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iH&,

IN THE CIRCUIT COURT OF COOK COUNTY. ILLINOIS


COUNTY DEPARTMENT, LAW DIVISION
ROBERT E. REILLY, JR.,

Plaintiff,
v.

Case No.

DHR INTERNATIONAL, INC., flKlA


HOFFMANN ACQUTSTTTON CO.,
INC., an Illinois corporation, and
DAVID H. HOFFMANN, an Illinois

Resident,
Defendant.
-l

VERIFIED COMPLAINT FOR DAMAGES AND OTEER RELIEF


PlaiDtif4 Robert E. Reilly, Jr. CT.eilly'), through his attomeys, Sonnenschein'-,
Nath and Rosenthal LLP, complains of Defendants, DHR Intemational, Inc. C.D}IR,),
aad David H. Hofftnann ("Hoffrnann"), as follows:

1.

This is an action to enforce Plaintiffs rights under both an employment

agreement between

plaintiff and DHR and under a shareholder agreement with defendant

DHR. Defendants DHR


Reilly,

and Hoffrnann have breached certain agreements made

with

DHR shareholder and former employee, causing him damages. Defendants

DHR and Hoftnann have firther breached fiduciary duties owed to Reilly, causing him
damages.

THEPARTIES

2.

PlaintiffReilly is a resident ofthe

Hill Road, Winnetka, Iilinois 60093.

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State of Illinois, residing at 9g Indian

3.
an

At all relevant times mentioned below, Defendant DHR was, and now is,

Illinois corporation with its principal place ofbusiness at

10 south Riverside

plaz4

Sttite 2220, Chicago, Illinois 60606. DHR is an executive search firm, assisting
businesses to recruit senior level executives. DHR does business in

cook county,

Illinois, and throughout the united states. DHR is the fifthJargest executive search firm
in the United states, with a*ual revenue of approximately $52.7 million. DHR is a
successor corporation to Hofanann Acquisition company,

Iac. DHR was at one point

sold to, and subsequently repurchased by Hofknarur and other DHR shareholders from,
Enterprise Profit solutions

(.'EPS). DHR's stock

is not publicly-traded through any

stock market or securities exchange, and is not available for sale to the public
by any
other means.

4.

David H. Hoftnann owas the contolling interest in DHR and serves as

DHR's chairman and cEo. Hoffrnann resides at 44 Locust Road, wimetk4 minois
60093. Hoffinann also owns and controts various related business entities.
At all times
relevant hereto and for all transactions described herein, Hoffrnarur acted with
full
authority to execute contracts and do business on behalf of DHR.

5.

This Court has jurisdiction over Defendants pursuant to 735 IJ;CS S/2_

6.

venue is proper in this county pursuaDt to 735 ILCS

209.

-2-

5/2-r0I

and,5/2-102.

ALLEGATIONS
'7

Reilly is a shareholder of record of DIIR, currently owning approximately

6.250/" of the oltstanding shares of DHR.

8.

Reilly has served DHR in various employment capacities, hcluding

as

President from 2000 to 2004. Reilly's employment duties included performing executive
searches for DHR clients. Reilly was compensated by DHR on a commission basis,
based on certain agreed-upon percentages ofrevenue paid to DHR by DHR clients.

Reilly was also compensated based on the performance of DHR employees recruited by

Reilly. Reilly's employment terms were govemed by a contract with DHR and
Hoffrnann. Reilly acted under the direction and control of DHR and Hoffnann.

9.

Reilly also served at various times

as a member

of the DHR Board

of

Directors.

10.

On January 26, 2005, Reilly terminated his employment relationship with

DHR and terminated all other then-existing officer and./or director relationships with
DHR.
Revised Shareholder Agreement
I

1.

Pursuant to his status as a DHR shareholder, Reilly was a party to a

Revised shareholder Agreement with DHR dated

Jwe 1,2002 (attached hereto

as

Exhibit A). Among other areas, the Revised Shareholder Agreement govems the
disposition of shares upon a shareholder's resigration or termination from DHR.

