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Exhibit 10.6
EMPLOYEE BENEFITS AGREEMENT
BETWEEN
XXXXXXXX XXXXXXXXXXXX
AND
LEAP WIRELESS INTERNATIONAL, INC.
SEPTEMBER 23, 1998
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TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS ......................................................... 1
1.1 Affiliate ..................................................... 1
1.2 Close of the Distribution Date ................................ 1
1.3 COBRA ......................................................... 1
1.4 Code .......................................................... 1
1.5 Distribution Date ............................................. 1
1.6 DOL ........................................................... 1
1.7 ERISA ......................................................... 2
1.8 Executive Retirement Plans .................................... 2
1.9 FMLA .......................................................... 2
1.10 Health and Welfare Plans ...................................... 2
1.11 Immediately after the Distribution Date ....................... 2
1.12 IRS ........................................................... 2
1.13 Leap 401(k) Plan .............................................. 2
1.14 Leap Entity ................................................... 2
1.15 Leap Individual ............................................... 2
1.16 Leap Stock Value .............................................. 2
1.17 Long Term Incentive Plan ...................................... 2
1.18 Medical Plan .................................................. 2
1.19 Non-Employee Director ......................................... 3
1.20 Option ........................................................ 3
1.21 Person ........................................................ 3
1.22 Plan .......................................................... 3
1.23 QUALCOMM 401(k) Plan .......................................... 3
1.24 QUALCOMM Entity ............................................... 3
1.25 QUALCOMM Stock Value .......................................... 3
1.26 QUALCOMM WCP .................................................. 3
1.27 SEC ........................................................... 3
1.28 Stock Purchase Plan ........................................... 3
ARTICLE 2 GENERAL PRINCIPLES .................................................. 4
2.1 Assumption of Liabilities ..................................... 4
2.2 Retention of Liabilities ...................................... 4
2.3 Establishment Of Leap Plans ................................... 4
2.4 Terms Of Participation In Leap Plans .......................... 5
ARTICLE 3 HEALTH AND WELFARE PLANS ............................................ 5
3.1 COBRA ......................................................... 5
3.2 FMLA .......................................................... 5
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3.3 Workers' Compensation Programs ................................ 6
ARTICLE 4 DEFINED CONTRIBUTION PLANS .......................................... 6
4.1 Leap 401(k) Plan .............................................. 6
4.2 Leap Executive Retirement Plans ............................... 7
ARTICLE 5 EMPLOYEE BENEFITS AND NON-EMPLOYEE DIRECTOR BENEFITS
UNDER QUALCOMM LONG-TERM INCENTIVE PLANS; LIFE INSURANCE ............ 7
5.1 Leap Option Grants with respect to Certain QUALCOMM Options ... 7
5.2 Adjustment of QUALCOMM Options held by Persons other than
Employees, Consultants and Non-Employee Directors of
QUALCOMM ...................................................... 8
5.3 Amendment of QUALCOMM Options held by Leap Employees .......... 8
5.4 Savings Clause ................................................ 8
5.5 Issuance of Leap Shares with respect to Certain QUALCOMM
Option Exercises .............................................. 9
5.6 Black-Out of Certain Exercises of QUALCOMM Options ............ 9
5.7 Registration Requirements ..................................... 9
5.8 Split Dollar Life Insurance ................................... 10
ARTICLE 6 GENERAL AND ADMINISTRATIVE .......................................... 10
6.1 Accounting Methodologies And Assumptions ...................... 10
6.2 Sharing Of Participant Information ............................ 10
6.3 Non-Termination Of Employment; No Third-Party Beneficiaries ... 10
6.4 Beneficiary Designations ...................................... 11
6.5 Requests For Agency Rulings And Opinions ...................... 11
6.6 Fiduciary Matters ............................................. 11
6.7 Consent Of Third Parties ...................................... 12
ARTICLE 7 MISCELLANEOUS ....................................................... 12
7.1 Effect If Distribution Does Not Occur ......................... 12
7.2 Relationship Of Parties ....................................... 12
7.3 Affiliates .................................................... 12
7.4 Third Party Beneficiaries ..................................... 12
7.5 Notices ....................................................... 12
7.6 Severability .................................................. 13
7.7 Modification And Amendment; Entire Agreement .................. 13
7.8 Dispute Resolution ............................................ 13
7.9 Governing Law ................................................. 13
Exhibit A Distribution Stock Option Agreement
Exhibit B Option Amendment Agreement
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EMPLOYEE BENEFITS AGREEMENT
THIS EMPLOYEE BENEFITS AGREEMENT ("Agreement"), dated as of September 23,
1998, is by and between XXXXXXXX XXXXXXXXXXXX ("QUALCOMM") and LEAP WIRELESS
INTERNATIONAL, INC. ("Leap"). Certain capitalized terms used herein and not
otherwise defined shall have the respective meanings assigned to them in Article
1 hereof or as assigned to them in the Separation and Distribution Agreement
between the parties dated as of the date hereof (the "Separation Agreement").
