the meeting for which such notice is given, and (ii) have
held shares representing the prescribed threshold in (a) or
11
(b) above, for a continuous period of at least one year
prior to the date on which such notice is given, is lodged at
our registered office in Singapore. Such a notice must also
include the consent to serve as a director of the person
nominated.
Shareholders can recommend qualified candidates for our Board to
the Board by submitting recommendations to our General Counsel,
c/o Avago
Technologies U.S. Inc., 350 West Trimble Road,
Building 90, San Jose, CA 95131, U.S.A. Submissions that
include the following requirements will be forwarded to the
Board for review and consideration:
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the candidates name and business address;
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a resume or curriculum vitae describing the candidates
qualifications, which clearly indicates that he or she has the
necessary experiences, skills, and qualifications to serve as a
director;
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a statement as to whether or not, during the past ten years, the
candidate has been convicted in a criminal proceeding (excluding
minor traffic violations) and, if so, the dates, the nature of
the conviction, the name or other disposition of the case, and
whether the individual has been involved in any other legal
proceeding during the past ten years;
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a statement from the candidate that he or she consents to serve
on the Board if elected; and
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a statement from the person submitting the candidate that he or
she is the registered holder of ordinary shares, or if the
shareholder is not the registered holder, a written statement
from the record holder of the ordinary shares (usually a broker
or bank) verifying that at the time the shareholder submitted
the candidate that he or she was a beneficial owner of ordinary
shares.
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Code of
Ethics and Business Conduct
Our Board has adopted a Code of Ethics and Business Conduct that
is applicable to all members of the Board, executive officers
and employees, including our chief executive officer, chief
financial officer and principal accounting officer. The Code of
Ethics and Business Conduct is available in the
InvestorsGovernance section of our website
(http://phx.corporate-ir.net/phoenix.zhtml?c=203541&p=irol-govHighlights)
under Code of Ethics and Business Conduct.
Shareholders may also request a copy in print from: Investor
Relations,
c/o Avago
Technologies U.S. Inc., 350 West Trimble Road,
Building 90, San Jose, CA 95131, U.S.A.
Compensation
Committee Interlocks and Insider Participation
The current members of our Compensation Committee,
Messrs. Davidson, Clammer and Macleod (and Mr. James
H. Greene, Jr., who served on our Compensation Committee
prior to his resignation from our Board in March 2010) are
not, and have never been, officers or employees of our company.
During Fiscal Year 2010, none of our executive officers served
on the board of directors or compensation committee of any other
entity that has one or more executive officers serving as a
member of our Board or our Compensation Committee.
Messrs. Davidson and Clammer are affiliated with the Silver
Lake and KKR entities, respectively, and have been designated by
Silver Lake and KKR, respectively, to serve on our Compensation
Committee. In addition, we have entered into certain
arrangements with Silver Lake and KKR. Please see Certain
Relationships and Related Party Transactions starting on
page 55 for more information regarding these arrangements.
Risk
Assessment and Compensation Practices
Our management has reviewed the Companys compensation
policies and practices for our employees as they relate to our
risk management and reported its findings to the Compensation
Committee. Management has concluded that our compensation
policies and practices (described in more detail under
Compensation Discussion and Analysis and
Executive Compensation below) balance short
and long-term goals and awards, as well as the mix of the cash
and equity components. Based upon this review, we believe the
elements of our compensation programs do not encourage
unnecessary or excessive risk-taking, and are not reasonably
likely to have a material adverse effect on the Company in the
future.
12
This Proxy Statement, including the preceding paragraph,
contains forward-looking statements. We have based these
forward-looking statements largely on our current expectations
and projections about future events. Forward-looking statements
contained in this Proxy Statement should be considered in light
of the many uncertainties that affect our business and
specifically those factors discussed from time to time in our
public reports filed with the SEC, such as those discussed under
the heading, Risk Factors, in our Annual Report on
Form 10-K
for Fiscal Year 2010 (the 2010
Form 10-K),
and as may be updated in subsequent SEC filings.
Director
Share Ownership Guidelines
At the recommendation of the Compensation Committee, our Board
adopted share ownership guidelines for non-employee directors in
December 2010 in connection with its review of our non-employee
directors compensation. The ownership guidelines encourage
our non-employees directors to hold 7,500 of our ordinary shares
or such number of shares having a fair market value equal to
three times the annual cash retainer paid to directors for
service on our Board (which would currently amount to $150,000),
whichever is less. The guidelines encourage our non-employee
directors to reach this goal within five years of the date the
Board approved the guidelines or the date of their appointment
or election to our Board, whichever is later, and to hold at
least such minimum value in shares for as long as he or she
serves on our Board.
13
DIRECTORS
COMPENSATION
Under the laws of Singapore, our shareholders must approve all
cash compensation paid to our non-employee directors. We do not
compensate our management directors for their service on the
Board or any committee of the Board.
Current
Non-Employee Directors Compensation
Our shareholders approved the current cash compensation
arrangements for our non-employee directors (which are those
directors not employed by us or any subsidiary) at our 2010
Annual General Meeting of Shareholders. We currently compensate
our non-employee directors and independent, non-employee
directors (directors not associated with any Equity Investor and
otherwise considered independent) as follows, payable quarterly:
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Current Annual Fees
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Independent
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Non-Employee
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Non-Employee
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Directors
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Directors
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Board membership (other than Chairperson of the Board)
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$
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50,000
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$
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50,000
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Chairperson of the Board
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$
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75,000
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$
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75,000
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Committee membership (other than Chairperson of the Audit
Committee)
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$
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10,000
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Chairperson of the Audit Committee
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$
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25,000
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Prior to December 2010, our non-employee directors also received
a grant of options to purchase 50,000 ordinary shares upon their
election to the Board. The exercise price per share of director
options is equal to the fair market value of an ordinary share
on the grant date, and director options expire five years from
the date of grant, or earlier if the optionee ceases to be a
director. Generally, director options become vested and
exercisable with respect to 20% of the shares subject to the
options nine months following the date the director commences
service on the Board and on each anniversary of that date so
that the options are completely vested and exercisable four
years and nine months following the date the director commences
service on the Board subject to continued service on the Board
through each vesting date. However, options granted to our
directors in April 2006 vest at a rate of 20% on each
anniversary of December 1, 2005. Prior to our initial
public offering (IPO) on August 6, 2010,
option grants were made to our directors under the Amended and
Restated Equity Incentive Plan for Senior Management Employees
of Avago Technologies Limited and Subsidiaries (the
Senior Management Plan). Following our
IPO, option grants to our directors are made under the 2009
Equity Incentive Award Plan (the 2009 Plan).
Non-employee directors are also reimbursed for travel and other
out-of-pocket
expenses related to their attendance at Board and committee
meetings. Non-employee directors do not receive any non-equity
incentive compensation, or participate in any pension plan or
deferred compensation plan.
Proposed
Changes to Non-Employee Directors Compensation
In November 2010, the Compensation Committee, assisted by
Compensia, the committees compensation consultant,
conducted a review of our non-employee director compensation
program. This review was conducted to ascertain whether our
non-employee directors compensation was competitive with
that of our established peer group of companies, which group is
discussed below under the heading Compensation Discussion
and Analysis. The Compensation Committee reviewed, among
other things, the current cash compensation of our non-employee
directors, the grant date fair value of option awards previously
made to non-employee directors, the total compensation of our
non-employee Chairperson of the Board and the aggregate number
of our ordinary shares held currently by each of our
non-employee directors. The Compensation Committee, with the
assistance of Compensia, also took into consideration
compensation trends for outside directors.
14
Based on Compensias review and analysis of the
compensation practices of our peer group, the Compensation
Committee determined that:
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average total cash compensation paid to our non-employee
directors for service on our Board and its committees was at the
50th percentile of cash compensation paid to non-employee
directors within the peer group, although cash compensation for
service as the chair of the Audit Committee was at the 75th
percentile and compensation for service as the chairperson of
the Compensation Committee was at the 25th percentile;
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the majority of companies within the peer group have moved from
granting only stock options to granting only restricted stock
units or a combination of stock option and restricted stock
grants as the means of establishing the desired level of stock
ownership at the board level, so that directors hold a
meaningful ownership position in the company and their interests
are aligned with those of shareholders;
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the majority of companies within the peer group made annual
equity grants to their non-employee directors; and
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the stock awarded to non-employee directors at a majority of
companies within the peer group was subject to vesting based on
future service as a director and was not used as a means of
compensating directors for prior service.
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Based on Compensias analysis, and upon the recommendation
of the Compensation Committee, our Board approved changes to our
non-employee director compensation, subject to
shareholders approval of non-employee directors cash
compensation at the 2011 AGM, as required by Singapore law. As
directors compensation runs from annual general meeting to
annual general meeting, these changes in directors cash
compensation will take effect for the year commencing on
March 30, 2011, the date of our 2011 AGM, if they are
approved by shareholders at that meeting. If approved by
shareholders, with effect from March 31, 2011 non-employee
directors cash compensation would be as follows:
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Proposed Annual Fees
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Independent
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Non-Employee
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Non-Employee
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Directors
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Directors
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Board membership (other than Chairperson of the Board)
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$
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50,000
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$
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50,000
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Chairperson of the Board
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$
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80,000
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Committee membership (other than committee chairperson)
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$
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10,000
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Chairperson of the Audit Committee
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$
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25,000
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Chairperson of the Compensation Committee
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$
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15,000
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Chairperson of the Nominating and Corporate Governance Committee
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$
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12,500
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In addition, on the Compensation Committees
recommendation, our Board approved the following changes to the
equity compensation of our non-employee directors, effective
January 19, 2011:
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We are changing the initial equity grant to new directors from a
grant of an option to acquire 50,000 ordinary shares to an
initial equity grant with a target fair market value of $350,000
on the date of grant, comprised 50% each of stock options and
restricted share units, with such awards vesting one-third
annually over three years; and
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We are implementing an annual equity grant to non-employee
directors, commencing in the fourth year of service as a
non-employee director, with each such grant to have target fair
market value of $100,000 on the date of grant, comprised 50%
each of stock options and restricted share units and to be
granted on the date of each Annual General Meeting of
Shareholders occurring in and after the directors fourth
year of service, subject to the directors re-election at
such meeting. Such annual equity grants would vest in full one
year from the date of grant.
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15
To determine the number of shares to be awarded pursuant to such
a grant, the target fair market value of the grant ($350,000 or
$100,000 depending on whether it is an initial or annual grant)
is divided by the Black Scholes value of one of our ordinary
shares (calculated using the average of the closing market
prices (as quoted on the Nasdaq Global Select Market) over the
30 calendar days immediately preceding the date of grant) to
arrive at a number of shares. Half of this resulting share
number represents the number of shares that will be issued
pursuant to options, which options will be issued at an exercise
price of the fair market value per ordinary share on the date of
grant. The remaining half of the resulting share number is then
divided by three to determine the number of restricted share
units that will be granted.
As a result of these changes, Compensia advised the Compensation
Committee that overall compensation for our non-employee
directors will approximate the 50th percentile of our
established peer group of companies.
Director
Share Ownership Guidelines
Effective January 19, 2011, the Board also approved the
implementation of director share ownership guidelines, which
encourage our non-employees directors to hold at a minimum 7,500
of our ordinary shares or such number of shares having a fair
market value equal to three times the annual cash retainer paid
to directors for service on our Board (which would currently
amount to $150,000), whichever is less, within five years of the
date of adoption of these guidelines, or the date of a
directors appointment or election to the Board, whichever
is later.
Directors
Compensation for Fiscal Year 2010
The following table sets forth information regarding
compensation earned by our non-employee directors during Fiscal
Year 2010.
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Fees Earned or
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Option
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Name
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Paid in Cash ($)
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Awards ($)(1)
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Total ($)
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Adam H. Clammer
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$
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50,000
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$
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50,000
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James A. Davidson
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$
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50,000
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$
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50,000
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James V. Diller(2)
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$
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86,250
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$
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86,250
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Kenneth Y. Hao
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$
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50,000
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$
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50,000
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David Kerko
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$
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50,000
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$
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50,000
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Justine F. Lien
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$
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75,000
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$
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75,000
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Donald Macleod
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$
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70,000
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$
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75,000
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Bock Seng Tan
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$
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50,000
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$
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50,000
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Dick M. Chang(2)
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$
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18,750
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$
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18,750
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James H. Greene, Jr(3)
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$
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25,000
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$
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149,117
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(4)
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$
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174,117
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John R. Joyce(3)
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$
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25,000
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$
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149,117
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(4)
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$
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174,117
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(1) |
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No stock options or other equity awards were granted to
non-employee directors in Fiscal Year 2010. As of
October 31, 2010, each of the directors held options to
acquire 50,000 ordinary shares outstanding, other than Bock Seng
Tan, who held options to acquire 10,000 shares and
Messrs. Chang, Greene and Joyce who held no options. |
(2) |
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Mr. Chang retired from our Board and as Chairman of the
Board on February 2, 2010. Mr. Diller was appointed
Chairman of the Board effective as of the date of
Mr. Changs retirement. |
(3) |
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Messrs. Greene and Joyce resigned from the Board effective
March 26, 2010. |
(4) |
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Represents the incremental fair value, determined in accordance
with the provisions of Accounting Standards Codification 718,
associated with the acceleration of the vesting and
exercisability of 10,000 options shares to March 26, 2010,
the date on which the director resigned, which options would
otherwise have been unvested as at such date, but for the action
taken by the Compensation Committee to accelerate the vesting
and exercisability of such options. The Compensation Committee
elected to accelerate the vesting and exercisability of these
options in light of the valuable service Messrs. Joyce and
Greene provided to the Company during their tenure as directors. |
16
PROPOSAL 2:
APPROVAL OF THE RE-APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC
ACCOUNTING FIRM AND INDEPENDENT SINGAPORE AUDITOR FOR FISCAL
YEAR 2011 AND AUTHORIZATION OF THE AUDIT COMMITTEE TO FIX ITS
REMUNERATION
PricewaterhouseCoopers LLP is our independent registered public
accounting firm in the U.S. and audits our consolidated
financial statements. During Fiscal Year 2010,
PricewaterhouseCoopers LLP in Singapore was our independent
Singapore auditor of our Singapore statutory financial
statements. Pursuant to section 205(2) and 205(4) of the
Singapore Companies Act, any appointment after the Boards
initial appointment of our independent Singapore auditor, or its
subsequent removal, requires the approval of our shareholders.
The Audit Committee has approved, subject to shareholder
approval, the re-appointment of PricewaterhouseCoopers LLP as
our independent registered public accounting firm and the
independent Singapore auditor for Fiscal Year 2011. Pursuant to
Section 205(16) of the Singapore Companies Act, the
remuneration of a companys auditors shall be fixed by the
shareholders in a general meeting or the shareholders may
authorize directors to fix the remuneration. The Board believes
that it is appropriate for the Audit Committee, as part of its
oversight responsibilities, to fix the auditors
remuneration. The Board is therefore requesting that the
shareholders authorize the Audit Committee to fix the
auditors remuneration for service rendered through our
2012 AGM. We expect a representative from PricewaterhouseCoopers
LLP to be present at the 2011 AGM. This representative will have
the opportunity to make a statement if he or she so desires and
is expected to be available to respond to appropriate questions.
Principal
Accounting Fees and Services
Set forth below are the aggregate fees charged to the Company
for the services performed by our independent registered public
accounting firm, PricewaterhouseCoopers LLP, relating to Fiscal
Year 2010 and the fiscal year ended November 1, 2009
(Fiscal Year 2009).
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Fiscal Year
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Fiscal Year
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2010
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2009
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($ in thousands)
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Audit Fees
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$
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3,048
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|
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$
|
2,407
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Audit-Related Fees
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|
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21
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Tax Fees
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|
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260
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|
|
|
105
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All Other Fees
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|
3
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|
|
|
3
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Total
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$
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3,311
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|
$
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2,536
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Audit Fees consist of fees for professional services
provided in connection with the audit of our annual consolidated
financial statements, audit of internal control over financial
reporting for Fiscal Year 2010, the review of our quarterly
consolidated financial statements, and audit services that are
normally provided by the independent registered public
accounting firm in connection with statutory and regulatory
filings or engagements for those fiscal years, such as statutory
audits. The fees also include services in connection with our
January 2010 and August 2010 secondary offerings and our IPO in
August 2009, including comfort letters, consents and review of
documents filed with the SEC.
Audit-Related Fees consist of fees for assurance and
related services by our independent registered public accounting
firm that are reasonably related to the performance of the audit
or review of our consolidated financial statements and not
included in Audit Fees. In Fiscal Year 2009, these fees
primarily related to implementation and compliance with the
Sarbanes-Oxley Act of 2002, and in both Fiscal Year 2009 and
Fiscal Year 2010 these fees related to providing certification
audits to the Singapore Economic Development Board in connection
with our tax incentive arrangements in Singapore.
Tax Fees consist of fees incurred for various tax
transfer pricing studies and a U.S. research and
development credit study.
17
All Other Fees consist of fees for professional services
rendered by our independent registered public accounting firm
for permissible non-audit services. In Fiscal Year 2010 and
Fiscal Year 2009, these fees consisted of a license for
specialized accounting research software.
In considering the nature of the services provided by
PricewaterhouseCoopers LLP, the Audit Committee determined that
such services are compatible with the provision of independent
audit services. The Audit Committee discussed these services
with PricewaterhouseCoopers LLP and our management to determine
that they are permitted under the rules and regulation
concerning independent registered public accounting firms
independence promulgated by the SEC to implement the
Sarbanes-Oxley Act of 2002, as well as the American Institute of
Certified Public Accountants.
Except as stated above, there were no other fees billed by
PricewaterhouseCoopers LLP for Fiscal Years 2009 and 2010. The
Audit Committee considers the provision of these services to be
compatible with maintaining the independence of our independent
registered public accounting firm.
Audit
Committee Pre-Approval Policy
The Audit Committee is responsible for selecting the independent
registered public accounting firm to be employed by us to audit
our financial statements, subject to approval by our
shareholders for appointment. The Audit Committee also assumes
responsibility for the retention, compensation, oversight and
termination of any independent auditor employed by us. All
engagements with the Companys independent registered
accounting firm, regardless of amount, must be authorized in
advance by the Audit Committee. The Audit Committee has
delegated its pre-approval authority to the Chairperson of the
Audit Committee, provided that any matters approved in such
manner are presented to the Audit Committee at its next meeting.
Pursuant to the charter of the Audit Committee, committee
approval of non-audit services (other than review and attest
services) is not required, if such services fall within
available exceptions established by the SEC. However, to date,
the Audit Committees policy has been to approve all
services provided by the Companys independent registered
accounting firm. The independent registered public accounting
firm and our management are required to periodically report to
the Audit Committee regarding the extent of services provided by
the independent registered public accounting firm in accordance
with the committees pre-approval, and the fees for the
services performed to date.
During Fiscal Years 2009 and 2010, all services provided to us
by PricewaterhouseCoopers LLP were approved by the Audit
Committee pursuant to paragraph (c)(7)(i) of
Rule 2-01
of
Regulation S-X.
The Board recommends a vote FOR the approval of the
re-appointment of PricewaterhouseCoopers LLP as the
Companys independent registered public accounting firm and
independent Singapore auditor for Fiscal Year 2011 and
authorization of the Audit Committee to fix its remuneration.
18
PROPOSAL 3:
ORDINARY RESOLUTION TO APPROVE NON-EMPLOYEE DIRECTORS CASH
COMPENSATION
Under the laws of Singapore, our shareholders must approve all
cash compensation paid by us to our directors for services
rendered in their capacity as directors. Accordingly, we are
seeking shareholder approval to provide payment of the following
cash compensation to our non-employee directors for service on
the Board and its committees during the period of approximately
12 months from March 31, 2011, the day after our 2011
AGM, through the date on which our 2012 AGM is held, and for
each
12-month
period thereafter as follows:
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annual cash compensation of $50,000 to each of our non-employee
directors, other than the Chairperson of the Board, and cash
compensation of $80,000 to the independent Chairperson of the
Board;
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additional annual cash compensation of $25,000 to the
chairperson of the Audit Committee, provided that such person is
an independent director;
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additional annual cash compensation of $15,000 to the
chairperson of the Compensation Committee, provided that such
person is an independent director;
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additional annual cash compensation of $12,500 to the
chairperson of the Nominating and Corporate Governance
Committee, provided that such person is an independent director;
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additional cash compensation of $10,000 to each of our
independent directors in respect of each of the foregoing
committees of the Board on which they serve, other than service
as chairperson of any such committee of the Board; and
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appropriate pro rata cash compensation, based on the annual cash
compensation set forth above, as applicable, to any new
non-employee director who is appointed by the Board, any
independent director who is appointed to the position of
Chairperson of the Board or chairperson of any such committee of
the Board, provided that such person is an independent director
or any independent director who is appointed to serve on any
such committee of the Board, in each case after the date of our
2011 AGM, for their services rendered as a director
and/or
committee member for any period less than 12 months.
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The above reflects the changes to the cash compensation for the
chairpersons of the Board, the Compensation Committee and the
Nominating and Corporate Governance Committee recommended by the
Compensation Committee, after consultation with Compensia, and
approved by the Board, subject to shareholder approval thereof,
as discussed under Directors Compensation on
page 14.
We believe that this authorization will benefit our shareholders
by enabling us to attract and retain qualified individuals to
serve as members of our Board and to continue to provide
leadership for our company.
The Board recommends a vote FOR the resolution to approve the
non-employee directors, the Board Chairpersons, the
committee chairpersons and the committee members
cash compensation.
19
PROPOSAL 4:
NON-BINDING, ADVISORY VOTE ON EXECUTIVE COMPENSATION
In accordance with Section 14A of the Exchange Act, we are
including in this Proxy Statement this proposal for shareholders
to approve, in a non-binding, advisory vote, the compensation of
the Companys named executive officers, as disclosed
pursuant to Item 402 of
Regulation S-K
promulgated by the SEC, set forth in Compensation
Discussion and Analysis and in the compensation tables and
accompanying narrative disclosure under Executive
Compensation set forth elsewhere in the Proxy Statement.
Shareholders are encouraged to read the Executive
Compensation section of this Proxy Statement, as well as
the Compensation Discussion and Analysis section,
which discusses our compensation policies, procedures and
programs and the Fiscal Year 2010 compensation for the
Companys named executive officers. The Companys
named executive officers consist of our Chief Executive Officer,
our Chief Financial Officer and each of our three other most
highly compensated executive officers serving at the end of
Fiscal Year 2010, who are listed in the 2010 Summary
Compensation Table included in the Executive
Compensation section of this Proxy Statement.
Compensation of our executive officers is structured around the
achievement of near-term corporate objectives, as well as
long-term business objectives and strategies. We believe that
our executive compensation policies and procedures are designed
to foster a
pay-for-performance
culture that focuses on both individual and Company performance,
while aligning the interests of our executives with those of our
shareholders. We believe that the compensation structure for our
executive officers was instrumental in helping us achieve our
strong financial and operating performance in Fiscal Year 2010.
Our compensation program for executives is designed to achieve
the following:
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attract and retain qualified, experienced and talented
executives, understanding competitive pressures from our Peer
Group Companies (as defined in Compensation Discussion and
Analysis);
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motivate and reward executives whose skills, knowledge and
performance are critical to the on-going success of our Company;
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encourage executives to focus on the achievement of corporate
and financial performance goals and metrics by aligning the
incentive reward program to the achievement of both
functional/divisional goals and corporate goals; and
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align the interests of our executives with those of our
shareholders.
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Long-term equity compensation is a significant portion of
compensation. A significant portion of total compensation
paid to our executives is in the form of equity. This serves as
a long term retention strategy and also aims to align the
interests of our executives with shareholders by tying a
significant portion of each executives compensation to
returns realizable by our shareholders.
Total cash compensation is tied to performance. A
significant portion of the total cash compensation of our
executives is based on Company and individual performance, and
fluctuates from year to year, reflecting the Companys
financial and operating results.
Compensation unrelated to performance is limited. The
Company does not have multi-year employment agreements or
guaranteed salary increases or incentive awards.
Executives severance and change of control benefits are
limited and change of control benefits are triggered only if
there is a qualifying termination of employment following a
change of control transaction. We do not offer significant
perquisites, nor do we provide tax
gross-up
payments on post-employment benefits.
While the vote on this resolution is advisory and not binding on
the Company, the Compensation Committee or the Board, the
Compensation Committee and the Board value the opinions that
shareholders express in their votes and will consider the
outcome of the vote on this resolution when considering future
executive compensation arrangements.
The Board recommends that shareholders vote, on a
non-binding, advisory basis, FOR the resolution to approve the
compensation of the Companys named executive officers.
20
PROPOSAL 5:
NON-BINDING, ADVISORY VOTE ON THE FREQUENCY OF
SHAREHOLDERS
VOTE ON EXECUTIVE COMPENSATION
In accordance with Section 14A of the Exchange Act, we are
including in this Proxy Statement this proposal for shareholders
to recommend, in a non-binding, advisory vote, that a
non-binding, advisory vote to approve the compensation of the
Companys named executive officers be put to shareholders
for their consideration every: one; two; or three years.
In considering their vote, shareholders may wish to review with
care the information presented in connection with
Proposal 4, the information on the Companys
compensation policies and decisions regarding the named
executive officers presented in the Compensation
Discussion and Analysis section of this Proxy Statement.
The Board has determined that providing shareholders with a
non-binding, advisory vote to approve the compensation of the
Companys named executive officers every three years is
most consistent with the Boards approach to compensation
and will be the most effective means to conduct and respond to
the outcome of such votes, based on a number of considerations
including the following:
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our compensation policies and programs are designed to include
and reward performance over a multi-year period and a three-year
cycle will allow shareholders to better judge the programs in
relation to the Companys long-term performance;
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we seek a consistent compensation approach from year to year
across our executive leadership team and we also believe that an
effective compensation program should incentivize performance
over a multi-year horizon; as a result we do not make frequent,
significant changes to our programs;
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a three-year cycle will provide shareholders sufficient time to
evaluate the effectiveness of our short-and long-term
compensation strategies and our related business outcome, while
an annual vote would not allow for changes to the Companys
compensation programs to be in place long enough to evaluate
whether such changes were effective;
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a three-year vote cycle gives the Board and the Compensation
Committee sufficient time to thoughtfully respond to
shareholders sentiments and to implement any necessary
changes to our executive compensation policies, procedures and
programs; and
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the Board will continue to engage with our shareholders on
executive compensation during the period between shareholder
votes. As discussed under Corporate
GovernanceShareholder Communications with our Board,
we provide shareholders an opportunity to communicate with the
Board, including on issues of executive compensation.
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While the Board has determined that providing shareholders with
the opportunity to vote on executive compensation once every
three years is advisable, and therefore recommends that you
adopt a triennial vote, the Compensation Committee and the Board
will consider our shareholders concerns and take them into
account in determining how frequently such a vote should occur.
However, the vote on this resolution is advisory and not binding
on the Company, the Compensation Committee or the Board.
The Board recommends that shareholders vote THREE YEARS with
respect to how frequently a non-binding advisory shareholder
vote to approve the compensation of the Companys named
executive officers should occur.
