Leap Wireless International, Inc.
As filed with the Securities and Exchange Commission on
May 16, 2008
Registration
No. 333-126246
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Post-Effective Amendment
No. 4
to
Form S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
LEAP WIRELESS INTERNATIONAL,
INC.
(Exact name of registrant as
specified in its charter)
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Delaware
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4812
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33-0811062
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(State or other jurisdiction
of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification Number)
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10307 Pacific Center Court
San Diego, CA 92121
(858) 882-6000
(Address, including zip code,
and telephone number, including area code, of
registrants principal
executive offices)
S. Douglas Hutcheson
Chief Executive Officer
Leap Wireless International, Inc.
10307 Pacific Center Court
San Diego, CA 92121
(858) 882-6000
(Name, address, including zip
code, and telephone number,
including area code, of agent
for service)
Copies To:
Barry M. Clarkson, Esq.
Ann C. Buckingham, Esq.
Latham & Watkins LLP
12636 High Bluff Drive, Suite 400
San Diego, CA 92130
(858) 523-5400
Approximate date of commencement of proposed sale to the
public:
From time to time after the effective date of this Registration
Statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, as amended (the
Securities Act), check the following box.
þ
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
Indicate by a check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the
Exchange Act.
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Large accelerated filer
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller reporting
company o
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(Do not check if a smaller reporting company)
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The registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act or until this Registration Statement shall
become effective on such date as the Securities and Exchange
Commission, acting pursuant to said section 8(a), may
determine.
The
information in this prospectus is not complete and may be
changed. Neither we nor the selling stockholders may sell these
securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and it is not
soliciting offers to buy these securities in any state in which
such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any
state.
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SUBJECT TO
COMPLETION, DATED MAY 16, 2008
PROSPECTUS
11,755,806 Shares
LEAP WIRELESS INTERNATIONAL,
INC.
Common Stock
This prospectus relates to up to 11,755,806 shares of our
common stock, par value $0.0001 per share, which may be offered
for sale from time to time by the selling stockholders named in
this prospectus. The shares of common stock may be sold at fixed
prices, prevailing market prices at the times of sale, prices
related to the prevailing market prices, varying prices
determined at the times of sale or negotiated prices. The shares
of common stock offered by this prospectus and any prospectus
supplement may be offered by the selling stockholders directly
to investors or to or through underwriters, dealers or other
agents. We will not receive any of the proceeds from the sale of
the shares of common stock sold by the selling stockholders. We
will bear all expenses of the offering of common stock, except
that the selling stockholders will pay any applicable
underwriting fees, discounts or commissions and transfer taxes.
Leap common stock is listed for trading on the Nasdaq Global
Select Market, under the symbol LEAP. On
May 15, 2008, the last reported sale price of Leap common
stock on the Nasdaq Global Select Market was $60.03 per share.
Investing in Leap common stock involves risks. See
Risk Factors beginning on page 5.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The date of this prospectus
is ,
2008
TABLE OF
CONTENTS
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EXHIBIT 23.1 |
ABOUT
THIS PROSPECTUS
This prospectus is part of a resale Registration Statement that
we filed with the Securities and Exchange Commission, or SEC,
using a shelf registration process. The
selling stockholders may offer and sell, from time to time, an
aggregate of up to 11,755,806 shares of Leap common stock
under the prospectus. In some cases, the selling stockholders
will also be required to provide a prospectus supplement
containing specific information about the selling stockholders
and the terms on which they are offering and selling Leap common
stock. We may also add, update or change in a prospectus
supplement any information contained in this prospectus. You
should read this prospectus and any accompanying prospectus
supplement, as well as any post-effective amendments to the
Registration Statement of which this prospectus is a part and
all documents incorporated by reference herein, together with
the additional information described under Where You Can
Find More Information before you make any investment
decision.
You should rely only on the information contained or
incorporated by reference in this prospectus. Neither we nor the
selling stockholders have authorized anyone to provide you with
information different from that contained or incorporated by
reference in this prospectus or additional information. We are
offering to sell, and seeking offers to buy, shares of Leap
common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of
the time of delivery of this prospectus or any sale of Leap
common stock.
MARKET
AND INDUSTRY DATA
This prospectus includes market and industry data and other
statistical information, which are based on independent industry
publications, government publications, reports by market
research firms or other published independent sources. Some data
are also based on our internal estimates, which are derived from
our review of internal surveys as well as independent sources.
We have not independently verified this information, or any of
the data or analyses underlying such information, and cannot
assure you of its accuracy and completeness in any respect. As a
result, you should be aware that market and industry data set
forth herein, and estimates and beliefs based on such data, may
not be reliable. Unless otherwise specified, information
relating to population and potential customers, or POPs, is
based on 2008 population estimates provided by Claritas Inc.
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SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Except for the historical information contained and incorporated
by reference herein, this prospectus and the documents
incorporated by reference herein contain forward-looking
statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements reflect
managements current forecast of certain aspects of our
future. You can identify most forward-looking statements by
forward-looking words such as believe,
think, may, could,
will, estimate, continue,
anticipate, intend, seek,
plan, expect, should,
would and similar expressions in this prospectus and
the documents incorporated by reference herein. Such statements
are based on currently available operating, financial and
competitive information and are subject to various risks,
uncertainties and assumptions that could cause actual results to
differ materially from those anticipated in or implied by our
forward-looking statements. Such risks, uncertainties and
assumptions include, among other things:
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our ability to attract and retain customers in an extremely
competitive marketplace;
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changes in economic conditions, including interest rates,
consumer credit conditions, unemployment and other
macro-economic factors that could adversely affect the demand
for the services we provide;
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the impact of competitors initiatives;
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our ability to successfully implement product offerings and
execute effectively on our planned coverage expansion, launches
of markets we acquired in the Federal Communications
Commissions, or FCCs, auction for Advanced Wireless
Services, or Auction #66, expansion of our mobile broadband
product offering and other strategic activities;
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our ability to obtain roaming services from other carriers at
cost-effective rates;
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our ability to maintain effective internal control over
financial reporting;
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delays in our market expansion plans, including delays resulting
from any difficulties in funding such expansion through our
existing cash, cash generated from operations or additional
capital, or delays by existing U.S. government and other
private sector wireless operations in clearing the Advanced
Wireless Services, or AWS, spectrum, some of which users are
permitted to continue using the spectrum for several years;
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our ability to attract, motivate and retain an experienced
workforce;
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our ability to comply with the covenants in our senior secured
credit facilities, indenture and any future credit agreement,
indenture or similar instrument;
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failure of our network or information technology systems to
perform according to expectations; and
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other factors detailed in the section entitled Risk
Factors commencing on page 5 of this prospectus.
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All future written and oral forward-looking statements
attributable to us or any persons acting on our behalf are
expressly qualified in their entirety by the cautionary
statements contained in this section or elsewhere in this
prospectus. New risks and uncertainties arise from time to time,
and it is impossible for us to predict these events or how they
may affect us. Except as required by law, we undertake no
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or
otherwise. In light of these risks and uncertainties, the
forward-looking events and circumstances discussed in this
prospectus and the documents incorporated by reference herein
may not occur and actual results could differ materially from
those anticipated or implied in the forward-looking statements.
Accordingly, users of this prospectus are cautioned not to place
undue reliance on the forward-looking statements.
ii
PROSPECTUS
SUMMARY
This summary highlights selected information from this
prospectus and does not contain all the information that you
should consider before buying shares in this offering. You
should read the entire prospectus carefully, including all
documents incorporated by reference herein, especially
Risk Factors included herein and the financial
statements and notes included in our Annual Report on
Form 10-K
for the year ended December 31, 2007 filed with the SEC on
February 29, 2008 and our Quarterly Report on
Form 10-Q
for the three months ended March 31, 2008 filed with
the SEC on May 12, 2008, before deciding to invest in
shares of Leap common stock. As used in this prospectus, the
terms we, our, ours and
us refer to Leap Wireless International, Inc., a
Delaware corporation, or Leap, and its wholly owned
subsidiaries, unless the context suggests otherwise. Leap is a
holding company and conducts operations only through its wholly
owned subsidiary Cricket Communications, Inc., or Cricket, and
Crickets subsidiaries.
Overview
of Our Business
We are a wireless communications carrier that offers digital
wireless service in the U.S. under the
Cricket®
brand. Our Cricket service offers customers unlimited wireless
service for a flat monthly rate without requiring a fixed-term
contract or a credit check. Cricket service is offered by
Cricket, a wholly owned subsidiary of Leap, and is also offered
in Oregon by LCW Wireless Operations, LLC, or LCW Operations, a
designated entity under FCC regulations. Cricket owns an
indirect 73.3% non-controlling interest in LCW Operations
through a 73.3% non-controlling interest in LCW Wireless, LLC,
or LCW Wireless. Cricket also owns an 82.5% non-controlling
interest in Denali Spectrum, LLC, or Denali, which purchased a
wireless license in Auction #66 covering the upper mid-west
portion of the U.S. as a designated entity through its
wholly owned subsidiary, Denali Spectrum License, LLC, or Denali
License. We consolidate our interests in LCW Wireless and Denali
in accordance with Financial Accounting Standards Board
Interpretation No., or FIN, 46(R), Consolidation of
Variable Interest Entities, because these entities are
variable interest entities and we will absorb a majority of
their expected losses.
At March 31, 2008, Cricket service was offered in
23 states and had approximately 3.1 million customers.
As of March 31, 2008, we, LCW Wireless License, LLC, or LCW
License (a wholly owned subsidiary of LCW Operations), and
Denali License owned wireless licenses covering an aggregate of
approximately 186 million POPs (adjusted to eliminate
duplication from overlapping licenses). The combined network
footprint in our operating markets covered approximately
53 million POPs as of March 31, 2008, which includes
incremental POPs attributed to ongoing footprint expansion. The
licenses we and Denali License purchased in Auction #66,
together with the existing licenses we own, provide 20 MHz
of coverage and the opportunity to offer enhanced data services
in almost all markets in which we currently operate or are
building out, assuming Denali License were to make available to
us certain of its spectrum.
In addition to the approximately 53 million POPs we covered
as of March 31, 2008 with our combined network footprint,
we estimate that we and Denali License hold licenses in markets
that cover up to approximately 85 million additional POPs
that are suitable for Cricket service. We recently launched our
first Auction #66 markets in Oklahoma City, Las Vegas and
southern Texas, and we and Denali License are currently building
out additional Auction #66 markets that we intend to launch
this year and in 2009. We also plan to continue to expand our
network coverage and capacity in many of our existing markets,
allowing us to offer our customers a larger local calling area.
As part of our overall coverage expansion plans, we expect to
increase our network coverage by approximately eight million
additional POPs between January and June 2008. Looking ahead, we
and Denali License expect to cover up to approximately
36 million additional POPs by the middle of 2009 and up to
approximately 50 million additional POPs by the end of 2010
(in each case measured on a cumulative basis beginning January
2008). We and Denali License may also develop some of the
licenses covering our additional POPs through partnerships with
others.
Portions of the AWS spectrum that was auctioned in
Auction #66 are currently used by U.S. federal
government
and/or
incumbent commercial licensees. Several federal government
agencies have cleared or developed plans to clear spectrum
covered by licenses we and Denali License purchased in
Auction #66 or have indicated that we and Denali License
can operate on the spectrum without interfering with the
agencies current uses. As a result, we do not expect
spectrum clearing issues to impact our near-term market
launches. In other markets, we continue to work with one federal
agency to ensure that the agency either relocates its spectrum
use to
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alternative frequencies or confirms that we can operate on the
spectrum without interfering with its current uses. If our
efforts with this agency are not successful, the agencys
continued use of the spectrum could delay the launch of certain
markets.
We believe that our business model is scalable and can be
expanded successfully into adjacent and new markets because we
offer a differentiated service and an attractive value
proposition to our customers at costs significantly lower than
most of our competitors. We continue to seek additional
opportunities to enhance our current market clusters and expand
into new geographic markets by participating in FCC spectrum
auctions, by acquiring spectrum and related assets from third
parties,
and/or by
participating in new partnerships or joint ventures. We also
expect to continue to look for opportunities to optimize the
value of our spectrum portfolio. Because some of the licenses
that we and Denali License hold include large regional areas
covering both rural and metropolitan communities, we and Denali
License may sell some of this spectrum and pursue the deployment
of alternative products or services in portions of this spectrum.
We expect that we will continue to build out and launch new
markets and pursue other strategic expansion activities for the
next several years. We intend to be disciplined as we pursue
these expansion efforts and to remain focused on our position as
a low-cost leader in wireless telecommunications. We expect to
achieve increased revenues and incur higher operating expenses
as our existing business grows and as we build out and after we
launch service in new markets. Large-scale construction projects
for the build-out of our new markets will require significant
capital expenditures and may suffer cost overruns. Any such
significant capital expenditures or increased operating expenses
would decrease earnings, operating income before depreciation
and amortization, or OIBDA, and free cash flow for the periods
in which we incur such costs. However, we are willing to incur
such expenditures because we expect our expansion activities
will be beneficial to our business and create additional value
for our stockholders.
We believe that our business model is different from most other
wireless companies. Our services primarily target market
segments underserved by traditional communications companies:
our customers tend to be younger, have lower incomes and include
a greater percentage of ethnic minorities. We have designed the
Cricket service to appeal to customers who value unlimited
mobile calling with a predictable monthly bill and who make the
majority of their calls from within Cricket service areas. Our
internal customer surveys indicate that approximately 65% of our
customers use our service as their sole phone service and
approximately 90% as their primary phone service. For the three
months ended March 31, 2008, our customers used our Cricket
service for an average of approximately 1,500 minutes per month,
which we believe was substantially above the U.S. wireless
national carrier customer average.
The majority of wireless customers in the U.S. subscribe to
post-pay services that may require credit approval and a
contractual commitment from the subscriber for a period of at
least one year, and include overage charges for call volumes in
excess of a specified maximum. According to International Data
Corporation, U.S. wireless penetration was approximately
80% at December 31, 2007. We believe that a large portion
of the remaining growth potential in the U.S. wireless
market consists of customers who are price-sensitive, who have
lower credit scores or who prefer not to enter into fixed-term
contracts. We believe our services appeal strongly to these
customer segments. We believe that we are able to serve these
customers and generate significant OIBDA because of our
high-quality network and low customer acquisition and operating
costs.
Our
Business Strategy
Our business strategy is to (1) target market segments
underserved by traditional communications companies,
(2) continue to develop and evolve our product and service
offerings, (3) build our brand awareness and improve the
productivity of our distribution system, (4) maintain an
industry-leading cost structure, (5) continue to expand our
network coverage and capacity in our existing markets and
(6) continue to develop and enhance our current market
clusters and expand into new geographic markets.
2
Corporate
Information
Leap was formed as a Delaware corporation in 1998. Leaps
shares began trading publicly in September 1998 and we launched
our innovative Cricket service in March 1999. In April 2003, we
filed voluntary petitions for relief under Chapter 11 in
federal bankruptcy court. On August 16, 2004, our plan of
reorganization became effective and we emerged from
Chapter 11 bankruptcy. On that date, a new board of
directors of Leap was appointed, Leaps previously existing
stock, options and warrants were cancelled, and Leap issued
60 million shares of new Leap common stock for distribution
to two classes of creditors. See Part I
Item 1. Business Chapter 11 Proceedings
Under the Bankruptcy Code in our Annual Report on
Form 10-K
for the year ended December 31, 2007 filed with the SEC on
February 29, 2008 for additional information. On
June 29, 2005, Leaps common stock became listed for
trading on the Nasdaq National Market (now known as the Nasdaq
Global Market) under the symbol LEAP. Effective
July 1, 2006, Leaps common stock became listed for
trading on the Nasdaq Global Select Market, also under the
symbol LEAP. Leap conducts operations through its
subsidiaries and has no independent operations or sources of
operating revenue other than through dividends, if any, from its
subsidiaries.
Our principal executive offices are located at 10307 Pacific
Center Court, San Diego, California 92121 and our telephone
number at that address is
(858) 882-6000.
Our principal websites are located at www.leapwireless.com,
www.mycricket.com and www.jumpmobile.com. The information
contained in, or that can be accessed through, our websites is
not part of this prospectus.
Leap is a U.S. registered trademark of Leap, and a
trademark application for the Leap logo is pending. Cricket,
Jump, the Cricket K and Flex Bucket are
U.S. registered trademarks of Cricket. In addition, the
following are trademarks or service marks of Cricket: BridgePay,
Cricket By Week, Cricket Choice, Cricket Connect, Cricket Nation
and Cricket Wireless Internet Service.
3
The
Offering
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Common stock offered by the selling stockholders |
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11,755,806 shares |
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Common stock outstanding before the offering |
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68,986,506 shares |
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Common stock outstanding after the offering |
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68,986,506 shares |
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Use of proceeds |
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We will not receive any proceeds from this offering. |
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Registration rights |
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We have agreed to use all reasonable efforts to keep the shelf
Registration Statement, of which this prospectus forms a part,
effective and current until the date that all of the shares of
common stock covered by this prospectus may be freely traded
without the effectiveness of such Registration Statement. |
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Trading |
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Our common stock is listed for trading on the Nasdaq Global
Select Market under the symbol LEAP. |
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Risk factors |
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See Risk Factors and the other information contained
and incorporated by reference in this prospectus for a
discussion of the factors you should carefully consider before
deciding to invest in Leap common stock. |
The outstanding share information shown above is based on our
shares outstanding as of May 2, 2008, and this information
excludes:
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600,000 shares of common stock issuable upon the exercise
of outstanding warrants at an exercise price of $16.83;
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3,479,830 shares of common stock reserved for issuance upon the
exercise of outstanding stock options at a weighted average
exercise price of $45.48;
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732,439 shares of common stock available for future
issuance under our Employee Stock Purchase Plan;
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an aggregate of 2,341,225 shares of common stock available
for future issuance under our 2004 Stock Option, Restricted
Stock and Deferred Stock Unit Plan; and
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shares reserved for potential issuance to CSM Wireless, LLC, or
CSM. Leap has reserved five percent of its outstanding common
stock, which was 3,449,325 shares as of May 2, 2008,
for potential issuance to CSM upon the exercise of CSMs
option to put its entire equity interest in LCW Wireless to
Cricket. Subject to certain conditions and restrictions in our
senior secured credit agreement, or Credit Agreement, we will be
obligated to satisfy the put price in cash or in shares of Leap
common stock, or a combination of cash and common stock, in our
sole discretion. See Part I Item 1.
Business Arrangements with LCW Wireless in our
Annual Report on
Form 10-K
for the year ended December 31, 2007 filed with the SEC on
February 29, 2008 for additional information.
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4
RISK
FACTORS
You should carefully consider the risk factors set forth
below, as well as the other information contained or
incorporated by reference in this prospectus, before you decide
to buy the common stock offered by this prospectus. The risks
described below are not the only risks facing us. Additional
risks and uncertainties not currently known to us or that we
currently deem to be immaterial may also materially and
adversely affect our business operations. Any of the following
risks could materially adversely affect our business, financial
condition or results of operations. In such case, the market
price of Leap common stock could decline, and you may lose all
or part of your original investment.
Risks
Related to Our Business and Industry
We
Have Experienced Net Losses, and We May Not Be Profitable in the
Future.
We experienced net losses of $18.1 million for the three
months ended March 31, 2008, $75.9 million for the
year ended December 31, 2007, $24.4 million for the
year ended December 31, 2006, $6.1 million and
$43.1 million (excluding reorganization items, net) for the
five months ended December 31, 2004 and the seven months
ended July 31, 2004, respectively, $597.4 million for
the year ended December 31, 2003 and $664.8 million
for the year ended December 31, 2002. Although we had net
income of $30.7 million for the year ended
December 31, 2005, we may not generate profits in the
future on a consistent basis, or at all. Our strategic
objectives depend, in part, on our ability to build out and
launch networks associated with newly acquired FCC licenses,
including the licenses that we and Denali License acquired in
Auction #66, and we will experience higher operating
expenses as we build out and after we launch our service in
these new markets. If we fail to achieve consistent
profitability, that failure could have a negative effect on our
financial condition.
