EXHIBIT(A)(10)
Published on October 28, 2009
Exhibit
(a)(10)
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EFiled:
Oct 20 2009 6:17PM
EDT
Transaction ID 27651613
Case
No. 5007-
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v.
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Defendants.
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Plaintiff,
by her undersigned attorneys, for her verified class action complaint against
defendants, alleges upon personal knowledge with respect to herself, and upon
information and belief based, inter alia, upon the
investigation of counsel as to all other allegations herein, as
follows:
NATURE OF THE
ACTION
1. This
is a class action on behalf of the public shareholders of Avocent Corporation
(“Avocent” or the “Company”), against the Company and its Board of Directors
(the “Board”), to enjoin the proposed acquisition of Avocent by Emerson Electric
Co., through its wholly owned subsidiary, Globe Acquisition Corporation
(collectively, “Emerson”). On or around October 6, 2009, the defendants caused
Avocent
to enter
into a merger agreement to be acquired by Emerson in a cash transaction by means
of an all-cash tender offer (the “Tender Offer”) and second-step merger valued
at as much as $1.2 billion (the “Proposed Transaction”). The Tender Offer is
currently expected to close on November 12, 2009. As alleged herein, Emerson
aided and abetted the Individual Defendants’ breaches of fiduciary duty.
Plaintiff seeks to enjoin the Proposed Transaction or, alternatively, rescind
the Proposed Transaction in the event defendants are able to consummate
it.
2. Compounding
the unfairness of the Proposed Transaction is the Individual Defendants’ attempt
to obtain shareholder approval of the Proposed Transaction through materially
incomplete and misleading disclosures contained in the Company’s
Solicitation/Recommendation Statement filed with the United States Securities
and Exchange Commission (“SEC”) on Form SC 14D-9 on October 15, 2009 (the
“Solicitation Statement”).
THE
PARTIES
3. Plaintiff
is, and has been continuously throughout all times relevant hereto, the owner of
Avocent common stock.
4. Defendant
Avocent is a Delaware corporation and maintains its principal executive offices
at 4991 Corporate Drive, Huntsville, Alabama, 35805. Avocent designs,
manufactures, licenses, and sells software and hardware products and
technologies that provide connectivity and centralized management of information
technology (IT) infrastructure in the United States and internationally. Avocent
has three divisions: Management Systems, LANDesk, and Connectivity and Control.
The Management
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Systems
division offers products, such as keyboard, video, and mouse (KVM); LCD console
trays; serial console; power control; digital extension; management appliances;
management software; and embedded manageability technologies, such as
intelligent platform management infrastructure and embedded KVM systems. The
LANDesk division delivers systems, security, and service management software for
desktops, servers, and mobile devices across an enterprise. The Connectivity and
Control division provides managed audio visual infrastructure solutions for
commercial digital signage, presentation, and rental and staging markets.
Avocent’s common stock trades on the NASDAQ under the ticker “AVCT.” As of
August 4, 2009, there were 44,351,911 shares of Avocent common stock
outstanding.
5. Defendant
William H. McAleer (“McAleer”) has been an Avocent director since July 2000.
According to the Company’s Annual Proxy Statement filed with the SEC on Form DEF
14A on April 29, 2009 (the “2009 Proxy”), McAleer is chairperson of the
Company’s Audit Committee and is a member of the Compensation Committee and the
Acquisition and Strategy Committee.
6. Defendant
David P. Vieau (“Vieau”) has been an Avocent director since April 2001.
According to the 2009 Proxy, Vieau is chairperson of the Company’s Compensation
Committee and is a member of the Nominating and Governance
Committee.
7. Defendant
Doyle C. Weeks (“Weeks”) has been an Avocent director since July 2000 and has
served as the Company’s President and Chief Operating Officer since February
2005. Prior to that time, Weeks served as the Company’s Executive Vice
3
President
of Group Operations and Business Development from July 2000 through January
2005.
8. Defendant
Michael J. Borman (“Borman”) has been an Avocent director since July 2008 and
has also served as the Company’s Chief Executive Officer since that
time.
9. Defendant
Harold D. Copperman (“Copperman”) has been an Avocent director since November
2002. According to the 2009 Proxy, Copperman is chairperson of the Company’s
Acquisition and Strategy Committee and is a member of the Audit Committee, the
Compensation Committee, and the Nominating and Governance
Committee.
