Filed On 1/18/08 1:11pm ET · SEC File 0-19528 · Accession Number 936392-8-56
As Of Filer Filing As/For/On Docs:Pgs Issuer Agent
1/18/08 Qualcomm Inc/DE DEF 14A 3/11/08 1:224 Bowne of San Diego/FA
Definitive Proxy Solicitation Material · Schedule 14A
Filing Table of Contents
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1: DEF 14A Definitive Proxy Statement HTML 1,340K
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)) |
| [X] |
Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to
Section 240.14a-12 |
QUALCOMM INCORPORATED
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required. |
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Fee computed on table
below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Fee paid previously with
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Check box if any part
of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting fee was paid previously. Identify
the previous filing by registration statement number, or the Form or Schedule
and the date of its filing. |
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Dear Fellow Stockholder:
You are cordially invited to attend your Company’s annual
meeting on Tuesday,
March 11, 2008. The meeting will begin
promptly at 9:30 a.m. local time at Copley Symphony Hall,
750 B Street,
San Diego,
California 92101. I
invite you to arrive early at 8:30 a.m. local time to
preview our product displays. We will begin the meeting with a
discussion and voting on matters set forth in the accompanying
Notice of Annual Meeting of Stockholders followed by
presentations and a report on your Company’s fiscal 2007
performance. In addition to the election of our directors
(Proposal 1) and ratification of our selection of
independent public accountants (Proposal 3), there is one
other substantive proposal on the agenda that I would like to
highlight.
Proposal 2 amends our 2006 Long-Term Incentive Plan. We
believe that offering broad-based equity compensation programs
is critical to attracting and retaining the finest people in our
industry. Employees with a stake in the future success of our
business are highly motivated to achieve long-term growth and
increase stockholder value. One of the purposes of
Proposal 2 is to provide us with a sufficient share
reserve, for the next two years, to continue to provide new
hires, as well as our existing employees with opportunities for
equity ownership in a dynamic and highly competitive employment
market. Equity compensation is a significant component of our
long-term employee compensation program because we do not offer
a defined benefit pension plan and we do not include Company
stock in our 401(k) plan. Over 99% of our regular, full-time
employees currently have stock options.
We take great pride in our accomplishments and believe that our
broad-based equity compensation programs have contributed
significantly to this success. Based on the 4-week moving
average as of
December 21, 2007,
our Company’s stock
price has increased at a compound annual growth rate of 30.74%
vs. 8.68%for the S&P 500 Index since
the Company became
publicly owned in December 1991. In each of the past nine years,
Qualcomm has been honored as one of the
“100 Best Companies
to Work for in America” by Fortune Magazine. The annual
retention rate of our employees is higher than other high
technology industry companies, according to Radford Surveys, a
leading human resources compensation survey company in the
high-tech industry.
Please review the enclosed proxy materials carefully and send in
your vote today. I look forward to seeing you in San Diego.
Your vote is very important to us. I urge you to vote
“FOR” all proposals.
Please review the enclosed proxy materials carefully and vote
today.
Sincerely,
Paul E. Jacobs
Chief Executive Officer
5775 Morehouse Drive
San Diego, California
92121-1714
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
To the Stockholders of QUALCOMM Incorporated:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders
of QUALCOMM Incorporated, a Delaware corporation
(
“Qualcomm” or the
“Company”), will be held
at Copley Symphony Hall, 750 B Street,
San Diego,
California 92101, on Tuesday,
March 11, 2008 at
8:30 a.m. local time for previewing product displays, and
9:30 a.m. local time for the following purposes:
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To elect ten directors to hold office until the next annual
stockholders’ meeting or until their respective successors
have been elected or appointed.
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To approve amendments to the 2006 Long-Term Incentive Plan and
an increase in the share reserve by 115,000,000 shares.
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To ratify the selection of PricewaterhouseCoopers LLP as the
Company’s independent public accountants for the
Company’s fiscal year ending September 28, 2008.
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To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
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The Board of Directors has fixed the close of business on
January 14, 2008 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,
Donald J. Rosenberg
Executive Vice President,
General Counsel and Corporate Secretary
San Diego, California
How
You Can Vote
If you are a stockholder whose
shares are registered in your name, you may vote your shares by
one of the three following methods:
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Vote by
Internet, by going to
the web address
http://www.proxyvote.com
and following the instructions for Internet voting shown on the
enclosed proxy card.
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Vote by
Telephone, by dialing
1-800-690-6903
and following the instructions for telephone voting shown on the
enclosed proxy card.
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Vote by Proxy
Card, by completing,
signing, dating and mailing the enclosed proxy card in the
envelope provided. If you vote by Internet or telephone, please
do not mail your proxy card.
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If your shares are held in
“street name” (through a broker, bank or other
nominee), you may receive a separate voting instruction form
with this Proxy Statement, or you may need to contact your
broker, bank or other nominee to determine whether you will be
able to vote electronically using the Internet or telephone.
PLEASE NOTE THAT IF YOUR SHARES ARE HELD OF RECORD BY A
BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE
MEETING, YOU WILL NOT BE PERMITTED TO VOTE IN PERSON AT THE
MEETING UNLESS YOU FIRST OBTAIN A LEGAL PROXY ISSUED IN YOUR
NAME FROM THE RECORD HOLDER.
In this document, the words “Qualcomm,”
“we,” “our,” “ours” and
“us” refer only to QUALCOMM Incorporated and not any
other person or entity.
ELECTRONIC
DELIVERY OF QUALCOMM STOCKHOLDER COMMUNICATIONS
We are pleased to offer to our stockholders the benefits and
convenience of electronic delivery of annual meeting materials,
including:
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Email delivery of the proxy statement, annual report and related
materials;
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Stockholder voting on-line;
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Reduction of the amount of bulky documents stockholders
receive; and
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Reduction of our printing and mailing costs associated with more
traditional delivery methods.
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We encourage you to conserve natural resources and to reduce
printing and mailing costs by signing up for electronic delivery
of Qualcomm stockholder communications.
If you are a registered stockholder, or a broker or other
nominee holds your Qualcomm shares, and you would like to
sign-up for
electronic delivery, please visit
www.icsdelivery.com/qcom/index.html to enroll. Your
electronic delivery enrollment will be effective until you
cancel it. If you have questions about electronic delivery,
please call Qualcomm Investor Relations at
858-658-4813
or send email to
ir@qualcomm.com.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY
MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
MARCH 11, 2008
Among other things, the proxy statement contains information
regarding:
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The date, time and location of the meeting;
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A list of the matters being submitted to the
stockholders; and
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Information concerning voting in person.
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PROXY
STATEMENT
TABLE OF
CONTENTS
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Appendix 1
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Appendix 2
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QUALCOMM
INCORPORATED
5775 Morehouse Drive
San Diego, California
92121-1714
PROXY STATEMENT
FOR ANNUAL MEETING OF
STOCKHOLDERS
The enclosed proxy is solicited on behalf of the Board of
Directors or (the
“Board”) of QUALCOMM Incorporated, a
Delaware corporation (
“Qualcomm” or the
“Company”), for use at the Annual Meeting of
Stockholders to be held on Tuesday,
March 11, 2008, at
9:30 a.m. local time (the
“Annual Meeting”), or
at any adjournment or postponement thereof, for the purposes set
forth herein and in the accompanying Notice of Annual Meeting.
The Annual Meeting will be held at Copley Symphony Hall,
750 B Street,
San Diego,
California 92101. The
Company intends to mail this proxy statement and accompanying
proxy card on or about
January 22, 2008 to all stockholders
entitled to vote at the Annual Meeting.
Voting
Rights and Outstanding Shares
Only holders of record of common stock at the close of business
on
January 14, 2008 (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
1,616,285,181 shares of common stock outstanding and
entitled to vote.
Each holder of record of common stock on the Record Date will be
entitled to one vote for each share held on all matters to be
voted upon. If no choice is indicated on the proxy, the shares
will be voted in favor of all Proposals.
All votes will be counted by an independent inspector of
election appointed for the meeting, who will separately tabulate
affirmative and negative votes, abstentions and broker non-votes.
Broker
Non-Votes
A broker non-vote occurs when a broker submits a proxy card with
respect to shares of common stock held in a fiduciary capacity
(typically referred to as being held in “street
name”), but declines to vote on a particular matter because
the broker has not received voting instructions from the
beneficial owner. Under the rules that govern brokers who are
voting with respect to shares held in street name, brokers have
the discretion to vote those shares on routine matters, but not
on non-routine matters. Routine matters include the election of
directors and ratification of independent public accountants.
Non-routine matters include actions on stock plans.
Revocability
of Proxies
Any person giving a proxy pursuant to this solicitation has the
power to revoke it at any time before it is voted. It may be
revoked by filing with the Corporate Secretary of
the Company at
the Company’s principal executive offices, 5775 Morehouse
Drive, N-510F, San Diego, California
92121-1714,
a written notice of revocation or a duly executed proxy bearing
a later date, or it may be revoked by attending the meeting and
voting in person. Attendance at the meeting will not, by itself,
revoke a proxy.
Solicitation
The Company will bear the entire cost of solicitation of proxies
including preparation, assembly, printing and mailing of this
proxy statement, the proxy card and any additional information
furnished to stockholders. Copies of solicitation materials will
be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of common stock
beneficially owned by others to forward to such beneficial
owners.
The Company may reimburse persons representing
beneficial owners of common stock for their costs of forwarding
solicitation materials to such beneficial owners. In addition,
the Company has retained Morrow & Company to act as a
proxy solicitor in conjunction with the meeting.
The Company has
agreed to pay that firm $12,500, plus reasonable out-of-pocket
expenses, for proxy solicitation services. Solicitation of
proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular
employees of
the Company. No additional compensation will be
paid to directors, officers or other regular employees for such
services.
Stockholder
Proposals
The deadline for submitting a stockholder proposal for inclusion
in
the Company’s proxy statement and form of proxy for the
Company’s 2009 Annual Meeting of Stockholders is
September 24, 2008. The deadline for submitting a
stockholder proposal or a nomination for director that is not to
be included in such proxy statement and proxy is also
September 24, 2008. Any such stockholder proposals must be
submitted to
the Company’s Corporate Secretary in writing
at 5775 Morehouse Drive, N-510F, San Diego, California
92121-1714.
Stockholders are also advised to review
the Company’s
bylaws, which contain additional advance notice requirements,
including requirements with respect to advance notice of
stockholder proposals and director nominations. For further
information see page 7.
Financial
Information
Attached in Appendix 1 is certain financial information
from our
Form 10-K
for the fiscal year ended
September 30, 2007 that we
originally filed with the Securities and Exchange Commission
(SEC) on
November 8, 2007. We have not undertaken any
updates or revisions to such information since the date it was
originally filed with the SEC. Accordingly, we encourage you to
review Appendix 1 together with any subsequent information
we have filed with the SEC and other publicly available
information.
ELECTION
OF DIRECTORS
The Company’s Restated
Certificate of Incorporation and
Bylaws provide that directors are to be elected at the Annual
Meeting to hold office until the next annual meeting of
stockholders, and until their respective successors are elected
and qualified. Vacancies on the Board resulting from death,
resignation, disqualification, removal or other causes may be
filled by either the affirmative vote of the holders of a
majority of the then-outstanding shares of common stock or by
the affirmative vote of a majority of the remaining directors
then in office, even if less than a quorum of the Board. Newly
created directorships resulting from any increase in the number
of directors may, unless the Board determines otherwise, be
filled only by the affirmative vote of the directors then in
office, even if less than a quorum of the Board. Any director
elected in accordance with a vacancy shall hold office for a
term expiring at the next Annual Meeting of Stockholders and
until such director’s successor shall have been elected and
qualified.
The Company’s Restated
Certificate of Incorporation
provides that the number of directors shall be fixed exclusively
by one or more resolutions adopted from time to time by the
Board. As part of its annual evaluation of its size, the Board,
upon the recommendation of its Governance Committee, has decided
to reduce the number of its members by one and, as a result, has
adopted a resolution reducing the size of the Board to ten
directors effective as of the time stockholders vote on the
election of directors at the Annual Meeting. Mr. Sacerdote
will conclude his service as a director at the 2008 Annual
Meeting; therefore, ten directors will stand for re-election at
the Annual Meeting.
If a quorum is present, the directors will be elected by a
plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote on the
election of directors. Abstentions and broker non-votes have no
effect on the vote. The ten candidates receiving the highest
number of affirmative votes of the shares of common stock
entitled to be voted for such directors will be elected
directors of
the Company. Shares of common stock represented by
executed proxies will be voted, if authority to do so is not
withheld, for the election of the ten nominees named below. In
the event that any nominee should be unavailable for election as
a result of an unexpected occurrence, such shares of common
stock will be voted for the election of such substitute nominee
as the Board may propose. Each person nominated for election has
agreed to serve if elected, and the Board has no reason to
believe that any nominee will be unable to serve.
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The following table sets forth, the nominees for election at
this meeting, information with respect to their ages and
background.
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Director
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Position With QUALCOMM
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Age
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Since
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Barbara T. Alexander
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Director
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2006
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Donald G. Cruickshank
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Director
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2005
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Raymond V. Dittamore
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Director
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2002
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Irwin Mark Jacobs
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Chairman of the Board
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1985
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Paul E. Jacobs
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Chief Executive Officer
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45
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2005
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Robert E. Kahn
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Director
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1997
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Sherry Lansing
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Director
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2006
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Duane A. Nelles
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Director
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1988
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Marc I. Stern
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Director
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1994
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Brent Scowcroft.
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Director
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1994
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Set forth below is biographical information for each person
nominated and each person whose term of office as a director
will continue after the Annual Meeting.
Nominees
for Election at this Meeting
BARBARA
T. ALEXANDER
Barbara T. Alexander, age 59, became a director of the
Company in July 2006. Ms. Alexander has been an independent
consultant since February 2004. From October 1999 to January
2004, she was a senior advisor for UBS, and from January 1992 to
September 1999, she was a Managing Director of Dillon
Read & Co., Inc. Prior to joining UBS,
Ms. Alexander was a managing director in the corporate
finance department of Salomon Brothers. Ms. Alexander is
past chairman of the board of the Joint Center for Housing
Studies at Harvard University and is currently a member of that
board’s executive committee and an executive fellow of the
Joint Center for Housing Studies at Harvard University.
Ms. Alexander also serves as a director of Centex
Corporation, Harrah’s Entertainment, Inc. and Federal Home
Loan Mortgage Corporation (Freddie Mac). She is a graduate of
the University of Arkansas, Fayetteville, where she earned B.S
and M.S. degrees in theoretical mathematics.
DONALD G.
CRUICKSHANK
Sir Donald Gordon Cruickshank, age 65, has served as a
director of
the Company since June 2005. He was Chairman of
Clinovia Group Ltd. from 2004 to 2006 and Formscape Group Ltd.
from 2003 to 2006 and has been a member of the Financial
Reporting Council, the body responsible in the U.K. for
oversight of the Accountancy and Actuarial professions and for
corporate governance standards, since 2002. Sir Donald has
extensive experience in a number of areas, including European
regulation and telecommunications. His career has included
assignments at McKinsey & Co. Inc., Times Newspapers,
Virgin Group plc., Wandsworth Health Authority and the National
Health Service in Scotland. Sir Donald served as Chairman of the
London Stock Exchange plc. from 2000 to 2003 and as Director
General of the U.K.’s Office of Telecommunications (Oftel)
from 1993 to 1998. From 1997 to 2000, he served as Chairman of
Action 2000, the U.K.’s Millennium Bug campaign. In 1998,
Chancellor Gordon Brown appointed him as Chairman of the
Government’s Review of the U.K. banking sector, and from
1999 to 2004, he served as Chairman of SMG plc. one of
Scotland’s leading broadcasters. Sir Donald is a member of
the Institute of Chartered Accountants of Scotland and has
received M.A. and L.L.D. degrees from the University of Aberdeen
and a M.B.A. degree from Manchester Business School.
RAYMOND
V. DITTAMORE
Raymond V. Dittamore, age 64, has served as a director of
the Company since December 2002. Mr. Dittamore is a retired
audit partner of Ernst & Young LLP, an international
accounting firm. Mr. Dittamore retired in 2001 after
35 years of service with that firm, including 14 years
as the managing partner of the firm’s San Diego
office.
3
Mr. Dittamore is also a director of Invitrogen Corporation,
Gen-Probe Incorporated and Digirad Corporation.
Mr. Dittamore received a B.S. degree from San Diego
State University.
IRWIN
MARK JACOBS
Irwin Mark Jacobs, age 74, one of the founders of the
Company, has served as Chairman of the Board of Directors since
it began operations in July 1985. He also served as Chief
Executive Officer of
the Company from July 1985 to June 2005.
Dr. Jacobs received a B.S. degree in Electrical Engineering
from Cornell University and M.S. and Sc.D. degrees from the
Massachusetts Institute of Technology. Dr. Jacobs is a
member of the National Academy of Engineering and the American
Academy of Arts and Sciences and was awarded the National Medal
of Technology in 1994. Dr. Irwin Jacobs is the father of
Dr. Paul Jacobs, our Chief Executive Officer, and Jeffrey
A. Jacobs, President of Qualcomm Global Development.
PAUL E.
JACOBS
Paul E. Jacobs, age 45, has served as a director since June
2005 and as
the Company’s Chief Executive Officer since
July 2005. He served as Group President of the Qualcomm
Wireless & Internet Group from July 2001 to June 2005.
In addition, he served as an Executive Vice President from
February 2000 to June 2005. Dr. Jacobs holds a B.S. degree
in Electrical Engineering and Computer Science, a M.S. degree in
Electrical Engineering and a Ph.D. degree in Electrical
Engineering and Computer Science from the University of
California, Berkeley. Dr. Paul Jacobs is the son of
Dr. Irwin Mark Jacobs, Chairman of Qualcomm’s Board,
and the brother of Jeffrey A. Jacobs, President of Qualcomm
Global Development.
ROBERT E.
KAHN
Robert E. Kahn, age 69, became a director of
the Company in
February 1997. Dr. Kahn is chairman, chief executive
officer and president of the Corporation for National Research
Initiatives (CNRI), which he founded in 1986. From 1972 to 1985,
Dr. Kahn was employed at the U.S. Defense Advanced
Research Projects Agency, where his last position was director
of the Information Processing Techniques Office. From 1966 to
1972, Dr. Kahn was a senior scientist with Bolt Beranek and
Newman, where he was responsible for the system design of the
Arpanet, the first packet switched network. Dr. Kahn
received numerous awards for his pioneering work on the Internet
for which he received the 1997 National Medal of Technology and
the 2005 Presidential Medal of Freedom. Dr. Kahn received a
B.E.E. degree from the City College of New York and M.A. and
Ph.D. degrees from Princeton University. Dr. Kahn holds
numerous honorary degrees and is a member of the National
Academy of Engineering and an Inductee of the National Inventors
Hall of Fame.
SHERRY
LANSING
Sherry Lansing, age 63, became a director of
the Company in
September 2006. Ms. Lansing is the founder and chair of the
Sherry Lansing Foundation, a philanthropic organization focusing
on cancer research, health and education. From 1992 to 2005, she
was the chair of the Motion Picture Group of Paramount Pictures
where she oversaw the release of more than 200 films, including
Academy
Award
®
winners Forrest Gump, Braveheart and Titanic. From 1984 to 1990,
she operated her own production company, Lansing Productions and
co-founded Jaffe/Lansing Productions. In 1980, she became the
film industry’s first female to oversee all aspects of a
studio’s motion picture production when she was appointed
president of production at 20th Century Fox. She holds
additional trustee, chair and advisory positions with the
Friends of Cancer Research, the American Association of Cancer
Research, the American Red Cross Board of Governors, the Carter
Center and Stop Cancer, a non-profit philanthropic group she
founded in partnership with Dr. Armand Hammer.
Ms. Lansing also is a regent of the University of
California and serves as chair of the University Health Services
Committee. She has earned the Woodrow Wilson Award for Corporate
Citizenship, the Distinguished Community Service Award from
Brandeis University, the Alfred P. Sloan, Jr. Memorial
Award, the Horatio Alger Humanitarian Award and an honorary
doctorate in fine arts from the American Film Institute. She
received her B.S. degree from Northwestern University.
