Qualcomm Inc.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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Preliminary Proxy Statement |
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(as permitted by Rule 14a-6(e)(2)) |
[X] |
Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to
Section 240.14a-12 |
QUALCOMM INCORPORATED
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
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identify the filing for which the offsetting fee was paid previously. Identify
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Dear Fellow Stockholder:
You are cordially invited to attend our Companys annual
meeting on Tuesday, March 7, 2006. The meeting will begin
promptly at 9:30 a.m. local time at the Copley Symphony
Hall, 750 B Street, San Diego, California 92101. I invite
you to arrive early at 8:30 a.m. local time to preview our
product displays. In addition to the election of four
Class III directors (Proposal 1) and ratification of
our selection of independent accountants (Proposal 4),
there are two other substantive proposals on the agenda that I
would like to highlight.
Proposal 2 To Eliminate the Classified Board
and Cumulative Voting
Two years ago, we received a non-binding stockholder proposal to
eliminate our staggered, or classified, board system.
Eliminating the classified board system would mean that all
directors would be elected annually, rather than in classes
every third year. That proposal, presented at our 2004
stockholder meeting, passed by over two-thirds of the votes
cast, and at that meeting our Chairman stated that he had heard
the stockholders voice on this matter and committed to
putting a binding resolution before you the following year.
Thus, our Board of Directors approved presenting at last
years stockholder meeting a binding proposal to amend our
Certificate of Incorporation to eliminate both the classified
board system and cumulative voting in the election of directors.
That binding measure received over 60% approval, but fell short
of the
662/3%
of the outstanding shares required for approval.
Given that a 60% majority voted in favor of eliminating the
classified board system, our Board of Directors has decided to
present this issue once again to you. We believe that given
another opportunity more stockholders may seek to make their
voices heard, and as a result this measure may be approved.
Proposal 3 On Employee Equity
Compensation
We believe that offering broad-based equity compensation
programs is critical to attracting and retaining the finest
people in our industry. Employees with a stake in the future
success of our business are highly motivated to achieve
long-term growth and increase stockholder value. The purpose of
Proposal 3, which seeks to combine our equity compensation
plans as the 2006 Long-Term Incentive Plan, is to provide the
Company with a sufficient share reserve and added flexibility to
continue to provide new hires, employees and management for
approximately the next two years with opportunities for equity
ownership in a changing employment market. While our current
plans are to continue to grant nonstatutory stock options, we
believe it is important to have the flexibility to make other
types of equity compensation awards, including incentive stock
options, stock appreciation rights and restricted stock.
Our Companys compensation and benefits philosophy
significantly contributes to creating and sustaining a
competitive advantage in the employment market that results in
leadership in our business markets. The broad merit-based grant
of stock options has been a central part of our unique
compensation and benefit mix and we believe it has helped to
create an inclusive atmosphere that sets QUALCOMM apart as a
place of collaborative innovation.
Equity compensation remains a significant component of our
long-term employee compensation because we do not sponsor a
defined-benefit pension plan and we do not include Company stock
in our 401(k) plan. Over 99% of our regular, full-time employees
currently have stock options.
We take great pride in our accomplishments and believe that
equity-based programs have contributed significantly to this
success. Based on the
4-week moving average
as of December 16, 2005, our Companys stock price has
increased at a compound annual growth rate of 37.03% versus
8.85% for the S&P 500 Index since the Company became
publicly owned in December 1991. In each of the past seven
years, QUALCOMM has been voted as One of the 100 Best
Companies To Work For In America by Fortune Magazine. The
annual retention rate of our employees is higher than other high
technology companies according to Radford Surveys, a leading
human resources survey company in the high-tech industry.
I urge you to support Proposal 3 on the agenda.
Summary
Your vote is very important to us. I
urge you to vote FOR all Proposals.
Please review the enclosed proxy materials carefully and vote
today.
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Sincerely, |
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Paul E. Jacobs |
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Chief Executive Officer |
5775 Morehouse Drive
San Diego, California 92121-1714
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On March 7, 2006
To the Stockholders of QUALCOMM Incorporated:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders
of QUALCOMM Incorporated, a Delaware corporation (the
Company), will be held at Copley Symphony Hall, 750
B Street, San Diego, California 92101, on Tuesday,
March 7, 2006 at 8:30 a.m. local time for previewing
product displays, and 9:30 a.m. local time for the
following purposes:
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1. |
To elect four Class III directors. |
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2. |
To approve amendments to the Companys Restated Certificate
of Incorporation to eliminate the classified board and
cumulative voting. |
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To approve the combination of the Companys equity
compensation plans as the 2006 Long-Term Incentive Plan and an
increase in the share reserve by 65,000,000 shares. |
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4. |
To ratify the selection of PricewaterhouseCoopers LLP as the
Companys independent accountants for the Companys
fiscal year ending September 24, 2006. |
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5. |
To approve any adjournments of the meeting to another time or
place, if necessary in the judgment of the proxy holders, for
the purpose of soliciting additional proxies in favor of any of
the foregoing proposals. |
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To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof. |
The Board of Directors has fixed the close of business on
January 6, 2006 as the record date for the determination of
stockholders entitled to notice of and to vote at this Annual
Meeting and at any adjournment or postponement thereof.
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By Order of the Board of Directors |
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Paul E. Jacobs |
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Chief Executive Officer |
San Diego, California
January 13, 2006
How You Can Vote
If you are a stockholder whose shares are
registered in your name, you may vote your shares by one of the
three following methods:
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Vote by
Internet, by going to the web
address http://www.proxyvote.com and following the instructions
for Internet voting shown on the enclosed proxy card.
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Vote by
Telephone, by dialing
1-800-690-6903 and
following the instructions for telephone voting shown on the
enclosed proxy card.
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Vote by Proxy
Card, by completing, signing,
dating and mailing the enclosed proxy card in the envelope
provided. If you vote by Internet or telephone, please do not
mail your proxy card.
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If your shares are held in street
name (through a broker, bank or other nominee), you may
receive a separate voting instruction form with this Proxy
Statement, or you may need to contact your broker, bank or other
nominee to determine whether you will be able to vote
electronically using the Internet or telephone.
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PLEASE NOTE THAT IF YOUR SHARES
ARE HELD OF RECORD BY A BROKER, BANK OR OTHER NOMINEE AND YOU
WISH TO VOTE AT THE MEETING, YOU WILL NOT BE PERMITTED TO VOTE
IN PERSON AT THE MEETING UNLESS YOU FIRST OBTAIN A LEGAL PROXY
ISSUED IN YOUR NAME FROM THE RECORD HOLDER. |
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TABLE OF CONTENTS
QUALCOMM INCORPORATED
5775 Morehouse Drive
San Diego, California 92121-1714
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
March 7, 2006
General
The enclosed proxy is solicited on behalf of the Board of
Directors of QUALCOMM Incorporated, a Delaware corporation (the
Company), for use at the Annual Meeting of
Stockholders to be held on Tuesday, March 7, 2006, at
9:30 a.m. local time (the Annual Meeting), or
at any adjournment or postponement thereof, for the purposes set
forth herein and in the accompanying Notice of Annual Meeting.
The Annual Meeting will be held at Copley Symphony Hall,
750 B Street, San Diego, California 92101. The Company
intends to mail this proxy statement and accompanying proxy card
on or about January 13, 2006 to all stockholders entitled
to vote at the Annual Meeting.
Voting Rights and Outstanding Shares
Only holders of record of common stock at the close of business
on January 6, 2006 (the Record Date) will be
entitled to notice of and to vote at the Annual Meeting. At the
close of business on the Record Date, the Company had
outstanding and entitled to vote 1,653,211,915 shares of
common stock.
Each holder of record of common stock on such date will be
entitled to one vote for each share held on all matters to be
voted upon. If no choice is indicated on the proxy, the shares
will be voted in favor of Proposals 1 through 5. With
respect to the election of directors, unless Proposal 2 is
approved, stockholders may exercise cumulative voting rights.
Under cumulative voting, each holder of common stock will be
entitled to four votes for each share held. Each stockholder may
give one candidate, who has been nominated prior to voting, all
the votes such stockholder is entitled to cast or may distribute
such votes among as many such candidates as such stockholder
chooses. However, no stockholder will be entitled to cumulate
votes for a candidate unless the candidates name has been
placed in nomination prior to the voting and at least one
stockholder has given notice at the meeting, prior to the
voting, of his or her intention to cumulate votes. Unless the
proxy holders are otherwise instructed, stockholders, by means
of the accompanying proxy, will grant the proxy holders
discretionary authority to cumulate votes.
All votes will be tabulated by an independent inspector of
election appointed for the meeting, who will separately tabulate
affirmative and negative votes, abstentions and broker non-votes.
Broker Non-Votes
A broker non-vote occurs when a broker submits a proxy card with
respect to shares of common stock held in a fiduciary capacity
(typically referred to as being held in street
name), but declines to vote on a particular matter because
the broker has not received voting instructions from the
beneficial owner. Under the rules that govern brokers who are
voting with respect to shares held in street name, brokers have
the discretion to vote such shares on routine matters, but not
on non-routine matters. Routine matters include the election of
directors, increases in authorized common stock for general
corporate purposes and ratification of auditors. Non-routine
matters include amendments to stock plans and most amendments to
the Certification of Incorporation.
Revocability of Proxies
Any person giving a proxy pursuant to this solicitation has the
power to revoke it at any time before it is voted. It may be
revoked by filing with the Corporate Secretary of the Company at
the Companys principal executive offices, 5775 Morehouse
Drive, L-733G, San Diego, California 92121-1714, a written
notice of
revocation or a duly executed proxy bearing a later date, or it
may be revoked by attending the meeting and voting in person.
Attendance at the meeting will not, by itself, revoke a proxy.
Solicitation
The Company will bear the entire cost of solicitation of proxies
including preparation, assembly, printing and mailing of this
proxy statement, the proxy card and any additional information
furnished to stockholders. Copies of solicitation materials will
be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of common stock
beneficially owned by others to forward to such beneficial
owners. The Company may reimburse persons representing
beneficial owners of common stock for their costs of forwarding
solicitation materials to such beneficial owners. In addition,
the Company has retained Morrow & Company to act as a
proxy solicitor in conjunction with the meeting. The Company has
agreed to pay that firm $12,500, plus reasonable out of pocket
expenses, for proxy solicitation services. Original solicitation
of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular
employees of the Company. No additional compensation will be
paid to directors, officers or other regular employees for such
services.
Stockholder Proposals
The deadline for submitting a stockholder proposal for inclusion
in the Companys proxy statement and form of proxy for the
Companys 2007 Annual Meeting of Stockholders pursuant to
Rule 14a-8,
Shareholder Proposals, of the Securities and
Exchange Commission (the SEC) is September 15,
2006. The deadline for submitting a stockholder proposal or a
nomination for director that is not to be included in such proxy
statement and proxy is also September 15, 2006. Any such
stockholder proposals must be submitted to the Companys
Corporate Secretary in writing at 5775 Morehouse Drive, L-733G,
San Diego, California 92121-1714. Stockholders are also
advised to review the Companys Bylaws, which contain
additional advance notice requirements, including requirements
with respect to advance notice of stockholder proposals and
director nominations. For further information regarding
stockholder proposals see page 8.
Code of Ethics
The Company has adopted a code of ethics that applies to all
QUALCOMM employees, including employees of QUALCOMMs
subsidiaries, as well as each member of the Companys Board
of Directors. The code of ethics is available at the
Companys website at
http://www.qualcomm.com/ir/docs/codeofethics.pdf. To
date, there have not been any waivers by the Company of the code
of ethics. Any amendments to, or waivers under, the code of
ethics which are required to be disclosed by the rules of the
SEC will be disclosed on the Companys website at
http://www.qualcomm.com/ir.
PROPOSAL 1
ELECTION OF DIRECTORS
The Companys Restated Certificate of Incorporation and
Bylaws provide that the Board of Directors shall be divided into
three classes, with each class having a three-year term.
Directors are assigned to each class in accordance with a
resolution or resolutions adopted by the Board of Directors,
each class consisting, as nearly as possible, of one-third the
total number of directors. Vacancies on the Board of Directors
resulting from death, resignation, disqualification, removal or
other causes may be filled by either the affirmative vote of the
holders of a majority of the then-outstanding shares of common
stock or by the affirmative vote of a majority of the remaining
directors then in office, even if less than a quorum of the
Board of Directors. Newly created directorships resulting from
any increase in the number of directors may, unless the Board of
Directors determines otherwise, be filled only by the
affirmative vote of the directors then in office, even if less
than a quorum of the Board of Directors. A director elected by
the Board of Directors to fill a vacancy (including a vacancy
created by an increase in the number of directors) shall serve
for the remainder of the full term of the class of directors in
which the vacancy occurred and until such directors
successor is elected and qualified.
2
The Companys Restated Certificate of Incorporation
provides that the number of directors which shall constitute the
whole Board of Directors shall be fixed exclusively by one or
more resolutions adopted from time to time by the Board of
Directors. The authorized number of directors is currently set
at 13. Four seats on the Board of Directors, currently held by
Richard C. Atkinson, Diana Lady Dougan, Peter M.
Sacerdote and Marc I. Stern, have been designated as
Class III Board seats, with the term of the directors
occupying such seats expiring as of the Annual Meeting.
Dr. Atkinson, Ambassador Dougan, and Messrs. Sacerdote
and Stern will stand for re-election at this Annual Meeting.
Dr. Atkinson, Ambassador Dougan, and Messrs. Sacerdote
and Stern are currently Board members of the Company who were
previously elected by the stockholders. If they are elected at
the Annual Meeting and Proposal 2 is not approved by the
stockholders, each of the four nominees would serve until the
2009 Annual Meeting and until his or her successor is duly
elected and qualified, or until such directors earlier
death, resignation or removal. If elected, and if
Proposal 2 is approved by the stockholders, then
Dr. Atkinson, Ambassador Dougan, and Messrs. Sacerdote
and Stern would serve until the 2007 Annual Meeting and until
each successor is duly elected and qualified or until such
directors earlier death, resignation or removal.
If a quorum is present and no stockholder has exercised
cumulative voting rights, the directors will be elected by a
plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote on the
election of directors. Abstentions and broker non-votes have no
effect on the vote. If Proposal 2 does not pass and a
stockholder has exercised cumulative voting rights, the four
candidates receiving the highest number of affirmative votes of
the shares of common stock entitled to be voted for such
directors will be elected directors of the Company. Shares of
common stock represented by executed proxies will be voted, if
authority to do so is not withheld, for the election of the four
nominees named below. In the event that any nominee should be
unavailable for election as a result of an unexpected
occurrence, such shares of common stock will be voted for the
election of such substitute nominee as the Board of Directors
may propose. Each person nominated for election has agreed to
serve if elected, and the Board of Directors has no reason to
believe that any nominee will be unable to serve.
The following table sets forth, for the Companys current
directors, including the Class III nominees to be elected
at this meeting, information with respect to their ages and
background.
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Position With QUALCOMM |
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Director | |
Name |
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Incorporated |
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Age | |
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Since | |
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Class III directors nominated for election at the 2006
Annual Meeting of Stockholders: |
Richard C. Atkinson
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Director |
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76 |
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1991 |
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Diana Lady Dougan
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Director |
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63 |
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1998 |
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Peter M. Sacerdote
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Director |
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68 |
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1989 |
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Marc I. Stern
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Director |
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61 |
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1994 |
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Class I directors whose terms expire at the 2007 Annual
Meeting of Stockholders: |
Adelia A. Coffman
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Director |
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53 |
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1992 |
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Raymond V. Dittamore
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Director |
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62 |
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2002 |
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Irwin Mark Jacobs
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Chairman of the Board |
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72 |
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1985 |
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Richard Sulpizio
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Director |
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56 |
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2000 |
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Class II directors whose terms expire at the 2008 Annual
Meeting of Stockholders: |
Donald G. Cruickshank
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Director |
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63 |
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2005 |
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Paul E. Jacobs
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Chief Executive Officer |
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43 |
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2005 |
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Robert E. Kahn
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Director |
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67 |
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1997 |
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Duane A. Nelles
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Director |
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62 |
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1988 |
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Brent Scowcroft
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Director |
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80 |
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1994 |
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Set forth below is biographical information for each person
nominated and each person whose term of office as a
director will continue after the Annual Meeting.
3
Nominees for Election at this Meeting
RICHARD C. ATKINSON
Richard C. Atkinson, age 76, became a Director of the
Company in January 1991. Dr. Atkinson served as the
president of the University of California from 1995 to 2003 and
is now President Emeritus. Prior to that time, he served as
chancellor of the University of California at San Diego
from 1980 to 1995. Dr. Atkinson joined the board of
directors of Cubic Corporation, a high-tech electronic company,
in May 1999. Dr. Atkinson is a former director of the
National Science Foundation, past president of the American
Association for the Advancement of Science and former chair of
the Association of American Universities. Dr. Atkinson is
one of the founders of Computer Curriculum Corporation.
Dr. Atkinson is a member of the National Academy of
Sciences, the Institute of Medicine, the National Academy of
Education and the American Philosophical Society.
Dr. Atkinson holds a Ph.D. degree from Indiana University
and a Ph.B. degree from the University of Chicago.
DIANA LADY DOUGAN
Diana Lady Dougan, age 63, became a Director of the Company
in December 1998. Ambassador Dougan is chairwoman of the Cyber
Century Forum and senior advisor at the Center for Strategic and
International Studies. Ambassador Dougan has served in senior
policy and management positions for more than three decades,
including appointments by both Republican and Democratic
presidents in senate-confirmed positions. From 1982 to 1988, as
the first statutory U.S. coordinator for International
Communications and Information Policy, Ambassador Dougan
spearheaded international negotiations and policies involving
telecom, broadcast, and information technology services on
behalf of 14 federal agencies, served administratively as
Assistant Secretary of State and holds the permanent rank of
ambassador. Early in her career, Ambassador Dougan was the first
CATV marketing director for Time, Inc. and an award-winning TV
producer. Ambassador Dougan serves on a diversity of technology
and public policy related boards including co-founder of the
Center for Information Infrastructure and Economic Development
under the auspices of the Chinese Academy of Social Sciences. In
addition to earning undergraduate degrees in industrial
psychology and English from the University of Maryland,
Ambassador Dougans studies also include economics at the
University of Utah and the Advanced Management Program at
Harvard University.
PETER M. SACERDOTE
Peter M. Sacerdote, age 68, became a Director of the
Company in October 1989. Mr. Sacerdote has been an advisory
director of Goldman, Sachs & Co. since May 1999 where
he also serves as chairman of the Investment Committee of its
Principal Investment Area. In the five years prior to that time,
he served as a limited partner of Goldman, Sachs Group, L.P.
Mr. Sacerdote also serves as a director of Franklin
Resources, Inc., a mutual fund management company and registered
investment company, and Hexcel Corporation, a materials
manufacturer. Mr. Sacerdote received his B.E.E. degree from
Cornell University and a M.B.A. degree from the Harvard Graduate
School of Business Administration.
MARC I. STERN
Marc I. Stern, age 61, became a Director of the Company in
February 1994. Mr. Stern is the Chairman of
Société Générales Global Investment
Management and Services (GIMS) North America unit. Prior to
his appointment as Chairman of GIMS North America in September
2005, Mr. Stern served as President and a Director of The
TCW Group Inc. (TCW), an asset management firm based in Los
Angeles. Société Générale acquired majority
control of TCW in 2001. In addition to his role at GIMS,
Mr. Stern is Vice Chairman of TCW. From 1988 to 1990,
Mr. Stern served as president and a director of SunAmerica,
Inc., a financial services company. Prior to joining SunAmerica,
Mr. Stern was managing director and chief administrative
officer of The Henley Group, Inc., a diversified manufacturing
company, and prior thereto was senior vice president of
Allied-Signal Inc., a diversified manufacturing company.
Mr. Stern is also a director of TCW Galileo Funds, Inc., a
registered investment company. Mr. Stern received a B.A.
degree from Dickinson
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College, a M.A. degree from the Columbia University Graduate
School of Public Law and Government and a J.D. degree from the
Columbia University School of Law.
Directors Elected to Continue in Office Until the 2007 Annual
Meeting
ADELIA A. COFFMAN
Adelia A. Coffman, age 53, one of the founders of the
Company, has served as a Director of the Company from July 1985
to February 1989 and since January 1992. Ms. Coffman also
served as chief financial officer of the Company from July 1985
until April 1994 and held the titles of vice president and
senior vice president at the Company during that time.
Ms. Coffman currently provides financial consulting
services; is active in a real estate investment and development
company of which she is an owner; and is an owner of Medford Air
Service LLC, which is a fixed base operation at the Rogue Valley
International Airport Medford in Oregon.
Ms. Coffman received her B.S. degree in business from
San Diego State University.
RAYMOND V. DITTAMORE
Raymond V. Dittamore, age 62, has served as a Director of
the Company since December 2002. Mr. Dittamore is a retired
audit partner of Ernst & Young LLP, an international
accounting firm. Mr. Dittamore retired in 2001 after
35 years of service with that firm, including 14 years
as the managing partner of the firms San Diego
office. Mr. Dittamore is also a director of Invitrogen
Corporation, Gen-Probe Incorporated, and Digirad Corporation.
Mr. Dittamore received his B.S. degree from San Diego
State University.
IRWIN MARK JACOBS
Irwin Mark Jacobs, age 72, one of the founders of the
Company, has served as Chairman of the Board of Directors of the
Company since it began operations in July 1985. He also served
as Chief Executive Officer of the Company from July 1985 to June
2005. Dr. Jacobs received his B.S. degree in Electrical
Engineering from Cornell University and his M.S. and Sc.D.
degrees from the Massachusetts Institute of Technology.
Dr. Jacobs is a member of the National Academy of
Engineering and the American Academy of Arts and Sciences and
was awarded the National Medal of Technology in 1994.
Dr. Irwin Jacobs is the father of Dr. Paul Jacobs, the
Companys Chief Executive Officer, and Jeffrey A. Jacobs,
President of QUALCOMM Global Development.
RICHARD SULPIZIO
Richard Sulpizio, age 56, has served as a Director of the
Company since December 2000. He served as President of MediaFLO
USA, Inc., a QUALCOMM subsidiary from January 2005 to December
2005. He served as President of QUALCOMM Europe from April 2004
to October 2004 and President of QUALCOMM China from May 2002 to
March 2003. Mr. Sulpizio retired in July 2001 after serving as
President and Chief Operating Officer of the Company from July
1998 to July 2001 and as the Companys chief operating
officer from 1995 to July 1998. He is also a director for
ResMed, Inc., a leading respiratory medical device manufacturer.
Mr. Sulpizio holds a B.A. degree from California State
University, Los Angeles and his M.S. degree in systems
management from the University of Southern California.
Directors Elected to Continue in Office Until the 2008 Annual
Meeting
DONALD G. CRUICKSHANK
Donald G. Cruickshank, age 63, has served as a Director of
the Company since June 2005. Mr. Cruickshank has been
Chairman of Clinovia Group Ltd. since 2004 and Formscape Group
Ltd. since 2003. He has also been a member of the Financial
Reporting Council, the body responsible in the U.K. for
oversight of the Accountancy and Actuarial professions and for
corporate governance standards, since 2002. Mr. Cruickshank
has extensive experience in a number of areas, including
European regulations and
5
telecommunications. His career has included assignments at
McKinsey & Co. Inc., Times Newspapers, Virgin Group
plc., Wandsworth Health Authority and National Health Service in
Scotland. Mr. Cruickshank served as Chairman of the London
Stock Exchange plc. from 2000 to 2003 and in the United
Kingdoms Office of Telecommunications (Oftel) from 1993 to
1998. From 1997 to 2000, Mr. Cruickshank also served as
Chairman of Action 2000, the U.K.s millennium bug
campaign. In 1998, Chancellor Gordon Brown appointed
Mr. Cruickshank as Chairman of the Governments Review
of the U.K. Banking Sector. From 1999 to 2004,
Mr. Cruickshank also served as Chairman of SMG plc.
(formerly Scottish Media Group), one of Scotlands leading
broadcasters. Mr. Cruickshank is a member of the Institute
of Chartered Accountants of Scotland. Mr. Cruickshank
received his M.A. degree from the University of Aberdeen and his
M.B.A. degree from Manchester Business School.
PAUL E. JACOBS
Paul E. Jacobs, age 43, has served as a director since June
2005 and as the Companys Chief Executive Officer since
July 2005. He served as Group President of the QUALCOMM
Wireless & Internet Group from July 2001 to June 2005.
In addition, he served as an Executive Vice President from
February 2000 to June 2005. Dr. Jacobs holds a B.S. degree
in Electrical Engineering and Computer Science, a M.S. degree in
Electrical Engineering and a Ph.D. degree in Electrical
Engineering and Computer Science from the University of
California, Berkeley. Dr. Paul Jacobs is the son of
Dr. Irwin Mark Jacobs, Chairman of the Companys Board
of Directors, and the brother of Jeffrey A. Jacobs, President of
QUALCOMM Global Development.
ROBERT E. KAHN
Robert E. Kahn, age 67, became a Director of the Company in
February 1997. Dr. Kahn is chairman, chief executive
officer and president of the Corporation for National Research
Initiatives (CNRI), which he founded in 1986. From 1972 to 1985,
Dr. Kahn was employed at the U.S. Defense Advanced
Research Projects Agency, where his last position was director
of the Information Processing Techniques Office. From 1966 to
1972, Dr. Kahn was a senior scientist with Bolt Beranek and
Newman, where he was responsible for the system design of the
Arpanet, the first packet switched network. Dr. Kahn
received numerous awards for his pioneering work on the Internet
for which he received the 1997 National Medal of Technology.
Dr. Kahn received a B.E.E. degree from the City College of
New York and M.A. and Ph.D. degrees from Princeton
University. Dr. Kahn holds numerous honorary degrees and is
a member of the National Academy of Engineering.
DUANE A. NELLES
Duane A. Nelles, age 62, a certified public accountant,
became a Director of the Company in August 1988.
Mr. Nelles has been in the personal investment business
since 1987. Prior to that time, Mr. Nelles was a partner in
the international public accounting firm of Coopers &
Lybrand, LLP, which he joined in 1968. Mr. Nelles is also a
director of WFS Financial Inc., an automotive finance
company and Westcorp Inc., a diversified financial services
holding company. He received his M.B.A. degree from the
University of Michigan.
BRENT SCOWCROFT
Brent Scowcroft, age 80, became a Director of the Company
in December 1994. General Scowcroft is the president of The
Scowcroft Group, Inc., an international business consulting firm
he founded in June 1994. General Scowcroft is also the
president of The Forum for International Policy, a non-profit
organization he founded in 1993 that promotes American
leadership and foreign policy. General Scowcroft served as
Assistant to the President for National Security Affairs for
President George H.W. Bush from January 1989 until
January 1993; he also held that position for President Ford
during his term. A retired U.S. Air Force lieutenant
general, General Scowcroft served in numerous national security
posts in the Pentagon and the White House prior to his
appointments as Assistant to the President for National Security
Affairs. General Scowcroft received his B.S. degree from West
Point and M.A. and Ph.D. degrees from Columbia University and
holds numerous honorary degrees.
6
Required Vote and Board of Directors Recommendation
If a quorum is present and voting, the four nominees for
Class III director receiving the highest number of votes
will be elected as Class III directors. Abstentions and
broker non-votes will each be counted as present for purposes of
determining the presence of a quorum, but will not have any
effect on the outcome of the vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
ELECTION OF EACH NAMED NOMINEE.
Board Committees and Meetings
During the fiscal year ended September 25, 2005, the Board
of Directors held eight meetings. Marc I. Stern has acted as the
Companys presiding independent director since the Board
meeting immediately following the 2005 stockholder meeting. The
Board currently has an Audit Committee, a Compensation
Committee, a Governance Committee, a Finance Committee and a
Strategic Committee. Committee assignments are re-evaluated
annually and approved by the Board at its annual meeting that
follows the annual meeting of stockholders in February or March
of each year.
The Audit Committee. The Audit Committee meets at least
quarterly with the Companys management and independent
accountants to, among other things, review the results of the
annual audit and quarterly reviews and discuss the financial
statements, select and engage the independent accountants,
assess the adequacy of the Companys staff, management
performance and procedures in connection with financial controls
and receive and consider comments as to internal controls. The
Audit Committee acts pursuant to a written charter adopted by
the Board. The charter is available on the Companys
website at
http://www.qualcomm.com/ir/PDF/audit comm charter.pdf.
During fiscal 2005, the Audit Committee was composed of
Messrs. Nelles (Committee Chair) and Dittamore, and
Dr. Atkinson and met eight times. The Audit Committee has
determined that Messrs. Dittamore and Nelles are audit
committee financial experts as defined by SEC rules. All of the
members of the Audit Committee are independent directors within
the meaning of Rule 4200 of the National Association of
Securities Dealers, Inc. (NASD) and SEC
Rule 10A-3(b)(1)(ii).
With respect to the determination of independence of
Mr. Nelles under NASD Rule 4200, the Board of
Directors considered the employment of Mr. Nelles
sons in non-executive officer positions by the Company, as
described below under the heading Certain
Transactions. The Board also considered
Mr. Nelles track record of decision-making and
determined that the employment of Mr. Nelles sons had
not interfered and would not interfere with the exercise of
Mr. Nelles independent judgment in carrying out his
duties as a director.
The Compensation Committee. The Compensation Committee
makes recommendations concerning salaries and incentive
compensation, administers and approves stock offerings under the
Companys 1996 Non-Qualified Employee Stock Purchase Plan
and the 2001 Employee Stock Purchase Plan (collectively, the
Employee Stock Purchase Plans), administers the
Companys 1991 Stock Option Plan and 2001 Stock Option Plan
(collectively, the Stock Option Plans) and otherwise
determines compensation levels for the Chief Executive Officer,
the Named Executive Officers (as listed in the Summary
Compensation Table), the directors and other key employees and
performs such other functions regarding compensation as the
Board may delegate. The Compensation Committee acts pursuant to
a written charter adopted by the Board. The charter is available
on the Companys website at
http://www.qualcomm.com/ir/PDF/comp comm charter.pdf.
During fiscal 2005, the Compensation Committee was composed of
Messrs. Dittamore (Committee Chair) and Stern and
Dr. Atkinson and met seven times. All of the members of the
Compensation Committee are independent directors within the
meaning of Rule 4200 of the NASD and outside directors
within the meaning of Section 162(m) of the Internal
Revenue Code of 1986, as amended.
The Governance Committee. The Governance Committee
reviews, approves and oversees various corporate governance
related policies and procedures applicable to the Company. The
Committee also reviews and evaluates the effectiveness of the
Companys executive development and succession planning
processes, as well as providing active leadership and oversight
with respect to these processes. In addition, the Committee
evaluates and recommends nominees for membership on the
Companys Board of Directors and its
7
committees. The Governance Committee acts pursuant to a written
charter adopted by the Board. The charter is available at the
Companys website at
http://www.qualcomm.com/ir/PDF/gov comm charter.pdf.
During fiscal 2005, the Governance Committee was composed of
Messrs. Stern (Committee Chair), Nelles and Sacerdote,
General Scowcroft, and Dr. Kahn, and met five times.
Mr. Cruickshank joined the Governance Committee on
September 26, 2005. All of the members of the Governance
Committee are independent directors within the meaning of
Rule 4200 of the NASD.
The Companys Bylaws contain provisions which address the
process by which a stockholder may nominate an individual to
stand for election to the Board of Directors at the
Companys Annual Meeting of Stockholders. The Board has
also adopted a formal policy concerning stockholder
recommendations of Board candidates to the Governance Committee.
This policy is set forth in the Companys Corporate
Governance Principles and Practices, which is available on its
website at
http://www.qualcomm.com/ir/PDF/corp gov prin pract.pdf.
Under this policy the Governance Committee will review a
reasonable number of candidates recommended by a single
stockholder who has held over 1% of the Companys stock for
over one year and who satisfies the notice, information and
consent requirements set forth in the Companys Bylaws. To
recommend a nominee for election to the Board, a stockholder
should submit his or her recommendation to the Companys
corporate offices at 5775 Morehouse Drive,
L-733G, San Diego,
California 92121-1714, Attention: Corporate Secretary. A
stockholders recommendation should be received by the
Company prior to the date set forth above under
Stockholder Proposals. A stockholders
recommendation should be accompanied by the information required
with respect to stockholder nominees in the Bylaws, including
among other things, the name, age, address and occupation of the
recommended person, the proposing stockholders name and
address and the number of shares beneficially owned by the
stockholder. The proposing stockholder should also provide
evidence of owning the requisite shares of Company stock for
over one year. Candidates so recommended will be reviewed using
the same process and standards for reviewing Board recommended
candidates.
In evaluating director nominees, the Governance Committee
considers the following factors:
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the appropriate size of the Companys Board of Directors; |
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the needs of the Company with respect to the particular talents
and experience of its directors; |
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the knowledge, skills and experience of nominees, including
experience in technology, business, finance, administration or
public service, in light of prevailing business conditions and
the knowledge, skills and experience already possessed by other
members of the Board; |
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familiarity with national and international business matters; |
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experience in political affairs; |
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experience with accounting rules and practices; |
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appreciation of the relationship of the Companys business
to the changing needs of society; |
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the nominees other commitments, including the other boards
on which a nominee serves; and |
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the desire to balance the considerable benefit of continuity
with the periodic injection of the fresh perspective provided by
new members. |
The Governance Committees goal is to assemble a Board of
Directors that brings to the Company a variety of perspectives
and skills derived from high quality business and professional
experience. In doing so the Governance Committee also considers
candidates with appropriate non-business backgrounds.
Other than the foregoing there are no stated minimum criteria
for director nominees, although the Governance Committee may
also consider such other factors as it may deem are in the best
interests of the Company and its stockholders. The Governance
Committee does, however, believe it appropriate for at least
one, and, preferably, several, members of the Board to meet the
criteria for an audit committee financial expert as
defined by SEC rules, and that a majority of the members of the
Board meet the definition of independent director
under NASD rules. The Governance Committee also believes it is
in the stockholders
8
best interest for certain key members of the Companys
current and former management to participate as members of the
Board.
The Governance Committee identifies nominees by first evaluating
the current members of the Board of Directors willing to
continue in service. Current members of the Board with skills
and experience that are relevant to the Companys business
and who are willing to continue in service are considered for
re-nomination, balancing the value of continuity of service by
existing members of the Board with that of obtaining a new
perspective. If any member of the Board does not wish to
continue in service or if the Governance Committee or the Board
decides not to re-nominate a member for re-election, the
Governance Committee identifies the desired skills and
experience of a new nominee in light of the criteria above.
Current members of the Governance Committee and Board of
Directors are polled for suggestions as to individuals meeting
the criteria of the Governance Committee. Research may also be
performed to identify qualified individuals. The Company has, in
the past, also engaged a third party to identify and evaluate
potential nominees.
The Company has also adopted a so-called Majority
Voting policy as a part of its Corporate Governance
Principles and Practices. Under this policy, if a director
receives in an uncontested election a greater number of
withhold votes than votes cast for his
or her election, the Governance Committee will undertake a
prompt evaluation of the appropriateness of the directors
continued service on the Board. In performing this evaluation,
the Governance Committee will review all factors it deems
relevant, including the stated reasons why votes were withheld,
the directors length of service, his or her past
contributions to the Company and the availability of other
qualified candidates. The Governance Committee will then make
its recommendation to the Board of Directors. The Board of
Directors will review the Governance Committees
recommendation and consider such further factors and information
as it deems relevant. Under this policy, the Governance
Committee will make its recommendation and the Board of
Directors will act on the Governance Committees
recommendation no later than 90 days following the date of
the stockholders meeting. If the Board of Directors
determines remedial action is appropriate, the director shall
promptly take whatever action is requested by the Board of
Directors. If the director does not promptly take the
recommended remedial action or if the Board determines that
immediate resignation is in the best interests of the Company
and its stockholders, the director shall promptly tender his or
her resignation upon request from the Board. The Company will
publicly disclose the Board of Directors decision within
four business days by filing a Current Report on
Form 8-K,
providing an explanation of the process by which the decision
was reached, and, if applicable, the reason for not requesting
the directors resignation. The director in question will
not participate in the Governance Committees or the Board
of Directors analysis.
The Finance Committee. The Finance Committee reviews the
Companys financial position, cash management, dividend and
stock repurchase programs, securities issuances, acquisitions
and other major strategic investment decisions. The Finance
Committee acts pursuant to a written charter adopted by the
Board. The charter is available at the Companys website at
http://www.qualcomm.com/ir/PDF/finance comm charter.pdf.
During fiscal 2005, the Finance Committee was composed of
Messrs. Sacerdote (Committee Chair) and Sulpizio, and
Ambassador Dougan and met six times.
The Strategic Committee. The Strategic Committee monitors
the development and implementation of the Companys
business and research and development strategies. It works with
management in identifying and developing Board focus on issues
and recommendations which will further the Companys long
and short term strategic planning. The Strategic Committee acts
pursuant to a written charter adopted by the Board. The charter
is available at the Companys website at
http://www.qualcomm.com/ir/PDF/strategic comm charter.pdf.
During fiscal 2005, the Strategic Committee was composed of
Ambassador Dougan (Committee Chair), Drs. Irwin Jacobs and
Robert Kahn, Mr. Sulpizio and General Scowcroft, and met
six times.
9
Communications with Directors
The Company has adopted a formal process for stockholder
communications with the Board. This process is also set forth in
the Companys Corporate Governance Principles and
Practices. Stockholders who wish to communicate to the Board
should do so in writing to the following address:
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[Name of Director(s) or Board of Directors] |
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QUALCOMM Incorporated |
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Attn: General Counsel |
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5775 Morehouse Drive,
L-733G
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San Diego, California 92121-1714 |
The Companys General Counsel logs all such communications
and forwards those not deemed frivolous, threatening or
otherwise inappropriate to the Chair of the Governance Committee
for distribution.
Board and Committee Meeting Attendance
During the fiscal year ended September 25, 2005, with the
exception of Mr. Cruickshank, each Board member attended at
least 75% of the aggregate of the meetings of the Board, and of
the Committees on which he or she served, held during the period
for which he or she was a Board or Committee member,
respectively. Mr. Cruickshank was unable to attend at least
75% of the meetings of the Board and Committees on which he
served as he joined the Board in June 2005 and had prior
scheduled commitments that conflicted with certain special
meetings of the Board.
Annual Meeting Attendance
The Companys Corporate Governance Principles and Practices
sets forth a policy on director attendance at annual meetings.
Directors are encouraged to attend absent unavoidable conflicts.
All of the then-sitting directors attended the Companys
last annual meeting.
Director Independence
The Board has determined that, except as noted below, all of the
members of the Board are independent directors
within the meaning of Rule 4200 of the NASD. Dr. Irwin
Mark Jacobs and Dr. Paul E. Jacobs are not considered
independent because both are employed by the Company as
executive officers, and Dr. Irwin Mark Jacobs son and
Dr. Paul E. Jacobs brother Jeffrey A. Jacobs is the
President of QUALCOMM Global Development and an executive
officer. Mr. Richard Sulpizio is not considered independent
because of his recent employment relationships with the Company
and its subsidiary, MediaFLO USA, Inc.
PROPOSAL 2
APPROVAL OF AMENDMENTS TO THE RESTATED CERTIFICATE
OF INCORPORATION TO ELIMINATE THE CLASSIFIED BOARD
OF DIRECTORS AND TO ELIMINATE CUMULATIVE VOTING
The Companys Restated Certificate of Incorporation
provides that the Board of Directors shall be divided into three
classes, with each class having a three-year term. The Restated
Certificate of Incorporation also provides that when electing
directors, stockholders may exercise cumulative voting rights.
Under cumulative voting, each holder of common stock is entitled
to that number of votes equal to the number of directors being
elected, including vacancies, for each share held. Each
stockholder may give one candidate, who has been nominated prior
to voting, all the votes such stockholder is entitled to cast or
may distribute such votes among as many candidates as such
stockholder chooses.
In December 2005, the Board of Directors adopted, subject
to stockholder approval, amendments to revise Article VI of
the Restated Certificate of Incorporation to eliminate the
classified Board of Directors and to eliminate cumulative voting
for election of directors. The proposal would allow for the
annual election of
10
directors in the manner described below. The Board of Directors
has set the current number of directors at 13. The proposal
would not change the present number of directors and the Board
of Directors would retain the authority to change that number
and to fill any vacancies or newly created directorships.
Background of Proposal
Classified or staggered boards have been widely adopted and have
a long history in corporate law. Proponents of classified boards
assert they promote the independence of directors because
directors elected for multi-year terms are less subject to
outside influence. Proponents of a classified structure for the
election of directors also believe it provides continuity and
stability in the management of the business and affairs of a
company because a majority of directors always has prior
experience as directors of the company. This continuity and
long-term focus is particularly important to research-based
organizations, such as the Company, where product and technology
development is complex and long-term. Proponents further assert
that classified boards may enhance stockholder value by forcing
an entity seeking control of a target company to initiate
arms-length discussions with the board of a target company
because the entity is unable to replace the entire board in a
single election. This system for electing and removing directors
was adopted by the Companys stockholders in 1993, and has
worked well for the past 12 years.
Alternatively, some investors view classified boards as having
the effect of reducing the accountability of directors to
stockholders because classified boards limit the ability of
stockholders to evaluate and elect all directors on an annual
basis. The election of directors is a primary means for
stockholders to influence corporate governance policies and to
hold management accountable for implementing those policies. In
addition, opponents of classified boards assert that a
classified structure for the election of directors may
discourage proxy contests in which stockholders have an
opportunity to vote for a competing slate of nominees and
therefore may erode stockholder value.
In 2004, a stockholder proposal requesting that the Board take
all necessary steps to elect the directors annually was included
in the Companys annual proxy statement and was approved by
greater than two-thirds of the votes cast. After a review by the
Companys Governance Committee and the Board of Directors,
the Board of Directors, based upon the recommendation of the
Governance Committee, decided that it was an appropriate time to
propose eliminating the classified Board and a binding proposal
to make the necessary amendments to the Companys Restated
Certificate of Incorporation was presented to the stockholders
at the 2005 annual meeting. The threshold for approval of this
proposal was
662/3%
of the shares of the Companys common stock outstanding as
of the record date for that meeting. While the measure garnered
over 60% of the outstanding shares voting in its favor, it did
not pass. Due to the relatively high number of votes cast in
favor of this proposal, however, the Governance Committee
recommended it be re-submitted to stockholders and the Board
concurred. The Board is committed to principles of corporate
democracy and is mindful that a substantial majority of the
shares voted at both the 2004 and 2005 annual meetings were
voted in favor of eliminating the classified structure. This
determination by the Board also furthers its goal of ensuring
that the Companys corporate governance policies maximize
management accountability to stockholders and would, if adopted,
allow stockholders the opportunity each year to register their
views on the performance of the entire Board of Directors.
Accordingly, the Board has determined that eliminating the
classified Board is in the best interests of the Company and its
stockholders.
In reviewing the Companys classified board structure, the
Governance Committee and Board also reviewed the Companys
Restated Certificate of Incorporation provisions on cumulative
voting. As allowed by Delaware corporate law, the Companys
Restated Certificate of Incorporation permits stockholders to
exercise cumulative voting rights when electing directors. As
explained above, each holder of common stock is entitled to that
number of votes equal to the number of directors being elected,
including vacancies, for each share held. Each stockholder may
give one candidate, who has been nominated prior to voting, all
the votes such stockholder is entitled to cast or may distribute
such votes among as many such candidates as such stockholder
chooses. Cumulative voting also worked together with the
classified board system to encourage bidders to negotiate with
the Board when making bids for the Company because it would be
more difficult to gain control of the Board as part of a hostile
transaction, thereby enhancing the Boards ability to
protect the interests of stockholders. Under this mechanism,
however, after eliminating the Companys classified board
11
system a minority stockholder would be able to
disproportionately influence the composition of the Board, as it
would require substantially less stock to assure a stockholder
of being able to elect a representative to the Board. The
Company believes, based on its review of public filings, that a
very small proportionate number of Delaware corporations in the
Nasdaq-100 and the Dow Jones Industrial Average maintain
cumulative voting without a classified board system.
The Board believes that, in the absence of a classified board,
each director should only be elected if such director receives a
plurality of the votes cast and that each director should
represent the interest of all stockholders, rather than the
interest of a minority stockholder or special constituency. The
elimination of cumulative voting for directors is consistent
with the Companys desire to more closely align stockholder
interests and Board accountability. Accordingly, the Board,
after review and deliberation, determined that, in the absence
of a classified board, eliminating cumulative voting of
directors is in the best interests of the Company and its
stockholders.
Both the elimination of the classified board and elimination of
cumulative voting would require amendments to the Restated
Certificate of Incorporation. If this proposal is approved by
the stockholders, current director nominees terms would
expire at the 2007 annual meeting of stockholders, but sitting
directors terms would not be shortened. Those directors
whose terms expire at the 2007 annual meeting of stockholders
will similarly be elected for a one-year term to expire in 2008.
Beginning with the 2008 annual meeting, all directors would be
elected for one-year terms at each annual meeting. Board
candidates receiving the highest number of votes of the shares
entitled to be voted, up to the number of directors to be
elected by such shares, shall be declared elected.
If this proposal is adopted, any director appointed by the Board
as a result of a newly created directorship or to fill a vacancy
on the Board of Directors would hold office until the next
annual meeting.
The amendments to the Restated Certificate of Incorporation to
implement this proposal are substantially set forth in
Appendix 2, and the Company has shown the changes to the
relevant sections of Article VI resulting from the proposed
amendment with deletions indicated by strike-outs and additions
indicated by both italicizing and underlining. If approved, this
proposal will become effective upon the filing of a Certificate
of Amendment to the Restated Certificate of Incorporation with
the Secretary of State of the State of Delaware containing
substantially these amendments, which the Company would do
promptly. The Board also intends to consider amendments to the
Companys Bylaws that would make the Bylaws consistent with
the proposed amendment to eliminate the classified Board and
eliminate cumulative voting of shares.
Required Vote and Board of Directors Recommendation
Approval of this proposal requires the affirmative vote of at
least sixty-six and two-thirds percent
(662/3%)
of the shares of the Companys common stock outstanding as
of the Record Date. Abstentions and broker non-votes will be
counted as present for purposes of determining if a quorum is
present, but will have the same effect as a negative vote on the
outcome of this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR APPROVAL OF THE AMENDMENTS TO THE RESTATED
CERTIFICATE OF INCORPORATION TO ELIMINATE THE CLASSIFIED BOARD
AND TO ELIMINATE CUMULATIVE VOTING.
PROPOSAL 3
APPROVAL OF THE COMBINATION OF THE COMPANYS EQUITY
COMPENSATION PLANS AS THE 2006 LONG-TERM INCENTIVE PLAN
AND
THE INCREASE IN THE SHARE RESERVE BY
65,000,000 SHARES
In December 2005, the Board of Directors adopted, subject
to stockholder approval, the Companys 2006 Long-Term
Incentive Plan (the 2006 Plan). The 2006 Plan is
intended to be a restatement of the 2001 Stock Option Plan. It
is also intended to be a successor to the 1991 Stock Option Plan
and the 2001 Non-Employee Directors Stock Option Plan and
its predecessor plan (the Prior Plans). It is also
intended to be
12
the source of shares for the Executive Retirement Matching
Contribution Plan (ERMCP). If the stockholders
approve the restatement of the 2001 Option Plan as the 2006
Plan, the share reserves of the Prior Plans and the ERMCP will
be merged into the reserve of the 2006 Plan, and an additional
65,000,000 shares will be reserved under the 2006 Plan, in
addition to the 15,818,449 shares available for grant under
the combined plans as of December 16, 2005.
The Company believes that appropriate equity incentives are
critical to attracting and retaining the best employees in its
industry. The approval of this proposal will enable the Company
to continue to provide such incentives. The Company believes its
use of stock options in the employee compensation process has
been a material factor in its success to date, and the Company
intends to continue the appropriate use of stock options in the
future.
The Board has full discretion to determine the number of awards
to be granted to employees under the 2006 Plan, subject to an
annual limitation on the total number of awards that may be
granted to any employee. Prior to the Annual Meeting, the
Company will not grant any awards under the 2006 Plan.
Key Features of the 2006 Long-Term Incentive Plan and other
significant historical option grant information has been
highlighted below:
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Multiple equity compensation plans are consolidated under one
plan; |
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An independent committee of the Board of Directors administers
the plan; |
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65,000,000 shares are authorized for grant under the 2006
Plan, in addition to the 15,818,449 shares still available
as of December 16, 2005 for grant under the combined plans; |
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Awards other than stock options and stock appreciation rights
will be charged against the 2006 Plan share reserve at the rate
of two shares for each share actually granted; |
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Awards may not be granted later than 10 years from the
Effective Date; |
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Awards may be stock options, stock appreciation rights,
restricted stock, restricted stock units, performance shares,
performance units, deferred compensation awards and other
stock-based awards; |
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Stock options and stock appreciation rights may not be repriced; |
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Stock options and stock appreciation rights may not be granted
below fair market value; |
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Stock options or stock appreciation rights generally shall not
be fully vested over a period of less than three years from the
date of grant and cannot be exercised more than 10 years
from the date of grant; |
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Restricted stock, restricted stock units, and performance awards
generally shall not vest faster than over a three-year period
(or a 12-month period
if vesting is based on a performance measure); |
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Shares tendered in payment of a stock option, shares withheld
for taxes and shares repurchased by the Company using stock
option proceeds will not be available again for grant; |
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The 2006 Plan reserve will be reduced by the full amount of
shares granted as stock appreciation rights, regardless of the
number of shares upon which payment is made; |
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The Companys policy is that all full-time employees are
eligible to receive stock options; and |
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The Companys options granted in a given year expressed as
a percentage of the Companys shares outstanding
(burn rate), for fiscal year 2005 was 2.1% and the
three-year average was 2.0%; however, excluding the one-time
grants to Drs. Paul Jacobs and Sanjay Jha and
Mr. Steven Altman in connection with their promotions, the
fiscal year 2005 burn rate would have been 2.0%. |
13
Summary of the 2006 Plan
The following is a summary of the material terms of the 2006
Plan. It is qualified in its entirety by the specific language
of the 2006 Plan, a copy of which is available to any
stockholder upon request.
General
The 2006 Plan provides for the grant of incentive and
nonstatutory stock options as well as stock appreciation rights,
restricted stock, restricted stock units, performance units and
shares and other stock-based awards. It is also the source of
shares for award under the ERMCP. Incentive stock options
granted under the 2006 Plan are intended to qualify as
incentive stock options within the meaning of
Section 422 of the Internal Revenue Code of 1986, as
amended (the Code). Nonstatutory stock options
granted under the 2006 Plan are not intended to qualify as
incentive stock options under the Code. The Company presently
intends to grant nonstatutory stock options under the 2006 Plan
and to use the 2006 Plan as a source of ERMCP shares.
Purpose
The purpose of the 2006 Plan is to advance the interests of the
Company and its stockholders by providing an incentive to
attract and retain persons eligible to receive awards under the
2006 Plan and by motivating such persons to contribute to the
growth and profitability of the Company.
Administration
The 2006 Plan is administered by the Board of Directors and its
designees. The Board is responsible for interpreting the 2006
Plan and, subject to the provisions of the 2006 Plan,
determining the persons to whom and the dates on which awards
will be granted, the number of shares to be subject to each
award, the time or times during the term of each award within
which all or a portion of such award may be exercised, the
exercise price, the type of consideration to be paid upon
exercise of an award, and other terms of the award. The Board of
Directors is authorized to delegate administration of the 2006
Plan to a committee of outside directors. The Board has
delegated administration of the 2006 Plan to the Compensation
Committee of the Board. For awards to persons other than
directors or corporate officers, the Compensation Committee in
turn has delegated implementation of the 2006 Plan to the
Management Stock Award Committee, currently comprised of the
Companys Chief Executive Officer, President and Executive
Vice President, Human Resources, who act pursuant to guidelines
approved by the Compensation Committee. As used herein with
respect to the 2006 Plan, the Board refers to the
Compensation Committee and the Management Stock Award Committee,
as well as to the Board of Directors itself.
Stock Subject to the 2006 Plan
The share reserve under the 2006 Plan will be equal to the
shares available for future grant under the 2001 Option Plan,
the 2001 Directors Plan and the ERMCP on the date the 2006
Plan is approved by the Companys stockholders, plus an
additional 65,000,000 shares for a total of
290,284,432 shares reserved. However, the share reserve
under the 2006 Plan will be increased without any further action
by the Board of Directors or stockholders by an amount equal to
the number of shares of common stock subject to any outstanding
option under a Prior Plan that is terminated or cancelled (but
not an option under a Prior Plan that expires) following the
date that the 2006 Plan is approved by stockholders. As of
December 16, 2005, of the total shares available under the
2001 Option Plan, the Prior Plans and the ERMCP,
209,465,983 shares were subject to outstanding options and
15,818,449 shares were available for future grants, for a
combined total of 225,284,432 shares. If awards granted
under the 2006 Plan expire, are cancelled or otherwise terminate
without being exercised, the shares of common stock subject to
such expired, cancelled or terminated awards will then be
available for grant under the 2006 Plan. Shares that are subject
to an award under the ERMCP and are returned to the Company
because they fail to vest will again become available for grant
under the 2006 Plan.
14
Shares subject to stock options and stock appreciation rights
that do not include a right to receive a dividend equivalent
right will be charged against the 2006 Plan share reserve on the
basis of one share for each one share granted. Shares subject to
stock options and stock appreciation rights that include the
right to receive dividends and all other types of awards will be
charged against the 2006 Plan share reserve on the basis of two
shares for each one share granted. Any shares returned to the
reserve as described above will be returned on the same basis as
they are charged.
Eligibility
Awards other than incentive stock options generally may be
granted only to employees, directors and consultants of the
Company, or certain related entities or designated affiliates.
An incentive stock option can only be granted to a person who,
on the effective date of grant, is an employee of the Company, a
parent corporation or a subsidiary corporation. Only designated
executives are eligible for matching awards under the ERMCP. As
of December 16, 2005, approximately 10,000 persons (all
full time employees of the Company, and the non-employee
directors) would have been eligible to receive grants under the
2006 Plan.
No incentive stock options may be granted under the 2006 Plan to
any person who, at the time of the grant, owns (or is deemed to
own) stock possessing more than 10% of the total combined voting
power of the Company, or any of its parent or subsidiary
corporations, unless the option exercise price is at least 110%
of the fair market value of the stock subject to the option on
the date of grant, and the term of the option does not exceed
five years from the date of grant. The aggregate fair market
value, determined at the time of grant, of the shares of Common
Stock with respect to which incentive stock options granted
under the 2006 Plan are exercisable for the first time by an
optionee during any calendar year (under all such plans of the
Company and its parent and subsidiary corporations) may not
exceed $100,000. In order to permit awards to qualify as
performance based compensation under Code
Section 162(m), no employee may be granted awards in excess
of the following in each fiscal year of the Company:
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Stock options and stock appreciation rights: No more than
3,000,000 shares. |
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Restricted stock and restricted stock unit awards having vesting
based upon the attainment of performance goals: No more than
1,000,000 shares. |
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Performance share awards: No more than 1,000,000 shares for
each full fiscal year contained in the performance period of the
award. |
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Performance unit awards: No more than $1,000,000 for each full
fiscal year contained in the performance period of the award. |
Restricted stock awards, restricted stock unit awards and
performance awards will generally vest based on continued
service no more rapidly than ratably over a three-year period.
Such awards will generally vest based on performance goals over
a performance period no shorter than 12 months.
Acceleration to a schedule more rapid than these will generally
only occur in connection with death, disability or a change in
control.
Options and Stock Appreciation Rights
The following is a description of the general terms of options
and stock appreciation rights under the 2006 Plan. Individual
grants may have terms that differ from those described below.
Exercise Price; Payment. The exercise price of incentive
stock options under the 2006 Option Plan may not be less than
the fair market value of the Common Stock subject to the option
on the date of the option grant, and in some cases (see
Eligibility above), may not be less than 110% of
such fair market value. The exercise price of nonstatutory stock
options and stock appreciation rights may not be less than the
fair market value of the stock subject to the award on the date
of the option grant. On December 16, 2005, the closing
price of the Companys Common Stock as reported on the
Nasdaq National Market was $44.95 per share. The exercise
price of options granted under the 2006 Plan must be paid:
(i) in cash, by check or cash equivalent, (ii) by
tender to the Company, or attestation to the ownership of shares
of Common Stock of the Company owned by the optionee having a
fair market value not less than the exercise price,
(iii) for optionees
15
who are employees, in the Companys sole and absolute
discretion, by delivery of a promissory note, (iv) in any
other form of legal consideration acceptable to the Board, or
(v) any combination of the above.
No Repricing. The 2006 Plan does not permit the Company
to lower the exercise price of options or stock appreciation
rights without stockholder approval.
Exercise. Options and stock appreciation rights granted
under the 2006 Plan may become exercisable (vest) in
cumulative increments as determined by the Board provided that
the holders employment by, or service as a director or
consultant to the Company or certain related entities or
designated affiliates continues from the date of grant until the
applicable vesting date. Shares covered by awards granted under
the 2006 Plan may be subject to different vesting terms;
provided, however, that options and stock appreciation rights
(other than those granted to non-employee directors) may not
vest fully in less than three years from the date of grant. The
Board has the power to accelerate the time during which an award
may be exercised, subject to this three year limit.
Term. The maximum term of options and stock appreciation
rights under the 2006 Plan is 10 years, except that in
certain cases (see Eligibility above) the maximum
term is five years. The 2006 Plan provides for earlier
termination of an award due to the holders cessation of
service.
Restrictions
on Transfer. Incentive stock options granted under the 2006
Plan may not be transferred except by will or by the laws of
descent and distribution, and may be exercised during the
lifetime of the person to whom the option is granted and only by
such person. A nonstatutory stock option or stock appreciation
right is not transferable in any manner other than (i) by
will or by the laws of descent and distribution, (ii) by
written designation of a beneficiary taking effect upon the
death of the optionee, (iii) by delivering written notice
to the Company, and in a form acceptable to the Company, that
the optionee will be gifting to certain family members or other
specific entities controlled by or for the benefit of such
family members, and such other transferees as the Board may
approve.
Restricted Stock Units
The Board may grant restricted stock units under the 2006 Plan,
which represent a right to receive shares of the Companys
common stock at a future date determined in accordance with the
participants award agreement. No monetary payment is
required for receipt of restricted stock units or the shares
issued in settlement of the award, the consideration for which
is furnished in the form of the participants services to
the Company. The Board may grant restricted stock unit awards
subject to the attainment of one or more performance goals
similar to those described below in connection with performance
awards, or may make the awards subject to vesting conditions
similar to those applicable to restricted stock awards. Unless
otherwise provided by the Board, a participant will forfeit any
restricted stock units which have not vested prior to the
participants termination of service. Participants have no
voting rights or rights to receive cash dividends with respect
to restricted stock unit awards until shares of common stock are
issued in settlement of such awards. However, the Board may
grant restricted stock units that entitle their holders to
receive dividend equivalents, which are rights to receive
additional restricted stock units for a number of shares whose
value is equal to any cash dividends the Company pays.
Restricted Stock Awards
The Board may grant restricted stock awards under the 2006 Plan
either in the form of a restricted stock purchase right, giving
a participant an immediate right to purchase common stock, or in
the form of a restricted stock bonus, for which the participant
furnishes consideration in the form of services to the Company.
The Board determines the purchase price payable under restricted
stock purchase awards, which may be less than the then current
fair market value of the Companys common stock. Restricted
stock awards may be subject to vesting conditions based on such
service or performance criteria as the Board specifies,
including the attainment of one or more performance goals
similar to those described below in connection with performance
awards. Shares acquired pursuant to a restricted stock award may
not be transferred by the participant until vested. Unless
otherwise provided by the Board, a participant will forfeit any
shares of
16
restricted stock as to which the restrictions have not lapsed
prior to the participants termination of service.
Participants holding restricted stock will generally have the
right to vote the shares and to receive any dividends paid,
except that dividends or other distributions paid in shares will
be subject to the same restrictions as the original award.
Performance Awards
The Board may grant performance awards subject to such
conditions and the attainment of such performance goals over
such periods as the Board determines in writing and sets forth
in a written agreement between the Company and the participant.
To the extent compliance with Section 162(m) of the Code is
desired, a committee comprised solely of outside
directors under Section 162(m) shall act with respect
to performance awards, and Board as used in this
section shall mean this committee. These awards may be
designated as performance shares or performance units.
