AIRV Air Via (MM)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934 (AMENDMENT NO. )

 

Filed by the Registrant þ

Filed by a Party other than the Registrant o

 

Check the appropriate box:

 

o   Preliminary Proxy Statement

o   Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

þ   Definitive Proxy Statement

o   Definitive Additional Materials

o   Soliciting Material Pursuant to § 240.14a-12

 

AIRVANA, INC.

(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):

 

 

 

Common stock, par value $0.001 per share, of Airvana, Inc. (the “Airvana common stock”).

 

 

 

63,073,600 shares of Airvana common stock and options to purchase 13,343,199 shares of Airvana common stock.

 

 

 

The maximum aggregate value was determined based on the sum of: (a) 63,073,600 shares of Airvana common stock multiplied by $7.65 per share; and (b) 13,343,199 shares of Airvana common stock underlying outstanding stock options with exercise prices less than $7.65 per share multiplied by $4.041 (which is the difference between $7.65 per share and the weighted average exercise price per share). The filing fee was determined by multiplying $0.00007130 by the maximum aggregate value of the transaction as determined in accordance with the preceding sentence.

 

 

 

$536,432,907

 

 

 

$38,248

 

 

 

 

 

 

 

 

 

 

 

 

 

AIRVANA, INC.
19 Alpha Road
Chelmsford, Massachusetts 01824

 

March 11, 2010

 

Dear Fellow Stockholder:

 

Airvana, Inc., a Delaware corporation (“Airvana” or the “Company”), entered into an Agreement and Plan of Merger dated as of December 17, 2009 (the “merger agreement”) with 72 Mobile Holdings, LLC, a Delaware limited liability company (“Parent”), and 72 Mobile Acquisition Corp. (“Merger Sub”), a wholly-owned subsidiary of Parent. Parent is a newly formed entity to be owned, directly and indirectly, by affiliates of S.A.C. Private Capital Group, LLC, GSO Capital Partners LP, Zelnick Media and funds advised by Sankaty Advisors, LLC upon consummation of the merger. In addition, Randall Battat, President and Chief Executive Officer of the Company, and Vedat Eyuboglu and Sanjeev Verma, Vice Presidents and co-founders of the Company (together, with certain of their affiliates, the “Rollover Stockholders”), will exchange a portion of their Airvana shares for an equity interest in Parent.

 

Under the terms of the merger agreement, Merger Sub will be merged with and into the Company, with the Company continuing as the surviving corporation (the “merger”). If the merger is completed, you will be entitled to receive $7.65 in cash, without interest and less any applicable withholding taxes, for each share of Airvana common stock that you own.

 

A special meeting of our stockholders will be held on April 9, 2010, at 10:00 a.m., local time, to vote on a proposal to adopt the merger agreement so that the merger can occur. The special meeting will be held at the offices of Wilmer Cutler Pickering Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109. Notice of the special meeting and the related proxy statement is enclosed.

 

The accompanying proxy statement gives you detailed information about the special meeting and the merger and includes the merger agreement as Annex A. The receipt of cash in exchange for shares of Airvana common stock in the merger will constitute a taxable transaction for U.S. federal income tax purposes. We encourage you to read the proxy statement and the merger agreement carefully.

 

Our board of directors has determined that the merger and the merger agreement are advisable and fair to and in the best interests of Airvana and its unaffiliated stockholders, and approved the merger agreement and the transactions contemplated thereby, including the merger. This recommendation is based, in part, upon the unanimous recommendation of a special committee of the board of directors consisting of four independent and disinterested directors.

 

Your vote is very important.   We cannot complete the merger unless holders of a majority of all outstanding shares of Airvana common stock entitled to vote on the matter vote to adopt the merger agreement. Our board of directors recommends that you vote “FOR” the proposal to adopt the merger agreement. The failure of any stockholder to vote on the proposal to adopt the merger agreement will have the same effect as a vote against the adoption of the merger agreement .

 

Whether or not you plan to attend the special meeting, please complete, date, sign and return, as promptly as possible, the enclosed proxy by mail in the accompanying reply envelope, or submit your proxy by telephone or the Internet. Stockholders who attend the meeting may revoke their proxies and vote in person.

 

Our board of directors and management appreciate your continuing support of the Company, and we urge you to support this transaction.

 

Sincerely,

 

Anthony S. Thornley

Chair of the Special Committee and

Lead Director of the Board

 

Neither the Securities and Exchange Commission nor any state securities regulatory agency has approved or disapproved the merger, passed upon the merits or fairness of the merger or passed upon the adequacy or accuracy of the disclosure in this document. Any representation to the contrary is a criminal offense.

 

The proxy statement is dated March 11, 2010, and is first being mailed to stockholders on or about March 12, 2010.

 

AIRVANA, INC.

19 Alpha Road

Chelmsford, Massachusetts 01824

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

to be held on April 9, 2010

 

Dear Airvana Stockholder:

 

Airvana, Inc., a Delaware corporation (the “Company”), will hold a special meeting of stockholders at the offices of Wilmer Cutler Pickering Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109, at 10:00 a.m., local time, on April 9, 2010, 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, 2009 (the “merger agreement”), by and among the Company, 72 Mobile Holdings, LLC, a Delaware limited liability company (“Parent”), and 72 Mobile Acquisition Corp., a wholly-owned subsidiary of Parent (“Merger Sub”), as such agreement may be amended from time to time.

 

2. To approve the adjournment of the special meeting, if necessary, to solicit additional proxies in the event there are not sufficient votes in favor of adoption of the merger agreement at the time of the special meeting.

 

3. To act upon other business as may properly come before the special meeting and any and all adjourned or postponed sessions thereof.

 

Only record holders of Airvana common stock at the close of business on February 23, 2010 are entitled to receive notice of, and will be entitled to vote at, the special meeting, including any adjournments or postponements of the special meeting.

 

We urge you to read the accompanying proxy statement carefully as it sets forth details of the proposed merger and other important information related to the merger.

 

Under Delaware law, if the merger is completed, holders of Airvana common stock who do not vote in favor of adoption of the merger agreement will have the right to seek appraisal of the fair value of their shares as determined by the Delaware Court of Chancery. In order to exercise your appraisal rights, you must submit a written demand for an appraisal prior to the stockholder vote on the merger agreement, not vote in favor of adoption of the merger agreement and comply with other Delaware law procedures explained in the accompanying proxy statement.

 

Your vote is important and we urge you to complete, sign, date and return your proxy card as promptly as possible by mail in the accompanying reply envelope, whether or not you expect to attend the special meeting. If you are unable to attend in person and you return your proxy card, your shares will be voted at the special meeting in accordance with your proxy. You may also submit a proxy by telephone by calling 1-800-662-7232 in the United States and 781-575-2300 from foreign countries or through the Internet at www.investorvote.com/AIRV using the control number on your proxy card. If your shares are held in “street name” by your broker or other nominee, only that holder can vote your shares unless you obtain a valid legal proxy from such broker or nominee. You should follow the directions provided by your broker or nominee regarding how to instruct such broker or nominee to vote your shares.

 

The merger is described in the accompanying proxy statement, which we urge you to read carefully. A copy of the merger agreement is attached as Annex A to the proxy statement.

 

By Order of the Board of Directors,

 

 

Peter C. Anastos

Vice President, General Counsel and Secretary

 

Chelmsford, Massachusetts

March 11, 2010

 

TABLE OF CONTENTS

 

 

References to “Airvana,” the “Company,” “we,” “our” or “us” in this proxy statement refer to Airvana, Inc., and its subsidiaries unless otherwise indicated by context.

 

SUMMARY TERM SHEET

 

The Merger and the Merger Agreement

	•	The Parties to the Merger (see page 66).   Airvana, Inc., a Delaware corporation, helps operators transform the mobile experience for users worldwide. Airvana’s high-performance technology and products, from core mobile network infrastructure to comprehensive femtocell solutions, enable operators to deliver compelling and consistent broadband services to mobile subscribers, wherever they are. Airvana’s products are deployed in over 70 commercial networks on six continents. 72 Mobile Holdings, LLC, which we refer to as “Parent,” is a newly formed Delaware limited liability company that was formed solely for the purpose of entering into the merger agreement and consummating the transactions contemplated by the merger agreement. Parent has not engaged in any business except for activities incident to its formation and in connection with the transactions contemplated by the merger agreement. 72 Mobile Acquisition Corp, which we refer to as “Merger Sub,” is a Delaware corporation and a wholly owned subsidiary of Parent. Merger Sub was formed solely for the purpose of entering into the merger agreement and consummating the transactions contemplated by the merger agreement. Merger Sub has not engaged in any business except for activities incident to its incorporation and in connection with the transactions contemplated by the merger agreement.

	•	The Merger (see page 70).   You are being asked to vote to adopt an agreement and plan of merger dated as of December 17, 2009 by and among Airvana, Parent and Merger Sub, as it may be amended from time to time, which agreement we refer to as the “merger agreement.” Pursuant to the merger agreement, Merger Sub will merge with and into Airvana, which we refer to as the “merger.” Airvana will be the surviving corporation in the merger, which we refer to as the “surviving corporation,” and will continue to do business as “Airvana” following the merger. As a result of the merger, Airvana will cease to be an independent, publicly traded company.

	•	Merger Consideration (see page 71).   If the merger is completed, each share of our common stock, other than as provided below, will be converted into the right to receive $7.65 in cash, without interest and less any applicable withholding taxes. We refer to this consideration per share of common stock to be paid in the merger as the “merger consideration.” The following shares of our common stock will not be converted into the right to receive the merger consideration in connection with the merger: (a) shares held by any of our stockholders who are entitled to and who properly exercise, and do not withdraw or lose, appraisal rights under Delaware law, (b) shares held by any of our wholly owned subsidiaries and (c) shares held by Parent or any of its wholly owned subsidiaries, including shares that each of Randall Battat, Vedat Eyuboglu and Sanjeev Verma, and certain of their affiliates, either personally or as trustees of certain trusts, whom we collectively refer to in such capacities as the “Rollover Stockholders,” have agreed to contribute to Parent immediately prior to the completion of the merger in exchange for equity interests in Parent. Mr. Battat is the Company’s President and CEO. Dr. Eyuboglu is our Chief Technology Officer and a founder of the Company. Mr. Verma is our Vice President, Femtocell Business and Corporate Development and a founder of the Company. The Rollover Stockholders and their respective affiliates collectively owned approximately 10.0% of the Airvana common stock outstanding as of the record date for the special meeting.

	•	Treatment of Options (see page 72).   Upon consummation of the merger, each outstanding option to purchase shares of Airvana common stock will be fully vested, to the extent not already fully vested, and cancelled, and thereafter will solely represent the right to receive from the surviving corporation in

		exchange, at the effective time of the merger or as soon as practicable thereafter, a cash payment equal to the product of (i) the number of shares of Airvana common stock subject to such option immediately prior to the effective time of the merger, multiplied by (ii) the excess, if any, of the merger consideration of $7.65 per share of Airvana common stock over the exercise price per share of Airvana common stock subject to such option.

	•	Conditions to Closing the Merger (see page 80).   The obligations of the parties to consummate the merger is subject to the satisfaction or waiver of a number of conditions, including the following:

	•	the adoption of the merger agreement by the affirmative vote of the holders of a majority of the outstanding shares of Airvana common stock;
	•	the expiration or termination of the waiting period applicable to the merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, which we refer to as the “HSR Act;”
	•	other than the filing of the certificate of merger, all authorizations of, filings with, or expirations of waiting periods imposed by, any governmental entity in connection with the merger having been obtained, filed or occurred except for failures not reasonably like to have a “Buyer Material Adverse Effect” or a “Company Material Adverse Effect” (each as defined in the merger agreement);
	•	the absence of an order suspending the use of this proxy statement or a proceeding for that purpose initiated or threatened in writing by the Securities and Exchange Commission, which we refer to as the “SEC,” or its staff;
	•	the absence of any governmental orders that have the effect of making the merger illegal or otherwise preventing the consummation of the merger;
	•	each party’s respective representations and warranties in the merger agreement being true and correct as of the closing date of the merger in the manner described in “ The Merger Agreement — Conditions to Closing the Merger ;”
	•	each party’s performance in all material respects of its obligations required to be performed under the merger agreement on or prior to the closing date of the merger;
	•	the absence of a “Company Material Adverse Effect” since the date of the merger agreement;
	•	our “Adjusted EBITDA” (as defined in “ The Merger Agreement — Definition of Adjusted EBITDA ”) for the twelve month period ended at least 30 days prior to the closing date of the merger being not less than $95 million; and
	•	Parent’s delivery to us of a solvency certificate substantially similar in form and substance to the solvency certificate to be delivered by Parent to its lenders that are financing, in part, this transaction.

	•	Restrictions on Solicitation of Other Offers (see page 83) or Restrictions on Change of Recommendation to Stockholders (see page 84) . We generally have agreed not to:

	•	solicit, initiate or knowingly encourage any inquiries or the making of any proposal or offer that constitutes, or could reasonably be expected to lead to, any acquisition proposal; or
	•	enter into, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any person any non-public information in response to, or otherwise for the purpose of encouraging or facilitating, any acquisition proposal.

	•	furnish information with respect to the Company to the person making such acquisition proposal; and
	•	engage in discussions or negotiations with such person.

	•	Termination (see page 85).   Airvana, Parent and Merger Sub may agree to terminate the merger agreement at any time prior to the effective time of the merger, even after our stockholders have adopted the merger agreement. The merger agreement may also be terminated in certain other circumstances, including:

	•	by either Airvana or Parent, if:

	•	the merger has not been consummated by June 15, 2010, except that this termination right will not be available to any party whose failure to fulfill any obligation under the merger agreement has been a principal cause of or resulted in the failure of the merger to occur on or before such date;
	•	a governmental entity of competent jurisdiction has issued a nonappealable final order, decree or ruling or taken any other nonappealable final action, in each case having the effect of permanently restraining, enjoining or otherwise prohibiting the merger, except that this termination right will not be available to any party whose failure to fulfill any obligation under the merger agreement has been a principal cause of or resulted in such order, decree, ruling or other action; or
	•	our stockholders do not vote to adopt the merger agreement at the special meeting.

	•	by Parent, if:

	•	(a) our board of directors fails to recommend the approval of the merger in the proxy statement distributed to our stockholders or withholds, withdraws, amends or modifies its recommendation of the merger to our stockholders in a manner adverse to Parent, (b) our board of directors adopts, approves, endorses or recommends to our stockholders another acquisition proposal, (c) a tender offer or exchange offer for our outstanding common stock is commenced and our board of directors recommends that our stockholders tender their shares in such tender or exchange offer or, within ten (10) business days after the public announcement of such tender or exchange offer, fails to recommend that our stockholders reject such offer and reaffirm its recommendation that our stockholders adopt the merger agreement, (d) we enter into an agreement concerning another acquisition proposal or (e) we or our board of directors publicly announces an intention to do any of the foregoing; or
	•	we breach or fail to perform any of our representations, warranties, covenants or agreements in the merger agreement and such breach or failure to perform would cause the conditions to the obligations of Parent and Merger Sub to consummate the closing not to be satisfied and such breach or failure to perform is not timely cured or is not capable of being cured, except that Parent

		does not have the right to terminate the merger agreement if it or Merger Sub is then in material breach of any of its representations, warranties, covenants or agreements and such breach would cause the conditions to our obligation to consummate the closing not to be satisfied.

	•	by Airvana, if:

	•	our board of directors pursuant to and in compliance with our non-solicitation obligations under the merger agreement, adopts, approves, endorses or recommends to our stockholders another acquisition proposal (or publicly proposes to do so) and prior to or simultaneously with such termination we pay to Parent in cash a $15 million termination fee;
	•	Parent or Merger Sub breaches or fails to perform any of their representations, warranties, covenants or agreements in the merger agreement and such breach or failure to perform would cause the conditions to our obligation to consummate the closing not to be satisfied and such breach or failure to perform is not timely cured or is not capable of being cured, except that the we do not have the right to terminate the merger agreement if we are then in material breach of any of our representations, warranties, covenants or agreements and such breach would cause the conditions to the obligations of Parent and Merger Sub to consummate the closing not to be satisfied; or
	•	all of the conditions to the obligations of Parent and Merger Sub to consummate the merger have been satisfied and Parent and Merger Sub fail to consummate the merger within ten (10) business days following the date the closing should have otherwise occurred.

	•	Termination Fees (see page 86) and Expense Reimbursement (see page 87) .  If the merger agreement is terminated, depending upon the certain circumstances under which such termination occurs:

	•	we may be obligated to pay Parent a termination fee of $15 million (less any expenses of Parent reimbursed by us in connection with such termination);
	•	we may be obligated to reimburse Parent for expenses actually incurred related to the transactions contemplated by the merger agreement, up to a total cap of $3 million; or
	•	Parent may be obligated to pay us a reverse termination fee of $25 million.

	•	Limitations on Remedies and Liability Cap (see page 87).

	•	Each of Parent and Merger Sub is entitled to an injunction to prevent breaches of the merger agreement by us and to enforce specifically the terms of the merger agreement against us, in addition to any other remedy to which it may be entitled. However, we are not entitled to enforce specifically the terms of the merger agreement against either of Parent or Merger Sub.
	•	Parent’s liability relating to the merger agreement is limited to the $25 million reverse termination fee plus interest (at the prime rate) and reimbursement of reasonable costs and expenses we may incur in enforcing our right to payment of such reverse termination fee.
	•	Our liability relating to the merger agreement is limited to the $15 million termination fee plus interest (at the prime rate) and reimbursement of reasonable costs and expenses Parent may incur in enforcing its right to payment of such termination fee. However, such liability limitation will in no way limit the rights of each of Parent and Merger Sub to seek an injunction to prevent breaches of the merger agreement by us and to enforce specifically the terms of the merger agreement against us.

 

The Special Meeting

 

Other Important Considerations

	•	Recommendation of the Special Committee (see page 28).   The special committee is a committee of our board of directors that was formed on July 9, 2009. The special committee has authority to establish, monitor and direct the process and procedures related to the review and evaluation of one or more proposals made to the Company by S.A.C. Private Capital Group, LLC, which we refer to as “SAC PCG,” and any alternative transaction. The special committee had the authority to solicit other proposals, to determine not to proceed with any such proposal or transaction, to reject or approve any such proposal or transaction, or recommend such rejection or approval to the board of directors, and to recommend to the board of directors whether any such proposal or transaction is advisable and is fair to, and in the best interests of, the Company and its stockholders. The special committee unanimously determined that the merger, the consideration to be paid in the merger, and the other terms and provisions of the merger agreement are fair to, advisable and in the best interests of the Company and its unaffiliated stockholders (by which we mean, for purposes of this determination, holders of Airvana common stock other than officers or directors of the Company or Rollover Stockholders). The special committee recommended that the board of directors accept the merger agreement and the terms and conditions of the merger and the merger agreement as being fair to, advisable and in the best interests of the Company and its unaffiliated stockholders, approve and adopt the merger agreement, and recommend adoption of the merger agreement by the holders of Airvana common stock.
	•	Recommendation of the Board of Directors (see page 33) .  The Company’s board of directors, acting upon the unanimous recommendation of the special committee and without the participation of Messrs. Battat and Verma, recommends that Airvana’s stockholders vote “FOR” the adoption of the merger agreement, and “FOR” the adjournment of the special meeting, if necessary, to solicit additional proxies in the event there are not sufficient votes in favor of adoption of the merger agreement at the time of the special meeting.

	•	Voting by Airvana’s Directors and Executive Officers (see page 68) .  As of February 23, 2010, the record date, the directors and executive officers of Airvana and their affiliates held and are entitled to vote, in the aggregate, shares of Airvana common stock representing approximately 48.6% of the outstanding shares of Airvana common stock. The directors and executive officers have informed Airvana that they currently intend to vote all of these shares of Airvana common stock “FOR” the adoption of the merger agreement and “FOR” the adjournment proposal.