We May
Not Be Successful in Increasing Our Customer Base Which Would
Negatively Affect Our Business Plans and Financial
Outlook.
Our growth on a
quarter-by-quarter
basis has varied substantially in the past. We believe that this
uneven growth generally reflects seasonal trends in customer
activity, promotional activity, competition in the wireless
telecommunications market, our pace of new market launches, and
varying national economic conditions. Our current business plans
assume that we will increase our customer base over time,
providing us with increased economies of scale. If we are unable
to attract and retain a growing customer base, our current
business plans and financial outlook may be harmed.
Our
Business Could Be Adversely Affected By General Economic
Conditions; If We Experience Low Rates of Customer Acquisition
or High Rates of Customer Turnover, Our Ability to Become
Profitable Will Decrease.
Our business could be adversely affected in a number of ways by
general economic conditions, including interest rates, consumer
credit conditions, unemployment and other macro-economic
factors. Because we do not require customers to sign fixed-term
contracts or pass a credit check, our service is available to a
broader customer base than that served by many other wireless
providers. As a result, during economic downturns or during
periods of high gasoline prices, we may have greater difficulty
in gaining new customers within this base for our services and
some of our existing customers may be more likely to terminate
service due to an inability to pay than the average industry
customer. Recent disruptions in the sub-prime mortgage market
may also affect our ability to gain new customers or the ability
of our existing customers to pay for their service. In addition,
our rate of customer acquisition and customer turnover may be
affected by other factors, including the size of our calling
areas, network performance and reliability issues, our handset
or service offerings (including the ability of customers to
cost-effectively roam onto other wireless networks), customer
care concerns, phone number portability, higher deactivation
rates among less-tenured customers we gained as a result of our
new market launches, and other competitive factors. We have also
experienced an increasing trend of current customers upgrading
their handset by buying a new phone, activating a new line of
service, and letting their existing service lapse, which trend
has resulted in a higher churn rate as these customers are
counted as having disconnected service but have actually been
retained. Our strategies to acquire new customers and address
customer turnover may not be successful. A high rate of customer
turnover or low rate of new customer acquisition would reduce
revenues and increase the total marketing expenditures required
to attract the minimum number of customers required to sustain
our business plan which, in turn, could have a material adverse
effect on our business, financial condition and results of
operations.
5
We
Have Made Significant Investment, and Will Continue to Invest,
in Joint Ventures That We Do Not Control.
In July 2006, we acquired a 72% non-controlling interest in LCW
Wireless, which was awarded a wireless license for the Portland,
Oregon market in Auction #58 and to which we contributed,
among other things, two wireless licenses in Eugene and Salem,
Oregon and related operating assets. In December 2006, we
completed the replacement of certain network equipment of a
subsidiary of LCW Wireless and, as a result, we now own a 73.3%
non-controlling membership interest in LCW Wireless. In July
2006, we acquired an 82.5% non-controlling interest in Denali,
an entity which participated in Auction #66. LCW Wireless
and Denali acquired their wireless licenses as very small
business designated entities under FCC regulations. Our
participation in these joint ventures is structured as a
non-controlling interest in order to comply with FCC rules and
regulations. We have agreements with our joint venture partners
in LCW Wireless and Denali, and we plan to have similar
agreements in connection with any future designated entity joint
venture arrangements we may enter into, which are intended to
allow us to actively participate to a limited extent in the
development of the business through the joint venture. However,
these agreements do not provide us with control over the
business strategy, financial goals, build-out plans or other
operational aspects of any such joint venture. The FCCs
rules restrict our ability to acquire controlling interests in
such entities during the period that such entities must maintain
their eligibility as a designated entity, as defined by the FCC.
The entities or persons that control the joint ventures may have
interests and goals that are inconsistent or different from ours
which could result in the joint venture taking actions that
negatively impact our business or financial condition. In
addition, if any of the other members of a joint venture files
for bankruptcy or otherwise fails to perform its obligations or
does not manage the joint venture effectively, we may lose our
equity investment in, and any present or future opportunity to
acquire the assets (including wireless licenses) of, such entity.
The FCC has implemented further rule changes aimed at addressing
alleged abuses of its designated entity program. While we do not
believe that these recent rule changes materially affect our
current joint ventures with LCW Wireless and Denali, the scope
and applicability of these rule changes to such current
designated entity structures remain in flux, and the changes
remain subject to administrative and judicial review. In
addition, we cannot predict how further rule changes or
increased regulatory scrutiny by the FCC with respect to
designated entity rules or structures will affect our current or
future business ventures with designated entities or our
participation with such entities in future FCC spectrum auctions.
We
Face Increasing Competition Which Could Have a Material Adverse
Effect on Demand for the Cricket Service.
The telecommunications industry is very competitive. In general,
we compete with national facilities-based wireless providers and
their prepaid affiliates or brands, local and regional carriers,
non-facilities-based mobile virtual network operators, or MVNOs,
voice-over-internet-protocol, or VoIP, service providers and
traditional landline service providers, including telephone and
cable companies.
Many of these competitors often have greater name and brand
recognition, access to greater amounts of capital and
established relationships with a larger base of current and
potential customers. Because of their size and bargaining power,
our larger competitors may be able to purchase equipment,
supplies and services at lower prices than we can. For example,
prior to the launch of a large market in 2006, disruptions by a
competitor interfered with our indirect dealer relationships,
reducing the number of dealers offering Cricket service during
the initial weeks of launch. In addition, some of our
competitors are able to offer their customers roaming services
at lower rates. As consolidation in the industry creates even
larger competitors, any purchasing advantages our competitors
have, as well as their bargaining power as wholesale providers
of roaming services, may increase. For example, in connection
with the offering of our nationwide roaming service, we have
encountered problems with certain large wireless carriers in
negotiating terms for roaming arrangements that we believe are
reasonable, and we believe that consolidation has contributed
significantly to such carriers control over the terms and
conditions of wholesale roaming services.
These competitors may also offer potential customers more
features and options in their service plans than those currently
provided by Cricket, as well as new technologies
and/or
alternative delivery plans.
6
Some of our competitors offer rate plans substantially similar
to Crickets service plans or products that customers may
perceive to be similar to Crickets service plans in
markets in which we offer wireless service. For example,
AT&T, Sprint Nextel,
T-Mobile and
Verizon Wireless have each begun to offer flat-rate unlimited
service offerings. In addition, Sprint Nextel offers a flat-rate
unlimited service offering under its Boost Unlimited brand,
which is very similar to the Cricket service. Sprint Nextel has
expanded and may further expand its Boost Unlimited service
offering into certain markets in which we provide service and
could further expand service into other markets in which we
provide service or in which we plan to expand, and this service
offering may present additional strong competition in markets in
which our offerings overlap. The competitive pressures of the
wireless telecommunications market have also caused other
carriers to offer service plans with unlimited service offerings
or large bundles of minutes of use at low prices, which are
competing with the predictable and unlimited Cricket calling
plans. Some competitors also offer prepaid wireless plans that
are being advertised heavily to demographic segments in our
current markets and in markets in which we may expand that are
strongly represented in Crickets customer base. For
example,
T-Mobile has
introduced a FlexPay plan which permits customers to pay in
advance for its post-pay plans and avoid overage charges, and an
internet-based service upgrade which permits wireless customers
to make unlimited local and long-distance calls from their home
phone in place of a traditional landline phone service. These
competitive offerings could adversely affect our ability to
maintain our pricing and increase or maintain our market
penetration and may have a material adverse effect on our
financial results.
We may also face additional competition from new entrants in the
wireless marketplace, many of whom may have significantly more
resources than we do. The FCC is pursuing policies designed to
increase the number of wireless licenses and spectrum available
for the provision of wireless voice and data services in each of
our markets. For example, the FCC has adopted rules that allow
the partitioning, disaggregation or leasing of PCS and other
wireless licenses, and continues to allocate and auction
additional spectrum that can be used for wireless services,
which may increase the number of our competitors. The FCC has
also in recent years allowed satellite operators to use portions
of their spectrum for ancillary terrestrial use, and also
permitted the offering of broadband services over power lines.
In addition, the auction and licensing of new spectrum,
including the 700 MHz band licenses recently auctioned by
the FCC, may result in new competitors
and/or allow
existing competitors to acquire additional spectrum, which could
allow them to offer services that we may not technologically or
cost effectively be able to offer with the licenses we hold or
to which we have access.
Our ability to remain competitive will depend, in part, on our
ability to anticipate and respond to various competitive factors
and to keep our costs low.
Recent
Disruptions in the Financial Markets Could Affect Our Ability to
Obtain Debt or Equity Financing On Reasonable Terms (or At All),
and Have Other Adverse Effects On Us.
We may wish to raise significant capital to finance business
expansion activities and our ability to raise debt or equity
capital in the public or private markets could be impaired by
various factors. For example, U.S. credit markets have
recently experienced significant dislocations and liquidity
disruptions which have caused the spreads on prospective debt
financings to widen considerably. These circumstances have
materially impacted liquidity in the debt markets, making
financing terms for borrowers less attractive, and in certain
cases have resulted in the unavailability of certain types of
debt financing. Continued uncertainty in the credit markets may
negatively impact our ability to access additional debt
financing or to refinance existing indebtedness on favorable
terms (or at all). These events in the credit markets have also
had an adverse effect on other financial markets in the U.S.,
which may make it more difficult or costly for us to raise
capital through the issuance of common stock, preferred stock or
other equity securities. If we require additional capital to
fund or accelerate the pace of any of our business expansion
efforts or other strategic activities and were unable to obtain
such capital on terms that we found acceptable or at all, we
would likely reduce our investments in expansion activities or
slow the pace of expansion activities as necessary to match our
capital requirements to our available liquidity. Any of these
risks could impair our ability to fund our operations or limit
our ability to expand our business, which could have a material
adverse effect on our financial results. In addition, we
maintain investments in commercial paper and other short-term
investments. Volatility and uncertainty in the financial markets
has resulted in losses from a decline in the value of those
investments, and may result in additional losses and difficulty
in monetizing those investments in the future.
7
We May
Be Unable to Obtain the Roaming Services We Need From Other
Carriers to Remain Competitive.
We believe that our customers prefer that we offer roaming
services that allow them to make calls automatically when they
are outside of their Cricket service area. Many of our
competitors have regional or national networks which enable them
to offer automatic roaming services to their subscribers at a
lower cost than we can offer. We do not have a national network,
and we must pay fees to other carriers who provide roaming
services to us. We currently have roaming agreements with
several other carriers which allow our customers to roam on
those carriers networks. However, these roaming agreements
generally cover voice but not data services and some of these
agreements may be terminated on relatively short notice. In
addition, we believe that the rates charged to us by some of
these carriers are higher than the rates they charge to certain
other roaming partners.
The FCC has adopted a report and order clarifying that
commercial mobile radio service providers are required to
provide automatic roaming for voice and SMS text-messaging
services on just, reasonable and non-discriminatory terms. The
FCC order, however, does not address roaming for data services
nor does it provide or mandate any specific mechanism for
determining the reasonableness of roaming rates for voice
services, and so our ability to obtain roaming services from
other carriers at attractive rates remains uncertain. In
addition, the FCC order indicates that a host carrier is not
required to provide roaming services to another carrier in areas
in which that other carrier holds wireless licenses or usage
rights that could be used to provide wireless services. Because
we and Denali License hold a significant number of spectrum
licenses for markets in which service has not yet been launched,
we believe that this in-market roaming restriction
could significantly and adversely affect our ability to receive
roaming services in areas where we hold licenses. We and other
wireless carriers have filed petitions with the FCC, asking that
it reconsider this in-market exception to its roaming order.
However, we can provide no assurances as to whether the FCC will
reconsider this exception or the timeframe in which it might do
so.
In light of the current FCC order, we cannot provide assurances
that we will be able to continue to provide roaming services for
our customers across the nation or that we will be able to
provide such services on a cost-effective basis. We may be
unable to enter into or maintain roaming arrangements for voice
services at reasonable rates, including in areas in which we
hold wireless licenses or have usage rights but have not yet
constructed wireless facilities, and we may be unable to secure
roaming arrangements for our data services. Our inability to
obtain these roaming services on a cost-effective basis may
limit our ability to compete effectively for wireless customers,
which may increase our churn and decrease our revenues, which
could materially adversely affect our business, financial
condition and results of operations.
We
Have Restated Our Prior Consolidated Financial Statements, Which
Has Led to Additional Risks and Uncertainties, Including
Shareholder Litigation.
As discussed in Note 2 to our consolidated financial
statements included in Part II
Item 8. Financial Statements and Supplementary Data
of our Annual Report on
Form 10-K,
as amended, for the year ended December 31, 2006 filed with
the SEC on December 26, 2007, we have restated our
consolidated financial statements as of and for the years ended
December 31, 2006 and 2005 (including interim periods
therein), for the period from August 1, 2004 to
December 31, 2004, and for the period from January 1,
2004 to July 31, 2004. In addition, we have restated our
condensed consolidated financial statements as of and for the
quarterly periods ended June 30, 2007 and March 31,
2007. The determination to restate these consolidated financial
statements and quarterly condensed consolidated financial
statements was made by Leaps Audit Committee upon
managements recommendation following the identification of
errors related to (i) the timing of recognition of certain
service revenues prior to or subsequent to the period in which
they were earned, (ii) the recognition of service revenues
for certain customers that voluntarily disconnected service,
(iii) the classification of certain components of service
revenues, equipment revenues and operating expenses and
(iv) the determination of a tax valuation allowance during
the second quarter of 2007.
As a result of these events, we have become subject to a number
of additional risks and uncertainties, including substantial
unanticipated costs for accounting and legal fees in connection
with or related to the restatement. In particular, three
shareholder derivative actions have been filed, and we have also
recently been named in a number of alleged securities class
action lawsuits. The plaintiffs in these lawsuits may make
additional claims, expand
8
existing claims
and/or
expand the time periods covered by the complaints. Other
plaintiffs may bring additional actions with other claims based
on the restatement. We may incur substantial defense costs with
respect to these claims, regardless of their outcome. Likewise,
these claims might cause a diversion of our managements
time and attention. If we do not prevail in any such actions, we
could be required to pay substantial damages or settlement
costs, which could materially adversely affect our business,
financial condition and results of operations.
Our
Business and Stock Price May Be Adversely Affected if Our
Internal Controls Are Not Effective.
Section 404 of the Sarbanes-Oxley Act of 2002 requires
companies to conduct a comprehensive evaluation of their
internal control over financial reporting. To comply with this
statute, we are required to document and test our internal
control over financial reporting; our management is required to
assess and issue a report concerning our internal control over
financial reporting; and our independent registered public
accounting firm is required to report on the effectiveness of
our internal control over financial reporting.
As described in Part 1 Item 4. Controls
and Procedures in our Quarterly Report on Form 10-Q for
the three months ended March 31, 2008 filed with the SEC on
May 12, 2008, our chief executive officer, or CEO, and
chief financial officer, or CFO, concluded that our disclosure
controls and procedures were not effective at the reasonable
assurance level as of March 31, 2008. Currently, our CEO,
S. Douglas Hutcheson, is also serving as acting CFO. The
material weakness we have identified in our internal control
over financial reporting related to the design of controls over
the preparation and review of the account reconciliations and
analysis of revenues, cost of revenue and deferred revenues, and
ineffective testing of changes made to our revenue and billing
systems in connection with the introduction or modification of
service offerings.
We have taken and are taking actions to remediate this material
weakness. In addition, management has developed and presented to
the Audit Committee a plan and timetable for the implementation
of remediation measures (to the extent not already implemented),
and the committee intends to monitor such implementation. We
believe that these actions will remediate the control
deficiencies we have identified and strengthen our internal
control over financial reporting.
We previously reported that certain material weaknesses in our
internal control over financial reporting existed at various
times during the period from September 30, 2004 through
December 31, 2007. These material weaknesses included
excessive turnover and inadequate staffing levels in our
accounting, financial reporting and tax departments, weaknesses
in the preparation of our income tax provision, and weaknesses
in our application of lease-related accounting principles,
fresh-start reporting oversight, and account reconciliation
procedures.
Although we believe we are taking appropriate actions to
remediate the control deficiencies we have identified and to
strengthen our internal control over financial reporting, we
cannot assure you that we will not discover other material
weaknesses in the future. The existence of one or more material
weaknesses could result in errors in our financial statements,
and substantial costs and resources may be required to rectify
these or other internal control deficiencies. If we cannot
produce reliable financial reports, investors could lose
confidence in our reported financial information, the market
price of Leaps common stock could decline significantly,
we may be unable to obtain additional financing to operate and
expand our business, and our business and financial condition
could be harmed.
Our
Primary Business Strategy May Not Succeed in the Long
Term.
A major element of our business strategy is to offer consumers
service plans that allow unlimited calls from within a Cricket
calling area for a flat monthly rate without entering into a
fixed-term contract or passing a credit check. However, unlike
national wireless carriers, we do not currently provide
ubiquitous coverage across the U.S. or all major metropolitan
centers, and instead have a smaller network footprint covering
only the principal population centers of our various markets.
This strategy may not prove to be successful in the long term.
Some companies that have offered this type of service in the
past have been unsuccessful. From time to time, we also evaluate
our service offerings and the demands of our target customers
and may modify, change, adjust or discontinue our service
offerings or offer new services. We cannot assure you that these
service offerings will be successful or prove to be profitable.
9
We
Expect to Incur Substantial Costs in Connection With the
Build-Out of Our New Markets, and Any Delays or Cost Increases
in the Build-Out of Our New Markets Could Adversely Affect Our
Business.
Our ability to achieve our strategic objectives will depend in
part on the successful, timely and cost-effective build-out of
the networks associated with newly acquired FCC licenses,
including the licenses that we and Denali License acquired in
Auction #66 and any licenses that we may acquire from third
parties. Large-scale construction projects for the build-out of
our new markets will require significant capital expenditures
and may suffer cost overruns. In addition, we expect to incur
higher operating expenses as our existing business grows and as
we build out and after we launch service in new markets. Any
such significant capital expenditures or increased operating
expenses, including in connection with the build-out and launch
of markets for the licenses that we and Denali License acquired
in Auction #66, would decrease OIBDA and free cash flow for
the periods in which we incur such costs. If we are unable to
fund the build-out of these new markets with our existing cash
and our cash generated from operations, we may be required to
raise additional equity capital or incur further indebtedness,
which we cannot guarantee would be available to us on acceptable
terms, or at all. In addition, the build-out of the networks may
be delayed or adversely affected by a variety of factors,
uncertainties and contingencies, such as natural disasters,
difficulties in obtaining zoning permits or other regulatory
approvals, our relationships with our joint venture partners,
and the timely performance by third parties of their contractual
obligations to construct portions of the networks.
Portions of the AWS spectrum that was auctioned in
Auction #66 are currently used by U.S. federal
government
and/or
incumbent commercial licensees. FCC rules require winning
bidders to avoid interfering with these existing users or to
clear the incumbent users from the spectrum through specified
relocation procedures. We and Denali License considered the
estimated cost and time-frame required to clear the spectrum
that we and Denali License purchased in Auction #66 while
placing bids in the auction. However, the actual cost of
clearing the spectrum may exceed our estimated costs.
Furthermore, delays in the provision of federal funds to
relocate government users, or difficulties in negotiating with
incumbent government and commercial licensees, may extend the
date by which the auctioned spectrum can be cleared of existing
operations, and thus may also delay the date on which we can
launch commercial services using such licensed spectrum. In
addition, certain existing government operations have been using
the spectrum for classified purposes. As a result, although the
government has agreed to clear that spectrum to allow AWS
licensees to utilize their spectrum in the affected areas, the
government has only provided limited information to licensees
about these classified uses, which has created additional
uncertainty about the time at which such spectrum would be
available for commercial use.
