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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
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DONALD E. HAMILTON,
Plaintiff,
v.
C.A. No. 13014
HENRY W. NOZKO, SR., HENRY W.
NOZKO, JR., JOHN C. CREASY,
and ACMAT CORPORATION,
Defendants.
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STIPULATION OF SETTLEMENT
The parties to the above-captioned action ("the Action"), by their
respective undersigned counsel of record, enter into this Stipulation of
Settlement (the "Stipulation" or this "Settlement"), dated as of May 2, 1996.
WHEREAS:
A. United Coasts Corporation ("UC") is an insurance holding company
whose wholly-owned subsidiary, United Coastal Insurance Company ("Coastal
Insurance"), operates as an excess and surplus lines property and casualty
insurer in 46 states, Puerto Rico, the District of Columbia and the Virgin
Islands. Coastal Insurance offers general, asbestos, pollution and professional
insurance to specialty trade contractors, environmental contractors, property
owners, storage and treatment facilities and allied professionals. It also
offers product liability policies to
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manufacturers and distributors.
B. ACMAT Corporation ("ACMAT") conducts operations directly and through
subsidiaries in two business segments: construction contracting and insurance.
Construction contracting operations include the furnishing of building
interiors, renovations, alterations and additions, and asbestos abatement
services. ACMAT does its insurance business through its subsidiaries, Coastal
Insurance and ACSTAR Insurance Company ("ACSTAR"). ACSTAR sells surety bonds and
contract payment and performance bonds to the construction industry.
C. As of May 4, 1993, ACMAT and its subsidiaries owned 83.6% of UC's
common stock. Henry W. Nozko, Sr. and Henry W. Nozko, Jr. together own
approximately 63% of the voting power of ACMAT, and thereby control UC.
D. Until mid-1993, UC common stock traded on the NASDAQ National
Market. In early 1993, UC ceased to provide public information and reports filed
under the Securities and Exchange Act of 1934 ("Exchange Act") and terminated
the registration of UC common stock under section 12 of the Exchange Act. UC's
last publicly filed report with the SEC was its Form 10Q for the quarter ended
September 30, 1992. As a result of the termination of UC's filing status, the UC
common stock ceased to trade on the NASDAQ National Market.
E. On or about May 13, 1993, ACMAT proposed an exchange offer (the
"Exchange Offer") for the UC common stock in which it offered to exchange one
share of ACMAT Class A stock for each 1.75 shares of outstanding UC common
stock. The Exchange Offer was scheduled to expire on June 30, 1993.
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F. On June 10, 1993, plaintiff Donald E. Hamilton ("Hamilton"),
individually and on behalf of persons similarly situated, filed the Action
seeking injunctive relief with respect to the Exchange Offer and damages on
behalf of a class of all holders of UC common stock and their successors in
interest, other than defendants and their affiliates. On June 15, 1993, ACMAT
announced that it was withdrawing the Exchange Offer.
G. On June 30, 1993, Hamilton filed an Amended Complaint (the
"Complaint"). The Complaint alleges violations of duties arising under the laws
of the State of Delaware, including, inter alia, alleged breaches of fiduciary
duties in connection with the Exchange Offer and with the deregistration and
delisting of the UC stock. The Complaint alleges that the Exchange Offer was
unlawfully coercive in that UC stockholders were faced with a choice of
exchanging their UC shares for unfair consideration or being left with stock for
which there would be no market because of defendants' expressed intent not to
provide financial information necessary to sustain a public market for UC
shares. In addition, the Complaint charged the defendants with proposing the
Exchange Offer to further their own interests by improving the liquidity of the
ACMAT Class A stock and providing to ACMAT access to UC's substantial cash
assets. The Complaint sought a mandatory injunction to require defendants to
reinstate and maintain the registration of UC stock under Section 12 of the
Exchange Act, damages, and attorneys' fees and expenses, including fees and
expenses for inducing the withdrawal of the Exchange Offer.
H. On July 7, 1993, defendants moved to dismiss the Action on the basis
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that the allegations regarding the Exchange Offer were moot by virtue of the
withdrawal of the Exchange Offer, and that in any event, the Exchange Offer was
not actionably coercive. The Court denied defendants' motion, finding that the
Complaint stated potentially actionable claims for relief both as to the
deregistration and delisting of the stock and as to the potentially coercive
nature of the Exchange Offer. Hamilton v. Nozko, Del. Ch., C.A. No. 13014,
Jacobs, V.C. (July 26, 1994). After the Court denied defendants' motion,
defendants answered the Complaint and responded to plaintiffs' discovery
requests. Plaintiff's counsel proceeded with discovery while simultaneously
engaging in extensive settlement negotiations with defendants. After nearly a
year of discovery and negotiations, the parties agreed to terms for the proposed
resolution of the claims alleged, which were embodied in a Memorandum of
Understanding signed in late December 1995.
I. Counsel for plaintiff have conducted a thorough investigation of the
facts, circumstances and transactions relating to and surrounding the
allegations set forth in the Complaint, including extensive consultations with a
financial expert, inspection of publicly-available documents, review of
thousands of pages of documents produced by defendants and the deposition of
defendant Henry W. Nozko, Jr.