10. Defendant
Edwin L. Harper (“Harper”) has been an Avocent director since July 2000. In
April 2003 he was elected as Lead Independent Director and was elected as
Chairman of the Board in January 2008. According to the 2009 Proxy, Harper is a
member of the Company’s Acquisition and Strategy Committee.
11. Defendant
Francis A. Dramis, Jr. (“Dramis”) has been an Avocent director since November
2002. According to the 2009 Proxy, Dramis is chairperson of the Company’s
Nominating and Governance Committee and is a member of the Audit Committee and
the Acquisition and Strategy Committee.
12. Defendant
Emerson Electric Co. is a Missouri corporation and maintains its principal
executive offices at 8000 West Florissant Avenue, St. Louis, Missouri, 63136.
Emerson Electric Co. is a diversified global technology company, engages in
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designing
and supplying product technology and delivering engineering services to various
industrial and commercial, and consumer markets worldwide.
13. Defendant
Globe Acquisition Corporation is a Delaware corporation and is a wholly-owned
subsidiary of Emerson Electric Co. that was created for the sole purpose of
effecting the Proposed Transaction.
14. The
defendants identified in ¶¶ 5-11 are collectively referred to herein as the
“Individual Defendants.” By reason of their positions as officers and/or
directors of the Company, the Individual Defendants are in a fiduciary
relationship with plaintiff and the other public shareholders of Avocent, and
owe plaintiff and Avocent’s other shareholders the highest obligations of
loyalty, good faith, fair dealing, due care, and full and fair
disclosure.
15. Each
of the Individual Defendants at all times had the power to control and direct
Avocent to engage in the misconduct alleged herein. The Individual Defendants’
fiduciary obligations required them to act in the best interest of plaintiff and
all Avocent shareholders.
16. Each
of the Individual Defendants owes fiduciary duties of good faith, fair dealing,
loyalty, candor, and due care to plaintiff and the other members of the Class.
They are acting in concert with one another in violating their fiduciary duties
as alleged herein, and, specifically, in connection with the Proposed
Transaction.
CLASS ACTION
ALLEGATIONS
17. Plaintiff
brings this action on his own behalf and as a class action, pursuant to Court of
Chancery Rule 23, on behalf of herself and the public shareholders
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of
Avocent (the “Class”). Excluded from the Class are defendants herein and any
person, firm, trust, corporation, or other entity related to or affiliated with
any defendant.
18. This
action is properly maintainable as a class action.
19. The
Class is so numerous that joinder of all members is impracticable. As of August
4, 2009, there were 44,351,911 shares of Avocent common stock outstanding, held
by scores, if not hundreds, of individuals and entities scattered throughout the
country.
20. Questions
of law and fact are common to the Class, including, among others:
a. Whether
defendants have breached their fiduciary duties owed to plaintiff and the Class;
and
b. Whether
defendants will irreparably harm plaintiff and the other members of the Class if
defendants’ conduct complained of herein continues.
21. Plaintiff
is committed to prosecuting this 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. Accordingly, plaintiff is an adequate
representative of the Class and will fairly and adequately protect the interests
of the Class.
22. 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 that would establish incompatible standards of conduct for
defendants, or adjudications with respect to individual members of the Class
that would,
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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.
23. Defendants
have acted, or refused to act, on grounds generally applicable, and causing
injury to the Class and, therefore, final injunctive relief on behalf of the
Class as a whole is appropriate.
SUBSTANTIVE
ALLEGATIONS
24. On
July 23, 2009, Avocent announced its second quarter 2009 earnings results. The
Company reported sales growth compared to the first quarter of 2009 due to the
contribution from Avocent’s branded products that were up 10%. The Company also
reported operating margin and operational net income improved over the first
quarter of 2009 because margins and earnings benefited from an improved sales
mix and lower operating costs following the Company’s restructuring
initiatives.
25. On
October 6, 2009, Avocent issued a press release wherein it announced it had
reached an agreement to be acquired by Emerson for $25.00 per share in an
all-cash tender offer, an approximate aggregate value of $1.2 billion. The
Tender Offer commenced on October 15, 2009 and is currently expected to close on
November 12, 2009.
