Case 5:20-cv-09314-SVK Document 1 Filed 12/23/20 Page 1 of 16
`
`BETSY C. MANIFOLD (SBN 182450)
`RACHELE R. BYRD (SBN 190634)
`MARISA C. LIVESAY (SBN 223247)
`BRITTANY N. DEJONG (SBN 258766)
`WOLF HALDENSTEIN ADLER
` FREEMAN & HERZ LLP
`750 B Street, Suite 1820
`San Diego, CA 92101
`Telephone: (619) 239-4599
`Facsimile: (619) 234-4599
`manifold@whafh.com
`byrd@whafh.com
`livesay@whafh.com
`dejong@whafh.com
`
`Attorneys for Plaintiff
`[Additional Counsel on Signature Page]
`
`
`
`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF CALIFORNIA
`
`
`Case No.
`
`
`
`COMPLAINT FOR VIOLATIONS OF
`SECTIONS 14(a) AND 20(a) OF THE
`SECURITIES EXCHANGE ACT OF
`1934
`
`DEMAND FOR JURY TRIAL
`
`
`
`))
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`SHIVA STEIN,
`
`
`Plaintiff,
`
`
`v.
`
`TELENAV, INC., DOUGLAS MILLER, H.P.
`JIN, SAMUEL CHEN, WES CUMMINS, and
`RANDY L. ORTIZ,
`
`
`
`Defendants.
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`
`COMPLAINT FOR VIOLATIONS OF SECTIONS 14(a)
`AND 20(a) OF THE SECURITIES EXCHANGE ACT OF 1934
`
`

`

`Case 5:20-cv-09314-SVK Document 1 Filed 12/23/20 Page 2 of 16
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`Plaintiff Shiva Stein (“Plaintiff”), by her attorneys, makes the following allegations
`against Telenav, Inc. (“Telenav” or the “Company”) and the members of the board of directors
`of Telenav (the “Board” or “Individual Defendants,” along with Telenav, collectively referred to
`as the “Defendants”), for their violations of Sections 14(a) and 20(a) of the Securities Exchange
`Act of 1934 (the “Exchange Act”), 15 U.S.C. §§ 78n(a), 78t(a), SEC Rule 14a-9, 17 C.F.R.
`240.14a-9, and Regulation G, 17 C.F.R. § 244.100 in connection with the proposed acquisition
`(the “Proposed Transaction”) of Telenav by affiliates of V99 Inc. (“V99”). The allegations in
`this complaint are based on the personal knowledge of Plaintiff as to herself and on information
`and belief (including the investigation of counsel and review of publicly available information)
`as to all other matters stated herein.
`
`INTRODUCTION
`1.
`This is an action brought by Plaintiff to enjoin a transaction whereby Viking Merger
`Sub, Inc., a Delaware corporation and direct wholly owned subsidiary of V99 (“Merger Sub”)
`will merge with and into Telenav, with Telenav continuing as the surviving corporation as a direct
`wholly owned subsidiary of V99 (“Proposed Transaction”). Pursuant to the Merger Agreement,
`Telenav shareholders will receive $4.80 in cash for each share of Telenav common stock owned
`(the “Merger Consideration”). The Board has unanimously recommended to the Company’s
`stockholders that they vote for the Proposed Transaction at the special meeting of the Telenav
`shareholders. Telenav shareholders will own approximately 36% of the post-transaction entity
`and V99 shareholders will own 64% of the post-transaction entity.
`2. To convince Telenav stockholders to vote in favor of the Proposed Transaction, on
`December 17, 2020, the Board authorized the filing of a materially incomplete and misleading
`Proxy Statement on Schedule 14A (the “Proxy Statement”) with the Securities and Exchange
`Commission (“SEC”). The Proxy Statement violates Sections 14(a) and 20(a) of the Exchange
`Act by noncompliance with Regulation G and SEC Rule 14a-9 (17 C.F.R. § 244.100 and 17
`C.F.R. § 240.14a-9, respectively).
