robert e. becker, et al. v. spacedev, inc., et al. 08-cv...

Case 3:08-cv-02199-L-CAB Document 20 Filed 10/14/09 of 24

1 HULETT HARPER STEWART LLPKIRK B. HULETT, SBN: 110726

2 SARAH P. WEBER, SBN: 2399793 LINDSAY J. FOSTER, SBN: 254008

525 B Street, Suite 7604 San Diego, CA 92101

Telephone: (619) 338-11335 Facsimile: (619) 338-1139

6 Attorneys for Plaintiff, Robert E. Becker7 [Additional Counsel on Signature Page]

8 IN THE UNITED STATES DISTRICT COURT

9 SOUTHERN DISTRICT OF CALIFORNIA

10 ROBERT E. BECKER, Individually and On Case No. 08 CV 2199 L CAB11 Behalf of All Others Similarly Situated,

AMENDED CLASS ACTION

12 Plaintiff, COMPLAINT FOR VIOLATION OF THEFEDERAL SECURITIES LAWS, FOR

13 v. VIOLATION OF FIDUCIARY DUTY TODISCLOSE, DUTY OF GOOD FAITH,

14 SPACEDEV, INC., MARK N. TRUST, LOYALTY, AND FOR AIDING15 SIRANGELO, RICHARD B. SLANSKY, AND ABETTING

SCOTT TIBBITTS, CURT DEAN BLAKE,16 HOWELL M. ESTES III, SCOTT

McCLENDON, ROBERT S. WALKER, JURY TRIAL DEMANDED17 HANS J. STEININGER, G. SCOTT

HUBBARD and PATRICIA G. SMITH, JUDGE: Honorable M. James Lorenz18 CTRM: 14

19Defendants.

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1 Plaintiff, by his undersigned attorneys, alleges upon personal knowledge with respect to

2 himself, and upon information and belief based, inter alia, upon the investigation of counsel as to

3 all other allegations herein, as follows:

4 NATURE OF THE ACTION

5 1. This class action is brought on behalf of the public common shareholders of

6 SpaceDev, Inc. (“SpaceDev” or the “Company”), against SpaceDev and its Board of Directors

7 (the “Board” or the “Individual Defendants) 1 (collectively, the “Defendants”), alleging violations

8 of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and

9 Rule 14a-9 promulgated thereunder by the United States Securities and Exchange Commission

10 (“SEC”), as well as state common law claims for breach of fiduciary duty of to disclose, breach of

11 fiduciary duty of good faith, trust, and loyalty, and for aiding and abetting the aforesaid breaches

12 of fiduciary duty. 2

13 2. Specifically, the Individual Defendants solicited shareholder proxies in support of

14 the Company’s then-proposed sale to Sierra Nevada Corporation (“SNC”) and SDV Acquisition

15 Corp. (“SDV”) (the “Acquisition”) through the issuance of a definitive proxy statement on

16 November 21, 2008 (the “Proxy”) that contained misleading statements of material fact and

17 omissions of material fact concerning, inter alia, (i) the process resulting in the Acquisition,

18 including the alternative transactions that the Board considered; (ii) the negotiation of the terms

19 of the Acquisition, including the deal protection devices at issue; and (iii) the analyses that the

20 Company’s financial advisor, Cowen and Company, LLC (“Cowen”), rendered in connection

21 with the Acquisition. In addition, the Individual Defendants failed to amend the Proxy or provide

22 other notice to the Company’s shareholders that the initial complaint in this matter, alleging

23 misleading statements of material fact and omissions of material fact in the Proxy, was filed with

24 1 The “Board” excludes SpaceDev Director Arthur A. Benson II, the brother of deceased

25 SpaceDev founder and director James Benson, who was elected by the Company’s shareholders26 after the events underlying the basis for this action transpired.

2 In that SpaceDev is incorporated in Delaware, see ¶ 7, below, the internal affairs doctrine27 requires that state law issues concerning the Company’s merger are governed by Delaware law.

28 Friese v. Superior Court, 36 Cal. Rptr. 558, 568 (Cal. Ct. App. 2005), rev. denied, 2006 Cal.LEXIS 3559 (Cal. Mar. 15, 2006), cert. denied, 549 U.S. 821 (2006).

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1 this Court on November 26, 2008, which was itself an omission of a material fact. The Individual

2 Defendants controlled the actions of the Company with respect to both the issuance of the

3 materially deficient Proxy and the material failure to amend the Proxy. The misrepresentations of

4 material fact and the omissions of materials fact regarding the Proxy breached the Individual

5 Defendants’ fiduciary duties under state common law to disclose fully and fairly all material

6 information within the Board’s control in seeking shareholder approval of the Acquisition. The

7 Individual Defendants breached their state common law fiduciary duties of good faith, trust, and

8 loyalty by failing to take reasonable steps to maximize the value of SpaceDev to the owners of its

9 common shares and by preventing them from adequately evaluating the Company’s true value or

10 assessing the Individual Defendants’ stated reasons for entering into the Merger Agreement and

11 recommending its approval. SNC and SDV knowingly aided and abetted the Individual

12 Defendants in the breach of their fiduciary duties under state common law.

13 3. Accordingly, this action seeks equitable or rescissory damages resulting from the

14 violations alleged above.

15 JURISDICTION AND VENUE

16 4. The claims asserted herein arise under Sections 14(a) and 20(a) of the Exchange

17 Act, 15 U.S.C. §§ 78n(a), 78t(a); SEC Rule 14a-9, 17 C.F.R. § 240.14a-9; and Delaware common

18 law. This Court has subject matter jurisdiction over the claims made under the Exchange Act

19 pursuant to Section 27 of the Exchange Act, 15 U.S.C. § 78aa, and 28 U.S.C. § 1331. The Court

20 has subject matter jurisdiction over the state law claims pursuant to 28 U.S.C. § 1367(a).

21 5. Venue is proper in this District because many of the acts and practices complained

22 of herein occurred in substantial part in this District, including the dissemination of the

23 misleading statements of material fact and omissions of material fact alleged herein. In addition,

24 SpaceDev maintains its principal executive offices in Poway, San Diego County, California.

25 THE PARTIES

26 6. Plaintiff Robert Becker is and has been the owner of SpaceDev common stock

27 continuously since prior to the wrongs complained of herein.