4
DUANE A.
NELLES
Duane A. Nelles, age 64, a certified public accountant,
became a director of
the Company in August 1988. Mr. Nelles
has been in the personal investment business since 1987. Prior
to that time, Mr. Nelles was a partner in the international
public accounting firm of Coopers & Lybrand, LLP,
which he joined in 1968. He received a B.A. degree from
Albion College and a M.B.A. degree from the University of
Michigan.
MARC I.
STERN
Marc I. Stern, age 63, became a director of
the Company in
February 1994. Mr. Stern is a member of the Management
Committee of Société Générale Group and the
Chairman of Société Générale’s Global
Investment Management and Services (GIMS) North America unit.
Prior to his appointment as Chairman of GIMS North America
in September 2005, Mr. Stern served as president and a
director of The TCW Group Inc. (TCW), an asset management firm
based in Los Angeles. Société Générale
acquired majority control of TCW in 2001. In addition to his
role at GIMS, Mr. Stern is Vice Chairman of TCW. From 1988
to 1990, Mr. Stern served as president and a director of
SunAmerica, Inc., a financial services company. Prior to joining
SunAmerica, Mr. Stern was managing director and chief
administrative officer of The Henley Group, Inc., a diversified
manufacturing company, and prior thereto was senior vice
president of Allied-Signal Inc., a diversified manufacturing
company. Mr. Stern is also a director of TCW Funds, Inc., a
registered investment company. Mr. Stern received a B.A.
degree from Dickinson College, a M.A. degree from the Columbia
University Graduate School of Public Law and Government and a
J.D. degree from the Columbia University School of Law.
BRENT
SCOWCROFT
Brent Scowcroft, age 82, became a director of
the Company
in December 1994. General Scowcroft is the president of The
Scowcroft Group, Inc., an international business consulting firm
he founded in June 1994. General Scowcroft is also the president
of The Forum for International Policy, a non-profit organization
he founded in 1993 that promotes American leadership and foreign
policy. General Scowcroft served as Assistant to the President
for National Security Affairs for President George H.W. Bush
from January 1989 until January 1993; he also held that position
for President Ford during his term. A retired U.S. Air
Force lieutenant general, General Scowcroft served in numerous
national security posts in the Pentagon and the White House
prior to his appointments as Assistant to the President for
National Security Affairs. General Scowcroft received a B.S.
degree from West Point and M.A. and Ph.D. degrees from Columbia
University and holds numerous honorary degrees.
Required
Vote and Board Recommendation
If a quorum is present and voting, the ten nominees for director
receiving the highest number of votes will be elected as
directors. Abstentions and broker non-votes will each be counted
as present for purposes of determining the presence of a quorum,
but will not have any effect on the outcome of the vote.
THE BOARD
RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH NAMED
NOMINEE.
The Company has adopted a code of ethics that applies to all
Qualcomm employees, including employees of Qualcomm’s
subsidiaries, as well as each member of the Board. The code of
ethics is available on our
website at
www.qualcomm.com
under the
“Corporate Governance” section under
“Investor Relations.” To date, there have not been any
waivers by
the Company of the code of ethics. Any amendments to,
or waivers under, the code of ethics which are required to be
disclosed by the rules of the Securities Exchange Commission
(
“SEC”) will be disclosed on our
website at
www.qualcomm.com under the
“Corporate
Governance” section under
“Investor Relations.”
5
Board
Committees, Meetings and Attendance
During the fiscal year ended
September 30, 2007, the Board
held nine meetings. Board agendas include regularly scheduled
sessions for the independent directors to meet without
management present, and the Board’s presiding independent
director leads those sessions. Peter M. Sacerdote, who will
conclude his service from the Board at the 2008 Annual Meeting,
has acted as the Board’s presiding independent director
since the Board meeting immediately following the 2007
Stockholders’ Meeting. The Board delegates various
responsibilities and authority to different Board committees.
Committees regularly report on their activities and actions to
the full Board. The Board’s current standing committees
are: Audit, Compensation, Governance, Finance and Strategic
Committees. Committee assignments are re-evaluated annually and
approved by the Board at its annual meeting that follows the
Annual Meeting of Stockholders in February or March of each
year. Each Committee acts according to a written charter
approved by the Board. Copies of each charter can be found on
our
website at
www.qualcomm.com as follows:
The Audit Committee. The Audit Committee meets
at least quarterly with our management and independent public
accountants to, among other things, review the results of the
annual audit and quarterly reviews, discuss the financial
statements, select and engage the independent public
accountants, assess the adequacy of
the Company’s staff,
management performance and procedures in connection with
financial controls and receive and consider comments as to
internal controls. At the beginning of fiscal 2007, the Audit
Committee was composed of Messrs. Nelles (Committee Chair)
and Dittamore, Ms. Alexander and Dr. Richard Atkinson
and met nine times during the fiscal year. In March 2007,
Dr. Atkinson retired from the Board. The Board has
determined that all current members are audit committee
financial experts as defined by SEC rules. All of the members of
the Audit Committee are independent directors within the meaning
of Rule 4200 of the National Association of Securities
Dealers, Inc. (
“NASD”) and SEC
Rule 10A-3(b)(1)(ii).
With respect to the determination of independence of
Mr. Nelles under NASD Rule 4200, the Board considered
the employment by
the Company of Mr. Nelles’ two sons
in non-executive officer positions that did not involve key
strategic roles, as described below under the heading
“Certain Relationships and Related Person
Transactions.” The Board also considered
Mr. Nelles’ track record of decision-making and
determined that the employment of Mr. Nelles’ sons had
not interfered and would not interfere with the exercise of
Mr. Nelles’ independent judgment in carrying out his
duties as a director.
The Compensation Committee. The Compensation
Committee makes recommendations concerning salaries and
incentive compensation, administers and approves stock offerings
under our 1996 Non-Qualified Employee Stock Purchase Plan and
the 2001 Employee Stock Purchase Plan (collectively, the
“Employee Stock Purchase Plans”), administers our 1991
Stock Option Plan, 2001 Stock Option Plan and 2006 Long-Term
Incentive Plan (collectively, the “Stock Option
Plans”) and otherwise determines compensation levels for
the Chief Executive Officer, the Named Executive Officers (as
listed in the Summary Compensation Table), the directors and
other key employees and performs such other functions regarding
compensation as the Board may delegate. At the beginning of
fiscal 2007, the Compensation Committee was composed of
Messrs. Dittamore (Committee Chair) and Stern, General
Scowcroft and Dr. Atkinson. In March 2007,
Dr. Atkinson retired from the Board. The Compensation
Committee met eight times during the 2007 fiscal year. All of
the members of the Compensation Committee are independent
directors within the meaning of Rule 4200 of the NASD and
outside directors within the meaning of Section 162(m) of
the Internal Revenue Code of 1986, as amended.
The Governance Committee. The Governance
Committee reviews, approves and oversees various corporate
governance related policies and procedures applicable to the
Company. The Committee also reviews and evaluates the
effectiveness of our executive development and succession
planning processes and provides active leadership and oversight
with respect to these processes. In addition, the Committee
evaluates and recommends nominees for membership on our Board
and its committees. At the beginning of fiscal 2007, the
Governance Committee was
6
composed of Messrs. Stern (Committee Chair) and Sacerdote,
Sir Donald Cruickshank and Ms. Lansing. During the fiscal
year, Ms. Alexander joined the Governance Committee. The
Governance Committee met six times during the 2007 fiscal year.
All of the members of the Governance Committee are independent
directors within the meaning of Rule 4200 of the NASD.
The Finance Committee. The Finance Committee
reviews our financial position, cash management, dividend and
stock repurchase programs, securities issuances, acquisitions
and other major strategic investment decisions. At the beginning
of fiscal 2007, the Finance Committee was composed of
Messrs. Sacerdote (Committee Chair), Nelles and Richard
Sulpizio, Ms. Adelia Coffman and Ambassador Diana Lady
Dougan. In March 2007, Ms. Coffman and Ambassador Dougan
retired from the Board and Drs. Paul Jacobs and Robert Kahn
joined the Finance Committee. The Finance Committee met five
times during the 2007 fiscal year.
The Strategic Committee. The Strategic
Committee monitors the development and implementation of our
business and research and development strategies. It works with
management in identifying and developing Board focus on issues
and recommendations which will further our long and short term
strategic planning. At the beginning of fiscal 2007, the
Strategic Committee was composed of Drs. Irwin Jacobs
(Committee Chair), Paul Jacobs and Robert Kahn, Ambassador
Dougan, Mr. Sulpizio and General Scowcroft. In March 2007,
Ambassador Dougan and Mr. Sulpizio retired from the Board
and Sir Donald Cruickshank joined the Strategic Committee. The
Strategic Committee met three times during the 2007 fiscal year.
During the fiscal year ended
September 30, 2007, 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 or
held during the period for which he or she was a Board or
Committee member, respectively.
Our
Bylaws contain provisions which address the process by which
a stockholder may nominate an individual to stand for election
to the Board at our Annual Meeting of Stockholders. The Board
has also adopted a formal policy concerning stockholder
recommendations of Board candidates to the Governance Committee.
This policy is set forth in our Corporate Governance Principles
and Practices, which is available on our
website at
www.qualcomm.com under the
“Corporate
Governance” section of
“Investor Relations.”
Under this policy the Governance Committee will review a
reasonable number of candidates recommended by a single
stockholder who has held over 1% of our stock for over one year
and who satisfies the notice, information and consent
requirements set forth in our
Bylaws. To recommend a nominee for
election to the Board, a stockholder must submit his or her
recommendation to the Corporate Secretary at our corporate
offices at 5775 Morehouse Drive, N-510F, San Diego,
California
92121-1714.
A stockholder’s recommendation must be received by us prior
to the date set forth above under
“Stockholder
Proposals.” A stockholder’s recommendation must be
accompanied by the information with respect to stockholder
nominees as specified in the
Bylaws, including among other
things, the name, age, address and occupation of the recommended
person, the proposing stockholder’s name and address and
the number of shares beneficially owned by the stockholder. The
proposing stockholder must also provide evidence of owning the
requisite number of shares of Company stock for over one year.
Candidates so recommended will be reviewed using the same
process and standards for reviewing Governance Committee
recommended candidates.
In evaluating director nominees, the Governance Committee
considers the following factors:
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The appropriate size of the Board;
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The needs of the Company with respect to the particular talents
and experience of its directors;
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The knowledge, skills and experience of nominees, including
experience in technology, business, finance, administration or
public service, in light of prevailing business conditions, and
the knowledge, skills and experience already possessed by other
members of the Board;
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Familiarity with national and international business matters;
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Experience in political affairs;
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Experience with accounting rules and practices;
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Appreciation of the relationship of our business to the changing
needs of society;
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The nominee’s other commitments, including the other boards
on which a nominee serves; and
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The desire to balance the considerable benefit of continuity
with the periodic injection of the fresh perspective provided by
new members.
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The Governance Committee’s goal is to assemble a Board that
brings to us a variety of perspectives and skills derived from
high quality business and professional experience. In doing so,
the Governance Committee also considers candidates with
appropriate non-business backgrounds.
Other than the foregoing, there are no stated minimum criteria
for director nominees, although the Governance Committee may
also consider such other factors as it may deem are in the best
interests of us and our stockholders. The Governance Committee
does, however, believe it appropriate for at least one, and
preferably several, members of the Board to meet the criteria
for an
“audit committee financial expert” as defined
by SEC rules, and that a majority of the members of the Board
meet the definition of
“independent director” under
NASD rules. The Governance Committee also believes it is in the
stockholders’ best interest for certain key members of our
current and former management to participate as members of the
Board. The Governance Committee identifies nominees by first
evaluating the current members of the Board willing to continue
in service. Current members of the Board with skills and
experience that are relevant to our business and who are willing
to continue in service are considered for re-nomination,
balancing the value of continuity of service by existing members
of the Board with that of obtaining a new perspective. If any
member of the Board does not wish to continue in service or if
the Governance Committee or the Board decides not to re-nominate
a member for re-election, the Governance Committee identifies
the desired skills and experience of a new nominee based on the
criteria above. Current members of the Governance Committee and
Board are polled for suggestions as to individuals meeting the
criteria of the Governance Committee. Research may also be
performed to identify qualified individuals.
The Company has, in
the past, engaged a third party to identify and evaluate
potential nominees.
Majority
Voting, Stock Ownership Guidelines and Other Matters
We adopted a
“Majority Voting” policy as a part of our
Corporate Governance Principles and Practices. Under this
policy, if a director receives in an uncontested election a
greater number of
“withhold” votes than votes cast
“for” his or her election, the Governance Committee
will undertake a prompt evaluation of the appropriateness of the
director’s continued service on the Board. In performing
this evaluation, the Governance Committee will review all
factors it deems relevant, including the stated reasons why
votes were withheld, the director’s length of service, his
or her past contributions to
the Company and the availability of
other qualified candidates. The Governance Committee will then
make its recommendation to the Board. The Board will review the
Governance Committee’s recommendation and consider such
further factors and information as it deems relevant. Under this
policy, the Governance Committee will make its recommendation,
and the Board will act on the Governance Committee’s
recommendation no later than 90 days following the date of
the stockholders’ meeting. If the Board determines remedial
action is appropriate, the director shall promptly take whatever
action is requested by the Board. If the director does not
promptly take the recommended remedial action or if the Board
determines that immediate resignation is in the best interests
of
the Company and its stockholders, the director shall promptly
tender his or her resignation upon request from the Board. We
will publicly disclose the Board’s decision within four
business days by filing a Current Report on
Form 8-K
with the SEC, providing an explanation of the process by which
the decision was reached, and, if applicable, the reason for not
requesting the director’s resignation. The director in
question will not participate in the Governance Committee’s
or the Board’s analysis.
In 2006, we adopted stock ownership guidelines for our
non-employee directors and executive officers to help ensure
that they each maintain an equity stake in
the Company, and by
doing so, appropriately link their interests with those of the
other stockholders. The guideline for executive officers is
based on a multiple of the executive’s base salary, ranging
from two to five times, with the size of the multiple based on
the individual’s position. Only shares actually owned (as
shares or as deferred units) count towards the requirement.
Executives are required to achieve these stock ownership levels
within five years of becoming an executive, or (in the case of
persons who were executive officers at the time these guidelines
were adopted) by September 2011. For non-employee directors, the
guideline is three times the annual cash retainer for Board
service. Non-employee directors are required to achieve
8
this ownership level within five years of joining the Board, or
(in the case of non-employee directors serving on the Board at
the time the guidelines were adopted) by September 2011. In
addition to the preceding ownership guidelines, all directors
are expected to own shares of
the Company’s common stock
within one year of joining the Board.
Communications
with Directors
We have adopted a formal process for stockholder communications
with the Board. This process is also set forth in our Corporate
Governance Principles and Practices. Stockholders who wish to
communicate to the Board should do so in writing to the
following address:
[Name of Director(s) or Board of Directors]
Qualcomm Incorporated
Attn: General Counsel
5775 Morehouse Drive, N-510F
San Diego, California
92121-1714
Our General Counsel logs all such communications and forwards
those not deemed frivolous, threatening or otherwise
inappropriate to the Chair of the Governance Committee for
distribution.
Annual
Meeting Attendance
The Company’s Corporate Governance Principles and Practices
sets forth a policy on director attendance at annual meetings.
Directors are encouraged to attend absent unavoidable conflicts.
All of the then-sitting directors attended
the Company’s
last annual meeting except for Messrs. Sacerdote, Stern and
Sulpizio.
Director
Independence
The Board has determined that, except as noted below, all of the
members of the Board are
“independent directors”
within the meaning of Rule 4200 of the NASD. Dr. Irwin
Mark Jacobs and Dr. Paul E. Jacobs are not considered
independent because both are employed by
the Company as
executive officers, and Dr. Irwin Mark Jacobs’ son and
Dr. Paul E. Jacobs’ brother Jeffrey A. Jacobs is the
President of Qualcomm Global Development and an executive
officer.
PROPOSAL 2
APPROVAL OF AMENDMENTS TO
THE 2006 LONG-TERM INCENTIVE PLAN AND
THE INCREASE IN THE SHARE RESERVE BY 115,000,000
SHARES
On
March 7, 2006, the stockholders approved our 2006
Long-Term Incentive Plan (the
“2006 LTIP”). The 2006
LTIP is a restatement of our 2001 Stock Option Plan and the
successor to the 1991 Stock Option Plan, the 2001 Non-Employee
Directors’ Stock Option Plan, and their predecessors. The
2006 LTIP also serves as the source of shares for the Executive
Retirement Matching Contribution Plan (
“the Match
Plan”).
The Board of Directors has adopted the following amendments to
the 2006 LTIP which require stockholder approval.
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Increase the maximum number of shares that we may issue under
the 2006 LTIP from 290,284,432 shares to
405,284,432 shares, which will enable us to continue to
grant awards to deserving individuals and remain competitive
with our industry peers, and make a corresponding change in the
ratio that we use to count awards other than stock options and
stock appreciation rights under the 2006 LTIP from a 2:1 ratio,
meaning that an award of 15 shares decreases the number of
shares available for issuance under the 2006 LTIP by
30 shares, to a 3:1 ratio, meaning that an award of
15 shares would decrease the shares available for issuance
under the 2006 LTIP by 45 shares.
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Increase the maximum annual award limit for performance units,
which are cash awards based on the achievement of performance
goals established under the terms of the 2006 LTIP, from
$1 million to $8 million. This increase is intended to
ensure that we retain the necessary flexibility under the terms
of the 2006 LTIP to determine performance unit awards consistent
with forecasted growth in salaries and any future changes to the
annual bonus targets set for our executive officers. Such an
increase is also appropriate to ensure continued adherence to
our compensation philosophy of linking executive compensation
with performance, as described in the Compensation Discussion
and Analysis portion of this proxy statement.
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Provide additional flexibility for the Compensation Committee in
establishing various business criteria that may be used to
determine performance goals under the 2006 LTIP by allowing the
Compensation Committee to establish performance goals calculated
in accordance with generally accepted accounting principles
(GAAP), industry usage or any other formulations established by
the Committee.
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We believe that equity incentives are critical to attracting and
retaining the best employees in our industry. The approval of
the proposed amendments will allow us to continue to provide
such incentives under the 2006 LTIP.
Key
Features of the 2006 LTIP:
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Multiple equity compensation plans were consolidated under one
plan;
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Awards are merit-based as part of our comprehensive and
effective compensation program;
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An independent committee of the Board of Directors administers
the plan;
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31,757,761 shares remain available for issuance as of
September 30, 2007;
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Awards other than stock options and stock appreciation rights
are charged against the 2006 LTIP share reserve at the rate of
two shares for each share actually granted;
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Awards may not be granted later than 10 years from the
effective date of the 2006 LTIP;
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Awards may be stock options, stock appreciation rights,
restricted stock, unrestricted stock, restricted stock units,
performance shares, performance units, deferred compensation
awards and other stock-based awards;
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Stock options and stock appreciation rights may not be repriced;
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Stock options and stock appreciation rights may not be granted
below fair market value;
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Stock options or stock appreciation rights generally shall not
be fully vested over a period of less than three years from the
date of grant and cannot be exercised more than 10 years
from the date of grant;
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Restricted stock, restricted stock units, and performance awards
generally shall not be fully vested over a period of less than
three years (or a
12-month
period if vesting is based on a performance measure);
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Shares tendered in payment of a stock option, shares withheld
for taxes and shares repurchased by the Company are not
available again for grant;
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The 2006 LTIP reserve is reduced by the full amount of shares
granted as stock appreciation rights, regardless of the number
of shares upon which payment is made; and
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The Company’s policy is that all full-time employees are
eligible to receive stock options.
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Significant
Historical Option Grant Information
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The aggregate number of stock options the Company granted in
fiscal 2006 increased 0.29% (from 34.9 million in fiscal
2005 to 35.0 million in fiscal 2006); however, our
full-time employee base increased 20.4% in the same period (from
8,670 to 10,440). The aggregate number of stock options the
Company granted in fiscal 2007 increased 11.4% (from
35.0 million in fiscal 2006 to 39.0 million in fiscal
2007); however, our full-time employee base increased 14.9% in
the same period (from 10,440 to 12,000).
