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
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NEXTEL PARTNERS, INC.
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(Name of Registrant as Specified in Its Charter)
N/ A
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NEXEL PARTNERS, INC.'S DEFINITIVE ADDITIONAL MATERIALS
On October 19, 2005, Nextel Partners, Inc. filed an answer and
counterclaim in the action entitled NEXTEL COMMUNICATIONS, INC., AND NEXTEL WIP
CORP. V. NEXTEL PARTNERS, INC. (C.A. No. 1704-N) pending in the Delaware
Chancery Court. The Answer and Counterclaim in the Delaware Chancery Court
Action is filed herewith as Exhibit 99.1.
EXHIBIT INDEX
99. 1 Answer and Counterclaim in Delaware Chancery Court Action
EXHIBIT 99.1
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
NEXTEL COMMUNICATIONS, INC., )
a Delaware corporation, and NEXTEL WIP )
CORP., a Delaware corporation, ) C.A. No.
) 1704-N
Plaintiffs-Counterclaim Defendants, )
)
v. )
)
NEXTEL PARTNERS, INC., a Delaware )
corporation, )
)
Defendant-Counterclaim Plaintiff. )
)
ANSWER AND COUNTERCLAIMS
Defendant-Counterclaim Plaintiff Nextel Partners, Inc. ("Nextel
Partners"), as and for its answer and counterclaims against
Plaintiffs-Counterclaim Defendants Nextel Communications, Inc. and Nextel WIP
Corp. ("NWIP", and together with Nextel Communications, Inc. "Nextel
Communications"), alleges as to itself upon personal knowledge, and otherwise
upon information and belief, as follows:
ANSWER
1. Admit the allegations of paragraph 1.
2. Deny the allegations of paragraph 2, except admit that Nextel
Partners is a Delaware corporation; that Nextel Partners' total market
capitalization based on recent market prices is approximately $7 billion; that
approximately 68% of Nextel Partners' equity is publicly traded Class A stock;
and that Class B common stock owned by NWIP accounts for approximately 32% of
Nextel Partners' equity.
3. Admit the allegations of paragraph 3.
NATURE OF THE ACTION
4. State that paragraph 4 contains a conclusion of law to which no
response is required.
5. Deny the allegations of paragraph 5, except admit that certain
disputes exist between the parties as to the interpretation of the charter.
6. Deny the allegations of paragraph 6, except admit that Section 5.7(b)
of the charter sets forth a definition of "Fair Market Value" ("FMV"), and
respectfully refer the Court to the charter for the complete terms thereof.
7. Deny the allegations of paragraph 7, except (a) admit that Section
5.7(c) of the charter contemplates an appraisal process involving at least two,
and possibly a third, appraiser, which third appraiser's valuation may
ultimately determine the put price, and respectfully refer the Court to the
charter for the complete contents thereof; (b) aver that Section 5.7(b) of
Nextel Partners' charter explicitly provides that "the First Appraiser and the
Second Appraiser will each render to the stockholders its written report on the
Fair Market Value of [Nextel Partners]"; and (c) admit that Nextel Partners has
issued a proxy statement and refer the Court to the proxy statement for the
complete contents thereof.
8. Deny the allegations of paragraph 8, except admit that Section 5.7(a)
of the charter requires the appraisers to determine the FMV in accordance with
the definition provided in the charter, and refer the Court to the charter for
the complete contents thereof.
9. Deny the allegations of paragraph 9.
10. Admit the allegations of paragraph 10, and respectfully refer the
Court to the charter for the complete terms thereof.
11. Deny the allegations of paragraph 11, except admit that (a) the
consummation of the merger of a subsidiary of Sprint Corporation ("Sprint") and
the predecessor of Nextel
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Communications on August 12, 2005 constituted a Nextel Sale for purposes of the
charter; that (b) if the holders of a majority of Class A stock vote to exercise
the put, NWIP must purchase the Class A stock (and all the holders must sell
that stock); and that (c) a meeting of Nextel Partners' Class A stockholders is
scheduled for October 24, 2005 to vote on whether to exercise the put or
postpone the meeting.
12. Deny the allegations of paragraph 12, except (a) deny knowledge or
information sufficient to form a belief as to the truth of the allegation as to
Nextel Communications' views in merging with Sprint; (b) admit that the
Sprint-Nextel merger was formally announced on December 15, 2004; (c) admit that
an article concerning the possibility of a merger between Sprint and Nextel
appeared in the WALL STREET JOURNAL on or about December 9, 2004, and
respectfully refer the Court to such article for the complete contents thereof;
(d) admit that securities analysts have made statements regarding the potential
impact of a Sprint-Nextel merger on Nextel Partners, and respectfully refer to
the Court to such statements for the complete contents thereof.
13. Deny the allegations of paragraph 13.
14. Deny the allegations of paragraph 14.
15. Deny the allegations of paragraph 15, except admit that on June 23,
2005, Nextel Partners announced that a special committee of Nextel Partners'
board of directors had decided to recommend that Nextel Partners' Class A
stockholders vote to exercise the put.
16. Admit the allegations of paragraph 16.
17. Admit the allegations of paragraph 17.
18. Deny the allegations of paragraph 18, except admit that if the
holders of a majority of Class A stock vote to exercise the put, Nextel will be
required to purchase the Class
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A stock based at a Fair Market Value price determined in accordance with the
provisions of the charter, and respectfully refer the Court to the charter for
the complete terms thereof..
19. Deny the allegations of paragraph 19, except admit that Nextel
Communications has acknowledged its obligation to acquire the Class A shares
under the terms set forth in the charter; and admit that if the holders of a
majority of Class A stock vote to exercise the put, Nextel will be required to
purchase the Class A stock based at a Fair Market Value price determined in
accordance with the provisions of the charter, and respectfully refer the Court
to the charter for the complete terms thereof.
20. Deny the allegations of paragraph 20, except admit that time is of
the essence and aver that in stark contrast to its allegation, Nextel
Communications has refused to accelerate the put process and has threatened to
delay that process and the consummation of the put.
21. Deny the allegations of paragraph 21, except admit that the
provisions of Nextel Partners' charter set forth the terms governing the put
process and respectfully refer the Court to the charter for the complete terms
thereof.
22. Deny the allegations of paragraph 22, except admit that the
provisions of Nextel Partners' charter set forth the terms governing the put
process and respectfully refer the Court to the complete terms thereof.
23. Deny the allegations of paragraph 23, except admit that it is
imperative that the fairness, objectivity, and integrity of the charter's
valuation process be preserved and protected.
24. Deny the allegations of paragraph 24, except admit that (a) section
5.7(b) contains the quoted language, among other language, and respectfully
refer the Court to the char-
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ter for the complete terms thereof; and (b) admit that assuming the Partners'
Class A stockholders vote to exercise the put, the Start Date will be no later
than November 13, 2005.
