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AEGIS CORP. v. GOLDMAN

October 12, 1981

AEGIS CORPORATION, Plaintiff,
v.
Sol GOLDMAN, Alan H. Goldman, Benjamin Lewis, Jack Schwadron, Robert Blum, Julius Shepard and Paul Saffro, Defendants



The opinion of the court was delivered by: BRODERICK

MEMORANDUM ORDER

I.

 Plaintiff has moved for summary judgment on the second and third claims of the amended complaint. For the reasons set forth in this memorandum order plaintiff's motion is granted with respect to its second claim. I enjoin Goldman, his employees, attorneys, and persons acting in concert with him from using or voting proxies received by Goldman in connection with Aegis' May 8, 1981 annual stockholders' meeting with respect to a motion to increase the size of the board of directors or for any other purpose. Plaintiff's motion for summary judgment on its third claim is denied.

 Defendants have cross-moved to dismiss the complaint for failure to state claims on which relief can be granted, or in the alternative to stay this action pending disposition of an action in the Court of Chancery of the State of Delaware. Defendants' motion is denied.

 II.

 The following facts are not in dispute.

 Aegis is a Delaware corporation with its principal place of business in Florida. There were 10,955,034 shares of Aegis common stock issued and outstanding as of March 18, 1981. The shares were registered pursuant to Section 12 of the Securities Exchange Act of 1934 ("the Act"), 15 U.S.C. ยง 78e, and are listed for trading on the American Stock Exchange.

 Goldman is a citizen of New York with his principal place of business there. As of March 18, 1981 Goldman was the largest shareholder of Aegis owning 807,200 shares, representing 7.4% of the total issued and outstanding. In accordance with requirements promulgated by the Securities and Exchange Commission ("SEC") pursuant to Section 13(d) of the Act, Goldman in September, 1980, filed a Schedule 13D statement. Subsequent to additional purchases of Aegis stock, Goldman filed five amendments to his original Schedule 13D, the last one on May 7, 1981. Goldman stated his intentions with respect to Aegis in his original Schedule 13D:

 
Mr. Goldman did not at the time of the purchases described herein, and does not now, seek to control Aegis.

 In February, 1981 Goldman's attorney met with Castle Jordan, president and chief executive officer of Aegis, requesting that the size of Aegis' board of directors be increased from seven to eight. Jordan rejected the proposal. From that meeting Goldman learned that Aegis' management would propose a stock option plan ("the plan") whereby officers and employees would be given the right to purchase up to an aggregate of 1,000,000 shares of Aegis common stock. In a March 6, 1981 amendment to his Schedule 13D Goldman stated:

 
Mr. Goldman is considering soliciting proxies for one or more nominees that he may propose in opposition to the Board of Directors. Mr. Goldman may or may not seek to gain control of Aegis. ... Mr. Goldman believes that a plan of the nature and size of the one to be proposed by Aegis' Board of Directors is not in the best interests of Aegis' stockholders, and Mr. Goldman has a present intention to solicit proxies in opposition to such plan.

 Goldman through legal action in Delaware obtained a list of Aegis shareholders for the purpose of soliciting proxies to oppose the Aegis stock option plan. On March 6, 1981 Goldman filed a Schedule 14B pursuant to Section 14(a) of the Act and Rule 14a-1. In that Schedule 14B Goldman indicated that he "... intend(ed) to solicit proxies against the stock option ... and may solicit proxies for nominees for directors in opposition to management...." In an amendment to the Schedule 14B dated April 2, 1981 Goldman indicated "... that he would not, at this time, solicit proxies for nominees for directors in opposition to the Board of Directors...."

 On April 3, 1981 Aegis mailed to its shareholders notice of its annual meeting on May 8, 1981 and its proxy statement scheduling three items on the agenda: 1) the election of the board of directors; 2) consideration of the stock option plan proposed by management; and 3) ratification of auditors.

 On or about April 12, 1981 Goldman mailed to Aegis shareholders a letter and a proxy statement entitled "In Opposition to the Aegis 1980 Incentive Stock Option Plan."

 In the letter Mr. Goldman stressed that he did not seek control of Aegis:

 
I am not seeking to gain anything personally from this solicitation of proxies to defeat the 1,000,000 share stock option plan. I am not seeking control of Aegis. I am not even seeking representation on Aegis' Board of Directors. I only wish to protect my investment in Aegis stock.

 In the proxy statement Goldman also disclaimed any purpose to seek control of the corporation:

 
... (H)e has determined that he will only solicit proxies to defeat the plan at this time. Accordingly, he is not seeking to gain control of Aegis. Indeed, he is not even seeking the one directorship he originally requested. By focusing on the single issue that he feels most clearly displays the Board's failure to aggressively promote the best interests of Aegis' stockholders, Mr. Goldman is attempting to isolate the contested proposal from the irrelevant and extraneous questions of politics and personalities that usually arise in proxy contests with respect to the election of directors.

 Mr. Goldman's proxy statement noted that other matters which would be voted on at the annual meeting were the election of directors and the selection of auditors and stated that "Mr. Goldman takes no position with respect to these matters." The proxy statement set forth that if no instructions were specified, "the proxies will withhold authority with respect to the election of directors and will abstain with respect to the selection of auditors." The proxy statement further asserted that "Mr. Goldman is not aware of any other matters to be considered at the Meeting. However, if any other matters properly come before the Annual Meeting, the ... (proxy holders) will have discretionary authority to vote all proxies with respect to such matters in accordance with their judgment."

 The form of proxy Mr. Goldman distributed made provision for shareholders to vote for or to withhold authority to vote for the Board of Directors' nominees for directors and to approve, disapprove, or abstain with respect to, the selection of auditors. Neither the form of proxy nor Goldman's proxy solicitation statement contained the names of any other nominees for the board of directors.

 One day before the annual shareholder's meeting Goldman filed with the S.E.C. a fifth Schedule 13D amendment. It indicated that he would seek representation on the board of directors:

 
... Mr. Goldman has changed his intention and has decided that he will seek representation on the Board of Directors. In this connection, on May 6, 1981, Mr. Goldman determined that he would take such actions as he deemed appropriate in order to obtain representation on the Board of ...

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