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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-9
(AMENDMENT NO. 1)
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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 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.
- -------
Exhibit 11 Complaint in Dynamics Corporation of America v. WHX
Corporation and SB Acquisition Corp. (3:97 CV 702 (GLG)),
filed in the United States District Court for the District of
Connecticut on April 14, 1997.
Exhibit 12 Press Release issued by Dynamics Corporation of America,
dated April 14, 1997.
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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 14, 1997 DYNAMICS CORPORATION OF
AMERICA
By: /s/ Henry V. Kensing
-------------------------------------
Henry V. Kensing
Vice President, General Counsel and
Secretary
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EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
- ------- -----------
Exhibit 11 Complaint in Dynamics Corporation of America v. WHX Corporation
and SB Acquisition Corp. (3:97 CV 702 (GLG)), filed in
the United States District Court for the District of Connecticut
on April 14, 1997
Exhibit 12 Press Release issued by Dynamics Corporation of America, dated
April 14, 1997
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UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
DYNAMICS CORPORATION OF AMERICA, : CIVIL ACTION NO.
:
Plaintiff, : 3:97 CV 702 (GLG)
:
VS. :
:
WHX CORPORATION and SB ACQUISI- :
TION CORP., :
:
Defendants. : April 14, 1997
COMPLAINT
Plaintiff Dynamics Corporation of America ("DCA"), by its
attorneys, alleges for its complaint for declaratory, injunctive and other
relief against WHX Corporation ("WHX") and SB Acquisition Corp. ("SB"), upon
knowledge as to itself and upon information and belief as to all other
matters, as follows:
NATURE OF THIS ACTION
1. WHX, through its wholly owned subsidiary SB
(collectively, "WHX"), has commenced an unlawful and unsolicited tender offer
(the "WHX Offer") for, at present, seventeen percent of DCA's outstanding
common stock. The WHX Offer is stated to be the first step in an attempt by
WHX to acquire DCA, which is headquartered in Greenwich, Connecticut and
maintains manufacturing facilities in Bridgeport and New Hartford. As part of
this effort, WHX
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has also announced that it intends to solicit proxies from DCA's shareholders
to attempt to enable it (i) to elect four of its nominees to DCA's Board of
Directors (the "Board") and (ii) to adopt by-laws allowing holders of 9.9% of
DCA's outstanding shares to call a special meeting of shareholders allowing
removal of present directors at any time without cause.
2. In connection with the WHX Offer and proxy solicitation
effort, WHX filed with the Securities and Exchange Commission (the "SEC") and
disseminated to DCA shareholders an offer to purchase (the "Offer to
Purchase") and supplement thereto and filed a preliminary proxy statement,
which contained false and misleading information in violation of the federal
securities laws. As an example, in a Supplement to the Offer to Purchase dated
April 10, WHX acknowledged that it had misstated the position of the SEC that
certain terms of the WHX Offer were unlawful.
3. Among other violations of the federal securities laws,
the WHX Offer originally contained a condition whereby WHX would only purchase
DCA shares from certain tendering shareholders who could transfer or deliver a
valid proxy for the DCA Annual Meeting of Shareholders then scheduled for May
2, 1997. Such discriminatory treatment of the other DCA shareholders who may
wish to have some or all of their shares purchased was a deliberate
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violation of federal law, which explicitly requires that tender offers be
extended to all shareholders of a target company.
4. Incredibly, defendants also admitted that prior to
initiating the original WHX Offer, they had been advised by the staff of the
SEC that the Record Holder Condition is not permissible under the All-Holders
Rule. Without regard to -- indeed, in the face of -- the SEC's advice,
defendants commenced the WHX Offer.
5. WHX also disclosed in its Offer to Purchase that it
purported to reserve the right to increase or decrease the number of shares
purchased in the offer, without being required to extend the expiration date
or certain other deadlines. This, too, was a deliberate violation of
applicable federal law. Again, defendants disclosed that they had been advised
by the staff of the SEC that it took no position on this issue. Again,
defendants have now acknowledged that this was a false statement -- in fact,
the SEC's staff took the position that this provision was also unlawful.
6. The WHX Offer and other of WHX's public disclosures
concerning DCA contain numerous materially false and misleading disclosures in
violation of Sections 13(d), 14(a), (d) and (e) of the Securities Exchange Act
of 1934 (the "Exchange Act") and the SEC rules and regulations
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promulgated thereunder beyond the "two erroneous statements" WHX conceded
making. These statements were disseminated by defendants within this district.
Among other things, the WHX Offer fails to disclose that:
o Despite express denials by WHX to the contrary,
WHX is part of a group under Section 13(d) of the
Exchange Act with Warren Lichtenstein, Steel
Partners II, L.P. and Steel Partners Services Ltd.
(collectively, "Lichtenstein"), that collectively
owns 5.5% of DCA's outstanding common stock;
o Because WHX is part of a Section 13(d) group, upon
completion of the tender offer WHX's proposed merger with
DCA would be prohibited for five years by New York Business
Corporation Law ("NYBCL") ss. 912(b);
o Because WHX is part of a Section 13(d) group, As part of
this Section 13(d) group, the completion of the tender offer
by WHX would trigger DCA's Shareholders' Rights Plan;
o Regardless of the existence of the 13(d) group, if the WHX
Offer is completed, approval of a merger between DCA and WHX
would have to be obtained by an affirmative vote of 80% of
the outstanding shares entitled to vote, rather than the
two-thirds stated in the WHX Offer; and
o Amendment to the DCA by-laws requires the
affirmative vote of 80% of DCA's shareholders, not
the majority as stated by WHX in the preliminary
proxy statement.