21
PROPOSAL 6:
ORDINARY RESOLUTION TO AUTHORIZE ORDINARY SHARE ALLOTMENTS AND
ISSUANCES
We are incorporated in the Republic of Singapore. Under the laws
of Singapore, our directors may issue ordinary shares and make
offers or agreements or grant options that might or would
require the issuance of ordinary shares only with the prior
approval of our shareholders. We are submitting this proposal to
authorize our Board to allot and issue our ordinary shares from
time to time, as set forth in the Notice, because we are
required to do so under the laws of Singapore before we can
issue any ordinary shares in connection with our equity
compensation plans, possible future strategic transactions, or
public and private offerings.
If this proposal is approved, the authorization would be
effective from the date of the 2011 AGM and continue until the
earlier of (i) the conclusion of the 2012 AGM or
(ii) the expiration of the period within which the 2012 AGM
is required by the laws of Singapore to be held. The 2012 AGM is
required to be held no later than 15 months after the date
of the 2011 AGM. The laws of Singapore allow for an application
to be made with the Singapore Accounting and Corporate
Regulatory Authority for an extension of up to an additional
three months of the time in which to hold an annual general
meeting of shareholders, which may be granted in the discretion
of that Authority.
The Board believes that it is advisable and in the best
interests of our shareholders for our shareholders to authorize
the directors to issue ordinary shares and to make, enter into
or grant offers, agreements or options that might or would
require the issuance of ordinary shares. In the future, the
directors may need to issue shares or make agreements that would
require the allotment and issuance of new ordinary shares. For
example:
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in connection with strategic transactions and acquisitions;
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pursuant to public and private offerings of our ordinary shares,
as well as instruments (including debt instruments) convertible
into our ordinary shares; or
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in connection with our equity compensation plans and
arrangements.
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Notwithstanding this general authorization to allot and issue
our ordinary shares, we will be required to seek shareholder
approval with respect to future issuances of ordinary shares,
where required, under the Nasdaq Stock Market rules, such as
where we propose to issue ordinary shares that will result in a
change in control of Avago or in connection with a transaction
involving the issuance of ordinary shares representing 20% or
more of our outstanding ordinary shares.
We expect that we will continue to issue ordinary shares and
grant options and other equity-based awards in the future under
circumstances similar to those in the past, including pursuant
to our Employee Share Purchase Plan (ESPP),
which was implemented in Fiscal Year 2010. As of the date of
this Proxy Statement, other than issuances of ordinary shares or
agreements that would require the issuance of new ordinary
shares in connection with our equity compensation plans and
arrangements, we have no specific plans, agreements or
commitments to issue any ordinary shares for which approval of
this proposal is required. Nevertheless, the Board believes that
it is advisable and in the best interests of our shareholders
for our shareholders to provide this general authorization in
order to avoid the delay and expense of obtaining shareholder
approval at a later date, and to provide us with greater
flexibility to pursue strategic transactions and acquisitions
and raise additional capital through public and private
offerings of our ordinary shares, as well as instruments
convertible into our ordinary shares.
If this proposal is approved, our directors would be authorized
to allot and issue, during the period described above, ordinary
shares subject to applicable Singapore laws and the Nasdaq Stock
Market rules. The issuance of a large number of ordinary shares
(or instruments convertible into ordinary shares) could be
dilutive to existing shareholders or reduce the trading price of
our ordinary shares on the Nasdaq Global Select Market. If this
proposal is not approved, we would not be permitted to issue
ordinary shares (other than shares issuable on exercise or
settlement of outstanding options, restricted share units and
other instruments convertible into or exercisable for ordinary
shares or the like, which were previously granted when the
previous shareholder approved share issue mandates were in
force). If we are unable to rely upon equity as a component of
compensation, we would have to review our compensation
practices, and would likely have to substantially increase cash
compensation to retain key personnel.
The Board recommends a vote FOR the resolution to authorize
ordinary share allotments and issuances.
22
PROPOSAL 7:
ORDINARY RESOLUTION TO APPROVE THE 2011 SHARE PURCHASE
MANDATE
Our purchases or acquisitions of our ordinary shares must be
made in accordance with, and in the manner prescribed by, the
Singapore Companies Act, the Nasdaq Stock Market rules and such
other laws and regulations as may from time to time be
applicable.
Singapore law requires us to obtain shareholder approval of a
general and unconditional share purchase mandate if
we wish to purchase or otherwise acquire our ordinary shares. We
refer to this as the Share Purchase Mandate
and it allows our directors to exercise their authority to
purchase or otherwise acquire our ordinary shares. Our
shareholders approved a Share Purchase Mandate at the 2010
Annual General Meeting of Shareholders (the
2010 Share Purchase Mandate), However,
our directors have not exercised any of the Companys
powers to purchase or otherwise acquire any ordinary shares
pursuant to the 2010 Share Purchase Mandate and the
2010 Share Purchase Mandate will expire at the conclusion
of our 2011 AGM. Accordingly, we are submitting this proposal to
seek approval for a new Share Purchase Mandate from our
shareholders at the 2011 AGM (the 2011 Share
Purchase Mandate). The 2011 Share Purchase
Mandate will, if approved, authorize our directors to exercise
all powers to purchase or otherwise acquire our issued ordinary
shares on the terms of the 2011 Share Purchase Mandate.
If approved by our shareholders at the 2011 AGM, the authority
conferred by the 2011 Share Purchase Mandate will, unless
varied or revoked by our shareholders at a general meeting,
continue in force until the earlier of the date of the 2012 AGM
or the date by which the 2012 AGM is required by law to be held.
The 2012 AGM is required to be held no later than 15 months
after the date of the 2011 AGM (which period may be extended for
up to an additional three months upon application by the Company
to, and the approval of, the Singapore Accounting and Corporate
Regulatory Authority).
The authority and limitations placed on our share purchases or
acquisitions under the proposed 2011 Share Purchase
Mandate, if approved at the 2011 AGM, are summarized below:
Limit on
Number of Ordinary Shares Allowed to be Purchased
During the period in which the 2011 Share Purchase Mandate
is effective, we may purchase or acquire that aggregate number
of our ordinary shares which is equal to 10% of the total number
of issued ordinary shares outstanding as of
(a) March 31, 2010 (the date of our last Annual
General Meeting of Shareholders) or (b) the date of the
passing of this resolution (expected to be March 30, 2011),
whichever is greater. There were 238,234,680 of our ordinary
shares outstanding as of March 31, 2010 and
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of our ordinary shares outstanding as of
February [ ], 2011, the most recent practicable
date.
Duration
of Share Purchase Mandate
Purchases or acquisitions of ordinary shares may be made, at any
time and from time to time, on and from the date of approval of
the Share Purchase Mandate up to the earlier of:
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the date on which our next Annual General Meeting of
Shareholders is held or required by law to be held; or
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the date on which the authority conferred by the Share Purchase
Mandate is revoked or varied by our shareholders at a general
meeting.
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Manner of
Purchases or Acquisitions of Ordinary Shares
Purchases or acquisitions of ordinary shares may be made by way
of:
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market purchases on the Nasdaq Global Select Market or any other
stock exchange on which our ordinary shares may for the time
being be listed and quoted, through one or more duly licensed
dealers appointed by us for that purpose; and/or
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off-market purchases (if effected other than on the Nasdaq
Global Select Market or, as the case may be, any other stock
exchange on which our ordinary shares may for the time being be
listed and quoted) in accordance with an equal access prescribed
by Singapore law.
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If we decide to purchase or acquire our ordinary shares in
accordance with an equal access scheme, our directors may impose
any terms and conditions on such purchase as they see fit and as
are in our interests, so long as the terms are consistent with
the 2011 Share Purchase Mandate, the regulations and rules
of the Nasdaq Global Select Market (or any other stock exchange
on which our ordinary shares may then be listed and quoted), the
Singapore Companies Act and other applicable laws. In addition,
an equal access scheme must satisfy the following conditions:
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offers for the purchase or acquisition of ordinary shares must
be made to every person who holds ordinary shares to purchase or
acquire the same percentage of their ordinary shares;
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all of those persons must be given a reasonable opportunity to
accept the offers made; and
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the terms of all of the offers must be the same (except
differences in consideration that result from offers relating to
ordinary shares with (i) different accrued dividend
entitlements and (ii) different amounts remaining unpaid
and differences in the offers solely to ensure that each person
is left with a whole number of ordinary shares).
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Purchase
Price
The purchase price (excluding brokerage commission, applicable
goods and services tax and other related expenses of the
purchase or acquisition) to be paid for an ordinary share will
be determined by our directors. The maximum purchase price to be
paid for the ordinary shares, as determined by our directors
must not exceed:
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in the case of a market purchase, the highest independent bid or
the last independent transaction price, whichever is higher, of
our ordinary shares quoted or reported on the Nasdaq Global
Select Market or as the case may be, any other stock exchange on
which our ordinary shares for the time being are listed or
quoted, at the time the purchase is effected; and
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in the case of an off-market purchase pursuant to an equal
access scheme, 150% of the Prior Day Close Price of
our ordinary shares, which means the closing price of an
ordinary share as quoted on the Nasdaq Global Select Market or,
as the case may be, any other stock exchange on which our
ordinary shares may, for the time being, be listed and quoted on
the day immediately preceding the date on which we announce our
intention to make an offer for the purchase or acquisition of
our ordinary shares from holders of our ordinary shares, stating
therein the purchase price (which shall not be more than the
maximum purchase price calculated on the foregoing basis) for
each ordinary share and the relevant terms of the equal access
scheme for effecting the off-market purchase.
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Sources
of Funds
Only funds legally available for purchasing or acquiring
ordinary shares in accordance with our Articles of Association
and applicable laws of Singapore shall be used. In the event
that we elect to purchase or acquire any of our ordinary shares,
depending on the number of ordinary shares repurchased or
acquired and then current market, business and other relevant
conditions, we may use our internal sources of funds
and/or
external borrowings to finance any such purchases or
acquisitions. Our directors do not propose to exercise the Share
Purchase Mandate in a manner and to such an extent that would
materially affect our working capital requirements and those of
our subsidiaries.
Under the Singapore Companies Act, any payment made in
consideration of the purchase or acquisition of ordinary shares
may be made out of our capital or profits. Acquisitions or
purchases made out of capital or profits are permissible only so
long as Avago is solvent. Pursuant to section 76F(4) of the
Singapore Companies Act, a company is solvent if (a) it is
able to pay its debts in full at the time of the payment made in
consideration of the purchase or acquisition (or the acquisition
of any right with respect to the purchase or
24
acquisition) of ordinary shares and will be able to pay its
debts as they fall due in the normal course of business during
the 12-month
period immediately following the date of such payment; and
(b) the value of the companys assets is not less than
the value of its liabilities (including contingent liabilities)
and will not, after giving effect to the proposed purchase or
acquisition, become less than the value of its liabilities
(including contingent liabilities).
Status of
Purchased or Acquired Ordinary Shares
The ordinary shares that we purchase or acquire will be deemed
cancelled immediately on purchase or acquisition, and all rights
and privileges attached to those ordinary shares will expire on
cancellation. The total number of issued shares will be
diminished by the number of ordinary shares purchased or
acquired by us.
We will cancel and destroy certificates, if applicable, in
respect of purchased or acquired ordinary shares as soon as
reasonably practicable following settlement of any purchase or
acquisition of ordinary shares.
Financial
Effects
Our net tangible assets will be reduced by the purchase price of
any ordinary shares purchased or acquired and cancelled. We do
not anticipate that the purchase or acquisition of our ordinary
shares in accordance with the 2011 Share Purchase Mandate
would have a material impact on our consolidated results of
operations, financial condition and cash flows.
The financial effects on us arising from purchases or
acquisitions of ordinary shares which may be made pursuant to
the 2011 Share Purchase Mandate will depend on, among other
things, whether the ordinary shares are purchased or acquired
out of our profits
and/or
capital, the number of ordinary shares purchased or acquired,
and the price paid for the ordinary shares.
Under the Singapore Companies Act, purchases or acquisitions of
ordinary shares by us may be made out of our profits
and/or our
capital. Where the consideration paid by us for the purchase or
acquisition of ordinary shares is made out of our profits, such
consideration (excluding brokerage, commission, goods and
services tax and other related expenses) will correspondingly
reduce the amount available for the distribution of cash
dividends by us. Where the consideration that we pay for the
purchase or acquisition of ordinary shares is made out of our
capital, the amount available for the distribution of cash
dividends by us will not be reduced. We declared and paid our
first interim cash dividend of $0.07 per ordinary share in
December 2010.
Rationale
for the Share Purchase Mandate
We believe that an approval of the 2011 Share Purchase
Mandate at the 2011 AGM will benefit our shareholders by
providing our directors with appropriate flexibility to cause
the repurchase of our ordinary shares if our directors believe
that such repurchases would be in the best interests of our
shareholders. Our decision to repurchase our ordinary shares
from time to time will depend on our continuing assessment of
then-current market conditions, our need to use available cash
to finance our operations, acquisitions and other strategic
transactions, the level of our debt, and the terms and
availability of financing.
Take-Over
Implications
If, as a result of our purchase or acquisition of our issued
ordinary shares, a shareholders proportionate interest in
our voting capital increases, such increase will be treated as
an acquisition under The Singapore Code on Take-overs and
Mergers, Appendix 2. If such increase results in a change
of effective control, or, as a result of such increase, a
shareholder or a group of shareholders acting in concert obtains
or consolidates effective control of our company, such
shareholder or group of shareholders acting in concert could
become obliged to make a take-over offer for our company under
Rule 14 of The Singapore Code on Take-overs and Mergers.
The circumstances under which shareholders (including directors
or a group of shareholders acting together) will incur an
obligation to make a take-over offer can be found under
Rule 14 and Appendix 2 of the Singapore Code on
Take-overs and Mergers. The effect of Appendix 2 is that,
unless exempted, shareholders
25
will incur an obligation to make a take-over offer under
Rule 14 if, as a result of us purchasing or acquiring our
issued ordinary shares, the voting rights of such shareholders
(and parties acting in concert with them) would increase to 30%
or more, or if such shareholders (and parties acting in concert
with them) hold between 30% and 50% of our voting rights, the
voting rights of such shareholders (and parties acting in
concert with them) would increase by more than 1% in any period
of six months. Shareholders who are in doubt as to their
obligations, if any, to make a mandatory take-over offer under
The Singapore Code on Take-overs and Mergers as a result of any
share purchase by us should consult the Securities Industry
Council of Singapore
and/or their
professional advisers at the earliest opportunity. Based on our
shareholdings as of February [ ], 2011, we do
not believe that the purchase of shares pursuant to the
2011 Share Purchase Mandate would cause any shareholder to
become the holder of 30% or more of our outstanding ordinary
shares. We therefore do not believe that the 2011 Share
Purchase Mandate or share purchases thereunder will have any
material take-over implications.
The Board recommends a vote FOR the resolution to approve the
2011 Share Purchase Mandate.
26
EXECUTIVE
OFFICERS
Executive
Officers
The following table sets forth certain information about our
executive officers as of February [ ], 2011.
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Name
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Age
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Position
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Hock E. Tan
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59
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President, Chief Executive Officer and Director
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Douglas R. Bettinger
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43
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Senior Vice President and Chief Financial Officer
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Boon Chye Ooi
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57
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Senior Vice President, Global Operations
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Bryan T. Ingram
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46
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Senior Vice President and General Manager, Wireless
Semiconductor Division
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Patricia H. McCall
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56
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Vice President and General Counsel
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Hock E. Tan has served as our President, Chief
Executive Officer and a director since March 2006. From
September 2005 to January 2008, he served as chairman of the
board of directors of Integrated Device Technology, Inc., or
IDT. Prior to becoming chairman of IDT, Mr. Tan was the
President and Chief Executive Officer of Integrated Circuit
Systems, Inc., or ICS, from June 1999 to September 2005. Prior
to ICS, Mr. Tan was Vice President of Finance with
Commodore International, Ltd. from 1992 to 1994, and previously
held senior management positions with PepsiCo, Inc. and General
Motors Corporation. Mr. Tan served as managing director of
Pacven Investment, Ltd., a venture capital fund in Singapore
from 1988 to 1992, and served as managing director for Hume
Industries Ltd. in Malaysia from 1983 to 1988.
Douglas R. Bettinger has served as our Senior Vice
President and Chief Financial Officer since August 2008. From
2007 to 2008, Mr. Bettinger served as Vice President of
Finance and Corporate Controller at Xilinx, Inc. From 2004 to
2007, he was Chief Financial Officer at 24/7 Customer, a
privately-held company. Mr. Bettinger was at Intel
Corporation from 1993 to 2004, where he served in several
senior-level finance and manufacturing operations positions,
including Corporate Planning and Reporting Controller, and
Malaysia Site Operations Controller.
Boon Chye Ooi has served as our Senior Vice
President, Global Operations since January 2009. From November
2003 until 2008, Mr. Ooi was at Xilinx, Inc., where he was
responsible for all worldwide manufacturing operations, most
recently as Senior Vice President of Worldwide Operations. Prior
to Xilinx, Mr. Ooi spent 25 years at Intel
Corporation, where he served in a variety of positions.
Bryan T. Ingram has served as our Senior Vice
President and General Manager, Wireless Semiconductor Division
since November 2007 and prior to that as Vice President of that
division since December 2005. Prior to the closing of our
acquisition of the Semiconductor Products Group
(SPG) of Agilent Technologies, Inc. (the
SPG Acquisition), Mr. Ingram was the
Vice President and General Manager, Wireless Semiconductor
Division of SPG. He has held various other positions with
Hewlett-Packard Company and Agilent Technologies, Inc.
Mr. Ingram joined Hewlett-Packard Company in 1990.
Patricia H. McCall has served as our Vice
President and General Counsel since March 2007. She served as
Director of Litigation at Adobe Systems from 2006 to 2007. Prior
to this, Ms. McCall served as Senior Vice President,
General Counsel and Secretary of ChipPAC Inc. from January 2003
to August 2004, when ChipPAC Inc. merged with ST Assembly Test
Services Ltd. in August 2004. Ms. McCall served as the
Senior Vice President Administration, General Counsel and
Secretary of ChipPAC Inc. from November 2000 to January 2003.
From November 1995 to November 2000, Ms. McCall was at
National Semiconductor Corporation, most recently as Associate
General Counsel, and prior to that was a partner at the law firm
of Pillsbury, Madison & Sutro. Ms. McCall is also
a Barrister in England.
Our executive officers are appointed by, and serve at the
discretion of, our Board. There are no family relationships
between our directors and executive officers.
27
COMPENSATION
DISCUSSION AND ANALYSIS
Executive
Summary
Our Compensation Committee reviews and approves compensation for
all our executives.
We have in place a compensation strategy for our executives
which focuses on both individual and Company performance.
Compensation of our executives is structured around the
achievement of near-term corporate targets (fiscal year metrics)
as well as longer-term business objectives and strategies. The
Compensation Committee is responsible for evaluating and
administering all of our compensation programs and practices to
ensure that they properly compensate and reward, and
appropriately drive, corporate performance while remaining
competitive with comparable semiconductor companies competing in
the same or similar markets. The Compensation Committee reviews
and approves all compensation policies, including executive base
salaries, bonuses and equity incentive compensation.
Our named executive officers (NEOs) for
Fiscal Year 2010 were Hock E. Tan, President and Chief Executive
Officer, Douglas R. Bettinger, Senior Vice President and Chief
Financial Officer, Boon Chye Ooi, Senior Vice President, Global
Operations, Bryan T. Ingram, Senior Vice President and General
Manager, Wireless Semiconductor Division, and Patricia H.
McCall, Vice President and General Counsel.
Objectives
and Philosophy of Our Executive Compensation Program
Our Compensation Committee has adopted a compensation philosophy
that is intended to keep total cash compensation (base salary
plus cash incentive reward) of our executives competitive with
compensation at companies within our peer group, with total cash
compensation (including incentive cash compensation) at the 75th
percentile generally viewed as the upper end of the desired
compensation for our executives. The Compensation Committee
believes that total cash compensation at or around this
percentile of the market provides us a competitive position for
attracting and retaining executives; provided, however, that our
Compensation Committee will make exceptions to this philosophy
when it determines it is necessary to attract or retain an
executive with the experience and skills the Compensation
Committee determines is desirable for a particular position, to
provide additional incentive to an executive to achieve the
Companys goals or to maintain internal parity among
executives with similar levels of responsibilities. As a result,
actual total cash compensation paid to an executive may be more
or less than the 75th percentile reference point. When reviewing
and setting compensation against market practices, the
Compensation Committee uses industry based market compensation
survey data, to which we refer in this Proxy Statement as
Market Salary Surveys, from the following
data sources:
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Radford Global Technology Survey;
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Radford Global Sales Survey; and
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Mercer High Tech Salary Survey (Asia).
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The companies the Compensation Committee used in December 2009
as a point of reference for reviewing and setting executive
compensation for 2010, to which we refer in this Proxy Statement
as our Peer Group Companies, and those that
participate in the Market Salary Surveys, are:
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Altera Corporation;
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Atmel Corporation;
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Cypress Semiconductor Corporation;
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Fairchild Semiconductor International, Inc.;
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Finisar Corporation;
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Intersil Corporation;
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Linear Technology Corporation;
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28
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LSI Logic Corporation;
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Marvell Technology Group Ltd.;
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Maxim Integrated Products, Inc.;
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Microchip Technology Incorporated.;
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National Semiconductor Corporation;
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ON Semiconductor Corporation; and
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Xilinx, Inc.
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The selection criteria for the peer group are companies in the
semiconductor industry, with similar business focus,
comparability across annual revenue (generally 0.5 to 2.0 times
that of the Company) and market capitalization (generally 0.25
to 3.0 times that of the Company). Based on these criteria, the
peer group used for our market comparisons in 2010 was the same
as the peer group used in 2009 except for the removal by the
Compensation Committee of International Rectifier Corporation
(their business focus was no longer aligned with that of the
Company), Qimonda North America (which filed for bankruptcy in
2010), Sharp Microelectronics of the Americas (which is a
division of Sharp Corporation and for which comparable data was
not publicly available), Spansion Inc. (which had a market
capitalization below the selection criteria) and
STMicroelectronics N.V. (which had annual revenues in excess of
the selection criteria), and the addition by the Compensation
Committee of the following two companies: Finisar Corporation
and Linear Technology Corporation, in place of the companies
removed from the peer group.
While the Compensation Committee reviews benchmark compensation
data for, and compensation practices at, peer companies to
inform its decision-making process, it does not set compensation
components to meet specific benchmarks. The Compensation
Committee uses peer-group data as a point of reference so that
it can set total compensation levels that it believes are
reasonably competitive, but also believes that over-reliance on
benchmarking can result in compensation that is unrelated to the
value delivered by our executives. While compensation levels may
differ among executives on competitive factors, and the role,
responsibilities and performance of each specific executive,
there are not material differences in the compensation
philosophies, objectives or policies for our executives,
including NEOs. We do not maintain a formal policy regarding
internal pay equity, but it may be considered as a factor in
determining compensation where applicable.
In September 2009, management retained Compensia to act as
compensation consultant for management and the Compensation
Committee advising on the compensation of our executive officers
for Fiscal Year 2010. In June 2010, the Compensation Committee
conducted a process independent of management, to identify and
select a compensation consultant to advise the committee on
executives and directors compensation and, as a
result of this process, the Compensation Committee retained
Compensia as its compensation consultant. Compensia has not
provided and does not provide any other services to the Company
other than de minimis ministerial data processing services. In
August 2010, our Compensation Committee reviewed our Peer Group
Companies for the purposes of setting 2011 compensation for our
executives using industry-based market surveys.
The peer group used for our market comparisons in 2011 is the
same as the peer group used in 2010 except for the addition by
the Compensation Committee of the following two companies:
Analog Devices, Inc. and Skyworks Solutions, Inc. which were
deemed appropriate peers based on selection criteria established
as discussed above.
Equity is a long term retention tool for key executives and is
intended to reflect the value we place on their contribution to
our Company. The Compensation Committee approves all equity
grants made to executives. At the time of the SPG Acquisition,
we granted significant equity awards to executives in order to
attract and retain them. We have from time to time made
additional grants of options to our executives, typically in
connection with their commencement of employment with us, in
connection with a promotion or in connection with the assignment
of increased responsibilities or for ongoing retention purposes.
When
29
allocating equity, the Compensation Committee looks at each
executives level of experience and expertise and overall
value to our Company.
Our compensation program for executives is designed to achieve
the following:
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attract and retain qualified, experienced and talented
executives, understanding competitive pressures from our Peer
Group Companies;
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motivate and reward executives whose skills, knowledge and
performance are critical to the on-going success of our Company;
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encourage executives to focus on the achievement of corporate
and financial performance goals and metrics by aligning the
incentive reward program to the achievement of both
functional/divisional goals and corporate goals; and
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align the interests of our executives with those of our
shareholders. A significant portion of total compensation paid
to our executives is in the form of equity. This serves as a
long term retention strategy and aims to align the interests of
our executives with shareholders by tying a significant portion
of each executives compensation to returns realizable by
our shareholders.
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Components
of Our Executive Compensation Program
The components of our executive compensation program are:
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Annual base salary;
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Annual (fiscal year) cash incentive program;
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Equity incentive (opportunities to purchase ordinary shares and
grants of restricted share units); and
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Perquisites.
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Annual
Cash Compensation
Base
Salary
Our Compensation Committee believes that a competitive base
salary is a necessary element of any compensation program
designed to attract, engage and retain key executives. Base
salaries provide fixed, baseline compensation and are set at
levels that are intended to be within a competitive range with
similar positions at our Peer Group Companies. The base salaries
of all our executives are reviewed annually by the Compensation
Committee against positions of similar size and scope in our
Peer Group Companies. As the independent consultant to the
Committee, Compensia prepares the assessment of executive
compensation based on market data, including data from our peer
companies.
Annual adjustments to an executives base salary take into
account:
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(i)
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individual performance throughout the prior fiscal year (based
on the achievement of divisional goals used in the annual cash
incentive bonus plan, fiscal responsibility and senior
leadership ability);
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(ii)
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the actual pay rate of our executives as compared to market pay
rates from the Market Salary Surveys;
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(iii)
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our ability to pay salary increases; and
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(iv)
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internal parity, where applicable.
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Our Compensation Committee reviews and considers many factors in
determining individual performance for the purposes of adjusting
base salaries including such measures as unit or division
performance against budget, achievement of unit or division
sales goals, new product introductions and corporate strategy
implementation. The process for internal parity where applicable
involves comparing executives in peer roles to ensure that base
salaries are comparable based on function, scope and
responsibilities of the role and taking into account the
executives experience, technical knowledge and expertise.
30
In December 2009, the Compensation Committee undertook a market
review of executive compensation, using the 2009 Market Salary
Surveys prepared by Compensia. Based on the NEOs
contributions throughout Fiscal Year 2009, and the Market Salary
Surveys for 2009, the Compensation Committee approved
market-based salary increases resulting in base salaries for the
NEOs for the remainder of Fiscal Year 2010 as follows:
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2009 Base Salary As
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2010 Base Salary As
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a Percentile of Base
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Base Salary
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a Percentile of Base
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Salaries at Peer
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(USD) Effective
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Salaries at Peer
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Name
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Group Companies
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February 1, 2010
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Group Companies
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Hock E. Tan
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37th
Percentile
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$700,000
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45th
Percentile
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Douglas R. Bettinger
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<25th
Percentile
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$385,000
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40th
Percentile
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Boon Chye Ooi
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>90th
Percentile
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$470,192(1)
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>90th
Percentile
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Bryan T. Ingram
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53rd
Percentile
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$385,000
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80th
Percentile
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Patricia H. McCall
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40th
Percentile
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$340,000
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65th
Percentile
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(1) |
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For the purposes of this table, salary amounts paid to
Mr. Ooi in Singapore Dollars were converted back to U.S.
