SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F 0 R M 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 25, 1999
COLUMBUS MCKINNON CORPORATION
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(Exact name of registrant as specified in its charter)
NEW YORK
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(State or other jurisdiction of incorporation)
0-27618 16-0547600
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(Commission File Number) (IRS Employer Identification No.)
140 JOHN JAMES AUDUBON PARKWAY, AMHERST, NEW YORK 14228-1197
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (716) 689-5400
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(Former name or former address, if changed since last report)
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Item 5. Other Events
On May 25, 1999, the registrant instituted litigation in the United States
District Court for the Southern District of New York against Metropolitan
Capital Advisors, Inc., Metropolitan Capital III, Inc., Bedford Falls Investors,
L.P., Metropolitan Capital Advisors International Limited, Jeffrey E. Schwarz,
Karen Finerman, Scoggin, Inc., Scoggin Capital Management, L.P., Scoggin, LLC,
Scoggin International Fund, Ltd., Curtis Schenker, Craig Effron, Lakeway Capital
Partners, LLC, Yaupon Partners, L.P., Yaupon Partners II, L.P. and Robert F.
Lietzow, Jr. A copy of the complaint in connection with such litigation is
attached hereto as Exhibit 99.
Item 7. Exhibits
Exhibit Number Description
99 Complaint
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
COLUMBUS McKINNON CORPORATION
By: /s/ Robert L. Montgomery, Jr.
Name: Robert L. Montgomery, Jr.
Title: Executive Vice President
Dated: May 26, 1999
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EXHIBIT INDEX
Exhibit Number Description Page
99 Complaint 5
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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COLUMBUS MCKINNON CORPORATION, :
Plaintiff, :
v. :
METROPOLITAN CAPITAL ADVISORS, INC., : Index No. 99 Civ. No. 3816 (WHP)
METROPOLITAN CAPITAL III, INC.,
BEDFORD FALLS INVESTORS, L.P., : VERIFIED COMPLAINT
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METROPOLITAN CAPITAL ADVISORS
INTERNATIONAL LIMITED, JEFFREY E. :
SCHWARZ, KAREN FINERMAN, SCOGGIN,
INC., SCOGGIN CAPITAL MANAGEMENT, :
L.P., SCOGGIN, LLC, SCOGGIN
INTERNATIONAL FUND, LTD., CURTIS :
SCHENKER, CRAIG EFFRON, LAKEWAY
CAPITAL PARTNERS, LLC, YAUPON :
PARTNERS, L.P., YAUPON PARTNERS II, L.P.,
and ROBERT F. LIETZOW, JR., :
Defendants. :
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Plaintiff Columbus McKinnon Corporation ("CMC"), by its
undersigned attorneys, for its complaint against defendants, alleges on
knowledge as to itself and all matters of public record, and on information and
belief as to all other matters:
PRELIMINARY STATEMENT
1. The following facts are clear:
(a) the individual defendants, stock speculators by
trade, have known and had business relationships with
each other for years;
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(b) the entities through whom these individuals carry
out their principal investment activities --
Metropolitan Capital Advisors, Inc. ("Metropolitan"),
Scoggin Capital Management, L.P. ("Scoggin"), and
Lakeway Capital Partners, LLC ("Lakeway") -- are all
officed on the same floor at the same address in New
York City; (c) shortly after purchasing CMC shares in
1997, certain of the individual defendants began a
campaign of urging CMC's management to sell the
company; and (d) this "Sell CMC" campaign by
defendants was consistent with others that they have
cooperatively run to pressure other companies in
which they had purchased stock to put up a "for sale"
sign.
2. Despite their history of and occasion for coordinated
activity, defendants have claimed in a Schedule 13D filing that not until May 3,
1999 did they form a "group" with the common purpose of nominating a slate of
directors at CMC's August 1999 annual meeting who, if elected, will implement a
"shareholder maximization process" with an emphasis on exploring the possible
sale of the company.
3. CMC respectfully submits that the defendants' close
relationship and past joint activities belie the notion that a 13D group was
just formed; instead, upon information and belief, defendants have been acting
as a group for some time with respect to their respective CMC investments
without properly disclosing that fact as required by
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Section 13(d) of the Securities Exchange Act of 1934 ("Exchange Act"). In order
to protect CMC and its shareholders from the harm caused by defendants'
violation of law, equitable relief is necessary, including, at the very least,
requiring defendants to divest all stock purchased during the period that they
were in violation of Section 13(d).