25. Deny the allegations of paragraph 25, except admit that the
provisions of Nextel Partners' charter set forth the terms governing the put
process and respectfully refer the Court to the charter for the complete terms
thereof.
26. Deny the allegations of paragraph 26, except (a) admit that Nextel
Partners retained Morgan Stanley & Co. Incorporated ("Morgan Stanley") in
January 2005 to act as financial advisor to its Special Committee, including in
connection with the Special Committee's consideration of whether or not to
recommend that the holders of Class A common stock vote to exercise the put, and
to provide an appraisal of the fair market value of Nextel Partners in the event
the put were exercised; (b) admit that NWIP has not yet designated the Second
Appraiser; and (c) aver that Nextel Partners has asked Nextel Communications to
designate the Second Appraiser in order to facilitate the expeditious conduct of
the appraisal but that Nextel has refused to do so.
27. Deny the allegations of paragraph 27, except admit that Section
5.7(c) of the charter sets forth the terms governing the put process, and
respectfully refer the Court to the complete terms thereof.
28. Deny the allegations of paragraph 28, except admit that Section
5.7(a) of the charter sets forth the definition of "Fair Market Value" to be
applied by the appraisers and respectfully refer the Court to the charter for
the complete terms thereof.
29. Deny the allegations of paragraph 29, except admit that the
appraisers are required to apply the definition of "Fair Market Value" set forth
in the charter, and respectfully refer the Court to the charter for the complete
terms thereof.
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30. Deny the allegations of paragraph 30, except admit that Nextel
Partners has issued a proxy statement regarding the potential exercise of the
put right and respectfully refer the Court to that proxy statement for the
complete contents thereof; and admit that there are fundamental disputes
regarding the put that require judicial resolution..
31. Deny the allegations of paragraph 31, except (a) admit that there
are certain disputes between the parties regarding the put process; (b) aver
that Section 5.7(b) of Nextel Partners' charter explicitly provides that "the
First Appraiser and the Second Appraiser will each render to the stockholders
its written report on the Fair Market Value of [Nextel Partners]"; (c) admit
that Nextel Partners has issued a proxy statement in which it has stated that
"the first appraiser and the second appraiser are each to render to the holders
of Class A common stock its written report on the fair market value of Nextel
Partners," and respectfully refer the Court to the proxy statement for the
complete contents thereof; (d) admit that Nextel Partners has asserted that a
premium is appropriate in the context of a discounted cash flow ("DCF")
analysis; (e) aver Section 5.7(a) of Nextel Partners' charter explicitly
provides that "In all cases, Fair Market Value for [Nextel Partners] will
include a control premium," and respectfully refer the Court to the charter for
the complete terms thereof.
32. Deny the allegations of paragraph 32, except admit that Nextel
Communications seeks declaratory relief.
33. Admit the allegation of paragraph 33 that there is an actual
controversy between Nextel Communications and Nextel Partners.
34. Deny the allegations of paragraph 34 except to admit that the proxy
statement advises Nextel Partners stockholders about issues material to the put
and admit that there are a number of disputes between the parties regarding the
operation of the put.
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35. Deny the allegations of paragraph 35, except admit that the quoted
language appears in Nextel Partners' charter, along with other, relevant
language, and respectfully refer the Court to the charter for the complete terms
thereof.
36. Deny the allegations of paragraph 36, and respectfully refer the
Court to the charter for the complete terms thereof.
37. Deny the allegations of paragraph 37, and respectfully refer the
Court to the charter for the complete terms thereof.
38. Deny the allegations of paragraph 38.
39. Deny the allegations of paragraph 39, and aver that, as set forth
more fully in Nextel Partners' counterclaims, Nextel Communications has itself
publicized its views on the put process and the value of Nextel Partners Class A
shares and has engaged in a public campaign to talk down the trading price of
Nextel Partners' stock, create uncertainty about the exercise of the put, and
foster delay.
40. Deny the allegations of paragraph 40.
41. Paragraph 41 alleges a legal conclusion to which no responsive
pleading is required. To the extent such a pleading is required, Nextel Partners
denies the allegations of paragraph 41.
42. Paragraph 42 alleges a legal conclusion to which no responsive
pleading is required. To the extent such a pleading is required, Nextel Partners
denies the allegations of paragraph 42.
43. Deny the allegations of paragraph 43, and respectfully refer the
Court to the charter for the complete terms thereof.
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44. Deny the allegations of paragraph 44, except admit that Nextel
Partners selected Morgan Stanley as its financial adviser and, in that capacity
it has provided financial advice to a Special Committee of the Nextel Partners
board of directors, and admit that it has selected Morgan Stanley to serve as
the First Appraiser in the event that Nextel Partners shareholders determine to
exercise their put right.
45. Deny the allegations of paragraph 45 and respectfully refers the
Court to the proxy statement for the complete contents thereof.
46. Deny the allegations of paragraph 46.
47. Deny the allegations of paragraph 47.
48. Paragraph 48 alleges a legal conclusion to which no responsive
pleading is required. To the extent such a pleading is required, Nextel Partners
denies the allegations of paragraph 48.
49. Admit that Section 5.7(a) of the charter contains the quoted words
among other words and respectfully refer the Court to the charter for the
complete terms thereof.
50. Deny the allegations of paragraph 50, except admit that Nextel
Partners' stock is publicly traded.
51. Admit that the proxy statement contains the quoted words among
others, and respectfully refer the Court to the proxy statement for the complete
terms thereof.
52. Deny the allegations of paragraph 52, except admit that the charter
requires that the appraisers "will take into consideration (i) the trading
activity and history of the Corporation's stock and (ii) the Corporation's most
recent "unaffected" public market stock price" but does not dictate the weight
that the appraisers are to give either of these factors in determining fair
market value.
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53. Deny the allegations of paragraph 53.
54. Paragraph 54 alleges a legal conclusion to which no responsive
pleading is required. To the extent such a pleading is required, Nextel Partners
denies the allegations of paragraph 54.
55. Deny the allegations of paragraph 55, and aver that while the
appraisers may if they so determine it is appropriate take the opportunities and
risks associated with evolving technology into account in determining the Fair
Market Value of Partners Class A shares, they must do so in a manner consistent
with the requirements of and assumptions contained in the definition of Fair
Market Value contained in the charter.
56. Admit that Nextel Communications has asserted certain (erroneous)
beliefs with respect to the application of the definition of Fair Market Value,
admit that Nextel Partners disputes certain of the positions taken by Nextel
Communications, and respectfully refer the Court to the proxy statement for the
complete contents thereof.
57. Deny the allegations of paragraph 57.
58. Paragraph 58 alleges a legal conclusion to which no responsive
pleading is required. To the extent such a pleading is required, Nextel Partners
denies the allegations of paragraph 58.
59. Admit the allegation of paragraph 59 and aver that Nextel
Communications by this suit is seeking to read out of the charter the
requirement of Section 5.7(a) that states that the Fair Market Value of Nextel
Partners' Class A shares under the put "in all cases . . . will include a
control premium."
