SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
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:
: Index No. 97-601661
KENNETH STEINER, :
:
Plaintiff, :
:
-against- :
: CLASS ACTION COMPLAINT
ANDRE LOZYNIAK, PATRICK J. DORME, :
HENRY V. KENSING, RUSSELL H. :
KNISEL, SAUL SPERBER, HAROLD
COHAN, FRANK A. GUNTHER, and : JURY TRIAL DEMAND
DYNAMICS CORP. OF AMERICA, :
:
Defendants. :
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Plaintiff, by his knowledge as to his own acts and upon information
and belief as to all other matters, alleges as follows:
NATURE OF THE ACTION
1. This is a stockholders' class action lawsuit brought on behalf of
the public stockholders of Dynamics Corp. of America ("Dynamics" or the
"Company") who have been, and continue to be, deprived of the opportunity to
realize fully the benefits of their investment in the Company. The individual
defendants have wrongfully refused to take the steps necessary to maximize
stockholder value, including properly considering a bona fide offer for the
Company from WHX Corporation through its subsidiary SB Acquisition Corp.
(collectively "WHX"). By failing and refusing to take such steps, including
adequately considering the Offer, defendants have breached
their fiduciary duties to plaintiff and the class. The individual defendants
are using their fiduciary positions of control over Dynamics to thwart others
in their legitimate attempts to acquire Dynamics, and the individual
defendants are trying to entrench themselves in their positions with the
Company.
PARTIES
2. Plaintiff Kenneth Steiner, a New York resident, is and, at all
relevant times has been, the owner of 550 shares of Dynamics' common stock.
3. Dynamics is a corporation duly organized and existing under the
laws of the State of New York. Dynamics designs, manufactures, and markets
electronic components and subsystems, such as resistors, micro-circuits,
loudspeakers, and switches. Dynamics maintains its principal executive offices
at 475 Steamboat Road, Greenwich, Connecticut 06830. Dynamics has
approximately 3.811 million shares of common stock outstanding and thousand of
stockholders of record. Dynamics's stock trades over the New York Stock
Exchange ("NYSE").
4. Defendant Andrew Lozyniak ("Lozyniak") is the Chairman of the
Board and President of Dynamics. In 1995, Lozyniak received from Dynamics
$356,052 in compensation.
5. Defendant Patrick J. Dorme ("Dorme") is the Chief Financial
Officer, Vice President, and a director
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of Dynamics. In 1995, Dorme received from Dynamics $161,997 in compensation.
6. Defendant Henry V. Kensing ("Kensing") is the Chief Legal Counsel,
Vice President, Secretary, and a director of Dynamics. In 1995, Kensing
received from Dynamics $193,187 in compensation.
7. Defendants Russell H. Knisel, Saul Sperber, Harold Cohan, and
Frank A. Gunther are directors of Dynamics.
8. The defendants named in paragraph 4 through 7 are hereinafter
referred to as the "Individual Defendants."
9. Because of their positions as officers/directors of the Company,
the Individual Defendants owe a fiduciary duty of loyalty and due care to
plaintiff and the other members of the class.
10. Each defendant herein is sued individually as a conspirator and
aider and abettor, as well as in his/her capacity as an officer and/or
director of the Company, and the liability of each arises from the fact that
he or she has engaged in all or part of the unlawful acts, plans, schemes, or
transactions complained of herein.
CLASS ACTION ALLEGATIONS
11. Plaintiff brings this case in its own behalf as a class action,
pursuant to CPLR ss. 901, on behalf of all stockholders of the Company, except
defendants herein and
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any person, firm, trust, corporation, or other entity related to or affiliated
with any of the defendants, who will be threatened with injury arising from
defendants' actions as is described more fully below (the "Class").
12. This action is properly maintainable as a class action.
13. The Class is so numerous that joinder of all members is
impracticable. The Company has hundreds of stockholders who are scattered
throughout the United States.
