IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
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:
Paul Berger,
on behalf of himself :
and all others similarly situated,
:
Plaintiff, : Civil Action No. 20068 NC
-against- : SHAREHOLDER CLASS
ACTION COMPLAINT
Martin T. Sosnoff, Jay S. Goldsmith, Ronald H.
Menaker, Craig B. Steinberg, Thurston :
Twigg-Smith and Atalanta/Sosnoff Capital
Corporation, :
Defendants. :
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Plaintiff, as and for his class action complaint, alleges upon personal
knowledge as to himself and his own acts, and upon information and belief
derived from, inter alia, a review of documents filed with the Securities and
Exchange Commission and publicly available news sources, such as newspaper
articles, as to all other matters, as follows:
NATURE OF THE ACTION
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1. This is a stockholder class action brought by plaintiff on behalf of the
public shareholders of Atalanta/Sosnoff Corporation ("Atalanta" or the
"Company") common stock against Atalanta and its directors to enjoin defendants
from accepting the going-private offer of Martin T. Sosnoff, the Company's
founder, Chairman, Chief Executive Officer, Chief Investment Officer and owner
of 83% of the Company's outstanding shares, at a grossly inadequate
consideration, and to obtain other appropriate relief.
PARTIES
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2. Plaintiff Paul Berger has been the beneficial owner of Atalanta common stock
at all relevant times and continues to be the beneficial owner of such shares.
3. Defendant, Atalanta, is a Delaware corporation with its principal place of
business at 101 Park Avenue, New York, New York 10178. According to the
Company's most recent 10-K, filed with the Securities and Exchange Commission on
March 28, 2002 (the "10-K"), Atalanta provides discretionary investment
advisory, brokerage and other related services.
4. Defendant Martin T. Sosnoff ("Sosnoff") is the founder of the Company and has
been Chairman of the Board, Chief Executive Officer, and Chief Investment
Officer of the Company and its subsidiaries since their inceptions. According to
Atalanta's most recent Schedule 14A, filed with the Securities and Exchange
Commission on March 27, 2002, Sosnoff beneficially owns 7,012,516 shares of
Atalanta and was deemed to own 76.9% of the Company(1). Sosnoff serves on the
Executive, Compensation and Stock Option and committees of Atalanta's Board of
Directors (the "Board").
5. Defendant Jay S. Goldsmith ("Goldsmith") has served as a director of Atalanta
since 2001. Goldsmith serves on the Audit, Compensation and Stock Option
committees of the Board.
6. Defendant Ronald H. Menaker ("Menaker") has served as a director of Atalanta
since 1999. Menaker serves on the Audit, Compensation and Stock Option
committees of the Board.
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(1) According to the Proxy Statement, Atalanta was deemed to have 9,125,707
shares outstanding as of March 27, 2002. However, this number has
decreased to 8,470,705 shares as of November 8,2002, as disclosed in
Atalanta's most recent 10-K, filed with the Securities and Exchange
Commission on that same
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7. Defendant Craig B. Steinberg ("Steinberg") has served as a director of
Atalanta since 1997. Steinberg has served as President and Director of Research
of the Company, and has held other offices with the Company and its
subsidiaries, since 1985. Steinberg serves on the Executive committee of the
Board.
8. Defendant Thurston Twigg-Smith ("Twigg-Smith") has served as a director of
Atalanta since June 1994. Twigg-Smith serves on the Audit, Compensation and
Stock Option committees of the Board.
9. The defendants identified in paragraphs 4 through 8 collectively constitute
the entirety of Atalanta's board of directors. These five individuals are
hereinafter referred to collectively as the "Individual Defendants."
10. By virtue of their positions as directors, and where applicable, officers of
Atalanta and/or their exercise of control and ownership over the business and
corporate affairs of Atalanta, the Individual Defendants have, and at all
relevant times had, the power to control an influence and did control and
influence and cause Atalanta to engage in the acts complained of herein. Each
Individual Defendant owed and owes Atalanta and its shareholders fiduciary
obligations and were and are required by law to: (1) use their ability to
control and manage Atalanta in a fair, just and equitable manner; (2) act in
furtherance of the best interests of Atalanta and its shareholders; (3) act to
maximize the value for all shareholders; (4) govern Atalanta in such a manner as
to heed the expressed views of its public shareholders; (5) refrain from abusing
their positions of control; and (6) not to favor their own interests or the
interests of the majority shareholder at the expense of Atalanta and its
minority shareholders.