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60. Deny the allegations of paragraph 60, except admit that the DCF
methodology is one of several methodologies that is commonly used and could be
used by the appraisers here, and respectfully refer the Court to the proxy
statement for the complete terms thereof.
61. Deny the allegations of paragraph 61, and respectfully refer the
Court to the opinions cited and proxy statement for the complete terms thereof.
62. Paragraph 62 alleges a legal conclusion to which no responsive
pleading is required. To the extent such a pleading is required, Nextel Partners
denies the allegations of paragraph 62.
63. Nextel Partners repeats and re-alleges and incorporates by reference
its response to each allegation set forth above.
64. Admit that an actual controversy exists between Nextel
Communications and Nextel Partners regarding the interpretation and application
of the terms and provisions of the charter relating to the put process and the
determination of Fair Market Value
65. Paragraph 65 alleges a legal conclusion to which no responsive
pleading is required. To the extent such a pleading is required, Nextel Partners
denies the allegations of paragraph 65.
FIRST DEFENSE
(FAILURE TO STATE A CLAIM)
66. The Complaint fails to state a claim upon which relief may be
granted.
SECOND DEFENSE
(UNCLEAN HANDS)
67. As set forth more fully in Nextel Partners' Counterclaims, below,
since December 2004 Nextel Communications has engaged in a calculated campaign
of seeking to drive down Nextel Partners' share price, lower the price that
Nextel Communications would ul-
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timately be required to pay under the put, and create uncertainty in the
marketplace about the timing and ultimate value of the put.
68. Nextel Communications' conduct turns its claim of an "unfair playing
field" on its head. If anything, it is Nextel Communications that has improperly
sought to inject its views about the appraisal process into the marketplace, to
"taint" potential third appraisers, and to create an atmosphere in which
potential third appraisers will feel intimidated by Sprint Nextel Corporation
and the fear of losing future investment banking business. Nextel Communications
has not acted equitably, and cannot equitably seek relief from this Court.
69. Nextel Communications is not entitled to any relief because it comes
before this Court with unclean hands.
THIRD DEFENSE
(LACHES)
70. Nextel Communications has been aware since late January 2005 that
Nextel Partners retained Morgan Stanley to act as financial advisor to its
Special Committee, including in connection with the Special Committee's
consideration of whether or not to recommend that the holders of Class A common
stock vote to exercise the put, and to provide an appraisal of the fair market
value of Nextel Partners in the event the put were exercised.
71. To the extent Nextel Communications claims that the appointment of
Morgan Stanley conveyed some sort of unfair advantage, such purported advantage
was apparent nearly eight months ago. Nextel Communications could have sought an
adjudication of its claim at any time without the prospect of delaying the
timing of the put process, but instead chose to wait until the last minute and
to seek additional delay.
72. Nextel Communications' claims therefore are barred by the doctrine
of laches.
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COUNTERCLAIMS
73. Since the formation of Nextel Partners and the inception of its
joint venture with Nextel Communications nearly seven years ago, Nextel Partners
shareholders have relied on the existence of the "put" right in Nextel Partners'
charter and associated appraisal procedures to protect the value of their
investment in the event of a sale of Nextel Communications. The recently
completed merger of Nextel Communications and Sprint Corporation ("Sprint") to
form Sprint Nextel Corporation ("Sprint Nextel") has triggered the right of
Nextel Partners' Class A shareholders to invoke this put and thereby require
NWIP to purchase their Class A shares at "Fair Market Value" as defined, a value
that, by the express terms of the Nextel Partners charter, must include a
control premium. The timely and appropriate conduct of the put process is thus
of paramount importance to Nextel Partners and the holders of its Class A
shares.
74. The commencement of this action by Nextel Communications is the
latest tactical maneuver in its ongoing campaign to subvert and inject delay and
uncertainty into the put process. The gravamen of the complaint is that Nextel
Partners has somehow sought to "tilt the playing field" to its own advantage by
retaining Morgan Stanley in January 2005, before the Class A shareholders vote
to exercise the put, and by providing Morgan Stanley with certain non-public
information in order to enable Morgan Stanley to advise a Special Committee of
the Nextel Partners board on whether it should recommend to Nextel Partners'
shareholders that they vote to exercise the put. To remedy this supposed wrong,
Nextel Communications asks this Court to override the time periods set forth in
the charter and delay the put process for an indeterminate period of time,
ostensibly to allow Nextel Communications and its yet-to-be-designated appraiser
to "catch up."
75. The claim is frivolous. As alleged below: (a) Nextel Communications
has stated that it has an in-depth understanding of Nextel Partners' business
and operations; (b)
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Nextel Communications has known since at least December 2004 that its merger
with Sprint would trigger the put process and that it was likely, if not
certain, that the put would be exercised; (c) Nextel Communications has made
repeated public statements since December 2004, including in filings with the
Securities and Exchange Commission ("SEC"), setting forth its views on the value
of Nextel Partners; (d) Nextel Partners has encouraged Nextel Communications to
appoint its appraiser and thereby facilitate the exchange of information between
both sides, but Nextel Communications has refused to do so; (e) together with
Sprint, Nextel Communications has five major investment banking firms available
to assist it in appraising the Fair Market Value of Nextel Partners; and (f) any
of these firms is fully capable of completing an appraisal within the time frame
provided by the Nextel Partners charter. Indeed, Nextel Communications has even
sought to bias any potential third appraiser by stating that any investment bank
that agreed to serve in that role would be inclined to favor Sprint Nextel
because it would be afraid of alienating Sprint Nextel and losing Sprint
Nextel's substantial investment banking business going forward. In the face of
these facts, Nextel Communications' claim of an "unfair playing field" and its
plea for delay simply fall flat.
76. Equally without substance is the claim that Nextel Partners would
subvert the put process by disclosing to its shareholders the reports issued by
the appraisers appointed by Nextel Partners and Nextel Communications. The
charter is unambiguous: it requires that, on or prior to the 45th day following
appointment of the first two appraisers, each of the two appraisers must "render
to the shareholders its written report on the Fair Market Value" of Nextel
Partners. This disclosure requirement became more, not less, imperative when
Nextel Partners became a public company.
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77. Nextel Communications' can hardly claim that it would be prejudiced
by this disclosure given that it has spent the last four months on an aggressive
campaign to disseminate its own views on the valuation of Nextel Partners
through public filings and statements as well as private conversations with
analysts and investors. Particularly in light of this, Nextel Communications
should not be heard to claim that the charter provision that the third appraiser
"will not be informed of the values" determined by the first two appraisers
means anything more than that the parties will not "inform" the third appraiser
of the values determined by the first two appraisers, but Nextel Partners must
nonetheless disclose the first two appraisal reports themselves to the Nextel
Partners shareholders.
