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1
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PLAINTIFFS MEMORANDUM IN RESPONSE TO THE OBJECTIONS OF OBERHAUS AND BERNAS TO PROPOSED SETTLEMENT
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EXTRACTED KEY WORDS
PLAINTIFFS COURT ENCORE DISTRIBUTION TRANSACTION LIQUIDATION DEFENDANTS GOULD SHAREHOLDERS SUN OBJECTORS CASH GORES COSTS PURCHASING PLAN SHARES AMENDED COMPLAINT APPEALING APPROVE MEMORANDUM OPINION REASONS INDEPENDENT SHAREHOLDERS OBERHAUS BUSINESS LITIGATION VACATE CONSOLIDATED AMENDED COMPLAINT STOCK |
IN THE COURT OF CHANCERY OF THE STATE OF D E L A W A R E `I-*.
IN AND FOR NEW CASTLE COUNTY
:.
:.
IN RE ENCORE COMPUTER Civil Action No. 16044 2
,.-a:
CORPORATION SHAREHOLDERS
LITIGATION :
~ ;1 -~
ci ,y
.
L. 1
PLAINTIFFS' MEMORANDUM IN RESPONSE TO -`( "
THE OBJECTIONS OF ANTHONY OBERHAUS AND ROBERT
BERNAS TO THE PROPOSED SETTLEMENT
Plaintiffs respectfully submit this memorandum in response to the objections of
Objectors Anthony Oberhaus and Robert Bernas. For the reasons stated below, unless the
Court is prepared to either (1) direct Gould Electronics, Inc. not to participate in any cash
distribution upon liquidation of the Company, or (2) vacate its Memorandum Opinion of
June 16,2000, the proposed settlement and Plan of Distribution should be approved.
I. Background
On November 18, 1997, plaintiffs initiated this action by filing a class and
derivative complaint on behalf of all shareholders of Encore against Gould Electronics,
Inc. ("Gould"), Kenneth G. Fisher, Rowland H. Thomas, Robert J. Fedor and C. David
Ferguson (collectively, the "Original Defendants"), and named the Company as a
nominal defendant. Plaintiffs alleged that the defendants breached their fiduciary duties
and obligations owed to the shareholders of Encore in connection with the proposed sale
of Encore's storage products business to Sun Microsystems, Inc. (the "Sun Transaction").
On July 15, 1999, the plaintiffs filed a Consolidated Amended Complaint adding
two additional defendants, Michael C. Veysey and Thomas N. Rich (collectively with the
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2
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MEMORANDUM OF OBJECTORS A. OBERHAUS AND R. BERNAS IN SUPPORT OF OBJECTIONS TO PROPOSED SETTLEMENT
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EXTRACTED KEY WORDS
PROPOSED SETTLEMENT COURT GOULD LIQUIDATION STOCKHOLDERS SHAREHOLDERS TRANSACTION OBJECTORS SUN TRANSACTION ENCORE COMPUTER OBERHAUS DISTRIBUTION DEFENDANTS GORES TRANSACTION SUPPORT LIQUIDATION CONCESSION ENCORE COMPUTER CORPORATION LITIGATION PLAINTIFFS REPRESENTATIONS COMMON STOCKHOLDERS EXTENDED LIQUIDATION CONCESSION COMMON STOCK PROXY STATEMENT WALSH AFF AGREEMENT LIQUIDATE MEMORANDUM NORTH MARKET STREET |
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN
AND FOR NEW CASTLE COUNTY
>
IN RE ENCORE COMPUTER CORPORATION)
SHAREHOLDERS LITIGATION C.A. No. 16044
i>
MEMORANDUM OF OBJECTORS ANTHONY
OBERHAUS AND ROBERT BERNAS IN SUPPORT OF .'
THEIR OBJECTIONS TO THE PROPOSED SETTLEMENT
Peter J. Walsh, Jr.
Richard L. Renck
POTTER ANDERSON & CORROON LLP
Hercules Plaza
13 13 North Market Street
P.O. Box 95 1
Wilmington, DE 19899
(302) 984-6000
Attorneys for the Objectors
Anthony N. Oberhaus and
Dated: September 28,200 1 Robert W. Bemas
488167
TABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .,..... . . . . . . . . . . . . . . . . . . . . . . . .
