UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
- - - - - - - - - - - - - - - - - - - - - - -x
PARK EAST INC. on behalf of itself :
and all others similarly situated, :
: Civil Action No:
Plaintiff, :
: CLASS ACTION COMPLAINT
- against - : 398CV00345 PCD
:
ECHLIN INC., LARRY W. MCCURDY, :
JOHN F. CREAMER, JR., MILTON P. :
DEVANE, DONALD C. JENSEN, :
TREVOR O. JONES, JEROME G. :
RIVARD, JOHN E. ECHLIN, JR., :
WILLIAM P. NUSBAUM and :
RICHARD E. DAUCH, : PLAINTIFF DEMANDS A
: TRIAL BY JURY
:
Defendants, :
- - - - - - - - - - - - - - - - - - - - - - -x
Plaintiff, by its attorneys, for its complaint against defendants,
alleges upon personal knowledge with respect to paragraph 9, and upon
information and belief based, inter alia, upon the investigation of counsel, as
to all other allegations herein, as follows:
NATURE OF THE ACTION
1. Plaintiff brings this action as a class action on behalf of itself
and all other stockholders of Echlin Inc. ("Echlin" or the "Company") against
the directors and/or senior officers of Echlin to enjoin certain actions of the
Company and the Director Defendants (as defined herein) which are intended to
thwart any takeover of the Company, as more fully described below.
2. In particular, Echlin's shareholders are currently being deprived of
the opportunity to realize the full benefits of their investment in Echlin.
Among other things, the director defendants have failed to adequately consider
and embrace a premium offer to acquire control of Echlin by SPX Corp. ("SPX").
The director defendants are utilizing their fiduciary positions of control over
Echlin to thwart SPX and others in their legitimate attempts to acquire the
Company.
3. In addition, defendants, in anticipation of such unsolicited bids,
have implemented or are using several antitakeover devices, including, but not
limited to, a "poison pill." Unless defendants are prevented from using these
defensive devices improperly, SPX and other potential suitors will effectively
be prevented from consummating any legitimate offers for Echlin. Also, certain
Connecticut statutes, which are discussed in detail below, will similarly thwart
any legitimate SPX offer or other offers from any potential acquiror, unless
Echlin takes affirmative steps to disarm the impact of these statutes. The
statutes, therefore, violate the Commerce Clause, the Supremacy Clause and the
Due Process Clause of the United States Constitution.
4. Such action and inaction represent an effort by the Director
Defendants to entrench themselves in office so that they may continue to receive
the substantial salaries, compensation and other benefits and perquisites of
their offices.
5. The Director Defendants are abusing their fiduciary positions of
control over Echlin to thwart legitimate attempts at acquiring the Company and
are seeking to entrench themselves in the management of the Company. The actions
of the Director Defendants constitute a breach of their fiduciary duties to
maximize shareholder value, to not consider their own interests over those of
the Company, and to respond reasonably and on an informed basis to bona fide
offers for the Company.
JURISDICTION AND VENUE
6. This action is brought pursuant to the Supremacy Clause (art.
VI, cl. 2), the Commerce Clause (art. I,section 8, cl. 3) and the Due
Process Clause (amends. V and XIV) of the United States Constitution;
principles of common law; and the federal Declaratory Judgments Act, 28
U.S.C.section 2201. Pursuant to Rule 24(c) of the Federal Rules of Civil
Procedure, plaintiff calls the attention of the Court to 28 U.S.C.section
2403, pursuant to which the Court shall notify the state attorney general
of any action in which the constitutionality of any statute of a state is
drawn into question.
7. The Court has jurisdiction of the subject matter of this action
pursuant to 28 U.S.C. sections 1331 and 1367(a).
8. Venue is proper in this district pursuant to 28 U.S.C. sections
1391(a)-(c).
THE PARTIES
9. Plaintiff Park East Inc. is and has been, at all time relevant to
this action, the owner of Echlin common stock.
10. Defendant Echlin is a Connecticut corporation with its principal
executive offices located at 100 Double Beach Road, Branford, Connecticut 06405.
Echlin is a worldwide manufacturer of a range of motor vehicle parts. The
Company manufactures and distributes motor vehicle brake, engine, power
transmission, steering and suspension system parts.
11. Defendants Larry W. McCurdy ("McCurdy"), John F. Creamer, Jr.,
Milton P. Devane, Donald C. Jensen, Trevor O. Jones, Jerome G. Rivard, John E.
