BROADCOM CORP (Form: 10-K, Received: 03/01/2005 06:33:33)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K


(Mark One)
þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2004
or

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-23993

Broadcom Corporation

(Exact Name of Registrant as Specified in Its Charter)






California		33-0480482
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

16215 Alton Parkway

Irvine, California 92618-3616

(Address of Principal Executive Offices) (Zip Code)

Registrant’s Telephone Number, Including Area Code: (949) 450-8700

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Class A common stock

(Title of class)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by a check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes þ No o

The aggregate market value of the registrant’s common stock, $0.0001 par value per share, held by non-affiliates of the registrant on June 30, 2004, the last business day of the registrant’s most recently completed second fiscal quarter, was $12,202,995,163 (based on the closing sales price of the registrant’s common stock on that date). Shares of the registrant’s common stock held by each officer and director and each person known to the registrant to own 10% or more of the outstanding voting power of the registrant have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not a determination for other purposes.

The registrant has two classes of common stock authorized, Class A common stock and Class B common stock. The rights, preferences and privileges of each class of common stock are substantially identical except for voting rights. Shares of Class B common stock are not publicly traded but are convertible at any time into shares of Class A common stock. As of December 31, 2004 there were 273,112,763 shares of Class A common stock and 57,395,782 shares of Class B common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates by reference certain information from the registrant’s definitive proxy statement (the “Proxy Statement”) for the 2005 Annual Meeting of Shareholders to be filed on or before March 29, 2005. Except with respect to information specifically incorporated by reference in this Form 10-K, the Proxy Statement is not deemed to be filed as part hereof.

Broadcom ® , the pulse logo, Blutonium ® , BroadVoice ® , NetXtreme ® , QAMLink ® , QuadSquad ® , ServerWorks ® , SiByte ® , StrataSwitch ® , StrataXGS ® , V-thernet ® , Videocore ® , 54g ^tm , 125 High Speed Mode ^tm , AirForce ^tm , AirForce One ^tm , BladeRunner ^tm , BroadRange ^tm , CryptoNetX ^tm , FirePath ^tm , InConcert ^tm , NetXtreme II ^tm , ROBOswitch-plus ^tm , ROBO-HS ^tm , SecureEasySetup ^tm , StrataSwitch II ^tm , StrataXGS III ^tm and SystemI/O ^tm are among the trademarks of Broadcom Corporation and/or its affiliates in the United States, certain other countries and/or the EU. Any other trademarks or tradenames mentioned are the property of their respective owners.

BROADCOM CORPORATION

ANNUAL REPORT ON FORM 10-K

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004

TABLE OF CONTENTS


		Page





PART I




Item 1.	Business		1




Item 2.	Properties		19




Item 3.	Legal Proceedings		20




Item 4.	Submission of Matters to a Vote of Security Holders		20




PART II




Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		20




Item 6.	Selected Financial Data		22




Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		23




	Risk Factors		50




Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		67




Item 8.	Financial Statements and Supplementary Data		68




Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		68




Item 9A.	Controls and Procedures		68




Item 9B.	Other Information		70




PART III




Item 10.	Directors and Executive Officers of the Registrant		70




Item 11.	Executive Compensation		70




Item 12.	Security Ownership of Certain Beneficial Owners and Management		70




Item 13.	Certain Relationships and Related Transactions		70




Item 14.	Principal Accounting Fees and Services		70




PART IV




Item 15.	Exhibits and Financial Statement Schedules		71
EXHIBIT 10.3
EXHIBIT 10.9
EXHIBIT 10.16
EXHIBIT 10.33
EXHIBIT 10.37
EXHIBIT 10.38
EXHIBIT 10.39
EXHIBIT 21.1
EXHIBIT 23.1
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32

CAUTIONARY STATEMENT

All statements included or incorporated by reference in this Report, other than statements or characterizations of historical fact, are forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements concerning projected net revenue, costs and expenses and gross margin; our accounting estimates, assumptions and judgments; the market acceptance and performance of our products; our ability to retain and hire key executives, technical personnel and other employees in the numbers, with the capabilities, and at the compensation levels needed to implement our business and product plans; the competitive nature of and anticipated growth in our markets; our ability to achieve further product integration; the status of evolving technologies and their growth potential; the timing of new product introductions; the adoption of future industry standards; our dependence on a few key customers for a substantial portion of our revenue; our ability to migrate to smaller process geometries; manufacturing capacity; our ability to consummate acquisitions and integrate their operations successfully; the need for additional capital; inventory and accounts receivable levels; and our success in pending litigation. These forward-looking statements are based on our current expectations, estimates and projections about our industry and business, management’s beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “may,” “will,” “should,” “would,” “could,” “potential,” “continue,” “ongoing,” similar expressions, and variations or negatives of these words. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors, some of which are listed under the section “Risk Factors” at the end of Item 7 of this Report. These forward-looking statements speak only as of the date of this Report. We undertake no obligation to revise or update publicly any forward-looking statement for any reason.

PART I


Item 1.	*Business*

Overview

Broadcom Corporation is a global leader in wired and wireless broadband communications semiconductors. Our products enable the convergence of high-speed data, high definition video, voice and audio at home, in the office and on the go. Broadcom provides manufacturers of computing and networking equipment, digital entertainment and broadband access products, and mobile devices with complete system-on-a-chip and software solutions. Our diverse product portfolio addresses every major broadband communications market, and includes solutions for digital cable, satellite and Internet Protocol (IP) set-top boxes; high definition television (HDTV); cable and DSL modems and residential gateways; high-speed transmission and switching for local, metropolitan, wide area and storage networking; home and wireless networking; cellular and terrestrial wireless communications; Voice over Internet Protocol (VoIP) gateway and telephony systems; broadband network and security processors; and SystemI/ O ^tm server solutions.

Broadcom was incorporated in California in August 1991. Our principal executive offices are located at 16215 Alton Parkway, Irvine, California 92618-3616, and our telephone number at that location is 949.450.8700. Our Internet address is www.broadcom.com . Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, amendments to those reports and other Securities and Exchange Commission, or SEC, filings are available free of charge through our website as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the SEC. Our Class A common stock trades on the NASDAQ National Market® under the symbol BRCM. The inclusion of our website address in this Report does not include or incorporate by reference into this Report any information on our website.

Industry Environment and Our Business

Over the past two decades communications technologies have evolved dramatically in response to the proliferation of the Internet and the emergence of new data-intensive computing and communications applications. These new applications include high-speed Internet web browsing, online audio and video communication, high definition television, corporate networking and information systems, wireless networking, and mobile voice and data connectivity. This evolution has also changed the ways in which we communicate. We

can now access and communicate information via wired and wireless networks through a variety of electronic devices, including personal computers, digital cable and satellite set-top boxes, high definition televisions, handheld computing devices such as personal digital assistants, or PDAs, and cellular phones. These applications and devices require increasingly higher processing speeds and information transfer rates within the computing systems and the data storage devices that support them and across the network communication infrastructures that serve them.

This evolution has inspired equipment manufacturers and service providers to develop and expand existing broadband communications markets, and has created the need for new generations of integrated circuits. Integrated circuits, or chips, are made using semiconductor wafers imprinted with a network of electronic components. They are designed to perform various functions such as processing electronic signals, controlling electronic system functions and processing and storing data. Today all electronic products use integrated circuits, and they are essential components of personal computers, wired and wireless voice and data communications devices, networking products and home entertainment equipment.

The broadband transmission of digital information over existing wired and wireless infrastructures requires very sophisticated semiconductor solutions to perform critical systems functions such as complex signal processing, converting digital data to and from analog signals, and switching and routing of packets of information over Internet Protocol, or IP, based networks. Solutions that are based on multiple discrete analog and digital chips generally cannot achieve the cost-effectiveness, performance and reliability required by today’s broadband marketplace. These requirements are best addressed by new generations of highly integrated mixed-signal devices. These devices combine complex analog, digital, and in many cases, radio frequency functions onto a single integrated circuit, and can be manufactured in high volumes using cost-effective process technologies.

Target Markets and Broadcom® Products

We design, develop and supply a diverse portfolio of products targeted to every significant broadband communications market. Our semiconductor solutions are ubiquitous, embedded in cable and DSL modems and digital set-top boxes in the home, networking equipment in the enterprise, wireless-enabled laptop and desktop computers and advanced PDAs and cellular phones, among other wired and wireless equipment.

The following is a brief description of each of our target markets and the silicon solutions that we provide for each market.


	Broadband Communications


	*Cable Modems*

Unlike traditional dial-up modems that provide online access through the public telephone system, cable modems provide users high-speed Internet access through a cable television network. Although cable networks were originally established to deliver television programming to subscribers’ homes, cable television operators have generally upgraded their systems to support two-way communications, high-speed Internet access and telecommuting through the use of cable modems. These modems are designed to achieve downstream transmission speeds of up to 43 megabits per second, or Mbps (North American standard), or 56 Mbps (international standard), and upstream transmission to the network at speeds of up to 30 Mbps. The speeds achieved by cable modems are nearly 1,000 times faster than the fastest analog telephone modems, which transmit downstream at up to 56 kilobits per second, or Kbps, and upstream at up to 28.8 Kbps. Cable modems typically connect to a user’s PC through a standard 10/ 100BASE-T Ethernet card or Universal Serial Bus, also known as a USB, connection. A device called a cable modem termination system, or CMTS, located at a local cable operator’s network hub, communicates through television channels to cable modems in subscribers’ homes and controls access to cable modems on the network.

The cable industry’s adoption of an open standard, the Data Over Cable Service Interface Specification, commonly known as DOCSIS®, has made possible interoperability among different manufacturers’ cable modems and CMTS equipment used by different cable networks. The first specification, DOCSIS 1.0, was adopted in 1997 and enabled the cost-effective deployment of cable modems. In 1998 the DOCSIS 1.1 specification was

announced. The new specification enhanced DOCSIS 1.0 to include support for cable telephony using VoIP technology, streaming video and managed data services. In 2002 DOCSIS 2.0 was approved. DOCSIS 2.0 adds support for higher upstream transmission speeds of up to 30 Mbps and more symmetric IP services, and provides extra capacity for cable telephony.

The high speeds of today’s cable modems can enable an entirely new generation of multimedia-rich content over the Internet and allow cable operators to expand their traditional video product offerings to include data and telephone services. The adoption of cable modem services and the continued proliferation of homes with multiple PCs have also generated the need for residential networking. Cable television operators have recognized the opportunity to include this feature in the equipment they utilize for cable modem services through either home telephone line or wireless solutions, and the cable industry has created a specification called CableHome ^tm that defines how a home intranet interoperates with a cable operator’s Internet service.

We offer integrated semiconductor solutions for cable modems and cable modem termination systems. We currently have a leading market position in both equipment areas, with an extensive product offering for the high-speed, two-way transmission of voice, video and data services to residential customers. We offer a complete system-level solution that not only includes integrated circuits, but also reference design hardware and a full software suite to support our customers’ needs and accelerate their time to market.

Cable Modem Solutions. All of our cable modem chips are built around our QAMLink® DOCSIS-compliant transceiver and media access controller, or MAC, technologies. These technologies enable downstream data rates up to 56 Mbps and upstream data rates up to 30 Mbps and are compliant with DOCSIS versions 1.0, 1.1 and 2.0. These devices provide a complete DOCSIS system solution in silicon, enabling quality of service to support constant bit rate services like VoIP and video streaming.

Residential Broadband Gateway Solutions. The levels of integration and performance that we continue to achieve in our cable modem chips are reducing the cost and size of cable modems while providing consumers with easy to use features and seamless integration to other transmission media. As a result, cable modem functionality is evolving into a small silicon core that can be incorporated into other consumer devices for broader distribution of IP-based services throughout the home. Broadcom offers residential broadband gateway solutions that bring together a range of capabilities, including those for cable modems, digital set-top boxes, home networking, VoIP and Ethernet connectivity. These products allow cable operators worldwide to provide residential broadband gateways capable of delivering digital telephone service via the PacketCable ^tm specification, IP video, and cable modem Internet services, as well as data home networking over in-home Ethernet or wireless networks.

CMTS Solutions. We have a complete end-to-end DOCSIS 1.0, 1.1 and 2.0 compliant cable modem semiconductor solution for both head-end and subscriber locations. Our CMTS chipset consists of downstream and upstream physical layer, or PHY, devices and a DOCSIS MAC. This cable modem termination system enables the exchange of information to and from the subscriber location, making it a key element in the delivery of broadband access over cable.


	*DSL*

Digital subscriber line technologies, commonly known as DSL, represent a family of broadband technologies that use a greater range of frequencies over existing telephone lines than traditional telephone services. This provides greater bandwidth to send and receive information. DSL speeds range from 128 Kbps to 52 Mbps depending upon the particular DSL standard and the distance between the central office and the subscriber. These data rates allow local exchange carriers to provide, and end users to receive, a wide range of new broadband services.

DSL technology has a number of standards or line codes used worldwide. We support all standards-based line codes, such as asymmetric DSL, or ADSL, ADSL2, ADSL2+ and very-high-speed DSL, or VDSL, including the standard Annexes used in North America, Europe, Japan and China. In addition, we provide end-to-end technology, with solutions designed for both customer premises equipment, or CPE, and central office applications. Our DSL technologies enable local exchange carriers and enterprise networking vendors to deliver

bundled broadband services, such as digital video, high-speed Internet access, VoIP, video teleconferencing and IP data business services, over existing telephone lines.

DSL Modem and Residential Gateway Solutions. For DSL CPE applications, we provide products that address the wide variety of local area network, or LAN, connectivity options, including Ethernet, USB-powered solutions, VoIP-enabled access devices and IEEE 802.11 wireless access points with multiple Ethernet ports. These solutions also provide a fully scalable architecture to address emerging value-added services such as in-home voice and video distribution. Wide area network connectivity is provided using integrated, standards-compliant PHY technology.

DSL Central Office Solutions. We provide highly integrated semiconductor solutions for DSL central office applications as well. Our BladeRunner ^tm high-density central office DSL chipset supports all worldwide DSL standards using our proprietary Firepath ^tm 64-bit digital signal processor. We believe these solutions will enable equipment manufacturers of digital subscriber line access multiplexers, or DSLAMs, and next generation digital loop carriers to offer a significant increase in the number of DSL connections that can be supported within telecommunication companies’ tight heat, power and space constraints. We also provide the inter-networking software that is enabling DSLAM technology to transition from Asynchronous Transfer Mode to Internet Protocol.

VDSL Solutions. For VDSL applications, we offer our QAM-based V-thernet® product family, which supports Ethernet transport over standard telephone wires and is instrumental in developing standards and products for next-generation VDSL2 applications.


	*Digital Cable, Direct Broadcast Satellite Set-Top Boxes and Digital Television*

The last decade has seen rapid growth in the quantity and diversity of television programming. Despite ongoing efforts to upgrade the existing cable infrastructure, an inadequate number of channels exist to provide the content demanded by consumers. In an effort to increase the number of channels and provide higher picture quality, cable service providers began offering digital programming in 1996 through the use of new digital cable set-top boxes. These digital cable set-top boxes facilitate high-speed digital communications between a subscriber’s television and the cable network. Digital cable set-top boxes are currently able to support downstream transmission speeds to the subscriber of up to 43 Mbps (North American standard) or 56 Mbps (international standard), and several hundred MPEG-2 or MPEG-4 advanced video coding compressed digital television channels.

Direct broadcast satellite, or DBS, is the primary alternative to cable for providing digital television programming. DBS broadcasts video and audio data from satellites directly to digital set-top boxes in the home via dish antennas. Due to the ability of DBS to provide television programming where no cable infrastructure is in place, we believe that the global market for DBS set-top boxes will outpace the market for cable set-top boxes.

The Federal Communications Commission has stated that traditional terrestrial broadcast stations will be required to broadcast in digital format in the future. Currently, the FCC is targeting 2007 for this mandated digital conversion. This conversion will ultimately require all television sets that are 13 inches or larger, DVD players and video cassette recorders to incorporate an HDTV receiver. We believe this conversion to digital broadcasting will create demand for new digital cable and satellite set-top boxes and digital television receivers. In addition, manufacturers continue to develop and introduce new generations of digital cable and satellite set-top boxes that incorporate enhanced functionalities, such as Internet access, personal video recording, or PVR, video on demand, interactive television, HDTV, 3-D gaming, audio players and various forms of home networking.

TV manufacturers also plan to incorporate digital cable-ready capability into television sets for the North American market by integrating today’s cable set-top box functionality directly into TV sets. The manufacturers of TVs, through their trade association, the Consumer Electronics Association, and in cooperation with North American cable operators, have created an industry specification called the “plug-n-play” agreement. This agreement and its associated specification define how to design digital cable-ready TVs for connection into the North American cable infrastructure.

Cable-TV Set-Top Box Solutions. We offer a complete silicon platform for the digital cable-TV set-top box market. These highly integrated chips give manufacturers a broad range of features and capabilities for building standard digital cable-TV boxes for digital video broadcasting, as well as high-end interactive set-top boxes. These high-end set-top boxes merge high-speed cable modem functionality with studio-quality graphics, text and video for both standard definition television, or SDTV, and HDTV formats.

Our cable-TV set-top box silicon consists of front-end transceivers with downstream, upstream and MAC functions, single-chip cable modems, advanced 2D/3D video-graphics encoders and decoders, radio frequency television tuners based on complementary metal oxide semiconductor, or CMOS, process technology, and digital visual interface chipsets. These cable-TV set-top box chips support most industry transmission and television standards, enabling universal interoperability and easy retail channel distribution. Peripheral modules incorporated into front-end devices also provide support for common set-top box peripheral devices, such as infrared remotes and keyboards, LED displays and keypads.

Our chips provide a comprehensive silicon platform for high-end interactive set-top boxes, supporting the simultaneous viewing of television programming with Internet content capability in either HDTV or SDTV format. This capability offers consumers a true interactive environment, allowing them to access Internet content while watching television. By adding our home networking and VoIP technologies, these set-top boxes can also support the functions of a residential broadband gateway for receiving and distributing digital voice and data services throughout the home over Ethernet or wireless networking. In addition, our set-top box semiconductor solutions incorporate PVR functionality. This allows viewers to watch and record multiple programs and enables additional features such as selective viewing, fast forward, fast reverse, skip forward, skip back, and slow motion and frame-by-frame viewing.

DBS Solutions. By leveraging our extensive investment and expertise in the cable-TV set-top box market, we have also developed comprehensive DBS solutions. These products include an advanced, high-definition video graphics subsystem, which drives the audio, video and graphic interfaces in DBS set-top boxes and provides multi-stream control to support PVR capabilities; a CMOS satellite tuner, which allows our customers to provide additional channel offerings; front-end receiver chips for set-top boxes, including an advanced modulation system to increase satellite capacity with existing satellites; and a digital visual interface transmitter. In addition, we offer a complete end-to-end chipset for receiving and displaying HDTV. This chipset provides television and set-top box manufacturers with a high performance vestigial side band receiver and a 2D/3D video-graphics subsystem for SDTV and HDTV displays.

To meet the needs of the growing broadband satellite market, we have also developed a complete satellite system solution that enables DBS providers to cost effectively deploy two-way broadband satellite services, enabling Internet access via satellite. This solution includes an advanced modulation digital satellite receiver, digital satellite tuner/receiver and a high-performance broadband gateway modem, combining the functionality of a satellite modem, a firewall router and home networking into a single chip.

Digital TV Solutions. We were an early developer of advanced television systems committee, or ATSC, demodulators used for the reception of terrestrial HDTV signals broadcast in North America. Capitalizing on the FCC HDTV mandate and the “plug-n-play” agreement, as well as on our extensive cable-TV set-top box technology portfolio, we have developed a highly integrated digital TV system-on-a-chip solution. This digital TV solution, when combined with our existing satellite, cable or terrestrial demodulators, forms a complete semiconductor solution for HDTV delivery platforms, including satellite, cable or terrestrial set-top boxes and integrated high definition televisions. Our integrated HDTV solution will allow television manufactures to develop digital cable-ready televisions that connect directly to the North American cable infrastructure without the need for an external set-top box.


	Enterprise Networking


	*Local Area Networking*

Local area networks, or LANs, consist of different types of equipment, such as servers, workstations and desktop and laptop computers, interconnected by copper, fiber or coaxial cables utilizing a common networking

protocol, generally the Ethernet protocol. Ethernet scales in speed from 10 Mbps to 10 gigabits per second, or Gbps, providing both the bandwidth and scalability required in today’s dynamic networking environment. As the volume and complexity of network traffic continues to increase, communications bottlenecks have developed in corporate LANs. As a result, new technologies such as Gigabit Ethernet, a networking standard that supports data transfer rates of up to one Gbps, and the 10 Gigabit Ethernet standard, which supports data transfer rates of up to 10 Gbps, are replacing older technologies such as Fast Ethernet, which supports data transfer rates of up to 100 Mbps, and 10BASE-T Ethernet, which supports data transfer rates of 10 Mbps.

Gigabit Ethernet is emerging as the predominant networking technology for desktop and laptop computers. As Gigabit Ethernet is deployed to desktop and laptop computers, we expect server and backbone connections to continue to migrate to the new 10 Gigabit Ethernet standard. We further expect the continued use of switch connections in place of legacy repeater connections. Switches not only have the ability to provide dedicated bandwidth to each connection, but also provide routing functionality and possess the intelligence to deal with differentiated traffic such as voice, video and data. We anticipate that a significant portion of the installed base of 10/100BASE-T Ethernet switches as well as network interface cards, or NICs, will be upgraded to faster technologies.

Our 10/100 Mbps Ethernet and Gigabit Ethernet transceivers, controllers and switches are integrated, low-power semiconductor solutions for servers, workstations, desktop and laptop computers, VoIP phones and wireless access points that enable the high-speed transmission of voice, video and data services over the Category 5 unshielded twisted-pair copper wiring widely deployed in enterprise and small office networks. We also offer 10 Gigabit Ethernet transceivers for network infrastructure products. These high-speed connections are enabling users to share Internet access, exchange graphics and video presentations, receive VoIP and video conferencing services, and share peripheral equipment, such as printers and scanners. We also incorporate intelligent networking functionality into our devices, enabling system vendors to deploy enhanced classes of services and applications, typically found only in the core of the network, to every corporate desktop.

Digital Signal Processing Communication Architecture. Our complex Ethernet transceivers are built upon a proprietary digital signal processing, or DSP, communication architecture optimized for high-speed enterprise network connections. Our DSP silicon core enables interoperability and robust performance over a wide range of cable lengths and operating conditions, and delivers performance of greater than 250 billion operations per second. This proprietary DSP architecture facilitates the migration path to smaller process geometries and minimizes the development schedule and cost of our transceivers. It has been successfully implemented in .5, .35, .25, .18 and .13 micron CMOS processes, and in chips with one, four, six and eight ports.

Fast Ethernet and Gigabit Ethernet Transceivers. Our 10/100 Ethernet transceiver product line ranges from single-chip 10/100 Ethernet transceivers to single-chip octal 10/100 Ethernet transceivers. These devices allow information to travel over standard Category 5 copper cable at rates of 10 Mbps and 100 Mbps. Our Gigabit Ethernet transceivers are enabling manufacturers to make equipment that delivers data at Gigabit speeds over Category 5 cabling. We believe this equipment can significantly upgrade the performance of existing networks without the need to rewire the network infrastructure with fiber or enhanced copper cabling. Additionally, we have developed a family of semiconductor solutions incorporating four transceivers on a single chip optimized for high-port-density Gigabit Ethernet switches and routers. Our QuadSquad® transceivers greatly reduce system costs by simplifying typical high-density board designs, further facilitating the deployment of Gigabit Ethernet bandwidth to the desktop.

Our Gigabit transceivers are driving the market toward lower power, smaller footprint solutions, making it easier and less expensive to build 10/100/1000 Ethernet NICs, switches, hubs and routers and to put networking chips directly on computer motherboards in LAN on motherboard, or LOM, configurations. We plan to continue to incorporate additional functionality into all of our transceivers, providing customers with advanced networking features, on-chip and cable diagnostic capabilities and higher performance capabilities.

10 Gigabit Ethernet Transceivers. We have developed a family of 10 Gigabit Ethernet CMOS transceivers. When combined with serial 10 Gigabit optics, these devices can simultaneously transmit and receive at 10 Gbps data rates over 100 kilometers of existing single mode optical fiber. A 10 Gigabit Ethernet link over such distances extends the reach of Ethernet into local, regional and metropolitan fiber optic networks. We believe that

significant cost, performance and latency advantages can be realized when the Ethernet protocol and other associated quality of service capabilities are available in these network domains. We anticipate that convergence around 10 Gigabit Ethernet will allow massive data flow from remote storage sites across the country over the metropolitan area network, or MAN, and into the corporate LAN, without unnecessary delays, costly buffering for speed mismatches or latency, or breaks in the quality of service protocol.

SerDes Technology and Products. We have developed an extensive library of Serializer/ Deserializer, or SerDes, cores for Ethernet, storage and telecommunications network infrastructures. The technology is available in stand-alone SerDes devices or integrated with our standard and custom products. New generations of SerDes architectures provide advanced on-chip diagnostic intelligence to allow system designers to monitor, test and control high-speed serial links for signal integrity and bit error rate performance to reduce development cycles and costly field maintenance support.

Gigabit Ethernet Controllers. Built upon five generations of Gigabit Ethernet MAC technology, our NetXtreme® family of Gigabit Ethernet controllers supports peripheral component interconnect, or PCI®, PCI-X® and PCI Express® local bus interfaces for use in NICs and LOM implementations. The NetXtreme family includes comprehensive solutions for servers, workstations, and desktop and laptop computers. These devices incorporate an integrated Gigabit Ethernet PHY transceiver and are provided with an advanced software suite available for a variety of operating systems. The NetXtreme architecture also features a processor-based design that enables advanced management software to run in firmware so it can be remotely upgraded through simple downloads. In 2004 Broadcom introduced the NetXtreme II ^tm family of Ethernet controllers. The NetXtreme II family is comprised of converged network interface controllers that are designed to improve server performance by integrating a TCP/ IP offload engine, remote direct memory access, iSCSI storage and remote management. NetXtreme II controllers simultaneously perform storage networking, high-performance clustering, accelerated data networking and remote system management pass-through functions. The entire NetXtreme product family is fabricated in a .13 micron or .18 micron CMOS process.

Ethernet Switches. We offer a broad switch-on-a-chip product line ranging from low-cost, unmanaged and managed, OSI Layer 2 eight port switch chips to high-end managed, Layer 3 through Layer 7 enterprise class switch chips.

Our ROBOswitch-plus ^tm product family consists of Layer 2+ switch chips supporting five, eight, 16 and 24 port 10/100 Ethernet switches, and our ROBO-HS ^tm product family supports single-chip networking solutions for Layer 2+ Gigabit Ethernet configurations of four, five, eight, 16 and 24 ports. We believe our switch chips make it economical for the remote office/business office and small office/home office network markets to have the same high-speed local connectivity as the large corporate office market. Our highly integrated family of switch products combines the switching fabric, MACs, 10/100 and Gigabit Ethernet transceivers, media independent interface and packet buffer memory onto single-chip solutions. These chips give manufacturers multiple switch design options that combine plug and play ease-of-use, scalability, network management features and non-blocking switching performance at optimal price points for the remote office and branch office user. In 2004 we introduced a switch that integrates 24-port Fast Ethernet physical layer transceivers and 2-port Gigabit Ethernet media access controllers into a single chip tailored for small-to-medium-sized business networking applications. The ROBOswitch family includes products for unmanaged, smart and managed solutions.

Our family of high-end StrataSwitch® products consists of wire-speed, multi-layer chips that combine multiservice provisioning capabilities with switching, routing and traffic classification functionality onto single-chip solutions. Replacing as many as 10 chips with one, our StrataSwitch II ^tm family of chips incorporates 24 Fast Ethernet and two Gigabit Ethernet ports with advanced Layer 3 switching and multi-layer packet classification.

Our StrataXGS® product family provides the multi-layer switching capabilities of our StrataSwitch II technology with wire-speed Gigabit and 10 Gigabit Ethernet switching performance for enterprise business networks. These devices, in combination with our quad and octal Gigabit Ethernet transceivers, enable system vendors to build 12, 24 and 48 port multi-layer Gigabit Ethernet stackable switches, supporting systems with up to 1,536 Gigabit Ethernet ports. These multi-layer switches are capable of receiving, prioritizing and forwarding packets of voice, video and data at high speeds over existing corporate networks. The StrataXGS family also

enables advanced network management capabilities in the switching infrastructure to track different data flows and monitor or control bandwidth on any one of these flows. This results in a more intelligent use of network resources and enables a whole new set of network service applications that require high bandwidth, reliable data transmission, low latency and advanced quality service features such as streaming video and VoIP. In addition, our StrataXGS III ^tm product family incorporates advanced features such as IPv6 routing, unified wired and wireless switch management, advanced security and intrusion detection features, sophisticated traffic management, and scalable buffer and routing tables for high end applications.


	*Servers, Storage and Workstations*

With the proliferation of data being accessed and sorted by the Internet and corporate intranets, the demand for servers has increased substantially. As integral pieces of the overall communications infrastructure, servers are multiprocessor-based computers that are used to support users’ PCs over networks and to perform data intensive PC functions such as accessing, maintaining and updating databases.

The dramatic increase in the volume of business-critical data that is generated, processed, stored and manipulated has also created challenges for organizations, which must find new ways to efficiently manage the proliferation of stored data. Traditionally, many companies accessed stored network data using a direct attached storage architecture in which a single server controls access to each storage device, and stored data is only available to applications running on the server directly connected to the storage device. However, with the proliferation of stored data, many companies found that this architecture created bottlenecks in their networks. As a result, many companies have moved to the use of new architectures such as networked attached storage, or NAS, and storage area networks, or SANs. In a NAS system, individual storage devices can be connected to a network and be made available to various servers on the network. In a SAN, multiple servers on a network are connected to a centralized pool of storage data devices using a switching element to enable data sharing at gigabit speeds. This shift in architecture has also inspired the creation of new interface protocols such as serial-ATA, or SATA, iSCSI and serial attached SCSI, or SAS, to connect computers, peripherals, storage devices and networks at high speeds.

Unlike mobile and desktop PCs, which are dominated by central processing units, or CPUs, server, storage and workstation platforms require highly-tuned core logic to provide high bandwidth, high performance and the reliability, availability and scalability that customers demand. The Internet has created a new market for servers, storage and workstation platforms as users access data and entertainment stored on servers from their PCs, handheld computers and wireless handsets.

Our SystemI/ O semiconductor solutions act as the essential conduits for delivering high-bandwidth data in and out of servers, and coordinating all input/output, or I/ O, transactions within server, storage and workstation platforms, including among external I/ O devices, the main system memory and multiple CPUs.

We provide core logic technology that manages the flow of data to and from a system’s processors, memory and peripheral I/ O devices. Our ServerWorks® products are used to design low-end and mid-range servers with two to four CPUs, as well as storage, workstation and networking platforms. The bandwidth of our SystemI/ O solutions, both from CPU to memory and memory to I/ O subsystems such as disk drives or networks, leads the industry. These products also provide reliability, availability and serviceability features. The current generation of ServerWorks SystemI/ O products supports Intel Pentium® 4 processors, which run at speeds beyond 2.4 GHz, and provides memory bandwidth of up to five gigabytes per second and I/ O bandwidth of up to four gigabytes per second. However, in response to the unique competitive dynamics within the Intel processor-based server I/ O chipset market, in the second half of 2003 we announced that we planned to actively diversify our ServerWorks products beyond Intel-based platforms. In 2004 we entered into an agreement with Advanced Micro Devices to provide core logic chipsets for AMD’s Opteron® product line. We currently anticipate that the Operton processor-based chipsets that we have developed under this agreement will be introduced in 2005.

To date our SystemI/ O chips have been used primarily in servers sold by major PC server OEMs and motherboard manufacturers; however, recently we have leveraged our server chipset technology and our expertise in networking technology into other expanding markets such as storage and networking. In addition to developing our own chips for storage platforms, in early 2004 we acquired a provider of complete enterprise-class,

redundant array of inexpensive disks, or RAID, software stack to enable us to deliver complete RAID solutions for local server storage. RAID is a technology in which data is stored in a distributed manner across multiple disk drives to enhance fault tolerance and the ability to survive and recover from a hard drive failure. RAID provides real-time data recovery, with uninterrupted access, when a hard drive fails, as well as increased system uptime and continuous network availability. Our initial RAID products included highly integrated RAID-on-chip and RAID-on-motherboard solutions for entry-level and mid-range server applications, including the software stack to provide our customers complete validated solutions. During 2004 Broadcom also introduced two new RAID products based on the emerging SATA standard. These products are chip-, board- and software-based and began shipping to value added resellers and systems integrators in 2004. We also continued to expand our portfolio of storage products with NAS-on-chip solutions targeted to the small business and residential user, RAID controllers based upon the SAS standard, and our converged network interface controllers that incorporate iSCSI storage as well as a TCP/ IP offload engine, remote direct memory access, and remote management.

Metropolitan and Wide Area Networking

To address the increasing volume of data traffic emanating from the growing number of broadband connections in homes and businesses, MANs and wide area networks, or WANs, will have to evolve at both the transport and switching layers. We believe that the CMOS fabrication process will be a key technology in this evolution by enabling the development of smaller optical modules and system components that cost less, consume less power and integrate greater functionality.

Electronic components for optical communications are a natural extension of our large portfolio of high-speed LAN chips, one that will allow us to provide end-to-end semiconductor solutions across the WAN, MAN and LAN that increase the performance, intelligence and cost-effectiveness of broadband communications networks.

We offer a portfolio of CMOS OC-48 and OC-192 transceiver and forward error correction solutions, chips for Synchronous Optical Networks and dense wave division multiplexing, or DWDM, applications, as well as a serial CMOS transceiver for 10 Gigabit Ethernet applications. Our use of the CMOS process allows substantially higher levels of integration and lower power consumption than competitive gallium arsenide, bipolar or silicon germanium solutions. Our DWDM transport processor combines an OC-192 transceiver, forward error correction, performance monitoring logic and G.709 digital wrapper into a single CMOS chip solution, occupying less than one half the space and consuming one-third the power of non-integrated solutions.

In addition, our latest generation of switch devices is designed for the Metro access and edge markets. These devices feature support for IPv4 and IPv6, MPLS, Ethernet over MPLS, advanced quality of service, and sophisticated packet classification and traffic management. They are also scalable to large systems with external memory.


	*Other Ethernet Markets*

The economies of scale derived from the Ethernet protocol have created emerging markets for Ethernet applications. Broadcom’s advance switch products are being used in second and third generation cellular infrastructures, IP DSLAM, Metro Ethernet, blade servers in data centers, passive optical networks and residential Ethernet applications. In addition, our Ethernet transceivers are now being integrated into printers, gaming consoles, LAN on motherboard applications, audiovisual equipment and a number of other consumer devices.


	*Security Processors and Adapters*

Most corporations today use the Internet for the transmission of data among corporate offices and remote sites and for a variety of e-commerce and business-to-business applications. To secure corporate networks from intrusive attacks and provide for secure communications among corporate sites and remote users, an increasing amount of networking equipment will include technology to establish virtual private networks, or VPNs, which use the Internet Protocol security, or IPSec, protocol. In addition to VPNs, secure socket layer, commonly referred to as SSL, is used to secure sensitive information among users and service providers for e-commerce applications.

Our SSL family of CryptoNetX ^tm high-speed security processors and adapters for enterprise networks is enabling companies to guard against Internet attacks without compromising the speed and performance of their networks. Our PCI 2.2-compliant adapters provide a range of performance from 800 to 10,000 SSL transactions per second. Our IPsec processors are built upon a proprietary, scalable silicon architecture that performs standards-compliant cryptographic functions at data rates ranging from a few Mbps to 10 Gbps full duplex. This architecture is being deployed across all of our product lines, addressing the entire broadband security network spectrum from residential applications to enterprise networking equipment. This scalable architecture allows us to develop standalone security products for very high-speed networking applications and to integrate the IP security processor core into lower speed solutions for consumer products, such as cable and DSL modem applications.


	*Broadband Processors*

Broadband processors are high performance devices enabling high-speed computations that help identify, optimize and control the flow of data within the broadband network. The continued growth of IP traffic, coupled with the increasing demand for new and improved services and applications such as security, high-speed access and quality of service, is placing additional processing demands on next-generation networking and communications infrastructures. From the enterprise to access network to the service provider edge, networking equipment must be able to deliver wire-speed performance from the OC-3 standard, which transmits data at 155 Mbps, through the OC-192 standard, which transmits data at 10 Gbps, as well as the scalability and flexibility required to support next-generation services and features. In the enterprise and data center markets, server and storage applications require high computational performance to support complex protocol conversions, and services such as virtualization. With the migration from second generation cellular mobile systems, or 2G, to the third generation cellular mobile systems, or 3G, networks and mobile infrastructure equipment must be able to support higher bandwidth rates utilizing low power resource levels.

Leveraging our expertise in high-performance, low-power very large scale integration design, we have developed a family of high performance, low power processor solutions designed specifically to meet the needs of next-generation networks. Our SiByte® family of processors delivers four key features essential for today’s embedded broadband network processors: very high performance, low power dissipation, high integration of network-centric functions, and programmability based on an industry-standard instruction set architecture. At the heart of the SiByte family of processors is the SB-1 core, a MIPS® 64-bit superscalar CPU capable of operating at frequencies of 400 MHz up to 1.2 GHz. These processors provide customers with a solution for high-speed network processing, including packet classification, queuing, forwarding and exception processing for wired and wireless networks. They enable complex applications such as deep content switching, routing and load balancing to be performed at wire speed. Our devices are also being designed for utilization in the fast growing network storage market, including network attached storage, storage area networking and RAID applications. Our general purpose processors are ideal for the complex protocol conversions, virtualization and proxy computations that storage applications require.


	*Custom Silicon Products*

Custom silicon products are devices for applications that customers are able to semi-customize by integrating their own intellectual property with our proprietary intellectual property cores. We have successfully deployed such devices into the LAN, WAN and PC markets. Our typical semi-custom devices are complex mixed-signal designs that leverage our advanced design processes.


	Mobile & Wireless Networking


	*Wireless Local Area Networking*

Wireless local area networking, also known as wireless LAN or Wi-Fi® networking, allows equipment on a local area network to connect without the use of any cables or wires. Wireless local area networking adds the convenience of mobility to the powerful utility provided by high-speed data networks, and is a natural extension of broadband connectivity in the home and office.

The first widely adopted standard for Wi-Fi technology was the IEEE 802.11b specification, which is the wireless equivalent of 10 Mbps Ethernet, allowing transfer speeds up to 11 Mbps and spanning distances of up to 100 meters. However, over the past year technology based upon the 802.11g specification, which provides almost five times the data rate of 802.11b networks, has replaced 802.11b as the mainstream wireless technology for both business and consumer applications. The industry has also begun transitioning, although to a lesser degree, to the 802.11a standard. Wi-Fi technology was first utilized in applications such as computers and routers, and is now being embedded into a number of other electronic devices such as printers, digital cameras, gaming devices, PDAs, cellular phones and broadband modems.

Our AirForce ^tm wireless LAN product family consists of standards-based transceiver and wireless network process chipsets and software that allow PCs and other devices to connect to wireless home or enterprise networks using 802.11b, 802.11g or 802.11a/g dual-band technology. Our 54g ^tm chipsets represent our implementation of the IEEE 802.11g wireless LAN standard that preserves full interoperability with 802.11b but provides connectivity at speeds of up to 54 Mbps. In 2003 we introduced our AirForce One ^tm single-chip 802.11b wireless LAN solution that enables wireless LAN connectivity in pocket-sized mobile devices such as PDAs, cellular phones, MP3 players and digital cameras. In 2004 Broadcom introduced the AirForce One single-chip 802.11g solution designed for embedded applications, an 802.11g and 802.11a/g chipset for USB 2.0 devices, and an integrated router system-on-a-chip with advanced security designed for small-to-medium sized business requirements.

In 2004 we also introduced a number of software and hardware performance enhancements for our wireless LAN product family, including 125 High Speed Mode ^tm technology, which increases the speed of wireless transmissions, BroadRange ^tm technology, which extends Wi-Fi coverage range, and SecureEasySetup ^tm , a software wizard that enables simple setup of a secure wireless network. All of our AirForce products also offer advanced security features, including certified support for Wi-Fi Protected Access ^tm , or WPA, the Cisco Compatible Extensions, and hardware accelerated Advanced Encryption Standard, or AES, encryption The entire AirForce family is comprised of all-CMOS solutions that are capable of self-calibrating based on usage temperature and other environmental conditions.


	*Cellular and Wireless Wide Area Networking*

The cellular handset market is transitioning from pure voice to broadband multimedia and data, transforming the traditional cellular phone from a voice-only device into a multimedia gateway. Products emerging from this transition will allow end-users to wirelessly download e-mail, view web pages, stream audio and video, and conduct videoconferences with cellular phones, PDAs, laptops and other mobile devices.

The international Global System for Mobile Communication, or GSM, is currently the dominant standard for digital mobile communications. Enhanced data communications standards derived from GSM include General Packet Radio Services, or GPRS, Enhanced Data Rates for GSM Evolution, or EDGE, and Universal Mobile Telecommunications System, or UMTS. UMTS technologies, including Wideband Code Division Multiple Access (WCDMA), are typically referred to as 3G technologies. Each of these standards have extended GSM to enable packet-based “always on” Internet applications and more efficient data transport with higher transmission rates for a new generation of data services such as Internet browsing, 3-D gaming and multimedia messaging with rich graphics and audio content.

We develop and market GSM, GPRS, EDGE and WCDMA chipsets and reference designs with complete software and terminal solutions for use in cellular phones, cellular modem cards and wireless PDAs. Our cellular and wireless wide area networking products include baseband processor solutions, which integrate both mixed signal and digital functions on a single chip. We also provide a range of handset and cellular modem engineering design services to select customers, encompassing printed circuit board, RF and handset hardware, software development and integration, product verification and certification, and manufacturing support.


	*Wireless Personal Area Networking*

The Bluetooth® short-range wireless networking standard is a low-cost wire-replacement technology that enables connectivity among a wide variety of mainstream consumer electronic devices including PCs, mobile

phones, PDAs, headsets and automotive electronics. Bluetooth short-range wireless connectivity enables personal area networking, or PAN, at speeds up to one Mbps, and can cover distances up to 30 feet. Bluetooth technology allows devices to automatically synchronize and exchange data with other Bluetooth-enabled devices without the need for wires, and enables wireless headset connections to cellular phones and wireless mouse and keyboard applications.

Our Blutonium® family of single-chip Bluetooth devices and software provides a complete solution that enables manufacturers to add Bluetooth functionality to almost any electronic device with a minimal amount of development time and resources. Our Bluetooth solutions, all of which have been qualified by the Bluetooth Qualification Board to meet version 1.2 of the Bluetooth specification, are incorporated in PCs, PDAs, wireless mouse and keyboard applications, and GSM/ GPRS/ UMTS and CDMA mobile phones.

Our Bluetooth solutions offer the industry’s highest levels of performance and integration with designs in standard CMOS, allowing them to be highly reliable while lowering manufacturing costs. In addition, we have developed InConcert ^tm software to allow products enabled with our AirForce Wi-Fi and Blutonium Bluetooth chips to collaboratively coexist within the same radio frequency.


	*Mobile Multimedia Processors*

Multimedia is becoming increasingly prevalent in handheld devices such as cellular phones. To support new multimedia features including imaging, graphics, camera image capture, audio capture, music playback, music streaming, video streaming, video capture, gaming, mobile TV, and more, Broadcom offers a new line of video and multimedia processors based on a low power, high performance architecture referred to as Videocore®.

Unlike hard-wired processor cores, Videocore devices are built to provide customers the benefit of total software flexibility and programmability. Videocore supports a wide variety of standard and non-standard software and codecs including, but not limited to, extremely low power implementations of MPEG-4 and H.264 for video, MP3 and AAC for audio, and MIDI. Providing the base codecs to our key customers allows them to rapidly develop next-generation products while maintaining backward compatibility of applications software. Because the fully programmable architecture of our mobile multimedia processors enables a complete range of multimedia functions to be executed in software, the system designer can quickly move to production without the costly overhead and time-to-market uncertainty of hardware accelerators. The scalability of the architecture allows features or new industry standard codecs to be added shortly before product release or through firmware upgrades in the field.

Our Videocore processors can either be used as standalone multimedia processors or as co-processors in conjunction with a host processor such as a GSM, EDGE or WCDMA baseband. Videocore-enabled video and multimedia processors for advanced handheld multimedia products are designed and optimized for video record/playback, mobile TV and 3D mobile gaming. Videocore technology is designed to create power efficient, high performance processors focused on multimedia for cellular handsets, but we are also deploying Videocore processors into a number of other portable applications, where battery life and performance are important.


	*Voice over IP*

Voice over Internet Protocol refers to the transmission of voice over any IP packet-based network. VoIP is stimulating dramatic changes in the traditional public switched and enterprise telephone networks. Packet-based networks provide significant economic advantages over traditional circuit-switched voice networks. The trend to IP networks for voice has been driven by the significant buildout of the Internet and deregulation of long distance and local phone service.

The enterprise equipment market is being radically affected by the convergence of corporate data networks and voice communications. A host of new enterprise services can be enabled when a LAN-based Ethernet switching infrastructure is used to carry both data and voice. We provide both silicon and software to enable our enterprise equipment customers to provide cost-effective IP phones.

Within residential markets, VoIP is gaining momentum as a viable alternative to traditional public telephone networks. In addition to enabling cost savings for long-distance calls, VoIP creates a number of consumer product opportunities and applications for equipment vendors and service providers.

IP Phone Processors. Our IP phone silicon and software solutions integrate packet processing, voice processing and switching technologies to provide the quality of service, high fidelity and reliability necessary for enterprise telephony applications. Our processors have enabled the development of new XML-based IP phones that can perform a wide variety of functions that traditional phones cannot support. Originally focused on Fast Ethernet, these processors now include support for Gigabit Ethernet as well to support the growing deployment of Gigabit Ethernet throughout enterprises.

Residential Terminal Adapter Processors. Our terminal adapter VoIP solutions enable existing analog phones to be connected to broadband modems via Ethernet. These products support residential VoIP services that are now being offered by a variety of broadband service providers.

Wi-Fi Phone Processors. In 2004 we introduced our first Wi-Fi phone processor that enables the development of next generation, cordless phone replacement devices. These Wi-Fi phones are beginning to be deployed in both enterprises and homes as the use of broadband and Wi-Fi applications increases in these markets.

All of our VoIP processors support our BroadVoice® technology, which features a wideband high fidelity mode that significantly improves the clarity and quality of telephony voice service.

Reference Platforms

We also develop reference platforms designed around our integrated circuit products that represent example system-level applications for incorporation into our customers’ equipment. These reference platforms generally include a fairly extensive suite of software drivers as well as protocol and application layer software to assist our customers in developing their own end products. By providing these reference platforms, we can assist our customers in achieving easier and faster transitions from initial prototype designs to final production releases. These reference platforms enhance the customer’s confidence that our products will meet its market requirements and product introduction schedules.

Customers and Strategic Relationships

We sell our products to leading manufacturers of broadband communications equipment in each of our target markets. Because we leverage our technologies across different markets, certain of our integrated circuits may be incorporated into equipment used in several different markets.

Customers currently shipping broadband communications equipment incorporating our products include Alcatel, Apple, Askey, Cisco, D-Link, Dell, Echostar, Hewlett-Packard, IBM, Motorola, Ningbo Bird, Nortel Networks, Scientific-Atlanta, Sony Ericsson, Thomson CE and 3Com, among others. To meet the current and future technical needs in our target markets, we have also established strategic relationships with multiservice operators that provide broadband communications services to consumers and businesses.

As part of our business strategy, we periodically establish strategic relationships with certain key customers. In September 1997 we entered into a development, supply and license agreement with General Instrument, now a wholly-owned subsidiary of Motorola, which provided that we would develop and supply chips for General Instrument’s digital cable set-top boxes. In November 2000 we modified that agreement to amend General Instrument’s minimum purchase requirements and entered into a new supply agreement with General Instrument covering our sale of cable modem chips. In January 2002 we modified the new supply agreement to add minimum purchase requirements of chips for digital set-top boxes. In December 2002 and January 2003 we further amended the supply agreement to extend minimum purchase requirements of chips for cable modems and digital set-top boxes, respectively.

From time to time, we have entered into development agreements with Cisco, Nortel Networks, Sony Ericsson, 3Com and others. We have worked closely with these customers to co-develop products.

A small number of customers have historically accounted for a substantial portion of our net revenue. Sales to our five largest customers represented approximately 51.1%, 51.6% and 52.3% of our net revenue in 2004, 2003 and 2002, respectively. See Note 13 of Notes to Consolidated Financial Statements, included in Part IV, Item 15 of this Report.

We expect that our key customers will continue to account for a substantial portion of our net revenue in 2005 and in the foreseeable future. These customers and their respective contributions to our net revenue have varied and will likely continue to vary from period to period. We typically sell products pursuant to purchase orders that customers can generally cancel or defer on short notice without incurring a significant penalty, and currently do not have agreements with any of our key customers that contain long-term commitments to purchase specified volumes of our products.

Core Technologies

Using proprietary technologies and advanced design methodologies, we design, develop and supply complete system-on-a-chip solutions and related hardware and software applications for our target markets. Our proven system-on-a-chip design methodology has enabled us to be first to market with advanced chips that are highly integrated and cost-effective, and that facilitate the easy integration of our customers’ intellectual property. Our design methodology leverages industry-standard, state-of-the-art electronic design automation tools, and generally migrates easily to new silicon processes and technology platforms. It also allows for the easy integration of acquired or licensed technology, providing customers with a broad range of silicon options with differentiated networking and performance features.

We believe that one of our key competitive advantages is our broad base of core technologies encompassing the complete design space from systems to silicon. We have developed and continue to build on the following technology foundations:


	•	proprietary communications systems algorithms and protocols;
	•	advanced DSP hardware architectures;
	•	system-on-a-chip design methodologies and advanced library development for both standard cell and full-custom integrated circuit design;
	•	high-performance radio frequency, analog and mixed-signal circuit design using industry-standard CMOS processes;
	•	high-performance custom microprocessor architectures and circuit designs; and
	•	extensive software reference platforms and board-level hardware reference platforms to enable complete system-level solutions.

Research and Development

We have assembled a large team of experienced engineers and technologists, many of whom are leaders in their particular field or discipline. As of December 31, 2004 we had 2,282 research and development employees, the majority of whom hold advanced degrees. Our work force includes 291 employees with Ph.Ds. These key employees are involved in advancing our core technologies, as well as applying them to our product development activities. Because the system-on-a-chip solutions for many of our target markets benefit from the same underlying core technologies, we are able to address a wide range of broadband communications markets with a relatively focused investment in research and development.

We believe that the achievement of higher levels of integration and the timely introduction of new products in our target markets is essential to our growth. Our current plans are to maintain our significant research and development staffing levels in 2005. In addition to our principal design facilities in Irvine, California and Santa Clara County, California, we have additional design centers in Tempe, Arizona; San Diego County, California; Duluth, Georgia; Germantown, Maryland; Andover, Massachusetts; Nashua, New Hampshire; Matawan, New Jersey; and Seattle, Washington. Internationally, we also have design facilities in Belgium, Canada, China, France, India, Israel, the Netherlands, Singapore, Taiwan and the United Kingdom. We anticipate establishing additional design centers in the United States and other countries in the future.

Our research and development expense was $495.1 million, $434.0 million and $461.8 million in 2004, 2003 and 2002, respectively. In addition, for employees engaged in research and development, we had non-cash stock-based compensation expense and stock option exchange expense of $58.6 million, $384.1 million and $252.4 million in 2004, 2003 and 2002, respectively. We also had amortization of purchased intangible assets related to research and development of $0.8 million and $19.6 million in 2003 and 2002, respectively. We had no amortization of purchased intangible assets related to research and development in 2004.

Manufacturing


	*Wafer Fabrication*

We manufacture our products using standard CMOS process techniques. The standard nature of these processes permits us to engage independent silicon foundries to fabricate our integrated circuits. By subcontracting our manufacturing requirements, we are able to focus our resources on design and test applications where we believe we have greater competitive advantages. This strategy also eliminates the high cost of owning and operating a semiconductor wafer fabrication facility.

Our operations and quality engineering team closely manages the interface between manufacturing and design engineering. While our design methodology typically creates a smaller than average die for a given function, it also generates full-custom integrated circuit designs. As a result, we are responsible for the complete functional and parametric performance testing of our devices, including quality. We employ a fully staffed operations and quality organization similar to that of a vertically integrated semiconductor manufacturer. We also arrange with our foundries to have online work-in-progress control. Our approach makes the manufacturing subcontracting process transparent to our customers.

We depend on six independent foundry subcontractors located in Asia to manufacture substantially all of our products. Our key silicon foundries are Taiwan Semiconductor Manufacturing Corporation in Taiwan, Chartered Semiconductor Manufacturing in Singapore, NEC Corporation in Japan, Semiconductor Manufacturing International Corporation in China, Silterra Malaysia Sdn. Bhd. in Malaysia and United Microelectronics Corporation in Taiwan. Any inability of one of our six independent foundry subcontractors to provide the necessary capacity or output for our products could result in significant production delays and could materially and adversely affect our business, financial condition and results of operations. While we currently believe we have adequate capacity to support our current sales levels, we continue to work with our existing foundries to obtain more production capacity, and we intend to qualify new foundries to provide additional production capacity. It is possible that from time to time adequate foundry capacity may not be available on acceptable terms, if at all. In the event a foundry experiences financial difficulties, or if a foundry suffers any damage to or destruction of its facilities, or in the event of any other disruption of foundry capacity, we may not be able to qualify alternative manufacturing sources for existing or new products in a timely manner.

Our products are currently fabricated with .5 micron, triple layer metal; .35 micron, quad layer metal; .22 micron, five layer metal; .18 micron, five and six layer metal; and .13 micron, six and seven layer metal. We continuously evaluate the benefits, on a product-by-product basis, of migrating to smaller geometry process technologies, and in 2004 we began to migrate certain products to 90 nanometer, seven to eight layer metal, feature sizes. Although our experience to date with the migration of products to smaller processes geometries has been predominantly favorable, we could experience difficulties in future process migration. Other companies in our industry have experienced difficulty transitioning to new manufacturing processes and, consequently, have suffered reduced yields or delays in product deliveries. We believe that the transition of our products to smaller geometries will be important for us to remain competitive. Our business, financial condition and results of operations could be materially and adversely affected if any such transition is substantially delayed or inefficiently implemented.


	*Assembly and Test*

Our wafer probe testing is conducted by either our independent foundries or independent wafer probe test subcontractors. Following completion of the wafer probe tests, the die are assembled into packages and the finished products are tested by one of our seven key subcontractors: ASAT Ltd. in Hong Kong; STATSChipac in

Singapore, Korea, Malaysia and China; Siliconware Precision in Taiwan; NEC Corporation in Japan; United Test and Assembly Center in Singapore; Signetics in Korea; and Amkor in Korea, Philippines and China. While we have not experienced material disruptions in supply from assembly subcontractors to date, we and others in our industry have experienced shortages in the supply of packaging materials from time to time, and we could experience shortages or assembly problems in the future. The availability of assembly and testing services from these subcontractors could be materially and adversely affected in the event a subcontractor experiences financial difficulties, or if a subcontractor suffers any damage to or destruction of its facilities, or in the event of any other disruption of assembly and testing capacity.


	*Quality Assurance*

Manufacturers of broadband communications equipment demand high quality and reliable semiconductors for incorporation into their products. We focus on product reliability from the initial stage of the design cycle through each specific design process, including layout and production test design. In addition, we subject our designs to in-depth circuit simulation at temperature, voltage and processing extremes before initiating the manufacturing process.

We prequalify each assembly and foundry subcontractor. This prequalification process consists of a series of industry standard environmental product stress tests, as well as an audit and analysis of the subcontractor’s quality system and manufacturing capability. We also participate in quality and reliability monitoring through each stage of the production cycle by reviewing electrical and parametric data from our wafer foundry and assembly subcontractors. We closely monitor wafer foundry production to ensure consistent overall quality, reliability and yield levels. In cases where we purchase wafers on a fixed cost basis, any improvement in yields can reduce our cost per chip.

As part of our total quality program, we received ISO 9002 certification, a comprehensive International Standards Organization specified quality system, for our Singapore facility. All of our principal independent foundries and package assembly facilities are currently ISO 9001 certified.

While every effort is made to monitor and meet the quality requirements of Broadcom’s customers, including the use of industry standard procedures and other additional methods, it is possible that an unanticipated quality problem may result in interruptions or delays in product shipments to our end customers. In that event, our reputation may be damaged and customers may be reluctant to buy our products, and we may be required to incur significant capital and other resources to remedy any quality problem with our products.


	*Environmental Management*

Broadcom is also focusing on managing the environmental impact of our products. Our manufacturing flow is registered to ISO 14000, the international standards related to environmental management, by our subcontractors. Due to environmental concerns, the need for lead-free solutions in electronic components and systems is receiving increasing attention within the semiconductor industry and many companies are moving towards becoming compliant with the Restriction of Hazardous Substances Directive, the European legislation that restricts the use of a number of substances, including lead, effective July 2006. Broadcom believes that its products are compliant with the RoHS Directive and that materials will be available to meet these emerging regulations. However, it is possible that unanticipated supply shortages or delays may occur as a result of these new regulations.


	*Product Distribution*

Initially we distributed products to our customers through an operations and distribution center located in Irvine, California. In 1999 we established an international distribution center in Singapore. This facility put us closer to our suppliers and many key customers and improved our ability to meet customers’ needs. Our Irvine facility continues to ship products to U.S. destinations, while our Singapore facility distributes products to international destinations. We also ship products of our wholly-owned subsidiary ServerWorks from a Los Angeles distribution facility. Products shipped to international destinations, primarily in Asia, represented 79.0%, 77.7% and 70.0% of our total net revenue in 2004, 2003 and 2002, respectively.

Sales and Marketing

Our sales and marketing strategy is to achieve design wins with technology leaders in each of our targeted broadband communications markets by providing quality, state-of-the-art products and superior sales, field application and engineering support. We market and sell our products in the United States through a direct sales force, distributors and manufacturers’ representatives. The majority of our sales occur through our direct sales force, which is based in offices located in California, Colorado, Florida, Georgia, Illinois, Maine, Maryland, Massachusetts, Michigan, New York, New Jersey, North Carolina, Ohio, Texas and Virginia. We have engaged independent distributors, Arrow Electronics and Insight Electronics, to service the North American and South American markets.

We dedicate sales managers to principal customers to promote close cooperation and communication. We also provide our customers with reference platform designs for most products. We believe this enables our customers to achieve easier and faster transitions from the initial prototype designs through final production releases. We believe these reference platform designs also significantly enhance customers’ confidence that our products will meet their market requirements and product introduction schedules.

We market and sell our products internationally through regional offices located in Canada, China, Finland, France, Germany, Japan, Korea, the Netherlands, Singapore, Sweden, Taiwan and the United Kingdom, as well as through a network of independent distributors and representatives in Australia, Canada, Germany, Hong Kong, India, Israel, Japan, Korea, Singapore and Taiwan. We select these independent entities based on their ability to provide effective field sales, marketing communications and technical support to our customers. All international sales to date have been denominated in U.S. dollars. For information regarding revenue from independent customers by geographic area, see Note 13 of Notes to Consolidated Financial Statements, included in Part IV, Item 15 of this Report.

Backlog

Our sales are made primarily pursuant to standard purchase orders for delivery of products. Due to industry practice that allows customers to cancel or change orders with limited advance notice prior to shipment, we do not believe that backlog is a reliable indicator of future revenue levels.

Competition

Broadband communications markets and the semiconductor industry are intensely competitive and are characterized by rapid change, evolving standards, short product life cycles and price erosion. We believe that the principal factors of competition for integrated circuit providers in our target markets include:


	•	product quality;
	•	product capabilities;
	•	level of integration;
	•	reliability;
	•	price;
	•	time-to-market;
	•	market presence;
	•	standards compliance;
	•	system cost;
	•	intellectual property;
	•	customer interface and support; and
	•	reputation.

We believe that we compete favorably with respect to each of these factors.

We compete with a number of major domestic and international suppliers of integrated circuits and related applications in our target broadband communications markets. We also compete with suppliers of system-level and motherboard-level solutions incorporating integrated circuits that are proprietary or sourced from manufacturers other than Broadcom. This competition has resulted and will continue to result in declining

average selling prices for our products. In all of our target markets, we also may face competition from newly established competitors, suppliers of products based on new or emerging technologies, and customers that choose to develop their own silicon solutions. We also expect to encounter further consolidation in the markets in which we compete.

Many of our competitors operate their own fabrication facilities and have longer operating histories and presence in key markets, greater name recognition, larger customer bases and significantly greater financial, sales and marketing, manufacturing, distribution, technical and other resources than we do. As a result, these competitors may be able to adapt more quickly to new or emerging technologies and changes in customer requirements or to devote greater resources to the promotion and sale of their products. Current and potential competitors have established or may establish financial or strategic relationships among themselves or with existing or potential customers, resellers or other third parties, and may refuse to provide us with information necessary to permit the interoperability of our products with theirs. Accordingly, it is possible that new competitors or alliances among competitors could emerge and rapidly acquire significant market share. In addition, competitors may develop technologies that more effectively address our markets with products that offer enhanced features, lower power requirements or lower costs. Increased competition could result in pricing pressures, decreased gross margins and loss of market share and may materially and adversely affect our business, financial condition and results of operations.

Intellectual Property

Our success and future revenue growth depend, in part, on our ability to protect our intellectual property. We rely primarily on patent, copyright, trademark and trade secret laws, as well as nondisclosure agreements and other methods, to protect our proprietary technologies and processes. However, these measures may not provide meaningful protection for our intellectual property.

We hold more than 800 U.S. patents and have filed more than 3,000 additional U.S. patent applications. We may not receive any additional patents as a result of these applications or future applications. Even if additional patents are issued, any claims allowed may not be sufficiently broad to protect our technology. In addition, any existing or future patents could be challenged, invalidated or circumvented, and any rights granted under such patents may not provide us with meaningful protection. We may not have foreign patents or pending applications corresponding to our U.S. patents and applications. Even if foreign patents are granted, effective enforcement in foreign countries may not be available. The failure of any patents to adequately protect our technology would make it easier for our competitors to offer similar products. In connection with our participation in the development of various industry standards, we may be required to license certain of our patents to other parties, including competitors, that develop products based upon the adopted industry standards.

We also generally enter into confidentiality agreements with our employees and strategic partners, and typically control access to and distribution of our documentation and other proprietary information. Despite these precautions, it may be possible for a third party to copy or otherwise obtain and use our products, services or technology without authorization, to develop similar technology independently, or to design around our patents. In addition, effective copyright, trademark and trade secret protection may not be available or may be limited in certain foreign countries. We have also entered into agreements with certain of our customers and granted these customers the right to use our proprietary technology in the event we default in our contractual obligations, including product supply obligations, and fail to cure the default within a specified time period. In addition, we often incorporate the intellectual property of our strategic customers into our designs, and therefore have certain obligations with respect to the non-use and non-disclosure of their intellectual property. It is possible that the steps taken by us to prevent misappropriation or infringement of our intellectual property or our customers’ intellectual property may not be successful. Moreover, we are currently engaged in litigation and may need to engage in additional litigation to enforce our intellectual property rights or the rights of our customers, to protect our trade secrets, or to determine the validity and scope of proprietary rights of others, including our customers. Such litigation could result in substantial costs and diversion of our resources and could materially and adversely affect our business, financial condition and results of operations.

Companies in the semiconductor industry often aggressively protect and pursue their intellectual property rights. From time to time, we have received, and may continue to receive, notices that claim we have infringed upon, misappropriated or misused other parties’ proprietary rights. Moreover, we have in the past and may continue to be engaged in litigation with parties who claim that we have infringed their patents or misappropriated or misused their trade secrets. We may also be sued by parties who may seek to invalidate one or more of our patents. Any future claims may materially and adversely affect our business, financial condition and results of operations. For example, in a patent or trade secret action, a court could issue a preliminary or permanent injunction that would require us to withdraw or recall certain products from the market or redesign certain products offered for sale or under development. In addition, we may be liable for damages for past infringement and royalties for future use of the technology. We may also have to indemnify certain customers and strategic partners under our agreements with such parties if a third party alleges or if a court finds that our products or activities have infringed upon, misappropriated or misused another party’s proprietary rights. Even if claims against us are not valid or successfully asserted, the defense of these claims could result in significant costs and a diversion of management and personnel resources. In any of these events, our business, financial condition and results of operations may be materially and adversely affected. Additionally, we have sought and may in the future seek to obtain a license under a third party’s intellectual property rights and have granted and may grant a license to certain of our intellectual property rights to a third party in connection with a cross-license agreement or a settlement of claims or actions asserted against us. However, we may not be able to obtain a license on commercially reasonable terms, if at all.

Employees

As of December 31, 2004 we had 3,373 full-time, contract and temporary employees, including 2,282 individuals engaged in research and development, 444 engaged in sales and marketing, 268 engaged in manufacturing operations and 379 engaged in finance, legal and general administration activities. Our employees are not represented by any collective bargaining agreement, and we have never experienced a work stoppage. We believe our employee relations are good.


Item 2.	*Properties*

We lease facilities in Irvine (our corporate headquarters) and Santa Clara County, California. Each of these facilities includes administration, sales and marketing, research and development and operations functions. In addition to our principal design facilities in Irvine and Santa Clara County, we lease additional design facilities in Tempe, Arizona; San Diego County, California; Duluth, Georgia; Germantown, Maryland; Andover, Massachusetts; Nashua, New Hampshire; Matawan, New Jersey; and Seattle, Washington.

Internationally, we lease a distribution center that includes engineering design and administrative facilities in Singapore as well as engineering design and administrative facilities in Belgium, Canada, China, France, India, Israel, the Netherlands, Taiwan and the United Kingdom.

In addition, we lease various sales and marketing facilities in the United States and several other countries.

The leased facilities currently in use comprise an aggregate of approximately 1.5 million square feet. Our principal facilities have lease terms expiring between 2005 and 2017. We believe that the facilities under lease by us will be adequate for at least the next 12 months. In December 2004 we entered into a lease agreement under which our corporate headquarters will move from our present location to a new, larger facility in Irvine, which will eventually consist of eight buildings with an aggregate of approximately 0.7 million square feet. The lease term is a period of ten years and two months beginning after the completion of the first two buildings and related tenant improvements, which is anticipated to occur in the first quarter of 2007.

For additional information regarding our obligations under property leases, see Note 6 of Notes to Consolidated Financial Statements, included in Part IV, Item 15 of this Report.


Item 3.	*Legal Proceedings*

The information set forth under Note 12 of Notes to Consolidated Financial Statements, included in Part IV, Item 15 of this Report, is incorporated herein by reference.


Item 4.	*Submission of Matters to a Vote of Security Holders*

No matters were submitted to a vote of security holders during the quarter ended December 31, 2004.

PART II


Item 5.	*Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities*

Market Information and Holders

Our Class A common stock is traded on the NASDAQ National Market under the symbol BRCM. The following table sets forth, for the periods indicated, the high and low sale prices for our Class A common stock on the NASDAQ National Market:


		High		Low

Year Ended December 31, 2003




	First Quarter	$	20.34	$	12.20




	Second Quarter		28.23		11.86




	Third Quarter		29.96		19.81




	Fourth Quarter		37.65		26.25




Year Ended December 31, 2004




	First Quarter	$	45.00	$	34.08




	Second Quarter		47.05		36.51




	Third Quarter		46.75		25.25




	Fourth Quarter		34.49		25.61




Year Ending December 31, 2005




	First Quarter (through February 25, 2005)	$	34.07	$	29.79

As of December 31, 2004 there were 1,972 record holders of our Class A common stock and 303 record holders of our Class B common stock. On February 25, 2005 the last reported sale price of our Class A common stock on the NASDAQ National Market was $32.88 per share.

Our Class B common stock is not publicly traded. Each share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock and in most instances automatically converts upon sale or other transfer.

Dividend Policy

We have never declared or paid cash dividends on shares of our capital stock. We currently intend to retain all of our earnings, if any, for use in our business and in acquisitions of other businesses, assets, products or technologies, and for purchases of our common stock from time to time. We do not anticipate paying any cash dividends in the foreseeable future.

Securities Authorized for Issuance under Equity Compensation Plans

The information under the caption “Equity Compensation Plan Information,” appearing in the Proxy Statement, is hereby incorporated by reference. For additional information on our stock incentive plans and activity, see Note 8 of Notes to Consolidated Financial Statements, included in Part IV, Item 15 of this Report.

Issuer Purchases of Equity Securities

Although we have made no purchases of our equity securities in the open market to date, in February 2005 our Board of Directors authorized a program to repurchase shares of our Class A common stock. The Board approved the repurchase of shares having an aggregate value of up to $250 million from time to time over a period of one year, depending on market conditions. These repurchases will be made in open market or privately negotiated transactions in compliance with SEC Rule 10b-18, subject to market conditions, applicable legal requirements and other factors. This program does not obligate us to acquire any particular amount of common stock and may be suspended at any time at our discretion.

Recent Sales of Unregistered Securities

In the three months ended December 31, 2004, we issued an aggregate of 1,776,944 shares of our Class A common stock upon conversion of a like number of shares of our Class B common stock. The offer and sale of those securities were effected without registration in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act.


Item 6.	*Selected Financial Data*


		Years Ended December 31,

		2004		2003			2002			2001			2000

		(In thousands, except per share data)




Consolidated Statements of Operations Data




Net revenue		$	2,400,610	$	1,610,095		$	1,082,948		$	961,821		$	1,096,160




Cost of revenue			1,193,294		839,776			604,397			557,733			484,219

Gross profit			1,207,316		770,319			478,551			404,088			611,941




Operating expense:




	Research and development ⁽¹⁾		495,075		434,018			461,804			446,648			250,676




	Selling, general and administrative ⁽¹⁾		212,727		190,138			165,267			155,448			103,305




	Stock-based compensation		73,320		263,960			359,790			484,039			115,307




	Amortization of purchased intangible assets		3,703		3,504			22,387			27,192			1,255




	Settlement costs		68,700		194,509			3,000			3,000			—




	In-process research and development		63,766		—			—			109,710			713,050




	Impairment of goodwill and other intangible assets		18,000		439,611			1,265,038			1,181,649			—




	Stock option exchange		—		209,266			—			—			—




	Restructuring costs		—		2,932			119,680			34,281			—




	Amortization of goodwill		—		—			—			753,042			136,984




	Merger-related costs		—		—			—			—			4,745

Income (loss) from operations			272,025		(967,619	)		(1,918,415	)		(2,790,921	)		(713,381	)




Interest income, net			15,010		6,828			12,183			23,019			24,299




Other income (expense), net			7,317		26,053			(32,750	)		(30,875	)		(2,693	)

Income (loss) before income taxes			294,352		(934,738	)		(1,938,982	)		(2,798,777	)		(691,775	)




Provision (benefit) for income taxes			75,607		25,127			297,594			(56,729	)		(3,953	)

Net income (loss)		$	218,745	$	(959,865	)	$	(2,236,576	)	$	(2,742,048	)	$	(687,822	)

Net income (loss) per share (basic) ⁽²⁾		$	.68	$	(3.29	)	$	(8.35	)	$	(10.79	)	$	(3.13	)

Net income (loss) per share (diluted) ⁽²⁾		$	.63	$	(3.29	)	$	(8.35	)	$	(10.79	)	$	(3.13	)


	December 31,

	2004		2003		2002		2001		2000

	(In thousands)




Consolidated Balance Sheet Data




Cash and cash equivalents	$	858,592	$	558,669	$	389,555	$	403,758	$	523,904




Working capital		1,087,342		492,227		187,767		265,107		673,092




Goodwill and purchased intangible assets, net		1,079,262		834,319		1,252,639		2,338,740		3,260,464




Total assets		2,885,839		2,017,622		2,216,153		3,631,409		4,677,822




Long-term debt, including current portion		—		—		113,470		118,046		23,649




Total shareholders’ equity		2,365,986		1,489,805		1,644,521		3,207,410		4,475,260


(1)	Excludes stock-based compensation expense, amortization of purchased intangible assets and stock option exchange expense. See Consolidated Statements of Operations, included in Part IV, Item 15 of this Report.

(2)	See Notes 1 and 2 of Notes to Consolidated Financial Statements, included in Part IV, Item 15 of this Report, for an explanation of the calculation of net income (loss) per share.

The table above sets forth our selected consolidated financial data. We prepared this information using the consolidated financial statements of Broadcom for the five years ended December 31, 2004. The consolidated financial statements include the results of operations of acquisitions as of their respective acquisition dates. See Note 3 of Notes to Consolidated Financial Statements, included in Part IV, Item 15 of this Report.

You should read this selected consolidated financial data together with the Consolidated Financial Statements and related Notes contained in this Report and in our prior and subsequent reports filed with the SEC, as well as the section of this Report and our other reports entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”


Item 7.	*Management’s Discussion and Analysis of Financial Condition and Results of Operations*

You should read the following discussion and analysis in conjunction with our Consolidated Financial Statements and related Notes thereto included in Part IV, Item 15 of this Report and the “Risk Factors” section at the end of this Item 7, as well as other cautionary statements and risks described elsewhere in this Report, before deciding to purchase, hold or sell our common stock.

Overview

Broadcom Corporation is a global leader in wired and wireless broadband communications semiconductors. Our products enable the convergence of high-speed data, high definition video, voice and audio at home, in the office and on the go. Broadcom provides manufacturers of computing and networking equipment, digital entertainment and broadband access products, and mobile devices with complete system-on-a-chip and software solutions. Our diverse product portfolio addresses every major broadband communications market, and includes solutions for digital cable, satellite and IP set-top boxes; high definition television (HDTV); cable and DSL modems and residential gateways; high-speed transmission and switching for local, metropolitan, wide area and storage networking; home and wireless networking; cellular and terrestrial wireless communications; Voice over Internet Protocol (VoIP) gateway and telephony systems; broadband network and security processors; and SystemI/ O ^tm server solutions.

Net Revenue. We sell our products to leading manufacturers of broadband communications equipment in each of our target markets. Because we leverage our technologies across different markets, certain of our integrated circuits may be incorporated into equipment used in several different markets. We utilize independent foundries to manufacture all of our semiconductor products.

Our net revenue is generated principally by sales of our semiconductor products. Such sales represented approximately 99.0%, 98.5% and 95.7% of our total net revenue in 2004, 2003 and 2002, respectively. We derive the remaining balance of our net revenue predominantly from development agreements, software licenses and maintenance agreements, system-level reference designs and cancellation fees.

The majority of our sales occur through the efforts of our direct sales force. However, we derived approximately 9.6%, 7.1% and 10.4% of our total net revenue from sales made through distributors in 2004, 2003 and 2002, respectively.

The demand for our products has been affected in the past, and may continue to be affected in the future, by various factors, including, but not limited to, the following:


	•	economic and market conditions in the semiconductor industry and the broadband communications markets;
	•	the timing, rescheduling or cancellation of significant customer orders and our ability, as well as the ability of our customers, to manage inventory;
	•	the rate at which our present and future customers and end-users adopt our products and technologies in our target markets;
	•	our ability to specify, develop or acquire, complete, introduce, market and transition to volume production new products and technologies in a cost effective and timely manner; and
	•	the qualification, availability and pricing of competing products and technologies and the resulting effects on sales and pricing of our products.

For these and other reasons, our net revenue and results of operations in 2004 and prior periods may not necessarily be indicative of future net revenue and results of operations.

From time to time, our key customers place large orders causing our quarterly net revenue to fluctuate significantly. We expect these fluctuations will continue.

Sales to our significant customers, including sales to their manufacturing subcontractors, as a percentage of net revenue were as follows:


	Years Ended
	December 31,

	2004			2003			2002

Hewlett-Packard ⁽¹⁾		12.9	%		15.5	%		14.8	%




Motorola		12.4			*			12.1




Dell		*			11.9			11.3




Cisco ⁽²⁾		*			*			10.0




Five largest customers as a group		51.1			51.6			52.3


*	Less than 10% of net revenue.


(1)	Includes sales to Compaq, which was acquired by Hewlett-Packard in May 2002, for all periods presented.

(2)	Includes sales to Linksys, which was acquired by Cisco in June 2003, for all periods presented.

We expect that our largest customers will continue to account for a substantial portion of our net revenue in 2005 and for the foreseeable future. The identity of our largest customers and their respective contributions to our net revenue have varied and will likely continue to vary from period to period.

Net revenue derived from all independent customers located outside the United States, excluding foreign subsidiaries or manufacturing subcontractors of customers that are headquartered in the United States, as a percent of total net revenue was as follows:


	Years Ended
	December 31,

	2004			2003			2002

Asia		15.0	%		19.6	%		20.5	%




Europe		6.4			5.9			4.4




Other		0.2			0.3			0.4

		21.6	%		25.8	%		25.3	%

Net revenue derived from actual shipments to international destinations, primarily to Asia, represented approximately 79.0%, 77.7% and 70.0% of the Company’s net revenue in 2004, 2003 and 2002, respectively.

All of our revenue to date has been denominated in U.S. dollars.

Gross Margin. Our gross profit as a percentage of net revenue, or gross margin, has been affected in the past, and may continue to be affected in the future, by various factors, including, but not limited to, the following:


	•	our product mix and volumes of product sales;
	•	stock-based compensation expense;
	•	the position of our products in their respective life cycles;
	•	the effects of competition;
	•	the effects of competitive pricing programs;
	•	manufacturing cost efficiencies and inefficiencies;
	•	fluctuations in direct product costs such as wafer pricing and assembly, packaging and testing costs, and overhead costs such as prototyping expenses;
	•	provisions for excess or obsolete inventories;
	•	product warranty costs;
	•	amortization of purchased intangible assets; and
	•	licensing and royalty arrangements.

Net Income (Loss). Our net income (loss) has been affected in the past, and may continue to be affected in the future, by various factors, including, but not limited to, the following:


	•	stock-based compensation expense;
	•	amortization of purchased intangible assets;
	•	settlement costs;
	•	in-process research and development, or IPR&D;
	•	impairment of goodwill and intangible assets;
	•	stock-option exchange expense; and
	•	restructuring costs.

In 2004 our net income was approximately $218.7 million as compared to a net loss of approximately $959.9 million in 2003, a difference of $1.179 billion. This significant improvement in profitability in 2004 was the direct result of a 49.1% improvement in net revenue and a 2.5 percentage point improvement in gross margin. This resulted in an increase of $437.0 million of gross profit. In addition, we had significant reductions in 2004 in stock-based compensation expense, settlement costs, impairment of goodwill and intangible assets, and stock option exchange expense, aggregating approximately $947.3 million, offset by an increase in IPR&D of approximately $63.8 million.

Product Cycles. The cycle for test, evaluation and adoption of our products by customers can range from three to more than six months, with an additional three to more than nine months before a customer commences volume production of equipment incorporating our products. Due to this lengthy sales cycle, we may experience significant delays from the time we incur expenses for research and development, selling, general and administrative efforts, and investments in inventory, to the time we generate corresponding revenue, if any. The rate of new orders may vary significantly from month to month and quarter to quarter. If anticipated sales or shipments in any quarter do not occur when expected, expenses and inventory levels could be disproportionately high, and our results of operations for that quarter, and potentially for future quarters, would be materially and adversely affected.

Acquisition Strategy. An element of our business strategy involves the acquisition of businesses, assets, products or technologies that allow us to reduce the time required to develop new technologies and products and bring them to market, incorporate enhanced functionality into and complement our existing product offerings, augment our engineering workforce, and/or enhance our technological capabilities. We plan to continue to evaluate strategic opportunities as they arise, including business combination transactions, strategic relationships, capital infusions and the purchase or sale of assets.

In 2004, 2003 and 2002 we completed eight acquisitions for original aggregate equity consideration of $458.0 million and cash consideration of $86.0 million. In 2004 we acquired RAIDCore, Inc., a developer of redundant array of inexpensive disks, or RAID, and virtualization software; Sand Video, Inc., a developer of advanced video compression semiconductor technology; M-Stream, Inc., a developer of solutions for signal-to-noise ratio performance improvements in cellular handsets; WIDCOMM, Inc., a provider of software solutions for Bluetooth wireless products; Zyray Wireless Inc., a developer of baseband co-processors addressing WCDMA (Wideband Code Division Multiple Access) mobile devices; and Alphamosaic Limited, a developer of advanced mobile imaging, multimedia and 3D graphics technology optimized for use in cellphones and other mobile devices. In 2003 we acquired certain assets of Gadzoox Networks, Inc., a provider of storage networking technology. In 2002 we acquired Mobilink Telecom, Inc., a supplier of chipsets and reference designs for use in mobile phones, PDAs and cellular modem cards. Because each of these acquisitions was accounted for as a purchase transaction, the accompanying consolidated financial statements include the results of operations of the acquired companies commencing as of their respective acquisition dates. See Note 3 of Notes to Consolidated Financial Statements.

Business Enterprise Segments. We operate in one reportable operating segment, broadband communications. The Financial Accounting Standards Board, or FASB, Statement of Financial Accounting Standards, or SFAS, No. 131, Disclosures about Segments of an Enterprise and Related Information, or SFAS 131, establishes standards for the way that public business enterprises report information about operating segments in annual consolidated financial statements and requires that those enterprises report selected information about operating segments in

interim financial reports. SFAS 131 also establishes standards for related disclosures about products and services, geographic areas and major customers. Although we had four operating segments at December 31, 2004, under the aggregation criteria set forth in SFAS 131 we only operate in one reportable operating segment, broadband communications.

Under SFAS 131, two or more operating segments may be aggregated into a single operating segment for financial reporting purposes if aggregation is consistent with the objective and basic principles of SFAS 131, if the segments have similar economic characteristics, and if the segments are similar in each of the following areas:


	•	the nature of products and services;
	•	the nature of the production processes;
	•	the type or class of customer for their products and services; and
	•	the methods used to distribute their products or provide their services.

We meet each of the aggregation criteria for the following reasons:


	•	the sale of integrated circuits is the only material source of revenue for each of our four operating segments or business groups;
	•	the integrated circuits sold by each of our operating segments use the same standard CMOS manufacturing processes;
	•	the integrated circuits marketed by each of our operating segments are sold to one type of customer: manufacturers of broadband equipment, who incorporate our integrated circuits into their electronic products; and
	•	all of our integrated circuits are sold through a centralized sales force and common wholesale distributors.

All of our business groups share similar economic characteristics as they have a similar long term business model, operate at similar gross margins, and have similar research and development expenses and similar selling, general and administrative expenses. The causes for variation among each of our business groups are the same and include factors such as (i) life cycle and price and cost fluctuations, (ii) number of competitors, (iii) product differentiation and (iv) size of market opportunity. Additionally, each business group is subject to the overall cyclical nature of the semiconductor industry. The number and composition of employees and the amount and types of tools and materials required are similar for each business group. Finally, even though we periodically reorganize our business groups based upon changes in customers, end markets or products, acquisitions, long-term growth strategies, and the experience and bandwidth of our vice presidents/general managers, the common financial goals for each business group remain constant.

Because we meet each of the criteria set forth in SFAS 131 and our four business groups as of December 31, 2004 share similar economic characteristics, we aggregate our results of operations in one reportable operating segment.

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net revenue and expenses in the reporting period. We regularly evaluate our estimates and assumptions related to allowances for doubtful accounts, sales returns and allowances, warranty reserves, inventory reserves, goodwill and purchased intangible asset valuations, strategic investments, deferred income tax asset valuation allowances, restructuring costs, litigation and other loss contingencies. We base our estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The actual results experienced by us may differ materially and adversely from management’s estimates. To the extent there are material differences between our estimates and the actual results, our future results of operations will be affected.

We believe the following critical accounting policies require us to make significant judgments and estimates in the preparation of our consolidated financial statements:


	•	Net Revenue We recognize product revenue when the following fundamental criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) our price to the customer is fixed or determinable and (iv) collection of the resulting accounts receivable is reasonably assured. In addition, we do not recognize revenue until all customer acceptance requirements have been met, when applicable. These criteria are usually met at the time of product shipment. However, a portion of our sales are made through distributors under agreements allowing for pricing credits and/or rights of return. Product revenue on sales made through these distributors is not recognized until the distributors ship the product to their customers. Customer purchase orders and/or contracts are generally used to determine the existence of an arrangement. Shipping documents and the completion of any customer acceptance requirements, when applicable, are used to verify product delivery or that services have been rendered. We assess whether a price is fixed or determinable based upon the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. We assess the collectibility of our accounts receivable based primarily upon the creditworthiness of the customer as determined by credit checks and analysis, as well as the customer’s payment history.

	•	Sales Returns and Allowance for Doubtful Accounts. We record reductions to revenue for estimated product returns and pricing adjustments, such as competitive pricing programs and rebates, in the same period that the related revenue is recorded. The amount of these reductions is based on historical sales returns, analysis of credit memo data, specific criteria included in rebate agreements, and other factors known at the time. Additional reductions to revenue would result if actual product returns or pricing adjustments exceed our estimates. We also maintain an allowance for doubtful accounts for estimated losses resulting from the inability of customers to make required payments. If the financial condition of any of our customers was to deteriorate, resulting in an impairment of its ability to make payments, additional allowances could be required.

	•	Inventory and Warranty Reserves. We write down our inventory for estimated obsolescence or unmarketable inventory in an amount equal to the difference between the cost of inventory and its estimated realizable value based upon assumptions about future demand and market conditions. If actual demand and market conditions are less favorable than those projected by management, additional inventory write-downs could be required. Our products typically carry a one to three year warranty. We establish reserves for estimated product warranty costs at the time revenue is recognized. Although we engage in extensive product quality programs and processes, our warranty obligation is affected by product failure rates, use of materials and service delivery costs incurred in correcting any product failure. Should actual product failure rates, use of materials or service delivery costs differ from our estimates, additional warranty reserves could be required, which could reduce gross margins.

	•	Goodwill and Purchased Intangible Assets. Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the net tangible and intangible assets acquired. The amounts and useful lives assigned to other intangible assets impact the amount and timing of future amortization, and the amount assigned to in-process research and development is expensed immediately. The value of our intangible assets, including goodwill, could be impacted by future adverse changes such as: (i) any future declines in our operating results, (ii) a decline in the valuation of technology company stocks, including the valuation of our common stock, (iii) another significant slowdown in the worldwide economy or the semiconductor industry or (iv) any failure to meet the performance projections included in our forecasts of future operating results. We evaluate these assets, including purchased intangible assets deemed to have indefinite lives, on an annual basis in the fourth quarter or more frequently if we believe indicators of impairment exist. In the process of our annual impairment review, we primarily use the income approach methodology of valuation that includes the discounted cash flow method as well as other generally accepted valuation methodologies to determine the fair value of our intangible assets. Significant management judgment is required in the forecasts of future operating results that are used in the discounted cash flow method of valuation. The estimates we have

used are consistent with the plans and estimates that we use to manage our business. It is possible, however, that the plans and estimates used may be incorrect. If our actual results, or the plans and estimates used in future impairment analyses, are lower than the original estimates used to assess the recoverability of these assets, we could incur additional impairment charges.

• Deferred Taxes and Contingencies. We utilize the liability method of accounting for income taxes. We record a valuation allowance to reduce our deferred tax assets to the amount that we believe is more likely than not to be realized. In assessing the need for a valuation allowance, we consider all positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance. As a result of our cumulative losses and the full utilization of our loss carrybacks, we concluded that a full valuation allowance against our net deferred tax assets was appropriate. In the future, if we realize a deferred tax asset that carries a valuation allowance, we will record a reduction to income tax expense in the period of such realization. We record estimated tax liabilities to the extent the contingencies are probable and can be reasonably estimated. However the actual liability in any such tax contingencies may be materially different from our estimates, which could result in the need to record additional tax liabilities or potentially reverse previously recorded tax liabilities.

• Litigation and Settlement Costs. From time to time, we are involved in disputes, litigation and other legal actions. We are aggressively defending our current litigation matters, including our pending securities class action lawsuit. However, there are many uncertainties associated with any litigation, and we cannot assure you that these actions or other third party claims against us will be resolved without costly litigation and/or substantial settlement charges. In addition the resolution of any future intellectual property litigation may require us to make royalty payments, which could adversely impact gross margins in future periods. If any of those events were to occur, our business, financial condition and results of operations could be materially and adversely affected. We record a charge equal to at least the minimum estimated liability for a loss contingency when both of the following conditions are met: (i) information available prior to issuance of the financial statements indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements and (ii) the range of loss can be reasonably estimated. However the actual liability in any such litigation may be materially different from our estimates, which could result in the need to record additional costs.

Results of Operations

The following table sets forth certain Consolidated Statements of Operations data expressed as a percentage of net revenue for the periods indicated:


		Years Ended December 31,

		2004			2003			2002

Net revenue			100.0	%		100.0	%		100.0	%




Cost of revenue			49.7			52.2			55.8

Gross profit			50.3			47.8			44.2




Operating expense:




	Research and development ⁽¹⁾		20.6			27.0			42.6




	Selling, general and administrative ⁽¹⁾		8.9			11.8			15.3




	Stock-based compensation		3.0			16.3			33.1




	Amortization of purchased intangible assets		0.2			0.2			2.1




	Settlement costs		2.9			12.1			0.3




	In-process research and development		2.7			—			—




	Impairment of goodwill and other intangible assets		0.7			27.3			116.8




	Stock option exchange		—			13.0			—




	Restructuring costs		—			0.2			11.1

Income (loss) from operations			11.3			(60.1	)		(177.1	)




Interest income, net			0.7			0.4			1.1




Other income (expense), net			0.3			1.6			(3.0	)

Income (loss) before income taxes			12.3			(58.1	)		(179.0	)




Provision for income taxes			3.2			1.5			27.5

Net income (loss)			9.1	%		(59.6	)%		(206.5	)%


(1)	Excludes stock-based compensation expense, amortization of purchased intangible assets and stock option exchange expense. See Consolidated Statements of Operations, included in Part IV, Item 15 of this Report.


	*Years Ended December 31, 2004 and 2003*


	Net Revenue, Cost of Revenue and Gross Profit

The following table presents net revenue, cost of revenue and gross profit for 2004 and 2003:


	Years Ended December 31,

	2004					2003

			% of Net					% of Net					%
	Amount		Revenue			Amount		Revenue			Increase		Change

	(In thousands, except percentages)




Net revenue	$	2,400,610		100.0	%	$	1,610,095		100.0	%	$	790,515		49.1	%




Cost of revenue		1,193,294		49.7			839,776		52.2			353,518		42.1

Gross profit	$	1,207,316		50.3	%	$	770,319		47.8	%	$	436,997		56.7

Net Revenue. Our revenue is generated principally by sales of our semiconductor products. Net revenue is revenue less reductions for rebates and provisions for returns and allowances. The following table presents net revenue from each of our major target markets and their contributions to the increase in net revenue in 2004 as compared to 2003:


	Years Ended December 31,

	2004					2003

			% of Net					% of Net					%
	Amount		Revenue			Amount		Revenue			Increase		Change

	(In thousands, except percentages)




Enterprise networking	$	1,121,090		46.7	%	$	917,876		57.0	%	$	203,214		22.1	%




Broadband communications		780,383		32.5			373,562		23.2			406,821		108.9




Mobile and wireless		499,137		20.8			318,657		19.8			180,480		56.6

Net revenue	$	2,400,610		100.0	%	$	1,610,095		100.0	%	$	790,515		49.1

The growth in net revenue resulted primarily from an increase in the volume of shipments of our semiconductor products stemming from the rise in demand for our products in each of our major target markets in 2004, except for Intel processor-based server chipsets, included in enterprise networking, which declined. The previously anticipated decline in shipments of our Intel processor-based server chipsets resulted in a $46.9 million decrease in net revenue for those products in 2004 as compared with 2003.

Our enterprise networking products include Ethernet controllers, transceivers, switches, broadband network and security processors, server chipsets and storage products. Our broadband communications products include solutions for cable modems, digital cable set-top boxes, direct broadcast satellites, personal video recording applications, DSL applications, IP set-top boxes, HD-DVD and digital TV. Our mobile and wireless products include wireless LAN, cellular, Bluetooth, mobile multimedia and VoIP solutions.

The following table presents net revenue from each of our major target markets and their contributions to the decrease in net revenue that occurred in the three months ended December 31, 2004 as compared to the three months ended September 30, 2004:


	Three Months Ended					Three Months Ended
	December 31, 2004					September 30, 2004

			% of Net					% of Net						%
	Amount		Revenue			Amount		Revenue			Decrease			Change

	(In thousands, except percentages)




Enterprise networking	$	238,048		44.1	%	$	295,724		45.8	%	$	(57,676	)		(19.5	)%




Broadband communications		175,354		32.5			218,810		33.8			(43,456	)		(19.9	)




Mobile and wireless		125,988		23.4			131,981		20.4			(5,993	)		(4.5	)

Net revenue	$	539,390		100.0	%	$	646,515		100.0	%	$	(107,125	)		(16.6	)

The decrease in net revenue from the third quarter of 2004 to the fourth quarter of 2004 resulted primarily from overall industry weakness, specifically related to inventory corrections in the direct broadcast satellite and networking markets. In addition, as expected, we experienced a quarter-to-quarter decline in shipments of our Intel processor-based server chipsets of approximately $35.0 million.

We currently anticipate that total net revenue in the first quarter of 2005 will be relatively consistent with the $539.4 million achieved in the fourth quarter of 2004. In the first quarter of 2005, we expect continued softness in the enterprise networking market and a further decline in shipments of our Intel processor-based server chipsets. In addition we expect to see some seasonality in our mobile and wireless business, offset by an increase in our Bluetooth business. We also believe we are seeing signs of recovery in our direct broadcast satellite business, as well as in other areas of our broadband communications target market.

We recorded rebates to certain customers in the amounts of $263.6 million and $165.2 million in 2004 and 2003, respectively. We account for rebates in accordance with FASB Emerging Issues Task Force Issue, or EITF,

Issue No. 01-9, Accounting for Consideration Given by a Vendor to Customer (Including a Reseller of the Vendor’s Products) , and, accordingly, record reductions to revenue for rebates in the same period that the related revenue is recorded. The amount of these reductions is based upon the terms included in our rebate agreements. Historically, reversals of rebate accruals have not been material. We anticipate that accrued rebates in absolute dollars will vary in future periods based on the level of overall sales to customers who participate in our rebate programs. However, we do not expect rebates to impact our gross margin as our prices to these customers and corresponding revenue and margins are already net of such rebates.

Cost of Revenue and Gross Profit. Cost of revenue includes the cost of purchasing the finished silicon wafers manufactured by independent foundries, costs associated with assembly, packaging, test and quality assurance for semiconductor products, prototyping costs, amortization of purchased technology, and manufacturing overhead, including costs of personnel and equipment associated with manufacturing support, product warranty costs and provisions for excess or obsolete inventories. Gross profit represents net revenue less the cost of revenue.

The 2004 increase in absolute dollars of gross profit resulted primarily from the 49.1% increase in net revenue. Gross margin increased from 47.8% in 2003 to 50.3% in 2004. The primary factors that resulted in this 2.5 percentage point improvement in gross margin were (i) a 1.5 percentage point improvement in product margin primarily due to changes in product mix, (ii) decreases in stock option exchange expense, the amortization of purchased intangible assets and stock-based compensation expense, which improved gross margin by 0.7, 0.6 and 0.3 percentage points, respectively, (iii) offset by an increase in the provision for excess and obsolete inventory of 0.4 percentage points.

In 2004 we increased our provision for excess and obsolete inventory as compared to 2003 as a result of an increase in gross inventory. The primary factors that resulted in increased inventory were the expansion of inventory in response to higher levels of purchase orders received from our customers, shorter lead times for certain of our customers, and the buildup of buffer inventory based upon our forecast of future demand for certain key products. Our inventory levels are determined based on these factors as well as the stage at which our products are in their respective product life cycles and competitive situations in the marketplace. Such considerations are balanced against the risk of obsolescence or potentially excess inventory levels and may require us to make additional provisions.

The following table presents details of certain non-cash expenses incurred in manufacturing operations for 2004 and 2003 that are included in cost of revenue:


	Years Ended December 31,

	2004					2003

			% of Net					% of Net						%
	Amount		Revenue			Amount		Revenue			Decrease			Change

	(In thousands, except percentages)




Stock-based compensation expense	$	1,367		0.1	%	$	6,528		0.4	%	$	(5,161	)		(79.1	)%




Amortization of purchased intangible assets		12,821		0.5			17,207		1.1			(4,386	)		(25.5	)




Stock option exchange expense		—		—			11,454		0.7			(11,454	)		—

	$	14,188		0.6	%	$	35,189		2.2	%	$	(21,001	)		(59.7	)

The 2004 decrease in stock-based compensation expense related primarily to a reduction in the number of assumed unvested options and shares of restricted stock being amortized and the elimination of deferred compensation as a result of the termination of employment of certain employees. At December 31, 2004 the unamortized balance of deferred compensation, which will be amortized to cost of revenue through 2007, was approximately $0.2 million. However, if there are any modifications or cancellations of the underlying unvested stock options or restricted stock, we may be required to either accelerate from future periods or cancel the remaining deferred compensation. In the event additional deferred compensation is recorded in connection with any future acquisitions, our cost of revenue may be increased by its amortization.

The 2004 decrease in amortization of purchased intangible assets resulted from fewer purchased intangible assets being amortized. At December 31, 2004 the unamortized balance of completed technology was

approximately $12.2 million, of which $9.2 million and $3.0 million are expected to be amortized to cost of revenue in 2005 and 2006, respectively. However, if we acquire purchased intangible assets in the future, our cost of revenue may be increased by the amortization of those assets.

We charged approximately $11.5 million in stock option exchange expense to cost of revenue in 2003. There were no comparable charges incurred in 2004.

Gross margin has been and will likely continue to be impacted in the future by competitive pricing programs, fluctuations in the volume of our product sales, fluctuations in silicon wafer costs and assembly, packaging and testing costs, product warranty costs, provisions for excess or obsolete inventories, possible future changes in product mix and the introduction of products with lower margins, among other factors. Our gross margin may also be impacted by additional stock-based compensation expense and amortization of purchased intangible assets related to future acquisitions and will be negatively impacted by the effectiveness of the FASB’s revised rules on stock option expensing in the third quarter of 2005. For a discussion of the effects of future expensing of stock options, see “Recent Accounting Pronouncements,” below. We anticipate that gross margin in the first quarter of 2005 will be relatively consistent with the 49.9% reported in the fourth quarter of 2004.

Research and Development and Selling, General and Administrative Expenses

The following table presents research and development and selling, general and administrative expenses for 2004 and 2003:


	Years Ended December 31,

	2004					2003

			% of Net					% of Net					%
	Amount		Revenue			Amount		Revenue			Increase		Change

	(In thousands, except percentages)




Research and development	$	495,075		20.6	%	$	434,018		27.0	%	$	61,057		14.1	%




Selling, general and administrative		212,727		8.9			190,138		11.8			22,589		11.9

Research and Development Expense. Research and development expense consists primarily of salaries and related costs of employees engaged in research, design and development activities, costs related to engineering design tools and computer hardware, subcontracting costs, prototyping costs and facilities expenses. Research and development expense does not include amounts associated with stock-based compensation or stock option exchange expenses for employees engaged in research and development or expense amounts associated with amortization of purchased intangible assets related to research and development activities.

The 2004 increase in research and development expense in absolute dollars resulted primarily from a $41.2 million increase in personnel-related expenses. The increase in personnel-related expenses was primarily due to a 22.3% increase in the number of employees engaged in research and development activities in 2004, through acquisitions and hiring. In addition, there were increases in outsourced engineering, facilities and engineering design tool expenses in 2004, offset in part by lower depreciation expense on computer software and equipment. Based upon past experience, we anticipate that research and development expense in absolute dollars will increase over the long term as a result of the growth and diversification of the markets we serve, new product opportunities, changes in our compensation policies and any expansion into new markets and technologies. We anticipate that research and development expense in the first quarter of 2005 will increase from the $127.4 million incurred in the fourth quarter of 2004.

We remain committed to significant research and development efforts to extend our technology leadership in the broadband communications markets in which we operate. We hold over 800 U.S. patents, and we maintain an active program of filing for and acquiring additional U.S. and foreign patents in broadband communications and other fields.

Selling, General and Administrative Expense. Selling, general and administrative expense consists primarily of personnel-related expenses, legal and other professional fees, facilities expenses, communications expenses and advertising expenses. Selling, general and administrative expense does not include amounts associated with stock-

based compensation or stock option exchange expenses for administrative employees or expense amounts associated with amortization of purchased intangible assets related to selling, general and administrative activities.

The 2004 increase in selling, general and administrative expense in absolute dollars resulted primarily from a $22.5 million increase in personnel-related expenses. The increase in personnel-related expenses was primarily due to a 22.1% increase in the number of employees engaged in selling, general and administrative activities in 2004, through acquisitions and hiring. In addition, there were increases in expenses for travel and entertainment, marketing and accounting, which were offset by decreases in legal expense. Based upon past experience, we anticipate that selling, general and administrative expense in absolute dollars will continue to increase over the long-term to support any expansion of our operations through indigenous growth and acquisitions, as a result of periodic changes in our infrastructure to support any increased headcount, changes in our compensation policies, acquisition and integration activities, and international operations, and as a result of current and future litigation. We anticipate that selling, general and administrative expense in the first quarter of 2005 will increase from the $51.4 million incurred in the fourth quarter of 2004.


	Stock-Based Compensation Expense

The following table presents stock-based compensation expense for employees engaged in research and development and selling, general and administrative activities for 2004 and 2003, which expense was segregated from the presentation of those items in the consolidated statements of operations:


	Years Ended December 31,

	2004					2003

			% of Net					% of Net						%
	Amount		Revenue			Amount		Revenue			Decrease			Change

	(In thousands, except percentages)




Research and development	$	58,611		2.4	%	$	219,337		13.6	%	$	(160,726	)		(73.3	)%




Selling, general and administrative		14,709		0.6			44,623		2.7			(29,914	)		(67.0	)

	$	73,320		3.0	%	$	263,960		16.3	%	$	(190,640	)		(72.2	)

Stock-based compensation expense generally represents the amortization of deferred compensation resulting from acquisitions. Deferred compensation primarily represents the difference between the fair value of our Class A common stock at the measurement date of each acquisition and the exercise price of each unvested stock option or each share of restricted stock assumed in the acquisition. To a much lesser extent, stock-based compensation expense represents expense related to restricted stock units issued to employees. Deferred compensation is presented as a reduction of shareholders’ equity and is amortized ratably over the respective vesting periods of the applicable unvested securities, generally three to five years.

The 2004 decrease in stock-based compensation expense related primarily to a reduction in the number of assumed unvested options and shares of restricted stock being amortized and the elimination of deferred compensation as a result of the termination of employment of certain employees. At December 31, 2004 the unamortized balance of deferred compensation, which will be amortized to operating expenses through 2008, was approximately $40.5 million. However, if there are any modifications or cancellations of the underlying unvested stock options or restricted stock, we may be required to either accelerate from future periods or cancel the remaining deferred compensation. In the event additional deferred compensation is recorded in connection with any future acquisitions, our operating expenses would be increased by its amortization.

For a discussion of the effects of future expensing of stock options, see the “Recent Accounting Pronouncements,” below.


	Amortization of Purchased Intangible Assets

The following table presents amortization of purchased intangible assets related to research and development and selling, general and administrative activities for 2004 and 2003, which expense was segregated from the presentation of those items in the consolidated statements of operations:


	Years Ended December 31,

	2004					2003

			% of Net					% of Net			Increase			%
	Amount		Revenue			Amount		Revenue			(Decrease)			Change

	(In thousands, except percentages)




Research and development	$	—		—	%	$	815		0.0	%	$	(815	)		—	%




Selling, general and administrative		3,703		0.2			2,689		0.2			1,014			37.7

	$	3,703		0.2	%	$	3,504		0.2	%	$	199			5.7

Purchased intangible assets primarily include completed technology, customer relationships, customer contracts and backlog, and are amortized on a straight-line basis over the estimated remaining useful lives of the respective assets, ranging from less than one to three years.

At December 31, 2004 the unamortized balance of customer relationships and other purchased intangible assets that will be amortized to future operating expense was approximately $4.9 million, of which $3.6 million and $1.3 million are expected to be amortized in 2005 and 2006, respectively. However, if we acquire purchased intangible assets in the future, our operating expenses would be increased by the amortization of those assets.


	Settlement Costs

The following table presents settlement costs for 2004 and 2003:


	Years Ended December 31,

	2004					2003

			% of Net					% of Net						%
	Amount		Revenue			Amount		Revenue			Decrease			Change

	(In thousands, except percentages)




Settlement costs	$	68,700		2.9	%	$	194,509		12.1	%	$	(125,809	)		(64.7	)%

We recorded $68.7 million in settlement costs in 2004. Of this amount, $60.0 million was related to the settlement of various litigation matters, and the remaining $8.7 million reflects settlement costs related to a claim arising from an acquisition and certain indemnification costs. For a more detailed discussion of our settled and outstanding litigation, see Notes 3 and 12 of Notes to Consolidated Financial Statements.

