-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S8V7h5Ty7aoboCJgPYgX6DSDBNon+w3+Px92c0lEBeTxqRsNiWSnHk6qKi0sn7wx KVvW/mfXDaN5/uBoWGOM6Q== 0001214659-09-001007.txt : 20090428 0001214659-09-001007.hdr.sgml : 20090428 20090428115125 ACCESSION NUMBER: 0001214659-09-001007 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 20090428 DATE AS OF CHANGE: 20090428 GROUP MEMBERS: BEAR MARKET OPPORTUNITY FUND, L.P. GROUP MEMBERS: DAVID SANDBERG GROUP MEMBERS: PINNACLE FUND, LLLP GROUP MEMBERS: PINNACLE PARTNERS, LLC GROUP MEMBERS: THE RED OAK FUND, LP SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CLST HOLDINGS, INC. CENTRAL INDEX KEY: 0000913590 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRONIC PARTS & EQUIPMENT, NEC [5065] IRS NUMBER: 752479727 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-42959 FILM NUMBER: 09774626 BUSINESS ADDRESS: STREET 1: 17304 PRESTON ROAD STREET 2: DOMINION PLAZA, SUITE 420 CITY: DALLAS STATE: TX ZIP: 75252 BUSINESS PHONE: 972-267-0500 MAIL ADDRESS: STREET 1: 17304 PRESTON ROAD STREET 2: DOMINION PLAZA, SUITE 420 CITY: DALLAS STATE: TX ZIP: 75252 FORMER COMPANY: FORMER CONFORMED NAME: CLST Holdings, Inc. DATE OF NAME CHANGE: 20070403 FORMER COMPANY: FORMER CONFORMED NAME: CELLSTAR CORP DATE OF NAME CHANGE: 19931018 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: Red Oak Partners, LLC CENTRAL INDEX KEY: 0001325533 IRS NUMBER: 020673129 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 145 FOURTH AVENUE STREET 2: SUITE 15A CITY: NEW YORK STATE: NY ZIP: 10003 BUSINESS PHONE: 212-614-8952 MAIL ADDRESS: STREET 1: 145 FOURTH AVENUE STREET 2: SUITE 15A CITY: NEW YORK STATE: NY ZIP: 10003 SC 13D/A 1 clhi13da20090424.txt AMENDMENT NO. 2 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 2)* CLST Holdings, Inc. ------------------------------------------------- (Name of Issuer) Common Stock, $.01 par value ------------------------------------------------- (Title of Class of Securities) 150925204 --------------------------------------- (CUSIP Number) RED OAK PARTNERS, LLC Attention: David Sandberg 145 Fourth Avenue, Suite 15A New York, NY 10003 Telephone: (212) 614-8952 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) April 27, 2009 ------------------------------------------------- (Date of Event Which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box [X]. Note. Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent. * The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes.) Page 1 of 11 pages CUSIP No.: 150925204 1. NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) David Sandberg 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] 3 SEC USE ONLY 4 SOURCE OF FUNDS AF 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] 6. CITIZENSHIP OR PLACE OF ORGANIZATION United States NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 8 SHARED VOTING POWER - 4,561,554 OWNED BY EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON WITH 10 SHARED DISPOSITIVE POWER - 4,561,554 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 22.19%** 14 TYPE OF REPORTING PERSON IN _________________________________ ** Based on 20,553,205 shares of common stock of CLST Holdings, Inc. outstanding at October 8, 2008, as reported in CLST Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended August 31, 2008 filed with the Securities and Exchange Commission on October 14, 2008. Page 2 of 11 pages CUSIP No.: 150925204 1. NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) Red Oak Partners, LLC 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] 3 SEC USE ONLY 4 SOURCE OF FUNDS AF 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION New York NUMBER OF 7 SOLE VOTING POWER 0 SHARES BENEFICIALLY 8 SHARED VOTING POWER - 4,561,554 OWNED BY EACH 9 SOLE DISPOSITIVE POWER 0 REPORTING PERSON WITH 10 SHARED DISPOSITIVE POWER - 4,561,554 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,561,554 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 22.19%** 14 TYPE OF REPORTING PERSON OO Page 3 of 11 pages CUSIP No.: 150925204 1. NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) The Red Oak Fund, LP 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] 3 SEC USE ONLY 4 SOURCE OF FUNDS WC 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware NUMBER OF 7 SOLE VOTING POWER 0 SHARES BENEFICIALLY 8 SHARED VOTING POWER - 3,341,106 OWNED BY EACH 9 SOLE DISPOSITIVE POWER 0 REPORTING PERSON WITH 10 SHARED DISPOSITIVE POWER - 3,341,106 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,341,106 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 16.26%** 14 TYPE OF REPORTING PERSON PN Page 4 of 11 pages CUSIP No.: 150925204 1. NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) Pinnacle Partners, LLC 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] 3 SEC USE ONLY 4 SOURCE OF FUNDS AF 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION Colorado NUMBER OF 7 SOLE VOTING POWER 0 SHARES BENEFICIALLY 8 SHARED VOTING POWER - 960,448 OWNED BY EACH 9 SOLE DISPOSITIVE POWER 0 REPORTING PERSON WITH 10 SHARED DISPOSITIVE POWER - 960,448 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 960,448 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 4.67%** 14 TYPE OF REPORTING PERSON OO Page 5 of 11 pages CUSIP No.: 150925204 1. NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) Pinnacle Fund, LLLP 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] 3 SEC USE ONLY 4 SOURCE OF FUNDS WC 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION Colorado NUMBER OF 7 SOLE VOTING POWER 0 SHARES BENEFICIALLY 8 SHARED VOTING POWER - 960,448 OWNED BY EACH 9 SOLE DISPOSITIVE POWER 0 REPORTING PERSON WITH 10 SHARED DISPOSITIVE POWER - 960,448 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 960,448 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 4.67%** 14 TYPE OF REPORTING PERSON PN Page 6 of 11 pages CUSIP No.: 150925204 1. NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) Bear Market Opportunity Fund, L.P. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] 3 SEC USE ONLY 4 SOURCE OF FUNDS WC 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware NUMBER OF 7 SOLE VOTING POWER 0 SHARES BENEFICIALLY 8 SHARED VOTING POWER - 260,000 OWNED BY EACH 9 SOLE DISPOSITIVE POWER 0 REPORTING PERSON WITH 10 SHARED DISPOSITIVE POWER - 260,000 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 260,000 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 1.27%** 14 TYPE OF REPORTING PERSON PN Page 7 of 11 pages ITEM 4. Purpose of Transaction. Item 4 as previously filed is amended by adding the following language: On March 18, 2009, David Sandberg, Red Oak Fund, L.P. ("Red Oak Fund") and Red Oak Partners LLC ("Red Oak Partners") sent a letter, attached as Exhibit A, to CLST Holdings (the "Company") demanding, pursuant to 8 Del. Code ss. 220, to inspect and copy certain documents and records of the Company. Specifically, they requested to see all records pertaining to minutes and analysis for stockholder nominations for the election of directors, classes of director and their terms, and discussions by the company and Board regarding amending the size of the Board from January 1, 2007 to present. The Reporting Persons planned to use the above stated information in order to asses