`3. Defendants have failed to disclose certain material information necessary for
`Telenav stockholders to properly assess the fairness of the Proposed Transaction, thereby
`
`
`
`
`COMPLAINT FOR VIOLATIONS OF SECTIONS 14(a)
`AND 20(a) OF THE SECURITIES EXCHANGE ACT OF 1934
`
`- 1 -
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`

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`Case 5:20-cv-09314-SVK Document 1 Filed 12/23/20 Page 3 of 16
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`violating SEC rules and regulations and rendering certain statements in the Proxy Statement
`materially incomplete and misleading.
`4.
`In particular, the Proxy Statement contains materially incomplete and misleading
`information concerning the financial forecasts for the Company prepared and relied upon by the
`Board in recommending to the Company’s stockholders that they vote in favor of the Proposed
`Transaction. The same forecasts were used by Telenav’s financial advisor, B. Riley Securities,
`Inc. (“B. Riley”), in conducting their valuation analyses in support of its fairness opinion. The
`Proxy Statement also contains materially incomplete and misleading information concerning
`certain financial analyses performed by the financial advisor.
`5. The material information that has been omitted from the Proxy Statement must be
`disclosed prior to the forthcoming stockholder vote in order to allow the stockholders to make an
`informed decision regarding the Proposed Transaction.
`6.
`For these reasons, and as set forth in detail herein, Plaintiff asserts claims against
`Defendants for violations of Sections 14(a) and 20(a) of the Exchange Act, based on Defendants’
`violations of Regulation G and Rule 14a-9. Plaintiff seeks to enjoin Defendants from holding the
`stockholders vote on the Proposed Transaction and taking any steps to consummate the Proposed
`Transaction unless, and until, all material information discussed below is disclosed to Telenav
`stockholders sufficiently in advance of the vote on the Proposed Transaction or, in the event the
`Proposed Transaction is consummated without corrective disclosures, to recover damages
`resulting from Defendants’ violations of the Exchange Act.
`JURISDICTION AND VENUE
`7. This Court has subject matter jurisdiction pursuant to Section 27 of the Exchange
`Act (15 U.S.C. § 78aa) and 28 U.S.C. § 1331 (federal question jurisdiction) as Plaintiff alleges
`violations of Section 14(a) and 20(a) of the Exchange Act.
`8. This Court has personal jurisdiction over each defendant named herein because
`each defendant is either a corporation that does sufficient business in California or an individual
`who has sufficient minimum contacts with California to render the exercise of jurisdiction by the
`California courts permissible under traditional notions of fair play and substantial justice.
`
`
`
`
`COMPLAINT FOR VIOLATIONS OF SECTIONS 14(a)
`AND 20(a) OF THE SECURITIES EXCHANGE ACT OF 1934
`
`- 2 -
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`Case 5:20-cv-09314-SVK Document 1 Filed 12/23/20 Page 4 of 16
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`9. Venue is proper in this District under Section 27 of the Exchange Act, 15 U.S.C.
`§ 78aa, as well as under 28 U.S.C. § 1391, because V99 is headquartered in this District.
`PARTIES
`10. Plaintiff has owned the common stock of Telenav since prior to the announcement
`of the Proposed Transaction herein complained of and continues to own this stock.
`11. Telenav is a corporation duly organized and existing under the laws of Delaware
`and maintains its principal offices in Santa Clara, California. Telenav is, and at all relevant times
`hereto was, listed and traded on the NASDAQ Stock Exchange under the symbol “TNAV.”
`12. Defendant Douglas Miller has been a member of the Board since 2015.
`13. Defendant H.P. Jin is a co-founder of the Company and has been a member of the
`Board and president of the Company since 1999.
`14. Defendant Samuel Chen has been a member of the Board since 2002.