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day. At all events, Plaintiff relies on Atalanta's representation that as of
December 6, 2002, Defendant Sosnoff owns 83% of the outstanding shares of
Atalanta.
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11. Each defendant herein is sued individually and/or as a conspirator and
aidor and abettor. The Individual Defendants are also sued in their capacity as
directors of Atalanta. The liability of each defendant arises from the fact that
they have engaged in all or part of the unlawful acts, plans, schemes, or
transactions complained of herein.
CLASS ACTION ALLEGATIONS
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12. Plaintiff, a shareholder of Atalanta, brings this action as a class action
pursuant to Delaware Rule of Chancery 23 on behalf of himself and all minority
Atalanta common stock holders. Excluded from the Class are defendants, members
of the immediate families of the defendants, their heirs and assigns, and those
in privity with them.
13. The members of the Class are so numerous that joinder of all of them would
be impracticable. While the exact number of Class members is unknown to
plaintiff, and can be ascertained only through appropriate discovery, plaintiff
believes there are many thousands of Class members. According to Atalanta's most
recent 10-Q, filed with the Securities and Exchange Commission on November 8,
2002, Atalanta has 8,470,705 shares of common stock outstanding.
14. Plaintiff's claims are typical of the claims of the Class, since plaintiff
and the other members of the Class have and will sustain damages arising out of
defendants' breaches of their fiduciary duties. Plaintiff does not have any
interests that are adverse or antagonistic to those of the Class. Plaintiff will
fairly and adequately protect the interests of the Class. Plaintiff is committed
to the vigorous prosecution of this action and has retained counsel competent
and experienced in this type of litigation.
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15. There are questions of law and fact common to the members of the Class that
predominate over any questions which, if they exist, may affect individual class
members. The predominant questions of law and fact include, among others,
whether:
(a) the defendants have and are breaching their fiduciary duties to the
detriment of Atalanta's shareholders;
(b) the Class has been damaged and the extent to which members of the
Class have sustained damages, and what is the proper measure of those damages.
16. A class action is superior to all other available methods for the fair and
efficient adjudication of this controversy, since joinder of all members is
impracticable. Further, as individual damages may be relatively small for most
members of the Class, the burden and expense of prosecuting litigation of this
nature makes it unlikely that members of the Class would prosecute individual
actions. Plaintiff anticipates no difficulty in the management of this action as
a class action. Further, the prosecution of separate actions by individual
members of the class would create a risk of inconsistent or varying results,
which may establish incompatible standards of conduct for defendants.
SUBSTANTIVE ALLEGATIONS
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17. On Friday, December 6, 2002, after the market closed, Atalanta announced
that it had received a proposal from Defendant Martin T. Sosnoff, the
Company's founder, Chairman of the Board, Chief Executive Officer, Chief
Investment Officer and majority shareholder, to acquire beneficial ownership of
the 17% of Atalanta which he did not currently own at a price of $12.50 per
share the ("Proposed Transaction"). Earlier that day, Atalanta closed at $10.25
per share.
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18. Atalanta shares have consistently traded over $10.00 per share, closing as
high as $12.35 per share in early May 2002. According to the 10-K, filed on
March 27, 2002, this strong performance was expected to continue:
The Company's performance results since inception rank above the
median among peer group money managers. Because of the strong relative
equity performance results for each of the four years ended December
31, 2001, the Company's performance rankings are very good.
* * *
The Company believes it has the capacity to continue to increase the
number of client accounts under management without significant
increases in fixed costs or personnel and without adversely affecting
the quality of service to existing clients. The Company has continued
to implement enhancements to its portfolio accounting, allocation,
monitoring and reporting systems to enable it to more efficiently
manage client accounts.
19. Recognizing the solid performance of Atalanta, Sosnoff, its majority-
controlling shareholder, determined to usurp this value for himself,
denying Atalanta's minority shareholders the opportunity to obtain fair value
for their equity interest by proposing a buy-out transaction at an insufficient
premium.
20. The Individual Defendants have failed to determine the value of Atalanta as
a public entity and have thereby allowed the price of Atalanta stock to be
capped, depriving plaintiff and the Class of the opportunity to realize any
increase in the value of Atalanta shares. Despite the long-term value of the
Atalanta acquisition for Sosnoff, Atalanta shareholders will be receiving an
inadequate premium over Atalanta's stock price immediately prior to announcement
of the Proposed Transaction.