STATEMENT OF FACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Objectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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3
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PLAINTIFFS APPLICATION FOR ORDER AWARDING PORTION OF ATTORNEY FEES
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EXTRACTED KEY WORDS
COUNSEL FEES RETAINER SETTLEMENT DEFENDANTS COURT PAID LITIGATION SUCCESSOR COUNSEL MILLER ENCORE SHAREHOLDERS REQUESTING ROSENBLUM WILLIAMS COLLINGS PLAINTIFFS ATTORNEY EXPENSES AMOUNT STAATS OBTAINING DELAWARE AWARD CALLINGS AFFIDAVIT APPEALING REPURCHASE SHARES COMMON |
WED STAMP)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
IN RE ENCORE COMPUTER Civil Action No., 16044 -1
CORPORATION SHAREHOLDERS ,!
LITIGATION ( 1
--7
PLAINTIFFS' APPLICATION FOR AN ORDER AWARDING A ; ;
PORTION OF THEIR ATTORNEY FEES AND EXPENSES : .`:
: .-J
Plaintiffs and plaintiffs' counse1 submit this memorandum in support of an
application for an order awarding a portion of their attorney's fees and expenses in
bringing this action. Specifically, plaintiffs seek an award directing Encore Computer
Corporation ("Encore" or "the Company") to reimburse plaintiffs for (1) the fees incurred
by successor counsel (retained subsequent to the dismissal of the complaint by the Court
of Chancery) who negotiated a settlement of this action, and (2) the amount of a retainer
paid by plaintiffs to plaintiffs' initial counsel who filed this action. This motion is
unopposed by all defendants.
I. Background
A. The Litigation
On November 18, 1997, Plaintiffs Paul S. Rosenblum, Louis J. Williams, Martin
Helfgott, Robert F. Callings, Ronald M. Stewart, M.D. and Hugh J. Kiley, Jr. (the
"Collings Plaintiffs") initiated this action by filing a class and derivative complaint styled
Robert F. Callings, et al. v. Kenneth V. Fisher, et al., C.A. No. 16044 (the "Callings
Action") on behalf of all shareholders of Encore against Gould Electronics, Inc., Kenneth
G. Fisher, Rowland H. Thomas, Robert J. Fedor and C. David Ferguson (collectively, the
"Original Defendants"), and named the Company as a nominal defendant.. The Collings
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4
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CONSOLIDATED AMENDED COMPLAINT
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EXTRACTED KEY WORDS
GOULD BUSINESS COMMON PREFERRED STOCK AGREEMENT DIRECTORS SUN SUN TRANSACTION DEFENDANTS DEBT COMMON SHAREHOLDERS PLAINTIFFS REAL-TIME BUSINESS OFFICER LIQUIDATION GORES TRANSACTION INDUCEMENT STORAGE PRODUCTS BUSINESS PROXY MATERIALS ASSET PURCHASE AGREEMENT SECOND SUN PAYMENT INVESTMENT CLUSTERING SOFTWARE JEC CONTROLLER BUSINESS OPERATIONS GORES GROUP SUN SET-OFF UNPAID DIVIDEND |
ORIGINALi
IN THE COURT OF CHANCERY OF THE STATE
OF DELAWARE IN AND FOR NEW CASTLE COUNTY
______________---___-------------------------------------------------- X
IN RE ENCORE COMPUTER CORPORATION CONSOLIDATED
SHAREHOLDERS LITIGATION CA. No. 16044
--------------------------------------------*-------------------------x
CONSOLIDATED AMENDED COMPLATNT
Plaintiffs, by their attorneys, allege upon information and belief, except with respect to
their ownership of common stock of Encore Computer Corporation ("Encore" or the
"Company"), which is alleged upon personal knowledge, as follows:
NATURE OF THE ACTION
1. During all relevant times, Gould Electronics, Inc. ("Gould") has controlled
Encore (a) by owning 48.5% of its common stock, (b) by owning substantially all of its
Preferred Stock; (c) by having two Gould officers on Encore's four member Board of
Directors, which was later increased to four Gould officers on Encore's six member Board of
Directors; and (d) entering into voting, inducement and other agreements that gave Gould
control over Encore's business operations and, in effect, the decisions of the two Encore
directors that were not Gould officers.