78. Alternatively, the court should direct the parties to appoint the
third appraiser in advance of the receipt of the first two appraisal reports and
have the third appraiser conduct its valuation analysis in parallel with the
first two. This would permit the third appraiser to complete its valuation by
the 45th day following selection of the first two appraisers (which is the
deadline for completion of the first two appraisals), and to deliver its sealed
report simultaneously with the delivery of the first two appraisers' reports.
The first two appraisers' reports could then be fully disclosed as required by
the charter and Nextel Partners' disclosure obligations, and the third
appraiser's report would be opened only under the circumstances that would
require a third appraiser under Nextel Partners' charter, I.E., if the first two
appraisers' valuations were more than 10% apart.
79. The substantive positions that Nextel Communications has advanced
are equally unfounded. For example, Nextel Communications claims that Nextel
Partners' "most recent unaffected public market stock price" MUST be reflected
in the appraisers' Fair Market Value findings. But whereas the charter
explicitly provides that the final valuation "SHALL be de-
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termined" (emphasis added) on the basis of a number of assumptions, the
unaffected stock price is not one of the mandatory factors. Rather, the charter
simply provides that the unaffected stock price -- along with the "trading
activity and history of Partners' stock" -- is a factor that the appraisers
"will take into consideration." It is for the appraisers, not a court, to
determine the weight, if any, to be given to this factor.
80. Nextel Communications also invokes Delaware case law, decided under
an inapplicable appraisal statute based on very different standards from the
fair market value definition in Nextel Partners' charter, to support its claim
that a control premium cannot be added in the context of a Discounted Cash Flow
("DCF") analysis. There is no such limitation in the charter or in Delaware law.
To the contrary: Section 5.7(e) could not be more clear that "[i]n ALL CASES,
Fair Market Value for [Nextel Partners] WILL INCLUDE A CONTROL PREMIUM and there
will be no minority or illiquidity discount." (Emphasis added.) And ironically,
in one of the cases that Nextel Communications relies upon for the proposition
that a premium is inappropriate in the context of a DCF analysis, this Court
recognized that, in fact, the "willing buyer" had paid the "willing seller" an
18.4% premium to the mid-range of the seller's DCF value.
81. Accordingly, as more fully set forth below, Nextel Partners by these
counterclaims seeks an order: (a) directing the parties to conduct the appraisal
in accordance with the timeframe specified in the Nextel Partners charter; (b)
requiring full disclosure of the first two appraisers' reports as required by
the charter or, alternatively, directing the parties to retain the third
appraiser on or prior to November 28, 2005, and to require the third appraiser
to render its report on or prior to December 29, 2005; (c) directing that the
retention agreement with the third appraiser provide that the third appraiser
will not solicit or accept investment banking business from Sprint Nextel or any
of its subsidiaries for a period of three years; and (d) declaring that all
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appraisers must include a control premium in their valuation of Nextel Partners.
Nextel Partners also seeks the additional relief set forth in more detail below.
PARTIES
82. Defendant-Counterclaim Plaintiff Nextel Partners, Inc. is a Delaware
corporation with its principal place of business in Kirkland, Washington.
Through its wholly-owned subsidiary Nextel Partners Operating Corp., Nextel
Partners provides wireless communications service to over 1.9 million
subscribers located in 31 states under the "Nextel" brand name. Nextel Partners'
markets generally consist of smaller and mid-sized cities and rural areas.
83. Plaintiffs-Counterclaim Defendants Nextel Communications, Inc. and
Nextel WIP Corp. are Delaware corporations. Following the consummation of the
Sprint-Nextel Communications merger on August 12, 2005, Nextel Communications
became a wholly-owned subsidiary of Sprint Nextel Corp. Nextel Communications,
Inc. is the parent of Nextel WIP Corp. Through subsidiaries, Nextel
Communications, Inc. provides wireless communications service to approximately
15.5 million subscribers.
84. Non-party Sprint Nextel Corporation is a Kansas corporation with its
principal place of business in Reston, Virginia. Prior to the consummation of
the merger with Nextel Communications, Sprint Nextel was named Sprint
Corporation and, through subsidiaries and licensees, provided wireless
communications service to 24 million subscribers in more than 350 metropolitan
markets in the United States under the "Sprint" brand.
THE NEXTEL PARTNERS JOINT VENTURE
85. At the time Nextel Partners was conceived in 1998, Nextel
Communications provided wireless service in certain major United States markets
under the "Nextel" brand. The technology platform that Nextel Communications
used (and continues to use) is known as "iDEN." An iDEN cell phone will only
work when it is able to connect with an iDEN cell site.
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As a result, in 1998, Nextel was only able to offer service in areas where
approximately only 70% of the United States population resided. A Nextel
subscriber who traveled outside of that service area was unable to use his or
her Nextel phone outside the service area because there would be no iDEN cell
site to connect to.
86. The technology used by Sprint and other wireless communications
companies is called "CDMA." A wireless provider that operates with CDMA
technology can provide national service to its customers by entering into
agreements with other CDMA providers that allow its subscribers to connect with
(or "roam") on CDMA cells in parts of the country where the provider does not
operate its own CDMA cell sites. Because there were no other wireless carriers
that used the iDEN technology in areas in which Nextel Communications lacked
coverage, Nextel Communications could not enter into such roaming agreements and
therefore could not offer its customers service in areas of the country where
Nextel Communications had not itself built out iDEN cell sites.
87. This inability to provide national service to its customers put
Nextel Communications at a significant disadvantage to its competitors. Nextel
Communications recognized, therefore, that it needed to find a way to get iDEN
cell sites built out and operated in the markets that it did not serve. However,
Nextel Communications lacked the financial capacity to build out that iDEN
network itself and to expand its focus to cover these markets.
88. Nextel Partners was the solution. Conceived in 1998, Nextel Partners
would be established as a separate entity with separate financing sources and
granted the exclusive right to build out and operate a "Nextel" iDEN network in
a territory consisting principally of mid-size and smaller markets across the
country.
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89. To that end, in May 1998, Nextel Communications, Nextel WIP and a
predecessor of Nextel Partners' entered into a Memorandum of Agreement (the "May
1998 Memorandum of Agreement") setting forth the proposed scope and structure of
the company and its relationship with Nextel Communications. The May 1998
Memorandum of Agreement included a put provision, and provided that the equity
holders other than Nextel Communications would have the right to require Nextel
Communications to purchase their interests at "Fair Market Value" in the event
that Nextel Communications were sold. The definition of Fair Market Value in the
May 1998 Memorandum of Agreement gave the appraisers the discretion to award a
control premium. The put right was included because the parties recognized that
Nextel Partners' fortunes would be tied directly to Nextel Communications and
its iDEN network and that, because only Nextel Communications and Nextel
Partners use iDEN technology, a sale of Nextel Communications could (and likely
would) create uncertainties for the future of Nextel Partners and its ability to
continue to operate successfully using an iDEN network.