Echlin, Jr., William P. Nusbaum and Richard E. Dauch. In addition, defendant
McCurdy is the Chairman, President and Chief Executive Officer of the Company
and defendant Jones is Vice Chairman of the Company.
12. By virtue of their positions as directors and/or officers of Echlin
and their exercise of control over the business and corporate affairs of Echlin,
the Echlin officers and directors named as defendants herein (the "Director
Defendants") have and at all relevant times had the power to control and
influence, and did control and influence and cause Echlin to engage in the
practices complained of herein. Each individual Defendant owed and owes Echlin
and its public stockholders fiduciary obligations and were and are required to:
(i) use their ability to control and manage Echlin in a fair, just and equitable
manner, (ii) act in furtherance of the best interests of Echlin and its
stockholders; (iii) act to maximize shareholder value; (iv) refrain from abusing
their positions of control; and (v) not favor their own interests at the expense
of Echlin and its stockholders. By reason of their fiduciary relationships,
these defendants owed and owe plaintiff and other members of the Class (as
herein defined) the highest obligations of good faith, fair dealing, loyalty,
complete candor and due care.
13. By virtue of the acts and conduct alleged herein, the Director
Defendants, who control the actions of Echlin, are breaching their fiduciary
duties to the public shareholders of Echlin.
14. Each defendant herein is sued individually as a conspirator and/or
aider and abettor, or, as appropriate, in his capacity as a director of the
Company, and the liability of each arises from the fact that he or it has
engaged in all or part of the unlawful acts, plans, schemes or transactions
complained of herein.
CLASS ACTION ALLEGATIONS
15. Plaintiff brings this action pursuant to Rule 23 of the Federal
Rules of Civil Procedure on their own behalf and as a class action on behalf of
all shareholders of Echlin (except defendants herein and any person, firm,
trust, corporation or other entity related to, controlled by or affiliated with
any of the defendants) and their successors in interest (the "Class").
16. This action is properly maintainable as a class action for the
following reasons:
(a) The Class of shareholders for whose benefit this action is
brought is so numerous that joinder of all Class members is impracticable. As of
December 31, 1997, Echlin reported that it had over 63.1 million shares of
common stock outstanding, owned by thousands of shareholders of record and
beneficial owners who are scattered throughout the United States.
(b) There are questions of law and fact common to members of the
Class which predominate over any questions affecting only individual members.
The common questions include, inter alia:
(i) whether the anti-takeover protections of Connecticut Gen.
Stat. sections 33-841, 33-842 and 33-844 are unconstitutional on their face or
applied;
(ii) whether the Director Defendants are unlawfully
impeding a potential acquisition of Echlin to the detriment of the shareholders
of the Company, and have breached their fiduciary and other common law duties
owed by them to plaintiff and other members of the Class by failing and refusing
to attempt in good faith to maximize shareholder value by adopting strategies,
policies and plans designed to thwart officers for Echlin and entrench
defendants in their positions of control and failing to act with complete
candor;
(iii) whether the Director Defendants have engaged and are
continuing to engage in an unlawful plan or scheme to perpetuate their control
over and enjoyment of the perquisites of office at the expense of Echlin's
public shareholders;
(iv) whether defendants have breached and/or aided and
abetted the breach of fiduciary duties and other common law duties owed by them
to plaintiff and other members of the Class; and
(v) whether plaintiff and other members of the Class
are being and will continue to be irreparably injured by the wrongful conduct
alleged herein and, if so, what is the proper remedy and/or measure of damages.
(c) The claims of plaintiff are typical of the claims of other members
of the Class and plaintiff has no interests that are adverse or antagonistic to
the interests of the Class.
(d) Plaintiff is committed to the vigorous prosecution of this action
and has retained competent counsel experienced in litigation of this nature.
Accordingly, plaintiff is an adequate representative of the Class and will
fairly and adequately protect the interests of the Class.
(e) Plaintiff anticipates that there will not be any difficulty in the
management of this litigation as a class action.
17. For the reasons stated herein, a class action is superior to other
available methods for the fair and efficient adjudication of this action and the
claims asserted herein. Because of the size of the individual Class members'
claims, few, if any, Class members could afford to seek legal redress
individually for the wrongs complained of herein. Absent a class action, the
Class members will continue to suffer damage and defendants' violations of law
will proceed without remedy. Defendants are acting in a manner which affects all
shareholders in the same or similar fashion and would be subjected to
potentially differing legal requirements or standards of conduct if this
litigation were not certified to proceed as a class action on behalf of all
Echlin shareholders.
