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This filing is made pursuant
to Rule 424(b)(4)
under the Securities Act of
1933 in connection with
Registration No. 333-45388
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED APRIL 4, 2001
2,800,000 Shares
[LEAP WIRELESS LOGO]
Common Stock
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We are selling 2,800,000 shares of common stock.
Our common stock is listed on the Nasdaq National Market under the symbol
"LWIN." The last reported sale price on May 2, 2001 was $36.31 per share.
The underwriter has an option to purchase a maximum of 200,000 additional
shares to cover over-allotments of shares.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE
S-5.
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS LEAP
----------- ------------- -----------
Per Share............................................ $33.50 $0.80 $32.70
Total................................................ $93,800,000 $2,240,000 $91,560,000
Delivery of the shares of common stock will be made on or about May 8,
2001.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement or the prospectus to which it relates is truthful or
complete. Any representation to the contrary is a criminal offense.
CREDIT SUISSE FIRST BOSTON
The date of this prospectus supplement is May 2, 2001.
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TABLE OF CONTENTS
PAGE
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PROSPECTUS SUPPLEMENT
ABOUT THIS PROSPECTUS SUPPLEMENT........... S-1
SUMMARY.................................... S-2
THE OFFERING............................... S-4
RISK FACTORS............................... S-5
FORWARD-LOOKING STATEMENTS................. S-17
USE OF PROCEEDS............................ S-17
UNDERWRITING............................... S-18
NOTICE TO CANADIAN RESIDENTS............... S-19
DESCRIPTION OF LEAP CAPITAL STOCK.......... S-21
LEGAL MATTERS.............................. S-22
EXPERTS.................................... S-22
WHERE YOU CAN FIND MORE INFORMATION........ S-22
PROSPECTUS
ABOUT THIS PROSPECTUS...................... 3
WHERE YOU CAN FIND MORE INFORMATION........ 4
PAGE
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FORWARD-LOOKING STATEMENTS................. 5
LEAP WIRELESS INTERNATIONAL................ 6
USE OF PROCEEDS............................ 6
RATIO OF EARNINGS TO FIXED CHARGES......... 6
DESCRIPTION OF DEBT SECURITIES............. 7
DESCRIPTION OF CAPITAL STOCK............... 16
Common Stock............................. 16
Preferred Stock.......................... 16
DESCRIPTION OF DEPOSITARY SHARES........... 19
DESCRIPTION OF WARRANTS.................... 22
DESCRIPTION OF RIGHTS...................... 25
DESCRIPTION OF UNITS....................... 26
PLAN OF DISTRIBUTION....................... 27
LEGAL MATTERS.............................. 30
EXPERTS.................................... 30
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This prospectus supplement and the accompanying prospectus incorporate
important business and financial information about Leap Wireless International,
Inc. and its subsidiaries that is not included in or delivered with these
documents. This information is available without charge to security holders upon
written or oral request.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
Cricket(R) is a registered trademark of Leap. Pegaso(MR) is a registered
service mark of Servicios Administrativos Pegaso, S.C. All other brand names,
trademarks and service marks appearing in this prospectus supplement and the
accompanying prospectus are the property of their respective holders.
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ABOUT THIS PROSPECTUS SUPPLEMENT
This prospectus supplement is a supplement to the accompanying prospectus
that is also a part of this document. This prospectus supplement and the
accompanying prospectus are part of a registration statement that we filed with
the Securities and Exchange Commission using a "shelf" registration process.
Under the shelf registration process, we may sell any combination of the
securities described in the accompanying prospectus up to a total dollar amount
of $1,000,000,000, of which this offering is a part. In this prospectus
supplement, we provide you with a general description of the shares of our
common stock that we will offer under this prospectus supplement and specific
information about the terms of this offering. Both this prospectus supplement
and the accompanying prospectus include important information about us, our
common stock and other information you should know before investing in our
common stock. This prospectus supplement also adds, updates and changes
information contained in the accompanying prospectus. To the extent that any
statement that we make in this prospectus supplement is inconsistent with the
statements made in the accompanying prospectus, the statements made in the
accompanying prospectus are deemed modified or superseded by the statements made
in this prospectus supplement. You should read both this prospectus supplement
and the accompanying prospectus as well as the additional information described
under the heading "Where You Can Find More Information" beginning on page S-22
of this prospectus supplement before investing in our common stock.
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SUMMARY
This summary highlights some information from this prospectus supplement
and the accompanying prospectus, and it may not contain all of the information
that is important to you. It is qualified in its entirety by the more detailed
information and consolidated financial statements, including the notes to the
consolidated financial statements, incorporated by reference in this prospectus
supplement and the accompanying prospectus. You should read the full text of,
and consider carefully the more specific details contained in or incorporated by
reference in, this prospectus supplement and the accompanying prospectus. When
used in this prospectus supplement and the accompanying prospectus, the terms
"Leap," "we," "our" and "us" refer to Leap Wireless International, Inc. and its
subsidiaries, unless the context requires otherwise. Unless otherwise specified,
information relating to population and potential customers is based on 1998
population estimates provided by Easy Analytic Software Incorporated.
OUR BUSINESS
Leap is a wireless communications carrier that is providing innovative,
affordable, simple wireless services designed to accelerate the transformation
of wireless service into a mass consumer product. We generally seek to address a
much broader population segment than traditional wireless providers have
addressed to date. In the U.S., we are offering wireless service under the brand
name "Cricket(TM)." Our innovative Cricket strategy is designed to extend the
benefits of mobility to the mass market by offering wireless service that is as
simple to understand and use as, and priced competitively with, traditional
landline service. In each of our markets, we are deploying 100% digital, Code
Division Multiple Access, or CDMA, networks that we believe provide higher
capacity and more efficient deployment of capital than competing technologies.
This, when combined with our efforts to streamline operation and distribution
systems, allows us to be a low-cost provider of wireless services in each of our
markets.
Cricket service allows customers to make and receive virtually unlimited
calls within a local calling area for a low, flat monthly rate compared with
traditional wireless services. Cricket customers pay in advance each month's
service from a simple, straightforward bill. We offer Cricket service without a
contract, and because service is paid in advance, we currently require no credit
check. The simplicity of the Cricket service allows us to sustain lower
operating costs per customer compared to traditional wireless providers. Our
networks are designed and built to provide coverage in the local calling area
where our target customers live, work and play. As a result, we believe that our
network operating costs are less than those of traditional wireless providers.
We believe that the Cricket service offering will help transform wireless
phone service from a luxury product into a mass consumer product. The Cricket
strategy is to provide digital wireless service to the mass market with a
simple, easy to understand approach. As a part of the Cricket strategy, we
intend to:
- attract new customers more quickly than traditional wireless providers
that offer complex pricing plans with peak/off-peak rates, roaming
charges and expensive "extra" minutes;
- maintain lower customer acquisition costs by offering one simple service
plan with a limited choice of handsets, and by distributing our product
through company stores and multiple third-party retail stores where the
mass market shops;
- sustain lower operating costs per customer compared to traditional
wireless providers through reduced network operation costs, streamlined
billing procedures, lower customer care expenses, lower credit
investigation costs and reduced bad debt; and
- deploy our capital more efficiently by building our networks to cover
only the urban and suburban areas of our markets where most of our
potential customers live, work and play, while avoiding rural areas and
corridors between distant markets.
At the end of March 2001, we had launched Cricket service in markets
covering a total population of approximately 9.2 million and had more than
339,000 Cricket customers across the U.S. To date we have acquired or have
rights to acquire wireless licenses covering approximately 72.6 million
potential customers in 36 states, and we plan to continue launching new Cricket
markets throughout 2001 and beyond.
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In Mexico, we were a founding shareholder and have invested $100 million in
Pegaso Telecomunicaciones, S.A. de C.V., a company that is providing a wireless
service in Mexico that is more traditional than our Cricket service. Pegaso
holds wireless licenses covering all of Mexico, representing approximately 99
million potential customers. At the end of March 2001, Pegaso had approximately
624,000 customers. We currently own 20.1% of Pegaso. In addition to Leap,
Alejandro Burillo Azcarrraga, a trust controlled by Mr. Burillo, an individual
related to Mr. Burillo, Sprint Mexico, Inc., and affiliates of Citicorp, the
Latin American Infrastructure Fund and Nissho Iwai have also invested in Pegaso.
Mr. Burillo is a member of our board of directors.
BUSINESS STRATEGY
Our business strategy is to bring innovative wireless communications
products and services to markets with strong growth potential. Key elements of
this strategy include:
- Enhancing the Mass Market Appeal of Wireless Service. We are working to
remove the price and complexity barriers that we believe have prevented
many potential customers from using wireless service. We believe that
large segments of the population do not use wireless service because they
view wireless service as an expensive luxury item, believe they cannot
control the cost of service, or find existing service plans too
confusing. Our service plans are designed to offer appealing value in
simple formats that customers can understand and budget for.
- Offering an Appealing Value Proposition. We strive to provide service
offerings that combine high quality and advanced features with simplicity
and attractive pricing to create a "high value/reasonable price"
proposition and broaden the market for wireless services. In the U.S., we
offer the Cricket service plan at a flat rate, paid in advance each
month, that is competitive with traditional landline service.
- Controlling and Minimizing Costs. To become one of the lowest-cost
providers in the wireless industry, we are designing high-quality
networks to minimize our capital costs and streamlining marketing,
distribution and back-office procedures.
- Leveraging CDMA Technology. We are deploying state-of-the-art CDMA
networks that are designed to provide higher capacity at a lower capital
cost and that can be easily upgraded to support enhanced capacity. We
believe this enables us to operate superior networks that support rapid
customer growth and high usage. In addition, we believe our CDMA networks
will provide a better platform to expand into data and other wireless
services based on advances in second and third generation digital
technology in the future.
- Expanding Our Cricket Service Through Acquisitions of Domestic Licenses
and Buildout of Additional Networks. We intend to expand the Cricket
service to selected metropolitan areas in the U.S. through the
acquisition of additional wireless licenses and the buildout of networks
for our newly-acquired wireless licenses.
- Expanding Our Service Offerings to Include Wireless Data Services. We
currently plan to expand our service offerings to include wireless data
services designed to appeal to a broad segment of the population and
further transform the nature of wireless communications for our
customers. We believe that wireless data services, like our innovative
Cricket service, need to be simple, easy to use and affordable for all
consumers.
- Investing Selectively in Foreign Ventures. While we expect our emphasis
for the next few years to be on our U.S.-based operations, if presented
with attractive opportunities, we may invest in international markets
where we believe the combination of unfulfilled demand and our attractive
wireless service offerings can fuel rapid growth.
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Leap was formed as a Delaware corporation in June 1998 as a subsidiary of
Qualcomm Incorporated. In September 1998, Qualcomm distributed all of the common
stock of Leap to Qualcomm's stockholders as a taxable dividend. Our executive
offices are located at 10307 Pacific Center Court, San Diego, CA 92121. Our
telephone number is (858) 882-6000.
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THE OFFERING
Common stock offered................ 2,800,000 shares
Common stock to be outstanding after
the offering........................ 33,275,740 shares
Use of proceeds..................... We intend to use the net proceeds to
supplement current funds available for
acquisitions, spectrum purchases and
for general corporate purposes
including, but not limited to, future
working capital needs.
Nasdaq National Market symbol....... LWIN
Unless we specifically state otherwise, information in this prospectus
supplement about the number of shares of our common stock to be outstanding upon
the closing of the offering excludes:
- 200,000 shares that the underwriter has the option to purchase to cover
over-allotments;
- 3,375,000 shares reserved for issuance upon exercise of a warrant issued
to Qualcomm in connection with the spin-off of Leap, which is exercisable
in whole or in part at any time between now and September 2008;
- 10,500,772 shares reserved for issuance upon the exercise of options or
awards granted or available for grant to employees, officers, directors
and consultants under Leap's equity incentive plans;
- 2,919,569 shares reserved for issuance upon exercise of options to
purchase Leap common stock granted to holders of Qualcomm options in
connection with the distribution of Leap's common stock to the
stockholders of Qualcomm;
- 2,203,691 shares reserved for issuance upon consummation of our pending
acquisitions of wireless licenses in Utica, New York, Visalia,
California, Birmingham and Tuscaloosa, Alabama, Jonesboro, Arkansas, and
Jackson, Mississippi, and up to 785,598 shares (subject to certain
adjustments based upon changes in the market value of wireless licenses)
reserved for issuance in connection with our pending acquisition of
wireless licenses in Buffalo and Syracuse, New York, all of which
acquisitions are subject to FCC approval and other conditions;
- 202,566 shares of common stock reserved for issuance upon exercise of a
warrant held by Chase Telecommunications Holdings, Inc.; and
- 2,829,854 shares of common stock reserved for issuance upon exercise of
the warrants issued in connection with our February 2000 units offering.
We have also committed to issue 373,367 shares of our common stock in an
acquisition transaction that closed in April 2001. These shares will be issued
from time to time upon surrender of certificates representing the cancelled
shares of the company we acquired.
Under certain circumstances, the number of shares to be issued in
connection with our acquisitions of wireless licenses is subject to change based
on the value of wireless licenses and the market price of our common stock at
the time of closing of the acquisition.
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RISK FACTORS
An investment in the common stock offered in connection with this
prospectus supplement and the accompanying prospectus involves a high degree of
risk. In addition to the other information in this prospectus supplement and the
accompanying prospectus, you should carefully consider the following risks
before making an investment decision.
WE HAVE A LIMITED OPERATING HISTORY
We have operated as an independent company since September 1998 and we
acquired and/or launched all of our existing Cricket markets beginning in
January 2000. Because we are at an early stage of development, we face risks
generally associated with establishing a new business enterprise. When
considering our prospects, investors must consider the risks, expenses and
difficulties encountered by companies in their early stages of development.
These risks include possible disruptions and inefficiencies associated with
rapid growth and workplace expansion, the difficulties associated with raising
money to finance new enterprises and the difficulties of establishing a
significant presence in highly competitive markets.
OUR BUSINESS STRATEGY IS UNPROVEN
Our business strategy in the U.S., marketed under the brand name Cricket,
is to offer consumers a service plan that allows them to make and receive
virtually unlimited local calls for an affordable, flat monthly rate. This
strategy, which has been introduced in a limited number of markets, is a new
approach to marketing wireless services and may not prove to be successful. Our
marketing efforts may not draw the volume of customers necessary to sustain our
business plan, our capital and operating costs may exceed planned levels, and we
may be unable to compete effectively with landline and other wireless service
providers in our markets. In addition, potential customers may perceive the
Cricket service to be less appealing than other wireless plans, which offer more
features and options, including the ability to roam outside of the home service
area. If our business strategy proves to be successful, other wireless providers
are likely to adopt similar pricing plans and marketing approaches. Should our
competitors choose to adopt a strategy similar to the Cricket strategy, some of
them may be able to price their services more aggressively or attract more
customers because of their stronger market presence and geographic reach and
their larger financial resources. Similarly, we currently have several new
services in development, including a data service designed to provide wireless
information to consumers' mobile phones. These planned services are innovative
and unproven. They may not attract or retain customers at a rate necessary to
make them profitable and otherwise may not prove to be successful.
WE HAVE A HISTORY OF LOSSES AND ANTICIPATE FUTURE LOSSES
Leap experienced net losses of approximately $114.4 million in the three
month period ended March 31, 2001, $269.3 million (excluding the gain on the
sale of Smartcom, net of related taxes and foreign currency impact) in the year
ended December 31, 2000, $75.8 million in the transition period from September
1, 1999 to December 31, 1999, $164.6 million in the year ended August 31, 1999,
$46.7 million in the year ended August 31, 1998 and $5.2 million in the year
ended August 31, 1997. Losses are likely to be significant for the next several
years as we launch service in new markets and seek to increase our customer
bases in new and existing markets. We may not generate profits in the short term
or at all. If we fail to achieve profitability, that failure could have a
negative effect on the market value of our common stock.
IF WE EXPERIENCE A HIGH RATE OF CUSTOMER TURNOVER, OUR COSTS COULD INCREASE
Many providers in the U.S. personal communications services, or PCS,
industry have experienced a high rate of customer turnover as compared to
cellular industry averages. The rate of customer turnover may be the result of
several factors, including limited network coverage, reliability issues such as
blocked or dropped calls, handset problems, inability to roam onto cellular
networks, affordability, customer care
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concerns and other competitive factors. Our strategy to address customer
turnover may not be successful, or the rate of customer turnover may be
unacceptable. In some markets, our competitors have chosen to provide a service
plan with pricing similar to the Cricket service, and these competitive factors
could also cause increased customer turnover. A high rate of customer turnover
could reduce revenues and increase marketing costs in order to attract the
minimum number of replacement customers required to sustain our business plan,
which, in turn, could have a material adverse effect on our business and
financial condition.