2. Gould had loaned Encore roughly $496 million to fund its business operations.
Over time, about $420 million of this debt was exchanged for Encore preferred stock. For its
own business reasons, Gould decided to discontinue funding Encore and wanted to get rid of
its entire investment for as much money as possible. Since Encore had no viable alternative
source of capital, it faced immediate liquidation. If Encore had simply liquidated, however,
the funds available to satisfy the Gould debt and preferred stock would not have been
I
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5
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MEMORANDUM OPINION
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EXTRACTED KEY WORDS
PLAINTIFFS ENCORE SUN TRANSACTION BUSINESS DEFENDANTS THOMAS GORES TRANSACTION ESQUIRES YORK LIQUIDATION PROXY STATEMENT REAL-TIME BUSINESS SHAREHOLDERS DIRECTORS FERGUSON AMENDED COMPLAINT AGREEMENT DISTRIBUTION STOCKHOLDER STORAGE PRODUCTS WOLF POPPER LLP ATTORNEYS COMMON SHAREHOLDERS RETENTION AGREEMENTS CLUSTERING SOFTWARE PREFERRED STOCK DISCLOSURE CLAIMS GORES GROUP LIQUIDATE |
IN THE COURT OF CHIANCERY OF THE STATE OF DELAWARE t5-7
IN AND FOR NEW CASTLE COUNTY
IN RE ENCORE COMPUTEFl CORPORATION ) CONSOLIDATED
SHAREHOLDERS LITIGATI.ON > CA. No. 16044
MEMORANDUM OPINION _
Date Submitted: February 22,, 1999. : :
Date Decided: June 16.2000
Norman M. Monhait and Carmella P. Keener, Esquires, of ROSENTHAL,
MONHAIT, GROSS & GODDESS, P.A., Wilmington, Delaware; and Norman
Berman and Michael G, L,ange, Esquires, of BERMAN, DEVALERIO & PEASE,
LLP, Boston, Massachusetts; and Robert I. Harwood and Jeffrey M. Haber, Esquires,
of `WECHSLER HARWQOD HALEBIAN & FEFFER LLP, New York, New York;
and Marian Rosner and Patricia Avery, Esquires, of WOLF POPPER LLP, New York,
New York and Curtis V. Trinko and Timothy J. McFall, Esl~~uires, of LAW OFFICES
OF CURTIS V. TRINKO, LLIP, New York, New York; Attorneys for Plaintiffs
R. Franklin Balotti, Lisa A. Schmidt and Peter B. Ladig, Esquires, of RICHARDS,
LA.YTON & FINGER, PA., Wilmington, Delaware; and F!ichard A. Cirillo, Debora
S. 13urstein and Ann M. Driscoll, Esquires, of RING & SPALDING, New York, New
York; Attorneys for Defendants Gould Electronics, Inc., Robert J. Fedor, C. David
Ferguson, Thomas N. Rich and Michael C. Veysey
Ste:phen J. Balick, Esquire, of A.SHBY & GEDDES, Wihnir~gton, Delaware; and Mark
D. Cahill, Esquire, of CHOA,.TE, HALL & STEWART, Boston, Massachusetts;
Attorneys for Defendants Kenneth G. Fisher and Rowland H. Thomas, Jr.
