AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 26, 2007
REGISTRATION NO. 333-144974
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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NEXTWAVE WIRELESS INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 3663 20-5361360
(State or Other Jurisdiction (Primary Standard (I.R.S. Employer
of Incorporation or Industrial Identification No.)
Organization) Classification Code Number)
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12670 HIGH BLUFF DRIVE
SAN DIEGO, CALIFORNIA 92130
(858) 480-3100
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
FRANK A. CASSOU
EXECUTIVE VICE PRESIDENT - CORPORATE DEVELOPMENT AND CHIEF LEGAL COUNSEL
NEXTWAVE WIRELESS INC.
12670 HIGH BLUFF DRIVE
SAN DIEGO, CALIFORNIA 92130
(858) 480-3100
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
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Copies to:
Marita Makinen, Esq.
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
(212) 310-8000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after this registration statement becomes effective.
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, as amended (the "Securities Act"), check the following box.[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 this form is a post effective amendment filed pursuant to Rule 462(d)
under the Securities Act. check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.[_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box.[_]
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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
The information in this prospectus is not complete and may be changed. The
selling stockholders may not sell these securities using this prospectus until
the registration statement filed with the Securities and Exchange Commission
relating to these securities 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.
SUBJECT TO COMPLETION, DATED NOVEMBER 26, 2007
PROSPECTUS
NEXTWAVE WIRELESS [Logo]
178,111 SHARES OF SERIES A SENIOR CONVERTIBLE PREFERRED STOCK, PAR VALUE $0.001
17,063,306 SHARES OF COMMON STOCK, PAR VALUE $0.001, ISSUABLE UPON
CONVERSION OF THE SERIES A PREFERRED STOCK
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This prospectus relates solely to the resale of up to 178,111 shares of
Series A Senior Convertible Preferred Stock, par value $0.001 (the "Series A
Preferred Stock"), of NextWave Wireless Inc. ("NextWave" or the "Company") and
17,063,306 shares of common stock, par value $0.001 (the "Common Stock") of
NextWave issuable upon the conversion of the Series A Preferred Stock by the
purchasers identified in this prospectus. On March 28, 2007, shares of the
Series A Preferred Stock were issued to the purchasers in a private placement
transaction exempt from the registration requirements of the Securities Act of
1933, as amended (the "Securities Act"), pursuant to Regulation D. This
prospectus will be used by the selling securityholders to resell their shares of
the Series A Preferred Stock and Common Stock issuable upon conversion of the
Series A Preferred Stock.
Shares of the Series A Preferred Stock provide for the payment of
dividends at a rate of 7.5% per annum, payable quarterly in arrears. Until March
28, 2011, the per share dividend amount will be added to the liquidation
preference of the Series A Preferred Stock unless the Company elects to pay cash
dividends. From and after March 28, 2011, the Company is obligated to pay
quarterly cash dividends on the Series A Preferred Stock. Shares of the Series A
Preferred Stock are convertible by holders into a number of shares of Common
Stock equal to the liquidation preference then in effect divided by $11.05 and
may be mandatorily converted at the election of the Company under certain
circumstances. The Company will be required to redeem all outstanding shares of
the Series A Preferred Stock, if any, on March 28, 2017, at a price equal to the
liquidation preference plus unpaid dividends. The Series A Preferred Stock is
also subject to other redemption rights exercisable by the holders of the Series
A Preferred Stock. For a more detailed description of the Series A Preferred
Stock, see "Description of the Capital Stock" beginning on page 39.
The selling stockholders identified in this prospectus may offer the
shares from time to time as they may determine through public or private
transactions or through other means described in the section entitled "Plan of
Distribution" beginning on page 44 at prevailing market prices, at prices
different than prevailing market prices or at privately negotiated prices. The
prices at which the selling stockholders may sell the shares may be determined
by the prevailing market price for the shares at the time of sale, may be
different than such prevailing market prices or may be determined through
negotiated transactions with third parties.
We will not receive any of the proceeds from the resale of these shares
by the selling stockholders. We have agreed to pay all expenses relating to
registering the resale of these shares. The selling stockholders will pay any
brokerage commissions and/or similar charges incurred for the sale of these
shares of our Common Stock.
Shares of our Common Stock are listed on The Nasdaq Global Market under
the ticker symbol "WAVE". We do not intend to list the Series A Preferred Stock
on any national securities exchange or to take any action to make it eligible
for any automated quotation system other than the PortalSM Market of the Nasdaq
Stock Market, Inc (the "PortalSM Market"). The Series A Preferred Stock is not
currently eligible to trade on the PortalSM Market.
Investing in our Series A Preferred Stock or Common Stock involves
significant risks. See "Risk Factors" beginning on page 9 to read about factors
you should consider before buying shares of our Series A Preferred Stock or
Common Stock.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY
OF ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
PROSPECTUS DATED , 2007
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement on Form S-3 that we
filed with the Securities and Exchange Commission using a "shelf" registration
or continuous offering process. Under this shelf process, certain selling
stockholders may from time to time sell shares of Series A Preferred Stock and
Common Stock issuable upon conversion of the Preferred Stock described in this
prospectus in one or more offerings.
You should rely only on the information contained or incorporated by
reference in this prospectus. Neither we nor the selling shareholders have
authorized anyone to provide you with different information. If anyone provides
you with different or inconsistent information, you should not rely on it. The
selling shareholders are not making an offer to sell these securities in any
jurisdiction where the offer or sale of these securities is not permitted. You
should assume that the information appearing in this prospectus is accurate only
as of the date on the front cover of this prospectus and that any information we
have incorporated by reference is accurate only as of the date of the document
incorporated by reference. Our business, financial condition, results of
operations and prospects may have changed since these dates.
TABLE OF CONTENTS
PAGE
PROSPECTUS SUMMARY............................................................1
THE OFFERING..................................................................4
RISK FACTORS..................................................................9
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS............................25
USE OF PROCEEDS..............................................................26
CERTAIN MATERIAL UNITED STATES INCOME TAX CONSIDERATIONS.....................27
SELLING STOCKHOLDERS.........................................................34
DESCRIPTION OF CAPITAL STOCK.................................................39
PLAN OF DISTRIBUTION.........................................................44
LEGAL MATTERS................................................................46
EXPERTS......................................................................46
WHERE YOU CAN FIND MORE INFORMATION..........................................47
INCORPORATION BY REFERENCE...................................................48
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PROSPECTUS SUMMARY
This summary highlights key aspects of our business that are described
in more detail in our reports filed with the Securities and Exchange Commission.
This summary does not contain all of the information that you should consider
before making a future investment decision with respect to our securities. You
should read this entire registration statement carefully, including the "Risk
Factors," and the combined audited financial statements and the notes thereto
and the other documents we have filed with the Securities and Exchange
Commission that are incorporated by reference herein.
Unless the context indicates otherwise, all references in this
registration statement to "NextWave," "the Company," "we," "us" and "our" refer
to NextWave Wireless Inc. and its direct and indirect subsidiaries. References
to Old NextWave Wireless refer to our existence as a company conducting a
separate line of business prior to April 13, 2005, when we emerged from Chapter
11 as a new wireless technology company.
OUR COMPANY
BUSINESS OVERVIEW
We are a wireless technology company that develops and markets
next-generation mobile broadband and wireless multimedia products and
technologies. Our products and technologies are designed to make wireless
broadband faster, more reliable, more accessible and more affordable. At
present, our customers include many of the largest mobile handset and wireless
service providers in the world.
We believe that mobile broadband represents the next logical step in
the evolution of the Internet and that consumer demand for fully-mobile,
wireless broadband service will transform the global wireless communications
industry from one driven primarily by circuit-switched voice to one driven by
IP-based broadband connectivity. In addition, we believe that wireless will play
a major role in facilitating digital media convergence and provide people the
ability to easily access and share multimedia content across multiple types of
mobile device and consumer electronics platforms. Our business activities are
focused on developing products, technologies and network solutions to enable
affordable, fully-mobile broadband access and seamless digital media convergence
solutions that will allow individuals to access the information and multimedia
content they want, where they want, when they want, on virtually any type of
digital communications device.
Our wireless broadband products and technologies are developed and
marketed through our operating subsidiaries. While, on a stand-alone basis, each
subsidiary is focused on providing customers with competitive products and
technologies targeted at a specific aspect of the mobile broadband ecosystem, we
expect that the combined offerings of our operating companies will form a
complete, end-to-end, next-generation wireless broadband solution. The following
is a summary of each of our major subsidiaries products and capabilities:
NextWave Broadband Inc. - Mobile broadband semiconductors and network
components based on WiMAX and Wi-Fi technologies, terminal device
reference designs and network implementation services;
PacketVideo Corporation - Multimedia software applications for wireless
handsets and digital media convergence software solutions;
GO Networks, Inc. - Carrier-class, wide-area, mobile Wi-Fi systems; and
IPWireless - Commercial and public service mobile broadband systems,
access devices, and mobile broadcast systems based on TD-CDMA
technology.
NEXTWAVE BROADBAND INC. Through its Advanced Technology Group, NextWave
Broadband is developing a family of mobile broadband semiconductor products
based on WiMAX and Wi-Fi technologies including multi-band RF chips and
high-performance, digital baseband WiMAX chips. Our chipsets are intended to
provide wireless device and network equipment manufacturers with an advanced
platform to develop next-generation WiMAX mobile terminal and infrastructure
products. Samples of our first-generation, NW1000 chipset family, which includes
a WiMAX baseband system-on-a-chip (SOC) and matched multi-band RFIC were made
available during the third quarter of 2007. Initial availability of our
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second-generation, NW2000 chipset family, the company's first chipset family
designed for high-volume commercial production, is planned for the first half of
2008. In addition, the Advanced Technology Group is developing wireless network
components and a family of handset and media player reference designs to
highlight the features of its subscriber station semiconductor products.
The primary design objectives of the Advanced Technology Group's
products and technologies, which are intended to be sold or licensed to network
infrastructure vendors, device manufacturers and service providers worldwide,
are to:
o Improve the performance, service quality and economics of WiMAX
networks and enhance their ability to cost-effectively handle the large
volume of network traffic associated with bandwidth-intensive,
multimedia applications such as mobile television, video-on-demand,
streaming audio, two-way video telephony and real-time gaming;
o Improve the performance, power consumption and cost characteristics of
WiMAX subscriber terminals;
o Improve the degree of interoperability and integration between Wi-Fi
and WiMAX systems for both Local Area Networks (LANs) and Wide Area
Networks (WANs); and
o Improve service provider economics and roaming capabilities by enabling
WiMAX networks and WiMAX enabled devices to seamlessly operate across
multiple frequency bands including certain unlicensed bands.
Through its Network Solutions Group, NextWave Broadband intends to
offer a full array of network services, including RF and core network design
services, network implementation and management services, and back-office
service solutions to service providers who deploy our WiMAX, Wi-Fi, and TD-CDMA
network solutions. To demonstrate the capabilities of our network service
capabilities and our wireless broadband products, the Network Solutions Group is
implementing a mobile WiMAX/Wi-Fi/TD-CDMA test site in Las Vegas, Nevada.
PACKETVIDEO CORPORATION. Through our PacketVideo subsidiary, we supply
device-embedded multimedia software to many of the world's largest wireless
carriers and wireless handset manufacturers, who use it to transform a mobile
phone into a feature-rich multimedia device that provides people with the
ability to stream, download and play video and music, receive live TV
broadcasts, and engage in two-way video telephony. PacketVideo's software is
compatible with virtually all network technologies, including WiMAX, CDMA,
WCDMA, and GSM. PacketVideo has been contracted by some of the world's largest
carriers, such as Verizon Wireless, Vodafone, NTT DoCoMo, Orange and T-Mobile to
design and implement the embedded multimedia software capabilities contained in
their handsets. To date, over 138 million PacketVideo-powered handsets have been
shipped by PacketVideo's service provider and device OEM customers.
To further enhance its market position, PacketVideo has invested in the
development and acquisition of a wide range of technologies and capabilities to
provide its customers with software solutions to enable home/office digital
media convergence using communication protocols standardized by the Digital
Living Network Alliance(TM) (DLNA(TM)). An example is PacketVideo's
network-based PacketVideo Experience(TM) platform that provides for content
search, discovery, organization and content delivery/sharing between mobile
devices and consumer electronics products connected to an IP-based network. This
innovative platform is designed to provide an enhanced user experience by
intelligently responding to user preferences based on content type, day-part,
and content storage location. In addition, PacketVideo's patented Digital Rights
Management (DRM) solutions, already in use by many carriers globally, represent
a key enabler of digital media convergence by preventing the unauthorized access
or duplication of multimedia content used or shared by PacketVideo-enabled
devices.
We believe that the continued growth in global shipments of high-end
handsets with multimedia capabilities, increasing demand for home/office digital
media convergence solutions, and the acceleration of global deployments of
mobile broadband enabled networks will substantially expand the opportunity for
PacketVideo to license its suite of multimedia software solutions to service
providers and to handset and consumer electronic device manufacturers.
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GO NETWORKS, INC. Through our GO Networks subsidiary, which was
acquired in February 2007, we offer carrier-class mobile Wi-Fi network systems
to commercial and municipal service providers worldwide. GO Networks' family of
micro, pico and femto Wi-Fi base stations utilize advanced xRFTM adaptive
beamforming smart-antenna technology and a cellular-mesh Wi-Fi architecture to
deliver superior Wi-Fi coverage, performance, and economics and provide service
providers with a cost-effective solution to support bandwidth-intensive mobile
broadband services such as video streaming, real-time gaming, web browsing, and
other types of multimedia applications on a wide-area basis.
IPWIRELESS. Our IPWireless subsidiary, which was acquired in May 2007,
played a leading role in the development of 3GPP TDD Universal Mobile
Telecommunications Systems (UMTS) standards and currently provides customers
with an assortment of TD-CDMA mobile broadband products and technologies. Mobile
broadband networks that utilize IPWireless' TD-CDMA technology, one of the first
standards-based mobile broadband technologies in the world, have been
commercially deployed in more than a dozen countries, including the Czech
Republic, New Zealand, Germany, South Africa, Sweden, and the United Kingdom.
The IPWireless TDtv solution, based on 3GPP Multimedia Broadcast
Multicast Service (MBMS), allows UMTS operators to deliver mobile television and
other multimedia services using their existing 3G spectrum and networks, with
little impact on their current voice and data services. A trial of TDtv
technology, recently conducted in the UK by several of the largest mobile
operators in Europe, successfully demonstrated its ability to deliver
high-quality, multi-channel broadcast services using the trial participants'
existing spectrum. TDtv supports key consumer requirements including fast
channel change times, operation at high travel speeds, and seamless integration
into small profile handsets.
In September 2006, IPWireless' TD-CDMA mobile broadband wireless
technology was selected by New York City's Department of Information Technology
and Telecommunications as part of a five-year contract awarded to Northrop
Grumman for the deployment of a citywide, public safety, mobile wireless
network. IPWireless has received an initial purchase order to deliver network
equipment through November 2007 in connection with this network deployment. We
believe that IPWireless' technology, as optimized for public safety
applications, can be utilized to deliver cost-effective and reliable public
safety network solutions in the 700MHz spectrum band plan currently under
consideration by the FCC for public safety purposes.
We believe the breadth of products, technologies, spectrum assets and
services offered by our various subsidiaries represents a unique platform to
provide advanced wireless broadband solutions to the market. While our
subsidiaries are intended to be operated as stand-alone businesses, we also
believe that they will provide synergistic value to each other and collectively
drive accelerated market penetration and share of the wireless broadband market
for us.
To help accelerate global market adoption of our mobile broadband
products, we intend to make our significant spectrum holdings available, under a
variety of business arrangements, to customers of our wireless broadband
products and technologies. Our spectrum footprint in the U.S. covers over 248
million people and includes many of the largest metropolitan areas in the
country. In addition, we have also acquired nationwide spectrum in numerous
international markets including Austria, Canada, Croatia, Germany, Slovakia and
Switzerland.
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THE OFFERING
Common Stock outstanding prior 92,665,556 shares of Common Stock
to this offering, excluding
the shares being offered
for resale to the public by
the selling stockholders(1)
Series A Preferred Stock 355,000 shares of Series A Preferred Stock
outstanding prior to this
offering
Series A Preferred Stock being Up to 178,111 shares of Series A Preferred
offered for resale to the Stock
public by the selling
shareholders
Common Stock being offered for Up to 17,063,306 shares of Common Stock,
resale to the public by the based on an initial conversion price of
selling shareholders $11.05 per share of Common Stock and
including the additional shares of Common
Stock issuable in connection with the
accretion of the per share dividend amount
to the liquidation preference of the Series
A Preferred Stock until December 31, 2007.
The conversion price is subject to
adjustment in certain circumstances as
described in "Description of Capital Stock -
Preferred Stock." Until March 2011, we can
elect whether to declare dividends in cash
or to not declare and pay dividends, in
which case the per share dividend amount
will be added to the liquidation preference.
From and after March 2011, we must declare
dividends in cash each quarter, subject to
applicable law. The terms of our 7% Senior
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(1) The number of shares of our Common Stock outstanding prior to this
offering is based on the number of shares of our Common Stock outstanding
as of September 29, 2007. This number does not include, as of September
29, 2007:
o 22,362,471 shares of our Common Stock issuable upon exercise of
options and warrants outstanding, at a weighted average exercise
price of $6.56 per share;
o 13,959,097 shares of our Common Stock reserved for issuance under
our NextWave Wireless Inc. 2005 Stock Incentive Plan, NextWave
Wireless Inc. 2007 Stock Incentive Plan, the CYGNUS
Communications, Inc. 2004 Stock Option Plan and the PacketVideo
Corporation 2005 Equity Incentive Plan;
o up to $142.0 million of our Common Stock that may be issued as
additional consideration to former IPWireless shareholders and
under the IPWireless Employee Stock Bonus Plan upon the
achievement of certain revenue milestones relating to IPWireless'
public safety business and TDtv business and up to $30.6 million
of our Common Stock that may be issued as additional
consideration to former GO Network shareholders and under the GO
Networks Employee Stock Bonus Plan upon the achievement of
certain revenue milestones relating to the sales of GO Network's
Wi-Fi base station products;
o 26,413,367 shares of our Common Stock issuable upon the
conversion of our Series A Preferred Stock that are not being
registered pursuant to this offering; and
o 833,333 shares of our Common Stock issuable under an advisory
contract.
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Secured Notes ("Senior Notes") due 2010
currently prevent the payment of cash
dividends on the Series A Preferred Stock.
Common Stock to be outstanding Up to 109,728,862 shares of Common Stock
after this resale offering
Series A Preferred Stock to be 355,000 shares of Series A Preferred Stock
outstanding after this
resale offering
Market value of the Common Up to $101,697,304, calculated based on the
Stock being offered for closing price per share of our Common Stock
resale to the public by the on Nasdaq on November 16, 2007. There can be
selling stockholders no assurance as to the trading price of our
Common Stock at any future date and you are
encouraged to obtain current market
quotations for our Common Stock.
The up to 17,063,306 shares of Common Stock
being offered for resale, after giving
effect to the conversion of the Series A
Preferred Stock, will represent 15.5% of our
shares of Common Stock and 27.5% of the
shares of our Common Stock held by persons
other than our executive officers, directors
and other holders who own greater than 10.0%
of our Common Stock ("Non-Affiliates").
Before giving effect to the conversion of
the Series A Preferred Stock, such shares
would represent 18.4% of the total shares of
Common Stock currently outstanding and 33.0%
of the total shares of Common Stock
currently outstanding and held by
Non-Affiliates. The foregoing definition of
Non-Affiliates is solely for purposes of
this registration statement and does not
reflect a determination of affiliate status
for any other purpose.
Initial liquidation preference $1,000 per share, subject to increase for
accrued dividends, as described below.
Quarterly dividend The Series A Preferred Stock is entitled to
receive quarterly dividends on the
liquidation preference at a rate of 7.5% per
annum, subject to increase if certain
defaults occur. Until March 2011, we can
elect whether to declare dividends in cash
or to not declare and pay dividends, in
which case the per share dividend amount
will be added to the liquidation preference.
From and after March 2011, we must declare
dividends in cash each quarter, subject to
applicable law. The terms of our Senior
Notes currently do not permit us to pay cash
dividends on the Series A Preferred Stock.
As a result, we expect that the per share
dividend amount will be added to the
liquidation preference of the Series A
Preferred Stock until March 28, 2011,
increasing the amount of the liquidation
preference and accordingly the number of
shares of our Common Stock issuable upon
conversion of each share of the Series A
Preferred Stock. See "Description of Capital
Stock - Preferred Stock".
Adjustments to the quarterly The dividend rate is subject to adjustment
dividend to 10% per annum if we default in our
dividend payment obligations or fail to
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cause the shelf registration statement to be
declared effective on or prior to November
30, 2007. The dividend rate is also subject
to adjustment to 15% per annum if we fail to
comply with the protective covenants of the
Series A Preferred Stock described below and
to 18% per annum if we fail to convert or
redeem the Series A Preferred Stock when
required to do so.
Conversion of Series A Preferred Each share of Series A Preferred Stock is
Stock at the option of the convertible, at the option of the holder,
holder into a number of shares of Common Stock
equal to the liquidation preference then in
effect divided by the conversion price of
$11.05, which is subject to adjustment upon
the occurrence of a stock dividend, stock
split or combination of shares. Upon such an
event, the conversion price will be adjusted
by multiplying the current conversion price
by a fraction, the numerator of which is the
number of shares of Common Stock outstanding
immediately prior to such event and the
denominator of which is the number of shares
of Common Stock outstanding immediately
after such event.