Performance shares and performance units are unfunded
bookkeeping entries generally having initial values,
respectively, equal to the fair market value determined on the
grant date of a share of common stock and a value set by the
Board. Performance awards will specify a predetermined amount of
performance shares or performance units that may be earned by
the participant to the extent that one or more predetermined
performance goals are attained within a predetermined
performance period. To the extent earned, performance awards may
be settled in cash, shares of common stock (including shares of
restricted stock) or any combination thereof.
Prior to the beginning of the applicable performance period or
such later date as permitted under Section 162(m) of the
Code, the Board will establish one or more performance goals
applicable to the award. Performance goals will be based on the
attainment of specified target levels with respect to one or
more measures of business or financial performance of the
Company and each subsidiary corporation consolidated with the
Company for financial reporting purposes, or such division or
business unit of the Company as may be selected by the Board.
The Board, in its discretion, may base performance goals on one
or more of the following such measures: sales revenue, gross
margin, operating margin, operating income, pre-tax profit,
earnings before interest, taxes, depreciation and amortization,
net income, expenses, the market price of the Companys
common stock, earnings per share, return on stockholder equity,
return on capital, return on net assets, economic value added,
market share, customer service, customer satisfaction, safety,
total stock holder return, free cash flow, or other measures as
determined by the Board. The target levels with respect to these
performance measures may be expressed on an absolute basis or
relative to a standard specified by the Board. The degree of
attainment of performance measures will be calculated in
accordance with generally accepted accounting principles, but
prior to the accrual or payment of any performance award for the
same performance period, and, according to criteria established
by the Board, excluding the effect (whether positive or
negative) of changes in accounting standards or any
extraordinary, unusual or nonrecurring item occurring after the
establishment of the performance goals applicable to a
performance award.
Following completion of the applicable performance period, the
Board will certify in writing the extent to which the applicable
performance goals have been attained and the resulting value to
be paid to the participant. The Board retains the discretion to
eliminate or reduce, but not increase, the amount that would
otherwise be payable on the basis of the performance goals
attained to a participant who is a covered employee
within the meaning of Section 162(m) of the Code. However,
no such reduction may increase the amount paid to any other
participant. The Board may make positive or negative adjustments
to performance award payments to participants other than covered
employees to reflect the participants individual job
performance or other factors determined by the Board. In its
discretion, the Board may provide for the payment to a
participant awarded performance shares of dividend equivalents
with respect to cash dividends paid on the Companys common
stock. The Board may provide for performance award payments in
lump sums or installments. If any payment is to be made on a
deferred basis, the Board may provide for the payment of
dividend equivalents or interest during the deferral period.
Unless otherwise provided by the Board, if a participants
service terminates due to the participants death or
disability prior to completion of the applicable performance
period, the final award value will be determined at the end of
the performance period on the basis of the performance goals
attained during the entire performance period but will be
prorated for the number of months of the participants
service during the performance period. If a participants
service terminates prior to completion of the applicable
performance
17
period for any other reason, the 2006 Plan provides that, unless
otherwise determined by the Board, the performance award will be
forfeited. No performance award may be sold or transferred other
than by will or the laws of descent and distribution prior to
the end of the applicable performance period.
Deferred Compensation Awards
The 2006 Plan authorizes the Board to establish a deferred
compensation award program in addition to the ERMCP. If and when
implemented, participants designated by the Board who are
officers, directors or members of a select group of highly
compensated employees may elect to receive, in lieu of
compensation otherwise payable in cash or in lieu of cash or
shares of common stock issuable upon the exercise or settlement
of stock options, stock appreciation rights or performance
shares or performance unit awards, an award of deferred stock
units. Each such stock unit represents a right to receive one
share of common stock at a future date determined in accordance
with the participants award agreement. Deferred stock
units are fully vested upon grant and will be settled by
distribution to the participant of a number of whole shares of
common stock equal to the number of stock units subject to the
award as soon as practicable following the earlier of the date
on which the participants service terminates or a
settlement date elected by the participant at the time of his or
her election to receive the deferred stock unit award.
Participants are not required to pay any additional
consideration in connection with the settlement of deferred
stock units. A holder of deferred stock units has no voting
rights or other rights as a stockholder until shares of common
stock are issued to the participant in settlement of the stock
units. However, participants holding deferred stock units will
be entitled to receive dividend equivalents with respect to any
payment of cash dividends on an equivalent number of shares of
common stock. Such dividend equivalents will be credited in the
form of additional whole and fractional stock units determined
in accordance with a method specified by the Board in the
participants award agreement. Prior to settlement,
deferred stock units may not be assigned or transferred other
than by will or the laws of descent and distribution.
Other Stock-Based Awards
The Plan permits the Board to grant other awards based on the
Companys stock or on dividends on the Companys stock.
Effect of Certain Corporate Events
In the event of any stock dividend, stock split, reverse stock
split, recapitalization, combination, reclassification or
similar change in the capital structure of the Company,
appropriate adjustments will be made in the number and class of
shares subject to the 2006 Plan and to any outstanding awards,
in the Section 162(m) per employee grant limit (see
Federal Income Tax Information Potential
Limitation on Company Deductions, below), and in the
exercise price per share of any outstanding awards. Any
fractional share resulting from an adjustment will be rounded
down to the nearest whole number, and at no time will the
exercise price of any option or stock appreciation right be
decreased to an amount less than par value of the stock subject
to the award.
If a Change in Control occurs, the surviving, continuing,
successor or purchasing corporation or parent corporation
thereof may either assume the Companys rights and
obligations under the outstanding awards or substitute
substantially equivalent awards for such corporations
stock. However, if an outstanding award is not assumed or
replaced, the 2006 Plan provides that the vesting and
exercisability of the award shall be accelerated, effective
10 days prior to the Change in Control. Awards that are not
assumed, replaced or exercised prior to the Change in Control
will terminate. The acceleration of an award in the event of an
acquisition or similar corporate event may be viewed as an
anti-takeover provision, which may have the effect of
discouraging a proposal to acquire or otherwise obtain control
of the Company.
Change in Control. The 2006 Plan defines a Change
in Control of the Company as any of the following events
upon which the stockholders of the Company immediately before
the event do not retain immediately after the event, in
substantially the same proportions as their ownership of shares
of the Companys voting stock immediately before the event,
direct or indirect beneficial ownership of more than
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50% of the total combined voting power of the stock of the
Company, its successor or the corporation to which the assets of
the Company were transferred: (i) a sale or exchange by the
stockholders in a single or series of related transactions of
more than 50% of the Companys voting stock; (ii) a
merger or consolidation in which the Company is a party;
(iii) the sale, exchange or transfer of all or
substantially all of the assets of the Company; or (iv) a
liquidation or dissolution of the Company.
Duration, Amendment and Termination
The Board may amend or terminate the 2006 Plan at any time. If
not earlier terminated, the 2006 Plan will expire on the tenth
anniversary of stockholder approval.
The Board may also amend the 2006 Plan at any time or from time
to time. However, no amendment authorized by the Board will be
effective unless approved by the stockholders of the Company if
the amendment would: (i) increase the number of shares
reserved for options under the 2006 Plan; (ii) change the
class of persons eligible to receive incentive stock options; or
(iii) modify the 2006 Plan in any other way if such
modification requires stockholder approval under applicable law,
regulation or rule.
Awards Granted to Certain Persons
The aggregate numbers of shares of common stock subject to
awards granted to certain persons under the plans to be combined
as the 2006 Plan in the last completed fiscal year are as
follows: (i) Paul E. Jacobs, Chief Executive Officer,
1,400,000 shares; (ii) Irwin Mark Jacobs, Chairman of
the Board, 500,000 shares; (iii) Steven R. Altman,
President, 1,150,000 shares; (iv) Sanjay K. Jha,
Executive Vice President and President, CDMA Technologies Group,
1,100,000 shares; (v) William E. Keitel, Executive
Vice President and Chief Financial Officer, 400,000 shares;
(vi) Roberto Padovani, Executive Vice President and Chief
Technology Officer, 300,000 shares; and (vii) all
current executive officers as a group, an aggregate of
5,787,000 shares; (viii) all current directors who are
not executive officers as a group, an aggregate of
377,000 shares; and (ix) all employees, including
current officers who are not executive officers, as a group, an
aggregate of 28,270,408 shares.
Federal Income Tax Information
Incentive Stock Options. An optionee recognizes no
taxable income for regular income tax purposes as the result of
the grant or exercise of an incentive stock option. Optionees
who do not dispose of their shares for at least two years
following the date the incentive stock option was granted or
within one year following the exercise of the option will
normally recognize a long-term capital gain or loss equal to the
difference, if any, between the sale price and the purchase
price of the shares. If an optionee satisfies both such holding
periods upon a sale of the shares, the Company will not be
entitled to any deduction for federal income tax purposes. If an
optionee disposes of shares either within two years after the
date of grant or within one year from the date of exercise
(referred to as a disqualifying disposition), the
difference between the fair market value of the shares on the
exercise date and the option exercise price (not to exceed the
gain realized on the sale if the disposition is a transaction
with respect to which a loss, if sustained, would be recognized)
will be taxed as ordinary income at the time of disposition. Any
gain in excess of that amount will be a capital gain. If a loss
is recognized, there will be no ordinary income, and such loss
will be a capital loss. A capital gain or loss will be long-term
if the optionees holding period is more than
12 months. Any ordinary income recognized by the optionee
upon the disqualifying disposition of the shares generally
should be deductible by the Company for federal income tax
purposes, except to the extent such deduction is limited by
applicable provisions of the Code or the regulations thereunder.
The difference between the option exercise price and the fair
market value of the shares on the exercise date of an incentive
stock option is an adjustment in computing the optionees
alternative minimum taxable income and may be subject to an
alternative minimum tax which is paid if such tax exceeds the
regular tax for the year. Special rules may apply with respect
to certain subsequent sales of the shares in a disqualifying
disposition, certain basis adjustments for purposes of computing
the alternative minimum taxable income on a subsequent sale of
the shares and certain tax credits which may arise with respect
to optionees subject to the alternative minimum tax.
19
Nonstatutory Stock Options and Stock Appreciation Rights.
Nonstatutory stock options and stock appreciation rights have no
special tax status. A holder of these awards generally does not
recognize taxable income as the result of the grant of such
award. Upon exercise of a nonstatutory stock option or stock
appreciation right, the holder normally recognizes ordinary
income in an amount equal to the difference between the exercise
price and the fair market value of the shares on the exercise
date. If the holder is an employee, such ordinary income
generally is subject to withholding of income and employment
taxes. Upon the sale of stock acquired by the exercise of a
nonstatutory stock option or stock appreciation right, any gain
or loss, based on the difference between the sale price and the
fair market value on the exercise date, will be taxed as capital
gain or loss. A capital gain or loss will be long-term if the
holding period of the shares is more than 12 months. The
Company generally should be entitled to a deduction equal to the
amount of ordinary income recognized by the optionee as a result
of the exercise of a nonstatutory stock option or stock
appreciation right, except to the extent such deduction is
limited by applicable provisions of the Code or the regulations
thereunder. No tax deduction is available to the Company with
respect to the grant of a nonstatutory stock option or stock
appreciation right or the sale of the stock acquired pursuant to
such grant.
Restricted Stock. A participant acquiring restricted
stock generally will recognize ordinary income equal to the fair
market value of the shares on the determination
date. The determination date is the date on
which the participant acquires the shares unless the shares are
subject to a substantial risk of forfeiture and are not
transferable, in which case the determination date is the
earlier of (i) the date on which the shares become
transferable or (ii) the date on which the shares are no
longer subject to a substantial risk of forfeiture. If the
determination date is after the date on which the participant
acquires the shares, the participant may elect, pursuant to
Section 83(b) of the Code, to have the date of acquisition
be the determination date by filing an election with the
Internal Revenue Service no later than 30 days after the
date on which the shares are acquired. If the participant is an
employee, such ordinary income generally is subject to
withholding of income and employment taxes. Upon the sale of
shares acquired pursuant to a restricted stock award, any gain
or loss, based on the difference between the sale price and the
fair market value on the determination date, will be taxed as
capital gain or loss. The Company generally should be entitled
to a deduction equal to the amount of ordinary income recognized
by the participant on the determination date, except to the
extent such deduction is limited by applicable provisions of the
Code.
Performance and Restricted Stock Unit Awards. A
participant generally will recognize no income upon the receipt
of a performance share, performance unit or restricted stock
unit award. Upon the settlement of such an award, participants
normally will recognize ordinary income in the year of receipt
in an amount equal to the cash received and the fair market
value of any substantially vested shares received. If the
participant is an employee, such ordinary income generally is
subject to withholding of income and employment taxes. If the
participant receives shares of restricted stock, the participant
generally will be taxed in the same manner as described above
(see discussion under Restricted Stock). Upon the
sale of any shares received, any gain or loss, based on the
difference between the sale price and the fair market value on
the determination date (as defined above under
Restricted Stock), will be taxed as capital gain or
loss. The Company generally should be entitled to a deduction
equal to the amount of ordinary income recognized by the
participant on the determination date, except to the extent such
deduction is limited by applicable provisions of the Code.
Deferred Compensation Awards. A participant generally
will recognize no income upon the receipt of a deferred
compensation award. Upon the settlement of the award, the
participant normally will recognize ordinary income in the year
of settlement in an amount equal to the fair market value of the
shares received. Upon the sale of any shares received, any gain
or loss, based on the difference between the sale price and the
fair market value of the shares on the date they are transferred
to the participant, will be taxed as capital gain or loss. The
Company generally should be entitled to a deduction equal to the
amount of ordinary income recognized by the participant, except
to the extent such deduction is limited by applicable provisions
of the Code.
Potential Limitation on Company Deductions. Code
Section 162(m) denies a deduction to the Company for
compensation paid to certain employees in a taxable year to the
extent that compensation exceeds $1 million for a covered
employee. It is possible that compensation attributable to stock
options, when combined with all other types of compensation
received by a covered employee from the Company, may cause
20
this limitation to be exceeded in any particular year. Certain
kinds of compensation, including qualified
performance-based compensation, are disregarded for
purposes of the deduction limitation. In accordance with
applicable regulations issued under Section 162(m),
compensation attributable to stock options and stock
appreciation rights will qualify as performance-based
compensation, provided that: (i) the option plan contains a
per-employee limitation on the number of shares for which
options or stock appreciation rights may be granted during a
specified period, (ii) the per-employee limitation is
approved by the stockholders, (iii) the option is granted
by a Compensation Committee comprised solely of outside
directors (as defined in Section 162(m)) and
(iv) the exercise price of the option or right is no less
than the fair market value of the stock on the date of grant.
For the aforementioned reasons, the Companys 2006 Plan
provides for an annual per employee limitation as required under
Section 162(m) and the Companys Compensation
Committee is comprised solely of outside directors. Accordingly,
options or stock appreciation rights granted by the Compensation
Committee qualify as performance-based compensation, and the
other awards subject to performance goals may qualify.
Other Tax Consequences. The foregoing discussion is
intended to be a general summary only of the federal income tax
aspects of awards granted under the 2006 Plan; tax consequences
may vary depending on the particular circumstances at hand. In
addition, administrative and judicial interpretations of the
application of the federal income tax laws are subject to
change. Furthermore, no information is given with respect to
state or local taxes that may be applicable. Participants in the
2006 Plan who are residents of or are employed in a country
other than the United States may be subject to taxation in
accordance with the tax laws of that particular country in
addition to or in lieu of United States federal income taxes.
Required Vote and Board of Directors Recommendation
The affirmative vote of a majority of the votes cast at the
meeting, at which a quorum is present, either in person or by
proxy, is required to approve this proposal. If you hold your
shares in your own name and abstain from voting on this matter,
your abstention will have no effect on the vote. If you hold
your shares through a broker and you do not instruct the broker
on how to vote on this proposal, your broker will not have the
authority to vote your shares. Abstentions and broker non-votes
will each be counted as present for purposes of determining the
presence of a quorum, but will not have any effect on the
outcome of the proposal.
Should such stockholder approval not be obtained, then the 2006
Plan and 65,000,000 share increase, which is the subject of
this proposal, will not be implemented and no additional awards
will be granted on the basis of this increase. However, in that
event the 2001 Option Plan, the Prior Plans and the ERMCP will
remain in effect, and awards may continue to be made pursuant to
the provisions of the plans until their share reserves are
depleted.
The Board believes that the 2006 Plan is in the best interests
of the Company and its stockholders for the reasons stated
above. THEREFORE, THE BOARD UNANIMOUSLY RECOMMENDS A VOTE
FOR APPROVAL OF THE COMBINATION OF THE
COMPANYS EQUITY COMPENSATION PLANS AS THE 2006 LONG-TERM
INCENTIVE PLAN AND THE INCREASE IN THE SHARE RESERVE BY
65,000,000 SHARES.
PROPOSAL 4
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Audit Committee of the Board of Directors has selected
PricewaterhouseCoopers LLP as the Companys independent
accountants for the fiscal year ending September 24, 2006
and has further directed that management submit the selection of
independent accountants for ratification by the stockholders at
the Annual Meeting. PricewaterhouseCoopers LLP has audited the
Companys financial statements since the Company commenced
operations in 1985. Representatives of PricewaterhouseCoopers
LLP are expected to be present at the Annual Meeting, will have
an opportunity to make a statement if they so desire and will be
available to respond to appropriate questions.
21
Stockholder ratification of the selection of
PricewaterhouseCoopers LLP as the Companys independent
accountants is not required by the Companys Bylaws or
otherwise. However, the Board is submitting the selection of
PricewaterhouseCoopers LLP to the stockholders for ratification
as a matter of good corporate practice. If the stockholders fail
to ratify the selection, the Audit Committee will reconsider
whether or not to retain that firm. Even if the selection is
ratified, the Audit Committee in their discretion may direct the
appointment of a different independent accounting firm at any
time during the year if they determine that such a change would
be in the best interests of the Company and its stockholders.
FEES PAID TO PRICEWATERHOUSECOOPERS LLP
Fees for Professional Services
The following table presents fees for professional services
rendered by PricewaterhouseCoopers LLP for the audit of the
Companys annual financial statements for the years ended
September 25, 2005 and September 26, 2004 and fees for
other services rendered by PricewaterhouseCoopers LLP during
those periods.
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2005 | |
|
Fiscal 2004 | |
|
|
| |
|
| |
Audit Fees(1)
|
|
$ |
3,513,000 |
|
|
$ |
4,260,000 |
|
Audit-Related Fees(2)
|
|
|
1,187,000 |
|
|
|
1,483,000 |
|
Tax Fees(3)
|
|
|
22,000 |
|
|
|
97,000 |
|
All Other Fees(4)
|
|
|
6,000 |
|
|
|
7,000 |
|
|
|
|
|
|
|
|
Total
|
|
$ |
4,728,000 |
|
|
$ |
5,847,000 |
|
|
|
|
|
|
|
|
|
|
(1) |
Audit Fees consist of fees for professional services rendered
for the audit of the Companys consolidated annual
financial statements and review of the interim consolidated
financial statements included in quarterly reports and services
that are normally provided by PricewaterhouseCoopers LLP in
connection with statutory and regulatory filings or engagements.
Audit fees also include fees for professional services rendered
for the audits of (i) managements assessment of the
effectiveness of internal control over financial reporting and
(ii) the effectiveness of internal control over financial
reporting. |
|
(2) |
Audit-Related Fees consist of fees for assurance and related
services that are reasonably related to the performance of the
audit or review of the Companys consolidated financial
statements and are not reported under Audit Fees.
This category includes fees principally related to field
verification of royalties due from licensees. |
|
(3) |
Tax Fees consist of fees for professional services rendered for
assistance with international tax compliance. |
|
(4) |
All Other Fees consist of fees for products and services other
than the services reported above. These services include fees
related to technical publications purchased from the independent
accountant. |
Fees for accounting services rendered by other professional
service firms during fiscal 2005 and 2004 were $5,337,000 and
$4,528,000, respectively.
Policy on Audit Committee Pre-Approval of Audit and Non-Audit
Services of Independent Accountant
The Audit Committees policy is to pre-approve all audit
and non-audit services provided by the independent accountants.
These services may include audit services, audit-related
services, tax services and other services. Pre-approval is
generally provided for up to one year and any pre-approval is
detailed as to the particular service or category of services
and is subject to a specific budget. The Audit Committee has
delegated pre-approval authority to certain Committee members
when expedition of services is necessary. The independent
accountants and management are required to periodically report
to the full Audit Committee regarding the extent of services
provided by the independent accountants in accordance with this
pre-approval, and the fees for the services performed to date.
None of the fees paid to the independent accountants during
fiscal 2005 and 2004, under the categories Audit-Related, Tax
and All Other fees described above were
22
approved by the Audit Committee after services were rendered
pursuant to the de minimis exception established by the SEC.
Required Vote and Board of Directors Recommendation
The affirmative vote of a majority of the votes cast at the
meeting, at which a quorum is present, either in person or by
proxy, is required to approve this proposal. Abstentions and
broker non-votes will each be counted as present for purposes of
determining the presence of a quorum but will not have any
effect on the outcome of the proposal.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE
RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS
THE COMPANYS INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR
ENDING SEPTEMBER 24, 2006.
PROPOSAL 5
ADJOURNMENT OF THE MEETING, IF NECESSARY, TO SOLICIT
ADDITIONAL PROXIES
Under the Companys Bylaws, any meeting of stockholders,
whether or not a quorum is present or has been established, may
be adjourned by the affirmative vote of a majority of the shares
casting votes that are entitled to vote and are present, in
person or by proxy. No new notice need be given of the date,
time or place of the adjourned meeting if such date, time or
place is announced at the meeting before adjournment, unless the
meeting is adjourned to a date more than 30 days after the
date fixed for the original meeting. If the proxy holders
determine that an adjournment of the meeting is appropriate for
the purpose of soliciting additional proxies in favor of any
proposal being submitted by the Company at the meeting, such
adjournment will be submitted for a stockholder vote under
Proposal 5 of the attached Notice of Meeting. The Company
will also use the discretionary authority conferred on its proxy
holders by duly executed proxy cards to vote for any other
matter as the Company determines to be appropriate.
Required Vote and Board of Directors Recommendation
The affirmative vote of a majority of the votes cast at the
meeting, at which a quorum is present, either in person or by
proxy, is required to approve this proposal. Abstentions and
broker non-votes will each be counted as present for purposes of
determining the presence of a quorum, but will not have any
effect on the outcome of the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR ADJOURNMENT OF THE MEETING, IF NECESSARY IN THE
JUDGMENT OF THE PROXY HOLDERS, TO SOLICIT ADDITIONAL PROXIES IN
FAVOR OF THE COMPANYS PROPOSALS IN THIS PROXY
STATEMENT.
23
STOCK OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
ownership of the Companys common stock as of
December 16, 2005 by: (i) each director and nominee
for director; (ii) each of the executive officers of the
Company named in the Summary Compensation Table under
Compensation of Executive Officers (the Named
Executive Officers); and (iii) all executive officers
and directors of the Company as a group. Based on currently
available Schedules 13D and 13G filed with the SEC, the Company
does not know of any beneficial owners of more than 5% of its
common stock.
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature of | |
|
|
Beneficial Ownership(1) | |
|
|
| |
|
|
Number of | |
|
Percent of | |
Name of Beneficial Owner |
|
Shares | |
|
Class | |
|
|
| |
|
| |
Paul E. Jacobs(2)
|
|
|
3,611,397 |
|
|
|
* |
|
Irwin Mark Jacobs(3)
|
|
|
37,784,745 |
|
|
|
2.28 |
|
Steven R. Altman(4)
|
|
|
1,597,785 |
|
|
|
* |
|
Sanjay K. Jha(5)
|
|
|
1,293,356 |
|
|
|
* |
|
William E. Keitel(6)
|
|
|
825,125 |
|
|
|
* |
|
Roberto Padovani(7)
|
|
|
1,436,666 |
|
|
|
* |
|
Richard C. Atkinson(8)
|
|
|
884,574 |
|
|
|
* |
|
Adelia A. Coffman(9)
|
|
|
517,632 |
|
|
|
* |
|
Donald G. Cruickshank
|
|
|
0 |
|
|
|
* |
|
Raymond V. Dittamore(10)
|
|
|
43,700 |
|
|
|
* |
|
Diana Lady Dougan(11)
|
|
|
479,632 |
|
|
|
* |
|
Robert E. Kahn(12)
|
|
|
718,632 |
|
|
|
* |
|
Duane A. Nelles(13)
|
|
|
419,972 |
|
|
|
* |
|
Peter M. Sacerdote(14)
|
|
|
1,553,232 |
|
|
|
* |
|
Brent Scowcroft(15)
|
|
|
547,216 |
|
|
|
* |
|
Marc I. Stern(16)
|
|
|
1,035,108 |
|
|
|
* |
|
Richard Sulpizio (17)
|
|
|
1,064,646 |
|
|
|
* |
|
All Executive Officers and Directors as a Group (22 persons )
(18)
|
|
|
57,871,174 |
|
|
|
3.46 |
|
|
|
|
|
(1) |
This table is based upon information supplied by officers and
directors. Unless otherwise indicated in the footnotes to this
table and subject to community property laws where applicable,
the Company believes that each of the stockholders named in this
table has sole voting and investment power with respect to the
shares indicated as beneficially owned. Applicable percentages
are based on 1,649,339,349 shares outstanding on
December 16, 2005, adjusted as required by rules
promulgated by the SEC. |
|
|
(2) |
Includes 1,437,990 shares held in family trusts,
82,231 shares held for the benefit of Dr. Paul
Jacobs children and 4,162 shares held jointly with
his spouse. Dr. Paul Jacobs disclaims all beneficial
ownership for the shares held in trust for the benefit of his
children. Also includes 2,087,014 shares issuable upon
exercise of options exercisable within 60 days of which
616,000 shares are held in trusts for the benefit of
Dr. Paul Jacobs and/or his spouse and 1,041 are held by
Dr. Paul Jacobs spouse. |
|
|
(3) |
Includes 25,967,003 shares held in family trusts and
2,192,334 shares held in a Grantor Retained Annuity Trust
for the benefit of Dr. Irwin Jacobs and his spouse.
Dr. Irwin Jacobs shares voting power with his spouse for
shares owned through these trusts. Also includes
9,625,408 shares issuable upon exercise of options
exercisable within 60 days, of which 1,963,612 shares
are held in trusts for the benefit of Dr. Irwin Jacobs
and/or his spouse and 1,481,686 shares are held by
Dr. Irwin Jacobs spouse. |
24
|
|
|
|
(4) |
Includes 178,620 shares held in family trusts and
1,419,165 shares issuable upon exercise of options
exercisable within 60 days. |
|
|
(5) |
Includes 24,024 shares held in family trusts and
1,269,332 shares issuable upon exercise of options
exercisable within 60 days. |
|
|
(6) |
Includes 819,999 shares issuable upon exercise of options
exercisable within 60 days. |
|
|
(7) |
Consists of 1,436,666 shares issuable upon exercise of
options exercisable within 60 days. |
|
|
(8) |
Includes 327,362 shares held in family trusts,
50,000 shares held by his spouse, 50,000 shares held
in a Grantor Retained Annuity Trust, and 65,280 shares held
in trust for the benefit of relatives. Also includes
391,932 shares issuable upon exercise of options
exercisable within 60 days. |
|
|
(9) |
Includes 263,000 shares held in family trusts. Also
includes 254,632 shares issuable upon exercise of options
exercisable within 60 days. |
|
|
(10) |
Includes 7,401 shares held in family trusts. Also includes
36,299 shares issuable upon exercise of options exercisable
within 60 days. |
|
(11) |
Consists of 479,632 shares issuable upon exercise of
options exercisable within 60 days. |
|
(12) |
Includes 686,632 shares issuable upon exercise of options
exercisable within 60 days. |
|
(13) |
Includes 318,632 shares issuable upon exercise of options
exercisable within 60 days. |
|
(14) |
Includes 114,600 shares held by The Peter M.
Sacerdote Investment Partners, L.P., a family partnership,
with Peter M. Sacerdote as General Partner and
480,000 shares owned by the Peter M.
Sacerdote Foundation. Mr. Sacerdote disclaims all
beneficial ownership for the shares owned by the Foundation.
Also includes 238,632 shares issuable upon exercise of
options exercisable within 60 days. |
|
(15) |
Includes 398,632 shares issuable upon exercise of options
exercisable within 60 days. |
|
(16) |
Includes 704,500 shares held by the Beatrice B. Corporation
of which Mr. Stern is the president and sole owner, and
162,576 shares owned through a grantor trust, which
Mr. Stern is the trustee. Also includes 168,032 shares
issuable upon exercise of options exercisable within
60 days. |
|
(17) |
Includes 846 shares held in family trusts and
16,800 shares held for the benefit of
Mr. Sulpizios children. Also includes
1,047,000 shares issuable upon exercise of options
exercisable within 60 days of which 1,368 shares are
held in trusts for the benefit of Mr. Sulpizios
children for which Mr. Sulpizios spouse is the
trustee. |
|
(18) |
Consists of 23,667,979 shares issuable upon exercise of
options exercisable within 60 days for all directors and
executive officers as a group. |
Section 16(a) Beneficial Ownership Reporting
Compliance
Section 16(a) of the Securities Exchange Act requires the
Companys directors, executive officers and persons who own
more than 10% of a registered class of the Companys equity
securities to file with the SEC initial reports of ownership and
reports of changes in ownership of common stock and other equity
securities of the Company. Officers, directors and
greater-than-ten-percent stockholders are required by SEC
regulations to furnish the Company with copies of all
Section 16(a) forms they file.
To the Companys knowledge, based solely on a review of the
copies of such reports furnished to the Company and written
representations that no other reports were required, during the
fiscal year ended September 25, 2005, all
Section 16(a) filing requirements were complied with except
for one Form 4 filed late for Dr. Irwin Jacobs,
reflecting a stock exercise, a stock sale and a gift.
Dr. Richard C. Atkinson and Adelia A. Coffman did not file
Forms 5 with respect to one gift made by each of them in
fiscal 2004, and instead reported the gifts on a late
Form 4 filed during fiscal 2005 and a Form 5 for
fiscal 2005, respectively.
25
EXECUTIVE COMPENSATION AND OTHER MATTERS
Compensation of Directors
Only Non-Employee Directors receive Director fees.
Non-Employee Directors receive the following compensation:
|
|
|
|
|
An annual retainer of $50,000, paid quarterly; |
|
|
|
A Board meeting fee of $2,000 for each Board meeting attended
($1,000 for attendance by telephone); |
|
|
|
A Board Committee meeting fee of $1,500 for each Board Committee
meeting attended (including attendance by telephone); and |
|
|
|
The Chair of each Board Committee receives a fee of
$7,500 per year, except the Audit Committee Chair receives
a fee of $15,000 per year. |
The following table presents the compensation provided by the
Company to the Non-Employee Directors for fiscal year ended
September 25, 2005.
