MILBERG WEISS BERSHAD
HYNES & LERACH LLP
WILLIAM S. LEARCH (68581)
ALAN SCHULMAN (128661)
DAREN J. ROBBINS (168593)
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
WECHSLER HARWOOD HALEBIAN
& FEFFER LLP
SAMUEL K. ROSEN
488 Madison Avenue
8th Floor
New York, NY 10022
Telephone: 212/935-7400
Attorneys for Plaintiff
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SAN DIEGO
HARBOR FINANCE PARTNERS, ) Case No. 720256
Individually and On Behalf of All )
Others Similarly Situated, ) CLASS ACTION
Plaintiff, )
) COMPLAINT
vs. )
)
MYCOGEN CORPORATION, CARLTON J. )
EIBL, JOHN L. HAGAMAN, NICKOLAS D. )
HEIN, LOUIS W. PRIBILA, WILLIAM C. )
SCHMIDT, G. WILLIAM TOLBERT, DOW )
AGROSCIENCES and DOES 1-25, )
inclusive, )
)
Defendants. ) Plaintiff Demands A
) Trial By Jury
- ------------------------------------- ) -------------------
Plaintiff, by its attorneys, for its class action complaint against
defendants, makes the following allegations upon information and belief,
except as to Paragraph 5, which is alleged upon knowledge. Plaintiff's
information and belief is based on, inter alia, investigation conducted by
its attorneys, including review of documents filed with the Securities and
Exchange Commission, articles in the financial news media, press releases,
and other publicly available information.
JURISDICTION AND VENUE
1. This Court has jurisdiction over all causes of action asserted
herein pursuant to the California Constitution, Article XL, Section 10,
because this case is a cause not given by statute to other trial courts.
2. This Court has jurisdiction over Mycogen because this defendant is a
California corporation with its principal place of business at 5501 Oberlin
Drive, San Diego, California.
3. Venue is proper in this Court because the conduct at issue took place
and had an effect in this County and defendants made misrepresentations which
had an effect in this County.
4. Plaintiff brings this action individually and as a class action on
behalf of all persons, other than defendants and persons or entities related
to them, who own the common stock of Mycogen Corp. ("Mycogen" or the "Company")
and thus are similarly situated (the "Class"), for injunctive and other
relief. Plaintiff seeks injunctive relief herein to, inter alia, enjoin the
implementation of an inherently unfair transaction ("the Offer") whereby
Mycogen's majority shareholder, Dow AgroSciences, formerly known as Dow
Elanco ("DowAgro") -- which owns approximately 69% of the
1
outstanding common stock of Mycogen and controls the operations of the
Company -- will acquire all of the remaining shares of the Company that it
does not already own for a grossly inadequate price. Alternatively, in the
event that the proposed transaction is implemented, plaintiff seeks to
recover damages caused by the breach of fiduciary duties owned by defendants.
PARTIES
5. Plaintiff Harbor Finance is a Colorado partnership, and at all
relevant times has been the owner of Mycogen common stock.
6. Defendant Mycogen is a California corporation that maintains its
principal place of business at 5501 Oberlin Drive, San Diego, California.
Mycogen's shares trade on the NASDAQ National Market System. Mycogen is a
diversified agribusiness and biotechnology company that develops and markets
seed for improved crop varieties and provides crop protection products.
7. Defendant DowAgro, an Indiana partnership, is a subsidiary of the
Dow Chemical Company and presently owns or controls approximately 69% of
Mycogen's outstanding stock.
8. Defendant Carlton J. Eibl ("Eibl") is and has been a director of the
Company since January 1998. He is the Company's President.
9. Defendants John L. Hagaman, Nickolas D. Hein, Louis W. Pribila,
William C. Schmidt, and G. William Tolbert are, and have at all relevant
times, been directors of Mycogen. Each is, and has at all relevant times,
been an officer of DowAgro.
10. The true names and capacitates of defendants sued herein under
California Code of Civil Procedure Section 474 as Does 1 through 25,
inclusive, are presently not known to plaintiff, who therefore sues
2
these defendants by such fictitious names. Plaintiff will seek to amend this
Complaint and include these Doe defendants' true names and capacities when
they are ascertained. Each of the fictitiously named defendants is
responsible in some manner for the conduct alleged herein and for the
injuries suffered by the Class.