At the time of issuance, the conversion
price of $11.05 was a 10.5% premium to the
closing price per share of Common Stock on
Nasdaq ($10.00). Currently, the conversion
price represents a 85.40% premium to the
closing price per share of Common Stock on
Nasdaq for November 16, 2007 ($5.96).
Conversion of Series A Preferred Each share of Series A Preferred Stock is
Stock at the option of the also convertible into Common Stock at the
Company conversion price described above at the
option of the Company in certain
circumstances. The holders will have the
right in connection with such conversions by
the Company to elect to have certain of
their shares redeemed by the Company as
described below. See also "Description of
Capital Stock - Preferred Stock".
Mandatory Redemption Date March 28, 2017
Redemption at the Option of the The holders of the Series A Preferred Stock
Holder may elect to cause the Company to redeem up
to 50% of the shares of Series A Preferred
Stock then outstanding in the aggregate, if
the Company elects to convert the Series A
Preferred Stock under certain circumstances,
for a redemption price per share equal to
130% of the liquidation preference of the
Series A Preferred Stock. The holders of the
Series A Preferred Stock will also have the
right to elect to cause the Company to
redeem their shares of Series A Preferred
Stock then outstanding if the Company elects
to consummate certain asset sales without
the requisite consent of the holders of the
Series A Preferred Stock, for a redemption
price per share equal to 120% of the
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liquidation preference of the Series A
Preferred Stock.
Deemed Liquidation Events Upon a deemed liquidation event, - including
a change in control, merger or sale of all
or substantially all our assets - the Series
A Preferred Stock will be entitled to
receive an amount per share equal to the
greater of 120% of the liquidation
preference or the amount that would have
been received if such share had converted
into Common Stock in connection with such
event. The holders of the Series A Preferred
Stock may elect, by the vote of the holders
of shares representing at least 75% of the
Series A Preferred Stock, to not treat a
covered event as a deemed liquidation. In
such event, the holders of the Series A
Preferred Stock may have the ability to
convert into capital stock of a successor
entity.
Voting rights So long as at least 25% of the issued shares
of Series A Preferred Stock remain
outstanding, and until the date on which the
Company elects to redeem all shares of
Series A Preferred Stock in connection with
an asset sale as described above, the
approval of the holders of shares
representing at least 75% of the Series A
Preferred Stock is required in order to
effect certain corporate actions. With
respect to other matters requiring
stockholder approval, the shares of Series A
Preferred Stock will be entitled to vote as
one class with the Common Stock on an
as-converted basis. See "Description of
Capital Stock - Preferred Stock".
Absence of Public Market for We do not intend to list the Series A
Preferred Stock Preferred Stock on any national securities
exchange or to take any action to make it
eligible for any automated quotation system
other than the PortalSM Market. The Series A
Preferred Stock is not currently eligible to
trade on the PortalSM Market.
Total proceeds raised by this We will not receive any proceeds from the
resale offering resale of our Series A Preferred Stock or
Common Stock by the selling stockholders
pursuant to this offering.
Total proceeds raised by our We issued 355,000 shares of the Series A
private placement of the Preferred Stock on March 28, 2007 in a
Series A Preferred Stock private placement transaction exempt from
the registration requirements of the
Securities Act pursuant to Regulation D. In
that transaction, we received net proceeds
of $351.1 million, after payment of
placement agent fees to UBS Securities LLC
and legal fees.
Payments in connection with our Except pursuant to the terms of the Series A
issuance of the Series A Preferred Stock as described herein, we have
Preferred Stock and this not made and are not obligated to make any
resale offering payment in connection with our issuance of
the Series A Preferred Stock or this resale
offering to the selling stockholders, any
affiliate of the selling stockholders or any
person with whom any selling stockholder has
a contractual relationship regarding the
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transaction. In connection with our issuance
of the Series A Preferred Stock, we paid
placement agent fees and legal fees of
approximately $3.9 million. Pursuant to the
registration rights agreement entered into
in connection with our issuance of the
Series A Preferred Stock, we agreed to pay
all expenses in connection with the filing
of the registration statement of which this
prospectus is a part. Assuming the per share
dividend amount on the Series A Preferred
Stock is added to the liquidation preference
through March 28, 2011, the total dollar
value of accrued dividends through March 28,
2011 would be $116,478,784.
Listing of our Common Stock Our Common Stock is traded on the Nasdaq
Global Market under the symbol "WAVE". We do
not intend to list the Series A Preferred
Stock on any national securities exchange or
to take any action to make it eligible for
any automated quotation system other than
the PortalSM Market. The Series A Preferred
Stock is not currently eligible to trade on
the PortalSM Market.
Risk factors See "Risk Factors" and the other information
included in this prospectus for a discussion
of risk factors you should carefully
consider before deciding to invest in our
Series A Preferred Stock or Common Stock.
8
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RISK FACTORS
Our business involves a high degree of risk. You should carefully
consider the following risks together with all of the other information
contained in or incorporated by reference into this registration statement
before making a future investment decision with respect to our securities. If
any of the following risks actually occurs, our business, financial condition
and results of operations could be materially adversely affected, and the value
of our securities could decline.
RISKS RELATING TO OUR BUSINESS
WE HAVE LIMITED RELEVANT OPERATING HISTORY AND A HISTORY OF LOSSES.
We emerged from our reorganization in April 2005 with a new business
plan and have made several significant acquisitions and investments. As a
result, we are at an early stage of our development and have had a limited
relevant operating history and, consequently, limited historical financial
information. Other than through our PacketVideo subsidiary, which we acquired in
July 2005, and our IPWireless subsidiary, which we acquired in May 2007,we have
never generated any material revenues and have limited commercial operations.
While certain of our businesses are currently generating revenues, the revenues
are not yet adequate to cover our operating expenses. In particular, although we
currently anticipate that our second generation NextWave Broadband WiMAX
technologies designed for high volume commercial production will initially be
available in the first half of 2008, we are currently unable to project when our
chipsets, network components and related technology licensing agreements based
on WiMAX and Wi-Fi technologies will be commercially deployed and generating
significant revenue. We, along with the companies we have acquired, have a
history of losses. We will continue to incur significant expenses in advance of
achieving broader commercial distribution of our IPWireless and GO Networks
products and generating revenues from our NextWave Broadband businesses,
particularly from our WiMAX/Wi-Fi semiconductor and network component products.
We are expected to realize significant operating losses for the next few years.
We are therefore subject to risks typically associated with a start-up entity.
If we are not able to successfully implement all key aspects of our
business plan, including selling and/or licensing high volumes of our products
to network operators and to device and network equipment manufacturers, we may
not be able to develop a customer base sufficient to generate adequate revenues.
If we are unable to successfully implement our business plan and grow our
business, either as a result of the risks identified in this section or for any
other reason, we may never achieve profitability, in which event our business
would fail.
WE HAVE IDENTIFIED A MATERIAL WEAKNESS IN OUR INTERNAL CONTROL OVER FINANCIAL
REPORTING, AND THE IDENTIFICATION OF ANY SIGNIFICANT DEFICIENCIES OR MATERIAL
WEAKNESSES IN THE FUTURE COULD AFFECT OUR ABILITY TO ENSURE TIMELY AND RELIABLE
FINANCIAL REPORTS.
In connection with our close process and the audit of our consolidated
financial statements for the year ended December 30, 2006, our management
concluded that a material weakness existed relating to revenue recognition
pursuant to software contracts at our PacketVideo subsidiary. Our failure to
correctly apply software revenue recognition principles resulted from a lack of
a sufficient number of employees with appropriate levels of knowledge, expertise
and training in the application of generally accepted accounting principles
relevant to software revenue recognition. As a public company, our systems of
internal controls over financial reporting are required to comply with the
standards adopted by the Securities and Exchange Commission ("SEC") and the
Public Company Accounting Oversight Board (the "PCAOB"). Both regulators
currently define a material weakness as a single deficiency, or combination of
deficiencies, in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement of the annual or interim
financial statements will not be prevented or detected on a timely basis. We
believe we have taken measures to remedy the material weakness, some of which
are still in progress. For a discussion of our internal control over financial
reporting and a description of the identified material weakness and the related
remedial measures, see Item 9A of our Annual Report on Form 10-K, for the year
ended December 30, 2006, filed with the SEC on March 30, 2007.
We will be required to make our first annual certification on our
internal controls over financial reporting in our Annual Report on Form 10-K for
the year ended December 29, 2007. In preparing for such certification, we are
presently evaluating our internal controls for compliance with applicable SEC
and PCAOB requirements. In addition to the material weakness related to revenue
9
recognition at our PacketVideo subsidiary, we may identify other internal
control processes and procedures that are deficient and, as a result, we may be
required to design enhanced processes and controls to address the control
deficiencies identified. This could result in significant delays and cost to us
and require us to divert substantial resources, including management time, from
other activities. We have commenced a review of our existing internal control
structure and plan to hire additional personnel. Although our review is not
complete, we have taken steps to improve our internal control structure by
hiring dedicated, internal compliance personnel to analyze and improve our
internal controls, to be supplemented periodically with outside consultants as
needed. However, if we fail to achieve and maintain the adequacy of our internal
controls, we may not be able to conclude that we have effective internal
controls over financial reporting as of the end of our fiscal year 2007.
Moreover, although our management will continue to review and evaluate the
effectiveness of our internal controls, we can give you no assurance that there
will be no material weaknesses in our internal control over financial reporting.
We may in the future have material weaknesses or other control deficiencies in
our internal control over financial reporting as a result of our controls
becoming inadequate due to changes in conditions, the degree of compliance with
our internal control policies and procedures deteriorating, or for other
reasons. If we have significant deficiencies or material weaknesses or other
control deficiencies in our internal control over financial reporting, our
ability to record, process, summarize and report financial information within
the time periods specified in the rules and forms of the SEC will be adversely
affected. This failure could materially and adversely impact our business, our
financial condition and the market value of our securities.
IF WE FAIL TO EFFECTIVELY MANAGE GROWTH IN OUR BUSINESS, OUR ABILITY TO DEVELOP
AND COMMERCIALIZE OUR PRODUCTS WILL BE ADVERSELY AFFECTED.
Our business and operations have expanded rapidly since the completion
of our reorganization in April 2005. For example, from April 13, 2005 through
September 29, 2007, the number of our employees increased from 50 to 991 as a
result of organic growth and acquisitions. In addition to various immaterial
acquisitions in 2007 and 2006, we acquired Websky Argentina S.A. in October
2007, a 65% interest in WiMax Telecom AG in July 2007, IPWireless, Inc. in May
2007, GO Networks, Inc. in February 2007, SDC Secure Digital Container AG in
January 2007, CYGNUS Communications, Inc. in February 2006 and PacketVideo
Corporation in July 2005 and we are still in the process of integrating WiMax
Telecom, IPWireless and GO Networks.
To support our expanded research and development activities for our
NextWave Broadband business and the anticipated growth in our WiMax Telecom,
IPWireless, PacketVideo and GO Networks businesses, we must continue to
successfully hire, train, motivate and retain our employees. We expect that
further expansion of our operations and employee base will be necessary. Our
recent acquisitions have also expanded the geographic reach of our operations to
countries including Argentina, Austria, Croatia, Denmark, Finland, Germany,
Israel, Slovakia, South Korea, Switzerland, and the United Kingdom. In order to
manage the increased complexity of our expanded operations, we will need to
continue to expand our management, operational and financial controls and
strengthen our reporting systems and procedures. All of these measures will
require significant expenditures and will demand the attention of management.
Failure to fulfill any of the foregoing requirements could result in our failure
to successfully manage our intended growth and development, and successfully
integrate our acquired businesses, which would adversely affect our ability to
develop and commercialize our products and achieve profitability.
WE OPERATE IN AN EXTREMELY COMPETITIVE ENVIRONMENT WHICH COULD MATERIALLY
ADVERSELY AFFECT OUR ABILITY TO WIN MARKET ACCEPTANCE OF OUR PRODUCTS AND
ACHIEVE PROFITABILITY.
We operate in an extremely competitive market and we expect such
competition to increase in the future. Our businesses are developing and selling
products and technologies based on WiMAX, Wi-Fi and UMTS standards. We will be
competing with well established, international companies that are engaged in the
development, manufacture and sale of products and technologies that support the
same technologies, as well as alternative wireless standards such as GSM and
CDMA2000. Companies that support these wireless technologies include well
established industry leaders such as Alcatel, Cisco, Ericsson, Huawei, LGE,
Lucent, Motorola, Nokia, Nortel, QUALCOMM, Samsung and Siemens. In addition, we
also compete with small and medium size companies such as Alvarion, Tropos
Networks, Strix Systems, and Belair Networks.
We also will be competing with numerous companies that are currently
developing or marketing WiMAX products and technologies including Airspan,
Beceem, Fujitsu, Intel, Motorola, Nortel, RunCom, Samsung, Sequans and WaveSat.
10
Some of these companies have significantly greater financial, technical
development, and marketing resources than we do, are already marketing
commercial WiMAX semiconductor products, and have established a significant time
to market advantage. These companies are also our potential customers and
partners and may not be available to us if they develop competing products. In
addition, we expect additional competition to emerge in the WiMAX semiconductor
and components market including well-established companies such as Samsung and
Broadcom.
In addition, our PacketVideo multimedia software products compete
primarily with the internal multimedia design teams at the OEM handset
manufacturers to whom PacketVideo markets its products and services.
Importantly, these OEMs represent some of PacketVideo's largest customers. In
addition several companies, including Flextronics/Emuzed, Hantro, Nextreaming,
Philips Software, Sasken and Thin Multimedia also currently provide software
products and services that directly or indirectly compete with our PacketVideo
products and our IPWireless TDtv solution. As the market for embedded multimedia
software evolves, we anticipate that additional competitors may emerge including
Apple Computer, Real Networks and OpenWave.
Some of our competitors have significantly greater financial,
technological development, marketing and other resources than we do, are already
marketing commercial products and technologies and have established a
significant time to market advantage. Our ability to generate earnings will
depend, in part, upon our ability to effectively compete with these competitors.
THE SUCCESS OF OUR BUSINESSES DEPENDS ON THE ADOPTION OF DEVELOPING WIRELESS
BROADBAND 4G TECHNOLOGIES, INCLUDING WIMAX AND TD-CDMA.
The success of our businesses depends on the deployment and market
acceptance of fourth generation (4G) wireless broadband technologies, including
WiMAX and TD-CDMA. We plan to generate most of our revenue from the sale of 4G
products and the licensing of 4G technologies. The market for 4G networks and
compatible products and technologies, as well as the technologies themselves,
are in an early stage of development and are continuing to evolve. In
particular, there are currently no mobile WiMAX networks in commercial operation
and there can be no assurance that commercial mobile WiMAX networks will prove
to be commercially viable. In order for 4G technologies to gain significant
market acceptance among customers, network operators and telecommunications
service providers will need to deploy 4G networks. However, many of the largest
wireless telecommunications providers have made significant expenditures in
incumbent technologies and may choose to develop these technologies rather than
utilize 4G technologies. Certification standards for 4G technologies are
controlled by industry groups. Accordingly, standard setting for 4G technologies
is beyond our control. If standards for 4G technologies such as WiMAX and
TD-CDMA, for example, change, the commercial viability of these technologies may
be delayed or impaired and our development efforts may also be delayed or
impaired or become more costly. If our 4G technologies and products do not
receive industry certification, we may not be able to successfully market,
license or sell our products or technologies. The development of 4G networks is
also dependent on the availability of spectrum. Access to spectrum suitable for
4G networks is highly competitive. Future 4G networks may utilize multiple
frequencies and this multi-spectrum approach is technologically challenging and
will require the development of new software, integrated circuits and equipment,
which will be time consuming and expensive and may not be successful. In order
for our business to continue to grow and to become profitable, 4G technology and
related services must gain acceptance among consumers, who tend to be less
technically knowledgeable and more resistant to new technology or unfamiliar
services. If consumers choose not to adopt 4G technologies, we will not be
successful in selling 4G products and technologies and our ability to grow our
business will be limited.
OUR NEXTWAVE BROADBAND WIRELESS BROADBAND PRODUCTS AND TECHNOLOGIES ARE IN THE
EARLY STAGES OF DEVELOPMENT AND WILL REQUIRE A SUBSTANTIAL INVESTMENT BEFORE
THEY MAY BECOME COMMERCIALLY VIABLE.
Many of our wireless broadband products and technologies are in the
early stages of development and will require a substantial investment before
they may become commercially viable. While we have announced the initial
availability of our first generation WiMAX baseband chip-on-a-chip and matched
multiband RFIC, these products are not expected to be commercially distributed
or generate significant revenue. We currently anticipate that our second
generation NextWave Broadband WiMAX technologies designed for high volume
commercial production will initially be available in the first quarter of 2008.
However, we may not able to meet this timeframe and therefore the commercial
deployment of these products could be delayed, which could adversely affect our
11
competitive position as well as our future profitability. In addition,
unexpected expenses and delays in development could adversely affect our
liquidity. Some of our other planned wireless broadband products and
technologies have not been tested, even on a pre-commercial basis. Even if our
new products and technologies function when tested, they may not produce
sufficient performance and economic benefits to justify full commercial
development efforts, or to ultimately attract customers. Failure to achieve high
volume sales of our NextWave Broadband semiconductors and other wireless
broadband products and technologies would adversely affect our ability to
achieve profitability.
OUR CUSTOMER AGREEMENTS DO NOT CONTAIN MINIMUM PURCHASE REQUIREMENTS AND CAN BE
CANCELLED ON TERMS THAT ARE NOT BENEFICIAL TO US.
Our customer agreements with network providers and mobile phone and
device manufacturers are not exclusive and many contain no minimum purchase
requirements or flexible pricing terms. Accordingly, mobile phone and device
manufacturers may effectively terminate these agreements by no longer purchasing
our products or reducing the economic benefits of those arrangements. In many
circumstances, we have indemnified these customers from certain claims that our
products and technologies infringes third-party intellectual property rights.
Our customer agreements are generally not exclusive and have a limited term of
one to five years, in some cases with evergreen, or automatic renewal,
provisions upon expiration of the initial term. These agreements set out the
terms of our distribution relationships with the customers but generally do not
obligate the customers to market or distribute any of our products or
applications. In addition, in some cases customers can terminate these
agreements early or at any time, without cause.
WE MAY EXPERIENCE DIFFICULTIES IN THE INTRODUCTION OF NEW OR ENHANCED PRODUCTS,
WHICH COULD RESULT IN REDUCED SALES, UNEXPECTED EXPENSES OR DELAYS IN THE LAUNCH
OF NEW OR ENHANCED PRODUCTS AND IN CERTAIN CASES, PENALTIES UNDER CUSTOMER
AGREEMENTS.
The development of new or enhanced wireless products and technologies
is a complex and uncertain process. We may experience design, manufacturing,
marketing and other difficulties that could delay or prevent our development,
introduction, commercialization or marketing of new products or product
enhancements. The difficulties could result in reduced sales, unexpected
expenses or delays in the launch of new or enhanced products, which may
adversely affect our results or operations. In addition, in some cases we are
required to provide liquidated damages and other penalty clauses in our customer
contracts (for, e.g., late delivered product, failure to comply with service
level agreements or defective products). If we are unable to perform in a timely
manner under such customer agreements, we would face financial penalties.
WE DO NOT HAVE ANY MANUFACTURING CAPABILITIES AND DEPEND ON THIRD-PARTY
MANUFACTURERS AND SUPPLIERS TO MANUFACTURE, ASSEMBLE AND PACKAGE OUR PRODUCTS.
NextWave Broadband is currently designing and developing semiconductor
products including digital baseband ASICs and multi-band RFICs. If we are
successful in our design and development activities and a market for these
products develops, these products will need to be manufactured. Due to the
expense and complexity associated with the manufacturer of digital baseband
ASICs and multi-band RFICs, we intend to depend on third-party manufacturers to
manufacture these products. In addition, GO Networks and IPWireless have each
engaged third-party manufacturers to develop and manufacture their products and
technologies, including ASICs, infrastructure equipment and end-user devices.
The dependence on third-parties to manufacture, assemble and package these
products involves a number of risks, including:
o a potential lack of capacity to meet demand;
o reduced control over quality and delivery schedules;
o risks of inadequate manufacturing yield or excessive costs;
o difficulties in selecting and integrating subcontractors;
12
o limited warranties in products supplied to us;
o price increases; and
o potential misappropriation of our intellectual property.
We may not be able to establish manufacturing relationships on
reasonable terms or at all. The failure to establish these relationships on a
timely basis and on attractive terms could delay our ability to launch these
products or reduce our revenues and profitability.
DEFECTS OR ERRORS IN OUR PRODUCTS AND SERVICES OR IN PRODUCTS MADE BY OUR
SUPPLIERS COULD HARM OUR RELATIONS WITH OUR CUSTOMERS AND EXPOSE US TO
LIABILITY. SIMILAR PROBLEMS RELATED TO THE PRODUCTS OF OUR CUSTOMERS OR
LICENSEES COULD HARM OUR BUSINESS.
Our mobile broadband products and technologies are inherently complex
and may contain defects and errors that are detected only when the products are
in use. Further, because our products and technologies serve as critical
functions in our customers' products and/or networks, such defects or errors
could have a serious impact on our customers, which could damage our reputation,
harm our customer relationships and expose us to liability. Defects in our
products and technologies or those used by our customers or licensees, equipment
failures or other difficulties could adversely affect our ability and that of
our customers and licensees to ship products on a timely basis as well as
customer or licensee demand for our products. Any such shipment delays or
declines in demand could reduce our revenues and harm our ability to achieve or
sustain desired levels of profitability. We and our customers or licensees may
also experience component or software failures or defects which could require
significant product recalls, reworks and/or repairs which are not covered by
warranty reserves and which could consume a substantial portion of the capacity
of our third-party manufacturers or those of our customers or licensees.