7. As a result of WHX's unlawful conduct, DCA shareholders
have suffered and will continue to suffer irreparable injury in that, among
other things, they will be deprived of full and fair disclosure and the
protections Congress and the SEC have determined they should be afforded and
they will be forced to make investment and voting
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decisions on the basis of concededly "erroneous" statements by WHX.
JURISDICTION
8. This Court has jurisdiction over the claims asserted
herein pursuant to Section 27 of the Securities Exchange Act of 1934 (the
"Exchange Act"), 15 U.S.C. ss. 78aa; 28 U.S.C. ss. 1331; and principles of
supplemental jurisdiction, 28 U.S.C. ss. 1367.
THE PARTIES
Plaintiff
9. DCA is a New York corporation with its principal
executive offices located in Greenwich, Connecticut. Founded in 1924, DCA is a
diversified manufacturer of commercial and industrial products with facilities
located in New Hartford and Bridgeport that employ nearly two hundred
employees in this State. DCA's common stock is registered with the SEC under
Section 12 of the Exchange Act and its shares are listed for trading on the
New York Stock Exchange. DCA currently holds a 44.1% stake in CTS Corporation
("CTS"), an Indiana corporation whose shares are also listed on the New York
Stock Exchange and which manufacturers electronic and electromechanical
components for, among others, the defense and aerospace, automotive, computer
equipment and consumer electronics
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markets. The single largest contribution to DCA's earnings
in 1996 came from its equity investment in CTS.
Defendants
10. WHX, a Delaware corporation with its principal executive
offices located in New York City, is primarily a domestic integrated steel
manufacturer. However, due to a strike against WHX by the United Steelworkers
of America which began on October 1, 1996 and has continued to date, no steel
products are being produced or shipped at eight of WHX's plants; WHX lost
approximately $34.6 million in the fourth quarter of 1996.
11. SB, a New York corporation with its principal executive
offices in New York City, is a wholly owned subsidiary of WHX. SB was recently
organized solely to act as the acquiring corporation in connection with the
WHX Offer. SB has no significant assets other than the ownership of
approximately 2.9% of DCA's outstanding shares and engages in no activities
other than those incident to the transactions contemplated by the WHX Offer.
BACKGROUND
12. Ronald LaBow ("LaBow"), Chairman of WHX, has been
described by the press as a corporate "raider." As a longtime bankruptcy
specialist at a New York City investment bank, he earned the reputation as
being one of Wall Street's leading "vulture" investors. LaBow left that firm
in 1989
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to form a partnership that battled for control of the then-bankrupt
Wheeling-Pittsburgh Steel Corporation ("WPS"). WPS emerged from Chapter 11
protection in 1991, with LaBow as Chairman. WPS and other affiliates were
reorganized into a new holding company, WHX, on July 26, 1994.
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LaBow's Prior Takeover Activity
o LaBow's Activities with
Warren Lichtenstein
13. WHX concedes that LaBow and Warren Lichtenstein "have
had business dealings with each other for several years."
14. In particular, although not disclosed by LaBow to DCA
shareholders, LaBow and Lichtenstein, among others, were members of a
dissident shareholders' committee formed in 1994 to effect a change in the
composition of the board of directors of Regency Equities Corp. ("Regency"), a
real estate company. LaBow is, and was at the time, a director of Regency. The
"Regency Shareholders Committee" (the "Committee") filed several Schedule 13Ds
with the SEC pursuant to Section 13(d) of the Exchange Act. According to those
SEC filings, Lichtenstein was chairman of the Committee and LaBow had agreed
to finance part of the proxy fight they waged.
15. According to those SEC filings, the Committee was formed
to solicit proxies to elect a slate of directors which would support a total
or partial liquidation of Regency. The Committee's nominees included
Lichtenstein, LaBow and Steven Wolosky, a lawyer with Olshan Grundman Frome &
Rosenzweig LLP ("Olshan Grundman"), which acted as counsel to the Committee
and is also acting as counsel to
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WHX in connection with the DCA offer and serves as counsel to Lichtenstein and
his affiliated partnerships.
16. Robert Frome, a name partner of Olshan
Grundman, was another reporting person on the Schedule 13D.
Marvin L. Olshan, a name partner of Olshan Grundman, is also
a director and secretary of WHX.
o LaBow's Hostile Attempt
to Take Over Teledyne, Inc.
17. By skimping on pension costs, WHX began to face serious
problems with pension funding and medical care for retiring workers. However,
these cost cutting measures allowed WHX to accumulate a war chest of $440
million. In late 1994, in an effort to ease upcoming negotiations with the
United Steelworkers of America (the "Steelworkers"), WHX sought to acquire
Teledyne, Inc. ("Teledyne"), a California-based aviation and electronics
conglomerate, reportedly to syphon off some of its pension monies.
18. According to public accounts, WHX was hoping to use
Teledyne's $850 million pension surplus to cover costs in settling pension
issues raised in negotiations with the Steelworkers. Despite its hopes, WHX's
unsolicited takeover attempt was rebuffed by Teledyne. In doing so, Teledyne
announced that it would not consider even an all-cash offer from WHX because
WHX did "not offer an attractive
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combination" and there were "no business synergies that
[they could] see whatsoever."