21. By entertaining the offer from Sosnoff, Atalanta's board has initiated a
process to sell the Company, which imposes heightened fiduciary responsibilities
and requires enhanced scrutiny by the Court. However, the terms of the Proposed
Transaction were not the result of a full and fair negotiation process or active
market check. Rather, they
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were arrived at without a full and thorough investigation by the Individual
Defendants and the price and process are intrinsically unfair and inadequate
from the standpoint of Atalanta's shareholders.
22. The Individual Defendants have failed to make an informed decision to date
as no market check of Atalanta's value was obtained.
23. The Individual Defendants have violated the fiduciary duties they owe to the
shareholders of Atalanta. The terms of the Proposed Transaction, its timing, and
defendants' failure to evaluate the value of Atalanta as an independent entity,
demonstrate a clear absence of the exercise of due care and of loyalty to
Atalanta's public shareholders.
24. The Individual Defendants fiduciary obligations under the circumstances of
Sosnoff's offer obligated them to:
(a) Undertake an appropriate evaluation of Atalanta's net worth as a
merger/acquisition candidate and as an independent entity;
(b) Actively evaluate the Proposed Transaction in an attempt to obtain
the best value for Atalanta's public shareholders;
(c) Act independently so that the interests of Atalanta's public
shareholders would be protected and enhanced; and
(d) Adequately ensure that no conflicts of interest exist between the
Individual Defendants' own interests, or the interests of the Company's majority
shareholder on the one hand, and their fiduciary obligations to maximize
shareholder value or, if such conflicts exist, to ensure that all conflicts are
resolved in the best interests of Atalanta's public shareholders.
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25. The Individual Defendants have breached their fiduciary duties by reason of
the acts and transactions complained of herein.
26. Plaintiff 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
Atalanta's assets and business, will be largely divested from their right to
share in Atalanta's future growth and development and have been and will be
prevented from obtaining a fair and adequate price for their shares of Atalanta
common stock.
27. The consideration to be paid to class members in the proposed merger is
unfair and inadequate because, inter alia, the intrinsic value of Atalanta's
common stock is in excess of the amount offered by Sosnoff, giving due
consideration to the anticipated operating results, net asset value, cash flow,
profitability and established markets of Atalanta.
28. The Individual Defendants have not yet appointed or retained any truly
independent person or entity to negotiate for or on behalf of Atalanta's public
shareholders to promote their best interests in the Proposed Transaction.
29. The Individual Defendants have breached their duty of loyalty to Atalanta's
public shareholders by using their control of Atalanta to attempt to force
plaintiff and the class to exchange their equity interest in the Company for
unfair consideration, and to deprive Atalanta's public shareholders of the
maximum value to which they are entitled.
30. The terms of the Proposed Transaction are grossly unfair to the class, and
the unfairness is compounded by the gross disparity between the knowledge and
information possessed by the Individual Defendants by virtue of their positions
of control of Atalanta and that possessed by Atalanta's public shareholders.
Defendants' intent is to take
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advantage of this disparity and to induce class members to relinquish their
Atalanta shares at an unfair price on the basis of incomplete or inadequate
information.
31. By reason of the foregoing, plaintiff and each member of the class is
suffering irreparable injury and damages.
32. Plaintiff and other members of the class have no adequate remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
1. determining that this action is a proper class action under Delaware Rule
of Chancery 23, and that plaintiff is a proper class representative;
2. declaring that defendants have breached their fiduciary duties to plaintiff
and the Class and aided and abetted such breaches;
3. enjoining the Proposed Transaction and, if the Proposed Transaction is
consummated, rescinding it;
4. awarding plaintiff and the class compensatory and/or rescissory damages as
allowed by law;
5. awarding interest, attorney's fees, expert fees and other costs, in an
amount to be determined; and
6. granting such other relief as the Court may find just and proper.
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Dated: December 9, 2002
HUGHES SISK & GLANCY, P.A.
522 Greenhill Avenue
Wilmington , Delaware 19805
By: /s/ Brian P. Glancy
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Brian P. Glancy
Attorneys for Plaintiff
OF COUNSEL:
THE BRUALDI LAW FIRM
29 Broadway, Suite 1515
New York, New York 10006
Telephone (212) 952-0602
Facsimile (212) 952-0608
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