PRER14A 1 d474948dprer14a.htm PRER14A PRER14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

(Amendment No. 3)

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant  x                            Filed by a Party other than the Registrant  ¨

Check the appropriate box:

 

x   Preliminary Proxy Statement
¨   Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
¨   Definitive Proxy Statement
¨   Definitive Additional Materials
¨   Soliciting Material Pursuant to § 240.14a-12

Clearwire Corporation

(Name of Registrant as Specified in Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

¨   No fee required.
¨   Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1)  

Title of each class of securities to which transaction applies: Class A Common Stock, par value $0.0001 per share, of Clearwire Corporation

 

 

   

 

  (2)  

Aggregate number of securities to which transaction applies: (A) 668,248,967 shares of Class A Common Stock outstanding and not beneficially owned by Sprint Nextel Corporation, SOFTBANK CORP. or any of their respective affiliates, (B) 65,644,812 shares of Class B Common Stock and Class B Common Units of Clearwire Communications, LLC outstanding and not beneficially owned by Sprint Nextel Corporation, SOFTBANK CORP. or any of their respective affiliates, which can be exchanged into 65,644,812 shares of Class A Common Stock, (C) 30,840,354 restricted stock units outstanding or reserved for issuance pursuant to awards made under the Company’s 2012 Performance Long-Term Incentive Plan and (D) 2,000,000 shares of Class A Common Stock issuable upon exercise of outstanding warrants with an exercise price of less than $2.97.

 

 

   

 

  (3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): solely for purposes of calculating the registration fee, the maximum aggregate value of the transaction was calculated as the sum of (A) 668,248,967 shares of Class A Common Stock outstanding and not beneficially owned by Sprint Nextel Corporation, SOFTBANK CORP. or any of their respective affiliates, multiplied by $2.97 per share, (B) 65,644,812 shares of Class B Common Stock and Class B Common Units of Clearwire Communications, LLC outstanding and not beneficially owned by Sprint Nextel Corporation, SOFTBANK CORP. or any of their respective affiliates, which can be exchanged into 65,644,812 shares of Class A Common Stock, multiplied by $2.97 per share, (C) 30,840,354 restricted stock units outstanding or reserved for issuance pursuant to awards made under the Company’s 2012 Performance Long-Term Incentive Plan, multiplied by $2.97 per share and (D) 2,000,000 shares of Class A Common Stock issuable upon exercise of outstanding warrants with an exercise price of less than $2.97, multiplied by $1.22 per share (which is the excess of $2.97 over the weighted average exercise price of such warrants)

 

 

   

 

  (4)  

Proposed maximum aggregate value of transaction: $2,273,700,375.01

 

 

   

 

  (5)   Total fee paid: $310,135.00
   
   

 

   
x   Fee paid previously with preliminary materials.
¨   Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

Amount previously paid:

 

 

   

 

  (2)  

Form, Schedule or Registration Statement No.:

 

 

   

 

  (3)  

Filing Party:

 

 

   

 

  (4)  

Date Filed:

 

 

   

 

 

 

 


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PRELIMINARY PROXY MATERIAL—SUBJECT TO COMPLETION

 

LOGO

Clearwire Corporation

1475 120th Avenue Northeast

Bellevue, Washington 98005

                    , 2013

Dear Stockholders:

You are invited to attend a Special Meeting of the stockholders of Clearwire Corporation, which we refer to as the Company or Clearwire, to be held on                     , 2013, at 9:00 a.m., Pacific Daylight Time at                     .

At the Special Meeting you will be asked to approve the adoption of the Agreement and Plan of Merger, dated as of December 17, 2012, as amended from time to time, by and among Sprint Nextel Corporation, Collie Acquisition Corp., a wholly-owned subsidiary of Sprint, and the Company. Pursuant to the Merger Agreement, Collie Acquisition Corp. will be merged with and into the Company and the Company will continue as the surviving corporation. Following the merger, the Company will be a wholly-owned subsidiary of Sprint.

Your vote is very important. Whether or not you plan to attend the Special Meeting, please complete, date, sign and return, as promptly as possible, the enclosed WHITE proxy card in the accompanying prepaid reply envelope, or submit your proxy over the Internet or by telephone. If you attend the Special Meeting and vote in person, your vote by ballot will revoke any proxy previously submitted.

We urge you to discard any gold proxy cards, which were sent to you by a dissident stockholder. If you previously submitted a gold proxy card, we urge you to cast your vote as instructed in your WHITE proxy card, which will revoke any earlier dated proxy card that you submitted, including any gold proxy card.

If the merger is completed, each outstanding share of Clearwire’s Class A common stock, par value $0.0001 per share (other than shares held by Sprint, SOFTBANK CORP., or any of their respective direct or indirect wholly-owned subsidiaries and any stockholders who properly exercise their appraisal rights under Delaware law), will automatically be converted into the right to receive $2.97 in cash, without interest, less any applicable withholding taxes.

In connection with the Merger Agreement, on December 17, 2012, Clearwire, Clearwire Communications, LLC and Clearwire Finance, Inc. also entered into a Note Purchase Agreement with Sprint, in which Sprint has agreed to purchase exchangeable notes from Clearwire. In order to allow Clearwire to request the full amount of potentially available financing, you will also be asked to approve an amendment to the Company’s amended and restated certificate of incorporation, which we refer to as the Certificate of Incorporation, to increase the Company’s authorized share capital and to authorize the issuance of additional shares of Class A common stock and Class B common stock.

Our board of directors, upon the unanimous recommendation of a Special Committee of the board consisting of three independent and disinterested directors who are not officers or employees of the Company or Sprint designees to the Company board, and who will not have an economic interest in the Company or the surviving corporation following the completion of the merger, has unanimously determined that the merger is

 

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advisable, is substantively and procedurally fair to, and is in the best interests of our unaffiliated stockholders. The Special Committee made its determination after consultation with its independent legal and financial advisors and consideration of a number of factors. Our board has also unanimously approved and declared advisable the Merger Agreement and resolved to recommend that the stockholders adopt the Merger Agreement and approve the other proposals discussed below. The board of directors made its recommendation after consultation with its legal and financial advisors and consideration of a number of factors, including the recommendation of the Special Committee. The board of directors unanimously recommends that you vote “FOR” the proposal to adopt the Merger Agreement, “FOR” the proposal to amend the Company’s Certificate of Incorporation to increase the Company’s authorized share capital, “FOR” the proposal to authorize the issuance of additional shares of Class A common stock and Class B common stock in accordance with Rule 5635(d) of the NASDAQ Listing Rules, “FOR” the proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies and “FOR” the non-binding proposal regarding certain merger-related executive compensation arrangements.

Approval of the proposal to adopt the Merger Agreement is independent of approval of the proposal to amend the Company’s Certificate of Incorporation, and each of these approvals is also independent of approval of the proposal to authorize the issuance of additional shares of Class A common stock and Class B common stock.

Pursuant to the terms of the Merger Agreement and the Note Purchase Agreement:

 

   

the approval of the proposal to adopt the Merger Agreement requires the affirmative vote of the holders of at least 75% of the outstanding shares of Clearwire’s common stock entitled to vote thereon, voting as a single class, and the holders of at least a majority of the outstanding shares of Clearwire’s common stock not held by Sprint, SoftBank or any of their respective affiliates, voting as a single class; and

 

   

the approval of the proposals to amend the Company’s Certificate of Incorporation to increase the Company’s authorized share capital and to authorize the issuance of additional shares of Class A common stock and Class B common stock each require the affirmative vote of the holders of at least a majority of the outstanding shares of Clearwire’s common stock entitled to vote thereon, voting as a single class, and the holders of at least a majority of the outstanding shares of Clearwire’s common stock not held by Sprint, SoftBank or any of their respective affiliates, voting as a single class.

Approval of the proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies requires the affirmative vote of the holders of a majority of the shares of common stock present in person or represented by proxy and entitled to vote thereon at the Special Meeting, whether or not a quorum is present. The non-binding proposal regarding certain merger-related executive compensation arrangements requires the affirmative vote of the holders of a majority of the shares of common stock present in person or represented by proxy and entitled to vote thereon at the Special Meeting.

Sprint beneficially owns approximately 50.2% of our outstanding common stock entitled to vote at the Special Meeting, and has agreed to vote all of its shares of our common stock (and to cause each of its controlled affiliates to vote their shares of our common stock, if any) in favor of the proposal to adopt the Merger Agreement, the proposal to amend the Company’s Certificate of Incorporation and the proposal to authorize the issuance of additional shares of Class A common stock and Class B common stock. In addition, Comcast Corporation, Bright House Networks, LLC, Intel Corporation and certain of their respective affiliates beneficially own approximately 13.0% of our outstanding common stock entitled to vote at the Special Meeting, and have also agreed to vote all of their shares of our common stock in favor of the proposals to adopt the Merger Agreement, to amend the Company’s Certificate of Incorporation, to authorize the issuance of additional shares

 

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of Class A common stock and Class B common stock and to adjourn the Special Meeting. As a result of the commitments of Sprint and these stockholders to participate in the Special Meeting, we expect

 

   

that a quorum will be present at the Special Meeting; and

 

   

that the holders of at least a majority of the outstanding shares of Clearwire’s Common Stock entitled to vote thereon, voting as a single class, will approve the proposal to amend the Company’s Certificate of Incorporation and the proposal to authorize the issuance of additional shares of Class A common stock and Class B common stock.

The accompanying proxy statement provides you with detailed information about the Special Meeting, the Merger Agreement and the merger and the Note Purchase Agreement. A copy of the Merger Agreement is attached as Annex A to the proxy statement and a copy of the Note Purchase Agreement, as well as two amendments thereto, are attached as Annexes F-1, F-2 and F-3 to the proxy statement. We encourage you to carefully read the entire proxy statement and its annexes, including the Merger Agreement and the Note Purchase Agreement, as well as the Schedule 13E-3, including the exhibits attached thereto, filed by the Company, Sprint and certain of Sprint’s affiliates with the Securities and Exchange Commission. You may also obtain additional information about the Company from other documents we have filed with the Securities and Exchange Commission.

If you have any questions or need assistance voting your shares of Clearwire’s common stock, please call MacKenzie Partners, Inc., the Company’s proxy solicitor in connection with the Special Meeting, toll-free at (800) 322-2885, or collect at (212) 929-5500.

Thank you in advance for your cooperation and continued support.

Sincerely,

 

LOGO

Erik Prusch

President and Chief Executive Officer

This proxy statement is dated                     , 2013, and is first being mailed to the Company’s stockholders on or about                     , 2013.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THE MERGER, PASSED UPON THE MERITS OR FAIRNESS OF THE MERGER AGREEMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER, OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

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LOGO

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

To Be Held on                     , 2013

Dear Stockholder:

You are cordially invited to attend a Special Meeting of the stockholders of Clearwire Corporation, which we refer to as the Company or Clearwire, to be held on                     , 2013, at 9:00 a.m., Pacific Daylight Time at                     , for the following purposes:

 

  1. To consider and vote on a proposal to adopt the Agreement and Plan of Merger, dated as of December 17, 2012, as amended from time to time, which we refer to as the Merger Agreement, by and among Sprint Nextel Corporation, which we refer to as Sprint, Collie Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Sprint, which we refer to as Merger Sub, and the Company, which we refer to as the Merger Agreement Proposal. A copy of the Merger Agreement is attached as Annex A to the accompanying proxy statement.

 

  2. To consider and vote on proposals to amend the Company’s amended and restated certificate of incorporation, which we refer to as the Certificate of Incorporation, to (a) increase the Company’s authorized shares of Class A common stock, par value $0.0001 per share, which we refer to as Class A Common Stock, by 1,019,162,522 shares and (b) increase the Company’s authorized shares of Class B common stock, par value $0.0001 per share, which we refer to as Class B Common Stock, by 1,019,162,522 shares, which we refer to collectively as the Charter Amendment Proposal.

 

  3. To consider and vote on proposals to authorize the issuance of (a) the Class A Common Stock and (b) the Class B Common Stock that may be issued upon (i) exchange of Clearwire Communications, LLC’s and Clearwire Finance, Inc.’s 1.00% Exchangeable Notes due 2018, which we refer to as the Notes, or (ii) with respect to the Class A Common Stock, upon exchange of the Class B Interests (as defined below), issued upon exchange of the Notes in accordance with Rule 5635(d) of the NASDAQ Listing Rules, which we refer to collectively as the NASDAQ Authorization Proposal.

 

  4. To consider and vote on a proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the Special Meeting to approve the Merger Agreement Proposal, the Charter Amendment Proposal or the NASDAQ Authorization Proposal, which we refer to as the Adjournment Proposal.

 

  5. To approve, by non-binding, advisory vote, certain compensation arrangements for the Company’s named executive officers in connection with the merger, which we refer to as the Golden Parachute Proposal.

 

  6. To transact any other business that may properly come before the Special Meeting, or any adjournment or postponement of the Special Meeting, by or at the direction of the board of directors of the Company.

These items of business are more fully described in the proxy statement accompanying this notice.

The record date for the Special Meeting is April 2, 2013. Only stockholders of record at the close of business on that date may vote at the Special Meeting or any adjournment or postponement thereof.

Your vote is important. The board of directors unanimously recommends that you vote “FOR” the Merger Agreement Proposal, “FOR” the Charter Amendment Proposal, “FOR” the NASDAQ Authorization Proposal, “FOR” the Adjournment Proposal and “FOR” the Golden Parachute Proposal.

 

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We urge you to discard any gold proxy cards, which were sent to you by a dissident stockholder. If you previously submitted a gold proxy card, we urge you to cast your vote as instructed in your WHITE proxy card, which will revoke any earlier dated proxy card that you submitted, including any gold proxy card.

Submitting your proxy over the Internet or by telephone is fast and convenient, and your proxy is immediately confirmed and tabulated. Using the Internet or telephone helps save the Company money by reducing postage and proxy tabulation costs.

On Behalf of the Board of Directors,

 

LOGO

Jillian Harrison

Corporate Secretary

Bellevue, Washington

Dated:                     , 2013

 

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TABLE OF CONTENTS

 

 

Summary Term Sheet

     1   
 

Special Factors

     14   
 

Background of the Merger

     14   
 

Recommendation of the Special Committee and the Board of Directors; Fairness of the Merger

     39   
 

Position of Sprint Parties Regarding the Fairness of the Merger

     46   
 

Opinion of Financial Advisor to the Special Committee

     49   
 

Opinion of Financial Advisor to the Board of Directors

     62   
 

Purpose and Reasons of Sprint Parties for the Merger

     73   
 

Plans for the Company After the Merger

     74   
 

Certain Effects of the Merger

     75   
 

Considerations Relating to the Merger; Certain Effects on the Company if the Merger is not Completed

     77   
 

Prospective Financial Information

     79   
 

Interests of Certain Persons in the Merger

     81   
 

Intent to Vote in Favor of the Merger

     87   
 

Special Committee Compensation

     87   
 

Material United States Federal Income Tax Consequences of the Merger

     87   
 

Financing of the Merger

     90   
 

Fees and Expenses

     90   
 

Regulatory Approvals

     91   
 

Litigation Relating to the Merger

     91   
 

Effective Time of Merger

     94   
 

Payment of Merger Consideration and Surrender of Stock Certificates

     94   
 

Provisions for Unaffiliated Security Holders

     95   
 

Accounting Treatment

     95   
 

Questions and Answers About the Special Meeting and the Merger

     96   
 

The Merger Agreement

     106   
 

The Merger

     106   
 

Effective Time; Closing

     106   
 

Merger Consideration

     107   
 

Treatment of Clearwire Stock Options and Other Equity-Based Awards and Convertible Securities

     108   
 

Withholding

     109   
 

Conditions to the Completion of the Merger

     109   
 

Clearwire Stockholder Meeting

     112   
 

Non-Solicitation of Alternative Proposals

     112   
 

Sprint-SoftBank Covenant

     114   
 

Reasonable Best Efforts; Cooperation

     114   
 

Regulatory Matters

     115   
 

Termination

     115   

 

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Remedies

     117   
 

Sprint Termination Fee

     117   
 

Expenses

     118   
 

Conduct of Business Pending the Merger

     118   
 

Governance of Surviving Corporation

     120   
 

Indemnification; Directors’ and Officers’ Insurance

     120   
 

Employee Matters

     121   
 

Additional Covenants

     122   
 

Representations and Warranties

     122   
 

Amendment and Waiver

     123   
 

Governing Law and Venue; Waiver of Jury Trial; Actions of Clearwire; No Third Party
Beneficiaries

     124   
 

Specific Performance

     124   
 

The Voting and Support Agreement

     125   
 

The Agreement Regarding Right of First Offer

     127   
 

The Irrevocable Exchange Agreement

     129   
 

Amendments to the Equityholders’ Agreement

     130   
 

The Note Purchase Agreement

     131   
 

Cautionary Statement Concerning Forward-Looking Information

     133   
 

Parties to the Merger

     134   
 

The Company

     134   
 

Sprint

     134   
 

Merger Sub

     134   
 

Certain Sprint-Related Parties

     135   
 

The Special Meeting

     136   
 

Time, Place and Purpose of the Special Meeting

     136   
 

Record Date and Quorum

     136   
 

Attendance

     137   
 

Vote Required

     137   
 

Proxies and Revocation

     140   
 

Adjournments and Postponements

     140   
 

Anticipated Date of Completion of the Merger

     141   
 

Rights of Stockholders Who Seek Appraisal

     141   
 

Solicitation of Proxies; Payment of Solicitation Expenses

     141   
 

Questions and Additional Information

     141   
 

The Merger (The Merger Agreement Proposal—Proposal 1)

     142   
 

The Proposal

     142   
 

Vote Required and Board Recommendation

     142   
 

Amendment of the Certificate of Incorporation (The Charter Amendment Proposal—Proposals 2A and  2B)

     143   

The Proposals

     143   

Vote Required and Board Recommendation

     143   

 

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Issuance of Additional Shares of Class  A Common Stock and Class B Common Stock, in Accordance with NASDAQ Listing Rules (The NASDAQ Authorization Proposal—Proposals 3A and 3B)

     144   

The Proposals

     144   

Vote Required and Board Recommendation

     144   

Adjournment of the Special Meeting (The Adjournment Proposal—Proposal 4)

     146   

The Proposal

     146   

Vote Required and Board Recommendation

     146   

Merger-Related Executive Compensation Arrangements (The Golden Parachute Proposal— Proposal 5)

     147   

The Proposal

     147   

Vote Required and Board Recommendation

     147   

Other Important Information Regarding Clearwire

     148   

Directors and Officers of the Company

     148   

Selected Historical Consolidated Financial Data

     152   

Ratio of Earnings to Fixed Charges

     154   

Book Value per Share of Common Stock

     154   

Market Price of Common Stock and Dividends

     154   

Security Ownership of Certain Beneficial Owners and Management

     155   

Prior Public Offerings

     159   

Certain Purchases and Sales of Company Common Stock

     159   

Description of Capital Stock

     160   

Other Important Information Regarding the Sprint Parties

     166   

Appraisal Rights

     172   

Delisting and Deregistration of Common Stock

     176   

Stockholder Proposals

     176   

Incorporation of Certain Documents by Reference

     178   

Where You Can Find More Information

     179   

Annex A

  Agreement and Plan of Merger, dated as of December  17, 2012, by and among Sprint Nextel Corporation, Collie Acquisition Corp. and Clearwire Corporation      A-1   

Annex B

  Voting and Support Agreement, dated as of December 17, 2012, by and among Clearwire Corporation and the Persons named on Schedule A thereto      B-1   

Annex C

  Agreement Regarding Right of First Offer, dated as of December 17, 2012, by and among Sprint HoldCo, LLC, Sprint Nextel Corporation, Intel Capital Corporation, Intel Capital (Cayman) Corporation, Intel Capital Wireless Investment Corporation 2008, Comcast Wireless Investment, LLC and BHN Spectrum Investments, LLC      C-1   

Annex D

  Irrevocable Exchange Agreement, dated as of December 17, 2012, by and among Clearwire Corporation, Sprint Nextel Corporation and Intel Capital Wireless Investment Corporation 2008A      D-1   

Annex E-1

  Second Amendment to Equityholders’ Agreement (dated as of November 28, 2008), dated as of December 17, 2012, by and among Clearwire Corporation, Sprint HoldCo, LLC, SN UHC 1, Inc., Eagle River Holdings, LLC, Intel Capital Wireless Investment Corporation 2008A, Intel Capital Corporation, Intel Capital (Cayman) Corporation, Middlefield Ventures, Inc., and Comcast Corporation      E-1-1   

 

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Annex E-2

  Third Amendment to Equityholders’ Agreement (dated as of November 28, 2008), dated as of December 17, 2012, by and among Clearwire Corporation, Sprint HoldCo, LLC, SN UHC 1, Inc., Intel Capital Wireless Investment Corporation 2008A, Intel Capital Corporation, Intel Capital (Cayman) Corporation, Middlefield Ventures, Inc., and Comcast Corporation.     E-2-1   

Annex F-1

  Note Purchase Agreement, dated as of December 17, 2012, by and among Clearwire Corporation, Clearwire Communications, LLC, Clearwire Finance, Inc. and Sprint Nextel Corporation     F-1   

Annex F-2

  First Amendment to the Note Purchase Agreement, dated as of January 31, 2013, by and among Clearwire Corporation, Clearwire Communications, LLC, Clearwire Finance, Inc. and Sprint Nextel Corporation     F-2-1   

Annex F-3

  Second Amendment to the Note Purchase Agreement, dated as of February 26, 2013, by and among Clearwire Corporation, Clearwire Communications LLC, Clearwire Finance, Inc. and Sprint Nextel Corporation     F-3-1   

Annex G

  Indenture, dated as of March 1, 2013, by and among Clearwire Communications LLC, Clearwire Finance, Inc., the guarantors named therein and Wilmington Trust, National Association     G-1   

Annex H

  Registration Rights Agreement, dated as of March 1, 2013, by and among Clearwire Corporation, Clearwire Communications LLC, Clearwire Finance, Inc., the entities listed on Schedule 1 thereto and Sprint Nextel Corporation     H-1   

Annex I

  Stock Delivery Agreement, dated as of March 1, 2013, by and among Clearwire Corporation, Clearwire Finance, Inc., and Clearwire Communications LLC     I-1   

Annex J

  Opinion of Centerview Partners LLC, dated December 16, 2012     J-1   

Annex K

  Opinion of Evercore Group L.L.C., dated December 16, 2012     K-1   

Annex L

  Section 262 of the General Corporation Law of the State of Delaware     L-1   

Annex M

  Form of Amendment to the Amended and Restated Certificate of Incorporation     M-1   

 

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SUMMARY TERM SHEET

The following summary term sheet highlights selected information in this proxy statement and may not contain all the information that may be important to you. Accordingly, we encourage you to read carefully this entire proxy statement, its annexes and the documents referred to in this proxy statement. Each item in this summary term sheet includes a page reference directing you to a more complete description of that topic. See “Where You Can Find More Information.” In this proxy statement, we refer to the Agreement and Plan of Merger, dated as of December 17, 2012, as amended from time to time, by and among Sprint Nextel Corporation, Collie Acquisition Corp. and Clearwire Corporation, as the Merger Agreement, and the merger of Collie Acquisition Corp. with and into Clearwire Corporation pursuant to the Merger Agreement as the Merger, and we refer to the Note Purchase Agreement, dated as of December 17, 2012, as amended on January 31, 2013 and February 26, 2013, by and among Clearwire Corporation, Clearwire Communications, LLC, Clearwire Finance, Inc. and Sprint, as the Note Purchase Agreement. In addition, we refer to Sprint Nextel Corporation as Sprint, Collie Acquisition Corp. as Merger Sub, Clearwire Communications, LLC as Clearwire Communications, Clearwire Finance, Inc. as Clearwire Finance and Clearwire Corporation as the Company, us, our or we.

Special Factors (page 14)

 

 

Background of the Merger (page 14). A description of the background of the Merger, including our discussions with Sprint, is included in “Special Factors—Background of the Merger.”

 

 

Recommendation of the Special Committee and the Board of Directors; Fairness of the Merger (page 39). The special committee of the board consisting of three independent and disinterested directors, who are not officers or employees of the Company or Sprint designees to the Company board, and who will not have an economic interest in the Company or the surviving corporation following the completion of the Merger, which committee we refer to as the Special Committee, unanimously determined that the terms of the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger, are advisable, are substantively and procedurally fair to, and are in the best interests of our unaffiliated stockholders, and the Special Committee unanimously recommended that the Clearwire board of directors (i) approve the Merger Agreement, the agreements related thereto and the transactions contemplated thereby, including the Merger, (ii) declare the advisability of the Merger Agreement to the stockholders of Clearwire and (iii) recommend the adoption of the Merger Agreement to the stockholders of Clearwire and submit the Merger Agreement to the stockholders of Clearwire for adoption. The Special Committee made its determination after consultation with its independent legal and financial advisors and consideration of a number of factors. Upon such recommendations, the board of directors of the Company has unanimously determined that the Merger is advisable, is substantively and procedurally fair to, and is in the best interests of our unaffiliated stockholders. The board of directors of the Company has also unanimously approved and declared advisable the Merger Agreement and resolved to recommend that the stockholders adopt the Merger Agreement and approve the other proposals discussed below. The board of directors made its recommendation after consultation with its legal and financial advisors and consideration of a number of factors, including the recommendation of the Special Committee. For the factors considered by the Special Committee and the board of directors in reaching its decision to approve the Merger Agreement, please see “Special Factors—Recommendation of the Special Committee and the Board of Directors; Fairness of the Merger.”

In connection with the Merger Agreement, Clearwire, Clearwire Communications and Clearwire Finance also entered into the Note Purchase Agreement with Sprint, pursuant to which Sprint has agreed to purchase exchangeable notes, which we refer to as the Notes, from us at our request, but subject to the conditions set forth in the Note Purchase Agreement. In order to allow Clearwire to request the full amount of potentially available financing provided by Sprint pursuant to the Note Purchase Agreement, you will also be asked to approve an amendment to the Company’s amended and restated certificate of incorporation, which we refer

 


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to as the Certificate of Incorporation, to increase the Company’s authorized share capital and to authorize the issuance of additional shares of Class A Common Stock, and Class B common stock, par value $0.0001 per share, which we refer to as Class B Common Stock, that may be issued upon exchange of the Notes or, with respect to the Class A Common Stock, upon exchange of Class B Common Stock and Clearwire Communications Class B units, which we refer to as the Class B Units and which we refer to together with our Class B Common Stock as the Class B Interests, issued upon exchange of the Notes in accordance with Rule 5635(d) of the NASDAQ Listing Rules.

The board of directors unanimously recommends that you vote:

 

   

FOR” the proposal to adopt the Merger Agreement, which we refer to as the Merger Agreement Proposal.

 

   

FOR” each of the proposals to amend the Certificate of Incorporation to (a) increase the Company’s authorized shares of Class A Common Stock by 1,019,162,522 shares, which we refer to as the Class A Common Stock Charter Amendment Proposal, and (b) increase the Company’s authorized shares of Class B Common Stock by 1,019,162,522 shares, which we refer to as the Class B Common Stock Charter Amendment Proposal and collectively with the Class A Common Stock Charter Amendment Proposal as the Charter Amendment Proposal. The approval of both the Class A Common Stock Charter Amendment Proposal and the Class B Common Stock Charter Amendment Proposal is required to approve the adoption of the Charter Amendment Proposal. Each of the proposals comprising the Charter Amendment Proposal is cross-conditioned upon the approval by our stockholders of the other proposal comprising the Charter Amendment Proposal. Neither the Class A Common Stock Charter Amendment Proposal nor the Class B Common Stock Charter Amendment Proposal will be deemed approved unless both of them are approved.

 

   

FOR” each of the proposals to authorize the issuance of (a) the Class A Common Stock, which we refer to as the Class A Common Stock NASDAQ Authorization Proposal, and (b) the Class B Common Stock, which we refer to as the Class B Common Stock NASDAQ Authorization Proposal, that may be issued upon (i) exchange of the Notes or (ii) with respect to the Class A Common Stock, upon exchange of the Class B Interests, issued upon exchange of the Notes in accordance with Rule 5635(d) of the NASDAQ Listing Rules, which we refer to collectively as the NASDAQ Authorization Proposal. The approval of both the Class A Common Stock NASDAQ Authorization Proposal and the Class B Common Stock NASDAQ Authorization Proposal is required to approve the adoption of the NASDAQ Authorization Proposal. Each of the proposals comprising the NASDAQ Authorization Proposal is cross-conditioned upon the approval by our stockholders of the other proposal comprising the NASDAQ Authorization Proposal. Neither the Class A Common Stock NASDAQ Authorization Proposal nor the Class B Common Stock NASDAQ Authorization Proposal will be deemed approved unless both of them are approved.

 

   

FOR” the proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the Special Meeting to approve the Merger Agreement Proposal, the Charter Amendment Proposal or the NASDAQ Authorization Proposal, which we refer to as the Adjournment Proposal.

 

   

FOR” the non-binding proposal regarding certain Merger-related executive compensation arrangements, which we refer to as the Golden Parachute Proposal.

Approval of the Merger Agreement Proposal is independent of approval of the Charter Amendment Proposal, and each of these approvals is also independent of approval of the NASDAQ Authorization Proposal. However, if the Merger Agreement Proposal is not approved by our stockholders, the Note Purchase Agreement will automatically terminate and after such termination we will not be able to request any financing from Sprint under the Note Purchase Agreement, whether or not our stockholders approve the Charter Amendment Proposal or the NASDAQ Authorization Proposal.

 

 

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Intent to Vote in Favor of the Merger (page 87). Our directors and executive officers have informed us that, as of the date of this Proxy Statement, they intend to vote all of the shares of Common Stock owned directly by them in favor of the adoption of the Merger Agreement and approval of each of the other proposals. As of April 2, 2013, the record date for the Special Meeting, our directors and current executive officers directly owned, in the aggregate, 8,111,404 shares of Common Stock entitled to vote at the Special Meeting, or collectively approximately 0.6% of the outstanding shares of Common Stock entitled to vote at the Special Meeting. See “Special Factors—Interests of Certain Persons in the Merger” beginning on page 81.

 

 

Position of Sprint Parties Regarding the Fairness of the Merger (page 46). Sprint and Merger Sub believe that the Merger is fair to our unaffiliated stockholders. Their belief is based upon their knowledge and analysis of the Company, as well as the factors discussed in “Special Factors—Position of Sprint Regarding the Fairness of the Merger.” For purposes of the Merger, and as used in this Proxy Statement, “unaffiliated stockholders” means all stockholders of the Company other than (i) Sprint and its affiliates, (ii) SOFTBANK CORP., a Japanese kabushiki kaisha, which we refer to as SoftBank, and its affiliates and (iii) the Company’s directors and executive officers. SoftBank has informed us that, as of the date of the proxy statement, it does not own any of our Common Stock.

 

 

Opinion of Financial Advisor to the Special Committee (page 49). In connection with the Special Committee’s analysis and consideration of potential strategic alternatives, including the Merger, on November 21, 2012, the Special Committee retained Centerview Partners LLC, which we refer to as Centerview, to act as financial advisor to the Special Committee. On December 16, 2012, at a joint meeting of the Special Committee and the Audit Committee, Centerview rendered to the Special Committee and the Audit Committee an oral opinion, which was subsequently confirmed by delivery of a written opinion, dated December 16, 2012, to the effect that, as of that date and based upon and subject to the various assumptions and limitations set forth in the written opinion, the merger consideration of $2.97 in cash per share, without interest, less any applicable withholding taxes, which amount we refer to as the Merger Consideration, to be paid to the holders of our Class A Common Stock (other than Sprint, SoftBank, or any of their respective affiliates) pursuant to the Merger Agreement was fair, from a financial point of view, to such holders, as more fully described in “Special Factors—Opinion of Financial Advisor to the Special Committee.”

The full text of Centerview’s opinion describes the assumptions made, procedures followed, matters considered and limitations on the review undertaken by Centerview. This opinion is attached as Annex J and is incorporated into this proxy statement by reference. Stockholders are encouraged to read Centerview’s opinion carefully in its entirety. Centerview’s opinion was provided for the information and assistance of the Special Committee and the Audit Committee in connection with, and for the purpose of, their consideration of the Merger, and Centerview’s opinion only addresses whether, as of the date of such written opinion, the Merger Consideration to be paid to the holders of our Class A Common Stock (other than Sprint, SoftBank, or any of their respective affiliates) pursuant to the Merger Agreement was fair, from a financial point of view, to such holders and does not address any other term or aspect of the Merger Agreement or the Merger contemplated thereby. The opinion does not constitute a recommendation to any stockholder as to how such stockholder should vote or otherwise act with respect to the Merger or any other matter. For a further discussion of Centerview’s opinion, see “Special Factors—Opinion of Financial Advisor to the Special Committee.”

 

 

Opinion of Financial Advisor to the Board of Directors (page 62). In connection with Clearwire’s board of directors’ analysis and consideration of potential strategic alternatives, including the Merger, on December 7, 2012, Clearwire’s board of directors retained Evercore Group, L.L.C., which we refer to as Evercore, to act as financial advisor to Clearwire’s board of directors. On December 16, 2012, at a meeting of Clearwire’s board of directors, Evercore delivered its oral opinion to Clearwire’s board of directors, which opinion was subsequently confirmed by delivery of a written opinion, dated December 16, 2012, to the effect that, as of that date and based upon and subject to assumptions made, matters considered and limitations on the scope of review undertaken by Evercore as set forth in its opinion, the Merger

 

 

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Consideration to be paid to the holders of shares of Class A Common Stock (other than Sprint, SoftBank, or any of their respective affiliates) pursuant to the Merger was fair, from a financial point of view, to such holders, as more fully described under the heading “Special Factors—Opinion of Financial Advisor to the Board of Directors.” The full text of Evercore’s written opinion, which sets forth, among other things, the procedures followed, assumptions made, matters considered and limitations on the scope of review undertaken in rendering its opinion, is attached to this proxy statement as Annex K and incorporated herein by reference. Evercore’s opinion was directed to Clearwire’s board of directors and addresses only, as of the date of such opinion, the fairness, from a financial point of view, of the Merger Consideration to be paid to holders of Class A Common Stock (other than Sprint, SoftBank, or any of their respective affiliates). The opinion does not address any other aspect of the proposed Merger and does not constitute a recommendation to Clearwire’s board of directors or to any other persons in respect of the Merger, including to any Clearwire shareholder as to how they should vote or act in respect of the Merger.

 

 

Certain Effects of the Merger; Certain Effects on the Company if the Merger is not Completed (page 75). The Merger Agreement provides that Merger Sub will merge with and into the Company. The Company will be the surviving corporation in the Merger and will continue as a wholly-owned subsidiary of Sprint following the Merger. As a result of the Merger, the Company will cease to be a publicly-traded company. If the Merger is completed, you will not own any shares of the capital stock of the surviving corporation.

In the Merger, each issued and outstanding share of our Class A Common Stock (other than shares held by Sprint, SoftBank, any of their respective affiliates and any stockholders who properly exercise their appraisal rights under Delaware law) will be converted automatically into the right to receive the Merger Consideration.

If the Merger Agreement is not adopted by our stockholders or if the Merger is not completed for any other reason, our stockholders will not receive any payment for their shares of our Class A Common Stock in connection with the Merger. Instead, the Company will remain a public company and the Class A Common Stock will continue to be listed and traded on the NASDAQ Global Select Market, which we refer to as NASDAQ, so long as the Company continues to meet the applicable listing requirements. Under certain circumstances described in “The Merger Agreement—Sprint Termination Fee,” if Sprint terminates the Merger Agreement or if the Merger is not consummated by October 15, 2013 (as may be extended in certain circumstances), which we refer to as the Outside Date, Sprint is required to pay a termination fee of $120 million to Clearwire, which will be satisfied by the cancellation of an equal amount of the Notes issued under the Note Purchase Agreement and, under certain circumstances described in “The Merger Agreement—Sprint Termination Fee,” the termination of the Merger Agreement may require Sprint to pay to Clearwire Communications a wireless broadband services prepayment in the amount of $100 million. If the Merger is not completed, we may be forced to explore all available alternatives, including financial restructuring, which could include seeking protection under the provisions of the United States Bankruptcy Code. Excluding any financing by Sprint pursuant to the Note Purchase Agreement, the Company currently has capital resources that it believes to be sufficient to support its operations into approximately the fourth quarter of 2013. If the Merger is not completed, the Company may not be able to raise sufficient capital to continue its existing operations beyond that time. We can give you no assurance that in a restructuring you would receive any value for your shares or a value equal to or in excess of the Merger Consideration. In addition, our board of directors is actively considering whether to not make the June 1, 2013, interest payment on our approximately $4.5 billion of outstanding debt.

If our stockholders fail to approve the Charter Amendment Proposal or the NASDAQ Authorization Proposal, we will only be able to request up to approximately $503 million or $410 million, respectively, of the financing provided by Sprint under the Note Purchase Agreement and, as a result, we may not have sufficient funds to meet our operating and capital expenditure needs in the near term.

If the Merger Agreement is not adopted by our stockholders, the Note Purchase Agreement will automatically terminate and after such termination we will not be able to request any financing from Sprint

 

 

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under the Note Purchase Agreement and, as a result, we may not have sufficient funds to meet our operating and capital expenditure needs in the near term.

 

 

Interests of Certain Persons in the Merger (page 81). When considering the recommendation of the board of directors, you should be aware that our officers and directors, including the directors who made up the Special Committee, may have interests in the Merger that are different from, or in addition to, your interests as a stockholder. The board of directors was aware of and considered these interests, among other matters, in evaluating and negotiating the Merger Agreement and the Merger, and in recommending that the Merger Agreement be adopted by our stockholders. These interests include the following:

 

   

the vesting and cash-out of all restricted stock units and options to purchase our Class A Common Stock held by our officers and directors;

 

   

the payment of severance to our officers if a termination of employment were to occur in connection with the Merger;

 

   

for a period of six years after the effective time of the Merger, the surviving corporation will continue the indemnification, expense advancement, and exculpation of our present and former officers and directors as provided in our Certificate of Incorporation or the Company’s bylaws, which we refer to as the Bylaws, or any other agreement in effect on December 17, 2012; and

 

   

the surviving corporation will maintain for six years after the effective time of the Merger, our current directors’ and officers’ liability insurance policies providing coverage with respect to matters arising on or before the effective time and naming as insureds thereunder all of our present and former directors and officers.

 

 

Special Committee Compensation (page 87). The board of directors approved a per-meeting fee of $2,000 for each in-person and telephonic meeting and a retainer fee of $40,000 for the chairman and $30,000 for the members of the Special Committee. Compensation of the Special Committee members was not and is not contingent on the Special Committee approving or recommending the Merger or any other strategic alternative or the consummation of the Merger or any other strategic alternative.

 

 

Material United States Federal Income Tax Consequences of the Merger (page 87). The exchange of shares of Class A Common Stock for cash pursuant to the Merger will be a taxable transaction to United States Holders (as defined in “Special Factors—Material United States Federal Income Tax Consequences of the Merger”) for United States federal income tax purposes. A United States Holder will recognize taxable gain or loss, measured by the difference, if any, between the amount of cash received by the holder in the Merger, and the adjusted tax basis of the Class A Common Stock surrendered in exchange therefor. A non-United States Holder (as defined in “Special Factors—Material United States Federal Income Tax Consequences of the Merger”) generally will not be subject to United States federal income tax on the exchange of shares of Class A Common Stock for cash pursuant to the Merger, but may be subject to United States backup withholding unless the non-United States Holder complies with certain certification procedures or otherwise establishes a valid exemption from backup withholding. Stockholders should read “Special Factors—Material United States Federal Income Tax Consequences of the Merger” below. Stockholders should also consult their own tax advisors to determine the particular tax consequences to them (including the application and effect of any United States federal non-income, state, local and non-United States tax laws) of the Merger.

 

 

Financing of the Merger (page 90). The receipt of financing by Sprint to consummate the Merger is not a condition to the obligations of either party to complete the Merger under the terms of the Merger Agreement. See “Special Factors—Financing of the Merger.” We anticipate that the total funds needed to complete the Merger will be approximately $2.2 billion. Sprint has informed us that it expects to fund this amount through cash on hand.

 

 

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Regulatory Approvals (page 91). The Communications Act of 1934, as amended, which we refer to as the Communications Act, requires the approval of the Federal Communications Commission, which we refer to as the FCC, prior to any transfer of control of an entity holding certain types of licenses and other authorizations issued by the FCC. Pursuant to the Merger Agreement, the consent of the FCC is a condition to the completion of the Merger.

 

 

Litigation Relating to the Merger (page 91). The Company, its directors, Sprint and Merger Sub are named as defendants in putative class action lawsuits brought by certain stockholders of the Company. The lawsuits allege, among other things, that Sprint and the members of our board of directors breached their fiduciary duties owed to the Company’s stockholders and seek, among other things, to enjoin the defendants from completing the Merger on the agreed-upon terms and to recover damages if the Merger is completed. The Company and the board of directors believe that the claims in these actions are without merit and intend to defend against them vigorously.

The Merger Agreement (page 106)

 

 

Treatment of Clearwire Stock Options and Other Equity-Based Awards and Convertible Securities (page 108).

 

   

Clearwire Stock Options. At the effective time of the Merger, each option to purchase shares of our Common Stock granted pursuant to any stock option plan or stock compensation plan, program or similar arrangement or any individual employment agreement, including, without limitation, the Company’s 2008 Stock Compensation Plan, 2007 Stock Compensation Plan and the 2003 Stock Option Plan, which we refer to collectively as the Stock Plans, outstanding and unexercised immediately prior to the effective time of the Merger, whether or not then vested, will be cancelled in exchange for the right to receive a lump sum cash amount, if any, by which the Merger Consideration exceeds the exercise price of such option, less applicable withholding taxes.

 

   

Clearwire Director Restricted Stock Units. At the effective time of the Merger, each restricted stock unit granted prior to December 17, 2012 under a Stock Plan and that is outstanding immediately prior to the effective time of the Merger which is held by a non-employee member of the Clearwire board of directors, each of which we refer to as a Director RSU, will be cancelled in exchange for the right to receive a lump sum cash payment equal to the product of the Merger Consideration, without interest, and the number of shares of Class A Common Stock subject to such Director RSU.

 

   

Clearwire Non-Director Restricted Stock Units. At the effective time of the Merger, each restricted stock unit granted prior to December 17, 2012 under a Stock Plan that is not a Director RSU and that is outstanding immediately prior to the effective time of the Merger, each of which we refer to as an Unvested RSU, will be converted into a right to receive a cash payment equal to the product of the Merger Consideration, without interest, and the number of shares of Class A Common Stock subject to such Unvested RSU, each of which we refer to as a Restricted Cash Account. At the effective time of the Merger, each holder of a Restricted Cash Account will receive a lump sum cash payment equal to 50% of the Restricted Cash Account balance, less applicable tax withholdings, from the surviving corporation, which the Merger Agreement provides will be paid as promptly as reasonably practicable following the effective time of the Merger. The remaining balance of the Restricted Cash Account will vest and be paid as described in “Interests of Certain Persons in the Merger—Treatment of Clearwire Stock Options and Other Equity-Based Awards—Clearwire Non-Director Restricted Stock Units.”