Resolving any defect or failure related issues could consume financial and/or
engineering resources that could affect future product release schedules.
Additionally, a defect or failure in our products and technologies or the
products of our customers or licensees could harm our reputation and/or
adversely affect the growth of the market for mobile WiMAX, Wi-Fi, TD-CDMA, and
other mobile broadband technologies.
WE MAY BE UNABLE TO PROTECT OUR OWN INTELLECTUAL PROPERTY AND COULD BECOME
SUBJECT TO CLAIMS OF INFRINGEMENT, WHICH COULD ADVERSELY AFFECT THE VALUE OF OUR
PRODUCTS AND TECHNOLOGIES AND HARM OUR REPUTATION.
As a technology company, we expect to incur expenditures to create and
protect our intellectual property and, possibly, to assert infringement by
others of our intellectual property. Other companies or entities also may
commence actions or respond to an infringement action that we initiate by
seeking to establish the invalidity or unenforceability of one or more of our
patents or to dispute the patentability of one or more of our pending patent
applications. In the event that one or more of our patents or applications are
challenged, a court may invalidate the patent or determine that the patent is
not enforceable or deny issuance of the application, which could harm our
competitive position. If any of our patent claims are invalidated or deemed
unenforceable, or if the scope of the claims in any of these patents is limited
by court decision, we could be prevented from licensing such patent claims. Even
if such a patent challenge is not successful, it could be expensive and time
consuming to address, divert management attention from our business and harm our
reputation. Effective intellectual property protection may be unavailable or
limited in certain foreign jurisdictions.
We also expect to incur expenditures to defend against claims by other
persons asserting that the technology that is used and sold by our Company
infringes upon the right of such other persons. From time to time we have
received, and expect to continue to receive, notices from our competitors and
others claiming that their proprietary technology is essential to our products
and seeking the payment of a license fee. Any claims, with or without merit,
could be time consuming to address, result in costly litigation and/or the
payment of license fees, divert the efforts of our technical and management
personnel or cause product release or shipment delays, any of which could have a
material adverse effect upon our ability to commercially launch our products and
technologies and on our ability to achieve profitability. If any of our products
were found to infringe on another company's intellectual property rights or if
we were found to have misappropriated technology, we could be required to
redesign our products or license such rights and/or pay damages or other
compensation to such other company. If we were unable to redesign our products
13
or license such intellectual property rights used in our products, we could be
prohibited from making and selling such products. In any potential dispute
involving other companies' patents or other intellectual property, our customers
and partners could also become the targets of litigation. Any such litigation
could severely disrupt the business of our customers and partners, which in turn
could hurt our relations with them and cause our revenues to decrease.
BECAUSE MOBILE WIMAX AND UMTS BASED TECHNOLOGIES SUCH AS TD-CDMA ARE EMERGING
WIRELESS TECHNOLOGIES THAT ARE NOT FULLY DEVELOPED, THERE IS A RISK THAT STILL
UNKNOWN PERSONS OR COMPANIES MAY ASSERT PROPRIETARY RIGHTS TO THE VARIOUS
TECHNOLOGY COMPONENTS THAT WILL BE NECESSARY TO OPERATE A WIMAX OR UMTS-BASED
WIRELESS BROADBAND NETWORK.
Because mobile WiMAX and UMTS based technologies such as TD-CDMA are
emerging wireless technologies that are not fully developed, there may be a
greater risk that persons or entities unknown to us will assert proprietary
rights to technology components that are necessary to operate WiMAX or
UMTS-based wireless broadband networks or products. Numerous companies have
submitted letters of assurance related to IEEE 802.16 and amendments or various
UMTS based technologies, including TD-CDMA, stating that they may hold or
control patents or patent applications, the use of which would be unavoidable to
create a compliant implementation of either mandatory or optional portions of
the standard. In such letters, the patent holder typically asserts that it is
prepared to grant a license to its essential IP to an unrestricted number of
applicants on a worldwide, non-discriminatory basis and on reasonable terms and
conditions. If any companies asserting that they hold or control patents or
patent applications necessary to implement the relevant technologies do not
submit letters of assurance, or state in such letters that they do not expect to
grant licenses, this could have an adverse effect on the implementation of
mobile broadband networks utilizing such technologies as well as the sale of our
mobile WiMAX or UMTS based products and technologies. In addition, we can not be
certain of the validity of the patents or patent applications asserted in the
letters of assurance submitted to date, or the terms of any licenses which may
be demanded by the holders of such patents or patent applications. If we were
required to pay substantial license fees to implement our mobile WiMAX or
UMTS-based products and technologies, this could adversely affect the
profitability of these products and technologies.
We anticipate that we will develop a patent portfolio related to our
WiMAX and UMTS based products and technologies. However, there is no assurance
that we will be able to obtain patents covering WiMAX or UMTS based products.
Litigation may be required to enforce or protect our intellectual property
rights. As a result of any such litigation, we could lose our proprietary rights
or incur substantial unexpected operating costs. Any action we take to license,
protect or enforce our intellectual property rights could be costly and could
absorb significant management time and attention, which, in turn, could
negatively impact our operating results. In addition, failure to protect our
trademark rights could impair our brand identity.
WE ARE SUBJECT TO RISKS ASSOCIATED WITH OUR INTERNATIONAL OPERATIONS.
We operate or hold spectrum through various subsidiaries and joint
ventures in Argentina, Austria, Canada, Croatia, Germany, Slovakia and
Switzerland and have additional operations located in Brazil, Denmark, Finland,
Germany, Israel, South Korea, Switzerland and the United Kingdom. We expect to
continue to expand our international operations and potentially enter new
international markets through acquisitions, joint ventures and strategic
alliances. For example, we recently launched business operations in Latin
America, where a new business unit headquartered in Sao Paulo, Brazil will
deliver our mobile broadband and wireless technology solutions to customers
throughout the Latin American region. Our activities outside the United States
operate in different competitive and regulatory environments than we face in the
United States, with many of our competitors having a dominant incumbent market
position and/or greater operating experience in the specific geographic market.
In addition, in some international markets, foreign governmental authorities may
own or control the incumbent telecommunications companies operating under their
jurisdiction. Established relationships between government-owned or
government-controlled telecommunications companies and their traditional local
telecommunications providers often limit access of third parties to these
markets. In addition, owning and operating wireless spectrum in overseas
jurisdictions may be subject to a changing regulatory environment. In
particular, our ownership of wireless broadband spectrum in Argentina remains
subject to obtaining governmental approval. We can not assure you that changes
in foreign regulatory guidelines for the issuance of wireless licenses, foreign
ownership of spectrum licenses, the adoption of wireless standards or the
enforcement and licensing of intellectual property rights will not adversely
14
impact our operating results. Due to these competitive and regulatory
challenges, our activities outside the United States may require a
disproportionate amount of our management and financial resources, which could
disrupt our operations and adversely affect our business.
THE BUSINESS PLAN OF OUR NETWORK SOLUTIONS GROUP IS DEPENDENT ON ENTERING INTO
OR MAINTAINING NETWORK PARTNER RELATIONSHIPS.
Our Network Solutions Group intends to build and operate WiMAX/Wi-Fi
networks for wireless service providers, cable operators, multimedia content
distributors, applications service providers and Internet service providers. At
present, NSG has not entered into any such arrangements and may not be able to
negotiate such arrangements on acceptable terms, or at all. If we are unable to
establish and maintain these service arrangements, we may have to modify our
plans for the Network Solutions Group.
OUR BUSINESSES WHICH CURRENTLY GENERATE REVENUE ARE DEPENDENT ON A LIMITED
NUMBER OF CUSTOMERS.
Our PacketVideo, GO Networks and IPWireless businesses currently
generate revenue but are dependent on a limited number of customers. For the
nine months ended September 29, 2007, revenues from Verizon Wireless
Communications and T-Mobile International accounted for 44% and 24%,
respectively, of our total revenues. We expect that our PacketVideo subsidiary
will continue to generate a significant portion of its revenues through a
limited number of mobile phone and device manufacturers and wireless carriers
for the foreseeable future, although these amounts may vary from
period-to-period. If any of these customers terminate their relationships with
us, our revenues and results of operations could be materially adversely
affected.
WE ARE DEPENDENT ON A SMALL NUMBER OF INDIVIDUALS, AND IF WE LOSE KEY PERSONNEL
UPON WHOM WE ARE DEPENDENT, OUR BUSINESS WILL BE ADVERSELY AFFECTED.
Our future success depends largely upon the continued service of our
board members, executive officers and other key management and technical
personnel, particularly Allen Salmasi, our Chairman and Chief Executive Officer.
Mr. Salmasi has been a prominent executive and investor in the technology
industry for over 20 years, and the Company has benefited from his industry
relationships in attracting key personnel and in implementing acquisitions and
strategic plans. In addition, in order to develop and achieve commercial
deployment of our mobile broadband products and technologies in competition with
well-established companies such as Intel, QUALCOMM and others, we must rely on
highly specialized engineering and other talent. Our key employees represent a
significant asset, and the competition for these employees is intense in the
wireless communications industry. We continue to anticipate significant
increases in human resources, particularly in engineering resources, through
2008. If we are unable to attract and retain the qualified employees that we
need, our business may be harmed.
As a company without a significant operating history, we may have
particular difficulty attracting and retaining key personnel in periods of poor
operating performance given the significant use of incentive compensation by
well-established competitors. We do not maintain key person life insurance on
any of our personnel. We also have no covenants against competition or
nonsolicitation agreements with certain of our key employees. The loss of one or
more of our key employees or our inability to attract, retain and motivate
qualified personnel could negatively impact our ability to design, develop and
commercialize our products and technology.
WE WILL NEED TO SECURE SIGNIFICANT ADDITIONAL CAPITAL IN THE FUTURE TO IMPLEMENT
CHANGES TO, OR EXPANSIONS OF, OUR BUSINESS PLAN AND TO CONTINUE TO FUND OUR
RESEARCH AND DEVELOPMENT ACTIVITIES AND OUR OPERATING LOSSES UNTIL WE BECOME
CASH FLOW POSITIVE AND GENERATE EARNINGS.
We will need to secure significant additional capital in the future to
implement changes to, or expansions of, our business plan and to continue to
fund our research and development activities and our operating losses until we
become cash flow positive and generate earnings. We currently anticipate that
our second generation NextWave Broadband WiMAX technologies designed for high
volume commercial production will initially be available in the first quarter of
2008. However, we may not be able to meet this timeframe and therefore the
commercial deployment of these products could be delayed, which could adversely
affect our competitive position as well as our ability to become cash flow
positive and show future profitability. Unexpected expenses and delays in
development, or delays in the adoption of WiMAX and other 4G technologies by
15
national telecommunications carriers and equipment manufacturers, could
adversely affect our liquidity.
In addition, part of our strategy is to pursue acquisitions of and
investments in businesses and technologies to expand our business and enhance
our technology development capabilities. In addition to our IPWireless, CYGNUS,
GO Networks, PacketVideo and WiMAX Telecom acquisitions, we have made
investments in a number of companies including Hughes Systique and Inquam
Broadband, and anticipate future investments in other companies or other
technologies, businesses or spectrum licenses. Our recent and future
acquisitions could result in substantial cash expenditures, potentially dilutive
issuances of equity securities, the incurrence of debt and contingent
liabilities, a decrease in our profit margins and amortization of intangibles
and potential impairment of goodwill. In addition, our investments could result
in substantial cash expenditures, fluctuations in our results of operations
resulting from changes in the value of the investments and diversion of
management's time and attention.
To augment our existing working capital resources in order to satisfy
our cash requirements, we may seek to sell debt securities or additional equity
securities or to obtain a credit facility. Our Senior Secured Notes and our
Series A Senior Convertible Preferred Stock prohibit our incurrence of
additional indebtedness, subject to certain exceptions. The sale of equity
securities or convertible debt securities could result in additional dilution to
our stockholders. The incurrence of additional indebtedness would also result in
additional debt service obligations and the requirement that we comply with
operating and financial covenants that would restrict our operations. In
addition, there can be no assurance that any additional financing will be
available on acceptable terms, if at all.
COVENANTS IN THE INDENTURE GOVERNING OUR SENIOR NOTES AND THE TERMS OF OUR
SERIES A PREFERRED STOCK IMPOSE OPERATING AND FINANCIAL RESTRICTIONS ON US.
Covenants in the indenture governing our senior secured notes and the
terms of our Series A Preferred Stock impose operating and financial
restrictions on us. These restrictions prohibit or limit our ability, and the
ability of our subsidiaries, to, among other things:
o pay dividends to our stockholders;
o incur, or cause certain of our subsidiaries to incur, additional
indebtedness;
o permit liens on or conduct sales of any assets pledged as
collateral;
o sell significant amounts of our assets or consolidate or merge with
or into other companies;
o issue shares of our Common Stock at less than fair market value;
o repay existing indebtedness; and
o engage in transactions with affiliates.
A breach of any covenants contained in the indenture could result in a
default under our senior secured notes. If we are unable to repay or refinance
those amounts, the holders of our senior secured notes could proceed against the
assets pledged to secure these obligations, which include a substantial portion
of our spectrum assets and substantially all of our other assets.
These restrictions may limit our ability to obtain additional
financing, withstand downturns in our business and take advantage of business
opportunities. Moreover, we may seek additional debt financing on terms that
include more restrictive covenants, may require repayment on an accelerated
schedule or may impose other obligations that limit our ability to grow our
business, acquire needed assets, or take other actions we might otherwise
consider appropriate or desirable.
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WE MAY BE LIABLE FOR CERTAIN INDEMNIFICATION PAYMENTS PURSUANT TO THE PLAN OF
REORGANIZATION.
In connection with the sale of NTI and its subsidiaries other than Old
NextWave Wireless to Verizon Wireless, we agreed to indemnify NTI and its
subsidiaries against all pre-closing liabilities of NTI and its subsidiaries and
against any violation of the Bankruptcy Court injunction against persons having
claims against NTI and its subsidiaries, with no limit on the amount of such
indemnity. We are not currently aware of any such liabilities that remain
following the plan of reorganization and Verizon Wireless has not made any
indemnity claims. We have received a decree of final judgment closing the
Chapter 11 case, and all claims made in connection with the Chapter 11 case have
been resolved. Nonetheless, to the extent that we are required to fund amounts
under the indemnification, our results of operations and our liquidity and
capital resources could be materially adversely affected. In addition, we may
not have sufficient cash reserves to pay the amounts required under the
indemnification if any amounts were to become due.
RISKS RELATING TO GOVERNMENT REGULATION
GOVERNMENT REGULATION COULD ADVERSELY IMPACT OUR DEVELOPMENT OF WIRELESS
BROADBAND PRODUCTS AND SERVICES, OUR OFFERING OF PRODUCTS AND SERVICES TO
CONSUMERS, AND OUR BUSINESS PROSPECTS.
The regulatory environment in which we operate is subject to
significant change, the results and timing of which are uncertain. The FCC has
jurisdiction over the grant, renewal, lease, assignment and sale of our wireless
licenses, the use of wireless spectrum to provide communications services, and
the resolution of interference between users of various spectrum bands. Other
aspects of our business, including construction and operation of our wireless
systems, and the offering of communications services, are regulated by the FCC
and other federal, state and local governmental authorities. States may exercise
authority over such things as billing practices and consumer-related issues.
Various governmental authorities could adopt regulations or take other
actions that would adversely affect the value of our assets, increase our costs
of doing business, and impact our business prospects. Changes in the regulation
of our activities, including changes in how wireless, mobile, IP enabled
services are regulated, changes in the allocation of available spectrum by the
United States and/or exclusion or limitation of our technology or products by a
government or standards body, could have a material adverse effect on our
business, operating results, liquidity and financial position.
CHANGES IN LEGISLATION OR REGULATIONS MAY AFFECT OUR ABILITY TO CONDUCT OUR
BUSINESS OR REDUCE OUR PROFITABILITY.
Future legislative, judicial or other regulatory actions could have a
negative effect on our business. Some legislation and regulations applicable to
the wireless broadband business, including how IP-enabled services are
regulated, are the subject of ongoing judicial proceedings, legislative hearings
and administrative proceedings that could change the manner in which our
industry is regulated and the manner in which we operate. We cannot predict the
outcome of any of these proceedings or their potential impact on our business.
If, as a result of regulatory changes, we become subject to general
common carrier rules and regulations applicable to telecommunications service
providers, commercial mobile radio service providers offering certain switched
services on a common carrier basis, and/or enhanced service providers, including
providers of interconnected Voice Over the Internet service, at the federal
level or in individual states, we may incur significant administrative,
litigation and compliance costs, or we may have to restructure our service
offerings, exit certain markets or raise the price of our services, any of which
could cause our services to be less attractive to customers. In addition, future
regulatory developments could increase our cost of doing business and limit our
growth.
WE MAY NOT HAVE COMPLETE CONTROL OVER OUR TRANSITION OF EBS AND BRS SPECTRUM,
WHICH COULD IMPACT COMPLIANCE WITH FCC RULES.
The FCC's rules require transition of EBS and BRS spectrum to the new
band plan on a Basic Trading Area ("BTA") basis. See "Government
Regulation-BRS-EBS License Conditions." We do not hold all of the EBS and BRS
spectrum in the BTAs in which we hold spectrum. Consequently, we will need to
coordinate with other EBS and BRS licensees in order to transition spectrum we
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hold or lease. Disagreements with other EBS or BRS licensees about how the
spectrum should be transitioned may delay our efforts to transition spectrum,
could result in increased costs to transition the spectrum, and could impact our
efforts to comply with applicable FCC rules. On April 27, 2006, the FCC
implemented new, amended rules related to transition of the spectrum, and it
adopted rules that will permit us to self-transition to the reconfigured band
plan if other spectrum holders in our BTAs do not timely transition their
spectrum.
OUR USE OF EBS SPECTRUM IS SUBJECT TO PRIVATELY NEGOTIATED LEASE AGREEMENTS.
CHANGES IN FCC RULES GOVERNING SUCH LEASE AGREEMENTS, CONTRACTUAL DISPUTES WITH
EBS LICENSEES, OR FAILURES BY EBS LICENSEES TO COMPLY WITH FCC RULES COULD
IMPACT OUR USE OF THE SPECTRUM.
All commercial enterprises are restricted from holding licenses for EBS
spectrum. Eligibility for EBS spectrum is limited to accredited educational
institutions, governmental organizations engaged in the formal education of
enrolled students (e.g., school districts), and nonprofit organizations whose
purposes are educational. Access to EBS spectrum can only be gained by
commercial enterprises through privately-negotiated EBS lease agreements. FCC
regulation of EBS leases, private interpretation of EBS lease terms, private
contractual disputes, and failure of an EBS licensee to comply with FCC
regulations all could impact our use of EBS spectrum and the value of our leased
EBS spectrum. On April 27, 2006, the FCC released new rules governing EBS lease
terms. EBS licensees are now permitted to enter into lease agreements with a
maximum term of 30 years; lease agreements with terms longer than 15 years must
contain a "right of review" by the EBS licensee every five years beginning in
year 15. The right of review must afford the EBS licensee with an opportunity to
review its educational use requirements in light of changes in educational
needs, technology, and other relevant factors and to obtain access to such
additional services, capacity, support, and/or equipment as the parties shall
agree upon in the spectrum leasing arrangement to advance the EBS licensee's
educational mission. A spectrum leasing arrangement may include any mutually
agreeable terms designed to accommodate changes in the EBS licensee's
educational use requirements and the commercial lessee's wireless broadband
operations. In addition, the terms of EBS lease agreements are subject to
contract interpretation and disputes could arise with EBS licensees. There can
be no assurance that EBS leases will continue for the full lease term, or be
renewed, or be extended beyond the current term, on terms that are satisfactory
to us. Similarly, since we are not eligible to hold EBS licenses, we must rely
on EBS licensees with whom we contract to comply with FCC rules. The failure of
an EBS licensee from whom we lease spectrum to comply with the terms of their
FCC authorization or FCC rules could result in termination, forfeiture or
non-renewal of their authorization, which would negatively impact the amount of
spectrum available for our use.
IF WE DO NOT COMPLY WITH FCC BUILD-OUT REQUIREMENTS RELATING TO OUR SPECTRUM
LICENSES, SUCH LICENSES COULD BE SUBJECT TO FORFEITURE.
Certain build-out or "substantial service" requirements apply to our
licensed wireless spectrum, which generally must be satisfied as a condition of
license renewal. In particular, the renewal deadline and the substantial service
build-out deadline for our WCS spectrum is July 21, 2010; for our BRS and EBS
spectrum, the substantial service build-out deadline is May 1, 2011; and for our
AWS spectrum, the substantial service build-out deadline is December 18, 2021.
Failure to make the substantial service demonstration, without seeking and
obtaining an extension from the FCC, would result in license forfeiture.
WE HAVE NO GUARANTEE THAT THE LICENSES WE HOLD OR LEASE WILL BE RENEWED.
The FCC generally grants wireless licenses for terms of ten or fifteen
years, which are subject to renewal and revocation. FCC rules require all
wireless licensees to comply with applicable FCC rules and policies and the
Communications Act of 1934 in order to retain their licenses. For example,
licensees must meet certain construction requirements, including making
substantial service demonstrations, in order to retain and renew FCC licenses.