WE FACE SIGNIFICANT COMPETITION
The wireless telecommunications industry generally is very competitive and
competition is increasing. Unlike many wireless providers, we also intend to
compete directly with landline service providers in the telecommunications
industry. Many competitors have substantially greater resources than we have,
and we may not be able to compete successfully. Some competitors have announced
rate plans substantially similar to the Cricket service plan in markets in which
we have launched or expect to launch service. These competitive plans could
adversely affect our ability to maintain our pricing, market penetration and
customer retention.
In the U.S., we will compete directly with other wireless providers and
traditional landline carriers in each of our markets, many of which have greater
resources than we do and entered the market before us. A few of our competitors
operate wireless telecommunications networks covering most of the U.S.
Competitors' earlier entry and broader presence in the U.S. telecommunications
market may have a negative effect on our ability to successfully implement our
strategy. Furthermore, the FCC is actively pursuing policies designed to
increase the number of wireless competitors in each of our markets. For example,
the FCC will soon auction licenses that will authorize the entry of two
additional wireless providers in each market. In addition, other wireless
providers in the U.S. could attempt to implement our domestic strategy of
providing unlimited local service at a low, flat monthly rate if our strategy
proves successful. The landline services with which we will compete are already
used by some of our potential customers, and we may not be successful in our
efforts to persuade potential customers to adopt our wireless service in
addition to, or in replacement of, their current landline service.
Although the deployment of advanced telecommunications services is in its
early stages in many developing countries, we believe competition is increasing
as businesses and foreign governments realize the market potential of
telecommunications services. In Mexico, a number of international
telecommunications companies, including Verizon, AT&T, MCI, Motorola, Nextel and
SBC, as well as local competitors such as Telmex and other Mexican
telecommunications companies, continue to actively engage in developing
telecommunications services. Pegaso also competes against landline carriers,
including government-owned telephone companies. We also expect the prices that
Pegaso may charge for its products and services in some regions will decline
over the next few years as competition increases in its markets. Our competitors
in Mexico have greater financial resources and more established operations than
Pegaso. Pegaso is at an early stage of development and may not be able to
compete successfully.
We compete with companies that use other communications technologies,
including paging and digital two-way paging, enhanced specialized mobile radio
and domestic and global mobile satellite service. These technologies may have
advantages over the technology we use and may ultimately be more attractive to
customers. We may compete in the future with companies who offer new
technologies and market other services, including cable television access,
landline telephone service and Internet access, that we do not currently intend
to market. Some of our competitors offer these other services together with
their wireless communications service, which may make their services more
attractive to customers. In addition, we expect that, over time, providers of
wireless communications services will compete more directly with providers of
traditional landline telephone services. In addition, energy companies, utility
companies and cable operators may expand their services to offer communications
services.
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LEAP MAY FAIL TO RAISE REQUIRED CAPITAL
We require significant additional capital to build out and operate planned
networks and for general working capital needs. We also require additional
capital to invest in any new wireless opportunities, including capital for
license acquisition costs, network buildout of newly-acquired licenses and the
planned development and rollout of our wireless data services. Capital markets
have recently been volatile and uncertain. These markets may not improve, and we
may not be able to access these markets to raise additional capital. If we fail
to obtain required new financing, that failure would have a material adverse
effect on our business and our financial condition. For example, if we are
unable to access capital markets, we may have to restrict our activities or sell
our interests in licenses, or in one or more of our subsidiaries or other
ventures earlier than planned or at a "distressed sale" price.
YOUR OWNERSHIP INTEREST IN LEAP WILL BE DILUTED UPON ISSUANCE OF SHARES WE HAVE
RESERVED FOR FUTURE ISSUANCE
On May 1, 2001, 30,475,740 shares of our common stock were outstanding, and
23,390,417 additional shares of our common stock were reserved for issuance. The
issuance of these additional shares will reduce your percentage ownership in
Leap.
The following shares were reserved for issuance as of May 1, 2001:
- 200,000 shares that the underwriter has the option to purchase to cover
over-allotments;
- 3,375,000 shares reserved for issuance upon exercise of a warrant issued
to Qualcomm in connection with the spin-off of Leap, which is exercisable
in whole or in part at any time between now and September 2008;
- 10,500,772 shares reserved for issuance upon the exercise of options or
awards granted or available for grant to employees, officers, directors
and consultants under Leap's equity incentive plans;
- 2,919,569 shares reserved for issuance upon exercise of options to
purchase Leap common stock granted to holders of Qualcomm options in
connection with the distribution of Leap's common stock to the
stockholders of Qualcomm;
- 2,203,691 shares reserved for issuance upon consummation of our pending
acquisitions of wireless licenses in Utica, New York, Visalia,
California, Birmingham and Tuscaloosa, Alabama, Jonesboro, Arkansas, and
Jackson, Mississippi, and up to 785,598 shares (subject to certain
adjustments based upon changes in the market value of wireless licenses)
reserved for issuance in connection with our pending acquisition of
wireless licenses in Buffalo and Syracuse, New York, all of which
acquisitions are subject to FCC approval and other conditions;
- 202,566 shares of common stock reserved for issuance upon exercise of a
warrant held by Chase Telecommunications Holdings, Inc.; and
- 2,829,854 shares of common stock reserved for issuance upon exercise of
the warrants issued in connection with our February 2000 units offering.
We have also committed to issue 373,367 shares of our common stock in an
acquisition transaction that closed in April 2001. These shares will be issued
from time to time upon surrender of certificates representing the cancelled
shares of the company we acquired.
Under certain circumstances, the number of shares to be issued in
connection with our acquisitions of wireless licenses is subject to change based
on the value of wireless licenses and the market price of our common stock at
the time of the closing of the acquisition. In the pending acquisition of
wireless licenses in Buffalo and Syracuse, New York that we refer to above, the
seller has asserted that based on the results of the recent FCC auction of
wireless licenses, it is entitled to a purchase price adjustment that would
result in the purchase price being effectively doubled. Under the terms of the
agreement, if we are obligated to pay a purchase price adjustment, we are
entitled to pay such additional amounts in cash or
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Leap common stock, at our discretion. We believe the seller's position is
without merit, and we will vigorously defend against any claim that the seller
may make in the future.
In December 2000, we entered into a common stock purchase agreement with
Acqua Wellington North American Equities Fund, Ltd. under which we may, at our
discretion, sell up to a maximum of $125 million of registered common stock from
time to time over the succeeding 28 month period. Under the agreement, we may
require Acqua Wellington to purchase between $10 and $25 million of common
stock, depending on the market price of our common stock, during one or more 18
trading day periods. In addition, we may grant to Acqua Wellington an option to
purchase up to an equal amount of common stock during the same 18 trading day
period. Acqua Wellington purchases the common stock at a discount to its then
current market price, ranging from 4.0% to 5.5%, depending on our market
capitalization at the time we require Acqua Wellington to purchase our common
stock. A special provision in the agreement (as amended and restated) allowed
the first sale of common stock under the agreement to be up to $55 million. On
January 23, 2001, we completed the first sale of our common stock under the
agreement, issuing 1,564,336 shares to Acqua Wellington in exchange for $55.0
million in cash.
Dilution of the outstanding number of shares of our common stock could
adversely affect prevailing market prices for our common stock and our ability
to raise capital through an offering of equity securities.
We have agreed to file registration statements to register for resale up to
2,989,289 shares reserved for issuance upon consummation of our pending
acquisitions of wireless licenses. In addition, we have agreed to file a
registration statement to register for resale 373,367 shares of our common stock
in connection with an acquisition transaction that closed in April 2001. Under
certain circumstances, the number of shares for which registration rights have
been granted is subject to change based on the value of wireless licenses and
the market price of our common stock at the time of the closing of the
transactions pursuant to which the shares to be registered are issued.
HIGH LEVELS OF DEBT COULD ADVERSELY AFFECT OUR BUSINESS AND FINANCIAL CONDITION
We have obtained and expect to continue to obtain much of our required
capital through debt financing. A substantial portion of the debt financing,
including all of our vendor financing, bears or is likely to bear interest at a
variable rate, exposing us to interest rate risk.
Our high leverage could have important consequences, including the
following:
- our ability to obtain additional financing may be impaired;
- a substantial portion of our future cash flows from operations must be
dedicated to the servicing of our debt, thus reducing the funds available
for operations and investments;
- our leverage may reduce our ability to adjust rapidly to changing market
conditions and may make us more vulnerable to future downturns in the
general economy; and
- high levels of debt may reduce the value of stockholders' investments in
Leap because debt holders have priority regarding our assets in the event
of a bankruptcy or liquidation.
We may not have sufficient future cash flows to meet our debt payments, and may
not be able to refinance any of our debt at maturity.
In addition, our vendors have a right and may choose to sell outstanding
debt under our vendor financing agreements to third parties at a discount. Such
sales could affect the prices at which our outstanding notes trade and could
adversely affect the market's perception of Leap's creditworthiness.
OUR DEBT INSTRUMENTS CONTAIN PROVISIONS AND REQUIREMENTS THAT COULD LIMIT OUR
ABILITY TO PURSUE BORROWING OPPORTUNITIES
The restrictions contained in the indenture governing the notes issued in
our February 2000 units offering, and the restrictions contained in our vendor
facilities, may limit our ability to implement our business plan, finance future
operations, respond to changing business and economic conditions, secure
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additional financing, if needed, and engage in opportunistic transactions, such
as the acquisition of wireless licenses. Such senior debt, among other things,
restricts our ability and the ability of our subsidiaries and our future
subsidiaries to do the following:
- incur additional indebtedness;
- create liens;
- make certain payments, including payments of dividends and distributions
in respect of capital stock;
- consolidate, merge and sell assets;
- engage in certain transactions with affiliates; and
- fundamentally change our business.
In addition, such senior debt requires us to maintain certain ratios,
including:
- leverage ratios;
- interest coverage ratios; and
- fixed charges ratios;
and to satisfy certain tests, including tests relating to:
- maximum annual capital expenditures;
- minimum covered population in order to incur additional indebtedness;
- minimum number of subscribers to our services in order to incur
additional indebtedness; and
- minimum quarterly revenues and, commencing in 2004, minimum annual
revenues.
We may not satisfy the financial ratios, tests and other covenants under
our senior debt due to events that are beyond our control. If we fail to satisfy
any of the financial ratios, tests, or other covenants, we could be in default
under our senior debt or may be limited in our ability to access additional
funds under our senior debt, which could result in our being unable to make
payments on our outstanding notes. In addition, if we fail to meet performance
requirements, our equipment financing may be restricted or cancelled. Because
Leap's new Cricket markets were launched later in the fourth quarter of 2000
than anticipated and because of reduced equipment sales revenues as a result of
holiday promotions, Cricket revenue was below the minimum required level
contained in the financial covenants in the vendor loan facilities. Leap has
received waivers of its failure to meet this revenue target from all of the
required lenders. We made up this revenue shortfall and were in compliance with
the revenue covenant by the end of the first quarter of 2001. There can be no
assurance that additional delays in market launches and/or other adverse results
in our business will not result in a failure to meet our financial or operating
covenants in the future. Any defaults that result in a suspension of further
borrowings under the vendor facilities or acceleration of our obligations to
repay the outstanding balances under the vendor facilities would have a material
adverse effect on our business and our financial condition.
WE MAY EXPERIENCE DIFFICULTIES IN CONSTRUCTING AND OPERATING OUR
TELECOMMUNICATIONS NETWORKS
We will need to construct new telecommunications networks and expand
existing networks. We will depend heavily on suppliers and contractors to
successfully complete these complex construction projects. We may experience
quality deficiencies, cost overruns and delays on these construction projects,
including deficiencies, overruns and delays not within our control or the
control of our contractors. We also will depend on third parties not under our
control or the control of our contractors to provide backhaul and
interconnection facilities on a timely basis. In addition, the construction of
new telecommunications networks requires the receipt of permits and approvals
from numerous governmental bodies including municipalities and zoning boards.
There are pressures to limit growth and tower and other construction in
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many of our markets. Failure to receive these approvals in a timely fashion can
delay system rollouts and can raise the costs of completing construction
projects. Pegaso's launch of commercial service in Mexico City was delayed
several months due to delays in obtaining the required permits from local
authorities for cell site construction and some planned 2000 launches were
delayed. Some of our planned Cricket launches were delayed and launched with
fewer cell sites than desirable and therefore reduced coverage, as well.
We may not complete construction projects within budget or on a timely
basis. A failure to satisfactorily complete construction projects could
jeopardize wireless licenses and customer contracts. As a result, a failure of
this type could have a material adverse effect on our business and financial
condition.
Even if we complete construction in a timely and cost effective manner, we
will also face challenges in managing and operating our telecommunications
systems. These challenges include operating and maintaining the
telecommunications operating equipment and managing the sales, advertising,
customer support, billing and collection functions of the business. Our failure
in any of these areas could undermine customer satisfaction, increase customer
turnover, reduce revenues and otherwise have a material adverse effect on our
business and financial condition.
WE HAVE ENCOUNTERED RELIABILITY PROBLEMS DURING THE INITIAL DEPLOYMENT OF OUR
NETWORKS
As is typical with newly-constructed and rapidly expanding wireless
networks, we have experienced reliability problems with respect to network
infrastructure equipment, reliability of third party suppliers and capacity
limitations of our networks. If our networks ultimately fail to perform as
expected, that failure could have a material adverse effect on our business and
financial condition.
CALL VOLUME UNDER CRICKET FLAT PRICE PLANS COULD EXCEED THE CAPACITY OF OUR
WIRELESS NETWORKS
Our Cricket strategy in the U.S. is to offer consumers a service plan that
allows them to make virtually unlimited local calls for a low, flat monthly
rate. Our business plans for this strategy assume that Cricket customers will
use their wireless phones for substantially more minutes per month than
customers who purchase service from other providers under more traditional
plans. Our current plans assume, and our experience has shown, that our Cricket
customers use their phones approximately 1,100 minutes per month. We design our
U.S. networks to accommodate this expected high call volume. Although we believe
CDMA-based networks will be well suited to support high call volumes, if
wireless use by Cricket customers exceeds the capacity of our future networks,
service quality may suffer, and 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 expand network capacity. If our
planned networks cannot handle the call volumes they experience, our competitive
position and business prospects could be materially adversely affected.
FCC DECISIONS RELATING TO OUR C-BLOCK AND F-BLOCK LICENSES ARE SUBJECT TO REVIEW
AND APPEAL
Our business plan depends on our acquisition and operation of C-Block and
F-Block licenses in the U.S. We may acquire and operate C-Block and F-Block
licenses only if we qualify as a "designated entity" under FCC rules.
In July 1999, the FCC issued an opinion and order that found that we were
entitled to acquire C-Block and F-Block licenses. The order approved our
acquisition of the 36 C-Block licenses for which we were the highest bidder in
the FCC's 1999 spectrum re-auction, and the transfer of three F-Block licenses
which cover portions of North Carolina from AirGate Wireless, L.L.C. to one of
our subsidiaries, in each case subject to the fulfillment of certain conditions.
In October 1999, the FCC issued to us the 36 re-auctioned licenses. In addition,
in March 2000, the FCC approved the transfer to us of 11 C-Block licenses from
Chase Telecommunications and one F-Block license from PCS Devco. Subsequently,
the FCC has approved the transfer to us of numerous other C-Block and F-Block
licenses.
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The FCC's grants of our C-Block and F-Block licenses are subject to certain
conditions. Each of the conditions imposed by the FCC in the opinion and order
has been satisfied. We have a continuing obligation, during the designated
entity holding period for our C-Block and F-Block licenses, to limit our debt to
Qualcomm to 50% or less of our outstanding debt and to ensure that persons who
are or were previously officers or directors of Qualcomm do not comprise a
majority of our Board of Directors or a majority of our officers. If we fail to
continue to meet any of the conditions imposed by the FCC or otherwise fail to
maintain our qualification to own C-Block and F-Block licenses, that failure
could have a material adverse effect on our business and financial condition.
Various parties previously challenged our qualification to hold C-Block and
F-Block licenses, which challenges were rejected in the FCC's July 1999 order.
One of these parties, a wireless operating company, requested that the FCC
review its order, as well as the order consenting to the transfer of licenses to
us from Chase Telecommunications and PCS Devco. That wireless operating company
also has opposed all of our subsequent assignment or transfer applications at
the FCC. In July 2000, the FCC affirmed its July 1999 order as well as the order
consenting to the transfer of licenses to us from Chase Telecommunications and
PCS Devco, and the wireless operating company subsequently appealed the FCC's
decision to the Court of Appeal for the D.C. Circuit. In November 2000, the
wireless operating company and Leap executed a settlement agreement that
resolves all pending agency or court proceedings brought by the wireless
operating company against Leap applications. This agreement was approved by the
FCC on March 1, 2001. The wireless operating company has withdrawn all pending
agency and judicial challenges to Leap's applications. On March 15, 2001, the
United States Court of Appeals for the D.C. Circuit issued an order dismissing
the wireless operating company's appeal. On April 13, 2001, the Commission
issued a public notice officially approving the withdrawal of the wireless
operating company's pending petitions to deny and applications for review of our
applications. While we believe further review is unlikely, this action may still
be subject to additional judicial or administrative review.
