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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: June 20, 1997
FAULDING INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 0-13588 04-2769995
- --------------- --------------------- -------------
(State or Other (Commission File No.) (IRS Employer
jurisdiction of Identification
incorporation) Number)
200 Elmora Avenue, Elizabeth, New Jersey 07207
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (908) 527-9100
-----------------------------
- --------------------------------------------------------------------------------
This document consists of 4 consecutively numbered pages; Index to Exhibit
appears on p. 3.
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Item 5. Other Events
On June 3, 1997, the Registrant received a merger proposal
(the "Proposal") from F.H. Faulding & Co. Limited ("Faulding") the parent of
Registrant's majority stockholder, Faulding Holdings Inc. ("Holdings"). In the
Proposal, Faulding offered to acquire all of the outstanding shares of common
stock, par value $0.01 per share (the "Common Stock"), of Registrant not
currently owned by Holdings at a price of $12 per share in cash. Faulding
currently owns approximately 61.5% of the Company's outstanding Common Stock and
would own approximately 73.2% of the Common Stock upon the conversion of its
preferred stock in the Registrant.
The acquisition contemplated by the Proposal would be
structured as a merger pursuant to which a newly organized United States
subsidiary of Faulding would be merged into the Registrant as a result of which
a subsidiary of Faulding would acquire all of the issued and outstanding shares
of Common Stock that are not currently owned by it for $12 per share in cash.
The Board of Directors of the Registrant held a meeting on
June 3, 1997 and appointed a Special Committee of the Board, consisting of Bruce
C. Tully and Joseph C. Minio, who are outside, independent directors of the
Registrant, to consider whether the proposal is fair to and in the best interest
of the Registrant and its stockholders, and to recommend whether the Board of
Directors should accept the proposal. The Special Committee has hired the law
firm of White & Case to act as independent legal counsel and intends to hire an
investment banking firm to act as independent financial advisors to assist the
Special Committee in its evaluation of the Proposal.
Following public announcement of the Proposal, four lawsuits,
all brought as purported class actions, were filed in the Delaware Chancery
Court, naming the Registrant, the members of the Board of Directors of the
Registrant, Faulding and Holdings as defendants. Copies of the complaints are
annexed hereto.
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Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits
(a) Financial Statements
Inapplicable
(b) Pro Forma Financial Information
Inapplicable
(c) Exhibits
99.1 Letter, dated June 3, 1997 from Edward D.
Tweddell, CEO, Group Managing Director, F.H.
Faulding & Co. Limited to Board of
Directors, Faulding Inc.
99.2 Faulding Inc. press release dated June 3,
1997
99.3 Class Action Complaint in Dechter v.
Tweddell, civ. A. No. 15722NC
99.4 Class Action Complaint in Golde v. Faulding
Inc., civ. A. No. 15728NC
99.5 Class Action Complaint in Harbor Finance
Partners v. Tweddell, civ. A. No. 15724NC
99.6 Class Action Complaint in Zimmerman v.
Moldin, civ. A. No. 15723NC
2
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Dated: June 20, 1997 FAULDING INC.
(Registrant)
By:___________________________
Richard F. Moldin
Chief Executive Officer
3
<PAGE>
EXHHIBIT 99.1
LETTER TO BOARD OF DIRECTORS OF THE ISSUER, DATED JUNE 3, 1997
3 June 1997
Board of Directors
Faulding Inc
200 Elmora Avenue
Elizabeth
New Jersey 07207
Dear Sirs,
The Board of Directors of FH Faulding & Co Limited ("Faulding") has authorised
me to make a proposal on behalf of Faulding to acquire all of the outstanding
shares of common stock, par value $0.01 per share (the "Common Stock"), of
Faulding Inc not currently owned by Faulding at a price of US$12 per share in
cash.
As you know, Faulding has owned a substantial majority of the outstanding shares
of Common Stock since 1989 and Faulding currently owns approximately 64% of the
Company's outstanding Common Stock and approximately 73% of the Common Stock on
a fully diluted basis. Faulding believes it would be in the mutual best interest
of Faulding, Faulding Inc and the shareholders of Faulding Inc for Faulding to
acquire the shares of Common Stock that it does not already own on the terms and
conditions set forth in this letter.
Faulding is prepared to enter into a merger agreement pursuant to which a newly
organised United States subsidiary of Faulding would be merged into Faulding Inc
as a result of which a subsidiary of Faulding would acquire all of the issued
and outstanding shares of Common Stock that are not currently owned by it at a
price of US$12 per share in cash. The merger agreement would be in a form
customary for transactions of this type. Our proposal presumes that there will
be no material adverse change in the results or operations, business or
financial condition of Faulding Inc and its subsidiaries taken together.
We believe that this proposal is fair to the minority stockholders of Faulding
Inc. It provides a substantial premium to recent market prices to holders of
Faulding Inc's Common Stock and enables Faulding Inc's shareholders to receive
cash for their shareholdings now at a premium per share price which they are
unable to recognise in the market. The US$12 offer price represents a premium of
approximately 78%, 28% and 11% over the average of the closing market price of
Faulding Inc's Common Stock during the latest twelve-month, three-month and
one-month periods, respectively. Furthermore, the offer price represents
<PAGE>
a multiple of approximately 25 times the average of the publicly forecasted
earnings per share for the fiscal year ending June 30, 1998.
Because of Faulding's holdings in Faulding Inc and my service on Faulding Inc's
Board, I believe that our proposal should be considered by a committee of the
Board consisting of independent directors advised by independent legal and
financial advisers selected by them. I would like to arrange a telephonic
meeting of the Board as soon as possible to create this committee.
As with any firm proposal of this nature, time is of the essence. We are in a
position to proceed on an expedited basis.
Yours sincerely,
Edward D. Tweddell
CEO/Group Managing Director
<PAGE>
EXHIBIT 99.2
PRESS RELEASE OF FH FAULDING & CO LIMITED, DATED JUNE 3, 1997
3 June, 1997 -- Adelaide, Australia
FH Faulding & Co Limited announces US $12 per share merger proposal for US
subsidiary Faulding Inc
FH Faulding & Co Limited (Faulding) announced today that its Board of Directors
had approved a proposal to the Board of Directors of Faulding Inc to acquire all
of the common shares of Faulding Inc not already owned by Faulding for US $12
per share in cash.
Faulding currently owns approximately 62% of the outstanding shares of common
stock of Faulding Inc and approximately 73% on a fully diluted basis.
Approximately 5,815,868 shares of Faulding Inc's common stock are owned by the
public.