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The average number of stock options granted per optionee has
steadily declined from 4,023 in fiscal 2005, to 3,350 in fiscal
2006, to 3,246 in fiscal 2007. This trend reflects the
Board’s focus on keeping grants at levels
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that do not unnecessarily dilute stockholders but continue to
provide effective stock-based incentives to employees.
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The Company’s options granted expressed as a percentage of
the Company’s shares outstanding (“burn rate”),
for fiscal year 2007 was 2.4%, slightly higher than fiscal 2006
due to an increase in the number of employees in fiscal 2007 to
meet business expansion and growth opportunities;
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Overhang (total options outstanding plus options available for
grant as a percentage of common shares outstanding plus options
outstanding plus options available for grant) was 12.6% at the
end of fiscal 2007. If the proposed amendment is approved by
stockholders, the maximum overhang would be 17.7%.; and
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The Named Executive Officers’ awards comprise 6.2% of the
total stock options granted in fiscal 2007.
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Summary
of the 2006 LTIP
The following paragraphs summarize material terms of the 2006
LTIP. This summary is qualified in its entirety by the specific
terms of the 2006 LTIP, a copy of which is available to any
stockholder upon request.
General
The 2006 LTIP provides for the grant of incentive and
nonstatutory stock options, as well as stock appreciation
rights, restricted stock, restricted stock units, performance
units and shares and other stock-based awards. It is also the
source of shares for matching stock awards under the Match Plan.
Incentive stock options granted under the 2006 LTIP are intended
to qualify as “incentive stock options” within the
meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the “Code”). Nonstatutory stock
options granted under the 2006 LTIP are not intended to qualify
as incentive stock options under the Code.
Purpose
The 2006 LTIP advances the interests of
the Company and its
stockholders by helping to attract and retain persons of skill
and ability to serve
the Company and by motivating these
individuals to continue their contributions to the growth and
profitability of
the Company.
Administration
The Board of Directors and its designees administer the 2006
LTIP. The Board interprets the 2006 LTIP, subject to the
requirements of the 2006 LTIP. As permitted under the 2006 LTIP,
the Board has delegated administration of the 2006 LTIP to the
Compensation Committee of the Board of Directors. The
Compensation Committee determines the recipients of awards, the
number of shares subject to each award, the times when an award
will become exercisable, the exercise price, the type of
consideration to be paid upon exercise, and other terms of the
award. For awards to persons other than directors or corporate
officers, the Compensation Committee in turn has delegated
implementation of the 2006 LTIP to the Management Stock Option
Committee, currently comprised of our Chief Executive Officer,
President and Executive Vice President, Human Resources, who act
pursuant to the guidelines approved by the Compensation
Committee. As used herein with respect to the 2006 LTIP, the
“Board” refers to the Compensation Committee and the
Management Stock Option Committee, as well as to the full Board
of Directors.
Stock
Subject to the 2006 LTIP
A total of 290,284,432 shares are currently reserved for
issuance under the 2006 LTIP. As discussed above, we propose to
increase the number of shares by 115,000,000 shares, for a
total of 405,284,432 shares reserved for issuance under the
2006 LTIP. As of
September 30, 2007,
206,453,957 shares are subject to outstanding stock options
and 31,757,761 shares remain available for future grants
under the 2006 LTIP. Shares underlying awards that expire, are
cancelled or otherwise terminate again become available for
grant under the 2006 LTIP, as do shares subject to an award
under the Match Plan that fail to vest under the terms of that
plan.
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Shares subject to stock options and stock appreciation rights
that do not include the right to receive a dividend equivalent
are charged against the 2006 LTIP share reserve on the basis of
one share for each share granted. If approved by the
stockholders, shares subject to stock options and stock
appreciation rights that include dividend equivalent rights and
all other types of awards, which are currently charged against
the 2006 LTIP share reserve on the basis of two shares for each
one share granted, will be charged against the share reserve on
the basis of three shares for each one share granted. Any shares
returned to the reserve will be returned on the same basis as
charged against the share reserve.
Eligibility
Awards other than incentive stock options generally may be
granted only to our employees and directors. Incentive stock
options may be granted only to employees, and only certain
executives may participate in the Match Plan.
Any person who, at the time of the grant, owns (or is deemed to
own) stock possessing more than 10% of the total combined voting
power of
the Company, or any of its parent or subsidiary
corporations, must be granted an incentive stock option at an
exercise price that is at least 110% of the fair market value of
the stock on the date of grant, and the term of the option must
not exceed five years. The aggregate fair market value,
determined at the time of grant, of the shares of common stock
with respect to which incentive stock options granted under the
2006 LTIP are exercisable for the first time by an optionee
during any calendar year (under all our plans and our parent and
subsidiary corporations) may not exceed $100,000. In order to
permit awards to qualify as
“performance-based
compensation” under Code Section 162(m), no employee
may be granted awards during each Company fiscal year in excess
of the following limits:
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Stock options and stock appreciation rights: No more than
3,000,000 shares.
|
| |
| |
•
|
Restricted stock and restricted stock unit awards vesting based
upon the attainment of performance goals: No more than
1,000,000 shares.
|
| |
| |
•
|
Performance share awards: No more than 1,000,000 shares for
each full fiscal year contained in the performance period of the
award;
|
| |
| |
•
|
Performance unit awards: Subject to stockholder approval, no
more than $8,000,000 for each full fiscal year contained in the
performance period of the award.
|
The Board has determined that the increase in the maximum amount
of cash value performance unit awards to $8,000,000 from the
previous $1,000,000 limit is an appropriate adjustment to ensure
that the performance unit award provisions of the 2006 LTIP
account for salary growth projections or future changes in
annual bonus targets.
The 2006 LTIP provides that, except for shares granted under the
Match Plan and a maximum of 2% of the shares reserved under the
2006 LTIP which may be issued as awards to non-employee
directors, restricted stock awards, restricted stock unit
awards, performance awards or stock-based awards based on the
full value of shares of stock, which vest on the basis of a
participant’s continued service, have a mandatory minimum
three-year vesting period. Performance awards generally are
subject to achievement of performance goals over a performance
period no shorter than 12 months. Acceleration of awards
under the 2006 LTIP occurs only in connection with death,
disability or a change-in-control.
Stock
Options and Stock Appreciation Rights
The following is a general description of the terms of options
and stock appreciation rights that may be awarded under the 2006
LTIP. Individual grants may have different terms, subject to the
overall requirements of the 2006 LTIP.
Exercise Price; Payment. The exercise price of
incentive stock options under the 2006 LTIP may not be less than
the fair market value of the common stock subject to the option
on the date of grant, and in some cases (see
“Eligibility” above) may not be less than 110% of the
fair market value on the grant date. The exercise price of
nonstatutory stock options and stock appreciation rights may not
be less than the fair market value of the stock subject to the
award on the date of the option grant. The exercise price of
options granted under the 2006 LTIP must
12
be paid: (1) in cash, check or a cash equivalent;
(2) by tender to
the Company, or subject to attestation to
the ownership of, shares of common stock of
the Company owned by
the optionee and having a fair market value not less than the
exercise price; (3) if permitted by the Board, by means of
a cashless exercise that complies with applicable securities and
other laws; (4) in any other form of payment acceptable to
the Board, or (5) by a combination of the above forms of
payment.
No Repricing. The 2006 LTIP does not permit
the Company to lower the exercise price of options or stock
appreciation rights without stockholder approval.
Exercise. Options and stock appreciation
rights granted under the 2006 LTIP vest in cumulative increments
as determined by the Board, provided that the holder’s
employment by, or service as a director or consultant to the
Company or certain related entities or designated affiliates,
continues from the date of grant until the applicable vesting
date. Awards granted under the 2006 LTIP may be subject to
different vesting terms, subject to an overall minimum
three-year vesting requirement applicable to options and stock
appreciation rights issued to participants other than
non-employee directors. The Board has the power to accelerate
the time during which an award may be exercised, subject to this
three-year overall limit.
Term. The maximum term of options and stock
appreciation rights under the 2006 LTIP is 10 years, except
for certain incentive stock options with a maximum term of
5 years (see “Eligibility” above). The 2006 LTIP
provides for the earlier termination of an award due to the
holder’s termination of service.
Restrictions on Transfer. Participants may not
transfer incentive stock options granted under the 2006 LTIP,
except by will or by the laws of descent and distribution.
Participants may not transfer nonstatutory stock options or
stock appreciation rights other than (1) by will or by the
laws of descent and distribution, (2) by written
designation of a beneficiary taking effect upon the death of the
optionee, (3) by delivering written notice to
the Company,
in a form acceptable to
the Company, that the optionee will be
gifting the option to certain family members or other specific
entities controlled by or for the benefit of such family
members, and such other transferees as the Board may approve.
Restricted
Stock Units
The Board may grant restricted stock units under the 2006 LTIP,
which represent a right to receive shares of
the Company’s
common stock at a future date determined in accordance with the
participant’s award agreement. There is no purchase or
exercise price associated with the restricted stock units or the
shares issued in settlement of the award. The Board may grant
restricted stock unit awards subject to the attainment of one or
more performance goals similar to those described below in
connection with performance awards, or may make the awards
subject to vesting conditions similar to those for restricted
stock awards, as described below. Unless the Board provides
otherwise, participants forfeit any unvested restricted stock
units upon termination of service. Participants have no voting
rights or rights to receive cash dividends with respect to
restricted stock unit awards until shares of common stock are
issued in settlement of such awards. However, the Board may
grant restricted stock units that entitle the holders to receive
dividend equivalents, which are rights to receive additional
restricted stock units based on the value of any cash dividends
the Company pays.
Restricted
Stock Awards
The Board may grant restricted stock awards under the 2006 LTIP
either in the form of a restricted stock purchase right, giving
a participant an immediate right to purchase common stock, or in
the form of a restricted stock bonus, for which the participant
furnishes consideration in the form of services to
the Company.
The Board determines the purchase price payable under restricted
stock purchase rights, which may be less than the then current
fair market value of
the Company’s common stock. Restricted
stock awards may be subject to vesting conditions based on such
service or performance criteria as the Board specifies,
including the attainment of one or more performance goals
similar to those described below in connection with performance
awards. Participants may not transfer shares acquired pursuant
to a restricted stock award until the shares vest. Unless
otherwise provided by the Board, participants forfeit any
unvested shares of restricted stock upon termination of service.
Participants holding restricted stock generally may vote the
shares and receive any dividends paid; however, such
distributions are subject to the same restrictions as the
original award.
13
Performance
Awards
The Board may grant performance awards subject to the
fulfillment of conditions and the attainment of performance
goals over such periods as the Board determines in writing and
sets forth in a written agreement between
the Company and the
participant. To the extent compliance with Section 162(m)
of the Code is desired, a committee comprised solely of
“outside directors” under Section 162(m) must act
with respect to performance awards, and
“Board” as
used in this section shall mean this committee. These awards may
be designated as performance shares or performance units.
Performance shares and performance units are unfunded
bookkeeping entries generally having initial values equal to the
fair market value of a share of stock determined on the grant
date and a value set by the Board, respectively. Performance
awards specify a predetermined amount of performance shares or
performance units that may be earned by the participant to the
extent that one or more predetermined performance goals are
attained within the predetermined performance period. To the
extent earned, performance awards may be settled in cash, shares
of common stock (including shares of restricted stock) or a
combination thereof.
Prior to the start of the applicable performance period or as
permitted pursuant to Section 162(m) of the Code, the Board
establishes one or more performance goals applicable to the
award. Performance goals are based on the attainment of
specified target levels with respect to one or more selected
measures of business or financial performance. Performance goals
may be based on one or more of the following measures: revenues,
gross margin, operating margin, operating income, earnings
before tax, earnings before interest, taxes, depreciation and
amortization, net income, expenses, the market price of the
Company’s common stock, earnings per share, return on
stockholder equity, return on capital, return on net assets,
economic value added, market share, customer service, customer
satisfaction, safety, total stockholder return, free cash flow
or other measures as determined by the Board. The degree of
attainment of performance measures may be calculated in
accordance with GAAP, industry usage or other formulations
determined by the Board in its discretion. For example,
performance goals may be established and calculated without
regard to the accrual or payment of performance awards and may
be based on pro forma formulations of these performance
measures, as determined by the Board in its discretion.
Following completion of the applicable performance period, the
Board certifies in writing the extent to which a participant has
attained the applicable performance goals and the resulting
value of the participant’s award. The Board retains the
discretion to eliminate or reduce, but not increase, the amount
that would otherwise be payable to a participant who is a
“covered employee” within the meaning of
Section 162(m) of the Code. However, no such reduction may
increase the amount correspondingly paid to any other
participant. The Board may make positive or negative adjustments
to performance award payments to participants other than covered
employees to reflect individual job performance or other
factors. In its discretion, the Board may provide for the
payment to a participant awarded performance shares of dividend
equivalents with respect to cash dividends paid on the
Company’s common stock. The Board may provide for
performance award payments in lump sums or installments. If any
payment is to be made on a deferred basis, the Board may provide
for the payment of dividend equivalents or interest during the
deferral period.
Unless otherwise provided by the Board, if a participant
terminates service due to death or disability prior to
completion of the applicable performance period, the final award
value is determined at the end of the performance period on the
basis of the performance goals attained during the entire
performance period, but is prorated for the number of months of
the participant’s service during the performance period. If
a participant’s service terminates prior to completion of
the applicable performance period for any other reason, the
participant forfeits the performance award, unless the Board
determines otherwise. Participants may not sell or transfer a
performance award, other than by will or the laws of descent and
distribution, prior to the end of the applicable performance
period.
Deferred
Compensation Awards
The 2006 LTIP authorizes the Board to establish a deferred
compensation award program in addition to the Match Plan. If and
when implemented, participants designated by the Board who are
officers, directors or members of a select group of highly
compensated employees may elect to receive an award of deferred
stock units, in lieu of compensation otherwise payable in cash
or in lieu of cash or shares of common stock issuable upon the
exercise or settlement of stock options, stock appreciation
rights, performance shares or performance unit awards. Each such
stock unit represents a right to receive one share of common
stock at a future date determined in accordance with the
participant’s award agreement. Deferred stock units are
fully vested upon grant and settled by distribution to the
14
participant of a number of whole shares of common stock equal to
the number of stock units subject to the award upon the earlier
of the date on which the participant separates from service or a
specific date elected by the participant at the time of his or
her election to receive the deferred stock unit award. A holder
of deferred stock units has no voting rights or other rights as
a stockholder until shares of common stock are issued to the
participant in settlement of the stock units. However,
participants holding deferred stock units may receive dividend
equivalents credited in the form of additional stock units as
determined by the Board. Prior to settlement, deferred stock
units may not be assigned or transferred other than by will or
the laws of descent and distribution.
Other
Stock-Based Awards
The 2006 LTIP permits the Board to grant other awards based on
our stock or on dividends paid on our stock.
Effect of
Certain Corporate Events
In the event of any stock dividend, stock split, reverse stock
split, recapitalization, combination, reclassification or
similar change in the capital structure of
the Company, the 2006
LTIP provides for appropriate adjustments in the number and
class of shares subject to the 2006 LTIP and to any outstanding
awards, in the Section 162(m) per employee grant limit (see
“Federal Income Tax Information — Potential
Limitation on Company Deductions,” below), and in the
exercise price per share of any outstanding awards. Any
fractional share resulting from an adjustment is rounded down to
the nearest whole number, and at no time will the exercise price
of any option or stock appreciation right be decreased to an
amount less than par value of the stock subject to the award.
Change-in-Control. If a Change-in-Control
occurs, the surviving, continuing, successor or purchasing
corporation or parent corporation thereof may either assume the
Company’s rights and obligations under the outstanding
awards or substitute substantially equivalent awards. However,
if an outstanding award is not assumed or replaced, the 2006
LTIP provides that the vesting and exercisability of the award
shall accelerate, effective 10 days prior to the
Change-in-Control. Awards that are not assumed, replaced or
exercised prior to the Change-in-Control will terminate. The
2006 LTIP defines a
“Change-in-Control” of
the Company
as any of the following events upon which the stockholders of
the Company immediately before the event do not retain
immediately after the event, in substantially the same
proportions as their ownership of shares of
the Company’s
voting stock immediately before the event, direct or indirect
beneficial ownership of more than 50% of the total combined
voting power of the stock of
the Company, its successor or the
corporation to which the assets of
the Company were transferred:
(1) a sale or exchange by the stockholders in a single or
series of related transactions of more than 50% of the
Company’s voting stock; (2) a merger or consolidation
in which
the Company is a party; (3) the sale, exchange or
transfer of all or substantially all of the assets of the
Company; or (4) a liquidation or dissolution of
the Company.
Duration,
Amendment and Termination
The Board may amend or terminate the 2006 LTIP at any time. If
not earlier terminated, the 2006 LTIP expires on the tenth
anniversary of the date it was originally approved by the
stockholders. No amendment authorized by the Board will be
effective unless approved by the stockholders of
the Company if
the amendment would: (1) increase the number of shares
reserved under the 2006 LTIP; (2) change the class of
persons eligible to receive incentive stock options; or
(3) modify the 2006 LTIP in any other way that requires
stockholder approval under applicable law.
Awards
Granted to Certain Persons
The aggregate numbers of shares of common stock subject to
awards granted to certain persons under the 2006 LTIP in the
last completed fiscal year are as follows: (1) Paul E.
Jacobs, Chief Executive Officer, 770,000 shares;
(2) William E. Keitel, Executive Vice President and Chief
Financial Officer, 370,000 shares; (3) Steven R.
Altman, President, 570,000 shares; (4) Irwin Mark
Jacobs, Chairman of the Board, 150,000 shares;
(5) Sanjay K. Jha, Executive Vice President and Group
President, CDMA Technologies Group, 545,000 shares;
(6) all current executive officers as a group, an aggregate
of 3,905,000 shares; (7) all current directors who are
not executive officers as a group, an aggregate of
112,000 shares; and (8) all employees, including
current officers who are not executive officers, as a group, an
aggregate of 34,916,022 shares.
15
Federal
Income Tax Information
The following discussion is intended to be a general summary
only of the federal income tax aspects of awards granted under
the 2006 LTIP, and not state or local taxes that may apply to
awards under the 2006 LTIP. Tax consequences may vary depending
on particular circumstances, and administrative and judicial
interpretations of the application of the federal income tax
laws are subject to change. Participants in the 2006 LTIP 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.
Incentive Stock Options. An optionee
recognizes no taxable income for regular income tax purposes as
the result of the grant or exercise of an incentive stock
option. Optionees who do not dispose of their shares for at
least two years following the date the incentive stock option
was granted or within one year following the exercise of the
option normally will recognize a long-term capital gain or loss
equal to the difference, if any, between the sale price and the
purchase price of the shares. If an optionee satisfies both such
holding periods upon a sale of the shares,
the Company will not
be entitled to any deduction for federal income tax purposes. If
an optionee disposes of shares either within two years after the
date of grant or within one year from the date of exercise
(referred to as a
“disqualifying disposition”), the
difference between the fair market value of the shares on the
exercise date and the option exercise price (not to exceed the
gain realized on the sale if the disposition is a transaction
with respect to which a loss, if sustained, would be recognized)
will be taxed as ordinary income at the time of disposition. Any
gain in excess of that amount will be treated as a capital gain.
If a loss is recognized, it will be a capital loss. A capital
gain or loss will be long-term if the optionee’s holding
period is more than 12 months. Any ordinary income
recognized by the optionee upon the disqualifying disposition of
the shares generally should be deductible by
the Company for
federal income tax purposes, except to the extent such deduction
is limited by applicable provisions of the Code or the
regulations thereunder. The difference between the option
exercise price and the fair market value of the shares on the
exercise date of an incentive stock option is an adjustment in
computing the optionee’s alternative minimum taxable income
and may be subject to an alternative minimum tax which is paid
if such tax exceeds the regular tax for the year. Special rules
may apply with respect to certain subsequent sales of the shares
in a disqualifying disposition, certain basis adjustments for
purposes of computing the alternative minimum taxable income on
a subsequent sale of the shares and certain tax credits which
may arise with respect to optionees subject to the alternative
minimum tax.
