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EXHIBIT 10.38
[LEAP LOGO]
March 7, 2001
Xxxxxx X. Xxxx
[Home Address]
Re: Change in Control Agreement
Dear Xxx:
Leap Wireless International, Inc., a Delaware corporation
("Leap"), considers it essential to the best interests of its stockholders to
xxxxxx the continuous employment of key management personnel. In connection with
this, Leap's Board of Directors (the "Board") and the Compensation Committee of
the Board (the "Compensation Committee") recognize that, as is the case with
many publicly held corporations, the possibility of a change in control of Leap
may exist and that the uncertainty and questions that it may raise among
management could result in the departure or distraction of management personnel
to the detriment of Leap and its stockholders.
The Board and the Compensation Committee have decided to
reinforce and encourage the continued attention and dedication of members of
Leap's management, including yourself, to their assigned duties without the
distraction arising from the possibility of a change in control of Leap.
In order to induce you to remain in the employ of Leap and its
direct and indirect, majority-owned subsidiaries (collectively, the "Company"),
Leap hereby agrees that after this letter agreement (this "Agreement") has been
fully executed and delivered by Leap and you, you shall be entitled to receive
the benefits set forth in this Agreement. You will be entitled to receive the
benefits described in Section 3 of this Agreement in the event of certain
Changes in Control (as defined in Section 2 of this Agreement). Also, in the
event your employment with the Company is terminated under the circumstances
described in Section 4 of this Agreement, you will be entitled to receive the
benefits set forth in Section 5 of this Agreement. Upon the execution and
delivery of this Agreement, any prior severance agreement between you and the
Company shall terminate and be of no further force or effect.
1. Term of Agreement. This Agreement shall commence on the date
hereof and shall continue in effect through December 31, 2002; provided,
however, that commencing on January 1, 2003 and on each January 1 thereafter,
the term of this Agreement
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shall be automatically extended for one additional year unless, not later than
June 30 of the preceding calendar year, Leap shall have given notice that it
does not wish to extend this Agreement; provided, further, that if a Change in
Control occurs, or Leap enters into an agreement that provides for a Change in
Control, during the original or any extended term of this Agreement, the term of
this Agreement shall continue in effect for a period of not less than two (2)
years following the month in which such Change in Control occurs or such
agreement terminates.
2. Change in Control. No benefits shall be payable under Section
3 or 5 of this Agreement unless there has been a Change in Control. For purposes
of this Agreement, a Change in Control shall occur if:
(a) any Person (as defined below) is or becomes the
Beneficial Owner (as defined below), directly or indirectly, of
securities of Leap representing not less than 35%. For purposes of this
Agreement, (A) the term "Person" is used as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"); provided, however, the term shall not
include Leap, any trustee or other fiduciary holding securities under an
employee benefit plan of the Company, and any corporation owned,
directly or indirectly, by the stockholders of Leap, in substantially
the same proportions as their ownership of stock of Leap, and (B) the
term "Beneficial Owner" shall have the meaning given to such term in
Rule 13d-3 under the Exchange Act;
(b) the Continuing Directors (as defined below) cease
for any reason to constitute at least a majority of the Board. For
purposes of this Agreement, "Continuing Directors" shall mean: (i)
persons who are members of the Board on the date hereof, and (ii) any
new director (other than a director designated by a person who has
entered into an agreement with Leap to effect a transaction described in
Section 2(a), (c) or (d) of this Agreement) whose election by the Board
or nomination for election by Leap's stockholders was approved by a vote
of at least two-thirds (2/3) of the directors then still in office who
either were directors on the date hereof or whose election or nomination
for election was previously so approved as provided in this Section
2(b);
(c) Leap merges or consolidates with any other
corporation (or other entity), other than a merger or consolidation
which would result in the voting securities of Leap outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity) more than 60% of the combined voting power of the
voting securities of Leap or such surviving entity outstanding
immediately after such merger or consolidation; or
(d) the stockholders of Leap approve a plan of complete
liquidation of Leap or an agreement for the sale or disposition by Leap
of all or substantially all of Leap's assets.
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3. Acceleration of Options and Other Stock-Based Awards.
(a) Partial Acceleration. During the term of this
Agreement, if any of the events described in Section 2 constituting a Change in
Control shall have occurred which Change of Control was not approved by a vote
of a majority of the board of directors of Leap, and you are employed by the
Company at any time during the period commencing 90 days prior to such Change in
Control (or, if earlier, commencing on the date on which Leap enters into an
agreement that provides for such Change in Control), and ending on such Change
in Control, then: (i) immediately prior to such Change in Control: (A) each of
your Unvested Awards (as defined below) shall become immediately vested and
exercisable as to 50% of the shares subject to such Unvested Award (or each
installment thereof), and all repurchase, transfer and other restrictions with
respect to the stock issued pursuant to each of your Unvested Awards (or each
installment thereof) shall immediately lapse and terminate as to 50% of the
shares, and (B) all of your Deferred Compensation (as defined below) shall
become immediately vested as to all amounts deferred thereunder, and (ii) upon
the first anniversary of such Change in Control, if you are then employed by the
Company, your Unvested Awards shall become immediately vested and exercisable as
to all shares subject thereto, and all repurchase, transfer and other
restrictions with respect to the stock issued pursuant to your Unvested Awards
shall immediately lapse and terminate as to all shares subject thereto.