`15. Defendant Wes Cummins has been a member of the Board since 2016.
`16. Defendant Randy L. Ortiz has been a member of the Board since 2017.
`17. The Defendants referred to in paragraphs 12-16 are collectively referred to herein as
`the “Individual Defendants” and/or the “Board.”
`18. The Defendants referred to in paragraphs 11-16 are collectively referred to herein as
`the “Defendants.”
`
`SUBSTANTIVE ALLEGATIONS
`
`The Proposed Transaction
`19. On November 3, 2020, Telenav announced that it had entered into the Agreement
`and Plan of Merger with V99 (the “Merger Agreement”):
`
`(NASDAQ:
`Inc.
`SANTA CLARA, Calif.--(BUSINESS WIRE)--Telenav,
`TNAV), a leading provider of connected-car and location-based services, today
`announced that it has entered into a definitive merger agreement to be acquired by
`V99, Inc., a Delaware corporation led by HP Jin, Co-Founder, President, and
`Chief Executive Officer of Telenav, for $4.80 per share in an all cash transaction
`that values Telenav at approximately $241 million. HP Jin, Samuel T. Chen, a
`director of Telenav, and a certain entity affiliated with Mr. Chen, are expected to
`provide debt financing in connection with the proposed transaction.
`
`
`
`
`
`COMPLAINT FOR VIOLATIONS OF SECTIONS 14(a)
`AND 20(a) OF THE SECURITIES EXCHANGE ACT OF 1934
`
`- 3 -
`
`

`

`Case 5:20-cv-09314-SVK Document 1 Filed 12/23/20 Page 5 of 16
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`The per share purchase price represents a premium of approximately 33.3 percent
`over Telenav’s closing stock price on October 1, 2020, the last full trading day
`prior to announcing that the Special Committee had received a non-binding “go-
`private” proposal from V99. Upon completion of the transaction, Telenav will
`become a private company with the flexibility to continue investing in its
`connected-car strategy.
`
`“We are pleased to have reached this agreement with V99, which we believe will
`deliver immediate value to stockholders and positions Telenav to accelerate its
`journey towards a connected-car future with smarter, easier and safer innovation,”
`said Douglas Miller, Lead Independent Director and a member of the Telenav
`Special Committee. “The transaction is the result of a thoughtful and
`comprehensive review of value creation opportunities available to Telenav. We
`are confident that this transaction is in the best interest of Telenav and all of its
`stakeholders, and we look forward to working with HP and V99 to complete the
`transaction.”
`
`“Today’s announcement represents an exciting new chapter for Telenav,” said HP
`Jin, Co-Founder, President and Chief Executive Officer. “As a private company,
`we will have the resources and flexibility to continue our growth and execute on
`our OEM-centric, connected-car strategy as the market for connected-car
`capabilities continues to expand. I would like to thank the Special Committee for
`taking the time to thoroughly evaluate and review V99’s offer and Telenav’s
`employees for their continued focus throughout this process. I am honored to
`continue leading Telenav through its next phase of growth and success, and I am
`confident Telenav will thrive as a privately held company.”
`
`Transaction Details
`Acting upon unanimous recommendation by the Special Committee, the Telenav
`Board of Directors unanimously approved the merger agreement and the merger,
`with Messrs. Jin and Chen recusing themselves from all related discussions and
`abstaining from the vote. The Special Committee negotiated the terms of the
`merger agreement with assistance from its independent financial and legal
`advisors.
`
`The agreement includes a 30-day “go-shop” period expiring on December 2,
`2020, which permits the Special Committee and its advisors to solicit alternative
`acquisition proposals from third parties. The Special Committee will have the
`right to terminate the merger agreement to enter into a superior proposal subject
`to the terms and conditions of the merger agreement. There can be no assurance
`that this “go-shop” will result in a superior proposal, and Telenav does not intend
`to disclose developments with respect to the solicitation process unless and until it
`determines such disclosure is appropriate or otherwise required.
