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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2 TO
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
------------------------
MAXTOR CORPORATION
(Name of Subject Company)
MAXTOR CORPORATION
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
577729 10 6
(CUSIP Number of Class of Securities)
DR. CHONG SUP PARK
PRESIDENT AND CHIEF EXECUTIVE OFFICER
MAXTOR CORPORATION
211 RIVER OAKS PARKWAY
SAN JOSE, CA 95134
(408) 432-1700
(Name, address and telephone number of persons
authorized to receive notice and communications
on behalf of person(s) filing statement)
COPY TO:
DIANE HOLT FRANKLE, ESQ.
GRAY CARY WARE & FREIDENRICH
A PROFESSIONAL CORPORATION
400 HAMILTON AVENUE
PALO ALTO, CA 94301-1825
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<PAGE> 2
Maxtor Corporation, a Delaware corporation (the "Company") hereby amends
and supplements its Solicitation/Recommendation Statement on Schedule 14D-9
dated November 8, 1995, as amended by Amendment No. 1 to Schedule 14D-9 dated
November 9, 1995 (as amended, the "Schedule 14D-9") relating to the tender offer
by Hyundai Acquisition, Inc., a Delaware corporation (the "Purchaser") and a
wholly-owned subsidiary of Hyundai Electronics America, a California Corporation
(the "Parent"), to purchase any and all outstanding shares of common stock, par
value $.01 per share (the "Shares"), of the Company at a price of $6.70 per
share, net to the sellers in cash, upon the terms and subject to the conditions
set forth in the Offer to Purchase, dated November 8, 1995 and in the related
Letter of Transmittal as disclosed in the Tender Offer Statement on Schedule
14D-1 dated November 8, 1995, as amended by Amendment No. 1 to Schedule 14D-1
dated November 28, 1995. All capitalized terms shall have the meanings assigned
to them in the Schedule 14D-9, as amended to date, unless otherwise indicated
herein.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(b)
Background of the Transaction; Past Contacts, Transactions and Negotiations
with Parent and the Purchaser.
This subsection is hereby amended and supplemented by addition of the
following information:
On November 14, 1995, the Company was informed by the Interested
Manufacturer that it was not interested in any form of joint venture or
business combination with the Company. The Interested Manufacturer
indicated that it continues to be interested in joint development of
products between the companies. Discussions with the Interested
Manufacturer are expected to continue.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
(b) Antitrust.
This subsection is hereby amended as follows:
As required by the HSR Act and rules promulgated by the FTC, Parent
expects to file a Notification and Report Form with respect to the Offer,
the Merger and the other transactions contemplated by the Merger Agreement
shortly.
(d) Certain Litigation.
This subsection is hereby amended and supplemented by addition of the
following information:
On November 17, 1995, a purported class action entitled Silber v.
Maxtor Corporation, et al., C.A. No. 14708 (the "Silber Action") was filed
in the Court of Chancery of the State of Delaware in and for New Castle
County. The Silber Action names as defendants each of the current members
of the Board of Directors, the Company, Parent and the Purchaser. As of
this date, none of the defendants have been served. The Silber Action
alleges, among other things, that the defendants violated their fiduciary
duties in structuring the Offer to eliminate the public stockholders of the
Company from continued equity participation in the Company at a price per
Share which is grossly unfair and inadequate, that Parent, the Purchaser
and the Hyundai Shareholders dominate and control the Company and the Board
of Directors giving them access to non-public information relating to the
true value of the Company and preventing a truly independent evaluation of
the Offer, and that the Special Committee was not independent. The Silber
Action seeks relief including, among other things, that the court
preliminarily and permanently enjoin the consummation of the Offer, order
defendants to carry out their fiduciary duties, account for and place in
trust all profits realized from their alleged actions, and award attorneys'
fees and costs. The defendants in the Silber Action believe the allegations
in the complaint are meritless and those defendants which are subject to
the jurisdiction of the court intend to defend against the action
vigorously.
On November 20, 1995, a purported class action entitled Barrington v.
Gallo, et al., C.A. No. 14711 (the "Barrington Action") was filed in the
Court of Chancery of the State of Delaware in and for New
2
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Castle County. The Barrington Action names as defendants each member of the
Board of Directors except Mr. Christ. The Company, Parent, HEI and Mr. Ryal
R. Popps, a former director of the Company, were also named as defendants.
As of this date, none of the defendants have been served. The Barrington
Action alleges that HEI controls and dominates the directors of the Company
and that the Company directors have approved the Parent's $6.70 proposal
notwithstanding the "gross inadequacy and unfairness of the price." The
Barrington Action seeks relief including, inter alia, a preliminary and
permanent injunction against the consummation of the Offer, unspecified
damages and attorneys' fees and costs. The defendants in the Barrington
Action believe the allegations in the complaint are meritless and those
defendants which are subject to the jurisdiction of the court intend to
defend against the action vigorously.
