1
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- -------------------------------------
AIRMONT PLAZA ASSOCIATES and
RICHARD SCHATZ,
Plaintiffs,
-against-
SPECTRAN CORPORATION, JOHN E. C.A. No. 17314NC
CHAPMAN, CHARLES B. HARRISON, IRA
S. NORDLICHT, LILY K. LAI, ROBERT A. CLASS ACTION
SCHMITZ, RICHARD M. DONOFRIO, PAUL COMPLAINT
D. LAZAY and LUCENT TECHNOLOGIES ------------
INC.,
Defendants.
- -------------------------------------
Plaintiffs, by their attorneys, allege upon information and belief, except
as to paragraph 1 which plaintiff's allege upon knowledge, as follows:
1. Plaintiffs are and were, at all times relevant to this action,
shareholders of defendant SpecTran Corporation ("SpecTran" or the "Company").
2. SpecTran is a corporation duly existing and organized under the laws
of the State of Delaware. SpecTran develops, manufactures, and markets glass
optical fibers and value-added fiber optic products. The Company manufactures
standard fiber and cable, as well as special performance fiber and cable for
global communications markets. SpecTran's optical fiber and cable products also
serve industrial, military/aerospace, and medical markets worldwide.
3. Defendant Charles B. Harrison ("Harrison") is President, Chief
2
Executive Officer and a director of the Company.
4. Defendant John E. Chapman ("Chapman") is a director and senior vice
president of the Company. He is also president of SpecTran Communication Fiber
Technologies, Inc., a wholly owned subsidiary of the Company.
5. Defendant Ira S. Nordlicht is a director of the Company. He is a
founding partner of the law firm which provides legal services to the Company.
6. Defendants Lily K. Lai, Robert A. Schmitz, Richard M. Donofrio and
Paul D. Lazay are directors of the Company.
7. Defendant Lucent Technologies Inc. ("Lucent") is a corporation duly
existing and organized under the laws of the State of Delaware. Lucent is one of
the world's leading manufacturers of fiber, with 13 fiber and cable
manufacturing operations and joint ventures around the world.
8. Each of the Individual Defendants has a fiduciary relationship and
responsibility to plaintiffs and the other public stockholders of SpecTran and
owes them the highest obligations of good faith, fair dealing and due care.
CLASS ACTION ALLEGATIONS
------------------------
9. Plaintiffs bring this action on their own behalf and as a class
action, pursuant to Rule 23 of the Rules of the Court of Chancery, on behalf of
all common stockholders of SpecTran, or their successors in interest, who are or
will be threatened with the deprivation of their investment in SpecTran by
reason of the proposed transaction complained of herein (the "Class"). Excluded
from the Class are defendants herein and
2
3
any person, firm, trust, corporation, or other entity related to or affiliated
with any of defendants.
10. This action is properly maintainable as a class action because:
(a) The class is so numerous that joinder of all members is
impracticable. There are hundreds of SpecTran stockholders of record who own
the approximately 7,000,000 SpecTran shares outstanding;
(b) There are questions of law and fact which are common to the
class and which predominate over questions affecting any individual class
members;
(c) Plaintiffs are committed to prosecuting this action and have
retained competent counsel experienced in litigation of this nature. The claims
of plaintiffs are typical of the claims of the other members of the class and
plaintiffs have the same interests as the other members of the class.
Accordingly, plaintiffs are adequate representatives of the class and will
fairly and adequately protect the interests of the class.
SUBSTANTIVE ALLEGATIONS
-----------------------
11. On July 15, 1999, before the markets opened, SpecTran and Lucent
announced that they had entered into a definitive merger agreement whereby
Lucent will acquire SpecTran in a transaction valued at $99 million. Under the
terms of the transaction, Lucent will commence a cash tender offer for all of
SpecTran's outstanding common shares at a price of $9.00 per share and will
assume $35 million in SpecTran debt. The tender offer will be followed by a
merger in which any untendered shares of SpecTran will be acquired for $9.00
per share in cash. The tender offer will commence
3
4
on July 21, 1999 and is not expected to close until the end of the quarter
ending September 30, 1999.
12. By entering into the agreement with Lucent, the SpecTran Board
has initiated a process to sell the Company which imposes heightened fiduciary
responsibilities on its directors and requires enhanced scrutiny by the Court.