26. The
consideration to be paid to plaintiff and the Class in the Proposed Transaction
is also unfair and grossly inadequate because, among other things, the intrinsic
value of Avocent is materially in excess of the amount offered in the Proposed
Transaction, giving due consideration to the Company’s anticipated operating
results, net asset value, cash flow profitability, and established
markets.
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27. The
Proposed Transaction will deny Class members their right to share
proportionately and equitably in the true value of the Company’s valuable and
profitable business, as well as its future growth in profits and earnings, at a
time when the Company is poised to increase its profitability.
28. As
a result, defendants have breached the fiduciary duties they owe to the
Company’s public shareholders because the shareholders will not receive adequate
or fair value for their Avocent common stock in the Proposed
Transaction.
29. Moreover,
to the detriment of Avocent’s shareholders, the terms of the Agreement and Plan
of Merger among Avocent and Emerson (the “Merger Agreement”) substantially favor
Emerson and are calculated to unreasonably dissuade potential suitors from
making competing offers.
30. The
Individual Defendants have agreed to a “No Solicitation” provision in Section
7.04 of the Merger Agreement that unfairly restricts the Board from soliciting
alternative proposals by, among other things, constraining its ability to
communicate with potential buyers, and in some circumstances, even consider
competing proposals. This provision also prohibits the Individual Defendants
from initiating contact with possible buyers, even if the Board believes that
communicating with a potential bidder could reasonably lead to a superior offer
or an offer more closely aligned with the interests of Avocent’s shareholders.
Section 7.04(a) of the Merger Agreement states, in relevant part:
(a) General
Prohibitions. Neither the Company nor any of its Subsidiaries shall, nor shall
the Company or any of its Subsidiaries
authorize or permit any of its or their officers, directors, employees,
investment bankers, attorneys, accountants, consultants or other agents or
advisors (“Representatives”) to, directly or indirectly, (i) solicit, initiate
or take any action to knowingly facilitate or encourage the submission of any
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Acquisition
Proposal, (ii) enter into or participate in any discussions or negotiations
with, furnish any information relating to the Company or any of its Subsidiaries
or afford access to the business, properties, assets, books or records of the
Company or any of its Subsidiaries to, otherwise cooperate in any way with, or
knowingly assist, participate in, facilitate or encourage any effort by any
Third Party that is seeking to make, or has made, an Acquisition Proposal, (iii)
fail to make, withdraw or modify in a manner adverse to Parent the Company Board
Recommendation (or recommend an Acquisition Proposal or take any action or make
any statement inconsistent with the Company Board Recommendation) (any of the
foregoing in this clause (iii), an “Adverse Recommendation Change”), (iv) grant
any waiver or release under any standstill or similar agreement with respect to
any class of equity securities of the Company or any of its Subsidiaries, (v)
approve any transaction under, or any Person becoming an “interested
stockholder” under, Section 203 of Delaware Law or (vi) enter into any agreement
in principle, letter of intent, term sheet, merger agreement, acquisition
agreement, option agreement or other similar instrument relating to an
Acquisition Proposal. It is agreed that any violation of the restrictions
on the Company set forth in this Section by any Representative of the Company or
any of its Subsidiaries shall be a breach of this Section by the
Company.
[Emphasis
added].
31. Section
7.04 of the Merger Agreement goes on to state that Avocent must notify Emerson
of any proposals, offers, or any overtures of interest from other potential
suitors and it must provide the identity of those potential suitors. Section
7.04(c) of the Merger Agreement states, in relevant part:
(c) Required
Notices. The Board of Directors shall not take any of the actions referred to in
Section 7.04 unless the Company shall have delivered to Parent a prior written
notice advising Parent that it intends to take such action, and, after taking
such action, the Company shall continue to advise Parent on a reasonably current
basis of the status and material terms of any discussions and negotiations with
the Third Party. In addition, the Company
shall notify Parent promptly (but in no event later than 24 hours) after receipt
by the Company (or any of its Representatives) of any Acquisition Proposal, any
express indication that a Third Party is considering making an Acquisition
Proposal, or any request for information relating to the Company or any of its
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Subsidiaries or
for access to the business, properties, assets, books or records of the Company
or any of its Subsidiaries by any Third Party that would reasonably be expected
to lead to, result in or facilitate the making of an Acquisition Proposal. The
Company shall provide such notice orally and in writing and shall identify the
Third Party making, and the terms and conditions of, any such Acquisition
Proposal, indication or request. The Company shall keep Parent reasonably
informed, on a reasonably current basis, of the status and material terms of any
such Acquisition Proposal, indication or request and shall promptly (but in no
event later than 24 hours after receipt) provide to Parent copies of all
correspondence and written materials sent or provided to the Company or any of
its Subsidiaries that describe any terms or conditions of any Acquisition
Proposal (as well as written summaries of any oral communications addressing
such matters). Any material amendment to any Acquisition Proposal will be
deemed to be a new Acquisition Proposal for purposes of the Company’s compliance
with this Section 7.04(c).