14. There are questions of law and fact common to the Class that
predominate over questions affecting any individual class member. The common
questions include, inter alia, whether:
a. defendants have breached their fiduciary duties owed by
them to plaintiff and other members of the Class by failing and refusing to
attempt in good faith to maximize stockholder value, including considering the
sale of Dynamics;
b. defendants have breached or aided and abetted the
breach of the fiduciary duties owed by them to plaintiff and other members of
the Class;
c. defendants engaged in a plan and scheme to thwart and
reject offers and proposals from third parties, including the one made by
WHX; and
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d. plaintiff and other members of the Class are being and
will continue to be injured by the wrongful conduct alleged herein and, if so,
what is the proper remedy and/or measure of damages.
15. Plaintiff is committed to prosecuting the action and has retained
competent counsel experienced in litigation of this nature. Plaintiff's claims
are typical of the claims of the other members of the Class and plaintiff has
the same interests as the other members of the Class. Plaintiff is an adequate
representative of the Class.
16. The prosecution of separate actions by individual members of the
Class would create the risk of inconsistent or varying adjudications with
respect to individual members of the Class which would establish incompatible
standards of conduct for defendants, or adjudications with respect to
individual members of the Class which would as a practical matter be
dispositive of the interests of the other members not parties to the
adjudications or substantially impair or impede their ability to protect their
interests.
17. The defendants have acted, or refused to act, on grounds
generally applicable to, and causing injury to, the Class and, therefore,
preliminary and final injunctive relief on behalf of the Class as a whole
are appropriate.
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SUBSTANTIVE ALLEGATIONS
18. By the acts, transactions, and courses of conduct alleged herein,
defendants, individually and as part of a common plan and scheme and/or aiding
and abetting one another in total disregard of their fiduciary duties, are
attempting to deprive plaintiff and the Class unfairly of the opportunity to
maximize the value of their investment in Dynamics.
19. On March 27, 1997, WHX offered, by letter, to acquire Dynamics in
a negotiated merger for $40.00 per share in a transaction valued at more than
$160 million (the "Offer"). The Offer represented a premium of approximately
20% above the price of Dynamics' stock.
20. In the Offer, WHX stated that it was prepared to increase its
offer if Dynamics provided additional information which demonstrated that a
higher price was warranted.
21. Dynamics responded to the Offer by saying only
that it would consider the proposal in due course.
22. Disappointed that Dynamics chose not to even consider WHX's bona
fide offer in the course of a week, WHX made the Offer public on March 31,
1997 and announced that it would immediately commence a tender offer at $40.00
per share.
23. In addition to commencing the tender offer, WHX stated its
intention to solicit proxies from shareholders
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for Dynamics' annual meeting to be held on May 2, 1997. WHX announced its
intention to elect four director/nominees and adopt shareholder by-law
provisions to permit holders of 9.9% of the outstanding common stock to call a
special meeting.
24. WHX's offer is clearly bona fide because it is an all cash offer
which is within WHX's financial means. WHX announced that the offer is not
contingent on any financing and that it had over $400 million of available
cash to proceed with the tender offer.
25. Dynamics responded to the announcement of the tender offer by
stating that all but one of the directors consider WHX's bona fide offer
"totally inadequate" and urged shareholders to take no action in tending their
shares to WHX.
26. Despite the significant interest of Dynamics stockholders,
defendants have acted without regard to the fiduciary duties they owe them by,
inter alia, failing to take the steps necessary to maximize stockholder value,
including, but not limited to, agreeing to meet with and negotiate the tender
offer and merger with WHX. Defendants have done so without business
justification and without negotiation.
27. Defendants' failure to act promptly upon the tender offer and
merger has no valid business purpose, and simply evidences their disregard for
the premium
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being offered to Dynamics stockholders. By failing to meet promptly and
negotiate, or offer to meet and negotiate, with WHX, defendants are depriving
plaintiff and the Class of their right to share in the assets and businesses
of Dynamics and receive the maximum value for their Dynamics shares.