Failure to comply with FCC requirements with respect to any license could result
in revocation or non-renewal of a license. In general, most wireless licensees
who meet their construction and/or substantial service requirements are afforded
a "renewal expectancy," however, all FCC license renewals can be challenged in
various ways, irrespective of whether such challenges have any legal merit. Such
challenges, while uncommon, may impact the timing of renewal grants and may
impose legal costs. Accordingly, there is no guarantee that licenses we hold or
lease will remain in full force and effect or be renewed.
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INTERFERENCE COULD NEGATIVELY IMPACT OUR USE OF WIRELESS SPECTRUM WE HOLD, LEASE
OR USE.
Under applicable FCC rules, users of wireless spectrum must comply with
technical rules that are intended to eliminate or diminish harmful
radiofrequency interference between wireless users. Licensed spectrum is
generally entitled to interference protection, subject to technical rules
applicable to the radio service, while unlicensed spectrum has no interference
protection rights and must accept interference caused by other users.
WIRELESS DEVICES UTILIZING WCS, BRS AND EBS SPECTRUM MAY BE SUSCEPTIBLE TO
INTERFERENCE FROM SATELLITE DIGITAL AUDIO RADIO SERVICES ("SDARS").
Since 1997, the FCC has considered a proposal to permanently authorize
terrestrial repeaters for SDARS operations adjacent to the C and D blocks of the
WCS band. The FCC has permitted a large number of these SDARS terrestrial
repeaters to operate on a special temporary authorization since 2001.
Permanently authorizing SDARS repeaters adjacent to the WCS band could cause
interference to WCS, BRS and EBS receivers. The extent of the interference from
SDARS repeaters is unclear and is subject to the FCC's final resolution of
pending proceedings. Because WCS C and D block licenses are adjacent to the
SDARS spectrum, the potential for interference to this spectrum is of greatest
concern. There is a lesser magnitude concern regarding interference from SDARS
to WCS A and B block licenses, and EBS and BRS licenses. Central to the FCC's
evaluation of this proposal has been the technical specifications for the
operation of such repeaters. SDARS licensees are seeking rule changes that would
both unfavorably alter WCS technical operating requirements and permit all
existing SDARS repeaters to continue to operate at their current operating
parameters. Through their representative association, the WCS Coalition, the
majority of affected WCS licensees, including NextWave, also have proposed
technical rules for SDARS terrestrial repeaters and WCS operations to the FCC.
Final technical rules will determine the potential interference conditions and
requirements for mitigation. If SDARS repeaters result in interference to our
WCS, BRS or WBS spectrum, our ability to realize value from this spectrum may be
impaired.
INCREASING REGULATION OF THE TOWER INDUSTRY MAY MAKE IT DIFFICULT TO DEPLOY NEW
TOWERS AND ANTENNA FACILITIES.
The FCC, together with the FAA, regulates tower marking and lighting.
In addition, tower construction and deployment of antenna facilities is impacted
by federal, state and local statutes addressing zoning, environmental protection
and historic preservation. The FCC adopted significant changes to its rules
governing historic preservation review of new tower projects, which makes it
more difficult and expensive to deploy towers and antenna facilities. The FCC
also is considering changes to its rules regarding when routine environmental
evaluations will be required to determine compliance of antenna facilities with
its RF radiation exposure limits. If adopted, these regulations could make it
more difficult to deploy facilities. In addition, the FAA has proposed
modifications to its rules that would impose certain notification requirements
upon entities seeking to (i) construct or modify any tower or transmitting
structure located within certain proximity parameters of any airport or
heliport, and/or (ii) construct or modify transmission facilities using the
2500-2700 MHz radio frequency band, which encompasses virtually all of the
BRS/EBS frequency band. If adopted, these requirements could impose new
administrative burdens upon use of BRS/EBS spectrum.
RISKS RELATING TO OUR PREFERRED STOCK AND COMMON STOCK
OUR DERIVATIVE SECURITIES AND CONTINGENT EARN-OUT PAYMENTS HAVE THE POTENTIAL TO
DILUTE SHAREHOLDER VALUE AND CAUSE THE TRADING PRICE OF OUR COMMON STOCK AND
SERIES A PREFERRED STOCK TO DECLINE.
As of September 29, 2007, 92,665,556 shares of our Common Stock were
outstanding. In addition, as of September 29, 2007, there were 70,531,742 shares
reserved for future issuance, of which 33,376,841 shares are reserved for
issuance upon the conversion of the Series A Senior Convertible Preferred Stock,
22,362,471 shares are reserved for issuance upon the exercise of granted and
outstanding options and warrants, 13,959,097 shares are reserved for future
option grants under our existing stock incentive plans and 833,333 shares are
issuable under an advisory contract. In addition, we may issue shares of our
Common Stock with a value of up to $135.0 million as additional purchase
consideration to former IPWireless shareholders and up to $7.0 million under the
IPWireless Employee Stock Bonus Plan upon the achievement of certain revenue
milestones related to IPWireless's public safety business and TDtv Business. We
may also issue shares of our Common Stock with a value of up to $25.6 million as
additional purchase consideration to former GO Networks shareholders and up to
$5.0 million under the GO Networks Employee Stock Bonus Plan upon the
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achievement of certain milestones relating to customer acceptance of GO
Network's Wi-Fi base station products and the continued employment of certain
key management employees.
In March 2007, we issued 355,000 shares of Series A Senior Convertible
Preferred Stock at a price of $1,000 per share of convertible preferred stock in
a private offering to investment funds and other institutional investors, as
well as existing shareholders, including NextWave Wireless Chairman and CEO,
Allen Salmasi, Douglas Manchester, a member of the NextWave Wireless Board of
Directors, and Avenue Capital Group, of which Robert T. Symington, a member of
the NextWave Board, is a portfolio manager. The Series A Senior Convertible
Preferred Stock is convertible into shares of our Common Stock upon election of
the holders at any time and at our election under certain circumstances.
Assuming that we do not elect to pay dividends in cash prior to March 2011 and
if all shares of Series A Senior Convertible Preferred Stock were converted at
such time, we would be obligated to issue 43,476,673 million shares of our
Common Stock.
The exercise or conversion of these derivative securities into shares
of Common Stock or the issuance of Common Stock pursuant to earn-outs may result
in significant dilution to our current stockholders. While the milestones giving
rise to our contingent earn-out payments may never be met or met only in part,
these obligations to issue additional shares of Common Stock may result in a
significant dilution to our current stockholders. In addition, sales of large
amounts of Common Stock in the public market upon exercise or conversion of
derivative securities or upon achievement of earn-outs could materially
adversely affect the share price. We have agreed to register the resale of
shares of Common Stock issuable upon exercise or conversion of our warrants and
Series A Preferred Stock and upon achievement of earn-outs in connection with
the IPWireless and GO Networks transactions. The registration of such resales
could facilitate the sale of such shares into the market.
In addition, we may need to raise additional funds to fund our
operations, to pay for an acquisition or to enter into a strategic alliance, and
we might use equity securities, debt, cash, or a combination of the foregoing to
finance such activities. If we use equity securities, our stockholders may
experience dilution. A significant amount of our Common Stock coming on the
market at any given time could result in a decline in the price of our Common
Stock or increased volatility.
OUR COMMON STOCK IS THINLY TRADED AND THUS THE MARKET PRICE OF OUR COMMON STOCK
IS PARTICULARLY SENSITIVE TO TRADING VOLUME AND THE TRADING PRICE OF OUR SERIES
A PREFERRED STOCK MAY BE ADVERSELY AFFECTED.
Our low trading volume has historically resulted in substantial
volatility in the market price of our Common Stock, and may make it more
difficult for us to sell equity or equity-related securities in the future at a
time and price that we deem appropriate. In addition, due to the relatively low
volume of trading in our Common Stock, stockholders may not be able to purchase
or sell shares, particularly large blocks of shares, as quickly and as
inexpensively as if the trading volume were higher. The sale of a significant
position in Common Stock by a large shareholder also may lead the price of our
stock to decline. Because our Series A Preferred Stock is convertible into our
Common Stock, volatility or depressed prices for our Common Stock could have a
similar effect on the trading prices of our Series A Preferred Stock. More
generally, the market for technology stocks has been extremely volatile, and has
from time to time experienced significant price and volume fluctuations that
bear little relationship or are not proportionate to the past or present
operating performance of those companies.
AN ACTIVE TRADING MARKET FOR OUR SERIES A PREFERRED STOCK MAY NOT DEVELOP, AND
YOU MAY BE UNABLE TO RESELL YOUR SHARES OF SERIES A PREFERRED STOCK AT OR ABOVE
THE PURCHASE PRICE.
We do not intend to list the Series A Preferred Stock on any national
securities exchange or to take any action to make it eligible for any automated
quotation system other than the PortalSM Market. The Series A Preferred Stock is
not currently eligible to trade on the PortalSM Market. Consequently, a liquid
trading market for the Series A Preferred Stock may not develop and the market
price of the Series A Preferred Stock may be volatile. As a result, you may be
unable to sell your shares of Series A Preferred Stock at a price equal to or
greater than that which you paid, if at all.
THE SERIES A PREFERRED STOCK RANKS JUNIOR TO ALL OF OUR LIABILITIES.
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The Series A Preferred Stock ranks junior to all of our liabilities and
all liabilities of our subsidiaries and any capital stock of our subsidiaries
held by others. In the event of any bankruptcy, liquidation, dissolution or
winding-up, our assets will be available to pay obligations on the Series A
Preferred Stock, including the liquidation preference of your shares of the
Series A Preferred Stock payable upon liquidation event or deemed liquidation
event, only after all our indebtedness and other liabilities have been paid.
WE MAY NOT HAVE SUFFICIENT EARNINGS AND PROFITS IN ORDER FOR DISTRIBUTIONS ON
THE PREFERRED STOCK TO BE TREATED AS DIVIDENDS.
The dividends paid by us may exceed our current and accumulated
earnings and profits, as calculated for U.S. federal income tax purposes. This
would result in the amount of the dividends that exceeds such earnings and
profits being treated first as a return of capital to the extent of the holder's
adjusted tax basis in the preferred stock, and the excess as capital gain. Such
treatment will generally be unfavorable for corporate holders and may also be
unfavorable for certain other holders.
A HOLDER OF SERIES A PREFERRED STOCK MAY BE TREATED AS RECEIVING DEEMED
DISTRIBUTIONS THAT MAY BE INCLUDIBLE IN INCOME.
If the Series A Preferred Stock is not respected as participating
preferred stock, in accordance with certain provisions of the Internal Revenue
Code and the Treasury Regulations, a holder of such preferred stock, despite the
absence of any actual payment of cash to the holder, may be treated as receiving
constructive distributions over the term of the Series A Preferred Stock or at
the time of any conversion into our Common Stock. In either such case, the
holder may be required to pay taxes on such constructive distributions in the
same manner as an actual distribution.
WE MAY NOT BE ABLE TO PAY THE LIQUIDATION PREFERENCE PREMIUM OF THE PREFERRED
STOCK UPON A DEEMED LIQUIDATION EVENT OR A MANDATORY REDEMPTION AND WE MAY NOT
BE ABLE TO PAY CASH DIVIDENDS ON THE PREFERRED STOCK WHEN REQUIRED.
In the event of a deemed liquidation event, including events such as a
merger, sale of assets or change in control, you will have the right to receive
an amount per share of Series A Preferred Stock equal to the greater of 120% of
the liquidation preference or the amount that would have been received if such
share was converted into our Common Stock, unless the holders of shares
representing 75% of the shares of Series A Preferred Stock then outstanding
elect to waive such deemed liquidation event, in which case the Series A
Preferred Stock would remain outstanding or be converted into shares of a
successor entity. We must redeem all outstanding shares of the Series A
Preferred Stock for an amount equal to the liquidation preference on March 28,
2017, up to 50% of all outstanding shares of Series A Preferred Stock for an
amount equal to 130% of the liquidation preference if we elect to convert the
Series A Preferred Stock into shares of our Common Stock, and up to all
outstanding shares of the Series A Preferred Stock for an amount equal to 120%
of the liquidation preference if we elect to consummate certain asset sales
without the requisite consent of the holders of the Series A Preferred Stock. We
may not have sufficient cash to purchase your shares of preferred stock upon a
deemed liquidation or a redemption event. Also, the terms of our Senior Notes
contain limitations on our ability to pay the liquidation preference in cash
while the Senior Notes remain outstanding.
Pursuant to the terms of our Senior Notes, which are due July 14, 2010,
we are not permitted to pay cash dividends on the shares of the Series A
Preferred Stock. The terms of the Series A Preferred Stock permit us to add the
per share dividend amount to the liquidation preference of the Series A
Preferred Stock until March 28, 2011, in lieu of paying cash dividends, thereby
increasing the amount of the liquidation preference and the number of shares of
our Common Stock issuable upon conversion of each share of the Series A
Preferred Stock. From and after March 28, 2011, the Company is obligated to pay
quarterly cash dividends on the Series A Preferred Stock. Terms of our future
indebtedness could restrict the payment of dividends and other obligations
relating to our capital stock in cash. Even if the terms of the instruments
governing our indebtedness at such time allow us to pay cash dividends and to
redeem the preferred stock in cash, we can only make such payments when, as and
if declared by our board of directors from legally available funds. Adequate
funds may not be available to pay cash dividends to you or to redeem your shares
of preferred stock.
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Further, because we are a holding company, our ability to pay the
liquidation preference of the preferred stock for cash or to pay dividends on
the preferred stock may be limited by restrictions on our ability to obtain
funds through dividends from our subsidiaries.
OUR OPERATING RESULTS ARE SUBJECT TO SUBSTANTIAL QUARTERLY AND ANNUAL
FLUCTUATIONS AND TO MARKET DOWNTURNS.
We believe that our future operating results over both the short- and
long-term will be subject to annual and quarterly fluctuations due to several
factors, some of which are outside management's control. These factors include:
o significant research and development costs:
o research and development issues and delays;
o the ability of our businesses to generate revenue adequate to cover
their expenses;
o spectrum acquisition costs;
o manufacturing issues and delays;
o the status of plans for the adoption of WiMAX and other 4G
technologies by national telecommunications carriers and equipment
manufacturers;
o impact of competitive products, services and technologies;
o changes in the regulatory environment;
o the cost and availability of network infrastructure; and
o general economic conditions.
These factors affecting our future operating results are difficult to
forecast and could harm our quarterly or annual operating results and the
prevailing market price of our securities. If our operating results fail to meet
the financial guidance we provide to investors or the expectations of investment
analysts or investors in any period, securities class action litigation could be
brought against us and/or the market price of our securities could decline.
IF THE OWNERSHIP OF OUR COMMON STOCK AND SERIES A PREFERRED STOCK CONTINUES TO
BE HIGHLY CONCENTRATED, IT MAY PREVENT YOU AND OTHER STOCKHOLDERS FROM
INFLUENCING SIGNIFICANT CORPORATE DECISIONS AND MAY RESULT IN CONFLICTS OF
INTEREST THAT COULD CAUSE THE PRICE OF OUR COMMON STOCK AND THE SERIES A
PREFERRED STOCK TO DECLINE.
Allen Salmasi, our executive officers and other members of our Board of
Directors beneficially own or control shares of our Common Stock and Series A
Preferred Stock representing approximately 36.0% of the voting power of our
capital stock as of September 29, 2007. Accordingly, Mr. Salmasi and the other
members of the Board of Directors will be able to significantly influence
matters that require stockholder approval, including the election of directors,
any merger, consolidation or sale of all or substantially all of our assets or
other significant corporate transactions. Our controlling stockholders may have
interests that differ from your interests and may vote in a way with which you
may disagree and which may be adverse to your interests. Corporate action may be
taken even if other stockholders oppose them. These stockholders may also delay
or prevent a change of control of us, even if that change of control would
benefit our other stockholders, which could deprive our stockholders of the
opportunity to receive a premium for their shares. The significant concentration
of ownership of our Common Stock and Series A Preferred Stock may adversely
affect the trading price of our Common Stock and Series A Preferred Stock due to
investors' perception that conflicts of interest may exist or arise.
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IF SECURITIES OR INDUSTRY ANALYSTS DO NOT PUBLISH RESEARCH OR REPORTS ABOUT OUR
BUSINESS, IF THEY CHANGE THEIR RECOMMENDATIONS REGARDING OUR SHARES ADVERSELY OR
IF OUR OPERATING RESULTS TO NOT MEET THEIR EXPECTATIONS, THE TRADING PRICE OF
OUR COMMON STOCK AND SERIES A PREFERRED STOCK COULD DECLINE.
The trading market for our Common Stock and the trading price of our
Series A Preferred Stock will be influenced by the research and reports that
industry and securities analysts publish about us or our business. Currently, we
have no significant, analyst coverage. If analysts fail to publish reports about
us or if one or more of these analysts cease coverage of our company or fail to
publish reports on us regularly, we could lose visibility in the financial
markets, which in turn could cause the price of our Common Stock to decline.
Moreover, if one or more analysts who cover us downgrade our Common Stock or if
our operating results do not meet their expectations, the price of our Common
Stock and Series A Preferred Stock could decline.
THE MARKET PRICE FOR OUR COMMON STOCK MAY BE VOLATILE, WHICH COULD CAUSE THE
VALUE OF YOUR INVESTMENT IN OUR COMMON STOCK OR SERIES A PREFERRED STOCK TO
DECLINE.
The stock market in general, and the stock prices of technology and
wireless communications companies in particular, have experienced volatility
that often has been unrelated to the operating performance of any specific
public company. Factors that may have a significant impact on the market price
of our Common Stock and accordingly the trading price of our Series A Preferred
Stock include:
o announcements concerning us or our competitors, including the
selection of mobile WiMAX wireless communications technology by
telecommunications providers and the timing of the roll-out of those
systems;
o receipt of substantial orders or order cancellations for integrated
circuits and system software products for mobile WiMAX networks by
us or our competitors;
o quality deficiencies in technologies, products or services;
o announcements regarding financial developments or technological
innovations;
o our ability to remediate the material weakness in internal controls
over financial reporting identified in connection with our
restatement of revenues of our PacketVideo subsidiary;
o international developments, such as technology mandates, political
developments or changes in economic policies;
o lack of capital to invest in WiMAX networks;
o new commercial products;
o changes in recommendations of securities analysts;
o government regulations, including FCC regulations governing spectrum
licenses;
o earnings announcements;
o proprietary rights or product or patent litigation;
o strategic transactions, such as acquisitions and divestitures; or
o rumors or allegations regarding our financial disclosures or
practices.
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Our share price may be subject to volatility, particularly on a
quarterly basis. Shortfalls in our revenues or earnings in any given period
relative to the levels expected by securities analysts could immediately,
significantly and adversely affect the trading price of our Common Stock.
From time to time, we may repurchase our Common Stock at prices that
may later be higher than the market value of the share on the repurchase date.
This could result in a loss of value for stockholders if new shares are issued
at lower prices.
In the past, securities class action litigation has often been brought
against a company following periods of volatility in the market price of its
securities. Due to changes in the volatility of the price of our Common Stock,
we may be the target of securities litigation in the future. Securities
litigation could result in substantial costs and divert management's attention
and resources.
PROVISIONS OF OUR CHARTER DOCUMENTS COULD DELAY OR PREVENT AN ACQUISITION OF OUR
COMPANY, EVEN IF THE ACQUISITION WOULD BE BENEFICIAL TO HOLDERS OF OUR COMMON
STOCK AND SERIES A PREFERRED STOCK, AND COULD MAKE IT MORE DIFFICULT FOR YOU TO
CHANGE MANAGEMENT.
Our Certificate of Incorporation and Bylaws contain provisions that
could depress the trading price of our Common Stock and Series A Preferred Stock
by acting to discourage, delay or prevent a change of control of our company or
changes in management that holders of our Common Stock might deem advantageous.
Specific provisions in our Certificate of Incorporation and Bylaws include:
o our directors serve staggered, three-year terms and accordingly,
pursuant to Delaware law, can only be removed with cause;
o no action can be taken by stockholders except at an annual or
special meeting of the stockholders called in accordance with our
bylaws, and stockholders may not act by written consent;
o our board of directors will be expressly authorized to make, alter
or repeal our bylaws, and our stockholders will be able to make,
alter or repeal our bylaws by a vote of 66-2/3% of the issued and
outstanding voting shares;
o any vacancies on the board of directors would be filled by a
majority vote of the board;
o our board of directors will be authorized to issue preferred stock
without stockholder approval; and
o we will indemnify officers and directors against losses that they
may incur in investigations and legal proceedings resulting from
their services to us, which may include services in connection with
takeover defense measures.
As a result of the provisions of our Certificate of Incorporation and
Bylaws, the price investors may be willing to pay in the future for our Common
Stock or Series A Preferred Stock may be limited.
24
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
This registration statement and other reports, documents and materials
we will file with the SEC contain, or will contain, disclosures that are
forward-looking statements that are subject to risks and uncertainties. All
statements other than statements of historical facts are forward-looking
statements. These statements, which represent our expectations or beliefs
concerning various future events, may contain words such as "may," "will,"
"expects," "anticipates," "intends," "plans," "believes," "estimates," or other
words of similar meaning in connection with any discussion of the timing and
value of future results or future performance. These forward-looking statements
are based on the current plans and expectations of our management and are
subject to certain risks, uncertainties (some of which are beyond our control)
and assumptions that could cause actual results to differ materially from
historical results or those anticipated. These risks include, but are not
limited to:
o our limited relevant operating history;
o our ability to remediate the material weakness in internal controls
over financial reporting identified in connection with our
restatement of revenues of our PacketVideo subsidiary;
o our ability to manage growth or integrate recent or future
acquisitions;
o competition from alternative wireless technologies and other
technology companies;
o our ability to develop and commercialize mobile broadband products
and technologies;
o the ability of vendors to manufacture commercial WiMAX equipment and
devices;
o consumer acceptance of WiMAX technology;
o changes in government regulations;
o changes in capital requirements or delays in our ability to become
cash flow positive;
o any loss of our key executive officers; and
o the other risks described under "Risk Factors" and elsewhere in the
information contained or incorporated into this registration
statement.