WHEREAS, QUALCOMM and Leap have entered into the Separation and Distribution
Agreement and certain other agreements that will govern certain matters relating
to the Separation, the Distribution and the relationship of QUALCOMM and Leap
and their respective Subsidiaries following the Distribution; and
WHEREAS, pursuant to the Separation and Distribution Agreement, QUALCOMM and
Leap have agreed to enter into this agreement allocating assets, liabilities and
responsibilities with respect to certain employee compensation and benefit plans
and programs between them.
NOW, THEREFORE, the parties, intending to be legally bound, agree as follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement the following terms shall have the following
meanings:
1.1 AFFILIATE means with respect to any other Person, a Person that
controls, is controlled by, or is under common control with, such other Person.
1.2 CLOSE OF THE DISTRIBUTION DATE means 11:59:59 P.M., Pacific Standard
Time or Pacific Daylight Time (whichever shall then be in effect), on the
Distribution Date.
1.3 COBRA means the continuation coverage requirements for "group health
plans" under Title X of the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, and as codified in Code Section 4980B and ERISA Sections 601
through 608.
1.4 CODE means the Internal Revenue Code of 1986, as amended, or any
successor federal income tax law. Reference to a specific Code provision also
includes any proposed, temporary, or final regulation in force under that
provision.
1.5 DISTRIBUTION DATE has the meaning given such term in the Separation and
Distribution Agreement.
1.6 DOL means the United States Department of Labor.
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1.7 ERISA means the Employee Retirement Income Security Act of 1974, as
amended. Reference to a specific provision of ERISA also includes any proposed,
temporary, or final regulation in force under that provision.
1.8 EXECUTIVE RETIREMENT PLANS, when immediately preceded by "QUALCOMM,"
means the QUALCOMM Executive Retirement Plan and the QUALCOMM Executive
Retirement Matching Contribution Plan. When immediately preceded by "Leap,"
Executive Retirement Plans means the Leap Executive Retirement Plan and the Leap
Executive Retirement Matching Contribution Plan.
1.9 FMLA means the Family and Medical Leave Act of 1993, as amended.
1.10 HEALTH AND WELFARE PLANS, when immediately preceded by "QUALCOMM,"
means the health and welfare plans established and maintained by QUALCOMM for
the benefit of employees of QUALCOMM and certain QUALCOMM Entities, and such
other health and welfare plans or programs as may apply to such employees as of
the Distribution Date. When immediately preceded by "Leap," Health and Welfare
Plans means the health and welfare plans to be established by Leap effective no
later than Immediately after the Distribution Date.
1.11 IMMEDIATELY AFTER THE DISTRIBUTION DATE means 12:00 A.M., Pacific
Standard Time or Pacific Daylight Time (whichever shall then be in effect), on
the day after the Distribution Date.
1.12 IRS means the Internal Revenue Service.
1.13 LEAP 401(k) PLAN means the Leap 401(k) Savings Plan to be established
by Leap effective on or before Immediately after the Distribution Date, as a
qualified defined contribution plan under ERISA and the Code.
1.14 LEAP ENTITY means any Person that is, at the relevant time, an
Affiliate of Leap.
1.15 LEAP INDIVIDUAL means any individual who is an employee of QUALCOMM or
a QUALCOMM Entity who receives an offer of employment from Leap or a Leap Entity
on or before the Distribution Date with employment to commence after the
Distribution Date and who accepts such offer.
1.16 LEAP STOCK VALUE means the last sales price per share of Leap Common
Stock (traded on a "when-issued" basis) on the Distribution Date.
1.17 LONG TERM INCENTIVE PLAN, when immediately preceded by "QUALCOMM,"
means any of the QUALCOMM 1991 Stock Option Plan, as amended, and Non-Employee
Directors' Stock Option Plan, as amended. When immediately preceded by "Leap,"
Long Term Incentive Plan means either of the 1998 Stock Option Plan or 1998
Non-Employee Directors' Stock Option Plan to be adopted by Leap prior to
Immediately after the Distribution Date.
1.18 MEDICAL PLAN, when immediately preceded by "QUALCOMM," means the
QUALCOMM Medical Expense Plan for Employees. When immediately preceded by
"Leap,"
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Medical Plan means the medical plan to be established by Leap effective no later
than Immediately after the Distribution Date.
1.19 NON-EMPLOYEE DIRECTOR, when immediately preceded by "QUALCOMM," means
a member of QUALCOMM's Board of Directors who is not an employee of QUALCOMM or
a QUALCOMM Entity. When immediately preceded by "Leap," Non-Employee Director
means a member of Leap's Board of Directors who is not an employee of Leap or a
Leap Entity.
1.20 OPTION, when immediately preceded by "QUALCOMM," means an option to
purchase QUALCOMM Common Stock, and when immediately preceded by "Leap," Option
means an option to purchase Leap Common Stock, in each case pursuant to a Long
Term Incentive Plan of either QUALCOMM or Leap.
1.21 PERSON means any individual or legal entity.
1.22 PLAN, when immediately preceded by "QUALCOMM" or "Leap," means any
plan, policy, program (including, without limitation, any workers compensation
program), payroll practice, ongoing arrangement, contract, trust, insurance
policy or other agreement or funding vehicle providing benefits to employees or
Non-Employee Directors of QUALCOMM or a QUALCOMM Entity, or Leap or a Leap
Entity, as applicable. The term "Plan" includes, but is not limited to, any
Executive Retirement Plans, Health and Welfare Plans, Long Term Incentive Plans,
Medical Plans, and Stock Purchase Plans.