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`COMPLAINT FOR VIOLATIONS OF SECTIONS 14(a)
`AND 20(a) OF THE SECURITIES EXCHANGE ACT OF 1934
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`Case 5:20-cv-09314-SVK Document 1 Filed 12/23/20 Page 6 of 16
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`Additionally, Messrs. Jin and Chen, Changbin Wang, and each of their affiliates
`and related parties, have executed a voting and support agreement with the
`Company, pursuant to which, among other things, such parties have agreed to
`vote their shares of Telenav stock in accordance with the recommendation of the
`Special Committee or the Telenav Board of Directors with respect to the merger
`agreement and the merger and to otherwise support any proposal that the Special
`Committee or the Telenav Board of Directors receives prior to the expiration of
`the “go-shop” period, and determines is a superior proposal and provides an
`appropriate notice to V99 on or prior to December 16, 2020, including by voting
`or tendering their shares of Telenav stock in accordance with the recommendation
`of the Special Committee or the Telenav Board of Directors, as applicable, with
`respect to such superior proposal.
`
`The transaction is expected to close during the first calendar quarter of 2021,
`subject to customary closing conditions, including approval by Telenav
`stockholders, approval by Telenav stockholders holding a majority of the
`outstanding shares owned by stockholders other than Mr. Jin, Mr. Chen,
`Changbin Wang, and each of their affiliates and related parties, and receipt of
`regulatory approvals. Upon closing of the transaction, Telenav common stock will
`no longer be listed on any public market. Telenav will continue to be
`headquartered in Santa Clara, California.
`
`First Quarter 2021 Earnings Conference Call Update
`Separately, Telenav today announced financial results for the first quarter of
`2021, which are available on the “Investor Relations” section of the Telenav
`website. In light of the announced transaction with V99, Telenav has cancelled
`the earnings conference call previously scheduled for November 5, 2020 at 2:00
`p.m. Pacific Time. During the pendency of the transaction, Telenav will issue
`earnings releases consistent with its current schedule, but will suspend earnings
`conference calls and webcasts.
`
`Advisors
`B. Riley Securities, Inc. and Wilson Sonsini Goodrich & Rosati, P.C. are serving
`as financial advisor and legal advisor, respectively, to the Telenav Special
`Committee. Norton Rose Fulbright LLP is serving as legal advisor to V99, Inc.
`
`* * *
`The Materially Misleading and Incomplete Solicitation Statement
`20.
`On December 17, 2020, Defendants caused the Proxy Statement to be filed with
`the SEC in connection with the Proposed Transaction. The Proxy Statement solicits the
`Company’s shareholders to vote in favor of the Proposed Transaction. Defendants were obligated
`to carefully review the Proxy Statement before it was filed with the SEC and disseminated to the
`
`
`
`
`COMPLAINT FOR VIOLATIONS OF SECTIONS 14(a)
`AND 20(a) OF THE SECURITIES EXCHANGE ACT OF 1934
`
`- 5 -
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`

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`Case 5:20-cv-09314-SVK Document 1 Filed 12/23/20 Page 7 of 16
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`Company’s shareholders to ensure that it did not contain any material misrepresentations or
`omissions. However, the Proxy Statement misrepresents and/or omits material information that is
`necessary for the Company’s shareholders to make an informed decision concerning whether to
`vote in favor of the Proposed Transaction, in violation of Sections 14(a) and 20(a) of the
`Exchange Act.
`Financial Forecasts
`21.