The Wacholder Action filed in the Court of Chancery of the State of
Delaware in and for New Castle County on November 1, 1995, and discussed in
more detail in Schedule 14D-9 and the Offer to Purchase, names as
defendants each member of the Board of Directors except Mr. Christ. The
Company, Parent, HEI and Mr. Poppa, a former director of the Company, were
also named as defendants. As of this date, all of the defendants other than
Parent and HEI have been served.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
Item 9 is hereby amended by addition of the following:
Exhibit 18 Complaint captioned Wacholder v. Gallo, et al., C.A. No. 14668
filed in the Delaware Chancery Court on November 1, 1995.
Exhibit 19 Complaint captioned Silber v. Maxtor Corporation, et al., C.A.
No. 14708 filed in the Delaware Chancery Court on November 17,
1995.
Exhibit 20 Complaint captioned Barrington v. Gallo, et al., C.A. No. 14711
filed in the Delaware Chancery Court on November 20, 1995.
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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.
November 28, 1995
MAXTOR CORPORATION
By /s/ GLENN H. STEVENS
Glenn H. Stevens
Vice President, General Counsel and
Secretary
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DOCUMENT DESCRIPTION NUMBER
- ----------- ------------------------------------------------------------------------- ------
<S> <C> <C>
Exhibit 1 Offer to Purchase dated November 8, 1995. ............................... *
Exhibit 2 Letter of Transmittal dated November 8, 1995. ........................... *
Exhibit 3 Agreement and Plan of Merger among Maxtor Corporation, Hyundai
Acquisition, Inc. and Hyundai Electronics America dated as of November 2,
1995. ................................................................... *
Exhibit 4 Rights Agreement dated as of January 27, 1998 between Maxtor Corporation
and The First National Bank of Boston, as Rights Agent. ................. *
Exhibit 5 Amendment to Rights Agreement dated as of September 10, 1993 between
Maxtor and The First National Bank of Boston, as Rights Agent. .......... *
Exhibit 6 Amendment No. 2 to Rights Agreement dated as of November 2, 1995 between
Maxtor Corporation and The First National Bank of Boston, as Rights
Agent. .................................................................. *
Exhibit 7 Letter to Stockholders of Maxtor Corporation dated November 9, 1995. .... *
Exhibit 8 Stock Purchase Agreement among Hyundai Electronics Industries Co., Ltd.,
Hyundai Heavy Industries Co., Ltd., Hyundai Corporation and Hyundai
Merchant Marine Co., Ltd. and Maxtor Corporation dated September 10,
1993. ................................................................... *
Exhibit 9 Restated Certificate of Incorporation of Maxtor Corporation effective
February 3, 1994. ....................................................... *
Exhibit 10 Manufacturing and Purchasing Agreement between Maxtor Corporation and
Hyundai Electronics Industries Co., Ltd. dated April 27, 1995.
(Confidential treatment has been requested for portions of this
exhibit.)................................................................ *
Exhibit 11 Guaranty and Recourse Agreement between Maxtor Corporation and Hyundai
Electronics Industries Co., Ltd. dated as of August 31, 1995. ........... *
Exhibit 12 Credit Agreement among Maxtor Corporation, as Borrower, and the Initial
Lenders Named therein and the Issuing Bank, as Initial Lenders and the
Issuing Bank, and Citibank, N.A., as Administrative Agent, dated as of
August 31, 1995. ........................................................ *
Exhibit 13 Memorandum of Understanding between Hyundai Electronics Industries Co.,
Ltd. and Maxtor Corporation dated September 19, 1995. ................... *
Exhibit 14 Opinion of Bear, Stearns & Co. Inc. dated November 1, 1995. ............. *
Exhibit 15 Forms of Indemnity Agreements between Maxtor Corporation and its officers
and directors. .......................................................... *
Exhibit 16 Press Release, dated November 1, 1995 issued by Maxtor Corporation. ..... *
Exhibit 17 Press Release, dated November 3, 1995 issued by Maxtor Corporation. ..... *
Exhibit 18 Complaint captioned Wacholder v. Gallo, et al., C.A. No. 14668 filed in
the Delaware Chancery Court on November 1, 1995. ........................
Exhibit 19 Complaint captioned Silber v. Maxtor Corporation, et al., C.A. No. 14708
filed in the Delaware Chancery Court on November 17, 1995. ..............
Exhibit 20 Complaint captioned Barrington v. Gallo, et al., C.A. No. 14711 filed in
the Delaware Chancery Court on November 20, 1995. .......................
</TABLE>
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* Previously filed.
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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
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)
ELAINE WACHOLDER, )
)
Plaintiff, ) Civil Action No. 14668
)
-against- )
)
GREGORY M. GALLO, I.B. JEON, C.S. )
PARK, RYAL R. POPPA, RICHARD D. )
BELANSON, M.H. CHUNG, CHARLES HILL, )
HYUNDAI ELECTRONICS INDUSTRIES CO. )
LTD., HYUNDAI ELECTRONICS AMERICA and )
MAXTOR CORPORATION, )
)
Defendants. )
)
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COMPLAINT
Plaintiff, by her attorneys for her complaint, alleges on information
and belief, except as to paragraph 3, which is alleged upon knowledge:
1. Defendant, Maxtor Corporation ("Maxtor") is a Delaware corporation
having over 33,000,000 shares of common stock issued and outstanding.