19. WHX continued its unsolicited takeover attempts of
Teledyne. In April 1996, after a sixteen month battle in which WHX made four
bids for Teledyne and launched two proxy fights, Teledyne announced it had
agreed to a $3.2 billion merger with Allegheny Ludlum Steel Corp., the
Pittsburgh-based steelmaker, ending LaBow's efforts for WHX to acquire
Teledyne and its pension surplus.
The WHX Strike
20. Unable to raid Teledyne's surplus pension funds, WHX was
stymied in its ability to resolve its differences over pension and retirement
benefits with the Steelworkers. On or about October 1, 1996, the Steelworkers'
contract expired and 4,500 union workers in three states struck WHX, idling
WHX plants in Pennsylvania, Ohio and West Virginia.
21. The strike continues today, making it the longest strike
against a major steelmaker in a decade. Union officials have called for LaBow
to use WHX's massive stockpile of cash to give the Steelworkers a guaranteed
defined pension plan. LaBow has countered that WHX needs this war chest, in
part to pursue possible acquisitions.
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THE UNLAWFUL WHX TENDER OFFER FOR DCA
22. Faced with the longest strike against a steel mill in a
decade, LaBow turned WHX's attention toward DCA. Among other things, DCA owns
44% of CTS, which has over $100 million in pension surplus and cash.
23. On Thursday, March 27, 1997, just before the Easter
holiday weekend, DCA received an unsolicited offer from WHX for a cash merger
at $40 per share, subject to a number of conditions. WHX peremptorily informed
DCA that if it did not hear from DCA by the close of business the next day,
WHX was authorized to launch a proxy fight and cash tender offer. Contrary to
the disclosure in WHX's Offer to Purchase and other proxy solicitation
materials, DCA promptly acknowledged receipt of WHX's letter on March 27, 1997
and advised WHX that several of DCA's directors were traveling for the Easter
weekend and that DCA's offices would be closed the next day for Good Friday.
DCA's President further stated that he would be in a position to inform all of
the directors the following week of WHX's correspondence and would communicate
further with WHX thereafter.
24. Ignoring DCA's response and showing that its March 27
letter was not really a sincere attempt to open negotiations, on March 31,
1997, WHX filed a Tender Offer Statement on Schedule 14D-1 with the SEC
pursuant to Section
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14(d)(1) of the Exchange Act and mailed its Offer to Purchase to DCA
shareholders. The Offer to Purchase is the principal document setting forth
the terms and conditions of the WHX Offer and is filed as an exhibit to WHX's
Schedule 14D-1.
25. According to the initial Offer to Purchase, WHX
originally proposed to purchase for $40 per share in cash up to a number of
DCA shares (then stated as up to 649,000 shares) which, when combined with the
approximately 2.9% already owned by WHX, would total 19.9% of DCA's
outstanding shares. The WHX Offer is currently scheduled to expire on April
29, 1997.
26. WHX's stated purpose for the WHX Offer is to acquire a
significant equity interest in DCA as the first step in a business combination
of DCA and WHX.
27. WHX has also announced that in connection with DCA's
Annual Meeting, it intends to solicit proxies from DCA's shareholders to
enable it (i) to elect four nominees to the DCA Board of Directors, (ii) to
adopt by-laws allowing holders of 9.9% of DCA's outstanding shares to call a
special meeting of shareholders and thereafter allowing removal of directors
at any time without cause and (iii) to repeal any amendments to DCA's by-laws
made after March 14.
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WHX Flouts the SEC and Then Retreats
28. From the outset, the WHX Offer violated federal law. In
fact, WHX knew that the SEC took this position but both ignored and
misrepresented its view to DCA shareholders.
29. Among other things, the original WHX Offer was not open
to all DCA shareholders. Rather, in violation of the SEC's All-Holders Rule,
17 C.F.R. ss. 240.14d-10(a), WHX had imposed a "Record Holder Condition"
pursuant to which it would only purchase DCA shares from certain tendering
shareholders who could transfer or deliver a valid proxy for the Annual
Meeting.
30. Remarkably, WHX acknowledged that it had been informally
advised by the SEC that the Record Holder Condition is not permissible under
Rule 14d-10(a)(1), yet it still commenced the original WHX Offer in the face
of such a warning.
31. In addition, WHX purported in its original offer to
reserve the right to adjust the number of shares it was willing to purchase
without affording DCA shareholders federally mandated time to consider fully
such a development. WHX is admittedly attempting to acquire only up to a
number of shares through the Offer that when combined with its previous
holdings of DCA will remain below
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the level of ownership which triggers DCA's shareholder rights agreement (the
"Rights Agreement").
32. The Rights Agreement currently is triggered when a
shareholder acquires 20% or commences a tender offer for 25% of the
outstanding common stock. The original WHX Offer provided that in the event
DCA amends its Rights Agreement to reduce the ownership level at which the
Rights Agreement is triggered, the specified percentage of DCA shares that WHX
intends to accept shall automatically be reduced commensurately (the
"Automatic Adjustment").
33. WHX asserted in the original WHX Offer that this
Automatic Adjustment "shall not give rise to any extension of the expiration,
protection or withdrawal dates of the Offer" under SEC Rule 14e-1(b), 17
C.F.R. ss. 240.14e- 1(b). However, Rule 14e-1(b) provides, in pertinent part,
that a tender offer shall not increase or decrease the percentage of the class
of stock being sought unless such offer remains open for at least ten business
days from the date that notice of such change is published or mailed to
shareholders.