	•	Interests of the Company’s Directors and Executive Officers in the Merger (see page 57) .  Upon the consummation of the merger, all stock options held by our directors and executive officers will vest, and each vested and unexercised stock option will be cashed out in an amount equal to the excess of $7.65 over the option exercise price. As of January 3, 2010, our directors and executive officers and their affiliates, as a group, beneficially owned, excluding all shares of common stock to be rolled over by the Rollover Stockholders, 27,174,700 shares of Airvana common stock and vested and unvested options to purchase 4,798,645 shares of Airvana common stock. Together, these securities represent 41.8% of the total Airvana securities that are subject to purchase as part of the merger. The maximum total amount of all cash payments our directors and executive officers may receive in respect of their beneficially owned Airvana securities upon the consummation of the merger is approximately $229.8 million, as more fully described on page 59. In considering the recommendation of our board of directors, you should be aware that some of our directors and executive officers have interests in the merger that are different from, or in addition to, your interests as a stockholder and that may present actual or potential conflicts of interest. These interests include, among others:

	•	accelerated vesting of stock options with exercise prices of less than $7.65 per share;
	•	the expected ownership of equity interests in Parent or its affiliates by the Rollover Stockholders after completion of the merger in exchange for certain shares of Airvana common stock which they currently own;

	•	the anticipated entry into new employment arrangements by certain of our executive officers, including Messrs. Battat and Verma and Dr. Eyuboglu in connection with the completion of the merger;
	•	the anticipated establishment of an equity-based compensation plan and grants of equity awards to our executive officers and other key employees after completion of the merger; and
	•	continued indemnification and directors’ and officers’ liability insurance applicable to the period prior to completion of the merger.

	•	Opinion of the Special Committee’s Financial Advisor (see page 34).

	•	Goldman, Sachs & Co., which we refer to as “Goldman Sachs,” delivered its opinion to the special committee that, as of December 17, 2009 and based upon and subject to the factors and assumptions set forth therein, the $7.65 per share in cash to be paid to the holders (other than the Rollover Stockholders) of the outstanding shares of the Company common stock pursuant to the merger agreement was fair from a financial point of view to such holders.
	•	The full text of the written opinion of Goldman Sachs, dated December 17, 2009, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex B to this proxy statement. Goldman Sachs provided its opinion for the information and assistance of the special committee in connection with its consideration of the merger agreement. The Goldman Sachs opinion is not a recommendation as to how any holder of the Company common stock should vote with respect to the merger or any other matter. Pursuant to an engagement letter among the special committee, the Company and Goldman Sachs, the Company has agreed to pay Goldman Sachs a transaction fee equal to approximately $6.3 million, $5.8 million of which is contingent upon consummation of the merger.

	•	Financing of the Merger (see page 54).   The merger agreement does not contain any condition relating to the receipt of financing by Parent or Merger Sub. Parent estimates that the aggregate amount of financing necessary to complete the merger and the payment of related fees and expenses will be approximately $530 million. This amount is expected to be funded by Parent and Merger Sub with a combination of the equity financing contemplated by the commitment letters described below, debt financing contemplated by the commitment letter described below and cash of the Company. The equity and debt financings are subject to the satisfaction of the conditions set forth in the commitment letters pursuant to which such financings will be provided.

	•	Equity Financing.   Parent has received an equity commitment letter from S.A.C. Capital Management, LLC to purchase, or cause to be purchased, up to $103.1 million of equity of Parent. Approximately $92.5 million of that commitment has been assigned to 72 Mobile Investors, LLC, which we refer to as “Investment Vehicle.” Parent has also received an equity commitment letter from GSO Capital Partners LP, which we refer to as “GSO,” to purchase, or cause to be purchased, up to $10 million of equity of Parent. In addition, the Rollover Stockholders have agreed to contribute to Parent an aggregate of 3,738,562 shares of our common stock (with an aggregate value of approximately $28.6 million, based on the merger consideration).

	•	Debt Financing.   Parent has received a debt financing commitment letter that provides for up to $170.0 million of debt financing from GSO, on behalf of certain funds managed by GSO. On January 13, 2010, the debt financing commitment letter was amended.

	•	Regulatory Approvals (see page 53) .  Under the HSR Act and the rules promulgated thereunder by the Federal Trade Commission, which we refer to as the “FTC,” the merger may not be completed until notification and report forms have been filed with the FTC and the Antitrust Division of the Department of Justice, which we refer to as the “DOJ,” and the applicable waiting period has expired or been terminated. Airvana and Parent filed notification and report forms under the HSR Act with the FTC and the Antitrust Division of the DOJ on January 15, 2010. The FTC and DOJ terminated the mandatory waiting period under the HSR Act on January 27, 2010.
	•	Material U.S. Federal Income Tax Consequences of the Merger to Our Stockholders (see page 61) .  The conversion of shares of our common stock into the right to receive the $7.65 per share cash merger consideration will be a taxable transaction to our stockholders for U.S. federal income tax purposes.
	•	Appraisal Rights (see page 90).   Holders of our common stock who object to the merger may elect to pursue their appraisal rights to receive the judicially determined “fair value” of their shares, which could be more or less than, or the same as, the per share merger consideration for the common stock, but only if they comply with the procedures required under Delaware law. In order to qualify for these rights, you must (1) not vote in favor of adoption of the merger agreement, nor consent thereto in writing, (2) make a written demand for appraisal prior to the taking of the vote on the adoption of the merger agreement at the special meeting and (3) otherwise comply with the Delaware law procedures for exercising appraisal rights. For a summary of these Delaware law procedures, see “Appraisal Rights” beginning on page 90. An executed proxy that is not marked “AGAINST’’ or “ABSTAIN” will be voted for adoption of the merger agreement and will disqualify the stockholder submitting that proxy from demanding appraisal rights. A copy of Section 262 of the General Corporation Law of the State of Delaware, or DGCL, is also included as Annex C to this proxy statement. Failure to follow the procedures set forth in Section 262 of the DGCL will result in the loss of appraisal rights.
	•	Market Price of Airvana Common Stock (see page 102).   The closing sale price of Airvana common stock on The NASDAQ Stock Market, which we refer to as “NASDAQ,” on December 17, 2009, the last trading day prior to the announcement of the merger, was $6.24 per share. The $7.65 per share to be paid for each share of Airvana common stock in the merger represents a premium of approximately 23% to the closing price on December 17, 2009. On March 10, 2010, which is the most recent practicable trading date prior to the date of the proxy statement, the closing trading price of our common stock was $7.72 per share.

 

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 do not address all questions that may be important to you as an Airvana stockholder. 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 or incorporated by reference in this proxy statement, which you should read carefully.

 

The Proposed Merger

 

 

This discussion of the merger is qualified by reference to the merger agreement, which is attached to this proxy statement as Annex A. You should read the entire merger agreement carefully as it is the legal document that governs the merger.

 

The board of directors of the Company (the “board”) regularly reviews and evaluates the Company’s business strategy and strategic alternatives with the goal of enhancing stockholder value.

 

In December 2007, after considering the risks and uncertainties of the Company’s current business model, including the uncertainties relating to the continued market for the Company’s principal EV-DO products and the risks relating to the Company’s efforts to develop its femtocell business, the board engaged a financial advisor to explore strategic alternatives available to the Company, including a possible sale of the Company. Over the next several months, the Company’s financial advisor contacted a number of potential strategic and financial buyers to assess their interest in a business combination with the Company. In the course of this process, the Company entered into a non-disclosure agreement with one potential strategic buyer, which expressed interest in acquiring the Company for between $5.80 and $6.20 per share. This process did not lead to any transaction and, on May 1, 2008, Airvana terminated the engagement of its financial advisor.

 

From September 2008 to January 2009, Airvana had exploratory discussions with two potential strategic buyers with respect to a possible business combination. One of the parties (“Bidder B”) initially expressed interest in acquiring the Company for $5.75 per share and subsequently orally indicated a willingness to consider a higher price, but discussions ended without any agreement. The other party declined to make any acquisition proposal.

 

On March 6, 2009, Merle Gilmore, a consultant to SAC PCG, contacted Randall S. Battat, President and Chief Executive Officer of the Company, to discuss SAC PCG’s possible interest in investing in certain technologies being offered for sale by one of the Company’s customers. During the discussion, Mr. Battat related to Mr. Gilmore that there might be an opportunity for SAC PCG to engage in a strategic transaction with the Company.

 

On March 10, 2009, at a meeting of the board, the directors discussed the possible interest of SAC PCG in a strategic transaction, and the board authorized management to explore possible acquisition alternatives, including an approach to Bidder B.

 

In mid-March 2009, Bidder B declined to pursue acquisition discussions with the Company.

 

On March 27, 2009, SAC PCG and the Company entered into a non-disclosure agreement.

 

On March 30, 2009, Messrs. Randall S. Battat, President and Chief Executive Officer of the Company; Sanjeev Verma, Vice President, Femto Business and Corporate Development; Dr. Vedat M. Eyuboglu, Vice President, Chief Technical Officer; and Mr. Jeffrey D. Glidden, Chief Financial Officer of the Company met with Messrs. Gilmore; Frank Baker, managing director of SAC PCG; Philip Lo, an associate of SAC PCG; and Michael Seedman, a consultant to SAC PCG, to review the business of the Company.

 

On April 22, 2009, Messrs. Battat, Verma and Glidden and Dr. Eyuboglu held a telephone call with Messrs. Baker, Gilmore and Lo to discuss the Company’s EV-DO business.

 

On April 27, 2009, at a meeting of the board, Mr. Battat reviewed the status of SAC PCG’s review of the business of the Company. It was the consensus of the board that management should continue to allow SAC PCG to engage in a diligence review of the Company.

 

In May 2009, representatives of SAC PCG met on several occasions with Messrs. Battat, Verma and Glidden and Dr. Eyuboglu to continue their diligence review of the business of the Company. During one of these meetings, SAC PCG discussed hypothetical structures for a potential acquisition by SAC PCG of all or a majority of the Company’s outstanding shares at a price of $6.50 per share. Management indicated to SAC PCG that the board would likely not be receptive to considering a transaction at that valuation.

On May 19, 2009, at a meeting of the board, Mr. Battat reviewed the status of the diligence review by SAC PCG. It was the consensus of the board that such review should continue.

 

On June 1, 2009, Messrs. Baker, Gilmore, Seedman and Lo met with Messrs. Battat, Verma and Glidden and Dr. Eyuboglu to continue SAC PCG’s diligence review.

 

On June 2, 2009, Messrs. Battat and Verma and Dr. Eyuboglu met with Mr. Paul J. Ferri, a member of the board and a founding partner of one of the Company’s principal stockholders, to discuss generally the status of SAC PCG’s review of the Company and various possible strategic alternatives, including a potential sale of the Company.

 

On June 10, 2009, at a meeting of the board, Mr. Battat reviewed the status of the discussions with SAC PCG and, specifically, SAC PCG’s request that it be permitted to share non-public information with third parties that might be interested in providing financing to SAC PCG for a possible transaction with the Company. As it was likely that any proposal from SAC PCG would assume that certain members of the Company’s management would agree to maintain some equity ownership in the Company and continue to be employed by the Company, the board determined that Messrs. Battat and Verma should be excluded from the board’s consideration of the request by SAC PCG or any potential transaction with SAC PCG.

 

On June 12, 2009, a meeting of a majority of the non-employee members of the board (consisting of Messrs. Hassan Ahmed, Gururaj Deshpande, Ferri and Anthony Thornley) was convened to discuss an appropriate response to the approach by SAC PCG. Representatives from Wilmer Cutler Pickering Hale and Dorr LLP (“WilmerHale”), the Company’s regular outside counsel, described to the directors their fiduciary responsibilities in considering a potential transaction with SAC PCG. The directors determined they did not have sufficient information to assess the level of interest of SAC PCG or the likelihood that it would be able to obtain financing for a transaction. It was therefore the consensus of the directors that the next step should be for Mr. Ferri or Mr. Thornley to call representatives of SAC PCG and try to gain more information that would enable the non-employee directors to assess any acquisition proposal that SAC PCG might make. The directors also determined that, in the event SAC PCG submitted an indication of interest to acquire the Company on terms that merited consideration by the board, the board would form a special committee of the board (the “special committee”) to evaluate such proposal. As the board recognized that any such proposal would likely assume that management would maintain some equity ownership in the Company and continue to be employed by the Company, it was determined that employee board members should not serve on any such committee. Also, it was determined that Mr. Deshpande would not serve on any such committee because a company with which he is affiliated could be a potentially interested party in a strategic transaction involving the Company. The board determined that it would be appropriate to form such a special committee, and have such committee engage its own legal and financial advisors, only after it had obtained additional information sufficient for it to evaluate the level of SAC PCG’s interest in an acquisition and the likelihood of its ability to finance such an acquisition.

 

On June 15, 2009, at a meeting of a majority of the non-employee directors (consisting of Messrs. Ferri, Thornley, Ahmed and Deshpande), the directors discussed SAC PCG’s request that it be permitted to approach potential financing sources for an acquisition of the Company in order to determine whether a transaction with the Company could be financed. The non-employee directors discussed this request and determined that SAC PCG should be given consent to approach a limited number of potential financing sources. The non-employee directors also determined to invite SAC PCG to submit a written preliminary indication of interest with respect to a possible transaction involving the Company so that the non-employee directors could better understand and evaluate the terms of any proposed transaction and SAC PCG’s level of interest.

 

Following the June 15, 2009 meeting, Mr. Ferri called Mr. Baker of SAC PCG to relay the non-employee directors’ invitation to submit a written expression of interest. A written invitation was sent on June 25, 2009.

 

On June 29, 2009, SAC PCG sent to Messrs. Ferri and Thornley a letter containing a preliminary indication of interest to acquire the Company for $7.00 per share in cash. SAC PCG’s preliminary indication of interest assumed that certain unspecified members of management would retain a significant equity interest in the Company and was subject to various conditions, including a financing condition and the Company’s

collection of approximately $35 million in accounts receivable from its primary customer (Nortel) or its successor through bankruptcy. The letter contemplated that the Company would negotiate exclusively with SAC PCG and not seek or negotiate with any other prospective acquirers.

 

On June 30, 2009, at a meeting of a majority of the non-employee members of the board (consisting of Messrs. Ferri, Thornley and Robert P. Badavas), the terms of SAC PCG’s June 29 letter were reviewed. It was determined that Messrs. Ferri and Thornley should continue to have discussions with SAC PCG to assess further SAC PCG’s expression of interest and the financing risks before convening a meeting of the full board to determine whether to establish a special committee of the board to consider whether to explore further SAC PCG’s preliminary indication of interest or other strategic alternatives that might be available to the Company.

 

On July 7, 2009, Messrs. Gilmore and Baker and Peter Berger, a managing director of SAC PCG, met with Messrs. Thornley and Ferri to discuss SAC PCG’s interest in acquiring the Company. At the meeting, the parties discussed generally SAC PCG’s interest in acquiring the Company, its transactional experience and its financing plans.

 

On July 9, 2009, at a meeting of the board, the board discussed SAC PCG’s indication of interest, as well as the advisability of examining other strategic alternatives that might be available to the Company. Representatives from WilmerHale advised the board regarding its fiduciary duties in considering strategic alternatives. Recognizing that one possible alternative was a sale of the Company to a financial buyer such as SAC PCG that could involve certain employee directors and management being asked to participate in such a transaction by becoming equity participants and retaining their managerial positions, the board determined that there could be a conflict of interest between certain members of management and the Company’s stockholders. Additionally, the board discussed the potential conflict arising from Mr. Deshpande’s affiliation with a company that had previously expressed interest in an acquisition of the Company, and that might express renewed interest in the future. In view of these possible conflicts, the board determined that it should establish a special committee comprised of independent, non-employee directors to review, evaluate, consider and negotiate potential strategic alternatives involving the Company, including the alternative of remaining independent and pursuing the Company’s existing strategy. Mr. Ferri then discussed the significant position in the Company held by Matrix Partners, an investment firm with which he was affiliated (“Matrix”). Mr. Ferri disclosed to the board that the initial term of a Matrix partnership that held some of Matrix’s equity interest in the Company was scheduled to expire near the end of 2009 but that the expiration date could be extended. Mr. Ferri advised the board that Matrix had made no decision about whether to extend the term of the partnership, that the initial expiration date of the partnership did not require Matrix to distribute or sell its shares at any particular time and that, accordingly, the expiration date of the partnership should not be considered by the board or a special committee in deciding to pursue or reject any strategic alternatives. The board determined that Mr. Ferri should continue to participate in discussions concerning strategic alternatives for the Company. They noted, among other things, that Matrix’s significant share position could operate as an effective veto over any prospective transaction, and that, in the event the board determined that a sale of the Company was in the best interest of stockholders, the interests of Matrix in obtaining the highest value available was aligned with the interests of other stockholders. After discussion, the board established a special committee, comprised of the independent, disinterested directors of the board, Messrs. Thornley (as Chair), Ferri, Ahmed and Badavas. The board delegated to the special committee the full power and authority to review and evaluate all strategic alternatives, including to determine whether pursuing a possible sale of the Company would be advisable and fair to, and in the best interests of, the Company and its stockholders, and, as it deemed appropriate, to reject or to recommend to the board any strategic alternative considered by it. The board also resolved that it would not approve a strategic transaction that did not have the approval of the special committee.

 

In the afternoon following the board meeting on July 9, 2009, the special committee met to discuss the process by which it would begin to examine potential strategic alternatives. The special committee determined to engage Ropes & Gray LLP (“Ropes & Gray”) as its legal advisor and Ropes & Gray joined such meeting. The special committee chose Ropes & Gray because of its experience in this area and because Ropes & Gray was independent from the Company and its management, having never represented the Company or its

management. Representatives of Ropes & Gray advised the special committee regarding its fiduciary duties in engaging in a review of strategic alternatives, including a possible sale of the Company, and discussed with the special committee the engagement of a financial advisor to assist it in the discharge of its responsibilities. The special committee resolved to contact certain investment banking firms to assist the special committee in fulfilling its fiduciary obligations. The special committee also directed Ropes & Gray to confirm with the Company’s management (specifically Messrs. Battat, Verma and Glidden and Dr. Eyuboglu) that, because of the possibility of personal interests of management, management should not contact potential parties regarding strategic alternatives and should not discuss with any interested buyer any participation (equity, employment arrangements or otherwise) unless and only to the extent authorized by the special committee. The special committee and Ropes & Gray discussed the preliminary indication of interest presented by SAC PCG to acquire the Company, including SAC PCG’s request for exclusivity in negotiating a potential transaction with the Company. The special committee believed that exclusivity should not be granted to SAC PCG until the special committee further explored the strategic alternatives available to the Company and the special committee instructed Ropes & Gray to contact Simpson Thacher & Bartlett LLP (“Simpson Thacher”), legal counsel to SAC PCG, and inform Simpson Thacher that the special committee was not willing to accept SAC PCG’s request for exclusivity. Simpson Thacher responded to Ropes & Gray that the special committee should consider instead negotiating exclusively with SAC PCG but including in the merger agreement a provision that would permit the board to actively solicit other offers after signing.

 

From July 9, 2009 through July 27, 2009, the special committee identified potential financial advisors and interviewed multiple candidates, including representatives of Goldman Sachs. On July 14, 2009, Goldman Sachs made a presentation on potential strategic alternatives available to the Company. On July 27, 2009, Goldman Sachs was engaged as financial advisor to the special committee. Goldman Sachs was chosen because of its industry experience and expertise and the special committee’s determination of its independence from the Company and the Company’s management. In light of the importance to the special committee of Goldman Sachs’ assistance to the special committee in its determination of what, if any, strategic alternatives could benefit the Company’s stockholders at such time, Goldman Sachs’ compensation was specifically negotiated by the special committee to provide for payment of both a study fee upon the presentation to the special committee of Goldman Sachs’ initial study on the feasibility of strategic alternatives for the Company, irrespective of whether the Company pursues a strategic transaction, and a transaction fee that would be paid, if at all, upon the consummation of a strategic transaction involving the Company.

