<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------
COMMERCIAL INTERTECH CORP.
(NAME OF SUBJECT COMPANY)
OPUS ACQUISITION CORPORATION,
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
UNITED DOMINION INDUSTRIES LIMITED
(BIDDERS)
COMMON SHARES, PAR VALUE $1.00 PER SHARE
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
(TITLE OF CLASS OF SECURITIES)
201709102
(CUSIP NUMBER OF CLASS OF SECURITIES)
------------------------
B. BERNARD BURNS, JR.
OPUS ACQUISITION CORPORATION
UNITED DOMINION INDUSTRIES LIMITED
2300 ONE FIRST UNION CENTER
301 SOUTH COLLEGE STREET
CHARLOTTE, NC 28202-6039
TELEPHONE: (704) 347-6800
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS)
------------------------
Copy to:
PAMELA S. SEYMON
WACHTELL, LIPTON, ROSEN & KATZ
51 WEST 52ND STREET
NEW YORK, NY 10019
TELEPHONE: (212) 403-1000
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This Schedule 14D-1 Tender Offer Statement (this "Statement") amends and
supplements the Tender Offer Statement on Schedule 14D-1 filed with the
Securities and Exchange Commission (the "Commission") on July 12, 1996 (as
amended from time to time, the "Schedule 14D-1") by Opus Acquisition
Corporation, a Delaware corporation (the "Purchaser") and an indirect wholly
owned subsidiary of United Dominion Industries Limited, a Canadian corporation
("Parent"). This Statement relates to a tender offer to purchase all outstanding
common shares, par value $1.00 per share (the "Common Shares"), and, unless and
until the Purchaser declares the Rights Condition (as defined in the Offer to
Purchase) has been satisfied, the associated preferred share purchase rights
(the "Rights") issued pursuant to the Rights Agreement (as defined in the Offer
to Purchase), of Commercial Intertech Corp., an Ohio corporation (the "Subject
Company"), at a price of $30.00 per Common Share (and associated Right), net to
the seller in cash, without interest thereon (the "Offer Price"), upon the terms
and subject to the conditions set forth in the Revised Offer to Purchase, dated
July 16, 1996 (the "Offer to Purchase") and in the related Revised Letter of
Transmittal (the "Letter of Transmittal") (which, as amended from time to time,
together constitute the "Offer"). The Offer amends the terms of the Purchaser's
original offer made on July 12, 1996, which was made at a price of $27 per
Common Share (and associated Right). Copies of the Offer to Purchase and the
Letter of Transmittal are annexed hereto as Exhibits (a)(14) and (a)(15),
respectively. Capitalized terms used herein and not otherwise defined shall have
the meanings ascribed to them in the Offer to Purchase.
ITEM 10. ADDITIONAL INFORMATION.
(e-f) On July 18, 1996, the Company issued a press release in which it
stated, among other things, that the Board of Directors of the Company had (1)
determined to recommend that shareholders reject as inadequate the Offer; (2)
fixed August 30, 1996, in Youngstown, Ohio, as the date and location of the Ohio
Control Share Acquisition Meeting and the close of business on August 7, 1996 as
the record date for the Ohio Control Share Acquisition Meeting, and purported to
fix the close of business on September 3, 1996, as the record date for
determining shareholders entitled to execute appointments of designated agents
for the calling of the Special Meeting, and (3) acted to delay the Distribution
Date under the Rights Agreement until either (a) the close of business on August
7, 1997, or (b) such earlier date prior to the expiration date of the Offer as
the Company's Board shall designate. Also on July 18, 1996, the Company filed
its Answer and Counterclaims (the "Company Answer") to the First Amended
Complaint filed by Parent and the Purchaser on July 15, 1996, in United Dominion
Industries Limited et al. v. Commercial Intertech Corp. et al., filed in the
Ohio Federal District Court on July 11, 1996 (the "Original Action") in which
the Company admitted that the Preferred Shares are entitled to only one vote per
share (notwithstanding that the Company's public filings under the Exchange Act
have expressly stated that the Preferred Shares are entitled to one and one-half
votes per share). In the Company Answer, the Company also asserted counterclaims
against Parent and the Purchaser including alleged disclosure violations under
state and Federal law. The Company Answer also asserts that if Parent and the
Purchaser obtain proxies representing more than 10% of the voting power of the
Common Shares to remove the Company's Board, Parent and the Purchaser would be
"interested shareholders" under the Ohio Business Combination Law.
On July 19, 1996, Parent and the Purchaser filed a Second Amended Complaint
in the Original Action seeking to enjoin the Company and its Board from taking
any steps to effectuate the proposed Spin-Off until the Company's shareholders
have the opportunity to vote at the Ohio Control Share Acquisition Meeting and
the Special Meeting.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase, dated July 12, 1996.*
(a)(2) Letter of Transmittal.*
(a)(3) Notice of Guaranteed Delivery.*
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.*
2
<PAGE> 3
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.*
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.*
(a)(7) Summary Advertisement, dated July 12, 1996.*
(a)(8) Press Release, dated July 11, 1996.*
(a)(9) Press Release, dated July 12, 1996.*
(a)(10) Preliminary Solicitation Statement of United Dominion Industries
Limited and Opus Acquisition Corporation to call a Special Meeting of
Shareholders of Commercial Intertech Corp., together with the form of
Appointment of Designated Agents relating thereto (incorporated by reference to
the Schedule 14A filed with the Securities and Exchange Commission on July 12,
1996).
(a)(11) Preliminary Proxy Statement of United Dominion Industries Limited
and Opus Acquisition Corporation relating to a Special Meeting of Shareholders
of Commercial Intertech Corp. pursuant to Section 1701.831 of the Ohio Revised
Code (incorporated by reference to the Schedule 14A filed with the Securities
and Exchange Commission on July 12, 1996).
(a)(12) Press Release, dated July 12, 1996.*
(a)(13) Press Release, dated July 15, 1996.*
(a)(14) Revised Offer to Purchase, dated July 16, 1996.*
(a)(15) Revised Letter of Transmittal.*
(a)(16) Revised Notice of Guaranteed Delivery.*
(a)(17) Revised Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.*
(a)(18) Revised Letter to Clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.*
(a)(19) Summary Advertisement, dated July 16, 1996.*
(a)(20) Press Release, dated July 19, 1996.
(a)(21) Letter, dated July 19, 1996, from William R. Holland, Chairman and
Chief Executive Officer of Parent, to Paul J. Powers, Chairman and Chief
Executive Officer of the Company.
(b)(1) Credit Agreement, dated June 20, 1996, among Parent and the other
banks and financial institutions listed therein (incorporated by reference to
Exhibit 10.2(a) of Parent's Current Report on Form 8-K, filed with the
Securities and Exchange Commission on July 12, 1996).
(b)(2) Commitment Letter dated July 11, 1996 between the Royal Bank of
Canada and Parent.*
(g)(1) Complaint in United Dominion Industries Limited et al. v. Commercial
Intertech Corp. et al., filed in the United States District Court for the
Southern District of Ohio, Eastern Division on July 11, 1996.*
(g)(2) First Amended Complaint in United Dominion Industries Limited et al.
v. Commercial Intertech Corp. et al., filed in the United States District Court
for the Southern District of Ohio, Eastern Division on July 15, 1996.*
(g)(3) Second Amended Complaint in United Dominion Industries Limited et
al. v. Commercial Intertech Corp. et al., filed in the United States District
Court for the Southern District of Ohio, Eastern Division on July 19, 1996.
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* Previously filed.
3
<PAGE> 4
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this Statement is true, complete and correct.
Dated: July 19, 1996 OPUS ACQUISITION CORPORATION
By: /s/ B. BERNARD BURNS, JR.
------------------------------------
Name: B. Bernard Burns, Jr.
Title: Vice President
and Secretary
UNITED DOMINION INDUSTRIES LIMITED
By: /s/ B. BERNARD BURNS, JR.
------------------------------------
Name: B. Bernard Burns, Jr.
Title: Senior Vice President,
General Counsel and Secretary
4
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER EXHIBIT NAME NUMBER
- ------- --------------------------------------------------------------------------- ------
<S> <C> <C>
(a)(1) Offer to Purchase, dated July 12, 1996.*...................................
(a)(2) Letter of Transmittal.*....................................................
(a)(3) Notice of Guaranteed Delivery.*............................................
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees.*.................................................................
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.*.............................................
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.*......................................................
(a)(7) Summary Advertisement, dated July 12, 1996.*...............................
(a)(8) Press Release, dated July 11, 1996.*.......................................
(a)(9) Press Release, dated July 12, 1996.*.......................................
(a)(10) Preliminary Solicitation Statement of United Dominion Industries Limited
and Opus Acquisition Corporation to call a Special Meeting of Shareholders
of Commercial Intertech Corp., together with the form of Appointment of
Designated Agents relating thereto (incorporated by reference to the
Schedule 14A filed with the Securities and Exchange Commission on July 12,
1996)......................................................................
(a)(11) Preliminary Proxy Statement of United Dominion Industries Limited and Opus
Acquisition Corporation relating to a Special Meeting of Shareholders of
Commercial Intertech Corp. pursuant to Section 1701.831 of the Ohio Revised
Code (incorporated by reference to the Schedule 14A filed with the
Securities and Exchange Commission on July 12, 1996).......................
(a)(12) Press Release, dated July 12, 1996.*.......................................
(a)(13) Press Release, dated July 15, 1996.*.......................................
(a)(14) Revised Offer to Purchase, dated July 16, 1996.*...........................
(a)(15) Revised Letter of Transmittal.*............................................
(a)(16) Revised Notice of Guaranteed Delivery.*....................................
(a)(17) Revised Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.*...........................................................
(a)(18) Revised Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.*.......................................
(a)(19) Summary Advertisement, dated July 16, 1996.*...............................
(a)(20) Press Release, dated July 19, 1996. .......................................
(a)(21) Letter, dated July 19, 1996, from William R. Holland, Chairman and Chief
Executive Officer of Parent, to Paul J. Powers, Chairman and Chief
Executive Officer of the Company. .........................................
(b)(1) Credit Agreement, dated June 20, 1996, among Parent and the other banks and
financial institutions listed therein (incorporated by reference to Exhibit
10.2(a) of Parent's Current Report on Form 8-K, filed with the Securities
and Exchange Commission on July 12, 1996)..................................
(b)(2) Commitment Letter dated July 11, 1996 between the Royal Bank of Canada and
Parent.*...................................................................
(g)(1) Complaint in United Dominion Industries Limited et al. v. Commercial
Intertech Corp. et al., filed in the United States District Court for the
Southern District of Ohio, Eastern Division on July 11, 1996.*.............
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER EXHIBIT NAME NUMBER
- ------- --------------------------------------------------------------------------- ------
<S> <C> <C>
(g)(2) First Amended Complaint in United Dominion Industries Limited et al. v.
Commercial Intertech Corp. et al., filed in the United States District
Court for the Southern District of Ohio, Eastern Division on July 15,
1996.*.....................................................................
(g)(3) Second Amended Complaint in United Dominion Industries Limited et al. v.
Commercial Intertech Corp. et al., filed in the United States District
Court for the Southern District of Ohio, Eastern Division on July 19,
1996.......................................................................
</TABLE>
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* Previously filed.