34. In its Offer to Purchase, WHX falsely stated that it had
been "informally advised by the staff of the SEC that it does not take any
position on this issue."
35. In furtherance of WHX's announced intentions, WHX filed
a preliminary proxy statement with the SEC on
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March 31, 1997 which, as with the Offer to Purchase and as alleged more fully
below, contains numerous false and misleading statements and material
omissions.
36. WHX also filed a letter to DCA shareholders dated April
7, 1997 with the SEC in furtherance of its proxy solicitation effort. The
letter touted WHX's unlawful $40 offer and proposed merger.
37. Two days later, on April 9, 1997, WHX issued a press
release announcing, without any explanation, that it was amending its tender
offer by (i) unilaterally raising the price of the offer from $40 to $45 per
share; (ii) withdrawing the unlawful Record Holder Condition; and (iii)
removing the unlawful Automatic Adjustment provision, thereby fixing the
number of shares sought to be purchased at up to 649,000 or 17% of the
outstanding shares.
38. The next day, WHX filed with the SEC and disseminated to
DCA shareholders a Supplement to its Offer to Purchase, in which it admitted
not only that it had knowingly and willfully commenced its unlawful tender
offer in the face of the SEC's warning that the conditions at issue would
violate the federal securities laws, but that WHX had misrepresented to DCA
shareholders the SEC's position concerning those matters. Specifically, WHX
revealed that:
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The Offer to Purchase contained two erroneous statements: the first
was regarding the non-compliance of the Record Holder Condition with
the "all holders" provision under Rule 14d-10, and the second was
regarding the non-applicability of the Specified Percentage to Rule
14e-1. In addition, those statements also included [WHX]'s view of
the SEC Staff's position with respect to those two rules. As noted in
this Supplement, the Record Holder Condition has been deleted, and
the Specified Percentage has been changed to a fixed number of Shares
(namely, up to 649,000 Shares). Furthermore, [WHX] erroneously
presented the SEC Staff's position with respect to those two rules.
By sending this Supplement to shareholders, [WHX] is seeking to
provide corrective disclosure; toward this end, [WHX] acknowledges
the SEC Staff's position that the Record Holder Condition is not
permissible under Rule 14d-10 and that the Specified Percentage is
not permissible under Rule 14e-1.
MATERIAL OMISSIONS AND MISREPRESENTATIONS
39. The WHX Offer to Purchase and other proxy
solicitation materials contain numerous material omissions
and misrepresentations.
o The Undisclosed 13D Group
40. WHX failed to inform DCA shareholders of its true
affiliation with Warren Lichtenstein and his affiliates, Steel Partners II,
L.P. and Steel Partners Services, Ltd. (collectively "Lichtenstein").
41. As admitted in the Offer to Purchase and as alleged
above, Lichtenstein and LaBow have acted together with respect to matters of
corporate control and in other business dealings. At a time unknown to DCA,
WHX and Lichtenstein agreed to cooperate and act in concert with
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respect to the WHX Offer, proxy solicitation and proposed
merger.
42. WHX also concedes that LaBow had known of Lichtenstein's
5.5% ownership interest in DCA since late 1994 or early 1995. LaBow approached
Lichtenstein only a few weeks before commencing the WHX Offer to ask if
Lichtenstein would be willing to sell all of his DCA shares to WHX or to
establish a joint arrangement for WHX to acquire additional shares of DCA.
43. Lichtenstein agreed to sell 80,000 DCA shares to WHX for
$32.50 on March 13, only two weeks before LaBow proposed the merger between
DCA and WHX whereby WHX would pay $40 per DCA share. LaBow has since raised
his offer to $45.
44. Despite express denials of working in concert or as a
group, LaBow purchased 80,000 shares of DCA from his longtime business
associate with the same legal counsel for over $10 less than the price for
which WHX is purportedly offering to acquire DCA shares three weeks later and
after having supposedly been invited by LaBow to join WHX in acquiring
additional DCA shares.
45. In fact, the compelling inference is as follows. WHX and
Lichtenstein arranged for Lichtenstein to sell nearly 3% of DCA's outstanding
shares to WHX in connection with the WHX Offer. Purchasing such shares
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through this transaction would be less expensive to WHX than attempting to buy
the same block of shares on the New York Stock Exchange. Moreover, after the
transaction, Lichtenstein purports to no longer be a reporting person, having
supposedly reduced his DCA shareholdings below 5%, and thereby taking the
position that he does not have to reveal his plans or purposes related to DCA
shares.
46. On March 31, 1997, the day the WHX Offer was announced,
Lichtenstein called DCA from Aspen, Colorado to inquire as to what was
happening in connection with the WHX Offer. In that conversation, Lichtenstein
was asked if he knew who had purchased the 80,000 DCA shares Lichtenstein had
sold on March 13. In an effort to conceal their group status, Lichtenstein
denied knowing who purchased such shares -- an obvious misrepresentation in
light of even the limited disclosure contained in the WHX Offer.
47. Moreover, subsequent to the WHX Offer being commenced,
Lichtenstein stated that, "We are thinking in the range of $40-$60 per share."
