SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
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[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
QUALCOMM INCORPORATED
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(Name of Registrant as Specified In Its Charter)
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PRELIMINARY PROXY MATERIALS
[QUALCOMM LETTERHEAD]
To Our Stockholders:
Enclosed with this letter are proxy materials for our upcoming Annual
Meeting, including detailed descriptions of three stock plan proposals, items 3,
4 and 5. We are requesting your approval of these proposals to allow us to
attract, retain and motivate highly qualified employees and outside Board
members, and thus enhance the value of the Company.
PHILOSOPHY ON EMPLOYEE COMPENSATION
An important focus in establishing employee compensation at QUALCOMM is
the relationship between long-term compensation and stock price, achieved
through the judicious award of stock options. We believe this is a key
ingredient to our prospects of success.
A significant component of our employee compensation philosophy is to
grant options widely throughout QUALCOMM's employee population. Although
competitive high-tech companies tend to grant options broadly throughout the
organization, we have elected to go a step further. Over the past three years,
only 6% of option grants were awarded to QUALCOMM's five most highly-compensated
officers as shown in the proxy statement. This compares favorably with many
other high-technology companies, which routinely award 20% or more of their
options to their five most highly-compensated executives.
The Board and management continue to examine the benefits and costs of
QUALCOMM's compensation philosophy. The Company periodically engages
compensation attorneys and consultants who advise the Company on the most
effective methods and levels of employee stock compensation. This is admittedly
a difficult process with many factors that must be frequently revisited.
First, we must ensure we are able to continue to hire and retain
qualified individuals to support the needs of a rapidly growing business. We are
satisfied that our prior option granting practices have been a critical factor
in our ability to hire and retain individuals whose collective contributions
have greatly added to QUALCOMM's success. We have typically provided technical
and professional employees with stock options upon hire and subsequently as
performance warrants. At this time, virtually all (98%) of our technical and
professional employees hold unvested stock options. We recognize these
employees have portable skills and frequently have opportunities to
accept other employment, and we believe our broad and inclusive policy of
granting stock options is a strong factor in our successful efforts to hire,
retain, and motivate employees. We have been informed that our technical and
professional employee turnover rate is less than half that of comparable
high-tech companies. QUALCOMM has greatly benefitted from being better able to
focus on the needs of our dynamic business instead of spending extra dollars to
recruit, relocate, assimilate and train even more new employees.
Second, we must balance the costs of stock compensation against other
benefits. The Company has established a 401(k) plan, but has not established an
employee retirement pension program. We believe equity awards are the most
attractive and cost-effective means to assist employees in planning for their
long-term needs. Employee participation in the Company's Employee Stock Purchase
Plan (ESPP) reaffirms this belief and vividly demonstrates our employees' faith
in QUALCOMM and their willingness to work hard for its success. Over the past
three years, participation in the ESPP has averaged approximately 65% of
eligible employees.
Third, we must attempt to remain competitive with other companies'
practices concerning stock plans, selecting those practices which are attractive
to current and future employees while always aligning such practices with the
long-term interests of stockholders. To these ends, you may recall that last
year we recommended and you approved two important changes to the 1991 Stock
Option Plan. The plan was amended to commit to our normal practice that (i)
stock options are granted at no less than 100% of QUALCOMM's fair market value
on the date of grant and (ii) options held by directors and corporate officers
are never repriced downward in the event of a decrease in the stock price.
PHILOSOPHY ON DIRECTOR COMPENSATION
The proposal in the proxy statement to amend the 1998 Non-Employee
Directors' Stock Option Plan is merely one element in the Board's decision to
change the total compensation package for our non-employee directors. Our
compensation advisors provided us with studies and surveys from various
consultants, public interest groups and academic sources regarding director
compensation. These studies were all similar in their conclusion that
non-employee director compensation should be tied primarily to the long-term
performance of the Company's stock. The conclusion was that, as long-term
stockholders, the decision-making process of the non-employee directors will
likely be more strongly influenced by a desire to increase the long-term value
of the company's stock.
Thus, with your approval, non-employee directors will be compensated as
follows: each new non-employee director will be granted an initial one-time
option for 20,000
shares which vests over five years and, following each annual meeting of
stockholders, each continuing non-employee director will be granted an annual
option for 10,000 shares which vests over five years. All non-employee
directors will also receive a fee of $1,000 for attending each Board or
non-concurrent Board Committee meeting ($500 if participation is by phone) and
an annual fee of $2,500 for serving as chair of each Board Committee (other
than the Nominating Committee). By making these changes in non-employee
director compensation, the Company will both reduce cash compensation to
non-employee directors and align the non-employee directors' interests more
closely to the interests of QUALCOMM's stockholders.
SUMMARY
In closing, let me assure you that I and other members of management
and the Board are very sensitive to the dilutive nature of stock options, as we
are also substantial stockholders (as disclosed in the beneficial ownership
table on page 20 of the proxy statement). We truly believe that approval of
these proposals will continue to enhance the value of QUALCOMM's stock. As
illustrated in the Performance Graph on page 27 of the proxy, the Company's
stock price increased approximately 29% during fiscal 1997 and approximately
715% over the last five complete fiscal years. The Board and management strongly
support approval of the three compensation proposals (3, 4, and 5) to help
ensure we continue on this successful path.
Sincerely,
Irwin M. Jacobs
Chairman and Chief Executive Officer
PRELIMINARY PROXY MATERIALS
LOGO
6455 LUSK BLVD.
SAN DIEGO, CALIFORNIA 92121
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 10, 1998
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 6455 Lusk
Blvd., San Diego, California 92121, on Tuesday, February 10, 1998 at 9:00 a.m.
local time for the following purposes:
1. To elect four Class I directors to hold office until the 2001 Annual
Meeting of Stockholders.
2. To approve an amendment to the Company's Restated Certificate of
Incorporation to increase the number of shares of Common Stock
authorized for issuance from 150,000,000 to 300,000,000 shares.
3. To approve the Company's 1991 Stock Option Plan, as amended, to increase
the aggregate number of shares of Common Stock authorized for issuance
under such plan by 5,000,000 shares.
4. To approve the Company's 1991 Employee Stock Purchase Plan, as amended,
to increase the aggregate number of shares of Common Stock authorized
for issuance under such plan by 2,200,000 shares.
5. To approve the Company's 1998 Non-Employee Directors' Stock Option Plan
as an amendment and restatement of the Company's existing Non-Employee
Directors' Stock Option Plan and to authorize an additional 470,000
shares of Common Stock for issuance under such plan.
6. To ratify the selection of Price Waterhouse LLP as the Company's
independent accountants for the Company's fiscal year ending September
27, 1998.
7. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on December 18, 1997
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.
By Order of the Board of Directors
LOGO
Irwin Mark Jacobs
Chairman of the Board
San Diego, California and Chief Executive Officer
December 29, 1997
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
PRELIMINARY PROXY MATERIALS
QUALCOMM INCORPORATED
6455 LUSK BLVD.
SAN DIEGO, CALIFORNIA 92121
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
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, February 10, 1998, at 9:00
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 the Company's principal
executive offices, 6455 Lusk Blvd., San Diego, California 92121. The Company
intends to mail this proxy statement and accompanying proxy card on or about
December 29, 1997 to all stockholders entitled to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies including
preparation, assembly, printing and mailing of this proxy statement, the proxy
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. 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
or, at the Company's request, D.F. King & Co., Inc., a professional proxy
solicitation firm. No additional compensation will be paid to directors,
officers or other regular employees for such services, but D.F. King & Co., Inc.
will be paid its customary fee, estimated to be about $10,000, if it renders
solicitation services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on December
18, 1997 (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 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. With respect to the
election of directors, 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. 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 the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be considered shares entitled
to vote in the tabulation of votes cast on proposals presented to the
stockholders and will have the same effect as negative votes. Broker non-votes
are counted towards a quorum but, except with respect to Proposal 2, are not
counted for any purpose in determining whether a matter has been approved. With
respect to Proposal 2, broker non-votes will have the same effect as negative
votes.
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
Secretary of the Company at the Company's principal executive offices, 6455 Lusk
Blvd., San Diego, California 92121, 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.
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the
Company's 1999 Annual Meeting of Stockholders must be received by the Company
not later than August 31, 1998.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's 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. Vacancies on
the Board of Directors resulting from death, resignation, disqualification,
removal or other causes shall be filled by either the affirmative vote of the
holders of a majority of the then-outstanding shares 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 shall, 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 Board of Directors) shall serve for the remainder of the
full term of the class of directors in which the vacancy occurred and until such
director's successor is elected and qualified.
The Company's 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
thirteen. Four seats on the Board of Directors, currently held by Irwin Mark
Jacobs, Andrew J. Viterbi, Adelia A. Coffman and Neil Kadisha, have been
designated as Class I Board seats, with the term of the directors occupying such
seats expiring as of the Annual Meeting.
Each of the nominees for election to this class is currently a Board member
of the Company who was previously elected by the stockholders. If elected at the
Annual Meeting, each of the four nominees would serve until the 2001 Annual
Meeting, in each case until their successor is elected and has qualified, or
until such director's earlier death, resignation or removal.
Directors are 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. Shares 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 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.
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.
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NOMINEES FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2001 ANNUAL MEETING
IRWIN MARK JACOBS
Irwin Mark Jacobs, age 64, one of the founders of the Company, has served
as Chairman of the Board of Directors and Chief Executive Officer of the Company
since it began operations in July 1985. He also held the title of President
prior to May 1992. Before joining the Company, Dr. Jacobs was Executive Vice
President and a Director of M/A-COM, Inc., a telecommunications company. From
October 1968 to April 1985, Dr. Jacobs held various executive positions at
LINKABIT (M/A-COM LINKABIT after August 1980), a company he co-founded. During
most of his period of service with LINKABIT, he was Chairman, President and
Chief Executive Officer and was at all times a Director. Dr. Jacobs received his
B.E.E. degree from Cornell University and his M.S. and Sc.D. degrees from the
Massachusetts Institute of Technology ("MIT").
ANDREW J. VITERBI
Andrew J. Viterbi, age 62, one of the founders of the Company, has served
as Vice-Chairman of the Board of Directors since it began operations in July
1985. From July 1985 through July 1996 he also served as the Company's Chief
Technical Officer. From July 1983 to April 1985, Dr. Viterbi was Senior Vice
President and Chief Scientist of M/A-COM, Inc., a telecommunications company.
From October 1968 to April 1985, Dr. Viterbi held various executive positions at
LINKABIT (M/A-COM LINKABIT after August 1980), a company he co-founded, and
served as President of the M/A-COM LINKABIT subsidiary of M/A-COM, Inc. During
most of his period of service with LINKABIT, he was Vice-Chairman and was at all
times a Director. Dr. Viterbi received his B.S and M.S. degrees in Electrical
Engineering from MIT and his Ph.D. degree from the University of Southern
California. He is a member of both the National Academy of Engineering and the
National Academy of Sciences.
ADELIA A. COFFMAN
Adelia A. Coffman, age 45, 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. She 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 and is also active in Oregon Diverse Industries, LLC, a real
estate investment and development company of which she is an owner. From July
1970 until July 1985, Ms. Coffman held various positions at LINKABIT and M/A-COM
LINKABIT. Prior to joining the Company, Ms. Coffman was Controller of M/A-COM
LINKABIT. Ms. Coffman received her B.S. degree in Business from San Diego State
University.
NEIL KADISHA
Neil Kadisha, age 42, joined the Company as a Director in August 1988.
Prior to becoming a Director of the Company, he served as Chairman of the Board
and Chief Executive Officer of Omninet Corporation. In 1981, Mr. Kadisha founded
GNC Industries, Inc./Stadco, an aerospace and aircraft component manufacturer,
where he is currently serving as Chief Executive Officer. In 1989, Mr. Kadisha
founded Texollini, Inc., a manufacturer of stretch fabric, where he currently
serves as Chairman of the Board. In 1996, Mr. Kadisha became the Chief Executive
Officer of HPM Corporation, a major manufacturer of machinery for the plastics
industry and machinery for the die casting industry. Mr. Kadisha's academic
background is in Industrial Management and Economics from Manchester, United
Kingdom.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1999 ANNUAL MEETING
ROBERT E. KAHN
Robert E. Kahn, age 59, 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
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founded in 1986. From 1972 to 1985, he 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 has
received numerous awards for his pioneering work on the Internet for which he
has 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. He is a member of the National Academy of Engineering.
JEROME S. KATZIN
Jerome S. Katzin, age 79, became a Director of the Company in November
1987. Until his retirement in 1990, Mr. Katzin was a director or partner of
Shearson Lehman Brothers Inc. and its predecessor investment banking firms since
1953. He is also a Director of the Coastal Corporation, an oil and gas business.
DUANE A. NELLES
Duane A. Nelles, age 54, a certified public accountant, joined the Company
as a Director in August 1988. Mr. Nelles has also served on the Board of
Directors of WFS Financial Inc., an automotive finance company, since July 1995.
He has been in the personal investment business since 1987. Prior to that, Mr.
Nelles was a partner in the international public accounting firm of Coopers &
Lybrand, L.L.P., which he joined in 1968 after receiving his M.B.A. degree from
the University of Michigan.
FRANK SAVAGE
Frank Savage, age 59, became a Director of the Company in February 1996. He
has served as Chairman of Alliance Capital Management International and a
Director of Alliance Capital Management Corporation since July 1993. He also
served as Senior Vice President of The Equitable Life Assurance Society of the
United States from February 1988 until March 1996. Alliance Capital is an
investment management subsidiary of Equitable Life Assurance Society. He was the
Chairman of Equitable Capital Management Corporation, an Equitable Life
investment management subsidiary, from April 1992 until it merged with Alliance
Capital in July 1993. From December 1970 to July 1985 he held various positions
with Equitable Life including investment officer and Vice President. Mr. Savage
is a Director of Lockheed Martin Corporation, an aero-technology corporation,
ARCO Chemical Company, a manufacturing company, Essence Communications, Inc., a
media company and The Johns Hopkins and Howard Universities. He earned a B.A.
from Howard University in 1962, an M.A. from The Johns Hopkins University Nitze
School of Advanced International Studies in 1968 and received an Honorary
Doctorate Degree in Humane Letters from Hofstra University.
BRENT SCOWCROFT
Brent Scowcroft, age 72, 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. He is also the
President of the Forum for International Policy, a non-profit organization that
he founded in 1993 that promotes American leadership and foreign policy. He
served as Assistant to the President for National Security Affairs for President
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. He received his B.S. degree from West Point and M.A.
and Ph.D. degrees from Columbia University. General Scowcroft is a Director of
Northrop Grumman Corporation, an aerospace company, Pennzoil Company, an oil and
gas company and Enron Global Power & Pipelines L.L.C., a utility company and a
member of the Board of Trustees of the Rand Corporation, a research and
development company.
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DIRECTORS CONTINUING IN OFFICE UNTIL THE 2000 ANNUAL MEETING
HARVEY P. WHITE
Harvey P. White, age 63, one of the founders of the Company, has served as
President since May 1992 and as Chief Operating Officer from February 1994 to
August 1995. Prior to May 1992 he was Executive Vice President and Chief
Operating Officer and has also been a Director of the Company since it began
operations in July 1985. From March 1978 to June 1985, Mr. White was an officer
of LINKABIT (M/A-COM LINKABIT after August 1980), where he was successively
Chief Financial Officer, Vice President, Senior Vice President and Executive
Vice President. Mr. White became Chief Operating Officer of LINKABIT in July
1979 and a Director of LINKABIT in December 1979. He holds a B.A. degree in
Economics from Marshall University.
RICHARD C. ATKINSON
Richard C. Atkinson, age 68, became a Director of the Company in January
1991. Dr. Atkinson has been serving as the President of the University of
California since October 1995. Prior to that he served as Chancellor of the
University of California at San Diego since 1980. He has also served on the
Board of Directors of San Diego Gas & Electric, a utilities company, since April
1992. 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. He is one of the founders of
Computer Curriculum Corporation. He 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.
PETER M. SACERDOTE
Peter M. Sacerdote, age 60, became a Director of the Company in October
1989. Mr. Sacerdote has been a limited partner of the Goldman Sachs Group, L.P.
since December 1990 where he also serves as Chairman of its Investment
Committee. During the five years prior to that time he served as a general
partner of Goldman, Sachs & Co. He also serves as a Director of AMF Group, Inc.,
a bowling center operator and equipment manufacturer and Franklin Resources,
Inc., a mutual fund management company.
MARC I. STERN
Marc I. Stern, age 53, became a Director of the Company in February 1994.
He has been with The TCW Group, Inc., an asset management firm, since March 1990
and has served as President since May 1992. From December 1988 to March 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, from May 1986 to December 1988. From September 1985 to
May 1986, he was Senior Vice President of Allied-Signal Inc., a diversified
manufacturing company. Mr. Stern is Chairman of Apex Mortgage Capital, Inc., a
financial services company; a Director of TCW Funds, Inc., a registered
investment company; and a Trustee of eleven open-end and closed-end registered
investment companies comprising the TCW/DW Family of Funds. He graduated from
Dickinson College in 1965, and received his master's degree from Columbia
University Graduate School of Public Law and Government in 1966 and his law
degree from Columbia University School of Law in 1969.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended September 28, 1997, the Board of Directors
held ten meetings. The Board has an Audit Committee, a Compensation Committee, a
Nominating Committee and a Stock Option Committee.
The Audit Committee meets at least quarterly with the Company's management
and independent accountants to, among other things, review the results of the
annual audit and discuss the financial statements, recommend to the Board the
independent accountants to be retained and receive and consider the
5
accountants' comments as to controls, adequacy of staff and management
performance and procedures in connection with audit and financial controls. The
Audit Committee, which as of the end of fiscal 1997 was composed of Messrs.
Nelles (Committee Chairman), Kadisha and Katzin and Ms. Coffman, met six times
during such fiscal year.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation, administers and approves stock offerings under the
Company's 1991 Employee Stock Purchase Plan and the 1996 Non-Qualified Employee
Stock Purchase Plan, administers the Company's 1991 Stock Option Plan and
otherwise determines compensation levels and performs such other functions
regarding compensation as the Board may delegate. The Compensation Committee,
which as of the end of fiscal 1997 was composed of Messrs. Katzin (Committee
Chairman), Nelles and Stern, met seven times during such fiscal year.
The Nominating Committee interviews, evaluates, nominates and recommends
individuals for membership on the Company's Board of Directors and committees
thereof. The Company's Bylaws provide for procedures for consideration of
nominees recommended by stockholders. Effective February 1996, the Nominating
Committee included Messrs. Katzin (Committee Chairman), Nelles, Savage and
Scowcroft; this Committee met twice during fiscal 1997. Effective February 1997,
the Nominating Committee was reconstituted to consist of Messrs. Sacerdote
(Committee Chairman), Atkinson and Stern and did not meet during the remainder
of fiscal 1997. This Committee met in November 1997 to nominate the Class I
Director nominees, subject to stockholder approval, as further discussed in
Proposal 1.
The Stock Option Committee administers and awards stock options to
employees and consultants (other than with respect to directors and corporate
officers of the Company) under the Company's 1991 Stock Option Plan. The Stock
Option Committee, which as of the end of fiscal 1997 was composed of Messrs.
Nelles (Committee Chairman), Jacobs, Viterbi and White, met five times during
such fiscal year.
During the fiscal year ended September 28, 1997, 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.
PROPOSAL 2
APPROVAL OF INCREASE IN NUMBER OF AUTHORIZED SHARES
OF COMMON STOCK
The Board of Directors has approved and adopted, subject to stockholder
approval, an amendment to the Company's Restated Certificate of Incorporation
(the "Restated Certificate") to increase the Company's authorized number of
shares of Common Stock from 150,000,000 shares to 300,000,000 shares (the
"Common Stock Amendment").