With respect to our Auction #66 markets, several federal
government agencies have cleared or developed plans to clear
spectrum covered by licenses we and Denali License purchased in
Auction #66 or have indicated that we and Denali License
can operate on the spectrum without interfering with the
agencies current uses. While we do not expect spectrum
clearing issues to impact our near-term market launches, we
continue to work with one federal agency in other markets to
ensure that it either relocates its spectrum use to alternative
frequencies or confirms that we can operate on the spectrum
without interfering with its current uses. If our efforts with
this agency are not successful, the agencys continued use
of the spectrum could delay our launch of certain markets. In
addition, to the extent that we or Denali License are operating
on AWS spectrum and a federal government agency believes that
our planned or ongoing operations interfere with its current
uses, we may be required to immediately cease using the spectrum
in that particular market for a period of time until the
interference is resolved. Any temporary or extended shutdown of
one of our or Denali Licenses wireless networks in a
launched market could materially and adversely affect our
competitive position and results of operations.
Any failure to complete the build-out of our new markets on
budget or on time could delay the implementation of our
clustering and strategic expansion strategies, and could have a
material adverse effect on our business, results of operations
and financial condition.
If We
Are Unable to Manage Our Planned Growth, Our Operations Could Be
Adversely Impacted.
We have experienced substantial growth in a relatively short
period of time, and we expect to continue to experience growth
in the future in our existing and new markets. The management of
such growth will require, among other things, continued
development of our financial and management controls and
management
10
information systems, stringent control of costs and handset
inventories, diligent management of our network infrastructure
and its growth, increased spending associated with marketing
activities and acquisition of new customers, the ability to
attract and retain qualified management personnel and the
training of new personnel. In addition, continued growth will
eventually require the expansion of our billing, customer care
and sales systems and platforms, which will require additional
capital expenditures and may divert the time and attention of
management personnel who oversee any such expansion.
Furthermore, the implementation of any such systems or
platforms, including the transition to such systems or platforms
from our existing infrastructure, could result in unpredictable
technological or other difficulties. Failure to successfully
manage our expected growth and development, to enhance our
processes and management systems or to timely and adequately
resolve any such difficulties could have a material adverse
effect on our business, financial condition and results of
operations.
Our
Significant Indebtedness Could Adversely Affect Our Financial
Health and Prevent Us From Fulfilling Our
Obligations.
We have now and will continue to have a significant amount of
indebtedness. As of March 31, 2008, our total outstanding
indebtedness under our Credit Agreement was $884.3 million,
and we also had a $200 million undrawn revolving credit
facility (which forms part of our senior secured credit
facility). Indebtedness under our senior secured credit facility
bears interest at a variable rate, but we have entered into
interest rate swap agreements with respect to $355 million
of our indebtedness. We have also issued $1,100 million in
unsecured senior notes due 2014. In addition, looking forward we
may raise significant capital to finance business expansion
activities, which could consist of debt financing from the
public
and/or
private capital markets.
Our significant indebtedness could have material consequences.
For example, it could:
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make it more difficult for us to satisfy our debt obligations;
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increase our vulnerability to general adverse economic and
industry conditions;
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impair our ability to obtain additional financing in the future
for working capital needs, capital expenditures, building out
our network, acquisitions and general corporate purposes;
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require us to dedicate a substantial portion of our cash flows
from operations to the payment of principal and interest on our
indebtedness, thereby reducing the availability of our cash
flows to fund working capital needs, capital expenditures,
acquisitions and other general corporate purposes;
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limit our flexibility in planning for, or reacting to, changes
in our business and the industry in which we operate;
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place us at a disadvantage compared to our competitors that have
less indebtedness; and
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expose us to higher interest expense in the event of increases
in interest rates because indebtedness under our senior secured
credit facility bears interest at a variable rate.
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Any of these risks could impair our ability to fund our
operations or limit our ability to expand our business, which
could have a material adverse effect on our business, financial
condition and results of operations.
Despite
Current Indebtedness Levels, We May Incur Substantially More
Indebtedness. This Could Further Increase the Risks Associated
With Our Leverage.
We may incur significant additional indebtedness in the future
over time, as market conditions permit, to enable us to take
advantage of business expansion activities. The terms of our
senior unsecured indenture permit us, subject to specified
limitations, to incur additional indebtedness, including secured
indebtedness. In addition, our Credit Agreement permits us to
incur additional indebtedness under various financial ratio
tests.
If new indebtedness is added to our current levels of
indebtedness, the related risks that we now face could
intensify. Furthermore, the subsequent build-out of the networks
covered by the licenses we acquired in Auction #66 may
significantly reduce our free cash flow, increasing the risk
that we may not be able to service our indebtedness.
11
To
Service Our Indebtedness and Fund Our Working Capital and
Capital Expenditures, We Will Require a Significant Amount of
Cash. Our Ability to Generate Cash Depends on Many Factors
Beyond Our Control.
Our ability to make payments on our indebtedness will depend
upon our future operating performance and on our ability to
generate cash flow in the future, which are subject to general
economic, financial, competitive, legislative, regulatory and
other factors that are beyond our control. We cannot assure you
that our business will generate sufficient cash flow from
operations, or that future borrowings, including borrowings
under our revolving credit facility, will be available to us in
an amount sufficient to enable us to pay our indebtedness or to
fund our other liquidity needs, or at all. If the cash flow from
our operating activities is insufficient, we may take actions,
such as delaying or reducing capital expenditures (including
expenditures to build out our newly acquired wireless licenses),
attempting to restructure or refinance our indebtedness prior to
maturity, selling assets or operations or seeking additional
equity capital. Any or all of these actions may be insufficient
to allow us to service our debt obligations. Further, we may be
unable to take any of these actions on commercially reasonable
terms, or at all.
We May
Be Unable to Refinance Our Indebtedness.
We may need to refinance all or a portion of our indebtedness
before maturity. We cannot assure you that we will be able to
refinance any of our indebtedness, including under our senior
unsecured indenture or our Credit Agreement, on commercially
reasonable terms, or at all. There can be no assurance that we
will be able to obtain sufficient funds to enable us to repay or
refinance our debt obligations on commercially reasonable terms,
or at all.
Covenants
in Our Indenture and Credit Agreement and Other Credit
Agreements or Indentures That We May Enter Into in the Future
May Limit Our Ability To Operate Our Business.
Our senior unsecured indenture and Credit Agreement contain
covenants that restrict the ability of Leap, Cricket and the
subsidiary guarantors to make distributions or other payments to
our investors or creditors until we satisfy certain financial
tests or other criteria. In addition, the indenture and our
Credit Agreement include covenants restricting, among other
things, the ability of Leap, Cricket and their restricted
subsidiaries to:
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incur additional indebtedness;
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create liens or other encumbrances;
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place limitations on distributions from restricted subsidiaries;
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pay dividends, make investments, prepay subordinated
indebtedness or make other restricted payments;
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issue or sell capital stock of restricted subsidiaries;
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issue guarantees;
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sell or otherwise dispose of all or substantially all of our
assets;
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enter into transactions with affiliates; and
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make acquisitions or merge or consolidate with another entity.
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Under our Credit Agreement, we must also comply with, among
other things, financial covenants with respect to a maximum
consolidated senior secured leverage ratio and, if a revolving
credit loan or uncollateralized letter of credit is outstanding
or requested, with respect to a minimum consolidated interest
coverage ratio, a maximum consolidated leverage ratio and a
minimum consolidated fixed charge coverage ratio. The Credit
Agreement includes a $200 million revolving credit
facility, which was undrawn as of March 31, 2008. The
business expansion efforts we are pursuing in 2008 and 2009 will
decrease our consolidated fixed charge coverage ratio and could
prevent us from borrowing under the revolving credit facility
for several quarters, depending on the scope and pace of our
expansion efforts. We do not intend, however, to pursue business
expansion activities that would prevent us from borrowing under
the revolving credit facility unless we believe we have
sufficient liquidity to support the operating and capital
requirements for our business and any such expansion activities
without drawing on the revolving credit facility.
12
The restrictions in our Credit Agreement could also limit our
ability to make borrowings, obtain debt financing, repurchase
stock, refinance or pay principal or interest on our outstanding
indebtedness, complete acquisitions for cash or debt or react to
changes in our operating environment. Any credit agreement or
indenture that we may enter into in the future may have similar
restrictions.
Our Credit Agreement also prohibits the occurrence of a change
of control, which includes the acquisition of beneficial
ownership of 35% or more of Leaps equity securities, a
change in a majority of the members of Leaps board of
directors that is not approved by the board and the occurrence
of a change of control under any of our other credit
instruments. Under our indenture, if a change of
control occurs (which includes the acquisition of
beneficial ownership of 35% or more of Leaps equity
securities, a sale of all or substantially all of the assets of
Leap and its restricted subsidiaries and a change in a majority
of the members of Leaps board of directors that is not
approved by the board), each holder of the notes may require
Cricket to repurchase all of such holders notes at a
purchase price equal to 101% of the principal amount of the
notes, plus accrued and unpaid interest.
If we default under our indenture or our Credit Agreement
because of a covenant breach or otherwise, all outstanding
amounts thereunder could become immediately due and payable. Our
failure to timely file our Quarterly Report on
Form 10-Q
for the fiscal quarter ended September 30, 2007 constituted
a default under our Credit Agreement and indenture, and the
restatement of certain of our historical consolidated financial
information (as described in Note 2 to our consolidated
financial statements included in Part II
Item 8. Financial Statements and Supplementary Data
of our Annual Report on
Form 10-K,
as amended, for the year ended December 31, 2006 filed with
the SEC on December 26, 2007) may have constituted a
default under our Credit Agreement. Although we were able to
obtain limited waivers under our Credit Agreement with respect
to these events, we cannot assure you that we will be able to
obtain a waiver in the future should a default occur. We cannot
assure you that we would have sufficient funds to repay all of
the outstanding amounts under our indenture or our Credit
Agreement, and any acceleration of amounts outstanding would
have a material adverse effect on our liquidity and financial
condition.
Rises
in Interest Rates Could Adversely Affect Our Financial
Condition.
An increase in prevailing interest rates would have an immediate
effect on the interest rates charged on our variable rate debt,
which rise and fall upon changes in interest rates. As of
March 31, 2008, approximately 28% of our debt was variable
rate debt, after considering the effect of our interest rate
swap agreements. If prevailing interest rates or other factors
result in higher interest rates on our variable rate debt, the
increased interest expense would adversely affect our cash flow
and our ability to service our debt.
A
Majority of Our Assets Consists of Goodwill and Other Intangible
Assets.
As of March 31, 2008, 51.9% of our assets consisted of
goodwill and other intangibles, including wireless licenses. The
value of our assets, and in particular, our intangible assets,
will depend on market conditions, the availability of buyers and
similar factors. By their nature, our intangible assets may not
have a readily ascertainable market value or may not be saleable
or, if saleable, there may be substantial delays in their
liquidation. For example, prior FCC approval is required in
order for us to sell, or for any remedies to be exercised by our
lenders with respect to, our wireless licenses, and obtaining
such approval could result in significant delays and reduce the
proceeds obtained from the sale or other disposition of our
wireless licenses.
The
Wireless Industry is Experiencing Rapid Technological Change,
and We May Lose Customers If We Fail to Keep Up With These
Changes.
The wireless communications industry is experiencing significant
technological change, as evidenced by the ongoing improvements
in the capacity and quality of digital technology, the
development and commercial acceptance of wireless data services,
shorter development cycles for new products and enhancements and
changes in end-user requirements and preferences. In the future,
competitors may seek to provide competing wireless
telecommunications service through the use of developing
technologies such as Wi-Fi, WiMax, and VoIP. The cost of
implementing or competing against future technological
innovations may be prohibitive to us, and we may lose customers
if we fail to keep up with these changes.
13
For example, we have expended a substantial amount of capital to
upgrade our network with
CDMA2000®
1xEV-DO, or
EvDO, technology to offer advanced data services. However, if
such upgrades, technologies or services do not become
commercially acceptable, our revenues and competitive position
could be materially and adversely affected. We cannot assure you
that there will be widespread demand for advanced data services
or that this demand will develop at a level that will allow us
to earn a reasonable return on our investment.
In addition, CDMA2000 infrastructure networks could become less
popular in the future, which could raise the cost to us of
equipment and handsets that use that technology relative to the
cost of handsets and equipment that utilize other technologies.
The
Loss of Key Personnel and Difficulty Attracting and Retaining
Qualified Personnel Could Harm Our Business.
We believe our success depends heavily on the contributions of
our employees and on attracting, motivating and retaining our
officers and other management and technical personnel. We do
not, however, generally provide employment contracts to our
employees. If we are unable to attract and retain the qualified
employees that we need, our business may be harmed.
We have experienced higher than normal employee turnover in the
past, in part because of our bankruptcy, including turnover of
individuals at the most senior management levels. In addition,
our business is managed by a small number of key executive
officers, including our CEO, S. Douglas Hutcheson. During
September 2007, Amin Khalifa resigned as our executive vice
president and CFO and the board of directors appointed
Mr. Hutcheson to serve as acting CFO until we find a
successor to Mr. Khalifa. During February 2008, Grant
Burton, who had served as chief accounting officer and
controller since June 2005, assumed a new role as vice
president, financial systems and processes, and the board of
directors appointed Steven R. Martin, a consultant to the
company, to serve as acting chief accounting officer. In
addition, Jeffrey Nachbor joined us as our senior vice
president, financial operations in April 2008. We may have
difficulty attracting and retaining key personnel in future
periods, particularly if we were to experience poor operating or
financial performance. The loss of key individuals in the future
may have a material adverse impact on our ability to effectively
manage and operate our business.
Risks
Associated With Wireless Handsets Could Pose Product Liability,
Health and Safety Risks That Could Adversely Affect Our
Business.
We do not manufacture handsets or other equipment sold by us and
generally rely on our suppliers to provide us with safe
equipment. Our suppliers are required by applicable law to
manufacture their handsets to meet certain governmentally
imposed safety criteria. However, even if the handsets we sell
meet the regulatory safety criteria, we could be held liable
with the equipment manufacturers and suppliers for any harm
caused by products we sell if such products are later found to
have design or manufacturing defects. We generally have
indemnification agreements with the manufacturers who supply us
with handsets to protect us from direct losses associated with
product liability, but we cannot guarantee that we will be fully
protected against all losses associated with a product that is
found to be defective.
Media reports have suggested that the use of wireless handsets
may be linked to various health concerns, including cancer, and
may interfere with various electronic medical devices, including
hearing aids and pacemakers. Certain class action lawsuits have
been filed in the industry claiming damages for alleged health
problems arising from the use of wireless handsets. In addition,
interest groups have requested that the FCC investigate claims
that wireless technologies pose health concerns and cause
interference with airbags, hearing aids and other medical
devices. The media has also reported incidents of handset
battery malfunction, including reports of batteries that have
overheated. Malfunctions have caused at least one major handset
manufacturer to recall certain batteries used in its handsets,
including batteries in a handset sold by Cricket and other
wireless providers. Concerns over radio frequency emissions and
defective products may discourage the use of wireless handsets,
which could decrease demand for our services.
Concerns over possible safety risks could decrease the demand
for our services. For example, in the beginning of 2008, a
technical defect was discovered in one of our
manufacturers handsets which appeared to prevent a portion
of 911 calls from being heard by the operator. After learning of
the defect, we instructed our retail locations to temporarily
cease selling the handsets, notified our customers of the matter
and directed them to bring their
14
handsets into our retail locations to receive correcting
software. If one or more Cricket customers were harmed by a
defective product provided to us by a manufacturer and
subsequently sold in connection with our services, our ability
to add and maintain customers for Cricket service could be
materially adversely affected by negative public reactions.
There also are some safety risks associated with the use of
wireless handsets while driving. Concerns over these safety
risks and the effect of any legislation that has been and may be
adopted in response to these risks could limit our ability to
sell our wireless service.
We
Rely Heavily on Third Parties to Provide Specialized Services; a
Failure by Such Parties to Provide the Agreed Upon Services
Could Materially Adversely Affect Our Business, Results of
Operations and Financial Condition.
We depend heavily on suppliers and contractors with specialized
expertise in order for us to efficiently operate our business.
In the past, our suppliers, contractors and third-party
retailers have not always performed at the levels we expect or
at the levels required by their contracts. If key suppliers,
contractors or third-party retailers fail to comply with their
contracts, fail to meet our performance expectations or refuse
or are unable to supply us in the future, our business could be
severely disrupted. Generally, there are multiple sources for
the types of products we purchase. However, some suppliers,
including software suppliers, are the exclusive sources of their
specific products. Because of the costs and time lags that can
be associated with transitioning from one supplier to another,
our business could be substantially disrupted if we were
required to replace the products or services of one or more
major suppliers with products or services from another source,
especially if the replacement became necessary on short notice.
Any such disruption could have a material adverse affect on our
business, results of operations and financial condition.
System
Failures Could Result in Higher Churn, Reduced Revenue and
Increased Costs, and Could Harm Our Reputation.
Our technical infrastructure (including our network
infrastructure and ancillary functions supporting our network
such as service activation, billing and customer care) is
vulnerable to damage or interruption from technology failures,
power loss, floods, windstorms, fires, human error, terrorism,
intentional wrongdoing, or similar events. Unanticipated
problems at our facilities, system failures, hardware or
software failures, computer viruses or hacker attacks could
affect the quality of our services and cause network service
interruptions. In addition, we are in the process of upgrading
some of our internal network systems, and we cannot assure you
that we will not experience delays or interruptions while we
transition our data and existing systems onto our new systems.
Any failure in or interruption of systems that we or third
parties maintain to support ancillary functions, such as
billing, customer care and financial reporting, could materially
impact our ability to timely and accurately record, process and
report information important to our business. If any of the
above events were to occur, we could experience higher churn,
reduced revenues and increased costs, any of which could harm
our reputation and have a material adverse effect on our
business.
To accommodate expected growth in our business, management has
been considering replacing our customer billing and activation
system, which we license from a third party. The vendor who
licenses the software to us and provides certain billing
services to us has a contract with us through 2010. The vendor
has developed a new billing product and has introduced that
product in a limited number of markets operated by another
wireless carrier. The vendor was working to adapt the new
billing product for our use, but we are now unlikely to use this
product because the vendor has announced that it intends to exit
the billing business. The vendor is currently exploring
alternative exit strategies, including selling its business to a
third party. If the vendor or its successor does not provide us
with an improved billing system in the future, we might choose
to terminate our contract for convenience and purchase billing
services from a different vendor if we believed it was necessary
to do so to meet the requirements of our business. In such an
event, we may owe substantial termination fees.
15
We May
Not Be Successful in Protecting and Enforcing Our Intellectual
Property Rights.
We rely on a combination of patent, service mark, trademark, and
trade secret laws and contractual restrictions to establish and
protect our proprietary rights, all of which only offer limited
protection. We endeavor to enter into agreements with our
employees and contractors and agreements with parties with whom
we do business in order to limit access to and disclosure of our
proprietary information. Despite our efforts, the steps we have
taken to protect our intellectual property may not prevent the
misappropriation of our proprietary rights. Moreover, others may
independently develop processes and technologies that are
competitive to ours. The enforcement of our intellectual
property rights may depend on any legal actions that we
undertake against such infringers being successful, but we
cannot be sure that any such actions will be successful, even
when our rights have been infringed.
We cannot assure you that our pending, or any future, patent
applications will be granted, that any existing or future
patents will not be challenged, invalidated or circumvented,
that any existing or future patents will be enforceable, or that
the rights granted under any patent that may issue will provide
competitive advantages to us. For example, see
Part II Item 1. Legal
Proceedings of our Quarterly Report on
Form 10-Q
for the three months ended March 31, 2008 filed with the
SEC on May 12, 2008 for a description of our patent
litigation with MetroPCS Communications, Inc., or MetroPCS, and
other affiliated entities. We intend to vigorously defend
against the matters brought by the MetroPCS entities. Due to the
complex nature of the legal and factual issues involved,
however, the outcome of these matters is not presently
determinable. If the MetroPCS entities were to prevail in any of
these matters, it could have a material adverse effect on our
business, financial condition and results of operations.