 

   

Clearwire Warrants. At the effective time of the Merger, each issued and outstanding warrant to acquire our Common Stock, whether vested or unvested, outstanding immediately prior to the effective time of the Merger will, by virtue of the Merger Agreement and without any further action, be deemed to constitute a warrant to acquire, on the same terms and conditions as were applicable under such

 

 

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warrant, the same aggregate Merger Consideration as the holder of such warrant would have been entitled to receive in the Merger had the holder thereof exercised such warrant in full immediately prior to the effective time of the Merger based on the exercise price set forth in the applicable warrant.

 

   

Treatment of Clearwire Exchangeable Notes. At the effective time of the Merger, the right to exchange each $1,000 principal amount of 8.25% Exchangeable Notes due 2040 will be changed into a right to exchange such principal amount of exchangeable notes into an amount of cash, without interest, equal to the product of the Merger Consideration multiplied by the exchange rate for each such exchangeable note applicable as of immediately prior to the effective time of the Merger.

 

 

Conditions to the Completion of the Merger (page 109). The respective obligations of the Company, Sprint and Merger Sub to consummate the Merger are subject to the satisfaction or waiver of certain customary conditions, including the adoption of the Merger Agreement by our stockholders, receipt of required FCC approvals, the accuracy of the representations and warranties of the parties (subject to materiality qualifications), the absence of any legal restraint or prohibition on the consummation of the Merger and material compliance by the parties with their respective undertakings and agreements under the Merger Agreement. In addition, Sprint’s obligation to consummate the Merger is conditioned upon the absence of any material adverse effect on Clearwire and either the effective time of the merger between Sprint and SoftBank, which we refer to as the Sprint-SoftBank Merger, having occurred or, if Sprint has terminated the Agreement and Plan of Merger, dated as of October 15, 2012, as amended, by and among Sprint, SoftBank, Starburst I, Inc., Starburst II, Inc. and Starburst III, Inc., which we refer to as the Sprint-SoftBank Merger Agreement, in order to enter into a definitive agreement with respect to an alternative transaction, the consummation of such alternative transaction having occurred.

 

 

Termination (page 115). Clearwire and Sprint may terminate the Merger Agreement at any time before the effective time of the Merger by mutual written consent of Clearwire and Sprint.

In addition, either Clearwire or Sprint may terminate the Merger Agreement at any time before the effective time of the Merger by written notice to the other party, if:

 

   

the Merger has not been consummated on the Outside Date; provided that the Outside Date will be automatically extended to any date to which the end date in the Sprint-SoftBank Merger Agreement is extended (or if Sprint has terminated the Sprint-SoftBank Merger Agreement in order to enter into a definitive agreement with respect to an alternative transaction, the end date of such definitive agreement) but not beyond December 31, 2013; provided, further, that the Outside Date may be extended by Clearwire to any date beyond December 31, 2013 to which the end date in the Sprint-SoftBank Merger Agreement is extended (or if Sprint has terminated the Sprint-SoftBank Merger Agreement in order to enter into a definitive agreement with respect to an alternative transaction, the end date of such definitive agreement); provided, further, that the right to terminate the Merger Agreement pursuant to this provision is not available to any party whose failure to fulfill any obligation under the Merger Agreement has been the principal cause of, or resulted in, the failure of the Merger to occur on or prior to such date;

 

   

a governmental entity has issued a final nonappealable injunction, order, decree, judgment or ruling, permanently enjoining or otherwise prohibiting the Merger; or

 

   

at the Clearwire stockholders’ meeting or any adjournment thereof at which adoption of the Merger Agreement is voted on, the Clearwire stockholders fail to adopt the Merger Agreement by the required stockholder vote.

Sprint may terminate the Merger Agreement upon written notice to Clearwire:

 

   

if, at any time before the adoption of the Merger Agreement by the required stockholder vote, the Clearwire board of directors or any committee (including the Special Committee) has withdrawn,

 

 

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qualified or modified its approval or recommendation of the Merger Agreement in a manner adverse to Sprint, which event we refer to as an adverse company board recommendation;

 

   

upon a breach of any representation, warranty, covenant or agreement on the part of Clearwire set forth in the Merger Agreement such that (if such breach occurred or was continuing as of the closing date of the Merger) the condition with respect to the accuracy of Clearwire’s representations and warranties or the condition with respect to the performance of Clearwire’s undertakings and agreements would be incapable of fulfillment and which breach is incapable of being cured, or is not cured within 60 days following receipt of written notice of such breach; provided, that neither Sprint nor Merger Sub is then in breach of the Merger Agreement so as to cause the condition with respect to the accuracy of Sprint’s and Merger Sub’s representations and warranties or the condition with respect to the performance of Sprint’s and Merger Sub’s undertakings and agreements to be incapable of being satisfied; or

 

   

if the Sprint-SoftBank Merger Agreement has been terminated (other than by Sprint in order to enter into an alternative transaction with respect to the Sprint-SoftBank Merger), provided that Sprint must exercise such right within 10 business days following such termination.

Clearwire may terminate the Merger Agreement upon written notice to Sprint:

 

   

upon a breach of any representation, warranty, covenant or agreement on the part of Sprint or Merger Sub set forth in the Merger Agreement such that (if such breach occurred or was continuing as of the closing date of the Merger) the condition with respect to the accuracy of Sprint’s and Merger Sub’s representations and warranties or the condition with respect to the performance of Sprint’s and Merger Sub’s undertakings and agreements would be incapable of fulfillment and which breach is incapable of being cured, or is not cured within 60 days following receipt of written notice of such breach; provided, that Clearwire is not then in breach of the Merger Agreement so as to cause the condition with respect to the accuracy of Clearwire’s representations and warranties or the condition with respect to the performance of Clearwire’s undertakings and agreements to be incapable of being satisfied.

In certain cases, the termination of the Merger Agreement may require Sprint to pay to Clearwire a termination fee of $120 million, which will be satisfied by the cancellation of an equal amount of the Notes issued under the Note Purchase Agreement and, under certain circumstances described in “The Merger Agreement—Sprint Termination Fee,” the termination of the Merger Agreement may require Sprint to pay to Clearwire Communications a wireless broadband services prepayment in the amount of $100 million.

 

 

Remedies (page 117). If the Merger Agreement is terminated pursuant to the termination rights described in “The Merger Agreement—Termination,” the Merger Agreement will become null and void (except for certain specified provisions that will survive any termination of the Merger Agreement), and, except as provided in “The Merger Agreement—Sprint Termination Fee,” there will be no liability on the part of any party to the Merger Agreement or any of their affiliates (except that certain remedies will be available in the case of fraud or willful or intentional breach of the Merger Agreement prior to any such termination).

The Merger Agreement provides that the parties are entitled to pursue all remedies available at law or in equity in the event of fraud or willful or intentional breach of the Merger Agreement, prior to any termination of the Merger Agreement pursuant to the termination rights described in “The Merger Agreement—Termination.”

 

 

Sprint Termination Fee (page 117). The Merger Agreement provides that, subject to Clearwire’s right to deliver a Fee Waiver to Sprint, as described in “The Merger Agreement—Sprint Termination Fee,” Sprint is required to pay a termination fee to Clearwire in each of the following circumstances:

 

   

Sprint terminates the Merger Agreement in connection with the Sprint-SoftBank Merger Agreement having been terminated as described in “The Merger Agreement—Termination”; or

 

   

Sprint or Clearwire terminates the Merger Agreement due to a failure to consummate the Merger by the Outside Date (as it may be extended in certain circumstances), as described in “The Merger

 

 

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Agreement—Conditions to the Completion of the Merger,” and in connection with such termination, the condition relating to the closing of the Sprint-SoftBank Merger, as described in “The Merger Agreement—Conditions to the Completion of the Merger,” has not been satisfied or waived and the conditions relating to the accuracy of Clearwire’s representations and warranties and the performance of Clearwire’s covenants and obligations, in each case as described in “The Merger Agreement—Conditions to the Completion of the Merger,” have been satisfied or are reasonably capable of being satisfied.

 

   

In connection with either of the termination events described in the immediately preceding bullets, Sprint will pay to Clearwire a termination fee of $120 million, which will be satisfied by the cancellation of an equal amount of the Notes issued under the Note Purchase Agreement.

In the event that Clearwire has received the termination fee as described above and has not delivered a Fee Waiver, as described in “The Merger Agreement—Sprint Termination Fee,” and Clearwire Communications completes construction of at least 5,000 hotspot sites that are on air by January 15, 2014, in accordance with the 4G MVNO Agreement, dated November 28, 2008, among Sprint, Clearwire Communications and certain other parties thereto, as amended, which we refer to as the 4G MVNO Agreement, then Sprint will pay to Clearwire Communications a wireless broadband services prepayment in the amount of $100,000,000 on the date when such 5,000 hotspot sites are on air, provided that if the Merger Agreement has not been terminated by such date, any payment in respect of the wireless broadband prepayment will be made 6 business days after the date Clearwire becomes entitled to receive the termination fee described above, to be credited against Sprint’s use of LTE services under the 4G MVNO Agreement.

 

 

Expenses (page 118). Except as otherwise contemplated by the Merger Agreement, all costs and expenses incurred in connection with the Merger Agreement and the consummation of the transactions contemplated by the Merger Agreement will be the obligation of the party incurring such expenses. Clearwire and Sprint will share all fees and expenses, other than attorneys’ fees, incurred in connection with the filing, printing and mailing of this proxy statement and any amendments or supplements hereto and the Schedule 13E-3 and any amendments or supplements thereto.

 

 

Additional Covenants (page 122). The Merger Agreement provides for certain other covenants between the parties relating to, among other things, cooperation in the preparation of this proxy statement and Schedule 13E-3, restrictions on transfers by Sprint of our Common Stock except in certain circumstances (including a conversion of Class B Common Stock held by Sprint or its affiliates into Class A Common Stock), notices and public announcements.

 

 

Specific Performance (page 124). The Merger Agreement provides that the parties will be entitled to an injunction or injunctions, specific performance or other equitable relief to prevent breaches of the Merger Agreement and to enforce specifically the terms and provisions thereof in the Delaware Court of Chancery, in addition to any other remedy to which any such party is entitled in law or in equity.

Parties to the Merger (page 134)

 

 

Clearwire Corporation, which we refer to as Clearwire, the Company, we, us or our, is a Delaware corporation and a leading provider of 4G wireless broadband services offering services in areas of the United States where more than 130 million people live. Clearwire holds the deepest portfolio of wireless spectrum available for data services in the United States. Clearwire serves retail customers through its own CLEAR® brand as well as through wholesale relationships with some of the leading companies in the retail, technology and telecommunications industries, including Sprint and NetZero. We are constructing a next-generation 4G LTE Advanced-ready network to address the capacity needs of the market, and are also working closely with the Global TDD-LTE Initiative and China Mobile to further the TDD-LTE ecosystem. Our principal executive office is located at 1475 120th Avenue Northeast, Bellevue, Washington, 98005, and the telephone number of our principal executive office is (425) 216-7600.

 

 

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Sprint Nextel Corporation, which we refer to as Sprint, is a Kansas corporation and offers a comprehensive range of wireless and wireline communications services bringing the freedom of mobility to consumers, businesses and government users. Sprint served nearly 56 million customers at the end of the third quarter of 2012 and is widely recognized for developing, engineering and deploying innovative technologies, including the first wireless 4G service from a national carrier in the United States; offering industry-leading mobile data services, leading prepaid brands including Virgin Mobile USA, Boost Mobile, and Assurance Wireless; instant national and international push-to-talk capabilities; and a global Tier 1 Internet backbone. The American Customer Satisfaction Index rated Sprint No. 1 among all national carriers in customer satisfaction and most improved, across all 47 industries, during the last four years. Newsweek ranked Sprint No. 3 in both its 2011 and 2012 Green Rankings, listing it as one of the nation’s greenest companies, the highest of any telecommunications company. Sprint’s equity interests in Clearwire are held by certain of its wholly owned subsidiaries, as further described in “Parties to the Merger—Certain Sprint-Related Parties.”

 

 

Collie Acquisition Corp., which we refer to as Merger Sub, is a Delaware corporation and a wholly-owned subsidiary of Sprint and was formed by Sprint solely for purposes of entering into the Merger Agreement and completing the Merger. Upon completion of the Merger, Merger Sub will be merged with and into the Company and will cease to exist.

The Special Meeting (page 136)

 

 

Time, Place and Purpose of the Special Meeting (page 136). The Special Meeting will be held on                 , 2013, starting at 9:00 a.m., Pacific Daylight Time at                                                                                           .

At the Special Meeting, holders of our Class A Common Stock or our Class B Common Stock, which we refer together with our Class A Common Stock as Common Stock, will be asked to approve the Merger Agreement Proposal, to approve the Charter Amendment Proposal, to approve the NASDAQ Authorization Proposal, to approve the Adjournment Proposal, and to approve the Golden Parachute Proposal.

 

 

Record Date and Quorum (page 136). You are entitled to receive notice of, and to vote at, the Special Meeting if you owned shares of our Common Stock as of the close of business on April 2, 2013, the record date for the Special Meeting, which we refer to as the Record Date. You will have one vote for each share of Common Stock that you owned on the Record Date. As of the Record Date, there were 698,846,925 shares of Class A Common Stock and 773,732,672 shares of Class B Common Stock outstanding and entitled to vote at the Special Meeting. A majority of the shares of Common Stock outstanding at the close of business on the Record Date and entitled to vote, present in person or represented by proxy, at the Special Meeting constitutes a quorum for purposes of the Special Meeting. 325,000 shares of the 699,171,925 shares of Class A Common Stock that were outstanding as of the Record Date are ineligible to vote at the Special Meeting, due to certain defaults under a stock pledge agreement relating to these shares, and such shares shall be disregarded for all purposes (including quorum and voting) at the Special Meeting.

 

 

Vote Required (page 137).

 

   

Pursuant to the terms of the Merger Agreement, the approval of the Merger Agreement Proposal requires the affirmative vote of the holders of at least 75% of the outstanding shares of our Common Stock entitled to vote thereon, voting as a single class, and, in accordance with the requirements of a “Qualifying Purchase” under the Equityholders’ Agreement, the holders of at least a majority of the outstanding shares of our Common Stock not held by Sprint, SoftBank or any of their respective affiliates, voting as a single class.

 

   

Pursuant to the terms of the Merger Agreement and the Note Purchase Agreement, the approval of the Charter Amendment Proposal requires the affirmative vote of the holders of at least a majority of the outstanding shares of our Common Stock entitled to vote thereon, voting as a single class, and the holders of at least a majority of the outstanding shares of our Common Stock not held by Sprint, SoftBank or any of their respective affiliates, voting as a single class.

 

 

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Pursuant to the terms of the Merger Agreement and the Note Purchase Agreement, the approval of the NASDAQ Authorization Proposal requires the affirmative vote of the holders of at least a majority of the outstanding shares of our Common Stock entitled to vote thereon, voting as a single class, and the holders of at least a majority of the outstanding shares of our Common Stock not held by Sprint, SoftBank or any of their respective affiliates, voting as a single class.

 

   

Approval of the Adjournment Proposal requires the affirmative vote of the holders of a majority of the shares of our Common Stock present in person or represented by proxy and entitled to vote thereon at the Special Meeting, whether or not a quorum is present.

 

   

Approval of the Golden Parachute Proposal requires the affirmative vote of the holders of a majority of the shares of Common Stock present in person or represented by proxy and entitled to vote thereon at the Special Meeting.

 

   

Sprint beneficially owns approximately 50.2% of our outstanding Common Stock entitled to vote at the Special Meeting, and has agreed to vote all of its shares of our Common Stock (and to cause each of its controlled affiliates to vote their shares of our Common Stock, if any) in favor of the Merger Agreement Proposal, the Charter Amendment Proposal and the NASDAQ Authorization Proposal. In addition, Comcast Corporation, which we refer to as Comcast, Bright House Networks, LLC, which we refer to as Bright House, Intel Corporation, which we refer to as Intel, and certain of their respective affiliates beneficially own approximately 13.0% of our outstanding Common Stock entitled to vote at the Special Meeting, and as described in “The Voting and Support Agreement” have also agreed to vote all of their shares of our Common Stock in favor of the Merger Agreement Proposal, the Charter Amendment Proposal, the NASDAQ Authorization Proposal and the Adjournment Proposal. As a result of the commitments of Sprint and these stockholders to participate in the Special Meeting, we expect:

 

   

that a quorum will be present at the Special Meeting.

 

   

that the holders of at least a majority of the outstanding shares of Clearwire’s Common Stock entitled to vote thereon, voting as a single class, will approve the Charter Amendment Proposal and NASDAQ Authorization Proposal.

 

   

Sprint and the parties to the Voting and Support Agreement together hold approximately 63.1% of the total outstanding Common Stock entitled to vote at the Special Meeting. As such, in order to meet the 75% approval threshold for approval of the Merger Agreement Proposal, holders of an additional 11.9% of our outstanding Common Stock entitled to vote at the Special Meeting (or approximately 32.2% of the remaining outstanding Common Stock that is not held by Sprint or the parties to the Voting and Support Agreement) will need to vote in favor of the Merger Agreement Proposal. SoftBank has informed us that, as of the date of the proxy statement, it does not own any of our Common Stock.

 

   

In addition, the approval of the Merger Agreement Proposal requires an affirmative vote of at least a majority of the outstanding shares of our Common Stock not held by Sprint, SoftBank or any of their respective affiliates, voting as a single class. All of the shares of our Common Stock held by the parties to the Voting and Support Agreement will count towards this condition and, as such, in order to meet this condition, holders of an additional 11.9% of our outstanding Common Stock entitled to vote at the Special Meeting (or approximately 32.2% of the remaining outstanding Common Stock that is not held by Sprint or the parties to the Voting and Support Agreement) will need to vote in favor of the Merger Agreement Proposal.

 

   

Approval of the Merger Agreement Proposal is independent of approval of the Charter Amendment Proposal, and each of these approvals is also independent of approval of the NASDAQ Authorization Proposal. However, if the Merger Agreement Proposal is not approved by our stockholders, the Note Purchase Agreement will automatically terminate and after such

 

 

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termination we will not be able to request any financing from Sprint under the Note Purchase Agreement, whether or not our stockholders approve the Charter Amendment Proposal or the NASDAQ Authorization Proposal.

 

 

Proxies and Revocation (page 140). Any stockholder of record entitled to vote at the Special Meeting may submit a proxy over the Internet, by telephone or by returning the enclosed WHITE proxy card in the accompanying prepaid reply envelope, or may vote in person by appearing at the Special Meeting. If your shares of our Common Stock are held in street name by your bank, broker or other nominee, you should instruct your bank, broker or other nominee on how to vote your shares of our Common Stock using the instructions provided by your bank, broker or other nominee. If you fail to submit a proxy or to vote in person at the Special Meeting, or do not provide your bank, broker or other nominee with instructions, as applicable, your shares of our Common Stock will not be voted, which will have the same effect as a vote cast against the Merger Agreement Proposal, the Charter Amendment Proposal and the NASDAQ Authorization Proposal.

You have the right to revoke a proxy, including any proxy you may have given by submitting a gold proxy card, whether delivered over the Internet, by telephone or by mail, at any time before it is exercised, by submitting another proxy, including a WHITE proxy card, at a later date through any of the methods available to you, by giving written notice of revocation to our Corporate Secretary, which must be filed with our Corporate Secretary before the Special Meeting begins, or by attending the Special Meeting and voting in person. If your shares of our Common Stock are held in street name by your bank, broker or other nominee, please refer to the information forwarded by your bank, broker or other nominee for procedures on revoking your proxy.

 

 

Only your last submitted proxy card will be considered. Please cast your vote “FOR” each of the proposals, following the instructions in your WHITE proxy card, as promptly as possible. You do not need to contact the dissident stockholder to revoke any previously granted proxy you may have given by submitting a gold proxy card. Your submission of your vote via the instructions in your WHITE proxy card is sufficient to revoke your gold proxy card.

 

 

Market Price of Common Stock (page 154). The closing price of our Class A Common Stock on the NASDAQ, on December 14, 2012, the last trading day prior to the public announcement of the execution of the Merger Agreement, was $3.37 per share. The closing price of our Class A Common Stock on the NASDAQ, on December 10, 2012, the trading day prior to the date that information about a potential transaction between the Company and Sprint was reported in the press, was $2.40 per share. The closing price of our Class A Common Stock on the NASDAQ, on November 20, 2012, the trading day prior to Sprint’s initial proposal to the Company with respect to the Merger, was $2.12 per share. The closing price of our Class A Common Stock on the NASDAQ, on October 10, 2012, the trading day immediately prior to the date discussions between Sprint and SoftBank were first confirmed in the marketplace, with the Company speculated to be a part of that transaction, was $1.30.

On             , 2013, the most recent practicable date before this proxy statement was mailed to our stockholders, the closing price for our Class A Common Stock on NASDAQ was $         per share. You are encouraged to obtain current market quotations for our Class A Common Stock in connection with voting your shares of Class A Common Stock.

 

 

Appraisal Rights (page 172). Stockholders are entitled to appraisal rights under the General Corporation Law of the State of Delaware, as amended, which we refer to as the DGCL, with respect to any or all of their shares of our Common Stock in connection with the Merger, provided they meet all of the conditions set forth in Section 262 of the DGCL, a copy of which is attached as Annex L to this proxy statement. This means that you are entitled to have the fair value of your shares of Common Stock determined by the Delaware Court of Chancery and to receive payment based on that valuation. The ultimate amount you

 

 

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receive in an appraisal proceeding may be less than, equal to or more than the amount you would have received under the Merger Agreement.

To exercise your appraisal rights, you must submit a written demand for appraisal to the Company before a vote is taken on the Merger Agreement, you must not submit a proxy or otherwise vote in favor of the Merger Agreement Proposal and you must hold your shares continuously through the effective time of the Merger and otherwise comply with Section 262 of the DGCL. Your failure to follow exactly the procedures specified under the DGCL may result in the loss of your appraisal rights. See “Appraisal Rights” and the text of Section 262 of the DGCL reproduced in its entirety as Annex L to this proxy statement. If you hold your shares of Common Stock through a bank, brokerage firm or other nominee and you wish to exercise appraisal rights, you should consult with your bank, broker or other nominee to determine the appropriate procedures for the making of a demand for appraisal by the nominee. In view of the complexity of Section 262 of the DGCL, stockholders who may wish to pursue appraisal rights should consult their legal and financial advisors prior to making any decision whether to pursue appraisal rights with respect to their shares of Common Stock.

 

 

Delisting and Deregistration of Common Stock (page 176). If the Merger is completed, our Class A Common Stock will be delisted from NASDAQ and deregistered under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act. In addition, we will no longer be a public company. As a result, we would no longer file periodic reports with the Securities and Exchange Commission, which we refer to as the SEC, on account of our Class A Common Stock.

 

 

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SPECIAL FACTORS

This discussion of the Merger summarizes the material terms of the Merger Agreement, which is attached to this proxy statement as Annex A. You should read the entire Merger Agreement carefully because it is the legal document that governs the Merger.

We are asking our stockholders to vote on the adoption of the Merger Agreement. If the Merger is completed, the Company will become a wholly-owned subsidiary of Sprint, and holders of our Class A Common Stock will have the right to receive $2.97 in cash, without interest, for each share of our Class A Common Stock.

Background of the Merger

The Company was formed in November 2008 as the result of a combination of Sprint’s mobile WiMAX business with Clearwire Legacy LLC (formerly known as Clearwire Corporation) and a concurrent investment by Comcast Corporation, which, together with its affiliates, we refer to as the Comcast Affiliates; Time Warner Cable Inc., which, together with its affiliates, we refer to as the Time Warner Affiliates; Intel Capital Corporation, which, together with its affiliates, we refer to as the Intel Affiliates; Google, Inc., which we refer to as Google; and BHN Spectrum Investments, LLC, which we refer to as BHN Spectrum. Eagle River Holdings, LLC, which we refer to as Eagle River, an entity controlled by the founder and former director of Clearwire Legacy LLC, Craig O. McCaw, remained a shareholder in the combined company.

In November 2008, concurrently with the Company’s formation, the Company entered into the Equityholders’ Agreement with Sprint, Eagle River, the Intel Affiliates, the Comcast Affiliates, Google, the Time Warner Affiliates and BHN Spectrum. The Equityholders’ Agreement generally provides for corporate governance arrangements between the parties (including Company board nomination rights and certain consent and approval provisions), preemptive rights, standstill obligations and certain transfer restrictions with respect to the Common Stock and corresponding Class B Units, subject to rights of first offer and tag-along rights. The current parties to the Equityholders’ Agreement (other than the Company and Sprint) are the Intel Affiliates, the Comcast Affiliates and BHN Spectrum, which we collectively refer to as the SIGs, as a result of Google’s sale of its entire position in the Company in March 2012, the Time Warner Affiliates’ sale of their entire position in the Company in October 2012, and Eagle River’s sale of its entire position (other than 375,000 warrants) in the Company in December 2012 and an amendment to the Equityholders’ Agreement, entered into concurrently with the execution of the Merger Agreement, that excluded Eagle River as a party thereto.

The Company deployed and now operates a 4G wireless broadband network covering an estimated 135 million people in 71 markets in the United States. The Company’s business plans contemplate selling wireless broadband services directly to consumers through various retail channels and indirectly through wholesale partners. Since the formation of the Company, Sprint has been the Company’s largest wholesale customer accounting for substantially all of the Company’s wholesale revenue, which represents approximately 36% of total revenues of the Company in 2012. To date, the Company has invested heavily in building and maintaining its networks, and it has a history of significant operating losses.

Throughout its history, the Company’s board of directors has continually evaluated the Company’s business plans and potential commercial and strategic alternatives and considered ways to enhance the Company’s performance and prospects in light of then-current business and economic conditions. As the Company’s deployment of its mobile WiMAX network was nearing completion in 2010, the Company’s board of directors focused the Company’s business strategy on cutting costs, driving growth in wholesale revenue by attempting to secure additional wholesale partners with substantial offload data capacity needs and developing a long-term technology and funding plan. At the same time, because of the Company’s need for substantial additional capital to fund its business, the Company’s board of directors began to consider other strategic alternatives.

On September 17, 2010, the Company’s board of directors determined that it was in the best interests of the Company and its stockholders to explore strategic alternatives in order to obtain additional financing and allow

 

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the Company to pursue its business plan and enhance stockholder value. In connection with such strategic alternative process and in order to avoid any actual, potential or perceived conflicts of interest with the Company’s stockholders, the Company’s board of directors formed a Strategic Committee comprised of independent and disinterested directors and delegated such Strategic Committee the authority to, among other things, review, evaluate, pursue, negotiate and, if appropriate, recommend for approval by the Company’s board of directors, possible strategic transactions. The members of the Strategic Committee were initially Peter L.S. Currie, Craig O. McCaw, Dennis S. Hersch, Theodore H. Schell, Arvind Sodhani and John W. Stanton. Currently, the Strategic Committee members are Dennis S. Hersch, Theodore H. Schell, John W. Stanton, Bruce Chatterley and Mufit Cinali.

Early in the fall of 2010, representatives of Sprint and the Company engaged in discussions in which Sprint expressed an interest in exploring the possibility of acquiring the shares of the Common Stock that Sprint did not already own. Representatives of the parties engaged in preliminary discussions about the framework of a transaction, including the mixture of consideration to be received by the SIGs and the Company’s other stockholders. In connection with such discussions, the relevant parties waived, for the purposes of these discussions, certain provisions of the standstill obligations under the Equityholders’ Agreement that could have restricted conversations about such a transaction. In November 2010, Sprint informed the Company that its board was unwilling to pursue an acquisition of the Company at that time. Sprint instead proposed an alternative transaction that involved the provision of financing to the Company and the acquisition of the Company’s retail customers and operations. The Company and Sprint exchanged several preliminary proposals, but ceased discussions as they were unable to reach a consensus on mutually favorable terms and the general framework of such a transaction.

While the discussions with Sprint were underway, the Company, which had disclosed that it had less than 12 months’ liquidity in its third quarter 2010 10-Q, also continued to pursue additional funding to meet its needs for additional capital. The Company explored debt and equity financings and also pursued a sale of certain of its assets, including excess spectrum assets, which the Company believed were not essential for its business.

In the fall of 2010, the Company undertook a process to sell excess spectrum in order to raise capital and engaged Deutsche Bank as its financial advisor. During the process, Deutsche Bank contacted 37 major telecommunications providers and potential spectrum purchasers. Out of these 37 parties four submitted preliminary and non-binding offers, including Sprint and a global provider of wireless communication services, which we refer to as Party A, for varying amounts of the Company’s spectrum. Another provider of telecommunication services, which we refer to as Party B, participated in the spectrum sale process. Party B conducted extensive due diligence, but ultimately declined to submit an offer for the Company’s spectrum. The Company terminated the spectrum sale process in part because of the lack of offers it found compelling and in part because the Company completed a successful financing during this time, as described below.

To satisfy the Company’s near term need for additional capital, in late 2010, the Company raised approximately $1.4 billion in a series of bond offerings.

During this period, the Company also experienced a series of changes in the composition of the Company’s board of directors and the Company’s executive officers. Beginning in late 2010, certain Sprint nominees on the Company’s board of directors, including Dan Hesse, Keith Cowan and Steve Elfman, resigned and were subsequently replaced with nominees of Sprint who were not directors, officers or employees of Sprint, including William Blessing, Mufit Cinali and Hossein Eslambolchi. Frank Ianna, also a Sprint nominee, served out his term as director and did not stand for re-election; rather Sprint nominated Jennifer Vogel, who is not a director, officer or employee of Sprint. Subsequently, at the end of 2010, Craig O. McCaw resigned from his position as the Eagle River nominee and chairman of the Company’s board of directors and was replaced by Benjamin Wolff, as the Eagle River nominee, and John W. Stanton, a Sprint nominee, as chairman of the Company’s board of directors. In early 2011, Arvind Sodhani resigned as the Intel Affiliates’ nominee on the Company’s board of directors and was subsequently replaced by Bruce Chatterly. Also in early 2011, William Morrow resigned as the Company’s

 

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Chief Executive Officer and was replaced on an interim basis by Mr. Stanton. Erik Prusch and Hope Cochran were also appointed as the Chief Operating Officer and Chief Financial Officer, respectively.

With the additional liquidity provided by the proceeds from the late 2010 bond offerings, in 2011, the Company continued to pursue its strategy of cutting costs, driving growth in wholesale revenue, developing a long-term technology and funding plan and pursuing other strategic alternatives. The Company decided to focus its business plans on expanding its wholesale business by attempting to secure additional significant wholesale partners and deploying LTE on its network. The Company also continued to pursue additional capital to fund its operations over the long term and its LTE deployment.

From late 2010 through early 2011, the Company held a series of discussions with Party A about possible wholesale and strategic agreements as well as a possible spectrum sale. These discussions came to an end when Party A decided to pursue a change of control transaction with Party B.

During early 2011, the Company also continued to pursue other possible significant wholesale and strategic partners. The Company held preliminary discussions with another provider of wireless communication services, which we refer to as Party C, about the possibility of the two companies combining or otherwise pursuing a commercial agreement or other strategic transaction, including a possible spectrum sale and a joint network build. Towards mid-2011, the Company also engaged in preliminary discussions with DISH Network Corporation, which we refer to as DISH, about possible wholesale or other commercial arrangements. None of these discussions went beyond the preliminary stage.

During early 2011, the Company also held further discussions with Sprint about possible new or modified commercial arrangements as well as financing and other strategic transactions. In particular, during this period, the Company and Sprint held a series of discussions about a number of outstanding wholesale pricing issues under the parties’ existing wholesale agreements, some of which the parties had previously submitted to arbitration. Following extensive negotiations, the parties reached a resolution in April 2011 and executed agreements that resolved the outstanding pricing issues and established a usage based pricing scheme.

Also during early 2011, Sprint and the Company discussed a possible arrangement whereby Sprint would agree to deploy LTE over the Company’s 2.5 GHz spectrum as part of Sprint’s planned upgrade of its own network. As part of the proposed arrangement, the Company would agree to reimburse Sprint for certain costs of its network upgrade, including the cost of the equipment necessary to operate LTE over the Company’s spectrum, and pay Sprint a proportionate share of the expenses incurred in operating the network, in addition to certain other fees intended to compensate Sprint for its efforts. In exchange, the Company would own the data capacity afforded by its spectrum. However, in August 2011, after several months of discussion, the Company concluded that the proposed terms would be substantially more costly than deploying LTE on its own network and, as a result, the parties were unable to reach an agreement on terms acceptable to the Company.

In the spring and summer of 2011, the Company also continued to seek new significant wholesale partners and funding for the deployment of LTE on its network.

In May 2011, Sprint indicated to the Company that it would support the Company’s efforts to secure wholesale arrangements with its competitors. The Company held discussions about possible wholesale or other commercial arrangements with a large number of potential partners, including, among others, certain previously contacted parties such as DISH, Party B and Party C. None of these conversations resulted in an agreement with any party, although the conversations with some of the parties continued.

On April 26, 2011, Eagle River sold 5,000,000 of its shares of Class A Common Stock to a third party in a block sale for $5.15 per share. Also, between May 16, 2011 and June 10, 2011, the Intel Affiliates sold 8,234,600 of their shares of Common Stock at an average price of $4.46 per share.

 

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In summer of 2011, the Company discussed a potential convertible preferred stock or debt investment and technical partnership with a foreign telecommunications company, which we refer to as Party D. Following a series of discussions, the Company and Party D agreed to jointly pursue a technical partnership promoting TDD-LTE in September 2011. However, Party D decided not to make a financial investment in the Company.

Throughout the summer of 2011, the Company discussed a possible sale of spectrum to a U.S.-based provider of Internet-based products and services, which we refer to as Party E. The parties engaged in a series of conversations about, among other things, the Company’s spectrum position, the specific spectrum assets the Company could make available for sale, and potential pricing and technical aspects of the 2.5 GHz spectrum band. The discussions ended without the Company receiving an offer from Party E.

During this period, the Company also pursued potential additional funding from other sources, such as equity or debt financings. It held discussions with three private equity firms about transactions that would provide the Company with additional capital. The discussions, which ranged from rights offerings to sale/leaseback transactions to preferred equity or debt financings, terminated because the parties could not agree upon transaction structures that would satisfy each of their needs. These private equity firms each cited the Company’s existing governance structure as an impediment to completing a transaction.

In July 2011, the Company learned that Sprint had entered into a network hosting agreement with Party F in June 2011. Under this arrangement, Party F agreed to pay Sprint to build out a 4G LTE network and to provide Sprint with data capacity on favorable terms on a 4G LTE network that Party F planned to deploy under the agreement.

In August 2011, Mr. Prusch was appointed President and Chief Executive Officer of Clearwire, relieving Mr. Stanton of his interim CEO role. Since that time, Mr. Stanton has continued to serve as Executive Chairman of the Company’s board of directors. In February 2012, Mr. Prusch was appointed to the Company’s board of directors.

Also in August 2011, Sprint notified the Company that it was concerned with the amount it was paying the Company for its services under the agreements the companies had executed in April 2011 and that Sprint was prepared to take a number of actions to reduce its usage of the Company’s network, including managing the 4G usage by certain of its subscribers. In early September 2011, Sprint proposed a modified wholesale pricing structure to the Company, which the Company countered. Sprint and the Company subsequently entered into discussions about a possible amendment to the parties’ existing wholesale agreement.

By late summer and early fall of 2011, the Company had approximately 12 months of liquidity remaining. The Company’s board of directors was reevaluating the Company’s ability to successfully implement its business plan on a standalone basis, driven by concerns including the changing market and macro-economic environment, the substantial additional funding required to build out the Company’s planned LTE network and support continuing operations and the Company’s inability as of that time to reach agreement with any company to become a significant wholesale customer in addition to Sprint.

During this period, the Company continued to have discussions with potential partners, including DISH, Party B and Party C, about wholesale and other commercial agreements. The Company also restarted conversations with Party A in December 2011 about potential wholesale and capacity offload arrangements. The Company also commenced discussions about a possible commercial relationship with a direct broadcast satellite service provider. None of the discussions the Company had in this period resulted in an agreement with any of these parties, but in some cases the discussions continued.

In the fall of 2011, at the same time it was continuing to pursue discussions about possible significant wholesale agreements with new partners, the Company also held further discussions with Party C about a possible spectrum sale. After extensive discussions, Party C delivered a non-binding indication of interest to

 

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purchase a portion of the Company’s spectrum assets. Following receipt of the indication of interest from Party C, the discussions between the parties continued, but the parties were unable to reach agreement on the spectrum to be included in the transaction or the price.

On October 7, 2011, Sprint held an analyst day and made a series of public announcements regarding new business plans and commercial arrangements, including that (1) as part of its plan to rebuild its existing 3G CDMA network and shut down its 2G iDEN network, it would be deploying its own LTE network on its existing, unused 1.9 MHz spectrum in the same markets in which the Company offered its services to Sprint, (2) its network hosting agreement with Party F would provide Sprint with LTE services that would help satisfy its offload data capacity needs, (3) it had made a significant financial commitment to begin selling the iPhone, which would not operate on Clearwire spectrum, (4) it viewed Clearwire as its third priority for LTE services behind its own LTE network and Party F, and (5) it commented on a potential restructuring of the Company. In June 2011, Sprint also separately announced that it had made an election to voluntarily reduce its voting interest in the Company below 50% to avoid the risk that any default by the Company on its debt obligations would trigger a default by Sprint under its own debt instruments. Following the announcements by Sprint on its analyst day that it planned to pursue a 4G LTE network without the Company’s assistance, the Company’s stock price fell 32% from $2.05 per share on October 6, 2011 to $1.39 per share on October 7, 2011. These announcements also caused the Company to reevaluate the amount of additional capital that would be required for its business and its ability to secure such capital.

In this context, in the fall of 2011, while the Company continued to actively seek additional funding, explore strategic alternatives such as a spectrum sale and pursue another significant wholesale customer, the Company also engaged Blackstone Advisory Partners, L.P., which we refer to as Blackstone, and Kirkland & Ellis LLP, which we refer to as Kirkland & Ellis, to explore the possibility of a financial restructuring. The Company held a number of discussions with Blackstone and Kirkland & Ellis throughout the fall of 2011, considered the possibility of not making the interest payment on the First Priority, Second Priority and Exchangeable Notes due on December 1, 2011 and was prepared to pursue a restructuring in the event that it was unable to secure additional funding or reach agreement on another strategic alternative.

While it explored the possibility of a financial restructuring with Blackstone and Kirkland & Ellis, the Company continued to discuss its funding and commercial needs with Sprint. The parties discussed funding options for the Company’s planned LTE network, Sprint’s purchase of LTE services from the Company, pricing for the Company’s LTE services and a flat rate for Sprint’s purchase of the Company’s mobile WiMAX services in 2012 and 2013. On November 30, 2011, the Company and Sprint reached agreement on the terms of an amendment to the Company’s wholesale agreement with Sprint that would modify the mobile WiMAX pricing structure and include Sprint’s commitment to the Company’s planned LTE network. Sprint also committed to participate in an equity offering proposed to be conducted by the Company by purchasing its pro-rata share of up to $347 million of the securities to be sold in such an offering.

With Sprint’s commitments under the newly executed agreements in place, in early December 2011, the Company launched an equity offering. The equity offering resulted in the Company selling 374.8 million shares at $1.91 per share net of underwriter discount and receiving a total of $715.5 million in net proceeds, thereby enabling the Company to commence deployment of its LTE network. The equity financing also enabled the Company to secure $295 million in additional debt financing, which it completed in January 2012.

In March 2012, Google sold its entire stake of 29,411,765 shares of the Common Stock at an average price of $2.26 per share, for aggregate proceeds to Google of $66.5 million.

During the first half of 2012, with the proceeds of the equity and debt financings completed in late 2011 and early 2012 satisfying its near-term liquidity needs, the Company continued to pursue its strategy of expanding its wholesale business by attempting to secure additional significant wholesale partners and deploying its LTE network. At the same time, the Company continued to seek equity and/or debt financing to satisfy its long-term capital needs, including through a possible sale of spectrum, and to pursue other strategic alternatives.

 

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In February 2012, Party B approached the Company about restarting discussions about a possible spectrum sale and commercial agreement. The conversations between the parties focused on technical issues and the spectrum that the Company could potentially make available for sale. Party B made it clear during the discussions that a transaction with the Company was one of the several options it was pursuing in order to satisfy its spectrum needs. Party B terminated further discussions with the Company in May 2012 after it had determined to pursue one of the other options to satisfy its spectrum needs.

With respect to its efforts to seek additional funding for its long-term capital needs, in the first half of 2012, the Company held discussions with a number of financial funds, including, among others, a significant public stockholder of the Company, which we refer to as Party G, about possible equity and debt financing transactions that the Company hoped would partially satisfy its long-term funding needs.

Following such discussions and after reviewing the proposals submitted by Party G, among other financial investors, in early May 2012, the Company entered into a sales agreement with Cantor Fitzgerald & Co., which we refer to as CF&Co., pursuant to which the Company agreed to sell up to $300 million in shares of the Common Stock to CF&Co. from time to time. After selling $58.5 million net of stock through CF&Co. at an average price of $1.23, the Company elected to terminate the agreement because for 30 consecutive days the trading price of the Common Stock fell below the floor price of $1.20 per share established by the Company’s board of directors in approving the sale and, as a result, the Company concluded it was unlikely that the Company would be able to raise sufficient proceeds from the offering to satisfy the Company’s objectives.

The Company also re-engaged in preliminary discussions with Party A and its affiliates in the first half of 2012 and, over the course of several months, the Company proposed a number of possible alternatives for how the companies could work together, including a possible combination between Party A and the Company, a spectrum sale, a network joint venture and a wholesale or other commercial agreement. However, none of these discussions progressed beyond a preliminary stage.

In May 2012, the Company resumed discussions with Party C about possible transactions, including a network joint venture, spectrum sale, an equity investment, certain commercial arrangements, or a possible combination of Party C and the Company, which discussions continued through September 2012. The Company also discussed the possibility of a combination of Party C and the Company with Sprint and, in connection with these conversations, the Company requested that Sprint consider providing additional funding to the Company to facilitate such a transaction. Sprint and the Company engaged in due diligence, but ultimately Sprint declined to provide additional funding in connection with such a transaction. Party C eventually terminated the discussions because it engaged in a change of control transaction with another party.

In June 2012, the Company also tried to engage in discussions with representatives of a wireless services provider, which we refer to as Party H, regarding the possibility of various strategic transactions. Conversations with Party H did not go beyond preliminary stages.

Between July and October 2012, the Company also held preliminary discussions with representatives of a manufacturer of wireless technology and a semiconductor company, which we refer to as Party I, about a possible spectrum sale and other strategic alternatives, including a possible network hosting arrangement.

Beginning in April 2012, the Company also reengaged in a number of discussions with DISH regarding the possibility of various commercial and strategic transactions, including a spectrum sale. These discussions led to the receipt of a proposal from DISH on August 7, 2012, which proposal contemplated a spectrum sale with a transaction value of $2.1894 billion, a commercial agreement and the issuance to DISH of approximately $1.0 billion of PIK senior notes that could be converted to equity (amounting to approximately 45% of the Company’s Common Stock) by DISH at an exercise price of $1.20, subject to certain conditions. Following receipt of this proposal, the Company engaged in several rounds of discussions with DISH in August 2012 and engaged Evercore to evaluate the DISH proposal and its effect on the Company’s liquidity position. In a telephone

 

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conversation with a representative of DISH, Mr. Prusch asked DISH to consider a purchase of the shares of Common Stock held by the public stockholders. However, this request was declined. By mid-September, while the parties continued discussions regarding certain deal terms, representatives of DISH indicated that they were concerned about first receiving FCC approval on a pending application filed by DISH which they expected before November 2012. DISH’s application was to modify other satellite spectrum rights already held by DISH to allow terrestrial use.

