Select Comfort Legal Battles Continue
September 9, 2009
Specialty bedding retailer Select Comfort Corp. (NASDAQ: SCSS) has now been sued by a shareholder who would have likely been named president and CEO if the failed Sterling Partners stock buy had been approved.
Patrick Hopf filed the lawsuit in Hennepin County Minnesota District Court last week requesting relief against the company, its directors and certain officers. The case requests the court issue orders declaring the named defendants breached their duty of care by failing to commence a recount and audit of the vote by an independent and neutral third party; ordering the named defendants to commence a recount and audit of the vote by an independent and neutral third party with a representative from each party present, and; ordering the named defendants to not take any action with respect to the Sterling Partners agreement until the vote has been recounted and audited by an independent third party.
Select Comfort's retailers rejected a securities purchase agreement with Sterling Partners Aug. 27. The agreement would have sold 50 million shares of Select Comfort stock to Sterling at a price of 70 cents per share for gross proceeds of $35 million.
Because of the small margin by which the company's shareholders rejected the Sterling Partners agreement, Select Comfort instructed Broadridge Financial Solutions, Inc.—the independent tabulation agent engaged by the company for purposes of the special meeting of shareholders—to perform a recount to ensure all votes were correctly counted.
Broadridge completed the recount and validated the initial results of the shareholder vote, which reconfirms that Select Comfort shareholders did not approve the Sterling Partners agreement. Under NASDAQ regulations applicable to the company, Select Comfort cannot consummate the Sterling Partners agreement absent shareholder approval.
Sterling Partners filed a complaint in Delaware Chancery Court Sept. 2 requesting expedited proceedings and a temporary restraining order requiring, among other things, that Select Comfort retain an additional independent third party to recount the vote and would be prohibited from terminating the Securities Purchase Agreement.
At a Sept. 4 hearing, the court rejected Sterling Partners' above-described requests. During the hearing, the company agreed to provide Sterling Partners with materials relating to Broadridge's tabulations of the shareholder votes and to not terminate the Securities Purchase Agreement prior to 5:00 p.m. Eastern time on Sept 8. The company has since provided Sterling Partners with the Broadridge tabulation materials.
Hopf filed his suit Sept. 3. According to Select Comfort's release, if shareholders had approved the Sterling Partners agreement, it was expected that the new Select Comfort board of directors, a majority of whom would be comprised of Sterling Partners designees, would appoint Hopf as president and CEO of Select Comfort.
Patrick Hopf filed the lawsuit in Hennepin County Minnesota District Court last week requesting relief against the company, its directors and certain officers. The case requests the court issue orders declaring the named defendants breached their duty of care by failing to commence a recount and audit of the vote by an independent and neutral third party; ordering the named defendants to commence a recount and audit of the vote by an independent and neutral third party with a representative from each party present, and; ordering the named defendants to not take any action with respect to the Sterling Partners agreement until the vote has been recounted and audited by an independent third party.
Select Comfort's retailers rejected a securities purchase agreement with Sterling Partners Aug. 27. The agreement would have sold 50 million shares of Select Comfort stock to Sterling at a price of 70 cents per share for gross proceeds of $35 million.
Because of the small margin by which the company's shareholders rejected the Sterling Partners agreement, Select Comfort instructed Broadridge Financial Solutions, Inc.—the independent tabulation agent engaged by the company for purposes of the special meeting of shareholders—to perform a recount to ensure all votes were correctly counted.
Broadridge completed the recount and validated the initial results of the shareholder vote, which reconfirms that Select Comfort shareholders did not approve the Sterling Partners agreement. Under NASDAQ regulations applicable to the company, Select Comfort cannot consummate the Sterling Partners agreement absent shareholder approval.
Sterling Partners filed a complaint in Delaware Chancery Court Sept. 2 requesting expedited proceedings and a temporary restraining order requiring, among other things, that Select Comfort retain an additional independent third party to recount the vote and would be prohibited from terminating the Securities Purchase Agreement.
At a Sept. 4 hearing, the court rejected Sterling Partners' above-described requests. During the hearing, the company agreed to provide Sterling Partners with materials relating to Broadridge's tabulations of the shareholder votes and to not terminate the Securities Purchase Agreement prior to 5:00 p.m. Eastern time on Sept 8. The company has since provided Sterling Partners with the Broadridge tabulation materials.
Hopf filed his suit Sept. 3. According to Select Comfort's release, if shareholders had approved the Sterling Partners agreement, it was expected that the new Select Comfort board of directors, a majority of whom would be comprised of Sterling Partners designees, would appoint Hopf as president and CEO of Select Comfort.
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