And another lawsuit.
LEVEL 1 - 33 OF 50 STORIES
Copyright 1994 The Morning Call, Inc.
The Morning Call (Allentown)
May 13, 1994, FRIDAY, FIFTH EDITION
SECTION: LOCAL/REGION, Pg. B6
LENGTH: 579 words
HEADLINE: SHAREHOLDER SUES PRESIDENT OF COMPANY
BYLINE: GAY ELWELL; The Morning Call
BODY:
A 50 percent shareholder in Straight Arrow Products Inc., the
Bethlehem-based
company that recently began packaging its equine products for human use,
wants
to rein in company President Roger Dunavant.
A suit filed in Northampton County says Dunavant has given himself $
1.4
million in bonuses over two years and has more than doubled his $
100,000-a-year
salary.
Devon Katzev of 200 Memorial Drive, Bath, whose parents founded the
company,
filed the suit and seeks millions of dollars in damages from Dunavant.
Katzev,
who is represented by attorneys Martin D. Cohen and Stephen Mowrey, also
wants
to void a trust that lets Dunavant vote Katzev's stock, cap Dunavant's
annual
salary at $ 100,000 and bar him from using company assets for personal
expenses, including defense of the suit.
Dunavant did not respond to a request for comment on the suit. An
injunction
hearing is scheduled for Tuesday morning.
The company manufactures grooming products for horses, including Mane
'n Tail
shampoo and conditioner. Using the Mane 'n Tail name, it began selling
the
products for human use in April after receiving numerous reports from
people who
believe the products had benefitted them.
The suit says that on May 1, 1990, Bonnie Katzev, the sole
shareholder in the
company, signed an agreement of sale that gave half the company stock to
her son
and transferred the remaining portion to Dunavant, who joined the
company in
1988. The agreement also included a 10-year trust, expiring April 30,
2000, that
gave Dunavant the right to vote all company stock.
During 1991, the suit says, the company began experiencing a great deal
of
success; the April 30, 1992, report for the preceding year showed total
sales of
$ 4,014,365. The report also shows that bonuses of $ 908,900 were
distributed to
employees for a net income of $ 26,674. Sales for the year ending April
30,
1993, more than doubled to $ 8,623,152. Bonuses of $ 867,000 were
distributed,
leaving a
net company income of $ 31,666, according to the suit.
Of the $ 1,775,900 in bonuses distributed in those two years, the
suit says,
$ 1.4 million went to Dunavant, who approved them either directly or
through the
use of the voting trust. Dunavant also increased his annual salary from
$
100,000 to $ 232,311.
His conduct amounted to conversion of funds "in complete disregard
for the
rights of the plaintiff," says the suit, which claims Dunavant has
stripped the
company of its assets and profits.
The suit also claims that Dunavant has run his personal expenses
through the
corporation, and without required approval from Katzev has engaged in
sales
transactions and credit and royalty arrangements "with corporations or
entities
in which the defendant has an interest" and which are unfair to Straight
Arrow
Products Inc.
The suit also seeks an accounting, verified by an independent audit,
of "all
monies, properties or other assets taken or wrongfully converted to the
personal
use of William R. Dunavant."
Specifically, the suit claims that Straight Arrow obtained $ 129,500
from an
affiliated company in which Dunavant has a one-third share for a
non-interest-bearing loan and that Straight Arrow paid royalties to a
company in
which Dunavant has a one-third interest. That violates the shareholders
agreement, which says any assets required by the corporation shall be
owned by
the corporation or leased from unrelated third parties, according to the
suit.
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