Denver C. Snuffer #3031
Timothy Miguel Willardson # 4443
Nelson, Snuffer & Dahle
10885 South State Street
Sandy, Utah 84070
Telephone: (801) 576-1400
Attorneys for Plaintiff
IN THE UNITED STATES DISTRICT COURT
DISTRICT OF UTAH, CENTRAL DIVISION
___________________________________________________________________
|
MARK BONDIETT, an individual | COMPLAINT
Plaintiff, |
vs. |
| Civil No. 2:96CV0303J
NOVELL, INC., a Delaware Corporation; |
ROBERT J. FRANKENBERG, an individual; |
ALAN C. ASHTON, an individual; ELAINE |
R. BOND, an individual; HANS-WERNER |
HECTOR, an individual; JACK L. |
MESSMAN, an individual; LARRY W. |
SONSINI, an individual; IAN R. WILSON, |
an individual; JOHN R. YOUNG, an |
individual; DAVID R. BRADFORD, an |
individual; and DOES D-ONE through |
D-FIFTY |
Defendants | Judge: Jenkins
_______________________________________|___________________________
Comes now the Plaintiff, Mark Bondiett ("BONDIETT") by and through
his attorneys, and complains of Defendant Novell, Inc. ("Novell" or
"the Company") as follows:
Jurisdiction & Venue
1. The Jurisdiction of this Court is based upon Section 22(a) of
the Securities Act of 1933, as amended (the "Securities Act"),
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Section 27 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and upon principles of supplemental jurisdiction.
2. Defendants, and each of them, directly and indirectly, have
engaged in acts and practices that constitute violations of
Sections 11(a) and 17(a) of the Securities Act; Sections 10 and
14(a) of the Exchange Act and the rules and regulations promulgated
thereunder; and well established principles of common law,
including breach of fiduciary responsibility and misrepresentation.
3. Plaintiff brings this action for the damages sustained by the
Plaintiff and the Class, as hereunder defined, as a result of the
Defendants wrongful acts and conduct, and for other relief,
equitable and legal, as may be appropriate.
4. The Defendants directly and indirectly made use of means or
instruments of transportation or communication in interstate
commerce or of the mails in connection with each of the acts or
practices alleged herein.
5. This action is commenced within the time prescribed by the
applicable statute of Limitations under the Securities Act and the
Exchange Act.
6. The acts and transactions constituting the violations of the
Securities Act and the Exchange Act occurred in the District of
Utah.
7. Each of the Defendants is found in, or is an inhabitant of,
or transacts or has transacted business in the District of Utah.
8. Upon information and belief, each of the Defendants either:
(a) Participated in the actions, transactions, conduct and
practices complained of in this Complaint; or
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(b) Approved, agreed to and conspired with respect to the
actions, transactions, conduct and practices complained
of in this Complaint; or
(c) Aided and abetted, in a knowing and willful manner, said
actions, transactions, conduct and practices; or
(d) During the period relevant to this action, directly or
indirectly, controlled, was controlled by, or was a
controlling person, within the Securities Act and the
Exchange Act, of those persons who participated,
conspired, or aided and abetted in said actions,
transactions, conduct and practices.
The Parties
9. Plaintiff, directly or indirectly, is or was a shareholder of
Novell, Inc. (the "Company") as of the close of business on
February 12, 1996 and entitled to vote at the annual meeting of
Shareholders scheduled for April 10, 1996.
10. Defendant Novell, Inc. was incorporated under the laws of
Delaware on March 14, 1983 and is now, and at all times relevant to
this action, a publicly held company. The Company's stock has
been, and is currently listed and traded on the National
Association of Securities Dealers Automatic Quotation System
(NASDAQ) and the Company files annual and quarterly reports
pursuant to Section 12(g) of the Exchange Act. The Company is a
computer software company with its international corporate
headquarters at 1555 North Technology Way, Orem, Utah 84057.