Non-Employee Director Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual | |
|
|
|
|
|
|
|
|
|
|
Cash | |
|
Board/Committee | |
|
Committee | |
|
|
|
Stock Underlying | |
Name |
|
Retainer | |
|
Meeting Fees | |
|
Chair Fees | |
|
Total | |
|
Options Granted | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Richard C. Atkinson
|
|
$ |
43,750 |
|
|
$ |
35,000 |
|
|
|
|
|
|
$ |
78,750 |
|
|
|
18,000 |
|
Adelia A. Coffman
|
|
|
43,750 |
|
|
|
12,000 |
|
|
|
|
|
|
|
55,750 |
|
|
|
18,000 |
|
Donald G. Cruickshank
|
|
|
16,346 |
|
|
|
3,000 |
|
|
|
|
|
|
|
19,346 |
|
|
|
40,000 |
|
Raymond V. Dittamore
|
|
|
43,750 |
|
|
|
31,500 |
|
|
$ |
7,500 |
|
|
|
82,750 |
|
|
|
18,000 |
|
Diana Lady Dougan
|
|
|
43,750 |
|
|
|
30,500 |
|
|
|
7,500 |
|
|
|
81,750 |
|
|
|
18,000 |
|
Robert E. Kahn
|
|
|
43,750 |
|
|
|
29,500 |
|
|
|
|
|
|
|
73,250 |
|
|
|
18,000 |
|
Duane A. Nelles
|
|
|
43,750 |
|
|
|
34,500 |
|
|
|
15,000 |
|
|
|
93,250 |
|
|
|
18,000 |
|
Peter M. Sacerdote
|
|
|
43,750 |
|
|
|
27,000 |
|
|
|
7,500 |
|
|
|
78,250 |
|
|
|
18,000 |
|
Brent Scowcroft
|
|
|
43,750 |
|
|
|
27,500 |
|
|
|
|
|
|
|
71,250 |
|
|
|
18,000 |
|
Marc I. Stern
|
|
|
43,750 |
|
|
|
29,000 |
|
|
|
7,500 |
|
|
|
80,250 |
|
|
|
18,000 |
|
Richard Sulpizio(1)
|
|
|
8,948 |
|
|
|
5,000 |
|
|
|
|
|
|
|
13,948 |
|
|
|
|
|
|
|
(1) |
Mr. Sulpizo became an employee Director on January 17,
2005. |
Beginning in calendar 2006, a Non-Employee Director may elect to
defer his or her cash fees under the Companys Executive
Retirement Plan.
When traveling from
out-of-town, the
members of the Board of Directors are also eligible for
reimbursement for their travel expenses incurred in connection
with attendance at Board meetings and Board Committee meetings.
These amounts are not included in the table above. Employee
Directors do not receive any compensation for their
participation in Board meetings or Board Committee meetings.
Charitable Gifts Program
Each Non-Employee Director of the Company is eligible to
participate in a Charitable Matching Gift Program in which the
Company will match (up to $50,000 annually) a Non-Employee
Directors contribution to a qualified, eligible IRS
recognized nonprofit organization.
26
Stock Option Program
Each Non-Employee Director of the Company is eligible to receive
stock option grants under the Companys 2001 Non-Employee
Directors Stock Option Plan (the
2001 Directors Plan). Employee Directors
are not eligible to receive stock options under the
2001 Directors Plan.
The 2001 Directors Plan provides for an Initial
Option grant to purchase 40,000 shares of the
Companys common stock to Non-Employee Directors upon first
joining the Board (except that a director who was an employee of
the Company or certain related entities or designated affiliates
and who subsequently becomes a Non-Employee Director as a result
of the termination of such employment shall not be eligible to
receive an Initial Option) and an Annual Option grant to
purchase 18,000 shares of the Companys common
stock at the time of each annual meeting to Non-Employee
Directors who continue to serve on the Board. A Non-Employee
Director that was granted an Initial Option within 270 days
prior to the annual meeting does not receive such Annual Option.
All options granted under the Companys Non-Employee
Directors Stock Option Plan (the Prior
Directors Plan), the 1998 Non-Employee
Directors Stock Option Plan (the
1998 Directors Plan) and the
2001 Directors Plan have exercise prices equal to the
fair market value of the underlying common stock on the date of
grant and vest over five years according to the following
vesting schedules. Annual Options granted on or after
February 27, 2001 under the 2001 Directors Plan
vest according to the following schedule: so long as the
optionee continues to serve as a Non-Employee Director or
employee of, or consultant to, the Company, 10% of the shares
subject to the option will vest on the six-month anniversary of
the date of grant, with ratable monthly vesting thereafter.
Initial Options granted on or after February 27, 2001 under
the 2001 Directors Plan vest according to the following
schedule: so long as the optionee continues to serve as a
Non-Employee Director or employee of, or consultant to, the
Company, 20% of the shares subject to the option will vest on
the one-year anniversary of the date of grant, with ratable
monthly vesting thereafter. Options granted between
January 17, 2000 and February 26, 2001 under the
1998 Directors Plan vest according to the following
schedule: so long as the optionee continues to serve as a
Non-Employee Director or employee of, or consultant to, the
Company, shares subject to the option will vest on each monthly
anniversary of the date of grant. Options granted between
November 18, 1996 and January 16, 2000 under the Prior
Directors Plan and under the 1998 Directors
Plan vest according to the following schedule: so long as the
optionee continues to serve as a Non-Employee Director or
employee of, or consultant to, the Company, 20% of the shares
subject to the option will vest on each of the first, second,
third, fourth and fifth anniversaries of the date of grant.
The term of all options under the Prior Directors Plan,
the 1998 Directors Plan and the
2001 Directors Plan is 10 years, but such
options generally terminate 30 days after the optionee
ceases to be a Non-Employee Director, employee or consultant
(including those options granted prior to November 18,
1996, as amended). In the event that an optionee terminates
service due to the optionees (i) retirement at
age 70 or older after nine years of service on the Board
(Retirement as defined in the
1998 Directors Plan and the 2001 Directors
Plan) or (ii) due to permanent and total disability as
defined in Section 22(e)(3) of the Code, the option will
terminate only upon expiration of the option term. In the event
that an optionee terminates service due to the optionees
death or due to the optionees termination due to permanent
and total disability or Retirement and such termination is
followed by death, the vesting of all unvested shares will be
accelerated in full as of the date of the optionees death
and the option may be exercised in full at any time within one
year of such termination or upon the original expiration date,
whichever is earlier. In addition to the foregoing, the vesting
of options granted under the Prior Directors Plan, the
1998 Directors Plan and the 2001 Directors
Plan accelerate in connection with specified change of control
transactions.
If the stockholders approve Proposal 3, the 2006 Long-Term
Incentive Plan will become the source of director equity
incentives. The Company currently intends to continue to grant
options to Non-Employee Directors under the 2006 Long-Term
Incentive Plan on the same basis as under the
2001 Directors Plan.
During the fiscal year ended September 25, 2005, pursuant
to the 2001 Directors Plan Annual Options to purchase
an aggregate of 162,000 shares of the Companys common
stock were granted to Non-Employee Directors serving on the
Board on March 8, 2005 (the annual meeting date) and an
initial option to
27
purchase 40,000 shares of the Companys common
stock was granted to Mr. Cruickshank on June 3, 2005
in connection with his appointment to the Board.
Compensation of Executive Officers
Summary Compensation Table
The following table shows, for each of the three fiscal years
ended September 25, 2005, compensation awarded or paid to,
or earned by the Named Executive Officers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term | |
|
|
|
|
|
|
|
|
|
|
Compensation | |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
Annual Compensation(1) | |
|
Securities | |
|
|
|
|
|
|
| |
|
Underlying | |
|
All Other | |
Name and Principal Position |
|
Year | |
|
Salary | |
|
Bonus | |
|
Options(#) | |
|
Compensation(2) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Paul E. Jacobs(3)
|
|
|
2005 |
|
|
$ |
650,016 |
|
|
$ |
500,000 |
|
|
|
1,400,000 |
|
|
$ |
154,645 |
|
|
Chief Executive Officer |
|
|
2004 |
|
|
|
531,743 |
|
|
|
984,525 |
|
|
|
400,000 |
|
|
|
105,606 |
|
|
|
|
|
2003 |
|
|
|
464,241 |
|
|
|
605,000 |
|
|
|
400,000 |
|
|
|
81,017 |
|
Irwin Mark Jacobs(4)
|
|
|
2005 |
|
|
|
984,239 |
|
|
|
500,000 |
|
|
|
500,000 |
|
|
|
273,893 |
|
|
Chairman of the Board |
|
|
2004 |
|
|
|
1,062,282 |
|
|
|
1,701,500 |
|
|
|
600,000 |
|
|
|
268,188 |
|
|
|
|
|
2003 |
|
|
|
977,774 |
|
|
|
1,500,000 |
|
|
|
550,000 |
|
|
|
283,928 |
|
Steven R. Altman(5)
|
|
|
2005 |
|
|
|
604,243 |
|
|
|
450,000 |
|
|
|
1,150,000 |
|
|
|
151,183 |
|
|
President |
|
|
2004 |
|
|
|
510,624 |
|
|
|
975,000 |
|
|
|
400,000 |
|
|
|
100,436 |
|
|
|
|
|
2003 |
|
|
|
477,556 |
|
|
|
550,000 |
|
|
|
400,000 |
|
|
|
79,173 |
|
Sanjay K. Jha
|
|
|
2005 |
|
|
|
575,011 |
|
|
|
425,000 |
|
|
|
1,100,000 |
|
|
|
149,909 |
|
|
President, CDMA |
|
|
2004 |
|
|
|
488,280 |
|
|
|
976,500 |
|
|
|
400,000 |
|
|
|
100,466 |
|
|
Technologies |
|
|
2003 |
|
|
|
343,371 |
|
|
|
555,625 |
|
|
|
520,000 |
|
|
|
37,617 |
|
William E. Keitel
|
|
|
2005 |
|
|
|
482,702 |
|
|
|
350,000 |
|
|
|
400,000 |
|
|
|
116,518 |
|
|
Executive Vice President and |
|
|
2004 |
|
|
|
455,679 |
|
|
|
750,000 |
|
|
|
280,000 |
|
|
|
148,048 |
|
|
Chief Financial Officer |
|
|
2003 |
|
|
|
370,102 |
|
|
|
400,000 |
|
|
|
280,000 |
|
|
|
96,934 |
|
Roberto Padovani
|
|
|
2005 |
|
|
|
421,542 |
|
|
|
200,000 |
|
|
|
300,000 |
|
|
|
86,581 |
|
|
Executive Vice President and |
|
|
2004 |
|
|
|
367,928 |
|
|
|
550,000 |
|
|
|
280,000 |
|
|
|
151,280 |
|
|
Chief Technology Officer |
|
|
2003 |
|
|
|
339,750 |
|
|
|
300,000 |
|
|
|
280,000 |
|
|
|
102,650 |
|
|
|
(1) |
As permitted by rules established by the SEC, no amounts are
shown with respect to certain perquisites where such
amounts do not exceed in the aggregate the lesser of 10% of
salary plus bonus or $50,000. |
|
(2) |
Includes the other compensation as indicated in the table below. |
|
(3) |
Dr. Paul Jacobs served as Executive Vice President and
President, Wireless and Internet Group until July 2005, when he
was named Chief Executive Officer. |
|
(4) |
Dr. Irwin Jacobs served as Chief Executive Officer until
July 2005. |
|
(5) |
Mr. Altman served as Executive Vice President and
President, Technology Transfer and Strategic Alliances Division
until July 2005, when he was named President. |
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company | |
|
Executive | |
|
|
|
|
|
|
|
|
Matching | |
|
Retirement | |
|
Split-Dollar | |
|
|
|
|
|
|
401(k) | |
|
Stock | |
|
Life | |
|
Total Other | |
Name |
|
Year | |
|
Contributions | |
|
Matching(1) | |
|
Insurance | |
|
Compensation | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Paul E. Jacobs
|
|
|
2005 |
|
|
$ |
5,075 |
|
|
$ |
149,570 |
|
|
$ |
|
|
|
$ |
154,645 |
|
|
|
|
2004 |
|
|
|
4,975 |
|
|
|
100,631 |
|
|
|
|
|
|
|
105,606 |
|
|
|
|
2003 |
|
|
|
4,875 |
|
|
|
72,331 |
|
|
|
3,811 |
|
|
|
81,017 |
|
Irwin Mark Jacobs
|
|
|
2005 |
|
|
|
5,475 |
|
|
|
268,418 |
|
|
|
|
|
|
|
273,893 |
|
|
|
|
2004 |
|
|
|
5,275 |
|
|
|
242,998 |
|
|
|
19,915 |
|
|
|
268,188 |
|
|
|
|
2003 |
|
|
|
5,175 |
|
|
|
169,463 |
|
|
|
109,290 |
|
|
|
283,928 |
|
Steven R. Altman
|
|
|
2005 |
|
|
|
5,075 |
|
|
|
146,108 |
|
|
|
|
|
|
|
151,183 |
|
|
|
|
2004 |
|
|
|
4,975 |
|
|
|
95,461 |
|
|
|
|
|
|
|
100,436 |
|
|
|
|
2003 |
|
|
|
4,875 |
|
|
|
70,195 |
|
|
|
4,103 |
|
|
|
79,173 |
|
Sanjay K. Jha
|
|
|
2005 |
|
|
|
5,075 |
|
|
|
144,834 |
|
|
|
|
|
|
|
149,909 |
|
|
|
|
2004 |
|
|
|
4,975 |
|
|
|
95,491 |
|
|
|
|
|
|
|
100,466 |
|
|
|
|
2003 |
|
|
|
4,875 |
|
|
|
32,742 |
|
|
|
|
|
|
|
37,617 |
|
William E. Keitel
|
|
|
2005 |
|
|
|
5,506 |
|
|
|
111,012 |
|
|
|
|
|
|
|
116,518 |
|
|
|
|
2004 |
|
|
|
5,550 |
|
|
|
142,498 |
|
|
|
|
|
|
|
148,048 |
|
|
|
|
2003 |
|
|
|
5,243 |
|
|
|
91,691 |
|
|
|
|
|
|
|
96,934 |
|
Roberto Padovani
|
|
|
2005 |
|
|
|
5,475 |
|
|
|
81,106 |
|
|
|
|
|
|
|
86,581 |
|
|
|
|
2004 |
|
|
|
5,475 |
|
|
|
145,805 |
|
|
|
|
|
|
|
151,280 |
|
|
|
|
2003 |
|
|
|
4,905 |
|
|
|
94,042 |
|
|
|
3,703 |
|
|
|
102,650 |
|
|
|
(1) |
The Company has a voluntary deferred compensation plan that
allows eligible executives to defer up to 100% of their income
on a pre-tax basis. The Company will match in stock, subject to
vesting, up to 10% of eligible income. The values stated above
are the values of the Companys quarterly contributions on
their respective dates of contribution. Company contributions
begin vesting based on certain minimum participation or service
requirements, and are fully vested at age 65. After the end
of a full years contribution, that contribution will then
vest over a four-year period in equal installments of
25% per year. Executive and Company contributions are
unsecured and subject to the general creditors of the Company. |
Stock Option Grants in Last Fiscal Year
The following table contains information concerning the stock
option grants made to each of the Named Executive Officers for
the fiscal year ended September 25, 2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individual Grants | |
|
|
|
|
| |
|
Value at Assumed Annual | |
|
|
Number of | |
|
% of Total | |
|
|
|
Rates of Stock Price | |
|
|
Securities | |
|
Options | |
|
|
|
Appreciation for | |
|
|
Underlying | |
|
Granted to | |
|
|
|
Option Term(2) | |
|
|
Options | |
|
Employees in | |
|
Exercise Price | |
|
Expiration | |
|
| |
Name |
|
Granted(1) | |
|
Fiscal Year | |
|
per Share | |
|
Date | |
|
5% | |
|
10% | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Paul E. Jacobs
|
|
|
600,000 |
|
|
|
1.7 |
% |
|
$ |
43.62 |
|
|
|
12/02/14 |
|
|
$ |
16,453,732 |
|
|
$ |
41,693,704 |
|
|
|
|
800,000 |
(3) |
|
|
2.3 |
% |
|
|
33.01 |
|
|
|
06/30/15 |
|
|
|
16,602,100 |
|
|
|
42,069,667 |
|
Irwin Mark Jacobs
|
|
|
500,000 |
|
|
|
1.4 |
% |
|
|
43.62 |
|
|
|
12/02/14 |
|
|
|
13,711,443 |
|
|
|
34,744,753 |
|
Steven R. Altman
|
|
|
600,000 |
|
|
|
1.7 |
% |
|
|
43.62 |
|
|
|
12/02/14 |
|
|
|
16,453,732 |
|
|
|
41,693,704 |
|
|
|
|
550,000 |
(3) |
|
|
1.6 |
% |
|
|
33.01 |
|
|
|
06/30/15 |
|
|
|
11,413,944 |
|
|
|
28,922,896 |
|
Sanjay K. Jha
|
|
|
600,000 |
|
|
|
1.7 |
% |
|
|
43.62 |
|
|
|
12/02/14 |
|
|
|
16,453,732 |
|
|
|
41,693,704 |
|
|
|
|
500,000 |
(3) |
|
|
1.4 |
% |
|
|
33.01 |
|
|
|
06/30/15 |
|
|
|
10,376,312 |
|
|
|
26,293,542 |
|
William E. Keitel
|
|
|
400,000 |
|
|
|
1.2 |
% |
|
|
43.62 |
|
|
|
12/02/14 |
|
|
|
10,969,155 |
|
|
|
27,795,803 |
|
Roberto Padovani
|
|
|
300,000 |
|
|
|
0.9 |
% |
|
|
43.62 |
|
|
|
12/02/14 |
|
|
|
8,226,866 |
|
|
|
20,846,852 |
|
|
|
(1) |
Options were granted under the 2001 Stock Option Plan and have a
grant price that is equal to the fair market value on the date
of grant. Such options vest according to the following schedule:
10% of the |
29
|
|
|
shares subject to the option will vest on the six-month
anniversary of the date of grant, with ratable monthly vesting
thereafter. Generally, vesting is contingent upon continued
service with the Company. Options granted under the
Companys Stock Option Plans generally have a maximum term
of 10 years. |
|
|
(2) |
Potential gains are net of exercise price, but before taxes
associated with exercise. These amounts represent certain
assumed rates of appreciation only, in accordance with the
SECs rules. Actual gains, if any, on stock option
exercises are dependent on the future performance of the common
stock, overall market conditions and the option holders
continued employment through the vesting period. The amounts
reflected in this table may not necessarily be achieved. |
|
(3) |
One-time grant for promotion. |
Aggregated Option Exercises in Last Fiscal Year and Fiscal
Year End Values
The following table sets forth information concerning option
exercises and option holdings by each of the Named Executive
Officers for the fiscal year ended September 25, 2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities | |
|
|
|
|
|
|
|
|
Underlying Unexercised | |
|
Value of Unexercised | |
|
|
Shares | |
|
|
|
Options Held at | |
|
In-the-Money Options at | |
|
|
Acquired | |
|
|
|
September 25, 2005 | |
|
September 25, 2005(1) | |
|
|
On | |
|
Value | |
|
| |
|
| |
Name |
|
Exercise | |
|
Realized | |
|
Exercisable | |
|
Unexercisable | |
|
Exercisable | |
|
Unexercisable | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Paul E. Jacobs
|
|
|
838,400 |
|
|
$ |
30,125,404 |
|
|
|
1,958,932 |
|
|
|
2,050,668 |
|
|
$ |
27,471,824 |
|
|
$ |
25,672,032 |
|
Irwin Mark Jacobs
|
|
|
2,127,664 |
|
|
|
76,707,815 |
|
|
|
9,930,479 |
|
|
|
1,184,501 |
|
|
|
336,624,103 |
|
|
|
17,557,564 |
|
Steven R. Altman
|
|
|
375,000 |
|
|
|
7,932,685 |
|
|
|
1,311,832 |
|
|
|
1,693,168 |
|
|
|
11,883,768 |
|
|
|
20,886,432 |
|
Sanjay K. Jha
|
|
|
249,600 |
|
|
|
7,978,537 |
|
|
|
1,117,932 |
|
|
|
1,607,668 |
|
|
|
21,108,627 |
|
|
|
21,046,397 |
|
William E. Keitel
|
|
|
|
|
|
|
|
|
|
|
710,499 |
|
|
|
739,501 |
|
|
|
11,611,432 |
|
|
|
9,584,068 |
|
Roberto Padovani
|
|
|
10,000 |
|
|
|
194,926 |
|
|
|
1,347,665 |
|
|
|
762,335 |
|
|
|
16,352,514 |
|
|
|
10,962,786 |
|
|
|
(1) |
Represents the closing price per share of the underlying shares
on the last day of the fiscal year less the option exercise
price multiplied by the number of shares. The closing price per
share was $44.76 on the last trading day of the fiscal year as
reported on the NASDAQ National Market. |
Information about employee and executive stock option grants
from fiscal 2002 through fiscal 2005 is as follows (number of
shares in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
| |
Total shares underlying options granted
|
|
|
35 |
|
|
|
31 |
|
|
|
34 |
|
|
|
53 |
|
Less shares underlying cancelled options
|
|
|
(6 |
) |
|
|
(4 |
) |
|
|
(9 |
) |
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net shares underlying granted options
|
|
|
29 |
|
|
|
27 |
|
|
|
25 |
|
|
|
47 |
|
Total shares underlying options granted to Named Executive
Officers
|
|
|
5 |
|
|
|
2 |
|
|
|
2 |
|
|
|
3 |
|
Net shares underlying grants during the period as % of
outstanding shares(1)
|
|
|
1.8 |
% |
|
|
1.7 |
% |
|
|
1.6 |
% |
|
|
3.1 |
% |
Grants to Named Executive Officers as % of total shares
underlying options granted(2)
|
|
|
13.9 |
% |
|
|
7.0 |
% |
|
|
6.7 |
% |
|
|
6.0 |
% |
Grants to Named Executive Officers as % of outstanding
shares(1)(2)
|
|
|
0.3 |
% |
|
|
0.1 |
% |
|
|
0.1 |
% |
|
|
0.2 |
% |
Cumulative shares underlying options held by Named Executive
Officers as % of total options outstanding(1)
|
|
|
12.0 |
% |
|
|
10.8 |
% |
|
|
10.5 |
% |
|
|
12.9 |
% |
|
|
(1) |
Calculated based on outstanding shares or options, as
applicable, as of the beginning of each period. |
|
(2) |
Excluding the one-time grant to Drs. Paul Jacobs and Sanjay
Jha and Mr. Steven Altman for their promotions in 2005, the
grants to Named Executive Officers as a percent of total shares
underlying options granted and as a percent of total outstanding
shares for 2005 would have been 8.6% and 0.2%, respectively. |
30
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information regarding outstanding
options and shares reserved for future issuance under the equity
compensation plans as of September 25, 2005 (number of
shares in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares to | |
|
|
|
|
|
|
be Issued Upon | |
|
Weighted Average | |
|
Number of Shares | |
|
|
Exercise of | |
|
Exercise Price of | |
|
Remaining Available | |
Plan Category |
|
Outstanding Options | |
|
Outstanding Options | |
|
for Future Issuance | |
|
|
| |
|
| |
|
| |
Equity compensation plans approved by stockholders(1)
|
|
|
201,990 |
|
|
$ |
20.30 |
|
|
|
47,842 |
(2) |
Equity compensation plans not approved by stockholders(3)
|
|
|
|
|
|
|
|
|
|
|
87 |
|
Total(4)
|
|
|
201,990 |
|
|
$ |
20.30 |
|
|
|
47,929 |
|
|
|
(1) |
Consists of six plans: the Companys 1991 Stock Option
Plan, 2001 Stock Option Plan, 1998 Non-Employee Directors
Stock Option Plan, 2001 Non-Employee Directors Stock
Option Plan, 2001 Employee Stock Purchase Plan, and the
Executive Retirement Matching Contribution Plan. |
|
(2) |
Includes 15,359,118 shares reserved for issuance under the
2001 Employee Stock Purchase Plan. |
|
(3) |
Consists solely of shares issuable under the Companys 1996
Non-Qualified Employee Stock Purchase Plan, which allows
eligible employees to purchase shares of common stock at 85% of
the lower of the fair market value on the first or the last day
of each six-month offering period. Employees may authorize the
Company to withhold up to 15% of their compensation during any
offering period, subject to certain limitations. |
|
(4) |
Excludes options assumed in connection with mergers and
acquisitions. Approximately 804,000 shares of the
Companys common stock were issuable upon exercise of these
assumed options. These options have a weighted average exercise
price of $20.36 per share. No additional options may be
granted under these assumed arrangements. |
Compensation Committee Interlocks and Insider Participation
in Compensation Decisions
None of the members of the Companys Compensation Committee
are, or have been, an employee or officer of the Company. During
fiscal 2005 no member of the Compensation Committee had any
relationship with the Company requiring disclosure under
Item 404 of
Regulation S-K.
During fiscal 2005, none of the Companys executive
officers served on the compensation committee (or equivalent) or
board of directors of another entity whose executive officer(s)
served on the Companys Compensation Committee or Board.
CERTAIN TRANSACTIONS
During fiscal 2005, the Company employed the family members of
directors and executive officers described below. All of the
following family members under the Companys employ were
adults who did not live with the related director or executive
officer. Each family member below is compensated according to
standard Company practices, including participation in the
Companys employee benefit plans generally made available
to employees of a similar responsibility level. The Company does
not view any of the directors or executive officers listed below
as having a beneficial interest in the described transactions
that is material to them or the Company. Moreover, none of the
following directors or executive officers believe that they have
a direct or indirect material interest in the employment
relationships of the listed family members. Options described
below were granted under the Companys 2001 Stock Option
Plan and have a grant price that is equal to the fair market
value on the date of grant. Such options vest according to the
following schedule: 10% of the shares subject to the option vest
on the six-month anniversary of the date of grant, with ratable
monthly vesting thereafter. Generally, vesting is contingent
upon continued service with the Company. Options granted under
the Companys Stock Option Plans generally have a maximum
term of 10 years.
Dr. Paul E. Jacobs and Jeffrey A. Jacobs are the
sons of Dr. Irwin Mark Jacobs, Chairman of the Board.
Dr. Irwin Mark Jacobs and Dr. Paul E. Jacobs were
compensated as described above under the heading
31
Executive Compensation and Other Matters.
Jeffrey A. Jacobs serves as the Companys President,
Global Development. Jeffrey A. Jacobs earned $484,248 in
salary and bonus during fiscal 2005 and received a stock option
grant for 200,000 shares of the Companys stock at an
exercise price of $43.62 per share.
Duane A. Nelles son Duane A. Nelles, III
serves as a Senior Director, Finance for the Company.
Duane A. Nelles III principal responsibilities
are in the strategy and development of the MediaFLO USA, Inc.
business and he is not involved in the preparation of the
Companys financial statements. Duane A.
Nelles III earned $126,013 in salary and bonus during
fiscal 2005 and received a stock option grant for
3,975 shares of the Companys stock at an exercise
price of $42.16 per share and a second grant for
3,500 shares at an exercise price of $33.57 per share.
Duane A. Nelles son Paul Nelles serves as an Associate
Project Manager for the Company. Paul Nelles earned $66,547 in
salary and bonus during fiscal 2005 and received a stock option
grant for 570 shares of the Companys stock at an
exercise price of $42.16 per share.
Steven R. Altmans brother Jeffrey S. Altman serves as a
Director, Business Development for the Company. Jeffrey S.
Altman earned $174,958 in salary and bonus during fiscal 2005
and received a stock option grant for 5,195 shares of the
Companys common stock at an exercise price of
$42.16 per share and a second grant for 4,200 shares
at an exercise price of $33.57 per share.
Dr. Daniel L. Sullivans daughter, Megan J. Sullivan,
serves as a Sr. Marketing Communications Coordinator for the
Company. Dr. Sullivan is the Companys Executive Vice
President, Human Resources. Megan J. Sullivan earned $63,745 in
salary and bonus during fiscal 2005 and received a stock option
grant for 310 shares of the Companys common stock at
an exercise price of $42.16 per share and a second grant
for 235 shares at an exercise price of $33.57 per
share.
32
REPORT OF THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
Overview
The Compensation Committee of the Board of Directors (the
Committee) assists the Board in fulfilling its
responsibilities for the total rewards packages offered to the
Companys officers and non-employee directors. The
Committees charter is to collaborate with executive
management in developing a compensation philosophy; to evaluate
and approve compensation for the Chief Executive Officer, other
officers, key executives, and non-employee directors; and to
oversee the general employee benefit programs, including the
Companys employee equity compensation plan and employee
stock purchase plan. The Committee has the authority to retain
and terminate any independent, third-party compensation
consultant and to obtain independent advice and assistance from
internal and external legal, accounting and other advisors. The
Total Rewards Management department in QUALCOMMs Human
Resources organization supports the Committee in its work, and
may collaborate with any independent, third-party compensation
consultant engaged by the Committee and Management. At least
annually, and at its February 2005 meeting, the Committee
reviews and reassesses the adequacy of its Charter, and its own
performance for purposes of self-evaluation and to encourage
continuous improvement. The Committees complete charter is
available at the Companys web site at
http://www.qualcomm.com/ir/PDF/comp comm charter.pdf.
Three independent, non-employee directors serve on the
Committee. Each member of the Committee meets the independence
requirements specified by the NASDAQ and by Section 162(m)
of the Code. The Chair reports the Committees actions and
recommendations to the full Board following each Committee
meeting. The Committee held seven formal meetings during fiscal
year 2005; each meeting included an executive session during
which only the independent directors and their advisors were
present.
Compensation Philosophy and Objectives
QUALCOMMs compensation and benefits philosophy and
programs significantly contribute to creating and sustaining a
competitive advantage in the labor market that translates to
leadership and innovation in our addressed business markets. The
Companys unique mix of compensation, benefits, equity
participation and workplace environment characterized by
integrity, innovation, collaboration and inclusion, leads
QUALCOMM to a distinctive position as an employer. The Company
consistently receives recognition from diverse sources, such as
Fortune magazines 100 Best Places to Work for in
America, Industry Weeks 100 Best Managed
Companies, CIO magazines Top 100, the
Fabless Semiconductor Associations Best Financially
Managed Company, and Fortunes Americas
Most Admired Companies. Forbes magazine ranked QUALCOMM
20th of 189 in efficiency (with a rank of 1 being most
efficient) of CEO pay relative to company performance for 2005.