There may also be other factors that cause our actual results to differ
materially from the forward looking statements.
Because of these factors, we caution you that you should not place any
undue reliance on any of our forward-looking statements. These forward-looking
statements speak only as of the date of this registration statement and you
should understand that those statements are not guarantees of future performance
or results. New risks and uncertainties arise from time to time, and it is
impossible for us to predict those events or how they may affect us. Except as
required by law, we have no duty to, and do not intend to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.
25
USE OF PROCEEDS
We are registering these shares pursuant to the registration rights
granted to the selling stockholders in connection with the issuance of Series A
Preferred Stock in a private placement transaction exempt from the registration
requirements of the Securities Act, pursuant to Regulation D. We will not
receive any proceeds from the resale of our Series A Preferred or Common Stock
under this offering.
Our net proceeds from the issuance of the Series A Preferred Stock in
March 2007 were approximately $351.1 million, after deducting approximately $3.9
million in placement agent and legal fees. The net proceeds are used to fund
operations, accelerate the development of new wireless technologies, expand our
business and enable strategic acquisitions.
26
CERTAIN MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary discusses certain material United States federal
income and, to the limited extent set forth under "non-U.S. holders," estate tax
considerations relating to the purchase, ownership and disposition of our Series
A Preferred Stock and the shares of our Common Stock received upon the
conversion of our Series A Preferred Stock. The discussion below is based upon
the provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
the Treasury Regulations promulgated thereunder, and administrative and judicial
interpretations of the foregoing, all as in effect as of the date hereof and all
of which are subject to change, possibly with a retroactive effect.
This summary does not purport to deal with all aspects of United States
federal income taxation that may be relevant to an investor's decision to
purchase shares of our Series A Preferred Stock. In particular, this summary
does not address tax consequences that may be applicable to special classes of
investors including, but not limited to, tax-exempt entities, insurance
companies, banks or other financial institutions, partnerships or other entities
classified as partnerships for United States federal income tax purposes, S
corporations, investors in such partnerships, S corporations or other
pass-through entities, brokers, dealers in securities, traders in securities
that elect to use a mark-to-market method of accounting for their securities
holdings, persons liable for the alternative minimum tax, regulated investment
companies, real estate investment trusts, controlled foreign corporations,
passive foreign investment companies, retirement plans, former citizens or
former long-term residents of the United States and persons that will hold our
Series A Preferred Stock or Common Stock as a position in a hedging transaction,
"straddle," "conversion transaction" or other risk reduction transaction. Except
where otherwise stated, this summary deals only with Series A Preferred Stock
held as "capital assets" within the meaning of the Code (generally held for
investment). Also not considered are the effect of any applicable foreign,
state, local or other tax laws, alternative minimum tax considerations, or
estate or gift tax considerations for U.S. holders.
We have not sought any rulings from the Internal Revenue Service (the
"IRS"). Accordingly, the discussion below is not binding on the IRS or the
courts, and no assurance can be given that the IRS would not assert, or that a
court would not sustain, a different position from any discussed herein.
As used herein, a "U.S. holder" is any beneficial owner of a share of
Series A Preferred Stock or of Common Stock that is for United States federal
income tax purposes:
o an individual that is a citizen or resident of the United States;
o a corporation (or other entity taxable as a corporation) created or
organized in or under the laws of the United States, any state of
the United States or the District of Columbia;
o an estate the income of which is subject to U.S. federal income
taxation regardless of its source; or
o a trust if it is subject to the primary supervision of a court
within the United States and one or more U.S. persons have the
authority to control all substantial decisions of the trust or if it
has a valid election in effect under applicable Treasury Regulations
to be treated as a domestic trust for United States federal income
tax purposes.
A "non-U.S. holder" is any individual, corporation, trust or estate that is a
beneficial owner of a share of Series A Preferred Stock and is not a U.S.
holder, other than former citizens and former long-term residents of the United
States.
If a partnership (including any entity treated as a partnership for
United States federal income tax purposes) is a beneficial owner of the Series A
Preferred Stock, the tax treatment of a partner in the partnership generally
will depend upon the status of the partner and the activities of the
partnership. A beneficial owner that is a partnership and partners in such a
partnership should consult their tax advisors about the United States federal
income tax considerations of the purchase, ownership and disposition of the
Series A Preferred Stock.
CONSEQUENCES TO U.S. HOLDERS OF SERIES A PREFERRED STOCK OR COMMON STOCK
27
Distributions
Distributions with respect to the Series A Preferred Stock and Common
Stock will be taxable as dividend income when paid to the extent of our current
and accumulated earnings and profits as determined for United States federal
income tax purposes. To the extent the amount of any distributions exceeds our
earnings and profits with respect to such distribution, the excess will be
applied against and will reduce the holder's adjusted tax basis (on a
dollar-for-dollar basis) in respect of the stock as to which the distribution
was made (but not below zero). Any remaining excess will be treated as gain from
the sale or exchange of such stock, with the consequences discussed below in
"--Sale or Other Disposition."
Dividends to Non-Corporate Shareholders. Distributions to individual
holders prior to January 1, 2011, which are treated as dividends for United
States federal income tax purposes, may qualify for taxation at a rate of 15%
applicable to long-term capital gains, provided certain holding period and other
requirements are satisfied.
Dividends to Corporate Shareholders. Distributions to corporate
holders, which are treated as dividends for United States federal income tax
purposes, may qualify for the 70% dividends received deduction that is available
to corporate shareholders that own less than 20% of the voting power or value of
the outstanding stock of the distributing corporation. A corporate shareholder
holding 20% or more of the distributing corporation may be eligible for an 80%
dividends received deduction. No assurance can be given that we will have
sufficient earnings and profits (as determined for United States federal income
tax purposes) to cause distributions to be eligible for a dividends received
deduction.
The dividends received deduction is only available if certain holding
period and taxable income requirements are satisfied. The length of time that a
shareholder has held its stock is reduced for any period during which the
shareholder's risk of loss with respect to the stock is diminished by reason of
the existence of certain options, contracts to sell, short sales or similar
transactions. In addition, to the extent that a corporation incurs indebtedness
that is directly attributable to an investment in the stock on which the
dividend is paid, all or a portion of the dividends received deduction may be
disallowed.
The benefit of the dividends received deduction to a corporate holder
of our Series A Preferred Stock may be effectively reduced or eliminated by
operation of the "extraordinary dividend" provisions of Section 1059 of the
Code. Section 1059 requires the corporate recipient to reduce its adjusted tax
basis in its stock by the amount excluded from income as a result of the
dividends received deduction. The excess of the excluded amount over basis may
be treated as gain from the sale or exchange of the stock. A dividend may be
treated as "extraordinary" if (i) it equals or exceeds 5% of the holder's
adjusted tax basis in the stock (reduced for this purpose by the non-taxed
portion of any prior extraordinary dividend), treating all dividends having
ex-dividend dates within an 85-day period as one dividend, or (ii) it exceeds
20% of the holder's adjusted tax basis in the stock, treating all dividends
having ex-dividend dates within a 365-day period as one dividend. For these
purposes, any deemed dividends arising by reason of the application of Section
305 of the Code, as discussed below, are taken into account.
A U.S. holder should consult its own tax advisors regarding the
availability of the reduced dividend tax rate and the dividends received
deduction in the light of its particular circumstances.
Constructive Dividends Under Section 305
Under Section 305 of the Code, certain transactions are treated as
creating dividend distributions on stock, despite the absence of any actual
payment of cash (or property) to the holder of such stock. Of particular
potential relevance to holders of our Series A Preferred Stock is that, under
such section, a holder of preferred stock may be treated as receiving
constructive distributions over the term of the preferred stock based on the
excess, if any, of the stock's redemption price over the stock's issue price
(subject to a de minimis exception) - sometimes referred to herein as "Preferred
OID" - unless the preferred stock participates in corporate growth to any
significant extent (disregarding conversion privileges). A right to participate
in corporate growth that lacks substance (i.e., as to which it is reasonable to
anticipate at the time of the distribution that there is little or no likelihood
of participating beyond a fixed preferential return) will not be respected.
Pursuant to the Treasury Regulations, and absent facts and circumstances
suggesting that there is little or no likelihood that the stock will actually
participate in the corporation's growth, stock which enjoys a priority as to
dividends and on liquidation and is entitled to participate, over and above such
28
priority, with another less privileged class of stock in earnings and profits
and upon liquidation, would be respected as participating preferred stock for
purposes of Section 305 and thus the Preferred OID rules of Section 305 would
not be applicable to such stock.
Our Series A Preferred Stock has the right to participate, over and
above its preference amount, in any dividends or liquidation proceeds along with
the Common Stock, on an as-if converted basis (see "Description of Capital Stock
- Series A Preferred Stock - Dividend Rights" and "Description of Capital Stock
- Common Stock - Dividend Rights," respectively). It is possible that dividends
may in any given year exceed the dividend preference. In addition, (i) upon
certain deemed liquidation events, including a change in control, a merger or a
sale of substantially all our assets, we are required to redeem the Series A
Preferred Stock at a redemption price equal to the greater of 120% of its
liquidation preference or the amount receivable on our Common Stock, on an as if
converted basis; (ii) in the event of certain asset sale transactions where we
fail to obtain approval of the holders of Series A Preferred Stock, we are
required to redeem the Series A Preferred Stock at a redemption price equal to
120% of its liquidation preference, and (iii) in the event we elect to convert
the Series A Preferred Stock after our Common Stock price has reached a certain
qualifying threshold, we are required to redeem (but not more than 50% of the
outstanding shares of Series A Preferred Stock) the shares of any holders of
Series A Preferred Stock who elect not to convert into Common Stock at a price
equal to 130% of the liquidation preference. We believe that there is a
reasonable likelihood that one of these events will occur. The Series A
Preferred Stock is also subject to a 10-year mandatory redemption, in which case
there is no participation or growth feature. Based on the foregoing facts and
circumstances, and consistent with the Purchase Agreement, we currently intend
to treat the Series A Preferred Stock as participating preferred stock for
purposes of Section 305. There is no assurance, however, that the IRS or the
courts will not take a contrary position. In general, each holder is bound by
our determination as to whether there is a constructive distribution, unless the
holder explicitly discloses that it is taking a contrary position in a statement
attached to its timely filed tax return for the taxable year in which it
acquires the stock.
If, contrary to our position, the Series A Preferred Stock were
considered to be non-participating preferred stock for Section 305 purposes, the
difference between the Series A Preferred Stock's "redemption price" and its
issue price would be treated as Preferred OID, resulting in one or more
constructive distributions to the holders of the Series A Preferred Stock. In
this regard, it is possible that the 20% or 30% premiums over liquidation
preference might have to be taken into account on a projected basis in
determining the redemption price. In addition, in the event we determine not to
declare and pay dividends in cash for any quarter before the fourth anniversary
of issuance, the per share dividend amount will be added to the liquidation
preference of the Series A Preferred Stock. It is possible that such increase in
the liquidation preference could be equated to Preferred OID and treated as a
constructive distribution for that quarter. Any constructive distribution would
be treated in the same manner as an ordinary distribution over the term of the
Series A Preferred Stock, regardless of whether the holder is a cash or accrual
method taxpayer. See "--Distributions" above. Accordingly, to the extent we have
available earnings and profits, or such distribution exceeds the holder's
adjusted tax basis in its stock, the holder would recognize taxable income prior
to any corresponding cash payment.
Aside from the treatment of any Preferred OID, the presence of an
adjustment to the conversion price at which the Series A Preferred Stock is
convertible into Common Stock may also result in constructive distributions to
the holders of such stock, as discussed below in "--Adjustment to Conversion
Price."
Sale or Other Disposition
A U.S. holder will generally recognize capital gain or loss on a sale,
exchange or other disposition of our Series A Preferred Stock or our Common
Stock equal to the difference between the amount realized upon the sale,
exchange or other disposition and the holder's adjusted tax basis in the stock
sold, exchanged or otherwise disposed of. Such capital gain or loss will be
long-term capital gain or loss if the holder's holding period for the stock sold
or exchanged is more than one year. Long-term capital gains of non-corporate
taxpayers currently are taxed at a maximum 15% rate. The deductibility of
capital losses is subject to limitations.
Redemption
In the case of a redemption of the Series A Preferred Stock for cash or
property, the United States federal income tax treatment of the redemption
depends on the particular facts relating to such holder at the time of the
29
redemption. If the redemption of such stock (i) is "not essentially equivalent
to a dividend" with respect to the holder, (ii) is "substantially
disproportionate" with respect to the holder (defined generally as a greater
than 20% reduction in a shareholder's relative voting stock of a corporation),
or (iii) results in a "complete termination" of all of such holder's equity
interest in the corporation, then the receipt of cash or property by such holder
will be respected as a sale or exchange of its stock and taxed accordingly. In
applying these tests, certain constructive ownership rules apply to determine
stock ownership. For this purpose, the holder is deemed to own any shares of our
stock that are owned, or deemed owned, by certain related persons and entities,
as well as any stock that the holder or a related person or entity has the right
to acquire by exercise of an option.
If the redemption does not qualify for sale or exchange treatment, the
holder will instead be treated as having received a distribution on such stock
with the general consequences described above in "-- Distributions." If the
holder does not retain any actual stock ownership in us following such
redemption, the holder may lose its tax basis completely (in that the tax basis
would shift to the stock that was treated as constructively owned by the
holder). If such distribution is taxable as a dividend to a corporate
shareholder, it will be subject to the "extraordinary dividend" provisions of
Section 1059 of the code as discussed above in "-- Distributions - Dividends to
Corporate Shareholders."
Conversion of Series A Preferred Stock into Common Stock
As a general rule, a U.S. holder will not recognize any gain or loss in
respect of the receipt of Common Stock upon the conversion of the Series A
Preferred Stock, except in respect of (i) any cash paid to a holder in lieu of
fractional shares and (ii) any Common Stock received attributable to any unpaid
dividends (as discussed in the next paragraph). The adjusted tax basis of the
Common Stock received on conversion will (except with respect to any unpaid
dividends taxable upon conversion) equal the adjusted tax basis of the Series A
Preferred Stock converted less the portion of the holder's tax basis allocable
to any fractional share, and the holding period of such Common Stock received on
conversion will (except with respect to any unpaid dividends taxable upon
conversion) generally include the period during which the converted Series A
Preferred Stock was held prior to conversion.
If, contrary to our position (see "--Constructive Dividends Under
Section 305" above), the Series A Preferred Stock is considered
non-participating preferred stock for purposes of Section 305 of the Code, a
portion of the Common Stock received should be treated as a constructive
distribution on the Series A Preferred Stock in an amount equal to any increase
in the liquidation preference due to unpaid dividends (but only to the extent
such increase was not previously treated as a constructive distribution, and not
in excess of the amount, if any, by which the fair market value of the Common
Stock received on conversion exceeds the issue price of the Series A Preferred
Stock). The constructive distribution would have the consequences as described
above under "--Distributions" for ordinary distributions. The tax basis of the
portion of the Common Stock so received will be the amount of such distribution,
and the holding period for such portion will commence on the day after receipt.
Adjustment of Conversion Price
The conversion price of the Series A Preferred Stock, as determined
based on such stock's liquidation preference, is subject to adjustments in
various circumstances. As discussed above in "--Constructive Dividends Under
Section 305," we intend to take the position that the Series A Preferred Stock
is participating preferred stock for purposes of Section 305 of the Code. So
treated, most adjustments to the conversion ratio of the Series A Preferred
Stock would not be taxable. If, contrary to our position, the Series A Preferred
Stock is treated as non-participating preferred stock, applicable Treasury
Regulations would treat a holder of our Series A Preferred Stock as having
received a constructive distribution if, and to the extent that, certain
adjustments in the conversion price increase the proportionate interest of such
holder in our earnings and profits. Adjustments to the conversion price made
pursuant to a bona fide reasonable adjustment formula which has the effect of
preventing dilution in the interest of a holder of the Series A Preferred Stock
generally will not be considered to result in a constructive distribution.
In addition, a failure to make an adjustment to the conversion price of
our Series A Preferred Stock could potentially give rise to constructive
distributions to holders of our Common Stock.
30
Thus, under certain circumstances, U.S. holders may recognize income in
the event of an adjustment to the conversion ratio even though they do not
receive any cash or property. In general, any constructive distribution would
have the consequences described above under "--Distributions" for ordinary
distributions.
Information Reporting and Backup Withholding on U.S. Holders
Certain U.S. holders may be subject to backup withholding with
respect to the payment of dividends on our Series A Preferred Stock or Common
Stock and to certain payments of proceeds on the sale of our Series A Preferred
Stock or our Common Stock unless such U.S. holders provide proof of an
applicable exemption or a correct taxpayer identification number, and otherwise
comply with applicable requirements of the backup withholding rules.
Any amount withheld under the backup withholding rules from a payment
to a holder is allowable as a credit against such holder's United States federal
income tax, which may entitle the U.S. holder to a refund, provided that the
holder provides the required information to the IRS. Moreover, certain penalties
may be imposed by the IRS on a holder who is required to furnish information but
does not do so in the proper manner.
U.S. holders are urged to consult their own tax advisors regarding the
application of backup withholding in their particular circumstances and the
availability of and procedure for obtaining an exemption from backup withholding
under current Treasury Regulations.
CONSEQUENCES TO NON-U.S. HOLDERS OF SERIES A PREFERRED STOCK OR COMMON STOCK
Dividends
Generally, dividends (including any constructive distributions, as
discussed above under "--Consequences to U.S. Holders of Series A Preferred
Stock or Common Stock-- Constructive Dividends Under Section 305" and " --
Adjustment of Conversion Price") paid to a non-U.S. holder by a U.S. corporation
are subject to a 30% United States withholding tax, or such lower rate as may be
specified by an applicable tax treaty, unless the dividends are (i) effectively
connected with a trade or business carried on by the non-U.S. holder within the
United States or (ii) if a tax treaty applies, attributable to a United States
permanent establishment maintained by the non-U.S. holder.
Dividends effectively connected with such trade or business or, if a
treaty applies, attributable to such permanent establishment will generally be
subject to United States federal income tax on a net basis at applicable
individual or corporate rates and will not be subject to United States
withholding tax if certain certification requirements are satisfied. A non-U.S.
holder that is a corporation may also be subject to a "branch profits tax" at a
30% rate (or such lower rate as may be specified by an applicable income tax
treaty) on the deemed repatriation from the United States of its "effectively
connected earnings and profits," subject to certain adjustments.
To claim exemption from or reduction in the 30% withholding tax rate, a
non-U.S. holder must provide us or our agent, prior to the payment of the
dividends, with a properly executed IRS Form W-8ECI (in the case of U.S. trade
or business income), IRS Form W-8BEN (in the case of a treaty), or other form
that the IRS designates, as applicable. These forms must be periodically
updated. In certain circumstances, a non-U.S. holder who is claiming the
benefits of an applicable tax treaty may be required to obtain and provide a
United States taxpayer identification number or certain documentary evidence
issued by foreign governmental authorities to prove such non-U.S. holder's
residence in that country. Also, current Treasury Regulations provide special
procedures for payments of dividends through qualified intermediaries.
The Treasury Regulations provide that a distributing corporation that
determined at the end of a taxable year in which a distribution is made that it
underwithheld on such distribution because, for example, at the time of the
distribution it did not then have, nor expected to have for such taxable year,
any earnings and profits but in fact did have earnings and profits for the
taxable year, is liable for the amount underwithheld. Therefore, even in the
absence of earnings and profits at the time of a distribution to the holders of
Series A Preferred Stock, we may decide, in our sole discretion, to withhold on
such distribution to satisfy our withholding tax obligations.
31
Sale or Other Disposition
A non-U.S. holder generally will not be subject to United States
federal income or withholding tax on income or gain realized on the sale or
exchange of the Series A Preferred Stock or the Common Stock (not including any
amounts attributable to declared and unpaid dividends, which will be taxable to
a non-U.S. holder of record as described above under "--Consequences to Non-U.S.
Holders of Series A Preferred Stock or Common Stock--Dividends") unless:
o the gain is effectively connected with a United States trade or
business of the holder (or, if a tax treaty applies, the gain is
attributable to a United States permanent establishment maintained
by such non-U.S. holder);
o the non-U.S. holder, in the case of a nonresident alien individual,
is present in the United States for 183 or more days in the taxable
year of the sale or disposition and certain other conditions are
met; or
o we are, or have been within the five years preceding the holder's
disposition of the Series A Preferred Stock or Common Stock, a
"United States real property holding corporation" ("USRPHC") for
United States federal income tax purposes. We believe that we have
not been and are not currently a USRPHC for United States federal
income tax purposes, nor do we anticipate becoming a USRPHC in the
future. However, no assurance can be given that we will not become a
USRPHC.
Conversion into Common Stock
The United States federal income tax consequences to non-U.S. holders
with respect to the conversion of our Series A Preferred Stock into Common Stock
generally should be the same as described above under "--Consequences to U.S.
Holders of Series A Preferred Stock or Common Stock-- Conversion of Series A
Preferred Stock into Common Stock." Any constructive distribution would be
treated in a similar manner to that described above for ordinary distributions.
See "--Dividends" above.