11. As of February 16, 1996, the date of the proxy statement
complained of herein:
(a) Defendant Robert J. Frankenberg was a director, the
Chairman of the Board, President and Chief Executive
Officer of the Company;
(b) Defendant Alan C. Ashton was a director of the Company;
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(c) Defendant Elaine R. Bond was a director of the Company;
(d) Defendant Hans-Werner Hector was a director of the
Company;
(e) Defendant Jack L. Messman was a director of the
Company;
(f) Defendant Larry W. Sonsini was a director of the
Company;
(g) Defendant Ian R. Wilson was a director of the Company;
(h) Defendant John R. Young was a director of the Company;
(i) Defendant David R. Bradford was Senior Vice President
and Secretary of the Company: and
(j) DOES D-ONE through D-FIFTY were officers, control
persons, aiders and abettors of the Defendants liable to
the Plaintiff for the actions, transactions, conduct and
practices complained of herein.
12. Ernst and Young, LLP ("Ernst & Young"), certified public
accountants, is a limited liability partnership that at all times
relevant herein provided the Company with certain professional
accounting services, including the performance of audits of the
Company's financial statements and furnishing reports thereon, but
upon information and belief acted within the scope of their
engagement, which engagement was intentionally narrowed by
Defendants to prevent adequate disclosure to the Plaintiff in the
financial documents prepared by Ernst & Young.
Class Action Allegations
13. The class on whose behalf this action is brought consists of:
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All persons, other than the Defendants herein, who were holders of
Novell, Inc. common stock at the close of business on February 12,
1996 and entitled to vote at the annual meeting of shareholders
scheduled for April 10, 1996.
14. The class is so numerous that joinder of all members is
impracticable since it consists of approximately seventeen
thousands of public stockholders of Novell, Inc., a company that is
listed on the NASDAQ quotation system.
15. There are questions of law and fact in this action which arise
out of, among other things, misrepresentations and omissions of
material facts in the Proxy Statement that was used with respect to
the actions, transactions, conduct and practices of Defendants, and
each of them, complained of herein, the breaches of fiduciary duty
by the officers and directors of the Company, and the aiding,
abetting and conspiracy relating thereto by the other Defendants,
which questions are common to all members of the class. The
questions of law and fact common to the class predominate over any
questions affecting only individual members. Plaintiff, on
information and belief, alleges that the class action is superior
to other available methods for the fair and efficient adjudication
of the controversy herein.
16. The claims of the Plaintiff are typical of the claims of the
class upon whose behalf the Plaintiff has brought suit and
Plaintiff will fairly and adequately protect the interests of the
class.
Count I. Exchange Act Section 14(a)
17. Plaintiff realleges and incorporates the allegations of
Paragraphs 1 through 16 as if fully set forth herein.
18. On or about October 30, 1995, The Company issued a press
release stating that it had "decided to exit the personal product
applications business and [was] in discussions to sell its Business
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Application Division" which included its "award-winning"
PerfectOffice suite, WordPerfect word processing products, Quattro
Pro spreadsheet and other business applications software. A copy
of the Company's press release is attached hereunder as Exhibit "A"
and incorporated herein by this reference.
19. The majority of the assets represented by the Business
Applications Division were assets acquired through a merger between
Novell, Inc. and WordPerfect Corporation in June 1994 where Novell,
Inc. exchanged approximately 51 Million shares of its common stock
and certain stock option rights for all of the issued and
outstanding shares of WordPerfect Corporation; and the purchase of
the Quattro Pro spreadsheet software from Borland International,
Inc. ("Borland") for the sum of approximately $110 million in cash
and the assumption of $10 million in liabilities, and the purchase
of three-year license to reproduce and distribute up to one million
copies of current and future versions of Borland's Paradox
relational data base software for the sum of $35 million in cash.
The transaction also resulted in a one-time write-off of $114
million for purchased research and development.