Dollars using the Accounting Rate for January, the third month
of our fiscal year. The Accounting Rate for January 2010 was
1.4073 Singapore Dollars to the U.S. Dollar as reported by
Bloomberg L.P. The Accounting Rate for any month is
the exchange ratio of the number of Singapore Dollars to one
U.S. Dollar for the last business day of the preceding month, as
reported by Bloomberg L.P. |
The NEOs base salaries were increased based on the
Compensation Committees assessment of the Market Salary
Surveys and in light of the NEOs experience, and
performance at the Company.
The Compensation Committee reviewed executive compensation again
in November 2010, but elected to defer decisions on changes to
executive compensation to later in Fiscal Year 2011. Our Chief
Executive Officer may recommend increasing the base salary of an
executive at any time throughout the course of the year if a
change in the scope of the executives role and
responsibilities warrants an increase. In limited circumstances,
our Chief Executive Officer may propose that an executives
base salary be adjusted in response to a competitive threat or
competitive labor market conditions. The Compensation Committee
approves any salary adjustments that are made during the fiscal
year for executive officers.
Annual
Cash Incentive Program
We have in place a performance based annual cash incentive bonus
plan for all of our executive management. The plan is reviewed
and approved on a
year-to-year
basis by our Compensation Committee. Company goals and business
metrics are also reviewed and approved by the Compensation
Committee prior to allocation. Our performance based annual cash
incentive plan is designed to encourage and motivate the Chief
Executive Officer to achieve corporate level goals and other
executives to achieve both corporate level and
functional/divisional level goals, thereby positively
contributing to the growth and performance of the Company. In
Fiscal Year 2010, the plan was structured to include a target
bonus amount expressed as a percentage of base salary which
could be achieved by meeting corporate and divisional goals and
could be increased or decreased based on individual performance.
The formula used to calculate an executives performance
based bonus is as follows:
Bonus Amount = Bonus Target Percent x Group Performance Factor x
Individual Performance Factor x Annual Bonus Eligible Earnings
(base salary paid during the fiscal year)
Bonus
Target Percent
Each of our executive officers participates in our performance
based annual cash incentive bonus plan. Rates at which our
executive officers participate in the performance based annual
cash incentive bonus plan are expressed as a percent of base
salary. Employees below the executive level participate at rates
set by the Compensation Committee based on Market Salary Survey
data for our Peer Group Companies, and the Compensation
Committees experience with similar programs. Our
Compensation Committee did not follow a
31
formula or otherwise weigh any of these factors, but rather used
the factors as general background information prior to
determining the participation rates of our NEOs. For executives
including NEOs, the Compensation Committee sets the rate of
participation based on its assessment of the executives
experience and ability to influence corporate results. In
addition, the Committee also reviews competitive market data
from the Market Salary Surveys for our Peer Group Companies as a
point of reference in making this determination; however, no
benchmarking against that data occurs. In particular, the
Compensation Committee set the participation rates based on each
executives experience in his or her role with our Company
and the level of responsibility held by each executive, which
the Compensation Committee believes directly correlates to his
or her ability to influence corporate results. The NEOs
target rates of participation for Fiscal Year 2010 were the same
as in 2009, except that Mr. Tans target rate of
participation was increased from 120% of his base salary to 150%
of his base salary based on the Compensation Committees
assessment of Market Salary Surveys, Mr. Tans
experience and overall leadership and management of us and our
subsidiaries. Each NEOs target bonus amount can be
calculated by multiplying his or her participation rate times
his or her base salary and is included in the table set forth in
the section below entitled Summary Bonus Table.
Group
Performance
Group performance for each executive, other than our Chief
Executive Officer, consists of corporate performance and
division/function performance, with each component equally
weighted at 50%. Our Chief Executive Officers group
performance is measured solely using corporate performance since
our Chief Executive Officer has overall responsibility for our
Company. A component of performance must be achieved at the
minimum level of performance before it is taken into account in
calculating an executives bonus amount. Achieving the
minimum level of performance results in 50% attainment while
achieving the maximum level of performance results in 150%
attainment for such component with performance between these
levels resulting in attainment based on linear interpolation.
Attainment cannot exceed 150%. For Direct Expenses performance
targets only, achieving the minimum level of performance will
result in 80% attainment while achieving the maximum level of
performance will result in 120% attainment for such component
with performance between these levels resulting in attainment
based on linear interpolation. Attainment on Direct Expenses
cannot exceed 120%.
The Compensation Committee determines corporate performance
based on our achievement of corporate goals. The corporate goals
for Fiscal Year 2010 were revenue growth as compared to Fiscal
Year 2009 and non-GAAP operating income, and each carried an
equal weighting of 50% of corporate performance. The target for
revenue growth for Fiscal Year 2010 was 14.4% as compared to
Fiscal Year 2009 and the target for non-GAAP operating income
was $339 million. The goals were set by the Compensation
Committee, with input from management, in light of the then
prevailing macroeconomic environment and business conditions due
to the global economic and financial crises, and were designed
to be difficult to attain and to require substantial effort by
management to achieve them. These targets were not expected to
be achieved based on average or below average performance. In
November 2010, the Compensation Committee determined that we
achieved Fiscal Year 2010 revenue growth of 41.0%. This
represented an increase greater than the maximum target level of
performance, resulting in 150% attainment of this goal. The
Compensation Committee also determined that we achieved non-GAAP
operating income for Fiscal Year 2010 of $574 million,
which was greater than the maximum target level of performance,
resulting in an attainment of this goal at 150%.
Non-GAAP operating income of $574 million for Fiscal Year
2010 is calculated from our consolidated audited financial
statements in our 2010
Form 10-K
by adding to our $466 million GAAP operating income
$79 million related to the amortization of
acquisition-related intangibles ($58 million reported as
amortization of intangible assets as part of cost of products
sold and $21 million reported in amortization of intangible
assets as part of operating expenses), $25 million related
to share-based compensation expense ($3 million reported as
part of cost of products sold and $22 million reported as
part of operating expenses), and $4 million related to
restructuring charges ($1 million related to cost of
products sold and $3 million related to operating expenses).
The Compensation Committee determines an executives
division/functional performance based on the achievement of
goals by the division/function overseen by the executive. The
Compensation Committee sets
32
divisional/functional goals and their weightings annually, based
on its assessment of the business requirements of the particular
division/function to which the goals relate and the relative
importance of the goals to the division/function. Each of the
divisional goals, and its respective weighting, for our NEOs is
described in the table set forth in the section below entitled
Summary Bonus Table. Each divisional goal is set by
the Compensation Committee to be difficult to attain and to
require substantial effort on behalf of the division and the
executive in charge of the division. Divisional/functional goals
are not expected to be attained based on average or below
average performance. In November 2010, the Compensation
Committee determined that divisional/functional goals had been
achieved at the levels set forth in the section below entitled
Summary Bonus Table.
Individual
Performance
Individual performance is applied as a multiplier to the bonus
amount calculated based on group performance. Individual
performance is determined by the Compensation Committee with
input from the Chief Executive Officer for each executive other
than the Chief Executive Officer. In determining individual
performance the Compensation Committee considers the
requirements of the executives position including the
achievement of the divisional goals set forth in the section
below entitled Annual Cash Incentive ProgramSummary
Bonus Table, fiscal responsibility as determined by the
Compensation Committee with input from the Chief Executive
Officer, other than with respect to himself, such
executives senior leadership capability and how each of
these factors impacts the overall performance of the
executives division
and/or
function. Executives, who consistently meet or exceed the
requirements of the position, as determined by the Compensation
Committee, will receive a bonus multiplier of 150% of the bonus
amount calculated using group performance. Executives who meet,
and sometimes exceed, the key requirements of their position, as
determined by the Compensation Committee, receive the bonus
amount calculated at 100% using group performance. Executives
who meet some, but not all, of the requirements of the position
or for whom the Compensation Committee believes that improvement
is needed will receive a bonus that is 50% of the bonus amount
calculated using group performance. The Compensation Committee
may adjust our Chief Executive Officers individual
performance factor upwards or downwards in its sole discretion,
based on any criteria it determines appropriate.
For Fiscal Year 2010, the Compensation Committee (with input
from our Chief Executive Officer, other than with respect to
himself) determined that each of our NEOs should receive an
individual performance factor of 100% based on attainment of the
bonus metrics below for their respective divisions/functions.
Discretionary
Bonuses
Each year, our Compensation Committee may supplement the
performance based cash incentive plan awards earned by our NEOs
with discretionary bonuses which are awarded based on our Chief
Executive Officers recommendations, other than with
respect to himself, and the Compensation Committees
assessment of individual contributions.
In November 2010, our Compensation Committee awarded a
discretionary bonus of $100,000 to each of Mr. Ingram and
Mr. Bettinger and $50,000 to Ms. McCall based, in each
case, on their commitment to the Company and their leadership
and the performance during Fiscal Year 2010 of the respective
division or function that they oversee.
In Fiscal Year 2010, Mr. Ingram was paid a discretionary
bonus of $6,754 in lieu of a mortgage subsidy to which he would
have been entitled to under an Agilent bonus program had he
remained employed by Agilent Technologies, Inc. We are under no
obligation to make the payment to Mr. Ingram and may
increase or decrease it at any time, at our discretion.
33
Summary
Bonus Table
With respect to each NEO, divisional/functional and corporate
goals were set and achieved, and bonuses were paid, as follows:
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Fiscal Year
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Fiscal Year 2010
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2010
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Payout
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Weighting
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in Dollars (USD)
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as a
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and as a
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Bonus
|
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Percentage
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Percentage of
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|
Target
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of Bonus
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2010
|
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Bonus Eligible
|
Name
|
|
Percent
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|
Fiscal Year 2010 Bonus Metric
|
|
Target
|
|
Achievement
|
|
Earnings
|
|
Hock E. Tan
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150%
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Avago Revenue Growth
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50%
|
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150%
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President and Chief
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Avago Operating Profit
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50%
|
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150%
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Executive Officer
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Total Weighted Fiscal Year 2010 Attainment
|
|
100%
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150.0%
|
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$1,529,572 (225%)
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Douglas R. Bettinger
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75%
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Avago Revenue Growth
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25%
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150%
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Senior Vice President and
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Avago Operating Profit
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25%
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150%
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Chief Financial Officer
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Direct Expenses
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20%
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101%
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Intra-Company Service Levels
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20%
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146%
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Asset Management
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10%
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149%
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|
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|
Total Weighted Fiscal Year 2010 Attainment
|
|
100%
|
|
139.4%
|
|
$392,778(1) (104.6%)
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Boon Chye Ooi
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75%
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|
Avago Revenue Growth
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|
25%
|
|
150%
|
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Senior Vice President,
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Avago Operating Profit
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|
25%
|
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150%
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Global Operations
|
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|
Avago Gross Margin %
|
|
20%
|
|
150%
|
|
|
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Global Operations Direct Expenses
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|
15%
|
|
111%
|
|
|
|
|
|
|
Supply Chain Management
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15%
|
|
138%
|
|
|
|
|
|
|
Total Weighted Fiscal Year 2010 Attainment
|
|
100%
|
|
142.3%
|
|
$530,928 (106.7%)
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Bryan T. Ingram
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75%
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|
Avago Revenue Growth
|
|
25%
|
|
150%
|
|
|
Senior Vice President and
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Avago Operating Profit
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|
25%
|
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150%
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General Manager, Wireless Semiconductor Division
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WSD New Product Introduction
|
|
25%
|
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150%
|
|
|
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WSD Contribution Profit
|
|
25%
|
|
118%
|
|
|
|
|
|
|
Total Weighted Fiscal Year 2010 Attainment
|
|
100%
|
|
141.9%
|
|
$395,410(2) (106.5%)
|
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|
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|
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|
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|
Patricia H. McCall
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40%
|
|
Avago Revenue Growth
|
|
25%
|
|
150%
|
|
|
Vice President and General
|
|
|
|
Avago Operating Profit
|
|
25%
|
|
150%
|
|
|
Counsel
|
|
|
|
Direct Expenses
|
|
25%
|
|
88%
|
|
|
|
|
|
|
Intra-Company Service Levels
|
|
25%
|
|
150%
|
|
|
|
|
|
|
Total Weighted Fiscal Year 2010 Attainment
|
|
100%
|
|
134.6%
|
|
$178,278(3) (53.8%)
|
|
|
|
(1) |
|
The Compensation Committee approved an additional discretionary
bonus of $100,000, not included in the above, based on the
performance of the Finance and General Administration function,
overseen by Mr. Bettinger, during Fiscal Year 2010. |
(2) |
|
The Compensation Committee approved an additional discretionary
bonus of $100,000, not included in the above, based on the
performance of the Wireless Semiconductor Division, overseen by
Mr. Ingram, during Fiscal Year 2010. |
(3) |
|
The Compensation Committee approved an additional discretionary
bonus of $50,000, not included in the above, based on the
performance of the Legal function, overseen by Ms. McCall,
during Fiscal Year 2010. |
34
Equity
Incentive Compensation
Our Compensation Committee believes that long term, sustainable
growth and performance will be best facilitated through a
culture of executive ownership that encourages long term
investment and engagement by our executive management. The aim
is also to align executive performance and behaviors to create a
culture conducive to shareholder investment.
Our Compensation Committee approves options to purchase ordinary
shares granted to executive officers. The size of initial and
any subsequent grants for executives takes into account past
equity grants, the executives position and level,
compensation and the value the executive brings to the Company
based on their technical experience, expertise and leadership
capabilities. The philosophy behind option grants is to provide
the executive with a strong incentive to build value in the
Company over an extended period of time. While subsequent
options may be proposed by our Chief Executive Officer and
granted by the Compensation Committee, we do not have a set
annual option grant program for executives. No equity awards
were granted to our NEOs during Fiscal Year 2010.
Options to purchase ordinary shares that were granted to
executives prior to our IPO are governed by the Equity Incentive
Plan for Executive Employees of Avago Technologies Limited and
Subsidiaries (the Executive Plan), which is
administered by the Compensation Committee. Generally, options
granted under the Executive Plan vest in equal annual
installments over five years based 50% upon the passage of time
and 50% on our financial performance, as measured using non-GAAP
operating income, subject in each case to continued employment
with Avago. The annual operating income target used for
performance-based options is income (loss) from operations
calculated in accordance with GAAP, but adjusted to exclude
amortization of acquisition-related intangibles, share-based
compensation, restructuring and asset impairment charges,
acquired in-process research and development, (gain)/loss on
extinguishment of debt, management and transaction fees payable
to the Sponsors or their affiliates, and (income) loss from and
(gain) loss on discontinued operations and other items eligible
for exclusion. The Compensation Committee determined that
non-GAAP operating income provides a better overall measure of
our financial performance among periods than operating income
calculated in accordance with GAAP would otherwise provide
because the amounts not included in the non-GAAP operating
income target are either non-recurring, in which case such
amounts do not reflect the results of continuing operations for
which our Compensation Committee wants our executives to be
accountable, or, if recurring, are not related to our operating
performance or are amounts over which our Compensation Committee
believes our executives do not have control. For example, the
Compensation Committee excludes share-based compensation from
the operating income target because these expenses are not
reflective of our operating performance, our share options
typically do not require cash settlement by us and the
share-based compensation expenses are often the result of
complex calculations using an option pricing model that
estimates share-based awards fair value based on factors
such as volatility and risk-free interest rates that are beyond
the control of our executives. The operating income targets have
been set at levels our Compensation Committee has determined are
challenging and will require substantial effort on the part of
our executives and the Company in order to be attained. Our
Compensation Committee does not believe that future operating
income targets will be achieved if our executives perform at an
average or below average level. Pursuant to their initial terms,
performance-based options that do not become exercisable in a
given year may be earned in future years, up to the fifth year
following the date of grant, if performance in any future year
exceeds the target for such year
(Catch-up
Vesting). As discussed below, in connection with our
IPO, outstanding performance-based options were amended to
eliminate performance targets or to provide for subsequent
time-based vesting of options that do not vest in a particular
year if performance targets are not met. Generally, the exercise
price of options granted under the Executive Plan was equal to
the fair market value of our ordinary shares on the date of
grant as determined by our Compensation Committee or the Board.
The minimum non-GAAP operating income threshold for Fiscal Year
2010, attainment of which must be achieved for any vesting of
our performance-based options to occur for the year, was
$272.7 million, and our non-GAAP operating income target
for Fiscal Year 2010, attainment of which would result in 100%
vesting of performance-based options for the year, was
$392.1 million. In December 2010, our Compensation
Committee determined our performance-based options vested at
100% based on Fiscal Year 2010 performance, since our actual
non-GAAP operating income was $574.4 million for Fiscal
Year 2010, calculated as described above,
35
representing an attainment of 253% of targeted performance (with
targeted performance calculated as the difference between the
minimum non-GAAP operating threshold and the non-GAAP operating
target). Since our actual non-GAAP operating income attained
significantly exceeded targeted performance for Fiscal Year
2010,
Catch-Up
Vesting for performance-based options that failed to vest based
upon the failure to achieve minimum performance targets for
Fiscal Year 2009 was triggered at 100%. Therefore, all options
originally scheduled to vest based on Fiscal Year 2009
performance will vest at 100% on the next regularly scheduled
vesting date, provided the executive remains employed by us
through the vesting date. No periods prior to Fiscal Year 2009
are affected by the
Catch-Up
vesting due to 100% or more attainment of targeted performance
in prior years, resulting in 100% vesting in each such year.
On July 20, 2009, the Compensation Committee approved an
amendment of the performance-based options held by
Messrs. Tan, Bettinger and Ingram to remove the operating
income performance-based vesting requirements and extend the
vesting period. The amended options will vest two years after
the date such options could first have vested had the
performance targets for such options been achieved, provided
that these individuals remain employed by us through the
applicable vesting date. The Compensation Committee determined
that the removal of performance-based vesting requirements was
appropriate in light of our then current financial projections,
which were lower than when the original performance targets were
set, and the uncertainty then present in the global economy. In
making its determination, the Compensation Committee heavily
weighted the importance of providing these individuals with
incentives to continue with us following our IPO. In addition,
the Compensation Committee amended all other outstanding
performance-based options to provide that if performance targets
for a particular year were not met the options will vest two
years after the date the options could first have vested had the
performance targets for such options been achieved, subject to
any earlier
Catch-Up
Vesting, provided that the employee remains employed by us
through the applicable vesting date.
With effect from our IPO, options are granted under our 2009
Plan, including any that may be granted to our executive
officers. Under the 2009 Plan, options granted to employees
expire no more than ten years following the date of grant and
options generally vest based on the passage of time over a four
year period from the date of grant. Options granted to
executives under the 2009 Plan generally vest in two equal
installments on the third and fourth anniversaries of the date
of grant.
Eligible executives employed by our participating subsidiaries,
including our NEOs, may also participate in our ESPP. The ESPP
provides eligible employees with the opportunity to acquire
ordinary shares of the Company through periodic payroll
deductions, at a discounted price, based on a six-month
look-back period. The ESPP is structured as a qualified employee
stock purchase plan under Section 423 of the Internal
Revenue Code of 1986. The ESPP requires participants to hold
shares for a minimum of six months after any purchase date,
unless they cease to be eligible to participate in the ESPP in
which case the shares become freely tradable, subject to our
applicable securities laws and our insider trading policy.
Termination-Based
Compensation
Separation compensation is determined by Company policy and any
specific arrangements detailed in the executives
employment agreement. Severance payments are typically comprised
of a cash payment in lieu of salary, bonuses
and/or
coverage of health benefits for a limited period of time and, in
some cases, option vesting acceleration. In addition to
employment agreement provisions, the vesting of options granted
under the Executive Plan accelerate with respect to 10% of the
shares subject to the options if an executive is terminated in
connection with the sale of his or her division. Our
Compensation Committee must approve any exceptions to severance
payments including any additional cash payments and any variance
from the Executive Plan regarding the treatment of options.
Executives who are terminated from Avago are required to sign a
general release of all claims against Avago to receive any
severance benefits.
Each of our NEOs is eligible for severance benefits under his or
her respective employment agreement with Avago other than
Mr. Ingram. Mr. Ingrams severance benefits upon
termination of employment other than in connection with a change
of control expired on November 1, 2009, pursuant to the
terms of his employment agreement. The Compensation Committee
provides termination benefits to our NEOs based on its
36
review of severance practices at our Peer Group Companies and as
the result of arms length negotiations at the time our
executives enter into employment with us, at the time they are
requested to take on additional responsibilities or from time to
time if deemed necessary or desirable to achieve parity with
other NEOs. The level of benefits varies from executive to
executive based on the level of responsibility of the executive
and accommodations made through arms length negotiations.
The table below sets forth the severance benefits payable to
each NEO under his or her respective employment agreement, offer
letter or severance agreement, upon a termination of employment
without cause, for good reason, because of death or because of
disability occurring, in each case, apart from a change in
control:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health Benefits
|
|
|
Continued
|
|
|
|
Continuation
|
Name
|
|
Base Salary
|
|
Bonus(1)
|
|
Coverage
|
|
Hock E. Tan
|
|
|
12 months
|
|
|
|
100
|
%
|
|
|
Douglas R. Bettinger
|
|
|
9 months
|
|
|
|
50
|
%
|
|
6 months
|
Boon Chye Ooi
|
|
|
6 months
|
|
|
|
50
|
%
|
|
6 months
|
Bryan T. Ingram(2)
|
|
|
|
|
|
|
|
|
|
|
Patricia H. McCall
|
|
|
9 months
|
|
|
|
50
|
%
|
|
6 months
|
|
|
|
(1) |
|
Bonus payments are calculated using the lesser of the
executives prior years actual bonus or prior
years target bonus. |
(2) |
|
The severance provisions of Mr. Ingrams employment
agreement relating to termination of employment other than in
connection with a change in control expired on November 1,
2009. |
The table below sets forth the severance benefits payable to
each NEO under his or her respective employment agreement, offer
letter or severance agreement, upon a termination of employment
without cause, for good reason, because of death or because of
disability occurring, in each case, in connection with a change
in control. Each executive must provide a full release of claims
in order to be eligible for his or her full severance payment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health Benefits
|
|
|
|
|
Continued
|
|
|
|
Continuation
|
|
Option Vesting
|
Name
|
|
Base Salary
|
|
Bonus(1)
|
|
Coverage
|
|
Acceleration(2)
|
|
Hock E. Tan
|
|
|
24 months
|
|
|
|
200
|
%
|
|
|
|
|
|
|
12 months
|
|
Douglas R. Bettinger
|
|
|
12 months
|
|
|
|
100
|
%
|
|
|
12 months
|
|
|
|
12 months
|
|
Boon Chye Ooi
|
|
|
12 months
|
|
|
|
100
|
%
|
|
|
12 months
|
|
|
|
12 months
|
|
Bryan T. Ingram
|
|
|
12 months
|
|
|
|
100
|
%
|
|
|
|
|
|
|
12 months
|
|
Patricia H. McCall
|
|
|
12 months
|
|
|
|
100
|
%
|
|
|
12 months
|
|
|
|
12 months
|
|
|
|
|
(1) |
|
Bonus payments are calculated using the lesser of the
executives prior years actual bonus or prior
years target bonus, except for Mr. Ingram, whose
bonus payment is calculated using the lesser of his prior
years actual bonus or target bonus for the fiscal year in
which the termination occurs. |
(2) |
|
Accelerated vesting is limited to time-based options which would
otherwise vest solely upon the executives continued
employment. |
For more detailed descriptions of the benefits provided to our
NEOs upon a termination of employment, please see
Executive CompensationEmployment, Severance and
Change of Control Agreements with Named Executive Officers
below.
Other
Compensation
All of our executive officers are eligible to participate in
certain benefits plans and arrangements offered to employees
generally. Such benefits include health, dental, life and
disability insurance and in the case of U.S. based
executives, the 401(k) plan. We pay the full monthly premium for
each U.S. based employee, including each executive, for
basic medical coverage. For other medical, dental and vision
coverage, we pay a portion of the cost and the employees,
including executives, pay a portion of the cost. We pay 100% of
the
37
premium for all employees, including executives, for Basic Life
Insurance, Accidental Death and Dismemberment, Business Travel
Accident Insurance and the Employee Assistance Plan. We pay 100%
of the premiums for all Colorado employees, including
executives, for Short Term and Long Term Disability. Employees
in California, including executives, contribute .08% of the
first $93,316 in annual earnings to the California Voluntary
Disability Plan for Short Term Disability and we pay 100% of the
premium for Long Term Disability. We provide access to a Group
Universal Life and Long-Term Care coverage but the entire cost
is paid by the employee, including executives.
Consistent with our overall compensation philosophy, we intend
to continue to maintain our current benefits plan for executives
as well as other employees. Our Compensation Committee in its
discretion may revise, amend or add to any executives
benefits and perquisites if it deems necessary.
U.S. based executives may also participate in the Avago
Technologies U.S. Inc. Deferred Compensation Plan. For a
description of the Deferred Compensation Plan, see footnote 1 of
the 2010 Non-Qualified Deferred Compensation Table.
We determine perquisites on a case by case basis and will
provide a perquisite to an NEO when we believe it is necessary
to attract or retain the executive officer. In Fiscal Year 2010,
the following executives received the following perquisites:
|
|
|
Name
|
|
Perquisites
|
|
Hock E. Tan, President and Chief Executive Officer
|
|
Reimbursement for travel to his residence in Pennsylvania.
|
Boon Chye Ooi, Senior Vice President, Global Operations
|
|
Temporary housing allowance and reimbursement of tax preparation
service fees.
|
Tax and
Accounting Considerations
While the Compensation Committee and our Board generally
consider the financial accounting and tax implications of its
executive compensation decisions, neither element has been a
material consideration in the compensation awarded to our NEOs
historically. In addition, the Compensation Committee and our
Board have considered the potential future effects of
Section 162(m) of the Internal Revenue Code on the
compensation paid to our executive officers. Section 162(m)
disallows a tax deduction for any publicly held corporation for
individual compensation exceeding $1 million in any taxable
year for our Chief Executive Officer and each of the other NEOs
(other than our Chief Financial Officer), unless compensation is
performance-based. Our Board has not previously taken the
deductibility limit imposed by Section 162(m) into
consideration in setting compensation. Our Compensation
Committee, however, may consider adopting a policy that, where
reasonably practicable, we will seek to qualify the variable
compensation paid to our executive officers for an exemption
from the deductibility limitations of Section 162(m).