The proposal, which was made in a letter delivered today to Faulding Inc,
involves a cash merger in which a newly formed wholly owned subsidiary of
Faulding would be merged into Faulding Inc and would acquire all of the issued
and outstanding common shares that are not currently owned by Faulding at a
price of US$12 per share in cash.
Dr Edward Tweddell, the Group Managing Director/Chief Executive Officer of
Faulding and Chairman of the Board of Faulding Inc, indicated that he planned to
seek a meeting of the Board of Directors of Faulding Inc as soon as possible and
would propose that the Board of Faulding Inc appoint a committee of its
independent directors to consider Faulding's proposal.
Faulding has appointed Dillon, Read & Co. Inc. to act as its investment banker
in this transaction.
Faulding intends to fund the merger by means of a rights issue for which an
underwriting offer has been received from JB Were & Son.
For further information, please contact:
Dr. Edward Tweddell
Group Managing Director/Chief Executive Officer
Telephone: +61 8 8205 6500ENDS (2/6/97)
<PAGE>
EXHIBIT 99.3
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ------------------------------------------------------x
AIMEE DECHTER, :
:
Plaintiff, :
:
-against- : Civil Action No. 15722NC
:
EDWARD D. TWEDDELL, RICHARD :
F. MOLDIN, ALAN G. MCGREGOR, :
JOSEPH C. MINIO, BRUCE C. TULLY, :
WILLIAM R. GRIFFITH, FAULDING INC. :
FH FAULDING & CO., LIMITED :
and FAULDING HOLDINGS INC. :
:
Defendants. :
- ------------------------------------------------------x
CLASS ACTION COMPLAINT
Plaintiff alleges the following upon information and belief,
except for those allegations which pertain to plaintiff, which allegations are
based upon personal knowledge:
THE PARTIES
1. Plaintiff is the owner of shares of common stock of
Faulding Inc. ("Faulding" or the "Company"), and has been the owner continuously
of such shares since prior to the wrongs complained of herein.
2. Faulding is a corporation duly existing and organized under
the laws of the State of Delaware, with its principal executive offices located
at 200 Elmora Avenue, Elizabeth, New Jersey 07207. Faulding is in the business
of developing,
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manufacturing, and selling generic drugs. Faulding's products include
antibiotics, cardiovascular drugs, anti-inflammatories, analgesics, injectable
drugs, dispensing devices, and anti-cancer drugs.
3. Defendant FH Faulding & Co., Limited ("FHF") is an
Australian pharmaceutical company that, through its subsidiary, defendant
Faulding Holdings Inc., currently owns approximately 62% of the common stock of
Faulding, or approximately 73% on a fully diluted basis.
4. Defendants Edward D. Tweddell, Richard F. Moldin, Alan G.
McGregor, Joseph C. Minio, Bruce C. Tully, and William R. Griffith are and were
at all relevant times directors of Faulding and owe fiduciary duties of good
faith, care, fair dealing, loyalty, and candor to the public shareholders of
Faulding. FHF, as majority shareholder of Faulding, owes the same duties to
Faulding public shareholders.
5. Defendant Tweddell is and was at all relevant times
Chairman of the Board of Directors and a director of the Company. Tweddell is
also Chief Executive Officer and a director of FHF.
6. Defendant Molding is and was at all relevant times
President, Chief Executive Officer, and a director of the Company.
7. Defendant McGregor is and was at all relevant times a
director of the Company. McGregor is also Chairman of the Board of Directors and
a director of FHF.
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8. Defendant Griffith is and was at all relevant times
Secretary and a director of the Company. Griffith is a member of the law firm
that is the Company's outside legal counsel and the primary United States
counsel to FHF.
CLASS ACTION ALLEGATIONS
9. Plaintiff brings this action pursuant to Rule 23 of the
Rules of the Court of Chancery on behalf of herself and all other stockholders
of the Company, and their transferees and their successors in interest, who are
threatened with injury by the wrongful acts of defendants as further described
herein (the "Class"). Excluded from the Class are defendants herein and any
person, firm, trust, corporation, or other entity related to or affiliated with
any of the defendants.
10. This action is properly maintainable as a class action for
the following reasons:
(a) The Class is so numerous that joinder of all members
is impracticable. While the exact number of class members is unknown to
plaintiff at this time and can only be ascertained through appropriate
discovery, there are more than 15 million shares of Faulding common stock
outstanding held by approximately 472 shareholders or record. The holders of
these shares are believed to be geographically dispersed throughout the United
States. Faulding common stock is listed and actively traded on the NASDAQ
National Market System;
(b) There are questions of law and fact which are common
to members of the Class including, inter alia, the following:
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(i) whether defendants have engaged in conduct
constituting unfair dealing to the detriment of the Class;
(ii) whether the proposed transaction is grossly
unfair to the Class; and
(iii) whether plaintiff and the other members of the
Class would be irreparably damaged were the transaction complained of herein
consummated;
(c) The claims of plaintiff are typical of the claims of
the other members of the Class and plaintiff has no interest that is adverse or
antagonistic to the interests of the Class; and
(d) 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 and will fairly and
adequately protect the interests of the Class.
SUBSTANTIVE ALLEGATIONS
11. Faulding's financial condition has improved and its future
growth is expected to increase as well. By way of example, on February 12, 1997,
Bloomberg News Service reported that defendant Moldin, in conjunction with
announcing the financial results for the second quarter of fiscal 1997, ending
December 31, 1996, stated:
We have made steady progress since our
restructuring last year, and Faulding now is
poised for greater sales and profits because of
the record number of new products that it has
moving through the pipeline at the Food and Drug
Administration into the marketplace. . . .
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Faulding currently has 14 new generic drug and
medical device products on file with the FDA. Since
last November, we have received FDA approval to
market three new products: clonazepam tablets,
Safe-Connect(TM) valve, iopamidol injection plus the
first and so far, only tentative approval for
etodolac tablets. Three of these are expected to be
commercialized in the next month . . . .
12. On April 30, 1997, Bloomberg News Service reported
Faulding's third quarter results for fiscal 1997. For that period, the Company
had net sales of $25.2 million and net income of $1.5 million, compared with
sales of $18.5 million and a net loss of $2.1 million for the same quarter in
1996. Defendant Moldin again commented:
Faulding has continued to deliver on its promise
of greater sales and profits since its restructuring
in early 1996. This quarter's success was a direct
result of the commercial launch of two new oral
products . . . . Our new management team's competence
in timely drug development and regulatory approvals
now compares very favorably to the best in the
industry . . . .
We have proved that we can survive in the most
challenging of competitive environments, but must
continue to move forward aggressively in order to
fulfill the commitment we have made to our
shareholders.
13. On June 3, 1997, it was announced that FHF had offered to
acquire the remaining shares of Faulding that it does not already own for $12
per share in cash (the "Buyout Transaction").
