Alloy Steel Stockholder Settlement

The purpose of the Notice is to notify Class Members of the existence of the Action and the terms of the proposed Settlement with the Defendants. The Notice is also being sent to inform Class Members of a hearing that the Court has scheduled to consider the fairness, reasonableness, and adequacy of the Settlement, the proposed Plan of Allocation for the Settlement proceeds, and the application by Plaintiffs’ Counsel for a Fee and Expense Award in connection with the Settlement (the “Settlement Hearing”). See "When and Where Will the Settlement Hearing Be Held?" below for details about the Settlement Hearing, including the location, date, and time of the hearing.

The Court directed that the Notice be mailed to you because you may be a member of the Class. The Court has directed us to send you the Notice because, as a Class Member, you have a right to know about your options before the Court rules on the proposed Settlement. Additionally, you have the right to understand how the Action and the proposed Settlement generally affect your legal rights.

Please Note: The Court may approve the proposed Settlement with such modifications as the Settling Parties may agree to, if appropriate, without further notice to the Class.

The issuance of the Notice is not an expression by the Court of any findings of fact or any opinion concerning the merits of any claim in the Action, and the Court has not yet decided whether to approve the Settlement. If the Court approves the Settlement, then payments to Eligible Class Members (defined in paragraph 21, below) will be made after any appeals are resolved.

Please Note: Receipt of the Notice does not mean that you are a Class Member or an Eligible Class Member or that you will be entitled to receive a payment from the Settlement.

THE FOLLOWING RECITATION DOES NOT CONSTITUTE FINDINGS OF THE COURT. THE COURT HAS MADE NO FINDINGS WITH RESPECT TO THE FOLLOWING MATTERS AND THESE RECITATIONS SHOULD NOT BE UNDERSTOOD AS AN EXPRESSION OF ANY OPINION OF THE COURT AS TO THE MERITS OF ANY OF THE CLAIMS OR DEFENSES RAISED BY ANY OF THE SETTLING PARTIES.

On May 18, 2021, Defendants Maria Kostecki and Steven Kostecki, holders of approximately 65% of Alloy Steel’s common stock at that time, proposed a going-private transaction by sending a letter to Alan Scott, a director, proposing to acquire all the outstanding shares of the Company’s common stock for $2.35 per share. After negotiations with a Special Committee appointed by the Company’s Board, the Kosteckis raised their offer to $2.55 per share. Upon review of valuations by independent experts and input from independent counsel, the Special Committee recommended the merger agreement as fair. The merger closed on September 17, 2021, entitling the Company’s stockholders, excluding the Kostecki family and its affiliated entities, to $2.55 per share in cash per share.

Certain stockholders of the Company exercised their appraisal rights pursuant to Section 262 of the Delaware General Corporation Law (the “Appraisal Stockholders”). The Appraisal Stockholders held a total of 520,195 shares of Company stock at the time of the Merger, and ultimately resolved their appraisal claims with the Company for separate consideration.

Plaintiffs filed a Verified Stockholder Class Action Complaint for Breach of Fiduciary Duty (the “Complaint”) on October 18, 2021, on behalf of themselves and those similarly situated in connection with the Merger (the “Action”). The Complaint alleged that the defendants breached their fiduciary duties to the minority stockholders by conducting and consummating the Merger pursuant to an unfair process and at an unfair price.

Between March 2022 and October 2023, Plaintiffs and Defendants engaged in discovery, including preparing, serving, and responding to requests for production of documents and interrogatories, serving subpoenas on third parties, and engaging in various written and oral communications concerning the scope of document production. This process included the production and review of more than 53,000 pages of documents from Defendants and third parties, and the production and review of approximately 4,000 pages of documents from Plaintiffs.

Additionally, Plaintiffs took three depositions: 1) Sam Dahanayake (the Company’s Chief Financial Officer) on September 28, 2023; 2) Steven Kostecki (the Company’s Chief Executive Officer) on September 29, 2023; and 3) Richard Homsany (a member of the Board and the Special Committee) on October 12, 2023.

The Settling Parties engaged in an all-day mediation (the “Mediation”) on October 26, 2023, in Wilmington Delaware, with the Honorable Joseph R. Slights III serving as the mediator. As a result of the Mediation, the Parties have agreed to settle and release all Claims against the Defendants in return for a lump sum cash payment from Defendants of $9,500,000.00 U.S. (the “Settlement Amount”), subject to the terms and conditions set forth in the stipulation. Before subtracting attorneys’ fees, expenses, and administration costs, the Settlement Amount would provide Class members a gross benefit of approximately $1.90 per share of Alloy Steel Common stock held at the time of the Merger, or a roughly 75% increase over and above the original $2.55 per share Merger consideration.

