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EXHIBIT 10.7
CONVERSION AGREEMENT
THIS CONVERSION 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 Agreement,
the Credit Facility, the Equipment Agreement, the Employee Benefits Agreement,
the Interim Services Agreement and the Tax Agreement (including this Agreement,
the "Ancillary Agreements"), which Ancillary Agreements will govern certain
matters relating to the Separation, the Distribution and the relationship of
QUALCOMM and Leap and their respective Subsidiaries following the Distribution;
WHEREAS, pursuant to Section 2.8 of the Separation Agreement, Leap has
agreed to issue shares of Leap Common Stock constituting the Leap Reserve Shares
as may be or become issuable as a result of the Distribution, including the
issuance of shares of Leap Common Stock to the holders of the Convertible
Preferred Securities or Debentures, as appropriate, promptly following the
conversion thereof, subject in each instance to applicable law;
WHEREAS, concurrently herewith, QUALCOMM and Leap have entered into the
Employee Benefits Agreement pursuant to which, among other things, Leap has
agreed to issue shares of Leap Common Stock and options with respect to certain
QUALCOMM options and option exercises, all as more fully set forth therein;
WHEREAS, QUALCOMM and Leap desire to enter into this Agreement to
provide for the issuance of shares of Leap Common Stock to holders of
Convertible Preferred Securities or Debentures, as appropriate, pursuant to the
terms set forth herein, and under the circumstances described herein; and
WHEREAS, Leap acknowledges that QUALCOMM is transferring certain assets
to Leap in connection with the Separation, and QUALCOMM is proceeding with the
Distribution, in consideration of and reliance upon, among other things, Leap's
agreement to perform the terms of this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants contained herein, and for other good and valuable
consideration, receipt of which is hereby acknowledged, the parties, intending
to be legally bound, agree as follows:
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ARTICLE 1
DEFINITIONS
For purposes of this Agreement the following terms shall have the
following meanings:
1.1 ADDITIONAL PAYMENTS shall have the meaning assigned thereto in the
Indenture.
1.2 CONVERSION AGENT shall have the meaning assigned thereto in the
Indenture.
1.3 CONVERSION DATE shall have the meaning assigned thereto in the
Indenture.
1.4 CONVERTIBLE PREFERRED SECURITIES shall have the meaning assigned
thereto in the Indenture.
1.5 DEBENTURES shall have the meaning assigned thereto in the Indenture.
1.6 DISTRIBUTION DATE means the date of the Distribution.
1.7 EXCHANGE ACT means the Securities Exchange Act of 1934, as amended, or
any similar successor federal statute, and the rules and regulations thereunder,
all as the same shall be in effect from time to time.
1.8 HOLDER shall have the meaning assigned thereto in the Indenture.
1.9 INDENTURE means that certain Indenture dated as of February 25, 1997 by
QUALCOMM, as Issuer, to Wilmington Trust Company, as Trustee, relating to the
Debentures.
1.10 MATURITY shall have the meaning assigned thereto in the Indenture.
1.11 NOTICE OF CONVERSION shall have the meaning assigned thereto in the
Indenture.
1.12 PERSON means any individual or legal entity.
1.13 REGISTRABLE SECURITIES means the shares Leap Common Stock or any other
securities of Leap into which the Convertible Preferred Securities and/or
Debentures, as appropriate, are from time to time convertible.
1.14 SEC means the United States Securities and Exchange Commission.
1.15 SECURITIES ACT shall mean the Securities Act of 1933, as amended, or
any similar successor federal statute, and the rules and regulations thereunder,
all as the same shall be in effect from time to time.
1.16 TRUST means the QUALCOMM Financial Trust I, a Delaware statutory
business trust.
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ARTICLE 2
CONVERSION OF CONVERTIBLE PREFERRED SECURITIES
2.1 CONVERTIBLE PREFERRED SECURITIES. Leap agrees that, effective as of the
Distribution Date, subject to and upon compliance with the provisions of Article
XV of the Indenture, each Convertible Preferred Security or Debenture, as
appropriate, shall be convertible into fully paid and nonassessable shares of
Leap Common Stock at an initial conversion rate of 0.17205 shares for each $50
in aggregate principal amount of Debentures. Subject to the terms hereof and
applicable law, conversion of such securities shall be governed by all
provisions of Article XV of the Indenture, so that, among other things, (i) Leap
shall have the obligations of "the Company" described therein with respect to
such Leap Common Stock so long as Leap may be required to issue any shares of
Leap Common Stock in accordance with this Agreement; and (ii) the conversion
rate set forth above pursuant to which securities are convertible into shares of
Leap Common Stock shall be subject to adjustment in the event of certain events
with respect to Leap Common Stock or certain actions of Leap, all as more fully
described in Article XV of the Indenture with respect to the Company.