[Emphasis
added].
32. Furthermore,
Section 7.04 of the Merger Agreement gives Emerson the opportunity to counter
any “Superior Proposal” that is made for Avocent. Section 7.04(d) of the Merger
Agreement states, in relevant part:
(d) “Last
Look.” Further, the Board of Directors shall not make an Adverse Recommendation
Change in response to an Acquisition Proposal unless (i) such Acquisition
Proposal constitutes a Superior Proposal, (ii) the Company
promptly notifies Parent in writing at least five (5) Business Days before
taking that action of its intention to do so, which notice shall attach the most
current version of the proposed agreement under which the transaction
contemplated by such Superior Proposal is proposed to be consummated and the
identity of the Third Party making the Acquisition Proposal, and (iii) Parent
does not make, within the foregoing five (5) Business Day period, a binding
offer capable of being accepted by the Company that in the good faith judgment
of the Board of Directors is at least as favorable to the stockholders of the
Company (in their capacity as such) as such Superior Proposal (it being
understood and agreed that any amendment to the financial terms or other
material terms of such Superior Proposal shall require a new written
notification from the Company and a new five (5) Business Day period under this
Section 7.04(d)).
[Emphasis
added].
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33. The
Merger Agreement also grants Emerson an irrevocable one time option (the “Top-Up
Option”) to purchase an aggregate number of Avocent shares that, when added to
the shares already beneficially owned by Emerson, constitutes one share more
than 90% of the Avocent shares outstanding. The Top-Up Option is only
exercisable after shares have been purchased pursuant to the Tender Offer and
Emerson will pay the same offering price for each Avocent share acquired
pursuant to the Top-Up Provision. Section 2.04 of the Merger Agreement states,
in relevant part:
Top-Up Option. (a) Subject to
Sections 2.04(b) and 2.04(c), the Company grants to Merger Subsidiary, an
irrevocable option, for so long as this Agreement has not been terminated
pursuant to the provisions hereof (the “Top-Up Option”), to purchase from
the Company, up to the number of authorized and unissued Shares equal to the
number of Shares that, when added to the number of Shares owned by Merger
Subsidiary at the time of the exercise of the Top-Up Option, constitutes at
least one Share more than 90% of the Shares that would be outstanding
immediately after the issuance of all Shares to be issued upon exercise of the
Top-Up Option, calculated on a fully-diluted basis or, at Parent’s
election, on a primary basis at the Effective Time (such Shares to be issued
upon exercise of the Top-Up Option, the “Top-Up Shares”).
[Emphasis
added].
34. Section
12.04 of the Merger Agreement contains a “Termination Fee” of $35 million, 2.9%
of the $1.2 billion that will be paid to shareholders for their stock, as
another deal protection device. Moreover, Avocent may be required to reimburse
Emerson $7.5 million for out-of-pocket fees and expenses. Moreover, the
Termination Fee is payable even in the event the Board terminates the Merger
Agreement pursuant to the lawful exercise of its fiduciary duty, which
reinforces the notion that the Termination Fee is an improper deterrent to the
Board’s seeking the best possible price for Avocent’s shareholders.
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35. These
acts, combined with other defensive measures the Company has in place,
effectively preclude any other bidders who might be interested in paying more
than Emerson for the Company, and have the effect of limiting the ability of the
Company’s stockholders to obtain the best price for their shares.
36. On
October 15, 2009, Avocent filed its Solicitation Statement with the SEC
recommending the Proposed Transaction. As alleged below, the Solicitation
Statement omits material information about the Proposed Transaction that must be
disclosed to Avocent’s shareholders to enable them to render an informed
decision as to whether to tender their shares. This omitted information, if
disclosed, would significantly alter the total mix of information available to
the average holder of Acocent’s stock.
