EXHIBIT 99.4
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
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: C.A. No. 15728-NC
MICHAEL J. GOLDE I/R/A, on behalf of :
itself and all others similarly situated, :
:
Plaintiff, : CLASS ACTION
: COMPLAINT
-against- :
:
FAULDING INC., EDWARD D. TWEDDELL, :
ALAN G. MCGREGOR, RICHARD F. MOLDIN :
DAVID BERETTA and BRUCE C. TULLY :
:
Defendants. :
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Plaintiff, by its attorneys, alleges upon information and belief,
except as to paragraph 1 which plaintiff alleges upon knowledge, as follows:
1. Plaintiff Michael J. Golde I/R/A/ is and was, at all times relevant
to this action, a stockholder of defendant Faulding Inc. ("Faulding" or the
"Company").
2. Defendant Faulding is a corporation duly organized and existing
under the laws of the state of Delaware, with its principal offices located at
20 Elmora Avenue, Elizabeth, New Jersey 07207. There are currently over 15
million shares of Faulding common stock outstanding. Faulding is a holding
company with subsidiaries which develop and manufacture generic oral drug
products and generic injectable pharmaceutical products. The Company also
designs, develops and commercializes disposable medical devices and injectable
drug delivery system devices. Approximately 62% of the 15 million
outstanding shares of Faulding are held by F.H. Faulding & Co. ("FHFC"), a
healthcare products company based in Australia.
3. Defendant Edward D. Tweddell ("Tweddell"), at all times relevant
hereto, held the position of Chairman of the Board of Faulding.
4. Defendant Richard F. Moldin ("Moldin"), at all times relevant
hereto, held the positions of President, Chief Executive Officer and Chief
Operating Officer of Faulding.
5. Defendants Alan G. McGregor, David Beretta and Bruce C. Tully are
and were together with Tweddell and Moldin, at all times relevant hereto,
members of the boards of directors of Faulding. They are sometimes referred to
herein as the "Individual Defendants".
6. The Individual Defendants as officers and directors of Faulding have
a fiduciary relationship and responsibility to plaintiff and the other common
public stockholders of Faulding and owe to plaintiff and the other class members
the highest obligations of good faith, loyalty, fair dealing, due care and
candor.
CLASS ACTION ALLEGATIONS
7. Plaintiff brings this action pursuant to Rule 23 of the Rules of the
Court of Chancery on behalf of himself and all other stockholders of the Company
(except defendants and any person, firm, trust, corporation, or other entity
related to or affiliated with any defendant), who are or will be adversely
affected by the conduct of the defendants as more fully described herein (the
"Class").
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8. This action is properly maintainable as a class action for the
following reasons:
(a) This Class action is so numerous that joinder of all
members is impracticable. As of February 6, 1997, Faulding had approximately 15
million shares of common stock outstanding;
(b) The members of the Class are scattered throughout the
United States and are so numerous as to make it impracticable to bring them all
before this Court;
(c) There are questions of law and fact which are common to
the Class including, inter alia, the following:
i. whether defendants are breaching their fiduciary
duties owed by them to plaintiff and members of the class and/or have aided and
abetted in such breach, by virtue of their participation and/or acquiescence and
by their other conduct complained of herein;
ii. whether defendants are breaching their fiduciary
obligations to plaintiff and members of the class by failing and refusing to
attempt in good faith to maximize stockholder value;
iii. whether defendants have wrongfully failed and
refused to seek a purchaser of Faulding and/or any and all of its various assets
or divisions at the best price obtainable; and
iv. whether plaintiff and the other members of the
Class will be irreparably damaged by defendants' wrongful conduct alleged herein
and if so, what is the proper remedy and/or measure of damages.
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(d) The claims of plaintiff are typical of the claims
of the Class in that all members of the Class will be damaged by defendants'
actions.
(e) Plaintiff is committed to prosecuting this action
and has retained competent counsel experienced in litigation of this nature.
Plaintiff is an adequate representative of the Class.
(f) The prosecution of separate actions by individual
members of the Class would create a risk of inconsistent or varying
adjudications with respect to individual members of the Class.
(g) Defendants have acted or refused to act on
grounds generally applicable to the Class, thereby making appropriate injunctive
relief and/or corresponding declaratory relief with respect to the Class as a
whole.
CLAIM FOR RELIEF
9. On June 3, 1997, it was reported over the Dow Jones News Wire that
Faulding had received a cash merger proposal from FHFC to acquire all Faulding
common shares it did not already own for $12 a share. As reported, FHFC expects
to fund the merger through a rights issue.
10. As reported by the Reuter Asia-Pacific Business Report on June 4,
1997, defendant Tweddell, the Chairman of the Board of Faulding and FHFC
managing director, commented that while forming a committee to consider the
proposal, "[W]e believe the offer is fair to both the F.H. Faulding shareholders
and the Faulding Inc. minorities." Tweddell also commented that he expected to
finalize the $70 million mop-up" of Faulding by late September.
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11. As set forth above, FHFC already owns 62% of the outstanding common
stock of Faulding and would own approximately 73% of Faulding's common shares on
a fully diluted basis if convertible preferred share conversion were factored
in. The loyalties of the Individual Defendants, all of whom are directors of
Faulding are, at best, divided in the transaction proposed by Faulding's
controlling stockholder. The Individual Defendants are beholden to FHFC, the
majority owner and controlling stockholder of Faulding, and can not be expected
to act in the best interest of Faulding's minority stockholders.
12. The purpose of the proposed merger transaction is to enable FHFC to
acquire the remaining shares of Faulding it does not already own and to acquire
Faulding's valuable assets for FHFC's own benefit at the expense of Faulding's
public stockholders.