14. The purpose of the Buyout Transaction is to enable FHF to
acquire one hundred (100%) percent equity ownership of Faulding and its valuable
assets for its own benefit at the expense of Faulding's public stockholders who
will be deprived of their
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equity investment and the benefits thereof including, among other things, the
expected growth in the Company's profitability.
15. The price of $12 cash per share to be paid to class
members is unfair and grossly inadequate because, among other things:
(a) the intrinsic value of Faulding's common stock is
materially in excess of the amount offered for its securities, giving due
consideration to the Company's recent operating results, the recent market price
of the Company's stock and Faulding's present and projected net asset value,
cash flow, and profitability;
(b) analysts following Faulding have projected Faulding's
continued profitability over the next few years, a continuation of the increase
in revenues and earnings per share for 1995 and 1996;
(c) because FHF has an overwhelming controlling interest
in the Company's common stock, no third party will likely bid for Faulding.
Thus, FHF will be able to proceed with the Buyout Transaction without an auction
or other type of market check to maximize value for Faulding's public
shareholders; and
(d) FHF timed the announcement of the Buyout Transaction
to place an artificial lid or cap on the market price for Faulding's stock to
enable FHF to acquire the minority stock at the lowest possible price.
16. By reason of their positions with Faulding and FHF's
controlling ownership of the Company, defendants are in possession of non-public
information concerning the financial condition and prospects of Faulding, and
especially the true
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value and expected increased future value of Faulding and its assets, which they
have not disclosed to Faulding's public stockholders.
17. The proposed Buyout Transaction is wrongful, unfair and
harmful to Faulding's minority public stockholders, and represents an effort by
defendants to aggrandize FHF's financial position and interests at the expense
of and to the detriment of class members. The Buyout Transaction is an attempt
to deny plaintiff and the other members of the Class their right to share
proportionately in the true value of Faulding's valuable technology, future
growth in profits, earnings and dividends, while usurping the same for the
benefit of FHF on unfair and inadequate terms.
18. Defendants, in failing to disclose the material non-public
information in their possession as to the value of Faulding's technology, the
full extent of the future earnings potential of Faulding and its expected
increase in profitability, have breached and are breaching their fiduciary
duties to the members of the Class.
19. As a result of defendants' unlawful actions, plaintiff and
the other members of the Class will be damaged in that they will not receive
their fair portion of the value of Faulding assets and business and will be
prevented from obtaining the real value of their equity ownership of the
Company.
20. Unless the proposed Buyout Transaction is enjoined by the
Court, defendants will continue to breach their fiduciary duties owed to the
plaintiff and the members of the Class, will not engage in arm's-length
negotiations on the merger terms, and will consummate and close the proposed
merger complained of, to the irreparable harm of the members of the Class.
7
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21. Plaintiff and other Class members are immediately
threatened by the acts and transactions complained of herein, which if
effectuated and continued, will cause irreparable injury to them, in that the
defendants' duties to act in the entire best interests of the shareholders have
and will continue to be violated as a result of the actions described above
which will cause Faulding shareholders significant impairment of their rights as
stockholders of the Company.
22. Absent injunctive relief, plaintiff and the other members
of the Class have been and will be damaged in that they have not and will not
receive their fair proportion of the value of Faulding's assets and businesses,
and have been and will be prevented from enhancing the value of their shares of
the Company's common stock.
23. Plaintiff and the other members of the Class have no
adequate remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
(a) declaring this action to be a proper class action and
certifying plaintiff as representative of the Class;
(b) granting preliminary and permanent injunctive relief
against consummation of the Buyout Transaction as described herein;
(c) in the event the Buyout Transaction is consummated,
rescinding the Buyout Transaction or awarding rescissory damages to the Class;
(d) ordering defendants, jointly and severally, to account
to plaintiff and other members of the Class for all damages suffered and to be
suffered by them as a result of the acts and transactions alleged herein;
8
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(e) awarding plaintiff the costs and disbursements of the
action including allowances for plaintiff's reasonable attorneys' and experts'
fees; and
(f) granting such other and further relief as the Court
may deem just and proper.
ROSENTHAL, MONHAIT, GROSS
& GODDESS, P.A.
By: ______________________________
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899
Attorneys for Plaintiff
OF COUNSEL:
WOLF POPPER LLP
845 Third Avenue
New York, New York 10022
(212) 759-4600
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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
AIMEE DECHTER, : CIVIL ACTION NO. 15722-NC
Plaintiff, :
: SUMMONS PURSUANT
VS. : TO 10 DEL.C. Sec. 3114
: ------
:
EDWARD D. TWEDDELL, RICHARD F. MOLDIN, :
ALAN G. MCGREGOR, JOSEPH C. MINIO, :
BRUCE C. TULLY, WILLIAM R. GRIFFITH, :
FAULDING INC., FH FAULDING & CO., :
LIMITED, and FAULDING HOLDINGS INC., :
:
Defendants. :
TO THE SPECIAL PROCESS SERVER
YOU ARE COMMANDED:
To Summon the above named individual defendants by service pursuant to
10 Del.C. Sec. 3114 upon Faulding Inc., a Delaware corporation, by serving its
registered agent United Corporate Services Inc., which is designated for service
of process in Delaware, so that within the time required by law, such defendants
shall serve upon Joseph A. Rosenthal, Esq., plaintiff's attorney whose address
is P.O. Box 1070 Wilmington, DE 19899-1070 an answer to the complaint.
To serve upon defendants a copy hereof, of the complaint, and of a
statement of plaintiff filed pursuant to Chancery Court Rule 4(dc)(1).
TO THE ABOVE NAMED DEFENDANTS:
In case of your failure, within the time permitted by 10 Del.C. Sec.
3114*, to serve on plaintiff's attorney named above an answer to the complaint,
judgment by default may be rendered against you for the relief demanded in the
complaint.
Dated June 5, 1997 /s/ Diane M. Kempski
-------------------------------------------- --------------------
Register in Chancery
*The text of 10 Del.C. Sec. 3114 is set out on the reverse of this Summons
-------
1
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CIVIL ACTION NO. 15722-NC
AIMEE DECHTER,
Plaintiff
vs.
EDWARD D. TWEDDELL, ET AL,
Defendant
SUMMONS
1. Edward D. Tweddell
2. Richard F. Moldin
3. Alan G. McGregor
4. Joseph C. Minio
5. Bruce C. Tully
6. William R. Griffith
by serving the registered agent for
Faulding Inc.:
United Corporate Services Inc.
15 East North Street
Dover, DE 19901
pursuant to 10 Del.C.ss.3114
------
SERVICE TO BE COMPLETED BY
SPECIAL PROCESS SERVER
<PAGE>
Sec. 3114. Service of process on non-resident, directors, trustees of members of
the governing body of Delaware corporations.
