EXHIBIT 10.2
CERTAIN MATERIAL (INDICATED BY AN ASTERISK) HAS BEEN OMITTED FROM THIS DOCUMENT
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
LEAP WIRELESS INTERNATIONAL, INC.
2004 STOCK OPTION, RESTRICTED STOCK
AND DEFERRED STOCK UNIT PLAN
STOCK OPTION GRANT NOTICE AND NON-QUALIFIED
STOCK OPTION AGREEMENT
Leap Wireless International, Inc. (the "COMPANY"), pursuant to its 2004
Stock Option, Restricted Stock and Deferred Stock Unit Plan (the "PLAN"), hereby
grants to the holder listed below ("HOLDER"), an option to purchase the number
of shares of the Company's Common Stock set forth below (the "OPTION"). This
Option is subject to all of the terms and conditions as set forth herein and in
the Non-Qualified Stock Option Agreement attached hereto as Exhibit A (the
"STOCK OPTION AGREEMENT") and the Plan, each of which are incorporated herein by
reference. Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Grant Notice and the Stock Option
Agreement.
HOLDER:
GRANT DATE: _________________
EXERCISE PRICE PER SHARE: $___________ per share
TOTAL NUMBER OF SHARES SUBJECT TO THE
OPTION: [_____]
EXPIRATION DATE: __________________
TYPE OF OPTION: This Option is a Non-Qualified Stock Option and is not an
incentive stock option within the meaning of Section 422 of
the Code.
VESTING SCHEDULE: The shares of Common Stock subject to the Option (rounded down
to the next whole number of shares) shall vest and become
exercisable on the dates and in the percentages indicated in
Exhibit B to this Grant Notice.
By his or her signature and the Company's signature below, Xxxxxx
agrees to be bound by the terms and conditions of the Plan, the Stock Option
Agreement and this Grant Notice. Holder has reviewed the Stock Option Agreement,
the Plan and this Grant Notice in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Grant Notice and fully
understands all provisions of this Grant Notice, the Stock Option Agreement and
the Plan. Holder hereby agrees to accept as binding, conclusive and final all
decisions or interpretations of the Administrator of the Plan upon any questions
arising under the Plan or the Option.
LEAP WIRELESS INTERNATIONAL, INC. HOLDER:
By: ___________________________________ By: ________________________________
Print Name: ___________________________ Print Name:
Title: ________________________________ Title: _____________________________
Address: 00000 Xxxxxxx Xxxxxx Court Address: ___________________________
San Diego, California 92121 ___________________________
-1-
EXHIBIT A
TO STOCK OPTION GRANT NOTICE
NON-QUALIFIED STOCK OPTION AGREEMENT
Pursuant to the Stock Option Grant Notice ("GRANT NOTICE") to which
this Non-Qualified Stock Option Agreement (this "AGREEMENT") is attached, Leap
Wireless International, Inc. (the "COMPANY") has granted to Holder an option
under the Company's 2004 Stock Option, Restricted Stock and Deferred Stock Unit
Plan (the "PLAN") to purchase the number of shares of Common Stock indicated in
the Grant Notice.
ARTICLE I
GENERAL
1.1 Defined Terms. Capitalized terms not specifically defined herein
shall have the meanings specified in the Plan and the Grant Notice.
1.2 Incorporation of Terms of Plan. The Option is subject to the terms
and conditions of the Plan which are incorporated herein by reference.
ARTICLE II
GRANT OF OPTION
2.1 Grant of Option. In consideration of Xxxxxx's past and/or continued
employment with or service to the Company or its Subsidiaries and for other good
and valuable consideration, effective as of the Grant Date set forth in the
Grant Notice (the "GRANT DATE"), the Company irrevocably grants to Holder the
Option to purchase any part or all of an aggregate of the number of shares of
Common Stock set forth in the Grant Notice, upon the terms and conditions set
forth in the Plan and this Agreement. The Option shall be a Non-Qualified Stock
Option and shall not be an incentive stock option within the meaning of Section
422 of the Code.
2.2 Purchase Price. The purchase price of the shares of Common Stock
subject to the Option shall be as set forth in the Grant Notice, without
commission or other charge.
ARTICLE III
PERIOD OF EXERCISABILITY
3.1 Commencement of Exercisability.
(a) Subject to Sections 3.3 and 5.8, the Option shall become
vested and exercisable in such amounts and at such times as are set forth in
Exhibit B to the Grant Notice.
(b) No portion of the Option which has not become vested and
exercisable at Termination of Employment, Termination of Directorship or
Termination of Consultancy, as
-1-
applicable, shall thereafter become vested and exercisable, except as may be
otherwise provided by the Administrator or as set forth in a written agreement
between the Company and Holder.