<PAGE> 1
Exhibit (a)(20)
CONTACTS:
Media - Robert L. Shaffer FOR IMMEDIATE RELEASE
(704) 347-6875 o.
(704) 366-2780 h.
TEC Shareholders & Analysts -
Stanley J. Kay, Jr. of MacKenzie Partners
(212) 929-5940 o.
UNITED DOMINION SUING COMMERCIAL INTERTECH TO DELAY
CUNO SPIN-OFF UNTIL AFTER SHAREHOLDERS CONSIDER UDI OFFER
CHARLOTTE, NC (July 19, 1996) -- United Dominion Industries (NYSE, TSE:
UDI), today said it has petitioned the U.S. District Court in Columbus, Ohio to
enjoin the board and management of Commercial Intertech Corp. (NYSE: TEC) from
taking unilateral action to spin-off its Cuno Inc. subsidiary until after the
company's shareholders meet to consider United Dominion's $30 per share offer
for all outstanding TEC common shares. Including the assumption of debt, the
aggregate value of the proposed transaction is approximately $550 million.
United Dominion said it is continuing efforts to take its proposal
directly to TEC shareholders but that it might choose to withdraw its tender
offer if the Cuno spin-off proceeds before TEC's shareholders are permitted to
vote on United Dominion's offer.
... more
<PAGE> 2
-2-
"We believe the action to spin-off Cuno in this precipitous manner is
ill-advised for TEC's shareholders and, at the least, they should be given the
opportunity to decide what is best for them. This is particularly the case in
light of serious questions concerning the tax-free nature of the spin-off.
Commercial Intertech has owned Cuno for 10 years and only after United
Dominion's offer at a 57% premium has the action taken on such a frantic tone.
We urge TEC shareholders to ask themselves `why'," William R. Holland, United
Dominion's chairman and chief executive officer, said.
Mr. Holland indicated that United Dominion expects clearance shortly
from the U.S. Securities and Exchange Commission to allow it to begin
soliciting TEC shareholders to call a special meeting at the earliest possible
date. He said this meeting would enable Commercial Intertech shareholders to
make an informed decision regarding United Dominion's offer after carefully
comparing its value with the alternative plan developed to thwart United
Dominion's proposal.
"We are confident that Commercial Intertech shareholders will conclude
that United Dominion's cash proposal offers significantly more value and
considerably less risk than the alternative proposed by Commercial Intertech's
management and board of directors," he said.
# # #
<PAGE> 1
Exhibit (a)(21)
[UNITED DOMINION LOGO]
[UNITED DOMINION LETTERHEAD]
July 19, 1996
Mr. Paul J. Powers, Chairman
Commercial Intertech Corp.
1775 Logan Avenue
Youngstown, OH 44501
Dear Paul:
I want to respond to your statement of "concern with United Dominion's past
treatment of the employees of the companies it has acquired" which you
expressed in your July 12, 1996 letter to Commercial Intertech employees. I am
curious as to the basis for your expressed concern, given our record in
acquisitions.
I want to reiterate our desire to acquire all of Commercial Intertech and to
keep the company together. In this regard, we note that you recently announced,
in response to our all cash tender offer for all of the common shares of
Commercial Intertech, that you intend to spin off Cuno Incorporated even though
your Board of Directors had previously considered and rejected that proposal.
We, unlike you, do not want to break Commercial Intertech apart.
You and your Board have absolutely no reason to be concerned about the past
treatment of the employees of the companies United Dominion has acquired, or
about how Commercial Intertech employees will be treated once the two companies
are combined. In the past six years, we have acquired fifteen businesses in
twelve transactions. In these transactions, only a few employees were laid off
or otherwise left the company as a result of our acquisition.
<PAGE> 2
[UNITED DOMINION INDUSTRIES ADDRESS]
Mr. Paul J. Powers
July 19, 1996
Page 2
In the annex attached to this letter, I have listed the businesses we have
acquired, the number of employees in each of those businesses at the time we
acquired them, the number of employees who left those businesses as a result of
our acquisition, and the number of employees currently employed by those
businesses. As you can clearly see, in twelve of the fifteen acquisitions, we
do not know of a single employee who was laid off or otherwise left the company
as a result of our acquisition. In total, only 150 employees out of 7,623 left
United Dominion. These work forces have since grown to 7,898.
Your letter attempts to give your employees the impression that we intend to
significantly reduce Commercial Intertech's work force. That is not the case.
We have the greatest respect for your employees throughout your global
operations. Indeed, the quality of your people is one of the primary reasons we
believe that Commercial Intertech and United Dominion would be such a good fit
and why we are pursuing this acquisition so earnestly. We look forward to a
long and mutually rewarding association with the employees of Commercial
Intertech.
I want to likewise take this opportunity to respond to the concerns your Board
has noted -- albeit without elaboration -- that a combination of United
Dominion and Commercial Intertech supposedly would have "a disruptive effect"
on your suppliers, customers and the communities where Commercial Intertech
operates. There is no basis for such concern. We firmly believe that, to the
contrary, our relationships with suppliers, customers and the communities where
Commercial Intertech operates will only be strengthened by the combination of
our two companies.
<PAGE> 3
[UNITED DOMINION INDUSTRIES ADDRESS]
Mr. Paul J. Powers
July 19, 1996
Page 3
Finally, Paul, I wish to emphasize our desire to acquire all of Commercial
Intertech on a friendly, negotiated basis. We believe that our proposal offers
significantly more value and less risk to your stockholders and work force than
the leveraged recapitalization and split-up of Commercial Intertech that you
have put forward in response. As I have said several times, I am prepared to
meet with you and your Board at any time to discuss any concerns you have, and
how we can best proceed on a negotiated basis. Should you elect not to
negotiate, we hope and trust you will allow the immediate future direction of
Commercial Intertech to be determined by its owners.
Sincerely,
/s/ Bill
W. R. Holland
WRH/es
Attachment
c: Board of Directors
Commercial Intertech Corp.
<PAGE> 4
ANNEX
UNITED DOMINION ACQUISITIONS 1990-1996
<TABLE>
<CAPTION>
Number of Number of Number of
Date Employees Employees who Employees
Acquisition at time of Left as a Result Currently
Name of Company Closed Acquisition of Acquisition Employed
- --------------- ----------- ----------- ---------------- ---------
<S> <C> <C> <C> <C>
Davenport International 07/21/95 288 22(1) 250
Flair Corporation 06/09/95 1,450 93(2) 1,472
McKee Door, Inc. 05/23/95 32 -0- 82
Puriti S.A. de C.V. 06/17/94 75 -0- 81
The Serco Company 06/14/94 250 -0- 385
The Marley Company(3) 08/11/93 2,800 35(4) 2,721
Robertson Flooring(5) 03/20/92 16 -0- 16
Robertson(5)(6) 02/03/92 796 -0- 442(7)
Ceco Door(6)(8) 02/03/92 769 -0- 801
Windsor Door(6) 02/03/92 457 -0- 564
Bredel Pump 01/02/92 50 -0- 40
Blaine Construction(9) 01/11/91 86 -0- 240
Hyster/HYPAC Compaction 12/17/90 160 -0- 287
AEP-Span 11/05/90 94 -0- 74
ANECO(9) 05/25/90 300 -0- 443
----- --- -----
7,623 150 7,898
</TABLE>
(1) The layoffs at Davenport's Missouri plant actually occurred prior to
our closing.
(2) The 93 employees were affected by a plant consolidation that took place
over one year after the closing.
(3) Two Marley units were sold after the acquisition.
(4) The 35 Marley employees who were discontinued were headquarters employees,
at least 5 of whom were offered employment with us. This closure was known,
and agreed to, by Marley senior management prior to the acquisition.
(5) Robertson and Robertson Flooring were recently combined with Smith Steelite
in a partnership. We own 50% of the partnership but do not manage the
venture.
(6) Robertson, Ceco and Windsor were acquired in the same transaction.
(7) The reduction at Robertson was related to the recent exit from
construction service related businesses.
(8) One Ceco unit has since been sold.
(9) Blaine and ANECO have since been sold.
<PAGE> 1
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
UNITED DOMINION INDUSTRIES :
LIMITED, et al. :
:
Plaintiffs, : Civil Action No. C2 96-672
:
v. : Judge Graham
:
COMMERCIAL INTERTECH CORP., et al. : Magistrate Judge King
:
Defendants. :
SECOND AMENDED AND SUPPLEMENTAL COMPLAINT
FOR TEMPORARY RESTRAINING ORDER AND FOR PRELIMINARY AND
PERMANENT INJUNCTIVE RELIEF AND DECLARATORY JUDGMENT
Plaintiffs, by their undersigned attorneys, as and for their Second
Amended and Supplemental Complaint herein, aver upon knowledge as to themselves
and upon information and belief as to all other matters as follows:
NATURE OF THIS ACTION
1. Plaintiffs seek (a) temporary, preliminary and permanent injunctive
relief, pursuant to Rule 65, Fed. R. Civ. P., against the enforcement of the
Ohio Take-Over Act, Ohio R.C. Sections 1707.041, 1707.042, 1707.23 and
1707.26 (the "Take-Over Act"), which purports to regulate nationwide tender
offers governed by federal law; (b) preliminary and permanent injunctive relief
prohibiting application of certain provisions of the Ohio Control Share
Acquisition Act, R.C. Sections 1701.01(CC)(2) and 1701.831(E)(1), to
impair the voting rights of holders of certain of Commercial Intertech Corp.
("CIC") Common Shares; (c) preliminary and permanent injunctive relief
prohibiting CIC and its directors from taking any steps to enforce or amend the
CIC Shareholder Rights Plan, commonly referred to as the "Poison Pill Plan,"
except to redeem the
<PAGE> 2
rights issued thereunder (the "Rights") or to delete the provisions in the
Poison Pill Plan that purport to prohibit directors elected by the shareholders
of CIC (without the approval of the current CIC directors) from redeeming the
Rights for a period of 180 days, as hereinbelow further alleged, and directing
CIC and its directors to redeem all Rights issued pursuant to CIC's Poison Pill
Plan; and (d) preliminary and permanent injunctive relief prohibiting CIC and
its directors from treating CIC's Preferred Shares as having one and one-half
shares.
2. Plaintiffs also seek a declaratory judgment, pursuant to 28 U.S.C.
Section 2201 and Fed. R. Civ. P. 57, declaring that (a) the Take-Over Act is
unconstitutional to the extent it is sought to be applied to the proposed
acquisition by Plaintiffs of all of the outstanding Common Shares of CIC; (b)
the Control Share Acquisition Act is unconstitutional to the extent it is sought
to be applied to impair the voting rights of holders of CIC's Common Shares
described in R.C. Section 1701.01(CC)(2); (c) CIC's Poison Pill Plan and the
Rights issued thereunder are invalid, unlawful, null and void; and (d) CIC's
Preferred Shares have one vote and any attempt to increase the voting power is
invalid.
PARTIES
3. Plaintiff United Dominion Industries Limited ("United Dominion") is
a corporation organized under the laws of Canada with its principal place of
business in Charlotte, North Carolina. United Dominion and Opus Acquisition
Corporation, a Delaware corporation with its principal place of business in
Charlotte, North Carolina and an indirect wholly-owned subsidiary of United
Dominion (hereinafter collectively referred to as "Plaintiffs"), are announcing
and commencing a nationwide cash tender offer for all of the outstanding Common
Shares of CIC.