However, the terms of the proposed transaction were not the result of an
auction process or active market check; they were arrived at without a full and
thorough investigation by the Individual Defendants; and they are intrinsically
unfair and inadequate from the standpoint of the SpecTran shareholders.
13. The proposed purchase price is inadequate. It is substantially
less than the closing price of SpecTran just the day before ($11.50 per share)
or the price paid in similar transactions. The proposed purchase price is lower
than any closing price for SpecTran shares from June 21, 1999 until the
announcement. Moreover, in transactions of this type it is usual and customary
to pay a premium for achieving total control, which premium can be as much as
or greater than 50% of the current price. Here, the proposed transaction
involves a discount from the current market price.
14. The Individual Defendants failed to make an informed decision, as
no market check of the Company's value was obtained. In agreeing to the merger,
the Individual Defendants failed to properly inform themselves of SpecTran's
highest transactional value.
4
5
15. The Individual Defendants have violated their fiduciary duties owed to
the public shareholders of SpecTran. The Individual Defendants' agreement to
the terms of the transaction, its timing, and the failure to auction the
Company and invite other bidders, and defendants' failure to provide a market
check demonstrate a clear absence of the exercise of due care and of loyalty to
SpecTran's public shareholders.
16. The Individual Defendants' fiduciary obligations under these
circumstances require them to:
(a) Undertake an appropriate evaluation of SpecTran's net worth as a
merger/acquisition candidate; and
(b) Engage in a meaningful auction with third parties in an attempt to
obtain the best value for SpecTran's public shareholders.
17. The Individual Defendants have breached their fiduciary duties by
reason of the acts and transactions complained of herein, including their
decision to merge with Lucent without making the requisite effort to obtain the
best offer possible.
18. Plaintiffs and 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 SpecTran's assets and business, and will be prevented from obtaining
fair and adequate consideration for their shares of SpecTran's common stock.
19. The consideration to be paid to class members in the proposed merger
is unfair and inadequate because, among other things:
(a) The intrinsic value of SpecTran's common stock is materially
5
6
in excess of the amount offered for those securities in the merger giving due
consideration to the anticipated operating results, net asset value, cash flow,
and profitability of the Company. Indeed, the amount offered is 22% ($2.50 per
share) less than the market price just the day before the announcement,
although a substantial premium to the current selling price is the norm;
(b) The merger price is not the result of an appropriate
consideration of the value of SpecTran because the SpecTran Board approved the
proposed merger without undertaking steps to accurately ascertain SpecTran's
value through open bidding or at least a "market check" mechanism; and
(c) By entering into the agreement with Lucent, the Individual
Defendants have allowed the price of SpecTran stock to be capped, thereby
depriving plaintiffs and the Class of the opportunity to realize any increase
in the value of SpecTran stock.
20. By reason of the foregoing, each member of the Class will suffer
irreparable injury and damages absent injunctive relief by this Court.
21. Defendant Lucent has knowingly aided and abetted the breaches of
fiduciary duty committed by the other defendants to the detriment of SpecTran's
public shareholders. Indeed, the proposed merger could not take place without
the active participation of Lucent. Furthermore, Lucent and its shareholders
are the intended beneficiaries of the wrongs complained of and would be unjustly
enriched absent relief in this action.
6
7
22. Plaintiffs and the other members of the Class have no adequate remedy
at law.
WHEREFORE, plaintiffs demand judgment against defendants as follows:
A. Declaring that this action is properly maintainable as a class action
and certifying plaintiffs as representatives of the Class;
B. Preliminarily and permanently enjoining 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 transaction;
C. In the event that the proposed transaction is consummated, rescinding
it and setting it aside, or awarding rescissory damages to the Class;
D. Awarding the Class compensatory damages against defendants,
individually and severally, in an amount to be determined at trial, together
with pre-judgment and post-judgment interest at the maximum rate allowable by
law;
E. Awarding plaintiffs their costs and disbursements and reasonable
allowances for fees of plaintiffs' counsel and experts; and
7
8
F. Granting plaintiffs and the Class such other and further relief as the
Court may deem just and proper.
ROSENTHAL, MONHAIT, GROSS &
GODDESS, P.A.
By: /s/
-----------------------------------
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
Attorneys for Plaintiffs
OF COUNSEL:
ABBEY GARDY & SQUITIERI, LLP
212 East 39th Street
New York, New York 10016
(212) 889-3700
SCHATZ & NOBEL, P.C.
216 Main Street
Hartford, CT 06106-1817
(860) 493-6292
8