According to a complaint filed November 10, 2011, the defendants allegedly violated state fiduciary duty laws and federal securities laws in connection with a proposed merger and acquisition.
Plaintiff's claims concern and arise from the Agreement and Plan of Merger between the Company and the Bidder Company dated October 24, 2011. The agreement contemplates that Cubist will acquire all of the outstanding shares of common stock of the Company by means of a tender offer (the "Tender Offer") and second step merger for $4.25 per Share in cash, plus one contingent payment right for each Share, which shall represent the right to receive up to $4.50 in cash subject to the fulfillment of certain conditions and/or the attainment of certain milestone.
The Complaint states that the Individual Defendants breached their fiduciary duties by agreeing to the Proposed Transaction for inadequate consideration which undervalues the Company and includes more than half of the consideration in a nontransferable Contingent Payment Right that may only payout after many years and many regulatory hurdles, some of which are not even in the control of the Bidder Company. The Plaintiffs assert that the present consideration offered in the Proposed Transaction is a discount to the target price set by equity analysts following the Company.
The Individual Defendants further breached their fiduciary duties, according to the Plaintiffs, by agreeing to lock up the Proposed Transaction with deal protection devices that preclude other bidders from making a successful competing offer for the Company. Pursuant to the Merger Agreement, the Board agreed to: (i) a strict no-solicitation provision that prevents the Company from soliciting other potential acquirers or even continuing discussions and negotiations with potential acquirers; (ii) a provision that requires the Company to pay the Bidder Company a termination fee of $10 million in order to enter into a transaction with a superior bidder; and (iii) enter into tender and voting agreements with officers/directors of the Company to support the Proposed Transaction and tender their shares in the tender offer. The Plaintiffs believe these provisions substantially and improperly limit the Board's ability to act with respect to investigating and pursuing superior proposals and alternatives including a sale of all or part of the Company.
On November 7, 2011, the Company filed a Solicitation Recommendation Statement with the SEC on Form 14D-9 pursuant to which the Company’s Board recommends that stockholders tender their shares in the Tender Offer and, if necessary, vote in favor of the Merger. Both the Offer to Purchase and 14D9 are materially misleading, or omit material information necessary to render them not misleading. The Proxy contains a number of false and misleading statements that are material to shareholders who are expected to rely upon the Proxy to determine whether to tender their shares with respect to the Proposed Transaction.
According to the notice entered into the Court's docket on October 9, 2012, Plaintiff voluntarily dismissed this action.