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EXHIBIT 10.2
TAX MATTERS AGREEMENT
This TAX MATTERS AGREEMENT ("AGREEMENT") is made effective as
of September ___, 1998 (the "EFFECTIVE DATE") by and between XXXXXXXX
Xxxxxxxxxxxx ("QUALCOMM"), a Delaware corporation, and Leap Wireless
International, Inc. ("LEAP") a Delaware corporation.
RECITALS
WHEREAS, QUALCOMM intends to contribute certain of its assets
to the capital of Leap in exchange for, among other things, all of the issued
and outstanding capital stock of Leap and shortly thereafter distribute one
hundred percent (100%) of its shares of Leap stock to its shareholders on
September ___, 1998, and
WHEREAS, QUALCOMM, on behalf of itself and QUALCOMM's present
and future Subsidiaries other than Leap and Leap's present and future
Subsidiaries (the "QUALCOMM GROUP"), and Leap, on behalf of itself and Leap's
present and future Subsidiaries (the "LEAP GROUP"), have determined that it is
necessary and desirable to provide for allocations between the QUALCOMM Group
and the Leap Group of the responsibilities, liabilities and benefits relating to
Taxes paid or payable by the parties, whether beginning before, on, or after the
Separation Date (as defined below), and to provide for certain other matters.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual agreements,
provisions, and covenants contained in this Agreement (the adequacy of which is
hereby acknowledged by the parties), the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
1. As used in this Agreement the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined). All other terms used in this Agreement shall have
their ordinary meanings interpreted in light of the context in which they
appear.
1.01 "After Tax Basis" means a basis such that any payment received or
deemed to have been received by a party (the "ORIGINAL PAYMENT") shall be
supplemented by a further payment to such party so that the sum of the two
payments shall equal the Original Payment, after taking into account all Taxes,
if any, that would result from the receipt or accrual of such payments, if
legally required. All payments hereunder shall be calculated on the assumptions
that the payee is subject to Tax at the highest marginal rates of Tax applicable
to such class of Taxpayer.
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1.02 "Adjustment" means an adjustment determined on an issue-by-issue
or transaction-by-transaction basis, as appropriate, made or proposed by a
Taxing Authority with respect to any amount reflected or required to be
reflected on any Return relating to such Tax.
1.03. "Code" means the Internal Revenue Code of 1986, as amended, and
"IRS" means the United States Internal Revenue Service.
1.04 "Final Determination" means (a) a decision, judgment, decree or
other order by any court of competent jurisdiction, which has become final and
is either no longer subject to appeal or for which a determination not to appeal
has been made; (b) a closing agreement made under Section 7121 of the Code or
any comparable foreign, state, local, municipal or other Taxing statute; (c) a
final disposition by any Taxing Authority of a claim for refund; or (d) any
other written agreement relating to an Adjustment to which any Taxing Authority
is a party to the execution of which is final and prohibits such Taxing
Authority from seeking any further legal or administrative remedies with respect
to such Adjustment.
1.05. "Post-Separation Period" means any Taxable period ending after
the Separation Date.
1.06. "QUALCOMM Businesses" means the assets owned and businesses
conducted by the QUALCOMM Group immediately after the Separation Date.
1.07 "Return" means any return, report, form or similar statement or
document (including, without limitation, any related or supporting information
or schedule attached thereto and any information return, claim for, amended
return and declaration of estimated Tax) that has been or is required to be
filed with any Taxing Authority or that has been or is required to be furnished
to any Taxing Authority in connection with the determination, assessment or
collection of any Taxes or the administration of any laws, regulations or
administrative requirements relating to any Taxes.
1.08. "Separation Period" means any Taxable period ending on or before
the Separation Date.
1.09. "Leap Businesses" means the assets owned and businesses conducted
by the Leap Group immediately after the Separation Date.
1.10. "Separation Date" means the date on which QUALCOMM distributes
100% of the stock of Leap to its shareholders.
1.11 "Subsidiary" means an entity in which Qualcomm or Leap, as the
case may be, owns at least 5% of the voting power, value or beneficial interests
therein.
1.12 "Tax" (and, with correlative meanings, "Taxes" and "Taxable")
means, without limitation, and as determined on a jurisdiction-by-jurisdiction
basis, each foreign or US federal, state, local or municipal income, alternative
or add-on minimum, gross receipts, sales, use, ad
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valorem, transfer, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property or any other
Tax, custom, tariff, impost, levy, duty, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest or
penalty, addition to Tax or additional amount related thereto, imposed by any
Taxing Authority.
1.13 "Tax Benefit" means with respect to any Taxable period or portion
of a Taxable period, and as computed separately with respect to each Tax, the
net decrease in each such Tax resulting from all Adjustments made pursuant to a
Final Determination with respect to each such Tax.
1.14 "Tax Contest" means, without limitation, any audit, examination,
claim, suit, action or other proceeding relating to Taxes in which an Adjustment
to Taxes may be proposed, collected or assessed and in respect of which an
indemnity payment, reimbursement or other payment may be sought under this
Agreement.
1.15 "Tax Detriment" means with respect to any Taxable period or
portion of a Taxable period, as computed separately with respect to each Tax,
the net increase in each such Tax resulting from all Adjustments made pursuant
to Final Determination with respect to each such Tax.
1.16 "Taxing Authority" means any governmental authority or any
subdivision, agency, commission or authority thereof, or any quasi-governmental
or private body having jurisdiction over the assessment, determination,
collection or other imposition of Taxes.
ARTICLE II
FILING OF TAX RETURNS
2.01 Pre-Separation Income Tax Returns.
(a) Federal Income Tax Returns. The income and other Tax items
of each member of the Leap Group for any Pre-Separation Period shall be included
in QUALCOMM's consolidated federal income Tax return. QUALCOMM shall prepare and
timely file all consolidated federal income Tax returns for such periods.
(b) State Income Tax Returns. QUALCOMM shall prepare and
timely file any consolidated or combined or separate state income Tax return
that includes a QUALCOMM Group member and/or a Leap Group member for any
Pre-Separation Period.
(c) Foreign Income Tax Returns. QUALCOMM shall prepare and
timely file any consolidated or combined or separate foreign income Tax return
that includes a QUALCOMM Group member for any Pre-Separation Period. Leap shall
prepare and timely file any consolidated or combined or separate foreign Tax
return that includes a Leap Group member for any Pre-Separation Period.
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(d) Amendments. With respect to any return that includes any
Leap Business and for which QUALCOMM has responsibility under this Section 2.01,
QUALCOMM shall not file an amended return or change any Tax accounting method or
election without Leap's consent (which shall not be unreasonably withheld) if
such action would increase any Tax for which any Leap Group member would be
liable under this Agreement, unless such action is required by law or is
necessary (in QUALCOMM's good-faith opinion) to avoid or reduce any penalty or
addition to Tax.
202. Post-Separation Income Tax Returns. Leap shall prepare and timely
file all federal, state, local and foreign income Tax returns for each Leap
Group member for all Post-Separation Periods. QUALCOMM shall prepare and timely
file all federal, state, local and foreign income Tax returns for each QUALCOMM
Group member for all Post-Separation Periods.
2.03. Other Tax Returns. All Tax Returns not covered by Section 2.01 or
2.02 shall be prepared and filed by either QUALCOMM or Leap based upon who is
primarily obligated for such Tax under applicable law.
ARTICLE III
PAYMENT OF TAXES
3.01. Payment of Taxes in General.
(a) Except as otherwise provided in this Article III, QUALCOMM
shall pay, and shall indemnify and hold harmless each Leap Group member from and
against, (i) all Taxes attributable to QUALCOMM Businesses, whether heretofore
or hereafter arising or incurred, and (ii) all Taxes for any Pre-Separation
Period that are attributable to Leap Businesses, except with respect to Taxes
relating to Leap's non-US. Subsidiaries as discussed herein. QUALCOMM shall be
entitled to any reduction in or refund of Taxes for which it is responsible
pursuant to the preceding sentence (except any reduction in or refund of Taxes
resulting from carrybacks of any Leap Group member described in Section 3.03).
