EXHIBIT 10.9.14
(FIVE YEAR VESTING)
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 amounts indicated in Exhibit B to
this Grant Notice.

     By his or her signature and the Company’s signature below, Holder 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:
10307 Pacific Center Court   Address:    
 
             
 
  San Diego, California 92121        
 
             

 

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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 Holder’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.
 

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          (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 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 to the Grant Notice);
               (iii) The expiration of one (1) year following the date of
Holder’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
to the Grant Notice).
          (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 Holder, any exercisable portion of the
Option may, prior to the time when the Option becomes unexercisable under
Section 3.3, be exercised by Holder’s personal representative or by any person
empowered to do so under the deceased Holder’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.
 

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     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 Holder 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,
 

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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. The 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
 

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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 Holder, any exercisable portion of the Option may, prior to
the time when the Option becomes unexercisable under Section 3.3, be exercised
by Holder’s personal representative or by any person empowered to do so under
the deceased Holder’s will or under the then applicable laws of descent and
distribution.
     5.3 Restrictive Legends and Stop-Transfer Orders.
 

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          (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) Holder 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 Holder’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 Holder 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.
 

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     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
Holder and his or her heirs, executors, administrators, successors and assigns.
 

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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
fifth 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 2006 as set forth in
paragraph (a) below and/or both equal or exceed the Achievement Threshold
amounts for 2007 as set forth in paragraph (b) below, and/or both equal or
exceed the Achievement Threshold amounts for 2008 as set forth in paragraph
(c) 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), (b) and (c) below; provided, however, that no
shares subject to the Option shall vest and become exercisable pursuant to
paragraph (a), (b) or (c) 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 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     [***]                           (in
thousands)                                
 
 
Target     12.5 %     20 %     22.5 %
 
    [***]                          
 
 
Maximum     15 %     22.5 %     30 %
 
    [***]                          

 

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     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 2007. If the Company’s EBITDA and Net Adds for Fiscal
Year 2007 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).

                                              2007 Net Adds            
Threshold   Target   Maximum             [***]   [***]   [***] 2007   Threshold
    10 %     12.5 %     15 % EBITDA     [***]                           (in
thousands)                                
 
  Target
    12.5 %     20 %     22.5 %
 
    [***]                          
 
  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.
          (c) Fiscal Year 2008. If the Company’s EBITDA and Net Adds for Fiscal
Year 2008 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).
 

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                                              2008 Net Adds            
Threshold   Target   Maximum             [***]   [***]   [***]
2008

  Threshold     10 %     12.5 %     15 %
EBITDA

    [***]                          
(in thousands)
                               
 
  Target     12.5 %     20 %     22.5 %
 
    [***]                          
 
  Maximum     15 %     22.5 %     30 %
 
    [***]                          

The percentage of Unreleased Shares which shall be released from the Company’s
Repurchase Option 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.
          (d) 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 the Company, 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.
          (e) 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
 

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DOCUMENT PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL
HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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shall, in its discretion, equitably adjust the Net Adds Achievement Levels set
forth in paragraphs (a), (b) and (c) to reflect the Company’s changed scope of
operations.
          (f) Adjustments for Future Changes in the Company’s Business. The
EBITDA Achievement Levels and Net Adds Achievement Levels set forth in
paragraphs (a), (b) and (c) were designed to be measured against the Company’s
performance in the thirty-nine (39) markets in which it was operating as of
March 1, 2005. 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.
          (g) Accelerated Vesting Cumulative; Continued Service Condition. The
vesting and exercisability of the Option as to shares of Common Stock under
paragraphs 2(a), 2(b) and 2(c) 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.
          (h) 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 2006, 2007 or 2008, 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.
          (i) Definition of Fiscal Year. For purposes of this Exhibit B, the
term “Fiscal Year” means the Company’s fiscal year ending December 31.
          (j) 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.
 

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     3. Change in Control Accelerated Vesting.
          (a) Change in Control. In the event of a Change in Control, (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 one-third of the number of unvested shares of
Common Stock subject to the Option immediately prior to the Change in Control
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 one-third of the number of unvested shares of Common Stock
subject to the Option immediately prior to the Change in Control, 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) 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, in each case, 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).
          (c) 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 (or the Parent, any Subsidiary or any successor thereof): (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 Holder’s incapacity due to physical or mental
illness or any such actual or anticipated failure after Holder’s issuance of a
Notice of Termination (as described below) for Good Reason), as reasonably
determined by the Company, or, if Holder 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,
 

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believes that Holder 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 Holder’s willful failure substantially to follow and
comply with the specific and lawful directives of the Company or, if Holder 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, any
Subsidiary or any successor thereof), as reasonably determined by the Company
or, if Holder 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 Holder’s incapacity due to
physical or mental illness or any such actual or anticipated failure after
Holder’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 Holder’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 Holder’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 a Notice of Termination given in
respect thereof: (A) the continuous assignment to Holder of any duties
materially inconsistent with Holder’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
 

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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 Holder’s position with the
Company. Holder’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 Holder’s incapacity due to physical or mental illness. Holder’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.
          (d) Condition to Accelerated Vesting and Exercisability. The
accelerated vesting and exercisability of shares of Common Stock subject to the
Option pursuant to subparagraph 3(b) 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. The Holder 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.
 

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Attachment B-1
Methodology for Linear Interpolation

                          2005 Net Adds         Threshold   Target   Maximum    
    [***]   [***]   [***]
2005 EBITDA
  Threshold      10%   12.5%      15%
(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.
     Solution: Use straight line interpolation for both measures. Starting with
either measure will yield the same result.
 

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     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 of [***]   (midpoint of 10%   (midpoint of 12.5%   (midpoint of 15%
EBITDA
  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%

 

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DOCUMENT PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL
HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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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 Holder has received,
read and understood the Plan and the Option Agreement. Holder 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 Holder’s purchase or disposition of the Shares. Holder
represents that Holder 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
 

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DOCUMENT PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL
HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

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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.

              ACCEPTED BY:   SUBMITTED BY LEAP WIRELESS INTERNATIONAL,   HOLDER:
INC.
           
 
           
By:
      By:    
 
            Print Name:   Print Name:
 
            Title:   Address: