Sprint - Nextel 2012 Annual Report Download - page 169

CLEARWIRE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
pursuant to a commercial agreement currently in effect between Sprint and Clearwire. Any such prepayment will be credited against certain of Sprint's
obligations under such agreement.
Note Purchase Agreement
In connection with the Merger Agreement, on December 17, 2012, we entered into a Note Purchase Agreement, which we refer to as the Note
Purchase Agreement, with Clearwire Communications LLC, which we refer to as Clearwire Communications, Clearwire Finance Inc., which we refer to as
Clearwire Finance, and together with Clearwire Communications, which we refer to as the Issuers, and Sprint, in which Sprint agreed to purchase from
us at our election up to an aggregate principal amount of $800.0 million of 1.00% Exchangeable Notes due
2018 , which we refer to as the Notes, in ten
monthly installments of
$80.0 million each on the first business day of each month, which we refer to as the Draw Date, beginning January 2013 and
through the pendency of the Proposed Merger. The Notes accrue interest at
1.00% per annum and are exchangeable into shares of Class A Common
Stock at an exchange rate of
666.67 shares per $1,000 aggregate principal amount of the Notes, which is equivalent to a price of $1.50 per share, subject
to anti - dilution protections. Additionally, on the last three Draw Dates (in August, September and October 2013), we can only request that Sprint
purchase notes if (i) an agreement has been reached between the parties on the accelerated build out of our wireless broadband network, which we
refer to as the Build
- Out Agreement, by February 28, 2013, (ii) the Build - Out Agreement is in full force and effect and (iii) we have not breached any of
our obligations under the Build - Out Agreement.
Under the terms of the Note Purchase Agreement, the terms of the Notes will be governed by an indenture, which the Issuers expect to enter into
on the first Draw Date, which we refer to as the New Indenture. The terms of the New Indenture are substantially similar to the indenture dated as of
December 8, 2010, by and among the Issuers, the guarantors named therein and the trustee named therein, governing the Issuers' existing
8.25%
Exchangeable Notes due 2040 , which we refer to as the Existing Indenture, which were issued in December 2010. However, under the New Indenture,
the Notes will be exchangeable by Sprint and certain of our other equityholders into either our Class A Common Stock, or Class B Common Stock, and
Class B units of Clearwire Communications LLC (such Class B units together with the corresponding Class B Common Stock, which we refer to as the
Class B Interests) at their election. The Notes will become exchangeable if (a) the Merger Agreement is terminated for any reason (except under
circumstances where we would receive, and do not reject, the Sprint Termination Fee), or (b) the Proposed Merger is consummated, at an exchange rate
of 666.67 shares per $1,000 aggregate principal amount of Notes (equivalent to a price of $1.50 per share), subject to anti - dilution protections, which we
refer to as the Exchange Rate.If the Merger Agreement is terminated under circumstances where we would receive, and do not reject, the Sprint
Termination Fee, then
$120.0 million principal amount of the Notes will be automatically canceled. In addition, if the Merger Agreement is terminated
because the SoftBank Transaction is not consummated, we will have the option to exchange the Notes that remain outstanding at the Exchange Rate
for
15 business days following the termination of the SoftBank Transaction. Unlike the terms of the Existing Indenture, the terms of the New Indenture
do not include an option to call or redeem the Notes, and Sprint does not have the right to put Notes at specified dates.
The Note Purchase Agreement can be terminated, among other things, by mutual consent, automatically if the required vote to approve the
Proposed Merger is not obtained at our stockholders meeting, or if the Merger Agreement is terminated due to a failure of the SoftBank Transaction or
a breach of Sprint's representations, warranties, covenants or agreements thereunder (subject to certain conditions), provided that if the Note
Purchase Agreement is terminated due to the Merger Agreement being terminated by reason of a failure of the SoftBank Transaction or because of a
breach of any representation, warranty, covenant or agreement by Sprint, then the Note Purchase Agreement will terminate upon the earlier of (i) our
exercising our option to exchange the Notes upon such termination and (ii) July 2, 2013; however the Note Purchase Agreement will not terminate on
July 2, 2013 if the Build - Out Agreement was reached by February 28, 2013, the Build - Out Agreement is in full force and effect and we have not
breached any of our obligations under the Build
- Out Agreement.
On December 26, 2012, we notified Sprint of our intention to take the first draw for January 2013 under the Note Purchase Agreement. Following
receipt of a proposal from DISH Network Corporation, which we refer to as DISH, we elected on December 28, 2012, to revoke our draw notice prior to
receiving any proceeds from the draw to allow us to evaluate DISH's proposal. Sprint subsequently asserted that it believes that the draw notice is
irrevocable and has reserved its rights with respect thereto. We also decided to forego the second draw for February 2013 as the Special Committee
continues to evaluate DISH's proposal. Our election to forego the first two draws under the Note Purchase Agreement has reduced the aggregate
principal amount available to
$640 million . The Special Committee has not made any determination with respect to any future draws under the Note
Purchase Agreement.
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