In addition to these outstanding matters, we cannot assure you
that any trademark or service mark registrations will be issued
with respect to pending or future applications or that any
registered trademarks or service marks will be enforceable or
provide adequate protection of our brands. Our inability to
secure trademark or service mark protection with respect to our
brands could have a material adverse effect on our business,
financial condition and results of operations.
We and
Our Suppliers May Be Subject to Claims of Infringement Regarding
Telecommunications Technologies That Are Protected By Patents
and Other Intellectual Property Rights.
Telecommunications technologies are protected by a wide array of
patents and other intellectual property rights. As a result,
third parties may assert infringement claims against us or our
suppliers from time to time based on our or their general
business operations, the equipment, software or services that we
or they use or provide, or the specific operation of our
wireless networks. For example, see
Part II Item 1. Legal
Proceedings of our Quarterly Report on
Form 10-Q
for the three months ended March 31, 2008 filed with the SEC on
May 12, 2008 for a description of certain patent
infringement lawsuits that have been brought against us.
We generally have indemnification agreements with the
manufacturers, licensors and suppliers who provide us with the
equipment, software and technology that we use in our business
to protect us against possible infringement claims, but we
cannot guarantee that we will be fully protected against all
losses associated with infringement claims. Our suppliers may be
subject to infringement claims that could prevent or make it
more expensive for them to supply us with the products and
services we require to run our business. For example, we
purchase certain CDMA handsets that incorporate EvDO chipsets
manufactured by Qualcomm Incorporated, or Qualcomm, which are
the subject of patent infringement actions brought by Broadcom
Corporation in separate proceedings before the United States
International Trade Commission, or ITC, and the United States
District Court for the Central District of California. Both the
ITC and District Court have issued orders in their proceedings
that prevent or limit Qualcomms ability, subject to
various conditions and timelines, to sell, import or support the
infringing chips, and restrict third parties from importing the
handsets that incorporate the chips. Although these orders are
currently on appeal and the ITC order is stayed as to certain
third parties (including most of our handset suppliers), these
patent infringement actions could have the effect of slowing or
limiting our ability to introduce and offer EvDO handsets and
devices to our customers. Moreover, we may be subject to claims
that products, software and services provided by different
vendors which we combine to offer our services may infringe the
rights of third parties, and we may not have any indemnification
from our vendors for these claims. Whether or not an
infringement claim against us or a supplier was valid or
successful, it could adversely affect our business by diverting
management
16
attention, involving us in costly and time-consuming litigation,
requiring us to enter into royalty or licensing agreements
(which may not be available on acceptable terms, or at all) or
requiring us to redesign our business operations or systems to
avoid claims of infringement. In addition, infringement claims
against our suppliers could also require us to purchase products
and services at higher prices or from different suppliers and
could adversely affect our business by delaying our ability to
offer certain products and services to our customers.
Regulation
by Government Agencies May Increase Our Costs of Providing
Service or Require Us to Change Our Services.
The FCC regulates the licensing, construction, modification,
operation, ownership, sale and interconnection of wireless
communications systems, as do some state and local regulatory
agencies. We cannot assure you that the FCC or any state or
local agencies having jurisdiction over our business will not
adopt regulations or take other enforcement or other actions
that would adversely affect our business, impose new costs or
require changes in current or planned operations. For example,
in 2007 the FCC released an order implementing certain
recommendations of an independent panel reviewing the impact of
Hurricane Katrina on communications networks, which requires
that wireless carriers provide emergency
back-up
power sources for their equipment and facilities, including up
to 24 hours of emergency power for mobile switch offices
and up to eight hours for cell site locations. In order for us
to comply with the new requirements should they become
effective, we may need to purchase additional equipment, obtain
additional state and local permits, authorizations and approvals
or incur additional operating expenses, and such costs could be
material. In addition, state regulatory agencies are
increasingly focused on the quality of service and support that
wireless carriers provide to their customers and several
agencies have proposed or enacted new and potentially burdensome
regulations in this area.
In addition, we cannot assure you that the Communications Act of
1934, as amended, or the Communications Act, from which the FCC
obtains its authority, will not be further amended in a manner
that could be adverse to us. The FCC recently implemented rule
changes and sought comment on further rule changes focused on
addressing alleged abuses of its designated entity program,
which gives certain categories of small businesses preferential
treatment in FCC spectrum auctions based on size. In that
proceeding, the FCC has re-affirmed its goals of ensuring that
only legitimate small businesses benefit from the program, and
that such small businesses are not controlled or manipulated by
larger wireless carriers or other investors that do not meet the
small business qualification tests. We cannot predict the degree
to which rule changes or increased regulatory scrutiny that may
follow from this proceeding will affect our current or future
business ventures or our participation in future FCC spectrum
auctions.
Under existing law, no more than 20% of an FCC licensees
capital stock may be owned, directly or indirectly, or voted by
non-U.S. citizens
or their representatives, by a foreign government or its
representatives or by a foreign corporation. If an FCC licensee
is controlled by another entity (as is the case with Leaps
ownership and control of subsidiaries that hold FCC licenses),
up to 25% of that entitys capital stock may be owned or
voted by
non-U.S. citizens
or their representatives, by a foreign government or its
representatives or by a foreign corporation. Foreign ownership
above the 25% holding company level may be allowed if the FCC
finds such higher levels consistent with the public interest.
The FCC has ruled that higher levels of foreign ownership, even
up to 100%, are presumptively consistent with the public
interest with respect to investors from certain nations. If our
foreign ownership were to exceed the permitted level, the FCC
could revoke our wireless licenses, which would have a material
adverse effect on our business, financial condition and results
of operations. Although we could seek a declaratory ruling from
the FCC allowing the foreign ownership or could take other
actions to reduce our foreign ownership percentage in order to
avoid the loss of our licenses, we cannot assure you that we
would be able to obtain such a ruling or that any other actions
we may take would be successful.
Our operations are subject to various other regulations,
including those regulations promulgated by the Federal Trade
Commission, the Federal Aviation Administration, the
Environmental Protection Agency, the Occupational Safety and
Health Administration and state and local regulatory agencies
and legislative bodies. Adverse decisions or regulations of
these regulatory bodies could negatively impact our operations
and costs of doing business. Because of our smaller size,
governmental regulations and orders can significantly increase
our costs and affect our competitive position compared to other
larger telecommunications providers. We are unable to predict
the scope, pace or financial impact of regulations and other
policy changes that could be adopted by the various governmental
entities that oversee portions of our business.
17
If
Call Volume Under Our Cricket Service Exceeds Our Expectations,
Our Costs of Providing Service Could Increase, Which Could Have
a Material Adverse Effect on Our Competitive
Position.
Cricket customers generally use their handsets for an average of
approximately 1,500 minutes per month, and some markets
experience substantially higher call volumes. Our Cricket
service plans bundle certain features, long distance and
unlimited service in Cricket calling areas for a fixed monthly
fee to more effectively compete with other telecommunications
providers. If customers exceed expected usage, we could face
capacity problems and our costs of providing the services could
increase. Although we own less spectrum in many of our markets
than our competitors, we seek to design our network to
accommodate our expected high call volume, and we consistently
assess and try to implement technological improvements to
increase the efficiency of our wireless spectrum. However, if
future wireless use by Cricket customers exceeds the capacity of
our network, service quality may suffer. We may be forced to
raise the price of Cricket service to reduce volume or otherwise
limit the number of new customers, or incur substantial capital
expenditures to improve network capacity or quality.
We May
Be Unable to Acquire Additional Spectrum in the Future at a
Reasonable Cost or on a Timely Basis.
Because we offer unlimited calling services for a fixed fee, our
customers average minutes of use per month is
substantially above the U.S. wireless customer average. We
intend to meet this demand by utilizing spectrally efficient
technologies. Despite our recent spectrum purchases, there may
come a point where we need to acquire additional spectrum in
order to maintain an acceptable grade of service or provide new
services to meet increasing customer demands. We also intend to
acquire additional spectrum in order to enter new strategic
markets. However, we cannot assure you that we will be able to
acquire additional spectrum at auction or in the after-market at
a reasonable cost or that additional spectrum would be made
available by the FCC on a timely basis. If such additional
spectrum is not available to us when required or at a reasonable
cost, our results of operations could be adversely affected.
Our
Wireless Licenses are Subject to Renewal, and May Be Revoked in
the Event that We Violate Applicable Laws.
Our existing wireless licenses are subject to renewal upon the
expiration of the
10-year or
15-year
period for which they are granted, which renewal period
commenced for some of our PCS wireless licenses in 2006. The FCC
will award a renewal expectancy to a wireless licensee that
timely files a renewal application, has provided substantial
service during its past license term and has substantially
complied with applicable FCC rules and policies and the
Communications Act. The FCC has routinely renewed wireless
licenses in the past. However, the Communications Act provides
that licenses may be revoked for cause and license renewal
applications denied if the FCC determines that a renewal would
not serve the public interest. FCC rules provide that
applications competing with a license renewal application may be
considered in comparative hearings, and establish the
qualifications for competing applications and the standards to
be applied in hearings. We cannot assure you that the FCC will
renew our wireless licenses upon their expiration.
Future
Declines in the Fair Value of Our Wireless Licenses Could Result
in Future Impairment Charges.
As of March 31, 2008, the carrying value of our wireless
licenses and those of Denali License and LCW License was
approximately $1.9 billion. During the years ended
December 31, 2007, 2006 and 2005, we recorded impairment
charges of $1.0 million, $7.9 million and
$12.0 million, respectively.
The market values of wireless licenses have varied dramatically
over the last several years, and may vary significantly in the
future. In particular, valuation swings could occur if:
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consolidation in the wireless industry allows or requires
carriers to sell significant portions of their wireless spectrum
holdings;
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a sudden large sale of spectrum by one or more wireless
providers occurs; or
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market prices decline as a result of the sale prices in FCC
auctions.
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In addition, the price of wireless licenses could decline as a
result of the FCCs pursuit of policies designed to
increase the number of wireless licenses available in each of
our markets. For example, the FCC has recently auctioned
additional spectrum in the 1700 MHz to 2100 MHz band
in Auction #66 and the 700 MHz band in
Auction #73, and has announced that it intends to auction
additional spectrum in the 2.5 GHz band. If the market
value of wireless licenses were to decline significantly, the
value of our wireless licenses could be subject to non-cash
impairment charges.
We assess potential impairments to our indefinite-lived
intangible assets, including wireless licenses, annually and
when there is evidence that events or changes in circumstances
indicate that an impairment condition may exist. We conduct our
annual tests for impairment of our wireless licenses during the
third quarter of each year. Estimates of the fair value of our
wireless licenses are based primarily on available market
prices, including successful bid prices in FCC auctions and
selling prices observed in wireless license transactions,
pricing trends among historical wireless license transactions,
our spectrum holdings within a given market relative to other
carriers holdings and qualitative demographic and economic
information concerning the areas that comprise our markets. A
significant impairment loss could have a material adverse effect
on our operating income and on the carrying value of our
wireless licenses on our balance sheet.
Declines
in Our Operating Performance Could Ultimately Result in an
Impairment of Our Indefinite-Lived Assets, Including Goodwill,
or Our Long-Lived Assets, Including Property and
Equipment.
We assess potential impairments to our long-lived assets,
including property and equipment and certain intangible assets,
when there is evidence that events or changes in circumstances
indicate that the carrying value may not be recoverable. We
assess potential impairments to indefinite-lived intangible
assets, including goodwill and wireless licenses, annually and
when there is evidence that events or changes in circumstances
indicate that an impairment condition may exist. If we do not
achieve our planned operating results, this may ultimately
result in a non-cash impairment charge related to our long-lived
and/or our
indefinite-lived intangible assets. A significant impairment
loss could have a material adverse effect on our operating
results and on the carrying value of our goodwill or wireless
licenses
and/or our
long-lived assets on our balance sheet.
We May
Incur Higher Than Anticipated Intercarrier Compensation
Costs.
When our customers use our service to call customers of other
carriers, we are required under the current intercarrier
compensation scheme to pay the carrier that serves the called
party. Similarly, when a customer of another carrier calls one
of our customers, that carrier is required to pay us. While in
most cases we have been successful in negotiating agreements
with other carriers that impose reasonable reciprocal
compensation arrangements, some carriers have claimed a right to
unilaterally impose what we believe to be unreasonably high
charges on us. The FCC is actively considering possible
regulatory approaches to address this situation but we cannot
assure you that the FCC rulings will be beneficial to us. An
adverse ruling or FCC inaction could result in carriers
successfully collecting higher intercarrier fees from us, which
could adversely affect our business.
The FCC also is considering making various significant changes
to the intercarrier compensation scheme to which we are subject.
We cannot predict with any certainty the likely outcome of this
FCC proceeding. Some of the alternatives that are under active
consideration by the FCC could severely increase the
interconnection costs we pay. If we are unable to
cost-effectively provide our products and services to customers,
our competitive position and business prospects could be
materially adversely affected.
If We
Experience High Rates of Credit Card, Subscription or Dealer
Fraud, Our Ability to Generate Cash Flow Will
Decrease.
Our operating costs can increase substantially as a result of
customer credit card, subscription or dealer fraud. We have
implemented a number of strategies and processes to detect and
prevent efforts to defraud us, and we believe that our efforts
have substantially reduced the types of fraud we have
identified. However, if our strategies are not successful in
detecting and controlling fraud in the future, the resulting
loss of revenue or increased expenses could have a material
adverse impact on our financial condition and results of
operations.
19
Risks
Related to this Offering and Ownership of Our Common
Stock
Our
Stock Price May Be Volatile, and You May Lose All or Some of
Your Investment.
The trading prices of the securities of telecommunications
companies have been highly volatile. Accordingly, the trading
price of Leap common stock has been, and is likely to be,
subject to wide fluctuations. Factors affecting the trading
price of Leap common stock may include, among other things:
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variations in our operating results or those of our competitors;
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announcements of technological innovations, new services or
service enhancements, strategic alliances or significant
agreements by us or by our competitors;
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entry of new competitors into our markets;
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significant developments with respect to our intellectual
property or related litigation;
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the announcements and bidding of auctions for new spectrum;
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recruitment or departure of key personnel;
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changes in the estimates of our operating results or changes in
recommendations by any securities analysts that elect to follow
Leap common stock;
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any default under our Credit Agreement or our indenture because
of a covenant breach or otherwise; and
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market conditions in our industry and the economy as a whole.
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We May
Elect To Raise Additional Equity Capital Which May Dilute
Existing Stockholders.
We may raise significant capital to finance business expansion
activities, which could consist of debt, convertible debt
and/or
equity financing from the public
and/or
private capital markets. To the extent that we elect to raise
convertible debt or equity capital, this financing may not be
available in sufficient amounts or on terms acceptable to us and
may be dilutive to existing stockholders. In addition, these
sales could reduce the trading price of Leaps common stock
and impede our ability to raise future capital. If we required
additional financing in the capital markets to take advantage of
business expansion activities or to accelerate our pace of new
market launches and could not obtain such financing on terms we
found acceptable, we would likely reduce our investment in
expansion activities or slow the pace of expansion activities to
match our capital requirements to our available liquidity.
Your
Ownership Interest in Leap Will Be Diluted Upon Issuance of
Shares We Have Reserved for Future Issuances, and Future
Issuances or Sales of Such Shares May Adversely Affect The
Market Price of Leaps Common Stock.
As of May 2, 2008, 68,986,506 shares of Leap common
stock were issued and outstanding, and 7,153,494 additional
shares of Leap common stock were reserved for issuance,
including 5,821,055 shares reserved for issuance upon
exercise of awards granted or available for grant under
Leaps 2004 Stock Option, Restricted Stock and Deferred
Stock Unit Plan, as amended, 732,439 shares reserved for
issuance under Leaps Employee Stock Purchase Plan, and
600,000 shares reserved for issuance upon exercise of
outstanding warrants.
In addition, Leap has reserved five percent of its outstanding
shares, which represented 3,449,325 shares of common stock
as of May 2, 2008, for potential issuance to CSM upon the
exercise of CSMs option to put its entire equity interest
in LCW Wireless to Cricket. CSMs put right generally
expires on July 1, 2014. Under the amended and restated
limited liability company agreement with CSM and WLPCS, the
purchase price for CSMs equity interest is calculated on a
pro rata basis using either the appraised value of LCW Wireless
or a multiple of Leaps enterprise value divided by its
adjusted earnings before interest, taxes, depreciation and
amortization, or EBITDA, and applied to LCW Wireless
adjusted EBITDA to impute an enterprise value and equity value
for LCW Wireless. Cricket may satisfy the put price either in
cash or in Leap common stock, or a combination thereof, as
determined by Cricket in its discretion. However, the covenants
in the Credit Agreement do not permit Cricket to satisfy any
substantial portion of its put obligations to CSM in cash. If
Cricket elects to satisfy its put obligations to CSM with
20
Leap common stock, the obligations of the parties are
conditioned upon the block of Leap common stock issuable to CSM
not constituting more than five percent of Leaps
outstanding common stock at the time of issuance. Dilution of
the outstanding number of shares of Leaps common stock
could adversely affect prevailing market prices for Leaps
common stock.
We have agreed to prepare and file a resale shelf registration
statement for any shares of Leap common stock issued to CSM in
connection with the put, and to use our reasonable efforts to
cause such registration statement to be declared effective by
the SEC. In addition, we have registered all shares of common
stock that we may issue under our stock option, restricted stock
and deferred stock unit plan and under our employee stock
purchase plan. When we issue shares under these stock plans,
they can be freely sold in the public market. If any of
Leaps stockholders cause a large number of securities to
be sold in the public market, these sales could reduce the
trading price of Leaps common stock. These sales also
could impede our ability to raise future capital.
Our
Directors and Affiliated Entities Have Substantial Influence
over Our Affairs, and Our Ownership Is Highly Concentrated.
Sales of a Significant Number of Shares by Large Stockholders
May Adversely Affect the Market Price of Leap Common
Stock.
Our directors and entities affiliated with them beneficially
owned in the aggregate approximately 23.0% of Leap common stock
as of May 2, 2008. Moreover, our four largest stockholders
and entities affiliated with them beneficially owned in the
aggregate approximately 59.5% of Leap common stock as of
May 2, 2008. These stockholders have the ability to exert
substantial influence over all matters requiring approval by our
stockholders. These stockholders will be able to influence the
election and removal of directors and any merger, consolidation
or sale of all or substantially all of Leaps assets and
other matters. This concentration of ownership could have the
effect of delaying, deferring or preventing a change in control
or impeding a merger or consolidation, takeover or other
business combination.
Our resale shelf registration statement, as amended, of which
this prospectus forms a part, registers for resale
11,755,806 shares of Leap common stock held by entities
affiliated with one of our directors, or approximately 17.0% of
Leaps outstanding common stock as of May 2, 2008. We
are unable to predict the potential effect that sales into the
market of any material portion of such shares, or any of the
other shares held by our other large stockholders and entities
affiliated with them, may have on the then-prevailing market
price of Leap common stock. If any of Leaps stockholders
cause a large number of securities to be sold in the public
market, these sales could reduce the trading price of Leap
common stock. These sales could also impede our ability to raise
future capital.
Provisions
in Our Amended and Restated Certificate of Incorporation and
Bylaws or Delaware Law, and Provisions in Our Credit Agreement
and Indenture, Might Discourage, Delay or Prevent a Change in
Control of Our Company or Changes in Our Management and,
Therefore, Depress The Trading Price of Our Common
Stock.
Our amended and restated certificate of incorporation and bylaws
contain provisions that could depress the trading price of Leap
common stock by acting to discourage, delay or prevent a change
in control of our company or changes in our management that our
stockholders may deem advantageous. These provisions:
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require super-majority voting to amend some provisions in our
amended and restated certificate of incorporation and bylaws;
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authorize the issuance of blank check preferred
stock that our board of directors could issue to increase the
number of outstanding shares to discourage a takeover attempt;
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prohibit stockholder action by written consent, and require that
all stockholder actions be taken at a meeting of our
stockholders;
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provide that the board of directors is expressly authorized to
make, alter or repeal our bylaws; and
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establish advance notice requirements for nominations for
elections to our board or for proposing matters that can be
acted upon by stockholders at stockholder meetings.