J. Plaintiff and his counsel enter into this Stipulation (i) after
taking into account the likelihood that this litigation, if not settled by
voluntary agreement among the parties to this Stipulation, will be expensive to
all of the said parties and protracted (including a lengthy trial and potential
time-consuming appeals), and would
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involve highly complex issues of fact (as to which the experts for the parties
may hold varying opinions), and other difficult issues relating both to
liability and to damages, as well as the other uncertainties and risks inherent
in complex litigation such as this case; (ii) after taking into account the
substantial benefits UC shareholders will receive as a result of the proposed
Settlement; and (iii) after having concluded, in light of, among other things,
governing law and the facts of this case, that the proposed Settlement provided
for herein is fair, reasonable and adequate and in the best interests of
plaintiff and the members of the Class defined below.
K. The defendants have denied and continue to deny each and all of the
claims in the Action. The defendants have asserted and continue to assert many
defenses thereto, and have expressly denied and continue to deny any wrongdoing
or legal liability arising out of the conduct alleged in the Action.
L. The defendants have, nonetheless, concluded that it is desirable
that the Action be settled in the manner and upon the terms and conditions set
forth herein in order to avoid the expense, inconvenience and distraction of
further legal proceedings and to put to rest completely the claims by the
plaintiff and the members of the Class against the defendants.
NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED, by and among the
undersigned parties, through their respective attorneys, subject to the approval
of the Court, the performance of all other matters on the part of the plaintiff
and defendants to be performed pursuant to the Stipulation, and the entry by the
Court of a Final Judgment approving the Settlement as fair, adequate and
reasonable and
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dismissing this Action with prejudice, that all claims, rights, causes of
action, suits, matters and issues, known and unknown, arising under common law,
or federal or state statutory law, including all securities laws (except for
claims for appraisal pursuant to Section 262 of the Delaware General Corporation
Law and the rights conferred by the Settlement) that have been or could have
been asserted in this or any other Court or forum by plaintiff or by any member
of the Class (as defined in paragraph 1 below), whether directly, indirectly,
representatively, derivatively, individually or in any other capacity, against
any of the defendants named in the Action, and their respective predecessors and
successors, present or former officers, directors, stockholders, agents,
employees, attorneys, representatives, advisors, affiliates (including the
directors and officers of such affiliates, parents, and subsidiaries), heirs,
executors, personal representatives, estates, administrators, successors and
assigns of any of the defendants or of any affiliate, parent or subsidiary of
any defendant (collectively, the "Defendants' Affiliates"), in connection with,
arising out of, or in any way related to any of the acts, facts, transactions,
occurrences, representations or admissions set forth, alleged, embraced or
otherwise referred to in the Action by plaintiff or any member of the Class, or
by any present or former common stockholder of UC, either directly, indirectly,
individually, derivatively, representatively or in any other capacity, except
for claims relating to any party's alleged failure to comply with the terms and
conditions of this Stipulation (the "Settled Claims"), shall be finally and
forever compromised, settled, remised, released, discharged and dismissed with
prejudice upon and subject to the following terms and
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conditions:
1. For purposes of this Settlement only, the Action shall be
maintained as a class action by plaintiff as the representative plaintiff, and
his counsel of record as class counsel, pursuant to Delaware Court of Chancery
Rules 23(a), 23(b)(1) and 23(b)(2) on behalf of a class (the "Class") consisting
of all persons and entities who are or were record holders or beneficial owners
of UC common stock at any time during the period from June 10, 1993 through the
record date of closing of the Merger (as defined below) (other than defendants,
members of their immediate families, ACSTAR, any entity in which any defendant
has, or during the Class period had, a controlling interest, and all of their
subsidiaries, affiliates, legal representatives, heirs, successors, or assigns)
including the legal representatives, heirs, predecessors and
successors-in-interest, transferees or assigns of all such foregoing holders,
immediate or remote (the "Class").
2. Defendants shall approve and take all steps necessary to
propose to UC's present shareholders for their approval a merger of UC with and
into ACMAT pursuant to an Agreement and Plan of Liquidation and Merger (the
"Merger") on the following terms:
(a) Each share of UC common stock not owned by ACMAT or
ACSTAR will be converted into Class A common stock of
ACMAT ("ACMAT stock") at the ratio of one share of
ACMAT stock per each X UC shares ("the Exchange
Ratio"), where X is determined as follows (i) divide
the total
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number of UC shares held by Class members as of the
Merger effective date by 1.5; (ii) from that
quotient, subtract the number of UC shares the Court
allows plaintiff's counsel in response to their fee
and expense request as contemplated in paragraph 9;
(iii) then divide the number of UC shares held by
Class members as of the Merger effective date by the
remainder obtained in step (ii). The quotient equals
X.
(b) All shares of UC common stock owned by ACSTAR will be
exchanged for shares of Coastal Insurance having
substantially equal aggregate fair market value; and
each share of UC common stock held by ACMAT will be
cancelled.
(c) To the extent that the Exchange Ratio results in any
UC shareholder becoming entitled to receive
fractional shares of ACMAT, such fractional share
interest will be converted into the right to receive
a sum of cash determined by the product of the
fraction and the average closing price of the ACMAT
stock during the last five days the stock was traded
on the NASDAQ National Market prior to the effective
date of the Merger (the "Merger Date"). Cash for
fractional shares will be paid within thirty (30)
days
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following the Merger Date.
(d) Defendants and their affiliates will refrain from
trading in ACMAT stock for twenty-one (21) days prior
to the Merger Date.
(e) The Merger will close as promptly as practicable
after final judicial approval of the Settlement and
all shareholder approvals are obtained.
(f) An express condition of the Merger will be approval
of the Merger (including the Exchange Ratio) by a
majority of UC shares held by persons other than
defendants and their affiliates that are voted in
connection with the Merger.
(g) Defendants will make usual and customary efforts to
solicit votes in favor of the Merger.