Nonstatutory Stock Options and Stock Appreciation
Rights. Nonstatutory stock options and stock
appreciation rights have no special tax status. A holder of
these awards generally does not recognize taxable income as the
result of the grant of such award. Upon exercise of a
nonstatutory stock option or stock appreciation right, the
holder normally recognizes ordinary income in an amount equal to
the difference between the exercise price and the fair market
value of the shares on the exercise date. If the holder is an
employee, such ordinary income generally is subject to
withholding of income and employment taxes. Upon the sale of
stock acquired by the exercise of a nonstatutory stock option or
stock appreciation right, any gain or loss, based on the
difference between the sale price and the fair market value on
the exercise date, will be taxed as capital gain or loss. A
capital gain or loss will be long-term if the holding period of
the shares is more than 12 months.
The Company generally
should be entitled to a deduction equal to the amount of
ordinary income recognized by the optionee as a result of the
exercise of a nonstatutory stock option or stock appreciation
right, except to the extent such deduction is limited by
applicable provisions of the Code or the regulations thereunder.
No tax deduction is available to
the Company with respect to the
grant of a nonstatutory stock option or stock appreciation right
or the sale of the stock acquired pursuant to such grant.
Restricted Stock. A participant acquiring
restricted stock generally will recognize ordinary income equal
to the fair market value of the shares on the
“determination date.” The
“determination
date” is the date on which the participant acquires the
shares unless the shares are subject to a substantial risk of
forfeiture and are not transferable, in which case the
determination date is the earlier of (i) the date on which
the shares become transferable or (ii) the date on which
the shares are no longer subject to a substantial risk of
forfeiture. If the determination date is after the date on which
the participant acquires the shares, the participant may elect,
pursuant to Section 83(b) of the Code, to have the date of
acquisition be the determination date by filing an election with
the Internal Revenue Service no later than 30 days after
the date on which the shares are acquired. If the participant is
an employee, such ordinary income generally is subject to
withholding of income and employment taxes. Upon the sale of
shares acquired pursuant to a restricted stock award, any gain
or loss, based on the difference between the sale price and the
fair market value on the determination date, will be taxed as
capital gain or loss.
The Company generally should be
16
entitled to a deduction equal to the amount of ordinary income
recognized by the participant on the determination date, except
to the extent such deduction is limited by applicable provisions
of the Code.
Performance and Restricted Stock Unit
Awards. A participant generally will recognize no
income upon the receipt of a performance share, performance unit
or restricted stock unit award. Upon the settlement of such an
award, participants normally will recognize ordinary income in
the year of receipt in an amount equal to the cash received and
the fair market value of any substantially vested shares
received. If the participant is an employee, such ordinary
income generally is subject to withholding of income and
employment taxes. If the participant receives shares of
restricted stock, the participant generally will be taxed in the
same manner as described above (see discussion under
“Restricted Stock”). Upon the sale of any shares
received, any gain or loss, based on the difference between the
sale price and the fair market value on the “determination
date” (as defined above under “Restricted
Stock”), will be taxed as capital gain or loss. We
generally should be entitled to a deduction equal to the amount
of ordinary income recognized by the participant on the
determination date, except to the extent such deduction is
limited by applicable provisions of the Code.
Deferred Compensation Awards. A participant
generally will recognize no income upon the receipt of a
deferred compensation award. Upon the settlement of the award,
the participant normally will recognize ordinary income in the
year of settlement in an amount equal to the fair market value
of the shares received. Upon the sale of any shares received,
any gain or loss, based on the difference between the sale price
and the fair market value of the shares on the date they are
transferred to the participant, will be taxed as capital gain or
loss. We generally should be entitled to a deduction equal to
the amount of ordinary income recognized by the participant,
except to the extent such deduction is limited by applicable
provisions of the Code. Deferred compensation awards, when
granted, would generally be subject to the requirements of
Section 409A of the Code, which would impose certain
restrictions on the timing and form of payment of deferred
compensation.
Potential Limitation on Company Deductions. In
accordance with applicable regulations issued under
Section 162(m), compensation attributable to stock options
and stock appreciation rights will qualify as performance-based
compensation, provided that: (1) the 2006 LTIP contains a
per-employee limitation on the number of shares for which
options or stock appreciation rights may be granted during a
specified period, (2) the per-employee limitation is
approved by the stockholders, (3) the option is granted by
a compensation committee comprised solely of “outside
directors” (as defined in Section 162(m)) and
(4) the exercise price of the option or right is not less
than the fair market value of the stock on the date of grant.
For the above reasons, our 2006 LTIP provides for an annual per
employee limitation as required under Section 162(m), and
our Compensation Committee is comprised solely of outside
directors. Accordingly, options or stock appreciation rights
granted by the Compensation Committee qualify as
performance-based compensation, and the other awards subject to
performance goals may also qualify.
Equity
Compensation Plan Information
Information about our equity compensation plans at
September 30, 2007 that were either approved or not
approved by our stockholders was as follows (number of shares in
millions):
| |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares to
|
|
|
|
|
|
|
|
|
|
|
be Issued Upon
|
|
|
Weighted Average
|
|
|
Number of Shares
|
|
|
|
|
Exercise of
|
|
|
Exercise Price of
|
|
|
Remaining Available
|
|
|
Plan Category
|
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Outstanding Options
|
|
|
Outstanding Options
|
|
|
for Future Issuance
|
|
|
|
|
Equity compensation plans approved by stockholders(1)
|
|
|
204
|
|
|
$
|
32.80
|
|
|
|
42
|
(2)
|
|
Equity compensation plans not approved by stockholders(3)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Total(4)
|
|
|
204
|
|
|
$
|
32.80
|
|
|
|
42
|
|
|
|
|
|
(1) |
|
Consists of seven plans: the Company’s 1991 Stock Option
Plan, 2001 Stock Option Plan, 2006 Long-Term Incentive Plan,
1998 Non-Employee Directors’ Stock Option Plan, 2001
Non-Employee Directors’ Stock Option Plan, 2001 Employee
Stock Purchase Plan and the Executive Retirement Matching
Contribution Plan. |
| |
|
(2) |
|
Includes approximately 11 million shares reserved for
issuance under the 2001 Employee Stock Purchase Plan. |
| |
|
(3) |
|
Consists solely of approximately 35,000 shares issuable
under the Company’s 1996 Non-Qualified Employee Stock
Purchase Plan, which allows eligible employees to purchase
shares of common stock at 85% of the lower of the fair market
value on the first or the last day of each six-month offering
period. Employees may authorize the Company to withhold up to
15% of their compensation during any offering period, subject to
certain limitations. |
17
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(4) |
|
Excludes options assumed in connection with mergers and
acquisitions. Approximately 2,506,000 shares of the
Company’s common stock were issuable upon exercise of these
assumed options. These options have a weighted average exercise
price of $23.46 per share. No additional options may be granted
under these assumed arrangements. |
Required
Vote and Board Recommendation
The affirmative vote of a majority of the votes cast at the
meeting, at which a quorum is present, either in person or by
proxy, is required to approve the proposed amendments to the
2006 LTIP discussed above. If you hold your shares in your own
name and abstain from voting on this matter, your abstention
will have no effect on the vote. If you hold your shares through
a broker and you do not instruct the broker on how to vote on
this proposal, your broker will not have the authority to vote
your shares. Abstentions and broker non-votes will each be
counted as present for purposes of determining the presence of a
quorum, but will not have any effect on the outcome of the
proposal.
Should stockholder approval not be obtained, then the proposed
amendments will not be implemented, and the 2006 LTIP will
continue in effect pursuant to its current terms.
The Board believes that the proposed amendments to the 2006 LTIP
are in the best interests of
the Company and its stockholders
for the reasons stated above.
THEREFORE, THE BOARD
UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL OF THE
PROPOSED AMENDMENTS TO THE 2006 LTIP AND THE INCREASE IN THE
SHARE RESERVE BY 115,000,000 SHARES.
RATIFICATION
OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee of the Board has selected
PricewaterhouseCoopers LLP as our independent public accountants
for the fiscal year ending
September 28, 2008, and the
Board has directed that management submit the selection of
independent public accountants for ratification by the
stockholders at the Annual Meeting.
PricewaterhouseCoopers LLP
has audited our consolidated financial statements since we
commenced operations in 1985. Representatives of
PricewaterhouseCoopers LLP are expected to be present at the
Annual Meeting, will have an opportunity to make a statement if
they so desire and will be available to respond to appropriate
questions.
Stockholder ratification of the selection of
PricewaterhouseCoopers LLP as our independent public accountants
is not required by the our
Bylaws or otherwise. However, the
Board is submitting the selection of
PricewaterhouseCoopers LLP
to the stockholders for ratification as a matter of good
corporate practice. If the stockholders fail to ratify the
selection, the Audit Committee will reconsider whether or not to
retain that firm. Even if the selection is ratified, the Audit
Committee in its discretion may direct the appointment of a
different independent accounting firm at any time during the
year if it determines that such a change would be in the best
interests of
the Company and its stockholders.
Fees for
Professional Services
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Fiscal 2007
|
|
|
Fiscal 2006
|
|
|
|
|
Audit fees(1)
|
|
$
|
4,405,000
|
|
|
$
|
4,204,000
|
|
|
Audit-related fees(2)
|
|
|
1,562,000
|
|
|
|
1,539,000
|
|
|
Tax fees(3)
|
|
|
3,000
|
|
|
|
—
|
|
|
All other fees(4)
|
|
|
6,000
|
|
|
|
6,000
|
|
|
|
|
|
|
|
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Total
|
|
$
|
5,976,000
|
|
|
$
|
5,749,000
|
|
|
|
|
|
|
|
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|
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|
(1) |
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Audit fees consist of fees for professional services rendered
for the audit of the Company’s annual consolidated
financial statements and review of the interim consolidated
financial statements included in quarterly reports |
18
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and services that are normally provided by
PricewaterhouseCoopers LLP in connection with statutory and
regulatory filings. Audit fees also include fees for
professional services rendered for the audits of the
effectiveness of internal control over financial reporting
during fiscal 2007 and 2006. |
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(2) |
|
Audit-related fees consist of fees for assurance and related
services that are reasonably related to the performance of the
audit or review of the Company’s consolidated financial
statements and are not reported under “Audit fees.”
This category includes fees principally related to field
verification of royalties from licensees. |
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|
(3) |
|
Tax fees consist of fees for professional services rendered for
international tax consulting. |
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(4) |
|
All other fees consist of fees for products and services other
than the services reported above. These fees related to
technical publications purchased from the independent public
accountant. |
Fees for accounting services rendered by other professional
service firms during fiscal 2007 and 2006 were $10,085,000 and
$6,391,000, respectively. The increase from prior year is
primarily due to increases in fees for tax-related and other
audit-related services.
Policy on
Audit Committee Pre-Approval of Audit and Non-Audit Services of
Independent Public Accountants
The Audit Committee’s policy is to pre-approve all audit
and non-audit services provided by the independent public
accountants. These services may include audit services,
audit-related services, tax fees, and other services.
Pre-approval is generally provided for up to one year and any
pre-approval is detailed as to the particular service or
category of services and is subject to a specific budget. The
Audit Committee has delegated pre-approval authority to certain
committee members when expedition of services is necessary. The
independent public accountants and management are required to
periodically report to the full Audit Committee regarding the
extent of services provided by the independent public
accountants in accordance with this pre-approval delegation, and
the fees for the services performed to date. Less than 1% of
total fees for services rendered by
PricewaterhouseCoopers LLP
during fiscal 2007 were related to non-audit services that were
approved by the Audit Committee after the services were
rendered, pursuant to the
de minimis exception
established by the SEC. All non-audit services rendered by
PricewaterhouseCoopers LLP during fiscal 2006 were pre-approved
by the Audit Committee.
Required
Vote and Board Recommendation
The affirmative vote of a majority of the votes cast at the
meeting, at which a quorum is present, either in person or by
proxy, is required to approve this proposal. Abstentions and
broker non-votes will each be counted as present for purposes of
determining the presence of a quorum but will not have any
effect on the outcome of the proposal.
19
STOCK
OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
ownership of our common stock as of
December 21, 2007 by:
(i) each director and nominee for director; (ii) each
of our executive officers named in the Summary Compensation
Table under
“Executive Compensation and Related
Information” (the
“Named Executive Officers”);
and (iii) all our executive officers and directors as a
group. Based on currently available Schedules 13D and 13G filed
with the SEC, we do not know of any beneficial owners of more
than 5% of our common stock.
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Amount and Nature of
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Beneficial Ownership (1)
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Number of
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Percent of
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Name of Beneficial Owner
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Shares
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Class
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Paul E. Jacobs(2)
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3,925,199
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|
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*
|
|
|
William E. Keitel(3)
|
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1,382,351
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|
|
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*
|
|
|
Steven R. Altman(4)
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2,208,928
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|
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*
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|
|
Irwin Mark Jacobs(5)
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32,874,140
|
|
|
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2.01
|
%
|
|
Sanjay K. Jha(6)
|
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|
2,068,798
|
|
|
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*
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|
|
Barbara T. Alexander(7)
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17,585
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|
|
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*
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Donald G. Cruickshank(8)
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29,233
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*
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Raymond V. Dittamore(9)
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81,343
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*
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Robert E. Kahn(10)
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444,566
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*
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Sherry Lansing(11)
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11,333
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*
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Duane A. Nelles(12)
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224,406
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*
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Peter M. Sacerdote(13)
|
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1,427,666
|
|
|
|
*
|
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|
Brent Scowcroft(14)
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586,765
|
|
|
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*
|
|
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Marc I. Stern(15)
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937,164
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|
|
*
|
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|
All Executive Officers and Directors as a Group
(21 persons)(16)
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52,201,854
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3.16
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%
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|
|
|
|
* |
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Less than 1%. |
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(1) |
|
This table is based upon information supplied by officers and
directors. Unless otherwise indicated in the footnotes to this
table and subject to community property laws where applicable,
the Company believes that each of the stockholders named in this
table has sole voting and investment power with respect to the
shares indicated as beneficially owned. Applicable percentages
are based on 1,628,584,066 shares outstanding on
December 21, 2007, adjusted as required by rules
promulgated by the SEC. |
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|
(2) |
|
Includes 1,107,600 shares held in family trusts,
8,634 shares held jointly with his spouse,
354,134 shares held in Grantor Retained Annuity Trusts for
the benefit of Dr. Paul Jacobs and his spouse and
108,741 shares held for the benefit of Dr. Paul
Jacobs’ children. Dr. Paul Jacobs disclaims all
beneficial ownership for the shares held in trust for the
benefit of his children. Also includes 2,346,090 shares
issuable upon exercise of options exercisable within
60 days of which 1,041 are held by Dr. Paul
Jacobs’ spouse. |
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(3) |
|
Includes 1,375,916 shares issuable upon exercise of options
exercisable within 60 days. |
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|
(4) |
|
Includes 159,929 shares held in family trusts and
2,048,999 shares issuable upon exercise of options
exercisable within 60 days. |
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(5) |
|
Includes 9,488,724 shares held in family trusts and
16,628,738 shares held in Grantor Retained Annuity Trusts
for the benefit of Dr. Irwin Jacobs and his spouse.
Dr. Irwin Mark Jacobs shares voting power with his spouse
for shares owned through these trusts. Also includes
6,756,678 shares issuable upon exercise of options
exercisable within 60 days, of which 265,456 shares
are held in trusts for the benefit of Dr. Irwin Jacobs
and/or his spouse and 1,087,108 shares are held by
Dr. Irwin Jacobs’ spouse. |
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(6) |
|
Includes 24,532 shares held in family trusts and
2,044,266 shares issuable upon exercise of options
exercisable within 60 days. |
20
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|
(7) |
|
Includes 5,000 shares held in family trusts and
12,000 shares issuable upon exercise of options exercisable
within 60 days. Also includes 585 fully vested deferred
stock units and dividend equivalents that settle three years
after the date of grant. |
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|
(8) |
|
Consists of 1,000 shares held in a pension plan pursuant to
which Sir Donald Cruickshank does not have voting rights or
discretion over the holdings in the plan. Also includes
28,233 shares issuable upon exercise of options exercisable
within 60 days. |
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(9) |
|
Includes 7,400 shares held in family trusts and
73,066 shares issuable upon exercise of options exercisable
within 60 days. Also includes 877 fully vested deferred
stock units and dividend equivalents that settle three years
after the date of grant. |
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|
(10) |
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Includes 337,066 shares issuable upon exercise of options
exercisable within 60 days. |
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|
(11) |
|
Consists of 11,333 shares issuable upon exercise of options
exercisable within 60 days. |
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|
(12) |
|
Includes 111,340 shares held in family trusts and
113,066 shares issuable upon exercise of options
exercisable within 60 days. |
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|
(13) |
|
Includes 114,600 shares held by The Peter M. Sacerdote
Investment Partners, L.P., a family partnership, with Peter M.
Sacerdote as General Partner and 480,000 shares owned by
the Peter M. Sacerdote Foundation. Mr. Sacerdote disclaims
all beneficial ownership for the shares owned by the Foundation.
Also includes 113,066 shares issuable upon exercise of
options exercisable within 60 days. |
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(14) |
|
Includes 433,066 shares issuable upon exercise of options
exercisable within 60 days. |
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|
(15) |
|
Includes 704,500 shares held by the Beatrice B. Corporation
of which Mr. Stern is the president and sole owner,
162,576 shares owned through a grantor trust, of which
Mr. Stern is the trustee and 1,170 fully vested deferred
stock units and dividend equivalents that settle three years
after the date of grant. Also includes 68,918 shares
issuable upon exercise of options exercisable within
60 days. |
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(16) |
|
Includes 20,864,752 shares issuable upon exercise of
options exercisable within 60 days for all directors and
executive officers as a group. Also includes 275,000 shares
pledged by one executive officer. |
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act requires our
directors, executive officers and persons who own more than 10%
of a registered class of our equity securities to file with the
SEC initial reports of ownership and reports of changes in
ownership of common stock and other equity securities of the
Company. Officers, directors and greater-than-10-percent
stockholders are required by SEC regulations to furnish us with
copies of all Section 16(a) forms they file.
To our knowledge, based solely on a review of the copies of such
reports furnished to us and written representations that no
other reports were required, during the fiscal year ended
September 30, 2007, all Section 16(a) filing
requirements were complied with except for the following: the
annual stock option grant for each of our outside directors was
reported late; and two allocations from the Match Plan for
Mr. Lauer were reported late.
Compensation
Committee Interlocks and Insider Participation in Compensation
Decisions
None of the members of our Compensation Committee are, or have
been, an employee or officer of
the Company. During fiscal 2007,
no member of the Compensation Committee had any relationship
with us requiring disclosure under Item 404 of
Regulation S-K.
During fiscal 2007, none of our executive officers served on the
compensation committee (or equivalent) or Board of another
entity whose executive officer(s) served on our Compensation
Committee or Board.
21
CERTAIN
RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Our code of ethics states that our executive officers and
directors, including their immediate family members, are charged
with avoiding situations in which their personal, family or
financial interests conflict with those of Qualcomm. In
accordance with its charter, the Audit Committee is responsible
for reviewing and approving all related person transactions
between Qualcomm and any directors or executive officers. The
Compensation Committee reviews compensation related transactions
with directors or executive officers (such as salary and bonus).
Any request for us to enter into a transaction with an executive
officer or director, or any of such persons’ immediate
family members or affiliates, must be presented to our Audit
Committee for review and approval. In considering the proposed
agreement, our Audit Committee will consider the relevant facts
and circumstances and the potential for conflicts of interest or
improprieties.
During fiscal 2007, we employed the family members of certain
directors and executive officers. Those employees whose
compensation exceeded $120,000 are discussed below. All of the
following family members under our employment were adults who
did not live with the related director or executive officer.
Each family member is compensated according to standard Company
practices, including participation in
the Company’s
employee benefit plans generally made available to employees of
a similar responsibility level. We do not view any of the
directors or executive officers as having a beneficial interest
in the described transactions that is material to them or the
Company. Moreover, none of the following directors or executive
officers believe that they have a direct or indirect material
interest in the employment relationships of the listed family
members. Options were granted under our the 2006 Long-Term
Incentive Plan and have a grant price that is equal to the fair
market value on the date of grant. Such options vest according
to the following schedule: 10% of the shares subject to the
option vest on the six-month anniversary of the date of grant,
with ratable monthly vesting over the remaining five-year
vesting period. Generally, vesting is contingent upon continued
service with
the Company. Options granted under any of our stock
option plans have a term of 10 years.