37. The
Solicitation Statement omits material information with respect to the process
and events leading up to the Proposed Transaction, as well as the opinion and
analyses of Avocent’s financial advisors:
a. The
Solicitation Statement is materially misleading in that it fails to explain the
amount or nature of future investment banking or other financial services that
Morgan Stanley & Co. Incorporated (“Morgan Stanley”) is currently providing
or expects to provide to Avocent, Emerson, or both. Moreover, the Solicitation
Statement is materially misleading in that it fails, in any fashion, to quantify
the anticipated fees and revenues to Morgan Stanley for the provision of these
services. A reasonable shareholder would find this information material in
assessing the ability of Morgan Stanley to render an impartial fairness opinion,
as well as how much of Morgan Stanley’s significant $16.5
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million
compensation is contingent upon the delivery of a fairness opinion in favor of a
acquisitive transaction;
b. The
Solicitation Statement is materially misleading in that it fails to disclose
critical information concerning the Discounted Cash Flow Analysis conducted by
Morgan Stanley. On one hand, the Solicitation Statement provides a set of
financial forecasts prepared by management considered by Morgan Stanley in
connection with the analyses underlying its fairness opinion. On the other hand,
the Solicitation Statement provides that management adjusted those forecasts at
least once during the process leading up to the Board’s approval of the Merger
Agreement. Nowhere in the Solicitation Statement, however, are any of the
management’s original forecasts disclosed. Likewise, the Solicitation Statement
fails to disclose what effect these “adjustments” had on the forecast. If, in
fact, the adjustments were negative in nature, this information is particularly
material because the consideration being offered in the Proposed Transaction
appears to be at the low end of the range of values resulting from Morgan
Stanley’s Discounted Cash Flow Analysis. Any downward adjustment in these
forecasts would have had the effect of skewing the resulting range of values
downward, thus making the deal price appear to fall within a range of fairness.
Put another way, without these “adjustments,” it is likely that the
consideration being offered by Emerson and approved by the Avocent Board would
not be fair based on the range of values indicated by the Discounted Cash Flow
Analysis. The Solicitation Statement discloses projections of revenue, gross
margin, and operating margin; however the level of disclosure is inadequate for
an investor to calculate net cash flow. Without disclosing projections of
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net cash
flow, forecasts of tax rates, deferred taxes, working capital adjustments, and
capital spending requirements are necessary for shareholders to better
understand the discounted cash flow analysis performed by Morgan Stanley. The
Solicitation Statement also is materially misleading in that it fails to
disclose the key assumptions underlying Morgan Stanley’s selection of discount
rates and implied perpetuity growth rates. The Solicitation Statement also does
not disclose whether Morgan Stanley considered, or management prepared, various
cases or scenarios for the financial forecasts;
c. The
Solicitation Statement discloses that during a meeting on October 4, 2009, the
day before the Board approved the Proposed Transaction, the Board considered a
new proposal regarding the treatment of certain Company equity awards. The
Solicitation Statement, however, fails to disclose any details concerning this
discussion, the proposal by Emerson, or the financial impact it would have upon
the Company’s management and directors. The Solicitation Statement is materially
misleading in that regard, as a reasonable shareholder would find such
information material, especially considering the fact that it could have a
direct affect on the people negotiating and approving a deal with Emerson, and
place their interests at odds with the Company’s other
shareholders;
d. The
Solicitation Statement is materially misleading in that it fails to describe or
quantify the synergies considered by Morgan Stanley and the Avocent Board in
approving the Merger Agreement. This information is material to stockholders who
wish to understand and confirm, among other things, the value to them of the
14
Company
being acquired by a synergistic buyer that can offer increased consideration,
and whether such factors were considered by the Board under the
circumstances;
e. The
Solicitation Statement is materially misleading in that it does not disclose why
the Board deemed it appropriate to approve a merger agreement with such a high,
combined termination fee and expense provision after abandoning a provision that
required a post-signing market check. A reasonable shareholder would find this
information material because the excessive termination fee and expense
provisions serve to deter potential third party buyers who otherwise may have
pursued negotiations with the Company before the Merger Agreement was approved
or as the result of a post-signing market check;
f. The
Solicitation Statement is materially misleading in that it fails to disclose
certain critical information concerning the Comparable Companies Analysis