Also between May and August 2012, the Company engaged in frequent discussions with Sprint regarding the Company’s financial condition and strategic direction, and potential strategic transactions for the Company with Sprint and with other parties.

In the fall of 2012, having been unable to secure a second significant wholesale partner or otherwise complete another strategic transaction, the Company was again facing significant long-term liquidity concerns having only twelve months of cash and significant uncertainty about its ability to obtain financing. While the Company continued to explore other strategic alternatives, it again engaged in extensive discussions with Blackstone and Kirkland & Ellis to explore a potential financial restructuring.

On October 3, 2012, the Time Warner Affiliates sold all 46,404,782 of their shares of the Company’s Common Stock through an underwritten offering at $1.37 per share. Following the sale by the Time Warner Affiliates, two other SIGs, the Comcast Affiliates and BHN Spectrum, each elected to convert all their shares of Class B Common Stock and their Class B Units into shares of Class A Common Stock.

On October 5, 2012, Keith Cowan, President, Strategy and Corporate Initiatives for Sprint, called Mr. Prusch and Mr. Stanton and expressed willingness to increase Sprint’s ownership stake in the Company and suggested that the Company undertake a rights offering. In addition, Sprint indicated that it would seek a waiver from the SIGs and Eagle River of their right to receive 30 days advance notice under the Equityholders’ Agreement in connection with any “Qualifying Purchase” by Sprint. He also specifically indicated a desire of Sprint to buy out the shares of any one of the remaining SIGs. He indicated that if the Company did not respond quickly, Sprint might not be able to address financing issues (such as providing liquidity or participating in a rights offering) with the Company for a period of time. Mr. Cowan was not more specific as to the length of such period of time during which Sprint might not be able to address financing issues. Under the Equityholders’ Agreement, each equityholder party to the Equityholders’ Agreement is subject to a standstill with respect to the Company until at least November 28, 2013 and a “Qualifying Purchase” is an exception to such standstill which requires an offer from any such equityholder to purchase all of the Common Stock not owned by such party, the approval of a simple majority of the members of the Company’s board of directors (excluding the designees of the purchasing equityholder to the Company’s board of directors) and the approval of a majority of the Company’s voting stock (excluding those shares of Company stock owned by the purchasing equityholder).

On October 8, 2012, Mr. Stanton met with Dan Hesse, Chief Executive Officer of Sprint, to discuss Mr. Cowan’s October 5th call to Mr. Stanton. Mr. Hesse indicated that Sprint was interested in acquiring the entire Company, or, alternatively, increasing its stake by participating in a potential rights offering by the Company as suggested by Sprint on October 5, 2012. Mr. Hesse indicated that his top priority was to acquire the stakes of one or more of the SIGs or Eagle River. Mr. Hesse also stressed the urgency of such a transaction and therefore the need to obtain a waiver from the SIGs of their right to receive the 30-day advance notice.

On October 9, 2012, Mr. Stanton updated the Company’s board of directors regarding his conversations with Mr. Hesse and Mr. Cowan, and distributed the proposed waiver to the SIGs. The proposed waiver was not executed at the time because Intel disagreed with, and accordingly refused to execute, the waiver request.

On October 11, 2012, a report surfaced in various press outlets that SoftBank was negotiating with Sprint to buy a stake in Sprint and speculating that the transaction could involve the Company. This was the first time that the Company learned of this potential transaction.

 

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Later on October 11, 2012, Sprint confirmed publicly that it was then engaged in discussions with SoftBank regarding a potential substantial investment by SoftBank in Sprint and further stated that, although there could be no assurances that these discussions would result in any transaction or on what terms any transaction might occur, any transaction with SoftBank could involve a change of control of Sprint.

The closing price of the Class A Common Stock rose from $1.30 per share on October 10, 2012 to $2.22 per share on October 11, 2012 following Sprint’s announcement.

On October 11, 2012, Ben Wolff, acting on behalf of Eagle River, called Mr. Stanton and informed him that Eagle River had been approached by Sprint to determine whether Eagle River wanted to make a right of first offer notice required under the terms of the Equityholders’ Agreement and was considering selling its shares of Class A and/or Class B Common Stock to Sprint and delivering such right of first offer notice.

That same day, Mr. Stanton called Mr. Hesse following Sprint’s October 11 public confirmation of the discussions of a potential transaction with SoftBank and the potential purchase of Eagle River shares by Sprint. Regarding the potential purchase of Eagle River shares, Mr. Hesse also informed Mr. Stanton that Sprint was in discussions to buy the shares of the Company held by one or more of the SIGs and Eagle River. Mr. Hesse then indicated again that Sprint had often been interested in exploring acquiring the entire Company, but had never had the financial resources necessary for such a transaction. He also said that, if the potential investment by SoftBank were to materialize, that would provide Sprint with sufficient funding to potentially pursue an acquisition of the entire Company, but the acquisition would be subject to SoftBank’s consent. At the time, Mr. Stanton told Mr. Hesse that he believed that Sprint should buy the entire Company on attractive terms, not just the shares held by the SIGs and Eagle River, and that Sprint should pay the same price for all shares of Common Stock, both Class A and Class B.

Later on October 11, Mr. Stanton called Charlie Ergen, the Chairman of the board of directors of DISH, and asked Mr. Ergen to consider with a sense of urgency a potential transaction between DISH and the Company. Mr. Ergen highlighted the importance to DISH of first obtaining FCC approval of DISH’s pending application for its satellite spectrum, but indicated to Mr. Stanton that he expected approval soon.

On October 12, 2012, Party I’s representatives expressed concerns to the Company that the potential Sprint-SoftBank transaction made a deal of any kind with the Company unappealing to Party I.

On October 13, 2012, Eagle River delivered a right of first offer notice to all of the SIGs notifying them of its intention to sell its shares of Class A and Class B Common Stock and Sprint responded by electing to purchase 100% of the shares offered by Eagle River. Mr. Hesse called Mr. Stanton to confirm that Sprint was interested in acquiring the shares held by Eagle River. The purpose of Mr. Hesse’s call was not to seek Mr. Stanton’s consent to the Eagle River purchase as, under the terms of the Equityholders’ Agreement, the Company did not have the right to consent to or veto such purchase. However, Mr. Stanton again urged Sprint to consider an acquisition of all of the Class A and Class B Common Stock not already owned by Sprint so as to achieve 100% ownership of the Company, and emphasized the need to pay the same per share consideration in respect of Class A Common Stock and Class B Common Stock in any such transaction. Later that day, Mr. Cowan called Mr. Stanton and indicated that SoftBank was only focused on acquiring shares from one or more of the SIGs or Eagle River at the time.

On October 15, 2012, Sprint and SoftBank issued a joint press release announcing that Sprint and SoftBank had entered into a series of definitive agreements under which SoftBank would acquire a 70% stake in Sprint and provide $8 billion in additional financing to Sprint, and that SoftBank would fund its investment in Sprint with a combination of cash on hand and a syndicated financing facility. The press release expressly indicated that the SoftBank investment did not require Sprint to take any actions involving the Company other than those set forth in existing agreements between Sprint and the Company and certain of its stockholders.

The closing price of the Class A Common Stock rose from $2.32 per share on October 12, 2012 to $2.69 per share on October 15, 2012 following the issuance of the joint press release by Sprint and SoftBank, but dropped to $2.23 per share on October 16, 2012.

 

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On October 17, 2012, after receiving objections from Comcast, Intel and Bright House to the form of the right of first offer notice delivered on October 13, Eagle River delivered a revised right of first offer notice to Sprint and the SIGs, and Sprint responded by electing to purchase 100% of the shares offered by Eagle River at the $2.97 per share blended offer price, subject to the pro rata participation rights of the SIGs. The SIGs did not elect to participate in the purchase, leaving Sprint the right to acquire 100% of the offered shares in accordance with the terms of the Equityholders’ Agreement. The blended price of $2.97 per share was based on a purported allocation by Eagle River of the purchase price of $2.00 per share of Class A Common Stock and $13.98 per share of Class B Common Stock and corresponding equity security in Clearwire Communications. Sprint later completed its acquisition of Eagle River’s shares on December 11, 2012.

On October 26, 2012, Mr. Stanton called Mr. Ergen to discuss the terms of a potential transaction between the Company and DISH, involving a spectrum sale and a commercial agreement.

On October 29, 2012, the Company’s board of directors met. Mr. Stanton and management updated the members of the Company’s board of directors on discussions with Sprint, DISH and Party I.

The Company’s board of directors and management were reminded that the Company continued to have very significant ongoing long-term capital needs of between approximately $2 billion and $4 billion (depending on whether or not the Company was able to secure additional significant wholesale customers) and, given the $4.5 billion of outstanding debt that the Company had raised over the past few years to support its operations and network build, the Company would face significant challenges in securing additional financing. At the same time, it was becoming increasingly apparent, given the Company’s unsuccessful strategic review process (as outlined above) and the Company’s inability to find a second significant wholesale customer, that the strategic and commercial options available to the Company on a standalone basis were limited. The Company’s board of directors was at the time also considering the impact of the recently announced Sprint-SoftBank Merger on the Company’s relationship with Sprint, the increased stake and control Sprint would have in the Company if it completed its desired acquisition of the SIGs’ shares of Common Stock and the position the minority stockholders and the Company’s board of directors might find themselves in with a combined Sprint/SoftBank as a controlling stockholder.

In late October and during the first week of November 2012, representatives of the Company had additional conversations with representatives of Sprint and SoftBank, including at an in-person meeting, regarding a possible transaction in which Sprint would acquire 100% ownership of the Company as well as certain related issues, including the timing of a potential transaction and the Company’s liquidity needs during the interim period.

On November 2, 2012 Mr. Stanton met with Mr. Masayoshi Son, the Chairman and CEO of SoftBank, in person, with Mr. Hesse and Mr. Ron Fisher, a member of the board of directors of SoftBank, participating telephonically. During that meeting, Mr. Stanton conveyed to Mr. Son that Mr. Stanton believed, based on his conversation with the SIGs, that they would not agree to sell their Company shares for a price per share less than the blended $2.97 price per share received by Eagle River in connection with its sale of its Company shares.

Also on November 5, 2012, at a combined meeting of the Audit Committee and the Strategic Committee of the Company’s board of directors, Mr. Stanton provided a report regarding the recent discussions with Sprint and SoftBank. It was the sense of the members of the Audit Committee and the Strategic Committee that a new independent committee of the Company’s board of directors should be established to oversee any discussions with Sprint.

On November 9, 2012, Mr. Hesse called Mr. Stanton and indicated that Sprint had been discussing the possibility of a transaction with the Company internally as well as with SoftBank, and was preparing to submit a preliminary non-binding indication of interest to acquire the Company. Mr. Fisher later called Mr. Stanton and delivered a similar message. In connection with preparing to submit an indication of interest, at around the same

 

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time, Mr. Cowan informed Mr. Prusch that Sprint wanted to obtain a waiver from the Company and the SIGs with respect to certain aspects of the provisions of the Equityholders’ Agreement related to the right of the SIGs to participate in any offer by Sprint to acquire the Common Stock that Sprint did not already own, so as to permit Sprint to engage in preliminary negotiations and activities and submit an indication of interest to acquire the Company. Following this conversation, the Company and the SIGs negotiated and executed the waiver requested by Sprint.

Also on November 9, 2012, Mr. Stanton sent an email to the Company’s board of directors updating the other directors on the recent discussions he had with Sprint and SoftBank. Mr. Stanton informed the Company’s board of directors that the Audit Committee and the Strategic Committee of the Company’s board of directors had recommended that the Company’s board of directors form a special committee to evaluate potential strategic alternatives, including a possible sale of the Common Stock that Sprint did not already own to Sprint.

On November 12, 2012, representatives of the Company met in person with representatives of DISH to discuss the potential spectrum sale and certain commercial arrangements. Following this meeting, on November 14, 2012, the Company sent a term sheet to DISH regarding a non-binding proposal for a potential spectrum sale and commercial agreement. Over the next thirty days, a series of discussions were held between the Company and DISH, regarding potential revisions to the term sheet with respect to the pricing structure and retail offering of the potential commercial agreement and the composition of the proposed spectrum portfolio. Throughout these discussions, DISH representatives indicated that DISH first needed to obtain FCC approval of its pending application for its satellite spectrum before entering into a transaction with Clearwire.

On November 13, 2012, the Company’s board of directors adopted by written consent formal resolutions for the formation of the Special Committee. The Special Committee is composed of Dennis Hersch, Kathleen Rae and Ted Schell, each an independent and disinterested director of the Company not nominated by Sprint who is not an officer or employee of the Company and who will not have an economic interest in the Company or the surviving corporation following the completion of the Merger. Mr. Hersch is the chairperson of the Special Committee. The Company’s board of directors exclusively delegated to the Special Committee its power and authority to explore, review, reject, evaluate and negotiate strategic alternatives that were available to Clearwire for the holders of our Class A Common Stock (other than Sprint, SoftBank and their respective affiliates), except to the extent not permitted by law and subject to the powers given to the Audit Committee in certain organizational documents of Clearwire, including empowering the Special Committee, on behalf of the Company to, among other things, determine whether a potential strategic alternative is appropriate or desirable for the Company and the holders of our Class A Common Stock (other than Sprint, SoftBank and their respective affiliates), formulate, structure and negotiate potential strategic transactions (including a transaction with Sprint or DISH), retain and compensate advisors, implement a shareholder rights plan, and/or terminate discussions with any counterparty (including Sprint and DISH) regarding any potential transaction. The Special Committee was not obligated to recommend any strategic alternative and the resolutions provided that (i) the Special Committee could not approve the execution of any definitive agreement evidencing the final terms of any strategic alternative but would instead submit its recommendation of any such agreement to the Company’s board of directors and (ii) the Company’s board of directors could not recommend any strategic alternative without the affirmative recommendation of the Special Committee.

Before and after the formal formation of the Special Committee on November 13, 2012, and before the first meeting of the Special Committee on November 23, 2012, the members of the Special Committee engaged in a series of phone calls related to various organizational matters of the Special Committee, including to engage Simpson Thacher & Bartlett LLP, which we refer to as Simpson Thacher, as counsel to the Special Committee, Richards, Layton & Finger, P.A., which we refer to as Richards Layton, as Delaware counsel to the Special Committee, and Centerview, as financial advisor to the Special Committee, in each case in connection with its review of potential strategic alternatives, including a possible transaction with Sprint or DISH.

 

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On November 17, 2012, representatives of Kirkland & Ellis and Simpson Thacher sent a draft confidentiality agreement to one of Sprint’s counsel, King & Spalding LLP, which we refer to as King & Spalding. Over the course of the next several days, representatives of Kirkland & Ellis and Simpson Thacher and representatives of King & Spalding negotiated the draft confidentiality agreement along with their respective clients and the agreement was executed on November 20, 2012.

On November 21, 2012, after a call from Mr. Hesse, Mr. Stanton received from Sprint a preliminary non-binding term sheet for the acquisition, by way of a merger, of all of the Common Stock not already owned by Sprint, a preliminary non-binding term sheet for an interim financing arrangement and a due diligence request list. The term sheet for the acquisition did not state the merger consideration, but Mr. Hesse indicated in his call that Sprint was proposing the same cash consideration for holders of Class A Common Stock and Class B Common Stock of $2.60 per share. Mr. Hesse also indicated to Mr. Stanton that, in light of certain timing issues related to the regulatory approvals of the Sprint-SoftBank Merger, it was important to Sprint that any transaction with the Company be completed on an accelerated time schedule so as not to delay the approval of the Sprint-SoftBank Merger. The term sheet for interim financing contemplated the purchase by Sprint of up to an aggregate principal amount of $600 million of 1.00% Exchangeable Notes due 2018 that were exchangeable for Common Stock at an exchange price of $1.25 per share, which Sprint asserted was the unaffected trading price for the Common Stock because it approximately equaled the closing price for the Class A Common Stock on the trading day prior to the date that Sprint publicly acknowledged the merger discussions with SoftBank. The term sheet for the interim financing also contemplated that a portion of the interim financing would be conditioned on Clearwire meeting certain build-out targets to be negotiated with Sprint. In addition, the term sheet proposed that one of the closing conditions to the transaction was the termination by the SIGs of the Company’s existing 4G MVNO Agreements with the SIGs.

The closing price of Class A Common Stock on November 20, 2012, the trading day prior to Sprint’s initial proposal to the Company, was $2.12 per share.

Following receipt of Sprint’s proposal, Mr. Stanton called Mr. Prusch. During the call, they concluded that Sprint’s term sheet represented a bona fide offer. Mr. Stanton and Mr. Prusch jointly called Mr. Hersch to ask that the Special Committee begin its review of the proposal. They then delivered a copy of the proposal to the members of the Special Committee. Mr. Stanton then updated the other members of the Company’s board of directors of the receipt of the proposal and the initiation of the Special Committee’s review. Mr. Stanton then called representatives of Comcast and Intel, both of whom indicated that they were supportive of a potential transaction between the Company and Sprint but that their support would depend on the price that Sprint would pay for the shares of Common Stock in any transaction as well as the other terms. The representatives of Comcast and Intel also expressed concerns over the closing condition in the term sheet concerning the termination of the 4G MVNO Agreement.

Mr. Stanton then called Mr. Ergen to encourage him to accelerate the DISH negotiations with the Company. Mr. Ergen indicated that he would be open to supplying financing to the Company in the interim as part of any transaction between the Company and DISH and again indicated that DISH expected approval soon by the FCC of DISH’s pending application.

Later on November 21, 2012, Mr. Prusch informed Mr. Cowan that the Special Committee would be meeting to review Sprint’s proposal the day after Thanksgiving and that the Company would not have any substantive comments or questions until after receiving instructions from the Special Committee.

On November 23, 2012, the Special Committee met with its advisors to discuss the preliminary proposal from Sprint. Mr. Hersch summarized for the Special Committee and its advisors the long-standing strategic review that had been undertaken by the Company and the various strategic alternatives and potential commercial arrangements that had been reviewed at numerous prior meetings of the Company’s board of directors. Representatives of Centerview provided a summary of the principal terms of the Sprint proposal, including the

 

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financial terms, and noted in particular that the proposal provided for the Class A Common Stock and Class B Common Stock to receive the same per share consideration and the fact that the Sprint proposal was conditioned on the closing of the Sprint-SoftBank Merger.

At the meeting, representatives of Simpson Thacher made a presentation to the Special Committee of its fiduciary duties in considering any proposed transaction, reviewed with the Special Committee its mandate as set forth in the Company’s board of directors’ resolutions forming the Special Committee and reviewed certain legal aspects of the Sprint proposal, including the conditions to the proposed transaction. The Company’s management provided a summary of the key elements of the interim financing proposal from Sprint and discussed the impact of such financing on the capital structure of the Company in the event the parties failed to complete the merger. Mr. Stanton provided an update on the status of his recent negotiations with representatives of DISH, who had most recently indicated that DISH needed to receive FCC approval on satellite spectrum before making an offer to the Company. After a lengthy discussion, the Special Committee determined that management and the Special Committee’s advisors should continue to explore all available alternatives, including the Sprint proposal, and that no substantive response should be given to Sprint until after a subsequent Special Committee meeting at which Centerview would present its initial financial analysis of the strategic alternatives available to the Company, including Sprint’s proposal. The Special Committee also determined that, given his long-standing experience in the telecom industry and the fact that he had no historical links to Sprint, Mr. Stanton, with the support of management led by Mr. Prusch, should act as the primary negotiator with Sprint on behalf of the Special Committee, with the understanding that he would do so at the direction of, and with the oversight of, the Special Committee.

On November 26, 2012, at the express direction of the Special Committee, the Company provided representatives of Sprint with access to an electronic data room and started providing information to Sprint in connection with Sprint’s due diligence.

On November 29, 2012, the Company’s board of directors met to discuss the Sprint proposal. Messrs. Stanton and Prusch updated the Company’s board of directors on the background of recent discussions with Sprint, and Mr. Stanton summarized the principal terms of the Sprint proposal. Representatives of Kirkland & Ellis gave a presentation on the Company’s board of directors’ fiduciary duties, both in the context of a strategic review process generally and in the context of a potential transaction with Sprint specifically. The Company’s management and representatives of Evercore, a financial advisor to the Company, discussed with the Company’s board of directors the terms of the interim financing proposed by Sprint, the factors that were limiting the Company’s ability to access capital markets, including constraints imposed by the Company’s organizational documents on the Company’s authorized share capital. The Company did not have enough authorized, but unissued shares available to raise sufficient additional capital through an equity financing. With the existing level of indebtedness, and the Company’s inability to issue additional secured indebtedness under the existing indentures, additional debt financings may not have been available on acceptable terms or at all. Even if additional debt financings were available, they could have increased the Company’s future financial commitments, including aggregate interest payments on its indebtedness, to levels that would be difficult to support.

Also, the Company’s management discussed financial restructuring alternatives, including seeking protection under the provisions of the United States Bankruptcy Code, which the Company had been considering during the fall of 2012.

On November 30, 2012, Mr. Stanton spoke with Mr. Ergen to discuss the Company’s need for a written proposal from DISH. Mr. Ergen expressed that he was unwilling to give the Company a written proposal until DISH had received approval from the FCC on its application requesting to build a cellular network on spectrum previously allocated to satellite services.

On December 2, 2012, Mr. Stanton spoke with Mr. Fisher, who confirmed that SoftBank was supportive of the proposal made by Sprint. Mr. Fisher further indicated that, assuming the Sprint-SoftBank Merger closed and the proposed merger between Sprint and the Company failed to close due to the failure to obtain the required

 

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stockholder approval, Sprint would seek to purchase the shares held by the SIGs pursuant to the right of first offer that Sprint has on sales of Common Stock by any SIG under the provisions of the Equityholders’ Agreement (which is an exception to the standstill that Sprint is subject to under the provisions of the Equityholders’ Agreement and which does not require the consent of the Company).

On December 3, 2012, the Special Committee met again to discuss the status of various potential strategic alternatives, including the possible transactions with Sprint or DISH as well as a restructuring alternative. Representatives of Simpson Thacher reviewed the fiduciary duties of the members of the Special Committee in connection with their evaluation of any proposed transaction. Mr. Stanton updated the Special Committee on recent conversations with the SIGs, who had indicated that they would be supportive of a potential transaction with Sprint, but that support would depend on the price ultimately offered by Sprint as well as the existing 4G MVNO Agreement remaining in place. Mr. Stanton also summarized his conversations with Mr. Ergen, including that Mr. Stanton had conveyed to him that the timing of receiving a formal proposal from DISH was becoming more pressing. Representatives of Centerview provided an overview of strategic alternatives then available to the Company, including the proposed transaction with Sprint, a commercial deal and spectrum sale with DISH, and a financial restructuring. In discussing a transaction with DISH, the representatives of Centerview noted that such a transaction would provide the Company with an immediate cash infusion; however, they also noted that such a transaction did not address the long term liquidity constraints of Clearwire (which were discussed during the November 29, 2012 meeting), Clearwire’s need to attract a second significant wholesale customer and the complexities, restrictions and challenges inherent in Clearwire’s governance and ownership structure, including provisions under the Equityholders’ Agreement that give Sprint, among other things, significant board representation and approval rights, which limited Clearwire’s flexibility to operate. In discussing the restructuring alternative, representatives of Centerview noted it was difficult to expect greater equity value in a restructuring than Sprint’s $2.60 per share proposal. At the request of the Special Committee, representatives of Centerview also reviewed the issues raised by letters sent by certain Company shareholders to the Company board related to the announcement of the Sprint-SoftBank transaction and the sale by Eagle River of its Common Stock to Sprint, which communications had previously been distributed to the members of the Special Committee and the Company’s board of directors. Mr. Hersch and the Company’s management reviewed the specific terms of a potential transaction with Sprint, including proposed responses to specific deal terms. After discussion, the Special Committee agreed to advise Sprint that its $2.60 per share proposal was rejected and that the Company should pursue discussions with Sprint and seek to improve the price and other terms of the Sprint proposal while continuing to pursue other potential strategic alternatives, including a potential commercial deal and spectrum sale with DISH. Specifically, the Special Committee directed Mr. Stanton to deliver a response to Sprint which would include a counterproposal on price of $3.15 per share, a reverse break-up fee in the event that a transaction is agreed to but does not close as a result of the failure to consummate the Sprint-SoftBank Merger, an increase of the threshold of the condition relating to dissenters’ rights, clarification that the Merger would be subject to the approval of the holders of a majority of the outstanding voting securities not held by Sprint or other interested parties, interim financing in the higher amount of $800 million, draws of the interim financing not conditioned on Clearwire meeting specified build-out targets and a coupon of 2% and an exchange price of $2.20 per share. The Special Committee then met with only its advisors and discussed the long-term viability of the Company in the absence of a strategic transaction as a result of the Company’s ongoing liquidity constraints and continued inability to attract a second significant wholesale customer.

Later that day, pursuant to the instructions from the Special Committee, Messrs. Prusch, Stanton and Scott Hopper, the Company’s Senior Vice President of Strategic Business Development, met in person with Messrs. Hesse, Cowan and Douglas Lynn, Vice President of Corporate Development of Sprint, to have a detailed discussion of the terms of the Sprint proposal, including the conditionality relating to the Sprint-SoftBank Merger, the Company’s build plan for its 4G LTE network, and the terms of interim financing. In that meeting, Mr. Hesse for the first time indicated that Sprint and SoftBank wanted Clearwire to substantially accelerate construction of its LTE network. In addition, in accordance with the Special Committee’s instruction, Mr. Stanton proposed a cash consideration of $3.15 per share. The next day, the Company sent a revised term

 

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sheet to Sprint, which reflected the Special Committee’s counterproposal on various deal terms, including the $3.15 per share merger consideration and the other terms discussed by the Special Committee at the December 3rd Special Committee meeting.

From December 4 through December 6, 2012, the Company’s engineers met with their respective counterparts at Sprint for technical diligence and to discuss the Company’s ability to accelerate its planned LTE deployment.

On December 5, 2012, the Company’s board of directors met to receive an update from the Special Committee regarding the Special Committee’s review of strategic alternatives. Mr. Hersch provided a summary of the discussions that took place at the December 3rd Special Committee meeting and informed the Company’s board of directors that it was the sense of the Special Committee that, while Sprint’s initial $2.60 per share proposal was rejected by the Special Committee, the Company should pursue further discussions with Sprint and seek improved terms while continuing to evaluate the other potential strategic alternatives, including a commercial deal and spectrum sale with DISH. Representatives of Centerview reviewed with the Company’s board of directors in summary form the analyses of potential strategic alternatives they had presented to the Special Committee at the December 3rd Special Committee meeting. Mr. Stanton then reviewed with the Company’s board of directors the terms proposed by Sprint and updated the Company’s board of directors on the status of ongoing negotiations with Sprint, including the Special Committee’s counterproposals on specific deal terms. Mr. Stanton also updated the Company’s board of directors on certain conversations with DISH, Party I and the SIGs.

On December 6, 2012, the Company received a revised term sheet from Sprint contemplating a $2.80 per share merger consideration. The revised term sheet also proposed the sale of all of the shares held by the SIGs to Sprint at the same price as the merger consideration in the event the merger failed to close due to failure to obtain the required approval from the Company’s stockholders, did not contain any termination fee payable by Sprint to the Company, included a termination right for Sprint in the event that the increase in authorized shares necessary to issue the exchangeable notes was not approved by stockholders of the Company, conditioned all draws of the interim financing on Clearwire meeting specified build-out targets, and included an exchange price for the notes under the interim financing of $1.50 per share.

Also on December 6, 2012, Mr. Hopper received a preliminary non-binding proposal from DISH to acquire certain spectrum assets of the Company as well as enter into certain commercial arrangements, which proposal we refer to as the Preliminary 2012 DISH Proposal. The Preliminary 2012 DISH Proposal contemplated a purchase price of approximately $2.2 billion in net proceeds to the Company for approximately 11.4 billion MHz-POPs and an option for DISH to purchase or lease an additional 2 MHz of spectrum nationwide. The net cash proceeds were prior to any adjustment for potential tax liabilities which were likely to arise from the sale of spectrum assets even after utilizing the existing net operating losses. The Preliminary 2012 DISH Proposal also contemplated certain commercial arrangements whereby each party would provide a variety of services to the other at cost plus 10%, including, among other things, services relating to building, operating, maintaining and managing a wireless network.

On December 7, 2012, the Special Committee met to discuss the status of the discussions relating to the potential strategic alternatives. Mr. Prusch updated the Special Committee on recent discussions with Sprint and SoftBank, including discussions relating to the Company’s build plan for its LTE network. Mr. Stanton reviewed with the Special Committee his previous response to Sprint, which was based on instructions from the Special Committee, and the response he received from Sprint on December 6, which included an increase of the price component of Sprint’s proposal to $2.80 per share. The Special Committee directed management and Mr. Stanton to continue the negotiation with Sprint with respect to the terms of a potential transaction, including continuing to request merger consideration of $3.15 per share, a reverse break-up fee in the event that the merger did not close due to the termination of the Sprint-SoftBank Merger, an increase of the threshold of the condition relating to dissenters’ rights and an exchange price of $2.20 and a coupon of 2% for the exchangeable notes under the interim financing. Also at this meeting, members of management and Mr. Stanton provided an update on the discussions with DISH concerning the Preliminary 2012 DISH Proposal.

 

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Later in the day on December 7, 2012, at the direction of the Special Committee, Mr. Stanton sent a revised term sheet to Sprint, including a proposed purchase price of $3.15 per share. On the same day, representatives of Skadden, Arps, Slate, Meagher & Flom LLP, counsel to Sprint, which we refer to as Skadden, sent drafts of a merger agreement and note purchase agreement for the proposed transaction for review by representatives of Kirkland & Ellis and Simpson Thacher.

On December 9, 2012, Mr. Hesse called Mr. Stanton to propose a revised set of terms for the proposed transaction with Sprint, which included an indicative price of $2.90 per share and agreeing to not include a closing condition related to the termination by the SIGs of the Company’s existing 4G MVNO Agreements with the SIGs.

Later in the day on December 9, 2012, the Special Committee met to discuss the revised proposal from Sprint. Mr. Stanton reviewed various terms of the revised Sprint proposal, including, among other things, the increased offer price, the revised terms with respect to the sale of shares by the SIGs to Sprint in the event of termination of the transaction under certain circumstances, the proposed build out plan, and a termination fee in the form of a prepayment for commercial services in the event that the transaction did not close because of a reason related to Sprint. Following discussion, the Special Committee directed management and Mr. Stanton to continue the negotiation with Sprint with respect to the terms of a potential transaction, including continuing to request a price of $3.15 per share, to seek to improve the terms of the interim financing and to add a reverse break-up fee in the event the transaction did not close for certain reasons.

On December 10, 2012, Mr. Stanton called Mr. Ergen and re-emphasized the urgency of a potential transaction and the need for a document with more finalized offer terms. Mr. Ergen reiterated his unwillingness to submit a more finalized proposal until DISH received approval from the FCC. Mr. Ergen expressed that he believed that this approval was imminent. The next day, engineers from the two companies had a conversation regarding certain technical issues relating to the Preliminary 2012 DISH Proposal.

On December 11, 2012, Messrs. Prusch and Stanton called Mr. Cowan to discuss various deal terms, including, among other things, price and Sprint’s continued insistence on a condition and termination right relating to dissenters’ rights. Mr. Cowan responded that he would discuss the Company’s positions with Sprint management.

On the same day, the media reported that Sprint was in active negotiations to acquire the shares of Common Stock that it did not already own. The trading price of the Class A Common Stock rose from a closing price of $2.40 per share on December 10, 2012 to a closing price of $2.68 per share on December 11, 2012.

Also, on December 11, 2012, the FCC approved DISH’s pending application for its satellite spectrum.

On December 12, 2012, Mr. Ergen called Mr. Stanton to discuss the terms of the Preliminary 2012 DISH Proposal and the results of the December 11 technical diligence discussions held between DISH and the Company. Mr. Ergen indicated to Mr. Stanton that DISH would be making a written proposal.

In the afternoon of December 12, 2012, the Special Committee and Audit Committee of the Company held a joint meeting to discuss the status of potential strategic alternatives. Given a provision in the Equityholders’ Agreement requiring certain related party transactions to be reviewed and recommended by the Audit Committee, it was determined that the Special Committee meetings at which the Sprint proposal was being discussed should be conducted as joint meetings with the Audit Committee. Representatives of Simpson Thacher reviewed the fiduciary duties of the members of the Special Committee in considering any proposed transaction. Mr. Stanton updated the Special Committee and the Audit Committee on the status of negotiations with Sprint regarding various deal terms, including price. He informed the Special Committee and the Audit Committee that despite the Company’s continued insistence on a $3.15 per share price, Sprint’s offer remained at $2.90 per share, although Mr. Stanton believed, based on recent conversations with Mr. Hesse, that Sprint might be able to

 

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increase its offer to $2.97 per share, the same price at which Eagle River sold its shares of Common Stock to Sprint. Representatives of Kirkland & Ellis and Simpson Thacher provided an overview of the outstanding legal issues on the draft documentation with Sprint. Messrs. Stanton and Hopper provided an update on recent discussions with DISH regarding a potential spectrum sale and commercial arrangement.

Mr. Stanton informed the Special Committee that, consistent with its instructions, he had told representatives of DISH that the timing of any proposal from them was pressing. Representatives of Centerview then gave a presentation on the potential strategic alternatives available to the Company and the terms of the revised Sprint proposal, and members of the Special Committee and Audit Committee engaged in a discussion regarding available strategic alternatives as well as the financial projections of the Company prepared by management of the Company, as described below under “—Prospective Financial Information,” including the Multi-Customer Case which assumed that Clearwire would achieve substantial non-Sprint network traffic beginning in 2014. The members of the Special Committee and Audit Committee agreed that, in light of extensive efforts by the Company to attract a second significant wholesale customer over the course of the last few years and the obstacles that the Company had encountered in connection with such efforts (including the Company’s ownership and governance structure), it was substantially uncertain whether the Company would be able to attract any such customer in the foreseeable future. The Special Committee then discussed the terms of the interim financing offered by Sprint with management and its advisors. In the course of those discussions, it was noted that if the partial debt forgiveness feature proposed by Sprint in the draft merger agreement was agreed to by Sprint (representing an effective termination fee under specified circumstances), the effective exchange price of the interim financing proposed by Sprint would become, under such circumstances, substantially higher than the proposed $1.50 per share.

After the joint meeting of the Special Committee and Audit Committee, the Company’s board of directors met on the same day to receive an update from the Special Committee on the strategic alternatives review. Mr. Stanton provided the Company’s board of directors with an update on the status of the negotiations with Sprint and the significant terms of Sprint’s most recent proposal. Representatives of Centerview then reviewed with the Company’s board of directors, in summary form, the presentation on potential strategic alternatives they had given to the Special Committee and Audit Committee earlier that day. Representatives of Evercore also provided the Company’s board of directors with a summary of the material terms of Sprint’s proposal.

During this meeting, the Company received by e-mail a formal written proposal from DISH. Mr. Stanton described the DISH proposal that had just been received to the Company’s board of directors. DISH proposed an acquisition of spectrum licenses and certain commercial arrangements, the terms of which, including economic terms, were substantially similar to those contemplated by the outline of terms submitted by the Preliminary 2012 DISH Proposal.

On December 13, 2012, after a Sprint board meeting to consider the terms of the proposed transaction, Sprint filed a beneficial ownership report on Schedule 13D disclosing the fact that Sprint was in discussions with the Company with the intent to attempt to reach a definitive agreement for a potential merger transaction, pursuant to which Sprint would acquire all of the shares of Class A Common Stock and Class B Common Stock that it did not already own at a purchase price of $2.90 per share. Sprint also disclosed its proposal to provide interim financing to the Company from and after the execution of definitive agreements for the proposed transaction in an amount up to an aggregate of $800 million through the purchase of exchangeable notes. In addition, Sprint disclosed that under the Sprint-SoftBank Merger Agreement, Sprint was required to obtain the prior written consent of SoftBank prior to entering into definitive documentation for a transaction with the Company. Following Sprint’s filing of the Schedule 13D, the trading price of the Class A Common Stock rose from a closing price of $2.75 per share on December 12, 2012 to a closing price of $3.37 per share on December 14, 2012.

Following the receipt of draft agreements from Sprint’s counsel on December 7, 2012, representatives of the Company and Sprint, together with representatives of their legal and financial advisors and the Special Committee’s legal and financial advisors, held a series of conference calls to negotiate the terms of various transaction documents

 

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for the proposed transaction, including the merger agreement and the note purchase agreement, and exchanged multiple drafts of the transaction documents. Among other things, the parties engaged in negotiations regarding the conditions to the merger (in particular the condition relating to the consummation of the Sprint-SoftBank Merger), the terms of interim financing, the efforts standard for obtaining the required regulatory approvals, the definition of material adverse effect, the ability of each of the Company’s board of directors and the Special Committee to change its respective recommendation with respect to the transaction with Sprint, the circumstances under which each party may terminate the merger agreement, the size and form of the termination fee and the restrictions on the Company’s operation of its business prior to the closing of the merger. As a result of these negotiations, Sprint agreed, among other things, to allow each of the Company’s board of directors and the Special Committee to change its respective recommendation with respect to the merger under specified circumstances if such change is required by the Company’s board of directors’ fiduciary duties, to eliminate a condition relating to dissenters’ rights, to increase the exchange price of the exchangeable notes from $1.25 to $1.50, and to forgive $120 million of the principal amount of the exchangeable notes in the event the merger failed to close due to the failure of the Sprint-SoftBank Merger to close, which effectively would substantially increase the conversion price per share.

Later on December 13, 2012, the Special Committee and the Audit Committee held a joint meeting to discuss the Sprint proposal and the other strategic review process. Mr. Stanton updated the Special Committee on his discussions with representatives of Sprint and with certain of the SIGs. Mr. Stanton informed the Special Committee that although he had continued to press for the $3.15 price, representatives of Sprint and SoftBank had told him that they would only be willing to increase the offer price to $2.97 per share. The Company’s management updated the Special Committee and the Audit Committee regarding the status of draft definitive documentation for the potential transaction with Sprint. The members of the Special Committee and the Audit Committee then discussed the consideration being offered by DISH in its proposal for a spectrum purchase, in comparison with the consideration offered by Sprint to purchase the remainder of the outstanding shares not owned by Sprint as well as the impact on the Company of selling the spectrum identified in the DISH proposal. The Special Committee made no determination at that time as to either proposal and instructed Mr. Stanton and management to continue to pursue the proposals and seek improved terms. Mr. Hopper noted that he had requested that senior management of DISH increase their offer and that DISH management declined to do so. The Special Committee directed Mr. Stanton to continue to seek a higher per share consideration from Sprint.

It was reported in the press later on December 13, 2012 that SoftBank would not agree to consent to any price higher than $2.97 in connection with Sprint’s offer to acquire the remaining shares of Clearwire that it did not own.

Also on December 13, 2012, Mr. Hopper called Thomas Cullen, Executive Vice President of Corporate Development at DISH, to discuss the Preliminary 2012 DISH Proposal and the Schedule 13D filed by Sprint.

On December 14, 2012, pursuant to the direction of the Special Committee, Mr. Stanton called Mr. Hesse to press for the proposed $3.15 per share price. Mr. Hesse indicated that SoftBank would not consent to Sprint entering into the transaction at any price above $2.97 per share. Following this conversation, Mr. Stanton called Mr. Fisher directly to discuss the offer price, and Mr. Fisher indicated that $2.97 per share was the highest offer price by Sprint as to which SoftBank was willing to provide consent.

Later on December 14, 2012, the Special Committee and the Audit Committee held a joint meeting to discuss the Sprint proposal and the other strategic alternatives. Mr. Hersch summarized certain stockholder communications the Company had received following initial media reports of a potential transaction with Sprint and the Schedule 13D filing by Sprint, which communications had previously been distributed to the members of the Special Committee and the Company’s board of directors, and noted that he had requested a detailed review of the statements made in such communications. Mr. Hersch also informed the committee members that he had requested management to contact parties with whom the Company had previously had discussions regarding spectrum sales to determine whether any such parties had any interest in pursuing a transaction. Mr. Stanton updated the Company’s board of directors on recent discussions he had with representatives of a number of such

 

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potential purchasers of the Company’s spectrum assets, noting that such purchasers were familiar with the Company’s assets given their participation in prior sales processes. Mr. Stanton noted that all of these potential purchasers that he had previously spoken with affirmatively declined any interest in engaging in a transaction with the Company, but that he, the Company’s management and representatives of Centerview would continue to reach out to potential purchasers for the Company’s spectrum assets in order to determine whether a spectrum sale was a viable alternative to the proposed transaction with Sprint.

Mr. Stanton also updated the members of the committees on the discussions with Sprint, noting that he had specifically requested that Mr. Hesse and Mr. Fisher discuss with Mr. Son the Special Committee’s position to increase the offer to $3.15 per share, especially in light of stockholder communications opposing a transaction with Sprint based on deal price, the convertible note financing and deal risks related to the execution of the Merger Agreement, that had been received by the Company from Mount Kellett Capital Management LP and Crest Financial Limited, which are publicly available, but SoftBank had not shown any willingness to change its position on price as a condition to its consent. Representatives of the Company updated the Special Committee and Audit Committee on the status of the discussions with DISH and the fact that representatives of DISH had not responded to requests for an improved proposal. The members of the Special Committee and its advisors discussed and reviewed the benefits and drawbacks for the Company of a spectrum sale to DISH. In connection with a discussion of any other alternatives to be pursued by the Company, Mr. Prusch confirmed that representatives of Sprint had confirmed to him that they would not be willing to sell their shares of Common Stock. In addition, representatives of the Company discussed that they still had not secured a commitment from another significant wholesale partner and that no other party had recently expressed interest in buying spectrum from the Company. Following these updates, representatives of Centerview reviewed an analysis they had prepared at the request of the Special Committee comparing the economic terms that would need to be offered in a spectrum sale in order to achieve, on a present value basis, the value being offered by Sprint.

After the Special Committee meeting, at the direction of the Special Committee, representatives of the Company and Centerview reached out to additional potential strategic partners with whom the Company had previously had discussions regarding potential strategic transactions and/or commercial arrangements, including, among others, Party A, Party B, Party E and Party I, to assess their interest in exploring a potential transaction at this time. All of the parties contacted by the Company responded that they were not interested in pursuing such a transaction at this time. Additionally, Mr. Hopper spoke with Mr. Cullen again and indicated that the discussions were moving away from DISH and asked Mr. Cullen if he wanted to alter the DISH proposal in any way in light of that. Mr. Cullen declined to alter the offer.