2
<PAGE> 3
4. Defendant CIC is an Ohio corporation with its principal executive
offices in Youngstown, Ohio.
5. Defendants Bresnahan, C. Cushwa, W. Cushwa, Galvin, Hill, Humphrey,
Kassling, McDonough, Midgley, Powers, Smart and Tucker are directors of CIC (the
"Directors"), and each is a citizen of a state other than Delaware or North
Carolina.
6. Defendant Thomas Geyer (the "Commissioner") is a citizen and
resident of Ohio and is the Acting Commissioner of the Division of Securities,
Department of Commerce of the State of Ohio (the "Division"). Pursuant to R.C.
Section 1707.46, the Division is charged with the enforcement of all laws and
rules enacted to regulate the sale of securities. In the enforcement of those
laws, the Commissioner is empowered, inter alia, to conduct hearings and
investigations (R.C. Sections 1707.041, 1707.23), issue cease and desist
orders (R.C. Section 1707.23) and seek court-ordered injunctive relief (R.C.
Sections 1707.23, 1707.26). Further, the Commissioner is empowered,
pursuant to R.C. Section 1707.23(E) and (H), to enforce certain criminal
provisions and may refer certain enforcement matters to the Attorney General and
the Prosecuting Attorney.
7. Defendant Donna Owens is a citizen and resident of Ohio and is the
Director of Commerce, Ohio Department of Commerce. The Department of Commerce
has authority to enforce provisions of the Take-Over Act.
8. The State of Ohio is being made a defendant herein by and through
Betty D. Montgomery, the Attorney General of Ohio.
3
<PAGE> 4
JURISDICTION AND VENUE
9. This action arises under (a) Sections 14(a), 14(d), 14(e) and 28 of
the Securities Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C.
Sections 78(a), 78n(d), 78n(e) and 78bb, and the rules and regulations
promulgated thereunder by the Securities and Exchange Commission (the "SEC"), 17
C.F.R. Sections 240.14d-1 et seq.; and (b) the Commerce Clause, Article I,
Section 8, Clause 3, and the Supremacy Clause, Article VI, Clause 2 of the
United States Constitution and 42 U.S.C. Section 1983.
10. This Court has subject matter jurisdiction over this action
pursuant to (a) Section 27 of the Exchange Act, 15 U.S.C. Section 78aa; (b) 28
U.S.C. Section 1331(a) (federal question); (c) 28 U.S.C. Section 1332 (diversity
of citizenship); (d) 28 U.S.C. Section 1337(a) (commerce and antitrust
regulation); (e) 28 U.S.C. Section 1343(a) (deprivation of constitutional
rights); and (f) 28 U.S.C. Section 1367 (supplemental jurisdiction). Plaintiffs
and defendants are of diverse citizenship, and the amount in controversy,
exclusive of interest and costs, exceeds $50,000. Further, this Court has
supplemental jurisdiction over the state law claims.
11. Venue is proper in this District pursuant to 28 U.S.C. Section
1391(b) and (c) because all defendants reside in or are subject to personal
jurisdiction in this District and the claims asserted herein arise from events
and/or omissions in this District; and pursuant to Section 27 of the Exchange
Act, 15 U.S.C. Section 78aa, because acts or transactions constituting
violations of the Exchange Act have occurred or are threatened to occur in this
District, and the defendants are in, inhabit or transact business in this
District. Venue in this division is proper pursuant to S.D. Ohio L.R. 3.3(c)
because defendants Geyer and Owens reside, and the cause of action arose, in
this division.
4
<PAGE> 5
THE TENDER OFFER
12. In a meeting on May 10, 1996 and in a letter dated June 27, 1996,
United Dominion advised CIC of its interest in acquiring CIC. In the June 27
letter, United Dominion proposed to acquire CIC by means of an all-cash merger
(not subject to financing) involving payment to CIC's shareholders of a very
substantial premium above the then current market value of CIC's Common Shares,
and stated its desire to engage in negotiations to effectuate such a
transaction.
13. In response to the June 27 letter, CIC's Board of Directors issued
a statement to the effect that, while it would review the United Dominion
proposal in consultation with legal and investment advisors, it reaffirmed CIC's
"long-standing objective of creating shareholder value as an independent public
company."
14. In light of CIC's lack of substantive response to United Dominion's
friendly overtures, United Dominion decided to make an offer directly to CIC's
shareholders.
15. Accordingly, Plaintiffs announced on July 11, 1996, that they would
commence a cash tender offer (the "Tender Offer") for all of the outstanding
shares of CIC's common stock (including common stock issuable upon conversion of
CIC's ESOP Convertible Preferred Stock Series B) at a price of $27 per Common
Share.
16. The Tender Offer is a substantial transaction in interstate
commerce, totaling more than $469,756,000. It is being made to all of CIC's
common shareholders, who are widely dispersed throughout the United States, with
the majority located outside Ohio. The Tender Offer is fair, reasonable and
adequate, and is not coercive. The Tender Offer is for all shares. The Tender
Offer has no financing condition. The Tender Offer price represents a premium of
5
<PAGE> 6
approximately 40% over the market price of CIC shares prior to public
announcement of United Dominion's interest in acquiring CIC. If the Tender Offer
is successful, Plaintiffs intend, as soon as practicable, to consummate a merger
and to acquire at the same price all remaining Common Shares not tendered in the
Tender Offer.
17. The Tender Offer complies in all respects with the detailed
substantive and disclosure requirements of federal law, which comprehensively
regulate nationwide tender offers, including, among other things, the Exchange
Act and certain amendments thereto (the "Williams Act"), and rules and
regulations promulgated by the Securities and Exchange Commission ("SEC")
pursuant to Congressional authorization. Plaintiffs are filing a Schedule 14D-1
with the SEC with respect to the Tender Offer which contains, among other
exhibits, an Offer to Purchase setting forth the material terms of the Tender
Offer. Plaintiffs are also filing a Form 041 together with the aforesaid
Schedule 14D-1, the Offer to Purchase and all other exhibits thereto, with the
Division, without prejudice to Plaintiffs' position that the Take-Over Act is
unconstitutional or inapplicable to the Tender Offer. In addition, Plaintiffs
are delivering an Acquiring Person Statement to CIC, without prejudice to
Plaintiffs' position that the Control Share Acquisition Act is unconstitutional
to the extent it is applied to impair certain voting rights.
18. Further, in order that the shareholders of CIC may have an
opportunity to receive the benefits of the Tender Offer and not be subject to
the defenses erected and being maintained by the incumbent Directors, Plaintiffs
are taking steps available under Ohio law and CIC's Code of Regulations to
solicit appointments of designated agents to call a special meeting of CIC
shareholders. At such meeting, Plaintiffs will offer the CIC shareholders an
opportunity, among
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other things, to adopt a resolution calling on the current Directors to redeem
the CIC Poison Pill Plan, to remove the incumbent Directors in favor of
Plaintiffs' nominees, to amend CIC's Code of Regulations if necessary to provide
that the Control Share Acquisition Law does not apply to CIC, and otherwise to
remove the defensive barriers to Plaintiffs' Tender Offer. Plaintiffs' efforts
to call such a special meeting will comply in all respects with Ohio law and
applicable federal law, and, together with the relief requested herein that is
necessary to enable the CIC shareholders' corporate franchise to be exercised
without unlawful and inequitable impairment, will enable the shareholders to
decide for themselves whether they wish to accept Plaintiffs' Tender Offer.
FEDERAL REGULATION OF THE TENDER OFFER
19. In 1968, Congress enacted the Williams Act amendments to the
Exchange Act and thereby established a uniform national system, administered by
the SEC, for regulation of interstate tender offers. The provisions of the
Williams Act, and the rules promulgated thereunder by the SEC, represent a
comprehensive federal scheme which regulates nationwide tender offers.
20. In enacting the Williams Act, Congress recognized that tender
offers serve legitimate and beneficial economic functions by, among other
things, providing investors with an opportunity to sell their shares at an
advantageous premium over the prevailing market prices and providing
shareholders with all information material to their respective decisions whether
or not to tender their shares.
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21. The Williams Act reflects the intent of Congress that interstate
tender offers for shares of public corporations should succeed or fail solely at
the hands of the free and informed investment judgment of the individual
shareholders of such corporations. The Williams Act is designed neither to deter
nor to encourage tender offers, but rather to establish evenhanded regulation,
favoring neither the tender offeror nor incumbent management of the corporation
whose securities are being sought. The goals of the Williams Act are shareholder
protection and strict neutrality in the contest for corporate control between
management of the target company and the tender offeror.
22. The Williams Act protects investors by requiring that tender
offerors provide shareholders with certain information which Congress has
determined to be material to an informed investment judgment as to whether an
individual shareholder should hold, sell or trade his securities and by
requiring that tender offerors observe specified timetable requirements in
connection with all tender offers for securities registered under the Exchange
Act.
23. Pursuant to its authority under Section 23(a)(1) and other
provisions of the Exchange Act, the SEC has promulgated rules and regulations in
furtherance of the comprehensive Congressional scheme set forth in the Williams
Act and in other provisions of the Exchange Act. Federal law establishes a
specific regulatory scheme and timetable which apply to the Tender Offer. The
Williams Act does not contain any provisions that would substantially delay or
restrict a tender offer, or permit administrative review respecting the fairness
of its substantive terms or the effectiveness of tender offer disclosures.
THE OHIO TAKE-OVER ACT
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24. The Take-Over Act, R.C. Section 1701.041, was originally enacted in
1969 and amended in 1990. It purports to regulate interstate tender offers.
25. Under the Take-Over Act, a "control bid" is defined to include an
offer to acquire equity securities of a corporation incorporated inside or
outside Ohio with its principal place of business or principal executive office
in Ohio or with substantial assets within Ohio if there are a certain specified
number of Ohio shareholders. R.C. Sections 1707.01(V)(1); 1707.01(Z)(1).
26. While the Take-Over Act requires disclosure which is, in part,
duplicative of that required under federal law, the information filed with the
Division and to be delivered to the subject company and Ohio offerees must also
include information which need not be disclosed in a Schedule 14D-1 filed with
the SEC pursuant to the Williams Act, such as:
(a) information regarding plans or proposals of the offeror to
make changes in employee plans or workforce or to close plants or
facilities. Section 1707.041(A)(2)(d).
(b) complete information on the organization and operations of
offeror, including
(i) a description of the offeror's outstanding
capital stock and long-term debt,
(ii) financial statements of the offeror for the
current period and three most recent annual accounting
periods,
(iii) a description of the location and general
character of offeror's principal physical properties,
(iv) a description of pending legal proceedings other
than routine litigation,
(v) a description of the business done and projected
by the offeror and the general development of offeror's
business over the past three years, and
(vi) the amount of any material interest, direct or
indirect, of any of offeror's officers or directors in any
material
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transaction during the past three years, or any proposed
transactions, to which the offeror was or is to be a party.
Section 1707.041(A)(2)(g).
(c) "[s]uch other and further documents, exhibits, data, and
information as may be required by regulations of the division of
securities, or as may be necessary to make fair, full and effective
disclosure to offerees of all information material to a decision to
accept or reject the offer." Section 1707.041(A)(2)(h).