In 2003 and 2004, Forbes awarded QUALCOMM an efficiency grade of
A for the Companys CEO pay relative to
performance.
The Committees guiding principle is to assure the
Companys compensation and benefits policies attract,
motivate and retain the key employees necessary to support the
Companys growth and success, both operationally and
strategically. This principle guides the design and
administration of compensation and benefit programs for the
Companys officers, other executives, and general
workforce. The Committee, in collaboration with executive
Management and independent consultants engaged by the Committee
and Management, re-affirmed in 2005 the following key strategies
in support of our guiding principle:
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Use total cash compensation (salary plus annual cash bonus) to
recognize appropriately each individual officers scope of
responsibility, role in the organization, experience and
contributions. The Committee and Management refer to external
benchmarks as part of its due diligence in determining salary
and target bonus amounts, including peer group companies noted
elsewhere in this report, and information provided by
independent, third-party published surveys in which QUALCOMM
participates. |
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Use long-term equity-based incentives (in the form of
non-qualified stock options and through a tax-qualified employee
stock purchase plan) to align employee and stockholder
interests, as well as to |
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attract, retain and motivate employees and enable them to share
in the long-term growth and success of the Company. |
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Provide benefit programs competitive within our defined talent
market that provide participant flexibility and are
cost-effective to the Company. |
Compensation Components and Processes
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Annual Salary |
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The annual salary for officers (including the Named Executive
Officers shown in the Summary Compensation Table on
page 28) and employees is determined relative to job
scope and responsibilities, past and current contributions,
compensation for similar positions at peer and/or other
high-technology companies, and individual factors (such as
unique skills, demand in the labor market, and longer-term
development and succession plans). The Committee emphasizes
pay-for-performance in all components of compensation, making
salary adjustments based on individual employee performance
relative to compensation levels among employees in similar
positions in their defined talent market and relationships among
internal peers. Salary is an important component of the
Companys total compensation and benefit packages, and the
Committee structures salaries to be a relatively smaller
proportion of total target cash compensation with increasing
responsibility. Annual salary represents 50% of the annual total
target cash for our CEO, between 57% to 67% for other officers,
and approximately 75% for non-officer executives. |
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The Committee reviews officer salaries annually after the end of
the fiscal year. At its December 2004 meeting, the Committee
reviewed recommendations for salary adjustments for the CEO, the
other Named Executive Officers, and the remaining Company
officers. To identify compensation practices for similar officer
positions among other high-technology companies, the Committee
engaged an independent, third-party consultant to obtain and
summarize data from Officer Pay Peer Group company proxies and
information provided in independent, third-party, published
surveys. The Committee also considered Company and Business Unit
strategic and operational performance, incumbent contributions
and experience, relative levels of pay among the officers, and
recommendations from the CEO and the Companys Human
Resources staff. The Committee approved salary increases for the
officers, effective for calendar year 2005. The increases varied
by officer, and resulted in an overall increase to the officer
payroll of 9%. |
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Effective July 1, 2005, Dr. Irwin Mark Jacobs
transitioned from Chairman of the Board and CEO to the role of
Chairman of the Board, relinquishing his
day-to-day
responsibilities and changing his formal status from full-time
to part-time employee. Dr. Paul E. Jacobs assumed the role
of CEO. Steven R. Altman assumed the role of President. In
addition, Dr. Sanjay K. Jha expanded his involvement in the
Companys strategic planning and in representing the
Company to investors and the community. The Committee reviewed
data and recommendations prepared by an independent, third-party
consultant and the Companys Human Resource staff,
regarding appropriate salary adjustments consistent with these
changing roles and responsibilities. The Committee approved
salary increases for Drs. Paul E. Jacobs and Sanjay K. Jha
and Mr. Steven R. Altman, and a salary decrease for
Dr. Irwin Mark Jacobs, effective July 2, 2005. |
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Annual Cash Bonus |
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The design of the Companys annual Executive Bonus Program
(the Bonus Program) rewards achievement at specified
levels of financial and individual performance. The Committee
approved the fiscal year 2005 Bonus Program at its November 2004
meeting. Each officer position has an assigned target bonus
level, expressed as a percent of fiscal year-end annual salary.
For fiscal year 2005, the target bonuses were 100% for the
Chairman & CEO (Dr. Irwin Mark Jacobs), and 75%
for the President & COO (Anthony S. Thornley), and
certain EVPs (Steven R. Altman, Drs. Paul E. Jacobs and
Sanjay K. Jha). The target bonus for the remaining officers was
50%. These target bonus levels are competitive with target
bonuses for similar positions reported in the independent,
third-party published surveys. The Committees independent
compensation consultant also reviewed the bonus target levels
and reported to |
34
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the Committee that the targets are competitive. Depending on
Corporate/ Business Unit financial performance and individual
performance, each officer may earn between 0 and 2.5X the target
bonus. |
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The Officer Bonus Pool (the Pool) is funded
depending on the Financial Performance of the Company and
relevant Business Unit, as appropriate. Financial performance
includes both revenue and Earnings Before Tax (EBT), with
greater emphasis placed on EBT the funding formula
places 40% weight on revenue performance and 60% weight on EBT
performance. The level of performance, upon which the bonus
award is based, is determined from the ratio of fiscal year-end
revenue and EBT compared to the planned revenue and EBT budgets
reviewed by the Board of Directors at the beginning of the
fiscal year. If the weighted sum of revenue and EBT performance
is at least 80%, then the Pool is funded at the minimum bonus
award level (0.3X of the target bonus). If the weighted sum of
revenue and EBT performance is 150%, then the Pool is funded at
the maximum bonus award level (2.5X of the target bonus). |
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Using the funds available in the Pool, the Committee and the CEO
may award an annual bonus to each officer based on the
officers target bonus level and contributions during the
fiscal year. |
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The Pool was funded at approximately 85% of the target bonus
level, and actual bonus awards for the fiscal year 2005 Bonus
Program reflect the fact that the Company performed well yet did
not exceed its revenue and EBT goals for the fiscal year. At its
November 2005 meeting, the Committee reviewed Managements
recommendations for officer bonus awards for fiscal 2005
performance. The Summary Compensation Table includes the bonus
awards for the Named Executive Officers approved by the
Committee. |
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Effective with his transition to Chairman of the Board on
July 1, 2005, the Committee reduced Dr. Irwin Mark
Jacobs target bonus to 0% for the time he served only in
this capacity, in order to align his focus in this role on
longer-term strategy. Concurrently, the Committee increased
Dr. Paul E. Jacobs target bonus to 100% for the time
he served as CEO. |
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Long-Term Equity Compensation |
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QUALCOMM grants non-qualified stock options at an exercise price
equal to the fair market value of the Companys common
stock on the date of the grant. The five-year option vesting
period, somewhat longer than the three- and four-year vesting
periods common to many high technology companies, encourages
officers and all Company employees to work with a long-term view
of the Companys achievement and to reinforce their
long-term affiliation with QUALCOMM. The design of the stock
option program helps to reduce officer and employee turnover and
to retain the knowledge and skills of our valued officers and
employees. |
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QUALCOMM grants stock options to substantially all employees.
This practice is integral to the success of the Company,
enabling QUALCOMM to attract and retain a highly talented and
marketable employee population, and enabling clear employee
focus on building shareholder value. Our employees report that,
among the various compensation and benefit program offerings,
stock options at time of hire is among the top two drivers in
their decision to join the Company, and eligibility for periodic
grants through our merit option program is also among the top
two drivers in their decision to remain with QUALCOMM. |
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The Company typically awards stock option grants to officers
following the end of the fiscal year. At its November 2005
meeting, the Committee reviewed the analyses and recommendations
for officer stock option grants provided by management. In
reviewing the recommended grants, the Committee considered each
officers performance and contribution during the fiscal
year, analyses reflecting the value delivered, and proportion of
options granted to each Named Executive Officer (NEO), and the
NEOs in aggregate, as a percentage of total options granted
during the fiscal year. The Summary Compensation Table includes
the stock option grants to the Named Executive Officers approved
by the Committee. |
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As noted previously, the Company implemented a management
succession plan, effective July 1, 2005. The Committee
reviewed data and recommendations prepared by an independent,
third-party consultant |
35
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and the Companys Human Resource staff, regarding
appropriate stock option awards consistent with these changing
roles and responsibilities. The Committee approved one-time
promotional awards of non-qualified stock options to
Drs. Paul E. Jacobs and Sanjay K. Jha and Mr. Steven R.
Altman in the amounts of 800,000, 550,000 and 500,000
respectively, at a fair market value exercise price of $33.01.
These options have the same
10-year term and
five-year vesting
schedule of the annual options granted to officers. |
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The Committee makes an annual recommendation to the Board
regarding the stock option pool for the year. In developing the
recommendation, the Committee considers Company performance,
anticipated hiring, competitive practices, contingencies for
mergers and acquisitions, and impact on dilution and overhang.
For fiscal year 2005, the burn rate (total options granted
during fiscal year 2005 as a percentage of common shares
outstanding) was 2.1%, compared to the fiscal year 2004 burn
rate of 1.9%. Overhang (total options outstanding plus options
available for grant as a percentage of common shares outstanding
plus options outstanding plus options available for grant) was
12.5%, compared to fiscal year 2004 overhang of 13.9%. |
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The Committee oversees the design, implementation and
administration of all Company-wide benefit programs. QUALCOMM
maintains a relatively egalitarian offering of benefit programs
with a limited number of additional benefit programs available
to Company officers and other non-officer executives, including: |
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Voluntary Executive Retirement Contribution and Matching
Plans |
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The Executive Retirement Contribution Plan (ERC
Plan) is a voluntary, non-qualified plan that enables
executives to defer income (base salary and annual bonus) on a
pre-income tax basis until retirement. The Executive Retirement
Matching Contribution Plan (the Matching Plan) is a
non-qualified plan under which participants who contribute to
the ERC Plan receive a Company contribution in the form of
Company stock of up to 10% of pay, less any 401(k) contribution.
The Company stock contributions under the Matching Plan are
subject to a four-year vesting schedule. The investment options
under the ERC Plan are the same as those made available to all
employees participating in the Companys 401(k) plan. |
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Financial & Retirement Planning Services |
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QUALCOMM will reimburse officers up to a maximum of
$12,500 per fiscal year for expenses incurred for
financial, estate and/or tax planning. |
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QUALCOMM provides supplemental health coverage, with a maximum
annual limit of $10,000 for officers, and lower limits for
non-officer executives, and other senior level employees. This
program covers the employee and all eligible dependents of the
employee, and provides coverage for most medical expenses not
covered by the Companys base health plan. |
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Executive Employment Agreements |
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QUALCOMMs employees, including our executive officers, are
employed at will and do not have employment
agreements. |
36
Committee Actions during Fiscal Year 2005
The Committee and Company Management collaborated on several
initiatives during the fiscal year that further evolve and
enhance the governance and alignment of compensation and benefit
practices with the interest of shareholders.
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Peer Groups for Compensation and Benefits
Benchmarking |
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The selection of peer group companies used to identify
competitive market practices has been a thoughtful and
deliberate process for the Committee and Management. In 2004,
the Committee and Management agreed upon five separate peer
groups for benchmarking (1) non-employee director
compensation, (2) officer compensation, (3) benefits,
(4) compensation best practices, and (5) financial
performance. Consistent with its role to oversee the selection
of peer group companies, the Committee and Management engaged an
independent, third-party consultant, to review and recommend
updates to the peer group companies. The consultants used
specific selection criteria, including industry segment
(primarily telecom service, telecom equipment and fabless
semiconductor), revenue (between $5B and $20B), and market
capitalization (between $6B and $125B) and also identified other
break-out companies reflecting rapid growth and
unique space within their markets. The consultants and
Management presented the recommended changes to the peer group
companies to the Committee at its May 2005 meeting. The officer
compensation peer group companies include Advanced Micro
Devices, Agilent Technologies, Apple Computer, Avaya, Cisco
Systems, Comcast, Computer Associates, eBay, Freescale
Semiconductor, Google,
L-3 Communications,
Lucent Technologies, Micron Technology, Motorola, Nortel
Networks, Oracle, Sun Microsystems, Texas Instruments, and
Yahoo!. The peer group companies identified for these purposes
is not identical to the companies listed in the NASDAQ
Communications Equipment Stocks included in the Stock
Performance Graph for this Proxy Statement. Certain companies
included in the NASDAQ index are not considered peer companies
for executive talent, and certain companies not included in
NASDAQ index are included in the peer groups because they are
considered competitors for executive talent. |
Policy on Deductibility of Named Executive Officer
Compensation
In evaluating compensation program alternatives, the Committee
considers the potential impact on QUALCOMM of
Section 162(m) of the Code. Section 162(m) eliminates
the deductibility of compensation over $1 million paid to
the Named Executive Officers, excluding performance-based
compensation. Compensation programs generally will qualify
as performance-based if (1) compensation is based on
pre-established objective performance targets, (2) the
programs material features have been approved by
shareholders, and (3) there is no discretion to increase
payments after the performance targets have been established for
the performance period.
The Committee endeavors to maximize deductibility of
compensation under Section 162(m) of the Code to the extent
practicable while maintaining a competitive, performance-based
compensation program. However, tax consequences, including but
not limited to tax deductibility, are subject to many factors
(such as changes in the tax laws and regulations or
interpretations thereof and the timing and nature of various
decisions by officers regarding stock options) beyond the
control of either the Committee or QUALCOMM. In addition, the
Committee believes that it is important for it to retain maximum
flexibility in designing compensation programs that meet its
stated objectives and fit within the Committees guiding
principles. Finally, based on the amount of deductions the
Company can take each year, the actual impact of the loss of
deduction for compensation paid to the CEO and the other top
highly compensated executives over the $1 million
limitation is extremely small and has a de minimis impact on the
Companys overall tax position. For all of the foregoing
reasons, the Committee, while considering tax deductibility as
one of its factors in determining compensation, will not limit
compensation to those levels or types of compensation that will
be deductible. The Committee will, of course, consider
alternative forms of compensation, consistent with its
compensation goals that preserve deductibility.
37
Chairman and Chief Executive Officer Compensation
The Committee followed the same philosophy and guiding
principles described above in determining compensation for
Dr. Irwin Jacobs, Chief Executive Officer of QUALCOMM up to
July 1, 2005, and for Dr. Paul Jacobs, Chief Executive
Officer of QUALCOMM effective July 1, 2005.
Dr. Irwin Jacobs annual base salary was $1,100,000
from the beginning of calendar year 2005 to July 1, 2005.
His annual salary was reduced to $650,000 effective July 2,
2005. Dr. Paul Jacobs annual base salary was $575,000
from the beginning of 2005 to July 1, 2005. His annual
salary was increased to $950,000 effective July 2, 2005.
In consideration of his overall leadership during the first
three quarters of fiscal 2005, after the end of fiscal 2005, the
Committee awarded Dr. Irwin Jacobs a $500,000 bonus and a
stock option grant to purchase 200,000 shares of the
Companys common stock at an exercise price of
$44.02 per share. In consideration of Dr. Paul
Jacobs leadership of the QW&I group comprised of the
QWI and QTL Business Segments during the first three quarters of
fiscal 2005, his leadership during the succession plan
transition and the final quarter of fiscal 2005, the Committee
awarded Dr. Paul Jacobs a $500,000 bonus and a stock option
grant to purchase 900,000 shares of the Companys
common stock at an exercise price of $44.02 per share.
The Committee reviewed summaries of each Officers total
compensation that tally the value of direct cash compensation,
stock option awards, benefits and perquisites, and the
hypothetical value of vested and unvested stock options at
various trading prices. The Committee believes its CEO
compensation is appropriate given the positive Company
performance in fiscal 2005. The criteria the Committee
considered in determining CEO compensation included the annual
financial performance of the Company, the Companys
year-over-year profitable growth and positioning for sustained
long-term growth, and other individual considerations such as
leadership, ethics, and corporate governance. QUALCOMMs
Total Shareholder Return (TSR) for both one- and three-
year periods ending on September 30, 2005 was in the third
quartile relative to our financial performance peer group of
20 companies (ticker symbols: AMD, ADI, AV, BRCM, CSCO, CA,
EMC, INTC, INTU, JNPR, LLL, LU, MU, MOT, NSM, NT, ORCL, SEBL,
SUNW and TXN). QUALCOMMs one-year TSR of 15.6% and
three-year TSR of 48.9% (annualized rate of return) placed the
Company at or above the 60th percentile among the financial
performance peer companies for both measurement periods. As
evidenced by the Companys fiscal year 2005
Form 10-K filing,
the Committee believed that the Companys financial
performance and position at the end of fiscal year 2005 was
strong. QUALCOMMs status within our industry, and in the
broader business community, is also exceptionally positive. We
earlier highlighted some of the recognition the Company has
received from diverse sources. Fiscal 2005 was a year of notable
achievements, including strong revenue and EPS performance,
driven by global demand for CDMA products and WCDMA
(UMTS) subscriber growth in Europe and Japan. The drivers
of this growth include demand for CDMA products and devices with
increasing functionality, the expansion of broadband data
services, and the accelerating growth in WCDMA service launches,
phone pricings, and multimedia capabilities. QUALCOMMs
BREW technology plays an increasing role in generating consumer
demand for wireless products.
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COMPENSATION COMMITTEE |
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Raymond V. Dittamore, Chair |
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Richard C. Atkinson |
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Marc I. Stern |
38
REPORT OF THE AUDIT COMMITTEE
The following is the report of the Audit Committee with respect
to QUALCOMMs audited financial statements for the fiscal
year ended September 25, 2005.
The purpose of the Audit Committee is to assist the Board in its
general oversight of QUALCOMMs financial reporting,
internal controls and audit functions. The Audit Committee
Charter describes in greater detail the full responsibilities of
the Committee and is included in this proxy statement as
Appendix 1. The Audit Committee is comprised solely of
independent directors as defined by the listing standards of
National Association of Securities Dealers, Inc.
The Audit Committee has reviewed and discussed the consolidated
financial statements with management and PricewaterhouseCoopers
LLP, the Companys independent auditors. Management is
responsible for the preparation, presentation and integrity of
QUALCOMMs financial statements; accounting and financial
reporting principles; establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act
Rule 13a-15(e));
establishing and maintaining internal control over financial
reporting (as defined in Exchange Act
Rule 13a-15(f));
evaluating the effectiveness of disclosure controls and
procedures; evaluating the effectiveness of internal control
over financial reporting; and evaluating any change in internal
control over financial reporting that has materially affected,
or is reasonably likely to materially affect, internal control
over financial reporting. PricewaterhouseCoopers LLP is
responsible for performing an independent audit of the
consolidated financial statements and expressing an opinion on
the conformity of those financial statements with accounting
principles generally accepted in the United States of America,
as well as expressing an opinion on (i) managements
assessment of the effectiveness of internal control over
financial reporting and (ii) the effectiveness of internal
control over financial reporting.
In fiscal 2004, management completed the documentation, testing
and evaluation of QUALCOMMs system of internal controls
over financial reporting. Continuing into fiscal 2005, the
second year of certification, management improved the internal
control evaluation process which is now being institutionalized
into the Companys standard operations and processes. The
Audit Committee is kept apprised of the progress of the
evaluation and provides oversight and advice to management. In
connection with this oversight, the Committee receives periodic
updates provided by management and PricewaterhouseCoopers LLP at
each regularly scheduled Committee meeting. At a minimum, these
updates occur quarterly. The Committee also holds regular
private sessions with PricewaterhouseCoopers to discuss their
audit plan for the year, the financial statements and risks of
fraud. At the conclusion of the process, management provides the
Committee with and the Committee reviews a report on the
effectiveness of the Companys internal control over
financial reporting. The Committee also reviews the report of
management contained in the Companys Annual Report on
Form 10-K for the
fiscal year ended September 25, 2005 filed with the SEC, as
well as PricewaterhouseCoopers LLPs Report of Independent
Registered Public Accounting Firm included in the Companys
Annual Report on
Form 10-K related
to its integrated audit of QUALCOMMs fiscal 2005
(i) consolidated financial statements and financial
statement schedule, (ii) managements assessment of
the effectiveness of internal control over financial reporting
and (iii) the effectiveness of internal control over
financial reporting. The Committee continues to oversee the
Companys efforts related to its internal control over
financial reporting and managements preparations for the
evaluation.
QUALCOMM has an Internal Audit Department that reports to the
Audit Committee. The Committee reviews and approves the internal
audit plan once a year and receives periodic updates of internal
audit activity in meetings held at least quarterly throughout
the year. Updates include discussion of audit project results,
quarterly assessment of internal controls and risks of fraud.
The Audit Committee has discussed with PricewaterhouseCoopers
LLP the matters required to be discussed by Statement on
Auditing Standards No. 61, as amended, Communication
with Audit Committees and PCAOB Auditing Standard
No. 2, An Audit of Internal Control Over Financial
Reporting Performed in Conjunction with an Audit of Financial
Statements. In addition, PricewaterhouseCoopers LLP has
provided the Audit Committee with the written disclosures and
the letter required by the Independence Standards Board Standard
No. 1, as amended, Independence Discussions with
Audit Committees, and the Audit Committee has discussed
with PricewaterhouseCoopers LLP their firms independence.
39
Based on its review of the consolidated financial statements and
discussions with and representations from management and
PricewaterhouseCoopers LLP referred to above, the Audit
Committee recommended to the Board of Directors that the audited
financial statements be included in QUALCOMMs Annual
Report on
Form 10-K for
fiscal year 2005, for filing with the Securities and Exchange
Commission.
In accordance with Audit Committee policy and the requirements
of law, the Audit Committee pre-approves all services to be
provided by QUALCOMMs external auditor
PricewaterhouseCoopers LLP. Pre-approval is required for audit
services, audit-related services, tax services and other
services. In some cases, the full Audit Committee provides
pre-approval for up to a year, related to a particular defined
task or scope of work and subject to a specific budget. In other
cases, a designated member of the Audit Committee may have
delegated authority from the Audit Committee to pre-approve
additional services, and such pre-approval is later reported to
the full Audit Committee. See Fees for Professional
Services for more information regarding fees paid to
PricewaterhouseCoopers LLP for services in fiscal years 2005 and
2004.
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AUDIT COMMITTEE |
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Duane A. Nelles, Chair |
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Richard C. Atkinson |
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Raymond V. Dittamore |
40
PERFORMANCE MEASUREMENT COMPARISON
The following graph compares total stockholder return on the
Companys common stock since September 24, 2000 to two
indices: the Standard & Poors 500 Stock Index
(the S&P 500) and the Nasdaq Total Return Index
for Communications Equipment Stocks, SIC 3660-3669 (the
Nasdaq-Industry). The S&P 500 tracks the
aggregate price performance of the equity securities of 500
U.S. companies selected by Standard & Poors
Index Committee to include companies in leading industries and
to reflect the U.S. stock market. The Nasdaq-Industry
tracks the aggregate price performance of equity securities of
communications equipment companies traded on the Nasdaq National
Market and the Nasdaq Small Cap Market. The total return for the
Companys stock and for each index assumes the reinvestment
of dividends, and is based on the returns of the component
companies weighted according to their capitalizations as of the
end of each annual period. The Company began paying out
dividends on the Company stock on March 31, 2003. The
Companys common stock is traded on the Nasdaq National
Market and is a component of each of the S&P 500 and the
Nasdaq-Industry.
Comparison of Cumulative Total Return on Investment Since
September 24, 2000(1)
The Companys closing stock price on September 23,
2005, the last trading day of the Companys 2005 fiscal
year, was $44.76 per share.
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(1) |
Shows the cumulative total return on investment assuming an
investment of $100 in each of the Company, the S&P 500 and
the Nasdaq-Industry on September 24, 2000. All returns are
reported as of the Companys fiscal year end, which is the
last Sunday of the month in which the fourth quarter ends,
whereas the numbers for the S&P 500 are calculated as of the
last day of the month in which the corresponding quarter ends. |
41
OTHER MATTERS
The Board of Directors knows of no other matters that will be
presented for consideration at the Annual Meeting. If any other
matters are properly brought before the meeting, it is the
intention of the persons named in the accompanying proxy to vote
on such matters in accordance with their best judgment.
A copy of the Companys Annual Report on
Form 10-K for the
fiscal year ended September 25, 2005, as filed with the
SEC, excluding exhibits, may be obtained by stockholders without
charge by written request addressed to Investor Relations, 5775
Morehouse Drive, San Diego, California 92121-1714 or may be
accessed on the Internet at: http://www.qualcomm.com/ir.
STOCKHOLDERS SHARING THE SAME LAST NAME AND ADDRESS
In accordance with notices that the Company sent to certain
stockholders, the Company is sending only one copy of its annual
report and proxy statement to stockholders who share the same
last name and address, unless they have notified the Company
that they want to continue receiving multiple copies. This
practice, known as householding, is designed to
reduce duplicate mailings and save significant printing and
postage costs as well as natural resources.
If you received a householded mailing this year and you would
like to have additional copies of the Companys annual
report and/or proxy statement mailed to you, or you would like
to opt out of this practice for future mailings, please submit
your request to Investor Relations via
e-mail at
[email protected], by fax to (858) 651-9303 or by mail
to Investor Relations, QUALCOMM Incorporated, 5775 Morehouse
Drive, San Diego, California, 92121-1714 or call at
(858) 658-4813. The Company will promptly send additional
copies of the annual report and/or proxy statement upon receipt
of such request. You may also contact the Company if you
received multiple copies of the annual meeting materials and
would prefer to receive a single copy in the future.
Unfortunately, householding for bank and brokerage accounts is
limited to accounts within the same bank or brokerage firm. For
example, if you and your spouse share the same last name and
address, and you and your spouse each have two accounts
containing QUALCOMM stock at two different brokerage firms, your
household will receive two copies of the QUALCOMM annual meeting
materials one from each brokerage firm. To reduce
the number of duplicate sets of annual meeting materials your
household receives, you may wish to enroll some or all of your
accounts in the Companys electronic delivery program.
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By Order of the Board of Directors |
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Paul E. Jacobs |
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Chief Executive Officer |
January 13, 2006
42
APPENDIX 1
QUALCOMM INCORPORATED
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
Purpose
The Audit Committee (the Committee) of the Board of
Directors (the Board) of QUALCOMM Incorporated (the
Company) was established to assist the Board in
fulfilling its oversight responsibilities by reviewing and
reporting to the Board on the integrity of the financial reports
and other financial information provided by the Company. This
charter specifies the scope of authority and responsibility of
the Committee.
Organization, Membership and Meetings
1. The Committee shall be comprised of at least three
directors who meet the independence and experience requirements
contained in the NASDAQ listing standards, such independence and
experience to be decided by the Governance Committee of the
Board (the Governance Committee).
2. Members of the Committee, including the chairperson of
the Committee, shall be appointed annually by the Board on the
recommendation of the Governance Committee. Members may be
replaced by the Board at any time, but shall otherwise serve
until a successor has been named.
3. The Committee shall meet at least four times a year,
with the authority to convene additional meetings, as
circumstances require. The Committee may invite members of
management, internal auditors, independent auditors, legal
counsel or others to attend meetings and to provide relevant
information. The Committee may include non-Committee members at
its meetings, but shall also hold an executive session at each
meeting at which only independent directors are present.
4. The Committee may form and delegate authority to
subcommittees when appropriate, or to one or more members of the
Committee.
5. The Committee shall maintain written minutes of its
meetings, which minutes will be filed in the corporate minute
book.
Committee Authority and Responsibilities
To fulfill its responsibilities and duties hereunder, the
Committee shall:
Independent Auditor
Oversight
1. Be directly and solely responsible for the oversight,
engagement and termination of any independent auditor employed
by the Company for the purpose of preparing or issuing an audit
report or related work. Each independent auditor shall report
directly to the Committee.
2. Meet with the independent auditor prior to the audit and
discuss the planning and staffing of the audit.
3. Approve in advance the engagement of the independent
auditor for all audit services and non-audit services and
approve the fees and other terms of any such engagement.
4. Obtain periodically from the independent auditor a
formal written statement of the matters required to be discussed
by Statement of Auditing Standards No. 61, as amended, and,
in particular, describing all relationships between the auditor
and the Company, and discuss with the auditor any disclosed
relationships or services that may impact auditor objectivity
and independence.
5. Evaluate annually the qualifications, performance and
independence of the independent auditor.
1
6. Establish policies for the hiring of employees or former
employees of the independent auditor, taking into account the
impact of such policies on auditor independence.
7. Review with the independent auditor:
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a. Any significant difficulties encountered during the
course of the audit, any restrictions on the scope of work or
access to required information and any significant disagreement
among management and the independent auditor in connection with
the preparation of the financial statements. |
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b. Any accounting adjustments. |
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c. Any communications between the audit team and the
auditors national office respecting auditing or accounting
issues. |
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d. Any Management Representation letter or Internal Control
Recommendation letter or Schedule of Unadjusted Differences
issued, or proposed to be issued, by the auditor to the Company,
and managements response. |
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Financial Information Oversight |
1. Review and discuss with management and the independent
auditor:
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a. The Companys annual audited financial statements. |
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b. Any certification, report, opinion or review rendered by
the independent auditor. |
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c. The Companys disclosure under
Managements Discussion and Analysis of Financial
Condition and Results of Operations. |
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d. The critical accounting policies and practices used by
the Company, all alternative treatments of financial information
within generally accepted accounting principles, the
ramifications of the use of such alternative disclosures and
treatments and the treatment preferred by the independent
auditor. |
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e. Earnings press releases and other information provided
to analysts and rating agencies, including pro forma
or core business or other adjusted financial
information. |
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f. Any significant judgments made in managements
preparation of the financial statements and the view of each as
to appropriateness of such judgments. |
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g. Any off-balance sheet transactions or structures and
their effect on the Companys financial results and
operations, as well as the disclosure regarding such
transactions and structures in the Companys public filings. |
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h. The effect of regulatory and accounting initiatives,
improvements and resulting changes to the Companys
auditing and accounting principles and practices. |
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i. Any correspondence with regulators or governmental
agencies that raise material issues regarding the Companys
financial statements or accounting policies. |
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j. Any employee complaints or published reports that raise
material issues regarding the Companys financial
statements or accounting policies. |
2. Report to the Board regarding any audit opinions that
contain going concern qualifications.