`The Proxy Statement discloses tables for forecasts for Telenav, including the
`Fiscal 2021 Plan and the Long Term Financial Model (the “Projections”). The Special Committee
`directed Telenav management to update the Projections in order to assist B. Riley in connection
`with B. Riley’s financial analyses and potential acquirors other than V99 in considering
`acquisition of the Company (the “Updated Projections”). There are two versions of the Updated
`Projections – one that assumed that Telenav would secure a next generation program with one of
`its automobile manufacturer customers (the “Extension Projections”) and one that assumed that
`Telenav would not secure this customer (the “No Extension Projections”, and together with the
`Extension Projections, Updated Projections, and the Projections, will be collectively referred to as
`the “Company Projections”). However, the Proxy Statement fails to provide material information
`concerning these Projections, which were developed by the Company’s management and relied
`upon by the Board in recommending that the shareholders vote in favor of the Proposed
`Transaction. These financial forecasts were also relied upon by B. Riley in rendering its fairness
`opinion.
`22. With respect to the Company Projections, the Proxy Statement fails to provide: (i)
`the value of certain line items used to calculate (a) Operating profit, (b) income before taxes, (c)
`income from continuing operations, (d) net income, (e) pro-forma net income, and (f) adjusted
`EBITDA, all of which are non-GAAP measures; (ii) a reconciliation to its most comparable
`GAAP measures, in direct violation of Regulation G and, consequently, Section 14(a); and (iii)
`stock-based compensation.
`23.
`The SEC has indicated that if the most directly comparable GAAP measure is not
`accessible on a forward-looking basis, the company must disclose that fact, provide any
`
`
`
`
`COMPLAINT FOR VIOLATIONS OF SECTIONS 14(a)
`AND 20(a) OF THE SECURITIES EXCHANGE ACT OF 1934
`
`- 6 -
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`

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`Case 5:20-cv-09314-SVK Document 1 Filed 12/23/20 Page 8 of 16
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`reconciling information that is available without unreasonable effort, identify any unavailable
`information and disclose the probable significance of that information. A company is permitted to
`provide the projected non-GAAP measure, omit the quantitative reconciliation and qualitatively
`explain the types of gains, losses, revenues or expenses that would need to be added to or
`subtracted from the non-GAAP measure to arrive at the most directly comparable GAAP
`measure, without attempting to quantify all those items.
`24. When a company discloses non-GAAP financial measures in a registration
`statement that were relied on by a board of directors to recommend that shareholders exercise
`their corporate suffrage rights in a particular manner, the company must, pursuant to SEC
`regulatory mandates, also disclose all forecasts and information necessary to make the non-GAAP
`measures not misleading, and must provide a reconciliation (by schedule or other clearly
`understandable method) of the differences between the non-GAAP financial measure disclosed or
`released with the most comparable financial measure or measures calculated and presented in
`accordance with GAAP. 17 C.F.R. § 244.100.
`25.
`Indeed, the SEC has increased its scrutiny of the use of non-GAAP financial
`measures in communications with shareholders. Former SEC Chairwoman Mary Jo White has
`stated that the frequent use by publicly traded companies of unique company-specific, non-GAAP
`financial measures (as Telenav included in the Proxy Statement here), implicates the centerpiece
`of the SEC’s disclosures regime:
`
`
`In too many cases, the non-GAAP information, which is meant to supplement the
`GAAP information, has become the key message to investors, crowding out and
`effectively supplanting the GAAP presentation. Jim Schnurr, our Chief
`Accountant, Mark Kronforst, our Chief Accountant in the Division of Corporation
`Finance and I, along with other members of the staff, have spoken out frequently
`about our concerns to raise the awareness of boards, management and investors.
`And last month, the staff issued guidance addressing a number of troublesome
`practices which can make non-GAAP disclosures misleading: the lack of equal or
`greater prominence for GAAP measures; exclusion of normal, recurring cash
`operating expenses;
`individually
`tailored non-GAAP
`revenues;
`lack of
`consistency; cherry-picking; and the use of cash per share data. I strongly urge
`companies to carefully consider this guidance and revisit their approach to non-
`GAAP disclosures. I also urge again, as I did last December, that appropriate
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`COMPLAINT FOR VIOLATIONS OF SECTIONS 14(a)
`AND 20(a) OF THE SECURITIES EXCHANGE ACT OF 1934
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`Case 5:20-cv-09314-SVK Document 1 Filed 12/23/20 Page 9 of 16
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`controls be considered and that audit committees carefully oversee their
`company’s use of non-GAAP measures and disclosures.1
`26.