12.

The Revised Shareholder Agreement contrors the disposition

shares upon his resignation from

ofReilly's

DHR. DH& and,ior its shareholders, must repurchase

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:.

:.

.'ry

Reilly's shares, under terms specified in the Revised Shareholder Agreement. DHR is
first given the option to repurchase Reilly's shares within 30 days ofresignation- If DHR
does not purchase the shares within 30 days, the remaining shareholders caa purchase the
shares on a pro-rata basis.

If

the shareholders decline to purchase the shares, DHR must

then purchase all the resigning shareholder's outstanding shares at the "Appraised

value." If the shares' value has been determined by an Independent Appraisal within the
last 12 months preceding the sale date, the value of the shares would be the value
determined by the Independent Appraisal.

Ifno

Independent Appraisal has occurred in

the preceding 12 months, DHR is required to order an Independent Appraisal of the


shares.

13.

On June 21, 2005, five months after

Reilly's notice to DHR of his desire

to resign and sell his shares, an appraisal of DHR prepared by FGMK, LLC
was provided to

Reilly

and his counsel.

CTGMK)

Reilly, through his counsel, has requested access

to the work papers and documentation supporting the FGMK appraisal, but those requests
have been refused.
and

Reilly's

shares have not been purchased by

DHR or the shareholders,

Reilly has received no offers to repurchase his shares'

14.

ln addition, the appraisal performed by FGMK understates the value of

DHR- Among other things, there is no indication in the report that any testing or
verification was perforrned to ensure that the information provided by DHR was
complete and accurate. Numerous assumptions were made in the report that tended to
reduce value, including inappropriate and unsubstantiated application ofboth a27%"

minorify interest discount and a 35% lack ofmarketability discount, neither of which are
called for under the Revised Shareholder Agteement. In addition, FGMK consistently

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applied aggressive and inappropriate assumptions with respect to discount rates, cost

of

equity, and growth rates that all tend to reduce the value. "Cash Flow" is not defined,
and the projections of fufure cash flows are unsupported and undocurnented. There is
also a highly unusual and suspect treatment

ofa so-called "option" in the amount of $6.3

million relating to a Hoffinan:r-owned company named JobPlex, which FGMK (but


apparently not DHR) wrote down to a value of $1.558 million without explanation, and

without including the JobPlex cash flows (which could potentially add value) in FGMK's
assessment. Reilly is informed and believes DHR actually purchased JobPlex, but that it
is being characterized as aa "option" to reduce

value. Irr any event, whether a purchase

or an option, the $6.3 million inveshnent in JobPlex appears to reflect a self-dealing


hansaction by Hoffrnann that has artificially reduced the value of DHR while keeping

JobPlex's income off the DHR books.

15.

The FGMK report is based on Reilly's ownership of 4,423,270 shares or

approximately 6.25%o of the total shares of DHR. However, Reilly is also entitled to
shares equal to an additional

l0% of the outstanding stock, or approximately 7,107,000

additional shares as set forth in paragraphs 17 - 18 below. Further, Reilly is entitled to an


additional 409,640 shares of DHR as set forth in paragraph 28 below. The FGMK report
also contains irregularities and inconsistencies in the treaftnent of certain tax
considerations and salary adjustments. There is no discussion of financial multiples paid

by DHR itself in connection with its own acquisitions or in connection with determining
the value of the JobPlex

"option." The Market Transaction Approach makes no

comparisons as to the comparability of the subject companies or whether the transactions


were on fair market value terms, and no explanation is provided as to why the averaging

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.i,,,

,'-;t,,f

approach taken by FGMK is appropriate. The selected transactions and related

adjustments are not adequately explained or developed.

16.