48. WHX takes great pains in its Offer to Purchase and its
preliminary proxy statement to deny that WHX and Lichtenstein are acting as a
"group." In view of all of the foregoing, WHX's purported "disclaimer" that it
was acting as a group with Steel Partners and Lichtenstein is false. WHX
failed to disclose to DCA Shareholders its
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status as a group with Lichtenstein, thereby concealing from DCA shareholders,
among other things, certain legally-required disclosures such as the current
identity and background of Lichtenstein and his affiliated partnerships, as
well as their intentions with respect to their holdings in DCA.
49. WHX also failed to disclose that as a result of its
group status, if it successfully completes the WHX Offer, the proposed merger
which WHX threatens to complete will be prohibited for five years pursuant to
applicable New York law.
50. Similarly, WHX did not disclose that if it completes the
WHX Offer, its affiliation with this group will trigger the Rights Agreement,
thereby making the proposed merger prohibitively expensive.
o The 80% Merger Vote
51. WHX has repeatedly disclosed to DCA shareholders that it
currently intends, as soon as possible following completion of the WHX Offer,
to seek to elect four nominees to the DCA board and, thereafter, to seek to
consummate a merger between WHX and DCA.
52. The Offer to Purchase materially misrepresents the
number of votes required to approve the proposed merger between WHX and DCA
and falsely describes
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the steps needed to consummate WHX's proposed merger as
follows:
Pursuant to New York Business Corporation Law ("NYBCL"),
consummation of the Merger would require the adoption of a
resolution by [DCA's] Board of Directors Approving the
Merger and the affirmative vote of the holders of two-thirds
of all of the Shares entitled to vote.
53. Article XV of DCA's Certificate of Incorporation, as
amended in 1975, however, actually provides that such a transaction would
require the affirmative vote of not fewer than 80% of DCA's outstanding stock.
54. WHX, therefore, failed to inform DCA shareholders that
DCA's Certificate of Incorporation provides that a merger with a beneficial
owner of 5% of the outstanding common stock, which WHX would be if the WHX
Offer is successful, requires the affirmative vote of 80% of the shares
entitled to vote, rather than a mere two-thirds. WHX also fails to disclose
the effect of this provision on its plans for DCA. WHX's other solicitation
materials make no disclosure about this critical issue at all.
o The 80% Shareholder Vote to Amend the By-Law
55. Similarly, although WHX has stated that it intends to
seek shareholder approval of by-law amendments which will permit holders of at
least 9.9% of DCA's shares
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to call a special meeting and to permit the removal of directors without
cause, WHX misrepresents what is required for shareholders to approve
amendments to DCA's by-laws.
56. WHX's preliminary proxy statement filed with the SEC
pursuant to Section 14(a) of the Exchange Act falsely represents that:
The affirmative vote of the holders of a majority of the
Shares represented in person or by proxy at the Annual
Meeting is required to adopt [WHX's proposed by-law
amendments].
57. However, Article XV(G) of DCA's Certificate of
Incorporation, as amended in 1975, provides:
The affirmative vote of a majority of the directors then in
office or the affirmative vote of not less than 80% of the
outstanding stock of the Corporation entitled to vote
thereon shall be required to adopt, amend or repeal the
By-Laws of the Corporation.
58. WHX's Offer to Purchase is silent on this issue as well.
o WHX Misrepresents DCA's Prompt Response
59. Both the Offer to Purchase and the preliminary proxy
statement contain a false and misleading statement regarding DCA's response to
WHX's March 27, 1997 letter (the "March 27 Letter") proposing a merger with
WHX.
60. LaBow, as Chairman of the Board of WHX, sent a letter on
March 27, the day before Good Friday and Easter
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Weekend, to the Chairman of DCA to propose a merger. The
March 27 Letter concludes:
If we do not hear from you by the close of business on
Friday, March 28, we are authorized to present this proposal
directly to your stockholders, through a proxy solicitation
at the upcoming annual meeting and through a cash tender
offer.
61. Referring to the March 27 Letter, the Offer to Purchase
incorrectly states that WHX "has not received a response to this letter and
has decided to commence this Offer and to undertake the proxy solicitation . .
. ."
62. Also referring to the March 27 Letter, the Proxy
Statement similarly misstates that "WHX did not receive a response to this
letter, and, thereafter commenced the tender offer." (emphasis added).
63. Despite the approaching holiday weekend, DCA responded
to this merger proposal with a letter sent via Facsimile to WHX on the very
same day it was received. The President of DCA replied to LaBow's March 27
Letter as follows:
I acknowledge receipt of your letter dated and received by
fax today. Unfortunately, our Board of Directors held its
regular monthly meeting yesterday. Several of our directors
are now traveling for the Easter weekend and our offices are
closed tomorrow for Good Friday. I will be in a position to
inform all of the directors next week of your correspondence
and I will
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communicate further with you after
discussing the matter with them.
64. WHX intentionally omitted to inform DCA shareholders
that DCA promptly responded to LaBow's March 27 Letter in the hopes of
creating the false impression that DCA would not properly consider LaBow's
peremptory merger proposal.
THE DCA BOARD OF DIRECTORS REJECTS
THE WHX OFFER AND DETERMINES TO
EXPLORE STRATEGIC ALTERNATIVES
65. Earlier today, DCA issued a press release
disclosing, among other things, that its board of directors had voted
unanimously to recommend that DCA shareholders reject WHX's unsolicited offer
and had concluded that the offer was inadequate, not in the best interests of
DCA and its shareholders and did not adequately reflect the value or prospects
of DCA. The press release also disclosed that the DCA board had determined:
o to explore alternative transactions to maximize
shareholder value;
o to postpone the 1997 annual meeting of
shareholders until August 1, 1997;
o to increase the size of the board of directors to
nine members; and
o to adopt certain amendments to DCA's by-laws.
