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dish-logoThe bidding war continues. Dish Network has boosted its offer for Bellevue-based Clearwire, just two days before shareholders were set to vote on a competing proposal by Sprint. The latest offer of $4.40 per share represents a 29 percent premium over Sprint’s last-and-final offer of $3.40.

The new bid comes as minority investors are set to vote on the Sprint deal on Friday, a transaction that the Clearwire board has recommended. Earlier today, the proxy advisor firm, Glass Lewis & Co., recommended that Clearwire investors reject the Sprint deal.

The move comes a day after Crest Financial, which holds eight percent of Clearwire’s stock, claimed that Clearwire “stacked the deck” in Sprint’s favor.

“The Special Committee of Clearwire’s board of directors has received Dish Network’s offer and will review it to determine the best course of action for the company and its stockholders,” the company said in a statement Wednesday night. “The Special Committee has not made any determination to change its recommendation of the current Sprint transaction.”

But earlier today, Clearwire noted the challenges of another party, other than Sprint, buying the company. They wrote in response to the Glass Lewis recommendation:

Clearwire’s Equityholders’ Agreement, which was entered into in November 2008, concurrently with Clearwire’s formation, specifies that a change of control or merger requires 75% stockholder approval, which means Clearwire cannot be sold to another party without Sprint’s approval. It has been well documented that Sprint is not a willing seller. In conducting its own analysis, the Special Committee accounted for this crucial constraint, while Glass Lewis simply ignores it.

Dish also appears to be ignoring that detail. Here’s the full letter that Dish Chairman Charlie Ergen sent to John Stanton, chairman of the board at Clearwire.

May 29, 2013

John Stanton, Chairman
Clearwire Corporation
1475 120th Avenue Northeast
Bellevue, Washington 98005

Gentlemen:

DISH Network Corporation (“DISH”) is pleased to submit this revised offer to acquire the outstanding capital stock of Clearwire Corporation (“Clearwire” or the “Company”). We have reviewed your recently amended merger agreement with Sprint Nextel Corporation (“Sprint”), and we continue to believe we can provide a meaningfully superior alternative to your stockholders, so we are presenting a transaction valued at $4.40 per share.

As you know, we are committed to completing a transaction that will permit DISH to commercialize its significant portfolio of wireless spectrum assets. We have therefore simplified and improved our previous proposal to provide you with revised terms that are both clearly actionable by Clearwire and unmistakably superior to the Sprint proposal. Importantly, we are prepared to de-link our proposed acquisition of 40 MHz of your BRS and EBS spectrum from the offer we will make to your stockholders.

The principal terms of our offer are as follows:

1. Funding: We are committed to ensuring that Clearwire has access to appropriate capital during the necessary transition period until the Company can effectively fund itself. Therefore, DISH is prepared to provide Clearwire with a committed financing package allowing Clearwire to draw up to $80 million per month until the aggregate amount of funding provided (together with any amounts funded by Sprint under its exchangeable notes purchase agreement) equals $800 million.

We would provide this funding by purchasing notes issued by Clearwire pursuant to a note purchase agreement (the “Note Purchase Agreement”). These notes will, to the extent allowed, be exchangeable for Clearwire Class A common stock at an exchange ratio equivalent to $2.50 per share and will bear interest at a rate of 1% per annum. To the extent any notes could not be exchangeable for Clearwire Class A common stock (i.e., to the extent any required stockholder vote has not been obtained), the notes would be non-exchangeable and bear interest at a rate of 12% per annum, accruing from the original issuance date. The proposed funding is on terms far superior to Clearwire and its minority shareholders than the Sprint funding, representing among other things two-thirds less equity dilution than the dilution inherent in the funding provided by Sprint.

We are also prepared to fit this offer within the confines of the existing pre-emptive rights under your Equityholders’ Agreement. Therefore, to the extent that any eligible Clearwire stockholder chooses to exercise pre-emptive rights and purchase exchangeable notes in order to maintain its percentage equity ownership interest in Clearwire, DISH would take up the remaining funding obligation, with the only condition being that DISH would acquire at least 25% of the exchangeable notes issued. In any such case, Clearwire would still receive a total of $80 million per month in the aggregate, but DISH’s portion would decrease to account for any take up of the offered notes by Clearwire’s other eligible stockholders.

The terms of the notes would include covenants comparable to those in the Sprint exchangeable notes indenture (to the extent the notes are exchangeable) and/or your existing senior secured notes (to the extent that the notes are not exchangeable). We have prepared definitive documentation for the note purchase and the terms of the notes and our counsel can provide these to yours at your request.