their rights relative to Board representation, decide whether or not to nominate director/s and facilitate discussions (under full compliance with applicable laws) with other shareholders. On March 19, 2009, Mr. Sandberg, Red Oak Fund and Red Oak Partners sent a letter, attached as Exhibit B, to the Company stating that via Section 211 of the Delaware Law, it intends to have the Company hold its 2008 annual meeting, should the Company decide to hold its 2009 annual meeting without holding its 2008 meeting. At the next shareholders meeting, the Reporting Persons intend to put forth several proposals including: a shareholder vote requesting the Board to implement the 2007 plan of dissolution, a shareholder vote to express disapproval of CLST Asset LLC's purchase of FCC Investment Trust I, a shareholder vote to express disapproval of the 2008 Long Term Incentive Plan, a shareholder vote to express disapproval of a purchase agreement effective December 10, 2008 for CLST Asset Trust II, and a shareholder vote to express disapproval of the February 13, 2009 transaction in which CLST Asset III, LLC purchased assets, receivables and installment sales contracts from Fair Finance Company, partly owned by Timothy Durham who is an officer and director of the Company. Red Oak understands that such votes are in the nature of requests to the board or advisory statements. On March 19, 2009, Mr. Sandberg, Red Oak Fund and Red Oak Partners sent a letter, attached as Exhibit C, to the Company stating that under Section 211 of the Delaware Law, it intends to have the Company hold its 2008 annual meeting, should the Company decide to hold its 2009 annual meeting without holding its 2008 meeting. In addition, the Reporting Persons plan to nominate two directors for the Director class that expired in 2008 and two directors for the Director class that expires in 2009. On March 25, 2009, Jackson Walker L.L.P. ("Jackson Walker") representing the Company, sent a letter, attached as Exhibit D, to Mr. Sandberg, Red Oak Fund and its attorneys Paul, Hastings, Janofsky and Walker LLP ("Paul, Hastings"). The letter states that the Company will not comply with the Reporting Persons' request for the inspection of books and records, as stated in the March 18 letter to the Company. Jackson Walker contends that the Reporting Persons did not comply with requirements under 8 Del. Code ss. 220. On March 27, 2009, Mr. Sandberg, Red Oak Fund and Red Oak Partners sent a letter, attached as Exhibit E, to the Company. In the letter, the Reporting Persons contend that they complied with requirements of 8 Del. Code ss. 220 in the March 18, 2009 and March 19, 2009 correspondence. Furthermore, the Reporting Persons requested that the Company explain why it believes the Reporting Persons did not comply with 8 Del. Code ss. 220, as the Company contends in their March 25, 2009 letter. Page 8 of 11 pages On April 1, 2009, Jackson Walker, representing the Company, sent a letter, attached as Exhibit F, to Mr. Sandberg, Red Oak Fund and Red Oak Partners stating that the Company refused to comply with the March 25 letter requesting certain information from the Company. Jackson Walker stated that the Company does not need to furnish the information as they feel the Reporting Persons request does "not comply with the inspection requirements in Section 220." On April 3, 2009, Paul, Hastings, on behalf of the Reporting Persons, sent a letter, attached as Exhibit G, to Jackson Walker. Paul, Hastings' letter addressed the previous letter Jackson Walker sent to the Reporting Persons dated Apr. 1, 2009, which stated that the Company refused to give the Reporting Persons certain information. The Apr. 3 letter from Paul, Hastings requested that information relating to the reduction of the Company's Board of Directors in 2007, the addition of a Board member in 2009, and process for nominating Board members, be release to the Reporting Persons. On April 6, 2009, Jackson Walker sent a letter, attached as Exhibit H, to Mr. Sandberg, Red Oak Fund and Red Oak Partners stating that the Company's Board rejected the Reporting Persons' nominations for Class I and Class II seats, as the nominations were not in accordance with the Company's certificate of incorporation. In addition, the Company also rejects the Reporting Persons' proposals because "they are not proper in form or substance to come before an annual meeting..." The letter goes on to say that the Company would be willing to respect the nominations and limited proposals provided that the Reporting Persons and the Company come to certain agreements, the Reporting Persons provide certain disclosures about its acquisition of the Company's shares, and the Reporting Persons not vote certain shares at the Annual Meeting. The letter also states that the Board will delay the Annual Meeting, as currently scheduled for May 22, 2009, until September 25, 2009, unless the Company and Red Oak reach an agreement prior to April 12, 2009. The company has since that time stated publicly that it will postpone its previously announced May, 2009 stockholder meeting unless it is able to reach an agreement with Red Oak by April 12, which has not happened. Red Oak currently intends to nominate and seek to elect persons it has selected for all open seats on the company's board of directors, If there are only two seats open, one in the class with a term scheduled to expire in 2008 and one in the class with a term scheduled to expire in 2009, Red Oak intends to nominate David Sandberg and Charles Bernard. If there are two positions open in each class, Red Oak intends also to nominate Adrian Pertierra and Tobin Walker. Red Oak also currently intends to consider steps to compel the company to hold meetings to elect directors and nominating additional persons for election to the director positions whose terms are set to expire in 2010. The purpose of such nominations will be to elect directors who will actively consider the stockholders' expressed desire to carry out the plan of liquidation approved in 2007 and who Red Oak believes will not approve transactions inconsistent with the planned liquidation or involving Mr. Timothy Durham or companies he controls, who will not approve executive Page 9 of 11 pages compensation plans or further grants of options or restricted shares, and who will, in Red Oak's opinion, be more closely aligned with stockholder interests. ITEM 7. Material to be Filed as Exhibits. Item 7 is hereby amended to add the following exhibits: Exhibit A: Letter to CLST Holdings, Inc. from the Reporting Persons Exhibit B: Letter to CLST Holdings, Inc. from the Reporting Persons Exhibit C: Letter to CLST Holdings, Inc. from the Reporting Persons Exhibit D: Letter to the Reporting Persons from Jackson Walker L.L.P. Exhibit E: Letter to CLST Holdings, Inc. from the Reporting Persons Exhibit F: Letter to the Reporting Persons from Jackson Walker L.L.P. Exhibit G: Letter to Jackson Walker L.L.P. from Paul, Hastings, Janofsky & Walker LLP Exhibit H: Letter to the Reporting Persons from Jackson Walker L.L.P. Page 10 of 11 pages SIGNATURES After reasonable inquiry and to best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: April 27, 2009 /s/ David Sandberg - ------------------------- David