(b) Except as otherwise provided in this Article III, Leap
shall pay, and shall indemnify and hold harmless each QUALCOMM Group member from
and against all Taxes for any Post-Separation Period that are attributable to
Leap Businesses. Leap shall pay, and shall indemnify and hold harmless each
QUALCOMM Group member from and against all Taxes for any Pre-Separation period
and any Post-Separation Period relating to Leap's non-US. Subsidiaries or any
predecessor or successor thereof. Leap shall be entitled to any reduction in or
refund of Taxes for which it is responsible pursuant to this paragraph.
(c) If a member of the QUALCOMM Group or Leap Group receives a
refund of Taxes to which the other group is entitled under this Article III,
such member shall remit such refund to the other group by promptly sending such
refund to QUALCOMM or Leap, as the case may be; provided, however, that any
amount payable by any QUALCOMM Group member or Leap Group member in respect of
any such refund shall paid on an After Tax Basis.
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3.02. Adjustments to Tax.
(a) QUALCOMM shall be responsible for, and shall indemnify and
hold harmless each Leap Group member from and against, all Adjustments to Taxes
(including, without limitation, additions to Tax, interest, and penalties) (i)
attributable to QUALCOMM Businesses, whether heretofore or hereafter arising or
incurred, or (ii) attributable to Leap Businesses for any Pre-Separation Period,
except with respect to Adjustments to Tax related to Leap's non-U.S.
Subsidiaries or any predecessor or successor thereto. QUALCOMM shall be entitled
to any Tax Benefit and shall bear any Tax Detriment resulting from Adjustments
to Taxes attributable to QUALCOMM Businesses (except Adjustments resulting from
carrybacks of any Leap Group member from a Post-Separation Period as provided in
Article 3.03 herein). If an Adjustment to a Tax item for which QUALCOMM is
responsible under this Section 3.02 reduces the Tax liability of a Leap Group
member, Leap shall pay promptly to QUALCOMM the amount of the Tax Benefit
realized by the Leap Group, net of any Tax Detriment, if any, experienced by the
Leap Group as a result of the Adjustment If an Adjustment to a Tax item for
which QUALCOMM is responsible under this Section 3.02 increases the Tax
liability of a Leap Group member, QUALCOMM shall pay promptly to Leap the amount
of the Tax Detriment realized by the Leap Group on an After Tax Basis upon
receiving written notification from Leap of such amount.
(b) Leap shall be responsible for, and shall indemnify and
hold harmless each QUALCOMM Group member from and against, all Adjustments to
Taxes (including, without limitation, additions to Tax, interest, and penalties)
(i) for any Pre-Separation Period with respect to Adjustments to Tax related to
Leap's non-US. Subsidiaries or any predecessor or successor thereto, and (ii)
for any Post-Separation Period with respect to Leap Businesses. Leap shall be
entitled to any Tax Benefit and shall bear any Tax Detriment resulting from such
Adjustments. If an Adjustment to a Tax item for which Leap is responsible under
this Section 3.02 reduces the Tax liability of an QUALCOMM Group member,
QUALCOMM shall pay promptly to Leap the amount of the Tax Benefit realized by
the QUALCOMM Group net of any Tax Detriment, if any, experienced by the QUALCOMM
Group as a result of the Adjustment. If an Adjustment to a Tax item for which
Leap is responsible under this Section 3.02 increases the Tax liability of an
QUALCOMM Group member, Leap shall pay promptly the amount of the Tax Detriment
incurred by the QUALCOMM Group on an After Tax Basis upon receiving written
notification from QUALCOMM of such amount.