11. By reason of its dominant position as the majority stockholder of
Mycogen and its ability to control the business and corporate affairs of
Mycogen at all relevant times, DowAgro owed and owes Mycogen stockholders
fiduciary duties of fairness and trust, and was and is obligated to refrain
from using its dominant position over Mycogen to enrich itself at the expense
of other stockholders.
12. The individual director defendant, by reason of their corporate
directorship and/or executive positions, stand in a fiduciary position
relative to the Company's shareholders, which fiduciary relationship, at all
times relevant herein, required the defendants to exercise their best
judgment, and to act in a prudent manner and in the best interests of the
Company's shareholders. A director is not permitted to act in his/her own
self-interest to the detriment of the shareholders.
13. 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.
3
CLASS ACTION ALLEGATIONS
14. Plaintiff brings this action individually on its own behalf and as a
class action, pursuant to Section 382 of the California Civil Code of Civil
Procedure on behalf of all stockholders of the Company (except the defendants
herein and any person, firm, trust, corporation, or other entity related to
or affiliated with any of the defendants) and their successors in interest,
who are or will be threatened with injury arising from defendants' actions
as more fully described herein (the "Class").
15. This action is properly maintainable as a class action.
16. The Class is so numerous that joinder of all members is
impracticable. There are thousands of shareholders who hold the approximately
31,000,000 shares of Mycogen common stock outstanding. The disposition of
their claims in a class action will be of benefit to the parties and the
Court. The record holders of Mycogen securities can be easily determined from
the stock transfer journals maintained by Mycogen or its agents.
17. A class action is superior to other methods for the fair and
efficient adjudication of the claims herein asserted, and no unusual
difficulties are likely to be encountered in the management of this action as
a class action. The likelihood of individual class members prosecuting
separate claims is remote.
18. There is a well-defined community of interest in the questions of
law and fact involved affecting the members of the Class. Among the questions
of law and fact which are common to the Class, which predominate over
questions affecting any individual class member are, inter alia, the
following:
4
(a) whether defendants have engaged in conduct constituting unfair
dealing by failing to maximize shareholder value through an adequate auction
or market check process;
(b) whether the proposed buy-out is grossly unfair to the public
stockholders of Mycogen;
(c) whether defendants have failed to disclose all material facts
relating to the buy-out proposal including the potential and expected
positive future financial benefits which they expect to derive from Mycogen;
(d) whether defendants have engaged and are continuing to engage in
a plan and scheme to eliminate the public stockholders of Mycogen through
fraudulent, deceptive, and coercive means and devices;
(e) whether defendants willfully and wrongfully failed or refused to
obtain or attempt to obtain a purchaser for the assets of Mycogen at a price
higher than the buy-out proposal;
(f) whether plaintiff and the other members of the Class would be
irreparably damaged were the transaction complained of herein consummated;
(g) whether defendants have breached or aided and abetted the breach
of the fiduciary and other common law duties owed by them to plaintiff and the
members of the Class; and
(h) whether defendants are pursuing a scheme and course of business
designed to eliminate the public stockholders of Mycogen in violation of the
laws of the State of California.
19. Plaintiff is a member of the Class and is committed to prosecuting
this action. Plaintiff has retained competent counsel experienced in
litigation of this nature. The claims of the
5
plaintiff are typical of the claims of other members of the Class, and
plaintiff has the same interests as the other members of the Class. Plaintiff
does not have interests antagonistic to or in conflict with those it seeks to
represent. Plaintiff is an adequate representative of the Class.
20. The likelihood of individual class members prosecuting separate
individual actions is remote due to the relatively small loss suffered by
each Class member as compared to the burden and expense of prosecuting
litigation of this nature and magnitude. Absent a class action, the
defendants are likely to avoid liability for their wrongdoing, and Class
members are unlikely to obtain redress for their wrongs alleged herein.
There are no difficulties likely to be encountered in the management of the
Class claims. This Court is an appropriate forum for this dispute.