On information and belief, Hofhnann directed FGMK to prepare a

ball" appraisal to support

"low-

buyout ofReilly's interest at far less than its fair value, in

derogation of Reilly's rights under the Revised Shareholder Agreement and in violation

of Hoffrnarur's fiduciary obligations

as a

contolling shareholder and in violation ofboth

Hoffrnarur's and DHR's obligations of good faith and fair dealing.


November 2000 Asreement

17.

In November 2000, in consideration for Reilly's employment services to

DHR, and in connection with the repurchase of DHR from EPS in 2000, Reilly and DHR,
acting through its duly authorized Chairman and CEO, Hofftnann, entered into an

agreement. The agreement provided certain terms in consideration for which Reilly

would continue his employment with DHR. This agreement was memorialized in a
handwritten memorandum written and sigred by Hoffrnann on November 30, 2000, and
delivered to and received by Reilly in person that same day (the 'November 2000

Agreement") (attached hereto as Exhibit B).

18.

Among other things, the November 2000 Agreement provided that Reilly

was to be granted an additional

0% of the total ownership equity interest in DHR in

addition to Reilly's existing holdings, under the same anti-dilution provision applicable to

Hofftnann. This provision entitles Reilly to approximately 7,107,000 additional shares.


Those shares have never been awarded.

19.

The November 2000 Agreement fi:rther provided that Reilly was to be

paid commissions on a45/55/o structure: an amount equal to 45yo of the first $475,000

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of commission revenue received by DHR from

client, and an amount equal to 55%

of

the amount of commission revenue over $475,000 received by DHR, plus any "overbill"

amounts. DHR clients pay DHR commissions based upon a percentage of a salary
amount the client agees it will pay an executive located by DHR.

Iithe client pays a

DHR-recruited executive a salary above the amount previously agreed to, the additional
amount is known as an "overbill." The client then pays DHR an additional commission
based on the overbill amount.

20.
5olo

The November 2000 Agreement also provided that Reilly was to receive a

"override" payment on all revenues generated by DHR executives identified,

recruited, and hired by Reilly through 2000. Under DHR's override program, a DHR
employee who mentors, monitors, and manages a person he or she has brought to DHR,

will be entitled to a 5% distribution of that person's collected

fees for the preceding year,

provided the DHR employee and the person mentored, monitored and managed were still
employed by DHR on March

Zl

3l of the year the distribution is to be paid.

Reilly mentored, monitored and managed three employees he recruited to

DHR from 1997 through 2000. Under the tenns of the November 2000 Agreement,

Reilly was to be paid the 5% override relating to these employees for all years through
2000, in the year 2001- No payment has been made to Reilly in the year 2001 pursuant to
the

50%

override provision of the November 2000 Agreement.

22.

In addition, the November 2000 Agreement also provided that Reilly was

to be reimbursed for his business expenses. Reilly has submitted his outstanding expense
records to DHR, aad did not retain a copy ofthose expense records, now in the sole
possession of Defendants. These expense amounts have not been paid to Reilly.

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23.

Reilly has fully complied with all his duties and obligations under the

November 2000 Agreement.

24.

As part of Reilly's employrnent at DHR, Reilly did executive search work

for clients Kraft and American hon Horse, clients Reilly brought to DHR. pursuant to
the November 2000 Agreement, and the parties' continuing practice and understanding,

Reilly was entitled to commissions


overbill amounts for Kraft

bas

ed on the 45/55oA commission skucture plus

and American

Iron Horse. For the Kraft and American Iron

Horse searches, Reilly was to eatn 45o/o ofthe first $475,000 of commission revenue
received by DHR on these contracts, and 55vo of the commission revenue received by

DHR on amounts over $475,000 of the total professional fee eamed by DHR on these
contracts- Information regarding commission revenue paid to DHR under these
agreements is under DHR aad Hofanann's

control. These commissions have not been

paid and are due and owing to Reilly.

Board of Director Compensation

25.