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21
We are also subject to Section 203 of the Delaware General
Corporation Law, which generally prohibits a Delaware
corporation from engaging in any of a broad range of business
combinations with any interested stockholder for a
period of three years following the date on which the
stockholder became an interested stockholder and
which may discourage, delay or prevent a change in control of
our company.
In addition, our Credit Agreement also prohibits the occurrence
of a change of control and, under our indenture, if a
change of control occurs, each holder of the notes
may require Cricket to repurchase all of such holders
notes at a purchase price equal to 101% of the principal amount
of the notes, plus accrued and unpaid interest. See Part
1 Item 2. Managements Discussion and Analysis
of Financial Condition and Results of Operations
Liquidity and Capital Resources of our Quarterly Report on
Form 10-Q for the three months ended March 31, 2008 filed
with the SEC on May 12, 2008.
22
USE OF
PROCEEDS
We will not receive any of the proceeds from the sale of the
shares by the selling stockholders.
PRICE
RANGE OF LEAP COMMON STOCK
Our common stock traded on the OTC Bulletin Board until
August 16, 2004 under the symbol LWINQ. When we
emerged from our Chapter 11 proceedings on August 16,
2004, all of our formerly outstanding common stock was cancelled
in accordance with our plan of reorganization and our former
common stockholders ceased to have any ownership interest in us.
The new shares of our common stock issued under our plan of
reorganization traded on the OTC Bulletin Board under the
symbol LEAP. Commencing on June 29, 2005, our
common stock became listed for trading on the Nasdaq National
Market (now known as the Nasdaq Global Market) under the symbol
LEAP. Commencing on July 1, 2006, our common
stock became listed for trading on the Nasdaq Global Select
Market, also under the symbol LEAP.
The following table sets forth the high and low closing prices
per share of our common stock for the quarterly periods
indicated, which correspond to our quarterly fiscal periods for
financial reporting purposes. Through June 30, 2006, prices
for our common stock are sales prices on the Nasdaq National
Market. On and after July 1, 2006, prices for our common
stock are sales prices on the Nasdaq Global Select Market.
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High($)
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Low($)
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Calendar Year 2006
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First Quarter
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43.89
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34.87
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Second Quarter
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47.41
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39.84
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Third Quarter
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48.18
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40.87
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Fourth Quarter
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61.37
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47.26
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Calendar Year 2007
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First Quarter
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68.24
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58.00
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Second Quarter
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87.46
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66.84
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Third Quarter
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98.33
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54.47
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Fourth Quarter
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83.74
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32.01
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Calendar Year 2008
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First Quarter
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49.76
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36.24
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Second Quarter through May 15, 2008
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60.03
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47.89
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On May 15, 2008, the last reported sale price of
Leaps common stock on the Nasdaq Global Select Market was
$60.03 per share. As of May 2, 2008, there were
68,896,506 shares of common stock outstanding held by
approximately 257 holders of record.
DIVIDEND
POLICY
Leap has never paid or declared any cash dividends on its common
stock and we do not anticipate paying any cash dividends on Leap
common stock in the foreseeable future. The terms of our Credit
Agreement and the indenture governing our unsecured senior notes
restrict our ability to declare or pay dividends. We intend to
retain future earnings, if any, to fund our growth. Any future
payment of dividends to our stockholders will depend on
decisions that will be made by our board of directors and will
depend on then existing conditions, including our financial
condition, contractual restrictions, capital requirements and
business prospects.
23
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table contains information about the beneficial
ownership of our common stock as of May 2, 2008 for:
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each stockholder known by us to beneficially own more than 5% of
our common stock;
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each of our directors;
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each of our named executive officers; and
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all directors and executive officers as a group.
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The percentage of ownership indicated in the following table is
based on 68,986,506 shares of common stock outstanding on
May 2, 2008.
Information with respect to beneficial ownership has been
furnished by each director and officer, and with respect to
beneficial owners of more than 5% of our common stock, by
Schedules 13D and 13G, filed with the SEC by them. Beneficial
ownership is determined in accordance with the rules of the SEC.
Except as indicated by footnote and subject to community
property laws where applicable, to our knowledge, the persons
named in the table below have sole voting and investment power
with respect to all shares of common stock shown as beneficially
owned by them. In computing the number of shares beneficially
owned by a person and the percentage ownership of that person,
shares of common stock subject to options or warrants held by
that person that are currently exercisable or will become
exercisable within 60 days after May 2, 2008 are
deemed outstanding, while such shares are not deemed outstanding
for purposes of computing percentage ownership of any other
person.
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Number of
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Percent of
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5% Stockholders, Directors and Officers(1)
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Shares
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Total
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Entities affiliated with Harbinger Capital Partners Master
Fund I, Ltd.(2)
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10,225,000
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14.8
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Entities affiliated with MHR Fund Management LLC(3)
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15,537,869
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22.5
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Entities affiliated with Owl Creek Asset Management, L.P.(4)
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6,224,347
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9.0
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T. Rowe Price Associates, Inc.(5)
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9,010,650
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13.1
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Mark H. Rachesky, M.D.(6)(7)
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15,581,543
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22.6
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John D. Harkey, Jr.(7)
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15,974
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*
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Robert V. LaPenta(7)(8)
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30,974
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*
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Michael B. Targoff(7)
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7,974
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*
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S. Douglas Hutcheson(9)
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256,311
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*
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Amin I. Khalifa(10)
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*
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Glenn T. Umetsu(11)
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80,772
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*
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Albin F. Moschner(12)
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210,009
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*
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Leonard C. Stephens(13)
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65,475
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*
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All directors and executive officers as a group (11 persons)
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16,358,307
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23.7
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* |
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Represents beneficial ownership of less than 1.0% of the
outstanding shares of common stock. |
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(1) |
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Unless otherwise indicated, the address for each person or
entity named below is
c/o Leap
Wireless International, Inc., 10307 Pacific Center Court,
San Diego, California 92121. |
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(2) |
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Consists of (a) 6,800,000 shares of common stock
beneficially owned by Harbinger Capital Partners Master
Fund I, Ltd., Harbinger Capital Partners Offshore Manager,
L.L.C. and HMC Investors, L.L.C.; (b) 3,425,000 shares
of common stock beneficially owned by Harbinger Capital Partners
Special Situations Fund, L.P., Harbinger Capital Partners
Special Situations GP, LLC and HMC New York, Inc.;
and (c) 10,225,000 shares of common stock beneficially
owned by Harbert Management Corporation, Philip Falcone, Raymond
J. Harbert and Michael D. Luce. The address for Harbinger
Capital Partners Master Fund I, Ltd is
c/o International
Fund Services (Ireland) Limited, Third Floor, Bishops
Square, Redmonds Hill, Dublin 2, Ireland. The address for
Harbinger Capital Partners Special Situations Fund, L.P.,
Harbinger Capital |
24
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Partners Special Situations GP, LLC, HMC New York,
Inc. and Philip Falcone is 555 Madison Avenue,
16th
Floor, New York, New York 10022 United States of America. The
address for Harbinger Capital Partners Offshore Manager, L.L.C.,
HMC Investors, L.L.C., Harbert Management Corporation, Raymond
J. Harbert and Michael D. Luce is One Riverchase Parkway South,
Birmingham, Alabama 35244. |
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(3) |
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Consists of (a) 353,420 shares of common stock held
for the account of MHR Capital Partners Master Account LP, a
limited partnership organized in Anguilla, British West Indies
(Master Account), (b) 42,514 shares of
common stock held for the account of MHR Capital Partners
(100) LP, a Delaware limited partnership (Capital
Partners (100)) (c) 3,340,378 shares of common
stock held for the account of MHR Institutional Partners II
LP, a Delaware limited partnership (Institutional Partners
II), (d) 8,415,428 shares of common stock held
for the account of MHR Institutional Partners IIA LP, a Delaware
limited partnership (Institutional Partners IIA) and
(e) 3,386,129 shares of common stock held for the
account of MHR Institutional Partners III LP, a Delaware
limited partnership (Institutional Partners III).
MHR Advisors LLC (Advisors) is the general partner
of each Master Account and Capital Partners (100), and in such
capacity, may be deemed to be the beneficial owner of the shares
of common stock held by Master Account and Capital Partners
(100). MHR Institutional Advisors II LLC
(Institutional Advisors II) is the general partner
of Institutional Partners II and Institutional Partners
IIA, and in such capacity, may be deemed to be the beneficial
owner of the shares of common stock held by Institutional
Partners II and Institutional Partners IIA. MHR
Institutional Advisors III LLC (Institutional
Advisors III) is the general partner of Institutional
Advisors III, and in such capacity, may be deemed to be the
beneficial owner of the shares of common stock held by
Institutional Partners III. MHR Fund Management LLC
(Fund Management) has entered into an
investment management agreement with Master Account, Capital
Partners (100), Institutional Partners II, Institutional
Partners IIA and Institutional Partners III and thus may be
deemed to be the beneficial owner of all of the shares of common
stock held by all of these entities. The address for each of
these entities is 40 West 57th Street, 24th Floor, New
York, New York 10019. |
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(4) |
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Consists of (a) 173,500 shares of common stock
beneficially owned by Owl Creek I, L.P.;
(b) 1,355,200 shares of common stock beneficially
owned by Owl Creek II, L.P., (c) 4,546,747 shares of
common stock beneficially owned by Owl Creek Overseas Fund, Ltd.
and (d) 148,900 shares of common stock beneficially
owned by Owl Creek Socially Responsible Investment Fund, Ltd.
Owl Creek Advisors, LLC is the general partner of Owl
Creek I, L.P. and Owl Creek II, L.P. Owl Creek Asset
Management, L.P. is the investment manager of Owl Creek Overseas
Fund, Ltd. and Owl Creek Socially Responsible Investment Fund,
Ltd. Jeffrey Altman is the managing member of Owl Creek
Advisors, LLC and managing member of the general partner of Owl
Creek Asset Management, L.P. The address for all of the entities
is 640 Fifth Avenue,
20th
Floor, New York, NY 10019. |
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(5) |
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These securities are owned by various individuals and
institutional investors, for which T. Rowe Price Associates,
Inc. (Price Associates) serves as investment adviser with power
to direct investments and/or sole power to vote the securities.
For purposes of the reporting requirements of the Exchange Act,
Price Associates is deemed to be a beneficial owner of such
securities; however, Price Associates expressly disclaims that
it is, in fact, the beneficial owner of such securities. |
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(6) |
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Consists of (a) all of the shares of common stock otherwise
described in footnote 3 by virtue of Dr. Racheskys
position as the managing member of each of Fund Management,
Advisors, Institutional Advisors II and Institutional
Advisors III, (b) 40,200 shares of common stock
issuable upon exercise of options and 2,719 shares of
restricted stock, as further described in footnote 7 and
(c) 755 shares of common stock which were previously
granted as shares of restricted stock and which vested pursuant
to its terms. The address for Dr. Rachesky is 40 West
57th
Street, 24th Floor, New York, New York 10019. |
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(7) |
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Includes vested shares issuable upon exercise of options, as
follows: Dr. Rachesky, 40,200 shares; Mr. Harkey,
2,500 shares; Mr. Targoff, 4,500 shares; and
Mr. LaPenta, 12,500 shares; restricted stock awards
which vest in three equal installments on May 18, 2007,
2008 and 2009, as follows: Dr. Rachesky, 2,264 shares;
Mr. Harkey, 2,264 shares; Mr. Targoff,
2,264 shares; and Mr. LaPenta, 2,264 shares; and
restricted stock awards which vest in three equal installments
on May 29, 2008, 2009 and 2010, as follows:
Dr. Rachesky, 1,210 shares; Mr. Harkey,
1,210 shares; Mr. Targoff, 1,210 shares; and
Mr. LaPenta, 1,210 shares. |
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(8) |
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Includes 5,000 shares held by a corporation which is wholly
owned by Mr. LaPenta. Mr. LaPenta has the power to
vote and dispose of such shares by virtue of his serving as an
officer and director thereof. |
25
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(9) |
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Includes (a) restricted stock awards for 7,590 shares
which vest on December 31, 2008, in each case subject to
certain conditions and accelerated vesting, (b) restricted stock
awards for 50,000 shares, of which 12,500 shares will vest on
March 25, 2010, 12,500 shares will vest on March 25, 2011, and
25,000 shares will vest on March 25, 2012, and
(c) restricted stock awards for 12,500 shares which
vest on December 20, 2010, as described under
Compensation Discussion and Analysis 2007
Equity Awards at Fiscal Year-End and Compensation
Discussion and Analysis Severance and Change in
Control Arrangements. Also includes 112,265 shares
issuable upon exercise of vested stock options. |
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(10) |
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Mr. Khalifa ceased serving as our executive vice president
and CFO as of September 6, 2007. |
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(11) |
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Includes (a) restricted stock awards for 30,000 shares, of which
10,000 shares will vest on March 1, 2009 and 20,000 shares will
vest on March 1, 2010, and (b) restricted stock awards for
6,000 shares which vest on December 20, 2010, as
described under Compensation Discussion and
Analysis 2007 Equity Awards at Fiscal Year-End
and Compensation Discussion and Analysis
Severance and Change in Control Arrangements. Also
includes 21,236 shares issuable upon exercise of vested
stock options. |
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(12) |
|
Includes (a) restricted stock awards for 30,000 shares, of which
7,500 shares will vest on February 28, 2010, 7,500 shares will
vest on February 28, 2011, and 15,000 shares will vest on
February 29, 2012, (b) restricted stock awards for
13,070 shares which vest on October 26, 2010, subject
to certain conditions and accelerated vesting, and (c)
restricted stock awards for 6,000 shares which vest on
December 20, 2010, as described under Compensation
Discussion and Analysis 2007 Equity Awards at Fiscal
Year-End and Compensation Discussion and
Analysis Severance and Change in Control
Arrangements. Also includes 142,880 shares issuable
upon exercise of vested stock options. |
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(13) |
|
Includes (a) restricted stock awards for 15,000 shares, of which
5,000 shares will vest on March 1, 2009 and 10,000 shares will
vest on March 1, 2010, and (b) restricted stock awards for
3,000 shares which vest on December 20, 2010, as
described under Compensation Discussion and
Analysis 2007 Equity Awards at Fiscal Year-End
and Compensation Discussion and Analysis
Severance and Change in Control Arrangements. Also
includes 22,387 shares issuable upon exercise of vested
stock options. |
26
SELLING
STOCKHOLDERS
The following table provides the name of each selling
stockholder and the number of shares of our common stock offered
by each selling stockholder under this prospectus. The
information regarding shares beneficially owned after the
offering assumes the sale of all shares offered by the selling
stockholders.
The selling stockholders do not have any position, office or
other material relationship with us or any of our affiliates,
nor have they had any position, office or material relationship
with us or any of our affiliates within the past three years,
except for those listed in the footnotes to the following table
or under Compensation Committee Interlocks And Insider
Participation included in our Definitive Proxy Statement
on Schedule 14A filed with the SEC on April 23, 2008. The
number of shares beneficially owned by each stockholder and each
stockholders percentage ownership prior to the offering is
based on their outstanding shares of common stock as of
May 2, 2008. The percentage of ownership indicated in the
following table is based on 68,986,506 shares of common
stock outstanding on May 2, 2008.
Information with respect to beneficial ownership has been
furnished by each selling stockholder. Beneficial ownership is
determined in accordance with the rules of the SEC. Except as
indicated by footnote and subject to community property laws
where applicable, to our knowledge, the persons named in the
table below have sole voting and investment power with respect
to all shares of common stock shown as beneficially owned by
them.
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|
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|
|
|
|
|
|
|
|
|
|
|
Beneficial Ownership
|
|
|
|
Number of
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
|
|
Shares
|
|
|
|
|
|
|
|
|
|
Beneficially
|
|
|
Number of
|
|
|
Beneficially
|
|
|
Percentage of
|
|
|
|
Owned
|
|
|
Shares
|
|
|
Owned
|
|
|
Shares Beneficially Owned
|
|
|
|
Prior to
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|
|
Being
|
|
|
After
|
|
|
Before
|
|
|
After
|
|
Selling Stockholders:
|
|
Offering
|
|
|
Offered
|
|
|
Offering
|
|
|
Offering
|
|
|
Offering
|
|
|
MHR Institutional Partners II LP(1)
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|
|
3,340,378
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|
|
|
3,340,378
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|
|
|
-0-
|
|
|
|
4.8
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%
|
|
|
0
|
%
|
MHR Institutional Partners IIA LP(1)
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|
|
8,415,428
|
|
|
|
8,415,428
|
|
|
|
-0-
|
|
|
|
12.2
|
%
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
11,755,806
|
|
|
|
11,755,806
|
|
|
|
-0-
|
|
|
|
17.0
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%
|
|
|
0
|
%
|
|
|
|
(1) |
|
MHR Institutional Advisors II LLC (Institutional
Advisors) is the general partner of MHR Institutional
Partners II LP and MHR Institutional Partners IIA LP. MHR
Fund Management LLC (Fund Management) has
entered into an investment management agreement with MHR
Institutional Partners II LP and MHR Institutional Partners
IIA LP. Dr. Mark H. Rachesky is the managing member of
Institutional Advisors and Fund Management, and in such
capacity, he exercises voting control over the Leap common stock
held by these selling stockholders. Dr. Rachesky also
serves as chairman of the board of directors of Leap. Each of
Dr. Rachesky, Fund Management and Institutional
Advisors may be deemed to be the beneficial owner of these
securities. Dr. Rachesky disclaims beneficial ownership of
these securities. |
27
PLAN OF
DISTRIBUTION
The selling stockholders, or their pledgees, donees,
transferees, or any of their successors in interest selling
shares received from a named selling stockholder as a gift,
partnership distribution or other non-sale-related transfer
after the date of this prospectus (all of whom may be selling
stockholders), may sell the securities from time to time on any
stock exchange or automated interdealer quotation system on
which the securities are listed, in the over-the-counter market,
in privately negotiated transactions or otherwise, at fixed
prices that may be changed, at market prices prevailing at the
time of sale, at prices related to prevailing market prices or
at prices otherwise negotiated. The selling stockholders may
sell the securities by one or more of the following methods,
without limitation:
(a) block trades in which the broker or dealer so engaged
will attempt to sell the securities as agent but may position
and resell a portion of the block as principal to facilitate the
transaction;
(b) purchases by a broker or dealer as principal and resale
by the broker or dealer for its own account pursuant to this
prospectus;
(c) an exchange distribution in accordance with the rules
of any stock exchange on which the securities are listed;
(d) ordinary brokerage transactions and transactions in
which the broker solicits purchases;
(e) privately negotiated transactions;
(f) short sales;
(g) through the writing of options on the securities,
whether or not the options are listed on an options exchange;
(h) through the distribution of the securities by any
selling stockholder to its partners, members or stockholders;
(i) one or more underwritten offerings on a firm commitment
or best efforts basis; and
(j) any combination of any of these methods of sale.
The selling stockholders may also transfer the securities by
gift. We do not know of any arrangements by the selling
stockholders for the sale of any of the securities.
The selling stockholders may engage brokers and dealers, and any
brokers or dealers may arrange for other brokers or dealers to
participate in effecting sales of the securities. These brokers,
dealers or underwriters may act as principals, or as an agent of
a selling stockholder. Broker-dealers may agree with a selling
stockholder to sell a specified number of the securities at a
stipulated price per security. If the broker-dealer is unable to
sell securities acting as agent for a selling stockholder, it
may purchase as principal any unsold securities at the
stipulated price. Broker-dealers who acquire securities as
principals may thereafter resell the securities from time to
time in transactions on any stock exchange or automated
interdealer quotation system on which the securities are then
listed, at prices and on terms then prevailing at the time of
sale, at prices related to the then-current market price or in
negotiated transactions. Broker-dealers may use block
transactions and sales to and through broker-dealers, including
transactions of the nature described above. The selling
stockholders may also sell the securities in accordance with
Rule 144 under the Securities Act, rather than pursuant to
this prospectus, regardless of whether the securities are
covered by this prospectus.