Reasons for Amendment. Although at present the Company has no plans to
issue additional shares of Common Stock other than the shares currently reserved
as discussed above, it desires to have such shares available to provide
additional flexibility to use its capital stock for business and financial
purposes in the future. The additional shares may be used, without further
stockholder approval, for various purposes including, without limitation,
raising capital, providing equity incentives to employees, officers, directors
or consultants, possible future stock splits or stock dividends, establishing
strategic relationships with other companies and expanding the Company's
business or product lines through the acquisition of other businesses or
products. Stockholders will not be entitled to preemptive rights with respect to
any such issuances.
Principal Effects. The additional shares of Common Stock to be authorized
by the Common Stock Amendment would have rights identical to the currently
authorized Common Stock of the Company. Adoption of the Common Stock Amendment
and the issuance of Common Stock would not affect the rights of the holders of
currently outstanding Common Stock of the Company, except for any dilutive
effects that existing holders of Common Stock may incur as a result of any
future issuance. The complete text of the Certificate of Amendment to the
Restated Certificate that would be filed with the office of the Secretary of
State of the State of Delaware to effect the Common Stock Amendment is set forth
in Exhibit A to this Proxy
6
Statement. If the Common Stock Amendment is approved by the stockholders, it
will become effective upon the filing of the Certificate of Amendment of the
Restated Certificate with the Secretary of State of the State of Delaware which
is expected to be effective as soon as practicable following the Annual Meeting.
As of November 21, 1997, of the 150,000,000 shares of Common Stock
presently authorized: 68,552,532 shares were issued and outstanding; under the
Company's 1991 Stock Option Plan (subject to stockholder approval of the
amendment thereof as discussed in Proposal 3), 7,488,960 shares remain available
for future option grants and 18,854,413 shares remain available for issuance
upon exercise of presently outstanding options; 2,732,691 shares remain
available for issuance under the Company's 1991 Employee Stock Purchase Plan
(subject to stockholder approval of the amendment thereof as discussed in
Proposal 4); 21,196 shares remain available for issuance under the Company's
1996 Non-Qualified Employee Stock Purchase Plan; under the Company's 1998
Non-Employee Directors' Stock Option Plan (subject to stockholder approval of
the amendment thereof as discussed in Proposal 5), 500,000 shares remain
available for future option grants (which includes 30,000 shares which remain
available under the Non-Employee Directors' Stock Option Plan and an additional
470,000 shares subject to approval under Proposal 5) and 570,000 shares remain
available for issuance upon exercise of presently outstanding options; 81,135
shares remain available for issuance under the Company's Executive Retirement
Matching Contribution Plan; 781,498 shares were reserved for issuance pursuant
to outstanding Warrants; 9,084,240 shares were reserved for issuance upon
conversion of the QUALCOMM Financial Trust I 5 3/4% Trust Convertible Preferred
Securities; and 41,333,335 shares were unissued and unreserved.
Vote Required. The affirmative vote of the holders of a majority of the
shares of the Common Stock outstanding on the Record Date will be required to
approve the Common Stock Amendment. As a result, abstentions and broker
non-votes will have the same effect as negative votes.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
PROPOSAL 3
APPROVAL OF THE 1991 STOCK OPTION PLAN, AS AMENDED
In August 1991, the Board of Directors adopted, and the stockholders
subsequently approved, the Company's 1991 Stock Option Plan (the "Option Plan")
authorizing the issuance of 9,000,000 shares of the Company's Common Stock. In
September 1993, November 1994, November 1995 and November 1996 the Board of
Directors approved, and the stockholders subsequently approved, amendments to
the Option Plan to increase the number of shares issuable to 13,000,000 shares,
17,000,000 shares, 23,000,000 shares and 28,400,000 shares, respectively.
In November 1997, the Board approved an amendment to the Option Plan,
subject to stockholder approval, to enhance the flexibility of the Company in
granting stock options under the Option Plan to the Company's employees and
consultants. The amendment increases the aggregate number of shares of Common
Stock authorized for issuance under such plan by 5,000,000 shares to a total of
33,400,000 shares. Prior to this amendment, as of November 16, 1997, an
aggregate of 25,890,650 shares of the Company's Common Stock had been granted
under the Option Plan (net of canceled or expired options), and 2,509,350 shares
(plus any shares that might in the future be returned to the Option Plan as a
result of cancellations or expirations of options) remained available for future
grant under the Option Plan.
The Company has been experiencing a period of significant growth in hiring
and the Company's management and Board of Directors believe that stock options
are a key aspect of the Company's ability to attract qualified engineering,
technical and other personnel in the face of an increasingly competitive hiring
environment. The Board increased the number of shares reserved for issuance
under the Option Plan to ensure that the Company is able to continue to grant
stock options to employees and consultants at levels determined appropriate by
the Board, the Compensation Committee and the Stock Option Committee. In the
event that this Proposal 3 is not approved by the stockholders, and as a
consequence the Company is unable to continue
7
to grant options at competitive levels, the Company's management believes that
it will negatively affect the Company's ability to manage future growth that may
require the hiring of additional highly qualified personnel.
The Board has full discretion to determine the number of options to be
granted to employees under the Option Plan, subject to an annual limitation on
the total number of options that may be granted to any employee. Details are
presented on stock options granted during the last three years to each of the
executive officers of the Company named in the Summary Compensation Table under
"Compensation of Executive Officers" (the "Named Executive Officers"). Over the
past three years, only 6% of option grants were awarded to the Company's Named
Executive Officers.
Vote Required. Stockholders are requested in this Proposal 3 to approve the
Option Plan, as amended. The affirmative vote of the holders of a majority of
the shares present in person or represented by proxy and entitled to vote at the
meeting will be required to approve the Option Plan, as amended. Abstentions
will be considered shares entitled to vote in the tabulation of votes cast on
proposals presented to the stockholders and will have the same effect as
negative votes. Broker non-votes are counted towards a quorum, but are not
counted for any purpose in determining whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 3.
The essential features of the Option Plan, as amended, are outlined below.
GENERAL
The Option Plan provides for the grant of both incentive and non-qualified
stock options. Incentive stock options granted under the Option 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"). The Company
has not granted incentive stock options since December 1988 and currently has no
outstanding incentive stock options. Non-qualified stock options granted under
the Option Plan are not intended to qualify as incentive stock options under the
Code. See "Tax Information" for a discussion of the tax treatment of incentive
and non-qualified stock options.
PURPOSE
The Option Plan was adopted to provide a means by which selected officers,
directors and employees of and consultants to the Company and its affiliates
could be given an opportunity to purchase stock in the Company, to assist in
retaining the services of employees holding key positions, to secure and retain
the services of persons capable of filling such positions and to provide
incentives for such persons to exert maximum efforts for the success of the
Company.
ADMINISTRATION
The Option Plan is administered by the Board of Directors. The Board has
the power to construe and interpret the Option Plan and, subject to the
provisions of the Option Plan, to determine the persons to whom and the dates on
which options will be granted, the number of shares to be subject to each
option, the time or times during the term of each option within which all or a
portion of such option may be exercised, the exercise price, the type of
consideration to be paid upon exercise of an option and other terms of the
option. The Board of Directors is authorized to delegate administration of the
Option Plan to a committee composed of not fewer than two members of the Board.
The Board has delegated administration of the Option Plan to the Compensation
Committee of the Board. The Board has also delegated administration of the
Option Plan to the Stock Option Committee of the Board with respect to option
grants to persons other than directors and corporate officers of the Company. As
used herein with respect to the Option Plan, the "Board" refers to the
Compensation Committee and the Stock Option Committee as well as to the Board of
Directors itself.
8
STOCK SUBJECT TO THE OPTION PLAN
If options granted under the Option Plan expire or otherwise terminate
without being exercised, the Common Stock not purchased pursuant to such options
again becomes available for issuance under the Option Plan.
ELIGIBILITY
Incentive stock options may be granted only to selected employees
(including corporate officers) of the Company and its affiliates. Non-qualified
stock options may be granted to selected employees (including corporate
officers), directors and consultants. As of November 21, 1997, approximately
6,133 persons were eligible to receive grants under the Option Plan.
No incentive stock options may be granted under the Option 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 affiliate of the Company, 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 5 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 Option Plan are exercisable for the first time by an optionee during
any calendar year (under all such plans of the Company and its affiliates) may
not exceed $100,000.
TERMS OF OPTIONS
The following is a description of the permissible terms of options under
the Option Plan. Individual option grants may be more restrictive as to any or
all of the permissible terms described below.
Exercise Price; Payment. The exercise price of incentive stock options
under the 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 non-qualified stock options may not be less than the fair
market value of the stock subject to the option on the date of the option grant.
At November 21, 1997, the closing price of the Company's Common Stock as
reported on the Nasdaq National Market was $69.63 per share. The exercise price
of options granted under the Option Plan must be paid either: (i) in cash at the
time the option is exercised; or (ii) at the discretion of the Board, (a) by
delivery of other Common Stock of the Company, (b) pursuant to a deferred
payment arrangement or (c) in any other form of legal consideration acceptable
to the Board.
Option Repricing. In the event of a decline in the value of the Company's
Common Stock, the Board has the authority to offer employees the opportunity to
replace outstanding higher priced options, whether incentive or non-qualified,
with new lower priced options. The Company has provided that opportunity to
employees (other than corporate officers) in the past only one time. The Board
can not reprice options of corporate officers or directors.
Option Exercise. Options granted under the Option Plan may become
exercisable in cumulative increments ("vest") as determined by the Board.
Options granted under the Option Plan generally are subject to vesting over a
5-year period, with a specified percentage of each option vesting on various
annual anniversary dates of the option's date of grant, provided that the
optionee has continuously provided services to the Company or an affiliate of
the Company from such date of grant until the applicable vesting date. In
connection with an option exchange program offered to employees (other than
corporate officers) in February 1994, the Company granted options subject to
vesting over 6 years with 20% vesting on each of the second, third, fourth,
fifth and sixth anniversaries of the date of grant. Shares covered by options
granted in the future under the Option Plan may be subject to different vesting
terms. The Board has the power to accelerate the time during which an option may
be exercised. In addition, options granted under the Option Plan may permit
exercise prior to vesting, but in such event the optionee may be required to
enter into an early exercise stock purchase agreement that allows the Company to
repurchase shares not yet vested at their exercise price should the optionee
leave the employ or cease to be a consultant of the Company before vesting.
9
Term. The maximum term of options under the Option Plan is ten years,
except that in certain cases (see "Eligibility") the maximum term is five years.
The Option Plan provides for earlier termination of an option due to the
optionee's cessation of service. Options under the Option Plan generally
terminate thirty (30) days after the optionee ceases to provide services to the
Company or any affiliate of the Company. However, in the event the optionee's
continuous service terminates due to the optionee's permanent and total
disability as defined in Section 22(e)(3) of the Code, then the option may
continue under its original terms if so provided in the option agreement. If the
optionee's continuous service terminates due to the death of the optionee or due
to the optionee's permanent and total disability and such termination due to
disability is followed by the death of the optionee, then the vesting of all
unvested shares may be accelerated as of the date of death of the optionee if so
provided in the option agreement. The Board has discretion to suspend and/or
extend the vesting and/or term of options granted to persons on leaves of
absence. Individual options by their terms may provide for exercise within a
longer period of time following termination of employment or the consulting
relationship.
RESTRICTIONS ON TRANSFER
Incentive stock options granted under the Option 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
only by such person. The Option Plan, as amended by the Board, provides that
non-qualified stock options shall be transferable by the optionee only upon such
terms and conditions as set forth in the option agreement as the Board shall
determine in its discretion. In addition, shares subject to repurchase by the
Company under an early exercise stock purchase agreement may be subject to
restrictions on transfer which the Board deems appropriate.
EFFECT OF CERTAIN CORPORATE EVENTS
If any change is made in the stock subject to the Option Plan or subject to
any option granted under the Option Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration of the Company), the Option Plan and options
outstanding thereunder will be appropriately adjusted as to the type(s) and the
maximum number of securities subject to such plan, the maximum number of
securities which may be granted to an employee in a particular calendar year and
the type(s), number of securities and price per share of stock subject to such
outstanding options.
In the event of a merger or consolidation in which the Company is not the
surviving corporation or a reverse merger in which the Company is the surviving
corporation but the shares of the Company's Common Stock outstanding prior to
the merger are converted into other property, then to the extent permitted by
law, any surviving corporation will be required to either assume options
outstanding under the Option Plan or substitute similar options for those
outstanding under such plan, or such outstanding options will continue in full
force and effect. In the event that any surviving corporation refuses to assume
or continue options outstanding under the Option Plan, or to substitute similar
options, then with respect to options held by persons then performing services
as employees, directors or consultants for the Company or any affiliate of the
Company, the time during which such options may be exercised will be accelerated
and the options terminated if not exercised prior to such event. In the event of
a dissolution or liquidation of the Company, any options outstanding under the
Option Plan will terminate if not exercised prior to such event.
In addition, the Option Plan provides that options held by any person who
is terminated for any reason other than cause within twenty-four (24) months
following a Change in Control will accelerate and immediately become fully
vested and exercisable, except if such potential acceleration would by itself
prohibit the Company from entering into a "pooling of interests" accounting
transaction.
10
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the Option Plan at any time. Unless
sooner terminated, the Option Plan will terminate on August 18, 2001.
The Board may also amend the Option Plan at any time or from time to time.
However, no amendment will be effective unless approved by the stockholders of
the Company within twelve (12) months before or after its adoption by the Board
if the amendment would: (i) increase the number of shares reserved for options
under the Option Plan; (ii) modify the requirements as to eligibility for
participation (to the extent such modification requires stockholder approval in
order for the Option Plan to satisfy Section 422 of the Code); or (iii) modify
the Option Plan in any other way if such modification requires stockholder
approval in order for the Option Plan to satisfy the requirements of Section 422
of the Code or to comply with the requirements of Rule 16b-3 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
FEDERAL INCOME TAX INFORMATION
Incentive Stock Options. Incentive stock options under the Option Plan are
intended to be eligible for the favorable federal income tax treatment accorded
"incentive stock options" under the Code.
There generally are no federal income tax consequences to the optionee or
the Company by reason of the grant or exercise of an incentive stock option.
However, the exercise of an incentive stock option may increase the optionee's
alternative minimum tax liability, if any. The Company has not granted incentive
stock options since December 1988 and currently has no outstanding incentive
stock options.
Non-qualified Stock Options. Non-qualified stock options granted under the
Option Plan generally have the following federal income tax consequences:
There are no tax consequences to the optionee or the Company by reason of
the grant of a non-qualified stock option. Upon exercise of a non-qualified
stock option, the optionee will recognize taxable ordinary income equal to the
excess of the stock's fair market value on the date of exercise over the option
exercise price. Generally, with respect to employees, the Company is required to
withhold taxes in an amount based on the ordinary income recognized. Subject to
the requirement of reasonableness and the satisfaction of a tax-reporting
obligation, the Company generally will be entitled to a business expense
deduction equal to the taxable ordinary income realized by the optionee. Upon
disposition of the stock, the optionee will recognize a capital gain or loss
equal to the difference between the selling price and the sum of the amount paid
for such stock plus any amount recognized as ordinary income upon exercise of
the option. Such gain or loss will be: (i) long-term if the stock was held for
more than eighteen (18) months, (ii) mid-term if the stock was held for more
than twelve (12) months but not more than eighteen (18) months or (iii)
short-term if the stock was not held more than twelve (12) months. Slightly
different rules may apply to optionees who acquire stock subject to certain
repurchase options or who are subject to Section 16(b) of the Exchange Act.
Potential Limitation on Company Deductions. In 1993, Code Section 162(m)
was adopted, which denies a deduction to any publicly held corporation for
compensation paid to certain employees in a taxable year to the extent that
compensation exceeds $1,000,000 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 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 Treasury regulations issued under Section 162(m),
compensation attributable to stock options will qualify as performance-based
compensation, provided that: either (a)(i) the option plan contains a
per-employee limitation on the number of shares for which options 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 is no less than the fair market value of the stock
on the date of grant; or (b) the option is granted by a Compensation Committee
comprised solely of "outside directors" and is granted (or exercisable) only
upon the achievement (as certified in writing by the
11
Compensation Committee) of an objective performance goal established by the
Compensation Committee while the outcome is substantially uncertain and approved
by the stockholders.
For the aforementioned reasons, the Company's Option Plan was amended to
provide for an annual per employee limitation as required under Section 162(m).
Such limit was approved by the stockholders in February 1995. Because the
Company's Compensation Committee is comprised solely of "outside directors,"
options granted by such committee will qualify as "performance-based
compensation." The Stock Option Committee is not comprised solely of "outside
directors;" consequently, options granted by the Stock Option Committee will not
qualify as "performance-based compensation."
Other Tax Consequences. The foregoing discussion is intended to be a
general summary only of the federal income tax aspects of options granted under
the Option 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 Option 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.
PROPOSAL 4
APPROVAL OF THE 1991 EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED
In August 1991, the Board of Directors adopted, and the stockholders
subsequently approved, the Company's 1991 Employee Stock Purchase Plan (the
"Purchase Plan") authorizing the issuance of 1,000,000 shares of the Company's
Common Stock. In November 1995, the Board of Directors approved, and the
stockholders subsequently approved, an amendment to the Purchase Plan to
increase the number of shares issuable to 2,000,000 shares. Prior to the
amendment by the Board to increase the number of shares issuable under the
Purchase Plan as discussed below, as of November 16, 1997, an aggregate of
1,467,309 shares had been issued, at prices ranging from $6.80 to $36.55 per
share under the Purchase Plan and only 532,691 shares remained available for the
grant of future rights under the Plan.
In November 1997, the Board approved an amendment to the Purchase Plan,
subject to stockholder approval, to increase the number of shares authorized for
issuance under the Purchase Plan from a total of 2,000,000 shares to 4,200,000
shares. This amendment is intended to afford the Company greater flexibility in
providing employees with stock incentives and ensures that the Company can
continue to provide such incentives at levels determined appropriate by the
Board.
Vote Required. Stockholders are requested in this Proposal 4 to approve the
Purchase Plan, as amended. The affirmative vote of the holders of a majority of
the shares present in person or represented by proxy and entitled to vote at the
meeting will be required to approve the Purchase Plan, as amended. Abstentions
will be considered shares entitled to vote in the tabulation of votes cast on
proposals presented to the stockholders and will have the same effect as
negative votes. Broker non-votes are counted towards a quorum, but are not
counted for any purpose in determining whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 4.
The essential features of the Purchase Plan, as amended, are outlined
below.
PURPOSE
The purpose of the Purchase Plan is to provide a means by which employees
of the Company (and any parent or subsidiary of the Company designated by the
Board of Directors to participate in the Purchase Plan (an "Affiliate")) may be
given an opportunity to purchase Common Stock of the Company through payroll
deductions, to assist the Company in retaining the services of its employees, to
secure and retain the services
12
of new employees and to provide incentives for such persons to exert maximum
efforts for the success of the Company.
The rights to purchase Common Stock granted under the Purchase Plan are
intended to qualify as options issued under an "employee stock purchase plan" as
that term is defined in Section 423(b) of the Code.
ADMINISTRATION
The Purchase Plan is administered by the Board of Directors, which has the
final power to construe and interpret the Purchase Plan and the rights granted
under it. The Board has the power, subject to the provisions of the Purchase
Plan, to determine when and how rights to purchase Common Stock of the Company
will be granted, the provisions of each offering of such rights (which need not
be identical), and whether any parent or subsidiary of the Company shall be
eligible to participate in such plan. The Board of Directors is authorized to
delegate administration of the Purchase Plan to a committee composed of not
fewer than two members of the Board. The Board has delegated administration of
the Purchase Plan to the Compensation Committee of the Board. As used herein
with respect to the Purchase Plan, the "Board" refers to the Compensation
Committee as well as to the Board of Directors itself. The Board may abolish any
such committee at any time and revest in the Board the administration of the
Purchase Plan.
STOCK SUBJECT TO THE PURCHASE PLAN
If rights granted under the Purchase Plan expire, lapse or otherwise
terminate without being exercised, the Common Stock not purchased under such
rights again becomes available for issuance under such plan.
OFFERINGS
The Purchase Plan is implemented by offerings of rights to all eligible
employees from time to time by the Board. Generally, each such offering has been
for 6 months' duration. The Board has discretion to change the length of
offerings under the Purchase Plan.
ELIGIBILITY
Any person who has been in the employ of the Company for at least 90 days
and is customarily employed at least twenty hours per week and five months per
calendar year by the Company (or by any Affiliate), on the first day of an
offering period, is generally eligible to participate in that offering under the
Purchase Plan. The Board may provide that officers of the Company who are
"highly compensated" as defined in the Code are not eligible to be granted
rights under an offering.
Notwithstanding the foregoing, no employee is eligible for the grant of any
rights under the Purchase Plan if, immediately after such grant, the employee
would own, directly or indirectly, stock possessing 5% or more of the total
combined voting power or value of all classes of stock of the Company or a
parent or subsidiary of the Company (including any stock which such employee may
purchase under all outstanding rights and options), nor will any employee be
granted rights that would permit him to buy more than $25,000 worth of stock
(determined based on the fair market value of the shares at the time such rights
are granted) under all employee stock purchase plans of the Company in any
calendar year.
PARTICIPATION IN THE PURCHASE PLAN
Eligible employees become participants in the Purchase Plan by delivering
to the Company, prior to the date selected by the Board as the offering date for
the offering, an agreement authorizing payroll deductions of up to 15% of such
employees' base compensation during the purchase period.
PURCHASE PRICE
The purchase price per share at which shares are sold in an offering under
the Purchase Plan cannot be less than the lower of (i) 85% of the fair market
value of a share of Common Stock on the date of
13
commencement of the offering or (ii) 85% of the fair market value of a share of
Common Stock on the date of purchase.
PAYROLL DEDUCTIONS
The purchase price of the shares is accumulated by payroll deductions over
the offering period. A participant may increase or reduce his or her payroll
deductions during the course of an offering only to the extent permitted under
the terms of the offering. Generally, a participant may not increase payroll
deductions after the beginning of any purchase period, but may decrease his or
her participation percentage at any time but on no more than one occasion during
the course of the offering. Notwithstanding the foregoing, a participant may
reduce his or her participation percentage to zero or withdraw from an offering
at any time during the course of the offering. All payroll deductions made for a
participant are credited to his or her account under the Purchase Plan and
deposited with the general funds of the Company.
PURCHASE OF STOCK
By executing an agreement to participate in the Purchase Plan, an eligible
employee is entitled to purchase shares under the Purchase Plan. In connection
with offerings made under the Purchase Plan, the Board specifies a maximum
number of shares any employee may be granted the right to purchase. If the
aggregate number of shares to be purchased upon exercise of rights granted in
the offering would exceed the maximum aggregate number of shares available for
issuance under the Purchase Plan, the Board would make a pro rata allocation of
shares available in a uniform and equitable manner. Unless the employee's
participation is discontinued, his or her right to purchase shares is exercised
automatically at each exercise date designated by the Board at the applicable
price. See "Withdrawal" below.
WITHDRAWAL
While each participant in the Purchase Plan is required to sign an
agreement authorizing payroll deductions, the participant may withdraw from a
given offering by terminating his or her payroll deductions and by delivering a
notice of withdrawal from the Purchase Plan to the Company. Such withdrawal may
be elected at any time prior to the end of the applicable offering except as
provided by the Board or the Committee in the offering.
Upon any withdrawal from an offering by the employee, the Company will
distribute to the employee his or her accumulated payroll deductions without
interest, and such employee's interest in the offering will be automatically
terminated. The employee is not entitled to again participate in such offering.
An employee's withdrawal from an offering will not have any effect upon such
employee's eligibility to participate in subsequent offerings under the Purchase
Plan.
TERMINATION OF EMPLOYMENT
Rights granted pursuant to any offering under the Purchase Plan terminate
immediately upon cessation of an employee's employment for any reason, and the
Company will distribute to such employee all of his or her accumulated payroll
deductions, without interest.
RESTRICTIONS ON TRANSFER
Rights granted under the Purchase Plan are not transferable and may be
exercised only by the person to whom such rights are granted.
EFFECT OF CERTAIN CORPORATE EVENTS
If any change is made in the stock subject to the Purchase Plan, or any
rights granted under the Purchase Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the Purchase Plan and
outstanding rights will be appropriately adjusted in
14
the class and maximum number of shares subject to the Purchase Plan and the
class, number of shares and price per share of stock subject to outstanding
rights.
In the event of a dissolution or liquidation of the Company, a merger or
consolidation in which the Company is not the surviving corporation, a reverse
merger in which the Company is the surviving corporation but the shares of the
Company's Common Stock are converted into other property or any other capital
reorganization in which more than fifty percent (50%) of the shares of the
Company entitled to vote are exchanged, then, as determined by the Board in its
sole discretion (i) any surviving corporation may assume outstanding rights or
substitute similar rights for those under the Purchase Plan, (ii) such rights
may continue in full force and effect or (iii) participants' accumulated payroll
deductions may be used to purchase Common Stock immediately prior to the
transaction described above and the participants' rights under the ongoing
offering terminated.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the Purchase Plan at any time. Unless
sooner terminated, the Purchase Plan will terminate on August 18, 2001.
The Board may also amend the Purchase Plan at any time or from time to
time. However, no amendment will be effective unless approved by the
stockholders of the Company within twelve (12) months before or after its
adoption by the Board if the amendment would: (i) increase the number of shares
reserved for issuance under the Purchase Plan; (ii) modify the requirements as
to eligibility for participation in the Purchase Plan (to the extent such
modification requires stockholder approval in order for the Plan to obtain
employee stock purchase plan treatment under Section 423 of the Code or to
comply with the requirements of Rule 16b-3); or (iii) modify the Purchase Plan
in any other way if such modification requires stockholder approval in order for
the Purchase Plan to obtain employee stock purchase plan treatment under Section
423 of the Code or to comply with the requirements of Rule 16b-3.
Rights granted before amendment or termination of the Purchase Plan will
not be altered or impaired by any amendment or termination of such plan without
consent of the person to whom such rights were granted.
FEDERAL INCOME TAX INFORMATION
Rights granted under the Purchase Plan are intended to qualify for
favorable federal income tax treatment associated with rights granted under an
employee stock purchase plan which qualifies under provisions of Section 423 of
the Code.
A participant will be taxed on amounts withheld for the purchase of shares
as if such amounts were actually received. Generally, other than this, no income
will be taxable to a participant until disposition of the shares acquired, and
the method of taxation will depend upon the holding period of the purchased
shares.
If the stock is disposed of at least two years after the first day of the
offering period and at least one year after the purchase date of the stock, then
the lesser of (i) the excess of the fair market value of the stock at the time
of such disposition over the purchase price of the stock or (ii) 15% of the fair
market value of the stock on the first day of the offering period, will be
treated as ordinary income. Any further gain, or any loss, will be taxed as a
longterm capital gain or loss if it was held for more than eighteen (18) months,
or mid-term capital gain or loss if it was held for more than twelve (12) months
but not more than eighteen (18) months.
If the stock is disposed of before the expiration of either of the holding
periods described above, then the excess of the fair market value of the stock
on the exercise date over the exercise price will be treated as ordinary income
at the time of such disposition. The balance of any gain or loss will be treated
as capital gain or loss. Such gain or loss will be: (i) long-term if the stock
was held for more than eighteen (18) months, (ii) mid-term if the stock was held
for more than twelve (12) months but not more than eighteen (18) months or (iii)
short-term if the stock was not held more than twelve (12) months. Even if the
stock is later disposed of for less than its fair market value on the exercise
date, the same amount of ordinary income is attributed to the participant, and a
capital loss is recognized equal to the difference between the sales price and
the fair market value of the stock on such exercise date.
15
There are no federal income tax consequences to the Company by reason of
the grant or exercise of rights under the Purchase Plan. The Company is entitled
to a deduction to the extent amounts are taxable as ordinary income to a
participant by reason of a disposition before the expiration of the holding
periods described above (subject to the requirement of reasonableness, the
provisions of Section 162(m) of the Code, and, perhaps, in the future, the
satisfaction of a withholding or tax reporting obligation).
Other Tax Consequences. The foregoing discussion is intended to be a
general summary only of the federal income tax aspects of rights granted under
the Purchase 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 Purchase 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.
PROPOSAL 5
APPROVAL OF THE 1998 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
In November 1997, the Board of Directors adopted, subject to stockholder
approval, the Company's 1998 Non-Employee Directors' Stock Option Plan (the
"1998 Directors' Plan") as an amendment and restatement of the Company's
existing Non-Employee Directors' Stock Option Plan (the "Prior Directors'
Plan"). In the event stockholder approval is not obtained, the Prior Directors'
Plan will continue to remain effective under the terms and conditions set forth
in such plan immediately prior to the amendment and restatement.
Vote Required. Stockholders are requested in this Proposal 5 to approve the
1998 Directors' Plan. The affirmative vote of the holders of a majority of the
shares present in person or represented by proxy and entitled to vote at the
meeting will be required to approve the 1998 Directors' Plan. Abstentions will
be considered shares entitled to vote in the tabulation of votes cast on
proposals presented to the stockholders and will have the same effect as
negative votes. Broker non-votes are counted towards a quorum, but are not
counted for any purpose in determining whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 5.
The essential features of the 1998 Directors' Plan are outlined below.
GENERAL
The 1998 Directors' Plan provides for the grant of non-qualified stock
options to "Non-Employee Directors" (defined below in "Eligibility") of the
Company. Such options granted under the 1998 Directors' Plan are intended not to
qualify as incentive stock options under the Code. See "Tax Information" for a
discussion of the tax treatment of non-qualified stock options.
PURPOSE
The 1998 Directors' Plan was adopted to provide a means by which
Non-Employee Directors will be given an opportunity to purchase stock of the
Company and to assist in retaining the services of such persons as members of
the Board of Directors of the Company.
ADMINISTRATION
The 1998 Directors' Plan is administered by the Board of Directors. The
Board has the power to construe and interpret the 1998 Directors' Plan. The
Board of Directors is authorized to delegate administration of the 1998
Directors' Plan to a committee composed of not fewer than two members of the
Board. As of the date of
16
this Proxy Statement, the Board has not delegated administration of the 1998
Directors' Plan to any committee.
STOCK SUBJECT TO THE 1998 DIRECTORS' PLAN
500,000 shares will be reserved for issuance, of which 470,000 shares are
subject to stockholder approval pursuant to this Proposal 5. If options granted
under the 1998 Directors' Plan (including options granted prior to this
amendment and restatement) expire or otherwise terminate without being
exercised, the Common Stock not purchased pursuant to such options again becomes
available for issuance under the 1998 Directors' Plan.
ELIGIBILITY
Stock options will be granted under the 1998 Directors' Plan only to
directors of the Company who are not otherwise employees of the Company or any
affiliate of the Company ("Non-Employee Directors"). As of November 21, 1997,
there were ten (10) Non-Employee Directors.
NON-DISCRETIONARY GRANTS
The 1998 Directors' Plan provides for (i) a one-time, non-discretionary
grant to each Non-Employee Director of an option to purchase 20,000 shares of
the Company's Common Stock, effective upon the election of such person for the
first time to serve as a Non-Employee Director of the Company (an "Initial
Option") and (ii) an annual grant to be issued at the time of each annual
meeting, to each Non-Employee Director who continues to serve as such, of an
option to purchase 10,000 shares of the Company's Common Stock (an "Annual
Option").
TERMS OF OPTION
Exercise Price; Payment. The exercise price of options granted under the
1998 Directors' Plan is equal to the fair market value of the Common Stock
subject to the option on the date of the grant. The exercise price of options
granted under the 1998 Directors' Plan must be paid either: (i) in cash at the
time the option is exercised, or (ii) at the discretion of the Board, (a) by
delivery of other Common Stock of the Company or (b) in any other form of legal
consideration acceptable to the Board.
Option Exercise. Initial Options for Non-Employee Directors granted
pursuant to the initial election of the optionee to the Board at an annual
meeting of stockholders and all Annual Options (regardless of the date on which
the Non-Employee Director commenced Board service) granted under the 1998
Directors' Plan vest over 5 years 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
January 15 of each of the first, second, third, fourth and fifth years following
the date of grant. Initial Options for Non-Employee Directors granted pursuant
to the initial election of the optionee to the Board at some time other than at
an annual meeting of the stockholders of the Company will vest over 5 years
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.
Term. The term of all options under the 1998 Directors' Plan is ten years,
provided; however, such options terminate 30 days after the optionee ceases to
be a Non-Employee Director, employee or consultant. In the event that an
optionee ceases to be a Non-Employee Director, employee or consultant due to the
optionee's (i) retirement at age seventy (70) or older after nine (9) years of
service on the Board 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 ceases to be a Non-Employee
Director, employee or consultant due to the optionee's death or due to the
optionee's termination due to permanent and total disability when such
termination due to disability is followed by death, the vesting of all unvested
shares will be accelerated to such date and the option may be exercised in full
at any time within one year of such termination.
17
RESTRICTIONS ON TRANSFER
The 1998 Directors' Plan provides that options shall be transferable by the
optionee only upon such terms and conditions as set forth in the option
agreement as the Board shall determine in its discretion. In addition, shares
subject to repurchase by the Company under an early exercise stock purchase
agreement may be subject to restrictions on transfer which the Board deems
appropriate.
EFFECT OF CERTAIN CORPORATE EVENTS
If any change is made in the stock subject to the 1998 Directors' Plan or
subject to any option granted under the 1998 Directors' Plan (through merger,
consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration of the
Company), the 1998 Directors' Plan and options outstanding thereunder will be
appropriately adjusted as to the type(s) and the maximum number of securities
subject to such plan, the maximum number of securities which may be granted to
an employee in a particular calendar year and the type(s), number of securities
and price per share of stock subject to such outstanding options.
In the event of: (1) a dissolution or liquidation of the Company, (2) the
sale of all or substantially all of the Company's assets, (3) a merger,
consolidation or reorganization of the Company with or into another corporation
or other legal person, other than a merger, consolidation or reorganization in
which more than fifty percent (50%) of the combined voting power of the
then-outstanding securities of the surviving entity (or if more than one entity
survives the transaction, the controlling entity) immediately after such a
transaction are held in the aggregate by holders of voting securities of the
Company immediately prior to such transaction, (4) the acquisition by any person
of beneficial ownership of securities representing fifty percent (50%) or more
of the combined voting power of the then-outstanding securities of the Company,
or (5) individuals who at the beginning of any consecutive two-year period
constitute the directors of the Company ceasing for any reason to constitute at
least a majority thereof (collectively, a "Change in Control"), then: (i) any
surviving or acquiring corporation shall assume options outstanding under the
Plan or shall substitute similar options or (ii) in the event any surviving or
acquiring corporation refuses to assume such options or to substitute similar
options for those outstanding under the Plan, then (A) with respect to options
held by persons then performing services as directors, employees or consultants,
the vesting of such options and the time during which such options may be
exercised shall be accelerated prior to such event and the options terminated if
not exercised after such acceleration and at or prior to such event, and (B)
with respect to any other options outstanding under the 1998 Directors' Plan,
such options shall be terminated if not exercised prior to such event.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the 1998 Directors' Plan at any time.
Unless sooner terminated, the 1998 Directors' Plan will terminate on February 9,
2113.
The Board may also amend the 1998 Directors' Plan at any time or from time
to time. However, except with respect to certain amendments relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary for the 1998 Directors' Plan to satisfy the requirements of Rule
16b-3, any requirements of Section 144 of the Delaware General Corporation Law,
or any Nasdaq National Market or securities exchange listing requirements.
FEDERAL INCOME TAX INFORMATION
Non-qualified Stock Options. Options granted under the 1998 Directors' Plan
are intended to be treated as non-qualified stock options and are not intended
to be eligible for the favorable federal income tax treatment accorded
"incentive stock options" under the Code. Non-qualified stock options granted
under the 1998 Directors' Plan generally have the following federal income tax
consequences:
18
There are no tax consequences to the optionee or the Company by reason of
the grant of a non-qualified stock option. Upon exercise of a non-qualified
stock option, the optionee will recognize taxable ordinary income equal to the
excess of the stock's fair market value on the date of exercise over the option
exercise price. Subject to the requirement of reasonableness, the Company will
be entitled to a business expense deduction equal to the taxable ordinary income
realized by the optionee. Upon disposition of the stock, the optionee will
recognize a capital gain or loss equal to the difference between the selling
price and the sum of the amount paid for such stock plus any amount recognized
as ordinary income upon exercise of the option. Such gain or loss will be: (i)
long-term if the stock was held for more than eighteen (18) months, (ii)
mid-term if the stock was held for more than twelve (12) months but not more
than eighteen (18) months or (iii) short-term if the stock was not held more
than twelve (12) months. Slightly different rules may apply to optionees who
acquire stock subject to certain repurchase options or who are subject to
Section 16(b) of the Exchange Act.
Other Tax Consequences. The foregoing discussion is intended to be a
general summary only of the federal income tax aspects of options granted under
the 1998 Directors' 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 1998 Directors' Plan who are residents of
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.
Each person who is currently serving as a Non-Employee Director immediately
following the Annual Meeting will receive an option grant to purchase 10,000
shares of Common Stock under the 1998 Directors' Plan. Accordingly, subject to
stockholder approval of this proposal, all Non-Employee Directors as a group
will be granted options under the 1998 Directors' Plan to purchase an aggregate
of 100,000 shares of Common Stock under the 1998 Directors' Plan, at a price
equal to the fair market value per share of the Common Stock on the date of the
Annual Meeting. Accordingly, it is expected that immediately following the
Annual Meeting, options to purchase an aggregate of 100,000 shares of Common
Stock will be outstanding under the 1998 Directors' Plan.
PROPOSAL 6
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Price Waterhouse LLP as the Company's
independent accountants for the fiscal year ending September 27, 1998 and has
further directed that management submit the selection of independent accountants
for ratification by the stockholders at the Annual Meeting. Price Waterhouse LLP
has audited the Company's financial statements since the Company commenced
operations in 1985. Representatives of Price Waterhouse 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.
Vote Required. Stockholder ratification of the selection of Price
Waterhouse LLP as the Company's independent accountants is not required by the
Company's Bylaws or otherwise. However, the Board is submitting the selection of
Price Waterhouse LLP to the stockholders for ratification as a matter of good
corporate practice. If the stockholders fail to ratify the selection, the Board
and the Audit Committee will reconsider whether or not to retain that firm. Even
if the selection is ratified, the Board and 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.
The affirmative vote of the holders of a majority of the shares represented
and voting at the meeting will be required to ratify the selection of Price
Waterhouse LLP.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 6.
19
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of November 21, 1997, by: (i) each director and
nominee for director; (ii) each of the Named Executive Officers; (iii) all
executive officers and directors of the Company as a group; and (iv) all those
known by the Company to be beneficial owners of more than five percent of its
Common Stock.