90. Following the execution of the May 1998 Memorandum of Agreement,
discussions ensued between Nextel Partners, Nextel Communications, and a private
equity investor (DLJ Merchant Banking Partners II, L.P and certain of its
affiliates), about a substantial investment in Nextel Partners' equity. As a
result of these discussions, DLJ Merchant Banking entered into an August 1998
Letter of Intent providing for the terms upon which it would make a $125 million
equity investment in Nextel Partners.
91. The August 1998 Letter of Intent modified the definition of Fair
Market Value contained in the May 1998 Memorandum of Agreement to require that
the determination of Fair Market Value MUST include a control premium, and to
require the appraisers to assume that Nextel Partners was sold in a hypothetical
auction with multiple bidders that expressly ex-
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cluded from consideration any discount that might otherwise attach because
Nextel Partners was dependent upon Nextel Communications and had built out an
iDEN network that was not compatible technologically with the networks
constructed by every other wireless company.
92. The transactions contemplated by the May 1998 Memorandum of
Agreement and the August 1998 Letter of Intent were consummated in January 1999.
At such time, Nextel Partners adopted a Restated Certificate of Incorporation
that included put provisions based on the provisions contained in the August
1998 Letter of Intent. At the closing, Nextel Communications became the owner of
Nextel Partners securities that were later converted into 100% of the Class B
common shares of Nextel Partners (representing 32% of the equity of the
company).
93. Under the Shareholders Agreement entered into at the time of the
closing, Nextel Communications was granted a seat on the Nextel Partners board
of directors. From January 1999 until July 21, 2005, that seat was filled by
Timothy Donahue, the CEO of Nextel Communications. Upon Mr. Donahue's
resignation from the Nextel Partners board on July 21, 2005, Nextel
Communications designated another Nextel Communications executive to fill that
seat.
94. In February 2000, Nextel Partners completed its initial public
offering and became a publicly traded company. As part of the transaction,
Nextel Partners sold approximately 27 million Class A shares to public
investors, who made their $540.5 million investment, in part, in reliance upon
the put provisions of the charter. Nextel Communications consented to the
transaction and participated directly in the preparation of the filings and
other documents necessary to effect that transaction. Accordingly, Nextel
Communications was clearly aware that the charter provision requiring disclosure
of the first two appraisers' reports to Nextel Partners'
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shareholders would mean that these reports would have to be disclosed publicly
once Nextel Partners was a public company. Yet it made no effort to revise this
provision or otherwise adjust the charter at that time.
THE PUT PROVISION OF THE
NEXTEL PARTNERS CHARTER
95. The put provisions of the Nextel Partners Restated Certificate of
Incorporation are located in Article V. Under Section 5.1(b)(i) of the charter,
the holders of 20% of Nextel Partners' Class A shares (I.E., the shares not held
by Nextel Communications) have the right to require the company to hold a
special meeting to vote on whether to exercise the put right upon a "Nextel
Sale." The merger of Sprint and Nextel Communications constituted a "Nextel
Sale" as defined for purposes of the put provision.
96. Under Section 5.7(b), if a majority of the Nextel Partners Class A
shareholders votes to exercise the Put, within 20 days after notice is given of
that vote, each of Nextel Partners and Nextel Communications must appoint a
nationally recognized investment bank or appraiser to determine the "Fair Market
Value" (as defined in Section 5.7(a)) of Nextel Partners. The date when both
appraisers are appointed is defined as the "Start Date."
97. Within 30 days of the Start Date, each of the two appraisers is to
determine its "preliminary view" of Nextel Partners' Fair Market Value and
consult with each other with respect to their respective preliminary values. On
or prior to the 45th day after the Start Date, the charter provides that "the
First Appraiser and the Second Appraiser will each render to the stockholders
its written report on the Fair Market Value of the Corporation."
98. Section 5.7(b) of the charter requires Nextel Partners and Nextel
Communications to "cooperate with any appraisers appointed under this Section
and share with each such appraiser all information relevant to a valuation of
the Corporation." This provision is mu-
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tual: it requires both Nextel Communications and Nextel Partners to make all
relevant information available to the appraisers. Information about Nextel
Communications is pertinent to the appraisal by the terms of Section 5.7 itself,
which as set forth below requires the appraisers to treat Nextel Partners as
being at least as valuable as if it were a part of Nextel Communications, and to
value Nextel Communications for purposes of determining this valuation floor.
99. Under Section 5.7(c), if the two appraisals are within 10% of each
other, then Fair Market Value is the average of the two. If the two appraisals
are more than 10% apart, then the appraisal of a third nationally recognized
investment banking firm or appraiser jointly selected by the first two
appraisers must be consulted. The charter permits the designation of a third
appraiser within 60 days after the Start Date. The third appraiser must reach
its determination of Fair Market Value within 30 days after it is designated. As
with the first two appraisers, Nextel Partners and Nextel Communications must
cooperate with the third appraiser and provide it with "all information relevant
to a valuation of the Corporation."
100. Within 20 days after the final determination of Fair Market Value
pursuant to this process, Nextel Communications (or any Class A stockholder) may
challenge the determination by giving a notice of challenge. The challenge can
only be sustained if the valuation is "grossly incorrect or fraudulently
obtained." There is no set time period within which the challenge must be
completed and no express provision requiring the payment of interest during the
challenge period to compensate Nextel Partners' shareholders for any resulting
delay in payment.
101. The definition of "Fair Market Value" is set forth in Section 5.7
of Nextel Partners' charter. As previously alleged, the definition of FMV was
specifically crafted by the equity investors in Nextel Partners to ensure that:
(a) regardless of the valuation technique used, Nextel Partners' Class A
shareholders would in all cases receive a control premium; and (b) the
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put price would not be discounted by Nextel Partners' dependence on Nextel
Communications, by the unique nature of the iDEN network, or by any one of a
number of other factors specified in the charter.
102. The requirement that Fair Market Value include a control premium
under all circumstances is clear. Section 5.7 states, in plain terms:
In all cases, Fair Market Value for the
Corporation will include a control premium and
there will be no minority or illiquidity discount.
103. The definition of Fair Market Value under Section 5.7(a) explicitly
assumes a hypothetical auction, with multiple bidders, structured to maximize
Nextel Partners' sale price:
"Fair Market Value" of the Corporation means the
price that WOULD be paid . . . by a willing buyer
to a willing seller, in an arm's-length
transaction, AS IF THE CORPORATION WERE A PUBLICLY
TRADED AND NON-CONTROLLED CORPORATION and the
buyer was acquiring all of such Corporation
Capital Stock of the Corporation, and ASSUMING
that the Corporation was being sold in a manner
designed to attract ALL POSSIBLE PARTICIPANTS to
the sales process (including Nextel and its
Competitors, subject to the provisions below) AND
TO MAXIMIZE STOCKHOLDER VALUE (including, if
necessary, through a public or private market sale
or other disposition (including tax-free
spin-offs, if possible) of businesses prohibited
by legal restrictions to be owned by a particular
buyer or class of buyer), with both buyer and
seller in possession of all material facts
concerning the Corporation and its business.
