If Completed, Tender Offer Would Violate Delaware Corporate Law, Sprint’s Bargained-For Rights and the Rights of the Strategic Investors Under the Charter and Equity Holders Agreement
Lawsuit Contends that the Tender Offer is Structurally and Actionably Coercive
OVERLAND PARK, Kan. (BUSINESS WIRE), June 17, 2013 – Sprint (NYSE:S, news, filings) announced today that it has filed a complaint in the Delaware Court of Chancery against DISH Network Corporation (NASDAQ:DISH) and Clearwire Corporation (NASDAQ: CLWR) asking the Court to prevent the consummation of the DISH tender offer for Clearwire. Sprint believes the transaction violates Delaware law and the rights of both Sprint and Clearwire’s other strategic investors under Clearwire’s charter and under the Equity Holders Agreement (“EHA”). In addition to seeking to enjoin the tender offer, Sprint’s lawsuit seeks to rescind certain parts of the tender offer agreement and seeks declaratory, injunctive, compensatory and other relief.
In its complaint, Sprint outlines why DISH’s tender offer violates the rights of Sprint and other Clearwire stockholders under Clearwire’s governing documents and Delaware law. It also details how DISH has repeatedly attempted to fool Clearwire’s shareholders into believing its proposal was actionable in an effort to acquire Clearwire’s spectrum and to obstruct Sprint’s transaction with Clearwire. Among the points the suit makes:
- Sprint and the strategic investors invested billions of dollars in cash and assets to form Clearwire. They entered into a shareholders agreement that established their governance rights (the Equity Holders Agreement (EHA)) as to nominating and electing directors, amending the charter and bylaws, issuance of stock, and other governance matters.
- Under Clearwire’s charter and the EHA, the DISH Tender Offer (together with the Investors Rights Agreement (IRA) and a related Note Purchase Agreement (the “NPA”)), cannot be completed without the approval of holders of at least 75% of Clearwire’s outstanding voting securities, nor without the approval of Comcast Corp., neither of which approvals have been obtained. Completion of the tender offer without such approvals is unlawful.
- DISH’s Tender Offer, if completed, would violate Delaware corporate law and Sprint’s and the strategic investors rights under the Charter and EHA by vesting DISH with a veto power over fundamental corporate events that Delaware law places in the control of the directors or shareholders and that the EHA details how many directors and shareholders are required for action.
- The IRA requires Clearwire to place and maintain a number of DISH designees on its board of directors in breach of the provisions in the EHA permitting Sprint to nominate 7 directors, the Significant Investors Group to nominate several other directors, and the nominating committee to nominate the remainder.
- The IRA violates the Charter by purporting to grant DISH pre-emptive rights that are explicitly prohibited by the Charter.
- The DISH Tender Offer is unlawfully coercive because it threatens to leave non-tendering shareholders holding shares in a company subject to governance deadlocks or substantial damage awards to DISH if Clearwire is unable to deliver on the unenforceable promises set forth in the IRA and NPA.
- Sprint is asking for Clearwire’s Charter and the EHA to be enforced by not letting Clearwire sign the IRA or the NPA and by enjoining the tender offer.
About Sprint Nextel
Sprint Nextel offers a comprehensive range of wireless and wireline communications services bringing the freedom of mobility to consumers, businesses and government users. Sprint Nextel served more than 55 million customers at the end of the first quarter of 2013 and is widely recognized for developing, engineering and deploying innovative technologies, including the first wireless 4G service from a national carrier in the United States; offering industry-leading mobile data services, leading prepaid brands including Virgin Mobile USA, Boost Mobile, and Assurance Wireless; instant national and international push-to-talk capabilities; and a global Tier 1 Internet backbone. The American Customer Satisfaction Index rated Sprint as the most improved company in customer satisfaction, across all 47 industries, during the last five years. Newsweek ranked Sprint No. 3 in both its 2011 and 2012 Green Rankings, listing it as one of the nation’s greenest companies, the highest of any telecommunications company. You can learn more and visit Sprint at www.sprint.com or www.facebook.com/sprint and www.twitter.com/sprint.