BENEFICIAL
OWNERSHIP(1)
--------------------
PERCENT
NUMBER OF OF
NAME OF BENEFICIAL OWNER SHARES TOTAL
------------------------------------------------ --------- ------
Irwin Mark Jacobs(2)(14)........................ 3,024,508 4.40%
Andrew J. Viterbi(3)(14)........................ 1,922,971 2.80%
Harvey P. White(4)(14).......................... 474,583 *
Richard Sulpizio(5)(14)......................... 86,433 *
Anthony S. Thornley(14)......................... 36,313 *
Richard C. Atkinson(6)(14)...................... 206,032 *
Adelia A. Coffman(7)(14)........................ 241,160 *
Neil Kadisha(8)(14)............................. 1,542,294 2.25%
Robert E. Kahn.................................. 0 --
Jerome S. Katzin(9)(14)......................... 237,334 *
Duane A. Nelles(10)(14)......................... 40,500 *
Peter M. Sacerdote(11)(14)...................... 75,000 *
Frank Savage.................................... 0 --
Brent Scowcroft(14)............................. 27,000 *
Marc I. Stern(12)(14)........................... 26,000 *
All Executive Officers and Directors as a Group
(24 persons)(13)(14).......................... 9,000,334 12.94%
- ---------------
* Less than 1%
(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G filed with the Securities
and Exchange Commission (the "Commission"). Unless otherwise indicated in
the footnotes to this table and subject to marital property laws where
applicable, 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 68,552,532 shares outstanding on
November 21, 1997, adjusted as required by rules promulgated by the
Commission.
(2) Includes 2,641,554 shares held in family trusts and 144,954 shares held in
trusts for the benefit of relatives, as to which Dr. Jacobs disclaims
beneficial ownership.
(3) Includes 1,582,738 shares held in family trusts and 249,800 shares held in
trusts for the benefit of relatives, as to which Dr. Viterbi disclaims
beneficial ownership.
(4) Includes 330,158 shares held in family trusts, 1,000 shares held in a
charitable remainder trust, and 24,425 shares held in trusts for the
benefit of relatives.
(5) Includes 4,433 shares held in family trusts.
(6) Includes 5,000 shares held in a foundation of which Dr. Atkinson disclaims
beneficial ownership. Also includes 115,952 shares held in family trusts,
51,000 shares held in a pension plan trust for the benefit of employees of
a business operated by Dr. Atkinson and 4,080 shares held in trust for the
benefit of relatives.
(7) Includes 190,960 shares held in family trusts.
(8) Includes 63,348 shares held in trust as to which Mr. Kadisha disclaims
beneficial ownership.
20
(9) Includes 172,266 shares held in family trusts and 35,068 shares held in
trust for the benefit of Mr. Katzin's grandchildren of which Mr. Katzin's
wife is the trustee.
(10) Includes 500 shares held by Mr. Nelles' children.
(11) Includes 25,000 shares held in a foundation of which Mr. Sacerdote
disclaims beneficial ownership.
(12) Includes 2,000 shares held in family trusts.
(13) Includes 100 shares held as custodian for the benefit of an executive
officer, 2,812 shares held by executive officers' spouses and 1,000 shares
held for the benefit of an executive officer's children.
(14) Includes shares issuable upon exercise of options exercisable within 60
days of November 21, 1997 as follows: Dr. Jacobs, 238,000 shares; Dr.
Viterbi, 86,000 shares; Mr. White, 119,000 shares; Mr. Sulpizio, 82,000
shares; Mr. Thornley, 36,000 shares; Dr. Atkinson, 30,000 shares; Ms.
Coffman, 50,200 shares (including 2,200 shares subject to options held by
Ms. Coffman's husband); Mr. Kadisha, 30,000 shares; Mr. Katzin, 30,000
shares; Mr. Nelles, 30,000 shares; Mr. Sacerdote, 30,000 shares; Mr.
Scowcroft, 24,000 shares; Mr. Stern, 24,000 shares; all directors and
executive officers as a group, 991,400 shares (including 10,000 shares
subject to options held by executive officers' spouses).
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten percent of a registered
class of the Company's equity securities to file with the Commission 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 Commission regulations to
furnish the Company with copies of all Section 16(a) forms they file.
To the Company's 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 28, 1997, all
Section 16(a) filing requirements applicable to its officers, directors and
greater-than-ten-percent beneficial owners were complied with; except that one
report, covering an increase in ownership held in trusts for the benefit of Dr.
Jacobs' family members, of which Dr. Jacobs disclaims beneficial ownership, will
be filed late by Dr. Jacobs.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Each Non-Employee Director of the Company receives (i) a fee of $1,500 for
each Board meeting attended, (ii) a fee of $750 for each Board meeting in which
such director participates by telephone, (iii) except when held on the same day
as a Board meeting, a fee of $750 for each Board Committee meeting attended and
(iv) a fee of $400 for each Board Committee meeting in which such director
participates by telephone. Effective February 10, 1998, each Non-Employee
Director will receive (i) a fee of $1,000 for each Board meeting attended, (ii)
a fee of $500 for each Board meeting in which such director participates by
telephone, (iii) except when held on the same day as a Board meeting, a fee of
$1,000 for each Board Committee meeting attended, (iv) except for the Nominating
Committee, a fee of $2,500 per annum for the Chairperson of each Board Committee
and (v) a fee of $500 for each Board Committee meeting in which such director
participates by telephone. In the fiscal year ended September 28, 1997, the
total amount of such compensation paid to Non-Employee Directors was
approximately $166,000. 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 committees of the
Board of Directors meetings. Employee directors do not receive any compensation
for their participation in Board or Board Committee meetings.
Non-Employee Directors of the Company were eligible to receive stock option
grants under the Company's Prior Directors' Plan following their initial
election to serve on the Board. If the 1998 Directors' Plan is approved by the
stockholders, as more fully described in Proposal 5, the Prior Directors' Plan
will be
21
terminated and Non-Employee Directors will become eligible to receive stock
option grants under only the 1998 Directors' Plan. Only Non-Employee Directors
are eligible to receive options under the Prior Directors' Plan or the 1998
Directors' Plan.
The Prior Directors' Plan provided for a one-time grant to each
Non-Employee Director of an option to purchase 60,000 shares of the Company's
Common Stock, effective upon the initial election of such person for the first
time to serve as a Non-Employee Director. The 1998 Directors' Plan will provide
for Initial Option grants to persons upon first joining the Board and Annual
Option grants to Non-Employee Directors who continue to serve on the Board. See
Proposal 5, Non-Discretionary Grants.
Options granted on or after November 18, 1996 under the Prior Directors'
Plan, as amended by the Board of Directors, vest over 5 years 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. Options granted under the Prior Directors'
Plan prior to November 18, 1996 vest over 5 years according to the following
schedule: So long as the optionee continues to serve as a Non-Employee Director
(or, as such options have been amended by the Board, as an employee of or
consultant to the Company), 20% of the shares subject to the option will vest on
each of the second, third and fourth anniversaries of the date of grant, and the
remaining 40% of such shares will vest on the fifth anniversary of the date of
grant. The term of all options under the Prior Directors' Plan is ten years, but
such options expire 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), unless the termination is due to such person's
death or permanent and total disability (as defined in the Code), in which case
the option may, but need not, provide that it may be exercised at any time
within one year of such termination, but only to the extent the option was
exercisable at the time of such termination.
If any change is made in the stock subject to the Prior Directors' Plan, or
subject to any option granted thereunder, the Prior Directors' Plan and options
outstanding thereunder will be appropriately adjusted as to the type(s) and
maximum number of securities subject to the such Plan and the type(s), number of
securities and price per share of stock subject to such outstanding options.
During the fiscal year which ended September 28, 1997, upon his election to
the Board in February 1997, Dr. Kahn was granted options to purchase 60,000
shares of Common Stock pursuant to the Prior Directors' Plan. As of November 21,
1997, no options had been exercised under the Prior Directors' Plan.
22
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY OF COMPENSATION
The following table shows, for each of the three fiscal years ended
September 28, 1997, compensation awarded or paid to, or earned by the Named
Executive Officers:
LONG-TERM
ANNUAL COMPENSATION ALL
COMPENSATION(1) SECURITIES OTHER
--------------------- UNDERLYING COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(#) SATION(2)
- ---------------------------------------- ----- -------- -------- ------------ ---------
Irwin Mark Jacobs....................... 1997 $538,394 $500,667 0 $55,458
Chairman of the Board and 1996 $476,477 $200,000 215,000 $46,706
Chief Executive Officer 1995 $390,992 $250,000 75,000 $ 5,082
Harvey P. White......................... 1997 $395,713 $250,000 0 $37,011
President 1996 $354,963 $100,000 85,000 $34,437
1995 $297,462 $150,000 60,000 $ 4,654
Richard Sulpizio........................ 1997 $340,411 $225,000 100,000 $20,981
Executive Vice-President and 1996 $277,702 $100,000 80,000 $ 3,386
Chief Operating Officer 1995 $223,486 $110,000 30,000 $ 3,329
Andrew J. Viterbi....................... 1997 $348,070 $201,600 0 $33,211
Vice Chairman of the Board 1996 $308,594 $100,800 85,000 $29,903
1995 $266,032 $110,000 45,000 $ 4,544
Anthony S. Thornley..................... 1997 $284,638 $150,000 0 $25,239
Executive Vice-President and 1996 $251,098 $ 85,000 55,000 $15,730
Chief Financial Officer 1995 $221,962 $ 75,000 10,000 $ 3,394
- ---------------
(1) As permitted by rules established by the Commission, no amounts are shown
with respect to certain "perquisites" where such amounts do not exceed the
lesser of 10% of bonus plus salary or $50,000.
(2) Includes Company matching 401(k) contributions, executive benefits payments
and executive retirement stock matching as follows:
COMPANY
MATCHING EXECUTIVE EXECUTIVE
401(K) BENEFITS RETIREMENT TOTAL OTHER
NAME YEAR CONTRIBUTIONS PAYMENTS CONTRIBUTIONS(1) COMPENSATION
- ---------------------------------------- ----- ------------- --------- ---------------- ------------
Irwin Mark Jacobs....................... 1997 $ 2,145 $ 2,948 $ 50,365 $ 55,458
1996 $ 2,191 $ 2,948 $ 41,567 $ 46,706
1995 $ 2,134 $ 2,948 $ 0 $ 5,082
Harvey P. White......................... 1997 $ 2,145 $ 2,520 $ 32,346 $ 37,011
1996 $ 2,191 $ 2,520 $ 29,726 $ 34,437
1995 $ 2,134 $ 2,520 $ 0 $ 4,654
Richard Sulpizio........................ 1997 $ 2,145 $ 1,195 $ 17,641 $ 20,981
1996 $ 2,191 $ 1,195 $ 0 $ 3,386
1995 $ 2,134 $ 1,195 $ 0 $ 3,329
Andrew Viterbi.......................... 1997 $ 2,145 $ 2,410 $ 28,656 $ 33,211
1996 $ 2,191 $ 2,410 $ 25,302 $ 29,903
1995 $ 2,134 $ 2,410 $ 0 $ 4,544
Anthony S. Thornley..................... 1997 $ 2,145 $ 1,260 $ 21,834 $ 25,239
1996 $ 2,191 $ 1,260 $ 12,279 $ 15,730
1995 $ 2,134 $ 1,260 $ 0 $ 3,394
- ---------------
(1) The Company has a voluntary retirement plan that allows eligible executives
to defer up to 100% of their income on a pre-tax basis. The participants
receive a 50% company stock match on a maximum deferral of 15% of income
payable only upon eligible retirement. Participants become fully vested in
the stock benefit at age 65 and may become partially vested earlier upon
reaching age 62 1/2 and completing ten years of employment with the Company.
The employee contributions and the stock benefit are unsecured
23
and subject to the general creditors of the Company. At September 28, 1997,
1,496 shares, 1,008 shares and 626 shares were vested on behalf of Irwin
Mark Jacobs, Harvey P. White and Andrew J. Viterbi, respectively.
1997 FISCAL YEAR STOCK OPTION GRANTS
The Company grants options to its executive officers under the Option Plan.
As of November 21, 1997, options to purchase a total of 25,911,040 shares had
been granted, 18,854,413 of which are presently outstanding and 7,056,627 of
which have been exercised under the Option Plan, and options to purchase
7,488,960 shares remained available for grant thereunder, including those
options subject to stockholder approval under Proposal 3.
The following tables show for the fiscal year ended September 28, 1997
certain information regarding options granted to, exercised by and held at year
end by the Named Executive Officers:
NUMBER OF POTENTIAL REALIZABLE
SECURITIES % OF TOTAL VALUE AT ASSUMED
UNDERLYING OPTIONS INDIVIDUAL GRANTS ANNUAL RATES OF STOCK
OPTIONS GRANTED TO --------------------- OPTION TERM(2)
GRANTED EMPLOYEES IN EXERCISE EXPIRATION -----------------------
NAME (#)(1) FISCAL YEAR(%) PRICE($) DATE 5% 10%
- ------------------------------- --------- -------------- -------- ---------- ---------- ----------
Richard Sulpizio............... 100,000 2.4% $52.50 9/18/07 $3,301,697 $8,367,148
- ---------------
(1) Mr. Sulpizio was the only Named Executive Officer that received a stock
option grant during the fiscal year ended September 28, 1997. Such options
vest according to the following schedule: 20% vest on each of the first,
second, third, fourth and fifth anniversaries of the date of grant.
(2) Calculated on the assumption that the market value of the underlying stock
increases at the stated values, compounded annually. Options granted under
the Option Plan generally have a maximum term of ten years. The total
appreciation of the options over their ten year terms at 5% and 10% is 63%
and 159%, respectively.
1997 FISCAL YEAR OPTION EXERCISES AND YEAR-END OPTION VALUES
SHARES NUMBER OF SECURITIES UNDERLYING
ACQUIRED UNEXERCISED OPTIONS HELD AT VALUE OF UNEXERCISED IN-THE-MONEY
ON VALUE SEPTEMBER 28, 1997 OPTIONS AT SEPTEMBER 28, 1997(1)
EXERCISE REALIZED --------------------------------- ---------------------------------
NAME (#) ($) EXERCISABLE(#) UNEXERCISABLE(#) EXERCISABLE($) UNEXERCISABLE($)
- -------------------- -------- ---------- -------------- ---------------- -------------- ----------------
Irwin Mark Jacobs... 0 $ 0 238,000 352,000 $5,615,850 $6,563,400
Harvey P. White..... 0 $ 0 119,000 176,000 $2,892,030 $3,618,120
Richard Sulpizio.... 25,560 $1,312,830 88,000 228,000 $2,198,640 $2,722,560
Andrew J. Viterbi... 0 $ 0 86,000 144,000 $2,011,710 $2,746,840
Anthony S.
Thornley.......... 5,000 $ 177,200 36,000 94,000 $ 904,500 $2,008,500
- ---------------
(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 value per share was $56.06 on the last trading
day of the fiscal year as reported on the Nasdaq National Market.
24
REPORT OF THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION (1)
OVERVIEW AND PHILOSOPHY
The Company's Compensation Committee (the "Committee") is composed of three
outside directors, Chairman Jerome S. Katzin and Messrs. Duane A. Nelles and
Marc I. Stern. Among other responsibilities, the Committee reviews and approves
annual executive officer compensation. In general, the compensation policies
adopted by the Committee continue to be designed to: (i) attract and retain
executives capable of leading the Company to meet its business objectives and
(ii) motivate the Company's executives to enhance long-term stockholder value.
EXECUTIVE OFFICER COMPENSATION
The Company's executive officer compensation program is comprised of base
salary, annual cash incentive compensation in the form of a cash bonus and
long-term incentive compensation in the form of stock option grants.
The Committee has access to a number of recognized executive management and
compensation studies(2). These form the basis for arriving at judgment decisions
as to the appropriate levels of executive compensation for the Company. In
general, the Committee attempts to set annual executive cash compensation (base
salary and bonus) and provide option grants at levels above the median levels
contained in such studies, adjusted for the size of the Company, its stage of
development, the highly competitive and innovative nature of the
telecommunications industry and the level of responsibility, experience,
performance and contribution of each executive officer to the Company's growth
and profitability. In addition, fiscal 1997 was another year of significant
achievement in all aspects of the Company's business. This considerable record
was a dominant factor in the Company's decision on salaries, bonuses and stock
options for executive officers of the Company. Our purpose is to attract and
retain the best and most talented people.
Base Salary
Over the past few years the Committee has moved executive officer base
salary to competitive levels relative to the various markets from which the
Company attracts executive talent. Competition for senior level talent in the
wireless communications industries continues to be high. Because of this
condition and due to the continuing rapid growth of the Company, the base salary
for executive officers generally continues to be set above the median level of
the market surveys.
Annual Cash Incentive Bonus
The Company pays bonuses to its executive officers at the end of the fiscal
year primarily upon the Company's performance, taking into consideration the
compensation studies, individual performance and the other factors noted above.
On a forward basis, the Committee is establishing financial and business targets
for guidance in setting fiscal 1998 bonus awards.
- ---------------
(1) The material in this report is not "soliciting material," is not deemed
filed with the SEC and is not to be incorporated by reference in any filing
of the Company under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, whether made before or after
the date hereof and irrespective of any general incorporation language in
any such filing.
(2) The data regarding salary surveys and the stock performance indices, which
appear under the caption "Performance Measurement Comparison," are based on
different sets of comparable companies and are derived from different
sources.
25
Stock Option Grants
The Company broadly grants stock options in order to provide long-term
incentives and align employee and stockholder long-term interests by creating a
direct link between compensation and stockholder return. Stock options are
granted at an option price equal to the fair market value of the Company's
Common Stock on the date of grant. In order to facilitate long-term incentives
through the option grants, options are subject to vesting over five years, with
20% of the shares vesting at the end of each of the first, second, third, fourth
and fifth years following the date of grant. During fiscal 1997, 8.6% of the
total options granted by the Company were granted to executive officers of the
Company, including 2.4% of the total options granted to the Named Executive
Officers.
The option vesting period is designed to encourage employees to work with a
long term view of the Company's welfare and to establish their long term
affiliation with the Company. It is also designed to reduce employee turnover
and to retain the trained skills of valued staff.
Because a primary purpose of granting options is to provide incentives for
future performance and to secure retention of valued employees, the Committee
considers each individual's previously granted shares and the number of unvested
shares when granting additional stock options.
Section 162(m) of the Code limits the Company to a deduction for federal
income tax purposes of no more than $1 million of compensation paid to certain
Named Executive Officers in a taxable year. Compensation above $1 million may be
deducted if it is "performance-based compensation" within the meaning of the
Code. The Compensation Committee has determined that stock options granted by
the Compensation Committee under the Company's 1991 Stock Option Plan with an
exercise price at least equal to the fair market value of the Company's Common
Stock on the date of grant shall be treated as "performance-based compensation."
CHAIRMAN AND CHIEF EXECUTIVE OFFICER SALARY
During fiscal 1997, as in previous years, Dr. Irwin Mark Jacobs, a founder
of the Company, has led the Company towards outstanding business and financial
achievements as its Chief Executive Officer. Financially, the Company has
enjoyed strong growth and success: revenue and net income for fiscal 1997 are
258% and 438%, respectively, of last year's. The Company achieved major
developments in each aspect of its lines of business. During fiscal 1997, Dr.
Jacobs earned a base salary of $538,000, a 13% increase over the prior year. To
reward Dr. Jacobs for his outstanding contributions to the Company's success
during fiscal 1997, after the end of fiscal 1997, the Committee awarded Dr.
Jacobs a $500,000 bonus and a stock option grant to purchase 180,000 shares of
the Company's Common Stock at an exercise price of $63.75 per share.