1.23 QUALCOMM 401(k) PLAN means the QUALCOMM 401(k) Savings Plan, as in
effect from time to time.
1.24 QUALCOMM ENTITY means any Person that is, at the relevant time, an
Affiliate of QUALCOMM, except that the term "QUALCOMM Entity" shall not include
Leap or a Leap Entity.
1.25 QUALCOMM STOCK VALUE means the last "regular way" sales price per
share of QUALCOMM Common Stock on the Nasdaq National Market on the Distribution
Date, less one-fourth of the Leap Stock Value.
1.26 QUALCOMM WCP means the QUALCOMM Workers' Compensation Program,
comprised of the various arrangements established by QUALCOMM or a QUALCOMM
Entity to comply with the workers' compensation requirements of the states in
which QUALCOMM or a QUALCOMM Entity conducts business.
1.27 SEC means the United States Securities and Exchange Commission.
1.28 STOCK PURCHASE PLAN, when immediately preceded by "QUALCOMM," means
the QUALCOMM 1991 Employee Stock Purchase Plan and the QUALCOMM 1996 Non-
Qualified Employee Stock Purchase Plan. When immediately preceded by "Leap,"
Stock Purchase Plan means the employee stock purchase plan to be established by
Leap prior to Immediately after the Distribution Date as an "employee stock
purchase plan" meeting the requirements set forth in Section 423 of the Code.
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ARTICLE 2
GENERAL PRINCIPLES
2.1 ASSUMPTION OF LIABILITIES. Leap hereby assumes and agrees to pay,
perform, fulfill and discharge, in accordance with their respective terms, all
of the following Liabilities (regardless of when or where such Liabilities arose
or arise or were or are incurred), except to the extent otherwise set forth in
this Agreement, or the Separation and Distribution Agreement: (a) all
Liabilities to or relating to any Leap Individual, and his or her respective
dependents and beneficiaries, in each case relating to, arising out of or
resulting from employment by QUALCOMM or a QUALCOMM Entity before becoming a
Leap Individual arising under a QUALCOMM Plan, but only to the extent such
Liabilities relate to the payment of a bonus to a Leap Individual or relate to
the payment or crediting of accrued vacation and sick pay; (b) all other
Liabilities to or relating to Leap Individuals and other employees or former
employees of Leap or a Leap Entity, and their dependents and beneficiaries, to
the extent relating to, arising out of or resulting from future, present or
former employment with Leap or a Leap Entity (including Liabilities under Leap
Plans); (c) all Liabilities relating to, arising out of or resulting from any
other actual or alleged employment relationship with Leap or a Leap Entity
(including without limitation, actual or alleged offers of employment with Leap
or a Leap Entity made prior to the Close of the Distribution Date to employees
of QUALCOMM, a QUALCOMM Entity or any other Person, by any Person who at the
time of the actual or alleged offer of employment was an employee of QUALCOMM or
a QUALCOMM Entity and who then became an employee of Leap or a Leap Entity); and
(d) all other Liabilities relating to, arising out of or resulting from
obligations, liabilities and responsibilities expressly assumed or retained by
Leap, a Leap Entity, or a Leap Plan pursuant to this Agreement. As to bonus
arrangements under a QUALCOMM Plan for which QUALCOMM has accrued a liability
and which would be payable for the first time after the Distribution Date, a
Leap Individual's termination of employment with QUALCOMM to become a Leap
Individual shall not prevent or terminate Leap's assumption of the liability to
pay such bonus amount, even though the applicable QUALCOMM Plan may provide that
termination of employment with QUALCOMM terminates QUALCOMM's liability for this
bonus.
2.2 RETENTION OF LIABILITIES. To the extent that Liabilities under a
QUALCOMM Plan that relate to the employment of a Leap Individual by QUALCOMM or
a QUALCOMM Entity prior to the Close of the Distribution Date are not assumed by
Leap, then QUALCOMM, the QUALCOMM Entity, or the QUALCOMM Plan respectively,
shall retain, discharge and pay such Liabilities.
2.3 ESTABLISHMENT OF LEAP PLANS. Effective no later than Immediately after
the Distribution Date, Leap shall adopt, or cause to be adopted, the Leap Long
Term Incentive Plan(s), the Leap 401(k) Plan, an executive retirement plan (the
"Leap Executive Retirement Plan"), an executive retirement matching plan (the
"Leap Executive Retirement Matching Contribution Plan"), and the Leap Medical
Plan for the benefit of current, future, and former employees of Leap and the
Leap Entities. Leap shall also adopt, or cause to be adopted, as soon as
practicable, the Leap Stock Purchase Plan, and the Leap Health and Welfare Plans
for the benefit of current, future, and former employees of Leap and the Leap
Entities.
