SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
TO
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
GLEASON CORPORATION
(Name of Subject Company (Issuer))
TORQUE ACQUISITION CO., L.L.C.
(Bidder)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(Title of Class of Securities)
377339106
(CUSIP Number of Class of Securities)
GLEASON CORPORATION
ATTN: EDWARD J. PELTA, ESQ.
VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
1000 UNIVERSITY AVENUE
P.O. BOX 22970
ROCHESTER, NEW YORK 14692
TELEPHONE:(716) 473-1000
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications on Behalf of Bidder)
COPY TO:
BLAINE V. FOGG, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
TELEPHONE: (212) 735-3000
CALCULATION OF FILING FEE:
Transaction Valuation** Amount of Filing Fee
- -----------------------------------------------------------------------------
$193,509,856 $38,702
- -----------------------------------------------------------------------------
** Estimated for purposes of calculating the amount of the filing fee
only. The amount assumes the purchase of 8,413,472 shares of common
stock, par value $1.00 per share (the "Shares"), of Gleason
Corporation, a Delaware corporation (the "Company"), at a price of
$23.00 per Share in cash. As of November 30, 1999, there were 9,589,195
Shares issued and outstanding. Certain stockholders of the Company,
owning in the aggregate (1) 1,458,983 Shares and (2) 472,322
unexercised options to acquire Shares under various employee stock
option plans of the Company as of November 30, 1999, have agreed not to
tender their Shares (which in the aggregate total 1,931,305 Shares,
including Shares underlying options) pursuant to the Offer. Based on
the foregoing, the maximum number of Shares available to be tendered
pursuant to the Offer is 8,413,472 Shares, which is equal to the number
of Shares outstanding on a fully diluted basis as of November 30, 1999
less the aggregate number of Shares and options to acquire Shares owned
by the non-tendering stockholders. The amount of the filing fee
calculated in accordance with Rule 0-11 of the Securities Exchange Act
of 1934, as amended, equals 1/50th of one percent of the value of the
transaction.
|X| Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
Amount previously paid: $38,702 Filing party: Torque Acquisition
Co., L.L.C.
Form or registration no.: Schedule 14D-1 Date filed: December 15, 1999
(Continued on following pages)
<PAGE>
This Amendment No. 2 to the Tender Offer Statement on Schedule
14D-1 amends and supplements the Tender Offer Statement on Schedule 14D-1
originally filed on December 15, 1999 (the "Schedule 14D-1") by Torque
Acquisition Co., L.L.C. ("Acquisition Company"), a Delaware limited
liability company and a wholly owned subsidiary of Vestar Capital Partners
IV, L.P., relating to the joint tender offer by Acquisition Company and
Gleason Corporation, a Delaware corporation (the "Company"), to purchase
all of the outstanding shares of common stock, par value $1.00 per share,
of the Company (the "Common Stock"), together with the associated preferred
share purchase rights (the "Rights" and, together with the Common Stock,
the "Shares"), at a purchase price of $23.00 per Share, net to the seller
in cash, without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated December 15, 1999, and
the related Letter of Transmittal. Capitalized terms used but not defined
herein shall have the meanings assigned to them in the Schedule 14D-1.
Acquisition Company hereby amends and supplements the Schedule 14D-1 as
follows:
ITEM 10. ADDITIONAL INFORMATION.
Item 10(e) is hereby amended and supplemented as follows:
On December 16, 1999, Plaintiff Melissa Marotta served her
complaint, Marotta v. Nichols, et al, C.A. No. 17643NC, upon the Company,
Vestar Capital Partners and each of the Company's directors. Defendants
were served plaintiff's first request for production of documents on
December 29, 1999. On December 29, 1999, the Company, Vestar and the
directors moved to dismiss this action for failure to state a claim upon
which relief can be granted. Along with this motion, the Company, Vestar
and the directors filed a motion to stay discovery. These motions are
presently before the Court of Chancery of the State of Delaware, in and for
New Castle County. The Court has not yet scheduled a hearing date for these
motions or entered any orders related to the motions.
ITEM 11. MATERIALS TO BE FILED AS EXHIBITS.
Item 11 is hereby amended and supplemented by the addition of
the following exhibit thereto:
(g)(10) Defendants' Notice of Motion, Motion to Dismiss and Opening
Brief in Support thereof, filed December 29, 1999, in the
matter of Marotta v. Nichols, et al, C.A. No. 17643NC (Court
of Chancery of New Castle County, Delaware).