Sandberg Red Oak Partners LLC By: /s/ David Sandberg ------------------------------- David Sandberg, Managing Member Pinnacle Partners, LLP By: Red Oak Partners LLC, its general partner By: /s/ David Sandberg ------------------------------- David Sandberg, Managing Member The Red Oak Fund, L.P. By: Red Oak Partners LLC, its general partner By: /s/ David Sandberg ------------------------------- David Sandberg, Managing Member Pinnacle Fund, LLLP By: Pinnacle Partners, LLC, its general partner By: Red Oak Partners LLC, its general partner By: /s/ David Sandberg ------------------------------- David Sandberg, Managing Member Bear Market Opportunity Fund, L.P. By: Red Oak Partners, LLC, its investment advisor By: /s/ David Sandberg ------------------------------- David Sandberg, Managing Member Page 11 of 11 pages EX-99.A 2 clhi13d20090424exhibita.txt THE RED OAK FUND, L.P. C/O RED OAK PARTNERS, LLC 145 4th Avenue, Suite 15A | New York, New York 10003 Telephone (212) 614-8952 | Facsimile (646) 390-6784 March 18, 2009 VIA FACSIMILE AND CERTIFIED MAIL CLST Holdings, Inc. 17304 Preston Road, Suite 420 Dallas, Texas 75252 Attention: Robert A. Kaiser Re: Stockholder Request for Inspection of Books and Records Dear Mr. Kaiser/ Corporate Secretary: The Red Oak Fund ("RO Fund") is the registered holder at the above address of 1,000 shares [represented by certificate No._C5020] of common stock of CLST Holdings ("CLST" or the "Company"), a Delaware corporation. The RO Fund also beneficially owns 3,341,106 shares of the common stock of CLST, representing 16.3% of all outstanding shares of CLST based on the 20,553,205 shares of common stock outstanding as of October 8, 2008 as reported by CLST. The RO Fund is the Company's largest shareholder as of that reporting date. Attached as Exhibit A is a true and correct copy of a Schedule 13D filing dated February 18, 2009, serving as documentary evidence of RO Fund's ownership interests. Red Oak Partners, LLC ("RO Partners") is the general partner of RO Fund, and I am the managing member of RO Partners, such that RO Partners, the RO Fund, and I have shared power to vote or direct the vote of, or to dispose or direct the disposition of the 3,341,106 shares of common stock held by RO Fund. Pursuant to 8 Del. Code 220, RO Fund hereby demands to inspect and copy (in person or by attorney or other agent), during the usual hours of business, the following books and records and other documents of the Company: Board Structure All books, records, reports, memoranda and materials, including but not limited to board and committee minutes and analyses, and materials furnished to or prepared by or for any member of the Board of Directors, whether or not reflected in the Company's public filings, relating to: a. Stockholder nominations for election of directors. b. Classes of directors and their terms of office, including all discussion by the Company or Board related to amending the size of the Board from the period of January 1, 2007 to the present. * * * RO Fund makes this demand for the following purposes, each of which is reasonably related to RO Fund's interests as a stockholder in CLST: (i) to review and understand RO Fund's rights and obligations relative to board representation, (ii) to assist RO Fund in determining whether to nominate persons for election as directors of the Company and (iii) to facilitate and inform discussions (in full compliance with applicable securities laws) with other stockholders about such matters. RO Fund will bear the reasonable costs incurred by the Company in connection with the production of the information demanded. RO Fund hereby authorizes and designates RO Partners, its general partner and agent, and its officers and employees and any other persons designed by them, acting singly or in combination, to conduct the inspection and copying herein demanded. We request that the Company reply and provide the above information within five business days from the date of this demand as mandated by Section 220. If you so desire, you may send the requested information directly to Peter J. Tennyson, Esq. and Jay C. Gandhi, Esq., Paul, Hastings, Janofsky & Walker LLP, 695 Town Center Drive, Seventeenth Floor, Costa Mesa, California, 92626. RO Fund is making this demand for books and records under oath and affirms such demand, including the attachment hereto, to be true and correct under penalty of perjury under the laws of the United States of America and under the laws of the States of Delaware and New York. Executed this 18th day of March, 2008, in New York, New York. Thank you for anticipated cooperation. Very truly yours, Red Oak Fund, L.P. By: Red Oak Partners, LLC, its General Partner By: ____________________________ David Sandberg, Managing Member Exhibit cc: Peter J. Tennyson, Esq. Jay C. Gandhi, Esq. EX-99.B 3 clhi13d20090424exhibitb.txt RED OAK PARTNERS, LLC 145 4th Avenue, Suite 15A | New York, New York 10003 Telephone (212) 614-8952 | Facsimile (646) 390-6784 March 19, 2009 CLST Holdings, Inc. 17304 Preston Road, Suite 420 Dallas, Texas 75252 Attention: Robert A. Kaiser Re: Proposed Business at Annual Meeting Dear Mr. Kaiser/Corporate Secretary: Your public press release (dated Friday March 13, 2009) announcing the annual meeting of stockholders did not specify whether this was for the 2008 or 2009 meetings or both. If the intent is to solely hold the 2009 meeting and thus effectively skip the 2008 meeting (and thus skip the Director elections for the expired 2008 class) then we will seek to compel a 2008 annual meeting coincident with the 2009 annual meeting via Section 211 of Delaware Law under the same argument used by Tim Durham's group in 2007. We are sending you this notice to propose business for shareholder vote at the upcoming Annual Meeting announced in your recent press release. In accordance with requirements under Article 6 (B) of the Company's Certificate of Incorporation filed with the state of Delaware, enclosed is the required information for such notice: Stockholder proposing business: The Red Oak Fund, L.P. Address: 145 4th Avenue, Suite 15A, New York, NY 10003 The Red Oak Fund, L.P. ("RO Fund") is the registered holder at the above address of 1,000 shares [represented by certificate No._C5020] of common stock of CLST Holdings, Inc. ("CLST" or the "Company"), a Delaware corporation. The RO Fund also beneficially owns 3,341,106 shares of the common stock of SMTC, representing 16.3% of all outstanding shares of CLST based on the 20,553,205 shares of common stock outstanding as of October 8, 2008 as reported by CLST. Based on the number of shares outstanding as of that reporting date, RO Fund is the Company's largest shareholder. Attached as Exhibit A are true and correct copies of (i) Schedule 13D filing dated February 18, 2009 and (ii) an amendment dated March 3, 2009 to the Schedule 13D serving as documentary evidence of RO Fund's current ownership interests. Red Oak Partners, LLC ("RO Partners") is the general partner of RO Fund, and David Sandberg is the managing member of RO Partners, such that RO Partners, the RO Fund, and David Sandberg have shared power to vote or direct the vote of, or to dispose or direct the disposition of the 3,341,106 shares of common