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2.4 TERMS OF PARTICIPATION IN LEAP PLANS. The Leap Plans shall not provide
benefits that duplicate benefits provided by, the corresponding QUALCOMM Plans
with respect to Leap Individuals and all other employees and former employees of
Leap and the Leap Entities, and beneficiaries and dependents thereof. QUALCOMM
and Leap shall agree on methods and procedures, including amending the
respective Plan documents, to prevent Leap Individuals from receiving
duplicative benefits from the QUALCOMM Plans and the Leap Plans. With respect to
Leap Individuals, each Leap Plan shall provide that all service determinations
that, as of the Close of the Distribution Date, were recognized under each
corresponding QUALCOMM Plan, if any, shall, as of Immediately after the
Distribution Date and thereafter, receive full recognition, credit, and validity
and be taken into account under such Leap Plan to the same extent as if such
determinations had occurred under such Leap Plan, except to the extent that
duplication of benefits would result. Nothing in this Section 2.4, or any other
provision of this Agreement, however, shall require Leap to adopt all of the
types of Plans sponsored by QUALCOMM on the Distribution Date, or to provide
that the terms of a Leap Plan shall be the same or similar to the terms of any
corresponding QUALCOMM Plan, or limit the ability of Leap to amend, modify or
terminate any Leap Plan.
ARTICLE 3
HEALTH AND WELFARE PLANS
3.1 COBRA. Effective Immediately after the Distribution Date, Leap shall
solely be responsible for administering compliance with the health care
continuation coverage requirements of COBRA for the Leap Health and Welfare
Plans, and shall cooperate and coordinate with QUALCOMM, as appropriate, to
allow QUALCOMM to administer compliance with the health care continuation
requirements of COBRA for the QUALCOMM Health and Welfare Plans. Leap
Individuals shall be permitted to timely elect health care continuation coverage
in accordance with the terms of the QUALCOMM Health and Welfare Plans, and
QUALCOMM and the QUALCOMM Health and Welfare Plans shall accept and honor such
timely and properly-made elections, to the fullest extent required under the
provisions of COBRA.
3.2 FMLA.
(a) Effective Immediately after the Distribution Date: (i) Leap shall
honor, and shall cause each Leap Entity to honor, all terms and conditions of
leaves of absence which have been granted to any Leap Individual and all other
employees of Leap and the Leap Entities under the FMLA before the Close of the
Distribution Date by QUALCOMM, Leap, or a Leap Entity, including such leaves
that are to commence after the Distribution Date; (ii) Leap and each Leap Entity
shall be solely responsible for administering compliance with the FMLA with
respect to their employees; and (iii) Leap and each Leap Entity shall recognize
all periods of service of Leap Individuals and all other employees of Leap and
the Leap Entities with QUALCOMM or a QUALCOMM Entity, as applicable, to the
extent such service is recognized by QUALCOMM for the purpose of eligibility for
leave entitlement under the FMLA; provided, that no duplication of benefits
shall be required by the foregoing.
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(b) As soon as administratively possible after the Close of the
Distribution Date, QUALCOMM shall provide to Leap copies of all records
pertaining to the FMLA with respect to all Leap Individuals and all other
employees of Leap and the Leap Entities to the extent such records have not been
provided previously to Leap or a Leap Entity.
3.3 WORKERS' COMPENSATION PROGRAMS. QUALCOMM and the QUALCOMM WCP shall
retain, discharge and pay all Liabilities arising under the QUALCOMM WCP,
including, without limitation, all Liabilities relating to claims that are, or
have been, incurred under the QUALCOM WCP before the Close of the Distribution
Date by Leap Individuals. Leap and the Leap WCP shall retain, discharge and pay
all Liabilities arising under the Leap WCP. Each party shall fully cooperate
with the other with respect to the administration and reporting of claims under
the QUALCOMM WCP and the Leap WCP, to the extent that such cooperation is
permitted under applicable law and does not otherwise have a material adverse
effect on the QUALCOMM WCP or the Leap WCP.
ARTICLE 4
DEFINED CONTRIBUTION PLANS
4.1 LEAP 401(k) PLAN.
(a) PLAN TRUST. Immediately after the Distribution Date or prior to
that time, Leap shall establish, or cause to be established, a trust qualified
under Code Section 401(a), exempt from taxation under Code Section 501(a)(1),
and forming part of the Leap 401(k) Plan.
(b) ASSUMPTION OF LIABILITIES AND TRANSFER OF ASSETS. As soon as
practicable after the Distribution Date or prior to that time: (i) the Leap
401(k) Plan shall assume and be solely responsible for all Liabilities to or
relating to Leap Individuals under the QUALCOMM 401(k) Plan other than
Liabilities arising prior to the transfer of assets described in the following
clause (ii) relating to breach of the trust or plan or failure of QUALCOMM to
comply with applicable laws, regulations or agreements (including, without
limitation, the failure of the QUALCOMM 401(k) Plan to be a "qualified plan"
under the Code); and (ii) QUALCOMM shall cause the accounts of the Leap
Individuals under the QUALCOMM 401(k) Plan, and the assets in such accounts,
which are held in trust as of the Close of the Distribution Date to be
transferred in kind to the Leap 401(k) Plan, and the related trust, and Leap
shall cause such transferred accounts and assets to be accepted in kind by such
plan and trust. Both QUALCOMM and Leap shall use their reasonable best efforts
to enter into such mutually satisfactory agreements to accomplish such
assumptions and transfers, and Leap shall use its reasonable best efforts to
enter into such agreements satisfactory to Leap to provide for the maintenance
of the necessary participant records, the appointment of an initial trustee
under the Leap 401(k) Plan, the engagement of an initial recordkeeper under such
plans, and the selection of one or more investment managers to manage the assets
of the Leap 401(k) Plan.
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4.2 LEAP EXECUTIVE RETIREMENT PLANS.
(a) PLAN TRUST. Immediately after the Distribution Date or prior to
that time, Leap shall establish, or cause to be established, a trust or separate
trusts for the deposit of assets forming part of the Leap Executive Retirement
Plans.
(b) ASSUMPTION OF LIABILITIES AND TRANSFER OF ASSETS. A Leap
Individual may request not later than December 31, 1998, and QUALCOMM may then
permit, if the Leap Individual executes an agreement provided by QUALCOMM
releasing QUALCOMM from liability arising out of events after the transfer, the
account of the Leap Individual under the respective QUALCOMM Executive
Retirement Plans which are held in trust as of the Close of the Distribution
Date to be transferred to the corresponding Leap Executive Retirement Plan and
related trust (the "Transferred Accounts"), and Leap shall cause such
Transferred Accounts to be accepted by such plan and trust. As to Transferred
Accounts, the Leap Executive Retirement Plans shall assume and be solely
responsible for all Liabilities to or relating to the Leap Individual under the
respective QUALCOMM Executive Retirement Plans other than Liabilities arising
before the transfer of the accounts under these plans relating to breach of the
trust or plan or failure of QUALCOMM to comply with applicable laws, regulations
or agreements. Effective no later than Immediately after the Distribution Date,
QUALCOMM and Leap shall use their reasonable best efforts to enter into such
mutually satisfactory agreements to accomplish such assumptions and transfers,
and Leap shall use its reasonable best efforts to enter into such agreements
satisfactory to Leap to provide for the maintenance of the necessary participant
records, the initial appointment of a trustee under the Leap Executive
Retirement Plans, the initial engagement of a recordkeeper under such plans, and
the selection of one or more investment managers to manage the assets of the
Leap Executive Retirement Plans.
ARTICLE 5
EMPLOYEE BENEFITS AND NON-EMPLOYEE DIRECTOR BENEFITS UNDER QUALCOMM
LONG-TERM INCENTIVE PLANS; LIFE INSURANCE
5.1 LEAP OPTION GRANTS WITH RESPECT TO CERTAIN QUALCOMM OPTIONS.
(a) Subject to the terms of this Agreement, effective as of
immediately prior to the Close of the Distribution Date, Leap shall grant to
each Person who is either a current or former employee, consultant or director
of QUALCOMM (as determined by QUALCOMM) and who is a holder of a QUALCOMM Option
that is outstanding as of immediately prior to the Close of the Distribution
Date, a Leap Option, with respect to each such QUALCOMM Option, in substantially
the form attached hereto as Exhibit A (each a "Distribution Option") which shall
be delivered to each such holder as soon as practicable after the Close of the
Distribution Date.
(b) Each Distribution Option shall provide for the purchase of a
number of shares of Leap Common Stock equal to twenty-five percent (25%) of the
number of shares of QUALCOMM Common Stock which are subject, as of immediately
prior to the Close of the Distribution Date, to the QUALCOMM Option (the
"Corresponding QUALCOMM Option")
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with respect to which such Distribution Option is granted (whether vested or
unvested), and then rounded down in the case of each Distribution Option to the
nearest whole share.
(c) The per-share exercise price of each Distribution Option shall be
calculated by multiplying the per-share exercise price of the applicable
Corresponding QUALCOMM Option by the product of four multiplied by a fraction,
the numerator of which is one-fourth of the Leap Stock Value and the denominator
of which is the sum of the QUALCOMM Stock Value and one-fourth of the Leap Stock
Value. The vesting provisions, term and other provisions of each Distribution
Option shall be the same as those in effect with respect to the applicable
Corresponding QUALCOMM Option immediately prior to the Close of the Distribution
Date, except as otherwise provided for in this Section 5.1 and subject to the
provisions of Section 5.3.
(d) The per-share exercise price of each Corresponding QUALCOMM Option
shall be reduced as of immediately prior to the Close of the Distribution Date
to the price determined by multiplying the per-share exercise price of such
Corresponding QUALCOMM Option as in effect immediately prior to such reduction
by a fraction, the numerator of which is the QUALCOMM Stock Value and the
denominator of which is the sum of the QUALCOMM Stock Value and one-fourth of
the Leap Stock Value. The vesting provisions, term and other provisions of each
such Corresponding QUALCOMM Option shall be the same as those in effect
immediately prior to the Close of the Distribution Date, subject to the
provisions of Section 5.3.