20. In June 1993, the Company had acquired UNIX System
Laboratories, Inc. ("USL") through the issuance of 11 million
shares of Novell, Inc. valued at $322 million, in exchange for all
of the issued and outstanding shares of USL not otherwise owned by
Novell and the assumption of $9 million in debt. The transaction
also resulted in a one-time $269 million write-off for purchased
research and development.
21. On December 26,1995 the Company sold its UnixWare product
line to the Santa Cruz Operation, Inc. ("SCO") for approximately
6.1 million shares, or approximately 17% of the total issued and
outstanding shares of SCO, and a "revenue stream" of up to $84
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million net present value that will terminate in the year 2002.
The Company announced it expected to report a gain on this
transaction in the first quarter of fiscal 1996.
22. On or about January 22,1996, the Company filed its Form 10-K
Annual Report with the U.S. Securities and Exchange Commission, a
copy of which is attached hereunder as Exhibit "B" and incorporated
herein by this reference.
23. On January 31, 1996, the Company issued a press release
announcing that a "definitive agreement" had been reached between
Corel Corporation of Ottawa, Canada ("Corel") and the Company
whereby Corel would acquire the PerfectOffice application suite,
WordPerfect word processing applications, Quattro Pro spreadsheet
and related software from Novell in exchange for 9.95 million
shares of Corel and $10.75 million in cash and a minimum license
royalty obligation of $70 million over the next five years. The
Company announced it expected a "slight one-time extraordinary
gain" in Novell's second fiscal quarter ending April 27,1996. A
copy of said press release is attached hereunder as Exhibit "C" and
incorporated herein by this reference.
24. On or about February 16,1996, the Company issued a call for an
annual meeting of shareholders to be held on April 10, 1996,
together with a proxy statement calling for the election of
currently serving directors to another term. A copy of said notice
and proxy statement mailed to Plaintiff is attached hereunder as
Exhibit "D" and incorporated herein by this reference.
25. Several days after the receipt of the notice and proxy
statement, Plaintiff received a copy of the Company's annual
report, which is attached hereunder as Exhibit "E" and incorporated
herein by this reference
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26. The sale of Company assets to Corel described in paragraph 23
above was completed on or about March 1, 1996, approximately 10
days after the receipt of the notice of annual meeting, proxy
statement and annual report by Plaintiff, and approximately 40 days
prior to the scheduled annual meeting. Yet, as of the date of this
Complaint, no additional material has been provided to shareholders
to update the proxy material to accurately reflect the effect of
this transaction.
27. Page 17 of the proxy statement set forth in Exhibit "D" makes
reference to and incorporates the annual report of Novell, Inc.
28. The manner of solicitation of proxies from the Company's
shareholders through the use of the proxy materials and the annual
report, and the presentation and omission of information therein
violated Section 14(a) and Rules 14a-3, 14a-5, and 14a-9 thereunder
in that:
a. The proxy statement, and most particularly the annual
report, were not mailed to the Company's shareholders
sufficiently in advance of the shareholder's meeting to
enable the shareholders to read and understand the
information presented;
b. The proxy material did not accurately reflect the
condition of the Company at the time the proxy statement
was issued, and was not properly updated to reflect
intervening events that substantially affected the
material set forth in the proxy statement and the annual
report; and
c. The proxy did not provide meaningful disclosure and was
not conducive to informed decision making by the
Company's shareholders, in that many of the material
facts were not adequately disclosed or were buried in the
statements in the annual report so as to make it
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difficult for the Plaintiff and the class to become aware
of those material facts. Examples of those omitted,
buried, or misstated material facts include but are not
limited to the following:
(1) Two days after Novell's fiscal year ended on October
28, 1995, the Company announced its intent to sell
its personal productivity applications product line,
even though the decision had been reached by
management prior to the end of the fiscal year. The
announcement was withheld intentionally for the
purpose of excluding a detailed discussion of the
decision in the Company's annual report and audited
financial statement. As a result, the sale of such
product line is treated in general non-specific and
incomplete terms.
