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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 8, 2001
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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LEAP WIRELESS INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 4812 33-0811062
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
ORGANIZATION)
10307 PACIFIC CENTER COURT
SAN DIEGO, CALIFORNIA 92121
(858) 882-6000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
AGENT FOR SERVICE: COPIES TO:
HARVEY P. WHITE SCOTT N. WOLFE, ESQ.
CHIEF EXECUTIVE OFFICER BARRY M. CLARKSON, ESQ.
LEAP WIRELESS INTERNATIONAL, INC. LATHAM & WATKINS
10307 PACIFIC CENTER COURT 12636 HIGH BLUFF DRIVE, SUITE 300
SAN DIEGO, CALIFORNIA 92121 SAN DIEGO, CALIFORNIA 92130
(858) 882-6000 (858) 523-5400
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] __________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] __________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED PER SHARE(1) PRICE(1) REGISTRATION FEE
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Common Stock, par value
$0.0001 per share(2)... 155,460 $31.415 $4,883,776 $1,221
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(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) based on the average of the high and low
reported sales prices on the Nasdaq National Market on June 6, 2001.
(2) Each share of common stock, par value $0.0001 per share, includes a right to
purchase one one-thousandth of a share of Series A Junior Participating
preferred stock, par value $0.0001 per share.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS (SUBJECT TO COMPLETION, DATED JUNE 8, 2001)
[LEAP WIRELESS LOGO]
LEAP WIRELESS INTERNATIONAL, INC.
155,460 SHARES OF COMMON STOCK
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This prospectus relates to the offer and sale of up to 155,460 shares of
Leap Wireless International, Inc. common stock by the selling security holders
identified in this prospectus. The shares offered by this prospectus were
originally issued by us to the selling security holders in connection with our
acquisition of a wireless license from Holland Wireless, LLC, subject to the
terms of an agreement for purchase and sale of license, dated December 1, 2000.
Under the terms of the purchase agreement, we agreed to register for resale the
shares of our common stock offered by this prospectus and bear the expenses of
registration of the shares. We will not receive any of the proceeds from the
sale of shares of common stock by the selling security holders.
Our common stock is quoted on the Nasdaq National Market under the symbol
"LWIN."
On June 7, 2001, the reported last sale price of our common stock on the
Nasdaq National Market was $31.18 per share.
BEFORE INVESTING IN THE SHARES OF OUR COMMON STOCK, PLEASE REFER TO THE
SECTION IN THIS PROSPECTUS ENTITLED "RISK FACTORS" BEGINNING ON PAGE 4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is , 2001.
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TABLE OF CONTENTS
PAGE
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Prospectus Summary.......................................... 1
Risk Factors................................................ 4
Forward-Looking Statements.................................. 16
Use of Proceeds............................................. 16
Selling Security Holders.................................... 17
Plan of Distribution........................................ 18
Description of Leap Capital Stock........................... 21
Legal Matters............................................... 25
Experts..................................................... 25
Where to Find Additional Information........................ 25
THIS PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND FINANCIAL INFORMATION
ABOUT LEAP WIRELESS INTERNATIONAL, INC. AND ITS SUBSIDIARIES THAT IS NOT
INCLUDED IN OR DELIVERED WITH THIS DOCUMENT. THIS INFORMATION IS AVAILABLE
WITHOUT CHARGE TO SECURITY HOLDERS UPON WRITTEN OR ORAL REQUEST.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT INFORMATION. WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN ANY
STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE
INFORMATION CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS IS
ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS PROSPECTUS.
Cricket(TM) 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 are the property of
their respective holders.
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PROSPECTUS SUMMARY
This summary highlights some information from this 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. You should read the full text of,
and consider carefully the more specific details contained in or incorporated by
reference in this prospectus. When used in this prospectus, the terms "Leap,"
"we," "our," "ours" and "us" refer to Leap Wireless International, Inc. and its
consolidated subsidiaries, unless the context requires otherwise, and not to the
selling security holders. 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
term 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.