In May 2003 we completed a management transition at our ServerWorks Corporation subsidiary and entered into a settlement agreement resolving various issues and disputes raised by certain employees and former securities holders of ServerWorks, including issues and disputes with three departing employees, relating to agreements entered into when we acquired ServerWorks in January 2001. In connection with the settlement, we incurred approximately $25.2 million in cash payments and expenses and recorded a one-time non-cash charge of approximately $88.1 million in May 2003, reflecting the acceleration from future periods of stock-based compensation expense, most of which was previously recorded as deferred compensation established upon the acquisition of ServerWorks (and based upon stock market valuations at the time of the acquisition).

In August 2003 we agreed with Intel Corporation to settle all litigation between the companies as well as litigation involving our respective affiliates. In connection with the settlement agreement, we paid Intel $60.0 million in 2003.

We recorded an additional $21.2 million in settlement costs in 2003 in connection with the settlement of other litigation and third party claims.


	In-Process Research and Development

IPR&D totaled $63.8 million for acquisitions completed in 2004. No comparable amount of IPR&D was recorded in 2003. The amounts allocated to IPR&D were determined through established valuation techniques used in the high technology industry and were expensed upon acquisition as it was determined that the underlying projects had not reached technological feasibility and no alternative future uses existed. In accordance with SFAS No. 2, Accounting for Research and Development Costs, as clarified by FASB Interpretation, or FIN, No. 4, Applicability of FASB Statement No. 2 to Business Combinations Accounted for by the Purchase Method — an Interpretation of FASB Statement No. 2 , amounts assigned to IPR&D meeting the above-stated criteria were charged to expense as part of the allocation of purchase price.

The fair value of the IPR&D for each of the acquisitions was determined using the income approach. Under the income approach, the expected future cash flows from each project under development are estimated and discounted to their net present value at an appropriate risk-adjusted rate of return. Significant factors considered in the calculation of the rate of return are the weighted-average cost of capital and return on assets, as well as the risks inherent in the development process, including the likelihood of achieving technological success and market acceptance. Each project was analyzed to determine the unique technological innovations, the existence and reliance on core technology, the existence of any alternative future use or current technological feasibility, and the complexity, cost and time to complete the remaining development. Future cash flows for each project were estimated based on forecasted revenue and costs, taking into account product life cycles, and market penetration and growth rates.

The IPR&D charges include only the fair value of IPR&D performed as of the respective acquisition dates. The fair value of developed technology is included in identifiable purchased intangible assets, and future research and development is included in goodwill. We believe the amounts recorded as IPR&D, as well as developed technology, represent the fair values and approximate the amounts an independent party would pay for these projects at the time of the respective acquisition dates.

The following table summarizes the significant assumptions at the acquisition dates underlying the valuations of IPR&D for our acquisitions completed in 2004:


			Weighted
			Average			Average				Risk
			Estimated			Estimated		Estimated		Adjusted
			Percent			Time to		Cost to		Discount
Company Acquired	Development Projects		Complete			Complete		Complete		Rate			IPR&D

						(In years)		(In millions)					(In millions)




RAIDCore		RAID software stack		60	%		1	$	1.8		23	%	$	2.3




Sand Video		Decoder/codec chips		45			1.5		6.4		28			20.5




M-Stream		Algorithm implemented in DSP chip		30			1		1.3		26			3.7




Zyray		WCDMA baseband co-processor		80			1		5.6		24			25.9




Alphamosaic		Multimedia co-processor		50			1		11.5		21			11.3

We completed the development projects related to the RAIDCore acquisition. For one development project related to the Sand Video acquisition, we reallocated the resources to focus on semiconductor products that we believe are a higher priority. All other development projects are still in process.

Except as noted above, actual results to date have been consistent, in all material respects, with our assumptions at the time of the acquisitions. The assumptions consist primarily of expected completion dates for the IPR&D projects, estimated costs to complete the projects, and revenue and expense projections for the products once they have entered the market.

As of the respective acquisition dates of the 2004 acquisitions, certain ongoing development projects were in process. Research and development costs to bring the products of the acquired companies to technological feasibility are not expected to have a material impact on our results of operations or financial condition.

Impairment of Goodwill and Other Intangible Assets

The following table presents impairment of goodwill and other intangible assets for 2004 and 2003:


	Years Ended December 31,

	2004					2003

			% of Net					% of Net
	Amount		Revenue			Amount		Revenue			Decrease			% Change

	(In thousands, except percentages)




Impairment of goodwill and other intangible assets	$	18,000		0.7	%	$	439,611		27.3	%	$	(421,611	)		(95.9	)%

We performed annual impairment assessments of the carrying value of goodwill recorded in connection with various acquisitions as required under SFAS No. 142, Goodwill and Other Intangible Assets , or SFAS 142, in October 2004 and 2003. Upon completion of the October 2004 and 2003 annual impairment assessments, we determined no impairment was indicated as the estimated fair values of our four reporting units exceeded their respective carrying values. In accordance with SFAS 142, we compared the carrying value of each of our reporting units that existed at those times to their estimated fair values. At October 1, 2004 and 2003 we determined and identified our four reporting units in accordance with SFAS 142.

We estimated the fair values of our reporting units primarily using the income approach valuation methodology that includes the discounted cash flow method, taking into consideration the market approach and certain market multiples as verification of the values derived using the discounted cash flow methodology. The discounted cash flows for each reporting unit were based on discrete four year financial forecasts developed by management for planning purposes and consistent with those distributed to our Board of Directors. Cash flows beyond the four year discrete forecasts were estimated using a terminal value calculation, which incorporated historical and forecasted financial trends for each identified reporting unit and considered long-term earnings growth rates for publicly traded peer companies. Future cash flows were discounted to present value by incorporating the present value techniques discussed in FASB Concepts Statement 7, Using Cash Flow Information and Present Value in Accounting Measurements , or Concepts Statement 7. Specifically, the income approach valuations included reporting unit cash flow discount rates ranging from 13% to 17%, and terminal value growth rates ranging from 0% to 11%. Publicly available information regarding the market capitalization of our company was also considered in assessing the reasonableness of the cumulative fair values of our reporting units estimated using the discounted cash flow methodology.

In May 2003 we determined that indicators of impairment existed for two of our reporting units, ServerWorks and mobile communications, and an additional impairment assessment was performed at that time. We tested the goodwill of these two reporting units for impairment in accordance with SFAS 142. The implied fair value of goodwill was determined in the same manner as that which is utilized to estimate the amount of goodwill recognized in a business combination. As part of the second step of the impairment test performed in 2003, we calculated the fair value of certain assets, including developed technology and IPR&D. To determine the implied value of goodwill, fair values were allocated to the assets and liabilities of each of the affected reporting units in 2003. The implied fair value of goodwill was measured as the excess of the fair value of the affected reporting unit over the amounts assigned to its assets and liabilities. The impairment loss for each of the affected reporting units was measured by the amount the carrying value of goodwill for that reporting unit exceeded the implied fair value of the goodwill. Based on this assessment, we recorded a charge of $438.6 million in June 2003 to write down the value of goodwill associated with the reporting units. Of this charge, $414.5 million represented the balance of goodwill related to the ServerWorks reporting unit and $24.1 million represented the balance of goodwill related to the mobile communications reporting unit.

and design losses, we reduced our forecasts of future operating results for the ServerWorks reporting unit for periods beginning as early as the second quarter of 2004 with the expectation of future loss of market share for that business. These forecasts in turn formed the basis for estimating the fair value of the ServerWorks reporting unit as of June 2003. We are continuing to pursue strategies to reposition our ServerWorks business and develop alternative sources of revenue for that reporting unit.

With respect to the mobile communications reporting unit, the primary factor that contributed to the impairment assessment was the recording of additional goodwill due to contingent consideration earned by former Mobilink shareholders and employees in May 2003 (see Note 3 of Notes to Consolidated Financial Statements), after that reporting unit had already been written down to its implied fair value in October 2002.

In January 2004 we acquired approximately 80 patents and patent applications related to the read channel and hard disk controller market, for $18.0 million. The immediate purpose for acquiring this patent portfolio was to assist us in the defense and settlement of then ongoing and future intellectual property litigation. As a result, we were unable to estimate any future cash flows from the patents. We also did not have any plans to resell the patents to a third party. Due to our intended use for these assets, we concluded that indicators of impairment existed upon acquisition of the patents because the carrying value of the patents might not be recoverable. Upon determining that indicators of impairment existed, we performed a recoverability test in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets , or SFAS 144. Estimates of future cash flows used to test the recoverability of long-lived assets should include only the future cash flows that are directly associated with, and that are expected to arise as a direct result of the use and eventual disposition of the asset. The only cash flows expected to arise as a direct result of the use of the patents are the cash savings expected to result from reduced but undeterminable litigation expenses over the next several years. Due to the unpredictable nature of legal disputes, it is not possible to reasonably: (i) determine if our strategy with respect to the patents will be successful, (ii) forecast litigation expenses that would have been incurred if the patent portfolio was not acquired, or (iii) forecast cash flows generated as a result of acquiring the patents. As a result, no reasonable analysis could be prepared to support future cash flows associated with the patents. Accordingly, pursuant to SFAS 144 the patents were determined to be fully impaired at the date of acquisition. The impairment charge for the patent portfolio was classified as an impairment of goodwill and other intangible assets in the consolidated statements of operations in 2004.

For further discussion of impairment of goodwill and other intangible assets, see Notes 1 and 9 of Notes to Consolidated Financial Statements.

Stock Option Exchange Expense

In April 2003 we commenced an offering to our employees to voluntarily exchange certain vested and unvested stock options. Under the program, employees holding options to purchase our Class A or Class B common stock were given the opportunity to exchange certain of their existing options, with exercise prices at or above $23.58 per share. In connection with this offering we recorded a stock option exchange expense for employees engaged in research and development and selling, general and administrative activities in the amount of $209.3 million in 2003. No comparable charges were incurred in 2004.

On May 5, 2003 the offer period ended and we accepted for exchange and cancellation vested eligible options to purchase 32,642,634 shares of Class A or Class B common stock, with a weighted average exercise price of $48.59 per share. In exchange, we issued 8,574,033 fully vested, non-forfeitable shares of our Class A common stock and recorded stock-based compensation expense of approximately $162.3 million related to the issuance of such vested shares, based on the closing price of our Class A common stock on May 5, 2003 of $18.93 per share. The 8,574,033 shares were included in our calculation of net loss per share effective as of May 5, 2003. Additionally, on May 5, 2003 we accepted for exchange and cancellation unvested eligible options to purchase 20,086,234 shares of Class A or Class B common stock, with a weighted average exercise price of $50.93 per share. In exchange, new options to purchase 18,301,676 shares of our Class A common stock were issued on November 10, 2003. The terms and conditions of the new options, including the vesting schedules, were substantially the same as the terms and conditions of the options cancelled. The exercise price for the new

options was $35.12 per share which was the last reported trading price of our Class A common stock on the grant date.

Eligible employees (members of our Board of Directors were not eligible to participate in the offer) who participated in the offer received, in exchange for the cancellation of vested eligible options, an amount of consideration, represented by fully vested, non-forfeitable common stock, equal to the number of shares underlying such vested eligible options, multiplied by the offered value (as determined under certain terms and conditions set forth in our offer), divided by the closing price of our Class A common stock as reported on the NASDAQ National Market on May 5, 2003. We concluded that the consideration paid for the eligible options represented “substantial consideration” as required by EITF Issue No. 00-23 Issues Relating to Accounting for Stock Compensation Under APB Opinion No. 25 and FASB Interpretation No. 44 , or EITF 00-23, as the offered value per vested option was at least equal to the fair value for each eligible option, as determined using the Black-Scholes option pricing model. In determining the fair value of the eligible options using the Black-Scholes option pricing model, we primarily used the following assumptions: (i) an expected life of approximately four years; (ii) a volatility of 0.70 during that expected life; (iii) a risk-free interest rate of 2.72%; and (iv) no dividends. The weighted average offered value per vested option share was $4.97.

Certain of our employees held unvested eligible options that were previously assumed by us in connection with acquisitions that were accounted for using the purchase method of accounting. We had recorded deferred compensation with respect to those options based upon the applicable stock market valuation at the time of acquisition. To the extent those employees tendered, and we accepted for exchange and cancellation, such assumed eligible options in exchange for new options, we were required to immediately accelerate the amortization of the remaining related deferred compensation previously recorded. Consequently, we recorded a non-cash charge of approximately $55.6 million in May 2003, reflecting the acceleration from future periods of stock-based compensation expense.

Variable accounting is not required under EITF 00-23 for eligible options subject to the offer that were not surrendered for cancellation, because: (i) the shares of Class A common stock offered as consideration for the surrendered options were fully vested and non-forfeitable and (ii) the number of shares received by an employee who accepted the offer was based on the number of surrendered eligible options multiplied by the offered value per vested option, divided by the fair value of the stock at the date of exchange.

We further concluded that the “look back” and “look forward” provisions of paragraph 45 of FIN No. 44, Accounting for Certain Transactions Involving Stock Compensation — An Interpretation of APB Opinion No. 25 , or FIN 44, applied to the stock options surrendered for cancellation. If any stock options were granted to participants in the offer within the six months prior to or following May 5, 2003, those stock options would be subject to variable accounting. As a result of these provisions, we recorded approximately $0.3 million and $3.5 million in 2004 and 2003, respectively, of stock-based compensation expense related to the portion of these variable options that vested during the periods.

In addition to the non-cash charges described above, we incurred certain associated employer payroll taxes and professional fees of approximately $2.8 million in connection with the offering. Employees were responsible for satisfying their portion of the payroll taxes, either through direct cash payment to us or through the sale of a portion of their new shares.

Restructuring Costs

Activity and liability balances related to the 2002 and 2001 Restructuring Plans were as follows:


	2001 Restructuring Plan						2002 Restructuring Plan

				Consolidation						Consolidation
	Workforce			of Excess			Workforce			of Excess
	Reductions			Facilities			Reductions			Facilities			Total

	(In thousands)




Restructuring liabilities at December 31, 2001	$	124		$	10,470		$	—		$	—		$	10,594




Charged to expense in 2002		1,411			30,454			65,048			22,767			119,680




Liabilities assumed in acquisition ⁽¹⁾		—			—			—			6,815			6,815




Non-cash costs ⁽²⁾		(135	)		(4,868	)		(46,821	)		(1,495	)		(53,319	)




Cash payments ⁽³⁾		(1,400	)		(6,502	)		(16,683	)		(3,494	)		(28,079	)

Restructuring liabilities at December 31, 2002		—			29,554			1,544			24,593			55,691




Charged to expense in 2003		—			—			2,932			—			2,932




Non-cash costs ⁽²⁾		—			—			(972	)		—			(972	)




Cash payments ⁽³⁾		—			(11,195	)		(3,504	)		(5,778	)		(20,477	)

Restructuring liabilities at December 31, 2003		—			18,359			—			18,815			37,174




Liabilities assumed in acquisitions ⁽¹⁾		—			—			—			3,411			3,411




Cash payments ⁽³⁾		—			(6,066	)		—			(7,402	)		(13,468	)

Restructuring liabilities at December 31, 2004	$	—		$	12,293		$	—		$	14,824		$	27,117


(1)	Although not related to the 2002 or 2001 Restructuring Plans, we assumed additional liabilities of approximately $6.8 million in connection with the Mobilink acquisition in 2002 and $3.4 million in connection with the Sand Video, WIDCOMM, Zyray and Alphamosaic acquisitions in 2004, for the consolidation of excess facilities, relating primarily to lease terminations, non-cancelable lease costs and write-offs of leasehold improvements. These costs were accounted for under EITF Issue No. 95-3, Recognition of Liabilities in Connection with Purchase Business Combinations, and were recognized as liabilities assumed in the purchase business combinations and offset by corresponding increases in goodwill. The liabilities related to these acquisitions have been classified as restructuring liabilities for presentation in the consolidated balance sheets.

(2)	Non-cash costs related to stock-based compensation expense resulting from an extension of the exercise period for vested stock options of certain terminated employees and the acceleration of the vesting period of certain options of certain terminated employees as required by their assumed option agreements, and the write-off of leasehold improvements.

(3)	Cash payments relate to severance and fringe benefits, net lease payments on excess facilities, lease terminations and non-cancelable lease costs.

These restructuring charges are classified as operating expenses in our consolidated statements of operations.

Certain of the restructuring charges were recorded in periods subsequent to the initial implementations of the 2001 and 2002 Restructuring Plans. These subsequent charges were primarily due to the inability to reasonably estimate those costs at the time of the initial implementations as we were still in the process of reviewing many of our facilities to determine where we could consolidate and which locations would no longer be required. We do not anticipate recording any additional charges under the 2001 and 2002 Restructuring Plans.

The consolidation of excess facilities costs will be paid over the respective lease terms through 2010.

Interest and Other Income, Net

The following table presents interest and other income, net for 2004 and 2003:


	Years Ended December 31,

	2004					2003

			% of Net					% of Net			Increase			%
	Amount		Revenue			Amount		Revenue			(Decrease)			Change

	(In thousands, except percentages)




Interest income, net	$	15,010		0.7	%	$	6,828		0.4	%	$	8,182			119.8	%




Other income, net		7,317		0.3			26,053		1.6			(18,736	)		(71.9	)

Interest Income, Net. Interest income, net, reflects interest earned on average cash and cash equivalents and marketable securities balances. The increase in 2004 was primarily the result of an overall increase in our cash and marketable securities balances and an increase in interest rates.

Other Income, Net. Other income, net, primarily includes recorded gains and losses on strategic investments as well as gains and losses on foreign currency transactions and dispositions of property and equipment. We recognized gains from strategic investments in the amounts of $5.2 million and $24.4 million in 2004 and 2003, respectively. The 2003 gain on investment was incurred on an investment that was previously written down by $24.1 million in September 2002, representing an other-than-temporary decline in the value of that investment at the time. The 2003 gain was offset in part by $2.3 million in losses, representing other-than-temporary declines in the value of other strategic investments. For additional information, see the comparable discussion included under “Years Ended December 31, 2003 and 2002,” below.


	Provision for Income Taxes

The following table presents the provision for income taxes for 2004 and 2003:


	Years Ended December 31,

	2004					2003

			% of Net					% of Net					%
	Amount		Revenue			Amount		Revenue			Increase		Change

	(In thousands, except percentages)




Provision for income taxes	$	75,607		3.2	%	$	25,127		1.5	%	$	50,480		200.9	%

The federal statutory rate was 35% for 2004 and 2003. The difference between our effective tax rate for 2004 and the federal statutory rate resulted primarily from the effects of nondeductible IPR&D and foreign earnings taxed at rates differing from the federal statutory rate. In addition, we realized tax benefits resulting from the reversal of certain prior period tax accruals of $21.3 million related to foreign subsidiaries due to the expiration of the statute of limitations for the assessment of taxes related to such periods. The difference between our effective tax rate for 2003 and the federal statutory rate resulted primarily from the effects of impairment of goodwill, foreign earnings taxed at rates differing from the federal statutory rate, as well as the effects of 2003 domestic losses recorded without tax benefit. We utilize the liability method of accounting for income taxes as set forth in SFAS No. 109, Accounting for Income Taxes , or SFAS 109. See Note 5 of Notes to Consolidated Financial Statements.

We record net deferred tax assets to the extent we believe these assets will more likely than not be realized in accordance with SFAS 109. As a result of our cumulative losses and the full utilization of our loss carrybacks, we provided a full valuation allowance against our net deferred tax assets in 2004 and 2003.


	*Years Ended December 31, 2003 and 2002*


	Net Revenue, Cost of Revenue and Gross Profit

The following table presents net revenue, cost of revenue and gross profit for 2003 and 2002:


	Years Ended December 31,

	2003					2002

			% of Net					% of Net					%
	Amount		Revenue			Amount		Revenue			Increase		Change

	(In thousands, except percentages)




Net revenue	$	1,610,095		100.0	%	$	1,082,948		100.0	%	$	527,147		48.7	%




Cost of revenue		839,776		52.2			604,397		55.8			235,379		38.9

Gross profit	$	770,319		47.8	%	$	478,551		44.2	%	$	291,768		61.0

Net Revenue. The following table presents net revenue from each of our target markets and their contributions to the increase in net revenue in 2003 as compared to 2002:


	Years Ended December 31,

	2003					2002

			% of Net					% of Net					%
	Amount		Revenue			Amount		Revenue			Increase		Change

	(In thousands, except percentages)




Enterprise networking	$	917,876		57.0	%	$	702,562		64.9	%	$	215,314		30.6	%




Broadband communications		373,562		23.2			288,609		26.7			84,953		29.4




Mobile and wireless		318,657		19.8			91,777		8.4			226,880		247.2

Net revenue	$	1,610,095		100.0	%	$	1,082,948		100.0	%	$	527,147		48.7

The growth in net revenue resulted primarily from an increase in volume shipments of our semiconductor products stemming from the rise in demand for our products in each of our major target markets in 2003.

Cost of Revenue and Gross Profit. The 2003 increase in absolute dollars of gross profit resulted primarily from the 48.7% growth in net revenue. The increase in gross margin in 2003 resulted primarily from lower amortization of purchased intangible assets, lower stock-based compensation expense and shifts in our product mix, offset in part by additional stock-based compensation expense due to our stock option exchange.

The following table presents details of certain non-cash expenses incurred in manufacturing operations for 2003 and 2002 that are included in cost of revenue:


	Years Ended December 31,

	2003					2002

			% of Net					% of Net			Increase			%
	Amount		Revenue			Amount		Revenue			(Decrease)			Change

	(In thousands, except percentages)




Stock-based compensation expense	$	6,528		0.4	%	$	12,917		1.2	%	$	(6,389	)		(49.5	)%




Amortization of purchased intangible assets		17,207		1.1			56,032		5.2			(38,825	)		(69.3	)




Stock option exchange expense		11,454		0.7			—		—			11,454			—

	$	35,189		2.2	%	$	68,949		6.4	%	$	(33,760	)		(49.0	)


	Research and Development and Selling, General and Administrative Expenses

The following table presents research and development and selling, general and administrative expenses for 2003 and 2002:


	Years Ended December 31,

	2003					2002

			% of Net					% of Net			Increase			%
	Amount		Revenue			Amount		Revenue			(Decrease)			Change

	(In thousands, except percentages)




Research and development	$	434,018		27.0	%	$	461,804		42.6	%	$	(27,786	)		(6.0	)%




Selling, general and administrative		190,138		11.8			165,267		15.3			24,871			15.0

Research and Development Expense. The 2003 decrease in research and development expense in absolute dollars resulted primarily from a $14.0 million decrease in personnel-related expenses and a $7.4 million decrease in prototyping costs due to our restructuring efforts. In addition, there were modest decreases in system level testing and costs related to engineering design tools and computer hardware. Research and developments costs in 2003 reflected cost savings resulting from the restructuring plan we began implementing in the fourth quarter of 2002, or the 2002 Restructuring Plan, which included workforce reductions. This was partially offset by new hires in 2003 as well as a change in our employee compensation policies implemented in the second quarter of 2003 that resulted in an increase in cash compensation to certain employees.

Selling, General and Administrative Expense. The 2003 increase in selling, general and administrative expense in absolute dollars resulted primarily from a $16.6 million increase in legal costs. In addition, there were modest increases in salaries and related costs, insurance costs and bad debt expense, offset in part by a decrease in information technology maintenance and supplies expense and expenditures for travel and entertainment.


	Stock-Based Compensation Expense

The following table presents stock-based compensation expense for employees engaged in research and development and selling, general and administrative activities for 2003 and 2002, which expense was segregated from the presentation of those items in the consolidated statements of operations:


	Years Ended December 31,

	2003					2002

			% of Net					% of Net						%
	Amount		Revenue			Amount		Revenue			Decrease			Change

	(In thousands, except percentages)




Research and development	$	219,337		13.6	%	$	252,365		23.3	%	$	(33,028	)		(13.1	)%




Selling, general and administrative		44,623		2.7			107,425		9.8			(62,802	)		(58.5	)

	$	263,960		16.3	%	$	359,790		33.1	%	$	(95,830	)		(26.6	)

The 2003 decrease in stock-based compensation expense related primarily to the elimination of deferred compensation due to the termination of certain employees and certain assumed options being fully amortized, offset in part by the acceleration from future periods of stock-based compensation expense related to certain assumed stock options and additional deferred compensation related to earned contingent consideration.

Employee terminations in 2003 and 2002 resulted in the elimination of deferred compensation of approximately $30.1 million and $103.0 million, respectively, that is no longer amortized. We recorded approximately $60.5 million of net deferred compensation in 2003, primarily for contingent consideration earned in connection with our acquisitions of ServerWorks and Mobilink. We recorded approximately $2.2 million of deferred compensation in 2002, primarily for restricted stock assumed in our acquisition of Mobilink.


	Amortization of Purchased Intangible Assets

The following table presents amortization of purchased intangible assets related to research and development and selling, general and administrative activities for 2003 and 2002, which expense was segregated from the presentation of those items in the consolidated statements of operations:


	Years Ended December 31,

	2003					2002

			% of Net					% of Net						%
	Amount		Revenue			Amount		Revenue			Decrease			Change

	(In thousands, except percentages)




Research and development	$	815		0.0	%	$	19,566		1.8	%	$	(18,751	)		(95.8	)%




Selling, general and administrative		2,689		0.2			2,821		0.3			(132	)		(4.7	)

	$	3,504		0.2	%	$	22,387		2.1	%	$	(18,883	)		(84.3	)

The 2003 decrease in amortization of purchased intangible assets was primarily a result of certain purchased intangible assets becoming fully amortized during the year.


	Impairment of Goodwill and Other Intangible Assets

The following table presents impairment of goodwill and other intangible assets for 2003 and 2002:


	Years Ended December 31,

	2003					2002

			% of Net					% of Net						%
	Amount		Revenue			Amount		Revenue			Decrease			Change

	(In thousands, except percentages)




Impairment of goodwill and other intangible assets	$	439,611		27.3	%	$	1,265,038		116.8	%	$	(825,427	)		(65.2	)%

For impairment of goodwill and other intangible assets in 2003, see the comparable discussion included under “Years Ended December 31, 2004 and 2003,” above.

We performed our annual impairment assessment of the carrying value of goodwill recorded in connection with our various acquisitions required under SFAS 142 in October 2002 and determined that the carrying values of four of our seven reporting units exceeded their estimated fair values. The four affected reporting units were broadband processors, client server networking, mobile communications and ServerWorks. Because indicators of impairment existed for these four reporting units, we performed the second step of the test required under SFAS 142 to determine the fair value of the goodwill for each of the affected reporting units.

We tested the goodwill of these reporting units for impairment in accordance with SFAS 142, as described above. Based on this assessment, we recorded a charge of $1.241 billion in October 2002. Of such charge, $536.0 million related to the goodwill of our broadband processor reporting unit, $206.1 million related to the goodwill of our client server networking reporting unit, $179.6 million related to the goodwill of our mobile communications reporting unit and $319.3 million related to the goodwill of our ServerWorks reporting unit.

The primary factors resulting in the 2002 impairment charge were: (i) the continued significant economic slowdown in the technology sector and the semiconductor industry, which affected both our operations at that time and our expectations with respect to future revenue, (ii) a decline in the valuation of technology company stocks, including the valuation of our stock, and (iii) unfavorable revisions in revenue and cash flow expectations regarding certain of our acquired businesses. These acquired businesses were priced based on valuation multiples that were indicative of the value at which businesses were purchased and sold at that time, but were inflated relative to historical and subsequent standards. In the second and third quarters of 2002 demand for servers, WAN networking equipment, handheld devices and other products using our chips declined relative to the demand that was anticipated when certain of our purchase acquisitions were consummated. In addition, we recognized that a sustained decline in demand combined with an oversupply of these products resulted in increased price competition for certain chipsets, giving effect to shrinking profit margins and expected future cash flows for our four affected reporting units. In response to the existing market conditions, we initiated a

restructuring program in the fourth quarter of 2002 that included significant headcount reductions, and we decreased our investment in certain target markets that were either performing below our expectations or had low near term growth potential. As a result, we revised our forecasts of future operating results, which were in turn used in calculating the estimated fair values of the reporting units.

In December 2003 and 2002, we acquired over 150 patents related to various technologies, including among others, wireless networking topologies and protocols, dual mode wireless transceivers, power management in integrated circuits, Ethernet networking, personal video recording, and VoIP telephony, for $1.0 million and $24.0 million, respectively. Pursuant to SFAS 144 the patents were determined to be fully impaired at their respective dates of acquisition. The impairment charge for the patent portfolio was classified as an impairment of intangible assets in the consolidated statements of operations in 2003 and 2002.

For further discussion of impairment of goodwill and other intangible assets, see Notes 1 and 9 of Notes to Consolidated Financial Statements.


	Settlement Costs

The following table presents settlement costs for 2003 and 2002:


	Years Ended December 31,

	2003					2002

			% of Net					% of Net					%
	Amount		Revenue			Amount		Revenue			Increase		Change

	(In thousands, except percentages)




Settlement costs	$	194,509		12.1	%	$	3,000		0.3	%	$	191,509		6,383	%

For settlement costs in 2003, see the comparable discussion included under “Years Ended December 31, 2004 and 2003,” above.

For a more detailed discussion of our settled and outstanding litigation, see Notes 3 and 12 of Notes to Consolidated Financial Statements.


	Stock Option Exchange Expense

For stock option exchange expense in 2003, see the comparable discussion included under “Years Ended December 31, 2004 and 2003,” above. There was no comparable stock option exchange expense in 2002.


	Restructuring Costs

The following table presents restructuring costs for 2003 and 2002:


	Years Ended December 31,

	2003					2002

			% of Net					% of Net						%
	Amount		Revenue			Amount		Revenue			Decrease			Change

	(In thousands, except percentages)




Restructuring costs	$	2,932		0.2	%	$	119,680		11.1	%	$	(116,748	)		(97.6	)%

For a description of our restructuring activities in 2003 and 2002, see the comparable discussion included under “Years Ended December 31, 2004 and 2003,” above.


	Interest and Other Income (Expense), Net

The following table presents interest and other income (expense), net for 2004 and 2003:


	Years Ended December 31,

	2003					2002

			% of Net						% of Net			Increase			%
	Amount		Revenue			Amount			Revenue			(Decrease)			Change

	(In thousands, except percentages)




Interest income, net	$	6,828		0.4	%	$	12,183			1.1	%	$	(5,355	)		(44.0	)%




Other income (expense), net		26,053		1.6			(32,750	)		(3.0	)		58,803			179.6

Interest Income, Net. The decrease in 2003 resulted primarily from a decline in interest rates, offset in part by a decline in interest expense on lower average debt balances.


	Other Income (Expense), Net

For Other Income (Expense), Net in 2003, see the comparable discussion included under “Years Ended December 31, 2004 and 2003,” above.

In 2002 we recorded impairment losses on strategic investments of approximately $37.8 million. We recorded a loss of approximately $4.1 million in February 2002, which was based on information that led us to believe that the investee was proceeding into either a major financial restructuring and/or bankruptcy. This belief was based on our working knowledge of the investee, the fact that we had been solicited by the investee company for continued financings, and the poor performance of venture technology investments in the geographical region. Previously, this privately held investment was reduced to its fair value of $4.1 million in September 2001 based on a then recent round of financing.

We also recorded impairment losses on strategic investments of $33.7 million in September 2002. Approximately $24.1 million related to a second privately held investment. Originally, this investment had high growth prospects and was proposed to be selected for a key customer design win. This key design win potentially would have generated hundreds of millions in revenue over the next several years and positioned the investee for either an initial public offering or as an acquisition target. Ultimately, the investee did not secure the key design win, and, accordingly, was forced to enter into discussions to obtain a subsequent round of financing at a lower valuation. Therefore, at September 30, 2002 we believed it was necessary to permanently reduce the carrying value of this investment to its fair value, based on the term sheet for the potential subsequent financing. In addition, approximately $7.8 million in impairment losses was related to a third privately held investment. The impairment was caused by an impending financing that was offered at a price substantially lower than our previously reduced carrying value. Earlier, this privately held investment was reduced to its fair value of $8.8 million in September 2001 based on a pricing model using historical financial information. In September 2002 we recorded an additional $1.8 million in impairment losses relating to other strategic investments using the methodologies described above.

The losses recorded in 2002 were offset in part by approximately $4.6 million in gains realized on sales of an investment in a publicly traded company.


	Provision for Income Taxes

The following table presents provision for income taxes for 2003 and 2002:


	Years Ended December 31,

	2003					2002

			% of Net					% of Net						%
	Amount		Revenue			Amount		Revenue			Decrease			Change

	(In thousands, except percentages)




Provision for income taxes	$	25,127		1.5	%	$	297,594		27.5	%	$	(272,467	)		(91.6	)%

The federal statutory rate was 35% for 2003 and 2002. No income tax benefit has been recorded for domestic tax losses. Our income tax expense in 2003 and 2002 primarily represents taxes on certain foreign

operations and increases in the valuation allowance for deferred tax assets. As a result of our cumulative losses and the full utilization of our loss carrybacks, we provided a full valuation allowance against our net deferred tax assets in 2003 and 2002.

Subsequent Events

In February 2005 our Board of Directors authorized a program to repurchase shares of our Class A common stock. The Board approved the repurchase of shares having an aggregate value of up to $250 million from time to time over a period of one year, depending on market conditions.

Recent Accounting Pronouncements

In December 2004 the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment, or SFAS 123R, which is a revision of SFAS 123, Accounting for Stock-Based Compensation, or SFAS 123. SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values and does not allow the previously permitted pro forma disclosure as an alternative to financial statement recognition. SFAS 123R supersedes Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees , or APB 25, and related interpretations and amends SFAS No. 95, Statement of Cash Flows, or SFAS 95. SFAS 123R is scheduled to be effective beginning in the third quarter of fiscal 2005. SFAS 123R allows for either prospective recognition of compensation expense or retroactive recognition, which may date back to the original issuance of SFAS 123 or only to interim periods in the year of adoption. We are currently evaluating these transition methods.

The adoption of the SFAS 123R fair value method will have a significant impact on our reported results of operations, although it will have no impact on our overall financial position. The impact of adoption of SFAS 123R cannot be predicted at this time because that will depend on the fair value and number of share-based payments granted in the future. However, had we adopted SFAS 123R in prior periods, the magnitude of the impact of that standard would have approximated the impact of SFAS 123 assuming the application of the Black-Scholes model as described in the disclosure of pro forma net loss and pro forma loss per share in Note 1 of our Notes to Consolidated Financial Statements. SFAS 123R also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after adoption. While we cannot estimate what those amounts will be in the future, the amount of operating cash flows recognized in 2004 for such excess tax deductions was $81.8 million. No comparable amounts were recorded in 2003 and 2002.

Liquidity and Capital Resources

Working Capital and Cash and Marketable Securities on Hand. The following table presents working capital and cash and marketable securities on hand:


	December 31,		December 31,
	2004		2003		Increase

	(In thousands)




Working capital	$	1,087,342	$	492,227	$	595,115

Cash and cash equivalents ⁽¹⁾	$	858,592	$	558,669	$	299,923




Short-term marketable securities ⁽¹⁾		324,041		47,296		276,745




Long-term marketable securities		92,918		36,405		56,513

	$	1,275,551	$	642,370	$	633,181


(1)	Included in working capital

Our working capital increased in 2004 primarily from cash provided by operations and cash proceeds from issuances of common stock in connection with the exercise of employee stock options and our employee stock

purchase plan, offset in part by cash paid in purchase transactions and the purchase of long-term marketable securities and property and equipment.

Cash Provided and Used in 2004 and 2003. Cash and cash equivalents increased to $858.6 million at December 31, 2004 from $558.7 million at December 31, 2003 as a result of cash provided by operating and financing activities, offset in part by cash used in investing activities.

In 2004 our operating activities provided $501.8 million in cash. This was primarily the result of $218.7 million in net income and $324.7 million in net non-cash operating expenses, offset in part by net cash used of $41.6 million from changes in operating assets and liabilities. Non-cash items included in net income include depreciation and amortization, stock-based compensation expense, amortization of purchased intangible assets, IPR&D, impairment of intangible assets, tax benefit from stock plans and gains on strategic investments. In 2003 our operating activities provided $30.6 million in cash. Although we had a net loss of $959.9 million and used cash of $95.0 million related to changes in net operating assets and liabilities, these amounts were more than offset by $1.085 billion in non-cash items.. Non-cash items included in net loss in 2003 included depreciation and amortization, stock-based compensation expense, amortization of purchased intangible assets, impairment of goodwill and intangible assets, stock option exchange expense, certain settlement costs, certain restructuring charges, net gains on strategic investments and development revenue.

Accounts receivable decreased $15.0 million from $220.1 million in 2003 to $205.1 million in 2004. The decrease in accounts receivable was primarily the result of improved shipment linearity and collections during the fourth quarter of 2004. We typically bill customers on an open account basis subject to our standard net thirty day payment terms. If, in the longer term, our revenue continues to increase as it has in the most recent past, it is likely that our accounts receivable balance will also increase. Our accounts receivable could also increase if customers delay their payments or if we grant extended payment terms to customers.

Inventories increased $24.2 million to $128.3 million in 2004 primarily due an expansion of inventory in response to higher levels of purchase orders received from our customers. In the future, our inventory levels will be determined based on these factors as well as the stage in which our products are in their respective product life cycles and competitive situations in the marketplace. Such considerations are balanced against the risk of obsolescence or potentially excess inventory levels.

Investing activities used cash of $456.0 million in 2004, which was primarily the result of $333.3 million used in the net purchase of marketable securities, $74.8 million net cash paid in purchase transactions, the purchase of $49.9 million of capital equipment to support our operations and the purchase of $3.2 million of strategic investments, offset by $5.2 million in net proceeds received from the sale of strategic investments. Investing activities provided cash of $42.5 million in 2003, which was primarily the result of $69.7 million in net proceeds received from the maturities of marketable securities and $29.2 million in net proceeds received from the sale of strategic investments, offset in part by the purchase of $47.9 million of capital equipment to support our operations, the purchase of $5.9 million in net assets of a business and the purchase of $2.5 million of strategic investments.

Our financing activities provided $254.1 million in cash in 2004, which was primarily the result of $253.3 million in net proceeds received from issuances of common stock upon exercises of stock options and pursuant to our employee stock purchase plan. Cash provided by financing activities was $96.0 million in 2003, which was primarily the result of $207.5 million in net proceeds received from issuances of common stock upon exercises of stock options pursuant to our employee stock purchase plan, offset in part by $113.5 million in repayments of debt and other obligations.

Due to the increase in the price of our Class A common stock, a greater number of employees exercised stock options and we received more proceeds from the exercise of stock options in 2004 than in 2003. The timing and number of stock option exercises are not within our control, and in the future we may not generate as much cash from the exercise of stock options as we have in the past. In addition, we have started to issue to employees a combination of restricted stock units and employee stock options. Unlike the exercise of stock options, the issuance of shares upon vesting of restricted stock units will not result in any cash proceeds and will require the use of cash as we have determined to allow employees to elect to have a portion of their shares

issuable during 2005 withheld to satisfy withholding taxes and then make corresponding cash payments to the appropriate taxing authorities on each employee’s behalf.

Obligations and Commitments. The following table summarizes our contractual payment obligations and commitments as of December 31, 2004:


	Payment Obligations by Year (In thousands)

											There-
	2005		2006		2007		2008		2009		after		Total

Operating leases	$	86,526	$	76,831	$	51,568	$	42,966	$	37,570	$	159,724	$	455,185




Inventory and other related purchased obligations		113,430		—		—		—		—		—		113,430




Other purchase obligations		45,360		4,348		2,136		—		—		—		51,844




Restructuring liabilities		10,364		5,990		4,495		2,507		2,507		1,254		27,117




Accrued settlement payments		10,700		2,000		2,000		2,000		—		—		16,700

	$	266,380	$	89,169	$	60,199	$	47,473	$	40,077	$	160,978	$	664,276

We lease our facilities and certain engineering design tools and information systems equipment under operating lease agreements that expire at various dates through 2017. In December 2004 we entered into a lease agreement under which our corporate headquarters will move from its present location to a new, larger facility in Irvine, California, which will eventually consist of eight buildings with an aggregate of approximately 0.7 million square feet. The lease term is a period of ten years and two months beginning after the completion of the first two buildings and related tenant improvements, which is anticipated to occur in the first quarter of 2007. The aggregate rent for the term of the lease, approximately $183.0 million, is included in the table above.

Inventory and other related purchase obligations are comprised of purchase commitments for silicon wafers and assembly and test services. We depend entirely upon subcontractors to manufacture our silicon wafers and provide assembly and test services. Due to lengthy subcontractor lead times, we must order these materials and services from these subcontractors well in advance. We expect to receive and pay for these materials and services within the next six months. Our subcontractor relationships allow for the cancellation of outstanding purchase orders, but require repayment of all expenses incurred through the date of cancellation.

Other purchase obligations are comprised of purchase commitments for lab test equipment, computer hardware, information systems infrastructure and other purchase commitments in the ordinary course of business.

Our restructuring liabilities consist of estimated future lease and operating costs on restructured facilities, less offsetting sublease income, if any. These costs will be paid over the respective lease terms through 2010. These amounts are included in our consolidated balance sheet.

Settlement payments represent payments to be made in connection with certain settlement and license agreements entered into in 2004. These amounts are included in our consolidated balance sheet. See Note 11 of Notes to Consolidated Financial Statements.

For purposes of the table above, obligations for the purchase of goods or services are defined as agreements that are enforceable and legally binding and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Our purchase orders are based on our current manufacturing needs and are typically fulfilled by our vendors within short time horizons. We have additional purchase orders (not included in the table above) that represent authorizations to purchase rather than binding agreements. We do not have significant agreements for the purchase of raw materials or other goods specifying minimum quantities or set prices that exceed our expected requirements.

Prospective Capital Needs. We believe that our existing cash, cash equivalents and marketable securities, together with cash generated from operations and from the exercise of employee stock options, will be sufficient to cover our working capital needs, capital expenditures, investment requirements, commitments and repurchases of our Class A common stock for at least the next 12 months. However, it is possible that we may need to raise additional funds to finance our activities beyond the next 12 months or to consummate acquisitions of other

businesses, assets, products or technologies. We could raise such funds by selling equity or debt securities to the public or to selected investors, or by borrowing money from financial institutions. In addition, even though we may not need additional funds, we may still elect to sell additional equity or debt securities or obtain credit facilities for other reasons. We have in effect a universal shelf registration statement on SEC Form S-3 that allows us to sell, in one or more public offerings, shares of our Class A common stock, shares of preferred stock or debt securities, or any combination of such securities, for proceeds in an aggregate amount of up to $750 million. However, we have not issued nor do we have immediate plans to issue securities to raise capital under the universal shelf registration statement. If we elect to raise additional funds, we may not be able to obtain such funds on a timely basis on acceptable terms, or at all. If we raise additional funds by issuing additional equity or convertible debt securities, the ownership percentages of existing shareholders would be reduced. In addition, the equity or debt securities that we issue may have rights, preferences or privileges senior to those of our common stock.

Although we believe that we have sufficient capital to fund our activities for at least the next 12 months, our future capital requirements may vary materially from those now planned. We anticipate that the amount of capital that we will need in the future will depend on many factors, including:


	•	the overall levels of sales of our products and gross profit margins;
	•	our business, product, capital expenditure and research and development plans, and product and technology roadmaps;
	•	the market acceptance of our products;
	•	volume price discounts and customer rebates;
	•	the levels of inventory and accounts receivable that we maintain;
	•	capital improvements for new and existing facilities;
	•	technological advances;
	•	our competitors’ responses to our products;
	•	our relationships with suppliers and customers;
	•	the availability of sufficient foundry capacity and packaging materials;
	•	the levels of promotion and advertising that will be required to launch our new products and achieve and maintain a competitive position in the marketplace;
	•	litigation expenses, settlements and judgments;
	•	expenses related to our restructuring plans;
	•	changes in our compensation policies;
	•	the exercise of stock options and stock purchases under our employee stock purchase plan;
	•	use of restricted stock units and the related payment in cash of withholding taxes due from employees; and
	•	general economic conditions and specific conditions in the semiconductor industry and the broadband communications markets, including the effects of recent international conflicts and the general economic slowdown and related uncertainties.

In addition, we may require additional capital to accommodate planned future growth, hiring, infrastructure and facility needs or to consummate acquisitions of other businesses, assets, products or technologies.

RISK FACTORS

Before deciding to purchase, hold or sell our common stock, you should carefully consider the risks described below, in addition to the other cautionary statements and risks described elsewhere and the other information contained in this Report and in our other filings with the SEC, including our subsequent reports on Forms 10-Q and 8-K. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business. If any of these known or unknown risks or uncertainties actually occurs with material adverse effects on Broadcom, our business, financial condition and results of operations could be seriously harmed. In that event, the market price for our Class A common stock could decline and you may lose all or part of your investment.

Our quarterly operating results may fluctuate significantly. As a result, we may fail to meet the expectations of securities analysts and investors, which could cause our stock price to decline.

Our quarterly net revenue and operating results have fluctuated significantly in the past and are likely to continue to vary from quarter to quarter due to a number of factors, many of which are not within our control. For instance, our net revenue for the three months ended December 31, 2004 decreased by 16.6% over the level achieved in the three months ended September 30, 2004. If our operating results do not meet the expectations of securities analysts or investors, the market price of our Class A common stock will likely decline. Fluctuations in our operating results may be due to a number of factors, including, but not limited to, those listed below and those identified throughout this “Risk Factors” section:


	•	changes in accounting rules, such as the change requiring the recording of expenses for employee stock options and other stock-based compensation that is scheduled to go into effect in the third quarter of 2005;
	•	a possible adverse outcome in or the settlement of our pending securities litigation or other actual or threatened litigation;
	•	the overall cyclicality of, and changing economic and market conditions in, the semiconductor industry and the broadband communications markets;
	•	the timing, rescheduling or cancellation of significant customer orders and our ability, as well as the ability of our customers, to manage inventory;
	•	the gain or loss of a key customer, design win or order;
	•	our ability to develop new sources of revenue to replace lost revenue from our declining Intel processor-based server chipset business;
	•	our ability to retain, recruit and hire key executives, technical personnel and other employees in the positions and numbers, with the experience and capabilities, and at the compensation levels that we need to implement our business and product plans;
	•	our ability to scale our operations in response to changes in demand for our existing products and services or demand for new products requested by our customers;
	•	our ability to timely and accurately predict market requirements and evolving industry standards and to identify opportunities in new markets;
	•	the rate at which our present and future customers and end users adopt our technologies and products in our target markets;
	•	our ability to specify, develop or acquire, complete, introduce, market and transition to volume production new products and technologies in a cost-effective and timely manner;
	•	the qualification, availability and pricing of competing products and technologies and the resulting effects on sales and pricing of our products;
	•	changes in our product or customer mix;
	•	the volume of our product sales and pricing concessions on volume sales;
	•	fluctuations in the manufacturing yields of our foundries, and other problems or delays in the fabrication, assembly, testing or delivery of our products; and
	•	the effects of public health emergencies, natural disasters, terrorist activities, international conflicts and other events beyond our control.

We continue to derive a larger portion of our product revenue from relatively newer markets. We expect new product lines to continue to account for a high percentage of our future sales. Some of these markets are immature and unpredictable, and we cannot assure you that these markets will develop into significant opportunities or that we will continue to derive significant revenue from these markets. Based on the limited amount of historical data available to us, it is difficult to predict our future revenue streams from, and the sustainability of, such newer markets.

Additionally, rapid changes in our markets and across our product areas make it difficult for us to estimate the impact of seasonal factors on our business. We believe that we may become subject to some seasonality in demand for our solutions that are designed for use in consumer products, such as desktop and notebook computers, cellphones and other mobile communication devices, other wireless-enabled consumer electronics, and satellite and digital cable set-top boxes, which may result in fluctuations in our quarterly operating results.

Due to all of the foregoing factors, and the other risks discussed in this Report, you should not rely on quarter-to-quarter comparisons of our operating results as an indicator of future performance.

Changes in the accounting treatment of stock options will adversely affect our results of operations.

In December 2004 the FASB issued SFAS 123R, which is a revision of SFAS 123. SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values and does not permit pro forma disclosure as an alternative to financial statement recognition. SFAS 123R is scheduled to be effective beginning in the third quarter of 2005. The adoption of the SFAS 123R fair value method will have a significant adverse impact on our reported results of operations because the stock-based compensation expense will be charged directly against our reported earnings. The impact of our adoption of SFAS 123R cannot be predicted at this time because that will depend on the future fair values and number of share-based payments granted in the future. However, had we adopted SFAS 123 in prior periods, the magnitude of the impact of that standard would have approximated the impact of SFAS 123 assuming the application of the Black-Scholes model as described in the disclosure of pro forma net loss and pro forma loss per share in Note 1 of our Notes to Consolidated Financial Statements.

Continuing worldwide political and economic uncertainties may adversely impact our revenue and profitability.

In the last three years, worldwide economic conditions have experienced a downturn due to slower economic activity, concerns about inflation and deflation, decreased consumer confidence, reduced corporate profits and capital spending, adverse business conditions and liquidity concerns in the telecommunications and broadband communications markets, the lingering effects of the war in Iraq, and recent international conflicts and terrorist and military activity. These conditions make it extremely difficult for our customers, our vendors and us to accurately forecast and plan future business activities, and they could cause U.S. and foreign businesses to slow spending on our products and services, which would delay and lengthen sales cycles. We recently experienced a slowdown in orders and a reduction in net revenue in the fourth quarter of 2004 that we believe was attributable in substantial part to excess inventory held by certain of our customers. We cannot predict the timing, strength or duration of any economic recovery, worldwide or in the broadband communications markets. If the economy or the broadband communications markets in which we operate do not recover, our business, financial condition and results of operations will likely be materially and adversely affected.

Our operating results may fluctuate significantly due to the cyclical nature of the semiconductor industry. Any such variations could adversely affect the market price of our Class A common stock.

We operate primarily in the semiconductor industry, which is cyclical and subject to rapid change and evolving industry standards. From time to time, the semiconductor industry has experienced significant downturns. These downturns are characterized by decreases in product demand, excess customer inventories, and accelerated erosion of prices. These factors could cause substantial fluctuations in our revenue and in our results of operations. Any downturns in the semiconductor industry may be severe and prolonged, and any failure of the industry or the broadband communications markets to fully recover from downturns could seriously impact our

revenue and harm our business, financial condition and results of operations. The semiconductor industry also periodically experiences increased demand and production capacity constraints, which may affect our ability to ship products. Accordingly, our operating results may vary significantly as a result of the general conditions in the semiconductor industry, which could cause large fluctuations in our stock price.

Our stock price is highly volatile. Accordingly, you may not be able to resell your shares of common stock at or above the price you paid for them. In addition we, like many other companies that experience volatility in the market prices of their securities, are engaged in securities litigation. An adverse outcome in such litigation could materially and adversely affect our operating results.

The market price of our Class A common stock has fluctuated substantially in the past and is likely to continue to be highly volatile and subject to wide fluctuations. Since January 1, 2002 our Class A common stock has traded at prices as low as $9.52 and as high as $53.35 per share. Fluctuations have occurred and may continue to occur in response to various factors, many of which we cannot control, including:


	•	quarter-to-quarter variations in our operating results;
	•	changes in accounting rules, particularly those related to the expensing of stock options;
	•	announcements of changes in our senior management;
	•	the gain or loss of one or more significant customers or suppliers;
	•	announcements of technological innovations or new products by our competitors, customers or us;
	•	the gain or loss of market share in any of our markets;
	•	general economic and political conditions and specific conditions in semiconductor industry and the broadband communications markets;
	•	continuing international conflicts and acts of terrorism;
	•	changes in earnings estimates or investment recommendations by analysts;
	•	changes in investor perceptions; or
	•	changes in expectations relating to our products, plans and strategic position or those of our competitors or customers.

In addition, the market prices of securities of Internet-related, semiconductor and other technology companies have been especially volatile. This volatility has significantly affected the market prices of securities of many technology companies for reasons frequently unrelated to the operating performance of the specific companies. Accordingly, you may not be able to resell your shares of common stock at or above the price you paid. In the past, companies that have experienced volatility in the market price of their securities have been the subject of securities class action litigation. As noted in Note 12 of Notes to Consolidated Financial Statements, we have been sued in several purported securities class action lawsuits, which have been consolidated into a single action, as well as other securities litigation. Although we believe that those lawsuits are without merit, the plaintiffs in our pending securities class action litigation have asserted that, if liability is found, damages may exceed $4.5 billion. Trial for our pending securities litigation is scheduled to commence in September 2005. An adverse determination in, or the settlement of, our pending securities litigation could require us to pay amounts that exceed the coverage that remains available to us under our directors’ and officers’ insurance, which amounts could be substantial. Such an event could have a very significant effect on our business and results of operations, and could materially and adversely affect the price of our stock. Moreover, regardless of the ultimate result, it is likely that the lawsuits will continue to divert management’s attention and resources from other matters, which could also adversely affect the price of our stock.

We are subject to order and shipment uncertainties, and if we are unable to accurately predict customer demand, we may hold excess or obsolete inventory, which would reduce our profit margin, or, conversely, we may have insufficient inventory, which would result in lost revenue opportunities and potentially in loss of market share and damaged customer relationships.

We typically sell products pursuant to purchase orders rather than long-term purchase commitments. Customers can generally cancel or defer purchase orders on short notice without incurring a significant penalty. In the recent past, some of our customers have developed excess inventories of their own products and have, as a consequence, deferred purchase orders for our products. We currently do not have the ability to accurately predict

what or how many products our customers will need in the future. Anticipating demand is difficult because our customers face volatile pricing and unpredictable demand for their own products, are increasingly focused more on cash preservation and tighter inventory management, and may be involved in legal proceedings that could affect their ability to buy our products. However, we place orders with our suppliers based on forecasts of customer demand and, in some instances, may establish buffer inventories to accommodate anticipated demand. Our forecasts are based on multiple assumptions, each of which may introduce error into our estimates. If we overestimate customer demand, we may allocate resources to manufacturing products that we may not be able to sell when we expect to, or at all. As a result, we would hold excess or obsolete inventory, which would reduce our profit margins and adversely affect our financial results. Conversely, if we underestimate customer demand or if insufficient manufacturing capacity is available, we would forego revenue opportunities and potentially lose market share and damage our customer relationships. In addition, any future significant cancellations or deferrals of product orders or the return of previously sold products could materially and adversely affect our profit margins, increase product obsolescence and restrict our ability to fund our operations. Furthermore, we generally recognize revenue upon shipment of products to a customer. If a customer refuses to accept shipped products or does not timely pay for these products, we could incur significant charges against our income.

Our efforts to develop new revenue sources and replace lost revenue sources for our ServerWorks business may not be successful.

In the past few years, a significant portion of our total net revenue has been derived from our chipset business for servers based on Intel processors. However, in 2003 that business experienced design losses that were attributable, in part, to our ongoing inability to obtain required design information from a third party that is also a competitor. During the second half of 2004 we experienced the first real impact of the long-anticipated decline in our Intel processor-based server chipset business, and we anticipate a steeper decline in that business going forward. We are now pursuing strategies to diversify our revenue stream beyond Intel-based platforms and to develop alternative sources of revenue for the business. Our new areas of focus are alternative server I/ O chipset platforms and the storage market. During 2004 we began to develop server platform products that support the AMD Opteron ^tm processor; however, these products are not expected to generate any substantial revenue until the second half of 2005. We cannot assure you that these strategies will be successful, and it is likely that we will not be able to make up the loss of revenue from our Intel processor-based server chipset business in the near term. If our strategies to reposition our server chipset business are not successful, or if revenues from our other businesses do not increase, our revenue, revenue growth rate and results of operations will be adversely affected.

We may be unable to attract, retain or motivate key senior management and technical personnel, which could seriously harm our business.

On January 3, 2005 Scott A. McGregor joined Broadcom as President and Chief Executive Officer. Mr. McGregor succeeded our former President and CEO, Alan E. Ross, who retired from these positions upon Mr. McGregor’s arrival but remains a member of the Board of Directors. The integration of Mr. McGregor into our business and operations, and any adjustments or changes that may be implemented by Mr. McGregor, may require the substantial attention of our Board of Directors and senior management personnel.

Our future success also depends to a significant extent upon the continued service of other key senior management personnel, including our co-founder, Chairman of the Board and Chief Technical Officer, Henry Samueli, Ph.D., and other senior executives. We do not have employment agreements with these executives, or any other key employees, that govern the length of their service, although we do have limited retention arrangements in place with certain executives. The loss of the services of Dr. Samueli or certain other key senior management or technical personnel could materially and adversely affect our business, financial condition and results of operations. For instance, if any of these individuals were to leave our company unexpectedly, we could face substantial difficulty in hiring qualified successors and could experience a loss in productivity during the search for and while any such successor is integrated into our business and operations.

Furthermore, our future success depends on our ability to continue to attract, retain and motivate senior management and qualified technical personnel, particularly software engineers, digital circuit designers, RF and mixed-signal circuit designers and systems applications engineers. Competition for these employees is intense. If

we are unable to attract, retain and motivate such personnel in sufficient numbers and on a timely basis, we will experience difficulty in implementing our current business and product plans. In that event, we may be unable to successfully meet competitive challenges or to exploit potential market opportunities, which could adversely affect our business and results of operations.

Stock options generally comprise a significant portion of our compensation packages for all employees. In April and May 2003 we conducted a stock option exchange offer to address the substantial decline in the price of our Class A common stock over the preceding two years and to improve our ability to retain key employees. However, we cannot be certain that we will be able to continue to attract, retain and motivate employees if our Class A common stock experiences another substantial price decline.

We have also modified our compensation policies by increasing cash compensation to certain employees and instituting awards of restricted stock units, while simultaneously reducing awards of stock options. This modification of our compensation policies and the FASB requirement to expense the fair value of stock options awarded to employees beginning in the third quarter of 2005 will increase our operating expenses. We cannot be certain that the changes in our compensation policies will improve our ability to attract, retain and motivate employees. Our inability to attract and retain additional key employees and the increase in stock-based compensation expense could each have an adverse effect on our business, financial condition and results of operations.

If we fail to scale our operations in response to changes in demand for our existing products and services or to the demand for new products requested by our customers, we may be unable to meet competitive challenges or exploit potential market opportunities, and our business could be materially and adversely affected.

To achieve our business objectives, we anticipate that we will need to continue to expand. We have experienced a period of rapid growth and expansion in the past. Through internal growth and acquisitions, we significantly increased the scope of our operations and expanded our workforce, from 2,580 employees, including contractors, as of December 31, 2002 to 3,373 employees, including contractors, as of December 31, 2004. This past growth has placed, and any future growth is expected to continue to place, a significant strain on our management personnel, systems and resources. To implement our current business and product plans, we will need to continue to expand, train, manage and motivate our workforce. All of these endeavors will require substantial management effort. Although we have recently implemented a new enterprise resource planning, or ERP, system to help us improve our planning and management processes and a new human resources management, or HRM, system, we anticipate that we will also need to continue to implement a variety of new and upgraded operational and financial systems, such as a new material requirements planning, or MRP, system, as well as additional procedures and other internal management systems. In addition, to support our growth we recently signed a lease agreement under which we will relocate our headquarters and Irvine operations to new, larger facilities that will enable us to centralize all of our Irvine employees and operations on one campus. This relocation is currently anticipated to begin in the first quarter of 2007. We may also engage in other relocations of our employees or operations from time to time. Such relocations could result in temporary disruptions of our operations or a diversion of our management’s attention and resources. If we are unable to effectively manage our expanding operations, we may be unable to scale our business quickly enough to meet competitive challenges or exploit potential market opportunities, and our business could be materially and adversely affected.

Because we depend on a few significant customers for a substantial portion of our revenue, the loss of a key customer could seriously impact our revenue and harm our business. In addition, if we are unable to continue to sell existing and new products to our key customers in significant quantities or to attract new significant customers, our future operating results could be adversely affected.

We have derived a substantial portion of our past revenue from sales to a relatively small number of customers. As a result, the loss of any significant customer could materially and adversely affect our financial condition and results of operations.

Sales to our five largest customers represented approximately 51.1%, 51.6% and 52.3% of our net revenue n 2004, 2003 and 2002, respectively. See Note 13 of Notes to Consolidated Financial Statements for further

details. We expect that our largest customers will continue to account for a substantial portion of our net revenue in 2005 and for the foreseeable future. The identity of our largest customers and their respective contributions to our net revenue have varied and will likely continue to vary from period to period.

We may not be able to maintain or increase sales to certain of our key customers for a variety of reasons, including the following:


	•	most of our customers can stop incorporating our products into their own products with limited notice to us and suffer little or no penalty;
	•	our agreements with our customers typically do not require them to purchase a minimum quantity of our products;
	•	many of our customers have pre-existing or concurrent relationships with our current or potential competitors that may affect their decisions to purchase our products;
	•	our customers face intense competition from other manufacturers that do not use our products; and
	•	some of our customers offer or may offer products that compete with our products.

In addition, our longstanding relationships with some larger customers may also deter other potential customers who compete with these customers from buying our products. To attract new customers or retain existing customers, we may offer certain customers favorable prices on our products. We may have to offer the same lower prices to certain of our customers who have contractual “most favored nation” pricing arrangements. In that event, our average selling prices and gross margins would decline. The loss of a key customer, a reduction in sales to any key customer or our inability to attract new significant customers could seriously impact our revenue and materially and adversely affect our results of operations.


	Our future success depends in significant part on strategic relationships with certain customers. If we cannot maintain these relationships or if these customers develop their own solutions or adopt a competitor’s solutions instead of buying our products, our operating results would be adversely affected.

In the past, we have relied in significant part on our strategic relationships with customers that are technology leaders in our target markets. We intend to pursue the formation of these strategic relationships but we cannot assure you that we will be able to do so. These relationships often require us to develop new products that may involve significant technological challenges. Our customers frequently place considerable pressure on us to meet their tight development schedules. Accordingly, we may have to devote a substantial amount of our limited resources to our strategic relationships, which could detract from or delay our completion of other important development projects. Delays in development could impair our relationships with our strategic customers and negatively impact sales of the products under development. Moreover, it is possible that our customers may develop their own solutions or adopt a competitor’s solution for products that they currently buy from us. If that happens, our sales would decline and our business, financial condition and results of operations could be materially and adversely affected.


	Our acquisition strategy may be dilutive to existing shareholders, result in unanticipated accounting charges or otherwise adversely affect our results of operations, and result in difficulties in assimilating and integrating the operations, personnel, technologies, products and information systems of acquired companies or businesses.

A key element of our business strategy involves expansion through the acquisitions of businesses, assets, products or technologies that allow us to complement our existing product offerings, expand our market coverage, increase our engineering workforce or enhance our technological capabilities. Between January 1, 1999 and December 31, 2004, we acquired 28 companies and certain assets of one other business. We continually evaluate and explore strategic opportunities as they arise, including business combination transactions, strategic partnerships, and the purchase or sale of assets, including tangible and intangible assets such as intellectual property. We also continually evaluate the performance and prospects of our various businesses and possible adjustments in our businesses to reflect changes in our assessment of their performance and prospects.

Acquisitions may require significant capital infusions, typically entail many risks, and could result in difficulties in assimilating and integrating the operations, personnel, technologies, products and information

systems of acquired companies or businesses. We have in the past and may in the future experience delays in the timing and successful integration of an acquired company’s technologies and product development through volume production, unanticipated costs and expenditures, changing relationships with customers, suppliers and strategic partners, or contractual, intellectual property or employment issues. In addition, key personnel of an acquired company may decide not to work for us. The acquisition of another company or its products and technologies may also require us to enter into a geographic or business market in which we have little or no prior experience. These challenges could disrupt our ongoing business, distract our management and employees, harm our reputation and increase our expenses. These challenges are magnified as the size of the acquisition increases. Furthermore, these challenges would be even greater if we acquired a business or entered into a business combination transaction with a company that was larger and more difficult to integrate than the typical size of the companies we have historically acquired.

Acquisitions may require large one-time charges and can result in increased debt or contingent liabilities, adverse tax consequences, deferred compensation charges, and the recording and later amortization of amounts related to deferred compensation and certain purchased intangible assets, any of which items could negatively impact our results of operations. In addition, we may record goodwill in connection with an acquisition and incur goodwill impairment charges in the future. Any of these charges could cause the price of our Class A common stock to decline.

Acquisitions or asset purchases made entirely or partially for cash may reduce our cash reserves. Alternatively, we may issue equity or convertible debt securities in connection with an acquisition. We have in effect an acquisition shelf registration statement on SEC Form S-4 that enables us to issue up to 30 million shares of our Class A common stock in one or more acquisition transactions that we may enter into from time to time. Any additional issuance of equity or convertible debt securities may be dilutive to our existing shareholders. In addition, the equity or debt securities that we may issue could have rights, preferences or privileges senior to those of our common stock. For example, as a consequence of the prior pooling-of-interests accounting rules, the securities issued in nine of our prior acquisitions were shares of Class B common stock, which have voting rights superior to our publicly traded Class A common stock.

We cannot assure you that we will be able to consummate any pending or future acquisitions or that we will realize any anticipated benefits from these acquisitions. We may not be able to find suitable acquisition opportunities that are available at attractive valuations, if at all. Even if we do find suitable acquisition opportunities, we may not be able to consummate the acquisitions on commercially acceptable terms, and any decline in the price of our Class A common stock may make it significantly more difficult and expensive to initiate or consummate additional acquisitions.


	We must keep pace with rapid technological changes and evolving industry standards in the semiconductor industry and broadband communications markets to remain competitive.

Our future success will depend on our ability to anticipate and adapt to changes in technology and industry standards and our customers’ changing demands. We sell products in markets that are characterized by rapid technological changes, evolving industry standards, frequent new product introductions, short product life cycles and increasing demand for higher levels of integration and smaller process geometries. Our past sales and profitability have resulted, to a large extent, from our ability to anticipate changes in technology and industry standards and to develop and introduce new and enhanced products incorporating the new standards and technologies. Our ability to adapt to these changes and to anticipate future standards, and the rate of adoption and acceptance of those standards, will be a significant factor in maintaining or improving our competitive position and prospects for growth. If new industry standards emerge, our products or our customers’ products could become unmarketable or obsolete, and we could lose market share. We may also have to incur substantial unanticipated costs to comply with these new standards. In addition, our target markets continue to undergo rapid growth and consolidation. A significant slowdown in any of these broadband communications markets could materially and adversely affect our business, financial condition and results of operations. Our success will also depend on the ability of our customers to develop new products and enhance existing products for the broadband communications markets and to introduce and promote those products successfully. These rapid technological changes and evolving industry standards make it difficult to formulate a long-term growth strategy

because the semiconductor industry and broadband communications markets may not continue to develop to the extent or in the time periods that we anticipate. We have invested substantial resources in emerging technologies that did not achieve the market acceptance that we had expected. If new markets do not develop as we anticipate, or if our products do not gain widespread acceptance in these markets, our business, financial condition and results of operations could be materially and adversely affected.


	If we are unable to develop and introduce new products successfully and in a cost-effective and timely manner or to achieve market acceptance of our new products, our operating results would be adversely affected.

Our future success is dependent upon our ability to develop new semiconductor solutions for existing and new markets, introduce these products in a cost-effective and timely manner, and convince leading equipment manufacturers to select these products for design into their own new products. Our historical quarterly results have been, and we expect that our future results will continue to be, dependent on the introduction of a relatively small number of new products and the timely completion and delivery of those products to customers. The development of new silicon devices is highly complex, and from time to time we have experienced delays in completing the development and introduction of new products and lower than anticipated manufacturing yields in the early production of such products. Our ability to develop and deliver new products successfully will depend on various factors, including our ability to:


	•	timely and accurately predict market requirements and evolving industry standards;
	•	accurately define new products;
	•	timely and accurately identify opportunities in new markets;
	•	timely complete and introduce new product designs;
	•	timely qualify and obtain industry interoperability certification of our products and the products of our customers into which our products will be incorporated;
	•	obtain sufficient foundry capacity and packaging materials;
	•	achieve high manufacturing yields;
	•	shift our products to smaller geometry process technologies to achieve lower cost and higher levels of design integration; and
	•	gain market acceptance of our products and our customers’ products.

In some of our businesses, our ability to develop and deliver next-generation products successfully depends in part on access to information from companies that are our competitors. If we are not able to develop and introduce new products successfully and in a cost-effective and timely manner, we will be unable to attract new customers or to retain our existing customers as these customers may transition to other companies that can meet their product development needs, which would materially and adversely affect our results of operations.


	As our international business expands, we are increasingly exposed to various legal, business, political and economic risks associated with our international operations.

We currently obtain substantially all of our manufacturing, assembly and testing services from suppliers located outside the United States. In addition, approximately 21.6% of our net revenue in 2004 was derived from sales to independent customers outside the United States. We also frequently ship products to our domestic customers’ international manufacturing divisions and subcontractors. Products shipped to international destinations, primarily in Asia, represented approximately 79.0% of our net revenue in 2004. In 1999 we established an international distribution center in Singapore that includes an engineering design center. We also undertake design, development activities in Belgium, Canada, China, France, India, Israel, the Netherlands, Taiwan and the United Kingdom. In addition, we undertake various sales and marketing activities through regional offices in several other countries. We intend to continue to expand our international business activities and to open other design and operational centers abroad. The recent war in Iraq and the lingering effects of terrorist attacks in the United States and abroad, the resulting heightened security and the increasing risk of extended international military conflicts may adversely impact our international sales and could make our

international operations more expensive. International operations are subject to many other inherent risks, including but not limited to:


	•	political, social and economic instability;
	•	exposure to different legal standards, particularly with respect to intellectual property;
	•	natural disasters and public health emergencies;
	•	nationalization of business and blocking of cash flows;
	•	trade and travel restrictions;
	•	the imposition of governmental controls and restrictions;
	•	burdens of complying with a variety of foreign laws;
	•	import and export license requirements and restrictions of the United States and each other country in which we operate;
	•	unexpected changes in regulatory requirements;
	•	foreign technical standards;
	•	changes in taxation and tariffs;
	•	difficulties in staffing and managing international operations;
	•	fluctuations in currency exchange rates;
	•	difficulties in collecting receivables from foreign entities or delayed revenue recognition; and
	•	potentially adverse tax consequences.

Any of the factors described above may have a material adverse effect on our ability to increase or maintain our foreign sales.

We currently operate under tax holidays in certain foreign jurisdictions. However, we cannot assure you that we will continue to enjoy such tax holidays or realize any net tax benefits from such tax holidays.

The seasonality of international sales and economic conditions in our primary overseas markets, particularly in Asia, may negatively impact the demand for our products abroad. All of our international sales to date have been denominated in U.S. dollars. Accordingly, an increase in the value of the U.S. dollar relative to foreign currencies could make our products less competitive in international markets or require us to assume the risk of denominating certain sales in foreign currencies. We anticipate that these factors will impact our business to a greater degree as we further expand our international business activities.

We may not be able to adequately protect or enforce our intellectual property rights, which could harm our competitive position.

Our success and future revenue growth will depend, in part, on our ability to protect our intellectual property. We primarily rely on patent, copyright, trademark and trade secret laws, as well as nondisclosure agreements and other methods, to protect our proprietary technologies and processes. Despite our efforts to protect our proprietary technologies and processes, it is possible that competitors or other unauthorized third parties may obtain, copy, use or disclose our technologies and processes. We hold more than 800 U.S. patents and have filed more than 3,000 additional U.S. patent applications. However, we cannot assure you that any additional patents will be issued. Even if a new patent is issued, the claims allowed may not be sufficiently broad to protect our technology. In addition, any of our existing or future patents may be challenged, invalidated or circumvented. As such, any rights granted under these patents may not provide us with meaningful protection. We may not have foreign patents or pending applications corresponding to our U.S. patents and applications. Even if foreign patents are granted, effective enforcement in foreign countries may not be available. If our patents do not adequately protect our technology, our competitors may be able to offer products similar to ours. Our competitors may also be able to develop similar technology independently or design around our patents. Some or all of our patents have in the past been licensed and likely will in the future be licensed to certain of our competitors through cross-license agreements. Moreover, because we have participated in developing various industry standards, we may be required to license some of our patents to others, including competitors, who develop products based on those standards.

Certain of our software (as well as that of our customers) may be derived from so-called “open source” software that is generally made available to the public by its authors and/or other third parties. Such open source

software is often made available to us under licenses, such as the GNU General Public License, or GPL, which impose certain obligations on us in the event we were to distribute derivative works of the open source software. These obligations may require us to make source code for the derivative works available to the public, and/or license such derivative works under a particular type of license, rather than the forms of license customarily used to protect our intellectual property. In addition, there is little or no legal precedent for interpreting the terms of certain of these open source licenses, including the determination of which works are subject to the terms of such licenses. While we believe we have complied with our obligations under the various applicable licenses for open source software, in the event the copyright holder of any open source software were to successfully establish in court that we had not complied with the terms of a license for a particular work, we could be required to release the source code of that work to the public and/or stop distribution of that work. With respect to our proprietary software, we generally license such software under terms that prohibit combining it with open source software as described above. Despite these restrictions, parties may combine Broadcom proprietary software with open source software without our authorization, in which case we could be required to release the source code of our proprietary software.

We generally enter into confidentiality agreements with our employees, consultants and strategic partners. We also try to control access to and distribution of our technologies, documentation and other proprietary information. Despite these efforts, parties may attempt to copy, disclose, obtain or use our products, services or technology without our authorization. Also, former employees may seek employment with our business partners, customers or competitors, and we cannot assure you that the confidential nature of our proprietary information will be maintained in the course of such future employment. Additionally, departing or former employees or third parties could attempt to penetrate our computer systems and networks to misappropriate our proprietary information and technology or interrupt our business. Because the techniques used by computer hackers to access or sabotage networks change frequently and generally are not recognized until launched against a target, we may be unable to anticipate, counter or ameliorate these techniques. As a result, our technologies and processes may be misappropriated, particularly in foreign countries where laws may not protect our proprietary rights as fully as in the United States.

In addition, some of our customers have entered into agreements with us that grant them the right to use our proprietary technology if we ever fail to fulfill our obligations, including product supply obligations, under those agreements, and if we do not correct the failure within a specified time period. Moreover, we often incorporate the intellectual property of strategic customers into our own designs, and have certain obligations not to use or disclose their intellectual property without their authorization.

We cannot assure you that our efforts to prevent the misappropriation or infringement of our intellectual property or the intellectual property of our customers will succeed. We have in the past engaged and may in the future engage in litigation to enforce or defend our intellectual property rights, protect our trade secrets, or determine the validity and scope of the proprietary rights of others, including our customers. This litigation has been and will likely continue to be very expensive and time consuming. Additionally, any litigation can divert the attention of management and other key employees from the operation of the business, which could negatively impact our operations.

Third party claims of infringement or other claims against us could adversely affect our ability to market our products, require us to redesign our products or seek licenses from third parties, and seriously harm our operating results. In addition, the defense of such claims could result in significant costs and divert the attention of our management or other key employees.

significant liability. Any of these claims may materially and adversely affect our business, financial condition and results of operations. For example, in a patent or trade secret action, a court could issue a preliminary or permanent injunction that would require us to withdraw or recall certain products from the market or redesign certain products offered for sale or under development. In addition, we may be liable for damages for past infringement and royalties for future use of the technology, and we may be liable for treble damages if infringement is found to have been willful. We may also have to indemnify some customers and strategic partners under our agreements with such parties if a third party alleges or if a court finds that our products or activities have infringed upon, misappropriated or misused another party’s proprietary rights. We have received requests from certain customers and strategic partners to include increasingly broad indemnification provisions in our agreements with them. These indemnification provisions may, in some circumstances, result in liability for combinations of components or system level designs and consequential damages and/or lost profits. Even if claims against us are not valid or successfully asserted, these claims could result in significant costs and a diversion of the attention of management and other key employees to defend. Additionally, we have sought and may in the future seek to obtain a license under a third party’s intellectual property rights and have granted and may in the future grant a license to certain of our intellectual property rights to a third party in connection with a cross-license agreement or a settlement of claims or actions asserted against us. However, we may not be able to obtain such a license on commercially reasonable terms, if we are able to obtain one at all.

Our products may contain technology provided to us by third parties. Because we did not develop such technology ourselves, we may have little or no ability to determine in advance whether such technology infringes the intellectual property rights of a third party. Our suppliers and licensors may not be required to indemnify us in the event that a claim of infringement is asserted against us, or they may be required to indemnify us only up to a maximum amount, above which we would be responsible for any further costs or damages.

We will have difficulty selling our products if customers do not design our products into their product offerings or if our customers’ product offerings are not commercially successful.

Our products are generally incorporated into our customers’ products at the design stage. As a result, we rely on equipment manufacturers to select our products to be designed into their products. Without these “design wins,” it becomes difficult to sell our products. We often incur significant expenditures on the development of a new product without any assurance that an equipment manufacturer will select our product for design into its own product. Additionally, in some instances, we are dependent on third parties to obtain or provide information that we need to achieve a design win. Some of these third parties may be our competitors and, accordingly, may not supply this information to us on a timely basis, if at all. Once an equipment manufacturer designs a competitor’s product into its product offering, it becomes significantly more difficult for us to sell our products to that customer because changing suppliers involves significant cost, time, effort and risk for the customer. Furthermore, even if an equipment manufacturer designs one of our products into its product offering, we cannot be assured that its product will be commercially successful or that we will receive any revenue from that product. Sales of our products largely depend on the commercial success of our customers’ products. Our customers are typically not obligated to purchase our products and can choose at any time to stop using our products if their own products are not commercially successful or for any other reason. We cannot assure you that we will continue to achieve design wins or that our customers’ equipment incorporating our products will ever be commercially successful.

We face intense competition in the semiconductor industry and the broadband communications markets, which could reduce our market share in existing markets and affect our entry into new markets.

The semiconductor industry and the broadband communications markets are intensely competitive. We expect competition to continue to increase as industry standards become well known and as other competitors enter our target markets. We currently compete with a number of major domestic and international suppliers of integrated circuits and related applications in our target markets. We also compete with suppliers of system-level and motherboard-level solutions incorporating integrated circuits that are proprietary or sourced from manufacturers other than Broadcom. This competition has resulted and may continue to result in declining average selling prices for some of our products. In all of our target markets we also may face competition from

newly established competitors, suppliers of products based on new or emerging technologies, and customers who choose to develop their own semiconductor solutions. We also expect to encounter further consolidation in the markets in which we compete.

Many of our competitors operate their own fabrication facilities and have longer operating histories and presence in key markets, greater name recognition, larger customer bases, and significantly greater financial, sales and marketing, manufacturing, distribution, technical and other resources than we do. These competitors may be able to adapt more quickly to new or emerging technologies and changes in customer requirements. They may also be able to devote greater resources to the promotion and sale of their products. In addition, current and potential competitors have established or may establish financial or strategic relationships among themselves or with existing or potential customers, resellers or other third parties. Accordingly, new competitors or alliances among competitors could emerge and rapidly acquire significant market share. Existing or new competitors may also develop technologies that more effectively address our markets with products that offer enhanced features and functionality, lower power requirements, greater levels of integration or lower cost. Increased competition has resulted in and is likely to continue to result in price reductions, reduced gross margins and loss of market share in certain markets. In some of our businesses, we are dependent on competitors for information for the timely development of next-generation products, and such information may not always be given to us on a timely basis, if at all. We cannot assure you that we will be able to continue to compete successfully against current or new competitors. If we do not compete successfully, we may lose market share in our existing markets and our revenues may fail to increase or may decline.

We depend on six independent foundry subcontractors to manufacture substantially all of our current products, and any failure to secure and maintain sufficient foundry capacity could materially and adversely affect our business.

We do not own or operate a fabrication facility. Six third-party foundry subcontractors located in Asia manufacture substantially all of our semiconductor devices in current production. Availability of foundry capacity has at times in the past been reduced due to strong demand. In addition, a recurrence of severe acute respiratory syndrome, or SARS, or the occurrence of a significant outbreak of avian influenza among humans or another public health emergency in Asia could further affect the production capabilities of our manufacturers by resulting in quarantines or closures. If we are unable to secure sufficient capacity at our existing foundries, or in the event of a quarantine or closure at any of these foundries, our revenues, cost of revenues and results of operations would be negatively impacted.

In September 1999 two of our foundries’ principal facilities were affected by a significant earthquake in Taiwan. As a consequence of this earthquake, they suffered power outages and equipment damage that impaired their wafer deliveries, which, together with strong demand, resulted in wafer shortages and higher wafer pricing industrywide. If any of our foundries experiences a shortage in capacity, suffers any damage to its facilities, experiences power outages, suffers an adverse outcome in pending litigation, or encounters financial difficulties or any other disruption of foundry capacity, we may need to qualify an alternative foundry in a timely manner. Even our current foundries need to have new manufacturing processes qualified if there is a disruption in an existing process. We typically require several months to qualify a new foundry or process before we can begin shipping products from it. If we cannot accomplish this qualification in a timely manner, we may experience a significant interruption in supply of the affected products.

Because we rely on outside foundries with limited capacity, we face several significant risks, including:


	•	a lack of guaranteed wafer supply and potential wafer shortages and higher wafer prices;
	•	limited control over delivery schedules, quality assurance, manufacturing yields and production costs; and
	•	the unavailability of, or potential delays in obtaining access to, key process technologies.

In addition, the manufacture of integrated circuits is a highly complex and technologically demanding process. Although we work closely with our foundries to minimize the likelihood of reduced manufacturing yields, our foundries have from time to time experienced lower than anticipated manufacturing yields. This often occurs during the production of new products or the installation and start-up of new process technologies. Poor

yields from our foundries could result in product shortages or delays in product shipments, which could seriously harm our relationships with our customers and materially and adversely affect our results of operations.

The ability of each foundry to provide us with semiconductor devices is limited by its available capacity and existing obligations. Although we have entered into contractual commitments to supply specified levels of products to some of our customers, we do not have a long-term volume purchase agreement or a significant guaranteed level of production capacity with any of our foundries. Foundry capacity may not be available when we need it or at reasonable prices. Availability of foundry capacity has in the recent past been reduced from time to time due to strong demand. We place our orders on the basis of our customers’ purchase orders or our forecast of customer demand, and the foundries can allocate capacity to the production of other companies’ products and reduce deliveries to us on short notice. It is possible that foundry customers that are larger and better financed than we are, or that have long-term agreements with our main foundries, may induce our foundries to reallocate capacity to them. This reallocation could impair our ability to secure the supply of components that we need. Although we use six independent foundries to manufacture substantially all of our semiconductor products, most of our components are not manufactured at more than one foundry at any given time, and our products typically are designed to be manufactured in a specific process at only one of these foundries. Accordingly, if one of our foundries is unable to provide us with components as needed, we could experience significant delays in securing sufficient supplies of those components. Also, our third party foundries typically migrate capacity to newer, state-of-the-art manufacturing processes on a regular basis, which may create capacity shortages for our products designed to be manufactured on an older process. We cannot assure you that any of our existing or new foundries will be able to produce integrated circuits with acceptable manufacturing yields, or that our foundries will be able to deliver enough semiconductor devices to us on a timely basis, or at reasonable prices. These and other related factors could impair our ability to meet our customers’ needs and have a material and adverse effect on our operating results.

Although we may utilize new foundries for other products in the future, in using new foundries we will be subject to all of the risks described in the foregoing paragraphs with respect to our current foundries.

We depend on third-party subcontractors to assemble, obtain packaging materials for, and test substantially all of our current products. If we lose the services of any of our subcontractors or if these subcontractors are unable to obtain sufficient packaging materials, shipments of our products may be disrupted, which could harm our customer relationships and adversely affect our net sales.

We do not own or operate an assembly or test facility. Seven third-party subcontractors located in Asia assemble, obtain packaging materials for, and test substantially all of our current products. Because we rely on third-party subcontractors to perform these functions, we cannot directly control our product delivery schedules and quality assurance. This lack of control has resulted, and could in the future result, in product shortages or quality assurance problems that could delay shipments of our products or increase our manufacturing, assembly or testing costs.

In the recent past we and others in our industry experienced a shortage in the supply of packaging substrates that we use for our products. If our third-party subcontractors are unable to obtain sufficient packaging materials for our products in a timely manner, we may experience a significant product shortage or delay in product shipments, which could seriously harm our customer relationships and materially and adversely affect our net sales.

We do not have long-term agreements with any of our assembly or test subcontractors and typically procure services from these suppliers on a per order basis. If any of these subcontractors experiences capacity constraints or financial difficulties, suffers any damage to its facilities, experiences power outages or any other disruption of assembly or testing capacity, we may not be able to obtain alternative assembly and testing services in a timely manner. Due to the amount of time that it usually takes us to qualify assemblers and testers, we could experience significant delays in product shipments if we are required to find alternative assemblers or testers for our components. Any problems that we may encounter with the delivery, quality or cost of our products could damage our customer relationships and materially and adversely affect our results of operations. We are continuing to develop relationships with additional third-party subcontractors to assemble and test our products.

However, even if we use these new subcontractors, we will continue to be subject to all of the risks described above.

We may experience difficulties in transitioning to smaller geometry process technologies or in achieving higher levels of design integration, which may result in reduced manufacturing yields, delays in product deliveries and increased expenses.

To remain competitive, we expect to continue to transition our semiconductor products to increasingly smaller line width geometries. This transition requires us to modify the manufacturing processes for our products and to redesign some products as well as standard cells and other integrated circuit designs that we may use in multiple products. We periodically evaluate the benefits, on a product-by-product basis, of migrating to smaller geometry process technologies to reduce our costs. Currently most of our products are manufactured in .25 micron, .22 micron, .18 micron and .13 micron geometry processes. In addition, we have begun to migrate some of our products to 90-nanometer process technology. In the past, we have experienced some difficulties in shifting to smaller geometry process technologies or new manufacturing processes, which resulted in reduced manufacturing yields, delays in product deliveries and increased expenses. We may face similar difficulties, delays and expenses as we continue to transition our products to smaller geometry processes. We are dependent on our relationships with our foundries to transition to smaller geometry processes successfully. We cannot assure you that our foundries will be able to effectively manage the transition or that we will be able to maintain our existing foundry relationships or develop new ones. If our foundries or we experience significant delays in this transition or fail to efficiently implement this transition, we could experience reduced manufacturing yields, delays in product deliveries and increased expenses, all of which could harm our relationships with our customers and our results of operations. As smaller geometry processes become more prevalent, we expect to continue to integrate greater levels of functionality, as well as customer and third party intellectual property, into our products. However, we may not be able to achieve higher levels of design integration or deliver new integrated products on a timely basis, or at all. Moreover, even if we are able to achieve higher levels of design integration, such integration may have a short-term adverse impact on our operating results, as we may reduce our revenue by integrating the functionality of multiple chips into a single chip.

Our products typically have lengthy sales cycles. A customer may decide to cancel or change its product plans, which could cause us to lose anticipated sales. In addition, our average product life cycles tend to be short and, as a result, we may hold excess or obsolete inventory that could adversely affect our operating results.

After we have developed and delivered a product to a customer, the customer will usually test and evaluate our product prior to designing its own equipment to incorporate our product. Our customers may need three to more than six months to test, evaluate and adopt our product and an additional three to more than nine months to begin volume production of equipment that incorporates our product. Due to this lengthy sales cycle, we may experience significant delays from the time we increase our operating expenses and make investments in inventory until the time that we generate revenue from these products. It is possible that we may never generate any revenue from these products after incurring such expenditures. Even if a customer selects our product to incorporate into its equipment, we have no assurances that the customer will ultimately market and sell its equipment or that such efforts by our customer will be successful. The delays inherent in our lengthy sales cycle increase the risk that a customer will decide to cancel or change its product plans. Such a cancellation or change in plans by a customer could cause us to lose sales that we had anticipated. In addition, anticipated sales could be materially and adversely affected if a significant customer curtails, reduces or delays orders during our sales cycle or chooses not to release equipment that contains our products.

While our sales cycles are typically long, our average product life cycles tend to be short as a result of the rapidly changing technology environment in which we operate. As a result, the resources devoted to product sales and marketing may not generate material revenue for us, and from time to time, we may need to write off excess and obsolete inventory. If we incur significant marketing expenses and investments in inventory in the future that we are not able to recover, and we are not able to compensate for those expenses, our operating results could be

adversely affected. In addition, if we sell our products at reduced prices in anticipation of cost reductions but still hold higher cost products in inventory, our operating results would be harmed.


	The complexity of our products could result in unforeseen delays or expenses and in undetected defects or bugs, which could damage our reputation with current or prospective customers and adversely affect the market acceptance of new products.

Highly complex products such as the products that we offer frequently contain defects and bugs when they are first introduced or as new versions are released. We have previously experienced, and may in the future experience, these defects and bugs. If any of our products contains defects or bugs, or has reliability, quality or compatibility problems, our reputation may be damaged and customers may be reluctant to buy our products, which could materially and adversely affect our ability to retain existing customers and attract new customers. In addition, these defects or bugs could interrupt or delay sales or shipment of our products to our customers. To alleviate these problems, we may have to invest significant capital and other resources. Although our products are tested by us and our suppliers and customers, it is possible that our new products will contain defects or bugs. If any of these problems are not found until after we have commenced commercial production of a new product, we may be required to incur additional development costs and product recall, repair or field replacement costs. These problems may divert our technical and other resources from other development efforts and could result in claims against us by our customers or others. In addition, system and handset providers who purchase components may require that we assume liability for defects associated with products produced by their manufacturing subcontractors and require that we provide a warranty for defects or other problems which may arise at the system level. Moreover, we would likely lose, or experience a delay in, market acceptance of the affected product or products, and we could lose credibility with our current and prospective customers.


	The six primary independent foundries upon which we rely to manufacture substantially all of our current products and our California and Singapore facilities are located in regions that are subject to earthquakes and other natural disasters.

Two of the six third-party foundries upon which we rely to manufacture substantially all of our semiconductor devices are located in Taiwan and one such third-party foundry is located in Japan. Both Taiwan and Japan have experienced significant earthquakes in the past and could be subject to additional earthquakes. Any earthquake or other natural disaster, such as a tsunami, in a country in which any of our foundries is located could significantly disrupt our foundries’ production capabilities and could result in our experiencing a significant delay in delivery, or substantial shortage, of wafers and possibly in higher wafer prices. Our California facilities, including our principal executive offices, are located near major earthquake fault lines, and our international distribution center is located in Singapore, which could be subject to an earthquake, tsunami or other natural disaster. If there is a major earthquake or any other natural disaster in a region where one of our facilities is located, it could significantly disrupt our operations.


	Changes in current or future laws or regulations or the imposition of new laws or regulations by the FCC, other federal or state agencies or foreign governments could impede the sale of our products or otherwise harm our business.

The Federal Communications Commission has broad jurisdiction over each of our target markets. Although current FCC regulations and the laws and regulations of other federal or state agencies are not directly applicable to our products, they do apply to much of the equipment into which our products are incorporated. FCC regulatory policies that affect the ability of cable operators or telephone companies to offer certain services to their customers or other aspects of their business may impede sales of our products. Accordingly, the effects of regulation on our customers or the industries in which they operate may, in turn, materially and adversely impact our business. For example, in the past we have experienced delays when products incorporating our chips failed to comply with FCC emissions specifications. We and our customers may also be subject to regulation by countries other than the United States. Foreign governments may impose tariffs, duties and other import restrictions on components that we obtain from non-domestic suppliers and may impose export restrictions on products that we sell internationally. These tariffs, duties or restrictions could materially and adversely affect our business, financial

condition and results of operations. Changes in current laws or regulations or the imposition of new laws and regulations in the United States or elsewhere could also materially and adversely affect our business.


	If our internal controls over financial reporting do not comply with the requirements of the Sarbanes-Oxley Act, our business and stock price could be adversely affected.

Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate the effectiveness of our internal controls over financial reporting as of the end of each year beginning in 2004, and to include a management report assessing the effectiveness of our internal controls over financial reporting in all annual reports beginning with this Report. Section 404 also requires our independent registered public accounting firm to attest to, and report on, management’s assessment of our internal controls over financial reporting.

Our management, including our CEO and CFO, does not expect that our internal controls over financial reporting will prevent all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, involving the company have been, or will be, detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and we cannot assure you that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Although our management has determined, and our independent registered public accounting firm has attested, that our internal control over financial reporting was effective as of December 31, 2004, we cannot assure you that we or our independent registered public accounting firm will not identify a material weakness in our internal controls in the future. A material weakness in our internal controls over financial reporting would require management and our independent registered public accounting firm to evaluate our internal controls as ineffective. If our internal controls over financial reporting are not considered adequate, we may experience a loss of public confidence, which could have an adverse effect on our business and our stock price.


	We may experience difficulties in implementing or enhancing new information systems.

We recently implemented a new ERP information system to manage our business operations and a new HRM system, and we intend to implement a new MRP information system. The implementation and migration to a new MRP system could adversely impact our ability to do the following in a timely manner: accept and process customer orders, receive inventory and ship products, invoice and collect receivables, place purchase orders and pay invoices, and process other business transactions related to the order entry, purchasing, and, supply chain processes within a new MRP system. Any such disruption could adversely affect our financial position, results of operations, cash flows and the market price of our Class A common stock. In addition, if any of the providers of our information systems do not choose to continue supporting the systems we have implemented, we may be forced to switch to new information systems, which could result in further disruptions.


	We may seek to raise additional capital through the issuance of additional equity or debt securities or by borrowing money, but additional funds may not be available on terms acceptable to us, or at all.

We believe that our existing cash, cash equivalents and marketable securities, together with cash generated by operations and from the exercise of employee stock options will be sufficient to cover our working capital needs, capital expenditures, investment requirements, commitments and repurchases of our Class A common stock for at least the next 12 months. However, it is possible that we may need to raise additional funds to finance our

activities beyond the next 12 months or to consummate acquisitions of other businesses, assets, products or technologies. We could raise such funds by selling equity or debt securities to the public or to selected investors, or by borrowing money from financial institutions. In addition, even though we may not need additional funds, we may still elect to sell additional equity or debt securities or obtain credit facilities for other reasons. We have in effect a universal shelf registration statement on SEC Form S-3 that allows us to sell, in one or more public offerings, shares of our Class A common stock, shares of preferred stock or debt securities, or any combination of such securities, for proceeds in an aggregate amount of up to $750 million. However, we have not issued nor do we have immediate plans to issue securities to raise capital under the universal shelf registration statement. If we elect to raise additional funds, we may not be able to obtain such funds on a timely basis on acceptable terms, or at all. If we raise additional funds by issuing additional equity or convertible debt securities, the ownership percentages of existing shareholders would be reduced. In addition, the equity or debt securities that we issue may have rights, preferences or privileges senior to those of our common stock.


	Our co-founders, directors, executive officers and their affiliates can control the outcome of matters that require the approval of our shareholders, and accordingly we will not be able to engage in certain transactions without their approval.

As of December 31, 2004 our co-founders, directors, executive officers and their respective affiliates beneficially owned approximately 17.8% of our outstanding common stock and held 65.2% of the total voting power held by our shareholders. Accordingly, these shareholders currently have enough voting power to control the outcome of matters that require the approval of our shareholders. These matters include the election of our Board of Directors, the issuance of additional shares of Class B common stock, and the approval of most significant corporate transactions, including a merger, consolidation or sale of substantially all of our assets. In particular, as of December 31, 2004 our two founders, Dr. Henry T. Nicholas III, who is no longer an officer or director of the company, and Dr. Henry Samueli, our Chairman of the Board and Chief Technical Officer, beneficially owned a total of approximately 16.6% of our outstanding common stock and held 64.1% of the total voting power held by our shareholders. Because of their significant voting stock ownership, we will not be able to engage in certain transactions, and our shareholders will not be able to effect certain actions or transactions, without the approval of one or both of these shareholders. These actions and transactions include changes in control of our Board of Directors, mergers, and the sale of control of our company by means of a tender offer, open market purchases or other purchases of our Class A common stock, or otherwise.


	Our articles of incorporation and bylaws contain anti-takeover provisions that could prevent or discourage a third party from acquiring us.

Our articles of incorporation and bylaws contain provisions that may prevent or discourage a third party from acquiring us, even if the acquisition would be beneficial to our shareholders. In addition, we have in the past issued and may in the future issue shares of Class B common stock in connection with certain acquisitions, upon exercise of certain stock options, and for other purposes. Class B shares have superior voting rights entitling the holder to ten votes for each share held on matters that we submit to a shareholder vote (as compared with one vote per share in the case of our Class A common stock). Our Board of Directors also has the authority to fix the rights and preferences of shares of our preferred stock and to issue such shares without a shareholder vote. It is possible that the provisions in our charter documents, the exercise of supervoting rights by holders of our Class B common stock, our co-founders’, directors’ and officers’ ownership of a majority of the Class B common stock, or the ability of our Board of Directors to issue preferred stock or additional shares of Class B common stock may prevent or discourage third parties from acquiring us, even if the acquisition would be beneficial to our shareholders. In addition, these factors may discourage third parties from bidding for our Class A common stock at a premium over the market price for our stock. These factors may also materially and adversely affect voting and other rights of the holders of our common stock and the market price of our Class A common stock.


Item 7A.	*Quantitative and Qualitative Disclosures about Market Risk*

We maintain an investment portfolio of various holdings, types and maturities. We do not use derivative financial instruments. We place our cash investments in instruments that meet high credit quality standards, as specified in our investment policy guidelines. These guidelines also limit the amount of credit exposure to any one issue, issuer or type of instrument.

Our cash and cash equivalents are not subject to significant interest rate risk due to the short maturities of these instruments. As of December 31, 2004 the carrying value of our cash and cash equivalents approximated fair value.

Our marketable debt securities, consisting of U.S. Treasury and agency obligations, commercial paper, corporate notes and bonds, time deposits, foreign notes and certificates of deposits, are generally classified as held-to-maturity and are stated at cost, adjusted for amortization of premiums and discounts to maturity. In addition, in the past certain of our short term marketable debt securities were classified as available-for-sale and were stated at fair value, which was equal to cost due to the short-term maturity of these securities. In the event that there were to be a difference between fair value and cost in any of our available-for-sale securities, unrealized holding gains and losses on these investments would be reported as a separate component of accumulated other comprehensive income (loss). Our investment policy for marketable debt securities requires that all securities mature in three years or less, with a weighted average maturity of no longer than one year. As of December 31, 2004 the carrying value and fair value of these securities were approximately $417.0 million and $415.8 million, respectively. The fair value of our marketable debt securities fluctuates based on changes in market conditions and interest rates; however, given the short-term maturities, we do not believe these instruments are subject to significant market or interest rate risk.

The carrying value, maturity and estimated fair value of our cash equivalents and marketable debt securities as of December 31, 2004 and 2003, respectively, were as follows:


		Carrying												Fair
		Value			Maturity									Value
		December 31,												December 31,
		2004			2005			2006			2007			2004

		(In thousands, except interest rates)




Investments




Cash equivalents		$	356,845		$	356,845		$	—		$	—		$	356,831




	Weighted average interest rate		2.33	%		2.33	%		—			—




Marketable debt securities		$	416,959		$	324,041		$	69,717		$	23,201		$	415,757




	Weighted average interest rate		2.40	%		2.30	%		2.64	%		3.12	%


		Carrying												Fair
		Value			Maturity									Value
		December 31,												December 31,
		2003			2004			2005			2006			2003

		(In thousands, except interest rates)




Investments




Cash equivalents		$	64,299		$	64,299		$	—		$	—		$	64,299




	Weighted average interest rate		1.15	%		1.15	%		—			—




Marketable debt securities		$	83,701		$	47,296		$	17,273		$	19,132		$	84,050




	Weighted average interest rate		2.20	%		2.08	%		2.26	%		2.46	%

Our strategic equity investments are generally classified as available-for-sale and are recorded on the balance sheet at fair value with unrealized gains or losses reported as a separate component of accumulated other comprehensive income (loss) for our publicly traded investments. We have also invested in privately held companies, the majority of which can still be considered to be in the start-up or development stage. We make investments in key business partners and other industry participants to establish strategic relationships, expand existing relationships, and achieve a return on our investment. These investments are inherently risky, as the markets for the technologies or products these companies have under development are typically in the early stages

and may never materialize. Likewise, the development projects of these companies may not be successful. In addition, early stage companies often fail to succeed for various other reasons. Consequently, we could lose our entire investment in these companies. As of December 31, 2004, the carrying and fair value of our strategic investments was approximately $5.2 million.


Item 8.	*Financial Statements and Supplementary Data*

The financial statements and supplementary data required by this item are included in Part IV, Item 15 of this Report.


Item 9.	*Changes in and Disagreements with Accountants on Accounting and Financial Disclosure*

None.


Item 9A.	*Controls and Procedures*

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2004, the end of the period covered by this Report.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework set forth in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework set forth in Internal Control — Integrated Framework , our management concluded that our internal control over financial reporting was effective as of December 31, 2004. Our management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2004 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included herein.

Attestation Report of Independent Registered Public Accounting Firm

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Board of Directors and Shareholders

Broadcom Corporation

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control over Financial Reporting appearing above, that Broadcom Corporation maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Broadcom Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Broadcom Corporation maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Broadcom Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the accompanying consolidated balance sheets of Broadcom Corporation as of December 31, 2004 and 2003, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2004 of Broadcom Corporation and our report dated February 25, 2004 expressed an unqualified opinion thereon.

Orange County, California

February 25, 2005


Item 9B.	*Other Information*

None.

PART III.


Item 10.	*Directors and Executive Officers of the Registrant*

(a) Identification of Directors. The information under the caption “Election of Directors,” appearing in the Proxy Statement, is hereby incorporated by reference.

(b) Identification of Executive Officers and Certain Significant Employees. The information under the caption “Elected Officers,” appearing in the Proxy Statement, is hereby incorporated by reference.

(c) Compliance with Section 16(a) of the Exchange Act. The information under the caption “Section 16(a) Beneficial Ownership Reporting Compliance,” appearing in the Proxy Statement, is hereby incorporated by reference.

(d) Code of Ethics. The information under the caption “Corporate Governance,” appearing in the Proxy Statement, is hereby incorporated by reference.


Item 11.	*Executive Compensation*

The information under the caption “Executive Compensation and Other Information,” appearing in the Proxy Statement, is hereby incorporated by reference.


Item 12.	*Security Ownership of Certain Beneficial Owners and Management*

The information under the captions “Ownership of Securities” and “Equity Compensation Plan Information,” appearing in the Proxy Statement, is hereby incorporated by reference.


Item 13.	*Certain Relationships and Related Transactions*

The information under the caption “Certain Transactions,” appearing in the Proxy Statement, is hereby incorporated by reference.


Item 14.	*Principal Accounting Fees and Services*

The information under the caption “Fees Paid to Independent Registered Public Accounting Firm,” appearing in the Proxy Statement, is hereby incorporated by reference.

PART IV.


Item 15.	*Exhibits and Financial Statement Schedules*

(a) 1. Financial Statements.

The following consolidated financial statements, and related notes thereto, of Broadcom and the Report of Independent Registered Public Accounting Firm are filed as part of this Form 10-K:


	Page

Report of Independent Registered Public Accounting Firm		F-1




Consolidated Balance Sheets as of December 31, 2004 and 2003		F-2




Consolidated Statements of Operations for the years ended December 31, 2004, 2003 and 2002		F-3




Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2004, 2003 and 2002		F-4




Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002		F-5




Notes to Consolidated Financial Statements		F-6

2. Financial Statement Schedules.

The following financial statement schedule of Broadcom and the related Report of Independent Registered Public Accounting Firm are filed as part of this Form 10-K:


	Page





Report of Independent Registered Public Accounting Firm on Financial Statement Schedule		S-1




Schedule II — Consolidated Valuation and Qualifying Accounts		S-2

All other schedules have been omitted because they are not applicable or not required, or the information is included in the Consolidated Financial Statements or Notes thereto.

3. Exhibits.

The exhibits listed on the accompanying index to exhibits immediately following the financial statements are filed as part of, or hereby incorporated by reference into, this Report.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Broadcom Corporation

We have audited the accompanying consolidated balance sheets of Broadcom Corporation as of December 31, 2004 and 2003, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2004. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Broadcom Corporation at December 31, 2004 and 2003, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Broadcom Corporation’s internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 25, 2005 expressed an unqualified opinion thereon.