(Emphasis added.)
104. By providing that Nextel Partners must be valued as if it were a
free-standing company that would be attractive to "all possible participants" in
an auction, "including Nextel and its Competitors," the charter assumes that the
appraisers will disregard any discount that might be applied as a result of
Nextel Partners' dependence upon Nextel Communications and its commitment to the
unique iDEN technology platform.
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105. This same assumption is set forth explicitly, TWICE, elsewhere in
the definition. First, Section 5.7(a) sets Nextel Partners' value to Nextel
Communications itself as the FLOOR in any valuation scenario:
Fair Market Value of the Corporation shall be
determined on the assumption that in a competitive
acquisition market with Nextel and prospective
buyers other than Nextel, THE CORPORATION WOULD BE
AT LEAST AS VALUABLE TO OTHER PROSPECTIVE BUYERS
AS TO NEXTEL. (Emphasis added.)
106. Second, the Fair Market Value definition enumerates several factors
that the appraisers may NOT take into account -- including a "catchall"
provision (section (z) below) that specifically addresses Nextel Communications'
control and the unique iDEN technology platform -- and provides that the
appraisers must assume that Nextel Partners is equally attractive to all
potential buyers even though it uses a unique technology platform and even
though Nextel Communications has control over various aspects of its operations:
In making the determination of Fair Market Value
of the Corporation . . . THERE WILL BE NO DISCOUNT
or premium included in any valuation of the
Corporation relative to its business as conducted
or reasonably expected to be conducted DUE TO THE
FACTS THAT
(v) the Corporation will not own but Nextel will
directly or indirectly lease or otherwise make
available to the Corporation certain of its
rights, assets and services pursuant to the Joint
Venture Agreement and the other Collateral
Agreements...,
(w) in certain circumstances Nextel will have the
right to acquire the Corporation's FCC licenses,...
(x) NEXTEL DIRECTLY OR INDIRECTLY HAS, AND MAY
EXERCISE, CERTAIN ASPECTS OF CONTROL OVER THE
CORPORATION'S BUSINESS AND THE CORPORATION,
(y) Nextel directly or indirectly provides certain
services and other benefits to the Corporation on
a cost or subsidized basis and
(z) there may be few potential buyers for the
Corporation due to any real or perceived control
of the Corporation exercised by
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Nextel or DUE TO THE FACT THAT ONLY NEXTEL HAS AN
IDENTICAL TECHNOLOGY PLATFORM. (Emphasis added.)
107. Section 5.7 confirms this same principle in another way, by
explicitly providing that the Fair Market Value of Nextel Partners must be AT
LEAST as much as the fair market value of a separable part of Nextel
Communications itself. It provides:
Fair Market Value shall be determined on the
assumption that [Nextel Partners] is AT LEAST AS
VALUABLE AS IF IT WERE A PART . . . OF [NEXTEL
COMMUNICATIONS], with the valuation of [Nextel
Partners] for purposes of this sentence being
derived from a valuation of Nextel
[Communications] consistent with the first
sentence of this paragraph but without taking into
account a control premium for [Nextel
Communications] (IT BEING UNDERSTOOD THAT A
CONTROL PREMIUM, HOWEVER, WILL BE APPLIED TO THE
[NEXTEL PARTNERS]). (Emphasis added.)
108. The foregoing provision requires the appraisers to create a
valuation floor by valuing Nextel Communications (assuming Nextel Partners were
already a part of Nextel Communications) under the same criteria as Nextel
Partners, I.E., a hypothetical auction designed to maximize shareholder value,
except without adding a control premium, and then adding to this value a control
premium just for Nextel Partners. By creating a floor value based on the value
of Nextel Partners as if it were already a part of Nextel Communications itself,
the put provision ensures that Nextel Partners would not be penalized in any way
by virtue of its relationship with Nextel Communications.
109. Although Nextel Partners' charter was drafted at a time when Nextel
Partners was not publicly traded, the put provision recognizes the possibility
that Nextel Partners would become a public company and addresses the
consideration of Nextel Partners' public trading price as a factor in
determining Fair Market Value. In contrast to other put provisions, however,
which plainly REQUIRE the valuation to reflect certain factors (E.G., that FMV
in all cases "will include a control premium" and that FMV "shall be determined
on the assumption" that
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Nextel Partners is at least as valuable to other buyers as to Nextel
Communications and is at least as valuable as though it were a separable part of
Nextel Communications), the provision relating to trading prices states only
that the company's trading history will be "take[n] into consideration":
If the Corporation's stock is publicly traded,
Fair Market Value will take into consideration (i)
the trading activity and history of the
Corporation's stock and (ii) the Corporation's
most recent "unaffected" public market stock
price.
110. Accordingly, while the appraisers are directed to take these
factors "into consideration," there is no direction as to how they should do so.
The reference to "trading activity and history" of Nextel Partners' stock, for
example, suggests that the appraisers should look at trading prices from the
inception of Nextel Partners as a public company to the present. Doing so might
lead an appraiser to the conclusion that recent trading prices reflect Nextel
Partners' performance, rather than speculation about the put process, which
might cause the appraiser to conclude that current stock prices reflect the
"most recent unaffected" price. Moreover, even if an appraiser concluded that
the "most recent unaffected" price is the price prevailing nearly a year ago,
before announcement of the Sprint-Nextel Communications merger, the appraiser
might go on to conclude that it would have to calculate the premiums paid in
precedent transactions by reference to the trading prices of the target
companies in those transactions from a year prior to the transaction. This, in
turn, might greatly increase the control premium that the appraiser would apply
to Nextel Partners' year-old trading price as part of determining Fair Market
Value today. In asking the Court to rule on one isolated aspect of the provision
relating to Nextel Partners' public trading prices, Nextel Communications
ignores the wide range of considerations that the appraisers may choose to take
into account with respect to this provision.
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THE SUCCESS OF THE JOINT VENTURE
111. Following its formation, Nextel Partners raised $3.4 billion to
build and operate the company and, of this amount, directly invested in excess
of $1.6 billion to construct a wireless iDEN communications network in its
territory that is compatible with and integrated into the Nextel Communications
iDEN network. In operating its iDEN network and otherwise providing iDEN service
to its customers and to Nextel Communications' customers, Nextel Partners'
operations were, in certain respects, integrated with the operations of Nextel
Communications. Through such integration and otherwise, Nextel Communications
had access to non-public information concerning the finances and operations of
Nextel Partners and to confidential information concerning the Nextel Partners
customer base.