27. The Take-Over Act impermissibly imposes burdens upon offerors, such
as the Plaintiffs, in conflict with the Williams Act, 15 U.S.C. Section 78n(d),
(e) (to which the Tender Offer is subject), and the regulations promulgated
thereunder, to the extent that the Take-Over Act requires that offerors provide
to the company being acquired, the Division and Ohio offerees, materials which
include, among other things, information with respect to the financial condition
and history of the offerors; plans relating to employees; and a general
open-ended requirement for additional information, beyond the requirements of
the Williams Act. R.C. Section 1707.041(A)(2).
28. The Take-Over Act allows the Division, by rule or in an
adjudicatory proceeding, to determine that an issuer is not a "subject company"
if "appropriate review" of the control bid will be made by a regulatory
authority of another jurisdiction. R.C. Section 1707.01(Z)(2).
29. The Division may "summarily suspend the continuation of the control
bid." Further, the Division may effectively block the Tender Offer from going
forward if, after a hearing, it determines that "all of the information required
to be provided . . . has not been provided by the offeror, that the control bid
materials provided to offerees do not provide full disclosure to offerees of all
material information concerning the control bid, or that the control bid is in
material violation of any provision of this chapter . . ." R.C. Section
1707.041(A)(4).
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30. The contemplated "suspension" of Plaintiffs' control bid, both
summarily and after hearing, would have the practical effect of impeding, and
possibly halting, the Tender Offer throughout the nation. Reinstitution of the
offer can be accomplished only by filing "new or amended information" to correct
"disclosure and other deficiencies." R.C. Section 1707.041(A)(4).
31. These provisions are in direct contravention of the Williams Act,
which does not contemplate any substantive administrative review of the
"effectiveness" of tender offer disclosures or of "other deficiencies". These
provisions also conflict with the explicit timetable of the Williams Act.
THE CONTROL SHARE ACQUISITION ACT
32. R.C. Section 1701.831 regulates the making of "control share
acquisitions" as defined in R.C. Section 1701.01(Z)(1). The Tender Offer to
acquire all of the Common Shares of CIC for cash proposes a control share
acquisition. Within ten days of receipt of an Acquiring Person Statement
delivered to CIC pursuant to R.C. Section 1701.831(B), defendant Directors of
CIC must call a special meeting (the "831 Special Meeting") of shareholders to
vote on the proposed control share acquisition.
33. Under R.C. Section 1701.831, the Tender Offer can only be
consummated if CIC shareholders approve the proposed control share acquisition
by the affirmative vote of a majority of the voting power of CIC in the election
of directors represented at the 831 Special Meeting in person or by proxy and a
majority of the portion of such voting power excluding the voting power of
"interested shares" [as defined in R.C. Section 1701.01(CC)]. A quorum must be
present at the 831 Special Meeting and will be deemed present if a majority of
the voting power of CIC in
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the election of directors and a majority of such voting power excluding
"interested shares" are represented at the meeting in person or by proxy.
34. According to R.C. Section 1701.832, the procedures in Section
1701.831 are to provide ". . . evenhanded protection of offerors and
shareholders from fraudulent and manipulative transactions arising in connection
with control acquisitions." "Evenhanded protection" requires that the
shareholder vote in Section 1701.831 must treat offerors and incumbent
management evenhandedly and must be bona fide and achievable. If the vote cannot
be calculated, or cannot be calculated in a timely manner, the voting
requirements are a blatant sham designed to enable entrenched management to
avoid a shareholder referendum on the Tender Offer and kill fair, all-cash,
non-manipulative tender offers or stymie them indefinitely.
35. R.C. Section 1701.01(CC)(2), a 1990 amendment, presents
insurmountable barriers to any and all control share acquisitions of the shares
of widely held public companies, such as CIC, by creating a class of "interested
shares" which, as a practical matter, is impossible to determine.
36. R. C. Section 1701.01(CC)(2) provides:
"Interested shares" also means any shares of an issuing public
corporation acquired, directly or indirectly, by any person from the
holder or holders thereof for a valuable consideration during the
period beginning with the date of the first public disclosure of a
proposed control share acquisition of the issuing public corporation or
any proposed merger, consolidation, or other transaction which would
result in a change in control of the corporation or all or
substantially all of its assets, and ending on the date of any special
meeting of the corporation's shareholders held thereafter pursuant to
section 1701.831 [1701.83.1] of the Revised Code, for the purpose of
voting on a control share acquisition proposed by any acquiring person
if either of the following apply:
(a) The aggregate consideration paid or given by the person
who acquired the shares, and any other persons acting in concert with
him, for all such shares exceeds two hundred fifty thousand dollars;
(b) The number of shares acquired by the person who acquired
the shares, and any other persons acting in concert with him, exceeds
one-half of one
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per cent of the outstanding shares of the corporation entitled to vote
in the election of directors. (Emphasis added).
37. Whether any shares of CIC are "interested shares" under R.C.
Section 1701.01(CC)(2) cannot be determined from the shareholder records of CIC
required to be maintained under R.C. Section 1701.37 because such records
disclose the names and addresses of record holders only, who may or may not also
be the beneficial owners of such shares. Even as to those record holders who are
also beneficial owners, the records do not contain the information necessary to
determine whether the shares are "interested shares" under R.C. Section
1701.01(CC)(2).
38. It is estimated that at least 50% of CIC's outstanding Common
Shares are held by clearing agencies and by brokers and banks as record holders
for the beneficial owners using "street" or nominee names. Such brokers, banks
and clearing agencies hold shares for many beneficial owners, including
arbitrageurs. Arbitrageurs buy and sell significant amounts of shares of widely
held public companies, like CIC, after tender offer announcements. They
frequently do not consent to disclosure of their names, addresses and holdings.
Neither CIC nor Plaintiffs can compel the record shareholders to disclose the
name, address or holdings of the numerous non-consenting beneficial owners of
shares, the prices paid by them for shares, when such shares were purchased or
whether they are "acting in concert" with any other person, and yet this
unavailable information must be obtained in order to identify the class of
"interested shares" created by R.C. Section 1701.01(CC)(2). Thus, this provision
presents insurmountable difficulties in tallying "interested shares" and,
accordingly, shares that are not "interested." Moreover, it is a practical
impossibility to determine whether there is a quorum or to determine the vote on
the proposed control share acquisition, which makes it impossible to comply with
the
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statutory requirement of obtaining approval of the Tender Offer by separate
majorities of the holders of "interested shares" and the other shares of CIC.
39. Section 14 of the Exchange Act and the regulations promulgated
thereunder (the "Proxy Rules") regulate the solicitation of proxies and related
matters with respect to public companies such as CIC.
40. Rules 14b-1(b)(3) and 14b-2(b)(4) of the Proxy Rules require
clearing agencies, securities brokers and banks holding record ownership of
stock for beneficial owners to provide a public company such as CIC, upon
request of the company, with the names, addresses and securities positions,
compiled as of a date no earlier than five business days after such request is
received, of its customers who are beneficial owners of the company's securities
and "who have not objected to disclosure of such `information'." Thus, the Proxy
Rules recognize the right of a beneficial owner to keep his identity
confidential. In addition, the Proxy Rules create no right or ability to compel
disclosure by a beneficial owner of the price paid by him for securities, the
time of the purchases, the identity of sellers or whether he is acting in
concert with any other person, all of which must be obtained to determine
whether shares of CIC are "interested shares" under R.C. Section 1701.01(CC)(2).
Therefore, Section 1701.01(CC)(2) conflicts with and is preempted by the Proxy
Rules.
41. While some of this information could be obtained from reports
required to be filed by 5% shareholders under Section 13 of the Exchange Act,
Section 1701.01(CC)(2) applies to a person holding as few as $250,000 worth of
the outstanding CIC shares, so that Section 13 filings would provide incomplete
and non-dispositive information in determining which CIC shares are
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"interested shares." Thus, Section 1701.01(CC)(2) is also in conflict with the
disclosure scheme of Section 13 of the Exchange Act.
42. The Williams Act, and the regulations thereunder, establish
procedural rules to govern tender offers. CIC and Plaintiffs are subject to the
Williams Act. The Williams Act strikes a careful balance between the interests
of offerors and target companies, and any state statute that upsets this balance
is preempted.
43. R.C. Section 1701.831(E)(1), by virtue of R.C. Section
1701.01(CC)(2), operates to favor entrenched management against offerors to the
detriment of shareholders by excluding, from one of the votes required under
Section 1701.831, certain shares of CIC trading after the Tender Offer
announcement. It does not protect independent shareholders against the
contending parties and does not ensure collective deliberation about the merits
of tender offers; rather, it deprives holders of independently-owned shares of
CIC of their rightful voice in corporate affairs. R.C. Section 1701.01(CC)(2)
excludes certain shares owned independently of CIC's management and Plaintiffs
from a crucial vote and makes it impossible to determine whether a requisite
shareholder vote has been obtained. Thus, it impedes the operation of the
special shareholder's meeting intended to give to the offeror the opportunity to
present its offer to the shareholders and to shareholders the opportunity to
decide for themselves whether a change in control should occur. Therefore, R.C.
Section 1701.01(CC)(2) frustrates the purposes of the Williams Act. R.C. Section
1701.01(CC)(2) also does not treat shares which trade after the first
announcement of a tender offer equally, thereby discriminating against
Plaintiffs' Tender Offer in favor of any later competing offer made by CIC's
management or a "white knight" friendly to management. Shares purchased after
the announcement of Plaintiffs' Tender Offer are "interested shares" as to
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<PAGE> 16
such Tender Offer but would not be "interested shares" as to any other offer if
such shares are purchased prior to the announcement of the second offer. The
"evenhanded" approach mandated by R.C. Section 1701.832 and the Williams Act is
frustrated by a scheme which favors entrenched management to the detriment of
CIC's shareholders.
44. The Ohio General Assembly demonstrated awareness that the amendment
of R.C. Section 1701.01, adding division (CC)(2), was constitutionally dubious
by specifically adding a severability clause solely for that division, to apply
"if any part of this division is held to be illegal or invalid in application .
. .." R.C. Section 1701.01(CC)(3).
THE POISON PILL PLAN, INCLUDING THE
UNIQUE "DEAD HAND PROVISION"
45. CIC's Poison Pill Plan (denominated the "Shareholder Rights Plan")
was initially adopted by CIC's Board of Directors on November 29, 1989, without
shareholder approval. On that date, CIC implemented the Poison Pill Plan by
distributing a dividend of one preferred share purchase right (i.e., a Right)
for each outstanding Common Share of CIC held of record by shareholders at the
close of business on December 13, 1989.
46. CIC's Poison Pill Plan is designed to impose substantial economic
penalties on any entity, like United Dominion, which attempts to acquire CIC in
a transaction desired by the shareholders of CIC but not approved by CIC's
incumbent Board of Directors. Thus, the Poison Pill Plan affords CIC's Board the
power effectively to prevent shareholders from receiving the benefits of
Plaintiffs' Tender Offer regardless of its merit or the desires of shareholders
to sell their shares pursuant thereto.
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47. CIC's Poison Pill Plan, however, empowers CIC's incumbent Directors
to redeem the Rights and remove the threat of overwhelming dilution that they
carry. CIC's incumbent Board may at its discretion redeem the Rights at the
nominal price of One Cent ($.01) per Right at any time prior to the time a
person together with its affiliates and associates, becomes the beneficial owner
of 20 percent or more of the voting power of CIC's outstanding voting securities
(an "Acquiring Person").