4. In addition, certain defendants have solicited shareholders
in support of their "Sell CMC" campaign through direct telephone calls. These
contacts have overlooked another technicality of the securities laws -- the
requirement that a proxy statement be on file in connection with a proxy
solicitation. Equitable relief is also required to remedy these unlawful proxy
solicitations, including, at the very least, an injunction prohibiting
defendants from soliciting proxies for the 1999 CMC annual meeting until a proxy
statement has been filed and harm from their premature solicitation has
dissipated.
JURISDICTION AND VENUE
5. This action arises under Sections 13(d) and 14(a) of the
Exchange Act, 15 U.S.C. sec. 78m(d), and the rules and regulations promulgated
thereunder. This Court's jurisdiction is founded upon Section 27 of the Exchange
Act, 15 U.S.C. sec. 78aa, and 28 U.S.C. sec. 1391.
6. Venue is proper in this District pursuant to Section 27 of
the Exchange Act, 15 U.S.C. sec. 78aa, and 28 U.S.C. sec. 1391, in that acts and
transactions constituting and in furtherance of violations of the Exchange Act
that have occurred and, unless enjoined, will continue to occur in this
District.
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PARTIES
7. Plaintiff CMC is a New York corporation with its principal
executive offices at 140 John James Audubon Parkway, Amherst, New York 14228.
CMC is a global provider of material handling products and solutions, including
chain and wire rope hoists and alloy and high-strength carbon steel chains.
The Schwarz Group
8. Defendant Bedford Falls Investors, L.P. ("Bedford Falls")
is a Delaware limited partnership with its principal executive offices at 660
Madison Avenue, New York, New York 10021. Bedford Falls is in the business of
purchasing, for investment and trading purposes, securities and other financial
instruments. As of May 6, 1999, Bedford Falls was the beneficial owner of and
had shared voting and dispositive power over 366,800 shares of CMC common stock.
9. Defendant Metropolitan is a New York corporation with its
principal executive offices at 660 Madison Avenue, New York, New York 10021.
Metropolitan is the sole general partner of Metropolitan Capital Advisors, L.P.,
a Delaware limited partnership. Metropolitan Capital Advisors, L.P. is the sole
general partner of Bedford Falls. As of May 6, 1999, Metropolitan had shared
voting and dispositive power over 366,800 shares of CMC common stock owned by
Bedford Falls.
10. Defendant Metropolitan Capital Advisors International
Limited ("Metropolitan International") is a British Virgin Islands corporation
with its principal executive offices at 660 Madison Avenue, New York, New York
10021. As of May 6, 1999,
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Metropolitan International was the beneficial owner of and had shared voting
and dispositive power over 240,600 shares of CMC common stock.
11. Defendant Metropolitan Capital III, Inc. ("Metropolitan
Capital III") is a Delaware corporation with its principal executive offices at
660 Madison Avenue, New York, New York 10021. Metropolitan Capital III is the
sole general partner of Metropolitan Capital Partners III, L.P., a Delaware
limited partnership, which in turn is the investment advisor to Metropolitan
International. Metropolitan Capital III has discretionary voting and dispositive
power over the assets of Metropolitan International. As of May 6, 1999,
Metropolitan Capital III had shared voting and dispositive power over 240,600
shares of CMC common stock owned by Metropolitan International.
12. Defendant Jeffrey E. Schwarz ("Schwarz") is a Director and
the Chief Executive Officer, Treasurer and Secretary, and controlling
shareholder of Metropolitan and Metropolitan Capital III and has a principal
place of business at 660 Madison Avenue, New York, New York 10021. As of May 6,
1999, through his interest in and control over Metropolitan, Metropolitan
Capital III, Bedford Falls and Metropolitan International, Schwarz was the
beneficial owner of and had shared voting and dispositive power over 607,400
shares of CMC common stock. In addition, Schwarz was the beneficial owner and
had sole voting and dispositive power over 7,200 shares of CMC common stock.
Moreover, 6,800 shares of CMC common stock were beneficially
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owned by certain family members and trusts established for the benefit of
certain family members of Schwarz.
13. Defendant Karen Finerman ("Finerman") is a Director and
the President of Metropolitan and Metropolitan Capital III and has a principal
place of business at 660 Madison Avenue, New York, New York 10021. As of May 6,
1999, through control over Metropolitan, Metropolitan Capital III, Bedford Falls
and Metropolitan International, Finerman was the beneficial owner of and had
shared voting and dispositive power over 607,400 shares of CMC common stock. In
addition, 8,000 shares of CMC common stock were beneficially owned by certain
family members of Finerman.
