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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
(AMENDMENT NO. 2)
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Dynamics Corporation of America
(Name of Subject Company)
Dynamics Corporation of America
(Name of Person(s) Filing Statement)
Common Stock, par value $0.10 per share
(Including the associated Series A Cumulative
Participating Preferred Stock Purchase Rights)
(Title of Class of Securities)
268039 10 4
(CUSIP Number of Class of Securities)
Henry V. Kensing
Vice President, General
Counsel and Secretary
475 Steamboat Road
Greenwich, Connecticut 06830-7197
(203) 869-3211
(Name, address and telephone number of person authorized to receive
notices and communications on behalf of the person(s) filing statement).
With a Copy to
Alan C. Myers
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
(212) 735-3000
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This Amendment No. 2 amends and supplements the
Solicitation/Recommendation Statement on Schedule 14D-9
(the "Schedule 14D-9") of Dynamics Corporation of America
(the "Company"), filed in connection with the tender
offer by SB Acquisition Corp., a wholly owned subsidiary
of WHX Corporation, for shares of common stock (including
the associated Series A Cumulative Participating
Preferred Stock Purchase Rights) of the Company.
Capitalized terms used herein shall have the definitions
set forth in the Schedule 14D-9.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit
No.
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Exhibit 13 Press Release issued by Dynamics
Corporation of America, dated April 29, 1997.
Exhibit 14 Order in Dynamics Corporation of America v.
WHX Corporation and SB Acquisition Corp.
(3:97 CV 702 (GLG)), dated April 29, 1997.
SIGNATURE
After reasonable inquiry and to the best of my
knowledge and belief, I certify that the information
set forth in this statement is true, complete and
correct.
Dated: April 29, 1997 DYNAMICS CORPORATION OF AMERICA
By: /s/ Henry V. Kensing
Henry V. Kensing
Vice President,
General Counsel and
Secretary
EXHIBIT INDEX
Exhibit
No. Description
Exhibit 13 Press Release issued by Dynamics
Corporation of America, dated April 29,
1997
Exhibit 14 Order in Dynamics Corporation of America v.
WHX Corporation and SB Acquisition Corp.
(3:97 CV 702 (GLG)), dated April 29, 1997
NEWS RELEASE
FOR IMMEDIATE RELEASE
FROM: Dynamics Corporation of America
475 Steamboat Road
Greenwich, Connecticut 06830-7197
Contact: Henry V. Kensing
(203) 869-3211
WHX Offer For Dynamics Corporation of
America Preliminarily Enjoined
Greenwich, Connecticut -- April 29, 1997 --
Dynamics Corporation of America (NYSE:DYA) announced
today that Judge Gerard L. Goettel of the United
States District Court for the District of Connecticut
has issued a preliminary injunction against WHX
Corporation in connection with its tender offer for up
to 649,000 shares of Dynamics common stock. WHX
was ordered to make further and complete disclosures
on certain issues and to extend the tender offer,
which is presently scheduled to expire at 12:00
midnight tonight, for an additional 20 days.
Dynamics Corporation of America is a
diversified company which manufactures electronic
components, mobile vans and transportable shelters for
specialized electronic and medical diagnostic
equipment, portable electric housewares and commercial
appliances, air distribution equipment, specialized
air-conditioning equipment and generator sets. The
Company currently holds a 44.1% stake in CTS
Corporation, an Indiana corporation headquartered in
Elkhart whose shares are listed on the New York Stock
Exchange (NYSE: CTS) and which manufactures electronic
and electromechanical components for the automotive,
data processing, communications equipment, instruments
and controls, defense and aerospace and consumer
electronic markets.
# # #
UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
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DYNAMICS CORPORATION OF :
OF AMERICA, :
:
Plaintiff, :
: 3:97 CV 702 (GLG)
-against- :
:
WHX CORPORATION and :
SB ACQUISITION CORP., :
:
Defendants. :
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This matter comes before the Court on plaintiff's motion for a
preliminary injunction enjoining defendants WHX Corporation and SB
Acquisition Corporation, a subsidiary of WHX formed solely for purposes
of the instant transaction ("WHX"), from (1) acquiring shares of
plaintiff Dynamics Corporation of America ("DCA") stock as part of an
existing tender offer commenced on March 3, 1997 with the ultimate
objective being a merger and (2) from making false or misleading
statements in its solicitation and other related relief until WHX
complies with the federal securities laws. For the reasons discussed
below, plaintiff's motion for injunctive relief (document #4) is
GRANTED.
FACTS
DCA is a diversified manufacturer of commercial and industrial
products. DCA also holds a 44.1% stake in CTS Corporation. WHX is a
domestic integrated steel manufacturer; SB Corporation is a wholly
owned subsidiary of WHX that was organized to act as the acquiring
corporation in connection with the WHX tender offer that forms the basis
of this litigation. Ronald LaBow ("LaBow") is the Chairman of WHX.