28 7. Defendant SpaceDev is a Delaware corporation with its principal executive offices2

08 CV 2199 L CAB


1 located in Poway, California. The Company, together with its subsidiaries, engages in the

2 conception, design, development, manufacture, integration, sale, and operation of space

3 technology systems, subsystems, products, and services. SpaceDev’s common stock was traded

4 on the Over the Counter Bulletin Board under the ticker symbol “SPDV.” As of August 14,

5 2008, there were 42,451,963 shares of SpaceDev common stock outstanding. SpaceDev’s stock

6 ceased trading on December 16, 2008, when it was acquired by SNC and SDV, and registration of

7 its shares was terminated. SpaceDev is now a wholly-owned subsidiary of SNC.

8 8. Individual Defendant Mark N. Sirangelo (“Sirangelo”) was a SpaceDev director

9 since 2005. Sirangelo was appointed the Company’s Vice Chairman and Chief Executive Officer

10 (“CEO”) in December 2005 and was serving as CEO and Chairman of the Board when it was

11 acquired by SNC. Sirangelo became Chairman in September 2006 upon the resignation of James

12 W. Benson (“James Benson”), a SpaceDev founder who remained a member of the Board until

13 his death in October 2008 shortly prior to the announcement of the Acquisition. According to the

14 Proxy, Sirangelo was a member of the Government Security committee. Sirangelo was a member

15 of QS Advisors, LLC (“QS Advisors”) and The QuanStar Group LLC, both of which served as

16 business advisors to SpaceDev. In connection with the Company’s merger with Starsys Research

17 Corporation in January 2006 (the “Starsys Merger”), QS Advisors received $200,000 in cash and

18 250,000 shares of SpaceDev’s common stock. Sirangelo is presently Executive Vice President of

19 SNC and Chairman of Sierra Nevada Space Systems Group (“SNSSG”), of which SpaceDev is a

20 part.

21 9. Individual Defendant Richard Slansky (“Slansky”) was a SpaceDev director since

22 2004. Slansky joined the Company in February 2003 as its Chief Financial Officer (“CFO”) and

23 Corporate Secretary. In November 2004, Slansky was appointed as the Company’s President and

24 was elected to the Board.

25 10. Individual Defendant Scott Tibbitts (“Tibbitts”) was a SpaceDev director since

26 2006. Tibbitts was appointed as the Company’s Managing Director and a director at the closing

27 of the Starsys Merger. In addition, Tibbitts received lucrative “non-compete” payments pursuant

28 to the terms of a January 31, 2006 agreement between him and the Company. Tibbits is presently

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1 Executive Director of eSpace, a not-for-profit organization created in 2009 by SNSSG and the

2 University of Colorado. 3

3 11. Individual Defendant Curt Dean Blake (“Blake”) was a SpaceDev director since

4 2000. In addition, according to the Proxy, Blake was Chairman of the Company’s Audit

5 Committee and a member of the Compensation Committee.

6 12. Individual Defendant Howell M. Estes III (“Estes”) was a SpaceDev director since

7 2001. In addition, according to the Proxy and the Company’s Annual Proxy Statement filed with

8 the SEC on Form DEFR14A on June 27, 2007 (the “2007 Proxy”), Estes was former Chairman of

9 the Company’s Nominating and Corporate Governance Committee and a former member of the

10 Compensation Committee.

11 13. Individual Defendant Scott McClendon (“McClendon”) was a SpaceDev director

12 since 1999. According to the Proxy, McClendon was Chairman of the Compensation Committee

13 and a member of the Audit Committee. According to the 2007 Proxy, he was previously a

14 member of the Nominating and Corporate Governance Committee.

15 14. Individual Defendant Robert S. Walker (“Walker”) was a SpaceDev director since

16 2001. According to the Proxy, Walker was a member of the Company’s Government Security

17 and Nominating and Corporate Governance Committees.

18 15. Individual Defendant Hans J. Steininger (“Steininger”) was a SpaceDev director

19 since 2007. Steininger was appointed Chief Executive Officer of MT Aerospace AG (“MT”) in

20 June 2007 and served as its Chief Financial Officer for the period between July 2005 and May

21 2007. He was also a co-investor in MT. MT is a subsidiary of OHB Technology AG

22 (collectively, “OHB”), a former substantial SpaceDev shareholder. Steininger was nominated

23 and elected to the Board in 2007 pursuant to an agreement entered into between the Company and

24 OHB when OHB acquired its initial interest in the Company.

25 16. Individual Defendant G. Scott Hubbard was a SpaceDev director since 2007.

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27 3 According to the Proxy, all of the members of the Board would resign upon consummation ofthe merger with SNC. It is unknown whether any of the Individual Defendants other that

28 Sirangelo and Tibbitts continue to have any type of business or financial relationship with SNC.

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1 According to the Proxy, Hubbard was a member of the Audit, Government Security, and

2 Nominating and Corporate Governance Committees.

3 17. Individual Defendant Patricia G. Smith was a SpaceDev director since 2008.

4 According to the Proxy, Smith was Chairman of the Government Security Committee.

5 18. Each of the Individual Defendants at all times had the power to control and direct

6 SpaceDev to engage in the misconduct alleged herein. The Individual Defendants’ fiduciary

7 obligations required them to act in the best interest of plaintiff and all SpaceDev shareholders.

8 19. Each of the Individual Defendants owes a fiduciary duty of loyalty to plaintiff and

9 the other members of the Class. The Individual Defendants are acting in concert with one another

10 in violating their fiduciary duties as alleged herein, and, specifically, in connection with the

11 Acquisition.

12 THE INDIVIDUAL DEFENDANTS’ FIDUCIARY DUTIES

13 20. In any situation where the directors of a publicly traded corporation undertake a

14 transaction that will result in either a change in corporate control or a break-up of the

15 corporation’s assets, the directors have an affirmative fiduciary obligation to act in the best

16 interests of the company’s shareholders. To diligently comply with these duties, the directors

17 may not take any action that:

18 a. Adversely affects the value provided to the corporation’s shareholders;

19 b. Will discourage or inhibit alternative offers to purchase control of the

20 corporation or its assets;

21 c. Contractually prohibits them from complying with their fiduciary duties;

22 and/or

23 d. Will provide the directors, executives or other insiders with preferential

24 treatment at the expense of, or separate from, the public shareholders, and place their own

25 pecuniary interests above those of the interests of the company and its shareholders.