As compensation ficr his service as a DHR director, Reilly was awarded

$20,000 in DHR stock or cash, at his election for 2002 service, and was to be paid
$

10,000 for each year of service thereafter. These awards were issued and voted upon at

a June 13, 2000 meeting

of the DHR Board of Directors. Reilly elected to receive cash

payments. To date, Reilly has not been paid these amounts for his service as a DHR
director in 2002 and 2003.

Deloitte & Touche LLP and EPS Settlements

26-

on or about Nov enber 22,2000, Hofanann and a predecessor and reratec

entity, Hoffrnann Investment company, commenced actions against Deloitte & Touche

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LLP C'D&T') and EPS, regarding these entities' allegedly fraudulent participation in the
EPS transaction, in which DHR was sold to Eps in a transaction involving a "roll up"
and consolidation of various entities.

27.

Hoffrnarur, Hoffrnarm lnvestment Companl and various related

HofFnann entities entered into a settlement Agreement, pursuant to which Hoffmann and
various "DHR related persons," including Reilly, agreed to settle the dispute with
D&T.

This isreflected in a settlement Agreement entered into with D&T in or around Februarv
2002 (attached hereto as Exhibit C).

28.

All equity owners (also referred to at DHR

as

"unit holders") of DHR at

the time of the D&T settlement, including Reiny, agreed to a pro rata
distribution of a

$I'000,000 annual payment, for four years. pursuant to this agreement, Re ly


received
approximately $40,940 in cash in 2oo2. Reilly agreed in 2003 to accept
DHR stock in
Iieu of cash at the price of $.10 per share, entitring Reilly to 409,640 DHR
shares. These
shares were never delivered to

Reilly. Reilly is fi.uther owed $40,964

cash per year

for

years 2004 and 2005, which has not been paid.

29.

Reilly has performed aI his obligations pursuant to the D&T Settrement

Agreement.

30.

DHR and HofAnann firther settled all claims against EpS for
$1.3 million

to be paid on a pro rata basis to all DHR

unit Holders. All unit holders of DHR

at the

time of the EPS settlement, including Reilly, agreed to the pro rata
setflement- pursuant
to Reilly's

April l,

1998 Agreement with Hofanann,

the time of settlement with

Reilly owned six units of DHR

at

Eps and is entitled to payment of at least $13,000 under the

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EPS settlement agreement.

A copy of

the EPS settlement agreement is in the possession

ofDefendants; Reilly does not have a copy.

Profit Distribution

31.

Per resolution of the board of directors of DHR on March 15, 2001, DHR

began an annual @egirming

with the year 2001) profit distribution to Hoffrnann of

$600,000 per year. However, in violation of the duties owed to the other shareholders,
such

profit distributions were not made to other DHR equity holders. Based on Reilly's

pro rata stock ownership of DHR, Reilly is owed profit distributions for the years 2001'
2002, 2003, 2004 and 2005.

Promissory Notes

32.

On or about February 15, 2001, DHR entered into a Subordinated

Promissory Note with Reilly (the "Reilly Note"), in which DHR agreed to pay Reilly
$180,000, with interest from the date of issuance at 1.75% above prime rate as
determined by Harris Bank, payable monthly. Five principal payments of 20o/o of the

principal value each were scheduled under the terms of the Note, with the five paym.ents
being due on February

l5 ofthe years 2002 through 2006. The February 15,2005

principal payment was not made on this Note, and outstanding principal and interest is
owed on the Reilly Note (attached hereto as Exhibit D).

33.

On or about Januuy,2003, Reilly purchased a Subordinated Promissory

Note from Victor Arias, a DHR stockholder and noteholder (the "Arias Note"). Reilly
assumed all rights and obligations held by Arias under the Arias

Note. The Arias Note

contained the same terms and payment due dates as the Reilly Note with a total principal
amount of$135,000. The February 15,2005 principal paynent was not made on the

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Arias Note, and outstanding principal and interest is owed on the Arias Note (aftached
hereto as Exhibit E).