SUBSTANTIVE ALLEGATIONS
A. The Companies
18. Echlin is a worldwide manufacturer of a range of motor vehicle
parts. The Company manufactures and distributes motor vehicle brake, engine,
power transmission, steering and suspension system parts.
19. SPX is a Delaware corporation with its principal place of business
located at 700 Terrace Point drive, Muskegon, Michigan. SPX is a global provider
of vehicle service solutions to franchised dealers of motor vehicle
manufacturers and independent service locations, service support to vehicle
manufacturers and vehicle components to the worldwide motor vehicle industry.
B. Echlin Ignores And Rebuffs SPX's Overtures
20. On or about February 1997, John S. Blystone ("Blystone"), Chairman
and Chief Executive Officer of SPX, met with defendant Jones -- who at the time
was the Chairman and interim President and Chief Executive officer of the
Company -- to explore the possibility of a business combination of the two
companies. Despite the potential benefits to the Company of further discussing
such a possibility or, at the very least, maintaining a dialogue with SPX,
defendant Jones made no effort to follow-up on this initial contact.
21. In the face of the Director Defendants' apathy towards discussing
and considering a potential transaction between the companies, SPX continued to
aggressively pursue discussions in an apparent effort to engage the Director
Defendants in a meaningful dialogue. For example, in or about November 1997,
Blystone met with defendant McCurdy -- who had succeeded Jones as President and
CEO -- to discuss a strategic merger between the two companies. Then, on
November 24, 1997, Patrick J. O'Leary, SPX's Vice President-Finance and Chief
Financial Officer, met with Robert Tobey, Echlin's Vice President-Corporate
Development. Following these meetings, SPX was informed that Echlin had no
interest in pursuing a transaction.
22. Unable to dislodge the Director Defendants from their unwillingness
to seriously consider and evaluate a proposed transaction between the companies,
on December 12, 1997, Blystone sent a letter to defendant McCurdy which
described the strategic rationale of a business combination between the two
companies and the benefits to Echlin's shareholders of a transaction. In that
letter, Blystone also indicated that a potential offer would be in the $40ish
range and that SPX was willing to revise its thinking on price if Echlin would
be share information identifying more value in the transaction. In effect,
Blystone was communicating a willingness to raise SPX's officer price if Echlin
would engage in a meaningful exchange of business information with SPX beyond
what was publicly available -- the Director Defendants never took any steps in
this regard, thereby disregarding the possibility that they could have
negotiated a significantly increased premium to the market price. Finally,
Blystone asked McCurdy to share the letter with Echlin's Board of Directors.
23. On December 17, 1997, Blystone received a letter from McCurdy that
indicated that McCurdy had purportedly shared the letter with Echlin's Board.
The Board was purportedly not interested in pursuing further discussions with
SPX.
24. On December 18, 1997, Blystone sent a letter to each member of
Echlin's Board enclosing a copy of his December 12th letter and reiterating the
benefits of a strategic merger of the companies. McCurdy responded by letter on
December 23, 1997, and advised that the Echlin Board was of the "unanimous" view
that the Company did not have an interest in the transaction.
25. With its efforts to negotiate with Echlin frustrated by the
Director Defendants' stonewalling, SPX took steps to take its offer directly to
Echlin's shareholders. On January 6, 1998, SPX notified Echlin that it was that
day filing a Premerger Notification and Report Form under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 seeking to acquire up to 100% of the voting
securities of the Company.
26. Two days later, McCurdy wrote to Blystone, acknowledging the filing
and indicating that Echlin was prepared to utilize its takeover defenses to
thwart SPX's interest.
27. On February 17, 1998, SPX sent a letter to Echlin's Board setting
forth the proposed business combination and its merits and reaffirming its
desire to negotiate a transaction with the Director Defendants. That same day,
SPX also made a demand on Echlin that a special meeting of shareholders be
called and held and, by separate letter, requested access to the Company's
shareholder list for the purpose of communicating directly with the Company's
shareholders.
C. SPX Announces Offer To Buy Echlin For A Substantial Premium To
the Prevailing Market Price
28. On February 17, 1998, SPX issued a press release announcing that it
had made an offer to acquire Echlin for cash and SPX shares valued at $48 per
Echlin share, for a total value of $3 billion. According to the press release,
the offer consists of $12.00 cash and 0.4796 SPX share per Echlin share which,
in aggregate, represents a 32% premium over the 30-day average trading price of
Echlin.