On December 16, 2012, the Special Committee and Audit Committee held a joint meeting to discuss the potential transaction with Sprint and the strategic review process. Mr. Hersch informed the Special Committee and the Audit Committee that, since the previous joint meeting of the committees on December 14, 2012, outstanding issues in the proposed merger agreement with Sprint, including the deletion of a condition related to dissenters’ rights, had been resolved and that Mr. Stanton and Company management had contacted the most likely potential parties to a spectrum sale transaction and that each potential spectrum purchaser contacted (other than DISH) had affirmatively declined any interest in acquiring spectrum assets from the Company at this time. Mr. Hersch also reviewed a summary prepared by management of the Company at his request, of the recent stockholder communications that had opposed the transaction based on deal price, the convertible note financing and deal risks related to the execution of the Merger Agreement, and the actions that management had taken in the past which already addressed the various statements outlined in such communications. Representatives of Simpson Thacher reminded the members of the Special Committee of their fiduciary duties in considering a transaction with Sprint and reviewed certain terms of the proposed merger agreement with Sprint. Mr. Stanton provided an update on his discussions with Sprint and reported that Sprint had increased its offer price to $2.97 per share and there was a discussion of the final terms of the documentation related to the Sprint transaction. Messrs. Stanton and Hopper also provided an update on the discussions with DISH and noted that representatives of DISH had stated that DISH was not willing to increase its offer price for the Company’s spectrum. Representatives of Centerview then summarized the significant issues that Centerview had discussed at prior Special Committee meetings with each of the strategic alternatives which the Special

 

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Committee had been evaluating. In connection with reviewing the restructuring alternative, the representative of Centerview noted that it was difficult to expect greater equity value in a restructuring than the proposed transaction with Sprint. In discussing the spectrum sale to DISH, the representative of Centerview noted that, even at a higher price, such a transaction would not solve the Company’s long-term liquidity issues or the Company’s need to attract a second significant wholesale customer. After such discussions, representatives of Centerview delivered Centerview’s opinion to the Special Committee and the Audit Committee to the effect that, as of December 16, 2012, and based upon and subject to the various assumptions and limitations set forth in Centerview’s written opinion, the Merger Consideration to be paid to the holders of shares of Class A Common Stock (other than Sprint, SoftBank or any of their respective affiliates and any stockholders who properly exercise their appraisal rights under Delaware Law) was fair, from a financial point of view, to such holders. Following additional discussions among the members of the Special Committee and the Audit Committee and their advisors, the Special Committee determined that, among other things, (i) the Merger Agreement and the transactions contemplated thereby, when compared to the other potential transactions reasonably available to the Company at that time, was the most favorable potential transaction to the holders of shares of Class A Common Stock, other than Sprint, SoftBank or any of their respective affiliates, (ii) the terms of the Merger Agreement and the Merger were advisable, fair to and in the best interest of the holders of our Class A Common Stock (other than Sprint, SoftBank and their respective affiliates), (iii) the Special Committee recommended that the Company’s board of directors approve the Merger Agreement and the other agreements to which the Company is a party contemplated by the Merger Agreement, and (iv) the Special Committee recommended that the Company’s board of directors declare the advisability of the Merger Agreement to the Company’s stockholders and recommend the adoption of the Merger Agreement by the Company’s stockholders; and the Audit Committee adopted resolutions to the effect that, among other things, (A) the Merger Agreement and the transactions contemplated thereby, including the Merger, were advisable, fair to and in the best interest of the Company and its stockholders, (B) the Merger Agreement and the other agreements to which the Company is a party contemplated by the Merger Agreement, and the transactions contemplated by these agreements, were approved for all purposes of the Audit Committee Charter and the Equityholders’ Agreement, and (C) the Audit Committee recommended that the Company’s board of directors declare the advisability of the Merger Agreement to the Company’s stockholders and recommend the adoption of the Merger Agreement by the Company’s stockholders.

Immediately following the joint Special Committee and Audit Committee meeting on December 16, 2012, the Company’s board of directors held a meeting to consider the proposed transaction with Sprint. At the meeting, Mr. Stanton reviewed with the Company’s board of directors communications with the SIGs regarding the proposed transaction with Sprint, specifically conversations with Intel regarding pricing protections Intel wanted included in the voting agreement, which Sprint refused to include. Mr. Stanton discussed the result of the Company’s recent market check to determine the possibility of other potential strategic transactions, the status of the current discussions with DISH regarding a spectrum sale, the Company’s board of directors’ efforts in the past two years to seek potential strategic transactions, commercial arrangements and a second significant wholesale customer, as well as the Company’s liquidity constraints and debt burden. Mr. Stanton also reviewed with the Company’s board of directors the review and evaluation process conducted by the Special Committee. Representatives of Evercore then reviewed with the Company’s board of directors their analyses of the Sprint transaction and delivered Evercore’s opinion that, as of December 16, 2012, and based upon and subject to the assumptions made, matters considered and limitations on the scope of review undertaken by Evercore as set forth in its written opinion, the Merger Consideration to be paid to the holders of shares of Class A Common Stock (other than Sprint, SoftBank, any of their respective affiliates and any stockholders who properly exercise their appraisal rights under Delaware law) pursuant to the Merger was fair, from a financial point of view, to such holders. Following these discussions, representatives of Kirkland & Ellis reminded the Company’s board of directors of its fiduciary duties in considering a transaction with Sprint, as well as the material terms and conditions of the proposed merger agreement with Sprint and other related agreements, including agreements for the interim financing and the voting and support agreement with the SIGs. Mr. Hersch then delivered the Special Committee’s recommendations to the Company’s board of directors with respect to the proposed transaction with Sprint, and Mr. Stanton conveyed to the Company’s board of directors the approval of the proposed transaction by the Audit Committee. The six directors who are disinterested and not designated by Sprint on the Company’s board of directors then unanimously approved the Merger Agreement and the transactions contemplated thereby,

 

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including the Merger. Following the action of the six directors who are disinterested and not designated by Sprint, the full Company’s board of directors unanimously determined that, among other things, (i) the Merger Agreement and the other agreements to which the Company is a party contemplated by the Merger Agreement, and the Merger and the other transactions contemplated thereby, are advisable, fair to and in the best interests of the Company and its stockholders, (ii) the Merger Agreement and the other agreements to which the Company is a party contemplated by the Merger Agreement are authorized and approved for all purposes by the Company’s board of directors or any subset of the directors on the Company’s board of directors as may be required under the Equityholders’ Agreement, (iii) the adoption of the Merger Agreement, the approval of an amendment to the Certificate of Incorporation to increase the Company’s authorized share capital, and the approval of the issuance of Class A Common Stock in connection with the exchange of the Notes, be submitted to the Company’s stockholders for consideration, and (iv) recommended that the stockholders of the Company vote their shares of Common Stock in favor of the Merger Agreement Proposal, the Charter Amendment Proposal and the NASDAQ Authorization Proposal.

In the early morning on December 17, 2012, the Company and Sprint executed the Merger Agreement, after which the Company and Sprint issued a joint press release announcing the execution of the Merger Agreement. Later that morning, Mr. Stanton called Mr. Ergen to inform him of the execution of the Merger Agreement.

Later that day, the Company and Sprint held a joint investor call in which senior management of both companies, including Mr. Prusch, participated. Mr. Prusch shared the Company’s view on the desirability of the Sprint transaction and answered several questions raised by investors on this matter, the transcript of which was filed on a Company Form 8-K on the same day.

Subsequent Events

On December 28, 2012, Mr. Ergen called Mr. Stanton to inform him that DISH intended to submit a proposal, and DISH then sent the Company a revised proposal from DISH consisting of the purchase of 11.4 billion MHz-POPs of spectrum for $2.184 billion, certain commercial arrangements and, for the first time, an offer to acquire up to all of Clearwire’s outstanding shares at $3.30 per share and provide interim financing, subject to certain restrictions and conditions. At the end of its proposal, DISH indicated that it would withdraw its proposal if the Company draws on the financing contemplated by the Note Purchase Agreement.

On December 29, 2012, Mr. Stanton called Mr. Hesse and Mr. Fisher to inform them of the receipt of the proposal from DISH. The Company then sent a summary of the proposal to Sprint as required under the Merger Agreement.

On January 2, 2013, the Company received a letter from Sprint responding to the December 28, 2012 revised DISH proposal.

On January 8, 2013, the Company issued a press release disclosing the material terms of DISH’s proposal as well as a summary of Sprint’s January 2nd letter from Sprint, the full text of which is set forth below:

Clearwire Corporation Provides Transaction Update

Clearwire (NASDAQ: CLWR) today announced that it has received an unsolicited, non-binding proposal (the “DISH Proposal”) from DISH Network Corporation (“DISH”). The DISH Proposal, as further summarized below, provides for DISH to purchase certain spectrum assets from Clearwire, enter into a commercial agreement with Clearwire, acquire up to all of Clearwire’s common stock for $3.30 per share (subject to minimum ownership of at least 25% and granting of certain governance rights) and provide Clearwire with financing on specified terms.

The DISH Proposal is only a preliminary indication of interest and is subject to numerous, material uncertainties and conditions, including the negotiation of multiple contractual arrangements being requested by

 

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DISH (some of which, as currently proposed, may not be permitted under the terms of Clearwire’s current legal and contractual obligations). It is also subject to regulatory approval.

As previously announced on December 17, 2012, Clearwire has entered into a definitive agreement with Sprint Nextel Corporation (“Sprint”) for Sprint to acquire the approximately 50 percent stake in Clearwire it does not already own for $2.97 per share (the “Sprint Agreement”). Clearwire’s ability to enter into strategic transactions is significantly limited by its current contractual arrangements, including the Sprint Agreement and its existing Equityholders’ Agreement.

The Special Committee of the Clearwire Board of Directors (the “Special Committee”) has determined that its fiduciary duties require it to engage with DISH to discuss, negotiate and/or provide information in connection with the DISH Proposal. The Special Committee has not made any determination to change its recommendation of the current Sprint transaction. Consistent with its obligations under the Sprint Agreement, Clearwire has provided Sprint with notice, and the material terms, of the DISH Proposal, and received a response from Sprint that is described below.

DISH had, prior to the announcement of the Sprint Agreement, provided Clearwire with a preliminary indication of interest solely with respect to acquiring certain of Clearwire’s spectrum assets, on substantially the same pricing per MHz-POP as the spectrum purchase included in the DISH Proposal described below, and entering into a commercial agreement. Although Clearwire worked with DISH prior to the execution of the Sprint Agreement to improve the overall terms of that proposal, the Special Committee of the Clearwire Board determined that the Sprint transaction was, for a number of reasons, a more-attractive alternative for Clearwire’s non-Sprint Class A stockholders than a transaction with DISH at that time and on the terms then-proposed by DISH.

Summary of DISH Proposal

The following is a summary of the material terms of the proposal:

 

 

Spectrum Purchase. DISH would acquire from Clearwire spectrum covering approximately 11.4 billion MHz-POPs (“Spectrum Assets”), representing approximately 24% of Clearwire’s total MHz pops of spectrum, for aggregate net cash proceeds to Clearwire of approximately $2.2 billion (the “Spectrum Purchase Price”). The net cash proceeds are prior to any adjustment for potential tax liabilities which are likely to arise from the sale of spectrum assets even after utilizing the existing net operating losses. At DISH’s option, Clearwire would also sell or lease up to an additional 2 MHz of Clearwire’s spectrum to DISH from a channel that is adjacent to the Spectrum Assets at a price to be calculated in the same manner as the Spectrum Assets.

 

 

Commercial Agreement. Clearwire would, at DISH’s request, provide certain commercial services to DISH, including the construction, operation, maintenance, and management of a wireless network covering AWS-4 spectrum and new deployments of 2.5 GHz spectrum.

 

 

Acquisition of Clearwire Shares; Governance. DISH would make an offer to Clearwire’s stockholders to purchase up to all of Clearwire’s outstanding shares at a price of $3.30 per share in cash. This tender offer would not be dependent on Sprint’s participation, but would be subject to a number of conditions, including DISH: (i) acquiring no less than 25% of the fully-diluted shares of Clearwire, (ii) being granted the right to designate Clearwire board members commensurate with its pro forma ownership percentage, (iii) receiving certain minority protections, including the right to approve material changes to Clearwire’s organizational documents, change of control and material transactions with related parties (unless these transactions were approved by an independent committee of the Clearwire board and, if over a certain threshold, supported by a written fairness opinion from a nationally recognized investment bank) and (iv) receiving preemptive rights. In addition, the DISH Proposal would require Clearwire to terminate the note purchase agreement under which Sprint has agreed to provide interim financing to Clearwire and is conditional upon the consummation of the spectrum purchase and Clearwire being in compliance with the commercial agreement (both as described above).

 

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Spectrum Purchase Price Funding. DISH would pre-fund the Spectrum Purchase Price within three business days of signing through a senior Unsecured PIK Debenture (the “PIK Debenture”) bearing PIK interest at a rate of 6% per annum in the event the Spectrum Assets are sold to DISH or 12% per annum otherwise. Clearwire would be obligated to either apply the proceeds of the pre-funding to reduce outstanding long-term debt through the redemption or repurchase of the 2015 Senior Secured Notes and 2016 Senior Secured Notes of Clearwire Communications LLC or, in the event that a portion of the Network Build Financing described below is unavailable due to the failure to receive shareholder approval, to use an equivalent portion of the proceeds of the PIK Debenture to fund network build-out costs; in that case, any future make up draws on the Network Build Financing following shareholder approval would be applied to reduce debt as provided in this sentence. If Spectrum Assets are not acquired due to a failure to obtain required regulatory approvals, Clearwire would, within 30 days following termination of the spectrum purchase agreement, repay the PIK Debenture plus interest at 6% per annum. If Clearwire is unable to repay the PIK Debenture during this 30 day period, it would be entitled to convert the principal amount and accrued interest on the PIK Debenture into a note on terms comparable to the 2015 Senior Secured Notes previously repaid, having a maturity of December 1, 2015.

 

 

Network Build Financing. DISH proposes to provide additional capital to fund a portion of Clearwire’s network build-out through a credit facility for the purchase of exchangeable notes on substantially similar terms to those which Sprint has agreed to provide, subject to cancellation of the Sprint Financing Agreements (as described below).

 

 

Deal Protections. DISH expects appropriate deal protections, including a 5-day match right, similar to those included in the Sprint Agreement. DISH would match Clearwire’s termination rights as provided for in the Sprint transaction (including the possible forgiveness of a portion of the exchangeable notes upon certain termination events).

 

 

Sprint Financing. DISH has indicated that the proposal will be withdrawn if Clearwire draws on the financing under the Sprint Financing Agreements.

In connection with the Sprint Agreement, Clearwire and Sprint also entered into agreements that provide up to $800 million of additional financing to Clearwire in the form of exchangeable notes, which will be exchangeable under certain conditions for Clearwire common stock at $1.50 per share, subject to adjustment under certain conditions (the “Sprint Financing Agreements”). Under the Sprint Financing Agreements, Sprint has agreed to purchase, at Clearwire’s option, $80 million of exchangeable notes per month for up to 10 months beginning on January 2, 2013. The DISH Proposal indicates that it will be withdrawn if Clearwire draws on the financing under the Sprint Financing Agreements. As a result, in order to allow the Special Committee to evaluate the DISH Proposal, at the direction of the Special Committee, Clearwire has revoked its initial draw notice and has not received the first $80 million under the Sprint Financing Agreements. The Special Committee has not made any determination with respect to any future draws under the Sprint Financing Agreements.

Summary of Sprint Response to DISH Proposal

In response to the DISH Proposal, Clearwire has received a letter from Sprint stating, among other things, that Sprint has reviewed the DISH Proposal and believes that it is illusory, inferior to the Sprint transaction and not viable because it cannot be implemented in light of Clearwire’s current legal and contractual obligations. Sprint has stated that the Sprint Agreement would prohibit Clearwire from entering into agreements for much of the DISH Proposal. The following is a summary of Sprint’s statements in its letter regarding the material terms of the DISH Proposal:

 

 

Spectrum Purchase. Sprint has stated that, under the Sprint Agreement, Clearwire is prohibited from selling the Spectrum Assets without Sprint’s consent. In addition, Sprint has stated that Clearwire is further subject to various requirements under its commercial agreements with Sprint and the Equityholders’ Agreement applicable to selling Spectrum Assets, even if the Merger Agreement were not in place.

 

 

Commercial Agreement. Sprint has stated that, under the Merger Agreement, Clearwire is prohibited from entering into the commercial agreement proposed by DISH so long as the Merger Agreement is in place.

 

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Acquisition of Clearwire Shares. Sprint has stated that the DISH Proposal may constitute a change of control under the Equityholders’ Agreement, which would require the affirmative vote of 75% of the issued and outstanding shares of Clearwire’s stock. Sprint has stated it would not vote in favor of the proposed transaction with DISH.

 

 

Governance. Sprint has stated that (i) it would be impermissible under Clearwire’s current Equityholders’ Agreement for Clearwire to agree to nominate DISH’s designees to the Clearwire Board, (ii) it would be impermissible under the Equityholders’ Agreement for Clearwire to create a new independent committee of the Clearwire Board and (iii) under Delaware law, certain governance rights requested by DISH (including the request for proportionate board representation) cannot be granted by Clearwire in a manner that does not require amendment of the certificate of incorporation or consent of Sprint to a shareholder agreement embodying what DISH has requested.

 

 

Funding. Among other arguments, Sprint has stated that the complex financing provisions of the DISH Proposal must also be considered in light of the existing Clearwire contractual arrangements (including debt arrangements) and that it is not clear from Sprint’s review that such financing is permitted by or would comply with Clearwire’s existing arrangements. In addition, Sprint has stated that Sprint and the other parties to the Equityholders’ Agreement would have preemptive rights with respect to any issuance of exchangeable notes by Clearwire as contemplated by the DISH Proposal, and any issuance of such notes may also require Clearwire stockholder approval in accordance with the NASDAQ listing requirements.

 

 

Sprint Financing. Sprint has stated that it is concerned with Clearwire’s failure to consummate the January 2 tranche of funding under the Sprint Financing Agreements, that it does not believe Clearwire’s initial draw notice was revocable and that it has reserved its rights relating thereto.

Process

The Special Committee will, consistent with its fiduciary duties and in consultation with its independent financial and legal advisors, continue to evaluate the DISH Proposal and the letter from Sprint and discuss them with each of DISH and Sprint, as appropriate. The Special Committee and Clearwire will pursue the course of action that is in the best interests of Clearwire’s non-Sprint Class A stockholders. Neither Clearwire nor the Special Committee has any further comment on this matter at this time.

Evercore Partners is acting as financial advisor and Kirkland & Ellis LLP is acting as counsel to Clearwire. Centerview Partners is acting as financial advisor and Simpson Thacher & Bartlett LLP and Richards, Layton & Finger, P.A. are acting as counsel to Clearwire’s special committee.

The Company subsequently entered into a confidentiality agreement with DISH. The DISH Proposal is a preliminary indication of interest and is subject to numerous, material uncertainties and conditions. The Special Committee has not made any determination to change its recommendation of the Merger.

On February 1, 2013, the Company issued a press release relating to the Company’s decision not to take the February $80 million draw under the Note Purchase Agreement with Sprint in order to permit the Special Committee to continue to evaluate the DISH proposal, the full text of which is set forth below:

CLEARWIRE CORPORATION PROVIDES TRANSACTION UPDATE

Clearwire (NASDAQ: CLWR) today announced that it has filed a preliminary proxy statement in connection with its definitive agreement with Sprint Nextel Corporation (“Sprint”) for Sprint to acquire the approximately 50 percent stake in Clearwire that it does not already own for $2.97 per share (the “Sprint Agreement”). The background section of the proxy statement describes the Company’s extensive review of strategic alternatives to maximize stockholder value over the past few years.

As previously disclosed on January 8, 2013, Clearwire received an unsolicited, non-binding proposal (the “DISH Proposal”) from DISH Network Corporation (“DISH”). The DISH Proposal provides for DISH to purchase certain spectrum assets from Clearwire, enter into a commercial agreement with Clearwire and

 

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acquire up to all of Clearwire’s common stock for $3.30 per share (subject to minimum ownership of at least 25% and granting of certain governance rights) and provide Clearwire with financing on specified terms. The DISH Proposal is only a preliminary indication of interest and is subject to numerous, material uncertainties and conditions, including the negotiation of multiple contractual arrangements being requested by DISH (some of which, as currently proposed, may not be permitted under the terms of Clearwire’s current legal and contractual obligations) as well as regulatory approvals.

In connection with the Sprint Agreement, Clearwire and Sprint also entered into agreements that provide up to $800 million of additional financing to Clearwire in the form of exchangeable notes, which will be exchangeable under certain conditions for Clearwire common stock at $1.50 per share, subject to adjustment under certain conditions (the “Sprint Financing Agreements”). Under the Sprint Financing Agreements, Sprint has agreed to purchase, at Clearwire’s option, $80 million of exchangeable notes per month for up to 10 months.

As previously disclosed on January 8, 2013, Clearwire did not take the initial draw under the Sprint Financing Agreements as DISH indicated that its preliminary proposal would be withdrawn were Clearwire to draw on the financing. In order to allow the Special Committee to continue to evaluate the DISH Proposal, at the direction of the Special Committee, Clearwire has not taken the February $80 million draw. The Special Committee has not made any determination with respect to any future draws under the Sprint Financing Arrangements.

Also, under the terms of the Sprint Financing Agreements, Sprint is only obligated to provide financing for the last three draws (in August, September and October 2013) if an agreement has been reached between Sprint and Clearwire on the accelerated build out of Clearwire’s wireless broadband network by January 31, 2013. Although the parties have not come to an agreement on the accelerated build out, Clearwire and Sprint have amended the Sprint Financing Agreements to extend the date by which agreement on the accelerated build out must be reached to February 28, 2013 for the Company to be able to take the last three draws.

The Special Committee will, consistent with its fiduciary duties and in consultation with its independent financial and legal advisors, continue to evaluate the DISH Proposal and engage in discussions with each of DISH and Sprint, as appropriate. The Special Committee has not made any determination to change its recommendation of the current Sprint transaction.

The Special Committee and Clearwire will pursue the course of action that it believes is in the best interests of Clearwire’s non-Sprint Class A stockholders. Neither Clearwire nor the Special Committee has any further comment on this matter at this time.

On February 27, 2013, the Company issued a press disclosing the Company’s decision to take the March $80 million draw under the Note Purchase Agreement with Sprint and that the Company and Sprint had amended the Note Purchase Agreement to permit the Company to take the final three draws thereunder without entering into an agreement with respect to the proposed accelerated build-out, the full text of which is set forth below:

CLEARWIRE CORPORATION PROVIDES TRANSACTION UPDATE

Clearwire (NASDAQ: CLWR) today announced that it has elected to take the $80 million March draw under the terms of its agreements with Sprint Nextel Corporation (“Sprint”) that provide additional financing to Clearwire in the form of exchangeable notes, which will be exchangeable under certain conditions for Clearwire common stock at $1.50 per share, subject to adjustment under certain conditions (the “Sprint Financing Agreements”). Clearwire no longer has any right to take the first two monthly draws under the Sprint Financing Agreements. The Special Committee has not made any determination as to whether to take any future draws under the Sprint Financing Agreements and has not made any determination to change its recommendation of the current Sprint transaction.

As previously disclosed on January 8, 2013, Clearwire received an unsolicited, non-binding proposal from DISH Network Corporation (“DISH”), which was a preliminary indication of interest and subject to numerous, material uncertainties and conditions. Consistent with its fiduciary duties to Clearwire’s non-Sprint class A

 

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stockholders, the Special Committee of Clearwire’s board of directors has engaged in discussions with DISH concerning its proposal and with Sprint over the course of the last two months, and the Special Committee intends to continue such discussions. The Special Committee will pursue the course of action that it believes is in the best interests of Clearwire’s non-Sprint Class A stockholders.

Also, Clearwire and Sprint have amended the Sprint Financing Agreements to remove the condition to Sprint’s obligation to provide financing for the last three draws (in August, September and October 2013) that an agreement has been reached between Sprint and Clearwire on the accelerated build out of Clearwire’s wireless broadband network. This amendment will allow Clearwire, at its option, to take the last three draws under the Sprint Financing Agreements whether or not an accelerated build out agreement has been entered into by the parties. Clearwire does not expect to enter into an accelerated build-out agreement with Sprint at this time.

On March 1, 2013, Clearwire received the $80 million March draw under the Note Purchase Agreement and issued $80 million in Notes to Sprint. In connection with this initial draw under the Note Purchase Agreement, the Company entered into a new indenture, a registration rights agreement with Sprint and a stock delivery agreement, which are attached hereto as Annexes G, H and I, respectively. See “The Note Purchase Agreement.”

On March 28, 2013, the Company issued a press release disclosing the Company’s decision to take the April $80 million draw under the Note Purchase Agreement, the full text of which is set forth below:

CLEARWIRE CORPORATION PROVIDES TRANSACTION UPDATE

Clearwire (NASDAQ: CLWR) today announced that it has elected to take the $80 million April draw under the terms of its agreements with Sprint Nextel Corporation (“Sprint”) that provide additional financing to Clearwire in the form of exchangeable notes, which will be exchangeable under certain conditions for Clearwire common stock at $1.50 per share, subject to adjustment under certain conditions (the “Sprint Financing Agreements”). The Special Committee has not made any determination as to whether to take any future draws under the Sprint Financing Agreements and has not made any determination to change its recommendation of the current Sprint transaction.

As previously disclosed on January 8, 2013, Clearwire received an unsolicited, non-binding proposal from DISH Network Corporation (“DISH”), which was a preliminary indication of interest and subject to numerous, material uncertainties and conditions. Consistent with its fiduciary duties to Clearwire’s non-Sprint class A stockholders, the Special Committee of Clearwire’s board of directors has engaged in discussions with DISH concerning its proposal and with Sprint over the course of the last three months, and the Special Committee intends to continue such discussions. The Special Committee will pursue the course of action that it believes is in the best interests of Clearwire’s non-Sprint Class A stockholders.

Clearwire received the $80 million April draw under the Note Purchase Agreement and issued the $80 million in Notes to Sprint on April 1, 2013.

On April 3, 2013, the Company received an unsolicited, non-binding written proposal from Crest, in which Crest proposed to provide to the Company $240 million in financing through a convertible debt facility, which would be convertible into shares of Common Stock at a price of $2.00 per share. On April 8, 2013, the Company sent a letter to Sprint requesting that Sprint consent, pursuant to Section 4.1(e) of the Merger Agreement, to Clearwire’s incurrence of debt pursuant to Crest’s proposal. On April 10, 2013, Sprint provided a written response indicating that it was not prepared at that time to provide such consent.

On April 8, 2013, the Company received an unsolicited, non-binding written proposal from Party J, a strategic buyer, in which Party J offered to acquire Clearwire spectrum leases generally located in large markets that cover approximately 5 billion MHz-POPs at a gross price of approximately $1.0 to $1.5 billion, less the present value of the spectrum leases which could be substantial. The Special Committee will, consistent with its

 

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fiduciary duties and in consultation with its independent financial and legal advisors, evaluate this proposal and any other proposal and engage in discussions with each of Party J and Sprint, as appropriate.

On April 9, 2013, the Company received an unsolicited, non-binding written proposal from Aurelius Capital Management, LP, which we refer to as Aurelius, in which Aurelius proposed to provide the Company $80 million in financing through exchangeable notes, which would be convertible into shares of Common Stock at a price of $2.00 per share. On April 9, 2013, the Company sent a letter to Sprint requesting that Sprint consent, pursuant to Section 4.1(e) of the Merger Agreement, to Clearwire’s incurrence of debt pursuant to Aurelius’s proposal. On April 10, 2013, Sprint provided a written response indicating that it was not prepared at that time to provide such consent.

The Special Committee will, consistent with its fiduciary duties and in consultation with its independent financial and legal advisors, continue to evaluate the DISH Proposal and engage in discussions with each of DISH and Sprint, as appropriate. The Special Committee has not made any determination to change its recommendation of the current Sprint transaction.

The Special Committee will pursue the course of action that it believes is in the best interests of Clearwire’s unaffiliated stockholders.

Recommendation of the Special Committee and the Board of Directors; Fairness of the Merger

Pursuant to resolutions of the Special Committee, dated December 16, 2012, adopted at a meeting of the Special Committee held on December 16, 2012, the Special Committee unanimously determined that the terms of the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger, were advisable, fair to and in the best interest of the holders of Class A Common Stock (other than Sprint, SoftBank, or any of their respective affiliates) and the Special Committee unanimously recommended that the Clearwire board of directors (i) approve the Merger Agreement, the agreements related thereto and the transactions contemplated thereby, including the Merger, (ii) declare the advisability of the Merger Agreement to the stockholders of Clearwire and (iii) recommend the adoption of the Merger Agreement by the stockholders of Clearwire. The Special Committee believes that, because the Merger Consideration will be received by unaffiliated stockholders of Clearwire as well as potentially certain affiliated stockholders of Clearwire (including certain directors of Clearwire and members of Clearwire’s senior management) and because all such persons are entitled to receive the Merger Consideration, its determination also relates to unaffiliated stockholders of Clearwire. In reaching its conclusion to make such determination and recommendations to the Clearwire board of directors that the transactions contemplated by the Merger Agreement, including the Merger, were advisable, both procedurally and substantively fair to and in the best interest of Clearwire’s unaffiliated stockholders, the Special Committee considered a number of factors, including the following:

 

   

its knowledge of Clearwire’s business, operations, financial condition, earnings and prospects, as well as the risk in achieving those prospects, including:

 

   

Clearwire’s reliance on Sprint, which accounts for substantially all of Clearwire’s wholesale revenues;

 

   

the long-standing strategic review undertaken by the board of directors of Clearwire and management of Clearwire with the assistance of various advisors which involved the exploration of various strategic alternatives and commercial arrangements relating to the Company and that had been reviewed by the board of directors of Clearwire at numerous prior meetings; and

 

   

that, considering Clearwire’s inability to attract a second significant wholesale customer despite significant efforts since 2010, there was significant uncertainty (i) that Clearwire would be able to do so in the future and that the viability of Clearwire’s long term business plan was dependent on obtaining a second significant wholesale customer and (ii) of attaining the Multi-Customer Case financial projections of the Company prepared by management of the Company, as described

 

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under “—Prospective Financial Information,” which assumes that Clearwire would achieve substantial non-Sprint network traffic beginning in 2014;

 

   

the belief of management of Clearwire that Clearwire required significant additional capital to further develop Clearwire’s network and to fund Clearwire’s business over the long term and the uncertainty around Clearwire’s ability to obtain such capital and the terms upon which such capital could be obtained, including as a result of the limited number of authorized shares of Common Stock, Sprint’s preemptive rights on certain equity issuances under the terms of the Equityholder’s Agreement, the limited capacity of Clearwire to incur additional senior indebtedness under the terms of Clearwire’s existing credit facilities and the unattractive borrowing costs associated with junior indebtedness;

 

   

the fact that the Merger Consideration represents (i) an approximately 40.1% premium to the closing price of our Common Stock on November 20, 2012, the trading day immediately prior to the date of the receipt of the initial non-binding offer from Sprint of $2.60 per share and (ii) an approximately 128.5% premium to the closing price of our Common Stock on October 10, 2012, the trading day immediately prior to the date discussions between Sprint and SoftBank were first confirmed in the marketplace, with Clearwire speculated to be a part of the transaction.

 

   

the current and historical market prices for our Class A Common Stock, including those set forth in the table under “Other Important Information Regarding Clearwire—Market Price of Common Stock and Dividends,” which traded as low as $0.90 per share and as high as $2.69 per share during the 52 weeks prior to the trading day that information about a potential transaction between Clearwire and Sprint was reported in the press;

 

   

the fact that Sprint had confirmed that it was not willing to agree to sell the shares of our Common Stock that it held to a third party and therefore, in light of Sprint’s ownership of more than 50% of our outstanding Common Stock as well as the various restrictions contained in the organizational documents of Clearwire, the Equityholders Agreement and certain commercial agreements with Sprint, there were limited strategic alternatives available to Clearwire;

 

   

its belief that the Merger Agreement and the transactions contemplated thereby, including the Merger, were more favorable to our unaffiliated stockholders when compared with other strategic alternatives that were reasonably available to Clearwire, including the Special Committee’s consideration of the following:

 

   

the fact that, since 2010, the Company undertook an extensive spectrum sale process without success and that, following the date that information about a potential transaction between Clearwire and Sprint was reported in the press and prior to entering into the Merger Agreement, at the direction of the Special Committee, Centerview, management of Clearwire and the executive chairman of Clearwire solicited what they believed to be all reasonably available potential buyers of spectrum assets of Clearwire and that each potential buyer that was solicited affirmatively declined any interest in acquiring spectrum assets from Clearwire, except, to the extent described below, DISH;

 

   

the fact that the Preliminary DISH Proposal would have provided some immediate liquidity to Clearwire but (i) did not address the long term liquidity constraints of Clearwire due to use of proceeds restrictions (including that proceeds must be used to purchase replacement assets within twelve months or used to repurchase outstanding debt) under Clearwire’s debt agreements, (ii) did not address Clearwire’s need to attract a second significant wholesale customer and (iii) related to the acquisition of higher quality spectrum assets of Clearwire and would leave Clearwire with less valuable spectrum assets;

 

   

the belief that a sale of Clearwire as a whole yields a higher value for stockholders of Clearwire than if the Company were to be sold in parts as (i) Clearwire’s assets, which consist primarily of owned and leased spectrum, are worth more as an integrated whole than if sold as individual

 

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components and (ii) a sale of Clearwire’s assets would result in a significant tax obligation to Clearwire, which would significantly reduce the net proceeds to Clearwire of any such sale;

 

   

the fact that if the Company did not pursue the Merger, it would need to seek an alternative and, without another source of significant financing, it might be unable to meet its obligations to its creditors and may default under its existing notes and under its other existing contracts, which may result in the Company being required to seek bankruptcy protection and the belief, based on discussions with its financial advisors, that there was significant uncertainty of attaining value equaling the Merger Consideration for Clearwire’s stockholders in any such bankruptcy;

 

   

the oral opinion of Centerview rendered at a joint meeting of the Special Committee and the Audit Committee on December 16, 2012, which was subsequently confirmed by delivery of a written opinion, dated December 16, 2012, to the Special Committee and the Audit Committee, to the effect that, as of that date and based upon and subject to the various assumptions and limitations set forth in the written opinion, the Merger Consideration to be paid to the holders of Class A Common Stock (other than Sprint, SoftBank, or any of their respective affiliates) pursuant to the Merger Agreement was fair, from a financial point of view, to such holders, as more fully described under “—Opinion of Financial Advisor to the Special Committee,” which the Special Committee noted related to the Merger Consideration to be received by our unaffiliated stockholders as well as certain affiliated stockholders of the Company, including certain directors of the Company and members of the Company’s senior management. The fact that the opinion of Centerview also related to the potential Merger Consideration to be received by certain affiliated stockholders of the Company did not affect the fairness determination of the Special Committee with respect to our unaffiliated stockholders because all such persons are entitled to receive the Merger Consideration;

 

   

the presentation of Centerview in support of its opinion presented to the Special Committee at the December 16, 2012 meeting of the Special Committee as more fully described under “—Opinion of Financial Advisor to the Special Committee”;

 

   

the presentations made by Centerview at multiple meetings of the Special Committee prior to the December 16, 2012 meeting of the Special Committee with respect to Centerview’s view of the possible strategic alternatives available to the Company, including the restructuring alternative and the Preliminary 2012 DISH Proposal, in each case which Centerview noted did not appear to be equally attractive alternatives to the final Sprint transaction, including for the reasons described above;

 

   

the fact that under the Merger Agreement the public stockholders of Clearwire will receive the same Merger Consideration as Clearwire’s existing significant equityholders other than Sprint and that the transactions contemplated by the Merger Agreement, including the Merger, mitigate the risk of Sprint acquiring our Common Stock directly from Clearwire’s other existing significant equityholders without also acquiring our Common Stock from the public stockholders of Clearwire;

 

   

the fact that under the Merger Agreement the public stockholders of Clearwire will receive (i) the same per share consideration as Sprint paid to Eagle River for its Common Stock on December 11, 2012, (ii) a higher per share consideration than the $2.26 per share that Google received for its Common Stock on March 1, 2012 and (iii) a higher per share consideration than the $1.37 per share that Time Warner received for its Common Stock on October 3, 2012;

 

   

the commitment from Comcast, BHN Spectrum and Intel, subject to the terms and conditions of the Voting and Support Agreement and the Agreement Regarding Right of First Offer, to vote their shares of Common Stock in support of the Merger and, under certain circumstances if the Clearwire stockholders fail to adopt the Merger Agreement, to sell their shares of Common Stock to Sprint for a price per share equal to the Merger Consideration, as described under “The Voting and Support Agreement” and “The Agreement Regarding Right of First Offer”;

 

   

the fact that in connection with entering into the Merger Agreement Sprint agreed to provide Clearwire financing pursuant to the Note Purchase Agreement during the period between the date of the Merger

 

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Agreement and the closing of the Merger, that, if Clearwire chooses to take such financing pursuant to the terms of the Note Purchase Agreement, such financing will potentially allow Clearwire to continue to develop its network, whether or not the Merger is consummated, and would enable Clearwire not to suffer a material deterioration in its financial position during the pendency of the Merger;

 

   

the fact that Sprint confirmed that the Merger Consideration was its final offer and that the Special Committee concluded, after discussions with Centerview and considering it was reported in the press on December 13, 2012 that SoftBank would not approve an offer by Sprint that was higher than the Merger Consideration, it was the best offer that could be obtained by the Special Committee and that further negotiations could have caused Sprint to abandon its offer;

 

   

the fact that the Merger Consideration consists solely of cash, providing Clearwire stockholders (other than Sprint, SoftBank, or any of their respective affiliates) with certainty of value and liquidity;

 

   

the complexities, restrictions and challenges inherent in Clearwire’s governance and ownership structure, including the consent rights of Sprint and of the other existing significant equityholders under the organizational documents of Clearwire and the Equityholders Agreement and, if the Merger is not completed, the ongoing implication of such complexities, restrictions and challenges on Clearwire’s continuing business operations and pursuit of strategic alternatives;

 

   

the terms and conditions of the Merger Agreement, including:

 

   

the rights of Clearwire to seek specific performance of Sprint’s obligations under the Merger Agreement, as described under “Merger Agreement—Specific Performance”;

 

   

the fact that the Merger Agreement does not contain any termination fee payable by Clearwire;

 

   

the fact that, under the terms of the Merger Agreement, in certain circumstances in which the transactions contemplated by the Sprint-SoftBank Merger agreement are not consummated, Sprint is required to pay a termination fee of $120 million to Clearwire, which will be satisfied by the cancellation of an equal amount of the Notes, if any, issued under the Note Purchase Agreement and, under certain circumstances in which such termination fee becomes payable, Sprint is also required to pay to Clearwire Communications a wireless broadband services prepayment in the amount of $100 million, as described under “Merger Agreement—Sprint Termination Fee”;

 

   

the fact that, subject to certain conditions, Clearwire has the ability to furnish information and hold discussions or negotiations in respect of any acquisition proposal received from any third party that was not solicited or knowingly encouraged by Clearwire or any subsidiary of Clearwire or any of Clearwire’s or any subsidiary of Clearwire’s directors, officers, employees, agents or representatives, as described under “Merger Agreement—Non-Solicitation of Alternative Proposals”;

 

   

the fact that the Clearwire board of directors (acting upon the recommendation of the Special Committee) or the Special Committee have the ability, subject to certain conditions, to make an adverse company board recommendation if the Clearwire board of directors or Special Committee, as the case may be, determines in good faith, after consultation with outside legal counsel, that making such adverse company board recommendation is required by its fiduciary duties under applicable laws, as described under “Merger Agreement—Non-Solicitation of Alternative Proposals”;

 

   

the fact that under the terms of the Merger Agreement, the Merger is subject to, in accordance with the requirements of a “Qualifying Purchase” under the Equityholders’ Agreement, approval by 75% of the outstanding shares of our Common Stock, and approval by at least a majority of the outstanding shares of our Common Stock not held by Sprint, SoftBank, or any of their respective affiliates;

 

   

the fact that the Merger is not subject to any financing contingency; and

 

   

the fact that the Merger is not subject to review or approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; and

 

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the likelihood that the Merger would be completed, and completed in a reasonably prompt time frame, considering the terms of the Merger Agreement, including the efforts that Sprint must use to consummate the Merger and the commitment from Comcast, BHN Spectrum and Intel, three of Clearwire’s sophisticated founding investors, to vote their shares of our Common Stock in support of the Merger.

The Special Committee also considered a number of potentially countervailing factors and risks. These countervailing factors and risks included the following:

 

   

the risk that the transactions contemplated by the Merger Agreement, including the Merger, and the financing provided by Sprint to Clearwire pursuant to the Note Purchase Agreement, may not be consummated in a timely manner or at all as well as the potential loss of value to Clearwire’s stockholders and the potential negative impact on the operations and prospects of Clearwire if such transactions were delayed or were not consummated;

 

   

the risk that the pendency of the Merger could adversely affect the relationship of Clearwire and its subsidiaries with their respective employees, agents, and business relationships;

 

   

the risks and potentially negative factors described in “—Considerations Relating to the Merger; Certain Effects on the Company if the Merger is not Completed”;

 

   

the risk that the Merger is conditioned on the closing of the transactions contemplated by the Sprint-SoftBank Merger Agreement and that a failure of one of the conditions under the Sprint-SoftBank Merger Agreement would allow Sprint to terminate the Merger Agreement;

 

   

the fact that Clearwire directors, officers and employees have expended and will expend extensive efforts attempting to complete the transactions contemplated by the Merger Agreement and to obtain the financing provided by Sprint to Clearwire pursuant to the Note Purchase Agreement and such persons have experienced and will experience significant distractions from their work during the pendency of such transactions and that Clearwire has incurred and will incur substantial costs in connection with such transactions even if such transactions are not consummated;

 

   

the risk that Clearwire and Sprint may not agree to an accelerated build out of Clearwire’s wireless broadband network within the time period required by the Note Purchase Agreement or that Clearwire may not fulfill its obligations under any such accelerated build out that is agreed with Sprint, in either case reducing the availability of the financing provided by Sprint to Clearwire pursuant to the Note Purchase Agreement (subsequently, pursuant to the second amendment to the Note Purchase Agreement dated February 26, 2013 and attached to this proxy statement as Annex F-3, the Note Purchase Agreement no longer requires Clearwire and Sprint to agree to an accelerated build out of Clearwire’s wireless broadband network as a condition to the availability of a portion of the financing provided by Sprint pursuant to the Note Purchase Agreement);

 

   

the fact that the Notes, if issued, will be exchangeable for our Common Stock under certain circumstances, as described in “The Note Purchase Agreement,” including circumstances in which the Merger is not consummated, and if so exchanged would result in Sprint acquiring additional Clearwire Common Stock, which would dilute the ownership interests of Clearwire’s stockholders, including the public stockholders;

 

   

publicly-available communications from Mount Kellett Capital Management LP and Crest Financial Limited after October 11, 2012, the date that Sprint publicly acknowledged merger discussions between SoftBank and Sprint, and publicly-available communications from Mount Kellett Capital Management LP and Crest Financial Limited after December 13, 2012, the date that Sprint filed a beneficial ownership report on Schedule 13D publicly disclosing its $2.90 per share offer, including the issues, concerns and strategic matters raised by such stockholders in such communications;

 

   

the fact that the receipt of the Merger Consideration in exchange for shares of Class A Common Stock pursuant to the Merger Agreement will generally be a taxable transaction for U.S. federal income tax purposes;

 

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the fact that consummation of the Merger and receipt of the Merger Consideration, while providing relative certainty of value, would not allow Clearwire stockholders (other than Sprint, SoftBank, or any of their respective affiliates) to participate in potential further appreciation of the Common Stock after the Merger and would not allow such stockholders to participate in potential further appreciation of the spectrum assets of Clearwire;

 

   

the fact that, although Clearwire will continue to exercise, consistent with the terms and conditions of the Merger Agreement, control and supervision over its operations prior to the effective time of the Merger, the Merger Agreement contains restrictions on the conduct of Clearwire’s business prior to the effective time of the Merger, as described in “Merger Agreement—Conduct of Business Pending the Merger,” which may delay or prevent Clearwire from undertaking business opportunities that may arise, including preventing Clearwire from incurring indebtedness or selling spectrum assets;

 

   

the fact that some of Clearwire’s directors and executive officers have other interests in the Merger in addition to their interests as Clearwire stockholders, including the manner in which they would be affected by the Merger as discussed under “—Interests of Certain Persons in the Merger”;

 

   

the fact that following the press reporting information about a potential transaction between Clearwire and Sprint and following Sprint’s filing of a beneficial ownership report on Schedule 13D on December 13, 2012 publicly disclosing its $2.90 per share offer, the trading price of the Class A Common Stock rose above $2.97 per share, closing at $3.16 per share on December 13, 2012 and $3.37 per share on December 14, 2012; and

 

   

the fact that under the terms of the Merger Agreement, Clearwire does not have a specified right to terminate the Merger Agreement if the Clearwire board of directors (acting upon the recommendation of the Special Committee) or the Special Committee, as applicable, makes an adverse company board recommendation.