(a) Every non-resident of this State who after September, 1977, accepts
Election or appointment as a director, trustee or member of the governing body
of a corporation organized under the laws of this State of who after June 30,
1978, serves in such capacity and every resident of this State who so accepts
election or appointment of serves in such capacity and thereafter removes his
residence from this State shall, by such acceptance or by such service, be
deemed thereby to have consented to the appointment of the registered agent of
such corporation (or, if there is none, the Secretary of State) as his agent
upon whom service of process may be made in all civil actions or proceedings
brought in this State, by or on behalf of, or against such corporation, in which
such director, trustee or member is a necessary or proper party, or in any
action or proceeding against such director, trustee or member for violation of
his duty in such capacity, whether or not he continues to serve as such
director, trustee or member at the time suit is commenced. Such acceptance of
service as such director, trustee or member shall be a signification of the
consent of such director, trustee or member that any process when so served
shall be of the same legal force and validity as if served upon such director,
trustee or member within this State and such appointment of the registered agent
(or, if there is none, the Secretary of State) shall be irrevocable.
(b) Service of process shall be effected by serving the registered agent
(or, if there is none, the Secretary of State) with 1 copy of such process in
the manner provided by law for service of writs of summons. In addition, the
Prothonotary or the Register in Chancery of the court in which the civil action
or proceeding is copies of the process, together with a statement that service
is being made pursuant to this section, addressed to such director, trustee or
member at the corporation's principal Place of business and at his residence
address as the same appears on the records of the Secretary of State, or, if no
such residence address appears, at his address last known to the party desiring
to make such service.
(c) In any action in which any such director, trustee of member has been
served with process as hereinabove provided, the time in which a defendant shall
be required to appear and file a responsive pleading shall be computed from the
2 date of mailing by the Prothonotary of the Register in Chancery as provided in
subsection b) of this section; however, the court in which such action has been
commenced may order such continuance of continuances as may be necessary to
afford such director, trustee of member reasonable opportunity to defend the
action.
(d) Nothing herein contained limits or affects the rights to seve process
in any other manner now or ehreafter provided by law. This section is an
extension of and not a limitation upon the right otherwise existing of service
of legal process upon non-residents.
(e) The Court of Chancery and the Superior Court may make all necessary
rules respecting the form of process, the manner of issuance and return thereof
and such other rules which may be necessary to implement this section and are
not inconsistent with this section (61 Del. Laws, c. 119 Sec.1)
<PAGE>
EXHIBIT 99.4
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ---------------------------------------------------
: C.A. No. 15728-NC
MICHAEL J. GOLDE I/R/A, on behalf of :
itself and all others similarly situated, :
:
Plaintiff, : CLASS ACTION
: COMPLAINT
-against- :
:
FAULDING INC., EDWARD D. TWEDDELL, :
ALAN G. MCGREGOR, RICHARD F. MOLDIN :
DAVID BERETTA and BRUCE C. TULLY :
:
Defendants. :
- ---------------------------------------------------
Plaintiff, by its attorneys, alleges upon information and belief,
except as to paragraph 1 which plaintiff alleges upon knowledge, as follows:
1. Plaintiff Michael J. Golde I/R/A/ is and was, at all times relevant
to this action, a stockholder of defendant Faulding Inc. ("Faulding" or the
"Company").
2. Defendant Faulding is a corporation duly organized and existing
under the laws of the state of Delaware, with its principal offices located at
20 Elmora Avenue, Elizabeth, New Jersey 07207. There are currently over 15
million shares of Faulding common stock outstanding. Faulding is a holding
company with subsidiaries which develop and manufacture generic oral drug
products and generic injectable pharmaceutical products. The Company also
designs, develops and commercializes disposable medical devices and injectable
drug delivery system devices. Approximately 62% of the 15 million
<PAGE>
outstanding shares of Faulding are held by F.H. Faulding & Co. ("FHFC"), a
healthcare products company based in Australia.
3. Defendant Edward D. Tweddell ("Tweddell"), at all times relevant
hereto, held the position of Chairman of the Board of Faulding.
4. Defendant Richard F. Moldin ("Moldin"), at all times relevant
hereto, held the positions of President, Chief Executive Officer and Chief
Operating Officer of Faulding.
5. Defendants Alan G. McGregor, David Beretta and Bruce C. Tully are
and were together with Tweddell and Moldin, at all times relevant hereto,
members of the boards of directors of Faulding. They are sometimes referred to
herein as the "Individual Defendants".
6. The Individual Defendants as officers and directors of Faulding have
a fiduciary relationship and responsibility to plaintiff and the other common
public stockholders of Faulding and owe to plaintiff and the other class members
the highest obligations of good faith, loyalty, fair dealing, due care and
candor.
CLASS ACTION ALLEGATIONS
7. Plaintiff brings this action pursuant to Rule 23 of the Rules of the
Court of Chancery on behalf of himself and all other stockholders of the Company
(except defendants and any person, firm, trust, corporation, or other entity
related to or affiliated with any defendant), who are or will be adversely
affected by the conduct of the defendants as more fully described herein (the
"Class").
2
<PAGE>
8. This action is properly maintainable as a class action for the
following reasons:
(a) This Class action is so numerous that joinder of all
members is impracticable. As of February 6, 1997, Faulding had approximately 15
million shares of common stock outstanding;
(b) The members of the Class are scattered throughout the
United States and are so numerous as to make it impracticable to bring them all
before this Court;
(c) There are questions of law and fact which are common to
the Class including, inter alia, the following:
i. whether defendants are breaching their fiduciary
duties owed by them to plaintiff and members of the class and/or have aided and
abetted in such breach, by virtue of their participation and/or acquiescence and
by their other conduct complained of herein;
ii. whether defendants are breaching their fiduciary
obligations to plaintiff and members of the class by failing and refusing to
attempt in good faith to maximize stockholder value;
iii. whether defendants have wrongfully failed and
refused to seek a purchaser of Faulding and/or any and all of its various assets
or divisions at the best price obtainable; and
iv. whether plaintiff and the other members of the
Class will be irreparably damaged by defendants' wrongful conduct alleged herein
and if so, what is the proper remedy and/or measure of damages.
3
<PAGE>
(d) The claims of plaintiff are typical of the claims
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) The prosecution of separate actions by individual
members of the Class would create a risk of inconsistent or varying
adjudications with respect to individual members of the Class.
(g) Defendants have acted or refused to act on
grounds generally applicable to the Class, thereby making appropriate injunctive
relief and/or corresponding declaratory relief with respect to the Class as a
whole.
