Clearwire 2010 Annual Report Download - page 34

• effect any material capital reorganization of Clearwire or any of its material subsidiaries, including
Clearwire Communications, other than a financial transaction (including securities issuances) in the
ordinary course of business;
• take any action that could cause Clearwire Communications or any of its material subsidiaries to be
taxed as a corporation for federal income tax purposes; and
• subject to certain exceptions, issue any Class B Common Stock or any equity interests of Clearwire
Communications;
• Eagle River, for so long as Eagle River owns at least 50% of the shares of the Clearwire common stock
received by it in the Merger Transactions, and the proposed action would disproportionately and adversely
affect Eagle River, the public stockholders of Clearwire or Clearwire in its capacity as a member of
Clearwire Communications, in order to amend the Charter, the Bylaws or the Operating Agreement or to
change the size of the Clearwire board of directors; and
• each of Sprint, Intel and the Strategic Investors, as a group, so long as each of Sprint, Intel and the Strategic
Investors, as a group, respectively, owns both (1) at least 50% of the number of shares of Clearwire common
stock received by it in the Transactions and (2) securities representing at least 5% of the outstanding voting
power of Clearwire, in order for Clearwire to enter into a transaction involving the sale of a certain
percentage of the consolidated assets of Clearwire and its subsidiaries to, or the merger of Clearwire with,
certain specified competitors of the Investors.
The Equityholders’ Agreement also contains provisions related to restrictions on transfer of Class A Common
Stock and Class B Common Stock, rights of first offer and pre-emptive rights.
As a result, Sprint, the Investors and Eagle River may be able prevent the taking of actions that align with your
best interests as a stockholder. The interests of Sprint, the Investors and Eagle River may not be aligned with your
interests as a stockholder.
Clearwire and its subsidiaries may be considered subsidiaries of Sprint under certain of Sprint’s
agreements relating to its indebtedness.
Sprint owned approximately 53.9% of the voting power of Clearwire as of December 31, 2010. As a result,
Clearwire and its subsidiaries may be considered subsidiaries of Sprint under certain of Sprint’s agreements relating
to its indebtedness. Those agreements govern the incurrence of indebtedness and certain other activities of Sprint’s
subsidiaries. Thus, our actions may result in a violation of covenants in Sprint’s debt obligations, which may cause
Sprint’s lenders to declare due and payable some or all of Sprint’s outstanding loan obligations, thereby severely
harming Sprint’s financial condition, operations and prospects for growth. The determination of whether or not we
would be considered a subsidiary under Sprint’s debt agreements is complex and subject to interpretation. Under the
Equityholders’ Agreement, if we intend to take any action that may be prohibited under the terms of certain Sprint
debt agreements, then Sprint will be obligated to deliver to us an officer’s certificate, which we refer to as a
Compliance Certificate, and legal opinion from a nationally recognized law firm stating that our proposed actions
do not violate those debt agreements. If Sprint notifies us that it cannot deliver the Compliance Certificate and legal
opinion, Sprint will be obligated to take certain actions to ensure that Clearwire is no longer considered a subsidiary
under its debt agreements. These actions may include surrendering board seats and voting stock of Clearwire. The
unusual nature of this arrangement may make it more difficult for us to obtain financing on favorable terms or at all.
Moreover, regardless of whether we receive a Compliance Certificate and legal opinion as described above, we
cannot be sure our actions will not violate Sprint’s debt covenants, and, if there is a violation that Sprint’s lenders
will waive such non-compliance and forbear from enforcing their rights, which could include accelerated collection
of Sprint’s obligations.
A number of our significant business arrangements are between us and parties that have an investment
in or a fiduciary duty to us, and the terms of those arrangements may not be beneficial to us.
We are party to a number of services, development, supply and licensing agreements with parties that have an
ownership or fiduciary relationship with us, including the various commercial agreements with Sprint and the other
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