stock held by RO Fund. The primary business of RO Fund is to make and manage investments as a hedge fund. During the past five years RO Fund has not (1) filed a petition under federal bankruptcy laws or any state insolvency law, (2) been convicted in a criminal proceeding or been a named subject of a criminal proceeding (excluding traffic violations and other minor offices), (3) been found by any court or competent jurisdiction to have violated any federal or state securities law or federal commodities law, or (4) been the subject of any order, judgment or decree limiting him from engaging in any type of business practice or in any activity in connection with the purchase or sale of any security or commodity. RO Fund intends to appear in person through its representatives or by proxy at the meeting to bring the business outlined below for the reasons outlined below: 1. Vote for shareholder approval to proceed with the 2007 shareholder-approved plan of dissolution. This proposal is being made to confirm whether shareholders wish to proceed with the already-approved plan and recommend that the Board make its primary focus the execution of the plan. 2. Vote for shareholder approval of the November 10, 2008 transaction whereby CLST Asset I, LLC, a wholly owned subsidiary of CLST Financo, Inc., which is one of CLST's direct, wholly owned subsidiaries, entered into a purchase agreement to acquire all of the outstanding equity interests of FCC Investment Trust I from a third party for approximately $41.0 million. This proposal is being made to confirm whether shareholders approve of a transaction in which (i) the Board seemingly did not pursue the execution of CLST's plan of liquidation, (ii) the Board did not obtain a fairness opinion, and (iii) $6 million in cash was removed from the CLST balance sheet, representing just under 40% of CLST's cash at that time. 3. Vote for shareholder approval of the 2008 Long Term Incentive Plan pursuant to which Directors approved the new issuance to themselves of up to 20 million shares of common stock, or just over 97% of the common stock outstanding at the time this plan was approved. Shareholders should be able to express their views about this plan. 4. Vote for shareholder approval of the December 12, 2008 transaction whereby CLST Asset Trust II, a newly formed trust wholly owned by CLST Asset II, LLC, a wholly owned subsidiary of CLST Financo, Inc. entered into a purchase agreement, effective as of December 10, 2008, to acquire (i) on or before February 28, 2009 receivables of at least $2 million, subject to certain limitations, and (ii) from time to time certain other receivables, installment sales contracts and related assets. This proposal is being made to confirm whether shareholders approve of a transaction in which (i) the Board seemingly did not pursue the execution of its plan of liquidation, (ii) the Board did not obtain a fairness opinion, and (iii) a substantial percentage of remaining cash was committed to be removed from the CLST balance sheet. 5. Vote for shareholder approval of the February 13, 2009 transaction whereby CLST Asset III, LLC, a newly formed, wholly owned subsidiary of CLST Financo, Inc., which is one of CLST's direct, Wholly owned subsidiaries, purchased certain receivables, installment sales contracts and related assets owned by Fair Finance Company, which is partly owned by Timothy S. Durham, an officer and director of CLST. This proposal is being made to confirm whether shareholders approve of a transaction in which (i) the majority of remaining cash held on CLST's balance sheet was spent to purchase receivables from a company partially owned by a CLST officer and director, (ii) the fairness opinion was dated after the purchase date, (iii) the only purportedly independent director who approved the transaction was a long-time business partner of Mr. Durham, and (iv) the Board seemingly did not pursue CLST's plan of liquidation or the Board's goal of preserving NOLs. Kind Regards, THE RED OAK FUND, L.P. By: RED OAK PARTNERS LLC, its general partner By: ______________________________ David Sandberg, Managing Member EXHIBIT A SCHEDULE 13D AND AMENDMENT (see attached) EX-99.C 4 clhi13d20090424exhibitc.txt RED OAK PARTNERS, LLC 145 4th Avenue, Suite 15A | New York, New York 10003 Telephone (212) 614-8952 | Facsimile (646) 390-6784 March 19, 2009 CLST Holdings, Inc. 17304 Preston Road, Suite 420 Dallas, Texas 75252 Attention: Robert A. Kaiser Re: Director Nominations Dear Mr. Kaiser/Corporate Secretary: Your public press release (dated Friday March 13, 2009) announcing the annual meeting of stockholders did not specify whether this was for the 2008 or 2009 meetings or both. If the intent is to solely hold the 2009 meeting and thus effectively skip the 2008 meeting (and thus skip the Director elections for the expired 2008 class) then we will seek to compel a 2008 annual meeting coincident with the 2009 annual meeting via Section 211 of Delaware Law under the same argument used by Tim Durham's group in 2007. We are sending you this notice that we intend to nominate four directors for election to the Company's board of directors at the upcoming annual meeting - Charles Bernard and Tobin Walker to be nominated for election for the Director class which expired in 2008 and David Sandberg and Adrian Pertierra to be nominated for election for the Director class expiring in 2009. We intend to deliver a proxy statement and form of proxy to holders of at least the percentage of the Common Stock required under applicable law to elect our nominees. In accordance with requirements under Article 9 (C) of the Company's Certificate of Incorporation filed with the state of Delaware, enclosed is the required information for such nominations: Stockholder who intends to make the nominations: The Red Oak Fund, L.P. Address: 145 4th Avenue, Suite 15A, New York, NY 10003 The Red Oak Fund, L.P. ("RO Fund") is the registered holder at the above address of 1,000 shares [represented by certificate No._C5020] of common stock of CLST Holdings, Inc. ("CLST" or the "Company"), a Delaware corporation. The RO Fund also beneficially owns 3,341,106 shares of the common stock of CLST, representing 16.3% of all outstanding shares of CLST based on the 20,553,205 shares of common stock outstanding as of October 8, 2008 as reported by CLST. Based on the number of shares outstanding as of that reporting date, RO Fund is the Company's largest shareholder. Red Oak Partners, LLC ("RO Partners") is the general partner of RO Fund, and David Sandberg is the managing member of RO Partners, such that RO Partners, the RO Fund, and David Sandberg have shared power to vote or direct the vote of, or to dispose or direct the disposition of the 3,341,106 shares of common stock held by RO Fund. RO Fund intends to appear in person through its representatives or by proxy at the meeting to nominate the persons specified in this notice. Information on each Nominee: Charles Bernard, age 36 Business Address: 32065 Castle Ct , Suite 100, Evergreen, CO 80439 Residence Address: 11 South Jackson St, Denver, CO 80209 Managing Director, White Peaks Asset Management Tobin Walker, age 38 Business Address: 112 E. Pecan Street #806, San Antonio, TX 78205 