(2) Management explains its decision to sell the
personal productivity applications product line on
Page 6 of the Annual Report set forth in Exhibit
"E", which states in part:
To make Novell a more competitive and profitable
company, we announced during the fourth quarter of
1995 our intent to exit two lines of business ...
In November, we announced our decision to sell our
personal productivity applications business, which
declined $122 million to $407 million during 1995.
The statement that the product line is being sold
because of lost revenues is misleading because it
conveys the impression that the product line was not
profitable and was losing popularity among its user
base. Management failed to disclose that the
decline in revenues was brought about in large part
by management's decisions to reduce the product line
sales force and thus reduce Company's ability to
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sell such products, andthe failure of management to
insure that WordPerfect products were updated to
keep in step with PC market developments.
(3) The delay in announcing the intent to sell the
personal productivity applications product line
resulted in the discussion of such decision as a
"subsequent event" in the notes to the audited
financial statement, with only cursory discussion of
the Company's intent to sell its personal
productivity applications business found on pages 21
and 37, a brief but incomplete and misleading
restatement of the comparative annual revenues of
the personal productivity applications product line
on page 22, and an incomplete discussion of
personnel reductions from the anticipated sale on
page 24. Instead of the complete discussion that
should have been included in the fiscal year 1995
financial statements, the financial information
presented therein was incomplete and misleading to
shareholders who could only rely upon press accounts
to try and determine the impact of management's
decision to sell Company product lines upon the
future financial viability of the Company. In
trying to determine the effect of the sale of the
product line, shareholders found that all financial
information disseminated to shareholders in the 1995
10-K and annual report, even for periods prior to
the merger with WordPerfect, were restated as if the
WordPerfect merger took place at the beginning of
such periods. As such shareholders were given no
historic information to assist them in analyzing the
impact of the decision to sell the product lines on
the Company's financial condition.
(4) Under Item I of Part I of the Form 10-K for 1995,
the following information is set forth:
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A reason the Company is seeking to sell its personal
productivity applications product line is to reduce
non-leveraged sales, marketing and customer support
expenditures. Nevertheless the Company will retain
the Groupware applications line and may incur
relatively higher expenditures than are incurred in
the sale of network operating systems.
The statement is misleading and incomplete in that
it fails to provide any meaningful explanation as to
why non-leveraged sales, marketing and customer
support expenditures are no longer desirable, nor is
there any explanation of why that constitutes a good
reason to sell a product line that yielded $407
million in revenues for fiscal year 1995, especially
in light of the company's decision to retail
GroupWise. Further, the statement uses jargon, such
as "non-leveraged sales" that is not readily
understood by investors. Novell's use of the phrase
"leveraged sales," which is a phrase with the
commonly accepted meaning of sales involving
financing, is confusing in that Novell appears, if
one reads all of Novell's press releases for the
past two years, to be using that phrase to describe
sales that allow Novell to make additional sales of
software that complement the first sale.
(5) Management fails to discuss the sale of the
Company's personal productivity applications product
line under Item 7 "Management's Discussion and
Analysis of Financial Condition and Result of
Operations" of Part 11 of the Form 10-K for 1995
further than incorporating the brief and incomplete
statements found on pages 21 through 25 of the
Annual Report set forth in Exhibit "E". The
discussion set forth on pages 21 through 25 fails to
focus on events and uncertainties, such as the sale
of the personal productivity applications product
line and the sale of UnixWare, items that "would
cause reported financial information not to be
necessarily indicative of future operating results
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or of future results or of future financial
condition" as required by item 303 of Regulation
S-K. No disclosure is given to shareholders
regarding the impact of the sale of these divisions
on the future revenue, net income, assets,
liabilities, cash flow, liquidity or capital
resources. Nor is there any pro forma restatement
of historic financial information, without these
divisions, given to shareholders. As such,
shareholders are completely left in the dark on
assessing the prospective effect of these
sales on the financial health and earning power of
the Company in the future. Management appears to
have intentionally delayed its announcement of the
sale of the product lines until after the end of the
fiscal year so that detailed analysis could be
omitted from the annual report and audited financial
statements, and has instead provided cursory,
incomplete, and misleading discussions that prevent
shareholders from effectively measuring the impact
of management's decisions, and thus making it
impossible for shareholders to make informed
decisions regarding management's proxy solicitation
for the April 10, 1996 annual meeting.
