Columbia firm sued by its ex-president North American Vaccine is target

Legal affairs

November 04, 1998|By Mark Guidera | Mark Guidera,SUN STAFF

Sharon Mates, the ousted president of Columbia-based North American Vaccine Inc., sued the company and its two largest shareholders yesterday, charging in her complaint that they conspired to have her fired because they wanted to gain a greater stake in the company at a low price and then sell it.

In her suit, Mates seeks a court order ruling that she was improperly fired and unspecified punitive damages. Mates, a member of the company's board, also wants the court to enjoin the company from completing a recent $25 million private-placement financing agreement and from holding board meetings without her.

Daniel Abdun-Nabi, North American Vaccine's general counsel, said yesterday that the company would fight the suit.

"Based on a preliminary review of the complaint, the company believes the claims are without merit and that the company has meritorious defenses available to it. The company intends to vigorously contest and defend against these claims in this litigation," he said.

Mates' attorney, Harvey L. Pitt of Fried, Frank, Harris, Shriver & Jacobsen in Washington, was not available for comment yesterday.

In the suit, filed in U.S. District Court in Greenbelt, Mates charges that North American's two vice chairmen, Phillip Frost and Francesco Bellini, "arranged a scheme to increase Frost's and BioChem's stake in North American at the expense of the company and its minority shareholders."

Bellini is also chief executive of BioChem Pharma Inc. Frost, who is chairman and chief executive officer of Ivax Corp. of Miami, owns 17 percent of North American's stock and 39 percent of BioChem's stock.

According to the suit, the two agreed to lend North American $25 million in the form of a convertible debenture. At the time, according to the company's second-quarter financial report, North American had about $18 million in cash on hand.

In return, Frost and BioChem received the right to convert the five-year note into company stock at $8.35 a share, the suit states.

The conversion terms were not advantageous to the company or shareholders, the suit says, because the closing price of the stock on the day the agreement was being considered by the board was $11.25. North American shares closed yesterday at $14.50.

Mates said she learned of the details of the debenture agreement during a board meeting conducted by telephone Sept. 23. She claims that she was only given 24 hours notice of the meeting, and that it was during that meeting that she first learned of the debenture and its terms.

Mates says in her suit that she was "shocked" to learn of the financing arrangements, and that she told board members that she believed a legal opinion on the fairness of the agreement should be obtained before the board voted on the proposal.

According to her suit, Mates was contacted later that day by Neil Flanzraich, the company's chairman, and informed that one of the conditions of the financing agreement was that she resign or be fired. Mates said she refused to resign, and learned the next day when the company issued a news release announcing the financing that she had been removed from the president's post. Mates' suit says company rules state that the president can be removed from office only at a specially called meeting of shareholders, and that no such meeting was called.

Pub Date: 11/04/98

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