Residence Address: 425 King William Street San Antonio, TX 78204 CIO and CEO, Black Swan Advisors, LP David Sandberg, age 36 Business Address: 145 4th Avenue, Suite 15A, New York, NY 10003 Residence Address: 121 Hillair Circle, White Plains, NY 10605 Managing Member and Portfolio Manager, Red Oak Partners, LLC Adrian Pertierra, age 37 Business Address: 145 4th Avenue, Suite 15A, New York, NY 10003 Residence Address: 222 East 19th St., Apt. 4E, New York, NY 10003 Senior Analyst, Red Oak Partners, LLC RO Partners manages the investments of, and has the authority to make investment decisions on behalf of, Bear Market Opportunity Fund, L.P., which Mr. Walker beneficially owns. Mr. Bernard is a manager of White Peaks Holdings LLC. White Peaks Holdings LLC, and Red Oak Partners, LLC are both managers of Pinnacle Partners, LLC, the general partner of Pinnacle Fund, LLLP. White Peaks Holdings, LLC and Red Oak Partners LLC are both managers of Pinnacle Capital, LLC, the investment advisor of Pinnacle Fund, LLLP. Red Oak Partners, LLC, as manager of the Pinnacle Capital, LLC, has authority to make investment decisions on behalf of Pinnacle Fund, LLLP. David Sandberg, RO Partners, RO Fund, Bear Market Opportunity Fund, L.P., Pinnacle Partners, LLC and Pinnacle Fund, LLLP collectively filed a Schedule 13D dated February 18, 2009, including an amendment thereto dated March 3, 2009, reporting their beneficial ownership of CLST stock. Attached as Exhibit A are true and correct copies of that Schedule 13D and amendment, serving as documentary evidence of the current ownership interests of David Sandberg, RO Partners, RO Fund, Bear Market Opportunities Fund, L.P., Pinnacle Partners, LLC and Pinnacle Fund, LLLP. Other than the shares beneficially owned by Bear Market Opportunity Fund, L.P., Mr. Walker does not own any CLST securities. Other than the shares beneficially owned by Pinnacle Fund, LLLP, none of Mr. Bernard, Pinnacle Capital, LLC, Pinnacle Partners, LLC or White Peak Holdings LLC owns any CLST securities. Mr. Pertierra does not beneficially own any CLST securities. None of the proposed nominees has during the past five years (1) filed a petition under federal bankruptcy laws or any state insolvency law, (2) been convicted in a criminal proceeding or been a named subject of a criminal proceeding (excluding traffic violations and other minor offices), (3) been found by any court or competent jurisdiction to have violated any federal or state securities law or federal commodities law, or (4) been the subject of any order, judgment or decree limiting him from engaging in any type of business practice or in any activity in connection with the purchase or sale of any security or commodity. Attached as Exhibit B is a description of the principal occupation or employment of each nominee during the past five years. Also attached as Exhibit C is the consent of each nominee to serve as a director if so elected. Our representative will appear in person at the meeting to nominate our nominees. Kind Regards, THE RED OAK FUND, L.P. By: RED OAK PARTNERS LLC, its general partner By: ______________________________ David Sandberg, Managing Member EXHIBIT A SCHEDULE 13D AND AMENDMENT (see attached) EXHIBIT B DIRECTOR NOMINEE BIOGRAPHIES CHARLES BERNARD has been the Managing Director of White Peaks Asset Management since its 2002 inception. Prior to that he was the portfolio manager of Vision Quest Capital from 1998-2001. Mr. Bernard received a BBA in Finance and a BA in Economics from the University of Iowa. TOBIN WALKER is the Chief Investment Officer and Chief Executive Officer of Black Swan Advisors, LP, a registered investment advisor that he founded in 2006. Previously, Mr. Walker was a founding partner of the Quantitative Group, a wealth management firm founded in 2004. Mr. Walker graduated cum laude and received a BA in International Relations from Claremont McKenna College. DAVID SANDBERG is a managing member, founder, and portfolio manager of Red Oak Partners, LLC, a NY-based hedge fund, since its March 2003 inception. Previously, Mr. Sandberg co-managed JH Whitney & Co's Green River Fund from 1998-2002. Mr. Sandberg received a BA in Economics and a BS in Industrial Management from Carnegie Mellon University. ADRIAN PERTIERRA is the Senior Analyst at Red Oak Partners, LLC, a NY-based hedge fund. Prior to joining Red Oak in 2007, Mr. Pertierra served as Vice President of Global Markets at Deutsche Bank Alternative Trading. Prior to that, Mr. Pertierra worked at Tradition Asiel Securities, Inc. Additionally, Mr. Pertierra was a Vice President of Institutional Equity Sales and Trading at BGC Partners, LP. Mr. Pertierra received a BA in Economics from the College of Holy Cross. EXHIBIT C CONSENTS OF NOMINEES (see attached) From: Charles Bernard [mailto:charles@whitepk.com] Sent: Wednesday, March 18, 2009 8:23 PM To: David Sandberg Subject: I hereby consent to serve as a director of CLST Holdings, ticker CLHI.PK, if so elected Charles Bernard White Peaks Asset Management LLC 32065 Castle Court Evergreen, Colorado 80439 (303) 322-1163 Office (303) 725-1442 Cell charles@whitepk.com ******************* PLEASE NOTE ******************* This E-Mail/telefax message and any documents accompanying this transmission may contain privileged and/or confidential information and is intended solely for the addressee(s) named above. If you are not the intended addressee/recipient, you are hereby notified that any use of, disclosure, copying, distribution, or reliance on the contents of this E-Mail/telefax information is strictly prohibited and may result in legal action against you. Please reply to the sender advising of the error in transmission and immediately delete/destroy the message and any accompanying documents. Thank you From: Tobin Walker [mailto:tw@blackswansa.com] Sent: Wednesday, March 18, 2009 4:50 PM To: David Sandberg Subject: FW: CLHI board I hereby consent to serve as a director of CLST Holdings, ticker CLHI.PK, if so elected. Tobin Walker Tobin Walker Chief Executive Officer & Chief Investment Officer Direct: 210.477.7616 Fax: 210.477.7611 Toll Free: 866.257.8934 Black Swan Advisors, LP 112 E. Pecan Street #806 San Antonio, TX 78205 tw@blackswansa.com From: apertierra@redoakpartners.com Sent: Wednesday, March 18, 2009 12:33 PM To: David Sandberg Subject: CLHI Board I hereby consent to serve as a director of CLST Holdings, ticker CLHI.PK, if so elected. By: /s/ Adrian Pertierra Name: Adrian Pertierra Adrian Pertierra Senior Analyst Red Oak Partners, LLC apertierra@redoakpartners.com (212) 253-5386 direct (646) 390-6784 fax 145 Fourth Avenue, Suite 15A New York , NY 10003 From: David Sandberg Sent: Thursday, March 19, 2009 2:53 PM To: David Sandberg Subject: CLHI Board I hereby consent to serve as a director of CLST Holdings, ticker CLHI.PK, if so elected. David Sandberg David Sandberg Portfolio Manager Red Oak Partners, LLC dsandberg@redoakpartners.com (212) 614-8952 direct (646) 773-6277 cell (646) 390-6784 fax 145 Fourth Avenue, Suite 15A New York , NY 10003 EX-99.D 5 clhi13d20090424exhibitd.txt [LOGO OMITTED] JACKSON WALKER L.L.P ATTORNEYS & COUNSELORS Mark T. Josephs (214) 953-6009 (Direct Dial) (214) 661-6651 (Direct Fax) mjosephs@jw.com March 25, 2009 VIA U.S. MAIL