26 21. In accordance with their duties of loyalty and good faith, the Individual

27 Defendants, as directors and/or officers of SpaceDev, were obligated to refrain from:

28 a. Participating in any transaction where the directors’ or officers’ loyalties

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1 were divided;

2 b. Participating in any transaction where the directors or officers were entitled

3 to receive a personal financial benefit not equally shared by the public shareholders of the

4 corporation; and/or

5 c. Unjustly enriching themselves at the expense or to the detriment of the

6 public shareholders.

7 22. Each of the Individual Defendants at all times had the power to control and direct

8 SpceDev to engage in the misconduct alleged herein. The Individual Defendants’ fiduciary

9 obligations required them to act in the best interest of plaintiff and all SpaceDev shareholders. In

10 addition, they acted in concert with one another in violating their fiduciary duties as alleged

11 herein, and, specifically, in connection with the Acquisition.

12 23. Plaintiff alleges herein that the Individual Defendants, separately and together, in

13 connection with the Acquisition, violated the fiduciary duty of loyalty that they owed to Plaintiff

14 and the other public shareholders of SpceDev. As a result, Plaintiff and the Class members did

15 not receive adequate, fair, or maximum value for their SpaceDev common stock in the

16 Acquisition.

17 24. Defendant SNC is a privately-held Nevada corporation with its principal executive

18 offices located in Sparks, Nevada. SNC is prime systems integrator and electronic systems

19 provider.

20 25. Defendant SDV is a Delaware corporation and wholly-owned subsidiary of SNC.

21 It was created for the purpose of acquiring SpaceDev.

22 CLASS ACTION ALLEGATIONS

23 26. Plaintiff brings this action on his own behalf and as a class action on behalf of all

24 common shareholders of SpaceDev (the “Class”) pursuant to Rule 23 of the Federal Rules of

25 Civil Procedure. Excluded from the Class are defendants, the current and former officers and

26 directors of any of the defendants, and, with respect to any of the foregoing, the members of their

27 immediate families and their legal representatives, heirs, successors or assigns and any entity in

28 which defendants have or had a controlling interest.

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1 27. This action is properly maintainable as a class action. For example, the Class is so

2 numerous that joinder of all members is impracticable. As of August 14, 2008, there were

3 42,451,963 publicly held shares of SpaceDev common stock outstanding, held by scores, if not

4 hundreds, of individuals and entities scattered throughout the country. Record owners and other

5 members of the Class may be identified from records maintained by SpaceDev or its successor

6 entity or their transfer agents and may be notified of the pendency of this action by mail, using the

7 form of notice similar to that customarily used in securities class actions.

8 28. There are questions of law and fact that are common to the Class and predominate

9 over questions affecting any individual members of the Class. These questions include, inter alia,

10 the following: (i) whether the Proxy contained misleading statements of material fact and

11 omissions of material fact in violation of Section 14(a) of the Exchange Act and SEC Rule 14a-9;

12 (ii) whether the Individual Defendants controlled the actions of the Company with respect to the

13 issuance of the Proxy that contained misleading statements of material fact and omissions of

14 material fact in violation of Section 20(a) of the Exchange Act; (iii) whether the Individual

15 Defendants breached their fiduciary duties under state law to disclose fully and fairly all material

16 information within the Board’s control in seeking shareholder approval of the Acquisition;

17 (iv) whether the Individual Defendants breached their fiduciary duties of good faith, trust, and

18 loyalty by failing to take reasonable steps to maximize the value of SpaceDev to the owners of its

19 common shares and by preventing them from adequately evaluating the Company’s true value or

20 assessing the Individual Defendants’ stated reasons for entering into the Merger Agreement and

21 recommending its approval; (v) whether SNC and SDV knowingly aided and abetted the

22 Individual Defendants in the breach of their fiduciary duties under state law; and (vi) whether

23 Plaintiff and the other members of the Class have been injured by the action or inaction of

24 Defendants as stated above.

25 29. Plaintiff is committed to prosecuting this action and has retained competent

26 counsel experienced in litigation of this nature. Plaintiff’s claims are typical of the claims of the

27 other members of the Class and Plaintiff has the same interests as the other members of the Class.

28 Accordingly, Plaintiff will fairly and adequately protect the interests of the Class.

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1 30. The prosecution of separate actions by individual members of the Class would

2 create the risk of inconsistent or varying adjudications with respect to individual members of the

3 Class that would establish incompatible standards of conduct for Defendants, or adjudications

4 with respect to individual members of the Class that would, as a practical matter, be dispositive of

5 the interests of the other members not parties to the adjudications or substantially impair or

6 impede their ability to protect their interests. As such, a class action is superior to all other

7 available methods for the fair and efficient adjudication of this controversy since joinder of all

8 members is impracticable.

9 31. Defendants have acted, or refused to act, on grounds generally applicable to, and

10 causing injury to, the Class and, therefore, and final relief on behalf of the Class as a whole is

11 appropriate.

12 SUBSTANTIVE ALLEGATIONS

13 32. On October 20, 2008, SpaceDev issued a press release in which it announced that

14 it had signed a definitive merger agreement to be acquired by SNC in the Acquisition (the

15 “Merger Agreement”). As the press release indicated, the final amount of cash consideration

16 payable to shareholders in the Acquisition “will vary based upon, among other things, the amount

17 of such expenses actually incurred by the Company and the effect, if any, of certain adjustment

18 provisions set forth in the Merger Agreement.” In addition, “as an inducement to enter into the

19 Merger Agreement, and in consideration thereof,” certain SpaceDev officers, directors,

20 institutional shareholders, and principal security holders who beneficially owned an aggregate of

21 approximately 37% of the Company’s common stock entered into irrevocable voting and holder

22 agreements with SNC (“Voting Agreement”), pursuant to which they agreed to vote their shares

23 in support of the Acquisition and against any alternate transaction, including a superior

24 transaction.