48. In the Offer to Purchase, Plaintiffs request that CIC's Board of
Directors redeem the Rights. Plaintiffs believe that CIC's Board will refuse to
redeem the Rights.
49. CIC uses and maintains the Rights solely to employ the
discriminatory "flip-over" and "flip-in" features of the Rights which are
designed to deter tender offerors, like Plaintiffs, whose offers have not been
approved by CIC's incumbent Board of Directors. According to CIC's Poison Pill
Plan, unless CIC's incumbent Board of Directors approves of the transaction --
without regard for the wishes of CIC's shareholders -- the Rights become
exercisable in the event that any person acquires 20 percent or more of the
voting power of CIC's outstanding voting securities, entitling the holder of
each Right (other than those owned by the Acquiring Person, which become void)
to purchase Common Shares of CIC having a market value of two times the $75
"Purchase Price" of the Right -- thereby exacting prohibitive dilution on the
position of the Acquiring Person (such right being referred to as a "flip-in"
right). Similarly, according to the Poison Pill Plan, in the event that, after a
person acquires 20 percent or more of CIC's voting power, CIC is involved in a
merger or other business combination transaction, each holder of a Right (other
than the Acquiring Person) will have the right to receive, upon exercise of the
Right at the Purchase Price, that number of shares of common stock of the
acquiring company which
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has a market value of two times the Purchase Price (such right being referred to
as a "flip-over" right) --thereby also exacting prohibitive dilution on the
position of the Acquiring Person, all without regard to the wishes of the
shareholders of CIC.
50. The Poison Pill Plan thus has anti-takeover effects in that the
Rights will cause substantial dilution to the ownership rights of any person who
attempts to acquire CIC on terms not approved by CIC's Board of Directors. This
dilution would impose substantial economic penalties on Plaintiffs or any other
person who attempts to take control of CIC in a transaction not approved by
CIC's incumbent Board of Directors.
51. In the face of Plaintiffs' all cash, all shares, premium,
noncoercive Tender Offer, CIC's Board of Directors likely will continue to
refuse to redeem the Rights despite Plaintiffs' demand that they do so. CIC's
Board of Directors is employing the Poison Pill Plan to obstruct Plaintiffs'
valuable offer, to deny to CIC's shareholders any meaningful opportunity to
decide for themselves whether to tender their shares, and to entrench the
incumbent Board.
52. The purported purpose of the Poison Pill Plan was to protect the
interests of CIC's shareholders. Plaintiffs' all cash, all shares premium Tender
Offer provides for fair and equal treatment of all CIC shareholders and is not
coercive. Consequently, CIC's Poison Pill has no valid application to
Plaintiffs' Tender Offer.
53. CIC's Board of Directors has a fiduciary duty to redeem the Rights
to allow Plaintiffs' Tender Offer to proceed. Unless the Poison Pill is
redeemed, CIC's shareholders may be denied the opportunity to exercise their
right to decide for themselves whether to accept the benefits of Plaintiffs'
Tender Offer.
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54. The Directors of CIC should promptly determine that the cash Tender
Offer for all outstanding Common Shares commenced by Plaintiffs is in the best
interest of the corporation and its shareholders, so that the Poison Pill Plan
does not apply to that Tender Offer. The failure to approve the Tender Offer and
render the Poison Pill Plan inapplicable would constitute a breach of fiduciary
duty, and may deny CIC's shareholders the opportunity to exercise their right to
decide for themselves whether to accept the benefits of Plaintiffs' Tender
Offer.
55. While CIC's Poison Pill Plan empowers CIC's incumbent Directors to
redeem the Rights and thereby remove them as a barrier to Plaintiffs' Tender
Offer, the Poison Pill Plan contains an unusual provision that purports to
prohibit a newly-elected CIC board of directors effectively from redeeming the
Rights, or otherwise permitting an acquisition of CIC to go forward, for a
period of 180 days (the "Dead Hand Provision"). By virtue of such Dead Hand
Provision, the incumbent Directors of CIC are purporting to penalize
shareholders of CIC should the shareholders, as is their right, determine to
oust the Directors in favor of Plaintiffs' nominees committed to support
Plaintiffs' highly advantageous tender offer and remove the defensive obstacles
erected by CIC's incumbent Directors. Were the CIC shareholders to choose to
remove the incumbent Directors in favor of Plaintiffs' nominees, the Dead Hand
Provision -- unless it is first removed by the incumbent Directors, as they may
do under the Poison Pill Plan prior to their removal from office -- would
dictate that the shareholders could not receive the premium tender offer for 180
days, thus subjecting the shareholders to the "Dead Hand" of the removed
Directors.
56. Specifically, CIC's Poison Pill Plan provides that, while the
current CIC Board of Directors may designate a tender offer for all shares to be
a "Permitted Offer" not subject to the
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Plan, no offer --regardless of its merits, its price, or its terms -- may be
deemed a Permitted Offer for a period of 180 days following the election to the
majority of the Board of Directors of CIC of persons not nominated by the
incumbent Directors. Similarly, the Poison Pill Plan provides that, while the
CIC Board of Directors may redeem the Rights for the nominal price of $.01 per
Right in order to permit a desirable transaction to go forward, the Rights
cannot be redeemed -- regardless of the desirability of a transaction or the
wishes of the shareholders -- for a period of 180 days following the election of
directors of which a majority are persons who were not nominated by the
incumbent Directors.
57. By such arrogant provisions, which purport to render directors not
chosen by the incumbent Directors themselves to be powerless to redeem or
otherwise remove the Rights as an obstacle to a transaction, the incumbent
Directors have sought to set themselves up as a continuously self-sustaining
body immune to the wishes of the shareholders, on pain that the shareholders are
compelled to suffer a 180-day (six-month) delay in the receipt of payment for
their shares in a tender offer should they deign to remove the Directors in
favor of other persons of their choosing, such as Plaintiffs' nominees. By such
provisions, the incumbent Directors are seeking to rule the shareholders with
their "Dead Hands" even after they are removed from office.
58. There is no legitimate purpose served by subjecting Plaintiffs'
Tender Offer, and the CIC shareholders, to the Dead Hand Provision of CIC's
Poison Pill Plan. The shareholders of CIC have the fundamental right to choose
to replace the CIC Directors. Plaintiffs have a fundamental right, under Ohio
and federal law, to solicit the CIC shareholders to replace the CIC Directors
with Plaintiffs' nominees. The Dead Hand Provision threatens to interfere with
these
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rights and, in so doing, severely penalizes the CIC shareholders who may be
unable to receive the premium tender offer price for 180 days after they chose
to remove the CIC Directors in favor of Plaintiffs' nominees (without any
corresponding payment of interest or other recompense for such lengthy and
unjustifiable delay). The Dead Hand Provision is invalid under Ohio law because
without amending CIC's Articles or Regulations by a vote of shareholders, CIC
Directors have unilaterally limited the voting rights of shareholders, created
different classes of CIC Directors, and improperly limited the exercise of the
fiduciary duties of certain CIC Directors, thereby preventing them from carrying
out their fiduciary duties under Ohio law.
59. The adoption of the Dead Hand Provision of CIC's Poison Pill Plan
and its continuation threaten to impede the right of CIC's shareholders freely
to decide whether to remove the CIC Directors, and to impose a severe economic
penalty on the CIC shareholders. By adopting and keeping the Dead Hand Provision
in place notwithstanding that they are free to remove it by amendment of the
Poison Pill Plan, the incumbent Directors are violating Ohio law, breaching
their fiduciary duties to the shareholders of CIC and acting to entrench
themselves in office by creating a totally artificial and unjustifiable cost to
their removal, imposed on the very shareholders to whom the Directors owe
fiduciary duties and at whose pleasure the Directors serve in our system of
corporate democracy.
VOTING RIGHTS OF PREFERRED SHARES
60. The Articles of Incorporation of CIC, as adopted by the
shareholders, do not state voting rights for the authorized common and preferred
shares. O.R.C. Section 1701.44(A) states "[e]xcept to the extent that the voting
rights of the shares of any class are increased, limited, or
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denied by the express terms of such shares . . . each outstanding share
regardless of class shall entitle the holder thereof to one vote . . ." The
express terms of the Preferred Shares were adopted by CIC's Directors, not its
shareholders. The express terms established by the Directors establish one vote
per share, as contemplated by Section 1701.44(A). Moreover, the Articles and
Regulations state that all shares, including preferred, have one vote. CIC's
Articles at Section 3(A) state: "[t]he holder of each share of Series B
Preferred Stock shall be entitled to one vote (or consent) for each share of
Series B Preferred Stock held by such holder." Article I, Section 8 of CIC's
Regulations, which were adopted by CIC's shareholders, states: "[e]ach voting
share of the corporation shall, unless otherwise provided by law or the
Articles, entitle the holder thereof . . . to one vote . . .".
61. Therefore, pursuant to Ohio law, CIC's Common Shares and Preferred
Shares each have one vote since there is no express term of the Preferred Shares
increasing the voting rights of such shares which was adopted by the
shareholders.
62. However, contrary to CIC's Articles and Regulations and O.R.C.
Section 1701.44(A), CIC has claimed in certain documents that its Preferred
Shares have increased voting rights. CIC's Proxy Statement for its 1996 Annual
Meeting of Shareholders claims that each Common Share is entitled to one vote
and each Preferred Share is entitled to one and one-half votes. In Note L to the
consolidated financial statement in CIC's 1995 Annual Report, the statement is
made that "Series B shares are entitled to one and one-half votes per share. .
." CIC's 1995 Form 10-K states "[t]he Series B shares are entitled to one and
one-half votes per share."
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63. Any such unauthorized increase in the voting rights of the
Preferred Shares would be a violation of the laws of Ohio and CIC's Articles and
Regulations. The Preferred Shares cannot be entitled to one and one-half votes,
and any attempt to increase their voting power is unlawful.
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CLAIMS FOR RELIEF
The Take-Over Act Violates The Commerce
Clause Of The United States Constitution
(COUNT ONE)
64. Plaintiffs repeat and reallege the averments set forth in
paragraphs 1-63 of this Complaint as if fully rewritten herein.
65. The Commerce Clause of the Constitution provides that "Congress
shall have power . . . to regulate commerce . . . among the several states."
U.S. Const. Art. I, Section 8, cl. 3.
66. Shareholders of CIC reside throughout the United States and the
Tender Offer will take place in interstate commerce.
67. The Take-Over Act imposes a substantial, adverse, and direct burden
on interstate commerce because, among other things, the Take-Over Act:
(a) grants to the Division power to suspend the Tender Offer in the
State of Ohio which would effectively prevent plaintiffs from going
forward with the Tender Offer nationwide;
(b) imposes disclosure requirements which exceed those required
under federal law;
(c) deprives Plaintiffs of the federally-protected right to buy
securities from willing sellers throughout the United States free of
state law impediments;
(d) exerts a powerful constraint upon transactions in securities
between willing buyers and willing sellers throughout the United
States;
(e) impedes the infusion of millions of dollars into interstate
commerce by means of tender offers and interferes with efficient
allocation of economic resources; and
(f) creates unnecessary, duplicative and wasteful expenses for
companies engaged in interstate commerce and upon persons wishing to
use the national securities exchanges.
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68. The Take-Over Act is invalid and unconstitutional because it places
a substantial burden on interstate commerce which outweighs any putative local
benefits, in violation of the Commerce Clause of the United States Constitution.