<PAGE>
SIGNATURE
After due inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is
true, complete and correct.
Dated: December 30, 1999
TORQUE ACQUISITION CO., L.L.C.
By: /s/ SANDER M. LEVY
-----------------------------
Name: Sander M. Levy
Title: President
<PAGE>
EXHIBIT INDEX
EXHIBITS
--------
(g)(10) Defendants' Notice of Motion, Motion to Dismiss and Opening
Brief in Support thereof, filed December 29, 1999, in the matter
of Marotta v. Nichols, et al, C.A. No. 17643NC (Court of
Chancery of New Castle County, Delaware).
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
MELISSA MAROTTA, :
:
Plaintiff, :
:
v. : Civil Action No. 17643NC
:
SILAS L. NICHOLS, ROBERT L. :
SMIALEK, DAVID J. BURNS, :
J. DAVID CARTWRIGHT, JAMES S. :
GLEASON, MARTIN L. ANDERSON, :
JOHN W. GUFFEY, JR., WILLIAM P. :
MONTAGUE, GLEASON :
CORPORATION and VESTAR :
CAPITAL PARTNERS, :
:
Defendants. :
NOTICE OF MOTION TO DISMISS
TO: Carmella P. Keener, Esquire Michael D. Goldman, Esquire
Rosenthal, Monhait, Gross Potter, Anderson & Corroon
& Goddess, P.A. Hercules Plaza
Suite 1401 P.O. Box 951
Mellon Bank Center Wilmington, Delaware 19899
919 North Market Street
Wilmington, Delaware 19801
PLEASE TAKE NOTICE that the attached Motion to Dismiss will
be presented by the undersigned counsel for Defendants Vestar Capital
Partners, David J. Burns and James S. Gleason at a time convenient to the
Court and counsel.
/s/ Edward P. Welch/lmh
--------------------------
Edward P. Welch
Andrew J. Turezyn
Lorin M. Hochman
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
One Rodney Square
P.O. Box 636
Wilmington, Delaware 19899
(302) 651-3000
Attorneys for Defendants Vestar Capital
Partners, David J. Burns and
James S. Gleason
DATED: December 29, 1999
<PAGE>
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
MELISSA MAROTTA, :
:
Plaintiff, :
:
v. : Civil Action No. 17643NC
:
SILAS L. NICHOLS, ROBERT L. :
SMIALEK, DAVID J. BURNS, :
J. DAVID CARTWRIGHT, JAMES S. :
GLEASON, MARTIN L. ANDERSON, :
JOHN W. GUFFEY, JR., WILLIAM P. :
MONTAGUE, GLEASON :
CORPORATION and VESTAR :
CAPITAL PARTNERS, :
:
Defendants. :
MOTION TO DISMISS
Defendants Vestar Capital Partners, David J. Burns and James
S. Gleason, by their undersigned counsel, hereby move the Court pursuant to
Rule 12(b) to dismiss this action for failure to state a claim upon which
relief can be granted.