38
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The following table sets forth information about compensation
earned by our NEOs during Fiscal Year 2010, Fiscal Year 2009 and
the Fiscal Year 2008. Our NEOs consist of our Chief Executive
Officer, our Chief Financial Officer, and each of our three
other most highly compensated executive officers serving at the
end of Fiscal Year 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
|
|
Incentive Plan
|
|
All Other
|
|
|
|
|
|
|
Salary
|
|
Bonus
|
|
Awards
|
|
Compensation
|
|
Compensation
|
|
Total
|
Name and Principal Position(s)
|
|
Year
|
|
($)
|
|
($)
|
|
($)(1)
|
|
($)(2)
|
|
($)
|
|
($)
|
Hock E. Tan
|
|
|
2010
|
|
|
|
681,252
|
|
|
|
|
|
|
|
|
|
|
|
1,529,572
|
|
|
|
41,695
|
(3)
|
|
|
2,252,519
|
|
President and Chief Executive Officer
|
|
|
2009
|
|
|
|
625,008
|
|
|
|
1,000,000
|
|
|
|
8,441,402
|
|
|
|
208,503
|
|
|
|
42,882
|
|
|
|
10,317,795
|
|
|
|
|
2008
|
|
|
|
623,468
|
|
|
|
|
|
|
|
|
|
|
|
915,000
|
|
|
|
34,269
|
|
|
|
1,572,737
|
|
Douglas R. Bettinger
|
|
|
2010
|
|
|
|
376,250
|
|
|
|
100,000
|
(4)
|
|
|
|
|
|
|
392,778
|
|
|
|
10,338
|
(8)
|
|
|
879,366
|
|
Senior Vice President and Chief Financial
|
|
|
2009
|
|
|
|
350,000
|
|
|
|
|
|
|
|
1,622,662
|
|
|
|
284,288
|
|
|
|
9,000
|
|
|
|
2,265,950
|
|
Officer
|
|
|
2008
|
|
|
|
87,500
|
|
|
|
165,593
|
|
|
|
805,935
|
|
|
|
86,121
|
|
|
|
|
|
|
|
1,145,149
|
|
Boon Chye Ooi
|
|
|
2010
|
|
|
|
497,548
|
(5)
|
|
|
|
|
|
|
|
|
|
|
530,928
|
|
|
|
18,513
|
(6)
|
|
|
1,046,989
|
|
Senior Vice President, Global Operations
|
|
|
2009
|
|
|
|
336,372
|
|
|
|
|
|
|
|
2,605,929
|
|
|
|
151,589
|
|
|
|
247,521
|
|
|
|
3,341,411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bryan T. Ingram
|
|
|
2010
|
|
|
|
372,402
|
|
|
|
106,754
|
(7)
|
|
|
|
|
|
|
395,410
|
|
|
|
9,819
|
(8)
|
|
|
884,385
|
|
Senior Vice President and General Manager,
|
|
|
2009
|
|
|
|
334,608
|
|
|
|
165,750
|
|
|
|
2,396,912
|
|
|
|
334,650
|
|
|
|
9,000
|
|
|
|
3,240,920
|
|
Wireless Semiconductor Division
|
|
|
2008
|
|
|
|
333,913
|
|
|
|
24,730
|
|
|
|
446,867
|
|
|
|
340,654
|
|
|
|
9,000
|
|
|
|
1,155,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patricia H. McCall
|
|
|
2010
|
|
|
|
331,749
|
|
|
|
50,000
|
(9)
|
|
|
|
|
|
|
178,278
|
|
|
|
11,259
|
(10)
|
|
|
571,286
|
|
Vice President and General Counsel
|
|
|
2009
|
|
|
|
304,305
|
|
|
|
|
|
|
|
752,137
|
|
|
|
84,485
|
|
|
|
9,600
|
|
|
|
1,150,527
|
|
|
|
|
(1)
|
|
Represents the grant date fair
value of options granted in each fiscal year of the grant and
for Fiscal Year 2009 also represents the incremental fair value
associated with a modification of option awards in that year,
determined in accordance with FASB ASC Topic 718. No options
were granted to the NEOs and no NEOs options were modified
in Fiscal Year 2010. Modification of NEOs options in Fiscal Year
2008 did not result in any incremental fair value of those
options. For a discussion of valuation assumptions used in the
calculations, see Note 9 of Notes to Consolidated Financial
Statements included in Part IV, Item 8 of our 2010
Form 10-K.
Details of the fair value of the options granted or modified in
Fiscal Year 2009 are presented in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Grant Date
|
|
Incremental
|
|
|
|
|
Fair Value
|
|
Fair Value on
|
|
Total Fair
|
Name
|
|
($)
|
|
Modification Date ($)
|
|
Value ($)
|
Hock E. Tan
|
|
|
2,959,350
|
|
|
|
5,482,050
|
|
|
|
8,441,402
|
|
Douglas R. Bettinger
|
|
|
332,340
|
|
|
|
1,290,322
|
|
|
|
1,622,662
|
|
Boon Chye Ooi
|
|
|
795,008
|
|
|
|
1,810,921
|
|
|
|
2,605,929
|
|
Bryan T. Ingram
|
|
|
1,190,082
|
|
|
|
1,206,830
|
|
|
|
2,396,912
|
|
Patricia H. McCall
|
|
|
493,225
|
|
|
|
258,912
|
|
|
|
752,137
|
|
|
|
|
(2)
|
|
Represents amounts paid for each
applicable fiscal year under our annual cash incentive program.
Please see plan description in Compensation Discussion and
AnalysisAnnual Cash CompensationAnnual Cash
Incentive Program above.
|
(3)
|
|
Represents $31,895 in
reimbursements for travel to Mr. Tans residence in
Pennsylvania and a $9,800 401(k) employer match.
|
(4)
|
|
Represents a $100,000 discretionary
bonus paid to Mr. Bettinger for the performance of his
function during the year.
|
(5)
|
|
Mr. Oois employment
agreement entitles him to an initial annual base salary of U.S.
$450,000. This was converted into Singapore Dollars at a rate of
1.4416 per U.S. Dollar at the time his employment in Singapore
commenced. This conversion rate has not subsequently been
adjusted. For the purposes of this table, salary amounts paid to
Mr. Ooi in Singapore Dollars were converted to U.S. Dollars
using the Accounting Rate for October 2010, the last month of
our fiscal year. The Accounting Rate for October 2010 was 1.3219
Singapore Dollars to the U.S. Dollar as reported by Bloomberg
L.P.
|
(6)
|
|
Represents $12,982 in temporary
housing allowance (converted from Singapore Dollars using the
Accounting Rate for October 2010 of 1.3219 Singapore Dollars per
U.S. Dollar) and $5,531 in reimbursement of tax preparation
service fees. The tax preparation service fees include fees of
2,100 Malaysian Ringgits, converted to U.S. Dollars using the
using the Accounting Rate for October 2010 of 3.0850 Malaysian
Ringgits to the U.S. Dollar, as reported by Bloomberg L.P.
|
(7)
|
|
Represents a $100,000 discretionary
bonus paid to Mr. Ingram for the performance of his
division during the year and $6,754 paid to Mr. Ingram as a
cash bonus in lieu of a mortgage subsidy that Mr. Ingram
was entitled to under an Agilent benefit program.
|
(8)
|
|
Represents a 401(k) employer match.
|
(9)
|
|
Represents a $50,000 discretionary
bonus paid to Ms. McCall for the performance of her
function during the year.
|
(10)
|
|
Represents a $10,659 401(k)
employer match and a $600 credit for not enrolling in a medical
plan.
|
39
Grant of
Plan-Based Awards in Fiscal Year 2010
The following table sets forth information regarding grants of
incentive awards during Fiscal Year 2010 to each of our NEOs.
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Estimated Future Payouts
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Under Non-Equity Incentive
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Plan Awards(1)
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Threshold
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Target
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Maximum
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($)(1)
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($)(2)
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($)
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Name (a)
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(c)
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(d)
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(e)
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Hock E. Tan
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127,464
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1,019,715
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2,294,358
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Douglas R. Bettinger
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7,042
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281,683
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633,786
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Boon Chye Ooi
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4,665
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373,161
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839,612
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Bryan T. Ingram
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17,411
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278,575
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626,793
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Patricia H. McCall
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8,278
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132,446
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298,003
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(1) |
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Represents estimated future payouts under our 2010 Annual
Performance Bonus Plan. The threshold amount for Mr. Hock
E. Tan is 12.5% of his target bonus amount, calculated based on
the achievement of a single corporate goal at 50% of the target
for such goal and using the minimum individual performance
factor. The threshold amount for each of Messrs. Bettinger
and Ooi is 2.50% and 1.25% respectively of their target bonus
amount and for Mr. Ingram and Ms. McCall is 6.25% of
their target bonus amounts, in each case, calculated based on
the achievement of a single divisional goal at 50% of the target
for such goal and using the minimum individual performance
factor. The maximum bonus payable is 225% of the target bonus
amount, which assumes maximum (150%) performance for each
corporate and divisional goal and uses the maximum individual
performance factor (150%). |
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(2) |
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Mr. Hock E. Tans target bonus for Fiscal Year 2010
was 150% of his base salary. Messrs. Bettinger, Ingram, and
Oois target bonus participation rate was 75% of their
respective base salaries and Ms. McCalls target bonus
was 40% of her base salary. |
Outstanding
Equity Awards at 2010 Fiscal Year-End
The following table sets forth grants of stock options
outstanding on October 31, 2010, the last day of Fiscal
Year 2010, of each of our NEOs.
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Option Awards
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Equity
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Incentive Plan
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Number of
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Number of
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Awards:
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Securities
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Securities
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Number of
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Underlying
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Underlying
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Securities
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Unexercised
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Unexercised
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Underlying
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Option
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Options
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Options
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Unexercised
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Exercise
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Option
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(#)
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(#)
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Unearned
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Price
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Expiration
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Vesting
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Exercisable
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Un-exercisable
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Options
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($)
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Date
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Name (a)
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Reference Date
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(b)
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(c)
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(d)
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(e)
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(f)
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Hock E. Tan
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2/1/2005
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1,399,102
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755,000
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(1)
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5.00
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4/12/2016
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3/3/2009
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60,000
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240,000
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(2)
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10.00
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3/2/2019
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8/5/2009
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300,000
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(3)
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15.00
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8/4/2019
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Douglas R. Bettinger
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8/4/2008
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90,000
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210,000
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(4)
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10.68
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8/3/2018
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8/5/2009
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50,000
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(3)
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15.00
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8/4/2019
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Boon Chye Ooi
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1/15/2009
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26,837
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140,000
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(5)
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175,000
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(5)
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8.12
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1/14/2019
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Bryan T. Ingram
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12/1/2005
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30,151
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1.25
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1/23/2015
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12/1/2005
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180,832
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77,502
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(6)
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5.00
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11/30/2015
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12/1/2005
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43,750
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18,750
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(7)
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5.00
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4/23/2016
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11/1/2007
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38,748
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125,418
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(8)
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10.22
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10/31/2017
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3/3/2009
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12,000
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48,000
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(2)
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10.00
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3/2/2019
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8/5/2009
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150,000
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(3)
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15.00
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8/4/2019
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Patricia H. McCall
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3/23/2007
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40,000
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16,000
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(5)
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24,000
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(5)
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10.22
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6/4/2017
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2/22/2008
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6,000
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6,000
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(5)
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8,000
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(5)
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10.22
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2/21/2018
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3/3/2009
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10,000
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40,000
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(2)
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10.00
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3/2/2019
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8/5/2009
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50,000
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(3)
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15.00
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8/4/2019
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40
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(1) |
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Options to purchase 185,000 shares will vest on the fifth
anniversaries of the Vesting Reference Date and options to
purchase 285,000 shares will vest on each of the sixth and
seventh anniversaries of the Vesting Reference Date, in each
case, subject to Mr. Tans continued employment with
Avago. |
(2) |
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Options vest at the rate of 20% of the shares subject thereto on
each anniversary of the Vesting Reference Date subject to the
executives continued employment with Avago. |
(3) |
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Options vest at the rate of 50% of the shares subject thereto on
each of the third and fourth anniversaries of the Vesting
Reference Date subject to the executives continued
employment with Avago. |
(4) |
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Options to purchase 30,000 shares vest on the third, sixth
and seventh anniversaries of the Vesting Reference Date and
options to purchase 60,000 shares vest on the fourth and
fifth anniversaries of the Vesting Reference Date subject to
Mr. Bettinger continued employment with Avago. |
(5) |
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Options vest 50% based upon the passage of time and the
optionees continued employment with Avago and 50% based
upon achieving specified financial targets, in each case, at a
rate of 20% per year over five years on each anniversary of the
Vesting Reference Date. As of December 2010, all
performance-based options subject to historic vesting conditions
have vested pursuant to the preceding schedule or been subject
to Catch-Up
Vesting (as a result of our over-achievement of the 2010
financial targets). Performance-based options that do not vest
in the future if performance targets for a particular future
year are not met will vest two years after the date such options
could first have vested had the performance targets for such
options been achieved, subject to any earlier
Catch-Up
Vesting. |
(6) |
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Options to purchase 25,834 shares vest on fifth, sixth and
seventh anniversary of the Vesting Reference Date subject to
Mr. Ingrams continued employment. |
(7) |
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Options to purchase 6,250 shares vest on the fifth, sixth
and seventh anniversaries of the Vesting Reference Date subject
to Mr. Ingrams continued employment. |
(8) |
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Options to purchase 17,916 shares vest on the fourth
anniversary of the Vesting Reference Date; options to purchase
17,917 shares vest on the third, fourth, sixth and seventh
anniversary of the Vesting Reference Date, and options to
purchase 35,834 shares vest on the fifth anniversary of the
Vesting Reference Date, in each case, subject to
Mr. Ingrams continued employment. |
Option
Exercises in Fiscal Year 2010
The following table shows information regarding the exercise of
options to purchase our ordinary shares during the year ended
October 31, 2010. Our NEOs do not hold unvested stock
awards.
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Option Awards
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Number of
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Shares
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Value
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Acquired on
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Realized on
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Exercise
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Exercise
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Name (a)
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(#) (b)
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($) (c)
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Boon Chye Ooi
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8,163
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87,061
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Bryan T. Ingram
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35,000
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502,200
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2010
Non-Qualified Deferred Compensation
The following table sets forth information regarding
contributions and earnings under the Avago Technologies
U.S. Inc. Deferred Compensation Plan during Fiscal Year
2010.
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Registrant
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Aggregate
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Aggregate
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Contributions
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Earnings
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Aggregate
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Balance at
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in Fiscal Year
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in Fiscal
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Withdrawals /
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October 31,
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2010
|
|
Year 2010
|
|
Distribution
|
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2010
|
|
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($)(1)
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($)(2)
|
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($)
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($)
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Name
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(c)
|
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(d)
|
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(e)
|
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(f)
|
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Douglas R. Bettinger
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3,146
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19,117
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Bryan T. Ingram
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2,179
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15,911
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Patricia H. McCall
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5,690
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32,983
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(1) |
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The Avago Technologies U.S. Inc. Deferred Compensation Plan is
an unfunded and unsecured deferred compensation arrangement that
is designed to allow the participants to defer a specified
percentage of their base salary, commissions and/or bonuses in a
manner similar to the way in which the Avago Technologies |
41
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U.S. Inc. 401(k) plan operates, but without regard to the
maximum deferral limitations imposed on 401(k) plans by the
Internal Revenue Code. In addition, we may make discretionary
contributions to participant accounts. As required by applicable
law, participation in the Deferred Compensation Plan is limited
to a group of our employees who have an annual base salary plus
targeted commissions of at least $175,000, which group includes
each of our U.S. based NEOs. |
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Amounts deferred by each participant pursuant to the Deferred
Compensation Plan are credited to a bookkeeping account
maintained on behalf of that participant. Amounts credited to
each participant under the Deferred Compensation Plan are
periodically adjusted for earnings and/or losses at a rate that
is equal to one or more of the measurement funds elected by a
participant. Currently, the measurement funds consist of the
following: Fidelity Retirement Money Market
Trust Retirement Government Money Market Portfolio, PIMCO
Total Return Fund Class Institutional Fund, Mainstay ICAP
Equity Fund-Class I, Goldman Sachs Small Cap Value
Fund Class Institutional , Main Stay Large Cap Growth
Fund Class I, Spartan 500 Index Investor Class,
Fidelity
Contrafund®,
Wells Fargo Advantage Discovery Fund Class Institutional,
Templeton Foreign Fund Class A, Fidelity Freedom
Funds®,
Fidelity Freedom Index Income Fund-Class K, Fidelity
Freedom 2000 Index Fund-Class K, Fidelity Freedom Index
2005 Fund-Class K, Fidelity Freedom Index 2010 Fund-
Class K, Fidelity Freedom Index 2015 Fund-Class K,
Fidelity Freedom Index Fund 2020-Class K, Fidelity
Freedom Index 2025 Fund-Class K, Fidelity Freedom Index
2030 Fund Class K, Fidelity Freedom Index 2035
Fund-Class K, Fidelity Freedom Index 2040
Fund-Class K, Fidelity Freedom Index 2045 Fund-Class K
and Fidelity Freedom Index 2050 Fund-Class K. |
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Distributions are made in accordance with elections filed by
participants at the time of their initial deferrals and
distributions occur in a lump sum upon death or total disability
and in a lump sum or installments upon a participants
separation of service. Distributions are also made in the event
of a change in control of our Company. |
(2) |
|
Amounts reflected are not included in the Fiscal Year 2010
Summary Compensation Table because the earnings and
losses are not above-market. These amounts include
dividends, interest and change in market value. |
Employment,
Severance and Change of Control Agreements with Named Executive
Officers
Hock
E. Tan
We entered into an offer letter with Hock E. Tan on
March 28, 2006 which was amended and restated on
July 17, 2009. Mr. Tans offer letter provides
that Mr. Tan will be our President and Chief Executive
Officer commencing March 31, 2006 and that he will be a
member of our Board. Mr. Tans offer letter entitles
him to an initial base salary of $625,000 per year with a target
bonus opportunity of 120% of his base salary.
Mr. Tans offer letter also provided for the grant of
an option to purchase 950,000 ordinary shares with
225,000 shares subject to the option vesting 20% per year
based upon Mr. Tans continued employment and
725,000 shares subject to the option vesting 20% per year
based upon us attaining specified performance targets. In
accordance with his offer letter, Mr. Tan purchased
$2 million in ordinary shares and was granted additional
non-qualified options to purchase 1,400,000 ordinary shares.
Mr. Tans offer letter agreement provides that he will
be eligible to participate in all employee benefit plans made
available to executive officers, is entitled to enter into an
indemnification agreement and must enter into our standard
agreement regarding confidential information and proprietary
developments. Mr. Tans offer letter agreement
entitled him to the payment of a relocation bonus in the amount
of one months base salary which was paid in a single lump
sum following his commencement of employment.
Mr. Tans offer letter provides Mr. Tan with
severance in the event of the termination of his employment
without cause, because of death or disability or a resignation
by him for good reason, provided that, in each case,
Mr. Tan executes and does not revoke a general release of
all claims against us and our affiliates within 60 days
following his termination of employment. If the termination of
employment without cause, because of death or disability or
resignation for good reason takes place within the three months
prior to or the 12 months following a change in control, we
must provide Mr. Tan with (a) continued salary
payments for 24 months following his termination or
resignation, (b) an amount equal to 200% of the lesser of
Mr. Tans prior years bonus or target bonus, in
both (a) and (b), payable in 24 monthly installments,
and (c) 12 months accelerated vesting for those
options held by Mr. Tan which would otherwise vest based
upon the passage of time and his continued employment. If the
termination of employment without cause or resignation for good
reason takes place more than three months prior to or more than
12 months following a change in control, Mr. Tan is
42
entitled to (a) continued salary payments for
12 months following his termination or resignation and
(b) an amount equal to the lesser of his prior years
bonus or target bonus, in both (a) and (b), payable in
12 monthly installments.
Douglas
R. Bettinger
We entered into an offer letter with Douglas R. Bettinger on
July 4, 2008. Mr. Bettingers offer letter
provides that Mr. Bettinger will be our Senior Vice
President and Chief Financial Officer. Mr. Bettingers
offer letter entitles him to an initial base salary of $350,000
per year and a target bonus opportunity of 75% of his base
salary. Mr. Bettingers offer letter also provided for
the grant of an option to purchase 300,000 of our ordinary
shares with 150,000 of the shares subject to the option vesting
at a rate of 20% per year based upon Mr. Bettingers
continued employment and 150,000 of the shares subject to the
option vesting at a rate of 20% per year based upon us attaining
specified performance targets and Mr. Bettingers
continued employment. Mr. Bettingers offer letter
agreement provides that he will be eligible to participate in
all employee benefit plans made available to executive officers,
is entitled to enter into an indemnification agreement and must
enter into the standard agreement regarding confidential
information and proprietary developments.
Mr. Bettingers offer letter provides him with
severance in the event of the termination of his employment
without cause, because of death or disability or a resignation
by him for good reason, provided that, in each case,
Mr. Bettinger executes and does not revoke a general
release of all claims against us and our affiliates within
60 days of any such termination. If the termination of
employment without cause, because of death or disability or
resignation for good reason takes place within 12 months
following a change in control, we must provide
Mr. Bettinger with (a) 12 months of continued
salary payments commencing on the sixtieth day following his
separation from us, (b) an amount equal to 100% of the
lesser of Mr. Bettingers prior years bonus or
target bonus payable in 12 monthly installments commencing
on the sixtieth day following his separation from us,
(c) 12 months accelerated vesting for those options
held by Mr. Bettinger which would otherwise vest based upon
the passage of time and his continued employment, and
(d) the payment of continued health, dental and vision
insurance premiums for Mr. Bettinger and any covered
dependents for 12 months, or, if earlier, until
Mr. Bettinger is covered under similar plans of a new
employer. If Mr. Bettingers termination of employment
without cause, because of death or disability or a resignation
for good reason takes place prior to or more than 12 months
following a change in control, Mr. Bettinger is entitled to
(a) nine months of continued salary payments commencing on
the sixtieth day following his separation from us, (b) an
amount equal to the lesser of 50% of his prior years bonus
or target bonus payable in nine monthly installments commencing
on the sixtieth day following his separation from us, and
(c) the payment of continued health, dental and vision
insurance premiums for Mr. Bettinger and any covered
dependents for six months, or, if earlier, until
Mr. Bettinger is covered under similar plans of a new
employer.
Boon
Chye Ooi
We entered into an offer letter with Boon Chye Ooi on
December 10, 2008, effective as of January 5, 2009.
Mr. Oois offer letter provides that Mr. Ooi will
be our Senior Vice President of Operations. Mr. Oois
employment agreement entitles him to an initial base salary of
$450,000 per year and a target bonus opportunity of 75% of his
base salary. Mr. Oois employment agreement also
provided for the grant of an option to purchase 350,000 of our
ordinary shares, with 175,000 of the shares subject to the
option vesting at a rate of 20% per year based upon
Mr. Oois continued employment and 175,000 of the
shares subject to the option vesting at a rate of 20% per year
based upon us attaining specified performance targets and
Mr. Oois continued employment. In addition,
Mr. Oois employment agreement provides him with a
one-time relocation payment of $200,000 to assist with his
relocation to Singapore; a temporary housing allowance of $7,000
Singapore dollars (approximately US$4,943, converted from
Singapore Dollars using the Accounting Rate for October 2009 of
1.4161 Singapore Dollars per U.S. Dollar) per month for
12 months; two, one-way business class airfares, once per
calendar year, for home leave; assistance with preparation of
taxation returns and tax-equalization payment.
Mr. Oois employment agreement provides that he will
be eligible to participate in all employee benefit plans made
available to executive officers in Singapore, is entitled to
enter into an
43
indemnification agreement and he must enter into the standard
agreement regarding confidential information and proprietary
developments.
Mr. Oois offer letter provides him with severance in
the event of the termination of his employment without cause,
because of death or disability or a resignation by his for good
reason, provided that, in each case, Mr. Ooi executes and
does not revoke a general release of all claims against us and
our affiliates within 60 days of any such termination. If
the termination of employment without cause, because of death or
disability or resignation for good reason takes place within
12 months following a change in control, we must provide
Mr. Ooi with (a) 12 months of continued salary
payments commencing on the sixtieth day following his separation
from us, (b) an amount equal to 100% of the lesser of
Mr. Oois prior years bonus or target bonus
payable in 12 monthly installments commencing on the
sixtieth day following his separation from us,
(c) 12 months accelerated vesting for those options
held by Mr. Ooi which would otherwise vest based upon the
passage of time and his continued employment, and (d) the
payment of continued health, dental and vision insurance
premiums for Mr. Ooi and any covered dependents for
12 months, or, if earlier, until Mr. Ooi is covered
under similar plans of a new employer. If Mr. Oois
termination of employment without cause or resignation for good
reason takes place prior to or more than 12 months
following a change in control, Mr. Ooi is entitled to
(a) six months of continued salary payments commencing on
the sixtieth day following his separation from us, (b) an
amount equal to the lesser of 50% of his prior years bonus
or target bonus payable in six monthly installments commencing
on the sixtieth day following his separation from us, and
(c) the payment of continued health, dental and vision
insurance premiums for Mr. Ooi and any covered dependents
for six months, or, if earlier, until Mr. Ooi is covered
under similar plans of a new employer.
Bryan
T. Ingram
Avago Technologies U.S. Inc., our wholly owned subsidiary,
entered into an employment agreement with Bryan T. Ingram on
October 30, 2007, effective as of November 1, 2007,
which was amended and restated on July 17, 2009.
Mr. Ingrams employment agreement provides that
Mr. Ingram will be our Senior Vice President and General
Manager, Wireless Semiconductor Division. Mr. Ingrams
employment agreement entitles him to an initial base salary of
$334,608 per year (as adjusted from time to time) with a target
bonus opportunity of 75% of his base salary.
Mr. Ingrams employment agreement provided that he
will be eligible for equity incentive awards and to participate
in all employee benefit plans made available to similarly
situated employees.
Mr. Ingrams employment agreement provides that in the
event of the termination of his employment with us by us without
cause, his death or disability, or a resignation by him for good
reason prior to November 1, 2009, we must provide him with
12 months continued salary payments following such
termination or resignation, and the accelerated vesting of
options to purchase ordinary shares held by Mr. Ingram
which would otherwise have vested had he continued his
employment with us through November 1, 2009. These
severance benefits under Mr. Ingrams employment
agreement expired on November 1, 2009. If
Mr. Ingrams employment is terminated by us without
cause, because of his death or disability, or he resigns for
good reason after November 1, 2009 and within the three
months prior to or 12 months following a change in control,
Mr. Ingram is entitled to (a) 12 months continued
salary payments, (b) an amount equal to the lesser of his
prior years bonus or target bonus for the fiscal year in
which the termination occurs, and (c) 12 months of
accelerated vesting for those options to purchase ordinary
shares held by Mr. Ingram which would otherwise vest based
solely upon the passage of time and his continued employment.
Under the employment agreement, Mr. Ingram must execute,
and not revoke, a general release of all claims against us and
our affiliates within 60 days of his termination of
employment, and any continued salary payments are subject to
Mr. Ingram continuing to abide by the noncompetition and
non-solicitation provisions of his employment agreement.
Patricia
H. McCall
We entered into an offer letter with Patricia H. McCall on
March 20, 2007. Ms. McCalls offer letter
provides that Ms. McCall will be our Vice President and
General Counsel. Ms. McCalls offer letter entitles
her to an initial base salary of $275,000 per year and a target
bonus opportunity of 40% of her base salary.
