Qualcomm 2004 Annual Report Download - page 78

QUALCOMM 74
Notes to Consolidated Financial Statements continued
Information about stock options outstanding at September 30, 2004 with exercise prices less than or above $38.25 per share, the closing price
at September 30, 2004, follows (number of shares in thousands):
Exercisable Unexercisable Total
Weighted Weighted Weighted
Average Average Average
Number Exercise Number Exercise Number Exercise
Stock Options of Shares Price of Shares Price of Shares Price
Less than $38.25 109,448 $13.36 75,967 $23.94 185,415 $17.70
Above $38.25 15,202 46.53 2,967 44.81 18,169 46.25
Total outstanding 124,650 $17.41 78,934 $24.73 203,584 $20.25
Employee Stock Purchase Plans
The Company has two employee stock purchase plans for all 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. The 2001 Employee Stock Purchase Plan authorizes up to approxi-
mately 24,309,000 shares to be granted. The 1996 Non-Qualified Employee Stock Purchase Plan authorizes up to 400,000 shares to be granted.
During fiscal 2004, 2003 and 2002, shares totaling approximately 2,205,000, 2,744,000 and 2,300,000 were issued under the plans at an
average price of $18.60, $13.20 and $15.73 per share, respectively. At September 30, 2004, approximately 17,232,000 shares were reserved
for future issuance.
Executive Retirement Plans
The Company has voluntary retirement plans that allow eligible executives to defer up to 100% of their income on a pre-tax basis. On a quarterly
basis, the Company matches up to 10% of the participants’ deferral in Company common stock based on the then-current market price, to be
distributed to the participant upon eligible retirement. The income deferred and the Company match held in trust are unsecured and subject to
the claims of general creditors of the Company.Company contributions begin vesting based on certain minimum participation or service require-
ments, and are fully vested at age 65. Participants who terminate employment forfeit their unvested shares. All shares forfeited are used to reduce
the Company’s future matching contributions. The plans authorize up to 1,600,000 shares to be allocated to participants at any time. During fiscal
2004, 2003 and 2002, approximately 108,000, 89,000 and 88,000 shares, respectively, were allocated under the plans. The Company recorded
$5 million, $2 million and $2 million in compensation expense during fiscal 2004, 2003 and 2002, respectively,related to its net matching
contributions to the plans. At September 30, 2004, approximately 331,000 shares were reserved for future allocation.
NOTE 9. COMMITMENTS AND CONTINGENCIES
Litigation
Schwartz, et al v. QUALCOMM: In fiscal 2001, 87 former QUALCOMM employees filed a lawsuit against the Company in the District Court for
Boulder County, Colorado, alleging claims for intentional misrepresentation, nondisclosure and concealment, violation of C.R.S. Section 8-2-104
(obtaining workers by misrepresentation), breach of contract, breach of the implied covenant of good faith and fair dealing, promissory estoppel,
negligent misrepresentation, unjust enrichment, violation of California Labor Code Section 970, violation of California Civil Code Sections 1709-1710,
rescission, violation of California Business & Professions Code Section 17200 and violation of California Civil Code Section 1575. The complaint
seeks economic, emotional distress and punitive damages and unspecified amounts of interest. On November 29, 2001, the Court granted the
Company’s motion to dismiss 17 of the plaintiffs from the lawsuit. Subsequently, the Court dismissed three other plaintiffs from the lawsuit. On
November 18, 2002, the Courtgranted the Company’smotion to dismiss 61 of the remaining 67 plaintiffs from the lawsuit. The Company sub-
sequently resolved the matters with the remaining plaintiffs. Those plaintiffs whose claims were dismissed have appealed. Oral argument on the
appeal occurred on October 26, 2004, and no decision has been received.
Hanig et al. v. QUALCOMM, Boesel, et al v. QUALCOMM, Stone v. QUALCOMM, Ortiz et al v. QUALCOMM, Shannon et al. v. QUALCOMM,
Deshon et al v. QUALCOMM, Earnhart et al. v. QUALCOMM: These cases, the first of which was filed in fiscal 2001, were filed in San Diego
County Superior Court by over 100 former employees, alleging claims for declaratory relief, breach of contract, intentional/negligent fraud, con-
cealment, rescission, specific performance, work, labor and services, breach of the implied covenant of good faith and fair dealing, violation of
California Business & Professions Code Section 17200 and unjust enrichment, claiming that they wereentitled to full vesting of unvested stock
options as a result of the sale of the Company’s infrastructure business to Ericsson in 1999. The Company has answered the complaints, which
have been consolidated, and discovery is ongoing. On July 16, 2004, the Court granted the Company’s summary adjudication motion, dismissing
plaintiffs’ breach of contract claims.
Durante, et al v.QUALCOMM: On February 2, 2000, three former QUALCOMM employees filed a putative class action against the Company,
ostensibly on behalf of themselves and those former employees of the Company whose employment was terminated in April 1999. Virtually all
of the purported class of plaintiffs received severance packages at the time of the termination of their employment, in exchange for a release of
claims, other than federal age discrimination claims, against the Company. The complaint was filed in California Superior Court in and for the
County of Los Angeles and purports to state 10 causes of action including breach of contract, age discrimination, violation of Labor Code Section
200, violation of Labor Code Section 970, unfair business practices, intentional infliction of emotional distress, unjust enrichment, breach of the
covenant of good faith and fair dealing, declaratory relief and undue influence. The complaint seeks an order accelerating all unvested stock
options for the members of the class, plus economic and liquidated damages of an unspecified amount. On June 27, 2000, the case was ordered