CLAIM FOR RELIEF
9. On June 3, 1997, it was reported over the Dow Jones News Wire that
Faulding had received a cash merger proposal from FHFC to acquire all Faulding
common shares it did not already own for $12 a share. As reported, FHFC expects
to fund the merger through a rights issue.
10. As reported by the Reuter Asia-Pacific Business Report on June 4,
1997, defendant Tweddell, the Chairman of the Board of Faulding and FHFC
managing director, commented that while forming a committee to consider the
proposal, "[W]e believe the offer is fair to both the F.H. Faulding shareholders
and the Faulding Inc. minorities." Tweddell also commented that he expected to
finalize the $70 million mop-up" of Faulding by late September.
4
<PAGE>
11. As set forth above, FHFC already owns 62% of the outstanding common
stock of Faulding and would own approximately 73% of Faulding's common shares on
a fully diluted basis if convertible preferred share conversion were factored
in. The loyalties of the Individual Defendants, all of whom are directors of
Faulding are, at best, divided in the transaction proposed by Faulding's
controlling stockholder. The Individual Defendants are beholden to FHFC, the
majority owner and controlling stockholder of Faulding, and can not be expected
to act in the best interest of Faulding's minority stockholders.
12. The purpose of the proposed merger transaction is to enable FHFC to
acquire the remaining shares of Faulding it does not already own and to acquire
Faulding's valuable assets for FHFC's own benefit at the expense of Faulding's
public stockholders.
13. The proposed acquisition comes at a time when Faulding has
performed well and FHFC expects it will continue to perform well because it is
already poised to do so. FHFC has timed this transaction to capture Faulding's
positive performance and use it to their own ends, without paying an adequate or
fair price for Faulding's remaining shares.
14. On April 30, 1997, Faulding announced net income for the third
quarter ended March 31, 1997 of $.05 per share as compared with a loss of $.18
in the same quarter of 1996. Analysts expect Faulding to earn $.14 per share in
the current quarter ending June 30, 1997. In the month prior to the announcement
of the proposed transaction, Faulding's stock has traded in the $10.00 to $12.00
per share range and in
5
<PAGE>
mid-May was trading at over $12.00 per share. Thus the proposed transaction, at
$12 per share, represents a meager, if any, premium over Faulding's current
trading price.
15. Defendants and FHFC are in a position of control and power over the
Faulding minority stockholders and have access to internal financial information
about Faulding, its true value, expected increase in true value and the benefits
to FHFC of 100% ownership of Faulding to which plaintiff and the Class members
are not privy. Defendants would be using their positions of power and control to
benefit FHFC in this transaction, to the detriment of the Faulding common
stockholders.
16. The individual Defendants have clear and material conflicts of
interest and are acting to better the interests of FHFC at the expense of
Faulding's public stockholders.
17. Defendants have breached their fiduciary and other common law
duties owed to plaintiff and other members of the Class in that they have not
and are not exercising independent business judgment and have acted and are
acting to the detriment of the Class in order to benefit themselves. Any
contemplated transaction would not be the product of arm's length negotiations
and is not based upon any independent evaluation of the current value of
Faulding's common stock, assets or business.
18. Defendants have failed and refused to take those steps necessary to
ensure that the Company's shareholders will receive maximum value of their
shares of Faulding stock. Defendants have thus far failed to announce any active
auction or open bidding procedures best calculated to maximize shareholder value
in selling the Company. As a result, defendants are acting to put their own
interests ahead of the public
6
<PAGE>
shareholders, all at the expense and to the detriment of the Company's public
shareholders.
19. By virtue of the acts and conduct alleged herein, the defendants,
who control the actions of the Company, have carried out a preconceived plan and
scheme to place the interests of FHFC ahead of the interests of Faulding's
public shareholders. The defendants have violated their fiduciary duties owed to
plaintiff and the Class in that they have not and are not exercising independent
business judgment and have acted and are acting to the detriment of the
Faulding's public shareholders for their own personal benefit.
20. The defendants have breached their fiduciary duties by reason of
the acts and transactions complained of herein, including their apparent
decision to effect a transaction without making an effort to obtain the best
offer possible and by affirmatively attempting to prevent a better offer.
21. As a result of the actions of the defendants, plaintiff and the
other members of the Class have been and will be damaged in that they have not
and will not receive their fair proportion of the value of Faulding's assets and
businesses and/or have been and will be prevented from obtaining a fair and
adequate price for their shares of Faulding's common stock.
22. In light of the foregoing, the Individual Defendants must, as their
fiduciary obligations require:
o undertake an appropriate evaluation of
Faulding's worth as an acquisition
candidate;
7
<PAGE>
o act independently so that the interests of
Faulding's public stockholders will be
protected, including but not limited to the
retention of independent advisors to any
committee of the Faulding board formed to
consider the FHFC offer and negotiate with
FHFC on behalf of Faulding's minority
stockholders;
o adequately ensure that no conflicts of
interest exist between defendants' own
interests and their fiduciary obligation to
maximize stockholder value or, if such
conflicts exist, to ensure that all
conflicts be resolved in the best interests
of Faulding's public stockholders; and
o if a merger transaction is to go forward,
require that it be approved by a majority of
Faulding's public stockholders.
23. Plaintiff seek preliminary and permanent injunctive relief and
declaratory relief preventing defendants from inequitably and unlawfully
depriving plaintiff and the Class of their right to realize a full and fair
value for their stock at a substantial premium over the market price, and to
compel defendants to carry out their fiduciary duties to maximize shareholder
value.
24. Plaintiff and the class have no adequate remedy at law. Only
through the exercise of this Court's equitable powers can plaintiff be fully
protected from the immediate and irreparable injury which defendants' actions
threaten to inflict.
25. Unless enjoined by the Court, defendants will continue to breach
their fiduciary duties owed to plaintiff and the other members of the Class, and
will consummate the sale of Faulding at an inadequate and unfair price, or upon
inequitable terms, all to the irreparable harm of plaintiff and the other
members of the Class.
8
<PAGE>
26. Plaintiff and the Class have no adequate remedy at law.
WHEREFORE, plaintiff prays for judgment and relief as follows:
A. Ordering that this action may be maintained as a class action and
certifying plaintiff as the Class representative;
B. Declaring that defendants have breached their fiduciary and other
duties to plaintiff and the other members of the Class;
C. Entering an order requiring defendants to take the steps set forth
hereinabove;
D. Preliminarily and permanently enjoining the defendants and their
counsel, agents, employees and all persons acting under, in concert with, or for
them, from proceeding with, consummating or closing the proposed merger
transaction;
E. In the event the proposed merger is consummated, rescinding it and
setting it aside;
F. Awarding compensatory damages against defendants individually and
severally in an amount to be determined at trial, together with prejudgment
interest at the maximum rate allowable by law;
G. Awarding costs and disbursements, including plaintiff's counsel's
fees and experts' fees; and
9
<PAGE>
H. Granting such other and further relief as the Court may deem just
and proper.