`The SEC has repeatedly emphasized that disclosure of non-GAAP forecasts can
`be inherently misleading and has therefore heightened its scrutiny of the use of such forecasts.2
`Indeed, the SEC’s Division of Corporation Finance released a new and updated Compliance and
`Disclosure Interpretation (“C&DI”) on the use of non-GAAP financial measures to clarify the
`extremely narrow and limited circumstances, known as the business combination exemption,
`where Regulation G would not apply.3
`27.
`More importantly, the C&DI clarifies when the business combination exemption
`does not apply:
`
`
`There is an exemption from Regulation G and Item 10(e) of Regulation S-K for
`non-GAAP financial measures disclosed in communications subject to Securities
`Act Rule 425 and Exchange Act Rules 14a-12 and 14d-2(b)(2); it is also intended
`to apply to communications subject to Exchange Act Rule 14d-9(a)(2). This
`exemption does not extend beyond such communications. Consequently, if the
`same non-GAAP financial measure that was included in a communication filed
`under one of those rules is also disclosed in a Securities Act registration
`statement, proxy statement, or tender offer statement, this exemption from
`Regulation G and Item 10(e) of Regulation S-K would not be available for that
`non-GAAP financial measure.
`
`Id.
`
`28.
`Thus, the C&DI makes clear that the so-called “business combination” exemption
`from the Regulation G non-GAAP to GAAP reconciliation requirement applies solely to the
`                                                       
`1
`Mary Jo White, Keynote Address, International Corporate Governance Network Annual
`Conference: Focusing the Lens of Disclosure to Set the Path Forward on Board Diversity, Non-
`GAAP, and Sustainability (June 27, 2016), https://www.sec.gov/news/speech/chair-white-icgn-
`speech.html (last visited Dec. 22, 2020) (emphasis added).
`2
`See, e.g., Nicolas Grabar and Sandra Flow, Non-GAAP Financial Measures: The SEC’s
`Evolving Views, HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE (June 24, 2016),
`https://corpgov.law.harvard.edu/2016/06/24/non-gaap-financial-measures-the-secs-evolving-
`views/ (last visited Dec. 22, 2020); Gretchen Morgenson, Fantasy Math Is Helping Companies
` THE NEW YORK TIMES
`(Apr.
`22,
`2016),
`Into Profits,
`Spin
`Losses
`http://www.nytimes.com/2016/04/24/business/fantasy-math-is-helping-companies-spin-losses-
`into-profits.html?_r=0 (last visited Dec. 22, 2020).
`3
`Non-GAAP Financial Measures, U.S. SECURITIES AND EXCHANGE COMMISSION (Apr. 4,
`2018), https://www.sec.gov/divisions/corpfin/guidance/nongaapinterp.htm#101 (last visited Dec.
`22, 2020). To be sure, there are other situations where Regulation G would not apply but are not
`applicable here.
`
`
`
`COMPLAINT FOR VIOLATIONS OF SECTIONS 14(a)
`AND 20(a) OF THE SECURITIES EXCHANGE ACT OF 1934
`
`- 8 -
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`Case 5:20-cv-09314-SVK Document 1 Filed 12/23/20 Page 10 of 16
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`extent that a third-party, such as a financial advisor, has utilized projected non-GAAP financial
`measures to render a report or opinion to the Board. To the extent the Board also examined and
`relied on internal financial forecasts to recommend a transaction, Regulation G applies.
`29. Thus, to bring the Proxy Statement into compliance with Regulation G as well as
`cure the materially misleading nature of the forecasts under SEC Rule 14a-9 as a result of the
`omitted information, Defendants must provide a reconciliation table of the non-GAAP measures
`to the most comparable GAAP measures.