2. The individual defendants are directors of Maxtor.
3. Plaintiff is the owner of shares of common stock of Maxtor.
4. Maxtor develops, manufacturers and markets hard disk drives for
desktop and mobile computer systems.
5. Hyundai Electronics Industries Co. Ltd. ("Hyundai") beneficially
owns over 37% of Maxtor's common stock.
<PAGE> 2
Hyundai Electronics America ("Hyundai America") is a subsidiary of Hyundai.
6. Through its 37% ownership of Maxtor's common stock, Hyundai
dominates and controls Maxtor and its board of directors, and effectively has
veto power over any other transaction to acquire Maxtor.
7. Hyundai, through its subsidiary Hyundai America, has offered to
acquire all of the outstanding shares of Maxtor not already owned by Hyundai
for $6.70 per share. Hyundai's offer of $6.70 per share has been unanimously
approved by a special committee of the board of directors of Maxtor.
8. (a) Plaintiff brings this action on her own behalf and on behalf
of all members of her class, namely, all owners of the common stock of Maxtor
who, like plaintiff, are threatened with being frozen out of Maxtor for unfair
and inadequate consideration offered by Hyundai.
(b) The class consists of thousands of members so that joinder of
all members is impracticable;
(c) Most, if not all, questions of law and fact are common to
the class;
(d) The claims of plaintiff herein are typical of the claims of
the class;
(e) Plaintiff will fairly and adequately protect the interests of
the class;
9. The prosecution of separate actions by individual members of the
class would create the risk of inconsistent or
2
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varying adjudications with respect to individual members of the class which
would establish incompatible standards of conduct for defendants, or
adjudications with respect to individual members of the class which would as
a practical matter be dispositve of the interests of the other members not
parties to the adjudications or substantially impair or impede their ability
to protect their interests.
10. The defendants have acted, or refused to act, on grounds generally
applicable to, and causing injury to, the class and, therefore, preliminary and
final injunctive relief on behalf of the class as a whole is appropriate.
11. Prior to Hyundai's offer for the stock of Maxtor, defendants did
not (i) undertake an adequate evaluation of Maxtor's worth as a potential
merger or acquisition candidate or take adequate steps to enhance Maxtor's
value or attractiveness as a merger or acquisition candidate; (ii) effectively
attempt to dispose of Maxtor's assets; (iii) attempt to solicit arms-length
bids to acquire all or part of Maxtor's business; or (iv) act so that the
interests of the public stockholders of Maxtor were protected.
12. In view of the fact that Hyundai controls and dominates the
directors of Maxtor, said directors have approved the proposal of Hyundai to
acquire the assets and business of Maxtor notwithstanding the gross inadequacy
and unfairness of the price.
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13. As a result of the foregoing, defendants have breached their
fiduciary duties to the class.
14. Plaintiff has no adequate remedy at law, and any steps taken to
consummate the proposed acquisition of Maxtor by Hyundai will create
irreparable injury to plaintiff and the class.
WHEREFORE, plaintiff prays for the following relief:
(a) That this action be certified as a class action under Rule
23 of the Rules of this Court;
(b) That defendants, and each of them, be enjoined,
preliminarily and permanently, from consummating the proposed acquisition of
Maxtor by Hyundai;
(c) That the class be awarded damages sustained by virtue of
the claims alleged herein;
(d) That plaintiff and her counsel be allowed the costs and
expenses of this litigation including reasonable attorneys', accountants' and
expert fees; and
(e) That plaintiff and the class be afforded such other,
further and different relief as the Court may deem just and proper in the
premises.
ROSENTHAL MONHAIT GROSS & GODDESS, P.A.
By: /s/ Norman M. Monhait
-----------------------------------
First Federal Plaza
Suite 214
P.O. BOX 1070
Wilmington, Delaware 19801
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
KAUFMAN MALCHMAN KIRBY & SQUIRE, LLP
919 Third Avenue
New York, New York 10022
(212) 771-6600
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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
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)
NATHAN SILBER, on behalf of )
himself and all others similarly )
situated, )
Plaintiff, ) Civil Action No. 14708
)
v. ) Class Action Complaint
)
MAXTOR CORPORATION; MONG HUN CHUNG; )
CHONG SUP PARK, GREGORY M. GALLO; )
IN BAIK JEON; CHARLES F. CHRIST; )
RICHARD D. BALANSON; CHARLES HILL; )
HYUNDAI ACQUISITION, INC. and HYUNDAI )
ELECTRONICS AMERICA, )
)
Defendants. )
)
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INTRODUCTION
Plaintiff brings this action individually and on behalf of the public
shareholders of Maxtor Corporation ("Maxtor" or the "Company") seeking redress
for breaches of fiduciary duties by Maxtor, the Board of Directors of Maxtor
and Hyundai (defined below) in connection with Hyundai's offer to purchase the
Maxtor shares which it does not already own for $6.70 per Maxtor share (the
"Buyout").