Orange County, California
February 25, 2005

F-1

CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)


					December 31,

					2004			2003

Assets




Current assets:




	Cash and cash equivalents				$	858,592		$	558,669




	Short-term marketable securities					324,041			47,296




	Accounts receivable (net of allowance for doubtful accounts of $6,900 in 2004 and $6,493 in 2003)					205,135			220,124




	Inventory					128,294			104,047




	Prepaid expenses and other current assets					68,380			65,667

				Total current assets		1,584,442			995,803




Property and equipment, net						107,160			142,113




Long-term marketable securities						92,918			36,405




Goodwill						1,062,188			827,652




Purchased intangible assets, net						17,074			6,667




Other assets						22,057			8,982

				Total assets	$	2,885,839		$	2,017,622






Liabilities and Shareholders’ Equity




Current liabilities:




	Accounts payable				$	171,248		$	219,064




	Wages and related benefits					42,697			33,965




	Deferred revenue					3,648			963




	Accrued liabilities					279,507			249,584

				Total current liabilities		497,100			503,576
Commitments and contingencies




Long-term liabilities						22,753			24,241




Shareholders’ equity:




		Convertible preferred stock, $.0001 par value:




			Authorized shares — 10,000,000 — none issued and outstanding			—			—




		Class A common stock, $.0001 par value:
			Authorized shares — 800,000,000




			Issued and outstanding shares — 273,112,763 in 2004 and 240,243,633 in 2003			27			24




		Class B common stock, $.0001 par value:
			Authorized shares — 400,000,000




			Issued and outstanding shares — 57,395,782 in 2004 and 65,778,605 in 2003			6			7




	Additional paid-in capital					8,741,045			8,123,941




	Notes receivable from employees					(7,955	)		(10,906	)




	Deferred compensation					(40,701	)		(77,616	)




	Accumulated deficit					(6,327,535	)		(6,546,280	)




	Accumulated other comprehensive income					1,099			635

				Total shareholders’ equity		2,365,986			1,489,805

				Total liabilities and shareholders’ equity	$	2,885,839		$	2,017,622

See accompanying notes.

F-2

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)


				Years Ended December 31,

				2004		2003			2002

Net revenue				$	2,400,610	$	1,610,095		$	1,082,948




Cost of revenue ⁽¹⁾					1,193,294		839,776			604,397

Gross profit					1,207,316		770,319			478,551




Operating expense:




	Research and development ⁽²⁾				495,075		434,018			461,804




	Selling, general and administrative ⁽²⁾				212,727		190,138			165,267




	Stock-based compensation				73,320		263,960			359,790




	Amortization of purchased intangible assets				3,703		3,504			22,387




	Settlement costs				68,700		194,509			3,000




	In-process research and development				63,766		—			—




	Impairment of goodwill and intangible assets				18,000		439,611			1,265,038




	Stock option exchange				—		209,266			—




	Restructuring costs				—		2,932			119,680

Income (loss) from operations					272,025		(967,619	)		(1,918,415	)




Interest income, net					15,010		6,828			12,183




Other income (expense), net					7,317		26,053			(32,750	)

Income (loss) before income taxes					294,352		(934,738	)		(1,938,982	)




Provision for income taxes					75,607		25,127			297,594

Net income (loss)				$	218,745	$	(959,865	)	$	(2,236,576	)

Net income (loss) per share (basic)				$	.68	$	(3.29	)	$	(8.35	)

Net income (loss) per share (diluted)				$	.63	$	(3.29	)	$	(8.35	)

Weighted average shares (basic)					319,442		292,009			267,990

Weighted average shares (diluted)					349,037		292,009			267,990

(1) Cost of revenue includes the following:




			Stock-based compensation expense	$	1,367	$	6,528		$	12,917




			Amortization of purchased intangible assets		12,821		17,207			56,032




			Stock option exchange expense		—		11,454			—

				$	14,188	$	35,189		$	68,949

(2) Stock-based compensation expense is excluded from the following:




			Research and development expense	$	58,611	$	219,337		$	252,365




			Selling, general and administrative expense		14,709		44,623			107,425

				$	73,320	$	263,960		$	359,790

		Amortization of purchased intangible assets is excluded from the following:




			Research and development expense	$	—	$	815		$	19,566




			Selling, general and administrative expense		3,703		2,689			2,821

				$	3,703	$	3,504		$	22,387

		Stock option exchange expense is excluded from the following:




			Research and development expense	$	—	$	164,798		$	—




			Selling, general and administrative expense		—		44,468			—

				$	—	$	209,266		$	—

See accompanying notes.

F-3

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands, except share amounts)


										Notes									Accumulated
			Common Stock				Additional			Receivable									Other			Total
							Paid-In			From			Deferred			Accumulated			Comprehensive			Shareholders’
			Shares		Amount		Capital			Employees			Compensation			Deficit			Income (Loss)			Equity

Balance at December 31, 2001				264,504,496	$	26	$	7,529,685		$	(14,452	)	$	(964,916	)	$	(3,349,839	)	$	6,906		$	3,207,410




	Purchase transactions			6,769,500		1		214,728			(299	)		—			—			—			214,430




	Exercise of stock options, net			5,491,411		1		25,377			(295	)		—			—			—			25,083




	Employee stock purchase plan			1,038,541		—		18,972			—			—			—			—			18,972




	Repayment of notes receivable			—		—		—			2,199			—			—			—			2,199




	Deferred compensation, net			—		—		(100,812	)		—			100,812			—			—			—




	Stock-based compensation expense			—		—		10,449			—			409,214			—			—			419,663




	Components of comprehensive loss:




		Change in net unrealized loss on investments		—		—		—			—			—			—			(7,152	)		(7,152	)




		Reclassification adjustment for net realized loss included in net loss		—		—		—			—			—			—			106			106




		Translation adjustments		—		—		—			—			—			—			386			386




		Net loss		—		—		—			—			—			(2,236,576	)		—			(2,236,576	)

	Comprehensive loss			—		—		—			—			—			—			—			(2,243,236	)

Balance at December 31, 2002				277,803,948		28		7,698,399			(12,847	)		(454,890	)		(5,586,415	)		246			1,644,521




	Purchase transactions, net			2,565,372		—		17,837			—			—			—			—			17,837




	Exercise of stock options, net			14,865,522		2		182,716			—			—			—			—			182,718




	Employee stock purchase plan			2,213,363		—		24,777			—			—			—			—			24,777




	Repayment of notes receivable			—		—		—			1,941			—			—			—			1,941




	Deferred compensation, net			—		—		30,363			—			(30,363	)		—			—			—




	Stock-based compensation expense			—		—		7,544			—			352,003			—			—			359,547




	Stock option exchange			8,574,033		1		162,305			—			55,634			—			—			217,940




	Components of comprehensive loss:




		Change in net unrealized loss on investments		—		—		—			—			—			—			(61	)		(61	)




		Reclassification adjustment for net realized loss included in net loss		—		—		—			—			—			—			137			137




		Translation adjustments		—		—		—			—			—			—			313			313




		Net loss		—		—		—			—			—			(959,865	)		—			(959,865	)

	Comprehensive loss			—		—		—			—			—			—			—			(959,476	)

Balance at December 31, 2003				306,022,238		31		8,123,941			(10,906	)		(77,616	)		(6,546,280	)		635			1,489,805




	Purchase transactions, net			7,370,165		1		244,212			(34	)		—			—			—			244,179




	Shares issued pursuant to stock awards, net			14,570,066		1		222,314			—			—			—			—			222,315




	Employee stock purchase plan			2,546,076		—		31,008			—			—			—			—			31,008




	Tax benefit realized from stock plans			—		—		81,798			—			—			—			—			81,798




	Repayment of notes receivable			—		—		—			2,985			—			—			—			2,985




	Deferred compensation, net			—		—		37,053			—			(37,053	)		—			—			—




	Stock-based compensation expense			—		—		719			—			73,968			—			—			74,687




	Components of comprehensive income:




		Change in net unrealized loss on investments		—		—		—			—			—			—			(3	)		(3	)




		Translation adjustments		—		—		—			—			—			—			467			467




		Net income		—		—		—			—			—			218,745			—			218,745

	Comprehensive income			—		—		—			—			—			—			—			219,209

Balance at December 31, 2004				330,508,545	$	33	$	8,741,045		$	(7,955	)	$	(40,701	)	$	(6,327,535	)	$	1,099		$	2,365,986

See accompanying notes.

F-4

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


				Years Ended December 31,

				2004			2003			2002

Operating activities




Net income (loss)				$	218,745		$	(959,865	)	$	(2,236,576	)




Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:




	Depreciation and amortization				75,166			70,237			68,709




	Stock-based compensation expense				74,687			270,488			372,707




	Amortization of purchased intangible assets				16,524			20,711			78,419




	In-process research and development				63,766			—			—




	Impairment of goodwill and intangible assets				18,000			439,611			1,265,038




	Tax benefit realized from stock plans				81,798			—			—




	Non-cash stock option exchange expense				—			217,940			—




	Non-cash settlement costs				—			88,087			—




	Non-cash restructuring charges				—			972			52,456




	(Gain) loss on strategic investments, net				(5,231	)		(22,041	)		33,201




	Non-cash development revenue				—			(508	)		(4,700	)




	Deferred taxes				—			—			286,525




	Change in operating assets and liabilities:




		Accounts receivable			23,631			(91,019	)		(62,333	)




		Inventory			(22,310	)		(57,554	)		(22,577	)




		Prepaid expenses and other assets			(22,080	)		(27,786	)		(26,371	)




		Accounts payable			(57,186	)		50,828			62,568




		Other accrued liabilities			36,328			30,538			63,743

			Net cash provided by (used in) operating activities		501,838			30,639			(69,191	)




Investing activities




Purchases of property and equipment					(49,931	)		(47,932	)		(75,182	)




Net cash received (paid) in purchase transactions					(74,846	)		(5,862	)		839




Purchases of strategic investments					(3,216	)		(2,500	)		(3,250	)




Proceeds from sales of strategic investments					5,231			29,152			7,597




Purchases of marketable securities					(525,949	)		(69,637	)		(94,300	)




Proceeds from sale of available for sale marketable securities					48,145			—			—




Proceeds from maturities of marketable securities					144,546			139,288			186,743

			Net cash provided by (used in) investing activities		(456,020	)		42,509			22,447




Financing activities




Payments on debt and other obligations					(2,203	)		(113,470	)		(13,713	)




Net proceeds from issuance of common stock					253,323			207,495			44,055




Proceeds from repayment of notes receivable from employees					2,985			1,941			2,199

			Net cash provided by financing activities		254,105			95,966			32,541

Increase (decrease) in cash and cash equivalents					299,923			169,114			(14,203	)




Cash and cash equivalents at beginning of year					558,669			389,555			403,758

Cash and cash equivalents at end of year				$	858,592		$	558,669		$	389,555

Supplemental disclosure of cash flow information




Interest paid				$	57		$	1,019		$	3,004

Income taxes paid (refunded)				$	5,234		$	8,355		$	(3,083	)

See accompanying notes.

F-5

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.	Summary of Significant Accounting Policies

The Company

Broadcom Corporation (the “Company”) is a global leader in wired and wireless broadband communications semiconductors. The Company’s products enable the convergence of high-speed data, high definition video, voice and audio at home, in the office and on the go. The Company provides manufacturers of computing and networking equipment, digital entertainment and broadband access products, and mobile devices with complete system-on-a-chip and software solutions. The Company’s diverse product portfolio addresses every major broadband communications market, and includes solutions for digital cable, satellite and Internet Protocol set-top boxes; high definition television (HDTV); cable and DSL modems and residential gateways; high-speed transmission and switching for local, metropolitan, wide area and storage networking; home and wireless networking; cellular and terrestrial wireless communications; Voice over Internet Protocol (VoIP) gateway and telephony systems; broadband network and security processors; and SystemI/ O ^tm server solutions.

Basis of Presentation

The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net revenue and expenses in the reporting period. The Company regularly evaluates estimates and assumptions related to allowances for doubtful accounts, sales returns and allowances, warranty reserves, inventory reserves, goodwill and purchased intangible asset valuations, strategic investments, deferred income tax asset valuation allowances, restructuring costs, litigation and other loss contingencies. The Company bases its estimates and assumptions on current facts, historical experience and on various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from management’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Revenue Recognition

The Company’s net revenue is generated principally by sales of its semiconductor products. Such sales represented approximately 99.0%, 98.5% and 95.7% of its total net revenue in 2004, 2003 and 2002, respectively. The Company derives the remaining balance of its net revenue predominantly from development agreements, software licenses and maintenance agreements, system-level reference designs and cancellation fees.

The majority of the Company’s sales occur through the efforts of its direct sales force. However, the Company derived approximately 9.6%, 7.1% and 10.4% of its total net revenue from sales made through distributors in 2004, 2003 and 2002, respectively.

In accordance with Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 101, Revenue Recognition in Financial Statements (“SAB 101”) as well as SAB No. 104, Revenue Recognition (“SAB 104”), the Company recognizes product revenue when the following fundamental criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the price to the customer is fixed or determinable and (iv) collection of the resulting receivable is reasonably assured. In addition, the Company does not recognize revenue until all customer acceptance requirements have been met, when applicable. These criteria are usually met at the time of product shipment. However, a portion of the Company’s sales are made through distributors under agreements allowing for pricing credits and/or rights of

F-6

return. Product revenue on sales made through these distributors is not recognized until the distributors ship the product to their customers. The Company records reductions to revenue for estimated product returns and pricing adjustments, such as competitive pricing programs and rebates, in the same period that the related revenue is recorded. The amount of these reductions is based on historical sales returns, analysis of credit memo data, specific criteria included in rebate agreements, and other factors known at the time.

Revenue under development agreements is recognized when applicable contractual milestones have been met, including deliverables, and in any case, does not exceed the amount that would be recognized using the percentage-of-completion method in accordance with the American Institute of Certified Public Accountants Statement of Position (“SOP”) 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts (“SOP 81-1”). The costs associated with development agreements are included in cost of revenue. Revenue from licensed software and maintenance agreements is recognized in accordance with the provisions of SOP 97-2, Software Revenue Recognition, as amended by SOP 98-9, Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions. Revenue from system-level reference designs is recognized in accordance with SAB 101 and SAB 104. Revenue from cancellation fees is recognized when cash is received from the customer.

Allowance for Doubtful Accounts

The Company evaluates the collectibility of accounts receivable based on a combination of factors. In cases where the Company is aware of circumstances that may impair a specific customer’s ability to meet its financial obligations subsequent to the original sale, the Company will record a specific allowance against amounts due, and thereby reduce the net recognized receivable to the amount the Company reasonably believes will be collected. For all other customers, the Company recognizes allowances for doubtful accounts based on the length of time the receivables are past due, industry and geographic concentrations, the current business environment and the Company’s historical experience.

Concentration of Credit Risk

The Company sells the majority of its products throughout North America, Asia and Europe. Sales to the Company’s recurring customers are generally made on open account while sales to occasional customers are typically made on a prepaid or letter of credit basis. The Company performs periodic credit evaluations of its recurring customers and generally does not require collateral. Reserves are maintained for potential credit losses, and such losses historically have not been significant and have been within management’s expectations.

The Company invests its cash in deposits and money market funds with major financial institutions, in U.S. Treasury and agency obligations, and in debt securities of corporations with strong credit ratings and in a variety of industries. It is the Company’s policy to invest in instruments that have a final maturity of no longer than three years, with a portfolio weighted average maturity of not more than one year.

Fair Value of Financial Instruments

The Company’s financial instruments consist principally of cash and cash equivalents, short-term and long-term marketable securities, accounts receivable, accounts payable and borrowings. The Company believes all of the financial instruments’ recorded values approximate current values because of their nature and respective durations. The fair value of marketable securities is determined using quoted market prices for those securities or similar financial instruments.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and short-term investments with original maturities of 90 days or less.

F-7

Marketable Securities

The Company defines marketable securities as income yielding securities that can be readily converted into cash. Examples of marketable securities include U.S. Treasury and agency obligations, commercial paper, corporate notes and bonds, time deposits, foreign notes and certificates of deposit.

Investments

The Company accounts for its investments in debt and equity securities under Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 115, Accounting for Certain Investments in Debt and Equity Securities. Management determines the appropriate classification of such securities at the time of purchase and reevaluates such classification as of each balance sheet date. The investments are adjusted for amortization of premiums and discounts to maturity and such amortization is included in interest income. Realized gains and losses and declines in value judged to be other than temporary are determined based on the specific identification method and are reported in the statements of operations.

The Company also has made strategic investments in publicly traded and privately held companies for the promotion of business and strategic objectives. The Company’s investments in publicly traded equity securities are classified as available-for-sale. Available-for-sale investments are initially recorded at cost and periodically adjusted to fair value through comprehensive income. The Company’s investments in equity securities of non-publicly traded companies are accounted for under the cost method. Under the cost method, strategic investments in which the Company holds less than a 20% voting interest and on which the Company does not have the ability to exercise significant influence are carried at the lower of cost or fair value. Both types of investments are included in other assets on the Company’s balance sheet and are carried at fair value or cost, as appropriate. The Company periodically reviews these investments for other-than-temporary declines in fair value based on the specific identification method and writes down investments to their fair value when an other-than-temporary decline has occurred. When determining whether a decline is other-than-temporary, the Company examines: (i) the length of time and the extent to which the fair value of an investment has been lower than its carrying value; (ii) the financial condition and near-term prospects of the investee, including any specific events that may influence the operations of the investee such as changes in technology that may impair the earnings potential of the investee; and (iii) the Company’s intent and ability to retain its investment in the investee for a sufficient period of time to allow for any anticipated recovery in market value. The Company generally believes an other-than-temporary decline has occurred when the fair value of the investment is below the carrying value for two consecutive quarters, absent evidence to the contrary. Fair values for investments in public companies are determined using their quoted market prices. Fair values for investments in privately held companies are estimated based upon one or more of the following: (a) values established in recent rounds of financing, (b) pricing models using historical and forecasted financial information, and/or (c) quoted market prices of comparable public companies.

Inventory

Inventory consists of work in process and finished goods and is stated at the lower of cost (first-in, first-out) or market. The Company establishes inventory allowances for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated realizable value based upon assumptions about future demand and market conditions. Shipping and handling costs are classified as a component of cost of revenue in the consolidated statements of operations.

Property and Equipment

Property and equipment are carried at cost. Depreciation and amortization are provided using the straight-line method over the assets’ estimated remaining useful lives, ranging from one to seven years. Depreciation and amortization of leasehold improvements are computed using the shorter of the remaining lease term or seven years.

F-8

Goodwill and Purchased Intangible Assets

Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the net tangible and intangible assets acquired. In accordance with SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS 142”), the Company tests goodwill for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis in the fourth quarter or more frequently if the Company believes indicators of impairment exist. The performance of the test involves a two-step process. The first step of the impairment test involves comparing the fair values of the applicable reporting units with their aggregate carrying value, including goodwill. The Company generally determines the fair value of its reporting units using the income approach methodology of valuation that includes the discounted cash flow method as well as other generally accepted valuation methodologies. If the carrying amount of a reporting unit exceeds the reporting unit’s fair value, the Company performs the second step of the goodwill impairment test to determine the amount of impairment loss. The second step of the goodwill impairment test involves comparing the implied fair value of the affected reporting unit’s goodwill with the carrying value of that goodwill.

The Company accounts for long-lived assets, including other purchased intangible assets, in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS 144”), which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment, such as reductions in demand or significant economic slowdowns in the semiconductor industry, are present. Reviews are performed to determine whether the carrying value of an asset is impaired, based on comparisons to undiscounted expected future cash flows. If this comparison indicates that there is impairment, the impaired asset is written down to fair value, which is typically calculated using: (i) quoted market prices and/or (ii) discounted expected future cash flows utilizing a discount rate consistent with the guidance provided in FASB Concepts Statement No. 7, Using Cash Flow Information and Present Value in Accounting Measurements (“Concepts Statement 7”). Impairment is based on the excess of the carrying amount over the fair value of those assets.

Income Taxes

The Company utilizes the liability method of accounting for income taxes as set forth in SFAS No. 109, Accounting for Income Taxes (“SFAS 109”). Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax bases of assets and liabilities using enacted tax rates. A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized. The Company also determines its tax contingencies in accordance with SFAS No. 5, Accounting for Contingencies. The Company records estimated tax liabilities to the extent the contingencies are probable and can be reasonably estimated.

Stock-Based Compensation

The Company has in effect several stock incentive plans under which incentive stock options and restricted stock units (“RSUs”) have been granted to employees and non-qualified stock options have been granted to employees, non-employee members of the Board of Directors and other non-employees. The Company also has an employee stock purchase plan for all eligible employees. The Company accounts for stock-based awards to employees in accordance with Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”) and related interpretations, and has adopted the disclosure-only alternative of SFAS No. 123, Accounting for Stock-Based Compensation (“SFAS 123”) and SFAS No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure. The fair value of options granted to non-employees, as defined under SFAS 123, has been expensed in accordance with SFAS 123.

In accordance with APB 25, stock-based compensation expense is not recorded in connection with stock options granted with exercise prices equal to or greater than the fair market value of the Company’s Class A common stock on the date of grant, unless certain modifications are subsequently made. The Company records deferred compensation in connection with stock options granted with exercise prices less than the fair market value of the Class A common stock on the date of grant. The amount of such deferred compensation per share is equal to the excess of such fair market value over the exercise price. In addition, the Company records deferred compensation in connection with RSU awards equal to the fair market value of the Class A common stock on

F-9

the date of grant. Recorded deferred compensation is recognized as stock-based compensation expense ratably over the applicable vesting periods.

In accordance with the requirements of the disclosure-only alternative of SFAS 123, set forth below are the assumptions used and a pro forma illustration of the effect on net income (loss) and net income (loss) per share computed as if the Company had valued stock-based awards to employees using the Black-Scholes option pricing model instead of applying the guidelines provided by APB 25.

The per share fair values of stock awards granted in connection with stock incentive plans and rights granted in connection with the employee stock purchase plan have been estimated with the following weighted average assumptions:


	Employee Stock Awards									Employee Stock Purchase Rights

	2004			2003			2002			2004			2003			2002

Expected life (in years)		4.73			4.00			4.00			1.59			1.28			1.17




Volatility		0.64			0.70			0.70			0.64			0.70			0.70




Risk-free interest rate		3.40	%		2.74	%		2.72	%		2.40	%		1.57	%		2.72	%




Dividend yield		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%




Weighted average fair value	$	19.19		$	16.88		$	9.33		$	7.36		$	5.90		$	6.89

The results of applying the requirements of the disclosure-only alternative of SFAS 123 to the Company’s stock-based awards to employees, assuming the application of the Black-Scholes model, would approximate the following:


	Years Ended December 31,

	2004			2003			2002

	(In thousands, except per share data)




Net income (loss) — as reported	$	218,745		$	(959,865	)	$	(2,236,576	)




Add: Stock-based compensation expense included in net income (loss) — as reported		74,687			577,487			419,663




Deduct: Stock-based compensation expense determined under the fair value method		(676,864	)		(1,025,896	)		(1,068,281	)

Net loss — pro forma	$	(383,432	)	$	(1,408,274	)	$	(2,885,194	)

Net income (loss) per share (basic) — as reported	$	.68		$	(3.29	)	$	(8.35	)

Net income (loss) per share (diluted) — as reported	$	.63		$	(3.29	)	$	(8.35	)

Net loss per share (basic and diluted) — pro forma	$	(1.20	)	$	(4.82	)	$	(10.77	)

For purposes of this illustration, the value of each stock award has been estimated as of the date of grant using the Black-Scholes model, which was developed for use in estimating the value of traded options that have no vesting restrictions and that are freely transferable. The Black-Scholes model considers, among other factors, the expected life of the option and the expected volatility of the Company’s stock price. Because it does not consider other factors important to stock-based awards, such as continued employment and periodic vesting requirements and limited transferability, the fair value generated by the Black-Scholes option pricing model may not be indicative of the actual fair value of the Company’s stock-based awards. For pro forma illustration purposes, the Black-Scholes value of the Company’s stock-based awards is assumed to be amortized on a straight-line basis over their respective vesting periods.

For the first three quarters of 2004, in performing the Black-Scholes calculations the Company used an expected life of five years and a volatility of 0.70. In the fourth quarter of 2004 the Company changed its expected life and volatility assumptions to four years and 0.50, respectively. This change represents a refinement to the Company’s determination of the appropriate assumptions to be used in the Black-Scholes model. The Company updated its assumptions based on more recent historical data related to trading patterns in its stock as well as other guidance included in the most recent accounting literature regarding the methods for selecting

F-10

assumptions. The Company believes that this refinement will generate more representative estimates of fair value. These refinements to the Company’s methodology decreased the 2004 pro forma net loss by approximately $1.2 million.

In March 2000 the FASB issued Interpretation (“FIN”) No. 44, Accounting for Certain Transactions Involving Stock Compensation — An Interpretation of APB Opinion No. 25 (“FIN 44”). FIN 44 clarifies the definition of an employee for purposes of applying APB 25, the criteria for determining whether a plan qualifies as a noncompensatory plan, the accounting consequence of various modifications to the terms of a previously fixed stock option or award, and the accounting for an exchange of stock compensation awards in a business combination. The rules require that the intrinsic value of the restricted stock and unvested options be allocated to deferred compensation and recognized as stock-based compensation expense ratably over the remaining future vesting period. In the event that a holder does not fully vest in the restricted stock or unvested options, the unamortized portion of deferred compensation is eliminated.

The Company also complies with the provisions of FASB Emerging Issues Task Force (“EITF”) Issue No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services (“EITF 96-18”) with respect to stock option grants to non-employees who are consultants to the Company. EITF 96-18 requires variable plan accounting with respect to such non-employee stock options, whereby compensation associated with such options is measured on the date such options vest, and incorporates the then-current fair market value of the Company’s common stock into the option valuation model.

In addition, the Company has complied with the provisions of FIN No. 28, Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans (“FIN 28”), which requires use of the variable accounting method with respect to certain stock options assumed in connection with purchase transactions in which contingent consideration was paid. Stock-based compensation expense with respect to such options was based on the amount by which the Class A common stock closing price at the end of each quarterly reporting period, or at the date of exercise, if earlier, exceeds the exercise price.

In December 2004 the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment (“SFAS 123R”), which is a revision of SFAS 123. SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values and does not allow the previously permitted pro forma disclosure as an alternative to financial statement recognition. SFAS 123R supersedes APB 25 and related interpretations and amends SFAS No. 95, Statement of Cash Flows. SFAS 123R is scheduled to be effective beginning in the third quarter of fiscal 2005. SFAS 123R allows for either prospective recognition of compensation expense or retroactive recognition, which may date back to the original issuance of SFAS 123 or only to interim periods in the year of adoption. The Company is currently evaluating these transition methods.

The adoption of the SFAS 123R fair value method will have a significant impact on the Company’s reported results of operations, although it will have no impact on the Company’s overall financial position. The impact of adoption of SFAS 123R cannot be predicted at this time because that will depend on the fair value and number of share-based payments granted in the future. However, had the Company adopted SFAS 123R in prior periods, the magnitude of the impact of that standard would have approximated the impact of SFAS 123 assuming the application of the Black-Scholes model as illustrated in the table above. SFAS 123R also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after adoption. While the Company cannot estimate what those amounts will be in the future, the amount of operating cash flows recognized in 2004 for such excess tax deductions was $81.8 million. No comparable amounts were recorded in 2003 and 2002.

Contingent Consideration

In connection with certain of the Company’s acquisitions, if certain future internal performance goals were later satisfied, the aggregate consideration for the respective acquisition was increased. Such additional consideration, if earned, was paid in the form of additional shares of the Company’s Class A common stock,

F-11

which were reserved for that purpose. Any additional consideration paid was allocated between goodwill, stock-based compensation expense and deferred compensation. The measurement, recognition and allocation of contingent consideration are accounted for using the following principles:


	*Measurement and Recognition*

In accordance with SFAS No. 141, Business Combinations (“SFAS 141”) contingent consideration is recorded when a contingency is satisfied and additional consideration is issued or becomes issuable. The Company records the additional consideration issued or issuable in connection with the relevant acquisition when a specified internal performance goal is met. For additional consideration paid in stock, the Company calculates the amount of additional consideration using the closing price of its Class A common stock on the date the performance goal is satisfied.


	*Amount Allocated to Goodwill*

In accordance with EITF Issue No. 95-8, Accounting for Contingent Consideration Paid to the Shareholders of an Acquired Enterprise in a Purchase Business Combination (“EITF 95-8”) and FIN 44, the portion of additional consideration issuable to holders of unrestricted common stock and fully vested options as of the acquisition date is recorded as additional purchase price, as the consideration is unrelated to continuing employment with the Company. Such portion is allocated to goodwill.


	*Amount Allocated to Stock-Based Compensation Expense*

In accordance with EITF 95-8, the intrinsic value associated with additional consideration related to stock or options that vest between the acquisition date and the date at which the contingency is satisfied is recorded as an immediate charge to stock-based compensation expense because the consideration is related to continuing employment with the Company.


	*Amount Allocated to Deferred Compensation*

Additional consideration related to options and restricted stock that remain unvested when the contingency is satisfied is recorded as deferred compensation expense under EITF 95-8 and FIN 44, as such consideration will only be earned to the extent that the holder of such options or restricted stock continues to be employed by the Company and meets the vesting requirements. The amount recorded as deferred compensation is based upon the intrinsic value of the restricted stock and unvested options at the date at which the contingency is satisfied. The Company amortizes such deferred compensation to stock-based compensation expense over the remaining vesting period of the underlying restricted stock and unvested options. In the event that a holder does not fully vest in the restricted stock or unvested options, the unamortized portion of deferred compensation is eliminated.

Litigation and Settlement Costs

From time to time, the Company is involved in disputes, litigation and other legal actions. In accordance with SFAS 5, the Company records a charge equal to at least the minimum estimated liability for a loss contingency when both of the following conditions are met: (i) information available prior to issuance of the financial statements indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements and (ii) the range of loss can be reasonably estimated.

Net Income (Loss) Per Share

Net income (loss) per share (basic) is calculated by dividing net income (loss) by the weighted average number of common shares outstanding during the year. Net income (loss) per share (diluted) is calculated by adjusting outstanding shares, assuming any dilutive effects of options, RSUs, warrants and convertible securities calculated using the treasury stock method.

F-12

Research and Development Expense

Research and development expenditures are expensed in the period incurred.

Advertising Expense

Advertising costs are expensed in the period incurred.

Rebates

The Company accounts for rebates in accordance with EITF Issue No. 01-9, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products) , and, accordingly, records reductions to revenue for rebates in the same period that the related revenue is recorded. The amount of these reductions is equal to 100% of the potential rebates, based upon the terms of the Company’s rebate agreements.

Warranty

The Company’s products typically carry a one to three year warranty. The Company establishes reserves for estimated product warranty costs at the time revenue is recognized based upon its historical warranty experience, and additionally for any known product warranty issues.

Comprehensive Income

SFAS No. 130, Reporting Comprehensive Income , establishes standards for reporting and displaying comprehensive income and its components in the consolidated financial statements. Accumulated other comprehensive income (loss) includes foreign currency translation adjustments and unrealized gains or losses on investments.

Business Enterprise Segments

The Company operates in one reportable operating segment, broadband communications. SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information (“SFAS 131”), establishes standards for the way that public business enterprises report information about operating segments in annual consolidated financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. SFAS 131 also establishes standards for related disclosures about products and services, geographic areas and major customers. Although the Company had four operating segments at December 31, 2004, under the aggregation criteria set forth in SFAS 131 the Company only operates in one reportable operating segment, broadband communications.


	•	the nature of products and services;
	•	the nature of the production processes;
	•	the type or class of customer for their products and services; and
	•	the methods used to distribute their products or provide their services.

The Company meets each of the aggregation criteria for the following reasons:


	•	the sale of integrated circuits is the only material source of revenue for each of its four operating segments or business groups;
	•	the integrated circuits sold by each of its operating segments use the same standard CMOS manufacturing processes;
	•	the integrated circuits marketed by each of its operating segments are sold to one type of customer: manufacturers of broadband equipment, who incorporate its integrated circuits into their electronic products; and
	•	all of its integrated circuits are sold through a centralized sales force and common wholesale distributors.

F-13

All of the Company’s business groups share similar economic characteristics as they have a similar long term business model, operate at similar gross margins, and have similar research and development expenses and similar selling, general and administrative expenses. The causes for variation among each of the business groups are the same and include factors such as (i) life cycle and price and cost fluctuations, (ii) number of competitors, (iii) product differentiation and (iv) size of market opportunity. Additionally, each business group is subject to the overall cyclical nature of the semiconductor industry. The number and composition of employees and the amount and types of tools and materials required are similar for each business group. Finally, even though the Company periodically reorganizes its business groups based upon changes in customers, end markets or products, acquisitions, long-term growth strategies, and the experience and bandwidth of its vice presidents/ general managers, the common financial goals for each business group remain constant.

Because the Company meets each of the criteria set forth in SFAS 131 and its four business groups as of December 31, 2004 share similar economic characteristics, the Company aggregates its results of operations in one reportable operating segment.

Reclassifications

Certain amounts in the 2003 and 2002 consolidated financial statements have been reclassified to conform with the current year presentation.


2.	Supplementary Financial Information

Inventory

The following table presents details of the Company’s inventory:


	December 31,

	2004		2003

	(In thousands)




Work in process	$	38,659	$	53,845




Finished goods		89,635		50,202

	$	128,294	$	104,047

Property and Equipment

The following table presents details of the Company’s property and equipment:


			December 31,

	Useful Life		2004			2003

	(In years)
			(In thousands)




Leasehold improvements		1 to 7	$	48,556		$	43,509




Office furniture and equipment		3 to 7		28,351			25,946




Machinery and equipment		2 to 5		128,187			90,938




Computer software and equipment		2 to 4		142,620			176,559




Construction in progress		N/A		9,436			17,156

				357,150			354,108




Less accumulated depreciation and amortization				(249,990	)		(211,995	)

			$	107,160		$	142,113

F-14

Goodwill

The following table presents the changes in the carrying value of the Company’s goodwill:


		Years Ended December 31,

		2004			2003			2002

		(In thousands)




Beginning balance		$	827,652		$	1,228,603		$	2,241,632




	Goodwill recorded in connection with purchase transactions (Note 3)		239,351			—			173,656




	Goodwill recorded in connection with contingent consideration earned (Note 3)		—			51,315			42,229




	Reclassification of assembled workforce		—			—			12,124




	Impairment losses (Note 9)		—			(438,611	)		(1,241,038	)




	Other		(4,815	)		(13,655	)		—

Ending balance		$	1,062,188		$	827,652		$	1,228,603

Purchased Intangible Assets

The following table presents details of the Company’s purchased intangible assets:


	December 31, 2004							December 31, 2003

			Accumulated							Accumulated
	Gross		Amortization			Net		Gross		Amortization			Net

	(In thousands)




Completed technology	$	152,230	$	(140,066	)	$	12,164	$	133,911	$	(127,244	)	$	6,667




Customer relationships		46,266		(41,997	)		4,269		39,921		(39,921	)		—




Other		9,027		(8,386	)		641		6,759		(6,759	)		—

	$	207,523	$	(190,449	)	$	17,074	$	180,591	$	(173,924	)	$	6,667

In connection with six purchase transactions completed in 2004, the Company recorded approximately $26.9 million in purchased intangible assets. See Note 3. At December 31, 2004 the unamortized balance of completed technology that will be amortized to future cost of revenue was approximately $12.2 million, of which $9.2 million and $3.0 million are expected to be amortized in 2005 and 2006, respectively. At December 31, 2004 the unamortized balance of customer relationships and other purchased intangible assets that will be amortized to future operating expense was approximately $4.9 million, of which $3.6 million and $1.3 million are expected to be amortized in 2005 and 2006, respectively.

Other Assets

The following table presents details of the Company’s other assets:


	December 31,

	2004		2003

	(In thousands)




Strategic investments (Note 4)	$	5,229	$	2,766




Employee notes and interest receivable		996		1,926




Other		15,832		4,290

	$	22,057	$	8,982

F-15

Accrued Liabilities

The following table presents details of the Company’s accrued liabilities:


	December 31,

	2004		2003

	(In thousands)




Accrued taxes	$	94,382	$	106,099




Accrued rebates		93,222		62,282




Warranty reserve		19,185		5,996




Accrued settlement liabilities		10,700		14,767




Restructuring liabilities		10,364		12,933




Other		51,654		47,507

	$	279,507	$	249,584

Long-Term Liabilities

The following table presents details of the Company’s long-term liabilities:


	December 31,

	2004		2003

	(In thousands)




Restructuring liabilities	$	16,753	$	24,241




Accrued settlement liabilities		6,000		—

	$	22,753	$	24,241

Accrued Rebates Activity

The following table summarizes the 2004 and 2003 activity related to accrued rebates:


		December 31,

		2004			2003

		(In thousands)




Beginning balance		$	62,282		$	42,391




	Rebates charged as a reduction of revenue		263,634			165,162




	Rebate payments		(232,694	)		(145,271	)

Ending balance		$	93,222		$	62,282

Warranty Reserve Activity

The following table summarizes the 2004 and 2003 activity related to the warranty reserve:


		December 31,

		2004			2003

		(In thousands)




Beginning balance		$	5,996		$	3,881




	Charged to costs and expenses		14,812			8,325




	Acquired through acquisition		157			—




	Payments		(1,780	)		(6,210	)

Ending balance		$	19,185		$	5,996

F-16

Advertising Expense

Advertising expense in 2004, 2003 and 2002 was $5.3 million, $3.2 million, and $0.3 million, respectively.

Interest Expense

Interest expense in 2004, 2003 and 2002 was $0.1 million, $1.1 million and $3.6 million, respectively.

Other Income (Expense), Net

The following table presents details of the Company’s other income (expense), net:


	Years Ended December 31,

	2004		2003		2002

	(In thousands)




Net gain (loss) on strategic investments (Note 4)	$	5,231	$	22,041	$	(33,201	)




Other		2,086		4,012		451

	$	7,317	$	26,053	$	(32,750	)

Computation of Net Income (Loss) Per Share

The following table presents the computation of net income (loss) per share:


			Years Ended December 31,

			2004			2003			2002

			(In thousands, except per share data)




Numerator: Net income (loss)			$	218,745		$	(959,865	)	$	(2,236,576	)

Denominator:




	Weighted average shares outstanding			319,778			292,881			271,628




	Less: Unvested common shares outstanding			(336	)		(872	)		(3,638	)

Denominator for net income (loss) per share (basic)				319,442			292,009			267,990




Effect of dilutive securities:




		Unvested common shares outstanding		318			—			—




		Stock options and other		29,277			—			—

Denominator for net income (loss) per share (diluted)				349,037			292,009			267,990

Net income (loss) per share (basic)			$	.68		$	(3.29	)	$	(8.35	)

Net income (loss) per share (diluted)			$	.63		$	(3.29	)	$	(8.35	)

If the Company had reported net income in 2003 and 2002, additional common share equivalents of 19,688,168 and 19,320,114, respectively, would have been included in the denominator for net income (loss) per share (diluted) noted in the table above. These common share equivalents, calculated using the treasury stock method, have been excluded from the diluted net loss per share calculation because such equivalents were antidilutive as of such dates. These excluded common share equivalents could be dilutive in the future. Contingent equity consideration paid by the Company in connection with certain acquisitions is included, as appropriate, in the calculation of basic and diluted net income (loss) per share as of the beginning of the period in which the respective equity consideration is earned.

F-17

Supplementary Cash Flow Information

The following table sets forth certain non-cash transactions excluded from the statements of cash flows:


	Years Ended December 31,

	2004		2003		2002

	(In thousands)




Acquisition of equipment through deferred payments	$	—	$	—	$	14,314




Trade-in of equipment as partial consideration for equipment acquired through an operating lease		10,712		—		—


3.	Business Combinations

From January 1, 2002 through December 31, 2004 the Company completed eight acquisitions. The consolidated financial statements include the results of operations of these acquired companies commencing as of their respective acquisition dates.

A summary of these transactions as of their respective acquisition dates is outlined below:


						Shares		Shares
						Reserved		Reserved
						for Stock		for Certain
						Purchase		Future		Total Shares		Cash
	Date			Shares		Rights		Performance		Issued or		Consideration
Company Acquired	Acquired		Business	Issued		Assumed		Goals		Reserved		Paid

												(In thousands)




2004 Acquisitions




RAIDCore, Inc.		Jan. 2004	Redundant array of inexpensive disks (“RAID”) and virtualization software		—		—		—		—	$	9,886




Sand Video, Inc.		Apr. 2004	Advanced video compression semiconductor technology		1,406,038		261,919		—		1,667,957		7,365




M-Stream, Inc.		Apr. 2004	Solutions for signal-to-noise ratio performance improvements in cellular handsets		—		26,536		—		26,536		7,898




WIDCOMM, Inc.		May 2004	Software solutions for Bluetooth® wireless products		—		—		—		—		48,427




Zyray Wireless Inc.		July 2004	Baseband co-processors addressing WCDMA (Wideband Code Division Multiple Access) mobile devices		1,894,221		344,977		—		2,239,198		3,850




Alphamosaic Limited		Sep. 2004	Advanced mobile imaging, multimedia and 3D graphics technology optimized for use in cellphones and other mobile devices		4,172,537		141,208		—		4,313,745		2,695

					7,472,796		774,640		—		8,247,436	$	80,121

2003 Acquisition




Gadzoox Networks, Inc.		Mar. 2003	Storage networking technology		—		—		—		—	$	5,862

2002 Acquisition




Mobilink Telecom, Inc.		May 2002	Chipsets and reference designs for use in mobile phones, PDAs and cellular modem cards		4,396,734		1,211,637		2,045,569		7,653,940	$	—





Total acquisitions					11,869,530		1,986,277		2,045,569		15,901,376	$	85,983

F-18

The Company’s primary reasons for the above acquisitions were to enter into or expand its market share in the relevant broadband communications markets, reduce the time required to develop new technologies and products and bring them to market, incorporate enhanced functionality into and complement the Company’s existing product offerings, augment its engineering workforce, and/ or enhance its technological capabilities.

Certain of the shares issued or cash paid are held in escrow pursuant to the terms of the respective acquisition agreements. Additionally, certain issued shares are subject to the Company’s right of repurchase should the shareholder cease employment with the Company prior to the scheduled vesting of those shares.

Allocation of Initial Purchase Consideration

The Company calculated the fair value of the tangible and intangible assets acquired to allocate the purchase prices in accordance with SFAS 141. Based upon those calculations, the purchase price for each of the acquisitions was allocated as follows:


	Net Assets			Goodwill and							In-Process
	(Liabilities)			Purchased		Deferred		Deferred Tax			Research &		Total
	Assumed			Intangibles		Compensation		Liabilities			Development		Consideration

	(In thousands)




2004 Acquisitions




RAIDCore	$	(267	)	$	7,893	$	—	$	—		$	2,260	$	9,886




Sand Video		(2,067	)		43,841		14,760		—			20,518		77,052




M-Stream		452			4,080		630		—			3,726		8,888




WIDCOMM		(689	)		49,116		—		—			—		48,427




Zyray		(1,781	)		59,516		13,707		—			25,929		97,371




Alphamosaic		913			101,836		8,705		—			11,333		122,787

	$	(3,439	)	$	266,282	$	37,802	$	—		$	63,766	$	364,411

2003 Acquisition




Gadzoox	$	2,521		$	3,341	$	—	$	—		$	—	$	5,862

2002 Acquisition




Mobilink	$	(10,998	)	$	191,126	$	1,253	$	(7,629	)	$	—	$	173,752

Total acquisitions	$	(11,916	)	$	460,749	$	39,055	$	(7,629	)	$	63,766	$	544,025

The equity consideration for each acquisition was calculated as follows: (i) common shares issued were valued based upon the Company’s stock price for a period commencing two trading days before and ending two trading days after the parties reached agreement and the proposed transaction was announced and (ii) restricted common stock and employee stock options were valued in accordance with FIN 44. Acquisition costs incurred by the Company have been included as part of the net assets (liabilities) assumed in connection with the purchase transactions.

F-19

Accounting for Contingent Consideration

In connection with its prior acquisitions of SiByte, Inc., ServerWorks Corporation and Mobilink, the Company reserved additional shares of its Class A common stock for issuance to the former share and option holders of the acquired companies upon satisfaction of certain future internal performance goals established in the definitive agreements for each of these acquisitions.

The following table presents activity in the Company’s Class A common stock reserved for issuance upon satisfaction of future internal performance goals related to purchase acquisitions:


											Shares
											Reserved for
											Certain
											Future
											Performance
		SiByte			ServerWorks			Mobilink			Goals

Balance at December 31, 2001			1,406,954			5,000,000			—			6,406,954




	Shares reserved for certain future internal performance goals		—			—			2,045,569			2,045,569




	Shares/options earned		—			(2,986,583	)		(500,444	)		(3,487,027	)




	Shares/options cancelled		(1,406,954	)		(13,417	)		(10,948	)		(1,431,319	)

Balance at December 31, 2002			—			2,000,000			1,534,177			3,534,177




	Shares/options earned		—			(1,984,144	)		(1,501,251	)		(3,485,395	)




	Shares/options cancelled		—			(15,856	)		(32,926	)		(48,782	)

Balance at December 31, 2003			—			—			—			—

In early 2003 the Company notified the stockholder agent representing the former stock and option holders of SiByte that the final SiByte performance goal for 2002 had not been satisfied, and the shares and options that remained available for future issuance in connection with such acquisition were cancelled. The stockholder agent disputed the Company’s determination, contending that the former stock and option holders of SiByte were entitled to the shares reserved for issuance upon satisfaction of the final performance goal. In November 2004 the Company recorded a cash settlement of that dispute in the amount of $8.2 million. See Note 11.

The following table presents the allocation of contingent consideration earned in connection with the satisfaction of the internal performance goals detailed in the table above:


						Total
						Contingent
		ServerWorks		Mobilink		Consideration

		(In thousands)
2002 Allocation of Contingent Consideration Earned




	Goodwill	$	36,252	$	5,977	$	42,229




	Stock-based compensation expense		—		11		11




	Deferred compensation, net		—		66		66

		$	36,252	$	6,054	$	42,306

2003 Allocation of Contingent Consideration Earned




	Goodwill	$	27,168	$	24,147	$	51,315




	Stock-based compensation expense		13,831		2,650		16,481




	Deferred compensation, net		30,235		6,677		36,912

		$	71,234	$	33,474	$	104,708

See Note 1 for a detailed explanation of the accounting policy relating to the measurement, recognition and allocation of contingent consideration.

F-20

Condensed Balance Sheets

The following table presents the combined details of the unaudited condensed balance sheets of the acquired companies at the respective dates of acquisition:


			2004			2003		2002
			Acquisitions			Acquisition		Acquisition

			(In thousands)




Assets




Current assets:




	Cash and cash equivalents		$	5,275		$	—	$	839




	Accounts receivable			8,642			890		584




	Inventory			1,937			457		1,192




	Prepaid expenses and other current assets			1,698			—		893

		Total current assets		17,552			1,347		3,508




Property and equipment, net				944			1,174		4,934




Other assets				159			—		3,000

		Total assets	$	18,655		$	2,521	$	11,442






Liabilities and Shareholders’ Equity




Current liabilities:




	Accounts payable		$	10,220		$	—	$	2,636




	Wages and related benefits			1,140			—		628




	Accrued liabilities			5,191			—		8,706




	Short-term debt			2,203			—		9,137

		Total current liabilities		18,754			—		21,107




	Total shareholders’ equity (deficit)			(99	)		2,521		(9,665	)

		Total liabilities and shareholders’ equity (deficit)	$	18,655		$	2,521	$	11,442

In connection with acquisitions, the Company incurred acquisition costs of approximately $3.3 million and $1.3 million in 2004 and 2002, respectively.

Goodwill and Purchased Intangible Assets

The following table presents the combined details of the total goodwill and purchased intangible assets of the acquired companies at the respective dates of acquisitions:


				2004		2003		2002
		Useful Life		Acquisitions		Acquisition		Acquisition

		(In years)
				(In thousands)




Goodwill			N/A	$	239,351	$	—	$	173,656




Purchased intangible assets (finite lives):




	Completed technology		2 to 3		18,318		2,441		14,550




	Customer relationships		2		6,345		—		—




	Customer contracts		1 to 2		725		—		1,620




	Other		<1		1,543		900		1,300

				$	266,282	$	3,341	$	191,126

F-21

In-Process Research and Development

In-process research and development (“IPR&D”) totaled $63.8 million for acquisitions completed in 2004. No comparable amount of IPR&D was recorded in 2003 and 2002. The amounts allocated to IPR&D were determined through established valuation techniques used in the high technology industry and were expensed upon acquisition as it was determined that the underlying projects had not reached technological feasibility and no alternative future uses existed. In accordance with SFAS No. 2, Accounting for Research and Development Costs, as clarified by FIN No. 4, Applicability of FASB Statement No. 2 to Business Combinations Accounted for by the Purchase Method, an Interpretation of FASB Statement No. 2 , amounts assigned to IPR&D meeting the above-stated criteria were charged to expense as part of the allocation of the purchase price.

The IPR&D charge includes only the fair value of IPR&D performed as of the respective acquisition dates. The fair value of developed technology is included in identifiable purchased intangible assets, and future research and development is included in goodwill. The Company believes the amounts recorded as IPR&D, as well as developed technology, represent the fair values and approximate the amounts an independent party would pay for these projects at the time of the respective acquisition dates.

The following table summarizes the significant assumptions at the acquisition dates underlying the valuations for the Company’s significant acquisitions completed in 2004:


		Weighted
		Average			Average				Risk
		Estimated			Estimated		Estimated		Adjusted
		Percent			Time to		Cost to		Discount
Company Acquired	Development Projects	Complete			Complete		Complete		Rate			IPR&D

					(In years)		(In millions)					(In millions)




RAIDCore	RAID software stack		60	%		1	$	1.8		23	%	$	2.3




Sand Video	Decoder/codec chips		45			1.5		6.4		28			20.5




M-Stream	Algorithm implemented in DSP chip		30			1		1.3		26			3.7




Zyray	WCDMA co-processor		80			1		5.6		24			25.9




Alphamosaic	Multimedia co-processor		50			1		11.5		21			11.3

The Company completed the development projects related to the RAIDCore acquisition. For one development project related to the Sand Video acquisition, the Company reallocated the resources to focus on semiconductor products that the Company believes are a higher priority. All other development projects are still in process.

Except as noted above, actual results to date have been consistent, in all material respects, with the Company’s assumptions at the time of the acquisitions. The assumptions consist primarily of expected completion dates for the IPR&D projects, estimated costs to complete the projects, and revenue and expense projections for the products once they have entered the market.

F-22

Supplemental Pro Forma Data (Unaudited)

The pro forma data of the Company set forth below gives effect to certain acquisitions completed in 2004 as if they had occurred at the beginning of 2003 and includes amortization of purchased intangible assets and stock-based compensation expense, but excludes the charge for acquired IPR&D. Included in the reported pro forma data for 2004 is a $3.4 million restructuring charge for the consolidation of excess facilities, related primarily to non-cancelable lease costs. This pro forma data is presented for informational purposes only and does not purport to be indicative of the results of future operations of the Company or of the results that would have actually occurred had the acquisitions taken place at the beginning of 2003. No supplemental pro forma information is presented for the acquisitions of RAIDCore, M-Stream or Gadzoox due to the immaterial effect of those acquisitions on the results of operations.


	Years Ended December 31,

	2004		2003

	(In thousands,
	except per share data)




Pro forma net revenue	$	2,410,176	$	1,621,061




Pro forma net income (loss)		254,290		(1,010,675	)




Pro forma net income (loss) per share (basic)		.78		(3.37	)




Pro forma net income (loss) per share (diluted)		.71		(3.37	)


4.	Investments

Held-to-Maturity Investments

At December 31, 2004 all of the Company’s held-to-maturity investments consisted of U.S. Treasury and agency obligations, commercial paper, corporate notes and bonds, time deposits, foreign notes and certificates of deposit. Debt securities are classified as held-to-maturity when the Company has the intent and ability to hold the securities to maturity. Held-to-maturity investments are stated at cost, adjusted for amortization of premiums and discounts to maturity. A summary of the Company’s held-to-maturity investments by balance sheet caption is as follows:


			Gross		Gross
			Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value

	(In thousands)




December 31, 2004




Cash equivalents	$	356,845	$	21	$	(35	)	$	356,831




Short-term marketable securities		324,041		17		(656	)		323,402




Long-term marketable securities		92,918		19		(582	)		92,355

	$	773,804	$	57	$	(1,273	)	$	772,588

December 31, 2003




Cash equivalents	$	64,299	$	—	$	—		$	64,299




Short-term marketable securities		47,296		262		(40	)		47,518




Long-term marketable securities		36,405		169		(42	)		36,532

	$	148,000	$	431	$	(82	)	$	148,349

F-23

Scheduled maturities of held-to-maturity securities were as follows:


	December 31,

	2004				2003

	(In thousands)
	Amortized				Amortized
	Cost		Fair Value		Cost		Fair Value

Less than one year	$	680,886	$	680,233	$	111,595	$	111,817




One to two years		69,717		69,247		17,273		17,380




Two to three years		23,201		23,108		19,132		19,152

	$	773,804	$	772,588	$	148,000	$	148,349

Strategic Investments

At December 31, 2004 and 2003 the carrying values of the Company’s investments in equity securities of privately held companies accounted for using the cost method were approximately $5.2 million and $2.8 million, respectively. In 2004, 2003 and 2002 the Company performed impairment analyses of these investments. The Company recorded impairment charges for these investments in the amounts of $2.3 million and $37.3 million in 2003 and 2002, respectively, representing other-than-temporary declines in the value of these non-marketable equity securities. There were no comparable charges incurred in 2004. In addition, in 2004 and 2002 the Company recorded net gains on the sale of its investments in publicly traded companies in the amounts of $5.2 million and $4.6 million, respectively. In 2002 the Company performed impairment analyses and recorded impairment charges for these investments in the amount of $0.5 million. These gains and charges were included in other income (expense), net, in the consolidated statements of operations.

From October 2001 through January 2002 the Company purchased an approximate 9.8% ownership interest in a privately held company for $23.0 million. In October 2001 the Company also entered into a separate agreement to perform certain development services for that company in exchange for additional equity consideration with an estimated aggregate value, based on the value at the time the agreement was signed, of up to approximately $10.0 million, if all of the development milestones were satisfied. The additional equity that the Company could receive under the development agreement consisted of shares of preferred stock of the privately held company that had rights that could protect the Company against subsequent dilution in the event that the privately held company issued additional equity securities for a per share price that was below the per share value of the stock received by the Company. Consistent with the Company’s existing policies, the strategic investment was accounted for using the cost method, and revenue under the development agreement was recorded using the percentage-of-completion method. In 2003 and 2002 approximately $0.5 million and $4.7 million of non-cash revenue, respectively, was recognized under the development agreement. In September 2003 the Company received approximately $28.4 million of proceeds and realized a gain on the sale of this investment of approximately $24.4 million. The investment was previously written down by $24.1 million in September 2002, representing an other-than-temporary decline in the value of that investment at that time. These charges and gains were also included in other income (expense), net, in the consolidated statements of operations.


5.	Income Taxes

For financial reporting purposes, income (loss) before income taxes includes the following components:


	Years Ended December 31,

	2004		2003			2002

	(In thousands)




United States	$	29,027	$	(1,071,532	)	$	(1,856,820	)




Foreign		265,325		136,794			(82,162	)

	$	294,352	$	(934,738	)	$	(1,938,982	)

F-24

A reconciliation of the provision (benefit) for income taxes at the federal statutory rate compared to the Company’s effective tax rate follows:


			Years Ended December 31,

			2004			2003			2002

			(In thousands)




Statutory federal provision (benefit) for income taxes			$	103,023		$	(327,158	)	$	(678,644	)




Increase (decrease) in taxes resulting from:




	Non-deductible impairment of goodwill			—			153,514			434,363




	In-process research and development			17,499			—			—




	State taxes, net of federal benefit			14,047			583			52,108




	Benefit of federal tax credits			(11,836	)		(39,939	)		(38,208	)




	Valuation allowance (federal)			36,893			262,201			465,557




	Reversal of taxes previously accrued			(21,300	)		—			—




	Tax rate differential on foreign earnings			(65,066	)		(23,334	)		63,572




	Other			2,347			(740	)		(1,154	)

		Provision for income taxes	$	75,607		$	25,127		$	297,594

The income tax provision consists of the following components:


		Years Ended December 31,

		2004		2003		2002

		(In thousands)




Current:




	Federal	$	44,598	$	15,753	$	—




	State		21,610		583		437




	Foreign		9,399		8,791		15,219

			75,607		25,127		15,656




Deferred:




	Federal		—		—		202,209




	State		—		—		79,729

			—		—		281,938

		$	75,607	$	25,127	$	297,594

F-25

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred taxes were as follows:


		December 31,

		2004			2003

		(In thousands)




Deferred tax assets:




	Research and development tax credit carryforwards	$	332,031		$	293,765




	Capitalized research and development costs		113,341			104,421




	Net operating loss carryforwards		1,010,151			915,190




	Investments in securities		16,809			9,842




	Reserves and accruals not currently deductible for tax purposes		30,837			32,352




	Deferred compensation and purchased intangible assets		141,328			98,790




	Other		14,873			16,113

Gross deferred tax assets			1,659,370			1,470,473




Valuation allowance			(1,659,370	)		(1,470,473	)

Deferred tax assets, net			—			—




Deferred tax liabilities			—			—

Net deferred tax assets		$	—		$	—

The Company operates under a tax holiday in Singapore, which is effective through March 2006. The tax holiday is conditional upon the Company meeting certain employment and investment thresholds. The impact of the Singapore tax holiday was to decrease Singapore taxes by approximately $147.1 million, $101.1 million and $47.8 million for 2004, 2003 and 2002, respectively. The benefit of the tax holiday on net income (loss) per share (diluted) was approximately $.42, $.35 and $.18 for 2004, 2003 and 2002, respectively.

At December 31, 2004 the Company had federal, state and United Kingdom net operating loss carryforwards of approximately $2.731 billion, $816.8 million and $35.7 million, respectively. If unutilized, the federal and state net operating loss carryforwards expire at various dates from 2006 to 2024 and 2005 to 2024, respectively. The United Kingdom net operating losses have no expiration date. The federal and state net operating losses are primarily the result of tax deductions related to employee stock option exercises.

At December 31, 2004 the Company had federal, state and Canadian research and development credit carryforwards of approximately $190.5 million, $209.8 million and $5.2 million, respectively. These research and development credit carryforwards expire at various dates from 2009 to 2024, if not previously utilized. Certain state research and development credit carryforwards have no expiration date.

In 2004 and 2003 the Company concluded that a full valuation allowance against its net deferred tax assets was appropriate. SFAS 109 requires that a valuation allowance must be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. In making such determination, a review of all available positive and negative evidence must be considered, including scheduled reversal of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial performance. The accounting guidance further states that forming a conclusion that a valuation allowance is not needed is difficult when there is negative evidence such as cumulative losses in recent years. As a result of the Company’s recent cumulative losses and the full utilization of its loss carryback potential, the Company concluded that a full valuation allowance should be recorded in 2004 and 2003.

If or when recognized, the tax benefits relating to any reversal of the valuation allowance on deferred tax assets at December 31, 2004 will be accounted for as follows: approximately $1.266 billion will be recognized as a reduction of income tax expense, $81.3 million will be recognized as a reduction of goodwill and $312.4 million will be recognized as an increase in shareholders’ equity for certain tax deductions from employee stock options.

F-26

In 2003 the IRS commenced a routine examination of the Company’s 1999 and 2000 tax years. Management believes that the results of this examination will not have a material effect on the Company’s financial condition or results of operations.

The Company has not provided for U.S. income taxes on undistributed earnings of non-U.S. subsidiaries of approximately $180.0 million as of December 31, 2004 because it is the Company’s intention to permanently invest these earnings overseas. U.S. income taxes would be immaterial if such earnings were not considered permanently reinvested due to U.S. net operating loss and tax credit carryforwards and resulting foreign tax credits.


6.	Commitments

The Company leases facilities in Irvine (its corporate headquarters) and Santa Clara County, California. Each of these facilities includes research and development, administration, sales and marketing, and operations functions. In addition to the Company’s principal design facilities in Irvine and Santa Clara County, the Company leases additional design facilities in Tempe, Arizona; San Diego County, California; Duluth, Georgia; Germantown, Maryland; Andover, Massachusetts; Nashua, New Hampshire; Matawan, New Jersey; and Seattle, Washington. Internationally, the Company leases a distribution center that includes engineering design and administrative facilities in Singapore as well as engineering design and administrative facilities in Belgium, Canada, China, France, India, Israel, the Netherlands, Taiwan and the United Kingdom. In addition, the Company leases various sales and marketing facilities in the United States and several other countries.

In December 2004 the Company entered into a lease agreement under which its corporate headquarters will move from its present location to a new, larger facility in Irvine eventually consisting of eight buildings with an aggregate of approximately 0.7 million square feet. The lease term is a period of ten years and two months beginning after the completion of the first two buildings and related tenant improvements, which is anticipated to be in the first quarter of 2007. The aggregate rent for the term of the lease, approximately $183.0 million, is included in the table below.

Future minimum payments under noncancelable operating leases and purchase obligations are as follows:


	Payment Obligations by Year

											There-
	2005		2006		2007		2008		2009		after		Total

	(In thousands)




Operating leases	$	86,526	$	76,831	$	51,568	$	42,966	$	37,570	$	159,724	$	455,185




Inventory and other related purchase obligations		113,430		—		—		—		—		—		113,430




Other purchase obligations		45,360		4,348		2,136		—		—		—		51,844

	$	245,316	$	81,179	$	53,704	$	42,966	$	37,570	$	159,724	$	620,459

Facilities rent expense in 2004, 2003 and 2002 was $38.4 million, $33.6 million and $35.0 million, respectively.

The Company leases its facilities and certain engineering design tools and information systems equipment under operating lease agreements that expire at various dates through 2017.

Inventory and other related purchase obligations are comprised of purchase commitments for silicon wafers and assembly and test services. The Company depends entirely upon subcontractors to manufacture its silicon wafers and provide assembly and test services. Due to lengthy subcontractor lead times, the Company must order these materials and services from these subcontractors well in advance. The Company expects to receive and pay for these materials and services within the next six months. The Company’s subcontractor relationships allow for the cancellation of outstanding purchase orders, but require repayment of all expenses incurred through the date of cancellation.

F-27

For the purpose of the table above, obligations for the purchase of goods or services are defined as agreements that are enforceable and legally binding and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. The Company’s purchase orders are based on its current manufacturing needs and are typically fulfilled by its vendors within short time horizons. The Company has additional purchase orders (not included in the table above) that represent authorizations to purchase rather than binding agreements. The Company does not have significant agreements for the purchase of raw materials or other goods specifying minimum quantities or set prices that exceed its expected requirements.

7. Shareholders’ Equity

Common Stock

The Company has 800,000,000 authorized shares of Class A common stock and 400,000,000 authorized shares of Class B common stock. The shares of Class A common stock and Class B common stock are substantially identical, except that holders of Class A common stock are entitled to one vote for each share held, and holders of Class B common stock are entitled to ten votes for each share held, on all matters submitted to a vote of the shareholders. In addition, holders of Class B common stock are entitled to vote separately on the proposed issuance of additional shares of Class B common stock in certain circumstances. The shares of Class B common stock are not publicly traded. Each share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock and in most instances automatically converts upon sale or other transfer. The Class A common stock and Class B common stock are sometimes collectively referred to herein as “common stock.”

Registration Statements

The Company has in effect a universal shelf registration statement on SEC Form S-3 and an acquisition shelf registration statement on SEC Form S-4. The universal shelf registration statement on Form S-3 permits the Company to sell, in one or more public offerings, shares of its Class A common stock, shares of preferred stock or debt securities, or any combination of such securities, for proceeds in an aggregate amount of up to $750 million. The acquisition shelf registration statement on Form S-4 enables the Company to issue up to 30 million shares of its Class A common stock in one or more acquisition transactions. These transactions may include the acquisition of assets, businesses or securities, by any form of business combination. To date no securities have been issued pursuant to either registration statement.

Comprehensive Income (Loss)

The components of comprehensive income (loss), net of taxes, are as follows:


		Years Ended December 31,

		2004			2003			2002

		(In thousands)




Net income (loss)		$	218,745		$	(959,865	)	$	(2,236,576	)




Other comprehensive income (loss):




	Change in unrealized gain (loss) on investments, net of taxes		(3	)		(61	)		(7,152	)




	Reclassification adjustment for net realized loss included in net loss		—			137			106




Translation adjustments			467			313			386

Total comprehensive income (loss)		$	219,209		$	(959,476	)	$	(2,243,236	)

F-28

The components of accumulated other comprehensive income are as follows:


	December 31,

	2004			2003

	(In thousands)




Accumulated unrealized gain (loss) on investments	$	(1	)	$	2




Accumulated translation adjustments		1,100			633

Total accumulated other comprehensive income	$	1,099		$	635

8. Employee Benefit Plans

Employee Stock Purchase Plan

The Company has an employee stock purchase plan for all eligible employees. Under the plan, employees may purchase shares of the Company’s Class A common stock at six-month intervals at 85% of fair market value (calculated in the manner provided in the plan). Employees purchase such stock using payroll deductions, which may not exceed 15% of their total cash compensation. The plan imposes certain limitations upon an employee’s right to acquire Class A common stock, including the following: (i) no employee may purchase more than 6,000 shares of Class A common stock on any one purchase date and (ii) no employee may be granted rights to purchase more than $25,000 worth of Class A common stock for each calendar year that such rights are at any time outstanding. In 2004, 2003 and 2002, 2,546,076, 2,213,363 and 1,038,541 shares, respectively, were issued under this plan at average per share prices of $12.18, $11.20 and $18.27, respectively. At December 31, 2004, 1,756,314 shares were available for future issuance under this plan.

In April 2002 the shareholders approved an amendment to the employee stock purchase plan to increase the number of shares of Class A common stock reserved for issuance under that plan by an additional 3,000,000 shares. In October 2002 the Board of Directors adopted an amendment to the employee stock purchase plan to increase the maximum number of shares of Class A common stock purchasable in total by all participants on each purchase date within an offering period from 600,000 shares to 1,200,000 shares.

In May 2003 the shareholders approved an amendment to the employee stock purchase plan to (i) revise the automatic annual share increase provision of the plan so that the increment by which the number of shares of Class A common stock reserved for issuance under the plan is augmented on the first trading day of January in each calendar year, beginning with the year 2004, would equal 1% of the total number of shares of common stock outstanding on the last trading day of the immediately preceding calendar year and (ii) increase the limitation on the automatic annual share increase to 3,000,000 shares per year.

Stock Incentive Plans

The Company has in effect several stock incentive plans under which incentive stock options and RSUs have been granted to employees and non-qualified stock options have been granted to employees, non-employee members of the Board of Directors, and other non-employees. The Company’s 1998 Stock Incentive Plan as amended and restated (the “1998 Plan”) is the successor equity incentive program to the Company’s 1994 Stock Option Plan (the “1994 Plan”) and the Company’s 1998 Special Stock Option Plan (together, the “Predecessor Plans”).

In March 2004, March 2003 and April 2002, the Board of Directors approved amendments to the 1998 Plan, as previously amended, to increase the number of shares of Class A common stock reserved for issuance under this plan by an additional 12,000,000, 13,000,000 and 13,000,000 shares, respectively. These amendments were approved by the shareholders at the Annual Meetings of Shareholders held in April 2004, May 2003 and April 2002, respectively.

The Board of Directors or the Plan Administrator determines eligibility, vesting schedules and exercise prices for options granted under the plans. Options granted generally have a term of 10 years, and in the case of new hires generally vest and become exercisable at the rate of 25% after one year and ratably on a monthly basis over

F-29

a period of 36 months thereafter; subsequent option grants to existing employees generally vest and become exercisable ratably on a monthly basis over a period of 48 months measured from the date of grant. However, certain options that have been granted under the Company’s 1998 Plan or that were assumed by the Company in connection with certain of its acquisitions provide that the vesting of the options granted thereunder will accelerate in whole or in part upon the occurrence of certain specified events.

In 2004 the Company granted RSUs to certain employees under the 1998 Plan. RSUs are share awards that entitle the holder to receive shares of Class A common stock as the award vests. Generally, RSUs vest on a quarterly basis over a period of sixteen quarters from the date of grant. During 2004, 153,000 RSUs were awarded at a weighted average fair value of approximately $28.20, of which 5,556 vested and the underlying shares were issued.

As of December 31, 2004, 128,460,708 shares of common stock were reserved for issuance under the 1998 Plan, including shares reserved for issuance upon exercise of outstanding options granted under Predecessor Plans. The number of shares of Class A common stock reserved for issuance under the 1998 Plan automatically increases in January each year. The increase is equal to 4.5% of the total number of shares of common stock outstanding on the last trading day of the immediately preceding year, subject to an 18 million annual share limit.

In 1999 the Board of Directors approved the 1999 Special Stock Option Plan (the “1999 Plan”) and reserved an aggregate of 1,000,000 shares of Class A common stock for issuance under that plan. Employees, independent consultants and advisors in the service of the Company or any of its subsidiaries who are neither officers of the Company nor members of the Board of Directors at the time of the option grant are eligible to participate in the plan. The exercise price of options granted under the 1999 Plan can be less than the fair market value of the underlying common stock on the grant date. In 2003 and 1999, 944,500 and 40,542 options were granted under the 1999 Plan to certain employees at a weighted average exercise price per share of $14.44 and $2.84, respectively. As of December 31, 2004, 688,351 shares of common stock were reserved for issuance under the 1999 Plan. The 1998 Plan, 1999 Plan and Predecessor Plans are collectively referred to herein as the “Broadcom Plans.”

As a result of the Company’s acquisitions, the Company assumed stock options granted under stock option plans or agreements established by each acquired company. As of December 31, 2004, 3,291,264 and 128,538 shares of Class A and Class B common stock, respectively, were reserved for issuance upon exercise of outstanding options assumed under these stock option plans.

F-30

Combined Incentive Plan Activity

Activity under all the stock incentive plans in 2004, 2003 and 2002 is set forth below:


					Options Outstanding

										Weighted
		Shares								Average
		Available for			Number of			Price Range		Exercise Price
		Grant			Shares			Per Share		Per Share

Balance at December 31, 2001			24,718,006			106,910,400		$	.02 - $213.06	$	36.74




	Additional shares reserved		24,964,761			—			—		—




	Options granted under Broadcom Plans		(40,694,533	)		40,694,533			10.10 - 35.06		16.61




	Options assumed in purchase transactions		—			2,013,253	⁽¹⁾		.04 - 23.64		9.79




	Options cancelled		11,969,651			(12,964,129	)		.02 - 213.06		40.53




	Options exercised		—			(4,654,444	)		.02 - 46.78		5.48

Balance at December 31, 2002			20,957,885			131,999,613			.02 - 213.06		30.84




	Additional shares reserved		25,501,177			—			—		—




	Options granted under Broadcom Plans		(48,256,513	) ⁽²⁾		48,256,513	⁽²⁾		12.63 - 36.05		32.30




	Options assumed in purchase transactions		—			397,797	⁽¹⁾		.02 - .02		.02




	Options cancelled		28,431,762	⁽³⁾		(29,919,925	) ⁽⁴⁾		.02 - 213.06		47.29




	Options tendered in stock option exchange offer		—			(32,642,634	)		23.58 - 219.48		48.59




	Shares issued in stock option exchange offer		(8,574,033	)		—			—		—




	Options exercised		—			(15,178,631	)		.02 - 33.68		11.89

Balance at December 31, 2003			18,060,278			102,912,733			.02 - 155.50		23.51




	Additional shares reserved		25,771,000			—			—		—




	Options granted under Broadcom Plans		(13,291,903	)		13,291,903			25.98 - 45.41		35.32




	Share awards granted under Broadcom Plans		(157,560	)		—			—		—




	Options assumed in purchase transactions		—			854,775	⁽¹⁾		.02 - 10.31		4.86




	Options cancelled		4,547,271			(4,741,729	)		.02 - 155.50		27.49




	Options exercised		—			(14,677,907	)		.02 - 40.59		15.21

Balance at December 31, 2004			34,929,086			97,639,775		$	.02 - $122.25	$	26.00


(1)	Includes options assumed in connection with purchase acquisitions and/or additional options subsequently issued upon achievement of internal performance goals (see Note 3).

(2)	Includes 18,301,676 replacement options issued pursuant to the Company’s 2003 stock option exchange offer to employees.

(3)	Includes 19,225,696 unvested options cancelled from Broadcom Plans pursuant to the Company’s 2003 stock option exchange offer to employees.

(4)	Includes 20,086,234 unvested options cancelled from Broadcom Plans and options assumed in connection with purchase acquisitions pursuant to the Company’s 2003 stock option exchange offer to employees.

F-31

The weighted average remaining contractual life and weighted average per share exercise price of options outstanding and of options exercisable as of December 31, 2004 were as follows:


	Outstanding						Exercisable

			Weighted		Weighted				Weighted
			Average		Average				Average
Range of	Number of		Remaining		Exercise		Number of		Exercise
Exercise Prices	Shares		Contractual Life		Price		Shares		Price

			(Years)




$ .02 to $ 10.11		8,227,446		4.50	$	3.31		6,817,748	$	2.49




10.31 to 15.74		21,538,169		7.45		15.39		12,353,961		15.44




15.92 to 20.45		10,203,977		5.62		19.73		7,034,669		19.78




20.71 to 33.68		12,548,510		8.42		28.97		4,251,165		27.94




34.10 to 35.12		36,523,731		8.83		34.74		19,309,117		34.95




35.36 to 122.25		8,597,942		8.74		40.32		2,099,344		42.73

		97,639,775						51,866,004

Additional information relating to the stock incentive plans is as follows:


		December 31,

		2004		2003		2002

		(Number of shares)




Unvested options outstanding			46,289,070		62,448,042		65,714,964




Vested options outstanding			51,350,705		40,464,691		66,284,649

Total options outstanding			97,639,775		102,912,733		131,999,613




Shares available for grant			34,929,086		18,060,278		20,957,885

	Total shares of common stock reserved for stock incentive plans		132,568,861		120,973,011		152,957,498

Nonvested common shares subject to repurchase			556,276		148,624		2,757,190




Weighted average per share repurchase price		$	1.15	$	7.15	$	1.68

At December 31, 2004 there were unvested options outstanding to purchase 515,299 shares of common stock that were exercisable in advance of vesting subject to repurchase arrangements.

The Company recorded deferred compensation for restricted common stock and employee stock options assumed in acquisitions in accordance with FIN 44. Net deferred compensation is presented as a reduction of shareholders’ equity and is amortized ratably over the respective vesting periods of the applicable options and restricted stock. The activity recorded in net deferred compensation by component was as follows:


	December 31,

	2004			2003

	(In thousands)




Purchase acquisitions	$	37,802		$	53,393




Awards to employees		4,314		$	7,091




Terminations		(5,063	)		(30,121	)

	$	37,053		$	30,363

F-32

Stock-based compensation expense is derived from the following equity transactions:


	Years Ended December 31,

	2004		2003		2002

	(In thousands)




Awards to employees	$	4,951	$	12,557	$	349




Stock option exchange program		—		217,940		—




Pooling-of-interests acquisitions		—		—		1,942




Purchase acquisitions		69,736		346,990		417,372

	$	74,687	$	577,487	$	419,663

Included in these amounts is approximately $1.0 million of stock-based compensation expense which was classified as restructuring costs in 2003 resulting from an extension of the post-service exercise period for vested stock options of certain terminated employees and due to the acceleration of the vesting period of certain options of certain terminated employees as required by their assumed option agreements. Also included in the 2003 amount is approximately $88.1 million of settlement costs reflecting the acceleration from future periods of stock-based compensation expense, most of which was previously recorded as deferred compensation established upon the acquisition of ServerWorks (and based upon stock market valuations at the time of the acquisition).

Outstanding stock options assumed in certain acquisitions were subject to variable accounting in accordance with FIN 44 and FIN 28 and were revalued quarterly over their vesting periods until all performance goals were satisfied or until the options were exercised, forfeited, cancelled or expired. In 2003 all remaining performance goals were achieved for ServerWorks and Mobilink and variable accounting was no longer required for these assumed outstanding stock options. Prior to the remaining performance goals being achieved, stock-based compensation expense in 2003 and 2002 included reversals of $3.1 million and $7.0 million, respectively, of previously recorded stock-based compensation expense related to stock options subject to variable accounting. These reversals were based on the amount by which the Class A common stock closing price at the end of each quarterly reporting period, or at the date of exercise, if earlier, exceeded the exercise price.

Shares Reserved For Future Issuance

The Company had the following shares of common stock reserved for future issuance upon the exercise of equity instruments as of December 31, 2004:


	Number of Shares

Stock options outstanding		97,639,775




Authorized for future grants under stock incentive plans		34,929,086




Authorized for future issuance under stock purchase plan		1,756,314




Stock awards		147,444




Other		76,739

		134,549,358

In February 2005 as part of the Company’s regular annual employee review or “focal grant” program, the Company granted 3,164,288 RSUs and 10,937,121 options. The fair value of the RSUs and the exercise price of the options awarded were both $32.21 per share. These awards are not included in the tables above.

2003 Stock Option Exchange Offer

On April 7, 2003 the Company commenced an offering to its employees to voluntarily exchange certain vested and unvested stock option grants. Under the program, employees holding options to purchase the Company’s Class A or Class B common stock were given the opportunity to exchange certain of their existing options, with exercise prices at or above $23.58 per share. Stock options to purchase an aggregate of 57,271,153 shares with a weighted average exercise price of $47.32 per share were eligible for tender at the

F-33

commencement of the program, representing approximately 43.6% of the Company’s outstanding stock options as of the commencement date.

On May 5, 2003 the offer period ended and the Company accepted for exchange and cancellation vested eligible options to purchase 32,642,634 shares of Class A or Class B common stock, with a weighted average exercise price of $48.59 per share. In exchange, the Company issued 8,574,033 fully vested, non-forfeitable shares of the Company’s Class A common stock and recorded stock-based compensation expense of approximately $162.3 million related to the issuance of such vested shares, based on the closing price of the Company’s Class A common stock on May 5, 2003 of $18.93 per share. The 8,574,033 shares were included in the Company’s calculation of net loss per share effective as of May 5, 2003. Additionally, on May 5, 2003 the Company accepted for exchange and cancellation unvested eligible options to purchase 20,086,234 shares of Class A or Class B common stock, with a weighted average exercise price of $50.93 per share. In exchange, new options to purchase 18,301,676 shares of the Company’s Class A common stock were issued on November 10, 2003. The terms and conditions of the new options, including the vesting schedules, were substantially the same as the terms and conditions of the options cancelled. The exercise price for the new options was $35.12 per share, which was the last reported trading price of the Company’s Class A common stock on the grant date.

Eligible employees (members of the Company’s Board of Directors were not eligible to participate in the offer) who participated in the offer received, in exchange for the cancellation of vested eligible options, an amount of consideration, represented by fully vested, non-forfeitable common stock, equal to the number of shares underlying such vested eligible options, multiplied by the offered value (as determined under certain terms and conditions set forth in the Company’s offer), divided by the closing price of the Company’s Class A common stock as reported on the NASDAQ National Market on May 5, 2003. The Company concluded that the consideration paid for the eligible options represented “substantial consideration” as required by EITF Issue No. 00-23, Issues Relating to Accounting for Stock Compensation Under APB Opinion No. 25 and FASB Interpretation No. 44 (“EITF 00-23”), as the offered value per vested option was at least equal to the fair value for each eligible option, as determined using the Black-Scholes option pricing model. In determining the fair value of the eligible options using the Black-Scholes option pricing model, the Company primarily used the following assumptions: (i) an expected life of approximately four years; (ii) an expected volatility of 0.70 during that expected life; (iii) a risk-free interest rate of 2.72%; and (iv) no dividends. The weighted average offered value per vested option share was $4.97.

Certain of the Company’s employees held unvested eligible options that were previously assumed by the Company in connection with acquisitions that were accounted for using the purchase method of accounting. The Company had recorded deferred compensation with respect to those options based upon the applicable stock market valuation at the time of acquisition. To the extent those employees tendered, and the Company accepted for exchange and cancellation, such assumed eligible options in exchange for new options, the Company was required to immediately accelerate the amortization of the remaining related deferred compensation previously recorded. Consequently, the Company recorded a non-cash charge of approximately $55.6 million in May 2003, reflecting the acceleration from future periods of stock-based compensation expense.

The Company further concluded that the “look back” and “look forward” provisions of paragraph 45 of FIN 44 applied to the stock options surrendered for cancellation. If any stock options were granted to participants in the offer within the six months prior to or following May 5, 2003, those stock options would be subject to variable accounting. As a result of these provisions, the Company recorded approximately $0.3 million and $3.5 million in 2004 and 2003, respectively, of stock-based compensation expense related to the portion of these variable options that vested during the periods.

In addition to the non-cash charges described above, the Company incurred certain associated employer payroll taxes and professional fees of approximately $2.8 million in connection with the offering. Employees were

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responsible for satisfying their portion of the payroll taxes, either through direct cash payment to the Company or through the sale of a portion of their new shares.

Defined Contribution 401(k) Savings and Investment Plan

The Company sponsors a defined contribution 401(k) savings and investment plan, which was established in 1996, covering substantially all of the Company’s employees, subject to certain eligibility requirements. At its discretion, the Company may make contributions to this plan. The Company made no contributions to this plan in 2004, 2003 or 2002.


9.	Impairment of Goodwill and Acquired Patents

Impairment of Goodwill


	*Years 2004, 2003 and 2002*

The Company performed annual impairment assessments of the carrying value of the goodwill recorded in connection with various acquisitions as required under SFAS 142 in October 2004, 2003 and 2002. In accordance with SFAS 142, the Company compared the carrying value of each of its reporting units that existed at those times to their estimated fair values. At October 1, 2004 and 2003, the Company had four reporting units. At October 1, 2002 the Company had seven reporting units. The Company determined and identified those reporting units in accordance with SFAS 142.

The Company estimated the fair values of its reporting units primarily using the income approach valuation methodology that includes the discounted cash flow method, taking into consideration the market approach and certain market multiples as verification of the values derived using the discounted cash flow methodology. The discounted cash flows for each reporting unit were based on discrete four year financial forecasts developed by management for planning purposes and consistent with those distributed to the Company’s Board of Directors. Cash flows beyond the four year discrete forecast were estimated using a terminal value calculation, which incorporated historical and forecasted financial trends for each identified reporting unit and considered long-term earnings growth rates for publicly traded peer companies. Future cash flows were discounted to present value by incorporating the present value techniques discussed in FASB Concepts Statement 7. Specifically, the income approach valuations included reporting unit cash flow discount rates ranging from 13% to 17%, and terminal value growth rates ranging from 0% to 11%. Publicly available information regarding the market capitalization of the Company was also considered in assessing the reasonableness of the cumulative fair values of its reporting units estimated using the discounted cash flow methodology.

Upon completion of the October 2004 and 2003 annual impairment assessments, the Company determined no impairment was indicated as the estimated fair values of the four reporting units exceeded their respective carrying values. Upon completion of the October 2002 assessment, the Company determined that the carrying values of four of its seven reporting units exceeded their estimated fair values. The four affected reporting units were broadband processors, client server networking, mobile communications and ServerWorks. Because indicators of impairment existed for these four reporting units, the Company performed the second step of the test required under SFAS 142 to determine the fair value of the goodwill for each of the affected reporting units.

In accordance with SFAS 142, the implied fair value of goodwill was determined in the same manner as that which is utilized to estimate the amount of goodwill recognized in a business combination. As part of the second step of the impairment test performed in 2002, the Company calculated the fair value of certain assets, including developed technology and IPR&D assets. To determine the implied value of goodwill, fair values were allocated to the assets and liabilities of each of the four affected reporting units in 2002. The implied fair value of goodwill was measured as the excess of the fair value of the affected reporting unit over the amounts assigned to its assets and liabilities. The impairment loss for each of the affected reporting units was measured by the amount the carrying value of goodwill for that reporting unit exceeded the implied fair value of the goodwill. Based on this assessment, the Company recorded a charge of $1.241 billion in October 2002. Of such charge, $536.0 million related to the goodwill of the broadband processor reporting unit, $206.1 million related to the goodwill of the

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client server networking reporting unit, $179.6 million related to the goodwill of the mobile communications reporting unit and $319.3 million related to the goodwill of the ServerWorks reporting unit.

The primary factors resulting in the 2002 impairment charge were: (i) the continued significant economic slowdown in the technology sector and the semiconductor industry, which affected both the Company’s operations at that time and its expectations with respect to future revenue, (ii) a decline in the valuation of technology company stocks, including the valuation of the Company’s stock, and (iii) unfavorable revisions in revenue and cash flow expectations regarding certain of the Company’s acquired businesses. These acquired businesses were priced based on valuation multiples that were indicative of the value at which businesses were purchased and sold at that time, but were inflated relative to historical and subsequent standards. In the second and third quarters of 2002 demand for servers, WAN networking equipment, handheld devices and other products using the Company’s chips declined relative to the demand that was anticipated when certain of its purchase acquisitions were consummated. In addition, the Company recognized that a sustained decline in demand combined with an oversupply of these products resulted in increased price competition for certain chipsets, giving effect to shrinking profit margins and expected future cash flows for the four affected reporting units. In response to the existing market conditions, the Company initiated a restructuring program in the fourth quarter of 2002 that included significant headcount reductions, and decreased its investment in certain target markets that were either performing below expectations or had low near term growth potential. As a result, the Company revised its forecasts of future operating results, which were in turn used in calculating the estimated fair values of the reporting units.

In May 2003 the Company determined that indicators of impairment existed for two of its reporting units, ServerWorks and mobile communications, and an additional impairment assessment was performed at that time. The Company tested the goodwill of these reporting units for impairment in accordance with SFAS 142 as described above. Based on this assessment, the Company recorded a charge of $438.6 million in June 2003 to write down the value of goodwill associated with the two reporting units. Of this charge, $414.5 million represented the balance of goodwill related to the ServerWorks reporting unit and $24.1 million represented the balance of goodwill related to the mobile communications reporting unit.

With respect to the ServerWorks reporting unit, the primary factors that contributed to the impairment assessment were additional competitive pressures in the server market and recent design losses experienced by that reporting unit that were attributable, in part, to the Company’s ongoing inability to obtain required design information from a third party that is also a competitor. Another factor that contributed to the impairment assessment was the recording of additional goodwill due to contingent consideration earned by former ServerWorks stockholders and employees (see Note 3). As a result of the competitive pressures and design losses, the Company reduced its forecasts of future operating results for the ServerWorks reporting unit for periods beginning as early as the second quarter of 2004 with the expectation of future loss of market share for that business. These forecasts in turn formed the basis for estimating the fair value of the ServerWorks reporting unit as of June 2003. The Company is continuing to pursue strategies to reposition its ServerWorks business and develop alternative sources of revenue for that reporting unit.

With respect to the mobile communications reporting unit, the primary factor that contributed to the impairment assessment was the recording of additional goodwill due to contingent consideration earned by former Mobilink shareholders and employees in May 2003 (see Note 3), after that reporting unit had already been written down to its implied fair value in October 2002.

Impairment of Acquired Patents

In January 2004 the Company acquired approximately 80 patents and patent applications related to the read channel and hard disk controller market, for $18.0 million. In December 2003 and 2002 the Company acquired over 150 patents related to various technologies, including among others, wireless networking topologies and protocols, dual mode wireless transceivers, power management in integrated circuits, Ethernet networking, personal video recording and VoIP telephony, for $1.0 million and $24.0 million, respectively. The immediate purpose for acquiring these patent portfolios was to assist the Company in the defense and settlement of then ongoing and future intellectual property litigation. As a result, the Company was unable to estimate any future

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cash flows from the patents. The Company also does not have any plans to resell the patents to a third party. Due to the intended use for these assets, the Company concluded that indicators of impairment existed upon acquisition of the patents because the carrying value of the patents might not be recoverable. Upon determining that indicators of impairment existed, the Company performed a recoverability test in accordance with SFAS 144. Estimates of future cash flows used to test the recoverability of long-lived assets should include only the future cash flows that are directly associated with, and that are expected to arise as a direct result of the use and eventual disposition of the asset. The only cash flows expected to arise as a direct result of the use of the patents are the cash savings expected to result from reduced but undeterminable litigation expenses over the next several years. Due to the unpredictable nature of legal disputes, it is not possible to reasonably: (i) determine if the Company’s strategy with respect to the patents will be successful, (ii) forecast litigation expenses that would have been incurred if the patent portfolio was not acquired, or (iii) forecast cash flows generated as a result of acquiring the patents. As a result, no reasonable analysis could be prepared to support future cash flows associated with the patents. Accordingly, pursuant to SFAS 144 the patents were determined to be fully impaired at the date of acquisition. The impairment charges for the patent portfolios were classified as impairment of goodwill and other intangible assets in the consolidated statements of operations in 2004, 2003 and 2002.


10.	Restructuring Costs

From the second quarter of 2001 through the third quarter of 2002, the Company implemented a plan to restructure its operations (the “2001 Restructuring Plan”) in response to the challenging economic climate. As a result of the prolonged downturn in the semiconductor industry, the Company announced an additional restructuring program which it implemented from the fourth quarter of 2002 through the second quarter of 2003 (the “2002 Restructuring Plan”). The plans focused on cost reductions and operating efficiencies, including workforce reductions and lease terminations. These restructuring plans resulted in certain business unit realignments, workforce reductions and consolidation of excess facilities. Approximately 510 and 160 employees were terminated across all of the Company’s business functions and geographic regions in connection with the 2002 and 2001 Restructuring Plans, respectively. In addition, headcount was reduced through attrition and reductions in the number of temporary and contract workers employed by the Company.

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Activity and liability balances related to the 2002 and 2001 Restructuring Plans were as follows:


	2001 Restructuring Plan						2002 Restructuring Plan

				Consolidation						Consolidation
	Workforce			of Excess			Workforce			of Excess
	Reductions			Facilities			Reductions			Facilities			Total

	(In thousands)




Restructuring liabilities at December 31, 2001	$	124		$	10,470		$	—		$	—		$	10,594




Charged to expense in 2002		1,411			30,454			65,048			22,767			119,680




Liabilities assumed in acquisition ⁽¹⁾		—			—			—			6,815			6,815




Non-cash costs ⁽²⁾		(135	)		(4,868	)		(46,821	)		(1,495	)		(53,319	)




Cash payments ⁽³⁾		(1,400	)		(6,502	)		(16,683	)		(3,494	)		(28,079	)

Restructuring liabilities at December 31, 2002		—			29,554			1,544			24,593			55,691




Charged to expense in 2003		—			—			2,932			—			2,932




Non-cash costs ⁽²⁾		—			—			(972	)		—			(972	)




Cash payments ⁽³⁾		—			(11,195	)		(3,504	)		(5,778	)		(20,477	)

Restructuring liabilities at December 31, 2003		—			18,359			—			18,815			37,174




Liabilities assumed in acquisitions ⁽¹⁾		—			—			—			3,411			3,411




Cash payments ⁽³⁾		—			(6,066	)		—			(7,402	)		(13,468	)

Restructuring liabilities at December 31, 2004	$	—		$	12,293		$	—		$	14,824		$	27,117


(1)	Although not related to the 2002 or 2001 Restructuring Plans, the Company assumed additional liabilities of approximately $6.8 million in connection with the Mobilink acquisition in 2002 and $3.4 million in connection with the Sand Video, WIDCOMM, Zyray and Alphamosaic acquisitions in 2004, for the consolidation of excess facilities, relating primarily to lease terminations, non-cancelable lease costs and write-offs of leasehold improvements. These costs were accounted for under EITF Issue No. 95-3, Recognition of Liabilities in Connection with Purchase Business Combinations , and were recognized as liabilities assumed in the purchase business combinations and offset by corresponding increases in goodwill. The liabilities related to these acquisitions have been classified as restructuring liabilities for presentation in the consolidated balance sheets.

(2)	Non-cash costs related to stock-based compensation expense resulting from an extension of the exercise period for vested stock options of certain terminated employees and the acceleration of the vesting period of certain options of certain terminated employees as required by their assumed option agreements, and the write-off of leasehold improvements.

(3)	Cash payments relate to severance and fringe benefits, net lease payments on excess facilities, lease terminations and non-cancelable lease costs.

These restructuring charges were classified as operating expenses in the Company’s consolidated statements of operations.

Certain of the restructuring charges were recorded in periods subsequent to the initial implementations of the 2001 and 2002 Restructuring Plans. These subsequent charges were primarily due to the inability to reasonably estimate those costs at the time of the initial implementations as the Company was still in the process of reviewing many of its facilities to determine where the Company could consolidate and which locations would no longer be required. The Company does not anticipate recording any additional charges under the 2001 and 2002 Restructuring Plans.

The consolidation of excess facilities costs will be paid over the respective lease terms through 2010.

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11.	Settlement Costs

The Company recorded $68.7 million in settlement costs in 2004. Of this amount, $60.0 million was related to the settlement of various litigation matters, and the remaining $8.7 million reflects settlement costs related to a claim arising from an acquisition and certain indemnification costs. For a more detailed discussion of the Company’s settled and outstanding litigation, see Notes 3 and 12.

In May 2003 the Company completed a management transition at its ServerWorks Corporation subsidiary and entered into a settlement agreement resolving various issues and disputes raised by certain employees and former securities holders of ServerWorks, including issues and disputes with three departing employees, relating to agreements entered into when the Company acquired ServerWorks in January 2001. In connection with the settlement, the Company incurred approximately $25.2 million in cash payments and expenses and recorded a one-time non-cash charge of approximately $88.1 million in May 2003, reflecting the acceleration from future periods of stock-based compensation expense, most of which was previously recorded as deferred compensation established upon the acquisition of ServerWorks (and based upon stock market valuations at the time of the acquisition).

In August 2003 the Company and Intel Corporation agreed to settle all litigation between the companies as well as litigation involving their respective affiliates. In connection with the settlement agreement, the Company paid Intel $60.0 million in 2003.

The Company recorded an additional $21.2 million in settlement costs in 2003 in connection with the settlement of other litigation and third party claims.


12.	Litigation

Intellectual Property Proceedings. In April 2004 the Company and STMicroelectronics, Inc. entered into a comprehensive settlement agreement and patent cross-license to settle all outstanding litigation between the companies. Pursuant to the settlement, each of the parties dismissed all claims and counterclaims in the litigation with prejudice. Other terms of the settlement were not disclosed.

In June 2004 the Company and Microtune, Inc. agreed to settle all outstanding litigation between the companies as well as litigation involving their affiliates. As a result of the settlement, all cases and appeals between the two companies were dismissed with prejudice. In addition, the injunction entered in Microtune (Texas), L.P. v. Broadcom Corporation, United States District Court for the Eastern District of Texas, Civil Action No. 4:01CV23, against the Company’s BCM3415 product was vacated. The parties also entered into reciprocal releases covering all patent claims and certain other claims. In connection with the settlement, the Company paid Microtune $22.5 million in 2004. The parties also entered into a patent cross-license agreement whereby patents claiming priority prior to the effective date of the license agreement are licensed for the lives of the patents, and subsequently acquired patents claiming priority within the following four years are licensed for ten years. Under the agreement, all products of the Company are licensed under all of Microtune’s patents and all current products and future analog signal processing products of Microtune are licensed under all of the Company’s analog signal processing patents.

In September 2004 the Company entered into a settlement and cross-license agreement with Agere Systems Inc. to settle all outstanding litigation between the two companies. Under the settlement, the companies agreed to dismiss all outstanding claims and counterclaims in the litigation with prejudice and entered into reciprocal releases covering all asserted and unasserted patent-related claims against the other party and its affiliates. In addition, the agreement includes a cross-license under the respective patent portfolios of each party and its affiliates. Other terms of the settlement were not disclosed.

In April 2004 Lonestar Inventions, L.P. filed a complaint against the Company, Marvell Semiconductor, Inc. and Analog Devices, Inc. in the United States District Court for the Western District of Texas alleging that the Company and the other named defendants (i) infringed a single patent relating to circuit technology and (ii) induced infringement of such patent. The complaint sought a permanent injunction against the Company as well as the recovery of monetary damages, including treble damages for willful infringement, and attorneys’ fees.

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In September 2004 the Company and Lonestar entered into a settlement agreement and dismissed with prejudice all claims and counterclaims between them. Other terms of the settlement were not disclosed.

Securities Litigation. From March through May 2001 the Company and three of its executive officers were served with a number of shareholder class action complaints alleging violations of the Securities Exchange Act of 1934, as amended. The essence of the allegations was that the defendants intentionally failed to disclose and properly account for the financial impact of performance-based warrants assumed in connection with five acquisitions consummated in 2000 and 2001, which plaintiffs allege had the effect of materially overstating the Company’s reported and future financial performance. In June 2001 the lawsuits were consolidated before the United States District Court for the Central District of California into a single action entitled In re Broadcom Corp. Securities Litigation. After denying the defendants’ motion to dismiss the complaint and a motion for partial summary judgment as to some of the challenged disclosures, in October 2003 the court issued an order certifying a class of all persons or entities who purchased or otherwise acquired publicly traded securities of the Company, or bought or sold options on the Company’s stock, between July 31, 2000 and February 26, 2001, with certain exceptions. The parties have completed discovery. In September 2004 defendants filed five motions for summary judgment or partial summary judgment. Through an order issued in November 2004, the court granted three of those motions for partial summary judgment, granted in part and denied in part one motion, and denied one motion. Plaintiffs have asserted that, if liability is found, damages may exceed $4.5 billion (taking into account the effect of the court’s rulings granting partial summary judgment in favor of the defendants), which the Company vigorously disputes and believes to be substantially inflated. The court has consolidated this action for trial with the Arenson, et al. v. Broadcom Corp., et al. matter described below. In February 2005 the court scheduled trial to begin in September 2005, ruled that the individual defendants were asserting, and were entitled to assert, a defense of reliance upon the advice of counsel, and reopened discovery concerning that issue. The Company believes the allegations in the purported consolidated shareholder class action are without merit and is defending the action vigorously.

In February 2002 an additional complaint, entitled Arenson, et al. v. Broadcom Corp., et al ., was filed by 47 persons and entities in the Superior Court of the State of California for the County of Orange, against the Company and three of its executive officers. The Company removed the lawsuit to the United States District Court for the Central District of California. The plaintiffs subsequently filed an amended complaint in that court that tracks the allegations of the federal class action complaint. The parties have completed discovery. In September 2004 defendants filed two motions for summary judgment arguing that the plaintiffs had no damages or could not adequately prove their damages. Through orders issued in October and December 2004, the court denied one of those two motions and granted the other motion as to 31 plaintiffs. By stipulation and order entered by the court in January 2005, the parties agreed that one of the dismissed plaintiff’s claims could be reinstated (subject to that plaintiff’s agreement that its damages, calculated in accordance with the court’s prior orders, did not exceed $745) but that five additional plaintiffs should be dismissed because they did not incur any damages. Accordingly, 35 of the original 47 Arenson plaintiffs have been dismissed and 12 plaintiffs remain. In addition, the parties stipulated that the court’s rulings on defendants’ five motions for summary judgment or partial summary judgment in the In re Broadcom Corp. Securities Litigation class action (described above) are binding in the Arenson matter. The court has consolidated this action for trial with the In re Broadcom Corp. Securities Litigation matter and has scheduled trial to begin in September 2005. The Company believes the allegations in this lawsuit are also without merit and is defending the action vigorously.

From March through June 2001 the Company, its then directors, and certain of its then officers were sued in five purported shareholder derivative actions based upon the same general set of alleged facts and circumstances as in the purported consolidated shareholder class action. Four of these actions were filed in the Superior Court of the State of California for the County of Orange, and by order of the court these four actions were consolidated into a single action entitled David v. Wolfen, et al. One purported derivative action was filed in the United States District Court for the Central District of California, entitled Aiken v. Nicholas, et al. In October 2004 the parties entered into a final stipulation of settlement of the David and Aiken matters. Under the stipulation, the plaintiffs agreed to dismiss the actions. The Company, plaintiffs and settling defendants also entered into reciprocal releases covering asserted and unasserted, known and unknown claims relating to the actions (other than certain rights created between the Company and settling defendants by law, contract or the

F-40

Company’s Articles of Incorporation or Bylaws). The settlement also provided that the Company would adopt certain corporate governance enhancements and pay $5.3 million in fees and expenses of the plaintiffs’ attorneys (inclusive of fees and expenses incurred in both the David and Aiken actions). No damages were payable under the settlement. The settlement set forth in the stipulation was approved by the California Superior Court at a hearing held in November 2004, and the David and Aiken actions were dismissed pursuant to the stipulation in November 2004. Pursuant to a policy of indemnity, one of the Company’s directors’ and officers’ liability insurers paid plaintiffs’ attorneys’ fees and expenses of $5.3 million.

The Company has entered into indemnification agreements with each of its present and former directors and officers. Under these agreements, the Company is required to indemnify each such director or officer against expenses, including attorney’s fees, judgments, fines and settlements (collectively “Liabilities”), paid by such individual in connection with the shareholder class action, shareholder derivative actions and the Arenson suit (other than Liabilities arising from willful misconduct or conduct that is knowingly fraudulent or deliberately dishonest).

General. The Company and its subsidiaries are also involved in other legal proceedings, claims and litigation arising in the ordinary course of business.

The pending unsettled lawsuits involve complex questions of fact and law and likely will require the expenditure of significant funds and the diversion of other resources to defend. From time to time the Company may enter into confidential discussions regarding the potential settlement of such lawsuits; however, there can be no assurance that any such discussions will occur or will result in a settlement. Moreover, the settlement of any pending litigation could require the Company to incur substantial settlement payments and costs and, in the case of the settlement of any intellectual property proceeding against the Company, may require the Company to obtain a license under a third party’s intellectual property rights that could require royalty payments in the future and to grant a license to certain of its intellectual property rights to a third party under a cross-license agreement. See the discussion of recent litigation settlements above and in Note 11. The results of litigation are inherently uncertain, and material adverse outcomes are possible.


13.	Significant Customer, Supplier and Geographical Information

Sales to the Company’s significant customers, including sales to their manufacturing subcontractors, as a percentage of net revenue were as follows:


	Years Ended
	December 31,

	2004			2003			2002

Hewlett-Packard ⁽¹⁾		12.9	%		15.5	%		14.8	%




Motorola		12.4			*			12.1




Dell		*			11.9			11.3




Cisco ⁽²⁾		*			*			10.0




Five largest customers as a group		51.1			51.6			52.3


*	Less than 10% of net revenue.


(1)	Includes sales to Compaq, which was acquired by Hewlett-Packard in May 2002, for all periods presented.

(2)	Includes sales to Linksys, which was acquired by Cisco in June 2003, for all periods presented.

No other customer represented more than 10% of the Company’s annual net revenue in these years.

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Net revenue derived from all independent customers located outside of the United States as a percent of total net revenue was as follows:


	Years Ended
	December 31,

	2004			2003			2002

Asia		15.0	%		19.6	%		20.5	%




Europe		6.4			5.9			4.4




Other		0.2			0.3			0.4

		21.6	%		25.8	%		25.3	%

Such net revenue does not include revenue from products shipped to subsidiaries or manufacturing subcontractors of customers that have headquarters in the United States even though such subsidiaries or manufacturing subcontractors are located outside of the United States. Net revenue derived from actual shipments to international destinations, primarily to Asia, represented approximately 79.0%, 77.7% and 70.0% of the Company’s net revenue in 2004, 2003 and 2002, respectively. All of the Company’s revenue to date has been denominated in U.S. dollars.

The Company does not own or operate a fabrication facility. Six independent third-party foundries located in Asia manufacture substantially all of the Company’s semiconductor devices in current production. Any sudden demand for an increased amount of semiconductor devices or sudden reduction or elimination of any existing source or sources of semiconductor devices could result in a material delay in the shipment of the Company’s products. In addition, substantially all of the Company’s products are assembled and tested by one of seven independent third-party subcontractors in Asia. The Company does not have long-term agreements with any of these suppliers. Any problems associated with the fabrication facilities or the delivery, quality or cost of the Company’s products could have a material adverse effect on the Company’s business, results of operations and financial condition.

The Company has an international distribution center that includes engineering design and administrative facilities in Singapore as well as engineering design facilities in Belgium, Canada, China, France, India, Israel, the Netherlands, Taiwan and the United Kingdom. At December 31, 2004 approximately $507.4 million of the Company’s net tangible assets were located outside the United States, primarily in Singapore.

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14.	Quarterly Financial Data (Unaudited)

The following table presents unaudited quarterly financial data of the Company. In the Company’s opinion, this information has been prepared on a basis consistent with that of its audited consolidated financial statements and all necessary material adjustments, consisting of normal recurring accruals and adjustments, have been included to present fairly the unaudited quarterly financial data. The Company’s quarterly results of operations for these periods are not necessarily indicative of future results of operations.


									Diluted Net
									Income
		Net		Gross					(Loss) Per
		Revenue		Profit		Net Income (Loss)			Share

		(In thousands, except per share data)




Year Ended December 31, 2004




	First Quarter	$	573,406	$	289,925	$	39,864	⁽¹⁾	$	.12




	Second Quarter		641,299		323,820		63,839	⁽²⁾		.18




	Third Quarter		646,515		324,476		43,901	⁽³⁾		.13




	Fourth Quarter		539,390		269,095		71,141	⁽⁴⁾		.20




Year Ended December 31, 2003




	First Quarter	$	327,464	$	155,444	$	(67,906	) ⁽⁵⁾	$	(.25	)




	Second Quarter		377,879		171,026		(891,742	) ⁽⁶⁾		(3.08	)




	Third Quarter		425,633		207,925		(6,298	) ⁽⁷⁾		(.02	)




	Fourth Quarter		479,119		235,924		6,081	⁽⁸⁾		.02


(1)	Includes impairment of acquired patent portfolio of $18.0 million, IPR&D of $2.3 million and litigation settlement costs of $19.0 million.