 

On July 28, 2009, at a meeting of the special committee, the special committee instructed representatives of Goldman Sachs to prepare a presentation for the special committee that included a preliminary financial analysis of the Company and the strategic alternatives available to the Company. The special committee discussed with its advisors SAC PCG’s preliminary indication of interest and subsequent oral requests that the special committee work exclusively with SAC PCG in connection with a sale of the Company. Because the special committee believed that granting such exclusivity would potentially impede an evaluation of other strategic alternatives available to the Company and that a pre-signing market check would be more effective than a post-signing go-shop, the special committee instructed representatives of Goldman Sachs to inform SAC PCG that the special committee was unwilling to grant SAC PCG exclusivity to pursue a transaction with the Company, but had not yet decided what process to undertake in connection with its evaluation of strategic alternatives.

 

On August 11, 2009, at a meeting of the special committee, the special committee discussed SAC PCG’s request to approach additional possible sources of financing. These sources of financing were non-institutional bank lenders, and the special committee determined to allow SAC PCG to approach two additional possible sources of financing, given the challenges that SAC PCG reported having with its other potential sources of financing, so that the Company could evaluate SAC PCG’s ability to finance an acquisition of the Company and because it believed that providing SAC PCG access to these financing sources would not restrict the ability of other potential purchasers of the Company to seek financing for an acquisition of the Company. Representatives of Goldman Sachs then made a presentation to the special committee regarding Goldman Sachs’ preliminary financial analyses of the Company and potential strategic alternatives involving the Company. The special committee discussed “Base Case” and “Downside Case” projections prepared by

management. The special committee discussed concerns about how expected changes to the EV-DO market, including the shift to next generation LTE technology and the financial position of some of the Company’s customers for EV-DO technology, could negatively affect the Company’s results in future periods and create risk and uncertainty about attaining management’s projections. The special committee also discussed the challenges in the Company’s femtocell business, including that the femtocell market was new, the size of the femtocell market was uncertain and the Company had no meaningful experience in developing and selling products for use by consumers. The special committee also discussed the strategic alternatives reviewed by representatives of Goldman Sachs, including the potential for a dividend recapitalization or sale of a portion of the business.

 

On August 13, 2009, at a meeting of the special committee, the special committee concluded that alternatives, such as a dividend recapitalization or sale of the Company’s femtocell or EV-DO businesses, were not likely to be achieved or to generate total value to shareholders in excess of what might be realized upon a sale of the Company, and that the special committee should accordingly proceed to evaluate SAC PCG’s proposal and the availability of other acquisition alternatives. The special committee determined that while it was in the interests of the Company’s stockholders to preserve and continue to evaluate SAC PCG’s proposal, exclusivity should not be granted to SAC PCG at that time. The special committee then discussed the possibility that the publicity associated with a public auction of the Company could be damaging to the Company and concluded that the Company should instead attempt to solicit the interest of a focused group of potential acquirers most likely to be interested. The special committee requested the assistance of Goldman Sachs in indentifying such potentially interested parties. The special committee instructed the Company’s management to set up a “dataroom” with legal and business due diligence materials involving the Company so that potential purchasers could conduct due diligence. Representatives of Goldman Sachs communicated the proposed approach to representatives of SAC PCG later that day.

 

On August 14, 2009, at a meeting of the special committee, the special committee discussed that SAC PCG had earlier that day communicated its intent to withdraw from any process in which it was not granted exclusive rights to negotiate a potential transaction with the Company. Notwithstanding its interest in having SAC PCG continue to pursue a possible strategic transaction with the Company, the special committee determined that, in order to assess whether SAC PCG’s preliminary indication of interest was the best value reasonably attainable for stockholders in connection with a sale of the Company, it would need to solicit the interest of other likely strategic and financial buyers of the Company. At the request of the special committee, over the next few days, representatives of Goldman Sachs discussed with representatives of SAC PCG the continued participation of SAC PCG in the process and SAC PCG indicated to representatives of Goldman Sachs that it would consider participating in a non-exclusive process of evaluating a potential transaction with the Company so long as the Company agreed to reimburse SAC PCG’s costs of conducting continued diligence.

 

On August 17, 2009, at a meeting of the special committee, the special committee discussed SAC PCG’s request for expense reimbursement. The special committee determined that providing some form of expense reimbursement to SAC PCG was desirable to prevent SAC PCG from withdrawing its preliminary indication of interest, but that such reimbursement should be subject to limitations, including a cap, and should be payable only if another entity acquired the Company within a limited period of time. Representatives of Goldman Sachs then proposed a list of additional strategic and financial buyers that representatives of Goldman Sachs believed would potentially be interested in a transaction with the Company, and the special committee authorized representatives of Goldman Sachs to contact nine strategic buyers and seven financial buyers.

 

Between August 17, 2009 and August 25, 2009, the Company negotiated an expense reimbursement agreement with SAC PCG on the terms further discussed and approved by the special committee at meetings held on August 21 and August 24, 2009 and, on August 25, 2009, the Company and SAC PCG entered into such agreement. See “ — Certain Relationships Between Parent and Airvana ” for a summary of such agreement.

Following the August 17, 2009 meeting, representatives of Goldman Sachs began to contact the potential purchasers that it was authorized to contact by the special committee at such meeting.

 

On September 4, 2009, at a meeting of the special committee, representatives of Goldman Sachs updated the special committee as to the status of discussions with potential purchasers, a proposed timeline for a potential transaction and management’s projections updated based upon the Company’s results of operations to date.

 

On September 10, 2009, Messrs. Battat, Verma and Glidden and Dr. Eyuboglu presented information regarding the business of the Company to representatives of GSO and SAC PCG to facilitate a possible debt financing by GSO of a potential acquisition by SAC PCG.

 

On September 16, 2009, Messrs. Battat, Verma and Glidden and Dr. Eyuboglu presented information regarding the business of the Company to representatives of an alternative financing source and SAC PCG to facilitate a possible debt financing by such entity of a potential acquisition by SAC PCG.

 

On September 16, 2009, at a meeting of the special committee, the special committee discussed with representatives of Goldman Sachs the status of discussions with potential purchasers. The special committee’s legal advisors gave a presentation on the terms and provisions of a draft merger agreement prepared by WilmerHale and Ropes & Gray that was distributed to the special committee, including the importance of limited closing conditions and either obtaining specific performance or a meaningful reverse break-up fee as a remedy for a potential purchaser failing to abide by its obligations under the merger agreement. The special committee determined that, in evaluating a potential sale of the Company, it would evaluate potential purchasers based principally on the proposed purchase price, but would also consider key terms such as the closing conditions and strength of financing commitments, as well as appropriate measures to enable the Company to pursue a superior proposal. The special committee authorized its legal advisors to distribute the draft merger agreement to Simpson Thacher for comment.

 

On September 22, 2009, at a meeting of the special committee, the special committee discussed with representatives of Goldman Sachs the status of discussions with potential purchasers. Representatives of Goldman Sachs informed the special committee that three additional financial purchasers and two strategic purchasers, including Bidder B, had expressed preliminary interest in evaluating a potential transaction involving the Company and executed non-disclosure agreements with the Company. All such interested purchasers were invited to review legal and business due diligence materials posted to the Company’s online dataroom. As the process progressed, only one of the three potential financial purchasers (“Bidder A”) continued to show interest in the Company at a competitive valuation and requested permission to speak with potential debt financing sources and only one of the two potential strategic purchasers, Bidder B, continued to move forward with its diligence investigation of the Company.

 

On October 2, 2009, at a meeting of the special committee, the special committee discussed with representatives of Goldman Sachs the status of discussions with potential purchasers. Representatives of Goldman Sachs informed the special committee that Bidder B had sought feedback from the special committee on whether it would be competitive in pursuing a potential transaction with the Company at a price per share in the low $6 range. After discussion, the special committee instructed representatives of Goldman Sachs to inform Bidder B that such valuation was not competitive with other valuations that the Company had received and that Bidder B would need to increase its valuation in order for the special committee to consider pursuing a potential transaction with Bidder B. Representatives of Goldman Sachs informed Bidder B of the special committee’s feedback and Bidder B indicated that it was not interested in pursuing a strategic transaction at a higher valuation than it had previously indicated.

 

On October 2, 2009, SAC PCG provided to the special committee’s advisors a draft of the debt financing commitment that GSO eventually provided to SAC PCG on December 17, 2009 (the “debt commitment letter”).

 

On October 5, 2009, at a meeting of the special committee, the special committee discussed with representatives of Goldman Sachs discussions that representatives of Goldman Sachs had had with SAC PCG and Bidder A. WilmerHale and Ropes & Gray also discussed with the special committee the draft debt

commitment letter, focusing on aspects of the draft debt commitment letter that they believed the financing source could use as a basis for refusing to fund the transaction.

 

On October 6, 2009, the special committee’s legal advisors discussed with Simpson Thacher SAC PCG’s comments on the draft merger agreement. SAC PCG made material concessions, including the elimination of SAC PCG’s receipt of financing as a closing condition, but the parties disagreed on other significant business issues in the merger agreement, including allocation of the risks associated with Nortel’s bankruptcy (including, the collection of the account receivable owed to the Company by Nortel and the assumption of the Company’s contract with Nortel by Telefon AB L.M. Ericsson (“Ericsson”)), closing conditions relating to a minimum cash level, exercise of appraisal rights, the scope of the reverse break-up fee and whether specific performance would be available as a remedy to the Company. Counsel also discussed the draft debt commitment letter.

 

On October 9, 2009, Bidder A orally indicated to representatives of Goldman Sachs that, based on its preliminary assessment of valuation and subject to further legal and business diligence and the availability of financing on terms satisfactory to Bidder A, it might be interested in pursuing a transaction with the Company at an initial valuation of $8.50 to $9.00 per share and requested that it be granted additional time and exclusivity to conduct further due diligence to determine whether it could in fact make an offer to acquire the Company at that valuation. Representatives of Goldman Sachs informed members of the special committee of Bidder A’s communication.

 

On October 11, 2009, at a meeting of the special committee, representatives of Goldman Sachs updated the special committee on discussions with Bidder A. The special committee concluded that it was not in the best interests of the stockholders of the Company to grant exclusivity to Bidder A, because Bidder A had not demonstrated that its indication of interest was credible or financeable and because granting exclusivity at that time could inhibit the Company’s evaluation of other strategic alternatives, including continued exploration of SAC PCG’s indication of interest. The special committee authorized Ropes & Gray and WilmerHale to deliver a draft merger agreement and related documents to Bidder A and instructed its advisors to cooperate fully with Bidder A to allow it to quickly pursue its indication of interest.

 

On October 11, 2009, the special committee’s advisors communicated to Bidder A that the special committee had not accepted Bidder A’s request for exclusivity and also that Bidder A must progress discussions with potential financing sources in order for the special committee to better assess Bidder A’s preliminary indication of interest. Bidder A stated to representatives of Goldman Sachs that it intended to be in a position to make a more credible indication of interest that included a debt financing commitment by early November.

 

On October 23, 2009, after representatives of Goldman Sachs, at the direction of the special committee, informed SAC PCG that the special committee was actively involved in discussing possible transactions with other parties, SAC PCG expressed a willingness to assume certain risks relating to Nortel’s bankruptcy (including the collection of the account receivable owed to the Company by Nortel and the assumption of the Company’s contract with Nortel by Ericsson) and drop other conditions in order to promptly move forward with a transaction involving the Company.

 

On October 25, 2009, at a meeting of the special committee, representatives of Goldman Sachs reported to the special committee that SAC PCG stated that it wanted to move forward with finalizing a proposed transaction rapidly and had concluded substantially all of its legal and business due diligence, but would need to conduct confirmatory calls with at least some of the Company’s significant customers. The special committee discussed this request, the status of discussions with Bidder A and the status of the Nortel bankruptcy (in which Ericsson was expected to assume the Company’s contract with Nortel and settle an approximately $35 million account payable with the Company) and determined that it did not want to authorize customer diligence calls at such time in light of timing sensitivities around the Nortel/Ericsson transaction and that it also preferred to allow Bidder A to complete its diligence and work with potential financing sources.

On October 30, 2009, SAC PCG sent a letter to the special committee threatening to terminate its pursuit of a potential acquisition of the Company should the special committee not provide SAC PCG with a rapid timeline for entering into definitive documentation with SAC PCG.

 

On November 2, 2009, at a meeting of the special committee, the special committee discussed the letter that it received from SAC PCG on October 30, 2009, the importance of the closing of the Ericsson/Nortel transaction with respect to any transaction involving the Company, and the need to approve a timeline that allowed the Company to assess potential transactions with both SAC PCG and Bidder A. After discussion, the special committee determined that proceeding in evaluating a potential transaction involving the Company on a rapid timeline was not in the best interests of the Company and that the special committee would need several more weeks to enable Bidder A to have an opportunity to solidify its indication of interest and to enable the Ericsson/Nortel transaction to close.

 

On November 4, 2009, the special committee sent a letter to SAC PCG setting forth a process for progressing a transaction during the next several weeks.

 

On November 5, 2009, SAC PCG provided a detailed mark-up of the draft merger agreement to the special committee’s legal advisors.

 

On November 10, 2009, the special committee authorized Bidder A’s preferred source of debt financing to talk to potential candidates in respect of syndicating the debt financing for Bidder A’s proposed acquisition of the Company. Additionally, the special committee’s legal advisors received a revised draft debt commitment letter, draft equity commitment and draft limited guarantee from SAC PCG’s legal counsel.

 

On November 10, 2009, at a meeting of the special committee, WilmerHale and Ropes & Gray made a presentation to the special committee outlining the material business issues presented in SAC PCG’s recent mark-up of the draft merger agreement and other ancillary agreements. The special committee discussed such mark-ups, focusing specifically on those changes that added conditionality to closing. In response to the Company’s proposal for a specific performance provision, SAC PCG proposed a customary reverse break-up fee that would be equal to the Company’s termination fee, guaranteed by a creditworthy entity and the Company’s sole remedy for Parent’s breach of the merger agreement. The special committee requested that its advisors obtain additional information about the entity being proposed to provide the limited guarantee.

 

The special committee then discussed recent discussions between representatives of Goldman Sachs and each of SAC PCG and Bidder A. The special committee discussed that Bidder A was not yet in a position to submit a fully developed acquisition proposal. Representatives of Goldman Sachs reported that Bidder A indicated that it would be able to present a more developed proposal later in the week and that such proposal would include a preliminary debt financing commitment.

 

On November 11, 2009, the special committee’s legal advisors distributed a revised draft of the merger agreement to Simpson Thacher. On Friday, November 13, 2009, Simpson Thacher distributed a redraft back to the special committee’s legal advisors and requested that the agreement continue to be negotiated over the weekend. The draft merger agreement was substantially complete, but open business issues included SAC PCG’s insistence that the Company’s remedies for Parent’s breach of the merger agreement not include specific performance and be limited to a more customary reverse break-up fee equivalent to the Company’s termination fee and the additional closing condition that statutory appraisal rights be exercised by holders of less than 10% of the Company’s shares.

 

As of November 13, 2009, Bidder A had still not yet delivered financing commitments to the special committee. Also on November 13, 2009, Ericsson assumed Nortel’s contract with Airvana and the Company was informed that it would be paid the approximately $35 million receivable it was owed within the next week.

 

On November 15, 2009, the special committee granted Bidder A’s request to seek additional potential financing sources.

 

On November 16, 2009, at a meeting of the special committee, representatives of Goldman Sachs reported that Bidder A had still not yet obtained financing commitments and was now seeking to provide such

commitments by November 18, 2009. The special committee also discussed the fact that Bidder A’s $8.50-$9 price per share valuation had been produced on the basis of limited diligence. The special committee also discussed the principal open issues in the draft merger agreement that it had most recently received from SAC PCG.

 

On November 18, 2009, Bidder A communicated orally to representatives of Goldman Sachs a proposal to acquire the Company at a $7.50 price per share in cash and provided a draft of the debt financing commitment from its financing source. It also provided a short list of general issues with the draft merger agreement, rather than providing the full mark-up of the merger agreement as requested by the special committee. Bidder A communicated that it would not proceed further with evaluating a potential transaction with the Company unless it received the ability to negotiate a sale of the Company with the special committee on an exclusive basis.

 

On November 19, 2009, at a meeting of the special committee, representatives of Goldman Sachs provided an update on discussions with Bidder A regarding a potential transaction involving the Company. Representatives of Goldman Sachs discussed the draft debt commitment received from Bidder A’s financing source and the merger agreement issues list that Bidder A had provided. The special committee discussed that Bidder A’s most recent indication of interest was significantly lower than the range initially indicated by Bidder A. Representatives of Goldman Sachs informed the special committee that Bidder A’s stated reason for such decrease was its third-party consultants’ forecast of a shorter revenue tail on the Company’s EV-DO business. The special committee also discussed that Bidder A’s indication of interest was not responsive to the special committee’s request for detailed mark-ups of transaction documents so that the special committee could identify outstanding business issues. Furthermore, the special committee discussed that Bidder A’s draft debt commitment letter had significant aspects of conditionality, including diligence conditions (some of which were not conditions or were more limited in scope in SAC PCG’s draft debt commitment letter). The special committee instructed its legal advisors to work with Bidder A to reduce the conditionality contained in Bidder A’s draft debt commitment letter and to express the need for Bidder A’s proposal to be more complete for the special committee to be in a position to more thoroughly consider a potential transaction with Bidder A. Given the incompleteness of Bidder A’s proposal and the adverse effect that granting exclusivity at that time could have on the sale process, the special committee instructed representatives of Goldman Sachs to communicate to Bidder A that the special committee would not grant Bidder A’s request for exclusivity. The special committee and its advisors discussed the special committee’s desire to continue negotiations with both Bidder A and SAC PCG in order to ensure that, should the Company decide to engage in a transaction with either potential purchaser, the Company would be able to negotiate the highest price and best available terms (including those relating to transaction certainty) and the special committee instructed it advisors to negotiate with both parties in such a manner.

 

On November 19, 2009, in an effort to expedite Bidder A’s completion of the necessary transaction documentation, the special committee’s legal advisors distributed to Bidder A a revised draft merger agreement and related agreements, mark-up of the debt commitment from Bidder A’s financing source, draft equity commitment and draft limited guarantee.

 

On November 22, 2009, the special committee’s legal advisors provided a revised merger agreement and related documents, revised limited guarantee and revised equity commitment to SAC PCG’s legal counsel.

 

On November 24, 2009, Bidder A provided a mark-up of the merger agreement to the Company’s legal advisors.

 

On November 24, 2009, at a meeting of the special committee, representatives of Goldman Sachs provided an update on discussions with Bidder A and with SAC PCG. The special committee discussed the progress that both potential purchasers were making towards terms of a transaction with the Company, but that Bidder A’s proposal remained less complete than the SAC PCG proposal and still subject to diligence. The special committee and its advisors discussed a strategy for continuing negotiations with both potential purchasers. In order to keep the bidders operating on a consistent timeframe, and to provide each with equivalent diligence access, the special committee determined that it would allow diligence calls with customers, although the calls would be moderated by representatives of Goldman Sachs so that both parties

could participate. Additionally, the special committee instructed its advisors to continue to negotiate for improved deal terms (including price) from both potential purchasers. The special committee also recognized that management equity rollover would be a significant component of each bidder’s acquisition proposal. While each bidder had previously requested the ability to negotiate equity rollover and compensation terms with management, the special committee had not authorized such negotiations in light of the open business issues with each party and a desire to maintain a level playing field among the bidders. However, in an effort to continue to move the process forward, the special committee determined to ask each bidder to answer basic diligence questions regarding post-closing operations of the Company, the answers to which, following review by the special committee’s advisors, would be shared with Company management. Additionally, at the request of the special committee, its advisors discussed market terms with respect to the size of reverse break-up fees and break-up fees. Finally, the special committee discussed recent communications that Bidder B had with certain members of the special committee and representatives of Goldman Sachs regarding a potential transaction involving the Company and that, when informed of the valuation range that Bidder B would need to be in for the special committee to evaluate a potential transaction with Bidder B, Bidder B indicated that it would not be willing to pursue a transaction involving the Company at a valuation in the range of that currently being contemplated with SAC PCG and Bidder A.