THE PARTIES
1. Plaintiff has owned Maxtor common stock for years and currently
holds 100 shares of Maxtor stock which were purchased prior to the Company's
announcement of the Buyout.
2. Defendant Maxtor is a Delaware corporation with executive offices
at 211 River Oaks Parkway, San Jose, California. Maxtor manufactures, designs
and markets magnetic
<PAGE> 2
and optical data storage products, such as magnetic disk drives, optical disk
drives and storage subsystems. As of August 4, 1995, Maxtor had over 52,000,000
shares of common stock outstanding held by 1,827 shareholders of record.
3. Defendant Hyundai Acquisition, Inc. (the "Purchaser"), is a
Delaware corporation and a wholly-owned subsidiary of defendant Hyundai
Electronics America. The Purchaser was formed as an acquisition vehicle in
connection with the Buyout.
4. (a) Defendant Hyundai Electronics America ("HEA") is a California
corporation with principal executive offices at 510 Cottonwood Drive, Milpitas,
California. HEA is engaged in the business of marketing semiconductors and
information systems such as personal computers and monitors.
(b) Defendant HEA is the parent company of Hyundai Electronics
Industries, Co., Ltd. ("HEI"), which is engaged in the business of designing,
manufacturing, assembling and marketing semiconductors, information systems,
telecommunication equipment and other electronic equipment and instruments;
Hyundai Heavy Industries Co., Ltd. ("HHI"), which is engaged in the business of
ship building, the development and manufacture of heavy equipment, and the
design and construction of electric and nuclear power plants; Hyundai
Corporation ("HC"), a general trading company selling consumer and other
manufactured goods, textiles and raw materials; and Hyundai Merchant Marine
Co., Ltd. ("HMM"), which is in the business of shipping and
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freight forwarding. HEI, HHI, HC and HMM are collectively referred to herein as
the "Hyundai Shareholders." The term "Hyundai" as used herein refers
collectively to the Purchaser, HEA and the Hyundai Shareholders.
5. As of October 30, 1995, the Hyundai Shareholders reportedly owned
39.8% of Maxtor's outstanding common stock. As such, together with Hyundai's
domination and control of the Maxtor Board of Directors, the Hyundai
Shareholders effectively control Maxtor and thus owe Maxtor and its public
shareholders fiduciary duties.
6. Defendant Mong Hun Chung ("Chung") is, and has been since February
1994, Chairman of the Board of Directors of defendant Maxtor. Defendant Chung
has also been Chairman of the Board of Directors of HEI since January 1992.
7. Defendant Chong Sup Park ("Park") is President, Chief Executive
Officer ("CEO") and a director of defendant Maxtor. He was appointed CEO and
President in February 1995, and a director in February 1994. Defendant Park has
also held various management positions with HEI. From 1990 to February 1992 he
was Senior Vice President of Sales and Marketing, and from 1985 to 1989 he was
President and CEO of HEA.
8. Defendant In Baik Jeon ("Jeon") is, and has been since February
1994, a director of defendant Maxtor. Prior to 1994, defendant Jeon held
various management positions with Hyundai, including Vice President, Corporate
Planning of HEI from 1991 to 1994 and Senior Vice President of HEA from 1988 to
1991.
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9. Defendant Gregory M. Gallo ("Gallo") is, and has been since
December 1987, a director of defendant Maxtor. Defendant Gallo is also a
partner with the law firm of Gray Cary Ware & Freidenrich, the Company's chief
outside counsel.
10. Defendant Richard D. Balanson ("Balanson") is, and has been since
October 1994, Executive Vice President and a director of defendant Maxtor.
11. Defendant Charles F. Christ ("Christ") is, and has been since
August 1995, a director of defendant Maxtor.
12. Defendant Charles Hill ("Hill") is, and has been since March 1992,
a director of defendant Maxtor.
13. The foregoing individuals, as officers and/or directors of Maxtor,
owe fiduciary duties to plaintiff and the other members of the Class (as
defined below).
CLASS ACTION ALLEGATIONS
14. Plaintiff brings this action pursuant to Rule 23 of the Rules of
this Court, on behalf of himself and all other shareholders of the Company
(except the defendants herein and any persons, firm, trust, corporation, or
other entity related to or affiliated with them and their successors in
interest), and their successors in interest, who are or will be threatened
with injury arising from defendants' actions, as more fully described herein
(the "Class").