COMPENSATION COMMITTEE
Jerome S. Katzin, Chairman
Duane A. Nelles
Marc I. Stern
26
PERFORMANCE MEASUREMENT COMPARISON
The following graph compares total stockholder return on the Company's
Common Stock since September 29, 1992 to two indices: the Nasdaq CRSP Total
Return Index for the Nasdaq Stock Market, U.S. companies (the "Nasdaq-US") and
the Nasdaq CRSP Total Return Index for Communications Equipment Stocks, SIC
3660-3669 (the "Nasdaq-Industry"). The Nasdaq-US tracks the aggregate price
performance of all equity securities of U.S. companies traded on the Nasdaq
National Market (the "NNM") and the Nasdaq SmallCap Market (the "SmallCap
Market"). The Nasdaq-Industry tracks the aggregate price performance of equity
securities of communications equipment companies traded on the NNM and the
SmallCap Market. The total return for the Company's stock and for each index
assumes the reinvestment of dividends, although dividends have never been
declared on the Company's stock, and is based on the returns of the component
companies weighted according to their capitalizations as of the end of each
quarterly period. The Company's Common Stock is traded on the NNM and is a
component of both the Nasdaq-US and the Nasdaq-Industry.(1)
COMPARISON OF CUMULATIVE TOTAL RETURN ON INVESTMENT SINCE
SEPTEMBER 29, 1992(2)
NASDAQ
INDUSTRY
MEASUREMENT INDEX NASDAQ
PERIOD (SIC U.S. BASELINE
(FISCAL YEAR QUALCOMM 3660- COMPANIES INDEX ON
COVERED) INCORPORATED 3669) INDEX 9/29/92
9/29/92 100 100 100 100
12/27/92 196.364 140.939 115.58 100
3/28/93 330.909 161.162 118.06 100
6/27/93 401.818 193.765 120.419 100
9/26/93 598.182 246.999 130.358 100
12/26/93 410.909 232.763 131.488 100
3/27/94 378.182 233.166 136.193 100
6/26/94 232.727 169.584 120.933 100
9/25/94 378.182 201.832 132.137 100
12/25/94 374.546 240.883 130.07 100
3/26/95 472.728 276.704 143.99 100
6/25/95 490.909 339.941 165.35 100
9/24/95 683.637 429.255 186.011 100
12/31/95 625.455 390.336 186.429 100
3/31/96 603.637 403.471 195.123 100
6/30/96 772.728 502.358 211.051 100
9/29/96 633.637 479.719 219.212 100
12/29/96 589.091 450.61 229.579 100
3/30/97 870.909 410.443 221.897 100
6/29/97 738.182 479.823 255.714 100
9/28/97 815.454 549.523 299.37 100
----------------------------------------------------------
Note: Historical stock price
performance is not
necessarily indicative of future price
performance.
----------------------------------------------------------
The Company's closing stock price on September 26, 1997, the last trading
day of the Company's 1997 fiscal year, was $56.06 per share.
- ---------------
(1) The material in this report is not "soliciting material," is not deemed
filed with the SEC and is not to be incorporated by reference in any filing
of the Company under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, whether made before or after
the date hereof and irrespective of any general incorporation language in
any such filing.
(2) Shows the cumulative total return on investment assuming an investment of
$100 in each of the Company, the Nasdaq-US and the Nasdaq-Industry on
September 29, 1992.
27
CERTAIN TRANSACTIONS
The Company's policy is that it will not make loans to or enter into other
transactions with directors, officers, or affiliates unless such loans or
transactions are approved by a majority of the Company's disinterested
directors, may reasonably be expected to benefit the Company and are determined
to be on terms no less favorable to the Company than could be obtained in arm's
length transactions with unaffiliated third parties.
The Company's Bylaws provide that the Company will indemnify its directors
and may indemnify its officers, employees, and other agents to the fullest
extent permitted by law. The Company believes that indemnification under its
Bylaws covers at least negligence and gross negligence by indemnified parties,
and may require the Company to advance litigation expenses in the case of
stockholder derivative actions or other actions, against an undertaking by the
indemnified party to repay such advances if it is ultimately determined that the
indemnified party is not entitled to indemnification.
In addition, the Company's Certificate of Incorporation provides that,
pursuant to Delaware law, its directors shall not be liable for monetary damages
for breach of the directors' fiduciary duty of care to the Company and its
stockholders. This provision in the Certificate of Incorporation does not
eliminate the duty of care, and in appropriate circumstances equitable remedies
such as injunctive or other forms of non-monetary relief will remain available
under Delaware law. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to the Company for acts
or omissions not in good faith or involving intentional misconduct, for knowing
violations of law, for actions leading to improper personal benefit to the
director, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws.
The Company has entered into separate indemnification agreements with its
directors. These agreements may require the Company, among other things, to
indemnify the directors against certain liabilities that may arise by reason of
their status or service as directors (other than liabilities arising from
willful misconduct of a culpable nature), to advance their expenses incurred as
a result of any proceeding against them as to which they could be indemnified
and to obtain directors' insurance if available on reasonable terms.
The Company maintains insurance policies covering officers and directors
under which the insurers agree to pay, subject to certain exclusions, including
certain violations of securities laws, for any claim made against the directors
and officers of the Company for a wrongful act that they may become legally
obligated to pay or for which the Company is required to indemnify the officers
or directors. The Company believes that its Certificate of Incorporation and
Bylaw provisions, indemnification agreements and such insurance policies are
necessary to attract and retain qualified persons as directors and officers.
At present, there is no pending litigation or proceeding involving a
director, officer, employee or other agent of the Company as to which
indemnification is being sought nor is the Company aware of any threatened
litigation that may result in claims for indemnification by any director,
officer, employee or other agent.
In November 1995, the Company paid $5,000,000 to purchase 1,666,666 shares
of Series B Common Stock and provided a $25,000,000 short-term note receivable
to NextWave Telecom Inc. ("NextWave"), a privately held company. As part of the
share purchase, the Company also received warrants to buy 1,111,111 additional
shares of Series B Common Stock at $3 per share. During March 1996, the Company
converted $15,000,000 of note receivable into 5,000,000 shares of Series B
Common Stock. During June 1996, the Company collected $9,602,000 of the
short-term note receivable and converted the remaining principal balance of
$398,000 into a 3 year promissory note convertible into 1,019,444 shares of
Series C Common Stock. Janice Obuchowski, an officer, a Director and a
stockholder of NextWave, was a director of the Company until her resignation in
November 1996.
In February 1997 and March 1997 the Company completed the sale of
13,200,000 QUALCOMM Financial Trust I 5 3/4% Trust Convertible Preferred
Securities in which it raised approximately $642 million in net proceeds. Each
Trust Convertible Preferred Security is convertible into approximately 0.6882
shares of
28
Common Stock of the Company. Goldman, Sachs & Co. acted as one of the managing
underwriters in the offering. Mr. Sacerdote, a director of the Company, is a
limited partner of the Goldman Sachs Group, L.P.
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 Company's Annual Report on Form 10-K for the fiscal year
ended September 28, 1997, as filed with the Securities and Exchange Commission,
excluding exhibits, may be obtained by stockholders without charge by written
request addressed to Investor Relations, 6455 Lusk Blvd., San Diego, California
92121.
By Order of the Board of Directors
/s/ IRWIN MARK JACOBS
-----------------------------------
Irwin Mark Jacobs
Chairman of the Board
and Chief Executive Officer
December 29, 1997
29
EXHIBIT A
CERTIFICATE OF AMENDMENT OF
RESTATED CERTIFICATE OF INCORPORATION OF
QUALCOMM INCORPORATED
QUALCOMM Incorporated, a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation") DOES HEREBY
CERTIFY:
FIRST, That, at a meeting of the Board of Directors of the Corporation,
resolutions were duly adopted setting forth proposed amendments to the Restated
Certificate of Incorporation of the Corporation (the "Restated Certificate"),
declaring said amendments to be advisable. The resolution setting forth the
proposed amendments is as follows:
RESOLVED, that Article IV of the Restated Certificate shall be amended
to read in its entirety as follows:
"This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the corporation is authorized to issue is three
hundred eight million (308,000,000) shares. Three hundred million
(300,000,000) shares shall be Common Stock, each having a par value of
one-one hundredth of one cent ($0.0001). Eight million (8,000,000) shares
shall be Preferred Stock, each having a par value of one-one hundredth of
one cent ($0.0001)."
SECOND, That the foregoing amendment was duly approved by the holders of
the necessary number of shares of the Corporation's voting securities as
required by statute and the Restated Certificate at a meeting of the
stockholders of the Corporation.
THIRD, That the foregoing amendments were adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, QUALCOMM Incorporated has caused this Certificate to be
signed by its duly authorized officers this day of February, 1998.
By:
--------------------------------------
Irwin Mark Jacobs
Chairman of the Board of Directors
ATTEST:
By:
- ----------------------------------------------------
Steven R. Altman
Assistant Secretary
QUALCOMM Incorporated
1991 EMPLOYEE STOCK PURCHASE PLAN
Adopted by the Board of Directors August 19, 1991
As amended by the Board of Directors on July 27, 1993, November 6, 1995 and
November 17, 1997
1. PURPOSE.
(a) The purpose of the QUALCOMM Incorporated 1991
Employee Stock Purchase Plan (the "Plan") is to provide a means by which
employees of QUALCOMM Incorporated, a Delaware corporation (the "Company"), and
its Affiliates, as defined in subparagraph 1(b), which are designated as
provided in subparagraph 2(b), may be given an opportunity to purchase stock of
the Company.
(b) The word "Affiliate" as used in the Plan means any
parent corporation or subsidiary corporation of the Company, whether now or
hereafter existing, as those terms are defined in Sections 424(e) and (f),
respectively, of the Internal Revenue Code of 1986, as amended (the "Code").
(c) The Company, by means of the Plan, seeks to retain
the services of its employees, to secure and retain the services of new
employees, and to provide incentives for such persons to exert maximum efforts
for the success of the Company.
(d) The Company intends that the rights to purchase stock
of the Company granted under the Plan be considered options issued under an
"employee stock purchase plan" as that term is defined in Section 423(b) of the
Code.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of
Directors (the "Board") of the Company unless and until the Board delegates
administration to a Committee, as provided in subparagraph 2(c). Whether or
not the Board has delegated administration, the Board shall have the final
power to determine all questions of policy and expediency that may arise in the
administration of the Plan.
(b) The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine when and how rights to purchase
stock of the Company shall be granted and the provisions of each offering of
such rights (which need not be identical).
(ii) To designate from time to time which
Affiliates of the Company shall be eligible to participate in the Plan.
(iii) To construe and interpret the Plan and rights
granted under it, and to establish, amend and revoke rules and regulations for
its administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan, in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective.
(iv) To amend the Plan as provided in paragraph 13.
(v) Generally, to exercise such powers and to
perform such acts as the Board deems necessary or expedient to promote the best
interests of the Company.
1
(c) The Board may delegate administration of the Plan to
a Committee composed of not fewer than two (2) members of the Board (the
"Committee"). If administration is delegated to a Committee, the Committee
shall have, in connection with the administration of the Plan, the powers
theretofore possessed by the Board, subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. The Board may abolish the Committee at any time and revest
in the Board the administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 12 relating to
adjustments upon changes in stock, the stock that may be sold pursuant to
rights granted under the Plan shall not exceed in the aggregate two million
(4,200,000) shares of the Company's $0.0001 par value common stock (the "Common
Stock"). If any right granted under the Plan shall for any reason terminate
without having been exercised, the Common Stock not purchased under such right
shall again become available for issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares
or reacquired shares, bought on the market or otherwise.
4. GRANT OF RIGHTS; OFFERING.
The Board or the Committee may from time to time grant or
provide for the grant of rights to purchase Common Stock of the Company under
the Plan to eligible employees (an "Offering") on a date or dates (the
"Offering Date(s)") selected by the Board or the Committee. Each Offering shall
be in such form and shall contain such terms and conditions as the Board or the
Committee shall deem appropriate. If an employee has more than one right
outstanding under the Plan, unless he or she otherwise indicates in agreements
or notices delivered hereunder: (1) each agreement or notice delivered by that
employee will be deemed to apply to all of his or her rights under the Plan,
and (2) a right with a lower exercise price (or an earlier-granted right, if
two rights have identical exercise prices), will be exercised to the fullest
possible extent before a right with a higher exercise price (or a later-granted
right, if two rights have identical exercise prices) will be exercised. The
provisions of separate Offerings need not be identical, but each Offering shall
include (through incorporation of the provisions of this Plan by reference in
the Offering or otherwise) the substance of the provisions contained in
paragraphs 5 through 8, inclusive.
5. ELIGIBILITY.
(a) Rights may be granted only to employees of the
Company or, as the Board or the Committee may designate as provided in
subparagraph 2(b), to employees of any Affiliate of the Company. Except as
provided in subparagraph 5(b), an employee of the Company or any Affiliate
shall not be eligible to be granted rights under the Plan, unless, on the
Offering Date, such employee has been in the employ of the Company or any
Affiliate for such continuous period preceding such grant as the Board or the
Committee may require, but in no event shall the required period of continuous
employment be equal to or greater than two (2) years. In addition, unless
otherwise determined by the Board or the Committee and set forth in the terms
of the applicable Offering, no employee of the Company or any Affiliate shall
be eligible to be granted rights under the Plan, unless, on the Offering Date,
such employee's customary employment with the Company or such Affiliate is at
least twenty (20) hours per week and at least five (5) months per calendar
year.
(b) The Board or the Committee may provide that, each
person who, during the course of an Offering, first becomes an eligible
employee of the Company or designated Affiliate will, on a date or dates
specified in the Offering which coincides with the day on which such person
becomes an eligible employee or occurs thereafter, receive a right under that
Offering, which right shall thereafter be deemed to be a part of that Offering.
Such right shall have the same characteristics as any rights originally granted
under that Offering, as described herein, except that:
(i) the date on which such right is granted shall
be the "Offering Date" of such right for all purposes, including determination
of the exercise price of such right;
2
(ii) the Purchase Period (as defined below) for
such right shall begin on its Offering Date and end coincident with the end of
such Offering; and
(iii) the Board or the Committee may provide that
if such person first becomes an eligible employee within a specified period of
time before the end of the Purchase Period (as defined below) for such
Offering, he or she will not receive any right under that Offering.
(c) No employee shall be eligible for the grant of any
rights under the Plan if, immediately after any such rights are granted, such
employee owns stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of stock of the Company or of any
Affiliate. For purposes of this subparagraph 5(c), the rules of Section 424(d)
of the Code shall apply in determining the stock ownership of any employee, and
stock which such employee may purchase under all outstanding rights and options
shall be treated as stock owned by such employee.
(d) An eligible employee may be granted rights under the
Plan only if such rights, together with any other rights granted under
"employee stock purchase plans" of the Company and any Affiliates, as specified
by Section 423(b)(8) of the Code, do not permit such employee's rights to
purchase stock of the Company or any Affiliate to accrue at a rate which
exceeds twenty-five thousand dollars ($25,000) of fair market value of such
stock (determined at the time such rights are granted) for each calendar year
in which such rights are outstanding at any time.
(e) Officers of the Company shall be eligible to
participate in Offerings under the Plan, provided, however, that the Board may
provide in an Offering that certain employees who are highly compensated
employees within the meaning of Section 423(b)(4)(D) of the Code shall not be
eligible to participate.
6. RIGHTS; PURCHASE PRICE.
(a) On each Offering Date, each eligible employee,
pursuant to an Offering made under the Plan, shall be granted the right to
purchase up to the number of shares of Common Stock of the Company purchasable
with a percentage designated by the Board or the Committee not exceeding
fifteen percent (15%) of such employee's Earnings (as defined in Section 7(a))
during the period which begins on the Offering Date (or such later date as the
Board or the Committee determines for a particular Offering) and ends on the
date stated in the Offering, which date shall be no more than twenty-seven (27)
months after the Offering Date (the "Purchase Period"). In connection with
each Offering made under this Plan, the Board or the Committee shall specify a
maximum number of shares which may be purchased by any employee as well as a
maximum aggregate number of shares which may be purchased by all eligible
employees pursuant to such Offering. In addition, in connection with each
Offering which contains more than one Exercise Date (as defined in the
Offering), the Board or the Committee may specify a maximum aggregate number of
shares which may be purchased by all eligible employees on any given Exercise
Date under the Offering. If the aggregate purchase of shares upon exercise of
rights granted under the Offering would exceed any such maximum aggregate
number, the Board or the Committee shall make a pro rata allocation of the
shares available in as nearly a uniform manner as shall be practicable and as
it shall deem to be equitable.
(b) The purchase price of stock acquired pursuant to
rights granted under the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%)
of the fair market value of the stock on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%)
of the fair market value of the stock on the Exercise Date.
(c) For purposes of this Plan, "fair market value" means,
as of any date, the value of the common stock of the Company determined as
follows:
3
(i) if the common stock is listed on any
established stock exchange or a national market system, including without
limitation the National Market System of the National Association of Securities
Dealers, Inc. Automated Quotation ("NASDAQ") System, the fair market value of a
share of common stock shall be the average of the highest and lowest price at
which the common stock was sold on such exchange or national market system on
the date as of which the determination is to be made (or, if such date is not a
trading day on such exchange system, on the date that is the next market
trading day following the date as of which the determination is to be made);
(ii) if the common stock is quoted on the NASDAQ
System (but not on the National Market System thereof) or is regularly quoted
by a recognized securities dealer but selling prices are not reported, the fair
market value of a share of common stock shall be the mean between the high bid
and high asked prices for the common stock on the date as of which the
determination is to be made (or, if such date is not a trading day on such
exchange system, on the date that is the next market trading day following the
date as of which the determination is to be made), as reported in the Wall
Street Journal or such other sources as the Board deems reliable;
(iii) in the absence of an established market for
the common stock, the fair market value shall be determined in good faith by
the Board.
7. PARTICIPATION; WITHDRAWAL; TERMINATION.
(a) An eligible employee may become a participant in an
Offering by delivering a participation agreement to the Company within the time
specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll deductions of up to the maximum percentage
specified by the Board or the Committee of such employee's Earnings during the
Purchase Period. "Earnings" is defined as the total compensation paid to an
employee, including all salary, wages (including amounts elected to be deferred
by the employee, that would otherwise have been paid, under any cash or
deferred arrangement established by the Company), overtime pay, and other
remuneration paid directly to the employee, but excluding commissions, bonuses,
profit sharing, the cost of employee benefits paid for by the Company,
education or tuition reimbursements, imputed income arising under any Company
group insurance or benefit program, traveling expenses, business and moving
expense reimbursements, income received in connection with stock options,
contributions made by the Company under any employee benefit plan, and similar
items of compensation. The payroll deductions made for each participant shall
be credited to an account for such participant under the Plan and shall be
deposited with the general funds of the Company. A participant may reduce
(including to zero), increase or begin such payroll deductions after the
beginning of any Purchase Period only as provided for in the Offering. A
participant may make additional payments into his or her account only if
specifically provided for in the Offering and only if the participant has not
had the maximum amount withheld during the Purchase Period.
(b) At any time during a Purchase Period a participant
may terminate his or her payroll deductions under the Plan and withdraw from
the Offering by delivering to the Company a notice of withdrawal in such form
as the Company provides. Such withdrawal may be elected at any time prior to
the end of the Purchase Period except as provided by the Board or the Committee
in the Offering. Upon such withdrawal from the Offering by a participant, the
Company shall distribute to such participant all of his or her accumulated
payroll deductions (reduced to the extent, if any, such deductions have been
used to acquire stock for the participant) under the Offering, without
interest, and such participant's interest in that Offering shall be
automatically terminated. A participant's withdrawal from an Offering will
have no effect upon such participant's eligibility to participate in any other
Offerings under the Plan but such participant will be required to deliver a new
participation agreement in order to participate in subsequent Offerings under
the Plan.
(c) Rights granted pursuant to any Offering under the
Plan shall terminate immediately upon cessation of any participating employee's
employment with the Company or an Affiliate, for any reason, and the Company
shall distribute to such terminated employee all of his or her accumulated
payroll deductions (reduced to the extent, if any, such deductions have been
used to acquire stock for the terminated employee), under the Offering, without
interest.
4
(d) Rights granted under the Plan shall not be
transferable, and shall be exercisable only by the person to whom such rights
are granted.