29. SPX further announced that it had received antitrust approval for
the transaction on February 5, 1998, and that it had filed a registration
statement with the Securities and Exchange Commission and will start an exchange
offer for all outstanding Echlin shares as soon as its registration statement is
cleared.
30. SPX also described Echlin's takeover defenses and its plans to
mount a proxy contest to challenge those defenses:
Echlin has a poison pill, which purports to prevent the acquisition of
more than 20% of Echlin shares without approval of Echlin's Board.
Accordingly, SPX is filing preliminary materials today with the SE to
solicit shareholder demands to call a special meeting to replace
Echlin's entire Board with SPX's nominees. The SPC nominees, if
elected, will take all action needed to facilitate consummation of
SPX's offer, subject to their fiduciary duties as Echlin directors.
Echlin is incorporated in Connecticut and, under that state's law, must
give notice of a special meeting within 30 days of receiving demands by
holders of 35% of its outstanding shares, and must hold the meeting
within 60 days of giving notice. Because Echlin does not have a
staggered board, the existing Board would be removed if more
shareholders vote at the meeting in favor of removal than vote against
removal; new directors would be elected by a plurality vote.
31. SPX also revealed that it was going to solicit demands from the
Echlin shareholders that a special meeting (the "Special Meeting") be called and
held for the purpose of removing Echlin's Board of Directors. Under Connecticut
law, Echlin is required to call a Special Meeting if 35% of the shareholders
make such a demand on the Company.
D. Echlin's Poison Pill And Other Defensive Measures
32. Echlin has at its disposal various anti-takeover devices and
other defensive measures -- including a Shareholder Rights Plan (i.e., a
Poison Pill), various corporate by-laws structured to entrench management
and the provisions of Connecticut Gen. Stat., Business Corporations,
Business Combinations, sections 33- 841, 33-842 and 33-844, which the
Director Defendants, in the pursuit of their entrenchment scheme, can and
will utilize to block the Offer and fend off any threats to their control.
1. The Poison Pill
33. Echlin has a number of anti-takeover provisions in place, such as
its shareholders' "rights plan," better known as a "poison pill." In the event
that a third-party (like SPX) acquires 20% or more of Echlin's shares, the
"poison pill" enables all Echlin shareholders other than that third-party to
purchase Echlin preferred shares at a substantial discount from market value.
34. The Poison Pill has the effect of making it extraordinarily
difficult, expensive and/or impossible for any potential acquiror not approved
by management to acquire Echlin. As a result, the Poison Pill has the effect of
precluding successful completion of even the most attractive offer for Echlin
unless the Board acquiesces or approves, thus denying the Company's shareholders
an opportunity to make their own choice.
35. By adopting the Poison Pill, the Company's directors caused a
fundamental shift of power from Echlin shareholders to themselves. The Poison
Pill thus permits the Director Defendants to act as the prime negotiators of --
and, in effect, totally to preclude -- any and all acquisition offers through
their power to redeem or to refuse to redeem the Rights.
36. This fundamental shift of control of the Company's destiny from its
public shareholders to Echlin's Board of Directors results in a heightened
fiduciary duty on the part of the Board to consider, in good faith, a
third-party bid, and further requires the directors to pursue a third-party's
bona fide interest in acquiring the Company and to negotiate in good faith with
a bidder on behalf of the Company's shareholders.
2. The Connecticut Business Combination Statutes
37. The Company and the Director Defendants also have at their
disposal the anti-takeover protections of Connecticut Gen. Stat., Business
Corporations, Business Combinations, sections 33-841, 33-842 and 33-844.
38. Under sections 33-841 and 33-842 of Connecticut Gen. Stat.,
Business Corporations, Business Combinations, any business combination with an
"Interested Shareholder" (i.e. an owner of 10% or more of the shares) that was
not approved by the Board of Directors prior to the 10% Acquisition must be
approved by the Board of Directors, plus 80% of the voting power of the
outstanding shares of voting stock of the corporation plus two-thirds of the
voting power not controlled by the Interested Shareholder or meet certain
stringent conditions regarding minimum price and type of consideration.