The Special Committee believes that sufficient procedural safeguards were and are present to ensure the fairness of the Merger and to permit the Special Committee to represent effectively the interests of our unaffiliated stockholders, and in light of such procedural safeguards the Special Committee did not consider it necessary to retain an unaffiliated representative to act solely on behalf of our unaffiliated stockholders for purposes of negotiating the terms of the Merger Agreement or preparing a report concerning the fairness of the Merger Agreement and the Merger. These procedural safeguards include the following:

 

   

the fact that the Special Committee was established by the board of directors of Clearwire and was authorized and was exclusively delegated the power and authority of the board of directors to review, evaluate and negotiate strategic alternatives that were available to Clearwire for our unaffiliated stockholders, except to the extent permitted by law and subject to the powers given to the Audit Committee in certain organizational documents of Clearwire;

 

   

the recognition by the Special Committee that it had no obligation to recommend that the Clearwire board of directors approve the Merger or any other transaction;

 

   

the fact that the Special Committee is comprised of three independent and disinterested directors, who are not officers or employees of the Company or Sprint nominees to the Company’s board of directors, and who will not have an economic interest in the Company or the surviving corporation following the completion of the Merger;

 

   

the fact that the Special Committee received the advice and assistance of Centerview, as financial advisor, and Simpson Thacher and Richards Layton, as legal advisors;

 

   

the fact that the Special Committee received the oral opinion of Centerview rendered at a joint meeting of the Special Committee and the Audit Committee on December 16, 2012, which was subsequently confirmed by delivery of a written opinion, dated December 16, 2012, to the Special Committee and the Audit Committee, to the effect that, as of that date and based upon and subject to the various

 

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assumptions and limitations set forth in the written opinion, the Merger Consideration to be paid to the holders of Class A Common Stock (other than Sprint, SoftBank, or any of their respective affiliates) pursuant to the Merger Agreement was fair, from a financial point of view, to such holders, as more fully described under “—Opinion of Financial Advisor to the Special Committee”;

 

   

the fact that, at the direction of the Special Committee, with the assistance of independent legal and financial advisors, active negotiations occurred with representatives of Sprint regarding the Merger Consideration and the other terms of the Merger and the Merger Agreement;

 

   

the fact that the Special Committee met numerous times during the course of negotiations with Sprint to discuss the status of the negotiations with Sprint, to review the terms of the proposed Merger Agreement and to consider the strategic alternatives reasonably available to Clearwire and that during such time the Special Committee had, together with Centerview, full access as needed to management of Clearwire and to the executive chairman of Clearwire;

 

   

the fact that the financial and other terms and conditions of the Merger Agreement and the transactions contemplated thereby, including the Merger, were the product of negotiations conducted by and at the direction of the Special Committee, with the assistance of independent legal and financial advisors, during a process that resulted in, among other things, (i) an approximately 14.2% increase in the merger consideration from the initial offer from Sprint of $2.60 per share on November 21, 2012, to the final $2.97 per share offer, (ii) an increase in the exchange price of the Notes from $1.25 to $1.50, (iii) the removal of the condition to the respective draws under the interim financing to be provided by Sprint under the Note Purchase Agreement (other than the August, September and October 2013 draws) related to Clearwire meeting accelerated build out targets to be negotiated with Sprint, (iv) the addition of the partial cancellation of the Notes and wireless broadband services prepayment as a form of a termination fee, as described in “Merger Agreement—Sprint Termination Fee” and (v) the removal of Sprint’s condition and termination right in the Merger Agreement relating to dissenter’s rights;

 

   

the fact that under the terms of the Merger Agreement, the Merger is subject to, in accordance with the requirements of a “Qualifying Purchase” under the Equityholders’ Agreement, approval by 75% of the outstanding shares of our Common Stock, and approval by at least a majority of the outstanding shares of our Common Stock not held by Sprint, SoftBank, or any of their respective Affiliates;

 

   

the fact that, subject to certain conditions, Clearwire has the ability to furnish information and hold discussions or negotiations in respect of any acquisition proposal received from any third party that was not solicited or knowingly encouraged by Clearwire or any subsidiary of Clearwire or any of Clearwire’s or any subsidiary of Clearwire’s directors, officers, employees, agents or representatives, as described under “Merger Agreement—Non-Solicitation of Alternative Proposals”;

 

   

the fact that the Clearwire board of directors (acting upon the recommendation of the Special Committee) or the Special Committee have the ability, subject to certain conditions, to make an adverse company board recommendation if the Clearwire board of directors or Special Committee, as the case may be, determines in good faith, after consultation with outside legal counsel, that making such adverse company board recommendation is required by its fiduciary duties under applicable laws, as described under “Merger Agreement—Non-Solicitation of Alternative Proposals”; and

 

   

the availability to the stockholders of Clearwire who do not vote in favor of the adoption of the Merger Agreement of appraisal rights under Delaware law, which provide such stockholders an opportunity to have a court determine the fair value of their shares.

This discussion of the risks and factors considered by the Special Committee in making its determination and recommendations is not intended to be exhaustive but includes all material factors considered by the Special Committee. In view of the wide variety of factors and risks considered by the Special Committee in making its determination and recommendations and the complexity of these factors and risks, the Special Committee did not find it useful, and did not attempt to, quantify, rank or otherwise assign relative weights to these factors and risks.

 

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In considering the factors and risks described above, individual members of the Special Committee may have given different weight to different factors and risks. The Special Committee conducted an overall analysis of the factors and risks described above, including discussions with, and questioning of, its legal and financial advisors, Clearwire’s management and Clearwire’s executive chairman, and considered the factors and risks overall to be favorable to, and to support, the Special Committee’s determination and recommendations.

In reaching its determination and making its recommendations the Special Committee did not establish a specific going concern value of Clearwire and did not believe that there is a single method for determining going concern value, however the Special Committee believed that each of Centerview’s valuation methodologies described in “—Opinion of Financial Advisor to the Special Committee” represented a valuation of Clearwire as it continues to operate its business, and, to that extent, such analyses could be collectively characterized as forms of going concern valuations and the Special Committee did consider each of these analysis in reaching its determination and making its recommendations. As described above, the Special Committee considered a potential restructuring of the Company in connection with its review of strategic alternatives and was advised by Centerview that it was difficult to expect greater equity value for stockholders of Clearwire in any such restructuring than Sprint’s initial per share proposal of $2.60. Based on this advice, the Special Committee believed that there was significant uncertainty of attaining value equaling the Merger Consideration for Clearwire’s stockholders in a liquidation, the Special Committee did not believe that the liquidation value of Clearwire was appropriate in a determination as to whether the Merger Consideration is fair to our unaffiliated stockholders and no appraisal of liquidation values was sought for purposes of evaluating the Merger Consideration. The Special Committee did not consider net book value to be a useful indicator of Clearwire’s value because the Special Committee believed that net book value is indicative of historical costs but is not a material indicator of the value of Clearwire as a going concern. The Special Committee did not consider firm offers made by unaffiliated persons during the last two years for the merger or consolidation of Clearwire with or into any company, the sale or transfer of all or any substantial part of Clearwire’s assets or a purchase of Clearwire securities that would enable the holder to exercise control of Clearwire, as no such offers were made during that time.

Position of Sprint Parties Regarding the Fairness of the Merger

Under the SEC rules governing “going private” transactions, Sprint, Merger Sub, Sprint HoldCo, LLC, which we refer to as Sprint HoldCo, SN UHC 1, Inc., which we refer to as SN UHC 1, and SN UHC 4, Inc., which we refer to as SN UHC 4, and which we refer to collectively as the Sprint Parties, are required to express their beliefs as to the substantive and procedural fairness of the Merger to unaffiliated stockholders of Clearwire. The Sprint Parties are making the statements included in this section solely for the purposes of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act. The views of the Sprint Parties as to fairness of the Merger should not be construed as a recommendation to any stockholder as to how such stockholder should vote on the Merger Agreement Proposal. Merger Sub, Sprint HoldCo, SN UHC 1 and SN UHC 4 are each wholly owned subsidiaries of Sprint. Sprint HoldCo and SN UHC 1 hold the Company equity interests owned by Sprint, and SN UHC 4 is the managing member of Sprint HoldCo.

The Sprint Parties did not participate in the deliberations of the Special Committee regarding, or receive advice from the Company’s or the Special Committee’s legal or financial advisors as to, the fairness of the Merger, nor did the Sprint Parties undertake any independent evaluation of the fairness of the Merger or engage a financial advisor for such purposes. Sprint engaged Citigroup Global Markets Inc., which we refer to as Citigroup, as financial advisor to provide certain financial advisory services with respect to the Merger. Citigroup did not provide an opinion with respect to the fairness of the Merger or the Merger Consideration.

The Sprint Parties believe that the Merger is substantively and procedurally fair to unaffiliated stockholders of Clearwire based on the following factors:

 

   

the Merger Consideration represents approximately a 128.5% premium to the closing share price of the Company’s Class A Common Stock the day before discussions between Sprint and SoftBank were first

 

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confirmed in the marketplace on October 11, 2012, with Clearwire speculated to be a part of that transaction; and, approximately a 40.1% premium to the closing price the day before the Company’s receipt of Sprint’s initial $2.60 per share non-binding indication of interest on November 21, 2012;

 

   

the Merger Consideration represents approximately a 14.2% premium to Sprint’s initial $2.60 per share non-binding indication of interest;

 

   

the price of $0.21 per MHz-POP for the Company’s spectrum portfolio, including owned and leased spectrum, is consistent with historical precedents for similar spectrum assets;

 

   

the fact that two of the Company’s founding investors, Google and Time Warner Cable Inc., which we refer to as Time Warner, sold all of their shares of Class A Common Stock at prices below the Merger Consideration in the months leading up to the Merger. Google sold on March 1, 2012 at $2.26 per share (according to the amended Schedule 13D filed with the SEC on March 14, 2012 regarding the Company), and Time Warner sold on October 3, 2012 at $1.37 per share (according to the amended Schedule 13D filed with the SEC on October 3, 2012 regarding the Company) and that the Company itself had sold $143 million of equity during 2012 at an average price of $1.66 per share;

 

   

the fact that another significant stockholder of the Company, Eagle River agreed to the same blended price of $2.97 per share for the sale of its Class A Common Stock and Class B Common Stock in October 2012 after Sprint confirmed its discussions with SoftBank;

 

   

the fact that Comcast, Bright House and Intel, who collectively own approximately 13% of the Company’s voting shares or approximately 26% of the non-Sprint voting shares, have agreed to vote their shares in favor of the Merger Agreement Proposal, and in certain circumstances where the Merger Agreement Proposal is not approved by the Company’s stockholders, to offer to sell their equity securities in the Company and Clearwire Communications to the other equityholders (including Sprint) at a price of $2.97 for each share, as described in “The Voting and Support Agreement” and “The Agreement Regarding Right of First Offer”;

 

   

the belief that the sale of the Company as a whole yields a higher value for stockholders (other than Sprint) than if the Company were to be sold in parts as the Company’s assets, which consist primarily of owned and leased spectrum, are worth more if sold as an integrated whole than if sold as individual components with attendant requirements to dispose of less valuable or unwanted assets and deal with liabilities and shutdown costs;

 

   

the belief that the value to the Company’s unaffiliated stockholders continuing as an independent public company would not be as great as the Merger Consideration, due to the public market’s emphasis on short-term results, and the potential risks and uncertainties associated with the near-term prospects of the Company in light of the challenges facing it, including a substantial funding gap and the Company’s continued difficulty attracting major wholesale customers in addition to Sprint;

 

   

the Merger will provide consideration to the Company’s stockholders entirely in cash, thus eliminating any uncertainty in valuing the Merger Consideration;

 

   

the Company has never recorded a profit or generated cash flow from operations;

 

   

although consummation of the Merger is conditioned on prior consummation of the Sprint-SoftBank Merger, Sprint believes the consummation of such transaction is likely to occur by mid-2013;

 

   

the Merger is not conditioned on any financing being obtained by Sprint, thus increasing the likelihood that the Merger will be consummated and that the consideration to be paid to the Company’s stockholders will be paid;

 

   

the board of directors of the Company established the Special Committee (consisting of independent and disinterested directors not designated by Sprint) to evaluate Sprint’s proposal and negotiate with Sprint and to evaluate other strategic alternatives;

 

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the Special Committee had the authority to reject any transaction proposed by Sprint;

 

   

the Merger Agreement allows the board of directors of the Company or the Special Committee to withdraw or change its recommendation of the Merger Agreement in certain circumstances;

 

   

neither Sprint nor its affiliates, participated in or had any influence on the deliberative process of, or the conclusions reached by the Special Committee or the negotiating positions of the Special Committee;

 

   

the board of directors of the Company and the Special Committee retained independent, internationally recognized financial and legal advisors, each of which has extensive experience in transactions similar to the Merger;

 

   

the Special Committee was deliberative in its process, meeting numerous times to analyze, evaluate and negotiate the terms of the Merger;

 

   

the Merger Consideration and the other terms and conditions of the Merger Agreement resulted from negotiations between the Special Committee and the Company and their respective advisors, on the one hand, and Sprint and its advisors, on the other hand;

 

   

the Special Committee unanimously (i) determined that the terms of the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger, are advisable, are substantively and procedurally fair to, and in the best interests of the Company’s unaffiliated stockholders and (ii) recommended that the Clearwire board of directors (a) approve the Merger Agreement, the agreements related thereto and the transactions contemplated thereby, including the Merger, (b) declare the advisability of the Merger Agreement to the stockholders of Clearwire and (c) recommend the adoption of the Merger Agreement to the stockholders of Clearwire and submit the Merger Agreement to the stockholders of Clearwire for adoption;

 

   

the board of directors of the Company (acting upon the unanimous recommendation of the Special Committee) unanimously (i) approved and declared advisable the Merger Agreement, (ii) determined that the Merger is substantively and procedurally fair to, and in the best interests of the Company’s unaffiliated stockholders, and (iii) resolved to recommend that the stockholders adopt the Merger Agreement;

 

   

the execution and delivery of the Merger Agreement by the Company and the consummation by the Company of the transactions contemplated by the Merger Agreement were authorized by all requisite corporate action on the part of the Company required under the Equityholders’ Agreement, including (upon the unanimous recommendation of the Special Committee) the review and recommendation by a majority of the directors of the Company on the Audit Committee to the board of directors of the Company and the approval by (i) a majority of the disinterested directors of the Company, (ii) a majority of the directors of the Company (excluding any directors designated by Sprint or its affiliates pursuant to the Equityholders’ Agreement), and (iii) a majority of the directors of the Company with related party directors abstaining;

 

   

the Special Committee (with respect to the opinion of Centerview) and the board of directors of the Company (with respect to the opinion of Evercore) received opinions from their financial advisors to the effect that, as of the date of the opinions and based upon and subject to the various assumptions and limitations set forth in the respective written opinions, the Merger Consideration to be paid to the holders of the Company’s Class A Common Stock (other than Sprint, SoftBank, or any of their respective affiliates) pursuant to the Merger Agreement was fair, from a financial point of view, to such holders, as described more fully in “—Opinion of Financial Advisor to the Special Committee” and “—Opinion of Financial Advisor to the Board of Directors”;

 

   

the Merger is conditioned upon (i) the holders of at least 75% of the outstanding shares of the Company’s Common Stock entitled to vote thereon, voting as a single class, voting in favor of the adoption of the Merger Agreement, and (ii) in accordance with the requirements of a “Qualifying

 

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Purchase” under the Equityholders’ Agreement, the holders of at least a majority of the outstanding shares of the Company’s Common Stock not held by Sprint, SoftBank or any of their respective affiliates, voting as a single class, voting in favor of the adoption of the Merger Agreement; and

 

   

stockholders who do not vote in favor of the Merger Agreement Proposal and who comply with certain procedural requirements will be entitled, upon completion of the Merger, to exercise statutory appraisal rights under Delaware law.

The Sprint Parties did not establish, and did not consider, a pre-merger public company going concern value of the Company’s Common Stock for the purposes of determining the Merger Consideration or the fairness of the Merger Consideration to the Company’s unaffiliated stockholders. However, to the extent the pre-merger going concern value was reflected in the closing share price of the Company’s Class A Common Stock the day before discussions between Sprint and SoftBank were first confirmed in the marketplace on October 11, 2012, with Clearwire speculated to be a part of that transaction, the Merger Consideration represents a premium to the going concern value of the Company. In addition, the Sprint Parties did not consider net book value of the Company’s Common Stock because they believe that net book value, which is an accounting concept, does not reflect, or have any meaningful impact on, either the market trading prices of the Company’s Class A Common Stock or the Company’s value as a going concern. The Sprint Parties did not consider liquidation value in determining the fairness of the Merger to the Company’s unaffiliated stockholders because of their belief that liquidation sales generally result in proceeds substantially less than sales of a going concern, because of the impracticability of determining a liquidation value given the significant execution risk involved in any breakup, and because of Sprint’s belief that the Company’s assets, which consist primarily of owned and leased spectrum, are worth more if sold as an integrated whole than if sold as individual components with attendant requirements to dispose of less valuable assets and deal with liabilities and shutdown costs. The Sprint Parties are aware that certain highly desirable spectrum assets might be valued at a price higher than the average of the blended whole, but believe that the sale of such assets would leave an undesirable residual entity with significant business and liquidity challenges and risks.

The foregoing discussion of the information and factors considered and given weight by the Sprint Parties in connection with the fairness of the Merger is not intended to be exhaustive but includes all material factors considered by the Sprint Parties. The Sprint Parties did not find it practicable to, and did not, quantify or otherwise assign relative weights to the individual factors considered in reaching their conclusions as to the fairness of the Merger. Rather, the fairness determinations were made after consideration of all of the foregoing factors as a whole. The Sprint Parties believe these factors provide a reasonable basis upon which to form their belief that the Merger is substantively and procedurally fair to the Company’s unaffiliated stockholders. This belief should not, however, be construed as a recommendation to any stockholder of the Company to approve the Merger Agreement Proposal. The Sprint Parties do not make any recommendation as to how stockholders of the Company should vote their shares of the Company’s Common Stock relating to the Merger Agreement Proposal or any other related matter.

Opinion of Financial Advisor to the Special Committee

In connection with the Special Committee’s analysis and consideration of potential strategic alternatives, including the Merger, on November 21, 2012, the Special Committee retained Centerview to act as its financial advisor. On December 16, 2012, Centerview delivered to the Special Committee and the Audit Committee its oral opinion, which was subsequently confirmed by delivery of a written opinion, dated December 16, 2012, to the effect that, as of that date and based upon and subject to the various assumptions and limitations set forth in the written opinion, the Merger Consideration to be paid to the holders of our Class A Common Stock (other than Sprint, SoftBank, or any of their respective affiliates) pursuant to the Merger Agreement was fair, from a financial point of view, to such holders.

 

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The full text of the written opinion of Centerview, dated December 16, 2012, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the review undertaken by Centerview in connection with its opinion, is attached as Annex J to this proxy statement and is incorporated by reference herein in its entirety. Centerview provided its opinion for the information and assistance of the Special Committee and the Audit Committee in connection with, and for purposes of, their consideration of the Merger and its opinion only addresses whether, as of the date of such written opinion, the Merger Consideration to be paid to the holders of our Class A Common Stock (other than Sprint, SoftBank, or any of their respective affiliates) pursuant to the Merger Agreement was fair, from a financial point of view, to such holders and does not address any other term or aspect of the Merger Agreement or the Merger contemplated thereby. Centerview’s opinion does not address the relative merits of the Merger as compared to other business strategies or transactions that might be available with respect to the Company or the Company’s underlying business decision to effect the Merger or any related transaction. The opinion does not constitute a recommendation to any stockholder of the Company as to how such stockholder should vote or otherwise act with respect to the Merger or any other matter. The summary of the written opinion of Centerview set forth below is qualified in its entirety by reference to the full text of such written opinion.

We encourage you to carefully read the written opinion of Centerview described above in its entirety for a description of the assumptions made, procedures followed, matters considered and limitations on the review undertaken by Centerview in connection with such opinion.

Summary of Centerview’s Opinion

In connection with rendering its opinion and performing its related financial analyses, Centerview reviewed, among other things:

 

   

a draft, dated December 14, 2012, of the Merger Agreement and certain documents related to the issuance of Clearwire Communications’ and Clearwire Finance’s 1.00% Exchangeable Notes due 2018;

 

   

the Annual Reports on Form 10-K of the Company for the years ended December 31, 2009, 2010 and 2011;

 

   

certain interim reports to stockholders, including Quarterly Reports on Form 10-Q of the Company;

 

   

certain publicly available research analyst reports for the Company;

 

   

certain other communications from the Company to its stockholders; and

 

   

certain internal information relating to the business, operations, earnings, cash flow, assets, liabilities and prospects of the Company furnished to Centerview by the Company, including certain financial forecasts, analyses and projections relating to the Company prepared by management of the Company (including the Single-Customer Case and the Multi-Customer Case more fully described below under “—Prospective Financial Information”) and furnished to Centerview by the Company, which Centerview refers to collectively throughout this section as the internal data (which internal data is the same as the information described under “—Prospective Financial Information”).

Centerview also conducted discussions with members of the senior management and representatives of the Company regarding their assessment of the internal data, the issuance of the Notes and the strategic rationale for the Merger. In addition, Centerview reviewed publicly available financial and stock market data, including valuation multiples, for the Company and compared that data with similar data for certain other companies, the securities of which are publicly traded, and Centerview compared certain of the proposed financial terms of the Merger with the financial terms, to the extent publicly available, of certain other transactions that Centerview deemed relevant. In addition, Centerview conducted such other financial studies and analyses and took into account such other information as Centerview deemed appropriate.

 

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Centerview did not assume any responsibility for independent verification of any of the financial, legal, regulatory, tax, accounting and other information supplied to, discussed with, or reviewed by Centerview for purposes of the opinion and have, with the consent of the Special Committee, relied upon such information as being complete and accurate. In that regard, Centerview assumed, at the direction of the Special Committee, that the internal data were reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of the Company as to the matters covered thereby and Centerview relied, at the direction of the Special Committee, on the internal data for purposes of Centerview’s analysis and opinion. Centerview expressed no view or opinion as to the internal data or the assumptions upon which it is based. In addition, at the direction of the Special Committee, Centerview did not make any independent evaluation or appraisal of any of the assets or liabilities (contingent, derivative, off-balance-sheet or otherwise) of the Company, nor was Centerview furnished with any such evaluation or appraisal, and Centerview was not asked to conduct, and did not conduct, a physical inspection of the properties or assets of the Company. Centerview assumed, at the direction of the Special Committee, that the final executed Merger Agreement would not differ in any respect material to Centerview’s analysis or opinion from the draft, dated December 14, 2012, of the Merger Agreement reviewed by Centerview and that the Merger will be consummated in accordance with the terms of the Merger Agreement, without the waiver, modification or amendment of any term, condition or agreement, the effect of which would be material to Centerview’s analysis or opinion. In addition, Centerview assumed that in the course of obtaining the necessary governmental, regulatory and other approvals, consents, releases and waivers for the Merger, no delay, limitation, restriction, condition or other change will be imposed, the effect of which would be material to Centerview’s analysis or opinion. Centerview did not evaluate and expressed no opinion as to the solvency or fair value of the Company, or the ability of the Company to pay its obligations when they come due, or as to the impact of the Merger on such matters, under any state, federal or other laws relating to bankruptcy, insolvency or similar matters. Centerview is not a legal, regulatory, tax or accounting advisor, and it expressed no opinion as to any legal, regulatory, tax or accounting matters.

Centerview expressed no view in its opinion as to, and its opinion did not address, the Company’s underlying business decision to proceed with or effect the Merger, or the relative merits of the Merger as compared to any alternative business strategies or transactions that might be available to the Company or in which the Company might engage. In connection with Centerview’s engagement and at the direction of the Special Committee, Centerview was requested to approach, and Centerview held discussions with, selected third parties to solicit indications of interest in the possible acquisition of certain assets of the Company. Centerview’s opinion was limited to and addressed only the fairness, from a financial point of view, to the holders of our Class A Common Stock (other than Sprint, SoftBank, or any of their respective affiliates), as of the date of the opinion, of the Merger Consideration to be paid to such holders pursuant to the Merger Agreement. Centerview was not asked to and did not express any view in the opinion on, and Centerview’s opinion did not address, any other term or aspect of the Merger Agreement or the Merger, including, without limitation, the structure or form of the Merger, or any term or aspect of the issuance of the Notes or any other agreements or arrangements contemplated by the Merger Agreement or entered into in connection with or otherwise contemplated by the Merger, including, without limitation, the fairness of the Merger to, or any consideration to be received in connection therewith by, or the impact of the Merger on, the holders of any other class of securities, creditors, or other constituencies of the Company or any party. In addition, Centerview expressed no view or opinion as to the fairness (financial or otherwise) of the amount, nature or any other aspect of any compensation to be paid or payable to any of the officers, directors or employees of the Company or any party, or class of such persons in connection with the Merger, whether relative to the Merger Consideration to be paid to the holders of our Class A Common Stock (other than Sprint, SoftBank, or any of their respective affiliates) pursuant to the Merger Agreement or otherwise. Centerview’s opinion was necessarily based on economic, monetary, currency, market and other conditions and circumstances as in effect on, and the information made available to Centerview as of the date of the written opinion, and Centerview does not have any obligation or responsibility to update, revise or reaffirm the opinion based on circumstances, developments or events occurring after the date of the written opinion.

 

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Centerview’s opinion does not constitute a recommendation to any stockholder of the Company or any other person as to how any such stockholder or other person should vote or otherwise act with respect to the Merger or any other matter.

Centerview’s financial advisory services and the opinion expressed in the written opinion were provided for the information and assistance of the Special Committee and the Audit Committee in connection with and for purposes of their consideration of the Merger. Centerview’s opinion was approved by the Centerview Partners LLC Fairness Opinion Committee.

Summary of Financial Analyses

The following is a brief summary of the material financial and comparative analyses that Centerview deemed to be appropriate for this type of transaction and that were reviewed with the Special Committee and the Audit Committee, in connection with rendering Centerview’s opinion. The following summary, however, does not purport to be a complete description of all the financial analyses performed by Centerview in connection with rendering its opinion, nor does the order of analyses described represent relative importance or weight given to those analyses by Centerview.

Some of the summaries of the financial analyses include information presented in tabular format. In order to fully understand the financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the financial analyses of Centerview. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before December 14, 2012 (the last trading day prior to the date that Centerview delivered its oral opinion to the Special Committee and the Audit Committee) and is not necessarily indicative of current market conditions.

Historical Stock Trading Analysis

Centerview reviewed, for reference and informational purposes only, the historical trading prices and volumes of the shares of Company Class A Common Stock for the 52-week period ended December 10, 2012 (the trading day prior to the date that information about a potential transaction between the Company and Sprint was reported in the press). Centerview noted that the 52-week closing price low and the 52-week closing price high of the shares over such period were $0.90 and $2.69 per share, respectively. Centerview compared the results of this analysis to the Merger Consideration to be paid to the holders of our Class A Common Stock (other than Sprint, SoftBank, or any of their respective affiliates) pursuant to the Merger Agreement. Centerview noted that the Merger Consideration to be paid to the holders of our Class A Common Stock (other than Sprint, SoftBank or any of their respective affiliates) pursuant to the Merger Agreement was above the range derived from this analysis.

Analyst Price Targets Analysis

Centerview reviewed, for reference and informational purposes only, stock price targets of 12 research analysts for shares of Company Class A Common Stock reflected in certain publicly available Wall Street research analyst reports.

 

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The stock price targets for shares of Company Class A Common Stock and the report date for each stock price target were as follows:

 

Firm

  

Report Date

  

Stock Price Target

Zachary Investment Research

   October 2012    $5.00

Bank of America Merrill Lynch

   October 2012    $4.00

J.P. Morgan

   December 2012    $4.00

Wells Fargo

   July 2012    $3.75

Davidson

   October 2012    $3.00

Guggenheim Partners

   October 2012    $3.00

JANCO Partners

   August 2012    $2.75

Macquarie Capital

   November 2012    $2.75

Royal Bank of Canada

   November 2012    $2.50

Jefferies & Company

   October 2012    $2.00

Evercore Partners

   October 2012    $1.75

UBS AG

   October 2012    $1.75

The stock prices targets in the table above represent one-year price targets, other than in the case of J.P. Morgan and Wells Fargo, where timing of target achievement is not given.

Centerview noted that the low and high analyst stock price targets in such research analyst reports ranged from $2.00 to $4.00 (excluding the highest and lowest price targets) per share. Centerview compared the results of this analysis to the Merger Consideration to be paid to the holders of our Class A Common Stock (other than Sprint, SoftBank, or any of their respective affiliates) pursuant to the Merger Agreement. Centerview noted that the Merger Consideration to be paid to the holders of our Class A Common Stock (other than Sprint, SoftBank or any of their respective affiliates) pursuant to the Merger Agreement was within the range derived from this analysis.

Selected Precedent Spectrum Transactions Analysis

Centerview analyzed certain information relating to selected precedent transactions involving acquisitions of spectrum blocks in the 2.5 GHz, WCS and MSS spectrum bands that Centerview, based on its experience and professional judgment and conversations with senior management and representatives of the Company, deemed comparable to the Company’s spectrum assets and the Merger for purposes of this analysis. In addition, Centerview took into account the preliminary non-binding proposal by DISH on December 6, 2012 to acquire certain spectrum assets of the Company, which proposal we refer to as the Preliminary 2012 DISH Proposal, as well as the blended price paid by Sprint to purchase the shares of Class A Common Stock and Class B Common Stock held by Eagle River and certain of its affiliates. The transactions analyzed were:

2.5 GHz Spectrum

 

Date
Announced

  

Seller

  

Acquiror

   Transaction Value /
MHz-POP

October 18, 2012

   Eagle River Holdings, LLC (Clearwire Class A and Class B Common Shares)    Sprint Nextel Corporation    $0.211

May 7, 2008

   Sprint Nextel Corporation    Clearwire Corporation    $0.255

February 15, 2007

   BellSouth Corporation    Clearwire Corporation    $0.176

Not applicable

   Clearwire Corporation    DISH Network Corporation    $0.216

 

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WCS Spectrum

 

Date
Announced

   Seller    Acquiror    Transaction Value /
MHz-POP

August 2, 2012

   NextWave Wireless, Inc.    AT&T Inc.    $0.211(a)

 

(a) Includes C/D blocks not immediately usable due to requirement for “guard bands.” Excluding “guard bands” yields implied transaction value / MHz-POP of $0.37.

MSS Spectrum

 

Date
Announced

  

Seller

  

Acquiror

   Transaction Value /
MHz-POP

June 14, 2011

   Terrestar Networks Inc.    DISH Network Corporation    $0.209

February 1, 2011

   DBSD North America, Inc.    DISH Network Corporation    $0.227

September 23, 2009

   SkyTerra Communications, Inc.    Harbinger Capital Partners Funds (LightSquared)    $0.247

While none of the transactions used in this analysis are identical or involve spectrum assets directly comparable to the Company’s spectrum assets or the Merger, the selected transactions were chosen because they involved spectrum blocks that were considered by Centerview to be most similar to the Company’s spectrum assets for purposes of Centerview’s analysis. In addition to the foregoing transactions, Centerview also reviewed certain information relating to selected precedent transactions involving acquisitions of spectrum blocks in the advanced wireless services, which we refer to as AWS, spectrum. Such transactions were not included in this analysis because Centerview, based on its experience and professional judgment and conversations with senior management and representatives of the Company, considered AWS spectrum insufficiently comparable to the Company’s spectrum assets for purposes of Centerview’s analysis due to, among other things, the fact that (i) AWS spectrum has lower frequencies which allow for better propagation characteristics and more effective penetration of foliage and buildings, (ii) AWS spectrum is subject to a different licensing scheme than spectrum in the 2.5 GHZ block, which utilizes non-standard geographic classifications and involves the management of multiple licenses and lessors, and (iii) there is generally a higher demand for AWS spectrum due to the fact that many industry participants already own significant blocks of AWS spectrum.

For each of the selected transactions, based on publicly available information and the Preliminary 2012 DISH Proposal, Centerview calculated and compared the transaction value per MHz-POP, which is the product derived from multiplying the number of megahertz associated with a spectrum license by the population of the license’s service area.

This analysis indicated a minimum transaction value per MHz-POP of $0.176 and a maximum transaction value per MHz-POP of $0.255. Centerview then applied this range to the Company’s 47.0 billion MHz-POPs based on the internal data. This analysis resulted in an illustrative implied equity value range of approximately $1.90 to $4.35 per share. Centerview compared the results of this analysis to the Merger Consideration to be paid to the holders of our Class A Common Stock (other than Sprint, SoftBank, or any of their respective affiliates) pursuant to the Merger Agreement. Centerview noted that the Merger Consideration to be paid to the holders of our Class A Common Stock (other than Sprint, SoftBank or any of their respective affiliates) pursuant to the Merger Agreement was within the illustrative range of implied equity values per share derived from this analysis. Centerview noted that the Merger Consideration to be paid to the holders of Class A Common Stock (other than Sprint, SoftBank, or any of their respective affiliates) pursuant to the Merger Agreement implied a transaction value per MHz-POP of $0.211. Centerview noted that the implied transaction value per MHz-POP of $0.211 was within the range of implied transaction value per MHz-POP derived from this analysis.

 

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Premiums Paid Analysis

Cash Transactions

Utilizing a publicly available transaction research database, Centerview identified cash only transactions for U.S.-based, publicly-traded, non-financial and non-real estate target companies with equity values ranging between $1 billion and $5 billion, announced since January 1, 2009 for which there were relevant premiums paid data, of which there were 108 transactions. Centerview analyzed the premiums paid in such transactions based on the value of the per share consideration received in the relevant transaction relative to the closing stock price of the target company 1-day, 1-week and 4-weeks prior to the announcement date of such transaction.

The following table presents the results of this analysis with respect to the selected transactions:

 

     1-Day Premium     1-Week Premium     4-Week Premium  

25th Percentile

     20     23     26

Median

     32     35     37

Mean

     38     39     46

75th Percentile

     45     44     52

Based on the foregoing, Centerview applied the median 1-day premium of 32% to the closing price of the shares of our Class A Common Stock on November 20, 2012 (the trading day prior to Sprint’s initial proposal to the Company with respect to the Merger) of $2.12 and the mean 1-day premium of 38% to the closing price of the shares of our Class A Common Stock on December 10, 2012 (the trading day prior to the date that information about a potential transaction between the Company and Sprint was reported in the press) of $2.40.

This analysis resulted in an illustrative implied equity value range of approximately $2.80 to $3.30 per share of our Class A Common Stock. Centerview compared the results of this analysis to the Merger Consideration to be paid to the holders of our Class A Common Stock (other than Sprint, SoftBank, or any of their respective affiliates) pursuant to the Merger Agreement. Centerview noted that the Merger Consideration to be paid to the holders of our Class A Common Stock (other than Sprint, SoftBank or any of their respective affiliates) pursuant to the Merger Agreement was within the illustrative range of implied equity values per share derived from this analysis.

In addition, Centerview applied the median 1-day premium of 32% to the closing price of the shares of our Class A Common Stock on October 10, 2012 (the trading day immediately prior to the date discussions between Sprint and SoftBank were first confirmed in the marketplace) of $1.30. This analysis extended the above referenced range and resulted in an illustrative implied equity value range of approximately $1.70 to $3.30 per share of our Class A Common Stock. Centerview compared the results of this analysis to the Merger Consideration in cash to be paid to the holders of our Class A Common Stock (other than Sprint, SoftBank, or any of their respective affiliates) pursuant to the Merger Agreement. Centerview noted that the Merger Consideration to be paid to the holders of our Class A Common Stock (other than Sprint, SoftBank or any of their respective affiliates) pursuant to the Merger Agreement was within the illustrative range of implied equity values per share derived from this analysis.

 

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Minority Buy-Outs

Centerview reviewed premiums paid for U.S.-based publicly-traded companies in 9 cash-only transactions with transaction equity value greater than $1.0 billion, involving majority holders’ buyout of minority holders that Centerview, based on its experience and professional judgment, deemed comparable to the Company and the Merger for purposes of this analysis. These transactions were:

 

Date Announced

   Target    Acquiror    1-Day
Premium
    1-Week
Premium
    4-Week
Premium
 

June 2, 2010

   Gerdau Ameristeel Corp.    Gerdau Steel North
America Inc.
     53.4     57.1     56.9

September 4, 2009

   Odyssey Re Holdings Corp.    Fairfax Financial
Holdings Ltd.
     30.0     29.9     39.9

August 12, 2008

   UnionBanCal Corp.    Mitsubishi UFJ
Financial Group Inc.
     27.2     29.5     104.4

July 21, 2008

   Genentech, Inc.    Roche Holding AG      16.1     26.0     28.1

March 10, 2008

   Nationwide Financial
Services, Inc.
   Nationwide Mutual
Insurance Company
     40.2     31.0     31.0

November 20, 2006

   TD Banknorth Inc.    TD Bank Financial Group      7.3     9.1     8.6

February 6, 2006

   Lafarge North America Inc.    Lafarge S.A.      33.8     34.4     40.5

September 1, 2005

   7-Eleven, Inc.    Seven & I Holdings
Co., Ltd.
     32.3     31.0     14.1

August 2, 2004

   Cox Communications, Inc.    Cox Enterprises, Inc.      26.0     24.6     25.2

Centerview analyzed the premiums paid in the above transactions based on the value of the per share consideration received in the relevant transaction relative to the closing stock price of the target company 1-day, 1-week and 4-weeks prior to the announcement date of such transaction.

The following table presents the results of this analysis with respect to the selected transactions:

 

     1-Day Premium     1-Week Premium     4-Week Premium  

Minimum

     7.3     9.1     8.6

Mean

     29.6     30.3     38.8

Median

     30.0     29.9     31.0

Maximum

     53.4     57.1     104.4

Based on the foregoing, Centerview applied the median 1-day premium of 30% to the closing price of the shares of our Class A Common Stock on November 20, 2012 (the trading day prior to Sprint’s initial proposal to the Company with respect to the Merger) of $2.12 and to the closing price of shares of our Class A Common Stock on December 10, 2012 (the trading day prior to the date that information about a potential transaction between the Company and Sprint was reported in the press) of $2.40.

This analysis resulted in an illustrative implied equity value range of approximately $2.75 to $3.10 per share of our Class A Common Stock. Centerview compared the results of this analysis to the Merger Consideration to be paid to the holders of our Class A Common Stock (other than Sprint, SoftBank, or any of their respective affiliates) pursuant to the Merger Agreement. Centerview noted that the Merger Consideration to be paid to the holders of our Class A Common Stock (other than Sprint, SoftBank or any of their respective affiliates) pursuant to the Merger Agreement was within the illustrative range of implied equity values per share derived from this analysis.

In addition, Centerview applied the median 1-day premium of 30% to the closing price of the shares on October 10, 2012 (the trading day immediately prior to the date discussions between Sprint and SoftBank were first

 

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confirmed in the marketplace) of $1.30 of our Class A Common Stock. This analysis extended the above referenced range and resulted in an illustrative implied equity value range of approximately $1.70 to $3.10 per share of our Class A Common Stock. Centerview compared the results of this analysis to the Merger Consideration to be paid to the holders of our Class A Common Stock (other than Sprint, SoftBank, or any of their respective affiliates) pursuant to the Merger Agreement. Centerview noted that the Merger Consideration to be paid to the holders of our Class A Common Stock (other than Sprint, SoftBank or any of their respective affiliates) pursuant to the Merger Agreement was within the illustrative range of implied equity values per share derived from this analysis.

Discounted Cash Flow Analysis

Centerview performed a discounted cash flow analysis of the Company based on two sets of financial projections of the Company for fiscal years 2013 through 2020 prepared by management of the Company: (1) a Single-Customer Case, which we refer to as the SCC, which assumes Sprint will remain the Company’s only major wholesale customer, and (2) a Multi-Customer Case, which we refer to as the MCC, which assumes the Company would achieve substantial non-Sprint network traffic beginning in 2014. See “—Prospective Financial Information.” The financial projections did not reflect any potential proceeds from the hypothetical divestiture of any of the Company’s excess spectrum assets.

Based on each of the SCC and the MCC, Centerview calculated the forecasted unlevered free cash flows of the Company and determined a terminal value for the Company assuming a perpetuity growth rate range of 1% to 3% based on Centerview’s experience and professional judgment, which was informed, in part, by the EBITDA multiples implied by the terminal value calculated assuming various perpetuity growth rates. Centerview then discounted to present value (utilizing a mid-year discounting convention and discounting back to January 1, 2013) the unlevered free cash flows of the Company and the terminal value, in each case using discount rates ranging from 10.0% to 17.5%, reflecting a range of Centerview’s estimates of the Company’s weighted average cost of capital based on Centerview’s review of the Company’s weighted average cost of capital implied by (i) the Company’s cost of equity derived using the capital asset pricing model and (ii) the yield on the Company’s outstanding traded debt securities. For each, Centerview reviewed values at December 10, 2012 (the trading day prior to the date that information about a potential transaction between the Company and Sprint was reported in the press), October 10, 2012 (the trading day immediately prior to the date discussions between Sprint and Softbank were first confirmed in the marketplace) and October 11, 2011 (the trading day on which the Company’s outstanding traded debt securities were traded at a price that implied the maximum yield to worst on these securities). In performing this analysis, Centerview also took into account the present value of the Company’s net operating losses based on the estimated utilization of the Company’s net operating losses per the Company’s management, discounted at a cost of equity ranging from 14% to 31%, which was based on Centerview’s estimate of the Company’s cost of equity assuming a weighted average cost of capital ranging from 10.0% to 17.5%, the Company’s after-tax cost of debt and the Company’s ratio of debt to capitalization.