Further judicial review of the FCC's orders granting us licenses is
possible. In addition, licenses awarded to us at auction may be subject to the
outcome of pending judicial proceedings by parties challenging the auction
process or the FCC's decision or authority to auction or reauction certain
C-Block and F-Block licenses. We may also be affected by other pending or future
FCC, legislative or judicial proceedings that generally affect the rules
governing C-Block and F-Block licensees or other designated entities. For
example, recent FCC rules changes have made it easier for large companies to
acquire C-Block and F-Block licenses at auction and in the aftermarket.
In a reauction of C-Block and F-Block PCS spectrum that closed in January
2001, we were named the high bidder on 22 licenses covering 22.4 million
potential customers. These licenses have not yet been granted to us, and we
cannot predict what effect any challenges before the FCC or in court to the
reauction generally, or the grant of these licenses to us specifically, will
have on us. NextWave Telecommunications, Inc. is a party to the litigation
challenging the validity of the reauction. Other parties have stated publicly
that they may challenge the validity of the auction and grants thereunder, as
well.
We may not prevail in connection with any such challenges, appeals or
proceedings. If the FCC or a court determines that we are not qualified to hold
C-Block or F-Block licenses, it could take the position that some or all of our
licenses should be divested, cancelled or reauctioned, or that we should pay
certain financial penalties.
IT MAY BE MORE DIFFICULT FOR US TO ACQUIRE C- AND F-BLOCK LICENSES IN THE FUTURE
Regulatory changes or requirements, or market circumstances, could make it
more difficult for us to acquire C- or F-Block PCS licenses, either at auction
or in the aftermarket.
The FCC held a reauction of 422 C-Block and F-Block licenses that closed in
January 2001. In connection with that reauction, the FCC made a number of
changes to its wireless and PCS licensing rules, and to the size of the licenses
being sold. Specifically, the FCC subdivided the C-Block licenses slated for
reauction into three 10 MHz licenses. For this reauction, the FCC also
subdivided the basic trading area, or BTA, service areas to which C-Block and
F-Block eligibility restrictions would continue to
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apply into two tiers according to population. In so-called "Tier 1" BTAs,
service areas with a population equal to or greater than 2.5 million, the FCC
removed all eligibility restrictions on two of the newly-created 10 MHz C-Block
licenses, and sold them in open bidding to any entity that could afford to
purchase them, no matter how large. In these Tier 1 BTAs, one 10 MHz C-Block
license remained subject to a closed bidding process, such that only entities
meeting C-Block and F-Block eligibility requirements were permitted to bid. In
Tier 2 BTAs, service areas with a population less than 2.5 million, two of the
10 MHz C-Block licenses remained subject to C-Block and F-Block eligibility
rules and thus were reserved for closed bidding by designated entities, while
one 10 MHz C-Block license per BTA was sold at open bidding. Several 15 MHz
C-Block licenses and a number of F-Block licenses slated for reauction also were
sold at open bidding, such that previous C-Block and F-Block eligibility
requirements no longer applied.
The FCC's reauction that closed in January 2001 represented a compromise
that made some additional spectrum available to large carriers, but also
continued to preserve C-Block and F-Block spectrum for designated entities. The
FCC's C-Block and F-Block rules, the recent reauction, and FCC actions taken in
connection with previous C-Block auctions and reauctions, remain subject to
pending FCC and judicial proceedings. These proceedings, and continuing changes
to the C-Block and F-Block rules, could have a material adverse effect on our
business and financial condition, including our ability to continue acquiring
C-Block and F-Block licenses. In addition, in the reauction, we were named the
high bidder on 22 licenses covering 22.4 million potential customers.
These licenses have not yet been granted to us, and we cannot predict what
effects any challenges before the FCC or in court to the reauction generally, or
the grant of these licenses to us specifically, will have on us. NextWave
Telecommunications, Inc. is a party to litigation challenging the validity of
the auction. Other parties have indicated publicly that they intend to challenge
the validity of the auction and grants thereunder, as well.
While we are in compliance with the terms of our C- and F-Block licenses,
as a result of the expansion of our business, we have now grown beyond certain
designated entity size thresholds specified in FCC rules. This growth will
likely preclude our ability to obtain additional C- or F-Block licenses that may
be auctioned by the FCC in the future. This growth does not preclude us from
continuing to acquire C- or F-Block licenses in the aftermarket, but we may be
subject to unjust enrichment penalties if we seek to acquire C- or F-Block
licenses from entities that qualify as "very small businesses" under FCC rules.
WE MAY NOT SATISFY THE BUILDOUT DEADLINES AND GEOGRAPHIC COVERAGE REQUIREMENTS
APPLICABLE TO OUR LICENSES, WHICH MAY RESULT IN THE REVOCATION OF SOME OF OUR
LICENSES OR THE IMPOSITION OF FINES AND/OR OTHER SANCTIONS
Each of our licenses is subject to an FCC mandate that we construct PCS
networks that provide adequate service to specified percentages of the
population in the areas covered by that license, or make a showing of
substantial service in that area, within five and ten years after the license
grant date. For 30 MHz C-Block licenses, this initial requirement is met when
adequate service is offered to at least one-third of the population of the
licensed service area. For 15 MHz and 10 MHz C-Block licenses and 10 MHz F-Block
licenses, the initial requirement is met when adequate service is provided to at
least one-quarter of the population in the licensed service area. Because we
obtained many of our wireless licenses from third parties subject to existing
buildout requirements, some of our licenses have buildout deadlines in 2001 and
several other licenses have buildout deadlines in the first half of 2002. We are
unable to predict whether the required coverage will be achieved and we have
applied to the FCC for a limited waiver of its construction requirements for a
number of licenses. We cannot predict whether or the extent to which our request
will be granted. Failure to comply with FCC buildout requirements could cause
the revocation of some of our licenses or the imposition of fines and/or other
sanctions.
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ADVERSE REGULATORY CHANGES COULD IMPAIR OUR ABILITY TO MAINTAIN EXISTING
LICENSES AND OBTAIN NEW LICENSES
We must maintain compliance with the terms of our existing
telecommunications licenses and those we acquire in the future to continue
offering wireless telecommunications services. Changes in regulations or failure
to comply with the terms of a license or failure to have the license renewed
could result in a loss of the license, penalties and fines. For example, we
could lose a license if we fail to construct or operate a wireless network as
required by the license. If we lose a license, that loss could have a material
adverse effect on our business and financial condition.
State regulatory agencies, the FCC, the U.S. Congress, the courts and other
governmental bodies regulate the operation of wireless telecommunications
systems and the use of licenses in the U.S. The FCC, Congress, the courts or
other federal, state or local bodies having jurisdiction over our operating
companies may take actions that could have a material adverse effect on our
business and financial condition.
Foreign governmental authorities regulate the operation of wireless
telecommunications systems and the use of licenses in the foreign countries in
which we operate. In some cases, the regulatory authorities also operate our
competitors. Changes in the current regulatory environment of these markets
could have a negative effect on us. In addition, the regulatory frameworks in
some of these countries are relatively new, and the interpretation of
regulations is uncertain.
We believe that the process of acquiring new telecommunications licenses
will be highly competitive. If we are not able to obtain new licenses, or cannot
otherwise participate in companies that obtain new licenses, our ability to
expand our operations would be limited.
RISKS ASSOCIATED WITH PEGASO COULD ADVERSELY AFFECT OUR BUSINESS
We face many risks from our international activities. Pegaso in Mexico
largely depends on the Mexican economy. The Mexican market is subject to rapid
fluctuations in currency exchange rates, consumer prices, inflation, employment
levels and gross domestic product.
Mexico's currency and financial markets continue to experience volatility.
The impact on the Mexican economy of the economic crisis that began in Asia and
then spread to Eastern Europe and Brazil has affected the ability of Mexican
companies to access the capital markets. The ability of Mexican companies to
access the capital markets may not improve and may deteriorate further in the
future. The economy of Mexico historically is affected by fluctuations in the
price of oil and petroleum products. Fluctuations in the prices of these
products and continuing political tensions in Mexico could negatively impact our
prospects in Mexico.
In addition, foreign laws and courts govern many of the agreements of
Pegaso. Other parties may breach or may make it difficult to enforce these
agreements.
Pegaso requires substantial additional capital to continue its planned
growth and operations. Leap may contribute capital to Pegaso in the future. If
Leap does not contribute additional capital to Pegaso, Leap's ownership interest
in Pegaso may be diluted due to additional capital contributions of other
investors.
If presented with attractive opportunities, Leap may invest in additional
international markets in the future. Any such international investment would
create risks associated with the applicable foreign country's economic
condition, including but not limited to currency exchange rates, inflation,
employment levels and gross domestic product.
OUR RESULTS OF OPERATIONS MAY BE HARMED BY FOREIGN CURRENCY FLUCTUATIONS
We are exposed to risk from fluctuations in foreign currency rates, which
could impact our results of operations and financial condition. Although we
report our financial statements in U.S. dollars, Pegaso reports its results in
Mexican pesos. Consequently, fluctuations in currency exchange rates between the
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U.S. dollar and the Mexican peso will affect our results of operations as well
as the value of our ownership interest in Pegaso. We do not currently hedge
against foreign currency exchange rate risks.
Pegaso generates revenues that are paid in Mexican pesos. However, many of
Pegaso's major contracts, including financing agreements and contracts with
equipment suppliers, are denominated in U.S. dollars. As a result, a significant
change in the value of the U.S. dollar against the Mexican peso could
significantly increase Pegaso's expenses and could have a material adverse
effect on our business and financial condition. For example, Pegaso may be
unable to satisfy its obligations under equipment supply agreements denominated
in U.S. dollars in the event of currency devaluations. In some developing
countries, including Mexico, significant currency devaluations relative to the
U.S. dollar have occurred and may occur again in the future. In such
circumstances, Leap and Pegaso may experience economic loss with respect to the
collectability of payments from their business partners and customers and the
recoverability of their investments.
If we invest in other foreign ventures in the future, we will face similar
risks relating to the applicable foreign currency of the foreign venture as well
as other country-specific risks.
THE TECHNOLOGIES THAT WE USE MAY BECOME OBSOLETE, WHICH WOULD LIMIT OUR ABILITY
TO COMPETE EFFECTIVELY
We have employed digital wireless communications technology based on CDMA
technology. We are required under an agreement entered into with Qualcomm in
connection with our spin-off to use only cdmaOne systems in international
operations through January 2004. Other digital technologies may ultimately prove
to have greater capacity or features and be of higher quality than CDMA. If
another technology becomes the preferred industry standard in any of the
countries in which we operate, we may be at a competitive disadvantage, and
competitive pressures may require us to change our digital technology at
substantial cost. We may not be able to respond to those pressures or implement
new technology on a timely basis, or at an acceptable cost. If CDMA technology
becomes obsolete at some time in the future, and we are unable to effect a
cost-effective migration path, it could materially and adversely affect our
business and financial condition.
IF WIRELESS HANDSETS POSE HEALTH AND SAFETY RISKS, WE MAY BE SUBJECT TO NEW
REGULATIONS, AND DEMAND FOR OUR SERVICES MAY DECREASE
Media reports have suggested that certain radio frequency emissions from
wireless handsets may be linked to various health concerns, including cancer,
and may interfere with various electronic medical devices, including hearing
aids and pacemakers. Concerns over radio frequency emissions may have the effect
of discouraging the use of wireless handsets, which would decrease demand for
our services. In recent years, the FCC and foreign regulatory agencies have
updated the guidelines and methods they use for evaluating radio frequency
emissions from radio equipment, including 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. 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 may be adopted in response to these risks
could limit our ability to market and sell our wireless service.
THE LOSS OF KEY PERSONNEL COULD HARM OUR BUSINESS
We believe our success depends on the contributions of a number of our key
personnel. These key personnel include but are not limited to Harvey P. White,
Chairman of the Board and Chief Executive Officer, and Susan G. Swenson,
President and Chief Operating Officer. If we lose the services of key personnel,
that loss could materially harm our business. We do not maintain "key person"
life insurance on any employee.
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OUR STOCK PRICE IS VOLATILE
The stock market in general, and the stock prices of telecommunications
companies and other technology-based companies in particular, have experienced
significant volatility that often has been unrelated to the operating
performance of any specific public companies. The market price of Leap common
stock has fluctuated widely in the past quarter and calendar year and is likely
to continue to fluctuate in the future. Factors that may have a significant
impact on the market price of Leap common stock include:
- future announcements concerning Leap or its competitors, including the
announcement of joint development efforts;
- changes in the prospects of our business partners or equipment suppliers;
- delays in the construction of planned Cricket networks and in general
implementation of our business plan;
- failure to achieve planned levels of subscriber growth and other
operating targets;
- deficiencies in our networks;
- results of technological innovations;
- government regulation, including the FCC's review of our acquisition of
wireless licenses;
- changes in recommendations of securities analysts and rumors that may be
circulated about Leap or its competitors;
- the impact of an economic slowdown on existing and future customers; and
- public perception of risks associated with our international operations.
Our future earnings and stock price may be subject to significant
volatility, particularly on a quarterly basis. Shortfalls in our revenues,
earnings or subscriber growth or delays in network buildout in any given period
relative to the levels and schedule expected by securities analysts could
immediately, significantly and adversely affect the trading price of Leap common
stock. In the past, following periods of volatility in the market price of a
company's securities, class action litigation has often been instituted against
the subject company. Litigation of this type could result in substantial costs
and a diversion of our management's attention and resources which could, in
turn, have a material adverse effect on our business and financial condition.
WE DO NOT INTEND TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE
We do not anticipate paying any cash dividends on our common stock in the
foreseeable future. The terms of the indenture governing the notes issued in our
February 2000 units offering restrict our ability to declare or pay dividends.
We intend to retain future earnings to fund our growth. Accordingly, you will
not receive a return on your investment in our common stock through the payment
of dividends in the foreseeable future and may not realize a return on your
investment even if you sell your shares. 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.
A DETERMINATION THAT LEAP IS AN INVESTMENT COMPANY COULD ADVERSELY AFFECT OUR
BUSINESS
Our ownership interest in Pegaso was 20.1% as of May 1, 2001, and we expect
that future investments in ventures will include ownership interests of less
than 50% and that our interests will vary over time as the ventures raise
additional capital. As a result, we could be subject to the registration
requirements of the Investment Company Act of 1940. The Investment Company Act
of 1940 requires registration of companies that engage primarily in the business
of investing in stock. Because we intend to actively participate in the business
operations of our subsidiaries and other ventures, we do not believe that we are
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primarily engaged in the business of investing in stock. We intend to monitor
and adjust our interests in our ventures to the extent practical to avoid being
subject to the Investment Company Act of 1940. If we must register as an
investment company under the Investment Company Act of 1940, compliance with
these regulations will negatively impact our business.
WE HAVE IMPLEMENTED OR ARE SUBJECT TO ANTI-TAKEOVER PROVISIONS THAT COULD
PREVENT OR DELAY AN ACQUISITION OF LEAP THAT IS BENEFICIAL TO OUR STOCKHOLDERS
Our charter and bylaws could make it more difficult for a third party to
acquire us, even if doing so would benefit our stockholders. Our charter and
bylaw provisions could diminish the opportunities for a stockholder to
participate in tender offers. The charter and bylaws may also restrain
volatility in the market price of our common stock resulting from takeover
attempts. In addition, our Board of Directors may issue preferred stock that
could have the effect of delaying or preventing a change in control of Leap. The
issuance of preferred stock could also negatively affect the voting power of
holders of our common stock. The provisions of the charter and bylaws may have
the effect of discouraging or preventing an acquisition of Leap or a sale of our
businesses. In addition, Section 203 of the Delaware General Corporation Law
imposes restrictions on mergers and other business combinations between us and
any holder of 15% or more of our common stock.
We have adopted a rights plan that could discourage, delay or prevent an
acquisition of Leap at a premium price. The rights plan provides for preferred
stock purchase rights attached to each share of our common stock which will
cause substantial dilution to a person or group acquiring 15% or more of our
stock if the acquisition is not approved by our board of directors.