39. Under section 33-844 of Connecticut Gen. Stat., Business
Corporations, Business Combinations (together with sections 33-841 and 33-842,
the "Connecticut Anti-Takeover Statutes"), an Interested Shareholder (like SPX)
cannot engage in a business combination with a Connecticut corporation for five
years following the date upon which the Interested Shareholder became such
unless the acquisition of the shares or the business combination is approved by
the Connecticut Corporation's Board in advance and by the majority of the
non-employee directors on the Board before the date of the 10% acquisition.
40. The combined effect of the Connecticut Anti-Takeover Statutes is to
frustrate and impede the ability of Echlin shareholders to decide for themselves
whether they wish to receive the benefits of any unsolicited offer, including
the SPX tender offer and proposed second-step merger. These devices unreasonably
and inequitably frustrate and impede the ability of the shareholders to maximize
the value of their Echlin holdings. The failure of Echlin and its Board to adopt
a by-law opting out of the Connecticut Anti-Takeover Statute, to adopt a
resolution approving the SPX tender offer and any other unsolicited bid, or
alternatively, to employ such defenses in a fair and non-coercive manner, are or
will breach, or threaten to breach the Director Defendant's fiduciary duties to
stockholders and thus are a violation of Connecticut law. In addition, the
effect of the Connecticut Anti-Takeover Statutes generally, and specifically as
applied here, is to unconstitutionally interfere with interstate commerce and
the Class members due process rights, particularly in light of SPX's announced
and imminent takeover efforts.
Declaratory and Injunctive Relief
41. The Court may grant the declaratory and injunctive relief sought
herein pursuant to 28 U.S.C.section 2201 and Fed. R. Civ. paragraph 57 and 65. A
substantial controversy presently exists, as demonstrated by: (a) Echlin's
rebuff of SPX's overtures of February 1997 for the acquisition of Echlin, (b)
Echlin's unwillingness even to seriously consider or discuss a combination or
merge with SPX or any other possible acquiror and (c) Echlin's failure to redeem
or amend the Poison Pill, and/or retract any of its other takeover defenses
including those in Echlin's by-laws and those unconstitutionally and
impermissibly afforded by the Connecticut Anti-Takeover Statutes or to use those
defenses in a proper way. The shareholders' interests in maximizing the value of
their Echlin holdings is adverse to "the interests of the Director Defendants in
their desire to retain their positions on the Echlin Board. The existence of
this controversy is causing confusion and uncertainty in the market tor public
securities because investors do not know whether they will be able to avail
themselves of an advantageous financial offer. The granting of the requested
declaratory and injunctive relief will serve the public interest by affording
relief from such uncertainty and by avoiding delay.
COUNT I
For Injunctive and Declaratory Relief --
Unconstitutionality of the Connecticut Business Statute
42. Plaintiff repeats and realleges each allegation set forth herein.
43. This claim arises under the Commerce, Supremacy and Due Process
Clauses of the United States Constitution.
44. SPX's offer constitutes a substantial securities transaction in
interstate commerce, employing interstate instrumentalities and facilities in
the communication of the Offer, and in transactions for the purchase and sale of
Echlin's securities occurring across state lines.
45. The Connecticut Anti-Takeover Statutes violate the Commerce Clause
because they impose direct, substantial and adverse burdens on interstate
commerce that are excessive in relation to the local interests purportedly
served by the statutes. Among other things, the Statutes make it more difficult
to accomplish transactions which Echlin shareholders may otherwise deem to be in
their best interests, because the Statutes vest the boards of Connecticut
companies with ultimate power to thwart potential business combinations.
46. The Connecticut Anti-Takeover Statutes are unconstitutional and
null and void on their face under the Commerce Clause. In addition, the
Connecticut Anti-Takeover Statutes are unconstitutional and null and void under
the Commerce Clause in their application under the circumstances of this case.
Echlin shareholders may be effectively prevented from accepting the SPX offer or
any other offer to the extent the Board of Echlin exercises its rights under the
Connecticut Anti-Takeover Statutes in furtherance of its course of entrenchment.
Accordingly, the undue burden on interstate commerce that is created by these
statutes has a direct and substantial impact in this case.
47. The Connecticut Anti-Takeover Statutes also violate the Supremacy
Clause of the United States Constitution. SPX's offer is subject to, among other
things, the federal laws and regulations governing tender offers, including the
Williams Act amendments to the Securities Exchange Act, 15 U.S.C. sections 78m
and 78n, and the rules and regulations promulgated thereunder. The Williams Act
is intended to establish even-handed regulation of tender offers which favors
neither the offeror nor incumbent management of the target but leaves the
decision concerning the merits of the offer to the target's stockholders.