3.2 Duration of Exercisability. The installments provided for in the
vesting schedule set forth in Exhibit B to the Grant Notice are cumulative. Each
such installment which becomes vested and exercisable pursuant to the vesting
schedule set forth in Exhibit B to the Grant Notice shall remain vested and
exercisable until it becomes unexercisable under Section 3.3.
3.3 Expiration of Option.
(a) The Option may not be exercised to any extent by anyone
after the first to occur of the following events:
(i) The expiration of ten (10) years from the Grant
Date; or
(ii) The expiration of ninety (90) days following the
date of Holder's Termination of Employment, Termination of Directorship or
Termination of Consultancy, as applicable, unless such termination occurs by
reason of Holder's death or Disability (as defined below) or the Holder's
termination by the Company for Cause (as defined in Exhibit B hereto);
(iii) The expiration of one (1) year following the
date of Xxxxxx's Termination of Employment, Termination of Directorship or
Termination of Consultancy, as applicable, by reason of Holder's death or
Disability; or
(iv) The date of Termination of Employment,
Termination of the Directorship, or Termination of Consultancy for Cause (as
defined in Exhibit B hereto).
(b) For purposes of this Agreement, "Disability" means
permanent and total disability within the meaning of Section 22(e)(3) of the
Code.
ARTICLE IV
EXERCISE OF OPTION
4.1 Person Eligible to Exercise. Except as provided in Sections 5.2(b)
and 5.2(c), during the lifetime of Holder, only Holder may exercise the Option
or any portion thereof. After the death of Xxxxxx, any exercisable portion of
the Option may, prior to the time when the Option becomes unexercisable under
Section 3.3, be exercised by Xxxxxx's personal representative or by any person
empowered to do so under the deceased Xxxxxx's will or under the then applicable
laws of descent and distribution.
4.2 Partial Exercise. Any exercisable portion of the Option or the
entire Option, if then wholly exercisable, may be exercised in whole or in part
at any time prior to the time when the Option or portion thereof becomes
unexercisable under Section 3.3.
4.3 Manner of Exercise. The Option, or any exercisable portion thereof,
may be exercised solely by delivery to the Secretary of the Company or the
Secretary's office of all
of the following prior to the time when the Option or such portion thereof
becomes unexercisable under Section 3.3:
(a) An Exercise Notice in writing signed by Holder or any
other person then entitled to exercise the Option or portion thereof, stating
that the Option or portion thereof is thereby exercised, such notice complying
with all applicable rules established by the Administrator. Such notice shall be
substantially in the form attached as Exhibit C to the Grant Notice (or such
other form as is prescribed by the Administrator); and
(b) Subject to Section 6.2(d) of the Plan:
(i) Full payment (in cash or by check) for the shares
with respect to which the Option or portion thereof is exercised; or
(ii) With the consent of the Administrator, such
payment may be made, in whole or in part, through the delivery of shares of
Common Stock which have been owned by Holder for at least six (6) months, duly
endorsed for transfer to the Company with a Fair Market Value on the date of
delivery equal to the aggregate exercise price of the Option or exercised
portion thereof; or
(iii) To the extent permitted under applicable laws,
through the delivery of a notice that Xxxxxx has placed a market sell order with
a broker with respect to shares of Common Stock then issuable upon exercise of
the Option, and that the broker has been directed to pay a sufficient portion of
the net proceeds of the sale to the Company in satisfaction of the Option
exercise price, provided, that payment of such proceeds is made to the Company
upon settlement of such sale; or
(iv) With the consent of the Administrator, any
combination of the consideration provided in the foregoing paragraphs (i), (ii)
and (iii); and
(c) A bona fide written representation and agreement, in such
form as is prescribed by the Administrator, signed by Holder or the other person
then entitled to exercise such Option or portion thereof, stating that the
shares of Common Stock are being acquired for Holder's own account, for
investment and without any present intention of distributing or reselling said
shares or any of them except as may be permitted under the Securities Act and
then applicable rules and regulations thereunder, and that Holder or other
person then entitled to exercise such Option or portion thereof will indemnify
the Company against and hold it free and harmless from any loss, damage, expense
or liability resulting to the Company if any sale or distribution of the shares
by such person is contrary to the representation and agreement referred to
above. The Administrator may, in its absolute discretion, take whatever
additional actions it deems appropriate to ensure the observance and performance
of such representation and agreement and to effect compliance with the
Securities Act and any other federal or state securities laws or regulations.
Without limiting the generality of the foregoing, the Administrator may require
an opinion of counsel acceptable to it to the effect that any subsequent
transfer of shares acquired on an Option exercise does not violate the
Securities Act, and may issue stop-transfer orders covering such shares. Share
certificates evidencing Common Stock issued on exercise of the Option shall bear
an appropriate legend referring to the
provisions of this subsection (c) and the agreements herein. The written
representation and agreement referred to in the first sentence of this
subsection (c) shall, however, not be required if the shares to be issued
pursuant to such exercise have been registered under the Securities Act, and
such registration is then effective in respect of such shares; and
(d) The receipt by the Company of full payment for such
shares, including payment of any applicable withholding tax, which in the
discretion of the Administrator may be in the form of consideration used by
Holder to pay for such shares under Section 4.3(b), subject to Section 10.4 of
the Plan; and
(e) In the event the Option or portion thereof shall be
exercised pursuant to Section 4.1 by any person or persons other than Holder,
appropriate proof of the right of such person or persons to exercise the Option.