The Effron/Schenker Group
14. Defendant Scoggin is a privately owned Delaware limited
partnership with its principal executive offices at 660 Madison Avenue, New
York, New York 10021. Scoggin is in the business of purchasing, for investment
and trading purposes, securities and other financial instruments. As of May 6,
1999, Scoggin was the beneficial owner of and had shared voting and dispositive
power over 322,500 shares of CMC common stock.
15. Defendant Scoggin, Inc., a Delaware corporation, is the
sole general partner of S&E Partners, L.P. with its principal executive offices
at 660 Madison Avenue, New York, New York 10021. S&E Partners, L.P. is the sole
general partner of
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Scoggin. As of May 6, 1999, Scoggin, Inc. had shared voting and dispositive
power over 322,500 shares of CMC common stock owned by Scoggin Capital.
16. Scoggin International Fund, Ltd. ("Scoggin International")
is a corporation of the Commonwealth of the Bahamas with its principal executive
offices at 660 Madison Avenue, New York, New York 10021. Scoggin International
is in the business of purchasing, for investment and trading purposes,
securities and other financial instruments. As of May 6, 1999, Scoggin
International was the beneficial owner of and had shared voting and dispositive
power over 153,200 shares of CMC common stock.
17. Defendant Scoggin, LLC is a Delaware limited liability
company with its principal executive offices at 660 Madison Avenue, New York,
New York 10021. Scoggin, LLC is the investment advisor of Scoggin International.
As of May 6, 1999, Scoggin, LLC had shared voting and dispositive power over
153,200 shares of CMC common stock owned by Scoggin International.
18. Defendant Curtis Schenker ("Schenker") is an executive
officer and director of Scoggin, Inc. and he maintains a principal place of
business at 660 Madison Avenue, New York, New York 10021. Schenker owns 50% of
the capital stock of Scoggin, Inc. As of May 6, 1999, through his interest in
and control over Scoggin, Scoggin, Inc., Scoggin International and Scoggin, LLC,
Schenker was the beneficial owner and had shared voting and dispositive power
over 480,700 shares of CMC common stock. In addition, Schenker was the
beneficial owner of and had sole voting and dispositive power of over 7,500
shares of CMC common stock.
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19. Defendant Craig Effron ("Effron") is an executive officer
and director of Scoggin, Inc. and he maintains a principal place of business at
660 Madison Avenue, New York, New York 10021. Effron owns the other 50% of the
capital stock of Scoggin, Inc. As of May 6, 1999, through his interest in and
control over Scoggin, Inc., Scoggin, Scoggin International, and Scoggin, LLC,
Effron was the beneficial owner and had shared voting and dispositive power over
475,700 shares of CMC common stock. In addition, Effron was the beneficial owner
and had sole voting and dispositive power of over 5,000 shares of CMC common
stock.
The Lietzow Group
20. Defendant Yaupon Partners, L.P. ("Yaupon") is a privately
owned Delaware limited partnership with its principal executive offices at 660
Madison Avenue, New York, New York 10021. Yaupon is in the business of
purchasing, for investment and trading purposes, securities and other financial
instruments. As of May 6, 1999, Yaupon was the beneficial owner of and had
shared voting and dispositive power over 116,750 shares of CMC common stock.
21. Defendant Yaupon Partners II, L.P. ("Yaupon II") is a
privately owned Delaware limited partnership with its principal executive
offices at 660 Madison Avenue, New York, New York 10021. Yaupon II is in the
business of purchasing, for investment and trading purposes, securities and
other financial instruments. As of May 6, 1999, Yaupon II was the beneficial
owner of and had shared voting and dispositive power over 3,700 shares of CMC
common stock.
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22. Defendant Lakeway is a Delaware limited liability company
with its principal executive offices at 660 Madison Avenue, New York, New York
10021. Lakeway is the sole general partner of Yaupon and Yaupon II. As of May 6,
1999, Lakeway had shared voting and dispositive power over 120,450 shares of CMC
common stock owned by Yaupon and Yaupon II.