As of March 31, 2001, we had launched Cricket service in markets covering a
total population of approximately 9.2 million and had approximately 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
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customers in 36 states, and we plan to continue launching new Cricket markets
throughout 2001 and beyond.
We 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. In furtherance of our objective to
offer low-cost wireless data services, we completed our first purchase of
wireless data technology in December 2000 through the acquisition of a
proprietary, personalized, location-based technology, and in March and April
2001 we completed two additional acquisitions to support our future offering of
wireless data services. We have several new services in development including a
data service designed to provide wireless information to customers' mobile
phones. We recently announced the first of these services which was launched in
May 2001 in Chattanooga. The service is marketed under the brand name
"Slice(TM)."
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 Azcarraga, 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 which 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.
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- 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.
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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RISK FACTORS
An investment in the common stock offered in connection with this
prospectus involves a high degree of risk. In addition to the other information
in this 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 concerns and other competitive factors.
Our strategy to address customer turnover may not be successful,
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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.
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,
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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 June 5, 2001, 34,079,432 shares of our common stock were outstanding,
and 22,633,849 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 June 5, 2001:
- 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;
- 10,501,534 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;
- 2,891,066 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;
- 2,048,231 shares reserved for issuance upon consummation of our pending
acquisitions of wireless licenses in 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.
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 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
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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.
In addition to the shares offered by this prospectus, we have agreed to
file registration statements to register for resale up to 2,833,829 shares
reserved for issuance upon consummation of our pending acquisitions of wireless
licenses. 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
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;
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- 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 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.
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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 in the U.S. could be materially adversely
affected.
THE FCC'S DECISION THAT WE ARE QUALIFIED TO HOLD C-BLOCK AND F-BLOCK LICENSES IS
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 various other C-Block and F-Block
licenses.
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,
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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 opposed 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 with 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 FCC 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 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.
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-BLOCK AND F-BLOCK LICENSES IN THE
FUTURE
Regulatory changes or requirements, or market circumstances, could make it
more difficult to acquire C-Block 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 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
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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-Block 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-Block 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-Block and F-Block licenses in the
aftermarket, but we may be subject to unjust enrichment penalties if we seek to
acquire C-Block 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.
ADVERSE REGULATORY CHANGES COULD IMPAIR OUR ABILITY TO MAINTAIN EXISTING
LICENSES AND OBTAIN NEW LICENSES
We must maintain 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
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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
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
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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.
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;
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- 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 June 5, 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
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
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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 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 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.
We have described other risks concerning Leap elsewhere in this prospectus
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 may not occur and actual results could differ materially from those
anticipated or implied in the forward-looking statements.
USE OF PROCEEDS
We will not receive any proceeds from the sale by the selling security
holders of the common stock offered by this prospectus.
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SELLING SECURITY HOLDERS
The shares offered by this prospectus were originally issued by us to the
selling security holders in connection with our acquisition of a wireless
license from Holland Wireless, LLC, subject to the terms of an agreement for
purchase and sale of license, dated December 1, 2000. Under the terms of the
purchase agreement, we agreed to register for resale the shares of our common
stock offered by this prospectus and bear the expenses of registration of the
shares. We agreed to keep the registration statement effective for a period
ending upon the earlier of May 24, 2002 (as such date may be extended
day-for-day for each day, if any, that the selling security holders are required
to be under the terms of any "lock-up" agreement) or such time as the selling
security holders advise us that they have completed the resale of the shares of
common stock offered by this prospectus.
The following table sets forth information with respect to the shares owned
by the selling security holders. The information regarding shares owned after
the offering assumes the sale of all shares offered by the selling security
holders. Other than as described in the footnotes to the table below, none of
the selling security holders has held a position or office or had a material
relationship with us or any of our affiliates within the past three years other
than as a result of the ownership of Leap common stock.