4.4 Conditions to Issuance of Stock Certificates. The shares of Common
Stock deliverable upon the exercise of the Option, or any portion thereof, may
be either previously authorized but unissued shares or issued shares which have
then been reacquired by the Company. Such shares shall be fully paid and
nonassessable. The Company shall not be required to issue or deliver any shares
of Common Stock purchased upon the exercise of the Option or portion thereof
prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock
exchanges on which such Common Stock is then listed; and
(b) The completion of any registration or other qualification
of such shares under any state or federal law or under rulings or regulations of
the Securities and Exchange Commission or of any other governmental regulatory
body, which the Administrator shall, in its absolute discretion, deem necessary
or advisable; and
(c) The obtaining of any approval or other clearance from any
state or federal governmental agency which the Administrator shall, in its
absolute discretion, determine to be necessary or advisable; and
(d) The lapse of such reasonable period of time following the
exercise of the Option as the Administrator may from time to time establish for
reasons of administrative convenience; and
(e) The receipt by the Company of full payment for such
shares, including payment of any applicable withholding tax, which in the
discretion of the Administrator may be in the form of consideration used by the
Holder to pay for such shares under Section 4.3(b), subject to Section 10.4 of
the Plan.
4.5 Rights as Stockholder. Holder of the Option shall not be, nor have
any of the rights or privileges of, a stockholder of the Company in respect of
any shares purchasable upon the exercise of any part of the Option unless and
until such shares shall have been issued by the Company to such holder.
ARTICLE V
OTHER PROVISIONS
5.1 Administration. The Administrator shall have the power to interpret
the Plan and this Agreement and to adopt such rules for the administration,
interpretation and application of the Plan as are consistent therewith and to
interpret, amend or revoke any such rules. All actions taken and all
interpretations and determinations made by the Administrator in good faith shall
be final and binding upon Holder, the Company and all other interested persons.
No member of the Administrator shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan,
this Agreement or the Option. In its absolute discretion, the Board may at any
time and from time to time exercise any and all rights and duties of the
Administrator under the Plan and this Agreement.
5.2 Option Not Transferable.
(a) Subject to Section 5.2(b), the Option may not be sold,
pledged, assigned or transferred in any manner other than by will or the laws of
descent and distribution or, subject to the consent of the Administrator,
pursuant to a DRO, unless and until the shares underlying the Option have been
issued, and all restrictions applicable to such shares have lapsed. Neither the
Option nor any interest or right therein shall be liable for the debts,
contracts or engagements of Holder or his or her successors in interest or shall
be subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be voluntary
or involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect, except to
the extent that such disposition is permitted by the preceding sentence.
(b) Notwithstanding any other provision in this Agreement,
with the consent of the Administrator and to the extent the Option is not
intended to qualify as an Incentive Stock Option, the Option may be transferred
to one or more Permitted Transferees, subject to the terms and conditions set
forth in Section 10.1 of the Plan.
(c) Unless transferred to a Permitted Transferee in accordance
with Section 5.2(b), during the lifetime of Holder, only Holder may exercise the
Option or any portion thereof unless it has been disposed of pursuant to a DRO.
After the death of Xxxxxx, any exercisable portion of the Option may, prior to
the time when the Option becomes unexercisable under Section 3.3, be exercised
by Xxxxxx's personal representative or by any person empowered to do so under
the deceased Xxxxxx's will or under the then applicable laws of descent and
distribution.
5.3 Restrictive Legends and Stop-Transfer Orders.
(a) The share certificate or certificates evidencing the
shares of Common Stock purchased hereunder shall be endorsed with any legends
that may be required by state or federal securities laws.
(b) Xxxxxx agrees that, in order to ensure compliance with the
restrictions referred to herein, the Company may issue appropriate "stop
transfer" instructions to its transfer
agent, if any, and that, if the Company transfers its own securities, it may
make appropriate notations to the same effect in its own records.
(c) The Company shall not be required: (i) to transfer on its
books any shares of Common Stock that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement, or (ii) to treat as owner
of such shares of Common Stock or to accord the right to vote or pay dividends
to any purchaser or other transferee to whom such shares shall have been so
transferred.
5.4 Shares to Be Reserved. The Company shall at all times during the
term of the Option reserve and keep available such number of shares of Common
Stock as will be sufficient to satisfy the requirements of this Agreement.