69. Plaintiffs have no adequate remedy at law.
The Take-Over Act Violates The Supremacy
Clause Of The United States Constitution
And Section 28 Of The Exchange Act
(COUNT TWO)
70. Plaintiffs repeat and reallege the averments set forth in
paragraphs 1-69 of this Complaint as if fully rewritten herein.
71. The Supremacy Clause, U.S. Const. Art. VI, cl. 2, provides, in
pertinent part:
This Constitution, and the Laws of the United States which shall be
made in Pursuance thereof . . . shall be the supreme Law of the Land;
and Judges in every State shall be bound thereby, any Thing in the
Constitution or Laws of any State to the Contrary notwithstanding.
72. The Take-Over Act frustrates the objectives of, and is in direct
conflict with, the Exchange Act and the rules and regulations promulgated
thereunder in the following respects:
(a) The Take-Over Act imposes disclosure requirements in addition
to those required by federal law;
(b) the Division may prohibit a tender offer from proceeding and
thereby frustrate the federal scheme which provides for each
shareholder to decide whether to accept a tender offer;
(c) the Take-Over Act represents an attempt to assert the
legislative power of the State of Ohio over a subject matter over which
the federal government has developed a comprehensive body of law; and
(d) the Take-Over Act creates the potential for unseemly conflict
between federal and state proceedings by permitting a state official to
halt a
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nationwide tender offer based upon his examination of materials
which meet applicable federal law.
73. By establishing policies, standards and procedures that conflict
with and are obstacles to the objectives of Congress expressed in the Exchange
Act and rules and regulations promulgated thereunder, the Take-Over Act is
invalid and unconstitutional as applied to the Tender Offer under the Supremacy
Clause, which accords supremacy to federal law over conflicting state law, and
violates and is preempted by Section 28(a) of the Exchange Act, 15 U.S.C.
Section 78bb, which prohibits and preempts state regulation which with the
provisions of the Exchange Act and the rules and regulations thereunder.
74. Plaintiffs have no adequate remedy at law.
The Control Share Acquisition Act,
By Virtue Of R.C. Section 1701.01(CC)(2),
Violates The Supremacy Clause Of The
United States Constitution And Section 28
Of The Exchange Act
(COUNT THREE)
75. Plaintiffs repeat and reallege the averments set forth in
paragraphs 1-74 of this complaint as if fully rewritten herein.
76. The provisions of the Control Share Acquisition Act impairing the
voting rights of the holders of certain of CIC's shares frustrate the
objectives, and are in direct conflict with, the Exchange Act and the rules and
regulations promulgated thereunder, in at least the following respects:
(a) Effectively imposing proxy requirements inconsistent with those
imposed by federal law;
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(b) Constituting an attempt to assert the legislative power of the
State of Ohio over a subject matter over which the federal government
has developed a comprehensive body of law; and
(c) Functioning as a bar to national tender offers by impeding the
ability to conduct the control share acquisition meeting so that
shareholders can decide whether a change of control should occur, by
making it impossible to identify "interested shares," and therefore
making it impossible to determine and obtain the vote required by R.C.
Section 1701.831(E)(1).
77. By establishing policies, standards and procedures that conflict
with and are obstacles to the objectives of Congress expressed in the Exchange
Act and the rules and regulations promulgated thereunder, R.C. Section
1701.831(E)(1), by virtue of R.C. Section 1701.01(CC)(2), is invalid and
unconstitutional as applied to the Tender Offer under the Supremacy Clause of
the United States Constitution, Article VI, Clause 2, which accords supremacy to
federal law over conflicting state law, and violates and is preempted by Section
28(a) of the Exchange Act, 15 U.S.C. Section 78bb, which prohibits and preempts
state regulation that conflicts with the provisions of the Exchange Act and the
rules and regulations thereunder.
The Control Share Acquisition Act, By Virtue Of
Ohio Rev. Code Section 1701.01(CC)(2),
Creates An Unlawful Burden
On Interstate Commerce
(COUNT FOUR)
78. Plaintiffs repeat and reallege the averments set forth in
paragraphs 1-77 of this Complaint as if fully rewritten herein.
79. The Control Share Acquisition Act, by virtue of R.C. Section
1701.01(CC)(2), was intended to discourage trading in securities of target
companies after the announcement of a tender offer by limiting the voting rights
of certain purchasers. It was intended to disrupt the
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national secondary market in securities, a market generally regulated by
federal, not state law. The provision effectively discourages the purchase of
shares of widely held public companies after announcement of a tender offer.
80. The Control Share Acquisition Act, by virtue of R.C. Section
1701.01(CC)(2), is invalid, unconstitutional, null and void because it places a
substantial burden on interstate commerce that outweighs any putative local
benefits, in violation of the Commerce Clause, Art. I, Section 8, cl. 3 of the
United States Constitution.
81. Plaintiffs have no adequate remedy at law.
The Dead Hand Provision Of The Poison Pill
Violates Ohio Law
(COUNT FIVE)
82. Plaintiffs repeat and reallege the averments set forth in
paragraphs 1-81 of this Complaint as if fully rewritten herein.
83. The Dead Hand Provision of CIC's Poison Pill Plan limits, in
violation of Ohio law, the right of CIC's shareholders to remove CIC's Directors
and replace them with Directors empowered to manage the affairs of CIC in
accordance with their fiduciary duties as required by O.R.C. Section 1701.59(A).
84. By granting certain powers to CIC's incumbent Directors but denying
such powers to replacement Directors, the Dead Hand Provision defines and limits
the power of certain Directors and establishes different classes of CIC
Directors in violation of Ohio law.
85. The Dead Hand Provision limits the exercise of the fiduciary duties
of certain CIC Directors and prevents them from carrying out their fiduciary
duties in violation of Ohio law.
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86. Plaintiffs have no adequate remedy at law.
The Directors' Adoption and Failure To Redeem
The Poison Pill And To Remove The
Dead Hand Provision Violates
Their Fiduciary Duties
(COUNT SIX)
87. Plaintiffs repeat and reallege the averments set forth in
paragraphs 1-86 of this Complaint as if fully rewritten herein.
88. The Tender Offer offers a substantial premium to CIC's stockholders
for their stock, and contains no threat or coercion of any kind to CIC or to
CIC's stockholders. The Tender Offer treats all CIC stockholders equally and
allows them to decide for themselves whether to accept the benefits of the
premium offer.
89. The purported purpose of the Poison Pill Plan is to protect CIC's
stockholders. The all-cash, all-shares premium Tender Offer does not imperil the
interests of CIC's stockholders in any way. Thus, the Poison Pill Plan cannot
legitimately be used to block the Tender Offer, and the CIC Directors' failure
to redeem the Poison Pill Rights constitutes a violation of the directors'
fiduciary duties under Ohio law.
90. The Dead Hand Provision violates Ohio law and its adoption by CIC
Directors constitutes a violation of the directors' fiduciary duties under Ohio
law, and the failure of the directors to amend the Poison Pill Plan to eliminate
this unlawful provision also constitutes a violation of their fiduciary duties.
91. Further, the Dead Hand Provision serves no purpose other than to
delay unnecessarily the receipt by CIC's stockholders of the cash to be paid in
the Tender Offer for
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CIC shares. If it is not removed by the current CIC Directors, the Dead Hand
Provision would result in a six-month delay in the payment of CIC's stockholders
for their shares -- even if those stockholders were to overwhelmingly express
their approval of the Tender Offer by voting to remove those Directors who
oppose the Tender Offer. In addition, by creating such a delay, the Dead Hand
Provision would impose a significant financial penalty upon the CIC stockholders
should they decide to remove the CIC Directors, and thus infringes upon the
stockholders' fundamental right of corporate suffrage. Accordingly, the Dead
Hand Provision serves no legitimate purpose, and the failure of the directors to
amend the Poison Pill Plan to eliminate it also constitutes a violation of their
fiduciary duties.
92. Plaintiffs have no adequate remedy at law.
CIC's Attempt To Alter The Voting Power
Of The Preferred Shares Violates Ohio Law And
Its Articles And Regulations
(COUNT SEVEN)
93. Plaintiffs repeat and reallege the averments set forth in
paragraphs 1-92 of this Complaint as if fully rewritten herein.
94. The Articles, Regulations, express share terms and Ohio law
establish that the Preferred Shares held by the Employee Stock Ownership Plan
and Retirement Stock Ownership and Savings Plan ("ESOPs") are entitled to only
one vote each.
95. Plaintiffs and CIC's other common shareholders are injured by the
dilution of their voting power, by the improper and invalid attempt to increase
the voting rights of the Preferred Shares. The Preferred Shares, which are held
in CIC's ESOPs, would presumably be voted, in
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significant part, to block Plaintiffs' Tender Offer and to further entrench
current management. Therefore, the attempt to increase the voting power of the
Preferred Shares is an invalid, unlawful and unauthorized defensive tactic,
which could deprive common shareholders of their right to consider Plaintiffs'
Tender Offer.
96. Plaintiffs and the other CIC shareholders have no adequate remedy
at law.
Actions By CIC Directors In Responding to
Plaintiffs' Acquisition Proposals Violate
Their Fiduciary Duties
(COUNT EIGHT)
97. Plaintiffs repeat and reallege the averments set forth in
paragraphs 1-96 of this Complaint as if fully rewritten herein.
98. On May 10, 1996, Mr. Holland, the Chairman and CEO of United
Dominion met with Mr. Powers, the Chairman, President and CEO of CIC. At that
meeting, Mr. Holland discussed the benefits of a combination between the
companies and proposed a transaction in which United Dominion would acquire all
of CIC's Common Shares at a price of $24 per share. CIC responded that it was
not interested in consideration a transaction between United Dominion and CIC.
99. On June 27, 1996, Mr. Holland sent a letter to Mr. Powers stating
he would like to see their discussions proceed further, and offering to acquire
CIC pursuant to a negotiated transaction in which the shareholders would receive
$27 per Common Share for all shares, a 40% premium to the then-current share
price. Also, on that date, United Dominion issued a press release setting forth
the text of the letter, shortly prior to which Mr. Holland telephoned Mr.
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Powers to apprise him of the announcement. Mr. Powers was unavailable and did
not return the call.
100. On June 30, 1996, CIC issued a press release reaffirming its "long
standing objective of creating shareholder value as an independent public
company." It also announced that as part of its "strategic plans to enhance
shareholder value," CIC was preparing a public offer of up to 20% of the stock
of Cuno Incorporated ("Cuno").
101. On July 10, 1996, at the suggestion of a financial advisor to CIC,
Mr. Holland placed a call to Mr. Powers, which call Mr. Powers returned later
that day. Mr. Holland indicated he hoped they could get together to discuss a
possible transaction. Mr. Powers replied that CIC would have no response until
its Board met, and therefore, there was no reason to have a meeting.