2. Tender Offer. To provide your stockholders, including in particular your minority stockholders, with a meaningful opportunity to monetize their investment, DISH is prepared to offer Clearwire and its stockholders a transaction that is substantially superior to the proposed Sprint merger. DISH would offer to purchase all of Clearwire’s outstanding shares at a price of $4.40 per share. This offer represents a 29% premium over the nominal purchase price of $3.40 per share in the Sprint proposal. The offer would be available to all stockholders, but DISH is also prepared to accept and pay for shares tendered only by those minority stockholders that wish to monetize their investment in Clearwire at this time, subject to a minimum participation in the offer. Consequently, the DISH offer provides both meaningfully improved value to your stockholders as well as the significant option value inherent in allowing your minority stockholders to choose for themselves whether to retain their investment in Clearwire. Our tender offer would be subject to very limited conditionality, including:

(a) Minimum Tender. For the offer to be of value to DISH, we need a minimum threshold investment, both for economic reasons and to ensure that we are able to participate meaningfully in the governance of the Company. We would therefore condition any offer on acquiring at least 25% of the fully diluted voting stock inClearwire.

(b) Governance Rights. DISH will need certain minimum participation and governance rights, including the right to designate members to the Clearwire board of directors. DISH requires at least three Board designees or, if we were to acquire a higher percentage of Clearwire shares, a number of designees that corresponds to DISH’s ownership percentage; for example, if DISH were to acquire 31% of the outstanding Clearwire shares, we would expect a fourth board seat to correspond to this higher percentage ownership.

DISH also requires a minimum level of minority protection rights to be set out in an Investor Rights Agreement, including the right to approve (1) material changes to the organizational documents of Clearwire and its material subsidiaries, (2) change of control transactions, and (3) material transactions with related parties (including Sprint) unless these transactions are approved by an independent and disinterested board committee and, if larger than a specific threshold, supported by fairness opinions. These minority protection rights are no more restrictive than those held by several of Clearwire’s current stockholders that retain a very limited ownership interest in Clearwire. We understand, however, that you are concerned that Sprint may challenge your ability to provide certain of these governance rights; to allay these concerns we would not condition our offer on the absence or failure of such a challenge. We would of course defend, and expect Clearwire to participate in defending, the agreed governance rights in the face of any challenge, including subsequent to the closing of our offer. If we are able to resolve any such challenge prior to the completion of our offer we would be prepared to reduce the minimum tender condition to as low as 12.5% of Clearwire’s fully diluted voting stock provided we obtain the minimum governance rights described above.

(c) Termination of Sprint Funding. DISH’s offer to acquire Clearwire shares and its purchase of exchangeable notes would be conditioned on termination of the funding arrangements under the Sprint exchangeable note purchase agreement with no further draws on the facility other than the June draw to the extent that irrevocable notice of that draw has already been delivered to Sprint.

3. Definitive Documentation. DISH is prepared to move expeditiously. We have prepared and are ready to file an offer to purchase and ancillary documentation (i.e., the note purchase agreement and investor rights agreement). Other than the funding described in paragraph 1 above, the remaining components of the transaction would be subject to customary closing conditions, including the receipt of applicable governmental and regulatory approvals.

4. Clarification Contacts. In the event that you have any questions about our offer or require any additional information, we ask that you contact us. We and our advisors will be available at any time to respond to your requests. Please contact:

Thomas A. Cullen
Executive Vice President
9601 S. Meridian Blvd.
Englewood, CO 80112
Telephone: (303) 723-1047
Facsimile: (303) 723-2076
email: thomas.cullen@dish.com

We are confident that this offer is clearly superior to the proposed Sprint merger. It offers substantially greater value to Clearwire and your minority stockholders and a clearer path to value realization for all parties. Importantly, it also provides a meaningful alternative to the significant group of your minority stockholders that remain opposed to the Sprint merger. We also are confident based on our conversations with you and our review of your publicly available governance arrangements that it can be executed without being subject to a successful challenge by any of your existing major stockholders. Our offer is not subject to any financing contingency. While we would still be pleased to work towards a mutually agreeable spectrum transaction with Clearwire in the future, we thought it important to make this improved, yet simplified offer now.

Our Board of Directors has approved this offer and no further internal approvals are required for DISH to execute this transaction. While we continue to be hopeful that we can work cooperatively toward a transaction, considering the abbreviated notice for and timing of your adjourned stockholders’ meeting, we feel compelled to release this letter publicly. We also intend to take our offer directly to your stockholders by commencing a tender offer prior to your stockholders’ meeting.

We look forward to hearing from you.

Sincerely,

DISH Network Corporation

Charlie Ergen
Chairman

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