5.5 Notices. Any notice to be given under the terms of this Agreement
to the Company shall be addressed to the Company in care of the Secretary of the
Company, and any notice to be given to Holder shall be addressed to Holder at
the address given beneath Xxxxxx's signature on the Grant Notice. By a notice
given pursuant to this Section 5.5, either party may hereafter designate a
different address for notices to be given to that party. Any notice which is
required to be given to Holder shall, if Xxxxxx is then deceased, be given to
the person entitled to exercise his or her Option pursuant to Section 4.1 by
written notice under this Section 5.5. Any notice shall be deemed duly given
when sent via email or when sent by certified mail (return receipt requested)
and deposited (with postage prepaid) in a post office or branch post office
regularly maintained by the United States Postal Service.
5.6 Titles. Titles are provided herein for convenience only and are not
to serve as a basis for interpretation or construction of this Agreement.
5.7 Governing Law; Severability. This Agreement shall be administered,
interpreted and enforced under the laws of the State of Delaware without regard
to conflicts of laws thereof. Should any provision of this Agreement be
determined by a court of law to be illegal or unenforceable, the other
provisions shall nevertheless remain effective and shall remain enforceable.
5.8 Conformity to Securities Laws. Holder acknowledges that the Plan is
intended to conform to the extent necessary with all provisions of the
Securities Act and the Exchange Act and any and all regulations and rules
promulgated by the Securities and Exchange Commission thereunder, and state
securities laws and regulations. Notwithstanding anything herein to the
contrary, the Plan shall be administered, and the Option is granted and may be
exercised, only in such a manner as to conform to such laws, rules and
regulations. To the extent permitted by applicable law, the Plan and this
Agreement shall be deemed amended to the extent necessary to conform to such
laws, rules and regulations.
5.9 Amendments. This Agreement may not be modified, amended or
terminated except by an instrument in writing, signed by Holder or such other
person as may be permitted to exercise the Option pursuant to Section 4.1 and by
a duly authorized representative of the Company.
5.10 No Employment Rights. If Holder is an Employee, nothing in the
Plan or this Agreement shall confer upon Holder any right to continue in the
employ of the Company or any Subsidiary or shall interfere with or restrict in
any way the rights of the Company and its Subsidiaries, which are expressly
reserved, to discharge Holder at any time for any reason whatsoever, with or
without cause, except to the extent expressly provided otherwise in a written
agreement between the Company and Holder.
5.11 Successors and Assigns. The Company may assign any of its rights
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Xxxxxx and his or her heirs, executors, administrators, successors and
assigns.
EXHIBIT B
TO STOCK OPTION GRANT NOTICE
VESTING AND EXERCISABILITY PROVISIONS
Capitalized terms used in this Exhibit B and not defined below shall
have the meanings given them in the Grant Notice and the Stock Option Agreement.
1. Time-Based Vesting. Subject to any accelerated vesting and
exercisability pursuant to paragraphs 2 and 3 below, the shares of Common Stock
subject to the Option shall vest and become exercisable in their entirety on the
third anniversary of the Grant Date, if Holder is an Employee, Director or
Consultant on that date.
2. Performance-Based Accelerated Vesting. If the Company's EBITDA (as
defined below) and the Company's Net Adds (as defined below) both equal or
exceed the respective Achievement Threshold amounts for 2005 as set forth in
paragraph (a) below and/or both equal or exceed the Achievement Threshold
amounts for 2006 as set forth in paragraph (b) below, then a certain percentage
of the number of shares of Common Stock subject to the Option shall vest and
become exercisable in accordance with the provisions of paragraphs (a) and (b)
below; provided, however, that no shares subject to the Option shall vest and
become exercisable pursuant to paragraphs (a) or (b) below, if either the
Company's EBITDA or Net Adds do not at least equal the Achievement Threshold
amount for the applicable year.
(a) Fiscal Year 2005. If the Company's EBITDA (as defined below) and
Net Adds (as defined below) for Fiscal Year 2005 equal or exceed the EBITDA and
Net Adds Achievement Thresholds (as set forth below), then the Option shall vest
and become exercisable as to that number of shares of Common Stock equal to the
number obtained by multiplying the percentage determined in accordance with the
following table, by the total number of shares of Common Stock subject to the
Option (as set forth in the Grant Notice).
-1-
2005 PERFORMANCE-BASED VESTING SCHEDULE
2005 Net Adds
-------------------------------------
Threshold Target Maximum
[***] [***] [***]
--------- ------- -------
2005 Threshold 10% 12.5% 15%
[***]
EBITDA
Target 12.5% 20% 22.5%
(in thousands) [***]
Maximum 15% 22.5% 30%
[***]
The percentage for determining the number of shares of Common Stock
that shall vest and become exercisable if performance is between the Achievement
Threshold amount and the Achievement Target amount or between the Achievement
Target amount and the Achievement Maximum amount shall be determined by linear
interpolation between the applicable Achievement amounts for each measure in
accordance with the method described in Attachment B-1.