15. This action is properly maintainable as a class action for the
following reasons:
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a. The Class is so numerous that joinder of all members is
impracticable. There are hundreds if not thousands of stockholders of Maxtor
stock who are members of the Class.
b. Members of the Class are scattered throughout the United
States and are so numerous that it is impracticable to bring them all before
this Court.
c. There are questions of law and fact that are common to the
Class and that predominate over questions affecting any individual class
member. The common questions include, inter alia, the following:
(i) Whether defendants have engaged in and are
continuing to engage in conduct which unfairly benefits themselves at the
expense of the members of the Class;
(ii) Whether the individual defendants, as officers
and/or directors of the Comapny, and the Hyundai Shareholders, as the
controlling stockholders of Maxtor, have fulfilled, and are capable of
fulfilling, their fiduciary duties to plaintiff and the other members of the
Class;
(iii) Whether plaintiff and the other members of the
Class would be irreparably damaged were defendants not enjoined from the conduct
described herein;
(iv) Whether defendants have initiated and timed the
Buyout unfairly to benefit Hyundai at the expense of Maxtor's public
shareholders.
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d. The claims of plaintiff are typical of the claims of the other
members of the Class in that all members of the Class will be damaged by
defendants' actions.
e. Plaintiff is committed to prosecuting this action and has
retained competent counsel experienced in litigation of this nature. Plaintiff
is an adequate representative of the Class.
f. A class action is superior to any other method available for
the fair and efficient adjudication of this controversy since it would be
impractical and undesirable for each of the members of the Class, who has
suffered or will suffer damages, to bring separate actions in various parts of
the country.
SUBSTANTIVE ALLEGATIONS
16. On or about November 8, 1995, HEA caused to be filed with the
Securities and Exchange Commission ("SEC") its Schedule 14D-1 tender offer
statement (the "Tender Offer"). The Tender Offer purports to explain, inter
alia, the circumstances leading to the Buyout and the reasons for the Maxtor
Board's recommendation that the Buyout be approved by Maxtor's shareholders.
17. Based on the Tender Offer's description of Hyundai's relationship
with Maxtor, it is apparent that for over two years, Hyundai has systematically
entered into agreements with Maxtor and infiltrated management and the Board
of Maxtor in an effort to gain control of Maxtor and ultimately buy out the
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<PAGE> 7
public shareholders of Maxtor at an unfair and inadequate price. This has been
accomplished in breach of the Hyundai Shareholders' and the Maxtor Board's
fiduciary duties owed to plaintiff and the Class.
HYUNDAI GAINS CONTROL OF MAXTOR
18. As explained in the Tender Offer, in early 1993, reportedly due to
sustained losses and increased competition in the disk drive industry, the
Company sought to increase its capital base either by issuing additional equity
or selling all or part of the Company. In March 1993, the Company contacted
HEI and its affiliates to discuss a possible transaction and in May 1993, the
Company retained Bear Stearns to help explore strategic alternatives. After
several months of negotiations, Maxtor announced, on or about September 10,
1993, that it had reached a definitive agreement with HEI regarding a strategic
partnership between the companies.
19. According to the agreement, HEI was to invest $150 million in
Maxtor in exchange for approximately 19.4 million shares of Maxtor common stock
representing a per share purchase price of $7.70 and constituting approximately
40% of Maxtor's outstanding stock (the "Stock Purchase Agreement"). The stock
that was issued to the Hyundai Shareholders was a special series of common
stock entitling the Hyundai Shareholders to representation on Maxtor's Board of
Directors proportionate to their share ownership, and certain voting rights.
Almost immediately, on September 13, 1993, the Hyundai Shareholders
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<PAGE> 8
announced their intention to appoint a new Maxtor chairman to replace James
McCoy, then Chairman of the Company's Board of Directors.
20. On December 20, 1993, The Company's stockholders voted to approve
Hyundai's investment in the Company and to amend and restate the Company's
certificate of incorporation. Thus, on February 3, 1994, the Hyundai
Shareholders purchased 19,480,000 Class A shares of Maxtor for $149,996,000.
21. Also on February 3, 1994, the Hyundai Shareholders nominated
defendants Chung, Park and Jeon as directors of the Company. Those defendants
all held management positions with Hyundai prior to their appointment to the
Maxtor Board and were therefore conflicted in all dealings between Maxtor and
Hyundai. On February 7, 1994, the Maxtor Board of Directors increased
the authorized number of directors from five to eight and elected defendants
Chung, Park and Jeon as directors. Also, on February 7, 1994, the Board of
Directors elected defendant Chung (HEI's Chairman) as Chairman of the Board
of Maxtor.
22. An additional immediate effect of the stock purchase agreement was
to give the Hyundai Shareholders considerable influence over major strategic
and operational decisions of the Company. The Hyundai shareholders' large
equity stake in the Company and the "Consent Rights" granted to them pursuant
to the Stock Purchase Agreement created impediments to a sale of the Company to
a third party. The Consent Rights provide that the Hyundai Shareholders have
approval rights over any
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<PAGE> 9
corporate sale of the Company until February 3, 1999. After 1999, the Hyundai
Shareholders still retain a right of first refusal.
