WILMINGTON, Del., Aug. 17, 2015 /PRNewswire/ -- Jeffrey R. Brooks filed Saturday, by and through his counsel Christopher D. Loizides of Loizides, P.A., his Memorandum of Law in Opposition to SS Body Armor I, Inc.'s (the "Debtor") Motion for a Preliminary Injunction.
Following formal demand on the Debtor's Board of Directors, on April 6, 2015, Jeffrey Brooks filed an action with the Delaware Court of Chancery to compel the Debtor to convene an annual meeting of shareholders.
Jeffrey Brooks commenced the Chancery Case to have an independent board appointed to investigate and pursue causes of action against Steel Partners II, L.P. and affiliated entities and individuals for acts taken when Steel controlled the Debtor. Jeffrey Brooks' investigation has revealed that, following a failed bid by Steel to buy the Debtors in 2007, Steel allegedly took control of the Debtor in 2008 with the intention of driving the Debtor into bankruptcy so that Steel could acquire the Debtor's assets at a huge discount. In connection with that effort, Steel caused the Debtor to enter into unfavorable transactions with Steel-owned companies, resulting in sub-standard products at substantially higher costs to the Debtor. Steel also caused the Debtor to pay many millions of dollars to Steel-affiliated professionals in connection with Steel's efforts. The result was the destruction of the Debtor's business and the loss of possibly hundreds of millions of dollars of shareholder value.
The Debtor was once the nation's leading manufacturer of bullet-resistant vests. As a component of the scheme by Steel, product quality issues were allegedly caused intentionally by the Debtor's management (as corroborated by witness statements), setting into motion a cash and liquidity crisis and ultimately leading to bankruptcy.
In 2011, the Debtor sold its assets to a Sun Capital affiliate for approximately $36 million. The reported and ongoing costs of the bankruptcy, as caused by Steel, amount to a cost to the Debtor—a cost to all equity holders—many millions of dollars greater than the fire sale proceeds realized by the voluntary sale of the Debtor's assets. In 2014, under the management of Sun Capital, Point Blank's revenues reached approximately $250 million, up nearly $100 million from two years prior.
The Board is beholden to Steel because the three Board members are Steel nominees as no shareholder meeting has been held for more than five years—that is, since prior to bankruptcy. Their loyalty is to Steel because they were on the Board when much of the alleged illicit conduct took place.
At least two other investors have also requested a shareholder meeting. Jeffrey Brooks understands that only an independent board will be acceptable to other shareholders. He is requesting that a board free from conflicts that burden the existing board be appointed. It will be the new and independent board that will evaluate the claims against Steel.
On July 22, 2015, the Debtor filed its amended proposed plan of liquidation. The Plan contains broad Debtor and third-party release and exculpation provisions, including of all of the members of Debtor's management and the existing Board. A confirmation hearing on the Plan has been set for November 9-10, 2015.
Jeffrey Brooks expects to object to the Plan on grounds including the Plan releases and the continuing control of the Debtor by existing management. The fact that Jeffrey Brooks opposes this particular Plan—or to be more precise—certain provisions in this particular Plan—does not mean that Jeffrey Brooks is opposed to confirmation of any plan. Any plan of reorganization should, at a minimum, enfranchise shareholders, place neutral fiduciaries in charge of the Debtor, and not release estate causes of action against current management, Steel and others. So long as existing management is in control of the plan process, however, they will assure that they remain in control despite the interests of shareholders and that they and others will benefit from the plan release provisions to the detriment of the creditors and all equity holders.
SOURCE Jeffrey R. Brooks