(2)	Includes IPR&D of $24.2 million and litigation settlement costs of $13.5 million.

(3)	Includes IPR&D of $37.3 million, litigation settlement costs of $35.7 million and net gain on strategic investments of $5.2 million.

(4)	Includes settlement costs of $0.5 million and a tax benefit of $21.3 million.

(5)	Includes restructuring costs of $0.8 million.

(6)	Includes restructuring costs of $2.2 million, impairment of goodwill of $438.6 million, stock option exchange expense of $220.7 million and litigation settlement costs of $178.3 million.

(7)	Includes net gain on strategic investments of $22.1 million.

(8)	Includes impairment of acquired patent portfolio of $1.0 million and settlement costs of $16.2 million.


15.	Subsequent Events

In February 2005 the Company’s Board of Directors authorized a program to repurchase shares of the Company’s Class A common stock. The Board approved the repurchase of shares having an aggregate value of up to $250 million from time to time over a period of one year, depending on market conditions.

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Exhibits and Financial Statement Schedules

Exhibit Index

The following Exhibits are filed herewith or incorporated herein by reference to the location indicated.


				Where Located

Exhibit						File	Exhibit				Filed
Number			Description	Form		No.	No.		Filing Date		Herewith

	2	.1	Merger Agreement and Plan of Reorganization by and among the registrant, RCC Acquisition Corp., Reliance Computer Corp., and the Other Parties Signatory Thereto dated as of January 5, 2001.		8-K	000- 23993		2.1		01/31/2001
	3	.1	Amended and Restated Articles of Incorporation dated March 3, 1998.		S-1/A	333- 45619		3.1		03/23/1998
	3	.1.1	Certificate of Amendment of Amended and Restated Articles of Incorporation dated December 28, 1999.		10-K	000- 23993		3.1.2		03/31/2003
	3	.1.2	Certificate of Amendment of Amended and Restated Articles of Incorporation dated June 26, 2000.		10-K	000- 23993		3.1.1		04/02/2001
	3	.2	Bylaws as amended through August 21, 2003.		10-K	000- 23993		3.2		03/15/2004
	10	.1*	2004 Bonuses & 2005 Base Salaries for Certain Executive Officers.		8-K	000- 23993		10.1		02/07/2005
	10	.2*	Form Letter Agreement for Executive Retention Program between the registrant and the following executive officers: David A. Dull, Bruce E. Kiddoo, Vahid Manian, Andrew J. Pease and William J. Ruehle.		10-Q	000- 23993		10.11		11/09/2004
	10	.3*†	Letter Agreement between the registrant and Scott A. McGregor dated October 25, 2004.									X
	10	.4*	Amended and Restated 1994 Stock Option Plan, together with form of Stock Option Agreement, form of Stock Purchase Agreement, form of Note Secured by Stock Pledge Agreement and form of Stock Pledge Agreement.		S-1/A	333- 45619		10.3		02/27/1998
	10	.5*	Special Stock Option Plan, together with form of Stock Option Agreement and form of Stock Purchase Agreement.		S-1/A	333- 45619		10.12		03/23/1998
	10	.6*	1998 Stock Incentive Plan (as amended and restated March 23, 2004).		10-Q	000- 23993		10.4		05/10/2004
	10	.7*	1998 Stock Incentive Plan forms of Notice of Grant of Stock Option, Stock Issuance Agreement, Stock Purchase Agreement and related Addenda.		S-8	333- 60763	99.2 & 99.4- 99.11			08/06/1998
	10	.8*	1998 Stock Incentive Plan form of Notice of Grant of Stock Option for the following executive officers: David A. Dull, Bruce E. Kiddoo, Vahid Manian, Andrew J. Pease and William J. Ruehle.		10-Q	000- 23993		10.3		11/09/2004
	10	.9*	1998 Stock Incentive Plan form of Notice of Grant of Stock Option, Stock Option Agreement and Addendum to Stock Option Agreement for Scott A. McGregor.									X
	10	.10*	1998 Stock Incentive Plan form of Stock Option Agreement.		10-Q	000- 23993		10.1		11/09/2004


				Where Located

Exhibit						File	Exhibit				Filed
Number			Description	Form		No.	No.		Filing Date		Herewith

	10	.11*	1998 Stock Incentive Plan form of Automatic Stock Option Agreement.		10-Q	000- 23993		10.2		11/09/2004
	10	.12*	1998 Stock Incentive Plan form of Executive Retention Program Addendum to Stock Option Agreement for the following executive officers: David A. Dull, Bruce E. Kiddoo, Vahid Manian, Andrew J. Pease and William J. Ruehle.		10-Q	000- 23993		10.5		11/09/2004
	10	.13*	1998 Stock Incentive Plan form of Special Stock Retention Addendum to Stock Option Agreement for the registrant’s Chief Executive Officer, Chief Financial Officer, Chief Technical Officer and member’s of the registrant’s Board of Directors.		10-Q	000- 23993		10.6		11/09/2004
	10	.14*	1998 Stock Incentive Plan form of Restricted Stock Unit Award Agreement.		10-Q	000- 23993		10.8		11/09/2004
	10	.15*	1998 Stock Incentive Plan form of Executive Retention Program Addendum to Restricted Stock Unit Award Agreement for the following executive officers: David A. Dull, Bruce E. Kiddoo, Vahid Manian, Andrew J. Pease and William J. Ruehle.		10-Q	000- 23993		10.10		11/09/2004
	10	.16*	1998 Stock Incentive Plan form of Restricted Stock Unit Award Agreement and Addendum to Restricted Stock Unit Award Agreement for Scott A. McGregor.									X
	10	.17*	1998 Employee Stock Purchase Plan (as amended and restated March 21, 2003).		10-Q	000- 23993		10.1		11/07/2003
	10	.18*	1998 Employee Stock Purchase Plan forms of Stock Purchase Agreements and Enrollment/ Change Form.		10-K	000- 23993		10.5.1		03/15/2004
	10	.19	1999 Special Stock Option Plan (as amended and restated July 18, 2003).		10-Q	000- 23993		10.2		08/11/2003
	10	.20	1999 Special Stock Option Plan form of Stock Option Agreement.		10-Q	000- 23993		10.2.1		08/11/2003
	10	.21	1999 Special Stock Option Plan form of Notice of Grant of Stock Option.		S-8	333- 93457		99.2		12/22/1999
	10	.22*	Form of Indemnification Agreement for Directors of the registrant.		S-1/A	333- 45619		10.1		02/27/1998
	10	.23*	Form of Indemnification Agreement for Officers of the registrant.		S-1/A	333- 45619		10.2		02/27/1998
	10	.24††	Development, Supply and License Agreement dated September 29, 1997 between the registrant and General Instrument Corporation, formerly known as NextLevel Systems, Inc.		S-1/A	333- 45619		10.8		02/27/1998
	10	.25††	Amendment dated November 22, 2000 to Development, Supply and License Agreement between the registrant and General Instrument Corporation.		10-K	000- 23993		10.16		04/02/2001
	10	.26††	Product Purchase Agreement dated November 22, 2000, together with Amendment dated January 1, 2002, to Product Purchase Agreement between the registrant and General Instrument Corporation.		10-Q	000- 23993.		10.1		05/15/2002


				Where Located

Exhibit						File	Exhibit				Filed
Number			Description	Form		No.	No.		Filing Date		Herewith

	10	.27††	Second Amendment dated December 3, 2002 to Product Purchase Agreement between the registrant and General Instrument Corporation.		10-K	000- 23993		10.22		03/31/2003
	10	.28††	Third Amendment dated as of January 1, 2003 to Product Purchase Agreement between the registrant and General Instrument Corporation.		8-K	000- 23993		99.1		04/16/2004
	10	.29††	Fourth Amendment dated March 31, 2004 to Product Purchase Agreement between the registrant and General Instrument Corporation.		10-Q	000- 23993		10.25		05/10/2004
	10	.30	Industrial Lease (Single Tenant; Net) dated August 7, 1998 between the registrant and The Irvine Company.		S-1	333- 65117		10.15		09/30/1998
	10	.31	First Amendment dated August 27, 1999 and Second Amendment dated December 10, 1999 to Industrial Lease (Single Tenant, Net), between the registrant and The Irvine Company.		10-K	000- 23993		10.20		03/31/2003
	10	.32	Third Amendment (Single Tenant, Net) dated December 19, 2003 between the registrant and the Irvine Company.		10-Q	000- 23993		10.12		11/09/2004
	10	.33	Industrial Lease (Multi-Tenant; Net) dated August 1, 2000 between the registrant and the Irvine Company; First Amendment dated October 18, 2000 and Second Amendment dated September 18, 2003 to Industrial Lease (Multi-Tenant; Net), between the registrant and The Irvine Company.									X
	10	.34	Lease Agreement dated February 1, 2000 between the registrant and Conejo Valley Development Corporation.		10-K	000- 23993		10.17		03/19/2002
	10	.35	Lease Agreement dated May 18, 2000 between the registrant and M-D Downtown Sunnyvale, LLC.		10-K	000- 23993		10.21		03/31/2003
	10	.36	Lease dated November 20, 2000 together with Second Amendment dated March 30, 2001 to Lease between the registrant and Sobrato Interests.		10-K	000- 23993		10.18		03/19/2002
	10	.37	Lease (Multi-Tenant; Net) dated August 12, 2001 between the registrant and The Irvine Company; Fourth Amendment dated April 30, 2004 to Lease (Multi-Tenant; Net) between the registrant and The Irvine Company.									X
	10	.38†	Lease Agreement dated December 29, 2004 between the registrant and Irvine Commercial Property Company.									X
	10	.39	Stipulation of Settlement (shareholder derivative actions) dated October 26, 2005.									X
	21	.1	Subsidiaries of the Company.									X
	23	.1	Consent of Independent Auditors.									X
	31	.1	Certification of the Chief Executive Officer, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.									X

Where Located

Exhibit

File

Exhibit

Filed

Number

Description

Form

No.

Filing Date

Herewith

Certification of the Chief Financial Officer, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certifications of the Chief Executive Officer and Chief Financial Officer, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


	*	Indicates a management contract or compensatory plan or arrangement.


	†	Confidential treatment has been requested with respect to the redacted portions of this amendment.


††	Confidential treatment has previously been granted by the SEC for certain portions of the referenced exhibit pursuant to Rule 406 under the Securities Act.

Financial Statement Schedules






(1) Report of Independent Registered Public Accounting Firm on Financial Statement Schedule			S-1




(2) Schedule II — Consolidated Valuation and Qualifying Accounts			S-2

Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the Consolidated Financial Statements or Notes thereto.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Irvine, State of California, on March 1, 2005.


	Broadcom Corporation


	By:	/s/ Scott A. McGregor



	Scott A. McGregor
	President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:


Signature	Title	Date

/s/ Scott A. McGregor Scott A. McGregor	President and Chief Executive Officer and Director (Principal Executive Officer)	March 1, 2005

/s/ Henry Samueli Henry Samueli, Ph.D.	Chairman of the Board and Chief Technical Officer	March 1, 2005

/s/ William J. Ruehle William J. Ruehle	Vice President and Chief Financial Officer (Principal Financial Officer)	March 1, 2005

/s/ Bruce E. Kiddoo Bruce E. Kiddoo	Vice President and Corporate Controller (Principal Accounting Officer)	March 1, 2005

/s/ George L. Farinsky George L. Farinsky	Director	March 1, 2005

/s/ John Major John Major	Director	March 1, 2005

/s/ Alan E. Ross Alan E. Ross	Director	March 1, 2005

/s/ Robert E. Switz Robert E. Switz	Director	March 1, 2005

/s/ Werner F. Wolfen Werner F. Wolfen	Director	March 1, 2005

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON FINANCIAL

STATEMENT SCHEDULE

Board of Directors and Shareholders

Broadcom Corporation

We have audited the consolidated financial statements of Broadcom Corporation as of December 31, 2004 and 2003, and for each of the three years in the period ended December 31, 2004, and have issued our report thereon dated February 25, 2005. Our audits also included the financial statement schedule listed in Item 15(a). This schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion based on our audits.

In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects the information set forth therein.

Orange County, California

February 25, 2005

S-1

SCHEDULE II — CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS

BROADCOM CORPORATION


				Balance at		Charged to			Charged to					Balance at
				Beginning of		Costs and			Other					End of
Description				Year		Expenses			Accounts(a)		Deductions			Year

				(In thousands)




Year ended December 31, 2004:




	Deducted from asset accounts:




		Allowance for doubtful accounts		$	6,493	$	1,793		$	300	$	(1,686	)	$	6,900




		Sales returns			655		16,236			—		(13,199	)		3,692




		Pricing allowances			444		2,507			—		(1,956	)		995




		Reserve for excess and obsolete inventory			25,111		26,224			2,217		(8,801	)		44,751




	Reserve for warranty				5,996		14,812			157		(1,780	)		19,185




	Restructuring liabilities				37,174		—			3,411		(13,468	)		27,117

			Total	$	75,873	$	61,572		$	6,085	$	(40,890	)	$	102,640

Year ended December 31, 2003:




	Deducted from asset accounts:




		Allowance for doubtful accounts		$	4,553	$	1,752		$	637	$	(449	)	$	6,493




		Sales returns			762		16,772			—		(16,879	)		655




		Pricing allowances			306		4,601			—		(4,463	)		444




		Reserve for excess and obsolete inventory			15,898		11,069			2,908		(4,764	)		25,111




	Reserve for warranty				3,881		8,325			—		(6,210	)		5,996




	Restructuring liabilities				55,691		2,932			—		(21,449	)		37,174

			Total	$	81,091	$	45,451		$	3,545	$	(54,214	)	$	75,873

Year ended December 31, 2002:




	Deducted from asset accounts:




		Allowance for doubtful accounts		$	5,375	$	—		$	—	$	(822	)	$	4,553




		Sales returns			2,232		6,834			—		(8,304	)		762




		Pricing allowances			8,143		(725	)		—		(7,112	)		306




		Reserve for excess and obsolete inventory			17,117		5,705			429		(7,353	)		15,898




	Reserve for warranty				5,663		1,299			—		(3,081	)		3,881




	Restructuring liabilities				10,594		126,495			—		(81,398	)		55,691

			Total	$	49,124	$	139,608		$	429	$	(108,070	)	$	81,091


(a)	Amounts represent beginning balances acquired through purchase acquisitions.

S-2

Exhibit Index


				Where Located

Exhibit						File	Exhibit				Filed
Number			Description	Form		No.	No.		Filing Date		Herewith

	2	.1	Merger Agreement and Plan of Reorganization by and among the registrant, RCC Acquisition Corp., Reliance Computer Corp., and the Other Parties Signatory Thereto dated as of January 5, 2001.		8-K	000- 23993		2.1		01/31/2001
	3	.1	Amended and Restated Articles of Incorporation dated March 3, 1998.		S-1/A	333- 45619		3.1		03/23/1998
	3	.1.1	Certificate of Amendment of Amended and Restated Articles of Incorporation dated December 28, 1999.		10-K	000- 23993		3.1.2		03/31/2003
	3	.1.2	Certificate of Amendment of Amended and Restated Articles of Incorporation dated June 26, 2000.		10-K	000- 23993		3.1.1		04/02/2001
	3	.2	Bylaws as amended through August 21, 2003.		10-K	000- 23993		3.2		03/15/2004
	10	.1*	2004 Bonuses & 2005 Base Salaries for Certain Executive Officers.		8-K	000- 23993		10.1		02/07/2005
	10	.2*	Form Letter Agreement for Executive Retention Program between the registrant and the following executive officers: David A. Dull, Bruce E. Kiddoo, Vahid Manian, Andrew J. Pease and William J. Ruehle.		10-Q	000- 23993		10.11		11/09/2004
	10	.3*†	Letter Agreement between the registrant and Scott A. McGregor dated October 25, 2004.									X
	10	.4*	Amended and Restated 1994 Stock Option Plan, together with form of Stock Option Agreement, form of Stock Purchase Agreement, form of Note Secured by Stock Pledge Agreement and form of Stock Pledge Agreement.		S-1/A	333- 45619		10.3		02/27/1998
	10	.5*	Special Stock Option Plan, together with form of Stock Option Agreement and form of Stock Purchase Agreement.		S-1/A	333- 45619		10.12		03/23/1998
	10	.6*	1998 Stock Incentive Plan (as amended and restated March 23, 2004).		10-Q	000- 23993		10.4		05/10/2004
	10	.7*	1998 Stock Incentive Plan forms of Notice of Grant of Stock Option, Stock Issuance Agreement, Stock Purchase Agreement and related Addenda.		S-8	333- 60763	99.2 & 99.4- 99.11			08/06/1998
	10	.8*	1998 Stock Incentive Plan form of Notice of Grant of Stock Option for the following executive officers: David A. Dull, Bruce E. Kiddoo, Vahid Manian, Andrew J. Pease and William J. Ruehle.		10-Q	000- 23993		10.3		11/09/2004
	10	.9*	1998 Stock Incentive Plan form of Notice of Grant of Stock Option, Stock Option Agreement and Addendum to Stock Option Agreement for Scott A. McGregor.									X
	10	.10*	1998 Stock Incentive Plan form of Stock Option Agreement.		10-Q	000- 23993		10.1		11/09/2004
	10	.11*	1998 Stock Incentive Plan form of Automatic Stock Option Agreement.		10-Q	000- 23993		10.2		11/09/2004


				Where Located

Exhibit						File	Exhibit				Filed
Number			Description	Form		No.	No.		Filing Date		Herewith

	10	.12*	1998 Stock Incentive Plan form of Executive Retention Program Addendum to Stock Option Agreement for the following executive officers: David A. Dull, Bruce E. Kiddoo, Vahid Manian, Andrew J. Pease and William J. Ruehle.		10-Q	000- 23993		10.5		11/09/2004
	10	.13*	1998 Stock Incentive Plan form of Special Stock Retention Addendum to Stock Option Agreement for the registrant’s Chief Executive Officer, Chief Financial Officer, Chief Technical Officer and member’s of the registrant’s Board of Directors.		10-Q	000- 23993		10.6		11/09/2004
	10	.14*	1998 Stock Incentive Plan form of Restricted Stock Unit Award Agreement.		10-Q	000- 23993		10.8		11/09/2004
	10	.15*	1998 Stock Incentive Plan form of Executive Retention Program Addendum to Restricted Stock Unit Award Agreement for the following executive officers: David A. Dull, Bruce E. Kiddoo, Vahid Manian, Andrew J. Pease and William J. Ruehle.		10-Q	000- 23993		10.10		11/09/2004
	10	.16*	1998 Stock Incentive Plan form of Restricted Stock Unit Award Agreement and Addendum to Restricted Stock Unit Award Agreement for Scott A. McGregor.									X
	10	.17*	1998 Employee Stock Purchase Plan (as amended and restated March 21, 2003).		10-Q	000- 23993		10.1		11/07/2003
	10	.18*	1998 Employee Stock Purchase Plan forms of Stock Purchase Agreements and Enrollment/ Change Form.		10-K	000- 23993		10.5.1		03/15/2004
	10	.19	1999 Special Stock Option Plan (as amended and restated July 18, 2003).		10-Q	000- 23993		10.2		08/11/2003
	10	.20	1999 Special Stock Option Plan form of Stock Option Agreement.		10-Q	000- 23993		10.2.1		08/11/2003
	10	.21	1999 Special Stock Option Plan form of Notice of Grant of Stock Option.		S-8	333- 93457		99.2		12/22/1999
	10	.22*	Form of Indemnification Agreement for Directors of the registrant.		S-1/A	333- 45619		10.1		02/27/1998
	10	.23*	Form of Indemnification Agreement for Officers of the registrant.		S-1/A	333- 45619		10.2		02/27/1998
	10	.24††	Development, Supply and License Agreement dated September 29, 1997 between the registrant and General Instrument Corporation, formerly known as NextLevel Systems, Inc.		S-1/A	333- 45619		10.8		02/27/1998
	10	.25††	Amendment dated November 22, 2000 to Development, Supply and License Agreement between the registrant and General Instrument Corporation.		10-K	000- 23993		10.16		04/02/2001
	10	.26††	Product Purchase Agreement dated November 22, 2000, together with Amendment dated January 1, 2002, to Product Purchase Agreement between the registrant and General Instrument Corporation.		10-Q	000- 23993.		10.1		05/15/2002
	10	.27††	Second Amendment dated December 3, 2002 to Product Purchase Agreement between the registrant and General Instrument Corporation.		10-K	000- 23993		10.22		03/31/2003


				Where Located

Exhibit						File	Exhibit				Filed
Number			Description	Form		No.	No.		Filing Date		Herewith

	10	.28††	Third Amendment dated as of January 1, 2003 to Product Purchase Agreement between the registrant and General Instrument Corporation.		8-K	000- 23993		99.1		04/16/2004
	10	.29††	Fourth Amendment dated March 31, 2004 to Product Purchase Agreement between the registrant and General Instrument Corporation.		10-Q	000- 23993		10.25		05/10/2004
	10	.30	Industrial Lease (Single Tenant; Net) dated August 7, 1998 between the registrant and The Irvine Company.		S-1	333- 65117		10.15		09/30/1998
	10	.31	First Amendment dated August 27, 1999 and Second Amendment dated December 10, 1999 to Industrial Lease (Single Tenant, Net), between the registrant and The Irvine Company.		10-K	000- 23993		10.20		03/31/2003
	10	.32	Third Amendment (Single Tenant, Net) dated December 19, 2003 between the registrant and the Irvine Company.		10-Q	000- 23993		10.12		11/09/2004
	10	.33	Industrial Lease (Multi-Tenant; Net) dated August 1, 2000 between the registrant and the Irvine Company; First Amendment dated October 18, 2000 and Second Amendment dated September 18, 2003 to Industrial Lease (Multi-Tenant; Net), between the registrant and The Irvine Company.									X
	10	.34	Lease Agreement dated February 1, 2000 between the registrant and Conejo Valley Development Corporation.		10-K	000- 23993		10.17		03/19/2002
	10	.35	Lease Agreement dated May 18, 2000 between the registrant and M-D Downtown Sunnyvale, LLC.		10-K	000- 23993		10.21		03/31/2003
	10	.36	Lease dated November 20, 2000 together with Second Amendment dated March 30, 2001 to Lease between the registrant and Sobrato Interests.		10-K	000- 23993		10.18		03/19/2002
	10	.37	Lease (Multi-Tenant; Net) dated August 12, 2001 between the registrant and The Irvine Company; Fourth Amendment dated April 30, 2004 to Lease (Multi-Tenant; Net) between the registrant and The Irvine Company.									X
	10	.38†	Lease Agreement dated December 29, 2004 between the registrant and Irvine Commercial Property Company.									X
	10	.39	Stipulation of Settlement (shareholder derivative actions) dated October 26, 2005.									X
	21	.1	Subsidiaries of the Company.									X
	23	.1	Consent of Independent Auditors.									X
	31	.1	Certification of the Chief Executive Officer, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.									X

Where Located

Exhibit

File

Exhibit

Filed

Number

Description

Form

No.

Filing Date

Herewith

Certification of the Chief Financial Officer, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certifications of the Chief Executive Officer and Chief Financial Officer, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


	*	Indicates a management contract or compensatory plan or arrangement.


	†	Confidential treatment has been requested with respect to the redacted portions of this amendment.


††	Confidential treatment has previously been granted by the SEC for certain portions of the referenced exhibit pursuant to Rule 406 under the Securities Act.

EXHIBIT 10.3

Confidential Treatment Requested

Omitted Portions Marked with [ * ] and Filed Separately with the SEC

October 25, 2004 BROADCOM CONFIDENTIAL

Mr. Scott A. McGregor

Dear Scott,

It is my pleasure to present you with this offer of employment to join Broadcom Corporation ("Broadcom" or the "company") in the position of President and Chief Executive Officer, reporting directly to the Broadcom Board of Directors (the "Board of Directors"). The specifics of our offer follow below. Certain capitalized terms not defined in this letter agreement (the "Letter Agreement") shall have the meanings defined in Appendix II. Appendices I and II are hereby incorporated as though set forth in full herein.

DUTIES & RESPONSIBILITIES

During your employment as President and Chief Executive Officer, you will be responsible for the general supervision, direction and control of the business and affairs of Broadcom and shall have such other duties and responsibilities as the Board of Directors and the Chairman of the Board shall designate that are consistent with your position as the most senior executive officer of Broadcom. As an employee, you will also serve without additional compensation as a member of the Board of Directors, as a member of any committee of the Board of Directors to which you may be appointed, and in any position as an officer and/or a member of the board of directors of any Broadcom subsidiary to which you may be appointed or elected, as the case may be. You will devote substantially all of your business time (excluding periods of vacation and absences made necessary because of illness or other traditionally approved leave purposes), energy and skill in the performance of your duties for Broadcom.

You agree to abide at all times by Broadcom's policies and procedures as the same may be revised and updated from time to time, including, without limitation, the Code of Ethics and Corporate Conduct (the "Code of Conduct"), Conflicts of Interest Policy, and Policy on Insider Trading and Unauthorized Disclosures.

Notwithstanding your commitment to devote substantially all of your business time, energy and skill in the performance of your duties for Broadcom, you may
(i) participate in charitable, civic, educational, professional, community or industry affairs of your choosing, (ii) serve on the board of directors or advisory board of up to three other companies, of which one may be a publicly-held company during the first twelve months of your employment and of which two may be publicly-held companies after the first twelve months of your employment, subject in each instance to the prior approval of the Board of Directors or the designated committee of the Board of Directors (which may be withheld for any reason or no reason in its sole discretion), and (iii) manage your and your family's personal investments; provided that (i) the time that you commit

Confidential Treatment Requested Omitted Portions Marked with [ * ] and Filed Separately with the SEC

Mr. Scott A. McGregor BROADCOM CONFIDENTIAL October 25, 2004

Page 2

to such activities is reasonable, individually and in the aggregate, (ii) in all such activities and at all times you comply with Broadcom's Code of Conduct and Conflicts of Interest Policy as the same may be revised and updated from time to time, and (iii) unless otherwise specifically approved by the Board of Directors, your involvement in such activities shall be in a personal capacity only and not as a representative or delegate of Broadcom.

BASE SALARY AND BONUS

Your base salary will be $23,076.92 paid bi-weekly (equivalent to a $600,000 annualized rate).

In 2005 the Compensation Committee of the Board of Directors (the "Committee") will consider establishing an annual cash and/or equity bonus program for Broadcom that you will help the Committee define. You will be eligible to participate annually in any so established bonus program so that there is an incentive and reward structure for achieving successful performance of company objectives. The Committee is not obligated to establish any bonus program, and the Committee shall be free to change, revise, amend or cancel any bonus program that may be established from time to time.

STOCK OPTIONS AND RESTRICTED STOCK UNITS

Upon the commencement of your services as President and Chief Executive Officer of Broadcom on a full-time basis (the "Start Date"), you will receive a stock option grant to purchase two million (2,000,000) shares of Broadcom Class A Common Stock with an exercise price equal to the closing price of our Class A Common Stock on the NASDAQ National Market as of the Start Date. This option to purchase stock will vest with respect to 25% of the underlying shares upon the first anniversary of the Start Date. The remaining 75% of shares subject to this option will vest in equal monthly installments, on each monthly anniversary of the Start Date that occurs during the period of thirty-six months following the first anniversary of the Start Date. The stock option shall have a ten year term.

On or about the first anniversary of the Start Date, and provided that you are still employed as Chief Executive Officer of Broadcom or its highest parent entity, if any, on the grant date, you will receive an additional stock option grant to purchase five hundred thousand (500,000) shares of Broadcom Class A Common Stock with an exercise price equal to the closing price of our Class A Common Stock on the Nasdaq National Market on the grant date. The shares subject to this option will vest in equal monthly installments, on each monthly anniversary of the Start Date that occurs during the period of forty-eight months following the first anniversary of the Start Date. The stock option shall have a ten year term.

The foregoing grants will be made by the Committee pursuant to Broadcom's 1998 Stock Incentive Plan, as amended and restated. We have provided you with a copy of the 1998 Stock Incentive Plan together with our current forms of notice of grant of stock option and stock option agreement. The terms and conditions set forth therein are subject to change from time to time. Except as otherwise specifically provided herein, the stock option grants described above will

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have the same terms and conditions as those made generally available to newly-hired Broadcom executives at the time that your respective grants are made, and will be evidenced by agreements substantially in the forms provided to you. Such grants and any shares acquired pursuant to such grants shall also be subject to the restrictions provided in the settlement of Broadcom's shareholder derivative securities litigation (David v. Wolfen, et al).

On the Start Date, the Committee will award you a grant under the 1998 Stock Incentive Plan of two hundred thousand (200,000) restricted stock units to acquire, with no cash payment on your part (other than applicable income and employment taxes), an equal number of shares of Broadcom Class A Common Stock. These restricted stock units will generally vest in equal quarterly installments, on each quarterly date that is generally utilized by Broadcom for the vesting of restricted stock units issued to other Broadcom employees, or if no such quarterly date is generally utilized by Broadcom then on each quarterly anniversary of the Start Date, over the period of thirty-six months following the Start Date. Vesting of such restricted stock units shall not be subject to performance criteria other than continued service as an employee. The applicable number of shares of Class A Common Stock, which unless otherwise agreed shall be issued to you upon each vesting date of the restricted stock units, will be vested and unrestricted, except for any applicable restrictions under the securities laws.

All of the above equity grants and underlying shares of common stock and any other compensatory equity awards subsequently provided to you will be fully covered by an effective registration statement on Form S-8 (or other applicable registration statement) filed by Broadcom with the Securities and Exchange Commission (the "SEC"). The Committee granting your compensatory equity awards will be constituted in such a manner that such equity grants are exempt from liability under Section 16(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), provided that an applicable exemption from liability continues to exist under the Exchange Act and applicable regulations promulgated thereunder.

To the extent permitted from time to time by applicable law, and subject to the restrictions provided in the settlement of Broadcom's shareholder derivative securities litigation (David v. Wolfen, et al), you will be able to exercise any stock options granted to you through a same day sale program established with a nationally recognized securities brokerage firm of your choice that is reasonably acceptable to Broadcom.

For your restricted stock units and any other restricted stock or equity awards that create taxable income to you at the time of vesting, if you are precluded by law at the time of vesting from selling Broadcom equity in an amount sufficient to result in proceeds at least equal to the tax obligation created by such vesting, then you shall, to the extent permitted from time to time by applicable law, be permitted to satisfy the applicable tax withholding obligations arising from the vesting of such awards through share withholding by Broadcom.

To the extent permitted from time to time by applicable law, you will also be permitted to implement and maintain, at your discretion, an exercise and selling trading plan covering your Broadcom equity in accordance with Rule 10b5-1 of the Exchange Act (a "10b5-1 Plan"). To the

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extent permitted from time to time by applicable law, you will be permitted to have an operational 10b5-1 Plan commencing at the time you select (provided that Broadcom must approve any commencement date that is within the first 90 days after the Start Date) and continuing during the entire time that you render services to Broadcom and you may, in your discretion, keep a 10b5-1 Plan active through the date that is 24 months after cessation of all your services to Broadcom. Any such plan will be in a form reasonably acceptable to Broadcom and will be established with a nationally recognized securities brokerage firm of your choice that is reasonably acceptable to Broadcom.

ANNUAL COMPENSATION REVIEW

Commencing in 2006, your total compensation for services rendered to the company will be reviewed by the Committee no later than the end of the second fiscal quarter of each year for possible increases considering the total compensation of chief executive officers of similarly situated companies and your performance as President and Chief Executive Officer of Broadcom. The Committee has no obligation to make any such increase, and you acknowledge that in any event the mix of your total compensation among salary, bonus and equity components may well differ from that of such other chief executive officers.

BENEFITS

As a Broadcom employee you will be eligible to participate in our employee benefits plan, which includes comprehensive medical, dental, vision, life and both short- and long-term disability insurance. In addition, you may participate in Broadcom's employee stock purchase plan, which allows employees to purchase a limited amount of Broadcom Class A Common Stock at a discounted price, a 401(k) savings program, ten (10) paid holidays, and paid vacation of 10 work days per year plus an additional work day for each completed year of service, up to a maximum of 20 work days.

The above benefits shall accrue in accordance with our stated policies and may change from time-to-time at Broadcom's discretion. We have provided you with a copy of our current benefits information for your convenience. Effective on your Start Date, or such other date as may be specified with regard to any particular benefit, you will be eligible for our current, comprehensive benefits package. Although the summary plan descriptions and other information from the Human Resources Department are designed to assist employees, the underlying plan documents themselves, which are available through the Human Resources Department, are the controlling documents with regard to these benefits. Should any questions relating to our benefits package arise, please feel free to discuss them with our benefits representative when you join Broadcom. At that time you will be asked to make a decision as to which of the medical plans best suit your needs.

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INDEMNIFICATION AND LIABILITY INSURANCE

You will be covered under Broadcom's insurance policies for directors and officers liability and will be provided indemnification (covering your services as an officer, director and/or employee) to the maximum extent permitted by Broadcom's bylaws and Articles of Incorporation, with such insurance coverage and indemnification to be on terms no less favorable than those provided as Broadcom's standard practice for senior executive officers and directors.

RELOCATION AND TEMPORARY LIVING EXPENSES

Broadcom will arrange for and pay for the movement of your household goods and storage thereof for up to six (6) months. Broadcom will also provide rental reimbursement for temporary housing for you and your family in the Orange County, California area for up to six (6) months. To the extent that Broadcom's payment of moving, storage or rental expenses results in federal or state taxable income to you, upon your certification to Broadcom of the state and federal tax rates applicable to you for the applicable period(s), Broadcom will make a cash payment to you equal to the amount of the additional federal and state income taxes payable according to such tax rates. Such payment will be made within thirty (30) days after you provide such certification.

Meals, phone services, utilities and miscellaneous expenses while staying in the temporary housing are not reimbursable unless otherwise reimbursable as regular business expenses.

TERMINATION

Employment with Broadcom is at-will. Broadcom may terminate your employment with or without "Cause" or in the event of your "Disability." You may terminate your employment with or without "Good Reason," and your employment automatically terminates upon your death. Any termination of your employment by Broadcom or you shall only be effective if communicated by a "Notice of Termination."

If Broadcom terminates your employment other than for Cause or Disability, or you terminate your employment for Good Reason, Broadcom agrees to make the payments and provide the benefits to you described in Appendix II (the "Severance Program"). Furthermore, Broadcom will pay certain "Accrued Obligations" and provide certain "Other Benefits" upon any termination of employment.

GENERAL TERMS

Please carefully review and consider the entire contents of this Letter Agreement, including the attached Appendix I, which outlines some of the most important terms and conditions of employment with Broadcom, and the attached Appendix II, which contains the terms of the Severance Program. This Letter Agreement, including the attached Appendices and any agreements relating to confidentiality and proprietary rights between you and Broadcom, sets forth the terms of your employment and constitutes the entire agreement between the parties, and

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supersedes all previous communications, representations, understandings, and agreements, whether oral or written, between the parties or any official or representative thereof, relating to the subject matter hereof. This Letter Agreement may not be modified or amended except by a written amendment signed by the parties hereto.

To indicate your acceptance of Broadcom's offer of employment, please sign and date this Letter Agreement in the space provided below acknowledging your acceptance and anticipated employment date, initial the last pages of Appendix I and Appendix II where indicated, and return all three to me. Please feel free to contact me if you need additional information or to discuss this offer further.

This offer of employment and Letter Agreement are subject to and conditioned upon your commencing services as President and Chief Executive Officer on a full-time basis no later than January 3, 2005.

Scott, the entire Board of Directors and I believe that you will make significant contributions to Broadcom. We look forward to your joining our company and contributing to our shared vision and future success.

Sincerely,

BROADCOM CORPORATION

/s/ Henry Samueli
------------------------------------
Henry Samueli, Ph.D.
Chairman of the Board

ACCEPTANCE:

I accept Broadcom Corporation's offer of employment on the terms and conditions set forth in this Letter Agreement, including the Appendices hereto.

Signed: /s/ Scott A. McGregor
        -----------------------------
        Scott A. McGregor

Date:   October 25, 2004

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APPENDIX I - ADDITIONAL TERMS AND CONDITIONS

This Appendix I sets forth terms and conditions of the offer of employment made by Broadcom Corporation ("Broadcom") to Scott A. McGregor. This Appendix I is to be construed in conjunction with, and is made a part of, the Letter Agreement offering employment with Broadcom. Capitalized terms not defined in this Appendix I shall have the meanings defined elsewhere in the Letter Agreement.

1. Immigration, Examinations and Absence of Conflicts. The IMMIGRATION AND CONTROL ACT of 1986 requires employers to verify that every new employee is eligible for employment in the US. This offer of employment is conditional upon the verification of valid US employment eligibility within three (3) days of your hire date. An information sheet that outlines various documents you may use to confirm work eligibility has been provided to you. This offer is also conditional upon the completion of a comprehensive pre-employment medical examination and background investigation of you with results satisfactory to Broadcom in its sole discretion. By accepting Broadcom's offer, you consent to such examination and investigation by professionals employed for that purpose by Broadcom and to permit the material results thereof to be released to and discussed with the Board of Directors, and you agree to complete any information statements and execute any consents required to facilitate the same.

By accepting Broadcom's offer, you represent that you have satisfied any obligation you may have to provide notice to any previous employer and that your employment will not constitute a breach of or contravene the terms of any other employment agreement or other agreement to which you are a party or otherwise bound (including but not limited to any agreement that prohibits or restricts your employment as a result of Broadcom's competition with any entity) thereby preventing you from performing your duties pursuant to the Letter Agreement, and this offer and your employment are conditional upon the absence of any such breach or contravention that would prevent you from performing your duties pursuant to the Letter Agreement. [ * ]

2. Policies and Procedures; Confidentiality and Invention Assignment Agreement. You will be expected to abide by all Broadcom policies and procedures, including the Code of Conduct, Conflicts of Interest Policy, and Policy on Insider Trading and Unauthorized Disclosures, and including signing and complying with the Broadcom Confidentiality and Invention Assignment Agreement (the "CIAA"). The CIAA (a copy of which has been provided to you) prohibits, both during and after your employment with Broadcom, unauthorized use or disclosure to anyone outside of Broadcom of the proprietary or trade secret information of Broadcom, its customers and its clients, as well as the disclosure to Broadcom of the proprietary or trade secret information of others. In addition, this agreement provides for the assignment of employee inventions to Broadcom and prohibits employees for a period of one year after their employment from inducing employees or consultants to sever their relationship with Broadcom. Of course, this description is only a summary, and your actual obligations will be governed by the CIAA itself.

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3. Key Man Life Insurance. You agree that at any time during your employment, at the request of the Board of Directors or a committee thereof and without additional compensation, you will provide information, complete and sign applications, and submit to reasonable physical examinations for the purpose of qualifying for so-called "key man" life insurance to be paid for by and owned by Broadcom for its own benefit. Broadcom shall have no obligation to apply for or to obtain such insurance or to maintain in effect any such insurance that may issue for any specific period after its issuance. You understand and agree that neither you nor any of your beneficiaries shall have any pecuniary, ownership or beneficial interest in such insurance whatsoever, or to require that Broadcom maintain any such insurance in effect, except that if any such insurance is in effect at the date of termination of your employment for any reason other than your death or Disability, you shall have the right to have assigned to you any such policies of insurance that are so assignable, as provided pursuant to Subsection 1(e) of Appendix II or as otherwise provided by the policies or practices of Broadcom then in effect, upon payment by you to Broadcom of the cash surrender value, if any, and any prepaid premiums.

4. Governing Law. The laws of California shall govern the validity and interpretation of the Letter Agreement and the Severance Program, without regard to the conflicts of law principles applicable in California or any other jurisdiction.

5. Captions. The captions of the Letter Agreement (including the captions of its Appendices) are not part of the provisions of this agreement or the Severance Program and shall have no force or effect.

6. Notices. All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party, by overnight courier prepaid, or by registered or certified mail, return receipt requested, postage prepaid, addressed (if to you) at the address you last provided in writing to Broadcom, and if to Broadcom, as follows:

Broadcom Corporation
16215 Alton Parkway
Irvine, California 92618
Attention: Chairman of the Board

or to such other address as either party may specify to the other from time to time by notice in writing.

Notices and communications shall be effective when actually received by the addressee. Neither your failure to give any notice required hereunder, nor defects or errors in any notice given by you, shall relieve Broadcom of any corresponding obligation under the Severance Program unless, and only to the extent that, Broadcom is actually and materially prejudiced thereby.

7. Severability. The invalidity or unenforceability of any provision of this agreement shall not affect the validity or enforceability of any other provision.

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8. Withholding Taxes. Broadcom may withhold from any amounts payable to you such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.

9. No Waiver. Your failure or Broadcom's failure to insist upon strict compliance with any provision hereof or the failure to assert any right you or Broadcom may have hereunder, including, without limitation, your right to terminate employment for Good Reason, shall not be deemed to be a waiver of the application of such provision or right with respect to any subsequent event or the waiver of any other provision or right, including any provision or right under the Severance Program.

10. Breach and Remedies. Notwithstanding the provisions of Appendix II setting forth certain payments and benefits that may be made upon the termination of your employment, you and Broadcom retain any and all of your rights to assert that the other party has breached the Letter Agreement (or any of the compensatory equity agreements) by virtue of some action or inaction that does not constitute "Cause" or "Good Reason" (as defined in Appendix II) and which, if true, would thereby entitle you to damages or other appropriate relief; provided, however, that any such action or inaction which is cured within 30 days after notice thereof shall not constitute a breach of the Letter Agreement; further provided that the measure of your damages for any such breach by the Company shall be your actual damages resulting therefrom and shall not be determined with reference to the payments or benefits set forth in Subsections
1(a), 1(b) or 1(e) of Appendix II; and further provided that your resignation (with or without "Good Reason") or your termination by Broadcom (with or without "Cause") shall not be deemed a breach of the Letter Agreement.

11. Execution and Counterparts. The Letter Agreement may be executed in counterparts, each of which shall be deemed an original as against any party whose signature appears thereon, and all of which together shall constitute one and the same instrument. The Letter Agreement shall become binding when one or more counterparts hereof, individually or taken together, bearing the signatures of both you and Broadcom's representative are exchanged (including an exchange of counterparts via confirmed facsimile transmission; provided, however, that if the initial exchange of counterparts is via confirmed facsimile transmission, we shall also exchange signed originals as soon thereafter as feasible). Photographic copies of such signed counterparts may be used in lieu of the originals for any purpose.

12. Mandatory Arbitration. ANY AND ALL DISPUTES OR CONTROVERSIES BETWEEN YOU AND BROADCOM ARISING OUT OF, RELATING TO OR OTHERWISE CONNECTED WITH YOUR EMPLOYMENT, THE LETTER AGREEMENT, THE BENEFITS PROVIDED UNDER THE SEVERANCE PROGRAM AS SET FORTH IN APPENDIX II OR THE VALIDITY, CONSTRUCTION, PERFORMANCE OR TERMINATION OF THIS AGREEMENT SHALL BE SETTLED EXCLUSIVELY BY BINDING ARBITRATION TO BE HELD IN ORANGE COUNTY, CALIFORNIA. THE ARBITRATION PROCEEDINGS SHALL BE GOVERNED BY (i) THE NATIONAL RULES FOR THE RESOLUTION OF EMPLOYMENT DISPUTES THEN IN EFFECT OF THE AMERICAN ARBITRATION ASSOCIATION AND (ii) THE FEDERAL ARBITRATION

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ACT. TO THE EXTENT YOU ASSERT A CLAIM IN THE ARBITRATION THAT WOULD OTHERWISE BE REQUIRED TO BE FILED WITH A GOVERNMENTAL AGENCY, BROADCOM SHALL NOT ASSERT AS A DEFENSE THE FAILURE TO EXHAUST ADMINISTRATIVE REMEDIES WITH RESPECT TO SUCH CLAIM.

THE ARBITRATOR SHALL HAVE THE SAME, BUT NO GREATER, REMEDIAL AUTHORITY AS WOULD A COURT HEARING THE SAME DISPUTE. THE DECISION OF THE ARBITRATOR SHALL BE FINAL, CONCLUSIVE AND BINDING ON THE PARTIES TO THE ARBITRATION AND SHALL BE IN LIEU OF THE RIGHTS THOSE PARTIES MAY OTHERWISE HAVE TO A JURY TRIAL; PROVIDED, HOWEVER, THAT SUCH DECISION SHALL BE SUBJECT TO CORRECTION, CONFIRMATION OR VACATION IN ACCORDANCE WITH THE PROVISIONS AND STANDARDS OF APPLICABLE LAW GOVERNING THE JUDICIAL REVIEW OF ARBITRATION AWARDS.

THE PREVAILING PARTY IN SUCH ARBITRATION, AS DETERMINED BY THE ARBITRATOR, AND IN ANY ENFORCEMENT OR OTHER COURT PROCEEDINGS, SHALL BE ENTITLED, TO THE EXTENT PERMITTED BY LAW, TO REIMBURSEMENT FROM THE OTHER PARTY FOR ALL OF THE PREVAILING PARTY'S COSTS (EXCLUDING THE ARBITRATOR'S COMPENSATION AND OTHER ARBITRATION FEES AND COSTS, WHICH SHALL BE PAID BY BROADCOM IN ACCORDANCE WITH APPLICABLE LAW), EXPENSES AND ATTORNEY'S FEES. JUDGMENT SHALL BE ENTERED ON THE ARBITRATOR'S DECISION IN ANY COURT HAVING JURISDICTION OVER THE SUBJECT MATTER OF SUCH DISPUTE OR CONTROVERSY. NOTWITHSTANDING THE FOREGOING, EITHER PARTY MAY IN AN APPROPRIATE MATTER APPLY TO A COURT PURSUANT TO CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 1281.8, OR ANY COMPARABLE STATUTORY PROVISION OR COMMON LAW PRINCIPLE, FOR PROVISIONAL RELIEF, INCLUDING A TEMPORARY RESTRAINING ORDER OR A PRELIMINARY INJUNCTION. TO THE EXTENT PERMITTED BY LAW, THE PROCEEDINGS AND RESULTS, INCLUDING THE ARBITRATOR'S DECISION, SHALL BE KEPT CONFIDENTIAL.

Initials: /s/ SM
          -------

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APPENDIX II - SEVERANCE PROGRAM

This Appendix II sets forth terms and conditions of a Severance Program which is part of the offer of employment made by Broadcom to Scott A. McGregor. This Appendix II is to be construed in conjunction with, and is made a part of, the Letter Agreement offering employment with Broadcom. Capitalized terms not defined in this Appendix II shall have the meanings defined elsewhere in the Letter Agreement.

1. Severance Benefits upon Certain Terminations. If your employment by Broadcom is terminated by you in a Notice of Termination specifying Good Reason, or by Broadcom in a Notice of Termination specifying no reason or a reason other than (i) Cause or (ii) your Disability, and your employment has not terminated automatically as a result of your death, Broadcom agrees, subject to the conditions and requirements set forth in this Appendix II, to make the payments and provide the benefits described below (the "Severance Program"):

(a) Salary Continuation. Broadcom shall continue to pay your base salary for a period of one (1) year following the "Date of Termination" (using your then current rate of base salary or, if you terminated your employment for Good Reason pursuant to Subsection 5(b) of this Appendix II due to an excessive reduction in base salary, then your rate of base salary immediately before the reduction).

(b) Options and other Equity Awards. Notwithstanding any less favorable terms of any stock option agreement or plan, any outstanding options to purchase shares of Broadcom's common stock or other equity awards granted to you by the Committee (including the restricted stock units granted to you) shall (i) immediately on the Date of Termination, vest as if you had completed an additional twenty-four (24) months of employment after the Date of Termination, and (ii) be exercisable for no less than twenty-four (24) months after the Date of Termination (or, if earlier, the date the option or other equity award would have expired had you remained employed by Broadcom during the entire 24 month period).

(c) Bonuses Not Yet Earned. Broadcom shall pay you (i) a cash bonus, if any, which was not vested because of a requirement of continued employment had not been satisfied by you as of the Date of Termination, but with respect to which the applicable performance period had been fully completed as of the Date of Termination (for the avoidance of doubt, a bonus shall be payable under this Subsection 1(c)(ii) only to the extent that any performance criteria with respect to such bonus had been satisfied during the applicable performance period), plus (ii) a pro-rata share of any cash bonus with respect to any period used for calculating bonuses that had been partially completed by you as of the Date of Termination
(calculated as if you had fully satisfied the performance criteria (if any) used to calculate such cash bonuses). Such pro-rata share shall equal the fraction of the period for calculating such cash bonuses which preceded the Date of Termination and shall be reduced dollar-for-dollar by any related bonus payments previously made to you for any portion of your service during the same period; provided, however, that in the event that as of the Date of Termination it is manifestly apparent that all or part of the applicable performance criteria cannot be satisfied for the period for calculating such cash bonuses, the pro-rata share of cash bonus payable hereunder

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attributable to the part(s) of the performance criteria that cannot be satisfied shall be reduced or eliminated, as the case may be. A bonus described in this Subsection 1(c) shall be payable to you only if, prior to the Date of Termination, the Committee had specifically designated the amount of bonus for which you would be eligible (or had specified your percentage participation in an executive bonus pool) as well as the performance criteria and any other conditions required to be satisfied in order for you to earn the bonus, either in whole or in part.

(d) Accrued Salary, Vacation Pay, Expenses, Earned Bonuses and Deferred Compensation. Broadcom shall, upon your Date of Termination, pay you a lump sum amount equal to the sum of (i) your full base salary through the Date of Termination at the rate in effect during such period, (ii) your accrued vacation pay, (iii) any unreimbursed business expenses incurred by you, (iv) any cash bonus which had been fully earned and vested (i.e., for which the applicable performance period and any service requirements for vesting had been fully completed) on or before the Date of Termination, but which had not been paid as of the Date of Termination (for the avoidance of doubt, any such bonus shall be payable only to the extent the applicable performance criteria had been satisfied during the applicable performance period), and (v) to the extent permissible under applicable law, any vested compensation previously deferred by you (including without limitation any contributions to the Broadcom 1998 Employee Stock Purchase Plan, as amended and restated, together with any accrued earnings or interest thereon), in each case to the extent not theretofore paid. Any vested deferred compensation that cannot in accordance with applicable law be paid to you on your Date of Termination shall be paid at such time and in such manner as set forth in the applicable plan or agreement governing the payment of that compensation. The amounts referred to in this Subsection 1(d) shall be referred to collectively as "Accrued Obligations."

(e) Benefit Continuation. For one (1) year after your Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, Broadcom shall, subject to your payment of the employee portion of the premiums for coverage at the rate generally applicable to other senior executives of Broadcom whose employment with Broadcom has not terminated, continue to provide welfare benefits (including, without limitation, health, life and disability insurance), fringe benefits, and other perquisites to you and your family at least equal to those which would have been provided to them if your employment had not been terminated in accordance with the most favorable plans, practices, programs or policies of Broadcom and its affiliated companies applicable generally to other senior executives of Broadcom and their families immediately preceding the Date of Termination; provided, however, that if you become re-employed with another employer and are eligible to receive medical or other welfare benefits under another employer-provided plan, the medical and other welfare benefits otherwise payable to you hereunder shall be coordinated with the benefits provided under such other plan during such applicable period of eligibility such that there shall be no duplication of benefits, and for purposes of such coordination, the medical and welfare benefits otherwise payable to you hereunder shall be secondary to the benefits provided under such other plan.

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Following the one-year period of continued benefits referred to in this Subsection 1(e), you and your family shall be given the right to elect to continue benefits in all group medical plans for an additional period of two (2) years, subject to your payment of the employee portion of the premium for such coverage at the rate generally applicable to other senior executives of Broadcom whose employment with Broadcom has not terminated. The medical coverage provided pursuant to this Subsection 1(e) shall satisfy Broadcom's obligation to provide continued coverage under Section 601 of the Employee Retirement Income Security Act (commonly called "COBRA continuation") and Broadcom's obligations (if any) under similar state laws. At the end of the period of coverage, you shall have the option to have assigned to you any assignable insurance policy owned by Broadcom and relating specifically to you, upon payment by you to Broadcom of the cash surrender value, if any, and any prepaid premiums. At the end of the period of coverage, you will also retain any conversion or continued participation rights that you may have under any insurance policies applicable to you, which rights you may exercise in your discretion but at your own expense. In the event that your participation in any of the plans, programs, practices or policies of Broadcom referred to in this Subsection 1(e) is barred by the terms of such plans, programs, practices or policies, Broadcom shall provide you with benefits substantially similar to those to which you would be entitled as a participant in such plans, programs, practices or policies. Notwithstanding the foregoing, in no event shall you be allowed to participate in the Broadcom Employee Stock Purchase Plan or the 401(k) savings plan following your Date of Termination or to receive any substitute benefits hereunder in replacement of those particular benefits, but you shall be paid the full value of any vested benefits accrued to your benefit under such plans prior to the Date of Termination.

(f) Other Benefits. To the extent not theretofore paid or provided, Broadcom shall timely pay or provide to you any other amounts or benefits required to be paid or provided, or which you are eligible to receive, under any plan, program, policy, practice, contract or agreement of Broadcom and its affiliated companies, including but not limited to any benefits payable to you under a plan, policy, practice, etc., referred to in Section 10 of this Appendix II (all such other amounts and benefits being hereinafter referred to as "Other Benefits"), in accordance with the terms of such plan, program, policy, practice, contract or agreement.

2. Parachute Payments. In the event that any payments or benefits to which you become entitled in accordance with the provisions of the Severance Program would otherwise constitute a parachute payment under Section 280G of the U.S. Internal Revenue Code, then such payments and benefits will be subject to reduction to the extent necessary to assure that you receive only the greater of (i) the amount of those payments or benefits which would not constitute such a parachute payment or (ii) the amount which yields you the greatest after-tax amount of benefits after taking into account any excise tax imposed on the payments and benefits provided to you under this letter (or on any other benefits to which you may be entitled in connection with a change in control or ownership of Broadcom or the subsequent termination of your employment with Broadcom) under
Section 4999 of the U.S. Internal Revenue Code. To the extent any such reduction is required, the dollar amount of your salary continuation payments under Subsection

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1(a) will be reduced first, then the number of options or other equity awards to be modified pursuant to Subsection 1(b) shall be reduced in such order as shall be agreed upon by the Committee and you, and then finally your remaining benefits will be reduced.

3. Other Terminations. Notwithstanding the provisions of Section 1 of this Appendix II, if your employment is terminated by reason of your death or by Broadcom for Cause or for your Disability, or you terminate your employment without Good Reason, you shall not be entitled to participate in the Severance Program and your participation in the Severance Program shall terminate without further obligations to you or your legal representatives under the Severance Program; provided, however, that Broadcom shall timely pay the Accrued Obligations and shall timely pay or provide the Other Benefits to you, your legal representative or your designated beneficiaries, as the case may be, and further provided, that in the event your employment is terminated by reason of your death or Disability, then Broadcom shall also timely pay the bonuses described in Subsection 1(c) above, if any, to you or your legal representative and, notwithstanding any less favorable terms in any stock option or other equity award agreement or plan or this Severance Program or the Letter Agreement, any unvested portion of any stock options or equity awards granted to you by Broadcom (including the restricted stock units) on or after the date of the Letter Agreement shall immediately vest in full on the Date of Termination and remain exercisable by you or your legal representative for 12 months after the Date of Termination.

4. Cause. Broadcom may terminate your employment with or without Cause as defined in this Section 4. For purposes of the Letter Agreement and the Severance Program, "Cause" shall mean the reasonable and good faith determination by a majority of Broadcom's Board of Directors that any of the following events or contingencies exists or has occurred:

(a) You materially breached a fiduciary duty to Broadcom, materially breached a material term of the Confidentiality and Invention Assignment Agreement between you and Broadcom, or materially breached a material term or policy set forth or described in Broadcom's Code of Conduct;

(b) You are convicted of a felony that involves fraud, dishonesty, theft, embezzlement, and/or an act of violence or moral turpitude, or plead guilty or no contest (or a similar plea) to any such felony; or

(c) You committed an act or an omission that constitutes fraud, material negligence, or material misconduct in connection with your employment by Broadcom, including but not limited to a material violation of applicable material state or federal securities laws. Notwithstanding the foregoing, an isolated or occasional failure to file or late filing of a report required under Section 16 of the Exchange Act shall not be deemed a material violation for purposes of this Subsection 4(c). Furthermore, with respect to filing reports or certifications you are required to provide under the Exchange Act, with respect to a transaction's compliance with the requirements of Rule 144 under the Securities Act of 1933, or with respect to the implementation of your 10b5-1 Plan, you shall not have committed a material violation for purposes of this Subsection 4(c) if the

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violation occurred because you relied in good faith on a certification or certifications provided by Broadcom or an authorized employee or agent of Broadcom, unless you knew or should have known after reasonable diligence that such certification was inaccurate, or upon the processes or actions of the securities brokerage firm handling your transactions in Broadcom equities provided that you have used a nationally recognized securities brokerage firm with substantial prior experience in and established regular procedures for handling option and equity transactions by executive officers of public companies in the United States.

The foregoing shall constitute an exclusive list of the events or contingencies that may constitute Cause under the Letter Agreement.

No termination that is based exclusively upon your commission or alleged commission of act(s) or omission(s) that are asserted to constitute material negligence shall constitute Cause hereunder unless you have been afforded notice of the alleged acts or omissions and have failed to cure such acts or omissions within 30 days after receipt of such notice.

If, following the receipt of a Notice of Termination stating that your termination is for Cause, you believe that Cause does not exist, you may, by written notice delivered to the Board of Directors within three business (3) days after receipt of such Notice of Termination, request that your Date of Termination be delayed to permit you to appeal the Board of Directors' determination that Cause for such termination existed. If you so request, you will be placed on administrative leave for a period determined by the Board of Directors (not to exceed 30 days), during which you will be afforded an opportunity to request that the Board of Directors reconsider its decision concerning your termination. If the Board of Directors or an appropriate committee thereof has not previously provided you with an opportunity to be heard in person concerning the reasons for termination stated in the Notice of Termination, the Board of Directors will endeavor in good faith to provide you with such an opportunity during such period of administrative leave. It is understood and agreed that any change in your employment status that occurs in connection with or as a result of such an administrative leave shall not constitute Good Reason. The Board of Directors may, as a result of such a request for reconsideration, reinstate your employment, revise the original Notice of Termination, or affirm the original Notice of Termination. If the Board of Directors affirms the original Notice of Termination or the period of administrative leave ends before the Board of Directors takes action, the Date of Termination shall be the date specified in the original Notice of Termination. If the Board of Directors reinstates your employment or revises the original Notice of Termination, then the original Notice of Termination shall be void and neither its delivery nor its contents shall be deemed to constitute Good Reason.

5. Good Reason. You may terminate your employment with or without Good Reason as defined in this Section 5. For purposes of the Letter Agreement and the Severance Program, "Good Reason" shall mean:

(a) Except as you may agree in writing and except as a result of an administrative leave and the related procedure described in the definition of Cause, a change in your

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position (including status, offices, titles and reporting requirements) with Broadcom that reduces your authority, duties or responsibilities as in effect on the Start Date, or any other action by Broadcom which results in a material diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial or inadvertent action which is remedied by Broadcom reasonably promptly after Broadcom receives your notice thereof; for purposes of this Subsection
5(a), it will be deemed to be a material reduction or diminution in your position or duties if (i) you are not at all times Broadcom's Chief Executive Officer and a member of the Board of Directors of Broadcom (or its successor), or in lieu thereof if Broadcom (or its successor) has any parent entities then you are not at all times the Chief Executive Officer and a member of the board of directors of the highest such parent entity,
(ii) Broadcom (acting through its Board of Directors) [ * ] publicly and materially disparages you through any oral or written communications to any third party (provided, however, that in no event shall non-public communications by or between you and Broadcom or any member of its Board of Directors, such as performance reviews, be considered to constitute such public and material disparagement), or (iii) Broadcom hires, appoints or promotes any person to an executive officer position at Broadcom without your prior consent (which you shall not unreasonably withhold);

(b) Any reduction in your base salary, as the same may be increased from time-to-time, in each case; provided, however, that a reduction or series of reductions in your base salary (not exceeding 15% in the aggregate) that is part of a broad-based reduction in base salaries for management employees and pursuant to which your base salary is not reduced by a greater percentage than the reductions applicable to other management employees shall not constitute Good Reason;

(c) The taking of any action by Broadcom (including the elimination of benefit plans without providing substitutes therefor or the reduction of your benefits thereunder) that would materially diminish the aggregate value of your bonuses and other cash incentive awards and other fringe benefits, including executive benefits and perquisites, from the levels in effect on the Start Date, by more than fifteen percent (15%) in the aggregate; provided, however, that (i) a reduction in your bonuses, cash awards or benefits that is part of a broad-based reduction in corresponding bonuses, awards or benefits for management employees and pursuant to which your bonuses, awards or benefits are not reduced by a greater percentage than the reductions applicable to other management employees, and (ii) a reduction in your bonuses and other cash incentive awards occurring as a result of your failure or Broadcom's failure to satisfy performance criteria applicable to such bonuses or awards, shall not constitute Good Reason;

(d) Broadcom's requiring you to be based at any office or location which increases the distance from your home to the office or location by more than fifty (50) miles from the distance in effect as of the date that such requirement is imposed;

(e) Any purported termination by Broadcom of your employment otherwise than pursuant to a Notice of Termination (for avoidance of doubt, the delivery or contents of a

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Notice of Termination that is revised or voided under the procedure provided in the definition of Cause shall not constitute Good Reason); or

(f) Any failure by Broadcom (or any successor) to comply with and satisfy Section 12 of this Appendix after receipt of written notice from you of such failure and a reasonable cure period of not less than thirty
(30) days.

The foregoing shall constitute an exclusive list of the events or contingencies that may constitute Good Reason under the Letter Agreement.

Notwithstanding the above, an isolated or inadvertent action or inaction by Broadcom that causes Broadcom to fail to comply with Subsections 5(b) or 5(c) and which is cured within ten days of your notifying Broadcom of such action or inaction shall not constitute Good Reason. Furthermore, no act, occurrence or condition set forth in this Section 5 shall constitute Good Reason if you consent in writing to such act, occurrence or condition, whether such consent is delivered before or after the act, occurrence or condition comes to pass.

6. Death. Your employment shall terminate automatically upon your death.

7. Disability. If your Disability occurs while you are employed by Broadcom and no reasonable accommodation is available to permit you to continue to perform the essential duties and responsibilities of your position, Broadcom may give you written notice of its intention to terminate your employment. In such event, your employment with Broadcom shall terminate effective on the 30th day after you receive such notice (the "Disability Effective Date"), provided that, within the 30 days after such receipt, you shall not have returned to performing your duties. For purposes of the Letter Agreement and the Severance Program, "Disability" shall mean your absence from your duties with Broadcom on a full-time basis for 120 consecutive business days as a result of incapacity due to mental or physical illness which is both (i) determined to be total and permanent by two (2) physicians selected by Broadcom or its insurers and acceptable to you or your legal representative, and (ii) entitles you to the payment of long-term disability benefits from Broadcom's long-term disability plan commencing immediately upon the Disability Effective Date.

8. Notice of Termination. For purposes of the Severance Program, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated, and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date, except in the case of a termination by you without Good Reason, shall be not more than thirty days after the giving of such notice). The basis for termination set forth in any Notice of Termination shall constitute the exclusive set of facts and circumstances upon which the party may rely to attempt to demonstrate that Cause or Good Reason (as the case may be) for such termination existed.

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9. Date of Termination. "Date of Termination" means (i) except as set forth in the definition of Cause, if your employment is terminated by Broadcom or by you for any reason other than death or Disability, the date of receipt of the Notice of Termination or a later date (within the limit set forth in the definition of Notice of Termination) specified therein, as the case may be, and (ii) if your employment is terminated by reason of death or Disability, the Date of Termination shall be the date of your death or the Disability Effective Date, as the case may be.

10. Non-exclusivity of Rights. Nothing in the Severance Program shall prevent or limit your continuing or future participation in any plan, program, policy or practice provided by Broadcom or any of its affiliated companies and for which you may qualify, nor shall anything herein limit or otherwise affect such rights as you may have under any contract or agreement with Broadcom or any of its affiliated companies. Amounts which are vested benefits or which you are otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with Broadcom or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by the Severance Program.

11. Full Settlement.

(a) Except as specifically set forth in this Appendix or the accompanying Letter Agreement, Broadcom's obligation to make the payments provided for in the Severance Program and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which Broadcom may have against you or others, except only for any advances made to you or for taxes that Broadcom is required to withhold by law. In no event shall you be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to you under any of the provisions of the Severance Program and, except regarding certain medical and welfare benefits as provided in Subsection 1(e), such amounts shall not be reduced whether or not you obtain other employment.

(b) Except to the extent precluded by applicable law, to be eligible to receive the payments and benefits under the Severance Program (other than the Accrued Obligations and Other Benefits, the payment or provision of which shall not be conditioned upon your execution of the separation agreement described in this Subsection 11(b)), you must, following your termination of employment, execute a separation agreement that includes (i) a general release (in a form acceptable to Broadcom) in favor of Broadcom and its subsidiaries, officers, directors, employees and agents which shall cover all claims you may have relating to your employment with Broadcom and the termination of that employment, other than claims relating to any benefits to which you become entitled under the Severance Program, (ii) mutual non-disparagement provisions, and (iii) a provision that precludes you from soliciting or inducing Broadcom employees to work for yourself, for an entity of which you are an employee or investor, or for any third party for a period of two years from the later of the Date of Termination or the date of execution of the separation agreement. To be eligible to receive the payments and benefits under the Severance Program, you must also be and remain in material

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compliance with your obligations to Broadcom pursuant to the Confidentiality and Invention Assignment Agreement during and subsequent to your employment.

12. Successors.

(a) Any benefits payable under the Severance Program are personal to you and without the prior written consent of Broadcom shall not be assignable by you otherwise than by will or the laws of descent and distribution. The benefits under the Severance Program shall inure to the benefit of and be enforceable by your legal representatives.

(b) Any rights and obligations under the Severance Program shall inure to the benefit of and be binding upon Broadcom and its successors and assigns.

(c) Broadcom will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of Broadcom to expressly assume and agree in writing to perform its obligations under this agreement and the Severance Program in the same manner and to the same extent that Broadcom would be required to perform it if no such succession had taken place. As used in the Severance Program, "Broadcom" shall include any successor to all or substantially all of its business and/or assets, as aforesaid, which assumes and agrees to perform the obligations created by the Severance Program by operation of law, or otherwise.

Initials: /s/ SM
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EXHIBIT 10.9

BROADCOM CORPORATION
NOTICE OF GRANT OF STOCK OPTION

Notice is hereby given of the following option grant (the "Option") to purchase shares of the Common Stock of Broadcom Corporation (the "Corporation"):

Optionee:                          Scott A. McGregor
Grant Date:
Vesting Commencement Date:
Exercise Price:                    $ per share
Number of Option Shares:
Expiration Date:
Type of Option:                    Incentive Stock Option or Non-Statutory
                                   Stock Option

Exercise Schedule: [for initial grants: The Option shall become exercisable for twenty-five percent (25%) of the Option Shares upon Optionee's completion of one (1) year of Service measured from the Vesting Commencement Date and shall become exercisable for the balance of the Option Shares in thirty-six (36) successive equal monthly installments upon Optionee's completion of each additional month of Service over the thirty-six (36) month period measured from the first anniversary of the Vesting Commencement Date.] [For subsequent grants: The Option shall become exercisable in forty-eight (48) successive equal monthly installments upon Optionee's completion of each additional month of Service over the forty-eight (48) month period measured from the first anniversary of the Vesting Commencement Date. In no event shall the Option become exercisable for any additional Option Shares after Optionee's cessation of Service.] In no event shall the Option become exercisable for any additional Option Shares after Optionee's cessation of Service.

Optionee understands and agrees that the Option is granted subject to and in accordance with the terms of the Broadcom Corporation 1998 Stock Incentive Plan, as amended and restated (the "Plan"). Optionee further agrees to be bound by the terms of the Plan and the terms of the Option as set forth in the Stock Option Agreement attached hereto as Appendix A. Optionee hereby acknowledges receipt of a copy of the official prospectus for the Plan in the form attached hereto as Appendix B. A copy of the Plan is available upon request made to the Corporate Secretary at the Corporation's principal offices. The Option shall also be governed by (i) the terms of the Addendum to Stock Option Agreement attached hereto as Appendix C and (ii) the terms of the Special Stock Retention Addendum to Stock Option Agreement attached hereto as Appendix D.

No Employment or Service Contract. Nothing in this Notice or in the attached Stock Option Agreement or in the Plan shall confer upon Optionee any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Parent or Subsidiary employing or retaining Optionee) or of Optionee, which rights are hereby expressly reserved by each, to terminate Optionee's Service at any time for any reason, with or without cause.

Definitions. All capitalized terms in this Notice shall have the meaning assigned to them in this Notice or in the attached Stock Option Agreement.

Date: ___________ __, 200_

Broadcom Corporation

                                            ------------------------------------
                                            Optionee

-------------------------------------       ------------------------------------
By:                                         Address
Title:
                                            ------------------------------------

ATTACHMENTS: A -- STOCK OPTION AGREEMENT; B -- PLAN SUMMARY AND PROSPECTUS; C -- ADDENDUM TO STOCK OPTION AGREEMENT; D. -- STOCK RETENTION ADDENDUM

BROADCOM CORPORATION

STOCK OPTION AGREEMENT

RECITALS

A. The Board has adopted the Plan for the purpose of retaining the services of selected Employees, non-employee members of the Board or of the board of directors of any Parent or Subsidiary and consultants and other independent advisors who provide services to the Corporation (or any Parent or Subsidiary).

B. Optionee is to render valuable services to the Corporation (or a Parent or Subsidiary), and this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the Corporation's grant of an option to Optionee.

C. All capitalized terms in this Agreement shall have the meaning assigned to them in the attached Appendix.

NOW, THEREFORE, it is hereby agreed as follows:

1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as of the Grant Date, an option to purchase up to the number of Option Shares specified in the Grant Notice. The Option Shares shall be purchasable from time to time during the option term specified in Paragraph 2 at the Exercise Price.

2. OPTION TERM. This option shall have a maximum term of ten (10) years measured from the Grant Date and shall accordingly expire at the close of business on the Expiration Date, unless sooner terminated in accordance with Paragraph 5 or 6.

3. LIMITED TRANSFERABILITY. This option shall be neither transferable nor assignable by Optionee other than by will or by the laws of descent and distribution following Optionee's death and may be exercised, during Optionee's lifetime, only by Optionee. However, if this option is designated a Non-Statutory Option in the Grant Notice, then this option may, in connection with the Optionee's estate plan, be assigned in whole or in part during Optionee's lifetime to one or more members of the Optionee's immediate family or to a trust established for the exclusive benefit of Optionee and/or one or more such family members. The assigned portion shall be exercisable only by the person or persons who acquire a proprietary interest in the option pursuant to such assignment. The terms applicable to the assigned portion shall be the same as those in effect for this option immediately prior to such assignment.

4. DATES OF EXERCISE. This option shall become exercisable for the Option Shares in one or more installments as specified in the Grant Notice. As the option becomes exercisable for such installments, those installments shall accumulate, and the option shall remain exercisable for the accumulated installments until the Expiration Date or sooner termination of the option term under Paragraph 5 or 6. Notwithstanding the foregoing, should the Optionee elect to

exercise this option during any period during which the Optionee is under investigation by the Corporation for Misconduct, then any Option Shares acquired by the Optionee as a result of such exercise and/or the net proceeds of any sale or sales of those acquired Option Shares (the gross sale proceeds less any Exercise Price payment or withholding taxes due the Corporation and broker commissions) during such period shall be held by the Corporation in escrow until such time as the investigation is satisfactorily completed.

5. CESSATION OF SERVICE/TERMINATION OF OPTION. The option term specified in Paragraph 2 shall terminate (and this option shall cease to be outstanding) prior to the Expiration Date should any of the following provisions become applicable:

(a) Should Optionee cease to remain in Service for any reason (other than death, Permanent Disability or Misconduct) while holding this option, then Optionee shall have a period of three (3) months (commencing with the date of such cessation of Service) during which to exercise this option, but in no event shall this option be exercisable at any time after the Expiration Date.

(b) Should Optionee die while holding this option, then the personal representative of Optionee's estate or the person or persons to whom the option is transferred pursuant to Optionee's will or in accordance with the laws of inheritance shall have the right to exercise this option. Such right shall lapse, and this option shall cease to be outstanding, upon the earlier of (i) the expiration of the twelve (12)-month period measured from the date of Optionee's death or (ii) the Expiration Date.

(c) Should Optionee cease Service by reason of Permanent Disability while holding this option, then Optionee shall have a period of twelve
(12) months (commencing with the date of such cessation of Service) during which to exercise this option. In no event shall this option be exercisable at any time after the Expiration Date.

(d) The applicable post-Service exercise period in effect for this option pursuant to the foregoing provisions of this Paragraph 5 shall automatically be extended by an additional period of time equal in duration to any interval within that otherwise applicable post-Service exercise period during which the exercise of this option or the immediate sale of the Option Shares acquired hereunder cannot be effected in compliance with applicable federal and state securities laws, but in no event shall such an extension result in the continuation of this option beyond the Expiration Date.

(e) During the limited period of post-Service exercisability, this option may not be exercised in the aggregate for more than the number of vested Option Shares for which the option is exercisable at the time of Optionee's cessation of Service. Upon the expiration of such limited exercise period or (if earlier) upon the Expiration Date, this option shall terminate and cease to be outstanding for any vested Option Shares for which the option has not been exercised. However, except as set forth herein, this option shall, immediately upon Optionee's cessation of Service for any reason, terminate and cease to be outstanding with respect to any Option Shares in which Optionee is not otherwise at that time vested or for which this option is not otherwise at that time exercisable.

(f) Should Optionee's Service be terminated for Misconduct or should Optionee engage in Misconduct at any time Optionee holds this option, then this option shall terminate immediately and cease to remain outstanding.

6. SPECIAL ACCELERATION OF OPTION.

(a) This option to the extent outstanding at the time of a Change in Control but not otherwise fully exercisable, shall NOT become exercisable on an accelerated basis if and to the extent: (i) this option is, in connection with the Change in Control, to be assumed by the successor corporation (or parent thereof) or otherwise continued in full force and effect pursuant to the terms of the Change in Control transaction or (ii) this option is to be replaced with a cash incentive program of the successor corporation which preserves the spread existing at the time of the Change in Control on the Option Shares for which this option is not otherwise at that time exercisable (the excess of the Fair Market Value of those Option Shares over the aggregate Exercise Price payable for such shares) and provides for subsequent payout of that spread in accordance with the same option exercise/vesting schedule set forth in the Grant Notice. However, if none of the foregoing conditions apply to this option at the time of Change in Control, then this option shall automatically accelerate so that such option shall, immediately prior to the effective date of that Change in Control, become exercisable for all the shares of Common Stock at the time subject to this option and may be exercised for any or all of those shares as fully vested shares of Common Stock.

(b) Immediately following the Change in Control, this option shall terminate and cease to be outstanding, except to the extent this option is assumed by the successor corporation (or parent thereof) in connection with the Change in Control or is otherwise to continue in full force and effect pursuant to the terms of the Change in Control transaction.

(c) If this option is assumed in connection with a Change in Control or is otherwise to continue in full force and effect, then this option shall be appropriately adjusted, immediately after such Change in Control, to apply to the number and class of securities which would have been issuable to Optionee in consummation of such Change in Control had the option been exercised immediately prior to such Change in Control, and appropriate adjustments shall also be made to the Exercise Price, provided the aggregate Exercise Price shall remain the same. To the extent the actual holders of the Corporation's outstanding Common Stock receive cash consideration for their Common Stock in consummation of the Change in Control transaction, the successor corporation may, in connection with the assumption or continuation of this option, substitute one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per share of Common Stock in such Change in Control transaction.

(d) This Agreement shall not in any way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

7. ADJUSTMENT IN OPTION SHARES. Should any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation's receipt of consideration, appropriate adjustments shall be made to (i) the total number and/or class of securities subject to this option and (ii) the Exercise Price to reflect such change and thereby preclude a dilution or enlargement of benefits hereunder.

8. SHAREHOLDER RIGHTS. The holder of this option shall not have any shareholder rights with respect to the Option Shares until such person shall have exercised the option, paid the Exercise Price and any required withholding taxes and become a holder of record of the purchased shares.

9. MANNER OF EXERCISING OPTION.

(a) To exercise this option with respect to all or any part of the Option Shares for which this option is at the time exercisable, Optionee (or any other person or persons exercising the option) must take the following actions:

(i) Execute and deliver to the Corporation a Notice of Exercise for the Option Shares for which the option is exercised or comply with such other procedures as the Corporation may establish for notifying the Corporation of the exercise of this option for one or more Option Shares.

(ii) Pay the aggregate Exercise Price for the purchased shares in one or more of the following forms:

(A) cash or check made payable to the Corporation;

(B) shares of Common Stock held by Optionee (or any other person or persons exercising the option) for the requisite period necessary to avoid a charge to the Corporation's earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date; or

(C) through a special sale and remittance procedure pursuant to which Optionee (or any other person or persons exercising the option) shall concurrently provide irrevocable instructions (I) to a Corporation-designated brokerage firm(1) to effect the immediate sale of the purchased shares and remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate Exercise Price payable for the purchased shares plus all applicable Federal, state and local income and employment taxes required to be withheld by the Corporation by reason of such exercise, and (II) to the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm to complete the sale.

(1) With respect to Section 16 Insiders, the brokerage firm need only be reasonably satisfactory to the Corporation for purposes of administering such procedure.

Except to the extent the sale and remittance procedure is utilized in connection with the option exercise, payment of the Exercise Price must accompany the Notice of Exercise delivered to the Corporation in connection with the option exercise.

(iii) Furnish to the Corporation appropriate documentation that the person or persons exercising the option (if other than Optionee) have the right to exercise this option.

(iv) Make appropriate arrangements with the Corporation (or Parent or Subsidiary employing or retaining Optionee) for the satisfaction of all Federal, state and local income and employment tax withholding requirements applicable to the option exercise.

(b) As soon as practical after the Exercise Date, the Corporation shall issue to or on behalf of Optionee (or any other person or persons exercising this option) a certificate for the purchased Option Shares, with the appropriate legends affixed thereto.

10. COMPLIANCE WITH LAWS AND REGULATIONS.

(a) The exercise of this option and the issuance of the Option Shares upon such exercise shall be subject to compliance by the Corporation and Optionee with all applicable requirements of law relating thereto and with all applicable regulations of any stock exchange (or the NASDAQ National Market(R), if applicable) on which the Common Stock may be listed for trading at the time of such exercise and issuance.

(b) The inability of the Corporation to obtain approval from any regulatory body having authority deemed by the Corporation to be necessary to the lawful issuance and sale of any Common Stock pursuant to this option shall relieve the Corporation of any liability with respect to the non-issuance or sale of the Common Stock as to which such approval shall not have been obtained. The Corporation, however, shall use its best efforts to obtain all such approvals.

11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided in Paragraphs 3 and 6, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Corporation and its successors and assigns and Optionee, Optionee's assigns and the legal representatives, heirs and legatees of Optionee's estate.

12. NOTICES. Any notice required to be given or delivered to the Corporation under the terms of this Agreement shall be in writing and addressed to the Corporation at its principal corporate offices. Any notice required to be given or delivered to Optionee shall be in writing and addressed to Optionee at the address indicated below Optionee's signature line on the Grant Notice. All notices shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified.

13. CONSTRUCTION. This Agreement and the option evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the terms of the Plan. The Plan Administrator shall have the discretionary authority to interpret and construe any term or provision of the Plan or this Agreement, and such interpretation shall be binding on all persons having an interest in this option.

14. GOVERNING LAW. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of California without resort to that State's conflict-of-laws rules.

15. MANDATORY ARBITRATION. ANY AND ALL DISPUTES OR CONTROVERSIES BETWEEN OPTIONEE AND THE CORPORATION ARISING OUT OF, RELATING TO OR OTHERWISE CONNECTED WITH THIS AGREEMENT OR THE OPTION EVIDENCED HEREBY OR THE VALIDITY, CONSTRUCTION, PERFORMANCE OR TERMINATION OF THIS AGREEMENT SHALL BE SETTLED EXCLUSIVELY BY BINDING ARBITRATION PURSUANT TO SECTION 12 OF APPENDIX I TO THE LETTER AGREEMENT BETWEEN OPTIONEE AND THE CORPORATION DATED OCTOBER 25, 2004, WHICH IS INCORPORATED BY REFERENCE HEREIN AS IF SET FORTH FULLY HEREIN.

16. EXCESS SHARES. If the Option Shares covered by this Agreement exceed, as of the Grant Date, the number of shares of Common Stock which may without shareholder approval be issued under the Plan, then this option shall not become exercisable with respect to those excess shares, unless shareholder approval of an amendment sufficiently increasing the number of shares of Common Stock issuable under the Plan is obtained in accordance with the provisions of the Plan.

17. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE OPTION. In the event this option is designated an Incentive Option in the Grant Notice, the following terms and conditions shall also apply to the grant:

(a) This option shall cease to qualify for favorable tax treatment as an Incentive Option if (and to the extent) this option is exercised for one or more Option Shares: (A) more than three (3) months after the date Optionee ceases to be an Employee for any reason other than death or Permanent Disability or (B) more than twelve (12) months after the date Optionee ceases to be an Employee by reason of Permanent Disability.

(b) No installment under this option shall qualify for favorable tax treatment as an Incentive Option if (and to the extent) the aggregate Fair Market Value (determined at the Grant Date) of the Common Stock for which such installment first becomes exercisable hereunder would, when added to the aggregate value (determined as of the respective date or dates of grant) of the Common Stock or other securities for which this option or any other Incentive Options granted to Optionee prior to the Grant Date (whether under the Plan or any other option plan of the Corporation or any Parent or Subsidiary) first become exercisable during the same calendar year, exceed One

Hundred Thousand Dollars ($100,000) in the aggregate. Should such One Hundred Thousand Dollar ($100,000) limitation be exceeded in any calendar year, this option shall nevertheless become exercisable for the excess shares in such calendar year as a Non-Statutory Option.

(c) Should the exercisability of this option be accelerated upon a Change in Control, then this option shall qualify for favorable tax treatment as an Incentive Option only to the extent the aggregate Fair Market Value (determined at the Grant Date) of the Common Stock for which this option first becomes exercisable in the calendar year in which the Change in Control occurs does not, when added to the aggregate value (determined as of the respective date or dates of grant) of the Common Stock or other securities for which this option or one or more other Incentive Options granted to Optionee prior to the Grant Date (whether under the Plan or any other option plan of the Corporation or any Parent or Subsidiary) first become exercisable during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in the aggregate. Should the applicable One Hundred Thousand Dollar ($100,000) limitation be exceeded in the calendar year of such Change in Control, the option may nevertheless be exercised for the excess shares in such calendar year as a Non-Statutory Option.

(d) Should Optionee hold, in addition to this option, one or more other options to purchase Common Stock which become exercisable for the first time in the same calendar year as this option, then for purposes of the foregoing limitations on the exercisability of such options as Incentive Options, this option and each of those other options shall be deemed to become first exercisable in that calendar year on the basis of the chronological order in which they were granted, except to the extent otherwise provided under applicable law or regulation.

APPENDIX

The following definitions shall be in effect under the Agreement:

A. AGREEMENT shall mean this Stock Option Agreement.

B. BOARD shall mean the Corporation's Board of Directors.

C. CHANGE IN CONTROL shall mean a change in ownership or control of the Corporation effected through any of the following transactions:

(i) a shareholder-approved merger or consolidation in which securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities are transferred to a person or persons different from the persons holding those securities immediately prior to such transaction, or

(ii) a shareholder-approved sale, transfer or other disposition of all or substantially all of the Corporation's assets in complete liquidation or dissolution of the Corporation, or

(iii) the acquisition, directly or indirectly by any person or related group of persons (other than the Corporation or a person that directly or indirectly controls, is controlled by, or is under common control with, the Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities pursuant to a tender or exchange offer made directly to the Corporation's shareholders.

D. CODE shall mean the Internal Revenue Code of 1986, as amended.

E. COMMON STOCK shall mean the Corporation's Class A Common Stock.

F. CORPORATION shall mean Broadcom Corporation, a California corporation, and any corporate successor to all or substantially all of the assets or voting stock of Broadcom Corporation, which shall by appropriate action adopt the Plan.

G. EMPLOYEE shall mean an individual who is in the employ of the Corporation (or any Parent or Subsidiary), subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance.

H. EXERCISE DATE shall mean the date on which the option shall have been exercised in accordance with Paragraph 9 of the Agreement.

I. EXERCISE PRICE shall mean the exercise price per Option Share as specified in the Grant Notice.

J. EXPIRATION DATE shall mean the date on which the option expires as specified in the Grant Notice.

K. FAIR MARKET VALUE per share of Common Stock on any relevant date shall be determined in accordance with the following provisions:

(i) If the Common Stock is at the time traded on the NASDAQ National Market, then the Fair Market Value shall be the closing selling price per share of Common Stock at the close of regular hours trading (i.e., before after- hours trading begins) on the NASDAQ National Market on the date in question, as such price is reported by the National Association of Securities Dealers. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists.

(ii) If the Common Stock is at the time listed on any Stock Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock at the close of regular hours trading (i.e., before after-hours trading begins) on the date in question on the Stock Exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists.

L. GRANT DATE shall mean the date of grant of the option as specified in the Grant Notice.

M. GRANT NOTICE shall mean the Notice of Grant of Stock Option, in written or electronic format, accompanying the Agreement, pursuant to which Optionee has been informed of the basic terms of the option evidenced hereby.

N. INCENTIVE OPTION shall mean an option that satisfies the requirements of Code Section 422.

O. MISCONDUCT shall mean the commission of any act of fraud, embezzlement or dishonesty by the Optionee, any unauthorized use or disclosure by such person of confidential information or trade secrets of the Corporation (or any Parent or Subsidiary), or any other intentional misconduct by such person adversely affecting the business or affairs of the Corporation (or any Parent or Subsidiary) in a material manner. The foregoing definition shall not in any way preclude or restrict the right of the Corporation (or any Parent or Subsidiary) to discharge or dismiss the Optionee or any other person in the Service of the Corporation (or any Parent or Subsidiary) for any other acts or omissions, but such other acts or omissions shall not be deemed, for purposes of the Plan or this Agreement, to constitute grounds for termination for Misconduct.

P. NON-STATUTORY OPTION shall mean an option not intended to satisfy the requirements of Code Section 422.

Q. NOTICE OF EXERCISE shall mean the notice of exercise in form and substance as prescribed by the Corporation.

R. OPTION SHARES shall mean the number of shares of Common Stock subject to the option as specified in the Grant Notice.

S. OPTIONEE shall mean the person to whom the option is granted as specified in the Grant Notice.

T. PARENT shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation, provided each corporation in the unbroken chain (other than the Corporation) owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

U. PERMANENT DISABILITY shall mean the inability of Optionee to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which is expected to result in death or has lasted or can be expected to last for a continuous period of twelve (12) months or more.

V. PLAN shall mean the Corporation's 1998 Stock Incentive Plan.

W. PLAN ADMINISTRATOR shall mean either the Board or a committee of the Board acting in its capacity as administrator of the Plan.

X. SECTION 16 INSIDER shall mean an officer or director of the Corporation subject to the short-swing profit liabilities of Section 16 of the 1934 Act.

Y. SERVICE shall mean the Optionee's performance of services for the Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a non-employee member of the board of directors or a consultant or independent advisor, except to the extent otherwise specifically provided in the documents evidencing the option grant. For purposes of this Agreement, Optionee shall be deemed to cease Service immediately upon the occurrence of either of the following events: (i) Optionee no longer performs services in any of the foregoing capacities for the Corporation or any Parent or Subsidiary or (ii) the entity for which Optionee is performing such services ceases to remain a Parent or Subsidiary of the Corporation, even though the Optionee may subsequently continue to perform services for that entity.

Z. STOCK EXCHANGE shall mean either the American Stock Exchange or the New York Stock Exchange.

AA. SUBSIDIARY shall mean any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation, provided each corporation (other than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

ADDENDUM
TO
STOCK OPTION AGREEMENT

The following provisions are hereby incorporated into, and are hereby made a part of that certain Stock Option Agreement (the "Option Agreement") by and between Broadcom Corporation, a California corporation (the "Corporation"), and Scott A. McGregor ("Optionee") evidencing a stock option granted this day to Optionee (the "Option") under the terms of the Corporation's 1998 Stock Incentive Plan, as amended and restated (the "Plan"). The provisions of this Addendum shall be effective immediately.

Optionee has entered into an employment agreement with the Corporation pursuant to that certain letter from the Corporation dated October 25, 2004 (the "Letter Agreement"). The purpose of this Addendum is to supplement the terms of the Option Agreement so that those terms conform to the special benefits to which Optionee will become entitled pursuant to the terms of the Letter Agreement.

All capitalized terms in this Addendum, to the extent not otherwise defined herein, shall have the meanings assigned to them in the Letter Agreement, including Appendix II thereto.

SPECIAL OPTION BENEFITS

1. If either the Corporation terminates Optionee's employment in a Notice of Termination specifying no reason or a reason other than Cause or Disability, or Optionee terminates his employment with the Corporation in a Notice of Termination specifying Good Reason, and Optionee's employment has not terminated automatically as a result of Optionee's death, then Optionee shall immediately become entitled to the following additional benefits to the extent the Option is at that time outstanding:

(i) Optionee shall, immediately on the Date of Termination, be credited with an additional twenty-four (24) months of employment with the Corporation for purposes of the vesting schedule in effect for the Option so that Optionee shall be immediately vested in the Option to the same extent as if Optionee had completed an additional twenty-four (24) months of employment with the Corporation prior to the Date of Termination, and

(ii) the Option shall remain exercisable, for any or all of the shares in which Optionee is vested on the Date of Termination (including the shares which vest on an accelerated basis in accordance with subparagraph (i) above), until the EARLIER of (A) the expiration of the twenty-four
(24)-month period measured from the Date of Termination or (B) the specified expiration date of the Option term.

2. If Optionee's employment is terminated by reason of death or Disability, then Optionee shall, immediately on the Date of Termination, become fully vested in the Option (to the extent outstanding on such date) and the Option shall remain exercisable until the EARLIER of (A) the expiration of the twelve
(12)-month period measured form the Date of Termination or (B) the specified expiration date of the Option term.

3. To the extent any of the benefits provided pursuant to this Addendum shall be deemed to constitute a parachute payment under Section 280G of the Internal Revenue Code, then those benefits shall be subject to the parachute payment limitation provisions of the Letter Agreement.

4. In no event shall Optionee be entitled to any benefits pursuant to this Addendum unless (i) Optionee shall have executed and delivered to the Corporation the separation agreement required under Paragraph 11 of Appendix II to the Letter Agreement and (ii) Optionee is in material compliance with his obligations to the Corporation pursuant to his Confidentiality and Invention Assignment Agreement during and subsequent to Optionee's employment.

5. To the extent the provisions of this Addendum conflict with the provisions of the Option Agreement (including, without limitation, the provisions of Paragraph 5 of such Option Agreement), the provisions of this Addendum shall be controlling.

6. Except to the extent modified by this Addendum, all the terms and conditions of the Option Agreement shall continue in full force effect.

7. Optionee hereby acknowledges that the Option shall cease to qualify for favorable tax treatment as an incentive stock option under the federal tax laws (if the Option is designated as an Incentive Stock Option in the Notice of Grant of Stock Option relating to such Option) if (and to the extent) the Option is exercised: (A) more than three (3) months after the date Optionee ceases to be an Employee for any reason other than death or Permanent Disability or (B) more than twelve (12) months after the date Optionee ceases to be an Employee by reason of Permanent Disability. For purposes of this Paragraph 7, the terms "EMPLOYEE" and "PERMANENT DISABILITY" shall have the meanings assigned to them in the Option Agreement.

IN WITNESS WHEREOF, BROADCOM CORPORATION has caused this Addendum to be executed by its duly-authorized officer, and Optionee has executed this Addendum, all as of the Effective Date specified below.

Broadcom Corporation

By:
Title:

Optionee

Scott A. McGregor

EFFECTIVE DATE: ________ __, 20__

EXHIBIT 10.16

RESTRICTED STOCK UNIT AWARD AGREEMENT

Dear Mr. McGregor:

Broadcom Corporation (the "Corporation") is pleased to inform you that you have been awarded Restricted Stock Units (the "Units") under the Corporation's 1998 Stock Incentive Plan, as amended and restated (the "Plan"). To the extent they become vested, the Units will entitle you to receive shares of the Corporation's Class A common stock (the "Common Stock") in a series of installments over your period of continued Service with the Corporation.

The Units are a non-voting bookkeeping device used under the Plan solely to determine any share issuance to eventually be made to you if and when the Units vest. Each Unit represents the right to receive one share of the Corporation's Common Stock on the vesting date of that Unit. Unlike a typical stock option grant, the shares will be issued to you for your continued Service over the vesting period, without any cash payment required from you. However, you must arrange with the Corporation for the payment of the applicable income and employment withholding taxes (described below) that the Corporation must collect upon the issuance of those shares.

Capitalized terms not otherwise defined in the body of this Agreement shall have the meaning assigned to them in the attached Appendix.

This Agreement sets forth the number of Units and underlying number of shares of Common Stock subject to your award, the applicable vesting schedule for those Units and underlying shares, the dates on which your vested shares will be issued to you and the remaining terms and conditions governing your award (the "Award").

Award Date:                         ___________ ___, 20__

Number of Units Subject to Award:   _______ units representing an equal number
                                    of shares of Common Stock (the "Shares")

Vesting Schedule:                   [For initial award: Subject to the
                                    provisions of the Addendum attached hereto,
                                    the Units will vest as follows (i) 5,556 of
                                    the Units will vest upon your continuation
                                    in Service through February 5, 2005; (ii) an
                                    additional 183,337 of the Units will vest in
                                    a series eleven (11) successive quarterly
                                    installments upon your completion of each
                                    three (3)-month period of Service from May
                                    5, 2005 and continuing through November 5,
                                    2007; and (iii) the remaining 11,107 Units
                                    will vest upon your continuation of Service
                                    through February 5, 2008. ] [For subsequent
                                    awards: The Units will vest in a series of
                                    sixteen (16) successive

                                    quarterly installments upon your completion
                                    of each successive three (3)-month period of
                                    Service over the forty-eight (48)-month
                                    period measured from the ___ day of
                                    __________________, 200___.]

Issuance Schedule:                  The Shares will be issued immediately upon
                                    the vesting of Units in accordance with the
                                    foregoing Vesting Schedule. In no event,
                                    however, will any Shares actually be issued
                                    to you unless and until the applicable
                                    Withholding Taxes are collected from you.

Other important features of your Award are as follows:

1. FORFEITABILITY. Should you cease Service prior to vesting in one or more Units subject to your Award, your Award will be cancelled with respect to those unvested Units (and the underlying Shares) on the first date you are no longer in Service, regardless of the reason for the termination of your Service, whether with or without cause, voluntary or involuntary. The number of your Units will be reduced accordingly, and you will cease to have any right or entitlement to receive any Shares under those cancelled Units.

The vesting schedule requires your continued Service through each applicable vesting date as a condition to the vesting of the applicable installment of the Award and the rights and benefits under this Agreement. Service for only a portion of a vesting period, even if a substantial portion, will not entitle you to any proportionate vesting or avoid or mitigate the forfeiture that occurs upon the termination of your Service.

2. TRANSFERABILITY. Prior to your actual receipt of the Shares in which you vest under your Award, you may not transfer any interest in your Award, your Units or the underlying Shares or pledge or otherwise hedge the sale of those Units or Shares, including (without limitation) any short sale or any acquisition or disposition of any put or call option or other instrument tied to the value of those Shares. Any attempt by you to do so will result in an immediate forfeiture of all of the Units awarded to you hereunder. However, your right to receive any Shares which have vested under your Units at or prior to your death but which remain unissued at the time of your death may be transferred pursuant to the provisions of your will or trust or the laws of inheritance or to your designated beneficiary following your death. You may make such a beneficiary designation at any time by filing the appropriate form with the Plan Administrator or its designee.

3. SHAREHOLDER RIGHTS. The Units create no fiduciary duty to you, and shall create only a contractual obligation on the part of the Corporation to issue Shares, subject to vesting and other terms and conditions of this Agreement and the Plan. The Units shall not be treated as property or as a trust fund of any kind.

You will not have any shareholder rights, including voting rights or dividend rights, with respect to the Shares subject to your Award until you become the record holder of those Shares upon their actual issuance to you following the Corporation's collection of the applicable Withholding Taxes. Except as otherwise provided in Paragraph 4, no adjustments will be made for dividends or other rights of a holder for which the record date is prior to the date of issuance of the stock certificate evidencing the shares.

Issuance of Shares following vesting of the corresponding Units shall be in complete satisfaction of such vested Units.

4. ADJUSTMENTS. Should any change be made to the Common Stock subject to your Award by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation's receipt of consideration, appropriate adjustments will be made to the number and/or class of securities issuable hereunder and the number and/or class of securities that vest on each vesting date pursuant to the Vesting Schedule set forth above.

5. FEDERAL INCOME TAXATION. You will recognize ordinary income for federal income tax purposes on each date the Shares subject to your Award vest, whether pursuant to the normal Vesting Schedule above or the special acceleration provisions of Paragraph 8 of this Agreement, and the Corporation must collect from you the applicable income taxes required to be withheld as a result of that income. The amount of your taxable income on each vesting date will be equal to the Fair Market Value per share of Common Stock on that date times the number of Shares in which you vest on that date.

6. FICA TAXES. The Corporation must also collect from you the employee portion of the FICA (Social Security and Medicare) taxes that become due as the Shares subject to your Award vest in accordance with the provisions of this Agreement. The FICA taxes due on each such vesting date will be based on the Fair Market Value per share of Common Stock on that date.

7. WITHHOLDING TAXES. All applicable Withholding Taxes, as determined by the Corporation, must be collected from you as and when they become due. Payment of such Withholding Taxes shall be effected automatically through the following share withholding procedure:

o On each date vested Shares are to be issued to you hereunder, the Corporation shall withhold a portion of those Shares with a Fair Market Value (measured as of the vesting date) equal to the amount of such Withholding Taxes; PROVIDED, HOWEVER, that the amount of any Shares so withheld shall not exceed the amount necessary to satisfy the Corporation's required tax withholding obligations using the minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to supplemental taxable income.

Notwithstanding the foregoing, and provided that you notify the Corporation's Shareholder Services in writing at least three business days prior to the date your Withholding Taxes become due, you may also pay your Withholding Taxes through any one or more of the following alternatives:

o the delivery of your separate check payable to the Corporation;

o irrevocable instructions given by you to a broker to remit to the Corporation cash from a previously established account you have with such broker in the amount of such Withholding Taxes, or

o the use of proceeds from a next day sale of the Shares in which you vest, PROVIDED AND ONLY IF (i) such a sale is permissible under the Corporation's trading policies governing your sale of Corporation shares and (ii) you are NOT at the time an executive officer subject to the short-swing trading restrictions of the federal securities laws.

If any withholding event occurs other than with respect to the vesting of such Units, or if the Corporation for any reason is unable to satisfy the withholding obligations with respect to the vesting of the Units through any of the collection procedures specified in this Paragraph 7, the Corporation shall be entitled to require you to make a cash payment and/or to deduct from other compensation payable to you the amount of any such withholding obligation.

8. CHANGE IN CONTROL. The following provisions shall govern the treatment of your Units in the event of a Change in Control should occur during your period of Service.

(a) Should the closing of a Change in Control transaction occur during your period of Service, then any Units at the time subject to your Award may be assumed by the successor entity or otherwise continue in full force and effect or may be replaced with a cash incentive program of the successor entity which preserves the Fair Market Value of any unvested shares of Common Stock subject to the Award at the time of the Change in Control and provides for subsequent payout of that value in accordance with the normal vesting schedule applicable to your Award. No accelerated vesting of the Units shall occur in the event of such assumption or continuation of the Award or such replacement of the Award with a cash incentive program.

(b) In the event the Award is assumed or otherwise continued in effect, the Units at the time subject to the Award will be adjusted immediately after the consummation of the Change in Control so as to apply to the number and class of securities into which the Shares subject to those units immediately prior to the Change in Control would have been converted in consummation of that Change in Control had those Shares actually been outstanding at that time. To the extent the actual holders of the outstanding Common Stock receive cash consideration for their Common Stock in consummation of the Change in Control, the successor corporation may, in connection with the assumption or continuation of the Restricted Stock Units subject

to your Award, substitute one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per share of Common Stock in the Change in Control transaction.

(c) If the Units subject to your Award are NOT so assumed or otherwise continued in effect under Paragraph 8(b) or replaced with a cash incentive program under Paragraph 8(a), then those units will vest immediately prior to the closing of the Change in Control. The Shares subject to those vested units will be issued immediately (or otherwise converted into the right to receive the same consideration per share of Common Stock payable to the other shareholders of the Corporation in consummation of that Change in Control), subject to the Corporation's collection of all applicable federal and state Withholding Taxes.

9. SECURITIES LAW COMPLIANCE. The Corporation will use its reasonable commercial efforts to assure that all Shares issued pursuant to this Agreement are registered under the federal securities laws. However, no Shares will be issued pursuant to your Award if such issuance would otherwise constitute a violation of any applicable federal or state securities laws or regulations or the requirements of the NASDAQ National Market or any Stock Exchange on which the Common Stock may then be listed. The inability of the Corporation to obtain approval from any regulatory body having authority deemed by the Corporation to be necessary to the lawful issuance of any Shares hereunder shall defer the Corporation's obligation with respect to the issuance of such Shares until such approval shall have been obtained.

10. TRANSFER RESTRICTION. None of the issued Shares may be sold or transferred in contravention of (i) any market blackout periods the Corporation may impose from time to time or (ii) the Corporation's insider trading policies to the extent applicable to you from time to time.

11. NOTICE. Any notice to be given or delivered to the Corporation relating to this Agreement shall be in writing and addressed to the Corporation at its principal corporate offices. Any notice to be given or delivered to you relating to this Agreement shall be in writing and addressed to you at the address indicated below your signature line on the last page of this Agreement or such other address of which you later advise the Corporation in writing. All notices shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified.

12. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall inure to the benefit of, and be binding upon, the Corporation and its successors and assigns and upon you and the legal representatives, heirs and the legatees of your estate.

13. CONSTRUCTION. This Agreement and the Award evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the terms of the Plan. The Plan Administrator shall have the discretionary authority to interpret and construe any term or

provision of the Plan or this Agreement, and such interpretation shall be binding on all persons having an interest in the Award.

14. GOVERNING LAW. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of California without resort to that State's conflict-of-laws rules.

15. AT WILL EMPLOYMENT. Nothing in this Agreement or your Award will provide you with any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way your right or the right of the Corporation to terminate your Service at any time for any reason, with or without cause, or for no reason.

16. MANDATORY ARBITRATION. ANY AND ALL DISPUTES OR CONTROVERSIES BETWEEN YOU AND THE CORPORATION ARISING OUT OF, RELATING TO OR OTHERWISE CONNECTED WITH THIS AGREEMENT OR THE AWARD OF RESTRICTED STOCK UNITS EVIDENCED HEREBY OR THE VALIDITY, CONSTRUCTION, PERFORMANCE OR TERMINATION OF THIS AGREEMENT SHALL BE SETTLED EXCLUSIVELY BY BINDING ARBITRATION PURSUANT TO SECTION 12 OF APPENDIX I TO THE LETTER AGREEMENT BETWEEN YOU AND THE CORPORATION DATED OCTOBER 25, 2004, WHICH IS INCORPORATED BY REFERENCE HEREIN AS IF SET FORTH FULLY HEREIN.

17. REMAINING TERMS. The remaining terms and conditions of your Award are governed by the Plan, and your Award is also subject to all interpretations, amendments, rules and regulations that may from time to time be adopted under the Plan. The official prospectus summarizing the principal features of the Plan and a special supplement discussing the restricted stock units issuable under the Plan are available for review on the Corporation's website at intranet.broadcom.com/stock/docs/98PSP.doc.

Please review the prospectus and the attached supplement carefully so that you fully understand your rights and benefits under your Award and the limitations, restrictions and vesting provisions applicable to the Award. In the event of any conflict between the provisions of this Agreement and those of the Plan, the provisions of the Plan shall be controlling.

You acknowledge reading and understanding the prospectus for the Plan, its supplement, and this Agreement. Provisions of the Plan that confer discretionary authority on Board or the Plan Administrator do not (and shall not be deemed to) confer in you any rights unless such rights are expressly set forth herein or are otherwise in the sole discretion of the Board or the Plan Administrator conferred by appropriate action after the date hereof.