(6) In spite of the fact that the Company had issued the
press release set forth in Exhibit "C" only days
after the close of the first quarter of fiscal 1996,
apparently to avoid any detailed discussion of the
transaction in the 10-Q report (Exhibit "G" hereto)
for the first quarter of fiscal 1996, no mention or
discussion of this significant development was
included in the proxy materials, although the proxy
materials were sent to shareholders more than two
weeks after the press release announcing Corel's
purchase. Shareholders were not able to realize,
without substantial research on their own, that the
acquisition of WordPerfect, for stock and cash, in
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June 1994 was valued at $855 million, while the sale
of its product line to Corel in early 1996, for
stock and cash, was valued at only $186 million.
Yet the 10-Q for the first fiscal quarter of 1996
makes only brief comments on the transaction,
stating that The Company expects to report a slight
one-time extraordinary gain in its second quarter of
fiscal 1996." The comment is misleading, and
material omissions prevent shareholders from
evaluating this significant event to determine that
from a true economic standpoint, Novell actually
suffered a loss of approximately $670 million, or
more, from the purchase and sale of the personal
productivity applications product line, and that the
"slight one-time extraordinary gain" it expects in
the second quarter will do little to overcome the
loss that will most certainly be reflected in the
second quarter 10-Q to be filed long after the
scheduled shareholder's meeting. Even after the
close of the sale to Corel, management made no
attempt to update the proxy material sent to
shareholders less than two weeks earlier, to reflect
the terms of the sale to allow shareholders to make
an informed decision in casting their vote or proxy
at the annual meeting. Further, upon information
and belief, the Company has failed to file an 8-K
report with the Securities and Exchange Commission
that reflects the completion of the sale to Corel,
further hampering the efforts of shareholders
attempting to make an informed decision with regard
to the proxy solicitation.
(7) Management falls to discuss the apparent decline in
market share being suffered by Novell's "core"
business, i.e., networking software. A Novell press
release dated June 28, 1995 asserts that Novell's
share of the world-wide market for networking is
75%. A check of Novell's World Wide Web site on
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March 13,1996 revealed a statement1 by Novell that
it has only 67% of the market worldwide. That
search also revealed an estimate by an independent
firm, IDC Research, that Novell has only a
62% market share.2 (Exhibit "H" hereto) Those
statements indicate that in the nine months from
June 1995 to March 1996, Novell has suffered at
least an 8% drop in world-wide market share for its
core business. Market share information is
completely absent from any of Novell'sfilings.
(8) Page 3 of Novell's Annual Report (Exhibit "E")
contains a statement that "sales of NetWare 4
increased 240 percent over 1994 ... ." This
statement is, at least, incomplete and appears to be
misleading. NetWare version 4.1 was introduced
during the fourth quarter of 1994 due to
disappointing performance, and therefore sales, of
versions 4.0, 4.01, and 4.02 of NetWare. By
comparing information on sales of the now
discontinued products that were sold during the
majority of fiscal 1994 with the current product,
the impression that sales have improved due to
something other than product changes is created.
The absence of detailed information prevents
shareholders from forming their own conclusions on
this matter.
