On August 1, 2012, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with AT&T Inc., a Delaware corporation (“AT&T”) and Rodeo Acquisition Sub Inc., a Delaware corporation and a direct wholly-owned subsidiary of AT&T (“Merger Sub”). 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 and a direct wholly-owned subsidiary of AT&T (the “Merger”).

The Merger Agreement provides that AT&T will acquire all of the outstanding common shares of NextWave for $1.00 per share plus a non-transferrable contingent payment right representing a pro rata interest in an amount of up to $25 million in the residual balance of a $50 million escrow fund to be funded initially with (i) a $25 million payment by AT&T pursuant to the terms of the Merger Agreement and (ii) $25 million of the price to be paid by AT&T for Third Lien Notes pursuant to the terms of a note purchase agreement entered into between AT&T and the holders of Third Lien Notes and described below, with such escrow fund and the contingent payment rights being subject to reduction to satisfy indemnification rights held by AT&T in respect of losses, resulting from, among other things, breaches of representations and warranties, certain pre-closing liabilities, balance sheet adjustments and other items described in the Merger Agreement and the purchase agreement for the Third Lien Notes, and to pay fees to be incurred under the contingent payment rights agreement and the escrow agreement.

AT&T has entered into note purchase agreements with each of the holders of our Notes. Pursuant to the note purchase agreements, immediately prior to the consummation of the Merger, AT&T will purchase the Notes for a cash amount equal to $600 million, less the $25 million cash consideration to be paid by AT&T at closing of the Merger pursuant to terms of the Merger Agreement and the $25 million to be deposited into the $50 million escrow fund in respect of the contingent payment rights at closing pursuant to the Merger Agreement and subject to a $25 million escrow hold-back to secure post-closing indemnification rights held by AT&T and other deductions pursuant to the note purchase agreement for the Third Lien Notes. The amount of cash to be paid at closing in respect of the Third Lien Notes will also be subject to reduction for closing date liabilities of NextWave, including certain tax amounts, and amounts necessary to repay a new working capital facility of up to $15 million to be provided by the holders of the Senior Notes. AT&T will also have the option upon the occurrence of certain insolvency filing events to purchase the Third Lien Notes.

In connection with the Merger Agreement, on August 1, 2012, the Company and its wholly owned subsidiary NextWave Wireless LLC, and certain subsidiary guarantors entered into a Forbearance Agreement (the “Forbearance Agreement”) with the holders of the Notes. Pursuant to the Forbearance Agreement, each holder has agreed, and directed The Bank of New York Mellon, as collateral agent, to temporarily forbear from exercising their respective rights and remedies in connection with potential defaults and events of default that may occur during the forbearance period. The forbearance period will terminate on the earliest to occur of the effective time of the Merger, sixty days after the date of any termination of the Merger Agreement and January 31, 2014.

At the time of the merger, NextWave will hold only its U.S. WCS and AWS spectrum assets, with the remainder of its assets and liabilities, including its Canadian WCS spectrum and its 2.5 MHz EBS/BRS spectrum assets, being held by a newly formed subsidiary (“NextWave Holdco”). Prior to the AT&T note purchase transactions described above, NextWave will redeem the outstanding amount of its Third Lien Notes that will not be purchased by AT&T for the equity interests in NextWave Holdco. The holders of the Third Lien Notes will also have the right to receive the equity interests in NextWave Holdco in connection with certain bankruptcy events and following any termination of the Merger Agreement, in redemption of the Third Lien Notes, and in the case of any termination of the Merger Agreement, in consideration of a payment of $25 million for the benefit of our stockholders. The Merger Agreement and the Forbearance Agreement require the Company to complete the transactions in connection with the formation of NextWave Holdco within thirty days following the date of the Merger Agreement or, if regulatory approval is required, as promptly as practicable following receipt of such regulatory approval.

To permit the consummation of the transactions described above, the holders of the Notes will amend and restate the Notes and amend certain documents ancillary to the Notes. The Third Lien Notes will be amended and restated and split into two series to provide that certain of the Company’s obligations to the holders of the Third Lien Notes will remain with the Company and the remaining obligations will become direct obligations of NextWave Holdco. Specifically, the parties have agreed that $325 million of the Company’s outstanding obligations under the Third Lien Notes will remain the Company’s direct obligations and the remaining principal balance of the Company’s Third Lien Notes plus accrued and unpaid interest as of the date the Third Lien Notes are amended and restated will become the direct obligations of NextWave Holdco. NextWave Holdco will provide a first priority guarantee of the Company’s obligations to the First Lien Holders and a second priority guarantee of the Company’s obligations to the Second Lien Holders in addition to the guarantees, security interests and pledges previously in place in connection with the Notes. It is contemplated that the interest rate on the Third Lien Notes transferred to NextWave Holdco will be 16% and that the covenants applicable to the Third Lien Notes will be amended, including without limitation to provide for the following, subject to the receipt of any required regulatory approvals:

In addition, the holders of the Senior Notes have agreed to provide a working capital line (subject to negotiation and execution of mutually agreeable documentation) of up to $15 million to be available to the Company prior to the closing of the Merger, which may be pari passu with the Senior Notes (or senior in priority to the Senior Notes, Second Lien Notes or Third Lien Notes) and senior to any other debt obligation of the Company. Proceeds from disbursements under the working capital line are to be used solely to pay expenses incurred in the ordinary course of operations of the Company or in connection with payments to be made in connection with the Merger.

The Merger Agreement will terminate automatically if the Merger has not occurred on or prior to July 31, 2013 (the “Termination Date”). The Termination Date may be extended for up to two three-month periods at the option of AT&T if requisite regulatory approvals have not been obtained. In addition, either the Company or AT&T can terminate the Merger Agreement under specified circumstances. The Merger Agreement also provides that, upon termination of the Merger Agreement under specified circumstances, NextWave, or an alternative acquiror of NextWave will pay AT&T a termination payment of $5 million.

The Merger and the transactions contemplated thereby were unanimously approved by the Independent Committee of NextWave’s Board of Directors and NextWave’s Board of Directors.

The transaction is subject to closing conditions, including approval of NextWave’s stockholders’ of record as of September 4, 2012 and regulatory approvals, including approval of the FCC.