112. As a result of the efforts and cooperation of Nextel Partners and
Nextel Communications over their seven-year operating history and as a direct
result of the mutual promises made by each company to the other, "Nextel"
wireless service became available in 48 states (the exceptions being Montana and
Alaska). The "Nextel" brand became recognized by consumers on a nationwide basis
and enabled both companies to gain customer acceptance for their products and
services and enhance their competitive position against Sprint and other
telecommunications companies.
THE SPRINT-NEXTEL COMMUNICATIONS
MERGER TRIGGERS THE PUT PROCESS
113. On December 15, 2004, Sprint and Nextel Communications entered into
a merger agreement pursuant to which Nextel Communications would become a
wholly-owned subsidiary of Sprint. At such time, it was recognized that
consummation of that transaction would trigger the put provisions of the Nextel
Partners charter. The fairness opinions delivered
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to the Sprint board on December 15, 2004, by its two financial advisors, Lehman
and Citigroup, both recite that they took the Nextel Partners put right into
account in rendering their opinions.
114. Following the announcement of the proposed Sprint-Nextel
Communications merger, the Nextel Partners board, in the exercise of its
fiduciary duties, formed a Special Committee comprised of the directors
unaffiliated with Nextel Communications to act with respect to the put process
and protect the interests of the company and its shareholders. In furtherance
thereof, on January 27, 2005, the Special Committee retained Morgan Stanley to
advise the Committee on whether or not to recommend to the company's Class A
stockholders that they vote to exercise the put right. As part of the
engagement, the Special Committee also engaged Morgan Stanley to provide an
appraisal in the event that the Class A shareholders voted to exercise the put.
115. On June 22, 2005, the Special Committee met with Morgan Stanley and
the Special Committee's legal advisors and determined to recommend to Nextel
Partners' shareholders that they vote to exercise the put right. The Special
Committee made its recommendation, in part, on the basis of the advice provided
to it by Morgan Stanley at that meeting.
116. On August 15, 2005, Sprint and Nextel Communications consummated
their merger. The consummation of the merger triggered the right of the Class A
shareholders to demand that the company hold a special meeting to vote on
whether to exercise the put upon the request of the holders of 20% of the Class
A shares.
117. On August 24, 2005, Nextel Partners received requests from the
holders of the requisite number of shares of Class A common stock, as expected,
requesting that Nextel Partners convene a special meeting of such holders to
vote on whether to exercise the put.
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118. On September 22, 2005, Nextel Partners mailed definitive proxy
materials to all Class A stockholders calling for a special meeting to be held
on October 24, 2005. In the proxy statement, the Special Committee recommends to
the Class A shareholders that they vote to exercise the put. It is anticipated
that the Class A shareholders will vote overwhelmingly to exercise the put.
NEXTEL COMMUNICATIONS' CAMPAIGN
TO TALK DOWN NEXTEL PARTNERS' STOCK
PRICE AND SUBVERT THE PUT PROCESS
119. Since the announcement of the Sprint-Nextel merger last December
15, Nextel Communications has made numerous statements to the public, to
investors and to analysts, that have been calculated to depress Nextel Partners'
stock price and ultimately lower the price that Nextel Communications will be
required to pay pursuant to the put. Key components of this strategy have been
to threaten to delay and create uncertainty about the put process.
120. One way that Nextel Communications has sought to inject uncertainty
into the process is by stating that it can invoke the "challenge" process under
the charter regardless of the outcome of the appraisal. Under the charter, a
party invoking this process would be required to demonstrate that the final Fair
Market Value determination was "grossly incorrect" or "fraudulently obtained."
Despite this standard, Nextel Communications has told investors that it can
initiate the challenge process regardless of the outcome of the appraisal and
thereby delay any payment to Nextel Partners' Class A shareholders. While any
party invoking the challenge process must act in good faith, the fact that
Nextel Communications is already suggesting -- before any valuations have been
rendered -- that it could invoke the challenge process demonstrates that it is
using the threat of the challenge process to raise the specter of uncertainty
and delay into the put process.
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121. Nextel Communications also has previewed to the market its analysis
of the Fair Market Value of the Class A shares and, in doing so, has made
repeated statements to the effect that Nextel Partners' stock is overvalued,
that the company is actually worth as little as half of its public market
trading price, and that any put price must heavily discount the value of Nextel
Partners because Nextel Partners is reliant upon iDEN technology. In this
connection, on August 17, 2005, Nextel Communications filed what it called an
"Investor Update Regarding Sprint PCS Affiliates and Nextel Partners" with the
SEC. Ex. A. In that filing, Nextel Communications made false and misleading
statements concerning the put process and the Fair Market Value definition,
stated its view that Nextel Partners' stock had been inflated by speculation
over the put and that Nextel Partners' stock was overvalued, and set forth
various valuation metrics that suggested that Nextel Partners' Class A shares
had a mean value of $11.30 to $13.00 per share.
122. In response to this filing and at the request of the SEC, on August
19, Nextel Partners submitted a letter to the SEC detailing how Sprint Nextel
had sought to mislead Nextel Partners shareholders. Ex. B. Among other things,
Nextel Partners pointed out that the price of Nextel Partners' stock had
underperformed its peers since the announcement of the Sprint-Nextel
Communications merger. In fact, as reflected in Exhibit C hereto, since well
before announcement of the Sprint-Nextel Communications merger, the rise in the
price of Nextel Partners' stock has tracked the rise in Nextel Partners'
Earnings Before Interest Taxes and Depreciation ("EBITDA"). The fact that this
same relationship between Nextel Partners' EBITDA and stock price has continued
since the merger announcement directly contradicts Nextel Communications'
suggestions that Nextel Partners' trading price is inflated by speculation over
the put.
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123. Nextel Communications also has sought to intimidate any potential
third appraiser. In this connection, Paul Saleh, the former CFO of Nextel
Communications and current CFO of Sprint Nextel, stated that any investment bank
that agreed to serve as the third appraiser would be inclined to favor Sprint
Nextel because it would be afraid that, if it did not do so, it would alienate
Sprint Nextel and lose any chance of getting investment banking business from
Sprint Nextel in the future. The effect of these statements is to create an
incentive for any investment bank that might seek to curry favor with Sprint
Nextel to favor Nextel Communications in the appraisal process.
124. Nextel Communications also has refused to take any steps that would
accelerate the put process or facilitate the exchange of the information it now
claims that it needs. Specifically, Nextel Partners has asked Nextel
Communications to appoint its appraiser in advance of the Nextel Partners
shareholder vote in order to facilitate the exchange of information and work by
the appraisers on their valuation. Nextel Communications has refused this
request, and has insisted that it will wait until the 20th day after Nextel
Partners' shareholders vote to exercise the put before it will name its
appraiser.
FIRST COUNTERCLAIM
(Injunctive Relief)
125. Nextel Partners repeats and realleges each allegation set forth
above as if fully set forth herein.
126. The Nextel Partners charter provides that the valuations by the two
appraisers appointed by the parties must be completed within 45 days after the
Start Date and that the valuation reports of those two appraisers must be
disclosed to Nextel Partners' shareholders.