102. On July 12, 1996, Plaintiffs commenced the Tender Offer. Also on
July 12, CIC issued a press release stating, among other things, that CIC's
Board recommended that shareholders reject as inadequate the Tender Offer and
announcing the spin-off of -- not 20% -- but 100% of Cuno. In addition, CIC
announced a program to repurchase up to 2.5 million of its 15.5 million
currently outstanding Common Shares. CIC also stated that "in light of the
Company's long-term strategic plan, its future prospects and other factors, that
this is not the time to sell the Company. Therefore, the Board strongly
recommends that shareholders not tender their shares to the United Dominion
tender offer." CIC also stated that it believed the spin-off of Cuno and the
share repurchase program "offer significantly better value for our shareholders
than does the alternative of selling the Company today." CIC stated that the
announced steps, including the spin-off of Cuno, which will be headquartered in
Connecticut, not
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Ohio, will "serve the interests of all of our constituencies," previously
referred to as including employees, suppliers, labor organizations and
communities. CIC also described the shareholders given the opportunity to sell
their shares in the repurchase program as those who "may be likely to support
actions that would make it more difficult for the company to resist an
inadequate bid."
103. In its Schedule 14D-9, dated July 12, 1996, CIC stated it did not
anticipate the Cuno spin-off would be subject to shareholder approval. While
acknowledging the risk of possible "adverse tax consequences to the Company and
certain of its shareholders," if there was an acquisition of CIC following the
spin-off, CIC is apparently not seeking an Internal Revenue Service ruling as to
the taxable nature of the transaction before proceeding.
104. To date, CIC's Board of Directors has failed and refused to
negotiate with Plaintiffs, notwithstanding Plaintiffs' interest in purchasing
CIC in its entirety, and their non-coercive, cash tender offer for all shares of
CIC. Instead, CIC's Board has determined to spin-off Cuno, notwithstanding
possible adverse tax results. Further, CIC's Board decided to repurchase shares
from only some -- but not all -- of the shareholders -- that is, those it
believes would support a change of control.
105. Pursuant to Ohio R.C. Section 1701.59, CIC's Board of Directors are
required to consider the interests of CIC's shareholders in evaluating the
Tender Offer and alternative transactions. The refusal of CIC's directors to
negotiate with Plaintiffs constitutes a violation of the duties imposed upon
directors pursuant to O.R.C. Section 1701.59. While CIC's directors have
announced plans to sell off part of its business for the stated purpose of
enhancing and maximizing shareholder value, they have not negotiated with
Plaintiffs about their proposed
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transaction, which includes Cuno. Therefore, CIC's Directors have acted
unreasonably and in violation of the duties of care, loyalty and candor owed by
them to CIC's shareholders.
106. CIC's actions in spinning-off Cuno and selectively repurchasing its
shares were taken by CIC in response to Plaintiffs' acquisition proposal. Such
actions were taken for the purpose of entrenching management and increasing the
cost and burden to Plaintiffs of acquiring all of CIC's outstanding Common
Shares in an all cash, fully funded, non-coercive tender offer, and constitute a
break-up of the company -- all without affording the shareholders any vote and,
instead all being undertaken in a manner admittedly designed to skew the
shareholder base in favor of management. These actions operate to the detriment
of CIC's shareholders, and violated the Directors' fiduciary duties to them.
107. Plaintiffs have no adequate remedy at law.
Disclosures By CIC Following The Tender Offer
Violate The Williams Act, 15 U.S.C. Section 78n
(COUNT NINE)
108. Plaintiffs repeat and reallege the averments set forth in
paragraphs 1-107 of this Complaint as if fully rewritten herein.
109. On July 12, 1996, CIC filed a Schedule 14D-9 with the Securities
and Exchange Commission, pursuant to Section 14(d)(4) of the Williams Act, 15
U.S.C. Section 78n(d)(4). The Schedule 14D-9 is required to be filed by a
company which is the subject of a tender offer and is intended to set forth the
company's recommendation to its shareholders concerning the acceptance or
rejection of the tender offer, as well as factual information relating to that
recommendation.
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110. Item 7 of Schedule 14D-9 requires CIC to provide certain
information concerning negotiations or transactions undertaken by CIC in
response to the Tender Offer which relate to, or which would result in, an
extraordinary transaction such as a merger or reorganization, a sale or transfer
of a material amount of assets, a tender offer for or other acquisition of
securities by CIC, or any material change in capitalization or dividend policy.
111. Section 14(e) of the Williams Act, 15 U.S.C. Section78n(e), makes
it unlawful for any person to make any untrue statement of a material fact or to
omit to state any material fact necessary in order to make the statements made,
in the light of the circumstances in which they were made, not misleading, or to
engage in any fraudulent, deceptive, or manipulative acts or practices, in
connection with any tender offer or in connection with any solicitation of
security holders in opposition to or in favor of any tender offer.
112. The Schedule 14D-9 filed by CIC merely mentions without description
or discussion the Spin-off and Repurchase Program. It omits to state material
facts concerning those proposed transactions. Among other omissions, the
Schedule 14D-9 fails to fully identify the tax ramifications of the spin-off.
113. The Schedule 14D-9 filed by CIC also is omissive in that it fails
to adequately describe the Directors' plan to spin-off Cuno. CIC refers to its
plan to build shareholder value as a basis for rejecting the Tender Offer, but
fails to disclose information which is material to shareholders in evaluating
the recommendation of the Board of Directors with respect to the Tender Offer
and the Directors' purported plan to build shareholder value, including how much
value the Directors believe the spin-off will provide.
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114. The Schedule 14D-9 filed by CIC fails to make full and fair
disclosure concerning the "reasons" for the incumbent Board's rejection of
Plaintiffs' Tender Offer, including in the following respects:
(a) while the Schedule 14D-9 states that the Board considered the
Cuno spin-off as enabling shareholders to benefit in the near
term from a "high growth, high multiple business"; it fails
to disclose that the Directors could not reasonably, and did
not, conclude that the spin-off would yield greater value for
all the shareholders than the Tender Offer;
(b) while the Schedule 14D-9 professes that the Board's rejection
took into account the best interests of shareholders, it
fails to disclose that by reason of the Directors' refusal to
negotiate with Plaintiffs, the Directors could not be
informed of how much greater value for all shareholders could
be available in such negotiation, and that the Directors well
knew that they were closing their eyes to such information by
rejecting the Tender Offer without any effort to negotiate,
despite Plaintiffs' consistent position of its willingness
and readiness to negotiate;
(c) the Schedule 14D-9 fails to disclose what value the Directors
actually believe will be available to shareholders via the
Cuno spin-off;
(d) while the Schedule 14D-9 states that CIC's financial advisor
opined that the then $27 Tender Offer price was "inadequate,"
it fails to disclose what price ranges were deemed fair by
such financial advisor or whether any opinion as to fairness
of the $27 price was in fact sought;
(e) while the Schedule 14D-9 asserts that the Tender Offer would
be "disruptive" as to employees, suppliers, customers and
communities, it fails to disclose any basis for such
conclusion and, indeed, the fact that there is no reasonable
basis upon which CIC's Directors could reach any such
conclusion.
115. Plaintiffs have no adequate remedy at law.
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CIC's "Street Sweep" Repurchase
Program Violates The Williams Act
(COUNT TEN)
116. Plaintiffs repeat and reallege the averments set forth in
paragraphs 1-115 of this Complaint as if fully rewritten herein.
117. Upon its July 12 announcement of its repurchase plan for up to 16%
of its outstanding shares, CIC immediately began aggressively to pursue the
program on the New York Stock Exchange.
118. Also on July 12, pursuant to Section 13(e)(1) of the Exchange Act
and Rule 13e-1 thereunder, CIC filed an SEC Rule 13e-1 Transaction Statement
purporting to describe its share-repurchase program. This bare-bones form
expressly admitted that the repurchase program was designed to buy out
"shareholders [who] may be more likely to support actions that would make it
more difficult for [CIC] to resist" the Tender Offer. Beyond this, however, the
Rule 13e-1 Statement provided only a minimal amount of information about the
nature and purposes of the repurchase program, and provided virtually no
disclosure of the repurchase program's effect upon CIC. Thus, in order to defeat
United Dominion's Tender Offer, CIC has embarked upon a major recapitalization
of itself -- with virtually no disclosure to shareholders, and with no
opportunity of any kind for the shareholders to have a voice in the future of
CIC as an entity and the proposed break-up of the company through the spin-off
of Cuno.
119. CIC's hurried "street sweep" repurchase program is an unlawful
attempt to stampede certain shareholders into selling their shares to CIC and to
entrench management, before shareholders could meaningfully benefit from the
disclosures to which the Williams Act and the proxy rules entitle them.
Specifically, CIC has embarked upon its repurchase program:
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- before United Dominion's Schedule 14D-1 could be disseminated;
- before CIC's Schedule 14D-9 was disseminated or even filed;
- before any meaningful disclosure could be made about CIC's
repurchase/going-private program;
- before the shareholder had necessary information about either
side's position in the contest for control of CIC; and
- in the midst of chaotic market conditions.
120. CIC's "street sweep" is an unlawful attempt to inflate and
otherwise manipulate the price of CIC's common stock, in violation of Section
14(e) of the Exchange Act, and fails to comply with the requirements of Section
13(e) of the Exchange Act and Rule 13e-1 promulgated thereunder.
121. Plaintiffs have no adequate remedy at law.
CIC's Threatened Spin-Off of Cuno
Without Regard to Shareholder Meetings
Violates Ohio Law and CIC's Code of Regulations
(COUNT ELEVEN)
122. Plaintiffs repeat and reallege the averments in paragraphs 1-121 of
the Complaint as is fully rewritten herein.
123. On July 18, 1996, CIC announced that its Board of Directors had
determined to reject Plaintiffs' increased offer of $30 per CIC common share (as
proposed by Plaintiffs on July 15, 1996, whereby Plaintiffs increased the Tender
Offer price from $27 to $30 per CIC share). At the same time, CIC's Board of
Directors reaffirmed its defensive plans to spin-off 100% of Cuno and to proceed
with the share repurchase program (which CIC again admitted was designed to buy
in shares held by persons who were more likely to support United Dominion's
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acquisition of CIC). Such determinations by the CIC Board of Directors were made
while the directors continued to refuse to negotiate with Plaintiffs and
continued to act in violation of the fiduciary duties imposed upon directors
pursuant to O.R.C. Section 1701.59.
124. Also on July 18, 1996, CIC revealed for the first time that its
Board of Directors, at its meeting the prior day, had purported to take steps to
thwart the right of the shareholders of CIC under Ohio law to vote on the
proposed acquisition of control of CIC by United Dominion, and United Dominion's
right to seek such approval -- shareholder votes provided for by R.C. Section
1701.831, calling for the 831 Meeting; and by R.C. Section 1701.40(A)(3) and
CIC's Code of Regulations, calling for a special meeting of CIC shareholders
upon Plaintiffs' solicitation of appointments of designated agents to call such
a special meeting, as herein-above alleged. CIC announced on July 18, 1996 that
its Board of Directors had fixed August 30, 1996 as the date of the 831 Meeting
to vote on the change of control of CIC -- the latest date for such meeting that
CIC could fix under Ohio law -and fixed the record date of such meeting as the
close of business on August 7, 1996; and that its Board of Directors,
notwithstanding the absence of authority therefor in Ohio law or the Articles or
Regulations of CIC, had purported to fix the close of business on September 3,
1996 as the "record date for determining shareholders entitled to execute agent
designations for the purpose of calling the Special Meeting."