2.2 RESERVATION OF SHARES. Leap agrees that as of and following the
Distribution Date, Leap will at all times have reserved and keep available,
solely for issuance and delivery upon the conversion of Convertible Preferred
Securities and/or Debentures, as appropriate, all Leap Common Stock issuable
from time to time upon conversion of such securities.
2.3 REGISTRATION OF SHARES. Leap is obligated to do the following:
(a) Prior to the Distribution, Leap (i) shall prepare and file with
the SEC a "shelf" registration statement under Rule 415 under the Securities
Act, on Form X-0, X-0, X-0 or other appropriate form(s) reasonably agreed to by
QUALCOMM, in order to effect and maintain the registration under the Securities
Act of, the issuance (subject to the terms hereof) of the Registrable Securities
(a "Registration Statement"); (ii) shall use its reasonable efforts to cause
such Registration Statement to be declared effective prior to or currently with
the Distribution, and if such effectiveness cannot be attained by that time then
as soon thereafter as practicable; and (iii) following the Distribution and such
effectiveness, shall use reasonable efforts to maintain the effectiveness of
such Registration Statement in accordance with the following paragraph.
(b) Leap shall prepare and file with the SEC (i) such amendments and
supplements to the Registration Statement and the prospectus used in connection
therewith, (ii) such documents required to be filed with the SEC under Sections
13, 14(a) and 15(d) of the Exchange Act and (iii) such other filings required by
the SEC, in each case as may be necessary to keep the Registration Statement
continuously effective and not misleading until the earlier of such date as all
of the Convertible Preferred Securities and Debentures have been either repaid
in full, redeemed, converted or cancelled in accordance with their terms and the
Indenture and are no longer outstanding.
Notwithstanding the foregoing, if, at any time following the
effectiveness of the Registration Statement, Leap shall have determined that (i)
the happening of any event requires
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the making of any changes to the Registration Statement or the prospectus
related to the Registrable Securities, so that, as of such date, the
Registration Statement and the prospectus do not contain an untrue statement of
a material fact and do not omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or (ii) the continued
effectiveness of the Registration Statement would require Leap to disclose a
material financing, acquisition or other material corporate transaction or
development, and the Leap Board of Directors shall have determined in good faith
that such disclosure is not in the best interests of Leap and its stockholders,
then in either case under clause (i) or (ii) above, Leap may suspend the
effectiveness of the Registration Statement and the issuance of Registrable
Securities pursuant thereto and shall prepare as soon as reasonably practical a
post-effective amendment to the Registration Statement or an amendment or
supplement to the related prospectus or file an appropriate report pursuant to
the Exchange Act or any other required document so that the Registration
Statement and prospectus will not include an untrue statement of a material fact
or omit to state any material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading. Leap
shall use its reasonable efforts to minimize the duration of any such suspension
of the effectiveness of the Registration Statement.
(c) Leap shall notify QUALCOMM in writing when the Registration
Statement or any post-effective amendment thereto has become effective and of
any request by the SEC for amendments or supplements to the Registration
Statement or the prospectus included therein or for additional information. Leap
shall notify QUALCOMM in writing of (i) the issuance by the SEC of any stop
order suspending effectiveness of the Registration Statement or the initiation
of any proceedings for that purpose; (ii the receipt by Leap of any notification
with respect to the suspension of the qualification of the securities included
therein for sale in any jurisdiction or the initiation of any proceeding for
such purpose; and (iii) the happening of any event that requires the making of
any changes in the Registration Statement or the prospectus included therein so
that, as of such date, the Registration Statement and prospectus do not contain
an untrue statement of a material fact and do not omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Leap
shall use all reasonable efforts to prevent the issuance, and if issued, to
obtain the withdrawal at the earliest possible time, of any order suspending the
effectiveness of any Registration Statement.