SUBSTANTIVE ALLEGATIONS
21. 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 deceive plaintiff and the Class and deprive them unfairly
of their investment in Mycogen.
22. On April 30, 1998, Dow Chemical announced it wanted to amend an
agreement (the "Agreement") dated January 15, 1996, pursuant to which DowAgro
had already acquired 69% of Mycogen's shares of common stock. Under the terms
of the Agreement, DowAgro cannot acquire all the remaining stock of Mycogen
until February 1999. The amendment Dow Chemical seeks is the right to acquire
the balance of Mycogen's shares now. The proposed transaction would provide
Mycogen shareholders $20.50 cash, per share, exactly the
6
price at which Mycogen closed on the NASDAQ before the proposal was announced
thus giving them no premium for their shares.
23. DowAgro is taking advantage of its majority stock ownership
position in Mycogen by imposing the inadequate Offer on Mycogen's public
stockholders. The Offer is being made at a time when, based upon DowAgro's
inside knowledge and dominance and control of Mycogen, DowAgro can acquire
the balance of Mycogen's shares at prices lower than it expects to pay in
February 1999.
24. Under the terms of the Agreement, the remaining shares of Mycogen
can only be bought by DowAgro (then Dow Elanco) under the following terms:
DowElanco may increase its beneficial ownership of Common Stock above
79.9% of the total outstanding shares only pursuant to a tender offer,
merger or similar transaction (but not a sale of assets) for all of the
outstanding shares of Common Stock that offers each holder of Common
Stock other than DowElanco the opportunity to dispose of some or all of
their Common Stock at the value that an unaffiliated third party would
be expected to pay in an arms' -length transaction negotiated by a
willing seller and a willing buyer for all of Mycogen's then
outstanding shares of Common Stock and not taking into account the
potentially controlling position of DowElanco (a "Buyout Transaction").
25. DowAgro announced the Offer during the period when the Agreement
precludes its acquisition of the remainder of Mycogen's publicly traded
shares of Mycogen because DowAgro believes that the price of Mycogen's shares
will increase prior to February 1999 and wishes to acquire those shares at a
lower price than it believes it will have to pay on that date.
26. Because of its position of dominance and control of Mycogen,
DowAgro has announced the Offer at this time so that it can cap the price of
Mycogen at no more than the approximate amount of the Offer, thereby limiting
the price it will have to pay for
7
the balance of Mycogen's stock. By announcing the Offer now, DowAgro has
locked in the offer price and avoided having to make a higher offer were
Mycogen's stock, unaffected by the Offer, to rise between now and February
1999.
27. Besides being the largest stockholder of Mycogen, DowAgro has 5 of
the 6 members on Mycogen's Board. Thus, DowAgro seeks, through its
hand-picked Board for Mycogen, to acquire Mycogen's business, growth, and cash
flow and squeeze out Mycogen's public stockholders at a price which is wholly
inadequate.
28. Even in light of what had been publicly disclosed about Mycogen's
present business and future prospects, the Offer is grossly unfair,
inadequate, and provides value to Mycogen's shareholders substantially below
the fair or inherent value of the Company. The intrinsic value of the equity
of Mycogen is materially greater than the consideration contemplated by the
Offer price, taking into account Mycogen's pharmaceutical business, asset
value, liquidation value, its expected growth, and its revenues and cash flow.
29. The Offer is wrong, unfair, harmful to Mycogen's public
stockholders, wholly inadequate, and will deny Class members their right to
share proportionately in the true value of Mycogen's valuable assets,
profitable business, and future growth in profits and earnings, while
usurping the same for the benefit of defendants.
30. The Offer is not the result of arm's-length negotiations but was
fixed arbitrarily by DowAgro, which dominates and controls Mycogen, as part
of its unlawful plan and scheme to obtain 100%
8
ownership of Mycogen at the lowest possible price and to usurp for itself
Mycogen's profitable business.
31. Defendants have violated fiduciary and other common law duties owed
to plaintiff and the other members of the Class in that it is using its
dominant control position over Mycogen to enrich itself at the expense of
Mycogen's other stockholders.