66. DCA has also filed today and will be mailing to DCA
shareholders a Solicitation/Recommendation Statement on Schedule 14D-9 setting
forth DCA's recommendation with
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respect to the WHX Offer and other information relating
thereto.
IRREPARABLE INJURY
67. Defendants' unlawful conduct has caused and unless
enjoined will continue to cause irreparable harm to DCA, as well as to its
public shareholders in that, among other things:
(a) DCA's public shareholders have been and will continue to
be denied material information to which they are lawfully entitled and which
is essential to informed decision making with respect to whether to hold,
tender or sell in the market, and how to vote their DCA shares; and
(b) the market in DCA common stock is being disrupted and
artificially manipulated so that trading is taking place based on materially
false and misleading information which Defendants have intentionally injected
into the marketplace.
AS AND FOR A FIRST CLAIM FOR RELIEF
[For Violations of Section 14(d) and (e) of the Exchange Act
and the SEC Rules and Regulations Promulgated Thereunder]
68. DCA realleges the allegations in the
preceding paragraphs of the Complaint as if fully set forth
herein.
69. Section 14(d) of the Exchange Act, 15 U.S.C. ss. 78n(d),
makes a tender offer such as Defendants' unlawful
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unless it is accompanied by a full disclosure of the information specified in
Section 13(d) of the Exchange Act and such other information as the SEC may
prescribe as necessary or appropriate in the public interest for the
protection of investors. In addition, the tender offeror must disclose
such additional material information, if any,
as may be necessary to make the required
statements, in light of the circumstances
under which they are made, not materially
misleading.
70. Section 14(e) of the Exchange Act, 15 U.S.C. ss. 78n(e),
makes it unlawful
for any person to make any untrue statement of a material
fact or omit to state any material fact necessary in order
to make the statements made, in the light of the
circumstances under which they are made, not misleading, or
to engage in any fraudulent, deceptive, or manipulative acts
or practices, in connection with any tender, or any
solicitation of security holders in opposition to or in
favor of any such offer, request, or invitation.
71. Sections 14(d) and (e) of the Exchange Act and the SEC
regulations thereunder are intended to insure that shareholders confronted
with a tender offer are provided with all the information about the offeror
and the offer necessary for them to make an informed investment decision about
whether to tender their shares to the offeror, sell their shares in the market
or hold their shares.
25
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72. As set forth above, WHX's Offer to Purchase contains
numerous knowingly untrue statements of material fact and omits to state
material facts necessary to render such statements, in light of the
circumstances under which they were made, not misleading.
73. Defendants' unlawful conduct constitutes violations of
Section 14(d) and (e) of the Exchange Act and the SEC's rules and regulations
promulgated thereunder.
74. DCA and all DCA shareholders have no adequate remedy at
law.
AS AND FOR A SECOND CLAIM FOR RELIEF
[For Violations of Section 14(a) of the
Exchange Act and Rule 14a-9 Promulgated Thereunder]
75. DCA realleges the preceding paragraphs of the Complaint
as if fully set forth herein.
76. Section 14(a) of the Exchange Act and Rule 14a-9 are
intended to ensure that the proxy solicitation process is truthful and to
enable shareholders to evaluate fully the information provided in proxy
materials. SEC Rule 14a-9 provides that:
No solicitation subject to this regulation shall be made by
means of any proxy statement . . . or other communication,
written or oral, containing any statement which at the time
and in the light of the circumstances under which it is
made, is false or misleading with respect to any material
fact, or which omits to state any material fact necessary in
order to
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make the statements therein not false or
misleading . . . .
17 C.F.R. ss. 240.14a-9.
77. WHX's Offer to Purchase, preliminary proxy statement and
other publicly disseminated press releases and other information referred to
above constitute solicitation materials pursuant to Section 14(a) of the
Exchange Act.
78. The knowingly false and misleading material
misrepresentations and omissions outlined above constitute violations of SEC
Rule 14a-9 promulgated under Section 14(a) of the Exchange Act.
79. DCA and all DCA shareholders have no adequate
remedy at law.
AS AND FOR A THIRD CLAIM FOR RELIEF
[For violations of Section 14(a) of the Exchange Act and
Rule 14a-11 Promulgated Thereunder]
80. DCA realleges the preceding paragraphs of the Complaint
as if fully set forth herein.
81. Defendants' April 7, 1997 letter to DCA shareholders
filed with the SEC as "solicitation material" pursuant to SEC Rule 14(a)-11.
SEC Rule 14(a)-11(b)(2) requires that the "identity of the participants in the
solicitation (as defined in Instruction 3 of Item 4 of Schedule 14A) and a
description of their interests, direct or indirect, by security holdings or
otherwise, are set
27
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forth in each communication published, sent or given to
security-holders in connection with the solicitation."
82. In violation of SEC Rule 14a-11, WHX failed to disclose
any such mandated information.
83. DCA and all DCA shareholders have no adequate remedy at
law.