Federal Estate Tax
Any Series A Preferred Stock or Common Stock owned or treated as owned
by an individual who is not a citizen or resident of the United States (as
specially defined for United States federal estate tax purposes) at the time of
death will be included in the individual's gross estate for United States
federal estate tax purposes, unless an applicable estate tax or other treaty
provides otherwise, and, therefore, may be subject to United States federal
estate tax.
Information Reporting and Backup Withholding on Non-U.S. Holders
Non-U.S. holders may be subject to information reporting and backup
withholding with respect to any dividends on, and the proceeds from dispositions
of, our Series A Preferred Stock or Common Stock paid to them, unless such
non-U.S. holders comply with certain reporting procedures (usually satisfied by
providing an IRS Form W-8BEN) or otherwise establish an exemption. Additional
rules relating to information reporting requirements and backup withholding with
respect to the payment of proceeds from the disposition of shares of our Series
A Preferred Stock or Common Stock will apply as follows:
o If the proceeds are paid to or through the U.S. office of a broker
(United States or foreign), they generally will be subject to backup
withholding and information reporting, unless the non-U.S. holder
certifies that he is not a United States person under penalties of
perjury (usually on an IRS Form W-8BEN) or otherwise establishes an
exemption;
o If the proceeds are paid to or through a non-U.S. office of a broker
that is not a United States person and is not a foreign person with
certain specified United States connections (a "U.S. Related
Person"), they will not be subject to backup withholding or
information reporting; or
32
o If the proceeds are paid to or through a non-U.S. office of a broker
that is a United States person or a U.S. Related Person, they
generally will be subject to information reporting (but not backup
withholding), unless the non-U.S. holder certifies that he is not a
United States person under penalties of perjury (usually on an IRS
Form W-8BEN) or otherwise establishes an exemption.
In addition, the amount of any dividends paid to a non-U.S. holder and
the amount of tax, if any, withheld from such payment generally must be reported
annually to such holder and the IRS. The IRS may make such information available
under the provisions of an applicable income tax treaty to the tax authorities
in the country in which such holder resides.
Any amounts withheld under the backup withholding rules will be allowed
as a refund or a credit against the holder's United States federal income tax
liability provided the required information is timely furnished to the IRS.
THE FOREGOING SUMMARY OF CERTAIN MATERIAL UNITED STATES FEDERAL INCOME
AND ESTATE TAX CONSEQUENCES IS ONLY GENERAL INFORMATION, AND NOT TAX ADVICE. IT
DOES NOT DISCUSS ALL ASPECTS OF UNITED STATES FEDERAL INCOME TAX THAT MAY BE
RELEVANT TO YOU IN LIGHT OF YOUR PARTICULAR CIRCUMSTANCES. ACCORDINGLY, WE
STRONGLY URGE YOU TO CONSULT WITH YOUR OWN TAX ADVISORS AS TO THE PARTICULAR TAX
CONSEQUENCES TO YOU OF PURCHASING, HOLDING AND DISPOSING OF OUR SERIES A
PREFERRED STOCK AND COMMON STOCK, INCLUDING THE APPLICABILITY AND EFFECT OF ANY
STATE, LOCAL OR NON-UNITED STATES TAX LAWS AND OF ANY CHANGES OR PROPOSED
CHANGES IN APPLICABLE LAW.
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SELLING STOCKHOLDERS
The selling stockholders may from time to time offer and sell any or
all of the shares of our Common Stock or Series A Preferred Stock set forth
below pursuant to this prospectus. When we refer to "selling stockholders" in
this prospectus, we mean the persons listed in the table below, and the pledges,
donees, permitted transferees, assignees, successors and others who later come
to hold any of the selling stockholders' interests in shares of our Common Stock
or Series A Preferred Stock other than through a public sale.
The following table sets forth, as of the date of this prospectus, the
name of the selling stockholders for whom we are registering shares for resale
to the public, and the number of shares of Common Stock and Series A Preferred
Stock that each selling stockholder may offer pursuant to this prospectus. The
shares of Common Stock and Series A Preferred Stock offered by the selling
stockholders were issued pursuant to exemptions from the registration
requirements of the Securities Act. At the time of purchase, the selling
stockholders represented to us that they were accredited investors and were
acquiring our Common Stock and Series A Preferred Stock in the ordinary course
of business for investment and not with a view towards distribution. In
addition, each of the selling stockholders represented that it did not have any
agreement or understanding, directly or indirectly, with any person to
distribute our Common Stock or Series A Preferred Stock. We have agreed to file
a registration statement covering the resale of the Common Stock and Series A
Preferred Stock received by the selling stockholders. We filed with the SEC,
under the Securities Act, a Registration Statement on Form S-3 with respect to
the resale of the Common Stock and Series A Preferred Stock from time to time by
the selling stockholders, and this prospectus forms a part of that registration
statement.
Based on the information provided to us by the selling stockholders and
as of the date the same was provided to us, assuming that the selling
stockholders sell all of the shares of our Common Stock and Series A Preferred
Stock beneficially owned by them that have been registered by us and do not
acquire any additional shares during the offering, the selling stockholders will
not own any shares other than those appearing in the column entitled "Shares
Owned After Completion of this Offering Assuming All Shares Offered Are Sold."
We cannot advise you as to whether the selling stockholders will in fact sell
any or all of such shares of Common Stock or Series A Preferred Stock. In
addition, the selling stockholders may have sold, transferred or otherwise
disposed of, or may sell, transfer or otherwise dispose of, at any time and from
time to time, the shares of our Common Stock or Series A Preferred Stock in
transactions exempt from the registration requirements of the Securities Act
after the date on which it provided the information set forth on the table
below.
SHARES OWNED AFTER
COMPLETION OF THIS
NUMBER OF SHARES OWNED NUMBER OF SHARES OFFERING ASSUMING ALL
PRIOR TO THE OFFERING REGISTERED HEREBY SHARES OFFERED ARE SOLD
--------------------- --------------------- --------------------- % OF
NAME OF SELLING STOCKHOLDER PREFERRED COMMON PREFERRED COMMON PREFERRED COMMON COMMON(2)
--------------------------- --------- ------ --------- ------ --------- ------ ---------
Avenue-CDP Global Opportunities
Fund, L.P. (1)(3)(11)
535 Madison Avenue, 14th Floor
New York, NY 10022 15,241 1,379,276 10,730 1,027,912 4,511 351,364 *
------------------------------------------------------------------------------------------------------------------------------------
Avenue International, Ltd.
(1)(3)(11)
535 Madison Avenue, 14th Floor
New York, NY 10022 48,739 4,410,769 34,312 3,287,148 14,427 1,123,621 1.0%
------------------------------------------------------------------------------------------------------------------------------------
Avenue Investments, L.P. (1)(3)(11)
535 Madison Avenue, 14th Floor
New York, NY 10022 20,828 2,024,640 14,663 1,404,721 6,165 619,919 *
------------------------------------------------------------------------------------------------------------------------------------
34
SHARES OWNED AFTER
COMPLETION OF THIS
NUMBER OF SHARES OWNED NUMBER OF SHARES OFFERING ASSUMING ALL
PRIOR TO THE OFFERING REGISTERED HEREBY SHARES OFFERED ARE SOLD
--------------------- --------------------- --------------------- % OF
NAME OF SELLING STOCKHOLDER PREFERRED COMMON PREFERRED COMMON PREFERRED COMMON COMMON(2)
--------------------------- --------- ------ --------- ------ --------- ------ ---------
Avenue Special Situations Fund IV,
L.P. (1)(3)(11)
535 Madison Avenue, 14th Floor
New York, NY 10022 13,726 3,038,409 9,663 925,735 4,063 2,112,674 2.0%
------------------------------------------------------------------------------------------------------------------------------------
D.E. Shaw Laminar Portfolios, L.L.C.(4)
120 West 45th Street, 39th Floor
New York, NY 10036 15,000 1,357,466 10,560 1,011,659 4,440 345,807 *
------------------------------------------------------------------------------------------------------------------------------------
D.E. Shaw Valence Portfolios, L.L.C.(4)
120 West 45th Street, 39th Floor
New York, NY 10036 10,000 904,977 7,040 674,439 2,960 230,538 *
------------------------------------------------------------------------------------------------------------------------------------
GPC 73, LLC
535 Madison Avenue, 14th Floor
New York, NY 10022 1,466 132,670 1,032 98,872 434 33,798 *
------------------------------------------------------------------------------------------------------------------------------------
Highbridge Convertible Arbitrage
Master Fund LP (5)
9 West 57th Street, 27th Floor
New York, NY 10019 1,000 90,498 704 67,444 296 23,054 *
------------------------------------------------------------------------------------------------------------------------------------
Highbridge International LLC
(1)(6)(11)
9 West 57th Street, 27th Floor
New York, NY 10019 24,500 2,217,195 17,248 1,652,375 7,252 564,820 *
------------------------------------------------------------------------------------------------------------------------------------
Investcorp Interlachen
Multi-Strategy Master Fund Limited
(1)(7)(11)
800 Nicollet Mall, Suite 2500
Minneapolis, MN 55402 7,500 678,733 5,280 505,829 2,220 172,904 *
------------------------------------------------------------------------------------------------------------------------------------
Kings Road Investments Ltd.
(1)(8)(11)
598 Madison Avenue, 14th Floor
New York, NY 10022 25,000 2,262,443 17,600 1,686,097 7,400 576,346 *
------------------------------------------------------------------------------------------------------------------------------------
SOLA, Ltd. (9)
399 Park Avenue, 22nd Floor
New York, NY 10022 30,000 2,714,932 21,120 2,023,317 8,880 691,615 *
------------------------------------------------------------------------------------------------------------------------------------
York Capital Management, L.P. (10)
767 Fifth Avenue, 17th Floor
New York, NY 10153 3,600 325,792 2,534 242,798 1,066 82,994 *
------------------------------------------------------------------------------------------------------------------------------------
York Credit Opportunities Fund,
L.P. (10)
767 Fifth Avenue, 17th Floor
New York, NY 10153 11,000 995,475 7,744 741,883 3,256 253,592 *
------------------------------------------------------------------------------------------------------------------------------------
York Global Value Partners, L.P.
767 Fifth Avenue, 17th Floor
New York, NY 10153 5,000 452,489 3,520 337,220 1,480 115,269 *
------------------------------------------------------------------------------------------------------------------------------------
York Investment Limited (10)
767 Fifth Avenue, 17th Floor
New York, NY 10153 11,800 1,067,873 8,307 795,838 3,493 272,035 *
------------------------------------------------------------------------------------------------------------------------------------
35
SHARES OWNED AFTER
COMPLETION OF THIS
NUMBER OF SHARES OWNED NUMBER OF SHARES OFFERING ASSUMING ALL
PRIOR TO THE OFFERING REGISTERED HEREBY SHARES OFFERED ARE SOLD
--------------------- --------------------- --------------------- % OF
NAME OF SELLING STOCKHOLDER PREFERRED COMMON PREFERRED COMMON PREFERRED COMMON COMMON(2)
--------------------------- --------- ------ --------- ------ --------- ------ ---------
York Select, L.P. (10)
767 Fifth Avenue, 17th Floor
New York, NY 10153 4,000 361,991 2,816 269,776 1,184 92,215 *
------------------------------------------------------------------------------------------------------------------------------------
York Select Units Trust (10)
767 Fifth Avenue, 17th Floor
New York, NY 10153 4,600 416,290 3,238 310,242 1,362 106,048 *
------------------------------------------------------------------------------------------------------------------------------------
* Represents beneficial ownership of less than 1%
(1) As indicated in footnotes 3, 6, 7 and 8 below, certain selling
stockholders own warrants to purchase our Common Stock. As disclosed in
the Company's previous filings with the SEC, in July 2006, the Company
issued its 7% Senior Secured Notes due 2010 (the "Senior Notes") in the
aggregate principal amount of $350.0 million. The purchasers of the Senior
Notes included, among others, affiliates of Avenue Capital Group,
Highbridge Capital Management, LLC, Investcorp Interlachen Multi-Strategy
Master Fund Limited, and Kings Road Investments Ltd., each of whom is a
selling stockholder. Prior to the issuance of these warrants, there were
no other securities transactions between our company and any of the
selling shareholders. None of the purchasers of the Senior Notes received
any compensation in connection with the financing. As an integral part of
this Senior Notes financing, the Company entered into a warrant agreement
with the purchasers of the Senior Notes whereby following completion of
our corporate conversion holding company merger on November 13, 2006, we
issued warrants to purchase 4,110,382 shares of Common Stock. The shares
issuable upon exercise of the warrants represented 5% of the outstanding
shares of our Common Stock of as of the date of our corporate conversion
merger and before giving effect to the exercise of any warrant. The
warrants have an exercise price of $0.01 per share (subject to certain
adjustments as set forth in the warrant agreement) and are exercisable at
any time from the date of issuance until July 15, 2009, and have standard
anti-dilution protection provisions. The shelf registration statement
registering the shares underlying the warrants was declared effective by
the SEC on December 29, 2006.
The warrants were issued as an integral part of the Senior Notes
transaction, and were intended to induce the Senior Note purchasers to
accept financing terms that were more favorable to us than otherwise
obtainable. Of the $297.5 million paid by the Senior Note purchasers,
$24.3 million was allocated to the purchase of the warrants. The table
below shows the current realizable profit relating to the warrants, based
on the difference between the current market price of our Common Stock and
the per share exercise price and the purchase price allocation of the
warrants.
-------------- ------------ --------------- --------------- ---------------- --------------
Current market Current
value (based realizable
Number of Purchase Price on $5.96 share Current profit (loss)
shares Exercise Allocation of price as of realizable (based on
underlying the price ($0.01 warrants ($5.91 November 16, profit (based on purchase price
warrants per share) per share) 2007) exercise price) allocation)
-------------- ------------ --------------- --------------- ---------------- --------------
4,110,382 $41,103.82 $24,292,357.62 $24,497,876.72 $23,840,215.60 $205,519.10
-------------- ------------ --------------- --------------- ---------------- --------------
(2) Unless otherwise indicated, assumes that each selling stockholder will
resell all of the shares of our preferred stock and the Common Stock
underlying the preferred shares offered hereunder. Applicable percentage
of ownership is based on 126,675,166 shares of our Common Stock
outstanding as of September 29, 2007, together with securities exercisable
for, or convertible into, shares of Common Stock within 60 days of
September 29, 2007.
(3) The number of shares owned prior to the offering includes warrants to
purchase 1,935,990 shares of Common Stock, issued by the Company to Avenue
Special Situations Fund IV, L.P. and Avenue Investments, L.P. on November
13, 2006. Mr. Marc Lasry and Avenue Capital Management II, L.P. exercise
voting and investment power over the securities beneficially owned by
Avenue-CDP Global Opportunities Fund, L.P., Avenue Special Situations Fund
IV, L.P., Avenue Investments, L.P., Avenue International, Ltd. and GPC 73,
LLC.
(4) D. E. Shaw & Co. L.P., as investment adviser, has voting and investment
control over any shares of Common Stock issuable upon conversion of the
notes owned by the Selling Securityholder. Julius Gaudio, Eric Wepsic,
36
Maximilian Stone, and Anne Dinning, or their designees, exercise voting
and investment control over the notes on D. E. Shaw & Co. L.P.'s behalf.
(5) Highbridge Capital Management, LLC is the trading manager of Highbridge
Convertible Arbitrage Master Fund, L.P. and has voting control and
investment discretion over the securities held by Highbridge Convertible
Arbitrage Master Fund, L.P. Glenn Dubin and Henry Swieca control
Highbridge Capital Management, LLC and have voting control and investment
discretion over the securities held by Highbridge Convertible Arbitrage
Master Fund, L.P. Each of Highbridge Capital Management, LLC, Glenn Dubin
and Henry Swieca disclaims beneficial ownership of the securities held by
Highbridge Convertible Arbitrage Master Fund, L.P.
(6) The number of shares owned prior to the offering includes warrants to
purchase 353,493 shares of Common Stock, issued by the Company to
Highbridge International LLC on November 13, 2006. Highbridge Capital
Management, LLC is the trading manager of Highbridge International LLC and
has voting control and investment discretion over the securities held by
Highbridge International LLC. Glenn Dubin and Henry Swieca control
Highbridge Capital Management, LLC and have voting control and investment
discretion over the securities held by Highbridge International LLC. Each
of Highbridge Capital Management, LLC, Glenn Dubin and Henry Swieca
disclaims beneficial ownership of the securities held by Highbridge
International LLC.
(7) The number of shares owned prior to the offering includes warrants to
purchase 69,818 shares of Common Stock, issued by the Company to
Investcorp Interlachen Multi-Strategy Master Fund Limited on November 13,
2006. Interlachen Capital Group LP is the trading manager of Investcorp
Interlachen Multi-Strategy Master Fund Limited and has voting and
investment discretion over securities held by Investcorp Interlachen
Multi-Strategy Master Fund Limited. Andrew Fraley, in his role as Chief
Investment Officer of Interlachen Capital Group LP, has voting control and
investment discretion over securities held by Investcorp Interlachen
Multi-Strategy Master Fund Limited. Andrew Fraley disclaims beneficial
ownership of the securities held by Investcorp Interlachen Multi-Strategy
Master Fund Limited.
(8) The number of shares owned prior to the offering includes warrants to
purchase 246,408 shares of Common Stock, issued by the Company to Kings
Road Investments Ltd. on November 13, 2006. Kings Road Investments Ltd.
("Kings Road") is a wholly-owned subsidiary of Polygon Global
Opportunities Master Fund (the "Master Fund"). Polygon Investment Partners
LLP, Polygon Investment Partners LP and Polygon Investment Partners HK
Limited (the "Investment Managers"), Polygon Investments Ltd. (the
"Manager"), the Master Fund, Alexander Jackson, Reade Griffith and Paddy
Dear share voting and/or dispositive power of the securities held by Kings
Road. The Investment Mangers, the Manager, Alexander Jackson, Reade
Griffith and Paddy Dear disclaim beneficial ownership of the securities
held by Kings Road.
(9) The beneficial holder of the securities is SOLA LTD ("SOLA"), a Cayman
Islands exempted company. The investment advisor of SOLA is Solus
Alternative Asset Management LP, a Delaware limited partnership, which is
an investment advisor registered with the SEC under the U.S. Investment
Advisors Act of 1940, as amended. The principals of the Investment
Advisors are Christopher Pucillo, Christopher Bondy, Steven Renehan, and
Nicholas Signorile. Each member disclaims beneficial ownership of the
securities owned by SOLA.
(10) Mr. James G. Dinan exercised voting and investment power over the
securities beneficially owned by York Capital Management, L.P., York
Credit Opportunities Fund, L.P., York Global Value Partners, L.P., York
Investment Limited, York Select, L.P. and York Select Units Trust.
(11) As referenced in footnotes 1, 3, 6, 7 and 8 above, on November 13, 2006,
certain selling stockholders were issued warrants to purchase our Common
Stock in connection with our Senior Notes financing. Prior to the issuance
of the warrants, there were no other securities transactions between our
company and any of the selling stockholders. The below table is provided
to give additional information about the warrants transaction and the
related registration of our Common Stock on behalf of the selling
stockholders.
--------------------------------------------------------------------------------
Number of shares outstanding prior to the
warrants transaction 82,070,754
--------------------------------------------------------------------------------
Number of shares owned by Non-Affiliates(i) prior
to the warrants transaction 37,979,008
--------------------------------------------------------------------------------
Number of underlying shares issued to selling
stockholders in the warrants transaction 2,605,709
--------------------------------------------------------------------------------
Underlying shares issued to selling stockholders in the warrants
transaction as a percentage of the number of shares owned by
Non-Affiliates prior to the warrants transaction 6.9%
--------------------------------------------------------------------------------
Number of underlying shares issued to selling stockholders
in the warrants transaction that were subsequently registered 2,605,709
--------------------------------------------------------------------------------
Underlying shares relating to the warrants transaction that
were subsequently resold by selling stockholders after
being registered 669,719
--------------------------------------------------------------------------------
37
--------------------------------------------------------------------------------
Underlying shares relating to the warrants transaction that
are still held by the selling stockholders after being
registered 1,935,990
--------------------------------------------------------------------------------
Number of shares registered for resale in the current transaction
on behalf of selling stockholders who participated in the
warrants transaction 10,033,466
--------------------------------------------------------------------------------
Market price of the underlying shares at time of the warrant
transaction $6.00
--------------------------------------------------------------------------------
Current market price per share of the underlying shares $5.81
--------------------------------------------------------------------------------
(i) Non-Affiliates are defined as persons other than our executive
officers, directors and other holders who own greater than 10.0% of our Common
Stock. This classification is solely for purposes of this registration statement
and does not reflect a determination that such persons are affiliates for any
other purpose.
38
DESCRIPTION OF CAPITAL STOCK
GENERAL
As of September 29, 2007, we have 92,665,556 shares of our Common Stock
outstanding held by approximately 1,142 holders of record. Our authorized
capital stock consists of 400,000,000 shares of Common Stock, par value $0.001
per share and 25,000,000 shares of preferred stock, par value $0.001 per share,
of which 355,000 shares have been designated as Series A Senior Convertible
Preferred Stock. As of September 29, 2007, we have 355,000 shares of our Series
A Preferred Stock outstanding held by approximately 21 holders of record. The
outstanding shares of our Common Stock and Series A Preferred Stock are fully
paid and non-assessable. As of September 29, 2007, there are 70,531,742 shares
reserved for future issuance, of which 33,376,841 shares are reserved for future
issuance upon the conversion of the Series A Preferred Stock, 22,362,471 shares
are reserved for issuance upon the exercise of granted and outstanding options
and warrants, 13,959,097 shares will be available for future option grants and
833,333 shares are reserved for issuance under an advisory contract. In
addition, up to $142.0 million of our Common Stock may be issued as additional
consideration to former IPWireless shareholders and under the IPWireless
Employee Stock Bonus Plan upon the achievement of certain revenue milestones
related to IPWireless' public safety business and TDtv Business and up to $30.6
million of our Common Stock may be issued as additional consideration to former
GO Network shareholders and under the GO Networks Employee Stock Bonus Plan upon
the achievement of certain revenue milestones relating to the sales of GO
Network's Wi-Fi base station products.