3.03. Carrybacks from Post-Separation Periods to Pre-Separation
Periods. Any loss, credit, or other item attributable to Leap Businesses and
arising in a Post-Separation Period may be carried back to a consolidated or
combined return of the QUALCOMM Group for a Pre-Separation Period as permitted
under applicable law. QUALCOMM shall cooperate with any Leap Group member to the
extent reasonably necessary (including, without limitation, amending any return
and filing any claim for refund) for such member to realize the Tax Benefit of
carrying such loss, credit, or other item back to such Pre-Separation Period.
QUALCOMM shall remit promptly to Leap any refund when received or reduction in
Tax when reported on an
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appropriate Tax Return resulting from such carryback; provided, however, that
the amount will be net of any Tax Detriment QUALCOMM experiences as a result of
the carryback.
ARTICLE IV
COOPERATION
4.01. Cooperation in General. Each of QUALCOMM and Leap agrees to make
available to the other party records in its custody and in the custody of any
member of its respective Group, to furnish other information, and otherwise to
cooperate to the extent reasonably required for the filing of Tax Returns and
documents relating to the assets or businesses of such other party.
4.02 Retention of Records by QUALCOMM. QUALCOMM shall retain all
material, including but not limited to, returns, supporting schedules,
workpapers, correspondence, and other documents relating to the consolidated
federal income Tax returns filed for a Taxable year during which Leap is a
member of the Qualcomm affiliated group within the meaning of section 1504 of
the Code and shall make such items available to Leap during regular business
hours.
4.03. Notice, Defense, and Settlement of Tax Claims. If a member of the
QUALCOMM Group or Leap Group receives written notice of a deficiency, Tax
Contest, audit, or other proceeding with respect to a proposed Tax liability for
which a member of the other group is or may be, in whole or in part, liable
under this Agreement (including liability hereunder to indemnify or reimburse a
member of the other group), then the recipient shall notify the other group of
such matter by promptly sending written notice thereof to QUALCOMM or Leap, as
the case may be. QUALCOMM and Leap shall cooperate to contest and defend against
any such proposed Tax liability. The corporation that is liable under applicable
law for such proposed Tax liability (without regard to this Agreement) shall not
settle, compromise, or otherwise agree to pay such liability without the consent
of the corporation that is liable for such Tax under this Agreement. Such
consent shall not be unreasonably withheld or delayed.
ARTICLE V
TERM AND TERMINATION
5.01 Term and Termination. This Agreement shall remain in full force
and effect from the Effective Date until the parties mutually agree in writing
to terminate this Agreement. Notwithstanding such a termination, this Agreement
shall continue in effect with respect to any payment due for any Taxable period
prior to termination.
ARTICLE VI
MISCELLANEOUS
6.01 Fixing of Liability. The provisions of this Agreement shall fix
the liability of the parties to each other as to the matters provided for herein
regardless of who is required to make
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Tax payments to any Taxing Authority, and regardless of how the payments made
pursuant hereto are treated for Tax purposes.
6.02 Acknowledgment that Other Agreements may Exist. QUALCOMM and Leap
recognize that other corporations are now or may from time to time hereafter
become members of the their respective consolidated or combined groups under
circumstances which may warrant other methods of sharing Taxes. Each party
hereto authorizes the other party hereto to enter into the same, similar or
different tax matters agreements with any corporation which is now or may
hereafter become a member of the Qualcomm or Leap Group, as applicable.
6.03 Consistency. The parties shall not take inconsistent positions as
to Tax matters pertaining to both parties, including, but not limited to, the
value of Leap and its stock on the date such stock is distributed to QUALCOMM's
shareholders.
6.04 Assignment. Neither party shall assign or transfer this Agreement
nor any right hereunder without the prior written consent of the other party and
any assignment so permitted shall be subject to the written consent of the
assignee to all the terms of this Agreement.
6.05 Modification. No modification, termination, extension, renewal, or
waiver of any provisions of this Agreement by addendum or otherwise, shall be
effective or binding upon either party unless made in writing and signed by
authorized officers of the parties.