25 33. On November 21, 2008, SpaceDev filed the Proxy in furtherance of soliciting

26 shareholder support for the Acquisition. As alleged herein, the Proxy contained misleading, or

27 failed to disclose, material facts necessary for SpaceDev’s public shareholders to make an

28 informed decision regarding the Acquisition.

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1 34. For example, the Proxy indicated that on September 12, 2008, the Individual

2 Defendants had an extended special meeting to discuss the potential acquisition of the Company

3 by SNC for a gross purchase price of $42.5 million, a value that had declined from an initial offer

4 of $44 million made in May 2008. Consistent with its initial deliberations, Cowen presented its

5 financial analysis of the transaction and the industry and opined that the transaction was fair to

6 the holders of the Company’s common stock.

7 35. Despite the apparent readiness of the parties to execute the merger agreement

8 approved on September 12, 2008, beginning in late September, SNC indicated that it would no

9 longer acquire SpaceDev at the previously agreed upon offering price. On September 25, 2008,

10 SNC indicated to the Company that it was updating its internal valuation and assumptions “based

11 upon the most recent due diligence and external market conditions (i.e., the worldwide financial

12 and credit markets downturn) and expressed that they would need to update their assessment of

13 the initial valuation proposition.” No specific information was provided in the Proxy as to how

14 these conditions affected or potentially affected the Acquisition of SpaceDev by SNC.

15 36. On October 1, 2008, SNC and Individual Defendants Sirangelo and Slansky met in

16 person to discuss information provided by the Company in response to SNC’s additional due

17 diligence requests, the complete overall SNC assessment of the Company’s current and future

18 expected financial position and the potential value of the integrated companies. Notably, the

19 parties also “discussed at length the external market and global financial crisis and environment.”

20 At the meeting, SNC indicated that based on its assessment of these issues, it could not maintain

21 its previous valuation model and indicated that it would provide a revised offer to the Company.

22 Again, the Proxy provided no details. Between October 3 and 8, 2008, SNC and Individual

23 Defendant Sirangelo negotiated a revised price. Among these exchanges was an email provided

24 from Individual Defendant Sirangelo to SNC that contained a counter-offer with the price reduced

25 by 5% “to address the new market and financial conditions.”

26 37. In short, in a little over one month, the Company agreed to a decrease in the value

27 of the Company of approximately 10.5%. The Proxy failed to detail or summarize the additional

28 financial data that purported, in part, to form the basis of the revaluation from the agreed upon

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1 price on September 12, 2005. In fact, the Proxy seemingly indicated the decrease was due to

2 external concerns related to the macro-economic environment and the ongoing financial crisis,

3 not anything directly related to SpaceDev or its particular net worth or financial outlook.

4 38. On October 10, 2008, the Individual Defendants met and discussed the revised

5 offer and agreed to hold a formal meeting. The Proxy indicated that during this meeting, “Cowen

6 made a preliminary observation that it appeared that the evaluations of comparable companies

7 and transactions had declined in the current financial market’s turmoil, proportionately more than

8 SNC’s proposed acquisition price had declined.” No explanation or background was provided for

9 this statement.

10 39. On October 20, 2008, the Individual Defendants held a meeting to consider the

11 revised offer, at which it “received an extensive updated briefing from Cowen, including a

12 detailed review of their financial analysis of the transaction and the industry.” After Cowen

13 rendered a favorable fairness opinion on the proposed transaction, the Individual Defendants

14 unanimously voted to approve the Company’s entry into the Acquisition.

15 40. Although Cowen’s presentation and financial analyses were of the utmost

16 importance to the Board, the Proxy failed to provide shareholders with a fair or complete

17 summary of those analyses. For example, the Proxy did not disclose, inter alia, the following

18 information:

19 a. The Company’s reason for failing to contact potential financial buyers that

20 could have been interested in acquiring the Company or engaging in a transaction, as well as the

21 Company’s reason for failing to perform a dedicated pre-or-post market check;

22 b. The details of the Company’s engagement of Cowen as well as the scope of

23 Cowen’s responsibilities as SpaceDev’s financial advisor;

24 c. Cowen’s rationale for considering an adjusted merger consideration of

25 $0.68 per common share in its analyses when the range offered to shareholders in connection with

26 the Acquisition started at $0.70 per common share;

27 d. Cowen’s rationale for limiting certain of its analyses to earnings before

28 interest, taxes, depreciation and amortization (“EBITDA”) and revenue multiples as opposed to

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1 other financial figures that are material to shareholders;

2 e. With respect to the Analysis of Premiums Paid in Selected Transactions:

3 (i) the manner in which Cowen selected the transactions it considered in connection with this

4 analysis; (ii) a range of multiples for this analysis, other than simply the mean and median results;

5 and (iii) the manner in which Cowen calculated “the implied stock prices for SpaceDev resulting

6 from the application of the premiums” considered from the selected industry transactions;

7 f. With respect to the Analysis of Selected Transactions: (i) the criteria that

8 Cowen employed to select the transactions considered, including Cowen’s rational for not

9 considering any transactions that occurred after July 15, 2008; (ii) a range of multiples for this

10 analysis, other than simply the mean and median results; and (iii) an explanation of the “complex

11 considerations and judgments concerning differences in historical and projected financial and

12 operating characteristics of the companies” selected, as well as the “other factors that could affect

13 the acquisition value of such companies or SpaceDev to which they are being compared;”

14 g. With respect to the Analysis of Selected Publicly Traded Companies:

15 (i) the basis for Cowen’s belief that the selected companies “have operating, market valuation and

16 trading valuations similar to what might be expected of SpaceDev”; (ii) a range of multiples for

17 this analysis, other than simply the mean and median results; and (iii) the sources of the Wall

18 Street analyst research reports that Cowen considered, as well as the specific analysts whose

19 reports Cowen considered and the specific reports;

20 h. With respect to the Historical Stock Trading Analysis: the manner in which

21 Cowen “derived” the per share merger consideration and adjusted merger consideration amounts;

22 i. With respect to the Discounted Cash Flow Analysis: (i) the financial

23 information underlying this analysis; (ii) the discounted present value of the projected after-tax

24 cash flows of SpaceDev provided by management of SpaceDev for the fiscal years ended 2008