The transfer restrictions imposed on the U.S. wireless licenses we own also
adversely affect the ability of third parties to acquire us. Our licenses may
only be transferred with prior approval by the FCC. In addition, we are
prohibited from voluntarily assigning or transferring control of our C-Block and
F-Block licenses for five years after grant date except to assignees or
transferees that satisfy the financial criteria established by the FCC for
designated entities, unless we have met the first network buildout deadline
applicable to such license. Accordingly, the number of potential transferees of
our licenses is limited, and any acquisition, merger or other business
combination involving us would be subject to regulatory approval.
In addition, the documents governing our indebtedness contain limitations
on our ability to enter into a change of control transaction. Under these
documents, the occurrence of a change of control transaction, in some cases
after notice and grace periods, would constitute an event of default permitting
acceleration of the indebtedness.
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FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus contain and
incorporate by reference forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These forward-looking statements are subject to a number
of risks, uncertainties and assumptions about Leap, including, among other
things:
- changes in the economic conditions of the various markets our
subsidiaries serve which could adversely affect the market for wireless
services;
- our ability to access capital markets;
- a failure to meet the operational, financial or other covenants of our
credit facilities;
- our ability to rollout networks in accordance with our plans, including
receiving equipment and backhaul and interconnection facilities on
schedule from third parties;
- failure of network systems to perform according to expectations;
- the effect of competition;
- the acceptance of our product offering by our target customers;
- our ability to retain customers;
- our ability to maintain our cost, market penetration and pricing
structure in the face of competition;
- uncertainties relating to negotiating and executing definitive agreements
and the ability to close pending transactions;
- technological challenges in developing wireless data services and
customer acceptance of such services if developed;
- our ability to integrate the businesses and technologies we acquire; and
- rulings by courts or the FCC adversely affecting our rights to own and/or
operate certain wireless licenses.
You can identify these forward-looking statements by forward-looking words
such as "believe," "may," "could," "will," "estimate," "continue," "anticipate,"
"intend," "seek," "plan," "expect," "should," "would" and similar expressions in
this prospectus supplement and the accompanying prospectus.
We have described other risks concerning Leap elsewhere in this prospectus
supplement under the heading "Risk Factors." We undertake no obligation to
publicly 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 supplement and the accompanying prospectus may not occur and actual
results could differ materially from those anticipated or implied in the
forward-looking statements.
USE OF PROCEEDS
The net proceeds we receive from the sale of 2,800,000 shares of our common
stock in this offering are estimated to be $91.4 million, or $97.9 million if
the underwriter exercises its over-allotment option in full, at the public
offering price of $33.50 per share after deducting underwriting discounts and
commissions and estimated offering expenses of $200,000 payable by us.
We expect to use the net proceeds of this offering to supplement current
funds available for acquisitions and spectrum purchases and for general
corporate purposes including, but not limited to, future working capital needs.
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UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated May 2, 2001, we have agreed to sell to Credit Suisse First
Boston Corporation all of the shares of common stock in the offering.
The underwriting agreement provides that the underwriter is obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
We have granted to the underwriter a 30-day option to purchase on a pro
rata basis up to 200,000 additional shares at the public offering price less the
underwriting discounts and commissions. The option may be exercised only to
cover any over-allotments of common stock.
The underwriter proposes to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus supplement. After
the public offering the underwriter may change the public offering price.
The following table summarizes the compensation we will pay:
Per Share Total
------------------------------- -------------------------------
Without With Without With
Over-allotment Over-allotment Over-allotment Over-allotment
-------------- -------------- -------------- --------------
Underwriting Discounts and Commissions paid
by us.................................... $0.80 $0.80 $2,240,000 $2,400,000
Leap, nine of its directors and all of its officers have agreed that,
without the prior written consent of the underwriter, it, he or she, as the case
may be, will not during the period ending 90 days after the date of this
prospectus supplement:
- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock, or
- enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the
common stock,
whether any such transaction described above is to be settled by delivery of
common stock or such other securities, in cash or otherwise. The restrictions
described in this paragraph do not apply to:
- the sale of shares to the underwriter;
- the issuance by us of shares of common stock upon the exercise of an
option or warrant or the conversion of any security outstanding on the
date of this prospectus supplement of which the underwriter has been
advised in writing or which is described in this prospectus supplement;
- the issuance by us of shares of common stock in connection with
acquisitions of wireless licenses or voice or data telecommunications
assets or technologies, provided that such shares may not be sold by the
seller, subject to certain exceptions, until 90 days after the date of
this prospectus supplement;
- the issuance by us of shares of common stock or securities convertible
into or exercisable for shares of common stock in a private placement
transaction, provided that such shares may not be sold by the acquiror
until 90 days after the date of this prospectus supplement;
- subject to certain limitations, issuances by us of shares of common stock
or call options pursuant to our agreement with Acqua Wellington North
American Equities Fund Ltd. at least 30 days after the date of this
prospectus supplement;
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- the grant by us of options or common stock under our equity and incentive
plans as in effect on the date of this prospectus supplement;
- transactions by any person other than Leap relating to shares of common
stock acquired in open market transactions after the completion of the
offering of the shares; and
- the transfer of shares of common stock by any person other than Leap to a
member of that person's immediate family or any affiliate of that person
if the transferee agrees to be subject to the restrictions described
above.
We have agreed to indemnify the underwriter against liabilities under the
Securities Act of 1933, or contribute to payments that the underwriter may be
required to make with respect to such liabilities.
In connection with the offering the underwriter may engage in stabilizing
transactions, over-allotment transactions, syndicate covering transactions, and
passive market making in accordance with Regulation M under the Securities
Exchange Act of 1934.
- Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
- Over-allotment involves sales by the underwriter of shares in excess of
the number of shares the underwriter is obligated to purchase, which
creates a syndicate short position. The short position may be either a
covered short position or a naked short position. In a covered short
position, the number of shares over-allotted by the underwriter is not
greater than the number of shares that it may purchase in the
over-allotment option. In a naked short position, the number of shares
involved is greater than the number of shares in the over-allotment
option. The underwriter may close out any short position by either
exercising its over-allotment option and/or purchasing shares in the open
market.
- Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions. In determining the source of shares to
close out the short position, the underwriter will consider, among other
things, the price of shares available for purchase in the open market as
compared to the price at which they may purchase shares through the
over-allotment option. If the underwriter sells more shares than could be
covered by the over-allotment option, a naked short position, the
position can only be closed out by buying shares in the open market. A
naked short position is more likely to be created if the underwriter is
concerned that there could be downward pressure on the price of the
shares in the open market after pricing that could adversely affect
investors who purchase in the offering.
- In passive market making, market makers in the common stock who are
underwriters or prospective underwriters may, subject to limitations,
make bids for or purchases of our common stock until the time, if any, at
which a stabilizing bid is made.
These stabilizing transactions and syndicate covering transactions may have the
effect of raising or maintaining the market price of our common stock or
preventing or retarding a decline in the market price of the common stock. As a
result the price of our common stock may be higher than the price that might
otherwise exist in the open market. These transactions may be effected on the
Nasdaq National Market or otherwise and, if commenced, may be discontinued at
any time.
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are made. Any resale of the common stock in Canada must
be made under applicable securities laws which will vary depending on the
relevant
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jurisdiction, and which may require resales to be made under available statutory
exemptions or under a discretionary exemption granted by the applicable Canadian
securities regulatory authority. Purchasers are advised to seek legal advice
prior to any resale of the common stock.
REPRESENTATIONS OF PURCHASERS
By purchasing common stock in Canada and accepting a purchase confirmation
a purchaser is representing to us and the dealer from whom the purchase
confirmation is received that
- the purchaser is entitled under applicable provincial securities laws to
purchase the common stock without the benefit of a prospectus qualified
under those securities laws,
- where required by law, that the purchaser is purchasing as principal and
not as agent, and
- the purchaser has reviewed the text above under Resale Restrictions.
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or such persons. All or a substantial portion of the assets of the issuer
and such persons may be located outside of Canada and, as a result, it may not
be possible to satisfy a judgment against the issuer or such persons in Canada
or to enforce a judgment obtained in Canadian courts against such issuer or
persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that the purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by the purchaser in this offering. The report must be in
the form attached to British Columbia Securities Commission Blanket Order BOR
#95/17, a copy of which may be obtained from us. Only one report must be filed
for common stock acquired on the same date and under the same prospectus
exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and about the eligibility of the common
stock for investment by the purchaser under relevant Canadian legislation.
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DESCRIPTION OF LEAP CAPITAL STOCK
The following description of our capital stock is intended as a summary
only and is qualified in its entirety by reference to our certificate of
incorporation and our bylaws. For information on obtaining a copy of our
certificate of incorporation and bylaws, see the section of this prospectus
supplement or the accompanying prospectus captioned "Where You Can Find More
Information."
Under our charter, the total number of shares of all classes of stock that
we have authority to issue is 310,000,000, consisting of 10,000,000 shares of
preferred stock and 300,000,000 shares of common stock.
COMMON STOCK
As of May 1, 2001, we had 30,475,740 shares of common stock outstanding.
The holders of our common stock are entitled to one vote for each share on all
matters voted on by stockholders. The holders of our common stock possess all
voting power, except as otherwise required by law or provided in any resolution
adopted by our board of directors regarding any series of preferred stock. After
adequate provision has been made for repayment of our creditors and subject to
any preferential or other rights of any outstanding series of our preferred
stock that may be designated by our board, the holders of our common stock will
be entitled to such dividends as may be declared from time to time by our board
from available funds and upon liquidation will be entitled to receive pro rata
all of our assets available for distribution to the holders of our capital
stock. The terms of the indenture governing the notes issued in our February
2000 units offering restrict our ability to declare or pay dividends.
WARRANTS
In connection with the spin-off of Leap from Qualcomm, we issued a warrant
to purchase 5,500,000 shares of our common stock to Qualcomm at an exercise
price of approximately $6.11 per share. In March 1999, in exchange for
consideration valued at $5.4 million, Qualcomm agreed to amend the warrant to
reduce the number of shares which may be acquired upon exercise to 4,500,000.
The warrant is exercisable during the 10 years following the spin-off of Leap.
The warrant provides that Qualcomm may not exercise the warrant if, as a result,
Qualcomm, together with its officers and directors, would own equity securities
of Leap in an amount that would disqualify Leap from being a "designated entity"
under FCC rules. As of May 1, 2001, Qualcomm had received 1,015,700 shares of
our common stock upon exercising portions of the warrant and had surrendered
rights to purchase 109,300 shares in partial payment of the exercise price. The
remaining number of shares which may be acquired upon exercise of the warrant is
3,375,000.
The warrant issued to Qualcomm includes three types of registration rights
which require Leap to register the shares of Leap common stock issuable upon
exercise of the warrant. First, the warrant provides for a one-time "demand"
registration right which permits Qualcomm to require Leap to register a minimum
of $5 million of Leap common stock issuable upon exercise of the warrant.
Second, the warrant provides for "piggyback" registration rights which require
Leap to notify Qualcomm of its intention to register shares of Leap common stock
with the SEC and, upon request, to include Qualcomm's shares issuable upon
exercise of the warrant in the registration. If Qualcomm exercises its piggyback
or demand registration rights and the offering is underwritten, the shares to be
registered may be reduced by the underwriters based on market conditions.
However, after Leap's first firm commitment underwritten public offering of
common stock, the shares to be registered may be reduced to no less than 30% of
the shares requested to be registered. Third, the warrant provides for "Form
S-3" registration rights which generally permit Qualcomm to require Leap to
register a minimum of $5 million of shares issuable upon exercise of the warrant
if Form S-3, a short-form registration statement, is available for the proposed
registration. We will be able to suspend the effectiveness of such registration
statement under certain circumstances. The registration rights in the warrant
may be assigned by Qualcomm with any transfer of the warrant.
In connection with our February 2000 units offering, we issued warrants to
purchase an aggregate of 2,829,854 shares of our common stock. The terms and
conditions of the warrants issued in the senior unit and senior discount unit
offerings are more fully described in an exhibit to the registration statement
of which this prospectus supplement and the accompanying prospectus forms a
part. Qualcomm, which
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purchased units in the offering, holds 308,000 of such warrants, which are
exercisable on or after February 23, 2001 for 770,924 shares of our common
stock, at an exercise price of $96.80 per share.
In connection with our acquisition of Chase Telecommunications in March
2000, we issued a warrant to Chase Telecommunications Holdings to purchase
643,068 shares of the common stock of our subsidiary, Cricket Communications
Holdings, for an aggregate warrant exercise price of $1,000,000. In connection
with the June 2000 merger of Cricket Communications Holdings into a wholly owned
subsidiary of ours, the warrant was converted into the right to purchase an
aggregate of 202,566 shares of Leap common stock at an exercise price of $4.9367
per share. The aggregate warrant exercise price of $1,000,000 remains unchanged.
LEGAL MATTERS
Latham & Watkins in San Diego, California will pass upon the validity of
the securities offered under this prospectus supplement and certain other legal
matters. O'Melveny & Myers LLP in San Francisco, California will pass upon
certain legal matters relating to the offering for the underwriter.
EXPERTS
The consolidated financial statements incorporated in this prospectus
supplement and the accompanying prospectus by reference to the Annual Report on
Form 10-K of Leap Wireless International, Inc. for the year ended December 31,
2000 have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The financial statements as of December 31, 1999 and 1998 and for the year
ended December 31, 1999 and for the period from June 24, 1998 (inception) to
December 31, 1998 of Pegaso Telecomunicaciones, S.A. de C.V. incorporated in
this prospectus supplement and the accompanying prospectus by reference to the
Annual Report on Form 10-K/A Amendment No. 2 of Leap Wireless International,
Inc. for the year ended August 31, 1999 have been so incorporated in reliance on
the report of PricewaterhouseCoopers, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
Leap is subject to the informational requirements of the Securities
Exchange Act of 1934, and files 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 SEC's public
reference room at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
SEC's regional offices at Seven World Trade Center, 13th Floor, New York, New
York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Please call the SEC at 1-800-SEC-0300 for further
information on the public reference rooms. You may also access filed documents
at the SEC's Website at www.sec.gov.
We have filed a registration statement on Form S-3 and related exhibits
with the SEC under the Securities Act of 1933. The registration statement
contains additional information about Leap and the securities. You may inspect
the registration statement and exhibits without charge and obtain copies from
the SEC at prescribed rates at the locations above.
The SEC allows us to "incorporate by reference" information that we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus supplement and the accompanying prospectus,
and information that we file later with the SEC will automatically update and
supersede this
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information. We incorporate by reference in this prospectus supplement and the
accompanying prospectus the following documents we have filed, or may file, with
the SEC:
- Our Annual Report on Form 10-K for the fiscal year ended December 31,
2000 filed with the SEC on March 2, 2001;
- Amendment No. 2 to our Annual Report on Form 10-K for the fiscal year
ended August 31, 1999 filed on Form 10-K/A with the SEC on June 28, 2000;
- Our Current Report on Form 8-K dated January 11, 2001 filed with the SEC
on January 19, 2001 and Amendment No. 1 thereto filed on Form 8-K/A with
the SEC on January 25, 2001;
- Our Current Report on Form 8-K dated January 23, 2001 filed with the SEC
on January 31, 2001;
- Our Current Report on Form 8-K dated February 14, 2001 filed with the SEC
on February 14, 2001;
- Our Current Report on Form 8-K dated March 16, 2001 filed with the SEC on
March 16, 2001;
- Our Current Report on Form 8-K dated April 9, 2001 filed with the SEC on
April 9, 2001;
- Our Current Report on Form 8-K dated April 19, 2001 filed with the SEC on
April 20, 2001;
- Our Current Report on Form 8-K dated May 2, 2001 filed with the SEC on
May 3, 2001;
- The description of our common stock and associated preferred stock
purchase rights contained in our Registration Statement on Form 10 filed
with the SEC on July 1, 1998, as amended;
- All documents filed by us with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 after the date of this
prospectus and before termination of this offering.
A statement contained in a document incorporated by reference in this
prospectus supplement or the accompanying prospectus shall be deemed to be
modified or superseded for purposes of this prospectus supplement and the
accompanying prospectus to the extent that a statement contained herein or in
any other subsequently filed document which is also incorporated herein modifies
or replaces such statement. Any statements so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this
document.
You may request a free copy of any of the documents incorporated by
reference in this prospectus supplement or the accompanying prospectus by
writing or telephoning us at the following address:
Leap Wireless International, Inc.
10307 Pacific Center Court
San Diego, CA 92121
(858) 882-6000
You should rely only on the information contained in or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We have
not authorized anyone else to provide you with different information. You should
not assume that the information in this prospectus supplement or the
accompanying prospectus is accurate as of any date other than the date on the
front of this document.
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PROSPECTUS
$1,000,000,000
LEAP WIRELESS INTERNATIONAL, INC.