Warren Lichtenstein ("Lichtenstein") is a holder of approximately 5% of
DCA stock. In July 1996, Lichtenstein filed with the SEC a Statement on
Schedule 13D stating that as of July 26, 1996, he beneficially owned
209,700 shares (or 5.5%) of DCA's outstanding common stock.
LaBow began purchasing DCA shares in the open market on March 4,
1997. On March 13, 1997, the last business day before the record date
for the DCA 1997 annual meeting of shareholders, LaBow negotiated with
Lichtenstein for the purchase of 80,000 shares of DCA stock at $32.50
per share-- $7.50 per share less than the tender offer price made less
than three weeks later. The number of shares sold were enough to relieve
Lichtenstein of his 13D filing obligations. While Lichtenstein
subsequently purchased 51,500 shares at $45 per share-- a price $7.50
per share higher than he had received from WHX a few weeks earlier--
this purchase was not enough to set him above the 5% reporting
threshold. Defendants contend that prior to this sale, Lichtenstein and
WHX had no business contacts regarding DCA.
WHX continued to purchase additional DCA shares in the open market
on March 17, 18, and 24. These purchases totaled 9,600 shares. No
further purchase offers were made until after the tender offer was
announced on March 31, 1997. Under the terms of tender offer, WHX stated
its intent to acquire up to 17% of DCA's outstanding common stock at $40
per share. This price was later raised to $45 per share. (If completed
this would still leave WHX with less than 20% of the stock-- an
important dividing line.)
DISCUSSION
There are two distinct bases for the plaintiff's motion. The more
definitive one is the claim that WHX is part of a group under ss. 13D of
the 1934 Act in that they have aligned themselves with Lichtenstein and
his affiliates. If there is in fact a group (and it takes only two
parties to make a group) it will have more than 20% of the stock and the
proposed merger of WHX with DCA would be prohibited for five years by
New York Business Corporate Law ss. 912(b).(1) In addition, if
defendants complete the tender offer, with or without Lichtenstein, it
would trigger Article XV of DCA shareholder's rights agreement which
requires an 80% affirmative vote of the shareholders to merge, rather
than the 2/3 vote required by ss. 912(b), simply by having more than 5%
of stock. Moreover, the failure to disclose Lichtenstein's cooperation
would violate the Williams Act as described below. Both sides have
submitted extensive briefing on the question of whether Lichtenstein is
working in collaboration with the defendants' interest and both sides
deny the need for an evidentiary hearing claiming that the affidavits
and transcripts presented clearly favor their argument that there is or
is not a group.
Lichtenstein clearly is a player in this corporate drama. While we
cannot say with any certainty at this point whether Lichtenstein is
merely prepared to hold the coat of LaBow or whether he is prepared to
enter the fray as a combatant, the resolution of this issue depends, to
a great extent, upon the credibility of Lichtenstein and LaBow, who have
denied such an affinity. As such, this is not an issue easily or,
perhaps properly, determined simply on paper. "[A] judge should not
resolve a factual dispute on affidavits and depositions for then he is
merely sowing a preference for 'one piece of paper to another.'"
Securities and Exchange Commission v. Spectrum, Ltd., 489 F.2d 535,
540 (2d Cir. 1973), quoting, Sims v. Greene, 161 F.2d 87, 88 (3d Cir.
1947). See also Fengler v. Numismatic Americana, Inc., 832 F.2d 745, 747
(2d Cir. 1987)(on preliminary injunction motion, where essential facts
are in dispute, there must be a hearing and appropriate findings of fact
must be made); Forts v. Wart, 566 F.2d 849, 851 (2d Cir. 1977)(motions
for preliminary injunction should not be resolved on basis of
affidavits; evidentiary hearing is required to decided credibility
issues). Accordingly, an evidentiary hearing seems appropriate.
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1 N.Y. Bus. Corp. Law ss. 912 prevents hostile bidders from affecting
the second-step in merger freezeout transactions by prohibiting an
offeror who acquires at least twenty percent of direct or indirect
beneficial ownership of outstanding common stock from voting that
block of stock and thereafter entering into business combinations,
unless the board of the target corporation approves.
The second basis for the proposed injunction concerns misleading
disclosures made by the defendants in violation of ss.ss. 14(a), (d),
and (e) of the Securities and Exchange Act of 1934. The initial tender
offer disclosures were clearly improper in two respects.(2) Moreover,
defendants went forward with these erroneous proposals even though the
SEC had indicated that they were improper. Thereafter, the tender offer
disclosures were amended to eliminate those two objectionable aspects
when the SEC threatened action. The SEC has not offered any further
objections to the amended disclosures. Plaintiff, however, argues that
the amended disclosures are misleading in several respects.