Hoffmann Acts of Self-dealing. Misappropriation. and Waste

34.

On information and belief, Hoffrnann misappropriated DHR assets in

connection with the repurchase of DHR from EPS. Hofftnann misappropriated a DHR

line of credit with Key Bank, and used the line of credit to pay down a note in the amount
of $2.7 million payable to Bank of America- In cormection with the repurchase of DHR

from EPS in 2000, DHR raised capital from its shareholders to accomplish the
repurchase. A total of $ I 0.75 million in capital was raised from the DHR shareholders.
DHR was re-purchased from Bank of America (EPS' investment bank in the DHR
transaction) for $5.75 million. Each DHR shareholder, including Reilly and Hoffrnann,
repurchasqd DHR stock in the repurchase from Bank of America, using a combination
cash and

of

debt. Hofftnann contributed $3 million to the DHR equity raise, contributing

$300,000 in equity, and assuming $2.7 million in personal debt to Bank of America. At
the time, DHR negotiated and secured an operating line of credit with Key Bank.

HofFnann used this line of credit to pay Bank of America the $2.7 million owed in
personal debt for the DHR repurchase. This Key Bank line of credit was an asset

of

DHR. Pursuant to a January 29,2001 Memorandum of Understanding between DHR

and

its shareholders made in connection with the repurchase of DHR, Reilly, and each of the
other shareholders who were repurchasing shares of

Dlfi,

were to be re-paid their

personal debt pro rata following the buy back of DHR. Irr using the Key Bank line

of

credit, Hoffrnann was personally enriched at the expense ofDHR, and its shareholders,
each

ofwhom

also held notes from DHR and who were to be paid pro rata on the note

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repayments. Furthermore, on information and belief, Hoffmann misappropriated the


additional $5 million in capital raised from DHR shareholders, and converted it for the
benefit of Hoffrnarur.

35.

On or about the year 2001, Hoffrnann caused DHR to purchase JobPlex,

an executive search firm wholly-owned by

Hoffrnann. DHR purchased JobPlex for

approximately $5 million cash, with all cash from the sale accruing to the sole JobPlex
shareholder, Hofftnam.

36.

An independent third party had appraised and valued JobPlex at $2.5

million and the third party had offered $2.5 million cash to purchase JobPlex.

37.

Iloffrnarur nonetheless caused DHR to purchase JobPlex for an artificially

inflated price of$5 million, and Hoffrnann, as the sole JobPlex shareholder, was thus
personally enriched at the expense ofDHR and its shareholders.

38.

Altematively, based on the FGMK report, Hoffrnann caused DHR to

purchase an option to buy JobPlex for $5

million. Hofhnann, the sole JobPlex

shareholder, was thus personally enriched, in the amount of the option expense to DHR,
at the expense

39.

ofDHR

and its shareholders.

Hoffrnann has engaged in other acts of self-dealing, such as palng

excessive "salaries" to family members employed by DHR, throughout Reilly's

employment with DHR.

40.

Hof&nann, the Chairman, CEO, and controlling shareholder of DHR, by

misappropriating and wasting DHR assets for the benefit of himself and family members,
has acted in an illegal, fraudulent and oppressive manner toward

intentionally breached fiduciary duties owed to Reilly.


1a

Reilly and has

4ff0.'..

Summarv of Damaees Suffered bY Plaintiff

4I.