 

On November 25, 2009, Bidder A provided the special committee’s legal advisors with a revised draft of the debt commitment from Bidder A’s preferred financing source. The terms of such debt commitment were not materially improved from the last draft presented to the special committee and continued to include terms that created significant conditionality. The special committee discussed Bidder A’s recent demand for exclusivity in order to continue to pursue its consideration of a transaction. As the special committee determined that Bidder A’s withdrawal from the process could limit competition to acquire the Company and negatively affect the transaction terms that the special committee could obtain, the special committee decided that, in lieu of accepting Bidder A’s request for exclusivity, it would offer to provide up to $500,000 of expense reimbursement to Bidder A on the conditions that Bidder A at all times maintain an offer to acquire the Company at a price greater or equal to $7.50 per share and that the Company be acquired by a third party other than Bidder A.

 

On November 28, 2009, the special committee’s legal advisors negotiated with Bidder A and Bidder A’s financing source to reduce the conditionality of the debt commitment received from Bidder A. On November 30, 2009, the special committee’s legal advisors received a revised debt commitment from Bidder A’s financing source that continued to reflect significant aspects of conditionality.

 

On December 1, 2009, SAC PCG and Bidder A both participated in a customer diligence call with Ericsson (the successor to Nortel under the Company’s contract with Nortel), moderated by representatives of Goldman Sachs, where both potential purchasers were invited to submit questions to be asked of Ericsson in advance of the call.

 

On December 1, 2009, at a meeting of the special committee, representatives of Goldman Sachs provided an update on discussions with SAC PCG and Bidder A. The special committee instructed WilmerHale and Ropes & Gray to prepare revised drafts of the merger agreement and related documents and circulate them to SAC PCG and Bidder A. The special committee then instructed its advisors to communicate that each of SAC PCG and Bidder A should provide the special committee with such party’s final proposal, including complete versions of the merger agreement and related documents that such potential purchaser would be prepared to execute by Friday, December 4, 2009, and after evaluating such offers and discussing it with its advisors, the special committee would endeavor to decide whether it would continue to pursue a transaction at that time and, if so, which party’s proposal would be in the best interests of the stockholders of the Company.

 

On December 3, 2009, representatives of Goldman Sachs communicated the special committee’s request for final proposals to both SAC PCG and Bidder A.

 

On December 4, 2009, the special committee received responses from SAC PCG and Bidder A containing their final proposals. The SAC PCG proposal contained a full and complete proposal that included a mark-up of the merger agreement and related documents in a form that SAC PCG was prepared to execute. At a meeting that day, the special committee discussed SAC PCG’s final proposal package, which included an

increase in its proposed purchase price to $7.50 per share, subject to SAC PCG performing confirmatory diligence calls with two or three of the Company’s principal customers. In order to propose such a price increase, SAC PCG proposed to require that management rollover its equity into equity of the acquiring entity on substantially different terms than previously anticipated. Because SAC PCG’s proposal was contingent on a minimum level of management rollover, the special committee determined that it would be appropriate to permit certain members of management, together with their own legal counsel, to view SAC PCG’s proposed rollover terms, so that the special committee could assess the feasibility of SAC PCG’s proposal. The special committee instructed representatives of Goldman Sachs to discuss SAC PCG’s revised proposal with SAC PCG and Messrs. Battat and Verma and Dr. Eyuboglu. The Bidder A proposal also contained a $7.50 per share offer, but did not include full transaction documentation sufficient to allow the special committee to assess other key issues, such as conditionality to closing. Representatives of Goldman Sachs informed the special committee that Bidder A had stated that it would not provide such documentation until it received exclusivity to complete its diligence and negotiate a sale transaction with the Company. The special committee instructed representatives of Goldman Sachs to inform Bidder A that the special committee could not assess Bidder A’s proposal without receiving complete copies of all agreements relating to its proposal, that such documents should be received by the special committee by December 7, 2009, and that the special committee would not grant its request for exclusivity.

 

On December 6, 2009, at a meeting of the special committee, representatives of Goldman Sachs reported that SAC PCG (through Goldman Sachs as an intermediary) and Messrs. Battat and Verma and Dr. Eyuboglu were making progress working on the terms of the management rollover equity proposal. Representatives of Goldman Sachs informed the special committee that while members of management had expressed a preference for receiving the cash merger consideration for at least half of their shares of common stock of the Company, SAC PCG’s proposal was sufficiently viable in management’s view that, if authorized by the special committee to negotiate equity rollover terms, management believed it could reach satisfactory arrangements on equity rollover terms to facilitate a transaction. Accordingly, the special committee determined that permitting direct negotiations between management and SAC PCG with respect to SAC PCG’s rollover proposal would be in the best interests of the Company since a transaction with SAC PCG would not be feasible unless certain members of management could come to an agreement with SAC PCG on equity rollover terms. Representatives of Goldman Sachs also reported to the special committee that Bidder A had still not provided a complete final package so that the special committee could fully assess Bidder A’s offer. The special committee instructed Ropes & Gray to prepare and send a letter to Bidder A reiterating the special committee’s request for a complete final package that included mark-ups of the draft merger agreement and related documents in a form that Bidder A was willing to execute.

 

On December 7, 2009, Messrs. Gilmore and Baker and representatives of Simpson Thacher met with Messrs. Battat and Verma and Dr. Eyuboglu and their legal advisors to discuss the terms of the rollover equity arrangements with management proposed by SAC PCG.

 

On December 9, 2009, at a meeting of the special committee, the special committee’s advisors informed the special committee that, given SAC PCG’s near completion of diligence and substantial agreement on proposed transaction documentation, they believed that the execution of definitive documentation in respect of a transaction with SAC PCG could be completed within a relatively short period of time should the special committee decide to do so. The special committee discussed Bidder A’s proposal and the continued absence of full documentation. Representatives of Goldman Sachs also informed the special committee that Bidder A was continuing to request exclusivity before it would proceed further. The special committee determined such request was still not in the best interest of the Company.

 

At the meeting of the special committee, representatives of Goldman Sachs presented to the special committee its preliminary financial analyses of a potential transaction and the Company’s strategic alternatives. The special committee discussed the presentation, as well as the “Downside Case,” the “Base Case,” and the “Upside Case” projections prepared by Company’s management and provided to Goldman Sachs in connection with the financial analyses performed by Goldman Sachs. These projections had been prepared by the Company’s management in November 2009 to update its previously presented forecasts to reflect actual results for the first three quarters of 2009. See “ Important Information About Airvana — Projected Financial

Information” beginning on page 98. The special committee discussed that the Downside Case did not take into account the risk that the Company’s future femtocell sales would be less favorable than projected in the Base Case, and expressed concerns about the likelihood of growth in the femtocell business over the long-term. It was the consensus of the special committee that the risks and uncertainties in the business (both in the continuing EV-DO sales and in the prospects for femtocell sales) made it unlikely that the Company would achieve the Upside Case. The special committee also discussed the strategic alternatives reviewed by representatives of Goldman Sachs, including the potential for a dividend recapitalization or a stock repurchase, and the special committee’s view of the limited feasibility of these alternatives. After considering each of the alternatives, and considering the risks and uncertainties facing the Company’s business, the special committee determined that a sale of the Company was in the best interests of the stockholders of the Company at this time.

 

Subsequent to the December 9, 2009 meeting, the special committee’s legal advisors sent a revised merger agreement and related documents, equity commitment and limited guarantee to SAC PCG for its review. Additionally, Bidder A sent the special committee’s legal advisors full mark-ups of the merger agreement and related documents.

 

On December 11, 2009, representatives of SAC PCG and its legal advisors met with Messrs. Battat and Verma and Dr. Eyuboglu and their legal advisors to negotiate management terms acceptable to SAC PCG and management. Mr. Battat subsequently reported that significant progress had been made to address management concerns.

 

Later on December 11, 2009, Bidder A provided a revised indication of interest at a $7.65 per share price, conditioned upon receiving exclusivity through December 23, 2009 and satisfactory completion of confirmatory due diligence, management rollover equity negotiations and customer due diligence (including in-person meetings with three principal customers).

 

On December 11, 2009, at a meeting of the special committee, the special committee discussed Bidder A’s latest proposal. The special committee discussed the risk of giving Bidder A exclusivity, including that SAC PCG would likely terminate its consideration of a transaction with the Company and that Bidder A could reduce its proposed price at the end of the exclusivity period. The special committee determined to reject Bidder A’s request for exclusivity. The special committee then discussed the proposal received from SAC PCG that included a proposed price of $7.50 per share. The special committee discussed with its advisors the potential risks in choosing the Bidder A proposal due to the lower degree of certainty of the execution of definitive documentation and the potential effect that granting exclusivity may have on any transaction involving the Company. The special committee instructed its advisors to continue to negotiate with both potential purchasers for superior deal terms, including price.

 

On December 12, 2009, Bidder A reported to the special committee’s legal advisors the extent of due diligence it still expected to complete. Additionally, at the direction of the special committee, representatives of Goldman Sachs informed SAC PCG that the special committee would not pursue a potential transaction with SAC PCG at a $7.50 per share price at this time, but would consider pursuing a potential transaction with SAC PCG at a higher price. SAC PCG indicated it might be willing to increase its proposal to $7.65 per share.

 

On December 12, 2009, at a meeting of the special committee, the special committee discussed with its legal and financial advisors the status of discussions with both potential purchasers. The special committee’s legal advisors reported that they had had discussions with Bidder A regarding the legal issues in the draft merger agreement and Bidder A’s request for exclusivity through December 23, 2009 as a condition to moving forward with the proposal. The legal advisors also reported that Bidder A requested in-person meetings with certain of the Company’s customers and that Bidder A had significant other remaining diligence items, including a review of the Company’s business by outside consultants. The special committee discussed the potential business risk presented by Bidder A’s request to engage in in-person meetings with the Company’s customers, as well as its concerns about Bidder A’s remaining other diligence work. Representatives of Goldman Sachs then updated the special committee on discussions with SAC PCG, and informed the special committee that SAC PCG was working to increase the price in its proposal to $7.65 per share. Representatives

of Goldman Sachs also informed the special committee that SAC PCG indicated that it was willing to move forward to signing definitive documentation on an expedited basis, eliminating the need for most remaining confirmatory diligence (other than customer calls).

 

On December 13, 2009, Bidder A provided an oral indication of interest at a $7.75 per share price, conditioned upon it receiving exclusive rights to negotiate a potential sale of the Company through December 23, 2009, completing its due diligence, engaging in satisfactory meetings with customers of the Company and negotiating satisfactory terms of rollover equity arrangements with certain members of the Company’s management.

 

On December 13, 2009, at a meeting of the special committee, the special committee discussed Bidder A’s December 13, 2009 proposal. The special committee then discussed the communications SAC PCG had with representatives of Goldman Sachs regarding its proposed price increase to $7.65 per share and authorized representatives of Goldman Sachs to communicate to SAC PCG the need to increase its price proposal further. The special committee discussed the risks that could arise if it granted Bidder A’s request for exclusivity at that time, including the likelihood that SAC PCG would withdraw its offer if the Company ceased negotiations with SAC PCG at a time that SAC PCG was ready to execute a transaction and the risk that Bidder A’s proposed price could decrease as a result of its remaining diligence. The special committee determined to deny Bidder A’s request for exclusivity and inform Bidder A that it would continue to negotiate with Bidder A, and requested that Bidder A provide clear information about what items of diligence remained outstanding and a timeline. The special committee also determined to make management available to Bidder A on December 14, 2009 to negotiate equity rollover and compensation arrangements on a non-exclusive basis.

 

On December 14, 2009, the special committee’s advisors updated the special committee on discussions with both potential purchasers. The special committee’s legal advisors reported to the special committee that documentation with SAC PCG was in substantially final form and that SAC PCG confirmed that it would be ready to execute definitive documentation, subject only to confirmatory diligence calls with two of the Company’s principal customers, but that it was not prepared to increase the purchase price above $7.65 per share. On the same day, Bidder A reported to representatives of Goldman Sachs that it was reducing its proposal to $7.50 per share. Representatives of Goldman Sachs reported that Bidder A was in the process of negotiating the proposed terms relating to the rollover of equity by certain members of the Company’s management. Representatives of Goldman Sachs also reported that Bidder A was continuing to request in-person customer meetings with each of the three principal customers of the Company.

 

On December 15, 2009, the special committee’s advisors updated the special committee on discussions with both potential purchasers. Representatives of Goldman Sachs reported to the special committee that Bidder A confirmed to representatives of Goldman Sachs that it was reducing its proposed price to $7.50 and would lower its price to $7.40 if it were required to forego its customer diligence requests. Representatives of Goldman Sachs then reported to the special committee that SAC PCG expressed that it was prepared to raise its offer to $7.65 and would be prepared to execute definitive documentation upon satisfactory completion of its remaining customer diligence calls. The special committee then discussed with its advisors the remedies provisions in SAC PCG’s proposed form of the merger agreement, which limited the Company’s remedies to a reverse break-up fee in the event of a failure by SAC PCG to close the transaction if all conditions to closing had been satisfied. The special committee discussed that the reverse break-up fee, which SAC PCG had agreed to increase to $25 million, would be guaranteed by an SAC PCG affiliate (S.A.C. Capital Management, LLC) and the special committee discussed with its advisors the financial strength of the entity that would be providing the limited guarantee.

 

Later on December 15, 2009, representatives of Goldman Sachs reported to the special committee that SAC PCG was finalizing the terms of the rollover equity arrangements with the Company’s management to reflect the increased purchase price. Representatives of Goldman Sachs also reported that Bidder A stated that it would increase its offer back to $7.75 per share, without a request for exclusivity, and, assuming satisfactory customer diligence calls, expected to be in a position to execute definitive documentation by the end of the week or over the weekend. Additionally, Bidder A represented that it would make significant progress on finalizing transaction documentation early in the day on December 16, 2009.

On December 16, 2009, the special committee held two meetings. At the first meeting, the special committee discussed Bidder A’s oral indication that it would raise its price to $7.75 per share and move quickly to finalize documentation, conditioned upon its satisfactory completion of customer calls and satisfactory completion of negotiations with certain members of management regarding the terms of a rollover equity proposal. The special committee discussed the issues that remained outstanding with Bidder A, including the fact that it had not provided revised transaction documentation, the fact that Bidder A reported to advisors to the special committee that Bidder A was not prepared to provide a revised third party debt commitment and that Bidder A still needed to complete customer due diligence. The special committee discussed the risk that Bidder A’s price would decline after completing its diligence. The special committee then discussed a process for allowing Bidder A to satisfactorily complete its customer calls as soon as possible, while recognizing the risks to the Company’s customer relationships that could arise from multiple calls with multiple bidders.

 

Mr. Battat joined the special committee meeting at the request of the special committee to discuss how to organize additional customer calls for SAC PCG and Bidder A. The special committee asked Mr. Battat to report on the status of management’s rollover equity negotiations with each of Bidder A and SAC PCG. Mr. Battat confirmed that he, Mr. Verma and Dr. Eyuboglu had reached a satisfactory understanding with each bidder and stood ready to enter into the rollover equity and compensation arrangements proposed by either Bidder A or SAC PCG. Mr. Battat then left the meeting.

 

The special committee then discussed the proposal received from SAC PCG that included a $7.65 price per share and that was conditioned on obtaining exclusivity from the completion of its customer diligence call until a definitive transaction agreement was signed.

 

SAC PCG and Bidder A participated in a customer diligence call on December 16, 2009. After the calls, SAC PCG reported to representatives of Goldman Sachs that it needed only to complete one additional customer diligence call in order to sign the definitive agreements.

 

At a special committee meeting late on December 16, 2009, the special committee discussed the proposal communicated by SAC PCG earlier in the day and determined that it would not grant SAC PCG’s demand for exclusivity. The special committee’s advisors also reported to the special committee that, at the committee’s request, SAC PCG had agreed to a number of other contractual concessions. The special committee also discussed the risks and uncertainties surrounding Bidder A’s proposal, including lack of certainty regarding its timing given the lack of advancement in documentation and the nature and scope of the remaining diligence. The special committee discussed the fact that Bidder A had communicated to representatives of Goldman Sachs that it would need supplemental diligence calls with certain customers that were not moderated by the Company’s management or representatives of Goldman Sachs. To better assess the risks and uncertainties associated with Bidder A’s proposal, the special committee determined that Mr. Ferri should contact Bidder A to discuss a mutually satisfactory process for finalizing Bidder A’s transaction documentation and customer diligence on a timetable and in a manner acceptable to the special committee.

 

On the morning of December 17, 2009, at the direction of the special committee, Mr. Ferri and representatives of Goldman Sachs called a principal of Bidder A to indicate that, in light of the competitive nature of the process, Bidder A needed to move forward promptly, and to discuss both the remaining customer call and Bidder A’s request for supplemental calls. The principal at Bidder A responded that Bidder A would not withdraw its requests for supplemental customer calls and concluded that it was terminating its consideration of a purchase of the Company.

 

Later in the day on December 17, 2009, SAC PCG participated in a diligence call with the final customer, which it reported to representatives of Goldman Sachs was satisfactory.

 

On the evening of December 17, 2009, the special committee and its legal and financial advisors met. The special committee discussed the call between Mr. Ferri and the principal of Bidder A, including Bidder A’s decision to withdraw from the process of evaluating a transaction with the Company at its most recently communicated valuation. It was also reported that Bidder A had subsequently sent correspondence to Goldman Sachs indicating that Bidder A would need some combination of lower price, more diligence, additional time

or potential structural changes to move forward with a transaction involving the Company. The special committee concluded that Bidder A’s proposals involved too much uncertainty to continue to pursue and delay consideration of the transaction proposed by SAC PCG.

 

The special committee then discussed with its advisors the proposal received from SAC PCG that included a $7.65 price per share. The special committee discussed that SAC PCG had completed its requested due diligence and reached complete agreement on proposed transaction documentation. At the request of the special committee, representatives of Goldman Sachs then presented its financial analyses of the proposed transaction with SAC PCG and a discussion of potential alternatives to a sale of the Company. The special committee asked questions of Goldman Sachs throughout the presentation. The special committee discussed the presentation and the “Downside Case,” the “Base Case,” and the “Upside Case” projections prepared by Company’s management and provided to Goldman Sachs in connection with the financial analyses performed by Goldman Sachs. See “ Important Information About Airvana — Projected Financial Information. ” At the request of the special committee, representatives of Goldman Sachs then delivered to the special committee its opinion that, as of December 17, 2009 and based upon and subject to the factors and assumptions set forth in such opinion, the $7.65 per share in cash to be received by the holders of outstanding shares of Airvana common stock (other than the Rollover Stockholders) pursuant to the merger agreement was fair from a financial point of view to such holders. The full text of the written opinion of Goldman Sachs, dated December 17, 2009, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex B to this proxy statement.

 

The special committee then requested that its legal advisors provide a presentation to the special committee on its fiduciary duties when engaging in the sale of the Company and a presentation on the merger agreement and related transaction documents negotiated with SAC PCG, and the special committee’s legal advisors provided such presentation. The special committee then discussed with its legal advisors the various considerations that the special committee had taken in reaching a proposed transaction with SAC PCG, including, among others, (i) the possible strategic alternatives for the Company, (ii) the terms of the merger agreement and related transaction documents, (iii) the Goldman Sachs financial analyses and opinion, (iv) the arm’s-length nature of the agreements to be entered into as a part of the proposed transaction, (v) the ability of the Company to pursue a superior proposal and the amount of the termination fee payable in that event, (vi) the liquidated damages provision in the merger agreement (so the Company would not have to prove damages upon the occurrence of a breach of the merger agreement by Parent) and (vii) the oversight the special committee had over the negotiations between SAC PCG and management regarding the rollover equity agreements. The special committee then discussed with its advisors the management rollover equity terms and compensation terms agreed to in the proposed transaction and that management had indicated it would be willing to agree to the rollover equity and other compensation terms proposed by either SAC PCG or Bidder A. After discussion, the special committee unanimously resolved to recommend to the board that the merger agreement and the merger be approved and declared advisable and that the board resolve to recommend that the Company’s stockholders adopt the merger agreement.