This analysis resulted in an illustrative implied equity value range of approximately ($2.23) to $0.76 per share of our Class A Common Stock based on the SCC and $3.45 to $15.50 per share of our Class A Common Stock based on the MCC. Centerview compared the results of the above analysis to the Merger Consideration to be paid to the holders of our Class A Common Stock (other than Sprint, SoftBank, or any of their respective affiliates) pursuant to the Merger Agreement. Centerview noted that the Merger Consideration to be paid to the holders of our Class A Common Stock (other than Sprint, SoftBank or any of their respective affiliates) pursuant to the Merger Agreement was below the illustrative range of implied equity values per share derived from this analysis based on the MCC and above the illustrative range of implied equity values per share derived from this analysis based on the SCC.

Centerview noted, however, that its assessment of the results of the discounted cash flow analysis was impacted by (1) with respect to the MCC, the fact that Centerview had been informed by the management of the Company that there were significant historical and continuing challenges and uncertainty in its ability to attract additional wholesale spectrum customers, and (2) the fact that based on management estimates, both the SCC and

 

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the MCC are expected to require significant amounts of capital to fully finance the corresponding business plans (approximately $3.9 billion of peak cumulative cash shortfalls for the SCC in 2017 and approximately $2.1 billion of peak cumulative cash shortfalls for the MCC in 2015), which may not be available to the Company.

Other Items

Preliminary Valuation Materials

Prior to December 17, 2012, in connection with its engagement, Centerview prepared discussion materials for the Special Committee which included preliminary valuation analyses based on information available as of earlier dates. Such preliminary valuation materials were provided to the Special Committee on December 3, 2012 and December 12, 2012.

The December 3, 2012 preliminary valuation materials included:

 

   

a historical trading price analysis similar to that described above under “Summary of Centerview’s Opinion – Summary of Financial Analyses – Historical Stock Trading Analysis” resulting in the same 52-week closing price low of $0.90 per share and 52-week closing price high of $2.69 per share described above under “Summary of Centerview’s Opinion – Summary of Financial Analyses – Historical Stock Trading Analysis”;

 

   

an analyst price target analysis similar to that described under “Summary of Centerview’s Opinion – Summary of Financial Analyses – Analyst Price Targets Analysis” based on the same stock price targets of 11 of the 12 research analysts described above under “Summary of Centerview’s Opinion – Summary of Financial Analyses – Analyst Price Targets Analysis.” The only stock price target not included in the December 3, 2012 preliminary analysis was the stock price target of JPMorgan, which was not reported until December 5, 2012. This analysis resulted in the same stock price target range of approximately $2.00 to $4.00 per share (excluding the highest and lowest price targets) described above under “Summary of Centerview’s Opinion – Summary of Financial Analyses – Analyst Price Targets Analysis”;

 

   

a precedent transactions analysis similar to that described under “Summary of Centerview’s Opinion – Summary of Financial Analyses – Selected Precedent Spectrum Transactions Analysis” based on the same eight transactions identified above under such section. This analysis indicated the same minimum transaction value per MHz-POP of $0.176 and maximum transaction value per MHz-POP of $0.255 described above under “Summary of Centerview’s Opinion – Summary of Financial Analyses – Selected Precedent Spectrum Transactions Analysis”;

 

   

a premiums paid analysis similar to that described under “Summary of Centerview’s Opinion – Summary of Financial Analyses – Premiums Paid Analysis – Cash Transactions” based on 106 of the 108 cash only transactions described above under “Summary of Centerview’s Opinion – Summary of Financial Analyses – Premiums Paid Analysis – Cash Transactions.” The only transactions not included in the December 3, 2012 preliminary analysis were ConAgra Foods Inc.’s acquisition of Ralcorp Holdings announced on November 27, 2012 and Danfoss A/S’s acquisition of Sauer-Danfoss Inc. announced on November 28, 2012. This analysis indicated the same median 1-day premium of 32% and mean 1-day premium of 38% described under “Summary of Centerview’s Opinion – Summary of Financial Analyses – Premiums Paid Analysis – Cash Transactions”;

 

   

a minority buy-out premiums paid analysis similar to that described under “Summary of Centerview’s Opinion – Summary of Financial Analyses – Premiums Paid Analysis – Minority Buy-Outs” based on the same nine cash only minority buy-out transactions described above under “Summary of Centerview’s Opinion – Summary of Financial Analyses – Premiums Paid Analysis – Minority Buy-Outs.” This analysis indicated the same median 1-day premium of 30% described above under “Summary of Centerview’s Opinion – Summary of Financial Analyses – Premiums Paid Analysis – Minority Buy-Outs”; and

 

   

a cash flow valuation analysis similar to that described under “Summary of Centerview’s Opinion – Summary of Financial Analyses – Discounted Cash Flow Analysis” for each of the MCC and SCC. On the

 

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basis of such analysis, and applying a perpetuity growth rate range of 0% to 3% and a discount rate range of 12.5% to 17.5%, Centerview calculated an illustrative implied equity value range of approximately ($2.29) to ($0.74) per share based on the SCC and $3.22 to $9.55 per share based on the MCC.

The December 12, 2012 preliminary valuation materials included the following updated analysis from the December 3, 2012 preliminary valuation materials:

 

   

a historical trading price analysis similar to that described above under “Summary of Centerview’s Opinion – Summary of Financial Analyses – Historical Stock Trading Analysis” resulting in the same 52-week closing price low of $0.90 per share and 52-week closing price high of $2.69 per share described above under “Summary of Centerview’s Opinion – Summary of Financial Analyses – Historical Stock Trading Analysis”;

 

   

an analyst price target analysis similar to that described under “Summary of Centerview’s Opinion – Summary of Financial Analyses – Analyst Price Targets Analysis” based on the same stock price targets of the same 12 research analysts described above under “Summary of Centerview’s Opinion – Summary of Financial Analyses – Analyst Price Targets Analysis.” This analysis resulted in the same stock price target range of approximately $2.00 to $4.00 per share (excluding the highest and lowest price targets) described above under “Summary of Centerview’s Opinion – Summary of Financial Analyses – Analyst Price Targets Analysis”;

 

   

a precedent transactions analysis similar to that described under “Summary of Centerview’s Opinion – Summary of Financial Analyses – Selected Precedent Spectrum Transactions Analysis” based on the same eight transactions identified above under such section. On the basis of such analysis, and applying the same minimum transaction value per MHz-POP of $0.176 and maximum transaction value per MHz-POP of $0.255 described above under “Summary of Centerview’s Opinion – Summary of Financial Analyses – Selected Precedent Spectrum Transactions Analysis,” Centerview calculated an illustrative implied equity value range of approximately $1.90 to $4.35 per share;

 

   

a premiums paid analysis similar to that described under “Summary of Centerview’s Opinion – Summary of Financial Analyses – Premiums Paid Analysis – Cash Transactions” based on the same 108 cash only transactions described above under “Summary of Centerview’s Opinion – Summary of Financial Analyses – Premiums Paid Analysis – Cash Transactions.” On the basis of such analysis, and applying the same median 1-day premium of 32% to the Company’s closing price on November 20, 2012 and the same mean 1-day premium of 38% to the Company’s closing price on December 10, 2012 described above under “Summary of Centerview’s Opinion – Summary of Financial Analyses – Premiums Paid Analysis – Cash Transactions,” Centerview calculated an illustrative implied equity value range of approximately $2.80 to $3.30 per share. Centerview also extended the above referenced range by applying the same median 1-day premium of 32% to the Company’s closing price on October 10, 2012 described above under “Summary of Centerview’s Opinion – Summary of Financial Analyses – Premiums Paid Analysis – Cash Transactions,” which resulted in an illustrative implied equity value range of approximately $1.70 to $3.30 per share;

 

   

a minority buy-out premiums paid analysis similar to that described under “Summary of Centerview’s Opinion – Summary of Financial Analyses – Premiums Paid Analysis – Minority Buy-Outs” based on the same nine cash only minority buy-out transactions described above under “Summary of Centerview’s Opinion – Summary of Financial Analyses – Premiums Paid Analysis – Minority Buy-Outs.” On the basis of such analysis, and applying the same median 1-day premium of 30% to the Company’s closing price on November 20, 2012 and December 10, 2012 described above under “Summary of Centerview’s Opinion – Summary of Financial Analyses – Premiums Paid Analysis – Minority Buy-Outs,” Centerview calculated an illustrative implied equity value range of approximately $2.75 to $3.10 per share. Centerview also extended the above referenced range by applying the same median 1-day premium of 30% to the Company’s closing price on October 10, 2012 described above under “Summary of Centerview’s Opinion – Summary of Financial Analyses – Premiums Paid Analysis – Minority Buy-Outs,” which resulted in an illustrative implied equity value range of approximately $1.70 to $3.10 per share; and

 

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a cash flow valuation analysis similar to that described under “Summary of Centerview’s Opinion – Summary of Financial Analyses – Discounted Cash Flow Analysis” for each of the MCC and SCC. On the basis of such analysis, and applying the same perpetuity growth rate range of 1% to 3% and the same discount rate range of 10.0% to 17.5% described above under “Summary of Centerview’s Opinion – Summary of Financial Analyses – Discounted cash Flow Analysis.” Centerview calculated an illustrative implied equity value range of approximately $(2.23) to $0.76 per share based on the SCC and $3.45 to $15.50 per share based on the MCC.

Other Materials

Prior to December 17, 2012, in connection with its engagement, Centerview prepared discussion materials for the Special Committee presented to the Special Committee on December 14, 2012 and December 16, 2012.

The December 14, 2012 discussion materials included a comparative analysis of the economic terms that would need to be offered in a spectrum sale in order to achieve, on a present value basis, the value being offered by Sprint in the transaction. This analysis was based on a hypothetical sale of the remainder of the Company’s spectrum on December 31, 2014 assuming (i) the Company first completed the spectrum sale contemplated by the Preliminary 2012 DISH proposal and (ii) the Company’s financial performance was consistent with the SCC forecast. Based on a range of discount rates from 10.0% to 25.0%, this analysis demonstrated that the Company’s remaining spectrum would need to be valued at $0.316/MHz-pop to $0.359/MHz-pop in order to achieve, on a present value basis, the value being offered by Sprint. Centerview also calculated the implied present value per share of the Company’s Class A Common Stock assuming the Company’s remaining spectrum was valued at $0.200/MHz-pop to $0.500/MHz-pop in a December 31, 2014 spectrum sale. Based on a range of discount rates from 10.0% to 25.0%, this analysis demonstrated that a sale of the Company’s remaining spectrum at this illustrative valuation range would generate $0.54 to $6.60 per share, on a present value basis.

The December 16, 2012 discussion materials included an overview of the key terms of the Preliminary 2012 Dish Proposal as well as (i) an analysis of the cash flow impact of the Preliminary 2012 Dish Proposal under both the SCC and MCC assuming either (a) no proceeds (after reserving for the net present value of the spectrum leases, cash tax payments, capital expenditures and operating expenses as permitted under the Company’s debt agreements) from the spectrum sale are used to repay the Company’s debt or (b) 100% of proceeds (after reserving for the net present value of the spectrum leases, cash tax payments, capital expenditures and operating expenses as permitted under the Company’s debt agreements) from the spectrum sale are used to repay the Company’s debt and (ii) an analysis substantially similar to the comparative analysis included in the December 14, 2012 materials described above.

The analysis of the cash flow impact of the Preliminary 2012 Dish Proposal resulted in the following pro forma ending cash balances as compared to the status quo cash balance for each of the MCC and SCC:

MCC (dollars in millions)

 

     2013E     2014E     2015E     2016E     2017E  

Pro Forma Ending Cash Balance (assuming no holders tender)

   $ 1,733      $ 429      $ 8      $ 1,185      $ 3,679   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Pro Forma Ending Cash Balance (assuming 100% of holders tender)

   $ 578      ($ 566   ($ 824   $ 513      $ 3,169   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Status Quo Cash Balance

   ($ 350   ($ 1,654   ($ 2,075   ($ 898   $ 1,596   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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SCC (dollars in millions)

 

     2013E     2014E     2015E     2016E     2017E  

Pro Forma Ending Cash Balance (assuming no holders tender)

   $ 1,782      $ 201      ($ 1,098   ($ 1,762   ($ 1,849
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Pro Forma Ending Cash Balance (assuming 100% of holders tender)

   $ 604      ($ 813   ($ 1,946   ($ 2,447   ($ 2,369
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Status Quo Cash Balance

   ($ 301   ($ 1,882   ($ 3,181   ($ 3,845   ($ 3,932
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other Considerations

The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Centerview believes that selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Centerview’s opinion. In arriving at its fairness determination, Centerview considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Centerview made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. In its analyses, Centerview considered industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of the Company. No company or transaction used in the analyses is identical to the Company or the Merger, and an evaluation of the results of the analyses is not entirely mathematical. Rather, the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the public trading, acquisition or other values of the companies and assets analyzed. The estimates contained in the analyses and the ranges of implied valuations resulting from any particular analysis are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by the analyses. In addition, analyses relating to the value of businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold. Accordingly, the estimates used in, and the results derived from, the analyses are inherently subject to substantial uncertainty. Centerview prepared the above analyses for the purpose of providing its opinion to the Special Committee and the Audit Committee regarding whether, as of the date of the written opinion, the Merger Consideration to be paid to the holders of our Class A Common Stock (other than Sprint, SoftBank, or any of their respective affiliates) pursuant to the Merger Agreement was fair, from a financial point of view, to such holders. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of the Company, Centerview or any other person assumes responsibility if future results are materially different from those forecasted.

The opinion and analyses of Centerview were only one of many factors taken into consideration by the Special Committee and the Audit Committee in their respective evaluations of the Merger. Consequently, the analyses described above should not be viewed as determinative of the views of the Special Committee, the Audit Committee, the Board of Directors or the Company’s management with respect to the Merger Consideration to be paid to the holders of our Class A Common Stock (other than Sprint, SoftBank, or any of their respective affiliates) pursuant to the Merger Agreement or as to whether the Special Committee, the Audit Committee or the Board of Directors would have been willing to determine that a different consideration was fair.

Centerview is a securities firm engaged directly and through affiliates in a number of investment banking, financial advisory and merchant banking activities. Centerview has not in the past two years provided investment banking or other services to the Company. Centerview has not in the past two years provided, and is not currently providing, investment banking or other services to Sprint or SoftBank. Centerview may provide investment banking or other services to the Company, Sprint or SoftBank, or their respective affiliates in the future, for which Centerview may receive compensation.

 

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Under the terms of Centerview’s engagement letter with the Special Committee, Centerview advised the Special Committee that, to the knowledge of Centerview, its controlled affiliates and the principal members of the team working on its engagement, none of Centerview, its controlled affiliates and the principal members of the team working on its engagement had any direct material economic interests in the Company, Sprint or Softbank, other than potential economic interests in accounts over which both (i) such person has no influence or control and (ii) such person has no knowledge of the holdings of such accounts.

In choosing a financial advisor, the Special Committee members discussed whether to engage a number of potential internationally recognized financial services firms to act as financial advisor, including Centerview, based on the knowledge of the members of the Special Committee of firms with expertise in transactions similar to the Merger. The members of the Special Committee then interviewed Centerview and, after consideration and confirmation that Centerview did not have a conflict of interest, selected Centerview as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience and expertise in transactions similar to the Merger. Centerview has acted as financial advisor to the Special Committee in connection with, and has participated in certain of the negotiations leading to, the Merger. In consideration of Centerview’s services, under the terms of Centerview’s engagement letter with the Special Committee, Centerview will receive a transaction fee which is estimated as of March 25, 2013 to be approximately $10.25 million, $1 million of which was non-contingent and paid upon the engagement of Centerview, $2 million of which was paid upon the public announcement of the execution of the Merger Agreement, and the remainder of which will become payable upon the consummation of the Merger. The Special Committee was aware of this fee structure, as well as the fact that Centerview would be entitled to receive a transaction fee in the event the Company entered into certain alternative transactions and an expiration fee if the engagement is terminated under certain circumstances and took such information into account in considering the Centerview opinion and in making its recommendations to the Company board. The Company has also agreed to reimburse Centerview for certain expenses arising, and to indemnify Centerview against certain liabilities that may arise, out of its engagement.

Opinion of Financial Advisor to the Board of Directors

In connection with Clearwire’s board of directors’ analysis and consideration of potential strategic alternatives, including the Merger, on December 7, 2012, Clearwire’s board of directors retained Evercore to act as financial advisor to Clearwire’s board of directors. On December 16, 2012, at a meeting of Clearwire’s board of directors, Evercore delivered its oral opinion to Clearwire’s board of directors, which opinion was subsequently confirmed by delivery of a written opinion, dated December 16, 2012, to the effect that, as of such date and based upon and subject to assumptions made, matters considered and limitations on the scope of review undertaken by Evercore as set forth in its opinion, the Merger Consideration to be paid to the holders of shares of our Class A Common Stock (other than Sprint, SoftBank, or any of their respective affiliates) pursuant to the Merger was fair, from a financial point of view, to such holders.

The full text of the written opinion of Evercore, dated December 16, 2012, which sets forth, among other things, the procedures followed, assumptions made, matters considered and limitations on the scope of review undertaken in rendering its opinion, is attached to this proxy statement as Annex K. You are urged to read Evercore’s opinion carefully and in its entirety. Evercore’s opinion was directed to Clearwire’s board of directors and addresses, as of the date of such opinion, only the fairness, from a financial point of view, of the Merger Consideration to be paid to holders of our Class A Common Stock (other than Sprint, SoftBank, or any of their respective affiliates). The opinion does not address any other aspect of the proposed Merger and does not constitute a recommendation to Clearwire’s board of directors or to any other persons in respect of the proposed Merger, including to any Clearwire shareholder as to how any such holder should vote or act in respect of the proposed Merger. Evercore’s opinion does not address the relative merits of the proposed Merger as compared to other business or financial strategies that might be available to Clearwire, nor does it address the underlying business decision of Clearwire to engage in the proposed Merger. The summary of the Evercore opinion set forth in

 

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this proxy statement is qualified in its entirety by reference to the full text of the opinion attached to this proxy statement as Annex K.

In connection with rendering its opinion, Evercore has, among other things:

 

  (i) reviewed certain publicly available business and financial information relating to Clearwire that Evercore deemed to be relevant, including publicly available research analysts’ estimates;

 

  (ii) reviewed certain non-public historical financial statements and other non-public historical financial and operating data relating to Clearwire prepared and furnished to Evercore by management of Clearwire;

 

  (iii) reviewed certain non-public projected financial data relating to Clearwire prepared and furnished to Evercore by management of Clearwire (including the Single-Customer Case and Multi-Customer Case more fully described below under “—Prospective Financial Information”), which we refer to as the Management Projections (which data is the same as the data contained in “—Prospective Financial Information”);

 

  (iv) discussed with management of Clearwire, Clearwire’s past and current operations, financial projections and current financial condition, including Clearwire’s liquidity position and capital needs (and including management’s views on the risks and uncertainties related to the foregoing);

 

  (v) reviewed the reported prices and the historical trading activity of the shares of Class A Common Stock;

 

  (vi) compared the valuation multiples relating to the Merger with those of certain other transactions that Evercore deemed relevant;

 

  (vii) reviewed a draft of the Merger Agreement dated December 14, 2012, which Evercore assumed was in substantially final form and from which Evercore assumed the final form would not vary in any material respect to Evercore’s analysis;

 

  (viii) reviewed drafts of the Note Purchase Agreement and the indenture relating to the Notes, each dated December 14, 2012 which Evercore assumed were in substantially final form and from which Evercore assumed the final form would not vary in any material respect to Evercore’s analysis; and

 

  (ix) performed such other analyses and examinations and considered such other factors that Evercore deemed appropriate.

For purposes of its analysis and opinion, Evercore assumed and relied upon, without undertaking any independent verification of, the accuracy and completeness of all of the information publicly available, and all of the information supplied or otherwise made available to, discussed with, or reviewed by Evercore, and Evercore assumed no liability therefor. With respect to the Management Projections, Evercore assumed that they had been reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of management of Clearwire as to the future financial performance of Clearwire under the business assumptions reflected therein. Evercore expressed no view as to any projected financial data relating to Clearwire or the assumptions on which they are based.

For purposes of rendering its opinion, Evercore assumed, in all respects material to its analysis, that the representations and warranties of each party contained in the Merger Agreement are true and correct, that each party will perform all of the covenants and agreements required to be performed by it under the Merger Agreement and that all conditions to the consummation of the proposed Merger will be satisfied without material waiver or modification thereof. Evercore further assumed that all governmental, regulatory or other consents, approvals or releases necessary for the consummation of the proposed Merger will be obtained without any material delay, limitation, restriction or condition that would have an adverse effect on Clearwire or the

 

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consummation of the proposed Merger or materially reduce the benefits to the holders of the Class A Common Stock in the proposed Merger.

Evercore did not make or assume any responsibility for making any independent valuation or appraisal of the assets or liabilities of Clearwire, nor was Evercore furnished with any such appraisals, nor did Evercore evaluate the solvency or fair value of Clearwire under any state or federal laws relating to bankruptcy, insolvency or similar matters. Evercore’s opinion was necessarily based upon information made available to it as of the date of the opinion and financial, economic, market and other conditions as they existed and as can be evaluated on the date of the opinion. It should be understood that subsequent developments may affect Evercore’s opinion and that Evercore does not have any obligation to update, revise or reaffirm its opinion. Clearwire advised Evercore that as of the date of the opinion, Clearwire did not expect to generate cumulative positive cash flows during the next twelve months after the date of the Evercore opinion, that Clearwire would need to raise substantial additional capital to fund its business and meet its financial obligations beyond the next twelve months after the date of the Evercore opinion and that the ability of Clearwire to successfully fulfill its additional capital needs in a timely manner was uncertain. In arriving at its opinion, Evercore took these views into account, as well as the impact of Clearwire’s liquidity position and capital needs on the execution of Clearwire’s business plan.

Evercore was not asked to pass upon, and expressed no opinion with respect to, any matter other than the fairness, as of the date of the Evercore opinion, to the holders of the Class A Common Stock (other than Sprint, SoftBank, or any of their respective affiliates), from a financial point of view, of the Merger Consideration as of the date of its opinion. Evercore did not express any view on, and its opinion did not address, the fairness of the proposed Merger to, or any consideration received in connection therewith by, the holders of any other securities, creditors or other constituencies of Clearwire, nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of Clearwire, or any class of such persons, whether relative to the Merger Consideration to be paid to the holders of the Class A Common Stock (other than Sprint, SoftBank, or any of their respective affiliates) or otherwise. Evercore did not express any view on, and its opinion did not address, the fairness of the transactions contemplated by the Note Purchase Agreement or the values of the constituent elements of that transaction. Evercore assumed that any modification to the structure of the transaction will not affect its analysis in any material respect. Evercore’s opinion did not address the relative merits of the Merger as compared to other business or financial strategies that might be available to Evercore, nor did it address the underlying business decision of Clearwire to engage in the proposed Merger.

In arriving at its opinion, Evercore was not authorized to solicit, and did not solicit, interest from any third party with respect to the acquisition of any or all of the shares of Class A Common Stock or any business combination or other extraordinary transaction involving Clearwire. Evercore’s opinion did not constitute a recommendation to the board of directors or to any other persons in respect of the proposed Merger, including as to how any holder of shares of Class A Common Stock should vote or act in respect of the proposed Merger. Evercore expressed no opinion as to the price at which shares of Clearwire will trade at any time. Evercore’s opinion noted that it is not a legal, regulatory, accounting or tax expert and Evercore assumed the accuracy and completeness of assessments by Clearwire and its advisors with respect to legal, regulatory, accounting and tax matters.

Evercore’s opinion was only one of many factors considered by the board of directors in its evaluation of the proposed Merger and should not be viewed as determinative of the views of the board of directors or our management with respect to the proposed Merger or the Merger Consideration to be paid to holders of Clearwire’s Class A Common Stock (other than Sprint, SoftBank, or any of their respective affiliates). Consequently, the analyses as described below should not be viewed as determinative of the opinion of the Clearwire board of directors with respect to the Merger Consideration or of whether the Clearwire board of directors would have been willing to agree to different consideration.

Set forth below is a summary of the material financial analyses reviewed by Evercore with Clearwire’s board of directors on December 16, 2012 in connection with rendering the Evercore opinion. The following summary, however, does not purport to be a complete description of the analyses performed by Evercore. The

 

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order of the analyses described and the results of these analyses do not represent relative importance or weight given to these analyses by Evercore. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data that existed on or before December 14, 2012, the most recent trading day before delivery of the opinion, and is not necessarily indicative of current market conditions.

The following summary of financial analyses includes information presented in tabular format. These tables must be read together with the text of each summary in order to understand fully the financial analyses. The tables alone do not constitute a complete description of the financial analyses. Considering the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Evercore’s financial analyses.

In conducting its analysis, Evercore used various methodologies to review the valuation of Clearwire to assess the fairness of the Merger Consideration to be paid to the holders of shares of Class A Common Stock (other than Sprint, SoftBank, or any of their respective affiliates). Specifically, Evercore conducted analyses of precedent premia paid analysis, selected publicly-traded companies, selected precedent spectrum transactions, discounted cash flow, which we refer to as DCF, historical share price, and research analyst price targets. However, Evercore only relied upon the analyses of precedent premia paid analysis, selected publicly-traded companies, selected precedent spectrum transactions and DCF for purposes of its opinion.

Analysis of Precedent Premia Paid

Evercore conducted a precedent premia paid analysis by analyzing three categories of transactions since January 1, 2000. A description of each of the categories is provided below.

 

   

All cash transactions wherein equity value purchased was greater than $500 million but less than $10 billion, which we refer to as All Cash transactions, in which the acquirer purchased 100% of the target. There were 611 such transactions, and the median premium paid relative to the trading share prices one day prior to the announcement of these transactions was 26.6%, the median premium paid relative to the trading share prices one week prior to the announcement of these transactions was 28.5%, and the median premium paid relative to the trading share prices four weeks prior to the announcement of these transactions was 31.7%.

 

   

All cash transactions wherein equity value purchased was greater than $500 million by an acquirer who already had a less than 50% ownership in the target and acquired the rest of the equity stake increasing its ownership to 100%, which we refer to as Minority-Led transactions. There were 23 such transactions, and the median premium paid relative to the trading share prices one day prior to the announcement of these transactions was 30.2%, the median premium paid relative to the trading share prices one week prior to the announcement of these transactions was 32.7%, and the median premium paid relative to the trading share prices four weeks prior to the announcement of these transactions was 44.5%.

 

   

All cash transactions wherein equity value purchased was greater than $500 million by an acquirer who already had a greater than 50% ownership in the target and acquired the rest of the equity stake increasing its ownership to 100%, which we refer to as Majority-Led transactions. There were 16 such transactions, and the median premium paid relative to the trading share prices one day prior to the announcement of these transactions was 25.8%, the median premium paid relative to the trading share prices one week prior to the announcement of these transactions was 27.7%, and the median premium paid relative to the trading share prices four weeks prior to the announcement of these transactions was 24.7%.

 

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Evercore applied these premia above to Clearwire’s closing share price one day, one week and four weeks prior to the speculation in the markets about the Sprint-SoftBank Merger on October 11, 2012 and to Clearwire’s closing share price one day, one week and four weeks prior to Sprint’s initial proposal to acquire the non-Sprint equity stake in Clearwire on November 21, 2012. The results are provided in the table below.

 

          Implied Share Price  
    Share Price     All Cash     Minority-Led     Majority-Led  

Prior to Sprint-SoftBank Speculation (10/11/12)

       

1-Day Prior

  $ 1.30      $ 1.65      $ 1.69      $ 1.64   

1-Week Prior

  $ 1.34      $ 1.72      $ 1.78      $ 1.71   

4-Weeks Prior

  $ 1.63      $ 2.15      $ 2.36      $ 2.03   

Prior to Initial Sprint Proposal (11/21/12)

       

1-Day Prior

  $ 2.12      $ 2.68      $ 2.76      $ 2.67   

1-Week Prior

  $ 2.22      $ 2.85      $ 2.95      $ 2.84   

4-Weeks Prior

  $ 1.91      $ 2.52      $ 2.76      $ 2.38   

Based on the above table, Evercore selected the high to low range of implied share prices based on Clearwire’s closing share price prior to October 11, 2012 and on Clearwire’s closing share price prior to November 21, 2012. The table below summarizes the implied per share equity value reference ranges for Clearwire:

 

     Implied Equity Value per share
Valuation Reference Range for
Clearwire
 

Prior to Sprint-SoftBank Speculation (10/11/12)

   $ 1.64 – $2.36   

Prior to Initial Sprint Proposal (11/21/12)

   $ 2.38 – $2.95   

Evercore noted that the Merger Consideration to be paid to holders of Clearwire’s Class A Common Stock (other than Sprint, SoftBank or any of their respective affiliates) pursuant to the Merger Agreement exceeds the ranges of the share prices implied by Evercore’s analysis of precedent premia paid.

Analysis of Selected Publicly-Traded Companies

In order to derive an implied per share equity value reference range for Clearwire, Evercore analyzed the implied spectrum value (or $/MHz-POP) based on public market trading values of similar companies. Evercore, based on its professional judgment and experience in the wireless telecommunications industry, deemed the following two companies, which have either debt and/or equity trading in public markets, sufficiently comparable to Clearwire to serve as a useful basis for comparison:

 

   

Globalstar, Inc., which we refer to as Globalstar

 

   

LightSquared Inc., which we refer to as LightSquared

However, because of the inherent differences between the businesses, operations, spectrum portfolio, capital structure, regulatory characteristics and prospects of Clearwire and the selected comparable companies, no comparable company is exactly the same as Clearwire.

Evercore reviewed, among other things, enterprise values as a multiple of the total MHz-POPs of the selected comparable companies. For Globalstar, enterprise value was calculated as public market equity value plus debt, less cash and cash equivalents based on publicly available information. No value was attributed to the existing mobile satellite services business for the purposes of this analysis. The implied spectrum value or implied $/MHz-POP for Globalstar was computed by dividing the calculated enterprise value by Globalstar’s MHz-POPs, derived from the spectrum approved by the FCC for Ancillary Terrestrial Component purposes. For

 

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LightSquared, enterprise value was calculated based on the market value of LightSquared outstanding indebtedness less cash and cash equivalents. Since LightSquared is currently in restructuring, there is no publicly-traded market value for the common equity and no value has been attributed to the common equity for the purposes of this analysis. The implied spectrum value or implied $/MHz-POP for LightSquared was computed by dividing the calculated enterprise value by LightSquared’s MHz-POPs, derived from publicly available information on LightSquared’s total spectrum portfolio. Implied $/MHz-POPs multiples for the selected comparable companies is summarized below:

 

Comparable Company

  

Implied $/MHz-POPs

Globalstar

   $0.17

LightSquared

   $0.09

Evercore then applied the range of selected calculated enterprise value to implied MHZ-POPs multiples of $0.09/ MHz-POP -$0.17/ MHz-POP derived from the selected comparable companies to the corresponding total MHz-POPs for Clearwire as furnished to Evercore by the management of Clearwire. This resulted in an implied enterprise value for Clearwire, which was then used to derive an implied price per share of Common Stock. These implied share prices were derived by subtracting management’s estimate of net debt and the present value of spectrum leases as of December 31, 2012 from enterprise value and then dividing those amounts by the number of fully diluted shares of Clearwire at that particular share price. Net debt is the sum of interest bearing debt, minus the cash balance, in each case based on management estimates.

The table below summarizes the implied per share equity value reference ranges for Clearwire:

 

     Implied Equity Value per share
Valuation Reference Range for
Clearwire

Selected Publicly-Traded Companies

   $(0.82) – $1.69

As discussed above, because of the inherent differences between the businesses, operations, spectrum portfolio, capital structure, regulatory characteristics and prospects of Clearwire and the selected comparable companies, no comparable company is exactly the same as Clearwire.

Evercore noted that the Merger Consideration to be paid to holders of Clearwire’s Class A Common Stock (other than Sprint, SoftBank or any of their respective affiliates) pursuant to the Merger Agreement exceeds the range of the share prices implied by Evercore’s analysis of selected publicly-traded companies.

 

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Analysis of Selected Precedent Spectrum Transactions

Evercore reviewed the financial terms, to the extent publicly available, of transactions since 2007 related to the sale of spectrum that Evercore deemed relevant, based on its professional experience with transactions in the wireless telecommunications industry. The set of transactions include the Preliminary 2012 DISH Proposal. For each of the selected precedent transactions, Evercore, using publicly available financial and other information, determined the spectrum value or $/MHz-POP for the spectrum sold in each of these transactions. The implied spectrum value or $/MHz-POP for each of the relevant transactions is listed below:

 

Acquirer

  

Target

  

Spectrum Band

   Date Transaction
Announced
   Implied $/MHz-
POP

Preliminary 2012

DISH

Proposal

   Clearwire    EBS/BRS    N/A    $0.216
Sprint   

Clearwire

(Represents the

sale of Eagle

River’s equity

interest in

Clearwire)

   EBS/BRS    October 2012    $0.21
Sprint   

Clearwire

(Represents

Clearwire equity

value received by

Sprint for its contribution of spectrum)

   EBS/BRS    May 2008    $0.26
Clearwire    BellSouth    EBS/BRS    February 2007    $0.18
AT&T   

NextWave

(Implied price for

A&B Block only)

   WCS    August 2012    $0.35
AT&T    NextWave (All)    WCS    August 2012    $0.19
DISH    Terrestar    S-Band    June 2011    $0.21
DISH    Terrestar    S-Band    June 2011    $0.13*
DISH    DBSD North America    S-Band    February 2011    $0.23
DISH    DBSD North America    S-Band    February 2011    $0.15*
Harbinger    SkyTerra    L-Band    September 2009    $0.25

 

* Evercore also analyzed implied $/MHz-POP multiples for the DISH/DBSD North America and the DISH/Terrestar transactions adjusted for the book value of satellite assets.

None of these precedent transactions is identical or directly comparable to the Merger. Because the reasons for, and the circumstances surrounding, each of the selected precedent transactions analyzed were so diverse, and because of the inherent differences between the operations and the financial condition of Clearwire and the companies involved in the selected precedent transactions, Evercore believes that a comparable transaction analysis is not solely mathematical and involves complex considerations and judgments. As such, based on this analysis and Evercore’s professional judgment, Evercore applied a range of the $0.18-$0.26 /MHz-POP to the aggregate MHz-POPs of Clearwire to calculate the implied enterprise value of Clearwire. The implied equity value of Clearwire was derived by subtracting net debt and the present value of spectrum leases as of December 31, 2012 from enterprise value and then dividing those amounts by the number of fully diluted shares of Clearwire at that particular share price. Net debt is the sum of interest bearing debt, minus the cash balance, in each case based on management estimates.

The Company is expected to continue to generate negative cash flows for the 12 months after the date of the Evercore opinion. As such, in order to illustrate the impact of reduction in cash on equity value, the equity value

 

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was derived as of December 31, 2012 and also as of September 30, 2013 using the same range of $0.18-$0.26/MHz-POPs discussed in the preceding paragraph and the estimated net debt corresponding to December 31, 2012 and September 30, 2013 and the present value of spectrum leases each as based on estimates from management of Clearwire.

The table below summarizes the implied per share equity value reference ranges for Clearwire:

 

     Implied Equity Value per share
Valuation Reference Range for
Clearwire
 

Selected Precedent Transactions (12/31/12 Est. Net Debt Balance)

   $ 2.01 – $4.52   

Selected Precedent Transactions (9/30/13 Est. Net Debt Balance)

   $ 1.53 – $4.04   

Evercore noted that the Merger Consideration to be paid to holders of Clearwire’s Class A Common Stock (other than Sprint, SoftBank or any of their respective affiliates) pursuant to the Merger Agreement is within the ranges of the share prices implied by Evercore’s analysis of selected precedent spectrum transactions.

Analysis of Discounted Cash Flow

As part of its analysis, and in order to estimate the implied present value of the equity value per share for Clearwire, Evercore prepared a discounted cash flow analysis for Clearwire.

A discounted cash flow analysis is a valuation methodology used to derive a valuation of an asset by calculating the present value of estimated future cash flows to be generated by the asset. Present value refers to the current value of future cash flows or amounts and is obtained by discounting those future cash flows or amounts by a discount rate. Evercore performed a discounted cash flow analysis for Clearwire by adding (1) the present value of Clearwire’ projected after-tax unlevered free cash flows for fiscal years 2013 through 2020, (2) the present value of the terminal value of Clearwire as of the end of fiscal year 2020, and (3) the present value of net operating losses of Clearwire. For each year, unlevered free cash flow was derived as follows: EBITDA plus certain non-cash adjustments less taxes less capital expenditures less changes in working capital, where changes in working capital can either be positive or negative. Terminal value refers to the present value of all future cash flows to be generated by an asset for the period after fiscal year 2020. The unlevered free cash flows, range of terminal values and net operating losses were discounted to present values as of December 31, 2012.

Evercore estimated a range of terminal values as of the end of fiscal year 2020 calculated based on perpetuity growth rates of 2.0% to 4.0%, which Evercore selected based on its professional judgment and experience in the wireless telecommunications industry. Evercore performed the discounted cash flow analysis using a range of discount rates from 12.5% to 17.5% which Evercore selected based on discount rate analysis (which took into account macro-economic assumptions and estimates of risk, cost of financial distress, Clearwire’s cost of debt, weighted average cost of capital analysis and other appropriate factors), professional judgment and experience in the wireless telecommunications industry. Evercore calculated per share equity values by first determining a range of enterprise values of Clearwire by adding the present values of the after-tax unlevered free cash flows, certain net operating losses and terminal values for each perpetuity growth rate and discount rate scenario, and then subtracting from the enterprise values the estimated net debt as of December 31, 2012 and then dividing those amounts by the number of fully diluted shares of Clearwire at that particular share price. Net debt is the sum of interest bearing debt, minus the cash balance, in each case based on management estimates at that date.

Evercore prepared discounted cash flow analyses for two sets of projections provided by the Company’s management. One set of projections was based on the assumption that Sprint will continue to be the Company’s only primary wholesale customer, or the SCC; while the other set of projections was based on the assumption that the Company will be able to source additional large wholesale customers in addition to Sprint, or the MCC. Based on management estimates, both sets of projections are expected to require significant amounts of capital to

 

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fully finance the corresponding business plans. The SCC and MCC are estimated to have peak cumulative cash shortfalls of approximately $3.9 billion and $2.1 billion in 2017 and 2015, respectively, before the time at which the Company becomes net cash flow positive. The SCC and MCC assume that any existing debt ($3.8 billion of which matures between 2015 and 2017) is refinanced at maturity at existing rates. In addition to the additional capital requirements needed to finance the SCC and MCC, management of Clearwire indicated that Clearwire has encountered historical and continuing significant challenges and uncertainty in its ability to attract additional wholesale spectrum customers.

In the SCC case, the management of Clearwire indicated that the Company may have excess spectrum capacity that may not be required to operate the business. As such, in the SCC case, in addition to the discounted cash flow analysis, Evercore also analyzed the incremental value to the equity of Clearwire from the net proceeds received from a potential sale of excess spectrum. For the purposes of this analysis, Evercore estimated $2.1 billion of net proceeds or $1.39 per share of incremental equity value in addition to the equity value derived from the discounted cash flow analysis.

The table below summarizes the implied per share equity value reference ranges for Clearwire:

 

     Implied Equity Value per share
Valuation Reference Range for
Clearwire*

DCF (SCC Case)

   ($1.88) – ($0.01)

DCF (SCC Case + Potential Sale of Excess Spectrum)

   ($0.49) – $1.39

DCF (MCC Case)

   $4.14 – $11.30

 

* The SCC and MCC are estimated to have peak cumulative cash shortfalls of approximately $3.9 billion and $2.1 billion, in 2017 and 2015, respectively, before the time at which the Company becomes net cash flow positive. The SCC and MCC assume that any existing debt ($3.8 billion of which matures between 2015 and 2017) is refinanced at maturity at existing rates.

Evercore noted that the Merger Consideration to be paid to holders of Clearwire’s Class A Common Stock (other than Sprint, SoftBank or any of their respective affiliates) pursuant to the Merger Agreement exceeds the ranges of the share prices implied by Evercore’s analysis of the DCF (SCC Case) and the DCF (SCC Case + Potential Sale of Excess Spectrum) and is below the range of the share prices implied by Evercore’s analysis of the DCF (MCC Case).

Review of Historical Share Prices

Evercore reviewed the recent stock price performance of Clearwire based on an analysis of public trading prices for the twelve months ended November 20, 2012 (the last trading day prior to Sprint’s initial offer to acquire Clearwire). During this time period, the trading price of Class A Common Stock ranged from a low of $0.90 to a high of $2.69.

 

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Review of Research Analyst Price Targets

Evercore compared recent publicly available research analyst price targets for Clearwire that were available to Evercore as of December 10, 2012 which was the day before there was speculation in the markets about the Merger. Evercore examined ten such analyst targets set forth in the table below, and noted that the low and high per share equity value price targets for Class A Common Stock were $1.00 and $4.00, respectively. Given that the low target price of $1.00 represented a forward target price as of December 31, 2013, Evercore discounted this target price to December 31, 2012 assuming a cost of equity of 20.0% based on Evercore’s professional judgment and experience in the wireless telecommunications industry, resulting in an adjusted low per-share equity value price target of $0.83 per share. As such, the publicly available analyst price targets indicated a range of $0.83 to $4.00 per share of Class A Common Stock.

 

Publication Date

   Analyst    Price Target   

Achievement Date

October 25, 2012

   Bank of America Merrill Lynch    $4.00    N/A

October 26, 2012

   Guggenheim Partners    3.00    End of 2013

November 8, 2012

   RBC    2.50    N/A

October 26, 2012

   D.A. Davidson    3.00    12-18 months

October 26, 2012

   Jefferies    2.00    Year-end 2013

October 25, 2012

   Evercore Partners    1.75    N/A

October 26, 2012

   Morgan Stanley    1.00    12 months

December 5, 2012

   J.P. Morgan    4.00    N/A

November 1, 2012

   Macquarie    2.75    12 months

October 26, 2012

   UBS    1.75    12 months

Preliminary Valuation Materials

Prior to December 16, 2012, in connection with its engagement, Evercore prepared discussion materials for the Board of Directors which included preliminary valuation analyses based on information available as of earlier dates. Such preliminary valuation materials were provided to the Board of Directors on December 12, 2012.