A description of our Common Stock and Series A Preferred Stock appears
below.
COMMON STOCK
Dividend Rights. Holders of outstanding shares of our Common Stock are
entitled to receive dividends out of assets legally available at the times and
in the amounts that our board of directors may determine from time to time.
Voting Rights. Each holder of Common Stock is entitled to one vote for
each share of Common Stock held on all matters submitted to a vote of
stockholders. We have not provided for cumulative voting for the election of
directors in our certificate of incorporation. This means that the holders of a
majority of the shares voted can elect all of the directors then standing for
election.
No Preemptive, Conversion or Redemption Rights. Our Common Stock is not
entitled to preemptive rights and is not subject to conversion or redemption.
Right to Receive Liquidation Distributions. Upon our liquidation,
dissolution or winding-up, the holders of our Common Stock are entitled to share
in all assets remaining after payment of all liabilities and the liquidation
preferences of any outstanding preferred stock. Each outstanding share of Common
Stock is fully paid and nonassessable.
SERIES A PREFERRED STOCK
Dividend Rights. The Series A Preferred Stock is entitled to receive
quarterly dividends on the liquidation preference at a rate of 7.5% per annum.
Until the fourth anniversary of issuance, we can elect whether to declare
dividends in cash or to not declare and pay dividends, in which case the per
share dividend amount will be added to the liquidation preference. From and
after the fourth anniversary of issuance, we must declare dividends in cash each
quarter, subject to applicable law. The dividend rate is subject to adjustment
to 10% per annum if we default in our dividend payment obligations, or fail to
cause a shelf registration statement for resales to be declared effective on or
prior to November 30, 2007. The dividend rate is also subject to adjustment to
15% per annum if we fail to comply with the protective covenants of the Series A
Preferred Stock described below and to 18% per annum if we fail to convert or
redeem the Series A Preferred Stock when required to do so, as described below.
In addition to the aforementioned dividend, our Series A Preferred Stock has the
right to participate, over and above its preference amount, in any dividends or
liquidation proceeds along with the Common Stock, on an as-if converted basis.
39
If we were to pay a dividend in cash or any other property on our Common Stock,
the holders of our Series A Preferred Stock will be entitled to participate in
such dividend on an as-converted basis.
Voting Rights. Pursuant to the terms of the Series A Preferred Stock,
so long as at least 25% of the issued shares of Series A Preferred Stock remain
outstanding, and until the date on which we elect to redeem all shares of Series
A Preferred Stock in connection with an asset sale, as described below, we must
receive the approval of the holders of shares representing at least 75% of the
Series A Preferred Stock then outstanding to (i) incur indebtedness in excess of
$500 million, subject to certain adjustments and exceptions, (ii) create any
capital stock that is senior to or on a parity with the Series A Preferred Stock
in terms of dividends, distributions or other rights, or (iii) consummate asset
sales involving the receipt of gross proceeds of, or the disposition of assets
worth, $500 million or more based on their fair market value. In addition, so
long as at least 25% of the issued shares of Series A Preferred Stock remain
outstanding, we may not distribute rights or warrants to all holders of our
Common Stock entitling them to purchase shares of our Common Stock, or
consummate any sale of our Common Stock, for an amount less than the fair market
value on the date of issuance, with certain exceptions. With respect to other
matters requiring stockholder approval, the shares of Series A Preferred Stock
will be entitled to vote as one class with the Common Stock on an as-converted
basis.
Conversion Rights and Redemption Rights. Each share of Series A
Preferred Stock is convertible into a number of shares of our Common Stock equal
to the liquidation preference then in effect divided by $11.05. If all shares of
Series A Preferred Stock were to be converted at September 29, 2007, we would be
obligated to issue 33,376,841 shares of our Common Stock. The Series A Preferred
Stock is convertible at any time at the option of the holder, or at our election
after the 18-month anniversary of issuance, subject to the trading price of our
Common Stock reaching $22.10 for a specified period of time, except that such
threshold price will be reduced to $16.575 on the earlier of the third
anniversary of issuance or our consummation of a qualified public offering. We
will not be entitled to convert the Series A Preferred Stock at our election
unless a shelf registration statement covering the shares of Common Stock issued
upon conversion is then effective or the shares are no longer considered
restricted securities under the Securities Act. The conversion price of the
Series A Preferred Stock will be adjusted from time to time upon the occurrence
of stock dividend, stock split or combination of shares. Upon such an event, the
conversion price will be adjusted by multiplying the current conversion price by
a fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately prior to such event and the denominator of which is the
number of shares or Common Stock outstanding immediately after such event.
We will be required to redeem all outstanding shares of Series A
Preferred Stock, if any, on March 28, 2017, at a price equal to the liquidation
preference plus unpaid dividends. The Series A Preferred Stock has an initial
liquidation preference of $1,000 per share, subject to increase for accrued
dividends as described above. If we elect to convert the Series A Preferred
Stock after our Common Stock price has reached the qualifying threshold, we must
redeem the shares of holders of Series A Preferred Stock who elect not to
convert into Common Stock at a price equal to 130% of the liquidation
preference. However, we are not required to redeem more than 50% of the shares
of Series A Preferred Stock subject to any particular conversion notice. In the
event that we fail to obtain approval of the holders of Series A Preferred Stock
to an asset sale transaction, we must either not consummate such asset sale or
elect to redeem all shares of Series A Preferred Stock at a redemption price
equal to 120% of the liquidation preference. Holders will be entitled to opt-out
of such a redemption.
Right to Receive Liquidation Distributions. The Series A Preferred
Stock has an initial liquidation preference of $1,000 per share, subject to
increase for accrued dividends as described above. The liquidation preference
would become payable upon redemption, as described above, upon a liquidation or
dissolution of our company, or upon deemed liquidation events including a change
in control, merger or sale of all or substantially all our assets, unless the
holders of Series A Preferred Stock provide a 75% vote to not treat a covered
event as a deemed liquidation. Upon a deemed liquidation event - including a
change in control, merger or sale of all or substantially all our assets - the
Series A Preferred Stock will be entitled to receive an amount per share equal
to the greater of 120% of the liquidation preference or the amount that would
have been received if such share had converted into Common Stock in connection
with such event.
ANTI-TAKEOVER EFFECTS OF DELAWARE LAW AND THE CERTIFICATE OF INCORPORATION AND
BYLAWS OF NEXTWAVE WIRELESS INC.
40
The provisions of Delaware law, as well as our certificate of
incorporation and bylaws described below may have the effect of delaying,
deferring or discouraging another party from acquiring control of our company.
Delaware Law
Effective upon the listing of our Common Stock on The Nasdaq Global
Market, our company became subject to the provisions of Section 203 of the
Delaware General Corporation Law regulating corporate takeovers. In general,
those provisions prohibit a Delaware corporation from engaging in any business
combination with any interested stockholder for a period of three years
following the date that the stockholder became an interested stockholder,
unless: the transaction is approved by the board of directors before the date
the interested stockholder attained that status; upon consummation of the
transaction that resulted in the stockholder becoming an interested stockholder,
the interested stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced; or on or after
the date the business combination is approved by the board of directors and
authorized at a meeting of stockholders by at least two-thirds of the
outstanding voting stock that is not owned by the interested stockholder.
Section 203 defines business combination to include the following: any
merger or consolidation involving the corporation and the interested
stockholder; any sale, transfer, pledge or other disposition of 10% or more of
the assets of the corporation involving the interested stockholder; subject to
certain exceptions, any transaction that results in the issuance or transfer by
the corporation of any stock of the corporation to the interested stockholder;
any transaction involving the corporation that has the effect of increasing the
proportionate share of the stock of any class or series of the corporation
beneficially owned by the interested stockholder; or the receipt by the
interested stockholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation.
In general, Section 203 defines an interested stockholder as any entity
or person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by any of these entities or persons. A Delaware corporation may opt
out of this provision either with an express provision in its original
certificate of incorporation or in an amendment to its certificate of
incorporation or bylaws approved by its stockholders. However, we have not opted
out, and do not currently intend to opt out of this provision. The statute could
prohibit or delay mergers or other takeover or change in control attempts and,
accordingly, may discourage attempts to acquire us.
Certificate of Incorporation and Bylaws
Our certificate of incorporation and bylaws provide that:
o our directors serve staggered, three-year terms and accordingly,
pursuant to Delaware law, can only be removed with cause;
o no action can be taken by stockholders except at an annual or
special meeting of the stockholders called in accordance with our
bylaws, and stockholders may not act by written consent;
o our board of directors will be expressly authorized to make, alter
or repeal our bylaws, and our stockholders will be able to make,
alter or repeal our bylaws by a vote of 66-2/3% of the issued and
outstanding voting shares;
o any vacancies on the board of directors would be filled by a
majority vote of the board;
o our board of directors will be authorized to issue preferred stock
without stockholder approval; and
o we will indemnify officers and directors against losses that they
may incur in investigations and legal proceedings resulting from
41
their services to us, which may include services in connection with
takeover defense measures.
NASDAQ GLOBAL MARKET LISTING
Our Common Stock is listed on The Nasdaq Global Market under the ticker
symbol "WAVE".
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our Common Stock is Computershare
Trust Company, N.A.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERENCE DIVIDENDS
--------------------------------------------------------------------------------
NINE INCEPTION
ENDED YEAR (APRIL 13,
MONTHS ENDED 2005) TO
SEPTEMBER DECEMBER DECEMBER
IN THOUSANDS 30, 2007 30, 2006 31, 2005
--------- --------- ---------
FIXED CHARGES:
Interest expensed and
capitalized 18,9725 11,144 67
Amortized premiums,
discounts and capitalized
expenses related to
indebtedness 15,647 9,503 939
Estimated interest within
rental expense 1,364 1,168 797
Preference securities
dividend requirements of
consolidated subsidiaries 13,814 -- --
--------- --------- ---------
Total Fixed Charges $ 49,797 $ 21,815 $ 1,803
EARNINGS:
Pretax loss before
minority interest $(215,808) $(106,663) $ (45,662)
Add: Fixed charges 49,797 21,815 1,803
--------- --------- ---------
Subtotal (166,011) (84,848) (43,859)
Less:
Preference security
dividend requirements of
consolidated subsidiaries 13,814 -- --
Minority interest in
pre-tax loss of subs that
have not incurred fixed
charges (1,048) (1,608) (127)
--------- --------- ---------
Total Earnings $(178,777) $ (83,240) $ (43,732)
Ratio of earnings to fixed
charges (1) -- -- --
--------------------------------------------------------------------------------
42
(1) Due to the Company's reported pretax loss before minority interest, the
ratio of earnings to fixed charges was less than 1:1 and earnings were
insufficient to cover fixed charges by $228.6 million, $105.1 million and $45.5
million for the nine months ended September 30, 2007, the year ended December
31, 2006 and the period from inception (April 13, 2005) to December 31, 2005,
respectively.
43
PLAN OF DISTRIBUTION
The Selling Stockholders (the "Selling Stockholders") of the Common
Stock and any of their pledgees, assignees and successors-in-interest may, from
time to time, sell any or all of their shares of Common Stock on the Nasdaq
Global Market or any other stock exchange, market or trading facility on which
the shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The Selling Stockholders may use any one or more of the
following methods when selling shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchases;
o block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o settlement of short sales entered into after the effective date of
the registration statement of which this prospectus is a part;
o broker-dealers may agree with the Selling Stockholders to sell a
specified number of such shares at a stipulated price per share;
o through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise;
o a combination of any such methods of sale; or
o any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"), if available, rather
than under this prospectus.
Broker-dealers engaged by the Selling Stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated, but, except as set forth in a supplement to this Prospectus, in the
case of an agency transaction not in excess of a customary brokerage commission
in compliance with NASDR Rule 2440; and in the case of a principal transaction a
markup or markdown in compliance with NASDR IM-2440.
In connection with the sale of the Common Stock or interests therein,
the Selling Stockholders may enter into hedging transactions with broker-dealers
or other financial institutions, which may in turn engage in short sales of the
Common Stock in the course of hedging the positions they assume. The Selling
Stockholders may also sell shares of the Common Stock short and deliver these
securities to close out their short positions, or loan or pledge the Common
Stock to broker-dealers that in turn may sell these securities. The Selling
Stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).
The Selling Stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
44
commissions or discounts under the Securities Act. The Selling Stockholders have
informed the Company that they do not have any written or oral agreement or
understanding, directly or indirectly, with any person to distribute the Common
Stock or the Series A Preferred Stock. In no event shall any broker-dealer
receive fees, commissions and markups that, in the aggregate, would exceed eight
percent (8%).
The Company is required to pay certain fees and expenses incurred by
the Company incidental to the registration of the shares. The Company has agreed
to indemnify the Selling Stockholders against certain losses, claims, damages
and liabilities, including liabilities under the Securities Act.
Because a Selling Stockholder may be deemed to be an "underwriter"
within the meaning of the Securities Act, it will be subject to the prospectus
delivery requirements of the Securities Act including Rule 172 thereunder. In
addition, any securities covered by this prospectus which qualify for sale
pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather
than under this prospectus. There is no underwriter or coordinating broker
acting in connection with the proposed sale of the resale shares by the Selling
Stockholders.
We agreed to keep this prospectus effective until the earlier of (i)
the date on which the shares may be resold by the Selling Stockholders without
registration and without regard to any volume limitations by reason of Rule
144(k) under the Securities Act or any other rule of similar effect or (ii) all
of the shares have been sold pursuant to this prospectus or Rule 144 under the
Securities Act or any other rule of similar effect. The resale shares will be
sold only through registered or licensed brokers or dealers if required under
applicable state securities laws. In addition, in certain states, the resale
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 is complied with.
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the resale shares may not simultaneously
engage in market making activities with respect to the Common Stock for the
applicable restricted period, as defined in Regulation M, prior to the
commencement of the distribution. In addition, the Selling Stockholders will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including Regulation M, which may limit the timing of
purchases and sales of shares of the Common Stock by the Selling Stockholders or
any other person. We will make copies of this prospectus available to the
Selling Stockholders and have informed them of the need to deliver a copy of
this prospectus to each purchaser at or prior to the time of the sale.
45
LEGAL MATTERS
The validity of our shares of Common Stock offered hereby will be
passed upon for us by Weil, Gotshal & Manges LLP, New York, New York.
EXPERTS
Ernst & Young LLP, independent registered public accounting firm, has
audited NextWave Wireless Inc.'s consolidated financial statements and schedule
at December 30, 2006 and December 31, 2005, and for the fiscal year ended
December 30, 2006 and the period from April 13, 2005 (inception) to December 31,
2005, as set forth in their report. We have incorporated by reference NextWave
Wireless Inc.'s consolidated financial statements and schedule in the prospectus
and elsewhere in the registration statement in reliance on Ernst & Young LLP's
report, given on their authority as experts in accounting and auditing.
The consolidated financial statements of IPWireless, Inc. as of
December 31, 2006 and 2005, and for each of the years in the two-year period
ended December 31, 2006, have been incorporated by reference herein in reliance
upon the reports of KPMG LLP, independent registered public accounting firm and
upon the authority of said firm as experts in accounting and auditing.
The audit report covering the December 31, 2006, consolidated financial
statements contains an explanatory paragraph that states that the Company's
recurring losses from operations and net capital deficiency raise substantial
doubt about the entity's ability to continue as a going concern. The
consolidated financial statements do not include any adjustments that might
result from the outcome of that uncertainty.
The audit report covering the December 31, 2006 financial statements
refers to a the adoption of Statement of Financial Accounting Standards No 123 (
R) Share-Based Payment, and Financial Accounting Standards Board Statements of
Position 150-5, Issuers Accounting under FASB Statement No. 150 for Freestanding
Warrants and Other Similar Instruments on Shares that are Redeemable.
46
WHERE YOU CAN FIND MORE INFORMATION
We file reports and other information with the SEC. On November 13,
2006, we became a SEC reporting company as a successor to NextWave Wireless LLC.
Copies of NextWave Wireless LLC's and our reports and other information may be
inspected and copied at the public reference facilities maintained by the SEC at
SEC Headquarters, Public Reference Section, 100 F Street, N.E., Washington D.C.
20549. The public may obtain information on the operation of the SEC's public
reference facilities by calling the SEC at 1-800-SEC-0330.
Copies of these materials can also be obtained by mail at prescribed
rates from the Public Reference Section of the SEC at SEC Headquarters or by
calling the SEC at 1-800-SEC-0330. The SEC maintains a website that contains
reports and other information regarding NextWave Wireless LLC. The address of
the SEC website is http://www.sec.gov.
You should rely only on the information contained in this prospectus or
on information to which NextWave has referred you. We have not authorized anyone
else to provide you with any information.
47
INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" in this prospectus
certain of the information we file with the SEC. This means we can disclose
important information to you by referring you to another document that has been
filed separately with the SEC. The information incorporated by reference is
considered to be part of this prospectus, and will modify and supersede the
information included in this prospectus to the extent that the information
included as incorporated by reference modifies or supersedes the existing
information.
The following documents filed by us with the SEC are hereby
incorporated by reference:
o Annual Report on Form 10-K for the fiscal year ended December 30,
2006;
o Quarterly Reports on Form 10-Q for the quarter ended March 31, 2007,
the quarter ended June 30, 2007 and the quarter ended September 29,
2007;
o Amended Quarterly Report on Form 10-Q/A filed April 20, 2007;
o Current Reports on Form 8-K filed on January 3, 2007, April 12,
2007, May 8, 2007, May 17, 2007, May 23, 2007, November 2, 2007 and
November 16, 2007;
o Amendment No. 1 to the Current Report on Form 8-K, filed on July 25,
2007, relating to the Current Report on Form 8-K, filed on May 17,
2007;
o Definitive Proxy Statement on Schedule 14A dated April 19, 2007,
relating to our annual meeting of stockholders held on May 17, 2007;
and
o all documents we have filed with the Commission pursuant to Sections
13(a), 13(c), 14, or 15(d) of the Securities o Exchange Act of 1934
after the date of the initial registration statement and prior to
the effectiveness of the registration statement, as well as
subsequent to the date of this prospectus and prior to the
termination of this offering, shall be deemed to be incorporated by
reference into this prospectus and to be part of this prospectus
from the date of the filing of the documents
Copies of these filings are available free of charge by writing to
NextWave Wireless Inc., 12670 High Bluff Drive, San Diego, California 92130,
Attention: Investor Relations, or by telephoning us at (858) 480-3100.
Any statement made in this prospectus concerning the contents of any
contract, agreement or other document is only a summary of the actual document.
You may obtain a copy of any document summarized in this prospectus at no cost
by writing to or telephoning us at the address and telephone number given above.
Each statement regarding a contract, agreement or other document is qualified in
its entirety by reference to the actual document.
48
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated fees and expenses (except
for the SEC registration fee, the National Association of Securities Dealers,
Inc. filing fee and The Nasdaq Global Market listing fee) payable by the
registrant in connection with the registration of the Common Stock:
SEC registration fee $ 3,902
Printer expenses $ N/A
Legal fees and expenses $ 75,000
Accounting fees and expenses $ 75,000
------------------
Total $ 153,902
==================
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits our board
of directors to indemnify any person against expenses (including attorneys'
fees), judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him or her in connection with any threatened, pending, or completed
action, suit, or proceeding in which such person is made a party by reason of
his or her being or having been a director, officer, employee, or agent of us,
or serving or having served, at our request, as a director, officer, employee,
or agent of another corporation, partnership, joint venture, trust, or other
enterprise, in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act. The statute provides that
indemnification pursuant to its provisions is not exclusive of other rights of
indemnification to which a person may be entitled under any bylaw, agreement,
vote of stockholders or disinterested directors, or otherwise.
We have adopted provisions in our certificate of incorporation and
bylaws that limit the liability of our directors and officers for any loss,
claim or damage incurred by reason of any act or omission performed or omitted
by such person on our behalf and in good faith and in a manner reasonably
believed to be within the scope of the authority conferred on such person by our
bylaws. However, a director or officer will be liable for any act or omission
(i) not performed or omitted in good faith or which such person did not
reasonably believe to be in our best interests or which involved intentional
misconduct or knowing violation of the law or (ii) from which such person
received an improper personal benefit.
We will advance the costs incurred by or on behalf of any director or
officer in connection with any indemnified loss within 20 days after we receive
a detailed statement providing reasonable documentation of such costs and
providing a written undertaking stating that such person will repay all advanced
costs if it is later determined that such individual was entitled to
indemnification by us. We believe that the limitation of liability provision in
our by-laws will facilitate our ability to continue to attract and retain
qualified individuals to serve as directors and officers.
