According to the complaint filed July 7, 2011, the defendants violated securities laws in a proposed merger. The plaintiffs allege that the price offered was unfair at $7.75 per share compared to other valuations of the company as high as $8.00 per share. Further, the compliant charges that the defendants agreed to impermissible “deal-protection” devices. For example, the Board agreed to: (i) a “no-shop” provision that prevents the Company from negotiating with or providing confidential Company information to competing bidders except under extremely limited circumstances; (ii) a “matching rights” provision that allowed the bidder three business days to match any competing proposal in the unlikely event that one emerges; and (iii) a $8.35 million termination fee to be paid to the bidder if the board agrees to a competing proposal. These actions by the defendants, according to the plaintiffs, breached their fiduciary duties.
The complaint also alleges that the defendants caused to be filed with the Securities and Exchange Commission (“SEC”) a false and misleading Proxy Statement on Schedule 14, on June 30, 2011 for the required vote by the company’s shareholders. The plaintiffs assert that the Proxy Statement is false and misleading in that it misstates and/or fails to disclose material information concerning, inter alia, the sales process leading to the Proposed Transaction including specific details regarding why the Board chose to abandon negotiations with Bidder D, a third party bidder, and why Bidder D is accusing the target company of violating its exclusivity agreement and confidentiality agreement. Furthermore, the Proxy Statement omits certain material projections for the company, including free cash flows, as well as key inputs in the analyses performed by Jefferies & Company, Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated. The complaint alleges that these misleading statements and omissions constitute violations of Sections 14(a) and 20(a) of the Exchange Act and the rules promulgated thereunder.
On January 19, 2012, the plaintiff filed a Notice voluntarily dismissing this action without prejudice. This Notice was signed by Judge Stanley R. Chesler 4 days later.