Cricket Wireless 2012 Annual Report Download - page 126

LEAP WIRELESS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
indebtedness and senior in right of payment to all indebtedness that is contractually subordinated to the notes.
The notes are structurally subordinated to the existing and future claims of Leap’s subsidiaries’ creditors,
including under the Credit Agreement and the secured and unsecured senior notes described below. The notes are
effectively junior to all of Leap’s existing and future secured obligations, including those under the Credit
Agreement and the senior secured notes due 2016, to the extent of the value of the assets securing such
obligations.
Holders may convert their notes into shares of Leap common stock at any time on or prior to the third
scheduled trading day prior to the maturity date of the notes, July 15, 2014. If, at the time of conversion, the
applicable stock price of Leap common stock is less than or equal to approximately $93.21 per share, the notes
will be convertible into 10.7290 shares of Leap common stock per $1,000 principal amount of the notes (referred
to as the “base conversion rate”), subject to adjustment upon the occurrence of certain events. If, at the time of
conversion, the applicable stock price of Leap common stock exceeds approximately $93.21 per share, the
conversion rate will be determined pursuant to a formula based on the base conversion rate and an incremental
share factor of 8.3150 shares per $1,000 principal amount of the notes, subject to adjustment.
Leap may be required to repurchase all outstanding notes in cash at a repurchase price of 100% of the
principal amount of the notes, plus accrued and unpaid interest, if any, thereon to the repurchase date if (1) any
person acquires beneficial ownership, directly or indirectly, of shares of Leap’s capital stock that would entitle
the person to exercise 50% or more of the total voting power of all of Leap’s capital stock entitled to vote in the
election of directors, (2) Leap (i) merges or consolidates with or into any other person, another person merges
with or into Leap, or Leap conveys, sells, transfers or leases all or substantially all of its assets to another person
or (ii) engages in any recapitalization, reclassification or other transaction in which all or substantially all of Leap
common stock is exchanged for or converted into cash, securities or other property, in each case subject to
limitations and excluding in the case of (1) and (2) any merger or consolidation where at least 90% of the
consideration consists of shares of common stock traded on NYSE, ASE or NASDAQ, (3) a majority of the
members of Leap’s board of directors ceases to consist of individuals who were directors on the date of original
issuance of the notes or whose election or nomination for election was previously approved by the board of
directors, (4) Leap is liquidated or dissolved or holders of common stock approve any plan or proposal for its
liquidation or dissolution or (5) shares of Leap common stock are not listed for trading on any of the New York
Stock Exchange, the NASDAQ Global Market or the NASDAQ Global Select Market (or any of their respective
successors). Leap may not redeem the notes at its option.
Senior Secured Notes Due 2016
In June 2009, Cricket issued $1,100 million of 7.75% senior secured notes due 2016 in a private placement
to institutional buyers at an issue price of 96.134% of the principal amount, which notes were exchanged in
December 2009 for identical notes that had been registered with the SEC. The $42.5 million discount to the net
proceeds the Company received in connection with the issuance of the notes has been recorded in long-term debt,
net in the consolidated financial statements and is being accreted as an increase to interest expense over the term
of the notes. At December 31, 2012, the effective interest rate on the notes was 7.92%, which includes the effect
of the discount accretion.
The notes bear interest at the rate of 7.75% per year, payable semi-annually in cash in arrears, which interest
payments commenced in November 2009. The notes are guaranteed on a senior secured basis by Leap and each
of its existing and future domestic subsidiaries (other than Cricket, which is the issuer of the notes) that
guarantees any indebtedness of Leap, Cricket or any subsidiary guarantor. The notes and the guarantees are
Leap’s, Cricket’s and the guarantors’ senior secured obligations and are equal in right of payment with all of
Leap’s, Cricket’s and the guarantors’ existing and future unsubordinated indebtedness.
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