Please execute the Acknowledgment section below to indicate your acceptance of the terms and conditions of your Award.

Broadcom Corporation

BY:
TITLE:

ACKNOWLEDGMENT

I hereby acknowledge and accept the foregoing terms and conditions of the Restricted Stock Unit award evidenced hereby. I further acknowledge and agree that the foregoing sets forth the entire understanding between the Corporation and me regarding my entitlement to receive the shares of the Corporation's Class A common stock subject to such award and supersedes all prior oral and written agreements on that subject.

SIGNATURE:
ADDRESS:

DATED: _______________________ , 20__

APPENDIX

The following definitions shall be in effect under the Agreement:

AGREEMENT shall mean this Restricted Stock Unit Agreement.

BOARD shall mean the Corporation's Board of Directors.

CHANGE IN CONTROL shall mean a change in ownership or control of the Corporation effected through any of the following transactions:

(ii) a shareholder-approved sale, transfer or other disposition of all or substantially all of the Corporation's assets, or

(iii) the acquisition, directly or indirectly by any person or related group of persons (other than the Corporation or a person that directly or indirectly controls, is controlled by, or is under common control with, the Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities pursuant to a tender or exchange offer made directly to the Corporation's shareholders.

CODE shall mean the Internal Revenue Code of 1986, as amended.

COMMON STOCK shall mean the Corporation's Class A Common Stock.

CORPORATION shall mean Broadcom Corporation, a California corporation, and any corporate successor to all or substantially all of the assets or voting stock of Broadcom Corporation, which shall by appropriate action adopt the Plan.

EMPLOYEE shall mean an individual who performs services while in the employ of the Corporation or any Parent or Subsidiary, subject to the control and direction of the employer entity not only as to the work to be performed but also as to the manner and method of performance.

FAIR MARKET VALUE shall mean the fair market value per share of Common Stock determined in accordance with the following provisions:

(i) If the Common Stock is at the time traded on the NASDAQ National Market, the Fair Market Value shall be the closing selling price per share of Common Stock at the close of

regular hours trading (i.e., before after-hours trading begins) on the NASDAQ National Market on the date in question, as such price is reported by the National Association of Securities Dealers. If there is no closing selling price for the Common Stock on the date in question, the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists.

(ii) If the Common Stock is at the time listed on any Stock Exchange, the Fair Market Value shall be the closing selling price per share of Common Stock at the close of regular hours trading (i.e., before after-hours trading begins) on the date in question on the Stock Exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange. If there is no closing selling price for the Common Stock on the date in question, the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists.

PARENT shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation, provided each corporation in the unbroken chain (other than the Corporation) owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

PLAN ADMINISTRATOR shall mean either the Board or a committee of the Board acting in its capacity as administrator of the Plan.

SERVICE shall mean your performance of services for the Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a non-employee member of the board of directors or a consultant or independent advisor. For purposes of this Agreement, you shall be deemed to cease Service immediately upon the occurrence of either of the following events: (i) you no longer perform services in any of the foregoing capacities for the Corporation or any Parent or Subsidiary or (ii) the entity for which you are performing such services ceases to remain a Parent or Subsidiary of the Corporation, even though you may subsequently continue to perform services for that entity.

STOCK EXCHANGE shall mean either the American Stock Exchange or the New York Stock Exchange.

SUBSIDIARY shall mean any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation, provided each corporation (other than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

WITHHOLDING TAXES shall mean the federal, state and local income and employment taxes required to be withheld by the Corporation in connection with the issuance of the shares of Common Stock that vest under the Award.

ADDENDUM
TO
RESTRICTED STOCK UNIT AWARD AGREEMENT

The following provisions are hereby incorporated into, and are hereby made a part of, that certain Restricted Stock Unit Award Agreement (the "RSU Agreement") by and between Broadcom Corporation, a California corporation (the "Corporation"), and Scott A. McGregor ("Recipient") evidencing a restricted stock unit award granted this day to Recipient (the "RSU Award") under the terms of the Corporation's 1998 Stock Incentive Plan, as amended and restated (the "Plan"). The provisions of this Addendum shall be effective immediately.

Recipient has entered into an employment agreement with the Corporation pursuant to the terms of that certain letter from the Corporation dated October 25, 2004 (the "Letter Agreement"). The purpose of this Addendum is to supplement the terms of the RSU Agreement so that those terms conform to the special benefits to which Recipient will become entitled pursuant to the terms of the Letter Agreement.

All capitalized terms in this Addendum, to the extent not otherwise defined herein, shall have the meanings assigned to them in the Letter Agreement, including Appendix II thereto.

SPECIAL BENEFIT

1. If either the Corporation terminates Recipient's employment in a Notice of Termination specifying no reason or a reason other than Cause or Disability, or Recipient terminates his employment with the Corporation in a Notice of Termination specifying Good Reason, and Recipient's employment has not terminated automatically as a result of death, then to the extent the RSU Award is at that time outstanding, Recipient shall be credited with an additional twenty-four (24) months of employment with the Corporation for purposes of the vesting schedule in effect for the RSU Award so that Recipient shall be immediately vested in the RSU Award to the same extent as if Recipient had completed an additional twenty-four (24) months of employment with the Corporation prior to the Date of Termination.

2. If Recipient's employment is terminated by reason of death or Disability, then Recipient shall, immediately on the Date of Termination, become fully vested in the RSU Award.

4. In no event shall Recipient be entitled to any benefits pursuant to this Addendum unless (i) Recipient shall have executed and delivered to the Corporation the separation agreement required under Paragraph 11 of Appendix II to the Letter Agreement and (ii) Recipient is in material compliance with his obligations to the Corporation pursuant to his Confidentiality and Invention Assignment Agreement during and subsequent to Recipient's employment.

5. To the extent the provisions of this Addendum conflict with the provisions of the Restricted Stock Unit Award Agreement, the provisions of this Addendum shall be controlling.

6. Except to the extent modified by this Addendum, all the terms and conditions of the Restricted Stock Unit Award Agreement shall continue in full force effect.

IN WITNESS WHEREOF, BROADCOM CORPORATION has caused this Addendum to be executed by its duly-authorized officer, and Recipient has executed this Addendum, all as of the Effective Date specified below.

Broadcom Corporation

By:

Title:

RECIPIENT

EFFECTIVE DATE: ___________, 200__

EXHIBIT 10.33

INDUSTRIAL LEASE
(MULTI-TENANT; NET)

BETWEEN

THE IRVINE COMPANY

AND

BROADCOM CORPORATION

(49 DISCOVERY)

                                 INDEX TO LEASE

ARTICLE I.                 BASIC LEASE PROVISIONS

ARTICLE II.                PREMISES
  Section 2.1              Leased Premises
  Section 2.2              Acceptance of Premises
  Section 2.3              Building Name and Address
  Section 2.4              Landlord's Responsibilities
  Section 2.5              Rights to Lease Additional Space
  Section 2.6              Grant of License Rights

ARTICLE III.               TERM
  Section 3.1              General
  Section 3.2              Delay in Possession
  Section 3.3              Right to Extend the Lease Term

ARTICLE IV                 RENT AND OPERATING EXPENSES
  Section 4.1              Basic Rent
  Section 4.2              Operating Expenses
  Section 4.3              Security Deposit

ARTICLE V.                 USES
  Section 5.1              Use
  Section 5.2              Signs
  Section 5.3              Hazardous Materials

ARTICLE VI.                COMMON AREAS; SERVICES
  Section 6.1              Utilities and Services
  Section 6.2              Operation and Maintenance of Common Areas
  Section 6.3              Use of Common Areas
  Section 6.4              Parking
  Section 6.5              Changes and Additions by Landlord
  Section 6.6              Outdoor Courtyard Area
ARTICLE VII.               MAINTAINING THE PREMISES
  Section 7.1              Tenant's Maintenance and Repair
  Section 7.2              Landlord's Maintenance and Repair
  Section 7.3              Alterations
  Section 7.4              Mechanic's Liens
  Section 7.5              Entry and Inspection

ARTICLE VIII.              TAXES AND ASSESSMENTS ON TENANT'S PROPERTY

ARTICLE IX.                ASSIGNMENT AND SUBLETTING
  Section 9.1              Rights of Parties
  Section 9.2              Effect of Transfer
  Section 9.3              Sublease Requirements
  Section 9.4              Certain Transfers

ARTICLE X.                 INSURANCE AND INDEMNITY
  Section 10.1             Tenant's Insurance
  Section 10.2             Landlord's Insurance
  Section 10.3             Tenant's Indemnity
  Section 10.4             Landlord's Nonliability
  Section 10.5             Waiver of Subrogation

ARTICLE XI.                DAMAGE OR DESTRUCTION
  Section 11.1             Restoration
  Section 11.2             Lease Governs

ARTICLE XII.               EMINENT DOMAIN
  Section 12.1             Total or Partial Taking
  Section 12.2             Temporary Taking
  Section 12.3             Taking of Parking Area

ARTICLE XIII.              SUBORDINATION; ESTOPPEL CERTIFICATE; FINANCIALS
  Section 13.1             Subordination
  Section 13.2             Estoppel Certificate
  Section 13.3             Financials

                                       (i)

ARTICLE XIV.               DEFAULTS AND REMEDIES
  Section 14.1             Tenant's Defaults
  Section 14.2             Landlord's Remedies
  Section 14.3             Late Payments
  Section 14.4             Right of Landlord to Perform
  Section 14.5             Default by Landlord
  Section 14.6             Expenses and Legal Fees
  Section 14.7             Waiver of Jury Trial
  Section 14.8             Satisfaction of Judgment

ARTICLE XV.                END OF TERM
  Section 15.1             Holding Over
  Section 15.2             Merger on Termination
  Section 15.3             Surrender of Premises; Removal of Property

ARTICLE XVI.               PAYMENTS AND NOTICES

ARTICLE XVII.              RULES AND REGULATIONS

ARTICLE XVIII.             BROKER'S COMMISSION

ARTICLE XIX.               TRANSFER OF LANDLORD'S INTEREST

ARTICLE XX.                INTERPRETATION
  Section 20.1             Gender and Number
  Section 20.2             Headings
  Section 20.3             Joint and Several Liability
  Section 20.4             Successors
  Section 20.5             Time of Essence
  Section 20.6             Controlling Law
  Section 20.7             Severability
  Section 20.8             Waiver and Cumulative Remedies
  Section 20.9             Inability to Perform
  Section 20.10            Entire Agreement
  Section 20.11            Quiet Enjoyment
  Section 20.12            Survival

ARTICLE XXI.               EXECUTION AND RECORDING
  Section 21.1             Counterparts
  Section 21.2             Corporate and Partnership Authority
  Section 21.3             Execution of Lease; No Option or Offer
  Section 21.4             Recording
  Section 21.5             Amendments
  Section 21.6             Executed Copy
  Section 21.7             Attachments

ARTICLE XXII               MISCELLANEOUS
  Section 22.1             Nondisclosure of Lease Terms
  Section 22.2             Guaranty
  Section 22.3             Changes Requested by Lender
  Section 22.4             Mortgagee Protection
  Section 22.5             Covenants and Conditions
  Section 22.6             Security Measures
  Section 22.7             JAMS

EXHIBITS

  Exhibit A                Description of Premises
  Exhibit B                Environmental Questionnaire
  Exhibit C                Landlord's Disclosures
  Exhibit D                Insurance Requirements
  Exhibit E                Rules and Regulations
  Exhibit X                Work Letter
  Exhibit Y                Project Site Plan

(ii)

INDUSTRIAL LEASE
(MULTI-TENANT; NET)

THIS LEASE is made as of the 1st day of August, 2000, by and between THE IRVINE COMPANY, hereafter called "Landlord," and Broadcom Corporation, a California corporation, hereinafter called "Tenant."

ARTICLE I. BASIC LEASE PROVISIONS

Each reference in this Lease to the "Basic Lease Provisions" shall mean and refer to the following collective terms, the application of which shall be governed by the provisions in the remaining Articles of this Lease.

1. Premises: All of one (1) two (2) story building known as 49 Discovery, Irvine, California (the "Building").

2. Project Description: Discovery Business Center I & II.

3. Use of Premises: General office use and any other use which does not violate applicable laws, rules and regulations or covenants, conditions and restrictions.

4. Commencement Date: October 15, 2000.

5. Lease Term: Sixty (60) months, plus such additional days as may be required to cause this Lease to expire on the final day of the last calendar month.

6. Basic Rent: One Hundred Three Thousand Nine Hundred Sixty Eight Dollars ($103,968.00) per month, based on $1.90 per rentable square foot.

Basic Rent is subject to adjustment as follows:

Commencing on the first day of the thirteenth (13th) month of the Lease Term, the Basic Rent shall be One Hundred Six Thousand Seven Hundred Four Dollars ($106,704.00) per month, based on $1.95 per rentable square foot.

Commencing on the first day of the twenty-fifth (25th) month of the Lease Term, the Basic Rent shall be One Hundred Nine Thousand Four Hundred Forty Dollars ($109,440.00) per month, based on $2.00 per rentable square foot.

Commencing on the first day of the thirty-seventh (37th) month of the Lease Term, the Basic Rent shall be One Hundred Twelve Thousand One Hundred Seventy Six Dollars ($112,176.00) per month, based on $2.05 per rentable square foot.

Commencing on the first day of the forty-ninth (49th) month of the Lease Term, the Basic Rent shall be One Hundred Fourteen Thousand Nine Hundred Twelve Dollars ($114,912.00) per month, based on $2.10 per rentable square foot.

7. Guarantor(s): None

8. Floor Area of Premises: Approximately 54,720 rentable square feet

9. Security Deposit: None

10. Broker(s): Real Estate & Logistics Technology, Inc. (Kim Josephson).

11. Additional Insureds: Insignia/ESG of California, Inc.

12. Address for Payments and Notices:

LANDLORD                                        TENANT

THE IRVINE COMPANY                              Broadcom Corporation
c/o Insignia/ESG of California                  16215 Alton Parkway
43 Discovery, Suite 120                         Irvine, CA
Irvine, CA  92618                               Attn:  Director Corporate Services

With a copy of notices to:                      With an additional copy sent to the same address
                                                to the attention of the Chief Financial Officer
THE IRVINE COMPANY
dba Irvine Industrial Company                   And with a copy of notices to:
P.O. Box 6370
Newport Beach, CA  92658-6370                   Brobeck, Phleger & Harrison LLP
Attn:  Vice President, Industrial Operations    12390 El Camino Real
                                                San Diego, CA  92130
                                                Attention:  Scott Biel

13. Tenant's Liability Insurance Requirement: $2,000,000.00

14. Vehicle Parking Spaces: 218

ARTICLE II. PREMISES

SECTION 2.1. LEASED PREMISES. Landlord leases to Tenant and Tenant leases from Landlord the premises shown in Exhibit A (the "Premises"), containing approximately the floor area set forth in Item 8 of the Basic Lease Provisions. The Premises are located in the building identified in Item 1 of the Basic Lease Provisions (which together with the underlying real property, is called the "Building"), and is a portion of the project shown in Exhibit Y (the "Project"). Tenant understands that the floor area set forth in Item 8 of the Basic Lease Provisions may include, at Landlord's option, a factor approximating the total square footage of any common lobby or internal common features of the Building times the ratio of the actual square footage of the Premises to the total square footage of the Building. The parties agree that the Floor Area of the Premises specified in Item 8 of the Basic Lease Provisions shall be the rentable area of the Premises for all purposes under this Lease notwithstanding any later determination or remeasure by either party. Landlord shall have no right to relocate Tenant from the Premises at any time during the Term of this Lease or any extension.

SECTION 2.2. ACCEPTANCE OF PREMISES. Tenant acknowledges that, except as expressly provided in this Lease, neither Landlord nor any representative of Landlord has made any representation or warranty with respect to the Premises or the Building or the suitability or fitness of either for any purpose, including, without limitation, any representations or warranties regarding zoning or other land use matters; and that neither Landlord nor any representative of Landlord has made any representations or warranties regarding (i) what other tenants or uses may be permitted or intended in the Building and the Project, or (ii) any exclusivity of use by Tenant with respect to its permitted use of the Premises as set forth in Item 3 of the Basic Lease Provisions. Tenant further acknowledges that neither Landlord nor any representative of Landlord has agreed to undertake any alterations or additions or construct any improvements to the Premises except as expressly provided in this Lease. The taking of possession or use of the Premises by Tenant for the conduct of Tenant's business therein (but not for construction or early entry for fixturization in accordance with the Work Letter) shall conclusively establish that the Premises and the Building were in satisfactory condition and in conformity with the provisions of this Lease in all respects, except for: (i) those matters which Tenant brings to Landlord's attention on a written punch list delivered to Landlord within thirty
(30) days after the Term of this Lease commences with respect to the Premises , and (ii) Landlord's other obligations specifically provided in this Lease, including, without limitation, the responsibilities contained in Section 2.4 hereof. Nothing contained in this Section shall affect the commencement of the Term or the obligation of Tenant to pay rent. Landlord shall diligently complete all punch list items of which it is notified as provided above.

SECTION 2.3. BUILDING NAME AND ADDRESS. Tenant shall not utilize any name selected by Landlord from time to time for the Building and/or the Project as any part of Tenant's corporate or trade name. Landlord shall have the right to change the name, address, number or designation of the Building or Project without liability to Tenant; provided, however, if the address of the Building and/or the Project is changed by Landlord, Landlord agrees to provide Tenant with no less than sixty (60) days prior written notice and to reimburse Tenant for all expenses reasonably incurred by Tenant in conjunction with such address change (including, without limitation, the cost of changing Tenant's stationery and of notifying Tenant's clients and customers of Tenant's new address of the Building and/or the Project), not to exceed Five Thousand Dollars ($5,000.00) in the aggregate.

SECTION 2.4 LANDLORD'S RESPONSIBILITIES.

(a) Landlord shall correct, repair or replace, at Landlord's sole cost and expense and not as a Project Cost, any non-compliance of the Building exterior and the Common Areas with all applicable building permits and codes in effect as of the Commencement Date, including, without limitation, the provisions of Title III of the Americans With Disabilities Act ("ADA") in effect as of the Commencement Date. Said costs of compliance shall be Landlord's sole cost and shall not be part of Project Costs. Landlord shall correct, repair or replace any non-compliance of the Building exterior and the Common Areas with any revisions or amendments to the ADA in effect after the Commencement Date, provided that the amortized cost of such repairs or replacements (amortized over the useful life thereof using a market cost of funds reasonably determined by Landlord) shall be included as Project Costs payable by Tenant. All other ADA compliance issues which pertain to the Premises, including, without limitation, in connection with Tenant's construction of any alterations or other improvements in the Premises (and any resulting ADA compliance requirements in the Common Areas), the Tenant Improvements and the operation of Tenant's business and employment practices in the Premises, shall be the responsibility of Tenant at its sole cost and expense. Landlord shall, during the initial Lease Term, correct, repair or replace, at Landlord's sole cost and expense and not as a Project Cost, any failure of the structural components of the roof, foundations, footings and load-bearing walls of the Building. The repairs, corrections or replacements required of Landlord or of Tenant under the foregoing provisions of this Section 2.4 shall be made promptly following notice of non-compliance from any applicable governmental agency.

(b) Landlord warrants to Tenant that the Shell Building Improvements as defined in the Discovery Outline Specifications (as defined in the Work Letter) and the Tenant Improvements to be completed pursuant to the Work Letter shall be free from defects in workmanship or materials for a period of twelve (12) months from the Commencement Date. Landlord shall promptly rectify any non-compliance at its sole cost and expense after receipt of written notice from Tenant within such time setting forth the nature and extent of any such non-compliance. Landlord shall obtain customary warranties and guaranties from the contractor(s) performing the Tenant Improvement work and/or the manufacturers of equipment installed but shall be under no obligation to incur additional expense in order to obtain or extend such warranties. If after expiration of the initial twelve (12) months of the Lease Term, Tenant is required to make repairs to any component of the Premises or any of its systems for which Landlord may have obtained

a warranty, Landlord shall, upon request by Tenant, use its good faith efforts to pursue its rights under any such warranties for the benefit of Tenant. Landlord shall be under no obligation to incur any expense in connection with asserting rights under such warranties or guaranties against either the contractor or the manufacturer, but shall use reasonable good faith efforts to enforce such warranties and guaranties for Tenant's benefit.

(c) Notwithstanding the provisions of Section 7.2 of this Lease, Landlord agrees to maintain and repair, at its sole cost and expense and not as an Operating Expense the structural components of the roof and Building, including floor/ceiling slabs, columns, beams, walls and the foundations and footings of the Building during the initial Lease Term. If a non-compliance with the foregoing warranty exists, Landlord shall, promptly after receipt of the written notice from Tenant setting forth the nature and extent of such non-compliance, rectify same at Landlord's sole cost and expense.

SECTION 2.5. RIGHTS TO LEASE ADDITIONAL SPACE. Provided Tenant is not then in default of any monetary covenant of this Lease (including, without limitation, the obligation to pay Basic Rent and/or Tenant's Share of Operating Expenses), or any material non-monetary covenant, following written notice to Tenant and the expiration of the applicable cure period, Landlord hereby grants Tenant the rights described in this Section.

(a) TENANT'S EXPANSION RIGHT - 47 DISCOVERY. Tenant shall have the right from the date of execution of this Lease to April 15, 2001 to expand the area of the Premises (the "Expansion Right") by delivering written notice to Landlord ("Expansion Notice") expressing Tenant's desire to lease all or a leasable portion (in a configuration reasonably acceptable to Landlord) of any space then available in the building owned by Landlord located at 47 Discovery (the "Expansion Space") upon the same terms and conditions as set forth in this Lease. Tenant's Expansion Notice shall identify the amount of space Tenant desires and, if less than a full floor, a depiction of the area desired. Landlord shall have the right in its sole discretion reasonably exercised to designate the final configuration of the Expansion Space if less than a full floor is requested. In the event Tenant gives Landlord an Expansion Notice prior to the Commencement Date, all terms and conditions of this Lease including Base rent and additional rent shall apply with respect to the Expansion Space so added to the Premises. In the event Tenant gives Landlord an Expansion Notice on or after the Commencement Date but prior to January 15, 2001, all terms and conditions of this Lease shall apply except that the Base Rent applicable to the Expansion Space shall be $0.10 per square foot per month greater than the rental rates set forth in Item 6 of the Basic Lease Provisions with respect to the Premises. In the event Tenant gives Landlord an Expansion Notice between January 16, 2001 and April 15, 2001, all terms and conditions of the Lease shall apply except that the Base Rent applicable to the Expansion Space shall be $0.20 per square foot per month greater than the rental rates set forth in Item 6 of the Basic Lease Provisions. Tenant's rights under this Section shall expire and be of no further force and effect unless exercised on or before April 15, 2001. Notwithstanding the foregoing, Tenant's expansion rights pursuant to this subparagraph shall terminate if Landlord has previously offered any of such space to Tenant pursuant to the Right of First Refusal described below. The date any Expansion Space is added to the Premises shall be the date which is fourteen
(14) calendar weeks after the date of the Expansion Notice.

(b) RIGHT OF FIRST REFUSAL - 47 DISCOVERY. In addition to the Expansion Right set forth above, Landlord hereby grants to Tenant the one-time right of first refusal applicable to the initial leasing only ("First Right") to lease all or any portion equal to or larger than one full floor of space in the building located at 47 Discovery ("First Right Space") in accordance with and subject to the provisions of this subsection. At any time after the date of this Lease, but prior to leasing the First Right Space, or any portion thereof, to any third party, if Landlord has reached a tentative agreement (which may be a nonbinding, tentative agreement) to lease any of the First Right Space to a third party, Landlord shall give Tenant written notice describing the space (the "Designated First Right Space") and the basic economic terms including but not limited to the Basic Rent, term, operating expenses, and tenant improvement allowance (collectively, the "Economic Terms"), tentatively agreed upon for such lease. It is understood that should Landlord intend to lease other space in addition to the First Right Space as part of a single transaction, then Landlord's notice shall so provide and all such space shall collectively be subject to the First Right provisions. If the Designated First Refusal Space is less than one complete floor of the First Right Space, Tenant's First Right shall be exercisable at a minimum with respect to the entire floor which contains the Designated First Right Space but Tenant shall have the right to exercise its First Refusal with respect to any of the First Right Space then remaining unleased upon the Economic Terms set forth in Landlord' Notice.

Within five (5) business days after receipt of Landlord's notice, Tenant shall give Landlord written notice ("Tenant's First Right Response Notice") pursuant to which Tenant shall elect to: (i) lease the Designated First Right Space (but in no event less than one complete floor of the First Right Space) or to lease all remaining First Right Space upon the Economic Terms; or
(ii) decline to lease the Designated First Right Space, in which event Landlord may lease the Designated First Right Space to any third party upon the Economic Terms and such other terms as it deems appropriate. In the event that Tenant fails to respond in writing to Landlord's notice within said five (5) business day period, Tenant shall be deemed to have elected clause (ii) above. In the event Tenant elects not to lease the Designated First Right Space or fails to respond, Tenant's First Right as set forth in this subsection and Tenant's Expansion Right as set forth above shall terminate as to any remaining space in the 47 Discovery building. In the event that Landlord shall not enter into a lease for the Designated First Right Space, or a portion thereof, with a third party within one hundred eighty (180) days following Landlord's notice described above, then prior to leasing the Designated First Right Space to any third party thereafter, Landlord shall repeat the procedures set forth in this subsection one final time but no such event shall revive Tenant's Expansion Right as set forth above.

(c) RIGHT OF SECOND REFUSAL - 15440 LAGUNA CANYON ROAD. In the event Tenant has previously added or irrevocably committed to add all of 47 Discovery to the Premises whether by exercise of its Expansion Right or First

Right, and whether or not the Commencement Date for all of 47 Discovery has yet occurred or in the event some third party has leased all of 47 Discovery, Tenant shall have a one-time right applicable to the initial leasing only, which is subject and subordinate to the prior rights of The Boeing Company ("Boeing"), of refusal ("Second Right") to lease any space within the building located at 15440 Laguna Canyon Road (the "Second Right Space"). At any time after the date of this Lease and provided Tenant has already irrevocably committed to add all of the space in 47 Discovery to the Premises by exercise of its Expansion Right or First Right, but prior to leasing the Second Right Space, or any portion thereof to any third party, if Landlord has reached a tentative agreement (which may be a nonbinding, tentative agreement) to lease any of the Second Right Space to a third party, Landlord shall give Tenant written notice describing the space (the "Designated Second Right Space") and the basic economic terms including but not limited to the Basic Rent, term, operating expenses, and tenant improvement allowance (collectively, the "Second Right Economic Terms"), tentatively agreed upon for such lease. It is understood that should Landlord intend to lease other space in addition to the Second Right Space as part of a single transaction, then Landlord's notice shall so provide and all such space shall collectively be subject to the following provisions. If the Designated Second Right Space is less than one complete floor, Tenant's Second Right shall be exercisable at a minimum with respect to the entire floor which contains the Designated Second Right Space. Landlord may elect, in its sole discretion, to give notice concurrently to Boeing and to Tenant of any proposed transaction for the Second Right Space and Tenant's right to lease such Second Right Space shall be conditioned on Boeing electing not to exercise its rights with respect to such Second Right Space but Tenant shall have the right (assuming Boeing declines to exercise its prior right) to exercise its Second Right with respect to any of the Second Right Space then remaining unleased upon the Economic Terms set forth in Landlord's notice given pursuant to this paragraph.

Within five (5) business days after receipt of Landlord's notice of Second Right Economic Terms, Tenant shall give Landlord written notice ("Tenant's Second Right Acceptance Notice") pursuant to which Tenant shall elect to: (i) lease the Designated Second Right Space but in no event less than one complete floor of the Second Right Space or to lease all remaining Second Right Space upon the same Economic Terms; or (ii) decline to lease the Designated Second Right Space, in which event Landlord may lease the Designated Second Right Space to any third party upon the Economic Terms and such other terms as it deems appropriate. In the event that Tenant fails to respond in writing to Landlord's notice within said five (5) business day period, Tenant shall be deemed to have elected clause (ii) above. In the event Tenant elects not to lease the Designated Second Right Space or fails to respond, Tenant's Second Right as set forth in this subsection shall terminate as to any remaining Second Right Space. In the event that Landlord shall not enter into a lease for the Designated Second Right Space, or a portion thereof, with a third party within one hundred eighty (180) days following Landlord's notice described above, then prior to leasing the Designated Second Right Space to any third party thereafter, Landlord shall repeat the procedures set forth in this subsection one final time.

(d) DOCUMENTATION OF ADDITIONAL SPACE. In the event Tenant exercises any or its rights under this Section to expand the Premises, then Landlord shall promptly prepare and deliver to Tenant an amendment to this Lease evidencing such transaction and Tenant shall execute and return same to Landlord within ten (10) business days. Tenant's failure to timely return the amendment shall be a default under this Lease with the Premises expanded as set forth in such amendment.

(e) RIGHTS LIMITED TO BROADCOM. Tenant's rights under this
Section 2.5 shall belong solely to Broadcom Corporation, a California corporation, and may not be assigned or transferred except in connection with the assignment of this Lease to a "Tenant Affiliate" as hereinafter defined. Any attempted assignment or transfer of such rights except to a Tenant Affiliate shall be void and of no force or effect.

SECTION 2.6 GRANT OF LICENSE RIGHTS. Landlord hereby grants to Tenant a non-exclusive license and permission to enter upon the areas described below (the "Licensed Area") for the purposes and on the terms and conditions set forth in this Section (the "License").The Licensed Area shall be considered to be a part of the Premises for all purposes under the Lease but there shall be no license fee or rent payable to Landlord with respect thereto, and except as otherwise expressly provided in this Section, all provisions applicable to the use of the Premises under the Lease shall apply to the Licensed Area and its use by Tenant.

(a) License to Roof Areas for Telecommunication Equipment. Landlord grants to Tenant the license and right to enter upon the areas of the roof to be designated on a written plan approved by Landlord for the installation, operation and maintenance of microwave and/or satellite antenna dishes and/or global positioning satellite ("GPS") antenna and related wires, cables, conduits (collectively the "Communications Equipment"). All such equipment shall be screened from view in a manner consistent with Landlord's requirements for screening such equipment elsewhere in the Project. Tenant shall at all times operate and maintain the Communications Equipment so as to ensure that such systems do not create electro-magnetic or other disturbances to existing systems in the area in which the Project is located whether operated by Landlord, other tenants or third parties. Tenant shall be solely responsible for any repair or maintenance to the roof required as a result of Tenant's activities. Landlord agrees that in the event it grants one or more licenses to third parties to install, operate and/or maintain Communications Equipment on the roof of the Building, Landlord shall obtain a covenant from such third parties that they shall operate any such systems in a manner which will not create unreasonable electro-magnetic or other disturbances to or with systems being operated by Tenant on the roof of the Building in accordance with the terms of this License.

plan. Tenant shall have access to the Licensed Area for the generator on a 24 hour per day/7 day per week basis; provided, however, that Tenant shall not undertake any repairs or maintenance in such Licensed Area which would interfere with the use of the Common Areas by other tenants without the prior written consent of Landlord. Landlord shall not unreasonably withhold its consent to any such repairs or maintenance, but may impose reasonable conditions thereon and Tenant shall undertake any such work as expeditiously as reasonably possible so as to cause as little interference with the rights of other tenants of the Project as possible. Tenant has advised Landlord that it intends to run the generator on a regular basis in order to comply with maintenance specifications and requirements of law and that such operation may be as often as one (1) thirty (30) minute period per week. Except in cases of emergency, when no prior approval shall be required, Tenant shall propose for Landlord's reasonable approval the schedule for operation of the generator which will provide minimal interference with the use of the Project by other tenants.

(1) The Term of the License shall be coterminous with this Lease and, subject to the terms hereof, shall be irrevocable so long as the Lease remains in effect;

(2) Tenant shall not be obligated to pay any license fee for the use of the Licensed Areas pursuant to this Section during the Term of this Lease or any extension thereof.

(3) Tenant shall use the Licensed Areas only for the installation, operation, repair, replacement and maintenance of the referenced equipment and the necessary mechanical and electrical equipment to service said equipment and for no other use or purpose. The installation of all equipment and facilities related thereto, including any required conduit from the Premises to the Licensed Areas, shall be deemed to constitute an alteration subject to the provisions of Section 7.3 of the Lease, provided that Landlord shall not unreasonably withhold its approval of the same. Landlord may require appropriate screening for any equipment installed within the Licensed Areas as a condition of Landlord's approval of the plans submitted.

(4) The Communications Equipment shall be used only for transmitting and/or receiving data, audio and/or video signals to and from Tenant's facilities within the Premises for Tenant's business use, and shall not be used or permitted to be used by Tenant for purposes of broadcasting signals to the public or to provide telecommunications or other communications transmitting or receiving services to the public. Notwithstanding the foregoing, Tenant shall not be prohibited from transmitting or receiving broadcasting signals to and from its customers, business affiliates and/or employees in connection with the conduct of its business in the Premises.

(5) In the event Landlord reasonably determines that the presence or operation of the equipment installed by Tenant is or will results in material damage to the Building, Landlord reserves the right upon reasonable prior written notice to Tenant to require either (a) the relocation of all equipment installed by Tenant on the roof of the Building to another location on the roof of the Building reasonably designated by Landlord, or (b) the removal of any and all of such equipment unless Tenant makes satisfactory arrangements to protect Landlord, the Building and its tenants therefrom;

(6) Tenant shall require its employees, when using the Licensed Areas, to stay within the immediate vicinity thereof. In addition, in the event any communications system or broadcast or receiving facilities are operating in the area, Tenant shall at all times during the term of the License conduct its operations so as to ensure that such system or facilities shall not be subjected to harmful interference as a result of such operations by Tenant. Upon notification from Landlord of any such interference, Tenant agrees to immediately take the necessary steps to correct such situation, and Tenant's failure to do so shall be deemed a default under the terms of this Lease subject to the applicable cure right in accordance with Section 14.1 hereof.

(7) During the term of the License, Tenant shall comply with any standards promulgated by applicable governmental authorities regarding the installation, use or maintenance of the Communications Equipment or generator or the generation of electromagnetic fields. In the event Landlord is advised by a governmental agency that the Communications Equipment poses a health or safety hazard to occupants of the Building, Landlord may require Tenant to make arrangements reasonably satisfactory to Landlord to mitigate such hazard or, if Tenant either fails or is unable to make such satisfactory arrangements, to remove the Communications Equipment. Any claim or liability resulting from the use of the Communications Equipment or the Licensed Areas by Tenant shall be subject to the indemnification provisions of this Lease applicable to Tenant's use of the Premises;

(8) During the term of the License, Tenant shall pay all taxes attributable to the Communications Equipment and generator and other equipment owned and installed by Tenant, and Tenant shall assure and provide Landlord with evidence that the Licensed Area and Tenant's use thereof are subject to the insurance coverages otherwise required to be maintained by Tenant as to the Premises pursuant to Exhibit D;

(9) Upon the expiration or sooner termination of the Lease, Tenant shall remove the Communications Equipment and generator and all related equipment and facilities, including any conduit from the Premises to the Licensed Areas and any other portions of the Building within or upon which the same may be installed, and shall restore the Licensed Areas and all other areas affected by such removal to their original condition, reasonable wear and tear excepted, all at its sole cost and expense. Notwithstanding the foregoing, Tenant shall not be obligated to remove underground conduit between the Building and the Generator pad provided it removes all cabling and caps the conduit in a manner reasonably satisfactory to Landlord; and

(10) The License is personal to Tenant and shall not be assignable in whole or in part (except to a Tenant Affiliate which is occupying a portion of the Building and any subtenant or assignee approved by Landlord in accordance with the Terms of this Lease), and any attempted assignment thereof without the consent of Landlord, which consent may be withheld by Landlord in its sole and absolute discretion, shall immediately terminate the License. Notwithstanding the foregoing, Landlord's consent shall not be required with respect to an assignment of the License to any Tenant Affiliate.

ARTICLE III. TERM

SECTION 3.1. GENERAL. The term of this Lease (the "Term") for the Premises shall be for the period shown in Item 5 of the Basic Lease Provisions. Subject to the provisions of Section 3.2 below, the Term shall commence ("Commencement Date") on the earlier to occur of: (i) ten (10) business days following the date that (A) Landlord notifies Tenant that Landlord has substantially completed the construction of the Tenant Improvements in accordance with the Work Letter attached as EXHIBIT X hereto, but for minor "punch list" items identified by Landlord and Tenant in a walk-through of the Premises prior to the Commencement Date, which items do not preclude or materially impair Tenant from conducting its business from the Premises, and (B) Landlord has provided Tenant with all parking required by this Lease in the Common Area of the Project, and (C) Landlord has obtained and provided Tenant with a certificate of occupancy or temporary certificate of occupancy for the Premises from the City of Irvine or (ii) the date Tenant acquires possession or commences use of such portion of the Premises for any purpose other than construction or installation of equipment, furniture, fixtures or network and telecommunications cabling; or (iii) October 15, 2000. Within ten (10) days after the Commencement Date has occurred, the parties shall memorialize on a form provided by Landlord the actual Commencement Date and the expiration date ("Expiration Date") of this Lease. Tenant's failure to execute that form shall not affect the validity of Landlord's determination of those dates. The Term shall be for the period shown in Item 5 of the Basic Lease Provisions.

SECTION 3.2. DELAY IN POSSESSION. If Landlord, for any reason whatsoever, cannot deliver possession of the Premises to Tenant on or before the Commencement Date, this Lease shall not be void or voidable nor shall Landlord be liable to Tenant for any resulting loss or damage. Notwithstanding the foregoing, if Tenant has been unable to occupy the Premises because the City of Irvine refuses or is prevented from issuing the permits required to construct the Tenant Improvements reasonably consistent with the approved Preliminary Plan, (but not as a result of Landlord Delay(s) as defined in the Work Letter) on or before October 15, 2001, (the "Outside Date") and, provided Tenant is not then in default of its obligations under this Lease after expiration of the applicable cure period, Tenant shall have the one-time right to terminate this Lease by giving Landlord written notice to that effect after the Outside Date but prior to October 31, 2001. Provided Tenant has not occupied the Premises on or before the Outside Date, Landlord shall have the right to terminate this Lease by written notice to Tenant given on or before November 15, 2001. In the event this Lease is terminated by Tenant, pursuant to the provisions of this Section, Tenant shall pay to Landlord concurrently with its notice of termination the unamortized portion of the real estate brokerage commission paid by Landlord in connection with this Lease.

SECTION 3.3. RIGHT TO EXTEND THE LEASE TERM. Provided that Tenant is not in default of any monetary covenant of this Lease (including, without limitation, the obligation to pay Basic Rent and/or Tenant's Share of Operating Expenses) or any material non-monetary covenant, following written notice and the expiration of the applicable cure period, either at the time of exercise of the extension right granted herein or at the time of the commencement of such extension, then Tenant may extend the Term of this Lease for one (1) period of sixty (60) months. Tenant shall exercise its right to extend the Term by and only by delivering Landlord, not later than nine (9) months or sooner than twelve (12) months prior to the expiration date of the then current Term, Tenant's irrevocable written notice of its commitment to extend (the "Commitment Notice"). The Basic Rent payable under the Lease during the extension of the Term shall be at the fair market rental, including subsequent adjustments, for comparable office space being leased by Landlord in the Irvine Spectrum. Landlord will provide written notice to Tenant of Landlord's good faith determination of the fair market rental rate not later than thirty (30) days after the date upon which Tenant timely exercises its extension option. Tenant will have thirty (30) days ("Tenant's Review Period") after receipt of Landlord's notice of the fair market rental rate within which to accept such fair market rental rate or to reasonably object thereto in writing. Tenant's failure to object to the fair market rental rate submitted by Landlord in writing within Tenant's Review Period will conclusively be deemed Tenant's approval and acceptance thereof. If Tenant reasonably objects to the fair market rental rate submitted by Landlord within Tenant's Review Period, Landlord and Tenant will attempt in good faith to agree upon such fair market rental rate using their best good faith efforts. If Landlord and Tenant fail to reach agreement on such fair market rental rate within thirty (30) days following the expiration of Tenant's Review Period (the "Outside Agreement Date"), then either party may elect, by written notice to the other party, to cause said rental, including subsequent adjustments, to be determined by appraisal as follows.

Within ten (10) business days following receipt of such appraisal election, the parties shall attempt to agree on an appraiser to determine the fair market rental. If the parties are unable to agree in that time, then each party shall designate an appraiser within ten (10) business days thereafter. Should either party fail to so designate an appraiser within that time, then the appraiser designated by the other party shall determine the fair rental value. Should each of the parties timely designate an appraiser, then the two appraisers so designated shall appoint a third appraiser who shall, acting alone, determine the fair rental value of the Premises. Any appraiser designated hereunder shall have an M.A.I. certification with not less than five (5) years experience in the valuation of commercial office buildings in Orange County, California.

Within thirty (30) days following the selection of the appraiser, such appraiser shall determine the fair market rental value of the Premises, including subsequent adjustments of rent, if any. In determining such value, the appraiser shall consider rental comparables for space in the Irvine Spectrum (including, without limitation, the Project). In no event shall the appraiser attribute factors for market tenant improvement allowances or brokerage commissions to reduce said fair market rental. Landlord and Tenant shall each pay for the services of their respective appraisers and shall share equally the cost of the third appraiser.

Within twenty (20) days after the determination of the fair market rental, Landlord shall prepare an amendment to this Lease reasonably reflecting the extended term and rental rate for the extension period, and Tenant shall execute and return same to Landlord within ten (10) days. Should the fair market rental not be established by the commencement of the extension period, then Tenant shall continue paying rent at the rate in effect during the last month of the initial Term, and a lump sum adjustment shall be made promptly upon the determination of such new rental.

If Tenant fails to timely comply with any of the provisions of this Section (other than appointing an appraiser), Tenant's right to extend the Term shall be extinguished and the Lease shall automatically terminate as of the expiration date of the Term, without any extension and without any liability to Landlord. Tenant shall have no other right to extend the Term beyond the sixty
(60) month extension created by this Section. Unless agreed to in a writing signed by Landlord and Tenant, any extension of the Term, whether created by an amendment to this Lease or by a holdover of the Premises by Tenant, or otherwise, shall be deemed a part of, and not in addition to, any duly exercised extension period permitted by this Section.

ARTICLE IV. RENT AND OPERATING EXPENSES

SECTION 4.1. BASIC RENT. From and after the Commencement Date, Tenant shall pay to Landlord without deduction or offset, Basic Rent for the Premises in the total amount shown (including subsequent adjustments, if any) in Item 6 of the Basic Lease Provisions. Any rental adjustment shown in Item 6 shall be deemed to occur on the specified monthly anniversary of the Commencement Date, whether or not that date occurs at the end of a calendar month. The rent shall be due and payable in advance commencing on the Commencement Date (as prorated for any partial month) and continuing thereafter on the first day of each successive calendar month of the Term. No demand, notice or invoice shall be required for the payment of Basic Rent. An installment of rent in the amount of one (1) full month's Basic Rent at the initial rate specified in Item 6 of the Basic Lease Provisions shall be delivered to Landlord concurrently with Tenant's execution of this Lease and shall be applied against the Basic Rent first due hereunder.

SECTION 4.2. OPERATING EXPENSES.

(a) Tenant shall pay to Landlord, as additional rent, Tenant's Share of "Operating Expenses", as defined below, incurred by Landlord in the operation of the Building and the Project. The term "Tenant's Share" means that portion of an Operating Expense determined by multiplying the cost of such item by a fraction, the numerator of which is the floor area of the Premises and the denominator of which is the total square footage of the floor area within all buildings in the Project to which such Operating Expenses relate, as of the date on which the computation is made. The rentable square footage of the Project may be adjusted from time to time in the event new buildings are constructed within or incorporated within the Project. Tenant may elect to assume responsibility for the operation and maintenance of any Building comprising a portion of the Premises which is one hundred percent (100%) leased by Tenant in which event, the Operating Expenses for such Building shall be paid directly and completely by Tenant and such expenses shall not be included within Landlord's determination of Operating Expenses.

(b) Prior to the Commencement Date and prior to the start of each full or partial Expense Recovery Period thereafter, Landlord shall give Tenant a written estimate of the amount of Tenant's Share of Operating Expenses for the Expense Recovery Period. Tenant shall pay the estimated amounts to Landlord in equal monthly installments, in advance, with Basic Rent. If Landlord has not furnished its written estimate for any Expense Recovery Period by the time set forth above, Tenant shall continue to pay cost reimbursements at the rates established for the prior Expense Recovery Period, if any; provided that when the new estimate is delivered to Tenant, Tenant shall, at the next monthly payment date, pay any accrued cost reimbursements based upon the new estimate. Notwithstanding the foregoing, if Landlord is more than three (3) months late in the delivery of its written estimate for any Expense Recovery Period, Tenant shall have the right to pay any accrued cost reimbursements in equal installments over a six (6) month period rather than in one lump sum. For purposes hereof, "Expense Recovery Period" shall mean every twelve month period during the Term (or portion thereof for the first and last lease years) commencing July 1 and ending June 30.

(c) Within one hundred twenty (120) days after the end of each Expense Recovery Period, Landlord shall furnish to Tenant a statement showing in reasonable detail the actual or prorated Operating Expenses incurred by Landlord during the period, and the parties shall within thirty (30) days thereafter make any payment or allowance necessary to adjust Tenant's estimated payments, if any, to the actual Tenant's Share as shown by the annual statement. Any delay or failure by Landlord in delivering any statement hereunder shall not constitute a waiver of Landlord's right to require Tenant to pay Tenant's Share of Operating Expenses pursuant hereto. Any amount due Tenant shall be credited against installments next coming due under this Section 4.2, and any deficiency shall be paid by Tenant together with the next installment. If Tenant has not made estimated payments during the Expense Recovery Period, any amount owing by Tenant pursuant to subsection (a) above shall be paid to Landlord in accordance with Article XVI. Should Tenant fail to object in writing to Landlord's determination of actual Operating Expenses within one hundred

twenty (120) days following delivery of Landlord's expense statement, Landlord's determination of actual Operating Expenses for the applicable Expense Recovery Period shall be conclusive and binding on the parties and any future claims to the contrary shall be barred except to the extent that a future audit shall determine that a particular category of expenses has been improperly included as Operating Expenses.

Landlord agrees that it will maintain complete and accurate records of all costs, expenses and disbursements paid or incurred by Landlord, its employees, agents and/or contractors, with respect to the Operating Expenses in accordance with generally accepted accounting principles, consistently applied. Such records shall be kept until one (1) year after the termination of this Lease. Landlord shall provide in reasonable detail the calculation of Tenant's Share of the Operating Expenses. Provided Tenant is not then in default of any monetary covenant of this Lease (including, without limitation, the obligation to pay Basic Rent and/or Tenant's Share of Operating Expenses), or any material non-monetary covenant, following written notice and the expiration of the applicable cure period, then Tenant shall have the right to have Tenant's financial officer or a certified public accountant audit Landlord's Operating Expenses, subject to the terms and conditions hereof. In no event, however, shall such auditor be compensated by Tenant on a "contingency" basis, or on any other basis tied to the results of said audit. Tenant shall give notice to Landlord of Tenant's intent to audit within one hundred twenty (120) days following delivery of Landlord's expense statement for each of the Expense Recovery Periods. Following at least ten (10) business days notice to Landlord, such audit shall be conducted at a mutually agreeable time during normal business hours at the office of Landlord or its management agent where the records are maintained in Orange County, California. Landlord agrees to make such personnel available to Tenant as is reasonably necessary for Tenant's employees and agents, to conduct such audit. Landlord shall make such records available to Tenant's employees and agents, for inspection during normal business hours. Tenant's employees and agents shall be entitled to make photostatic copies of such records, provided Tenant bears the expense of such copying, and further provided that Tenant keeps such copies in a confidential manner and does not discuss, display or distribute such copies to any other third party. If Tenant's audit determines that actual Operating Expenses have been overstated by more than four percent (4%), then subject to Landlord's right to review and/or contest the audit results, Landlord shall reimburse Tenant for the reasonable out-of-pocket costs of such audit. Tenant's Basic Rent shall be appropriately adjusted to reflect any overstatement in Operating Expenses. In the event of a dispute between Landlord and Tenant regarding the results of such audit, such dispute shall be submitted to and resolved by JAMS as provided in
Section 22.7 of this Lease.

All of the information obtained by Tenant and/or its auditor in connection with such audit, as well as any compromise, settlement, or adjustment reached between Landlord and Tenant as a result thereof, shall be held in strict confidence and, except as may be required pursuant to litigation and except for inadvertent disclosures despite Tenant's reasonable efforts to keep the disclosed information confidential, shall not be disclosed to any third party, directly or indirectly, by Tenant or its auditor or any of their officers, agents or employees. Landlord may require Tenant's auditor to execute a separate confidentiality agreement affirming the foregoing as a condition precedent to any audit.

(d) Even though the Lease has terminated and the Tenant has vacated the Premises, when the final determination is made of Tenant's Share of Operating Expenses for the Expense Recovery Period in which the Lease terminates, Tenant shall upon notice pay the entire increase due over the estimated expenses paid. Conversely, any overpayment made in the event expenses decrease shall be rebated promptly by Landlord to Tenant.

(e) If, at any time during any Expense Recovery Period, any one or more of the Operating Expenses are increased to a rate(s) or amount(s) in excess of the rate(s) or amount(s) used in calculating the estimated expenses for the year, then the estimate of Tenant's Share of Operating Expenses shall be increased for the month in which such rate(s) or amount(s) becomes effective and for all succeeding months by an amount equal to Tenant's Share of the increase. Landlord shall give Tenant written notice of the amount or estimated amount of the increase, the month in which the increase will become effective, Tenant's Share thereof and the month for which the payments are due. Tenant shall pay the increase to Landlord as a part of Tenant's monthly payments of estimated expenses as provided in paragraph (b) above, commencing with the month in which effective.

(f) The term "Operating Expenses" shall mean and include all "Project Costs" (as hereafter defined) and "Property Taxes" (as hereafter defined).

only the amortized cost thereof shall be included in Project Costs during the remaining Term of the Lease; costs associated with the procurement and maintenance of an air conditioning, heating and ventilation service agreement; labor; reasonably allocated wages and salaries, fringe benefits, and payroll taxes for administrative and other personnel directly applicable to the Premises and/or Project, including both Landlord's personnel and outside personnel; any expense incurred pursuant to Sections 6.1, 6.2, 6.4, 7.2, and 10.2; and a reasonable overhead/management fee for the professional operation of the Project. Any such overhead management fee charged to Tenant shall not be in excess of those being charged for other comparable first-class office projects in the Irvine Spectrum area. It is understood that Project Costs may include competitive charges for direct services provided by any subsidiary or division of Landlord. Notwithstanding any contrary provision herein, Landlord agrees that Tenant shall have access to and use of after-hours air conditioning services to the Premises. For any Building not wholly leased to Tenant, Tenant shall pay an hourly charge based on the reasonable cost incurred by Landlord to supply such services and in any Building wholly leased to Tenant, Tenant shall pay the cost for such services directly as contemplated by Section 6.1 hereof.

Notwithstanding the provisions of this Section 4.2 to the contrary, Operating Expenses shall not include any cost or expense identified as the responsibility of Landlord and not an Operating Expense or a Project Cost by the express terms of this Lease, and shall not include any of the following:

(1) Leasing commissions, attorneys' fees, costs, disbursements and other expenses incurred by Landlord or its agents in connection with negotiations for leases with tenants, other occupants or prospective tenants or other occupants of the Project, and similar costs incurred in connection with disputes with and/or enforcement of any lease with tenants, other occupants, or prospective tenants or other occupants of the Project;

(2) "Tenant allowances", "tenant concessions", work letter payments, and other costs or expenses (including permit, license and inspection fees) incurred in completing, fixturing, furnishing, renovating or otherwise improving, decorating or redecorating space for tenants or other occupants of the Project, or vacant, leasable space in the Project, including space planning/interior design fees for same;

(3) Depreciation and other "non-cash" expense items;

(4) Services, items and benefits for which Tenant or any other tenant or occupant of the Project specifically reimburses Landlord or for which Tenant or any other tenant or occupant of the Project pays third persons or services, items or benefits which are not generally made available to Tenant as an occupant of the Building or the Project;

(5) Costs or expenses (including fines, penalties and legal fees) incurred due to the violation by Landlord of any terms and conditions (other than by Tenant) of this Lease or of the leases of other tenants in the Project, that would not have incurred but for such violation by Landlord;

(6) Penalties for late payment of any Operating Expenses by Landlord, including, without limitation, with respect to taxes, equipment leases, etc.;

(7) Payments in respect of overhead and/or profit to any subsidiary or Affiliate (hereinafter defined) of Landlord, as a result of a non-competitive selection process for services (other than the management fee) on or to the Project, or for goods, supplies or other materials, to the extent that the costs of such services, goods, supplies or materials exceed the costs that would have been paid if the services, goods, supplies or materials had been provided by parties unaffiliated with Landlord, of similar skill, competence and experience, on a competitive basis;

(8) Payments of principal, finance charges or interest on debt or amortization on any deed of trust or other debt encumbering the Project, and rental payments (or increases in same) under any ground or underlying lease or leases encumbering the Project (except to the extent the same may be made to pay or reimburse, or may be measured by Property Taxes);

(9) Except for a management fee which is reasonable and commercially competitive for similar projects in the Irvine Spectrum area, costs of Landlord's general overhead and general administrative expenses (individual, partnership or corporate, as the case may be) and wages, salaries and other compensation and benefits (as well as adjustments thereto) for all employees and personnel of Landlord above the level of manager for the Project, which costs would not be chargeable to Operating Expenses in accordance with generally accepted accounting principles, consistently applied;

(10) Rentals and other related expenses, if any, incurred in leasing air conditioning systems or other equipment ordinarily considered to be of a capital nature, except equipment which is used in providing janitorial services and which is not affixed to the Project and equipment which is leased on a temporary basis in emergency situations;

(11) Advertising and promotional expenses;

(12) Costs or expenses for the acquisition of sculpture, paintings or other works of art, but not the reasonable expenses of maintaining, repairing and insuring same;

(13) Costs for which Landlord is compensated through or reimbursed by insurance;

(14) Contributions to political or charitable organizations;

(15) Costs incurred in removing the property of former tenants and/or other occupants of the Project;

(16) The costs of any "tap fees" or one-time lump sum sewer, water or other utility connection fees for the Project;

(17) Costs or fees relating to the defense of Landlord's title to or interest in the Building and/or the Project, or any part thereof; and

(18) Any other expense which, under generally accepted accounting principles, consistently applied, would not be considered to be a normal maintenance or operating expense of the Building and/or the Project.

As used herein, the term "Affiliate" shall mean and refer to any person or entity controlling, controlled by, or under common control with another such person or entity. "Control", as used herein, shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such controlled person or entity; the ownership, directly or indirectly, of at least fifty-one percent (51%) of the voting securities of, or possession of the right to vote, in the ordinary direction of its affairs, at least fifty-one percent (51%) of the voting interest in, any person or entity shall be presumed to constitute such control. In the case of Landlord, the term "Affiliate" shall include any person or entity controlling or controlled by or under common control with any general partner of Landlord or any general partner of Landlord's general partner.

(h) The term "Property Taxes" as used herein shall include the following: (i) all real estate taxes or personal property taxes, as such property taxes may be reassessed from time to time; and (ii) other taxes, charges and assessments which are levied with respect to this Lease or to the Building and/or the Project, and any improvements, fixtures and equipment and other property of Landlord located in the Building and/or the Project, except that general net income and franchise taxes imposed against Landlord shall be excluded; and (iii) all assessments and fees for public improvements, services, and facilities and impacts thereon, including, without limitation, arising out of any Community Facilities Districts, "Mello Roos" districts, similar assessment districts, and any traffic impact mitigation assessments or fees
(except for assessments or fees under any Community Facilities District(s) formed after the date of this Lease); (iv) any tax, surcharge or assessment including, without limitation, taxes based on the receipt of rent (including gross receipts or sales taxes applicable to the receipt of rent unless such are required to be paid by Tenant) which shall be levied in addition to or in lieu of real estate or personal property taxes, other than taxes covered by Article VIII; and (v) costs and expenses incurred in contesting the amount or validity of any Property Tax by appropriate proceedings ("Tax Contest Costs") shall be included in Property Taxes in the year such expenses are paid. Tax refunds, if any, shall be credited against Property Taxes for the year paid including any interest which may be received thereon from the taxing authority. Landlord shall refund to Tenant within thirty days (30) after receipt of any such tax refund, the amount to which Tenant is entitled plus its pro-rata share of any interest corresponding to such amount to the extent received from the taxing authority provided Tenant paid Property Taxes for the year relating to such refund.

(i) The term "Property Taxes" shall not include personal property taxes of any kind, which shall instead be governed by the provisions of Article VIII of this Lease.

(j) If Tenant reasonably believes that the amount of any real property tax is improper for any reason, Tenant may notify Landlord in writing of Tenant's desire that such real property taxes be contested or challenged by Landlord with the applicable taxing authority. Tenant shall indicate the basis for Tenant's contention that such taxes are improper in Tenant's notice to Landlord. Upon receipt of any such request from Tenant, Landlord shall promptly meet with Tenant to discuss whether or not it is appropriate to initiate a challenge or contest of such taxes or to take no action with respect thereto. Landlord agrees that if Landlord is pursuing tax contests for other buildings within the Project, Landlord will also pursue such a contest for the Building if so requested by Tenant.

(k) Any assessment of real property taxes shall be deemed imposed in the maximum number of installments permitted by applicable laws, whether or not actually paid; provided, however, that if the prevailing practice in other comparable projects in the vicinity of the Project is to pay such assessments on an earlier basis, and Landlord pays the same on such basis, such assessments shall be included in real property taxes as paid by Landlord. In no event, however, shall Landlord impute any accrued interest (resulting from such installment payments of real property taxes) in its computation of real property taxes except as imposed by the taxing authority.

Landlord in an amount sufficient to restore the Security Deposit to its original amount. Landlord shall not be required to keep this Security Deposit separate from its general funds, and Tenant shall not be entitled to interest on the Security Deposit. If Tenant fully performs its obligations under this Lease, the Security Deposit shall be returned to Tenant (or, at Landlord's option, to the last assignee of Tenant's interest in this Lease) after the expiration of the Term, provided that Landlord may retain the Security Deposit to the extent and until such time as all amounts due from Tenant in accordance with this Lease have been determined and paid in full.

ARTICLE V. USES

SECTION 5.1. USE. Tenant shall use the Premises only for the purposes stated in Item 3 of the Basic Lease Provisions, all in accordance with applicable laws and restrictions and pursuant to approvals to be obtained by Tenant from all relevant and required governmental agencies and authorities. The parties agree that any contrary use shall be deemed to cause material and irreparable harm to Landlord and shall entitle Landlord to injunctive relief in addition to any other available remedy. Tenant, at its expense, shall procure, maintain and make available for Landlord's inspection throughout the Term, all governmental approvals, licenses and permits required for the proper and lawful conduct of Tenant's permitted use of the Premises. Tenant shall not do or permit anything to be done in or about the Premises which will in any way unreasonably interfere with the rights of other occupants of the Building or the Project, or use or allow the Premises to be used for any unlawful purpose, nor shall Tenant permit any nuisance or commit any waste in the Premises or the Project. Tenant shall not perform any work or conduct any business whatsoever in the Project other than inside the Premises. Tenant shall not knowingly do or permit to be done anything which will invalidate or increase the cost of any insurance policy(ies) covering the Building, the Project and/or their contents, and shall comply with all applicable and reasonable insurance underwriters rules and the requirements of the Pacific Fire Rating Bureau or any other organization performing a similar function to the extent such rules and requirements are provided to Tenant. Subject to the express provisions of this Lease to the contrary, Tenant shall comply at its expense with all present laws, ordinances, restrictions, regulations, orders, rules and requirements of all governmental authorities that pertain particularly to Tenant or its particular use of the Premises and/or pertain only to the interior of the Premises, including, without limitation, all federal and state occupational health and safety requirements, whether or not Tenant's compliance will necessitate expenditures or interfere with its use and enjoyment of the Premises. Tenant shall comply at its expense with all present covenants, conditions, easements or restrictions now affecting or encumbering the Building and/or Project, and any future covenants, conditions, easements or restrictions, and any amendments or modifications thereto which do not materially derogate the rights of Tenant or materially increase the obligations of Tenant hereunder, including, without limitation, the payment by Tenant of any periodic or special dues or assessments charged against the Premises or Tenant which may be allocated to the Premises or Tenant in accordance with the provisions thereof. Tenant shall promptly upon demand reimburse Landlord for any additional insurance premium charged by reason of Tenant's failure to comply with the provisions of this Section, and shall indemnify Landlord from any liability and/or expense resulting from Tenant's noncompliance.

SECTION 5.2. SIGNS. Provided Tenant continues to lease the all of the Building, Tenant shall have the exclusive right to all exterior signage on the Building and on any other building entirely leased by Broadcom Corporation, subject to Landlord's right of prior approval that such exterior signage is in compliance with the Signage Criteria (defined below) and Landlord's designation of the location for two (2) exterior identification signs. Except as provided in the foregoing, or as otherwise approved in writing by Landlord, in its sole discretion, Tenant shall have no right to maintain identification signs of any location in, on or about the Premises or the Building which are visible from the exterior thereof and shall not place or erect any signs, displays or other advertising materials that are visible from the exterior of the Building. The size, design, graphics, material, style, color and other physical aspects of any permitted sign shall be subject to any covenants, conditions or restrictions encumbering the Premises, Landlord's signage program, if any, as in effect at the time ("Signage Criteria"), and any applicable municipal or other governmental permits and approvals. Tenant acknowledges having received and reviewed a copy of the current Signage Criteria, if applicable. Tenant shall be responsible for the cost of any permitted signs, including the fabrication, installation, maintenance and removal thereof. If Tenant fails to maintain its signs, or if Tenant fails to remove same upon termination of this Lease and repair any damage caused by such removal, Landlord may do so at Tenant's expense.

Tenant's sign rights described in this Section and may be assigned in connection with an assignment of this Lease or a sublease for the remainder of the Term of a portion of the Premises which sublease or assignment is completed in accordance with the terms of this Lease; provided, however, that the size, design, graphics, material, style, color and other physical aspects of any sign proposed to be used by such transferee shall be subject to Landlord's prior approval that such signage is in compliance with the Signage Criteria and that such signage will not materially devalue the Building or the Project as determined by Landlord in its sole and absolute discretion. Notwithstanding the foregoing, in the event Tenant proposes to sublease or assign all or any portion of its interest in the Premises and Landlord elects to recapture such space pursuant to its right to do so set forth in Section 9.1(c) of this Lease, then:

(a) If the rentable floor area of the portion of the Premises to be recaptured is seventy-five percent (75%) or more of the floor area of the Premises, Tenant shall have the right to maintain one exterior (1) eyebrow sign in a location designated by Landlord;

have the right to retain one (1) Building top sign in a location of its choice. Tenant shall relinquish all other exterior sign rights to the Building; and

(c) If the rentable floor area of the portion of the Premises to be recaptured is less than fifty percent (50%) of the floor area of the Premises, Tenant shall be entitled to retain two (2) building top signs and Landlord shall have the right to any and all exterior signage at the eyebrow level of the Building.

SECTION 5.3. HAZARDOUS MATERIALS.

(a) For purposes of this Lease, the term "Hazardous Materials" includes (i) any "hazardous materials" as defined in Section 25501(o) of the California Health and Safety Code, (ii) any other substance or matter which results in liability to any person or entity from exposure to such substance or matter under any statutory or common law theory, and (iii) any substance or matter which is in excess of permitted levels set forth in any federal, California or local law or regulation pertaining to any hazardous or toxic substance, material or waste.

(b) Tenant shall not cause or knowingly permit any Hazardous Materials to be brought upon, stored, used, generated, released or disposed of on, under, from or about the Premises (including, without limitation, the soil and groundwater thereunder) without the prior written consent of Landlord. Notwithstanding the foregoing, Tenant shall have the right, without obtaining prior written consent of Landlord, to utilize within the Premises standard office products that may contain Hazardous Materials (such as photocopy toner, "White Out", and the like), provided however, that (i) Tenant shall maintain such products in their original retail packaging, shall follow all instructions on such packaging with respect to the storage, use and disposal of such products, and shall otherwise comply with all applicable laws with respect to such products, and (ii) all of the other terms and provisions of this Section 5.3 shall apply with respect to Tenant's storage, use and disposal of all such products. Landlord may, in its sole discretion, place such conditions as Landlord deems appropriate with respect to any such Hazardous Materials, and may further require that Tenant demonstrate that any such Hazardous Materials are necessary or useful to Tenant's business and will be generated, stored, used and disposed of in a manner that complies with all applicable laws and regulations pertaining thereto and with good business practices. Tenant understands that Landlord may utilize an environmental consultant to assist in determining conditions of approval in connection with the storage, generation, release, disposal or use of Hazardous Materials by Tenant on or about the Premises, and/or to conduct periodic inspections of the storage, generation, use, release and/or disposal of such Hazardous Materials by Tenant on and from the Premises, and Tenant agrees that any costs reasonably incurred by Landlord in connection therewith shall be reimbursed by Tenant to Landlord as additional rent hereunder upon demand; however, Tenant shall have no obligation to reimburse Landlord for any costs incurred in connection with any environmental consultant retained by Landlord pursuant to this Section unless Tenant shall be in default under this
Section 5.3 and such costs are covered by Tenant's indemnity contained in this
Section 5.3.

(c) Prior to the execution of this Lease, Tenant shall complete, execute and deliver to Landlord an Environmental Questionnaire and Disclosure Statement (the "Environmental Questionnaire") in the form of EXHIBIT B attached hereto. The completed Environmental Questionnaire shall be deemed incorporated into this Lease for all purposes, and Landlord shall be entitled to rely fully on the information contained therein. On each anniversary of the Commencement Date until the expiration or sooner termination of this Lease, Tenant shall disclose to Landlord in writing the names and amounts of all Hazardous Materials, if any, which were stored, generated, used, released and/or disposed of on, under or about the Premises for the twelve-month period prior thereto, and which Tenant desires to store, generate, use, release and/or dispose of on, under or about the Premises for the succeeding twelve-month period. In addition, to the extent Tenant is permitted to utilize Hazardous Materials upon the Premises, Tenant shall promptly provide Landlord with complete and legible copies of all the following environmental documents relating thereto: reports filed pursuant to any self-reporting requirements; permit applications, permits, monitoring reports, workplace exposure and community exposure warnings or notices and all other reports, disclosures, plans or documents (even those which may be characterized as confidential) relating to water discharges, air pollution, waste generation or disposal, and underground storage tanks for Hazardous Materials; orders, reports, notices, listings and correspondence (even those which may be considered confidential) of or concerning the release, investigation of, compliance, cleanup, remedial and corrective actions, and abatement of Hazardous Materials; and all complaints, pleadings and other legal documents filed by or against Tenant related to Tenant's use, handling, storage, release and/or disposal of Hazardous Materials.

(d) Landlord and its agents shall have the right, but not the obligation, to inspect, sample and/or monitor the Premises and/or the soil or groundwater thereunder at any time to determine whether Tenant is complying with the terms of this Section 5.3, and in connection therewith Tenant shall provide Landlord with full access to all relevant facilities, records and personnel. If Tenant is not in compliance with any of the provisions of this Section 5.3, or in the event of a release of any Hazardous Material on, under or about the Premises caused or permitted by Tenant, its agents, employees, contractors, licensees or invitees, Landlord and its agents shall have the right, but not the obligation, without limitation upon any of Landlord's other rights and remedies under this Lease, to immediately enter upon the Premises without notice and to discharge Tenant's obligations under this Section 5.3 at Tenant's expense, including, without limitation, the taking of emergency or long-term remedial action. Landlord and its agents shall endeavor to minimize interference with Tenant's business in connection therewith, but shall not be liable for any such interference. In addition, Landlord, at Tenant's expense, shall have the right, but not the obligation, to join and participate in any legal proceedings or actions initiated in connection with any claims arising out of the storage, generation, use, release and/or disposal by Tenant or its agents, employees, contractors, licensees or invitees of Hazardous Materials on, under, from or about the Premises.

(e) If the presence of any Hazardous Materials on, under, from or about the Premises or the Project caused or permitted by Tenant or its agents, employees, contractors, licensees or invitees results in (i) injury to any person, (ii) injury to or any contamination of the Premises or the Project, or
(iii) injury to or contamination of any real or personal property wherever situated, Tenant, at its expense, shall promptly take all actions necessary to return the Premises and the Project and any other affected real or personal property owned by Landlord to the condition existing prior to the introduction of such Hazardous Materials and to remedy or repair any such injury or contamination, including, without limitation, any cleanup, remediation, removal, disposal, neutralization or other treatment of any such Hazardous Materials. Notwithstanding the foregoing, Tenant shall not, without Landlord's prior written consent, take any remedial action in response to the presence of any Hazardous Materials on, under or about the Premises or the Project or any other affected real or personal property owned by Landlord or enter into any similar agreement, consent, decree or other compromise with any governmental agency with respect to any Hazardous Materials claims; provided however, Landlord's prior written consent shall not be necessary in the event that the presence of Hazardous Materials on, under or about the Premises or the Project or any other affected real or personal property owned by Landlord (i) imposes an immediate threat to the health, safety or welfare of any individual or (ii) is of such a nature that an immediate remedial response is necessary and it is not possible to obtain Landlord's consent before taking such action. To the fullest extent permitted by law, Tenant shall indemnify, hold harmless, protect and defend (with attorneys acceptable to Landlord) Landlord and any successors to all or any portion of Landlord's interest in the Premises and the Project and any other real or personal property owned by Landlord from and against any and all liabilities, losses, damages, diminution in value, judgments, fines, demands, claims, recoveries, deficiencies, costs and expenses (including, without limitation, attorneys' fees, court costs and other professional expenses), whether foreseeable or unforeseeable, arising directly or indirectly out of the use, generation, storage, treatment, release, on- or off-site disposal or transportation of Hazardous Materials on, into, from, under or about the Premises, the Building and the Project and any other real or personal property owned by Landlord caused or permitted by Tenant, its agents, employees, contractors, licensees or invitees, specifically including, without limitation, the cost of any required or necessary repair, restoration, cleanup or detoxification of the Premises, the Building and the Project and any other real or personal property owned by Landlord, and the preparation of any closure or other required plans, whether or not such action is required or necessary during the Term or after the expiration of this Lease. If Landlord at any time discovers that Tenant or its agents, employees, contractors, licensees or invitees have caused or knowingly permitted the release of a Hazardous Material on, under, from or about the Premises or the Project or any other real or personal property owned by Landlord, Tenant shall, at Landlord's request, immediately prepare and submit to Landlord a comprehensive plan, subject to Landlord's reasonable approval, specifying the actions to be taken by Tenant to return the Premises or the Project or any other real or personal property owned by Landlord to the condition required under all applicable environmental laws. Upon Landlord's approval of such cleanup plan, Tenant shall, at its expense, and without limitation of any rights and remedies of Landlord under this Lease or at law or in equity, immediately implement such plan and proceed to cleanup such Hazardous Materials in accordance with all applicable laws and as required by such plan and this Lease. The provisions of this subsection (e) shall expressly survive the expiration or sooner termination of this Lease.

(f) If the release of any Hazardous Materials on, under, from or about the Premises or the Project caused by Landlord, its authorized agents or employees, and not introduced by Tenant, its agents, employees, contractors, licensees, or invitees results in (i) injury to any person, or (ii) injury to or any contamination of the Premises or the Project at levels which require clean-up or remediation under applicable laws, Landlord, at its expense (which shall not be included in Operating Expenses), shall promptly take all actions necessary to return the Premises and the Project to the condition existing prior to the introduction of such Hazardous Materials, or to such condition as is satisfactory to all governmental agencies asserting jurisdiction, and to remedy or repair any such injury or contamination, including, without limitation, any clean-up, remediation, removal, disposal, neutralization or other treatment of any such Hazardous Materials.

(g) If the release of Hazardous Materials caused by Landlord, its authorized agents or employees, renders the Premises untenantable in whole or in part or results in Tenant being required to vacate the Premises in whole or in part pursuant to an order or requirement of any governmental agency or authority, then the Base Rent, Real Property Taxes, insurance premiums, and other charges, if any, payable by Tenant hereunder for the period during which the Premises (or a portion thereof) remain so impaired shall be abated in proportion to the degree to which Tenant's use of the Premises is impaired and for the period of such impairment. If the period of such impairment shall exceed seven (7) months, Tenant shall have the right to terminate this Lease upon written notice to Landlord given within ten (10) days following the passage of such seven (7) month period. Tenant's termination of the Lease pursuant to this Paragraph shall be effective as of the date of such notice.

(h) Landlord hereby discloses to Tenant, and Tenant hereby acknowledges, certain facts relating to Hazardous Materials at the Project known by Landlord to exist as of the date of this Lease, as more particularly described in EXHIBIT C attached hereto. Tenant shall have no liability or responsibility with respect to the Hazardous Materials facts described in EXHIBIT C, nor with respect to any Hazardous Materials which were not caused or knowingly permitted by Tenant, its agents, employees, contractors, licensees or invitees. Landlord shall take responsibility, at its sole cost and expense, for any governmentally-ordered clean-up, remediation, removal, disposal, neutralization or other treatment of Hazardous Materials conditions described in this Section 5.3(h). The foregoing obligation on the part of Landlord shall include the reasonable costs (including, without limitation, reasonable attorney's fees) of defending Tenant (with attorneys reasonably acceptable to Tenant) from and against any legal action or proceeding instituted by any governmental agency in connection with such clean-up, remediation, removal, disposal, neutralization or other treatment of such conditions, provided that Tenant promptly tenders such defense to Landlord.

Tenant agrees to notify its agents, employees, contractors, licensees, and invitees of any exposure or potential exposure to Hazardous Materials at the Premises that Landlord brings to Tenant's attention.

(i) The obligations on the part of Landlord contained in Sections 5.3(f) and 5.3(h) above are personal to Landlord and shall not be binding on, nor inure against any successor in interest to Landlord as of the owner of the Premises, including, without limitation, any lender acquiring the Premises by foreclosure of its mortgage or deed of trust or deed in lieu of foreclosure.

(j) Except as disclosed in Section 5.3(h) above (and/or as may otherwise be disclosed to Tenant in writing), Landlord represents that, to the best of its actual knowledge without duty of inquiry or investigation whatsoever, there are no Hazardous Materials in or about the Premises which are in violation of any applicable federal, state or local law, ordinance or regulation.

ARTICLE VI. COMMON AREAS; SERVICES

SECTION 6.1. UTILITIES AND SERVICES. Tenant shall be responsible for and shall pay promptly, directly to the appropriate supplier, all charges for water, gas, electricity, sewer, heat, light, power, telephone, refuse pickup, janitorial service, interior landscape maintenance and all other utilities, materials and services furnished directly to Tenant or the Premises or used by Tenant in, on or about the Premises during the Term, together with any taxes thereon; provided, however, Tenant shall not be obligated to pay directly for any utilities, water, gas, electricity, sewer, heat, light, power, janitorial service, landscape maintenance, etc. to the extent such costs are billed to Tenant as Operating Expenses for the Project. Tenant, at its sole cost, may select and retain a janitorial service company to clean the Premises at such times and in a manner consistent with the operation of a first class office building. If any utilities or services are not separately metered or assessed to Tenant, Landlord shall make a reasonable determination of Tenant's proportionate share of the cost of such utilities and services and Tenant shall pay such amount to Landlord, as an item of additional rent, within ten (10) days after receipt of Landlord's statement or invoice therefor. Alternatively, Landlord may elect to include such cost in the definition of Building Costs in which event Tenant shall pay Tenant's proportionate share of such costs in the manner set forth in Section 4.2. Landlord shall not be liable for damages or otherwise for any failure or interruption of any utility or other service furnished to the Premises, and no such failure or interruption shall be deemed an eviction or entitle Tenant to terminate this Lease or withhold or abate any rent due hereunder. Landlord shall at all reasonable times have free access to all electrical and mechanical installations of Landlord. In exercising Landlord's right of free access to all mechanical and electrical installations, Landlord shall not unreasonably interfere with Tenant's use and enjoyment of the Premises.

Notwithstanding the foregoing, if as a result of the actions of Landlord, its authorized agents or employees, for more than three (3) consecutive business days following written notice to Landlord there is no HVAC or electricity services to all or a portion of the Premises, or such an interruption of other essential utilities and building services, such as fire protection or water, so that all or a portion of the Premises cannot be used by Tenant, then Tenant's Basic Rent (or an equitable portion of such Basic Rent to the extent that less than all of the Premises are affected) shall thereafter be abated until the Premises are again usable by Tenant; provided, however, that if Landlord is diligently pursuing the repair of such utilities or services and Landlord provides substitute services reasonably suitable for Tenant's purposes, as for example, bringing in portable air-conditioning equipment, then there shall not be an abatement of Basic Rent. Any disputes concerning the foregoing shall be submitted to and resolved by JAMS arbitration pursuant to Section 22.7 of this Lease. The foregoing provisions shall not apply in case of damage to, or destruction of, the Premises, which shall be governed by the provisions of Article XI of the Lease.

SECTION 6.2. OPERATION AND MAINTENANCE OF COMMON AREAS. During the Term, Landlord shall operate, maintain and repair all Common Areas within any Building comprising the Premises and the Project in a first-class manner comparable to other Class A office buildings in the Irvine Spectrum area and in compliance with all obligations of Landlord under this Lease. The term "Common Areas" shall mean all areas within the exterior boundaries of the Building and other buildings in the Project which are not held for exclusive use by persons entitled to occupy space, and all other appurtenant areas outside the exterior boundaries of the Building and other buildings in the Project provided by Landlord for the common use of Landlord and tenants and their respective employees and invitees, including, without limitation, parking areas and structures, driveways, sidewalks, landscaped and planted areas, hallways and interior stairwells not located within the premises of any tenant, common electrical rooms and roof access entries, common entrances and lobbies, elevators, and restrooms not located within any tenantable premises of the Building and/or other buildings in the Project. Building hours for any Building not wholly leased by Tenant shall be Monday through Friday 7:00 a.m. to 6:00
p.m., and Saturday 9:00 a.m. to 1:00 p.m., President's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day, New Year's Day and Sundays excluded. Tenant shall have access to its Premises twenty-four (24) hours per day, seven (7) days per week, fifty-two (52) weeks per year including access to utilities and heating, ventilating and air conditioning services but subject to Tenant's obligation to pay the reasonable costs of any such services used other than during the Building hours described above; provided that Landlord may install access control systems as it deems advisable for any Building not wholly leased by Tenant. The reasonable cost of maintaining and repairing any such access control systems (but not the cost of installation of, or any "capital" cost of replacing, said systems) shall be included in Project Costs under Section 4.2.

time to time by Landlord in a reasonable and non-discriminatory manner. Landlord shall operate and maintain the Common Areas in a first-class manner consistent with comparable Class A office buildings in the Irvine Spectrum as Landlord may determine to be appropriate. All reasonable costs incurred by Landlord for the maintenance and operation of the Common Areas shall be included in Project Costs unless excluded under Section 4.2 or unless any particular cost incurred can be charged to a specific tenant of the Project. Landlord shall at all times during the Term have exclusive control of the Common Areas, and may restrain any use or occupancy, except as authorized by Landlord's rules and regulations. Tenant shall keep the Common Areas clear of any obstruction or unauthorized use related to Tenant's operations. Nothing in this Lease shall be deemed to impose liability upon Landlord for any damage to or loss of the property of, or for any injury to, Tenant, its invitees or employees. Landlord may temporarily close any portion of the Common Areas for repairs, remodeling and/or alterations, to prevent a public dedication or the accrual of prescriptive rights, or for any other reason deemed sufficient by Landlord, without liability to Landlord. Tenant shall not be required to comply with any rules and regulations for the Project other than those attached to this Lease unless such rules and regulations are commercially reasonable and nondiscriminatory in content and application. Landlord's exclusive control, operation, maintenance and repair of the Common Area shall be subject to Tenant's parking rights contained in Section 6.4 below and to all other limitations contained in this Lease. Landlord agrees that any temporary closure of any portion of the Common Areas shall not unreasonably interfere with Tenant's intended use of the Premises, nor its reasonable access to or parking for the Premises.

SECTION 6.4. PARKING. Tenant shall be entitled to the number of vehicle parking spaces set forth in Item 14 of the Basic Lease Provisions, which spaces shall be located on those portions of the Common Areas designated by Landlord for parking, and said parking spaces shall be provided at no charge to Tenant during the Lease Term. Tenant shall not use more parking spaces than such number. In the event the Premises is expanded at any time during the Term, the number of spaces shall be increased by the number included in the Economic Terms for such space. Landlord shall allow Tenant to select and mark the fifteen (15) spaces designated on Exhibit A-1 as "Broadcom Visitor" for use by Tenant's employees and customers, provided Landlord shall have no obligation to monitor the use of such stalls but such stalls shall be considered as part of the total number of stalls to which Tenant is entitled. In the event the Premises is expanded and Tenant leases all of any other building, Tenant shall have the right to mark an additional ten (10) spaces "Broadcom Visitor" for such building in a location reasonably designated by Landlord. All vehicle parking spaces shall be used only for parking by vehicles no larger than full size passenger automobiles, vans, mini-vans or pickup trucks. Tenant shall not knowingly permit or allow any vehicles that belong to or are controlled by Tenant or Tenant's employees, suppliers, shippers, customers or invitees to be loaded, unloaded, parked or stored in areas other than those designated by Landlord for shipping and receiving activities. If Tenant permits or allows any of the prohibited activities described above, then Landlord shall have the right, without notice, in addition to such other rights and remedies that Landlord may have, to remove or tow away the vehicle involved and charge the costs to Tenant; provided Landlord agrees not to cause or permit the towing of any vehicle from parking within the Common Area without first attempting to contact Tenant to identify the Owner of the vehicle in question. Parking within the Common Areas shall be limited to striped parking stalls, and no parking shall be permitted in any driveways, access ways or in any area which would prohibit or impede the free flow of traffic within the Common Areas. There shall be no extended overnight parking of any vehicles of any kind unless otherwise authorized by Landlord (periodic, temporary overnight parking of employee vehicles for up to seventy-two (72) hours and vehicles used in the ordinary course of Tenant's business at the Premises shall be permitted), and vehicles which have been abandoned or parked in violation of the terms hereof may be towed away at the owner's expense. Nothing contained in this Lease shall be deemed to create liability upon Landlord for any damage to motor vehicles of visitors or employees, for any loss of property from within those motor vehicles, or for any injury to Tenant, its visitors or employees, unless ultimately determined to be caused by the sole active negligence or willful misconduct of Landlord. Landlord shall have the right to establish, and from time to time amend, and to enforce against all users all reasonable rules and regulations (including the designation of areas for employee parking) that Landlord may deem necessary and advisable for the proper and efficient operation and maintenance of parking within the Common Areas. Landlord shall have the right to construct, maintain and operate lighting facilities within the parking areas; to change the area, level, location and arrangement of the parking areas and improvements therein; to restrict parking by tenants, their officers, agents and employees to employee parking areas and to do and perform such other acts in and to the parking areas and improvements therein as, in the use of good business judgment, Landlord shall determine to be advisable. Any person using the parking area shall observe all directional signs and arrows and any posted speed limits. In no event shall Tenant interfere with the use and enjoyment of the parking area by other tenants of the Building or their employees or invitees. Parking areas shall be used only for parking passenger vehicles. Servicing of vehicles, or the parking or storage of shipping and receiving vehicles in any area is prohibited unless otherwise authorized by Landlord. Periodic washing and detailing of automobiles shall be permitted, subject to the Landlord's reasonable rules and regulations and Landlord's reasonable standards for such third party providers. Tenant shall be liable for any damage to the parking areas caused by Tenant or Tenant's employees, suppliers, shippers, customers or invitees, including, without limitation, damage from excess oil leakage. Tenant shall have no right to install any fixtures, equipment or personal property in the parking areas. Landlord agrees to enforce all parking rights and restrictions and rules and regulations for the Project on an equal and non-discriminatory basis. Tenant shall have no liability for non-compliance with the provisions of the Lease regarding parking other than with respect to Tenant's officers, directors and employees or persons under the control of Tenant, except for Landlord's towing rights herein provided.

parking spaces granted under this Lease, or (iv) otherwise materially interfere with Tenant's access to and use of the Premises, the parking areas and the Common Areas adjacent to the Building in any material manner without Tenant's prior written consent, which shall not be unreasonably withheld.

SECTION 6.6. OUTDOOR COURTYARD AREA. With at least ten (10) business days prior written notice to Landlord and subject to availability, Tenant shall have the right to use certain adjacent areas of the Common Areas for Tenant's social and/or business functions with no additional rent for such use payable by Tenant, on the following terms and conditions: (i) Tenant may conduct up to twelve (12) such functions within any calendar year; (ii) such functions shall be limited to a reasonable number of people consistent with applicable fire, health and safety laws; (iii) Tenant shall execute Landlord's standard form entry permit prior to any such function, (iv) the insurance, indemnity and nonliability obligations and provisions contained in Sections 10.1, 10.3 and 10.4 of this Lease, respectively (including Tenant's obligation to carry liquor law liability insurance if alcoholic beverages are served or consumed during such functions), shall apply to and govern any claims, liabilities, costs or expenses arising from any such function, (v) no such proposed function shall, in Landlord's reasonable determination, unreasonably disrupt either other tenants of the Project, or the operation or maintenance of the Common Areas, and (vi) Tenant shall pay any and all Landlord's reasonable costs of preparation for, supervision of and/or clean-up in connection with, such functions.

ARTICLE VII. MAINTAINING THE PREMISES

SECTION 7.1. TENANT'S MAINTENANCE AND REPAIR. Tenant at its sole expense shall make all repairs necessary to keep the Premises in the condition as existed on the Commencement Date (or on any later date that the improvements may have been installed), excepting ordinary wear and tear, including, without limitation, all glass, the interior surfaces of all windows, all doors, door closures, hardware, fixtures, electrical, plumbing, fire extinguisher equipment and other equipment; provided, however, Tenant shall have no obligation to repair, maintain or replace the roof, foundations, footings, structural systems, exterior glass, sky lights, sky light seals, window seals and vents, electrical, plumbing, sewer and other utility lines outside the Premises, landscaping, walkways, fencing, parking areas, exterior lighting or exterior surfaces of exterior walls of the Building, and washing of exterior windows, all of which obligations shall be the sole responsibility of Landlord as provided in and subject to the terms of Section 7.2 below. Any damage or deterioration of the Premises shall not be deemed ordinary wear and tear if the same could have been prevented by good maintenance practices by Tenant. As part of its maintenance obligations hereunder, Tenant shall, at Landlord's request, provide Landlord with copies of all maintenance schedules, reports and notices prepared by, for or on behalf of Tenant. As part of its maintenance obligations hereunder, Tenant shall obtain a preventive maintenance contract from a licensed heating and air conditioning ("HVAC") contractor to provide for regular inspection, maintenance and repair of the HVAC system servicing the Premises all subject to Landlord's reasonable approval; provided, however, that Tenant may elect to have its own full-time qualified employees undertake such inspections and preventive maintenance provided the preventive maintenance and inspections are the equivalent of what would be provided by a licensed contractor in Landlord's reasonable determination. Project Costs billed to Tenant pursuant to Section 4.2 of this Lease shall not include charges for normal maintenance of HVAC to the extent Tenant fulfills its obligations under this Section but Project Costs shall include the cost of annual inspections by Landlord's HVAC contractor. If, as a result of annual or other inspections, Landlord determines that Tenant's employees are not performing satisfactory inspection and maintenance, Tenant shall obtain a third party maintenance contract for the HVAC system as set forth above. All repairs shall be at least equal in quality to the original work, shall be made only by a licensed contractor approved in writing in advance by Landlord and shall be made only at the time or times approved by Landlord. Any contractor utilized by Tenant shall be subject to Landlord's standard requirements for contractors, as modified from time to time. Landlord may impose reasonable restrictions and requirements with respect to repairs, as provided in
Section 7.3, and the provisions of Section 7.4 shall apply to all repairs. If Tenant fails to properly maintain or repair any portion of the Premises as required under this Section 7.1 following written notice to Tenant and a reasonable opportunity to cure, Landlord may elect to make any such repair on behalf of Tenant and at Tenant's expense, and Tenant shall promptly reimburse Landlord for all costs incurred upon submission of an invoice. Landlord agrees not to unreasonably withhold its approval of any preventive maintenance contracts or licensed contractors selected by Tenant with respect to Tenant's maintenance and repair obligations.

SECTION 7.2. LANDLORD'S MAINTENANCE AND REPAIR. Subject to Section 7.1 and Article XI, Landlord shall provide service, maintenance and repair and shall maintain in good repair in a manner consistent with the repair and maintenance of comparable Class A office buildings in the Irvine Spectrum area, the roof, foundations, and footings of the Building, the exterior surfaces of the exterior walls of the Building, all exterior glass, sky lights, sky light seals, window seals and vents of the Building, electrical, plumbing, sewer and other utility lines outside the Premises, landscaping, walkways, fencing, parking areas, exterior lighting and exterior surfaces of exterior walls of the Building, and washing of exterior windows, and the structural, electrical and mechanical systems of the Building and all Common Area improvements within the Project, except that, subject to the waiver of subrogation contained in Section 10.5 below, Tenant at its expense shall make all repairs within the Premises only which Landlord deems reasonably necessary as a result of the act or negligence of Tenant, its agents, employees, invitees, subtenants or contractors (i.e., to the extent such repairs are not or would not be covered by a standard policy of property insurance or the property insurance actually maintained by Landlord). Landlord shall have the right to employ or designate any reputable person or firm, including any employee or agent of Landlord or any of Landlord's affiliates or divisions, to perform any service, repair or maintenance function. Landlord need not make any other improvements or repairs except as specifically required under this Lease, and nothing contained in this Section shall limit Landlord's right to reimbursement from Tenant for maintenance, repair costs and replacement costs as provided elsewhere in this Lease. Tenant understands that it shall not make repairs at Landlord's expense except as specifically set forth below. Tenant further understands that Landlord

shall not be required to make any repairs to the roof, foundations, footings, structural, electrical or mechanical systems unless and until Tenant has notified Landlord in writing of the need for such repair and Landlord shall have a reasonable period of time thereafter to commence and complete said repair, if warranted. Subject to the terms of Sections 2.4 and 4.2, all reasonable costs of any maintenance and repairs on the part of Landlord provided hereunder shall be considered part of Project Costs. Tenant shall have no obligation to maintain contracts for landscaping and irrigation systems or for asphalt or parking lot maintenance. Except in emergency situations, where prior notice is not reasonably possible, Landlord agrees to provide Tenant with at least twenty-four
(24) hours prior notice before commencing any repairs, improvements or alterations to the Building or the Project which are reasonably likely to materially impair Tenant's use or enjoyment of the Premises, Tenant's parking areas or access to the Project or the Premises.

If Landlord shall fail to perform any repair obligations required under this Lease within thirty (30) days following Tenant's written request for such repairs, or if Landlord shall fail to perform any repairs required under this Lease of an emergency condition within forty-eight (48) hours' written notice from Tenant, then Tenant may elect to make such repairs at Landlord's expense by complying with the following provisions. Before making any such repair, Tenant shall deliver to Landlord a notice for the need for such repair ("Self-Help Notice"), which notice shall specifically advise Landlord that Tenant intends to exercise its self-help right hereunder. Should Landlord fail, within ten (10) days following receipt of the Self-Help Notice (or within twenty-four (24) hours following notice in the event of necessary emergency repairs), to commence the necessary repair or to make other arrangements reasonably satisfactory to Tenant, then Tenant shall have the right to make such repair on behalf of Landlord. Landlord shall reimburse Tenant for the reasonable costs of such repairs within thirty (30) days following receipt of Tenant's invoice for such costs, provided that in no event shall Tenant have the right to offset Basic Rent or any other charges payable by Tenant hereunder against such costs. It is understood that such reimbursement obligation shall be personal to Landlord, and in no event shall any lender or other deed of trust holder succeeding to Landlord be liable for payment of any such amount. In the event that the work could affect the Building's structural, mechanical, electrical, heating, ventilating, air conditioning, life safety or plumbing components or systems, then Tenant shall use only those contractors whose names are furnished by Landlord for such work. If those contractors are unwilling or unable to perform the work, or if Landlord fails to furnish the names of its contractors to Tenant prior to the commencement of the work by Tenant, Tenant shall retain the services of qualified, reputable and licensed, bonded contractors with like experience in similar building systems. Tenant shall be responsible for obtaining any necessary governmental permits before commencing the repair work. Tenant shall be liable for any damage, loss or injury resulting from said work to the extent of Tenant's or its agent's, employee's or contractor's negligence. Any disputes regarding these self-help provisions shall be submitted to and resolved by JAMS arbitration pursuant to Section 22.7 of this Lease.

SECTION 7.3. ALTERATIONS. Tenant shall make no alterations, additions or improvements to the Premises without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed. Notwithstanding the foregoing, but subject to the following provisions of this Section, Landlord's consent shall not be required for any alterations, additions or improvements to the Premises during the initial Term which cost less than the Alteration Cost Cap. Alteration Cost Cap means an amount equal to One Dollar and 05/00 ($1.05) per rentable square foot of Premises per lease year on a cumulative basis but subject to an aggregate maximum over the initial Term of Five Dollars Twenty-Five Cents ($5.25) per rentable square foot. Any such alterations are subject to all other provisions of this Section. For example, assuming Tenant continues to occupy all of the Building but made no alterations during the first year of the Term, Tenant could make alterations without Landlord's prior written consent during the second year of the Term in an amount up to $114,912.00 (54,720 feet x .1.05 x 2 years). Under this example, Tenant's ability to make further alterations during the remainder of the initial Term without Landlord's consent would be subject to an annual cap of $57,456.00 and an aggregate cap of $172,368.00. Notwithstanding anything to the contrary contained in the preceding sentences of this Section, without the prior written consent of Landlord, which may be withheld in Landlord's sole and absolute discretion, in no event shall any alteration, addition or improvement: (i) affect the exterior of the Building or outside areas (or be visible from adjoining sites), or (ii) affect or penetrate any of the structural portions of the Building, including but not limited to the roof, or (iii) require any material change to the basic floor plan of the Premises, any change to any structural or mechanical systems of the Premises, or any governmental permit as a prerequisite to the construction thereof, or (iv) interfere in any manner with the proper functioning of or Landlord's access to any mechanical, electrical, plumbing or HVAC systems, facilities or equipment located in or serving the Building. Landlord may impose, as a condition to its consent, any requirements that Landlord in its discretion may deem reasonable or desirable, including but not limited to requirements as to the manner, time, and contractor mutually acceptable to Landlord and Tenant for performance of the work. Tenant shall obtain all required permits for the work and shall perform the work in compliance with all applicable laws, regulations and ordinances, all covenants, conditions and restrictions affecting the Project, and the Rules and Regulations (hereafter defined). Tenant understands and agrees that Landlord shall be entitled to a supervision fee in the amount of three percent (3%) of the cost of any work which is both in excess of the Alteration Cost Cap, and which requires a governmental permit. If any governmental entity requires, as a condition to any proposed alterations, additions or improvements to the Premises by Tenant, that improvements be made to the Common Areas, and if Landlord consents to such improvements to the Common Areas, then Tenant shall, at Tenant's sole expense, make such required improvements to the Common Areas in such manner, utilizing such materials, and with such contractors (including, if required by Landlord, Landlord's contractors) as Landlord may reasonably require. Under no circumstances shall Tenant make any improvement which incorporates any Hazardous Materials, including, without limitation, asbestos-containing construction materials into the Premises. Any request for Landlord's consent shall be made in writing and shall contain architectural plans describing the work in detail reasonably satisfactory to Landlord. Unless Landlord otherwise agrees in writing, all alterations, additions or improvements affixed to the Premises (excluding moveable trade fixtures and furniture) shall become the property of Landlord and shall be surrendered with the Premises at the end of the Term, except that Landlord may require Tenant to remove by the Expiration Date, or sooner termination date of this Lease, all or any alterations, decorations, fixtures,

additions, improvements and the like installed either by Tenant or by Landlord at Tenant's request and to repair any damage to the Premises arising from that removal. Except as otherwise provided in this Lease or in any exhibit to this Lease, should Landlord make any alteration or improvement to the Premises for Tenant, Landlord shall be entitled to prompt reimbursement from Tenant for all costs incurred.

Landlord shall have the right to require Tenant to remove (i) any of the components of the initial Tenant Improvements to the Premises but only if Landlord notifies Tenant that such removal will be required at the time of Landlord's approval of the Preliminary Plan, and (ii) any subsequent alterations, additions or improvements whether or not Landlord's consent was required unless Landlord's written consent was obtained and unless at the time of providing its consent Landlord notified Tenant in writing that Tenant would not have to remove such items upon the expiration of the Lease Term. Landlord and Tenant agree that Tenant shall have the right, upon expiration or termination of this Lease, to remove any and all phone systems, furniture, fixtures and other personal property which are not permanently affixed to the Premises or which may be removed without significant change to the Premises (including floor coverings, draperies, and/or removable shelves) that are installed in the Premises at Tenant's sole expense; provided, however, that Tenant shall, at its sole cost, repair any damage caused by such removal, reasonable wear and tear excepted.

SECTION 7.4. MECHANIC'S LIENS. Tenant shall keep the Premises free from any liens arising out of any work performed, materials furnished, or obligations incurred by or for Tenant. Upon request by Landlord, Tenant shall promptly cause any such lien to be released by posting a bond in accordance with California Civil Code Section 3143 or any successor statute. In the event that Tenant shall not, within thirty (30) days following the imposition of any lien, cause the lien to be released of record by payment or posting of a proper bond, Landlord shall have, in addition to all other available remedies, the right to cause the lien to be released by any means it reasonably deems proper, including payment of or defense against the claim giving rise to the lien. All reasonable and actual expenses so incurred by Landlord, including Landlord's reasonable attorneys' fees, and any foreseeable consequential or other damages incurred by Landlord proximately caused by such lien, shall be reimbursed by Tenant promptly following Landlord's demand, together with interest from the date of payment by Landlord at the Interest Rate provided for in Section 14.3(a) below until paid. Tenant shall give Landlord no less than twenty (20) days' prior notice in writing before commencing construction of any kind on the Premises so that Landlord may post and maintain notices of nonresponsibility on the Premises.

SECTION 7.5. BUILDING ENTRY AND INSPECTION. Landlord shall, at all reasonable times upon at least twenty-four (24) hours advance written notice given in accordance with the provisions of Article XVI of this Lease or oral notice to Tenant's building manager or head of security (except in emergencies, when no notice shall be required), and provided that for security and confidentiality purposes, Landlord's representatives are accompanied by a representative of Tenant at all times (except in cases of emergency), have the right to enter the Premises to inspect them, to supply services in accordance with this Lease, to protect the interests of Landlord in the Premises, and to submit the Premises to prospective or actual purchasers or encumbrance holders (or, during the last one hundred and eighty (180) days of the Term or when a Tenant default exists [which is not cured within the expiration of the applicable cure period], to prospective tenants), all without being deemed to have caused an eviction of Tenant and without abatement of rent except as provided elsewhere in this Lease. Landlord shall have the right to use any and all reasonable means which Landlord may deem proper under the circumstances to open the doors in an emergency in order to obtain entry to the Premises, and any entry to the Premises obtained by Landlord by such means shall not under any circumstances be deemed to be a forcible or unlawful entry into, or a detainer of, the Premises, or any eviction of Tenant from the Premises.

ARTICLE VIII. TAXES AND ASSESSMENTS ON TENANT'S PROPERTY

Tenant shall be liable for and shall pay before delinquency, all taxes and assessments levied against all personal property of Tenant located in the Premises, and against any alterations, additions or like improvements made to the Premises by or on behalf of Tenant. When possible Tenant shall cause its personal property, Above Standard Improvements and alterations to be assessed and billed separately from the real property of which the Premises form a part. If any taxes on Tenant's personal property, and/or alterations are levied against Landlord or Landlord's property and if Landlord pays the same, or if the assessed value of Landlord's property is increased by the inclusion of a value placed upon the personal property, and/or alterations of Tenant and if Landlord pays the taxes based upon the increased assessment, Tenant shall pay to Landlord the taxes so levied against Landlord or the proportion of the taxes resulting from the increase in the assessment.

ARTICLE IX. ASSIGNMENT AND SUBLETTING

SECTION 9.1. RIGHTS OF PARTIES.

attempted assignment or subletting shall constitute a material default of this Lease. Without limiting the foregoing, Landlord agrees that the use and occupancy of not more than ten percent (10%) of the floor area of the Premises in the aggregate by any person or entity performing office support services (such as mail room, copy center, shipping or travel services) or other services incidental to Tenant's permitted use on an outsource basis shall not constitute a sublease or other prohibited transfer of the Premises provided Tenant continues to occupy the remainder of the Premises. Landlord shall not be deemed to have given its consent to any assignment or subletting by any other course of action, including its acceptance of any name for listing in the Building directory. To the extent not prohibited by provisions of the Bankruptcy Code, 11 U.S.C. Section 101 et seq. (the "Bankruptcy Code"), including Section 365(f)(1), Tenant on behalf of itself and its creditors, administrators and assigns waives the applicability of Section 365(e) of the Bankruptcy Code unless the proposed assignee of the Trustee for the estate of the bankrupt meets Landlord's standard for consent as set forth in Section 9.1(b) of this Lease. If this Lease is assigned to any person or entity pursuant to the provisions of the Bankruptcy Code, any and all monies or other considerations to be delivered in connection with the assignment shall be delivered to Landlord, shall be and remain the exclusive property of Landlord and shall not constitute property of Tenant or of the estate of Tenant within the meaning of the Bankruptcy Code. Any person or entity to which this Lease is assigned pursuant to the provisions of the Bankruptcy Code shall be deemed to have assumed all of the obligations arising under this Lease on and after the date of the assignment, and shall upon demand execute and deliver to Landlord an instrument confirming that assumption.

(b) If Tenant desires to transfer an interest in this Lease, it shall first notify Landlord of its desire and shall submit in writing to Landlord: (i) the name and address of the proposed transferee; (ii) the nature of any proposed subtenant's or assignee's business to be carried on in the Premises; (iii) the terms and provisions of any proposed sublease or assignment, including a copy of the proposed assignment or sublease form; (iv) evidence of insurance of the proposed assignee or subtenant complying with the requirements of EXHIBIT D hereto; (v) a completed Environmental Questionnaire from the proposed assignee or subtenant; and (vi) any other information reasonably requested by Landlord and reasonably related to the transfer. Except as provided in Subsection (c) of this Section, Landlord shall not unreasonably withhold its consent, provided:
(1) the use of the Premises will be consistent with the provisions of this Lease and with Landlord's written contractual commitments to other tenants of the Building and/or Project; (2) at Landlord's election, insurance requirements relating to such transferee's occupancy shall be brought into conformity with Landlord's then current leasing practice; (3) any proposed subtenant or assignee demonstrates that it is financially responsible by submission to Landlord of all reasonable information as Landlord may request concerning the proposed subtenant or assignee, including, but not limited to, a balance sheet of the proposed subtenant or assignee as of a date within ninety (90) days of the request for Landlord's consent, statements of income or profit and loss of the proposed subtenant or assignee for the two-year period preceding the request for Landlord's consent; (4) any proposed subtenant or assignee demonstrates to Landlord's reasonable satisfaction a record of successful experience in business; and (5) the proposed transfer will not impose additional burdens or adverse tax effects on Landlord.

If Landlord consents to the proposed transfer, Tenant may within ninety (90) days after the date of the consent effect the transfer upon the terms described in the information furnished to Landlord; provided that any material change in the terms shall be subject to Landlord's consent as set forth in this Section. Landlord shall approve or disapprove any requested transfer within fifteen (15) business days following receipt of Tenant's written request, the information set forth above, and the fee set forth below.

(c) In lieu of consenting to a proposed assignment or subletting of thirty-seven percent (37%) or more of the rentable area of the Premises in the aggregate taking into consideration prior subleases for the duration of the then remaining Term, Landlord may elect to recapture the portion of the Premises subject to the proposed subletting, and lease such recaptured Premises directly to the proposed assignee or sublessee or to any third party, as provided in this paragraph. In the event Tenant proposes to sublease any space in the Building, such space proposed for sublease must be separately leaseable and tenantable, as reasonably determined by Landlord. Tenant shall provide Landlord with notice of its proposal to sublease (which notice shall include all material terms of the proposed sublease, including rental rate, tenant improvements, base year, etc.). Landlord shall have fifteen (15) business days within which to notify Tenant of its intent to recapture the portion of the Premises designated for subletting. If Landlord declines to exercise its right to recapture, Tenant shall have one hundred eighty (180) days from the time Landlord notifies Tenant of its decision not to recapture the space, to sublease said space to any party at terms (inclusive of rental rate, tenant improvements, base year, etc.) not materially different than those proposed to Landlord and, if Tenant is unsuccessful, Tenant shall repeat the procedures set forth in this paragraph. In the event of any such recapture by Landlord, this Lease shall terminate as to the recaptured space and the rent payable under this Lease shall be proportionately reduced, and Landlord shall be responsible for any brokerage commissions and other leasing costs relating to such re-leasing of the recaptured space.

acknowledged as a reasonable amount to reimburse Landlord for all of its costs of review and evaluation of a proposed assignee/sublessee, and Landlord shall not be obligated to commence such review and evaluation unless and until such fee is paid.