performed by Morgan Stanley in connection with its Fairness Opinion in support
of the Proposed Transaction. Specifically, the Solicitation Statement is
materially misleading in that it fails to disclose sufficient information
concerning the selection criteria for the companies considered. The Solicitation
Statement also critically fails to disclose which if any, companies Morgan
Stanley excluded from this analysis and for what reason. The Solicitation
Statement indicates that Morgan Stanley analyzed price per share (“P”) divided
by calendar year 2010 estimated earnings per share (“EPS”) to derive the implied
value of Avocent, but it does not indicate the rationale for the selection of
this valuation metric or why pricing multiples of other operating measures such
as revenue; earnings before interest, taxes, depreciation, and amortization
(“EBITDA”); operating income; or
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book
value were not observed. Morgan Stanley also failed to disclose the individual
multiples for each comparable company or its rationale in selecting a P / 2010
EPS range of 9.0x-11.0x to apply to Avocent’s estimated EPS. This selected range
does not provide an independent investor enough information to determine whether
this multiple range is appropriate because Morgan Stanley fails to disclose
summary statistics or any other information regarding the observed comparable
company pricing multiples;
g. The
Solicitation Statement discloses that Morgan Stanley performed a Leveraged
Buyout (“LBO”) Analysis based on forecasts of 2015 EBITDA and 2014 cash and debt
balances, however the source or basis of these forecasts is not disclosed. The
Solicitation Statement only discloses revenue and margin projections through
2012. If projections exist beyond 2012, it is important that these forecasts are
made available to shareholders. The LBO analysis contains the selection of a
6.0x -7.0x multiple of 2015 EBITDA for a financial sponsor to monetize its
investment in Avocent, yet Morgan Stanley fails to disclose the rationale behind
this selected range;
h. The
Solicitation Statement contains disclosure of Morgan Stanley’s Premia Paid
Analysis. However, this analysis is materially insufficient because it omits the
inclusion of premia paid to acquire companies comparable to Avocent. Morgan
Stanley selected a premium range of 25% to 50% based on all observed cash
transactions since September 2007, but failed to disclose summary statistics or
other information regarding the observed premia. It is material for shareholders
to have knowledge of the detailed observations and/or summary statistics of
these observed transactions to determine whether Morgan Stanley’s selected range
is appropriate. The
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Solicitation
Statement omits any mention of a precedent transaction analysis performed by
Morgan Stanley to analyze pricing multiples paid in acquisitions of target
companies deemed comparable to Avocent. Precedent transactions analyses are
ordinarily and customarily included as part of a fairness opinion, and the
absence of any such analysis in this instance is noteworthy. It is material for
Morgan Stanley to disclose why it did not consider or review transactions of
target companies in the information technology infrastructure space. Pricing
indications from transactions involving comparable targets would provide
shareholders material information to evaluate the tender offer and determine
whether or not to tender their shares; and
i. The
Solicitation Statement discloses generic projections concerning anticipated
synergies to be realized in a potential acquisition of Avocent. In light of this
speculation, the Solicitation Statement is materially misleading in that it
fails to disclose the actual projected synergies to be gained by the proposed
acquisition of the Company by Emerson. This information is material to a
reasonable stockholder trying to determine whether Board obtained the best price
reasonably available by understanding the potential cost savings that will be
realized through the Proposed Transaction and whether those savings could have
resulted in higher per share consideration for the Company.
COUNT
I
(Breach
of Fiduciary Duty against the Individual Defendants)
38. Plaintiff
repeats and re-alleges the preceding allegations as if fully set forth
herein.
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39. As
members of the Company’s board of directors, the Individual Defendants have
fiduciary obligations to: (a) undertake an appropriate evaluation of Avocent’s
net worth as a merger/acquisition candidate; (b) take all appropriate steps to
enhance Avocent’s value and attractiveness as a merger/acquisition candidate;
(c) act independently to protect the interests of the Company’s public
shareholders; (d) adequately ensure that no conflicts of interest exist between
the Individual Defendants’ own interests and their fiduciary obligations, and,
if such conflicts exist, to ensure that all conflicts are resolved in the best
interests of Avocent’s public shareholders; (e) actively evaluate the Proposed
Transaction and engage in a meaningful auction with third parties in an attempt
to obtain the best value on any sale of Avocent; and (f) disclose all material
information in soliciting shareholder approval of the Proposed
Transaction.