(b) Continuation of Awards. If Leap enters into an
agreement that provides for any of the events described in Section 2
constituting a Change in Control, and you are employed by the Company on the
date Leap enters into such agreement, then, notwithstanding any contrary terms
thereof, your Awards and your Deferred Compensation shall remain outstanding
(except to the extent such Awards or Deferred Compensation are exercised by you
or distributed to you) and shall not be subject to forfeiture, repurchase,
termination or expiration until such Change in Control occurs or such agreement
terminates.
(c) Early Termination of Awards. During the term of this
Agreement, if any of the events described in Section 2 constituting a Change in
Control shall have occurred, and you are employed by the Company at any time
during the period commencing 90 days prior to the Change in Control (or, if
earlier, commencing on the date on which Leap enters into an agreement that
provides for such Change in Control), and ending on the Change in Control, and
your Unvested Awards shall terminate or be cancelled upon, as result of, or in
connection with, such Change in Control, then immediately prior to such
termination or cancellation of your Unvested Awards, your Unvested Awards shall
become immediately vested and exercisable as to all shares subject thereto, and
all repurchase, transfer and other restrictions with respect to the stock issued
pursuant to your Unvested Awards shall immediately lapse and terminate as to all
shares subject thereto.
(d) Definitions. For purposes of this Agreement, (i)
your "Awards" as of any date shall mean your stock options, stock appreciation
rights, restricted stock, deferred stock and other stock-based awards under the
Company's stock option, incentive or other similar plans or under agreements
with the Company (or stock options, stock appreciation rights, restricted stock,
deferred stock or other stock-based awards substituted therefor) that are
outstanding on such date, (ii) your "Unvested Awards" as of any date shall mean
the portion or portions of your Awards that are unvested or unexercisable, or
with
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respect to which the stock issued pursuant thereto is subject to repurchase,
transfer or other restrictions, on such date, and (iii) your "Deferred
Compensation" as of any date means your deferred compensation under the
Company's nonqualified deferred compensation plans or agreements.
4. Termination of Employment.
(a) General. During the term of this Agreement, if any of the
events described in Section 2 constituting a Change in Control shall have
occurred, you shall be entitled to the benefits provided in Section 5 in the
event of the termination of your employment with the Company, if: (i) the Date
of Termination occurs during the term of this Agreement and within the period
commencing 90 days prior to such Change in Control (or, if earlier, commencing
on the date on which Leap enters into an agreement providing for such Change in
Control) and ending one year after the date of such Change in Control occurs
(the "Change in Control Period"), (ii) such termination of employment is by the
Company other than for Cause (as defined in Section 4(b)), or by you for Good
Reason (as defined in Section 4(c)), and (iii) you execute and deliver to the
Company a General Release, substantially in the form of Exhibit A attached
hereto (the "General Release"), in accordance with Section 4(f), and such
General Release shall become irrevocable in accordance with the terms thereof.
(b) Cause. For purposes of this Agreement, the termination of
your employment by the Company for "Cause" shall mean termination: (i) upon your
willful and continued failure substantially to perform your duties with the
Company (other than any such failure resulting from your incapacity due to
physical or mental illness or any such actual or anticipated failure after your
issuance of a Notice of Termination (as defined in Section 4(d)) for Good
Reason), after a written demand for substantial performance is delivered to you
by the Board, which demand specifically identifies the manner in which the Board
believes that you have not substantially performed your duties, (ii) upon your
willful and continued failure substantially to follow and comply with the
specific and lawful directives of the Board, as reasonably determined by the
Board (other than any such failure resulting from your incapacity due to
physical or mental illness or any such actual or anticipated failure after your
issuance of a Notice of Termination for Good Reason), after a written demand for
substantial performance is delivered to you by the Board, which demand
specifically identifies the manner in which the Board believes that you have not
substantially performed your duties, (iii) upon your willful commission of an
act of fraud or dishonesty resulting in material and demonstrable damage to the
Company, or (iv) upon your willful engagement in illegal conduct or gross
misconduct that is materially and demonstrably damaging to the Company. For
purposes of this Section 4(b), no act, or failure to act, on your part shall be
deemed "willful" unless done, or omitted to be done, by you not in good faith.
Notwithstanding the foregoing, your employment shall not be deemed terminated
for "Cause" pursuant to this Section 4(b) unless and until there shall have been
delivered to you a copy of a resolution duly adopted by the affirmative vote of
not less than three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board (after reasonable notice to you, an opportunity for you,
together with your counsel, to be heard before the Board and a reasonable
opportunity to cure (provided such conduct is capable of being cured)), finding
that, in the Board's good faith opinion, you have committed the conduct set
forth above in this Section 4(b) and specifying the particulars thereof in
reasonable detail.