Ms. McCalls offer letter also provided for the grant
of an option to purchase 80,000 of our ordinary shares,
44
with 40,000 of the shares subject to the option vesting at a
rate of 20% per year based upon Ms. McCalls continued
employment and 40,000 of the shares subject to the option
vesting at a rate of 20% per year based on us attaining
specified performance targets and Ms. McCalls
continued employment. Ms. McCalls offer letter
agreement provides that she will be eligible to participate in
all employee benefit plans made available to executive officers,
is entitled to enter into an indemnification agreement and she
must enter into the standard agreement regarding confidential
information and proprietary developments.
We also entered into a Severance Benefit Agreement with
Ms. McCall effective December 18, 2008.
Ms. McCalls Severance Benefit Agreement provides her
with severance in the event of the termination of her employment
without cause, because of death or disability or a resignation
by her for good reason, provided that, in each case,
Ms. McCall executes and does not revoke a general release
of all claims against us and our affiliates within 60 days
of any such termination. If the termination of employment
without cause, because of death or disability or resignation for
good reason takes place within 12 months following a change
in control, we must provide Ms. McCall with
(a) 12 months of continued salary payments commencing
on the sixtieth day following her separation from us,
(b) an amount equal to 100% of the lesser of
Ms. McCalls prior years bonus or target bonus
payable in 12 monthly installments commencing on the
sixtieth day following her separation from us,
(c) 12 months accelerated vesting for those options
held by Ms. McCall which would otherwise vest based upon
the passage of time and her continued employment, and
(d) the payment of continued health, dental and vision
insurance premiums for Ms. McCall and any covered
dependents for 12 months, or, if earlier, until
Ms. McCall is covered under similar plans of a new
employer. If Ms. McCalls termination of employment
without cause, because of death or disability or a resignation
for good reason takes place prior to or more than 12 months
following a change in control, Ms. McCall is entitled to
(a) nine months of continued salary payments commencing on
the sixtieth day following her separation from us, (b) an
amount equal to the lesser of 50% of her prior years bonus
or target bonus payable in nine monthly installments commencing
on the sixtieth day following her separation from us, and
(c) the payment of continued health, dental and vision
insurance premiums for Ms. McCall and any covered
dependents for six months, or, if earlier, until Ms. McCall
is covered under similar plans of a new employer.
Potential
Severance Payments and Benefits Upon Certain
Terminations
The following table reflects the potential payments and benefits
to which the NEOs would be entitled under their agreements as
described under Termination-Based Compensation above
in the event of a termination of employment without cause,
because of death or disability or a resignation with good reason
taking place not in connection with a change in control. The
amounts presented in the table assume a termination date of
October 31, 2010 and that all eligibility requirements
contemplated by the NEOs respective agreements or our
Companys policies and practices, as applicable, were met.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
Health
|
|
|
|
|
Severance
|
|
Cash
|
|
Benefits
|
|
|
|
|
Base
|
|
Severance
|
|
Continuation
|
|
|
Name
|
|
Salary ($)
|
|
Bonus ($)
|
|
Coverage ($)(1)
|
|
Total ($)
|
|
Hock E. Tan
|
|
|
700,000
|
|
|
|
1,050,000
|
|
|
|
|
|
|
|
1,750,000
|
|
Douglas R. Bettinger
|
|
|
288,750
|
|
|
|
144,375
|
|
|
|
9,788
|
|
|
|
442,913
|
|
Boon Chye Ooi(2)
|
|
|
250,284
|
|
|
|
187,713
|
|
|
|
832
|
|
|
|
438,829
|
|
Bryan T. Ingram
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patricia H. McCall
|
|
|
255,000
|
|
|
|
68,000
|
|
|
|
|
|
|
|
323,000
|
|
|
|
|
(1) |
|
Represents the cost of Company-subsidized continued benefits,
based on our current costs to provide such coverage. |
(2) |
|
All amounts paid to Mr. Ooi upon any termination will be
paid in Singapore Dollars, converted from U.S. Dollars, where
applicable, using the Accounting Rate for the month in which
such termination occurs. |
45
Potential
Severance Payments and Benefits Upon Certain Terminations in
Connection with Change in Control
The following table reflects the potential payments and benefits
to which the NEOs would be entitled under their employment
agreements or our Companys policies and practices as
described under Termination-Based Compensation above
in the event of a termination of employment without cause,
because of death or disability or a resignation for good reason
taking place in connection with a change in control. The amounts
presented in the table assume a termination date of
October 31, 2010 and that all eligibility requirements
contemplated by the NEOs respective agreements and our
Companys policies and practices, as applicable, were met.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
Health
|
|
|
|
|
|
|
Severance
|
|
Cash
|
|
Benefits
|
|
Un-exercisable
|
|
|
|
|
Base Salary
|
|
Severance
|
|
Continuation
|
|
Options that
|
|
|
Name
|
|
($)
|
|
Bonus ($)
|
|
Coverage ($)(1)
|
|
Vest ($)(2)
|
|
Total ($)
|
|
Hock E. Tan
|
|
|
1,400,000
|
|
|
|
2,100,000
|
|
|
|
|
|
|
|
5,402,400
|
|
|
|
8,902,400
|
|
Douglas R. Bettinger
|
|
|
385,000
|
|
|
|
288,750
|
|
|
|
19,577
|
|
|
|
420,000
|
|
|
|
1,113,327
|
|
Boon Chye Ooi(3)
|
|
|
500,568
|
|
|
|
375,426
|
|
|
|
1,665
|
|
|
|
1,738,800
|
|
|
|
2,616,459
|
|
Bryan T. Ingram
|
|
|
385,000
|
|
|
|
288,750
|
|
|
|
|
|
|
|
1,066,652
|
|
|
|
1,740,403
|
|
Patricia H. McCall
|
|
|
340,000
|
|
|
|
136,000
|
|
|
|
|
|
|
|
609,520
|
|
|
|
1,085,520
|
|
|
|
|
(1) |
|
Represents the cost of Company-subsidized continued benefits
based on our current costs to provide such coverage. |
(2) |
|
Represents the difference between the exercise price of each
unvested option that is accelerated and $24.68, the closing
market price per ordinary share, as quoted on the Nasdaq Stock
Market as of October 31, 2010. |
(3) |
|
All amounts paid to Mr. Ooi upon any termination will be
paid in Singapore Dollars, converted from U.S. Dollars, where
applicable, using the Accounting Rate for the month in which
such termination occurs. |
Management
Shareholders Agreement
Each participant in the Executive Plan, including each executive
officer, as well as certain participants in our Senior
Management Plan, entered into a Management Shareholders
Agreement with us and our then controlling shareholder, Bali
Investments S.àr.l., in connection with the
executives purchase of shares pursuant to the Executive
Plan. Each Management Shareholders Agreement provided the
Company with certain rights that effectively restricted the
transfer of ordinary shares until a change of control
transaction or the later of five years from the date of
purchase, or in the case of shares acquired upon the exercise of
options, the date of grant of such options, absent Balis
and our prior written consent. Each executive held a tag-along
right pursuant to the agreement whereby each executive could
require Bali Investments. or its successor to allow the
executive to sell alongside Bali in certain sales, and
piggyback registration rights allowing the executive
to sell alongside Bali Investments in a public offering.
On March 3, 2010, the Company, Bali, the Sponsors and
Mr. Bettinger, our Senior Vice President and Chief
Financial Officer, in his capacity as Trustee of the Bettinger
Family Revocable Trust, dated June 6, 2007, entered into a
Limited Release under Management Shareholders Agreement. Under
this agreement, 7,390 ordinary shares of the Company held by the
Bettinger Family Revocable Trust, dated June 6, 2007, were
released from all provisions of Mr. Bettingers
Management Shareholders Agreement. The Management Shareholders
Agreement, among other matters, restricts the transfer, sale,
assignment, or disposition of ordinary shares of the Company
held by Mr. Bettinger or his permitted transferees.
All Management Shareholder Agreements, including those of our
NEOs, were terminated with effect from September 27, 2010,
pursuant to Management Shareholders Agreement Termination
Agreements, dated as of September 24, 2010, entered into by
the Company, Bali, the Sponsors and each executive officer,
employee or former employee party to a Management Shareholders
Agreement.
46
Hedging
Prohibitions
As noted above, a core element of our compensation philosophy is
to align the interests of executive officers with those of
shareholders by providing appropriate long-term incentives. In
furtherance of this philosophy, our insider trading policy
prohibits our executives from pledging or margining Avago
securities or trading in derivative securities related to our
securities.
Equity
Compensation Plan Information
We have four equity compensation plans that have been approved
by our shareholders: the Executive Plan, the Senior Management
Plan (together, the Prior Plans), the 2009
Plan and the ESPP. Upon the conclusion of our IPO, we ceased to
make grants under the Prior Plans. The ESPP was amended and
restated by our Board in June 2010 and the first purchase period
under the ESPP commenced on September 15, 2010 and will end
on March 14, 2011. As of the date of this proxy statement,
no ordinary shares have yet been purchased or issued pursuant to
our ESPP.
The following table sets forth the number and weighted-average
exercise price of ordinary shares to be issued upon exercise of
outstanding options, warrants and rights, and the number of
securities remaining available for future issuance under all of
our equity compensation plans, at October 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Ordinary
|
|
|
Number of Ordinary
|
|
|
|
Shares Remaining Available
|
|
|
Shares to be Issued upon
|
|
Weighted-Average
|
|
for Future Issuance Under
|
|
|
Exercise of Outstanding
|
|
Exercise Price of
|
|
Equity Compensation Plans
|
|
|
Options, Warrants and
|
|
Outstanding Options,
|
|
(Excluding Securities
|
|
|
Rights
|
|
Warrants and Rights
|
|
Reflected in Column (a))
|
Plan Category
|
|
(a)(1)
|
|
(b)
|
|
(c)
|
|
Equity compensation plans approved by shareholders
|
|
|
23,327,144
|
|
|
$
|
11.50
|
(2)
|
|
|
21,194,312
|
(3)
|
Equity compensation plans not approved by shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
23,327,144
|
|
|
|
|
|
|
|
21,194,312
|
(3)
|
|
|
|
(1) |
|
Represents 23,260,478 shares subject to outstanding options
and 66,666 shares that may be issued upon vesting of
outstanding restricted share units. |
(2) |
|
66,666 shares issuable upon vesting of restricted share
units have been excluded from the calculation of the weighted
average exercise price because they have no exercise price
associated with them. |
(3) |
|
Reflects ordinary shares available for grant under the 2009
Plan, including ordinary shares subject to outstanding awards
under the Prior Plans that are cancelled, forfeited or lapse
unexercised on or after August 6, 2009, the date of our
IPO, which shares become available for future issuance under the
2009 Plan, and 8,000,000 shares available for issuance
under the ESPP. |
47
COMPENSATION
COMMITTEE REPORT
The Compensation Committee is responsible for determining
executive base compensation and incentive compensation and
approving the terms of equity grants pursuant to our equity
incentive plans. The Compensation Committee has the full
authority to determine and approve the compensation of our Chief
Executive Officer in light of relevant corporate performance
goals and objectives.
This report, filed in accordance with Item 407(e)(5) of
Regulation S-K,
should be read in conjunction with the other information
relating to executive compensation which is contained elsewhere
in this Proxy Statement and is not repeated here.
In this context, the Compensation Committee hereby reports as
follows:
|
|
|
|
1.
|
The Compensation Committee has reviewed and discussed with
management the Compensation Discussion and Analysis required by
Item 402(b) of
Regulation S-K.
|
|
|
2.
|
Based upon such review and the related discussions referenced
above, the Compensation Committee recommended to the Board that
the Compensation Discussion and Analysis be included in
Avagos Proxy Statement for the 2011 Annual General Meeting
of Shareholders.
|
Submitted by the Compensation Committee of the Board of
Directors:
James A. Davidson, Chairman of the Compensation Committee
Adam H. Clammer, Compensation Committee Member
Donald Macleod, Compensation Committee Member
January 17, 2011
48
AUDIT
COMMITTEE REPORT
The Audit Committee is responsible for assisting the Board with
its oversight responsibilities regarding the following:
|
|
|
|
|
the quality and integrity of the Companys financial
statements and internal controls;
|
|
|
|
the appointment, compensation, retention, qualifications and
independence of the Companys independent registered public
accounting firm;
|
|
|
|
the performance of the Companys internal audit function
and independent registered public accounting firm;
|
|
|
|
the Companys compliance with legal and regulatory
requirements; and
|
|
|
|
related party transactions.
|
In fulfilling its oversight responsibilities, the Audit
Committee reviewed and discussed the Companys financial
statements for Fiscal Year 2010 with the Companys
management and PricewaterhouseCoopers LLP, the Companys
independent registered public accounting firm. In addition, the
Audit Committee has discussed with PricewaterhouseCoopers LLP,
with and without management present, the Companys internal
control over financial reporting and overall quality of the
Companys financial reporting. The Audit Committee also
discussed with PricewaterhouseCoopers LLP the matters required
to be discussed by Statement on Auditing Standards No. 61,
as amended (AICPA, Professional Standards, Vol. 1, AU
Section 380), as adopted by the Public Company Accounting
Oversight Board in Rule 3200T. The Audit Committee also
received the written disclosures and the letter from
PricewaterhouseCoopers LLP required by the applicable
requirements of the Public Company Accounting Oversight Board
regarding the independent accountants communications with
the Audit Committee concerning independence, and has discussed
the independence of PricewaterhouseCoopers LLP with that firm.
The Audit Committees policy is to pre-approve all audit
and permissible non-audit services provided by the
Companys independent registered public accounting firm.
All audit and non-audit services performed by our independent
registered public accounting firm during Fiscal Year 2010 were
pre-approved by our Audit Committee in accordance with
established procedures.
Based on the Audit Committees review and discussions noted
above, the Audit Committee recommended to the Board that the
audited financial statements be included in the Companys
Annual Report on
Form 10-K
for Fiscal Year 2010, which was filed with the SEC on
December 15, 2010.
The Audit Committee and the Board of Directors also have
recommended, subject to shareholder approval, the selection of
PricewaterhouseCoopers LLP as the Companys independent
registered public accounting firm and independent Singapore
auditor for Fiscal Year 2011.
Submitted by the Audit Committee of the Board of Directors:
Justine F. Lien, Audit Committee Chairperson
James V. Diller, Audit Committee Member
Donald Macleod, Audit Committee Member
January 17, 2011
49
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information about the beneficial
ownership of our ordinary shares at January 25, 2011 for:
|
|
|
|
|
each named executive officer;
|
|
|
|
each of our directors;
|
|
|
|
each person known to us to be the beneficial owner of more than
5% of our ordinary shares; and
|
|
|
|
all of our executive officers and directors as a group.
|
We have determined beneficial ownership in accordance with the
rules of the SEC. Except as indicated by the footnotes below, we
believe, based on the information furnished to us, that the
persons and entities named in the tables below have sole voting
and investment power with respect to all ordinary shares that
they beneficially own, subject to applicable community property
laws.
Ordinary shares subject to options that are currently
exercisable or exercisable within 60 days of
January 25, 2011 are deemed to be outstanding and to be
beneficially owned by the person holding the options for the
purpose of computing the percentage ownership of that person but
are not treated as outstanding for the purpose of computing the
percentage ownership of any other person.
In the table below, percentage ownership is based on 243,277,400
ordinary shares outstanding as of January 25, 2011.
|
|
|
|
|
|
|
|
|
|
|
Shares Beneficially Owned(1)
|
Name and Address of Beneficial Owner
|
|
Number of Shares
|
|
Percent
|
|
|
|
|
|
|
|
|
|
|
5% Shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bali Investments S.àr.l(2)
|
|
|
74,678,861
|
|
|
|
30.7
|
%
|
59 rue de Rollingergrund
|
|
|
|
|
|
|
|
|
L2440 Luxembourg
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds affiliated with KKR(3)
|
|
|
74,678,861
|
|
|
|
30.7
|
%
|
Suite 500, 603 7th Avenue S.W.
|
|
|
|
|
|
|
|
|
Calgary, Canada
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds affiliated with Silver Lake(4)
|
|
|
74,678,861
|
|
|
|
30.7
|
%
|
Ugland House, PO Box 309
|
|
|
|
|
|
|
|
|
South Church Street, George Town
|
|
|
|
|
|
|
|
|
Grand Cayman, Cayman Islands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FMR LLC(5)
|
|
|
[ ]
|
|
|
|
[ ]
|
%
|
82 Devonshire Street
|
|
|
|
|
|
|
|
|
Boston, MA 02109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Seletar Investments Pte Ltd(6)
|
|
|
9,765,554
|
|
|
|
4.0
|
%
|
60B Orchard Road
|
|
|
|
|
|
|
|
|
#06-18, Tower 2
|
|
|
|
|
|
|
|
|
The Atrium @ Orchard
|
|
|
|
|
|
|
|
|
Singapore 238891
|
|
|
|
|
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
Shares Beneficially Owned(1)
|
Name and Address of Beneficial Owner
|
|
Number of Shares
|
|
Percent
|
|
Directors and Named Executive Officers:
|
|
|
|
|
|
|
|
|
Hock E. Tan(7)
|
|
|
1,024,102
|
|
|
|
*
|
|
Douglas R. Bettinger(8)
|
|
|
73,043
|
|
|
|
*
|
|
Boon Chye Ooi(9)
|
|
|
71,837
|
|
|
|
*
|
|
Bryan T. Ingram(10)
|
|
|
247,482
|
|
|
|
*
|
|
Patricia H. McCall(11)
|
|
|
96,000
|
|
|
|
*
|
|
Adam H. Clammer(12)
|
|
|
50,000
|
|
|
|
*
|
|
James A. Davidson(13)
|
|
|
74,728,861
|
|
|
|
30.7
|
%
|
James V. Diller(14)
|
|
|
200,000
|
|
|
|
*
|
|
Kenneth Y. Hao(15)
|
|
|
74,728,861
|
|
|
|
30.7
|
%
|
David Kerko(16)
|
|
|
30,000
|
|
|
|
*
|
|
Justine F. Lien(17)
|
|
|
20,000
|
|
|
|
*
|
|
Donald Macleod
|
|
|
30,000
|
|
|
|
*
|
|
Bock Seng Tan
|
|
|
50,000
|
|
|
|
*
|
|
All 13 directors and executive officers as a group(18)
|
|
|
76,671,325
|
|
|
|
31.3
|
%
|
Other:
|
|
|
|
|
|
|
|
|
Geyser Investment Pte. Ltd.(19)
|
|
|
6,510,368
|
|
|
|
2.7
|
%
|
c/o GIC
168 Robinson Road
#37-01 Capital Tower
Singapore 068912
|
|
|
|
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* |
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Represents beneficial ownership of less than 1%. |
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(1) |
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Shares shown in the table above include shares held in the
beneficial owners name or jointly with others, or in the
name of a bank, nominee or trustee for the beneficial
owners account. |
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(2) |
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Bali Investments S.àr.l. is a Luxembourg corporation, the
shareholders of which include investment entities affiliated
with KKR (such entities, as more specifically defined below, the
KKR Entities) and investment funds affiliated with Silver Lake
(such funds, as more specifically defined below, the Silver Lake
Funds). Messrs. Adam H. Clammer, James A. Davidson, Kenneth
Y. Hao and William J. Janetschek and Dr. Wolfgang Zettel,
in their capacities as directors of Bali, may be deemed to have
shared voting or dispositive power over these shares. Each of
them, however, disclaims this beneficial ownership. |
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(3) |
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Shares shown in the table above consist of
74,678,861 shares beneficially owned by Bali, over which
the KKR Entities and Avago Investment Partners, Limited
Partnership, or AIP, may be deemed, as a result of their
ownership of Balis outstanding shares, to have shared
voting or dispositive power. The KKR Entities disclaim this
beneficial ownership except for the shares that are deemed to be
held indirectly by the KKR Entities in which such funds have a
pecuniary interest, which consist of their 46.4% ownership of
Bali, which is equivalent to an indirect ownership of 34,634,204
ordinary shares of Avago. AIP owns approximately 7.0% of Bali. |
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KKR Millennium Fund (Overseas), Limited Partnership, or
Millennium Fund, as a shareholder of Bali, may be deemed to
indirectly own 7,690,639 ordinary shares of Avago. KKR
Associates Millennium (Overseas), Limited Partnership is the
sole general partner of Millennium Fund. KKR Millennium Limited
is the sole general partner of KKR Associates Millennium
(Overseas), Limited Partnership. KKR Associates Millennium
(Overseas), Limited Partnership and KKR Millennium Limited
disclaim beneficial ownership of the ordinary shares indirectly
owned by Millennium Fund. |
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KKR European Fund, Limited Partnership, or European Fund, as a
shareholder of Bali, may be deemed to indirectly own 15,313,092
ordinary shares of Avago. KKR Associates Europe, Limited
Partnership is the sole general partner of European Fund. KKR
Europe Limited is the sole general partner of KKR Associates
Europe, Limited Partnership. KKR Associates Europe, Limited
Partnership and KKR Europe Limited disclaim beneficial ownership
of the ordinary shares indirectly owned by European Fund. |
51
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KKR European Fund II, Limited Partnership, or European
Fund II, as a shareholder of Bali, may be deemed to
indirectly own 10,270,739 ordinary shares of Avago. KKR
Associates Europe II, Limited Partnership is the sole general
partner of European Fund II. KKR Europe II Limited is
the sole general partner of KKR Associates Europe II, Limited
Partnership. KKR Associates Europe II, Limited Partnership and
KKR Europe II Limited disclaim beneficial ownership of the
ordinary shares indirectly owned by European Fund II. |
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AIP, as a shareholder of Bali, may be deemed to indirectly own
5,243,214 ordinary shares of Avago. Avago Investment G.P.,
Limited is the sole general partner of AIP. KKR Millennium GP
LLC is a member of Avago Investment G.P., Limited. Avago
Investment G.P., Limited and KKR Millennium GP LLC disclaim
beneficial ownership of the ordinary shares indirectly owned by
AIP. |
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Each of KKR Fund Holdings L.P., or KKR Fund Holdings
(as the sole shareholder of KKR Millennium Limited, KKR Europe
Limited and KKR Europe II Limited and the designated member
of KKR Millennium GP LLC); KKR Fund Holdings GP Limited, or
KKR Fund Holdings GP (as a general partner of KKR
Fund Holdings); KKR Group Holdings L.P., or KKR Group
Holdings (as the sole shareholder of KKR Fund Holdings GP
and a general partner of KKR Fund Holdings); KKR Group
Limited, or KKR Group (as the general partner of KKR Group
Holdings); KKR & Co. L.P., or KKR & Co. (as
the sole shareholder of KKR Group); and KKR Management LLC (as
the general partner of KKR & Co.) may also be deemed
to be the beneficial owner of the securities held by Millennium
Fund, European Fund and European Fund II. |
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KKR Partners (International), Limited Partnership, or KKR
Partners, as a shareholder of Bali, may be deemed to indirectly
own 1,359,734 ordinary shares of Avago. KKR 1996 Overseas,
Limited is the sole general partner of KKR Partners, but
disclaims beneficial ownership of the ordinary shares indirectly
owned by KKR Partners. |
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As the designated members of KKR Management LLC,
Messrs. Henry R. Kravis and George R. Roberts may be deemed
to be the beneficial owner of the securities held by Millennium
Fund, European Fund and European Fund II but disclaim
beneficial ownership of such securities. As directors of KKR
1996 Overseas, Limited, Messrs. Henry R. Kravis, George R.
Roberts, James H. Greene, Jr., Paul E. Raether, Michael W.
Michelson, Johannes P. Huth, Todd A. Fisher, Alexander Navab,
Marc S. Lipschultz, Reinhard Gorenflos, Joseph Y. Bae, Brian F.
Carroll, Scott C. Nuttal and William J. Janetschek may be deemed
to be the beneficial owner of the securities held by KKR
Partners but disclaim beneficial ownership of such securities.
The entities named in this note (3) excluding AIP are
sometimes referred to as the KKR Entities. Adam H. Clammer,
James H. Greene Jr. and David Kerko are members of our Board and
are executives of Kohlberg Kravis Roberts & Co. L.P.
and/or one or more of its affiliates. The address of the KKR
Entities (other than Millennium Fund, European Fund, European
Fund II and KKR Partners) and the individuals named in this
footnote (3) is
c/o Kohlberg
Kravis Roberts & Co. L.P., 9 West 57th Street,
New York, NY 10019. The address of AIP is
P.O. Box 309, Ugland House, Grand Cayman KY1-1104,
Cayman Islands. |
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The above referenced shares are indirectly owned through the KKR
Entities and AIPs investments in Bali, which
directly holds shares in Avago. |
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(4) |
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The 74,678,861 shares shown in the table above are directly
held and beneficially owned by Bali. Silver Lake
Partners II Cayman, L.P., or SLP II Cayman, and Silver Lake
Technology Investors II Cayman, L.P., or SLTI II Cayman,
together own approximately 45.6% of Balis outstanding
shares, and AIP (as defined in Footnote (3) above) owns
approximately 7.0% of Balis outstanding shares. For ease
of reference, SLP II Cayman and SLTI II Cayman are collectively
referred to as the Silver Lake Funds in this
footnote. |
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By virtue of their 52.6% stake in Bali, the Silver Lake Funds
and AIP may be deemed to have shared voting or dispositive power
over the 74,678,861 shares held by Bali. The Silver Lake
Funds, however, disclaim this beneficial ownership, except for
the 34,050,491 ordinary shares (or 45.6% of the
74,678,861 shares) that are deemed to be held indirectly by
them and in which they have a pecuniary interest. Of these
34,050,491 shares, 33,953,962 shares are attributable
to SLP II Cayman, and the other 96,529 shares are
attributable to SLTI II Cayman. |
52
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Silver Lake Technology Associates II Cayman, L.P., or SLTA
II Cayman, is the general partner of SLP II Cayman. Silver Lake
(Offshore) AIV GP II, Ltd. is (a) the general partner of
each of SLTA II Cayman and SLTI II Cayman and (b) a member
of Avago Investment G.P., Limited. Silver Lake (Offshore) AIV GP
II, Ltd. disclaims beneficial ownership of the ordinary shares
indirectly owned by the Silver Lake Funds and AIP, except to the
extent of its pecuniary interest therein. |
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Messrs. James A. Davidson, Glenn H. Hutchins, David J.