3. Contemporaneously with submission to the SEC of a
Registration Statement of ACMAT concerning the public offering to members of the
Class of shares of ACMAT stock, defendants shall provide such Registration
Statement and any related materials concerning a special meeting of UC
shareholders called to approve the Merger to plaintiff's counsel. In preparing
the final Registration Statement and related materials, defendants shall
consider any and all comments they may receive from plaintiff's counsel,
although they shall be under no obligation to implement any such comments.
4. In the event that valid and effective demands for appraisal
are
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received with respect to more than 416,797 United Coasts shares, defendants
may, in their discretion withdraw from the Settlement, and the provisions of
paragraph 12 shall apply.
5. Promptly following the execution of this Stipulation, ACMAT
shall apply to the administrator of the insurance laws of the State of Illinois
for consent or approval to the exchange under the terms of the Merger of shares
of UC common stock held by ACSTAR for shares of Coastal Insurance with
substantially equal aggregate fair market value, and shall take all reasonable
steps necessary to secure such consent or approval. In the event that such
consent or approval is denied or not received within a reasonable time,
defendants may, in their discretion, withdraw from the Settlement, and the
provisions of paragraph 12 shall apply.
6. Immediately following execution of this Stipulation, the
undersigned attorneys shall submit to the Court this Stipulation and a proposed
order ("the Settlement Hearing Order"), substantially in the form attached
hereto as Exhibit A.
7. If the Court approves the Settlement, the parties will
jointly move for the entry of an Order and Final Judgment substantially in the
form attached hereto as Exhibit C.
8. ACMAT shall assume the administrative responsibility and
shall bear the expense of preparing and distributing the Notice of Pendency of
Class Action, Class Action Determination, Proposed Settlement, Settlement
Hearing and Right to Appear (the "Notice"), substantially in the form attached
hereto as Exhibit B, in
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accordance with the Settlement Hearing Order. Prior to the Settlement hearing,
counsel for ACMAT shall file with the Court an affidavit attesting to the
mailing of the Notice.
9. If the Settlement set forth in this Stipulation, including
any modification thereof made with consent of the parties as provided for
herein, is approved by the Court, and the UC shareholders approve the Merger,
plaintiff's counsel will apply to the Court for an award of attorneys' fees and
disbursements, in the amount of 26,000 shares of ACMAT stock to be deducted from
shares otherwise distributable to the Class in connection with the Merger.
Defendants may object to plaintiff's counsel's application. If the Court allows
fees and expenses in ACMAT stock and such award becomes final as a result of the
latter of lack of objection, final affirmance on appeal or reargument, lapse of
time to appeal, or otherwise being no longer subject to appeal, or final
dismissal of any appeal, then plaintiff's counsel shall be entitled to receive
such award at the later of the time the Merger is implemented or the award
becomes final. Prior to the distribution of shares in connection with the
Merger, plaintiff's counsel, Rosenthal, Monhait, Gross & Goddess, P.A. and
Kaufman Malchman Kirby & Squire, LLP shall advise defendants in writing of the
number of shares to be allocated to each firm, and the shares shall be issued
pursuant to such advice.
10. If the Merger does not receive majority of the minority approval as
provided in paragraph 2(f), plaintiff will dismiss the Action without prejudice,
except for a claim for an allowance of attorneys' fees and expenses for inducing
withdrawal
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of the Exchange Offer. Any such application shall not exceed $75,000. Defendants
may oppose any such application.
11. Neither the Stipulation nor any document referred to herein, nor
any action taken to carry out this Stipulation is, may be construed as, or may
be used as, an admission by or against the defendants of any fault, wrongdoing
or liability whatsoever, or by plaintiff of any lack of merit in the claims
asserted. Entering into or carrying out this Stipulation, and any negotiations
or proceeding related thereto, shall not in any event be construed as, or deemed
to be evidence of, an admission or a concession with regard to the denials or
defenses by the defendants and shall not be offered or received in evidence in
any action or proceeding against any party hereto in any court, administrative
agency or other tribunal for any purpose whatsoever other than to enforce or
implement the provisions of this Stipulation, or the provisions of any related
agreement or release, except that this Stipulation and related documents may be
filed in this Action as evidence of a matter set forth in this Stipulation and
such related documents.
12. If (a) defendants exercise their right to withdraw from the
Settlement pursuant to paragraphs 4 or 5; (b) an Order containing provisions
substantially as provided in Exhibit A is not approved by the Court; or (c) the
Settlement is not approved, or an Order and Final Judgment containing provisions
substantially as provided in Exhibit C is otherwise not entered or such Order is
entered but is not finally affirmed on appeal or does not become final by lapse
of time, dismissal or otherwise, this Stipulation shall be null and void, shall
have no further force and effect
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with respect to any party in the Action, and shall not be used in the Action or
in any other proceedings for any purpose, and the Stipulation and all papers,
negotiations, proceedings and statements made or had in connection herewith
shall be without prejudice to any person, and shall not be deemed or construed
to be an admission or concession by any party of any fact, matter, or
proposition, and shall not be used in any manner or for any purpose in any
subsequent proceeding in this Action or in any Court; and all parties to the
Action shall stand in the same position, without prejudice, as if this
Stipulation had not been made or filed with the Court, except that ACMAT shall
not be entitled to reimbursement of expenses incurred in connection with mailing
the Notice pursuant to paragraph 8.
13. The fairness, reasonableness, and adequacy of the Settlement may be
considered and ruled upon by this Court independently of any award of fees and
disbursements requested by counsel for the plaintiff and the Class.