The December 12, 2012 preliminary valuation materials included:

 

   

a premia paid analysis similar to that described under “Opinion of Financial Advisor to the Board of Directors—Analysis of Precedent Premia Paid” based on the same precedent transactions described above under such section. This analysis indicated the same median 1-day, 1-week and 4-weeks premia paid and the same implied equity value per share valuation reference ranges for Clearwire described above under “Opinion of Financial Advisor to the Board of Directors—Analysis of Precedent Premia Paid”;

 

   

a public peer group analysis similar to that described under “Opinion of Financial Advisor to the Board of Directors—Analysis of Selected Publicly-Traded Companies” based on the same publicly-traded peer companies described above under such section. This analysis indicated the same implied equity value per share valuation reference range for Clearwire described above under “Opinion of Financial Advisor to the Board of Directors—Analysis of Selected Publicly-Traded Companies”;

 

   

a precedent spectrum transactions analysis similar to that described under “Opinion of Financial Advisor to the Board of Directors—Analysis of Selected Precedent Spectrum Transactions” based on the same 11 transactions identified above under such section. This analysis indicated the same implied equity value per share valuation reference range for Clearwire described above under “Opinion of Financial Advisor to the Board of Directors—Analysis of Selected Precedent Spectrum Transactions”;

 

   

a discounted cash flow valuation analysis similar to that described under “Opinion of Financial Advisor to the Board of Directors—Analysis of Discounted Cash Flow” for each of the MCC and SCC. On the basis of such analysis, and applying the same perpetuity growth rate ranges and discount rate ranges

 

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described in such section, Evercore calculated the same implied equity value per share valuation reference ranges for Clearwire for each of the SCC case and the SCC plus the potential sale of excess spectrum case described above under “Opinion of Financial Advisor to the Board of Directors—Analysis of Discounted Cash Flow” and an implied equity value per share valuation reference range for Clearwire for the MCC case of $4.14 to $11.31;

 

   

a historical trading price analysis similar to that described above under “Opinion of Financial Advisor to the Board of Directors—Review of Historical Share Prices” resulting in the same 52-week closing price low of $0.90 per share and 52-week closing price high of $2.69 per share described above under “Opinion of Financial Advisor to the Board of Directors—Review of Historical Share Prices”; and

 

   

an analyst price target analysis similar to that described under “Opinion of Financial Advisor to the Board of Directors—Review of Research Analyst Price Targets” based on the same stock price targets of the 10 research analysts described above under such section. This analysis resulted in the same stock price target range described above under “Opinion of Financial Advisor to the Board of Directors—Review of Research Analyst Price Targets.”

General

The foregoing summary of certain material financial analyses does not purport to be a complete description of the analyses or data presented by Evercore. In connection with the review of the proposed Merger by Clearwire’s board of directors, Evercore performed a variety of financial and comparative analyses for purposes of rendering its opinion. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary described above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Evercore’s opinion. In arriving at its fairness determination, Evercore considered the results of all the analyses and did not draw, in isolation, conclusions from or with regard to any one analysis or factor considered by it for purposes of its opinion. Rather, Evercore made its determination as to fairness on the basis of its experience and professional judgment in the wireless telecommunications industry after considering the results of all the analyses. In addition, Evercore considered various assumptions more or less probable than other assumptions, so that the range of valuations resulting from any particular analysis described above should therefore not be taken to be Evercore’s view of the value of Clearwire. No precedent spectrum sale transaction used in the above analyses as a comparison is directly comparable to a potential sale of spectrum by Clearwire. Further, Evercore’s analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the acquisition, public trading or other values of the companies or transactions used, including judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of Clearwire or its advisors. The fact that any specific analysis has been referred to in the summary above is not meant to indicate that such analysis was viewed as any more significant or was or should be given any greater weight than any other analysis.

Evercore prepared these analyses for the purpose of providing an opinion to Clearwire’s board of directors as to the fairness, from a financial point of view, of the Merger Consideration to be paid to holders of shares of Class A Common Stock (other than Sprint, SoftBank, or any of their respective affiliates) pursuant to the proposed Merger. These analyses do not purport to be appraisals or to necessarily reflect the prices at which the business or securities actually may be sold. Any estimates contained in these analyses are not necessarily indicative of actual future results, which may be significantly more or less favorable than those suggested by such estimates. Accordingly, estimates used in, and the results derived from, Evercore’s analyses are inherently subject to substantial uncertainty, and Evercore assumes no responsibility if future results are materially different from those forecasted in such estimates.

The issuance of the Evercore opinion was approved by an opinion committee of Evercore Group L.L.C.

 

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Under the terms of Evercore’s engagement, Clearwire agreed to pay Evercore a customary fee for its services. Clearwire agreed to pay Evercore a total fee that is estimated as of March 25, 2013 to be approximately $10.25 million, (i) $1 million of which was non-contingent and paid to Evercore upon the execution of its engagement letter with Clearwire, (ii) $2 million of which was paid to Evercore upon the public announcement by Clearwire of Clearwire’s execution of the Merger Agreement and (iii) the remainder of which is contingent, and payable upon, consummation of the Merger. The board of directors of Clearwire was aware of this fee structure, as well as the fact that Evercore would be entitled to receive a transaction fee in the event the Company entered into certain alternative transactions and an expiration fee if the engagement is terminated under certain circumstances, and took such information into account in considering the Evercore opinion and in approving the Merger. In addition, Clearwire has agreed to reimburse Evercore for its reasonable out-of-pocket expenses (including legal fees, expenses and disbursements) incurred in connection with its engagement, and to indemnify Evercore and its members, partners, officers, directors, advisors, representatives, employees, agents, affiliates or controlling persons against certain losses, claims, damages, liabilities or expense to which any such person may become subject, relating to, arising out of or in connection with Evercore’s engagement, performance of any service in connection therewith or any transaction contemplated thereby. Prior to its engagement, Evercore informed the board of directors of Clearwire that Eduardo Mestre, a Senior Managing Director of Evercore and a member of the Evercore team that would provide services to Clearwire, is a member of the Board of Directors of Comcast. The Clearwire Board engaged Evercore and requested Evercore’s opinion after having been so informed.

During the two year period prior to the date hereof, no material relationship existed between Evercore and its affiliates and Clearwire, Sprint or SoftBank pursuant to which compensation was received by Evercore or its affiliates as a result of such a relationship. Evercore may provide financial or other services to Clearwire, Sprint or SoftBank or their respective affiliates in the future and in connection with any such services Evercore may receive compensation.

In the ordinary course of business, Evercore or its affiliates may actively trade the securities, or related derivative securities, or financial instruments of Clearwire, Sprint and their respective affiliates, for its own account and for the accounts of its customers and, accordingly, may at any time hold a long or short position in such securities or instruments.

In choosing a financial advisor, the Company’s board of directors discussed whether to engage a number of potential internationally recognized financial services firms to act as financial advisor, including Evercore, based on the knowledge of the members of the Company’s board or directors of firms with expertise in the industry in which the Company operates and in transactions similar to the Merger. The members of the Company’s board of directors then interviewed Evercore and certain other firms that the board of directors determined did not have conflicts and, after consideration and determination by the board of directors that Evercore did not have a conflict of interest, selected Evercore as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience in the telecommunications industry, is familiar with spectrum, had performed work for the Company in the past and has substantial expertise in transactions similar to the Merger. Evercore is an internationally recognized investment banking firm and is regularly engaged in the valuation of businesses in connection with mergers and acquisitions, leveraged buyouts, competitive biddings, private placements and valuations for corporate and other purposes.

Purpose and Reasons of Sprint Parties for the Merger

Under the SEC rules governing “going private” transactions, the Sprint Parties are required to express their purposes and reasons for the Merger to our unaffiliated stockholders. The Sprint Parties are making the statements included in this section solely for the purposes of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act.

The purchase of all of the shares in the Company that the Sprint Parties do not already own will enable Sprint to combine the Company’s operations and spectrum with Sprint’s resulting in a robust network and an

 

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enhanced spectrum portfolio that will increase Sprint’s competitiveness in the United States wireless industry. Sprint expects after this combination to achieve operational efficiencies and improved service for customers.

In addition, after the Merger, the Company’s Class A Common Stock will cease to be publicly traded and the Company will be a wholly-owned subsidiary. Sprint believes that a 100% ownership structure will provide greater operating flexibility and eliminate some burdens, costs and constraints imposed on public companies, and particularly with respect to the Company in light of the current governance structure.

As detailed above in “Special Factors—Background of the Merger,” Sprint and the Company have periodically engaged in discussions regarding a number of various transactions, including exploring the possibility of Sprint acquiring the shares of the Common Stock that Sprint did not already own; however, for a number of reasons, these discussions had not previously resulted in an agreement between the parties. Sprint had previously been interested in exploring acquiring the entire Company, but, among other reasons, generally did not necessarily have the financial resources readily accessible for such a transaction. In connection with the Sprint-SoftBank Merger in October 2012, SoftBank purchased a convertible bond from Sprint in the amount of $3.1 billion. This cash infusion provided Sprint with increased financial flexibility, and Sprint began to consider its investment alternatives. Sprint began to consider an acquisition of the Company, which would require SoftBank’s consent under the terms of the Sprint-SoftBank Merger Agreement. In November 2012, as Sprint continued to consider an acquisition of the Company, it realized that due to certain timing issues related to regulatory approvals of the Sprint-SoftBank Merger, it was important to Sprint that any transaction with the Company be completed on an accelerated time schedule so as not to delay the approval of the Sprint-SoftBank Merger and that, if such a timetable was not possible, it would cease consideration of such acquisition. In particular, when the Sprint-SoftBank Merger Agreement was announced on October 15, 2012, it was stated that the parties expected to close in mid-2013, given the need for clearance by the SEC, FCC and the Committee on Foreign Investment in the United States and compliance with the applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. Sprint management was aware of this timing and cognizant of the view of Sprint’s board of directors that no transactions be undertaken by Sprint which would interfere with or delay the timing of the Sprint-SoftBank Merger, as originally announced. When a possible transaction with Clearwire was discussed by the Sprint board on December 12, 2012, the Sprint board was advised by Sprint’s management and counsel that they believed that the regulatory requirements to approve the Clearwire transaction would not be expected to significantly delay the regulatory approval or consummation of the Sprint-SoftBank Merger, in large part because many of the involved regulatory agencies would incorporate review of Sprint’s existing equity interests in Clearwire into their analysis in any event. Sprint was prepared, if the discussions in December 2012 had not led to a definitive agreement at the time they ultimately did (or a reasonable period of time thereafter), to cease such discussions so as to avoid regulatory delay of the Sprint-SoftBank Merger. As such, Sprint elected to undertake the transaction in mid-December 2012 due to these factors and the fact that, if the transaction was not undertaken at that time, it would likely not be able to enter into an acquisition transaction with the Company for several months until after the expected closing of the Sprint-SoftBank Merger in mid-2013. Given the Company’s liquidity and funding issues discussed elsewhere in this proxy statement, Sprint was concerned that the operations and financial condition of the Company could significantly deteriorate during that time, possibly to a point which jeopardized the ongoing viability of the Company.

Plans for the Company After the Merger

After the effective time of the Merger, Sprint expects that the Company will continue its current operations, except that Sprint and the Company will operate as an integrated enterprise with combined expertise and resources, and, if the Sprint-SoftBank Merger is consummated, the Company will have access to the expertise and resources of SoftBank as well. With combined expertise and resources, Sprint expects that the Company will have the financial resources needed to continue to transition the Company’s network from WiMAX to LTE technology and improve wireless broadband service to the Company’s and Sprint’s customers. In addition, Sprint expects that its Network Vision architecture will allow the combined enterprise to achieve operational efficiencies and improved service for customers.

 

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Under the terms of the Merger Agreement, the directors of Merger Sub will serve as directors of the Company following completion of the Merger, and thereafter Sprint expects that the directors of the Company will be persons affiliated with Sprint. Sprint will continue to evaluate all aspects of the Company’s business, operations, capitalization and management and personnel and will take such actions from and after the Merger as it deems appropriate under the circumstances. Sprint expressly reserves the right to make any changes that it deems necessary, appropriate or convenient in light of its review, future developments or changes in Sprint’s operating objectives, particularly since, if the Sprint-SoftBank Merger is consummated, SoftBank will have significant control over the operations of Sprint and its subsidiaries.

Following the consummation of the Merger, the registration of the Company’s Class A Common Stock and the Company’s reporting obligation under the Exchange Act with respect to the Company’s Class A Common Stock will be terminated upon application to the SEC. In addition, upon consummation of the Merger, the Company’s Class A Common Stock will no longer be listed on any exchange or quotation system, including NASDAQ, and price quotations will no longer be available.

Sprint may determine to elect to exercise its right to exchange some of its Class B Interests for shares of Class A Common Stock pursuant to the Company’s organizational documents. If elected, it is anticipated that such exchange would occur prior to the closing of the Merger (and possibly before the Special Meeting). Any such exchange by Sprint would not change the voting interest of Sprint in the Company or the overall ownership interest that Sprint holds in the Company and its subsidiaries, but would merely change the form of that ownership from economic interests in Clearwire Communications to economic interests in the Company. Sprint would continue to hold a roughly 50.2% ownership and voting interest in the Company both before and after such exchange.

Certain Effects of the Merger

At the effective time of the Merger, each issued and outstanding share of our Class A Common Stock (other than shares held by Sprint, SoftBank, any of their respective affiliates and any stockholders who properly exercise their appraisal rights under Delaware law) will be converted into the right to receive the Merger Consideration of $2.97.

At the effective time of the Merger, each option to purchase shares of our Common Stock granted pursuant to any Stock Plan outstanding and unexercised immediately prior to the effective time of the Merger, whether or not then vested, will be cancelled in exchange for the right to receive a lump sum cash amount, if any, by which the Merger Consideration exceeds the exercise price of such option, less applicable withholding taxes. At the effective time of the Merger, each Director RSU will be cancelled in exchange for the right to receive a lump sum cash payment equal to the product of the Merger Consideration, without interest, and the number of shares of Class A Common Stock subject to such Director RSU. At the effective time of the Merger, each Unvested RSU (which was granted prior to December 17, 2012) will be converted into a Restricted Cash Account. In addition, each restricted stock unit granted after December 17, 2012 under a Stock Plan that is not a restricted stock unit held by a non-employee member of the Clearwire board of directors and that is outstanding immediately prior to the effective time of the Merger, each of which we refer to as an Unvested 2013 RSU, will be converted into a right to receive a cash payment equal to the product of the Merger Consideration, without interest, and the number of shares of Class A Common Stock subject to such Unvested 2013 RSU, each of which we refer to as a 2013 Restricted Cash Account.

The primary benefit of the Merger to our unaffiliated stockholders (other than any stockholders who properly exercise their appraisal rights under Delaware law) will be their right to receive a cash payment of $2.97, without interest, less applicable withholding taxes, for each share of Class A Common Stock held by such stockholders as described above, representing approximately a 128.5% premium to the closing share price of the Company’s Class A Common Stock the day before discussions between Sprint and SoftBank were first confirmed in the marketplace on October 11, 2012, with Clearwire speculated to be a part of that transaction;

 

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and, approximately a 40.1% premium to the closing price the day before our receipt of Sprint’s initial $2.60 per share non-binding indication of interest on November 21, 2012.

The primary detriments of the Merger to our unaffiliated stockholders include the lack of an interest of such stockholders in the potential future earnings or growth of Clearwire. Additionally, the receipt of cash in exchange for shares of Clearwire Class A Common Stock pursuant to the Merger Agreement will be a taxable transaction for United States federal income tax purposes.

The primary benefits of the Merger to Sprint include its right to all of the potential future earnings and growth of Clearwire which, if Clearwire successfully executes its business strategies, could exceed the value of Sprint’s original investment in Clearwire in 2008. Additionally, following the Merger, Clearwire will be a private company, wholly-owned by Sprint and any additional investors permitted by Sprint, and, as such, will be relieved of the burdens imposed on public companies, including the pressure to meet analyst forecasts and the requirements and restrictions on trading that our directors, officers and beneficial owners of more than 10% of the shares of our Class A Common Stock face as a result of the provisions of Section 16 of the Exchange Act.

The primary detriments of the Merger to Sprint include the fact that all of the risk of any possible decrease in the earnings, growth or value of Clearwire following the Merger will be borne by Sprint and any additional investors permitted by them. Additionally, the investment of Sprint and any additional investors permitted by them in Clearwire will be illiquid, with no public trading market for such securities.

After the completion of the Merger, Sprint’s interest in Clearwire’s net book value and net loss or income will increase from approximately 50.2% to 100%. Based on Clearwire’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012, the following table shows what Sprint’s interests in Clearwire’s net loss was for the fiscal year ended December 31, 2012 and Clearwire’s book value as of December 31, 2012, and what those interests would have been had the Merger been completed as of that date.

 

           Sprint’s Interest
Before the Merger
    Sprint’s Interest After
the Merger
 
     Total     Dollars     Percent     Dollars     Percent  
     (dollars in millions)  

Net loss for the fiscal year ended December 31, 2012

   $ (1,912.1   $ (959.9     50.2   $ (1,912.1     100

Net book value as of December 31, 2012

   $ 1,881.6      $ 944.6        50.2   $ 1,881.6        100

Our Class A Common Stock is currently registered under the Exchange Act and is quoted on the NASDAQ under the symbol “CLWR.” As a result of the Merger, Clearwire will become a private company, and there will be no public market for its Common Stock. After the Merger, Class A Common Stock will cease to be quoted on the NASDAQ, and price quotations with respect to sales of shares of Class A Common Stock in the public market will no longer be available. In addition, registration of Class A Common Stock under the Exchange Act will be terminated, although we will still be required to comply with the reporting requirements of the Exchange Act (except for those of Section 16 thereof) to the extent required by any indenture governing our outstanding indebtedness at or after the closing of the Merger.

As a result of the Merger, the directors of Merger Sub will become the directors of the surviving corporation following the Merger, and we expect that the officers of Merger Sub will become the officers of the surviving corporation following the Merger. At the effective time of the Merger, the Company’s Certificate of Incorporation and Bylaws, will each be amended and restated in their entirety to read as the certificate of incorporation and bylaws of Merger Sub as in effect immediately prior to the effective time of the Merger, except that in each case the name of the surviving corporation will remain “Clearwire Corporation,” and as so amended and restated will be the certificate of incorporation and bylaws of the surviving corporation.

 

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Considerations Relating to the Merger; Certain Effects on the Company if the Merger is not Completed

Set forth below are various risks relating to the Merger and certain effects on the Company if the Merger is not completed. The following is not intended to be an exhaustive list of the risks relating to the Merger or effects on the Company if the Merger is not completed, and should be read in conjunction with the other information in this proxy statement. In addition, you should refer to the section entitled “Risk Factors” in our annual report on Form 10-K for the fiscal year ended December 31, 2012, and other risk factors detailed from time to time in the Company’s reports filed with the SEC and incorporated by reference in this proxy statement for risks relating to our business.

The fairness opinion delivered by Centerview will not reflect changes in circumstances between signing the Merger Agreement and the completion of the Merger.

The Special Committee of Clearwire has not obtained an updated fairness opinion as of the date of this proxy statement from Centerview, financial advisor to the Special Committee. Changes in the operations and prospects of Sprint or Clearwire, general market and economic conditions and other factors that may be beyond the control of Sprint or Clearwire, and on which the fairness opinion was based, may alter the value of Clearwire or the price of Clearwire’s Class A Common Stock by the time the Merger is completed. The Centerview opinion does not speak as of the time the Merger will be completed or as of any date other than the date of the opinion. The Centerview opinion only addresses, as of the date of such opinion, the fairness, from a financial point of view, of the Merger Consideration to be paid to the holders of Clearwire’s Class A Common Stock (other than Sprint, SoftBank, or any of their respective affiliates). The opinion is attached to this proxy statement as Annex J. For a further discussion of the Centerview opinion and a summary of the material financial analyses performed in connection with rendering the Centerview opinion, see “Special Factors—Opinion of Financial Advisor to the Special Committee.”

The fairness opinion delivered by Evercore will not reflect changes in circumstances between signing the Merger Agreement and the completion of the Merger.

Clearwire’s board of directors has not obtained an updated fairness opinion as of the date of this proxy statement from Evercore, Clearwire’s financial advisor. Changes in the operations and prospects of Sprint or Clearwire, general market and economic conditions and other factors that may be beyond the control of Sprint or Clearwire, and on which the fairness opinion was based, may alter the value of Clearwire or the price of Clearwire’s Class A Common Stock by the time the Merger is completed. The Evercore opinion does not speak as of the time the Merger will be completed or as of any date other than the date of the opinion. The Evercore opinion only addresses, as of the date of such opinion, the fairness, from a financial point of view, of the Merger Consideration to be paid to the holders of Clearwire’s Class A Common Stock (other than Sprint, SoftBank, or any of their respective affiliates). The opinion is attached to this proxy statement as Annex K. For a further discussion of the Evercore opinion and a summary of the material financial analyses performed in connection with rendering the Evercore opinion, see “Special Factors—Opinion of Financial Advisor to the Board of Directors.”

The Merger is subject to certain regulatory conditions that may not be satisfied on a timely basis, or at all.

Completion of the Merger is conditioned upon, among other matters, certain communications regulatory approvals. As described in “The Merger—Regulatory Matters,” Sprint and certain of its affiliates have filed applications for approvals with the FCC. There can be no assurance that regulatory approvals will be obtained or that such approvals will not be materially conditioned or delayed. If these regulatory approvals are not obtained, or if they are materially conditioned or delayed, it could result in the termination of the Merger Agreement and abandonment of the Merger. If the Merger is not completed on a timely basis, or at all, our business could be adversely affected. See “—Failure to complete the Merger could negatively impact our business and the market

 

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price of our Class A Common Stock, and substantial doubt may arise regarding our ability to continue as a going concern.”

Uncertainties associated with the Merger may cause us to lose key customers and key personnel.

As a result of the uncertainty surrounding the conduct of our business following the completion of the Merger, we may lose key customers and our employees may be uncertain about their future roles and relationships with us following the completion of the Merger, which may adversely affect our ability to retain them.

The consummation of the Merger is conditioned on the consummation of the Sprint-SoftBank Merger or an alternative transaction.

Sprint‘s obligation to complete the Merger is conditioned upon either the consummation of the Sprint-SoftBank Merger or, if Sprint has terminated the Sprint-SoftBank Merger Agreement in order to enter into a definitive agreement with respect to an alternative transaction, the consummation of such alternative transaction. This condition will be deemed satisfied if Sprint has a right to terminate the Merger Agreement because the Sprint-SoftBank Merger Agreement is terminated (except in order for Sprint to enter into a definitive agreement with respect to an alternative transaction) and Sprint does not exercise such termination right within 10 business days following termination of the Sprint-SoftBank Merger Agreement. There can be no assurance that the Sprint-SoftBank Merger or an alternative transaction will be consummated, or that this condition of the Merger Agreement will otherwise be satisfied or waived.

If the Merger Agreement is terminated because it is not adopted by our stockholders, then under certain circumstances Sprint may gain significant control over us.

If the Merger Agreement is terminated because it is not adopted by our stockholders, and either the Sprint-SoftBank Merger has been consummated or the Sprint-SoftBank Merger has been terminated in order for Sprint to enter into an alternative transaction with respect to the Sprint-SoftBank Merger and such alternative transaction has been consummated, then Sprint will gain significant control over Clearwire by increasing its majority stake in the Company to approximately 63.1% pursuant to the Agreement Regarding Right of First Offer, by and among Intel Capital Wireless Investment Corporation 2008A, which we refer to as Intel 2008A, Intel Capital Corporation, Intel Capital (Cayman) Corporation, Comcast Wireless Investment, LLC and BHN Spectrum, which we collectively refer to as the Voting Agreement Stockholders, Sprint and Sprint HoldCo, which agreement we refer to as the Agreement Regarding Right of First Offer. In such case, pursuant to the Agreement Regarding Right of First Offer, each Voting Agreement Stockholder will offer to sell to Sprint HoldCo, and Sprint HoldCo will purchase all of the equity securities of Clearwire and Clearwire Communications that such Voting Agreement Stockholder owns at a price per share equal to the Merger Consideration, as more fully described in “The Agreement Regarding Right of First Offer.”

Failure to complete the Merger could negatively impact our business and the market price of our Class A Common Stock, and substantial doubt may arise regarding our ability to continue as a going concern.

If the Merger is not completed for any reason, we will be subject to a number of material risks, including the following:

 

   

the disruption to our business resulting from the announcement of the signing of the Merger Agreement, the diversion of management’s attention from our day-to-day business and the substantial restrictions imposed by the Merger Agreement on the operation of our business during the period before the completion of the Merger may make it difficult for us to achieve our business goals if the Merger does not occur; and

 

   

the market price of our Class A Common Stock will likely decline to the extent that the current market price of our Class A Common Stock reflects a market assumption that the Merger will be completed.

 

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If the Merger is not completed, we may be forced to explore all available alternatives, and substantial doubt may arise regarding the Company’s ability to continue as a going concern. If substantial doubt arises regarding the Company’s ability to continue as a going concern, the Company may have to liquidate its assets, and it may realize significantly less for its assets than the values at which they are carried on its financial statements. Excluding any financing by Sprint pursuant to the Note Purchase Agreement, the Company currently has capital resources that it believes to be sufficient to support its operations into approximately the fourth quarter of 2013. If the Merger is not completed, the Company may not be able to raise sufficient capital to continue its existing operations beyond that time. The Company cannot assure you that any actions that the Company takes would raise or generate sufficient capital to fully address the uncertainties of its financial position. In addition, our board of directors is actively considering whether to not make the June 1, 2013, interest payment on our approximately $4.5 billion of outstanding debt.

The Company may be unable to realize value from its assets and discharge its liabilities in the normal course of business. If the Company is unable to settle its obligations to its creditors or if it is unable to obtain financing to support continued satisfaction of its debt obligations, the Company would likely be in default under its existing notes and other contractual obligations and may need to pursue financial restructuring, which could include seeking protection under the provisions of the United States Bankruptcy Code. In that event, the Company may seek to reorganize its business, or a trustee appointed by the court may be required to liquidate its assets. In either of these events, whether the stockholders would receive any value for their shares or a value equal to or in excess of the Merger Consideration is highly uncertain. We can give you no assurance that, in the event the Company is required to liquidate under the United States Bankruptcy Code, stockholders would receive any value for their shares or value equal to or in excess of the Merger Consideration.

If the Merger is not completed, approval of the Charter Amendment Proposal and the NASDAQ Authorization Proposal has potential anti-takeover and dilutive effects.

If the Charter Amendment Proposal is approved by our stockholders, the number of authorized but unissued and unreserved shares of Common Stock available for future issuance will increase. In addition, if the NASDAQ Authorization Proposal is approved by our stockholders, we will be able to issue Common Stock equal to 20% or more of the Common Stock or 20% or more of the voting power outstanding before the issuance for less than the greater of book value or market value of the stock for the purpose of exchanging the Notes we have issued to Sprint under the Note Purchase Agreement.

Although neither the Charter Amendment Proposal nor the NASDAQ Authorization Proposal are intended to have any anti-takeover effect, our stockholders should note that the availability of additional authorized and unissued shares of Common Stock could make any attempt to gain control of the Company or the Company’s Board of Directors more difficult or time consuming, and the availability of additional authorized and unissued shares might make it more difficult to remove management. Although the Board of Directors currently has no intention of doing so, shares of Common Stock could be issued by the Board of Directors to dilute the percentage of Common Stock owned by a significant stockholder and increase the cost of, or the number of, voting shares necessary to acquire control of the Board of Directors or to meet the voting requirements imposed by applicable law with respect to a merger or other business combinations involving the Company.

Prospective Financial Information

The Company does not as a matter of course make public projections as to future sales, earnings, or other results. However, the management of the Company has prepared the prospective financial information set forth below that was made available to the Special Committee, the Company’s board of directors and the Special Committee’s and the Company’s financial advisors in connection with the approval of the Merger Agreement. The accompanying prospective financial information was not prepared with a view toward public disclosure or with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information, but, in the view of the Company’s management, was prepared on a reasonable basis, reflects the best currently available estimates and judgments at the time of

 

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preparation, and presents, to the best of management’s knowledge and belief, the expected course of action and the expected future financial performance of the Company at the time of preparation and have not been updated since they were prepared. However, this information is not fact and should not be relied upon as being necessarily indicative of future results, and readers of this proxy statement are cautioned not to place undue reliance on the prospective financial information.

Neither the Company’s independent auditors, nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the prospective financial information.

The prospective financial information is subjective in many respects and reflects numerous judgments, estimates and assumptions that are inherently uncertain, many of which are beyond the Company’s control, including estimates and assumptions regarding industry performance and general business, economic, regulatory, market and financial conditions, as well as other future events. Important factors that may affect actual results and cause this information not to be accurate include, but are not limited to, risks and uncertainties relating to the Company’s business, our dependence on wholesale partners, suppliers and third-party service providers, competition, conflicts of interest, the regulatory environment, data security breaches, and capital adequacy and other factors described in “Cautionary Statement Concerning Forward-Looking Information” in this proxy statement and also described in the section entitled “Risk Factors” of our annual report on Form 10-K for the year ended December 31, 2012 and other risk factors detailed from time to time in the Company’s reports filed with the SEC and incorporated by reference in this proxy statement. In addition, the prospective financial information does not reflect any events that could affect the Company’s prospects, changes in general business or economic conditions or any other transaction or event that has occurred since, or that may occur and that was not anticipated at, the time the financial projections were prepared. The prospective financial information also covers multiple years and by its nature becomes subject to greater uncertainty with each successive year. Furthermore, and for the same reasons, this information should not be construed as commentary by the Company’s management as to how the Company’s management expects the Company’s actual results to compare to research analysts’ estimates. There can be no assurance that the prospective financial information is or will be accurate or that the Company’s future financial results will not vary, even materially, from this information. None of the Company, its affiliates, representatives or agents undertakes any obligation to update or otherwise to revise the prospective financial information to reflect circumstances existing or arising after the date such information was generated or to reflect the occurrence of future events, even if any or all of the underlying estimates and assumptions are shown to be in error.

Set forth below is prospective financial information based on two sets of financial projections of the Company for fiscal years 2012 through 2020 prepared by management of the Company: (1) the Single-Customer Case, which we refer to as the SCC, which assumes Sprint will remain the Company’s only major wholesale customer, and (2) the Multi-Customer Case, which we refer to as the MCC, which assumes the Company would achieve substantial non-Sprint network traffic from a second major wholesale partner beginning in 2014. The Company, however, does not expect to be able to obtain a second significant wholesale customer and has been unable to obtain a second significant wholesale customer in spite of its efforts to do so for the last two years. See “—Background of the Merger.”

 

Single-Customer Case

  12-‘20
CAGR
    2011A   2012E   2013E   2014E   2015E   2016E   2017E   2018E   2019E   2020E  
    (in millions)

Revenue

    $ 1,253       $ 1,262       $ 1,191       $ 839       $ 1,211       $ 1,714       $ 2,101       $ 2,434       $ 2,749       $ 2,904         11.0 %

Adjusted EBITDA (1)

    $ (305 )     $ (168 )     $ (267 )     $ (717 )     $ (387 )     $ 106       $ 745       $ 1,287       $ 1,554       $ 1,640         NM  

% Margin

      NM         NM         NM         NM         NM         6.2 %       35.5 %       52.9 %       56.5 %       56.5 %    

Capital expenditures (2)

    $ 220       $ 157       $ 293       $ 317       $ 154       $ 171       $ 238       $ 243       $ 279       $ 298         8.4 %

Interest Expense

    $ (477 )     $ (514 )     $ (512 )     $ (511 )     $ (511 )     $ (510 )     $ (510 )     $ (510 )     $ (510 )     $ (510 )       -0.1 %

Free Cash Flow (3)

    $ (1,368 )     $ (624 )     $ (1,065 )     $ (1,545 )     $ (1,267 )     $ (641 )     $ (57 )     $ 487       $ 725       $ 812         NM  

Cash Shortfall (4)

    $ 1,108       $ 828       $ (301 )     $ (1,882 )     $ (3,181 )     $ (3,845 )     $ (3,932 )     $ (3,481 )     $ (2,794 )     $ (2,021 )    

 

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Multi-Customer Case

  12-‘20
CAGR
    2011A   2012E   2013E   2014E   2015E   2016E   2017E   2018E   2019E   2020E  
    (in millions)

Revenue

    $ 1,253       $ 1,262       $ 1,207       $ 1,082       $ 2,351       $ 3,905       $ 5,098       $ 6,145       $ 7,141       $ 7,447         24.8 %

Adjusted EBITDA (1)

    $ (305 )     $ (168 )     $ (280 )     $ (482 )     $ 748       $ 2,275       $ 3,696       $ 4,871       $ 5,763       $ 5,940         NM  

% Margin

      NM         NM         NM         NM         31.8 %       58.3 %       72.5 %       79.3 %       80.7 %       79.8 %    

Capital expenditures (2)

    $ 220       $ 157       $ 327       $ 294       $ 235       $ 390       $ 510       $ 614       $ 714       $ 745         21.5 %

Interest Expense

    $ (477 )     $ (514 )     $ (512 )     $ (511 )     $ (511 )     $ (510 )     $ (510 )     $ (510 )     $ (510 )     $ (510 )       -0.1 %

Free Cash Flow (3)

    $ (1,368 )     $ (624 )     $ (1,113 )     $ (1,269 )     $ (389 )     $ 1,200       $ 2,524       $ 2,184       $ 2,600       $ 2,768         NM  

Cash Shortfall (4)

    $ 1,108       $ 828       $ (350 )     $ (1,654 )     $ (2,075 )     $ (898 )     $ 1,596       $ 3,743       $ 6,306       $ 9,036      

 

(1) Adjusted EBITDA is defined as consolidated operating loss less depreciation and amortization expenses, non-cash expenses related to operating leases (towers, spectrum leases and buildings), stock-based compensation expense, loss from abandonment of network and other assets, charges for differences between recorded amounts and the results of physical counts, and charges for excessive and obsolete network equipment and CPE inventory.
(2) Capital expenditures include expenditures for the improvement and maintenance of our existing networks and for the deployment of our LTE network.
(3) Free Cash Flow is defined as Adjusted EBITDA less capital expenditures, changes in net working capital, cash taxes and interest.
(4) Cash shortfall is defined as cumulative Free Cash Flow adjusted for estimated 2012 year end cash balance of $828 million, and assumes our debt is refinanced at maturity at existing rates and there is no incremental debt or other funding other than vendor financing.

There can be no assurance that any results reflected in any prospective financial information will be, or are likely to be, realized, or that the assumptions on which the prospective financial information is based will prove to be, or are likely to be, correct. You are cautioned not to place undue reliance on this information in making a decision as to whether to vote for the Merger Agreement Proposal or any of the other proposals in this proxy statement.

Interests of Certain Persons in the Merger

In considering the recommendation of the board of directors that you vote to approve the Merger Agreement Proposal and approve the other proposals described herein, you should be aware that our directors and officers, including the directors who made up the Special Committee, have interests in the Merger that are different from, or in addition to, your interests as a stockholder. The Special Committee and the board of directors were aware of and considered these interests, among other matters, in evaluating and negotiating the Merger Agreement and the Merger, and in recommending that the Merger Agreement be adopted by our stockholders. For the purposes of all of the agreements and plans described below, the completion of the transactions contemplated by the Merger Agreement will constitute a change in control.

Treatment of Clearwire Stock Options and Other Equity-Based Awards

Clearwire Stock Options

At the effective time of the Merger, each option to purchase shares of Class A Common Stock under any stock option plan or stock compensation plan, program or similar arrangement or any individual employment agreement, including, without limitation, the Stock Plans, outstanding and unexercised immediately prior to the effective time of the Merger, whether or not then vested, will be cancelled in exchange for the right to receive, in cash and for each share of our Common Stock subject to such option, the amount, if any, by which the Merger Consideration, without interest, exceeds the exercise price of such option, less applicable withholding taxes, which amount the Merger Agreement provides will be paid by the surviving corporation as promptly as reasonably practicable following the effective time of the Merger (and in all events no later than the later of (A) 10 business days following the effective time of the Merger and (B) the last day of the surviving corporation’s first regular payroll cycle following the closing of the Merger). Any such option with a per share exercise price equal to or greater than the Merger Consideration will be cancelled as of the effective time of the

 

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Merger for no consideration. All outstanding options held by executive officers and directors have a per share exercise price greater than the Merger Consideration and will be cancelled as of the effective time of the Merger for no consideration.

Clearwire Director Restricted Stock Units

At the effective time of the Merger, each Director RSU will be cancelled in exchange for the right to receive a lump sum cash payment equal to the product of the Merger Consideration, without interest, and the number of shares of Class A Common Stock subject to such Director RSU. The Merger Agreement provides that all such payments with respect to each Director RSU will be made by the surviving corporation as promptly as reasonably practicable following the effective time of the Merger (and in all events no later than the later of (A) 10 business days following the effective time of the Merger and (B) the last day of the surviving corporation’s first regular payroll cycle following the closing of the Merger).

Clearwire Non-Director Restricted Stock Units

At the effective time of the Merger, each Unvested RSU (which was granted prior to December 17, 2012) will be converted into a Restricted Cash Account. At the effective time of the Merger, each holder of a Restricted Cash Account will receive a lump sum cash payment equal to 50% of the Restricted Cash Account balance, less applicable tax withholdings, by the surviving corporation which the Merger Agreement provides will be paid as promptly as reasonably practicable following the effective time of the Merger (and in all events no later than the later of (A) 10 business days following the effective time of the Merger and (B) the last day of the surviving corporation’s first regular payroll cycle following the closing of the Merger). The Merger Agreement provides that at and following the effective time of the Merger, the remaining balance of the Restricted Cash Account will vest and be paid, subject to the original terms and conditions of the corresponding Unvested RSU, on the earlier of:

 

   

the original vesting schedule in accordance with the terms set forth in the applicable award agreement to the corresponding Unvested RSU; or

 

   

the one year anniversary of the effective time of the Merger; provided, however, that the holder of a Restricted Cash Account will be paid the remaining balance in the Restricted Cash Account upon either the holder’s involuntary termination of employment without “Cause” or due to death or “Disability” or the holder’s resignation from employment with “Good Reason” (as such terms are defined in the Sprint 2007 Omnibus Incentive Plan); provided, further, that the Merger Agreement provides that all such payments will be made, less applicable tax withholdings, as promptly as reasonably practicable following the applicable payment date (and in all events no later than the later of (1) 3 business days following the applicable payment date and (2) the last day of the surviving corporation’s first regular payroll cycle following the applicable payment date).

Notwithstanding the foregoing, with respect to Unvested RSUs which are subject to Section 409A of the Code, at and following the effective time of the Merger, the Restricted Cash Account will be paid on the original schedule in accordance with the terms set forth in the applicable award agreement to the corresponding Unvested RSU; provided that any such awards will vest in accordance with the Merger Agreement to the extent such vesting schedule is more favorable to the holder of such Restricted Cash Account.

New Equity Grants

At the effective time of the Merger, each restricted stock unit granted after December 17, 2012 under a Stock Plan that is not a restricted stock unit held by a non-employee member of the Clearwire board of directors and that is outstanding immediately prior to the effective time of the Merger, each of which we refer to as an Unvested 2013 RSU, will be converted into a right to receive a cash payment equal to the product of the Merger Consideration, without interest, and the number of shares of Class A Common Stock subject to such Unvested

 

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2013 RSU, each of which we refer to as a 2013 Restricted Cash Account. This 2013 Restricted Cash Account will be unvested and will vest and be paid out in accordance with the original vesting conditions of the award. A participant who does participate in our Executive Continuity Plan (as defined below) will vest and receive an enhanced pro rated portion of the 2013 Restricted Cash Account in the event of a termination of the participant’s employment by Clearwire without “Cause” by the participant for “Good Reason” or due to the participant’s death or Disability (as such terms are defined in the Executive Continuity Plan). The enhanced pro-ration means a credit of one extra year of service. Other than as described above, a participant who terminates employment will forfeit the unvested balance of the 2013 Restricted Cash Account.

At the effective time of the Merger, each restricted stock unit granted after December 17, 2012 under a Clearwire Stock Plan that is held by a non-employee member of the Clearwire board of directors, each of which we refer to as a 2013 Director RSU, will be cancelled in exchange for the right to receive a lump sum cash payment equal to a pro rated portion of the product of the Merger Consideration, without interest, and the number of shares of Class A Common Stock subject to such 2013 Director RSU, the pro rated portion equal to the percentage of the vesting of period of such award that is served by the director prior to the effective time of the Merger.

Stock Options and Restricted Share Units to be Cashed Out in the Merger

The following table sets forth, the number shares of Class A Common Stock of Clearwire and the number of restricted stock units held by directors and executive officers and the cash proceeds that each of Clearwire’s directors and executive officers would receive at the closing of the Merger in respect of the cash-out of equity-based awards assuming continued service after the Merger and assuming the closing of the Merger occurs on October 15, 2013.

 

     Unvested Equity Awards
That Will Not Vest Upon
Completion of the Merger
     Unvested Equity Awards
That Will Vest Upon
Completion of the Merger
     Vested Equity Awards and
Owned Shares
     Total Cash
Payment With
Respect to All
Equity (1)
 

Executive Officers

   Shares (2)      Value      Shares (3)      Value (4)      Shares     Value (5)         

Prusch, Erik E.

     1,430,976       $ 4,249,999         2,312,553       $ 7,743,282         618,934      $ 1,838,234       $ 13,831,515   

Cochran, Hope F.

     353,536       $ 1,050,002         674,915       $ 2,241,998         303,438      $ 901,211       $ 4,193,210   

Draper, Dow

     286,196       $ 850,002         474,653       $ 1,584,719         152,960      $ 454,291       $ 2,889,013   

Ednie, Steve

     138,048       $ 410,003         300,134       $ 991,398         66,271      $ 196,825       $ 1,598,225   

Hodder, Broady R.

     232,324       $ 690,002         494,841       $ 1,632,178         246,139      $ 731,033       $ 3,053,213   

Saw, John C.B.

     387,206       $ 1,150,002         701,545       $ 2,371,089         309,435      $ 919,022       $ 4,440,112   

Stroberg, Don

     235,691       $ 700,002         474,909       $ 1,585,480         581,218      $ 1,726,217       $ 4,011,699   

Non-Employee Directors

                 Shares (3)      Value      Shares     Value (5)         

Stanton, John W.

           184,126       $ 546,854         4,751,943 (6)    $ 14,113,271       $ 14,660,125   

Blessing, William R.

           42,152       $ 125,191         89,330      $ 265,310       $ 390,502   

Chatterley, Bruce A.

           50,402       $ 149,694         71,080      $ 211,108       $ 360,802   

Cinali, Mufit

           42,152       $ 125,191         79,330      $ 235,610       $ 360,802   

Collazo, Jose A.

           33,652       $ 99,946         184,720      $ 548,618       $ 648,565   

Eslambolchi, Hossein

           42,152       $ 125,191         79,330      $ 235,610       $ 360,802   

Gorton, Slade

           150,613       $ 447,321         —        $ —         $ 447,321   

Hersch, Dennis S.

           33,652       $ 99,946         126,720      $ 376,358       $ 476,305   

McAndrews, Brian P.

           33,652       $ 99,946         126,720 (7)    $ 376,358       $ 476,305   

Rae, Kathleen H.

           63,402       $ 188,304         109,543      $ 325,343       $ 513,647   

Schell, Theodore H.

           33,652       $ 99,946         146,720      $ 435,758       $ 535,705   

Vogel, Jennifer L.