6.06 Amendments, Modifications, Etc., To The Code. Any alteration,
modification, addition, deletion, or other change in the consolidated income Tax
return provisions of the Code or the Regulations thereunder shall automatically
be applicable to this Agreement.
6.07 Controlling Law. This Agreement shall be governed by and construed
and enforced in accordance with the substantive laws of the State of California,
excluding its conflicts of laws provisions, as an agreement entered into and to
be performed entirely within the State of California between California
residents, and shall be binding upon the parties worldwide.
6.08 Attorney's Fees and Expenses. In the event of a breach or
violation of any provision of this Agreement or if any dispute arises out of or
relating to this Agreement, such dispute shall be resolved by submission to
binding arbitration in San Diego County, California before a retired judge or
justice. If we are unable to agree on a retired judge or justice, each party
will name a retired judge or justice and the two named persons will select a
neutral judge or justice who will act as the sole arbitrator.
6.09 Binding Effect; Entire Agreement. This Agreement shall be binding
upon, enforceable by and against, and inure to the benefit of, the parties
hereto and the respective successors and assigns of the parties hereto, but no
assignment hereof shall relieve any party of its obligations hereunder without
the written consent of the other party. Any member corporation which leaves the
Consolidated Group shall be bound by this agreement. This
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Agreement supersedes all proposals, oral or written and all negotiations,
conversations or discussions heretofore had between the parties related to the
Agreement. All prior oral communications, negotiations and undertaking between
the parties relating to the subject matter hereof are superseded by this
Agreement.
6.10 Severability. If any provision of this Agreement is ruled
unenforceable, such provision shall be enforced to the extent permissible, the
parties shall negotiate a substitute valid provision which most nearly effects
the intent of the parties, and the remainder of this Agreement shall remain in
effect.
6.11 No Waiver. No party's rights to enforce provisions of this
Agreement shall be affected by any prior course of dealing, waiver, delay,
omission or forbearance.
6.12 Notices. Any notice, instruction, or communication required or
permitted to be given under this Agreement to either party shall be in writing
and shall be given by personal delivery, or telecopier, or sent by
internationally recognized air courier, postage or fees prepaid.
Notices to XXXXXXXX Xxxxxxxxxxxx shall be addressed to:
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Notices to Leap Wireless International, Inc. shall be
addressed to:
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The parties may request by written notice that a different
address be used. Any such notice, instruction or communication shall be deemed
given when actually received or, if earlier, three (3) business days after
deposit with an internationally recognized air courier.
6.13 Costs & Expenses. Unless otherwise provided in this Agreement,
each party shall bear all fees and expenses incurred in performing its
obligations under this Agreement, and shall be solely responsible for, and shall
indemnify and hold the other party free and harmless from, any and all claims,
damages or lawsuits arising out of its acts or those of its employees.
6.14 Remedies Cumulative. The remedies of the parties under this
Agreement are cumulative and shall not exclude any other remedies to which the
party may be lawfully entitled.
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6.15 Captions, Numbers. Titles or captions of articles and paragraphs
contained in this Agreement are inserted only as a matter of convenience and for
reference, and in no way define, limit, extend, or describe the scope of this
Agreement or the intent of any provision hereof. Whenever required by the
context, the singular number shall include the plural and the plural number
shall include the singular.
6.16 Counterparts. This Agreement may be executed in multiple copies,
each of which shall be deemed an original and shall for all purposes constitute
an Agreement, binding on the parties, and each party hereby covenants and agrees
to execute all duplicates or replacement counterparts of this Agreement as may
be required.
6.17. No Third-Party Beneficiaries. This Agreement is for the sole
benefit of the parties hereto and their permitted assigns and nothing herein,
express or implied, is intended to or will confer upon any other person or
entity any legal or equitable right, benefit or remedy of any nature whatsoever
under or by reason of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives.
XXXXXXXX XXXXXXXXXXXX LEAP WIRELESS INTERNATIONAL, INC.
By: /s/ ___________________________ By: /s/ ___________________________
Name: ___________________________ Name: ___________________________
Title: ___________________________ Title: ___________________________
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