(9) On February 21, 1996 Novell issued a press release
announcing its 1st quarter financial results and
announcing a change in distribution stocking policy
___________________
1 http://www.novell.com/rollout/wproll2.html
2 http://corp.novell.com/strategy/fscorp4.html
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which the press release (Exhibit "I" hereto) stated
will, "significantly reduce revenue and earnings in
[the second fiscal quarter.]" The press release
further stated:
Changes in distribution stocking policy are
forward looking and involve a number of risks
and uncertainties. As such, actual results could
materially differ from those we are projecting in
these forward looking statements. Unanticipated
declines in revenue due to competitive, market and
general economic factors could limit the company's
ability to gain the benefit of improved earnings
based on historical trends which, should they
reverse, would negatively impact growth projections
of revenue and earnings. Further uncertainties are
associated with any impact to our distribution
channel resulting from this changein distribution
stocking policy. Novell believes this action is in
the best interests of its customers, channel
partners and shareholders, but implementing this
program may result in some short-term business
interruption as our partners and customers work
through this change. (Emphasis added.)
The extent of the effect of this change is estimated
as being $225,000,000 in the second quarter. The
likely outcome appears to be that Novell's second
fiscal quarter sales will be reduced by that amount.
In spite of the magnitude of this likely drop in
sales, information that would enable shareholders to
make an informed decision regarding the vote on
directors and compensation covered by the proxy has
not been provided by the Company.
29. On March 14,1996 and March 20,1996 Plaintiff made two
separate and independent requests of the Company to provide a
list of shareholders for the purpose of soliciting proxies for an
alternative slate of directors, and presenting proxy information
related to the matters complained of herein. Defendants, by and
through Defendant Bradford, intentionally and unreasonably withheld
such information from Plaintiff in willful disregard of Plaintiff's
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lawful requests, for the purpose of preventing the dissemination of
information to other shareholders regarding the acts and omissions
of Defendants complained of herein.
30. All of the acts and material omissions of the Defendants
complained of herein, when viewed in their totality, and other
acts which may be discovered by Plaintiff, set forth a pattern of
behavior that clearly shows an intent to manipulate information for
the purpose of misleading and deceiving the shareholders of Novell
in violation of Section 14(a) of the Exchange Act.
31. The Defendants knew, or in the exercise of reasonable
discretion and due diligence should have known, that the
representations in the proxy statement and the accompanying proxy
materials were false and misleading and/or omitted to state
material facts necessary in order to make the statements made not
misleading, in light of the circumstances under which they were
made, and that the Proxy and manner of solicitation of proxies did
not comply with Section 14(a) and the rules and regulations
thereunder.
32. Defendants engaged in the conduct described in this First
Count with the intent to deceive, manipulate or defraud, or engaged
in the conduct with reckless disregard for the consequences of that
conduct to Plaintiff and the class, or were negligent in engaging
in such conduct.
33. Plaintiff and the class were not adequately informed of the
falsity of the representations and the untrue statements or of the
omissions of material facts and, in determining whether to vote
their Novell shares regarding the proposed slate of directors, or
proxy their votes as requested by the Company, relied upon the
proxy statement and accompanying proxy material to contain true and
accurate representations and statements, and not to omit any
material facts.
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34. The false and misleading statements and omissions are material
to the determination by the Novell shareholders as to whether to
vote their shares in favor of the proposed directors at the annual
meeting. As a result of the use of the proxy statement and the
accompanying proxy materials and the intentional refusal by
Defendants to provide shareholder fists to Plaintiff to facilitate
the dissemination of alternative proxy material to the Company's
shareholders, the largest blocks of institutional shareholders have
voted their proxies which, upon information and belief, will be
cast in favor of Defendants' proxy solicitation, effecting the
re-election of the current board of directors at the annual meeting
scheduled for April 10, 1996 to the damage of the Plaintiff and the
class.
35. By reason of the acts and omissions of the Defendants
complained of herein, the Plaintiff and the class are entitled to
recover damages from the Defendants, and/or receive injunctive
relief from the Court nullifying the annual meeting scheduled for
April 10, 1996. Although the precise amount of damages that
Plaintiff and the class are entitled to recover is not yet
ascertainable, and Plaintiff will seek leave to amend further this
Complaint when the same have been ascertained, Plaintiff believes
the damages, exclusive of interest, to be at least $100,000,000 in
the aggregate.