AS AND FOR A FOURTH CLAIM FOR RELIEF
[For Violations of Section 13(d) of the Exchange Act
and the Rules and Regulations Promulgated Thereunder]
84. DCA realleges the preceding paragraphs of the Complaint
as if fully set forth herein.
85. Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder provide that any person who acquires,
directly or indirectly, the beneficial ownership of more than 5% of any class
of equity security of an issuer registered under Section 12 of the Exchange
Act, shall, within 10 days after such acquisition, send to the company at its
principal office and file with the SEC and any exchange where the security is
traded, a Schedule 13D setting forth, among other things, the background and
identity of all persons by whom or on whose behalf the acquisition is being
made, the purpose or purposes of their acquisition of the issuer's stock,
their plans with respect to the issuer, and all contracts,
28
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arrangements, understandings or relationships with respect
to the securities of the issuer.
86. Section 13(d)(3) requires that any person who is the
beneficial owner of more than five percent of a class of a company's stock
file a statement with the SEC which discloses, among other things, whether the
filer has any plans or proposals to sell the company's assets or merge it with
any other persons or make any other major change in its business or corporate
structure. The instructions to Schedule 13D specifically include disclosure of
any plan or proposal to change the size or composition of the board of
directors or to effectuate a sale of the company's stock.
87. The purpose of Section 13(d) and the applicable
regulations is to permit issuers, their stockholders and the investing public
generally to (i) be aware of accumulations of blocks of stock in excess of
five percent of the outstanding shares of any equity security, (ii) ascertain
the background of, and other pertinent information relating to, the holders of
such blocks and (iii) learn the plans and intentions of the holders of such
blocks with respect to the particular issuer in question, all with a view
toward enabling shareholders and the public to make informed investment
decisions based upon full disclosure of all relevant and material information.
29
<PAGE>
88. Section 13(d)(3) of the Exchange Act provides that two
or more persons who act as a group for the purpose of acquiring, holding or
disposing of the registered equity securities of an issuer are deemed a
"person" who must file a Schedule 13D after acquiring beneficial ownership of
more than five percent of those securities. Rule 13d-5 promulgated thereunder,
17 C.F.R. ss. 240.13d-5, provides that "[w]hen two or more persons agree to
act together for the purpose of acquiring, holding, voting or disposing of
equity securities of an issuer, the group formed thereby shall be deemed to
have acquired beneficial ownership, for purposes of Sections 13(d) and 13(g)
of the Act, as of the date of such agreement, of all equity securities of that
issuer beneficially owned by any such persons."
89. WHX and Lichtenstein have agreed to act in concert, as a
group, for the purpose of holding, voting and/or disposing of equity
securities of DCA in furtherance of the WHX Offer, proxy solicitation and
merger proposal. Although they have agreed to act and have acted in concert as
a group and together beneficially own more than five percent of the
outstanding common shares of DCA, WHX has not only knowingly and intentionally
failed to disclose the existence of this group as required by the law, but has
expressly denied such existence in the Offer to Purchase and in the
preliminary proxy statement.
30
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90. According to the instructions which accompany Schedule
13D, if the statement is filed by a group, the requisite information called
for by the Schedule must be given with respect to each member of the group.
91. Although WHX and Lichtenstein have agreed to act, have
acted, and are acting in concert as a group, and together beneficially own
more than five percent of the outstanding common shares of DCA, WHX has not
filed a Schedule 13D at all, as required by Section 13(d) of the Exchange Act.
92. DCA and all DCA shareholders have no adequate remedy at
law.
AS AND FOR A FIFTH CLAIM FOR RELIEF
[For Violation of Section 10(b) of the Exchange Act
and the Rules and Regulations Promulgated Thereunder]
93. DCA realleges the preceding paragraphs as if fully set
forth herein.
94. Section 10(b) of the Exchange Act makes it unlawful for
any person,
to use or employ in connection with the purchase
or sale of any security any manipulative or
deceptive device or contrivance in contravention
of such rules as the Commission may prescribe . .
. .
95. Rule 10b-5 promulgated thereunder, 17 C.F.R. ss.
240.10b-5, makes it unlawful for any person,
to engage in any act, practice, or course of
business which would operate as a fraud or deceit
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<PAGE>
upon any person in connection with the purchase or
sale of any security.
96. As alleged more fully above, Defendants have knowingly
engaged in conduct constituting manipulative, deceptive and fraudulent devices
or contrivances in violation of Section 10(b) of the Exchange Act and Rule
10b-5 promulgated thereunder. Such activities are ongoing, and will continue
absent the relief requested herein.
97. Because of the clandestine nature of Defendants' scheme,
DCA is in the best position to seek injunctive relief to protect the interests
of all of its shareholders.
98. DCA and all DCA shareholders have no adequate remedy at
law.
AS AND FOR A SIXTH CLAIM FOR RELIEF
[Declaratory Relief with Respect to Defendants' Demand to
Inspect Certain DCA Corporate Records]
99. DCA realleges the preceding paragraphs as if fully set
forth herein.
100. As part of their continuous plan and scheme to acquire
DCA at an inadequate price, Defendants, by letter dated April 3, 1997 directed
to DCA's Greenwich headquarters, have purported to demand certain information
from DCA regarding DCA's shareholders and certain beneficial ownership records
for the stated purpose of communicating
32
<PAGE>
with DCA's shareholders regarding matters to be voted upon at DCA's upcoming
annual meeting of shareholders.