Dr. Paul E. Jacobs and Jeffrey A. Jacobs are the sons of
Dr. Irwin Mark Jacobs, Chairman of the Board.
Dr. Paul E. Jacobs serves as our CEO. Drs. Paul
E. Jacobs and Irwin Mark Jacobs were compensated as described
below under the heading “Executive Compensation and Related
Information.”
Jeffrey A. Jacobs serves as President of Qualcomm Global
Development. Jeffrey A. Jacobs earned $388,553 in salary and
$287,000 in bonus during fiscal 2007 and received a stock option
grant for 175,000 shares of
the Company’s stock at an
exercise price of $34.83 per share.
Duane A. Nelles’ son Duane A. Nelles, III serves as a
Senior Director, Business Development for us.
Duane A. Nelles III earned $173,716 in salary and
$32,800 in bonus during fiscal 2007 and received a stock option
grant for 4,000 shares of
the Company’s stock at an
exercise price of $37.99 per share and a second grant for
3,500 shares at an exercise price of $44.63 per share.
Steven R. Altman’s brother Jeffrey S. Altman serves as a
Senior Director, Business Development for us.
Jeffrey S. Altman earned $165,470 in salary and
$20,500 in bonus during fiscal 2007 and received a stock option
grant for 3,000 shares of
the Company’s common stock
at an exercise price of $37.99 per share and a second grant for
2,650 shares at an exercise price of $44.63 per share.
COMPENSATION
COMMITTEE REPORT
The Compensation Committee (the “Committee”) reviewed
and discussed the Compensation Discussion and Analysis
(CD&A) with management. Based on our review and
discussions, the Committee recommended to the Board of Directors
that the CD&A be included in Qualcomm’s 2008 Proxy
Statement.
COMPENSATION COMMITTEE
Raymond V. Dittamore, Chair
Brent Scowcroft
Marc I. Stern
22
COMPENSATION
DISCUSSION AND ANALYSIS
Our CD&A discusses the total compensation for our Chief
Executive Officer (CEO), Chief Financial Officer (CFO), and the
other three most highly compensated executive officers (the
“Named Executive Officers” or “NEOs”).
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1.
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Dr. Paul E. Jacobs, CEO, has 17 years of service with
Qualcomm and has been CEO since July 2005.
|
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| |
2.
|
Mr. William E. Keitel, CFO, has 11 years of service
with Qualcomm and has been CFO since February 2002.
|
| |
| |
3.
|
Mr. Steven R. Altman, President, has 18 years of
service with Qualcomm and has been President since July 2005.
|
| |
| |
4.
|
Dr. Sanjay K. Jha, COO and Group President of Qualcomm CDMA
Technologies, has 13 years of service with Qualcomm and has
been COO since December 2006.
|
| |
| |
5.
|
Dr. Irwin M. Jacobs, Chairman of the Board and a founder of
the Company, has 22 years of service with Qualcomm and has
served as Chairman of the Board since 1985.
|
The compensation programs for the NEOs also apply to our other
executive officers. In this CD&A, references to the
executive officers include the NEOs and the other executive
officers. The terms
“we,” “our” and
“the Company” refer to Qualcomm and not to the
Compensation Committee.
The CD&A provides us the opportunity to describe our
overall compensation philosophy, objectives and practices to
current and potential investors. Our compensation philosophy and
objectives generally apply to all our employees and most of our
employees are eligible to participate in the three main
components of our compensation program (salary, annual bonus and
long-term incentives). The relative value of each of these
programs for individual employees varies based on job role and
responsibility, as well as our financial and stock price
performance. We may limit the availability of some of our other
compensation programs (such as retirement plans and health and
welfare plans) to comply with regulatory requirements.
Our compensation program is characterized by the following:
|
|
|
| |
•
|
We employ our executive officers “at will”, without
severance agreements or employment contracts;
|
| |
| |
•
|
It aligns executive officer and stockholder financial interests;
|
| |
| |
•
|
It enables us to attract, motivate, reward and retain highly
talented executive officers;
|
| |
| |
•
|
It considers competitive compensation practices and relevant
factors without establishing compensation targets at specific
benchmark percentiles;
|
| |
| |
•
|
A significant portion of executive officer compensation is
realized only when we achieve annual business goals and when our
stock price increases;
|
| |
| |
•
|
It includes thorough processes that include Committee review and
approval of compensation program design and practices, the
advice of an independent, third-party compensation consultant
engaged by the Committee and in depth discussions between the
CEO and the Committee with respect to his performance, as well
as the performance of the other executive officers; and
|
| |
| |
•
|
It features long-standing, consistently and appropriately
applied practices with respect to the timing and pricing of
stock option grants.
|
What are
the objectives of our executive officer compensation
program?
The main objective of our compensation program is to align the
financial interests of our executive officers and stockholders.
To achieve this alignment we must attract and retain individuals
with the appropriate expertise and leadership ability, and we
must motivate and reward them to build long-term stockholder
value. Our competitors and we recruit from a limited pool of
resources for individuals who are highly experienced, successful
and well rewarded. Our unique talent base includes executive
officers who enjoy national and international recognition for
23
their expertise and leadership. Accordingly, our compensation
program must be competitive in a challenging and dynamic labor
market, while, at the same time, reinforcing our core values of
innovation, execution and partnership.
What is
our executive officer compensation program designed to
reward?
Our compensation program rewards our executive officers when
they achieve our annual business goals, build stockholder value
and maintain long-term careers with Qualcomm. We reward these
three aspects so that the team will make balanced annual and
long-term decisions that result in consistent financial
performance, product innovation and collaboration within
Qualcomm and with our customers and suppliers.
What are
the elements of our executive officer compensation program and
why do we provide each element?
We have a straightforward compensation program. The three main
elements are salary, bonus and long-term incentives. We also
provide executive officer retirement savings plans, health and
welfare programs and other forms of compensation, perquisites
and personal benefits. Each of these elements helps us attract
and retain executive officers and the specific purposes of each
of them are identified in the descriptions that follow.
Salary. We provide an annual salary to
each executive officer as an economic consideration for each
person’s level of responsibility, expertise, skills,
knowledge and experience.
Bonus. The bonus is part of our
executive officers’ annual compensation and one component
of variable compensation. We may or may not award an annual
bonus, and the amount of any award varies with company
performance and individual considerations.
Long-term incentives. We provide
long-term incentives in the form of stock options. Long-term
incentives are a form of variable compensation in that the
number of options granted is discretionary and the amount of any
income earned is completely dependent upon and varies with the
stock price over the option term. We offer stock options as an
incentive to build long-term stockholder value, to align the
interests of executive officers and stockholders, and to retain
executive officers through what we hope will be long-term wealth
creation in the value of their stock options, which have vesting
provisions that encourage continued employment. The SEC requires
that we report the estimated fair value of our stock option
grants in the Summary Compensation Table and the Grants of
Plan-Based Awards table in accordance with FAS 123R for
accounting purposes. At the time of grant, our stock options
have no intrinsic value and the amounts disclosed in the tables
for accounting purposes do not reflect whether the executive
officer has or will realize a financial benefit from the stock
option awards. Our executive officers are motivated by the
potential appreciation in our stock price above the exercise
price of the stock options. We also encourage stock ownership
(see the discussion of stock ownership guidelines) which we
regard as important for commitment, engagement and motivation.
Many of our employees are the targets for competitor
companies’ recruiting efforts, and restricted stock units
(RSUs) are an increasingly larger component of the compensation
packages offered to our employees by competitor companies. We
are positioned to refine our long-term incentive strategy should
it be in the interests of stockholders so that we can continue
to attract and retain the highly skilled talent required to
execute our business strategy.
Voluntary Retirement Savings Plans. We
offer our executive officers the opportunity to participate in
voluntary retirement savings plans in addition to a 401(k) plan.
We offer these voluntary plans to encourage long-term
employment, stock ownership and to create stockholder value. We
do not have a pension plan or other defined benefit retirement
plans; such plans are not typical among our peer companies in
the high technology industry or necessary for competitive
purposes.
401(k) Plan. Qualcomm offers a tax-qualified
401(k) plan to all U.S. domestic employees, including the
executive officers. We match employee contributions in cash
using a tiered structure in order to encourage employee
participation.
Voluntary Executive Retirement Contribution Plan (the
“ERC Plan”) and Executive Retirement Matching
Contribution Plan (the “Match
Plan”). Under the ERC Plan, a voluntary
nonqualified plan, eligible employees may defer up to 100% of
their salary and annual bonus on a pre-tax basis. The investment
choices under the ERC Plan are the same as those made available
to all employees participating in our 401(k) plan. In
24
addition, ERC Plan participants receive a Company contribution
under the Match Plan in the form of Qualcomm stock up to 10% of
salary plus annual bonus, less any 401(k) contributions. Our
stock contributions under the Match Plan are subject to a
four-year vesting schedule.
Health and Welfare Programs. We provide
a supplemental health care plan to our executive officers due to
its strong retention value and because it encourages
senior-level employees to stay and advance to the eligibility
level. The program provides coverage for most medical expenses
not paid by our broad-based health plan, with a maximum annual
coverage limit of $10,000 per executive officer.
We also offer a vacation program to all U.S. domestic
employees, including executive officers, that is consistent with
competitive practices in our industry. The vacation accrual rate
varies with length of Company service.
Other
forms of compensation, perquisites and personal
benefits.
We make the following additional benefits available to our
executive officers:
Employee Stock Purchase Plan. We have a
tax-qualified, voluntary Employee Stock Purchase Plan (the
“ESPP”) available to all U.S. domestic employees,
including the executive officers. The purchase price is 85% of
the lower of: (1) the fair market value (FMV) on the first
day of the six-month offering period; or (2) the FMV on the
last day of the six-month offering period. The ESPP encourages
long-term stock ownership and helps to align employee and
stockholder interests on a cost- and tax-effective basis. Annual
purchases are limited to $25,000 per individual, including the
price discount.
Financial and retirement planning services. We
may reimburse the CEO, the President and the Chairman up to
$12,500 annually (net of estimated income taxes) for expenses
incurred for financial, estate
and/or tax
planning. We may reimburse other executive officers up to $8,000
annually. We provide this benefit to help our executive officers
efficiently manage their time and financial affairs and to allow
them to stay focused on business issues and minimize
distractions of this type.
Charitable match. Subject to limits based on
the employee’s job level, we match employee contributions
to qualified, eligible Internal Revenue Service (IRS) recognized
non-profit organizations, excluding organizations that further a
religious doctrine, exclusionary organizations
and/or
political non-profit organizations. We match up to $125,000
annually for the CEO, the President and the Chairman and up to
$100,000 annually for other executive officers. We offer this
program to encourage, extend and expand their support of
cultural, educational and community non-profit organizations.
Insurance. We provide company-paid life
insurance to all employees equal to three times annual salary.
We provide additional life insurance to vice presidents and
above, including executive officers. The CEO, the President and
the Chairman receive an additional $1,000,000 in coverage, and
other executive officers receive an additional $750,000 in
coverage. We offer the additional insurance for competitive
positioning in the labor market.
Corporate aircraft. When executive officers
use our corporate aircraft for company business and there are
vacant seats on a flight, they may at times invite guests to
accompany them. We also permit use of our corporate aircraft for
executive officers traveling to attend meetings of educational
or other non-profit organizations. See footnote 1 to the All
Other Compensation table under the Executive Compensation and
Related Information section for more information. Executives are
not permitted to reimburse Qualcomm for the cost of personal
flights, or the incremental cost for non-business guests,
because reimbursements would violate Federal Aviation Agency
(FAA) regulations; reimbursements would result in the flight
being deemed a charter by the FAA and Qualcomm does not operate
its aircraft under an FAA charter certificate.
Personal security. Our executive officers may
receive personal security services for their residences and
while on personal travel as necessary to address a bona fide
business-oriented security concern or as circumstances otherwise
warrant. During fiscal 2007, in order to address a potential
threat to the Chairman and the CEO (following an incident with
another high-profile business executive in the same residential
area), we took immediate temporary action to provide residential
guard services. We discontinued the residential
25
guard services in fiscal 2007. We may also arrange security for
executive officers while on personal travel if available data
suggests high crime rates or other unusual concerns at
particular locations and venues.
Entertainment and charitable events. We
purchase tickets to various sporting, civic, cultural, charity
and entertainment events for business purposes. If not used for
business purposes, we may make these tickets available to our
employees, including our executive officers, as a form of
recognition and reward for their efforts.
Post employment compensation.
No employment agreements. We employ all
U.S. based employees, including our executive officers,
“at will,” without severance agreements or employment
contracts. This is consistent with our objective of providing
compensation related to individual contributions that improve
our market leadership, competitive advantage and stockholder
value. It enables our Board to terminate employment with
discretion as to the terms and conditions of any separation.
Stock Option Plans. The 2001 Stock Option Plan
and the stock option award agreements under the 2006 Long-Term
Incentive Plan (the “2006 LTIP”) provide for
accelerating 10% of unvested options under certain involuntary
terminations that are not “for cause,” subject to
execution of a general release of claims. The 2001 Stock Option
Plan and the 2006 LTIP provide that if a
change-in-control
(as defined in the plans) occurs and an outstanding stock option
award is not assumed or substituted with a substantially similar
award, the Committee may accelerate the vesting of any or all
outstanding stock options. Our stock option agreements include a
“double trigger” in which vesting of stock options is
accelerated if, within 24 months after a
change-in-control,
the stock option recipient is involuntarily terminated for any
reason other than for cause or if the stock option recipient
voluntarily resigns for good reason (as defined in the stock
option award agreements).
Severance provisions. We do not have a
pre-defined severance plan or policy for the involuntary
termination of employees, including the executive officers.
While unvested options may be accelerated in certain severance
situations, we do not accelerate unvested options in the event
of an involuntary
“for cause” termination. Such
terminations may involve theft, dishonesty, falsification,
actions that are detrimental to
the Company, conviction of a
criminal act that impairs the performance of duties required by
the Company or violation of a material company policy.
How do we
determine the amount for each element of executive officer
compensation?
We believe the levels of compensation we provide should be
competitively reasonable and appropriate for our business needs
and circumstances. Our approach is to consider competitive
compensation practices and relevant factors rather than
establishing compensation at specific benchmark percentiles.
This enables us to respond to dynamics in the labor market and
provides us with flexibility in maintaining and enhancing our
executive officers’ engagement, focus, motivation and
enthusiasm for our future. We follow a two-phase process. In the
first phase, we conduct competitive compensation analyses to
estimate the median,
75th percentile
and 90th percentile positions for salary, target annual
cash (salary + target bonus), long-term incentive compensation,
and target total direct compensation (salary + target bonus +
long-term incentives). The range from the competitive median to
above the
90th percentile
reflects what the Committee believes is competitively reasonable
and appropriate. We believe this range is consistent with our
compensation program objectives and is appropriate given that
our long-term incentive compensation consists entirely of stock
options (unlike many of our competitors that offer lower-risk
restricted stock and full-value shares), our target total direct
compensation is variable because bonus plus stock options are
approximately 90% of target total direct compensation for NEOs
eligible to receive a bonus, and we do not provide a defined
benefit pension plan. In the second phase, we consider many
factors in determining appropriate compensation levels for each
executive officer. These considerations may include:
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Our analyses of competitive compensation practices;
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The Committee’s evaluation of the CEO and other executive
officers;
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26
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•
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Individual performance and contributions to financial goals such
as revenue, earnings before tax, cash flow and operating expense;
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Operational management, such as project milestones and process
improvements;
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Internal working and reporting relationships and our desire to
encourage collaboration and teamwork among our executive
officers;
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•
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Individual expertise, skills and knowledge;
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•
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Leadership, including developing and motivating employees,
collaborating within Qualcomm, attracting and retaining
employees and personal development;
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•
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Labor market conditions, the need to retain and motivate, the
potential to assume increased responsibilities and the long-term
value to Qualcomm; and
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•
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Information and advice from an independent, third-party
compensation consultant engaged by the Committee.
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We do not have a pre-defined framework that determines which of
these factors may be more or less important, and the emphasis
placed on specific factors may vary among the executive
officers. Ultimately, it is the Committee’s judgment of
these factors along with competitive data that form the basis
for determining the CEO’s compensation. The Committee and
the CEO follow a similar practice to determine the basis of the
other executive officers’ compensation.
Competitive compensation analyses for fiscal
2007. In fiscal 2007, we used two primary
resources to identify competitive compensation practices
relevant to our executive officers:
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The Radford U.S. Executive Survey for high technology
companies with revenue greater than $1 billion; and
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SEC disclosure data from our peer companies.
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The criteria used to select peer companies included large market
capitalization high technology companies, with similar pay
models and similar growth expectations. The peer companies were:
Peer
Companies for Fiscal 2007
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Advanced Micro Devices
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Agilent
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Amazon
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Analog Devices
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Apple
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Applied Materials
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Broadcom
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Cisco
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Comcast
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Dell
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eBay
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EMC Corporation
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Freescale Semiconductors
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Google
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Intel
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L-3 Communications
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Linear Technology
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Lucent
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Marvell Technologies
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Motorola
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Oracle
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Sprint Nextel
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Texas Instruments
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Yahoo!
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We reviewed our relative position among the peer companies with
respect to market capitalization, revenue, net income and one-
and three-year total stockholder return. Our revenue was in the
lower half of the peer companies; net income and total
stockholder returns were between the median and
75th percentiles;
and market capitalization was above the
75th percentile.
Our varied percentile rankings relative to the peer companies
supported our view that the peer companies include an
appropriate range of size and performance and did not introduce
a favorable or unfavorable bias in comparing executive
compensation data.
How compensation or amounts realizable from prior
compensation are considered. The Committee
reviews the current value of shares owned, the current value of
exercisable and unvested stock options and the gain on option
sales for the preceding three years as part of its annual review
of executive officer compensation. The amount of past
compensation, including annual bonus awards and amounts realized
or realizable from prior stock option awards, is generally not a
significant factor in the Committee’s considerations,
because bonuses are awarded for fiscal year
27
performance and stock options are awarded as part of the target
total direct compensation the Committee establishes each year.
Tax considerations. A goal of the Committee is
to comply with the requirements of Internal Revenue Code
Sections 162(m) and 409A. Section 162(m) places a
$1 million annual limit on the amount that a public company
may deduct for compensation paid to the CEO and the other three
most highly compensated executive officers, excluding the CFO.
The $1 million limit does not apply if the compensation
meets Section 162(m) requirements for performance-based
compensation (i.e., the compensation is based on pre-established
objective performance goals based on criteria approved by
stockholders and is determined and administered according to
related regulations). Compliance with Section 162(m) did
not influence the allocation of compensation among salary,
annual bonus plan targets and stock option grants. We designed
and administered our fiscal 2007 bonus program to be eligible
for tax deductions to the extent permitted by the relevant tax
regulations, including Section 162(m). From time-to-time,
we may pay compensation to our executive officers that may not
be tax deductible, if there are compelling reasons to do so.
Stock options granted under the 2006 LTIP also qualify as
performance-based compensation.
Under Section 409A, amounts deferred by an executive
officer under a nonqualified deferred compensation plan (such as
the ERC Plan and Match Plan) may be included in gross income
when deferred and subject to a 20% additional federal tax,
unless the plan complies with certain requirements related to
the timing of deferral election and distribution decisions.
Nonqualified stock options may be exempt from Section 409A
if the option satisfies certain requirements (i.e., the exercise
price is not less than the fair market value on the grant date,
the number of shares subject to option is fixed on the grant
date, and there is no deferral feature beyond exercise). We
administer the ERC Plan, the Match Plan, and stock option awards
consistent with Section 409A requirements.
CEO involvement in compensation
decisions. After the end of the fiscal year, the
Committee and the CEO discussed our business performance, his
performance and his evaluation of and compensation
recommendations for the other executive officers. The Committee,
without the CEO present, determined the CEO’s annual
salary, bonus award and stock option award. The Committee also
approved the annual salaries, bonuses and stock option awards
for the other executive officers.
