Critchley reports - New round in Look fighthttps://www.financialpost.com/opinion/columnists/round+Look+fight/5850178/story.html
New round in Look fight
Barry Critchley, Financial Post · Dec. 13, 2011 | Last Updated: Dec. 13, 2011 3:09 AM ET
Another legal matter involving former insiders at Unique Broadband Systems and Look Communications - ousted following a shareholder revolt at the 2010 annual meeting - and the new insiders gets underway Tuesday.
The parties will argue whether the court can demand the former insiders file a statement of defence in response to a statement of claim, or whether that matter can be delayed until the court decides that Look is compelled to indemnify the former insiders for their legal bills on a variety of issues.
One side will presumably argue insiders have lost that right because of the way they behaved; the other will argue it's a rite of passage for companies to pay insiders' legal bills.
Meanwhile, the main matter, the more than $15-million paid to former Look insiders following the net $64million sale of UBS's spectrum assets, remains on hold.
Last July the new insiders issued a statement of claim and a notice of motion. That motion asked the court to rule whether the monies set aside for cash bonuses and to compensate holders of option and share appreciation rights (SARs) "constituted transactions prohibited" - under the May 2009 sale approval order in the plan of arrangement.
The motion also asked the court to decide on whether the former insiders breached the sale approval order under which Look was required [to] "not engage in any transactions that are outside the ordinary course of business." And it wants the court to rule on whether the former Look insiders failed to advise the monitor [Grant Thornton] of "all material steps."
In all it wants the court to rule that the former insiders return the monies paid to them. "By authorizing and causing these awards to be paid to themselves in connection with the sale, Look's former officers and directors breached their fiduciary duties and failed to act in the best interests of the company," said the motion record.
One affidavit filed in support of the motion purports to detail the circumstances in which Look insiders were paid came from Louis Mirtovich, a director from 2004 to 2010. In his 15-page statement, he says in July 2009 he tried to get chief executive (Gerry McGoey) to engage a compensation consultant "because I was concerned that Mr. McGoey was demanding extraordinary compensation awards." He spoke of "a very heated discussion" that lasted four hours. He also spoke of the circumstances where Look's options and SARs were valued at 40¢ per share - almost double the then share price. At a June 16 board meeting, "Management recommended the assumed 40¢ per share on the basis of an offer that Rogers Communications had allegedly made to Look for all its assets, which offer would allegedly result in a value of 40¢ a share." Mr. Mitrovich added "the Look board was never shown an actual offer by Rogers." One month later, he said Look's board learned "Rogers was not prepared to proceed with an offer" at 40¢ a share. But "we did not revisit the decisions we made at the June 16 meeting."
He also spoke of an Aug. 25 meeting that "involved a significant amount of yelling by Mr. McGoey -" of the cash bonuses being "a big number to swallow," - and "we simply had to give in to the continuous demands of management on this point and in order to move past these issues."
Overall, Mr. Mitrovich, who received $195,367 and has agreed to return $100,000, said in retrospect "we could have taken a firmer stand regarding the merits of granting the Look compensation awards."
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WTF is the OSC doing?