/s/ Edward P. Welch/lmh
--------------------------
Edward P. Welch
Andrew J. Turezyn
Lorin M. Hochman
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
One Rodney Square
P.O. Box 636
Wilmington, Delaware 19899
(302) 651-3000
Attorneys for Defendants Vestar Capital
Partners, David J. Burns and
James S. Gleason
DATED: December 29, 1999
<PAGE>
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
MELISSA MAROTTA, :
:
Plaintiff, :
:
v. : Civil Action No. 17643NC
:
SILAS L. NICHOLS, ROBERT L. :
SMIALEK, DAVID J. BURNS, :
J. DAVID CARTWRIGHT, JAMES S. :
GLEASON, MARTIN L. ANDERSON, :
JOHN W. GUFFEY, JR., WILLIAM P. :
MONTAGUE, GLEASON :
CORPORATION and VESTAR :
CAPITAL PARTNERS, :
:
Defendants. :
OPENING BRIEF IN SUPPORT OF THE
DEFENDANTS' MOTION TO DISMISS THE COMPLAINT
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
One Rodney Square
P.O. Box 636
Wilmington, Delaware 19899
(302) 651-3000
Attorneys for Defendants Vestar
Capital Partners,
David J. Burns and
James S. Gleason
DATED: December 29, 1999
<PAGE>
TABLE OF CONTENTS
Page
TABLE OF CASES AND AUTHORITIES..........................................i
NATURE OF PROCEEDINGS AND STATEMENT OF FACTS............................1
ARGUMENT................................................................3
I. THE CONCLUSORY ALLEGATIONS OF THE COMPLAINT
DO NOT STATE A CLAIM AGAINST VESTAR OR THE INDIVIDUAL
DEFENDANTS......................................................3
II. THE CONCLUSORY ALLEGATIONS OF UNFAIR PRICE
FAIL TO STATE A CLAIM FOR RELIEF................................6
III. THE CLAIM FOR DAMAGES AGAINST THE INDIVIDUAL
DEFENDANTS IS BARRED BY ARTICLE TENTH OF
GLEASON'S RESTATED CERTIFICATE OF INCORPORATION................11
IV. THE COMPLAINT DOES NOT STATE A CLAIM FOR AIDING
AND ABETTING BREACH OF FIDUCIARY DUTY..........................14
CONCLUSION.............................................................16
<PAGE>
TABLE OF CASES AND AUTHORITIES
CASES PAGE(S)
Arnold v. Society For Savs. Bancorp, Inc.,
Del. Supr., 650 A.2d 1270 (1994)..................................13
In re Baxter Int'l, Inc. Shareholders Litig.,
Del. Ch., 654 A.2d 1268 (1995)....................................11
Gilbert v. El Paso,
Del. Ch., 490 A.2d 1050 (1984),
aff'd, Del. Supr., 575 A.2d 1131 (1990)...........................14
Green v. Phillips,
Del. Ch., C.A. No. 14436, Jacobs, V.C. (June 19, 1996)............11
Grimes v. Donald,
Del. Supr., 673 A.2d 1207 (1996)...................................3
Grobow v. Perot,
Del. Supr., 539 A.2d 180 (1988)....................................3
John Hancock Capital Growth Management, Inc. v. Aris Corp.,
Del. Ch., C.A. No. 9920, Jacobs, V.C. (Aug. 24, 1990).............13
Lewis v. Honeywell Inc.,
Del. Ch., C.A. No. 8651, Jacobs, V.C. (July 28, 1987)..............3
Lewis v. Leaseway Transp. Corp.,
Del. Ch., C.A. No. 8720, Chandler, V.C. (May 16, 1990)..........6, 8
Nebenzahl v. Miller,
Del. Ch., C.A. No. 13206, Steele, V.C.
(Aug. 26, revised Aug. 29, 1996)...............................3, 14
Porter v. Texas Commerce Bancshares, Inc.,
Del. Ch., C.A. No. 9114, Allen, C. (Oct. 12, 1989)...........6, 7, 8
Rabkin v. Philip A. Hunt Chem. Corp.,
Del. Supr., 498 A.2d 1099 (1985)...................................3
Shearin v. E.F. Hutton Group, Inc.,
Del. Ch., 652 A.2d 578 (1994)...................................6, 8
Solomon v. Pathe Communications Corp.,
Del. Ch., C.A. No. 12563, Allen, C. (Apr. 21, 1995),
aff'd, Del. Supr., 672 A.2d 35 (1996)...........................4, 5
Weinberger v. UOP, Inc.,
Del. Ch., 409 A.2d 1262 (1979).....................................3
In re Wheelabrator Tech. Inc. Shareholders Litig.,
Del. Ch., C.A. No. 11495, Jacobs, V.C. (Sept. 1, 1992)........14, 15
AUTHORITIES
8 Del. C. ss. 102(b)(7).............................................11, 12, 13
<PAGE>
NATURE OF PROCEEDINGS AND STATEMENT OF FACTS
This is an action challenging a cash-for-stock merger
negotiated at arm's length between an acquiring group and a special
committee of independent directors. According to the complaint, Defendant
Vestar Capital Partners ("Vestar") is a New York based investment firm
specializing in management buy outs and growth capital investments.(1) Compl.
P. 4. Defendants David J. Burns and James S. Gleason (the "Director
Defendants") are members of the group that will acquire Gleason. Plaintiff
claims that she owns stock in Gleason.