AND TELECOPIER - ---------------------------- Mr. David Sandberg The Red Oak Fund, L.P. c/o Red Oak Partners, LLC 145 4th Avenue, Suite 15A New York, New York 10003 Mr. Paul J. Tennyson Mr. Jay C. Gandhi Paul Hastings 695 Town Center Drive Seventeenth Floor Costa Mesa, CA 92626 Re: Stockholder Request for Inspection of Books and Records, dated March 18, 2009 Dear Sirs: We represent CLST Holdings, Inc. (the "Company"). In that regard, we have been provided with a copy of the letter, dated March 18, 2009, from The Red Oak Fund, L.P., c/o its general partner, Red Oak Partners, LLC ("Red Oak") to the Company (the "Demand") making a general demand pursuant to 8 Del. C. ss. 220 to inspect and copy "[a]11 books, records, reports, memoranda and materials, including but not limited to board and committee minutes and analyses, and materials furnished to or prepared by or for any member of the Board of Directors, whether or not reflected in the Company's public filings, relating to: a) Stockholder nominations for election of directors [and] b) Classes of directors and their terms of office, including all discussion by the Company or Board related to amending the size of the Board from the period of January 1, 2007 to the present." The Company hereby rejects the Demand because it fails to comply with the requirements of 8 Del. C. ss. 220. Sincerely, /s/ Mark T Josephs Mark T Josephs 901 Main Street, Suite 6000 * Dallas, Texas 75202 (214) 953-6000 * fax (214) 953-5822 Messrs. Sandberg, Tennyson and Gandhi March 25, 2009 Page 2 - ------------------------------------- cc: Mr. Robert A. Kaiser Chief Executive Officer CLST Holdings, Inc. 17304 Preston Road, Suite 420 Dallas, Texas 75252 EX-99.E 6 clhi13d20090424exhibite.txt THE RED OAK FUND, L.P. C/O RED OAK PARTNERS, LLC 145 4th Avenue, Suite 15A | New York, New York 10003 Telephone (212) 614-8952 | Facsimile (646) 390-6784 March 27, 2009 VIA FACSIMILE AND CERTIFIED MAIL CLST Holdings, Inc. 17304 Preston Road, Suite 420 Dallas, Texas 75252 Attention: Robert A. Kaiser Re: Stockholder Request for Inspection of Books and Records Dear Mr. Kaiser/Corporate Secretary: Attached is a corrected copy of our request for inspection of books and records sent to you on March 18, 2009 pursuant to 8 Del. Code ss. 220 and received on March 19, 2009 via certified US mail (the "Demand Letter"), as well as a copy of our stock certificate verifying that the Red Oak Fund L.P. is the registered holder of 1,000 shares of CLST holdings, Inc. Your fax received by us on March 25, 2009 claimed that the Demand Letter failed to comply with the requirements of 8 Del. Code ss. 220. We have reviewed our Demand Letter and believe it fully complied with the requirements of 8 Del. Code ss. 220. We ask for an explanation of how in your view the Demand Letter did not comply with 8 Del. Code ss. 220 within three business days (to be received by us on Wednesday, April 1st) such that we may avoid filing an action seeking relief from the courts to enforce this request. Very truly yours, Red Oak Fund, L.P. By: Red Oak Partners, LLC, its General Partner By: ____________________________ David Sandberg, Managing Member Exhibit cc: Peter J. Tennyson, Esq. Jay C. Gandhi, Esq. Brian J. Robbins, Esq. George C. Aguilar, Esq. EX-99.F 7 clhi13d20090424exhibitf.txt [LOGO OMITTED] JACKSON WALKER L.L.P ATTORNEYS & COUNSELORS Jeffrey M. Stone (214) 953-6107 (Direct Dial) (214) 661-6651 (Direct Fax) jsone@jw.com April 1, 2009 Via U.S. Mail and Facsimile - --------------------------- David Sandberg The Red Oak Fund, L.P. c/o Red Oak Partners, LLC 145 4th Avenue, Suite 15A New York, New York 10003 Re: Red Oak Request for Inspection of CLST Books and Records -------------------------------------------------------- Dear Mr. Sandberg: I write on behalf of my client, CLST Holdings, Inc. (the "Company"), in response to your requests, by letters dated March 18, 2009 and March 27, 2009, pursuant to 8 Del. C. ss. 220 ("Section 220") to inspect certain of the Company's books and records (collectively, the "Demand"). Pursuant to your March 27 request, this letter explains on a non-exclusive basis certain of the principal reasons for the Company's view that the Demand does not comply with the inspection requirements in Section 220. The Demand requests "[a]ll books, records, reports, memoranda and materials, including but not limited to board and committee minutes and analyses, and materials furnished to or prepared by or for any member of the Board of Directors, whether or not reflected in the Company's public filings, relating to: a) Stockholder nominations for election of directors [and] b) Classes of directors and their terms of office, including all discussion by the Company or Board related to amending the size of the Board from the period of January 1, 2007 to the present" (collectively, the "Requested Documents"). The Demand lists three purposes as the bases for seeking the Requested Documents: "(i) to review and understand RO Fund's rights and obligations relative to board representation, (ii) to assist RO Fund in determining whether to nominate persons for election as directors of the Company and (iii) to facilitate and inform discussions ... with other stockholders about such matters." The inspection of books and records under Section 220 is limited to those books and records that are necessary and essential to the satisfaction of a stockholder's stated purpose, which must be reasonably related to the stockholder's interest as a stockholder. See, e.g., Saito v. McKesson HBOC, Inc, 806 A.2d 113, 116 (Del. 2002). The Demand plainly does not comply with this standard. Red Oak does not need the Requested Documents to determine its rights 901 Main Street, Suite 6000 * Dallas, Texas 75202 (214) 953-6000 * fax (214) 953-5822 - -------------------------------------------------------------------------------- www.jw.com * Austin * Dallas * Fort Worth * Houston * San Angelo * San Antonio Member of GLOBALAW(sm) April 1, 2009 Page 2 - ---------------------------------------- and obligations as a stockholder of the Company related to board representation, Red Oak's fights and obligations as a stockholder are described in the Company's Amended and Restated Certificate of Incorporation and the Company's Bylaws, both of which are publicly available and on file with the SEC. Nor does Red Oak require access to the Company's books and records to "determin[e] whether to nominate persons for election." Red Oak has already proposed the nomination of a slate of directors at the Company's upcoming annual meeting.