SHARES OWNED AFTER
NUMBER OF SHARES OFFERING
NAME OF SELLING OWNED PRIOR TO THE NUMBER OF SHARES ---------------------
SECURITY HOLDER OFFERING BEING OFFERED NUMBER PERCENTAGE
--------------- ------------------ ---------------- -------- ----------
Falkenberg Capital Corporation............... 3,104 3,104 -- --
James P. McCarthy............................ 108,591 108,591 -- --
Jeremiah O. McCarthy Irrevocable Trust
#1(1)...................................... 7,568 7,568 -- --
Oneida County Rural Telephone Company(2)..... 36,197 36,197 -- --
-------
Total...................................... 155,460
=======
------------------------
(1) James P. McCarthy, Thomas I. Ellis and Christine F. McCarthy, trustees of
the selling security holder, share voting and investment power with respect
to these shares.
(2) James P. McCarthy, Jeremiah O. McCarthy and Thomas I. Ellis, directors and
officers of the selling security holder, share voting and investment power
with respect to these shares.
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PLAN OF DISTRIBUTION
RESALES BY THE SELLING SECURITY HOLDERS
Leap is registering the shares on behalf of the selling security holders.
The selling security holders may offer the shares from time to time, either in
increments or in a single transaction. The selling security holders may also
decide not to sell any or all of the shares allowed to be sold under this
prospectus. The selling security holders will act independently of Leap in
making decisions with respect to the timing, manner and size of each sale.
DONEES, PLEDGEES AND DISTRIBUTEES
The term "selling security holders" includes donees, persons who receive
shares from the selling security holders after the date of this prospectus by
gift. The term also includes pledgees, persons who, upon contractual default by
the selling security holders, may seize shares which the selling security
holders pledged to such persons. The term also includes distributees who receive
shares from the selling security holders after the date of this prospectus as a
distribution to members, partners or beneficiaries of the selling security
holders.
COST AND COMMISSIONS
Leap will pay all costs, expenses and fees in connection with the
registration of the shares being offered by this prospectus. The selling
security holders will pay all brokerage commissions and similar selling
expenses, if any, attributable to the sale of shares.
TYPES OF SALE TRANSACTIONS
The selling security holders will act independently of Leap in making
decisions with respect to the timing, manner and size of each sale. The selling
security holders may sell their shares in one or more types of transactions
(which may include block transactions):
- on any national securities exchange or quotation service on which the
common stock may be listed or quoted at the time of sale, including the
Nasdaq National Market;
- in privately negotiated or block transactions;
- in the over-the-counter market;
- through the writing of options on shares;
- by pledge to secure debts and other obligations;
- in hedge transactions and in settlement of other transactions;
- in short sales; or
- through any combination of the above methods of sale.
The shares may be sold at a fixed offering price, which may be changed, or
at market prices prevailing at the time of sale, or at negotiated prices.
SALES TO OR THROUGH BROKER-DEALERS
The selling security holders may either sell shares directly to purchasers,
or sell shares to, or through, broker-dealers. These broker-dealers may act
either as an agent of the selling security holders, or as a principal for the
broker-dealer's own account. These transactions may include transactions in
which the same broker acts as an agent on both sides of the trade. Such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the selling security holders and/or the purchasers of shares.
This compensation may be received both if the broker-dealer acts as an agent or
as a principal. This compensation might also exceed customary commissions.
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The selling security holders may enter into hedging transactions with
broker-dealers in connection with distributions of the shares or otherwise. In
such transactions, broker-dealers may engage in short sales of the shares in the
course of hedging the positions they assume with the selling security holders.
The selling security holders also may sell shares short and re-deliver the
shares to close out such short positions. The selling security holders may enter
into options or other transactions with broker-dealers which require the
delivery to the broker-dealer of the shares. The broker-dealer may then resell
or otherwise transfer such shares pursuant to this prospectus. The selling
security holders also may loan or pledge the shares to a broker-dealer. The
broker-dealer may sell the shares so loaned, or upon a default the broker-dealer
may sell the pledged shares pursuant to this prospectus.
