Exhibit 99.1
(CRICKET LOGO)
April 12, 2005
VIA FEDEX AND FACSIMILE
To the Lenders under the Credit Agreement, dated as of January 10, 2005, among,
Leap Wireless International, Inc. ("Leap"), Cricket Communications, Inc.
(the "Cricket"), the Lenders party thereto and the Administrative Agent
(the "Credit Agreement")
Re: Request for Waiver of Defaults under Credit Agreement
Gentlemen:
Attached is a request for a waiver of certain defaults and potential defaults
under the Credit Agreement primarily related to a review of Leap and Cricket's
accounting for leases.
As you may know, the Office of the Chief Accountant of the SEC released a letter
to the American Institute of Certified Public Accountants in early February
clarifying the SEC's view with respect to certain lease accounting matters. This
letter has caused many companies who have a large number of real estate leases
such as restaurants chains, wireless operators and tower companies to review
and, in many cases, revise their policies for accounting for real estate leases.
Many of the affected companies have delayed filing their financial statements
and have restated prior period financials to adjust for impacts related to
accounting for leases.
We have been working closely with our auditors to review the lease accounting
practices and related policies of Leap and Cricket since the letter was
released. We have not yet concluded our analysis and, therefore, we do not
expect to complete the annual financial statements for the year ended December
31, 2004 and file our Annual Report on Form 10-K by April 15. Additionally,
since many of our accounting and finance resources that would normally have been
working toward preparing the 1st quarter financial statements and Form 10-Q have
been and will continue to be focused on completing the year-end financial
statements and Form 10-K, it may also be difficult for us to prepare our
financial statements, complete the compliance certificates and file our Form
10-Q by May 15th as required by the Credit Agreement.
Cricket Communications, Inc.
10307 Pacific Center Court
San Diego, California 92121
T (858) 882 6000
F (858) 882 6080
www.mycricket.com
(CRICKET LOGO)
As a result of potential changes in our policy for lease accounting and certain
other issues, we may need to amend our financial statements and Form 10-Q for
the third quarter of 2004 and possibly other periods. This may affect the
accuracy of our representations and warranties regarding such financial
statements in our Credit Agreement. We expect that any changes that may be
required to prior period financial statements will not be material to the
Lenders' evaluation of the credit worthiness of Cricket or Leap. We also do not
expect that any changes that may be required ton our prior period financial
statements would affect our compliance with the financial covenants of the
Credit Agreement.
Accordingly, we therefore request the following:
- - The deadline for providing audited financial statement and
compliance certificates for the fiscal year ended December 31, 2004 be
extended until May 16, 2005.
- - The deadline for providing financial statements and the compliance
certificate for the fiscal quarter ended March 31, 2005 be extended until
June 15, 2005.
- - Any default under the Credit Agreement that may occur if we were to
amend any prior period financial statements be waived provided that
(i) EBITDA as defined under the Credit Agreement is at least $217
million for the four quarters ended September 30, 2004 compared to
the $219 million of EBITDA previously reported to the Lenders, and
(ii) neither Indebtedness as defined in the Credit Agreement, nor
total liabilities, each as of September 30, 2004, shall be more than
$10 million greater than that previously reported to the Lenders.
We respectfully request that the lenders provide consent to the waiver request
no later than noon on Friday, April 15th. If you have any questions regarding
this request, you may contact me or you may contact Scott Connor at Bank of
America, the Administrative Agent for the facility. Thank you in advance for
your prompt response.
Regards,
/s/ Dean M. Luvisa
Dean M. Luvisa
Acting Chief Financial Officer and Treasurer
Cricket Communications, Inc.
10307 Pacific Center Court
San Diego, California 92121
T (858) 882 6000
F (858) 882 6080
www.mycricket.com
EXECUTION COPY
LETTER WAIVER
Dated as of April 15, 2005
To the banks, financial institutions
and other institutional lenders
(collectively, the "Lenders")
parties to the Credit Agreement
referred to below and to Bank of
America, N.A., as agent (the "Agent")
for the Lenders
Ladies and Gentlemen:
We refer to the Credit Agreement dated as of January 10, 2005 (the "Credit
Agreement") among Cricket Communications, Inc., as Borrower (the "Borrower"),
Leap Wireless International, Inc. ("Holdings"), as a guarantor and you.