From time to time, one or more of the selling stockholders may
pledge, hypothecate or grant a security interest in some or all
of the securities owned by them. The pledgees, secured parties
or persons to whom the securities have been hypothecated will,
upon foreclosure in the event of default, be deemed to be
selling stockholders. As and when a selling stockholder takes
such actions, the number of securities offered under this
prospectus on behalf of such selling stockholder will decrease.
The plan of distribution for that selling stockholders
securities will otherwise remain unchanged. In addition, a
selling stockholder may, from time to time, sell the securities
short, and, in those instances, this prospectus may be delivered
in connection with the short sales and the securities offered
under this prospectus may be used to cover short sales.
28
To the extent required under the Securities Act, the aggregate
amount of selling stockholders securities being offered
and the terms of the offering, the names of any agents, brokers,
dealers or underwriters and any applicable commission with
respect to a particular offer will be set forth in an
accompanying prospectus supplement. Any underwriters, dealers,
brokers or agents participating in the distribution of the
securities may receive compensation in the form of underwriting
discounts, concessions, commissions or fees from a selling
stockholder
and/or
purchasers of selling stockholders securities for whom
they may act (which compensation as to a particular
broker-dealer might be in excess of customary commissions).
The selling stockholders and any underwriters, brokers, dealers
or agents that participate in the distribution of the securities
may be deemed to be underwriters within the meaning
of the Securities Act, and any discounts, concessions,
commissions or fees received by them and any profit on the
resale of the securities sold by them may be deemed to be
underwriting discounts and commissions.
A selling stockholder may enter into hedging transactions with
broker-dealers and the broker-dealers may engage in short sales
of the securities in the course of hedging the positions they
assume with that selling stockholder, including, without
limitation, in connection with distributions of the securities
by those broker-dealers. A selling stockholder may enter into
option or other transactions with broker-dealers that involve
the delivery of the securities offered hereby to the
broker-dealers, who may then resell or otherwise transfer those
securities. A selling stockholder may also loan or pledge the
securities offered hereby to a broker-dealer and the
broker-dealer may sell the securities offered hereby so loaned
or upon a default may sell or otherwise transfer the pledged
securities offered hereby.
A selling stockholder may enter into derivative transactions
with third parties, or sell securities not covered by this
prospectus to third parties in privately negotiated
transactions. If the applicable prospectus supplement indicates,
in connection with those derivatives, the third parties may sell
securities covered by this prospectus and the applicable
prospectus supplement, including in short sale transactions. If
so, the third party may use securities pledged by the selling
stockholder or borrowed from the selling stockholder or others
to settle those sales or to close out any related open
borrowings of stock, and may use securities received from the
selling stockholder in settlement of those derivatives to close
out any related open borrowings of stock. The third party in
such sale transactions will be an underwriter and, if not
identified in this prospectus, will be identified in the
applicable prospectus supplement (or a post-effective amendment).
The selling stockholders and other persons participating in the
sale or distribution of the securities will be subject to
applicable provisions of the Securities Exchange Act of 1934, or
the Exchange Act, and the rules and regulations thereunder,
including Regulation M. This regulation may limit the
timing of purchases and sales of any of the securities by the
selling stockholders and any other person. The anti-manipulation
rules under the Exchange Act may apply to sales of securities in
the market and to the activities of the selling stockholders and
their affiliates. Furthermore, Regulation M may restrict
the ability of any person engaged in the distribution of the
securities to engage in market-making activities with respect to
the particular securities being distributed for a period of up
to five business days before the distribution. These
restrictions may affect the marketability of the securities and
the ability of any person or entity to engage in market-making
activities with respect to the securities.
We have agreed to indemnify in certain circumstances the selling
stockholders and any brokers, dealers and agents (who may be
deemed to be underwriters), if any, of the securities covered by
the registration statement, against certain liabilities,
including liabilities under the Securities Act. The selling
stockholders have agreed to indemnify us in certain
circumstances against certain liabilities, including liabilities
under the Securities Act.
The securities offered hereby were originally issued to the
selling stockholders pursuant to an exemption from the
registration requirements of the Securities Act. We agreed to
register the securities under the Securities Act and to keep the
Registration Statement of which this prospectus is a part
effective for a specified period of time. We have agreed to pay
all expenses in connection with this offering, including the
fees and expenses of counsel to the selling stockholders, but
not including underwriting discounts, concessions, commissions
or fees of the selling stockholders.
We will not receive any proceeds from sales of any securities by
the selling stockholders.
We cannot assure you that the selling stockholders will sell all
or any portion of the securities offered hereby.
29
DESCRIPTION
OF CAPITAL STOCK
Leaps authorized capital stock consists of
160,000,000 shares of common stock, $0.0001 par value
per share, and 10,000,000 shares of preferred stock,
$0.0001 par value per share.
The following summary of the rights of Leaps common stock
and preferred stock is not complete and is qualified in its
entirety by reference to our amended and restated certificate of
incorporation and amended and restated bylaws, copies of which
are filed as exhibits to Leaps Registration Statement on
Form S-1,
as amended, of which this prospectus forms a part.
Common
Stock
As of May 2, 2008, there were 68,986,506 shares of
common stock outstanding.
As of May 2, 2008, there were warrants outstanding to
purchase 600,000 shares of Leaps common stock.
As of May 2, 2008, Leap had approximately 257 record
holders of Leaps common stock.
Voting
Rights
Holders of Leaps common stock are entitled to one vote per
share on all matters to be voted upon by the stockholders. The
holders of common stock are not entitled to cumulative voting
rights with respect to the election of directors, which means
that the holders of a majority of the shares voted can elect all
of the directors then standing for election.
Dividends
Subject to limitations under Delaware law and preferences that
may apply to any outstanding shares of preferred stock, holders
of Leaps common stock are entitled to receive ratably such
dividends or other distribution, if any, as may be declared by
Leaps board of directors out of funds legally available
therefor.
Liquidation
In the event of our liquidation, dissolution or winding up,
holders of Leaps common stock are entitled to share
ratably in all assets remaining after payment of liabilities,
subject to the liquidation preference of any outstanding
preferred stock.
Rights
and Preferences
The common stock has no preemptive, conversion or other rights
to subscribe for additional securities. There are no redemption
or sinking fund provisions applicable to Leaps common
stock. The rights, preferences and privileges of holders of
common stock are subject to, and may be adversely affected by,
the rights of the holders of shares of any series of preferred
stock that Leap may designate and issue in the future.
Fully
Paid and Non-assessable
All outstanding shares of Leaps common stock are, validly
issued, fully paid and non-assessable.
Preferred
Stock
Leaps board of directors is authorized, subject to the
limits imposed by the Delaware General Corporation Law, to issue
up to 10,000,000 shares of preferred stock in one or more
series, to establish from time to time the number of shares to
be included in each series, to fix the rights, preferences and
privileges of the shares of each wholly unissued series and any
of its qualifications, limitations and restrictions. Leaps
board of directors can also increase or decrease the number of
shares of any series, but not below the number of shares of that
series then outstanding, without any further vote or action by
Leaps stockholders.
Leaps board of directors may authorize the issuance of
preferred stock with voting or conversion rights that adversely
affect the voting power or other rights of Leaps common
stockholders. The issuance of preferred stock,
30
while providing flexibility in connection with possible
acquisitions, financings and other corporate purposes, could
have the effect of delaying, deferring or preventing our change
in control and may cause the market price of Leaps common
stock to decline or impair the voting and other rights of the
holders of Leaps common stock. We have no current plans to
issue any shares of preferred stock. At May 2, 2008, Leap
had no shares of preferred stock outstanding.
Warrants
As of May 2, 2008, there were warrants outstanding to
purchase 600,000 shares of our capital stock. The warrants
expire on March 23, 2009. These warrants have an exercise
price of $16.83 per share and contain customary anti-dilution
and net-issuance provisions.
Registration
Rights Agreement with the Selling Holders
Under a registration rights agreement, as amended, certain of
Leaps stockholders have the right to require us to
register their shares with the SEC so that those shares may be
publicly resold, or to include their shares in any registration
statement we file as follows:
Demand
Registration Rights
At any time after June 30, 2005, any holder who is a party
to the registration rights agreement and who holds a minimum of
15% of the common stock covered by the registration rights
agreement, has the right to demand that we file a registration
statement covering the resale of its common stock, subject to a
maximum of three such demands in the aggregate for all holders
and to other specified exceptions. The underwriters of any such
offering will have the right to limit the number of shares to be
offered except that if the limit is imposed, then only shares
held by holders who are parties to the registration rights
agreement will be included in such offering and the number of
shares to be included in such offering will be allocated pro
rata among those same parties. In addition, while we are in
registration, we generally will not be required to take any
action to effect a demand registration.
Piggyback
Registration Rights
If we register any securities for public sale, stockholders with
registration rights will have the right to include their shares
in the registration statement. The underwriters of any
underwritten offering will have the right to limit the number of
such shares to be included in the registration statement,
except, in any underwritten offering that is not a demand
registration, the number of shares held by these stockholders
cannot be reduced to less than 50% of the total number of
securities that are included in such registration statement.
Shelf
Registration Rights
Not later than June 30, 2005, we were required to file with
the SEC a resale shelf registration statement covering all
shares of common stock held by these stockholders to be offered
to the public on a delayed or continuous basis, subject to
specified exceptions. We have filed a resale shelf Registration
Statement, of which this prospectus forms a part, pursuant to
this registration rights agreement. We are required to use
reasonable efforts to keep this Registration Statement
continuously effective until (a) all shares of common stock
registered pursuant to the Registration Statement have been
sold; (b) such shares of common stock have been sold or
transferred in accordance with the provisions of Rule 144
promulgated under the Securities Act; (c) such shares of
common stock are sold or transferred (other than in a
transaction under (a) or (b) above) by these
stockholders in a transaction in which the rights under this
registration rights agreement are not assigned; (d) such
shares of common stock are no longer outstanding; or
(e) such shares of common stock may be sold or transferred
by these stockholders or beneficial owners of such shares
pursuant to Rule 144(k).
Expenses
of Registration
Other than underwriting fees, discounts and commissions, we will
pay all reasonable expenses relating to piggyback registrations
and all reasonable expenses relating to demand registrations.
31
Expiration
of Registration Rights
The registration rights described above will terminate for a
particular holder when (a) all shares of common stock
registered pursuant to the resale shelf Registration Statement,
of which this prospectus forms a part, have been sold;
(b) such shares of common stock have been sold or
transferred in accordance with the provisions of Rule 144
promulgated under the Securities Act; (c) such shares of
common stock are sold or transferred (other than in a
transaction under (a) or (b) above) by these
stockholders in a transaction in which the rights under this
registration rights agreement are not assigned; (d) such
shares of common stock are no longer outstanding; or
(e) such shares of common stock may be sold or transferred
by these stockholders or beneficial owners of such shares
pursuant to Rule 144(k).
Registration
Rights Granted to CSM in Connection with LCW Wireless
Transaction
Leap has reserved five percent of its outstanding shares, which
was 3,449,325 shares as of May 2, 2008, for potential
issuance to CSM upon the exercise of CSMs option to put
its entire equity interest in LCW Wireless to Cricket.
CSMs put right generally expires on July 1, 2014.
Under the LCW Wireless Limited Liability Company Agreement, the
purchase price for CSMs equity interest is calculated on a
pro rata basis using either the appraised value of LCW Wireless
or a multiple of Leaps enterprise value divided by its
adjusted EBITDA and applied to LCW Wireless adjusted
EBITDA to impute an enterprise value and equity value for LCW
Wireless. Cricket may satisfy the put price either in cash or in
Leap common stock, or a combination thereof, as determined by
Cricket in its discretion. However, the covenants in the Credit
Agreement do not permit Cricket to satisfy any substantial
portion of its put obligations to CSM in cash. If Cricket
satisfies its put obligations to CSM with Leap common stock, the
obligations of the parties are conditioned upon the block of
Leap common stock issuable to CSM not constituting more than
five percent of Leaps outstanding common stock at the time
of issuance.
We have agreed to prepare and file a resale shelf registration
statement for any shares of Leap common stock that may be issued
to CSM upon the exercise of CSMs option to put its entire
equity interest in LCW Wireless to Cricket. See
Part I Item 1. Business
Arrangements with LCW Wireless in our Annual Report on
Form 10-K
for the year ended December 31, 2007 filed with the SEC on
February 29, 2008 for additional information. Such resale
shelf registration statement will cover these shares of common
stock held by CSM to be offered to the public on a delayed or
continuous basis, subject to specified exceptions. We will be
required to keep such resale shelf registration statement
effective with the SEC until (a) all such shares of common
stock registered pursuant to the registration statement have
been resold; or (b) all such shares of common stock may be
sold or transferred pursuant to Rule 144. Other than
underwriting fees, discounts and commissions, the fees and
disbursements of counsel retained by CSM and transfer taxes, if
any, we will pay all reasonable expenses incident to the
registration of such shares.
Anti-takeover
Effects of Delaware Law and Provisions of Our Amended and
Restated Certificate of Incorporation and Amended and Restated
Bylaws
Delaware
Takeover Statute
We are subject to Section 203 of the Delaware General
Corporation Law. This statute regulating corporate takeovers
prohibits a Delaware corporation from engaging in any business
combination with any interested stockholder for three years
following the date that the stockholder became an interested
stockholder, unless:
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prior to the date of the transaction, the board of directors of
the corporation approved either the business combination or the
transaction which resulted in the stockholder becoming an
interested stockholder;
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the interested stockholder owned at least 85% of the voting
stock of the corporation outstanding at the time the transaction
commenced, excluding for purposes of determining the number of
shares outstanding (a) shares owned by persons who are
directors and also officers and (b) shares owned by
employee stock plans in which employee participants do not have
the right to determine confidentially whether shares held
subject to the plan will be tendered in a tender or exchange
offer; or
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on or subsequent to the date of the transaction, the business
combination is approved by the board and authorized at an annual
or special meeting of stockholders, and not by written consent,
by the affirmative vote of at least
662/3%
of the outstanding voting stock which is not owned by the
interested stockholder.
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Section 203 defines a business combination to include:
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any merger or consolidation involving the corporation and the
interested stockholder;
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any sale, transfer, pledge or other disposition involving the
interested stockholder of 10% or more of the assets of the
corporation;
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subject to exceptions, any transaction that results in the
issuance or transfer by the corporation of any stock of the
corporation to the interested stockholder; or
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the receipt by the interested stockholder of the benefit of any
loans, advances, guarantees, pledges or other financial benefits
provided by or through the corporation.
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In general, Section 203 defines an interested stockholder
as any entity or person beneficially owning 15% or more of the
outstanding voting stock of the corporation and any entity or
person affiliated with or controlling or controlled by the
entity or person.
Amended
and Restated Certificate of Incorporation and Amended and
Restated Bylaw Provisions
Provisions of Leaps amended and restated certificate of
incorporation and amended and restated bylaws, may have the
effect of making it more difficult for a third-party to acquire,
or discourage a third-party from attempting to acquire, control
of our company by means of a tender offer, a proxy contest or
otherwise. These provisions may also make the removal of
incumbent officers and directors more difficult. These
provisions are intended to discourage certain types of coercive
takeover practices and inadequate takeover bids and to encourage
persons seeking to acquire control of Leap to first negotiate
with us. These provisions could also limit the price that
investors might be willing to pay for shares of Leaps
common stock. These provisions may make it more difficult for
stockholders to take specific corporate actions and could have
the effect of delaying or preventing a change in control of
Leap. The amendment of any of these anti-takeover provisions
would require approval by holders of at least
662/3%
of our outstanding common stock entitled to vote on such
amendment.
In particular, Leaps certificate of incorporation and
bylaws as amended and restated, provide for the following:
No
Written Consent of Stockholders
Any action to be taken by Leaps stockholders must be
effected at a duly called annual or special meeting and may not
be effected by written consent.
Special
Meetings of Stockholders
Special meetings of Leaps stockholders may be called only
by the chairman of the board of directors, the chief executive
officer or president, or a majority of the members of the board
of directors.
Advance
Notice Requirement
Stockholder proposals to be brought before an annual meeting of
Leaps stockholders must comply with advance notice
procedures. These advance notice procedures require timely
notice and apply in several situations, including stockholder
proposals relating to the nominations of persons for election to
the board of directors. Generally, to be timely, notice must be
received at our principal executive offices not less than
70 days nor more than 90 days prior to the first
anniversary date of the annual meeting for the preceding year.
Amendment
of Bylaws and Certificate of Incorporation
The approval of not less than
662/3%
of the outstanding shares of Leaps capital stock entitled
to vote is required to amend the provisions of Leaps
amended and restated bylaws by stockholder action, or to amend
provisions of Leaps amended and restated certificate of
incorporation described in this section or that are described in
Compensation Discussion & Analysis
Indemnification of Directors and Executive Officers and
Limitation on Liability in our Definitive Proxy Statement
on Schedule 14A filed with the SEC on April 23, 2008.
These provisions make it more difficult to circumvent the
anti-takeover provisions of Leaps certificate of
incorporation and our bylaws.
33
Issuance
of Undesignated Preferred Stock
Leaps board of directors is authorized to issue, without
further action by the stockholders, up to 10,000,000 shares
of preferred stock with rights and preferences, including voting
rights, designated from time to time by the board of directors.
The existence of authorized but unissued shares of preferred
stock enables Leaps board of directors to render more
difficult or to discourage an attempt to obtain control of us by
means of a merger, tender offer, proxy contest or otherwise.
Credit
Agreement and Indenture
Our Credit Agreement prohibits the occurrence of a change of
control and, under our indenture, if a change of control occurs,
each holder of the notes may require Cricket to repurchase all
of such holders notes at a purchase price equal to 101% of
the principal amount of the notes, plus accrued and unpaid
interest. See Part I Item 2.
Managements Discussion and Analysis of Financial Condition
and Results of Operations Liquidity and Capital
Resources in our Quarterly Report on
Form 10-Q
for the three months ended March 31, 2008 filed with
the SEC on May 12, 2008 for additional information.
Transfer
Agent and Registrar
The transfer agent and registrar for Leaps common stock is
Mellon Bank Investor Services, LLC.
Nasdaq
Global Select Market
Leaps common stock is listed for trading on the Nasdaq
Global Select Market under the symbol LEAP.
LEGAL
MATTERS
The validity of the shares of common stock offered by this
prospectus has been passed upon for us by Latham &
Watkins LLP, San Diego, California.
EXPERTS
The consolidated financial statements of Leap and
managements assessment of the effectiveness of internal
control over financial reporting (which is included in
Managements Report on Internal Control over Financial
Reporting) incorporated in this prospectus by reference to the
Annual Report on
Form 10-K
of Leap for the year ended December 31, 2007 have been so
incorporated in reliance on the report (which contains an
adverse opinion on the effectiveness of internal control over
financial reporting) of PricewaterhouseCoopers LLP, an
independent registered public accounting firm, given on the
authority of said firm as experts in auditing and accounting.
LIMITATION
ON LIABILITY AND DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our certificate of incorporation and bylaws provide that we will
indemnify our directors and officers, and may indemnify our
employees and other agents, to the fullest extent permitted by
the Delaware General Corporation Law. Insofar as indemnification
for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been
advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
WHERE YOU
CAN FIND MORE INFORMATION
We are subject to the reporting, proxy and information
requirements of the Exchange Act, as amended, and file annual,
quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any reports,
proxy statements and other information we file at the SECs
public reference room at 100 F Street, N.E.,
Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330
for further information on the public reference room. You may
also access filed documents at the SECs web site at
www.sec.gov, as well as on our website,
www.leapwireless.com. The information contained in, or
that can be accessed through, our website is not part of this
prospectus.