25 through 2012; (iii) the terminal value of SpaceDev at December 31, 2012; (iv) why Cowen

26 calculated a range of terminal multiples of EBITDA for SpaceDev based on the general range of

27 multiples of EBITDA for the “selected companies” considered in that analysis; (v) the discount

28 rates that Cowen used between the range of 20% and 30%, as well as the basis for Cowen’s use of11

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1 those rates; (vi) the estimated industry weighted average cost of capital that Cowen purportedly

2 considered; and (vii) the calculations that resulted in an implied per share equity value of

3 SpaceDev common stock ranging from $0.69 to $1.01 per share;

4 j. With respect to the Leveraged Buyout Analysis: (i) the manner in which

5 Cowen performed this analysis; (ii) Cowen’s basis and rationale for assuming internal rates of

6 return in excess of 30% and terminal multiples of 7.0x to 8.0x estimated 2012 EBITDA; and

7 (iii) Cowen’s reason for performing this type of analysis;

8 k. With respect to the price reduction agreed to by the Board in October 2008,

9 why or how external concerns related to the macro-economic environment and financial crisis

10 affected the Company’s economic prospects or net worth; and

11 l. With respect to Cowen’s statement that “it appeared that the evaluations of

12 comparable companies and transactions had declined in the current financial market’s turmoil,

13 proportionately more than SNC’s proposed acquisition price had declined,” how and why the

14 drastic reduction in the price ultimately approved by SpaceDev’s Board was reasonable.

15 41. These misleading statements and omissions of material fact were compounded by

16 the failure of the Proxy to fully discuss the various valuations of the Company that were

17 considered during extensive negotiations and discussions concerning potential business

18 combinations between itself and an international aerospace company, identified as “Company E”

19 in the Proxy, with operations in the U.S. that occurred over a year-long period beginning in late

20 2007 and ending in the fourth quarter of 2008. Although these discussions purportedly halted due

21 to international ownership concerns of Company E, and changes within Company E, the

22 valuations, if any, placed upon SpaceDev during these discussions would have served as an

23 effective cross-check mechanism for shareholders to determine the fairness of the consideration

24 they were to receive pursuant to the Merger Agreement. The same is true for SpaceDev’s

25 negotiations with “Company B,” which ran from the first quarter of 2008 to the third quarter of

26 2008, and which involved the exchange of financial information, a “preliminary analysis” by

27 Cowen, “and briefings conducted with the SpaceDev Board.” Significantly, negotiations were

28 terminated because, inter alia, the “parties were unable to agree upon valuation.”

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1 42. The Proxy also failed to disclose material information regarding the steps that the

2 Company or its financial advisors took in attempting to maximize shareholder value. The Proxy

3 indicated that the Company and SNC engaged in discussions regarding a strategic relationship for

4 months, during which time it became increasingly apparent that SNC management viewed the

5 Company as an attractive acquisition candidate. Despite these facts, the Proxy was silent as to

6 why neither the Company nor its financial advisors took any steps to perform a formal market

7 check. Moreover, to the extent the Company or its financial advisors undertook any informal

8 canvass, the Proxy failed to discuss who was contacted, including whether any discussions with

9 either strategic or financial buyers ever took place.

10 43. Further, although the Proxy indicated that Cowen and the Individual Defendants

11 considered various strategic alternatives available to SpaceDev, it only identified two such

12 alternatives (negotiating with SNC and remaining independent). The Proxy was silent regarding

13 any other potential strategic alternatives, including limited equity investments and other means to

14 raise capital and increase liquidity. Moreover, with respect to remaining independent, the Proxy

15 was silent as to how viable an option that actually was for the Company, and whether more value

16 for shareholders could be garnered through that course of conduct, considering the significant

17 prospects for the Company set forth herein.

18 44. In addition, SpaceDev’s reported strong third-quarter financial results for 2008,

19 raised the question whether the Acquisition undervalued the Company and whether the Individual

20 Defendants disclosed enough information to shareholders to permit them to ascertain the true

21 value of the Company. On November 13, 2008, the Company announced its financial results for

22 the three and nine months ended September 30, 2008, reporting “year to date revenues of

23 approximately $28.3 million, an increase of over 11.6%, net income for the nine months of almost

24 $500,000 and Adjusted EBITDA of approximately $2.1 million for the same nine month period.”

25 Specifically, SpaceDev reported the following favorable financial results:

26 Revenue - SpaceDev reported revenue of approximately $9.0 million and $28.3million for the three and nine months ended September 30, 2008, an increase of

27 approximately $1.4 million and $3.0 million, or 18.9% and 11.7% for the three andnine month periods respectively, from the approximate $7.6 million and $25.3

28 million in revenue reported for the same three and nine month periods in 2007.

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1 Income from Operations - SpaceDev realized income from operations of

approximately $348,000 and $586,000 in the three and nine months ended

2 September 30, 2008, which included approximately $164,000 and $420,000 for

stock option expense, compared to an operating income of $164,000 and $539,000

3 for the same three and nine months in 2007, which included approximately

$90,000 and $302,000 for stock option expense. In addition and included as

4 operating expenses, the Company increased by 135% its investment in R&D,

investing year to date over $623,000 in 2008 compared to $265,000 in 2007.

5 Net Income - Net income for the three and nine months ended September 30, 2008was approximately $293,000 and $498,000 respectively, compared to

6 approximately $58,000 and $214,000 for the same three and nine month periods in2007 with $0.00 earnings per share for both quarters and earnings per share of

7 $0.01 for the nine months to date in 2008 and $0.00 for 2007.

8 Cash Position - At September 30, 2008, SpaceDev’s cash position, which included

cash reserves and cash available for investment, was approximately $5.8 million

9 compared to approximately $6.5 million at December 31, 2007. The change is

primarily due to the repurchase of preferred stock of $1,368,000 year to date. The

10Company’s current ratio improved to 2.11 (at September 30, 2008) from 2.04 (atSeptember 30, 2007).

11 Adjusted EBITDA

During the three and nine months ended September 30, 2008, SpaceDev’s

12 Adjusted EBITDA was approximately $0.9 million, or 10.0% of net sales, and$2.1 million or 7.4% of net sales, respectively, compared to an adjusted EBITDA

13 of $0.5 million, or 6.6% of net sales, and $1.4 million, or 5.5% of net sales, for the

14same three and nine months in 2007.