Count II - Securities Act Section 11(a)
36. Plaintiff realleges and incorporates the allegations of
Paragraphs 1 through 35 as if fully set forth herein.
37. The misrepresentations and omissions and the misleading
disclosures described in Plaintiff's First Count herein were all
made in violation of Section 11(a) of the Securities Act.
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38. As a result of the violations of law described herein,
Defendants are liable to Plaintiff and the class for damages as set
forth in Section 11(e) of the Securities Act.
Count III - Securities Act Section 17(a)
39. Plaintiff realleges and incorporates the allegations of
Paragraphs 1 through 38 as if fully set forth herein.
40. The misrepresentations and omissions and the misleading
disclosures described herein were all made in violation of Section
17(a) of the Securities Act.
41. The actions of Defendants described herein constitute a
device, scheme or artifice to defraud the Plaintiff and the class,
or a transaction, practice or course of business which operated, or
would operate as a fraud or deceit upon the Plaintiff and the
class, in violation of Section 17(a) of the Securities Act.
42. Defendants engaged in the conduct described herein with the
intent to deceive, manipulate or defraud or engaged in such conduct
with reckless disregard for the consequences of that conduct to
Plaintiff and the class or were negligent in engaging in such
conduct.
43. As a result of the violations of law described herein,
Defendants are liable to Plaintiff and the class for damages as
alleged in Paragraph 35 and for the consideration paid for all
shares of Novell common stock purchased as a result of reliance
upon the misrepresentations and omissions of the Defendants
complained of herein, with interest thereon, less the amount of any
income received.
Count IV - Exchange Act Section 10, Rule 10b-5
44. Plaintiff realleges and incorporates the allegations of
Paragraphs 1 through 43 as if fully set forth herein.
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45. The misrepresentations and omissions and the misleading
disclosures described herein were all made in violation of Section
10 of the Exchange Act and Rule 10b-5 thereunder.
46. The actions of the Defendants described herein constitute a
device, scheme or artifice to defraud the Plaintiff and the class,
or a transaction, practice or course of business which operated, or
would operate as a fraud or deceit upon the Plaintiff and the
class, in violation of Section 10 of the Exchange Act and Rule
10b-5 thereunder.
47. Defendants engaged in the conduct described herein with the
intent to deceive, manipulate or defraud or engaged in such conduct
with reckless disregard for the consequences of that conduct to
Plaintiff and the class.
48. As a result of the violations of law described herein,
Defendants are liable to the Plaintiff and the class for damages as
alleged in paragraph 43.
Count V. Violation of Utah Corporation Law (U.C.A.
§ 16-10a-720, et seq.)
49. Plaintiff hereby realleges and incorporates by reference each
of the allegations made above.
50. On or about March 14, 1996, Plaintiff Bondiett, through his
attorneys, communicated a series of five written demands to
Defendant Novell, Inc. for examination and copying of the
stockholder's list of the corporation and a demand for examination
and copying of the bylaws of the corporation. (Exhibit "J" hereto.)
51. On or about March 18, 1996, Defendant Novell refused
Bondiett's request. (Exhibit "K" hereto.)
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52. On or about March 20, 1996, Plaintiff Bondiett, through his
attorneys, communicated a second series of six written demands to
Defendant Novell, Inc. and each of the individual Defendants for
examination and copying of the stockholder's list of the
corporation and a second demand for examination and copying of the
bylaws of the corporation. (Exhibit "L" hereto.)
53. On or about March 22, 1996, Defendants, through counsel,
refused Bondiett's requests a second time. That denial was couched
in terms that made it clear that Defendants would never voluntarily
release the requested documents. (Exhibit "M" hereto.)
54. The demands above were made pursuant to and in accordance
with Utah Code Annotated § 16-10a-720, et seq.
55. Defendants' denial of those requests is in violation of those
statutes. That denial was intentional on the part of Defendants.
56. As a direct an proximate result of Defendants' wrongful acts,
Plaintiff and the class have been damaged as alleged above and are
entitled to an award of costs and attorneys' fees as provided by
statute.