DEBT SECURITIES
PREFERRED STOCK
DEPOSITARY SHARES
COMMON STOCK
WARRANTS
RIGHTS
UNITS
-------------------------
We may offer and sell from time to time in one or more classes or series
and in amounts, at prices and on the terms that we will determine at the time of
offering, with an aggregate initial offering price of up to $1,000,000,000:
- debt securities, which may consist of debentures, notes or other types of
debt;
- shares of preferred stock;
- shares of preferred stock represented by depositary shares;
- shares of common stock;
- warrants to purchase debt securities, preferred stock or common stock;
- rights to purchase shares of common stock; and
- units consisting of two or more of the foregoing.
We will provide the specific terms of these securities in supplements to
this prospectus. You should read this prospectus and any supplement carefully
before you invest.
Our common stock is listed on the Nasdaq National Market under the symbol
"LWIN."
-------------------------
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.
We will sell these securities directly to our stockholders or to purchasers
or through agents on our behalf or through underwriters or dealers as designated
from time to time. If any agents or underwriters are involved in the sale of any
of these securities, the applicable prospectus supplement will set forth the
names of the agents or underwriters and any applicable fees, commissions or
discounts.
-------------------------
The date of this prospectus is April 4, 2001
27
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not making an offer
to sell these securities in any jurisdiction where the offer or sale is not
permitted. You should assume that the information appearing in this prospectus
is accurate as of the date on the front cover of this prospectus only. Our
business, financial condition, results of operations and prospects may have
subsequently changed.
-------------------------
TABLE OF CONTENTS
PAGE
----
About this Prospectus....................................... 3
Where You Can Find More Information......................... 4
Forward-Looking Statements.................................. 5
Leap Wireless International................................. 6
Use of Proceeds............................................. 6
Ratio of Earnings to Fixed Charges.......................... 6
Description of Debt Securities.............................. 7
Description of Capital Stock................................ 16
Common Stock.............................................. 16
Preferred Stock........................................... 16
Description of Depositary Shares............................ 19
Description of Warrants..................................... 22
Description of Rights....................................... 25
Description of Units........................................ 26
Plan of Distribution........................................ 27
Legal Matters............................................... 30
Experts..................................................... 30
-------------------------
Whenever we refer to "Leap," "we," "our" or "us" in this prospectus, we
mean Leap Wireless International, Inc. and its consolidated subsidiaries, unless
the context suggests otherwise. When we refer to "you" or "yours," we mean the
holders of the applicable series of securities.
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission using a "shelf" registration process. Under
this shelf registration process, we may sell any combination of the securities
described in this prospectus in one or more offerings up to a total dollar
amount of $1,000,000,000. This prospectus provides you with a general
description of the securities we may offer. Each time we offer to sell
securities, we will provide a prospectus supplement that will contain specific
information about the terms of that offering. The prospectus supplement may also
add, update or change information contained in this prospectus. To the extent
that any statement that we make in a prospectus supplement is inconsistent with
statements made in this prospectus, the statements made in this prospectus will
be deemed modified or superseded by those made in a prospectus supplement. You
should read both this prospectus and any prospectus supplement together with
additional information described under the next heading, "Where You Can Find
More Information."
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WHERE YOU CAN FIND MORE INFORMATION
Leap is subject to the informational requirements of the Securities
Exchange Act of 1934, and files 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 SEC's public
reference room at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
SEC's regional offices at Seven World Trade Center, 13th Floor, New York, New
York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Please call the SEC at 1-800-SEC-0300 for further
information on the public reference rooms. You may also access filed documents
at the SEC's Web site at www.sec.gov.
We are incorporating by reference some information about us that we file
with the SEC. We are disclosing important information to you by referencing
those filed documents. Any information that we reference this way is considered
part of this prospectus.
We incorporate by reference the following documents we have filed, or may
file, with the SEC:
- Our Annual Report on Form 10-K for the fiscal year ended December 31,
2000 filed with the SEC on March 2, 2001;
- Amendment No. 2 to our Annual Report on Form 10-K for the fiscal year
ended August 31, 1999 filed on Form 10-K/A with the SEC on June 28, 2000;
- Our Current Report on Form 8-K dated January 11, 2001 filed with the SEC
on January 19, 2001 and Amendment No. 1 thereto filed on Form 8-K/A with
the SEC on January 25, 2001;
- Our Current Report on Form 8-K dated January 23, 2001 filed with the SEC
on January 31, 2001;
- Our Current Report on Form 8-K dated February 14, 2001 filed with the SEC
on February 14, 2001;
- Our Current Report on Form 8-K dated March 16, 2001 filed with the SEC on
March 16, 2001;
- The description of our common stock and associated preferred stock
purchase rights contained in our Registration Statement on Form 10 filed
with the SEC on July 1, 1998, as amended; and
- All documents filed by us with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 after the date of this
prospectus and before termination of this offering.
A statement contained in a document incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which is also incorporated herein modifies or replaces such statement.
Any statements so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this prospectus.
You may request a free copy of any of the documents incorporated by
reference in this prospectus by writing or telephoning us at the following
address:
Leap Wireless International, Inc.
10307 Pacific Center Court
San Diego, California 92121
(858) 882-6000
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FORWARD-LOOKING STATEMENTS
This prospectus contains and incorporates by reference forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. These forward-looking
statements are subject to a number of risks, uncertainties and assumptions about
Leap, including, among other things:
- changes in the economic conditions of the various markets our
subsidiaries serve which could adversely affect the market for wireless
services;
- our ability to access capital markets;
- a failure to meet the operational, financial or other covenants contained
in our credit facilities;
- our ability to rollout networks in accordance with our plans, including
receiving equipment and backhaul and interconnection facilities on
schedule from third parties;
- failure of network systems to perform according to expectations;
- the effect of competition;
- the acceptance of our product offering by our target customers;
- our ability to retain customers;
- our ability to maintain our cost, market penetration and pricing
structure in the face of competition;
- uncertainties relating to negotiating and executing definitive agreements
and the ability to close pending transactions;
- technological challenges in developing wireless data services and
customer acceptance of such services if developed;
- rulings by courts or the FCC adversely affecting our rights to own and/or
operate certain wireless licenses; and
- other factors detailed in our other SEC filings.
You can identify these forward-looking statements by forward-looking words
such as "believe," "may," "could," "will," "estimate," "continue," "anticipate,"
"intend," "seek," "plan," "expect," "should," "would" and similar expressions in
this prospectus.
We undertake no obligation to publicly 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 may not occur and actual results
could differ materially from those anticipated or implied in the forward-looking
statements.
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LEAP WIRELESS INTERNATIONAL
Leap is a wireless communications carrier that is deploying unique,
affordable, simple wireless services designed to accelerate the transformation
of wireless service into a mass consumer product. We generally seek to address a
much broader population segment than traditional wireless providers have
addressed to date. In the U.S., we are offering wireless service under the brand
name "Cricket(TM)." Our innovative Cricket strategy is designed to extend the
benefits of mobility to the mass market by offering wireless service that is as
simple to understand and use as, and priced competitively with, traditional
landline service. In each of our markets, we are deploying 100% digital, Code
Division Multiple Access, or CDMA, networks that we believe provide higher
capacity and more efficient deployment of capital than competing technologies.
This, when combined with our efforts to streamline operation and distribution
systems, allows us to be a low-cost provider of wireless services in each of our
markets.
Leap was formed as a Delaware corporation in June 1998 as a subsidiary of
Qualcomm Incorporated. In September 1998, Qualcomm distributed all of the common
stock of Leap to Qualcomm's stockholders as a taxable dividend. Our executive
offices are located at 10307 Pacific Center Court, San Diego, CA 92121. Our
telephone number is (858) 882-6000.
USE OF PROCEEDS
We intend to use the net proceeds from the sale of the securities under
this prospectus for general corporate purposes, including acquisitions, capital
expenditures and working capital. We expect to use the majority of the proceeds
from offerings under this prospectus to finance future acquisitions of wireless
operating licenses, including those that the FCC plans to auction, acquisitions
of wireless operating systems and complementary businesses and costs related to
building out wireless markets. We may invest funds not required immediately for
these purposes in short-term investment grade securities.
RATIO OF EARNINGS TO FIXED CHARGES
Our ratios of earnings to fixed charges are as follows for the periods
indicated:
PERIOD FROM
SEPTEMBER 1,
YEAR ENDED AUGUST 31, 1999 YEAR ENDED
------------------------- TO DECEMBER 31, DECEMBER 31,
1996 1997 1998 1999 1999 2000
---- ---- ---- ---- --------------- ------------
Ratio of earnings to fixed charges............ -- -- -- -- -- 2.05
For the years ended August 31, 1996, 1997, 1998, 1999 and the transition
period from September 1, 1999 to December 31, 1999, our earnings were
insufficient to cover fixed charges by $0.4 million, $1.4 million, $23.6
million, $37.1 million and $52.7 million, respectively. Earnings consist of
pre-tax income (loss) from continuing operations adjusted to add back fixed
charges, minority interest in earnings of consolidated subsidiary, losses from
and write-down of investments in equity investees and amortization of
capitalized interest and to subtract capitalized interest. Fixed charges consist
of interest expense, including capitalized interest, amortized discounts related
to indebtedness and that portion of rent expenses deemed to be interest.
To date, we have not issued any shares of preferred stock. Therefore, the
ratios of earnings to fixed charges and preferred stock dividends are identical
to the ratios presented in the table above.
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DESCRIPTION OF DEBT SECURITIES
This prospectus describes the general terms and provisions of our debt
securities. When we offer to sell a particular series of debt securities, we
will describe the specific terms of the series in a supplement to this
prospectus. Accordingly, for a description of the terms of any series of debt
securities, you must refer to both the prospectus supplement relating to that
series and the description of the debt securities in this prospectus. A
prospectus supplement may change any of the terms of the debt securities
described in this prospectus.
The debt securities offered by this prospectus will be issued under an
indenture between us and the trustee named therein. The indenture is subject to,
and governed by, the Trust Indenture Act of 1939, as amended. We have
incorporated by reference the form of indenture as an exhibit to the
registration statement of which this prospectus forms a part and you should read
the indenture for the provisions that may be important to you. We have
summarized select portions of the indenture below. The summary is not complete.
Terms used in the summary below and not defined in this prospectus have the
meanings specified in the indenture.
GENERAL
The debt securities will be our direct obligations, which may be secured or
unsecured, and which may be senior or subordinated indebtedness. We may issue an
unlimited amount of debt securities, in one or more series, under the indenture.
The terms of each series of debt securities will be established by our board of
directors or in a supplemental indenture. We do not have to issue all debt
securities of one series at the same time and, unless described differently in a
prospectus supplement, we may reopen a series, without the consent of the
holders of the debt securities of that series, for issuances of additional debt
securities of that series.
There may be more than one trustee under the indenture, each relating to
one or more series of debt securities. Any trustee may resign or be removed by
us at which time we will appoint a successor trustee. Each trustee will be a
trustee of a trust under the indenture separate and apart from the trust
administered by any other trustee under the indenture. Except as indicated
elsewhere in this prospectus, any action taken by the trustee may be taken by
the trustee only relating to the series of debt securities for which it is the
trustee.
We will provide in a prospectus supplement, including any pricing
supplement, relating to any series of debt securities being offered, the
aggregate principal amount and the following terms of the debt securities:
- the title of the debt securities;
- the aggregate principal amount of the debt securities and any limit on
the aggregate principal amount of the debt securities;
- whether we will issue the debt securities at a discount and the portion
of the principal amount of the debt securities payable upon declaration
of acceleration of the maturity of the securities or upon redemption, if
other than the principal amount, and the rate at which the original issue
discount will accrue;
- the date on which we will pay the principal on the debt securities;
- the rate, which may be fixed or variable, or the method used to determine
the rate at which the debt securities will bear interest;
- the date from which interest will accrue, the date on which interest will
be payable and any regular record date for the interest payable on any
interest payment date;
- the place where we will pay, or the method of payment of, principal,
premium and interest on the debt securities and where holders may
surrender the debt securities for conversion, registration of transfer or
exchange;
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- any obligation we have to redeem or purchase the debt securities under
any sinking fund or similar provisions or at the option of a holder of
debt securities;
- our right to redeem the debt securities and the date on which, the price
at which and the terms and conditions upon which we may redeem the debt
securities;
- the denominations in which we will issue the debt securities, if other
than denominations of $1,000 and any multiples of $1,000;
- provisions, if any, for the defeasance or discharge of our obligations
relating to the debt securities;
- whether we will issue the debt securities in registered or bearer form;
- the currency in which we will pay principal, premium and interest on the
debt securities;
- if we will pay principal, premium or interest on the debt securities in
one or more currencies other than those in which the debt securities are
denominated, the manner in which we will determine the exchange rate on
the payments;
- the manner in which we will determine the amounts of payment of
principal, premium or interest on the debt securities if these amounts
may be determined by reference to an index based on a currency other than
that in which the debt securities are denominated or designated or by
reference to a commodity, commodity index, stock exchange index or
financial index;
- any addition to, or change or deletion of, any events of default or
covenants in the indenture;
- a discussion of any material or special United States federal income tax
considerations applicable to the debt securities;
- any depositaries, trustees, interest rate calculation agents, exchange
rate calculation agents or other agents relating to the debt securities
other than those originally appointed;
- whether we will issue the debt securities in the form of global
securities and whether we will issue the global securities in temporary
or permanent global form;
- any rights of the holders of the debt securities to convert the debt
securities into other securities or property and the terms and conditions
of the conversion;
- any subordination provisions relating to the debt securities;
- any listing of the debt securities on a securities exchange;
- any provisions relating to any security provided for by the debt
securities; and
- any other terms of the debt securities that will not be inconsistent with
the indenture.
We may issue debt securities at a discount below their stated principal
amount. Even if we do not issue the debt securities below their stated principal
amount, for United States federal income tax purposes the debt securities may be
deemed to have been issued with a discount because of interest payment
characteristics. We will describe in a prospectus supplement the United States
federal income tax considerations applicable to debt securities issued at a
discount or deemed to be issued at a discount. We will also describe in a
prospectus supplement the special United States federal income tax
considerations or other restrictions or terms applicable to debt securities
issuable in bearer form, offered exclusively to foreigners or denominated in a
foreign currency.
DENOMINATIONS, REGISTRATION, TRANSFER AND EXCHANGE
Unless we specify otherwise in the prospectus supplement, the debt
securities of any series will be issuable only in denominations of $1,000 and
multiples of $1,000, and will be payable only in U.S. dollars.
We may issue the debt securities in whole or in part in the form of one or
more global securities that will be deposited with, or on behalf of, a
depositary identified in the applicable prospectus supplement. We
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may issue the global securities in either registered or bearer form and in
either temporary or permanent form. We will describe the specific terms of the
depositary arrangement relating to a series of debt securities in the prospectus
supplement.
You may transfer or exchange certificated debt securities at any office we
maintain for this purpose in accordance with the terms of the indenture. We will
not charge a service fee for any transfer or exchange of certificated debt
securities, but we may require payment of a sum sufficient to cover any tax or
other governmental charge we are required to pay in connection with a transfer
or exchange.
You may effect the transfer of certificated debt securities and the right
to receive the principal, premium and interest on certificated debt securities
only by surrendering the certificate representing those certificated debt
securities and either reissuance by us or the trustee of the certificate to the
new holder or the issuance by us or the trustee of a new certificate to the new
holder.
We are not required to:
- register, transfer or exchange debt securities of any series during a
period beginning at the opening of 15 business days before the day we
transmit a notice of redemption of debt securities of the series selected
for redemption and ending at the close of business on the day of the
transmission; or
- to register, transfer or exchange any debt security so selected for
redemption in whole or in part, except the unredeemed portion of any debt
security being redeemed in part.
COVENANTS
We will describe in the prospectus supplement any restrictive covenants
applicable to an issue of debt securities.
CONSOLIDATION, MERGER OR SALE OF ASSETS
We may not consolidate or merge with or into, or sell, assign, convey or
transfer our properties and assets substantially in their entirety to another
corporation, person or entity unless:
- in the case of a consolidation or merger, (a) we are the surviving
corporation, or (b) the successor corporation is an entity organized and
validly existing under the laws of the United States, any state of the
United States or the District of Columbia and expressly assumes our
obligations under the debt securities and the indenture; and
- immediately after giving effect to the transaction, no event of default
exists.
Notwithstanding the foregoing, any of our subsidiaries may consolidate
with, merge into or transfer all or part of its properties and assets to us.