15 45. Moreover, on October 16, 2008, SpaceDev announced it was “placed sixth on the

16 prestigious ‘Fast Track 50,’ an annual ranking of global defense companies published by Defense

17 News Magazine.” According to the announcement, “Defense News evaluated all defense

18 companies in the world regardless of their size by their compound annual growth rate over the

19 last five years.” The announcement also stated that SpaceDev had been “recognized as the eighth

20 fastest growing technology company in the San Diego area” of any kind by percentage revenue

21 growth over five years at “the recent Deloitte ‘Technology Fast 50’ awards.”

22 46. Accordingly, SpaceDev exhibited the ability to weather challenging market

23 conditions and report favorable financial results, raising the question of whether the Proxy

24 adequately informed investors of the Company’s true value or the Board’s entire rationale for

25 electing to pursue the Acquisition as opposed to other alternatives, including remaining

26 independent.

27 47. On November 26, 2008, Plaintiff filed his initial class action complaint with this

28 Court alleging violations of Section 14(a) and Rule 14a-9 on the grounds that the Proxy contained

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1 misleading statements of material fact and omitted material fact and, in the exercise of reasonable

2 care, SpaceDev and the Individual Defendants should have known the Proxy contained

3 misleading statements of material fact and omitted material fact necessary to render them non-

4 misleading. Plaintiff sought injunctive relief enjoining the Acquisition until the Proxy’s

5 deficiencies could be remedied and the statements contained therein be rendered complete and

6 non-misleading. SpaceDev and the Individual Defendants failed to amend the Proxy or otherwise

7 notify the Company’s shareholders of this material development. 4

8 48. The Proxy revealed that the Individual Defendants had “interests in the transaction

9 that are different from, and/or in addition to, the interests of the Company’s stockholders

10 generally.” Specifically, the vesting of unvested stock options held by persons then in the service

11 of the Company would be accelerated as of immediately before the effective time of the merger

12 and, under the Merger Agreement, the newly-vested options would be purchased by the Company

13 for cash. Under this arrangement, Individual Defendant Sirangelo would receive approximately

14 $290,000 for his unvested options; Individual Defendant Slansky approximately $308,000; and

15 the remaining Individual Directors approximately $43,650.

16 49. According to the Proxy:

17 As of October 20, 2008, the record date for the Annual Meeting, the directors andexecutive officers of the Company held and are entitled to vote, in the aggregate,

18 8,455,643 shares of Company common stock (excluding options), representing

19approximately 19.4% of the voting power of the Company. Each of ourCompany’s directors and executive officers has informed the Company that he or

20 4 SpaceDev’s Prospectus Supplement, Form 424B3, filed with the SEC on December 5, 2008,

21 seven days after the filing of this action, stated:

22 On October 30, 2008 and again on November 5, 2008, plaintiffs filed in Californiaand Delaware two purported class action lawsuits related to the proposed

23 transaction with Sierra Nevada Corporation. These lawsuits seek to prevent the

24 proposed transaction as well as damages. The Company is obligated to commitresources to defending such litigation. If the plaintiffs are successful, the court

25 could potentially temporarily or permanently prevent the merger from takingplace.

26 The Proxy also noted the initiation of the two matters discussed in the Prospectus Supplement.27 Plaintiff’s class action complaint was originally filed in Delaware on November 5. By

December 5, it had been voluntarily withdrawn and re-filed with this Court. The action in28 California state court was subsequently withdrawn as well. [CONFIRM]

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1 she intends to vote all of their Company shares "FOR" the approval and adoptionof the merger agreement, and SNC has advised us that it has obtained voting

2 agreements and irrevocable proxies from our directors Messrs. Sirangelo, Tibbittsand Slansky to vote in favor of approving and adopting the merger agreement. 5

3

4 (Emphasis added).

5 50. The Proxy also disclosed that, when including the right to obtain additional shares

6 of common stock through the exercise of outstanding options or warrants or the conversion of

7 convertible securities within 60 days from October 20, 2008 (i.e., prior to the scheduled date for

8 shareholder approval of the Acquisition): (i) Individual Defendant Steininger beneficially owned

9 5,979,846 shares of SpaceDev, or 13.74% of the outstanding shares of the Company; (ii) OHB,

10 whose shares were controlled by Individual Defendant Steininger, owned 7,973,129 shares of

11 SpaceDev, or 18.32% of the outstanding shares of the Company; (iii) Individual Defendant

12 Slansky beneficially owned 2,237,886 shares, or 4.90%; (iv) Individual Defendant Sirangelo

13 beneficially owned 2,142,500 shares, or 4.72%; (v) Individual Defendant Tibbitts beneficially

14 owned 1,909,394 shares, or 4.39%; and (vi) the remaining Individual Defendants beneficially

15 owned 520,847 shares, or 1.2%. Combined, the Individual Defendants beneficially owned or

16 controlled 47.27% of the outstanding common shares of SpaceDev.

17 51. The Proxy’s statement that “the directors and executive officers of the Company

18 held and are entitled to vote, in the aggregate, 8,455,643 shares of Company common stock

19 (excluding options), representing approximately 19.4% of the voting power of the Company” was

20 a misleading statement of material fact because it did not represent the true power the Individual

21 Defendants had over the Company.

22 52. In addition, the Proxy revealed that the Voting Agreement covered an additional

23 12,351,963 common shares of SpaceDev, or 29.09% of the outstanding shares, not including

24 those owned by Individual Defendants Slansky, Sirangelo, and Tibbitts.

25 53. The sum of the percentage of shares owned or controlled by the Individual

26

27 5 Also a party to the Voting Agreement was Susan C. Benson, the widow of the recentlydeceased James Benson and the sister-in-law of SpaceDev director Arthur Benson. Ms. Benson

28 beneficially owned 7,184,107 shares, or 16.5% of the outstanding common shares.

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1 Defendants plus those owned by the other parties to the Voting Agreement totaled 76.36%, far

2 more than sufficient to ensure that a majority of the owners of the Company’s common shares

3 would vote to approve the Acquisition even if every other shareholder voted against it.