48. By establishing policies, standards and procedures that conflict
with and are obstacles to the policies implemented by Congress by means of the
Williams Act and the rules and regulations promulgated thereunder, the
Connecticut Business Combination Statutes are invalid and unconstitutional as
applied to the SPX's offer under the Supremacy Clause of the United States
Constitution, art. VI, cl. 2, which accords supremacy to federal law over
conflicting state law, and violate and are preempted by Section 28(a) of the
Securities Exchange Act of 1934, (the "Exchange Act") 15 U.S.C.section 78bb,
which prohibits and preempts state regulation that conflicts with the provisions
of the Exchange Act and the rules and regulations thereunder.
49. The Connecticut Anti-Takeover Statutes also violate the Due Process
Clause of the United States Constitution. The Statutes prevent plaintiff and the
other members of the Class from maximizing the value of their Echlin holdings
due to the Director Defendant's entrenching efforts. Thus, those persons, acting
under color of state law, are diminishing the property interest of all class
members. The class members are thus being deprived of fundamental freedoms and
property interests guaranteed by the Due Process Clause of the United States
Constitution.
50. Plaintiff seeks declaratory relief with respect to the
unconstitutionality of the Connecticut Anti-Takeover Statutes, pursuant to the
Federal Declaratory Judgments Act, 28 U.S.C.section 2201, and injunctive relief
against the application and enforcement of these unconstitutional Statutes.
Plaintiff and the Class members are or will be irreparably and imminently
injured by the wrongs alleged herein.
51. Plaintiff and the class have no adequate remedy at law.
COUNT II
Against All Defendants
For Breach Of Fiduciary Duties
52. Plaintiff repeats and realleges each of the foregoing allegations
as if fully set forth in this paragraph.
53. The Company and Director Defendants have taken no affirmative steps
to facilitate SPX's premium offer. To act consistent with their fiduciary
duties, the Director Defendants should evaluate all available alternatives,
including further negotiating with SPX, which they have failed to do.
54. The Director Defendants owe fundamental fiduciary obligations under
the present circumstances to take all necessary and appropriate steps to
maximize shareholder value and explore in good faith the SPX proposal. In
addition, the Director Defendants have the responsibility to act independently
so that the interests of Echlin's public stockholders will be protected, to
seriously consider all bona fide offers for the Company, and to conduct fair and
active bidding procedures or other mechanisms for checking the marker to assure
that the highest possible price is achieved. Further, the directors of the
Company must adequately ensure that no conflict of interest exists between
defendants' own interests and their fiduciary obligations to maximize
stockholder value and act in the shareholders' best interests or, if such
conflicts exist, to ensure that they will be resolved in the best interests of
the Company's public stockholders.
55. Echlin represents a highly attractive acquisition candidate.
Defendants' conduct has deprived and will continue to deprive the Company's
public shareholders of the very substantial control premium which SPX is
prepared to pay or of the enhanced premium which further exposure of the Company
to the market could provide. Defendants are precluding the shareholders'
enjoyment of the full economic value of their investment by failing to proceed
expeditiously and in good faith to evaluate and pursue a premium acquisition
proposal which would provide for an acquisition for all shares at a very
attractive price.
56. Echlin's Board and its top management have frustrated SPX's current
acquisition overtures and offers, even though these proposals would result in
Echlin's shareholders receiving a substantial premium over the then market-price
of Echlin stock. The Director Defendants have done this because they know that
in the event Echlin were acquired by any potential bidders, most or all of the
directors of Echlin and its senior management would, either in connection with
the acquisition or shortly thereafter, be removed from the Board of the
surviving company because their services would not be necessary and they would
be mere surplusage and thus an acquisition would bring an end to their power,
prestige and profit. In so acting, Echlin's directors and those in management
allied with them have been aggrandizing their own personal positions and
interests over those of Echlin and its broader shareholder community to whom
they owe fundamental fiduciary duties not to entrench themselves in office.
57. The Poison Pill and Echlin's other anti-takeover defenses are
wrongfully being used in a discriminatory manner to preclude SPX's premium
acquisition proposal or any other competing bid. Given the premium and
non-coercive nature of SPX's offer, and its substantial value to Echlin's
stockholders, the Director Defendants should not be permitted to deny the
Company's stockholders this opportunity. Defendants' use of Echlin's poison pill
or other anti-takeover devices to block SPX's offer constitutes an unreasonable
and draconian response thereto in violation of the fiduciary duties owed to
Echlin's stockholders.