13. The proposed acquisition comes at a time when Faulding has
performed well and FHFC expects it will continue to perform well because it is
already poised to do so. FHFC has timed this transaction to capture Faulding's
positive performance and use it to their own ends, without paying an adequate or
fair price for Faulding's remaining shares.
14. On April 30, 1997, Faulding announced net income for the third
quarter ended March 31, 1997 of $.05 per share as compared with a loss of $.18
in the same quarter of 1996. Analysts expect Faulding to earn $.14 per share in
the current quarter ending June 30, 1997. In the month prior to the announcement
of the proposed transaction, Faulding's stock has traded in the $10.00 to $12.00
per share range and in
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mid-May was trading at over $12.00 per share. Thus the proposed transaction, at
$12 per share, represents a meager, if any, premium over Faulding's current
trading price.
15. Defendants and FHFC are in a position of control and power over the
Faulding minority stockholders and have access to internal financial information
about Faulding, its true value, expected increase in true value and the benefits
to FHFC of 100% ownership of Faulding to which plaintiff and the Class members
are not privy. Defendants would be using their positions of power and control to
benefit FHFC in this transaction, to the detriment of the Faulding common
stockholders.
16. The individual Defendants have clear and material conflicts of
interest and are acting to better the interests of FHFC at the expense of
Faulding's public stockholders.
17. Defendants have breached their fiduciary and other common law
duties owed to plaintiff and other members of 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 Class in order to benefit themselves. Any
contemplated transaction would not be the product of arm's length negotiations
and is not based upon any independent evaluation of the current value of
Faulding's common stock, assets or business.
18. Defendants have failed and refused to take those steps necessary to
ensure that the Company's shareholders will receive maximum value of their
shares of Faulding stock. Defendants have thus far failed to announce any active
auction or open bidding procedures best calculated to maximize shareholder value
in selling the Company. As a result, defendants are acting to put their own
interests ahead of the public
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shareholders, all at the expense and to the detriment of the Company's public
shareholders.
19. By virtue of the acts and conduct alleged herein, the defendants,
who control the actions of the Company, have carried out a preconceived plan and
scheme to place the interests of FHFC ahead of the interests of Faulding's
public shareholders. The 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
Faulding's public shareholders for their own personal benefit.
20. The defendants have breached their fiduciary duties by reason of
the acts and transactions complained of herein, including their apparent
decision to effect a transaction without making an effort to obtain the best
offer possible and by affirmatively attempting to prevent a better offer.
21. As a result of the actions of the defendants, plaintiff and the
other members of the Class have been and will be damaged in that they have not
and will not receive their fair proportion of the value of Faulding's assets and
businesses and/or have been and will be prevented from obtaining a fair and
adequate price for their shares of Faulding's common stock.
22. In light of the foregoing, the Individual Defendants must, as their
fiduciary obligations require:
o undertake an appropriate evaluation of
Faulding's worth as an acquisition
candidate;
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o act independently so that the interests of
Faulding's public stockholders will be
protected, including but not limited to the
retention of independent advisors to any
committee of the Faulding board formed to
consider the FHFC offer and negotiate with
FHFC on behalf of Faulding's minority
stockholders;
o adequately ensure that no conflicts of
interest exist between defendants' own
interests and their fiduciary obligation to
maximize stockholder value or, if such
conflicts exist, to ensure that all
conflicts be resolved in the best interests
of Faulding's public stockholders; and
o if a merger transaction is to go forward,
require that it be approved by a majority of
Faulding's public stockholders.
23. Plaintiff seek preliminary and permanent injunctive relief and
declaratory relief preventing defendants from inequitably and unlawfully
depriving plaintiff and the Class of their right 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.
24. Plaintiff and the class have no adequate remedy at law. Only
through the exercise of this Court's equitable powers can plaintiff be fully
protected from the immediate and irreparable injury which defendants' actions
threaten to inflict.
25. Unless enjoined by the Court, defendants will continue to breach
their fiduciary duties owed to plaintiff and the other members of the Class, and
will consummate the sale of Faulding at an inadequate and unfair price, or upon
inequitable terms, all to the irreparable harm of plaintiff and the other
members of the Class.
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26. Plaintiff and the Class have no adequate remedy at law.
WHEREFORE, plaintiff prays for judgment and relief as follows:
A. Ordering that this action may be maintained as a class action and
certifying plaintiff as the Class representative;
B. Declaring that defendants have breached their fiduciary and other
duties to plaintiff and the other members of the Class;
C. Entering an order requiring defendants to take the steps set forth
hereinabove;
D. Preliminarily and permanently enjoining the defendants and their
counsel, agents, employees and all persons acting under, in concert with, or for
them, from proceeding with, consummating or closing the proposed merger
transaction;
E. In the event the proposed merger is consummated, rescinding it and
setting it aside;
F. Awarding compensatory damages against defendants individually and
severally in an amount to be determined at trial, together with prejudgment
interest at the maximum rate allowable by law;
G. Awarding costs and disbursements, including plaintiff's counsel's
fees and experts' fees; and
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H. Granting such other and further relief as the Court may deem just
and proper.
Dated: June 6, 1997
ROSENTHAL, MONHAIT, GROSS &
GODDESS, P.A.
By:____________________________
919 North Market Street
Mellon Bank Center, Suite 1401
Wilmington, Delaware 19801
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
ABBEY, GARDY & SQUITIERI, LLP
212 East 39th Street
New York, New York 10016
(212) 889-3700
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