On December 11, 2023, the Court entered a Scheduling Order directing that notice of the Settlement be provided to potential Class Members, and scheduling the Settlement Hearing to, among other things, consider whether to grant final approval of the Settlement.

If you are a member of the Class, you are subject to the Settlement. The Class preliminarily certified by the Court for purposes of the Settlement consists of:

All record and beneficial owners of Alloy Steel common stock, as of September 17, 2021 (the date of the consummation of the Merger), who received Merger consideration, together with their respective successors and assigns. Excluded from the Class are the Defendants, their officers, directors and Immediate Family members, and the Appraisal Stockholders.

Please Note: The Class is a non-“opt-out” class pursuant to Delaware Court of Chancery Rules 23(a), 23(b)(1), and 23(b)(2). Accordingly, Class Members do not have the right to exclude themselves from the Class.

In consideration of the settlement, Defendants will cause $9,500,000.00 USD in cash (the “Settlement Amount”) to be deposited into an interest-bearing escrow account for the benefit of the Class. See the Proposed Plan of Allocation below for details about the distribution of the Settlement proceeds to Eligible Class Members.

Plaintiffs and Plaintiffs’ Counsel thoroughly considered the facts and law underlying the claims asserted in the Action. Although Plaintiffs and Plaintiffs’ Counsel believe that the claims asserted have merit, the Court could adopt Defendants’ view of the applicable legal standards or of the underlying evidence, and could enter judgment for the Defendants, either dismissing the claims against Defendants prior to trial or after trial. Plaintiffs and Plaintiffs’ Counsel also considered the expense and length of continued proceedings necessary to pursue Plaintiffs’ claims against Defendants through trial, the uncertainty of appeals, and the collectability of any potential judgment.

In light of the monetary recovery achieved, and based upon their investigation and prosecution of the case and the information available to them through discovery and the settlement negotiations, Plaintiffs and Plaintiffs’ Counsel have concluded that the terms and conditions of the Stipulation are fair, reasonable, and adequate to Plaintiffs and the Class, and in their best interests. The Settlement provides an immediate benefit in the form of a $9,500,000.00 USD cash payment without the risk of continued litigation that could result in obtaining no recovery or a smaller recovery from the Defendants after continued extensive and expensive litigation, including trial and appeals.

Defendants deny any and all allegations of wrongdoing, liability, violations of law or damages arising out of or related to any of the conduct, statements, acts, or omissions alleged against Defendants in the Action, and maintain that their conduct was at all times proper, in the best interests of the Company and its stockholders, and in compliance with applicable law. The Defendants further deny any breach of contract, breach of fiduciary duties, aiding and abetting any breach of fiduciary duties, and any tortious interference with contract. Defendants affirmatively assert that the Merger was the best available transaction for the Company and its stockholders, was entirely fair to the Company and its stockholders, and has provided the Company and its stockholders with substantial benefits. Defendants also deny that the Company or its stockholders were harmed by any conduct of the Defendants alleged in the Action or that could have been alleged therein. Each of the Defendants asserts that, at all relevant times, he, she, or it acted in good faith and in a manner reasonably believed to be in the best interests of the Company and all of its stockholders.

Nevertheless, the Defendants wish to eliminate the uncertainty, risk, burden, and expense of further litigation. The Defendants have therefore determined to settle the claims asserted against them in the Action solely to put the Claims to rest, finally and forever, without in any way acknowledging any wrongdoing, fault, liability, or damages. Each of the Defendants asserts that, at all relevant times, he, she, or it acted in good faith and in a manner he, she, or it reasonably believed to be in the best interests of the Company and all of its stockholders. Nothing in the Settlement and the Stipulation shall be construed as, or deemed to be, evidence of or an admission or concession on the part of any of the Defendants with respect to any claim or factual allegation or of any fault or liability or wrongdoing or damage whatsoever or any infirmity in the defenses that any of the Defendants have or could have asserted.

Please Note: If you are eligible to receive a payment from the Net Settlement Fund, you do not have to submit a claim form in order to receive your payment.

As stated above, the $9,500,000.00 USD Settlement Amount will be deposited into an interest-bearing escrow account for the benefit of the Class. If the Settlement is approved by the Court and the Effective Date of the Settlement occurs, the Net Settlement Fund (that is, the Settlement Amount plus any and all interest earned thereon (the “Settlement Fund”) less: i) any Taxes and Tax Expenses; (ii) any Notice and Administration Costs; (iii) any Fee and Expense Award awarded by the Court; and (iv) any other costs or fees approved by the Court will be distributed in accordance with the proposed Plan of Allocation or such other plan of allocation as the Court may approve.

Refer to the Notice for more information.