DISTRIBUTION ARRANGEMENTS WITH BROKER-DEALERS
If the selling security holders notify Leap that any material arrangement
has been entered into with a broker-dealer for the sale of shares through:
- a block trade,
- a special offering,
- an exchange distribution or secondary distribution, or
- a purchase by a broker or dealer,
then Leap will file, if required, a supplement to this prospectus under Rule
424(b) of the Securities Act.
The supplement will disclose, to the extent required:
- the names of the selling security holders and of the participating
broker-dealer(s);
- the number of shares involved;
- the price at which such shares were sold;
- the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable;
- that such broker-dealer(s) did not conduct any investigation to verify
the information set out or incorporated by reference in this prospectus;
and
- any other facts material to the transaction.
DEEMED UNDERWRITING COMPENSATION
The selling security holders and any broker-dealers that act in connection
with the sale of his shares might be deemed to be "underwriters" within the
meaning of Section 2(a)(11) of the Securities Act. Any commissions received by
such broker-dealers, and any profit on the resale of shares sold by them while
acting as principals, could be deemed to be underwriting discounts or
commissions under the Securities Act.
INDEMNIFICATION
The selling security holders may agree to indemnify any agent, dealer or
broker-dealer that participates in transactions involving sales of his shares
against certain liabilities, including liabilities arising under the Securities
Act. Under our agreements with the selling security holders, we and the selling
security holders will be indemnified by the other against certain liabilities,
including certain liabilities under the Securities Act, or will be entitled to
contribution in connection with these liabilities.
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PROSPECTUS DELIVERY REQUIREMENTS
Because a selling security holder may be deemed an underwriter, the selling
security holders must deliver this prospectus and any supplements to this
prospectus in the manner required by the Securities Act.
SALES UNDER RULE 144
The selling security holders may also resell all or a portion of the shares
offered by this prospectus in open market transactions in reliance upon Rule 144
under the Securities Act. To do so, the selling security holders must meet the
criteria and comply with the requirements of Rule 144.
REGULATION M
The selling security holders and any other persons participating in the
sale or distribution of the shares will be subject to applicable provisions of
the Exchange Act and the rules and regulations under such act, including,
without limitation, Regulation M. These provisions may restrict certain
activities of, and limit the timing of purchases and sales of any of the shares
by, the selling security holders or any other such person.
COMPLIANCE WITH STATE LAW
In jurisdictions where the state securities laws require it, the selling
security holders' shares offered by this prospectus may be sold only through
registered or licensed brokers or dealers. In addition, in some states the
shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and has been complied with.
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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
captioned "Where To Find Additional 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 June 5, 2001, we had 34,079,432 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 terms
of the indenture governing the notes restrict our ability to declare or pay
dividends.
PREFERRED STOCK
Our board of directors is authorized to issue shares of preferred stock, in
one or more series, and to determine, regarding any series, the terms and rights
of the series, including the following:
- the designation of the series;
- the rate and time of, and conditions and preferences regarding,
dividends, and whether the dividends are cumulative;
- the voting rights, if any, of shares of the series;
- the price, timing and conditions regarding the redemption of shares of
the series and whether a sinking fund should be established for the
series;
- the rights and preferences of shares of the series in the event of our
voluntary or involuntary dissolution, liquidation or winding up of our
affairs; and
- the right, if any, to convert or exchange shares of the series into or
for stock or securities of any other series or class.
We believe that the availability of the preferred stock will provide us
with increased flexibility in structuring possible future financings and
acquisitions, and in meeting other corporate needs which might arise. Having
authorized shares available for issuance will allow us to issue shares of
preferred stock without the expense and delay of a special stockholders'
meeting. The authorized shares of preferred stock, as well as shares of our
common stock, will be available for issuance without further action by our
stockholders, unless action is required by applicable law or the rules of any
stock exchange on which our securities may be listed or unless we are restricted
by the preferred stock.