Roux, Alan K. Austin, Michael J. Bingle, Egon Durban, Greg
Mondre and Kenneth Y. Hao and Ms. Karen King serve as
directors of Silver Lake (Offshore) AIV GP II, Ltd. They
disclaim beneficial ownership of the ordinary shares indirectly
owned by the Silver Lake Funds and AIP, except to the extent of
their pecuniary interests therein. |
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(5) |
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Based solely on information reported by FMR LLC on the
Schedule 13G/A filed with the SEC on
February [ ], 2011 and reporting ownership as of
February [ ], 2011. FMR LLC has sole voting
power over
[ ] shares
and sole dispositive power over
[ ] shares. |
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(6) |
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Seletar Investments Pte Ltd is directly wholly-owned by Temasek
Capital (Private) Limited (Temasek Capital), which
is wholly-owned by Temasek Holdings (Private) Limited
(Temasek). Seletar, Temasek Capital and Temasek are
Singapore companies. No individual has beneficial ownership over
the 9,765,554 ordinary shares. Voting and investment decisions
relating to these securities are made by the board of directors
of Seletar, which is currently comprised of Mr. Syn Yi Ming
and Ms. Michelle Git. The Seletar board of directors acts
by majority vote and no board member may act individually to
vote or sell these ordinary shares. |
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(7) |
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Shares shown in the table above include 924,102 shares that
Mr. Hock E. Tan has the right to acquire within
60 days after January 25, 2011 upon the exercise of
share options. |
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(8) |
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Shares shown in the table above consist of 67,500 shares
that Mr. Bettinger has the right to acquire within
60 days after January 25, 2011 upon the exercise of
share options. Shares shown in the table above include
7,565 shares held by Douglas R. Bettinger as Trustee for
the Bettinger Family Revocable Trust, dated June 6, 2007. |
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(9) |
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Shares shown in the table above consist of 71,837 shares
that Mr. Ooi has the right to acquire within 60 days
after January 25, 2011 upon the exercise of share options. |
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(10) |
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Shares shown in the table above consist of 247,482 shares
that Mr. Ingram has the right to acquire within
60 days after January 25, 2011 upon the exercise of
share options. |
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(11) |
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Shares shown in the table above consist of 96,000 shares
that Ms. McCall has the right to acquire within
60 days after January 25, 2011 upon the exercise of
share options. |
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(12) |
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Mr. Clammer is an executive of Kohlberg Kravis
Roberts & Co. L.P. and/or one or more of its
affiliates. |
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(13) |
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As disclosed in footnote (4) above, Mr. Davidson is a
director of Silver Lake (Offshore) AIV GP II, Ltd. Amounts
disclosed for Mr. Davidson include shares beneficially
owned by Bali, over which the Silver Lake Funds and AIP may be
deemed, as a result of their ownership of 52.6% of Balis
outstanding shares, to have shared voting or dispositive power.
Mr. Davidson disclaims beneficial ownership of any shares
owned directly or indirectly by the Silver Lake Funds and AIP.
See footnotes (2) and (4) above. Mr. Davidson
also serves as a member of our Board. The shares listed next to
Mr. Davidsons name in the table above include
50,000 shares that he has the right to acquire within
60 days after January 25, 2011 upon the exercise of
share options. |
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(14) |
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Shares shown in the table above include 50,000 shares that
Mr. Diller has the right to acquire within 60 days
after January 25, 2011 upon the exercise of share options.
Shares shown in the table above include 75,000 shares held
by Mr. Diller as Trustee for the James V. Diller Annuity
Trust2010B dated May 10, 2010 and 75,000 shares
held by Mr. Diller as Trustee for the June P. Diller
Annuity Trust2010B dated May 10, 2010 |
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(15) |
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As disclosed in footnote (4) above, Mr. Hao is a
director of Silver Lake (Offshore) AIV GP II, Ltd. Amounts
disclosed for Mr. Hao include shares beneficially owned by
Bali, over which the Silver Lake Funds and AIP may be deemed, as
a result of their ownership of 52.6% of Balis outstanding
shares, to have shared voting or dispositive power. Mr. Hao
disclaims beneficial ownership of any shares owned directly or
indirectly by the Silver Lake Funds and AIP. See footnotes
(2) and (4) above. Mr. Hao also |
53
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serves as a member of our Board. The shares listed next to
Mr. Haos name in the table above include
50,000 shares that he has the right to acquire within
60 days after January 25, 2011 upon the exercise of
share options. |
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(16) |
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Mr. Kerko is an executive of Kohlberg Kravis
Roberts & Co. L.P. and/or one or more of its
affiliates. Shares shown in the table above consist of
30,000 shares that Mr. Kerko has the right to acquire
within 60 days after January 25, 2011 upon the
exercise of share options. |
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(17) |
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Shares shown in the table above consist of 20,000 shares
that Ms. Lien has the right to acquire within 60 days
after January 25, 2011 upon the exercise of share options. |
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(18) |
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Shares shown in the table above include 1,606,921 shares
that directors and executive officers have the right to acquire
within 60 days after January 25, 2011 upon the
exercise of share options. |
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(19) |
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Geyser Investment Pte. Ltd. shares the power to vote and power
to dispose of these securities with each of GIC Special
Investments Pte. Ltd. and the Government of Singapore Investment
Corporation Pte. Ltd., each of which is a Singapore private
limited company. No individual has beneficial ownership over
these securities. Voting and investment decisions relating to
these securities are made by the GIC Special Investments Pte.
Ltd. investment committee, which is currently comprised of eight
members: Teh Kok Peng, Ng Kin Sze, Ang Eng Seng, Kunna Chinniah,
Tay Lim Hock, Eugene Wong, John Tang and Mayukh Mitter. The
investment committee acts by majority vote and no member may act
individually to vote or sell these securities. Beneficial
ownership is disclaimed by the investment committee and its
members. |
54
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Other than compensation and other arrangements described above
under Director Compensation, Executive
Compensation and as set forth below, since
November 1, 2009, there was not, nor is there currently
planned, any transaction or series of similar transactions to
which we were or will be a party:
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in which the amount involved exceeded or will exceed
$120,000; and
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in which any director, nominee, executive officer, holder of
more than 5% of our ordinary shares or any member of their
immediate family had or will have a direct or indirect material
interest.
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We refer to these types of transactions as related party
transactions.
Second
Amended and Restated Shareholder Agreement
The Equity Investors, invested approximately $1,300 million
in our business as part of the SPG Acquisition. In connection
with the closing of the SPG Acquisition, we entered into a
shareholder agreement with the Equity Investors, other than
members of management. In connection with our IPO, we and the
Equity Investors amended and restated the shareholder agreement
to delete or curtail provisions that became inoperative or
unnecessary upon us becoming a public company. Set forth below
is a description of the Second Amended and Restated Shareholder
Agreement, referred to in this Proxy Statement as the
Shareholder Agreement.
Board Composition. The Shareholder Agreement provides
that, subject to election by our shareholders at each annual
general meeting, certain of our shareholders have the right to
designate director nominees to our Board as follows:
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three designees of KKR for so long as KKR and its affiliates
either continue to own, directly or indirectly, at least 24% of
our outstanding ordinary shares or have not transferred any
shares to an unaffiliated third-party, provided that KKR has the
right to designate two directors for so long as KKR and its
affiliates continue to own, directly or indirectly, at least 15%
of our outstanding ordinary shares and one director for so long
as KKR and its affiliates continue to own, directly or
indirectly, at least 5% of our outstanding ordinary shares;
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three designees of Silver Lake for so long as Silver Lake and
its affiliates either continue to own, directly or indirectly,
at least 24% of our outstanding ordinary shares or have not
transferred any shares to an unaffiliated third-party, provided
that Silver Lake has the right to designate two directors for so
long as Silver Lake and its affiliates continue to own, directly
or indirectly, at least 15% of our outstanding ordinary shares
and one director for so long as Silver Lake and its affiliates
continue to own, directly or indirectly, at least 5% of our
outstanding ordinary shares;
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one designee of Seletar, an affiliate of Temasek Capital
(Private) Limited, so long as it either continues to own,
directly or indirectly, 2.5% of our outstanding shares and has
not sold any of its shares, or continues to own, directly or
indirectly, 5% of our outstanding shares;
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our Chief Executive Officer; and
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three other directors mutually agreeable to KKR and Silver Lake,
to which we refer collectively in this Proxy Statement as the
Sponsors.
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The number of other directors mutually agreeable to the Sponsors
may be increased from time to time with the Sponsors prior
approval, however the Sponsors may revoke such approval at any
time and immediately remove the excess director from the Board.
Each of KKR, Silver Lake and Seletar has the right to remove and
replace its director-designees at any time and for any reason
and to fill any vacancies otherwise resulting in such director
positions. If the number of directors that an Equity Investor is
entitled to designate is reduced, any vacant seats on our Board
will be filled by the Board acting in accordance with its
nomination and governance procedures.
55
One designee of Geyser, so long as Geyser either continues to
own, directly or indirectly, 2.5% of our outstanding shares and
has not sold any of its shares, or continues to own, directly or
indirectly, 5% of our outstanding shares, has the right to
attend all meetings of the Board, and such designee will be
provided with copies of all materials provided to the Board
members.
Each of KKR and Silver Lake has the right to designate one
member to each committee of the Board, so long as such Sponsor
has the right to designate one or more director nominees to the
Board and subject to compliance with applicable federal
securities laws and the requirements of the U.S. exchange
on which our ordinary shares are traded.
The rights with respect to Board composition described here will
terminate upon a change of control transaction.
Sponsor Approval. The Shareholder Agreement provides that
the following actions by us or any of our subsidiaries require
approval of the Sponsors for so long as the Sponsors own 50% or
more of our outstanding ordinary shares:
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changing the size or composition of our Board;
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entering into a change of control transaction;
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acquiring or disposing of assets or entering into joint ventures
with a value in excess of $300 million;
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incurring indebtedness in excess of $300 million;
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filing for voluntary liquidation, dissolution, receivership,
bankruptcy or similar insolvency proceeding;
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entering into certain transactions with the Sponsors or any of
their affiliates;
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making material changes in the nature of the our business or our
subsidiaries business; and
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amending, waiving or otherwise modifying certain shareholder
agreements.
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The Sponsors previously consented to the Boards
appointment of Mr. Diller, Ms. Lien and
Mr. Macleod to the Board.
Co-Investor Protections. The Shareholder Agreement
provides that, other than actions specifically set forth
therein, we will not take any action in respect of any class of
our shares that has a materially disproportionate effect on
specified Equity Investors other than the Sponsors (the
Co-Investors), as compared to the Sponsors,
in their capacity as shareholders of such class of shares,
without first obtaining the prior written consent of the
Co-Investors holding a majority of such class of shares then
held by the Co-Investors.
Transfer Restrictions. Within two years after our
IPO, neither KKR nor Silver Lake may transfer its shares without
the approval of the other Sponsor, subject to certain permitted
transfers. No Co-Investor may transfer its shares without the
approval of the Sponsors, except (i) to permitted
transferees, (ii) in a transfer in connection with a sale
pursuant to the Registration Rights Agreement described under
Registration Rights Agreement, or
(iii) if either Sponsor has reduced the number of shares it
holds relative to the number of shares initially held by it,
each Co-Investor may sell up to the number of shares as would
cause such Co-Investor to reduce the number of shares it holds
in the same proportion as that of such Sponsor. These transfer
restrictions will terminate upon a change of control transaction
unless terminated earlier by the Sponsors.
Tag Along Right. Prior to making any transfer of
shares (other than certain customary permitted transfers,
transfers in connection with sales pursuant to the Registration
Rights Agreement, transfers pursuant to Rule 144 and
certain distributions and charitable contributions), any
prospective selling Sponsor must provide written notice to each
Co-Investor setting forth the terms of such proposed transfer.
Each Co-Investor may elect to sell up to its pro rata portion of
the shares (based upon the ownership of such shares by the
transferring Sponsor and all persons entitled to participate in
such transfer) to be sold in such transfer. This tag along right
will terminate upon a change of control transaction unless
terminated earlier by the Sponsors.
56
Drag Along Right. If the Sponsors approve a change
of control transaction, each Co-Investor will be required to
vote in favor of and not oppose such transaction and, if
structured as a sale of shares, sell its shares to a prospective
buyer on the same terms that are applicable to the Sponsors.
This drag along right will terminate upon a change of control
transaction unless terminated earlier by the Sponsors.
Information Rights. We have agreed to provide to the
Equity Investors, so long as the applicable Equity Investor owns
at least 2.5% of our outstanding ordinary shares, monthly
financial information. We have agreed to provide to each
shareholder party to the Shareholder Agreement the necessary
information for the preparation of such shareholders
income tax returns. So long as the applicable Equity Investor
owns at least 5% of our outstanding ordinary shares, we have
granted such Equity Investor rights to inspect our facilities,
records, files and other information, and to meet with our
management and outside accountants. Each shareholder party to
the Shareholder Agreement agrees to keep confidential the
confidential information obtained from us. The information
rights will expire upon a change in control transaction.
Termination. The Shareholder Agreement may be
amended or terminated, and the provisions thereof waived, by an
agreement in writing signed by us and the Equity Investors
holding not less than 70% of our outstanding ordinary shares
held by all Equity Investors. If any amendment would adversely
affect the rights of a particular Equity Investor or adversely
impose additional material obligations on a particular Equity
Investor, then the consent of such particular Equity Investor is
required for the amendment.
Indemnification;
Costs and Fees
We provide customary indemnification to the Equity Investors for
liabilities arising from their ownership of our ordinary shares
and from the SPG Acquisition. We will pay all reasonable fees
and expenses incurred by the Equity Investors from and after the
closing of the SPG Acquisition in connection with the Equity
Investors enforcement of their rights under the
Shareholder Agreement, Registration Rights Agreement and our
Articles of Association.
We have entered into indemnity agreements with all our directors
and executive officers and intend to continue doing so in the
future. The indemnity agreement provides, among other things,
that we will indemnify such officer or director, under the
circumstances and to the extent provided for therein, for
expenses, damages, judgments, fines and settlements he or she
may be required to pay in actions or proceedings which he or she
is or may be made a party by reason of his or her position as a
director, officer or other agent of the Company, subject to and
to the fullest extent permitted under the Singapore Companies
Act, as amended, and our Articles of Association.
Registration
Rights Agreement
We are party to a registration rights agreement (the
Registration Rights Agreement), which
provides the Sponsors the right to demand that we file a
registration statement and the Sponsors and the Co-Investors the
right to request that their shares be covered by a registration
statement that we are otherwise filing, subject to certain
limitations. During the first two years after our IPO, upon the
request of both Sponsors, we may be required to initiate an
unlimited number of registrations under the Securities Act in
order to register the resale of their ordinary shares with an
anticipated aggregate offering price of at least
$50 million in the case of a long-form
registration and $20 million in the case of a
short-form registration. After the second
anniversary of our IPO, each Sponsor may require us to initiate
three long-form registrations, provided that each
has an aggregate offering price of at least $50 million,
and an unlimited number of short-form registrations,
provided that each has an aggregate offering price of at least
$20 million, under the Securities Act in order to register
the resale of their ordinary shares. The minimum offering
amounts may be reduced with the approval of the Sponsors. In the
event that we propose to register any of our securities under
the Securities Act, either for our own account or for the
account of other security holders, the Sponsors and Co-Investors
are entitled to notice of such registration and are entitled to
certain piggyback registration rights allowing them
to include their ordinary shares in such registration, subject
to certain marketing and other limitations. We may, in certain
circumstances, defer such registrations. In addition, in an
underwritten offering, including an underwritten initial public
offering, the managing underwriter, if any, has the right,
subject to
57
specified conditions, to limit the number of registrable
securities such holders may include. Any such limitations on the
number of registrable securities that may be included by such
holders must be on a pro rata basis. The Registration Rights
Agreement also contains customary cross-indemnification
provisions.
Participants in our Executive Plan were party to a Management
Shareholders Agreement that provided them piggyback
registration rights alongside with the Sponsors and
Co-Investors. The Management Shareholders Agreements have all
been terminated. For more information, see Executive
CompensationManagement Shareholders Agreement.
Reimbursement
Agreement
In connection with the registered public offering and sale by
certain shareholders of the Company of an aggregate of
25,000,000 of the Companys ordinary shares in January 2010
(the January 2010 Offering), Bali,
Seletar and Geyser agreed to reimburse us for two-thirds of the
expenses of the offering, pursuant to which they reimbursed us
for $627,000, $84,000 and $56,000 respectively.
Management
Shareholders Agreements
All executive officers and certain key employees were party to a
Management Shareholders Agreement with us and Bali Please see
Executive CompensationManagement Shareholders
Agreement elsewhere in this Proxy Statement.
In connection with the January Offering, we, Bali and the
Sponsors entered into a Termination and Agreement with
Mr. Chang, the then Chairman of our Board, pursuant to
which Bali agreed to reduce its pro rata allocation of the
shares to be sold in the offering shall to allow Mr. Chang
to sell up to 629,166 Shares in the offering and to
terminate his Management Shareholders Agreement with effect from
the date of the closing of the offering (which occurred on
February 2, 1010).
In addition, the Management Shareholders Agreement of
Mr. Bettinger, our Senior Vice President and Chief
Financial Officer, was amended on March 3, 2010, and all
remaining Management Shareholders Agreements (including those of
the NEOs) were terminated with effect from September 27,
2010. Please see Executive CompensationManagement
Shareholders Agreement elsewhere in this Proxy Statement.
Procedures
for Approval of Related Party Transactions
As provided by our Audit Committee Charter, the Audit Committee
must review all related party transactions on an ongoing basis
and all such transactions must be approved by the Audit
Committee. In approving or rejecting the proposed agreement, our
Audit Committee considers the relevant facts and circumstances
available and deemed relevant to the Audit Committee, including,
but not limited to the risks, costs and benefits to us, the
terms of the transaction, the availability of other sources for
comparable services or products, and, if applicable, the impact
on a directors independence. Our written Code of Ethics
and Business Conduct requires that directors, officers and
employees make appropriate disclosure of potential conflicts of
interest situations to the Nominating and Corporate Governance
Committee or the Audit Committee, in the case of directors and
officers, and the supervisor, who will then seek authorization
from our compliance officer, in the case of employees.
Other
Relationships
Capstone Equity Investors LLC (Capstone), an
affiliate of KKR Capstone, a consulting company that works
exclusively with KKR and its portfolio companies,
was granted an option to purchase 800,000 ordinary
shares with an exercise price of $5.00 per share on
February 3, 2006. One half of these options vested over
four years, and the other half vested only upon the achievement
of certain company financial performance metrics. 700,000 of
these option shares vested by the end of the first quarter of
fiscal year 2010. The performance targets related to the
remaining 100,000 option shares were not met and those 100,000
options shares did not vest. In connection with the January 2010
Offering and the registered public offerings and sales by
certain shareholders of the Company of an aggregate of
14,9050,000 of the Companys ordinary shares in
58
August 2010 (the August Offering), an
aggregate of 25,000,000 of the Companys ordinary shares in
December 2010 (the December Offering) and an
aggregate of 25,000,000 of the Companys ordinary shares in
January 2011 (the January 2011 Offering),
Capstone partially exercised this option in each of the January
2010 Offering, the August Offering, the December Offering and
the January 2011 Offering with respect to an aggregate of
314,212 ordinary shares and sold those shares in the offerings.
We received aggregate option exercise proceeds of approximately
$1.6 million from Capstone as a result of these option
exercises.
Mr. James A. Davidson, a director, also serves as a
director of Flextronics. In the ordinary course of business, we
continue to sell to Flextronics, which during Fiscal Year 2010
accounted for $115 million of revenue from continuing
operations. Trade accounts receivable due from Flextronics as of
October 31, 2010 were $13 million.
Mr. John R. Joyce, a director of the Company until
March 26, 2010, also serves as a director of
Hewlett-Packard Company. In the ordinary course of business, we
continue to sell to Hewlett-Packard Company, which in Fiscal
Year 2010 accounted for $12 million of net revenue from
continuing operations. We also use Hewlett-Packard Company as a
service provider for information technology services. For Fiscal
Year 2010, operating expenses include $6 million for
services provided by Hewlett-Packard Company.
Mr. James V. Diller, a director and the Chairman of our
Board, is also a director of PMC-Sierra, Inc. In the ordinary
course of business, we sell products to PMC-Sierra, Inc.
Other portfolio companies of the Sponsors have from time to time
entered into, and may continue to enter into, arrangements with
us to purchase our products or to sell products to us in the
ordinary course of their and our business, and on an arms
length basis. Such transactions have in the past resulted, and
may in the future result, in revenues to, or amounts payable by,
the Company in excess of $120,000 annually, but are not material
to us or such other company.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, our directors,
executive officers and any persons holding more than ten percent
of our ordinary shares (Reporting Persons),
are required to report, to the SEC and to the Nasdaq Stock
Market, their initial ownership of our ordinary shares and other
equity securities and any subsequent changes in that ownership,
and to furnish us with copies of all these reports they file. As
a matter of practice, an administrative staff member assists our
executive officers and directors in preparing initial ownership
reports and reporting ownership changes, and typically files
these reports on their behalf.
Based solely on our review of the copies of such reports
received by us or written representations from certain Reporting
Persons that no Forms 3, 4 or 5 were required, we believe
that during Fiscal Year 2009, all Reporting Persons complied
with all applicable filing requirements, other than Bock Seng
Tan, for whom a Form 4 in respect of an option exercise was
inadvertently filed 2 days late.
HOUSEHOLDING
OF PROXY MATERIALS
Some banks, brokers and other nominee record holders may be
participating in the practice of householding proxy
statements and annual reports. This means that only one copy of
our proxy materials and our 2010
Form 10-K
may have been sent to multiple shareholders in your household,
unless we have received contrary instructions from one or more
shareholders in your household. We will promptly deliver a
separate copy of either document to you if you request one by
writing or calling as follows:
c/o Avago
Technologies U.S. Inc., 350 W. Trimble Road,
Building 90, San Jose, California 95131, U.S.A., Telephone:
(408) 435-7400.
If you want to receive separate copies of our proxy materials or
annual reports in the future, or if you are receiving multiple
copies and would like to receive only one copy for your
household, you should contact your bank, broker or other nominee
record holder, or you may contact us at the above address and
phone number.
59
SHAREHOLDER
PROPOSALS FOR THE 2012 ANNUAL GENERAL MEETING
Pursuant to
Rule 14a-8
under the Exchange Act, some shareholder proposals may be
eligible for inclusion in our 2012 proxy statement. Any such
shareholder proposals must be submitted, along with proof of
ownership of our ordinary shares in accordance with
Rule 14a-8(b)(2),
to Avago Technologies U.S. Inc., located at
350 W. Trimble Road, Building 90, San Jose, CA
95131, U.S.A., Attention: General Counsel. We must receive all
submissions no later than
[ ],
2011. We strongly encourage any shareholder interested in
submitting a proposal to contact our General Counsel in advance
of this deadline to discuss the proposal, and shareholders may
want to consult knowledgeable counsel with regard to the
detailed requirements of applicable securities laws. Submitting
a shareholder proposal does not guarantee that we will include
it in our proxy statement. Our Board will review any shareholder
proposals. These shareholder proposals may be included in our
proxy statement for the 2012 AGM so long as they are provided to
us on a timely basis and satisfy the other conditions set forth
in applicable rules and regulations promulgated by the SEC.
Shareholder proposals are also subject to the requirements of
the Singapore Companies Act, as described in the following
paragraph. The proxies designated by us will have discretionary
authority to vote on any matter properly presented by a
shareholder for consideration at the 2012 AGM unless notice of
such proposal is received by the applicable deadlines prescribed
by the Singapore Companies Act.
In addition, under Section 183 of the Singapore Companies
Act, registered shareholders representing not less than 5% of
the total voting rights or registered shareholders representing
not fewer than 100 registered shareholders having an average
paid up sum of at least $500 each may, at their expense, request
that we include and give notice of their proposal for the 2012
AGM. Subject to satisfaction of the requirements of
Section 183 of the Singapore Companies Act, any such
requisition must be signed by all the shareholders making the
request and be deposited at our registered office in Singapore,
1 Yishun Avenue 7, Singapore 768923, at least six weeks prior to
the date of the 2012 AGM in the case of a request requiring
notice of a resolution, or at least one week prior to the date
of the 2012 AGM in the case of any other request.
Under our Articles of Association, no person other than a
director retiring at a general meeting is eligible for
appointment as a director at any general meeting of
shareholders, without the recommendation of the Board for
election, unless (a) in the case of a member or members who
in aggregate hold(s) more than 50% of the total number of our
issued and
paid-up
shares (excluding treasury shares), not less than ten days, or
(b) in the case of a member or members who in aggregate
hold(s) more than five percent of the total number of our issued
and paid-up
shares (excluding treasury shares), not less than 120 days,
before the date of the notice provided to members in connection
with the general meeting, a written notice signed by such member
or members (other than the person to be proposed for
appointment) who (i) are qualified to attend and vote at
the meeting for which such notice is given, and (ii) have
held shares representing the prescribed threshold in (a) or
(b) above, for a continuous period of at least one year
prior to the date on which such notice is given, is lodged at
our registered office in Singapore. Such a notice must also
include the consent to serve as a director of the person
nominated.
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
We incorporate by reference the following sections of our Annual
Report on
Form 10-K
for Fiscal Year 2010:
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Item 7, Managements Discussion and Analysis of
Financial Condition and Results of Operations;
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Item 7A, Quantitative and Qualitative Disclosures
About Market Risk; and
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Item 8, Financial Statements and Supplementary
Data.
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The information contained under the captions Compensation
Committee Report and Audit Committee Report
shall not be deemed to be soliciting material or to
be filed with the U.S. Securities and Exchange
Commission, nor shall such information be incorporated by
reference into any filings under the U.S. Securities Act of
1933, as amended, or under the Exchange Act, or be subject to
the liabilities of Section 18 of the
60
Exchange Act, except to the extent that we specifically
incorporate this information by reference into any such filing.
OTHER
MATTERS
Our management does not know of any matters to be presented at
the 2011 AGM other than those set forth herein and in the notice
accompanying this Proxy Statement. If any other matters are
properly presented for a vote, the enclosed proxy confers
discretionary authority to the individuals named as proxies to
vote the shares represented by proxy, as to those matters.
It is important that your shares be represented at the meeting,
regardless of the number of shares which you hold. We urge you
to promptly execute and return the accompanying proxy card in
the envelope which has been enclosed for your convenience.
Shareholders who are present at the meeting may revoke their
proxies and vote in person or, if they prefer, may abstain from
voting in person and allow their proxies to be voted.
Accompanying this Proxy Statement is our 2010
Form 10-K.
Copies of our 2010
Form 10-K,
as filed with the SEC, are available free of charge on our
website at www.avagotech.com or you can request a copy free of
charge by calling Investor Relations at
(408) 435-7400.
Upon request, we will furnish without charge to each person
to whom this Proxy Statement is delivered a copy of any exhibit
listed in our 2010
Form 10-K.
You may request a copy of this information, at no cost, by
writing or telephoning us at:
Avago
Technologies Limited
Attn: Investor Relations
c/o Avago
Technologies U.S. Inc.
350 West Trimble Road, Building 90
San Jose, California 95131 U.S.A.
Telephone: + 1
(855) 462-8246
(within the United States) or +1
(408) 435-7400
Email: investor.relations@avagotech.com
To ensure timely delivery of any materials requested prior to
the date of the 2011 AGM, you should request such materials no
later than March 18, 2010.
By Order of the Board,
Hock E. Tan
Director, Chief Executive Officer and President
February [ ], 2011
San Jose, California
61
AVAGO
TECHNOLOGIES LIMITED
For the
financial year ended October 31, 2010
The directors present their report to the members together with
the audited consolidated financial statements of Avago
Technologies Limited and its subsidiaries (we, or
the Group) for the financial year ended
October 31, 2010 and the unconsolidated balance sheet of
the Avago Technologies Limited (the Company, or
Avago Ltd) as at October 31, 2010.
Directors
The directors of the Company in office at the date of this
report are as follows:
Adam H. Clammer
David M. Kerko
Donald Macleod
James A. Davidson
James V. Diller
Justine F. Lien
Kenneth Y. Hao
Tan Bock Seng
Tan Hock E.