3. Review prior to filing, all filings with the Securities
and Exchange Commission containing the Companys financial
statements, including but not limited to the Quarterly Reports
on Form 10-Q and
the Annual Report on
Form 10-K.
4. Recommend to the Board whether the audited financial
statements should be included in the Companys annual
report on Form 10-K.
5. Periodically (but not less than annually) meet
separately with the independent auditor.
2
Controls Oversight
1. Review and discuss annually with management its
assessment of the effectiveness of the Companys internal
controls, disclosure controls and procedures for financial
reporting.
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a. Review annually with the independent auditor the
attestation to, and report on, the assessment of controls made
by management. |
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b. Consider whether any changes to the internal controls or
disclosure controls processes and procedures are appropriate in
light of managements assessment or the independent
auditors report. |
2. Review and approve, at least annually, the internal
audit scope, audit plans, budget and staffing and relevant
process and programs of the internal audit function.
Periodically review the scope, budget and significant results of
any internal audit services provided by outside parties. The
Committee shall also receive regular reports from the
Companys internal auditor regarding the significant
results of internal audits, and whether recommendations made in
the audits have been implemented by Company management. The
Committee shall meet separately with the senior internal auditor
to discuss any matter that members of the Committee or the
internal auditor believe should be discussed privately.
3. Review with the principal executive and financial
officers of the Company any report on significant deficiencies
in the design or operation of internal controls, and any fraud,
whether or not material, that involves management or other
employees who have a significant role in the Companys
internal controls.
Legal Compliance and Ethics
Oversight
1. Review and approve all related-party transactions after
reviewing each such transaction for potential conflicts of
interests and improprieties. The Committee may delegate review
and approval of any compensation-related related-party
transactions to the Compensation Committee.
2. Establish procedures for receipt, retention and
treatment of complaints received by the Company regarding
accounting, internal accounting controls or auditing matters,
and the confidential, anonymous submission by employees of the
Company of concerns regarding questionable accounting or
auditing matters.
3. Adopt a Code of Ethics for senior financial officers and
provide for and review prompt disclosure to the public of any
change in, or waiver of such Code of Ethics. Review conduct
alleged to be in violation of such Code of Ethics and adopt as
necessary or appropriate, remedial, disciplinary, or other
measures with respect to such conduct.
4. Review managements monitoring of compliance with
the Foreign Corrupt Practices Act.
Other Matters
Oversight
1. Review the Companys policies and practices with
respect to risk management.
2. Discuss with management the Companys major
financial risk exposures and the steps management has taken to
monitor and control such exposures.
3. Discuss with management the Companys practices
pertaining to foreign exchange, investments and derivatives.
4. Prepare the Committees report required by the
rules of the Securities and Exchange Commission to be included
in the Companys annual proxy statement.
5. Regularly report to the Board on the Committees
activities, recommendations and conclusions.
6. Review and reassess the Charters adequacy at least
annually.
7. Review its own performance, at least annually, for
purposes of self-evaluation and to encourage the continuing
improvement of the Committee in the execution of its
responsibilities.
3
8. On an annual basis, determine who among its members is
to be designated for disclosure purposes as an audit
committee financial expert as defined by Securities and
Exchange Commission regulations.
General and Resources
1. Have the authority to pay the fees and expenses of
advisors and experts deemed necessary, as determined by the
Committee, to permit the Committee to perform its duties under
this Charter. The fees and expenses of these advisors and
experts shall be paid by the Company.
2. At its discretion, have the authority to initiate
special investigations, and, if appropriate, hire special legal,
accounting or other outside advisors or experts to assist the
Committee, to fulfill its duties under this Charter.
3. Also perform such other activities consistent with this
Charter, the Companys Bylaws and governing law, as the
Committee or the Board deems necessary or appropriate.
As amended December 5, 2005
4
APPENDIX 2
PROPOSED AMENDMENTS TO ARTICLE VI
OF THE
RESTATED CERTIFICATE OF INCORPORATION
OF
QUALCOMM
INCORPORATED1
IV.
For the management of the business and for the conduct of the
affairs of the corporation, and in further definition,
limitation and regulation of the powers of the corporation, of
its directors and of its stockholders or any class thereof, as
the case may be, it is further provided that:
A. The management of the business and the conduct of the
affairs of the corporation shall be vested in its Board of
Directors. The number of directors which shall constitute the
whole Board of Directors shall be fixed exclusively by one or
more resolutions adopted from time to time by the Board of
Directors. Every stockholder entitled to vote in any
election of directors of this corporation may cumulate such
stockholders votes and give one candidate a number of
votes equal to the number of directors to be elected multiplied
by the number of votes to which the stockholders shares
are otherwise entitled, or distribute the stockholders
votes on the same principle among as many candidates as such
stockholder thinks fit. The candidates receiving the
highest number of votes of the shares entitled to be voted for
them up to the number of directors to be elected by such shares
shall be declared elected.
The Board of Directors shall be divided into three
classes designated as Class I, Class II and
Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions
adopted by the Board of Directors. At the first annual meeting
of stockholders following September 11, 1991 (the
Initial Election Date), the term of office of the
Class I directors shall expire and Class I directors
shall be elected for a full term of three years. At the second
annual meeting of stockholders following the Initial Election
Date, the term of office of the Class II directors shall
expire and Class II directors shall be elected for a full
term of three years. At the third annual meeting of stockholders
following the Initial Election Date, the term of office of the
Class III directors shall expire and Class III
directors shall be elected for a full term of three years. At
each succeeding annual meeting of stockholders, directors shall
be elected for a full term of three years to succeed the
directors of the class whose terms expire at such annual
meeting.
At the 2006 annual meeting of stockholders, the successors
of the directors whose terms expire at that meeting shall be
elected for a term expiring at the 2007 annual meeting of
stockholders. At the 2007 annual meeting of stockholders, the
successors of the directors whose terms expire at that meeting
shall be elected for a term expiring at the 2008 annual meeting
of stockholders. At the 2008 annual meeting of stockholders, all
directors shall be elected for a term expiring at the 2009
annual meeting of stockholders. At each annual meeting of
stockholders thereafter, the directors shall be elected for
terms expiring at the next annual meeting of
stockholders.
Notwithstanding the foregoing provisions of this Article, each
director shall serve until his successor is duly elected and
qualified or until his death, resignation or removal. No
decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
Any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes shall be
filled by either (i) the affirmative vote of the holders of
a majority of the voting power of the then-outstanding shares of
voting stock of the corporation entitled to vote generally in
the election of directors (the Voting Stock) voting
together as a single class; or (ii) by the affirmative vote
of a majority of
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1 |
Insertions are shown as underlined and italicized
text; deletions are shown as strike through
text. |
1
the remaining directors then in office, even though less than a
quorum of the Board of Directors. Newly created directorships
resulting from any increase in the number of directors shall,
unless the Board of Directors determines by resolution that any
such newly created directorship shall be filled by the
stockholders, be filled only by the affirmative vote of the
directors then in office, even though less than a quorum of the
Board of Directors. Any director elected in accordance with
the preceding sentence this paragraph
shall hold office for the remainder of the full term
of the class of directors in which the new directorship was
created or the vacancy occurred a term expiring
at the next annual meeting of stockholders and until
such directors successor shall have been elected and
qualified.
B. The Bylaws may be altered or amended or new Bylaws
adopted by the affirmative vote of at least sixty-six and
two-thirds percent
(662/3%)
of the voting power of all of the then-outstanding shares of the
Voting Stock. In furtherance and not in limitation of the power
conferred by statute, the Board of Directors is expressly
authorized to adopt, amend, supplement or repeal the Bylaws.
C. The directors of the corporation need not be elected by
written ballot unless the Bylaws so provide.
D. No action shall be taken by the stockholders of the
corporation except at an annual or special meeting of
stockholders called in accordance with the Bylaws and no action
shall be taken by the stockholders by written consent.
E. Advance notice of stockholder nominations for the
election of directors and of business to be brought by
stockholders before any meeting of the stockholders of the
corporation shall be given in the manner provided in the Bylaws
of the corporation.
F. Any director, or the entire Board of Directors, may be
removed from office at any time (i) with cause by the
affirmative vote of the holders of at least a majority of the
voting power of all of the then-outstanding shares of the Voting
Stock, voting together as a single class; or (ii) without
cause by the affirmative vote of the holders of at least
sixty-six and two-thirds percent
(662/3%)
of the voting power of all of the then-outstanding shares of the
Voting Stock. So long as shareholders may cumulate their
votes in the election of directors, if less than the entire
Board of Directors is to be removed, no director may be removed
without cause if the votes cast against his removal would be
sufficient to elect him if then cumulatively voted at an
election of the entire Board of Directors, or, if there be
classes of directors, at an election of the class of directors
of which he is a part. Furthermore, if If
the holders of any class or series of capital stock are
entitled to elect one (1) or more directors by this
certificate of incorporation, as amended from time to time, the
removal of such directors without cause shall be by a vote of
the outstanding shares of that series or class of capital stock
and not the outstanding shares of capital stock as a whole.
2
QUALCOMM Incorporated
2006 Long-Term Incentive Plan
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Establishment, Purpose and Term of Plan |
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1 |
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1.1 |
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Establishment |
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1 |
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1.2 |
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Purpose |
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1 |
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1.3 |
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Term of Plan |
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1 |
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2. |
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Definitions and Construction |
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1 |
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2.1 |
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Definitions |
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1 |
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2.2 |
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Construction |
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6 |
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3. |
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Administration |
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6 |
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3.1 |
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Administration by the Committee |
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6 |
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3.2 |
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Authority of Officers |
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6 |
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3.3 |
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Administration with Respect to Insiders |
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6 |
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3.4 |
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Committee Complying with Section 162(m) |
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6 |
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3.5 |
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Powers of the Committee |
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6 |
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3.6 |
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Indemnification |
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7 |
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3.7 |
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Arbitration |
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7 |
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3.8 |
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Repricing Prohibited |
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8 |
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4. |
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Shares Subject to Plan |
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8 |
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4.1 |
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Maximum Number of Shares Issuable |
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8 |
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4.2 |
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Adjustments for Changes in Capital Structure |
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8 |
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5. |
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Eligibility and Award Limitations |
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9 |
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5.1 |
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Persons Eligible for Awards |
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9 |
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5.2 |
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Participation |
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9 |
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5.3 |
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Incentive Stock Option Limitations |
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9 |
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5.4 |
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Award Limits |
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9 |
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6. |
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Terms and Conditions of Options |
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10 |
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6.1 |
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Exercise Price |
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10 |
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6.2 |
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Exercisability and Term of Options |
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10 |
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6.3 |
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Payment of Exercise Price |
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11 |
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6.4 |
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Effect of Termination of Service |
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11 |
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6.5 |
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Transferability of Options |
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12 |
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7. |
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Terms and Conditions of Stock Appreciation Rights |
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12 |
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7.1 |
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Types of SARs Authorized |
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12 |
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7.2 |
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Exercise Price |
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12 |
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7.3 |
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Exercisability and Term of SARs |
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12 |
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7.4 |
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Deemed Exercise of SARs |
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12 |
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7.5 |
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Effect of Termination of Service |
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12 |
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7.6 |
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Nontransferability of SARs |
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13 |
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8. |
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Terms and Conditions of Restricted Stock Awards |
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13 |
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8.1 |
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Types of Restricted Stock Awards Authorized |
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14 |
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8.2 |
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Purchase Price |
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14 |
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8.3 |
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Purchase Period |
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14 |
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8.4 |
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Vesting and Restrictions on Transfer |
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14 |
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8.5 |
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Voting Rights; Dividends and Distributions |
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14 |
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8.6 |
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Effect of Termination of Service |
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14 |
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8.7 |
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Nontransferability of Restricted Stock Award Rights |
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14 |
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9. |
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Terms and Conditions of Performance Awards |
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14 |
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9.1 |
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Types of Performance Awards Authorized |
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15 |
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9.2 |
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Initial Value of Performance Shares and Performance Units |
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15 |
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9.3 |
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Establishment of Performance Period, Performance Goals and Performance Award Formula |
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15 |
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9.4 |
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Measurement of Performance Goals |
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15 |
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9.5 |
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Settlement of Performance Awards |
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16 |
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9.6 |
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Voting Rights; Dividend Equivalent Rights and Distributions |
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16 |
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9.7 |
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Effect of Termination of Service |
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16 |
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9.8 |
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Nontransferability of Performance Awards |
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17 |
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10. |
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Terms and Conditions of Restricted Stock Unit Awards |
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17 |
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10.1 |
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Grant of Restricted Stock Unit Awards |
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17 |
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10.2 |
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Vesting |
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17 |
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10.3 |
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Voting Rights, Dividend Equivalent Rights and Distributions |
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17 |
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10.4 |
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Effect of Termination of Service |
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17 |
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10.5 |
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Settlement of Restricted Stock Unit Awards |
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18 |
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10.6 |
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Nontransferability of Restricted Stock Unit Awards |
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18 |
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11. |
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Deferred Compensation Awards |
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18 |
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11.1 |
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Establishment of Deferred Compensation Award Programs |
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18 |
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11.2 |
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Terms and Conditions of Deferred Compensation Awards |
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18 |
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12. |
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Other Stock-Based Awards |
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19 |
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13. |
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Effect of Change in Control on Options and SARs |
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19 |
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13.1 |
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Accelerated Vesting |
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19 |
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13.2 |
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Assumption or Substitution |
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20 |
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13.3 |
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Effect of Change in Control on Restricted Stock and Other Type of Awards. |
|
|
20 |
|
14. |
|
Compliance with Securities Law |
|
|
20 |
|
15. |
|
Tax Withholding |
|
|
20 |
|
|
|
15.1 |
|
Tax Withholding in General |
|
|
20 |
|
ii
|
|
|
|
|
|
|
|
|
|
|
15.2 |
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Withholding in Shares |
|
|
21 |
|
16. |
|
Amendment or Termination of Plan |
|
|
21 |
|
17. |
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Miscellaneous Provisions |
|
|
21 |
|
|
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17.1 |
|
Repurchase Rights |
|
|
21 |
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|
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17.2 |
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Provision of Information |
|
|
21 |
|
|
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17.3 |
|
Rights as Employee, Consultant or Director |
|
|
21 |
|
|
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17.4 |
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Rights as a Stockholder |
|
|
21 |
|
|
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17.5 |
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Fractional Shares |
|
|
21 |
|
|
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17.6 |
|
Severability |
|
|
21 |
|
|
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17.7 |
|
Beneficiary Designation |
|
|
21 |
|
|
|
17.8 |
|
Unfunded Obligation |
|
|
22 |
|
iii
QUALCOMM Incorporated
2006 Long-Term Incentive Plan
1. Establishment, Purpose and Term Of Plan.
1.1 Establishment. The QUALCOMM Incorporated 2006 Long-Term Incentive Plan (the Plan") is
hereby adopted December 5, 2005, subject to approval by the stockholders of the Company (the date
of such approval, the Effective Date"). The Plan is a restatement of the Companys 2001 Stock
Option Plan. The Plan is also a successor to the Companys 1991
Stock Option Plan, the
Companys 2001 Non-Employee Directors Stock Option Plan and its predecessor plan (the "Prior
Plans") and the source of shares for the Companys Executive Retirement Matching Contribution Plan
(ERMCP).
1.2 Purpose. The purpose of the Plan is to advance the interests of the Participating Company
Group and its stockholders by providing an incentive to attract and retain the best qualified
personnel to perform services for the Participating Company Group, by motivating such persons to
contribute to the growth and profitability of the Participating Company Group, by aligning their
interests with interests of the Companys stockholders, and by rewarding such persons for their
services by tying a significant portion of their total compensation package to the success of the
Company. The Plan seeks to achieve this purpose by providing for Awards in the form of Options,
Stock Appreciation Rights, Restricted Stock Awards, Performance Shares, Performance Units,
Restricted Stock Units, Deferred Compensation Awards and other Stock-Based Awards as described
below. The Plan is also a source for the issuance of shares pursuant to the ERMCP.
1.3 Term of Plan. The Plan shall continue in effect until the earlier of its termination by
the Board or the date on which all of the shares of Stock available for issuance under the Plan
have been issued and all restrictions on such shares under the terms of the Plan and the agreements
evidencing Awards granted under the Plan have lapsed. However, Awards shall not be granted later
than ten (10) years from the Effective Date. The Company intends that the Plan comply with Section
409A of the Code (including any amendments to or replacements of such section), and the Plan shall
be so construed.
2. Definitions and Construction.
2.1 Definitions. Whenever used herein, the following terms shall have their respective
meanings set forth below:
(a) Affiliate means (i) an entity, other than a Parent Corporation, that directly, or
indirectly through one or more intermediary entities, controls the Company or (ii) an entity, other
than a Subsidiary Corporation, that is controlled by the Company directly, or indirectly through
one or more intermediary entities. For this purpose, the term control (including the term
controlled by) means the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of the relevant entity, whether through the ownership of
voting securities, by contract or otherwise; or shall have such other meaning assigned such term
for the purposes of registration on Form S-8 under the Securities Act.
(b) Award means any Option, SAR, Restricted Stock Award, Performance Share, Performance
Unit, Restricted Stock Unit or Deferred Compensation Award or other Stock-Based Award granted under
the Plan or an award of shares pursuant to the ERMCP.
(c) Award Agreement means a written agreement between the Company and a Participant setting
forth the terms, conditions and restrictions of the Award granted to the Participant.
(d)
Board means the Board of Directors of the Company.
(e) A "Change in Control shall mean an Ownership Change Event or a series of related
Ownership Change Events (collectively, a Transaction) wherein the stockholders of the Company
immediately before the Transaction do not retain immediately after the Transaction, in
substantially the same proportions as their
1
ownership of shares of the Companys voting stock immediately before the Transaction, direct
or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting
power of the outstanding voting securities of the Company or, in the case of a Transaction
described in Section 2.1(z)(iii), the corporation or other business entity to which the assets of
the Company were transferred (the Transferee), as the case may be. The Board shall determine in
its discretion whether multiple sales or exchanges of the voting securities of the Company or
multiple Ownership Change Events are related. Notwithstanding the preceding sentence, a Change in
Control shall not include a Spinoff Transaction.
(f) Code means the Internal Revenue Code of 1986, as amended, and any applicable regulations
promulgated thereunder.
(g) Committee means the Compensation Committee or other committee of the Board duly
appointed to administer the Plan and having such powers as shall be specified by the Board. If no
committee of the Board has been appointed to administer the Plan, the Board shall exercise all of
the powers of the Committee granted herein, and, in any event, the Board may in its discretion
exercise any or all of such powers. The Committee shall have the exclusive authority to administer
the Plan and shall have all of the powers granted herein, including, without limitation, the power
to amend or terminate the Plan at any time, subject to the terms of the Plan and any applicable
limitations imposed by law.
(h) Company means QUALCOMM Incorporated, a Delaware corporation, or any Successor.
(i) Consultant means a person engaged to provide consulting or advisory services (other than
as an Employee or a member of the Board) to a Participating Company.
(j) Deferred Compensation Award means an award of Stock Units granted to a Participant
pursuant to Section 11 of the Plan.
(k) Director means a member of the Board or of the board of directors of any Participating
Company.
(l) Disability means the Participant has been determined by the long-term disability insurer
of the Participating Company Group as eligible for disability benefits under the long-term
disability plan of the Participating Company Group or the Participant has been determined eligible
for Supplemental Security Income benefits by the Social Security Administration of the United
States of America; provided, however that with respect to Nonemployee Director Awards, Disability
means the Participant has been determined eligible for supplemental Security Income benefits by the
Social Security Administration of the United States of America and also means the inability of the
Participant, in the opinion of a qualified physician acceptable to the Company, to perform the
duties of the Participants position with the Participating Company Group because of sickness or
other physical or mental incapacity.
(m) Dividend Equivalent means a credit, made at the discretion of the Committee or as
otherwise provided by the Plan, to the account of a Participant in an amount equal to the cash
dividends paid on one share of Stock for each share of Stock represented by an Award held by such
Participant.
(n) Employee means any person treated as an employee (including an Officer or a member of
the Board who is also treated as an employee) in the records of a Participating Company and, with
respect to any Incentive Stock Option granted to such person, who is an employee for purposes of
Section 422 of the Code; provided, however, that neither service as a member of the Board nor
payment of a directors fee shall be sufficient to constitute employment for purposes of the Plan.
The Company shall determine in good faith and in the exercise of its discretion whether an
individual has become or has ceased to be an Employee and the effective date of such individuals
employment or termination of employment, as the case may be. For purposes of an individuals
rights, if any, under the Plan as of the time of the Companys determination, all such
determinations by the Company shall be final, binding and conclusive, notwithstanding that the
Company or any court of law or governmental agency subsequently makes a contrary determination.
2
(o) Exchange Act means the Securities Exchange Act of 1934, as amended.
(p) Fair Market Value means, as of any date, the value of a share of Stock or other property
as determined by the Committee, in its discretion, or by the Company, in its discretion, if such
determination is expressly allocated to the Company herein, subject to the following:
(i) Except as otherwise determined by the Committee, if, on such date, the Stock is listed
on a national or regional securities exchange or market system, the Fair Market Value of a share
of Stock shall be the closing price of a share of Stock as quoted on such national or regional
securities exchange or market system constituting the primary market for the Stock on the last
trading day prior to the day of determination, as reported in The Wall Street Journal or such
other source as the Company deems reliable.
(ii) Notwithstanding the foregoing, the Committee may, in its discretion, determine the Fair
Market Value on the basis of the closing, high, low or average sale price of a share of Stock or
the actual sale price of a share of Stock received by a Participant, on such date, the preceding
trading day, the next succeeding trading day or an average determined over a period of trading
days; provided, however, that the Fair Market Value shall not be less that the Fair Market Value
determined under Section 2.1(p)(i). The Committee may vary its method of determination of the
Fair Market Value as provided in this Section for different purposes under the Plan.
(iii) If, on such date, the Stock is not listed on a national or regional securities
exchange or market system, the Fair Market Value of a share of Stock shall be as determined by
the Committee in good faith without regard to any restriction other than a restriction which, by
its terms, will never lapse.
(q) Incentive Stock Option means an Option intended to be (as set forth in the Award
Agreement) and which qualifies as an incentive stock option within the meaning of Section 422(b) of
the Code.
(r) Insider means an Officer, a Director or any other person whose transactions in Stock are
subject to Section 16 of the Exchange Act.
(s) Non-Control Affiliate means any entity in which any Participating Company has an
ownership interest and which the Committee shall designate as a Non-Control Affiliate.
(t) Nonemployee Director means a Director who is not an Employee.
(u)
Nonstatutory Stock Option means an Option not intended to be (as set forth in the Award
Agreement) an incentive stock option within the meaning of Section 422(b) of the Code.
(v) "Normal Retirement Age means the date on which a Participant has attained the age of
sixty (60) years and has completed ten years of continuous Service; provided, however, that with
respect to Nonemployee Director Awards, Normal Retirement Age means the date on which a
Participant has attained the age of seventy (70) years and has completed nine years of continuous
Service.
(w) Officer means any person designated by the Board as an officer of the Company.
(x) Option means the right to purchase Stock at a stated price for a specified period of
time granted to a Participant pursuant to Section 6 of the Plan. An Option may be either an
Incentive Stock Option or a Nonstatutory Stock Option.
(y)
Option Expiration Date means the date of expiration of the Options term as set forth in
the Award Agreement.
(z) An "Ownership Change Event shall be deemed to have occurred if any of the following
occurs with respect to the Company: (i) the direct or indirect sale or exchange in a single or
series of related transactions by the stockholders of the Company of more than fifty percent (50%)
of the voting stock of the Company; (ii) a merger or consolidation in which the Company is a party;
(iii) the sale, exchange, or transfer of all or substantially
3
all, as determined by the Board in its discretion, of the assets of the Company; or (iv) a
liquidation or dissolution of the Company.
(aa) Parent Corporation means any present or future parent corporation of the Company, as
defined in Section 424(e) of the Code.
(bb) Participant means any eligible person who has been granted one or more Awards.
(cc)
Participating Company means the Company or any Parent Corporation, Subsidiary
Corporation or Affiliate.
(dd) Participating Company Group means, at any point in time, all entities collectively
which are then Participating Companies.
(ee) Performance Award means an Award of Performance Shares or Performance Units.
(ff) Performance Award Formula means, for any Performance Award, a formula or table
established by the Committee pursuant to Section 9.3 of the Plan which provides the basis for
computing the value of a Performance Award at one or more threshold levels of attainment of the
applicable Performance Goal(s) measured as of the end of the applicable Performance Period.
(gg)
Performance Goal means a performance goal established by the Committee pursuant to
Section 9.3 of the Plan.
(hh)
Performance Period means a period established by the Committee pursuant to Section 9.3
of the Plan at the end of which one or more Performance Goals are to be measured.
(ii) Performance Share means a bookkeeping entry representing a right granted to a
Participant pursuant to Section 9 of the Plan to receive a payment equal to the value of a
Performance Share, as determined by the Committee, based on performance.
(jj) Performance Unit means a bookkeeping entry representing a right granted to a
Participant pursuant to Section 9 of the Plan to receive a payment equal to the value of a
Performance Unit, as determined by the Committee, based upon performance.
(kk) Restricted Stock Award means an Award of Restricted Stock.
(ll) Restricted Stock Unit or Stock Unit means a bookkeeping entry representing a right
granted to a Participant pursuant to Section 10 or Section 11 of the Plan, respectively, to receive
a share of Stock on a date determined in accordance with the provisions of Section 10 or Section
11, as applicable, and the Participants Award Agreement.
(mm) Restriction Period means the period established in accordance with Section 8.4 of the
Plan during which shares subject to a Restricted Stock Award are subject to Vesting Conditions.
(nn) Rule 16b-3 means Rule 16b-3 under the Exchange Act, as amended from time to time, or
any successor rule or regulation.
(oo) SAR or Stock Appreciation Right means a bookkeeping entry representing, for each
share of Stock subject to such SAR, a right granted to a Participant pursuant to Section 7 of the
Plan to receive payment in any combination of shares of Stock or cash of an amount equal to the
excess, if any, of the Fair Market Value of a share of Stock on the date of exercise of the SAR
over the exercise price.
(pp) Section 162(m) means Section 162(m) of the Code.
4
(qq) Securities Act means the Securities Act of 1933, as amended.
(rr) Service means
(i) a Participants employment or service with the Participating Company Group, whether in
the capacity of an Employee, a Director or a Consultant. A Participants Service shall not be
deemed to have terminated merely because of a change in the capacity in which the Participant
renders Service to the Participating Company Group or a change in the Participating Company for
which the Participant renders such Service, provided that there is no interruption or termination
of the Participants Service. Furthermore, only to such extent as may be provided by the
Companys leave policy, a Participants Service with the Participating Company Group shall not be
deemed to have terminated if the Participant takes any military leave, sick leave, or other leave
of absence approved by the Company. Notwithstanding the foregoing, a leave of absence shall be
treated as Service for purposes of vesting only to such extent as may be provided by the
Companys leave policy. The Participants Service shall be deemed to have terminated either upon
an actual termination of Service or upon the entity for which the Participant performs Service
ceasing to be a Participating Company; except that if the entity for which Participant performs
Service is a Subsidiary Corporation and ceases to be a Participating Company as a result of the
distribution of the voting stock of such Subsidiary Corporation to the shareholders of the
Company, Service shall not be deemed to have terminated as a result of such distribution.
Subject to the foregoing, the Company, in its discretion, shall determine whether the
Participants Service has terminated and the effective date of such termination.
(ii) Notwithstanding any other provision of this Section, a Participants Service shall not
be deemed to have terminated merely because the Participating Company for which the Participant
renders Service ceases to be a member of the Participating Company Group by reason of a Spinoff
Transaction, nor shall Service be deemed to have terminated upon resumption of Service from the
Spinoff Company to a Participating Company. For all purposes under this Plan, a Participants
Service shall include Service, whether in the capacity of an Employee, Director or a Consultant,
for the Spinoff Company provided a Participant was employed by the Participating Company Group
immediately prior to the Spinoff Transaction. Notwithstanding the foregoing, if the Companys
auditors determine that the provisions or operation of the preceding two sentences would cause
the Company to incur a compensation expense and provided further that in the absence of the
preceding two sentences no such compensation expense would be incurred, then the two preceding
sentences shall be without force or effect, and the vesting and exercisability of each
outstanding Option and any shares acquired upon the exercise thereof shall be determined under
any other applicable provision of the Plan or the Option Agreement evidencing such Option.
(ss) "Spinoff Company means a Participating Company which ceases to be such as a result of a
Spinoff Transaction.
(tt) "Spinoff Transaction means a transaction in which the voting stock of an entity in the
Participating Company Group is distributed to the shareholders of a parent corporation as defined
by Section 424(e) of the Code, of such entity.
(uu) Stock means the common stock of the Company, as adjusted from time to time in
accordance with Section 4.2 of the Plan.
(vv)
Stock-Based Awards means any award that is valued in whole or in part by reference to,
or is otherwise based on, the Stock, including dividends on the Stock, but not limited to those
Awards described in Sections 6 through 11 of the Plan.
(ww) Subsidiary Corporation means any present or future subsidiary corporation of the
Company, as defined in Section 424(f) of the Code.
(xx) "Successor means a corporation into or with which the Company is merged or consolidated
or which acquires all or substantially all of the assets of the Company and which is designated by
the Board as a Successor for purposes of the Plan.
5
(yy) Ten Percent Owner means a Participant who, at the time an Option is granted to the
Participant, owns stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of a Participating Company (other than an Affiliate) within the meaning of
Section 422(b)(6) of the Code.
(zz)
Vesting Conditions mean those conditions established in accordance with Section 8.4 or
Section 10.2 of the Plan prior to the satisfaction of which shares subject to a Restricted Stock
Award or Restricted Stock Unit Award, respectively, remain subject to forfeiture or a repurchase
option in favor of the Company upon the Participants termination of Service.
2.2 Construction. Captions and titles contained herein are for convenience only and shall not
affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated
by the context, the singular shall include the plural and the plural shall include the singular.
Use of the term or is not intended to be exclusive, unless the context clearly requires
otherwise.
3. Administration.
3.1 Administration by the Committee. The Plan shall be administered by the Committee. All
questions of interpretation of the Plan or of any Award shall be determined by the Committee, and
such determinations shall be final and binding upon all persons having an interest in the Plan or
such Award.