JA.COBS, VICE CHANCEILOR
This consolidated class action is brought by former shareholders of Encore
Computer Corporation, a Delaware corporation ("Encore" or "the Company"),
against Encore's former di-rectors and its largest stockholder, Gould Electronics,
Inc. ("Gould"). The plaintiffs' claim is that the defendants breached their duties of
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6
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MEMORANDUM OPINION (REVISED PAGES)
|
EXTRACTED KEY WORDS
TRANSACTION SUN TRANSACTION DEL ENCORE PLAINTIFFS ALLEGE FACTS SUPR GOULD ASSETS STORAGE PRODUCTS PROCEEDS OPINION ENCLOSURES DUTY LOYALTY PRESUMPTION DIRECTORS COMPLAINT PURPOSES JUDGEMENT JUDGMENT STANDARD VALID BUSINESS JUSTIFICATION DISAGREE ENCORE STOCKHOLDERS TRANSACTION ENABLED ENCORE DISCHARGE AMOUNTS DEBT |
C O U R T O F C H A N C E R Y
OF THE
STATE OF DELAWARE
June 16.2000
Norman M. Monhait, Esquire Stephen J. Bailick, Esquire
Rosenthal, Monhait, Gross & Ashby & Geddes
Goddess One Rodney Square
Mellon Bank Center, Suite 140 1 Suite 302
P.O. Box 1070 P.O. Box 1150
Wilmington, DE 19899 Wilmington, DE 19899
R. Franklin Balotti, Esquire
Richards, Layton & Finger
One Rodney Square
P.0. Box 55 1
Wil.mington, DE 19899
RE: In Re Encore Computer Corporation
Shareholders Litigation
C.A. No. 16044
Dear Counsel:
Two typographical errors were found in the Opinion issued earlier
today in the above-captioned matter. Please substitute the enclosed pages 12 and
16 with your copy of the Opinion. I apologize for any inconvenience this may
have caused.
Very truly yours,
lycx IQ*
f?
Enclosures
cc: Register in Chancery
supported by specific factual allegations will not be accepted as true.4
A. The Duty of Loyalty Claims
It is well-established Delaware law that the business judgement rule creates
a "powerful presumption in favor of actions taken by the directors in that a
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7
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DEFENDANTS REPLY BRIEF IN SUPPORT OF MOTION TO DISMISS
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EXTRACTED KEY WORDS
ENCORE BUSINESS SHAREHOLDERS GOULD PROXY STATEMENT DEFENDANTS BUSINESS JUDGMENT RULE DETRIMENT SUN TRANSACTION INJURY DEL MATERIALS REAL-TIME BUSINESS GORES SUFFICIENTLY PLEAD INJURY FAIRNESS TEST PREFERRED STOCK COMPLAINT MISREPRESENTATIONS LIQUIDATION ALLEGATIONS STOCKHOLDERS DIRECTORS AGREEMENT ASSERTION PREFERRED SHARES DISTRIBUTION DISCLOSURES |
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE -'
IN AND FOR NEW CASTLE COUNTY
IN RE ENCORE COMPUTER CORPORATION ) CONSOLIDATED
SHAREHOLDERS LITIGATION > C.A. No. 16044
DEFENDANTS' REPLY BRIEF HN SUPPORT OF THEIR MOTION TO DISMISS
OF COUNSEL: R. Franklin Balotti
Lisa A. Schmidt
Richard A. Cirillo Peter B. Ladig ;.,
Debora S. Burstein Richards, Layton & Finger, P.AF! 17 it?
,,
Ann M. Driscoll One Rodney Square .
,...
,' ;
King & Spalding P.O. Box 551 i',
1185 Avenue of the Americas Wilmington, DE 19899 ;
I _
New York, NY 10036 (302) 658-6541 ; ../
:_ ,. I
(212) 556-2100 Attorneys for Defendants Gould:Elect&nics,
Inc., Robert J. Fedor, C. Davi~$%gu&n,
Thomas N. Rich and Michael C. %!ey&y
OF COUNSEL: Steven J. Balick
Ashby & Geddes
Mark D. Cahill One Rodney Square, Suite 302
Choate, Hall & Stewart P.O. Box 1150
Exchange Place Wilmington, DE 19899
53 State Street (302) 654-1888
Boston, MA 02109-2891 Attorneys for Defendants Kenneth G. Fisher
and Rowland H. Thomas, Jr.