34
INCORPORATION
OF DOCUMENTS BY REFERENCE
The SEC allows us to incorporate by reference
certain of our publicly filed documents into this prospectus,
which means that important information included in such publicly
filed documents is considered part of this prospectus. The
documents we incorporate by reference into this prospectus are:
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Our Annual Report on
Form 10-K
for the year ended December 31, 2007 filed with the SEC on
February 29, 2008.
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Our Quarterly Report on
Form 10-Q
for the three months ended March 31, 2008 filed with the
SEC on May 12, 2008.
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Our Current Report on Form
8-K dated
February 20, 2008 filed with the SEC on February 26,
2008.
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Our Current Report on
Form 8-K
dated February 27, 2008 filed with the SEC on
February 27, 2008.
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Our Current Report on
Form 8-K
dated March 10, 2008 filed with the SEC on March 14,
2008.
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Our Definitive Proxy Statement on Schedule 14A filed with the
SEC on April 23, 2008.
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Any statement contained in a document incorporated by reference
in this prospectus will be deemed to be modified or superseded
for the purposes of this prospectus to the extent that a later
statement contained herein or in any other document incorporated
by reference in this prospectus modifies or supersedes the
earlier statement. Any statement so modified or superseded will
not be deemed, except as so modified or superseded, to
constitute a part of this prospectus.
We will provide at no cost to each person, including any
beneficial owner, to whom this prospectus is delivered, upon
oral or written request of such person, a copy of any or all of
the reports or documents that have been incorporated by
reference in this prospectus, but not delivered with the
prospectus. Requests for such copies should be directed to:
Amy Wakeham
Leap Wireless International, Inc.
10307 Pacific Center Court
San Diego, California 92121
(858) 882-6000
These documents may also be accessed through our website at
www.leapwireless.com or as described under Where
You Can Find More Information above. The information
contained in, or that can be accessed through, our websites is
not part of this prospectus.
35
LEAP WIRELESS INTERNATIONAL,
INC.
PART II
INFORMATION
NOT REQUIRED IN PROSPECTUS
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ITEM 13.
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Other
Expenses of Issuance and Distribution.
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The following table sets forth the costs and expenses, other
than the underwriting discount, payable by the registrant in
connection with the sale of common stock being registered. All
amounts are estimates except for the SEC registration fee:
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SEC registration fee
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$
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55,383
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Printing and engraving expenses
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14,000
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*
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Legal fees and expenses
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80,000
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*
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Accounting fees and expenses
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105,000
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*
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Miscellaneous
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15,617
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Total
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$
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270,000
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Includes estimated printing and
engraving expenses, legal fees and expenses, and accounting fees
and expenses for the original Registration Statement on
Form S-1
filed with the SEC on June 30, 2005, the Post-Effective
Amendment No. 1 to Registration Statement on
Form S-1
filed with the SEC on April 14, 2006, the Post-Effective
Amendment No. 2 on Form
S-3 to
Registration Statement on
Form S-1
filed with the SEC on September 5, 2006, the Post-Effective
Amendment No. 3 on
Form S-1
to Registration Statement on
Form S-3
filed with the SEC on March 28, 2008, and this
Post-Effective Amendment No. 4 to Registration Statement on
Form S-1.
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ITEM 14.
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Indemnification
of Directors and Executive Officers and Limitation on
Liability.
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As permitted by Section 102 of the Delaware General
Corporation Law, Leap has adopted provisions in its amended and
restated certificate of incorporation and amended and restated
bylaws that limit or eliminate the personal liability of
Leaps directors for a breach of their fiduciary duty of
care as a director. The duty of care generally requires that,
when acting on behalf of the corporation, directors exercise an
informed business judgment based on all material information
reasonably available to them. Consequently, a director will not
be personally liable to Leap or its stockholders for monetary
damages or breach of fiduciary duty as a director, except for
liability for:
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any breach of the directors duty of loyalty to Leap or its
stockholders;
|
|
|
|
any act or omission not in good faith or that involves
intentional misconduct or a knowing violation of law;
|
|
|
|
any act related to unlawful stock repurchases, redemptions or
other distributions or payment of dividends; or
|
|
|
|
any transaction from which the director derived an improper
personal benefit.
|
These limitations of liability do not affect the availability of
equitable remedies such as injunctive relief or rescission.
Leaps amended and restated certificate of incorporation
also authorizes Leap to indemnify its officers, directors and
other agents to the fullest extent permitted under Delaware law.
As permitted by Section 145 of the Delaware General
Corporation Law, Leaps amended and restated bylaws provide
that:
|
|
|
|
|
Leap may indemnify its directors, officers, and employees to the
fullest extent permitted by the Delaware General Corporation
Law, subject to limited exceptions;
|
|
|
|
Leap may advance expenses to its directors, officers and
employees in connection with a legal proceeding to the fullest
extent permitted by the Delaware General Corporation Law,
subject to limited exceptions; and
|
|
|
|
the rights provided in Leaps amended and restated bylaws
are not exclusive.
|
Leaps amended and restated certificate of incorporation
and amended and restated bylaws provide for the indemnification
provisions described above. In addition, we have entered into
separate indemnification agreements
II-1
with our directors and officers which may be broader than the
specific indemnification provisions contained in the Delaware
General Corporation Law. These indemnification agreements may
require us, among other things, to indemnify our officers and
directors against liabilities that may arise by reason of their
status or service as directors or officers, other than
liabilities arising from willful misconduct. These
indemnification agreements also may require us to advance any
expenses incurred by the directors or officers as a result of
any proceeding against them as to which they could be
indemnified. In addition, we have purchased policies of
directors and officers liability insurance that
insure our directors and officers against the cost of defense,
settlement or payment of a judgment in some circumstances. These
indemnification provisions and the indemnification agreements
may be sufficiently broad to permit indemnification of our
officers and directors for liabilities, including reimbursement
of expenses incurred, arising under the Securities Act.
Certain of our current and former officers and directors have
been named as defendants in multiple lawsuits and several of
these defendants have indemnification agreements with us. We are
also a defendant in some of these lawsuits. See
Part II Item 1. Legal
Proceedings in our Quarterly Report on
Form 10-Q
for the three months ended March 31, 2008 filed with the
SEC on May 12, 2008 for additional information.
|
|
ITEM 15.
|
Recent
Sales of Unregistered Securities.
|
None.
|
|
ITEM 16.
|
Exhibits
and Financial Statement Schedules.
|
(a) Exhibits.
|
|
|
|
|
|
2
|
.1(1)
|
|
Fifth Amended Joint Plan of Reorganization dated as of
July 30, 2003, as modified to reflect all technical
amendments subsequently approved by the Bankruptcy Court.
|
|
2
|
.2(2)
|
|
Disclosure Statement Accompanying Fifth Amended Joint Plan of
Reorganization dated as of July 30, 2003.
|
|
2
|
.3(3)
|
|
Order Confirming Debtors Fifth Amended Joint Plan of
Reorganization dated as of July 30, 2003.
|
|
3
|
.1(4)
|
|
Amended and Restated Certificate of Incorporation of Leap
Wireless International, Inc.
|
|
3
|
.2(4)
|
|
Amended and Restated Bylaws of Leap Wireless International, Inc.
|
|
4
|
.1(5)
|
|
Form of Common Stock Certificate.
|
|
4
|
.2(4)
|
|
Registration Rights Agreement dated as of August 16, 2004,
by and among Leap Wireless International Inc., MHR Institutional
Partners II LP, MHR Institutional Partners IIA LP and
Highland Capital Management, L.P.
|
|
4
|
.2.1**
|
|
Amendment No. 1 to Registration Rights Agreement dated as
of June 7, 2005 by and among Leap Wireless International,
Inc., MHR Institutional Partners II LP, MHR Institutional
Partners IIA LP and Highland Capital Management, L.P.
|
|
5
|
.1**
|
|
Opinion of Latham & Watkins LLP.
|
|
10
|
.1(6)
|
|
System Equipment Purchase Agreement, dated as of June 11,
2007, by and among Cricket Communications, Inc., Alaska Native
Broadband 1 License LLC and Nortel Networks Inc.
|
|
10
|
.2(6)
|
|
System Equipment Purchase Agreement, dated as of June 14,
2007, by and among Cricket Communications, Inc., Alaska Native
Broadband 1 License LLC and Lucent Technologies, Inc.
|
|
10
|
.3(7)
|
|
Amended and Restated Credit Agreement, dated June 16, 2006,
by and among Cricket Communications, Inc., Leap Wireless
International, Inc., the lenders party thereto and Bank of
America, N.A., as administrative agent and L C issuer.
|
|
10
|
.3.1(8)
|
|
Amendment No. 1 to Amended and Restated Credit Agreement,
dated March 15, 2007, by and among Cricket Communications,
Inc., Leap Wireless International, Inc., the lenders party
thereto and Bank of America, N.A., as administrative agent.
|
|
10
|
.3.2(8)
|
|
Consent dated March 15, 2007 by Leap Wireless
International, Inc. and the subsidiary guarantors party thereto.
|
|
10
|
.3.3(9)
|
|
Amendment No. 2 to Amended and Restated Credit Agreement,
dated November 20, 2007, by and among Cricket
Communications, Inc., Leap Wireless International, Inc., the
lenders party thereto and Bank of America, N.A., as
administrative agent.
|
II-2
|
|
|
|
|
|
10
|
.3.4(9)
|
|
Consent dated November 20, 2007 by Leap Wireless
International, Inc. and the subsidiary guarantors party thereto.
|
|
10
|
.3.5(7)
|
|
Amended and Restated Security Agreement, dated June 16,
2006, made by Cricket Communications, Inc., Leap Wireless
International, Inc., and the Subsidiary Guarantors to Bank of
America, N.A., as collateral agent.
|
|
10
|
.3.6(10)
|
|
Letter Amendment to the Amended and Restated Security Agreement
dated as of June 16, 2006 by and among Cricket
Communications, Inc., Leap Wireless International, Inc. and Bank
of America, N.A., as administrative agent, dated
October 16, 2006.
|
|
10
|
.3.7(7)
|
|
Amended and Restated Parent Guaranty, dated June 16, 2006,
made by Leap Wireless International, Inc. in favor of the
secured parties under the Credit Agreement.
|
|
10
|
.3.8(7)
|
|
Amended and Restated Subsidiary Guaranty, dated June 16,
2006, made by the Subsidiary Guarantors of the secured parties
under the Credit Agreement.
|
|
10
|
.4(11)
|
|
Credit Agreement, dated as of July 13, 2006, by and among
Cricket Communications, Inc., Denali Spectrum License, LLC and
Denali Spectrum, LLC.
|
|
10
|
.4.1(10)
|
|
Amendment No. 1 to Credit Agreement by and among Cricket
Communications, Inc., Denali Spectrum License, LLC and Denali
Spectrum, LLC, dated as of September 28, 2006.
|
|
10
|
.4.2(12)
|
|
Amendment No. 2 to Credit Agreement by and among Cricket
Communications, Inc., Denali Spectrum License, LLC, Denali
Spectrum, LLC, Denali Spectrum Operations, LLC and Denali
Spectrum License Sub, LLC, dated as of April 16, 2007.
|
|
10
|
.4.3(13)
|
|
Letter of Credit and Reimbursement Agreement by and between
Cricket Communications, Inc. and Denali Spectrum Operations,
LLC, dated as of February 21, 2008.
|
|
10
|
.4.4(14)
|
|
Amendment No. 3 to Credit Agreement by and among Cricket
Communications, Inc., Denali Spectrum License, LLC, Denali
Spectrum, LLC, Denali Spectrum Operations, LLC and Denali
Spectrum License Sub, LLC, dated as of March 6, 2008.
|
|
10
|
.5(15)#
|
|
Form of Indemnity Agreement to be entered into by and between
Leap Wireless International, Inc. and its directors and officers.
|
|
10
|
.6(5)#
|
|
Amended and Restated Executive Employment Agreement among Leap
Wireless International, Inc., Cricket Communications, Inc., and
S. Douglas Hutcheson, dated as of January 10, 2005.
|
|
10
|
.6.1(16)#
|
|
First Amendment to Amended and Restated Executive Employment
Agreement among Leap Wireless International, Inc., Cricket
Communications, Inc., and S. Douglas Hutcheson, effective as of
June 17, 2005.
|
|
10
|
.6.2(17)#
|
|
Second Amendment to Amended and Restated Executive Employment
Agreement among Leap Wireless International, Inc., Cricket
Communications, Inc., and S. Douglas Hutcheson, effective as of
February 17, 2006.
|
|
10
|
.7(13)#
|
|
Form of Executive Vice President and Senior Vice President
Amended and Restated Severance Benefits Agreement.
|
|
10
|
.8(5)#
|
|
Employment Offer Letter dated January 31, 2005, between
Cricket Communications, Inc. and Albin F. Moschner.
|
|
10
|
.9(18)#
|
|
Leap Wireless International, Inc. 2004 Stock Option, Restricted
Stock and Deferred Stock Unit Plan.
|
|
10
|
.9.1(12)#
|
|
First Amendment to the Leap Wireless International, Inc. 2004
Stock Option, Restricted Stock and Deferred Stock Unit Plan.
|
|
10
|
.9.2(6)#
|
|
Second Amendment to the Leap Wireless International, Inc. 2004
Stock Option, Restricted Stock and Deferred Stock Unit Plan.
|
|
10
|
.9.3(16)#
|
|
Form of Stock Option Grant Notice and Non-Qualified Stock Option
Agreement (February 2008 Vesting).
|
|
10
|
.9.4(16)#
|
|
Form of Stock Option Grant Notice and Non-Qualified Stock Option
Agreement (Five-Year Vesting) entered into prior to
October 26, 2005.
|
II-3
|
|
|
|
|
|
10
|
.9.5(17)#
|
|
Amendment No. 1 to Form of Stock Option Grant Notice and
Non-Qualified Stock Option Agreement (Five-Year Vesting) entered
into prior to October 26, 2005.
|
|
10
|
.9.6(17)#
|
|
Form of Stock Option Grant Notice and Non-Qualified Stock Option
Agreement (Five-Year Vesting) entered into on or after
October 26, 2005.
|
|
10
|
.9.7(17)#
|
|
Stock Option Grant Notice and Non-Qualified Stock Option
Agreement, effective as of October 26, 2005, between Leap
Wireless International, Inc. and Albin F. Moschner.
|
|
10
|
.9.8(19)#
|
|
Form of Stock Option Grant Notice and Non-Qualified Stock Option
Agreement (Four-Year Time Based Vesting).
|
|
10
|
.9.9(16)#
|
|
Form of Restricted Stock Award Grant Notice and Restricted Stock
Award Agreement (February 2008 Vesting).
|
|
10
|
.9.10(16)#
|
|
Form of Restricted Stock Award Grant Notice and Restricted Stock
Award Agreement (Five-Year Vesting) entered into prior to
October 26, 2005.
|
|
10
|
.9.11(17)#
|
|
Amendment No. 1 to Form of Restricted Stock Award Grant
Notice and Restricted Stock Award Agreement (Five-Year Vesting)
entered into prior to October 26, 2005.
|
|
10
|
.9.12(12)#
|
|
Restricted Stock Award Grant Notice and Restricted Stock Award
Agreement, effective as of October 26 2005, between Leap
Wireless International, Inc. and Albin F. Moschner.
|
|
10
|
.9.13(12)#
|
|
Form of Restricted Stock Award Grant Notice and Restricted Stock
Award Agreement (Five-Year Vesting) entered into on or after
October 26, 2005.
|
|
10
|
.9.14(19)#
|
|
Form of Restricted Stock Award Grant Notice and Restricted Stock
Award Agreement (Four-Year Time Based Vesting).
|
|
10
|
.9.15(18)#
|
|
Form of Deferred Stock Unit Award Grant Notice and Deferred
Stock Unit Award Agreement.
|
|
10
|
.9.16(5)#
|
|
Form of Non-Employee Director Stock Option Grant Notice and
Non-Qualified Stock Option Agreement.
|
|
10
|
.9.17(20)#
|
|
Form of Restricted Stock Award Grant Notice and Restricted Stock
Award Agreement (for Non-Employee Directors).
|
|
10
|
.10(13)#
|
|
Consulting Agreement 2008, dated as of
January 5, 2008, between Leap Wireless International, Inc.
and Steven R. Martin.
|
|
10
|
.11(21)#
|
|
Leap Wireless International, Inc. Executive Incentive Bonus Plan.
|
|
10
|
.12(12)#
|
|
2007 Cricket Non-Sales Bonus Plan.
|
|
21
|
.1(22)
|
|
Subsidiaries of Leap Wireless International, Inc.
|
|
23
|
.1*
|
|
Consent of PricewaterhouseCoopers LLP, an independent registered
public accounting firm.
|
|
23
|
.2**
|
|
Consent of Latham & Watkins LLP (included in
Exhibit 5.1).
|
|
24
|
.1**
|
|
Power of Attorney
|
|
|
|
* |
|
Filed herewith. |
|
** |
|
Previously filed. |
|
|
|
Portions of this exhibit (indicated by asterisks) have been
omitted pursuant to a request for confidential treatment
pursuant to
Rule 24b-2
under the Securities Exchange Act of 1934. |
|
# |
|
Management contract or compensatory plan or arrangement in which
one or more executive officers or directors participates. |
|
|
|
(1) |
|
Filed as an exhibit to Leaps Current Report on
Form 8-K/A,
dated October 22, 2003, filed with the SEC on May 7,
2004, and incorporated herein by reference. |
|
|
|
(2) |
|
Filed as an exhibit to Leaps Current Report on
Form 8-K,
dated July 30, 2003, filed with the SEC on August 11,
2003, and incorporated herein by reference. |
|
(3) |
|
Filed as an exhibit to Leaps Current Report on
Form 8-K,
dated October 22, 2003, filed with the SEC on
November 6, 2003, and incorporated herein by reference. |
|
(4) |
|
Filed as an exhibit to Leaps Current Report on
Form 8-K,
dated August 16, 2004, filed with the SEC on
August 20, 2004, and incorporated herein by reference. |
II-4
|
|
|
(5) |
|
Filed as an exhibit to Leaps Annual Report on
Form 10-K
for the fiscal year ended December 31, 2004, filed with the
SEC on May 16, 2005, and incorporated herein by reference. |
|
(6) |
|
Filed as an exhibit to Leaps Quarterly Report on
Form 10-Q
for the fiscal quarter ended June 30, 2007, filed with the
SEC on August 9, 2007, and incorporated herein by reference. |
|
(7) |
|
Filed as an exhibit to Leaps Current Report on
Form 8-K,
dated June 16, 2006, filed with the SEC on June 19,
2006, and incorporated herein by reference. |
|
(8) |
|
Filed as an exhibit to Leaps Current Report on
Form 8-K,
dated March 15, 2007, filed with the SEC on March 21,
2007, and incorporated herein by reference. |
|
(9) |
|
Filed as an exhibit to Leaps Current Report on
Form 8-K,
dated November 20, 2007, filed with the SEC on
November 23, 2007, and incorporated herein by reference. |
|
(10) |
|
Filed as an exhibit to Leaps Quarterly Report on
Form 10-Q
for the fiscal quarter ended September 30, 2006, filed with
the SEC on November 9, 2006, and incorporated herein by
reference. |
|
(11) |
|
Filed as an exhibit to Leaps Quarterly Report on
Form 10-Q
for the fiscal quarter ended June 30, 2006, filed with the
SEC on August 8, 2006, and incorporated herein by reference. |
|
(12) |
|
Filed as an exhibit to Leaps Quarterly Report on
Form 10-Q
for the fiscal quarter ended March 31, 2007, filed with the
SEC on May 10, 2007, and incorporated herein by reference. |
|
(13) |
|
Filed as an exhibit to Leaps Annual Report on
Form 10-K
for the fiscal year ended December 31, 2007, filed with the
SEC on February 29, 2008, and incorporated herein by
reference. |
|
(14) |
|
Filed as an exhibit to Leaps Registration Statement on
Form S-4
(File
No. 333-149937),
filed with the SEC on March 28, 2008, and incorporated
herein by reference. |
|
(15) |
|
Filed as an exhibit to Leaps Registration Statement on
Form 10, as amended (File
No. 0-29752),
filed with the SEC on August 21, 1998 and incorporated
herein by reference. |
|
(16) |
|
Filed as an exhibit to Leaps Current Report on
Form 8-K,
dated June 17, 2005, filed with the SEC on June 23,
2005, and incorporated herein by reference. |
|
(17) |
|
Filed as an exhibit to Leaps Annual Report on
Form 10-K
for the fiscal year ended December 31, 2005, filed with the
SEC on March 27, 2006, and incorporated herein by reference. |
|
(18) |
|
Filed as an exhibit to Leaps Current Report on
Form 8-K,
dated January 5, 2005, filed with the SEC on
January 11, 2005, and incorporated herein by reference. |
|
(19) |
|
Filed as an exhibit to Leaps Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, filed with the
SEC on March 1, 2007, and incorporated herein by reference. |
|
(20) |
|
Filed as an exhibit to Leaps Current Report on
Form 8-K,
dated May 18, 2006, filed with the SEC on June 6,
2006, and incorporated herein by reference. |
|
(21) |
|
Filed as Appendix B to Leaps Definitive Proxy
Statement filed with the SEC on April 6, 2007, and
incorporated herein by reference. |
|
|
|
(22) |
|
Filed as an exhibit to Leaps Amendment No. 1 to
Registration Statement on Form
S-4 (File
No. 333-149937),
filed with the SEC on May 16, 2008, and incorporated herein
by reference. |
(b) Financial Statement Schedules.