101. DCA has provided WHX with certain information in
response to its request. WHX has taken the position that it is entitled to
certain additional information, including a list of certain non-objecting
beneficial owners of DCA common stock and other information that does not
appear in WHX's demand to inspect certain DCA corporate records. DCA has
communicated to WHX that it disagrees with this position, and has denied WHX's
request to obtain access to this additional information.
102. Accordingly, DCA seeks a declaration,
pursuant to 28 U.S.C. ss. 2201, that it has satisfied its
obligations in connection with its production of information
in response to SB's Demand.
WHEREFORE, Plaintiff demands judgment:
(i) temporarily, preliminarily and permanently enjoining
Defendants, their respective officers, agents, servants, employees, attorneys,
affiliates and partners and all other persons acting in concert with them or
on their behalf, directly and indirectly, from:
(a) acquiring or attempting to acquire any shares
of DCA stock;
(b) making or continuing or attempting to make
any tender offer, request or invitation for
33
<PAGE>
tenders of any shares of DCA stock, including pursuant to the
purported tender offer commenced by WHX on March 31, 1997;
(c) taking any steps in furtherance of, or to
assist or facilitate the completion of, the tender offer for DCA by
WHX or any affiliate;
(d) soliciting from any DCA shareholder any
proxy, consent or authorization to vote any shares of DCA stock at
the 1997 Annual Meeting;
(e) orchestrating or financing any solicitation
or arranging for the solicitation or revocation of proxies, consents
or authorizations with respect to the shares of DCA's stock;
(f) making any materially false or misleading
statement in any solicitation pertaining to DCA shares; or
(g) otherwise voting, using or attempting to use
any shares of DCA stock as a means of controlling or affecting the
business, management or operations of DCA or seeking to effect or
cause a sale of DCA or some or all of its assets;
unless and until WHX complies, in full, with the federal securities laws; and
unless and until such time in the future as the Court may determine that the
effects of WHX's unlawful conduct have dissipated, including by requiring WHX
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<PAGE>
to terminate its current offer and recommence an offer for
DCA shares on such lawful terms as WHX deems advisable;
(ii) declaring the WHX Offer to be unlawful and in violation
of the federal securities laws;
(iii) declaring WHX's proxy statement and other solicitation
materials to be in violation of Section 14(a) of the Exchange Act and Rule
14a-9 promulgated thereunder;
(iv) declaring that WHX has violated Section 14(a) of the
Exchange Act and the rules and regulations promulgated thereunder;
(v) declaring WHX to be part of a group under Section 13(d)
of the Exchange Act;
(vi) requiring WHX to comply with Section 13(d) and the
rules and regulations promulgated thereunder;
(vii) declaring that DCA has satisfied its obligations under
New York law in connection with its production of information in response to
SB's Demand;
(viii) enjoining WHX from asserting any claims arising out
of the transactions or occurrences that are at issue in this action in any
other forum; and
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(ix) granting such other and further relief as this Court
may deem just and proper, including costs, disbursements and reasonable
attorneys' fees.
PLAINTIFF, DYNAMICS CORPORATION
OF AMERICA
By /s/ Peter M. Holland
------------------------------------
Thomas J. Groark, Jr. (#ct04245)
James Sicilian (#ct05608)
Peter M. Holland (#ct14887)
Day, Berry & Howard
CityPlace I
Hartford, Connecticut 06103-3499
(860) 275-0100
OF COUNSEL:
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
919 Third Avenue
New York, New York 10022
(212) 735-3000
CERTIFICATION
THIS IS TO CERTIFY that a copy of the foregoing was faxed and mailed
this date, postage prepaid, to:
Ilan K. Reich, Esq.
Olshan Grundman Frome & Rosenzweig LLP
505 Park Avenue
New York, New York 10022
Attorneys for Defendants
WHX Corporation and SB Acquisition Corp.
/s/ Peter M. Holland
-------------------------
Peter M. Holland
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NEWS RELEASE
==============================================================================
IMMEDIATE
RELEASE
FROM: Dynamics Corporation of America
475 Steamboat Road
Greenwich, Connecticut 06830-7197
Contact: Henry V. Kensing
(203) 869-3211
DYNAMICS CORPORATION OF AMERICA FILES
SUIT AGAINST WHX CORPORATION'S OFFER
------------------------------------
GREENWICH, CONNECTICUT (April 14, 1997)--Dynamics
Corporation of America (NYSE: DYA) announced today that it has filed suit
against WHX Corporation in the United States District Court for the District
of Connecticut, in connection with the tender offer by WHX for 649,000
Company common shares at a price of $45 per share and related proxy
solicitation by WHX. The complaint principally asserts violations of the
applicable antifraud provisions of the federal securities laws and the
existence of an undisclosed group. The complaint alleges that as a result of
the existence of a group, completion of the tender offer would trigger the
Company's shareholder rights plan. The complaint also asserts that the
Company's charter requires that a merger between the Company and WHX be
approved by holders of 80% of the outstanding Company shares, rather than the
two-thirds stated in the WHX tender offer materials, and that changes to the
Company's by-laws be approved by 80% of the outstanding Company shares, rather
than the 50% stated in the tender offer materials.
The complaint seeks, among other relief, an order directing
WHX to file corrective disclosure, and an order enjoining WHX from taking any
further steps in connection with the tender offer and WHX's related proxy
solicitation, pending compliance by WHX with federal securities laws.
# # #
<PAGE>
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.
# # #
2