Arrangements
to enable directors to acquire shares and debentures
Neither at the end of nor at any time during the financial year
was the Company a party to any arrangement whose object was to
enable the directors of the Company to acquire benefits by means
of the acquisition of shares in, or debentures of, the Company
or any other body corporate, other than as disclosed under
Share options.
Directors
interests in shares or debentures
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(a) |
According to the register of directors shareholdings, none
of the directors holding office at the end of the financial year
had any interest in the shares or debentures of the Company or
its related corporations, except as follows:
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Holdings registered in name
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of director
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As of
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As of
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October 31,
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November 1,
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2010
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2009
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(No. of ordinary shares)
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Avago Technologies Limited
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James V. Diller
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150,000
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Tan Hock E.
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100,000
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100,000
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Tan Bock Seng
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30,000
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30,000
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S-1
AVAGO
TECHNOLOGIES LIMITED
DIRECTORS
REPORT(Continued)
For the
financial year ended October 31, 2010
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Holdings in which director is
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deemed to have an interest
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As of
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As of
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October 31,
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November 1,
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2010
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2009
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(No. of ordinary shares)
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Avago Technologies Limited
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James A. Davidson(1)(2)
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115,687,178
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150,274,441
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Kenneth Y. Hao(1)(2)
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115,687,178
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150,274,441
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James V. Diller(3)
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150,000
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Tan Bock Seng(4)
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10,000
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(Share options outstanding)
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Tan Hock E.(5)
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2,754,102
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2,754,102
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Adam H. Clammer(6)
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50,000
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50,000
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Tan Bock Seng(7)
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10,000
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20,000
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James V. Diller(8)
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50,000
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50,000
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James A. Davidson(9)
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50,000
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50,000
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Kenneth Y. Hao(10)
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50,000
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50,000
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Donald Macleod(11)
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50,000
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50,000
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David M. Kerko(12)
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50,000
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50,000
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Justine F. Lien(13)
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50,000
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50,000
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(1)
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Represents shares owned by Bali Investments S.àr.l.
(Bali). Bali is a Luxembourg
corporation, the shareholders of which include investment
entities affiliated with Kohlberg Kravis Roberts & Co.
L.P. (such funds collectively, the KKR
Funds) and investment funds affiliated with Silver
Lake Partners (such funds collectively, the Silver
Lake Funds). The KKR Funds and Silver Lake Funds
may be deemed, as a result of their ownership of 46.4% and
45.6%, respectively, of Balis outstanding shares as of
October 31, 2010, to have shared voting or dispositive
power over all of these shares. The KKR Funds and Silver Lake
Funds disclaim this beneficial ownership except for the total
number of ordinary shares of Avago Technologies Limited that are
deemed held indirectly (a) by the KKR funds through Bali,
which was 53,652,846 shares, and (b) by the Silver
Lake funds through Bali, which was 52,748,597 shares.
Messrs. Adam Clammer, James A. Davidson and Kenneth Y. Hao,
in their capacities as directors of Bali, may be deemed to have
shared voting or dispositive power over all of these shares.
Each of them, however, disclaims this beneficial ownership.
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(2)
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Mr. Davidson and Mr. Hao are directors of Silver Lake
(Offshore) AIV GP II, Ltd, the ultimate general partner of the
Silver Lake Funds. Share amounts disclosed for Mr. Davidson
and Mr. Hao are ordinary shares of the Company that may be
deemed, as disclosed in footnote (1), to be beneficially owned
by the Silver Lake Funds through their ownership of Bali.
Mr. Davidson and Mr. Hao disclaim beneficial ownership
of any shares owned directly or indirectly by the Silver Lake
Funds, except to the extent of their pecuniary interest therein.
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(3)
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Shares held in family trusts of which Mr. Diller and his
wife are beneficiaries.
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(4)
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Shares held in electronic form in the name of Cede &
Co. as nominee for The Depository Trust Company.
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(5)
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Mr. Tan has the right to acquire 1,644,102 of these shares
within 60 days after October 31, 2010 upon the
exercise of share options. Mr. Tan exercised options to
acquire an aggregate of 407,752 shares and immediately sold
the resulting shares at various prices on various dates between
December 7, 2010 and December 30, 2010 pursuant to a
share trading plan adopted pursuant to
Rule 10b5-1
of the U.S. Securities and Exchange Act of 1934, as amended.
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S-2
AVAGO
TECHNOLOGIES LIMITED
DIRECTORS
REPORT(Continued)
For the
financial year ended October 31, 2010
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(6)
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Mr. Clammer is an executive of Kohlberg Kravis
Roberts & Co. L.P. and/or one or more of its
affiliates. Mr. Clammer has the right to acquire 50,000 of
these shares within 60 days after October 31, 2010
upon the exercise of share options. Mr. Clammer exercised
options to acquire 50,000 shares on December 17, 2010.
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(7)
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Mr. Tan has the right to acquire 10,000 of these shares
within 60 days after October 31, 2010 upon the
exercise of options. Mr. Tan exercised options to acquire
10,000 shares on December 3, 2010.
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(8)
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Mr. Diller has the right to acquire 50,000 of these shares
within 60 days after October 31, 2010 upon the
exercise of options.
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(9)
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Mr. Davidson has the right to acquire 50,000 of these
shares within 60 days after October 31, 2010 upon the
exercise of options.
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(10)
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Mr. Hao has the right to acquire 50,000 of these shares
within 60 days after October 31, 2010 upon the
exercise of options.
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(11)
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Mr. Macleod has the right to acquire 30,000 of these shares
within 60 days after October 31, 2010 upon the
exercise of options. Mr. Macleod exercised options to
acquire 30,000 shares on December 7, 2010.
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(12)
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Mr. Kerko is an executive of Kohlberg Kravis
Roberts & Co. L.P. and/or one or more of its
affiliates. Mr. Kerko has the right to acquire 20,000 of
these shares within 60 days after October 31, 2010
upon the exercise of options.
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(13)
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Ms. Lien has the right to acquire 20,000 of these shares
within 60 days after October 31, 2010 upon the
exercise of options.
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(b) |
According to the register of directors shareholdings,
certain directors holding office at the end of the financial
year had interests in options to subscribe for ordinary shares
of the Company (as set forth under Share options
outstanding in (a) above) granted pursuant to the
Equity Incentive Plans as set out below under the caption
Share options.
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The following table shows for the financial year ended
October 31, 2010, certain information regarding options
granted to, and held at year-end by the Companys
directors. No options were granted to, or exercised by the
directors during the financial year ended October 31, 2010,
other than the exercise by Mr. Tan Bock Seng of options to
acquire 10,000 ordinary shares at an exercise price of U.S.$5.00
per share on February 11, 2010. As disclosed in footnotes
(a)(5),
(a)(6),
(a)(7)
and
(a)(11)
above, certain directors exercised options after the end of the
financial year.
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Individual grant
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% of total
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options
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Number of securities
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granted to
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underlying options
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employees as
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Exercise or
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Expiration
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Name
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granted
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at year end
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base price
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date
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U.S.$
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Tan Hock E.
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2,154,102
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9.23
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5.00
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04/12/2016
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300,000
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1.29
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10.00
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02/03/2019
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300,000
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1.29
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15.00
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04/08/2019
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James A. Davidson
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50,000
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0.21
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5.00
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04/13/2011
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Kenneth Y. Hao
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50,000
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0.21
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5.00
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04/13/2011
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Tan Bock Seng(1)
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10,000
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0.04
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5.00
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04/13/2011
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James V. Diller
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50,000
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0.21
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5.00
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04/13/2011
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Adam H. Clammer
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50,000
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0.21
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5.00
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04/13/2011
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Donald Macleod
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50,000
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0.21
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10.22
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02/21/2013
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David M. Kerko
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50,000
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0.21
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10.68
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07/30/2013
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Justine F. Lien
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50,000
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0.21
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10.68
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07/30/2013
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(1) |
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Mr. Tan was granted an option to purchase
50,000 shares, but exercised the option with respect to an
aggregate of 40,000 shares as at October 31, 2010. |
S-3
AVAGO
TECHNOLOGIES LIMITED
DIRECTORS
REPORT(Continued)
For the
financial year ended October 31, 2010
Directors
contractual benefits
Since the end of the previous financial year, no director has
received or become entitled to receive a benefit by reason of a
contract made by the Company or a related corporation with the
director or with a firm of which he is a member or with a
company in which he has a substantial financial interest, except
as disclosed in the Note 16 of the accompanying financial
statements and in this report, and except that Mr. Tan Hock
E. has an employment relationship with the Group, and has
received remuneration in that capacity.
Share
options
Summary
of Equity Plans
The Company previously adopted, the Equity Incentive Plan for
Executive Employees of Avago Technologies Limited and
Subsidiaries (the Executive Plan) and
the Equity Incentive Plan for Senior Management Employees of
Avago Technologies Limited and Subsidiaries (the
Senior Management Plan) and together
with the Executive Plan, (the Prior Equity Incentive
Plans), which together authorized the grant of
options and share purchase rights covering up to 30 million
ordinary shares of the Company.
Under the Prior Equity Incentive Plans, awards generally expire
ten years following the date of grant unless granted to a
non-employee, in which case the awards generally expire five
years following the date of grant and were granted at a price
equal to the fair market value at the time of the grant. Since
the initial public offering of the Companys ordinary
shares on August 6, 2009 (the
IPO) in the United States, the Company
has ceased making further grants under the Prior Equity
Incentive Plans.
In July 2009, the Companys Board of Directors adopted, and
the Companys shareholders approved, the Avago Technologies
Limited 2009 Equity Incentive Award Plan (the 2009
Plan and together with the Prior Equity Incentive
Plans, the Equity Incentive Plans), to
authorize the grant of options, share appreciation rights,
restricted share units, dividend equivalents, performance
awards, and other share-based awards. 20 million ordinary
shares are initially reserved for issuance under the 2009 Plan,
subject to annual increases starting in calendar year 2012. The
2009 Plan became effective upon closing of the IPO in August
2009. Under the 2009 Plan, options may have a term of no more
than ten years following the date of grant in the case of
employees, and no more than five years following the date of
grant in the case of non-employees. Any shares subject to
options granted under the Prior Equity Incentive Plan that are
cancelled, forfeited or lapse unexercised become available for
issuance under the 2009 Plan.
In July 2009, the Companys board of directors adopted, and
the Companys shareholders approved the Avago Technologies
Employee Share Purchase Plan (this plan, as amended, the
ESPP) to allow eligible employees of
the Company and its participating subsidiaries to purchase
ordinary shares at semi-annual intervals, with their accumulated
payroll deductions, at a discounted price, based on a six-month
look-back period. 8 million ordinary shares are initially
reserved for issuance under the ESPP, subject to annual
increases starting in calendar year 2012. The ESPP became
effective on June 2, 2010 and the first purchase period
under the ESPP commenced on September 15, 2010 and will end
on March 14, 2010. No ordinary shares have yet been
purchased or issued pursuant to the ESPP.
Executive
Plan
Amended
and Restated Equity Incentive Plan for Executive Employees of
Avago Technologies Limited and Subsidiaries
The Companys Board of Directors initially adopted and the
Companys shareholders initially approved the Executive
Plan on November 23, 2005. The Executive Plan, was amended
and restated by the Companys Board of Directors on
April 14, 2006 and January 25, 2007 and was approved
by the Companys shareholders
S-4
AVAGO
TECHNOLOGIES LIMITED
DIRECTORS
REPORT(Continued)
For the
financial year ended October 31, 2010
on April 11, 2007. The Executive Plan was also amended and
restated by the Board of Directors on February 25, 2008.
Types of Awards. The Executive Plan provided for the
grant of non-qualified options and share purchase rights to
employees, consultants and other persons having a unique
relationship with the Company or its subsidiaries.
Share Reserve. The Company had reserved an aggregate
of 30 million ordinary shares for issuance under the
Executive Plan and the Senior Management Plan. However,
following the IPO no additional awards may be made under these
plans.
Administration. The Compensation Committee of the
Board of Directors of the Company (the Compensation
Committee) administers the Executive Plan. The
Compensation Committee had the authority to select the employees
to whom options and/or share purchase rights were granted under
the Executive Plan, the number of shares subject to those
options or share purchase rights, and the terms and conditions
of the options and share purchase rights. In addition, the
Compensation Committee has the authority to construe and
interpret the Executive Plan and to adopt rules for the
administration, interpretation and application of the Executive
Plan that are consistent with the terms of the Executive Plan.
Shareholder Agreements. The options and shares
acquired upon exercise of options and share purchase rights
granted pursuant to the Executive Plan were subject to the terms
and conditions of management shareholder agreements entered into
by the option and share purchase right holders, which agreements
were terminated during the financial year ended October 31,
2010. Please see Share Options Management
Shareholders Agreement below for additional information.
Amendment and Termination. The Executive Plan may be
amended or modified by the Compensation Committee, and may be
terminated by the Companys Board of Directors.
Exercise. The exercise price of options and share
purchase rights granted under the Executive Plan may be paid for
in cash, or, with the consent of the Compensation Committee,
with the ordinary shares of the Company, including ordinary
shares acquired contemporaneously upon exercise.
Certain Events. Under the Executive Plan, the
Compensation Committee may, in its sole discretion, provide that
options granted under the plan cannot be exercised after the
consummation of the merger or consolidation of the Company into
another corporation, the exchange of all or substantially all of
the assets of the Company for the securities of another
corporation, the acquisition by another corporation of 80% or
more of the Companys then outstanding voting shares or the
recapitalization, reclassification, liquidation or dissolution
of the Company, or other adjustment or event which results in
the Companys ordinary shares being exchanged for or
converted into cash, securities or other property, in which case
the Compensation Committee may further provide that the options
will become fully vested and exercisable prior to the completion
of the change of control. The Compensation Committee may also
provide that options remaining exercisable after such an event
may only be exercised for the consideration received by
shareholders in such event, or its cash equivalent. The Company
shall in its discretion appropriately and equitably adjust the
exercise price of an option in the event of a spin off or other
substantial distribution of the Companys assets.
Management
Shareholders Agreement
Each participant in the Executive Plan, including each executive
officer, was required to enter into a Management Shareholders
Agreement with the Company and its controlling shareholder, Bali
Investments S.àr.l., in connection with the
executives purchase of shares pursuant to the Executive
Plan. In addition, in connection with the IPO, any person
holding options granted under the Senior Management Plan to
acquire 40,000 or more ordinary shares of the Company also
entered into a Management Shareholders Agreement at
S-5
AVAGO
TECHNOLOGIES LIMITED
DIRECTORS
REPORT(Continued)
For the
financial year ended October 31, 2010
the time of the IPO. Each Management Shareholders Agreement
provides the company with certain rights that effectively
restrict the transfer of the Companys ordinary shares
until a change of control transaction or five years from the
date of purchase, or in the case of options, the date of grant.
The restrictive rights provided to the Company pursuant to each
Management Shareholders Agreement included a bring along right
whereby Bali Investments S.àr.l. could require participants
to sell shares along side Bali Investments. Each executive also
held a tag-along right whereby each executive may require Bali
Investments S.àr.l. to allow the executive to sell along
side Bali Investments in certain sales, and
piggyback registration rights allowing the executive
to sell along side Bali Investments in a public offering.
All remaining Management Shareholder Agreements were terminated
with effect from September 27, 2010, pursuant to Management
Shareholders Agreement Termination Agreements, dated as of
September 24, 2010, entered into by the Company, Bali
Investments S.àr.l., the Sponsors and each executive
officer, employee or former employee party to a Management
Shareholders Agreement.
Senior
Management Plan
Amended
and Restated Equity Incentive Plan for Senior Management
Employees of Avago Technologies Limited and
Subsidiaries
The Companys Board of Directors initially adopted and the
Companys shareholders initially approved the Senior
Management Plan on November 23, 2005. The Senior Management
Plan was adopted and restated by the Companys Board of
Directors on April 14, 2006 and approved by the
Companys shareholders on April 11, 2007. The Senior
Management Plan was also amended and restated by the
Companys Board of Directors on February 25, 2008 and
amended in July 2009.
Types of Awards. The Senior Management Plan provides
for the grant of non-qualified options and share purchase rights
to employees, consultants, other persons having a unique
relationship with the Company or its subsidiaries and
non-employee members of the Companys Board of Directors.
Options and share purchase rights granted to non-employee
members of the Companys Board of Directors were approved
by the Companys shareholders on April 14, 2007.
Share Reserve. The Company had reserved an aggregate
of 30 million ordinary shares for issuance under the Senior
Management Plan and the Executive Plan. However, following the
IPO no additional awards may be made under these plans.
Administration. The Compensation Committee
administers the Senior Management Plan. The Compensation
Committee had the authority to select the employees to whom
options and/or share purchase rights will be granted under the
Senior Management Plan, the number of shares to be subject to
those options or share purchase rights, and the terms and
conditions of the options and share purchase rights. In
addition, the Compensation Committee has the authority to
construe and interpret the Senior Management Plan and to adopt
rules for the administration, interpretation and application of
the Senior Management Plan that are consistent with the terms of
the Senior Management Plan.
Restrictive Rights. The options and shares acquired
upon exercise of options and share purchase rights granted
pursuant to the Senior Management Plan are subject to a call
right, right of first refusal and bring along right in favor of
the Company and its controlling shareholders and a put right in
favor of the option holder or shareholder upon such
individuals death or permanent disability. The Senior
Management Plan provides that, with limited exceptions, the
option or share purchase right holder may not transfer, sell or
otherwise dispose of any ordinary shares of the Company prior to
the fifth anniversary of the date of grant. These provisions
were removed with respect to employees of the Company and its
subsidiaries by the July 2009 amendment of the Senior Management
Plan.
S-6
AVAGO
TECHNOLOGIES LIMITED
DIRECTORS
REPORT(Continued)
For the
financial year ended October 31, 2010
Amendment and Termination. The Senior Management
Plan may be amended or modified by the Compensation Committee,
and may be terminated by the Companys Board of Directors.
Exercise. The exercise price of options and share
purchase rights granted under the Senior Management Plan may be
paid for in cash, or, with the consent of the Compensation
Committee, with the ordinary shares of the Company, including
ordinary shares acquired contemporaneously upon exercise.
Certain Events. Under the Senior Management Plan,
the Compensation Committee may, in its sole discretion, provide
that options granted under the plan cannot be exercised after
the consummation of the merger or consolidation of the Company
into another corporation, the exchange of all or substantially
all of the assets of the Company for the securities of another
corporation, the acquisition by another corporation of 80 or
more of the Companys then outstanding voting shares or the
recapitalization, reclassification, liquidation or dissolution
of the Company, or other adjustment or event which results in
the Companys ordinary shares being exchanged for or
converted into cash, securities or other property, in which case
the Compensation Committee may further provide that the options
will become fully vested and exercisable prior to the completion
of the change of control. The Compensation Committee may also
provide that options remaining exercisable after such an event
may only be exercised for the consideration received by
shareholders in such event, or its cash equivalent. The Company
shall in its discretion appropriately and equitably adjust the
exercise price of an option in the event of a spin off or other
substantial distribution of the Companys assets.
2009
Plan
Avago
Technologies Limited 2009 Equity Incentive Award
Plan
The Companys Board of Directors adopted the 2009 Plan on
July 27, 2009, and the Companys shareholders approved
the 2009 Plan on July 31, 2009.
Share Reserve. Under the 2009 Plan,
20 million ordinary shares will be initially reserved for
issuance pursuant to a variety of share-based compensation
awards, including options, share appreciation rights, or SARs,
restricted share awards, restricted share unit awards, deferred
share awards, dividend equivalent awards, performance share
awards, performance share unit awards, share payment awards,
performance-based awards and other share-based awards plus the
number of ordinary shares subject to options outstanding under
the Executive Plan the Senior Management Plan, as of the
effective date of the 2009 Plan that are forfeited in the future
under such plans. The number of shares initially reserved for
issuance or transfer pursuant to awards under the 2009 Plan will
be increased by an annual increase on the first day of each
calendar year beginning in 2012 and ending in 2019, equal to the
least of (i) 6 million shares, (ii) 3% of the
ordinary shares outstanding (on an as converted basis) on the
last day of the immediately preceding fiscal year and
(iii) such smaller number of ordinary shares as determined
by the board; provided, however, no more than 90 million
ordinary shares may be issued upon the exercise of incentive
stock options.
The following counting provisions will be in effect for the
share reserve under the 2009 Plan:
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to the extent that an award terminates, expires or lapses for
any reason, any shares subject to the award at such time will be
available for future grants under the 2009 Plan;
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to the extent shares are tendered or withheld to satisfy the
grant, exercise price or tax withholding obligation with respect
to any award under the 2009 Plan, such tendered or withheld
shares will be available for future grants under the 2009 Plan;
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to the extent any restricted shares are forfeited by the holder,
such shares will be available for future grants under the 2009
Plan;
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the payment of dividend equivalents in cash in conjunction with
any outstanding awards will not be counted against the shares
available for issuance under the 2009 Plan; and
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S-7
AVAGO
TECHNOLOGIES LIMITED
DIRECTORS
REPORT(Continued)
For the
financial year ended October 31, 2010
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to the extent permitted by applicable law or any exchange rule,
shares issued in assumption of, or in substitution for, any
outstanding awards of any entity acquired in any form of
combination by the Company or any of its subsidiaries will not
be counted against the shares available for issuance under the
2009 Plan.
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Initially, there will be no limit on the number of shares that
may be covered by share-based awards or the maximum aggregate
dollar amount subject to cash-based performance awards granted
to any individual during any calendar year. However, after a
limited transition period, no individual may be granted
share-based awards under the 2009 Plan covering more than
2 million shares or more than $3 million in cash in
any calendar year. The limited transition period will expire on
the earliest of:
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the first material modification of the 2009 Plan;
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the issuance of all of the ordinary shares reserved for issuance
under the 2009 Plan;
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the expiration of the 2009 Plan;
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the first meeting of the Companys shareholders at which
members of the Companys Board of Directors are to be
elected that occurs after the close of the third calendar year
following the calendar year in which the IPO occurred; or
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such earlier date as may be required by Section 162(m) of
the U.S. Internal Revenue Code of 1986 (the
Code).
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Administration. The Compensation Committee
administers the 2009 Plan. Subject to the terms and conditions
of the 2009 Plan, the Compensation Committee has the exclusive
authority to select the persons to whom awards are to be made,
to determine the number of shares to be subject to awards and
the terms and conditions of awards, and to make all other
determinations and to take all other actions necessary or
advisable for the administration of the 2009 Plan. The
Compensation Committee is also authorized to adopt, amend or
rescind rules relating to administration of the 2009 Plan. The
Companys Board of Directors may at any time remove the
Compensation Committee as the administrator and re-vest in
itself the authority to administer the 2009 Plan. The full Board
of Directors administers the 2009 Plan with respect to awards to
non-employee directors.
Eligibility. Options, share appreciation rights
(SARs), restricted shares and all
other share-based and cash-based awards under the 2009 Plan may
be granted to individuals who are then the Companys
officers, employees or consultants or are the officers,
employees or consultants of certain of the Companys
subsidiaries. Such awards also may be granted to directors of
the Company. Only employees may be granted incentive stock
options (ISOs).
Awards. The 2009 Plan provides that the
administrator may grant or issue options, SARs, restricted
shares, restricted share units, deferred shares, dividend
equivalents, performance awards, share payments and other
share-based and cash-based awards, or any combination thereof.
Each award will be set forth in a separate agreement with the
person receiving the award and will indicate the type, terms and
conditions of the award.
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Nonqualified Options (NQOs), will
provide for the right to purchase ordinary shares at a specified
price which may not be less than fair market value on the date
of grant, and usually will become exercisable (at the discretion
of the administrator) in one or more installments after the
grant date, subject to the participants continued
employment or service with us and/or subject to the satisfaction
of corporate performance targets and individual performance
targets established by the administrator. NQOs may be granted
for any term specified by the administrator, but may not exceed
ten years.
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S-8
AVAGO
TECHNOLOGIES LIMITED
DIRECTORS
REPORT(Continued)
For the
financial year ended October 31, 2010
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Incentive Stock Options will be designed in a manner
intended to comply with the provisions of Section 422 of
the Code and will be subject to specified restrictions contained
in the Code. Among such restrictions, ISOs must have an exercise
price of not less than the fair market value of an ordinary
share on the date of grant, may only be granted to employees,
and must not be exercisable after a period of ten years measured
from the date of grant. To the extent ISOs having an aggregate
exercise price in an amount greater than $100,000 become
exercisable by an individual in any calendar year, the options
in excess of $100,000 will be treated as NQOs. In the case of an
ISO granted to an individual who owns (or is deemed to own) at
least 10% of the total combined voting power of all classes of
the Companys shares, the 2009 Plan provides that the
exercise price must be at least 110% of the fair market value of
an ordinary share on the date of grant and the ISO must not be
exercisable after a period of five years measured from the date
of grant.
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Restricted Shares may be granted to any eligible
individual and made subject to such restrictions as may be
determined by the administrator. Restricted shares, typically,
may be forfeited for no consideration if the conditions or
restrictions on vesting are not met. In general, restricted
shares may not be sold, or otherwise transferred, until
restrictions are removed or expire. Purchasers of restricted
shares, unlike recipients of options, generally will have voting
rights and will have the right to receive dividends, if any,
prior to the time when the restrictions lapse.
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Restricted Share Units may be awarded to any eligible
individual, typically without payment of consideration, but
subject to vesting conditions based on continued employment or
service or on performance criteria established by the
administrator. Like restricted shares, restricted share units
may not be sold, or otherwise transferred or hypothecated, until
vesting conditions are removed or expire. Unlike restricted
shares, shares underlying restricted share units will not be
issued until the restricted share units have vested, and
recipients of restricted share units generally will have no
voting or dividend rights prior to the time when vesting
conditions are satisfied.
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Deferred Share Awards represent the right to receive
ordinary shares on a future date. Deferred shares may not be
sold or otherwise hypothecated or transferred until issued.
Deferred shares will not be issued until the deferred share
award has vested, and recipients of deferred shares generally
will have no voting or dividend rights prior to the time when
the vesting conditions are satisfied and the shares are issued.
Deferred share awards generally will be forfeited, and the
underlying shares will not be issued, if the applicable vesting
conditions and other restrictions are not met.
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Share Appreciation Rights may be granted in connection
with options or other awards, or separately. SARs granted in
connection with options or other awards typically will provide
for payments to the holder based upon increases in the price of
ordinary shares over a set exercise price. The exercise price of
any SAR granted under the 2009 Plan must be at least 100% of the
fair market value of an ordinary share on the date of grant.
Except as required by Section 162(m) of the Code with
respect to a SAR intended to qualify as performance-based
compensation as described in Section 162(m) of the Code, there
are no restrictions specified in the 2009 Plan on the exercise
of SARs or the amount of gain realizable therefrom, although
restrictions may be imposed by the administrator in the SAR
agreements. SARs under the 2009 Plan will be settled in cash or
ordinary shares, or in a combination of both, at the election of
the administrator.
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Dividend Equivalents represent the value of the
dividends, if any, per share paid by us, calculated with
reference to the number of shares covered by the options, SARs
or other awards held by the participant. Dividend equivalents
may be settled in cash or shares and at such times as determined
by the Compensation Committee or Board of Directors, as
applicable.