Dated: December 3, 1999
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8
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DEFENDANTS OPENING BRIEF IN SUPPORT OF THEIR MOTION TO DISMISS THE CONSOLIDATED AMENDED COMPLAINT
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EXTRACTED KEY WORDS
AMENDED COMPLAINT DEFENDANTS GOULD TRANSACTION REAL-TIME BUSINESS PLAINTIFFS SUN TRANSACTION DEL GORES SHAREHOLDERS MOTION SUPPORT DIRECTORS DISMISS SUPR PROXY STATEMENT PREFERRED STOCK LIQUIDATION ENCORE BOARD GOULD AGREEMENT ALLEGATIONS COMMON STOCKHOLDERS STORAGE PRODUCTS BUSINESS CLUSTERING SOFTWARE BUSINESS JUDGMENT RULE CONSOLIDATED AMENDED COMPLAINT PRELIMINARY STATEMENT FIDUCIARY DUTY MATERIAL MISREPRESENTATIONS |
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
IN RE ENCORE COMPUTER CORPORATION ) CONSOLIDATED
SHAREHOLDERS LITIGATION 1 C.A. No. 16044
DEFENDANTS' OPENING BRIEF IN SUPPORT OF THEIR
MOTION TO DISMISS THE CONSOLIDATED AMENDED COMPLAINT
OF COUNSEL: R. Franklin Balotti
Lisa A. Schmidt
Richard A. Cirillo Peter B. Ladig
Deborah S. Burstein Richards, Layton & Finger
Ann M. Driscoll One Rodney Square
King & Spalding P.O. Box 551
1185 Avenue of the Americas Wilmington, Delaware 19899
New York, New York 10036 (302) 658-6541
(212) 556-2100 Attorneys for Defendants
Gould Electronics Inc., Robert J. Fedor,
C. David Ferguson, Thomas N. Rich, and
Michael C. Veysey
OF COUNSEL:
Steven J. Balick
Mark D. Cahill Ashby & Geddes
Choate, Hall & Stewart One Rodney Square, #302
Exchange Place P.O. Box 1150
53 State Street Wilmington, Delaware 19899
Boston, Massachusetts 02109-2891 (302) 654- 1888
(6 17) 248-5000 Attorneys for Defendants Kenneth G.
Fisher and Rowland H. Thomas, Jr.
Dated: August 30, 1999
RLFl-2049244-l
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BRIEF
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EXTRACTED KEY WORDS
JUDGEMENT GOULD SUN TRANSACTION FACTS ENCORE BOARD BUSINESS DEL DEFENDANTS SUMMARY JUDGMENT COURT DIRECTORS SHAREHOLDERS GOULD AGREEMENT PLAINTIFFS DATA STORAGE MOTION LIQUIDATION COMMON STOCKHOLDERS PREFERRED STOCK LIQUIDATION PREFERENCE STORAGE PRODUCTS BUSINESS JUDGMENT RULE DISTRIBUTION PREFERRED SHARES REPRESENTATIONS MATERIAL FACTS INTELLECTUAL PROPERTY INDEBTEDNESS NATURE |
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
IN RE ENCORE COMPUTER CORPORATION ) CONSOLIDATED
SHAREHOLDERS LITIGATION > C.A. No. 16044
DEFENDANTS' OPENING BRIEF IN
SUPPORT OF THEIR MOTION FOR SUMMARY JUDGMENT
OF COUNSEL: R. Franklin Balotti
Lisa A. Schmidt
Richard A. Cirillo Peter B. Ladig
Deborah S. Burstein Richards, Layton & Finger
Lisl J. Dunlop One Rodney Square
Rogers & Wells P.O. Box 551
200 Park Avenue Wilmington, Delaware 19899
New York, NY 10 166-O 153 (302) 658-6541
(212) 878-8000 Attorneys for Defendants
Gould Electronics Inc., Robert J. Fedor
and C. David Ferguson
OF COUNSEL: Steven J. Balick
Ashby & Geddes
Mark D. Cahill (BB0#544693) One Rodney Square, #302
Choate, Hall & Stewart P.O. Box 1150
Exchange Place Wilmington, Delaware 19899
53 State Street (302) 654-1888
Boston, Massachusetts 02109-2891 Attorneys for Defendants Kenneth G.
(6 17) 248-5000 Fisher and Rowland H. Thomas, Jr.
Dated: February 5,1999
RLFl-203730-I
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