23. Defendant Robert F. Lietzow, Jr. ("Lietzow") is the sole
managing member of Lakeway Capital and he maintains a principal place of
business at 660 Madison Avenue, New York, New York 10021. As of May 6, 1999,
through his interest in and control over Lakeway, Yaupon and Yaupon II, Lietzow
was the beneficial owner and had shared voting and dispositive power over
120,450 shares of CMC common stock. In addition, Lietzow was the beneficial
owner and had sole voting and dispositive power over 17,295 shares of CMC common
stock.
BACKGROUND
Defendants' History Together
24. The personal relationship between defendants Effron,
Schenker and Schwarz goes back to at least 1980 when all three were attending
the University of Pennsylvania. They have kept in contact in subsequent years
and, in fact, in November 1988, the Washington Post reported that the Securities
and Exchange Commission ("SEC") was investigating approximately a dozen former
University of Pennsylvania classmates for insider trading on corporate
takeovers, including Effron, Schenker and Schwarz.
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25. Effron's and Schenker's troubles with government
regulators did not stop there. According to the September 15, 1992 Wall Street
Journal, the Commodity Futures Trading Commission ("CFTC"), following a
three-year investigation, filed an administrative complaint against Effron and
Schenker for illegal trading in metal future contracts. On September 28, 1993,
Schenker entered into a settlement agreement with the CFTC pursuant to which he
was prohibited from trading on the Commodities Exchange floor for four weeks. On
May 19, 1994, Effron entered into a settlement agreement with CFTC pursuant to
which he was prohibited from trading on the Commodities Exchange floor for eight
weeks. Subsequently, on March 4, 1997, Effron entered into a second settlement
agreement with the CFTC pursuant to which his trading privileges were suspended
for one year and his registration with the CFTC revoked.
26. Eventually, Schwarz, Effron and Schenker settled into the
same line of business -- starting investment vehicles through which they
purchased and sold stakes in various companies. Schwarz started Metropolitan and
Effron and Schenker joined together and started Scoggin.
27. At some point, Lietzow joined with Schwarz to become a
Vice President of Metropolitan. He has since followed in Schwarz's footsteps and
created his own investment vehicle, Lakeway.
28. The offices of Schwarz, Lietzow, Effron, and Schenker and
their various investment vehicles are all located on the 20th Floor of 660
Madison Avenue in New York. This close proximity obviously provides the
defendants with unusually
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convenient means of coordinating activities without using the telephone, which,
of course, would leave a record for investigators.
Defendants' Modus Operandi
29. Defendants have historically had their various investment
vehicles purchase shares in the same corporations and then jointly applied
pressure to the company's management to sell the company and thereby drive up
the stock price.
30. For example, on February 18, 1997, Schwarz, Finerman and
Lietzow filed a Schedule 13D on behalf of various entities stating that they had
formed a group for the purpose of taking control of the board of directors of
the Raymond Corporation. Their 13D -- much like their CMC 13D -- stated that
their board nominees would explore a sale of the company. At the same time,
Scoggin, owned by Effron and Schenker, purchased a 3.8% stake in the Raymond
Corporation. Scoggin entered into a shareholders agreement with Metropolitan on
February 17, 1997 stating that it would use its ownership interest in Raymond to
support the position of Metropolitan and filed a separate 13D four days later.
31. Similarly, in 1996, Schwarz, Finerman and Lietzow, through
the Bedford Falls and Metropolitan entities, sought to replace the board of Yale
International, Inc. ("Yale") with Lietzow and five other new directors in order
to facilitate the sale of Yale. Metropolitan, a 10.5% holder of Yale, once again
was joined by defendants Effron and Schenker through Scoggin, which was a 6.5%
owner of Yale's outstanding shares.
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32. Defendants have repeated this pattern of purchasing an
interest in a company and forcing its sale on other occasions with other
partners. For example, on October 19, 1998, Schwarz and Finerman, on behalf of
one of Schwarz's affiliated entities, filed a Schedule 13D seeking to elect two
directors of the Circon Corporation ("Circon"). Once again, the purpose of
electing these directors was to pressure Circon's board into "maximizing
shareholder value" by selling the company, and a Schedule 13D was filed
attaching shareholders' agreements that were dated only days before the 13D
filing.
33. Similarly, on April 18, 1994, Effron and Schenker, through
Scoggin, filed a Schedule 13D on the Allstate Financial Corporation
("Allstate"). Selig Partners, L.P., another investment entity which, at the
time, was officed in the same New York City suite as Scoggin, joined Scoggin in
filing the 13D. While Scoggin and Selig refused to concede that they were a
"group" for the purposes of Section 13(d), this "non-group" subsequently waged
a proxy fight for control of Allstate.