 

Immediately following the meeting of the special committee, a meeting of the board was convened, with the Company’s legal advisors and the special committee’s legal and financial advisors being present. At the request of the special committee, representatives of Goldman Sachs confirmed to the board that it had delivered to the special committee its opinion that, as of December 17, 2009 and based upon and subject to the factors and assumptions set forth in such opinion, the $7.65 per share in cash to be received by holders of outstanding shares of Airvana common stock (other than the Rollover Stockholders) pursuant to the merger agreement was fair from a financial point of view to such holders. Following a discussion among and questions by the board to the special committee’s legal and financial advisors and the Company’s legal advisors, the Company’s board, by unanimous action (with Messrs. Battat and Verma abstaining), approved and declared advisable the merger agreement and the merger and resolved to recommend that the Company’s stockholders adopt the merger agreement.

After the meeting of the board on December 17, 2009, the Company, Parent and Merger Sub executed the merger agreement and related agreements and issued a press release announcing the execution of such agreements on the morning of December 18, 2009.

 

The Special Committee

 

The special committee is a committee of our board of directors, comprised solely of non-employee directors, that was formed on July 9, 2009 to establish, monitor and direct the process and procedures related to the review and evaluation of a proposal made to the Company by SAC PCG and any alternative transaction, and was granted the authority to solicit other proposals, to determine not to proceed with any such proposal or transaction, to reject or approve any such proposal or transaction, or recommend such rejection or approval to the board of directors, and to recommend to the board of directors whether any such proposal or transaction is advisable and is fair to, and in the best interests of, the Company and its stockholders. Our board of directors also resolved that it would not approve a strategic transaction that did not have the approval of the special committee. The special committee retained Goldman Sachs as its financial advisor and Ropes & Gray as its legal counsel. The special committee was not formed to act solely on behalf of unaffiliated stockholders, and did not retain a financial advisor, legal counsel or other representative to act solely on behalf of unaffiliated stockholders for purposes of negotiating a transaction or preparing a report concerning the fairness of the transaction. Between July 9, 2009 and December 17, 2009, the special committee met more than 30 times to consider the merger proposal and alternatives to the merger proposal, as described more fully above. See “  — Background of the Merger ” beginning on page 13.

 

The special committee, acting with the advice and assistance of its independent legal and financial advisors, evaluated and negotiated the merger proposal from SAC PCG, including the terms and conditions of the merger agreement. At a meeting held on December 17, 2009, the special committee unanimously determined that the merger, the consideration to be paid in the merger, and the other terms and provisions of the merger agreement were fair to, advisable and in the best interests of the Company and its unaffiliated stockholders and recommended that the board of directors accept the merger agreement and the terms and conditions of the merger and the merger agreement as being fair to, advisable and in the best interests of the Company and its unaffiliated stockholders, approve and adopt the merger agreement and recommend adoption of the merger agreement by the holders of Airvana common stock.

 

In the course of reaching its determination, the special committee considered the following substantive factors and potential benefits of the merger, each of which the special committee believed supported its decision:

 

Merger Consideration

 

The special committee considered the following with respect to the merger consideration to be received by the Airvana stockholders:

 

 

 

Prospects in Remaining Independent

 

The special committee considered the possibility of continuing to operate Airvana as an independent public company. In considering the alternative of pursuing growth as an independent company, the special committee considered the following factors:

 

 

Process Followed

 

The special committee considered the process it followed, including the solicitation of interest from a total of 16 potential financial and strategic buyers regarding a potential acquisition.

Opinion of Goldman, Sachs & Co.

 

With respect to advice received from Goldman Sachs, the special committee considered the financial analyses of Goldman Sachs presented to the special committee and the opinion of Goldman Sachs, dated December 17, 2009, to the special committee that, as of that date and based upon and subject to the factors and assumptions set forth therein, the $7.65 per share in cash to be paid to the holders of the outstanding shares of Airvana common stock (other than the Rollover Stockholders) pursuant to the merger agreement was fair from a financial point of view to such holders, as more fully described in “—  Opinion of the Special Committee’s Financial Advisor ” beginning on page 34.

 

The special committee also considered the fact that, although the opinion received by the special committee from Goldman Sachs spoke to the fairness of the merger consideration to be paid to the holders of shares of Airvana common stock other than the Rollover Stockholders, and not to the fairness of the merger consideration to be paid to the unaffiliated stockholders, the merger consideration to be paid to stockholders of the Company who are affiliates but not Rollover Stockholders is the same as the merger consideration to be paid to unaffiliated stockholders. The special committee noted the fact that certain officers and directors that were not Rollover Stockholders had interests different from, and/or in addition to, the interests of unaffiliated stockholders, as more fully described in “ — Interests of the Company’s Directors and Executive Officers in the Merger ” beginning on page 57. However, the special committee believed that such different or additional benefits are attributable to services provided or to be provided by such officers and directors, are customary and/or determined on an arms’-length basis, and were not offered in contemplation of the merger (in the case of equity awards and any acceleration thereof, indemnification and insurance) or, if offered in contemplation of the merger, were negotiated after the terms of the merger had been settled and did not affect the merger consideration, were attributable to services provided or to be provided by such officers and directors, are customary and/or determined on an arms’-length basis and are not paid in respect of their shares of Airvana common stock (in the case of fees for members of the special committee and retention bonus and severance arrangements).

 

Terms of the Merger Agreement

 

The special committee considered the terms and conditions of the merger agreement and the course of negotiations thereof, including:

 

 

 

The special committee also considered a number of factors that are discussed below relating to the procedural safeguards that the special committee believes were and are present to ensure the fairness of the merger. The special committee believes these factors support its decision and provide assurance of the procedural fairness of the merger to the unaffiliated stockholders:

 

 

 

 

The special committee also considered the following risks and other potentially negative factors concerning the merger agreement and the merger:

 

 

 

 

 

 

In addition, the special committee was aware of and considered the interests that certain of our directors and executive officers have with respect to the merger that differ from, or are in addition to, their interests as stockholders of the Company, as described in “—  Interests of the Company’s Directors and Executive Officers in the Merger ” beginning on page 57. However, the special committee believed that such different or additional benefits are attributable to services provided or to be provided by such officers and directors, are customary and/or determined on an arms’-length basis, and were either not offered in contemplation of the merger or, if offered in contemplation of the merger, were negotiated after the terms of the merger had been settled and did not affect the merger consideration.

 

In the course of reaching its conclusion regarding the fairness of the merger to the unaffiliated stockholders and its decision to approve the merger, the special committee considered financial analyses presented by Goldman Sachs related to the going concern value of Airvana. These analyses included, among others, a premium paid analysis, an implied transaction multiples analysis, a selected companies analysis, a present value of future share price analysis, a discounted cash flow analysis, a leveraged buyout analysis, a special dividend analysis and a share buyback analysis. All of the material analyses as presented to the special committee on December 17, 2009 are summarized below under “ — Opinion of the Special Committee’s Financial Advisor ” beginning on page 34. The special committee expressly adopted these analyses and the opinion of Goldman Sachs, among other factors considered, in reaching its determination as to the fairness of the transactions contemplated by the merger agreement. In the course of reaching its decision, the special committee did not consider the liquidation value of the Company’s assets because it considers the Company to be a viable going concern business where value is derived from cash flows generated from its continuing operations. In addition, the special committee believed that the value of the Company’s assets that might be realized in a liquidation would be significantly less than its going concern value. Further, the special committee did not consider the Company’s net book value, which is an accounting concept, as a factor because it believed that net book value is not a material indicator of the value of the Company as a going concern but rather is indicative of historical costs. The Company’s net book value per share as of September 27, 2009 was $1.81, which is substantially below the merger consideration, $7.65 per share in cash. There are no material U.S. federal tax consequences to the Company in connection with the merger.

 

The foregoing discussion summarizes the material factors considered by the special committee in its consideration of the merger. In view of the wide variety of factors considered by the special committee, and the complexity of these matters, the special committee did not find it practicable to quantify or otherwise assign relative weights to the foregoing factors. In addition, individual members of the special committee may have assigned different weights to various factors. The special committee unanimously approved the merger agreement and the transactions contemplated thereby and recommended the adoption of the merger agreement based upon the totality of the information presented to, and considered by, it.

Recommendation of the Board of Directors

 

Our board of directors (without the participation of Messrs. Battat and Verma), acting upon the unanimous recommendation of the special committee, at a meeting described above on December 17, 2009, (i) determined that the merger agreement and the transactions contemplated thereby, including the merger, are advisable, fair to and in the best interests of the Company and our unaffiliated stockholders, (ii) approved the merger agreement and the transactions contemplated thereby, including the merger and (iii) recommended the adoption by our stockholders of the merger agreement. In reaching these determinations, our board of directors considered (x) the financial presentations of Goldman Sachs that were prepared for the special committee and that were delivered to the board of directors at the request of the special committee, as well as the fact that the special committee received an opinion of Goldman Sachs, dated December 17, 2009, that as of such date and based upon and subject to the factors and assumptions set forth therein, the $7.65 per share in cash to be paid to holders of the outstanding shares of Airvana common stock (other than the Rollover Stockholders) pursuant to the merger agreement was fair from a financial point of view to such holders (the full text of the written opinion of Goldman Sachs, dated December 17, 2009, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex B to this proxy statement), and (y) the unanimous recommendation and analysis of the special committee, as described above, and adopted such recommendation and analysis in reaching its determinations.

 

The foregoing discussion summarizes the material factors considered by our board of directors in its consideration of the merger. In view of the wide variety of factors considered by our board of directors, and the complexity of these matters, our board of directors did not find it practicable to quantify or otherwise assign relative weights to the foregoing factors. In addition, individual members of our board of directors may have assigned different weights to various factors. The board of directors approved and recommended the merger agreement and the merger based upon the totality of the information presented to and considered by it.

Messrs. Battat and Verma abstained from voting on the foregoing actions due to the fact that they are exchanging certain of their shares of Airvana common stock for an interest in Parent.

 

Our board of directors (without the participation of Messrs. Battat and Verma) recommends that you vote “FOR” the adoption of the merger agreement and “FOR” the adjournment of the special meeting, if necessary, to solicit additional proxies.

Opinion of the Special Committee’s Financial Advisor

 

Goldman Sachs delivered its opinion to the special committee that, as of December 17, 2009 and based upon and subject to the factors and assumptions set forth therein, the $7.65 per share in cash to be paid to the holders (other than the Rollover Stockholders) of the outstanding shares of the Company common stock pursuant to the merger agreement was fair from a financial point of view to such holders.

 

The full text of the written opinion of Goldman Sachs, dated December 17, 2009, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex B to this proxy statement. Goldman Sachs provided its opinion for the information and assistance of the special committee in connection with its consideration of the merger. The Goldman Sachs opinion is not a recommendation as to how any holder of the Company common stock should vote with respect to the merger or any other matter.

 

In connection with rendering the opinion described above and performing its related financial analyses, Goldman Sachs reviewed, among other things:

 

 

Goldman Sachs also held discussions with members of the senior management of the Company regarding their assessment of the past and current business operations, financial condition and future prospects of the Company. In addition, Goldman Sachs reviewed the reported price and trading activity for the shares of the Company common stock, compared certain financial and stock market information for the Company with similar information for certain other companies the securities of which are publicly traded, and reviewed the financial terms of certain recent business combinations in the communications technology industry specifically and in other industries generally and performed such other studies and analyses, and considered such other factors, as Goldman Sachs considered appropriate.

 

For purposes of rendering the opinion described above, Goldman Sachs relied upon and assumed, without assuming any responsibility for independent verification, the accuracy and completeness of all of the financial, legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by Goldman Sachs, and Goldman Sachs did not assume any liability for any such information. In that regard, Goldman Sachs assumed with the consent of the special committee that the Base Case Management Projections were reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of the Company. In addition, Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or off-balance-sheet assets and

liabilities) of the Company or any of its subsidiaries, nor was any such evaluation or appraisal furnished to Goldman Sachs. Goldman Sachs assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the merger will be obtained without any adverse effect on the expected benefits of the merger in any way meaningful to Goldman Sachs’ analysis. Goldman Sachs also assumed that the merger will be consummated on the terms set forth in the merger agreement without the waiver or modification of any term or condition the effect of which would be in any way meaningful to Goldman Sachs’ analysis. Goldman Sachs did not express any opinion as to the impact of the merger on the solvency or viability of the Company or Parent or the ability of the Company or Parent to pay its obligations when they come due. In addition, Goldman Sachs’ opinion did not address any legal, regulatory, tax or accounting matters nor did it address the underlying business decision of the Company to engage in the merger or the relative merits of the merger as compared to any strategic alternatives that may be available to the Company. Goldman Sachs’ opinion addresses only the fairness from a financial point of view, as of the date of the opinion, of the $7.65 per share in cash to be paid to the holders (other than the Rollover Stockholders) of the outstanding shares of the Company common stock pursuant to the merger agreement. Goldman Sachs did not express any view on, and Goldman Sachs’ opinion did not address, any other term or aspect of the merger agreement or the merger or any term or aspect of any other agreement or instrument contemplated by the merger agreement or entered into or amended in connection with the merger, including, without limitation, the fairness of the merger to, or any consideration received in connection therewith by, the holders of any other class of securities, creditors, or other constituencies of the Company; 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 the Company, or class of such persons in connection with the merger, whether relative to the $7.65 per share in cash to be paid to the holders of shares of the Company common stock (other than the Rollover Stockholders) pursuant to the merger agreement or otherwise. Goldman Sachs’ opinion was necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to Goldman Sachs as of, the date of the opinion, and Goldman Sachs assumed no responsibility for updating, revising or reaffirming its opinion based on circumstances, developments or events occurring after the date of its opinion. Goldman Sachs’ opinion was approved by a fairness committee of Goldman Sachs.

 

The following is a summary of the material financial analyses delivered by Goldman Sachs to the special committee in connection with rendering the opinion described above. The following summary, however, does not purport to be a complete description of the financial analyses performed by Goldman Sachs, nor does the order of analyses described represent relative importance or weight given to those analyses by Goldman Sachs. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and are alone not a complete description of Goldman Sachs’ financial analyses. 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 16, 2009, and is not necessarily indicative of current market conditions.

 

Premium Paid Analysis.   Goldman Sachs reviewed the historical trading prices for the Company common stock for the period beginning July 20, 2007 (the date of the initial public offering of the Company common stock) and ended December 16, 2009 (the last trading day prior to the execution of the merger agreement) and for the latest one-month, three-month, six-month and twelve-month trading periods ended December 16, 2009. In addition, Goldman Sachs analyzed the consideration of $7.65 per share to be paid to the holders of shares of the Company common stock pursuant to the merger agreement in relation to the closing price of the Company common stock on December 16, 2009, the average closing prices of the Company common stock during the one-month, three-month, six-month and twelve-month trading periods ended December 16, 2009, the average closing price of the Company common stock during the period from July 20, 2007 to December 16, 2009, the low and high closing prices of the Company common stock for the 52-week period ended December 16, 2009, the all-time high closing price of the Company common stock since July 20, 2007, and the initial offering price of the Company common stock on July 20, 2007. Goldman Sachs also calculated the pro forma $7.65 per share merger consideration (excluding cash) and the pro forma closing price per share (excluding cash) of the Company common stock on December 16, 2009. Goldman Sachs performed these calculations by subtracting net cash per share (based on the total cash listed on the Company’s balance sheet of September 30, 2009 of $244.9 million, as adjusted to include the Company’s collection of approximately

$35 million (plus interest) in accounts receivable from Nortel or its successor through bankruptcy) from the $7.65 per share merger consideration and closing price per share of the Company common stock on December 16, 2009. Goldman Sachs then analyzed the pro forma $7.65 per share merger consideration (excluding cash) in relation to the pro forma closing price per share (excluding cash) of the Company common stock on December 16, 2009.

 

This analysis indicated that the price per share to be paid to the Company stockholders pursuant to the merger agreement represented:

 

 

Implied Transaction Multiples.   Goldman Sachs calculated various financial multiples and ratios for the Company based on the closing price of $6.21 per share of the Company common stock on December 16, 2009 and the $7.65 per share merger consideration using the Base Case Management Projections provided by Company management (see “ Important Information About Airvana — Projected Financial Information ” beginning on page 98) and market data as of December 16, 2009. With respect to the Company, Goldman Sachs calculated the following multiples:

 

 

 

The results of these analyses are summarized in the table below:

 

 

 

 

 

 

Selected Companies Analysis.   Goldman Sachs reviewed and compared certain financial information, financial ratios and multiples for the Company to corresponding financial information, financial ratios and multiples for the following publicly traded companies in the communications technology industry:

 

 

 

Although none of the selected companies is directly comparable to the Company, the companies included were chosen because they are publicly traded companies with operations and financial profiles that for purposes of analysis may be considered similar to certain operations and financial profiles of the Company.

 

Goldman Sachs calculated and compared the financial multiples and ratios for the selected companies based on publicly available financial information, estimates from Institutional Brokers’ Estimate System, or IBES, and common stock closing prices on December 16, 2009. Goldman Sachs calculated the financial multiples and ratios for the Company based on publicly available financial information, Wall Street research, the Base Case Management Projections provided by Company management (see “ Important Information About Airvana — Projected Financial Information ” beginning on page 98) and the closing price of the Company common stock on December 16, 2009, the day prior to the execution of the merger agreement, of $6.21 per share. Goldman Sachs used the Company’s undisturbed stock price prior to the merger announcement in these analyses in order to exclude the effect of the merger announcement on the Company’s stock price. With respect to each of the Company and the selected companies, Goldman Sachs calculated:

 

 

 

 

Goldman Sachs also compared the estimated rate of growth in revenues and EBITDA for the selected companies with the estimated rate of growth in billings and EBITDA (based on billings) for the Company for the calendar years 2008, 2009 and 2010 and compared the estimated 2009 and 2010 EBITDA margin for the selected companies with the estimated 2009 and 2010 EBITDA margin (based on billings) for the Company. The following table presents the results of these analyses:

 

 

 

 

 

Goldman Sachs then compared the enterprise value to EBITDA (based on billings) multiples for the Company based on Wall Street research to the enterprise value to EBITDA multiples for the selected companies based on IBES EBITDA estimates over the last 52-week period ended December 16, 2009. Goldman Sachs also compared price to one-year forward earnings (based on billings) multiples for the Company based on Wall Street research to the one-year forward earnings multiples for a composite of the selected companies for the same periods based on IBES price to one-year forward earnings estimates over such period. This analysis indicated that the Company common stock and the common stock of the selected companies traded at the following enterprise value to one-year forward EBITDA (based on billings) multiples and one-year forward EBITDA multiples, respectively, and price to one-year forward earnings (based on billings) multiples and one-year forward earnings multiples, respectively, for the following periods:

 

1-Year Forward EV/EBITDA

 

 

 

 

1-Year Forward P/E

 

 

 

 

Illustrative Present Value of Future Share Price Analysis.   Goldman Sachs performed illustrative analyses of the implied present values of the future price of a share of the Company common stock, using Company management’s Base Case, Downside Case and Upside Case Management Projections of the Company’s one-year forward EBITDA (based on billings), one-year forward net income (based on billings) and one-year forward adjusted net income (based on billings and adjusted by adding after-tax interest income to one-year forward net income, excluding cash) for each of the fiscal years 2010, 2011 and 2012. See “ Important Information About Airvana — Projected Financial Information ” beginning on page 98.

 

Goldman Sachs calculated the implied enterprise value of the Company for each of the fiscal years 2010, 2011 and 2012 by applying a one-year forward EBITDA (based on billings) multiple of 3.1x for each of the fiscal years 2010, 2011 and 2012 to the one-year forward EBITDA (based on billings) estimates provided by Company management for each such year. Goldman Sachs then calculated the implied equity value of the Company for each of the fiscal years 2010, 2011 and 2012 by adding the Company’s net cash forecast provided by Company management for each of 2010, 2011 and 2012 to the implied enterprise value of Company for each such year and discounted those values for the Company back to December 31, 2009, using a range of discount rates from 10.0% to 15.0%, reflecting estimates of the Company’s cost of equity. Goldman Sachs then divided the implied equity value of the Company for each such year by the number of shares of the Company common stock outstanding (as determined on a fully diluted basis using implied price and treasury method for options) as of October 30, 2009. The following table presents the results of these analyses:

 

Based on EV/EBITDA* Multiples

 

 

 

 

 

The merger consideration is $7.65 per share of the Company common stock.