(d) Prior to any issuance of Registrable Securities pursuant to the
Registration Statement, Leap shall register or qualify the Registrable
Securities for offer and sale under the securities or blue sky laws of any
jurisdictions in which the issuance of Registrable Securities to the Holders is
required; provided, however, that in no event shall Leap be obligated to (i)
qualify as a foreign corporation or as a dealer in securities in any
jurisdiction where it would not otherwise be required to so qualify but for this
Section 2.3(e), (ii) file any general consent to service of process in any
jurisdiction where it is not as of the date hereof so subject or (iii) subject
itself to taxation in any such jurisdiction if it is not so subject.
(e) QUALCOMM shall bear all reasonable expenses (exclusive of any
brokerage fees, underwriting discounts and commissions), including without
limitation the reasonable fees and expenses of outside counsel to Leap, (i) in
connection with the initial preparation, printing and filing of the Registration
Statement and any corresponding
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prospectuses; (ii) in connection with required post-effective amendments and
supplements thereto, including post-effective amendment(s) necessary to convert
the Registration Statement to Form S-3 upon Leap's initial qualification for the
use thereof; and (iii) for expenses primarily relating to the maintenance of
effectiveness of the Registration Statement and any corresponding prospectuses,
excluding expenses incurred by Leap in connection with fulfillment of its
reporting or other obligations as a public company under the Exchange Act.
(f) Leap's obligations to register and issue the Registrable
Securities under this Agreement and the Separation Agreement shall be subject in
all respects to applicable law and to QUALCOMM's furnishing to Leap such
information regarding QUALCOMM and its subsidiaries and the Holders as Leap may
from time to time reasonably request for inclusion or incorporation by reference
in the Registration Statement and any corresponding prospectus in order to
comply with applicable law. In the event that the Registration Statement at any
time (other than as permitted hereby) does not register the issuance by the
Company of any Registrable Securities to the Holders in compliance with
applicable law, the Company shall prepare and file a "no-action" letter with the
SEC's Division of Corporation Finance, or prepare and file a registration
statement on another form of registration statement, or a resale registration
statement, if appropriate, and generally use reasonable efforts to take such
other actions as may be necessary to permit the issuance of Leap Common Stock to
the Holders upon conversion of the Convertible Preferred Securities or
Debentures, as applicable, and the resale thereof (subject to Rule 144 under the
Securities Act, if applicable) in compliance with applicable law.
2.4 INDEMNIFICATION.
(a) As used in this Section 2.4 the following terms shall have the
following respective meanings:
(i) "Registration Statement" shall include any final prospectus,
exhibit, supplement or amendment included in or relating to the Registration
Statement referred to in Section 2.3; and
(ii) "Untrue Statement" shall include any untrue statement or
alleged untrue statement, or any omission or alleged omission to state in the
Registration Statement a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(b) Leap agrees to indemnify and hold harmless QUALCOMM (and each
person, if any, who controls QUALCOMM within the meaning of Section 15 of the
Securities Act) from and against any losses, claims, damages or liabilities to
which QUALCOMM (or any such officer, director or controlling person) may become
subject (under the Securities Act or otherwise) insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) arise out
of any failure to comply with the covenants and agreements of Leap contained in
Section 2.3 or 2.4 hereof, or any Untrue Statement contained in the Registration
Statement on or after the effective date thereof or on or after the date of any
prospectus or prospectus supplement, and Leap will reimburse QUALCOMM (or such
officer, director or controlling person, as the case may be) for any reasonable
legal or other expenses reasonably incurred in investigating, defending or
preparing to defend any such action, proceeding or claim;
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provided, however, that Leap shall not be liable to QUALCOMM in any such case to
the extent that such loss, claim, damage or liability arises out of, or is based
upon, an Untrue Statement made in such Registration Statement in reliance upon
and in conformity with written information furnished to Leap by or on behalf of
QUALCOMM specifically for use in preparation of, or for incorporation by
reference into, the Registration Statement, and Leap shall not be liable under
this Section 2.4 for any settlement of any action effected without its written
consent, which consent shall not unreasonably be withheld.