Dated: June 6, 1997
ROSENTHAL, MONHAIT, GROSS &
GODDESS, P.A.
By:____________________________
919 North Market Street
Mellon Bank Center, Suite 1401
Wilmington, Delaware 19801
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
ABBEY, GARDY & SQUITIERI, LLP
212 East 39th Street
New York, New York 10016
(212) 889-3700
10
<PAGE>
EXHIBIT 99.5
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ---------------------------------------------------------------
: C.A. No. 15724
HARBOR FINANCE PARTNERS, a :
Colorado Limited Partnership, :
Individually And On Behalf :
All Others Similarly Situated, :
:
Plaintiff, : CLASS ACTION
: COMPLAINT
-against- :
:
EDWARD D. TWEDDELL, ALAN G. :
MCGREGOR, RICHARD F. MOLDIN, :
JOSEPH C. MINIO, BRUCE C. TULLY, :
WILLIAM R. GRIFFITH, F.H. FAULDING :
& COMPANY LIMITED and FAULDING INC., :
:
Defendants. :
- ---------------------------------------------------------------
Plaintiff, by its undersigned attorneys, for its complaint
against defendants alleges upon information and belief, except for paragraph 2
which is alleged upon knowledge, as follows:
NATURE OF THE ACTION
1. Plaintiff brings this action individually and as a class
action on behalf of all persons, other than defendants, who own the securities
of Faulding Inc. ("Faulding" or the "Company") and who are similarly situated,
for injunctive and other appropriate relief in connection with the acquisition
offer (the "Offer") announced by defendant Faulding on June 3, 1997 pursuant to
which F.H. Faulding & Company Limited ("F.H.F.") which, through
<PAGE>
its wholly-owned subsidiary, Faulding Holdings Inc., already controls 62% of the
approximately 15 million outstanding shares of Faulding's common stock and about
73% of such common shares on a fully diluted basis, would acquire the Company's
shares that it does not already control for $12.00 per share. Alternatively, in
the event that the transaction is consummated, plaintiff seeks to recover
rescissory and/or compensatory damages sustained by Faulding's public
shareholders as a result of the wrongs complained of herein.
PARTIES
2. Plaintiff is and has been the owner of shares of Faulding
common stock at all times material hereto.
3. Faulding is a corporation duly organized and existing under
the laws of the State of Delaware, with its principal offices located at 20
Elmora Avenue, Elizabeth, New Jersey. As of February 6, 1997, the Company had
approximately 15,000,000 shares of common stock outstanding. Faulding is a
holding company with subsidiaries which develop, manufacture, and sell generic
drugs and injectable pharmaceutical products on a wholesale basis.
4. Defendant F.H.F. is an Australian pharmaceutical company
conducting business in the United States. F.H.F. has numerous business
relationships with Faulding, including, among other things, license agreements,
consulting agreements, and supply agreements.
2
<PAGE>
5. Defendant Edward D. Tweddell ("Tweddell") at all times
material hereto has been the Chairman of the Board of Directors of Faulding. He
is also a director of F.H.F.
6. Defendant Alan G. McGregor ("McGregor") at all times
material hereto has been a director of Faulding. McGregor is also the Chairman
of the Board of Directors of F.H.F.
7. Defendant Richard F. Moldin ("Moldin") at all times
material hereto has been the President and Chief Executive Officer since March
of 1996 and a director of the Company. Moldin has also served as Chief Executive
Officer of Faulding Medical Device Co., President of Faulding Puerto Rico, Inc.,
and since July 1996 President of Faulding Pharmaceutical Co.
8. Defendant Joseph C. Minio ("Minio") at all times material
hereto has been a director of the Company.
9. Defendant Bruce C. Tully ("Tully") at all times material
hereto has been a director of the Company.
10. Defendant William R. Griffith ("Griffith") has served as
Secretary of the Company since October 1993 and as a member of the law firm of
Parker Duryee Rosoff & Haft, counsel for the Company and F.H.F.
11. Defendants Tweddell, McGregor, Moldin, Minio, Tully, and
Griffith are collectively referred to as the Individual Defendants.
3
<PAGE>
12. The Individual Defendants and F.H.F. owe fiduciary
obligations to the Company's public shareholders to act with loyalty, entire
fairness and good faith in dealings between F.H.F. and Faulding's public
shareholders.
CLASS ACTION ALLEGATIONS
13. Plaintiff brings this action individually and as a class
action on behalf of all stockholders of the Company (except the defendants
herein and any person, firm, trust, corporation, or other entity related to or
affiliated with any of the defendants) and their successors in interest, who are
or will be threatened with injury arising from defendants' actions as more fully
described herein (the "Class").
14. This action is properly maintainable as a class action
because:
(a) The Class is so numerous that joinder of all members
is impracticable. There are hundreds of shareholders who hold the approximately
15 million shares of Faulding common stock outstanding.
(b) There are questions of law and fact common to the
Class including, inter alia, the following:
(1) whether the proposed buy-out is grossly unfair to
the public stockholders of Faulding; and
(2) whether plaintiffs and the other members of the
Class would be irreparably damaged were the transaction complained of herein
consummated.
15. Plaintiff is a member of the Class and is committed to
prosecuting this action. Plaintiff has retained competent counsel experienced in
litigation of this nature. The claims of the plaintiff are typical of the claims
of other members of the Class, and
4
<PAGE>
plaintiff has the same interests as the other members of the Class. Plaintiffs
do not have interests antagonistic to or in conflict with those they seek to
represent. Plaintiff is an adequate representative of the Class.
SUBSTANTIVE ALLEGATIONS
16. On June 3, 1997, the Dow Jones News Wire reported that
F.H.F. had made a definitive offer to buy the remaining Faulding stock that it
does not already own for $12.00 per share. F.H.F. announced that it expects to
fund the merger through a rights issue. Upon announcement of the offer, the
market price of the Company's stock rose $1.50 to $12.25 per share.
17. The offer was made at a time which is particularly
beneficial to F.H.F. because Faulding is now poised to reap significant
increases in net income over past earnings. On May 6, 1997 the Dow Jones News
Wire estimated that it will earn 14(cent) per share for the fourth fiscal
quarter ended June 1997.