32. As a result of defendants' actions, plaintiff and the Class have
been and will be damaged by breaches of fiduciary duty and, therefore,
plaintiff and the Class will not receive the fair value of Mycogen's assets
and businesses.
33. Unless enjoined by this Court, defendants will continue to breach
their fiduciary duties owed to plaintiff and the Class, and will succeed in
their plan to exclude plaintiff and the Class from the fair proportionate
share of Mycogen's valuable assets and businesses, all to the irreparable
harm of the Class.
34. Plaintiff and the Class have no adequate remedy of law.
PRAYER FOR RELIEF
WHEREFORE, plaintiff prays for judgment and relief as follows:
1. declaring that this lawsuit is properly maintainable as a class
action and certifying plaintiff as representative of the Class;
2. declaring that the defendants and each of them have committed or
aided and abetted a gross abuse of trust and have breached their fiduciary
duties to plaintiff and the other members of the Class;
3. declaring the transaction to be a nullity;
9
4. 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 transaction;
5. in the event the transaction is consummated, rescinding it and
setting it aside;
6. ordering defendants, jointly and severally, to account to plaintiff
and the Class for all profits realized and to be realized by them as a result
of the transaction complained of and, pending such accounting, to hold such
profits in a constructive trust for the benefit of plaintiff and other
members of the Class;
7. ordering defendants to permit a stockholders' committee comprising of
class members and the representatives only to ensure a fair procedure,
adequate procedural safe-guards, and independent input by plaintiff and the
Class in connection with any transaction for the public shares of Mycogen;
8. awarding compensatory damages against defendants, jointly and
severally, in an amount to be determined at trial, together with prejudgment
interest at the maximum rate allowable by law;
9. awarding plaintiff and the Class their costs and disbursements and
reasonable allowances for plaintiff's counsel and experts' fees and expenses;
and
10
10. granting such other and further relief as may be just and proper.
DATED: May 1, 1998 MILBERG WEISS BERSHAD
HYNES & LERACH LLP
WILLIAM S. LERACH
ALAN SCHULMAN
DARREN J. ROBBINS
/S/ Alan Schulman
-----------------------------------
ALAN SCHULMAN
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
WECHSLER HARWOOD HALEBIAN
& FEFFER LLP
SAMUEL K. ROSEN
488 Madison Avenue
8th Floor
New York, NY 10022
Telephone: 212/935-7400
Attorneys for Plaintiff
11
MILBERG WEISS BERSHAD
HYNES & LERACH LLP
WILLIAM S. LERACH (68581)
ALAN SCHULMAN (128661)
DARREN J. ROBBINS (168593)
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
WECHSLER HARWOOD HALEBIAN
& FEFFER LLP
SAMUEL K. ROSEN
488 Madison Avenue
8th Floor
New York, NY 10022
Telephone: 212/935-7400
Attorneys for Plaintiff
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SAN DIEGO
HARBOR FINANCE PARTNERS, ) Case No. 720256
Individually and On Behalf of All )
Others Similarly Situated, ) CLASS ACTION
)
Plaintiff, )
) JURY DEMAND
vs. )
)
MYCOGEN CORPORATION, CARLTON J. )
EIBL, JOHN L. HAGAMAN, NICKOLAS D. )
HEIN, LOUIS W. PRIBILA, WILLIAM C. )
SCHMIDT, G. WILLIAM TOLBERT, DOW )
AGROSCIENCES and DOES 1-25, )
inclusive. )
)
Defendants. )
)
- ------------------------------------- )
Plaintiff demands a trial by jury.
DATED: May 1, 1998 MILBERG WEISS BERSHAD
HYNES & LERACH LLP
WILLIAM S. LERACH
ALAN SCHULMAN
DARREN J. ROBBINS
/S/ Alan Schulman
-----------------------------------
ALAN SCHULMAN
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
WECHSLER HARWOOD HALEBIAN
& FEFFER LLP
SAMUEL K. ROSEN
488 Madison Avenue
8th Floor
New York, NY 10022
Telephone: 212/935-7400
Attorneys for Plaintiff
2