5.2 ADJUSTMENT OF CERTAIN QUALCOMM OPTIONS. Subject to the terms of this
Agreement, effective as of immediately prior to the Close of the Distribution
Date, QUALCOMM shall cause to be made, with respect to each QUALCOMM Option held
by any Person as of immediately prior to the Close of the Distribution Date who
is not either a current or former employee, consultant or director of QUALCOMM
(as determined by QUALCOMM), an adjustment to the per share exercise price and
number of shares of QUALCOMM Common Stock subject to such Option in such manner
as QUALCOMM deems appropriate in its reasonable discretion pursuant to the terms
of the QUALCOMM Long Term Incentive Plan under which such Option was originally
granted.
5.3 AMENDMENT OF QUALCOMM OPTIONS HELD BY LEAP INDIVIDUALS. Subject to the
terms of this Agreement, effective as of immediately prior to the Close of the
Distribution Date, QUALCOMM shall, with respect to each QUALCOMM Option held by
any Leap Individual, cause the vesting provisions of such Option to be amended
such that the vesting of such Option is tied to such Leap Individual's continued
employment with Leap or a Leap Entity rather than QUALCOMM or a QUALCOMM Entity,
all as more fully set forth in and in accordance with the terms of the Option
Amendment Agreement in the form substantially as attached hereto as Exhibit B
and, with respect to each such Leap Individual, subject to the execution and
delivery by such Leap Individual of such Option Amendment Agreement.
5.4 SAVINGS CLAUSE. Notwithstanding any other provision of Sections 5.1
through 5.3, if and to the extent QUALCOMM shall determine in its reasonable
judgment that any action required to be taken by QUALCOMM or Leap under such
Sections may not comply with all applicable laws or the terms of any applicable
Long Term Incentive Plan or that any such action is otherwise inappropriate or
inadvisable, QUALCOMM shall be entitled to require that Leap or
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QUALCOMM instead shall take such other action that QUALCOMM determines in its
reasonable judgment is necessary or appropriate in order to comply with such
laws or Long Term Incentive Plan or is otherwise appropriate or advisable. In no
event shall the total effect of the grant of any Leap Options or adjustment of
any QUALCOMM Options pursuant to such Sections cause a new measurement date for
any QUALCOMM Option to be used by QUALCOMM's accountants.
5.5 ISSUANCE OF LEAP SHARES WITH RESPECT TO CERTAIN QUALCOMM OPTION
EXERCISES.
(a) To the extent a QUALCOMM Option granted to a current or former
employee, director or consultant of QUALCOMM (as determined by QUALCOMM) is
exercised after the Record Date but prior to the Close of the Distribution Date,
then Leap shall issue and deliver, within ten (10) days (or such shorter period
of time as may be required by applicable laws or the requirements of Nasdaq)
after the Close of the Distribution Date, to the holder of such QUALCOMM Option
such number of shares of Leap Common Stock that equals one-fourth the number of
shares for which such QUALCOMM Option was so exercised; provided that such
number of shares of Leap Common Stock shall be rounded down to the nearest whole
share. Notwithstanding any other provision in this Agreement or any Ancillary
Agreement, QUALCOMM shall have no obligation to deliver any shares of Leap
Common Stock with respect to any such exercises.
(b) For each such share of Leap Common Stock delivered pursuant to
this Section 5.5, within the time set forth in subsection 5.5(a), QUALCOMM shall
pay to Leap a prorated portion of the consideration received by QUALCOMM from
such exercise of the QUALCOMM Option as is determined by QUALCOMM in its
reasonable judgment to be appropriate and which is consistent with the
allocation of option exercise prices otherwise provided for in Section 5.1. The
shares reserved for issuance under the Leap Long-Term Incentive Plan under which
such shares would have been issued had the exercise of the QUALCOMM Option not
occurred prior to the Close of the Distribution Date shall be correspondingly
reduced by the number of shares so delivered.
5.6 BLACK-OUT OF CERTAIN EXERCISES OF QUALCOMM OPTIONS. QUALCOMM shall use
reasonable efforts to cause each QUALCOMM Option outstanding during the period
beginning with the Record Date and ending as of immediately prior to the Close
of the Distribution Date and held by any Person who is not a current or former
employee, director or consultant of QUALCOMM (as determined by QUALCOMM) not to
be exercised by the holder thereof during such period.
5.7 REGISTRATION REQUIREMENTS. Following the date as of which the Form 10
is declared effective by the SEC but in any case prior to the date of issuance
or grant of any Leap Option and/or shares of Leap Common Stock pursuant to this
Article 5, Leap agrees that it shall file a Form S-8 Registration Statement with
respect to and cause to be registered pursuant to the Securities Act of 1933, as
amended, each such grant and/or issuance of such Options and/or Common Stock, as
applicable and as required pursuant to such Act and any applicable rules or
regulations thereunder.