(b) Fiscal Year 2006. If the Company's EBITDA and Net Adds for
Fiscal Year 2006 equal or exceed the EBITDA and Net Adds Achievement Thresholds
(as set forth below), then the Option shall vest and become exercisable as to
that number of shares of Common Stock equal to the number obtained by
multiplying the percentage determined in accordance with the following table, by
the total number of shares of Common Stock subject to the Option (as set forth
in the Grant Notice).
2006 Net Adds
----------------------------------------
Threshold Target Maximum
[***] [***] [***]
--------- ------ -------
2006 Threshold 10% 12.5% 15%
[***]
EBITDA
Target 12.5% 20% 22.5%
(in thousands) [***]
Maximum 15% 22.5% 30%
[***]
*** Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
The percentage for determining the number of shares of Common Stock
that shall vest and become exercisable if performance is between the Achievement
Threshold amount and the Achievement Target amount or between the Achievement
Target amount and the Achievement Maximum amount shall be determined by linear
interpolation between the applicable Achievement amounts for each measure in
accordance with the method described in Attachment B-1.
(c) Definition of EBITDA. For purposes of this Exhibit B, the
term "EBITDA" for a Fiscal Year means the Company's consolidated net income or
loss for such period before extraordinary items and before the cumulative effect
of any change in accounting principles plus (a) the following to the extent
deducted in calculating such consolidated net income or loss: (i) consolidated
interest expense, (ii) all income tax expense deducted in arriving at such
consolidated net income or loss, (iii) depreciation and amortization expense,
(iv) non-cash impairment of assets (tangible and intangible) and related
non-cash charges, (v) charges and expenses related to stock based compensation
awards, (vi) net non-cash reorganization expenses and charges, (vii) non-cash
dividends or other distributions made with respect to qualified preferred stock
as contemplated by the Credit Agreement negotiated among Holdings, Cricket
Communications Inc., the administrative agent identified therein and others
posted to IntraLinks on December 23, 2004 and (viii) other non-recurring
expenses reducing such consolidated net income or loss which do not represent a
cash item in such period or any future period (including losses attributable to
the sale of assets other than in the ordinary course of business) and minus (b)
the following to the extent included in calculating such consolidated net income
or loss: (i) income tax credits for such period, (ii) all gains arising in
relation to the sale of assets other than in the ordinary course of business and
(iii) all non-cash items increasing such consolidated net income or loss for
such period..
(d) Definition of Net Adds. For purposes of this Exhibit B,
the term "NET ADDS" means, with respect to any Fiscal Year, the Company's "end
of period customers" on the last day of such Fiscal Year less "end of period
customers" on the last day of the preceding Fiscal Year. If the Company adopts a
pre-paid card based service offering, the Administrator shall, in its
discretion, equitably adjust the Net Adds Achievement Levels set forth in
paragraphs (a) and (b) to reflect the Company's changed scope of operations.
(e) Adjustments for Future Changes in the Company's Business.
The EBITDA Achievement Levels and Net Adds Achievement Levels set forth in
paragraphs (a) and (b) are designed to be measured against the Company's
performance in its existing thirty-nine (39) markets. If the Company commences
operations in any new markets, or ceases to operate in any existing market, the
Administrator shall, in its discretion, equitably adjust the EBITDA Achievement
Levels and/or the Net Adds Achievement Levels to reflect the Company's changed
scope of operations.
(f) Accelerated Vesting Cumulative; Continued Service
Condition. The vesting and exercisability of the Option as to shares of Common
Stock under paragraphs 2(a) and 2(b) shall be cumulative. The Option shall vest
and become exercisable as to shares of Common Stock pursuant to this paragraph 2
if Holder is an Employee, Director or Consultant of the Company or any of its
Subsidiaries on the applicable Performance Vesting Effective Date.
(g) Definition of Performance Vesting Effective Date. For
purposes of this Exhibit B, the term "PERFORMANCE VESTING EFFECTIVE DATE" means,
with respect to vesting and exercisability to occur upon the attainment of
EBITDA and Net Adds Achievement Levels for 2005 or 2006, as applicable, the date
of the public announcement by the Company of EBITDA or Net Adds, as applicable,
for the relevant Fiscal Year, but in no event shall the Company make such public
announcement later than the date on which the Company files its Form 10-K for
the relevant Fiscal Year.
(h) Definition of Fiscal Year. For purposes of this Exhibit B,
the term "FISCAL YEAR" means the Company's fiscal year ending December 31.
(i) Termination of Performance-Based Vesting. Notwithstanding
the foregoing provisions of this paragraph 2, the Option shall not vest and
become exercisable as to any additional shares of Common Stock pursuant to
performance-based accelerated vesting and exercisability under this paragraph 2
on or after the date of the occurrence of a Change in Control.