Consultants and advisors. The Committee has
the authority to retain and terminate any independent
third-party compensation consultant and to obtain independent
advice and assistance from internal and external legal,
accounting and other advisors. During fiscal 2007, the Committee
engaged an independent executive compensation consulting firm,
Frederic W. Cook & Co., Inc. (“FWC”), to
advise them on compensation matters. FWC reported directly to
the Committee. During fiscal 2007, we did not engage FWC for any
additional services beyond their support of the Committee. The
Committee instructed FWC to provide information, insights and
advice regarding compensation philosophy, objectives and
strategy, selection of peer companies for competitive analyses,
methodology for valuing long-term incentives and total direct
compensation, and specific issues the Committee addressed during
the year. The Committee also instructed FWC to provide peer
company compensation data to our human resources staff who
analyzed competitive practices and presented the results and
recommendations to the Committee. The Committee asked FWC to
comment on our recommendations regarding executive officer
compensation and aggregate equity compensation. Finally, the
Committee instructed FWC to provide an analysis of competitive
practices for non-employee director compensation.
Representatives from FWC attended all but one Committee meeting
during fiscal 2007 and interacted with the Committee Chair,
members of our human resources staff and outside legal counsel
prior to and following Committee meetings. During fiscal 2007,
the Committee sought and received advice from our outside legal
counsel, DLA Piper. The total rewards management department
within our human resources organization supports the Committee
in its work, collaborates with FWC and DLA Piper, conducts
competitive analyses and manages our compensation and benefit
programs.
Other
key policies and
practices.
Timing, grant date and exercise price for stock option
awards.
We have a long-standing and consistent practice of awarding
annual stock option grants to the executive officers during the
first quarter of our fiscal year. The Committee approves salary
levels, bonus awards and annual stock options at the same time
to facilitate consideration of total compensation to executive
officers. We also award
28
stock options upon hiring a new executive officer, and we may
award stock options upon a promotion or change in roles and
responsibilities of an executive officer.
Fiscal 2007 awards. We granted annual stock
option awards to executive officers in November 2006. Those
awards are disclosed in the Grants of Plan-Based Awards table.
In keeping with our practice, the grant date was the Friday of
the week during which the Committee approved the awards. The
exercise price was the closing price on the most recently
completed trading day prior to the grant date. Generally, this
has been the closing price on Thursday, the day immediately
before the Friday grant date. In March 2007, we adjusted our
guidelines for the grant date for future stock option awards to
be the same date on which the Committee approves the award. We
also amended the 2006 LTIP so that the exercise price is the
closing price on the grant date. We made these changes after
carefully reviewing the controls, procedures and feasibility of
administering new option granting practices in order to be
consistent with the SEC’s amended disclosure requirements
for executive and director compensation that were published in
September 2006. There were no grants to executive officers in
fiscal 2007 under these new guidelines.
Fiscal 2008 awards. The Committee approved
annual stock options, bonus awards and salary levels for
executive officers in November 2007. The stock option awards are
disclosed in the Fiscal 2008 Long-Term Incentive Awards table.
The grant date was the same date on which the Committee approved
the awards, and the exercise price was the closing price on the
grant date.
Stock ownership guidelines. In September 2006,
we adopted stock ownership guidelines for our executive
officers. The guidelines help ensure that our executive officers
maintain an equity stake in Qualcomm, and by doing so,
appropriately link their interests with those of other
stockholders. Only shares actually owned (including deferred
units under the Match Plan) count towards the equity ownership
requirement, outstanding unexercised stock options do not count
towards the requirement. Executive officers are required to
achieve these stock ownership levels within five years of
becoming an executive officer. The deadline for achieving the
stock ownership levels is September 2011 for those who were
executive officers at the time we adopted the guidelines. If an
executive officer has not met the guidelines by the deadline, we
will require that the executive officer, upon a stock option
exercise, hold at least 50% of the net shares remaining after
required tax withholdings, until they meet the minimum
guideline. The guidelines are as follows:
Stock
Ownership Guidelines
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Role
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Multiple of Salary
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CEO
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5 X
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CFO
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2 X
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President
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3 X
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Chairman of the Board
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2 X
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COO & Group President, QCT
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3 X
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The Committee has determined that, as of
September 30,
2007, Drs. Paul Jacobs and Irwin Jacobs and Mr. Altman
have met their ownership guidelines. Dr. Jha and
Mr. Keitel own stock and have made progress toward meeting
their guidelines by acquiring additional shares during fiscal
2007.
Analysis
of NEO compensation during fiscal 2007.
General. Our competitive compensation analyses
identified relevant market data for our NEOs with the exception
of Dr. Jha. The Committee, with the concurrence of FWC,
determined that the available competitive data did not
adequately reflect Dr. Jha’s role, scope of work,
responsibilities and influence on business performance.
Dr. Jha has significant strategic responsibilities,
interactions with investors and stockholders, a prominent role
in the semiconductor industry and leads our corporate research
and development staff in addition to Qualcomm CDMA Technologies.
The Committee determined that a relational approach that
establishes Dr. Jha’s target total direct compensation
relative to the CEO is an appropriate method in lieu of
competitive market data. The Committee considered internal
working and reporting relationships and the relative
responsibilities and influence on the business of
Mr. Altman and Dr. Jha. For fiscal 2007, the Committee
decided that Dr. Jha’s salary, stock option award
29
and target total direct compensation should be between 65% and
70% of the CEO’s salary, stock option award and target
total direct compensation.
The Fiscal 2007 Target Total Direct Compensation table below
summarizes the levels established by the Committee with respect
to salary, target bonus, stock options and target total direct
compensation. We discuss each element of the table in the
narrative that follows.
Fiscal
2007 Target Total Direct Compensation
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Base Target Bonus(2)
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Stretch Target Bonus(2)
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Base
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Stretch
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Long-term
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Target
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Target
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Incentive
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Base Total
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Stretch Total
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Annual
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Bonus
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Base
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Bonus
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Stretch
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Award — Fair
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Direct
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Direct
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Salary
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(As a%
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Target
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(As a% of
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Target
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Value
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Compensation
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Compensation
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(1)
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of Annual
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Bonus
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Annual
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Bonus
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(3)
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(4)
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(5)
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Name
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($000s)
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Salary)
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($000s)
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Salary)
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($000s)
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($000s)
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($000s)
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($000s)
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Paul E. Jacobs
CEO
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1,075
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100
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%
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1,075
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125
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%
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1,344
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10,047
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12,197
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12,466
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William E. Keitel
CFO
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630
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75
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%
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473
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90
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%
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567
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4,828
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5,931
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6,025
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Steven R. Altman
President
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790
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95
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%
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751
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115
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%
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909
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7,438
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8,979
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9,137
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Irwin M. Jacobs
Chairman of the Board
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650
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—
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—
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—
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—
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1,957
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2,607
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2,607
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Sanjay K. Jha
COO and Group President
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735
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75
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%
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551
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90
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%
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662
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7,112
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8,398
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8,509
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(1) |
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These annual salaries were in effect at the end of fiscal 2007.
The NEOs’ annual salaries were effective on
December 16, 2006; therefore, these annual salary rates do
not reflect the total actual salaries earned in fiscal 2007 as
reported in the Summary Compensation Table. |
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(2) |
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See the discussion of target bonus for a description of the base
and stretch target bonus. |
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(3) |
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These amounts reflect the fair value as of the grant date as
determined in accordance with FAS 123R for accounting
purposes and do not reflect whether the recipient has actually
realized or will realize a financial benefit from the awards.
The potential appreciation in our stock price above the exercise
price of the stock options, not the fair value used for
accounting purposes at grant, motivates our executive officers.
For additional information on the valuation assumptions, refer
to Note 1 of Qualcomm’s consolidated financial
statements in our annual report on
Form 10-K
for the year ended September 30, 2007, as filed with the
SEC. |
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(4) |
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The sum of salary plus base target bonus plus the estimated fair
value of the fiscal 2007 stock option award. |
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(5) |
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The sum of salary plus stretch target bonus plus the estimated
fair value of the fiscal 2007 stock option award. |
Salary. The primary factors in the
Committee’s consideration of salary included anticipated
increases in the labor market and the fact that the executive
officers’ target annual cash (salary + target bonus) was
generally below the median amounts identified in our competitive
analyses. Based on these competitive practices and the resulting
target annual compensation (salary + target bonus), the
Committee approved a 4.2% aggregate increase to the NEOs’
salaries. The increases were effective
December 16, 2006.
After the increases, our executive officers’ salaries, in
aggregate, were between the median and
75
th percentiles
identified in our competitive analyses. Dr. Paul
Jacobs’ salary increased 4.9% to $1.1 million,
slightly below the
75
th percentile.
The increases for the other NEOs ranged from no increase for
Dr. Irwin Jacobs to a 5.3% increase for Mr. Altman.
Dr. Irwin Jacobs’ and Mr. Altman’s salaries
were between the median and the
75
th percentile.
Mr. Keitel’s salary was slightly above the
75
th percentile.
Dr. Jha’s salary increased 5% and was 68% of the
CEO’s salary.
30
Target bonus. The executive officers’
annual target bonuses were determined as a percent of annual
salary. Consistent with fiscal 2006, we used a two-tier target
bonus structure (see the Fiscal 2007 Target Total Direct
Compensation table), consisting of a base target bonus (the
“base target bonus”) and a higher stretch target bonus
(the “stretch target bonus”). The base and stretch
target bonuses varied among the executive officers and increased
with job scope and responsibility, which was consistent with
market practices and our intent to make variable compensation a
greater portion of target total direct compensation as
responsibility increases. FWC observed that the base target
bonus levels were below the competitive median and the stretch
target bonus levels were between the competitive median and
75th percentile.
The Committee considered competitive data and the factors
described earlier (especially to reflect internal working and
reporting relationships and to encourage collaboration and
teamwork) in approving the executive officers’ target
bonuses. The target bonuses were generally below the competitive
median so that the Committee could award a significant portion
of target total direct compensation through stock options.
Target annual compensation (sum of salary + base target
bonus). Dr. Paul Jacobs’ and
Mr. Altman’s target annual compensation amounts were
below the median identified in our competitive analysis. The
target annual compensation for Mr. Keitel was at the
median. Dr. Irwin Jacobs and the Committee agreed to
compensate his role as Chairman with a salary and long-term
incentives because he is not directly responsible for short-term
operating performance; he was not eligible for the annual bonus
program. The Committee did not establish a specific target
annual compensation relationship for Dr. Jha relative to
the CEO.
Long-term incentive compensation. Our
long-term incentive compensation consisted entirely of stock
options. We determined a competitive number of option shares
based on a derived “guideline grant” that, when added
to the target annual cash, resulted in a target total direct
compensation level that the Committee determined was reasonable
and appropriate. The Committee, at its discretion, awarded stock
option grants that considered the guideline grant and the
factors described earlier. The actual stock options granted
ranged from 1% below to 5% above the guideline grant. The grants
were consistent with respect to our timing and exercise price
practices in effect at the time of grant and are disclosed in
the Grants of Plan-Based Awards table (see “Fiscal 2007
awards” under “Other key policies and practices”
above).
We do not believe that the estimated fair value of our stock
option grants reflected in the Summary Compensation Table and
the Grants of Plan-Based Awards table is a measure of the
compensation actually received or that may be received. Our
executives are motivated by the potential appreciation in our
stock price above the exercise price of the stock options.
Target total direct compensation (salary + base target bonus
+ stock options). Dr. Paul Jacobs’
target total direct compensation, and that of
Messrs. Altman and Keitel, was between the median and
75th percentiles
identified in our competitive analyses. Dr. Jha’s
target total direct compensation, established by the Committee,
was 69% of that of the CEO. Dr. Irwin Jacobs did not
participate in the annual bonus plan; his target total direct
compensation was below the median for positions deemed to be
comparable.
In making compensation decisions, the Committee did not
specifically consider the ratio of the CEO’s compensation
to the executive officers, other than for Dr. Jha. We do
note that the average base target total direct compensation of
the three NEOs participating in the bonus plan was 64% of the
CEO’s base target total direct compensation. Specifically,
Mr. Altman’s base target total direct compensation was
74% of the CEO’s, Mr. Keitel’s was 49% of the
CEO’s, and as noted above, Dr. Jha’s was 69% of
the CEO’s. We believe these relationships appropriately
reflect each NEO’s level of responsibility and our interest
in encouraging collaboration and teamwork.
Excluding Dr. Irwin Jacobs (because he did not participate
in the annual bonus plan), annual compensation (salary + base
target bonus) was less than 20% of target total direct
compensation, and variable compensation (base target bonus +
stock options) was approximately 90% of target total direct
compensation. We believe that our compensation program for NEOs
is aligned with stockholders’ interests due to the
significant variable and long-term structure of target total
direct compensation, and the manner in which the variable
compensation is determined.
31
Fiscal
2007 bonus
awards.
The design of the bonus program in fiscal 2007 was similar to
prior fiscal years’ bonus programs. The key components of
the bonus program were pro forma revenue and pro forma Earnings
Before Tax (EBT) as compared to target pro forma revenue and
target pro forma EBT, expressed as “Achievement
Ratios.” We use revenue and EBT because these two
operational metrics focus the executive officer team on overall
business growth and profitability, provide direct
“line-of-sight” between decisions and outcomes and are
two key factors that influence stockholder value. Pro forma
results exclude the Qualcomm Strategic Initiatives (QSI)
segment, certain estimated share-based compensation, certain tax
items related to prior years and acquired in-process research
and development (R&D) expense. We believe that pro forma
metrics, rather than GAAP-based metrics, enable evaluation of
operating results on a consistent and comparable basis.
We administered the bonus awards under our 2006 LTIP, consistent
with the Committee’s goal to comply with the requirements
of Internal Revenue Code Section 162(m). Our 2006 LTIP
includes a limit of $1 million that may be paid in cash to
an employee for a fiscal year performance award. (The
$1 million limit is a plan limit that was not intended to
specifically correspond to the Section 162(m)
performance-based compensation limit. In Proposal 2 of this
proxy, we are asking stockholders to increase the 2006 LTIP
limit to $8 million.) For any bonus award that exceeded
$1 million, the payment would be up to $1 million in
cash and any excess amount due the employee would be satisfied
through the issuance of fully vested, unrestricted shares of
Qualcomm stock.
The Fiscal 2007 Bonus Program Metrics and Formula Award Funding
Factor Calculations table below summarizes the performance
targets, actual achievement and the calculations for determining
the formula award funding factor. The formula award funding
factor yielded the ceiling, or maximum potential award level
that could be paid to an executive officer under our fiscal 2007
bonus program. We multiplied the formula award funding factor
times each executive officer’s stretch target bonus
(because we exceeded the stretch goal for fiscal 2007) to
establish the officer’s maximum potential bonus award. The
maximum potential bonus awards were: $1,962K for Dr. Paul
Jacobs; $828K for Mr. Keitel; $1,327K for Mr. Altman;
and $967K for Dr. Jha. The Committee considered our
business performance, the CEO’s performance, the CEO’s
evaluation of and recommendation for the other executive
officers, and its evaluation of the CEO’s performance;
based on this assessment, the Committee used its discretion to
approve bonus awards that were less than the maximum potential
bonus awards.
To encourage profitable growth, we weight pro forma EBT
performance 60% and pro forma revenue performance 40%. The pro
forma targets reflected approximately 11% growth over fiscal
2006 pro forma revenue and 9% growth over fiscal 2006 pro forma
EBT. The Committee also established a “stretch”
Earnings per Share (EPS) goal for fiscal 2007. The stretch
target provided additional incentive to exceed the annual
financial goals. We structured the fiscal 2007 bonus program so
that, if pro forma EPS were below the pre-defined stretch goal,
the base target bonus percentage would apply. If pro forma EPS
met or exceeded the pre-defined stretch goal, the higher stretch
target bonus percentage would apply. For fiscal 2007, we
exceeded the stretch pro forma $2.00 EPS goal.
Fiscal
2007 Bonus Program Metrics and Formula Award Funding Factor
Calculations
| |
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Fiscal 2007 Target
|
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and Actual
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Funding Rate
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Achievement
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Formula
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Weighted
|
|
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($ Millions)
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Achievement
|
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|
(See the Graphic
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Relative
|
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Funding
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Financial Metric
|
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Actual
|
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Target
|
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Ratio
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Below)
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Funding Rate
|
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Weight
|
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|
Rate
|
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|
Pro Forma Revenue
|
|
$
|
8,870
|
|
|
|
¸
|
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|
$
|
8,336
|
|
|
|
=
|
|
|
|
1.064
|
|
|
|
|
*
|
|
|
(1.064 * 3
|
) - 2
|
|
|
=
|
|
|
|
1.19
|
|
|
|
|
*
|
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|
40
|
%
|
|
|
=
|
|
|
|
0.48
|
|
|
Pro Forma EBT
|
|
$
|
4,363
|
|
|
|
¸
|
|
|
$
|
4,150
|
|
|
|
=
|
|
|
|
1.051
|
|
|
|
|
*
|
|
|
(1.051 * 3
|
) - 2
|
|
|
=
|
|
|
|
1.15
|
|
|
|
|
*
|
|
|
60
|
%
|
|
|
=
|
|
|
|
0.69
|
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|
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|
|
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|
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|
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|
Company Performance
|
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=
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|
1.17
|
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|
Performance Factor
|
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|
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|
*
|
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|
1.25
|
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|
Formula award funding factor (applied to each executive
officer’s stretch target bonus)
|
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=
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|
1.46
|
|
32
Funding Rate Formula. We apply different
funding rate formulas based on the Achievement Ratio (see the
table below). If the Achievement Ratio is below a minimum level
of performance (80% of target), there is no bonus funding for
that financial metric. If the Achievement Ratio is between the
minimum and target levels of performance, bonus funding is at a
specific rate. If the Achievement Ratio is between the target
and maximum levels of performance, bonus funding as a function
of the Achievement Ratio progresses at a somewhat slower rate
than for performance between the minimum and target levels of
performance. The maximum funding level is 2.5 times the target
if we achieve 150% of the financial metric. Below is a graphic
representation of the funding rate as a function of Achievement
Ratio.
Funding
Rate Formula for Achievement Ratios
| |
|
|
|
Achievement Ratio
|
|
Funding Rate Formula
|
|
|
|
a) Less than 0.80
|
|
0.0 (no funding)
|
|
b) 0.80 to 1.00 (minimum to target level of
performance)
|
|
(Achievement Ratio * 3.5) — 2.5
|
|
c) 1.00 to 1.50 (target to maximum level of
performance)
|
|
(Achievement Ratio * 3.0) — 2
|
|
d) Greater than 1.50 (above maximum level of
performance)
|
|
2.50 (maximum funding rate)
|
Performance Factor. This is a funding
mechanism that provides a margin for the Committee to operate
within Section 162(m) requirements in the exercise of
negative discretion from a formula award. It also enables the
Committee to reflect risks and opportunities inherent in the
financial plan. The Committee establishes the Performance Factor
each year. For fiscal 2007, the Committee set the Performance
Factor at 1.25. Inherent risks in the financial plan included
the impact on royalty revenues and EPS associated with legal
challenges to Qualcomm’s business model and litigation
expenses associated with defending our intellectual property.
The Committee wanted to ensure that the bonus plan properly
motivated the executive officers to act in the long-term
interests of the stockholders.
In addition to the formulaic calculation of the maximum
potential bonus award, the Committee engaged in its annual
review of the CEO’s performance and his evaluation of the
other executive officers, both for general review purposes, as
well as to inform the Committee with respect to the fiscal 2007
bonus awards. In its evaluation, the Committee noted the
following:
|
|
|
| |
•
|
We were, and continue to be, under attack in litigation and in
front of regulatory bodies from competitors and those who want
to diminish or destroy our business model, notwithstanding its
demonstrable benefits to the wireless community as well as our
stockholders;
|
| |
| |
•
|
Despite these attacks, the Committee noted that we achieved new
records in pro forma revenue and earnings and, importantly to
our future, we continued to innovate by introducing new
chipsets, as well as other products and services, which were
recognized by analysts and customers alike as continuing to set
the standard for technological excellence;
|
| |
| |
•
|
We continued to make significant strides in the development and
deployment of MediaFLO;
|
33
|
|
|
| |
•
|
Our efforts in stabilizing and, in certain cases, expanding,
relationships with our customers and other business partners,
notwithstanding the attacks on us that had the potential for
significantly impacting the businesses of these customers and
partners; and
|
| |
| |
•
|
We suffered significant negative publicity as a result of
discovery related failures and the actions of our outside
counsel at trial in a lawsuit in San Diego.
|
The Committee gave great credit to Dr. Paul Jacobs for his
leadership under extremely difficult circumstances and, while
noting its disappointment with issues related to the management
of our legal department, applauded efforts that have been taken
to hire a seasoned leader for that department and to provide the
necessary resources to support and improve this important
function. Dr. Paul Jacobs accepted and concurred with the
Committee’s evaluation.