II-1
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
INDEX TO EXHIBITS
NUMBER DESCRIPTION
-------- -----------------------------------------------------------------
2.1 Third Joint Plan of Reorganization Under Chapter 11 of the
Bankruptcy Code of NextWave Personal Communications Inc.,
NextWave Power Partners Inc., NextWave Partners Inc., NextWave
Wireless Inc. and NextWave Telecom Inc., dated January 21, 2005
(incorporated by reference to Exhibit 2.1 to the Registration
Statement on Form 10 of NextWave Wireless LLC filed May 1, 2006
(the "Form 10"))***
2.2 Agreement and Plan of Merger, dated as of May 25, 2005, by and
among NextWave Wireless LLC, PVC Acquisition Corp., PacketVideo
Corporation and William D. Cvengros, as the Stockholder
Representative (incorporated by reference to Exhibit 2.2 to
Amendment #1 to the Registration Statement on Form 10 of NextWave
Wireless LLC filed June 29, 2006 ("Amendment #1 to the Form
10"))***
2.3 Agreement and Plan of Merger, dated November 7, 2006, by and
among NextWave Wireless Inc., NextWave Wireless LLC and NextWave
Merger LLC (incorporated by reference to Exhibit 2.1 to the
Current Report on Form 8-K of NextWave Wireless Inc. filed
November 7, 2006)***
2.4 Agreement and Plan of Merger, dated as of December 31, 2006, by
and among NextWave Wireless Inc., Go Acquisition Corp., GO
Networks, Inc. and Nechemia J. Peres, as Stockholder
Representative (incorporated by reference to Exhibit 2.1 to the
Current Report on Form 8-K of NextWave Wireless Inc. filed
January 3, 2007)***
2.5 Agreement and Plan of Merger, dated as of April 6, 2007, by and
among NextWave Wireless Inc., IPW, LLC, IPWireless, Inc. and J.
Taylor Crandall, as Stockholder Representative (incorporated by
reference to Exhibit 2.1 to the Current Report on Form 8-K of
NextWave Wireless Inc. filed April 12, 2007)***
3.1 Amended and Restated Certificate of Incorporation of NextWave
Wireless Inc. (incorporated by reference to Exhibit 3.1 to
Amendment #2 to the Company's Registration Statement on Form S-4
filed November 17, 2006 ("Amendment #2 to the Form S-4"))***
3.2 Amended and Restated Bylaws of NextWave Wireless Inc.
(incorporated by reference to Exhibit 3.2 to the Current Report
on Form 8-K of NextWave Wireless Inc. filed November 2, 2007)***
4.1 Specimen common stock certificate (incorporated by reference to
Exhibit 4.1 to Amendment #2 to the Form S-4)***
4.2 Form of Station 4, LLC Warrant (incorporated by reference to
Exhibit 4.2 to the Form 10)***
4.3 Indenture, dated April 13, 2005, by and between NextWave Wireless
LLC and JPMorgan Chase Bank, N.A., as trustee (with respect to
$149,000,000 Non-Recourse Secured Notes) (incorporated by
reference to Exhibit 4.2 to the Form 10)***
4.4 Purchase Agreement, dated as of July 17, 2006, among NextWave
Wireless LLC, as issuer, NextWave Broadband Inc., NW Spectrum
Co., AWS Wireless Inc., and PacketVideo Corporation, as
subsidiary guarantors, the note purchasers party thereto and The
Bank of New York, as collateral agent (incorporated by reference
to Exhibit 4.1 to the Current Report on Form 8-K/A of NextWave
Wireless LLC filed September 8, 2006)***
4.5 Warrant Agreement, dated as of July 17, 2006, among NextWave
Wireless Inc. and the Holders listed on Schedule I thereto
(incorporated by reference to Exhibit 4.2 to the Current Report
on Form 8-K of NextWave Wireless LLC filed July 21, 2006 (the
"July 21, 2006 Form 8-K"))***
II-2
NUMBER DESCRIPTION
-------- -----------------------------------------------------------------
4.6 Registration Rights Agreement, dated as of July 17, 2006, among
NextWave Wireless Inc. and the Purchasers listed on Schedule I
thereto (incorporated by reference to Exhibit 4.3 to the July 21,
2006 Form 8-K)***
4.7 Certificate of Designations for NextWave Wireless Inc.'s Series A
Senior Convertible Preferred Stock (incorporated by reference to
Exhibit 4.4 to the Company's Annual Report on Form 10-K filed
March 30, 2007 (the "2006 10-K"))***
4.8 Securities Purchase Agreement, dated March 28, 2007, by and among
NextWave Wireless Inc. and the Purchasers listed on Schedule I
(the "Purchasers") thereto (incorporated by reference to Exhibit
10.19 to the 2006 10-K)***
4.9 Registration Rights Agreement, dated March 28, 2007, among
NextWave Wireless Inc. and the Purchasers (incorporated by
reference to Exhibit 10.20 to the 2006 10-K)***
5.1 Opinion of Weil, Gotshal & Manges LLP*
8.1 Opinion Regarding Tax Matters, provided by Weil, Gotshal & Manges
LLP*
10.1 NextWave Wireless Inc. 2005 Stock Incentive Plan (incorporated by
reference to Exhibit 99.1 to the Company's Post-Effective
Amendment #1 on Form S-8 filed January 19, 2007)***
10.2 PacketVideo Corporation 2005 Equity Incentive Plan (incorporated
by reference to Exhibit 10.2 to the Form 10)***
10.3 CYGNUS Communications, Inc. 2004 Stock Option Plan (incorporated
by reference to Exhibit 10.3 to the Form 10)***
10.4 Acquisition Agreement by and among NextWave Telecom Inc., Cellco
Partnership D/B/A Verizon Wireless and VZW Corp., dated as of
November 4, 2004 (incorporated by reference to Exhibit 10.4 to
the Form 10)***
10.5 Option Agreement between NextWave Wireless LLC and Manchester
Financial Group LP (incorporated by reference to Exhibit 10.5 to
the Form 10)***
10.6 NextWave Wireless Inc. 2005 Stock Incentive Plan Option Award
Agreement (incorporated by reference to Exhibit 99.3 to the
Company ` s Registration Statement on Form S-8 filed December 7,
2006)***
10.7 Acquisition Agreement, dated as of May 9, 2006, by and among (i)
NextWave Wireless LLC, (ii) NW Spectrum Co., (iii) WCS Wireless,
Inc., (iv) Columbia WCS III, Inc., (v) TKH Corp., (vi) Columbia
Capital Equity Partners III (Cayman), L.P., the sole stockholder
of Columbia WCS III, Inc., (vii) each of the stockholders of TKH
Corp., namely, Aspen Partners Series A, Series of Aspen Capital
Partners, L.P., Oak Foundation USA, Inc., Enteraspen Limited, and
The Reed Institute dba Reed College and (viii) Columbia Capital,
LLC, as the Stockholder Representative (incorporated by reference
to Exhibit 10.7 to Amendment #1 of the Form 10)***
10.8 Spectrum Acquisition Agreement, dated as of October 13, 2005,
between NextWave Broadband Inc. and Bal-Rivgam, LLC (incorporated
by reference to Exhibit 10.8 to Amendment #1 of the Form 10)***
10.9 Guaranty, dated as of July 17, 2006, by and among NextWave
Broadband, Inc., NW Spectrum Co., AWS Wireless Inc., PacketVideo
Corporation and The Bank of New York, as Collateral Agent
(incorporated by reference to Exhibit 10.1 to the July 21, 2006
Form 8-K)***
10.10 Parent Guaranty, dated as of July 17, 2006, between NextWave
Wireless Inc. and The Bank of New York, as Collateral Agent
(incorporated by reference to Exhibit 10.2 to the July 21, 2006
Form 8-K)***
II-3
NUMBER DESCRIPTION
-------- -----------------------------------------------------------------
10.11 Pledge and Security Agreement, dated as of July 17, 2006, by and
among NextWave Wireless LLC, the undersigned direct and indirect
subsidiaries of NextWave Wireless LLC, each additional Grantor
that may become a party thereto and The Bank of New York, as
Collateral Agent (incorporated by reference to Exhibit 10.3 to
the July 21, 2006 Form 8-K)***
10.12 NextWave Wireless Inc. 2007 New Employee Stock Incentive Plan
(incorporated by reference to Exhibit 10.17 to the 2006 10-K)***
10.13 GO Networks, Inc. Stock Bonus Plan (incorporated by reference to
Exhibit 10.18 to the 2006 10-K)***
10.14 NextWave Wireless, Inc. 2007 New Employee Stock Incentive Plan
(incorporated by reference to Exhibit 99.5 to the Registration
Statement on Form S-8 of NextWave Wireless Inc. filed May 2, 2007
(the "May 2, 2007 Form S-8")***
10.15 NextWave Wireless Inc. 2007 New Employee Stock Incentive Plan
Option Award Agreement (incorporated by reference to Exhibit 99.6
to the May 2, 2007 Form S-8)***
10.16 Amendment to NextWave Wireless Inc. 2007 New Employee Stock
Incentive Plan (incorporated by reference to Exhibit 99.2 to the
Registration Statement on Form S-8 of NextWave Wireless Inc.
filed July 11, 2007)***
10.17 IPWireless, Inc. Employee Stock Bonus Plan (incorporated by
reference to Exhibit 99.1 to the Registration Statement on Form
S-8 of NextWave Wireless Inc. filed July 11, 2007)***
11.1 Statement of Computation of Earnings Per Share (required
information contained in this Registration Statement)
12.1 Statement of Computation of Ratio of Earnings to Fixed Charges
and Preference Dividends***
21.1 Subsidiaries of the registrant (incorporated by reference to
Exhibit 21.1 to Amendment #1 of the Form 10)***
23.1 Consent of Ernst & Young LLP, Independent Registered Public
Accounting Firm**
23.2 Consent of KPMG LLP, Independent Registered Public Accounting
Firm**
23.3 Consent of Weil, Gotshal & Manges LLP (included in Exhibit 5.1) *
* Previously filed.
** Filed herewith.
*** Incorporated 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 Commission 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;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
Provided, however, that:
Paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) of this section do not
apply if the Registration Statement is on Form S-3 (ss.239.13 of this
chapter) or Form F-3 (ss.239.33 of this chapter) and the information
required to be included in a post-effective amendment by those paragraphs
is contained in reports filed with or furnished to the Commission by the
registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
Registration Statement, or is contained in a form of prospectus filed
pursuant to Rule 424(b) (ss.230.424(b) of this chapter) that is part of
the 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 therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
(b) That, for 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 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(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 the foregoing 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 Act 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 Act and will be governed by the final
adjudication of such issue.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on November 26, 2007.
NextWave Wireless Inc.
By: /s/ Frank A. Cassou
------------------------------------
Frank A. Cassou
Executive Vice President - Corporate
Development and Chief Legal Counsel,
Secretary
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned constitutes
and appoints each of Frank A. Cassou, George C. Alex and Roseann Rustici, or any
of them, each acting alone, his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for such person and in his name,
place and stead, in any and all capacities, to sign this Registration Statement
on Form S-3 (including all pre-effective and post-effective amendments and
registration statements filed pursuant to Rule 462 under the Securities Act of
1933), and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the SEC, granting unto said attorneys-in-fact and
agents, each acting alone, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming that any such attorney-in-fact and
agent, or his/her substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on November 26, 2007.
NAME TITLE
------------------------------ ------------------------------------------
Chairman of the Board of Directors,
* Chief Executive Officer and President
--------------------------- (Principal Executive Officer)
Allen Salmasi
Executive Vice President -
* Chief Financial Officer
--------------------------- (Principal Financial Officer)
George C. Alex
Executive Vice President -
* Chief Accounting Officer
--------------------------- (Principal Accounting Officer)
Francis J. Harding
* Director
---------------------------
James C. Brailean
* Director
---------------------------
William Jones
* Director
---------------------------
Douglas F. Manchester
II-5
Director
---------------------------
Jack Rosen
* Director
---------------------------
Robert T. Symington
* Director
---------------------------
William H. Webster
*By: /s/ Frank A. Cassou
---------------------------
Frank A. Cassou
As Attorney-in-Fact
II-6
INDEX TO EXHIBITS
NUMBER DESCRIPTION
-------- -----------------------------------------------------------------
2.1 Third Joint Plan of Reorganization Under Chapter 11 of the
Bankruptcy Code of NextWave Personal Communications Inc.,
NextWave Power Partners Inc., NextWave Partners Inc., NextWave
Wireless Inc. and NextWave Telecom Inc., dated January 21, 2005
(incorporated by reference to Exhibit 2.1 to the Registration
Statement on Form 10 of NextWave Wireless LLC filed May 1, 2006
(the "Form 10"))***
2.2 Agreement and Plan of Merger, dated as of May 25, 2005, by and
among NextWave Wireless LLC, PVC Acquisition Corp., PacketVideo
Corporation and William D. Cvengros, as the Stockholder
Representative (incorporated by reference to Exhibit 2.2 to
Amendment #1 to the Registration Statement on Form 10 of NextWave
Wireless LLC filed June 29, 2006 ("Amendment #1 to the Form
10"))***
2.3 Agreement and Plan of Merger, dated November 7, 2006, by and
among NextWave Wireless Inc., NextWave Wireless LLC and NextWave
Merger LLC (incorporated by reference to Exhibit 2.1 to the
Current Report on Form 8-K of NextWave Wireless Inc. filed
November 7, 2006)***
2.4 Agreement and Plan of Merger, dated as of December 31, 2006, by
and among NextWave Wireless Inc., Go Acquisition Corp., GO
Networks, Inc. and Nechemia J. Peres, as Stockholder
Representative (incorporated by reference to Exhibit 2.1 to the
Current Report on Form 8-K of NextWave Wireless Inc. filed
January 3, 2007)***
2.5 Agreement and Plan of Merger, dated as of April 6, 2007, by and
among NextWave Wireless Inc., IPW, LLC, IPWireless, Inc. and J.
Taylor Crandall, as Stockholder Representative (incorporated by
reference to Exhibit 2.1 to the Current Report on Form 8-K of
NextWave Wireless Inc. filed April 12, 2007)***
3.1 Amended and Restated Certificate of Incorporation of NextWave
Wireless Inc. (incorporated by reference to Exhibit 3.1 to
Amendment #2 to the Company's Registration Statement on Form S-4
filed November 17, 2006 ("Amendment #2 to the Form S-4"))***
3.2 Amended and Restated Bylaws of NextWave Wireless Inc.
(incorporated by reference to Exhibit 3.2 to the Current Report
on Form 8-K of NextWave Wireless Inc. filed November 2, 2007)***
4.1 Specimen common stock certificate (incorporated by reference to
Exhibit 4.1 to Amendment #2 to the Form S-4)***
4.2 Form of Station 4, LLC Warrant (incorporated by reference to
Exhibit 4.2 to the Form 10)***
4.3 Indenture, dated April 13, 2005, by and between NextWave Wireless
LLC and JPMorgan Chase Bank, N.A., as trustee (with respect to
$149,000,000 Non-Recourse Secured Notes) (incorporated by
reference to Exhibit 4.2 to the Form 10)***
4.4 Purchase Agreement, dated as of July 17, 2006, among NextWave
Wireless LLC, as issuer, NextWave Broadband Inc., NW Spectrum
Co., AWS Wireless Inc., and PacketVideo Corporation, as
subsidiary guarantors, the note purchasers party thereto and The
Bank of New York, as collateral agent (incorporated by reference
to Exhibit 4.1 to the Current Report on Form 8-K/A of NextWave
Wireless LLC filed September 8, 2006)***
4.5 Warrant Agreement, dated as of July 17, 2006, among NextWave
Wireless Inc. and the Holders listed on Schedule I thereto
(incorporated by reference to Exhibit 4.2 to the Current Report
on Form 8-K of NextWave Wireless LLC filed July 21, 2006 (the
"July 21, 2006 Form 8-K"))***
4.6 Registration Rights Agreement, dated as of July 17, 2006, among
NextWave Wireless Inc. and the Purchasers listed on Schedule I
thereto (incorporated by reference to Exhibit 4.3 to the July 21,
2006 Form 8-K)***
II-7
NUMBER DESCRIPTION
-------- -----------------------------------------------------------------
4.7 Certificate of Designations for NextWave Wireless Inc.'s Series A
Senior Convertible Preferred Stock (incorporated by reference to
Exhibit 4.4 to the Company's Annual Report on Form 10-K filed
March 30, 2007 (the "2006 10-K"))***
4.8 Securities Purchase Agreement, dated March 28, 2007, by and among
NextWave Wireless Inc. and the Purchasers listed on Schedule I
(the "Purchasers") thereto (incorporated by reference to Exhibit
10.19 to the 2006 10-K)***
4.9 Registration Rights Agreement, dated March 28, 2007, among
NextWave Wireless Inc. and the Purchasers (incorporated by
reference to Exhibit 10.20 to the 2006 10-K)***
5.1 Opinion of Weil, Gotshal & Manges LLP*
8.1 Opinion Regarding Tax Matters, provided by Weil, Gotshal & Manges
LLP*
10.1 NextWave Wireless Inc. 2005 Stock Incentive Plan (incorporated by
reference to Exhibit 99.1 to the Company's Post-Effective
Amendment #1 on Form S-8 filed January 19, 2007)***
10.2 PacketVideo Corporation 2005 Equity Incentive Plan (incorporated
by reference to Exhibit 10.2 to the Form 10)***
10.3 CYGNUS Communications, Inc. 2004 Stock Option Plan (incorporated
by reference to Exhibit 10.3 to the Form 10)***
10.4 Acquisition Agreement by and among NextWave Telecom Inc., Cellco
Partnership D/B/A Verizon Wireless and VZW Corp., dated as of
November 4, 2004 (incorporated by reference to Exhibit 10.4 to
the Form 10)***
10.5 Option Agreement between NextWave Wireless LLC and Manchester
Financial Group LP (incorporated by reference to Exhibit 10.5 to
the Form 10)***
10.6 NextWave Wireless Inc. 2005 Stock Incentive Plan Option Award
Agreement (incorporated by reference to Exhibit 99.3 to the
Company ` s Registration Statement on Form S-8 filed December 7,
2006)***
10.7 Acquisition Agreement, dated as of May 9, 2006, by and among (i)
NextWave Wireless LLC, (ii) NW Spectrum Co., (iii) WCS Wireless,
Inc., (iv) Columbia WCS III, Inc., (v) TKH Corp., (vi) Columbia
Capital Equity Partners III (Cayman), L.P., the sole stockholder
of Columbia WCS III, Inc., (vii) each of the stockholders of TKH
Corp., namely, Aspen Partners Series A, Series of Aspen Capital
Partners, L.P., Oak Foundation USA, Inc., Enteraspen Limited, and
The Reed Institute dba Reed College and (viii) Columbia Capital,
LLC, as the Stockholder Representative (incorporated by reference
to Exhibit 10.7 to Amendment #1 of the Form 10)***
10.8 Spectrum Acquisition Agreement, dated as of October 13, 2005,
between NextWave Broadband Inc. and Bal-Rivgam, LLC (incorporated
by reference to Exhibit 10.8 to Amendment #1 of the Form 10)***
10.9 Guaranty, dated as of July 17, 2006, by and among NextWave
Broadband, Inc., NW Spectrum Co., AWS Wireless Inc., PacketVideo
Corporation and The Bank of New York, as Collateral Agent
(incorporated by reference to Exhibit 10.1 to the July 21, 2006
Form 8-K)***
10.10 Parent Guaranty, dated as of July 17, 2006, between NextWave
Wireless Inc. and The Bank of New York, as Collateral Agent
(incorporated by reference to Exhibit 10.2 to the July 21, 2006
Form 8-K)***
10.11 Pledge and Security Agreement, dated as of July 17, 2006, by and
among NextWave Wireless LLC, the undersigned direct and indirect
subsidiaries of NextWave Wireless LLC, each additional Grantor
that may become a party thereto and The Bank of New York, as
Collateral Agent (incorporated by reference to Exhibit 10.3 to
the July 21, 2006 Form 8-K)***
II-8
NUMBER DESCRIPTION
-------- -----------------------------------------------------------------
10.12 NextWave Wireless Inc. 2007 New Employee Stock Incentive Plan
(incorporated by reference to Exhibit 10.17 to the 2006 10-K)***
10.13 GO Networks, Inc. Stock Bonus Plan (incorporated by reference to
Exhibit 10.18 to the 2006 10-K)***
10.14 NextWave Wireless, Inc. 2007 New Employee Stock Incentive Plan
(incorporated by reference to Exhibit 99.5 to the Registration
Statement on Form S-8 of NextWave Wireless Inc. filed May 2, 2007
(the "May 2, 2007 Form S-8")***
10.15 NextWave Wireless Inc. 2007 New Employee Stock Incentive Plan
Option Award Agreement (incorporated by reference to Exhibit 99.6
to the May 2, 2007 Form S-8)***
10.16 Amendment to NextWave Wireless Inc. 2007 New Employee Stock
Incentive Plan (incorporated by reference to Exhibit 99.2 to the
Registration Statement on Form S-8 of NextWave Wireless Inc.
filed July 11, 2007)***
10.17 IPWireless, Inc. Employee Stock Bonus Plan (incorporated by
reference to Exhibit 99.1 to the Registration Statement on Form
S-8 of NextWave Wireless Inc. filed July 11, 2007)***
11.1 Statement of Computation of Earnings Per Share (required
information contained in this Registration Statement)
12.1 Statement of Computation of Ratio of Earnings to Fixed Charges
and Preference Dividends***
21.1 Subsidiaries of the registrant (incorporated by reference to
Exhibit 21.1 to Amendment #1 of the Form 10)***
23.1 Consent of Ernst & Young LLP, Independent Registered Public
Accounting Firm**
23.2 Consent of KPMG LLP, Independent Registered Public Accounting
Firm**
23.3 Consent of Weil, Gotshal & Manges LLP (included in Exhibit 5.1) *
* Previously filed.
** Filed herewith.
*** Incorporated by reference.
II-9