(f) Landlord agrees to execute and deliver to Tenant, within fifteen (15) days following Tenant's request, a consent to lien waiver, including lease estoppel language as may be requested by Tenant's lender (all in a form reasonably acceptable to Tenant's lender and Landlord).

SECTION 9.2. EFFECT OF TRANSFER. No subletting or assignment, even with the consent of Landlord, shall relieve Tenant of its obligation to pay rent and to perform all its other obligations under this Lease. Moreover, Tenant shall indemnify and hold Landlord harmless, as provided in Section 10.3, for any act or omission by an assignee or subtenant. Each assignee, other than Landlord, shall be deemed to assume all obligations of Tenant under this Lease and shall be liable jointly and severally with Tenant for the payment of all rent, and for the due performance of all of Tenant's obligations, under this Lease. No transfer shall be binding on Landlord unless any document memorializing the transfer is delivered to Landlord and both the assignee/subtenant and Tenant deliver to Landlord an executed consent to transfer instrument prepared by Landlord and consistent with the requirements of this Article. The acceptance by Landlord of any payment due under this Lease from any other person shall not be deemed to be a waiver by Landlord of any provision of this Lease or to be a consent to any transfer. Consent by Landlord to one or more transfers shall not operate as a waiver or estoppel to the future enforcement by Landlord of its rights under this Lease.

SECTION 9.3. SUBLEASE REQUIREMENTS. The following terms and conditions shall apply to any subletting by Tenant of all or any part of the Premises and shall be deemed included in each sublease:

(b) Tenant hereby irrevocably assigns to Landlord all of Tenant's interest in all rentals and income arising from any sublease of the Premises, and Landlord may collect such rent and income and apply same toward Tenant's obligations under this Lease; provided, however, that until a default occurs in the performance of Tenant's obligations under this Lease, Tenant shall have the right to receive and collect the sublease rentals. Landlord shall not, by reason of this assignment or the collection of sublease rentals, be deemed liable to the subtenant for the performance of any of Tenant's obligations under the sublease. Tenant hereby irrevocably authorizes and directs any subtenant, upon receipt of a written notice from Landlord stating that an uncured default exists in the performance of Tenant's obligations under this Lease, to pay to Landlord all sums then and thereafter due under the sublease. Tenant agrees that the subtenant may rely on that notice without any duty of further inquiry and notwithstanding any notice or claim by Tenant to the contrary. Tenant shall have no right or claim against the subtenant or Landlord for any rentals so paid to Landlord.

(c) Except as permitted under Section 9.4 below, in the event of the termination of this Lease, Landlord may, at its sole option, take over Tenant's entire interest in any sublease and, upon notice from Landlord, the subtenant shall attorn to Landlord. In no event, however, shall Landlord be liable for any previous act or omission by Tenant under the sublease or for the return of any advance rental payments or deposits under the sublease that have not been actually delivered to Landlord, nor shall Landlord be bound by any sublease modification executed without Landlord's consent or for any advance rental payment by the subtenant in excess of one month's rent. The general provisions of this Lease, including, without limitation, those pertaining to insurance and indemnification, shall be deemed incorporated by reference into the sublease despite the termination of this Lease.

SECTION 9.4. CERTAIN TRANSFERS. Notwithstanding anything to the contrary contained in this Article IX, Landlord's consent shall not be required for the assignment or transfer of this Lease to any parent or wholly owned subsidiary of Tenant or in connection with the sale of all or substantially all of the assets of Tenant or as a result of a merger by Tenant with or into another entity controlling, under common control with, or controlled by Tenant (a "Tenant Affiliate"); provided that (i) the financial ability of the persons and/or entities remaining liable for Tenant's obligations under this Lease after such transfer, when considered in the aggregate, shall not be materially and adversely reduced or impaired when compared to the financial ability of Tenant prior to such transfer, evidence of which, satisfactory to Landlord, shall be presented to Landlord prior to such transfer unless such prior disclosure is prohibited by applicable law in which event disclosure shall be made as soon as reasonably possible after such transaction is disclosed to the public, (ii) Tenant shall provide to Landlord prior to or contemporaneously with such transfer, written notice of such transactions and such documentation and other information as Landlord may reasonably request in connection therewith, (iii) the terms of Section 9.2 shall be applicable to any such assignment, and (iv) the use of the Premises by the Tenant Affiliate shall be as set forth in this Lease. For purposes of this Section, a public or private refinancing or offering of Tenant stock is a permitted transfer and the term "control" means possession, directly or indirectly, of the power to direct or cause the direction of the management, affairs and policies of anyone, whether through the ownership of voting securities, by contract or otherwise. The provisions of Section 9.1 (c) and (d) shall not apply to the assignment or transfer of Tenant's interest in this Lease to a Tenant Affiliate pursuant to the provisions of this Section.

ARTICLE X. INSURANCE AND INDEMNITY

SECTION 10.1. TENANT'S INSURANCE. Tenant, at its sole cost and expense, shall provide and maintain in effect the insurance described in EXHIBIT D. Evidence of that insurance must be delivered to Landlord prior to the Commencement Date.

SECTION 10.2. LANDLORD'S INSURANCE. Landlord shall provide the following types of insurance, in amounts and coverages as may be determined by Landlord in its reasonable discretion provided such amounts, coverages and deductibles are reasonable and comparable to coverages maintained on comparable properties in the area: "all risk" property insurance, subject to standard exclusions covering the Building and the Project, and commercial general liability coverage. Further, Landlord may, in its sole and absolute discretion, obtain coverage for such other risks as Landlord or its mortgagees may from time to time deem appropriate, including, without limitation, coverage for leasehold improvements and/or earthquake (provided, however, that the cost of earthquake insurance shall not be included as an Operating Expense unless Landlord elects or is required to carry such coverage on the entire Project). Landlord shall not be required to carry insurance of any kind on Tenant's property, including leasehold improvements, trade fixtures, furnishings, equipment, plate glass, signs and all other items of personal property, and shall not be obligated to repair or replace that property should damage occur. All proceeds of insurance maintained by Landlord upon the Building and Project shall be the property of Landlord, whether or not Landlord is obligated to or elects to make any repairs. At Landlord's option, Landlord may self-insure all or any portion of the risks for which Landlord is required or elects to provide insurance hereunder; provided, however, that in the event that Landlord transfers its fee interest in the Project including the Premises (other than to an entity affiliated with, controlled, controlling or under common control with Landlord, or in which Landlord retains an interest), such transferee shall demonstrate a financial net worth of at least Fifty Million Dollars ($50,000,000.00) or cash reserves of Ten Million Dollars ($10,000,000.00), and in the absence of such financial net worth or cash reserves, such transferee shall instead maintain insurance coverage as required by this Section 10.2 from third-party insurance carrier(s).

SECTION 10.3. JOINT INDEMNITY.

(a) To the fullest extent permitted by law, but subject to the express limitations on liability contained in Section 10.5 of this Lease, Tenant shall defend, indemnify, protect, save and hold harmless Landlord, its agents, and any and all affiliates of Landlord, including, without limitation, any corporations or other entities controlling, controlled by or under common control with Landlord, from and against any and all claims, liabilities, costs or expenses arising either before or after the Commencement Date from Tenant's use or occupancy of the Premises, or from the conduct of its business, or from any activity, work, or thing done, permitted or suffered by Tenant or its agents, employees, invitees or licensees in or about the Premises, or from any negligence or willful misconduct of Tenant or its agents, employees, visitors, patrons, guests, invitees or licensees. In cases of alleged negligence asserted by third parties against Landlord which arise out of, are occasioned by, or in any way attributable to Tenant's, its agents, employees, contractors, licensees or invitees use and occupancy of the Premises, or from the conduct of its business or from any activity, work or thing done, permitted or suffered by Tenant or its agents, employees, invitees or licensees on Tenant's part to be performed under this Lease, or from any negligence or willful misconduct of Tenant, its agents, employees, licensees or invitees, Tenant shall accept any tender of defense for Landlord and shall, notwithstanding any allegation of negligence or willful misconduct on the part of the Landlord, defend Landlord and protect and hold Landlord harmless and pay all costs, expenses and attorneys' fees incurred in connection with such litigation, provided that Tenant shall not be liable for any such injury or damage, and Landlord shall reimburse Tenant for the reasonable attorney's fees and costs for the attorney representing both parties, all to the extent and in the proportion that such injury or damage is ultimately determined by a court of competent jurisdiction (or in connection with any negotiated settlement agreed to by Landlord) to be attributable to the negligence or willful misconduct of Landlord. Upon Landlord's request, Tenant shall at Tenant's sole cost and expense, retain a separate attorney reasonably selected by Landlord to represent Landlord in any such suit if Landlord reasonably determines that the representation of both Tenant and Landlord by the same attorney would cause a conflict of interest; provided, however, that to the extent and in the proportion that the injury or damage which is the subject of the suit is ultimately determined by a court of competent jurisdiction (or in connection with any negotiated settlement agreed to by Landlord) to be attributable to the negligence or willful misconduct of Landlord, Landlord shall reimburse Tenant for the reasonable legal fees and costs of the separate attorney retained by Tenant. The provisions of this Subsection 10.3(a) shall expressly survive the expiration or sooner termination of this Lease.

(b) To the fullest extent permitted by law, but subject to the express limitations on liability contained in this Lease (including, without limitation, the provisions of Sections 10.4, 10.5 and 14.8 of this Lease), Landlord shall defend, indemnify, protect, save and hold harmless Tenant, its agents and any and all affiliates of Tenant, including, without limitation, any corporations, or other entities controlling, controlled by or under common control with Tenant, from and against any and all claims, liabilities, costs or expenses arising either before or after the Commencement Date from the operation, maintenance or repair of the Common Areas, the Project and/or the Building by Landlord or its employees or authorized agents. In cases of alleged negligence asserted by third parties against Tenant which arise out of, are occasioned by, or in any way attributable to the maintenance or repair of the Common Areas, the Project or the Building by Landlord or its authorized agents or employees, Landlord shall accept any tender of defense for Tenant and shall, notwithstanding any allegation of negligence or willful misconduct on the part of Tenant, defend Tenant and protect and hold Tenant harmless and pay all cost, expense and attorneys' fees incurred in connection with such litigation, provided that Landlord shall not be liable for any such injury or damage, and Tenant shall reimburse Landlord for the reasonable attorney's fees and costs for the attorney representing both parties, all to the extent and in the proportion that such injury or damage is ultimately determined by a court of competent jurisdiction (or in connection with any negotiated settlement agreed to by Tenant) to be attributable to the negligence or willful misconduct of Tenant. Upon Tenant's request, Landlord shall at Landlord's sole cost and expense, retain a separate attorney reasonably selected by Tenant to represent Tenant in any such suit if Tenant reasonably determines that the representation of both Tenant and Landlord by the same

attorney would cause conflict of interest; provided, however, that to the extent and the proportion that the injury or damage which is the subject of the suit is ultimately determined by a court of competent jurisdiction (or in connection with any negotiated settlement agreed to by Tenant) to be attributable to the negligence or willful misconduct or Tenant, Tenant shall reimburse Landlord for the reasonable legal fees and costs of the separate attorney retained by Landlord. The provisions of this Subsection 10.3(b) shall expressly survive the expiration or sooner termination of this Lease.

SECTION 10.4. LANDLORD'S NONLIABILITY. Subject to the express indemnity obligations contained in Section 10.3(b) of this Lease, Landlord shall not be liable to Tenant, its employees, agents and invitees, and Tenant hereby waives all claims against Landlord for loss of or damage to any property or personal injury, or any other loss, cost, damage, injury or liability whatsoever resulting from fire, explosion, falling plaster, steam, gas, electricity, water or rain which may leak or flow from or into any part of the Premises or from the breakage, leakage, obstruction or other defects of the pipes, sprinklers, wires, appliances, plumbing, air conditioning, electrical works or other fixtures in the Building, whether the damage or injury results from conditions arising in the Premises or in other portions of the Building. Notwithstanding any provision of this Lease to the contrary, including, without limitation, the provisions of
Section 10.3(b) of this Lease, Landlord shall in no event be liable to Tenant, its employees, agents, and invitees, and Tenant hereby waives all claims against Landlord, for loss or interruption of Tenant's business or income (including, without limitation, any consequential damages and lost profit or opportunity costs), or any other loss, cost, damage, injury or liability resulting from, but not limited to, Acts of God (except with respect to restoration obligations pursuant to Article XI below), acts of civil disobedience or insurrection, acts or omissions (criminal or otherwise) of any third parties (other than Landlord's employees or authorized agents), including, without limitation, any other tenants within the Project or their agents, employees, contractors, guests or invitees. It is understood that any such condition may require the temporary evacuation or closure of all or a portion of the Building. Except as provided in Sections 6.1, 11.1 and 12.1 below, there shall be no abatement of rent and no liability of Landlord by reason of any injury to or interference with Tenant's business (including, without limitation, consequential damages and lost profit or opportunity costs) arising from the making of any repairs, alterations or improvements to any portion of the Building, including repairs to the Premises, nor shall any related activity by Landlord constitute an actual or constructive eviction; provided, however, that in making repairs, alterations or improvements, Landlord shall interfere as little as reasonably practicable with the conduct of Tenant's business in the Premises. Neither Landlord nor its agents shall be liable for interference with light or other similar intangible interests. Tenant shall immediately notify Landlord in case of fire or accident in the Premises, the Building or the Project and of defects in any improvements or equipment.

SECTION 10.5. WAIVER OF SUBROGATION. Landlord and Tenant each hereby waives all rights of recovery against the other and the other's agents on account of loss and damage occasioned to the property of such waiving party to the extent only that such loss or damage would be covered under any "all risk" property insurance policies required by this Article X; provided however, that (i) the foregoing waiver shall not apply to the extent of Tenant's obligations to pay deductibles under any such policies and this Lease, and (ii) if any loss is due to the negligent act, omission or willful misconduct of Tenant or its agents, employees, contractors, guests or invitees, Tenant's liability insurance shall be primary and shall cover all losses and damages prior to any other insurance hereunder. By this waiver it is the intent of the parties that neither Landlord nor Tenant shall be liable to any insurance company (by way of subrogation or otherwise) insuring the other party for any loss or damage insured against under any "all-risk" property insurance policies required by this Article, even though such loss or damage might be occasioned by the negligence of such party, its agents, employees, contractors, guests or invitees. The provisions of this
Section shall not limit the indemnification provisions elsewhere contained in this Lease.

ARTICLE XI. DAMAGE OR DESTRUCTION

SECTION 11.1. RESTORATION.

(a) If the Building of which the Premises are a part is damaged, Landlord shall diligently repair that damage as soon as reasonably possible, at its expense, unless: (i) Landlord reasonably determines that the cost of repair is not covered by Landlord's fire and extended coverage insurance then in place (or if Landlord is self-insuring, would not be covered by a standard policy of "all risk" fire insurance), plus such additional amounts Tenant elects, at its option, to contribute, excluding however the deductible (for which Tenant shall be responsible for Tenant's Share); (ii) Landlord reasonably determines that the Premises cannot, with reasonable diligence, be fully repaired by Landlord (or cannot be safely repaired because of the presence of hazardous factors, including, without limitation, Hazardous Materials, earthquake faults, and other similar dangers) within two hundred seventy (270) days after the date of the damage; (iii) the damage occurs during the final twelve (12) months of the Term. Should Landlord elect not to repair the damage for one of the preceding reasons, Landlord shall so notify Tenant in writing within thirty (30) days after the damage occurs and this Lease shall terminate as of the date of that notice.

(b) Unless Landlord elects to terminate this Lease in accordance with subsection (a) above, this Lease shall continue in effect for the remainder of the Term and Landlord shall promptly notify Tenant in writing of Landlord's election to restore the Premises and of the time Landlord estimates to complete such restoration; provided that so long as Tenant is not in default under this Lease following the expiration of the applicable cure period, if the damage is so extensive that Landlord reasonably determines that the Premises cannot, with reasonable diligence, be repaired by Landlord (or cannot be safely repaired because of the presence of hazardous factors, earthquake faults, and other similar dangers) so as to allow Tenant's substantial use and enjoyment of the Premises within two hundred seventy (270) days

after the date of damage, then Tenant may elect to terminate this Lease by written notice to Landlord within the thirty (30) day period stated in subsection (a).

(c) Commencing on the date of any damage to the Building, and ending on the sooner of the date the damage is repaired or the date this Lease is terminated, the rental to be paid under this Lease shall be abated in the same proportion that the floor area of the Premises that is rendered unusable by the damage from time to time bears to the total floor area of the Premises, and if as a result of any partial damage, Tenant reasonably determines that it cannot conduct its business in the remaining portions of the Premises, the rent for the entire Premises shall be abated. Any such abatement shall be conditioned upon Tenant's then carrying the required business interruption insurance as described in EXHIBIT D.

(d) Notwithstanding the provisions of subsections (a), (b) and (c) of this Section, and subject to the provisions of Section 10.5 above, the cost of any repairs shall be borne by Tenant, and Tenant shall not be entitled to rental abatement or termination rights, if the damage is due to the fault or neglect of Tenant or its employees, subtenants, invitees or representatives, but only to the extent such damage is not covered by a standard policy of "all risk" insurance (whether or not Landlord is self-insuring). In addition, the provisions of this Section shall not be deemed to require Landlord to repair any improvements or fixtures that Tenant is obligated to repair or insure pursuant to any other provision of this Lease.

(e) Tenant shall fully cooperate with Landlord in removing Tenant's personal property and any nonstructural debris from the Premises to facilitate all inspections of the Premises and the making of any repairs. Notwithstanding anything to the contrary contained in this Lease, if Landlord in good faith believes there is a risk of injury to persons or damage to property from entry into the Building or Premises following any damage or destruction thereto, Landlord may restrict entry into the Building or the Premises by Tenant, its employees, agents and contractors in a non-discriminatory manner, without being deemed to have violated Tenant's rights of quiet enjoyment to, or made an unlawful detainer of, or evicted Tenant from, the Premises. Upon request, Landlord shall consult with Tenant to determine if there are safe methods of entry into the Building or the Premises solely in order to allow Tenant to retrieve files, data in computers, and necessary inventory, subject however to all indemnities and waivers of liability from Tenant to Landlord contained in this Lease and any additional indemnities and waivers of liability which Landlord may require. If damage or destruction rendering the Premises unusable occurs during the final twelve (12) months of the Lease Term or the final twelve
(12) months of any extension period which cannot be repaired within sixty (60) days following such damage or destruction, Tenant shall have the option to terminate the Lease by providing Landlord written notification of Tenant's election to terminate within thirty (30) days after the damage occurs. For all purposes of this Section 11.1, damage to Tenant's parking areas and access to the Premises shall be deemed damage to the Building.

SECTION 11.2. LEASE GOVERNS/JAMS. Tenant agrees that the provisions of this Lease, including, without limitation, Section 11.1, shall govern any damage or destruction and shall accordingly supersede any contrary statute or rule of law. Any disputes regarding the obligations of the parties under this Article XI shall be submitted to and resolved by JAMS arbitration pursuant to Section 22.7 of this Lease.

ARTICLE XII. EMINENT DOMAIN

SECTION 12.1. TOTAL OR PARTIAL TAKING. If all or a material portion of the Premises which materially impairs Tenant's ability to conduct business from the Premises is taken by any lawful authority by exercise of the right of eminent domain, or sold to prevent a taking, either Tenant or Landlord may terminate this Lease effective as of the date possession is required to be surrendered to the authority. In the event title to a portion of the Building or Project, other than the Premises, is taken or sold in lieu of taking, and if Landlord elects to restore the Building in such a way as to alter the Premises materially, either party may terminate this Lease, by written notice to the other party, effective on the date of vesting of title. In the event neither party has elected to terminate this Lease as provided above, then Landlord shall promptly, after receipt of a sufficient condemnation award, proceed to restore the Premises to substantially their condition prior to the taking, and a proportionate allowance shall be made to Tenant for the rent corresponding to the time during which, and to the part of the Premises of which, Tenant is deprived on account of the taking and restoration. In addition, Tenant's share of Operating Expenses and all other elements of this Lease which are a function of the square footage of the Premises shall be adjusted to reflect the taking. In the event of a taking, Landlord shall be entitled to the entire amount of the condemnation award without deduction for any estate or interest of Tenant; provided that nothing in this Section shall be deemed to give Landlord any interest in, or prevent Tenant from seeking any award against the taking authority for, the taking of personal property and fixtures belonging to Tenant or for relocation or business interruption expenses recoverable from the taking authority.

SECTION 12.2. TEMPORARY TAKING. No temporary taking of the Premises shall terminate this Lease or give Tenant any right to abatement of rent, and any award specifically attributable to a temporary taking of the Premises shall belong entirely to Tenant. A temporary taking shall be deemed to be a taking of the use or occupancy of the Premises for a period of not to exceed ninety (90) days.

of the Premises, Tenant may, at its option, terminate this Lease by written notice to Landlord. If this Lease is not so terminated by Tenant, there shall be no abatement of rent and this Lease shall continue in effect. Any dispute regarding the substitution of parking spaces under this Section 12.3 shall be submitted to and resolved by JAMS arbitration pursuant to Section 22.7 of this Lease.

ARTICLE XIII. SUBORDINATION; ESTOPPEL CERTIFICATE; FINANCIALS

SECTION 13.1. SUBORDINATION. At the option of Landlord, this Lease shall be either superior or subordinate to all ground or underlying leases, mortgages and deeds of trust, if any, which may hereafter affect the Building, and to all renewals, modifications, consolidations, replacements and extensions thereof; provided, that so long as Tenant is not in default under this Lease following the expiration of the applicable cure period, this Lease shall not be terminated or Tenant's quiet enjoyment of the Premises disturbed in the event of termination of any such ground or underlying lease, or the foreclosure of any such mortgage or deed of trust, to which Tenant has subordinated this Lease pursuant to this Section. Any such subordination instrument presented for Tenant's signature shall contain nondisturbance provisions for Tenant's benefit substantially in accordance with the provisions for Tenant's benefit set forth in this Section. In the event of a termination or foreclosure, Tenant shall become a tenant of and attorn to the successor-in-interest to Landlord upon the same terms and conditions as are contained in this Lease, and shall execute any instrument reasonably required by Landlord's successor for that purpose. Tenant shall also, upon written request of Landlord, execute and deliver all instruments as may be required from time to time to subordinate the rights of Tenant under this Lease to any ground or underlying lease or to the lien of any mortgage or deed of trust (provided that such instruments include the nondisturbance and attornment protections set forth above in form reasonably acceptable to Tenant), or, if requested by Landlord, to subordinate, in whole or in part, any ground or underlying lease or the lien of any mortgage or deed of trust to this Lease.

SECTION 13.2. ESTOPPEL CERTIFICATE.

(a) Tenant shall, at any time upon not less than fifteen (15) days prior written notice from Landlord, execute, acknowledge and deliver to Landlord, in any form that Landlord may reasonably require, a statement in writing (i) certifying that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of the modification and certifying that this Lease, as modified, is in full force and effect) and the dates to which the rental, additional rent and other charges have been paid in advance, if any, and (ii) acknowledging that, to Tenant's knowledge, there are no uncured defaults on the part of Landlord, or specifying each default if any are claimed, and (iii) setting forth all further information that Landlord may reasonably require. Tenant's statement may be relied upon by any prospective purchaser or encumbrancer of all or any portion of the Building or Project.

(b) Notwithstanding any other rights and remedies of Landlord, Tenant's failure to deliver any estoppel statement within fifteen (15) days following written notice therefor shall be conclusive upon Tenant that (i) this Lease is in full force and effect, without modification except as may be represented by Landlord, (ii) there are no uncured defaults in Landlord's performance, and
(iii) not more than one month's rental has been paid in advance.

SECTION 13.3. FINANCIALS.

(a) Tenant shall deliver to Landlord, prior to the execution of this Lease and thereafter at any time within fifteen (15) days following Landlord's request but not more than once in each calendar year, Tenant's current financial statements, certified true, accurate and complete by the chief financial officer of Tenant, including a balance sheet and profit and loss statement for the most recent prior year (collectively, the "Statements"), which Statements shall accurately and completely reflect the financial condition of Tenant. Landlord agrees that it will keep the Statements confidential, except that Landlord shall have the right to deliver the same to any proposed purchaser of the Building or Project (provided that any such purchaser shall agree to keep said Statements confidential), and to any encumbrancer of all or any portion of the Building or Project (provided that Landlord shall request that any such encumbrancer keep said Statements confidential).

(b) Tenant acknowledges that Landlord is relying on the Statements in its determination to enter into this Lease, and Tenant represents to Landlord, which representation shall be deemed made on the date of this Lease and again on the Commencement Date, that no material change in the financial condition of Tenant, as reflected in the Statements, has occurred since the date Tenant delivered the Statements to Landlord. The Statements are represented and warranted by Tenant to be correct and to accurately and fully reflect Tenant's true financial condition as of the date of submission by any Statements to Landlord.

ARTICLE XIV. DEFAULTS AND REMEDIES

SECTION 14.1. TENANT'S DEFAULTS. In addition to any other event of default set forth in this Lease, the occurrence of any one or more of the following events shall constitute a default by Tenant:

provided, however, that any such notice shall be in lieu of, and not in addition to, any notice required under California Code of Civil Procedure Section 1161 and 1161(a) as amended. For purposes of these default and remedies provisions, the term "additional rent" shall be deemed to include all amounts of any type whatsoever other than Basic Rent to be paid by Tenant pursuant to the terms of this Lease.

(b) Assignment, sublease, encumbrance or other transfer of the Lease by Tenant, either voluntarily or by operation of law, whether by judgment, execution, transfer by intestacy or testacy, or other means, without the prior written consent of Landlord.

(c) The discovery by Landlord that any financial statement provided by Tenant, or by any affiliate, successor or guarantor of Tenant, was materially false.

(d) The failure of Tenant to timely and fully provide any subordination agreement, estoppel certificate or financial statements in accordance with the requirements of Article XIII.

(e) The failure or inability by Tenant to observe or perform any of the express or implied covenants or provisions of this Lease to be observed or performed by Tenant, other than as specified in any other subsection of this Section, where the failure continues for a period of thirty (30) days after written notice from Landlord to Tenant or such shorter period as is specified in any other provision of this Lease; provided, however, that any such notice shall be in lieu of, and not in addition to, any notice required under California Code of Civil Procedure Section 1161 and 1161(a) as amended. However, if the nature of the failure is such that more than thirty (30) days are reasonably required for its cure, then Tenant shall not be deemed to be in default if Tenant commences the cure within thirty (30) days, and thereafter diligently pursues the cure to completion.

(f) (i) The making by Tenant of any general assignment for the benefit of creditors; (ii) the filing by or against Tenant of a petition to have Tenant adjudged a Chapter 7 debtor under the Bankruptcy Code or to have debts discharged or a petition for reorganization or arrangement under any law relating to bankruptcy (unless, in the case of a petition filed against Tenant, the same is dismissed within sixty (60) days); (iii) the appointment of a trustee or receiver to take possession of substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease, if possession is not restored to Tenant within sixty (60) days; (iv) the attachment, execution or other judicial seizure of substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease, where the seizure is not discharged within sixty (60) days; or (v) Tenant's convening of a meeting of its creditors for the purpose of effecting a moratorium upon or composition of its debts. Landlord shall not be deemed to have knowledge of any event described in this subsection unless notification in writing is received by Landlord, nor shall there be any presumption attributable to Landlord of Tenant's insolvency. In the event that any provision of this subsection is contrary to applicable law, the provision shall be of no force or effect.

SECTION 14.2. LANDLORD'S REMEDIES.

(a) In the event of any default by Tenant, or in the event of the abandonment of the Premises by Tenant, then in addition to any other remedies available to Landlord, Landlord may exercise the following remedies:

(i)Landlord may terminate Tenant's right to possession of the Premises by any lawful means, in which case this Lease shall terminate and Tenant shall immediately surrender possession of the Premises to Landlord. Such termination shall not affect any accrued obligations of Tenant under this Lease. Upon termination, Landlord shall have the right to reenter the Premises and remove all persons and property. Landlord shall also be entitled to recover from Tenant:

(1) The worth at the time of award of the unpaid rent and additional rent which had been earned at the time of termination;

(2) The worth at the time of award of the amount by which the unpaid rent and additional rent which would have been earned after termination until the time of award exceeds the amount of such loss that Tenant proves could have been reasonably avoided;

(3) The worth at the time of award of the amount by which the unpaid rent and additional rent for the balance of the Term after the time of award exceeds the amount of such loss that Tenant proves could be reasonably avoided;

(4) Any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result from Tenant's default, including, but not limited to, the cost of recovering possession of the Premises, refurbishment of the Premises to the condition required upon surrender under this Lease, marketing costs, commissions and other expenses of reletting, including necessary repair, the unamortized portion of any tenant improvements and brokerage commissions funded by Landlord in connection with this Lease, reasonable attorneys' fees, and any other reasonable costs (provided that the unamortized portion of any tenant improvements shall not be computed separately from the rent which includes such amounts); and

required to be paid by Tenant to Landlord pursuant to the terms of this Lease. Any sum, other than Basic Rent, shall be computed on the basis of the average monthly amount accruing during the twenty-four (24) month period immediately prior to default, except that if it becomes necessary to compute such rental before the twenty-four (24) month period has occurred, then the computation shall be on the basis of the average monthly amount during the shorter period. As used in subparagraphs (1) and (2) above, the "worth at the time of award" shall be computed by allowing interest at the rate of ten percent (10%) per annum. As used in subparagraph (3) above, the "worth at the time of award" shall be computed by discounting the amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%).

(ii) Landlord may elect not to terminate Tenant's right to possession of the Premises, in which event Landlord may continue to enforce all of its rights and remedies under this Lease, including the right to collect all rent as it becomes due. Efforts by the Landlord to maintain, preserve or relet the Premises, or the appointment of a receiver to protect the Landlord's interests under this Lease, shall not constitute a termination of the Tenant's right to possession of the Premises. In the event that Landlord elects to avail itself of the remedy provided by this subsection (ii), Landlord shall not unreasonably withhold its consent to an assignment or subletting of the Premises subject to the reasonable standards for Landlord's consent as are contained in this Lease.

(b) The various rights and remedies reserved to Landlord in this Lease or otherwise shall be cumulative and, except as otherwise provided by California law, Landlord may pursue any or all of its rights and remedies at the same time.

(c) No delay or omission of Landlord to exercise any right or remedy shall be construed as a waiver of the right or remedy or of any default by Tenant. The acceptance by Landlord of rent shall not be a (i) waiver of any preceding breach or default by Tenant of any provision of this Lease, other than the failure of Tenant to pay the particular rent accepted, regardless of Landlord's knowledge of the preceding breach or default at the time of acceptance of rent, or (ii) a waiver of Landlord's right to exercise any remedy available to Landlord by virtue of the breach or default. The acceptance of any payment from a debtor in possession, a trustee, a receiver or any other person acting on behalf of Tenant or Tenant's estate shall not waive or cure a default under Section 14.1. No payment by Tenant or receipt by Landlord of a lesser amount than the rent required by this Lease shall be deemed to be other than a partial payment on account of the earliest due stipulated rent, nor shall any endorsement or statement on any check or letter be deemed an accord and satisfaction and Landlord shall accept the check or payment without prejudice to Landlord's right to recover the balance of the rent or pursue any other remedy available to it. No act or thing done by Landlord or Landlord's agents during the Term shall be deemed an acceptance of a surrender of the Premises, and no agreement to accept a surrender shall be valid unless in writing and signed by Landlord. No employee of Landlord or of Landlord's agents shall have any power to accept the keys to the Premises prior to the termination of this Lease, and the delivery of the keys to any employee shall not operate as a termination of the Lease or a surrender of the Premises.

SECTION 14.3. LATE PAYMENTS. Any rent due under this Lease that is not received by Landlord within ten (10) days of the date when due shall bear interest at the rate of ten percent (10%) per annum not to exceed the maximum rate permitted by law (the "Interest Rate") from the date due until fully paid. The payment of interest shall not cure any default by Tenant under this Lease. In addition, Tenant acknowledges that the late payment by Tenant to Landlord of rent will cause Landlord to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult and impracticable to ascertain. Those costs may include, but are not limited to, administrative, processing and accounting charges, and late charges which may be imposed on Landlord by the terms of any ground lease, mortgage or trust deed covering the Premises. Accordingly, if any rent due from Tenant shall not be received by Landlord or Landlord's designee within ten (10) days after the date due, then Tenant shall pay to Landlord, in addition to the interest provided above, a late charge in a sum equal to the greater of five percent (5%) of the amount overdue or Two Hundred Fifty Dollars ($250.00) for each delinquent payment; provided that such late charge shall be waived for the initial late rent payment during each calendar year during the Term and any extension. Acceptance of a late charge by Landlord shall not constitute a waiver of Tenant's default with respect to the overdue amount, nor shall it prevent Landlord from exercising any of its other rights and remedies.

SECTION 14.4. RIGHT OF LANDLORD TO PERFORM. All covenants and agreements to be performed by Tenant under this Lease shall be performed at Tenant's sole cost and expense and without any abatement of rent or right of set-off. If Tenant fails to pay any sum of money, other than rent, or fails to perform any other act on its part to be performed under this Lease, and the failure continues beyond any applicable grace period set forth in Section 14.1, then in addition to any other available remedies, Landlord may, at its election make the payment or perform the other act on Tenant's part. Landlord's election to make the payment or perform the act on Tenant's part shall not give rise to any responsibility of Landlord to continue making the same or similar payments or performing the same or similar acts. Tenant shall, promptly upon demand by Landlord, reimburse Landlord for all sums paid by Landlord and all necessary incidental costs, together with interest at the maximum rate permitted by law from the date of the payment by Landlord. Landlord shall have the same rights and remedies if Tenant fails to pay those amounts as Landlord would have in the event of a default by Tenant in the payment of rent. Landlord shall provide Tenant with written notice and the appropriate cure period provided in the Lease before performing any act on behalf of Tenant and will provide Tenant with written request for any reimbursement payable under this Section 14.4.

performance, then Landlord shall not be deemed to be in default if it commences performance within the thirty (30) day period and thereafter diligently pursues the cure to completion. If Landlord shall default in the performance of any of its obligations under the Lease (after notice and an opportunity to cure as provided herein), Tenant shall have the right to pursue any and all remedies available to it as set forth in this Lease, at law, or in equity, subject to the express limitations on liability contained in this Lease.

SECTION 14.6. EXPENSES AND LEGAL FEES. All sums reasonably incurred by Landlord in connection with any event of default by Tenant under this Lease or holding over of possession by Tenant after the expiration or earlier termination of this Lease, including, without limitation, all costs, expenses and actual accountants, appraisers, attorneys and other professional fees, and any collection agency or other collection charges, shall be due and payable by Tenant to Landlord on demand, and shall bear interest at the rate of ten percent (10%) per annum. Should either Landlord or Tenant bring any action in connection with this Lease, the prevailing party shall be entitled to recover as a part of the action its reasonable attorneys' fees, and all other costs. The prevailing party for the purpose of this paragraph shall be determined by the trier of the facts.

SECTION 14.7. WAIVER OF JURY TRIAL. LANDLORD AND TENANT EACH ACKNOWLEDGES THAT IT IS AWARE OF AND HAS HAD THE ADVICE OF COUNSEL OF ITS CHOICE WITH RESPECT TO ITS RIGHTS TO TRIAL BY JURY, AND EACH PARTY DOES HEREBY EXPRESSLY AND KNOWINGLY WAIVE AND RELEASE ALL SUCH RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTY HERETO AGAINST THE OTHER (AND/OR AGAINST ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, OR SUBSIDIARY OR AFFILIATED ENTITIES) ON ANY MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, TENANT'S USE OR OCCUPANCY OF THE PREMISES, AND/OR ANY CLAIM OF INJURY OR DAMAGE.

SECTION 14.8. SATISFACTION OF JUDGMENT. The obligations of Landlord do not constitute the personal obligations of the individual partners, trustees, directors, officers or shareholders of Landlord or its constituent partners. Should Tenant recover a money judgment against Landlord, such judgment shall be satisfied only out of the proceeds of sale received upon execution of such judgment and levied thereon against the right, title and interest of Landlord in the Project and out of the rent or other income from such property receivable by Landlord or out of consideration received by Landlord from the sale or other disposition of all or any part of Landlord's right, title or interest in the Project and no action for any deficiency may be sought or obtained by Tenant.

ARTICLE XV. END OF TERM

SECTION 15.1. HOLDING OVER. This Lease shall terminate without further notice upon the expiration of the Term, and any holding over by Tenant after the expiration shall not constitute a renewal or extension of this Lease, or give Tenant any rights under this Lease, except when in writing signed by both parties. If Tenant holds over for any period after the expiration (or earlier termination) of the Term without the prior written consent of Landlord, such possession shall constitute a tenancy at sufferance only; such holding over with the prior written consent of Landlord shall constitute a month-to-month tenancy commencing on the first (1st) day following the termination of this Lease. In either of such events, possession shall be subject to all of the terms of this Lease, except that the monthly Basic Rent shall be one hundred twenty percent (120%) of the Basic Rent for the month immediately preceding the date of termination for the initial two (2) months of holdover by Tenant and thereafter, the monthly Basic Rent for the third (3rd) and each successive month of holdover shall be the greater of one hundred fifty percent (150%) of the Basic Rent for the month immediately preceding the date of termination or the then current Basic Rent for comparable space in the Building or Project, as the case may be. If Tenant fails to surrender the Premises upon the expiration of this Lease despite Landlord's written demand to do so (which demand shall include notice to Tenant of a succeeding tenant and the need for Tenant's immediate surrender), then Tenant shall be liable for Landlord's foreseeable consequential and other damages (including, without limitation, reasonable attorney's fees) proximately caused by such failure to surrender. Acceptance by Landlord of rent after the termination shall not constitute a consent to a holdover or result in a renewal of this Lease. The foregoing provisions of this Section are in addition to and do not affect Landlord's right of re-entry or any other rights of Landlord under this Lease or at law.

SECTION 15.2. MERGER ON TERMINATION. The voluntary or other surrender of this Lease by Tenant, or a mutual termination of this Lease, shall terminate any or all existing subleases unless Landlord, at its option, elects in writing to treat the surrender or termination as an assignment to it of any or all subleases affecting the Premises.

Landlord may effect the removal and/or make any repairs, and the cost to Landlord shall be additional rent payable by Tenant upon demand. If Tenant fails to remove Tenant's personal property from the Premises upon the expiration of the Term, Landlord may remove, store, dispose of and/or retain such personal property, at Landlord's option, in accordance with then applicable laws, all at the expense of Tenant. If requested by Landlord, Tenant shall execute, acknowledge and deliver to Landlord an instrument in writing releasing and quitclaiming to Landlord all right, title and interest of Tenant in the Premises.

ARTICLE XVI. PAYMENTS AND NOTICES

All sums payable by Tenant to Landlord shall be paid, without deduction or offset (except as otherwise expressly provided in this Lease), in lawful money of the United States to Landlord at its address set forth in Item 12 of the Basic Lease Provisions, or at any other place as Landlord may designate in writing. Unless this Lease expressly provides otherwise, as for example in the payment of rent pursuant to Section 4.1, all payments shall be due and payable within five (5) days after demand. All payments requiring proration shall be prorated on the basis of a thirty (30) day month and a three hundred sixty (360) day year. Any notice, election, demand, consent, approval or other communication to be given or other document to be delivered by either party to the other may be delivered in person or by courier or overnight delivery service to the other party, or may be deposited in the United States mail, duly registered or certified, postage prepaid, return receipt requested, and addressed to the other party at the address set forth in Item 12 of the Basic Lease Provisions. Either party may, by written notice to the other, served in the manner provided in this Article, designate a different address. If any notice or other document is sent by mail, it shall be deemed served or delivered on the date actually received or refused as indicated on the return receipt. If more than one person or entity is named as Tenant under this Lease, service of any notice upon any one of them shall be deemed as service upon all of them. Unless the Lease expressly provides otherwise, all payments shall be due and payable within ten (10) days of demand.

ARTICLE XVII. RULES AND REGULATIONS

Tenant agrees to observe faithfully and comply strictly with the Rules and Regulations, attached as EXHIBIT E, and any reasonable and nondiscriminatory amendments, modifications and/or additions as may be adopted and published by written notice to tenants by Landlord for the safety, care, security, good order, or cleanliness of the Premises, Building, Project and Common Areas. Landlord shall not be liable to Tenant for any violation of the Rules and Regulations or the breach of any covenant or condition in any lease by any other tenant or such tenant's agents, employees, contractors, guests or invitees. One or more waivers by Landlord of any breach of the Rules and Regulations by Tenant or by any other tenant(s) shall not be a waiver of any subsequent breach of that rule or any other. Tenant's failure to keep and observe the Rules and Regulations shall constitute a default under this Lease. In the case of any conflict between the Rules and Regulations and this Lease, this Lease shall be controlling. Tenant's agreement to abide by, keep and observe all reasonable rules and regulations which Landlord may make shall be limited to those rules and restrictions which are consistently applied by Landlord to all tenants of the Project in a non-discriminatory manner.

ARTICLE XVIII. BROKER'S COMMISSION

The parties recognize as the broker(s) who negotiated this Lease the firm(s), if any, whose name(s) is (are) stated in Item 10 of the Basic Lease Provisions, and agree that Landlord shall be responsible for the payment of brokerage commissions to those broker(s) pursuant to Landlord's separate agreement with said Broker. Tenant warrants that it has had no dealings with any other real estate broker or agent in connection with the negotiation of this Lease, and Tenant agrees to indemnify and hold Landlord harmless from any cost, expense or liability (including reasonable attorneys' fees) for any compensation, commissions or charges claimed by any other real estate broker or agent employed or claiming to represent or to have been employed by Tenant in connection with the negotiation of this Lease. The foregoing agreement shall survive the termination of this Lease. To the fullest extent permitted by law, Landlord agrees to indemnify, defend and hold harmless Tenant from and against any and all costs, expenses and liabilities for any compensation claimed by any broker, finder or agent employed or claiming to have been employed by Landlord in connection with the negotiation of this Lease.

ARTICLE XIX. TRANSFER OF LANDLORD'S INTEREST

In the event of any transfer of Landlord's interest in the Premises, Landlord agrees to transfer, by credit to the purchase price or otherwise, Tenant's Security Deposit to the transferee, and the transferor shall thereupon be automatically relieved of all obligations on the part of Landlord accruing under this Lease from and after the date of the transfer, provided that: (i) any other funds held by the transferor in which Tenant has an interest shall be turned over, subject to that interest, to the transferee and Tenant is notified of the transfer as required by law and (ii) any such transferee shall assume, in writing, all non-accrued obligations of Landlord under this Lease Notwithstanding the foregoing, no holder of a mortgage and/or deed of trust to which this Lease is or may be subordinate, and no landlord under a so-called sale-leaseback, shall be responsible in connection with the Security Deposit, unless the mortgagee or

holder of the deed of trust or the landlord actually receives the Security Deposit. It is intended that the covenants and obligations contained in this Lease on the part of Landlord shall, subject to the foregoing, be binding on Landlord, its successors and assigns, only during and in respect to their respective successive periods of ownership.

ARTICLE XX. INTERPRETATION

SECTION 20.1. GENDER AND NUMBER. Whenever the context of this Lease requires, the words "Landlord" and "Tenant" shall include the plural as well as the singular, and words used in neuter, masculine or feminine genders shall include the others.

SECTION 20.2. HEADINGS. The captions and headings of the articles and sections of this Lease are for convenience only, are not a part of this Lease and shall have no effect upon its construction or interpretation.

SECTION 20.3. JOINT AND SEVERAL LIABILITY. If more than one person or entity is named as Tenant, the obligations imposed upon each shall be joint and several and the act of or notice from, or notice or refund to, or the signature of, any one or more of them shall be binding on all of them with respect to the tenancy of this Lease, including, but not limited to, any renewal, extension, termination or modification of this Lease.

SECTION 20.4. SUCCESSORS. Subject to Articles IX and XIX, all rights and liabilities given to or imposed upon Landlord and Tenant shall extend to and bind their respective heirs, executors, administrators, successors and assigns. Nothing contained in this Section is intended, or shall be construed, to grant to any person other than Landlord and Tenant and their successors and assigns any rights or remedies under this Lease.

SECTION 20.5. TIME OF ESSENCE. Time is of the essence with respect to the performance of every provision of this Lease.

SECTION 20.6. CONTROLLING LAW. This Lease shall be governed by and interpreted in accordance with the laws of the State of California.

SECTION 20.7. SEVERABILITY. If any term or provision of this Lease, the deletion of which would not adversely affect the receipt of any material benefit by either party or the deletion of which is consented to by the party adversely affected, shall be held invalid or unenforceable to any extent, the remainder of this Lease shall not be affected and each term and provision of this Lease shall be valid and enforceable to the fullest extent permitted by law.

SECTION 20.8. WAIVER AND CUMULATIVE REMEDIES. One or more waivers by Landlord or Tenant of any breach of any term, covenant or condition contained in this Lease shall not be a waiver of any subsequent breach of the same or any other term, covenant or condition. Consent to any act by one of the parties shall not be deemed to render unnecessary the obtaining of that party's consent to any subsequent act. No breach by Tenant of this Lease shall be deemed to have been waived by Landlord unless the waiver is in a writing signed by Landlord. The rights and remedies of Landlord under this Lease shall be cumulative and in addition to any and all other rights and remedies which Landlord may have. The failure of Tenant or Landlord to seek redress for violation of, or to insist upon the strict performance of, any term, covenant or condition of the Lease shall not be deemed a waiver of such violation or prevent a subsequent act which would have originally constituted a violation from having all the force and effect of the original violation, nor shall any custom or practice which may become established between the parties in the administration of the terms hereof be deemed a waiver of, or in any way affect, the right of a party to insist upon the performance by the other party of its obligations in strict accordance with said terms. Any payment of rents or other sums hereunder by Tenant shall not, in and of itself, be deemed a waiver of any preceding breach by Landlord of any term, covenant or condition of this Lease, regardless of Tenant's knowledge of such preceding breach at the time of payment of such rent or other sums.

SECTION 20.9. INABILITY TO PERFORM. In the event that either party shall be delayed or hindered in or prevented from the performance of any work or in performing any act required under this Lease by reason of any cause beyond the reasonable control of that party, then the performance of the work or the doing of the act shall be excused for the period of the delay and the time for performance shall be extended for a period equivalent to the period of the delay. The provisions of this Section shall not operate to excuse Tenant from the prompt payment of rent or from the timely performance of any other obligation under this Lease within Tenant's reasonable control.

SECTION 20.10. ENTIRE AGREEMENT. This Lease and its exhibits and other attachments cover in full each and every agreement of every kind between the parties concerning the Premises, the Building, and the Project, and all preliminary negotiations, oral agreements, understandings and/or practices, except those contained in this Lease, are superseded and of no further effect. Tenant waives its rights to rely on any representations or promises made by Landlord or others which are not contained in this Lease. No verbal agreement or implied covenant shall be held to modify the provisions of this Lease, any statute, law, or custom to the contrary notwithstanding.

SECTION 20.11. QUIET ENJOYMENT. Upon the observance and performance of all the covenants, terms and conditions on Tenant's part to be observed and performed, and subject to the other provisions of this Lease, Tenant shall peaceably and quietly hold and enjoy the Premises for the Term without hindrance or interruption by Landlord or any other person claiming by or through Landlord.

SECTION 20.12. SURVIVAL. All covenants of Landlord or Tenant which reasonably would be intended to survive the expiration or sooner termination of this Lease, including, without limitation, any warranty or indemnity hereunder, shall so survive and continue to be binding upon and inure to the benefit of the respective parties and their successors and assigns.

ARTICLE XXI. EXECUTION AND RECORDING

SECTION 21.1. COUNTERPARTS. This Lease may be executed in one or more counterparts, each of which shall constitute an original and all of which shall be one and the same agreement.

SECTION 21.2. CORPORATE AND PARTNERSHIP AUTHORITY. Tenant and Landlord each represent and warrant that each individual executing this Lease on behalf of Tenant or Landlord, respectively, is duly authorized to execute and deliver this Lease on behalf of Tenant or Landlord, respectively, and that this Lease is binding upon Tenant or Landlord, respectively, in accordance with its terms.

SECTION 21.3. EXECUTION OF LEASE; NO OPTION OR OFFER. The submission of this Lease to Tenant shall be for examination purposes only, and shall not constitute an offer to or option for Tenant to lease the Premises. Execution of this Lease by Tenant and its return to Landlord shall not be binding upon Landlord, notwithstanding any time interval, until Landlord has in fact executed and delivered this Lease to Tenant, it being intended that this Lease shall only become effective upon execution by Landlord and delivery of a fully executed counterpart to Tenant.

SECTION 21.4. RECORDING. Tenant shall not record this Lease without the prior written consent of Landlord. Tenant, upon the request of Landlord, shall execute and acknowledge a "short form" memorandum of this Lease for recording purposes.

SECTION 21.5. AMENDMENTS. No amendment or termination of this Lease shall be effective unless in writing signed by authorized signatories of Tenant and Landlord, or by their respective successors in interest. No actions, policies, oral or informal arrangements, business dealings or other course of conduct by or between the parties shall be deemed to modify this Lease in any respect.

SECTION 21.6. EXECUTED COPY. Any fully executed photocopy or similar reproduction of this Lease shall be deemed an original for all purposes.

SECTION 21.7. ATTACHMENTS. All exhibits, amendments, riders and addenda attached to this Lease are hereby incorporated into and made a part of this Lease.

ARTICLE XXII. MISCELLANEOUS

SECTION 22.1. NONDISCLOSURE OF LEASE TERMS. Tenant acknowledges and agrees that the terms of this Lease are confidential and constitute proprietary information of Landlord. Disclosure of the terms could adversely affect the ability of Landlord to negotiate other leases and impair Landlord's relationship with other tenants. Accordingly, Tenant agrees that it, and its partners, officers, directors, employees and attorneys, shall not intentionally and voluntarily disclose the terms and conditions of this Lease to any other tenant or apparent prospective tenant of the Project, either directly or indirectly, without the prior written consent of Landlord, provided, however, that Tenant may disclose the terms to prospective subtenants or assignees under this Lease. The provisions of this Section are not intended to prevent Tenant from disclosing the existence or terms of this Lease as may be required of a public company in its filings with regulatory agencies.

SECTION 22.2. GUARANTY. [INTENTIONALLY OMITTED]

SECTION 22.3. CHANGES REQUESTED BY LENDER. If, in connection with obtaining financing for the Project, the lender shall request reasonable modifications in this Lease as a condition to the financing, Tenant will not unreasonably withhold or delay its consent, provided that the modifications do not materially increase the obligations of Tenant or materially and adversely affect the leasehold interest created by this Lease.

SECTION 22.4. MORTGAGEE PROTECTION. No act or failure to act on the part of Landlord which would otherwise entitle Tenant to be relieved of its obligations hereunder or to terminate this Lease shall result in such a release or termination unless (a) Tenant has given notice by registered or certified mail to any beneficiary of a deed of trust or mortgage covering the Building whose address has been furnished to Tenant and (b) such beneficiary is afforded a reasonable opportunity to cure the default by Landlord (which in no event shall be less than sixty (60) days), including, if necessary to effect the cure, time to obtain possession of the Building by power of sale or judicial foreclosure provided that such foreclosure remedy is commenced within such sixty (60) day period and is thereafter diligently pursued. Tenant agrees that each beneficiary of a deed of trust or mortgage covering the Building is an express third party beneficiary hereof, Tenant shall have no right or claim for the collection of any deposit from such beneficiary or from any purchaser at a foreclosure sale unless such beneficiary or purchaser shall have actually received and not

refunded the deposit, and Tenant shall comply with any written directions by any beneficiary to pay rent due hereunder directly to such beneficiary without determining whether an event of default exists under such beneficiary's deed of trust.

SECTION 22.5. COVENANTS AND CONDITIONS. All of the provisions of this Lease shall be construed to be conditions as well as covenants as though the words specifically expressing or imparting covenants and conditions were used in each separate provision.

SECTION 22.6. SECURITY MEASURES. Tenant hereby acknowledges that Landlord shall have no obligation whatsoever to provide guard service or other security measures for the benefit of the Premises or the Project. Tenant assumes all responsibility for the protection of Tenant, its agents, invitees and property from acts of third parties. Nothing herein contained shall prevent Landlord, at its sole option, from providing security protection for the Project or any part thereof, in which event the cost thereof shall be included within the definition of Project Costs. Tenant shall have the right to install, maintain and operate a security system on the interior and exterior of the Premises as it deems appropriate. Any such system shall be subject to Landlord's reasonable approval but shall be installed, maintained, operated and removed upon expiration or earlier termination of the Lease at Tenant's sole cost and expense.

SECTION 22.7. JAMS ARBITRATION.

(a) All claims or disputes between Landlord and Tenant arising out of, or relating to the Lease which either party is expressly authorized by a provision hereof to submit to arbitration, shall be decided by the JAMS/ENDISPUTE, or its successor, in Orange, California ("JAMS"), unless the parties mutually agree otherwise. Within ten (10) business days following submission to JAMS, JAMS shall designate three arbitrators and each party may, within five (5) business days thereafter, veto one of the three persons so designated. If two different designated arbitrators have been vetoed, the third arbitrator shall hear and decide the matter. Any arbitration pursuant to this Section shall be decided within thirty (30) days of submission of JAMS. The decision of the arbitrator shall be final and binding on the parties. All costs associated with arbitration shall be awarded to the prevailing party as determined by the arbitrator.

(b) Notice of the demand for arbitration by either party to the Lease shall be filed in writing with the other party to the Lease and with JAMS and shall be made within a reasonable time after the dispute has arisen. The award rendered by the arbitrators shall be final, and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof. Except by written consent of the person or entity sought to be joined, no arbitration arising out of or relating to the Lease shall include, by consolidation, joinder or in any other manner, any person or entity not a party to the Lease under which such arbitration is filed if (1) such person or entity is substantially involved in a common question of fact or law, (2) the presence of such person or entity is required if complete relief is to be accorded in the arbitration, or (3) the interest or responsibility of such person or entity in the matter is not insubstantial.

(c) The agreement herein among the parties to the Lease and any other written agreement to arbitrate referred to herein shall be specifically enforceable under prevailing law.

LANDLORD:                                  TENANT:

THE IRVINE COMPANY,                        BROADCOM CORPORATION

A DELAWARE CORPORATION                     A CALIFORNIA CORPORATION

By:/s/ Richard G. Sim                      By: /s/ William J. Ruehle
   -------------------------------             -------------------------------------------
   Richard G. Sim                              William J. Ruehle,
   Executive Vice President                    Vice President and Chief Financial Officer



By:/s/ Brian R. Schaefgen
   ----------------------------------
      Brian R. Schaefgen
      Assistant Secretary

FIRST AMENDMENT TO LEASE

This First Amendment to Lease (the "Amendment") is entered into as of October 18, 2000, by and between THE IRVINE COMPANY ("Landlord") and BROADCOM CORPORATION, a California corporation.

RECITALS

A. On August 1, 2000, Landlord and Tenant entered into an Industrial Lease (Multi-Tenant; Net) (the "Initial Lease") for all of the space in a building located at 49 Discovery, Irvine, California, ("Initial Premises").

B. The Initial Lease included an expansion right granting Tenant the right to lease all or a portion of a building owned by Landlord at 47 Discovery, Irvine, California (the "Expansion Building"). Tenant has exercised its expansion right by giving an Expansion Notice to Landlord in accordance with the terms of Section 2.5(a) of the Initial Lease indicating its desire to lease all of the Expansion Building.

C. Landlord and Tenant now desire to modify the Lease to add the Expansion Building, which contains approximately 53,220 rentable square feet, to the Premises, to adjust the Basic Rent to reflect the addition of the Expansion Building, and make such other modifications as are set forth in this Amendment.

AGREEMENT

I. BASIC LEASE PROVISIONS. The Basic Lease Provisions are hereby amended as follows (section numbers refer to the Basic Lease Provision numbers):

A. Item 1 is deleted in its entirety and the following shall be substituted therefor:

1. PREMISES: The Premises includes all of two (2) two (2) story buildings known as 47 and 49 Discovery, Irvine, California. The buildings are referred to separately as the "47 Discovery Building" and the "49 Discovery Building".

All references to the "Building" in the Lease shall be amended to refer to the 47 Discovery Building and/or the 49 Discovery Building, either collectively or individually as the context may reasonably require.

B. Item 4 is hereby amended by adding the following:

4. COMMENCEMENT DATE FOR 47 DISCOVERY BUILDING: January 15, 2001

C. Item 5 is hereby amended by adding the following:

The Term for the 47 Discovery Building shall commence on the Commencement Date for 47 Discovery Building and shall, unless otherwise terminated in accordance with the terms of this Lease, terminate concurrently upon termination of the Lease for the Premises.

D. Item 6 is hereby amended by adding the following:

BASIC RENT: Commencing on the Commencement Date for the 47 Discovery Building, the Basic Rent shall be Two Hundred Five Thousand Eighty-Six Dollars ($205,086.00) including One Hundred One Thousand One Hundred Eighteen Dollars ($101,118.00) per month for the 47 Discovery Building and One Hundred Three Thousand Nine Hundred Sixty Eight Dollars ($103,968.00) per month for the 49 Discovery Building, based on $1.90 per rentable square foot.

Basic Rent is subject to adjustment as follows:

Commencing on the first day of the thirteenth (13th) month of the Lease Term, the Basic Rent shall be Two Hundred Ten Thousand Four Hundred Eighty-Three Dollars ($210,483.00) including One Hundred Three Thousand Seven Hundred Seventy-Nine Dollars ($103,779.00) for the 47 Discovery Building and One Hundred Six Thousand Seven Hundred Four Dollars ($106,704.00) per month for the 49 Discovery Building, based on $1.95 per rentable square foot.

Commencing on the first day of the twenty-fifth (25th) month of the Lease Term, the Basic Rent shall be Two Hundred Fifteen Thousand Eight Hundred Eighty Dollars ($215,880.00) including One Hundred Six Thousand Four Hundred Forty Dollars ($106,440.00) for the 47 Discovery Building and One Hundred Nine Thousand Four Hundred Forty Dollars ($109,440.00) per month for the 49 Discovery Building, based on $2.00 per rentable square foot.

Commencing on the first day of the thirty-seventh (37th) month of the Lease Term, the Basic Rent shall be Two Hundred Twenty One Thousand Two Hundred Seventy-Seven Thousand Dollars ($221,277.00) including One Hundred Nine Thousand One Hundred One Dollars ($109,101.00) for the 47 Discovery Building and One Hundred Twelve Thousand One Hundred Seventy Six Dollars ($112,176.00) per month for the 49 Discovery Building, based on $2.05 per rentable square foot.

Commencing on the first day of the forty-ninth (49th) month of the Lease Term, the Basic Rent shall be Two Hundred Sixty Six Thousand Six Hundred Seventy-Four Dollars ($266,274.00) including One Hundred Eleven Thousand Seven Hundred Seventy-Two Dollars ($111,762.00) for the 47 Discovery Building and One Hundred Fourteen Thousand Nine Hundred Twelve Dollars ($114,912.00) per month for the 49 Discovery Building, based on $2.10 per rentable square foot.

E. Item 8 is deleted in its entirety and the following shall be substituted therefor:

8. FLOOR AREA OF PREMISES: Approximately 107,940 rentable square feet as follows:

47 Discovery Building 53,220 rentable square feet 49 Discovery Building 54,720 rentable square feet

F. Effective as of the Commencement Date for 47 Discovery Building, Item 14 shall be deleted in its entirety and the following shall be substituted therefor:

14. VEHICLE PARKING SPACES: Two Hundred Twelve (212) additional stalls shall be added bringing the total number of stalls to Four Hundred Thirty (430) subject to adjustment at the rate of four (4) spaces per 1000 rentable square feet if additional space is added to the Premises. Tenant shall have the right to mark up to a total of twenty (20) spaces in the area designated on Exhibit A-2 attached hereto as "Broadcom Visitor".

II. AMENDMENT OF LEASE PROVISIONS.

A. LANDLORD'S RESPONSIBILITIES. The provisions of Section 2.4 of the Lease shall apply to 47 Discovery except that the references to twelve (12) months from the Commencement Date shall mean twelve (12) months from the Commencement Date for 47 Discovery Building.

B. RIGHT TO ADDITIONAL SPACE IN THE 47 DISCOVERY BUILDING. The Expansion
Right set forth in Section 2.5(a) and the Right of First Refusal set forth in
Section 2.5(b) are hereby deleted in their entirety.

C. RIGHT OF SECOND REFUSAL DELETED. The Second Right of Refusal set forth in Section 2.5(c) of the Lease is hereby deleted in its entirety.

D. LICENSE RIGHTS FOR 47 DISCOVERY BUILDING. The license rights granted pursuant to the provisions of Section 2.6 of the Lease shall be applicable to the 47 Discovery Building and Tenant shall have the right to install Communications Equipment on the roof and/or generator equipment in the Common Area subject to Landlord's review and approval of Tenant's plan in accordance with the provisions of Section 2.6 of the Lease.

E. RIGHT TO EXTEND LEASE TERM. Tenant's right to extend the Term of the Lease pursuant to Section 3.3 of the Lease shall be effective as to the entire Premises; provided that Tenant, in Tenant's sole discretion, may elect to exercise the extension right granted therein with respect to the 47 Discovery Building only, the 49 Discovery Building only or as to the entire Premises by indicating that portion of the Premises which Tenant elects to lease for the extended term of the Lease in its Commitment Notice. Tenant's failure to designate a single building, rather than the entire Premises, for lease during the extended Term shall be deemed Tenant's extension of the Term for the entire Premises. If Tenant elects to extend the Term with respect to one Building only, Landlord and Tenant shall enter into a written amendment to accurately reflect the Basic Lease Provisions for the single Building, and Tenant shall fulfill all of its surrender obligations with respect to the Building to be surrendered at the expiration of the initial Term for such Building on or before such expiration date.

F. SIGNAGE. Tenant's right to exterior signage on the "Building" set forth in Section 5.2 of the Lease shall apply to each of the 47 Discovery Building and the 49 Discovery Building individually, and not to the Premises as a whole.

G. ALTERATIONS. Tenant's rights and limitations on alterations set forth in Section 7.3 of the Lease shall apply to the each Building on the Premises individually.

H. RESTORATION. Section 11.1 of the Lease is hereby amended by adding the following additional provisions:

(f) If one Building is damaged by fire or other casualty which would permit either Landlord or Tenant to terminate this Lease pursuant to the provisions of Section 11.1(a)(i) of the Lease (the "Damaged Building"), but the other Building comprising the Premises is not so damaged, either party, as applicable, shall be entitled to elect to terminate this Lease only as to the Damaged Building. In the event that this Lease is terminated only as to one Building comprising the Premises, Tenant shall not be entitled to occupy or use any portion of the Building or land or Common Area associated with the Damaged Building, and Tenant shall promptly remove all improvements installed by Tenant on the land or Common Areas associated with the Damaged Building. Immediately after such termination, Landlord and Tenant shall enter into an amendment of this Lease reducing the square footage of the Premises, proportionately reducing Base Rent and incorporating such other amendments as are necessary to reflect the reduction of the Premises.

(g) Notwithstanding anything to the contrary in this Section 11.1, in the event Landlord elects to terminate the Lease as to a Damaged Building or as to the entire Premises pursuant to
Section 11.1(a)(i), Tenant may elect to override Landlord's termination of the Lease by agreeing in writing with Landlord, in form reasonably satisfactory to Landlord, within ten (10) business days after Tenant's receipt of Landlord's termination notice, to pay to Landlord, on demand, the amount by which the cost of repairs and/or restoration exceed net insurance proceeds available to Landlord, if any, and to provide such amount prior to the commencement of repair or reconstruction by the Landlord; such agreement shall provide, if Landlord so requires, security reasonably satisfactory to Landlord for the performance by Tenant of its obligations to pay and provide such amount. Tenant's right to override Landlord's termination of the Lease pursuant to this subparagraph shall be available

to Tenant only if Tenant is not then in default of its obligations under the Lease after expiration of the applicable cure period and then only if the Term remaining after completion of the restoration, based upon Landlord's reasonable estimate of the restoration period, would be not less than twelve (12) months including any extension of the Term to which Tenant has committed pursuant to the terms of the Lease.

I. TENANT IMPROVEMENTS. Landlord hereby agrees to complete the Tenant Improvements for the 47 Discovery Building in accordance with the provisions of the Work Letter attached hereto as Exhibit B.

III. GENERAL.

A. EFFECT OF AMENDMENTS. The Lease shall remain in full force and effect except to the extent that it is modified by this Amendment.

B. ENTIRE AGREEMENT. This Amendment embodies the entire understanding between Landlord and Tenant with respect to the modifications set forth herein and can be changed only by a writing signed by Landlord and Tenant.

C. COUNTERPARTS. If this Amendment is executed in counterparts, each is hereby declared to be an original; all, however, shall constitute but one and the same amendment. In any action or proceeding, any photographic, photostatic, or other copy of this Amendment may be introduced into evidence without foundation.

D. DEFINED TERMS. All words commencing with initial capital letters in this Amendment and defined in the Lease shall have the same meaning in this Amendment as in the Lease, unless they are otherwise defined in this Amendment.

E. CORPORATE AND PARTNERSHIP AUTHORITY. Each individual executing this Amendment in his or her capacity as a corporate officer represents that he or she is duly authorized to execute and deliver this Amendment on behalf of such corporation and that this Amendment is binding upon such corporation in accordance with its terms.

Landlord and Tenant have executed this Amendment as of the date as set forth above.

LANDLORD:                                  TENANT:

THE IRVINE COMPANY, INC.                   BROADCOM CORPORATION,
a Delaware corporation                     a California corporation


By: /s/ Richard G. Sim                     By: /s/ William J. Ruehle
    ----------------------------------         -----------------------------------
    Richard G. Sim,                            William J. Ruehle, Vice President and
    Executive Vice President                   Chief Financial Officer


By: /s/ Brian R. Schaefgen
    ----------------------------------
    Brian R. Schaefgen, Assistant
    Secretary

SECOND AMENDMENT TO LEASE

I. PARTIES AND DATE.

This Second Amendment to Lease (the "Amendment") dated September 18, 2003, is by and between THE IRVINE COMPANY ("Landlord"), and BROADCOM CORPORATION, a California corporation ("Tenant").

II. RECITALS.

On August 1, 2000, Landlord and Tenant entered into a lease for space in a building located at 49 Discovery, Irvine, California, which lease was amended by a First Amendment to Lease dated October 18, 2000, wherein the 47 Discovery Building was added to the Premises (as amended, the "Lease").

Landlord and Tenant each desire to modify the Lease to add approximately 44,820 rentable square feet of space in the a building located at 41 Discovery, Irvine, California, more particularly described on EXHIBIT A attached to this Amendment and herein referred to as the "41 Discovery Building", to adjust the Basic Rent, and to make such other modifications as are set forth in "III. MODIFICATIONS" next below.

III. MODIFICATIONS.

A. Basic Lease Provisions. The Basic Lease Provisions are hereby amended as follows:

1. Effective as of the "Commencement Date for the 41 Discovery Building" (as defined in this Amendment), Item 1 shall be deleted in its entirety and substituted therefor shall be the following:

"1. Premises: The Premises includes all of three (3) two (2) story buildings known as 41, 47 and 49 Discovery, Irvine, California. The buildings are referred to separately as the "41 Discovery Building", the "47 Discovery Building", and the "49 Discovery Building".

All references to the "Building" in the Lease shall be amended to refer to the 41, 47 and 49 Discovery Buildings, either collectively or individually as the context may reasonably require."

2. Item 4 is hereby amended by adding the following:

"Commencement Date for the 41 Discovery Building: September 1, 2003."

3. Item 5 is hereby amended by adding the following:

"The Term for the 41 Discovery Building shall commence on the Commencement Date for the 41 Discovery Building and shall, unless otherwise terminated in accordance with the terms of this Lease, expire on June 30, 2006. The Term of the Lease for the 47 Discovery Building and for the 49 Discovery Building shall continue to expire, as provided by the express terms of the Lease, on October 31, 2005."

4. Item 6 is hereby amended by adding the following:

"Basic Rent for the 41 Discovery Building: Commencing on the Commencement Date for the 41 Discovery Building, the Basic Rent for the 41 Discovery Building shall be One Hundred Five Thousand Three Hundred Twenty-Seven Dollars ($105,327.00) per month, based on $2.35 per rentable square foot.

Basic Rent for the 41 Discovery Building is subject to adjustment as follows:

Commencing on July 1, 2004, the Basic Rent for the 41 Discovery Building shall be One Hundred Seven Thousand Five Hundred Sixty-Eight Dollars ($107,568.00) per month, based on $2.40 per rentable square foot.

Commencing on July 1, 2005, the Basic Rent for the 41 Discovery Building shall be One Hundred Nine Thousand Eight Hundred Nine Dollars ($109,809.00) per month, based on $2.45 per rentable square foot."

5. Effective as of the Commencement Date for the 41 Discovery Building, Item 8 shall be deleted in its entirety and substituted therefor shall be the following:

"8. Floor Area of Premises: Approximately 152,760 rentable square feet, comprised of the following:

41 Discovery Premises - approximately 44,820 rentable square feet
47 Discovery Premises - approximately 53,220 rentable square feet
49 Discovery Premises - approximately 54,720 rentable square feet."

6. Item 11 is hereby deleted in its entirety and substituted therefor shall be the following:

"11. Additional Insureds: None"

7. Item 12 is hereby amended by deleting Landlord's address for payments and notices and substituted therefor shall be the following:

"LANDLORD

THE IRVINE COMPANY
dba Office Properties
8105 Irvine Center Drive, Suite 300
Irvine, CA 92618

Attn: Vice President, Operations, Technology Portfolio

with a copy of notices to:

THE IRVINE COMPANY
dba Office Properties
8105 Irvine Center Drive, Suite 300
Irvine, CA 92618

Attn: Senior Vice President, Operations Office Properties"

8. Effective as of the Commencement Date for the 41 Discovery Building, Item 14 shall be deleted in its entirety and substituted therefor shall be the following:

"14. Vehicle Parking Spaces: Five Hundred Ninety-Two (592) subject to adjustment at the rate of four (4) spaces per 1000 rentable square feet if additional space is added to the Premises. Tenant shall have the right to mark up to a total of twenty (20) spaces in the area designated on Exhibit A-1 (attached to the Lease) as "Broadcom Visitor".

B. Landlord's Responsibilities. The provisions of Section 2.4 of the Lease shall apply to the 41 Discovery Building except that the references to twelve
(12) months from the Commencement Date shall mean twelve (12) months from the Commencement Date for the 41 Discovery Building.

C. Right to Extend Lease Term. Tenant's right to extend the Term of the Lease pursuant to Section 3.3 of the Lease shall be effective as to the entire Premises; provided that Tenant, in Tenant's sole discretion, may elect to exercise the extension right granted therein with respect to one or two of the Buildings only by indicating specifically in the Commitment Notice as to which of the Buildings Tenant's election is effective. Tenant, however, shall not have the right to extend the Term as to portions only of the rentable space of any Building. Tenant's failure to so designate one and/or two of the Buildings, rather than the entire Premises, for lease during the extended Term shall be deemed Tenant's extension of the Term for the entire Premises. If Tenant elects to extend the Term with respect to one or two of the Buildings only, Landlord and Tenant shall enter into a written amendment to accurately reflect the Basic Lease Provisions for the Building(s) so elected for extension, and Tenant shall fulfill all of its surrender obligations with respect to the Building(s) to be surrendered at the expiration of the initial Term.

D. Signage. Tenant's right to exterior signage on the "Building" set forth in Section 5.2 of the Lease shall apply to each of the 41, 47 and 49 Discovery Buildings individually, and not to the Premises as a whole.

E. Floor Plan of the 41 Discovery Building. As used herein, the "41 Discovery Building" shall mean the space described in Exhibit A attached to this Amendment. From and after the date of this Amendment, the 41 Discovery Building collectively with the 47 Discovery Building and the 49 Discovery Building described on EXHIBIT A attached to the Lease, shall constitute the "Premises" as defined in Section 2.1 of the Lease.

F. Tenant Improvements. Landlord hereby agrees to complete the Tenant Improvements for the 41 Discovery Premises in accordance with the provisions of Exhibit B, Work Letter, attached hereto.

IV. GENERAL.

A. Effect of Amendments. The Lease shall remain in full force and effect except to the extent that it is modified by this Amendment.

B. Entire Agreement. This Amendment embodies the entire understanding between Landlord and Tenant with respect to the modifications set forth in "III. MODIFICATIONS" above and can be changed only by a writing signed by Landlord and Tenant.

C. Counterparts. If this Amendment is executed in counterparts, each is hereby declared to be an original; all, however, shall constitute but one and the same amendment. In any action or proceeding, any photographic, photostatic, or other copy of this Amendment may be introduced into evidence without foundation.

D. Defined Terms. All words commencing with initial capital letters in this Amendment and defined in the Lease shall have the same meaning in this Amendment as in the Lease, unless they are otherwise defined in this Amendment.

E. Corporate and Partnership Authority. If Tenant is a corporation or partnership, or is comprised of either or both of them, each individual executing this Amendment for the corporation or partnership represents that he or she is duly authorized to execute and deliver this Amendment on behalf of the corporation or partnership and that this Amendment is binding upon the corporation or partnership in accordance with its terms.

F. Attorneys' Fees. The provisions of the Lease respecting payment of attorneys' fees shall also apply to this Amendment.

V. EXECUTION.

Landlord and Tenant executed this Amendment on the date as set forth in
"I. PARTIES AND DATE." above.

LANDLORD:                                      TENANT:

THE IRVINE COMPANY                             BROADCOM CORPORATION,
                                               a California corporation

By:/s/ Donald S. McNutt                        By:/s/ William J. Ruehle
   --------------------------------------         ---------------------------------------
   Donald S. McNutt, Senior Vice President        William J. Ruehle
   Leasing, Office Properties                     Vice President and
                                                  Chief Financial Officer

By:/s/ Steven E. Claton
   ---------------------------------
   Steven E. Claton, Vice President
   Operations, Office Properties

EXHIBIT 10.37

LEASE
(MULTI-TENANT; NET)

BETWEEN

THE IRVINE COMPANY

AND

BROADCOM CORPORATION

(48 DISCOVERY)

                                 INDEX TO LEASE

ARTICLE I.                 BASIC LEASE PROVISIONS

ARTICLE II.                PREMISES
  Section 2.1              Leased Premises
  Section 2.2              Acceptance of Premises
  Section 2.3              Building Name and Address
  Section 2.4              Landlord's Responsibilities
  Section 2.5              Rights to Lease Additional Space
  Section 2.6              Grant of License Rights

ARTICLE III.               TERM
  Section 3.1              General
  Section 3.2              Delay in Possession
  Section 3.3              Right to Extend the Lease Term

ARTICLE IV                 RENT AND OPERATING EXPENSES
  Section 4.1              Basic Rent
  Section 4.2              Operating Expenses
  Section 4.3              Security Deposit

ARTICLE V.                 USES
  Section 5.1              Use
  Section 5.2              Signs
  Section 5.3              Hazardous Materials

ARTICLE VI.                COMMON AREAS; SERVICES
  Section 6.1              Utilities and Services
  Section 6.2              Operation and Maintenance of Common Areas
  Section 6.3              Use of Common Areas
  Section 6.4              Parking
  Section 6.5              Changes and Additions by Landlord
  Section 6.6              Outdoor Courtyard Area
ARTICLE VII.               MAINTAINING THE PREMISES
  Section 7.1              Tenant's Maintenance and Repair
  Section 7.2              Landlord's Maintenance and Repair
  Section 7.3              Alterations
  Section 7.4              Mechanic's Liens
  Section 7.5              Entry and Inspection

ARTICLE VIII.              TAXES AND ASSESSMENTS ON TENANT'S PROPERTY

ARTICLE IX.                ASSIGNMENT AND SUBLETTING
  Section 9.1              Rights of Parties
  Section 9.2              Effect of Transfer
  Section 9.3              Sublease Requirements
  Section 9.4              Certain Transfers
  Section 9.5              Colocation of Equipment

ARTICLE X.                 INSURANCE AND INDEMNITY
  Section 10.1             Tenant's Insurance
  Section 10.2             Landlord's Insurance
  Section 10.3             Tenant's Indemnity
  Section 10.4             Landlord's Nonliability
  Section 10.5             Waiver of Subrogation

ARTICLE XI.                DAMAGE OR DESTRUCTION
  Section 11.1             Restoration
  Section 11.2             Lease Governs

ARTICLE XII.               EMINENT DOMAIN
  Section 12.1             Total or Partial Taking
  Section 12.2             Temporary Taking
  Section 12.3             Taking of Parking Area

ARTICLE XIII.              SUBORDINATION; ESTOPPEL CERTIFICATE; FINANCIALS
  Section 13.1             Subordination
  Section 13.2             Estoppel Certificate
  Section 13.3             Financials

                                       (i)

ARTICLE XIV.               DEFAULTS AND REMEDIES
  Section 14.1             Tenant's Defaults
  Section 14.2             Landlord's Remedies
  Section 14.3             Late Payments
  Section 14.4             Right of Landlord to Perform
  Section 14.5             Default by Landlord
  Section 14.6             Expenses and Legal Fees
  Section 14.7             Waiver of Jury Trial
  Section 14.8             Satisfaction of Judgment

ARTICLE XV.                END OF TERM
  Section 15.1             Holding Over
  Section 15.2             Merger on Termination
  Section 15.3             Surrender of Premises; Removal of Property

ARTICLE XVI.               PAYMENTS AND NOTICES

ARTICLE XVII.              RULES AND REGULATIONS

ARTICLE XVIII.             BROKER'S COMMISSION

ARTICLE XIX.               TRANSFER OF LANDLORD'S INTEREST

ARTICLE XX.                INTERPRETATION
  Section 20.1             Gender and Number
  Section 20.2             Headings
  Section 20.3             Joint and Several Liability
  Section 20.4             Successors
  Section 20.5             Time of Essence
  Section 20.6             Controlling Law
  Section 20.7             Severability
  Section 20.8             Waiver and Cumulative Remedies
  Section 20.9             Inability to Perform
  Section 20.10            Entire Agreement
  Section 20.11            Quiet Enjoyment
  Section 20.12            Survival

ARTICLE XXI.               EXECUTION AND RECORDING
  Section 21.1             Counterparts
  Section 21.2             Corporate and Partnership Authority
  Section 21.3             Execution of Lease; No Option or Offer
  Section 21.4             Recording
  Section 21.5             Amendments
  Section 21.6             Executed Copy
  Section 21.7             Attachments

ARTICLE XXII               MISCELLANEOUS
  Section 22.1             Nondisclosure of Lease Terms
  Section 22.2             Guaranty
  Section 22.3             Changes Requested by Lender
  Section 22.4             Mortgagee Protection
  Section 22.5             Covenants and Conditions
  Section 22.6             Security Measures
  Section 22.7             JAMS

EXHIBITS

  Exhibit A                Description of Premises
  Exhibit B                Environmental Questionnaire
  Exhibit C                Landlord's Disclosures
  Exhibit D                Insurance Requirements
  Exhibit E                Rules and Regulations
  Exhibit X                Work Letter
  Exhibit Y                Project Site Plan

(ii)

INDUSTRIAL LEASE
(MULTI-TENANT; NET)

THIS LEASE is made as of the 12th day of January, 2001, by and between THE IRVINE COMPANY, hereafter called "Landlord," and Broadcom Corporation, a California corporation, hereinafter called "Tenant."

ARTICLE I. BASIC LEASE PROVISIONS

1. Premises: All of one (1) two (2) story building known as 48 Discovery, Irvine, California (the "Building").

2. Project Description: Discovery Business Center V.

3. Use of Premises: General office use and any other use which does not violate applicable laws, rules and regulations or covenants, conditions and restrictions.

4. Estimated Commencement Date: May 15, 2001.

5. Lease Term: Sixty (60) months, plus such additional days as may be required to cause this Lease to expire on the final day of the last calendar month.

6. Basic Rent: One Hundred Twenty One Thousand One Hundred Forty Dollars ($121,140.00) per month, based on $2.25 per rentable square foot.

Basic Rent is subject to adjustment as follows:

Commencing on the first day of the thirteenth (13th) month of the Lease Term, the Basic Rent shall be One Hundred Twenty Three Thousand Eight Hundred and Thirty Two Dollars ($123,832.00) per month, based on $2.30 per rentable square foot.

Commencing on the first day of the twenty-fifth (25th) month of the Lease Term, the Basic Rent shall be One Hundred Twenty Six Thousand Dollars Five Hundred Twenty Four Dollars ($126,524.00) per month, based on $2.35 per rentable square foot.

Commencing on the first day of the thirty-seventh (37th) month of the Lease Term, the Basic Rent shall be One Hundred Twenty Nine Thousand Two Hundred Sixteen Dollars ($129,216.00) per month, based on $2.40 per rentable square foot.

Commencing on the first day of the forty-ninth (49th) month of the Lease Term, the Basic Rent shall be One Hundred Thirty One Thousand Nine Hundred and Eight Dollars ($131,908.00) per month, based on $2.45 per rentable square foot.

7. Guarantor(s): None

8. Floor Area of Premises: Approximately 53,840 rentable square feet

9. Security Deposit: None

10. Broker(s): Real Estate & Logistics Technology, Inc. (Kim Josephson).

11. Additional Insureds: Insignia/ESG of California, Inc.

12. Address for Payments and Notices:

LANDLORD                                            TENANT

THE IRVINE COMPANY                                  Broadcom Corporation
c/o Insignia/ESG of California                      16215 Alton Parkway
43 Discovery, Suite 120                             Irvine, CA
Irvine, CA  92618                                   Attn:  Director Corporate Services

With a copy of notices to:                          With an additional copy sent to the same address
                                                    to the attention of the Chief Financial Officer
THE IRVINE COMPANY

dba Irvine Industrial Company                       And with a copy of notices to:
P.O. Box 6370
Newport Beach, CA  92658-6370                       Brobeck, Phleger & Harrison LLP
Attn:  Vice President, Industrial Operations        12390 El Camino Real
                                                    San Diego, CA  92130
                                                    Attention:  Scott Biel

13. Tenant's Liability Insurance Requirement: $2,000,000.00

14. Vehicle Parking Spaces: 215

ARTICLE II. PREMISES

SECTION 2.4 LANDLORD'S RESPONSIBILITIES.

(b) Landlord warrants to Tenant that the Shell Building Improvements as defined in the Discovery Outline Specifications (as defined in the Work Letter) and the Tenant Improvements to be completed pursuant to the Work Letter shall be free from defects in workmanship or materials for a period of twelve
(12) months from the Commencement Date. Landlord shall promptly rectify any non-compliance at its sole cost and expense after receipt of written notice from Tenant within such time setting forth the nature and extent of any such non-compliance. Landlord shall obtain customary warranties and guaranties from the contractor(s) performing the Tenant Improvement work and/or the manufacturers of equipment installed but shall be under no obligation to incur additional expense in order to obtain or extend such warranties. If after expiration of the initial twelve (12) months of the Lease Term, Tenant is required to make repairs to any component of the Premises or any of its systems for which Landlord may have obtained

(a) TENANT'S EXPANSION RIGHT - 42 AND 46 DISCOVERY. Unless Tenant has previously received from Landlord a notice pursuant to subparagraph (b) of this
Section with respect to Designated First Right Space, Tenant shall have the right from the date of execution of this Lease to October 31, 2001 to expand the area of the Premises (the "Expansion Right") by delivering written notice to Landlord ("Expansion Notice") expressing Tenant's desire to lease all or a leasable portion (in a configuration reasonably acceptable to Landlord) of any space then available in the buildings owned by Landlord located at 42 and/or 46 Discovery (the "Expansion Space") upon the same terms and conditions as set forth in this Lease. Tenant's Expansion Notice shall identify the amount of space Tenant desires and, if less than a full floor, a depiction of the area desired. Landlord shall have the right in its sole discretion reasonably exercised to designate the final configuration of the Expansion Space if less than a full floor is requested. In the event Tenant gives Landlord an Expansion Notice prior to the Commencement Date, all terms and conditions of this Lease including Base rent and additional rent shall apply with respect to the Expansion Space so added to the Premises. In the event Tenant gives Landlord an Expansion Notice on or after the Commencement Date but prior to August 1, 2001, all terms and conditions of this Lease shall apply except that the Base Rent applicable to the Expansion Space shall be $0.05 per square foot per month greater than the rental rates set forth in Item 6 of the Basic Lease Provisions with respect to the Premises. In the event Tenant gives Landlord an Expansion Notice between August 1, 2001 and October 31, 2001, all terms and conditions of the Lease shall apply except that the Base Rent applicable to the Expansion Space shall be $0.15 per square foot per month greater than the rental rates set forth in Item 6 of the Basic Lease Provisions. Tenant's rights under this
Section shall expire and be of no further force and effect unless exercised on or before October 31, 2001. Notwithstanding the foregoing, Tenant's expansion rights pursuant to this subparagraph shall terminate with respect to any Designated First Right Space which Landlord has previously offered to Tenant pursuant to the Right of First Refusal described below. The date any Expansion Space is added to the Premises shall be the date which is fourteen (14) calendar weeks after the date of the Expansion Notice and the termination date with respect to such portion of the Premises shall be the date which is sixty (60) months after the Commencement Date with respect to such space.

(b) RIGHT OF FIRST REFUSAL - 42 AND 46 DISCOVERY. In addition to the Expansion Right set forth above, Landlord hereby grants to Tenant the one-time right of first refusal applicable to the initial leasing only ("First Right") to lease all or any portion equal to or larger than one full floor of space in the buildings located at 42 and 46 Discovery ("First Right Space") in accordance with and subject to the provisions of this subsection. At any time after the date of this Lease, but prior to leasing the First Right Space, or any portion thereof, to any third party, if Landlord has reached a tentative agreement (which may be a nonbinding, tentative agreement) to lease any of the First Right Space to a third party, Landlord shall give Tenant written notice describing the space (the "Designated First Right Space") and the basic economic terms including but not limited to the Basic Rent, term, operating expenses, and tenant improvement allowance (collectively, the "Economic Terms"), tentatively agreed upon for such lease. It is understood that should Landlord intend to lease other space in addition to the First Right Space as part of a single transaction, then Landlord's notice shall so provide and all such space shall collectively be subject to the First Right provisions. If the Designated First Refusal Space is less than one complete floor of the First Right Space, Tenant's First Right shall be exercisable at a minimum with respect to the entire floor which contains the Designated First Right Space but Tenant shall have the right to exercise its First Refusal with respect to any of the First Right Space then remaining unleased upon the Economic Terms set forth in Landlord' Notice.

Within five (5) business days after receipt of Landlord's notice, Tenant shall give Landlord written notice ("Tenant's First Right Response Notice") pursuant to which Tenant shall elect to: (i) lease the Designated First Right Space (but in no event less than one complete floor of the First Right Space) or to lease all remaining First Right Space upon the Economic Terms; or (ii) decline to lease the Designated First Right Space, in which event Landlord may lease the Designated First Right Space to any third party upon the Economic Terms and such other terms as it deems appropriate. In the event that Tenant fails to respond in writing to Landlord's notice within said five (5) business day period, Tenant shall be deemed to have elected clause (ii) above. In the event Tenant elects not to lease the Designated First Right Space or fails to respond, Tenant's First Right as set forth in this subsection shall terminate as to any remaining space in the building containing the Designated First Right Space. In the event that Landlord shall not enter into a lease for the Designated First Right Space, or a portion thereof, with a third party within one hundred eighty (180) days following Landlord's notice described above, then prior to leasing the Designated First Right Space to any third party thereafter, Landlord shall repeat the procedures set forth in this subsection one final time but no such event shall revive Tenant's Expansion Right as set forth above. The term, commencement and expiration date for any First Right

Space added to the Premises shall be as set forth in the Economic Terms and such dates shall not affect the Commencement Date or expiration date of this Lease with respect to the Premises.

(c) ADDITIONAL FIRST RIGHT SPACE. In the event that Tenant leases all of 42 Discovery or 46 Discovery, whether by exercise of an Expansion Right pursuant to subparagraph (a) of this Section or by exercise of one or more Rights of First Refusal pursuant to subparagraph (b) of this Section, then Tenant shall have the one-time Right of First Refusal applicable to the initial leasing only on space within the buildings currently under construction by Landlord located at 36 Discovery and 38 Discovery (collectively the "Additional First Right Space") upon all the terms and conditions set forth in subparagraph
(b) of this Section except that all references to First Right Space shall be deemed to refer to the Additional First Right Space.

(d) DOCUMENTATION OF ADDITIONAL SPACE. In the event Tenant exercises any or its rights under this Section to expand the Premises, then Landlord shall promptly prepare and deliver to Tenant either an amendment to this Lease or a new lease upon the same terms and conditions but which pertains only the addition to the Premises and Tenant shall execute and return same to Landlord within ten (10) business days. Tenant's failure to timely return the amendment shall be a default under this Lease with the Premises expanded as set forth in such amendment.

(e) RIGHTS LIMITED TO BROADCOM. Tenant's rights under this Section 2.5 shall belong solely to Broadcom Corporation, a California corporation, and may not be assigned or transferred except in connection with the assignment of this Lease to a "Tenant Affiliate" as hereinafter defined. Any attempted assignment or transfer of such rights except to a Tenant Affiliate shall be void and of no force or effect.

(b) License to Common Areas for Generator Equipment. Landlord grants Tenant the license and right to enter upon and use an area to be designated on a written plan approved by Landlord for the installation, operation and maintenance of a backup power generator and associated fuel tank, the plans for which shall be approved by Landlord. The License Area for use in connection with the generator will include area for the passage of related wires, cables and conduit between Tenant's electrical room and the generator itself, all is to be more specifically defined in the proposed plan. Tenant shall have access to the Licensed Area for the generator on a 24 hour per day/7 day per week basis; provided, however, that Tenant shall not undertake any repairs or maintenance in such Licensed Area which would interfere with the use of the Common Areas by other tenants without the prior written consent of Landlord. Landlord shall not unreasonably withhold its consent to any such repairs or maintenance, but may impose reasonable conditions thereon and Tenant shall undertake any such work as expeditiously as reasonably possible so as to cause as little interference with the rights of other tenants of the Project as possible. Tenant has advised Landlord that it intends to run the generator on a regular basis in order to comply with maintenance specifications and requirements of law and that such operation may be as often as one (1) thirty (30) minute period per week. Except in cases of emergency, when no prior approval shall be required, Tenant shall propose for Landlord's reasonable approval the schedule for operation of the generator which will provide minimal interference with the use of the Project by other tenants.

(c) License to Common Areas for Conduit. Tenant shall have the right, at its sole cost and expense, to trench in the Common Areas within the boundaries of the Project reasonably approved by Landlord (which approval may be withheld or conditioned if such trenching adversely affects other tenants of the Project) and, if necessary, to trench beneath Discovery Way, subject to Tenant's obtaining all required governmental permits, consents and approvals, for the purpose of "hard wiring" for voice, data and power transmissions between and among the Buildings within the Project which are fully or partially occupied by Tenant. Tenant shall be responsible for the operation and maintenance of any such conduit installed throughout the Term of this Lease. Tenant shall not be obligated to remove such conduit but Tenant shall be required to strip all cabling from such conduit at its sole cost and expense upon expiration or earlier termination of this Lease.

(d) Additional Terms and Conditions.

(1) The Term of the License shall be coterminous with this Lease and, subject to the terms hereof, shall be irrevocable so long as the Lease remains in effect;

(2) Tenant shall not be obligated to pay any license fee for the use of the Licensed Areas pursuant to this Section during the Term of this Lease or any extension thereof.

ARTICLE III. TERM

("Commencement Date") on the earlier to occur of: (i) ten (10) business days following the date that (A) Landlord notifies Tenant that Landlord has substantially completed the construction of the Tenant Improvements in accordance with the Work Letter attached as EXHIBIT X hereto, but for minor "punch list" items identified by Landlord and Tenant in a walk-through of the Premises prior to the Commencement Date, which items do not preclude or materially impair Tenant from conducting its business from the Premises, and (B) Landlord has provided Tenant with all parking required by this Lease in the Common Area of the Project, and (C) Landlord has obtained and provided Tenant with a certificate of occupancy or temporary certificate of occupancy for the Premises from the City of Irvine or (ii) the date Tenant acquires possession or commences use of such portion of the Premises for any purpose other than construction or installation of equipment, furniture, fixtures or network and telecommunications cabling. Within ten (10) days after the Commencement Date has occurred, the parties shall memorialize on a form provided by Landlord the actual Commencement Date and the expiration date ("Expiration Date") of this Lease. Tenant's failure to execute that form shall not affect the validity of Landlord's determination of those dates. The Term shall be for the period shown in Item 5 of the Basic Lease Provisions.

SECTION 3.2. DELAY IN POSSESSION. If Landlord, for any reason whatsoever, cannot deliver possession of the Premises to Tenant on or before the Commencement Date, this Lease shall not be void or voidable nor shall Landlord be liable to Tenant for any resulting loss or damage. Notwithstanding the foregoing, if Landlord and Tenant have approved Plans and Specifications (as defined in the Work Letter) and such Plans and Specifications have been submitted to the City of Irvine for building permits on or before January 19, 2001 but Tenant is unable to occupy the Premises on or before October 31, 2001, (the "Outside Date") because the City of Irvine refuses or is prevented from issuing the permits required to construct the Tenant Improvements reasonably consistent with the Plans and Specifications, and, provided that Tenant is not then in default of its obligations under this Lease after expiration of the applicable cure period, Tenant shall have the one-time right to terminate this Lease by giving Landlord written notice to that effect after the Outside Date but prior to November 15, 2001. In the event this Lease is terminated by Tenant, pursuant to the provisions of this Section, Tenant shall pay to Landlord concurrently with its notice of termination the unamortized portion of the real estate brokerage commission paid by Landlord in connection with this Lease.

If Tenant fails to timely comply with any of the provisions of this
Section (other than appointing an appraiser), Tenant's right to extend the Term shall be extinguished and the Lease shall automatically terminate as of the expiration date of the Term, without any extension and without any liability to Landlord. Tenant shall have no other right to extend the Term beyond the sixty
(60) month extension created by this Section. Unless agreed to in a writing signed by Landlord and Tenant, any extension of the Term, whether created by an amendment to this Lease or by a holdover of the Premises by Tenant, or otherwise, shall be deemed a part of, and not in addition to, any duly exercised extension period permitted by this Section.

ARTICLE IV. RENT AND OPERATING EXPENSES

SECTION 4.2. OPERATING EXPENSES.

Expenses, subject to the terms and conditions hereof. In no event, however, shall such auditor be compensated by Tenant on a "contingency" basis, or on any other basis tied to the results of said audit. Tenant shall give notice to Landlord of Tenant's intent to audit within one hundred twenty (120) days following delivery of Landlord's expense statement for each of the Expense Recovery Periods. Following at least ten (10) business days notice to Landlord, such audit shall be conducted at a mutually agreeable time during normal business hours at the office of Landlord or its management agent where the records are maintained in Orange County, California. Landlord agrees to make such personnel available to Tenant as is reasonably necessary for Tenant's employees and agents, to conduct such audit. Landlord shall make such records available to Tenant's employees and agents, for inspection during normal business hours. Tenant's employees and agents shall be entitled to make photostatic copies of such records, provided Tenant bears the expense of such copying, and further provided that Tenant keeps such copies in a confidential manner and does not discuss, display or distribute such copies to any other third party. If Tenant's audit determines that actual Operating Expenses have been overstated by more than four percent (4%), then subject to Landlord's right to review and/or contest the audit results, Landlord shall reimburse Tenant for the reasonable out-of-pocket costs of such audit. Tenant's Basic Rent shall be appropriately adjusted to reflect any overstatement in Operating Expenses. In the event of a dispute between Landlord and Tenant regarding the results of such audit, such dispute shall be submitted to and resolved by JAMS as provided in
Section 22.7 of this Lease.

(f) The term "Operating Expenses" shall mean and include all "Project Costs" (as hereafter defined) and "Property Taxes" (as hereafter defined).

(g) The term "Project Costs" shall include all reasonable costs and expenses of operation and maintenance of the Building and the Project, together with all appurtenant Common Areas (as defined in Section 6.2), and shall include the following charges by way of illustration but not limitation: water and sewer charges; insurance premiums or reasonable premium equivalents for the reasonable cost of administering a self-insurance program should Landlord elect to self-insure any risk that Landlord is authorized to insure hereunder as provided in Section 10.2 below; license, permit, and inspection fees; heat; light; power; air conditioning; janitorial services to any interior Common Areas; supplies; materials; equipment; tools; the reasonable cost of any environmental, insurance, tax or other consultant utilized by Landlord in connection with the Premises and/or Project; establishment of reasonable reserves for replacements and/or repair of the Building and Common Areas; the cost of any capital investments, after application of previously established reserves for such items, to the extent of the amortized cost thereof over the useful life of such capital investment as reasonably determined by Landlord for each year of useful life during the Term; subject to the express provisions of this Lease to the contrary, costs incurred in connection with compliance of any laws or changes in laws applicable to the Premises or the Project (except for laws or changes in laws that pertain particularly to Tenant or to Tenant's particular use of the Premises and/or only to the interior of the Premises which shall be the sole responsibility of Tenant at its cost), to the extent such laws or change in laws require expenditures of a "capital" nature (as determined by generally accepted accounting principles consistently applied), then such "capital" expenditure shall be amortized (using a market cost of funds as reasonably determined by Landlord) over the useful life of such asset and only the amortized cost thereof shall be included in Project Costs during the remaining Term of the Lease; costs associated with the procurement and maintenance of an air conditioning, heating and ventilation service agreement; labor; reasonably allocated wages and salaries, fringe benefits, and payroll taxes for administrative and other personnel directly applicable to the Premises and/or Project, including both Landlord's personnel and outside personnel; any expense incurred pursuant to Sections 6.1, 6.2, 6.4, 7.2, and 10.2; and a reasonable overhead/management fee for the professional operation of the Project. Any such overhead management fee charged to Tenant shall not be in excess of those being charged for other comparable first-class office projects in the Irvine Spectrum area. It is understood that Project Costs may include competitive charges for direct services provided by any subsidiary or division of Landlord. Notwithstanding any contrary provision herein, Landlord agrees that Tenant shall have access to and use of after-hours air conditioning services to the Premises. For any Building not wholly leased to Tenant, Tenant shall pay an hourly charge based on the reasonable cost incurred by Landlord to supply such services and in any Building wholly leased to Tenant, Tenant shall pay the cost for such services directly as contemplated by Section 6.1 hereof.

(3) Depreciation and other "non-cash" expense items;

(6) Penalties for late payment of any Operating Expenses by Landlord, including, without limitation, with respect to taxes, equipment leases, etc.;

(11) Advertising and promotional expenses;

(12) Costs or expenses for the acquisition of sculpture, paintings or other works of art, but not the reasonable expenses of maintaining, repairing and insuring same;

(13) Costs for which Landlord is compensated through or reimbursed by insurance;

(14) Contributions to political or charitable organizations;

(15) Costs incurred in removing the property of former tenants and/or other occupants of the Project;

(16) The costs of any "tap fees" or one-time lump sum sewer, water or other utility connection fees for the Project;

(17) Costs or fees relating to the defense of Landlord's title to or interest in the Building and/or the Project, or any part thereof; and

(i) The term "Property Taxes" shall not include personal property taxes of any kind, which shall instead be governed by the provisions of Article VIII of this Lease.

SECTION 4.3. SECURITY DEPOSIT. Concurrently with Tenant's delivery of this Lease, Tenant shall deposit with Landlord the sum, if any, stated in Item 9 of the Basic Lease Provisions, to be held by Landlord as security for the full and faithful performance of Tenant's obligations under this Lease (the "Security Deposit"). Subject to the last sentence of this Section, the Security Deposit shall be understood and agreed to be the property of Landlord upon Landlord's receipt thereof, and may be utilized by Landlord in its discretion towards the payment of all prepaid expenses by Landlord for which Tenant would be required to reimburse Landlord under this Lease, including, without limitation, brokerage commissions and Tenant Improvement costs. Upon any default by Tenant, including specifically Tenant's failure to pay rent or to abide by its obligations under Sections 7.1 and 15.3 below, whether or not Landlord is informed of or has knowledge of the default, the Security Deposit shall be deemed to be automatically and immediately applied, without waiver of any rights Landlord may have under this Lease or at law or in equity as a result of the default, as a setoff for full or partial compensation for that default. If any portion of the Security Deposit is applied after a default by Tenant, Tenant shall within five
(5) days after written demand by Landlord deposit cash with Landlord in an amount sufficient to restore the Security Deposit to its original amount. Landlord shall not be required to keep this Security Deposit separate from its general funds, and Tenant shall not be entitled to interest on the Security Deposit. If Tenant fully performs its obligations under this Lease, the Security Deposit shall be returned to Tenant (or, at Landlord's option, to the last assignee of Tenant's interest in this Lease) after the expiration of the Term, provided that Landlord may retain the Security Deposit to the extent and until such time as all amounts due from Tenant in accordance with this Lease have been determined and paid in full.

ARTICLE V. USES

(b) If the rentable floor area of the portion of the Premises to be recaptured is fifty percent (50%) or more of the floor area of the Premises but less than seventy-five percent (75%) of the floor area of the Premises, Tenant shall have the right to retain one (1) Building top sign in a location of its choice. Tenant shall relinquish all other exterior sign rights to the Building; and

SECTION 5.3. HAZARDOUS MATERIALS.

Hazardous Materials. Notwithstanding the foregoing, Tenant shall not, without Landlord's prior written consent, take any remedial action in response to the presence of any Hazardous Materials on, under or about the Premises or the Project or any other affected real or personal property owned by Landlord or enter into any similar agreement, consent, decree or other compromise with any governmental agency with respect to any Hazardous Materials claims; provided however, Landlord's prior written consent shall not be necessary in the event that the presence of Hazardous Materials on, under or about the Premises or the Project or any other affected real or personal property owned by Landlord (i) imposes an immediate threat to the health, safety or welfare of any individual or (ii) is of such a nature that an immediate remedial response is necessary and it is not possible to obtain Landlord's consent before taking such action. To the fullest extent permitted by law, Tenant shall indemnify, hold harmless, protect and defend (with attorneys acceptable to Landlord) Landlord and any successors to all or any portion of Landlord's interest in the Premises and the Project and any other real or personal property owned by Landlord from and against any and all liabilities, losses, damages, diminution in value, judgments, fines, demands, claims, recoveries, deficiencies, costs and expenses (including, without limitation, attorneys' fees, court costs and other professional expenses), whether foreseeable or unforeseeable, arising directly or indirectly out of the use, generation, storage, treatment, release, on- or off-site disposal or transportation of Hazardous Materials on, into, from, under or about the Premises, the Building and the Project and any other real or personal property owned by Landlord caused or permitted by Tenant, its agents, employees, contractors, licensees or invitees, specifically including, without limitation, the cost of any required or necessary repair, restoration, cleanup or detoxification of the Premises, the Building and the Project and any other real or personal property owned by Landlord, and the preparation of any closure or other required plans, whether or not such action is required or necessary during the Term or after the expiration of this Lease. If Landlord at any time discovers that Tenant or its agents, employees, contractors, licensees or invitees have caused or knowingly permitted the release of a Hazardous Material on, under, from or about the Premises or the Project or any other real or personal property owned by Landlord, Tenant shall, at Landlord's request, immediately prepare and submit to Landlord a comprehensive plan, subject to Landlord's reasonable approval, specifying the actions to be taken by Tenant to return the Premises or the Project or any other real or personal property owned by Landlord to the condition required under all applicable environmental laws. Upon Landlord's approval of such cleanup plan, Tenant shall, at its expense, and without limitation of any rights and remedies of Landlord under this Lease or at law or in equity, immediately implement such plan and proceed to cleanup such Hazardous Materials in accordance with all applicable laws and as required by such plan and this Lease. The provisions of this subsection (e) shall expressly survive the expiration or sooner termination of this Lease.

ARTICLE VI. COMMON AREAS; SERVICES

to or loss of the property of, or for any injury to, Tenant, its invitees or employees. Landlord may temporarily close any portion of the Common Areas for repairs, remodeling and/or alterations, to prevent a public dedication or the accrual of prescriptive rights, or for any other reason deemed sufficient by Landlord, without liability to Landlord. Tenant shall not be required to comply with any rules and regulations for the Project other than those attached to this Lease unless such rules and regulations are commercially reasonable and nondiscriminatory in content and application. Landlord's exclusive control, operation, maintenance and repair of the Common Area shall be subject to Tenant's parking rights contained in Section 6.4 below and to all other limitations contained in this Lease. Landlord agrees that any temporary closure of any portion of the Common Areas shall not unreasonably interfere with Tenant's intended use of the Premises, nor its reasonable access to or parking for the Premises.