After considering all of the foregoing, the Committee awarded
Dr. Paul Jacobs a bonus for fiscal 2007 in the amount of
$1,131,700. Consistent with our 2006 LTIP, the amount in excess
of $1 million was paid out in fully vested, unrestricted
shares of stock. The Committee also approved the awards listed
in the Non-Equity Incentive Plan Compensation column of the
Summary Compensation Table.
Compensation
planning for the Named Executive Officers for fiscal
2008.
This section provides an update to compensation decisions and
actions we made after the end of fiscal 2007.
Highlights
|
|
|
| |
•
|
The peer companies changed slightly from fiscal 2007;
|
| |
| |
•
|
The target total direct compensation opportunities for
Dr. Paul Jacobs, Messrs. Keitel and Altman and
Dr. Jha are between the competitive median and slightly
above the
75th percentile;
|
| |
| |
•
|
The target total direct compensation opportunity for
Dr. Irwin Jacobs is below the competitive median; and
|
| |
| |
•
|
We increased the target bonuses for the NEOs, eliminated the
two-tier base and stretch target bonus approach and modified the
funding rate formulas associated with the Achievement Ratio.
|
Competitive analysis for fiscal 2008
compensation. We used SEC disclosure data from
our peer companies to identify competitive compensation
practices relevant to our NEOs for fiscal 2008.
We identified an initial group of potential fiscal 2008 peer
companies that met one or more of the following selection
criteria:
|
|
|
| |
•
|
Market capitalization in the range from $35 billion to
$140 billion;
|
| |
| |
•
|
Revenue in the range from $4 billion to $17 billion;
|
| |
| |
•
|
Revenue growth in the range from 10% to 25%;
|
| |
| |
•
|
Research and development spending in the range from 10% to 35%
of revenue;
|
| |
| |
•
|
High barriers to entry or extensive revenue streams from
intellectual property portfolios; and
|
| |
| |
•
|
Similar pay models with high performance risk and leverage and
relying on incentives and equity to reward performance and
retain talent.
|
We then amended the initial group to include other relevant
labor market competitors and exclude companies that were in
multi-year business turn-around situations or that did not
provide a meaningful labor market comparison for our executive
officers. The Committee’s consultant, FWC, confirmed that
the changes to the peer group from 2007 would not skew the
compensation comparison to the advantage or disadvantage of the
executive officers.
34
The peer companies for fiscal 2008 are:
Peer
Companies for Fiscal 2008
| |
|
|
|
|
|
Advanced Micro Devices
|
|
Agilent
|
|
Analog Devices
|
|
Apple
|
|
Applied Materials
|
|
Broadcom
|
|
Cisco
|
|
EMC Corporation
|
|
Google
|
|
Intel
|
|
Linear Technology
|
|
Marvell Technologies
|
|
Microsoft
|
|
Motorola
|
|
NVIDIA
|
|
Oracle
|
|
Sprint Nextel
|
|
Texas Instruments
|
|
Yahoo!
|
|
|
|
|
Fiscal
2008 target
compensation.
We noted earlier that the Committee has a long-standing and
consistent practice of approving salary levels, bonus awards and
stock option awards during the first quarter of our fiscal year.
The Committee meeting date of
November 12, 2007 was
confirmed, and Committee members notified, on
January 30,
2007, more than 9 months in advance of the meeting. On
November 12, 2007, the Committee met and approved the
salaries, target bonuses and long-term incentive compensation
awards for the executive officers. The Fiscal 2008 Target Total
Direct Compensation table summarizes these compensation levels.
General. We noted that for fiscal 2007, the
Committee, with the concurrence of FWC, determined that
Dr. Jha’s salary, stock option award and target total
direct compensation should be determined relative to the CEO
because appropriate competitive data was not available. For
fiscal 2008, we compared Dr. Paul Jacobs’ compensation
to peer company CEO data, Mr. Keitel (our CFO) to peer
company CFO data, Mr. Altman, Dr. Jha and
Dr. Irwin Jacobs to the
2nd,
3rd and
5th highest
paid NEOs, respectively. We believe that this method provides
the best-available data for balancing external competitive and
internal position relationships.
Salary for calendar 2008. Salary increases
were effective on
December 15, 2007. We have a
long-standing practice of establishing the executive
officers’ salaries concurrent with the calendar year. The
aggregate increase in executive officers’ salaries was
1.2%, which is below the 4% level of expected salary increases
in 2008. At their request, the Committee did not change
Drs. Paul Jacobs’ and Irwin Jacobs’ and
Mr. Altman’s salaries from the 2007 levels. The
Committee increased Dr. Jha’s salary by less than 3%
to keep his target annual cash compensation below the
competitive
75
th percentile.
The Committee increased Mr. Keitel’s salary by 4%,
consistent with expected competitive increases.
Target bonus. The Committee increased the
bonus targets to position target total cash compensation closer
to the competitive
75th percentile.
The Committee eliminated the two-tier base and stretch target
bonus approach because it increased the bonus targets for
performance levels significantly beyond the fiscal 2007 base
target levels. The Committee considered competitive data and
used discretion in approving the executive officers’ bonus
targets in order to reflect internal relationships and to
encourage collaboration and teamwork among our executive
officers. The key components of the bonus program, as in fiscal
2007, are pro forma revenue and pro forma EBT, compared to
target pro forma revenue and target pro forma EBT. For fiscal
2008:
|
|
|
| |
•
|
The target pro forma revenue is within, but at the higher end of
the range we provided in our initial fiscal 2008 earnings
guidance of pro forma revenues of $9.5 billion to
$9.9 billion,
|
| |
| |
•
|
The targets for both pro forma revenue and pro forma EBT are
higher than the levels of actual achievement for fiscal
2007, and
|
| |
| |
•
|
Pro forma EBT is weighted 60% and pro forma revenue is weighted
40%, consistent with fiscal 2007 target performance goals, to
encourage profitable growth.
|
We believe that the relative difficulty of our target
performance goals for fiscal 2008 is consistent with the
difficulty of achieving the fiscal 2007 target performance goals
and consistent with the above-median positioning of target
annual compensation when viewed as part of the overall total
compensation program.
35
Target annual compensation for fiscal 2008 (salary + target
bonus). The fiscal 2008 target annual cash
compensation levels for Dr. Paul Jacobs, Mr. Keitel
and Dr. Jha are between the competitive median and
75th percentiles. The target cash compensation for
Mr. Altman is slightly above the competitive
75th percentile.
This represents a shift in our approach to acknowledge market
practices and a general trend toward lower-risk total direct
compensation packages. Dr. Irwin Jacobs and the Committee
agreed to continue to compensate his role as Chairman with a
salary and long-term incentives; he is not eligible for the
annual bonus plan.
Long-term incentive compensation. Our
long-term incentive compensation for NEOs continues to consist
entirely of stock options. The Committee, at its discretion,
awarded Dr. Paul Jacobs, Mr. Keitel, Mr. Altman
and Dr. Jha stock option grants that, when added to their
respective target annual cash compensation, results in target
total direct compensation from the competitive median to
slightly above the
75th percentile.
The Committee, at its discretion, awarded Dr. Irwin Jacobs
a stock option grant that, when added to his target annual cash
compensation, results in target total direct compensation below
the competitive median because he does not participate in the
annual bonus plan.
The stock option grants were consistent with the previously
described current practices. The grant date was the date the
Committee approved the stock option awards (
November 12,
2007). Further, as is consistent with the Committee’s
practice, the exercise price was the closing price on the grant
date. The Fiscal 2008 Long-Term Incentive Awards table
summarizes the stock option awards.
Fiscal
2008 Target Total Direct Compensation
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term Incentive
|
|
|
|
|
|
|
|
Annual Salary
|
|
|
Target Bonus
|
|
|
Awarded in FY08 —
|
|
|
Target Total Direct
|
|
|
|
|
(Effective
|
|
|
Target Bonus (As a
|
|
|
|
|
|
Fair Value
|
|
|
Compensation
|
|
|
|
|
12/15/07)
|
|
|
% of Annual Salary)
|
|
|
Target Bonus
|
|
|
($000s)
|
|
|
($000s)
|
|
|
Name
|
|
($000s)
|
|
|
(%)
|
|
|
($000s)
|
|
|
(1)
|
|
|
(2)
|
|
|
|
|
Paul E. Jacobs CEO
|
|
|
1,075
|
|
|
|
175
|
|
|
|
1,881
|
|
|
|
14,021
|
|
|
|
16,977
|
|
|
William E. Keitel CFO
|
|
|
655
|
|
|
|
110
|
|
|
|
721
|
|
|
|
6,273
|
|
|
|
7,649
|
|
|
Steven R. Altman President
|
|
|
790
|
|
|
|
125
|
|
|
|
988
|
|
|
|
8,487
|
|
|
|
10,265
|
|
|
Irwin M. Jacobs, Chairman of the Board
|
|
|
650
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,214
|
|
|
|
2,864
|
|
|
Sanjay K. Jha COO and Group President
|
|
|
755
|
|
|
|
125
|
|
|
|
944
|
|
|
|
8,487
|
|
|
|
10,186
|
|
|
|
|
|
(1) |
|
These amounts reflect the fair value on the grant date as
determined in accordance with FAS 123R for accounting
purposes and do not reflect whether the recipient has actually
realized or will realize a financial benefit from the awards.
The potential appreciation in our stock price above the exercise
price of the stock options, not the fair value used for
accounting purposes at grant, motivates our executive officers.
For additional information on the valuation assumptions, refer
to footnote 1 to the Fiscal 2008 Long-Term Incentive Awards
table, immediately following. |
| |
|
(2) |
|
The sum of annual salary plus target bonus plus long-term
incentive award. |
36
Fiscal
2008 Long-Term Incentive Awards
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Subject
|
|
|
Exercise Price of
|
|
|
Grant Date Fair
|
|
|
|
|
|
|
|
to Option
|
|
|
Option Award
|
|
|
Value of Option
|
|
|
Name
|
|
Grant Date
|
|
|
(#)
|
|
|
($)
|
|
|
Award ($)(1)
|
|
|
|
|
Paul E. Jacobs
|
|
|
11/12/2007
|
|
|
|
950,000
|
|
|
|
37.29
|
|
|
|
14,021,335
|
|
|
William E. Keitel
|
|
|
11/12/2007
|
|
|
|
425,000
|
|
|
|
37.29
|
|
|
|
6,272,703
|
|
|
Steven R. Altman
|
|
|
11/12/2007
|
|
|
|
575,000
|
|
|
|
37.29
|
|
|
|
8,486,598
|
|
|
Irwin M. Jacobs
|
|
|
11/12/2007
|
|
|
|
150,000
|
|
|
|
37.29
|
|
|
|
2,213,895
|
|
|
Sanjay K. Jha
|
|
|
11/12/2007
|
|
|
|
575,000
|
|
|
|
37.29
|
|
|
|
8,486,598
|
|
|
|
|
|
(1) |
|
These amounts reflect the fair value under FAS 123R as
determined using a binomial option-pricing model with the
following assumptions: 40.443% volatility; 4.32% risk-free
interest rate; 1.25% dividend rate; 7.5% post-vesting forfeiture
rate; and 1.86 suboptimal exercise factor. |
EXECUTIVE
COMPENSATION AND RELATED INFORMATION
The following tables, narratives and footnotes describe the
total compensation and benefits for our NEOs for fiscal 2007.
The values presented in the tables do not always reflect the
actual compensation received by our NEOs during the fiscal year.
In the narratives and footnotes, we disclose values actually
realized by the NEOs.
Summary
Compensation Table (the “SCT”).
Salary. The fiscal 2007 salaries reported in
the SCT reflect approximately three months of earnings at the
calendar 2006 rates and approximately nine months of earnings at
the calendar 2007 rates.
Bonus. We did not award discretionary bonuses
to the NEOs during fiscal 2007. Dr. Paul Jacobs received
$13,200 from Qualcomm’s patent award program. The annual
cash bonus, as described in the CD&A, is disclosed in the
Non-Equity Incentive Plan Compensation column.
Stock Awards. The amounts in this column
represent the grant date fair market value of fully vested,
unrestricted stock awarded as part of the fiscal 2007 annual
bonus plan.
Option Awards. The amounts disclosed in this
column represent the grant date fair value compensation expenses
recognized in fiscal 2007 under FAS 123R for each NEO. The
recognized expenses are for stock options awarded in 2007 and in
prior years, under our 2001 Stock Option Plan or our 2006 LTIP.
These values do not represent actual compensation realized in
fiscal 2007. See the Grants of Plan-Based Awards table for
details on the stock option awards granted during fiscal 2007 to
the NEOs.
Change in Pension Value and Nonqualified Deferred
Compensation Earnings. We do not offer a pension
plan or other defined benefit retirement program. The amounts
disclosed in this column represent the combined earnings from
the ERC Plan and the Match Plan (see the Voluntary Retirement
Savings Plans in the CD&A for a description of these
plans). Earnings include amounts that vest under the Match Plan
and dividend earnings on vested shares. We do not provide
above-market or preferential earnings on deferred compensation.
We do not provide dividends on stock in the Match Plan at a rate
higher than dividends on our common stock. These values do not
represent actual compensation realized in fiscal 2007 because
deferred compensation is not realized until it is paid to the
NEO.
Non-Equity Incentive Plan Compensation. The
amounts disclosed in this column represent cash awards under our
annual bonus plan. The relevant performance period was fiscal
2007. The Committee approved the actual awards after the end of
fiscal 2007; the NEOs received payment of the awards that were
earned in fiscal 2007 in December 2007.
All Other Compensation. Please see the All
Other Compensation table for an itemized account of all other
compensation.
37
Summary
Compensation Table
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
Compensation
|
|
|
Incentive Plan
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary
|
|
|
Bonus
|
|
|
Awards
|
|
|
Awards
|
|
|
Earnings
|
|
|
Compensation
|
|
|
Compensation
|
|
|
Total
|
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
|
($)
|
|
|
($)
|
|
|
($)(1)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
|
|
|
|
|
Paul E. Jacobs,
Chief Executive Officer
|
|
|
2007
|
|
|
|
1,063,467
|
|
|
|
13,200
|
|
|
|
131,671
|
|
|
|
10,802,060
|
|
|
|
1,380,976
|
|
|
|
1,000,000
|
|
|
|
691,858
|
|
|
|
15,083,232
|
|
|
|
|
|
|
William E. Keitel,
Executive Vice President and Chief Financial Officer
|
|
|
2007
|
|
|
|
659,321
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,208,739
|
|
|
|
602,519
|
|
|
|
715,000
|
|
|
|
165,724
|
|
|
|
7,351,303
|
|
|
|
|
|
|
Steven R. Altman,
President
|
|
|
2007
|
|
|
|
862,813
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,720,428
|
|
|
|
649,780
|
|
|
|
765,100
|
|
|
|
372,469
|
|
|
|
11,370,590
|
|
|
|
|
|
|
Irwin M. Jacobs,
Chairman of the Board
|
|
|
2007
|
|
|
|
650,005
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,551,026
|
|
|
|
1,449,383
|
|
|
|
—
|
|
|
|
361,253
|
|
|
|
8,011,667
|
|
|
|
|
|
|
Sanjay K. Jha,
Chief Operating Officer and Group President, Qualcomm CDMA
Technologies
|
|
|
2007
|
|
|
|
726,931
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,402,969
|
|
|
|
1,129,206
|
|
|
|
835,000
|
|
|
|
253,790
|
|
|
|
11,347,896
|
|
|
|
|
|
|
|
|
|
(1) |
|
Dr. Paul Jacobs was awarded an unrestricted stock bonus for
fiscal 2007. The fair market value on the award date was $37.29
per share, the closing price of the Company’s stock on the
date the stock was approved by the Compensation Committee. This
stock represents the bonus amount in excess of the
$1 million, as described in the CD&A. |
The All Other Compensation table provides an itemized account of
all other compensation reported in the SCT. The SEC requires
disclosures to separately identify and quantify any individual
item of compensation exceeding $10,000, except as discussed
below under “Perquisites and Other Personal Benefits.”
|
|
|
| |
•
|
Perquisites and Other Personal Benefits. The
SEC requires disclosure of all perquisites unless the aggregate
annual value is less than $10,000; if the $10,000 threshold is
exceeded, each perquisite and personal benefit must be
identified by type. The SEC also requires individual
identification and quantification of each perquisite if the
amount exceeds the greater of $25,000 or 10% of the aggregate
amount of all perquisites for any NEO.
|
| |
| |
•
|
Executive Retirement Matching Contribution
Plan. The amounts disclosed represent the dollar
value of common stock used to match up to 10% of pay, less any
401(k) contributions, deferred on a pre-tax basis, to the ERC
Plan. (See the CD&A for a description of the ERC Plan.)
|
| |
| |
•
|
Charitable Match. The amounts disclosed
represent Qualcomm matches to employee contributions to
qualified, eligible IRS recognized nonprofit organizations.
|
| |
| |
•
|
Company Match on 401(k) Contributions. The
amounts disclosed represent the cash value of Company matches to
employee contributions to the 401(k) plan.
|
| |
| |
•
|
Life Insurance Premiums. The amounts disclosed
represent the premiums paid for group term life greater than
$50,000.
|
| |
| |
•
|
Tax
Gross-Ups. Qualcomm
“grosses-up”
its reimbursement to the NEOs for financial planning. The
amounts disclosed in this column reflect the tax
gross-up
amount.
|
38
All Other
Compensation
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Perquisites
|
|
|
Executive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Other
|
|
|
Retirement
|
|
|
|
|
|
Company
|
|
|
Life
|
|
|
|
|
|
All Other
|
|
|
|
|
Personal
|
|
|
Contribution
|
|
|
Charitable
|
|
|
Matching 401k
|
|
|
Insurance
|
|
|
Tax
|
|
|
Compensation
|
|
|
|
|
Benefits
|
|
|
Match
|
|
|
Match
|
|
|
Contributions
|
|
|
Premiums
|
|
|
Gross-Ups
|
|
|
Total
|
|
|
Name
|
|
($)(1)
|
|
|
Plan ($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
|
|
Paul E. Jacobs
|
|
|
248,476
|
|
|
|
291,316
|
|
|
|
122,850
|
|
|
|
5,225
|
|
|
|
13,387
|
|
|
|
10,604
|
|
|
|
691,858
|
|
|
William E. Keitel
|
|
|
—
|
|
|
|
123,751
|
|
|
|
28,415
|
|
|
|
5,725
|
|
|
|
7,004
|
|
|
|
829
|
|
|
|
165,724
|
|
|
Steven R. Altman
|
|
|
23,821
|
|
|
|
206,301
|
|
|
|
124,750
|
|
|
|
5,225
|
|
|
|
12,372
|
|
|
|
—
|
|
|
|
372,469
|
|
|
Irwin M. Jacobs
|
|
|
88,268
|
|
|
|
74,840
|
|
|
|
125,000
|
|
|
|
5,725
|
|
|
|
61,415
|
|
|
|
6,005
|
|
|
|
361,253
|
|
|
Sanjay K. Jha
|
|
|
—
|
|
|
|
180,685
|
|
|
|
63,342
|
|
|
|
5,225
|
|
|
|
4,538
|
|
|
|
—
|
|
|
|
253,790
|
|
|
|
|
|
(1) |
|
The amounts in this column include: Dr. Paul
Jacobs — $194,850 for temporary residential security
and the remaining $53,626 for security while on personal travel,
financial planning, other personal travel expenses and other
insurance premiums; Mr. Altman — personal travel,
other insurance premiums and home computer/home office; and
Dr. Irwin Jacobs — $70,200 for temporary
residential security and the remaining $18,068 for financial
planning and other insurance premiums. Under certain limited
circumstances, executives may use the corporate aircraft solely
for personal purposes. In those instances, the value is based on
the aggregate incremental cost to Qualcomm. For personal
flights, the incremental cost is calculated based on the
variable costs to Qualcomm, including fuel costs, mileage,
trip-related maintenance, universal weather-monitoring costs,
on-board catering, landing/ramp fees and other miscellaneous
variable costs. Fixed costs, which do not change based on usage,
such as pilot salaries and the cost of maintenance not related
to specific flights, are excluded. Qualcomm purchases tickets to
various sporting, civic, cultural, charity and entertainment
events. We use these tickets for business development,
partnership building, charitable donations, and to maintain our
community involvement. If not used for business purposes, we may
make these tickets available to our employees, including our
executive officers, as a form of recognition and reward for
their efforts. Because we had already purchased these tickets,
we do not believe that there is any aggregate incremental cost
to us if an executive officer uses a ticket for personal
purposes. |
Grants
of Plan-Based Awards.