4 54. The Individual Defendants have breached their fiduciary duties to SpaceDev’s

5 public shareholders by causing the Company to enter into and move forward with the Acquisition

6 that provided for the sale of SpaceDev at an unfair price, and deprived SpaceDev’s public

7 shareholders of maximum value to which they are entitled.

8 55. The consideration paid to plaintiff and the Class in the Acquisition is unfair and

9 grossly inadequate because, among other things, the intrinsic value of SpaceDev materially

10 exceeded the amount offered in the Acquisition, giving due consideration to the Company’s

11 recent performance and anticipated operating results.

12 56. Under Delaware law, the Company’s public shareholders deserve to receive the

13 maximum value for their shares through the Acquisition. The consideration reflected in the

14 Acquisition did not adequately value the Company’s substantial assets or the value of control of

15 the Company.

16 57. As a result of these breaches of fiduciary duty, the Company’s public shareholders

17 did not receive adequate or fair value for their SpaceDev common stock in the Acquisition.

18 58. SpaceDev’s annual shareholder meeting was held on December 15, 2008, at which

19 time the Acquisition was approved by a majority of the Company’s shareholders. The following

20 day, the merger was consummated, trading of SpaceDev’s stock ceased, and the Company filed

21 Form 15, Certification and Notice of Termination of Registration under Section 12(g) of the

22 Securities Exchange Act of 1934 or Suspension of Duty to File Reports under Sections 13 and

23 15(d) of the Securities Exchange Act, with the SEC.

24 COUNT I

25 Violations of Section 14(a) of the Exchange Act and Rule 14a-9 Promulgated Thereunder

26 (Against SpaceDev and the Individual Defendants)

27 59. Plaintiff incorporates each and every allegation set forth above as if fully set forth

28 herein. This claim is asserted against SpaceDev and the Individual Defendants.

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08 CV 2199 L CAB


1 60. SpaceDev and the Individual Defendants issued the Proxy with the intention of

2 soliciting shareholder support of the Acquisition.

3 61. Rule 14a-9, promulgated by the SEC pursuant to Section 14(a) of the Exchange

4 Act, provides that a proxy statement shall not contain “any statement which, at the time an in the

5 light of the circumstances under which it is made, is false or misleading with respect to any

6 material fact, or which omits to state any material fact necessary in order to make the statements

7 therein not false or misleading.”

8 62. The Proxy violated Section 14(a) and Rule 14a-9 because it contains misleading

9 statements of material fact and omitted material fact, specifically those set forth in ¶¶ 34-51,

10 above. Moreover, in the exercise of reasonable care, SpaceDev and the Individual Defendants

11 knew or should have known that the Proxy contained misleading statements of material fact and

12 omitted material fact.

13 63. The Proxy was an essential link for SpaceDev shareholder approval of the

14 Acquisition, which was required for consummation of the transaction.

15 64. The misleading statements and omissions of fact in the Proxy were material to

16 Plaintiff and the Class because there is a substantial likelihood that a reasonable shareholder

17 would have considered the correct and omitted information important in deciding how to vote,

18 and Plaintiff and the Class were deprived of their entitlement to cast a fully informed vote

19 because such misleading statements and omissions were not corrected prior to the vote on the

20 Acquisition.

21 65. The misleading statements and omissions were of a magnitude that they

22 constituted, at a minimum, negligence on the part of SpaceDev and the Individual Defendants.

23 As described above, the Individual Defendants had personal incentives, above and beyond those

24 of the common shareholders, in ensuring the approval of the transaction. The Individual

25 Defendants had the motivation to mislead the Company’s shareholders and omit information that

26 would cause them to consider voting against approving the Acquisition.

27 66. As set forth above, SpaceDev and the Individual Defendants each violated Section

28 14(a) and Rule 14a-9 by their acts and omissions as alleged in this Complaint. As a direct and

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1 proximate result of SpaceDev’s and the Individual Defendants’ wrongful conduct, Plaintiff and

2 the other members of the Class suffered damages in connection with the sale of SpaceDev to

3 SNC.

4 COUNT II

5 Violations of Section 20(a) of the Exchange Act

6 (Against the Individual Defendants)

7 67. Plaintiff repeats and realleges the allegations set forth above as though fully set

8 forth herein. This claim is asserted against the Individual Defendants.

9 68. The Individual Defendants acted as controlling persons of SpaceDev within the

10 meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their high level

11 positions with the Company, participation in and/or awareness of the Company’s finances and

12 operations, and/or participation in and/or knowledge of the negotiations, recommendation of, and

13 approval of the acquisition of SpaceDev by SNC, the Individual Defendants had the power to

14 influence and control and did influence and control, directly or indirectly, the decision making of

15 the Company, including the content and dissemination of the Proxy which the Plaintiff contends

16 contained misleading statements of material fact and omitted material fact that were necessary to

17 render them not misleading. The Individual Defendants were provided with or had unlimited

18 access to copies of the Company’s internal books and records, reports, financial information,

19 plans, projections, forecasts, and other data not available to its shareholders prior to and after the

20 Proxy was issued and had the ability to prevent the issuance of the Proxy or cause the Proxy to be

21 corrected or updated.

22 69. As set forth above, SpaceDev and the Individual Defendants each violated Section

23 14(a) and Rule 14a-9 by their acts and omissions as alleged in this Complaint. By virtue of their

24 controlling positions, the Individual Defendants are liable pursuant to Section 20(a) of the

25 Exchange Act. As a direct and proximate result of the Individual Defendants’ wrongful conduct,

26 Plaintiff and the other members of the Class suffered damages in connection with the sale of

27 SpaceDev to SNC.

28

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08 CV 2199 L CAB


1 COUNT III

2 Violations of Fiduciary Duties of Disclosure

3 (Against the Individual Defendants)



6 71. The misrepresentations and omissions in the Proxy described above constitute a

7 breach of the Individual Defendants’ fiduciary duties to disclose fully and fairly all material

8 information within the Board’s control in seeking shareholder approval of the Acquisition.