`Financial Analyses
`30. With respect to B. Riley’s Selected Companies Analysis, the Proxy Statement fails
`to disclose: (i) the results of B. Riley’s analysis of the estimated tax savings attributable to
`Telenav’s net operating losses (“NOLs”) and the implied value of Telenav’s NOLs.
`31. With respect to B. Riley’s Discounted Cash Flow Analysis, the Proxy Statement
`fails to disclose: (i) Telenav management’s estimates of the impact of Telenav’s NOLs; (ii) with
`respect to the Extension Projections, the underlying inputs and basis for applying a range of
`terminal value multiples of 5.5x to 6.5x to Telenav’s estimated fiscal year 2025E Adjusted
`EBITDA and discount rates ranging from 15.5% to 20.5%; (iii) with respect to the No Extension
`Projections, the underlying inputs and basis for applying a range of terminal value multiples of
`3.5x to 4.5x to Telenav’s estimated fiscal year 2025E Adjusted EBITDA and discount rates
`ranging from 15.5% to 20.5%; and (iv) Telenav’s free cash flows and all line items used to
`calculate free cash flows.
`32. With respect to B. Riley’s Premiums Paid Analysis, the Proxy Statement fails to
`disclose the transactions and premiums paid in those transactions observed by B. Riley in the
`analysis.
`33. With respect to B. Riley’s NOL Analysis, the Proxy Statement fails to disclose the
`basis, inputs and assumptions for applying discount rates ranging from 16.5% to 19.5%;
`34.
`In sum, the Proxy Statement independently violates both: (i) Regulation G, which
`requires a presentation and reconciliation of any non-GAAP financial measure to their most
`directly comparable GAAP equivalent; and (ii) Rule 14a-9, since the material omitted information
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`COMPLAINT FOR VIOLATIONS OF SECTIONS 14(a)
`AND 20(a) OF THE SECURITIES EXCHANGE ACT OF 1934
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`Case 5:20-cv-09314-SVK Document 1 Filed 12/23/20 Page 11 of 16
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`renders certain statements, discussed above, materially incomplete and misleading. As the Proxy
`Statement independently contravenes the SEC rules and regulations, Defendants violated Section
`14(a) and Section 20(a) of the Exchange Act by filing the Proxy Statement to garner votes in
`support of the Proposed Transaction from Telenav shareholders.
`35. Absent disclosure of the foregoing material information prior to the special
`shareholder meeting to vote on the Proposed Transaction, Plaintiff will not be able to make a fully
`informed decision regarding whether to vote in favor of the Proposed Transaction, and she is thus
`threatened with irreparable harm, warranting the injunctive relief sought herein.
`
`FIRST CAUSE OF ACTION
`(Against All Defendants for Violations of Section 14(a) of the Exchange Act
`and 17 C.F.R. § 244.100 Promulgated Thereunder)
`36. Plaintiff repeats and re-alleges each allegation set forth above as if fully set forth
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`herein.
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`37. Section 14(a)(1) of the Exchange Act makes it “unlawful for any person, by the
`use of the mails or by any means or instrumentality of interstate commerce or of any facility of a
`national securities exchange or otherwise, in contravention of such rules and regulations as the
`Commission may prescribe as necessary or appropriate in the public interest or for the protection
`of investors, to solicit or to permit the use of his name to solicit any proxy statement or consent or
`authorization in respect of any security (other than an exempted security) registered pursuant to
`section 78l of this title.” 15 U.S.C. § 78n(a)(1).
`38. As set forth above, the Proxy Statement omits information required by SEC
`Regulation G, 17 C.F.R. § 244.100, which independently violates Section 14(a). SEC Regulation
`G, among other things, requires an issuer that chooses to disclose a non-GAAP measure to
`provide a presentation of the “most directly comparable” GAAP measure, and a reconciliation “by
`schedule or other clearly understandable method” of the non-GAAP measure to the “most directly
`comparable” GAAP measure. 17 C.F.R. § 244.100(a).