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
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equity securities of Leap in an amount that would disqualify Leap from being a
"designated entity" under FCC rules. As of June 5, 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 "piggy-back" 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
piggy-back 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, the shares to be registered may be reduced to no less than
30% of the shares requested to be registered. The registration rights in the
warrant may be assigned by Qualcomm with any transfer of the warrant. 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. Qualcomm has agreed to waive its
piggy-back registration rights with respect to this offering. 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 the warrant agreement for those warrants,
which is filed as an exhibit to the registration statement of which this
prospectus forms a part. Qualcomm, which purchase 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 common stock of our subsidiary, Cricket Communications, for an
aggregate warrant exercise price of $1,000,000. In connection with the June 2000
merger of Cricket Communications 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.
LEAP COMMON STOCK RESERVED FOR ISSUANCE
Future sales of substantial amounts of our common stock in the public
market could adversely affect the trading price of our common stock. As of June
5, 2001, we had 34,079,432 shares of common stock outstanding, the large
majority of which were freely tradable without restriction or further
registration under the Securities Act of 1933. Also, as of June 5, 2001, we had
reserved for issuance 22,633,849 shares of our common stock as follows:
3,375,000 shares reserved for issuance upon exercise of a warrant held by
Qualcomm; 10,501,534 shares of common stock reserved for issuance upon the
exercise of options or awards granted or available for grant to employees,
officers, directors and consultants under Leap equity incentive plans; 2,891,066
shares of common stock reserved for issuance upon exercise of options granted in
connection with the spin-off of Leap to holders of options for Qualcomm common
stock (including our employees who were former employees of Qualcomm); 2,048,231
shares reserved for issuance upon consummation of our pending acquisitions of
wireless licenses in 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 acquisitions are
subject to FCC approval and other conditions; 202,566 shares of common stock
reserved
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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. In addition to the shares offered by this prospectus, we have agreed
to file registration statements to register for resale 2,833,829 shares reserved
for issuance upon consummation of our pending acquisitions of wireless licenses.
Under certain circumstances, the number of shares to be issued in connection
with our acquisitions of wireless licenses and 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.
NO PREEMPTIVE RIGHTS
No holder of any stock of Leap has any preemptive right to subscribe for
any securities of Leap of any kind or class.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for our common stock is Computershare
Investor Services LLC.
DELAWARE LAW AND CHARTER PROVISIONS
We must comply with the provisions of Section 203 of the Delaware General
Corporation Law, an anti-takeover law. In general, the statute prohibits a
publicly held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. A "business
combination" includes a merger, asset sale or other transaction resulting in a
financial benefit to the stockholder. An "interested stockholder" is a person
who, together with affiliates and associates, owns at the time of the business
combination (or within three years prior, did own) 15% or more of the
corporation's voting stock.
Our charter also requires that any required or permitted action by our
stockholders must be effected at a duly called annual or special meeting of
stockholders and may not be effected by any consent in writing. In addition,
special meetings of our stockholders may be called only by a majority of the
authorized number of directors, the Chairman of the Board or the President of
Leap. The charter also provides for a classified board of directors consisting
of three classes as nearly equal in number as possible with the directors in
each class serving staggered three-year terms. In addition, the charter provides
that the authorized number of directors may be changed only by resolution of our
board of directors. Our bylaws require advance notice by a stockholder of a
proposal or director nomination which such stockholder desires to present at the
annual meeting of stockholders. Our charter and bylaws also require that the
holders of at least 66 2/3% of our voting stock must approve any amendment to
either the charter or bylaws affecting certain provisions. These provisions may
have the effect of deterring hostile takeovers or delaying changes in control or
management of Leap.
RIGHTS PLAN
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 as a result of its warrant to purchase 4,500,000 shares of
our common stock or the warrants purchased by
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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 captioned
"Where To Find Additional Information."