EVENTS OF DEFAULT
Each of the following is an event of default relating to a series of debt
securities:
- default in the payment of any interest upon any debt security of that
series when it becomes due and payable, and continuance of that default
for a period of 30 days;
- default in the payment of principal of or premium on any debt security of
that series when due and payable;
- default in the deposit of any sinking fund payment, when and as due
relating to any debt security of that series;
- default in the performance or breach by us of any other covenant or
warranty in the indenture, other than a covenant or warranty that has
been included in the indenture solely for the benefit of a series of debt
securities other than that series, which default continues uncured for a
period of 60 days after we receive written notice from the trustee or we
and the trustee receive written notice
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from the holders of at least 25% in principal amount of the outstanding
debt securities of that series as provided in the indenture;
- the acceleration of the maturity date of any of our indebtedness, other
than non-recourse indebtedness, at any one time, in an amount exceeding
the greater of (1) $25 million or (2) 5% of our consolidated net tangible
assets, if the acceleration is not cancelled within 30 days;
- events of bankruptcy, insolvency or reorganization; and
- any other event of default provided relating to debt securities of that
series that is described in the applicable prospectus supplement
accompanying this prospectus.
Non-recourse indebtedness means indebtedness for which the terms provide
that the lender's claim for repayment of the indebtedness is limited solely to a
claim against the property which secures the indebtedness.
Consolidated net tangible assets means the total amount of assets,
including investments in joint ventures, of a company and its subsidiaries, if
any, less applicable depreciation, amortization and other valuation reserves
after deducting:
- all current liabilities, excluding (1) the current portion of long-term
indebtedness, (2) intercompany liabilities and (3) any liabilities which
are by their terms renewable or extendible at the option of the obligor
to a time more than 12 months from the time as of which the amount is
being computed; and
- all goodwill, trade names, trademarks, patents, unamortized debt discount
and any other similar intangibles, all as provided on the most recent
consolidated balance sheet of the company and computed in accordance with
generally accepted accounting principles.
If an event of default relating to outstanding debt securities of any
series occurs and is continuing, then the trustee or the holders of at least 25%
in principal amount of outstanding debt securities of that series may declare,
in a written notice, the principal amount, or specified amount, plus accrued and
unpaid interest and premium, if payable on all debt securities of that series to
be immediately due and payable. At any time after a declaration of acceleration
relating to debt securities of any series has been made, the holders of a
majority in principal amount of the outstanding debt securities of that series
may rescind and cancel the acceleration if:
- the holders act before the trustee has obtained a judgment or decree for
payment of the money due;
- we have paid or deposited with the trustee a sum sufficient to pay
overdue interest and overdue principal other than the accelerated
interest and principal; and
- we have cured or the holders have waived all events of default, other
than the non-payment of accelerated principal and interest relating to
debt securities of that series, as provided in the indenture.
We refer you to the prospectus supplement relating to any series of debt
securities that are discount securities for the particular provisions relating
to acceleration of a portion of the principal amount of the discount securities
upon the occurrence of an event of default.
The trustee has no obligation to exercise any of its rights or powers under
the indenture at the request of any holder of outstanding debt securities,
unless the trustee receives indemnity satisfactory to it against any loss,
liability or expense. Subject to rights of the trustee, the holders of a
majority in principal amount of the outstanding debt securities of any series
will have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the trustee or exercising any trust or
power conferred on the trustee relating to the debt securities of that series.
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No holder of any debt security of any series will have any right to
institute any judicial or other proceeding relating to the indenture or for the
appointment of a receiver or trustee, or for any remedy under the indenture,
unless:
- that holder has previously given the trustee written notice of a
continuing event of default relating to debt securities of that series;
and
- the holders of at least a 25% in principal amount of outstanding debt
securities of that series have made written request, and offered
reasonable indemnity, to the trustee to institute the proceeding as
trustee, and the trustee has not received from the holders of a majority
in principal amount of the outstanding debt securities of that series a
direction inconsistent with that request and has failed to institute the
proceeding within 60 days.
The holder of any debt security will have an absolute and unconditional
right to receive payment of the principal, premium and any interest on that debt
security on or after the due dates expressed in that debt security and to
institute suit for the enforcement of payment.
Within 120 days after the end of our fiscal year we will furnish to the
trustee a statement as to compliance with the indenture. The trustee may
withhold notice to the holders of debt securities of any series of any default
or event of default, except in payment on any debt securities of that series,
relating to debt securities of that series if it in good faith determines that
withholding notice is in the interest of the holders of those debt securities.
MODIFICATION AND WAIVER
We may modify the indenture, without prior notice to or consent of any
holders, for any of the following purposes:
- to evidence the succession of another corporation to our rights and the
assumption by the successor of our covenants and obligations in the
indenture and the debt securities;
- to add to the covenants for the benefit of the holders of the debt
securities or to surrender any right or power conferred upon us in the
indenture;
- to add any events of default;
- to add or change any provision of the indenture to permit or facilitate
the issuance of debt securities of any series in bearer form, to permit
bearer securities to be issued in exchange for registered securities, to
permit bearer securities to be issued in exchange for bearer securities
of other denominations or to permit the issuance of debt securities of
any series in uncertificated form, provided that the action will not
adversely affect the interests of the holders of debt securities or
coupons in any material respect;
- to change or eliminate any provision of the indenture, provided that the
change or elimination will become effective only when there is no
outstanding debt security issued under the indenture or coupon of any
series created prior to the modification which is entitled to the benefit
of the provision and as to which the modification would apply;
- to secure the debt securities or to provide that any of our obligations
under the debt securities or the indenture will be guaranteed and the
terms and conditions for the release or substitution of the security or
guarantee;
- to supplement any provisions of the indenture to permit or facilitate the
defeasance and discharge of any series of debt securities, provided that
the action will not adversely affect the interests of the holders of the
debt securities or coupons in any material respect;
- to establish the form or terms of debt securities and coupons as
permitted by the indenture;
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- to evidence and provide for a successor or other trustee relating to one
or more series of debt securities and to add or change any provision of
the indenture to provide for or facilitate the administration of the
trusts by more than one trustee; or
- to cure any ambiguity, to correct or supplement any provision of the
indenture which may be defective or inconsistent with any other provision
of the indenture, to eliminate any conflict between the terms of the
indenture and the debt securities and the Trust Indenture Act or to make
any other provisions which will not be inconsistent with any provision of
the indenture; provided, however, that these other provisions will not
adversely affect the interest of the holders of outstanding debt
securities or coupons in any material respect.
We may modify and amend the indenture with the written consent of at least
a majority in principal amount of the outstanding debt securities of each series
affected by the modifications or amendments. However, these modifications may
not, without the consent of the holder of each outstanding debt security of each
series affected:
- change the stated maturity of any debt security or coupon;
- reduce the principal amount of any payment to be made on any debt
security or coupon;
- reduce the rate of interest or extend the time for payment of interest or
premium payable upon redemption of any debt security;
- change the coin or currency in which any debt security or any premium or
interest is payable;
- reduce the amount of the principal of a discount security that would be
due and payable upon a declaration of acceleration of the maturity;
- impair the right to institute suit for the enforcement of any payment on
or after the due date of the payment;
- alter any redemption provisions in a manner adverse to the holders of the
debt securities;
- reduce the percentage in principal amount of the outstanding debt
securities;
- adversely affect the right of any holder to convert any debt security;
- modify any of the waiver provisions, except to increase any required
percentage or to provide that other provisions of the indenture cannot be
modified or waived without the consent of the holder of each affected
outstanding debt security; or
- modify any provision described in the applicable prospectus supplement as
requiring the consent of each affected holder of debt securities.
A modification which changes or eliminates any covenant or other provision
of the indenture relating to one or more particular series of debt securities
and coupons, or which modifies the rights of the holder of debt securities and
coupons of that series, will be deemed not to affect the rights of the holders
of debt securities and coupons of any other series.
The holders of at least a majority in principal amount of the outstanding
debt securities of any series, by notice to the trustee, may on behalf of the
holders of all debt securities of that series waive any default and its
consequences under the indenture, except:
- a continuing default in the payment of interest on, premium or the
principal amount of any debt security held by a non-consenting holder; or
- a default of a covenant or provision which cannot be modified or amended
without the consent of the holder of each outstanding debt security of
each series affected.
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DEFEASANCE OF DEBT SECURITIES AND COVENANTS IN CIRCUMSTANCES
Legal Defeasance. We may be discharged from any and all obligations
relating to the debt securities of any series except for obligations:
- to pay additional amounts, if any, upon the occurrence of specified tax,
assessment or government charge events relating to payments on the debt
securities;
- to register the transfer or exchange of debt securities;
- to replace stolen, lost or mutilated debt securities;
- to maintain paying agencies; and
- to hold money in payment for trust.
We will be discharged upon our deposit with the trustee, in trust, of money
or government obligations that will provide money in an amount sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay and discharge each installment of principal, premium and interest on and
any mandatory sinking fund payments relating to the debt securities of that
series on the stated maturity of those payments.
We may be discharged only if we have delivered to the trustee an opinion of
counsel stating that we have received from, or there has been published by, the
United States Internal Revenue Service a ruling or, since the date of execution
of the indenture, there has been a change in the applicable United States
federal income tax law, in either case to the effect that the holders of the
debt securities of that series will not recognize income, gain or loss for
United States federal income tax purposes as a result of the deposit, defeasance
and discharge.
Defeasance of Covenants. Upon compliance with specified conditions, we will
not be required to comply with some restrictive covenants contained in the
indenture and any omission to comply with the obligations will not constitute a
default or event of default relating to the debt securities. These conditions
include:
- depositing with the trustee money or government obligations that, through
the payment of interest and principal in accordance with their terms,
will provide money in an amount sufficient in the opinion of a nationally
recognized firm of independent public accountants to pay principal,
premium and interest on and any mandatory sinking fund payments relating
to the debt securities of that series on the date those payments are due;
and
- delivering to the trustee an IRS ruling or an opinion of counsel to the
effect that the holders of the debt securities of the series will not
recognize income, gain or loss for United States federal income tax
purposes as a result of the deposit and related covenant defeasance.
LIMITED LIABILITY OF SOME PERSONS
No past, present or future stockholder, incorporator, employee, officer or
director of Leap or any successor corporation or any of our affiliates will have
any personal liability for our obligations under the indenture or the debt
securities because of his, her or its status as a stockholder, incorporator,
employee, officer or director.
CONVERSION RIGHTS
We will describe in the applicable prospectus supplement the terms and
conditions, if any, upon which the debt securities are convertible into common
stock or preferred stock. Those terms will include:
- whether the debt securities are convertible into common stock or
preferred stock;
- the conversion price, or manner of calculation;
- the conversion period;
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- provisions regarding whether conversion will be at our option or the
option of the holders;
- the events requiring an adjustment of the conversion price; and
- provisions affecting conversion in the event of the redemption of the
debt securities.
PAYMENT AND PAYING AGENTS
The indenture will require us to duly and punctually pay the principal,
premium and interest on the debt securities as provided in the debt securities
and the indenture.
If debt securities of a series are issuable only as registered securities,
we will maintain in each place of payment for that series an office or agency
where:
- holders may present or surrender for payment debt securities of that
series;
- holders may surrender debt securities of that series for registration of
transfer or exchange; and
- we may be served with notices and demands regarding the debt securities
of that series.
If debt securities of a series are issuable as bearer securities, we will
maintain or cause to be maintained:
- in the Borough of Manhattan, the City and State of New York, an office or
agency (i) where holders may (1) present or surrender for payment any
registered securities of that series, (2) surrender for registration or
transfer any registered securities of that series, (3) surrender debt
securities of that series for exchange or redemption and (4) present or
surrender for payment bearer securities of that series and related
coupons in the circumstances described in the following paragraph and not
otherwise, and (ii) where we may be served with notices and demands
regarding the debt securities of that series;
- subject to any applicable laws or registration, in a place of payment for
that series which is located outside the United States, an office or
agency where holders may present and surrender for payment debt
securities of that series and related coupons; provided that if the debt
securities of that series are listed on The Stock Exchange of the United
Kingdom and the Republic of Ireland, the Luxembourg Stock Exchange or any
other stock exchange located outside the United States and the stock
exchange so requires, we will maintain a paying agent for the debt
securities of that series in London, Luxembourg or any other required
city located outside the United States, so long as the debt securities of
that series are listed on that exchange; and
- subject to any applicable laws or regulations, in a place of payment for
that series located outside the United States, an office or agency where
holders may surrender any registered securities of that series for
registration of transfer or surrender for exchange or redemption debt
securities of that series and where we may receive notices and demands
regarding the debt securities of that series.
We will give prompt written notice to the applicable trustee of the
locations, and any change in the locations, of offices or agencies. If at any
time we fail to maintain any required office or agency or fail to furnish the
applicable trustee with the address, holders may make or serve the
presentations, surrenders, notices and demands at the corporate trust office of
the applicable trustee, except that holders may present and surrender bearer
securities of that series and the related coupons for payment at the offices
specified in the applicable debt security. We will appoint the applicable
trustee as our agent to receive the foregoing presentations, surrenders, notices
and demands. However, in the case of bearer securities, we may appoint another
agent as may be specified in the applicable prospectus supplement.
We will make no payment of principal, premium or interest on bearer
securities at any of our offices or agencies in the United States or by check
mailed to any address in the United States or by transfer to an account
maintained with a bank located in the United States. However, if the debt
securities of a series are denominated and payable in U.S. dollars, we will pay
principal and any premium and interest on the debt securities of that series, if
specified in the applicable prospectus supplement, at the office of our
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paying agent in the Borough of Manhattan, the City and State of New York, only
if payment in U.S. dollars of the full amount of the principal, premium,
interest or additional amounts, as the case may be, at all offices or agencies
outside the United States maintained for the purpose by us in accordance with
the indenture is illegal or effectively precluded by exchange controls or other
similar restrictions.
GOVERNING LAW
The indenture and the related debt securities will be governed by and
construed in accordance with the laws of the State of New York.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
This prospectus describes the general terms of our capital stock. For a
more detailed description of these securities, you should read the applicable
provisions of Delaware law and our charter. When we offer to sell a particular
series of these securities, we will describe the specific terms of the series in
a supplement to this prospectus. Accordingly, for a description of the terms of
any series of securities, you must refer to both the prospectus supplement
relating to that series and the description of the securities described in this
prospectus. A prospectus supplement may change any of the terms of the
securities described in this prospectus.
Under our charter, the total number of shares of all classes of stock that
we have authority to issue is 310,000,000, consisting of 10,000,000 shares of
preferred stock and 300,000,000 shares of common stock.
COMMON STOCK
As of March 23, 2001, we had 30,060,571 shares of common stock outstanding.
The holders of our common stock are entitled to one vote for each share on all
matters voted on by stockholders. The holders of our common stock possess all
voting power, except as otherwise required by law or provided in any resolution
adopted by our board of directors regarding any series of preferred stock.
Subject to any preferential or other rights of any outstanding series of our
preferred stock that may be designated by our board, the holders of our common
stock will be entitled to such dividends as may be declared from time to time by
our board from available funds and upon liquidation will be entitled to receive
pro rata all of our assets available for distribution to the holders. The common
stock has no subscription, redemption, conversion or preemptive rights. All
shares of common stock are fully paid and nonassessable. The terms of the
indenture governing our outstanding notes restrict our ability to declare or pay
dividends.
As a corporation organized under the laws of the State of Delaware, we are
subject to Section 203 of the General Corporation Law of the State of Delaware,
known as the DGCL, which restricts our ability to enter into business
combinations with an interested stockholder or a stockholder owning 15% or more
of our outstanding voting stock, or that stockholder's affiliates or associates,
for a period of three years. These restrictions do not apply if:
- prior to becoming an interested stockholder, our board of directors
approves either the business combination or the transaction in which the
stockholder becomes an interested stockholder;
- upon consummation of the transaction in which the stockholder becomes an
interested stockholder, the interested stockholder owns at least 85% of
our voting stock outstanding at the time the transaction commenced,
subject to exceptions; or
- on or after the date a stockholder becomes an interested stockholder, the
business combination is both approved by our board of directors and
authorized at an annual or special meeting of our stockholders by the
affirmative vote of at least two-thirds of the outstanding voting stock
not owned by the interested stockholder.
PREFERRED STOCK
Under our charter, our board of directors is authorized to issue shares of
our preferred stock from time to time, in one or more classes or series, without
stockholder approval. Prior to the issuance of shares of each series, the board
of directors is required by the DGCL and our charter to adopt resolutions and
file a certificate of designation with the Secretary of State of the State of
Delaware. The certificate of designation fixes for each class or series the
designations, powers, preferences, rights, qualifications, limitations and
restrictions, including the following:
- the number of shares constituting each class or series;
- voting rights;
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- rights and terms of redemption, including sinking fund provisions;
- dividend rights and rates;
- dissolution;
- terms concerning the distribution of assets;
- conversion or exchange terms;
- redemption prices; and
- liquidation preferences.