 

Goldman Sachs also performed the foregoing analysis to calculate the implied equity value of the Company for each of the fiscal years 2010, 2011 and 2012 by applying a price to one-year forward earnings (based on billings) multiple of 12.5x to the one-year forward earnings (based on billings) estimates provided by Company management for each such year. Goldman Sachs then discounted those values back to December 31, 2009 using a range of discount rates from 10.0% to 15.0%, reflecting estimates of the Company’s cost of equity. Goldman Sachs then divided the implied equity value of the Company for each such year by the number of shares of the Company common stock outstanding (as determined on a fully

diluted basis using implied price and treasury method for options) as of October 30, 2009. The following table presents the results of these analyses:

 

Based on P/E* Multiples

 

 

 

 

 

The merger consideration is $7.65 per share of the Company common stock.

 

In addition, Goldman Sachs performed the foregoing analysis to calculate the implied equity value of the Company for each of the fiscal years 2010, 2011 and 2012 by applying a price to one-year forward earnings (based on billings and excluding cash) multiple of 5.6x to the one-year forward adjusted net income (based on billings and adjusted by adding after-tax interest income to one-year forward net income) estimates provided by Company management for each such year. Goldman Sachs then calculated the implied equity values (including cash) of the Company for each of the fiscal years 2010, 2011 and 2012 by adding the Company’s total cash estimates provided by Company management for each of 2010, 2011 and 2012 to the implied equity value (excluding cash) of the Company for each such year. Goldman Sachs then discounted those values back to December 31, 2009, using a range of discount rates from 10.0% to 15.0%, reflecting estimates of the Company’s cost of equity. Goldman Sachs then divided the implied equity value of the Company for each such year by the number of shares of the Company common stock outstanding (as determined on a fully diluted basis using implied price and treasury method for options) as of October 30, 2009. The following table presents the results of these analyses:

 

Based on P/E (Excluding Cash)* Multiples

 

 

 

 

 

The merger consideration is $7.65 per share of the Company common stock.

 

Illustrative Discounted Cash Flow Analysis.   Goldman Sachs performed an illustrative discounted cash flow analysis on the Company to determine a range of implied present values per share of the Company common stock using Company management’s Base Case, Downside Case and Upside Case Management Projections. See “ Important Information About Airvana — Projected Financial Information ” beginning on page 98. First, Goldman Sachs calculated the net present value of the unlevered free cash flows (based on billings) for the EV-DO business for the fiscal years 2010 through 2018, using discount rates ranging from 16.5% to 18.5%, reflecting estimates of the EV-DO business’ weighted-average cost of capital, to derive the implied present value of the EV-DO business. In this analysis, Goldman Sachs assumed that the EV-DO business has no value at perpetuity based on Company management’s assumption that the EV-DO business would not yield any revenue after the fiscal year 2018. Goldman Sachs then calculated indications of net present value of the unlevered free cash flows (based on billings) for the femtocell business for the fiscal years 2010 through 2013, excluding the losses forecast by Company management and assuming any such losses would be funded with available cash, using discount rates ranging from 25% to 30%, reflecting estimates of

the femtocell business’ weighted-average cost of capital. Goldman Sachs also calculated the net present value of the illustrative terminal value of the femtocell business in the fiscal year 2013 by applying a range of enterprise value to EBITDA (based on billings) multiples of 10.3x to 12.3x to the estimated EBITDA (based on billings) in the fiscal year 2013 for the femtocell business and using discount rates ranging from 25% to 30%, reflecting estimates of femtocell business’ weighted-average cost of capital. Goldman Sachs then calculated the implied present value of the femtocell business by adding the present value of the projected cash flows from the femtocell business for the fiscal years 2010 through 2013 to the present value of the terminal value for the femtocell business in the fiscal year 2013.

 

Goldman Sachs then calculated the implied present value of the Company by adding (i) the implied present value of the EV-DO business, (ii) the implied present value of the femtocell business, and (iii) the amount of Company’s estimated total cash as of December 31, 2009 after pre-funding $77 million of losses forecast by Company management from the femtocell business and then dividing by the number of shares of the Company common stock outstanding (as determined on a fully diluted basis using implied price and treasury method for options) as of October 30, 2009.

 

Goldman Sachs also performed an analysis similar to that described above but assuming the shutdown of the femtocell business in January 2010 and no pre-funding of losses forecast by Company management from the femtocell business. The following table presents the results of these analyses in a range of implied present values:

 

 

 

 

 

The merger consideration is $7.65 per share of the Company common stock.

 

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 set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Goldman Sachs’ opinion. In arriving at its fairness determination, Goldman Sachs considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Goldman Sachs made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. No company or transaction used in the above analyses as a comparison is directly comparable to the Company or Parent or the merger.

 

Goldman Sachs prepared these analyses for purposes of Goldman Sachs providing its opinion to the special committee as to the fairness from a financial point of view to the holders of shares of the Company common stock (other than the Rollover Stockholders) of the $7.65 per share in cash to be paid to such holders pursuant to the merger agreement. These analyses do not purport to be appraisals nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. 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, Parent, Goldman Sachs or any other person assumes responsibility if future results are materially different from those forecast.

The $7.65 per share merger consideration was determined through arm’s-length negotiations between the special committee and Parent and was approved by the Company’s board of directors. Goldman Sachs provided advice to the special committee during these negotiations. Goldman Sachs did not, however, recommend any specific amount of consideration to the special committee or its board of directors or that any specific amount of consideration constituted the only appropriate consideration for the merger.

 

As described above, Goldman Sachs’ opinion to the special committee was one of many factors taken into consideration by the special committee in making its determination to approve the merger agreement. The foregoing summary does not purport to be a complete description of the analyses performed by Goldman Sachs in connection with the fairness opinion and is qualified in its entirety by reference to the written opinion of Goldman Sachs attached as Annex B to this proxy statement.

 

Goldman Sachs and its affiliates are engaged in investment banking and financial advisory services, commercial banking, securities trading, investment management, principal investment, financial planning, benefits counseling, risk management, hedging, financing, brokerage activities and other financial and non-financial activities and services for various persons and entities. In the ordinary course of these activities and services, Goldman, Sachs & Co. and its affiliates may at any time make or hold long or short positions and investments, as well as actively trade or effect transactions, in the equity, debt and other securities (or related derivative securities) and financial instruments (including bank loans and other obligations) of third parties, the Company and its affiliates, and SAC PCG and its affiliates and portfolio companies or any currency or commodity that may be involved in the merger for their own account and for the accounts of their customers. Goldman Sachs acted as financial advisor to the special committee in connection with, and participated in certain of the negotiations leading to, the merger. During the two year period ended December 17, 2009, Goldman Sachs and its affiliates did not receive any fees from the Company for services unrelated to the proposed merger. Goldman Sachs also has provided certain investment banking and other financial services to SAC PCG and its affiliates and portfolio companies from time to time, including having acted as financial advisor to a consortium of financial sponsors, including SAC PCG, in its acquisition of Laureate Education Inc. in August 2007. Goldman Sachs also may provide investment banking and other financial services to the Company and its affiliates and SAC PCG and its affiliates and portfolio companies in the future. In connection with the above-described services, Goldman Sachs has received, and may receive in the future, compensation. Affiliates of Goldman Sachs may co-invest with SAC PCG and its affiliates and may invest in limited partnership units of affiliates of SAC PCG in the future.

 

The special committee selected Goldman Sachs as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience in transactions similar to the merger. Pursuant to a letter agreement dated July 27, 2009, the special committee engaged Goldman Sachs to act as its financial advisor in connection with the consideration of strategic alternatives. Pursuant to the terms of this engagement letter, the Company has agreed to pay Goldman Sachs a transaction fee equal to approximately $6.3 million, $5.8 million of which is contingent upon consummation of the merger. In addition, the Company has agreed to reimburse Goldman Sachs for its reasonable expenses, including attorneys’ fees and disbursements, which expenses are not limited to a maximum amount. However, Goldman Sachs is obligated to notify the Company if the expenses to be reimbursed exceed $100,000. The Company has also agreed to indemnify Goldman Sachs and related persons against various liabilities, including certain liabilities under the federal securities laws.

 

Other Written Presentations by Goldman Sachs

 

In addition to the presentation made to the special committee on December 17, 2009 described above, Goldman Sachs also made written presentations to the special committee on July 14, 2009, August 11, 2009, September 4, 2009 and December 9, 2009. Each of these presentations and Goldman Sachs’ fairness opinion to the special committee has been filed as an exhibit to the Schedule 13E-3 filed with the SEC in connection with the merger. See “ Where You Can Find Additional Information ” on page 107. None of these other written presentations by Goldman Sachs, alone or together, constitute an opinion of Goldman Sachs with respect to the consideration to be paid in the merger.

Information contained in these other written presentations is substantially similar to the information provided in Goldman Sachs’ written presentation to the special committee on December 17, 2009 described above. The July 14, 2009 materials contained preliminary valuation analyses, discussion of potentially interested financial sponsors and strategic buyers, proposed timeline and initial process considerations. The August 11, 2009 materials contained Company management’s projections, preliminary valuation analyses, analyses of selected alternatives for the Company, including leveraged buyout, special dividend and sale of the Company, and illustrative return analyses, discussion of potentially interested strategic and financial buyers and an industry overview. The September 4, 2009 materials contained a preliminary timetable and an update on Company management’s financial projections. The December 9, 2009 materials contained an update on Company management’s financial projections, preliminary valuation analyses, analyses of selected alternatives for the Company, including leveraged buyout, special dividend, share buyback and illustrative return analyses. The valuation analyses contained in these other written presentations made by Goldman Sachs included, among other things, the following types of valuation analyses:

 

 

These financial analyses were not necessarily included in all of the other written presentations listed above. The financial analyses in these other written presentations were based on market, economic and other conditions as they existed as of the dates of the respective presentations as well as other information that was available at those times. Accordingly, the results of these financial analyses differed due to changes in those conditions. Among other things, multiples attributable to selected companies changed as those companies’ stock prices changed, present value of future share price analyses and discounted cash flows analyses changed as the Company’s financial results (as well as forecasts updated by Company management to reflect actual results) and discount rates used changed, and discount rates changed based on market conditions. In addition, premium paid analysis and implied transaction multiples changed as the merger consideration changed based on the status of the parties’ negotiations. Finally, Goldman Sachs continued to refine various aspects of its financial analyses with respect to the Company over time.

 

Parent and Merger Sub, as well as 72 Mobile Investors, LLC, Sankaty, ZM Capital and 72 Private Investments, L.P. which we refer to collectively as the “other Buyer Filing Persons,” are making the statements included in this section solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act. 72 Mobile Investors, LLC, which we refer to as “Investment Vehicle,” is the managing member of Parent. We refer to Parent, Merger Sub and the other Buyer Filing Persons collectively, as the “Buyer Filing Persons.”

 

If the merger is completed, Airvana will become a subsidiary of Parent. For Parent and Merger Sub, the purpose of the merger is to effectuate the transactions contemplated by the merger agreement. For the other Buyer Filing Persons, the purpose of the merger is to indirectly own equity interests in Airvana and to bear the rewards and risks of such ownership after shares of Airvana common stock cease to be publicly traded.

 

The Buyer Filing Persons believe that it is best for Airvana to operate as a privately held entity in order to allow Airvana greater operational flexibility and to focus on its business without the constraints and distractions caused by the public equity market’s valuation of its common stock. Moreover, the Buyer Filing Persons believe that Airvana’s business prospects can be improved through the active participation of Parent in the strategic direction of Airvana. Although the Buyer Filing Persons believe that there will be significant opportunities associated with their investment in Airvana, they realize that there are also substantial risks (including the risks and uncertainties relating to the prospects of Airvana and its femtocell business) and that such opportunities may not ever be fully realized.

The Buyer Filing Persons believe that structuring the transaction as a merger transaction is preferable to other transaction structures because (a) it will enable Parent to acquire all of the outstanding shares of Airvana at the same time, (b) it represents an opportunity for Airvana’s unaffiliated stockholders to receive fair value for their shares of common stock in the form of the merger consideration or, at the election of the unaffiliated stockholder, by pursuing appraisal rights and (c) it allows the Rollover Stockholders to maintain a portion of their investment in Airvana.

 

The Rollover Stockholders are making the statements included in this section solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act.

 

Concurrently with Airvana entering into the merger agreement, the Rollover Stockholders entered into a rollover commitment letter with Parent pursuant to which approximately 60% of the shares of Airvana common stock held by each of the Rollover Stockholders will be exchanged for equity interests of Parent, valuing the exchanged shares at an amount per share equal to the merger consideration. The Rollover Stockholders expect the exchange of their shares to be tax deferred for U.S. federal income tax purposes. In addition, each of Messrs. Battat and Verma and Dr. Eyuboglu expects to enter into employment agreements with Parent. See “ — Interests of the Company’s Directors and Executive Officers in the Merger” beginning on page 57. For the Rollover Stockholders, the purpose of the merger is to enable the Rollover Stockholders to receive cash for their stock options and for a significant portion of their holdings of Airvana common stock at a premium over recent and historical market prices and to benefit from any future earnings and growth of Airvana, to the extent of their equity interest in Parent after the Airvana common stock ceases to be publicly traded. The Rollover Stockholders believe that Airvana’s business profile is better suited for a privately held entity than a public company because of the uncertainties associated with the reliance of Airvana’s EV-DO business on a single customer and the transition to next generation 4G technology, its complex financial statements and the absence of a proven track record of business performance for Airvana’s femtocell products.

 

The Buyer Filing Persons are making the statements included in this section solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act. The views of the Buyer Filing Persons should not be construed as a recommendation to any stockholder as to how that stockholder should vote on the proposal to adopt the merger agreement.

 

Parent and Merger Sub attempted to negotiate the terms of a transaction that would be most favorable to them, and not to the stockholders of Airvana, and, accordingly, did not negotiate the merger agreement with a goal of obtaining terms that were fair to such stockholders. None of the Buyer Filing Persons believes that it has or had any fiduciary duty to Airvana or its stockholders, including with respect to the merger and its terms.

 

None of the Buyer Filing Persons participated in the deliberation processes of the special committee or our board of directors, or in the conclusions of the special committee or our board of directors, with respect to the substantive and procedural fairness of the merger to the unaffiliated stockholders of Airvana, nor did they undertake any independent evaluation of the fairness of the merger or engage a financial advisor for such purpose. Nevertheless, they believe that the proposed merger is substantively and procedurally fair to the unaffiliated stockholders on the basis of the factors discussed below.

 

The Buyer Filing Persons believe that the proposed merger is substantively fair to the unaffiliated stockholders based on the following factors:

 

 

 

The Buyer Filing Persons believe that the proposed merger is procedurally fair to the unaffiliated stockholders based on the following factors:

 

 

 

The Buyer Filing Persons did not consider the liquidation value of the Company’s assets to be a factor in determining the substantive fairness of the transaction to the unaffiliated stockholders because they consider the Company to be a viable going concern business where value is derived from cash flows generated from its continuing operations. In addition, the Buyer Filing Persons believe that the value of the Company’s assets that might be realized in a liquidation would be significantly less than its going concern value. The Buyer Filing Persons did not establish a pre-merger going concern value for the Company’s equity as a public company for the purpose of determining the fairness of the merger consideration to the unaffiliated stockholders because, following the merger, the Company will have a significantly different capital structure, which will result in different opportunities and risks for the business as a more highly leveraged private company. Further, the Buyer Filing Persons did not consider the Company’s net book value, which is an accounting concept, as a factor because they believed that net book value is not a material indicator of the value of the Company as a going concern but rather is indicative of historical costs. In making their determination as to the substantive fairness of the merger to the unaffiliated stockholders, The Buyer Filing Persons were not aware of any firm offers during the prior two years by any person for the merger or consolidation of Airvana with another company, the sale or transfer of all or substantially all of Airvana’s assets or a purchase of Airvana’s assets that would enable the holder to exercise control of Airvana, although there were proposals as described in “ — Background of the Merger” beginning on page 13. None of the Buyer Filing Persons undertook or engaged a financial advisor or other outside party to undertake any independent evaluation, appraisal or other analysis for the purpose of evaluating the fairness of the merger to the unaffiliated stockholders.

The foregoing discussion of the information and factors considered and given weight by the Buyer Filing Persons in connection with the fairness of the merger is not intended to be exhaustive but includes all material factors considered by the Buyer Filing Persons. The Buyer Filing Persons did not find it practicable to assign, and did not, assign or otherwise attach, relative weights to the individual factors in reaching their position as to the fairness of the merger. Rather, their fairness determinations were made after consideration of all of the foregoing factors as a whole. The Buyer Filing Persons believe the foregoing factors provide a reasonable basis for their belief that the merger is substantively and procedurally fair to the unaffiliated stockholders.

 

The Rollover Stockholders are making the statements included in this section solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act.

 

The views of the Rollover Stockholders as to the fairness of the merger should not be construed as a recommendation to any stockholder as to how that stockholder should vote on the proposal to adopt the merger agreement. The Rollover Stockholders have interests in the merger different from, and in addition to, those of the other stockholders of Airvana. These interests are described under “— Interests of the Company’s Directors and Executive Officers in the Merger” beginning on page 57.

 

The Rollover Stockholders are not a party to and did not participate in the negotiation of the merger agreement with the Company, Parent or Merger Sub or their respective representatives or advisors. None of the Rollover Stockholders participated in the deliberations of the special committee with respect to the substantive or procedural fairness of the merger to the unaffiliated stockholders, nor did they undertake any independent evaluation of the fairness of the merger or engage a financial advisor for such purpose. Nevertheless, the Rollover Stockholders believe that the proposed merger is substantively and procedurally fair to the unaffiliated stockholders on the basis of the factors discussed below.

 

The Rollover Stockholders believe that the proposed merger is substantively fair to the unaffiliated stockholders based on the following factors:

 

 

 

The Rollover Stockholders believe that the proposed merger is procedurally fair to the unaffiliated stockholders based on the following factors:

 

 

 

The Rollover Stockholders did not consider the liquidation value of the Company’s assets to be a factor in determining the substantive fairness of the transaction to the unaffiliated stockholders because they consider the Company to be a viable going concern business where value is derived from cash flows generated from its continuing operations. In addition, the Rollover Stockholders believe that the value of the Company’s assets that might be realized in a liquidation would be significantly less than its going concern value. The Rollover Stockholders did not establish a pre-merger going concern value for the Company’s equity as a public company for the purpose of determining the fairness of the merger consideration to the unaffiliated stockholders because, following the merger, the Company will have a significantly different capital structure, which will result in different opportunities and risks for the business as a more highly leveraged private company. Further, the Rollover Stockholders did not consider the Company’s net book value, which is an accounting concept, as a factor because they believed that net book value is not a material indicator of the value of the Company as a going concern but rather is indicative of historical costs. None of the Rollover Stockholders undertook or engaged a financial advisor or other outside party to undertake any independent evaluation, appraisal or other analysis for the purpose of evaluating the fairness of the merger to the unaffiliated stockholders.

 

The foregoing discussion of the information and factors considered and given weight by the Rollover Stockholders in connection with the fairness of the merger is not intended to be exhaustive but includes all material factors considered by the Rollover Stockholders. The Rollover Stockholders did not find it practicable to assign, and did not assign or otherwise attach, relative weights to the individual factors in reaching their position as to the fairness of the merger. Rather, their fairness determinations were made after consideration of all of the foregoing factors as a whole. The Rollover Stockholders believe the foregoing factors provide a reasonable basis for their belief that the merger is substantively and procedurally fair to the unaffiliated stockholders.

 

It is expected that, upon consummation of the merger, the operations of Airvana will be conducted substantially as they currently are being conducted, except that we will cease to have publicly traded equity securities and will instead be a wholly owned subsidiary of Parent. Parent has advised Airvana that it does not have any current intentions, plans or proposals to cause us to engage in any of the following:

 

 

We expect, however, that both before and following consummation of the merger, Airvana and the surviving corporation will act to form new direct or indirect subsidiaries of Airvana referred to as “Femto Holdings,” to which Airvana and its other subsidiaries will transfer substantially all of the assets and liabilities that primarily relate to the femtocell business (subject to certain exceptions). The senior secured facility is expected to require Femto Holdings to be capitalized with approximately $15.0 million as of the closing of the merger and, thereafter, to permit Airvana to fund Femto Holdings with certain excess cash flows from the EV-DO business. The senior secured facility is also expected to require, no later than 180 days after the closing of the merger:

 

 

We additionally expect the management and/or board of directors of the surviving corporation will continue to assess our assets, corporate and capital structure, capitalization, operations, business, properties and personnel to determine what changes, if any, would be desirable following the merger to enhance the business and operations of the surviving corporation and may cause the surviving corporation to engage in additional transactions if the management and/or board of directors of the surviving corporation decides that such transactions are in the best interests of the surviving corporation upon such review. The surviving corporation expressly reserves the right to make any changes it deems appropriate in light of such evaluation and review or in light of future developments.