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our officers and directors are covered by the provisions of the Delaware
General Corporation Law (DGCL), the charter, the bylaws, individual
indemnification agreements with us and insurance policies which serve to limit,
and, in some instances, to indemnify them against, liabilities which they may
incur in such capacities. These various provisions are described below.
Elimination of Liability in Certain Circumstances. The DGCL authorizes
corporations to limit or eliminate the personal liability of directors to
corporations and their stockholders for monetary damages for breach of
directors' fiduciary duty of care. This duty of care requires that, when acting
on behalf of the corporation, directors must exercise an informed business
judgment based on all significant information reasonably available to them.
Absent the limitations authorized by the DGCL, directors are accountable to
corporations and their stockholders for monetary damages for conduct
constituting negligence or gross negligence in the exercise of their duty of
care. Although the statute does not change directors' duty of care, it enables
corporations to limit available relief to equitable remedies such as injunction
or rescission. Our charter limits the liability of directors to Leap or our
stockholders (in their capacity as directors but not in their capacity as
officers) to the fullest extent permitted by the Delaware statute. Specifically,
our directors will not be personally liable for monetary damages for breach of a
director's fiduciary duty as director, except for liability:
- for any breach of the director's duty of loyalty to Leap or its
stockholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- for unlawful payments of dividends or unlawful share repurchases or
redemptions as provided in Section 174 of the DGCL; or
- for any transaction from which the director derived an improper personal
benefit.
Indemnification and Insurance. Under the DGCL, we have the power, under
specified circumstances generally requiring the directors or officers to have
acted in good faith and in a manner they reasonably believe to be in or not
opposed to our best interests, to indemnify our directors and officers in
connection with actions, suits or proceedings brought against them by a third
party or in our name, by reason of the fact that they were or are such directors
or officers; and against expenses, judgments, fines and amounts paid in
settlement in connection with any such action, suit or proceeding. The bylaws
generally provide for mandatory indemnification of our directors and officers to
the full extent provided by Delaware corporate law. In addition, we have entered
into indemnification agreements with our directors and officers which generally
provide for indemnification of the officers and directors to the fullest extent
permitted under the
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DGCL, including under circumstances for which indemnification would otherwise be
discretionary under Delaware law.
We have purchased and intend to maintain insurance on behalf of any person
who is or was a director or officer of Leap, or is or was a director or officer
of Leap serving at our request as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not we would have the power or obligation to indemnify him or her
against such liability under the provisions of our charter or bylaws.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling pursuant
to the foregoing provisions, those provisions are, in the opinion of the SEC,
against public policy as expressed in the Securities Act of 1933 and are
therefore unenforceable.
LEGAL MATTERS
Latham & Watkins, San Diego, California, will pass upon the validity of the
securities being offered by this prospectus and certain other legal matters.
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.
WHERE TO FIND ADDITIONAL 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 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.
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.
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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 Quarterly Report on Form 10-Q for the quarter ended March 31, 2001
filed with the SEC on May 15, 2001;
- 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; 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 superceded 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 superceded shall not be deemed, except as so
modified or superceded, 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
You should rely only on the information incorporated by reference or
provided in this prospectus. We have not authorized anyone else to provide you
with different information. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the front cover of
this document.
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[LEAP WIRELESS LOGO]
31
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Our estimated expenses in connection with the distribution of the
securities being registered are as set forth in the following table:
SEC Registration Fee........................................ $ 1,221
Legal Fees and Expenses..................................... 5,000
Accounting Fees and Expenses................................ 15,000
Printing and Engraving Expenses............................. 1,000
Miscellaneous............................................... $ 1,779
-------
Total..................................................... $24,000
=======
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Officers and directors of Leap are covered by the provisions of the DGCL,
the charter, the bylaws, individual indemnification agreements with Leap and
insurance policies which serve to limit, and, in some instances, to indemnify
them against, certain liabilities which they may incur in such capacities. These
various provisions are described below.