(c) QUALCOMM agrees to indemnify and hold harmless Leap (and each
person, if any, who controls Leap within the meaning of Section 15 of the
Securities Act) from and against any losses, claims, damages or liabilities to
which Leap (or any such officer, director or controlling person) may become
subject (under the Securities Act or otherwise) insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) arise out
of any failure to comply with the covenants and agreements of QUALCOMM contained
in Section 2.3 or 2.4 hereof, or any Untrue Statement made in the Registration
Statement on or after the effective date thereof or on or after the date of any
prospectus or prospectus supplement in reliance on and in conformity with
written information furnished to Leap by or on behalf of QUALCOMM specifically
for use in preparation of or for incorporation by reference into the
Registration Statement, and QUALCOMM will reimburse Leap (or such officer,
director or controlling person, as the case may be) for any reasonable legal or
other expenses reasonably incurred in investigating, defending or preparing to
defend any such action, proceeding or claim; provided, however, that QUALCOMM
shall not be liable under this Section 2.4 for any settlement of any action
effected without its written consent, which consent shall not unreasonably be
withheld.
2.5 CONVERSION OF SHARES. Subject to applicable law (including the
effectiveness of the Registration Statement) and the terms of this Agreement,
promptly following written notice by QUALCOMM to Leap that a Notice of
Conversion has been delivered in accordance with Section 15.2 of the Indenture,
Leap shall issue and deliver at the office of the Conversion Agent, unless
otherwise directed by the Holder in the Notice of Conversion, a certificate or
certificates for the number of full shares of Leap Common Stock issuable upon
such conversion, together with the cash payment, if any, in lieu of any fraction
of any share to the Person or Persons entitled to receive the same. The
Conversion Agent shall thereupon be instructed to deliver such certificate or
certificates to such Person or Persons. The Person or Persons entitled to
receive the Leap Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such Leap Common Stock as of the
date of issuance.
2.6 SATISFACTION OF QUALCOMM PRINCIPAL REPAYMENT; NO CONSIDERATION TO LEAP.
Leap shall receive no consideration for the issuance of Leap Common Stock upon
conversion of the Convertible Preferred Securities or the Debentures, as
applicable. Leap shall have no obligation to pay principal and/or interest to
Holders under the Indenture.
2.7 AGENCY. In effecting the conversion transactions described in this
Section 2 and in Section 15.2 of the Indenture, the Conversion Agent is acting
as agent of the Holders of the Convertible Preferred Securities (in the exchange
of Convertible Preferred Securities for Debentures) and as agent of the Holders
of Debentures (in the conversion of Debentures into Common Stock), as the case
may be. Leap acknowledges and agrees the Conversion Agent is
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authorized (i) to exchange Debentures held by the Trust from time to time for
Convertible Preferred Securities in connection with the conversion of such
Convertible Preferred Securities in accordance with this Section 2 and Article
XV of the Indenture and (ii) to convert all or a portion of the Debentures into
QUALCOMM Common Stock and/or Leap Common Stock as appropriate and thereupon to
deliver such shares of QUALCOMM Common Stock and/or Leap Common Stock in
accordance with this Section 2 and Article XV of the Indenture and to deliver to
the Trust a new Debenture or Debentures for any resulting unconverted principal
amount.
ARTICLE 3
MISCELLANEOUS
3.1 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 or in connection with the Distribution shall not be
taken or occur except to the extent specifically agreed by Leap and QUALCOMM.
3.2 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.
3.3 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.
3.4 THIRD PARTY BENEFICIARIES. It is understood and agreed between the
parties that this Agreement and the covenants that are made herein are made
expressly and solely for the benefit of the parties hereto, and no other Person
shall be entitled or be deemed to be entitled to any benefits or rights
hereunder nor be authorized or entitled to enforce any rights, claims or
remedies hereunder.
3.5 MODIFICATION AND AMENDMENT; ENTIRE AGREEMENT. This Agreement may be
modified, amended or terminated by the parties pursuant hereto at any time only
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.
3.6 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 9 of the Separation and
Distribution Agreement.
3.7 GOVERNING 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, performance and remedies.
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IN WITNESS WHEREOF, the parties have caused this Conversion Agreement to
be duly executed as of the day and year first above written.
XXXXXXXX XXXXXXXXXXXX:
By: /s/ Xxxxxxx X. Xxxxxxxx
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Name: Xxxxxxx X. Xxxxxxxx
Title: Executive Vice President and
Chief Financial Officer
LEAP WIRELESS INTERNATIONAL, INC.:
By: /s/ Xxxxxx X. Xxxxx
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Name: Xxxxxx X. Xxxxx
Title: President & Chief Executive
Officer
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