28. Dynamics represents a highly attractive acquisition candidate.
Defendants' conduct is depriving Dynamics's public stockholders of the control
premium that WHX are prepared to pay, or of the enhanced premium that further
negotiation or exposure of Dynamics to the market could provide.
29. Defendants owe fundamental fiduciary obligations to Dynamics's
stockholders to take all necessary and appropriate steps to maximize the value
of their shares. In addition, the Individual Defendants have the
responsibility to act independently so that the interests of Dynamics'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 market to assure that the highest possible price
is achieved. Further, the directors of Dynamics must adequately ensure that no
conflict of interest exists between the Individual Defendants' own interests
and their fiduciary obligations to maximize stockholder value or, if such
conflicts
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exist, to insure that all such conflicts will be resolved in the best
interests of the Company's stockholders.
30. Because defendants dominate and control the business and
corporate affairs of Dynamics and because they are in possession of private
corporate information concerning Dynamics's assets, businesses and future
prospects, there exists an imbalance and disparity of knowledge of economic
power between defendants and the public shareholders of Dynamics. This
discrepancy makes it grossly and inherently unfair for defendants to refrain
from taking those steps necessary to maximize stockholder value. Defendants
have refused to seriously consider the tender offer and merger, and have
failed to announce any active auction or open bidding procedures that would
maximize stockholder value by entertaining offers to purchase the Company.
31. The Individual 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.
32. The Individual Defendants are acting to entrench themselves in
their offices and positions and maintain their substantial salaries and
perquisites, all at the expense and to the detriment of the public
stockholders of Dynamics.
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33. As a result of the actions of the Individual 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
Dynamics's assets and businesses and/or have been and will be prevented from
obtaining a fair and adequate price for their shares of Dynamics's common
stock.
34. Plaintiff seeks preliminary and permanent injunctive 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 premium over the market price, by unlawfully entrenching themselves in their
positions of control, and to compel defendants to carry out their fiduciary
duties to maximize stockholder value.
35. Only through the exercise of this Court's equitable powers can
plaintiff and the Class be fully protected from the immediate and irreparable
injury that defendants' actions threaten to inflict. Defendants are precluding
the enjoyment by Dynamics stockholders 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 that would provide consideration for
all shares at a premium price.
36. Unless enjoined by the Court, defendants will
continue to breach their fiduciary duties owed to plain-
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tiff and the members of the Class, and/or aid and abet and participate in such
breaches of duty, and will prevent the sale of Dynamics at a substantial
premium, all to the irreparable harm of plaintiff and other members of the
Class.
37. 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 a class representative;
(b) Ordering the Individual Defendants to carry out their
fiduciary duties to plaintiff and the other members of the Class by announcing
their intention to:
(i) cooperate fully with any entity or
person, including WHX, having a bona fide interest in proposing any
transaction that would maximize stockholder value including, but not limited
to, a merger or acquisition of Dynamics;
(ii) immediately undertake an appropriate
evaluation of Dynamics's worth as a merger/acquisition
candidate;
(iii) take all appropriate steps to
enhance Dynamics's value and attractiveness as a merg-
er/acquisition candidate;
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(iv) take all appropriate steps to effec-
tively expose Dynamics to the marketplace in an effort to
create an active auction of the Company;
(v) act independently so that the inter-
est of the Company's public stockholders will be protected; and
(vi) adequately ensure that no conflicts
of interest exist between the Individual Defendants' own interest and their
fiduciary obligation to maximize stockholder value or, in the event such
conflicts exist, to ensure that all conflicts of interest are resolved in the
best interests of the public stockholders of Dynamics;
(c) Ordering the Individual 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;
(e) Awarding plaintiff the costs and disbursements of this
action, including a reasonable allowance for plaintiff's attorneys' and
experts' fees; and
(f) Granting such other and further relief as
may be just and proper.
Dated: April 1, 1997
WECHSLER HARWOOD
HALEBIAN & FEFFER LLP
805 Third Avenue
12
New York, New York 10022
Attorneys For The Plaintiff
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