125. By setting the 831 Meeting as late as August 30, 1996 while
simultaneously reaffirming its determination to proceed with the 100% spin-off
of its "crown-jewel" business, Cuno, CIC is threatening to break up the company,
divesting it of its most valuable component (which has accounted for a
substantial part of CIC's revenues and earnings in past years), before the
shareholders of CIC will have the opportunity to vote at the 831 Meeting on the
proposed
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change of control of CIC. United Dominion's proposed control share acquisition
is the acquisition of CIC as it existed when that proposal was made -- not a CIC
from which its "crown jewel" component has been removed by unilateral action of
the Directors without any chance for there to be a vote of the CIC shareholders.
126. By setting the 831 Meeting for August 30,1996 and simultaneously
proceeding with its defensive plan to spin-off Cuno before that vote will occur,
the CIC Board of Directors is threatening to make a mockery of the Ohio Control
Share Acquisition Act and the right of shareholders to vote guaranteed by the
Act. CIC is threatening to deny the shareholders their right to a "reasonable
opportunity to express their views by voting on a proposed shift of control"
(R.C. Section 1701.832(A)(4)), and to manipulate the corporate machinery so as
to deny "evenhanded protection of offerors and shareholders from fraudulent and
manipulative transactions arising in connection with control acquisitions."
127. As part of its effort to deny the shareholders their right to
express their views by voting on a proposed shift of control, CIC further
purported on July 18, 1996 to announce a "record date" of September 3, 1996 for
the determination of shareholders entitled to execute agent designations for the
purpose of calling the special meeting of CIC shareholders sought by United
Dominion. By purporting to set such a "record date," CIC's Board of Directors is
claiming the right to delay and forestall that special meeting until well after
it can, by unilateral action of the Directors without any approval of the
shareholders, effect the spin-off of Cuno, thereby depriving the shareholders of
their right to vote in favor of United Dominion's acquisition of control of CIC.
As hereinabove alleged and as announced by United Dominion on July 12, 1996,
Plaintiffs will, at such special meeting, offer the CIC shareholders an
opportunity,
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among other things, to remove the incumbent Directors in favor of Plaintiffs
nominees and otherwise to remove the defensive barriers to Plaintiffs' Tender
Offer. If the special meeting is delayed until after the directors spin-off Cuno
from CIC, then the opportunity for a shareholder vote at such meeting provided
for under Ohio law (R.C. Section 1701.40(A)(3)) and CIC's own Code of
Regulations will be rendered nugatory. The very purpose of the call for a
special meeting was to permit the CIC shareholders to vote with respect to
Plaintiffs' acquisition of CIC; if the Cuno spin-off is implemented before that
vote, CIC as it currently exists, and as the company Plaintiffs proposed to
acquire, will no longer exist, and the CIC shareholders will be deprived of
their right to vote on the subject.
128. The CIC Board of Directors' attempt to fix a "record date" for the
appointment of agent designations is without basis under Ohio law or the
Articles or Regulations of CIC. Under the express terms of the Regulations of
CIC, as adapted by the shareholder of CIC, "[s]pecial meetings of the
shareholders may be called at any time by . . . the holders of forty percent
(40%) of the voting shares of the corporation." Plaintiffs and the other
shareholders of CIC are entitled to call a special meeting at any time that 40%
of the voting shares of the corporation call for such a meeting. Plaintiffs
intend to solicit agent designations as promptly as practicable -- without
regard to the Directors' unauthorized attempt to set a September 3, 1996 "record
date" for such solicitation, an attempt that is without basis and contrary to
CIC's Regulations -- and, upon receiving the support of 40% of the CIC voting
shares, to call such special meeting.
129. Cuno is an integral and significant part of CIC. Plaintiffs' Tender
Offer and its proposed acquisition of CIC seeks to acquire the entire company.
If the spin-off of CIC were to be implemented by the Directors before the CIC
shareholders have an opportunity to vote at the
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831 Special Meeting and the special meeting called pursuant to agent
designations, the CIC shareholders will be deprived of the opportunity,
guaranteed to them by Ohio law, to vote on a proposed change in corporate
control. By the same token, Plaintiff will be deprived of an opportunity to seek
the support of the CIC shareholders for Plaintiffs' acquisition of control of
CIC.
130. The foregoing actions of CIC's Directors opposing Plaintiffs'
Tender Offer and depriving CIC shareholders of their rights also violate R.C.
Section 1707.042.
131. Plaintiffs have no adequate remedy at law.
IRREPARABLE INJURY
132. Unless temporary, preliminary and permanent injunctive relief is
granted, plaintiffs and CIC's shareholders will be irreparably harmed in at
least the following respects:
(a) Plaintiffs face the difficulty of proceeding nationwide, if
there is a "summary suspension" in Ohio, and the inability to consummate
the Tender Offer if the Division denies permission to proceed with the
Tender Offer because it will be effectively unable to purchase
nationwide;
(b) the confusion, delay, or litigation resulting from any attempt
to enforce the Take-Over Act will adversely affect Plaintiffs' ability
to purchase shares pursuant to the Tender Offer nationwide, and could be
used by CIC's management to frustrate the Tender Offer and deprive CIC
shareholders of the opportunity to choose whether or not to tender their
shares;
(c) CIC's shareholders may be discouraged from accepting the Tender
Offer because of uncertainty surrounding the Take-Over Act;
(d) CIC's shareholders will be further subjected to corporate
governance inconsistent with their own best interests and CIC may be
unable to comply with the illegal vote required by the Control Share
Acquisition Act;
(e) CIC's shareholders may be deprived of an opportunity to receive
the benefits of Plaintiffs' all cash premium offer;
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(f) CIC's shareholders will be subject to misleading and materially
omissive disclosures by CIC;
(g) Plaintiffs' solicitation of CIC shareholders to remove the
anti-takeover obstacles created and maintained by the Directors will be
made materially more difficult by CIC's selective repurchase program
that is admittedly intended to buy back shares likely to support a
change in control, rather than the entrenched position of CIC
management;
(h) if the spin-off of Cuno is allowed to proceed without an
opportunity for the CIC shareholders to vote at either the 831 Meeting
or the special meeting called pursuant to agent designations, CIC's
shareholders will be deprived of their right to vote on whether they
should receive the benefits of the Tender Offer; and
(i) if the spin-off of Cuno is allowed to proceed without an
opportunity for the CIC shareholders to vote at either the 831 Meeting
or the special meeting called pursuant to agent designations, Plaintiffs
will be denied the opportunity to acquire the entirety of CIC even if
that is what CIC's shareholders desire to occur.
133. Unless temporary, preliminary and permanent injunctive relief is
granted, CIC shareholders who reside throughout the United States, including
those residing in Ohio, may be deprived of their right freely to consider and
avail themselves of the Tender Offer and to sell their shares to Plaintiffs at
the substantial premium over market prices offered pursuant to the Tender Offer.
WHEREFORE, plaintiffs pray that this Court:
(i) declare and adjudge that the Take-Over Act is unconstitutional as
applied to the Tender Offer;
(ii) temporarily, preliminary and permanently enjoin defendants, their
respective assigns and successors, their directors, officers, agents, employees,
attorneys, servants and shareholders and all persons in active concert or
participation with them, from taking any actions to enforce or apply the
Take-Over Act to the Tender Offer;
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(iii) declare and adjudge that R.C. Section 1701.831(E)(1), by virtue of
R.C. Section 1701.01(CC)(2), is unconstitutional as applied to the Tender Offer;
(iv) preliminarily and permanently enjoin defendants from classifying or
treating any CIC shares as "interested shares" pursuant to R.C. Section
1701.01(CC)(2) for purposes of conducting the vote on the proposed control share
acquisition under R.C. Section 1701.831(E)(1);
(v) preliminarily and permanently enjoin CIC and its Board of Directors
from taking any steps to enforce or amend the Poison Pill (except to redeem the
Rights, designate the Tender Offer as a Permitted Offer or eliminate the Dead
Hand Provision);
(vi) preliminarily and permanently order CIC and its Board of Directors
to redeem the Rights; (vii) preliminarily and permanently order CIC and its
Board of Directors to amend the Poison Pill Plan to remove the Dead Hand
Provision;
(viii) declare and adjudge that the Poison Pill may not properly be
enforced to bar the Tender Offer; (ix) declare and adjudge that the Dead Hand
Provision of the Poison Pill Plan is invalid and unenforceable;
(x) declare and adjudge any attempt to increase the voting power of
Preferred Shares invalid;
(xi) preliminarily and permanently enjoin CIC and its Directors from
treating Preferred Shares as having one and one-half votes, or altering or
increasing their voting power;
(xii) declare and adjudge that CIC's Directors are in breach of their
fiduciary duties under Ohio law by undertaking to spin-off Cuno and selectively
repurchase shares;
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(xiii) declare and adjudge that CIC's Directors are in breach of their
fiduciary duties under Ohio law for refusing to negotiate with Plaintiffs;
(xiv) preliminarily and permanently order CIC and its Directors to
negotiate with Plaintiffs; (xv) preliminarily and permanently enjoin CIC from
continuing its repurchase program; (xvi) declare and adjudge that the Schedule
14D-9 filed by CIC violates the Williams Act, 15 U.S.C. Section 78n(e);
(xvii) preliminarily and permanently order CIC to amend its Schedule
14D-9 to make the various statements about its repurchase program and spin-off
of Cuno not misleading;
(xviii) declare and adjudge that CIC's "street sweep" repurchases
violate the Williams Act; (xix) preliminarily and permanently enjoin CIC and the
Directors from taking any steps to effectuate the Cuno spin-off until CIC's
shareholders have the opportunity to vote at the 831 Meeting and the special
meeting called pursuant to agent designations;
(xx) award plaintiffs their costs and disbursements in this action,
including reasonable attorney's fees; and
(xxi) grant such other and further relief as the Court may deem just and
proper.
/s/ Thomas B. Ridgley
----------------------------
Thomas B. Ridgley (0000910)
Trial Attorney
VORYS, SATER, SEYMOUR AND PEASE
52 East Gay Street
P.O. Box 1008
Columbus, Ohio 43216-1008
(614) 464-6229
Attorneys for Plaintiffs
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OF COUNSEL:
WACHTELL, LIPTON, ROSEN & KATZ
51 West 52nd Street
New York, New York 10019
(212) 403-1000
VORYS, SATER, SEYMOUR AND PEASE
Laura G. Kuykendall (0012591)
Robert N. Webner (0029984)
52 East Gay Street
P.O. Box 1008
Columbus, Ohio 43216-1008
(614) 464-6400
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CERTIFICATE OF SERVICE
The undersigned hereby certifies that a copy of the foregoing Second
Amended and Supplemental Complaint for Temporary Restraining Order and for
Preliminary and Permanent Injunctive Relief and Declaratory Judgment was served
upon the following this 19th day of July, 1996:
BY FACSIMILE TRANSMISSION:
COMMERCIAL INTERTECH CORP. and the Defendant Directors,
by their attorneys,
JOHN W. EDWARDS, ESQ.
Jones, Day, Reavis & Pogue
North Point, 901 Lakeside Avenue
Cleveland, OH 44114
J. KEVIN COGAN, ESQ.
Jones, Day, Reavis & Pogue
1900 Huntington Center
41 South High Street
Columbus, OH 43215
MARC P. CHERNO, ESQ.
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004-1980
BY HAND DELIVERY:
State Defendants, by their attorney:
STEPHEN H. JOHNSON, ESQ.
Assistant Attorney General
State Office Tower
30 East Broad Street, 26th Floor
Columbus, OH 43215-3428
/s/ Thomas B. Ridgley
----------------------------
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