Elimination of Liability in Certain Circumstances. In June 1986, Delaware
enacted legislation which authorizes corporations to limit or eliminate the
personal liability of directors to corporations and their stockholders for
monetary damages for breach of directors' fiduciary duty of care. This duty of
care requires that, when acting on behalf of the corporation, directors must
exercise an informed business judgment based on all significant information
reasonably available to them. Absent the limitations now authorized by such
legislation, directors are accountable to corporations and their stockholders
for monetary damages for conduct constituting negligence or gross negligence in
the exercise of their duty of care. Although the statute does not change
directors' duty of care, it enables corporations to limit available relief to
equitable remedies such as injunction or rescission. The charter limits the
liability of directors to Leap or its stockholders (in their capacity as
directors but not in their capacity as officers) to the fullest extent permitted
by such legislation. Specifically, the directors of Leap will not be personally
liable for monetary damages for breach of a director's fiduciary duty as
director, except for liability:
- for any breach of the director's duty of loyalty to Leap or its
stockholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- for unlawful payments of dividends or unlawful share repurchases or
redemptions as provided in Section 174 of the DGCL; or
- for any transaction from which the director derived an improper personal
benefit.
Indemnification and Insurance. As a Delaware corporation, Leap has the
power, under specified circumstances generally requiring the directors or
officers to have acted in good faith and in a manner they reasonably believe to
be in or not opposed to Leap's best interests, to indemnify its directors and
officers in connection with actions, suits or proceedings brought against them
by a third party or in the name of Leap, by reason of the fact that they were or
are such directors or officers, against expenses, judgments, fines and amounts
paid in settlement in connection with any such action, suit or proceeding. The
bylaws generally provide for mandatory indemnification of Leap's directors and
officers to the full extent provided by Delaware corporate law. In addition,
Leap has entered into indemnification agreements with its directors and officers
which generally provide for indemnification of the officers and directors to the
fullest extent permitted under Delaware law, including under circumstances for
which indemnification would otherwise be discretionary under Delaware law.
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Leap has purchased and intends to maintain insurance on behalf of any
person who is or was a director or officer of Leap, or is or was a director or
officer of Leap serving at the request of Leap as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise against any liability asserted against him or
her and incurred by him or her in any such capacity, or arising out of his or
her status as such, whether or not Leap would have the power or obligation to
indemnify him or her against such liability under the provisions of its charter
or bylaws.
ITEM 16. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
4.1 (1) Form of Common Stock Certificate.
4.2.1(2) Rights Agreement, dated as of September 14, 1998, between
the Registrant and Harris Trust Company of California.
4.2.2(3) First Amendment to Rights Agreement, dated as of February 8,
2000, between Leap Wireless International, Inc. and Harris
Trust Company of California.
4.2.3(3) Second Amendment to Rights Agreement, dated as of March 30,
2000, between Leap Wireless International, Inc. and Harris
Trust Company of California.
5.1 Opinion of Latham & Watkins.
23.1 Consent of Latham & Watkins. Reference is made to Exhibit
5.1.
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of PricewaterhouseCoopers.
24.1 Powers of Attorney (contained on the signature page of this
Registration Statement).
-------------------------
(1) Filed as an exhibit to Leap's Registration Statement on Form 10, as amended
(File No. 0-29752), and incorporated herein by reference.
(2) Filed as an exhibit to Leap's Current Report on Form 8-K dated September 14,
1998, and incorporated herein by reference.