No financial statement schedules are provided because the
information called for is not applicable or is shown in the
financial statements or notes thereto.
II-5
ITEM 17. Undertakings.
We hereby undertake:
1. To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement:
(i) to include any prospectus required by
Section 10(a)(3) of the Securities Act;
(ii) to reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in the
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the SEC pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no
more than 20 percent change in the maximum aggregate
offering price set forth in the Calculation of
Registration Fee table in the effective Registration
Statement; and
(iii) to include any material information with respect to
the plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement.
2. That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide
offering thereof.
3. To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
We hereby undertake that, for purposes of determining liability
under the Securities Act to any purchaser, each prospectus filed
pursuant to Rule 424(b) as part of a registration statement
relating to an offering, other than registration statements
relying on Rule 430B or other than prospectuses filed in
reliance on Rule 430A, shall be deemed to be part of and
included in the registration statement as of the date it is
first used after effectiveness. Provided, however, that
no statement made in a registration statement or prospectus that
is part of the registration statement or made in a document
incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of
contract of sale prior to such first use, supersede or modify
any statement that was made in the registration statement or
prospectus that was part of the registration statement or made
in any such document immediately prior to such date of first use.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our directors, officers and
controlling persons pursuant to the foregoing provisions, or
otherwise, we have been advised that in the opinion of the SEC
such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by us of expenses incurred or paid by
one of our directors, officers or controlling persons in the
successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered hereunder, we
will, unless in the opinion of our counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such
indemnification by us is against public policy as expressed in
the Securities Act and will be governed by the final
adjudication of such issue.
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act, Leap
Wireless International, Inc. has duly caused this Post Effective
Amendment No. 4 to Registration Statement (File
No. 333-126246)
to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of San Diego, state of California,
on May 16, 2008.
LEAP WIRELESS INTERNATIONAL, INC.
|
|
|
|
By:
|
/s/ S.
Douglas Hutcheson
|
S. Douglas Hutcheson
Chief Executive Officer, President,
Acting Chief Financial Officer and Director
Pursuant to the requirements of the Securities Act, this Post
Effective Amendment No. 4 to Registration Statement (File
No. 333-126246)
has been signed by the following persons in the capacities and
on the dates indicated.
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ S.
Douglas Hutcheson
S.
Douglas Hutcheson
|
|
Chief Executive Officer,
President, Acting Chief Financial Officer and Director
(Principal Executive Officer and Principal Financial
Officer)
|
|
May 16, 2008
|
|
|
|
|
|
/s/ Steven
R. Martin
Steven
R. Martin
|
|
Acting Chief Accounting Officer (Principal Accounting
Officer)
|
|
May 16, 2008
|
|
|
|
|
|
*
John
D. Harkey, Jr.
|
|
Director
|
|
May 16, 2008
|
|
|
|
|
|
*
Robert
V. LaPenta
|
|
Director
|
|
May 16, 2008
|
|
|
|
|
|
*
Mark
H. Rachesky, MD
|
|
Chairman of the Board
|
|
May 16, 2008
|
|
|
|
|
|
*
Michael
B. Targoff
|
|
Director
|
|
May 16, 2008
|
|
|
|
|
|
|
|
*By:
|
|
/s/ S.
Douglas Hutcheson
S.
Douglas Hutcheson
Attorney-in-Fact
|
|
|
|
|
II-7
INDEX TO
EXHIBITS
|
|
|
|
|
|
2
|
.1(1)
|
|
Fifth Amended Joint Plan of Reorganization dated as of
July 30, 2003, as modified to reflect all technical
amendments subsequently approved by the Bankruptcy Court.
|
|
2
|
.2(2)
|
|
Disclosure Statement Accompanying Fifth Amended Joint Plan of
Reorganization dated as of July 30, 2003.
|
|
2
|
.3(3)
|
|
Order Confirming Debtors Fifth Amended Joint Plan of
Reorganization dated as of July 30, 2003.
|
|
3
|
.1(4)
|
|
Amended and Restated Certificate of Incorporation of Leap
Wireless International, Inc.
|
|
3
|
.2(4)
|
|
Amended and Restated Bylaws of Leap Wireless International, Inc.
|
|
4
|
.1(5)
|
|
Form of Common Stock Certificate.
|
|
4
|
.2(4)
|
|
Registration Rights Agreement dated as of August 16, 2004,
by and among Leap Wireless International Inc., MHR Institutional
Partners II LP, MHR Institutional Partners IIA LP and
Highland Capital Management, L.P.
|
|
4
|
.2.1**
|
|
Amendment No. 1 to Registration Rights Agreement dated as
of June 7, 2005 by and among Leap Wireless International,
Inc., MHR Institutional Partners II LP, MHR Institutional
Partners IIA LP and Highland Capital Management, L.P.
|
|
5
|
.1**
|
|
Opinion of Latham & Watkins LLP.
|
|
10
|
.1(6)
|
|
System Equipment Purchase Agreement, dated as of June 11,
2007, by and among Cricket Communications, Inc., Alaska Native
Broadband 1 License LLC and Nortel Networks Inc.
|
|
10
|
.2(6)
|
|
System Equipment Purchase Agreement, dated as of June 14,
2007, by and among Cricket Communications, Inc., Alaska Native
Broadband 1 License LLC and Lucent Technologies, Inc.
|
|
10
|
.3(7)
|
|
Amended and Restated Credit Agreement, dated June 16, 2006,
by and among Cricket Communications, Inc., Leap Wireless
International, Inc., the lenders party thereto and Bank of
America, N.A., as administrative agent and L C issuer.
|
|
10
|
.3.1(8)
|
|
Amendment No. 1 to Amended and Restated Credit Agreement,
dated March 15, 2007, by and among Cricket Communications,
Inc., Leap Wireless International, Inc., the lenders party
thereto and Bank of America, N.A., as administrative agent.
|
|
10
|
.3.2(8)
|
|
Consent dated March 15, 2007 by Leap Wireless
International, Inc. and the subsidiary guarantors party thereto.
|
|
10
|
.3.3(9)
|
|
Amendment No. 2 to Amended and Restated Credit Agreement,
dated November 20, 2007, by and among Cricket
Communications, Inc., Leap Wireless International, Inc., the
lenders party thereto and Bank of America, N.A., as
administrative agent.
|
|
10
|
.3.4(9)
|
|
Consent dated November 20, 2007 by Leap Wireless
International, Inc. and the subsidiary guarantors party thereto.
|
|
10
|
.3.5(7)
|
|
Amended and Restated Security Agreement, dated June 16,
2006, made by Cricket Communications, Inc., Leap Wireless
International, Inc., and the Subsidiary Guarantors to Bank of
America, N.A., as collateral agent.
|
|
10
|
.3.6(10)
|
|
Letter Amendment to the Amended and Restated Security Agreement
dated as of June 16, 2006 by and among Cricket
Communications, Inc., Leap Wireless International, Inc. and Bank
of America, N.A., as administrative agent, dated
October 16, 2006.
|
|
10
|
.3.7(7)
|
|
Amended and Restated Parent Guaranty, dated June 16, 2006,
made by Leap Wireless International, Inc. in favor of the
secured parties under the Credit Agreement.
|
|
10
|
.3.8(7)
|
|
Amended and Restated Subsidiary Guaranty, dated June 16,
2006, made by the Subsidiary Guarantors of the secured parties
under the Credit Agreement.
|
|
10
|
.4(11)
|
|
Credit Agreement, dated as of July 13, 2006, by and among
Cricket Communications, Inc., Denali Spectrum License, LLC and
Denali Spectrum, LLC.
|
|
10
|
.4.1(10)
|
|
Amendment No. 1 to Credit Agreement by and among Cricket
Communications, Inc., Denali Spectrum License, LLC and Denali
Spectrum, LLC, dated as of September 28, 2006.
|
|
10
|
.4.2(12)
|
|
Amendment No. 2 to Credit Agreement by and among Cricket
Communications, Inc., Denali Spectrum License, LLC, Denali
Spectrum, LLC, Denali Spectrum Operations, LLC and Denali
Spectrum License Sub, LLC, dated as of April 16, 2007.
|
|
10
|
.4.3(13)
|
|
Letter of Credit and Reimbursement Agreement by and between
Cricket Communications, Inc. and Denali Spectrum Operations,
LLC, dated as of February 21, 2008.
|
|
|
|
|
|
|
10
|
.4.4(14)
|
|
Amendment No. 3 to Credit Agreement by and among Cricket
Communications, Inc., Denali Spectrum License, LLC, Denali
Spectrum, LLC, Denali Spectrum Operations, LLC and Denali
Spectrum License Sub, LLC, dated as of March 6, 2008.
|
|
10
|
.5(15)#
|
|
Form of Indemnity Agreement to be entered into by and between
Leap Wireless International, Inc. and its directors and officers.
|
|
10
|
.6(5)#
|
|
Amended and Restated Executive Employment Agreement among Leap
Wireless International, Inc., Cricket Communications, Inc., and
S. Douglas Hutcheson, dated as of January 10, 2005.
|
|
10
|
.6.1(16)#
|
|
First Amendment to Amended and Restated Executive Employment
Agreement among Leap Wireless International, Inc., Cricket
Communications, Inc., and S. Douglas Hutcheson, effective as of
June 17, 2005.
|
|
10
|
.6.2(17)#
|
|
Second Amendment to Amended and Restated Executive Employment
Agreement among Leap Wireless International, Inc., Cricket
Communications, Inc., and S. Douglas Hutcheson, effective as of
February 17, 2006.
|
|
10
|
.7(13)#
|
|
Form of Executive Vice President and Senior Vice President
Amended and Restated Severance Benefits Agreement.
|
|
10
|
.8(5)#
|
|
Employment Offer Letter dated January 31, 2005, between
Cricket Communications, Inc. and Albin F. Moschner.
|
|
10
|
.9(18)#
|
|
Leap Wireless International, Inc. 2004 Stock Option, Restricted
Stock and Deferred Stock Unit Plan.
|
|
10
|
.9.1(12)#
|
|
First Amendment to the Leap Wireless International, Inc. 2004
Stock Option, Restricted Stock and Deferred Stock Unit Plan.
|
|
10
|
.9.2(6)#
|
|
Second Amendment to the Leap Wireless International, Inc. 2004
Stock Option, Restricted Stock and Deferred Stock Unit Plan.
|
|
10
|
.9.3(16)#
|
|
Form of Stock Option Grant Notice and Non-Qualified Stock Option
Agreement (February 2008 Vesting).
|
|
10
|
.9.4(16)#
|
|
Form of Stock Option Grant Notice and Non-Qualified Stock Option
Agreement (Five-Year Vesting) entered into prior to
October 26, 2005.
|
|
10
|
.9.5(17)#
|
|
Amendment No. 1 to Form of Stock Option Grant Notice and
Non-Qualified Stock Option Agreement (Five-Year Vesting) entered
into prior to October 26, 2005.
|
|
10
|
.9.6(17)#
|
|
Form of Stock Option Grant Notice and Non-Qualified Stock Option
Agreement (Five-Year Vesting) entered into on or after
October 26, 2005.
|
|
10
|
.9.7(17)#
|
|
Stock Option Grant Notice and Non-Qualified Stock Option
Agreement, effective as of October 26, 2005, between Leap
Wireless International, Inc. and Albin F. Moschner.
|
|
10
|
.9.8(19)#
|
|
Form of Stock Option Grant Notice and Non-Qualified Stock Option
Agreement (Four-Year Time Based Vesting).
|
|
10
|
.9.9(16)#
|
|
Form of Restricted Stock Award Grant Notice and Restricted Stock
Award Agreement (February 2008 Vesting).
|
|
10
|
.9.10(16)#
|
|
Form of Restricted Stock Award Grant Notice and Restricted Stock
Award Agreement (Five-Year Vesting) entered into prior to
October 26, 2005.
|
|
10
|
.9.11(17)#
|
|
Amendment No. 1 to Form of Restricted Stock Award Grant
Notice and Restricted Stock Award Agreement (Five-Year Vesting)
entered into prior to October 26, 2005.
|
|
10
|
.9.12(12)#
|
|
Restricted Stock Award Grant Notice and Restricted Stock Award
Agreement, effective as of October 26 2005, between Leap
Wireless International, Inc. and Albin F. Moschner.
|
|
10
|
.9.13(12)#
|
|
Form of Restricted Stock Award Grant Notice and Restricted Stock
Award Agreement (Five-Year Vesting) entered into on or after
October 26, 2005.
|
|
10
|
.9.14(19)#
|
|
Form of Restricted Stock Award Grant Notice and Restricted Stock
Award Agreement (Four-Year Time Based Vesting).
|
|
10
|
.9.15(18)#
|
|
Form of Deferred Stock Unit Award Grant Notice and Deferred
Stock Unit Award Agreement.
|
|
10
|
.9.16(5)#
|
|
Form of Non-Employee Director Stock Option Grant Notice and
Non-Qualified Stock Option Agreement.
|
|
10
|
.9.17(20)#
|
|
Form of Restricted Stock Award Grant Notice and Restricted Stock
Award Agreement (for Non-Employee Directors).
|
|
|
|
|
|
|
10
|
.10(13)#
|
|
Consulting Agreement 2008, dated as of
January 5, 2008, between Leap Wireless International, Inc.
and Steven R. Martin.
|
|
10
|
.11(21)#
|
|
Leap Wireless International, Inc. Executive Incentive Bonus Plan.
|
|
10
|
.12(12)#
|
|
2007 Cricket Non-Sales Bonus Plan.
|
|
21
|
.1(22)
|
|
Subsidiaries of Leap Wireless International, Inc.
|
|
23
|
.1*
|
|
Consent of PricewaterhouseCoopers LLP, an independent registered
public accounting firm.
|
|
23
|
.2**
|
|
Consent of Latham & Watkins LLP (included in
Exhibit 5.1).
|
|
24
|
.1**
|
|
Power of Attorney
|
|
|
|
* |
|
Filed herewith. |
|
** |
|
Previously filed. |
|
|
|
Portions of this exhibit (indicated by asterisks) have been
omitted pursuant to a request for confidential treatment
pursuant to
Rule 24b-2
under the Securities Exchange Act of 1934. |
|
# |
|
Management contract or compensatory plan or arrangement in which
one or more executive officers or directors participates. |
|
|
|
(1) |
|
Filed as an exhibit to Leaps Current Report on
Form 8-K/A,
dated October 22, 2003, filed with the SEC on May 7,
2004, and incorporated herein by reference. |
|
|
|
(2) |
|
Filed as an exhibit to Leaps Current Report on
Form 8-K,
dated July 30, 2003, filed with the SEC on August 11,
2003, and incorporated herein by reference. |
|
(3) |
|
Filed as an exhibit to Leaps Current Report on
Form 8-K,
dated October 22, 2003, filed with the SEC on
November 6, 2003, and incorporated herein by reference. |
|
(4) |
|
Filed as an exhibit to Leaps Current Report on
Form 8-K,
dated August 16, 2004, filed with the SEC on
August 20, 2004, and incorporated herein by reference. |
|
(5) |
|
Filed as an exhibit to Leaps Annual Report on
Form 10-K
for the fiscal year ended December 31, 2004, filed with the
SEC on May 16, 2005, and incorporated herein by reference. |
|
(6) |
|
Filed as an exhibit to Leaps Quarterly Report on
Form 10-Q
for the fiscal quarter ended June 30, 2007, filed with the
SEC on August 9, 2007, and incorporated herein by reference. |
|
(7) |
|
Filed as an exhibit to Leaps Current Report on
Form 8-K,
dated June 16, 2006, filed with the SEC on June 19,
2006, and incorporated herein by reference. |
|
(8) |
|
Filed as an exhibit to Leaps Current Report on
Form 8-K,
dated March 15, 2007, filed with the SEC on March 21,
2007, and incorporated herein by reference. |
|
(9) |
|
Filed as an exhibit to Leaps Current Report on
Form 8-K,
dated November 20, 2007, filed with the SEC on
November 23, 2007, and incorporated herein by reference. |
|
(10) |
|
Filed as an exhibit to Leaps Quarterly Report on
Form 10-Q
for the fiscal quarter ended September 30, 2006, filed with
the SEC on November 9, 2006, and incorporated herein by
reference. |
|
(11) |
|
Filed as an exhibit to Leaps Quarterly Report on
Form 10-Q
for the fiscal quarter ended June 30, 2006, filed with the
SEC on August 8, 2006, and incorporated herein by reference. |
|
(12) |
|
Filed as an exhibit to Leaps Quarterly Report on
Form 10-Q
for the fiscal quarter ended March 31, 2007, filed with the
SEC on May 10, 2007, and incorporated herein by reference. |
|
(13) |
|
Filed as an exhibit to Leaps Annual Report on
Form 10-K
for the fiscal year ended December 31, 2007, filed with the
SEC on February 29, 2008, and incorporated herein by
reference. |
|
(14) |
|
Filed as an exhibit to Leaps Registration Statement on
Form S-4
(File
No. 333-149937),
filed with the SEC on March 28, 2008, and incorporated
herein by reference. |
|
(15) |
|
Filed as an exhibit to Leaps Registration Statement on
Form 10, as amended (File
No. 0-29752),
filed with the SEC on August 21, 1998 and incorporated
herein by reference. |
|
(16) |
|
Filed as an exhibit to Leaps Current Report on
Form 8-K,
dated June 17, 2005, filed with the SEC on June 23,
2005, and incorporated herein by reference. |
|
(17) |
|
Filed as an exhibit to Leaps Annual Report on
Form 10-K
for the fiscal year ended December 31, 2005, filed with the
SEC on March 27, 2006, and incorporated herein by reference. |
|
|
|
(18) |
|
Filed as an exhibit to Leaps Current Report on
Form 8-K,
dated January 5, 2005, filed with the SEC on
January 11, 2005, and incorporated herein by reference. |
|
(19) |
|
Filed as an exhibit to Leaps Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, filed with the
SEC on March 1, 2007, and incorporated herein by reference. |
|
(20) |
|
Filed as an exhibit to Leaps Current Report on
Form 8-K,
dated May 18, 2006, filed with the SEC on June 6,
2006, and incorporated herein by reference. |
|
(21) |
|
Filed as Appendix B to Leaps Definitive Proxy
Statement filed with the SEC on April 6, 2007, and
incorporated herein by reference. |
|
|
|
(22) |
|
Filed as an exhibit to Leaps Amendment No. 1 to
Registration Statement on Form
S-4 (File
No. 333-149937),
filed with the SEC on May 16, 2008, and incorporated herein
by reference. |