(1) Plaintiff contends that the disclosures are inadequate because
of their failure to admit group status. As we have indicated above, we
are not prepared to rule on that issue without an evidentiary hearing.
(2) Plaintiff also argues that the amended disclosures should
reveal that defendant's initial disclosures were deemed to violate SEC
rules and regulation, yet were made despite SEC advice to the contrary.
However, we do not know of any requirement that one must confess error
in an amended disclosure, provided that the amended disclosure is
thereafter full and complete. Thus, at least with respect to plaintiff's
first two claims, we find WHX's disclosures to be satisfactory at this
time.
(3) In addition, plaintiff points to specific language in the
disclosures that it claims is inadequate. The present disclosures state
that WHX "may be" required to comply with New York law if it is found to
be a group. There is, however, no "may" involved: WHX will be required
to comply with ss. 912(b) if it is found to be in a group since it will
have, collectively, over 20% of the corporation's stock. Conditional
representations in a tender offer are improper. Polaroid Corp. v.
Disney, 862 F.2d 987, 1004-05 (3d Cir. 1988).
(4) Similar conditional use of "may" also is set forth by
defendants with respect to the applicability of Article XV of DCA's
Article of Incorporation. Under that provision, if WHX acquires 5% or
more of DCA's outstanding shares of common stock, an affirmative vote of
80% of DCA shares would be required to approve a merger. The most direct
way around this provision, and indeed the manner being pursued by
defendants, is to have Article XV eliminated as being in violation of
New York ss. 912(b).(3) A more proper way to describe the situation would
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2 Initially, WHX proposed to purchase shares only from shareholders
who could also provide it with a proxy that could be voted at the
plaintiff's 1997 shareholder's meeting which was scheduled to occur
shortly after the tender offer period. This violated the SEC's "all
holders rule" Rule 24(d)-10(a), 17 C.F.R. ss.ss. 240.14(d)-10(a).
It also sought to have a provision allowing it to change of the
number of shares that it intended to purchase without extending
the expiration date of the proposed offer in the event that
certain action was taken by the DCA Board. Under appropriate SEC
rules, such an amendment would require an extension of ten business
days in the event that the change was made more than ten business
day into the offer.
3 Defendants have already filed motion for summary judgment seeking
such relief.
have been to advise shareholders that an 80% vote of the shares would be
required to approve a merger unless the defendants succeeded in having
Article XV stricken.
(5) Plaintiff also complains about the failure of the defendants
to indicate its future plans with respect to shareholders if it is
foreclosed from effecting a merger for five years. (In its brief, WHX
says it is prepared to be a passive investor if it cannot complete the
sought-after back-end merger.) In light of the difficulties defendants
will face in achieving this merger, we believe that WHX's intent in this
regard is material and should be disclosed, at least to the extent
included in the brief.
To obtain a preliminary injunction, a movant must show: (1)
irreparable harm and (2) either (a) a likelihood of success on the
merits or (b) sufficiently serious questions going to the merits to make
them fair grounds for litigation, plus a balance of the hardships
tipping decidedly toward the party requesting the preliminary relief.
ICN Pharmaceuticals, Inc. v. Khan, 2 F.3d 484, 490 (2d Cir. 1993);
Jackson Dairy, Inc. v. M.P. Hood & Sons, Inc., 596 F.2d 70, 72 (2d Cir.
1979). A district court's decision to issue a preliminary injunction is
subject only to an abuse of discretion standard. Spears, Leeds & Kellogg
v. Central Life Assurance Co., 85 F.3d 21, 25 (2d Cir. 1996)(reversal
appropriate only where district court abused its discretion in applying
incorrect law, basing its decision on clearly erroneous findings of
fact, or making an error in the substance or the form of injunction
issued), cert. denied, 117 S. Ct. 609 (1996).
Plaintiff seeks this preliminary injunction relying on the
provisions of the Williams Act amendments to the Securities and Exchange
Act of 1934 ("1934 Act"), adopted by Congress in 1968 in response to the
growing use of cash tender offers as a means of achieving corporate
takeovers. Piper v. Chris-Craft Industries, Inc., 430 U.S. 1, 22 (1977).
The Williams Act was intended to insure that shareholders of companies
for which tender offers are made receive, on a timely basis, meaningful
and accurate information to enable them to make an informed investment
decision. Id. at 35; ICN Pharmaceuticals, Inc. v. Khan, 2 F.3d at 490.