SECTION 6.4. PARKING. Tenant shall be entitled to the number of vehicle parking spaces set forth in Item 14 of the Basic Lease Provisions, which spaces shall be located on those portions of the Common Areas designated by Landlord for parking, and said parking spaces shall be provided at no charge to Tenant during the Lease Term. Tenant shall not use more parking spaces than such number. In the event the Premises is expanded at any time during the Term, the number of spaces shall be increased by the number included in the Economic Terms for such space. Landlord shall allow Tenant to mark the twenty (20) spaces designated on Exhibit A-1 as "Broadcom Visitor" for use by Tenant's employees and customers, provided Landlord shall have no obligation to monitor the use of such stalls but such stalls shall be considered as part of the total number of stalls to which Tenant is entitled. In the event the Premises is expanded and Tenant leases a full floor or more of any other building, Tenant shall have the right to mark a proportionate number of parking stalls, up to an additional twenty (20) spaces for each additional building fully leased by Tenant, as "Broadcom Visitor" in a location reasonably designated by Landlord. All vehicle parking spaces shall be used only for parking by vehicles no larger than full size passenger automobiles, vans, mini-vans or pickup trucks. Tenant shall not knowingly permit or allow any vehicles that belong to or are controlled by Tenant or Tenant's employees, suppliers, shippers, customers or invitees to be loaded, unloaded, parked or stored in areas other than those designated by Landlord for shipping and receiving activities. If Tenant permits or allows any of the prohibited activities described above, then Landlord shall have the right, without notice, in addition to such other rights and remedies that Landlord may have, to remove or tow away the vehicle involved and charge the costs to Tenant; provided Landlord agrees not to cause or permit the towing of any vehicle from parking within the Common Area without first attempting to contact Tenant to identify the Owner of the vehicle in question. Parking within the Common Areas shall be limited to striped parking stalls, and no parking shall be permitted in any driveways, access ways or in any area which would prohibit or impede the free flow of traffic within the Common Areas. There shall be no extended overnight parking of any vehicles of any kind unless otherwise authorized by Landlord (periodic, temporary overnight parking of employee vehicles for up to seventy-two (72) hours and vehicles used in the ordinary course of Tenant's business at the Premises shall be permitted), and vehicles which have been abandoned or parked in violation of the terms hereof may be towed away at the owner's expense. Nothing contained in this Lease shall be deemed to create liability upon Landlord for any damage to motor vehicles of visitors or employees, for any loss of property from within those motor vehicles, or for any injury to Tenant, its visitors or employees, unless ultimately determined to be caused by the sole active negligence or willful misconduct of Landlord. Landlord shall have the right to establish, and from time to time amend, and to enforce against all users all reasonable rules and regulations (including the designation of areas for employee parking) that Landlord may deem necessary and advisable for the proper and efficient operation and maintenance of parking within the Common Areas. Landlord shall have the right to construct, maintain and operate lighting facilities within the parking areas; to change the area, level, location and arrangement of the parking areas and improvements therein; to restrict parking by tenants, their officers, agents and employees to employee parking areas and to do and perform such other acts in and to the parking areas and improvements therein as, in the use of good business judgment, Landlord shall determine to be advisable. Any person using the parking area shall observe all directional signs and arrows and any posted speed limits. In no event shall Tenant interfere with the use and enjoyment of the parking area by other tenants of the Building or their employees or invitees. Parking areas shall be used only for parking passenger vehicles. Servicing of vehicles, or the parking or storage of shipping and receiving vehicles in any area is prohibited unless otherwise authorized by Landlord. Periodic washing and detailing of automobiles shall be permitted, subject to the Landlord's reasonable rules and regulations and Landlord's reasonable standards for such third party providers. Tenant shall be liable for any damage to the parking areas caused by Tenant or Tenant's employees, suppliers, shippers, customers or invitees, including, without limitation, damage from excess oil leakage. Tenant shall have no right to install any fixtures, equipment or personal property in the parking areas. Landlord agrees to enforce all parking rights and restrictions and rules and regulations for the Project on an equal and non-discriminatory basis. Tenant shall have no liability for non-compliance with the provisions of the Lease regarding parking other than with respect to Tenant's officers, directors and employees or persons under the control of Tenant, except for Landlord's towing rights herein provided.

SECTION 6.5. CHANGES AND ADDITIONS BY LANDLORD. Landlord reserves the right to make alterations or additions to the Building or the Project, or to the attendant fixtures, equipment and Common Areas. Landlord may at any time relocate or remove any of the various buildings, parking areas, and other Common Areas, and may add buildings and areas to the Project from time to time. No change shall entitle Tenant to any abatement of rent or other claim against Landlord. In no event, however, shall Landlord (i) impair visibility of Tenant's Exterior Signage; (ii) materially impair access to and from the Premises from the parking areas; (iii) reduce the number or size of Tenant's parking spaces granted under this Lease, or (iv) otherwise materially interfere with Tenant's access to and use of the Premises, the parking areas and the Common Areas adjacent to the Building in any material manner without Tenant's prior written consent, which shall not be unreasonably withheld.

and conditions: (i) Tenant may conduct up to twelve (12) such functions within any calendar year; (ii) such functions shall be limited to a reasonable number of people consistent with applicable fire, health and safety laws; (iii) Tenant shall execute Landlord's standard form entry permit prior to any such function,
(iv) the insurance, indemnity and nonliability obligations and provisions contained in Sections 10.1, 10.3 and 10.4 of this Lease, respectively (including Tenant's obligation to carry liquor law liability insurance if alcoholic beverages are served or consumed during such functions), shall apply to and govern any claims, liabilities, costs or expenses arising from any such function, (v) no such proposed function shall, in Landlord's reasonable determination, unreasonably disrupt either other tenants of the Project, or the operation or maintenance of the Common Areas, and (vi) Tenant shall pay any and all Landlord's reasonable costs of preparation for, supervision of and/or clean-up in connection with, such functions.

ARTICLE VII. MAINTAINING THE PREMISES

Landlord agrees to provide Tenant with at least twenty-four (24) hours prior notice before commencing any repairs, improvements or alterations to the Building or the Project which are reasonably likely to materially impair Tenant's use or enjoyment of the Premises, Tenant's parking areas or access to the Project or the Premises.

ARTICLE VIII. TAXES AND ASSESSMENTS ON TENANT'S PROPERTY

ARTICLE IX. ASSIGNMENT AND SUBLETTING

SECTION 9.1. RIGHTS OF PARTIES.

(a) Tenant will not, either voluntarily or by operation of law, assign, sublet, encumber, or otherwise transfer all or any part of Tenant's interest in this lease, or permit the Premises to be occupied by anyone other than Tenant, without Landlord's prior written consent, which consent shall not be unreasonably withheld or conditioned in accordance with the provisions of
Section 9.1(b) and shall be delivered to Tenant within fifteen (15) business days following Tenant's request. No assignment (whether voluntary, involuntary or by operation of law) and no subletting shall be valid or effective without Landlord's prior written consent and, at Landlord's election, any such assignment or subletting or attempted assignment or subletting shall constitute a material default of this Lease. Without limiting the foregoing, Landlord agrees that the use and occupancy of not more than ten percent (10%) of the floor area of the Premises in the aggregate by any person or entity performing office support services (such as mail room, copy center, shipping or travel services) or other services incidental to Tenant's permitted use on an outsource basis shall not constitute a sublease or other prohibited transfer of the Premises provided Tenant continues to occupy the remainder of the Premises. Landlord

shall not be deemed to have given its consent to any assignment or subletting by any other course of action, including its acceptance of any name for listing in the Building directory. To the extent not prohibited by provisions of the Bankruptcy Code, 11 U.S.C. Section 101 et seq. (the "Bankruptcy Code"), including Section 365(f)(1), Tenant on behalf of itself and its creditors, administrators and assigns waives the applicability of Section 365(e) of the Bankruptcy Code unless the proposed assignee of the Trustee for the estate of the bankrupt meets Landlord's standard for consent as set forth in Section 9.1(b) of this Lease. If this Lease is assigned to any person or entity pursuant to the provisions of the Bankruptcy Code, any and all monies or other considerations to be delivered in connection with the assignment shall be delivered to Landlord, shall be and remain the exclusive property of Landlord and shall not constitute property of Tenant or of the estate of Tenant within the meaning of the Bankruptcy Code. Any person or entity to which this Lease is assigned pursuant to the provisions of the Bankruptcy Code shall be deemed to have assumed all of the obligations arising under this Lease on and after the date of the assignment, and shall upon demand execute and deliver to Landlord an instrument confirming that assumption.

(d) Tenant agrees that fifty percent (50%) of any amounts paid by an assignee or subtenant, however described, in excess of (i) the Basic Rent payable by Tenant hereunder, or in the case of a sublease of a portion of the Premises, in excess of the Basic Rent reasonably allocated to such portion, plus
(ii) Tenant's direct out-of-pocket costs such as tenant improvements, moving costs or brokerage commissions which Tenant certifies to Landlord have been paid to provide occupancy related services to such assignee or subtenant of a nature commonly provided by landlords of similar space, shall be the property of Landlord and such amounts shall be payable directly to Landlord by the assignee or subtenant or, at Landlord's option, by Tenant. For the purpose of determining Tenant's direct out-of -pocket costs for subparagraph (ii) of this paragraph, Tenant shall be allowed to deduct the unamortized portion (assuming straight line depreciation over the Lease Term) of Tenant's Contribution (as defined in the Work Letter) provided that such subtenant or assignee is taking the Premises "as-is" in its current configuration and no other tenant improvement costs are included. At Landlord's request, a written agreement shall be entered into by and among Tenant, Landlord and the proposed assignee or subtenant confirming the requirements of this subsection.

(e) Tenant shall pay to Landlord a fee of Five Hundred Dollars ($500.00) if and when any transfer hereunder is requested by Tenant, except for any transfer to a "Tenant Affiliate" (as hereinafter defined). Such fee is hereby acknowledged as a reasonable amount to reimburse Landlord for all of its costs of review and evaluation of a proposed

assignee/sublessee, and Landlord shall not be obligated to commence such review and evaluation unless and until such fee is paid.

(f) Landlord agrees to execute and deliver to Tenant, within fifteen
(15) days following Tenant's request, a consent to lien waiver, including lease estoppel language as may be requested by Tenant's lender (all in a form reasonably acceptable to Tenant's lender and Landlord).

SECTION 9.3. SUBLEASE REQUIREMENTS. The following terms and conditions shall apply to any subletting by Tenant of all or any part of the Premises and shall be deemed included in each sublease:

SECTION 9.5 COLOCATION OF EQUIPMENT. Tenant may from time to time throughout the Lease Term provide services to or require services from customers, suppliers, vendors or other persons or entities with whom Tenant has a business relationship (the "Customers") which allows such Customers to locate equipment owned by such Customers within the Premises and Tenant may grant such Customers access to the Premises for the operation, maintenance repair and/or replacement of such equipment ("Colocation"). The use of the Premises by such Customers

for Colocation shall not be considered a sublease, assignment or other transfer of Tenant's interest in this lease requiring Landlord's consent provided: (i) there is no demising wall segregating any portion of the Building for solely for use by such Customer; and (ii) no such Customer has exclusive use of or control over a portion of the Building. Tenant shall be solely responsible for causing such Customers to access and use the Premises in accordance with the terms of this Lease. Landlord shall have no obligation to operate, maintain, insure or otherwise be responsible for any such equipment whether owned by Tenant or any such Customers.

ARTICLE X. INSURANCE AND INDEMNITY

SECTION 10.3. JOINT INDEMNITY.

or authorized agents. In cases of alleged negligence asserted by third parties against Tenant which arise out of, are occasioned by, or in any way attributable to the maintenance or repair of the Common Areas, the Project or the Building by Landlord or its authorized agents or employees, Landlord shall accept any tender of defense for Tenant and shall, notwithstanding any allegation of negligence or willful misconduct on the part of Tenant, defend Tenant and protect and hold Tenant harmless and pay all cost, expense and attorneys' fees incurred in connection with such litigation, provided that Landlord shall not be liable for any such injury or damage, and Tenant shall reimburse Landlord for the reasonable attorney's fees and costs for the attorney representing both parties, all to the extent and in the proportion that such injury or damage is ultimately determined by a court of competent jurisdiction (or in connection with any negotiated settlement agreed to by Tenant) to be attributable to the negligence or willful misconduct of Tenant. Upon Tenant's request, Landlord shall at Landlord's sole cost and expense, retain a separate attorney reasonably selected by Tenant to represent Tenant in any such suit if Tenant reasonably determines that the representation of both Tenant and Landlord by the same attorney would cause conflict of interest; provided, however, that to the extent and the proportion that the injury or damage which is the subject of the suit is ultimately determined by a court of competent jurisdiction (or in connection with any negotiated settlement agreed to by Tenant) to be attributable to the negligence or willful misconduct or Tenant, Tenant shall reimburse Landlord for the reasonable legal fees and costs of the separate attorney retained by Landlord. The provisions of this Subsection 10.3(b) shall expressly survive the expiration or sooner termination of this Lease.

ARTICLE XI. DAMAGE OR DESTRUCTION

SECTION 11.1. RESTORATION.

ARTICLE XII. EMINENT DOMAIN

SECTION 12.3. TAKING OF PARKING AREA. In the event there shall be a taking of the parking area such that Landlord can no longer provide sufficient parking to comply with this Lease, Landlord may substitute reasonably equivalent parking in a location reasonably close to the Building; provided that if Landlord fails to make that substitution within ninety (90) days following the taking and if the taking materially impairs Tenant's use and enjoyment of the Premises, Tenant may, at its option, terminate this Lease by written notice to Landlord. If this Lease is not so terminated by Tenant, there shall be no abatement of rent and this Lease shall continue in effect. Any dispute regarding the substitution of parking spaces under this Section 12.3 shall be submitted to and resolved by JAMS arbitration pursuant to Section 22.7 of this Lease.

ARTICLE XIII. SUBORDINATION; ESTOPPEL CERTIFICATE; FINANCIALS

SECTION 13.2. ESTOPPEL CERTIFICATE.

(b) Notwithstanding any other rights and remedies of Landlord, Tenant's failure to deliver any estoppel statement within fifteen (15) days following written notice therefor shall be conclusive upon Tenant that (i) this Lease is in full force and effect, without modification except as may be represented by Landlord, (ii) there are no uncured defaults in Landlord's performance, and (iii) not more than one month's rental has been paid in advance.

SECTION 13.3. FINANCIALS.

ARTICLE XIV. DEFAULTS AND REMEDIES

SECTION 14.1. TENANT'S DEFAULTS. In addition to any other event of default set forth in this Lease, the occurrence of any one or more of the following events shall constitute a default by Tenant:

(a) The failure by Tenant to make any payment of rent or additional rent required to be made by Tenant, as and when due, where the failure continues for a period of ten (10) days after written notice from Landlord to Tenant; provided, however, that any such notice shall be in lieu of, and not in addition to, any notice required under California Code of Civil Procedure Section 1161 and 1161(a) as amended. For purposes of these default and remedies provisions, the term "additional rent" shall be deemed to include all amounts of any type whatsoever other than Basic Rent to be paid by Tenant pursuant to the terms of this Lease.

(c) The discovery by Landlord that any financial statement provided by Tenant, or by any affiliate, successor or guarantor of Tenant, was materially false.

(d) The failure of Tenant to timely and fully provide any subordination agreement, estoppel certificate or financial statements in accordance with the requirements of Article XIII.

SECTION 14.2. LANDLORD'S REMEDIES.

(i) Landlord may terminate Tenant's right to possession of the Premises by any lawful means, in which case this Lease shall terminate and Tenant shall immediately surrender possession of the Premises to Landlord. Such termination shall not affect any accrued obligations of Tenant under this Lease. Upon termination, Landlord shall have the right to reenter the Premises and remove all persons and property. Landlord shall also be entitled to recover from Tenant:

(1) The worth at the time of award of the unpaid rent and additional rent which had been earned at the time of termination;

(5) At Landlord's election, all other amounts in addition to or in lieu of the foregoing as may be permitted by law. The term "rent" as used in this Lease shall be deemed to mean the Basic Rent and all other sums required to be paid by Tenant to Landlord pursuant to the terms of this Lease. Any sum, other than Basic Rent, shall be computed on the basis of the average monthly amount accruing during the twenty-four (24) month period immediately prior to default, except that if it becomes necessary to compute such rental before the twenty-four (24) month period has occurred, then the computation shall be on the basis of the average monthly amount during the shorter period. As used in subparagraphs (1) and (2) above, the "worth at the time of award" shall be computed by allowing interest at the rate of ten percent (10%) per annum. As used in subparagraph (3) above, the "worth at the time of award" shall be computed by discounting the amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%).

extremely difficult and impracticable to ascertain. Those costs may include, but are not limited to, administrative, processing and accounting charges, and late charges which may be imposed on Landlord by the terms of any ground lease, mortgage or trust deed covering the Premises. Accordingly, if any rent due from Tenant shall not be received by Landlord or Landlord's designee within ten (10) days after the date due, then Tenant shall pay to Landlord, in addition to the interest provided above, a late charge in a sum equal to the greater of five percent (5%) of the amount overdue or Two Hundred Fifty Dollars ($250.00) for each delinquent payment; provided that such late charge shall be waived for the initial late rent payment during each calendar year during the Term and any extension. Acceptance of a late charge by Landlord shall not constitute a waiver of Tenant's default with respect to the overdue amount, nor shall it prevent Landlord from exercising any of its other rights and remedies.

SECTION 14.5. DEFAULT BY LANDLORD. Landlord shall not be deemed to be in default in the performance of any obligation under this Lease unless and until it has failed to perform the obligation within thirty (30) days after written notice by Tenant to Landlord specifying in reasonable detail the nature and extent of the failure; provided, however, that if the nature of Landlord's obligation is such that more than thirty (30) days are required for its performance, then Landlord shall not be deemed to be in default if it commences performance within the thirty (30) day period and thereafter diligently pursues the cure to completion. If Landlord shall default in the performance of any of its obligations under the Lease (after notice and an opportunity to cure as provided herein), Tenant shall have the right to pursue any and all remedies available to it as set forth in this Lease, at law, or in equity, subject to the express limitations on liability contained in this Lease.

ARTICLE XV. END OF TERM

SECTION 15.3. SURRENDER OF PREMISES; REMOVAL OF PROPERTY. Upon the Expiration Date or upon any earlier termination of this Lease, Tenant shall quit and surrender possession of the Premises to Landlord in as good order, condition and repair as when received or as hereafter may be improved by Landlord or Tenant, reasonable wear and tear and repairs which are Landlord's obligation excepted, and shall, without expense to Landlord, remove or cause to be removed from the Premises all personal property and debris, except for any items that Landlord may by written authorization allow to remain. Tenant shall repair all damage to the Premises resulting from such removal, which repair shall include the patching and filling of holes (other than holes resulting from the hanging of pictures or other items of decoration, which Tenant shall not be obligated to patch and fill) and repair of structural damage, provided that Landlord may instead elect to repair any structural damage at Tenant's expense. If Tenant shall fail to comply with the provisions of this Section following ten (10) days written notice to Tenant and failure to cure, Landlord may effect the removal and/or make any repairs, and the cost to Landlord shall be additional rent payable by Tenant upon demand. If Tenant fails to remove Tenant's personal property from the Premises upon the expiration of the Term, Landlord may remove, store, dispose of and/or retain such personal property, at Landlord's option, in accordance with then applicable laws, all at the expense of Tenant. If requested by Landlord, Tenant shall execute, acknowledge and deliver to Landlord an instrument in writing releasing and quit claiming to Landlord all right, title and interest of Tenant in the Premises.

ARTICLE XVI. PAYMENTS AND NOTICES

ARTICLE XVII. RULES AND REGULATIONS

guests or invitees. One or more waivers by Landlord of any breach of the Rules and Regulations by Tenant or by any other tenant(s) shall not be a waiver of any subsequent breach of that rule or any other. Tenant's failure to keep and observe the Rules and Regulations shall constitute a default under this Lease. In the case of any conflict between the Rules and Regulations and this Lease, this Lease shall be controlling. Tenant's agreement to abide by, keep and observe all reasonable rules and regulations which Landlord may make shall be limited to those rules and restrictions which are consistently applied by Landlord to all tenants of the Project in a non-discriminatory manner.

ARTICLE XVIII. BROKER'S COMMISSION

ARTICLE XIX. TRANSFER OF LANDLORD'S INTEREST

ARTICLE XX. INTERPRETATION

SECTION 20.5. TIME OF ESSENCE. Time is of the essence with respect to the performance of every provision of this Lease.

SECTION 20.6. CONTROLLING LAW. This Lease shall be governed by and interpreted in accordance with the laws of the State of California.

ARTICLE XXI. EXECUTION AND RECORDING

SECTION 21.1. COUNTERPARTS. This Lease may be executed in one or more counterparts, each of which shall constitute an original and all of which shall be one and the same agreement.

SECTION 21.6. EXECUTED COPY. Any fully executed photocopy or similar reproduction of this Lease shall be deemed an original for all purposes.

SECTION 21.7. ATTACHMENTS. All exhibits, amendments, riders and addenda attached to this Lease are hereby incorporated into and made a part of this Lease.

ARTICLE XXII. MISCELLANEOUS

SECTION 22.2. GUARANTY. [INTENTIONALLY OMITTED]

SECTION 22.7. JAMS ARBITRATION.

(a) All claims or disputes between Landlord and Tenant arising out of, or relating to the Lease which either party is expressly authorized by a provision hereof to submit to arbitration, shall be decided by the JAMS/ENDISPUTE, or its successor, in Orange, California ("JAMS"), unless the parties mutually agree otherwise. Within ten (10) business days following submission to JAMS, JAMS shall designate three arbitrators and each party may, within five (5) business days thereafter, veto one of the three persons so designated. If two different designated arbitrators have been vetoed, the third arbitrator shall hear and decide the matter. Any arbitration pursuant to this
Section shall be decided within thirty (30) days of submission of JAMS. The decision of the arbitrator shall be final and binding on the parties. All costs associated with arbitration shall be awarded to the prevailing party as determined by the arbitrator.

(c) The agreement herein among the parties to the Lease and any other written agreement to arbitrate referred to herein shall be specifically enforceable under prevailing law.

LANDLORD:                             TENANT:

THE IRVINE COMPANY,                   BROADCOM CORPORATION
A DELAWARE CORPORATION                A CALIFORNIA CORPORATION

By: /s/ Clarence W. Barker            By: /s/ William J. Ruehle
    -----------------------------         ------------------------------------
    Clarence W. Barker, President         William J. Ruehle,
    Investment Properties Group,          Vice President and Chief Financial
                                          Officer


By: Brian Schaefgen
    -----------------------------
    Brian Schaefgen,
    Assistant Secretary

FOURTH AMENDMENT TO LEASE

I. PARTIES AND DATE.

This Fourth Amendment to Lease (the "Amendment") dated April 30, 2004, is by and between THE IRVINE COMPANY ("Landlord"), and BROADCOM CORPORATION, a California corporation ("Tenant").

II. RECITALS.

Landlord and Tenant have previously entered into that certain Lease (Multi-Tenant; Net) dated January 12, 2001, as amended by that certain First Amendment to Lease which was executed concurrently (the "Original Lease"), for all of the space in those two (2) buildings commonly known as 46 Discovery and 48 Discovery, Irvine, California, ("Original Premises"). The Original Lease was since modified by a Second Amendment to Lease dated June 30, 2001 and a Third Amendment to Lease dated September 18, 2003. The Original Lease as amended is referred to in this Agreement as the "Lease". All capitalized terms not defined in this Amendment shall have the meanings given to them in the Lease.

Landlord and Tenant now desire to modify the Lease to terminate Tenant's leasehold interest in approximately 53,840 rentable square feet of space in the building located at 48 Discovery, Irvine, California (the "48 Discovery Building") from the Premises and to incorporate into the Premises approximately 62,814 rentable square feet of space in the building located at 43 Discovery, Irvine California (together with the underlying land, the "43 Discovery Building") and to make such other modifications as are set forth in "III. MODIFICATIONS" next below.

III. MODIFICATIONS.

A. Termination of Tenant's Leasehold Interest in the 48 Discovery Building. The parties agree that subject to the terms and conditions of this Amendment, Tenant's leasing of that portion of its Premises located in the 48 Discovery Building shall terminate on the "48 Discovery Termination Date" (as hereinafter defined), provided that such termination shall not relieve Tenant of
(i) any rent or other charges owed by Tenant, or other obligations required of Tenant, as are set forth in the Lease from and after the date of this Amendment through and including the 48 Discovery Termination Date, (ii) any obligations for the remaining Premises pursuant to the Lease as amended by this Amendment, and (iii) any indemnity or hold harmless obligations set forth in the Lease which by their express terms survive the termination of the Lease. Tenant's obligation for payment of Basic Rent (but not Operating Expenses) with respect to the 48 Discovery Building shall cease and terminate as of the 48 Discovery Building Termination Date. Except for Tenant's obligation contained in Section 4.2(d) of the Lease and its obligation to continue to pay Operating Expenses until the 43 Discovery Building Commencement Date, all liability of Tenant for Basic Rent attributable to the 48 Discovery Building, shall cease and terminate as of the 48 Discovery Termination Date. As used herein, the "48 Discovery Termination Date" shall mean the end of the calendar month in which this Amendment is fully executed and delivered by Landlord and Tenant.

B. Vacation and Surrender of the 48 Discovery Building. Tenant hereby agrees to vacate the 48 Discovery Building and to surrender and deliver exclusive possession of its Premises located in the 48 Discovery Building to Landlord on or before the 48 Discovery Termination Date. Landlord hereby agrees that, notwithstanding the terms and conditions of the Lease, the current physical condition of the 48 Discovery Building is deemed to comply with the surrender requirements of Section 15.3 of the Lease for the effective surrender of the 48 Discovery Building, and Landlord hereby agrees to accept Tenant's Premises in the 48 Discovery Building from Tenant in their current "as-is" condition; provided that Tenant shall be obligated to remove all of Tenant's personal property from the 48 Discovery Building as herein provided leaving said Building in a "broom clean" condition, and shall repair any damages arising from such removal.

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C. Demise of 43 Discovery Building. Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the premises shown on Exhibit A hereto, as an additional portion of the Premises leased by Tenant pursuant to the Lease, consisting of approximately 62,814 rentable square feet of space in the 43 Discovery Building. The occupancy by Tenant of the 43 Discovery Building shall include the use of those Common Areas located in, on and about the 43 Discovery Building in common with Landlord and with all others for whose convenience and use such Common Areas may be provided by Landlord, subject, however, to compliance with all rules and regulations as are prescribed from time to time by Landlord. Tenant shall have the same signage rights with respect to the 43 Discovery Building as were made available to Tenant pursuant to its leasing of the 48 Discovery Building under the Original Lease.

D. Right to Possession of the 43 Discovery Building. Notwithstanding the termination of the Lease with respect to Tenant's Premises located in the 48 Discovery Building, and Landlord's agreement to lease to Tenant additional premises in the 43 Discovery Building, and Tenant's obligation to commence paying Basic Rent for the 43 Discovery Building on the 48 Discovery Termination Date as set forth in Subparagraph III.G.2 below, Tenant's right to access and occupy the 43 Discovery Building, its obligation to pay Tenant's Share of Operating Expenses for the 43 Discovery Building and perform any of its non-monetary Lease obligations with respect thereto not set forth in the Work Letter attached hereto as Exhibit B shall commence only upon that date when the following conditions precedent have been satisfied (the "43 Discovery Building Commencement Date"):

1. Rational Software, the current tenant of Suite 200 of the 43 Discovery Building shall have vacated the space and returned possession thereof to the Landlord;

2. Irvine Apartment Communities, the current tenant of the ground floor of 43 Discovery shall have vacated the space and returned possession thereof to the Landlord; and

3. The Tenant Improvements to be constructed by Landlord pursuant to the Work Letter attached hereto as Exhibit B shall be substantially completed and Landlord shall have provided Tenant with at least five (5) business days following substantial completion to relocate its personal property and equipment into the 43 Discovery Building.

Landlord shall notify Tenant in writing within three (3) business days after the foregoing conditions have been satisfied. Notwithstanding the Tenant's Basic Rent obligations for the 43 Discovery Building set forth in Subparagraph
III.G.2 below, in the event that the conditions precedent of Subparagraph
III.D.1. and Subparagraph III.D.2. above are not satisfied such that construction of the Tenant Improvements can be commenced in the ground floor portion of the Premises located in the 43 Discovery Building by August 31, 2004, then fifty-percent (50%) of the Basic Rent otherwise due and payable on the 43 Discovery Building Commencement Date shall be abated on a day-to-day basis until such conditions precedent are satisfied in order to permit construction of the Tenant Improvements to commence; and further provided that if such conditions precedent are not satisfied by November 30, 2004, then Tenant, at its option, may, by written notice to Landlord, terminate this Amendment; provided Tenant submits written notice to Landlord prior to November 30, 2004 of its intention to so terminate this Amendment.

E. Tenant Improvements. As a condition to the commencement of the Lease for that portion of the Premises located in the 43 Discovery Building, Landlord hereby agrees to complete Tenant Improvements for the 43 Discovery Premises in accordance with the provisions of the Work Letter attached hereto as Exhibit B. Any Work Letter attached to the Original Lease or any prior Amendment is hereby deleted in its entirety.

F. Release of Liability. With respect to the 48 Discovery Building only, and conditioned on the performance by the parties of their respective obligations under this Amendment:

(a) Except as provided in Paragraph III.(A) above, Landlord and Tenant shall, as of the 48 Discovery Termination Date, be fully and unconditionally released and discharged from their respective obligations for the 48 Discovery Building arising after such date from or connected with the Lease. Except as provided in Paragraph III.(A) above, such release shall include, without

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limitation, Tenant's monetary obligations for the 48 Discovery Building arising under the Lease after such date, whether designated as "rent" or "additional rent" or otherwise; provided, however, that such release shall not act as a waiver of Tenant's ability to audit or review Landlord's books or records or to contest any Operating Expenses relating to any payments for which Tenant, remains liable pursuant to this Agreement (as expressly provided in Section 4.2(c) of the Lease), nor shall this Paragraph III.F(a) apply to the extent that this Amendment makes Tenant liable for reimbursing Landlord for Tenant's Share of Operating Expenses accruing until the 43 Discovery Building Commencement Date. Landlord and Tenant shall settle and adjust any refund or additional payment between them in good faith and as expeditiously as practicable. Except as provided in Paragraph III.(A) above, this Amendment shall fully and finally settle all other demands, charges, claims, accounts or causes of action of any nature, including, without limitation, both known and unknown claims and causes of action that may arise out of or in connection with the obligations of the parties under the Lease for the 48 Discovery Building after the 48 Discovery Building Termination Date.

(b) In connection with the release and discharge contained in Paragraph III.(C)(a) above, each of the parties expressly, knowingly, and voluntarily waives and relinquishes any and all rights and benefits that either of them may have under California Civil Code Section 1542, which provides:

"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING
THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR."

                    WJR                      DSM
             _________________        ____________________
             Tenant's Initials        Landlord's Initials

G. Basic Lease Provisions. The following Basic Lease Provisions are amended as follows:

1. Item 1 is deleted in its entirety as of the 48 Discovery Termination Date and the following shall be substituted therefor:

"1. Premises: The Premises includes all of Suites 100, 150, 200 and 250 building known as 43 Discovery, Irvine, California.

All references to the "Building" in the Lease shall be amended to refer to the 43 Discovery Building only."

2. Item 6 is amended as of the 48 Discovery Termination Date by deleting all reference to the 48 Discovery Building and the Basic Rent payable therefor, and adding the following:

"Basic Rent for the 43 Discovery Building: Commencing on the 48 Discovery Termination Date, the Basic Rent shall be One Hundred Twenty-Six Thousand Five Hundred Twenty-Four Dollars ($126,524.00) per month.

Basic Rent for the 43 Discovery Building is subject to adjustment as follows:

Unless the 43 Discovery Building Commencement Date occurs prior to such date, commencing on July 1, 2004, the Basic Rent shall be One Hundred Twenty-Nine Thousand Two Hundred Sixteen Dollars ($129,216.00) per month.

Subject to any rent abatement to which Tenant may be entitled pursuant to Paragraph III.D. above, commencing on the 43 Discovery Building Commencement Date, the Basic Rent shall be One Hundred Forty-Four

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Thousand Twenty-Three Dollars ($144,023.00) per month.

Commencing July 1, 2005, the Basic Rent shall be One Hundred Forty-Six Thousand Seven Hundred Fifteen Dollars ($146,715.00) per month."

3. Effective as of the 43 Discovery Building Commencement Date, Item 8 shall be deleted in its entirety and substituted therefor shall be the following:

"8. Floor Area of Premises: Approximately 62,814 rentable square feet"

4. Item 12 is hereby amended as of the 48 Discovery Termination Date by deleting Landlord's address for payments and notices and substituted therefor shall be the following:

"LANDLORD

THE IRVINE COMPANY

dba Office Properties
8105 Irvine Center Drive, Suite 300 Irvine, CA 92618
Attn: Vice President, Operations, Technology Portfolio

with a copy of notices to:

THE IRVINE COMPANY

dba Office Properties
8105 Irvine Center Drive, Suite 300 Irvine, CA 92618
Attn: Senior Vice President, Operations Office Properties"

5. Effective as of the 43 Discovery Building Commencement Date, Item 14 shall be deleted in its entirety and substituted therefor shall be the following:

"14. Vehicle Parking Spaces: Two hundred fifty-one (251)"

H. Rights to Lease Additional Space. The provisions of Section 2.5 of the Lease entitled "Rights to Lease Additional Space" are hereby deleted in their entirety and shall have no further force or effect.

I. Floor Plan of Premises. Effective as of the 48 Discovery Termination Date, Exhibit A attached to the Lease, depicting the 48 Discovery Building, shall be deleted therefrom and the Exhibit A attached hereto showing the 43 Discovery Building shall be substituted therefor.

IV. GENERAL.

A. Effect of Amendments. The Lease shall remain in full force and effect except to the extent that it is modified by this Amendment.

D. Defined Terms. All words commencing with initial capital letters in this Amendment

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and defined in the Lease shall have the same meaning in this Amendment as in the Lease, unless they are otherwise defined in this Amendment.

F. Attorneys' Fees. The provisions of the Lease respecting payment of attorneys' fees shall also apply to this Amendment.

V. EXECUTION.

Landlord and Tenant executed this Amendment on the date as set forth in "I. PARTIES AND DATE." above; provided, however, that if Landlord fails to execute and return a fully-executed original of this Amendment to Tenant within five (5) business days following Tenant's execution and delivery hereof to Landlord, this Amendment shall become null and void.

LANDLORD: TENANT:

THE IRVINE COMPANY                          BROADCOM CORPORATION,
                                            a California corporation

By: /s/ Donald S. McNutt                    By: /s/ William J. Ruehle
    _______________________________             ________________________________
    Donald S. McNutt, Senior Vice President     William J. Ruehle
    Leasing, Office Properties                  Vice President and
                                                Chief Financial Officer
By: /s/ Steven E. Claton
    ____________________________________
    Steven E. Claton, Vice President
    Operations, Office Properties

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EXHIBIT 10.38

CONFIDENTIAL TREATMENT REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT.

LEASE

(UNIVERSITY RESEARCH PARK - PHASES XII & XIII [GL])

BETWEEN

IRVINE COMMERCIAL PROPERTY COMPANY

AND

BROADCOM CORPORATION

*** Confidential treatment has been requested for the redacted text of this document. The confidential redacted text has been omitted and filed separately with the Securities and Exchange Commission.

CONFIDENTIAL TREATMENT REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT.

LEASE
(UNIVERSITY RESEARCH PARK - PHASES XII & XIII [GL])

THIS LEASE is made as of the 17th day of December, 2004, by and between IRVINE COMMERCIAL PROPERTY COMPANY, a Delaware corporation (formerly known as Irvine Community Development Company, a Delaware corporation), hereinafter called "LANDLORD," and BROADCOM CORPORATION, a California corporation, hereinafter called "TENANT."

ARTICLE I. BASIC LEASE PROVISIONS

Each reference in this Lease to the "BASIC LEASE PROVISIONS" shall mean and refer to the following collective terms, the application of which shall be governed by the provisions in the remaining Articles of this Lease.

1. Premises: Subject to Tenant's election as to the "Option Building" contained in Section 2.5 of this Lease, the Premises (more particularly described in Section 2.1) shall consist of all of the rentable square footage in eight (8) separate buildings, which buildings are designated as 5300, 5310, 5320, 5330, 5331, 5321, 5311 and 5301 California Avenue, Irvine, California. The Premises are depicted on Exhibit A attached hereto as Buildings A through H. Each building is referred to as a "BUILDING" and all buildings leased by Tenant pursuant to their Lease are collectively referred to as the "BUILDINGS."

2. Project and Site Description: The Project is the University Research Park as shown on Exhibit Y attached hereto. The Site is a portion of the Project and consists of the Buildings outlined on Exhibit A attached hereto which are initially leased by Tenant pursuant to this Lease and the attendant Common Areas, all as outlined on Exhibit A attached hereto, subject to the qualifications in Section 2.1 of the Lease.

3. Use of Premises: general office use including but not limited to (i) corporate headquarters functions; (ii) research and development of semiconductors and related products, including non-destructive electronic laboratory facilities; (iii) storage and shipping of both raw and finished goods; (iv) cafeteria, kitchen, work out, health club, child care, and medical facilities to serve the needs of the employees and guests of Tenant; and (v) any other non-retail use permitted by applicable law, so long as such uses are consistent with the applicable zoning ordinances of the City of Irvine and with the Ground Leases (including the Development Plan incorporated by reference in the Ground Leases).

4. First Phase Target Date: twenty-three (23) months following the end of the calendar month during which this Lease is fully executed and delivered by and between Landlord and Tenant.

Second Phase Target Date: four (4) weeks following the First Phase Target Date.

Third Phase Target Date: eight (8) weeks following the First Phase Target Date.

Fourth Phase Target Date: twelve (12) weeks following the First Phase Target Date.

5. Term: One hundred twenty-two (122) months following the First Phase Commencement Date, plus such additional days as may be required to cause this Lease to terminate on the final day of the calendar month.

6. Basic Rent: Commencing on the Commencement Date for each Phase (as defined in Article III), the Basic Rent shall equal the product of (i) the rentable area of all Buildings in such Phase multiplied by (ii) *** per rentable square foot.

*** Confidential treatment has been requested for the redacted text of this document. The confidential redacted text has been omitted and filed separately with the Securities and Exchange Commission.

CONFIDENTIAL TREATMENT REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT.

Basic Rent is subject to adjustment as follows:

Commencing twelve (12) months following the Fourth Phase Commencement Date of the Lease, the Basic Rent shall be *** per month, based on *** per rentable square foot;

Commencing twenty-four (24) months following the Fourth Phase Commencement Date of the Lease, the Basic Rent shall be *** per month, based on *** per rentable square foot;

Commencing thirty-six (36) months following the Fourth Phase Commencement Date of the Lease, the Basic Rent shall be *** per month, based on *** per rentable square foot;

Commencing forty-eight (48) months following the Fourth Phase Commencement Date of the Lease, the Basic Rent shall be *** per month, based on *** per rentable square foot;

Commencing sixty (60) months following the Fourth Phase Commencement Date of the Lease, the Basic Rent shall be *** per month, based on *** per rentable square foot;

Commencing seventy-two (72) months following the Fourth Phase Commencement Date of the Lease, the Basic Rent shall be *** per month, based on *** per rentable square foot;

Commencing eighty-four (84) months following the Fourth Phase Commencement Date of the Lease, the Basic Rent shall be *** per month, based on *** per rentable square foot;

Commencing ninety-six (96) months following the Fourth Phase Commencement Date of the Lease, the Basic Rent shall be *** per month, based on *** per rentable square foot; and

Commencing one hundred eight (108) months following the Fourth Phase Commencement Date of the Lease, the Basic Rent shall be *** per month, based on *** per rentable square foot.

7. Guarantor(s): None

8. Rentable square feet: agreed to be 685,584 in the aggregate, consisting of the rentable areas of the Buildings as set forth in Exhibit A-1, subject to remeasurement pursuant to Section 2.6.

Usable square feet: agreed to be 634,858 in the aggregate, consisting of the usable areas of the Buildings as set forth in Exhibit A-1, subject to remeasurement pursuant to Section 2.6.

9. Security Deposit: None

10. Broker(s): Real Estate & Logistics Technology, Inc.

11. Additional Insureds: The Regents of the University of California

12. Address for Payments and Notices:

*** Confidential treatment has been requested for the redacted text of this document. The confidential redacted text has been omitted and filed separately with the Securities and Exchange Commission.

CONFIDENTIAL TREATMENT REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT.

LANDLORD                                              TENANT
                                                      Prior to Tenant commencing Business
                                                      Operations from the Premises

IRVINE COMMERCIAL PROPERTY COMPANY                    BROADCOM CORPORATION
c/o The Irvine Company                                16215 Alton Parkway
550 Newport Center Drive                              P.O. Box 57013
Newport Beach, CA  92660                              Irvine, CA 92619-7013
Attn:  Senior Vice President, Operations              Attn:  Senior Director, Corporate Services
Irvine Office Properties
                                                      and

                                                      BROADCOM CORPORATION
                                                      16215 Alton Parkway
                                                      P.O. Box 57013
                                                      Irvine, CA 92619-7013
                                                      Attn:  Deputy General Counsel

with a copy of notices to:                            with a copy of notices to:

THE IRVINE COMPANY                                    DLA PIPER RUDNICK GRAY CARY US
550 Newport Center Drive                              LLP
Newport Beach, CA  92660                              550 South Hope Street, 23rd Floor
Attn:  Vice President, Operations                     Los Angeles, CA 90071
Irvine Office Properties,                             Attn: Michael E. Meyer, Esq.
    Technology Portfolio
                                                      and to

                                                      Mr. Kim Josephson
                                                      Real Tech
                                                      16215 Alton Parkway
                                                      Irvine, California 92618

*** Confidential treatment has been requested for the redacted text of this document. The confidential redacted text has been omitted and filed separately with the Securities and Exchange Commission.

CONFIDENTIAL TREATMENT REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT.

After Tenant Commences Business Operations
From the Premises:

BROADCOM CORPORATION
5300 California Avenue
Irvine, California 92617
Attn: Senior Director, Corporate Services

and

BROADCOM CORPORATION
5300 California Avenue
Irvine, California 92617
Attn:  Deputy General Counsel

with a copy of notices to:

DLA Piper Rudnick Gray Cary
550 South Hope Street, 23rd Floor
Los Angeles, California 90071
Attn:  Michael Meyer, Esq.

and

Mr. Kim Josephson
Real Tech
16215 Alton Parkway
Irvine, California 92618

13. Tenant's Liability Insurance Requirement: $5,000,000.00

14. Vehicle Parking Spaces: 3.5 parking spaces per 1,000 rentable feet of the Premises (as such spaces may be reduced to accommodate special Tenant requirements such as the installation of a loading dock or generator).

15. The Premises are a portion of certain real property which is ground leased by Landlord pursuant to those certain following described ground leases (collectively, the "GROUND LEASES"), each executed by and between The Regents of the University of California, a California corporation, as "Landlord" (the "GROUND LESSOR") and Landlord, as "Tenant": (i) that certain Ground Lease (Phase 3) dated July 28, 2000, a memorandum of which was recorded on August 30, 2000 as Instrument No. 20000454626 in the Official Records of Orange County, California, and (ii) that certain Ground Lease (Phase 4) dated July 28, 2000, a memorandum of which was recorded on August 30, 2000 as Instrument No. 20000454627 in the Official Records of Orange County, California. Tenant understands and acknowledges that a material consideration for Landlord entering into this Lease with Tenant is the nature of Tenant's business and the mutual benefits to be derived by Tenant and by Ground Lessor. Accordingly, in the event of any proposed assignment of this Lease or sublease of the Premises or any portion thereof, in addition to all of the provisions of Section 9.1 of this Lease, Landlord may reasonably withhold its consent to any such proposed assignment or sublease if the transferee is not approved by Ground Lessor, but only to the extent such Ground Lessor is entitled to withhold its consent pursuant to the applicable Ground Lease.

*** Confidential treatment has been requested for the redacted text of this document. The confidential redacted text has been omitted and filed separately with the Securities and Exchange Commission.

CONFIDENTIAL TREATMENT REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT.

ARTICLE II. PREMISES

SECTION 2.1. LEASED PREMISES. Landlord leases to Tenant and Tenant leases from Landlord the premises (the "PREMISES") within the buildings identified in Item 1 of the Basic Lease Provisions (the "BUILDINGS"). The Premises and Buildings, together with the attendant Common Areas as depicted on Exhibit A, shall sometimes be referred to herein as the "SITE". However, in the event that Tenant elects not to lease the Option Building (as defined below), then the Option Building (except with respect to Section 2.4 Rights) and the underlying real property shall cease to be a part of the Site for purposes of this Lease (including without limitation the signage provisions set forth in Section 5.2 hereof). The Site is a portion of the project identified in Item 2 of the Basic Lease Provisions and shown in Exhibit Y attached hereto (the "PROJECT"). Landlord makes no representation that any portion of the Project designated on Exhibit Y as "Future Development" will be ultimately constructed. The Premises are agreed to contain, and all references to the "FLOOR AREA" in this Lease shall mean, the rentable square footage set forth in Item 8 of the Basic Lease Provisions. Landlord shall have no right to relocate Tenant from the Premises at any time during the Term of this Lease or any extension.

SECTION 2.2. ACCEPTANCE OF PREMISES. Tenant acknowledges that neither Landlord nor any representative of Landlord has, except as specifically provided in this Lease, made any representation or warranty with respect to the Premises, the Building(s) or the Project or their respective suitability or fitness for any purpose, including without limitation any representations or warranties regarding zoning or other land use matters except that the Premises may be used for general business office operations, and that except as specifically provided in this Lease, neither Landlord nor any representative of Landlord has made any representations or warranties regarding (i) what other tenants or uses may be permitted or intended in the Project, (ii) any exclusivity of use by Tenant with respect to its permitted use of the Premises as set forth in Item 3 of the Basic Lease Provisions, or (iii) any construction of portions of the Project not yet completed. Tenant further acknowledges that neither Landlord nor any representative of Landlord has agreed to undertake any alterations or additions or construct any improvements to the Premises except as expressly provided in this Lease.

Notwithstanding the foregoing or anything in this Lease to the contrary, Landlord hereby represents and warrants to Tenant that the Buildings, including the foundation, floor/ceiling slabs, roof, curtain wall, exterior glass and mullions, windows and seals, columns, beams, shafts (including elevator shafts), stairs, stairwells, elevator cabs, base building washrooms, and main electrical room (collectively, "BUILDING STRUCTURE"), the Common Areas, and the mechanical, electrical, life safety, plumbing, sprinkler systems (connected to the core) and HVAC systems (collectively, "BUILDING SYSTEMS") shall, upon completion of construction by Landlord, be in good operating order and condition and in compliance with all laws applicable to new construction (including, without limitation, the ADA and laws pertaining to Hazardous Materials), structurally sound, with water tight roofs and perimeter walls and windows.

SECTION 2.3. BUILDING NAME AND ADDRESS. Subject to the terms of the Ground Leases and the Development Plan referenced therein and the provisions of Section 5.2 below, Tenant may name the Buildings and the Site and utilize any name selected by Tenant from time to time for the Building(s) and/or the Site in designating the location of Tenant's operations. Provided that Tenant is then leasing at least four (4) full Buildings within the Site, Landlord shall not have the right to change the name, address, number or designation of the Building(s) or Site. It is understood that Tenant has requested that the numbered addresses of the Buildings as currently established be rearranged and Landlord has agreed to cooperate in seeking approval of the City of Irvine to that request.

SECTION 2.4. ***

(a) ***

(b) ***

SECTION 2.5. OPTION BUILDING. Tenant shall have the right to delete from this Lease the Building containing approximately 90,900 rentable square feet and shown on Exhibit A as Building A (the "OPTION

*** Confidential treatment has been requested for the redacted text of this document. The confidential redacted text has been omitted and filed separately with the Securities and Exchange Commission.

CONFIDENTIAL TREATMENT REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT.

BUILDING"), provided, however, for this right to be exercised Tenant shall provide written notification to Landlord of Tenant's election to delete the Option Building from this Lease not later than May 31, 2005.

SECTION 2.6. METHOD OF MEASUREMENT. The rentable and usable areas of the initial Buildings shall be determined in accordance with the standards set forth on Exhibit F to this Lease. Either party shall have the right, upon notice delivered to the other within ninety (90) days following the Delivery Date of a Phase, to cause Landlord's Architect to remeasure one or more of the Building(s) in that Phase. In the event that any remeasurement pursuant to the terms of this
Section indicates that the square footage measurement previously set forth in the Lease or otherwise agreed upon by Landlord and Tenant is incorrect, then any payments due either party (or other rights between Landlord and Tenant) based upon the amount of square feet contained in the Premises shall be proportionally, retroactively and prospectively adjusted to reflect the actual number of square feet. If Tenant disagrees with the remeasurement by Landlord's Architect, then Tenant may, by written election not later than thirty (30) days thereafter, cause such dispute to be resolved pursuant to binding arbitration pursuant to Section 22.7.

ARTICLE III. TERM

SECTION 3.1. GENERAL. The term of this Lease ("TERM") shall be for the period shown in Item 5 of the Basic Lease Provisions. Subject to the provisions of Section 3.2 below, the Term shall commence on that date (the "COMMENCEMENT DATE") which is the earlier of (i) five (5) months following the Delivery Date (as defined in the Work Letter attached as Exhibit X to this Lease) for the First Phase, as extended for any Landlord Delays and Force Majeure Delays as defined in the Work Letter, or (ii) the date that Tenant commences its normal business operations within the First Phase. The Buildings are to be constructed and delivered to Tenant in phases (collectively, the "PHASES" and each, a "PHASE") of four (4) Phases, each Phase consisting of two (2) Buildings (except that the Fourth Phase may be one (1) Building if Tenant timely elects not to lease the Option Building). Notwithstanding the foregoing, however, Landlord may, upon at least twelve (12) months prior written notice to Tenant, elect to deliver the Buildings in as few as two (2) Phases, each of which shall contain not more than four (4) Buildings. Subject to Section 3.2, the Commencement Date as to each Phase of the Premises subsequent to the first Phase shall be the date which is the earlier of (i) five (5) months following the Delivery Date of that Phase, as extended for Landlord Delays and Force Majeure Delays, or (ii) the date Tenant commences its normal business operations in the applicable Phase. In any event, however, the Commencement Date of the Lease shall be deemed to occur on the Commencement Date of the First Phase of the Site. It is Landlord's intention to deliver each Phase of the Premises in approximate four (4)-week intervals, but Landlord shall use its commercially reasonable efforts to accelerate the delivery of the Phases (but at no additional cost to Landlord). Prior to Tenant's taking of possession of the Premises or any Phase thereof, the parties shall memorialize on a form provided by Landlord the actual Commencement Date for the Premises (or for each Phase thereof), and the Expiration Date of this Lease. Tenant's failure to execute that form shall not affect the validity of Landlord's determination of those dates.

SECTION 3.2. DELAY IN POSSESSION. If, for any reason whatsoever, the Delivery Date for the first two Buildings has not occurred on or before the "FIRST PHASE TARGET DATE" set forth in Item 4 of the Basic Lease Provisions, the Delivery Date for the next two Buildings has not occurred on or before the "SECOND PHASE TARGET DATE" set forth in Item 4 of the Basic Lease Provisions, the Delivery Date for the next two Buildings has not occurred on or before the "THIRD PHASE TARGET DATE" set forth in Item 4 of the Basic Lease Provisions, and/or the Core and Shell Improvements for the final Building(s) has not occurred on or before the "FOURTH PHASE TARGET DATE" set forth in Item 4 of the Basic Lease Provisions, then subject to Section 3.3, this Lease shall not be void or voidable nor shall Landlord be liable to Tenant for any resulting loss or damage. However, if the Delivery Date for the First Phase fails to occur on or before the First Phase Target Date (or for any subsequent Phase on or before the applicable Target Date for that Phase) due to any action or inaction of Tenant (including without limitation any Tenant Delay described in the Work Letter attached to this Lease), then the applicable Delivery Date shall, for purposes of Section 3.1, be deemed advanced by the collective number of days of delay in excess of thirty (30) caused by Tenant (it being understood that Tenant may cause up to thirty days of delay in the aggregate without rental penalty).

*** Confidential treatment has been requested for the redacted text of this document. The confidential redacted text has been omitted and filed separately with the Securities and Exchange Commission.

CONFIDENTIAL TREATMENT REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT.

SECTION 3.3. ***.

SECTION 3.4. RIGHT TO EXTEND THIS LEASE. Provided that no Event of Default exists under any provision of this Lease at the time of exercise of the extension right granted herein, and provided Tenant has not assigned this Lease (except for this purpose only, an assignment pursuant to Section 9.4 shall not be considered an assignment), then Tenant may extend the Term of this Lease for two (2) successive periods of sixty (60) months. Tenant shall exercise its right to extend the Term by and only by delivering to Landlord, not less than eighteen
(18) months prior to the expiration date of the Term, Tenant's irrevocable written notice of its commitment to extend (the "COMMITMENT NOTICE"). If Tenant so provides in the Commitment Notice, Tenant may extend the Lease as to four (4) or more full Buildings only, which minimum number of Buildings shall consist of either Buildings A, B, C, and D as depicted on Exhibit A (the "NORTH BUILDINGS") or Buildings E, F, G, and H as depicted on Exhibit A (the "SOUTH BUILDINGS"). Should Tenant elect to extend the Lease as to more than four Buildings, the additional Buildings shall be at the easternmost portion of the Site (e.g., should Tenant lease the North Buildings, then any additional Buildings shall start at Building H and move westward in order as shown on Exhibit A). Should Tenant extend this Lease as to fewer than all of the Buildings in the Site, then Tenant's monument signage rights and rights to utilize exterior Common Areas within the Site shall be appropriately modified to reflect a multi-tenant Site.

The Basic Rent payable under the Lease during any extension of the Term shall be determined as provided in the following provisions. If Landlord and Tenant have not by then been able to agree upon the Basic Rent for the extension of the Term, then not later than one hundred eighty (180) days prior to the expiration date of the Term, Landlord shall notify Tenant in writing of the Prevailing Market Rent (as defined in Section 3.5 below) that would reflect one hundred percent (100%) of the Prevailing Market Rent rate for a 60-month renewal of comparable space in the Project (together with any increases thereof during the extension period) as of the commencement of the extension period ("LANDLORD'S DETERMINATION"). Concurrently with the delivery of the Landlord's Determination, Tenant shall deliver to Landlord Tenant's written determination of the Prevailing Market Rent ("TENANT'S DETERMINATION"). If within thirty (30) days following the concurrent delivery of the Landlord's Determination and the Tenant's Determination the parties are still unable to agree on the rental terms for the extension period, then either party may thereafter submit the determination of the Prevailing Market Rent for the extension period to arbitration pursuant to Section 22.7 below. The arbitrator utilized to reach such determination shall have at least ten (10) years of experience in commercial real estate matters.

Within thirty (30) days following the selection of the arbitrator and such arbitrator's receipt of the Landlord's Determination and the Tenant's Determination, the arbitrator shall determine whether the Prevailing Market Rent rate determined by Landlord or by Tenant more accurately reflects one hundred percent (100%) of the Prevailing Market Rent rate for each 60-month renewal of the Lease for the Premises. Accordingly, either the Landlord's Determination or the Tenant's Determination shall be selected by the arbitrator as the Prevailing Market Rent for the extension period. At any time before the decision of the arbitrator is rendered, either party may, by written notice to the other party, accept the rental terms submitted by the other party, in which event such terms shall be deemed adopted as the agreed Prevailing Market Rent. The fees of the arbitration shall be borne entirely by the party whose determination of the fair market rental rate was not accepted by the arbitrator. At any time before the decision of the arbitrator is rendered, either party may, by written notice to the other party, accept the rental terms submitted by the other party, in which event such terms shall be deemed adopted as the agreed Prevailing Market Rent.

Within twenty (20) days after the determination of the Prevailing Market Rent, Landlord shall prepare an appropriate amendment to this Lease for the extension period, and Tenant shall execute and return same to Landlord within ten (10) days after Tenant's receipt of same. Should the Prevailing Market Rent not be established by the commencement of the extension period, then Tenant shall continue paying rent at the rate in effect during the last month of the initial Term, and a lump sum adjustment shall be made promptly upon the determination of such new rental.

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The rights granted to Tenant under this Section 3.4 are personal to Broadcom Corporation, a California corporation, and to any assignee thereof permitted pursuant to Section 9.4 of the Lease. Any other attempt to assign or transfer any right or interest created by this Section shall be void from its inception. Tenant shall have no other right to extend the Term beyond the two
(2) successive sixty (60) month extension periods created by this paragraph. Unless agreed to in a writing signed by Landlord and Tenant, any extension of the Term, whether created by an amendment to this Lease or by a holdover of the Premises by Tenant, or otherwise, shall be deemed a part of, and not in addition to, any duly exercised extension period permitted by this paragraph.

SECTION 3.5. PREVAILING MARKET RENT. The prevailing market rental rate ("PREVAILING MARKET RENT") is defined as the Base Rent, together with any increases thereof during the extension period, and other economic terms then being accepted by Landlord for a 60-month lease of comparable space in the Project in excess of 50,000 rentable square feet (the parties acknowledge that any transaction in excess of 50,000 rentable square feet will be a "comp" because they understand that there may be no 600,000 square feet deals and that one or two 600,000 square feet deals may reflect a distorted picture of the market place) to a new, non-sublease, non-renewal and non-expansion tenant (except for extensions by tenants whose leases contain a comparable fair market extension right, whether or not exercised, and for expansions pursuant to an option right at a fair market rate) as of the commencement of the applicable extension term ("COMPARABLE TRANSACTIONS"). To the extent there are not a sufficient number of Comparable Transactions in the Project, then Comparable Transactions will also include what a comparable landlord of comparable buildings with comparable vacancy factors in comparable locations in the vicinity of the Project ("COMPARABLE BUILDINGS") would accept in Comparable Transactions, taking into account and adjusting for historic rental differentials between the Comparable Buildings and the Project. In any determination of Comparable Transactions appropriate consideration shall be given to the annual rental rates per rentable square foot, the standard of measurement by which the rentable square footage is measured, the type of escalation clause (e.g., whether increases in additional rent are determined on a net or gross basis, and if gross, whether such increases are determined according to a base year or a base dollar amount expense stop), parking rights and obligations (it being specifically understood that because Tenant is granted free parking hereunder, Landlord shall be entitled to an economic credit if other tenants of the Project and Comparable Buildings are then paying for parking), roof/antenna and other license rights, signage rights, abatement provisions reflecting free rent and/or no rent during the period of construction or subsequent to the commencement date as to the space in question, brokerage commissions (but only if Tenant has engaged the services of a broker or Landlord is otherwise required to pay a commission with respect to the renewal), length of the lease term, size and location of premises being leased, building standard work letter and/or tenant improvements allowances, if any, the condition of the base building and the Landlord's responsibility with respect thereto, the value, if any, of the existing tenant improvements, all other relevant economic considerations and other generally applicable conditions of tenancy for such Comparable Transactions. The intent is that Tenant will obtain (and pay) the same rent and receive the other economic benefits that Landlord would otherwise give in Comparable Transactions and that Landlord will make and receive the same economic payments and concessions that Landlord would otherwise make and receive in Comparable Transactions.

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ARTICLE IV. RENT AND OPERATING EXPENSES

SECTION 4.1. BASIC RENT. From and after the Commencement Date, Tenant shall pay to Landlord without deduction or offset except as specifically permitted by this Lease, the rental amount for the Premises shown in Item 6 of the Basic Lease Provisions (the "BASIC RENT"), including adjustments shown in said Item 6. Rental adjustments to Basic Rent shown in Item 6 shall be deemed to occur on the specified monthly anniversary of the Fourth Phase Commencement Date of the Lease, whether or not the Fourth Phase Commencement Date occurs at the end of a calendar month. The rent shall be due and payable in advance commencing on the Commencement Date for each Phase (as prorated for any partial month) and continuing thereafter on the first day of each successive calendar month of the Term. No demand, notice or invoice shall be required for the payment of Basic Rent. Tenant shall not be required to pay the first month's Basic Rent upon execution of this Lease. Rather, Tenant shall be required to pay the first month's Basic Rent on the Commencement Date.

SECTION 4.2. OPERATING EXPENSES.

(a) From and after the Commencement Date, Tenant shall pay to Landlord, as additional rent, one hundred percent of all Operating Expenses, as defined in
Section 4.2(f), attributable to the Buildings being leased hereunder by Tenant, which Operating Expenses will include a pro rata allocation of Common Area expenses incurred by Landlord in the operation of the Site ("TENANT'S SHARE"). During such time as Tenant leases all Buildings within the Site, Tenant shall pay all Operating Expenses incurred by Landlord in the operation of the Site. It is understood that the Operating Expenses attributable to the Site shall include certain items that benefit the Site and other properties owned by Landlord (but exclusive of charges for Landlord's engineering personnel to the extent that Tenant is maintaining all Building Systems hereunder), provided that such items shall be equitably allocated among all affected properties based upon their comparative rentable areas.

(b) Prior to the start of the first full or partial "Expense Recovery Period" (as defined in this Section 4.2), Landlord shall give Tenant a written estimate (with breakdown by major expense components, prepared on a consistent basis) of the amount of Tenant's Share of Operating Expenses for the applicable Expense Recovery Period,. Tenant shall pay the estimated amounts to Landlord in equal monthly installments, in advance concurrently with payments of Basic Rent. If Landlord has not furnished its written estimate for any Expense Recovery Period by the time set forth above, Tenant shall continue to pay monthly the estimated Tenant's Share of Operating Expenses in effect during the prior Expense Recovery Period; if any; provided that when the new estimate is delivered to Tenant, Tenant shall, at the next monthly payment date, pay any accrued estimated Tenant's Share of Operating Expenses based upon the new estimate. For purposes hereof, "EXPENSE RECOVERY PERIOD" shall mean every twelve month period during the Term (or portion thereof for the first and last lease years) commencing July 1 and ending June 30, provided that Landlord shall have the right to change the date on which an Expense Recovery Period commences in which event appropriate reasonable adjustments shall be made to Tenant's Share of Operating Expenses so that the amount payable by Tenant shall not increase as a result of such change.

(c) Within one hundred twenty (120) days after the end of each Expense Recovery Period, Landlord shall furnish to Tenant a statement showing in reasonable detail (i.e., by breakdown of major expense components prepared on a consistent basis) the actual or prorated Tenant's Share of Operating Expenses incurred by Landlord during the period, and the parties shall within thirty (30) days thereafter make any payment or allowance necessary to adjust Tenant's estimated payments of Tenant's Share of Operating Expenses, if any, to the actual Tenant's Share of Operating Expenses as shown by the annual statement. Any delay or failure by Landlord in delivering any statement hereunder shall not constitute a waiver of Landlord's right to require Tenant to pay Tenant's Share of Operating Expenses pursuant hereto; provided, however, any delay by Landlord in billing Tenant for any Operating Expenses of more than six (6) months following the expiration of the Review Period (as defined below) shall be deemed a waiver of Landlord's right to require payment of Tenant's obligations for any such Operating Expenses. Any amount due Tenant shall be credited against installments next coming due under this Section 4.2, and/or against any installments of Basic Rent next coming due under Section 4.1, unless this Lease shall have terminated, in which case Landlord shall pay Tenant the amount due within thirty (30) days, and any deficiency shall be paid by Tenant within thirty (30) days following receipt of an itemized invoice covering such payment. Should Tenant fail to object in writing to Landlord's determination of Tenant's Share of Operating Expenses within two (2) years

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following delivery of Landlord's expense statement ("REVIEW PERIOD"), Landlord's determination of Tenant's Share of Operating Expenses for the applicable Expense Recovery Period shall be conclusive and binding on Tenant for all purposes and any future claims to the contrary shall be barred.

If Tenant disputes the Operating Expense reconciliation, Tenant shall have the right to meet with Landlord and/or its property manager to inspect Landlord's records with respect to such disputed items. If after such meeting and inspection the parties are unable to resolve the dispute, Tenant may cause a certified public accountant or a real estate professional who specializes in lease audits, engaged on a non-contingency fee basis, to audit Operating Expenses by inspecting Landlord's general ledger of expenses not more than once during any Expense Recovery Period. However, to the extent that insurance premiums or any other component of Operating Expenses is determined by Landlord on the basis of an internal allocation of costs utilizing information Landlord in good faith deems proprietary, such expense component shall not be subject to audit so long as it does not exceed the amount per square foot typically incurred by landlords of other first class business parks in Orange County, California. Tenant shall give notice to Landlord of Tenant's intent to audit within the Review Period. Such audit shall be conducted at a mutually agreeable time during normal business hours at the office of Landlord or its management agent where such accounts are maintained. If after such audit is completed Tenant still desires to contest the Operating Expenses for such period, then the results of the audit shall be provided to Landlord. If such audit reveals that Landlord has overcharged Tenant, then within thirty (30) days after the results of such audit are made available to Landlord but subject to Landlord's right to contest the audit result as provided below, Landlord shall reimburse Tenant the amount of such overcharge with interest thereon at the Interest Rate. If the audit reveals that Tenant was undercharged, then within thirty (30) days after the results of the audit are made available to Tenant, Tenant shall reimburse Landlord the amount of such undercharge with interest thereon at the Interest Rate. If Tenant's audit determines that Tenant's Share of the actual Operating Expenses have been overstated by more than five percent (5%), then subject to Landlord's right to review and/or contest the audit results, Landlord shall reimburse Tenant for the reasonable out-of-pocket costs of such audit. Tenant's rent shall be appropriately adjusted to reflect any overstatement in Operating Expenses. In the event of a dispute between Landlord and Tenant regarding such audit, such dispute shall be submitted and resolved by binding arbitration pursuant to Section 22.7 below. All of the information obtained by Tenant and/or its auditor in connection with such audit, as well as any compromise, settlement, or adjustment reached between Landlord and Tenant as a result thereof, shall be held in strict confidence and, except as may be required pursuant to litigation, shall not be disclosed to any third party, directly or indirectly, by Tenant or its auditor or any of their officers, agents or employees. Landlord may require Tenant's auditor to execute a separate reasonable confidentiality agreement affirming the foregoing as a condition precedent to any audit. The payment by Tenant of any amounts pursuant to this
Section shall not preclude Tenant from questioning the correctness of any statement provided by Landlord at any time during a Review Period, but the failure of Tenant to object thereto prior to the expiration of the Review Period shall be conclusively deemed Tenant's approval of such statement.

(d) Even though this Lease has terminated and the Tenant has vacated the Premises, when the final determination is made of Tenant's Share of Operating Expenses for the Expense Recovery Period in which this Lease terminates, Tenant shall within thirty (30) days of written notice pay the entire increase over the estimated Tenant's Share of Operating Expenses already paid. Conversely, any overpayment by Tenant shall be rebated by Landlord to Tenant not later than thirty (30) days after such final determination. The provisions of (c) above shall also apply to payments due under this paragraph.

(e) If, at any time during any Expense Recovery Period, any one or more of the Operating Expenses are increased to a rate(s) or amount(s) in excess of the rate(s) or amount(s) used in calculating the estimated Tenant's Share of Operating Expenses for the year, then the estimate of Tenant's Share of Operating Expenses may be increased by written notice from Landlord for the month in which such rate(s) or amount(s) becomes effective and for all succeeding months by an amount equal to Tenant's Share of the increase. Landlord shall give Tenant written notice of the amount or estimated amount of the increase and the month in which the increase will become effective. Tenant shall pay the increase to Landlord as a part of Tenant's monthly payments of the estimated Tenant's Share of Operating Expenses as provided in Section 4.2(b), commencing with the month following Tenant's receipt of Landlord's notice. Notwithstanding the foregoing, Landlord shall only have the right to adjust the estimated expenses once in any Expense Recovery Period.

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(f) The term "OPERATING EXPENSES" shall mean and include all Site Costs, as defined in subsection (g), and Property Taxes, as defined in subsection (h).

(g) The term "SITE COSTS" shall include all expenses of operation, repair and maintenance of the Building(s) and the Site, including without limitation all appurtenant Common Areas (as defined in Section 6.2), and shall include the following charges by way of illustration but not limitation: water and sewer charges; subject to Section 10.2(b) below, insurance premiums or reasonable premium equivalents should Landlord elect to self-insure all or any portion of any risk that Landlord is authorized to insure hereunder; license, permit, and inspection fees; heat; light; power; janitorial services to any interior Common Areas maintained by Landlord, if any; air conditioning; supplies; materials; equipment; tools; establishment of reasonable reserves for replacement and repair of the Building roof; the cost of any environmental consultant used by Landlord in connection with the Site; the cost of any capital expenditures but only to the extent of the amortized amount thereof over the useful life of such capital expenditures calculated at a market cost of funds, all as reasonably determined by Landlord, for each such year of useful life during the Term, provided that such capital expenditures shall be limited to (i) improvements which increase or enhance building security and/or safety (such as lighting, life/fire safety systems, etc.), (ii) repairs or replacements of the Building Structure, Building Systems or Common Areas as required for functional (and not esthetic) reasons, (iii) alterations or improvements required to comply with any law or change in law first becoming effective as to any Building after the date hereof; and (iv) expenditures incurred as a cost or labor saving measure or to affect other economies in the operation or maintenance of the Buildings or Project (in which event the entire amount of any resulting cost saving may be included in Project Costs during the applicable Expense Recovery Period but in no event in excess of the total cost of the capital expenditure) (collectively, "PERMITTED CAPITAL ITEMS"); costs associated with the maintenance of an air conditioning, heating and ventilation service agreement (except with respect to any Buildings for which Tenant is required hereunder to provide such maintenance), and maintenance of an intrabuilding network cable service agreement for any intrabuilding network cable telecommunications lines within the Buildings, and any other installation, maintenance, repair and replacement costs associated with such lines; labor; reasonably allocated wages and salaries, fringe benefits, and payroll taxes for administrative and other personnel (not higher than Building or Project Manager) directly applicable to the Building(s) and/or Site, including both Landlord's personnel and outside personnel; any expense incurred pursuant to Sections 6.1, 6.2, 6.4, 7.2, and 10.2; and a competitive management fee for the professional operation of the Site. ***. It is understood and agreed that Site Costs may include competitive charges for direct services provided by any subsidiary or division of Landlord.

(h) The term "PROPERTY TAXES" as used herein shall include the following: (i) all real estate taxes or personal property taxes which are levied on the Building and/or the Site and any improvements, fixtures and equipment and other property of Landlord located in the Buildings and/or the Site, as such property taxes may be reassessed from time to time; and (ii) other taxes, charges and assessments which are levied with respect to this Lease or to the Buildings and/or the Site, and any improvements, fixtures and equipment and other property of Landlord located in the Buildings and/or the Site, except that general net income, franchise, capital stock, succession, transfer, gift, estate or inheritance taxes imposed against Landlord, (iii) all assessments and fees for public improvements, services, and facilities and impacts thereon, including without limitation arising out of any Community Facilities Districts, "Mello Roos" districts, similar assessment districts, and any traffic impact mitigation assessments or fees; (iv) any tax, surcharge or assessment which shall be levied in addition to or in lieu of real estate or personal property taxes, other than taxes covered by Article VIII; (v) taxes based on the receipt of rent (including gross receipts or sales taxes applicable to the receipt of rent); and (vi) costs and expenses incurred in contesting the amount or validity of any Property Tax by appropriate proceedings. General net income or franchise taxes imposed against Landlord shall be excluded from Property Taxes. ***.

(i) Notwithstanding the provisions of this Section 4.2 to the contrary, Operating Expenses shall not include any cost or expense identified as the responsibility of Landlord and not an Operating Expense or a Site Cost by the express terms of this Lease, and shall not include any of the following:

(i) Any ground lease rental;

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(ii) Costs which are deemed capital expenditures under generally accepted accounting principles consistently applied or otherwise
("CAPITAL ITEMS"), except for Permitted Capital Items set forth in (g) above and any other items specifically authorized herein;

(iii) Rentals for items (except when needed in connection with normal repairs and maintenance of permanent systems) which if purchased, rather than rented, would constitute a Capital Item which is specifically excluded in (ii) above (excluding, however, equipment not affixed to the Building which is used in providing janitorial or similar services);

(iv) Costs incurred for the repair of any casualty damage to the Buildings and/or the Site if and to the extent that such repair costs exceed Two Hundred Fifty Thousand Dollars ($250,000) per occurrence;

(v) Costs, including permit, license and inspection costs, incurred with respect to the installation of tenants' or other occupants' improvements in the Site or incurred in renovating or otherwise improving, decorating, painting or redecorating vacant space for tenants or other occupants of the Site;

(vi) Depreciation, amortization and interest payments, except as provided herein and except on materials, tools, supplies and vendor-type equipment purchased by Landlord to enable Landlord to supply services Landlord might otherwise contract for with a third party where such depreciation, amortization and interest payments would otherwise have been included in the charge for such third party's services, all as determined in accordance with generally accepted accounting principles, consistently applied, and when depreciation or amortization is permitted or required, the item shall be amortized over its reasonably anticipated useful life;

(vii) Marketing costs including, without limitation, leasing commissions, attorneys' fees in connection with the negotiation and preparation of letters, deal memos, letters of intent, leases, subleases and/or assignments, space planning costs, and other costs and expenses incurred in connection with lease, sublease and/or assignment negotiations and transactions with present or prospective tenants or other occupants of the Site;

(viii) Expenses in connection with services or other benefits which are not offered to Tenant or for which Tenant is charged for directly but which are provided to another tenant or occupant of the Site;

(ix) Costs incurred by Landlord due to the violation of the terms and conditions of any lease of space in the Site;

(x) Overhead and profit increment paid to Landlord or to subsidiaries or affiliates of Landlord for goods and/or services in or to the Site to the extent the same exceeds the costs of such goods and/or services rendered by unaffiliated third parties on a competitive basis;

(xi) Interest, principal, points and fees on debts or amortization on any mortgage or mortgages or any other debt (except as permitted in (ii) above);

(xii) Landlord's general corporate overhead and general and administrative expenses;

(xiii) Any compensation paid to clerks, attendants or other persons in commercial concessions operated by Landlord;

(xiv) Rentals and other related expenses incurred in leasing HVAC systems, elevators or other equipment ordinarily considered to be Capital Items, except for (1) expenses in

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connection with making minor repairs on or keeping Building Systems in operation while minor repairs are being made, and (2) costs of equipment not affixed to the Buildings which is used in providing janitorial or similar services;

(xv) Advertising and promotional expenditures, and costs of signs in or on the Buildings and/or the Site identifying the owner of the Site or other tenants' signs;

(xvi) Electric power costs for which any tenant directly contracts with the local public service company or of which any tenant is separately metered or submetered and pays Landlord directly; provided, however, that if any tenant in any Building contracts directly for electric power service or is separately metered or submetered during any portion of the relevant period, the total electric power costs for such Building shall be "grossed up" to reflect what those costs would have been had each tenant in such Building used the Building-standard amount of electric power;

(xvii) Services and utilities provided, taxes attributable to, and costs incurred in connection with the operation of the retail and restaurant operations in the Site;

(xviii) Costs incurred in connection with upgrading the Buildings and/or the Site to comply with disability, life, fire and safety codes, ordinances, statutes, or other laws in effect prior to the commencement of construction of the Shell and Core Improvements, including, without limitation, the ADA, including penalties or damages incurred due to such non-compliance;

(xix) Tax penalties incurred as a result of the failure to make payments and/or to file any tax or informational returns when due;

(xx) Costs for which Landlord has been compensated by a management fee;

(xxi) Costs arising from the negligence or fault of other tenants or Landlord or its agents, or any vendors, contractors, or providers of materials or services selected, hired or engaged by Landlord or its agents;

(xxii) Notwithstanding any contrary provision of the Lease, including, without limitation, any provision relating to capital expenditures, any and all costs arising from the presence of those items set forth on Landlord's Disclosure attached to this Lease as Exhibit C and made a part hereof and hazardous materials or substances (as defined by applicable laws in effect on the date the Lease is executed) in or about the Premises, the Building or the Site including, without limitation, hazardous substances in the ground water or soil, not placed in the Premises, the Building or the Site by Tenant, its agents, contractors, employees, invitees or subtenants;

(xxiii) Costs arising from charitable or political contributions;

(xxiv) Costs arising from defects in the base, shell or core of the Building(s) or improvements installed by Landlord or repair thereof, exclusive of normal wear and tear and ordinary repair items;

(xxv) Costs for the acquisition of (as opposed to the maintenance of) sculpture, paintings or other objects of art;

(xxvi) Costs (including in connection therewith all attorneys' fees and costs of settlement judgments and payments in lieu thereof) arising from claims, disputes or potential disputes in connection with potential or actual claims, litigation or arbitrations pertaining to Landlord and/or the Building(s) and/or the Site;

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(xxvii) Costs associated with the operation of the business of the entity which constitutes Landlord as the same are distinguished from the costs of operation of the Site, including corporate accounting and legal matters, costs of defending any lawsuits with any mortgagee (except as the actions of Tenant may be in issue), costs of selling, syndicating, financing, mortgaging or hypothecating any of Landlord's interest in the Site, costs of any disputes between Landlord and its employees (if any) not engaged in Building operation, disputes of Landlord with Building management, or outside fees paid in connection with disputes with other tenants;

(xxviii) Costs of any initial "tap fees" or any initial sewer or water connection fees for the Site;

(xxix) Costs incurred in connection with any environmental clean-up, response action, or remediation on, in, under or about the Premises or the Building(s) or the Site except as may be caused by Tenant or any of its subtenants, including but not limited to, costs and expenses associated with the defense, administration, settlement, monitoring or management thereof;

(xxx) Any expenses incurred for use by other than Tenant or its subtenants of any portions of the Site to accommodate events including, but not limited to shows, promotions, kiosks, displays, filming, photography, private events or parties, ceremonies, and advertising beyond the normal expenses otherwise attributable to providing Building services, such as lighting and HVAC to such public portions of the Building and/or the Site in normal Building operations during standard Building hours of operation;

(xxxi) Any entertainment, dining or travel expenses for any purpose;

(xxxii) Any flowers, gifts, balloons, etc. provided to any entity whatsoever, to include, but not limited to, Tenant, other tenants, employees, vendors, contractors, prospective tenants and agents;

(xxxiii) Any "validated" parking for any person or entity;

(xxxiv) Any "finders fees", brokerage commissions, job placement costs or job advertising cost;

(xxxv) The cost of any magazine, newspaper, trade or other subscriptions;

(xxxvi) The cost of any training or incentive programs, other than for tenant life safety information services;

(xxxvii) The cost of any "tenant relations" parties, events or promotion not consented to by an authorized representative of Tenant in writing;

(xxxviii) "In-house" legal and/or accounting fees;

(xxxix) Reserves of any kind or for any purpose except as specifically authorized herein; and

(xl) Any Operating Expenses or Property Taxes applicable to the portion of the Project located outside the Site, except as otherwise permitted by this Lease.

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(j) In the event any facilities, services or utilities used in connection with the Building(s) and/or the Site are provided from another location owned or operated by Landlord or vice versa, the costs incurred by Landlord in connection therewith shall be allocated to Operating Expenses by Landlord on a reasonably equitable basis.

(k) Landlord further agrees that if and to the extent Tenant is leasing entire Buildings on a net basis, no gross up provision or calculation shall be included or made in connection with this Lease. Landlord agrees that (i) Landlord will not collect or be entitled to collect Operating Expenses from Tenant in an amount which is in excess of one hundred percent (100%) of the Operating Expenses actually paid by Landlord in connection with the operation of the Buildings, and (ii) except for Landlord's management fee, Landlord shall make no profit from Landlord's collections of Operating Expenses. All assessments and premiums which are not specifically charged to Tenant because of what Tenant has done, which can be paid by Landlord in installments, shall be paid by Landlord in the maximum number of installments permitted by law and not included as Operating Expenses except in the year in which the assessment or premium installment is actually paid; provided, however, that if the prevailing practice in Comparable Buildings is to pay such assessments or premiums on an earlier basis, and Landlord pays on such basis, such assessments or premiums shall be included in Operating Expenses as paid by Landlord. Landlord shall not include any imputed interest (except for interest actually paid) on such assessments or premiums in its computation of Operating Expenses.

(l) For the purpose of payment of Operating Expenses, to the extent Landlord pays Property Taxes less frequently than monthly, the cost of same shall not be included in Operating Expenses but shall be separately calculated, with Tenant being obligated to pay Tenant's Share of same on the later of five
(5) business days after receipt of an invoice from Landlord or ten (10) days prior to the date Landlord is obligated to pay same to the taxing authority.

ARTICLE V. USES

SECTION 5.1. USE. Landlord represents to Tenant that Tenant may use the Premises for general business office operations without violating any of the zoning laws applicable to the Building and/or the Site. Tenant shall use the Premises only for the purposes stated in Item 3 of the Basic Lease Provisions, all in accordance with applicable laws and restrictions and pursuant to approvals to be obtained by Tenant from all relevant and required governmental agencies and authorities. Tenant, at its expense, shall procure, maintain and make available for Landlord's inspection throughout the Term, all governmental approvals, licenses and permits required for the proper and lawful conduct of Tenant's permitted use of the Premises. Tenant shall not do or permit anything to be done in or about the Premises which will in any way interfere with the normal and customary business operations of other occupants of the Project, or use or allow the Premises to be used for any unlawful purpose, nor shall Tenant permit any nuisance or commit any waste in the Premises or the Site. Tenant shall not perform any work or conduct any business whatsoever in the Project other than within the Site. Tenant shall not do or permit to be done anything which will invalidate or increase the cost of any insurance policy(ies) covering the Buildings, the Project and/or their contents (unless Tenant elects to pay such increased costs), and shall comply with all applicable insurance underwriters rules. Tenant shall comply at its expense (except as specifically provided to the contrary in this Lease) with all present and future laws, ordinances, restrictions, regulations, orders, rules and requirements of all governmental authorities that pertain to Tenant or its use of the Premises, including without limitation all federal and state occupational health and safety requirements, whether or not Tenant's compliance will necessitate expenditures or interfere with its use and enjoyment of the Premises. Tenant shall comply at its expense with the pertinent provisions of the Ground Leases (and the Development Plan referenced therein) and with all present and future covenants, conditions, easements or restrictions now encumbering the Building(s) and/or Site. Tenant shall promptly upon demand reimburse Landlord for any additional insurance premium charged by reason of Tenant's failure to comply with the provisions of this Section, and shall indemnify Landlord from any liability and/or expense resulting from Tenant's noncompliance. Notwithstanding the foregoing or anything in this Lease to the contrary, Tenant shall not be required to make, and Landlord shall make, all repairs to, modifications of, or additions to the Building Structure and/or the exterior Common Areas of the Site except and to the extent required because of

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Alterations made by Tenant or Tenant's use of all or a portion of the Premises for other than normal and customary business office operations.

SECTION 5.2. SIGNS. Tenant shall have the exclusive right on each full Building leased by Tenant to install and maintain Building "top" and "eyebrow" signage for Tenant's name and graphics to the extent permitted by the Signage Criteria (defined below). For so long as Tenant leases at least four (4) full Buildings in the Site, Tenant shall also have the exclusive right to install and maintain at least one (1) monument sign at the entrance to the Site (it being understood that Tenant shall be entitled to two (2) entrance monument signs for so long as Tenant is leasing at least seven (7) full Buildings in the Site), and one (1) monument sign for Tenant's name and graphics at the south end of the Site (facing the 73 Freeway); provided, however, that Tenant's right to the monument signage facing the 73 Freeway shall be conditioned upon Tenant's continued leasing of at least two (2) of the South Buildings in their entirety, it being further understood that such monument shall be shared (with Tenant being at the top of such sign and no one else having a larger sign on the monument than Tenant) unless Tenant continues to lease all of the South Buildings. For so long as Tenant leases all Buildings within the Site, such Building and monument signage for the Site shall be exclusive to Tenant. All such exterior signage shall be in locations approved by Landlord, and shall be subject to Landlord's right of prior approval that such exterior signage is in compliance with the Signage Criteria. Except as provided in the foregoing, Tenant shall not have the right to maintain signs in any location on or about the Building(s) or the Site and shall not place or erect any signs that are visible from the streets surrounding the Site. The size, design, graphics, material, style, color and other physical aspects of any permitted sign shall be subject to Landlord's written determination prior to installation that such signage has been approved by the Ground Lessor and is in compliance with Landlord's current signage program for the Site (attached as Exhibit W to this Lease) and approved by the City of Irvine ("SIGNAGE CRITERIA"). Prior to placing or erecting any such signs, Tenant shall obtain and deliver to Landlord a copy of any applicable municipal or other governmental permits and approvals and comply with any applicable insurance requirements for such signage. Tenant shall be responsible for the cost of any permitted sign, including the fabrication, installation, maintenance and removal thereof and the cost of any permits therefor. If Tenant fails to maintain its sign in good condition, or if Tenant fails to remove same upon termination of this Lease and repair and restore any damage caused by the sign or its removal and such failure continues for ten (10) business days after notice from Landlord to Tenant of such failure, Landlord may do so at Tenant's expense. Landlord shall have the right to temporarily remove any signs in connection with any repairs or maintenance in or upon the Building(s). The term "sign" as used in this Section shall include all signs, designs, monuments, displays, advertising materials, logos, banners, projected images, pennants, decals, pictures, notices, lettering, numerals or graphics.

For so long as Tenant leases all Buildings within the Site, no other sign shall be placed in, on or around the Building(s) and/or the Site (except for the Building directory) which identifies any person, company or entity other than Tenant. Under no circumstances shall the Site be named after or referred to utilizing the name of anyone other than Tenant. Landlord further agrees that it will not grant any tenant or any one else signage on the monument sign which is larger in size or higher than Tenant's signage. Tenant's exterior signage rights hereunder shall be personal to the original Tenant named herein and an Affiliate thereof, except that Landlord shall authorize a transfer of such rights to a permitted assignee or subtenant (regardless of whether Tenant is then leasing all Buildings within the Site) if Landlord reasonably determines that such transfer would not impair the first class nature of the Project.

SECTION 5.3. HAZARDOUS MATERIALS.

(a) For purposes of this Lease, the term "HAZARDOUS MATERIALS" includes (i) any "hazardous material" as defined in Section 25501(o) of the California Health and Safety Code, (ii) any toxic or hazardous materials, substances, wastes or materials as defined pursuant to any other applicable state, federal or local law or regulation, and (iii) any other substance or matter which results in liability to any person or entity from exposure to such substance or matter under any statutory or common law theory.

(b) Tenant shall not cause or permit any Hazardous Materials to be brought upon, stored, used, generated, released or disposed of on, under, from or about the Premises (including without limitation the soil and groundwater thereunder) without the prior written consent of Landlord, which consent may be given or withheld in Landlord's sole and absolute discretion. Notwithstanding the foregoing, Tenant shall have the right, without

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obtaining prior written consent of Landlord, to utilize within the Premises standard office products that may contain Hazardous Materials (such as photocopy toner, "White Out", and the like), provided however, that (i) Tenant shall maintain such products in their original retail packaging, shall follow all instructions on such packaging with respect to the storage, use and disposal of such products, and shall otherwise comply with all applicable laws with respect to such products, and (ii) all of the other terms and provisions of this Section 5.3 shall apply with respect to Tenant's storage, use and disposal of all such products. Landlord may, in its reasonable discretion, place such conditions as Landlord deems appropriate with respect to Tenant's use of any such Hazardous Materials, and may further require that Tenant demonstrate that any such Hazardous Materials are necessary or useful to Tenant's business and will be generated, stored, used and disposed of in a manner that complies with all applicable laws and regulations pertaining thereto and with good business practices. Notwithstanding the foregoing, Tenant may use such materials as are necessary for Broadcom's research and development operations as long as it complies with all applicable laws.

(c) Prior to the execution of this Lease, Tenant shall complete, execute and deliver to Landlord an Environmental Questionnaire and Disclosure Statement (the "ENVIRONMENTAL QUESTIONNAIRE") in the form of Exhibit B attached hereto. The completed Environmental Questionnaire shall be deemed incorporated into this Lease for all purposes, and Landlord shall be entitled to rely fully on the information contained therein. On each anniversary of the Commencement Date until the expiration or sooner termination of this Lease, Tenant shall disclose to Landlord in writing the names and amounts of all Hazardous Materials which were stored, generated, used, released and/or disposed of on, under or about the Premises for the twelve-month period prior thereto, and which Tenant desires to store, generate, use, release and/or dispose of on, under or about the Premises for the succeeding twelve-month period. In addition, to the extent Tenant is permitted to utilize Hazardous Materials upon the Premises, Tenant shall promptly provide Landlord with complete and legible copies of all the following environmental documents relating thereto: reports filed pursuant to any self-reporting requirements; permit applications, permits, monitoring reports, emergency response or action plans, workplace exposure and community exposure warnings or notices and all other reports, disclosures, plans or documents (even those which may be characterized as confidential) relating to water discharges, air pollution, waste generation or disposal, and underground storage tanks for Hazardous Materials; orders, reports, notices, listings and correspondence (even those which may be considered confidential) of or concerning the release, investigation of, compliance, cleanup, remedial and corrective actions, and abatement of Hazardous Materials; and all complaints, pleadings and other legal documents filed by or against Tenant related to Tenant's use, handling, storage, release and/or disposal of Hazardous Materials.

(d) Landlord and its agents shall have the right, but not the obligation, to inspect, sample and/or monitor the Premises and/or the soil or groundwater thereunder at any time to determine whether Tenant is complying with the terms of this Section 5.3, and in connection therewith Tenant shall provide Landlord with reasonable access to all facilities, records and personnel related thereto, provided Landlord shall provide Tenant with reasonable prior notice. If Tenant is not in compliance with any of the provisions of this Section 5.3, or in the event of a release of any Hazardous Material on, under or about the Premises caused or permitted by Tenant, its agents, employees, contractors, licensees or invitees, Landlord and its agents shall have the right, but not the obligation, without limitation upon any of Landlord's other rights and remedies under this Lease, to immediately enter upon the Premises without notice in the case of emergency, and otherwise on reasonable prior notice, and to discharge Tenant's obligations under this Section 5.3 at Tenant's expense, including without limitation the taking of emergency or long-term remedial action. Landlord and its agents shall endeavor to minimize interference with Tenant's business in connection therewith, but shall not be liable for any such interference. In addition, Landlord, at Tenant's expense, shall have the right, but not the obligation, to join and participate in any legal proceedings or actions initiated in connection with any claims arising out of the storage, generation, use, release and/or disposal by Tenant or its agents, employees, contractors, licensees or invitees of Hazardous Materials on, under, from or about the Premises.

(e) If the presence of any Hazardous Materials on, under, from or about the Premises or the Site caused by Tenant or its agents, employees, contractors, licensees or invitees results in (i) injury to any person, (ii) injury to or any contamination of the Premises or the Site, or (iii) injury to or contamination of any real or personal property wherever situated, Tenant, at its expense, shall promptly take all actions necessary to return the Premises and the Site and any other affected real or personal property owned by Landlord to the condition existing

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prior to the introduction of such Hazardous Materials and to remedy or repair any such injury or contamination, including without limitation, any cleanup, remediation, removal, disposal, neutralization or other treatment of any such Hazardous Materials. Notwithstanding the foregoing, Tenant shall not, without Landlord's prior written consent, which consent shall not be unreasonably withheld, take any remedial action in response to the presence of any Hazardous Materials on, from, under or about the Premises or the Site or any other affected real or personal property owned by Landlord or enter into any similar agreement, consent, decree or other compromise with any governmental agency with respect to any Hazardous Materials claims; provided however, Landlord's prior written consent shall not be necessary in the event that the presence of Hazardous Materials on, under or about the Premises or the Site or any other affected real or personal property owned by Landlord (i) imposes an immediate threat to the health, safety or welfare of any individual and (ii) is of such a nature that an immediate remedial response is necessary and it is not possible to obtain Landlord's consent before taking such action. To the fullest extent permitted by law, Tenant shall indemnify, hold harmless, protect and defend (with attorneys reasonably acceptable to Landlord) Landlord and any successors to all or any portion of Landlord's interest in the Premises and the Site and any other real or personal property owned by Landlord from and against any and all liabilities, losses, damages, diminution in value, judgments, fines, demands, claims, recoveries, deficiencies, costs and expenses (including without limitation attorneys' fees, court costs and other professional expenses), whether foreseeable or unforeseeable, arising directly or indirectly out of the use, generation, storage, treatment, release, on- or off-site disposal or transportation of Hazardous Materials on, into, from, under or about the Premises, the Buildings or the Site and any other real or personal property owned by Landlord caused by Tenant, its agents, employees, contractors, licensees or invitees. Such indemnity obligation shall specifically include, without limitation, the cost of any required or necessary repair, restoration, cleanup or detoxification of the Premises, the Building(s) and the Site and any other real or personal property owned by Landlord, the preparation of any closure or other required plans, whether or not such action is required or necessary during the Term or after the expiration of this Lease, and any loss of rental due to the inability to lease the Premises or any portion of the Building or Project as a result of such Hazardous Material or remediation thereof. If Landlord at any time discovers that Tenant or its agents, employees, contractors, licensees or invitees may have caused or permitted the release of a Hazardous Material on, under, from or about the Premises, the Building(s) or the Site or any other real or personal property owned by Landlord, Tenant shall, at Landlord's request, immediately prepare and submit to Landlord a comprehensive plan, subject to Landlord's approval, specifying the actions to be taken by Tenant to return the Premises, the Building(s) or the Project or any other real or personal property owned by Landlord to the condition existing prior to the introduction of such Hazardous Materials. Upon Landlord's approval of such cleanup plan, Tenant shall, at its expense, and without limitation of any rights and remedies of Landlord under this Lease or at law or in equity, immediately implement such plan and proceed to cleanup such Hazardous Materials in accordance with all applicable laws and as required by such plan and this Lease. The provisions of this Section 5.3(e) shall expressly survive the expiration or sooner termination of this Lease.

(f) Landlord hereby discloses to Tenant, and Tenant hereby acknowledges, certain facts relating to Hazardous Materials at the Site known by Landlord to exist as of the date of this Lease, as more particularly described in Exhibit C attached hereto. Tenant shall have no liability or responsibility with respect to the Hazardous Materials facts described in Exhibit C, nor with respect to any Hazardous Materials which Tenant proves were not caused or placed on the Premises by Tenant, its agents, employees, contractors, licensees or invitees. Notwithstanding the preceding two sentences, Tenant agrees to notify its agents, employees, contractors, licensees, and invitees of any exposure or potential exposure to Hazardous Materials at the Premises that Landlord brings to Tenant's attention. Landlord hereby represents and warrants that to the best of Landlord's knowledge, other than as set forth in Exhibit C, as of the date of this Lease, no other Hazardous Materials are present in, on or around the Building or the Site. Landlord agrees to indemnify and hold harmless Tenant and Tenant's employees, agents, directors, officers and partners from claims arising from the breach of the warranty contained herein. Nothing in this Section or this Lease shall require Tenant to indemnify Landlord with respect to any Hazardous Materials which were on or in the Premises, the Building or the Site prior to the date this Lease was executed or which were placed on or in the Premises, the Building or the Site by anyone other than Tenant or Tenant's agents, contractors, subtenants or representatives.

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ARTICLE VI. COMMON AREAS; SERVICES

SECTION 6.1. UTILITIES AND SERVICES. Tenant shall be responsible for and shall pay promptly, directly to the appropriate supplier, all charges for water, gas, electricity, sewer, heat, light, power, telephone, telecommunications service, refuse pickup, janitorial service, interior landscape maintenance, interior and exterior pest control, interior and exterior window washing, security services, exterior plumbing (back flows testing), and all other utilities, materials and services furnished directly to Tenant or the Premises or used by Tenant in, on or about the Premises during the Term, together with any taxes thereon. Tenant shall provide whatever janitorial and security services it deems appropriate for the Site and the Buildings and Landlord shall have no responsibility for and shall not provide janitorial or security services to the Site or the Buildings unless requested to do so by Tenant. If any utilities or services are not separately metered or assessed to Tenant, Landlord shall make a reasonable determination of Tenant's proportionate share of the Actual Cost (as hereinafter defined) of such utilities and services, and Tenant shall pay such amount to Landlord, as an item of additional rent, within thirty
(30) days after receipt of Landlord's statement or invoice therefor. For purposes of this Lease, the term "Actual Cost" shall mean an amount equal to actual incremental cost to Landlord to provide the applicable service or utility to Tenant, without markup for profit. Alternatively, Landlord may elect to include such cost in the definition of Site Costs in which event Tenant shall pay Tenant's proportionate share of such costs in the manner set forth in
Section 4.2. *** Landlord shall not be liable for damages or otherwise for any failure or interruption of any utility or other service furnished to the Premises, and no such failure or interruption shall be deemed an eviction or entitle Tenant to terminate this Lease or withhold or abate any rent due hereunder except as otherwise provided in this Lease. Landlord shall at all reasonable times have free access to the Building and Premises to install, maintain, repair, replace or remove all electrical and mechanical installations of Landlord; provided, however, that if such electrical and/or mechanical installations are located in the Premises, Landlord shall provide Tenant with reasonable prior notice of this intent to access same and shall follow Tenant's reasonable instructions as to the time and manner such work is to be performed so as to minimize disruption to Tenant's business operations.

Notwithstanding the foregoing, if for more than five (5) consecutive business days following written notice to Landlord (the "Eligibility Period"),
(a) there is no HVAC or electricity service to all or a portion of the Premises, or such an interruption of other essential utilities and building services, such as fire protection or water, (b) there is any repair, maintenance or alteration performed by Landlord, and/or (c) there is any failure by Landlord to provide Tenant with access to the Premises or the parking areas, so that Tenant is prevented from using and does not use all or a portion of the Premises, then provided such interruption of services is not attributable to the fault or neglect of Tenant, its agents, employees, contractors or subtenants or the failure by Tenant to fulfill its responsibilities hereunder (taking into account that Tenant shall, except as otherwise provided herein, be responsible for the maintenance and repair of Building Systems), Tenant's rent (inclusive of Basic rent and Operating Expenses) shall thereafter be abated in the same proportion that the Floor Area of the Premises rendered unusable from time to time bears to the total Floor Area of the Premises until the Premises are again usable by Tenant. However, in the event that Tenant is prevented from conducting, and does not conduct, its business in any portion of the Premises for a period of time in excess of the Eligibility Period, and the remaining portion of the Building is not sufficient to allow Tenant to effectively conduct its business therein, and if Tenant does not conduct its business from such remaining portion, then for such time after expiration of the Eligibility Period during which Tenant is so prevented from effectively conducting its business therein, the rent for the entire Building shall be abated; provided, however, if Tenant reoccupies and conducts its business from any portion of the Building during such period, the rent allocable to such reoccupied portion, based on the proportion that the rentable area of such reoccupied portion of the Building bears to the total rentable area of the Building, shall be payable by Tenant from the date such business operations commence. The foregoing provisions shall be Tenant's sole recourse and remedy in the event of such an interruption of services, and shall not apply in case of damage to, or destruction of, the Premises (which shall be governed by the provisions of Article XI of the Lease). Any disputes concerning the foregoing provisions shall be submitted to and resolved by arbitration pursuant to Section 22.7 of this Lease.

SECTION 6.2. OPERATION AND MAINTENANCE OF COMMON AREAS. During the Term, Landlord shall, except as provided in this Lease to the contrary, operate and maintain all exterior Common Areas within the Site in a first-class manner. The term "COMMON AREAS" shall mean all areas within the Site that are

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outside the footprint of each of the Buildings including, without limitation, parking areas and structures, driveways, sidewalks, landscaped and planted areas.

SECTION 6.3. USE OF COMMON AREAS. The occupancy by Tenant of the Premises shall include the use of the Common Areas in common with Landlord and with all others for whose convenience and use the Common Areas may be provided by Landlord, subject, however, to compliance with all rules and regulations as are prescribed from time to time by Landlord. All costs incurred by Landlord for the maintenance and operation of the Common Areas shall be included in Site Costs except to the extent any particular cost incurred is related to or associated with Tenant and can be charged directly to Tenant. Tenant shall keep the Common Areas clear of any obstruction or unauthorized use related to Tenant's operations or use of Premises, including without limitation, planters and furniture. Unless caused by the negligence or willful misconduct of Landlord or its agents, contractors or employees and not covered by Tenant's insurance, nothing in this Lease shall be deemed to impose liability upon Landlord for any damage to, or loss of the property of, Tenant. As long as Tenant's access to and/or use of the Premises is not adversely affected, Landlord may temporarily close any portion of the Common Areas for repairs, remodeling and/or alterations, to prevent a public dedication or the accrual of prescriptive rights, or for any other reason deemed sufficient by Landlord, without liability to Landlord. Notwithstanding the foregoing, Tenant shall have the right, at Tenant's sole cost and expense, to secure the entire or any portion of the perimeter of the Buildings with fencing and/or access gates, subject, however, to the prior right of review and approval of such fencing and/or access gates by Landlord, at its sole and absolute discretion, and to the approval of the City and, if required, the Ground Lessor. Conversely, Landlord shall obtain Tenant's prior reasonable approval of the kinds of any trees planted in the parking areas. For so long as Tenant leases all Buildings within the Site, except to the extent necessary for Landlord to perform its maintenance and repair obligations, Tenant may use the entire Site and the Common Areas in a reasonable manner for its own functions including employee parties, etc. so long as no nuisance is thereby created. For so long as Tenant leases all of the North Buildings and/or all of the South Buildings of the site, Tenant shall have the right to control the parking for those respective Buildings, and may install access control gating therefor approved by Landlord, the City and, if and to the extent required by the Ground Lease, the Ground Lessor. Tenant shall be solely responsible for the costs of installation, maintenance and removal of any access control or gating systems installed by Tenant.

SECTION 6.4. PARKING. At no cost to Tenant during the Lease Term, Tenant shall be entitled to the number of vehicle parking spaces set forth in Item 14 of the Basic Lease Provisions, which spaces shall be unreserved and unassigned (except that should Tenant lease all eight Buildings in the Site, Tenant may elect to make all or a portion of such spaces reserved so long as applicable code requirements are satisfied), on those portions of the Common Areas designated by Landlord for parking as depicted on Exhibit A. All parking spaces shall be used only for parking of vehicles no larger than full size passenger automobiles, sports utility vehicles, pickup trucks, carpool vehicles and vans. Tenant shall not permit or allow any vehicles that belong to or are controlled by Tenant or Tenant's employees, suppliers, shippers, customers or invitees to be loaded, unloaded or parked in areas other than those reasonably designated by Tenant for such activities. Parking within the Common Areas shall be limited to striped parking stalls, and no parking shall be permitted in any driveways, access ways or in any area which would prohibit or impede the free flow of traffic within the Common Areas. There shall be no parking of any vehicles for longer than a forty-eight (48) hour period except in situations where an employee leaves his or her car in the parking area while on a business trip, vacation or because of personal or business necessity, the parties hereby otherwise agreeing that the parking area is not to be used as a storage facility. Nothing contained in this Lease shall be deemed to create liability upon Landlord to Tenant for any damage to motor vehicles of visitors or employees, for any loss of property from within those motor vehicles, or for any injury to Tenant unless ultimately determined to be caused by the sole active negligence or willful misconduct of Landlord or its agents, contractors or employees. Landlord shall cause the parking area to be lighted at night and the landscaping will be subject to Tenant's consent, not to be unreasonably withheld, so as to reduce the likelihood that the trees and bushes will "shed" on vehicles. Landlord shall have the right to establish, and from time to time amend, and to enforce against all users all reasonable rules and regulations that Landlord may reasonably deem necessary and advisable for the proper and efficient operation and maintenance of parking within the Common Areas, taking into account that all parking on the Site will be dedicated exclusively for use by Tenant for so long as Tenant leases all eight Buildings. Landlord shall have the obligation to construct and maintain the parking areas in good condition and operate lighting facilities within the parking areas; and to do and perform such other acts in and to the parking areas and improvements therein as, in the use of good business judgment, Landlord shall determine to be advisable. Any person using the parking

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area shall observe all directional signs and arrows and any posted speed limits. In the event that Tenant fails at any time to lease all eight Buildings of the Site, Tenant understands that the parking areas shall be shared on a proportionate basis and Tenant shall not interfere with such proportionate use and enjoyment of the parking areas by other tenants. Parking areas shall be used only for parking vehicles, except that washing, waxing, cleaning or servicing of vehicles may be performed by or on behalf of Tenant as to vehicles that belong to Tenant or its employees in locations within the parking areas that will not interfere with the rights of other tenants of the Site, if any. Subject to the provisions of Section 10.5, Tenant shall be liable for any damage to the parking areas caused by Tenant or Tenant's employees, suppliers, shippers, customers or invitees, including without limitation damage from excess oil leakage. Tenant shall have no right to install any fixtures, equipment or personal property in the parking areas, except upon receipt of Landlord's consent, which will not be unreasonably withheld.