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(c) Good Reason. For purposes of this Agreement, "Good Reason"
shall mean, without your express written consent, the occurrence of any of the
following circumstances unless such circumstances are cured (provided such
circumstances are capable of being cured) prior to the Date of Termination (as
defined in Section 4(e)) specified in the Notice of Termination given in respect
thereof: (i) the assignment to you of any duties inconsistent with the position
in the Company that you held immediately prior to the Change in Control Period,
a significant adverse alteration in the nature or status of your
responsibilities or the conditions of your employment with the Company from
those in effect immediately prior to such Change in Control Period, the
cessation of your position with the Company as an officer of a publicly-held
company, or any other action that results in a material diminution in your
position, authority, title, duties or responsibilities with the Company during
the Change in Control Period; (ii) the Company's reduction of your annual base
salary as in effect on the date hereof or as the same may be increased from time
to time thereafter; (iii) the relocation of the Company's offices at which you
are principally employed to a location more than thirty (30) miles from the
location at which you are principally employed immediately prior to the date of
the Change in Control Period; (iv) the Company's failure to pay to you any
portion of your current compensation or to pay to you any portion of an
installment of deferred compensation under any deferred compensation program of
the Company within seven (7) days of the date such compensation is due; (v) the
Company's failure to continue in effect any material compensation or benefit
plan in which you participate immediately prior to the Change in Control Period,
unless an equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such plan, or the Company's
failure to continue your participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable, both in terms of the
amount of benefits provided and the level of your participation relative to
other participants, as in effect immediately prior to the Change in Control
Period; (vi) the Company's failure to continue to provide you with benefits
substantially similar in the aggregate to those enjoyed by you under any of the
Company's life insurance, medical, health and accident, disability, pension,
retirement, or other benefit plans in which you and your eligible family members
were participating immediately prior to the Change in Control Period, the taking
of any action by the Company which would directly or indirectly materially
reduce any of such benefits, or the failure by the Company to provide you with
the number of paid vacation days to which you are entitled on the basis of years
of service with the Company in accordance with the Company's normal vacation
policy in effect immediately prior to the Change in Control Period; (vii) the
Company's failure to obtain a satisfactory agreement from any successor to
assume and agree to perform this Agreement, as contemplated in Section 6 hereof;
or (viii) the continuation or repetition, after written notice of objection from
you, of harassing or denigrating treatment of you by the Company inconsistent
with your position with the Company. Your right to terminate your employment
with the Company pursuant to this Section 4(c) shall not be affected by your
incapacity due to physical or mental illness. Your continued employment with the
Company shall not constitute consent to, or a waiver of rights with respect to,
any circumstance constituting Good Reason hereunder.
(d) Notice of Termination. Any purported termination of your
employment by the Company or by you (other than termination due to death, which
shall terminate your employment automatically) shall be communicated by Notice
of Termination to the other party
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hereto in accordance with Section 7. "Notice of Termination" shall mean a
written notice that shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for the termination of employment under
the provision so indicated.
(e) Date of Termination. For purposes of this Agreement, "Date
of Termination" shall mean: (i) if your employment is terminated due to your
death, the date of your death; or (ii) if your employment is terminated by the
Company or by you (other than due to your death), the date specified in the
Notice of Termination (which, in the case of a termination by the Company for
Cause shall not be less than thirty (30) days after the date such Notice of
Termination is given, and in the case of a termination by you for Good Reason
shall not be less than fifteen (15) nor more than sixty (60) days after the date
such Notice of Termination is given). Notwithstanding anything to the contrary
contained in this Section 4(e), if within fifteen (15) days after any Notice of
Termination is given, the party receiving such Notice of Termination notifies
the other party that a dispute exists concerning the termination, then the Date
of Termination shall be the date on which the dispute is finally determined,
either by mutual written agreement of the parties, or otherwise; provided,
however, that the Date of Termination shall be extended by a notice of dispute
only if such notice is given in good faith and the party giving such notice
pursues the resolution of such dispute with reasonable diligence; provided,
further, that if the date specified in the Notice of Termination occurs during
the term of this Agreement and during the Change in Control Period, the Date of
Termination shall not be extended under this sentence beyond the term of this
Agreement or the last day of the Change in Control Period.
(f) General Release. In consideration of, and as a condition to
receiving, the benefits to be provided to you under Sections 5(b), (c), (d), (e)
and (f), you shall execute and deliver to the Company the General Release on or
after the Date of Termination and not later than twenty-one (21) days after your
Date of Termination (or, in the event that the termination of your employment
with the Company is in connection with an exit incentive or other employment
termination program offered to a group or class of employees, not later than
forty-five (45) days after your Date of Termination (or, if later, the date are
provided with the information provided in accordance with Section 3(f) of the
General Release). In the event that you fail to execute and deliver to the
Company the General Release in accordance with this Section 4(f), or you revoke
the General Release in accordance with the terms thereof, you shall not receive
the benefits under Sections 5(b), (c), (d), (e) and (f).
5. Benefits upon Termination of Employment on or after a Change
in Control. In the event that your employment with the Company terminates under
the circumstances described in Section 4, you shall be entitled to the benefits
described below:
(a) Leap shall pay to you your full base salary, when due,
through the Date of Termination at the rate in effect at the time Notice of
Termination is given, at the time specified in Section 5(g), plus all other
amounts to which you are entitled under any compensation or benefit plan of the
Company at the time such payments or benefits are due.
(b) In lieu of any further salary or other payments to you for
periods subsequent to the Date of Termination, Leap shall pay to you, at the
time specified in Section
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5(g), a lump sum severance payment (the "Severance Payment") equal to the sum
of: (i) one times your annual base salary as in effect as of the Date of
Termination or immediately prior to the Change in Control, whichever is greater,
and (ii) one times your targeted annual bonus as in effect as of the Date of
Termination or immediately prior to the Change in Control, whichever is greater.