All shares of preferred stock offered by this prospectus will, when issued,
be fully paid and nonassessable and will not have any preemptive or similar
rights. Our board of directors could authorize the issuance of additional shares
of preferred stock with terms and conditions which could have the effect of
discouraging a takeover or other transaction that might involve a premium price
for holders of the shares or which holders might believe to be in their best
interests.
We will describe in a prospectus supplement relating to the class or series
of preferred stock being offered the following terms:
- the title and stated value of the preferred stock;
- the number of shares of the preferred stock offered, the liquidation
preference per share and the offering price of the preferred stock;
- the dividend rate(s), period(s) or payment date(s) or method(s) of
calculation applicable to the preferred stock;
- whether dividends are cumulative or non-cumulative and, if cumulative,
the date from which dividends on the preferred stock will accumulate;
- the procedures for any auction and remarketing, if any, for the preferred
stock;
- the provisions for a sinking fund, if any, for the preferred stock;
- the provision for redemption, if applicable, of the preferred stock;
- any listing of the preferred stock on any securities exchange;
- the terms and conditions, if applicable, upon which the preferred stock
will be convertible into common stock, including the conversion price or
manner of calculation and conversion period;
- voting rights, if any, of the preferred stock;
- whether interests in the preferred stock will be represented by
depositary shares;
- a discussion of any material or special United States federal income tax
considerations applicable to the preferred stock;
- the relative ranking and preferences of the preferred stock as to
dividend rights and rights upon the liquidation, dissolution or winding
up of our affairs;
- any limitations on issuance of any class or series of preferred stock
ranking senior to or on a parity with the class or series of preferred
stock as to dividend rights and rights upon liquidation, dissolution or
winding up of our affairs; and
- any other specific terms, preferences, rights, limitations or
restrictions of the preferred stock.
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RANK
Unless we specify otherwise in the applicable prospectus supplement, the
preferred stock will rank, relating to dividends and upon our liquidation,
dissolution or winding up:
- senior to all classes or series of our common stock and to all of our
equity securities ranking junior to the preferred stock;
- on a parity with all of our equity securities the terms of which
specifically provide that the equity securities rank on a parity with the
preferred stock; and
- junior to all of our equity securities the terms of which specifically
provide that the equity securities rank senior to the preferred stock.
The term equity securities does not include convertible debt securities.
PARTICIPATING PREFERRED STOCK PURCHASE RIGHTS
On September 9, 1998, our board of directors adopted a shareholder rights
plan. Under the rights plan, a dividend of one preferred share purchase right
was declared for each outstanding share of our common stock. The common stock
currently trades with a right to purchase Series A Junior Participating
preferred stock. A preferred share purchase right will be attached to each share
of common stock issued during the term of the rights plan. Each right entitles
shareholders to buy one one-thousandth of a share of our Series A preferred
stock at an exercise price of $350.00, subject to anti-dilution adjustments,
upon the triggering event of a person acquiring, or making a tender or exchange
offer for, 15% or more of our outstanding common stock. Each right entitles its
holder, other than the person acquiring 15% or more of the outstanding common
stock, to purchase shares of our common stock with a market value of twice the
right's exercise price. Ownership of our common stock in excess of the 15%
threshold by Qualcomm Incorporated as a result of exercising its warrant to
purchase 4,500,000 shares of our common stock or the warrants purchased by
Qualcomm in our February 2000 units offering entitling it to purchase 770,924
shares of our common stock, however, will not trigger the rights plan, unless
and until Qualcomm acquires one or more additional shares of our common stock.
In addition, if a company acquires us in a merger or other business combination,
or if we sell more than 50% of our consolidated assets or earning power, these
rights will entitle our shareholders, other than the acquirer, to purchase, for
the exercise price, shares of the common stock of the acquiring company having a
market value of two times the exercise price. At any time prior to these events,
the board of directors may redeem the rights at one cent per right.
The rights plan is intended to protect shareholders in the event of an
unsolicited attempt to acquire us. The right is transferred automatically with
the transfer of the common stock until separate rights certificates are
distributed upon the occurrence of certain events. The rights plan could have
the effect of delaying, deferring or preventing a person from acquiring us or
accomplishing a change in control of the board of directors. This description of
the rights plan is intended as a summary only and is qualified in its entirety
by reference to a rights agreement dated as of September 14, 1998, as amended,
between Leap and Harris Trust Company of California. To obtain a copy of the
rights agreement, as amended, see the section of this prospectus entitled "Where
You Can Find More Information."
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for our common stock is Computershare
Investor Services LLC.
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DESCRIPTION OF DEPOSITARY SHARES
GENERAL
We may issue depositary shares, each of which will represent a fractional
interest of a share of a particular series of preferred stock, as specified in
the applicable prospectus supplement. We will deposit with a depositary,
referred to as the preferred stock depositary, shares of preferred stock of each
series represented by depositary shares. We will enter into a deposit agreement
with the preferred stock depositary and holders from time to time of the
depositary receipts issued by the preferred stock depositary which evidence the
depositary shares. Subject to the terms of the deposit agreement, each owner of
a depositary receipt will be entitled, in proportion to the holder's fractional
interest in the preferred stock, to all the rights and preferences of the series
of the preferred stock represented by the depositary shares, including dividend,
voting, conversion, redemption and liquidation rights.
Immediately after we issue and deliver the preferred stock to a preferred
stock depositary, we will cause the preferred stock depositary to issue the
depositary receipts on our behalf. The form of deposit agreement is filed as an
exhibit to the registration statement of which this prospectus forms a part and
you should read the deposit agreement for the provisions that may be important
to you. The statements made in this section relating to the deposit agreement
and the depositary receipts are summaries only. These summaries are not complete
and we may modify any of the terms of the depositary shares described in this
prospectus in a prospectus supplement. For more detail, we refer you to the
deposit agreement itself.
DIVIDENDS AND OTHER DISTRIBUTIONS
The preferred stock depositary will distribute all cash dividends or other
cash distributions received relating to the preferred stock to the record
holders of depositary receipts in proportion to the number of the depositary
receipts owned by the holders, subject to the obligations of holders to file
proofs, certificates and other information and to pay certain charges and
expenses to the preferred stock depositary.
In the event of a distribution other than in cash, the preferred stock
depositary will distribute property received by it to the record holders of
depositary receipts in proportion to the number of the depositary receipts owned
by the holders, unless the preferred stock depositary determines that it is not
feasible to make the distribution, in which case the preferred stock depositary
may, with our approval, sell the property and distribute the net proceeds from
the sale to the holders.
No distribution will be made relating to any depositary share that
represents any preferred stock converted into other securities.
WITHDRAWAL OF STOCK
Assuming we have not previously called for redemption or converted into
other securities the related depositary shares, upon surrender of the depositary
receipts at the corporate trust office of the preferred stock depositary, the
holders will be entitled to delivery at that office of the number of whole or
fractional shares of the preferred stock and any money or other property
represented by the depositary shares. Holders of depositary receipts will be
entitled to receive shares of the related preferred stock as specified in the
applicable prospectus supplement, but holders of the shares of preferred stock
will no longer be entitled to receive depositary shares.
REDEMPTION OF DEPOSITARY SHARES
Whenever we redeem shares of preferred stock held by the preferred stock
depositary, the preferred stock depositary will concurrently redeem the number
of depositary shares representing shares of the preferred stock so redeemed,
provided we have paid the applicable redemption price for the preferred stock to
be redeemed plus an amount equal to any accrued and unpaid dividends to the date
fixed for redemption. The redemption price per depositary share will be equal to
the corresponding proportion of the redemption price and any other amounts per
share payable relating to the preferred stock. If fewer than all
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the depositary shares are to be redeemed, the depositary shares to be redeemed
will be selected pro rata or by any other equitable method determined by us.
From and after the date fixed for redemption:
- all dividends relating to the shares of preferred stock called for
redemption will cease to accrue;
- the depositary shares called for redemption will no longer be deemed to
be outstanding; and
- all rights of the holders of the depositary receipts evidencing the
depositary shares called for redemption will cease, except the right to
receive any moneys payable upon the redemption and any money or other
property to which the holders of the depositary receipts were entitled
upon redemption and surrender to the preferred stock depositary.
Any funds we deposit with the preferred stock depositary for redemption of
depositary shares that the holders fail to redeem will be returned to us after a
period of two years from the date the funds are deposited.
VOTING OF THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the preferred
stock are entitled to vote, the preferred stock depositary will mail the
information contained in the notice of meeting to the record holders of the
depositary receipts. Each record holder of these depositary receipts on the
record date, which will be the same date as the record date for the preferred
stock, will be entitled to instruct the preferred stock depositary as to the
exercise of the voting rights pertaining to the amount of preferred stock
represented by the holder's depositary shares. The preferred stock depositary
will vote the amount of preferred stock represented by the depositary shares in
accordance with the instructions, and we will agree to take all reasonable
action necessary to enable the preferred stock depositary to do so. The
preferred stock depositary will abstain from voting the amount of preferred
stock represented by the depositary shares for which it does not receive
specific instructions from the holders of depositary receipts evidencing the
depositary shares. The preferred stock depositary will not be responsible for
any failure to carry out any instruction to vote, or for the manner or effect of
any vote made, as long as the action or non-action is in good faith and does not
result from the preferred stock depositary's negligence or willful misconduct.
LIQUIDATION PREFERENCE
In the event that we voluntarily or involuntarily liquidate, dissolve or
wind up, the holders of each depositary receipt will be entitled to the fraction
of the liquidation preference accorded each share of preferred stock represented
by the depositary shares, as set forth in the applicable prospectus supplement.
CONVERSION OF DEPOSITARY SHARES
The depositary shares will not be convertible into common stock or any of
our other securities or property, unless we so specify in the applicable
prospectus supplement relating to an offering of depositary shares.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
We may amend the form of depositary receipt and any provision of the
deposit agreement at any time by agreement with the preferred stock depositary.
However, any amendment which imposes or increases any fees, taxes or other
charges payable by the holders of depositary receipts, other than taxes and
other governmental charges, fees and other expenses payable by the holders as
described below under "Charges of Preferred Stock Depositary," or which
otherwise prejudices any substantial existing right of holders of depositary
receipts, will not take effect as to outstanding depositary receipts until the
expiration of 30 days after notice of the amendment has been mailed to the
record holders of outstanding depositary receipts.
When we direct the preferred stock depositary to do so, the preferred stock
depositary will terminate the deposit agreement by mailing a notice of
termination to the record holders of all depositary receipts then outstanding at
least 30 days prior to the date fixed in the notice for termination. In
addition, the
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preferred stock depositary may terminate the deposit agreement if at any time 45
days have passed since the preferred stock depositary has delivered to us a
written notice of its election to resign and a successor depositary has not been
appointed and accepted its appointment. If any depositary receipts remain
outstanding after the date of termination, the preferred stock depositary
thereafter will discontinue the transfer of depositary receipts, will suspend
the distribution of dividends to the holders thereof, and will not give any
further notices, other than the notice of termination, or perform any further
acts under the deposit agreement, except as provided below and except that the
preferred stock depositary will continue to collect dividends on the preferred
stock and other distributions with respect to the preferred stock and will
continue to deliver the preferred stock together with any dividends and
distributions and the net proceeds of any sales of rights, preferences,
privileges or other property, without liability for interest thereon, in
exchange for depositary receipts surrendered. At any time after the expiration
of two years from the date of termination, the preferred stock depositary may
sell the preferred stock then held by it at public or private sales, at such
place or places and upon such terms as it deems proper and may thereafter hold
the net proceeds of any such sale, together with any money or other property
then held by it, without liability for interest thereon, for the pro rata
benefit of the holders of depositary receipts which have not been surrendered.
In addition, the deposit agreement will automatically terminate if:
- all outstanding depositary shares have been redeemed; or
- there has been a final distribution of the related preferred stock in
connection with our liquidation, dissolution or winding up and the
distribution has been distributed to the holders of depositary receipts
evidencing the depositary shares representing the preferred stock.
CHARGES OF PREFERRED STOCK DEPOSITARY
We will pay all fees, charges and expenses of the preferred stock
depositary in connection with its performance of the deposit agreement, except
for any taxes and other governmental charges and except as provided in the
deposit agreement. Holders of depositary receipts will pay the fees and expenses
of the preferred stock depositary for any duties requested by the holders to be
performed which are outside those expressly provided for in the deposit
agreement.
RESIGNATION AND REMOVAL OF DEPOSITARY
The preferred stock depositary may resign at any time by delivering to us
notice of its election to do so, and we may at any time remove the preferred
stock depositary. Any resignation or removal of the acting preferred stock
depository will take effect upon our appointment of a successor preferred stock
depositary. We must appoint a successor preferred stock depositary within 45
days after delivery of the notice of resignation or removal.
MISCELLANEOUS
The preferred stock depositary will make available for inspection to
holders of depositary receipts any reports and communications the preferred
stock depositary receives from us relating to the preferred stock.
We will not be liable, nor will the preferred stock depositary be liable,
if we are prevented from or delayed in, by law or any circumstances beyond our
control, performing our obligations under the deposit agreement. Our obligations
and the obligations of the preferred stock depositary under the deposit
agreement will be limited to performing our duties in good faith and without
negligence or willful misconduct. We will not be obligated, nor will the
preferred stock depositary be obligated, to prosecute or defend any legal
proceeding relating to any depositary receipts, depositary shares or shares of
preferred stock represented by depositary shares unless satisfactory indemnity
is furnished to us. We may rely, and the preferred stock depositary may rely, on
written advice of counsel or accountants, or information provided by persons
presenting shares of preferred stock represented by depositary shares for
deposit, holders of depositary receipts or other persons we believe in good
faith to be competent to give this information, and on documents we believe in
good faith to be genuine and signed by a proper party.
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DESCRIPTION OF WARRANTS
We may issue warrants to purchase debt securities, preferred stock or
common stock. We may issue warrants independently or together with any other
securities we offer under a prospectus supplement. The warrants may be attached
to or separate from the securities. We will issue each series of warrants under
a separate warrant agreement that we will enter into with a bank or trust
company, as warrant agent. The form of warrant agreement, is filed as an exhibit
to the registration statement of which this prospectus forms a part and you
should read the warrant agreement for the provisions that may be important to
you. The statements made in this section relating to the warrant agreement are
summaries only. These summaries are not complete. When we issue warrants, we
will describe the specific terms of the warrants in a prospectus supplement. The
prospectus supplement may change any of the terms of the warrants described in
this prospectus.
DEBT WARRANTS
We will describe in the applicable prospectus supplement the terms of the
debt warrants being offered, the warrant agreement relating to the debt warrants
and the debt warrant certificates representing the debt warrants, including:
- the title of the debt warrants;
- the aggregate number of the debt warrants;
- the price or prices at which the debt warrants will be issued;
- the designation, aggregate principal amount and terms of the debt
securities purchasable upon exercise of the debt warrants, and the
procedures and conditions relating to the exercise of the debt warrants;
- the designation and terms of any related debt securities with which the
debt warrants are issued, and the number of the debt warrants issued with
each security;
- the date, if any, on and after which the debt warrants and the related
debt securities will be separately transferable;
- the principal amount of debt securities purchasable upon exercise of each
debt warrant, and the price at which the principal amount of the debt
securities may be purchased upon exercise;
- the date on which the right to exercise the debt warrants will commence,
and the date on which the right will expire;
- the maximum or minimum number of the debt warrants which may be exercised
at any time;
- information with respect to book-entry procedures, if any;
- a discussion of the material United States federal income tax
considerations applicable to the exercise of the debt warrants; and
- any other terms of the debt warrants and terms, procedures and
limitations relating to the exercise of the debt warrants.
Holders may exchange debt warrant certificates for new debt warrant
certificates of different denominations, and may exercise debt warrants at the
corporate trust office of the warrant agent or any other office indicated in the
applicable prospectus supplement. Prior to the exercise of their debt warrants,
holders of debt warrants will not have any of the rights of holders of the
securities purchasable upon the exercise and will not be entitled to payments of
principal, premium or interest on the securities purchasable upon the exercise
of debt warrants.
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EQUITY WARRANTS
We will describe in the applicable prospectus supplement the terms of the
preferred stock warrants or common stock warrants being offered, the warrant
agreement relating to the preferred stock warrants or common stock warrants and
the warrant certificates representing the preferred stock warrants or common
stock warrants, including:
- the title of the warrants;
- the securities for which the warrants are exercisable;
- the price or prices at which the warrants will be issued;
- if applicable, the number of warrants issued with each share of preferred
stock or share of common stock;
- if applicable, the date on and after which the warrants and the related
preferred stock or common stock will be separately transferable;
- the date on which the right to exercise the warrants will commence, and
the date on which the right will expire;
- the maximum or minimum number of warrants which may be exercised at any
time;
- information with respect to book-entry procedures, if any;
- a discussion of the material United States federal income tax
considerations applicable to exercise of the warrants; and
- any other terms of the warrants, including terms, procedures and
limitations relating to the exchange and exercise of the warrants.