As a result ofDefendants' breaches ofvarious agreements, breaches

of

fiduciary duty, and intentional and fiaudulent acts, Reilly has suffered various damages.
Reilly has been damaged in at least the following respects: (i) Defendants have failed to
make override payments to Reilly in the amount of at least $625,000; (ii) Defendants
have failed to make commission payments to Reilly on the American kon Horse and

Kraft accounts; (iii) Defendants have failed to repurchase Reilly's shares at their fair
value as required under the Revised Shareholder Agreement, (iv) Defendants have failed

to pay Reilly total principal of$245,000 and interest due of at least $6,590 on the two
outstanding Subordinated Promissory Notes; (v) Defendants have failed to pay Reilly

profit dishibutions ofat least $650,000; (vi) Defendants have failed to pay Reilly $30,000
as compensation for

Reilly's service

as a

DHR director; (vii) Defendants have failed to

pay Reilly $81,880 and issue 409,640 shares of DHR rmder the terms of the D&T
Settlement Agreement; (viii) Defendants have failed to issue Reilly the additional 10%

of

the total equity of DHR; (ix) Defendants have failed to pay Reilly at least $13,000 under
the terrns of the EPS Seftle.ment; and (x) Defendants have failed to reimburse Reilly for
his business expenses.

COLINT

42.

I:

BREACH OF NOYEMBER 2000 AGREEMENT

Plaintiffrepeats and re-alleges as ifset forth herein, the allegations set

forth in paragraphs 1-41.

43.

The November 2000 Agreement is a valid and binding agreement between

Defendants and Reiilv.

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44.

Reilly has complied with all his duties and obligations under the

November 2000 Agreement.

45.

Defendants have breached the November 2000 Agreernent in at least the

following respects:

46.

(A)

Defendants have not issued Reillv the additional l0oZ of the total
equity interest in DHR;

(B)

Defendants have not paid Reilly the 57o override commissions for
associates hired in 2000:

(c)

Reilly has not been paid the 45l55olo commission structure on the
Kraft and American kon Horse accounts.

Defendants' breaches were material aad contrary to the entire purpose

of

the November 2000 Agreement.


47

Reilly, on or about May 16, 2001, Decemb er 27,2O01, and December 21,

2004, and on various other occasions notified DHR. through Hofftnann, ofhis desire to
obtain the additional l0% equity interest in DHR pursuant to the November 2000
Agreement.

WHEREFORE, Plaintiff prays for judgrnent against Defendants as follows:


awarding damages in an amount to be proven at Fial for (i) override pa)ments due; (ii)
commissions due on the Kraft and American Iron Horse accounts; and

(iii) failing to

award Plaintiff an additional l0% of the equity of DHR.

COUNT

48.

II:

BREACH OF REYISED SIIAREHOLDER AGREEMENT

Plaintiff repeats and re-alleges

forth in paragraphs 1-41.

1A

as

ifset forth herein, the allegations

set

49.

The Revised Shareholder Agreement is a valid and binding agreement

between DHR and its shareholders, including Reilly. Reiliy has fulfilled all his duties
and obligations under the Revised Shareholder Agreement.

50.

Defendants have breached the Revised Shareholder Agreement in failing

to obtain a fair or accurate appraisal and in failing to repurchase Reilly's shares.


51

Defendants' breaches were material and contrary to the entire purpose

of

the Revised Shareholder Agreement.

WHER-EFORE, Plaintiff prays for judgrnent against Defendants as follows:


awarding damages for Defendants' failure to obtain a fair or accutate appraisal, and

failwe to repurchase Reilly's shares, under the terms of the Revised Shareholder
Agreement.

COUNT TII: BREACII OF BOARD OF DIRECTOR COMPENSATION


AGREEMENT

52.

Plaintiffrepeats and re-alleges

as

ifset forth herein,

the allegations set

forth in paragraphs l-41.

53.

The DHR board resolution awarding the board ofdirector payrnents is a

valid and binding agreement between DHR and its directors. Reilly has fulfilled all
duties and obligations as a DHR director for the period at issue, and is owed a total

of

$30,000 for his service as a DHR director for the years 2002 and 2003.

54.

Defendants have breached their agreement to compensate Reilly for his

service as a DHR director.

55.

Defendants' breaches were material and contrary to the entire purpose

the director compensation agreement.

of

WHEREFORE, Plaintiffprays for judgrnent against Defendants as follows:


awarding damages of $30,000 for Plaintills director compensation.