Non-Disclosed Members of the Group
34. In addition to the reporting persons in defendants'
Schedule 13D, there is evidence to suggest that other shareholders are
cooperating with the defendant group in support of their plans. Notably, members
of Schwarz's and Finerman's family are shareholders in CMC but are absent from
the reporting persons listed in the 13D. Moreover, the General Counsel of
Dickstein Partners has become a shareholder in CMC,
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indicating that Mark Dickstein ("Dickstein"), another stock speculator and
President of Dickstein Partners, Inc., may be joining up with defendants for
their CMC escapade.
35. Dickstein also went to the University of Pennsylvania and
was among the alumni investigated by the SEC, according to the 1988 Washington
Post article. Similar to Effron and Schenker, Dickstein was investigated by the
Commodities Futures Exchange Commission and, in 1991, pursuant to a settlement
agreement, was barred from the floor of the commodities exchange for three years
and had his commodities registration revoked. Dickstein Partners, Inc. currently
maintains its offices at 660 Madison Avenue in New York City, the same building
as the defendants.
36. Dickstein has had a working relationship with Schenker. In
1995, Dickstein gained control of the Hills Stores Co. ("Hills") board of
directors, after a proxy fight in which Dickstein proposed that the company be
sold. Upon gaining control of Hills, Dickstein placed Schenker on Hills' board
of directors.
37. Upon information and belief, Effron and Schenker have also
been investors in other companies that Mr. Dickstein has purchased stakes in,
including Younkers, Inc. and Marietta Corporation, against both of whom Mr.
Dickstein used a proxy fight as a means of pressuring the company to pursue a
sale.
Defendants' CMC Activities
38. Defendants, following their usual strategy, obtained
significant holdings in CMC and then attempted to pressure CMC's management into
selling the company.
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39. As early as July 9, 1997, Lietzow and Schwarz approached
the management of CMC to promote a sale of the company. At that time, Lietzow
was still working for Schwarz at Metropolitan and together they "encouraged
[Robert Montgomery, Jr., Chief Financial Officer of CMC] and then Chief
Executive Officer, Herb Ladds, Jr., to consider a sale of the company as the
most effective mechanism for maximizing shareholder value." (Defendants'
Schedule 13D statement, Exhibit C.)
40. In January or February 1999, Schwarz spoke with the
President and Chief Executive Officer of CMC, Timothy Tevens, to urge a sale. On
March 3, 1999, Schwarz and Lietzow once again met with CMC management to
"reiterate[] that a sale of the company would be the better route to maximize
value for shareholders." (Defendants' Schedule 13D statement, Exhibit C.)
41. On March 17, 1999, Schwartz and Lietzow, for the fourth
time, approached CMC management to encourage a sale of the company. By this
meeting, Lietzow had started Lakeway and had made an investment in CMC on
Lakeway's behalf.
42. A mere six weeks later, on May 6, 1999, Schwarz and
Lietzow, along with the other defendants, filed a Schedule 13D stating that they
had become the "Columbus McKinnon Shareholders Committee." According to the 13D,
a shareholders agreement, signed as of May 3, 1999, memorializes the objectives
of the committee. The Schedule 13D revealed that defendants are beneficial
owners of 1,245,545 shares of CMC common stock, or approximately 8.49% of the
number of shares outstanding.
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43. The Schedule 13D states that defendants formed the group
and entered into the Shareholders Agreement for their usual reasons -- "to
nominate a slate of directors in opposition to the management nominees standing
for election at the next shareholder meeting. The purpose of such nominations is
to elect to [CMC's] Board a majority of directors who will implement a
shareholder maximization process. The [defendants] expect that such process
would include directing [CMC's] investment bankers to fully explore the possible
sale of [CMC]. . . ." This is the precise objective that Schwarz and Lietzow had
been promoting to the CMC management for over two years and the same objective
that Schwarz, Lietzow, Effron and Schenker had sought in numerous past
investments.
44. Thus, defendants contend they became a group on May 3 even
though: (i) Schwarz, Lietzow, Effron, and Schenker operate their businesses out
of the same floor of the same office building; (ii) while working for the same
entity, Schwarz and Lietzow had urged CMC to do the same thing that the 13D
group is urging (sale of the company); and (iii) defendants have worked this
same sort of strategy before with other companies. Coincidence or conspiracy? --
the overwhelming facts point to the latter.