23. Hyundai's control became even stronger in December 1994, when
Maxtor's Board of Directors, which was now being led, for all practical
purposes, by Hyundai Shareholder appointees, began to consider expanding the
relationship with HEI from a purely financial orientation to a more strategic
focus. Towards this end, in January of 1995, the Company and HEI entered into a
memorandum of understanding concerning the creation of a manufacturing
partnership.
24. Further increasing Hyundai's stranglehold on Maxtor, on February 8,
1995, then President and Chief Executive Officer Larry Smart resigned his
position and the Board of Directors of Maxtor appointed defendant Park as
President and Chief Executive Officer of the Company.
Hyundai Plans To Acquire
The Remaining Shares Of Maxtor
- ------------------------------
25. In July 1995, the Company's management (by that time, controlled by
defendant Park) advised the Board (whose Chairman was defendant Chung) that
management would seek out a new credit facility, but that in light of the
Company's financial condition, any such facility would need to be supported by
the guaranty of HEI. The Maxtor Board considered the advisability of engaging
in a more broad-reaching transaction, such as a sale of the Company, but could
not do so largely because of the Consent Rights granted to the Hyundai
Shareholders pursuant to the Stock
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<PAGE> 10
Purchase Agreement. On July 17, 1995, HEI agreed to provide an unconditional
guaranty of up to $100 million of prospective borrowings by the Company.
26. During the Summer of 1995, the Company's management developed a
strategic business plan which was intended to improve the Company's operational
facilities, with the goal of making the Company one of the top three companies
in the disk drive industry within two years. In order to make this plan a
reality, however, Maxtor required significant capital investment in
manufacturing, and management concluded that the Company lacked the financial
resources to fully execute the plan by itself.
27. The Maxtor Board considered the possibility of negotiating an
outsourcing arrangement under which the Company would sell all of its
manufacturing facilities and Hyundai would manufacture and supply the Company
with all of its disk drive requirements.
28. In order to negotiate this investment, Maxtor's full Board of
Directors formed a special committee of supposedly independent directors (the
"Special Committee") comprised of defendants Hill, Christ and Gallo. The
Special Committee in turn retained Bear Stearns as its advisor because Bear
Stearns was familiar with the Company, having represented the Company in
connection with its sale of shares to Hyundai pursuant to the Stock Purchase
Agreement. Not surprisingly, the Special Committee concluded that the universe
of credible buyers for the
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Company's facilities appeared to be limited, and HEI appeared to be the most
logical buyer of the Company's manufacturing assets in light of the financial
and other support previously provided to the Company by HEI and the financial
resources of HEI and its affiliates.
29. On September 19, 1995, the Company and HEI signed a non-binding
memorandum of understanding providing that HEI would acquire all the
Company's manufacturing facilities in Singapore, Hong Kong and Thailand for
$100 million and that HEI and the Company would enter into a long-term
manufacturing and supply agreement under which HEI would manufacture and supply
all the Company's disk drive requirements.
30. While discussions with Hyundai were ongoing regarding the
outsourcing arrangement, Maxtor engaged in discussions with a third party
interested in a strategic alliance, but the interested party soon rejected the
notion of a joint venture or merger solely with Maxtor.
31. The interested third party did express an interest in a joint
venture or business combination with Hyundai, however. Toward that end, the
third party suggested an acquisition of Maxtor by Hyundai and a subsequent
joint venture between the two entities. Hyundai, also expressed interest in
such a transaction.
32. Shortly thereafter, defendant Chung informed defendant Park that
Hyundai was interested in acquiring the common stock of Maxtor that it did not
already own. On October
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<PAGE> 12
16, 1995, Merrill Lynch was retained by Hyundai to evaluate the possibility of
acquiring the remaining equity interest in the Company.
33. On October 17, 1995, Maxtor determined that a sale of the Company
was a feasible alternative to the proposed outsourcing transaction and the
Special Committee was charged with responsibility for negotiating such a sale.
34. By October 24, 1995, HEI informed the Special Committee that it
wished to purchase the remaining Maxtor shares at $5.15 per share. Bear Stearns
advised the Special Committee that based on different models it utilized, it
could justify a range of prices between $6.30 and $12.33 per share. Bear
Stearns further advised the Special Committee that it should accept a price of
$10.75 per share. On October 25, 1995, Maxtor rejected the $5.15 offer and
suggested an acquisition price of $10.75 per share.
35. Negotiations from that point saw Maxtor lower its price
dramatically and often, without similar response from Hyundai. For example, on
October 25, 1995, Hyundai rejected Maxtor's $10.75 counteroffer and simply
reiterated its original $5.15 offer. Despite receiving no counteroffer from
Hyundai, Maxtor, bargaining against itself, dropped its demand by $2 to $8 per
share on October 26, 1995.
36. On October 27, 1995, the Special Committee was advised that
management (i.e., Hyundai) reported that several of the Company's suppliers had
indicated their intention to change
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<PAGE> 13
the terms upon which they extended credit to the Company. The Special Committee
was also informed that these suppliers expressed "discomfort" at the Company's
reaction to Hyundai's original offer.