14. The parties and their attorneys agree to cooperate fully with one
another in seeking Court approval of this Stipulation and to use their best
efforts to effect the consummation of this Stipulation, including the entry and
the carrying out of the Order and Final Judgment in the form attached hereto as
Exhibit C.
15. The undersigned counsel for plaintiff represent that plaintiff has
authorized them to execute this Stipulation, and the undersigned counsel for
defendants represent that they have been duly authorized and empowered by their
clients to execute this Stipulation.
16. This Stipulation shall be binding upon and inure to the benefit of
the
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parties hereto and their respective subsidiaries, affiliates, directors,
officers, employees, heirs, partners, successors and assigns and any corporation
or other entity into or with which any corporate party hereto may merge or
consolidate.
17. This Stipulation shall be construed and entered into in accordance
with the laws of the State of Delaware.
18. Without further order of the Court, the parties may agree to
reasonable extensions of time to carry out any of the provisions of this
Stipulation.
19. The foregoing constitutes the entire agreement between the parties
with regard to the subject matter hereof and may not be waived, modified or
amended in any respect except in writing signed by all parties hereto.
ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A.
By: _______________________________________
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
KAUFMAN MALCHMAN KIRBY & SQUIRE, LLP
By: _________________________________________
919 Third Avenue
New York, NY 10022
(212) 371-6600
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Attorneys for Plaintiff
MORRIS NICHOLS ARSHT & TUNNELL
By: _________________________________________
1201 N. Market Street
P.O. Box 1347
Wilmington, DE 19899-1347
(302) 658-9200
Attorneys for Defendants
OF COUNSEL:
MURTHA, CULLINA, RICHTER & PINNEY
Cityplace I, 185 Asylum Street
Hartford, CT 06103-3469
(860) 240-6000
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Exhibit A
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- -----------------------------------------------------
DONALD E. HAMILTON,
Plaintiff,
v.
C.A. No. 13014
HENRY W. NOZKO, SR., HENRY W.
NOZKO, JR., JOHN C. CREASY,
and ACMAT CORPORATION,
Defendants.
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O R D E R
The parties to the above-captioned action (the "Action"), having
applied for an Order seeking a class action determination and having entered
into the Stipulation of Settlement dated May , 1996 (the "Stipulation" or the
"Settlement"), which among other things seeks dismissal of the Action with
prejudice upon the terms and conditions set forth in the Stipulation;
NOW, upon the consent of the parties, after consideration of the
Stipulation filed with the Court and the exhibits annexed thereto, and after due
deliberation, IT IS HEREBY ORDERED THAT:
1. Pursuant to Court of Chancery Rules 23(a) and 23(b)(1)
and/or (b)(2), the Action, for purposes of the Settlement only and pending the
Settlement
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Hearing, shall be maintained as a class action on behalf of a class consisting
of all persons and entities who are or were record holders or beneficial owners
of United Coasts Corporation ("UC") common stock at any time during the period
from June 10, 1993 through the record date of closing of the Merger (as defined
in the Stipulation) (other than defendants, members of their immediate families,
ACSTAR Insurance Company, any entity in which any defendant has, or during the
Class period had, a controlling interest, and all of their subsidiaries,
affiliates, legal representatives, heirs, successors, or assigns) including the
legal representatives, heirs, predecessors and successors-in-interest,
transferees or assigns of all such foregoing holders, immediate or remote (the
"Class"). The named plaintiff is temporarily certified as the Class
representative and his counsel shall serve as Class counsel.
2. A hearing shall be held at __________ ____.m. on ___________, 1996,
at the Daniel L. Herrmann Courthouse, 1020 North King Street, Wilmington, DE
19801 to (a) determine whether the Settlement, including the release of all
claims, should be approved by the Court, (b) determine whether a judgment should
be entered pursuant to the Stipulation that would, among other things, dismiss
the Action with prejudice, (c) consider the application of plaintiff's counsel
for attorneys' fees and reimbursement of expenses, and (d) rule on such other
matters as the Court may deem appropriate.
3. The Court reserves the right to adjourn the hearing or any
adjournment thereof without further notice of any kind to the Class other than
oral announcement at the hearing or any adjournment thereof.
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4. The Court reserves the right to approve the Settlement with or
without modification and with or without notice of any kind.
5. Not less than thirty (30) days prior to the Special Meeting of UC
shareholders, ACMAT Corporation shall mail the Notice of Pendency of Class
Action, Class Action Determination, Proposed Settlement, Settlement Hearing and
Right to Appear substantially in the form annexed to the Stipulation as Exhibit
B (the "Notice") to those Class members appearing in the transfer journals of UC
as record owners of UC common stock. All record owners in the Class who are not
also the beneficial owners of the UC common stock held by them of record are
requested to forward the Notice to such beneficial owners of those shares. ACMAT
shall use reasonable efforts to give notice to such beneficial owners by making
additional copies of the Notice available to any record holder who, prior to the
hearing, requests them for distribution to beneficial owners or by mailing the
Notice to beneficial owners whose addresses record owners provide.
6. The form and method of notice specified herein is the best notice
practicable and shall constitute due and sufficient notice of the hearing to all
persons entitled to receive such notice. ACMAT shall, at or before the hearing
directed herein, file an appropriate affidavit with respect to the mailing of
the Notice.