Defendants' Unlawful Proxy Solicitations
45. Having just filed their Schedule 13D, defendants have
wasted little time contacting shareholders regarding the upcoming election of
directors. On May 7, 1999, Schwarz contacted directly at least one institutional
shareholder and told it that
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CMC might have an "uphill battle" defeating the defendants' slate of directors.
In addition, persons from at least three hedge funds and one CMC board member
have been contacted by individuals who have told them in virtually identical
words that CMC might have an "uphill battle" in the upcoming proxy contest.
Since no other party but the defendants would appear to have an interest in
making such statements or soliciting CMC's shareholders in such a manner, upon
information and belief, all of these calls have been orchestrated by the
defendants. Moreover, upon information and belief, in these communications,
defendants failed to disclose the nature of their "group" or their interests in
CMC. These contacts were made before the defendants filed a proxy statement.
46. Now, more than two weeks after defendants began their oral
solicitations, they have still not filed a preliminary proxy statement. Instead,
on May 24, 1999, defendants filed Amendment No. 1 to their Schedule 13D ("13D
Amendment No. 1") which attaches a letter from Jeffrey Schwartz on behalf of
defendants to "Fellow Columbus McKinnon Shareholders." (A copy of the letter is
annexed hereto as "Exhibit A".) Through this open letter to all of CMC's
shareholders, defendants seek the support of the shareholders in advancing their
board of directors election agenda and their "value maximization strategy."
Specifically, the defendants state that they are "committed to providing [the
shareholders] with an alternative to the current Board, and in so doing, allow
[shareholders] to choose a slate dedicated to evaluating all alternatives for
immediate maximization of [their] share value." (Id.) Defendants then beseech
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shareholders "to tell management what you think of [management's] attempts to
impede action by independent shareholders, and to express your support for
[defendants'] strategy to maximize value." (Id.) In addition, the letter advises
shareholders that defendants have retained a proxy solicitor, MacKenzie
Partners, Inc., to assist them in connection with the CMC annual meeting and
urges shareholders to call MacKenzie with their "input." As originally filed,
the letter again omitted a statement of defendants' interests in CMC. In limited
deference to federal securities laws, however, the defendants later that day
filed a revised version of the letter attaching the information required by SEC
Rule 14a-11(b)(2).
47. Curiously considering defendants' contention that they did
not become a group until May 3, 1999, the letter states: "IN 1998, WE advocated
that management use some of the Company's remaining borrowing capacity to
implement a share buyback." (Emphasis added)
IRREPARABLE HARM
48. CMC's annual meeting is presently anticipated to take
place in August 1999. Defendants are preparing to influence the results of that
meeting without complying with the federal regulatory scheme set out in Sections
13(d) and 14(a) of the Exchange Act. This behavior is to the detriment of CMC
and CMC's shareholders. Should defendants succeed in this effort, they could
gain control of CMC's board by using methods that violate federal law and that
are inimical to the public interest. As a result, CMC and its shareholders have
suffered, and will continue to suffer, immediate
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and irreparable harm and injury as a consequence of defendants' failure to
comply with Sections 13(d) and 14(a) and the rules and regulations promulgated
thereunder.
AS AND FOR A
FIRST CLAIM FOR RELIEF
(For Violations of Section 13(d) of the Exchange Act
and SEC Rule 13d-1)
49. Plaintiff CMC repeats and realleges the allegations
contained in paragraphs 1 through 48 as if fully set forth herein.
50. Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder require any person or group acquiring 5% of
any class of equity security to file, within 10 days after obtaining such
status, a Schedule 13D statement providing detailed information regarding the
person or group.
51. Pursuant to Section 13(d)(3) of the Exchange Act, "[w]hen
two or more persons act as a partnership, limited partnership, syndicate, or
other group for the purpose of acquiring, holding or disposing of securities of
an issuer, such syndicate or group shall be deemed a 'person' for the purposes
of" Section 13D.
52. The facts demonstrate that prior to May 3, 1999, the
defendants acted in concert to pursue their common objective of forcing a sale
of CMC. Thus, defendants constituted a group for purposes of Section 13(d)(3) of
the Exchange Act well before May 3, 1999.
53. Defendants' actions and omissions have violated Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder
in that defendants
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failed to file a Schedule 13D statement within 10 days after they formed a group
with aggregate stock holdings greater than 5% of CMC's common stock.