40. The
Individual Defendants have breached their fiduciary duties to plaintiff and the
Class.
41. As
alleged herein, defendants have initiated a process to sell Avocent that
undervalues the Company and vests them with benefits that are not shared equally
by Avocent’s public shareholders – a clear effort to take advantage of the
temporary depression in Avocent’s stock price caused by the current economic
conditions. In addition, by agreeing to the Proposed Transaction, defendants
have capped the price of Avocent at a price that does not adequately reflect the
Company’s true value. Defendants also failed to sufficiently inform themselves
of Avocent’s value, or disregarded the true value of the Company, in an effort
to benefit themselves. Furthermore, any alternate
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acquirer
will be faced with engaging in discussions with a management team and board that
is committed to the Proposed Transaction.
42. As
such, unless the Individual Defendants’ conduct is enjoined by the Court, they
will continue to breach their fiduciary duties to plaintiff and the other
members of the Class, and will further a process that inhibits the maximization
of shareholder value.
43. Plaintiff
and the members of the Class have no adequate remedy at law.
COUNT
II
(Breach
of the Fiduciary Duty of Disclosure against the Individual
Defendants)
44. Plaintiff
repeats and re-alleges the preceding allegations as if fully set forth
herein.
45. Defendants
have already caused materially misleading and incomplete information to be
disseminated to the Company’s public shareholders. Defendants have an obligation
to be complete and accurate in their disclosures.
46. The
Solicitation Statement fails to disclose material financial information,
including financial information and information necessary to prevent the
statements contained therein from being misleading.
47. The
misleading omissions and disclosures by defendants concerning information and
analyses presented to and considered by the Board and its advisors affirm the
inadequacy of disclosures to the Company’s shareholders. Because of defendants’
failure to provide full and fair disclosure, plaintiffs and the Class will be
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stripped
of their ability to make an informed decision on whether to vote in favor of the
Proposed Transaction, and thus are damaged thereby.
48. Plaintiff
and the members of the Class have no adequate remedy at law.
COUNT
III
(Aiding
and Abetting the Board’s Breaches of Fiduciary Duty against
Avocent
and Emerson)
49. Plaintiff
repeats and re-alleges the preceding allegations as if fully set forth
herein.
50. Defendants
Avocent and Emerson knowingly assisted the Individual Defendants’ breaches of
fiduciary duty in connection with the Proposed Transaction, which, without such
aid, would not have occurred. In connection with discussions regarding the
Proposed Transaction, Avocent provided, and Emerson obtained, sensitive
non-public information concerning Avocent’s operations and thus had unfair
advantages which enabled it to acquire the Company at an unfair and inadequate
price.
51. As
a result of this conduct, plaintiff and the other members of the Class have been
and will be damaged in that they have been and will be prevented from obtaining
a fair price for their Avocent shares.
52. Plaintiff
and the members of the Class have no adequate remedy at law.
WHEREFORE, plaintiff prays for
judgment and relief as follows:
A. Ordering
that this action may be maintained as a class action and certifying plaintiff as
the Class representative;
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B. Preliminarily
and permanently enjoining defendants and all persons acting in concert with
them, from proceeding with, consummating, or closing the Proposed
Transaction;
C. In
the event defendants consummate the Proposed Transaction, rescinding it and
setting it aside or awarding rescissory damages to plaintiff and the
Class;
D. Directing
defendants to account to plaintiff and the Class for their damages sustained
because of the wrongs complained of herein;
E. Awarding
plaintiff the costs of this action, including reasonable allowance for
plaintiff’s attorneys’ and experts’ fees; and
F. Granting
such other and further relief as this Court may deem just and
proper.
|
Dated:
October
20, 2009
|
RIGRODSKY
& LONG, P.A.
|
|||
|
|
By:
|
/s/ Brian D. Long | ||
|
Seth
D. Rigrodsky (#3147)
Brian
D. Long (#4347)
Timothy
J. MacFall
919
N. Market Street, Suite 980
Wilmington,
DE 19801
(302)
295-5310
Attorneys
for Plaintiff
|
||||
|
|
||||
OF
COUNSEL:
GLANCY
BINKOW & GOLDBERG LLP
Lionel Z.
Glancy
Richard
A. Maniskas
1801
Avenue of the Stars, Suite 311
Los
Angeles, CA 90067
(310)
201-9150
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