18. An April 30, 1997 Business Wire article, emphasized the
potential growth and future earnings potential of Faulding. Defendant Moldin
stated
Faulding has continued to deliver on its promise of
greater sales and profits since its restructuring in
early 1996. This quarter's success was a direct
result of the commercial launch of two new oral
products that were cleared for marketing less than a
year after our initial submission to the FDA. Our new
management team's competence in timely drug
development and regulatory approvals now compares
very favorably to the best in the industry.
* * *
We have proved that we can survive in the most
challenging of competitive environments, but must
continue to move
5
<PAGE>
forward aggressively in order to fulfill the
commitment we have made to our shareholders.
19. In announcing the merger, defendants have failed to
disclose, inter alia, the full extent of the future earnings potential of
Faulding and its expected increase in profitability.
20. Defendants' knowledge and economic power and that of the
investing public is unequal because F.H.F. and the other insiders who own in
excess of 62% of the Company control the business and corporate affairs of
Faulding and are in possession of material non-public information concerning the
Company's assets, businesses, and future prospects. This disparity makes it
inherently unfair for F.H.F. to obtain 100% ownership of Faulding from its
public stockholders at such an unfair and grossly inadequate price.
21. The consideration to be paid to the public shareholders in
the buy-out is grossly unfair, inadequate, and substantially below the fair or
inherent value of the Company. The intrinsic value of the equity of Faulding is
materially greater than the consideration being considered, taking into account
Faulding's assets value, liquidation value, its expected growth, and the
strength of its business.
22. The offer price is not the result of arm's-length
negotiations, but was fixed arbitrarily by F.H.F. as part of its unlawful plan
to obtain the entire ownership of Faulding at the lowest possible price.
23. The proposed going private transaction is wrongful,
unfair, and harmful to Faulding public stockholders, and represents an attempt
by F.H.F. to aggrandize its personal interests at the expense of and to the
detriment of the public stockholders of the
6
<PAGE>
Company. The proposed transaction will deny class members their right to share
proportionately in the true value of Faulding's valuable assets, profitable
business, and future growth in profits and earnings, while usurping the same for
the benefit of F.H.F. at an unfair and inadequate price.
24. As a result of the wrongs complained of, plaintiff and the
Class have been and will be damaged in that they are and will be the victims of
unfair dealing and will not receive the fair value of Faulding's assets and
businesses.
25. Unless enjoined by this Court, defendants will continue to
breach their fiduciary duties owed to plaintiff and the Class and F.H.F. will
succeed in its plan to enrich itself at the expense and to the irreparable harm
of the Class.
26. Plaintiff and the Class have no adequate remedy of law.
WHEREFORE, plaintiff prays for judgment and relief as follows:
(a) declaring that this lawsuit is properly maintainable
as a class action and certifying plaintiff as representative of the Class;
(b) preliminarily and permanently enjoining defendants and
their counsel, agents, employees, and all persons acting under, in concert with,
or for them, from proceeding with, consummating or closing the transaction
complained of;
(c) in the event the transaction is consummated,
rescinding it and setting it aside;
(d) awarding rescissory and/or compensatory damages to the
Class, in an amount to be determined at trial, together with prejudgment
interest at the maximum rate allowable by law;
7
<PAGE>
(e) awarding plaintiff and the Class their costs and
disbursements and reasonable allowances for plaintiffs' counsel and experts'
fees and expenses; and
(f) granting such other and further relief as may be just
and proper.
ROSENTHAL, MONHAIT, GROSS
& GODDESS, P.A.
By:____________________________
919 Market Street
Mellon Bank Center, Suite 1401
Wilmington, Delaware 19899-1070
(302) 656-4433
Of Counsel:
WECHSLER HARWOOD HALEBIAN
& FEFFER
805 Third Avenue
New York, New York 10022
(212) 935-7400
8
<PAGE>
EXHIBIT 99.6
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
<TABLE>
<CAPTION>
- --------------------------------------------------------------
<S> <C>
: C.A. No. 15723NC
CHARLES ZIMMERMAN, on behalf of :
himself and all others similarly situated, : CLASS ACTION COMPLAINT
:
Plaintiff, :
:
-against- :
:
RICHARD F. MOLDIN, EDWARD D. :
TWEDDELL, ALAN G. McGREGOR, :
JOSEPH C. MINIO, BRUCE C. TULLY, :
F.H. FAULDING & CO., LIMITED, :
WILLIAM R. GRIFFITH, FAULDING :
HOLDINGS INC. and FAULDING INC. :
:
Defendants. :
- --------------------------------------------------------------
</TABLE>
INTRODUCTION
Plaintiff brings this action individually and on behalf of the
public shareholders of Faulding Inc. ("Faulding" or the "Company") seeking
redress for defendants' breaches of fiduciary duties in connection with F.H.
Faulding & Co., Limited's offer to purchase the Faulding shares which it does
not already own for $12.00 per Faulding share (the "Buyout").
THE PARTIES
1. Plaintiff Charles Zimmerman owns, and since prior to
the announcement of the transaction complained of, has owned, shares of Faulding
common stock.
<PAGE>
2. Defendant Faulding is a Delaware corporation with executive
offices in Elizabeth, New Jersey. Faulding develops, manufactures, and markets
human pharmaceutical and medical devices. As of June 3, 1997, Faulding had
approximately 15 million shares of common stock outstanding.
3. Defendant F.H. Faulding & Co., Limited ("F.H. Faulding" or
the "Purchaser"), owns approximately 73% of Faulding's shares on a fully diluted
basis through its wholly owned subsidiary, Faulding Holdings Inc. ("Holdings"),
a corporation incorporated in Delaware with its principal place of business in
Connecticut. Through F.H. Faulding's controlling ownership of Faulding stock, it
effectively controls Faulding and thus owes Faulding's public shareholders
fiduciary duties of loyalty and good faith.
4. Defendant Richard F. Moldin ("Moldin") is, and has been
since July 1995, Chief Executive Officer, President and Director of defendant
Faulding.
5. Defendant Edward D. Tweddell ("Tweddell") is, and has been
since 1990, a director and Chairman of the Board of Directors of Faulding. In
addition, Tweddell has been a director of F.H. Faulding since March 1989.
6. Defendant Alan G. McGregor ("McGregor") is, and has been, a
director of Faulding since June 1988. In addition, McGregor is also Chairman
of F.H. Faulding.
7. Defendant Joseph C. Minio ("Minio") is, and has been since
January 1997, a director of defendant Faulding.
8. Defendant Bruce Tully ("Tully") is, and has been since
April 1989, a director of defendant Faulding.
2
<PAGE>
9. William R. Griffith is and has been, at all relevant times,
a director and secretary of Faulding.
10. The foregoing individuals, as officers and/or directors of
Faulding (collectively, the "Individual Defendants"), owe fiduciary duties to
plaintiff and the other members of the Class (as described below).