 

If the merger agreement is adopted by the Company’s stockholders and certain other conditions to the closing of the merger are either satisfied or waived, Merger Sub will be merged with and into Airvana, with Airvana being the surviving corporation.

 

Upon the consummation of the merger, each share of Airvana common stock issued and outstanding immediately prior to the effective time of the merger (other than shares held in the treasury of the Company, shares owned by any of our wholly owned subsidiaries, shares owned by Parent immediately prior to the effective time of the merger or shares held by stockholders who are entitled to and who properly exercise, and do not withdraw or lose, appraisal rights under Delaware law) will be converted into the right to receive $7.65 in cash, without interest and less any applicable withholding taxes. We expect that such shares owned by Parent will include certain shares held by the Rollover Stockholders that will be exchanged for equity interests in Parent rather than for cash in the merger. Upon the consummation of the merger, all outstanding options to acquire Airvana common stock will become fully vested and immediately exercisable and all such options not exercised prior to the merger will be cancelled and converted into a right to receive a cash payment equal to the number of shares of Airvana common stock underlying the options multiplied by the amount by which $7.65 exceeds the option exercise price, without interest and less any applicable withholding taxes.

 

Following the merger, the entire equity in the surviving corporation will directly and indirectly be owned through Parent by Investment Vehicle, the Co-Investors (which, for purposes of this description of the equity financing, includes 72 Private Investments, L.P., which we refer to as “72 Private Investments,” and an affiliate of GSO), the Rollover Stockholders and any additional investors that the Investment Vehicle and the Co-Investors permit to invest in Parent. As of the date hereof, the Investment Vehicle and the Co-Investors do not have an agreement with any such additional investors to permit investment in Parent. If the merger is completed, the Investment Vehicle, the Co-Investors, the Rollover Stockholders and any additional investors that the Investment Vehicle and the Co-Investors permit to invest in Parent will be the sole beneficiaries of our

future earnings and growth, if any, and will be entitled to vote on corporate matters affecting Airvana following the merger. Similarly, the Investment Vehicle, the Co-Investors, the Rollover Stockholders and any additional investors that the Investment Vehicle and the Co-Investors permit to invest in Parent will also bear the risks of their investment in Parent, including the risks of any decrease in our value after the merger and the operational and other risks related to the incurrence by the surviving corporation of significant additional debt as described below under “— Financing of the Merger .”

 

 

 

 

The Rollover Stockholders will receive benefits and be subject to obligations in connection with the merger that are different from, or in addition to, the benefits and obligations of Airvana stockholders generally, as described in more detail under “  — Interests of the Company’s Directors and Executive Officers in the Merger ” beginning on page 57. The incremental benefits will include the right and commitment of the Rollover Stockholders to make an agreed upon equity investment in the Parent by exchanging a portion of their shares of Airvana common stock for equity interests in the Parent, and the ability for Messrs. Battat and Verma and Dr. Eyuboglu to participate in an equity incentive plan of Femto Holdings or one of its subsidiaries. Additional incremental benefits to Messrs. Battat and Verma and Dr. Eyuboglu include higher base salaries and cash incentive bonuses than currently paid by Airvana. A potential detriment to the Rollover Stockholders may be that their new options, if any, may not be exercisable for shares registered under the federal securities laws and their new interests, if any, in the Parent will not initially be and may not be registered under the federal securities laws and such shares, if any, will be relatively illiquid without an active public trading market for such securities. The equity interests, if any, received upon exercise of these options and the equity interests received in exchange for such shares of Airvana common stock will also be subject to a stockholders agreement or other agreement restricting the ability of the Rollover Stockholders to sell such equity. A potential detriment to the Rollover Stockholders is that the Investment Vehicle and the Co-Investors will own a majority of Parent’s shares, will control the respective boards of directors of Parent and the surviving corporation and will be able to exert substantial influence over the governance and operations of Parent and the surviving corporation following the merger.

 

Airvana common stock is currently registered under the Exchange Act and is quoted on the NASDAQ under the symbol “AIRV.” As a result of the merger, Airvana will be a privately held corporation, and there will be no public market for its common stock. After the merger, the Airvana common stock will cease to be quoted on the NASDAQ, and price quotations with respect to sales of shares of common stock in the public market will no longer be available. In addition, registration of the Airvana common stock under the Exchange Act will be terminated.

 

At the effective time of the merger, the directors of Merger Sub will become the directors of the surviving corporation and the current officers of Airvana will become the officers of the surviving corporation. The certificate of incorporation of Airvana will be amended to be the same as the certificate of incorporation of

Merger Sub as in effect immediately prior to the effective time of the merger, except that the name of the surviving corporation shall continue to be “Airvana, Inc.” The bylaws of the Company in effect immediately prior to the effective time of the merger will become the bylaws of the surviving corporation. Each of Messrs. Battat and Verma and Dr. Eyuboglu will be members of the board of directors of Parent and the surviving corporation.

 

If the merger agreement is not adopted by Airvana’s stockholders or if the merger is not completed for any other reason, stockholders will not receive any payment for their shares in connection with the merger. Instead, Airvana will remain an independent public company and the Airvana common stock will continue to be listed and traded on the NASDAQ. In addition, if the merger is not completed, we expect that management will operate the business in a manner similar to that in which it is being operated today and that Airvana stockholders will continue to be subject to the same risks and opportunities as they currently are. Accordingly, if the merger is not consummated, there can be no assurance as to the effect of these risks and opportunities on the future value of your Airvana shares. Under specified circumstances, Airvana may be required to pay Parent a termination fee of $15 million or reimburse Parent for its out of pocket expenses up to $3 million or Parent may be required to pay Airvana a reverse termination fee of $25 million, in each case, as described in “The Merger Agreement — Termination Fees” beginning on page 86. From time to time, Airvana’s board of directors will evaluate and review, among other things, the business, operations, properties, dividend policy and capitalization of Airvana and make such changes as are deemed appropriate and continue to seek to identify strategic alternatives to enhance stockholder value. If the merger agreement is not adopted by Airvana’s stockholders or if the merger is not consummated for any other reason, there can be no assurance that any other transaction acceptable to Airvana will be offered, or that the business, prospects or results of operations of Airvana will not be adversely impacted.

 

If the merger is completed, the Airvana common stock will be delisted from the NASDAQ and deregistered under the Exchange Act.

 

Under the HSR Act and the rules promulgated thereunder by the FTC, the merger cannot be completed until Airvana and Parent file a notification and report form under the HSR Act and the applicable waiting period has expired or been terminated. Airvana and Parent filed notification and report forms under the HSR Act with the FTC and the Antitrust Division of the DOJ on January 15, 2010. The FTC and DOJ terminated the mandatory waiting period under the HSR Act on January 27, 2010.

 

Although Airvana expects that the merger can be effected in compliance with federal and state antitrust laws, it cannot be certain that the merger will not be challenged by a governmental authority or private party on antitrust grounds. At any time before or after consummation of the merger, the DOJ or the FTC could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the consummation of the merger or seeking divestiture of substantial assets of Airvana or Parent. At any time before or after the consummation of the merger any state could take such action under the antitrust laws as it deems necessary or desirable in the public interest. Such action could include seeking to enjoin the consummation of the merger or seeking divestiture of substantial assets of Airvana or Parent. Private parties may also seek to take legal action under the antitrust laws under certain circumstances.

 

The term “antitrust laws” means the Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the Federal Trade Commission Act, as amended, and all other Federal and state statutes, rules, regulations, orders, decrees, administrative and judicial doctrines, and other laws that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade.

 

No provision has been made (i) to grant Airvana’s unaffiliated stockholders access to the corporate files of Airvana, any other party to the proposed merger or any of their respective affiliates or (ii) to obtain counsel or appraisal services at the expense of Airvana or any other such party or affiliate.

 

Equity Financing

 

Parent has received an equity commitment letter from S.A.C. Capital Management, LLC. Pursuant to this equity commitment letter, S.A.C. Capital Management, LLC has committed to purchase, or cause to be purchased, up to $103.1 million of equity of Parent in connection with the merger. The obligation to fund the commitments under the equity commitment letter is subject to the following conditions:

 

 

Pursuant to the interim investors agreement described in greater detail below in “— Parent Interim Investors Agreement,” S.A.C. Capital Management, LLC has assigned approximately $92.5 million of its commitment to Investment Vehicle. Investment Vehicle has received equity commitment letters in substantially similar form from 72 Private Investments and the Co-Investors. Pursuant to these equity commitment letters, 72 Private Investments has committed to purchase, or cause to be purchased, up to approximately $50 million, Sankaty has committed to purchase, or cause to be purchased, up to $25 million and ZM Capital has committed to purchase, or cause to be purchased, up to $17.5 million of equity of Investment Vehicle in connection with the merger. Any of the foregoing commitments may be assigned under circumstances set forth in these commitment letters. The obligation to fund the commitments under each of the equity commitment letters is subject to the following conditions:

 

 

Parent has also received an equity commitment letter from GSO, pursuant to which letter GSO committed to purchase or cause to be purchased, $10 million of equity securities of Parent in connection with the merger on the terms and conditions set forth in such commitment letter. The obligation to fund the commitments under the equity commitment letter is subject to the following conditions:

 

 

 

The Rollover Stockholders have committed to contribute an aggregate of 3,738,562 shares of Airvana’s common stock (with an aggregate value of approximately $28.6 million based on the merger consideration) to Parent immediately prior to the consummation of the merger in exchange for equity interests in Parent. The shares contributed will be cancelled in connection with the merger and will not be entitled to receive any merger consideration upon completion of the merger. The Rollover Stockholders, Parent, SAC PCG and GSO have agreed to cooperate to structure the contribution of Airvana common stock held by the Rollover Stockholders to Parent as a tax-free exchange to the extent permitted by law. The obligations to contribute the shares pursuant to the rollover commitment letters are subject to the following conditions:

 

 

Parent Interim Investors Agreement

 

In connection with the execution and delivery of the merger agreement, Parent, Merger Sub, S.A.C. Capital Management, LLC, Investment Vehicle and the Rollover Stockholders have entered into an interim investors agreement setting forth certain terms and conditions governing the relationship among the parties until the consummation of the merger. In addition to certain representations and warranties of the parties, the interim investors agreement provides for, among other things, (i) control by Investment Vehicle over the actions or omissions of Parent and Merger Sub, (ii) the entrance into, concurrent with the consummation of the merger, of a new limited liability company agreement of Parent, (iii) the assignment by S.A.C. Capital Management, LLC to Investment Vehicle of approximately $92.5 million of its equity commitment, (iv) the right of Parent to enforce (including by specific performance) the provisions of each equity commitment letter, (v) a prohibition on the transfer of obligations and/or rights under any equity commitment letter without the written approval of Investment Vehicle, (vi) the payment or reimbursement by Investment Vehicle of certain expenses incurred by Parent and Merger Sub in connection with the merger agreement and transactions contemplated thereby, (vii) the termination of certain agreements between the Rollover Stockholders and the Company, (viii) the waiver of appraisal rights under Delaware law by the Rollover Stockholders, (ix) the good faith pursuit of all necessary antitrust approvals by the Rollover Stockholders and (x) the entrance into by Parent, at or prior to the consummation of the merger, of a management agreement with an affiliate of Investment Vehicle.

 

Debt Financing

 

In connection with the execution and delivery of the merger agreement, Parent has received a debt commitment letter for up to $170.0 million of debt financing from GSO, on behalf of certain funds managed by GSO, consisting of a senior secured term loan facility with a term of seven years. The debt commitment letter was amended on January 13, 2010. Merger Sub and/or Airvana will be the borrower under the senior secured facility (the “Borrower”). The proceeds of borrowings under the senior secured facility will be used to finance, in part, the payment of the amounts payable under the merger agreement and the payment of fees and expenses incurred in connection with the merger.

The debt financing commitments are conditioned on the consummation of the merger on the terms set forth in the merger agreement, as well as other customary conditions, including, but not limited to:

 

 

 

 

Under the merger agreement, Parent and Merger Sub may replace or amend the debt financing commitment to add lenders, arrangers or similar entities or otherwise so long as the terms would not adversely impact the ability of Parent and the Merger Sub to timely consummate the merger or the likelihood of the consummation of the merger and related transaction. As of the date of this proxy statement, no alternative financing arrangements or alternative financing plans have been made in the event the debt financing described above is not available as anticipated or otherwise. The documentation governing the senior secured facility has not been finalized and, accordingly, its actual terms may differ from those described in this proxy statement. There is no plan or arrangement regarding the refinancing or repayment of the debt financing except as described herein.

 

The loans under the senior secured facilities are expected to bear interest at a rate of 14.00% per annum if the principal amount outstanding is less than $85 million and 14.75% per annum in all other cases.

All obligations of the Borrower under the senior secured facility are expected to be guaranteed on a senior secured basis by Parent and by each of Parent’s existing and subsequently acquired or organized direct or indirect U.S. subsidiaries (subject to certain exceptions, the “Guarantors”).

 

The obligations of the Borrower and the Guarantors under the senior secured facility are expected to be secured, subject to permitted liens and other agreed upon exceptions, by a perfected first-priority security interest in substantially all of the present and after acquired assets of the Borrower and each Guarantor and by a first-priority lien on all of the capital stock of the Borrower and each direct subsidiary of the Borrower and each subsidiary Guarantor (limited, in the case of foreign subsidiaries, to 100% of the non-voting capital stock and 65% of the voting capital stock of such subsidiaries).

 

The senior secured facility is expected to contain customary representations and warranties and customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, investments, sales of assets, mergers and consolidations, liens, transactions with affiliates and dividends and other distributions. The senior secured facility will require the Borrower, Parent and the other Guarantors to cause Femto Holdings and its subsidiaries to separate their legal, business and financial affairs from those of the Borrower, the Guarantors and their respective subsidiaries (other than Femto Holdings and its subsidiaries). The financial maintenance covenant will consist of a maximum total leverage ratio. The senior secured facility is expected to also include customary events of default, including with respect to a change of control to be defined.

 

In connection with the merger agreement, S.A.C. Capital Management, LLC has agreed to guarantee the due and punctual payment of certain of the payment obligations of Parent under the merger agreement, up to a maximum amount of the reverse termination fee of $25 million (plus interest and enforcement costs incurred by the Company should the reverse termination fee not be paid by Parent when due). This limited guarantee will remain in full force and effect until the earlier of (i) closing of the transactions contemplated by the merger agreement, (ii) the termination of the merger agreement under circumstances in which Parent would not be obligated to pay the reverse termination fee and (iii) the payment in full by Parent or the guarantor of all of the obligations of Parent to the Company under the limited guarantee.

 

The Company cannot seek specific performance to require Parent and Merger Sub to complete the merger, and the Company’s exclusive remedy for the failure of Parent and Merger Sub to complete the merger is the reverse termination fee in the circumstances described under “The Merger Agreement — Termination Fees” beginning on page 86.

 

In considering the recommendations of the board of directors, Airvana’s stockholders should be aware that certain of Airvana’s directors and executive officers have interests in the transaction that are different from, and/or in addition to, the interests of Airvana’s stockholders generally. The Rollover Stockholders will exchange approximately 60% of their shares of Airvana common stock for interests in Parent and Messrs. Battat and Verma and Dr. Eyuboglu will serve as officers and directors of the surviving corporation and as directors of Parent. The special committee and our board of directors were aware of these potential conflicts of interest and considered them, among other matters, in reaching their decisions to approve the merger agreement and to recommend that our stockholders vote in favor of adopting the merger agreement.

 

Exchange of Shares by Rollover Stockholders

 

Concurrently with Airvana entering into the merger agreement, the Rollover Stockholders entered into a rollover commitment letter agreement with Parent pursuant to which 1,278,026 of the 2,189,208 shares of Airvana common stock held by Mr. Battat and related trusts, 1,159,144 of the 1,901,089 shares held by Dr. Eyuboglu, his spouse and related trusts and 1,301,392 of the 2,245,838 shares held by Mr. Verma, his spouse and related trusts will be exchanged for equity interests of Parent, valuing the exchanged shares at an amount per share equal to the merger consideration. As a result, the Rollover Stockholders will be paid merger consideration for approximately 40% of the shares of Airvana common stock that they hold. In addition,

Mr. Battat and related trusts will receive approximately 4,044,000 A Units, 508,000 D Units and 5,733,000 E Units in Parent, Dr. Eyuboglu, his spouse and related trusts will receive approximately 3,134,000 A Units, 441,000 D Units and 5,733,000 E Units in Parent, and Mr. Verma, his spouse and related trusts will receive approximately 4,222,000 A Units, 521,000 D Units and 5,733,000 E Units in Parent, in each case in exchange for their exchanged shares of Airvana common stock. The Rollover Stockholders expect the exchange of their shares to be tax deferred for U.S. federal income tax purposes.

 

The Class E Units received by the Rollover Stockholders in exchange for their shares of Airvana common stock will have a priority in receipt of distributions from the Parent following the merger. Each Rollover Stockholder will be entitled to receive distributions in respect of the Class E Units in the aggregate amount of $2,866,667 prior to distributions to any of the holders of other equity interests in Parent, and upon payment of these distributions, each Rollover Stockholder will receive one A Unit for each two of its E Units and all rights of the Rollover Stockholders in the Class E Units will terminate.

 

Airvana Equity Compensation Plans

 

Upon the consummation of the merger, all unvested stock options will vest and all stock options will be cancelled and converted into the right to receive a cash payment equal to the number of outstanding options multiplied by the amount by which $7.65 exceeds the option exercise price, without interest and subject to applicable withholding taxes. See “The Merger Agreement — Treatment of Options” on page 72 and “The Merger Agreement — Employee Benefits” beginning on page 89 for a more complete discussion of the treatment of these plans and awards.

 

The table below sets forth, as of January 3, 2010 (for each of our executive officers and directors, and our executive officers and directors together as a group): (a) the number of stock options held by such person, including unvested stock options that will vest upon the consummation of the merger, (b) the cash payment that may be made in respect of the foregoing employee stock options upon the consummation of the merger, (c) the cash payment that will be made in respect of all other shares owned by such person (as such shares are reflected in the table on page 103 of this proxy statement, but excluding stock options) upon consummation of the merger, and (d) the total cash payment such person will receive in respect of all payments described in this table if the merger is consummated (in all cases before applicable withholding taxes).

 

 

 

 

 

New Arrangements with the Surviving Corporation After Closing — New Management Arrangements

 

Effective as of the closing, Messrs. Battat and Verma and Dr. Eyuboglu have each agreed to enter into an employment agreement with the Company. The principal terms of the employment agreements are set forth below:

 

 

 

 

 

Airvana Director Compensation Arrangements and Other Interests

 

As of January 3, 2010, our non-employee directors held options to purchase an aggregate of 373,781 shares of Airvana common stock at a weighted average exercise price of $6.025 per share. As with our other employees generally, the vesting of these options will be accelerated in connection with the merger and these options will be cancelled and converted into the right to receive the merger consideration or otherwise be cashed out as described elsewhere in this proxy statement. The aggregate cash payment that will be made to these directors in respect of options upon the consummation of the merger is anticipated to be approximately $607,394, based on a cash merger consideration of $7.65 per share. Additionally, these directors will receive an aggregate cash payment in respect of their other beneficially owned shares of Airvana common

stock in the amount of $184,118,232. The Chair of the special committee received remuneration in the amount of $15,000 per month between July 9, 2009 and December 17, 2009, and will receive $7,500 per month from December 18, 2009 to the Effective Time, plus expenses, in consideration of his acting in such capacity, and each other member of the special committee received remuneration in the amount of $10,000 per month between July 9, 2009 and December 17, 2009, and will receive $5,000 per month from December 18, 2009 to the Effective Time, plus expenses, in consideration of his acting in such capacity. The members of the board of directors (excluding Messrs. Battat and Verma) are independent of and have no economic interest or expectancy of an economic interest in Parent or its affiliates, and will not retain an economic interest in the surviving corporation or Parent following the merger.