(c) Effective immediately prior to your Date of Termination (or,
if your termination of employment occurs prior to the Change in Control,
immediately prior to such Change in Control), your Unvested Awards shall become
immediately vested and exercisable as to all shares subject thereto, and all
repurchase, transfer and other restrictions with respect to the stock issued
pursuant to your Unvested Awards shall immediately lapse and terminate as to all
shares subject thereto.
(d) Leap shall furnish you for six (6) years following the Date
of Termination (without reference to whether the term of this Agreement
continues in effect) with directors' and officers' liability insurance insuring
you against insurable events which occur or have occurred while you were a
director or officer of Leap, such insurance to have policy limits aggregating
not less than the amount in effect as of the Date of Termination or immediately
prior to the Change in Control, whichever is greater, and otherwise to be in
substantially the same form and to contain substantially the same terms,
conditions and exceptions as the liability issuance policies provided for
officers and directors of Leap in force from time to time; provided, however,
that such terms, conditions and exceptions shall not be, in the aggregate,
materially less favorable to you than those in effect on the date hereof; and
provided, further, that if the aggregate annual premiums for such insurance at
any time during such period exceed one hundred and fifty percent (150%) of the
per annum rate of premium paid by Leap on the date hereof for such insurance,
then Leap shall provide the maximum coverage that will then be available at an
annual premium equal to one hundred and fifty percent (150%) of such rate.
(e) For a twelve (12) month period after such termination of
employment, Leap shall continue to provide you and your eligible family members,
based on the cost sharing arrangement between you and Leap on the date of your
termination of employment or the date of the Change in Control, whichever
provides more favorable benefits to you, with medical and dental benefits at
least equal to those which would have been provided to you and them if your
employment had not been terminated or, if more favorable to you, as in effect
under the Company's medical and dental benefit plans covering executive officers
of the Company at any time thereafter; provided, however, that if you become
re-employed with another employer and are eligible to receive medical and dental
benefits under such other employer's plans, Leap's obligations under this
Section 5(e) shall be reduced to the extent comparable benefits are actually
received by you during the twelve (12) month period following your termination
of employment, and any such benefits actually received by you shall be reported
to Leap. In the event you are ineligible under the terms of the Company's plans
to continue to be so covered, in such event, Leap shall provide you with
substantially equivalent coverage through other sources or will provide you with
a lump sum payment in such amount that, after all taxes on that amount, shall be
equal to the cost to the Company for such benefit coverage. The lump sum shall
be determined on a present value basis using the interest rate provided in
section
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1274(b)(2)(B) of the Code on the Date of Termination. At the termination of the
benefits coverage under the second preceding sentence, you, your spouse and your
dependents shall be entitled to continuation coverage pursuant to section 4980B
of the Internal Revenue Code of 1986, as amended from time to time (the "Code"),
sections 601-608 of the Employee Retirement Income Security Act of 1974, as
amended, and under any other applicable law, to the extent required by such
laws, as if you had terminated employment with the Company on the date such
benefits coverage terminates.
(f) In the event that it shall be determined under this Section
5(f) that any payment or benefit to you or for your benefit or on your behalf
(whether paid or payable or distributed or distributable) pursuant to the terms
of this Agreement or any other agreement, arrangement or plan with the Company
or any Affiliate (as defined below) (including, without limitation, any payment
under Section 3 of this Agreement) (individually, a "Payment" and collectively,
the "Payments") would be subject to the excise tax imposed by section 4999 of
the Code (the "Excise Tax"), then you shall be entitled to receive from Leap one
or more additional payments (individually, a "Gross-Up Payment" and
collectively, the "Gross-Up Payments") in an aggregate amount such that the net
amount of the Payments and the Gross-Up Payments retained by you after the
payment of all Excise Taxes (and any interest or penalties imposed with respect
to such Excise Taxes) on the Payments and all federal, state and local income
tax, employment tax and Excise Taxes (including any interest or penalties
imposed with respect to such taxes) on the Gross-Up Payments provided for in
this Section 5(f), and taking into account any lost or reduced tax deductions on
account of the Gross-Up Payments, shall be equal to the Payments. For purposes
of this Section 5(f), an "Affiliate" shall mean any successor to all or
substantially all of the business and/or assets of Leap, any person acquiring
ownership or effective control of Leap or ownership of a substantial portion of
the assets of the Company's assets, or any person whose relationship to Leap or
such person is such as to require attribution under Section 318(a) of the Code.
(i) All determinations required to be made under this
Section 5(f), including whether and when any Gross-Up Payment is
required and the amount of such Gross-Up Payment, and the assumptions to
be utilized in arriving at such determinations shall be made by the
Accountants (as defined below) which shall provide you and Leap with
detailed supporting calculations with respect to such Gross-Up Payment
within fifteen (15) business days of the receipt of notice from you or
Leap that there you have received or will receive a Payment. For the
purposes of this Section 5(f), the "Accountants" shall mean Leap's
independent certified public accountants serving immediately prior to
the Change in Control. In the event that the Accountants are also
serving as the accountants or auditors for the individual, entity or
group effecting the Change in Control, you shall appoint another
nationally recognized public accounting firm, reasonably acceptable to
Leap, to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accountants hereunder). All fees
and expenses of the Accountants shall be borne solely by Leap.