Pursuant to the Williams Act, one making a tender offer must
disclose information specified in ss. 13D of the 1934 Act (regarding
group status) and other information s the SEC may prescribe. Sections
14(d) and (e) of the 1934 Act make it unlawful to misrepresent or omit
to state any material fact. See 15 U.S.C. ss. 78n(d), (e).(4) In the
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4 Materiality for ss. 14(d) and (e) purposes is governed by the same
standard as that governing Rule 10b-5 or Rule 14a-9 and 15, Seaboard
World Airlines, Inc. v. Tiger International, Inc., 600 F.2d 355,
360-61 (2d Cir. 1979), and is defined as follows:
An omitted fact is material if there is a substantial
likelihood that a reasonable shareholder would consider it
important in deciding [whether to tender her stock] . . . It
does not require proof of a substantial likelihood that
disclosure of the omitted fact would have caused the reasonable
investor to change his vote. What the standard does contemplate
is a showing of substantial likelihood that, under all the
circumstances, the omitted fact would have assumed significance
in the deliberations of a reasonable shareholder. Put another
way, there must be a substantial likelihood that the disclosure
of the omitted fact would have been viewed by the reasonable
investor as having significantly altered the 'total mix' of the
information made available.
Prudent Real Estate Trust v. Johncamp Realty, Inc., 599 F.2d 1140,
1147 (2d Cir. 1979), quoting, TSC Industries, Inc. v. Northway,
Inc., 426 U.S. 438, 449 (1976).
context of the Williams Act, a preliminary injunction may be issued
where there is clear and convincing evidence of a pending and continuous
violation of SEC rules and regulations and the moving party has made a
showing of irreparable harm. Maynard Oil Co. v. Deltec PanAmerica S.A.,
630 F. Supp. 502, 507 (S.D.N.Y. 1985); Schmidt v. Enertec Corp., 598 F.
Supp. 1528, 1543 (S.D.N.Y. 1984).
Under the facts as presented by the parties, we find that, at
least with respect to DCA's shareholders who have to make a decision on
whether to tender their shares, they face irreparable harm if they do
not have a full and complete understanding of the ramifications of the
situation. See ICN Pharmaceuticals v. Kahn, 2 F.3d at 489 (curative
disclosure sufficient because shareholders had time to consider
offer); Treadway Companies, Inc. v. Care Corp., 638 F.2d 357, 380 (2d
Cir. 1980)(curative disclosure sufficient only because shareholders had
four months to ponder decision). See also Gearhart Industries, Inc. v.
Smith International, Inc., 741 F.2d 707, 716 (5th Cir. 1984)(finding
14(e) disclosure violation warranted injunctive relief until such time
as proper disclosure was made and a short period thereafter); Pabst
Brewing Co. v. Jacobs, 549 F. Supp. 1068, 1079 (D.Del.)(granting
injunctive relief for corrective disclosure and 30 days cooling-off
period for disclosure violations), aff'd, 707 F.2d 1392 (3d Cir. 1982);
Kirsch Co. v. Bliss and Laughlin Industries, Inc., 495 F. Supp. 488, 507
(W.D.Mich. 1980)(enjoining defendant from purchasing shares until 30
days after filing was amended). Some of DCA's shareholders might not
tender if they are aware of the potential effect of N.Y.Bus. Law ss.
912(b) and DCA's Art. XV. Yet, their tenders cannot be withdrawn after
purchases are effected by WHX, pursuant to the terms of the tender
offer. Conversely, some shareholders who will not tender might do so if
they were provided with such information, but they are locked out of the
offer after the existing stock tender is completed.
Furthermore, defendants cannot claim that they will be harmed by
having to make the disclosures required by law, even if correction of
past misrepresentations causes a delay in the offer. The only claim of
injury by defendants is that it cannot consummate the proposed
purchase today. Certainly, that is one factor to consider. But, we think
that it is important, in weighing this interest, to bear in mind that
the interest is dependent upon the legality of WHX's offer. See Gulf &
Western Industries, Inc. v. Great Atlantic & Pacific Tea Co., Inc., 476
F.2d 687, 698 (2d Cir., 1973).
Finally, in our view, the public interest also is served by
affording the shareholders with the information they need to make a
fully informed decision as to whether to cast their lot with DCA or to
tender their stock and invest their money elsewhere. Such shareholders
are entitled to the degree of candor which has become customary in
business practice and is required by the Williams Act.
CONCLUSION
Accordingly, we GRANT plaintiff's motion for the preliminary
injunction (document #4) to the extent of directing that further and
complete disclosures be made on these subjects by the defendants and
that the tender offer period, which is presently scheduled to expire on
April 29, 1997, be extended for an additional twenty days.
So Ordered.
Dated: April 29, 1997
Waterbury, CT /s/ Gerard L. Goettel
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Gerard L. Goettel
U.S.D.J.