58. By virtue of the acts and conduct alleged herein, the Director
Defendants, who control the actions of the Company, have carried out a
preconceived plan and scheme to place their own personal interests ahead of the
interests of the shareholders of Echlin and thereby entrench themselves in their
offices, and positions within the Company. The Director Defendants have violated
their fiduciary duties owed to plaintiff and the Class in that they have not and
are not exercising independent business judgment and have acted and are acting
to the detriment of the Company's public shareholders for their own personal
benefit.
59. Plaintiff seeks preliminary and permanent injunctive relief and
declaratory relief preventing defendants from inequitably and unlawfully
depriving plaintiff and the Class of their rights to realize a full and fair
value for their stock at a substantial premium over the market price and to
compel defendants to carry out their fiduciary duties to maximize shareholder
value in selling Echlin.
60. Only through the exercise of this Court's equitable powers can
plaintiff be fully protected from the immediate and irreparable injury which
defendants' actions are inflicting or threaten to inflict.
61. Unless enjoined by the Court, defendants will continue to breach
their fiduciary duties owed to plaintiff and other members of the Class, and/or
aid and abet and participate in such breaches of duty, will continue to entrench
themselves in office, and will prevent the sale of Echlin at a substantial
premium, all to the irreparable harm of plaintiff and the other members of the
Class.
62. Plaintiff and the Class have no adequate remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
A. Declaring this to be a proper class action and certifying plaintiff
as class representative;
B. Declaring that the Connecticut Anti-Takeover Statutes, either
generally or as applied here, are unconstitutional;
C. Ordering the Director Defendants to carry out their fiduciary duties
to plaintiff and other members of the Class by announcing their intention to:
(i) cooperate fully with any entity or person, including, but
not limited to, SPX, having a bona fide interest in proposing any transaction
which would maximize shareholder value, including, but not limited to, a buy-out
or takeover of the Company;
(ii) immediately undertake an appropriate evaluation of
Echlin's worth as a merger or acquisition candidate;
(iii) make all appropriate steps to effectively expose Echlin
to the marketplace in an effort to create an active auction of the Company;
(iv) act independently so that the interests of the Company's
public shareholders will be protected; and
(v) adequately ensure that no conflicts of interest exist
between the Director Defendants' own interest and their fiduciary obligation to
maximize shareholder value or, in the event such conflicts exist, to ensure that
all conflicts of interest are resolved in the best interests of the public
shareholders of Echlin.
D. Declaring that the Director Defendants have violated their fiduciary
duties to the Class;
E. Enjoining defendants from abusing the corporate machinery of the
Company for the purpose of entrenching themselves in office or to unduly impede
the Offer, including, without limitation, any by-law amendments that impair the
Company's stockholders' existing rights to amend the by-laws and/or to call a
special stockholders' meeting;
F. Ordering the Director Defendants to take steps to facilitate a
premium acquisition by utilizing the Company's antitakeover defenses, including
the Rights Plan and the Connecticut Anti-Takeover Statutes (if they are not
stricken) exclusively in a manner designed to maximize shareholder value;
G. Ordering the Director Defendants, jointly and severally, to account
to plaintiff and the Class for all damages suffered and to be suffered by them
as a result of the acts and transactions alleged herein;
H. Awarding plaintiff the costs and disbursements of this action,
including a reasonable allowance for plaintiff's attorneys' and experts' fees;
and
I. Granting such other and further relief as may be just and proper.
JURY DEMAND
Plaintiff demands a trial by jury of all issues so triable.
DATED: February 19, 1998
HARRIS BEACH & WILCOX
By: /s/ J. Daniel Sagarin
------------------------------
J. Daniel Sagarin
Federal Bar No. CT04289
Elias A. Alexiades
Federal Bar No. CT03543
147 N. Broad Street
P.C. Box 112
Milford, Connecticut 06460
(203) 877-8000
MILBERG WEISS BERSHAD
HYNES & LERACH LLP
David J. Bershad
Steven O. Schulman
Samuel H. Rudman
One Pennsylvania Plaza
New York, NY 10119
(212) 594-5300
Harold E. Soicher, Esq.
600 Old Country Road
Garden City, NY 11530
(516) 228-9514