Capitalized terms not otherwise defined in this Letter Waiver have the same
meanings as specified in the Credit Agreement.
As previously disclosed to the Lenders, Holdings is reviewing and revising
its method of accounting for operating leases as a result of a letter from the
Office of the Chief Accountant of the SEC to the American Institute of Certified
Public Accountants (the "OCA Letter") which clarified the SEC's view with
respect to certain lease accounting matters. This review may cause a delay in
delivery of Holdings' annual audited financial statements for the fiscal year
ended December 31, 2004 and quarterly financial statements for the fiscal
quarter ended March 31, 2005. In addition, Holdings may be required to amend its
financial statements for one or more fiscal periods ended on or before September
30, 2004 in part to revise the treatment of operating leases therein.
We hereby request that, in order to enable us to complete the review of
our lease accounting policies and the preparation of our audited annual
financial statements, you waive, solely for the period commencing on March 31,
2005 through May 16, 2005 (the "Extended 10-K Delivery Date"), (a) the
requirements of Section 6.01(a) of the Credit Agreement, (b) the requirements of
Section 6.02(a) of the Credit Agreement and (c) the requirements of Section 6.08
of the Credit Agreement solely to the extent that the requirements of such
Section 6.08 would be violated by the failure to file Holdings' annual report on
Form 10-K for the fiscal year ended December 31, 2004 (the "2004 Form 10-K")
with the SEC prior to the Extended 10-K Delivery Date. On the Extended 10-K
Delivery Date, if the requirements of Sections 6.01(a), 6.02(a) and 6.08 (with
respect to the filing of the 2004 Form 10-K) of the Credit Agreement are not
satisfied on or before such date, then without any further action by the Agent
and the Lenders, all of the
Cricket Communications Letter Waiver
terms and provisions set forth in the Loan Documents with respect to Defaults
thereunder that are waived hereunder and not cured prior to the Extended 10-K
Delivery Date shall have the same force and effect as if this Letter Waiver had
not been entered into by the parties hereto, and the Agent and the Lenders shall
have all of the rights and remedies afforded to them under the Loan Documents
with respect to any such Defaults as though no waiver had been granted by them
hereunder.
We hereby further request that you waive, solely for the period commencing
on the date first above written through June 15, 2005 (the "Extended 10-Q
Delivery Date"), (a) the requirements of Section 6.01(b) of the Credit
Agreement, in order to enable us to complete the preparation of our quarterly
financial statements for the fiscal quarter ended March 31, 2005, (b) the
requirements of Section 6.02(a) of the Credit Agreement and (c) the requirements
of Section 6.08 of the Credit Agreement solely to the extent that the
requirements of such Section 6.08 would be violated by the failure to file
Holdings' quarterly report on Form 10-Q for the fiscal quarter ended March 31,
2005 (the "Q1 Form 10-Q")with the SEC prior to the Extended 10-Q Delivery Date.
On the Extended 10-Q Delivery Date, if the requirements of Sections 6.01(b) and
6.08 (with respect to the filing of the Q1 Form 10-Q) of the Credit Agreement
are not satisfied on or before such date, then without any further action by the
Agent and the Lenders, all of the terms and provisions set forth in the Loan
Documents with respect to Defaults thereunder that are waived hereunder and not
cured prior to the Extended 10-Q Delivery Date shall have the same force and
effect as if this Letter Waiver had not been entered into by the parties hereto,
and the Agent and the Lenders shall have all of the rights and remedies afforded
to them under the Loan Documents with respect to any such Defaults as though no
waiver had been granted by them hereunder.