8. EXERCISE.
(a) On each exercise date, as defined in the relevant
Offering (an "Exercise Date"), each participant's accumulated payroll
deductions and other additional payments specifically provided for in the
Offering (without any increase for interest) will be applied to the purchase of
whole shares of stock of the Company, up to the maximum number of shares
permitted pursuant to the terms of the Plan and the applicable Offering, at the
purchase price specified in the Offering. No fractional shares shall be issued
upon the exercise of rights granted under the Plan. The amount, if any, of
accumulated payroll deductions remaining in each participant's account after
the purchase of shares which is less than the amount required to purchase one
share of stock on the final Exercise Date of an Offering shall be held in each
such participant's account for the purchase of shares under the next Offering
under the Plan, unless such participant withdraws from such next Offering, as
provided in subparagraph 7(b), or is no longer eligible to be granted rights
under the Plan, as provided in paragraph 5, in which case such amount shall be
distributed to the participant after said final Exercise Date, without
interest. The amount, if any, of accumulated payroll deductions remaining in
any participant's account after the purchase of shares which is equal to the
amount required to purchase whole shares of stock on the final Exercise Date of
an Offering shall be distributed in full to the participant after such Exercise
Date, without interest.
(b) No rights granted under the Plan may be exercised to
any extent unless the Plan (including rights granted thereunder) is covered by
an effective registration statement pursuant to the Securities Act of 1933, as
amended (the "Securities Act"). If on an Exercise Date of any Offering
hereunder the Plan is not so registered, no rights granted under the Plan or
any Offering shall be exercised on said Exercise Date and the Exercise Date
shall be delayed until the Plan is subject to such an effective registration
statement, except that the Exercise Date shall not be delayed more than two (2)
months and the Exercise Date shall in no event be more than twenty-seven (27)
months from the Offering Date. If on the Exercise Date of any Offering
hereunder, as delayed to the maximum extent permissible, the Plan is not
registered, no rights granted under the Plan or any Offering shall be exercised
and all payroll deductions accumulated during the purchase period (reduced to
the extent, if any, such deductions have been used to acquire stock) shall be
distributed to the participants, without interest.
9. COVENANTS OF THE COMPANY.
(a) During the terms of the rights granted under the
Plan, the Company shall keep available at all times the number of shares of
stock required to satisfy such rights.
(b) The Company shall seek to obtain from each regulatory
commission or agency having jurisdiction over the Plan such authority as may be
required to issue and sell shares of stock upon exercise of the rights granted
under the Plan. If, after reasonable efforts, the Company is unable to obtain
from any such regulatory commission or agency the authority which counsel for
the Company deems necessary for the lawful issuance and sale of stock under the
Plan, the Company shall be relieved from any liability for failure to issue and
sell stock upon exercise of such rights unless and until such authority is
obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to rights granted
under the Plan shall constitute general funds of the Company.
11. RIGHTS AS A STOCKHOLDER.
A participant shall not be deemed to be the holder of, or to
have any of the rights of a holder with respect to, any shares subject to
rights granted under the Plan unless and until certificates representing such
shares shall have been issued.
5
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the
Plan, or subject to any rights granted under the Plan (through merger,
consolidation, reorganization, recapitalization, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or otherwise), the
Plan and outstanding rights will be appropriately adjusted in the class(es) and
maximum number of shares subject to the Plan and the class(es) and number of
shares and price per share of stock subject to outstanding rights.
(b) In the event of: (1) a dissolution or liquidation of
the Company; (2) a merger or consolidation in which the Company is not the
surviving corporation; (3) a reverse merger in which the Company is the
surviving corporation but the shares of the Company's Common Stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise; or (4)
any other capital reorganization in which more than fifty percent (50%) of the
shares of the Company entitled to vote are exchanged, then, as determined by
the Board in its sole discretion (i) any surviving corporation may assume
outstanding rights or substitute similar rights for those under the Plan, (ii)
such rights may continue in full force and effect, or (iii) participants'
accumulated payroll deductions may be used to purchase Common Stock immediately
prior to the transaction described above and the participants' rights under the
ongoing Offering terminated.
13. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may
amend the Plan. However, except as provided in paragraph 12 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company within twelve (12) months before or
after the adoption of the amendment, where the amendment will:
(i) Increase the number of shares reserved for
rights under the Plan;
(ii) Modify the provisions as to eligibility for
participation in the Plan (to the extent such modification requires stockholder
approval in order for the Plan to obtain employee stock purchase plan treatment
under Section 423 of the Code or to comply with the requirements of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended ("Rule
16b-3")); or
(iii) Modify the Plan in any other way if such
modification requires stockholder approval in order for the Plan to obtain
employee stock purchase plan treatment under Section 423 of the Code or to
comply with the requirements of Rule 16b-3.
It is expressly contemplated that the Board may amend the Plan in any respect
the Board deems necessary or advisable to provide eligible employees with the
maximum benefits provided or to be provided under the provisions of the Code
and the regulations promulgated thereunder relating to employee stock purchase
plans and/or to bring the Plan and/or rights granted under it into compliance
therewith.
(b) Rights and obligations under any rights granted
before amendment of the Plan shall not be altered or impaired by any amendment
of the Plan, except with the consent of the person to whom such rights were
granted or except as necessary to comply with any laws or governmental
regulation.
14. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any
time. Unless sooner terminated, the Plan shall terminate ten (10) years from
the date the Plan is adopted by the Board or approved by the stockholders of
the Company, whichever is earlier. No rights may be granted under the Plan
while the Plan is suspended or after it is terminated.
6
(b) Rights and obligations under any rights granted while
the Plan is in effect shall not be altered or impaired by suspension or
termination of the Plan, except with the consent of the person to whom such
rights were granted or except as necessary to comply with any laws or
governmental regulation.
15. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board,
but no rights granted under the Plan shall be exercised unless and until the
Plan has been approved by the stockholders of the Company.
7
QUALCOMM INCORPORATED
1998 NON-EMPLOYEE DIRECTORS'
STOCK OPTION PLAN
ADOPTED EFFECTIVE FEBRUARY 10, 1998
STOCKHOLDER APPROVAL FEBRUARY 10, 1998
1. PURPOSE.
(a) The purpose of the Plan is to provide a means by which Non-Employee
Directors may be given an opportunity to benefit from increases in value of the
common stock of the Company ("Common Stock") through the granting of
Nonstatutory Stock Options. This Plan shall serve as an amendment and
restatement of the Company's Non-Employee Director Stock Option Plan, which was
adopted by the Company in 1993 (the "Prior Plan"), and shall be effective
February 10, 1998 (the "Effective Date").
(b) The Company, by means of the Plan, seeks to retain the services of
persons now serving as Non-Employee Directors of the Company, to secure and
retain the services of persons capable of serving in such capacity and to
provide incentives for such persons to exert maximum efforts for the success of
the Company. (C) The Company intends that the Options issued under the Plan
shall be Nonstatutory Stock Options granted pursuant to Section 6 hereof.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f), respectively, of the Code.
(b) "ANNUAL OPTION" means a stock option granted pursuant to subsection
5(c) of the Plan.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CODE" means the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(f) "COMPANY" means QUALCOMM Incorporated, a Delaware corporation.
(g) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided
1.
that the term "Consultant" shall not include Directors who are paid only a
director's fee by the Company or who are not compensated by the Company for
their services as Directors.
(h) "CONTINUOUS SERVICE" means that the Optionee's service to the
Company or an Affiliate of the Company, whether in the capacity of a Director or
subsequently as an Employee or a Consultant, is not interrupted or terminated.
The Optionee's Continuous Service shall not be deemed to have terminated merely
because of a change in the capacity in which the Optionee renders such service
to the Company or an Affiliate of the Company or a change in the entity for
which the Optionee renders such service, provided that there is no interruption
or termination of the Optionee's service. The Board or its designee, in that
party's sole discretion, may determine whether Continuous Service shall be
considered interrupted in the case of: (i) any leave of absence approved by the
Board or its designee, including sick leave, military leave, or any other
personal leave; or (ii) transfers between locations of the Company or between
the Company, Affiliates or their successors.
(i) "DIRECTOR" means a member of the Board.
(j) "DISABILITY" means the permanent and total disability of the
Optionee within the meaning of Section 22(e)(3) of the Code.
(k) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(m) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock of the Company determined as follows:
(i) If the Common Stock is listed on any established stock exchange,
or traded on the Nasdaq National Market, the Fair Market Value of a share of
Common Stock shall be the average of the highest and lowest price at which the
Common Stock was sold on such exchange or national market on the trading day
prior to the day of determination (or, in the case in which the Common Stock is
traded on more than one market, the exchange or system on which the Common Stock
has the highest average trading volume), as reported in the Wall Street Journal
or such other source as the Board deems reliable; or
(ii) in the absence of any such market for the Common Stock, the
Fair Market Value shall be determined in good faith by the Board.
(n) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "INITIAL OPTION" means a stock option granted pursuant to subsection
5(b) of the Plan.
2.
(p) "NON-EMPLOYEE DIRECTOR" means a Director who is not a current
Employee or Officer of the Company or its parent or a subsidiary and does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director.
(q) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.
(r) "OFFICER" means any person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(s) "OPTION" means a stock option granted pursuant to the Plan.
(t) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
(u) "OPTIONEE" means a person to whom an Option is granted pursuant to
the Plan.
(v) "PLAN" means this QUALCOMM Incorporated 1998 Non-Employee Directors'
Stock Option Plan.
(w) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3, as in effect when discretion is being exercised with respect to
the Plan.
(x) "SECURITIES ACT" means the Securities Act of 1933, as amended.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(ii) To construe and interpret the Plan and Options granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Option Agreement, in a
manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.
(ii) To amend the Plan or an Option as provided in Section 11.
3.
(iii) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) The Board may delegate administration of the Plan to a Committee or
Committees of not fewer than two members of the Board. If administration is
delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the Board (and
references in this Plan to the Board shall thereafter be to the Committee),
subject, however, to such resolutions, not inconsistent with the provisions of
the Plan, as may be adopted from time to time by the Board, and to the
requirements of Section 144 of the Delaware General Corporation Law. The Board
may abolish the Committee at any time and revest in the Board the administration
of the Plan.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 10 relating to adjustments upon
changes in stock, the stock that may be issued pursuant to Options shall not
exceed in the aggregate Five Hundred Thousand (500,000) shares of Common Stock.
This share reserve shall be comprised of: (i) the Thirty Thousand (30,000)
shares of Common Stock available for grant under the Prior Plan plus (ii) an
additional Four Hundred and Seventy Thousand (470,000) shares. If any Option
(including an Option granted under the Prior Plan) shall for any reason expire
or otherwise terminate, in whole or in part, without having been exercised in
full, the stock not acquired under such Option shall revert to and again become
available for issuance under the Plan. Similarly, if the Company shall for any
reason exercise its right of repurchase with respect to any unvested shares of
Common Stock purchased pursuant an early exercise provision, as provided for in
subsection 6(j), the unvested shares so repurchased shall revert to and again
become available for issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY AND NON-DISCRETIONARY GRANTS.
(a) Options shall be granted only to Non-Employee Directors of the
Company.
(b) Each person who is, on the Effective Date or any subsequent date
thereto, elected or appointed for the first time to be a Non-Employee Director
shall automatically, upon such date of initial election or appointment, be
granted an Initial Option to purchase Twenty Thousand (20,000) shares of Common
Stock of the Company on the terms and conditions set forth herein.
(c) Each year, commencing with the annual meeting of stockholders of the
Company (the "Annual Meeting") occurring in 1998, each person who is then
serving as a Non-Employee Director, other than a Non-Employee Director who is
granted an Initial Option at such Annual Meeting, shall automatically be granted
an Annual Option to purchase Ten Thousand (10,000) shares of Common Stock of the
Company on the terms and conditions set forth herein.
4.
6. OPTION PROVISIONS.
Each Option shall include (through incorporation of provisions hereof by
reference in the Option or otherwise) each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) PRICE. The exercise price of each Option shall equal one hundred
percent (100%) of the Fair Market Value of the stock subject to the Option on
the date the Option is granted. Notwithstanding the foregoing, an Option may be
granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another option in a manner satisfying the provisions of Section 424(a) of the
Code.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either: (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, either at the time of the grant or
exercise of the Option, by (A) delivery to the Company of other Common Stock of
the Company or (B) other arrangement (which may include, without limiting the
generality of the foregoing, the use of other Common Stock of the Company) with
the Optionee in any other form of legal consideration that may be acceptable to
the Board.
(d) TRANSFERABILITY. An Option shall be transferable only to the extent
specifically provided in the Option Agreement; provided, however, that if the
Option Agreement does not specifically provide for the transferability of the
Option, the Option shall not be transferable except by will or by the laws of
descent and distribution and shall be exercisable during the lifetime of the
person to whom the Option is granted only by such person or by such person's
guardian or legal representative. Notwithstanding the foregoing, the person to
whom the Option is granted may, by delivering written notice to the Company, in
a form satisfactory to the Company, designate a third party who, in the event of
the death of the Optionee, shall thereafter be entitled to exercise the Option.
(e) VESTING.
(i) The total number of shares of stock subject to an Option shall
be allotted in periodic installments. The Option Agreement shall provide that
from time to time during each of such installment periods, the Option may become
exercisable ("vest") with respect to some or all of the shares allotted to that
period, and may be exercised with respect to some or all of the shares allotted
to such period and/or any prior period as to which the Option became vested but
was not fully exercised.
(ii) Initial Options shall vest over a period of five (5) years with
twenty percent (20%) of the total number of such shares subject to such Option
("Option Shares") vesting as follows: (A) if the Initial Option is granted
pursuant to the election of the Optionee to the Board at an Annual Meeting, then
such Initial Option will vest on January 15 of each of the
5.
first, second, third, fourth and fifth years following the date of the grant of
such Initial Option; or (B) if the Initial Option is granted pursuant to the
election or appointment of the Optionee to the Board at some time other than at
an Annual Meeting, then such Initial Option will vest on the anniversary of the
date of the grant of such Initial Option in each of first, second, third, fourth
and fifth years following such grant; provided, however, that if the Optionee's
Continuous Service is terminated due to (1) death, (2) a Voluntary Termination
with Good Reason (as defined in subsection 10(c)), or (3) an Involuntary
Termination without Cause (as defined in subsection 10(d)), then the vesting of
such Initial Option and the time during which such Initial Option may be
exercised shall be accelerated upon the occurrence of such event.
(iii) Annual Options shall vest over five (5) years, with twenty
percent (20%) of the Option Shares vesting on January 15 of each of the first,
second, third, fourth and fifth years following the date of the grant of such
Annual Option; provided, however, that if the Optionee's Continuous Service is
terminated due to (1) death, (2) a Voluntary Termination with Good Reason, or
(3) an Involuntary Termination without Cause, then the vesting of such Annual
Option and the time during which such Annual Option may be exercised shall be
accelerated upon the occurrence of such event.
(F) TERMINATION OF SERVICE. In the event an Optionee's Continuous
Service terminates (other than upon the Optionee's retirement at age seventy
(70) or older after nine (9) or more years of service on the Board or, the
Optionee's death or Disability), the Optionee may exercise his or her Option (to
the extent that the Optionee was entitled to exercise it at the date of
termination) but only within such period of time ending on the earlier of (i)
the date thirty (30) days after the termination of the Optionee's Continuous
Service or (ii) the expiration of the term of the Option as set forth in the
Option Agreement. If, after termination, the Optionee does not exercise his or
her Option within the time specified in the Option Agreement, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
If the exercise of the Option following the termination of the
Optionee's Continuous Service (other than upon the Optionee's retirement at age
seventy (70) or older after nine (9) or more years of service on the Board or
the Optionee's death or Disability) would be prohibited at any time solely
because the issuance of shares would violate the registration requirements under
the Securities Act, then the Option shall terminate on the earlier of (i) the
expiration of the term of the Option or (ii) the expiration of a period of
thirty (30) days after the termination of the Optionee's Continuous Service
during which the exercise of the Option would not be in violation of such
registration requirements (if such provisions would result in an extension of
the time during which the Option may be exercised beyond the period described in
the first paragraph of this subsection 6(f)).
If the exercise of the Option following the termination of the
Optionee's Continuous Service (other than upon the Optionee's retirement at age
seventy (70) or older after nine (9) or more years of service on the Board or
the Optionee's death or Disability) would be prohibited at any time solely
because such exercise would result in liability under Section 16(b) of the
Exchange Act, then the Option shall terminate on the earliest of (i) the
expiration of the term of the Option, (ii) the tenth
6.
(10th) day after the last date upon which exercise would result in such
liability, or (iii) six (6) months and ten (10) days after the termination of
the Optionee's Continuous Service.
(g) RETIREMENT OF OPTIONEE. Notwithstanding anything in subsection 6(f)
to the contrary, in the event of the retirement of an Optionee at age seventy
(70) or older after nine (9) years of service on the Board, the Option will
terminate only upon the expiration of the Option term.
(h) DISABILITY OF OPTIONEE. Notwithstanding anything in subsection 6(f)
to the contrary, in the event an Optionee's Continuous Service terminates due to
the Disability of the Optionee, the Option will terminate only upon the
expiration of the Option term.
(i) DEATH OF OPTIONEE. In the event that: (i) an Optionee's Continuous
Service terminates due to the death of the Optionee, or (ii) an Optionee's
Continuous Service terminates due to the Disability of the Optionee and such
termination is subsequently followed by the death of the Optionee prior to the
expiration of the term of the Option, then the vesting of all unvested shares
owned by the Optionee will be accelerated effective as of the date of death of
the Optionee and the Option may be exercised by the Optionee's estate, by a
person who acquired the right to exercise the Option by bequest or inheritance,
or by a person designated to exercise the option upon the Optionee's death
pursuant to subsection 6(d), but only within the period ending twelve (12)
months after the death of the Optionee. If, after the death of the Optionee, the
Option is not exercised within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
(j) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased shall be subject to a repurchase right in favor of the Company, with
the repurchase price to be equal to the original purchase price of the Common
Stock, or to any other restriction the Board determines to be appropriate;
provided, however, that (i) the right to repurchase at the original purchase
price shall lapse at a rate of twenty percent (20%) per year over five (5) years
from the date the Option was granted, and (ii) such right shall be exercisable
only within (A) the ninety (90) day period following the termination of the
Optionee's Continuous Service or (B) such longer period as may be agreed to by
the Company and the Optionee.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the Options, the Company shall keep available at
all times the number of shares of stock required to satisfy such Options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares under Options. If, after reasonable efforts, the Company
is unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the
7.
lawful issuance and sale of stock under the Plan, the Company shall be relieved
from any liability for failure to issue and sell stock upon exercise of such
Options unless and until such authority is obtained.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.
9. MISCELLANEOUS.
(a) Neither a Non-Employee Director nor any person to whom an Option is
transferred in accordance with the Plan shall be deemed to be the holder of, or
to have any of the rights of a holder with respect to, any shares subject to
such Option unless and until such person has satisfied all requirements for
exercise of the Option pursuant to its terms.
(b) Nothing in the Plan or any instrument executed or Option granted
pursuant thereto shall confer upon any holder of Options any right to continue
serving as a Director, Employee or Consultant, or shall affect the right of the
Company or any Affiliate to terminate the Optionee's service as a Director,
Employee or Consultant, pursuant to the Company's Bylaws and the provisions of
the corporate law of the state in which the Company is incorporated.
(c) The Company may require any person to whom an Option is granted, or
any person to whom an Option is transferred in accordance with the Plan, as a
condition of exercising or acquiring stock under any Option: (i) to give written
assurances satisfactory to the Company as to such person's knowledge and
experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters, and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Option; and (ii) to give written assurances satisfactory
to the Company stating that such person is acquiring the stock subject to the
Option for such person's own account and not with any present intention of
selling or otherwise distributing the stock. The foregoing requirements, and any
assurances given pursuant to such requirements, shall be inoperative if (i) the
issuance of the shares upon the exercise or acquisition of stock under the
Option has been registered under a then currently effective registration
statement under the Securities Act, or (ii) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the stock.