3.2 Authority of Officers. Any Officer shall have the authority to act on behalf of the
Company with respect to any matter, right, obligation, determination or election which is the
responsibility of or which is allocated to the Company herein, provided the Officer has apparent
authority with respect to such matter, right, obligation, determination or election.
3.3 Administration with Respect to Insiders. With respect to participation by Insiders in the
Plan, at any time that any class of equity security of the Company is registered pursuant to
Section 12 of the Exchange Act, the Plan shall be administered in compliance with the requirements,
if any, of Rule 16b-3.
3.4 Committee Complying with Section 162(m). While the Company is a publicly held
corporation within the meaning of Section 162(m), the Board may establish a Committee of outside
directors within the meaning of Section 162(m) to approve the grant of any Award which might
reasonably be anticipated to result in the payment of employee remuneration that would otherwise
exceed the limit on employee remuneration deductible for income tax purposes pursuant to Section
162(m).
3.5 Powers of the Committee. In addition to any other powers set forth in the Plan and
subject to the provisions of the Plan, the Committee shall have the full and final power and
authority, in its discretion:
(a) to determine the persons to whom, and the time or times at which, Awards shall be granted
and the number of shares of Stock or units to be subject to each Award;
(b) to determine the type of Award granted and to designate Options as Incentive Stock Options
or Nonstatutory Stock Options;
(c) to determine the Fair Market Value of shares of Stock or other property;
(d) to determine the terms, conditions and restrictions applicable to each Award (which need
not be identical) and any shares acquired pursuant thereto, including, without limitation, (i) the
exercise or purchase price of shares purchased pursuant to any Award, (ii) the method of payment
for shares purchased pursuant to any Award, (iii) the method for satisfaction of any tax
withholding obligation arising in connection with Award, including by the withholding or delivery
of shares of Stock, (iv) the timing, terms and conditions of the exercisability or vesting of any
Award or any shares acquired pursuant thereto, (v) the Performance Award Formula and Performance
Goals applicable to any Award and the extent to which such Performance Goals have been attained,
(vi) the time of the expiration of any Award, (vii) the effect of the Participants termination of
Service on any of the foregoing, and (viii) all other terms, conditions and restrictions applicable
to any Award or shares acquired pursuant thereto not inconsistent with the terms of the Plan;
6
(e) to determine whether an Award will be settled in shares of Stock, cash, or in any
combination thereof;
(f) to approve one or more forms of Award Agreement;
(g) to amend, modify, extend, cancel or renew any Award or to waive any restrictions or
conditions applicable to any Award or any shares acquired pursuant thereto;
(h) to accelerate, continue, extend or defer the exercisability or vesting of any Award or any
shares acquired pursuant thereto, including with respect to the period following a Participants
termination of Service;
(i) without the consent of the affected Participant and notwithstanding the provisions of any
Award Agreement to the contrary, to unilaterally substitute at any time a Stock Appreciation Right
providing for settlement solely in shares of Stock in place of any outstanding Option, provided
that such Stock Appreciation Right covers the same number of shares of Stock and provides for the
same exercise price (subject in each case to adjustment in accordance with Section 4.2) as the
replaced Option and otherwise provides substantially equivalent terms and conditions as the
replaced Option, as determined by the Committee;
(j) to prescribe, amend or rescind rules, guidelines and policies relating to the Plan, or to
adopt sub-plans or supplements to, or alternative versions of, the Plan, including, without
limitation, as the Committee deems necessary or desirable to comply with the laws or regulations of
or to accommodate the tax policy, accounting principles or custom of, foreign jurisdictions whose
citizens may be granted Awards;
(k) to correct any defect, supply any omission or reconcile any inconsistency in the Plan or
any Award Agreement and to make all other determinations and take such other actions with respect
to the Plan or any Award as the Committee may deem advisable to the extent not inconsistent with
the provisions of the Plan or applicable law; and
(l) to delegate to any proper Officer the authority to grant one or more Awards, without
further approval of the Committee, to any person eligible pursuant to Section 5, other than a
person who, at the time of such grant, is an Insider; provided, however, that (i) the exercise
price per share of each such Option shall be equal to the Fair Market Value per share of the Stock
on the effective date of grant, and (ii) each such Award shall be subject to the terms and
conditions of the appropriate standard form of Award Agreement approved by the Committee and shall
conform to the provisions of the Plan and such other guidelines as shall be established from time
to time by the Committee.
3.6 Indemnification. In addition to such other rights of indemnification as they may have as
members of the Board or the Committee or as officers or employees of the Participating Company
Group, members of the Board or the Committee and any officers or employees of the Participating
Company Group to whom authority to act for the Board, the Committee or the Company is delegated
shall be indemnified by the Company against all reasonable expenses, including attorneys fees,
actually and necessarily incurred in connection with the defense of any action, suit or proceeding,
or in connection with any appeal therein, to which they or any of them may be a party by reason of
any action taken or failure to act under or in connection with the Plan, or any right granted
hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is
approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a
judgment in any such action, suit or proceeding, except in relation to matters as to which it shall
be adjudged in such action, suit or proceeding that such person is liable for gross negligence, bad
faith or intentional misconduct in duties; provided, however, that within sixty (60) days after the
institution of such action, suit or proceeding, such person shall offer to the Company, in writing,
the opportunity at its own expense to handle and defend the same.
3.7 Arbitration. Any dispute or claim concerning any Awards granted (or not granted) pursuant
to this Plan and any other disputes or claims relating to or arising out of the Plan shall be
fully, finally and exclusively resolved by binding arbitration conducted pursuant to the Commercial
Arbitration Rules of the American Arbitration Association in San Diego, California. By accepting
an Award, Participants and the Company waive their respective rights to have any such disputes or
claims tried by a judge or jury.
7
3.8 Repricing Prohibited. Without the affirmative vote of holders of a majority of the shares
of Stock cast in person or by proxy at a meeting of the stockholders of the Company at which a
quorum representing a majority of all outstanding shares of Stock is present or represented by
proxy, the Committee shall not approve a program providing for either (a) the cancellation of
outstanding Options or SARs and the grant in substitution therefore of new Options or SARs having a
lower exercise price or (b) the amendment of outstanding Options or SARs to reduce the exercise
price thereof. This paragraph shall not be construed to apply to the issuance or assumption of an
Award in a transaction to which Code section 424(a) applies, within the meaning of Section 424 of
the Code.
4. Shares Subject to Plan.
4.1 Maximum Number of Shares Issuable. Subject to adjustment as provided in Section 4.2, the
maximum aggregate number of shares of Stock that may be issued under
the Plan shall be 290,284,432
and shall consist of authorized but unissued or reacquired shares of Stock or any combination
thereof. The share reserve, determined at any time, shall be reduced by the number of shares
subject to Prior Plan Options and shares issued under the ERMCP. Any shares of Stock subject to
Prior Plan Option shall again be available for issuance under the Plan only if the Prior Plan
Option is terminated or cancelled but not if it expires. Any shares of Stock that are subject to
Awards of Options or SARs without a related Dividend Equivalent shall be counted against the limit
as one (1) share for every one (1) share granted. Any shares of Stock that are subject to Awards
(other than Options or SARs without a related Dividend Equivalent) shall be counted against this
limit as two (2) shares for every one (1) share granted. If an outstanding Award, excluding Prior
Plan Options, for any reason expires or is terminated or canceled without having been exercised or
settled in full, or if shares of Stock acquired pursuant to an Award subject to forfeiture or
repurchase, and shares issued under the ERMCP, are forfeited to the Company, the shares of Stock
allocable to the terminated portion of such Award or such forfeited shares of Stock shall again be
available for issuance under the Plan. Any shares of Stock that again become available for shares
pursuant to this Section 4.1 shall be added back as one (1) share if such shares were subject to
Options without a Dividend Equivalent or SARs granted under the Plan or under a Prior Plan and as
two (2) shares if such shares were subject to Awards (other than Options without a Dividend
Equivalent or SARs) granted under the Plan or a Prior Plan. Notwithstanding anything to the
contrary contained herein: (i) shares of Stock tendered in payment of an Option shall not be added
to the aggregate plan limit described above; (ii) shares of Stock withheld by the Company to
satisfy any tax withholding obligation shall not be added to the aggregate plan limit described
above; (iii) shares of Stock that are repurchased by the Company with Option proceeds shall not be
added to the aggregate plan limit described above; and (iv) all shares of Stock covered by an SAR,
to the extent that it is exercised and settled in shares of Stock, and whether or not shares of
Stock are actually issued to the Participant upon exercise of the SAR, shall be considered issued
or transferred pursuant to the Plan.
4.2 Adjustments for Changes in Capital Structure. Subject to any required action by the
stockholders of the Company, in the event of any change in the Stock effected without receipt of
consideration by the Company, whether through merger, consolidation, reorganization,
reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock
split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change
in the capital structure of the Company, or in the event of payment of a dividend or distribution
to the stockholders of the Company in a form other than Stock (excepting normal cash dividends)
that has a material effect on the Fair Market Value of shares of Stock, appropriate adjustments
shall be made in the number and kind of shares subject to the Plan and to any outstanding Awards,
in the Award limits set forth in Section 5.4, and in connection with the ERMCP, and in the exercise
or purchase price per share under any outstanding Award in order to prevent dilution or enlargement
of Participants rights under the Plan. For purposes of the foregoing, conversion of any
convertible securities of the Company shall not be treated as effected without receipt of
consideration by the Company. If a majority of the shares which are of the same class as the
shares that are subject to outstanding Awards are exchanged for, converted into, or otherwise
become (whether or not pursuant to an Ownership Change Event) shares of another corporation (the
"New Shares"), the Committee may unilaterally amend the outstanding Options to provide that such
Options are exercisable for New Shares. In the event of any such amendment, the number of shares
subject to, and the exercise price per share of, the outstanding Awards shall be adjusted in a fair
and equitable manner as determined by the Board, in its discretion. Any fractional share resulting
from an adjustment pursuant to this Section 4.2 shall be rounded down to the nearest whole number.
The Committee in its sole discretion, may also make such adjustments in the terms of any Award to
reflect, or related to, such changes in the capital structure of the Company or distributions as it
deems appropriate, including modification of Performance Goals, Performance Award Formulas and
Performance Periods. The adjustments determined by the Committee pursuant to this Section 4.2
shall be final, binding and conclusive.
8
5. Eligibility and Award Limitations.
5.1 Persons Eligible for Awards. Awards may be granted only to Employees, Consultants and
Directors. For purposes of the foregoing sentence, Employees, Consultantsand Directors shall
include prospective Employees, prospective Consultants and prospective Directors to whom Awards are
offered to be granted in connection with written offers of an employment or other service
relationship with the Participating Company Group; provided, however, that no Stock subject to any
such Award shall vest, become exercisable or be issued prior to the date on which such person
commences Service.
5.2 Participation. Awards other than Nonemployee Director Awards are granted solely at the
discretion of the Committee. Eligible persons may be granted more than one Award. However,
eligibility in accordance with this Section shall not entitle any person to be granted an Award,
or, having been granted an Award, to be granted an additional Award.
5.3 Incentive Stock Option Limitations.
(a) Persons Eligible. An Incentive Stock Option may be granted only to a person who, on the
effective date of grant, is an Employee of the Company, a Parent Corporation or a Subsidiary
Corporation (each being an ISO-Qualifying Corporation). Any person who is not an Employee of an
ISO-Qualifying Corporation on the effective date of the grant of an Option to such person may be
granted only a Nonstatutory Stock Option. An Incentive Stock Option granted to a prospective
Employee upon the condition that such person become an Employee of an ISO-Qualifying Corporation
shall be deemed granted effective on the date such person commences Service with an ISO-Qualifying
Corporation, with an exercise price determined as of such date in accordance with Section 6.1.
(b) Fair Market Value Limitation. To the extent that options designated as Incentive Stock
Options (granted under all stock option plans of the Participating Company Group, including the
Plan) become exercisable by a Participant for the first time during any calendar year for stock
having a Fair Market Value greater than One Hundred Thousand Dollars ($100,000), the portion of
such options which exceeds such amount shall be treated as Nonstatutory Stock Options. For
purposes of this Section, options designated as Incentive Stock Options shall be taken into account
in the order in which they were granted, and the Fair Market Value of stock shall be determined as
of the time the option with respect to such stock is granted. If the Code is amended to provide
for a limitation different from that set forth in this Section, such different limitation shall be
deemed incorporated herein effective as of the date and with respect to such Options as required or
permitted by such amendment to the Code. If an Option is treated as an Incentive Stock Option in
part and as a Nonstatutory Stock Option in part by reason of the limitation set forth in this
Section, the Participant may designate which portion of such Option the Participant is exercising.
In the absence of such designation, the Participant shall be deemed to have exercised the Incentive
Stock Option portion of the Option first. Upon exercise, shares issued pursuant to each such
portion shall be separately identified.
5.4 Award Limits.
(a) Maximum Number of Shares Issuable Pursuant to Incentive Stock Options. Subject to
adjustment as provided in Section 4.2, the maximum aggregate number of shares of Stock that may be
issued under the Plan pursuant to the exercise of Incentive Stock Options shall not exceed
226,239,821 the maximum aggregate number of shares of Stock that may be issued under the Plan
pursuant to all Awards other than Incentive Stock Options shall be the number of shares determined
in accordance with Section 4.1, subject to adjustment as provided in Section 4.2 and further
subject to the limitation set forth in Section 5.4(b) below.
(b) Limits on Full Value Awards. Except for shares granted under the Executive Retirement
Matching Contribution Plan, any Restricted Stock Awards, Restricted Stock Unit Awards and
Performance Awards (Full Value Awards") which vest on the basis of the Participants continued
Service shall not provide for vesting which is any more rapid than annual pro rata vesting over a
three (3) year period and any Full Value Awards which vest upon the attainment of Performance Goals
shall provide for a Performance Period of at least twelve (12) months. There shall be no
acceleration of vesting of such Full Value Awards except in connection with death, Disability or a
Change in Control.
9
(c) Section 162(m) Award Limits. The following limits shall apply to the grant of any Award
if, at the time of grant, the Company is a publicly held corporation within the meaning of
Section 162(m).
(i) Options and SARs. Subject to adjustment as provided in Section 4.2, no Employee shall
be granted within any fiscal year of the Company one or more Options or Freestanding SARs which
in the aggregate are for more than 3,000,000 shares of Stock reserved for issuance under the
Plan.
(ii) Restricted Stock and Restricted Stock Unit Awards. Subject to adjustment as provided
in Section 4.2, no Employee shall be granted within any fiscal year of the Company one or more
Restricted Stock Awards or Restricted Stock Unit Awards, subject to Vesting Conditions based on
the attainment of Performance Goals, for more than 1,000,000 shares of Stock reserved for
issuance under the Plan.
(iii) Performance Awards. Subject to adjustment as provided in Section 4.2, no Employee
shall be granted (1) Performance Shares which could result in such Employee receiving more than
1,000,000 shares of Stock reserved for issuance under the Plan for each full fiscal year of the
Company contained in the Performance Period for such Award, or (2) Performance Units which could
result in such Employee receiving more than $1,000,000 for each full fiscal year of the Company
contained in the Performance Period for such Award. No Participant may be granted more than one
Performance Award for the same Performance Period.
6. Terms and Conditions of Options.
Options shall be evidenced by Award Agreements specifying the number of shares of Stock
covered thereby, in such form as the Committee shall from time to time establish. No Option or
purported Option shall be a valid and binding obligation of the Company unless evidenced by a
fully executed Award Agreement. Award Agreements evidencing Options may incorporate all or any
of the terms of the Plan by reference and shall comply with and be subject to the following
terms and conditions:
6.1 Exercise Price. The exercise price for each Option shall be established in the discretion
of the Committee; provided, however, that (a) the exercise price per share shall be not less than
the Fair Market Value of a share of Stock on the effective date of grant of the Option and (b) no
Incentive Stock Option granted to a Ten Percent Owner shall have an exercise price per share less
than one hundred ten percent (110%) of the Fair Market Value of a share of Stock on the effective
date of grant of the Option. Notwithstanding the foregoing, an Option (whether an Incentive Stock
Option or a Nonstatutory Stock Option) may be granted with an exercise price lower than the minimum
exercise price set forth above if such Option is granted pursuant to an assumption or substitution
for another option in a manner qualifying under the provisions of Section 424(a) of the Code.
6.2 Exercisability and Term of Options.
(a) Option Vesting and Exercisability. Options shall be exercisable at such time or times, or
upon such event or events, and subject to such terms, conditions, performance criteria and
restrictions as shall be determined by the Committee and set forth in the Award Agreement
evidencing such Option; provided, however, that (a) no Option shall be exercisable after the
expiration of ten (10) years after the effective date of grant of such Option, (b) no Incentive
Stock Option granted to a Ten Percent Owner shall be exercisable after the expiration of five (5)
years after the effective date of grant of such Option, (c) no Option shall become fully vested in
a period of less than three (3) years from the date of grant, other than in connection with a
termination of Service or a Change in Control or in the case of an Option granted to a Nonemployee
Director, and (d) no Option offered or be granted to a prospective Employee, prospective Consultant
or prospective Director may become exercisable prior to the date on which such person commences
Service. Subject to the foregoing, unless otherwise specified by the Committee in the grant of an
Option, any Option granted hereunder shall terminate ten (10) years after the effective date of
grant of the Option, unless earlier terminated in accordance with its provisions, or the terms of
the Plan.
(b) Participant Responsibility for Exercise of Option. Each Participant is responsible for
taking any and all actions as may be required to exercise any Option in a timely manner, and for
properly executing any documents as may be required for the exercise of an Option in accordance
with such rules and procedures as may be established from time to time. By signing an Option
Agreement each Participant acknowledges that information
10
regarding the procedures and requirements for the exercise of any Option is available upon
such Participants request. The Company shall have no duty or obligation to notify any Participant
of the expiration date of any Option.
6.3 Payment of Exercise Price.
(a) Forms of Consideration Authorized. Except as otherwise provided below, payment of the
exercise price for the number of shares of Stock being purchased pursuant to any Option shall be
made (i) in cash, by check or in cash equivalent, (ii) by tender to the Company, or attestation to
the ownership, of shares of Stock owned by the Participant having a Fair Market Value not less than
the exercise price, (iii) provided that the Participant is an Employee, and not an Officer or
Director (unless otherwise not prohibited by law, including, without limitation, any regulation
promulgated by the Board of Governors of the Federal Reserve System) and in the Companys sole and
absolute discretion at the time the Option is exercised, by delivery of the Participants
promissory note in a form approved by the Company for the aggregate exercise price, provided that,
if the Company is incorporated in the State of Delaware, the Participant shall pay in cash that
portion of the aggregate exercise price not less than the par value of the shares being acquired,
(iv) by such other consideration as may be approved by the Committee from time to time to the
extent permitted by applicable law, or (v) by any combination thereof. The Committee may at any
time or from time to time grant Options which do not permit all of the foregoing forms of
consideration to be used in payment of the exercise price or which otherwise restrict one or more
forms of consideration.
(b) Limitations on Forms of Consideration.
(i) Tender of Stock. Notwithstanding the foregoing, an Option may not be exercised by
tender to the Company, or attestation to the ownership, of shares of Stock to the extent such
tender or attestation would constitute a violation of the provisions of any law, regulation or
agreement restricting the redemption of the Companys stock.
(ii) Payment by Promissory Note. No promissory note shall be permitted if the exercise of
an Option using a promissory note would be a violation of any law. Any permitted promissory note
shall be on such terms as the Committee shall determine. The Committee shall have the authority
to permit or require the Participant to secure any promissory note used to exercise an Option
with the shares of Stock acquired upon the exercise of the Option or with other collateral
acceptable to the Company. Unless otherwise provided by the Committee, if the Company at any
time is subject to the regulations promulgated by the Board of Governors of the Federal Reserve
System or any other governmental entity affecting the extension of credit in connection with the
Companys securities, any promissory note shall comply with such applicable regulations, and the
Participant shall pay the unpaid principal and accrued interest, if any, to the extent necessary
to comply with such applicable regulations.
6.4 Effect of Termination of Service.
(a) Option Exercisability. Subject to earlier termination of the Option as otherwise provided
herein and unless otherwise provided by the Committee, an Option shall be exercisable after a
Participants termination of Service only during the applicable time periods provided in the Award
Agreement.
(b) Extension if Exercise Prevented by Law. Notwithstanding the foregoing, unless the
Committee provides otherwise in the Award Agreement, if the exercise of an Option within the
applicable time periods is prevented by the provisions of Section 14 below, the Option shall remain
exercisable until three (3) months (or such longer period of time as determined by the Committee,
in its discretion) after the date the Participant is notified by the Company that the Option is
exercisable, but in any event no later than the Option Expiration Date.
(c) Extension if Participant Subject to Section 16(b). Notwithstanding the foregoing, if a
sale within the applicable time periods of shares acquired upon the exercise of the Option would
subject the Participant to suit under Section 16(b) of the Exchange Act, the Option shall remain
exercisable until the earliest to occur of (i) the tenth (10th) day following the date on which a
sale of such shares by the Participant would no longer be subject to such suit, (ii) the one
hundred and ninetieth (190th) day after the Participants termination of Service, or (iii) the
Option Expiration Date.
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6.5 Transferability of Options. During the lifetime of the Participant, an Option shall be
exercisable only by the Participant or the Participants guardian or legal representative. Prior
to the issuance of shares of Stock upon the exercise of an Option, the Option shall not be subject
in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge,
encumbrance, or garnishment by creditors of the Participant or the Participants beneficiary,
except transfer by will or by the laws of descent and distribution. Notwithstanding the foregoing,
to the extent permitted by the Committee, in its discretion, and set forth in the Award Agreement
evidencing such Option, a Nonstatutory Stock Option shall be assignable or transferable subject to
the applicable limitations, if any, described in the General Instructions to Form S-8 Registration
Statement under the Securities Act.
7. Terms and Conditions of Stock Appreciation Rights.
Stock Appreciation Rights shall be evidenced by Award Agreements specifying the number of
shares of Stock subject to the Award, in such form as the Committee shall from time to time
establish. No SAR or purported SAR shall be a valid and binding obligation of the Company
unless evidenced by a fully executed Award Agreement. Award Agreements evidencing SARs may
incorporate all or any of the terms of the Plan by reference and shall comply with and be
subject to the following terms and conditions:
7.1 Types of SARs Authorized. SARs may be granted in tandem with all or any portion of a
related Option (a Tandem SAR") or may be granted independently of any Option (a "Freestanding
SAR"). A Tandem SAR may be granted either concurrently with the grant of the related Option or
at any time thereafter prior to the complete exercise, termination, expiration or cancellation
of such related Option.
7.2 Exercise Price. The exercise price for each SAR shall be established in the
discretion of the Committee; provided, however, that (a) the exercise price per share subject
to a Tandem SAR shall be the exercise price per share under the related Option and (b) the
exercise price per share subject to a Freestanding SAR shall be not less than the Fair Market
Value of a share of Stock on the effective date of grant of the SAR.
7.3 Exercisability and Term of SARs.
(a) Tandem SARs. Tandem SARs shall be exercisable only at the time and to the extent, and
only to the extent, that the related Option is exercisable, subject to such provisions as the
Committee may specify where the Tandem SAR is granted with respect to less than the full number of
shares of Stock subject to the related Option.
(b) Freestanding SARs. Freestanding SARs shall be exercisable at such time or times, or upon
such event or events, and subject to such terms, conditions, performance criteria and restrictions
as shall be determined by the Committee and set forth in the Award Agreement evidencing such SAR;
provided, however, that no Freestanding SAR shall be exercisable after the expiration of ten (10)
years after the effective date of grant of such SAR.
No SAR shall become fully vested in a period of less than three (3) years from the date of grant,
other than in connection with a termination of Service or a Change in Control or the case of an SAR
granted to a Nonemployee Director.
7.4 Deemed Exercise of SARs. If, on the date on which an SAR would otherwise terminate or
expire, the SAR by its terms remains exercisable immediately prior to such termination or
expiration and, if so exercised, would result in a payment to the holder of such SAR, then any
portion of such SAR which has not previously been exercised shall automatically be deemed to be
exercised as of such date with respect to such portion.
7.5 Effect of Termination of Service. Subject to earlier termination of the SAR as otherwise
provided herein and unless otherwise provided by the Committee in the grant of an SAR and set forth
in the Award Agreement, an SAR shall be exercisable after a Participants termination of Service
only as provided in the Award Agreement.
12
7.6 Nontransferability of SARs. During the lifetime of the Participant, an SAR shall be
exercisable only by the Participant or the Participants guardian or legal representative. Prior to the
exercise of an SAR, the SAR shall not be subject in any manner to anticipation, alienation, sale,
exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant
or the Participants beneficiary, except transfer by will or by the laws of descent and
distribution.
8. Terms and Conditions of Restricted Stock Awards.
Restricted Stock Awards shall be evidenced by Award Agreements specifying the number of
shares of Stock subject to the Award, in such form as the Committee shall from time to time
establish. No Restricted Stock Award or purported Restricted Stock Award shall be a valid and
binding obligation of the Company unless evidenced by a fully executed Award Agreement. Award
Agreements evidencing Restricted Stock Awards may incorporate all or any of the terms of the
Plan by reference and shall comply with and be subject to the following terms and conditions:
13
8.1 Types of Restricted Stock Awards Authorized. Restricted Stock Awards may or may not
require the payment of cash compensation for the stock. Restricted Stock Awards may be granted
upon such conditions as the Committee shall determine, including, without limitation, upon the
attainment of one or more Performance Goals described in Section 9.4. If either the grant of a
Restricted Stock Award or the lapsing of the Restriction Period is to be contingent upon the
attainment of one or more Performance Goals, the Committee shall follow procedures substantially
equivalent to those set forth in Sections 9.3 through 9.5(a).
8.2 Purchase Price. The purchase price, if any, for shares of Stock issuable under each
Restricted Stock Award and the means of payment shall be established by the Committee in its
discretion.
8.3 Purchase Period. A Restricted Stock Award requiring the payment of cash consideration
shall be exercisable within a period established by the Committee; provided, however, that no
Restricted Stock Award granted to a prospective Employee, prospective Consultant or prospective
Director may become exercisable prior to the date on which such person commences Service.
8.4 Vesting and Restrictions on Transfer. Shares issued pursuant to any Restricted Stock
Award may or may not be made subject to Vesting Conditions based upon the satisfaction of such
Service requirements, conditions, restrictions or performance criteria, including, without
limitation, Performance Goals as described in Section 9.4, as shall be established by the Committee
and set forth in the Award Agreement evidencing such Award. During any Restriction Period in which
shares acquired pursuant to a Restricted Stock Award remain subject to Vesting Conditions, such
shares may not be sold, exchanged, transferred, pledged, assigned or otherwise disposed of other
than as provided in the Award Agreement or as provided in Section 8.7. Upon request by the
Company, each Participant shall execute any agreement evidencing such transfer restrictions prior
to the receipt of shares of Stock hereunder.
8.5 Voting Rights; Dividends and Distributions. Except as provided in this Section, Section
8.4 and any Award Agreement, during the Restriction Period applicable to shares subject to a
Restricted Stock Award, the Participant shall have all of the rights of a stockholder of the
Company holding shares of Stock, including the right to vote such shares and to receive all
dividends and other distributions paid with respect to such shares. However, in the event of a
dividend or distribution paid in shares of Stock or any other adjustment made upon a change in the
capital structure of the Company as described in Section 4.2, any and all new, substituted or
additional securities or other property (other than normal cash dividends) to which the Participant
is entitled by reason of the Participants Restricted Stock Award shall be immediately subject to
the same Vesting Conditions as the shares subject to the Restricted Stock Award with respect to
which such dividends or distributions were paid or adjustments were made.
8.6 Effect of Termination of Service. Unless otherwise provided by the Committee in the grant
of a Restricted Stock Award and set forth in the Award Agreement, if a Participants Service
terminates for any reason, whether voluntary or involuntary (including the Participants death or
disability), then the Participant shall forfeit to the Company any shares acquired by the
Participant pursuant to a Restricted Stock Award which remain subject to Vesting Conditions as of
the date of the Participants termination of Service in exchange for the payment of the purchase
price, if any, paid by the Participant. The Company shall have the right to assign at any time any
repurchase right it may have, whether or not such right is then exercisable, to one or more persons
as may be selected by the Company.
8.7 Nontransferability of Restricted Stock Award Rights. Prior to the issuance of shares of
Stock pursuant to a Restricted Stock Award, rights to acquire such shares shall not be subject in
any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance
or garnishment by creditors of the Participant or the Participants beneficiary, except transfer by
will or the laws of descent and distribution. All rights with respect to a Restricted Stock Award
granted to a Participant hereunder shall be exercisable during his or her lifetime only by such
Participant or the Participants guardian or legal representative.
9. Terms and Conditions of Performance Awards.
Performance Awards shall be evidenced by Award Agreements in such form as the Committee
shall from time to time establish. No Performance Award or purported Performance Award shall
be a valid and binding obligation of the Company unless evidenced by a fully executed Award
Agreement. Award Agreements evidencing Performance Awards may incorporate all or any of the
terms of the Plan by reference and shall comply with and be subject to the following terms and
conditions:
14
9.1 Types of Performance Awards Authorized. Performance Awards may be in the form of either
Performance Shares or Performance Units. Each Award Agreement evidencing a Performance Award shall
specify the number of Performance Shares or Performance Units subject thereto, the Performance
Award Formula, the Performance Goal(s) and Performance Period applicable to the Award, and the
other terms, conditions and restrictions of the Award.
9.2 Initial Value of Performance Shares and Performance Units. Unless otherwise provided by
the Committee in granting a Performance Award, each Performance Share shall have an initial value
equal to the Fair Market Value of one (1) share of Stock, subject to adjustment as provided in
Section 4.2, on the effective date of grant of the Performance Share. Each Performance Unit shall
have an initial value determined by the Committee. The final value payable to the Participant in
settlement of a Performance Award determined on the basis of the applicable Performance Award
Formula will depend on the extent to which Performance Goals established by the Committee are
attained within the applicable Performance Period established by the Committee.