According to the complaint, on December 9, 1999, Gleason
announced that it had signed a definitive merger agreement (the
"Agreement") with Vestar. The complaint alleges that according to the terms
of the Agreement, the Company and Vestar have commenced a joint tender
offer to purchase all of Gleason's outstanding common shares for $23.00 per
share in cash. James S. Gleason, David J. Burns, other members of Gleason
management and the Gleason Foundation (with Vestar, the "Group") will not
tender their shares. The tender offer is conditioned on the tender of a
sufficient number of shares to give the Group ownership of two-thirds of
the outstand ing shares - approximately 80% of the shares held by the
public.
- -----------
(1) Plaintiff incorrectly alleges that Vestar Capital Partners, along
with the management of Gleason, will acquire Gleason. Compl. P. 13.
Vestar Capital Partners is not the entity making the acquisition.
Even if the Court concludes that Plaintiff has stated a claim, she
has named an improper party.
The day Gleason announced the merger, Plaintiff filed a
complaint on behalf of herself and purportedly on behalf of all other
similarly situated Gleason stockholders. As of December 14, 1999, nine
complaints had been filed. Only the complaint in this action has been
served. The complaint contains nothing more than conclusory allegations
that the merger is unfair and that the Defendants breached their fiduciary
duties in some completely unspecified manner. Each of the Defendants has
moved to dismiss. This is the Opening Brief of Defendants Vestar, David J.
Burns and James S. Gleason in support of their motion to dismiss the
complaint for failure to state a claim upon which relief can be granted.
<PAGE>
ARGUMENT
I. THE CONCLUSORY ALLEGATIONS OF THE COMPLAINT DO NOT STATE A
CLAIM AGAINST VESTAR OR THE INDIVIDUAL DEFENDANTS.
In order to survive a motion to dismiss, a complaint must
allege facts that, if taken as true, would establish each and every element
of a claim upon which relief can be granted. Lewis v. Honeywell Inc., Del.
Ch., C.A. No. 8651, slip op. at 8, Jacobs, V.C. (July 28, 1987). The Court
cannot accept conclusory allegations of facts as true where there are no
allegations of specific facts that would support such conclusions. Id.; see
also Weinberger v. UOP, Inc., Del. Ch., 409 A.2d 1262, 1264 (1979). "[A]ll
facts of the pleadings and reasonable inferences to be drawn therefrom are
accepted as true, but neither inferences nor conclusions of fact
unsupported by allegations of specific facts upon which the inferences or
conclusions rest are accepted as true." Grobow v. Perot, Del. Supr., 539
A.2d 180, 187 n.6 (1988) (citations omitted). "Conclusory statements
without supporting factual averments will not be accepted as true. . . ."
Grimes v. Donald, Del. Supr., 673 A.2d 1207, 1213 (1996); see also
Nebenzahl v. Miller, Del. Ch., C.A. No. 13206, slip op. at 5, Steele, V.C.
(Aug. 26, revised Aug. 29, 1996) ("[t]he courts will not accept conclusory
allegations"); Rabkin v. Philip A. Hunt Chem. Corp., Del. Supr., 498 A.2d
1099, 1105 (1985) (conclusory allegations of unfair dealing cannot survive
a motion to dismiss).
This rule is based on sound public policy considerations.
Former Chancellor Allen has explained that:
It is a fact evident to all of those who are familiar with
shareholder litigation that surviving a motion to dismiss means, as
a practical matter, that economical rational defendants . . . will
settle such claims, often for a peppercorn and a fee. This fact
causes one to apply the pleading test under Rule 12 with special
care in such suits. The court cannot be satisfied with mere
conclusions, as it might, for example, in an auto-accident case,
because in this sort of litigation the risk of strike suits means
that too much turns on the mere survival of the complaint.
Solomon v. Pathe Communications Corp., Del. Ch., C.A. No. 12563, slip op.
at 11, Allen, C. (Apr. 21, 1995) (footnote omitted), aff'd, Del. Supr., 672
A.2d 35, 38 (1996) ("we find that the Chancellor applied the correct
standard of review").
Here, the complaint contains nothing but the most conclusory
allegations of breach of fiduciary duty. Other than conclusory allegations
with respect to price (discussed below), the only allegation of breach of
fiduciary duty is that:
The proposed merger represents an improper attempt to eliminate the
public shareholders of Gleason Corp. to permit defendants to retain
for themselves Gleason Corp.'s valuable business and assets.