The Net Settlement Fund will not be distributed unless and until the Court has approved the Settlement and a plan of allocation, and the time for any petition for rehearing, appeal, or review, whether by certiorari or otherwise, has expired. Approval of the Settlement is independent from approval of a plan of allocation. Any determination with respect to a plan of allocation will not affect the Settlement, if approved.

The Court may approve the Plan of Allocation as proposed or it may modify the Plan of Allocation without further notice to the Class. Any Orders regarding any modification of the Plan of Allocation will be posted on this website. Refer to the Notice for more information.

If the Settlement is approved, the Court will enter a judgment (the “Judgment”). Pursuant to the Judgment, the claims asserted against the Defendants in the Action will be dismissed with prejudice and the following releases will occur:

Release of Claims by Plaintiffs and the Class: Upon the Effective Date, Plaintiffs and each and every other member of the Class, on behalf of themselves and any and all of their respective successors-in-interest, successors, predecessors-in-interest, predecessors, representatives, trustees, executors, administrators, estates, heirs, assigns and transferees, immediate and remote, and any Person acting for or on behalf of, or claiming under, any of them, and each of them, together with their predecessors-in-interest, predecessors, successors-in-interest, successors, and assigns, each of the foregoing in their capacities as such only, shall have fully, finally, and forever released, settled, and discharged Defendants from and with respect to every one of the Plaintiffs’ Claims, and all claims, liabilities, sanctions, complaints, or other assertions of wrongdoing, known or unknown, arising out of or relating to this Action through the date of the Settlement, and shall thereupon be forever barred and enjoined from commencing, instituting, prosecuting, or continuing to prosecute any Claims against any of the Defendants.

Release of Claims by Defendants: Upon the Effective Date, Defendants, on behalf of themselves and any and all of their respective successors-in-interest, successors, predecessors-in-interest, predecessors, representatives, trustees, executors, administrators, estates, heirs, assigns and transferees, immediate and remote, and any Person acting for or on behalf of, or claiming under, any of them, and each of them, together with their predecessors-in-interest, predecessors, successors-in-interest, successors, and assigns, each of the foregoing in their capacities as such only, shall have waived, released and otherwise agreed to forego all claims, liabilities, sanctions, complaints, or other assertions of wrongdoing, known or unknown, arising out of or relating to this Action through the date of the Settlement, including, without limitation, all actions taken by Plaintiffs and Plaintiffs’ Counsel in connection with the initiation, prosecution, litigation, or settlement of this Action through the date of the Settlement.

Plaintiffs and Defendants acknowledge, and each of the other Class Members by operation of law are deemed to acknowledge, that they may discover facts in addition to or different from those now known or believed to be true with respect to the Claims, but that it is the intention of Plaintiffs and Defendants, and by operation of law the other Class Members, to completely, fully, finally, and forever extinguish any and all Claims, known or unknown, suspected or unsuspected, which now exist, or heretofore existed, or may hereafter exist, and without regard to the subsequent discovery of additional or different facts.

By Order of the Court, all proceedings against the Defendants in the Action have been stayed, and Plaintiffs and all other Class Members are barred and enjoined from commencing, instituting, or prosecuting any other proceedings against Defendants asserting any Claims pending final determination of whether the Settlement should be approved.

If the Settlement is approved and the Effective Date occurs, no Alloy Steel stockholder or Class Member will be able to bring another action asserting Claims against any of the Defendants.

Plaintiffs’ Counsel have not received any payment for their services in pursuing claims in the Action on behalf of the Class, nor have Plaintiffs’ Counsel been paid for their litigation expenses incurred in connection with the Action. Before final approval of the Settlement, Plaintiffs’ Counsel will apply to the Court for an award of attorneys’ fees and litigation expenses to Plaintiffs’ Counsel in connection with achieving the creation of the Settlement Fund (the “Fee and Expense Award”) in an amount not to exceed 30% of the Settlement Fund, plus reimbursement of out-of-pocket expenses in an amount not to exceed $200,000. The Court will determine the amount of the Fee and Expense Award. The Fee and Expense Award will be paid solely from (and out of) the Settlement Fund in accordance with the terms of the Stipulation. Class Members are not personally liable for any such fees or expenses. Plaintiffs’ Counsel may petition the Court to award incentive fees to Plaintiffs. Any such incentive fees would be paid solely out of the Fee and Expense Award to Plaintiffs’ Counsel. Neither the Class nor the Settling Parties will have any separate responsibility with respect to any such incentive fee award.