`39. The failure to reconcile the numerous non-GAAP financial measures included in
`the Proxy Statement violates Regulation G and constitutes a violation of Section 14(a).
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`COMPLAINT FOR VIOLATIONS OF SECTIONS 14(a)
`AND 20(a) OF THE SECURITIES EXCHANGE ACT OF 1934
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`- 10 -
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`Case 5:20-cv-09314-SVK Document 1 Filed 12/23/20 Page 12 of 16
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`SECOND CAUSE OF ACTION
`(Against All Defendants for Violations of Section 14(a) of the Exchange Act
`and Rule 14a-9 Promulgated Thereunder)
`40. Plaintiff repeats and re-alleges each allegation set forth above as if fully set forth
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`herein.
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`41. SEC Rule 14a-9 prohibits the solicitation of shareholder votes in registration
`statements that contain “any statement which, at the time and in the light of the circumstances
`under which it is made, is false or misleading with respect to any material fact, or which omits to
`state any material fact necessary in order to make the statements therein not false or misleading . .
`. .” 17 C.F.R. § 240.14a-9.
`42. Regulation G similarly prohibits the solicitation of shareholder votes by
`“mak[ing] public a non-GAAP financial measure that, taken together with the information
`accompanying that measure . . . contains an untrue statement of a material fact or omits to state a
`material fact necessary in order to make the presentation of the non-GAAP financial measure . . .
`not misleading.” 17 C.F.R. § 244.100(b).
`43. Defendants have issued the Proxy Statement with the intention of soliciting
`shareholder support for the Proposed Transaction. Each of the Defendants reviewed and
`authorized the dissemination of the Proxy Statement, which fails to provide critical information
`regarding, amongst other things, the financial forecasts for the Company.
`44.
`In so doing, Defendants made untrue statements of fact and/or omitted material
`facts necessary to make the statements made not misleading. Each of the Individual Defendants,
`by virtue of their roles as officers and/or directors, were aware of the omitted information but
`failed to disclose such information, in violation of Section 14(a). The Individual Defendants were
`therefore negligent, as they had reasonable grounds to believe material facts existed that were
`misstated or omitted from the Proxy Statement, but nonetheless failed to obtain and disclose such
`information to shareholders although they could have done so without extraordinary effort.
`45. The Individual Defendants knew or were negligent in not knowing that the Proxy
`Statement is materially misleading and omits material facts that are necessary to render it not
`misleading. The Individual Defendants undoubtedly reviewed and relied upon the omitted
`
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`COMPLAINT FOR VIOLATIONS OF SECTIONS 14(a)
`AND 20(a) OF THE SECURITIES EXCHANGE ACT OF 1934
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`- 11 -
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`Case 5:20-cv-09314-SVK Document 1 Filed 12/23/20 Page 13 of 16
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`information identified above in connection with their decision to approve and recommend the
`Proposed Transaction.
`46. The Individual Defendants knew or were negligent in not knowing that the
`material information identified above has been omitted from the Proxy Statement, rendering the
`sections of the Proxy Statement identified above to be materially incomplete and misleading.
`47. The Individual Defendants were, at the very least, negligent in preparing and
`reviewing the Proxy Statement. The preparation of a registration statement by corporate insiders
`containing materially false or misleading statements or omitting a material fact constitutes
`negligence. The Individual Defendants were negligent in choosing to omit material information
`from the Proxy Statement or failing to notice the material omissions in the Proxy Statement upon
`reviewing it, which they were required to do carefully as the Company’s directors. Indeed, the
`Individual Defendants were intricately involved in the process leading up to the signing of the
`Merger Agreement and the preparation of the Company’s financial forecasts.
`48. Telen