We hereby further request that, in the event that the financial statements
for the fiscal quarter ended September 30, 2004 or for any prior period
(collectively, the "Prior Financial Statements") are amended, you waive each of
the following Defaults and Events of Default, in each case, solely to the extent
that such Default or Event of Default results from the treatment of items in
such Prior Financial Statements that are so amended: (a) any Event of Default
arising under Section 8.01(d) of the Credit Agreement caused by the failure of
any representation or warranty in Section 5.05(b) or 5.15 of the Credit
Agreement or in the Compliance Certificate dated January 10, 2005 to have been
true and correct in all material respects when made and (b) any Event of Default
arising under Section 8.01(b) of the Credit Agreement caused by the failure of
Holdings and its Subsidiaries to comply with the requirements of Section 6.09 of
the Credit Agreement; provided, that in no event shall any waiver in this
paragraph be effective if (i) Consolidated EBITDA for the twelve months ended
September 30, 2004 (which shall be calculated as set forth in Item I.A of
Schedule 2 to the Form of Compliance Certificate attached to the Credit
Agreement as Exhibit D and using components of such calculation consistent in
all respects with the audited financial statements for the fiscal year ended
December 31, 2004), is less than $217,000,000, (ii) if Indebtedness as reflected
in any such amended financial statements is more than $10,000,000 in excess of
the amount of Indebtedness reflected in the corresponding Prior Financial
Statements or (iii) if total liabilities as reflected in any such amended
financial statements are more than $10,000,000 in excess of the amount shown for
total liabilities in the corresponding Prior Financial Statements. For the
avoidance of doubt, none of the waivers set forth in this Letter Waiver shall be
construed as a waiver of compliance with any of the
Cricket Communications Letter Waiver
covenants set forth in Section 7.10 of the Credit Agreement, whether or not any
such non-compliance results from or relates to a Default specifically waived
herein.
From and after the effectiveness of this Letter Waiver and the delivery of
any amendment to any Prior Financial Statements contemplated by the preceding
paragraph, the parties hereto agree that any representation or warranty relating
to the Prior Financial Statements (or to any report, information, certificate or
schedule to the extent based thereon) made or deemed to be made by a Loan Party
pursuant to the terms of the Loan Documents shall be deemed to refer to such
Prior Financial Statements as so amended (or to such report, information,
certificate or schedule, which shall be deemed to have been amended by such
Prior Financial Statements as so amended) . The delivery of any amendment to any
Prior Financial Statements shall be deemed to constitute a making by Holdings of
each of the representations and warranties contained in Sections 5.05(b) and
5.15 of the Credit Agreement with respect to such Prior Financial Statements as
so amended.
This Letter Waiver shall become effective as of the date first above
written when, and only when, the Agent shall have received counterparts of this
Letter Waiver executed by us and the Required Lenders or, as to any of the
Lenders, advice satisfactory to the Agent that such Lender has executed this
Letter Waiver, and the consent attached hereto executed by each Grantor. The
effectiveness of this Letter Waiver is conditioned upon the accuracy of the
factual matters described herein. This Letter Waiver is subject to the
provisions of Section 10.03 of the Credit Agreement.
The Credit Agreement, the Notes and each of the other Loan Documents,
except to the extent of the waiver specifically provided above, are and shall
continue to be in full force and effect and are hereby in all respects ratified
and confirmed. Without limiting the generality of the foregoing, the Collateral
Documents and all of the Collateral described therein do and shall continue to
secure the payment of all Obligations of the Loan Parties under the Loan
Documents. The execution, delivery and effectiveness of this Letter Waiver shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of any Lender or the Agent under any of the Loan Documents, nor
constitute a waiver of any provision of any of the Loan Documents.
If you agree to the terms and provisions of this Letter Waiver, please
evidence such agreement by executing and returning at least two counterparts of
this Letter Waiver to Shearman & Sterling LLP, 599 Lexington Avenue, New York,
New York 10022, Attention: Andrew Hyman, telecopier number: 646-848-4580.
This Letter Waiver may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement. Delivery of an executed counterpart of a
signature page to this Letter Waiver by telecopier shall be effective as
delivery of a manually executed counterpart of this Letter Waiver.
Cricket Communications Letter Waiver
This Letter Waiver shall be governed by, and construed in accordance with, the
laws of the State of New York.
Very truly yours,
CRICKET COMMUNICATIONS, INC.
By
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Title:
LEAP WIRELESS INTERNATIONAL, INC.