(d) To the extent provided by the terms of an Option Agreement, the
person to whom an Option is granted may satisfy any federal, state or local tax
withholding obligation relating to the exercise or acquisition of stock under an
Option by any of the following means (in addition to the Company's right to
withhold from any compensation paid to such person by the Company) or
8.
by a combination of such means: (i) tendering a cash payment; (ii) authorizing
the Company to withhold shares from the shares of the Common Stock otherwise
issuable to the participant as a result of the exercise or acquisition of stock
under the Option; or (iii) delivering to the Company owned and unencumbered
shares of the Common Stock of the Company.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any Option, without the receipt of consideration by the Company (through
merger, consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the type(s) and maximum
number of securities subject to the Plan pursuant to subsection 4(a), and the
outstanding Options will be appropriately adjusted in the type(s) and number of
securities and price per share of stock subject to such outstanding Options.
Such adjustments shall be made by the Board, the determination of which shall be
final, binding and conclusive. (The conversion of any convertible securities of
the Company shall not be treated as a "transaction not involving the receipt of
consideration by the Company.")
(b) In the event of: (1) a dissolution or liquidation of the Company,
(2) the sale of all or substantially all of the Company's assets, (3) a merger,
consolidation or reorganization of the Company with or into another corporation
or other legal person, other than a merger, consolidation or reorganization in
which more than fifty percent (50%) of the combined voting power of the
then-outstanding securities of the surviving entity (or if more than one entity
survives the transaction, the controlling entity) immediately after such a
transaction are held in the aggregate by holders of voting securities of the
Company immediately prior to such transaction, (4) the acquisition by any person
(within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act)
of beneficial ownership (within the meaning of Rule 13d-3 or any successor rule
or regulation promulgated under the Exchange Act) of securities representing
fifty percent (50%) or more of the combined voting power of the then-outstanding
securities of the Company, or (5) during any period of two (2) consecutive
years, individuals who at the beginning of any such period constitute the
Directors of the Company (the "Incumbent Directors") cease for any reason to
constitute at least a majority thereof unless the election or the nomination for
election by the Company's stockholders of a Director of the Company first
elected during such period was approved by the vote of at least two-thirds of
the Incumbent Directors, whereupon such Director shall also be classified as an
Incumbent Director (collectively, a "Change in Control"), then: (i) any
surviving or acquiring corporation shall assume Options outstanding under the
Plan or shall substitute similar options (including an option to acquire the
same consideration paid to stockholders in the transaction described in this
subsection 10(b)) for those outstanding under the Plan and in the event any
surviving or acquiring corporation does assume such Options or substitute
similar options for those outstanding under the Plan, then upon the Optionee's
Voluntary Termination with Good Reason (as described in subsection 10(c)) or the
Optionee's Involuntary Termination without Cause (as described in subsection
10(d)) the vesting of such Options and the time during which such
9.
Options may be exercised shall be accelerated upon the occurrence of such event
or (ii) in the event any surviving or acquiring corporation refuses to assume
such Options or to substitute similar options for those outstanding under the
Plan, then (A) with respect to Options held by persons then performing services
as Directors, Employees or Consultants, the vesting of such Options and the time
during which such Options may be exercised shall be accelerated prior to such
event and the Options terminated if not exercised after such acceleration and at
or prior to such event, and (B) with respect to any other Options outstanding
under the Plan, such Options shall be terminated if not exercised prior to such
event.
(c) The term "Voluntary Termination with Good Reason" means the
Optionee's resignation, with Good Reason (as defined below), as a Director,
within one (1) month prior to the Change in Control or within thirteen (13)
months following a Change in Control. "Good Reason" means any of the following
to the extent applicable to the Optionee's position as a Director, Employee or
Consultant at that time:
(i) reduction of the Optionee's rate of compensation (including
Director fees) as in effect immediately prior to the Change in Control;
(ii) failure to provide a package of benefits which, taken as a
whole, provide substantially similar benefits to those in which the Optionee was
entitled to participate immediately prior to the Change in Control;
(iii) a change in the Optionee's responsibilities, authority, title
or office resulting in diminution of position, excluding for this purpose an
isolated, insubstantial and inadvertent action not taken in bad faith which is
remedied by the Company promptly after notice thereof is given by the Optionee;
(iv) a request that the Optionee render services at a site more than
thirty-five (35) miles from the prior site at which Optionee rendered services,
unless the Optionee accepts such relocation request;
(v) failure or refusal of a successor to the Company to assume any
Option granted under this Plan; or
(vi) any material breach by the Company or any successor to the
Company of any of the material provisions of the Optionee's Option.
(d) The term "Involuntary Termination without Cause" means the
involuntary termination without Cause (as defined below) of the Optionee's
Continuous Service by the Company within one (1) month prior to a Change in
Control or within thirteen (13) months following a Change in Control. "Cause"
means any of the following:
(i) the Optionee's theft, dishonesty, or falsification of documents
or records;
(ii) the Optionee's improper use or disclosure of the Company's
confidential or proprietary information;
10.
(iii) any action by the Optionee which has a material detrimental
effect on the Company's reputation or business;
(iv) the Optionee's failure or inability to perform any reasonable
assigned duties after written notice from the Board of, and a reasonable
opportunity to cure, such failure or inability;
(v) any material breach by the Optionee of any service agreement
between the Optionee and the Company which breach is not cured pursuant to the
terms of such agreement; or
(vi) the Optionee's conviction (including any plea of guilty or nolo
contendere) of any criminal act which materially impairs the Optionee's ability
to perform his or her duties with the Company.
11. AMENDMENT OF THE PLAN AND OPTIONS.
(a) The Board at any time, and from time to time, may amend the Plan
and/or some or all outstanding Options granted under the Plan. However, except
as provided in Section 10 relating to adjustments upon changes in stock, no
amendment shall be effective unless approved by the stockholders of the Company
to the extent stockholder approval is necessary for the Plan to satisfy the
requirements of Rule 16b-3, any requirements of Section 144 of the Delaware
General Corporation Law, or any Nasdaq National Market or securities exchange
listing requirements.
(b) An Optionee's rights and obligations under any Option granted before
any amendment of the Plan shall not be impaired by such amendment unless (i) the
Company requests the consent of the person to whom the Option was granted and
(ii) such person consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on February 9, 2113, which is
fifteen (15) years from the date the Plan was approved by the stockholders of
the Company. No Options may be granted under the Plan while the Plan is
suspended or after it is terminated.
(b) An Optionee's rights and obligations under any Option granted while
the Plan is in effect shall not be impaired by suspension or termination of the
Plan, except with the consent of the person to whom the Option was granted.
13. EFFECTIVE DATE OF PLAN.
The Plan shall become effective on the Effective Date, which is the date
of the Plan's approval by the stockholders of the Company. In the event the Plan
is not approved by the
11.
stockholders, then the Prior Plan shall continue in full force and effect
without regard to the adoption of this Plan.
12.
QUALCOMM INCORPORATED
1998 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
NONSTATUTORY STOCK OPTION
(INITIAL OPTION)
______________________, Optionee:
On ________________, 19___, an option to purchase shares of common stock
("Common Stock") was automatically granted to you (the "Optionee") pursuant to
the QUALCOMM Incorporated (the "Company") 1998 Non-Employee Directors' Stock
Option Plan (the "Plan"). This option is not intended to qualify and will not be
treated as an "incentive stock option" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). Capitalized terms not
explicitly defined in this agreement shall have the meaning assigned to such
terms in the Plan.
The details of your option are as follows:
1. The total number of shares of Common Stock subject to this option is
twenty thousand (20,000).
2. The exercise price of this option is _____________________
($________) per share, such amount being equal to the Fair Market Value of the
Common Stock on the date of grant of this option.
3. Subject to the limitations contained herein, if:
(i) this option is being granted pursuant to your initial
election to the Board of Directors of the Company at an annual meeting of the
Company's stockholders, then this option shall become exercisable (i.e., vest)
in five (5) equal annual installments with each installment becoming exercisable
on January 15 of each of the first, second, third, fourth and fifth years
following the date of the grant; or
(ii) this option is being granted pursuant to your initial
election to the Board of Directors of the Company at some time other than at an
annual meeting of the Company's stockholders, then this option shall become
exercisable (i.e., vest) in five (5) equal annual installments with each
installment becoming exercisable on each of the first, second, third, fourth and
fifth anniversaries of the date of the grant;
provided, however, that you have, during the period from the date of grant to
such vesting date, remained in Continuous Service, whereupon this option shall
become fully exercisable with respect to that portion of the shares represented
by that installment.
4. (a) This option may be exercised, to the extent specified above, by
delivering a Notice of Exercise (in the form attached hereto or such other form
designated by the Company) together with the exercise price to the Secretary of
the Company, or to such other person as the Company may designate, during
regular business hours, together with such additional documents as the Company
may then require.
(b) This option may only be exercised for whole shares.
1.
(c) You may elect to pay the exercise price under one of the
following alternatives:
(i) In cash (or check) at the time of exercise;
(ii) Payment pursuant to a program developed under Regulation T
as promulgated by the Federal Reserve Board which results in the receipt of cash
(or check) by the Company either prior to the issuance of shares of the Common
Stock or pursuant to the terms of irrevocable instructions issued by you prior
to the issuance of shares of the Common Stock; or
(iii) Payment by a combination of the methods of payment
specified in subparagraphs (i) and (ii) above.
(d) By exercising this option you agree that the Company may require
you to enter an arrangement providing for the cash payment by you to the Company
of any tax withholding obligation of the Company arising by reason of the
exercise of this option.
5. The term of this option is ten (10) years measured from the date of
grant, subject, however, to earlier termination upon your termination of
service, as set forth in Sections 6(f), (g), (h) and (i) of the Plan.
6. Any notices provided for in this option or the Plan shall be given in
writing and shall be deemed effectively given upon receipt or, in the case of
notices delivered by the Company to you, five (5) days after deposit in the
United States mail, postage prepaid, addressed to you at the address specified
below or at such other address as you hereafter designate by written notice to
the Company.
7. This option is subject to all the provisions of the Plan, a copy of
which is attached hereto and its provisions are hereby made a part of this
option, and is further subject to all interpretations, amendments, rules and
regulations which may from time to time be promulgated and adopted pursuant to
the Plan. In the event of any conflict between the provisions of this option and
those of the Plan, the provisions of the Plan shall control.
Very truly yours,
QUALCOMM Incorporated
By: _____________________________________
Duly authorized on behalf
of the Board of Directors
ATTACHMENTS: Notice of Exercise
1998 Non-Employee Directors' Stock Option Plan
2.
QUALCOMM INCORPORATED
1998 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
NOTICE OF EXERCISE
QUALCOMM Incorporated
6455 Lusk Blvd.
San Diego, CA 92121 Date of Exercise: ____________________
Ladies and Gentlemen:
This constitutes notice under my stock option that I elect to purchase
the number of shares for the price set forth below.
Type of option: Nonstatutory
Stock option dated: ___________________
Number of shares for
which option is exercised: ___________________
Certificates to be
issued in name of: ___________________
Total exercise price: $__________________
Cash payment delivered
herewith: $__________________
Value of ______ shares of
common stock delivered herewith(1): $__________________
By this exercise, I agree (i) to provide such additional documents as
you may require pursuant to the terms of the Company's 1998 Non-Employee
Directors' Stock Option Plan and (ii) to provide for the payment by me to you
(in the manner designated by you) of your withholding obligation, if any,
relating to the exercise of this option.
Very truly yours,
___________________________________
- -----------
(1) Shares must meet the public trading requirements set forth in the option.
Shares must be valued in accordance with the terms of the option being
exercised, must have been owned for the minimum period required in the
option, and must be owned free and clear of any liens, claims, encumbrances
or security interests. Certificates must be endorsed or accompanied by an
executed assignment separate from certificate.
1.
QUALCOMM INCORPORATED
1998 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
NONSTATUTORY STOCK OPTION
(ANNUAL OPTION)
______________________, Optionee:
On ________________, 19___, an option to purchase shares of common stock
("Common Stock") was automatically granted to you (the "Optionee") pursuant to
the QUALCOMM Incorporated (the "Company") 1998 Non-Employee Directors' Stock
Option Plan (the "Plan"). This option is not intended to qualify and will not be
treated as an "incentive stock option" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). Capitalized terms not
explicitly defined in this agreement shall have the meaning assigned to such
terms in the Plan.
The details of your option are as follows:
1. The total number of shares of Common Stock subject to this option is
ten thousand (10,000).
2. The exercise price of this option is _____________________
($________) per share, such amount being equal to the Fair Market Value of the
Common Stock on the date of grant of this option.
3. Subject to the limitations contained herein, this option shall become
exercisable (i.e., vest) in five (5) equal annual installments with each
installment becoming exercisable on January 15 of each of the first, second,
third, fourth and fifth years following the date of the grant; provided,
however, that you have, during the period from the date of grant to such vesting
date, remained in Continuous Service, whereupon this option shall become fully
exercisable with respect to that portion of the shares represented by that
installment.
4. (a) This option may be exercised, to the extent specified above, by
delivering a Notice of Exercise (in the form attached hereto or such other form
designated by the Company) together with the exercise price to the Secretary of
the Company, or to such other person as the Company may designate, during
regular business hours, together with such additional documents as the Company
may then require.
(b) This option may only be exercised for whole shares.
(c) You may elect to pay the exercise price under one of the
following alternatives:
(i) In cash (or check) at the time of exercise;
1.
(ii) Payment pursuant to a program developed under Regulation T
as promulgated by the Federal Reserve Board which results in the receipt of cash
(or check) by the Company either prior to the issuance of shares of the Common
Stock or pursuant to the terms of irrevocable instructions issued by you prior
to the issuance of shares of the Common Stock; or
(iii) Payment by a combination of the methods of payment
specified in subparagraphs (i) and (ii) above.
(d) By exercising this option you agree that the Company may require
you to enter an arrangement providing for the cash payment by you to the Company
of any tax withholding obligation of the Company arising by reason of the
exercise of this option.
5. The term of this option is ten (10) years measured from the date of
grant, subject, however, to earlier termination upon your termination of
service, as set forth in Sections 6(f), (g), (h) and (i) of the Plan.
6. Any notices provided for in this option or the Plan shall be given in
writing and shall be deemed effectively given upon receipt or, in the case of
notices delivered by the Company to you, five (5) days after deposit in the
United States mail, postage prepaid, addressed to you at the address specified
below or at such other address as you hereafter designate by written notice to
the Company.
7. This option is subject to all the provisions of the Plan, a copy of
which is attached hereto and its provisions are hereby made a part of this
option, and is further subject to all interpretations, amendments, rules and
regulations which may from time to time be promulgated and adopted pursuant to
the Plan. In the event of any conflict between the provisions of this option and
those of the Plan, the provisions of the Plan shall control.
Very truly yours,
QUALCOMM Incorporated
By: __________________________________
Duly authorized on behalf
of the Board of Directors
ATTACHMENTS: Notice of Exercise
1998 Non-Employee Directors' Stock Option Plan
2.
QUALCOMM INCORPORATED
1998 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
NOTICE OF EXERCISE
QUALCOMM Incorporated
6455 Lusk Blvd.
San Diego, CA 92121 Date of Exercise: ___________________
Ladies and Gentlemen:
This constitutes notice under my stock option that I elect to purchase
the number of shares for the price set forth below.
Type of option: Nonstatutory
Stock option dated: _________________
Number of shares for
which option is exercised: _________________
Certificates to be
issued in name of: _________________
Total exercise price: $________________
Cash payment delivered
herewith: $________________
Value of ______ shares of
common stock delivered herewith(1): $________________
By this exercise, I agree (i) to provide such additional documents as
you may require pursuant to the terms of the Company's 1998 Non-Employee
Directors' Stock Option Plan and (ii) to provide for the payment by me to you
(in the manner designated by you) of your withholding obligation, if any,
relating to the exercise of this option.
Very truly yours,
_____________________________________
- -----------
(1) Shares must meet the public trading requirements set forth in the option.
Shares must be valued in accordance with the terms of the option being
exercised, must have been owned for the minimum period required in the
option, and must be owned free and clear of any liens, claims, encumbrances
or security interests. Certificates must be endorsed or accompanied by an
executed assignment separate from certificate.
1.
QUALCOMM INCORPORATED
1991 STOCK OPTION PLAN
ADOPTED BY THE BOARD OF DIRECTORS AUGUST 19, 1991 AS
AMENDED BY THE BOARD OF DIRECTORS ON MAY 4, 1992,
SEPTEMBER 8, 1993, AND NOVEMBER 14, 1994 AS AMENDED
BY THE COMPENSATION COMMITTEE ON NOVEMBER 11, 1994
AS AMENDED BY THE BOARD OF DIRECTORS ON NOVEMBER 6,
1995, NOVEMBER 18, 1996, AND NOVEMBER 17, 1997
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its Affiliates,
may be given an opportunity to purchase stock of the Company.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company, to
secure and retain the services of new Employees, Directors and Consultants, and
to provide incentives for such persons to exert maximum efforts for the success
of the Company.
(c) The Company intends that Options issued under the Plan shall, in the
discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either Incentive Stock Options or Non-qualified Stock Options. All Options shall
be separately designated Incentive Stock Options or Non-qualified Stock Options
at the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(e) "COMPANY" means QUALCOMM Incorporated, a Delaware corporation.
1.
(f) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render services and who is compensated for such
services, provided that the term "Consultant" shall not include Directors who
are paid only a director's fee by the Company or who are not compensated by the
Company for their services as Directors.
(g) "CONTINUOUS SERVICE AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means
that the service of an individual to the Company, whether as an Employee,
Director or Consultant, is not interrupted or terminated. The Board or the chief
executive officer of the Company may determine, in that party's sole discretion,
whether Continuous Service as an Employee, Director or Consultant shall be
considered interrupted in the case of: (i) any leave of absence approved by the
Board or the chief executive officer, including sick leave, military leave, or
any other personal leave; or (ii) transfers between the Company or between the
Company, Affiliates or their successors. The term of each Option may be extended
at the discretion of the Board or the chief executive officer (but not beyond
ten (10) years from the date of original grant) for the period of any such
approved leave of absence.
(h) "COVERED EMPLOYEE" means the chief executive officer and the four
(4) other highest compensated officers of the Company.
(i) "DIRECTOR" means a member of the Board.
(j) "DISABILITY" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(k) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(m) "FAIR MARKET VALUE" means, as of any date, the value of the common
stock of the Company determined as follows:
(i) If the common stock is listed on any established stock exchange
or traded on the National Market of the Nasdaq Stock Market, the Fair Market
Value of a share of common stock shall be the average of the highest and lowest
price at which the common stock was sold on such exchange or national market on
the last market trading day prior to the date as of which the determination is
to be made;
(ii) If the common stock is quoted on the Nasdaq Stock Market (but
not on the National Market thereof) or is regularly quoted by a recognized
securities dealer
2.
but selling prices are not reported, the Fair Market Value of a share of common
stock shall be the mean between the high bid and high asked prices for the
common stock on the last market trading day prior to the day of determination,
as reported in The Wall Street Journal or such other source as the Board deems
reliable;
(iii) In the absence of an established market for the common stock,
the Fair Market Value shall be determined in good faith by the Board.
(n) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
("Regulation S-K")), does not possess an interest in any other transaction as to
which disclosure would be required under Item 404(a) of Regulation S-K, and is
not engaged in a business relationship as to which disclosure would be required
under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a
"non-employee director" for purposes of Rule 16b-3.
(p) "NON-QUALIFIED STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.
(q) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(r) "OPTION" means a stock option granted pursuant to the Plan.
(s) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
The Option Agreement is subject to the terms and conditions of the Plan.
(t) "OPTIONED STOCK" means the common stock of the Company subject to an
Option.
(u) "OPTIONEE" means an Employee or Consultant who holds an outstanding
Option.