Unless otherwise provided in the applicable prospectus supplement, holders
of equity warrants will not be entitled, by virtue of being such holders, to
vote, consent, receive dividends, receive notice as stockholders with respect to
any meeting of stockholders for the election of our directors or any other
matter, or to exercise any rights whatsoever as stockholders.
Except as set forth in the applicable prospectus supplement, the exercise
price payable and the number of shares of common stock or preferred stock
purchasable upon the exercise of each warrant will be subject to adjustment in
certain events, including the issuance of a stock dividend to holders of common
stock or preferred stock or a stock split, reverse stock split, combination,
subdivision or reclassification of common stock or preferred stock. In lieu of
adjusting the number of shares of common stock or preferred stock purchasable
upon exercise of each warrant, we may elect to adjust the number of warrants.
Unless otherwise provided in the applicable prospectus supplement, no
adjustments in the number of shares purchasable upon exercise of the warrants
will be required until all cumulative adjustments require an adjustment of at
least 1% thereof. We may, at our option, reduce the exercise price at any time.
No fractional shares will be issued upon exercise of warrants, but we will pay
the cash value of any fractional shares otherwise issuable. Notwithstanding the
foregoing, except as otherwise provided in the applicable prospectus supplement,
in case of any consolidation, merger, or sale or conveyance of our property as
an entirety or substantially as an entirety, the holder of each outstanding
warrant will have the right to the kind and amount of shares of stock and other
securities and property, including cash, receivable by a holder of the number of
shares of common stock or preferred stock into which each warrant was
exercisable immediately prior to the particular triggering event.
EXERCISE OF WARRANTS
Each warrant will entitle the holder of the warrant to purchase for cash at
the exercise price provided in the applicable prospectus supplement the
principal amount of debt securities or shares of preferred stock or shares of
common stock being offered. Holders may exercise warrants at any time up to the
close of
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business on the expiration date provided in the applicable prospectus
supplement. After the close of business on the expiration date, unexercised
warrants are void.
Holders may exercise warrants as described in the prospectus supplement
relating to the warrants being offered. Upon receipt of payment and the warrant
certificate properly completed and duly executed at the corporate trust office
of the warrant agent or any other office indicated in the prospectus supplement,
we will, as soon as practicable, forward the debt securities, shares of
preferred stock or shares of common stock purchasable upon the exercise of the
warrant. If less than all of the warrants represented by the warrant certificate
are exercised, we will issue a new warrant certificate for the remaining
warrants.
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DESCRIPTION OF RIGHTS
We may issue rights to our stockholders to purchase shares of our common
stock. Each series of rights will be issued under a separate rights agreement to
be entered into between us and a bank or trust company, as rights agent. The
rights agent will act solely as our agent in connection with the certificates
relating to the rights of the series of certificates and will not assume any
obligation or relationship of agency or trust for or with any holders of rights
certificates or beneficial owners of rights.
The prospectus supplement will provide the terms of the rights to be
issued, including:
- the date of determining the stockholders entitled to the rights
distribution;
- the aggregate number of shares of common stock purchasable upon exercise
of the rights;
- the exercise price;
- the aggregate number of rights being issued;
- the date, if any, on and after which the rights may be transferable
separately;
- the date on which the right to exercise the rights will commence and the
date on which the right will expire;
- if applicable, a discussion of the material United States federal income
tax considerations applicable to the issuance or exercise of the rights;
and
- any other terms of the rights, including terms, procedures and
limitations relating to the distribution, exchange and exercise of the
rights.
EXERCISE OF RIGHTS
Each right will entitle the holder of rights to purchase for cash the
principal amount of shares of common stock at the exercise price as shall be set
forth in the prospectus supplement relating to the rights being offered. Rights
may be exercised at any time up to the close of business on the expiration date
for the rights set forth in the applicable prospectus supplement. After the
close of business on the expiration date, all unexercised rights will become
void.
Rights may be exercised as set forth in the applicable prospectus
supplement relating to the rights being offered. Upon receipt of payment and the
rights certificate properly completed and duly executed at the corporate trust
office of the rights agent or any other office indicated in the prospectus
supplement, we will, as soon as practicable, forward the shares of common stock
purchasable upon such exercise. In the event that not all of the rights issued
in any rights offering are exercised, we may determine to offer any unsubscribed
securities directly to persons other than stockholders, to or through agents,
underwriters or dealers or through a combination of such methods, including
pursuant to standby underwriting arrangements, as set forth in the applicable
prospectus supplement.
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DESCRIPTION OF UNITS
We may issue units consisting or two or more other constituent securities.
These units may be issuable as, and for a specified period of time may be
transferable as, a single security only, as distinguished from the separate
constituent securities comprising such units. When we issue units, we will
describe the specific terms of the units in a prospectus supplement including
the following:
- the title of any series of units;
- identification and description of the separate constituent securities
comprising the units;
- the price or prices at which the units will be issued;
- if applicable, the date on and after which the constituent securities
comprising the units will become separately transferable;
- information with respect to book-entry procedures, if any;
- a discussion of any material federal income tax considerations; and
- any other terms of the units and their constituent securities.
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PLAN OF DISTRIBUTION
GENERAL
We may sell the securities from time to time pursuant to underwritten
public offerings, negotiated transactions, block trades or a combination of
these methods. The securities also may be sold pursuant to what is known as an
equity line of credit, as described below under the heading "--Equity Line of
Credit." We may sell the securities (1) through underwriters or dealers, (2)
through agents, and/or (3) directly to one or more purchasers. We may distribute
the securities from time to time in one or more transactions at:
- a fixed price or prices, which may be changed;
- market prices prevailing at the time of sale;
- prices related to the prevailing market prices; or
- negotiated prices.
We may solicit directly offers to purchase the securities being offered by
this prospectus. We may also designate agents to solicit offers to purchase the
securities from time to time. We will name in a prospectus supplement any agent
involved in the offer or sale of our securities.
If we utilize a dealer in the sale of the securities being offered by this
prospectus, we will sell the securities to the dealer, as principal. The dealer
may then resell the securities to the public at varying prices to be determined
by the dealer at the time of resale.
If we utilize an underwriter in the sale of the securities being offered by
this prospectus, we will execute an underwriting agreement with the underwriter
at the time of sale and we will provide the name of any underwriter in the
prospectus supplement which the underwriter will use to make resales of the
securities to the public. In connection with the sale of the securities, we, or
the purchasers of securities for whom the underwriter may act as agent, may
compensate the underwriter in the form of underwriting discounts or commissions.
The underwriter may sell the securities to or through dealers, and the
underwriter may compensate those dealers in the form of discounts, concessions
or commissions.
In the event we enter into an agreement regarding an equity line of credit
which contemplates an at the market equity offering, we will file a
post-effective amendment to this registration statement that identifies the
underwriters in that at the market equity offering.
With respect to underwritten public offerings, negotiated transactions and
block trades, we will provide in the applicable prospectus supplement any
compensation we pay to underwriters, dealers or agents in connection with the
offering of the securities, and any discounts, concessions or commissions
allowed by underwriters to participating dealers. Underwriters, dealers and
agents participating in the distribution of the securities may be deemed to be
underwriters within the meaning of the Securities Act of 1933, as amended, and
any discounts and commissions received by them and any profit realized by them
on resale of the securities may be deemed to be underwriting discounts and
commissions. We may enter into agreements to indemnify underwriters, dealers and
agents against civil liabilities, including liabilities under the Securities
Act, or to contribute to payments they may be required to make in respect
thereof.
Shares of common stock sold pursuant to the registration statement of which
this prospectus is a part will be authorized for quotation and trading on the
Nasdaq National Market. Other securities may or may not be listed on the Nasdaq
National Market or a national securities exchange. To facilitate the offering of
securities, other than securities offered through an equity line of credit,
certain persons participating in the offering may engage in transactions that
stabilize, maintain or otherwise affect the price of the securities. This may
include over-allotments or short sales of the securities, which involve the sale
by persons participating in the offering of more securities than we sold to
them. In these circumstances, these persons would cover such over-allotments or
short positions by making purchases in the open market or by exercising their
over-allotment option. In addition, these persons may stabilize or maintain the
price of the securities by bidding for or purchasing securities in the open
market or by imposing penalty bids, whereby
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selling concessions allowed to dealers participating in the offering may be
reclaimed if securities sold by them are repurchased in connection with
stabilization transactions. The effect of these transactions may be to stabilize
or maintain the market price of the securities at a level above that which might
otherwise prevail in the open market. These transactions may be discontinued at
any time.
The underwriters, dealers and agents may engage in other transactions with
us, or perform other services for us, in the ordinary course of their business.
EQUITY LINE OF CREDIT
On December 20, 2000 we entered into what is sometimes termed an equity
line of credit arrangement with Acqua Wellington North American Equities Fund,
Ltd. Specifically, we entered into a common stock purchase agreement with Acqua
Wellington, which, as amended and restated, provides that Acqua Wellington is
committed to purchase up to $125,000,000 of our common stock over the 28-month
term of the purchase agreement. We have filed the purchase agreement as an
exhibit to this post-effective amendment to the registration statement. The
total amount of securities available under the purchase agreement, as amended
and restated, does not exceed 10% of the aggregate market value of our
outstanding common stock that was held by our non-affiliates within sixty days
prior to December 20, 2000. From time to time beginning in December 2000 and
ending in April 2003 and at our sole discretion, we may present Acqua Wellington
with draw down notices constituting offers to purchase our common stock over 18
consecutive trading days or such other number of trading days as agreed upon by
us and Acqua Wellington. Under the purchase agreement, we are able to present
Acqua Wellington with up to 24 draw down notices during the term of the
agreement, with a minimum of five trading days required between each draw down
period.
Once presented with a draw down notice, Acqua Wellington is required to
purchase a pro rata portion of the shares on each trading day during the trading
period on which the daily volume weighted average price for our common stock
exceeds a threshold price determined by us and set forth in the draw down
notice. The per share purchase price for these shares equals the daily volume
weighted average price of our common stock on each date during the draw down
period on which shares are purchased, less a discount ranging from 4.0% to 5.5%,
based on our market capitalization on the date we issue a draw down notice. If
the daily volume weighted average price of our common stock falls below the
threshold price on any trading day during a draw down period, the purchase
agreement provides that Acqua Wellington will not be required to purchase the
pro-rata portion of shares of common stock allocated to that day. However, at
its election, Acqua Wellington could buy the pro-rata portion of shares
allocated to that day at the threshold price less the discount described above.
The purchase agreement also provides that from time to time and at our sole
discretion we may grant Acqua Wellington a call option to purchase additional
shares of our common stock in an aggregate amount up to the applicable draw down
amount requested by us in such draw down period. Upon Acqua Wellington's
exercise of the call option, we will issue and sell the shares of our common
stock subject to the call option at a price equal to the greater of the daily
volume weighted average price of our common stock on the day Acqua Wellington
notifies us of its election to exercise its call option or the threshold price
of our common stock, less a discount ranging from 4.0% to 5.5%, based on our
market capitalization on the date we issue a draw down notice.
In addition to our issuance of shares of common stock to Acqua Wellington
pursuant to the purchase agreement, this prospectus also covers the sale of
those shares from time to time by Acqua Wellington to the public. Acqua
Wellington is an "underwriter" within the meaning of Section 2(a)(11) of the
Securities Act.
Acqua Wellington has informed us that it intends to use Carlin Equities
Corp. as the broker-dealer to sell shares of common stock on the Nasdaq National
Market. Such sales will be made on the Nasdaq National Market at prices and at
terms then prevailing or at prices related to the then current market price.
Carlin Equities Corp. is the same broker-dealer that Acqua Wellington used to
sell shares of common stock it purchased from us in January 2001 pursuant to a
draw down notice we delivered in
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December 2000 and related call options. Carlin Equities Corp. is an
"underwriter" within the meaning of Section 2(a)(11) of the Securities Act. We
filed a prospectus supplement in January 2001, and according to a telephone
interpretation issued by the SEC Staff, we should have filed a post-effective
amendment naming Carlin Equities Corp. as an underwriter. Acqua Wellington has
informed us that Carlin Equities Corp., which is not an affiliate of Acqua
Wellington, will receive commissions from Acqua Wellington which will not exceed
customary brokerage commissions. Acqua Wellington also will pay other expenses
associated with the sale of the common stock it acquires pursuant to the
purchase agreement.
The shares of common stock may be sold in one or more of the following
manners:
- ordinary brokerage transactions and transactions in which the broker
solicits purchasers; or
- a block trade in which the broker or dealer so engaged will attempt to
sell the shares as agent, but may position and resell a portion of the
block as principal to facilitate the transaction.
In addition, Acqua Wellington and Carlin Equities Corp. will be subject to
liability under the federal securities laws and must comply with the
requirements of the Securities Act and the Securities Exchange Act of 1934, as
amended, including without limitation, Rule 415(a)(4) under the Securities Act
and Rule 10b-5 and Regulation M under the Exchange Act. These rules and
regulations may limit the timing of purchases and sales of shares of common
stock by Acqua Wellington or Carlin Equities Corp. Under these rules and
regulations, Acqua Wellington and Carlin Equities Corp.:
- may not engage in any stabilization activity in connection with our
securities;
- must furnish each broker which offers shares of our common stock covered
by this prospectus with the number of copies of this prospectus and any
prospectus supplement which are required by each broker; and
- may not bid for or purchase any of our securities or attempt to induce
any person to purchase any of our securities other than as permitted
under the Exchange Act.
These restrictions may affect the marketability of the shares of common stock by
Acqua Wellington and Carlin Equities Corp.
Acqua Wellington has agreed that prior to, during the term of and for a
period of three months after the termination of the purchase agreement, neither
Acqua Wellington nor any of its affiliates will be in a short position with
respect to shares of our common stock. During the term of the purchase
agreement, Acqua Wellington may sell the shares that it has the right to
purchase pursuant to the purchase agreement, but Acqua Wellington has agreed
that it will not sell any other shares of our common stock. In addition, Acqua
Wellington has agreed that it will not grant any option to purchase or acquire
any right to dispose or otherwise dispose for value, any shares of common stock
or any securities convertible into, or exchangeable for, or warrants to purchase
any shares of common stock or any swap, hedge or other agreement that transfers,
in whole or in part, the economic risk of ownership of our common stock. In the
purchase agreement, Acqua Wellington also has agreed that its sales of our
common stock on any trading day will not represent more than 30% of the total
trading volume of our common stock, as reported on Bloomberg Financial LP, for
that trading day.
We have agreed to indemnify and hold harmless Acqua Wellington against
certain liabilities, including liabilities under the Securities Act, which may
be based upon, among other things, any untrue statement or alleged untrue
statement of a material fact contained in or incorporated by reference in the
registration statement of which this prospectus is a part, or any omission or
alleged omission to state in the registration statement or any document
incorporated by reference in the registration statement, a material fact
required to be stated therein or necessary to make the statements therein not
misleading, unless made or omitted in reliance upon written information provided
to us by Acqua Wellington. We have agreed to pay all of Acqua Wellington's
reasonable fees and expenses related to the transactions contemplated by the
purchase agreement, except that we are obligated to pay only up to $50,000 of
the reasonable attorneys' fees and expenses (exclusive of disbursements and
out-of-pocket expenses) incurred by Acqua Wellington in connection with the
preparation, negotiation, execution and delivery of the purchase agreement. We
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have also agreed to pay all reasonable fees and expenses incurred by Acqua
Wellington in connection with any amendments, modifications or waivers of the
purchase agreement, or incurred in connection with the enforcement of the
purchase agreement, including without limitation, all reasonable attorneys' fees
and expenses.
The purchase agreement as executed and as amended and restated as of
December 20, 2000 has been incorporated by reference into and has been filed as
an exhibit to the registration statement of which this prospectus forms a part.
LEGAL MATTERS
Latham & Watkins, San Diego, California, will pass upon the validity of the
securities being offered by this prospectus.
EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference to the Annual Report on Form 10-K of Leap Wireless International, Inc.
for the year ended December 31, 2000 have been so incorporated in reliance on
the report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
The financial statements as of December 31, 1999 and 1998 and for the year
ended December 31, 1999 and for the period from June 24, 1998 (inception) to
December 31, 1998 of Pegaso Telecomunicaciones, S.A. de C.V. incorporated in
this prospectus by reference to the Annual Report on Form 10-K/A Amendment No. 2
of Leap Wireless International, Inc. for the year ended August 31, 1999 have
been so incorporated in reliance on the report of PricewaterhouseCoopers,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
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