9 72. As a direct and proximate result of the Individual Defendants’ wrongful conduct,


11 SpaceDev to SNC.

12 COUNT IV

13 Violations of Fiduciary Duties of Good Faith, Trust, and Loyalty(Against the Individual Defendants)

14



17 74. All of the Individual Defendants either entered into an irrevocable voting and

18 holder agreement with SNC, pursuant to which they agreed to vote their shares in support of the

19 Acquisition and against any alternate transaction, including a superior transaction, or announced

20 in the Proxy they would vote in favor of the Acquisition.

21 75. The Individual Defendants maintained a controlling interest in the Company.

22 76. The Individual Defendants’ duty of loyalty required them to act with undivided

23 and unselfish loyalty and to allow no conflict between duty and self-interest. The duty of loyalty

24 is implicated when a director stands on both sides of a challenged transaction or derives a

25 personal benefit therefrom. In such circumstances, directors must satisfy the entire fairness

26 standard by establishing that the transaction was the product of both fair dealing and fair price.

27 77. As significant shareholders of SpaceDev, the Individual Defendants stood on both

28 sides of the Acquisition. Individual Defendants Sirangelo and Slansky, and to a lesser extent the

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08 CV 2199 L CAB


1 other Individual Defendants, stood to receive substantial benefits not available to the remainder of

2 the common shareholders if the Acquisition was approved.

3 78. All of the Individual Defendants will be liable if they fail to prove entire fairness.

4 79. The Individual Defendants cannot prove entire fairness because: (i) the

5 Acquisition undervalued the Company and deprived the common shareholders of the right to

6 receive a fair and adequate price; and (ii) the misrepresentations and omissions in the Proxy

7 prevented shareholders from adequately evaluating the Company’s true value or assessing the

8 Individual Defendants’ stated reasons for entering into the Merger Agreement and recommending

9 its approval.

10 80. The failure of the Individual Defendants to act with undivided and unselfish

11 loyalty and to allow no conflict between duty and self-interest, and their inability to demonstrate

12 the entire fairness of the Acquisition, constitute a breach of their fiduciary duties of good faith,

13 trust, and loyalty.

14 81. As a direct and proximate result of the Individual Defendants’ wrongful conduct,


16 SpaceDev to SNC.

17 COUNT V

18 Aiding and Abetting the Breaches of Fiduciary Duty

19 (Against Defendants SNC and SDV)


21 forth herein. This claim is asserted against SNC and SDV.

22 83. SNC and SDV knowingly participated in the Individual Defendants’ breaches of

23 their fiduciary duties by, inter alia, entering into the Merger Agreement and Voting Agreement

24 with the Individual Defendants. By their admission, SNC and SDV entered into the Voting

25 Agreement with the Individual Defendants “[a]s an inducement to enter into the Merger

26 Agreement.” SDV was created for the purpose of facilitating the acquisition of SpaceDev by

27 SNC. SNC and SDV knew of the Individual Defendants’ divided loyalties, yet proceeded with

28 the Acquisition despite its lack of entire fairness to SpaceDev’s shareholders.

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08 CV 2199 L CAB


1 84. As a direct and proximate result of SNC’s and SDV’s wrongful conduct, Plaintiff

2 and the other members of the Class suffered damages in connection with the sale of SpaceDev to

3 SNC.

4 PRAYER

5 WHEREFORE, Plaintiff demands relief, in his favor and in favor of the Class, and against

6 the Defendants, as follows:

7 A. Declaring that this action is properly maintainable as a class action, certifying

8 Plaintiff as a Class representative, and appointing Plaintiff’s counsel as Class Counsel;

9 B. Declaring that the Proxy contained misleading statements of material fact and

10 omissions of material fact in violation of Section 14(a) of the Exchange Act and Rule 14a-9

11 promulgated thereunder and that SpaceDev and the Individual Defendants violated said

12 provisions;

13 C. Declaring that the Individual Defendants were controlling persons of SpaceDev

14 within the meaning of Section 20(a) of the Exchange Act and that they violated said provision by

15 their acts and failures to act that resulted in the above-described violations of Section 14(a) of the

16 Exchange Act and Rule 14a-9 promulgated thereunder;

17 D. Declaring that the Individual Defendants breached their fiduciary duties to disclose

18 fully and fairly all material information within the Board’s control in seeking shareholder

19 approval of the Acquisition;

20 E. Declaring that the Individual Defendants breached their fiduciary duties of good

21 faith, trust, and loyalty in seeking shareholder approval of the Acquisition despite its lack of

22 entire fairness to the common shareholders;

23 F. Declaring that SNC and SDV knowingly aided and abetted the Individual

24 Defendants in breaching their fiduciary duties;

25 G. Rescinding the Acquisition or awarding the Class rescissory damages;

26 H. Directing that Defendants pay to Plaintiff and the other members of the Class all

27 damages caused to them and account for all profits and any special benefits obtained as a result of

28 their wrongful conduct;

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08 CV 2199 L CAB


1 I. Awarding Plaintiff the costs and disbursements of this action, including a

2 reasonable allowance for Plaintiff’s attorneys and experts’ fees; and

3 J. Granting such other and further relief as the Court may deem just and proper.

4 JURY DEMAND

5 Plaintiff demands a trial by jury.

6 DATED: October 14, 2009 HULETT HARPER STEWART LLP

7 KIRK B. HULETTSARAH P. WEBER

8 LINDSAY J. FOSTER

9

10 /s/ Kirk B. Hulett

11 KIRK B. HULETT

12 525 B Street, Suite 760San Diego, CA 92101

13 Telephone: (619) 338-1133

14Facsimile: (619) 338-1139

15 Attorneys for Plaintiff, Robert E. BeckerOF COUNSEL:

16RIGRODSKY & LONG PA

17 SETH D. RIGRODSKYBRIAN D. LONG

18 919 North Market Street, Suite 98019 Wilmington, DE 19801

Telephone: (302) 295-5310

20 Facsimile: (302) 654-7530

21 THE ROSEN LAW FIRM P.A.22 LAURENCE ROSEN

PHILIP KIM23 350 Fifth Avenue, Suite 5508

New York, NY 10118

24 Telephone: (212) 686-1060

Facsimile: (212) 202-382725

26

27

28

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08 CV 2199 L CAB

robert e. becker, et al. v. spacedev, inc., et al. 08-cv...

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