Notwithstanding anything to the contrary contained in the Lease, Tenant's parking privileges shall be available to Tenant twenty-four (24) hours per day, seven (7) days per week, every day of the year, in any location where Tenant shall maintain its parking privileges. Tenant's parking shall be non-tandem. As long as Tenant leases all eight (8) Buildings, Landlord shall "stripe" the parking lot as directed by Tenant so long as applicable code requirements are satisfied and Tenant shall have exclusive use of all parking on the Site. In addition, Tenant may load and unload trucks within the Site on any reasonable schedule determined by Tenant.

SECTION 6.5. CHANGES AND ADDITIONS BY LANDLORD. As long as Tenant's access to and/or use of the Premises and Buildings shall not be adversely affected, Landlord reserves the right to make alterations or additions to the Building(s) or the Site, or to the attendant fixtures and equipment. Landlord may at any time relocate or remove parking areas (so long as reasonable substitute parking is provided to Tenant) and other Common Areas, and may add buildings and areas to the Project from time to time as long as Tenant's use of the Project and Common Areas is not adversely affected; provided that for so long as Tenant leases all eight Buildings within the Site, Landlord shall not make changes or additions to the Buildings or parking areas of the Site except as may be required by law. Subject to the provision s of Sections 6.1 and 22.9 of this Lease, no change shall entitle Tenant to any abatement of rent or other claim against Landlord, provided that the change does not deprive Tenant of reasonable access to or use of the Premises.

SECTION 6.6. LICENSE FOR GENERATOR. At any time during the Term, Tenant shall have the right to install, in locations designated by Landlord, one (1) generator for each Building to supply back-up electrical power to the Premises in the event of a reduction or interruption in the supply of normal electrical power to the Premises. Tenant's rights under this Section 6.6 shall be subject to the following additional terms and provisions: (a) the exercise of Tenant's rights under this Section shall be subject to Tenant's compliance, at its sole cost and expense, with all laws and acquisition of all approvals and permits required, from applicable governmental authorities and, if required, from Ground Lessor; (b) the installation, maintenance, repair, monitoring and removal of the generators shall be at Tenant's sole cost and expense; (c) if installed in the parking areas, the space taken up by the generators shall be counted towards the parking spaces allocated to Tenant pursuant to Item 14 of the Basic Lease Provisions; (d) Tenant shall comply with all laws pertaining to the operation, maintenance and monitoring of generators, along with any additional reasonable requirements imposed by Landlord in connection therewith (including, without limitation, Landlord's prior approval of the screening of the generators and operational issues relating to the use of Hazardous Materials in connection therewith), and shall provide Landlord with evidence of such compliance in such form and at such times as Landlord requires; (e) Tenant shall maintain and repair the generators, and shall be responsible for all reporting, monitoring, clean up and remediation activities and costs pertaining to the generator (including, without limitation, the obligations under Section 5.3 of the Lease respecting Hazardous Materials used, stored and/or released from the generator);
(f) Tenant shall remove the generators and attendant screening at the expiration or earlier termination of the Lease in accordance with the provisions of Section 15.3 of the Lease (and shall obtain a customary closure certificate from applicable governmental authorities in connection with such removal), and shall repair any damage to the Building or Common Areas that occurs in connection with such removal. Landlord agrees to reasonably cooperate with Tenant, but at no additional cost or expense to Landlord, in obtaining any required permits and approvals for the generators.

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ARTICLE VII. MAINTAINING THE PREMISES

SECTION 7.1. TENANT'S MAINTENANCE AND REPAIR. Tenant at its sole expense shall make all repairs and replacements necessary to keep the Premises and the Building (excluding therefrom the Building Structure which is Landlord's responsibility hereunder but including all Building Systems) in good condition, excepting ordinary wear and tear and damage by casualty, including without limitation all interior glass, interior doors, door closures, hardware, fixtures, electrical, plumbing, fire life safety, access control and HVAC equipment and systems. Any damage or deterioration of the Premises shall not be deemed ordinary wear and tear if the same could have been prevented by good maintenance practices by Tenant. In maintaining the Building Systems and HVAC equipment, Tenant shall comply with the normal maintenance standards and specifications followed by Landlord (which maintenance standards may be reasonably enhanced by Landlord to reflect HVAC usage by Tenant that exceeds normal office standards) and with all requirements imposed by equipment manufacturers, and shall use qualified personnel and/or vendors to perform any maintenance or repair work. Tenant shall permit representatives of Landlord access on a regular basis to inspect the equipment and systems and Tenant's maintenance thereof. Should Landlord reasonably determine that Tenant is not properly maintaining the Building Systems and equipment, then subject to Tenant's right to contest such determination pursuant to Section 22.7 below, Landlord may elect thereafter to maintain same and the costs thereof shall be included within Operating Expenses. Landlord may also elect to undertake such maintenance responsibilities if the original Tenant named herein or an Affiliate thereof is no longer occupying at least fifty percent (50%) of the Premises. All repairs and replacements shall be at least equal in quality to the original work, shall be made only by a licensed contractor approved in writing in advance by Landlord (which approval shall not be unreasonably withheld) and shall be made only at the time or times reasonably approved by Landlord, taking into account that Tenant may be the sole occupant of each Building. Any contractor utilized by Tenant shall be subject to Landlord's reasonable requirements for contractors, as modified from time to time. Landlord may impose reasonable restrictions and requirements with respect to repairs, as provided in Section 7.3, and the provisions of Section 7.4 shall apply to all repairs. If Tenant fails to properly maintain and/or repair the Premises as herein provided following Landlord's notice and the expiration of the applicable cure period (or earlier if Landlord determines that such work must be performed prior to such time in order to avoid damage to the Premises or Building or other detriment), then Landlord may elect, but shall have no obligation, to perform any repair or maintenance required hereunder on behalf of Tenant and at Tenant's expense, and Tenant shall reimburse Landlord upon demand for all costs incurred upon submission of an invoice.

SECTION 7.2. LANDLORD'S MAINTENANCE AND REPAIR. Subject to Sections 6.1 and 7.1 and Article XI, Landlord shall provide service, maintenance and repair with respect to the Building Structure, including but not limited to the roof, foundations, and footings, Common Areas, exterior lighting, and the exterior surfaces of the exterior walls of the Building (including exterior glass), except that Tenant at its expense shall make all repairs which Landlord deems reasonably necessary as a result of the act or negligence of Tenant, its agents, employees, invitees, subtenants or contractors; provided, however, that Tenant shall be entitled to reimbursement for the cost of any such repairs to the extent the costs of such repairs is covered by insurance carried (or required to be carried) by Landlord as part of Operating Expenses. Landlord shall have the right to employ or designate any reputable person or firm, including any employee or agent of Landlord or any of Landlord's affiliates or divisions, to perform any service, repair or maintenance function. Landlord need not make any other improvements or repairs except as specifically required under this Lease, and nothing contained in this Section shall limit Landlord's right to reimbursement from Tenant for maintenance, repair costs and replacement costs as provided in Section 10.5 and elsewhere in this Lease. Except as set forth herein, Tenant understands that it shall not make repairs at Landlord's expense or by rental offset. Tenant further understands that Landlord shall not be required to make any repairs to the roof, foundations, footings, or the exterior surfaces of the exterior walls of the Building (excluding exterior glass), unless and until either Tenant has notified Landlord in writing of the need for such repair or Landlord shall otherwise have received notification thereof, and Landlord shall have a reasonable period of time thereafter to commence and complete said repair, if warranted. All costs of any maintenance, repairs and replacement on the part of Landlord provided hereunder shall be considered part of Site Costs subject to the provisions of Section 4.2.

Notwithstanding any provision in this Lease to the contrary, if Landlord shall fail to commence any repair obligations required under this Lease with respect to any full Building then being leased by Tenant within ten (10) business days following Tenant's written request for such repairs and thereafter complete such repairs with

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commercially reasonable due diligence, or if Landlord shall fail to commence any emergency repairs (i.e., repairs required to avoid imminent injury or damage or cessation of business) with respect to any such full Building being leased by Tenant within three (3) business days following written notice from Tenant and thereafter complete such repairs with commercially reasonable due diligence, then Tenant may elect to make repairs to such Building(s) at Landlord's expense by complying with the following provisions. Before making any such repair, and following the expiration of the applicable period set forth above, Tenant shall deliver to Landlord a notice for the need for such repair ("SELF-HELP NOTICE"), which notice shall specifically advise Landlord that Tenant intends to exercise its self-help right hereunder. Should Landlord fail, within five (5) business days following receipt of the Self-Help Notice (or within two (2) business days following notice in the event of necessary emergency repairs), to commence the necessary repair or to make other arrangements reasonably satisfactory to Tenant, then Tenant shall have the right to make such repair on behalf of Landlord. Landlord agrees that Tenant will have access to the Building Systems and Building Structure within the applicable Buildings to the extent necessary to perform the work contemplated by this Section. In the event Tenant takes such action, and such work will affect the Building Structure and/or the Building Systems, Tenant shall use only those contractors used or approved by Landlord in the Building for work on such Building Structure or Building Systems unless such contractors are unwilling or unable to immediately perform, or timely and competitively perform, such work, in which event Tenant may utilize the services of any other qualified contractor which normally and regularly performs similar work in Comparable Buildings in the area. Tenant shall provide Landlord with a reasonably detailed invoice together with reasonable supporting evidence of the costs reasonably and actually incurred. Landlord shall either reimburse Tenant for the reasonable costs of such repairs within thirty (30) days following receipt of Tenant's invoice for such costs or deliver a written objection stating with specificity the reasons Landlord disputes Tenant's actions or the amounts. If Landlord fails to pay Tenant's invoice within such thirty (30) day period or deliver a written objection, Tenant shall have the right to offset such costs against Basic Rent next coming due under this Lease. If Landlord delivers to Tenant, within thirty (30) days, a written objection to the payment of such invoice, setting forth Landlord's reasons for its claim that such action did not have to be taken by Landlord pursuant to the terms of this Lease or that the charges are excessive (in which case Landlord shall pay the amount it contends would not have been excessive), then Tenant shall not then be entitled to offset any amount from rent, but as Tenant's sole remedy, the dispute shall be resolved by arbitration pursuant to Section 22.7 hereof. If Tenant prevails in the arbitration, the amount of the award shall include interest at the Interest Rate (from the time of each expenditure by Tenant until the date Tenant receives such amount by payment or offset and attorneys' fees and related costs). If Landlord fails to pay the amount of the award within thirty (30) days from the date of the award, the amount of the award may be deducted by Tenant from the Basic Rent next due and owing under the Lease. Tenant shall be responsible for obtaining any necessary governmental permits before commencing the repair work. Tenant shall be liable for any damage, loss or injury resulting from said work to the extent of Tenant's or its agent's, employee's or contractor's negligence.

SECTION 7.3. ALTERATIONS. Tenant shall make no alterations, additions, fixtures or improvements ("ALTERATIONS") to the Premises or the Building without the prior written consent of Landlord, which consent shall be granted or withheld in accordance with the Design Approval Criteria standards set forth in Exhibit X hereto. Notwithstanding the foregoing, Landlord's consent shall not be required for any cosmetic alterations, additions or improvements to the Premises which cost less than One Hundred Thousand Dollars ($100,000.00) in the aggregate during any twelve (12) month period and which do not (i) create a Design Problem or incorporate Non-Standard Improvements (as those terms are defined in Exhibit
X) or (ii) require any governmental permit as a prerequisite to the construction thereof. Landlord may in its reasonable discretion establish reasonable requirements as to the manner and time of performance of such work for any Partial Building Space. Landlord shall in all events, whether or not Landlord's consent is required, have the right to reasonably approve the contractor performing the installation and removal of Alterations and Tenant shall not permit any contractor not approved by Landlord to perform any work on the Premises or on the Building. Tenant shall obtain all required permits for the installation and removal of Alterations and shall perform the installation and removal of Alterations in compliance with all applicable laws, regulations and ordinances, including without limitation the Americans with Disabilities Act, all covenants, conditions and restrictions affecting the Site, and the Rules and Regulations as described in Article XVII. Landlord shall be entitled to a supervision fee in the amount of *** of the cost of the Alterations; provided that no such fee shall be imposed for any Alteration project that does not require a governmental permit or that costs less than *** in the aggregate. Under no circumstances shall Tenant make any Alterations which incorporate any Hazardous Materials, including without limitation asbestos-containing construction materials into the Premises, the Building or the Common Area. If any governmental entity requires, as a condition to any proposed Alterations by Tenant, that

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improvements be made to the Common Areas, and if Landlord consents to such improvements to the Common Areas pursuant to the consent standard set forth herein, then Tenant shall, at Tenant's sole expense, make such required improvements to the Common Areas in such manner, utilizing such materials, and with such contractors, architects and engineers as Landlord may require in its reasonable discretion; provided, however, that Tenant shall not be required to make any modification of or addition to the Building Structure, Building Systems and/or the exterior portions of the Site (including without limitation, the Common Areas) except and to the extent required because of (a) Tenant's use of all or a portion of the Premises for other than normal and customary office operations, or (b) Non-Standard Improvements installed by Tenant. Any request for Landlord's consent to any proposed Alterations shall be made in writing and shall contain architectural plans describing the work in detail reasonably satisfactory to Landlord. Should the work proposed by Tenant and consented to by Landlord modify the basic floor plan of the Premises, then Tenant shall, at its expense, furnish Landlord with as-built drawings and CAD disks compatible with Landlord's systems and standards. Unless Landlord otherwise agrees in writing, all Alterations permanently affixed to the Premises, the Building or to the Common Area (excluding moveable trade fixtures, equipment and furniture), including without limitation all Tenant Improvements constructed pursuant to the Work Letter (except as otherwise provided in the Work Letter), shall become the property of Landlord and shall be surrendered with the Premises at the end of the Term; provided that Landlord may, by notice to Tenant given at the time Tenant requests Landlord's consent to any Alteration, require Tenant to remove by the Expiration Date, or sooner termination date of this Lease, all or any of the Alterations installed either by Tenant or by Landlord at Tenant's request, and to repair any damage to the Premises, the Building or the Common Area arising from that removal; provided further, however, that Tenant shall not be required to remove the Tenant Improvements constructed in accordance with Exhibit X or any normal and customary business office improvements utilizing only Standard Improvements (as defined in Exhibit X), and Tenant may, in connection with the making of alterations, additions or improvements to the Premises approved by Landlord, remove, alter or replace any prior permanent alterations, additions or improvements previously made to the Premises.

SECTION 7.4. MECHANIC'S LIENS. Tenant shall remove any liens arising out of any work performed, materials furnished, or obligations incurred by or for Tenant. Upon request by Landlord, Tenant shall promptly (but in no event later than five (5) business days following such request) cause any such lien to be released by any legal means and/or by posting a bond in accordance with California Civil Code Section 3143 or any successor statute. In the event that Tenant shall not, within thirty (30) days following notice of the imposition of any lien, cause the lien to be released of record by payment or posting of a proper bond, Landlord shall have, in addition to all other available remedies, the right to cause the lien to be released by any means it deems proper, including payment of or defense against the claim giving rise to the lien. All expenses so incurred by Landlord, including Landlord's attorneys' fees, and any consequential or other damages incurred by Landlord arising out of such lien, shall be reimbursed by Tenant upon demand, together with interest from the date of payment by Landlord at the maximum rate permitted by law until paid. Tenant shall give Landlord no less than twenty (20) days' prior notice in writing before commencing construction of any kind on the Premises or Common Area and shall again notify Landlord that construction has commenced, such notice to be given on the actual date on which construction commences, so that Landlord may post and maintain notices of nonresponsibility on the Premises or Common Area, as applicable, which notices Landlord shall have the right to post and which Tenant agrees it shall not disturb. Tenant shall also provide Landlord notice in writing within ten (10) days following the date on which such work is substantially completed.

SECTION 7.5. ENTRY AND INSPECTION. Landlord shall at all reasonable times, upon reasonable prior written notice (except in emergencies, when no notice shall be required), have the right to enter the Premises to inspect them, to supply services in accordance with this Lease, to have access to install, repair, maintain, replace or remove all electrical and mechanical installations of Landlord and to protect the interests of Landlord in the Premises, and to submit the Premises to prospective or actual purchasers or encumbrance holders (or, during the last one hundred and eighteen (18) months of the Term or when an uncured Tenant Event of Default exists, to prospective tenants), all without being deemed to have caused an eviction of Tenant and without abatement of rent except as provided elsewhere in this Lease. Except for mutually agreed upon times for regularly scheduled services (such as janitorial services) and except in the event of emergencies, Landlord agrees that Tenant may elect to have a representative accompany any entry by Landlord. Furthermore, any entry by Landlord shall be accomplished as expeditiously as reasonably possible and in a manner so as to cause as little interference to Tenant as reasonably possible. Landlord shall have the right, if desired, to retain a key which unlocks all of the doors in the Premises,

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excluding Tenant's vaults, safes, and Secured Areas (as defined below) and Landlord shall have the right to use any and all means which Landlord may deem proper to open the doors in an emergency in order to obtain entry to the Premises, and any entry to the Premises obtained by Landlord shall not under any circumstances be deemed to be a forcible or unlawful entry into, or a detainer of, the Premises, or any eviction of Tenant from the Premises. Notwithstanding anything to the contrary set forth above, Tenant may reasonably and in good faith designate certain areas of the Premises as "Secured Areas" should Tenant require such areas for the purpose of securing certain valuable property or confidential information. Landlord may not enter such Secured Areas except in the case of emergency or in the event of a Landlord inspection, in which case Landlord shall provide Tenant with ten (10) days' prior written notice of the specific date and time of such Landlord inspection.

SECTION 7.6. COMMUNICATIONS EQUIPMENT. During the Term of this Lease, Landlord hereby grants to Tenant a license (the "LICENSE") to install, maintain and operate on the roof of the Buildings (including any subsequent buildings that may be leased in whole or part by Tenant hereunder) antennas and accompanying communications equipment not exceeding forty-eight inches (48") in height as to each antenna (collectively, the "ANTENNA"), in accordance with and subject to the terms and conditions set forth below. The Antenna shall be installed at a location designated by Landlord and reasonably acceptable to Tenant ("LICENSED AREA"). Except for equipment of the Landlord necessary to service the Buildings, no one other than Tenant shall have the right to use the roofs of full Buildings leased by Tenant. The Licensed Area shall be considered to be a part of the Premises for all purposes under the Lease (other than the payment of Basic Rent and Operating Expenses), and except as otherwise expressly provided in this Section 7.6 all provisions applicable to the use of the Premises under the Lease shall apply to the Licensed Area and its use by Tenant.

(1) Tenant shall not be obligated to pay any license fee for the use of the Licensed Area pursuant to this Section 7.6 during the Term of this Lease;

(2) Tenant shall use the Licensed Area only for the installation, operation, repair, replacement and maintenance of the Antenna and the necessary mechanical and electrical equipment to service said Antenna and for no other use or purpose. The installation of the Antenna and all equipment and facilities related thereto, including any required conduit from the Premises to the Antenna, shall be deemed to constitute an alteration subject to the provisions of Section 7.3 of the Lease, provided that Landlord shall not withhold its approval of same unless a Design Problems exist. Landlord may require appropriate screening for the Antenna as a condition of Landlord's approval of the installation of the Antenna;

(3) The Antenna shall be used only for transmitting and/or receiving data, audio and/or video signals to and from Tenant's facilities within the Premises for Tenant's use, and shall not be used or permitted to be used by Tenant for purposes of broadcasting signals to the public or to provide commercial telecommunications or other communications transmitting or receiving services to any third parties;

(4) In the event any other communications system or broadcast or receiving facilities are operating in the area, Tenant shall at all times during the term of the License conduct its operations so as to ensure that such system or facilities shall not be subjected to harmful interference as a result of such operations by Tenant. Upon notification from Landlord of any such interference, Tenant agrees to immediately take the necessary steps to correct such situation, and Tenant's failure to do so shall be deemed a default under the terms of this Lease.

(5) During the term of the License, Tenant shall comply with any standards promulgated by applicable governmental authorities or otherwise reasonably established by Landlord regarding the generation of electromagnetic fields. Any claim or liability resulting from the use of the Antenna or the Licensed Area shall be subject to the indemnification provisions of this Lease applicable to Tenant's use of the Premises;

(6) During the term of the License, Tenant shall pay all taxes attributable to the Antenna and other equipment owned and installed by Tenant, and Tenant shall assure and provide Landlord with evidence that the Licensed Area and Tenant's use thereof are subject to the insurance coverages otherwise required to be maintained by Tenant as to the Premises pursuant to Exhibit D; and

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(7) Upon the expiration or sooner termination of the Lease, Tenant shall remove the Antenna and all related equipment and facilities, including any conduit from the Premises to the Antenna, from the Licensed Area and any other portions of the Building within or upon which the same may be installed, and shall restore the Licensed Area and all other areas affected by such removal to their original condition, reasonable wear and tear excepted, all at its sole cost and expense.

SECTION 7.7. COMMUNICATION VENDORS. Tenant shall have the right to select all required communications vendors for the Premises, and such vendors shall be allowed reasonable access to the Buildings and the Common Areas and the risers within the Buildings without charge (including easements, if necessary) to supply communications service during the Term of this Lease. In addition, for so long as Tenant is leasing all of the Buildings in the Site, Tenant shall have the exclusive use (and the right to the non-exclusive use if Tenant is not leasing all of the Buildings, in each case so long and to the extent a Design Problem is not created) of any interconnecting telecommunications conduit installed linking the Buildings within the Site; provided that Tenant shall be solely responsible for the maintenance of such conduit and for removing its cabling at the end of the Lease Term.

ARTICLE VIII. TAXES AND ASSESSMENTS ON TENANT'S PROPERTY

Tenant shall be liable for and shall pay, at least ten (10) days before delinquency, all taxes and assessments levied against all personal property of Tenant located in the Premises, and, if required by Landlord, against all improvements to the Premises made by Landlord (at Tenant's request) or Tenant which are above Landlord's Project standard in quality and/or quantity for comparable space within the Project ("ABOVE STANDARD IMPROVEMENTS"), and against any Alterations (as defined in Section 7.3) made to the Premises or the Building by or on behalf of Tenant. If possible, Tenant shall cause its personal property, Above Standard Improvements and Alterations to be assessed and billed separately from the real property of which the Premises form a part. If any taxes required to be paid by Tenant on Tenant's personal property, Above Standard Improvements and/or Alterations are levied against Landlord or Landlord's property and if Landlord pays the same, or if the assessed value of Landlord's property is increased by the inclusion of a value placed upon the personal property, Above Standard Improvements and/or Alterations of Tenant and if Landlord pays the taxes based upon the increased assessment, Landlord shall have the right to require that Tenant pay to Landlord the taxes so levied against Landlord or the proportion of the taxes resulting from the increase in the assessment. In calculating what portion of any tax bill which is assessed against Landlord separately, or Landlord and Tenant jointly, is attributable to Tenant's Above Standard Improvements, Alterations and personal property, Landlord's reasonable determination shall be conclusive.

ARTICLE IX. ASSIGNMENT AND SUBLETTING

SECTION 9.1. RIGHTS OF PARTIES.

(a) Notwithstanding any provision of this Lease to the contrary, and except as to transfers expressly permitted without Landlord's consent pursuant to Sections 9.4 and 9.5, Tenant will not, either voluntarily or by operation of law, assign, sublet, encumber, or otherwise transfer all or any part of Tenant's interest in this Lease or the Premises, or permit the Premises to be occupied by anyone other than Tenant, without Landlord's prior written consent, which consent shall not unreasonably be withheld conditioned or delayed in accordance with the provisions of Section 9.1(b). Except as to transfers expressly permitted without Landlord's consent pursuant to Sections 9.4 and 9.5 no assignment (whether voluntary, involuntary or by operation of law) and no subletting shall be valid or effective without Landlord's prior written consent and, at Landlord's election, any such assignment or subletting shall be void and of no force and effect. Landlord shall not be deemed to have given its consent to any assignment or subletting by any course of action other than written consent.

(b) If Tenant desires to transfer an interest in this Lease or the Premises, it shall first notify Landlord of its desire and shall submit in writing to Landlord: (i) the name and address of the proposed transferee; (ii) the nature of any proposed transferee's business to be carried on in the Premises; (iii) the terms and provisions of any proposed sublease, assignment or other transfer, including a copy of the proposed assignment, sublease or transfer form; (iv) a completed Environmental Questionnaire from the proposed assignee, subtenant or transferee;

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(v) any other information reasonably requested by Landlord and reasonably related to the transfer and (vi) the fee described in Section 9.1(e). Except as provided in Section 9.1 (c), Landlord shall not unreasonably withhold its consent so long as: (1) the use of the Premises will be consistent with the provisions of this Lease; (2) insurance requirements of the proposed assignee or subtenant shall be brought into conformity with Landlord's then current leasing practice provided such practice is comparable to the practices of landlords of Comparable Buildings; (3) a proposed subtenant or assignee demonstrates to the reasonable satisfaction of Landlord that it is financially responsible to undertake the financial obligations of the transfer by providing credit enhancements such as letters of credit guarantees and the like and/or by submission to Landlord of all reasonable information as requested by Landlord concerning the proposed subtenant or assignee, including, but not limited to, a balance sheet of the proposed subtenant or assignee as of a date within ninety
(90) days of the request for Landlord's consent, statements of income or profit and loss of the proposed subtenant or assignee for the two-year period preceding the request for Landlord's consent (or, if shorter, for whatever period the subtenant or assignee has been in business), and/or a certification signed by the proposed subtenant or assignee that it has not been evicted at any other leased premises for the 3-year period preceding the request for Landlord's consent (except that this requirement shall not be imposed if the financial standing of the original Tenant hereunder is at least comparable to such standing as of December 1, 2004); (4) the proposed transferee is not an existing tenant of the Site (except that this restriction shall not apply if Landlord does not have sufficient available space in the Site to accommodate the proposed transferee); (5) the proposed transfer will not impose material additional security or other burdens on Landlord; and (6) the proposed transferee has been approved by the Ground Lessor.

If Landlord consents to the proposed transfer, Tenant may effect the transfer upon the terms described in the information furnished to Landlord; provided that any material change in the terms shall be subject to Landlord's consent as set forth in this Section 9.1. Landlord shall approve or disapprove any requested transfer within ten (10) business days following receipt of Tenant's written request, the information set forth above, and the fee set forth below, and any failure by Landlord to respond within such ten (10) business day period shall be deemed to be Landlord's consent thereto.

(c) Notwithstanding anything to the contrary contained in this Article IX, in the event that Tenant contemplates an assignment of this Lease, or a sublease of all or a portion of the Premises for substantially the remainder of the Term of this Lease ("CONTEMPLATED TRANSFER"), then Tenant shall give Landlord notice ("INTENTION TO TRANSFER NOTICE") of such Contemplated Transfer. The Intention to Transfer Notice shall specify the portion and amount of rentable square feet of the Premises which Tenant intends to transfer ("CONTEMPLATED TRANSFER SPACE"), the contemplated date of the commencement of the Contemplated Transfer ("CONTEMPLATED EFFECTIVE DATE") and shall state that it is an assignment or a sublease of the Contemplated Transfer Space for substantially all of the remainder of the Term of this Lease, and shall specify that such Intention to Transfer Notice is delivered to Landlord pursuant to this
Section 9.1(c) in order to allow Landlord to elect to recapture the Contemplated Transfer Space. Thereafter, Landlord shall have the option, by giving written notice to Tenant within fifteen (15) business days after receipt of such Intention to Transfer Notice, to recapture such Contemplated Transfer Space upon the basic terms and conditions specified in the Intention to Transfer Notice. In the event Landlord does not give such written recapture notice to Tenant within such fifteen (15) business day period, Tenant shall have one hundred eighty
(180) days thereafter within which to effect the transfer in accordance with the Intention to Transfer Notice and subject to compliance with the other provisions of this Lease. In the event Tenant does not complete the transfer within that 180-day period, Tenant shall be required to deliver a new Intention to Transfer Notice to Landlord and repeat the provisions of this Section. In the event the recapture option is exercised by Landlord, this Lease shall be canceled and terminated with respect to the Contemplated Transfer Space as of the Contemplated Effective Date. In the event of a recapture by Landlord, if this Lease shall be canceled with respect to less than the entire Premises, (i) the rent reserved herein shall be prorated on the basis of the number of rentable square feet retained by Tenant in proportion to the number of rentable square feet contained in the Premises, and this Lease as so amended shall continue thereafter in full force and effect, and upon the request of either party, the parties shall execute written confirmation of the same, (ii) Landlord shall install, on a commercially reasonable basis, any corridor and/or demising wall, at Landlord's expense, which is required as a result of the cancellation of the Lease with respect to less than the entire Premises, and (iii) if the recapture results in Tenant leasing less than a full Building, then the provisions of
Section 2.4(b) above shall apply with respect to that partial Building space.

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(d) *** Tenant shall within thirty (30) days after the effective date of any such assignment or subletting deliver to Landlord a written certified statement setting forth the Transfer Costs incurred and a schedule of the time required to recover those costs. After Tenant has recovered one hundred percent (100%) of its Transfer Costs, fifty percent (50%) of the Transfer Profits shall be paid to Landlord as and when received by Tenant for the remainder of the term of such sublease of assignment. Landlord shall have the right to request copies from Tenant of documentation to support the Transfer Costs incurred and/or to have such records reviewed or audited by an employee of Landlord or an outside accountant to confirm the accuracy thereof. In the event such Transfer Costs are overstated by Tenant by more than five percent (5%), Tenant shall reimburse Landlord for its out-of-pocket costs incurred in connection with such review or audit. At Landlord's request, a written agreement shall be entered into by and among Tenant, Landlord and the proposed assignee or subtenant confirming the requirements of this subsection

(e) Tenant shall pay to Landlord a fee equal to Five Hundred Dollars ($500.00) to process any request by Tenant for an assignment, subletting or other transfer under this Lease. Tenant shall pay Landlord the sum of Five Hundred Dollars ($500.00) concurrently with Tenant's request for consent to any assignment, subletting or other transfer, and Landlord shall have no obligation to consider such request unless accompanied by such payment. Such fee is hereby acknowledged as a reasonable amount to reimburse Landlord for its costs of review and evaluation of a proposed transfer.

SECTION 9.2. EFFECT OF TRANSFER. No subletting or assignment, even with the consent of Landlord, shall relieve Tenant of its obligation to pay rent and to perform all its other obligations under this Lease. Moreover, Tenant shall indemnify and hold Landlord harmless, as provided in Section 10.3, for any act or omission by an assignee or subtenant. Each assignee, other than Landlord, shall assume all obligations of Tenant under this Lease and shall be liable jointly and severally with Tenant for the payment of all rent, and for the due performance of all of Tenant's obligations, under this Lease. No assignment or subletting shall be effective or binding on Landlord unless documentation in form and substance reasonably satisfactory to Landlord in its reasonable discretion evidencing the transfer, and in the case of an assignment, the assignee's assumption of the obligations of Tenant under this Lease, is delivered to Landlord and both the assignee/subtenant and Tenant deliver to Landlord an executed consent to transfer instrument prepared by Landlord and consistent with the requirements of this Article. The acceptance by Landlord of any payment due under this Lease from any other person shall not be deemed to be a waiver by Landlord of any provision of this Lease or to be a consent to any transfer. Consent by Landlord to one or more transfers shall not operate as a waiver or estoppel to the future enforcement by Landlord of its rights under this Lease or as a consent to any subsequent transfer.

SECTION 9.3. SUBLEASE REQUIREMENTS. The following terms and conditions shall apply to any subletting by Tenant of all or any part of the Premises and shall be deemed included in each sublease:

(a) Each and every provision contained in this Lease (other than with respect to the payment of rent hereunder) is incorporated by reference into and made a part of such sublease, with "LANDLORD" hereunder meaning the sublandlord therein and "TENANT" hereunder meaning the subtenant therein and the sublet space being substituted for "Premises." Notwithstanding the foregoing, Landlord agrees that Tenant will not be in violation of this Lease if it grants subtenant lesser rights under the sublease than were granted to Tenant under this Lease or imposes greater obligations on the subtenant under the sublease than were imposed on Tenant under this Lease.

(b) Tenant hereby irrevocably assigns to Landlord all of Tenant's interest in all rentals and income arising from any sublease of the Premises, and Landlord may collect such rent and income and apply same toward Tenant's obligations under this Lease; provided, however, that until there is an Event of Default by Tenant, Tenant shall have the right to receive, collect and retain the sublease rentals. Landlord shall not, by reason of this assignment or the collection of sublease rentals, be deemed liable to the subtenant for the performance of any of Tenant's obligations under the sublease. Tenant hereby irrevocably authorizes and directs any subtenant, upon receipt of a written notice from Landlord stating that an uncured Event of Default exists in the performance of Tenant's obligations under this Lease, to pay to Landlord all sums then and thereafter due under the sublease. Tenant agrees that the subtenant may rely on that notice without any duty of further inquiry and notwithstanding any notice or claim by Tenant to the contrary. Tenant shall have no right or claim against the subtenant or Landlord for any rentals so paid to Landlord.

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CONFIDENTIAL TREATMENT REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT.

SECTION 9.4. CERTAIN TRANSFERS. The following shall be deemed to constitute an assignment of this Lease: (a) the sale of all or substantially all of Tenant's assets (other than bulk sales in the ordinary course of business) or
(b) if Tenant is a corporation, an unincorporated association, a limited liability company or a partnership, the transfer, assignment or hypothecation of any stock or interest in such corporation, association, limited liability company or partnership that results in a change of control of such entity. Notwithstanding the foregoing, occupancy of all or part of the Premises by a corporate parent, subsidiary, or affiliated companies of Tenant or of Tenant's parent or of Tenant's subsidiary shall not be deemed an assignment or subletting provided that such parent, subsidiary or affiliated companies were not formed as a subterfuge to avoid the obligations of this Article IX. Furthermore, without limiting the generality of the foregoing, Tenant may assign the Lease at any time, or sublease all or part of the Premises, without receipt of Landlord's consent, to any entity which acquires all or substantially all of Tenant's business, or which is acquired in whole or in part by Tenant, or which is controlled directly or indirectly by Tenant, or which entity controls, directly or indirectly, Tenant ("AFFILIATE"), or which owns or is owned by the Affiliate, so long as such transaction was not entered into as a subterfuge to avoid the obligations and restrictions of this Lease. In connection with any such transfer to an Affiliate, (i) if Tenant does not survive and remain in existence after such transfer, the net worth of the successor after such transfer is at least equal to the lower of the net worth of Tenant as of the execution of this Lease by Landlord or the net worth of Tenant immediately prior to the date of such transfer, evidence of which, satisfactory to Landlord, shall be presented to Landlord prior to such transfer; (ii) Tenant shall provide to Landlord, prior to such transfer, written notice of such transfer and such assignment documentation and other information as Landlord may reasonably request in connection therewith and (iii) all of the other terms and requirements of this Article shall apply with respect to such assignment. The normal and customary issuance and transfer of shares among and between the shareholder employees of Tenant to reflect the addition, withdrawal or change in ownership interests of the shareholder employees of Tenant shall not be deemed an assignment or other transfer of Tenant's interest in this Lease.

SECTION 9.5. OCCUPANCY BY OTHERS. Tenant may allow any person or company which is a client or customer of Tenant or which is providing service to Tenant or one of Tenant's clients to occupy, during the period of such business relationship, certain portions of the Premises without such occupancy being deemed an assignment or subleasing as long as such relationship was not created as a subterfuge to avoid the obligations set forth in this Article IX, provided that any such occupancy shall be subject to the requirements of this Lease.

SECTION 9.6. ***

ARTICLE X. INSURANCE AND INDEMNITY

SECTION 10.1. TENANT'S INSURANCE. Tenant, at its sole cost and expense, shall provide and maintain in effect the insurance described in Exhibit D. Evidence of that insurance must be delivered to Landlord prior to the Commencement Date.

SECTION 10.2. LANDLORD'S INSURANCE.

(a) Landlord shall provide all of the following types of insurance, with customary deductible and in amounts and coverages as may be determined by Landlord in its reasonable discretion based on the types and amounts of insurance (and deductibles) being maintained by comparable landlords of Comparable Buildings: "all risk" property insurance, subject to standard exclusions, covering the Building and/or Project, loss of rent insurance, worker's compensation insurance and commercial general liability coverage. Landlord shall not be required to carry insurance of any kind on Tenant's removable improvements or property, including, without limitation, Tenant's trade fixtures, furnishings, equipment, signs and all other items of personal property, and Landlord shall not be obligated to repair or replace that property should damage occur. All proceeds of insurance maintained by Landlord upon the Building and/or Project shall be the property of Landlord, whether or not Landlord is obligated to or elects to make any repairs. At Landlord's option, Landlord may self-insure all or any portion of the risks for which Landlord elects to provide insurance hereunder.

(b) ***

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CONFIDENTIAL TREATMENT REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT.

SECTION 10.3. INDEMNITY. To the fullest extent permitted by law, Tenant shall defend, indemnify, protect, save and hold harmless Landlord, its agents, any and all affiliates of Landlord, including, without limitation, any corporations or other entities controlling, controlled by or under common control with Landlord, and the Ground Lessor from and against any and all claims, liabilities, costs or expenses arising either before or after the Commencement Date from Tenant's use or occupancy of the Premises, the Building or the Common Areas, including without limitation, the use by Tenant, its agents, employees, invitees or licensees of any recreational facilities within the Common Areas, or from the conduct of its business, or from any activity, work, or thing done, permitted or suffered by Tenant or its agents, employees, invitees or licensees in or about the Premises, the Building or the Common Areas, or from any breach in the performance of any obligation on Tenant's part to be performed under this Lease, or from any act or negligence or willful misconduct of Tenant or its agents, employees, visitors, patrons, guests, invites or licensees in, on or about the Premises, the Building or the Project. In cases of alleged negligence asserted by third parties against Landlord and/or Ground Lessor which arise out of, are occasioned by, or in any way attributable to Tenant, its agents', employees', contractors', licensees' or invitees' use and occupancy of the Premises, the Building or the Common Areas, or from the conduct of its business or from any activity, work or thing done, permitted or suffered by Tenant or its agents, employees, invitees or licensees on Tenant's part to be performed under this Lease, or from any negligence or willful misconduct of Tenant, its agents, employees, licensees or invitees in, on or about the Premises, the Building or the Site, Tenant shall accept any tender of defense for Landlord and Ground Lessor and shall, notwithstanding any allegation of negligence or willful misconduct on the part of the Landlord, defend Landlord and Ground Lessor with counsel reasonably satisfactory to Landlord and protect and hold Landlord and Ground Lessor harmless and pay all costs, expenses and attorneys' fees incurred in connection with such litigation, provided that Tenant shall not be liable for any such injury or damage, and Landlord shall reimburse Tenant for the reasonable attorneys' fees and costs for the attorney representing both parties, all to the extent and in the proportion that such injury or damage is ultimately determined by a court of competent jurisdiction (or in connection with any negotiated settlement agreed to by Landlord) to be attributable to the negligence or willful misconduct of Landlord or its authorized agents or employees. Upon Landlord's request, Tenant shall at Tenant's sole cost and expense, retain a separate attorney reasonably selected by Landlord to represent Landlord or Ground Lessor in any such suit if Landlord reasonably determines that the representation of both Tenant and Landlord or Ground Lessor by the same attorney would cause a conflict of interest; provided, however, that to the extent and in the proportion that the injury or damage which is the subject of the suit is ultimately determined by a court of competent jurisdiction (or in connection with any negotiated settlement agreed to by Landlord) to be attributable to the negligence or willful misconduct of Landlord, Landlord shall reimburse Tenant for the reasonable legal fees and costs of the separate attorney retained by Tenant. The provisions of this
Section shall expressly survive the expiration or sooner termination of this Lease. Notwithstanding the foregoing, in the event it is ultimately determined that any claim, liability or expense was caused by the negligence or willful misconduct of Landlord, its employees, agents or contractors, then subject to Sections 10.5 and 14.8 below, Landlord shall indemnify and hold Tenant harmless from and against such liability or expense.

SECTION 10.4. LANDLORD'S NONLIABILITY. Except to the extent of the negligence or willful misconduct of Landlord or its agents, contractors or employees (but subject to Sections 10.5 and 14.8 below), Landlord shall not be liable to Tenant, and Tenant hereby waives all claims against Landlord and knowingly assumes the risk of for loss of or damage to any property, or loss or interruption of business or income, or any other loss, cost, damage, injury or liability whatsoever (including without limitation any consequential damages and lost profit or opportunity costs) resulting from, but not limited to, Acts of God, acts of civil disobedience or insurrection, acts or omissions of third parties and/or of other tenants within the Project or their agents, employees, contractors, guests or invitees, fire, explosion, falling plaster, steam, gas, electricity, water or rain which may leak or flow from or into any part of the Premises or from the breakage, leakage, obstruction or other defects of the pipes, sprinklers, wires, appliances, plumbing, air conditioning, electrical works, roof, windows or other fixtures in the Building, whether the damage or injury results from conditions arising in the Premises or in other portions of the Building. It is understood that any such condition may require the temporary evacuation or closure of all or a portion of the Building. Except as provided in
Section 6.1 above and Sections 11.1 and 12.1 below, Landlord shall have no liability (including without limitation consequential damages and lost profit or opportunity costs) and there shall be no abatement of rent, by reason of any injury to or interference with Tenant's business arising from the making of any repairs, alterations or improvements to any portion of the Building, including repairs to the Premises, nor shall any related activity by Landlord constitute an actual or constructive eviction; provided, however, that in making repairs, alterations or improvements, Landlord shall interfere as little as reasonably practicable with the conduct of

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CONFIDENTIAL TREATMENT REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT.

Tenant's business in the Premises. Should Tenant elect to receive any service or products from a concessionaire, licensee or third party tenant of Landlord, Landlord shall have no liability for any services or products so provided or for any breach of contract by such third party provider. Neither Landlord nor its agents shall be liable for interference with light or other similar intangible interests. Tenant shall immediately notify Landlord in case of fire or accident in the Premises, the Building or the Project and of defects in any improvements or equipment.

SECTION 10.5. WAIVER OF SUBROGATION. Landlord and Tenant each hereby waives all rights of recovery against the other and the other's agents on account of loss and damage occasioned to the property of such waiving party to the extent that such loss or damage is required to be insured against under any "all risk" property insurance policy required by this Article X, except to the extent of any commercially reasonable deductibles under any such policy. By this waiver it is the intent of the parties that neither Landlord nor Tenant shall be liable to any insurance company (by way of subrogation or otherwise) insuring the other party for any loss or damage insured against, or required to be insured against, under any "all-risk" property insurance policies required by this Lease (except for reasonable deductibles thereunder), even though such loss or damage might be occasioned by the negligence of such party, its agents, employees, contractors, guests or invitees. The provisions of this Section shall not limit the indemnification provisions elsewhere contained in this Lease.

SECTION 10.6. BLANKET INSURANCE/SELF INSURANCE. Notwithstanding the foregoing or anything set forth in Exhibit D, all of the insurance requirements set forth herein on the part of Tenant to be observed shall be deemed satisfied if the Premises are covered by a blanket insurance policy or, for so long as Broadcom Corporation or an Affiliate thereof remains the Tenant hereunder, if Tenant sends a letter to Landlord, signed by an authorized officer of Tenant, stating that Tenant has elected to act as a self insurer whereupon Tenant shall have the same obligations and rights, and Landlord shall have the same rights and obligations, as if Tenant was an insurance company furnishing the policies and coverages required under this Lease. Notwithstanding the foregoing, however, Tenant shall not have the right to self-insure the general liability insurance coverage required under this Lease.

ARTICLE XI. DAMAGE OR DESTRUCTION

SECTION 11.1. RESTORATION.

(a) If the Premises or the Building or a part thereof are materially damaged by any fire, flood, earthquake or other casualty, Landlord shall have the right to terminate this Lease upon written notice to Tenant if:
(i) Landlord reasonably determines that the full cost of repair (exclusive of any deductible up to seven and one-half percent of the loss amount) is not covered by Landlord's insurance that Landlord is required to maintain by this Lease which Landlord carries and includes as part of Operating Expenses, including without limitation earthquake insurance, plus such additional amounts Tenant elects, at its option, to contribute, excluding however the deductible (for which Tenant shall be responsible for Tenant's Share as an Operating Expense); (ii) Landlord reasonably determines that the Premises cannot, with reasonable diligence, be fully repaired by Landlord (or cannot be safely repaired because of the presence of hazardous factors, including without limitation Hazardous Materials, earthquake faults, and other similar dangers) within one (1) year after the date of the damage; (iii) an uncured Event of Default by Tenant has occurred and remains uncured at the time of such casualty; or (iv) the material damage occurs during the final twelve (12) months of the Term. Landlord shall notify Tenant in writing ("LANDLORD'S NOTICE") within thirty (30) days after the damage occurs as to (A) whether Landlord is terminating this Lease as a result of such material damage and (B) if Landlord is not terminating this Lease, the number of days within which Landlord has estimated that the Premises, with reasonable diligence, are likely to be fully repaired. In the event Landlord elects to terminate this Lease, this Lease shall terminate as of the date of Landlord's Notice. Notwithstanding the foregoing, Landlord shall only have the right to terminate this Lease under (i) above if Landlord terminates the leases of all tenants in the Project similarly damaged by such casualty and such tenants have comparable rights and obligations in the event of such casualty.

(b) If Landlord has the right to terminate this Lease pursuant to
Section 11.1(a) and does not elect to so terminate this Lease, and provided that at the time of Landlord's Notice no uncured Event of Default exists under this Lease, then within fifteen (15) business days following delivery of Landlord's Notice pursuant to

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CONFIDENTIAL TREATMENT REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT.

Section 11.1(a), Tenant may elect to terminate this Lease by written notice to Landlord, but only if (i) Landlord's Notice specifies that Landlord has determined that the Premises cannot be repaired, with reasonable diligence, within twelve (12) months after the date of damage (the "MAXIMUM PERIOD") or
(ii) the casualty has occurred within the final twelve (12) months of the Term and Tenant is prevented from using the Premises for sixty (60) consecutive days due to such damage. If Tenant fails to provide such termination notice within such fifteen (15) business day period, Tenant shall be deemed to have waived any termination right under this Section 11.1(b) or any other applicable law.

(c) In the event that neither Landlord nor Tenant terminates this Lease pursuant to this Section 11.1 as a result of material damage to the Building resulting from a casualty, Landlord shall, except as provided in subsection (e) below, repair all material damage to the Premises or the Building as soon as reasonably possible and this Lease shall continue in effect for the remainder of the Term. Notwithstanding the foregoing, the repair of damage to the Premises to the extent such damage is not material shall be governed by Sections 7.1 and 7.2.

Notwithstanding anything to the contrary contained in this Section 11.1(c), if the anticipated repair period set forth in Landlord's Notice was less than the Maximum Period but Landlord subsequently determines that the actual repair period will exceed the Maximum Period, then Landlord shall so notify Tenant and Tenant may, within ten (10) business days thereafter, elect to terminate this Lease effective as of the date of Landlord's notice; otherwise, the Maximum Period shall be deemed extended as set forth in the notice from Landlord. Should Landlord fail substantially to complete the restoration within the Maximum Period (as the same may be extended as aforesaid), then Tenant may elect to terminate this Lease by written notice to Landlord.

(d) From and after the sixth (6th) business day after such material damage to the Building (or such earlier date that Landlord is entitled to rent loss insurance proceeds), and ending on the sooner of the date the damage is repaired or the date this Lease is terminated, the rental to be paid under this Lease shall be abated in the same proportion that the Floor Area of the Premises that is rendered unusable by the damage from time to time bears to the total Floor Area of the Premises, as reasonably determined by Landlord. However, in the event that Tenant is prevented from conducting, and does not conduct, its business in any portion of the Premises for a period of time in excess of the Eligibility Period, and the remaining portion of the Building is not sufficient to allow Tenant to effectively conduct its business therein, and if Tenant does not conduct its business from such remaining portion, then for such time after expiration of the Eligibility Period during which Tenant is so prevented from effectively conducting its business therein, the rent for the entire Building shall be abated; provided, however, if Tenant reoccupies and conducts its business from any portion of the Building during such period, the rent allocable to such reoccupied portion, based on the proportion that the rentable area of such reoccupied portion of the Building bears to the total rentable area of the Building, shall be payable by Tenant from the date such business operations commence.

(e) Landlord shall not be required to repair or replace any improvements or fixtures that Tenant is obligated to repair or replace pursuant to Section 7.1 or any other provision of this Lease.

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CONFIDENTIAL TREATMENT REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT.

(f) Tenant shall fully cooperate with Landlord in removing Tenant's personal property and any debris from the Premises to facilitate all inspections of the Premises and the making of any repairs. Notwithstanding anything to the contrary contained in this Lease, if Landlord in good faith believes there is a risk of injury to persons or damage to property from entry into the Building or Premises following any damage or destruction thereto, Landlord may restrict entry into the Building or the Premises by Tenant, its employees, agents and contractors in a non-discriminatory manner, without being deemed to have violated Tenant's rights of quiet enjoyment to, or made an unlawful detainer of, or evicted Tenant from, the Premises. Upon request, Landlord shall consult with Tenant to determine if there are safe methods of entry into the Building or the Premises solely in order to allow Tenant to retrieve files, data in computers, and necessary inventory, subject however to all indemnities and waivers of liability from Tenant to Landlord contained in this Lease and any additional indemnities and waivers of liability which Landlord may require.

(g) If Landlord has the right, and elects to terminate the Lease as to one or more of the Buildings, but not all of the Buildings constituting the Premises, then by notice to Landlord given within sixty (60) days following Landlord's election to terminate but prior to the commencement by Landlord of reconstruction, Tenant may terminate the Lease as to one or more of the remaining Buildings on the date set forth in the termination notice which date must be within one (1) year of the date such damage initially occurred.

SECTION 11.1. LEASE GOVERNS. Tenant agrees that the provisions of this Lease, including without limitation Section 11.1, shall govern any damage or destruction and shall accordingly supersede any contrary statute or rule of law.

ARTICLE XII. EMINENT DOMAIN

SECTION 12.1. TOTAL OR PARTIAL TAKING. If all or a material portion of the Premises is taken by any lawful authority by exercise of the right of eminent domain, or sold to prevent a taking, either Tenant or Landlord may terminate this Lease effective as of the date possession is required to be surrendered to the authority. In the event title to a portion of the Building(s) or Project, whether or not including a portion of the Premises, is taken or sold in lieu of taking, and if the Lease is not or cannot be terminated, Landlord must, if possible, restore the Building(s) in such a way as to not alter the Premises materially. In the event neither party has elected to terminate this Lease as provided above, then Landlord shall promptly proceed to restore the Premises to substantially their condition prior to the taking, and a proportionate allowance shall be made to Tenant for the rent corresponding to the time during which, and to the part of the Premises of which, Tenant is deprived on account of the taking and restoration as provided in Section 6.1. Landlord shall be entitled to the entire amount of the condemnation award without deduction for any estate or interest of Tenant; provided that nothing in this Section shall be deemed to give Landlord any interest in, or prevent Tenant from seeking any award against the taking authority for, the taking of personal property and fixtures belonging to Tenant, the unamortized cost of the Tenant Improvements or other alterations to the extent paid for by Tenant, or relocation or business interruption expenses recoverable from the taking authority.

SECTION 12.3. TAKING OF PARKING AREA. In the event there shall be a taking of the parking area such that Landlord can no longer provide sufficient parking to comply with this Lease, Landlord may substitute reasonably equivalent parking in a location reasonably close to the Building(s); provided that if Landlord fails to make that substitution within ninety (90) days following the taking and if the taking materially impairs Tenant's use and enjoyment of the Premises, Tenant may, at its option, terminate this Lease by written notice to Landlord. If this Lease is not so terminated by Tenant, there shall be no abatement of rent and this Lease shall continue in effect.

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CONFIDENTIAL TREATMENT REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT.

ARTICLE XIII. SUBORDINATION; ESTOPPEL CERTIFICATE; FINANCIALS

SECTION 13.1. SUBORDINATION. At the option of Landlord, the Ground Lessor, or any lender of Landlord's that obtains a security interest in the Building, this Lease shall be either superior or subordinate to the Ground Leases and to all ground or underlying leases, mortgages and deeds of trust, if any, which may hereafter affect the Building, and to all renewals, modifications, consolidations, replacements and extensions thereof; provided, that so long as no Event of Default exists under this Lease, Tenant's possession and quiet enjoyment of the Premises shall not be disturbed and this Lease shall not terminate in the event of termination of any such ground or underlying lease, or the foreclosure of any such mortgage or deed of trust, to which this Lease has been subordinated pursuant to this Section. Tenant shall execute and deliver any commercially reasonable documents or agreements requested by Landlord or such lessor or lender which provide Tenant with the non-disturbance protections set forth in this Section. In the event of a termination or foreclosure, Tenant shall, subject to the provisions of Section 12.5 of the Ground Leases, become a tenant of and attorn to the successor-in-interest to Landlord upon the same terms and conditions as are contained in this Lease, and shall execute any instrument reasonably required by Landlord's successor for that purpose. Tenant shall also, upon written request of Landlord, execute and deliver all instruments as may be required from time to time to subordinate the rights of Tenant under this Lease to any ground or underlying lease or to the lien of any mortgage or deed of trust (provided that such instruments include the nondisturbance and attornment provisions set forth above), or, if requested by Landlord, to subordinate, in whole or in part, any ground or underlying lease or the lien of any mortgage or deed of trust to this Lease.

SECTION 13.2. GROUND LESSOR NDAA. Landlord hereby represents and warrants that, as of the date hereof, there are no ground leases (except for the Ground Leases described above) and no mortgages and/or deeds of trust affecting the Project. Furthermore, and notwithstanding the foregoing to the contrary, Landlord agrees to provide Tenant with a commercially reasonable non-disturbance and attornment agreement ("NDAA") in favor of Tenant from the current Ground Lessor concurrently with the execution of the Lease in substantially the form of Exhibit Z attached to this Lease. Landlord also agrees to provide Tenant with a commercially reasonable NDAA from any ground lessor, mortgagor, lien holder or deed of trust holder of Landlord who later come(s) into existence at any time prior to the expiration of the Term of the Lease, as it may be extended, in consideration of, and as a condition precedent to, Tenant's agreement to be bound by this Section.

SECTION 13.3. ESTOPPEL CERTIFICATE.

(a) Tenant shall, at any time upon not less than ten (10) business days prior written notice from Landlord, execute, acknowledge and deliver to Landlord, in any form that Landlord may reasonably require, a statement in writing (i) certifying that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of the modification and certifying that this Lease, as modified, is in full force and effect) and the dates to which the rental, additional rent and other charges have been paid in advance, if any, and (ii) acknowledging that, to Tenant's actual knowledge as of the date thereof, there are no uncured defaults on the part of Landlord, or specifying each default if any are claimed, and (iii) setting forth all further information that Landlord or any purchaser or encumbrancer may reasonably require. Tenant's statement may be relied upon by any prospective purchaser or encumbrancer of all or any portion of the Building(s) or Project.

(b) Notwithstanding any other rights and remedies of Landlord, Tenant's failure to deliver any estoppel statement within the provided time shall be conclusive upon Tenant that (i) this Lease is in full force and effect, without modification except as may be represented by Landlord, (ii) there are no uncured Events of Default in Landlord's performance, and (iii) not more than one month's rental has been paid in advance.

(c) Landlord hereby agrees to execute and deliver to Tenant an estoppel certificate for the benefit of a transferee or lender of Tenant containing the same types of information, and within the same periods of time, as are set forth above, except such changes as are reasonably necessary to reflect that the estoppel certificate is being granted and signed by Landlord to Tenant's lender, assignee or sublessee, rather than from Tenant to Landlord or to a lender or purchaser. Notwithstanding anything to the contrary set forth in this Lease, neither Landlord nor Tenant will be appointed to act as power of attorney to sign for the other.

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CONFIDENTIAL TREATMENT REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT.

SECTION 13.4. FINANCIALS. Upon request by Landlord in connection with the sale or financing of the Site or a portion thereof, Tenant shall deliver to Landlord Tenant's current financial statements, certified true, accurate and complete by the chief financial officer of Tenant, including a balance sheet and profit and loss statement for the most recent prior year, or, in the event Tenant is a publicly traded corporation on a nationally recognized stock exchange, then in lieu of the foregoing, Tenant shall provide its current financial reports filed with the Securities and Exchange Commission (either of the foregoing being collectively referred to as the "STATEMENTS"), which Statements shall accurately and completely reflect the financial condition of Tenant. Landlord agrees that it will keep the Statements confidential (unless otherwise available to the public), except that Landlord shall have the right to deliver the same to any proposed purchaser or encumbrancer of all or any portion of the Site.

ARTICLE XIV. EVENTS OF DEFAULT AND REMEDIES

SECTION 14.1. TENANT'S DEFAULTS. The occurrence of any one or more of the following events shall constitute an "EVENT OF DEFAULT" BY TENANT:

(a) The failure by Tenant to make any payment of Basic Rent or additional rent required to be made by Tenant, as and when due, where the failure continues for a period of five (5) business days after receipt by Tenant of written notice from Landlord that such payment was not made when due; provided, however, that any such notice shall be in addition to and not in lieu of, any notice required under California Code of Civil Procedure Section 1161 and 1161(a) as amended. For purposes of these Events of Default and remedies provisions, the term "ADDITIONAL RENT" shall be deemed to include all amounts of any type whatsoever other than Basic Rent to be paid by Tenant pursuant to the terms of this Lease.

(b) The failure by Tenant to observe or perform any of the covenants or provisions of this Lease to be observed or performed by Tenant, where the failure continues for a period of thirty (30) days after receipt by Tenant of written notice from Landlord to Tenant; provided, however, that any such notice shall be in addition to and not in lieu of, any notice required under California Code of Civil Procedure Section 1161 and 1161(a) as amended. However, if the nature of the failure is such that more than thirty (30) days are reasonably required for its cure, then Tenant shall not be deemed to have committed an Event of Default if Tenant commences the cure within thirty (30) days, and thereafter diligently pursues the cure to completion.

SECTION 14.2. LANDLORD'S REMEDIES.

(a) If an Event of Default by Tenant occurs, then in addition to any other remedies available to Landlord, Landlord may exercise the following remedies:

(i) Landlord may terminate Tenant's right to possession of the Premises by any lawful means, in which case this Lease shall terminate and Tenant shall immediately surrender possession of the Premises to Landlord. Such termination shall not affect any accrued obligations of Tenant under this Lease. Upon termination, Landlord shall have the right to reenter the Premises and remove all persons and property. Landlord shall also be entitled to recover from Tenant:

(1) The worth at the time of award of the unpaid Basic Rent and additional rent which had been earned at the time of termination;

(2) The worth at the time of award of the amount by which the unpaid Basic Rent and additional rent which would have been earned after termination until the time of award exceeds the amount of such loss that Tenant proves could have been reasonably avoided;

(3) The worth at the time of award of the amount by which the unpaid Basic Rent and additional rent for the balance of the Term after the time of award exceeds the amount of such loss that Tenant proves could be reasonably avoided;

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(4) Any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result from Tenant's Event of Default, including, but not limited to, the cost of recovering possession of the Premises, refurbishment of the Premises, marketing costs, commissions and other expenses of reletting, including necessary repair, the unamortized portion of any tenant improvements and brokerage commissions funded by Landlord in connection with this Lease, reasonable attorneys' fees, and any other reasonable costs; and

(5) At Landlord's election, all other amounts in addition to or in lieu of the foregoing as may be permitted by law. The term "RENT" as used in the Lease shall be deemed to mean the Basic Rent, Tenant's Share of Operating Expenses and any other sums required to be paid by Tenant to Landlord pursuant to the terms of this Lease. Any sum, other than Basic Rent, shall be computed on the basis of the average monthly amount accruing during the twenty-four (24) month period immediately prior to the Event of Default, except that if it becomes necessary to compute such rental before the twenty-four (24) month period has occurred, then the computation shall be on the basis of the average monthly amount during the shorter period. As used in Sections 14.2(a)(i) (1) and
(2) above, the "worth at the time of award" shall be computed by allowing interest at the rate of ten percent (10%) per annum. As used in Section 14.2(a)(i)(3) above, the "worth at the time of award" shall be computed by discounting the amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%).

(ii) Landlord may elect not to terminate Tenant's right to possession of the Premises, in which event Landlord may continue to enforce all of its rights and remedies under this Lease, including the right to collect all rent as it becomes due. Efforts by the Landlord to maintain, preserve or relet the Premises, or the appointment of a receiver to protect the Landlord's interests under this Lease, shall not constitute a termination of the Tenant's right to possession of the Premises. In the event that Landlord elects to avail itself of the remedy provided by this Section 14.2(a)(ii), Landlord shall not unreasonably withhold its consent to an assignment or subletting of the Premises subject to the reasonable standards for Landlord's consent as are contained in this Lease.

(b) Except for maintenance and repair obligations under the Lease, Landlord shall be under no obligation to observe or perform any covenant of this Lease on its part to be observed or performed which accrues after the date of any Event of Default by Tenant unless and until the Event of Default is cured by Tenant, it being understood and agreed that the performance by Landlord of its obligations under this Lease are expressly conditioned upon Tenant's full and timely performance of its obligations under this Lease. The various rights and remedies reserved to Landlord in this Lease or otherwise shall be cumulative and, except as otherwise provided by California law, Landlord may to the extent it does not result in a double recovery by Landlord pursue any or all of its rights and remedies at the same time.

(c) No delay or omission of Landlord to exercise any right or remedy shall be construed as a waiver of the right or remedy or of any breach or Event of Default by Tenant. The acceptance by Landlord of rent shall not be a (i) waiver of any preceding breach or Event of Default by Tenant of any provision of this Lease, other than the failure of Tenant to pay the particular rent accepted, regardless of Landlord's knowledge of the preceding breach or Event of Default at the time of acceptance of rent, or (ii) a waiver of Landlord's right to exercise any remedy available to Landlord by virtue of the breach or Event of Default. The acceptance of any payment from a debtor in possession, a trustee, a receiver or any other person acting on behalf of Tenant or Tenant's estate shall not waive or cure a breach or Event of Default under Section 14.1. No payment by Tenant or receipt by Landlord of a lesser amount than the rent required by this Lease shall be deemed to be other than a partial payment on account of the earliest due stipulated rent, nor shall any endorsement or statement on any check or letter be deemed an accord and satisfaction and Landlord shall accept the check or payment without prejudice to Landlord's right to recover the balance of the rent or pursue any other remedy available to it. No act or thing done by Landlord or Landlord's agents during the Term shall be deemed an acceptance of a surrender of the Premises, and no agreement to accept a surrender shall be valid unless in writing and signed by Landlord. No employee of Landlord or of Landlord's agents shall have any power to accept the keys to the Premises prior to the termination of this Lease, and the delivery of the keys to any employee shall not operate as a termination of this Lease or a surrender of the Premises. Unless Landlord has entered into a new lease for all or a portion of the Premises with a third party with whom Landlord had

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executed a Recognition Agreement pursuant to Section 9.6 above, nothing in this Lease shall be deemed to constitute a waiver by Tenant of its right to seek a relief from forfeiture pursuant to Section 1179 of the California Code of Civil Procedure.

SECTION 14.3. LATE PAYMENTS. Any payment due to Landlord under this Lease, including without limitation Basic Rent, Tenant's Share of Operating Expenses or any other payment due to Landlord under this Lease, that is not received by Landlord within one (1) business day following the date due shall bear interest at the lesser of (i) the rate publicly announced and in effect in California, as of the date of the initial Tenant breach, by the Bank of America (or by Wells Fargo Bank if Bank of America is not then conducting business in California) as its Prime Rate or its Reference Rate or other similar benchmark, as quoted at its Los Angeles Main Branch, plus two percent (2%) and (ii) the maximum rate permitted by law ("INTEREST RATE") from the date due until fully paid. The payment of interest shall not cure any breach or Event of Default by Tenant under this Lease. In addition, Tenant acknowledges that the late payment by Tenant to Landlord of Basic Rent and Tenant's Share of Operating Expenses will cause Landlord to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult and impracticable to ascertain. Those costs may include, but are not limited to, administrative, processing and accounting charges, and late charges which may be imposed on Landlord by the terms of any ground lease, mortgage or trust deed covering the Premises. Accordingly, if any Basic Rent or Tenant's Share of Operating Expenses due from Tenant shall not be received by Landlord or Landlord's designee within five (5) business days after receipt by Tenant from Landlord of written notice that same has not been paid when due, then Tenant shall pay to Landlord, in addition to the interest provided above, a late charge, which the Tenant agrees is reasonable, in a sum equal to the lesser of two percent (2%) of the amount overdue or Two Thousand Dollars ($2,000.00) for each delinquent payment; provided that in no event shall such late charge be less than Two Hundred Fifty Dollars ($250.00). Acceptance of a late charge by Landlord shall not constitute a waiver of Tenant's breach or Event of Default with respect to the overdue amount, nor shall it prevent Landlord from exercising any of its other rights and remedies.

SECTION 14.4. RIGHT OF LANDLORD TO PERFORM. All covenants and agreements to be performed by Tenant under this Lease shall be performed at Tenant's sole cost and expense and without any abatement of rent or right of set-off (except as otherwise provided in this Lease). If Tenant fails to pay any sum of money, other than rent payable to Landlord, or fails to perform any other act on its part to be performed under this Lease, and the failure continues beyond any applicable grace period set forth in Section 14.1, then in addition to any other available remedies, Landlord may, at its election, following three (3) business days notice to Tenant (unless Tenant cures within such three (3) business day period) make the payment or perform the other act on Tenant's part. Landlord's election to make the payment or perform the act on Tenant's part shall not give rise to any responsibility of Landlord to continue making the same or similar payments or performing the same or similar acts. Tenant shall, promptly upon demand by Landlord, reimburse Landlord for all sums paid by Landlord and all necessary incidental costs, together with interest at the Interest Rate from the date of the payment by Landlord.

SECTION 14.5. DEFAULT BY LANDLORD. Landlord shall not be deemed to be in default in the performance of any obligation under this Lease, and Tenant shall have no rights to take any action against Landlord, unless and until Landlord has failed to perform the obligation within thirty (30) days after written notice by Tenant to Landlord specifying in reasonable detail the nature and extent of the failure; provided, however, that if the nature of Landlord's obligation is such that more than thirty (30) days are required for its performance, then Landlord shall not be deemed to be in default if it commences performance within the thirty (30) day period and thereafter diligently pursues the cure to completion. Upon any such default by Landlord, Tenant may exercise any of its rights provided in law or at equity, provided that such remedies shall not include termination rights except as expressly provided herein.

SECTION 14.6. EXPENSES AND LEGAL FEES. All sums reasonably incurred by Landlord or Tenant in connection with any Event of Default by Tenant or default by Landlord under Section 14.5, above, or holding over of possession by Tenant after the expiration or earlier termination of this Lease, or any action related to a filing for bankruptcy or reorganization by Tenant or Landlord, including without limitation all costs, expenses and actual accountants, appraisers, attorneys and other professional fees, and any collection agency or other collection charges, shall be due and payable to the non defaulting party on demand, and shall bear interest at the Interest Rate. Should

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either Landlord or Tenant bring any action in connection with this Lease which results in a judgment or an award, the prevailing party shall be entitled to recover as a part of the action its reasonable attorneys' fees, and all other costs. The prevailing party for the purpose of this Section shall be determined by the trier of the facts.

SECTION 14.8. SATISFACTION OF JUDGMENT. The obligations of Landlord do not constitute the personal obligations of the individual partners, trustees, directors, officers or shareholders of Landlord or its constituent partners. Should Tenant recover a money judgment against Landlord, such judgment shall be satisfied only from the interest of Landlord in the Project and out of the rent or other income from such property receivable by Landlord or out of consideration received by Landlord from the sale or other disposition of all or any part of Landlord's right, title or interest in the Project or from any insurance proceeds available to Landlord and no action for any deficiency may be sought or obtained by Tenant.

SECTION 14.9. INJUNCTION RELIEF. Landlord and Tenant agree that each may enforce their respective rights under this Lease by seeking specific performance remedies by arbitration or court proceedings, as appropriate.

ARTICLE XV. END OF TERM

SECTION 15.1. HOLDING OVER. This Lease shall terminate without further notice upon the expiration of the Term, and any holding over by Tenant after the expiration shall not constitute a renewal or extension of this Lease, or give Tenant any rights under this Lease, except when in writing signed by both parties. If Tenant holds over for any period after the Expiration Date (or earlier termination) of the Term with or without the prior written consent of Landlord, such possession shall constitute a month-to-month tenancy commencing on the first (1st) day following the termination of this Lease and terminating thirty (30) days following delivery of written notice of termination by either Landlord or Tenant to the other. In such event, possession shall be subject to all of the terms of this Lease, except that the monthly Basic Rent shall be *** of the Basic Rent for the month immediately preceding the date of termination. Any such monthly hold-over rental shall be appropriately prorated for any partial calendar month so long as Tenant has provided the requisite thirty days prior notice of termination. If Tenant fails to surrender the Premises within forty-five (45) days following the expiration of this Lease despite demand to do so by Landlord, Tenant shall indemnify and hold Landlord harmless from all loss or liability, including without limitation, any claims made by any succeeding tenant relating to such failure to surrender. The foregoing provisions of this
Section are in addition to and do not affect Landlord's right of re-entry or any other rights of Landlord under this Lease or at law.

SECTION 15.2. PERMITTED HOLD-OVER. Notwithstanding anything to the contrary set forth above, Tenant shall have the right, upon the expiration of the original Term of this Lease or any extension thereof, to hold over in the Premises for a period not to exceed six (6) months upon the same terms and conditions that were applicable to the Premises during the last month of the Term of the Lease (except that the Basic Rent shall be *** of the Basic Rent for the final month of the Term), by giving written notice of such election to Landlord not less than eighteen (18) months prior to the scheduled Expiration Date, as it may be extended. Such notice by Tenant shall provide that it is being delivered pursuant to this Section 15.2 and shall specify the length of the hold-over period, which period shall not thereafter be subject to change by Tenant.

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SECTION 15.3. MERGER ON TERMINATION. Subject to the provisions of Section 9.6, the voluntary or other surrender of this Lease by Tenant, or a mutual termination of this Lease, shall terminate any or all existing subleases unless Landlord, at its option, elects in writing to treat the surrender or termination as an assignment to it of any or all subleases affecting the Premises.

SECTION 15.4. SURRENDER OF PREMISES; REMOVAL OF PROPERTY. Subject to the provisions of 7.3 of this Lease, upon the Expiration Date or upon any earlier termination of this Lease, Tenant shall quit and surrender possession of the Premises to Landlord in as good order, condition and repair as when received or as hereafter may be improved by Landlord or Tenant, reasonable wear and tear, damage by casualty and repairs which are Landlord's obligation excepted, and shall, without expense to Landlord, remove or cause to be removed from the Premises all personal property and debris, except for any items that Landlord may by written authorization allow to remain as provided in Section 7.3. Tenant shall repair all damage to the Premises resulting from the removal, which repair shall include the repair of structural damage, provided that Tenant shall not be required to patch carpeting or paint walls. If Tenant shall fail to comply with the provisions of this Section, Landlord may effect the removal and/or make any repairs, and the actual and reasonable cost to Landlord shall be additional rent payable by Tenant upon demand. If Tenant fails to remove Tenant's personal property from the Premises upon the expiration of the Term, Landlord may upon three (3) business days notice to Tenant referencing this Section 15.4, remove, store, dispose of and/or retain such personal property, at Landlord's option, in accordance with then applicable laws, all at the expense of Tenant. If requested by Landlord, Tenant shall execute, acknowledge and deliver to Landlord an instrument in writing releasing and quitclaiming to Landlord all right, title and interest of Tenant in the Premises.

ARTICLE XVI. PAYMENTS AND NOTICES

All sums payable by Tenant to Landlord shall be deemed to be rent under this Lease and shall be paid, without deduction or offset (except as otherwise provided in this Lease), in lawful money of the United States to Landlord at its address set forth in Item 12 of the Basic Lease Provisions, or at any other place as Landlord may designate in writing. Unless this Lease expressly provides otherwise, as for example in the payment of Basic Rent and the Tenant's Share of Operating Costs pursuant to Sections 4.1 and 4.2, then any payment from either party shall be due and payable within twenty (20) days after delivery to such party, at its notice address herein, of written demand and supporting invoices/documentation with respect thereto. All payments requiring proration shall be prorated on the basis of a thirty (30) day month and a three hundred sixty (360) day year. Any notice, election, demand, consent, approval or other communication to be given or other document to be delivered by either party to the other may be delivered in person or by courier or overnight delivery service to the other party, or may be deposited in the United States mail, duly registered or certified, postage prepaid, return receipt requested, and addressed to the other party at the address set forth in Item 12 of the Basic Lease Provisions. Either party may, by written notice to the other, served in the manner provided in this Article, designate a different address for notices.

ARTICLE XVII. RULES AND REGULATIONS

Subject to the preamble to Exhibit E, Tenant agrees to observe faithfully and comply with the Rules and Regulations, attached as Exhibit E, and any reasonable and nondiscriminatory amendments, modifications and/or additions as may be adopted and published by written notice to tenants by Landlord for the safety, care, security, good order, or cleanliness of the Premises, Building, Site and Common Areas; provided, however, that no amendments, modifications or additions shall interfere with Tenant's permitted use of the Premises or materially decrease Tenant's rights under this Lease. Landlord shall not be liable to Tenant for any violation of the Rules and Regulations or the breach of any covenant or condition in any lease by any other tenant or such tenant's agents, employees, contractors, guests or invitees. One or more waivers by Landlord of any breach of the Rules and Regulations by Tenant or by any other tenant(s) shall not be a waiver of any subsequent breach of that rule or any other. Landlord shall not enforce the Rules and Regulations in an unreasonable or discriminatory manner or in a manner which shall unreasonably interfere with or restrict the normal and customary use of the Premises by Tenant for normal and customary business office operations. In the case of any conflict between the Rules and Regulations and this Lease, this Lease shall be controlling.

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CONFIDENTIAL TREATMENT REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT.

ARTICLE XVIII. BROKER'S COMMISSION

The parties recognize as the broker(s) who negotiated this Lease the firm(s), if any, whose name(s) is (are) stated in Item 10 of the Basic Lease Provisions, and agree that Landlord shall be responsible for the payment of brokerage commissions to those broker(s) unless otherwise provided in this Lease. Landlord and Tenant warrant that they have had no dealings with any other real estate broker or agent in connection with the negotiation of this Lease, and Landlord and Tenant agree to indemnify and hold the other harmless from any cost, expense or liability (including reasonable attorneys' fees) for any compensation, commissions or charges claimed by any other real estate broker or agent employed or claiming to represent or to have been employed by Landlord or Tenant, as applicable, in connection with the negotiation of this Lease. The foregoing agreement shall survive the termination of this Lease.

ARTICLE XIX. TRANSFER OF LANDLORD'S INTEREST

In the event of any transfer of Landlord's interest in the Premises, the transferor shall be automatically relieved of all further obligations on the part of Landlord accruing under this Lease from and after the date of the transfer, provided that such transferee assumes the obligations as to which Landlord is being relieved, and the transferor shall be relieved of any obligation to pay any funds in which Tenant has an interest to the extent that such funds have been turned over, subject to that interest, to the transferee and Tenant is notified of the transfer as required by law. It is intended that the covenants and obligations contained in this Lease on the part of Landlord shall, subject to the foregoing, be binding on Landlord, its successors and assigns, only during and in respect to their respective successive periods of ownership.

ARTICLE XX. INTERPRETATION

SECTION 20.1. GENDER AND NUMBER. Whenever the context of this Lease requires, the words "LANDLORD" and "TENANT" shall include the plural as well as the singular, and words used in neuter, masculine or feminine genders shall include the others.

SECTION 20.3. JOINT AND SEVERAL LIABILITY. If more than one person or entity is named as Tenant or Landlord , the obligations imposed upon each shall be joint and several and the act of or notice from, or notice or refund to, or the signature of, any one or more of them shall be binding on all of them with respect to the tenancy of this Lease, including, but not limited to, any renewal, extension, termination or modification of this Lease.

SECTION 20.5. TIME OF ESSENCE. Time is of the essence with respect to the performance of every provision of this Lease.

SECTION 20.6. CONTROLLING LAW/VENUE. This Lease shall be governed by and interpreted in accordance with the laws of the State of California. Any litigation commenced concerning any matters whatsoever arising out of or in any way connected to this Lease shall be initiated in the Superior Court of the county in which the Project is located.

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party adversely affected, shall be held invalid or unenforceable to any extent, the remainder of this Lease shall not be affected and each term and provision of this Lease shall be valid and enforceable to the fullest extent permitted by law.

SECTION 20.9. INABILITY TO PERFORM. In the event that either party shall be delayed or hindered in or prevented from the performance of any work or in performing any act required under this Lease by reason of any cause beyond the reasonable control of that party, then the performance of the work or the doing of the act shall be excused for the period of the delay and the time for performance shall be extended for a period equivalent to the period of the delay. The provisions of this Section shall not operate to excuse Tenant from the prompt payment of rent, Landlord from the payment of any sums due Tenant hereunder, or either party from the timely performance of any other obligation under this Lease within such party's reasonable control.

SECTION 20.10. ENTIRE AGREEMENT. This Lease and its exhibits and other attachments cover in full each and every agreement of every kind between the parties concerning the Premises, the Building, and the Project, and all preliminary negotiations, oral agreements, understandings and/or practices, except those contained in this Lease, are superseded and of no further effect. Tenant and Landlord waive their respective rights to rely on any representations or promises made by the other or others which are not contained in this Lease. No verbal agreement or implied covenant shall be held to modify the provisions of this Lease, any statute, law, or custom to the contrary notwithstanding.

SECTION 20.11. QUIET ENJOYMENT. So long as an Event of Default shall not have occurred under this Lease, and subject to the other provisions of this Lease, Tenant shall have the right of quiet enjoyment and use of the Premises for the Term without hindrance or interruption by Landlord or any other person claiming by or through Landlord.

SECTION 20.12. SURVIVAL. All covenants of Landlord or Tenant which reasonably would be intended to survive the expiration or sooner termination of this Lease, including without limitation any warranty or indemnity hereunder, shall so survive and continue to be binding upon and inure to the benefit of the respective parties and their successors and assigns.

SECTION 20.13. INTERPRETATION. This Lease shall not be construed in favor of or against either party, but shall be construed as if both parties prepared this Lease.

ARTICLE XXI. EXECUTION AND RECORDING

SECTION 21.1. COUNTERPARTS. This Lease may be executed in one or more counterparts, each of which shall constitute an original and all of which shall be one and the same agreement.

SECTION 21.2. CORPORATE, LIMITED LIABILITY COMPANY AND PARTNERSHIP AUTHORITY. If Landlord or Tenant is a corporation, limited liability company or partnership, each individual executing this Lease on behalf of the corporation, limited liability company or partnership represents and warrants that he or she is duly authorized to execute and deliver this Lease on behalf of the corporation, limited liability company or partnership, and that this Lease is binding upon the corporation, limited liability company or partnership in accordance with its terms.

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SECTION 21.3. EXECUTION OF LEASE; NO OPTION OR OFFER. The submission of this Lease to Tenant shall be for examination purposes only, and shall not constitute an offer to or option for Tenant to lease the Premises. Execution of this Lease by Tenant and its return to Landlord shall not be binding upon Landlord, notwithstanding any time interval, until Landlord has in fact executed and delivered this Lease to Tenant within ten (10) business days of receipt of such fully executed Lease by Tenant, it being intended that this Lease shall only become effective upon execution by Landlord and delivery of a fully executed counterpart to Tenant.

SECTION 21.4. RECORDING. Tenant shall not record this Lease without the prior written consent of Landlord. Tenant and Landlord, upon the request of the other, shall execute and acknowledge a "SHORT FORM" memorandum of this Lease for recording purposes.

SECTION 21.6. EXECUTED COPY. Any fully executed photocopy or similar reproduction of this Lease shall be deemed an original for all purposes.

SECTION 21.7. ATTACHMENTS. All exhibits, amendments, riders and addenda attached to this Lease are hereby incorporated into and made a part of this Lease.

ARTICLE XXII. MISCELLANEOUS

SECTION 22.1. NONDISCLOSURE OF LEASE TERMS. Tenant and Landlord acknowledge and agree, subject to the exceptions and qualifications set forth below, that the terms of this Lease are confidential and constitute proprietary information of Landlord and Tenant. Tenant and Landlord agree that they, and their respective partners, officers, directors, employees and attorneys, shall not intentionally and voluntarily disclose, by public filings or otherwise, the terms and conditions of this Lease to any other tenant or apparent prospective tenant of the Building or the Project, or to another landlord or to any media, either directly or indirectly, without the prior written consent of the other, except to disclose the location and size of the Premises and the term of the Lease; provided, however, notwithstanding the foregoing, Tenant and Landlord may disclose the terms of this Lease to prospective assignees of this Lease and prospective subtenants under this Lease, or to purchasers of the Building(s) or of the Landlord or Tenant, or to their respective lenders and/or investors, or to their lawyers, accountants, brokers and others who are providing services and need to know the terms and conditions of this Lease in connection with the providing of such services, or as otherwise required by applicable laws, including filings required by applicable government agencies.

SECTION 22.2. [INTENTIONALLY OMITTED]

SECTION 22.3. CHANGES REQUESTED BY LENDER. If, in connection with obtaining financing for the Project, the lender shall request reasonable modifications in this Lease as a condition to the financing, Tenant will not unreasonably withhold or delay its consent, provided that the modifications do not increase the monetary obligations of Tenant or materially increase the non-monetary obligations of Tenant or materially and adversely affect the leasehold interest created by this Lease.

SECTION 22.4. MORTGAGEE PROTECTION. No act or failure to act on the part of Landlord which would otherwise entitle Tenant to be relieved of its obligations hereunder shall result in such a release or termination unless (a) Tenant has given notice by registered or certified mail to any beneficiary of a deed of trust or mortgage covering the Building whose address has been furnished to Tenant and (b) such beneficiary is afforded a reasonable opportunity to cure the default by Landlord (which in no event shall be more than sixty (60) days), including, if necessary to effect the cure, time to obtain possession of the Building by power of sale or judicial foreclosure provided that such foreclosure remedy is diligently pursued. Tenant agrees that each beneficiary of a deed of trust or mortgage covering the Building is an express third party beneficiary hereof, Tenant shall have no right or claim

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for the collection of any deposit from such beneficiary or from any purchaser at a foreclosure sale unless such beneficiary or purchaser shall have actually received and not refunded the deposit, and Tenant shall comply with any written directions by any beneficiary to pay rent due hereunder directly to such beneficiary without determining whether a default exists under such beneficiary's deed of trust.

SECTION 22.6. SECURITY MEASURES. Landlord shall provide a security service to patrol the exterior of the Buildings and the Common Areas of the Project, but not of the Site if and for so long as Tenant leases all eight Buildings of the Site. Tenant shall be entitled, at its sole cost and expense, to provide its own security systems for the Premises and, if and for so long as Tenant leases all eight Buildings of the Site, for the Site, including without limitation, security personnel stationed at each of the Buildings and the Site and roving security personnel. Tenant's interior security systems for each Building which is entirely leased by Tenant shall not be subject to Landlord's approval thereto, provided that such systems do not interfere with any Building Systems and are removed by Tenant at its expense upon termination of this Lease. Without limiting the generality of the foregoing, Tenant shall be permitted to install security cameras on each full Building of the Site leased by Tenant, subject to any reasonable requirements imposed by Landlord for compliance with laws, cosmetic considerations, safety and the like; provided that such cameras shall be removed by Tenant at is expense upon termination of this Lease. Tenant shall not have to pay additional consideration to Landlord for its rights under this Section. Landlord shall have no obligation or right to provide security for the full Buildings leased by Tenant or, if and for so long as Tenant leases all eight Buildings of the Site, for the Site.

SECTION 22.7. ARBITRATION OF DISPUTES.

(a) EXCEPT AS SET FORTH IN SUBPARAGRAPH (b) BELOW, IN THE EVENT OF ANY CLAIMS OR DISPUTES BETWEEN LANDLORD AND TENANT ARISING OUT OF, OR RELATING TO THE LEASE, EXCEPT WITH RESPECT TO ACTIONS FOR UNLAWFUL OR FORCIBLE DETAINER, EITHER PARTY MAY CAUSE THE DISPUTE TO BE SUBMITTED TO THE AMERICAN ARBITRATION ASSOCIATION ("AAA"), OR ITS SUCCESSORS, IN THE COUNTY IN WHICH THE BUILDING IS SITUATED FOR BINDING ARBITRATION BEFORE A SINGLE ARBITRATOR. NO ARBITRATION ELECTION BY EITHER PARTY PURSUANT TO THIS SUBSECTION SHALL BE EFFECTIVE IF MADE LATER THAN THIRTY (30) DAYS FOLLOWING SERVICE OF A JUDICIAL SUMMONS AND COMPLAINT BY OR UPON SUCH PARTY CONCERNING THE DISPUTE. THE ARBITRATION SHALL BE CONDUCTED IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF THE AAA, AS APPLICABLE, AND OTHERWISE PURSUANT TO THE CALIFORNIA ARBITRATION ACT (CODE OF CIVIL PROCEDURE SECTIONS 1280 ET SEQ.). NOTWITHSTANDING THE FOREGOING, THE ARBITRATOR IS SPECIFICALLY DIRECTED TO LIMIT DISCOVERY TO THAT WHICH IS ESSENTIAL TO THE EFFECTIVE PROSECUTION OR DEFENSE OF THE ACTION. THE ARBITRATOR SHALL, TO THE EXTENT APPLICABLE, FOLLOW THE SUBSTANTIVE LAW OF CALIFORNIA AND SHALL RENDER A REASONED WRITTEN DECISION WITHIN TWENTY DAYS FOLLOWING THE HEARING. THE ARBITRATOR SHALL APPORTION THE COSTS OF THE ARBITRATION, TOGETHER WITH THE ATTORNEYS' FEES OF THE PARTIES, IN THE MANNER DEEMED EQUITABLE BY THE ARBITRATOR, IT BEING THE INTENTION OF THE PARTIES THAT THE PREVAILING PARTY ORDINARILY BE ENTITLED TO RECOVER ITS REASONABLE COSTS AND FEES. JUDGMENT UPON ANY AWARD RENDERED BY THE ARBITRATOR MAY BE ENTERED BY ANY COURT HAVING JURISDICTION.

(b) THE PROVISIONS OF THIS SECTION SHALL NOT APPLY TO:

(i) ANY UNLAWFUL DETAINER ACTION INSTITUTED BY LANDLORD AS A RESULT OF A DEFAULT OR ALLEGED DEFAULT BY TENANT PURSUANT TO THIS LEASE;

*** Confidential treatment has been requested for the redacted text of this document. The confidential redacted text has been omitted and filed separately with the Securities and Exchange Commission.

CONFIDENTIAL TREATMENT REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT.

(ii) ANY REQUEST OR APPLICATION FOR AN ORDER OR DECREE GRANTING ANY PROVISIONAL OR ANCILLARY REMEDY (SUCH AS A TEMPORARY RESTRAINING ORDER OR INJUNCTION) WITH RESPECT TO ANY RIGHT OR OBLIGATION OF EITHER PARTY TO THIS LEASE, AND ANY PRELIMINARY DETERMINATION OF THE UNDERLYING CONTROVERSY, DISPUTE, QUESTION OR ISSUE AS IS REQUIRED TO DETERMINE WHETHER OR NOT TO GRANT THE RELIEF REQUESTED OR APPLIED FOR. A FINAL AND BINDING DETERMINATION OF SUCH UNDERLYING CONTROVERSY, DISPUTE, QUESTION OR ISSUE SHALL BE MADE BY AN ARBITRATION CONDUCTED PURSUANT TO THIS SECTION AFTER AN APPROPRIATE TRANSFER UPON MOTION OR APPLICATION OF EITHER PARTY HERETO. ANY ANCILLARY OR PROVISIONAL RELIEF WHICH IS GRANTED PURSUANT TO THIS CLAUSE (iii) SHALL CONTINUE IN EFFECT PENDING AN ARBITRATION DETERMINATION AND ENTRY OF JUDGMENT THEREON PURSUANT TO THIS SECTION.

(iii) EXERCISE OF ANY REMEDIES TO ENFORCE ANY JUDGMENT ENTERED BASED UPON A DETERMINATION MADE BY ARBITRATION PURSUANT TO THIS SECTION.

SECTION 22.8. CONSENT/DUTY TO ACT REASONABLY. Except where a party is expressly given the right to consent to any matter in its sole or absolute discretion, and except for matters which could have an adverse effect on the Building Structure or Building Systems or the exterior appearance of the Building, whereupon in each such case Landlord's duty is to act in good faith and in compliance with the Lease, any time the consent of Landlord or Tenant is required, such consent shall not be unreasonably withheld, conditioned or delayed. Whenever the Lease grants Landlord or Tenant the right to take action, exercise discretion, establish rules and regulations or make allocations or other determinations (other than decisions to exercise expansion, contraction, cancellation, termination or renewal options), then except as otherwise provided herein, Landlord and Tenant shall act reasonably and in good faith and take no action which might result in the frustration of the reasonable expectations of a sophisticated tenant or landlord concerning the benefits to be enjoyed under the Lease

SECTION 22.9. ACCESS. Except in emergency circumstances or during periods of necessary repair, Tenant shall be granted access to the Building, the Premises and the parking provided to the Building twenty-four (24) hours per day, seven (7) days per week, every day of the year.

SECTION 22.10. SPECTRUM PREMISES.

(a) Notwithstanding the provisions of the Spectrum Leases, Tenant shall be permitted to continue to occupy the Spectrum Premises on a month-to-month hold-over basis following the expiration date of the Spectrum Leases; provided that Tenant may elect to hold-over in only a portion of the Spectrum Premises on a full building by full building basis. Landlord agrees that it shall not require Tenant to vacate the Spectrum Premises, or subject Tenant to any liability for failing to do so, prior to the date that is three (3) months following the Commencement Date of this Lease. Any such hold-over by Tenant shall be subject to all of the terms of the Spectrum Leases, and the base rent payable by Tenant shall, from the date of the hold-over until six (6) months after the Commencement Date of this Lease (if applicable), remain at the same amount in effect for the final full month of the scheduled term of the applicable Spectrum Lease, as appropriately prorated for any full buildings relinquished. In consideration of the foregoing, Tenant shall cooperate in good faith with Landlord's efforts to release the Spectrum Premises by keeping Landlord advised of Tenant's anticipated relocation schedule and providing Landlord with reasonable access to show the space to prospective tenants.

(b) Notwithstanding the provisions of the Spectrum Leases, Landlord agrees that Tenant shall not be required to remove any of the existing improvements installed within the Spectrum Premises; provided, however, that Tenant shall remain obligated to remove all of its personal property, equipment, trade fixtures and debris from the Spectrum Premises upon the vacation thereof and to repair any damage to the Spectrum Premises, normal wear and tear excepted.

*** Confidential treatment has been requested for the redacted text of this document. The confidential redacted text has been omitted and filed separately with the Securities and Exchange Commission.

CONFIDENTIAL TREATMENT REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT.

LANDLORD:                                 TENANT:

IRVINE COMMERCIAL PROPERTY                BROADCOM CORPORATION,
COMPANY, a Delaware corporation           a California corporation

By: /s/ Clarence W. Barker                By: /s/ William J. Ruehle
   _______________________________        ________________________________
   Clarence W. Barker,                    William J. Ruehle, Vice President and
   Executive Vice President               Chief Financial Officer

By: /s/ William R. Halford
   _______________________________
   William R. Halford, President,
   Office Properties

*** Confidential treatment has been requested for the redacted text of this document. The confidential redacted text has been omitted and filed separately with the Securities and Exchange Commission.

CONFIDENTIAL TREATMENT REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT.

EXHIBITS INTENTIONALLY OMITTED.
AVAILABLE UPON REQUEST.

Exhibit 10.39

FILED
SUPERIOR COURT OF CALIFORNIA
COUNTRY OF ORANGE
CENTRAL JUSTICE CENTER

NOV 01 2004

ALAN SLATER, Clerk of the Court
/s/ J. Frausto
BY J. FRAUSTO

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IRELL & MANELLA LLP
David Siegel (Bar No. 101355)
Daniel P. Lefler (Bar No. 151253)
Harry A. Mittleman (Bar No. 172343)
Stephen Hasegawa (Bar No. 198472)
1800 Avenue of the Stars, Suite 900
Los Angeles, California 90067-4276
Telephone: (310) 277-1010
Facsimile: (310) 203-7199

IRELL & MANELLA LLP
Layn R. Phillips (103854)
840 Newport Center Drive, Suite 500
Newport Beach, California 92660-6324
Telephone: (949) 760-0991
Facsimile: (949) 760-5200

Attorneys for Defendants HENRY T. NICHOLAS,
III, HENRY SAMUELI, WILLIAM J. RUEHLE,
AURELIO E. FERNANDEZ, DAVID A. DULL,
TIMOTHY LINDENFELSER, MARTIN J.
COLOMBATTO, and VAHID MANIAN, and
Nominal Defendant BROADCOM
CORPORATION

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF ORANGE


KIM DAVID, et al.,			Case No. 01-CC-03930

Plaintiffs,			Assigned To: Judge Ronald L. Bauer

v.			STIPULATION OF SETTLEMENT

WERNER F. WOLFEN, et al.,

Defendants,

– and –

BROADCOM CORPORATION, a California corporation,

Nominal Defendant.

This Document Relates To:

ALL ACTIONS.

STIPULATION OF SETTLEMENT

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

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

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

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

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

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

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

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

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

upon and subject to the terms and conditions hereof.

I.    SETTLING DERIVATIVE PLAINTIFFS’ CLAIMS IN THE DERIVATIVE

      ACTIONS AND THE SETTLING DERIVATIVE DEFENDANTS’ DENIALS OF

      WRONGDOING AND LIABILITY

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

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

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

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

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

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

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

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

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

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

“ David Complaint”) in the David Action.

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

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

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

407 GLT (the “ Aiken Action”).

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

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

“Derivative Actions.”

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

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

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

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

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

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

its partners and employees.

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

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

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

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

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

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

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

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

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

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

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

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

shareholders.

II. BENEFITS OF SETTLEMENT

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

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

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

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

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

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

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

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

Derivative Actions.

The Settling Derivative Defendants and Broadcom have also concluded that further

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

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

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

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

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

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

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

forth in this Stipulation.

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

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

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

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

II. TERMS OF STIPULATION AND AGREEMENT OF SETTLEMENT

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

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

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

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

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

conditions of the Stipulation, as follows:

1. Definitions

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

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

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

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

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

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

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

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

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

Derivative Defendants, the Settling Derivative Plaintiffs and Broadcom.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

§ 1542, which provides:

      A general release does not extend to claims which the creditor does not know or
      suspect to exist in his favor at the time of executing the release, which if known
      by him must have materially affected his settlement with the debtor.

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

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

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

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

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

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

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

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

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

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

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

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

the settlement of which this release is a part.

2. Settlement Of The Derivative Actions

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

Settling Derivative Parties, on the following terms.

2.2 Broadcom has adopted or will adopt the corporate governance and

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

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

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

the Complaints will occur.

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

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

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

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

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

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

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

the best interests of Broadcom and Broadcom shareholders.

3. Dismissals

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

4. Releases

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

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

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

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

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

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

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

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

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

Derivative Defendant was not legally entitled to advancement or indemnification.

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

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

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

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

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

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

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

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

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

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

agreement between Broadcom and such Settling Derivative Defendant.

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

Of Expenses

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

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

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

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

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

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

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

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

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

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

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

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

no liability or responsibility therefor whatsoever.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

expenses pursuant to this ¶ 5.2 of this Stipulation.

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

Termination

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

of all of the following events:

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

accordance with applicable law;

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

¶¶ 5.l and 5.2 above;

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

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

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

and

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

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

substantially the form attached hereto as Exhibit C.

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

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

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

to proceed with the Stipulation.

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

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

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

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

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

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

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

Stipulation shall be treated as vacated, nunc pro tunc .

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7. Miscellaneous Provisions

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

respectively.

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

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

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

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

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

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

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

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

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

-11-

STIPULATION OF SETTLEMENT

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

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

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

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

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

and are fully incorporated hereby by this reference.

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

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

7.7 The Stipulation and the Exhibits attached hereto constitute the entire

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

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

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

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

Settling Derivative Party shall bear its own costs.

7.8 Settling Derivative Plaintiffs’ Counsel is expressly authorized by the

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

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

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

which they deem appropriate.

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

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

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

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

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

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

successors and assigns of the parties hereto.

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

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

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STIPULATION OF SETTLEMENT

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

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

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

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

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

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

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

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

IT IS SO STIPULATED.


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



	By:	/s/ Darren J. Robbins

		DARREN J.ROBBINS
		Counsel for Derivative Plaintiffs


Dated: 10-25-04	SOLTAN & ASSOCIATES



	By:	/s/ Venus Soltan

		VENUS SOLTAN
	Counsel for Derivative Plaintiffs



Dated: 10/23/04	MILBERG WEISS BERSHAD & SCHULMAN LLP



	By:	/s/ Jeff S. Westerman

		JEFF S. WESTERMAN
	Counsel for Derivative Plaintiffs

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STIPULATION OF SETTLEMENT

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

	By:	/s/ Robert B. Weiser

		ROBERT B. WEISER
	Counsel for Derivative Plaintiffs




Dated: 10/26/04	IRELL & MANELLA LLP

	By:	/s/ David Siegel

		DAVID SIEGEL
	Counsel for Defendants
	Henry T. Nicholas, III, Henry
	Samueli, William J. Ruehle,
	Aurelio E. Fernandez, David A.
	Dull, Timothy Lindenfelser, Martin
	J. Colombatto, Vahid Manian and
	Nominal Defendant Broadcom
	Corporation





Dated: 10/26/04	GRAY CARY WARE & FREIDENRICH LLP

	By:	/s/ Shirli Fabbri Weiss

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

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STIPULATION OF SETTLEMENT

EXHIBIT A

EXHIBIT A

CORPORATE GOVERNANCE

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

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

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

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

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

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

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

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

- 2 -

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

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

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

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

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

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

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

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

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

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

- 3 -

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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EXHIBIT B

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FILED
SUPERIOR COURT OF CALIFORNIA
COUNTY OF ORANGE
CENTRAL JUSTICE CENTER

NOV 01 2004

ALAN SLATER, Clerk of the Court
/s/ J. Frausto
BY J. FRAUSTO

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF ORANGE


KIM DAVID, et al.					Case No. 0l-CC-03930

Plaintiffs,					Assigned To: Judge Ronald L. Bauer

v.

					[PROPOSED] ORDER GRANTING
WERNER F. WOLFEN, et al,					APPROVAL OF STIPULATION OF SETTLEMENT, AND ORDER OF DISMISSAL

Defendants,

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BROADCOM CORPORATION, a California corporation,

Nominal Defendant.




This Document Relates To:

ALL ACTIONS.

EXHIBIT B

[PROPOSED] ORDER

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

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

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

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

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

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

the Stipulation of Settlement.

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

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

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

of the Stipulation.

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

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

Procedure §§ 128.5 and 128.7.

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

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

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

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

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

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

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

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

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

or occurrences.

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

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

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

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

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[PROPOSED] ORDER

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

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

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

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

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

pursuant to California Code of Civil Procedure § 581d.


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

				Judge Ronald L. Bauer

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[PROPOSED] ORDER

EXHIBIT C


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8	UNITED STATES DISTRICT COURT

9	CENTRAL DISTRICT OF CALIFORNIA

10	SOUTHERN DIVISION

11
	WILLIAM AIKEN Derivatively On Behalf of	)	Case No. SACV 01-407 GLT (MLGx)
12	BROADCOM CORPORATION,	)
		)
13	Plaintiff,	)	[PROPOSED] ORDER OF DISMISSAL
		)
14	vs.	)
		)
15	HENRY T. NICHOLAS, III, et al.,	)
		)
16	Defendants,	)
		)
17	-and-	)
		)
18	BROADCOM CORPORATION, a California	)
	corporation,	)
19		)
	Nominal Defendant.	)
20		)
		)
21		)


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	EXHIBIT C


1	Pursuant to Rules 23.1 and 41 (a) of the Federal Rules of Civil Procedure, and good cause

2	appearing, IT IS HEREBY ORDERED as follows:

3	1. The entire action is hereby DISMISSED as to the Settling Derivative Parties, as

4	that term is defined in the Stipulation of Settlement dated as of October 25, 2004, and all causes of

5	action. Any claims of the Settling Derivative Plaintiffs in their individual capacities are

6	DISMISSED WITH PREJUDICE.

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

8	their respective counsel, at all times, complied with the requirements of Rule 11 of the Federal

9	Rules of Civil Procedure.

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11	Dated:
		Hon. Gary L. Taylor

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Exhibit 21.1

Subsidiaries of the Company


		State or Other Jurisdiction of
Name of Entity		Incorporation or Organization

Broadcom International Limited		Cayman Islands

Broadcom Singapore Pte Ltd.		Singapore

ServerWorks Corporation		Delaware

ServerWorks International Ltd.		Cayman Islands

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements (Form S-8 Nos. 333-60763, 333-80317, 333-87673, 333-93457, 333-33170, 333-41110, 333-49158, 333-49680, 333-51632, 333-53492, 333-58498, 333-58574, 333-67702, 333-71338, 333-90862, 333-107882, 333-114405, 333-116877, 333-117866, 333-119553, Form S-4 No. 333-112997, and Form S-3 Nos. 333-90903, 333-112998, 333-114382, 333-119552) of our reports dated February 25, 2004 with respect to the consolidated financial statements and financial statement schedule of Broadcom Corporation, management’s assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internal control over financial reporting of Broadcom Corporation, included in this Annual Report on Form 10-K for the year ended December 31, 2004.

/s/ ERNST & YOUNG LLP

Orange County, California
February 25, 2005

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Scott A. McGregor, President and Chief Executive Officer, certify that:

1. I have reviewed this Annual Report on Form 10-K of Broadcom Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


	(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


	(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


	/s/ Scott A. McGregor

	Scott A. McGregor
	President and Chief Executive Officer
	(Principal Executive Officer)

Date: March 1, 2005

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, William J. Ruehle, Vice President and Chief Financial Officer, certify that:

1. I have reviewed this Annual Report on Form 10-K of Broadcom Corporation;


	(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


	(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


	/s/ William J. Ruehle

	William J. Ruehle
	Vice President and Chief Financial Officer
	(Principal Financial Officer)

Date: March 1, 2005

Exhibit 32

The following certifications are being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and pursuant to SEC Release No. 33-8238 are being “furnished” to the SEC rather than “filed” either as part of the Report or as a separate disclosure statement, and are not to be incorporated by reference into the Report or any other filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. The foregoing certifications shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of Section 18 or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended.

Certification of Chief Executive Officer

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Broadcom Corporation (the “Company”) hereby certifies, to such officer’s knowledge, that:


	(i) the accompanying Annual Report on Form 10-K of the Company for the annual period ended December 31, 2004 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and

	(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


	/s/ Scott A. McGregor

	Scott A. McGregor
	Chief Executive Officer

Date: March 1, 2005

Certification of Chief Financial Officer


	(i) the accompanying Annual Report on Form 10-K of the Company for the annual period ended December 31, 2004 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and

	(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


	/s/ William J. Ruehle

	William J. Ruehle
	Chief Financial Officer

Date: March 1, 2005


		used are consistent with the plans and estimates that we use to manage our business. It is possible, however, that the plans and estimates used may be incorrect. If our actual results, or the plans and estimates used in future impairment analyses, are lower than the original estimates used to assess the recoverability of these assets, we could incur additional impairment charges.

	•	Deferred Taxes and Contingencies. We utilize the liability method of accounting for income taxes. We record a valuation allowance to reduce our deferred tax assets to the amount that we believe is more likely than not to be realized. In assessing the need for a valuation allowance, we consider all positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance. As a result of our cumulative losses and the full utilization of our loss carrybacks, we concluded that a full valuation allowance against our net deferred tax assets was appropriate. In the future, if we realize a deferred tax asset that carries a valuation allowance, we will record a reduction to income tax expense in the period of such realization. We record estimated tax liabilities to the extent the contingencies are probable and can be reasonably estimated. However the actual liability in any such tax contingencies may be materially different from our estimates, which could result in the need to record additional tax liabilities or potentially reverse previously recorded tax liabilities.

	•	Litigation and Settlement Costs. From time to time, we are involved in disputes, litigation and other legal actions. We are aggressively defending our current litigation matters, including our pending securities class action lawsuit. However, there are many uncertainties associated with any litigation, and we cannot assure you that these actions or other third party claims against us will be resolved without costly litigation and/or substantial settlement charges. In addition the resolution of any future intellectual property litigation may require us to make royalty payments, which could adversely impact gross margins in future periods. If any of those events were to occur, our business, financial condition and results of operations could be materially and adversely affected. We record a charge equal to at least the minimum estimated liability for a loss contingency when both of the following conditions are met: (i) information available prior to issuance of the financial statements indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements and (ii) the range of loss can be reasonably estimated. However the actual liability in any such litigation may be materially different from our estimates, which could result in the need to record additional costs.