Crest Financial Criticizes Sprint Letter To Clearwire Board As A Further Breach Of Fiduciary Duties And Urges Clearwire Board To Fully Consider Tender Offer From DISH
HOUSTON, June 6, 2013 /PRNewswire/ -- Crest Financial Limited, the largest of the independent minority stockholders of Clearwire Corporation (NASDAQ: CLWR), sent a letter to Clearwire's Board of Directors criticizing Sprint Nextel Corporation's objections to DISH Network Corporation's $4.40 per share tender offer for all outstanding Clearwire shares. Crest agreed with DISH's responses to Sprint's letter, which it says was "fraught with unfounded assertions." Crest again urged the Clearwire Board to appoint a new Special Committee with new directors to fully consider DISH's tender offer and pursue a competitive bidding process to "unlock the Company's true value for Clearwire's stockholders."
In Crest's letter to the Clearwire Board, David K. Schumacher, Crest's General Counsel, states: "We recognize Sprint's letter for what it is: Sprint's latest attempt to interfere with your consideration of alternatives that will benefit all stockholders, rather than just Sprint. We are convinced that DISH's tender offer, and your entering into the Investor Rights Agreement and the Note Purchase Agreement proposed by DISH, will not violate the Company's contractual obligations or the law. And failure to consider DISH's offer would be a breach of your own fiduciary duties. In its June 4 letter, DISH directly rebutted the untrue, overbearing assertions in Sprint's letter. As Clearwire's largest independent minority stockholder, we write this letter to add our own views."
According to Schumacher: "DISH's request for nomination rights is not problematic. The [Equityholder's Agreement ('EHA')] does not bar the Board or its nominating committee from agreeing to nominate DISH's designees to the Board. The EHA states only that the nominating committee will fill unreserved seats, which it of course would be doing when it nominates DISH's designees. And DISH's proposal would not require a reduction to Sprint's nomination rights. Nor does Delaware law prohibit the Company, with approval of the Board, from entering into an agreement with a stockholder to nominate certain directors through its nominating committee. Sprint's suggestion that the agreement is unlawful because it continues 'in perpetuity' is wholly unfounded. Sprint's own nominating rights are 'not time-bound,' and Sprint has made no effort to distinguish its rights from DISH's proposal. We also do not see any fiduciary duty concerns in this context since DISH covenants to nominate only independent directors (as defined by the NASDAQ listing rules). That said, any concerns you may have could easily be addressed by a 'fiduciary out' provision. Such a provision would give the Board's nominating committee the right to reject a candidate to the extent the committee determines in good faith and on advice of outside counsel that the candidates nomination would violate the directors' fiduciary duties."
Schumacher adds: "The veto rights in DISH's proposed Investor Rights Agreement are commonplace and permissible. Merger agreements, stock purchase agreements, investor agreements, credit agreements, indentures, and many other legal instruments regularly include negative covenants of the kind DISH requested, as Sprint well knows. Neither Delaware law nor Clearwire's Certificate of Incorporation prohibit Clearwire from granting pre-emptive rights by contract, and that is all that DISH has requested. Finally, DISH's status as a minority stockholder does not magically render these covenants unlawful—as is evident from the rights already granted to non-Sprint minority stockholders under the EHA."
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