7. Any member of the Class who objects to the Settlement and/or the
judgment to be entered herein, or who otherwise wishes to be heard, may appear
in person or by his or her attorney at the hearing and present evidence or
argument that may be proper and relevant; provided, however, that no person
other than counsel for
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the named plaintiff and defendants shall be heard and no papers, briefs,
pleadings or other documents submitted by any person shall be considered by the
Court unless, not later than ten (10) days prior to the hearing, such person
files with the Court and serves upon counsel listed below: (a) a written notice
of intention to appear; (b) a statement of such person's objections to any
matter before the Court; (c) proof of membership in the Class; and, (d) the
reasons and grounds therefor that such person desires to appear and be heard,
and documents or writings that such person desires the Court to consider. Such
filings shall be served upon the following counsel:
Norman M. Monhait
ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A.
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899-1070
Irving Malchman
KAUFMAN MALCHMAN KIRBY & SQUIRE, LLP
919 Third Avenue
New York, NY 10022
Attorneys for Plaintiff
Thomas Reed Hunt, Jr.
MORRIS NICHOLS ARSHT & TUNNELL
1201 N. Market Street
P.O. Box 1347
Wilmington, DE 19899-1347
Attorneys for Defendants
Any person who fails to object in the manner provided herein shall be deemed to
have waived his, her or its objection and shall be forever barred from making
such objection.
8. Pending final determination of whether the Stipulation should be
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approved, plaintiff and all members of the Class, or any of them, either
directly, representatively or in any other capacity, upon receipt of the Notice,
shall not commence or prosecute any action asserting any claims that are or
relate to the Settled Claims (as defined in the Stipulation).
9. If the Settlement is not approved by the Court or shall not become
effective for any reason whatsoever, the Settlement (including any modification
thereof made with the consent of the parties as provided for in the
Stipulation), any class certification herein and any actions taken or to be
taken in connection therewith (including this Order and any judgment entered
herein) shall be terminated and shall become void and have no further force and
effect, except (a) ACMAT's obligation to pay the costs of providing the Notice,
as provided in paragraph 8 of the Stipulation, and (b) plaintiff's right to make
an application for attorneys' fees and expenses for inducing withdrawal of the
Exchange Offer, as provided in paragraph 10 of the Stipulation.
__________________________________
Vice Chancellor
Dated: ______________________, 1996
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Exhibit B
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
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DONALD E. HAMILTON,
Plaintiff,
v.
C.A. No. 13014
HENRY W. NOZKO, SR., HENRY W.
NOZKO, JR., JOHN C. CREASY,
and ACMAT CORPORATION,
Defendants.
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NOTICE OF PENDENCY OF CLASS ACTION,
CLASS ACTION DETERMINATION, PROPOSED
SETTLEMENT, SETTLEMENT HEARING AND RIGHT TO APPEAR
TO: ALL RECORD HOLDERS OR BENEFICIAL OWNERS OF UNITED COASTS
CORPORATION COMMON STOCK AT ANY TIME DURING THE PERIOD FROM
JUNE 10, 1993 THROUGH THE RECORD DATE OF CLOSING OF THE MERGER
(AS DEFINED IN THE STIPULATION OF SETTLEMENT) (OTHER THAN
DEFENDANTS, MEMBERS OF THEIR IMMEDIATE FAMILIES, ACSTAR
INSURANCE COMPANY ("ACSTAR"), ANY ENTITY IN WHICH ANY
DEFENDANT HAS, OR DURING THE CLASS PERIOD HAD, A CONTROLLING
INTEREST, AND ALL OF THEIR SUBSIDIARIES, AFFILIATES, LEGAL
REPRESENTATIVES, HEIRS, SUCCESSORS, OR ASSIGNS) INCLUDING THE
LEGAL REPRESENTATIVES, HEIRS, PREDECESSORS AND SUCCESSORS-IN-
INTEREST, TRANSFEREES OR ASSIGNS OF SUCH FOREGOING HOLDERS,
IMMEDIATE OR REMOTE. PLEASE READ THIS NOTICE WITH CARE AS IT
AFFECTS YOUR RIGHTS WITH RESPECT TO THIS ACTION. THIS NOTICE IS
NOT AN EXPRESSION OF ANY OPINION BY THE COURT AS TO THE MERITS
OF ANY OF THE CLAIMS OR DEFENSES ASSERTED BY ANY PARTY IN THIS
ACTION. THIS NOTICE IS SENT FOR THE PURPOSE OF INFORMING YOU OF
THE PENDENCY OF THIS ACTION, THE PROPOSED SETTLEMENT, THE CLASS
DETERMINATION BY THE COURT FOR THE PURPOSE OF THE PROPOSED
SETTLEMENT, AND THE ALTERNATIVE COURSES OF ACTION THAT YOU
MAY TAKE.
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THIS NOTICE IS TO INFORM YOU OF THE PROPOSED SETTLEMENT OF HAMILTON v.
HENRY W. NOZKO, SR. ET AL., C.A. No. 13014 (THE "CLASS ACTION"), AND THE HEARING
TO BE HELD ON _________________________, 1996 AT ____________ ______.M., BEFORE
THE HONORABLE JACK B. JACOBS, VICE CHANCELLOR OF THE COURT OF CHANCERY OF THE
STATE OF DELAWARE (THE "CHANCERY COURT"), AT THE DANIEL L. HERRMANN COURTHOUSE,
1020 NORTH KING STREET, WILMINGTON, DE 19801, TO DETERMINE WHETHER THE PROPOSED
SETTLEMENT OF THE CLASS ACTION IS FAIR, REASONABLE, ADEQUATE, AND SHOULD BE
APPROVED BY THE COURT;
THE FOLLOWING RECITATION DOES NOT CONSTITUTE THE FINDINGS OF THE
CHANCERY COURT. IT IS BASED ON STATEMENTS OF THE PARTIES.