 

Indemnification and Insurance

 

The surviving corporation has agreed to indemnify, to the greatest extent permitted by law, each of our present and former directors and executive officers against all expenses, losses and liabilities (and to comply with all of our obligations to advance funds for expenses) incurred in connection with any claim, proceeding or investigation arising out of any act or omission in their capacity as an officer or director occurring on or before the closing date of the merger.

 

The merger agreement requires that we maintain, and that following the closing date of the merger the surviving corporation maintain, directors’ and officers’ liability insurance policies in an amount and scope at least as favorable as the Company’s existing policies and with a claims period of at least six years from the closing date of the merger for claims arising from facts or events that occurred on or prior to the closing date, or a six-year prepaid “tail policy” in lieu of such continued coverage. If the annual premiums of insurance coverage exceed 300% of our current annual premium, the surviving corporation must obtain a policy with the greatest coverage available for a cost not exceeding 300% of the current annual premium paid by us.

 

Retention Bonus and Severance Arrangements

 

The special committee has approved retention bonus arrangements pursuant to which bonuses for up to 10 employees at an aggregate cost not to exceed $250,000 would be paid if (a) the merger is consummated and (b) the affected employee remains employed as of the effective time of the merger (or is terminated without cause before the effective time of the merger). The special committee has also approved severance arrangements, pursuant to which payments for up to 10 employees at an aggregate cost not to exceed $1,000,000 and in lieu of any other severance arrangements for them, would be made if the merger is consummated and (i) such employee is terminated without cause before the effective time or (ii) at or within 12 months after the effective time such employee is terminated without cause or resigns her/his employment for ‘good reason’ (defined as a relocation more than 40 miles from the current location of employment, a material reduction in job responsibility, or a reduction in salary or bonus opportunity). Airvana will pay the employer side of medical insurance premiums (COBRA coverage) for a period equal to the lesser of the months with respect to which severance is paid or the period for which the former employee is eligible for continued coverage. Receipt of the severance benefits is contingent on the individual’s executing a release of claims against the Company that becomes binding. In connection with these arrangements, the compensation committee of our board of directors approved retention bonuses for Peter Anastos in the amount of $51,250 and David Gamache in the amount of $50,000 and severance arrangements for such executive officers of one year of salary continuation and the medical premium payments described above. The Rollover Stockholders are not eligible to participate in the retention bonus or severance arrangements described above.

 

The following discussion summarizes the material U.S. federal income tax consequences of the merger to holders of Airvana common stock whose shares will be converted to cash in the merger. It does not address any tax consequences to the Rollover Stockholders or other holders who will own (actually or constructively after the application of ownership attribution rules) any shares of Airvana common stock after the merger. This discussion is based upon the provisions of the Internal Revenue Code of 1986, as amended, which we refer to as the Code, the U.S. Treasury Regulations promulgated thereunder and judicial and administrative rulings, all

as in effect as of the date of this proxy statement and all of which are subject to change or varying interpretation, possibly with retroactive effect. Any such changes could affect the accuracy of the statements and conclusions set forth herein.

 

This discussion assumes that holders of Airvana common stock hold their shares as capital assets within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all aspects of U.S. federal income taxation that may be relevant to a holder of Airvana common stock in light of such holder’s particular circumstances, nor does it discuss the special considerations applicable to holders of our common stock subject to special treatment under the U.S. federal income tax laws, such as, for example, financial institutions or broker-dealers, mutual funds, partnerships or other pass-through entities and their partners or members, tax-exempt organizations, insurance companies, dealers in securities or foreign currencies, traders in securities who elect mark-to-market method of accounting, controlled foreign corporations, passive foreign investment companies, U.S. expatriates, holders who acquired their Airvana common stock through the exercise of options or otherwise as compensation, holders who hold their Airvana common stock as part of a hedge, straddle, constructive sale or conversion transaction, U.S. holders whose functional currency is not the U.S. dollar, and holders who exercise appraisal rights. This discussion does not address any aspect of foreign, state, local, alternative minimum, estate, gift or other tax law that may be applicable to a U.S. holder.

 

We intend this discussion to provide only a general summary of the material U.S. federal income tax consequences of the merger to holders of Airvana common stock. We do not intend it to be a complete analysis or description of all potential U.S. federal income tax consequences of the merger. The U.S. federal income tax laws are complex and subject to varying interpretation. Accordingly, the Internal Revenue Service may not agree with the tax consequences described in this proxy statement.

 

If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds Airvana common stock, the tax treatment of a partner in such partnership generally will depend on the status of the partner and activities of the partnership. If you are a partner of a partnership holding Airvana common stock, you should consult your own tax advisor.

 

All holders should consult their own tax advisor to determine the particular tax consequences to them (including the application and effect of any state, local or foreign income and other tax laws) of the receipt of cash in exchange for shares of Airvana common stock pursuant to the merger.

 

For purposes of this discussion, the term “U.S. holder” means a beneficial owner of Airvana common stock that is, for U.S. federal income tax purposes:

 

 

A “non-U.S. holder” is a beneficial owner (other than a partnership) of Airvana common stock that is not a U.S. holder.

 

Treatment of the Merger

 

The conversion of shares of Airvana common stock into cash pursuant to the merger will be in part a taxable redemption and in part a taxable sale for U.S. federal income tax purposes.

 

A U.S. holder generally will recognize gain or loss for U.S. federal income tax purposes equal to the difference, if any, between the amount of cash received pursuant to the merger and such U.S. holder’s adjusted

tax basis in the shares converted into cash pursuant to the merger. Such gain or loss generally will be capital gain or loss, and will be long-term capital gain or loss if the holder’s holding period for such shares exceeds one year as of the date of the merger. Long-term capital gains for certain non-corporate U.S. holders, including individuals, are generally eligible for a reduced rate of federal income taxation. The deductibility of capital losses is subject to limitations. If a U.S. holder acquired different blocks of Airvana common stock at different times or different prices, such U.S. holder must determine its tax basis, holding period, and gain or loss separately with respect to each block of Airvana common stock.

 

Any gain realized by a non-U.S. holder upon the conversion of shares in the merger generally will not be subject to United States federal income tax unless: (i) the gain is effectively connected with a trade or business of the non-U.S. holder in the United States (and, if required by an applicable income tax treaty, is attributable to a United States permanent establishment or fixed base of the non-U.S. holder), (ii) the non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of the merger, and certain other conditions are met, or (iii) we are or have been a “United States real property holding corporation” for United States federal income tax purposes at any time during the shorter of the five-year period ending on the date of the merger or the period that the non-U.S. holder held the shares, and the non-U.S. holder owns, or is treated as owning, more than 5% of our shares.

 

Net gain realized by a non-U.S. holder described in clause (i) of the preceding sentence will be subject to tax at generally applicable United States federal income tax rates. Any gains of a foreign corporation non-U.S. holder described in clause (i) of the preceding sentence may also be subject to an additional “branch profits tax” at a 30% rate, or such lower rate as may be specified by an applicable income tax treaty. Gain realized by an individual non-U.S. holder described in clause (ii) of such sentence will be subject to a flat 30% tax, which may be offset by United States source capital losses, even though the individual is not considered a resident of the United States. We currently are not a “United States real property holding corporation.”

 

Information Reporting and Backup Withholding

 

A U.S. holder may, under certain circumstances, be subject to information reporting and backup withholding at the applicable rate (currently 28%) with respect to the cash received pursuant to the merger, unless such holder properly establishes an exemption or provides its correct tax identification number and otherwise complies with the applicable requirements of the backup withholding rules.

 

A non-U.S. holder is required to certify its foreign status under penalties of perjury or otherwise establish an exemption in order to avoid information reporting and backup withholding on disposition proceeds where the transaction is effected by or through a United States office of a broker. United States information reporting and backup withholding generally will not apply to a payment of proceeds from a disposition of common stock where the transaction is effected outside the United States through a foreign office of a foreign broker. However, information reporting requirements, but not backup withholding, generally will apply to such a payment if the broker is (i) a U.S. person, (ii) a foreign person that derives 50% or more of its gross income for certain periods from the conduct of a trade or business in the United States, (iii) a controlled foreign corporation as defined in the Code or (iv) a foreign partnership with certain United States connections, unless the broker has documentary evidence in its records that the holder is a non-U.S. holder and certain conditions are met or the holder otherwise establishes an exemption.

 

Backup withholding is not an additional tax. Amounts withheld under the backup withholding rules may be refunded or credited against the holder’s United States federal income tax liability, if any, provided that certain required information is furnished to the IRS in a timely manner. Holders should consult their own tax advisors regarding application of backup withholding in their particular circumstances and the availability of and procedure for obtaining an exemption from backup withholding under current United States Treasury Regulations.

Certain Relationships Between Parent and Airvana

 

There are no material relationships between Parent and Merger Sub or any of their respective affiliates, on the one hand, and Airvana or any of its affiliates, on the other hand, other than in respect of the merger agreement and

those arrangements described above under “— Background of the Merger” beginning on page 13 and “— Interests of the Company’s Directors and Executive Officers in the Merger” beginning on page 57.

 

On August 25, 2009, we entered into a letter agreement obligating us, subject to the terms and conditions set forth therein, to reimburse SAC PCG for up to $1,000,000 of its out-of-pocket costs and expenses (including the fees and expenses of legal and accounting advisors and the out of pocket costs of its financial advisors and financing sources) incurred in connection with its due diligence investigation of us during the period from August 17, 2009 until our termination of such investigation. The letter agreement only obligated us to reimburse such expenses if (i) we entered into a definitive agreement by February 25, 2010 to sell Airvana to a third party and (ii) SAC PCG pursued in good faith through the date we terminated such due diligence investigation its offer to acquire us in a transaction in which holders of our common stock would receive at least $7 per share. The merger agreement expressly supersedes the letter agreement.

 

On December 18, 2009, we, our directors, SAC PCG, Parent, GSO, Sankaty Advisors, LLC and ZelnickMedia, LLC were named as defendants in a putative class action complaint, captioned Israni v. Airvana, Inc., et al. , C.A. No. 5153-CC, filed in the Court of Chancery of the State of Delaware. That action, purportedly brought on behalf of a class of stockholders, alleges that our directors breached their fiduciary duties in connection with the proposed merger by, among other things, failing to fully inform themselves of Airvana’s market value, maximize stockholder value, obtain the best financial and other terms, and act in the best interests of public stockholders, and seeking to benefit themselves improperly. The complaint further alleges that the non-Airvana defendants aided and abetted the directors’ purported breaches. The plaintiff seeks injunctive and other equitable relief, including to enjoin us and Parent from consummating the merger, in addition to fees and costs. On December 31, 2009, the plaintiff served document requests on us.

 

On December 31, 2009, a second putative class action complaint was filed against us, our directors, SAC PCG, Parent, GSO, Sankaty Advisors, LLC and ZelnickMedia, LLC in the Court of Chancery of the State of Delaware in an action captioned Gittleson v. Airvana, Inc., et al. , C.A. No. 5179-CC. That action, purportedly brought on behalf of a class of stockholders, also alleges that our directors breached their fiduciary duties in connection with the proposed merger by, among other things, failing to fully inform themselves of Airvana’s market value, maximize shareholder value, obtain the best financial and other terms, and act in the best interest of public stockholders, and seeking to benefit themselves improperly. The complaint further alleges that the non-Airvana defendants aided and abetted the directors’ purported breaches. The plaintiff seeks injunctive and other equitable relief, including to enjoin us and Parent from consummating the merger, in addition to fees and costs.

 

On January 12, 2010, we, our directors, Dr. Eyuboglu, Merger Sub, 72 Mobile Investors, LLC, SAC PCG, GSO, Sankaty Advisors, LLC and ZelnickMedia LLC were named as defendants in a third putative class action complaint, captioned Willis v. Airvana, Inc. et al., C.A. No. 5200, filed in the Court of Chancery of the State of Delaware. That action, purportedly brought on behalf of a class of stockholders, alleges that our directors breached their fiduciary duties in connection with the proposed merger by, among other things, failing to fully inform themselves of our market value, maximize shareholder value, obtain the best financial and other terms, and act in the best interest of public stockholders, and seeking to benefit themselves improperly. The complaint further alleges that the non-Airvana defendants aided and abetted the purported breaches by the directors and Dr. Eyuboglu. The plaintiff seeks declaratory, injunctive and other equitable relief, including to enjoin us and affiliates of Parent from consummating the merger, in addition to unspecified damages, fees and costs.

 

The above three actions have been consolidated into a single proceeding captioned “ In re Airvana Shareholders Litigation .” On February 2, 2010, the plaintiffs submitted a consolidated class action complaint re-alleging the substance of the allegations from the pre-consolidation complaints and further alleging that the January 14 preliminary proxy omitted material information concerning the merger. On February 5, 2010, the plaintiffs filed: (i) a motion to enjoin defendants from consummating the proposed transaction and (ii) a motion for an order directing discovery to proceed on an expedited basis and scheduling a hearing on

plaintiffs’ motion for a preliminary injunction. On February 14, 2010, the defendants filed an opposition to the plaintiffs’ request for emergency relief. On February 15, 2010, the court denied plaintiffs’ application for expedited proceedings and declined to schedule a hearing on plaintiffs’ motion for a preliminary injunction. On February 19, 2010, the defendants filed a motion to dismiss.

 

On December 28, 2009, we, our directors, S.A.C. Private Capital Partners LP (a nonexistent entity), Parent, GSO, Sankaty Advisors, LLC and ZelnickMedia, LLC were named as defendants in a putative class action complaint, captioned Mountney v. Airvana, Inc., et al. , C.A. No. 09-5470, filed in the Superior Court, Business Litigation Session, of Suffolk County of the Commonwealth of Massachusetts. That action, purportedly brought on behalf of a class of stockholders, alleges that our directors breached their fiduciary duties in connection with the proposed merger by, among other things, failing to fully inform themselves of Airvana’s market value, maximize shareholder value, obtain the best financial and other terms, and act in the best interest of public stockholders, and seeking to benefit themselves improperly. The complaint further alleges that we and the non-Airvana defendants aided and abetted the directors’ purported breaches. The plaintiff seeks declaratory, injunctive and other equitable relief, including to enjoin us and Parent from consummating the merger, in addition to fees and costs.

 

On January 6, 2010, we, our directors, Parent and Merger Sub were named as defendants in a separate putative class action complaint, captioned Short v. Airvana, Inc., et al., C.A. No. 10-0042, filed in the Superior Court, Business Litigation Session, of Suffolk County of the Commonwealth of Massachusetts. That action, purportedly brought on behalf of a class of stockholders, alleges that our directors breached their fiduciary duties in connection with the proposed merger by, among other things, failing to fully inform themselves of our market value, maximize shareholder value, obtain the best financial and other terms, and act in the best interest of public stockholders, and seeking to benefit themselves improperly. The complaint further alleges that we, Parent and Merger Sub aided and abetted the directors’ purported breaches. The plaintiff seeks declaratory, injunctive and other equitable relief, including to enjoin us and affiliates of Parent from consummating the merger, in addition to fees and costs.

 

On January 28, 2010, the Company and its directors moved to stay the Massachusetts lawsuits in favor of the consolidated Delaware action. On February 8, 2010 the plaintiffs in the Short action served an opposition to the motion to stay. The defendants served their reply on February 26, 2010.

 

We believe that the claims asserted in these suits are without merit.

 

We estimate that we will incur, and will be responsible for paying, transaction-related fees and expenses, consisting primarily of financial, legal, accounting and tax advisory fees, SEC filing fees and other related charges, totaling approximately $17 million. This amount includes the following estimated fees and expenses:

 

 

This proxy statement contains forward-looking statements that are based on our current expectations, assumptions, beliefs, estimates and projections about our company and our industry. The forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “project,” “should” and similar expressions. Factors that may affect those forward-looking statements include, among other things:

 

 

We caution you that reliance on any forward-looking statement involves risks and uncertainties, and that although we believe that the assumptions on which our forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and, as a result, the forward-looking statements based on those assumptions could be incorrect. In light of these and other uncertainties, you should not conclude that we will necessarily achieve any plans and objectives or projected financial results referred to in any of the forward-looking statements. We do not undertake to release the results of any revisions of these forward-looking statements to reflect future events or circumstances, except as required by law.

 

Airvana is a Delaware corporation with its headquarters in Chelmsford, Massachusetts. Airvana is a leading provider of network infrastructure products used by wireless operators to provide mobile broadband services. Airvana specializes in helping operators transform the mobile experience of users worldwide. Its high performance technology and products, from core mobile network infrastructure to comprehensive femtocell solutions, enable operators to deliver broadband services to mobile subscribers, wherever they are.

 

Airvana was incorporated in March 2000 and its principal executive offices are located at 19 Alpha Road, Chelmsford, Massachusetts 01824. Airvana’s website is located at http://www.airvana.com and its telephone number is 978-250-3000. Additional information regarding Airvana is contained in our filings with the SEC. See “ Where You Can Find More Information ” on page 107.

 

72 Mobile Holdings, LLC, which we refer to as “Parent,” is a newly formed Delaware limited liability company that was formed solely for the purpose of entering into the merger agreement and consummating the transactions contemplated by the merger agreement. Parent has not engaged in any business except for activities incident to its formation and in connection with the transactions contemplated by the merger

agreement. The principal office address of 72 Mobile Holdings, LLC is 72 Cummings Point Rd., Stamford, Connecticut 06902. Its telephone number is 203-890-2000.

 

72 Mobile Acquisition Corp, which we refer to as “Merger Sub,” is a newly formed Delaware corporation and a wholly owned subsidiary of Parent. Merger Sub was formed solely for the purpose of entering into the merger agreement and consummating the transactions contemplated by the merger agreement. Merger Sub has not engaged in any business except for activities incident to its incorporation and in connection with the transactions contemplated by the merger agreement. Upon the consummation of the proposed merger, Merger Sub will cease to exist and Airvana will continue as the surviving corporation and a wholly owned subsidiary of Parent. The principal office address of 72 Mobile Acquisition Corp. is 72 Cummings Point Rd., Stamford, Connecticut 06902. Its telephone number is 203-890-2000.

 

Additional information concerning these transaction participants is set forth in Annex D to this proxy statement.

 

This proxy statement is furnished in connection with the solicitation of proxies by our board of directors in connection with the special meeting of our stockholders relating to the merger.

 

We will hold the special meeting at the offices of Wilmer Cutler Pickering Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109, at 10:00 a.m., local time, on April 9, 2010.

 

At the special meeting, we will ask the holders of our common stock to adopt the merger agreement, and, if there are not sufficient votes in favor of adoption of the merger agreement, to adjourn the special meeting to a later date to solicit additional proxies.

 

Only holders of record of our common stock at the close of business on February 23, 2010, the record date, are entitled to notice of, and to vote at, the special meeting. On the record date, 63,560,767 shares of our common stock were issued and outstanding and held by approximately 129 holders of record. Holders of record of our common stock on the record date are entitled to one vote per share at the special meeting on the proposal to adopt the merger agreement and the proposal to adjourn the special meeting, if necessary, to solicit additional proxies.

 

A quorum of stockholders is necessary to hold a valid special meeting. Under our by-laws, a quorum is present at the special meeting if a majority of the issued and outstanding shares of our common stock entitled to vote on the record date are present, in person or represented by proxy. In the event that a quorum is not present at the special meeting, it is expected that the meeting will be adjourned to solicit additional proxies. For purposes of determining the presence of a quorum, abstentions will be counted as shares present, however, broker non-votes (where a broker or nominee does not exercise discretionary authority to vote on a matter), if any, will not be counted as shares present.

 

The adoption of the merger agreement requires the affirmative vote of the holders of a majority of the issued and outstanding shares of our common stock. Adoption of the merger agreement is a condition to the closing of the merger.