Grants
of Plan-Based Awards(1)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
Awards on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
Option
|
|
|
|
Grant Date
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts
|
|
Stock
|
|
Awards:
|
|
Exercise or
|
|
(If Exercise
|
|
Grant Date
|
|
|
|
|
|
|
|
|
|
Under Non-Equity Incentive
|
|
Awards:
|
|
Number of
|
|
Base
|
|
Price is
|
|
Fair Value of
|
|
|
|
|
|
|
|
Date
|
|
Plan Awards
|
|
Number of
|
|
Securities
|
|
Price of
|
|
Lower Than
|
|
Stock and
|
|
|
|
|
|
|
|
Grant
|
|
|
|
Baseline
|
|
Stretch
|
|
|
|
Shares of
|
|
Underlying
|
|
Option
|
|
Grant
|
|
Option
|
|
|
|
Type of
|
|
Grant
|
|
was
|
|
Threshold
|
|
Target
|
|
Target
|
|
Maximum
|
|
Stock or
|
|
Options
|
|
Awards
|
|
Date FMV)
|
|
Awards
|
|
Name
|
|
Award
|
|
Date
|
|
Approved
|
|
($)(2)
|
|
($) (2)
|
|
($) (2)
|
|
($) (2)
|
|
Units (#)
|
|
(#)(3)
|
|
($/Sh)
|
|
($/Sh)
|
|
($) (4)
|
|
|
|
Paul E. Jacobs
|
|
Annual bonus plan
|
|
|
|
|
|
|
|
|
|
|
403,127
|
|
|
|
1,343,758
|
|
|
|
1,679,698
|
|
|
|
4,199,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On-going equity
|
|
|
11/10/2006
|
|
|
|
11/6/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
770,000
|
|
|
|
34.83
|
|
|
|
35.24
|
|
|
|
10,047,499
|
|
|
|
|
award
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William E. Keitel
|
|
Annual bonus plan
|
|
|
|
|
|
|
|
|
|
|
177,191
|
|
|
|
590,636
|
|
|
|
708,763
|
|
|
|
1,771,907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On-going equity
|
|
|
11/10/2006
|
|
|
|
11/6/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
370,000
|
|
|
|
34.83
|
|
|
|
35.24
|
|
|
|
4,828,019
|
|
|
|
|
award
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven R. Altman
|
|
Annual bonus plan
|
|
|
|
|
|
|
|
|
|
|
281,439
|
|
|
|
938,131
|
|
|
|
1,135,632
|
|
|
|
2,839,080
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On-going equity
|
|
|
11/10/2006
|
|
|
|
11/6/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
570,000
|
|
|
|
34.83
|
|
|
|
35.24
|
|
|
|
7,437,759
|
|
|
|
|
award
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Irwin M. Jacobs
|
|
Annual bonus plan
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On-going equity
|
|
|
11/10/2006
|
|
|
|
11/6/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
|
|
|
34.83
|
|
|
|
35.24
|
|
|
|
1,957,305
|
|
|
|
|
award
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sanjay K. Jha
|
|
Annual bonus plan
|
|
|
|
|
|
|
|
|
|
|
206,721
|
|
|
|
689,072
|
|
|
|
826,886
|
|
|
|
2,067,215
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On-going equity
|
|
|
11/10/2006
|
|
|
|
11/6/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
545,000
|
|
|
|
34.83
|
|
|
|
35.24
|
|
|
|
7,111,542
|
|
|
|
|
award
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
We do not have an equity incentive award program, nor did we
award stock or stock units other than described in footnote 2;
therefore, we did not include these columns in this table. |
| |
|
(2) |
|
The Committee determined that any bonus award shall be paid in
cash up to $1 million and any excess amount due the NEO
shall be satisfied through the issuance of fully vested,
unrestricted shares of Qualcomm stock, with |
39
|
|
|
|
|
|
a fair market value on the date the Committee certifies the
amount actually payable to an NEO, subject to the 2006 LTIP
limits. For clarity, we are reporting the threshold, target and
maximum amounts under the non-equity plan columns. Any amount
reported in the non-equity plan section in excess of
$1 million will be awarded in equivalent shares of stock. |
| |
|
(3) |
|
The stock options reported are nonqualified stock options
granted under the 2006 LTIP. The shares vest 10% six months
after the grant date and in equal monthly installments over the
next 54 months, becoming fully vested five years after the
grant date. The options have a
10-year
term. Generally, vesting is contingent upon continued service
with Qualcomm. |
| |
|
(4) |
|
The amounts shown represent the estimated fair value of the
stock options on the grant date as determined in accordance with
FAS 123R. Qualcomm uses a binomial model in estimating the
fair value of stock options. For additional information on the
valuation assumptions, refer to Note 1 of Qualcomm’s
consolidated financial statements in our annual report on Form
10-K for the
year ended September 30, 2007, as filed with the SEC. These
amounts reflect Qualcomm’s accounting expense and do not
correspond to the actual value that will be recognized by the
NEOs. |
Outstanding
Equity Awards at Fiscal
Year-End.
The Outstanding Equity Awards at Fiscal Year-End table provides
information on the current holdings of stock options by the
NEOs. We have not granted restricted stock or other performance
shares. The stock awarded as part of the fiscal 2007 incentive
plan was fully vested and unrestricted at the time of the award;
therefore, it is not reportable in this table.
Outstanding
Equity Awards at Fiscal Year-End
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
Plan Awards: Number
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
of Securities
|
|
|
|
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
|
|
Unexercised Options
|
|
|
Unexercised Options
|
|
|
Unexercised
|
|
|
Option Exercise
|
|
|
|
|
|
|
|
(#)
|
|
|
(#)
|
|
|
Unearned Options
|
|
|
Price
|
|
|
|
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
(#)
|
|
|
($)
|
|
|
Option Expiration Date
|
|
|
|
|
Paul E. Jacobs
|
|
|
240,000
|
|
|
|
—
|
|
|
|
|
|
|
|
41.75
|
|
|
|
11/11/2009
|
|
|
|
|
|
320,000
|
|
|
|
—
|
|
|
|
|
|
|
|
43.00
|
|
|
|
11/16/2010
|
|
|
|
|
|
287,600
|
|
|
|
—
|
|
|
|
|
|
|
|
23.78
|
|
|
|
9/27/2011
|
|
|
|
|
|
840,000
|
|
|
|
—
|
|
|
|
|
|
|
|
29.21
|
|
|
|
11/29/2011
|
|
|
|
|
|
13,333
|
|
|
|
13,334
|
|
|
|
|
|
|
|
17.47
|
|
|
|
11/7/2012
|
|
|
|
|
|
54,184
|
|
|
|
93,334
|
|
|
|
|
|
|
|
22.23
|
|
|
|
11/27/2013
|
|
|
|
|
|
330,000
|
|
|
|
270,000
|
|
|
|
|
|
|
|
43.62
|
|
|
|
12/2/2014
|
|
|
|
|
|
346,666
|
|
|
|
453,334
|
|
|
|
|
|
|
|
33.01
|
|
|
|
6/30/2015
|
|
|
|
|
|
330,000
|
|
|
|
570,000
|
|
|
|
|
|
|
|
44.02
|
|
|
|
11/3/2015
|
|
|
|
|
|
128,333
|
|
|
|
641,667
|
|
|
|
|
|
|
|
34.83
|
|
|
|
11/9/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,890,116
|
|
|
|
2,041,669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William E. Keitel
|
|
|
80,000
|
|
|
|
—
|
|
|
|
|
|
|
|
41.75
|
|
|
|
11/11/2009
|
|
|
|
|
|
60,000
|
|
|
|
—
|
|
|
|
|
|
|
|
43.00
|
|
|
|
11/16/2010
|
|
|
|
|
|
250,000
|
|
|
|
—
|
|
|
|
|
|
|
|
29.21
|
|
|
|
11/29/2011
|
|
|
|
|
|
100,000
|
|
|
|
—
|
|
|
|
|
|
|
|
19.20
|
|
|
|
4/18/2012
|
|
|
|
|
|
88,666
|
|
|
|
9,334
|
|
|
|
|
|
|
|
17.47
|
|
|
|
11/7/2012
|
|
|
|
|
|
209,666
|
|
|
|
65,334
|
|
|
|
|
|
|
|
22.23
|
|
|
|
11/27/2013
|
|
|
|
|
|
220,000
|
|
|
|
180,000
|
|
|
|
|
|
|
|
43.62
|
|
|
|
12/2/2014
|
|
|
|
|
|
174,166
|
|
|
|
300,834
|
|
|
|
|
|
|
|
44.02
|
|
|
|
11/3/2015
|
|
|
|
|
|
61,666
|
|
|
|
308,334
|
|
|
|
|
|
|
|
34.83
|
|
|
|
11/9/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,244,164
|
|
|
|
863,836
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven R. Altman
|
|
|
320,000
|
|
|
|
—
|
|
|
|
|
|
|
|
41.75
|
|
|
|
11/11/2009
|
|
|
|
|
|
320,000
|
|
|
|
—
|
|
|
|
|
|
|
|
43.00
|
|
|
|
11/16/2010
|
|
|
|
|
|
345,000
|
|
|
|
—
|
|
|
|
|
|
|
|
29.21
|
|
|
|
11/29/2011
|
|
40
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
Plan Awards: Number
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
of Securities
|
|
|
|
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
|
|
Unexercised Options
|
|
|
Unexercised Options
|
|
|
Unexercised
|
|
|
Option Exercise
|
|
|
|
|
|
|
|
(#)
|
|
|
(#)
|
|
|
Unearned Options
|
|
|
Price
|
|
|
|
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
(#)
|
|
|
($)
|
|
|
Option Expiration Date
|
|
|
|
|
|
|
|
6,666
|
|
|
|
13,334
|
|
|
|
|
|
|
|
17.47
|
|
|
|
11/7/2012
|
|
|
|
|
|
6,666
|
|
|
|
93,334
|
|
|
|
|
|
|
|
22.23
|
|
|
|
11/27/2013
|
|
|
|
|
|
330,000
|
|
|
|
270,000
|
|
|
|
|
|
|
|
43.62
|
|
|
|
12/2/2014
|
|
|
|
|
|
238,333
|
|
|
|
311,667
|
|
|
|
|
|
|
|
33.01
|
|
|
|
6/30/2015
|
|
|
|
|
|
227,333
|
|
|
|
392,667
|
|
|
|
|
|
|
|
44.02
|
|
|
|
11/3/2015
|
|
|
|
|
|
95,000
|
|
|
|
475,000
|
|
|
|
|
|
|
|
34.83
|
|
|
|
11/9/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,888,998
|
|
|
|
1,556,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Irwin M. Jacobs
|
|
|
1,050,764
|
|
|
|
—
|
|
|
|
|
|
|
|
3.90
|
|
|
|
11/13/2007
|
|
|
|
|
|
4,211,128
|
|
|
|
—
|
|
|
|
|
|
|
|
3.51
|
|
|
|
7/16/2008
|
|
|
|
|
|
800,000
|
|
|
|
—
|
|
|
|
|
|
|
|
41.75
|
|
|
|
11/11/2009
|
|
|
|
|
|
560,000
|
|
|
|
—
|
|
|
|
|
|
|
|
43.00
|
|
|
|
11/16/2010
|
|
|
|
|
|
450,000
|
|
|
|
—
|
|
|
|
|
|
|
|
29.21
|
|
|
|
11/29/2011
|
|
|
|
|
|
528,543
|
|
|
|
18,334
|
|
|
|
|
|
|
|
17.47
|
|
|
|
11/7/2012
|
|
|
|
|
|
460,000
|
|
|
|
140,000
|
|
|
|
|
|
|
|
22.23
|
|
|
|
11/27/2013
|
|
|
|
|
|
275,000
|
|
|
|
225,000
|
|
|
|
|
|
|
|
43.62
|
|
|
|
12/2/2014
|
|
|
|
|
|
73,333
|
|
|
|
126,667
|
|
|
|
|
|
|
|
44.02
|
|
|
|
11/3/2015
|
|
|
|
|
|
25,000
|
|
|
|
125,000
|
|
|
|
|
|
|
|
34.83
|
|
|
|
11/9/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
8,433,768
|
|
|
|
635,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sanjay K. Jha
|
|
|
160,000
|
|
|
|
—
|
|
|
|
|
|
|
|
41.75
|
|
|
|
11/11/2009
|
|
|
|
|
|
80,000
|
|
|
|
—
|
|
|
|
|
|
|
|
43.00
|
|
|
|
11/16/2010
|
|
|
|
|
|
200,000
|
|
|
|
—
|
|
|
|
|
|
|
|
29.21
|
|
|
|
11/29/2011
|
|
|
|
|
|
70,000
|
|
|
|
—
|
|
|
|
|
|
|
|
16.20
|
|
|
|
4/25/2012
|
|
|
|
|
|
68,833
|
|
|
|
1,167
|
|
|
|
|
|
|
|
18.00
|
|
|
|
10/17/2012
|
|
|
|
|
|
137,500
|
|
|
|
12,500
|
|
|
|
|
|
|
|
18.29
|
|
|
|
2/6/2013
|
|
|
|
|
|
109,600
|
|
|
|
40,000
|
|
|
|
|
|
|
|
16.11
|
|
|
|
5/1/2013
|
|
|
|
|
|
306,666
|
|
|
|
93,334
|
|
|
|
|
|
|
|
22.23
|
|
|
|
11/27/2013
|
|
|
|
|
|
330,000
|
|
|
|
270,000
|
|
|
|
|
|
|
|
43.62
|
|
|
|
12/2/2014
|
|
|
|
|
|
216,666
|
|
|
|
283,334
|
|
|
|
|
|
|
|
33.01
|
|
|
|
6/30/2015
|
|
|
|
|
|
207,166
|
|
|
|
357,834
|
|
|
|
|
|
|
|
44.02
|
|
|
|
11/3/2015
|
|
|
|
|
|
90,833
|
|
|
|
454,167
|
|
|
|
|
|
|
|
34.83
|
|
|
|
11/9/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,977,264
|
|
|
|
1,512,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Option Exercises and Stock Vested during Fiscal
2007.
The Option Exercises and Stock Vested table provides information
on stock option exercises by the NEOs during fiscal 2007. We
have not granted restricted stock or other performance shares;
therefore, we have not included these columns in this table.
41
Option
Exercises and Stock Vested
| |
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
|
Number of Shares
|
|
|
Value Realized Upon
|
|
|
|
|
Acquired on Exercise
|
|
|
Exercise
|
|
|
Name
|
|
(#)
|
|
|
($)
|
|
|
|
|
Paul E. Jacobs
|
|
|
324,000
|
|
|
|
10,704,262
|
|
|
William E. Keitel
|
|
|
—
|
|
|
|
—
|
|
|
Steven R. Altman
|
|
|
275,000
|
|
|
|
5,862,185
|
|
|
Irwin M. Jacobs
|
|
|
346,000
|
|
|
|
14,449,825
|
|
|
Sanjay K. Jha
|
|
|
100,000
|
|
|
|
2,520,300
|
|
Nonqualified
Deferred
Compensation.
The Nonqualified Deferred Compensation table provides
information on the nonqualified deferred compensation of the
NEOs. Qualcomm provides two nonqualified plans. Employees at a
certain level are eligible to participate.
Nonqualified
Deferred Compensation
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
Company
|
|
|
Plan A
|
|
|
Plan B
|
|
|
Total
|
|
|
Aggregate
|
|
|
|
|
|
|
|
Contributions in
|
|
|
Contributions in
|
|
|
ERC Plan
|
|
|
Match Plan
|
|
|
Aggregate Earnings
|
|
|
Withdrawals/
|
|
|
Aggregate Balance
|
|
|
|
|
Last FY
|
|
|
Last FY
|
|
|
Aggregate Earnings
|
|
|
Aggregate Earnings
|
|
|
in Last FY
|
|
|
Distributions
|
|
|
at Last FYE
|
|
|
Name
|
|
($)(1)
|
|
|
($)
|
|
|
in Last FY ($)
|
|
|
in Last FY ($)
|
|
|
($)
|
|
|
($)
|
|
|
($)(2)
|
|
|
|
|
Paul E. Jacobs
|
|
|
535,078
|
|
|
|
291,316
|
|
|
|
1,251,587
|
|
|
|
129,389
|
|
|
|
1,380,976
|
|
|
|
—
|
|
|
|
7,736,540
|
|
|
William E. Keitel
|
|
|
691,510
|
|
|
|
123,751
|
|
|
|
503,320
|
|
|
|
99,199
|
|
|
|
602,519
|
|
|
|
—
|
|
|
|
3,510,227
|
|
|
Steven R. Altman
|
|
|
377,893
|
|
|
|
206,301
|
|
|
|
484,131
|
|
|
|
165,649
|
|
|
|
649,780
|
|
|
|
—
|
|
|
|
5,351,403
|
|
|
Irwin M. Jacobs
|
|
|
114,501
|
|
|
|
74,840
|
|
|
|
780,964
|
|
|
|
668,419
|
|
|
|
1,449,383
|
|
|
|
—
|
|
|
|
11,794,757
|
|
|
Sanjay K. Jha
|
|
|
1,337,416
|
|
|
|
180,685
|
|
|
|
1,020,313
|
|
|
|
108,893
|
|
|
|
1,129,206
|
|
|
|
—
|
|
|
|
8,028,165
|
|
|
|
|
|
(1) |
|
The amounts disclosed in this column are also included in the
salary column of the Summary Compensation Table. |
| |
|
(2) |
|
Includes all vested amounts under the Match Plan. Vested amounts
attributable to fiscal 2007 are included in the Summary
Compensation Table in the Change in Pension Value and
Nonqualified Deferred Compensation Earnings column. |
Potential
Post-Employment
Payments.
As noted in our CD&A, Qualcomm employs all
U.S. domestic employees, including our executive officers,
“at will,” without employment
contracts or severance
agreements. We do not have a pre-defined involuntary termination
severance plan or policy for employees, including the executive
officers. Our practice in an involuntary termination situation
may include:
|
|
|
| |
•
|
Salary continuation dependent on the business reason for the
termination;
|
| |
| |
•
|
Lump sum payment based on job level and service with Qualcomm;
|
| |
| |
•
|
Paid health care coverage and COBRA payments for a limited
time; and
|
| |
| |
•
|
Outplacement services.
|
The information in the Potential Payments Upon Termination or
Change-in-Control table describes the compensation that would be
payable under specific circumstances if the NEO’s
employment had terminated on the last day of fiscal 2007.
42
Potential
Payments Upon Termination or
Change-in-Control
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
Equity Awards
|
|
Compensation ($)
|
|
Name
|
|
Termination Scenario
|
|
Stock Options ($)(1)(2)(3)(4)(5)
|
|
(6)(7)
|
|
|
|
Paul E. Jacobs
|
|
Death
|
|
|
11,160,955
|
|
|
|
564,424
|
|
|
|
|
Long-Term Disability (LTD)
|
|
|
11,160,955
|
|
|
|
564,424
|
|
|
|
|
Change-in-Control
|
|
|
11,160,955
|
|
|
|
564,424
|
|
|
|
|
Involuntary Termination
|
|
|
1,116,130
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