3. Change in Control Accelerated Vesting.
(a) Change in Control prior to January 1, 2006. In the event
of a Change in Control prior to January 1, 2006, (i) if Holder is an Employee,
Director or Consultant immediately prior to such Change in Control, the Option
shall then vest and become exercisable as to a number of shares of Common Stock
equal to fifty percent (50%) of the number of then unvested shares of Common
Stock subject to the Option and (ii) if Holder is an Employee, Director or
Consultant on the first anniversary of the date of the occurrence of such Change
in Control, the Option shall then vest and become exercisable as to an
additional number of shares of Common Stock equal to fifty percent (50%) of the
number of then unvested shares of Common Stock subject to the Option, and (iii)
if Holder is an Employee, Director or Consultant on the second anniversary of
the date of the occurrence of such Change in Control, the Option shall then vest
and become exercisable as to the remaining unvested shares of Common Stock
subject to the Option.
(b) Change in Control during 2006. In the event of a Change in
Control during 2006, (i) if Holder is an Employee, Director or Consultant
immediately prior to such Change in Control, the Option shall then vest and
become exercisable as to a number of shares of Common Stock equal to
seventy-five percent (75%) of the number of then unvested shares of Common Stock
subject to the Option, and (ii) if Holder is an Employee, Director or Consultant
on the first anniversary of the date of the occurrence of such Change in
Control, the Option shall then vest and become exercisable as to the remaining
unvested shares of Common Stock subject to the Option.
(c) Change in Control on or after January 1 2007. In the event
of a Change in Control on or after January 1, 2007, if Xxxxxx is an Employee,
Director or Consultant immediately prior to such Change in Control, the Option
shall then vest and become exercisable as to a number of shares of Common Stock
equal to eighty-five percent (85%) of the number of then unvested shares of
Common Stock subject to the Option, and (ii) if Holder is an Employee, Director
or Consultant on the first anniversary of the date of the occurrence of such
Change in
Control, the Option shall then vest and become exercisable as to any then
remaining unvested shares of Common Stock subject to the Option.
(d) Termination of Employment in the Event of a Change in
Control. In the event of a Change in Control, if the Holder has a Termination of
Employment by reason of discharge by the Company other than for Cause (as
defined below), or by reason of resignation by Holder for Good Reason (as
defined below), during the period commencing ninety (90) days prior to such
Change in Control and ending twelve (12) months after such Change in Control,
then (i) if the Change in Control occurs prior to January 1, 2006, twenty-five
percent (25)% of the number of then unvested shares of Common Stock subject to
the Option shall vest and become exercisable and (ii) if the change in Control
occurs on or after January 1, 2006, the remaining unvested shares of Common
Stock subject to the Option shall vest and become exercisable on the date of
Holder's Termination of Employment (or, if later, immediately prior to the date
of the occurrence of such Change in Control).
(e) Definitions of Cause and Good Reason. For purposes of this
Exhibit B, the terms "CAUSE" and "GOOD REASON" shall have the meanings given to
such terms in the Holder's employment agreement with the Company in effect on
the Grant Date and if the Holder does not have an employment agreement or
Holder's employment agreement does not include definitions of "Cause" and "Good
Reason", the terms shall be defined for purposes of this Exhibit B as follows:
(i) "CAUSE" shall mean termination of Holder's
employment by the Company: (A) upon Holder's willful failure
substantially to perform Holder's duties with the Company (or the
Parent, any Subsidiary or any successor thereof) (other than any such
failure resulting from Xxxxxx's incapacity due to physical or mental
illness or any such actual or anticipated failure after Xxxxxx's
issuance of a Notice of Termination (as defined below) for Good
Reason), as reasonably determined by the Company, or, if Xxxxxx is then
employed in a position as Senior Vice President of the Company or a
more senior officer of the Company, by the Board of Directors of the
Company after a written demand for substantial performance is delivered
to Holder by the Company, or the Board of Directors of the Company, as
the case may be, which demand specifically identifies the manner in
which the Company or the Board of Directors of the Company, as the case
may be, believes that Xxxxxx has not substantially performed such
duties, provided that Holder shall have been given a reasonable period,
not to exceed fifteen (15) days, in which to cure such failure
(provided such failure is capable of being cured), (B) upon Xxxxxx's
willful failure substantially to follow and comply with the specific
and lawful directives of the Company or, if Xxxxxx is then employed in
a position as a Senior Vice President of the Company or a more senior
officer of the Company, by the Board of Directors of the Company (or
the Board of Directors of the Parent) or duly adopted policies of the
Company which are consistent with Holder's duties with the Company (or
the Parent), as reasonably determined by the Company or, if Xxxxxx is
then employed in a position as a Senior Vice President of the Company
or a more senior office of the Company, by the Board of Directors of
the Company (other than any such failure resulting from Xxxxxx's
incapacity due to physical or mental illness or any such actual or
anticipated failure after Xxxxxx's issuance of a Notice of Termination
for Good Reason), after a written demand for substantial performance is
delivered to Holder by the
Company or the Board of Directors of the Company, as the case may be,
which demand specifically identifies the manner in which the Company or
the Board of Directors of the Company, as the case may be, believes
that Holder has not substantially performed such directives, provided
that the Holder shall have been given a reasonable period not to exceed
fifteen (15) days in which to cure such failure (provided such failure
is capable of being cured), (C) upon Holder's commission of an act of
fraud or dishonesty impacting or involving the Company (or the Parent,
any Subsidiary or any successor thereof), (D) upon Xxxxxx's willful
engagement in illegal conduct or gross misconduct affecting the
Company, or (E) upon the Holder's being convicted of, or pleading nolo
contendere to, the commission of a felony.