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5.8 SPLIT DOLLAR LIFE INSURANCE. QUALCOMM and Leap shall take all actions
necessary or appropriate to assign to Leap, effective on the Distribution Date,
(i) QUALCOMM's rights and interests in the split dollar life insurance policy
(including, without limitation, all riders to such policy that are then in
effect) covering the life of Leap's Chief Executive Officer, and (ii) QUALCOMM's
obligations under any agreements requiring QUALCOMM to pay any premiums for any
split dollar life insurance policy (including, without limitation, all riders to
such policy that are then in effect) covering the life of Leap's Chief Executive
Officer. Such actions shall include Leap's acceptance of any collateral
assignments, policy endorsements or such other documentation executed by or on
behalf of such individual, or any trustee of any trust to which such
individual's policy rights or incidents of ownership under the assigned split
dollar policy have been assigned, and Leap's entering into such agreements as
may be necessary to fulfill any obligations of QUALCOMM to any such trustee of
any trust, or any insurance company or insurance agent or broker under such
policy or policies and to release QUALCOMM from such obligations. From and after
the effective date of the assignment of any such split dollar policy to Leap,
Leap shall assume and be solely responsible for all Liabilities, and shall be
entitled to all benefits, of QUALCOMM under such policy and any related
agreements entered into by such individual, or any trustee of any trust to which
such individual's policy rights or incidents of ownership under the assigned
split dollar policy has been assigned; provided however, that an amount equal to
the sum of premiums paid by QUALCOMM under such split dollar life insurance
policy, and for which QUALCOMM has not otherwise been reimbursed, shall be
transferred by Leap to QUALCOMM within thirty days of Leap receiving payment
under the terms of such split dollar life insurance policy or agreement relating
to it. Leap shall transfer to QUALCOMM, no later than the thirtieth business day
after the Distribution Date, a pro-rated portion of the cost of all premiums
paid by QUALCOMM to maintain in effect the split dollar life insurance policy
(including, without limitation, all riders to such policy that are then in
effect) for the month in which falls the Distribution Date; such pro-rata amount
shall be determined based on the number of calendar days in the month, and the
premium cost allocable to the Distribution Date and the calendar days that
follow the Distribution Date and fall in that month shall be the pro-rata amount
that Leap shall transfer to QUALCOMM.
ARTICLE 6
GENERAL AND ADMINISTRATIVE
6.1 ACCOUNTING METHODOLOGIES AND ASSUMPTIONS. For purposes of this
Agreement, unless specifically indicated otherwise, the value of the assets of a
Plan shall be the value established for purposes of relevant audited or
unaudited financial statements for the period ending on the date as of which the
valuation is to be made.
6.2 SHARING OF PARTICIPANT INFORMATION. QUALCOMM and Leap shall share with
each all participant information reasonably necessary to effectuate the
transfers and other transactions hereunder.
6.3 NON-TERMINATION OF EMPLOYMENT; NO THIRD-PARTY BENEFICIARIES. No
provision of this Agreement or the Separation and Distribution Agreement, or any
other agreements entered into between QUALCOMM or a QUALCOMM Entity and Leap or
a Leap Entity relating to this Agreement or the Separation and Distribution
Agreement, shall be
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construed to create any right, or accelerate entitlement, to any compensation or
benefit whatsoever on the part of any Leap Individual or other future, present
or former employee of QUALCOMM, a QUALCOMM Entity, Leap, or a Leap Entity under
any QUALCOMM Plan or Leap Plan or otherwise; or to continue to be employed by or
return to employment with QUALCOMM or a QUALCOMM Entity, or Leap or a Leap
Entity. Without limiting the generality of the foregoing: (i) the Distribution
shall not cause any employee to be deemed to have incurred a termination of
employment which entitles such individual to the commencement of benefits under
any of the QUALCOMM Plans, any of the Leap Plans; and (ii) except as expressly
provided in this Agreement, nothing in this Agreement shall preclude Leap, at
any time after the Close of the Distribution Date, from amending, merging,
modifying, terminating, eliminating, reducing, or otherwise altering in any
respect any Leap Plan, any benefit under any Leap Plan or any trust, insurance
policy or funding vehicle related to any Leap Plan.
6.4 BENEFICIARY DESIGNATIONS. All beneficiary designations made by Leap
Individuals for QUALCOMM Plans shall be transferred to and be in full force and
effect under the corresponding Leap Plans until such beneficiary designations
are replaced or revoked by the Leap Individual who made the beneficiary
designation.
6.5 REQUESTS FOR AGENCY RULINGS AND OPINIONS.
(a) COOPERATION. Leap shall cooperate fully with QUALCOMM on any issue
relating to the transactions contemplated by this Agreement for which QUALCOMM
elects to seek a determination letter or private letter ruling from the IRS, an
advisory opinion from the DOL, or a no-action letter or other ruling from the
SEC. QUALCOMM shall cooperate fully with Leap with respect to any request for a
determination letter or private letter ruling from the IRS, an advisory opinion
from the DOL, or a no-action letter or other ruling from the SEC, with respect
to any of the Leap Plans relating to the transactions contemplated by this
Agreement.
(b) LIFE INSURANCE. To the extent the transfer or allocation of all or
a portion of any life insurance policies results in any adverse tax or legal
consequences, including without limitation (i) any finding that such transfer
results in the creation of a modified endowment contract within the meaning of
Code Section 7702A, a transfer for value within the meaning of Code Section
101(a), or a lack of insurable interest for either QUALCOMM or Leap (or their
respective trusts, if any), or (ii) multiple claims for insurance proceeds,
QUALCOMM and Leap shall take such steps as may be necessary to contest any such
finding and, to the extent of any final determination that such adverse tax or
legal consequences will result, QUALCOMM and Leap shall make such further
adjustments so as to place both parties in the proportionate financial position
that they each would have been in relative to the other but for such adverse tax
or legal consequences.