Count VI. Violation of Utah Criminal Code - False Reports
(U.C.A. § 76-10-707)
57. Plaintiff hereby realleges and incorporates by reference each
of the allegations made above.
58. Utah Code Annotated § 76-10-707. "False reports" provides:
Every director, officer, or agent of any corporation or joint
stock association who knowingly makes or concurs in making or
publishing any written report, exhibit, or statement of its
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affairs or pecuniary condition, containing any material
statement which is false is guilty of a class B misdemeanor.
59. On or about January 22, 1996, Defendants caused to be
published an annual report to shareholders. That annual report
contains false statements, as alleged above.
60. On or about February 16,1996, Defendants caused to be
published a proxy statement to shareholders. That statement
contains false statements, as alleged above.
61. Plaintiff and the class, as shareholders, are the class of
persons intended to be protected and benefited by this criminal
statute.
62. As a direct an proximate result of Defendants' wrongful acts,
Plaintiff and the class have been damaged as alleged above.
Count VII. Violation of Utah Criminal Code - Refusing
Inspection of Books (U.C.A. § 76-10-708)
63. Plaintiff hereby realleges and incorporates by reference each
of the allegations made above.
64. Utah Code Annotated § 76-10-708. "Refusing inspection of
books" provides:
Every officer or agent of any corporation having or keeping an
office within this state, who has in his custody or control
the books of such corporation, and who refuses to give to a
bona fide stockholder of record or member of the corporation,
lawfully demanding during office hours, the right to inspect
or take a copy of it or of any part thereof, is guilty of a
class B misdemeanor.
65. Defendants' denial of Bondiett's request is in violation of
that statute. That denial was intentional on the part of
Defendants.
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66. Plaintiff and the class, as shareholders, are the class of
persons intended to be protected and benefited by this criminal
statute.
67. As a direct an proximate result of Defendants' wrongful acts,
Plaintiff and the class have been damaged as alleged above.
Count VIII. Violation of Delaware Corporation Law
(Title 8 D.C.A. § 219, et seq.)
68. Plaintiff hereby realleges and incorporates by reference each
of the allegations made above.
69. The demands made on March 20,1996 were made pursuant to and
in accordance with Title 8 Delaware Code Annotated §§ 219, and 220.
(Exhibit "L".)
70. Defendants' denial of those requests is in violation of those
statutes. That denial was intentional on the part of Defendants.
71. As a direct an proximate result of Defendants' wrongful acts,
Plaintiff and the class have been damaged as alleged above.
WHEREFORE, Plaintiff demands judgment against Defendants as
follows:
1. For a temporary restraining order requiring Novell, Inc. to
honor Bondiett's demands for inspection and copying of records
together with costs and attorneys' fees as provided by statute;
2. For a temporary restraining order preventing Novell, Inc.
from holding a shareholder meeting on April 10, 1996;
3. For a preliminary injunction requiring Novell, Inc. to honor
such Bondiett's demands for inspection and copying of records;
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4. For a preliminary injunction requiring Novell, Inc. to
include proxy and informational materials to be supplied by
Plaintiff Bondiett in Novell, Inc.'s next proxy solicitation or
mailing to shareholders;
5. For a permanent injunction, pursuant to Title 8, Delaware
Code Annotated § 219(b), disqualifying each individual Defendant
from serving on the Board of Directors of Novell, Inc.;
6. For a permanent injunction invalidating and voiding the
shareholder meeting of April 10, 1996;
7. For attorneys' fees and costs incurred by Plaintiff in
bringing and prosecuting this action;
8. For damages in the amounts proven at trial as to all counts;
and
9. For such other and further relief as is deemed proper by the
Court under the circumstances.
/s/
___________________________________
Denver C. Snuffer, Jr.
Timothy Miguel Willardson
Counsel for Plaintiff Mark Bondiett
Plaintiff's Address: Mark Bondiett
10578 South 700 East
Sandy, UT 84070
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