(1) Even assuming that one of the purposes stated in the Demand warrants the limited inspection permitted under Section 220, the Demand's overbreadth renders it deficient under Delaware law. "Section 220 is not meant to be a forum for the kinds of wide-ranging document requests permissible under [Court of. Chancery] Rule 34." Highland Select Equity Fund, L.P. v. Motient Corp., 906 A.2d 156 (Del. Ch. 2006), aff'd, 922 A.2d 415 (Del. 2007). A stockholder seeking to inspect books and records pursuant to Section 220 must identify with "rifled precision" each category of documents essential to the accomplishment of the articulated purpose. See, e.g., Brehm v. Eisner, 746 A.2d 244, 266-67 (Del. 2000). The Demand fails to meet this standard because it seeks "[a]ll books, records, reports, memoranda and materials, including but not limited to board and committee minutes and analyses" that were "furnished to or prepared by or for any member of the Board of Directors" during a 27-month period for the purported purpose of determining Red Oak's present rights and obligations. The improper and narrow scope of the purposes stated in the Demand, the availability of public information sufficient to discharge those purposes, and the disproportionate breadth of the document requests set forth in the Demand also indicate that the purposes stated in the Demand are pretextual and that Red Oak's true purposes are to engage in a fishing expedition and/or to seek backdoor discovery related to the pending derivative action it commenced against the Company and, its officers and directors on March 2, 2009 in the 134th District Court of Dallas County, Texas. Neither such purpose is proper under Delaware law. See, e.g., Meizer v. CNET Networks, Inc., 934 A.d 912, 918 (Del. Ch. 2007); Taubenfeld JT v. JW Marriott, Jr., et al., C.A. No. 20122-NC (Del. Ch. July 29, 2003). - ---------------------------------------- (1) If the Company should interpret the Demand as a withdrawal of Red Oak's proposed director nominations, please let me know immediately. April 1, 2009 Page 3 - ---------------------------------------- If Red Oak submits a new demand, the Company will evaluate its compliance with Section, 220. If the new demand satisfies the statutory requirements, we will address immediately with you the appropriate scope of any potential production as well as the terms of an appropriate confidentiality agreement. Very truly yours, /s/ Jeffrey M. Sone Jeffrey M. Sone cc: Robert A. Kaiser Kevin G. Abrams, Esq. Paul J. Tennyson, Esq. EX-99.G 8 clhi13d20090424exhibitg.txt April 3, 2009 72411.00005 Jeffrey M. Sone Jackson Walker L.L.P. 901 Main Street, Suite 6000 Dallas, Texas 78202 Re: Red Oak Request for Inspection of CLST Books and Records Dear Mr. Sone: Thank you for copying me on your April 1, 2009 letter to David Sandberg of Red Oak Fund. We request that you and CLST Holdings, Inc. (the "Company") reconsider your refusal to provide the information Red Oak has requested that you provide. Essentially, your letter to Mr. Sandberg dated April 1, 2009 takes two positions, namely that the request is too broad and that the requested information is available from public records. You also question whether the requested materials are necessary or useful to Red Oak's stated purposes. I hope to explain in some better detail Red Oak's purposes behind its requests and ask that you and your client reconsider providing the requested materials, so that both parties can avoid the expense of a court proceeding. The demand is cited as being broad because it requests books, records, reports, memoranda and materials furnished to or prepared by or for any member of the board of directors relating to stockholder nominations for election of directors and classes of directors. Although the request is necessarily broad as to type, because Red Oak would like to receive memoranda and discussion materials provided at meetings in addition to just minutes, the request is actually quite narrow. It seeks only materials relating to stockholder nominations for the election of directors, materials relating to the classification of the Company's board, and any materials relating to amending the size of the board. As you know, since your firm prepares many of the Company's securities filings, the Company announced in 2007 that it had reduced the size of its board to three members and subsequently announced in January of 2009 that it had expanded the board size by one member and elected an additional member to Class III. It certainly does not seem overbroad to ask for any materials, reports or board minutes leading up to these decisions, or any interim decisions that were not announced. Further, the Company disclosed in 2007 consideration of shareholder nominations but has not disclosed further or additional shareholder nomination discussions. It hardly seems overbroad to request that the consideration given by the board to stockholder nominations, and the process for receiving and evaluating such nominations be produced. These requested materials relate directly to Red Oak's stated purposes. Understanding the board's decision to contract and then expand the board would help Red Oak understand the board's potential response to a request for a board seat and the board's likely or potential response to Red Oak's notice that it intends to nominate stockholders, which you acknowledge in your letter was received. In response to the issue raised in your footnote, Red Oak still plans to nominate, and needs the requested material to do so. Further, while Red Oak has notified the Company it intends to nominate persons for election at the May 22 annual meeting, receiving copies of the materials requested would help Red Oak determine it has the right to nominate one person, two persons or more persons to the board of directors. The Company's public filings are somewhat ambiguous on this point as Red Oak's request pointed out. Perhaps some of the requested material is not needed if the Company confirms it will be electing directors for both Class I and Class II. More importantly, these materials relate directly to Red Oak's third stated purpose which is to facilitate an informed discussion with other stockholders about these matters. As you can anticipate, Red Oak would likely file proxy materials with respect to the May 22 meeting, given that it has stated its intent to nominate persons for election to the board of directors and to introduce other proposals for consideration by the stockholders. Knowing the board's prior minutes and other materials considered when determining the size of the board and what persons to elect to the board would facilitate the preparation of such proxy materials and assist Red Oak to conduct an orderly discussion with the Company's stockholders. Understandably, Red Oak would prefer not simply to rely on what the Company has stated in its filings about the decision to reduce and then expand the board of directors and would like to verify that resolutions to that effect were actually adopted. Red Oak's concern in this matter is increased because of the letter submitted by Mr. Rajewoda, through his counsel, objecting that certain board actions were not approved by disinterested directors and that minutes of meetings had neither been circulated nor approved. Under the circumstances Red Oak is justifiably concerned about whether resolutions fixing and expanding the size of the board, and calling the annual meeting, or dealing with the nomination of persons for election as directors, were properly accomplished. If you believe that a more limited production of documents would accomplish the purposes Red Oak is seeking, namely to be certain about the number of persons it ought to nominate for election, the classes in which they should be placed, and that the meeting procedures are being carefully followed as well as to properly prepare its proxy materials, we would welcome a discussion about