CLASS ACTION ALLEGATIONS
11. Plaintiff bring 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").
12. This action is properly maintainable as a class action for
the following reasons:
a. The Class is so numerous that joinder of all members is
impracticable. There are hundreds if not thousands of stockholders of Faulding
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:
3
<PAGE>
(i) Whether defendants have engaged in and are
continuing to engage in conduct which unfairly benefits F.H. Faulding at the
expense of the members of the Class;
(ii) Whether the individual defendants, as officers
and/or directors of the Company, some of whom are also directors of F.H.
Faulding, the controlling stockholder of Faulding, 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; and
(vi) Whether defendants have initiated and timed the
Buyout unfairly to benefit F.H. Faulding at the expense of Faulding's public
shareholders.
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 identically
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.
SUBSTANTIVE ALLEGATIONS
13. On June 3, 1997, Faulding announced that F.H. Faulding was
offering $12.00 per share to purchase all outstanding shares of Faulding that
are not already owned by F.H. Faulding. This price offers virtually no premium
to the historic trading price
4
<PAGE>
of Faulding common stock and the intrinsic value of Faulding common stock. As
recently as May 15, 1997, the closing price of Faulding common stock traded
above the offering price at $12 3/16 per share. F.H. Faulding is attempting to
acquire Faulding at a grossly unfair and inadequate price.
14. The aforesaid proposal is in furtherance of a plan and
scheme which, if its consummation is not enjoined, will result in forcing
Faulding public shareholders to sell their investment in the Company for grossly
inadequate consideration.
15. The consideration to be paid to Class members in the
proposed stock acquisition is unfair and grossly inadequate because, among other
things, the intrinsic value of Faulding common stock is materially in excess of
the amount offered, giving due consideration to the promising products of
Faulding that will be entering the marketplace and considering Faulding's
anticipated operating results, net asset value and profitability. Similarly, the
amount offered does not take into account that F.H. Faulding's ownership of 73%
of the outstanding shares of Faulding has effectively suppressed the market
price of Faulding for at least the past year.
16. F.H. Faulding is the research and development partner of
Faulding and is well aware of the progress of several of Faulding's new
products. In making its grossly inadequate and unfair offer to acquire the
remaining stock of Faulding, F.H. Faulding has tried to take advantage of the
fact that the market price of Faulding stock does not fully reflect the progress
of these new products.
17. The proposed acquisition price offered by F.H. Faulding is
not the result of arms length negotiations, but rather represents a maneuver by
Faulding and its
5
<PAGE>
representatives on the Faulding board of directors to take advantage of F.H.
Faulding's control over Faulding to force Faulding's minority shareholders to
relinquish their Faulding shares at a grossly unfair and inadequate price.
18. Because of F.H. Faulding's inherent conflict of interest
as the 73% owner of Faulding, the Faulding board cannot properly evaluate the
proposed offer. Given the dominance and control of F.H. Faulding over Faulding
and its board of directors, none of the directors is capable of vigorously
representing and protecting the interests of Faulding's minority shareholders or
bargaining at arm's length on their behalf.
19. In addition, although the Faulding board will "consider
appointing a special committee" to review the proposal, any such committee will
apparently be authorized only to evaluate F.H. Faulding's proposed stock
acquisition and not to explore any other alternative transaction or means to
assure that Faulding's minority shareholders will receive full and fair value
for their shares.
20. F.H. Faulding, by reason of its 73% ownership of Faulding's
outstanding shares, is in a position to ensure effectuation of the transaction
without regard to its fairness to Faulding's public shareholders.
21. Because F.H. Faulding is in possession of proprietary
corporate information concerning Faulding's future financial prospects, the
degree of knowledge and economic power between F.H. Faulding and the Class
members is unequal, making it grossly and inherently unfair for F.H. Faulding to
obtain the remaining 23% of Faulding's shares at the unfair and grossly
inadequate price that it has proposed.
6
<PAGE>
22. By offering a grossly inadequate price for Faulding's
shares, F.H. Faulding has violated its duties as majority shareholder of
Faulding to treat the minority fairly in its dealings with the minority public
shareholders, and to provide full and fair disclosure to the minority
shareholders in connection with the proposed buyout.
23. Plaintiff and the Class will suffer irreparable harm
unless the defendants are enjoined from breaching their fiduciary duties and
from carrying out the aforesaid plan and scheme.
24. The Buyout is in furtherance of an unfair plan to take
Faulding private, which, if not enjoined, will result in the elimination of the
public shareholders of Faulding. 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. F.H. Faulding, by virtue of, among other things, its
voting and ownership power, controls and dominate Faulding and the Faulding
Board of Directors;
c. Given F.H. Faulding's domination and control of Faulding
and its Board, the Faulding Board of Directors cannot be expected independently
to advocate, and protect the best interests of, and to obtain the best price
for, Faulding's public shareholders;
7
<PAGE>
d. The law firm that is legal counsel to Faulding also is
counsel to F.H. Faulding. This conflicting allegiance of Faulding's counsel to
the interests of Faulding's shareholders renders Faulding's consideration of the
Buyout suspect;
e. F.H. Faulding 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. F. H. Faulding does significant business with Faulding
and thus has unique knowledge of Faulding's business and effectively controls
Faulding's business operations.
g. Given F. H. Faulding's domination and control, the
individual defendants cannot be expected independently and actively to advocate
and negotiate in the best interest of Faulding's public shareholders; and
h. The Buyout does not provide plaintiff and the Class with
a fair price for their shares.
25. 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 because they will not receive their rightful proportion of the true
value of Faulding's assets and business.
26. 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.
27. Plaintiff and the other members of the Class have no
adequate remedy at law.
8
<PAGE>
28. WHEREFORE, plaintiff demands judgment as follows:
a. Declaring this to be a proper class action and naming
plaintiff as Class representatives;
b. Granting preliminary and permanent injunctive relief
against the consummation of the Buyout;
c. In the event the Buyout is consummated, rescinding the
Buyout or awarding rescissory damages to the Class;
d. Ordering defendants, jointly and severally, to account
to plaintiff and to other members of the Class for all damages suffered and to
be suffered by them as the result of the conduct alleged herein;
e. Awarding plaintiff the costs and disbursements of the
action including allowances for plaintiff' reasonable attorneys and experts
fees; and
f. Granting such other and further relief as may be just
and proper in the premises.
ROSENTHAL, MONHAIT, GROSS &
GODDESS, P.A.
By:___________________________________
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
KAUFMAN MALCHMAN KIRBY & SQUIRE, LLP
Peter S. Linden
919 Third Avenue
New York, New York 10022
(212) 371-6600
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