DISTRIBUTION

56-

Plaintiffrepeats and re-aleges as ifset forth herein, the allegations set

forth in paragraphs l-41.

57.

The DHR Board Resolution of March 15, 2001 awarding

profit

distributions is a valid and binding agreement between DHR and its shareholders.
Reilly
has performed all duties and obligations as a DHR shareholder and
has not been issued

profit distributions.

58.

Defendants have breached their agreement to distribute DHR profits


pro-

rata to Reilly, a DHR shareholder.

59.

Defendants' breaches were material and contrary to the entire


purpose

of

the Board Resolution.

WHEREFORE, plaintiff prays for judgrnent against Defendants as


follows:
awarding Plaintiff a pro-rata profit distribution.

60-

Plaintiffrepeats and re-aleges as ifset forth firlly herein, the


allegations

set forth in paragraphs 1-41.

61.

Defendants have further breached the terms ofthe Subordinated

Promissory Notes, in not paying principal paynents due and


owing as of February 15,
2005' and failing to pay interest due. Reilly has performed all
his obligations under these
notes-

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62.

Defendants' breaches were material and contrary to the entire purpose of

the Promissory Notes.

WHEREFORE, Plaintiff prays for judgnent against Defendants as follows:


awarding damages and interest on the subordinated Promissory Notes.

COUNT

63.

VI:

BREACH OF SETTLEMENT AGREEMENTS

Plaintiffs repeats and re-alleges

set forth in paragraphs I -41

64.

as

ifset forth fully herein, the allegations

Defendants have breached the terms of the D&T Seftlement Agreement, in

failing to issue Reilly $40,964 cash for each of the years 2004 and 2005, and in failing to
issue Reilly 409,640 shares of DHR stock. Reilly has performed all his obligations under
the

D&T Settlement Agreement.

65.

Defendants have breached the terms of the EPS Settlement Agreement, in

failing to issue Reilly the pro rata settlement payment due to Reilly. Reilly has
performed all his obligations under the EPS Settlement Agreement.

66.
the

D&T

Defendants' breaches were material and contrary to the entire purposes of

and EPS Settlement Agreements.

WHEREFORE, Plaintiffprays for judgrnent against Defendants as follows:


awarding damages and interest under the terms of the D&T and EPS Settlement
Agreements.

COUNT

67.

YII:

BRXACH OF FIDUCIARY DUTY

Plaintiffrepeats and re-alleges

as

forth in paragraphs 1-41.

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ifset forth herein, the allegations

set

68.

As the Chairmaa and CEO of DHR, Hoffrnarur owes fiduciary duties,

including but not limited to duties ofloyalty and good faith, to DHR and its shareholders.
DHR is a closely-held corporation, as its shares are not publicly-traded through any stock
market or securities exchange, and Hoffrnarur is the controlling DHR shareholder.

Hoffinarur, as the majority shareholder, owes fiduciary duties to Reilly, as another


shareholder of DHR-

69.

As a result ofthe acts alJeged in paragraphs 34-40, and on information and

belief, other acts of self-dealing by Hofhnann, the assets of DHR have been
misappropriated and wasted to enrich Hoffrnann and at the expense of Reilly, whose
ownership interest in DHR has lost value and been damaged as a result of the
self-dealing.

70.

Hoffuarm and DHR have further breached fiduciary duties by failing to

obtain a fair or accurate appraisal or to repurchase Reilly's DHR shares at their fair value
as required under the

Revised Shareholder Agreement.

WHEREFORE, Plaintiff prays for

judpent

against Defendants as follows:

awarding compensatory and punitive damages in an amount to be proven at trial.

ACCOUNIING PT]RSUAI\TT TO 805 TLCS 5/12.56


7|

72.

Plaintiff repeats and re-alleges

as

if

set

forth herein paragraphs

-4 I .