(ii) For the purposes of determining whether any of the
Payments will be subject to the Excise Tax and the amount of such Excise
Tax, such Payments will be treated as "parachute payments" within the
meaning of section 280G of the
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Code, and all "parachute payments" in excess of the "base amount" (as
defined under section 280G(b)(3) of the Code) shall be treated as
subject to the Excise Tax, unless and except to the extent that, in the
opinion of the Accountants, such Payments (in whole or in part) either
do not constitute "parachute payments" or represent reasonable
compensation for services actually rendered (within the meaning of
section 280G(b)(4) of the Code) in excess of the "base amount," or such
"parachute payments" are otherwise not subject to such Excise Tax.
(iii) For purposes of determining the amount of the
Gross-Up Payment, you shall be deemed to pay Federal income taxes at the
highest applicable marginal rate of Federal income taxation for the
calendar year in which the Gross-Up Payment is to be made and to pay any
applicable state and local income taxes at the highest applicable
marginal rate of taxation for the calendar year in which the Gross-Up
Payment is to be made, net of the maximum reduction in Federal income
taxes which could be obtained from the deduction of such state or local
taxes if paid in such year (determined without regard to limitations on
deductions based upon the amount of your adjusted gross income); and to
have otherwise allowable deductions for Federal, state and local income
tax purposes at least equal to those disallowed because of the inclusion
of the Gross-Up Payment in your adjusted gross income. To the extent
practicable, any Gross-Up Payment with respect to any Payment shall be
paid by Leap at the time you are entitled to receive the Payment and in
no event will any Gross-Up Payment be paid later than five days after
the receipt by you of the Accountant's determination.
(iv) Any determination by the Accountants shall be
binding upon Leap and you. As a result of uncertainty in the application
of section 4999 of the Code at the time of the initial determination by
the Accountants hereunder, it is possible that the Gross-Up Payment made
will have been an amount less than Leap should have paid pursuant to
this Section 5(f) (the "Underpayment"). In the event that Leap exhausts
its remedies pursuant to Section 5(f)(vi) and you are required to make a
payment of any Excise Tax, the Underpayment shall be promptly paid by
Leap to or for your benefit; and
(v) You shall notify Leap in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment
by Leap of the Gross-Up Payment. Such notification shall be given as
soon as practicable after you are informed in writing of such claim and
shall apprise Leap of the nature of such claim and the date on which
such claim is requested to be paid. You shall not pay such claim prior
to the expiration of the 30-day period following the date on which you
give such notice to Leap (or such shorter period ending on the date that
any payment of taxes, interest and/or penalties with respect to such
claim is due). If Leap notifies you in writing prior to the expiration
of such period that it desires to contest such claim, you shall: (A)
give Leap any information reasonably requested by Leap relating to such
claim; (B) take such action in connection with contesting such claim as
Leap shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by
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Leap; (C) cooperate with Leap in good faith in order to effectively
contest such claim; and (D) permit Leap to participate in any
proceedings relating to such claims; provided, however, that Leap shall
bear and pay directly all costs and expenses (including additional
interest and penalties) incurred in connection with such contest and
shall indemnify you for and hold you harmless from, on an after-tax
basis, any Excise Tax or income or other taxes (including interest and
penalties with respect thereto) imposed as a result of such
representation and payment of all related costs and expenses.
(vi) Without limiting the foregoing provisions of this
Section 5(f), Leap shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and
all administrative appeals, proceedings, hearings and conferences with
the taxing authority in respect of such claim and may, at its sole
option, either direct you to pay the tax claimed and xxx for a refund or
contest the claim in any permissible manner, and you agree to prosecute
such contest to a determination before any administrative tribunal, in a
court of initial jurisdiction and in one or more appellate courts, as
Leap shall determine; provided, however, that if Leap directs you to pay
such claim and xxx for a refund, Leap shall advance the amount of such
payment to you, on an interest-free basis, and shall indemnify you for
and hold you harmless from, on an after-tax basis, any Excise Tax or
income or other taxes (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to any
imputed income with respect to such advance (including as a result of
any forgiveness by Leap of such advance); provided, further, that any
extension of the statute of limitations relating to the payment of taxes
for the taxable year of you with respect to which such contested amount
is claimed to be due is limited solely to such contested amount.
Furthermore, Leap's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and
you shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(vii) In any situation where under applicable law Leap
has the power to indemnify (or advance expenses to) you in respect of
any judgments, fines, settlements, loss, cost or expense (including
attorneys' fees) of any nature related to or arising out of your
activities as an agent, employee, officer or director of Leap or in any
other capacity on behalf of or at the request of Leap, Leap shall
promptly on written request, indemnify (and advance expenses to) you to
the fullest extent permitted by applicable law, including but not
limited to making such findings and determinations and taking any and
all such actions as Leap may, under applicable law, be permitted to have
the discretion to take so as to effectuate such indemnification or
advancement. Such agreement by Leap shall not be deemed to impair any
other obligation of Leap respecting your indemnification otherwise
arising out of this or any other agreement or promise of Leap or under
any statute.