The Settlement Hearing will be held on April 4, 2024 at 11:00 a.m., before The Honorable Lori W. Will, Vice Chancellor, in person at the Court of Chancery of the State of Delaware, New Castle County, Leonard L. Williams Justice Center, 500 North King Street, Wilmington, Delaware 19801, to, among other things: (i) determine whether the Action may be finally maintained as a non-opt-out class action and whether the Class should be finally certified, for purposes of the Settlement, pursuant to Court of Chancery Rules 23(a), 23(b)(1), and 23(b)(2); (ii) determine whether Plaintiffs may be finally appointed as representatives for the Class and Plaintiffs’ Counsel may finally be appointed as counsel for the Class, and whether Plaintiffs and Plaintiffs’ Counsel have adequately represented the interests of the Class in the Action; (iii) determine whether the proposed Settlement on the terms and conditions provided for in the Stipulation is fair, reasonable, and adequate to the Class, and should be approved by the Court; (iv) determine whether a Judgment, substantially in the form attached as Exhibit D to the Stipulation, should be entered dismissing the Action with prejudice as against Defendants; (v) determine whether the proposed Plan of Allocation of the Net Settlement Fund is fair and reasonable, and should therefore be approved; (vi) determine whether the application by Plaintiffs’ Counsel for an award of attorneys’ fees and expenses should be approved; (vii) hear and rule on any objections to the Settlement, the proposed Plan of Allocation, and/or to the application by Plaintiffs’ Counsel for an award of attorneys’ fees and expenses; and (viii) consider any other matters that may properly be brought before the Court in connection with the Settlement.

Class Members do not need to attend the Settlement Hearing. The Court will consider any submission made in accordance with the provisions below even if a Class Member does not attend the Settlement Hearing. Class Members can recover from the Settlement without attending the Settlement Hearing.

Please Note: The date and time of the Settlement Hearing may change without further written notice to Class Members. In addition, the Court may decide to conduct the Settlement Hearing remotely by Zoom, or otherwise allow Class Members to appear at the hearing remotely by video or phone, without further written notice to Class Members.

Any Class Member may object to the Settlement, the proposed Plan of Allocation, or Plaintiffs’ Counsel’s application for an award of attorneys’ fees and litigation expenses (“Objector”); provided, however, that no Objector shall be heard or entitled to object unless, on or before March 20, 2024, such person (1) files their written objection, together with copies of all other papers and briefs supporting the objection specified below, with the Register in Chancery at the address set forth below; (2) serves such papers (electronically by File & ServeXpress, by hand, by first-class U.S. Mail, or by express service) on Plaintiffs’ Counsel and Defendants’ Counsel at the addresses set forth below; and (3) emails a copy of the written objection to ndenright@zlk.com, etripodi@zlk.com, jcafritz@zlk.comjcafritz@zlk.com, SJenkins@ashbygeddes.com, RHeins@ashbygeddes.com, sgross@ashbygeddes.com, Jon.Bergman@dgslaw.com, JAbramczyk@morrisnichols.com, ahoeschel@morrisnichols.com.

This is only a summary of the terms of the proposed Settlement. For more detailed information about the matters involved in the Action, you are referred to the papers on file in the Action, including the Stipulation, which may be inspected during regular office hours at the Office of the Register in Chancery in the Court of Chancery of the State of Delaware, New Castle County, Leonard L. Williams Justice Center, 500 North King Street, Wilmington, Delaware 19801.

If you have questions regarding the Settlement, you may contact the Settlement Administrator, Epiq Systems, Inc., toll free at 1-888-703-0748 or Plaintiffs’ Counsel listed above.

If you are a broker or other nominee that held shares of Alloy Steel common stock as of the Closing (September 17, 2021) for the beneficial interest of persons or entities other than yourself, you are requested to either: (i) within seven (7) calendar days of receipt of the Notice, request from the Settlement Administrator sufficient copies of the Notice to forward to all such beneficial owners and within seven (7) calendar days of receipt of those Notices forward them to all such beneficial owners; or (ii) within seven (7) calendar days of receipt of the Notice, provide a list of the names, addresses, and, if available, email addresses of all such beneficial owners to Epiq Systems, Inc. If you choose the second option, the Settlement Administrator will send a copy of the Notice to the beneficial owners.

Please see the Nominees Page of this website to upload a list of the names, addresses, and, if available, email addresses of all such beneficial owners to Epiq Systems, Inc electronically.

To assist the Court and the parties in maintaining accurate lists of Class Members, you are requested to mail notice of any changes in your address to the following address:

Alloy Steel Stockholder Settlement
c/o Epiq Systems, Inc.
P.O. Box 2528
Portland, OR 97208-2528

If the Notice was forwarded to you by the postal service, or if it was otherwise sent to you at an address that is not current, you should immediately contact the Notice Administrator, Epiq Class Action & Claims Solutions, Inc., at the address above or at 1-888-703-0748 (Toll-Free) and provide them with your correct address. If the Notice Administrator does not have your correct address, you may not receive notice of important developments in this Action.

This website gives only a summary of the lawsuit and the claims asserted by Class Representatives. For more detailed information regarding the Action, you may review the court documents on the Documents page of this website or contact Class Counsel.