(ii) "GOOD REASON" shall mean, without Xxxxxx's
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 specified in the Notice of Termination given in respect
thereof: (A) the continuous assignment to Holder of any duties
materially inconsistent with Xxxxxx's positions with the Company (or
the Parent, any Subsidiary or any successor thereof), a significant
adverse alteration in the nature or status of Holder's responsibilities
or the conditions of Holder's employment with the Company (or the
Parent, any Subsidiary or any successor thereof), or any other action
that results in a material diminution in Holder's position, authority,
title, duties or responsibilities with the Company (or the Parent, any
Subsidiary or any successor thereof); (B) reduction of Holder's annual
base salary as in effect on the Grant Date or as the same may be
increased from time to time thereafter; (C) the relocation of the
Company's offices at which Holder is principally employed to a location
more than sixty (60) miles from such location; (D) the Company's
failure (or the failure of the Parent, any Subsidiary or any successor)
to pay Holder any portion of Holder's current compensation; (E) the
Company's failure (or the failure of the Parent, any Subsidiary or any
successor) to continue in effect any material compensation or benefit
plan in which Holder participates, 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
Holder's participation therein (or in such substitute or alternative
plan) on the basis not materially less favorable, both in terms of the
amount of benefits provided and the level of Holder's participation
relative to other participants; (F) the Company's failure (or the
failure of the Parent, any Subsidiary or any successor) to continue to
provide Holder with benefits substantially similar in the aggregate to
those enjoyed by Holder under any of the Company's life insurance,
medical, health and accident, disability, pension, retirement, or other
benefit plans in which Holder or Holder's eligible family members were
participating immediately prior thereto, or the taking of any action by
the Company (or the Parent, any Subsidiary or any successor thereof)
which would directly or indirectly materially reduce any of such
benefits; or (G) the continuation or repetition, after written notice
of objection from Holder, of harassing or denigrating treatment of
Holder by the Company, the Parent, any Subsidiary or any successor
thereof inconsistent with Xxxxxx's position with the Company. Xxxxxx's
right to terminate employment with the Company or the Parent,
Subsidiary or any successor thereof pursuant to this subparagraph shall
not be affected by Xxxxxx's incapacity due to physical or mental
illness. Xxxxxx's continued employment with the Company or the
Parent, Subsidiary or any successor thereof shall not constitute
consent to, or a waiver of rights with respect to, any circumstance
constituting Good Reason thereunder.
(f) Condition to Accelerated Vesting and Exercisability. The
accelerated vesting and exercisability of shares of Common Stock subject to the
Option pursuant to subparagraph 3(d) shall be conditioned on the Holder's
delivery to the Company of an executed General Release and the Holder's
non-revocation of such General Release during the time period for such
revocation set forth therein.
4. Limit on Vesting. In no event will the Option become vested and/or
exercisable for more than 100% of the shares of Common Stock subject to the
Option pursuant to the provisions of this Exhibit B.
5. Confidentiality. Xxxxxx agrees to keep the EBITDA and Net Adds
achievement levels set forth in this Exhibit B confidential and not to disclose
such thresholds to any third party without the prior written consent of the
Company.
ATTACHMENT B-1
METHODOLOGY FOR LINEAR INTERPOLATION
2005 Net Adds
-----------------------------------
Threshold Target Maximum
[***] [***] [***]
--------- ------ -------
2005 Threshold 10% 12.5% 15%
EBITDA [***]
(in thousands)
Target 12.5% 20% 22.5%
[***]
Maximum 15% 22.5% 30%
[***]
The EBITDA amounts in the following examples are shown in thousands.
Example 1:
- 2005 EBITDA: [***]
- 2005 Net Adds: [***]
PROBLEM: The net adds performance falls exactly on a specified payout
range, but performance in EBITDA falls somewhere in-between the schedule.
SOLUTION: Start with the net adds payout column and use straight-line
interpolation to determine the final payout.
