UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
ALLAN ZISHKA and GERALD R. DAILEY, ) Civ. No. 98CV0660-D
On Behalf of Themselves and All ) [filed Mar. 10, 1998]
others Similarly Situated, ) COMPLAINT - CLASS ACTION
)
Plaintiffs, )
)
vs. )
)
AMERICAN PAD & PAPER COMPANY, BAIN )
CAPITAL, INC., BAIN VENTURE )
CAPITAL, TYLER CAPITAL FUND, L.P., ) COMPLAINT FOR VIOLATION OF
TYLER MASS., L.P., TYLER ) THE SECURITIES EXCHANGE ACT
INTERNATIONAL, L.P. II, BCIP TRUST ) OF 1934
ASSOCIATES, L.P., BCIP ASSOCIATES, )
GREGORY M. BENSON, JONATHAN S. )
LAVINE, RUSSELL M. GARD, MARC B. )
WOLPOW, CHARLES G. HANSON, III, )
ROBERT C. GAY, KEVIN W. McALEER, )
SCOTT R. WATTERSON, MORGAN STANLEY )
& Co., INC., ALEX. BROWN & SONS, )
INC., BANKERS TRUST NEW YORK )
CORPORATION, BT SECURITIES CORP. )
and CREDIT SUISSE FIRST BOSTON, )
INC., )
)
Defendants. ) Plaintiffs Demand A
____________________________________) Trial By Jury
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SUMMARY OF ACTION
1. This is a suit on behalf of purchasers of American Pad &
Paper Company ("American Pad" or the "Company") stock between
7/2/96 and 12/17/97 (the "Class Period"), alleging violations of
§§ 10b) and 20(a) of the Securities Exchange Act of 1934 ("1934
Act") and SEC Rule 10b-5. This action complains of a scheme by
American Pad, its controlling shareholders and top insiders, its
lending bank and its securities underwriters (which included its
lending bank) to escape from a failing leveraged buyout ("LBO") of
American Pad by misrepresenting American Pad's business, financial
results and future prospects to accomplish a $234 million initial
SNIPPETS:
AMERICAN PAD & PAPER COMPANY,
CORPORATION, BT SECURITIES CORP.)
This action complains of a scheme by American Pad, its controlling shareholders and top
public offering of American Pad stock.
Defendants represented that the new and restructured American Pad was a growth company in a
share growth of at least 20% per year over the next several years.
These misrepresentations artificially inflated the price of American Pad's stock, enabling
New York Corporation ("Bankers Trust"), American Pad's main lender, $175 million owed under a
The IPO also allowed Bain Capital, Inc., including Bain Venture Capital -- American Pad's
positive shareholders' equity -- boosting the book value of the 10 million American Pad
They invested only $3 million of their own capital, borrowing almost all the funds necessary
an IPO would create the trading market in American Pad's stock they needed to be able to do a
industry and, at worst, a "dead" industry from an investment viewpoint -- an industry plagued
As a result of the Williamhouse acquisition and the creation of its new "pro forma" financial
The defendants hurried to take American Pad public as soon as they could in 96, as they knew
Brown") and Credit Suisse First Boston, Inc..
In order to create intensive investor interest in the American Pad IPO, defendants organized
* American Pad was uniquely well positioned to increase its sales to office superstores, one
It presented American Pad's "growth strategy," stressing its "competitive strengths," which,
Gay has been a Managing Director of Bain Capital since 93, and since 89 a general partner of
It also had four representatives, who were its employees, agents and controlled persons, on
Bain Capital's shares of American Pad were owned by the "Bain Capital Funds," i.e.,
Defendants Morgan Stanley, Alex.
Because of their close association with American Pad, the Underwriter Defendants had constant
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