9.3 Establishment of Performance Period, Performance Goals and Performance Award Formula. In
granting each Performance Award, the Committee shall establish in writing the applicable
Performance Period, Performance Award Formula and one or more Performance Goals which, when
measured at the end of the Performance Period, shall determine on the basis of the Performance
Award Formula the final value of the Performance Award to be paid to the Participant. To the
extent compliance with the requirements under Section 162(m) with respect to performance-based
compensation is desired, the Committee shall establish the Performance Goal(s) and Performance
Award Formula applicable to each Performance Award no later than the earlier of (a) the date ninety
(90) days after the commencement of the applicable Performance Period or (b) the date on which 25%
of the Performance Period has elapsed, and, in any event, at a time when the outcome of the
Performance Goals remains substantially uncertain. Once established, the Performance Goals and
Performance Award Formula shall not be changed during the Performance Period. The Company shall
notify each Participant granted a Performance Award of the terms of such Award, including the
Performance Period, Performance Goal(s) and Performance Award Formula.
9.4 Measurement of Performance Goals. Performance Goals shall be established by the Committee
on the basis of targets to be attained ("Performance Targets") with respect to one or more measures
of business or financial performance (each, a "Performance Measure"), subject to the following:
(a) Performance Measures. Performance Measures shall have the same meanings as used in the
Companys financial statements, or, if such terms are not used in the Companys financial
statements, they shall have the meaning applied pursuant to generally accepted accounting
principles, or as used generally in the Companys industry. Performance Measures shall be
calculated with respect to the Company and each Subsidiary Corporation consolidated therewith for
financial reporting purposes or such division or other business unit as may be selected by the
Committee. For purposes of the Plan, the Performance Measures applicable to a Performance Award
shall be calculated in accordance with generally accepted accounting principles, but prior to the
accrual or payment of any Performance Award for the same Performance Period and excluding the
effect (whether positive or negative) of any change in accounting standards or any extraordinary,
unusual or nonrecurring item, as determined by the Committee, occurring after the establishment of
the Performance Goals applicable to the Performance Award. Each such adjustment, if any, shall be
made solely for the purpose of providing a consistent basis from period to period for the
calculation of Performance Measures in order to prevent the dilution or enlargement of the
Participants rights with respect to a Performance Award. Performance Measures may be one or more
of the following, as determined by the Committee: (i) sales revenue; (ii) gross margin; (iii)
operating margin; (iv) operating income; (v) pre-tax profit; (vi) earnings before interest, taxes
and depreciation and amortization; (vii) net income; (viii) expenses; (ix) the market price of the
Stock; (x) earnings per share; (xi) return on stockholder equity; (xii) return on capital; (xiii)
return on net assets; (xiv) economic value added; (xv) market share; (xvi) customer service; (xvii)
customer satisfaction; (xviii) safety; (xix) total stockholder return; (xx) free cash flow; or
(xxi) such other measures as determined by the Committee consistent with this Section 9.4(a).
(b) Performance Targets. Performance Targets may include a minimum, maximum, target level and
intermediate levels of performance, with the final value of a Performance Award determined under
the applicable Performance Award Formula by the level attained during the applicable Performance
Period. A Performance Target may be stated as an absolute value or as a value determined relative
to a standard selected by the Committee.
15
9.5 Settlement of Performance Awards.
(a) Determination of Final Value. As soon as practicable following the completion of the
Performance Period applicable to a Performance Award, the Committee shall certify in writing the
extent to which the applicable Performance Goals have been attained and the resulting final value
of the Award earned by the Participant and to be paid upon its settlement in accordance with the
applicable Performance Award Formula.
(b) Discretionary Adjustment of Award Formula. In its discretion, the Committee may, either
at the time it grants a Performance Award or at any time thereafter, provide for the positive or
negative adjustment of the Performance Award Formula applicable to a Performance Award that is not
intended to constitute qualified performance based compensation to a covered employee within
the meaning of Section 162(m) (a Covered Employee) to reflect such Participants individual
performance in his or her position with the Company or such other factors as the Committee may
determine. With respect to a Performance Award intended to constitute qualified performance-based
compensation to a Covered Employee, the Committee shall have the discretion to reduce some or all
of the value of the Performance Award that would otherwise be paid to the Covered Employee upon its
settlement notwithstanding the attainment of any Performance Goal and the resulting value of the
Performance Award determined in accordance with the Performance Award Formula.
(c) Payment in Settlement of Performance Awards. As soon as practicable following the
Committees determination and certification in accordance with Sections 9.5(a) and (b), payment
shall be made to each eligible Participant (or such Participants legal representative or other
person who acquired the right to receive such payment by reason of the Participants death) of the
final value of the Participants Performance Award. Payment of such amount shall be made in cash,
shares of Stock, or a combination thereof as determined by the Committee.
9.6 Voting Rights; Dividend Equivalent Rights and Distributions. Participants shall have no
voting rights with respect to shares of Stock represented by Performance Share Awards until the
date of the issuance of such shares, if any (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company). However, the Committee, in its
discretion, may provide in the Award Agreement evidencing any Performance Share Award that the
Participant shall be entitled to receive Dividend Equivalents with respect to the payment of cash
dividends on Stock having a record date prior to the date on which the Performance Shares are
settled or forfeited. Such Dividend Equivalents, if any, shall be credited to the Participant in
the form of additional whole Performance Shares as of the date of payment of such cash dividends on
Stock. The number of additional Performance Shares (rounded to the nearest whole number) to be so
credited shall be determined by dividing (a) the amount of cash dividends paid on such date with
respect to the number of shares of Stock represented by the Performance Shares previously credited
to the Participant by (b) the Fair Market Value per share of Stock on such date. Dividend
Equivalents may be paid currently or may be accumulated and paid to the extent that Performance
Shares become nonforfeitable, as determined by the Committee. Settlement of Dividend Equivalents
may be made in cash, shares of Stock, or a combination thereof as determined by the Committee, and
may be paid on the same basis as settlement of the related Performance Share as provided in Section
9.5. Dividend Equivalents shall not be paid with respect to Performance Units. In the event of a
dividend or distribution paid in shares of Stock or any other adjustment made upon a change in the
capital structure of the Company as described in Section 4.2, appropriate adjustments shall be made
in the Participants Performance Share Award so that it represents the right to receive upon
settlement any and all new, substituted or additional securities or other property (other than
normal cash dividends) to which the Participant would entitled by reason of the shares of Stock
issuable upon settlement of the Performance Share Award, and all such new, substituted or
additional securities or other property shall be immediately subject to the same Performance Goals
as are applicable to the Award.
9.7 Effect of Termination of Service. Unless otherwise provided by the Committee in the grant
of a Performance Award and set forth in the Award Agreement, the effect of a Participants
termination of Service on the Performance Award shall be as follows:
(a) Death or Disability. If the Participants Service terminates because of the death or
Disability of the Participant before the completion of the Performance Period applicable to the
Performance Award, the final value of the Participants Performance Award shall be determined by
the extent to which the applicable Performance Goals have been attained with respect to the entire
Performance Period and shall be prorated based on the number of months of the Participants Service
during the Performance Period. Payment shall be made following the end of the Performance Period
in any manner permitted by Section 9.5.
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(b) Other Termination of Service. If the Participants Service terminates for any reason
except death or Disability before the completion of the Performance Period applicable to the
Performance Award, such Award shall be forfeited in its entirety; provided, however, that in the
event of an involuntary termination of the Participants Service, the Committee, in its sole
discretion, may waive the automatic forfeiture of all or any portion of any such Award.
9.8 Nontransferability of Performance Awards. Prior to settlement in accordance with the
provisions of the Plan, no Performance Award shall be subject in any manner to anticipation,
alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors
of the Participant or the Participants beneficiary, except transfer by will or by the laws of
descent and distribution. All rights with respect to a Performance Award granted to a Participant
hereunder shall be exercisable during his or her lifetime only by such Participant or the
Participants guardian or legal representative.
10. Terms and Conditions of Restricted Stock Unit Awards.
Restricted Stock Unit Awards shall be evidenced by Award Agreements specifying the number of
Restricted Stock Units subject to the Award, in such form as the Committee shall from time to time
establish. No Restricted Stock Unit Award or purported Restricted Stock Unit Award shall be a
valid and binding obligation of the Company unless evidenced by a fully executed Award Agreement.
Award Agreements evidencing Restricted Stock Units may incorporate all or any of the terms of the
Plan by reference and shall comply with and be subject to the following terms and conditions:
10.1 Grant of Restricted Stock Unit Awards. Restricted Stock Unit Awards may be granted upon
such conditions as the Committee shall determine, including, without limitation, upon the
attainment of one or more Performance Goals described in Section 9.4. If either the grant of a
Restricted Stock Unit Award or the Vesting Conditions with respect to such Award is to be
contingent upon the attainment of one or more Performance Goals, the Committee shall follow
procedures substantially equivalent to those set forth in Sections 9.3 through 9.5(a).
10.2 Vesting. Restricted Stock Units may or may not be made subject to Vesting Conditions
based upon the satisfaction of such Service requirements, conditions, restrictions or performance
criteria, including, without limitation, Performance Goals as described in Section 9.4, as shall be
established by the Committee and set forth in the Award Agreement evidencing such Award.
10.3 Voting Rights, Dividend Equivalent Rights and Distributions. Participants shall have no
voting rights with respect to shares of Stock represented by Restricted Stock Units until the date
of the issuance of such shares (as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company). However, the Committee, in its discretion,
may provide in the Award Agreement evidencing any Restricted Stock Unit Award that the Participant
shall be entitled to receive Dividend Equivalents with respect to the payment of cash dividends on
Stock having a record date prior to the date on which Restricted Stock Units held by such
Participant are settled. Such Dividend Equivalents, if any, shall be paid by crediting the
Participant with additional whole Restricted Stock Units as of the date of payment of such cash
dividends on Stock. The number of additional Restricted Stock Units (rounded to the nearest whole
number) to be so credited shall be determined by dividing (a) the amount of cash dividends paid on
such date with respect to the number of shares of Stock represented by the Restricted Stock Units
previously credited to the Participant by (b) the Fair Market Value per share of Stock on such
date. Such additional Restricted Stock Units shall be subject to the same terms and conditions and
shall be settled in the same manner and at the same time (or as soon thereafter as practicable) as
the Restricted Stock Units originally subject to the Restricted Stock Unit Award. In the event of
a dividend or distribution paid in shares of Stock or any other adjustment made upon a change in
the capital structure of the Company as described in Section 4.2, appropriate adjustments shall be
made in the Participants Restricted Stock Unit Award so that it represents the right to receive
upon settlement any and all new, substituted or additional securities or other property (other than
normal cash dividends) to which the Participant would entitled by reason of the shares of Stock
issuable upon settlement of the Award, and all such new, substituted or additional securities or
other property shall be immediately subject to the same Vesting Conditions as are applicable to the
Award.
10.4 Effect of Termination of Service. Unless otherwise provided by the Committee in the
grant of a Restricted Stock Unit Award and set forth in the Award Agreement, if a Participants
Service terminates for any reason, whether voluntary or involuntary (including the Participants
death or disability), then the Participant shall
17
forfeit to the Company any Restricted Stock Units pursuant to the Award which remain subject
to Vesting Conditions as of the date of the Participants termination of Service.
10.5 Settlement of Restricted Stock Unit Awards. The Company shall issue to a Participant on
the date on which Restricted Stock Units subject to the Participants Restricted Stock Unit Award
vest or on such other date determined by the Committee, in its discretion, and set forth in the
Award Agreement one (1) share of Stock (and/or any other new, substituted or additional securities
or other property pursuant to an adjustment described in Section 10.3) for each Restricted Stock
Unit then becoming vested or otherwise to be settled on such date, subject to the withholding of
applicable taxes. Notwithstanding the foregoing, if permitted by the Committee and set forth in
the Award Agreement, the Participant may elect in accordance with terms specified in the Award
Agreement to defer receipt of all or any portion of the shares of Stock or other property otherwise
issuable to the Participant pursuant to this Section.
10.6 Nontransferability of Restricted Stock Unit Awards. Prior to the issuance of shares of
Stock in settlement of a Restricted Stock Unit Award, the Award shall not be subject in any manner
to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or
garnishment by creditors of the Participant or the Participants beneficiary, except transfer by
will or by the laws of descent and distribution. All rights with respect to a Restricted Stock
Unit Award granted to a Participant hereunder shall be exercisable during his or her lifetime only
by such Participant or the Participants guardian or legal representative.
11. Deferred Compensation Awards.
11.1 Establishment of Deferred Compensation Award Programs. This Section 11 shall not be
effective unless and until the Committee determines to establish a program pursuant to this
Section. The Committee, in its discretion and upon such terms and conditions as it may determine,
may establish one or more programs pursuant to the Plan under which:
(a) Participants designated by the Committee who are Insiders or otherwise among a select
group of highly compensated Employees may irrevocably elect, prior to a date specified by the
Committee, to reduce such Participants compensation otherwise payable in cash (subject to any
minimum or maximum reductions imposed by the Committee) and to be granted automatically at such
time or times as specified by the Committee one or more Awards of Stock Units with respect to such
numbers of shares of Stock as determined in accordance with the rules of the program established by
the Committee and having such other terms and conditions as established by the Committee.
(b) Participants designated by the Committee who are Insiders or otherwise among a select
group of highly compensated Employees may irrevocably elect, prior to a date specified by the
Committee, to be granted automatically an Award of Stock Units with respect to such number of
shares of Stock and upon such other terms and conditions as established by the Committee in lieu
of:
(i) shares of Stock otherwise issuable to such Participant upon the exercise of an
Option;
(ii) cash or shares of Stock otherwise issuable to such Participant upon the exercise of
an SAR; or
(iii) cash or shares of Stock otherwise issuable to such Participant upon the settlement
of a Performance Award or Performance Unit.
11.2 Terms and Conditions of Deferred Compensation Awards. Deferred Compensation Awards
granted pursuant to this Section 11 shall be evidenced by Award Agreements in such form as the
Committee shall from time to time establish. No such Deferred Compensation Award or purported
Deferred Compensation Award shall be a valid and binding obligation of the Company unless evidenced
by a fully executed Award Agreement. Award Agreements evidencing Deferred Compensation Awards may
incorporate all or any of the terms of the Plan by reference and shall comply with and be subject
to the following terms and conditions:
18
(a) Vesting Conditions. Deferred Compensation Awards shall not be subject to any vesting
conditions.
(b) Terms and Conditions of Stock Units.
(i) Voting Rights; Dividend Equivalent Rights and Distributions. Participants shall have no
voting rights with respect to shares of Stock represented by Stock Units until the date of the
issuance of such shares (as evidenced by the appropriate entry on the books of the Company or of
a duly authorized transfer agent of the Company). However, a Participant shall be entitled to
receive Dividend Equivalents with respect to the payment of cash dividends on Stock having a
record date prior to date on which Stock Units held by such Participant are settled. Such
Dividend Equivalents shall be paid by crediting the Participant with additional whole and/or
fractional Stock Units as of the date of payment of such cash dividends on Stock. The method of
determining the number of additional Stock Units to be so credited shall be specified by the
Committee and set forth in the Award Agreement. Such additional Stock Units shall be subject to
the same terms and conditions and shall be settled in the same manner and at the same time (or as
soon thereafter as practicable) as the Stock Units originally subject to the Stock Unit Award.
In the event of a dividend or distribution paid in shares of Stock or any other adjustment made
upon a change in the capital structure of the Company as described in Section 4.2, appropriate
adjustments shall be made in the Participants Stock Unit Award so that it represent the right to
receive upon settlement any and all new, substituted or additional securities or other property
(other than normal cash dividends) to which the Participant would be entitled by reason of the
shares of Stock issuable upon settlement of the Award.
(ii) Settlement of Stock Unit Awards. A Participant electing to receive an Award of Stock
Units pursuant to this Section 11 shall specify at the time of such election a settlement date
with respect to such Award. The Company shall issue to the Participant as soon as practicable
following the earlier of the settlement date elected by the Participant or the date of
termination of the Participants Service, a number of whole shares of Stock equal to the number
of whole Stock Units subject to the Stock Unit Award. Such shares of Stock shall be fully
vested, and the Participant shall not be required to pay any additional consideration (other than
applicable tax withholding) to acquire such shares. Any fractional Stock Unit subject to the
Stock Unit Award shall be settled by the Company by payment in cash of an amount equal to the
Fair Market Value as of the payment date of such fractional share.
(iii) Nontransferability of Stock Unit Awards. Prior to their settlement in accordance with
the provision of the Plan, no Stock Unit Award shall be subject in any manner to anticipation,
alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by
creditors of the Participant or the Participants beneficiary, except transfer by will or by the
laws of descent and distribution. All rights with respect to a Stock Unit Award granted to a
Participant hereunder shall be exercisable during his or her lifetime only by such Participant or
the Participants guardian or legal representative.
12. Other Stock-based Awards.
In addition to the Awards set forth in Sections 6 through 11 above, the Committee, in its sole
discretion, may carry out the purpose of this Plan by awarding Stock-Based Awards as it determines
to be in the best interests of the Company and subject to such other terms and conditions as it
deems necessary and appropriate.
13. Effect of Change in Control on Options and Sars.
13.1 Accelerated Vesting. The Committee, in its sole discretion, may provide in any Award
Agreement or, in the event of a Change in Control, may take such actions as it deems appropriate to
provide for the acceleration of the exercisability and vesting in connection with such Change in
Control of any or all outstanding Options and SARs and shares acquired upon the exercise of such
Options and SARs upon such conditions and to such extent as the Committee shall determine. The
previous sentence notwithstanding such acceleration shall not occur to the extent an Option or SAR
is assumed or substituted with a substantially similar Award in connection with a Change in
Control.
19
13.2 Assumption or Substitution. In the event of a Change in Control, the surviving,
continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case
may be (the "Acquiring Corporation"), may, without the consent of the Participant, either assume
the Companys rights and obligations under outstanding Options and SARs or substitute for
outstanding Options and SARs substantially equivalent options or stock appreciation rights for the
Acquiring Corporations stock. Any Options or SARs which are neither assumed or substituted for by
the Acquiring Corporation in connection with the Change in Control nor exercised as of the date of
the Change in Control shall terminate and cease to be outstanding effective as of the date of the
Change in Control. Notwithstanding the foregoing, shares acquired upon exercise of an Option or
SAR prior to the Change in Control and any consideration received pursuant to the Change in Control
with respect to such shares shall continue to be subject to all applicable provisions of the Award
Agreement evidencing such Award except as otherwise provided in such Award Agreement. Furthermore,
notwithstanding the foregoing, if the corporation the stock of which is subject to the outstanding
Options or SARs immediately prior to an Ownership Change Event described in Section 2.1(z)(i)
constituting a Change in Control is the surviving or continuing corporation and immediately after
such Ownership Change Event less than fifty percent (50%) of the total combined voting power of its
voting stock is held by another corporation or by other corporations that are members of an
affiliated group within the meaning of Section 1504(a) of the Code without regard to the provisions
of Section 1504(b) of the Code, the outstanding Options and SARs shall not terminate unless the
Board otherwise provides in its discretion.
13.3 Effect of Change in Control on Restricted Stock and Other Type of Awards. The Committee
may, in its discretion, provide in any Award Agreement evidencing a Restricted Stock or Other Type
of Award that, in the event of a Change in Control, the lapsing of any applicable Vesting
Condition, Restriction Period or Performance Goal applicable to the shares subject to such Award
held by a Participant whose Service has not terminated prior to the Change in Control shall be
accelerated and/or waived effective immediately prior to the consummation of the Change in Control
to such extent as specified in such Award Agreement; provided, however, that such acceleration or
waiver shall not occur to the extent an Award is assumed or substituted with a substantially
equivalent Award in connection with the Change in Control. Any acceleration, waiver or the lapsing
of any restriction that was permissible solely by reason of this Section 13.3 and the provisions of
such Award Agreement shall be conditioned upon the consummation of the Change in Control.
14. Compliance with Securities Law.
The grant of Awards and the issuance of shares of Stock pursuant to any Award shall be
subject to compliance with all applicable requirements of federal, state and foreign law with
respect to such securities and the requirements of any stock exchange or market system upon which
the Stock may then be listed. In addition, no Award may be exercised or shares issued pursuant to
an Award unless (a) a registration statement under the Securities Act shall at the time of such
exercise or issuance be in effect with respect to the shares issuable pursuant to the Award or (b)
in the opinion of legal counsel to the Company, the shares issuable pursuant to the Award may be
issued in accordance with the terms of an applicable exemption from the registration requirements
of the Securities Act. The inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Companys legal counsel to be necessary to the
lawful issuance and sale of any shares hereunder shall relieve the Company of any liability in
respect of the failure to issue or sell such shares as to which such requisite authority shall not
have been obtained. As a condition to issuance of any Stock, the Company may require the
Participant to satisfy any qualifications that may be necessary or appropriate, to evidence
compliance with any applicable law or regulation and to make any representation or warranty with
respect thereto as may be requested by the Company.
15. Tax Withholding.
15.1 Tax Withholding in General. The Company shall have the right to deduct from any and
all payments made under the Plan, or to require the Participant, through payroll
withholding, cash payment or otherwise, including by means of a Cashless Exercise or Net
Exercise of an Option, to make adequate provision for, the federal, state, local and foreign
taxes, if any, required by law to be withheld by the Participating Company Group with
respect to an Award or the shares acquired pursuant thereto. The Company shall have no
obligation to deliver shares of Stock, to release shares of Stock from an escrow established
pursuant to an Award Agreement, or to make any payment in cash under the Plan until the
Participating Company Groups tax withholding obligations have been satisfied by the
Participant.
20
15.2 Withholding in Shares. The Company shall have the right, but not the obligation, to
deduct from the shares of Stock issuable to a Participant upon the exercise or settlement of an
Award, or to accept from the
Participant the tender of, a number of whole shares of Stock having a Fair Market Value, as
determined by the Company, equal to all or any part of the tax withholding obligations of the
Participating Company Group. The Fair Market Value of any shares of Stock withheld or tendered to
satisfy any such tax withholding obligations shall not exceed the amount determined by the
applicable minimum statutory withholding rates.
16. Amendment or Termination of Plan.
The Board or the Committee may amend, suspend or terminate the Plan at any time. However,
without the approval of the Companys stockholders, there shall be (a) no increase in the maximum
aggregate number of shares of Stock that may be issued under the Plan (except by operation of the
provisions of Section 4.2), (b) no change in the class of persons eligible to receive Incentive
Stock Options, and (c) no other amendment of the Plan that would require approval of the Companys
stockholders under any applicable law, regulation or rule. No amendment, suspension or termination
of the Plan shall affect any then outstanding Award unless expressly provided by the Board or the
Committee. In any event, no amendment, suspension or termination of the Plan may adversely affect
any then outstanding Award without the consent of the Participant unless necessary to comply with
any applicable law, regulation or rule.
17. Miscellaneous Provisions.
17.1 Repurchase Rights. Shares issued under the Plan may be subject to one or more repurchase
options, or other conditions and restrictions as determined by the Committee in its discretion at
the time the Award is granted. The Company shall have the right to assign at any time any
repurchase right it may have, whether or not such right is then exercisable, to one or more persons
as may be selected by the Company. Upon request by the Company, each Participant shall execute any
agreement evidencing such transfer restrictions prior to the receipt of shares of Stock hereunder
and shall promptly present to the Company any and all certificates representing shares of Stock
acquired hereunder for the placement on such certificates of appropriate legends evidencing any
such transfer restrictions.
17.2 Provision of Information. Each Participant shall be given access to information
concerning the Company equivalent to that information generally made available to the Companys
common stockholders.
17.3 Rights as Employee, Consultant or Director. No person, even though eligible pursuant to
Section 5, shall have a right to be selected as a Participant, or, having been so selected, to be
selected again as a Participant. Nothing in the Plan or any Award granted under the Plan shall
confer on any Participant a right to remain an Employee, Consultant or Director or interfere with
or limit in any way any right of a Participating Company to terminate the Participants Service at
any time. To the extent that an Employee of a Participating Company other than the Company
receives an Award under the Plan, that Award shall in no event be understood or interpreted to mean
that the Company is the Employees employer or that the Employee has an employment relationship
with the Company.
17.4 Rights as a Stockholder. A Participant shall have no rights as a stockholder with
respect to any shares covered by an Award until the date of the issuance of such shares (as
evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company). No adjustment shall be made for dividends, distributions or other rights
for which the record date is prior to the date such shares are issued, except as provided in
Section 4.2 or another provision of the Plan.
17.5 Fractional Shares. The Company shall not be required to issue fractional shares upon the
exercise or settlement of any Award.
17.6 Severability. If any one or more of the provisions (or any part thereof) of this Plan
shall be held invalid, illegal or unenforceable in any respect, such provision shall be modified so
as to make it valid, legal and enforceable, and the validity, legality and enforceability of the
remaining provisions (or any part thereof) of the Plan shall not in any way be affected or impaired
thereby.
17.7 Beneficiary Designation. Subject to local laws and procedures, each Participant may file
with the Company a written designation of a beneficiary who is to receive any benefit under the
Plan to which the Participant is entitled in the event of such Participants death before he or she
receives any or all of such benefit. Each designation will revoke all prior designations by the
same Participant, shall be in a form prescribed by the Company,
21
and will be effective only when filed by the Participant in writing with the Company during
the Participants lifetime. If a married Participant designates a beneficiary other than the
Participants spouse, the effectiveness of such designation may be subject to the consent of the
Participants spouse. If a Participant dies without an effective designation of a beneficiary who
is living at the time of the Participants death, the Company will pay any remaining unpaid
benefits to the Participants legal representative.
17.8 Unfunded Obligation. Participants shall have the status of general unsecured creditors
of the Company. Any amounts payable to Participants pursuant to the Plan shall be unfunded and
unsecured obligations for all purposes, including, without limitation, Title I of the Employee
Retirement Income Security Act of 1974. No Participating Company shall be required to segregate
any monies from its general funds, or to create any trusts, or establish any special accounts with
respect to such obligations. The Company shall retain at all times beneficial ownership of any
investments, including trust investments, which the Company may make to fulfill its payment
obligations hereunder. Any investments or the creation or maintenance of any trust or any
Participant account shall not create or constitute a trust or fiduciary relationship between the
Committee or any Participating Company and a Participant, or otherwise create any vested or
beneficial interest in any Participant or the Participants creditors in any assets of any
Participating Company. The Participants shall have no claim against any Participating Company for
any changes in the value of any assets which may be invested or reinvested by the Company with
respect to the Plan. Each Participating Company shall be responsible for making benefit payments
pursuant to the Plan on behalf of its Participants or for reimbursing the Company for the cost of
such payments, as determined by the Company in its sole discretion. In the event the respective
Participating Company fails to make such payment or reimbursement, a Participants (or other
individuals) sole recourse shall be against the respective Participating Company, and not against
the Company. A Participants acceptance of an Award pursuant to the Plan shall constitute
agreement with this provision.
22
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 7, 2006
The undersigned hereby appoints Paul E. Jacobs and Steven R. Altman, and each of them,
as attorneys and proxies of the undersigned, with full power of substitution, to vote all of the
shares of stock of QUALCOMM Incorporated (the Company) which the undersigned may be entitled to
vote at the Annual Meeting of Stockholders of the Company to be held at Copley Symphony Hall, 750 B
Street, San Diego, CA 92101, on Tuesday, March 7, 2006 at 9:30 a.m. local time and at any and all
adjournments or postponements thereof, with all powers that the undersigned would possess if
personally present, upon and in respect of the following matters and in accordance with the
following instructions, with discretionary authority as to any and all other matters that may
properly come before the meeting.
The shares represented by this proxy card will be voted as directed or, if this card contains
no specific voting instructions, these shares will be voted in accordance with the recommendation
of the Board of Directors.
YOUR VOTE IS IMPORTANT. If you will not be voting by telephone or the Internet, you are urged
to complete, sign, date and promptly return the accompanying proxy in the enclosed envelope, which
is postage-prepaid if mailed in the United States.
(Continued and to be signed on reverse side.)
QUALCOMM INCORPORATED
5775 MOREHOUSE DRIVE, L729M
SAN DIEGO, CA 92121
VOTE BY INTERNET www.proxyvote.com
Use the Internet to transmit your voting
instructions and for electronic delivery of
information up until 11:59 P.M. Eastern Time the
day before the cut-off date or meeting date. Have
your proxy card in hand when you access the web
site and follow the instructions to vote.
VOTE BY PHONE 1-800-690-6903
Use any touch-tone telephone to transmit your
voting instructions up until 11:59 P.M. Eastern
Time the day before the cut-off date or meeting
date. Have your proxy card in hand when you call
and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it
in the postage-paid envelope we have provided or
return it to QUALCOMM Incorporated, c/o ADP, 51
Mercedes Way, Edgewood, NY 11717.
The Internet and Telephone voting facilities will
close at 11:59 p.m. Eastern Standard Time on March
6, 2006.
IF YOU HAVE VOTED OVER THE INTERNET OR BY
TELEPHONE, THERE IS NO NEED FOR YOU TO MAIL BACK
YOUR PROXY.
THANK YOU FOR VOTING.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
QUALC1 KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
QUALCOMM INCORPORATED
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR PROPOSALS 1-5:
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1. |
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To elect four Class III Directors whether by
cumulative voting or otherwise, to hold office until
the 2009 Annual Meeting of Stockholders, or if
Proposal 2 passes, until the 2007 Annual Meeting of
Stockholders. |
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01) |
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Richard C. Atkinson |
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02) |
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Diana Lady
Dougan |
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03) |
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Peter M. Sacerdote |
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04) |
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Marc I. Stern |
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For |
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Withhold |
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Exceptions |
All |
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All |
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o
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o
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To withhold authority to
vote for any individual
nominee, mark the
Exceptions box and write
the nominees name on the
line below.
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For |
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Against |
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Abstain |
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2.
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To approve amendments to the Companys
Restated Certificate of Incorporation to eliminate
the classified board and cumulative voting.
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o
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o
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o |
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3.
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To approve the combination of the Companys
equity compensation Plans as the 2006 Long-Term
Incentive Plan and an increase in the share reserve
by 65,000,000 shares.
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o
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o
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o |
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For |
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Against |
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Abstain |
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4.
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To ratify the selection of Pricewaterhouse
Coopers LLP as the Companys independent
accountants for the Companys fiscal year
ending September 24, 2006.
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o
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o
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o |
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5.
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To approve any adjournments of the meeting
to another time or place, if necessary in the
judgment of the proxy holders, for the purpose
of soliciting additional proxies in favor of any
of the foregoing proposals.
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o
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o
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o |
Please sign below, exactly as name or names appear on this proxy. If the stock is registered in the
names of two or more persons, each should sign. When signing as attorney, executor, administrator,
trustee, custodian, guardian or corporate officer, give full title. If more than one trustee, all
should sign.
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Signature (Joint Owners)
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Date
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