37. On October 29, 1995, Hyundai increased its offer to $6.15 per
share. The Special Committee immediately reduced its demand further still to
$7.15 per share. Nevertheless, by October 31, 1995, fearing repercussions from
Hyundai, including that Hyundai might have sought to renegotiate terms of the
proposed out-sourcing transaction, the Special Committee agreed to accept the
price of $6.70 per share despite the fact that this price was some $6 below
Bear Stearns' best valuation for the Company's shares and some $4 below the
Special Committee's initial proposal. Hyundai had come up a mere $1.55 from
its original "low-ball" offer.
38. On November 1, 1995, Hyundai publicly announced that it would
acquire the 60.2% of Maxtor's common stock that it did not already own for
$6.70 per Maxtor share.
39. The Buyout offers no premium to Maxtor's shareholders. Although the
price of Maxtor stock has fallen as of late, as recently as September 19, 1995,
Maxtor stock closed at $6 per share and on June 23, 1995, Maxtor stock closed
at $7 per share. Moreover, the offering price is substantially below what Bear
Stearns initially deemed to be a fair price.
40. Because defendant Hyundai controls Maxtor and because of the
Consent Rights granted to the Hyundai
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<PAGE> 14
Shareholders, no third party, as a practical matter, can expect due
consideration of a competing bid for Maxtor without the consent and cooperation
of Hyundai.
41. The Buyout is in furtherance of an unfair plan to take Maxtor
private, which, if not enjoined, will result in the elimination of the public
shareholders of Maxtor. More particularly, the Buyout is in violation of
defendants' fiduciary duties and has been timed and structured unfairly in that:
a. The Buyout is structured to eliminate members of the Class as
shareholders of the Company from continued equity participation in the Company
at a price per share which defendants know or should know is grossly unfair and
inadequate;
b. Hyundai, by virtue of, among other things, its voting and
ownership power, controls and dominates Maxtor and the Maxtor Board of
Directors;
c. Given Hyundai's domination and control of Maxtor and its
Board, the Maxtor Board of Directors cannot be expected independently to
advocate, and protect the best interests of, and to obtain the best price for,
Maxtor's public shareholders;
d. The Special Committee was not truly independent because, among
other things, defendant Gallo's law firm, Gray, Cary, Ware & Friedenrich, is
chief legal counsel to Maxtor which is effectively controlled by Hyundai. His
allegiance to the interests of Maxtor's shareholders is, therefore, suspect;
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<PAGE> 15
e. Hyundai has unique knowledge of the Company and has access to
non-public information relating to the true value of the Company denied or
unavailable to other potential bidders;
f. In view of defendant Hyundai's control of Maxtor under the
circumstances, it is unfair and in violation of defendants' fiduciary duties to
consummate the Buyout without first obtaining a recommendation and input by a
truly independent representative of the Maxtor public stockholders, obtaining
the majority approval of the public shareholders, or otherwise ensuring entire
fairness;
g. The defendants unfairly timed the Buyout to take advantage of
the currently depressed stock price of Maxtor; and
h. The Buyout does not provide plaintiff and the Class with a fair
price for their shares.
42. By reason of the foregoing acts, practices and course of conduct,
plaintiff and the other members of the Class have been and will be damaged.
43. Unless enjoined by this Court, defendants will continue to breach
fiduciary duties owed to plaintiff and the Class and will consummate the buyout
to the irreparable harm of plaintiff and the Class.
44. Plaintiff and the other members of the Class have no adequate
remedy at law.
45. WHEREFORE, plaintiff demands judgment as follows:
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<PAGE> 16
a. Declaring this to be a proper class action and naming plaintiff
as Class representative;
b. Ordering defendants to carry out their fiduciary duties to
plaintiff and the other members of the Class;
c. Granting preliminary and permanent injunctive relief against
the consummation of the Buyout;
d. In the event the Buyout is consummated, rescinding the Buyout
and/or awarding rescissory damages;
e. Ordering defendants, jointly and severally, to pay to plaintiff
and to other members of the Class all damages suffered and to be suffered by
them as the result of the conduct alleged herein;
f. Ordering defendants, jointly and severally, to account to
plaintiff and the Class for all profits realized and to be realized by them as
a result of the conduct complained of and, pending such accounting, to hold
such profits in a constructive trust for the benefit of plaintiff and other
members of the Class;
g. Ordering defendants to permit a stockholders committee,
comprised of class members and their representatives, to ensure a fair
procedure, adequate procedural safeguards, and truly independent input by
plaintiff and the Class in connection with any buyout proposal;
h. Awarding plaintiff the costs and disbursements of the action
including allowances for plaintiff's reasonable attorneys and experts fees; and
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<PAGE> 17
i. Granting such other and further relief as may be just and
proper in the premises.
Dated: November 17, 1995 CHIMICLES, JACOBSEN & TIKELLIS
-------------------------------
Pamela S. Tikellis
Robert J. Kriner Jr.