By misappropriating and wasting corporate assets and willfully breaching

fiduciary duties owed to Reilly, Hoffnann has acted in a manaer that is illegal,
oppressive and fraudulent

with respect to Reilly.

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13.
access

Defendants have willfully refused to provide Reilly, a DHR shareholder,

to documents used by FGMK in preparing the appraisal of DHR. Without such

supporting documents, Reilly cannot independently assess the accuracy and validity

of

the FGMK appraisal.

74.
audit

ofDHR,

Pursuant to 805 ILCS 5/12.56, this Court should order an independent


and an independent appraisal

ofDI{R,

aad any other

reliefthe court deems

appropriate under 805 ILCS 5/12.56 to remedy the acts ofself-dealing, fraud and
oppression cornmitted by Hoffrnarur, and to enforce Reilly,s righs under the Revised
Shareholder Agreement.

WHEREFORE' pursuant to 805 ILCS 51r2.56(s), plaintiff requests that the coun
enter

judgment requiring an independent audit and an accounting of DHR's books and

records, an ind?endent appraisal ofDHR and Reilly's shares of DIIR, an award


damages pursuant to 805 ILCS 5/12.56(10), and such other and further

relief

as

of

this coun

deems appropriate pursuant to 805 ILCS 5/12.56.

75.

Plaintiff repeats and re-alleges

as

ifset forth herein the allegations set

forth in paragraphs 1 through 41 .

76.

At all relevant times, Reilly was a DHR employee.

77.

At the time of Reilly's resignation from DIIR, he was owed fiaal

compensation, consisting of commissions, and other compensatioo, due and owing to

Reilly, totaling at least $625,000.

- 19-

78.

Pursuant to the Illinois Wage Payment and Collection Act, 820 ILCS 115,

an employer must pay the final compensation of separated employees in

full,

at the time

ofseparation, or by the employee's oext regularly-scheduled pay period.

79.

Pursuant to the Illinois Wage Payment and Collection Act, 820 ILCS

I15i2, the term "wages" is defined as "any compensation owed an employee by an


ernployer pursuant to an employment contact or agteemeDt between the 2 parties,
whether the amount is determined on a time, task, piece or any other basis

of

calculalion." The statute defines "Final Compensation" as: "wages, salaries, eamed
commissions, earned bonuses, and the monetary equivalent of eamed holidays, and any
other compensation owed the employee by the employer pursuant to an employnent

conhact or agreeme,nt between the 2 parties."

80.

Defendants DHR and Hoffinann, with the intent to secure for themselves

such amounts due and owing to Reilly, and

with the intent to defraud, harass, delay and

hinder the payrnent owed to Reilly, have willfitlly refused to pay Reilly his final
compensation, totaling at least $625,000.

81.

Alternatively, Hoftnarm,

as the

Chairman and CEO ofDIIR" has

knowingly permitted and allowed DHR to violate provisions of the Illinois Wage
Payment and Collection Act.

82.

On

April 28,2005, Reilly, by and through his counsel, made a written

demand to DHR and Hofhnann for all fiaal compensation due and owing to
and

Hoftnann have refused to pay Reilly these amounts.

-20 -

Reilly. DHR

WHEREFORE, Plaintifrprays for judgpent

Hofuann,

as

follows: Awarding

ogi"st Dcfendants DHR and

damagcs in an amormt to be proven at

jury trial for

awardiug
commissions and othcr compensation duc pursuant to 820 ILCS 115, and

plaintiffreasonable attornela' fees and costs pursuant to 705 TLCS 22511.


Plaint'rfrrequests a jury

Dated: AugustS-,2005

tial.
Submitt4

NATII & ROSENTTIALLIJ

Richdl..

Fcnton
JcfferyS. Davis

8fiX)SeasTowcr

Qbicago, IL 60606
(312) 8768000
(3L2) 876-7934 (tu)

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