DESCRIPTION OF THE LITIGATION AND SETTLEMENT
1. In June 1993, Donald E. Hamilton, a United Coasts Corporation
("United Coasts") stockholder, filed a lawsuit in the Chancery Court, assertedly
as a class action on behalf of other United Coasts stockholders against the
members of the United Coasts Board of Directors, and ACMAT Corporation
("ACMAT"), which controls a majority of the United Coasts common stock. The
lawsuit claimed that ACMAT's offer to exchange 1 share of ACMAT Class A Stock
for each 1.75 shares of outstanding United Coasts common stock (the "Exchange
Offer") was coercive and did not offer fair value for the publicly held United
Coasts common stock. After plaintiff filed the Class Action, the defendants
withdrew the Exchange Offer.
2. On July 7, 1993, defendants moved to dismiss the Class Action on the
basis that the allegations regarding the Exchange Offer were moot by virtue of
their withdrawal of the Exchange Offer, and that in any event, the Exchange
Offer was not actionably
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coercive. The Court denied defendants' motion, finding that the Complaint stated
potentially actionable claims for relief both as to the deregistration and
delisting of the stock and as to the potentially coercive nature of the Exchange
Offer. Hamilton v. Henry W. Nozko, Sr. et al., Del. Ch., C.A. No. 13014, Jacobs,
V.C. (July 26, 1994). After the Court denied defendants' motion, defendants
answered the Complaint and responded to plaintiff's discovery requests.
Plaintiff's counsel proceeded with discovery while simultaneously engaging in
extensive settlement negotiations with defendants. After nearly a year of
discovery and negotiations, the parties agreed to terms for the proposed
resolution of the claims alleged, which were embodied in a Memorandum of
Understanding signed in late December 1995.
3. Counsel for plaintiff have conducted a thorough investigation of the
facts, circumstances and transactions relating to and surrounding the
allegations set forth in the Complaint, including extensive consultations with a
financial expert, inspection of publicly-available documents, review of
thousands of pages of documents produced by defendants and the deposition of
defendant Henry W. Nozko, Jr.
4. Defendants have denied and continue to deny plaintiff's allegations
and have raised a number of defenses to the claims.
5. To avoid the substantial expense of litigation, defendants have
agreed for settlement purposes, to the terms of the proposed Settlement,
described below.
6. The proposed Settlement of the Class Action is now pending before
the Honorable Jack B. Jacobs, Vice Chancellor of the Chancery Court. If approved
by the Chancery Court, the Settlement will be binding upon a class, consisting
of all persons and entities who are or were record holders or beneficial owners
of United Coasts common stock at any time during the period from June 10, 1993
through the record date of closing of the
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Merger (other than defendants, members of their immediate families, ACSTAR, any
entity in which any defendant has, or during the Class period had, a controlling
interest, and all of their subsidiaries, affiliates, legal representatives,
heirs, successors or assigns) including the legal representatives, heirs,
predecessors and successors-in-interest, transferees or assigns of all such
foregoing holders, immediate or remote (the "Class").
SUMMARY OF THE PROPOSED SETTLEMENT
7. Defendants have agreed to approve and to take all steps necessary to
propose to United Coasts' stockholders for their approval a merger of United
Coasts with and into ACMAT pursuant to an Agreement and Plan of Liquidation and
Merger (the "Merger") on the following terms:
(a) Each share of UC common stock not owned by ACMAT or
ACSTAR will be converted into Class A common stock of
ACMAT ("ACMAT stock") at the ratio of one share of
ACMAT stock per each X UC shares ("the Exchange
Ratio"), where X is determined as follows (i) divide
the total number of UC shares held by Class members
as of the Merger effective date by 1.5; (ii) from
that quotient, subtract the number of UC shares the
Court allows plaintiff's counsel in response to their
fee and expense request as contemplated in paragraph
8; (iii) then divide the number of UC shares held by
Class members as of the Merger effective date by the
remainder obtained in step (ii). The quotient equals
X.
(b) All shares of UC common stock owned by ACSTAR will
be exchanged for shares of Coastal Insurance having
substantially
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equal aggregate fair market value; and each share of
UC common stock held by ACMAT will be cancelled.
(c) To the extent that the Exchange Ratio results in any
United Coasts shareholder becoming entitled to
receive fractional shares of ACMAT, such fractional
share interest will be converted into the right to
receive a sum of cash determined by the product of
the fraction and the average closing price of the
ACMAT stock during the last five (5) days the ACMAT
stock was traded on the NASDAQ National Market prior
to the effective date of the Merger (the "Merger
Date"). Cash for fractional shares will be paid
within thirty (30) days following the Merger Date;
(d) Defendants and their affiliates will refrain from
trading in ACMAT stock for twenty-one (21) trading
days prior to the Merger Date; and,
(e) The Merger will close as promptly as practicable
after final judicial approval of the Settlement and
all shareholder approvals are obtained.
(f) The Merger must be approved by a majority of the
United Coasts shares held by the Class that are voted
in connection with the Merger.
(g) Defendants will make usual and customary efforts to
solicit votes in favor of the Merger.
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(h) Defendants may withdraw from the Settlement if
holders of more than 416,797 United Coasts shares
submit valid and effective demands for appraisal.