127. The Nextel Partners charter provides that: (a) the third appraiser
must be appointed within 60 days of the Start Date; (b) the third appraiser must
deliver its valuation re-
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port within 30 days of its appointment; (c) the third appraiser will not be
informed of the values determined by the party-appointed appraisers; and (d) the
third appraiser must be a nationally recognized investment banker or appraiser.
128. Based on the unambiguous charter requirement to render the first
two appraisers' reports to Nextel Partners' public shareholders, and Nextel
Partners' independent disclosure obligations as a public company, the Court
should enter an order requiring the disclosure of the first two appraisers'
reports to the Nextel Partners shareholders as required by the charter, but
prohibiting the parties from informing the third appraiser of the values
determined by the first two appraisers.
129. Alternatively, the Court should enter an order directing the
parties to select a third appraiser within 15 days after the Start Date and to
require the third appraiser to deliver its sealed valuation report within 30
days after it is selected (i.e., by the 45th day after the Start Date,
concurrently with delivery of the reports of the first two appraisers), to be
used only under the terms set forth in Section 5.7 of Nextel Partners' charter.
130. As hereinabove alleged, Sprint Nextel has made statements that are
intended to have the effect of inducing any third appraiser to favor Nextel
Communications in the appraisal process in order to curry its favor. Regardless
of whether such statements have been made or communicated, the fact that Sprint
Nextel will continue in business as a major consumer of investment banking
services following the consummation of the put, whereas Nextel Partners will
not, creates an incentive for a third appraiser to favor Nextel Communications.
131. Accordingly, in addition to providing the above-requested relief,
in order to assure that the third appraiser is not influenced by the prospect of
gaining or losing investment banking business from Sprint Nextel, the Court
should enter an order requiring the parties to
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provide in the retainer agreement with the third appraiser that the third
appraiser will not solicit or accept investment banking business from Sprint
Nextel or any of its subsidiaries for a period of three years from the
completion of its appraisal.
SECOND COUNTERCLAIM
(Declaratory Relief)
132. Nextel Partners repeats and realleges by reference each of the
allegations set forth above as if fully set forth herein.
133. An actual controversy exists between Nextel Partners and Nextel
Communications regarding the interpretation and application of the terms and
provisions of the charter relating to the put process and the determination of
Fair Market Value:
(a) Nextel Communications has claimed that if the appraisers choose to
use a discounted cash flow analysis, they may not include a control premium.
This position is directly contradicted by the Nextel Partners charter, which
expressly provides that the value determined by the appraisers must "in all
cases" include a control premium, regardless of what valuation methodology they
choose to use.
(b) Nextel Communications has claimed that in valuing Nextel Partners,
the appraisers must discount the value of the company because it is reliant on
iDEN technology and because Nextel Communications has the right under the joint
venture agreements to prevent Nextel Partners from adapting its technology
platform. This position is completely inconsistent with the express language of
the charter, which provides: (i) that "In making the determination of Fair
Market Value of the Corporation . . . there will be no discount or premium
included in any valuation of [Nextel Partners] relative to its business as
conducted or reasonably expected to be conducted due to the facts that . . . (x)
Nextel directly or indirectly has, and may exercise, certain aspects of control
over the
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Corporation's business and the Corporation . . . [and] (z) there may be few
potential buyers for the Corporation due to any real or perceived control of the
Corporation exercised by Nextel or due to the fact that only Nextel has an
identical technology platform"; and (ii) that "Fair Market Value shall be
determined on the assumption that [Nextel Partners] is at least as valuable as
if it were a part (although separable) of" [Nextel Communications]."
(c) Nextel Partners has claimed that in valuing Nextel Partners, the
appraisers must conclude that the "most recent unaffected stock price" of Nextel
Partners stock pre-dates December 9, 2004, and that the appraisers' valuation
must take this into account. This position is completely inconsistent with the
express terms of the charter: (i) which leaves for the appraisers the discretion
to determine the "most recent unaffected stock price" for themselves; (ii) which
permits the appraisers to consider "the trading activity and history of" Nextel
Partners stock without regard to any specific time frame, whether affected or
unaffected; and (iii) which requires the appraisers only to "take into
consideration" these stock prices and determine for themselves what weight, if
any, should be given to those prices in reaching their determination.
134. Accordingly, Nextel Partners seeks a declaration from the Court
that its construction of the meaning of these provisions of the charter is
correct.
WHEREFORE, Nextel Partners respectfully requests that this Court enter
judgment:
1. Dismissing the Complaint in its entirety and with prejudice;
2. Ordering the parties:
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(a) to conduct the appraisal in accordance with the timeframe specified
in the Nextel Partners charter;
(b) to provide full public disclosure of the first two appraisers'
reports as required by the charter, but not to inform any third appraiser of the
values determined by the first two appraisers or, alternatively, to direct their
respective appraisers to designate the third appraiser on or prior to the
fifteenth day after the Start Date and to require the third appraiser to
complete its appraisal within 30 days after it is designated; and
(c) to require the third appraiser to agree, as a condition of its
retention, that it will not solicit or accept investment banking business from
Sprint Nextel or any of its subsidiaries for a period of three years after it
delivers its valuation;
3. Declaring the rights of the parties under the put provision of the
charter, namely that:
(a) regardless of the valuation method or methods used, including
Discounted Cash Flow analysis, each appraiser's valuation must include a control
premium in their determination of Fair Market Value;
(b) in determining Fair Market Value, the appraisers may not apply a
discount to Nextel Partners' stock because Nextel Partners currently uses iDEN
technology or because Nextel Communications must consent to any steps that
Nextel Partners may make to adapt its technology; and
(c) the appraisers are to determine the "most recent 'unaffected' public
market stock price" of Nextel Partners Class A stock for themselves and to
decide for themselves what weight, if any, to give to this or any other price or
aspect of the trading history of
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Nextel Partners' Class A stock, including current stock prices, in reaching
their Fair Market Value determination;
4. Retaining jurisdiction over the parties so that the Court may
promptly resolve any future dispute that may arise and prevent Nextel
Communications from injecting delay into the completion of the put process; and
5. Granting Nextel Partners such other and further relief as the Court
deems just and proper.
ASHBY & GEDDES
OF COUNSEL:
By: ____________________________________
Marc Wolinsky Philip Trainer, Jr. (#2788)
Steven R. DiPrima 222 Delaware Avenue
Jonathan M. Moses P.O. Box 1150
Jed I. Bergman (302) 654-1666
Robert J. Liubicic Wilmington, DE 19899
Joshua A. Munn Attorneys for Defendant-Counterclaim
Deborah Martinez Plaintiff Nextel Partners, Inc.
WACHTELL, LIPTON, ROSEN & KATZ
51 West 52nd Street
New York, New York 10019
(212) 403-1000
Dated: October 19, 2005
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