By
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Title:
Agreed as of the date first above written:
BANK OF AMERICA, N.A.,
as Agent and as Lender
By
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Title:
Cricket Communications Letter Waiver
[NAME OF LENDER]
By
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Title:
Cricket Communications Letter Waiver
CONSENT
Dated as of April 15, 2005
Each of the undersigned, as Guarantor under the Subsidiary Guaranty dated
January 10, 2005 (the "Subsidiary Guaranty") and as Grantor under the Security
Agreement dated January 10, 2005 (the "Security Agreement"), each in favor of
the Agent, for its benefit and the benefit of the Secured Parties referred to in
the Credit Agreement referred to in the foregoing Letter Waiver, hereby consents
to such Letter Waiver and hereby confirms and agrees that (a) notwithstanding
the effectiveness of such Letter Waiver, each of the Subsidiary Guaranty and the
Security Agreement is, and shall continue to be, in full force and effect and is
hereby ratified and confirmed in all respects, and (b) the Collateral Documents
to which such Grantor is a party and all of the Collateral described therein do,
and shall continue to, secure the payment of all of the Secured Obligations (in
each case, as defined therein).
BACKWIRE.COM, INC.
TELEPHONE ENTERTAINMENT NETWORK, INC.
CHASETEL LICENSEE CORP.
CRICKET LICENSEE (ALBANY), INC.
CRICKET LICENSEE (COLUMBUS), INC.
CRICKET LICENSEE (DENVER) INC.
CRICKET LICENSEE (LAKELAND) INC.
CRICKET LICENSEE (MACON),INC.
CRICKET LICENSEE (NORTH CAROLINA) INC.
CRICKET LICENSEE (PITTSBURGH) INC.
CRICKET LICENSEE (REAUCTION), INC.
CRICKET LICENSEE I, INC.
CRICKET LICENSEE II, INC.
CRICKET LICENSEE III, INC.
CRICKET LICENSEE IV, INC.
CRICKET LICENSEE V, INC.
CRICKET LICENSEE VI, INC.
CRICKET LICENSEE VII, INC.
CRICKET LICENSEE VIII, INC.
CRICKET LICENSEE IX, INC.
CRICKET LICENSEE X, INC.
CRICKET LICENSEE XII, INC.
CRICKET LICENSEE XIII, INC.
CRICKET LICENSEE XIV, INC.
CRICKET LICENSEE XV, INC.
CRICKET LICENSEE XVI, INC.
CRICKET LICENSEE XVII, INC.
CRICKET LICENSEE XVIII, INC.
CRICKET LICENSEE XIX, INC.
Cricket Communications Letter Waiver
CRICKET LICENSEE XX, INC.
CRICKET HOLDINGS DAYTON, INC.
MCG PCS LICENSEE CORPORATION, INC.
CHASETEL REAL ESTATE HOLDING COMPANY, INC.
CRICKET ALABAMA PROPERTY COMPANY
CRICKET ARIZONA PROPERTY COMPANY
CRICKET ARKANSAS PROPERTY COMPANY
CRICKET CALIFORNIA PROPERTY COMPANY
CRICKET COLORADO PROPERTY COMPANY
CRICKET FLORIDA PROPERTY COMPANY
CRICKET GEORGIA PROPERTY COMPANY, INC.
CRICKET IDAHO PROPERTY COMPANY
CRICKET ILLINOIS PROPERTY COMPANY
CRICKET INDIANA PROPERTY COMPANY
CRICKET KANSAS PROPERTY COMPANY
CRICKET KENTUCKY PROPERTY COMPANY
CRICKET MICHIGAN PROPERTY COMPANY
CRICKET MINNESOTA PROPERTY COMPANY
CRICKET MISSISSIPPI PROPERTY COMPANY
CRICKET NEBRASKA PROPERTY COMPANY
CRICKET NEVADA PROPERTY COMPANY
CRICKET NEW MEXICO PROPERTY COMPANY
CRICKET NEW YORK PROPERTY COMPANY, INC.
CRICKET NORTH CAROLINA PROPERTY COMPANY
CRICKET OHIO PROPERTY COMPANY
CRICKET OKLAHOMA PROPERTY COMPANY
CRICKET OREGON PROPERTY COMPANY
CRICKET PENNSYLVANIA PROPERTY COMPANY
CRICKET TEXAS PROPERTY COMPANY
CRICKET UTAH PROPERTY COMPANY
CRICKET WASHINGTON PROPERTY COMPANY
CRICKET WISCONSIN PROPERTY COMPANY
LEAP PCS MEXICO, INC.
Cricket Communications Letter Waiver
By
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Title:
Cricket Communications Letter Waiver