(v) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (as defined in the
Treasury
3.
regulations promulgated under Section 162(m) of the Code), is not a former
employee of the Company or an affiliated corporation receiving compensation for
prior services (other than benefits under a tax qualified pension plan), was not
an officer of the Company or an affiliated corporation at any time, and is not
currently receiving direct or indirect remuneration in any capacity other than
as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(w) "PLAN" means this 1991 Stock Option Plan.
(x) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3, as in effect with respect to the Company when discretion is being
exercised with respect to the Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons eligible
under the Plan shall be granted Options; when and how the Option shall be
granted; whether the Option will be an Incentive Stock Option or a Non-qualified
Stock Option; the provisions of each Option granted (which need not be
identical), including the time or times such Option may be exercised in whole or
in part; and the number of shares for which an Option shall be granted to each
such person.
(ii) To construe and interpret the Plan and Options granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Option Agreement, in a
manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.
(iii) To amend the Plan or an Option as provided in Section 11.
(iv) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company.
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members (the "Committee"), all of the members
of which Committee shall be, in the discretion of the Board, Non-Employee
Directors and/or Outside Directors. If administration is delegated to a
Committee, the Committee shall have, in connection with the administration of
the Plan, the powers theretofore possessed
4.
by the Board, including the power to delegate to a subcommittee of two (2) or
more Outside Directors any of the administrative powers the Committee is
authorized to exercise (and references in this Plan to the Board shall
thereafter be to the Committee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. The Board may abolish the Committee at any time and revest in
the Board the administration of the Plan. Notwithstanding anything in this
Section 3 to the contrary, the Board or the Committee may delegate to a
committee of one or more members of the Board the authority to grant Options to
eligible persons who (1) are not then subject to Section 16 of the Exchange Act
and/or (2) are either (i) not then Covered Employees and are not expected to be
Covered Employees at the time of recognition of income resulting from such
Option, or (ii) not persons with respect to whom the Company wishes to comply
with Section 162(m) of the Code.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 10 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to Options shall not
exceed in the aggregate thirty-three million four hundred thousand (33,400,000)
shares of the Company's common stock; provided, however, that of such
thirty-three million four hundred thousand (33,400,000) shares, not more than
five million three hundred twenty-four thousand four hundred eighty (5,324,480)
shares of the Company's common stock (after giving effect to a 2:1 split in the
Company's common stock effective February 16, 1994) shall be issued as a
consequence of the assumption of options to acquire common stock of QUALCOMM,
Inc., a California corporation, (the "Predecessor Company") pursuant to the
Predecessor Company's Stock Option Plan, which plan has been terminated. If any
Option shall for any reason expire or otherwise terminate without having been
exercised in full, the stock not purchased under such Option shall again become
available for issuance pursuant to exercises of options granted under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, whether bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to Employees.
Non-qualified Stock Options may be granted only to Employees, Directors or
Consultants.
(b) No person shall be eligible for the grant of an Incentive Stock
Option if, at the time of grant, such person owns (or is deemed to own pursuant
to Section 424(d) of the Code) stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or of any
of its Affiliates unless the exercise price of such Incentive Stock Option is at
least one hundred ten percent (110%) of the
5.
Fair Market Value of such stock at the date of grant and the Incentive Stock
Option is not exercisable after the expiration of five (5) years from the date
of grant.
(c) No Employee shall be eligible to be granted in any calendar year
Options covering more than two percent (2%) of the total number of shares of the
Company's common stock outstanding on the record date for the Company's 1995
Annual Meeting of Stockholders (1,293,860 shares).
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms
and conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) PRICE. The exercise price of each Option shall be not less than one
hundred percent (100%) of the fair market value of the stock subject to the
Option on the date the Option is granted. Notwithstanding the foregoing, an
Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be
granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another option in a manner satisfying the provisions of Section 424(a) of the
Code.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the option is exercised, or (ii) at
the discretion of the Board or the Committee, either at the time of the grant or
exercise of the Option, (A) by delivery to the Company of other common stock of
the Company or (B) according to a deferred payment arrangement, except that
payment of the common stock's "par value" (as defined in the Delaware General
Corporation Law) shall not be made by deferred payment, or other arrangement
(which may include, without limiting the generality of the foregoing, the use of
other common stock of the Company) with the person to whom the Option is granted
or to whom the Option is transferred pursuant to subsection 6(d) in any other
form of legal consideration that may be acceptable to the Board.
In the case of any deferred payment arrangement, interest shall be
payable at least annually and shall be charged at the minimum rate of interest
necessary to avoid the treatment as interest, under any applicable provisions of
the Code, of any amounts other than amounts stated to be interest under the
deferred payment arrangement.
6.
(d) TRANSFERABILITY. An Incentive Stock Option shall not be transferable
except by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the person to whom the Incentive Stock Option
is granted only by such person. A Non-qualified Stock Option shall be
transferable by the Optionee only upon such terms and conditions as set forth in
the Option Agreement for such Non-qualified Stock Option, as the Board or the
Committee shall determine in its discretion. The person to whom the Option is
granted may, by delivering written notice to the Company, in a form satisfactory
to the Company, designate a third party who, in the event of the death of the
Optionee, shall thereafter be entitled to exercise the Option.
(e) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. During the remainder of the term of the Option (if its term extends
beyond the end of the installment periods), the Option may be exercised from
time to time with respect to any shares then remaining subject to the Option.
The provisions of this subsection 6(e) are subject to any Option provisions
governing the minimum number of shares as to which an Option may be exercised.
(f) SECURITIES LAW COMPLIANCE. The Company may require any Optionee, or
any person to whom an Option is transferred under subsection 6(d), as a
condition of exercising any such Option, (1) to give written assurances
satisfactory to the Company as to the Optionee's knowledge and experience in
financial and business matters and/or to employ a purchaser representative
reasonably satisfactory to the Company who is knowledgeable and experienced in
financial and business matters, and that he or she is capable of evaluating,
alone or together with the purchaser representative, the merits and risks of
exercising the Option; and (2) to give written assurances satisfactory to the
Company stating that such person is acquiring the stock subject to the Option
for such person's own account and not with any present intention of selling or
otherwise distributing the stock. These requirements, and any assurances given
pursuant to such requirements, shall be inoperative if (i) the issuance of the
shares upon the exercise of the Option has been registered under a then
currently effective registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), or (ii) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws.
(g) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A CONSULTANT OR
DIRECTOR. In the event an Optionee's Continuous Service as an Employee, Director
or Consultant terminates (other than upon the Optionee's death or Disability),
the Optionee
7.
may exercise his or her Option, but only within such period of time as is
determined by the Board, and only to the extent that the Optionee was entitled
to exercise it at the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Option Agreement). In
the case of an Incentive Stock Option, the Board shall determine such period of
time (in no event to exceed ninety (90) days from the date of termination) when
the Option is granted. If, at the date of termination, the Optionee is not
entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance pursuant to Options granted under the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time specified in
the Option Agreement, the Option shall terminate, and the shares covered by such
Option shall revert to and again become available for issuance pursuant to
Options granted under the Plan.
(h) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous
Service as an Employee, Director or Consultant terminates as a result of the
Optionee's Disability, then: (i) the Option may continue under its original
terms, if so provided in the Option Agreement, or (ii) if the Option Agreement
does not provide for the continuation of the Option under its original terms,
then the Optionee may exercise his or her Option, but only within twelve (12)
months from the date of such termination (or such shorter period specified in
the Option Agreement), and only to the extent that the Optionee was entitled to
exercise it at the date of such termination (but in no event later than the
expiration of the term of such Option as set forth in the Option Agreement). If,
at the date of termination, the Option does not continue under its original
terms and the Optionee is not entitled to exercise his or her entire Option, the
shares covered by the unexercisable portion of the Option shall revert to and
again become available for issuance pursuant to Options granted under the Plan.
If, after termination, the Option does not continue under its original terms and
the Optionee does not exercise his or her Option within the time specified in
the Option Agreement, the Option shall terminate, and the shares covered by such
Option shall revert to and again become available for issuance pursuant to
Options granted under the Plan.
(i) DEATH OF OPTIONEE. In the event an Optionee's Continuous Service as
an Employee, Director or Consultant terminates as a result of Optionee's death
or due to the Optionee's Disability and such termination due to Disability is
followed by the Optionee's death, then: (i) the vesting of all unvested shares
may be accelerated as of the date of the death of the Optionee, if so provided
in the Option Agreement, or (ii) if the Option Agreement does not provide for
the acceleration of the vesting of all unvested shares, then Option may be
exercised, at any time within twelve (12) months following the date of death (or
such shorter period specified in the Option Agreement) (but in no event later
than the expiration of the term of such Option as set forth in the Option
Agreement), by the Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent the
Optionee was entitled to
8.
exercise the Option at the date of death. If, the Option Agreement does not
provide for the acceleration of the vesting of all unvested shares and, at the
time of death, the Optionee was not entitled to exercise his or her entire
Option, the shares covered by the unexercisable portion of the Option shall
revert to and again become available for issuance pursuant to Options granted
under the Plan. If, after death, the Optionee's estate or a person who acquired
the right to exercise the Option by bequest or inheritance does not exercise the
Option within the time specified herein, the Option shall terminate, and the
shares covered by such Option shall revert to and again become available for
issuance pursuant to Options granted under the Plan.
(j) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to a repurchase right in favor of the Company or to any
other restriction the Board determines to be appropriate.
(k) WITHHOLDING. To the extent provided by the terms of an Option
Agreement, the Optionee may satisfy any federal, state or local tax withholding
obligation relating to the exercise of such Option by any of the following means
or by a combination of such means: (1) tendering a cash payment; (2) authorizing
the Company to withhold shares from the shares of the common stock otherwise
issuable to the participant as a result of the exercise of the Option; or (3)
delivering to the Company owned and unencumbered shares of the common stock of
the Company.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the Options, the Company shall keep available at
all times the number of shares of stock required to satisfy such Options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Options; provided, however,
that this undertaking shall not require the Company to register under the
Securities Act either the Plan, any Option or any stock issued or issuable
pursuant to any such Option. If, after reasonable efforts, the Company is unable
to obtain from any such regulatory commission or agency the authority which
counsel for the Company deems necessary for the lawful issuance and sale of
stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such Options unless and until
such authority is obtained.
8. USE OF PROCEEDS FROM STOCK.
9.
Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.
9. MISCELLANEOUS.
(a) The Board shall have the power to accelerate the time at which an
option may first be exercised or the time during which an Option or any part
thereof will vest pursuant to subsection 6(e) only for purposes of allowing
early exercise, notwithstanding the provisions in the Option stating the time at
which it may first be exercised or the time during which it will vest.
(b) Neither an Optionee nor any person to whom an Option is transferred
under subsection 6(d) shall be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares subject to such Option unless and
until such person has satisfied all requirements for exercise of the Option
pursuant to its terms.
(c) Nothing in the Plan or any instrument executed or Option granted
pursuant thereto shall confer upon any Employee, Director or Consultant or
Optionee any right to continue in the service of the Company or any Affiliate or
shall affect the right of the Company or any Affiliate to terminate the
employment of any Employee, with or without cause, to remove any Director as
provided in the Company's By-Laws and the provisions of the General Corporation
Law of the State of Delaware, or to terminate the relationship of any Consultant
subject to the terms of that Consultant's agreement with the Company or
Affiliate to which such Consultant is providing services.
(d) To the extent that the aggregate Fair Market Value (determined at
the time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Non-qualified Stock
Options.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any Option (through merger, consolidation, reorganization, recapitalization,
stock dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration of the
Company), the Plan will be appropriately adjusted in the type(s) and maximum
number of securities subject to the Plan as well as the maximum number of
securities subject to award to any Employee during any calendar year pursuant to
subsection 5(c), and each outstanding Option will be appropriately adjusted in
the type(s), number of securities, and price per share of stock subject to the
10.
outstanding Option. Such adjustments shall be made by the Board or Committee,
the determination of which shall be final, binding and conclusive. (The
conversion of any convertible securities of the Company shall not be treated as
a "transaction not involving the receipt of consideration by the Company.")
(b) In the event of: (1) a merger or consolidation in which the Company
is not the surviving corporation or (2) a reverse merger in which the Company is
the surviving corporation but the shares of the Company's common stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or otherwise
then to the extent permitted by applicable law: (i) any surviving corporation
shall assume any Options outstanding under the Plan or shall substitute similar
Options for those outstanding under the Plan, or (ii) such Options shall
continue in full force and effect. In the event any surviving corporation
refuses to assume or continue such Options, or to substitute similar options for
those outstanding under the Plan, then, with respect to options held by persons
then performing services as Employees, Directors or Consultants for the Company,
the time at which such Options may first be exercised shall be accelerated and
the Options terminated if not exercised prior to such event. In the event of a
dissolution or liquidation of the Company, any Options outstanding under the
Plan shall terminate if not exercised prior to such event.
(c) In addition, with respect to any person who was providing
Continuous Service as an Employee, Director or Consultant immediately prior to
the consummation of the Change in Control, any Options held by such person shall
immediately become fully vested and exercisable (and any repurchase right by the
Company with respect to shares acquired by such person under an Option shall
lapse) if such person is Involuntarily Terminated Without Cause or
Constructively Terminated within twenty-four (24) months following the Change in
Control. Notwithstanding the preceding sentence, in the event all of the
following occurs: (i) such contemplated Change in Control would occur prior to
December 18, 1999 (the date two (2) years following the adoption of this Section
10(c)); (ii) such potential acceleration of vesting (and exercisablilty) would
by itself result in a contemplated Change in Control that would otherwise be
eligible to be accounted for as a "pooling of interests" accounting transaction
to become ineligible for such accounting treatment; and (iii) the potential
acquiror of the Company desires to account for such contemplated Change in
Control as a "pooling of interests" transaction, then such acceleration shall
not occur. Additionally, in the event that the restrictions upon acceleration
provided for in the immediately preceding sentence by itself would result in a
contemplated Change in Control to become ineligible to be accounted for as a
"pooling of interests" accounting transaction, then such restrictions shall be
deemed inoperative. Accounting issues shall be determined by the Company's
independent public accountants applying generally accepted accounting
principles.
For purposes of the Plan, Constructively Terminated shall mean the
voluntary termination of employment by Optionee after any of the following are
undertaken without Optionee's express written consent: (a) the assignment to
Optionee of any duties or responsibilities which result in a material diminution
or adverse change of Optionee's position, status or circumstances of employment,
but does not include a mere change in title or reporting relationship; (b)
reduction by the Company in Optionee's base salary; (c) any failure by the
Company to continue in effect any benefit plan or arrangement, including
incentive plans or plans to receive securities of the Company, in which Optionee
is participating (hereinafter referred to as "Benefit Plans"), or the taking of
any action by the Company which would adversely affect Optionee's participation
in or reduce Optionee's benefits under any Benefit Plans or deprive Optionee of
any fringe benefit then enjoyed by Optionee, provided, however, that Optionee's
termination is not deemed to be Constructively Terminated if the Company offers
a range of benefit plans and programs which, taken as a whole, are comparable to
the Benefit Plans; (d) a relocation of Optionee or the Company's principal
business offices to a location more than fifty (50) miles from the location at
which Optionee performs duties, except for required travel by Optionee on the
Company's business to an extent substantially consistent with Optionee's
business travel obligations; (e) any breach by the Company of any material
agreement between Optionee and the Company concerning Optionee's employment; or
(f) any failure by the Company to obtain the assumption of any material
agreement between Optionee and the Company concerning Optionee's employment by
any successor or assign of the Company.
For purposes of the Plan, Involuntarily Terminated Without Cause shall
mean dismissal or discharge of Optionee for any reason other than Cause, death
or Disability.
For purposes of the Plan, Cause shall mean any of the following: (a) an
intentional act which materially injures the Company; (b) an intentional refusal
or failure to follow lawful and reasonable directions of the Board or an
individual to whom participant reports (as appropriate); (c) a willful and
habitual neglect of duties; or (d) a conviction of a felony involving moral
turpitude which is reasonably likely to inflict or has inflicted material injury
on the Company.
11. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 10 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(i) Increase the number of shares reserved for options under the
Plan;
(ii) Modify the requirements as to eligibility for participation in
the Plan (to the extent such modification requires stockholder approval in order
for the Plan to satisfy the requirements of Section 422 of the Code); or
(iii) Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to satisfy the requirements of
Section 422 of the Code or to comply with the requirements of Rule 16b-3.
(b) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith.
11.
(c) Rights and obligations under any Option granted before amendment of
the Plan or of such Option shall not be impaired by any amendment of the Plan
unless (i) the Company requests the consent of the person to whom the Option was
granted and (ii) such person consents in writing.
(d) The Board at any time, and from time to time, may amend the terms of
any one or more Options; provided, however, that the rights and obligations
under any Option shall not be impaired by any such amendment unless (i) the
Company requests the consent of the person to whom the Option was granted and
(ii) such person consents in writing, and; provided, further, that any repricing
of outstanding Options shall in no event apply to Officers as defined in
subsection 2(q) or to persons denominated as officers of the Company by the
Board.
(e) The Board may in its sole discretion submit any other amendment to
the Plan for stockholder approval, including, but not limited to, amendments to
the Plan intended to satisfy the requirements of Section 162(m) of the Code and
the regulations promulgated thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.
12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on August 18, 2001, which shall be
within ten (10) years from the date the Plan is adopted by the Board or approved
by the stockholders of the Company, whichever is earlier. No Options may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Option granted while the Plan is in
effect shall not be altered by suspension or termination of the Plan, except
with the consent of the person to whom the Option was granted.
13. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no
Options granted under the Plan shall be exercised unless and until the Plan has
been approved by the stockholders of the Company.
12.
PRELIMINARY PROXY MATERIALS
PROXY QUALCOMM INCORPORATED PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 10, 1998
The undersigned hereby appoints Irwin Mark Jacobs and Harvey P. White, 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 6455 Lusk Boulevard, San Diego,
California 92121 on Tuesday, February 10, 1998 at 9:00 a.m. local time and at
any and all continuations and 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.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR ALL
NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSALS 2, 3, 4, 5 AND 6 AS MORE
SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE
INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
YOUR VOTE IS IMPORTANT. THEREFORE, YOU ARE URGED TO COMPLETE, SIGN, DATE,
AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE.
(Continued and to be signed on other side)
QUALCOMM INCORPORATED
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
NOMINEES FOR DIRECTOR AND FOR PROPOSALS 2, 3, 4, 5 AND 6.
1. To elect four directors whether by cumulative voting or otherwise, to hold
office until the 2001 Annual Meeting of Stockholders.
NOMINEES: Irwin Mark Jacobs, Andrew J. Viterbi, Adelia A. Coffman and
Neil Kadisha
For All Withhold All For All Except Nominee Exception
(INSTRUCTION: To withhold authority to vote for any nominee(s) write such
nominee(s)' name(s) above.)
2. To approve the Company's Restated Certificate of Incorporation, as amended.
3. To approve the Company's 1991 Stock Option Plan, as amended.
4. To approve the Company's 1991 Employee Stock Purchase Plan, as amended.
5. To approve the Company's 1998 Non-Employee Directors' Stock Option Plan as
an amendment and restatement of the Company's existing Non-Employee
Directors' Stock Option Plan.
6. To ratify the selection of Price Waterhouse LLP as the Company's
independent accountants for the Company's fiscal year ending September 27,
1998.
FOR AGAINST ABSTAIN
Please vote, date and promptly return this
proxy in the enclosed return envelope which
is postage prepaid if mailed in the United
States.
DATED____________________________, 1998
________________________________________
Signature
________________________________________
Signature
Please sign exactly as your name appears hereon. If the stock is registered in
the names of two or more persons, each should sign. Executors, administrators,
trustees, guardians and attorneys-in-fact should add their titles. If signer is
a corporation, please give full corporate name and have a duly authorized
officer sign, stating title. If signer is a partnership, please sign in
partnership name by authorized person.