54. Plaintiff has no adequate remedy at law.
AS AND FOR A
SECOND CLAIM FOR RELIEF
(For Violations of Section 14(a) of the Exchange Act
and SEC Rule 14a-3(a))
55. Plaintiff CMC repeats and realleges the allegations
contained in paragraphs 1 through 48 as if fully set forth herein.
56. SEC Rule 14a-1(1) broadly defines "solicit" and
"solicitation" as including any "communication to security-holders under
circumstances reasonably calculated to result in the procurement, withholding or
revocation of a proxy."
57. Defendants' communications with shareholders, including
the statement to CMC shareholders that the company might have an "uphill battle"
defeating the defendants' slate of directors and defendants' letter to all the
shareholders of CMC, were disseminated under circumstances reasonably calculated
to result in the procurement or withholding of a proxy in connection with the
election of CMC's board of directors.
58. SEC Rule 14a-3(a) mandates that no solicitation "shall be
made unless each person solicited is concurrently furnished or has previously
been furnished with a publicly-filed preliminary or definitive written proxy
statement containing the information specified in Schedule 14A."
59. Although SEC Rule 14a-11 allows certain solicitations to
be made prior to the filing of a proxy statement, there must be "a description
of [the solicitors']
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interests . . . set forth in each communication published, sent or given to
security holders by or on behalf of the person making the solicitation."
(emphasis added). Moreover, defendants must file a written proxy statement "to
security holders solicited pursuant to this paragraph (b) at the EARLIEST
PRACTICABLE DATE." SEC Rule 14a-11(b)(3) (emphasis added).
60. Defendants' oral solicitations have violated SEC Rule
14a-3a because they have not furnished the persons they have solicited with a
publicly-filed preliminary or definitive written proxy statement containing the
information specified in Schedule 14A. Nor can defendants seek sanctuary under
SEC Rule 14a-11 because (a) upon information and belief, they failed to disclose
their interests in CMC during the course of these solicitations and (b) over two
weeks after solicitations began, defendants have yet to file a proxy statement.
61. Plaintiffs have no adequate remedy at law.
WHEREFORE, plaintiff demands judgment:
A. Preliminarily and permanently enjoining defendants, their
officers, employees, agents, and all others acting in concert with them, from
violating the provisions of Sections 13(d) and 14(a) of the Exchange Act;
B. Ordering defendants to dispose of any shares of CMC that
they purchased during the period that they were in violation of the federal
securities laws in an orderly manner through a public distribution pursuant to a
plan approved by the Court, so as to return the market for CMC stock to the
STATUS QUO ANTE;
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<PAGE>
C. Preliminarily and permanently enjoining defendants, and
each of them, from voting the shares of CMC they acquired during the period that
they were in violation of the federal securities laws;
D. Preliminarily and permanently enjoining defendants, and
each of them, from soliciting from any CMC shareholder any proxy, consent or
authorization to vote any shares of CMC at the CMC annual shareholders meeting
unless and until defendants comply, in full, with all applicable provisions of
the federal securities laws, and unless and until such time as the Court may
determine that the effects of defendants' unlawful conduct have dissipated;
E. Awarding CMC the costs and disbursements of this action;
and
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<PAGE>
F. Granting such other and further relief as the Court may
deem just and proper.
Dated: May 25, 1999
New York, New York
SULLIVAN & CROMWELL
-------------------------------
John L. Hardiman (JH 3872)
Alexander D. Hoehn-Saric (AH 9464)
125 Broad Street
New York, New York 10004
(212) 558-4000
Attorneys for Plaintiff
Columbus McKinnon Corporation
-22-
<PAGE>
CORPORATE VERIFICATION
----------------------
STATE OF NEW YORK )
) ss:
COUNTY OF ERIE )
Robert L. Montgomery, Jr., being duly sworn, deposes and says::
I am Executive Vice President and the Chief Financial Officer of
Columbus McKinnon Corporation, the plaintiff in this action. I have reviewed
the foregoing Verified Complaint. The facts as presented therein are true and
correct, based upon my personal knowledge, except as to matters of public record
and as to those matters alleged upon information and belief, and as to those
matters I believe them to be true.
EXECUTED this 25th day of May, 1999.
/s/ Robert L. Montgomery, Jr.
-----------------------------
Robert L. Montgomery, Jr.
Subscribed and sworn before me
this 25th day of May, 1999.