6.6 FIDUCIARY MATTERS. QUALCOMM and Leap each acknowledge that actions
required to be taken pursuant to this Agreement may be subject to fiduciary
duties or standards of conduct under ERISA or other applicable law, and no party
shall be deemed to be in violation of this Agreement if it fails to comply with
any provisions hereof based upon its good faith determination that to do so
would violate such a fiduciary duty or standard.
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6.7 CONSENT OF THIRD PARTIES. If any provision of this Agreement is
dependent on the consent of any third party (such as a vendor or a union) and
such consent is withheld, QUALCOMM and Leap shall use their reasonable best
efforts to implement the applicable provisions of this Agreement to the full
extent practicable. If any provision of this Agreement cannot be implemented due
to the failure of such third party to consent, QUALCOMM and Leap shall negotiate
in good faith to implement the provision in a mutually satisfactory manner. The
phrase "reasonable best efforts" as used herein shall not be construed to
require the incurrence of any non-routine or unreasonable expense or liability
or the waiver of any right.
ARTICLE 7
MISCELLANEOUS
7.1 EFFECT IF DISTRIBUTION DOES NOT OCCUR. If the Distribution does not
occur, then all actions and events that are, under this Agreement, to be taken
or occur effective as of the Close of the Distribution Date, Immediately after
the Distribution Date, or otherwise in connection with the Distribution, shall
not be taken or occur except to the extent specifically agreed by Leap and
QUALCOMM.
7.2 RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be deemed or
construed by the parties or any third party as creating the relationship of
principal and agent, partnership or joint venture between the parties, it being
understood and agreed that no provision contained herein, and no act of the
parties, shall be deemed to create any relationship between the parties other
than the relationship set forth herein.
7.3 AFFILIATES. Each of QUALCOMM and Leap shall cause to be performed, and
hereby guarantees the performance of, all actions, agreements and obligations
set forth in this Agreement to be performed by a QUALCOMM Entity or a Leap
Entity, respectively.
7.4 THIRD PARTY BENEFICIARIES. The provisions of this Agreement and each
Ancillary Agreement are solely for the benefit of the parties and are not
intended to confer upon any Person except the parties any rights or remedies
hereunder, and there are no third party beneficiaries of this Agreement or any
Ancillary Agreement and neither this Agreement nor any Ancillary Agreement shall
provide any third person with any remedy, claim, liability, reimbursement, claim
of action or other right in excess of those existing without reference to this
Agreement or any Ancillary Agreement.
7.5 NOTICES. All notices or other communications under this Agreement or
any Ancillary Agreement shall be in writing and shall be deemed to be duly given
when (a) delivered in person or (b) deposited in the United States mail or
private express mail, postage prepaid, addressed as follows:
If to QUALCOMM, to: XXXXXXXX Xxxxxxxxxxxx.
0000 Xxxx Xxxxxxxxx
Xxx Xxxxx, XX 00000
Attn: President
With a copy to General Counsel at the same
address.
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If to Leap, to: Leap Wireless International, Inc.
00000 Xxxxxxx Xxxxxx Xxxxx
Xxx Xxxxx, XX 00000
Attn: President
With a copy to General Counsel at the same
address.
Either party may, by notice to the other party, change the address to which such
notices are to be given.
7.6 SEVERABILITY. If any provision of this Agreement or any Ancillary
Agreement or the application thereof to any Person or circumstance is determined
by a court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions hereof or thereof, or the application of such provision to
Persons or circumstances or in jurisdictions other than those as to which it has
been held invalid or unenforceable, shall remain in full force and effect and
shall in no way be affected, impaired or invalidated thereby, so long as the
economic or legal substance of the transactions contemplated hereby or thereby,
as the case may be, is not affected in any manner adverse to any party. Upon
such determination, the parties shall negotiate in good faith in an effort to
agree upon such a suitable and equitable provision to effect the original intent
of the parties.
7.7 MODIFICATION AND AMENDMENT; ENTIRE AGREEMENT. This Agreement may not be
modified or amended except in a writing signed by the parties. This Agreement
sets forth the entire agreement of the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings
between the parties with respect to the subject matter hereof.
7.8 DISPUTE RESOLUTION. The parties acknowledge and agree that this
Agreement and any dispute hereunder shall be subject to and governed by the
dispute resolution provisions set forth in Article 10 of the Separation and
Distribution Agreement.
7.9 GOVERNING LAW. To the extent not preempted by applicable federal law,
this Agreement shall be governed by, construed and interpreted in accordance
with the laws of the State of California, irrespective of the choice of laws
principles of the State of California, as to all matters, including matters of
validity, construction, effect, enforceability, performance and remedies.
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IN WITNESS WHEREOF, the parties have caused this Employee Benefits
Agreement to be duly executed as of the day and year first above written.
XXXXXXXX XXXXXXXXXXXX:
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Executive Vice President and
Chief Financial Officer
LEAP WIRELESS INTERNATIONAL, INC.:
By: /s/ Xxxxxx X. Xxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxx
Title: President and Chief Executive
Officer
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