One Rodney Square
P.O. Box 1035
Wilmington, DE 19899
(302) 656-2500
Attorneys for Plaintiff
OF COUNSEL:
WOLF HALDENSTEIN ADLER FREEMAN
& HERZ LLP
Jeffrey G. Smith
Neil L. Zola
370 Madison Avenue
New York, New York 10016
(212) 545-4600
LAW OFFICES OF EDELSTEIN & FAEGENBURG
Adam Edelstein
26 Court Street
Suite 1503
Brooklyn, NY 11241
(718) 625-3500
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<PAGE> 1
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- -------------------------------------------x
CYNTHIA ALISON BARRINGTON, :
:
Plaintiff, :
:
v. :
:
:
GREGORY M. GALLO, I.B. JEON, C.S. PARK, : C.A. No. 14711
RYAL R. POPPA, RICHARD D. BELANSON, : --------
M.H. CHUNG, CHARLES HILL, HYUNDAI :
ELECTRONICS INDUSTRIES CO. LTD., :
HYUNDAI ELECTRONICS AMERICA and :
MAXTOR CORPORATION, :
:
Defendants. :
:
- -------------------------------------------x
COMPLAINT
Plaintiff, by her attorneys for her complaint, alleges on information
and belief, except as to paragraph 3, which is alleged upon knowledge:
1. Defendant, Maxtor Corporation ("Maxtor") is a Delaware corporation
having over 33,000,000 shares of common stock issued and outstanding.
2. The individual defendants are directors of Maxtor.
3. Plaintiff is the owner of shares of common stock of Maxtor.
4. Maxtor develops, manufactures and markets hard disk drives for
desktop and mobile computer systems.
5. Hyundai Electronics Industries Co. Ltd. ("Hyundai") beneficially
owns over 37% of Maxtor's common stock. Hyundai Electronics America ("Hyundai
America") is a subsidiary of Hyundai.
<PAGE> 2
6. Through its 37% ownership of Maxtor's common stock, Hyundai
dominates and controls Maxtor and its board of directors, and effectively has
veto power over any other transaction to acquire Maxtor.
7. Hyundai, through its subsidiary Hyundai America, has offered to
acquire all of the outstanding shares of Maxtor not already owned by Hyundai
for $6.70 per share. Hyundai's offer of $6.70 per share has been unanimously
approved by a special committee of the board of directors of Maxtor.
8. (a) Plaintiff brings this action on her own behalf and on behalf
of all members of her class, namely, all owners of the common stock of Maxtor
who, like plaintiff, are threatened with being frozen out of Maxtor for unfair
and inadequate consideration offered by Hyundai.
(b) The class consists of thousands of members so that joinder of
all members is impracticable;
(c) Most, if not all, questions of law and fact are common to the
class;
(d) The claims of plaintiff herein are typical of the claims of
the class;
(e) Plaintiff will fairly and adequately protect the interests
of the class;
9. 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 which would establish incompatible
standards of conduct
2
<PAGE> 3
for defendants, or adjudications with respect to individual members of the
class which would 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.
10. The defendants have acted, or refused to act, on grounds generally
applicable to, and causing injury to, the class and, therefore, preliminary and
final injunctive relief on behalf of the class as a whole is appropriate.
11. Prior to Hyundai's offer for the stock of Maxtor, defendants did
not (i) undertake an adequate evaluation of Maxtor's worth as a potential
merger or acquisition candidate or take adequate steps to enhance Maxtor's
value or attractiveness as a merger or acquisition candidate; (ii) effectively
attempt to dispose of Maxtor's assets; (iii) attempt to solicit arms-length
bids to acquire all or part of Maxtor's business; or (iv) act so that the
interests of the public stockholders of Maxtor were protected.
12. In view of the fact that Hyundai controls and dominates the
directors of Maxtor, said directors have approved the proposal of Hyundai to
acquire the assets and business of Maxtor notwithstanding the gross inadequacy
and unfairness of the price.
13. As a result of the foregoing, defendants have breached their
fiduciary duties to the class.
14. Plaintiff has no adequate remedy at law, and any steps taken to
consummate the proposed acquisition of Maxtor by Hyundai will create
irreparable injury to plaintiff and the class.
3
<PAGE> 4
WHEREFORE, plaintiff prays for the following relief:
(a) That this action be certified as a class action under Rule
23 of the Rules of this Court;
(b) That defendants, and each of them, be enjoined,
preliminarily and permanently, from consummating the proposed acquisition of
Maxtor by Hyundai;
(c) That the class be awarded damages sustained by virtue of
the claims alleged herein;
(d) That plaintiff and her counsel be allowed the costs and
expenses of this litigation including reasonable attorneys', accountants' and
expert fees;
and
(e) That plaintiff and the class be afforded such other,
further and different relief as the Court may deem just and proper
in the premises.
ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A.
By: /s/ Norman M. Monhait
---------------------------------------
First Federal Plaza, Suite 214
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
LAW OFFICES OF CURTIS V. TRINKO
310 Madison Avenue, 14th Floor
New York, NY 10017
(212) 490-9500
4