Compl. P.14. The complaint is barren of any facts supporting this utterly
conclusory statement.
Plaintiff's allegations of unfairness are equally defective.
The complaint merely alleges that:
The proposed plan will, for a grossly inadequate consideration,
deny plaintiff and the other members of the Class their right to
share proportionately in the future success of Gleason Corp. and
its valuable assets, while permitting Vestar Group to reap huge
benefits from the transaction.
Compl. P. 16.
Even in a self-interested transaction, which this is not, a
stockholder must allege some facts that tend to show that the transaction
was not fair. Solomon, slip op. at 12. Here, the independent public
stockholders will decide the outcome of the tender offer. Moreover, there
are simply no facts alleged that raise any claim of breach of fiduciary
duty or unfairness. The complaint should therefore be dismissed for failure
to state a claim upon which relief can be granted.
<PAGE>
II. THE CONCLUSORY ALLEGATIONS OF UNFAIR PRICE FAIL TO STATE A
CLAIM FOR RELIEF.
Plaintiff's primary objection to the proposed merger appears
to be directed to the price. See, e.g., Compl. P. 14 ("[d]efendants are
attempting to take advantage of this decline in Gleason Corp.'s stock price
to buy the Company at an inadequate price"); Compl. P. 15 ("[t]he price of
$23 per share to be paid to the Class members is unconscionable, unfair and
grossly inadequate"); Compl. P. 15(a) ("the intrinsic value of the stock of
Gleason Corp. is materially in excess of $23 per share"). Each of these
allegations is nothing more than a claim that the price is unfair.
This Court has routinely dismissed similar claims based on
allegations of inadequate price. See, e.g., Lewis v. Leaseway Transp.
Corp., Del. Ch., C.A. No. 8720, Chandler, V.C. (May 16, 1990) (dismissing a
claim for unfair price, finding that, absent any allegations of self-
dealing, lack of independence or failure of the board to adequately inform
itself, the plaintiff had not established that the entire fairness standard
should be invoked). See also Porter v. Texas Commerce Bancshares, Inc.,
Del. Ch., C.A. No. 9114, slip op. at 12, Allen, C. (Oct. 12, 1989) (claims
that merger price was unfair and inadequate "may be disposed of
summarily"); Shearin v. E.F. Hutton Group, Inc., Del. Ch., 652 A.2d 578,
592 (1994) (dismissing a claim for unfair price where complaint "alleges no
procedural defect in the course of the merger or other non-price related
basis for an injunction or other equitable remedy").
In Porter, the plaintiffs, stockholders of Texas Commerce
Bancshares, Inc. ("Texas Commerce"), sought rescission of a merger or
damages on the basis that the merger consideration was less than the
intrinsic value of their shares. In "summarily" disposing of claims that
the merger price was unfair and inadequate, the Chancellor found that where
there are no allegations that the merger was anything but "a negotiated,
arms'-length transaction," the "obligation to pay a 'fair price' . . . does
not arise." Porter, slip op. at 12. The Chancellor went on to find that the
rights of the Texas Commerce stockholders "do not include a right to a
price in the merger that is 'adequate' or 'fair.'" Id. at 13. In such a
situation, the stockholders have the legal right to approve or disapprove
the transaction. Id. Thus, "there is no right to a fair price in the merger
itself and thus no right to enjoin an arms'-length merger on the ground
that an ex post facto judicial review would conclude that the negotiated
price did not represent a 'fair' or 'adequate' price." Id. The Chancellor
held that the "plaintiffs' repeated allegations of the inadequacy of the
merger price do not themselves create a claim, in the context of an
arms'-length transaction, upon which relief may be granted. Where there is
no right, there can be no remedy." Id., slip op. at 13- 14.
In Lewis v. Leaseway Transp. Corp., this Court relied on
Porter in dismissing plaintiffs' claims challenging a leveraged buyout
transaction. The complaint in Lewis alleged that the deal price was
inadequate and that the defendants had (i) failed properly to negotiate
with prospective bidders; (ii) subjected the company to an excessive
break-up fee, a no-shop clause and a lock-up option, thereby bestowing a
benefit on some stockholders to the detriment of others; and (iii) not
adequately evaluated the company's worth. Lewis, slip op. at 8. The Court
found that the unsubstantiated allegations in the complaint "provide[d] no
basis to invoke the entire fairness standard -- the special scrutiny given
to transactions effectuated by stockholders or directors who have divided
loyalties." Id. at 9-10 (citations omitted). As in this case, there were no
allegations in Lewis that a majority stockholder existed or that a majority
of the directors were insiders. Without well-pleaded facts that would
invoke the entire fairness standard, the obligation to pay a fair price
does not arise. Id.; see also Shearin at 592.