PAYOUT CALCULATION: Net additions of [***] dictate a payout of 12.5%
for threshold EBITDA performance and 20% for target EBITDA performance. Since
EBITDA performance ([***]) is halfway between THRESHOLD and TARGET performance
([***] and [***]), the actual payout should be halfway between the scheduled
payouts of 12.5% and 20%. Thus the payout is (1/2)*(20%-12.5%)+12.5%
- Payout = 16.25%
Example 2:
- 2005 EBITDA: [***]
- 2005 Net Adds: [***]
PROBLEM: Neither the net adds performance nor the EBITDA performance
fall exactly on a specified payout.
*** Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
SOLUTION: Use straight line interpolation for both measures. Starting
with either measure will yield the same result.
PAYOUT CALCULATION: EBITDA performance ([***]) is halfway between
THRESHOLD and TARGET performance ([***] and [***]), so we can interpolate an
EBITDA-based payout schedule by finding the halfway point at each defined level
of Net Adds. At [***] net adds, the EBITDA-based payout would be halfway between
10% and 12.5%. At [***] net adds, the EBITDA-based payout would be halfway
between 12.5% and 20%. At [***] net adds, the EBITDA-based payout would be
halfway between 15% and 22.5%. Thus the interpolated, EBITDA-based payout
schedule looks like this:
2005 Net Adds
---------------------------------------
Threshold Target Maximum
[***] [***] [***]
--------- ------ -------
Actual 11.25% 16.25% 18.75%
2005 $[***] (midpoint (midpoint (midpoint
EBITDA (midpoint of of 10% of 12.5% of 15%
$[***] and and 12.5%) and 20%) and 22.5%)
$[***])
To determine the actual payout given this range, we interpolate a
payout at [***] net adds based on the scheduled payouts at [***] and [***].
First we determine where [***] lies in the range of [***] to [***]. The length
of the range is [***] - [***] = [***] net adds. [***] is [***] above the range
minimum ([***] - [***] = [***]). So the actual performance of [***] net adds
falls 1/3 of the way between [***] net adds (target) and [***] net adds
(maximum). This means the actual payout must fall 1/3 of the way between 16.25%
and 18.75%. Thus the payout is (1/3)*(18.75%-16.25%)+16.25%
- Payout = 17.08%
*** Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
EXHIBIT C
TO STOCK OPTION GRANT NOTICE
FORM OF EXERCISE NOTICE
Effective as of today, _____________________, __________ the
undersigned ("HOLDER") hereby elects to exercise Holder's option to purchase
____________ shares of the Common Stock (the "SHARES") of Leap Wireless
International, Inc. (the "COMPANY") under and pursuant to the Leap Wireless
International, Inc. 2004 Stock Option, Restricted Stock and Deferred Stock Unit
Plan (the "Plan") and the Stock Option Grant Notice and Non-Qualified Stock
Option Agreement dated _________________, (the "OPTION AGREEMENT"). Capitalized
terms used herein without definition shall have the meanings given in the Option
Agreement.
GRANT DATE: ___________________________
NUMBER OF SHARES AS TO
WHICH OPTION IS EXERCISED: _____________________________________
EXERCISE PRICE PER SHARE: $____________
TOTAL EXERCISE PRICE: $____________
CERTIFICATE TO BE ISSUED IN NAME OF: _____________________________________
CASH PAYMENT DELIVERED HEREWITH: $______________ (Representing the full
Exercise Price for the Shares, as well
as any applicable withholding tax)
TYPE OF OPTION: The Option is a Non-Qualified Stock Option and is not an
incentive stock option within the meaning of Section 422 of
the Code.
1. Representations of Holder. Holder acknowledges that Xxxxxx has
received, read and understood the Plan and the Option Agreement. Xxxxxx agrees
to abide by and be bound by their terms and conditions.
2. Rights as Stockholder. Until the Shares are issued (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or any'
other rights as a stockholder shall exist with respect to Shares subject to the
Option, notwithstanding the exercise of the Option. No adjustment will be made
for a dividend or other right for which the record date is prior to the date the
Shares are issued, except as provided in Section 10.3 of the Plan.
3. Tax Consultation. Holder understands that there are tax consequences
to Holder as a result of Xxxxxx's purchase or disposition of the Shares. Holder
represents that Xxxxxx has consulted with any tax consultants Holder deems
advisable in connection with the purchase or disposition of the Shares and that
Holder is not relying on the Company for any tax advice.
4. Entire Agreement. The Plan and Option Agreement are incorporated
herein by reference. This Exercise Notice, the Plan and the Option Agreement
constitute the entire agreement of the parties and supersede in their entirety
all prior undertakings and agreements of the Company and Holder with respect to
the subject matter hereof.
-1-
ACCEPTED BY: SUBMITTED BY
LEAP WIRELESS INTERNATIONAL, INC. HOLDER:
By:__________________________________ By:__________________________________
Print Name:__________________________ Print Name: _________________________
Title:_______________________________ Address:_____________________________