(g) The payments provided for in Section 5(a) shall be made
promptly following the termination of your employment with the Company. The
payments provided for in Sections 5(b), (c) and (f) shall be made not later than
the tenth day following the date of which the General Release by you becomes
irrevocable (or, if later, the tenth day following the
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date on which the Change in Control occurs); provided, however, that if the
amounts of such payments cannot be finally determined on or before such day,
Leap shall pay to you on such day an estimate, as determined in good faith by
Leap, of the minimum amount of such payments and shall pay the remainder of such
payments (together with interest at the rate provided in section 1274(b)(2)(B)
of the Code) as soon as the amount thereof can be determined but in no event
later than the thirtieth day after the Date of Termination. In the event that
the amount of the estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by Leap to you, payable on
the fifth day after demand by Leap (together with interest at the rate provided
in section 1274(b)(2)(B) of the Code).
(h) You shall not be required to mitigate the amount of any
payment provided for in this Section 5 by seeking other employment or otherwise
nor, except as provided in Section 5(e), shall the amount of any payment or
benefit provided for in this Section 5 be reduced by any compensation or
benefits earned by you as the result of employment by another employer or
self-employment, by retirement benefits, by offset against any amount claimed to
be owed by you to Leap, or otherwise.
6. Successors; Binding Agreement. Leap shall require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of Leap to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that Leap would be required to perform it if no such succession
had taken place. Failure of Leap to obtain such assumption and agreement prior
to the effectiveness of any such succession shall be a breach of this Agreement
and shall entitle you to terminate your employment and receive compensation from
Leap in the same amount and on the same terms to which you would be entitled
hereunder if you terminate your employment for Good Reason following a Change in
Control, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date of
Termination. Unless expressly provided otherwise, "Leap" as used herein shall
mean Leap as defined in this Agreement and any successor to its business and/or
assets as aforesaid. This Agreement shall inure to the benefit of and be
enforceable by you and your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If you
should die while any amount would still be payable to you hereunder had you
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to your devisee, legatee or
other designee or, if there is no such designee, to your estate.
7. Notice. For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this
Agreement, provided that all notices to Leap shall be directed to the attention
of the Board with a copy to the Secretary of Leap, or to such other address as
either party may have furnished to the other in writing in accordance herewith,
except that notice of change of address shall be effective only upon receipt.
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8. Non-Compete, Confidentiality and Non-Solicitation Covenants.
In consideration of the benefits to be provided to you under Sections 5(b), (c),
(d), (e) and (f) of this Agreement, and in order to protect the goodwill of
Leap, you hereby agree to the following covenants.
(a) Non-Compete. For a period of one year commencing on the Date
of Termination, you shall not, directly or indirectly, own, manage, operate,
join, control or participate in the ownership, management, operation or control
of, or be connected as a director, officer, employee, partner, consultant or
otherwise with, any profit or nonprofit business or organization which, directly
or indirectly competes with, or in any way interferes with, the business of Leap
or any of its affiliates in any region in which Leap is then operating or has
firm plans to operate.
(b) Confidentiality. For the period of three years commencing on
the Date of Termination, you shall not, directly or indirectly, disclose or make
available to any person, firm, corporation, association or other entity for any
reason or purpose whatsoever, any Confidential Information (as defined below).
You agree that, upon termination of your employment with Leap, all Confidential
Information in your possession that is in written or other tangible form
(together with all copies or duplicates thereof, including computer files) shall
be returned to Leap and shall not be retained by you or furnished to any third
party, in any form except as provided herein; provided, however, that you shall
not be obligated to treat as confidential, or return to Leap copies of any
Confidential Information that (i) was publicly known at the time of disclosure
to you, (ii) becomes publicly known or available thereafter other than by any
means in violation of this Agreement or any other duty owed to Leap by any
person or entity, or (iii) is lawfully disclosed to you by a third party. As
used in this Agreement, the term "Confidential Information" means: information
disclosed to you or known by you as a consequence of or through your
relationship with Leap, about the customers, employees, business methods, public
relations methods, organization, procedures or finances, including, without
limitation, information of or relating to customer lists, of Leap and its
affiliates.
(c) Non-Solicitation. For the period commencing on the Date of
Termination and terminating on the third anniversary thereof, you shall not,
either on your own account or jointly with or as a manager, agent, officer,
employee, consultant, partner, joint venturer, owner or shareholder or otherwise
on behalf of any other person, firm or corporation, directly or indirectly
solicit or attempt to solicit away from Leap any of its officers or employees or
offer employment to any person who, on or during the six (6) months immediately
preceding the date of such solicitation or offer, is or was an officer or
employee of Leap; provided, however, that a general advertisement to which an
employee of Leap responds shall in no event be deemed to result in a breach of
this Section 8(c).
(d) Breach of Covenants. In the event that you breach any of the
provisions of this Section 8, or threaten to do so, in addition to and without
limiting or waiving any other remedies available to the Company in law or in
equity, the Company shall be entitled to immediate injunctive relief in any
court having the capacity to grant such relief, to restrain such breach or
threatened breach and to enforce this Section 8. You acknowledge that it is
impossible to measure in money the damages that the Company will sustain in the
event that
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you breach or threaten to breach this Section 8 and, in the event that the
Company institutes any action or proceeding to enforce this Section 8 seeking
injunctive relief, you hereby waive and agree not to assert or use as a defense
a claim or defense that the Company has an adequate remedy at law. Also, in
addition to any other remedies available to the Company in law or in equity, in
the event that you breach the provisions of this Section 8 in any material
respect, you shall forfeit your right to further benefits under Sections 5(b),
(c), (d), (e) and (f) and you shall be obligated to repay to the Company the
benefits that you have received under Sections 5(b), (c), (d), (e) and (f). If a
court or arbitrator shall hold that the duration, scope or area restriction or
other provision of this Section 8 is unreasonable under the circumstances now or
then existing, the parties hereto agree that the maximum duration, scope or area
restriction reasonable under the circumstances shall be substituted for the
stated duration, scope or area restriction.
9. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by you and such officer of the Company as may be
specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement. You acknowledged that you have consulted with counsel (or have had a
reasonable opportunity to consult with counsel) and are fully aware of your
rights and obligations under this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of California without regard to its conflicts of law principles. All
references to sections of the Exchange Act or the Code shall be deemed also to
refer to any successor provisions to such sections. Any payments provided for
hereunder shall be paid net of any applicable withholding required under
federal, state or local law. Any obligations of Leap under Sections 4 and 5
shall survive the expiration of the term of this Agreement. The section headings
contained in this Agreement are for convenience only, and shall not affect the
interpretation of this Agreement.
10. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
11. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
12. Arbitration; Dispute Resolution, Etc.
(a) Arbitration Procedure. Any disagreement, dispute,
controversy or claim arising out of or relating to this Agreement or the
interpretation of this Agreement or any arrangements relating to this Agreement
or contemplated in this Agreement or the breach, termination or invalidity
thereof shall be settled by final and binding arbitration administered by the
American Arbitration Association ("AAA") in San Diego, California in accordance
with its
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then existing National Rules for the Resolution of Employment Disputes. In the
event of such an arbitration proceeding, you and Leap shall select a mutually
acceptable neutral arbitrator from among the AAA panel of arbitrators. In the
event you and Leap cannot agree on an arbitrator, the Administrator of AAA will
appoint an arbitrator. Neither you nor Leap nor the arbitrator shall disclose
the existence, content, or results of any arbitration hereunder without the
prior written consent of all parties. Except as provided herein, the Federal
Arbitration Act shall govern the interpretation, enforcement and all
proceedings. The arbitrator shall apply the substantive law (and the law of
remedies, if applicable) of the state of California, or federal law, or both, as
applicable and the arbitrator is without jurisdiction to apply any different
substantive law. The arbitrator shall have the authority to entertain a motion
to dismiss and/or a motion for summary judgment by any party and shall apply the
standards governing such motions under the Federal Rules of Civil Procedure. The
arbitrator shall render an award and a written, reasoned opinion in support
thereof. Judgment upon the award may be entered in any court having jurisdiction
thereof. Leap shall pay all fees and expenses of the Arbitrator regardless of
the result and shall provide all witnesses and evidence reasonably required by
you to present your case. Leap shall pay to you all reasonable arbitration
expenses and legal fees incurred by you as a result of a termination of your
employment in seeking to obtain or enforce any right or benefit provided by this
Agreement (whether or not you are successful in obtaining or enforcing such
right or benefit). Such payments shall be made within five (5) days after your
request for payment accompanied with such evidence of fees and expenses incurred
as Leap reasonably may require.
(b) Compensation during Dispute, Etc. Your benefits during any
disagreement, dispute, controversy, claim, suit, action or proceeding
(collectively, a "Dispute") arising out of or relating to this Agreement or the
interpretation of this Agreement shall be as follows. If a Dispute as to whether
you are entitled to the benefits provided under this Agreement, then, during the
period of that Dispute, Leap shall pay you the amount specified in Section 5(a),
fifty percent (50%) of the amount specified in Section 5(b), and Leap shall
provide you with the other benefits provided in Sections 5(c), (d) and (e) of
this Agreement, if, but only if, you agree in writing that if the Dispute is
resolved against you, you shall promptly refund to Leap all payments and other
amounts you receive under this Agreement to which you are found not to be
entitled, plus interest at the rate provided in Section 1274(d) of the Code,
compounded quarterly. If the Dispute is resolved in your favor, promptly after
resolution of the Dispute, Leap shall pay you the benefits that were withheld
during the period of the Dispute, plus interest at the rate provided in Section
1274(d) of the Code, compounded quarterly.
(c) Legal Fees. Leap shall pay to you all legal fees and
expenses incurred by you in connection with any Dispute arising out of or
relating to this Agreement or the interpretation thereof (including, without
limitation, all such fees and expenses, if any, incurred in contesting or
disputing any termination of your employment or in seeking to obtain or enforce
any right or benefit provided by this Agreement, or in connection with any tax
audit or proceeding to the extent attributable to the application of section
4999 of the Code to any payment or benefit provided hereunder).
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13. At-Will Employment. Nothing in the foregoing diminishes or
alters Leap's policy of at-will employment for all employees, where both Leap
and you may terminate the employment relationship at any time and for any
reason, with or without cause or notice.
14. Entire Agreement. This Agreement sets forth the entire
agreement of the parties hereto in respect of the subject matter contained
herein and supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto; and any prior agreement
of the parties hereto in respect of the subject matter contained herein,
including, without limitation, any prior severance agreements, is hereby
terminated and cancelled. Any of your rights hereunder shall be in addition to
any rights you may otherwise have under benefit plans or agreements of the
Company to which you are a party or in which you are a participant, including,
but not limited to, any Company sponsored employee benefit plans and stock
options plans and your Awards. Provisions of this Agreement shall not in any way
abrogate your rights under such other plans and agreements and your Awards, and
your rights under this Agreement shall be in addition to your rights under such
other plans and agreements and your Awards.