<PAGE>
Each of the allegations in the complaint in this case is
nothing more than a repetition of the refrains rejected in Porter and
Lewis. The claims of inadequate price should also be rejected here.
The merger in this case is a classic arm's-length
transaction. As in Lewis, there are no allegations that there is a majority
stockholder. In fact, this is not a transaction that is controlled by any
one individual or group. Although it is not necessary for purposes of this
motion, it is noteworthy that the board is truly independent; six of the
eight members of the board are independent, outside directors. Moreover,
the board relied on a Special Committee of three independent directors. The
Committee relied, among other things, on the opinion of an independent
financial advisor chosen by the Committee without any input or influence by
Vestar or management.
To further ensure the fairness of the transaction, the
Committee and its independ ently selected financial and legal advisors
negotiated a long tender period -- forty-nine days from the date the
transaction was publicly announced -- before the deal can close. The
Committee also insisted that it be free to negotiate with and provide
information to third parties making inquiries about a possible acquisition
of the Company. The press release announcing the merger highlighted that:
[T]he Special Committee requested the Company's management and the
Special Committee's financial advisor to be available to receive
written unsolicited inquiries from any other parties interested in
the possible acquisition of the Company and, if the Special
Committee concludes that the failure to do so would be inconsistent
with its fiduciary duties to the Company's stockholders, to provide
information to and, in Bear Stearns' case in conjunction with the
Special Commit tee and its legal counsel, to enter into discussions
and negotiations with such parties in connection with any such
indicated interest.
Press Release dated Dec. 9, 1999 (Exhibit A). The terms of the Agreement
also contain provisions permitting the Special Committee to terminate the
Agreement and accept a higher offer.
Additionally, the tender offer contains a condition
requiring the tender of a sufficient number of shares to give Vestar,
management and the Gleason Foundation two-thirds of the outstanding public
shares -- approximately 80% of the shares held by the public. This is
because the Company's Certificate of Incorporation requires a 66-2/3% vote
to approve the subsequent merger. The public's decision on the fairness of
this transaction will therefore effectively control. Consequently,
Plaintiff's complaint should be dismissed for failure to state a claim.
<PAGE>
III. THE CLAIM FOR DAMAGES AGAINST THE INDIVIDUAL DEFENDANTS IS
BARRED BY ARTICLE TENTH OF GLEASON'S RESTATED CERTIFICATE
OF INCORPORATION.
Even if the Court were to find that Plaintiff's allegations
stated a claim as to the Director Defendants - which they do not - her
complaint must be dismissed as to the Director Defendants to the extent
that it seeks to recover monetary damages, because the underlying
"substantive" allegations of the complaint fail to state a claim upon which
relief may be granted against the Director Defendants under 8 Del. C. ss.
102(b)(7) and Article Tenth of Gleason's Restated Certificate of
Incorporation.(2)
- -------------
(2) The Court of Chancery may take judicial notice on a motion to
dismiss of a charter provision adopted pursuant to 8 Del. C.ss.
102(b)(7). Green v. Phillips, Del. Ch., C.A. No. 14436, slip op. at
13 n.7, Jacobs, V.C. (June 19, 1996); In re Baxter Int'l, Inc.
Shareholders Litig., Del. Ch., 654 A.2d 1268, 1270 (1995).
Section 102(b)(7) of the Delaware General Corporation Law
allows a corporation to include in its certificate of incorporation:
A provision eliminating or limiting the personal liability
of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided that
such provision shall not eliminate or limit the liability of a
director: (i) For any breach of the director's duty of loyalty to
the corporation or its stockholders; (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) under ss. 174 of this title; or (iv) for
any transaction from which the director derived an improper
personal benefit.