DISMISSAL OF THE CLASS ACTION AND RELEASE OF CLAIMS
8. The Stipulation provides that, if the proposed Settlement is
approved by the Chancery Court, the Class Action will be dismissed on the merits
with prejudice as to all defendants and their affiliates and against plaintiff
and all other members of the Class without costs, except as provided in the
Stipulation, and the claims asserted in the Class Action shall be compromised,
settled, released and discharged. Thus, if the Chancery Court approves the
proposed Settlement, members of the Class will be forever barred from contesting
the fairness, reasonableness or adequacy of the proposed Settlement, or from
pursuing the claims asserted in the Class Action.
THE SETTLEMENT HEARING
9. All members of the Class may have an interest in the Class Action
and are hereby notified that a hearing will be held before the Chancery Court in
its courtroom in the Daniel L. Herrmann Courthouse, 1020 North King Street,
Wilmington, DE 19801, on ______________________, 1996 ________ ____at .m. (the
"Settlement Hearing"), to determine: (i) whether the proposed Settlement is
fair, reasonable, adequate and in the best interests of the Class, and should be
approved by the Chancery Court, (ii) whether an Order and Final Judgment, as
contemplated by the proposed Settlement, should be entered, dismissing the Class
Action as to all defendants and with prejudice against the named plaintiff and
all members of the Class, and (iii) whether, if the Chancery Court approves the
proposed Settlement and enters
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the Order and Final Judgment, the Chancery Court should approve the application
for plaintiff's attorneys' fees and expenses.
10. The Chancery Court has reserved the right to adjourn the Settlement
Hearing from time to time by oral announcement at such hearing or any
adjournment thereof, without further notice of any kind. The Chancery Court also
has reserved the right to approve the proposed Settlement with or without
modification, to enter an Order and Final Judgment dismissing the Class Action
on the merits and with prejudice, and to order the payment of attorneys' fees
and disbursements without further notice of any kind.
APPLICATION FOR ATTORNEYS' FEES AND EXPENSES
11. If the proposed Settlement is approved by the Chancery Court in all
respects, and the United Coasts shareholders approve the Merger, plaintiff's
attorneys in the Class Action will apply to the Chancery Court for an award of
attorneys' fees and expenses in the amount of 26,000 shares of ACMAT stock to be
deducted from shares otherwise distributable to the Class in connection with the
Merger. Any such award of attorneys' fees and expenses will reduce the amount of
shares available for distribution to members of the Class in connection with the
Merger. Defendants have reserved the right to object to the application for an
allowance of attorneys' fees and expenses.
12. If a majority of United Coasts shares held by persons other than
defendants and their affiliates which are voted in connection with the Merger
are not voted in favor of the Merger, plaintiff will dismiss the Class Action
without prejudice, except for a claim for an allowance of attorneys' fees and
expenses for inducing withdrawal of the Exchange Offer. Any such application
shall not exceed $75,000, and defendants may oppose any such application.
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RIGHT TO APPEAR
13. At the Settlement Hearing, any person who objects to the proposed
Settlement, the judgment to be entered in the Class Action or the award of
attorneys' fees and expenses, may appear in person or by his or her attorney at
the hearing and present any evidence or arguments that may be proper and
relevant; provided, however, that no person other than the named plaintiff and
defendants in the Class Action shall be heard and no papers, briefs, pleadings
or other documents submitted by any such person shall be received and considered
by the Chancery Court (unless the Chancery Court in its discretion shall
thereafter otherwise direct, upon application of such person and for good cause
shown), unless no later than ten (10) days prior to the Settlement Hearing such
person files with the Court and serves upon counsel listed below: (a) a written
notice of intention to appear, (b) a statement of such person's objections to
any matters before the Chancery Court, (c) proof of membership in the Class, and
(d) the reasons and grounds therefor that such person desires to appear and to
be heard, and all documents or writings that such person desires the Chancery
Court to consider:
Norman M. Monhait, Esquire Irving Malchman, Esquire
ROSENTHAL, MONHAIT, GROSS KAUFMAN, MALCHMAN, KIRBY
& GODDESS, P.A. & SQUIRE LLP
Suite 1401, Mellon Bank Center 919 Third Avenue
P.O. Box 1070 New York, NY 10022
Wilmington, DE 19899-1070
Counsel for Plaintiff
Thomas Reed Hunt, Jr., Esquire
MORRIS, NICHOLS, ARSHT & TUNNELL
1201 N. Market Street
P.O. Box 1347
Wilmington, DE 19899-1347
Counsel for Defendants
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14. Any person who fails to object in the manner described above will
be deemed to have waived such objection and will be forever barred from raising
such objection in this Class Action. Pending final determination of whether the
proposed Settlement should be approved, the Chancery Court has ordered that
plaintiff, all members of the Class, or any of them, either directly,
representatively or in any capacity upon the receipt of this Notice, may not
commence or prosecute any action asserting claims that are or relate to the
claims asserted in the Class Action.
SCOPE OF THIS NOTICE
15. The foregoing description of the transaction at issue, the Class
Action, the Settlement Hearing, the Class determination, the terms of the
proposed Settlement and other matters described herein, does not purport to be
comprehensive. For further information, members of the Class are referred to the
Stipulation of Settlement and other documents filed with the Chancery Court in
the Class Action, which you or your attorney may examine during regular business
hours of each business day at the office of the Register in Chancery, Daniel L.
Herrmann Courthouse, 1020 North King Street, Wilmington, DE 19801.
Dated: May ______, 1996
Wilmington, Delaware
________________________________
Register in Chancery
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Exhibit C
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- -----------------------------------------------------
DONALD E. HAMILTON,
Plaintiff,
v.