If this letter sets forth our agreement on the subject matter
hereof, kindly sign and return to Leap the enclosed copy of this letter, which
shall then constitute our agreement on this subject.
Sincerely,
LEAP WIRELESS INTERNATIONAL, INC.
/s/ XXXXXXX X. XXXXXXXX
Xxxxxxx X. Xxxxxxxx
Xx. Vice President, Human Resources
Accepted and Agreed to this 7th day of March, 2001.
/s/ XXXXXX X. XXXX
------------------------------------
Xxxxxx X. Xxxx
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EXHIBIT A
GENERAL RELEASE
1. General Release of Claims. In consideration of the benefits under
Sections 5(b), (c), (d), (e) and (f) of Change in Control Agreement (the
"Agreement"), effective as of March 7, 2001, by and between Leap Wireless
International, Inc. ("Leap") and Xxxxxx X. Xxxx ("Employee"), Employee does
hereby for himself or herself and his or her spouse, beneficiaries, heirs,
successors and assigns, release, acquit and forever discharge Leap and its
stockholders, officers, directors, managers, employees, representatives, related
entities, successors and assigns, and all persons acting by, through or in
concert with them (the "Releasees") of and from any and all claims, actions,
charges, complaints, causes of action, rights, demands, debts, damages, or
accountings of whatever nature, except for criminal activity, known or unknown,
which Employee may have against the Releasees based on any actions or events
which occurred prior to the date of this General Release, including, but not
limited to, those related to, or arising from, Employee's employment with Leap
or the termination thereof, any claims under Title VII of the Civil Rights Act
of 1964, the Federal Age Discrimination and Employment Act and the California
Fair Employment and Housing Act, but excluding claims under the Agreement
(collectively, "Claims"). This General Release shall not, however, constitute a
waiver of any of Employee's rights under the Agreement or under any outstanding
stock option granted to Employee, or under the terms of any employee benefit
plan of Employer in which Employee is a participant.
2. Release of Unknown Claims. In addition, Employee expressly waives all
rights under Section 1542 of the Civil Code of the State of California, which
reads as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH A CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIM FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR.
3. Older Worker's Benefit Protection Act. Employee agrees and expressly
acknowledges that this General Release includes a waiver and release of all
claims which Employee has or may have under the Age Discrimination in Employment
Act of 1967, as amended, 29 U.S.C. Section 621, et seq. ("ADEA"). The following
terms and conditions apply to and are part of the waiver and release of the ADEA
claims under this General Release:
(a) That the Agreement and this General Release are
written in a manner calculated to be understood by Employee.
(b) The waiver and release of claims under the ADEA
contained in this General Release do not cover rights or claims that may
arise after the date on which Employee signs this General Release.
(c) The Agreement provides for consideration in addition
to anything of value to which Employee is already entitled.
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(d) Employee is advised to consult an attorney before
signing this General Release.
(e) Employee is afforded twenty-one (21) days (or, in
the event that the termination of Employee's employment is in connection
with an exit incentive or other employment termination program,
forty-five (45) days) after Employee is provided with this General
Release to decide whether or not to sign this General Release. If
Employee executes this General Release prior to the expiration of such
period, Employee does so voluntarily and after having had the
opportunity to consult with an attorney.
(f) In the event that the termination of Employee's
employment is in connection with an exit incentive or other employment
termination program, Employee is provided with written information,
calculated to be understood by the average individual eligible to
participate, as to:
(i) any class, unit, or group of individuals
covered by such program, any eligibility factors for such
program, and any time limits applicable to such programs; and
(ii) the job titles and ages of all individuals
eligible or selected for the program, and the ages of all
individuals in the same job classification or organizational
unit who are not eligible or not selected for the program.
(g) Employee will have the right to revoke this General
Release within seven (7) days of signing this General Release. In the
event this General Release is revoked, this General Release will be null
and void in its entirety, and Employee will not receive the benefits
described in Sections 5(b), (c), (d) (e) and (f) of the Agreement.
(h) If Employee wishes to revoke the General Release,
Employee shall deliver written notice stating his intent to revoke this
General Release to the President of Employer on or before the seventh
(7th) day after the date hereof.
4. No Assignment of Claims. Employee represents and warrants to
the Releasees that there has been no assignment or other transfer of any
interest in any Claim which Employee may have against the Releasees, or any of
them, and Employee agrees to indemnify and hold the Releasees harmless from any
liability, claims, demands, damages, costs, expenses and attorneys' fees
incurred as a result of any person asserting any such assignment or transfer of
any rights or Claims under any such assignment or transfer from such party.
5. No Suits or Actions. Employee agrees that if he hereafter
commences, joins in, or in any manner seeks relief through any suit arising out
of, based upon, or relating to any of the Claims released hereunder, or in any
manner asserts against the Releasees any of the Claims released hereunder, then
he will pay to the Releasees against whom such suit or Claim is asserted, in
addition to any other damages caused thereby, all attorneys' fees incurred by
such Releasees in defending or otherwise responding to said suit or Claim.
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6. No Admission. Employee further understands and agrees that
neither the payment of money nor the execution of this Release shall constitute
or be construed as an admission of any liability whatsoever by the Releasees.
EMPLOYEE
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Date:
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