Clearwire 2008 Annual Report Download - page 42

Cl
earw
i
re,
i
nor
d
er
f
or C
l
earw
i
re to enter
i
nto a transact
i
on
i
nvo
l
v
i
ng t
h
esa
l
eo
f
a certa
i
n percentage o
f
the consolidated assets of Clearwire and its subsidiaries to, or the mer
g
er of Clearwire with, certai
n
specified competitors of Sprint, Intel and the Strategic Investors.
Th
e Equ
i
ty
h
o
ld
ers’ Agreement a
l
so conta
i
ns prov
i
s
i
ons re
l
ate
d
to restr
i
ct
i
ons on trans
f
er o
f
C
l
earw
i
re C
l
ass A
and Class B Common Stock, ri
g
hts of first offer and preemptive ri
g
hts.
As a resu
l
t, Spr
i
nt, Eag
l
eR
i
ver an
d
t
h
e Investors may
b
ea
bl
e to cause us to ta
k
e, or prevent t
h
eta
ki
ng o
f
,
act
i
ons t
h
at ma
y
con
fli
ct w
i
t
hy
our
b
est
i
nterests as a stoc
kh
o
ld
er, w
hi
c
h
cou
ld
a
d
verse
ly
a
ff
ect our resu
l
ts o
f
operations and the tradin
g
price of Clearwire Class A Common Stock.
C
learwire and its subsidiaries may be considered subsidiaries of Sprint under certain of Sprint’s agree
-
m
ents relating to its indebtedness.
Sprint owns approximately
5
1% of the voting power of Clearwire, as of February 28, 2009. As a result
,
C
l
earw
i
re an
di
ts su
b
s
idi
ar
i
es ma
yb
e cons
id
ere
d
su
b
s
idi
ar
i
es o
f
Spr
i
nt un
d
er certa
i
no
f
Spr
i
nt’s a
g
reements re
l
at
i
n
g
t
o its indebtedness. Those a
g
reements
g
overn the incurrence of indebtedness and certain other activities of Sprint’
s
s
ubsidiaries. Thus, our actions may result in a violation of covenants in Sprint’s debt obligations, which may cause
S
pr
i
nt’s
l
en
d
ers to
d
ec
l
are
d
ue an
d
pa
y
a
bl
ea
ll
o
f
Spr
i
nt’s outstan
di
n
gl
oan o
blig
at
i
ons, t
h
ere
by
severe
ly h
arm
i
n
g
S
print’s financial condition, operations and prospects for
g
rowth. The determination of whether or not we would b
e
considered a subsidiar
y
under Sprint’s debt a
g
reements is complex and sub
j
ect to interpretation. Under th
e
E
qu
i
ty
h
o
ld
ers’ Agreement,
if
we
i
nten
d
to ta
k
e any act
i
on t
h
at may
b
e pro
hibi
te
d
un
d
er t
h
e terms o
f
certa
i
n Spr
i
n
t
debt a
g
reements, then Sprint will be obli
g
ated to deliver to us an officer’s certificate, which we refer to as
a
Compliance Certificate, and le
g
al opinion from a nationall
y
reco
g
nized law firm statin
g
that our proposed action
s
d
o not v
i
o
l
ate t
h
ose
d
e
b
t agreements. I
f
Spr
i
nt not
ifi
es us t
h
at
i
t cannot
d
e
li
ver t
h
e Comp
li
ance Cert
ifi
cate an
dl
ega
l
opinion, Sprint will be obli
g
ated to take certain actions to ensure that we are no lon
g
er considered a subsidiar
y
unde
r
its debt a
g
reements. These actions ma
y
include surrenderin
g
board seats and votin
g
stock. The unusual nature of
thi
s arrangement may ma
k
e
i
t more
diffi
cu
l
t
f
or us to o
b
ta
i
n
fi
nanc
i
ng on
f
avora
bl
e terms or at a
ll
. Moreover,
r
e
g
ar
dl
ess o
f
w
h
et
h
er we rece
i
ve a Comp
li
ance Cert
ifi
cate an
dl
e
g
a
l
op
i
n
i
on as
d
escr
ib
e
d
a
b
ove, we cannot
b
e sur
e
our actions will not violate S
p
rint’s debt covenants, and, if there is a violation, that S
p
rint’s lenders will waive such
non-compliance and forbear from enforcing their rights, which could include accelerated collection of Sprint’s
o
blig
at
i
ons.
We wi
ll
incur signi
f
icant ex
p
ense in com
ply
ing wit
h
t
h
e terms o
f
our 4G MVNO Agreement, an
d
we ma
y
n
ot recognize t
h
e
b
ene
f
its we ex
p
ect i
f
S
p
rint an
d
certain o
f
our Investors are not success
f
u
l
in rese
ll
ing
o
ur services to their customers, which would adversely affect our business prospects and results
.
Un
d
er t
h
e4GMVNOAgreement,Spr
i
nt an
d
certa
i
no
f
our Investors
h
ave t
h
er
i
g
h
ttorese
ll
serv
i
ces over our
networ
k
stot
h
e
i
r customers, an
df
or any o
f
t
h
e
i
r customers t
h
at purc
h
ase serv
i
ces over our networ
k
,Spr
i
nt an
d
t
h
ese
Investors are requ
i
re
d
to pa
y
us certa
i
n
f
ees. However, not
hi
n
gi
nt
h
e4GMVNOA
g
reement requ
i
res Spr
i
nt or an
y
o
f
our Investors to resell any of these services, and they may elect not to do so or to curtail such sales activities if their
efforts prove unsuccessful. In the course of implementing the terms of the 4G MVNO Agreement, we expect to incur
sig
n
ifi
cant expense
i
n connect
i
on w
i
t
hd
es
ig
n
i
n
g billi
n
g
,
di
str
ib
ut
i
on an
d
ot
h
er s
y
stems w
hi
c
h
are necessar
y
t
o
facilitate such sales, and we ma
y
elect to deplo
y
our networks in markets requested b
y
Sprint and our Investors where
w
ewou
ld
not ot
h
erw
i
se
h
ave
l
aunc
h
e
d
.I
f
Spr
i
nt an
d
our Investors
f
a
il
to rese
ll
serv
i
ces o
ff
ere
d
over our networ
ki
nt
h
e
amount we expect or at a
ll
,our
b
us
i
ness prospects an
d
resu
l
ts o
f
operat
i
ons wou
ld b
ea
d
verse
ly
a
ff
ecte
d.
A
num
b
er o
f
our signi
f
icant
b
usiness arrangements are
b
etween us an
dp
arties t
h
at
h
ave an investmen
t
in or a fiduciary duty to us, and the terms of those arrangements may not be beneficial to us
.
We are part
y
to a number of services, development, suppl
y
and licensin
g
a
g
reements with parties that have an
owners
hi
por
fid
uc
i
ary re
l
at
i
ons
hi
pw
i
t
h
us,
i
nc
l
u
di
ng t
h
evar
i
ous commerc
i
a
l
agreements w
i
t
h
Spr
i
nt an
d
t
he
Investors
d
escr
ib
e
d
e
l
sew
h
ere
i
nt
hi
s report. T
h
ese re
l
at
i
ons
hi
ps ma
y
create actua
l
or potent
i
a
l
con
fli
cts o
fi
nterest
,
an
d
ma
y
cause t
h
e part
i
es to t
h
ese arran
g
ements to ma
k
e
d
ec
i
s
i
ons or ta
k
e act
i
ons t
h
at
d
o not re
fl
ect our
b
es
t
interests.
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