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S-9
AVAGO
TECHNOLOGIES LIMITED
DIRECTORS
REPORT(Continued)
For the
financial year ended October 31, 2010
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Performance Awards may be granted by the administrator on
an individual or group basis. Generally, these awards will be
based upon specific performance targets and may be paid in cash
or in ordinary shares or in a combination of both. Performance
awards may include phantom share awards that provide
for payments based upon the value of ordinary shares.
Performance awards may also include bonuses that may be granted
by the administrator on an individual or group basis and which
may be payable in cash or in ordinary shares or in a combination
of both.
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Share Payments may be authorized by the administrator in
the form of ordinary shares or an option or other right to
purchase ordinary shares as part of a deferred compensation
arrangement in lieu of all or any part of compensation,
including bonuses, that would otherwise be payable in cash to
the employee, consultant or non-employee director.
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Change in Control. In the event of a change in
control where the acquirer does not assume or replace awards
granted under the 2009 Plan, awards issued under the 2009 Plan
will be subject to accelerated vesting such that 100% of such
award will become vested and exercisable or payable, as
applicable. In addition, the administrator will also have
complete discretion to structure one or more awards under the
2009 Plan to provide that such awards will become vested and
exercisable or payable on an accelerated basis in the event such
awards are assumed or replaced with equivalent awards but the
individuals service with us or the acquiring entity is
subsequently terminated within a designated period following the
change in control event. The administrator may also make
appropriate adjustments to awards under the 2009 Plan and is
authorized to provide for the acceleration, cash-out,
termination, assumption, substitution or conversion of such
awards in the event of a change in control or certain other
unusual or nonrecurring events or transactions. Under the 2009
Plan, a change in control is generally defined as:
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the transfer or exchange in a single or series of related
transactions by the Companys shareholders of more than 50%
of the Companys voting shares to a person or group;
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a change in the composition of the Companys Board of
Directors over a two-year period such that fifty percent or more
of the members of the board were elected through one or more
contested elections;
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a merger, consolidation, reorganization or business combination
in which the Company is involved, directly or indirectly, other
than a merger, consolidation, reorganization or business
combination which results in the Companys outstanding
voting securities immediately before the transaction continuing
to represent a majority of the voting power of the acquiring
companys outstanding voting securities and after which no
person or group beneficially owns 50% or more of the outstanding
voting securities of the surviving entity immediately after the
transaction;
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the sale, exchange, or transfer of all or substantially all of
the Companys assets; or
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shareholder approval of the Companys liquidation or
dissolution.
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Non-Employee Director Awards. The 2009 Plan permits
the Companys Board of Directors to grant awards to the
Companys non-employee directors pursuant to a written
non-discretionary formula established by the plan administrator.
Adjustments of Awards. In the event of any share
dividend, share split, combination or exchange of shares,
merger, consolidation, spin-off, recapitalization, distribution
of the Companys assets to shareholders (other than normal
cash dividends) or any other corporate event affecting the
number of the Companys outstanding ordinary shares or the
price of the Companys ordinary shares that would require
adjustments to the 2009 Plan
S-10
AVAGO
TECHNOLOGIES LIMITED
DIRECTORS
REPORT(Continued)
For the
financial year ended October 31, 2010
or any awards under the 2009 Plan in order to prevent the
dilution or enlargement of the potential benefits intended to be
made available thereunder, the committee will make appropriate,
proportionate adjustments to:
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the aggregate number and type of shares subject to the 2009 Plan
and any other plan terms denominated in shares;
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the terms and conditions of outstanding awards (including,
without limitation, any applicable performance targets or
criteria with respect to such awards); and
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the grant or exercise price per share of any outstanding awards
under the 2009 Plan.
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Amendment and Termination. The Companys Board
of Directors or the Compensation Committee (with Board approval)
may terminate, amend, or modify the 2009 Plan at any time and
from time to time. However, the Company must generally obtain
shareholder approval:
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to increase the number of shares available under the 2009 Plan
(other than in connection with certain corporate events, as
described above);
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to the extent required by applicable law, rule or regulation
(including any applicable stock exchange rule).
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Options may be amended to reduce the per share exercise price
below the per share exercise price of such option on the grant
date without shareholder approval.
Expiration Date. The 2009 Plan will expire on, and
no option or other award may be granted pursuant to the 2009
Plan after ten years following the effective date of the 2009
Plan. Any award that is outstanding on the expiration date of
the 2009 Plan will remain in force according to the terms of the
2009 Plan and the applicable award agreement.
ESPP
Avago
Technologies Limited Employee Share Purchase Plan
The Companys Board of Directors initially adopted the ESPP
on July 27, 2009, and the Companys shareholders
approved, the ESPP on July 31, 2009. The ESPP was amended
and restated by the Compensation Committee on June 2, 2010.
Share Reserve. 8 million ordinary shares are
initially reserved for issuance under the ESPP. The number of
ordinary shares reserved under the ESPP will automatically
increase on the first day of each fiscal year, beginning in
2012, by an amount equal to the least of: (i) 1% of the
outstanding ordinary shares outstanding on such date,
(ii) 2 million ordinary shares or (iii) a lesser
amount determined by the Companys Board of Directors. The
maximum aggregate number of ordinary shares which may be issued
over the term of the ESPP is 24 million shares. In
addition, no participant in the ESPP may be issued or
transferred more than $25,000 of ordinary shares pursuant to
awards under the ESPP per offering period and /or per calendar
year.
Offering Periods. The ESPP is administered using a
series of successive offering periods. Unless otherwise
determined by the Compensation Committee, each offering period
will have a duration of six months. The initial offering period
under the ESPP commenced on September 15, 2010 and will end
on March 14, 2010.
Eligible Employees. The Companys employees,
and any employees of the Companys subsidiaries that the
Compensation Committee designates as participating in the ESPP,
who are scheduled to work more than 20 hours per week for more
than five calendar months per year who are employed as such five
trading days prior to the start of an offering period may join
an offering period on the start date of that period.
S-11
AVAGO
TECHNOLOGIES LIMITED
DIRECTORS
REPORT(Continued)
For the
financial year ended October 31, 2010
Payroll Deductions. A participant may contribute
from 1% to 10% of his or her eligible compensation through
payroll deductions, and the accumulated deductions will be
applied to the purchase of shares on each semi-annual purchase
date. The purchase price per share will be equal to 85% of the
fair market value per share of the Companys ordinary
shares the first trading date of an offering period in which a
participant is enrolled or, if lower, 85% of the fair market
value per share on the semi-annual purchase date. Semi-annual
purchase dates will occur on the last trading day of each
offering period. However, not more than 2,500 shares may be
purchased in total by any participant during any offering
period. The Compensation Committee has the authority to change
these limitations for any subsequent offering period.
Change in Control. Should the Company be acquired by
merger or sale of substantially all of its assets or more than
50% of its voting securities, then all outstanding purchase
rights may either be assumed by the acquirer or, if not assumed,
will be exercised at an early purchase date prior to the
effective date of the acquisition. The purchase price in effect
for each participant will be equal to 85% of the fair market
value per share of the Companys ordinary shares on the
first trading date of the offering period in which the
participant is enrolled at the time the acquisition occurs or,
if lower, 85% of the fair market value per share on the purchase
date prior to the acquisition.
Other Plan Provisions. Employees may not transfer
shares for six months after the date of purchase, unless they
cease to be an eligible employee, in which case the shares may
be sold at any time thereafter.
Amendment and Termination. The Companys Board
of Directors or the Compensation Committee may at any time
amend, suspend or discontinue the ESPP. However, certain
amendments may require shareholder approval.
Expiration Date. The ESPP will terminate no later
than ten years after the date the Companys Board of
Directors initially approved it.
General
Under the Executive Plan, options generally vest at a rate of
20% per year based on the passage of time and attaining certain
performance criteria, in each case subject to continued
employment. Those options subject to vesting based on the
passage of time may accelerate by one year upon certain
terminations of employment. On July 20, 2009, the
Compensation Committee of the Companys Board of Directors
approved a change in the vesting schedules associated with
performance-based options to purchase 2.3 million ordinary
shares issued and outstanding under the Executive Plan. The
Compensation Committee approved the amendment of
performance-based options held by certain of the Companys
executive officers (including options to acquire
570,000 shares held by Mr. Tan Hock E.) to provide
that such options will no longer vest based on the attainment of
performance targets but instead each portion of such options
shall vest two years following the first date such portion could
have vested had the performance goals for such portion been
achieved, subject to the officers continued service with
the Company through such vesting date. The performance-based
options held by employees other than the executive officers
referred to in the preceding sentence were amended to provide
that any portion of such options that fail to vest based upon
the attainment of a performance goal shall vest on the date two
years following the first date such portion could have vested
had such performance goal been attained, subject to the
employees continued service with us through such vesting
date.
The Compensation Committee made these changes to
performance-based options in light of the Companys then
current financial projections, which were lower than when the
performance goals for such options were last determined, the
uncertainty present in the current global economy and the
importance of retaining key employees to continue in employment
with the Company following the IPO.
S-12
AVAGO
TECHNOLOGIES LIMITED
DIRECTORS
REPORT(Continued)
For the
financial year ended October 31, 2010
Under the Senior Management Plan, options generally vest at a
rate of 20% per year based on the passage of time and continued
employment.
Under the Equity Incentive Plans, awards generally expire ten
years following the date of grant unless granted to a
non-employee, in which case the awards generally expire five
years following the date of grant and are granted at a price
equal to the fair market value.
A summary of award activities under the Equity Incentive Plans
is as set out below (in millions, except per share amounts):
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Awards outstanding
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Weighted-
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Awards
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average
|
|
|
|
available
|
|
|
Number
|
|
|
exercise price
|
|
|
|
for grant
|
|
|
outstanding
|
|
|
per share
|
|
|
|
|
|
|
|
|
|
$
|
|
|
Balance as of November 1, 2009
|
|
|
20
|
|
|
|
24
|
|
|
|
8.69
|
|
Granted
|
|
|
(5
|
)
|
|
|
5
|
|
|
|
19.52
|
|
Exercised
|
|
|
|
|
|
|
(4
|
)
|
|
|
6.46
|
|
Cancelled
|
|
|
2
|
|
|
|
(2
|
)
|
|
|
10.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of October 31, 2010
|
|
|
17
|
|
|
|
23
|
|
|
|
11.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of November 2, 2008
|
|
|
5
|
|
|
|
21
|
|
|
|
7.03
|
|
Shares authorised under 2009 plan
|
|
|
20
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
(7
|
)
|
|
|
7
|
|
|
|
12.56
|
|
Exercised
|
|
|
|
|
|
|
(2
|
)
|
|
|
4.86
|
|
Cancelled
|
|
|
2
|
|
|
|
(2
|
)
|
|
|
7.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of November 1, 2009
|
|
|
20
|
|
|
|
24
|
|
|
|
8.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S-13
AVAGO
TECHNOLOGIES LIMITED
DIRECTORS
REPORT(Continued)
For the
financial year ended October 31, 2010
Share
options outstanding
The following table summarizes significant ranges of outstanding
and exercisable awards as of October 31, 2010 (in millions,
except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
Awards Exercisable
|
|
|
|
|
|
|
Average
|
|
|
Weighted-
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Remaining
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Contractual
|
|
|
Exercise
|
|
|
|
|
|
Exercise
|
|
|
|
Number
|
|
|
Life
|
|
|
Price
|
|
|
Number
|
|
|
Price
|
|
Exercise Prices
|
|
Outstanding
|
|
|
(in years)
|
|
|
Per Share
|
|
|
Exercisable
|
|
|
Per Share
|
|
|
As at October 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.00 5.00
|
|
|
6
|
|
|
|
5.07
|
|
|
|
4.90
|
|
|
|
4
|
|
|
|
4.93
|
|
$5.01 10.00
|
|
|
3
|
|
|
|
8.00
|
|
|
|
9.02
|
|
|
|
1
|
|
|
|
8.28
|
|
$10.01 15.00
|
|
|
8
|
|
|
|
7.48
|
|
|
|
11.69
|
|
|
|
2
|
|
|
|
10.94
|
|
$15.01 20.00
|
|
|
2
|
|
|
|
9.10
|
|
|
|
17.54
|
|
|
|
|
|
|
|
17.02
|
|
$20.01 25.00
|
|
|
4
|
|
|
|
9.74
|
|
|
|
20.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
23
|
|
|
|
7.41
|
|
|
|
11.50
|
|
|
|
7
|
|
|
|
7.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Independent
auditor
The independent auditor, PricewaterhouseCoopers LLP, has
expressed its willingness to accept re-appointment.
On behalf of the directors
|
|
|
/s/ James
V. Diller
James
V. Diller
Director
|
|
/s/ Hock
E. Tan
Tan
Hock E.
Director
|
S-14
AVAGO
TECHNOLOGIES LIMITED
For the
financial year ended October 31, 2010
In the opinion of the directors,
|
|
(a)
|
the unconsolidated balance sheet of the Company and the
consolidated financial statements of the Group are drawn up so
as to give a true and fair view of the state of affairs of the
Company and of the Group as at October 31, 2010 and of the
results of the business, changes in equity and cash flows of the
Group for the financial year then ended; and
|
|
(b)
|
at the date of this statement, there are reasonable grounds to
believe that the Company will be able to pay its debts as and
when they fall due.
|
On behalf of the directors
|
|
|
/s/ James
V. Diller
James
V. Diller
Director
|
|
/s/ Hock
E. Tan
Tan
Hock E.
Director
|
S-15
INDEPENDENT
AUDITORS REPORT TO THE MEMBERS OF
AVAGO TECHNOLOGIES LIMITED
(In compliance with the requirements of the Singapore Companies
Act)
In our opinion,
|
|
(a)
|
the accompanying consolidated and unconsolidated balance sheets
and related consolidated statement of operations, of
shareholders equity and comprehensive income (loss) and of
cash flows, set out on pages 24 to 85, present fairly, in all
material respects, the consolidated financial position of Avago
Technologies Limited. (the Company) and its
subsidiaries (the Group) and the unconsolidated
financial position of the Company at October 31, 2010, and
the consolidated results of the Groups operations and cash
flows for the financial year ended October 31, 2010 in
conformity with accounting principles generally accepted in the
United States of America.
|
|
(b)
|
the accounting and other records required by the Singapore
Companies Act, Cap. 50 (the Act) to be kept by the
Company and by those subsidiaries incorporated in Singapore of
which we are the auditors have been properly kept in accordance
with the provisions of the Act.
|
These financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Public Accountants and Certified Public Accountants
Singapore, 21 January, 2011
S-16
AVAGO
TECHNOLOGIES LIMITED
For the
financial year ended October 31, 2010
|
|
|
|
|
|
|
|
|
|
|
Group
|
|
|
|
October 31,
|
|
|
November 1,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In millions,
|
|
|
(In millions,
|
|
|
|
except per
|
|
|
except per
|
|
|
|
share data)
|
|
|
share data)
|
|
|
Net revenue
|
|
|
2,093
|
|
|
|
1,484
|
|
|
|
|
|
|
|
|
|
|
Costs of products sold:
|
|
|
|
|
|
|
|
|
Cost of products sold
|
|
|
1,068
|
|
|
|
855
|
|
Amortization of intangible assets
|
|
|
58
|
|
|
|
58
|
|
Restructuring charges
|
|
|
1
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
Total cost of products sold
|
|
|
1,127
|
|
|
|
924
|
|
Gross margin
|
|
|
966
|
|
|
|
560
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
280
|
|
|
|
245
|
|
Selling, general and administrative
|
|
|
196
|
|
|
|
165
|
|
Amortization of intangible assets
|
|
|
21
|
|
|
|
21
|
|
Restructuring charges
|
|
|
3
|
|
|
|
23
|
|
Advisory agreement termination fee
|
|
|
|
|
|
|
54
|
|
Selling shareholder expenses
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
500
|
|
|
|
512
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
466
|
|
|
|
48
|
|
Interest expense
|
|
|
(34
|
)
|
|
|
(77
|
)
|
Loss on extinguishment of debt
|
|
|
(24
|
)
|
|
|
(8
|
)
|
Other (expense) income, net
|
|
|
(2
|
)
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
|
406
|
|
|
|
(36
|
)
|
(Benefit from) provision for income taxes
|
|
|
(9
|
)
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
415
|
|
|
|
(44
|
)
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
415
|
|
|
|
(44
|
)
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share:
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
1.74
|
|
|
|
(0.20
|
)
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
1.74
|
|
|
|
(0.20
|
)
|
|
|
|
|
|
|
|
|
|
Diluted:
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
1.69
|
|
|
|
(0.20
|
)
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
1.69
|
|
|
|
(0.20
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average shares:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
238
|
|
|
|
219
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
246
|
|
|
|
219
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
S-17
AVAGO
TECHNOLOGIES LIMITED
As of October 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group
|
|
|
Company
|
|
|
|
|
|
|
October 31,
|
|
|
November 1,
|
|
|
October 31,
|
|
|
November 1,
|
|
|
|
Note
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
(In millions,
|
|
|
(In millions,
|
|
|
(In millions,
|
|
|
(In millions,
|
|
|
|
|
|
|
except share
|
|
|
except share
|
|
|
except share
|
|
|
except share
|
|
|
|
|
|
|
amounts)
|
|
|
amounts)
|
|
|
amounts)
|
|
|
amounts)
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
561
|
|
|
|
472
|
|
|
|
46
|
|
|
|
7
|
|
Trade accounts receivable, net
|
|
|
|
|
|
|
285
|
|
|
|
186
|
|
|
|
|
|
|
|
|
|
Inventory
|
|
|
|
|
|
|
189
|
|
|
|
162
|
|
|
|
|
|
|
|
|
|
Other current assets
|
|
|
|
|
|
|
52
|
|
|
|
44
|
|
|
|
156
|
|
|
|
169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
|
|
|
|
1,087
|
|
|
|
864
|
|
|
|
202
|
|
|
|
176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
|
|
|
|
281
|
|
|
|
264
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
172
|
|
|
|
171
|
|
|
|
|
|
|
|
|
|
Intangible assets, net
|
|
|
|
|
|
|
573
|
|
|
|
647
|
|
|
|
|
|
|
|
|
|
Other long-term assets
|
|
|
|
|
|
|
44
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
Investment in subsidiary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,304
|
|
|
|
868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
|
|
|
2,157
|
|
|
|
1,970
|
|
|
|
1,506
|
|
|
|
1,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
|
|
|
198
|
|
|
|
154
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits
|
|
|
|
|
|
|
82
|
|
|
|
55
|
|
|
|
|
|
|
|
|
|
Accrued interest
|
|
|
|
|
|
|
12
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
Capital lease obligationcurrent
|
|
|
|
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
Other current liabilities
|
|
|
|
|
|
|
41
|
|
|
|
33
|
|
|
|
1
|
|
|
|
4
|
|
Current portion of long-term debt
|
|
|
|
|
|
|
230
|
|
|
|
364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
|
|
|
|
565
|
|
|
|
633
|
|
|
|
1
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
|
|
|
|
|
|
|
|
230
|
|
|
|
|
|
|
|
|
|
Capital lease obligationsnon-current
|
|
|
|
|
|
|
4
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities
|
|
|
|
|
|
|
83
|
|
|
|
64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
|
|
|
|
652
|
|
|
|
930
|
|
|
|
1
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares, no par value; 239,888,231 and
235,392,897 shares issued and outstanding on
October 31, 2010 and November 1, 2009 respectively
|
|
|
|
|
|
|
1,450
|
|
|
|
1,393
|
|
|
|
1,450
|
|
|
|
1,393
|
|
Retained earnings (accumulated deficit)
|
|
|
|
|
|
|
59
|
|
|
|
(356
|
)
|
|
|
59
|
|
|
|
(356
|
)
|
Accumulated other comprehensive (loss) income
|
|
|
|
|
|
|
(4
|
)
|
|
|
3
|
|
|
|
(4
|
)
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
|
|
|
|
1,505
|
|
|
|
1,040
|
|
|
|
1,505
|
|
|
|
1,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
|
|
|
|
|
2,157
|
|
|
|
1,970
|
|
|
|
1,506
|
|
|
|
1,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
S-18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained Earnings
|
|
|
Accumulated Other
|
|
|
Total
|
|
|
|
|
|
|
Number of
|
|
|
(Accumulated
|
|
|
Comprehensive
|
|
|
Shareholders
|
|
|
Comprehensive
|
|
|
|
Ordinary Shares
|
|
|
Deficit)
|
|
|
Income (Loss)
|
|
|
Equity
|
|
|
Income (Loss)
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Amount
|
|
|
Amount
|
|
|
Amount
|
|
|
Amount
|
|
|
|
|
|
|
(In millions)
|
|
|
(In millions)
|
|
|
(In millions)
|
|
|
(In millions)
|
|
|
(In millions)
|
|
|
Balance as of November 2, 2009
|
|
|
235,392,897
|
|
|
|
1,393
|
|
|
|
(356
|
)
|
|
|
3
|
|
|
|
1,040
|
|
|
|
|
|
Issuance of ordinary shares in connection with exercise of
options
|
|
|
4,495,334
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
28
|
|
|
|
|
|
Share-based compensation
|
|
|
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
25
|
|
|
|
|
|
Tax benefits from share-based compensation
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
Changes in accumulated other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial gains and prior service costs associated with
post-retirement benefit and defined benefit pension plans, net
of taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7
|
)
|
|
|
(7
|
)
|
|
|
(7
|
)
|
Net income
|
|
|
|
|
|
|
|
|
|
|
415
|
|
|
|
|
|
|
|
415
|
|
|
|
415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of October 31, 2010
|
|
|
239,888,231
|
|
|
|
1,450
|
|
|
|
59
|
|
|
|
(4
|
)
|
|
|
1,505
|
|
|
|
408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of November 3, 2008
|
|
|
213,517,292
|
|
|
|
1,084
|
|
|
|
(312
|
)
|
|
|
8
|
|
|
|
780
|
|
|
|
|
|
Issuance of ordinary shares, net of issuance costs of
$23 million
|
|
|
21,500,000
|
|
|
|
300
|
|
|
|
|
|
|
|
|
|
|
|
300
|
|
|
|
|
|
Exercise of options
|
|
|
1,183,405
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
Repurchase of ordinary shares
|
|
|
(807,800
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
Cash settlement of equity awards
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
Share-based compensation
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
Tax benefits from share-based
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
compensation
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
Changes in accumulated other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial gains and prior service costs associated with
post-retirement benefit and defined benefit pension plans, net
of taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
(6
|
)
|
|
|
(6
|
)
|
Unrealized net loss on derivative instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
(44
|
)
|
|
|
|
|
|
|
(44
|
)
|
|
|
(44
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of November 1, 2009
|
|
|
235,392,897
|
|
|
|
1,393
|
|
|
|
(356
|
)
|
|
|
3
|
|
|
|
1,040
|
|
|
|
(49
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
S-19
AVAGO
TECHNOLOGIES LIMITED
For the
financial year ended October 31, 2010
|
|
|
|
|
|
|
|
|
|
|
Group
|
|
|
|
October 31,
|
|
|
November 1,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In millions)
|
|
|
(In millions)
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
415
|
|
|
|
(44
|
)
|
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
159
|
|
|
|
160
|
|
Amortization of debt issuance costs
|
|
|
2
|
|
|
|
4
|
|
Loss on extinguishment of debt
|
|
|
8
|
|
|
|
8
|
|
Loss on disposal of property, plant and equipment
|
|
|
2
|
|
|
|
2
|
|
Non-cash portion of restructuring charges
|
|
|
|
|
|
|
1
|
|
Impairment of investment
|
|
|
|
|
|
|
2
|
|
Share-based compensation
|
|
|
25
|
|
|
|
12
|
|
Tax benefits from share-based compensation
|
|
|
|
|
|
|
1
|
|
Excess tax benefits from share-based compensation
|
|
|
(2
|
)
|
|
|
(1
|
)
|
Changes in assets and liabilities, net of acquisitions and
dispositions:
|
|
|
|
|
|
|
|
|
Trade accounts receivable, net
|
|
|
(96
|
)
|
|
|
|
|
Inventory
|
|
|
(26
|
)
|
|
|
27
|
|
Accounts payable
|
|
|
23
|
|
|
|
(16
|
)
|
Employee compensation and benefits
|
|
|
27
|
|
|
|
(19
|
)
|
Other current assets and current liabilities
|
|
|
(16
|
)
|
|
|
(39
|
)
|
Other long-term assets and long-term liabilities
|
|
|
(11
|
)
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
510
|
|
|
|
139
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment
|
|
|
(79
|
)
|
|
|
(57
|
)
|
Acquisitions and investments, net of cash acquired
|
|
|
(9
|
)
|
|
|
(7
|
)
|
Purchase of intangible assets
|
|
|
|
|
|
|
(1
|
)
|
Proceeds from disposal of property, plant and equipment
|
|
|
2
|
|
|
|
|
|
Proceeds from sale of discontinued operations
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(86
|
)
|
|
|
(63
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Issuance of ordinary shares, net of issuance costs
|
|
|
28
|
|
|
|
304
|
|
Repurchase of ordinary shares
|
|
|
|
|
|
|
(6
|
)
|
Debt repayments
|
|
|
(364
|
)
|
|
|
(114
|
)
|
Excess tax benefits from share-based compensation
|
|
|
3
|
|
|
|
1
|
|
Cash settlement of equity awards
|
|
|
|
|
|
|
(1
|
)
|
Payment on capital lease obligation
|
|
|
(2
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
(335
|
)
|
|
|
183
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
89
|
|
|
|
259
|
|
Cash and cash equivalents at beginning of financial year
|
|
|
472
|
|
|
|
213
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of financial year
|
|
|
561
|
|
|
|
472
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
|
46
|
|
|
|
79
|
|
Cash paid for income taxes
|
|
|
6
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
S-20
AVAGO
TECHNOLOGIES LIMITED
For the
financial year ended October 31, 2010
|
|
1.
|
Overview
and Basis of Presentation
|
Avago Technologies Limited (the Company, or
Avago Ltd) was organized under the laws of the
Republic of Singapore in August, 2005. Avago Ltd and its
subsidiaries (we, or the Group) are the
successor to the Semiconductor Products Group, SPG,
of Agilent Technologies, Inc., Agilent. On
December 1, 2005, we acquired substantially all of the
assets of SPG from Agilent for $2.7 billion (the SPG
Acquisition).
We are a designer, developer and global supplier of analog
semiconductor devices with a focus on III-V based products. We
offer products in four primary target markets: industrial and
automotive electronics, wired infrastructure, wireless
communications, and consumer and computing peripherals.
Applications for our products in these target markets include
cellular phones, consumer appliances, data networking and
telecommunications equipment, enterprise storage and servers,
factory automation, displays, optical mice and printers.
The Company is required to file its audited balance sheet with
the Accounting and Corporate Regulatory Authority
(ACRA) in accordance with the provisions of the
Singapore Companies Act, Cap. 50 (the Act). This
standalone Company balance sheet is referred to herein as the
unconsolidated balance sheet.
Avago Ltd has received an exemption under Section 201
(14) of the Act to prepare its financial statements in
accordance with accounting principles generally accepted in the
United States of America (US GAAP). Accordingly, the
consolidated financial statements and unconsolidated balance
sheet have been prepared in accordance with the US GAAP.