(3) Filed as an exhibit to Leap's Quarterly Report on Form 10-Q for the quarter
ended May 31, 2000, as filed with the SEC on July 17, 2000, and incorporated
herein by reference.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in this registration statement;
II-2
33
provided, however, that subparagraphs (a)(1)(i) and (a)(1)(ii) above do not
apply if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed with or furnished to
the SEC by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in this
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned registrant hereby further undertakes that, for the
purposes of determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 that is incorporated by reference
in this registration statement shall be deemed to be a new registration
statement relating to the securities offered herein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to existing provisions or otherwise, the registrant has
been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
II-3
34
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of San Diego, County of San Diego, State of
California, on June 8, 2001.
By: /s/ THOMAS D. WILLARDSON
------------------------------------
Thomas D. Willardson
Senior Vice President, Finance and
Treasurer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Harvey P. White and James E. Hoffmann and
each of them, as his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments, exhibits thereto and other documents in connection
therewith) to this Registration Statement and any subsequent registration
statement filed by the registrant pursuant to Rule 462(b) of the Securities Act
of 1933, as amended, which related to this Registration Statement, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorney-in-fact and
agents, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Under the requirements of the Securities Act of 1933, as amended, this
Registration Statement on Form S-3 has been signed by the following persons in
the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ HARVEY P. WHITE Chief Executive Officer and June 8, 2001
----------------------------------------------------- Director (Chief Executive
Harvey P. White Officer)
/s/ SUSAN G. SWENSON President, Chief Operating June 8, 2001
----------------------------------------------------- Officer and Director
Susan G. Swenson
/s/ THOMAS D. WILLARDSON Senior Vice President, Finance June 8, 2001
----------------------------------------------------- and Treasurer (Chief Financial
Thomas D. Willardson Officer)
/s/ STEPHEN P. DHANENS Vice President and Controller June 8, 2001
----------------------------------------------------- (Chief Accounting Officer)
Stephen P. Dhanens
/s/ JILL E. BARAD Director June 8, 2001
-----------------------------------------------------
Jill E. Barad
Vice Chairman and Director June , 2001
-----------------------------------------------------
Thomas J. Bernard
II-4
35
SIGNATURE TITLE DATE
--------- ----- ----
/s/ ALEJANDRO BURILLO AZCARRAGA Director June 8, 2001
-----------------------------------------------------
Alejandro Burillo Azcarraga
/s/ ANTHONY R. CHASE Director June 8, 2001
-----------------------------------------------------
Anthony R. Chase
/s/ ROBERT C. DYNES Director June 8, 2001
-----------------------------------------------------
Robert C. Dynes
/s/ SCOT B. JARVIS Director June 8, 2001
-----------------------------------------------------
Scot B. Jarvis
/s/ MICHAEL B. TARGOFF Director June 8, 2001
-----------------------------------------------------
Michael B. Targoff
/s/ JEFFREY P. WILLIAMS Director June 8, 2001
-----------------------------------------------------
Jeffrey P. Williams
II-5
36
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
4.1 (1) Form of Common Stock Certificate.
4.2.1(2) Rights Agreement, dated as of September 14, 1998, between
the Registrant and Harris Trust Company of California.
4.2.2(3) First Amendment to Rights Agreement, dated as of February 8,
2000, between Leap Wireless International, Inc. and Harris
Trust Company of California.
4.2.3(3) Second Amendment to Rights Agreement, dated as of March 30,
2000, between Leap Wireless International, Inc. and Harris
Trust Company of California.
5.1 Opinion of Latham & Watkins.
23.1 Consent of Latham & Watkins. Reference is made to Exhibit
5.1.
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of PricewaterhouseCoopers.
24.1 Powers of Attorney (contained on the signature page of this
Registration Statement).
-------------------------
(1) Filed as an exhibit to Leap's Registration Statement on Form 10, as amended
(File No. 0-29752), and incorporated herein by reference.
(2) Filed as an exhibit to Leap's Current Report on Form 8-K dated September 14,
1998, and incorporated herein by reference.
(3) Filed as an exhibit to Leap's Quarterly Report on Form 10-Q for the quarter
ended May 31, 2000, as filed with the SEC on July 17, 2000, and incorporated
herein by reference.