In 1987, pursuant to the statutory authorization contained
in Section 102(b)(7), Gleason's stockholders approved Gleason's Restated
Certificate of Incorporation which eliminates director liability to the
full extent permitted by Section 102(b)(7).(3) The effect of these
provisions is that the individual Defendants, as members of the Gleason
board, can be personally liable to the corporation or its stockholders only
if the directors' alleged actions constituted a breach of the duty of
loyalty, involved intentional misconduct or actions not taken in good
faith, or provided improper personal benefits to the directors.
- ------------
(3) Article Tenth specifically provides that:
No director of the Corporation shall be held personally
liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, except
(1) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (2) for acts or omissions
not in good faith or which involve intentional misconduct or
a knowing violation of law, (3) under Section 174 of the
[Delaware] General Corporation Law, or (4) for any
transaction from which the director derived an improper
personal benefit. (Exhibit B)
<PAGE>
The complaint fails to plead with particularity any facts
which would support a conclusion that any of the exceptions contained in
Section 102(b)(7) and Article Tenth is applicable here. There is no
allegation of any breach of the duty of loyalty, and no allegation of
intentional misconduct or knowing violation of law by any director -- let
alone by a majority of Gleason's directors. Nor are there any specific
particularized allegations of facts demonstrating that any of Gleason's
directors acted in bad faith or derived any personal benefit from the
challenged conduct.
Equally important, there are no allegations which even
remotely plead a violation of the duty of care. However, to the extent the
complaint is construed as pleading such a claim, it should be dismissed as
against the Director Defendants pursuant to Section 102(b)(7) and Article
Tenth of Gleason's Certificate of Incorporation. See, e.g., Arnold v.
Society For Savs. Bancorp, Inc., Del. Supr., 650 A.2d 1270, 1287 (1994);
John Hancock Capital Growth Management, Inc. v. Aris Corp., Del. Ch., C.A.
No. 9920, slip op. at 4, Jacobs, V.C. (Aug. 24, 1990) (same).
IV. THE COMPLAINT DOES NOT STATE A CLAIM FOR AIDING AND ABETTING
BREACH OF FIDUCIARY DUTY.
Paragraph 19 of the complaint alleges that Vestar aided and
abetted the individual defendants' breaches of fiduciary duty. In order to
state a claim for aiding and abetting, a plaintiff must allege facts
sufficient to establish breach of fiduciary duty. Nebenzahl v. Miller, Del.
Ch., C.A. 13206, slip op. at 16, Steele, V.C. (Aug. 26, 1996) (citations
omitted); Gilbert v. El Paso, Del. Ch., 490 A.2d 1050, 1057, aff'd, Del.
Supr., 575 A.2d 1131 (1990). "Without some pleaded facts evidencing a
fiduciary breached a duty, a non-fiduciary cannot aid and abet." Nebenzahl,
slip op. at 18. Plaintiff has not alleged facts sufficient to establish a
breach of fiduciary duties. The complaint, including the
aiding-and-abetting claim, should be dismissed on this ground alone. Id.
In addition, the complaint should be dismissed because an
aiding-and-abetting claim requires that "a defendant, who is not a
fiduciary, knowingly participated in a breach." Nebenzahl, slip op. at 16.
"A court can infer a non-fiduciary's knowing participation only if a
fiduciary breaches its duty in an inherently wrongful manner, and the
plaintiff alleges specific facts from which that court could reasonably
infer knowledge of the breach." Id. at 17 (citations omitted). Where no
such facts are alleged, dismissal is appropriate. Id. at 18; see also In re
Wheelabrator Tech. Inc. Shareholders Litig., Del. Ch., C.A. No. 11495, slip
op. at 19-20, Jacobs, V.C. (Sept. 1, 1992) (dismissing claim because
allegations of knowing participation were wholly conclusory).
There are no allegations in the complaint of knowing
participation in any breach of duty. Therefore, Plaintiff's
aiding-and-abetting claim should be dismissed.
<PAGE>
CONCLUSION
For the reasons set forth above, the Defendants' Motion to
Dismiss the complaint for failure to state a claim should be granted.
/s/ Edward P. Welch/lmh
----------------------------------
Edward P. Welch
Andrew J. Turezyn
Lorin M. Hochman
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
One Rodney Square
P.O. Box 636
Wilmington, Delaware 19899
(302) 651-3000
Attorneys for Defendants Vestar Capital
Partners, David J. Burns and
James S. Gleason
DATED: December 29, 1999