C.A. No. 13014
HENRY W. NOZKO, SR., HENRY W.
NOZKO, JR., JOHN C. CREASY,
and ACMAT CORPORATION,
Defendants.
- -----------------------------------------------------
ORDER AND FINAL JUDGMENT
AND NOW, this _____day of _______________, 1996, this class action (the
"Class Action") having come to be heard on ____________________________, 1996
pursuant to the Ordered entered herein on ______________________, 1996 (the
"Order") and upon the Stipulation of Settlement, dated ___________________, 1996
(the "Stipulation" or the "Settlement"); and the Court having determined that
notice of said hearing was given in accordance with the Order to members of the
Class as certified by the Court in the Order (the "Class"); and that said notice
was adequate and sufficient; and the parties having appeared by their attorneys
of record; and the attorneys for the respective parties having been heard in
support of the settlement of the Class Action; and an opportunity to be heard
having been given to all other persons desiring to be heard; and the entire
matter of the Settlement having been considered by the Court;
IT IS HEREBY ORDERED, ADJUDGED AND DECREED as follows:
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1. The Notice of Pendency of Class Action, Class Action Determination,
Proposed Settlement, Settlement Hearing and Right to Appear (the "Notice") has
been given to the members of the Class pursuant to and in the manner directed by
the Court's Order of ______________________________, 1996; proof of mailing of
said Notice was filed with the Court by counsel for ACMAT at or before the
hearing held before the Court on __________________________, 1996, and full
opportunity to be heard has been offered to all parties, Class members and
interested persons.
2. Pursuant to Court of Chancery Rules 23(a) and 23(b)(1) and (2):
(a) the Court finds that (i) the Class, as defined below, is so
numerous that joinder of all members is impracticable, (ii) there are questions
of law and fact common to the Class, (iii) the claims of the plaintiff are
typical of the claims of the Class, and (iv) the plaintiff has fairly and
adequately protected the interests of the Class;
(b) the action is hereby certified as a class action on behalf of
all persons and entities who were record holders or beneficial owners of United
Coasts common stock at any time during the period from June 10, 1993 through the
record date of closing of the Merger (as defined in the Stipulation) (other than
defendants, members of their immediate families, ACSTAR Insurance Company, any
entity in which any defendant has, or during the Class period had, a controlling
interest, and all of their subsidiaries, affiliates, legal representatives,
heirs, successors, or assigns) including the legal representatives, heirs,
predecessors and successors-in-interest, transferees or assigns of all such
foregoing holders, immediate or remote (the "Class");
(c) plaintiff is hereby certified as Class representative and his
counsel are certified as Class counsel; and
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(d) the Court finds that the requirements of Court of Chancery Rules
23(b)(1) and (2) have been satisfied.
3. The Settlement is found to be fair, reasonable, adequate and in the
best interests of plaintiff and other members of the Class, and is hereby
approved. The parties to the Stipulation are hereby authorized and directed to
comply with and consummate the Settlement in accordance with its terms and
provisions.
4. This Order and Final Judgment shall not constitute any evidence or
admission by any party herein that any acts of wrongdoing have been committed by
any of the parties to this Class Action and shall not be deemed to imply that
there is any liability therefor.
5. The Class Action is hereby dismissed with prejudice as to all
defendants and defendants' affiliates (as defined below) and against plaintiff
and all other members of the Class without costs, except as provided in the
Stipulation.
6. All claims, rights, demands, causes of action, suits, matters and
issues, known and unknown, arising under common law, or federal or state
statutory law, including all securities laws (except for claims for appraisal
pursuant to Section 262 of the Delaware General Corporation Law and the rights
conferred by the Settlement) that have been or could have been asserted in this
or any other court or forum by plaintiff or by any member of the Class (as
defined in paragraph 2(b) above), whether directly, indirectly,
representatively, derivatively, individually, or in any other capacity, against
any of the defendants named in the Action, and their respective predecessors and
successors, present or former officers, directors, stockholders, agents,
employees, attorneys, representatives, advisors, affiliates (including the
directors and officers of such affiliates, parents, and subsidiaries), heirs,
executors, personal representatives, estates, administrators, successors and
assigns of any of the defendants or of any affiliate, parent or subsidiary of
any defendant (collectively, the
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"Defendants' Affiliates"), in connection with, arising out of, or in any way
related to any of the acts, facts, transactions, occurrences, representations or
admissions set forth, alleged, embraced or otherwise referred to in the Action
by plaintiff or any member of the Class, or by any present or former common
stockholder of United Coasts, either directly, indirectly, individually,
derivatively, representatively or in any other capacity, except for claims
relating to any party's alleged failure to comply with the terms and conditions
of the Stipulation (the "Settled Claims"), shall be and hereby are finally and
forever compromised, settled, remised, released, discharged and dismissed with
prejudice.
7. Plaintiff's counsel, Rosenthal, Monhait, Gross & Goddess, P.A. and
Kaufman Malchman Kirby & Squire, LLP, are hereby awarded attorneys' fees and
expenses in the amount of _______________ shares of ACMAT stock to be deducted
from the shares otherwise distributable to the Class in connection with the
Merger. The shares are to be issued in accordance with the Stipulation.
8. Without effecting the finality of this Order and Final Judgment in
any way, the Chancery Court hereby reserves jurisdiction for the purpose of
taking any action that may be appropriate to give effect to or enforce this
Order and Final Judgment.
____________________________
Vice Chancellor
Dated: _________________, 1996.
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