Item 5.02
|
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
|
(e) On June 15, 2017, the board of directors (the
Board
) of Broadcom Limited (
Broadcom
or the
Company
) approved the grant of a performance-based long-term compensation and retention equity award (the
Award
) to Hock E. Tan, the Companys President and Chief Executive Officer, consisting
of an aggregate of 168,000 performance share units (
PSUs
), pursuant to which Mr. Tan has the opportunity to earn up to a maximum of 756,000 ordinary shares, no par value, of the Company (the
Share
s
). The number of Shares, if any, that will be earned pursuant to the Award will depend on the level of performance achieved based on each of the Companys relative total shareholder return
(
TSR
) as compared to the S&P 500 Index companies and the Companys absolute TSR. Half of the PSUs will vest over a performance period of three years (
Performance Period #1
) and half will vest
over performance period of four years (
Performance Period # 2,
together with Performance Period 1, the
Performance Periods
), with each Performance Period commencing June 15, 2017.
This performance-based Award is intended to incentivize Mr. Tan to lead the Company to sustained, superior financial and operational
performance, continuing the successful performance Mr. Tan has led the Company to achieve since he joined the Company in 2006, and to provide substantial long-term retention incentive to Mr. Tan. The Award, designed in consultation with
and upon the advice of the Compensation Committees external, independent compensation consultant, emphasizes sustainable shareholder value creation. The value Mr. Tan will realize from the Award will depend on his ability to continue to
successfully lead the Company to outperform its peers over the next three to four years and thereby achieve the corresponding significant, sustained increases in the Companys share price, relative to the companies that comprise the S&P 500
Index, needed to meet the performance requirements for Shares to vest under the Award.
The PSUs vest on the last day of each Performance
Period, subject to Mr. Tans continued service through such date. Within 60 days after the end of each Performance Period, the Board will determine the number of Shares that Mr. Tan is entitled to receive pursuant to the Award, by
reference to the Companys TSR, as compared to the TSR of the S&P 500 Index companies, over the Performance Period expressed as a percentile (the
Relative TSR
). Mr. Tan will not be entitled to receive any
Shares with respect to a Performance Period if the Company Relative TSR is not at or above the 25
th
percentile of the S&P 500 Index companies, the minimum performance criteria.
Mr. Tan will be entitled to receive a target number of Shares (84,000 with respect to each Performance Period), if the Companys Relative TSR is at the 50
th
percentile of the S&P 500
Index companies. Mr. Tan will be entitled to receive up to 252,000 Shares with respect to each Performance Period if the Companys Relative TSR is at the 75
th
percentile of the S&P
500 Index companies and up to an aggregate of 756,000 Shares (inclusive of Shares earned in both Performance Periods) if the Companys Relative TSR is at or above the 90
th
percentile of the
S&P 500 Index companies in Performance Period #2. The maximum number of Shares that can be earned in Performance Period #2 may include additional catch-up Shares that were not earned in Performance Period #1. However, if the
Companys TSR is negative for any Performance Period, then the maximum number of Shares that may be earned in that Performance Period is 84,000. In addition, the maximum aggregate number of Shares that may be earned under the Award under any
circumstances is capped at 756,000.
In the event of Mr. Tans termination of service due to death or permanent disability prior
to the end of any Performance Period, 50% of the PSUs subject to such Performance Period will automatically vest and be converted into an equal number of Shares. In the event of the closing of a Change in Control (as defined in the 2009 Plan) prior
to the end of any Performance Period, the Performance Period will be shortened to end on a date within ten (10) days prior to the closing of the Change in Control determined by the Board, and the PSUs will be converted into a number of
time-vesting restricted stock units based on the transaction price and will vest on the last day of the applicable Performance Period, subject to continued service through, or upon certain qualifying terminations of employment prior to, such date.
The PSUs are subject to the terms and conditions of a Performance Share Unit Award Agreement, dated June 15, 2017, between the
Company and Mr. Tan (the
PSU Agreement
) and the Avago Technologies Limited 2009 Equity Incentive Award Plan (the
2009 Plan
), and the foregoing description of the PSUs in this Current Report on
Form 8-K is qualified in its entirety by reference to the PSU Agreement, a copy of which is filed herewith as Exhibit 10.1, and to the 2009 Plan, a copy of which was previously filed with the Securities and Exchange Commission (the
SEC
) (see Exhibit 10.18 to Avago Technologies Limiteds Registration Statement on Form S-1/A previously filed with the SEC on July 27, 2009).
The first scheduled vesting date under the Award will be on June 15, 2020, one year after the scheduled vesting date of
Mr. Tans most recent performance-based equity award, granted on June 15, 2016. The Award represents a multi-year grant. Going forward, the Board, upon the recommendation of the Compensation Committee and the advice of the
Compensation Committees external, independent compensation consultant, intends to make episodic grants to Mr. Tan, instead of annual awards.