narrowing the request. If the concerns expressed in the letter from Mr. Rajewoda's counsel are correct, and there are in fact no board meeting minutes, we would appreciate being able to confirm that fact. As a final matter, we note that in your letter you express concern that Red Oak will use the requested materials for discovery purposes in certain pending litigation between it and the Company's directors. Even though Red Oak cannot envisage how the requested materials relate to the lawsuit, to assuage this concern Red Oak has authorized me to state that any materials you produce can be produced to our firm with the understanding that we will not share with, or permit them to be used by, Red Oak's counsel in that litigation. If you would like to propose a formal written letter to confirm that, we would be happy to consider it. Please understand that despite Red Oak's dissatisfaction with certain actions by your board of directors, it does not seek an intrusive and far-reaching search into the corporate records. It wishes merely to assure itself that it has sufficient information to verifiably prepare materials for inclusion in its proxy statements and determine which of the persons it has noticed to the Company can properly be nominated. I look forward to speaking with you about these matters at your convenience. Hopefully we can avoid the need for our clients to engage in additional disputes. Sincerely, Peter J. Tennyson of PAUL, HASTINGS, JANOFSKY & WALKER LLP cc: David Sandbeerg EX-99.H 9 clhi13d20090424exhibith.txt [LOGO OMITTED] JACKSON WALKER L.L.P ATTORNEYS & COUNSELORS Jeffrey M. Stone (214) 953-6107 (Direct Dial) (214) 661-6697 (Direct Fax) jstone@jw.com April 6, 2009 Via U.S. Mail and Facsimile - --------------------------- David Sandberg The Red Oak Fund, L.P. c/o Red Oak Partners, LLC 145 4th Avenue, Suite 15A New York, New York 10003 Re: Director Nominations and Stockholder Proposals Dear Mr. Sandberg: I write on behalf of our client, CLST Holdings, Inc. (the "Company"), in response to your two letters dated March 19, 2009. The first letter purports to nominate two persons for election to Class I of the Company's board of directors (the "Board") and two persons for election to Class II of the Board (collectively, the "Nominations") at the Company's 2009 annual meeting of stockholders (the "Annual Meeting"). The second letter purports to give notice of five proposals (the "Proposals") that you wish to present to the Company's stockholders at the Annual Meeting and with respect to which you propose to solicit proxies using your own materials. The Board rejects the Nominations because you have nominated two persons for the single Class I Seat that is subject to election at the Annual Meeting and two persons for the single Class II seat that is subject to election at the Annual Meeting. Your nominations are thus not in accordance with Article 9(C) of the Company's certificate of incorporation (the "Charter"). The Board also rejects your Proposals because they are not proper in form or substance to come before an annual meeting of stockholders of a Delaware corporation. Thus, in accordance with Article 6(B) of the Charter, your proposals will not be placed before the Annual Meeting Pursuant to federal law, the Board expects that you will omit the Proposals from your solicitation materials. Notwithstanding its rejection of your Nominations and Proposals, the Board has asked us to discuss with you the possibility of an agreement pursuant to which the Board would permit your nomination of one Class I director and one Class II director and a limited number of proper proposals for consideration at the Annual Meeting. The Board would be willing to permit these nominations and limited proposals if, prior to April 12, 2009, (i) appropriate information is 901 Main Street, Suite 6000 * Dallas, Texas 75202 (214) 953-6000 * fax (214) 953-5822 - -------------------------------------------------------------------------------- www.jw.com * Austin * Dallas * Fort Worth * Houston * San Angelo * San Antonio Member of GLOBALAW(sm) April 6, 2009 David Sandberg The Red Oak Fund, LP Page 2 - -------------------- provided with respect to Red Oak's two nominees; (ii) the proposals are proper in substance to come before an annual meeting of stockholders of a Delaware corporation and are in proper form for submission, solicitation of proxies and stockholder action; and (iii) an agreement is reached among Red Oak and its affiliates (collectively "Red Oak") and the Company in which Red Oak commits to (a) comply with applicable law relating to its acquisition and holding of the securities of the Company during the period prior to the meeting and its solicitation of proxies with respect to the 2009 Annual Meeting, (h) make corrective disclosures, approved by the Company, that will bring Red Oak into compliance with the requirements of the Securities Exchange Act of 1934, as amended, (the "34 Act") including in particular Sections 13 and 14 thereof, and (c) sterilize, for purposes of voting at the Annual Meeting, all shares of the Company's stock acquired by Red Oak in violation of. Section 14 of the 34 Act (including without limitation those acquired during the period commencing on February 4, 2009 and ending on February 13, 2009). Red Oak has taken a number of hostile actions toward the Company in recent months, and put at risk the Company's ability to manage its affairs in the best interests of its stockholders. Red Oak's director nominations, frivolous proposals and litigation have put a burden on the Company's limited personnel resources, and made it impossible for the Company to provide adequate information to its stockholders in sufficient time for them to take informed action at the Annual Meeting as currently scheduled on May 22, 2009. The Company has today filed an amended complaint in its lawsuit against Red Oak pending in the United States District Court for the Northern District of Texas, seeking remedies that it hopes will allow it to proceed with a proper annual meeting, pursuant to proper notice, at a time when the Company's stockholders have sufficient information to make informed decisions. Because, among other reasons, the Company does not expect that litigation, which bears directly upon the Annual Meeting, to be resolved for some months, the Board has determined to delay the Annual Meeting until September 25, 2009 - unless the Company and Red Oak are able to reach an agreement prior to April 12, 2009. April 6. 2009 David Sandberg The Red oak Fund, LP Page 3 - -------------------- If you are willing to discuss these matters and to negotiate in good faith an agreement between Red Oak and the Company with a view to achieving the results contemplated in the preceding paragraphs, please let us know immediately. Because the agreement contemplated by the Board is a relatively complex one, and will involve a substantial investment of money and time to draft and negotiate, we ask that you indicate by the close of business tomorrow if the proposed terms described above are acceptable to you in concept. Very Truly yours, /s/ Jeffrey M. Stone Jeffrey M. Stone cc: Robert A. Kaiser Kevin G. Abrams, Esq. Paul J. Tennyson, Esq. -----END PRIVACY-ENHANCED MESSAGE-----