           50,402       $ 149,694         71,080      $ 211,108       $ 360,802   

 

(1) All outstanding options have a per share exercise price greater than the Merger Consideration and will be cancelled as of the effective time of the Merger for no consideration.
(2)

These restricted stock units (RSUs) were granted on March 1, 2013 and will vest in four equal annual installments beginning on March 1, 2014. At the effective time of the merger, each of these RSUs will be converted into a right to receive a cash payment of $2.97 per share upon vesting, the aggregate amount of which we refer to as a 2013 Restricted Cash Account. The 2013 Restricted Cash Account will vest in

 

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  accordance with the original vesting schedule of the RSUs, subject to partial accelerated vesting in the event of certain terminations of the reporting person’s employment.
(3) This figure represents the unvested shares as of March 8, 2013 that were granted prior to December 17, 2012, and the prorated value of grants that were approved on March 1, 2013 that will vest upon effectiveness of the merger in a pro-rated amount based on days of service.
(4) Comprised of full acceleration of stock options and RSUs, assumes a stock price of $2.97 and the target value of Performance RSUs granted on February 12, 2012 and to be released on March 1, 2014. The summary below shows the estimated value for such Performance RSUs. However, the number of shares subject to the Performance RSUs is not currently determinable. Mr. Prusch - $875,000; Ms. Cochran - $237,500; Mr. Draper - $175,000; Mr. Hodder - $162,500; Dr. Saw - $287,500; Mr. Stroberg - $175,000; Mr. Ednie - $100,000
(5) Assumes a stock price of $2.97. Prior to closing, additional shares may become exercisable or be sold in ordinary course.
(6) Includes 588,235 shares of Class A Common Stock issued in the name of CW Investments Holdings LLC, an affiliate of the stockholder, 100,000 shares of Class A Common Stock issued in the name of The Aven Foundation, 375,000 shares of Class A Common Stock issued in the name of The Stanton Family Trust, and 100 shares held in the name of the stockholder’s son. Mr. Stanton shares control of The Aven Foundation and disclaims beneficial ownership of the securities held by this entity. Mr. Stanton shares control of The Stanton Family Trust and disclaims beneficial ownership of these securities except to the extent of his pecuniary interest and investment control therein.
(7) Includes 40 shares of Class A Common Stock issued in the name of LKM Investments LLC, an entity managed by the stockholder.

Executive Continuity Plan

Each executive officer participates in the Company’s 2010 Executive Continuity Plan, which will be referred to as the Executive Continuity Plan. Under the Executive Continuity Plan, Mr. Prusch, as Chief Executive Officer, would be entitled to receive cash severance payments equal to 200% of targeted annual compensation (base salary and target bonus), and the other continuing executive officers would be entitled to receive cash severance payments equal to 150% of targeted annual compensation (base salary and target bonus), if terminated by Clearwire without “Cause” or the executive officer terminates his or her employment with “Good Reason” (as defined in Mr. Prusch’s offer letter, and as defined in the Executive Continuity Plan for the other executive officers) (1) within twenty-four months following a “Change in Control” (as defined in the Executive Continuity Plan) of Clearwire or (2) in the period between the commencement of a Change in Control transaction and the closing of such transaction, if the termination event occurred due to the request or instruction of a third party attempting to effect a Change in Control. These executive officers would also be entitled to receive:

 

   

Accelerated vesting on all unvested equity grants, with one year to exercise vested options; and

 

   

Continuation of health care coverage, at no increased cost, for twenty-four months for Mr. Prusch, and for twelve months for the other executive officers, following termination, unless and until such time as an executive officer is otherwise eligible for health care coverage that is substantially similar in cost and in level of benefits provided, from a successor employer or otherwise.

To receive payments under the terms of the Executive Continuity Plan, an executive officer must execute a release and non-compete agreement with the Company upon termination of his or her employment with the length of the non-compete agreements corresponding to the amount of payments to be received. The cash payments would be paid out in regular installments over a two-year period for Mr. Prusch, and an eighteen month period for the other executive officers, which is equal to the term of the non-competition agreements to which the executive officers would be bound.

If the amounts payable to an executive officer under the Executive Continuity Plan result in the executive officer’s becoming liable for the payment of any excise taxes pursuant to Section 4999 of the Internal Revenue

 

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Code, the executive officer will receive the greater, on an after-tax basis, of (a) the severance benefits payable or (b) the maximum amount of severance benefits that can be paid without triggering the imposition of the Section 280G excise tax under the Internal Revenue Code.

The cash severance amounts payable to the named executive officers under the Executive Continuity Plan are described on the table under “Golden Parachute Compensation.” Using the same assumption as described on the table under “Golden Parachute Compensation,” the cash severance amounts payable to Don Stroberg and Steve Ednie (the other executive officers that are not named executive officers) under the Executive Continuity Plan are $804,375 and $576,367, respectively.

2013 Bonus

The 2013 bonus for executive officers may, in certain cases, be more favorable to certain of executive officers than our historic annual bonus program. Clearwire may establish a 2013 bonus plan with two 6-month performance periods. Clearwire will otherwise establish the performance measures, targets, maximums and performance award levels in the ordinary course of business consistent with past practices for the period from January 1, 2013 through June 30, 2013. If the closing of the Merger occurs prior to June 30, 2013, then the compensation committee of Clearwire’s board of directors may determine the actual achievement of the performance measure(s) based on the most recent forecast available at that time. Clearwire (or if the closing of the Merger has occurred, Sprint) will establish the performance measures, targets, maximums and performance award levels for the period from July 1, 2013 through December 31, 2013. The Merger Agreement provides that any bonuses earned under the 2013 bonus plan will be paid in the ordinary course of business consistent with past practice in 2014, but in no event later than February 15, 2014. The aggregate amount of bonus opportunities under the 2013 bonus plan will not exceed $18 million. To the extent an employee that is a participant in the Executive Continuity Plan resigns with “Good Reason” (as defined in the Executive Continuity Plan) or is involuntarily terminated by Sprint without “Cause” (as defined in the Executive Continuity Plan) or due to such employee’s death or “Disability” (as defined in the Executive Continuity Plan) before payment of any bonuses earned, and (A) if the employee is so terminated after the completion of a performance period, such employee will be entitled to payment of his actual performance bonus for such performance period, if such 2013 performance bonus has not yet been paid, and (B) if the employee is so terminated during a performance period, such employee will be entitled to payment of a pro-rata portion of his performance bonus at target payout, based on the number of days worked in such performance period through such employee’s termination date; in the case of (A) and (B) above, such payment will be made in all events no later than the later of (x) ten (10) business days following such employee’s termination of employment, and (y) the last day of the surviving corporation’s first regular payroll cycle following such termination of employment. An employee will be entitled to a payment pursuant to (A) and (B) above, if his termination occurs both during and after a performance period and he has not received any 2013 performance bonus payment at the time of his termination.

Indemnification; Directors’ and Officers’ Insurance

For a period of six years after the effective time of the Merger, pursuant to the Merger Agreement, the surviving corporation will continue the indemnification, expense advancement, and exculpation of our present and former officers and directors as provided in our Certificate of Incorporation or Bylaws or any other agreement in effect on December 17, 2012.

Clearwire Golden Parachute Compensation

The following table sets forth the information required by Item 402(t) of Regulation S-K regarding certain compensation which each of the named executive officers of Clearwire may receive that is based on or that otherwise relates to the Merger, as described under “—Interests of Certain Persons in the Merger.” This compensation is referred to as “golden parachute” compensation. The “golden parachute” compensation payable to the named executive officers of Clearwire is subject to a non-binding advisory vote of Clearwire stockholders, as described under “Merger-Related Executive Compensation Arrangements.” Please note that the amounts

 

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indicated below are estimates based on multiple assumptions that may or may not actually occur, including assumptions described in this proxy statement/prospectus. As a result, the actual amounts, if any, to be received by a named executive officer may differ from the amounts set forth below. In preparing the table, Clearwire made the following assumptions:

 

   

the closing of the Merger occurs on October 15, 2013, and

 

   

the employment of the named executive officers who are employed by Clearwire at the time of the Merger closing will terminate immediately after the Merger on October 15, 2013, either by Clearwire without cause or by the named executive officer for good reason.

Golden Parachute Compensation

 

Name

   Cash ($)(1)      Equity ($)(2)      Pension/
NQDC
($)
     Perquisites/
Benefits
($)(3)
     Tax
Reimbursement
($)(4)
     Other
($)
     Total ($)  

Prusch, Erik E.

   $ 3,046,495       $ 7,743,282       $ 0       $ 38,680       $ 0       $ 0       $ 10,828,457   

Cochran, Hope F.

   $ 1,113,946       $ 2,241,998       $ 0       $ 19,340       $ 0       $ 0       $ 3,375,284   

Draper, Dow

   $ 836,551       $ 1,570,760       $ 0       $ 19,340       $ 0       $ 0       $ 2,426,651   

Hodder, Broady R.

   $ 828,121       $ 1,632,178       $ 0       $ 19,340       $ 0       $ 0       $ 2,479,639   

Saw, John C.B.

   $ 1,127,421       $ 2,371,089       $ 0       $ 19,340       $ 0       $ 0       $ 3,517,849   

 

(1) The aggregate dollar value of a cash severance payment to Mr. Prusch is comprised of two times the sum of his annual base salary of $764,623.20 and target bonus of $764,623.20 as of March 8, 2013. The aggregate dollar value of a cash severance payment for Ms. Cochran is comprised of 1.5 times the sum of her annual base salary of $424,360.04 and target bonus of $318,270.03 as of March 8, 2013; the aggregate dollar value of a cash severance payment for Mr. Draper is comprised of 1.5 times the sum of his annual base salary of $338,000.00 and $219,700.00 as of March 8, 2013; the aggregate dollar value of a cash severance payment for Mr. Hodder is comprised of 1.5 times the sum of his annual base salary of $345,050.16 and target bonus of $207,030.10 as of March 8, 2013 and the aggregate dollar value of a cash severance payment for Dr. Saw is comprised of 1.5 times the sum of his annual base salary of $455,523.12 and target bonus of $296,090.03 as of March 8, 2013.
(2) Comprised of full acceleration of stock spread and RSUs, assumes a stock price of $2.97 and the target value of Performance RSUs. The equity value for Mr. Prusch is comprised of the full acceleration value of stock spread and RSUs at $6,868,282 and the value of Performance RSUs deemed earned at 100% of target of $875,000. The equity value for Ms. Cochran is comprised of the full acceleration value of stock spread and RSUs of $2,004,498 and the value of Performance RSUs deemed earned at 100% of target of $237,500. The equity value for Mr. Draper is comprised of the full acceleration value of stock spread and RSUs of $1,395,760 and the value of Performance RSUs deemed earned at 100% of target of $175,000. The equity value for Mr. Hodder is comprised of the full acceleration value of stock spread and RSUs of $1,469,678 and the value of Performance RSUs deemed earned at 100% of target of $162,500. The equity value for Dr. Saw is comprised of the full acceleration value of stock spread and RSUs of $2,083,589 and the value of Performance RSUs deemed earned at 100% of target of $287,500.
(3) The health and welfare benefit value is comprised of medical and dental coverage based on the rates as of January 1, 2013. The dollar value of Mr. Prusch's health and welfare benefit coverage is comprised of two times the annual medical rate of $17,605 plus the annual dental rate of $1,735. The dollar value of Ms. Cochran's health and welfare benefit coverage is comprised of one times the annual medical rate of $17,605 plus the annual dental rate of $1,735. The dollar value of Mr. Draper's health and welfare benefit coverage is comprised of one times the annual medical rate of $17,605 plus the annual dental rate of $1,735. The dollar value of Mr. Hodder's health and welfare benefit coverage is comprised of one times the annual medical rate of $17,605 plus the annual dental rate of $1,735. The dollar value of Dr. Saw's health and welfare benefit coverage is comprised of one times the annual medical rate of $17,605 plus the annual dental rate of $1,735.
(4) None of the named executive officers are entitled to tax reimbursements.

 

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Sprint Golden Parachute Compensation

Pursuant to the information required by Item 402(t) of Regulation S-K, the named executive officers of Sprint will not receive any compensation that is based on or otherwise relates to the Merger.

Intent to Vote in Favor of the Merger

Our directors and executive officers have informed us that, as of the date of this Proxy Statement, they intend to vote all of the shares of Common Stock owned directly by them in favor of the adoption of the Merger Agreement and each of the other proposals. As of April 2, 2013, the record date for the Special Meeting, our directors and current executive officers directly owned, in the aggregate, 8,111,404 shares of Common Stock entitled to vote at the Special Meeting, or collectively approximately 0.6% of the outstanding shares of Common Stock entitled to vote at the Special Meeting.

Special Committee Compensation

The board of directors approved a per-meeting fee of $2,000 for each in-person and telephonic meeting and a retainer fee of $40,000 for the chairman and $30,000 for the members of the Special Committee. Compensation of the Special Committee members was not and is not contingent on the Special Committee approving or recommending the Merger or any other strategic alternative or the consummation of the Merger or any other strategic alternative.

In deciding to approve the per-meeting fee, the Clearwire board of directors considered, among other things, the complexities inherent in the strategic financial alternatives to be considered and the time expected to be required by the Special Committee members, the need for the Special Committee to evaluate a variety of matters and the publicly-reported compensation of the special committees of the boards of directors of other companies.

Material United States Federal Income Tax Consequences of the Merger

The following discussion is a summary of material United States federal income tax consequences of the Merger to holders of shares of Class A Common Stock (other than shares held by Sprint, SoftBank, any of their respective affiliates and any stockholders who properly exercise their appraisal rights under Delaware law). This summary is general in nature and does not discuss all aspects of United States federal income taxation that may be relevant to a holder of shares of Class A Common Stock in light of its particular circumstances. In addition, this summary does not describe any tax consequences arising under the laws of any state, local or non-United States jurisdiction and does not consider any aspects of United States federal tax law other than income taxation, nor does it address any aspects of the unearned income Medicare contribution tax enacted pursuant to the Health Care and Education Reconciliation Act of 2010. This summary deals only with shares of Class A Common Stock held as capital assets (generally, property held for investment) within the meaning of Section 1221 of the United States Internal Revenue Code of 1986, as amended, which we refer to as the Code, and does not address tax considerations applicable to any holder of shares of Class A Common Stock that may be subject to special treatment under the United States federal income tax laws, including:

 

   

a bank or other financial institution;

 

   

a tax-exempt organization;

 

   

a retirement plan or other tax-deferred account;

 

   

a partnership, S corporation or other pass-through entity (or an investor in a partnership, S corporation or other pass-through entity);

 

   

an insurance company;

 

   

a mutual fund;

 

   

a real estate investment trust;

 

   

a dealer or broker in stocks and securities or in currencies;

 

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a trader in securities that elects mark-to-market treatment;

 

   

a stockholder subject to the alternative minimum tax provisions of the Code;

 

   

a stockholder that received shares of Class A Common Stock through the exercise of an employee stock option, through a tax qualified retirement plan or otherwise as compensation;

 

   

a person that has a functional currency other than the United States dollar;

 

   

a person that holds shares of Class A Common Stock as part of a hedge, straddle, constructive sale, conversion or other integrated transaction;

 

   

certain former United States citizens or long-term residents; and

 

   

a person that is or was a party to the Equityholders’ Agreement.

If a partnership (including any entity or arrangement treated as a partnership for United States federal income tax purposes) holds shares of Class A Common Stock, the tax treatment of a partner in the partnership generally will depend upon the status of the partner and the activities of the partner and the partnership. Such holders should consult their own tax advisors regarding the tax consequences of exchanging shares of Class A Common Stock pursuant to the Merger.

This summary is based on the Code, the Treasury regulations promulgated under the Code, judicial authority, published administrative positions of the United States Internal Revenue Service, which we refer to as the IRS, and other applicable authorities, all as in effect as of the date of this proxy statement, and all of which are subject to change or differing interpretations at any time, with possible retroactive effect. We have not sought, and do not intend to seek, any ruling from the IRS with respect to the statements made and the conclusions reached in the following summary, and no assurance can be given that the IRS will agree with the views expressed herein, or that a court will not sustain any challenge by the IRS in the event of litigation.

The following summary is for general informational purposes only and is not a substitute for careful tax planning and advice. We urge you to consult your own tax advisor with respect to the specific tax consequences to you of the Merger in light of your own particular circumstances, including federal estate, gift and other non-income tax consequences, and tax consequences under state, local or non-United States tax laws.

United States Holders

The following is a summary of the material United States federal income tax consequences that will apply to you if you are a United States Holder. For purposes of this discussion, the term United States Holder refers to a beneficial owner of Class A Common Stock that is, for United States federal income tax purposes:

 

   

an individual citizen or resident of the United States;

 

   

a corporation (or any other entity or arrangement treated as a corporation for United States federal income tax purposes) organized in or under the laws of the United States or any state thereof or the District of Columbia;

 

   

an estate, the income of which is subject to United States federal income taxation regardless of its source; or

 

   

a trust if (i) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust or (ii) the trust has validly elected to be treated as a “United States person” under applicable Treasury regulations.

 

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Payments with Respect to Class A Common Stock

The exchange of shares of Class A Common Stock for cash pursuant to the Merger will be a taxable transaction for United States federal income tax purposes. A United States Holder that receives cash for shares of Class A Common Stock pursuant to the Merger will recognize gain or loss, if any, equal to the difference, if any, between the amount of cash received and the holder’s adjusted tax basis in the shares of Class A Common Stock exchanged therefor. Gain or loss will be determined separately for each block of Class A Common Stock (generally, shares of Class A Common Stock acquired at the same cost in a single transaction) held by such United States Holder. Such gain or loss will be capital gain or loss, and will be long-term capital gain or loss if such United States Holder’s holding period for shares of Class A Common Stock is more than one year at the time of the exchange. Long-term capital gain recognized by an individual holder is generally eligible for reduced rates of taxation. There are limitations on the deductibility of capital losses.

Backup Withholding Tax

Proceeds from the exchange of shares of Class A Common Stock pursuant to the Merger generally will be subject to backup withholding tax at the applicable rate (currently 28%) unless the applicable United States Holder or other payee provides a valid taxpayer identification number and complies with certain certification procedures (generally, by providing a properly completed IRS Form W-9) or otherwise establishes an exemption from backup withholding tax. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding tax rules from a payment to a United States Holder will be allowed as a credit against that holder’s United States federal income tax liability and may entitle the holder to a refund, provided that the required information is timely furnished to the IRS. Each United States Holder should complete and sign the IRS Form W-9, which will be included with the letter of transmittal to be returned to the paying agent, to provide the information and certification necessary to avoid backup withholding tax, unless an exemption applies and is established in a manner satisfactory to the paying agent.

Non-United States Holders

The following is a summary of material United States federal income tax consequences that will apply to you if you are a non-United States Holder. The term non-United States Holder refers to a beneficial owner of shares of Class A Common Stock that is, for United States federal income tax purposes, not a United States Holder.

The following discussion applies only to non-United States Holders, and assumes that no item of income, gain, deduction or loss derived by the non-United States Holder in respect of shares of Class A Common Stock at any time is effectively connected with the conduct of a United States trade or business. Special rules, not discussed herein, may apply to certain non-United States Holders, such as:

 

   

certain former citizens or residents of the United States;

 

   

controlled foreign corporations;

 

   

passive foreign investment companies;

 

   

corporations that accumulate earnings to avoid United States federal income tax;

 

   

investors in pass-through entities that are subject to special treatment under the Code; and

 

   

non-United States Holders that are engaged in the conduct of a United States trade or business.

Payments with Respect to Class A Common Stock

Gain realized by a non-United States Holder on the exchange of shares of Class A Common Stock for cash in the Merger generally will not be subject to United States federal income tax, unless (i) the non-United States

 

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Holder is an individual who was present in the United States for 183 days or more in the taxable year of the exchange and certain other conditions are met, in which case the holder will be subject to tax at a flat rate of 30% (or such lower rate as may be specified under an applicable income tax treaty) on any gain from the exchange of shares of Class A Common Stock, net of applicable United States-source losses from sales or exchanges of other capital assets recognized by the holder during the year, or (ii) in certain circumstances, the Company is or has been a United States real property holding corporation for United States federal income tax purposes during the five years preceding the closing date of the Merger. The Company believes that it is not, and has not been during the applicable five-year period, a United States real property holding corporation.

Backup Withholding Tax

A non-United States Holder may be subject to backup withholding tax at the applicable rate (currently 28%) with respect to the proceeds from the disposition of shares of Class A Common Stock pursuant to the Merger, unless, generally, the non-United States Holder certifies under penalties of perjury on an appropriate IRS Form W-8 that such non-United States Holder is not a United States person, or the non-United States Holder otherwise establishes an exemption in a manner satisfactory to the paying agent. Each non-United States Holder should complete, sign and deliver to the paying agent (in the manner specified in the letter of transmittal) an appropriate IRS Form W-8 to provide the information and certification necessary to avoid backup withholding tax, unless an exemption applies and is established in a manner satisfactory to the paying agent.

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding tax rules generally will be allowed as a credit against the non-United States Holder’s United States federal income tax liability and may entitle the holder to a refund, provided the required information is timely furnished to the IRS.

The foregoing summary does not discuss all aspects of United States federal income taxation that may be relevant to particular holders of shares of Class A Common Stock. Each stockholder should consult its own tax advisor as to the particular tax consequences to it of exchanging its shares of Class A Common Stock for cash pursuant to the Merger under any federal, state, local or non-United States tax laws.

Financing of the Merger

The Merger is not subject to any financing condition. We anticipate that the total funds needed to complete the Merger will be approximately $2.2 billion. Sprint has informed us that it expects to fund this amount using cash on hand. At December 31, 2012, Sprint had cash, cash equivalents and short-term investments of $8.2 billion. If the Sprint-SoftBank Merger is consummated prior to the Merger, Sprint’s cash on hand is expected to reflect an additional cash infusion of $4.9 billion to be contributed by SoftBank at the effective time of the Sprint-SoftBank Merger.

Fees and Expenses

The estimated fees and expenses incurred or expected to be incurred by Clearwire in connection with the Merger are as follows:

 

Description

   Amount  

Financial advisory fee

   $ 20,500,000   

Legal fees and expenses

     10,000,000   

SEC filing fees

     307,000   

Printing, proxy solicitation and mailing costs

     150,000   

Miscellaneous

     800,000   
  

 

 

 

Total

   $ 31,757,000   
  

 

 

 

 

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In addition, it is expected that Merger Sub and/or Sprint will incur approximately $25,000 in paying agent fees. It is also expected that Merger Sub and/or Sprint will incur approximately $13,200,000 of legal fees and other advisory fees.

Except as provided below in “The Merger Agreement—Expenses,” the Merger Agreement provides that each of Sprint, Merger Sub and Clearwire will pay all costs and expenses incurred by it in connection with the Merger Agreement.

Regulatory Approvals

The Communications Act requires the approval of the FCC, prior to any transfer of control of an entity holding certain types of licenses, leases and other authorizations issued by the FCC. Pursuant to the Merger Agreement, the consent of the FCC is a condition to the completion of the Merger.

On December 20, 2012, SoftBank, its indirect U.S. subsidiary Starburst II, Inc., which we refer to as Starburst II, and Sprint filed an amendment to supplement their applications filed on November 30, 2012, seeking consent to the transfer of control of, among other things, various wireless licenses and leases and authorizations held by Sprint, Clearwire and their respective subsidiaries to SoftBank and Starburst II, and a declaratory ruling that it is in the public interest for the foreign shareholders of SoftBank’s U.S. subsidiaries to hold foreign ownership and voting rights in Sprint and its post-transaction direct and indirect licensee subsidiaries in excess of certain benchmarks under the Communications Act.

In their application, SoftBank, Starburst II and Sprint claimed, among other things, that the Merger would result in numerous public interest benefits, including helping to provide the financial resources needed to transition Clearwire’s network to LTE technology, improving the wireless broadband services provided to Clearwire and Sprint customers and enabling Sprint to use Clearwire’s 2.5 GHz spectrum more effectively. In addition, SoftBank, Starburst II and Sprint claimed that the Merger would have no adverse competitive effects and that similarly, SoftBank’s indirect acquisition of a controlling interest in Clearwire raises no competitive concerns.

There are a number of outstanding procedural and substantive challenges to the pending Merger. In particular, there are two pending petitions for reconsideration of the FCC’s approval of Clearwire’s pro forma application permitting Sprint to reacquire de jure ownership control of Clearwire through Sprint’s acquisition of Clearwire stock held by Eagle River. Ten entities have also filed petitions, comments or ex parte letters regarding the pending FCC applications relating to the Merger. Most of the filing parties requested that the FCC deny the applications or, in the alternative, impose conditions on the Merger. On February 12, 2013 SoftBank, Starburst II and Sprint filed an opposition to those parties opposing the transactions. Reply comments were filed on February 25, 2013, completing the FCC pleading cycle.

There can be no assurance that all of the regulatory approvals described above will be obtained and, if obtained, there can be no assurance as to the timing of any approvals or the absence of any litigation challenging such approvals.

Litigation Relating to the Merger

Between December 12, 2012 and January 11, 2013, eight putative class action lawsuits related to the Merger were filed against some or all of the following: the Company, its directors, Sprint, Sprint HoldCo, Eagle River, Merger Sub and SoftBank.

The Company and the board of directors believe that the claims in these actions are without merit and intend to defend against them vigorously.

 

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Crest Fin. v. Sprint Nextel Corp., et al, C.A. No. 8099-CS (Del. Ch. Ct.)

On or about December 12, 2012, Crest Financial Limited filed a putative class action lawsuit against the Company, its directors, Sprint, Sprint HoldCo and Eagle River, purportedly brought on behalf of the public stockholders of the Company, which action we refer to as the Crest Action. An amended complaint was filed on December 14, 2012, and a second amended complaint was filed on January 2, 2013. The Crest Action alleges that the directors of the Company breached their fiduciary duties in connection with the proposed transaction between Sprint and the Company, that Sprint and Eagle River breached duties owed to the Company’s public stockholders by virtue of their alleged status as controlling stockholders, including with respect to the Sprint-SoftBank Merger, and that the Company aided and abetted the alleged breaches of fiduciary duty by Sprint and Eagle River. The Crest Action also alleges that the Merger Consideration undervalues the Company, and that the controlling stockholders acted to enrich themselves at the expense of the minority stockholders. The Crest Action seeks to permanently enjoin the Sprint-SoftBank Merger, permanently enjoin the Merger, permanently enjoin Sprint from allegedly interfering with the Company’s plans to raise capital or sell its spectrum and to recover other compensatory damages.

On December 12, 2012 the plaintiff in the Crest Action filed a motion seeking an expedited trial. Following a hearing on January 10, 2013, the Court denied the motion to expedite. The Court also indicated that the various Delaware actions should be consolidated, and the parties have agreed to extend Clearwire’s time to respond to the complaints and discovery requests in connection with this action, as well as the below-referenced Delaware actions, pending the filing of a consolidated complaint.

On March 20, 2013, the Company received a letter from Crest Financial Limited demanding that the Company make available its stock ledger and list of stockholders for inspection and copying by Crest Financial Limited. The Company made materials available to Crest Financial Limited starting April 5, 2013.

Katsman v. Prusch et al, C.A. No. 8133-CS (Del. Ch. Ct.)

On or about December 20, 2012 stockholder Abraham Katsman filed a putative class action lawsuit in Delaware Chancery Court against the Company, its directors, Sprint and SoftBank, purportedly bought on behalf of the public stockholders of the Company, which action we refer to as the Katsman Action. The Katsman Action alleges that the directors of the Company breached their fiduciary duties in connection with the Merger, that Sprint breached duties owed to the Company’s public stockholders by virtue of its alleged status as controlling stockholder, and that SoftBank aided and abetted the alleged breaches of fiduciary duty by Sprint and the directors of the Company. The Katsman Action also alleges that the Merger Consideration undervalues the Company and that the Merger was negotiated pursuant to an unfair process. The Katsman Action seeks to enjoin the Merger and, should the Merger be consummated, rescission of the Merger, and to recover unspecified rescissory and compensatory damages.

Kuhnle v. Clearwire Corp. et al, No. 12-2-40219-1 SEA (Wash. Superior Ct., King Cty.)

On or about December 20, 2012 stockholder Joe Kuhnle filed a putative class action lawsuit in the Superior Court of Washington, King County against the Company and its directors, purportedly brought on behalf of the public stockholders of the Company, which action we refer to as the Kuhnle Action. The Kuhnle Action alleges that the directors of the Company breached their fiduciary duties in connection with the Merger, and that the Company aided and abetted the alleged breaches of fiduciary duty by the directors of the Company. The Kuhnle Action also alleges that the Merger Consideration undervalues the Company, that the Merger was negotiated pursuant to an unfair process, that the deal protection devices favor Sprint to the detriment of the public stockholders, and that the directors of the Company failed to make necessary disclosures in their public filings. The Kuhnle Action seeks a declaratory judgment that the Merger was entered into in breach of defendants’ fiduciary duties, a preliminary injunction preventing the Merger and, should the Merger be consummated, rescission of the Merger, and to recover unspecified rescissory and compensatory damages.

 

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On January 11, 2013, plaintiff filed a motion for Limited Expedited Discovery along with an amended complaint. On January 18, 2013 the Company filed an opposition to plaintiff’s motion for Limited Expedited Discovery. The Court denied plaintiff’s motion for Limited Expedited Discovery on January 28, 2013, and ordered discovery to proceed in the ordinary course. On January 18, the Company filed a motion to Stay the Kuhnle Action in favor of the prior-filed Delaware actions. On January 25, 2013, plaintiff filed its opposition to the motion to stay, and, on January 31, 2013, the Company filed its reply. The Court granted the motion to Stay on February 11, 2013, ordering that the Kuhnle Action be stayed pending the resolution of the Delaware action Crest Financial Limited v. Sprint Nextel Corp. et al, C.A. No. 8099-CS, referenced above. The Court required that defendants in the Kuhnle Action note a motion for status review on September 9, 2013. Pursuant to a joint stipulation filed on March 1, 2013, the Washington actions (including those referenced below) are consolidated and defendants need not respond to any complaint filed or discovery request served in the Washington actions during the pendency of the stay.

Millen v. Clearwire Corp. et al, No. 12-2-40220-5 SEA (Wash. Superior Ct., King Cty.)

On or about December 20, 2012, stockholder Doug Millen filed a putative class action lawsuit in the Superior Court of Washington, King County against the Company and its directors, purportedly brought on behalf of the public stockholders of the Company, which action we refer to as the Millen Action. The Millen Action alleges that the directors of the Company breached their fiduciary duties owed to the Company’s public stockholders in connection with the Merger, and that the Company aided and abetted the alleged breaches of fiduciary duty by the directors of the Company. The Millen Action also alleges that the Merger Consideration undervalues the Company, that the Merger was negotiated pursuant to an unfair process, that the deal protection devices favor Sprint to the detriment of the public stockholders, and that the directors of the Company failed to make necessary disclosures in connection with the announcement of the transaction. The Millen Action seeks a declaratory judgment that the Merger was entered into in breach of defendants’ fiduciary duties, an injunction preventing the Merger, and rescission of the Merger to the extent it has already been consummated.

Feigeles v. Clearwire Corp. et al, C.A. No. 8157-CS (Del. Ch. Ct.)

On or about December 28, 2012, stockholder Kenneth L. Feigeles filed a putative class action lawsuit in Delaware Chancery Court against the Company, its directors, Sprint, Merger Sub and Eagle River, purportedly brought on behalf of the public stockholders of the Company, which action we refer to as the Feigeles Action. The Feigeles Action alleges that the directors of the Company breached their fiduciary duties in connection with the Merger, that Sprint breached duties owed to the Company’s public stockholders by virtue of its alleged status as controlling stockholder, and that the Company, Sprint, Merger Sub and Eagle River aided and abetted the alleged breaches of fiduciary duty by Sprint and the directors of the Company. The Feigeles Action also alleges that the Merger Consideration undervalues the Company, and that the Merger was negotiated pursuant to an unfair process. The Feigeles Action seeks to enjoin the Merger and, should the Merger be consummated, to rescind the Merger, and it seeks unspecified rescissory and compensatory damages.

Litwin v. Sprint Nextel Corp. et al, C.A. No. 8158-CS (Del. Ch. Ct.)

On or about December 28, 2012, stockholder Joan Litwin filed a putative class action lawsuit in Delaware Chancery Court against the Company, its directors, Sprint, Sprint HoldCo and Eagle River, purportedly brought on behalf of the public stockholders of the Company, which action we refer to as the Litwin Action. The Litwin Action alleges that the directors of the Company breached their fiduciary duties in connection with the Merger, that Sprint and Eagle River breached duties owed to the Company’s public stockholders by virtue of their alleged status as controlling stockholders, and that the Company aided and abetted the alleged breaches of fiduciary duty by Sprint, Eagle River and the directors of the Company. The Litwin Action also alleges that the Merger Consideration undervalues the Company, that Sprint is using its position as controlling stockholder to obtain Clearwire’s spectrum for itself to the detriment of the public stockholders, and that the directors of the Company allowed the Company to stagnate in order to benefit Sprint and Eagle River. The Litwin Action seeks to enjoin

 

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the Merger, to enjoin Sprint from interfering with Clearwire’s build-out plans or any future sale of spectrum, and also unspecified compensatory damages.

Rowe v. Clearwire Corp. et al, No. 12-2-41432-7 SEA (Wash. Superior Ct., King Cty.)

On or about December 31, 2012, stockholder Clinton Rowe filed a putative class action lawsuit in the Superior Court of Washington, King County against the Company, its directors, Sprint and Merger Sub, purportedly brought on behalf of the public stockholders of the Company, which action we refer to as the Rowe Action. The Rowe Action alleges that Sprint and the directors of the Company breached their fiduciary duties in connection with the Merger, and that the Company, Sprint and Merger Sub aided and abetted the alleged breaches of fiduciary duty by the directors of the Company. The Rowe action also alleges that the Merger Consideration undervalues the Company, that the Merger was negotiated pursuant to an unfair process, and that the directors of the Company did not protect the Company against numerous conflicts of interest. The Rowe Action seeks a declaratory judgment that the Merger was entered into in breach of defendants’ fiduciary duties, an injunction preventing the Merger, rescission of the transaction to the extent it has already been implemented, and the imposition of a constructive trust in favor of the plaintiff class upon any benefits improperly received by defendants.

DeLeo v. Schell et al, C.A. No. 8176-CS (Del. Ch. Ct.)

On or about January 3, 2013, stockholder David DeLeo filed a putative class action lawsuit in Delaware Chancery Court against the Company, its directors, Sprint and Merger Sub, purportedly brought on behalf of the public stockholders of the Company, which action we refer to as the DeLeo Action. The DeLeo Action alleges that the directors of the Company breached their fiduciary duties in connection with the Merger, that Sprint breached duties owed to the Company’s public stockholders by virtue of its alleged status as controlling stockholder, and that the Company and Merger Sub aided and abetted the alleged breaches of fiduciary duty by Sprint and the directors of the Company. The DeLeo Action also alleges that the Merger Consideration undervalues the Company, that Sprint and the directors of the Company misappropriated non-public information that was not disclosed to the plaintiffs, and that the Merger was negotiated pursuant to an unfair process. The DeLeo Action seeks a declaratory judgment that the proposed transaction between Sprint and the Company was entered into in breach of Sprint’s fiduciary duties, an injunction preventing the proposed transaction between Sprint and the Company and, should the Merger be consummated, to rescind the Merger, and it seeks unspecified rescissory and compensatory damages.

Effective Time of Merger

The closing of the Merger is expected to take place no later than the third business day following the date on which the last of the conditions to the closing of the Merger (described in “The Merger Agreement—Conditions to the Completion of the Merger”) has been satisfied or waived (other than the conditions that by their nature are to be satisfied at the closing of the Merger, but subject to the satisfaction or written waiver of those conditions).

The effective time of the Merger will occur as soon as practicable following the closing of the Merger upon the filing of a certificate of merger with the Secretary of State of the State of Delaware (or at such later date as we and Sprint may agree and specify in the certificate of merger).

Payment of Merger Consideration and Surrender of Stock Certificates

Each record holder of shares of our Class A Common Stock (other than Sprint, SoftBank, any of their respective affiliates and any stockholders who properly exercise their appraisal rights under Delaware law) will receive promptly after the completion of the Merger a letter of transmittal describing how such holder may exchange shares of our Class A Common Stock for the Merger Consideration.

You should not return your stock certificates with the enclosed WHITE proxy card, and you should not forward your stock certificates to the paying agent without a letter of transmittal.

 

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You will not be entitled to receive the Merger Consideration for your shares of Class A Common Stock until you deliver a duly completed and executed letter of transmittal to the paying agent. If your shares are certificated, you must also surrender your stock certificate or certificates to the paying agent. If ownership of your shares is not registered in the transfer records of the Company, a check for any cash to be delivered will only be issued if the applicable letter of transmittal is accompanied by all documents reasonably required to evidence and effect transfer and to evidence that any applicable stock transfer taxes have been paid or are not applicable. With respect to shares of our Class A Common Stock held by The Depository Trust Company, which we refer to as DTC, the paying agent will transmit to DTC an amount in cash in immediately available funds equal to the number of shares of our Class A Common Stock held of record by DTC immediately prior to the effective time, multiplied by the Merger Consideration. DTC will then appropriately credit the accounts of the holders of our Class A Common Stock that is held by DTC.

Provisions for Unaffiliated Security Holders

No provision has been made to grant Clearwire’s stockholders, other than Sprint or its affiliates or pursuant to the terms of the Equityholders’ Agreement, access to the corporate files of Clearwire or any other party to the Merger or to obtain counsel or appraisal services at the expense of Clearwire or any other such party.

Accounting Treatment

The Merger will be accounted for as a purchase transaction with Sprint as the accounting acquirer for financial accounting purposes, which will include adjusting each asset and liability of Clearwire to fair value and the consolidation of Clearwire with Sprint.

 

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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

The following questions and answers are intended to address briefly some commonly asked questions regarding the Merger, the Merger Agreement and the Special Meeting. These questions and answers may not address all questions that may be important to you as a stockholder of the Company. Please refer to the “Summary Term Sheet” and the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to in this proxy statement, all of which you should read carefully. See “Where You Can Find More Information.”

 

Q. Why am I receiving this document?

 

A. The Company has agreed to be acquired by Sprint pursuant to the terms of the Merger Agreement described in this proxy statement. A copy of the Merger Agreement is attached to this proxy statement as Annex A. The Special Committee has unanimously determined that the Merger is advisable, is substantively and procedurally fair to, and is in the best interests of our unaffiliated stockholders. The Special Committee made its determination after consultation with its independent legal and financial advisors and consideration of a number of factors. Upon such recommendations, the board of directors of the Company has unanimously determined that the Merger is advisable, is substantively and procedurally fair to, and in the best interest of our unaffiliated stockholders. The board of directors of the Company has also unanimously approved and declared advisable the Merger Agreement and resolved to recommend that the stockholders adopt the Merger Agreement and approve the other proposals discussed below. The board of directors made its recommendation after consultation with its legal and financial advisors and consideration of a number of factors, including the recommendation of the Special Committee. The Company is holding the Special Meeting so that our stockholders may vote with respect to the Merger Agreement Proposal, the Charter Amendment Proposal and the NASDAQ Authorization Proposal among other matters.

The Company is soliciting proxies for the Special Meeting. You are receiving this proxy statement because you own shares of our Common Stock. This proxy statement contains important information about the proposed transaction and the Special Meeting, and you should read it carefully. The enclosed proxy allows you to vote your shares of our Common Stock without attending the Special Meeting in person.

Your vote is extremely important, and we encourage you to submit your proxy as soon as possible. For more information on how to vote your shares of our Common Stock, please see the section of this proxy statement entitled “The Special Meeting.”

 

Q. What is the proposed transaction and what effects will it have on the Company?

 

A. The proposed transaction is the acquisition by Sprint of all of the Company’s Common Stock that Sprint and its affiliates do not already own pursuant to the Merger Agreement. If the Merger Agreement Proposal is approved by our stockholders and the other closing conditions under the Merger Agreement have been satisfied or waived, Merger Sub, a wholly-owned subsidiary of Sprint, will merge with and into the Company and the Company will continue as the surviving corporation. We refer to this transaction as the Merger. As a result of the Merger, the Company will become a wholly-owned subsidiary of Sprint and will no longer be a publicly-held corporation. In addition, as a result of the Merger, our Class A Common Stock will be delisted from NASDAQ and deregistered under the Exchange Act, we will no longer file periodic reports with the SEC on account of our Class A Common Stock, and you will no longer have any interest in our future earnings or growth.

In connection with the Merger Agreement, Clearwire, Clearwire Communications and Clearwire Finance also entered into the Note Purchase Agreement with Sprint, pursuant to which Sprint has agreed to purchase the Notes from us at our request, but subject to the conditions set forth in the Note Purchase Agreement. In order to allow Clearwire to request the full amount of potentially available financing provided by Sprint pursuant to the Note Purchase Agreement, you will also be asked to approve the Charter Amendment Proposal and the NASDAQ Authorization Proposal.

 

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Q. What will I receive if the Merger is completed?

 

A. Upon completion of the Merger, you will be entitled to receive the Merger Consideration for each share of our Class A Common Stock that you own, unless you properly exercise, and do not withdraw, your appraisal rights under the DGCL with respect to such shares. For example, if you own 100 shares of our Class A Common Stock, you will receive $297.00 in cash in exchange for your 100 shares of our Class A Common Stock, less any applicable withholding taxes. Upon consummation of the Merger, you will not own any shares of the capital stock of the surviving corporation.

 

Q. How does the Merger Consideration compare to the market price of the Company’s Class A Common Stock prior to the announcement of the Merger?

 

A. The Merger Consideration represents approximately a 128.5% premium to the closing share price of the Company’s Class A Common Stock the day before discussions between Sprint and SoftBank were first confirmed in the marketplace on October 11, 2012, with Clearwire speculated to be a part of that transaction; and, approximately a 40.1% premium to the closing price the day before our receipt of Sprint’s initial $2.60 per share non-binding indication of interest on November 21, 2012.

 

Q. When do you expect the Merger to be completed?

 

A. We are using our reasonable best efforts to complete the Merger as promptly as practicable. Assuming timely satisfaction of necessary closing conditions, we anticipate that the Merger will be completed by mid-2013. If our stockholders vote to approve the Merger Agreement Proposal, the Merger will become effective as promptly as practicable following the satisfaction or written waiver of the other conditions to the Merger.

 

Q. What happens if the Merger is not completed?

 

A. If the Merger Agreement Proposal is not approved by our stockholders or if the Merger is not completed for any other reason, our stockholders will not receive any payment for their shares of our Class A Common Stock in connection with the Merger. Instead, the Company will remain a public company and the Class A Common Stock will continue to be listed and traded on NASDAQ, so long as the Company continues to meet the applicable listing requirements. Under certain circumstances described in “The Merger Agreement—Sprint Termination Fee,” if Sprint terminates the Merger Agreement or if the Merger is not consummated by the Outside Date (as it may be extended in certain circumstances), Sprint is required to pay a termination fee of $120 million to Clearwire, which will be satisfied by the cancellation of an equal amount of the Notes issued under the Note Purchase Agreement and, under certain circumstances described in “The Merger Agreement—Sprint Termination Fee,” the termination of the Merger Agreement may require Sprint to pay to Clearwire Communications a wireless broadband services prepayment in the amount of $100 million. If the Merger is not completed, we may be forced to explore all available alternatives, including financial restructuring, which could include seeking protection under the provisions of the United States Bankruptcy Code. Excluding any financing by Sprint pursuant to the Note Purchase Agreement, the Company currently has capital resources that it believes to be sufficient to support its operations into approximately the fourth quarter of 2013. If the Merger is not a completed, the Company may not be able to raise sufficient capital to continue its existing operations beyond that time. We can give you no assurance that in a restructuring you would receive any value for your shares or value equal to or in excess of the Merger Consideration. For more information, see “Special Factors—Considerations Relating to the Merger; Certain Effects on the Company if the Merger is not Completed—Fail