/s/ Lois H. Demler
- ------------------
Notary Public
Lois H. Demler
Notary Public, State of New York
Qualified in Erie County
My Commission Expires May 31, 2000
<PAGE>
EXHIBIT A
- ---------
THE COLUMBUS MCKINNON
SHAREHOLDERS COMMITTEE
c/o Metropolitan Capital Advisors, Inc.
660 Madison Avenue
New York, NY 10021
May 24, 1999
Dear Fellow Columbus McKinnon Shareholder:
Nearly three weeks ago, several long-time, significant shareholders who own
approximately 8.5% of Columbus McKinnon, formed the Columbus McKinnon
Shareholders Committee. Our purpose in nominating an alternate slate of
directors is to pursue a value maximization strategy for Columbus shareholders.
Our proposal to the Company, and the history of management inaction that led to
it, are described in a Form 13D filed with the Securities and Exchange
Commission which we amended today.
We want to take this opportunity to update you on events that only reinforce the
need for shareholders to act.
o Since our filing, management has neither publicly responded to our
proposal, nor indicated any intent to develop a new strategy of their
own. Despite the market's clear support for the sale of Columbus,
management has refused to answer shareholder questions about our
proposal to adopt a value maximization strategy. Even in its recent
press release reporting results for fiscal year 1999, and a related
conference call for investors, management only offered its reasons for
underperforming analyst expectations, and pointed to better times
ahead. What management did not describe was a new strategy to achieve
better returns ahead.
o Management claims that it has already succeeded in building
shareholder value. We disagree. In over three years since Columbus
first became a public company to the day before our announcement, the
value of Columbus' shares appreciated less than $6. In just the few
days following our announcement, Columbus' shares traded as much as $8
higher , and even after the Company announced earnings below
expectations, shares remain nearly $6 higher. Management's continued
refusal to acknowledge that their strategy has not succeeded only
indicates you can expect no new initiatives from the incumbent Board,
and no recognition that shareholder value is the top priority, not an
afterthought.
o Let us give another example of management's silence speaking volumes
about their view of outside shareholders. Even as they issued their
press release and held a conference call, management and the incumbent
Board amended the Company's by-laws to make it more difficult for
shareholders to nominate alternative directors, or propose business
for shareholder action. Why did management choose not to disclose
these defensive tactics in their press release, or in their conference
call- Did they think these steps were not important? Would they be
able to explain why the Company's long-standing by-laws suddenly were
deemed inadequate? We suggest that this eleventh-hour attempt to
change the election process tells you what management thinks of
allowing shareholders to freely choose a value maximization strategy:
it is less important than the incumbent Board retaining their
positions.
o Management's disregard of shareholder interests and views is not new.
In 1998, we advocated that management use some of the Company's
remaining borrowing capacity to implement a share buyback. The
Company's poor market performance (with the stock declining below its
IPO level) actually presented Columbus with an excellent opportunity
to enhance value for all shareholders by buying back and retiring its
substantially undervalued shares. Management did decide to pursue a
share repurchase strategy, but not as a value-enhancing tool for
public shareholders. Instead, the Company purchased stock exclusively
for the ESOP, thereby stockpiling years of shares and votes in the
ESOP, but not increasing the ownership of public shareholders. Did
this do the most for shareholders? No. Did this do more to entrench
management and the incumbent Board? What do you think?
<PAGE>
One final point. Management has continually pointed to the 1998 strike at
General Motors as the prime driver for Company earnings failing to meet investor
expectations. However, an agreement settling that strike was reached in July
1998 and UAW workers began to return to their jobs in early August. In fact, not
only has stability returned to the economy, but GDP growth and industrial
activity rebounded well beyond pre-strike levels in the quarters following the
strike. The strike is not the cause for management's failure to create
shareholder value. Management has had years to implement its strategy, and have
it bear fruit. It has not succeeded. It is time to change the strategy and the
Board.
The Columbus McKinnon Shareholder Committee is committed to providing you with
an alternative to the current Board, and in so doing, allow you to choose a
slate dedicated to evaluating all alternatives for immediate maximization of
your share value. We welcome your input either directly at (212) 829-9507, or by
your contacting our representative, MacKenzie Partners, Inc. at (800) 322-2885.
We also strongly encourage you to tell management what you think of their
attempts to impede action by independent shareholders, and to express your
support for our strategy to maximize value.
Sincerely,
/s/ Jeffrey E. Schwarz
Jeffrey E. Schwarz
On Behalf of the Columbus McKinnon
Shareholders Committee
