SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934*
CAPCO AUTOMOTIVE PRODUCTS CORPORATION
______________________________________________________________________________
(NAME OF ISSUER)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
______________________________________________________________________________
(TITLE OF CLASS OF SECURITIES)
139168 10 8
______________________________________________________________________________
(CUSIP NUMBER)
GERALD L. GHERLEIN, ESQ.
EATON CORPORATION
EATON CENTER
1111 SUPERIOR AVENUE
CLEVELAND, OHIO 44114
(216) 523-5000
______________________________________________________________________________
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS)
MARCH 8, 1996
______________________________________________________________________________
(DATE OF EVENT WHICH REQUIRES FILING OF THIS STATEMENT)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box [ ].
Check the following box if a fee is being paid with this statement [X]. (A
fee is not required only if the reporting person: (1) has a previous state-
ment on file reporting beneficial ownership of more than five percent of the
class of securities described in Item 1; and (2) has filed no amendment subse-
quent thereto reporting beneficial ownership of less than five percent of such
class. See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are
to be sent.
*The remainder of this cover page should be filled out for a reporting per-
son's initial filing on this form with respect to the subject class of securi-
ties, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).<PAGE>
CUSIP NO. 139168 10 8
_______________________________________________________________________________
(1) Names of Reporting Persons S.S. or I.R.S. Identification Nos. of
Above Persons
Eaton Corporation
34-0196300
_______________________________________________________________________________
(2) Check the Appropriate Box if a Member of a Group
(a) [ ]
(b) [ ]
_______________________________________________________________________________
(3) SEC Use Only
_______________________________________________________________________________
(4) Source of Funds
00
_______________________________________________________________________________
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e)
[ ]
______________________________________________________________________________
(6) Citizenship or Place of Organization
Ohio
______________________________________________________________________________
Number of (7) Sole Voting Power 805,000 shares
Shares Bene- _______________________________________________________________
ficially (8) Shared Voting Power 0 shares
Owned by _____________________________________________________________
Each Report- (9) Sole Dispositive Power 805,000 shares
ing Person _______________________________________________________________
With (10) Shared Dispositive Power 0 shares
______________________________________________________________________________
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
805,000 shares
_______________________________________________________________________________
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares
[ ]
_______________________________________________________________________________
(13) Percent of Class Represented by Amount in Row (11)
7.3%
_______________________________________________________________________________
(14) Type of Reporting Person (See Instructions)
CO<PAGE>
ITEM 1. SECURITY AND ISSUER.
This Statement on Schedule 13D relates to shares of
Common Stock, par value $.01 per share (the "Shares"), of
CAPCO Automotive Products Corporation, a Michigan corporation
(the "Company"). The principal executive offices of the Com-
pany are located at 300 S. St. Louis Boulevard, P.O. Box 208,
South Bend, Indiana 46624.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(c),(f) This Statement is being filed by Eaton Corpo-
ration ("Eaton"), an Ohio corporation principally engaged in
the manufacture of highly engineered products which serve the
vehicle, industrial, construction, commercial and aerospace
markets. The principal offices of Eaton are located at Eaton
Center, 1111 Superior Avenue, Cleveland, Ohio 44114. The
name, business address, present principal occupation or
employment and citizenship of each of the directors and exe-
cutive officers of Eaton are set forth in Schedule I hereto
and are incorporated herein by reference.
(d)-(e) During the last five years, neither Eaton nor any
of its directors or executive officers (i) has been convicted
in a criminal proceeding (excluding traffic violations and
similar misdemeanors), or (ii) has been a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is
subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation
with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Eaton has purchased 805,000 Shares on the open mar-
ket for an aggregate purchase price of $5,803,300. Funds
provided by Eaton's ongoing commercial paper program were
used to purchase the 805,000 Shares.
ITEM 4. PURPOSE OF TRANSACTION.
(a)-(j) Eaton acquired the Shares in order to facilitate a
possible business combination between Eaton and the Company.
On March 13, 1996, Stephen R. Hardis, Chairman and Chief
Executive Officer of Eaton, sent a letter to F. Edmir
Bertolaccini, Chairman and Chief Executive Officer of the
Company, proposing an acquisition of the Company by Eaton at
$11 per share in cash (the "March 13 Letter"). A copy of the
March 13 Letter is attached hereto as Exhibit 1 and is incor-
porated herein by reference. On March 13, 1996, Eaton issued<PAGE>
a press release with respect to the March 13 Letter. A copy
of the press release is attached hereto as Exhibit 2 and is
incorporated herein by reference. The foregoing description
of the March 13 Letter and the press release is qualified in
its entirety by reference to Exhibits 1 and 2.
On March 13, 1996, Eaton delivered a notice to the
Company nominating seven individuals for election as direc-
tors at the Company's annual meeting of shareholders sched-
uled for May 14, 1996. On March 14, 1996, Cede & Co., at the
request of Eaton, delivered a similar notice to the Company
(the Eaton notice and the Cede & Co. notice, collectively the
"Nomination Notices"). In the Nomination Notices, Eaton
stated that all of its nominees were committed to supporting
the proposal made by Eaton to acquire the Company in a
transaction pursuant to which the Company's shareholders will
receive $11 per share in cash. Following the filing of
preliminary solicitation materials with the Securities and
Exchange Commission, Eaton intends to solicit proxies from
the Company's shareholders for the purpose of electing to the
Board of Directors of the Company the director candidates
nominated by Eaton in order to insure that the Company's
Board of Directors will take all such actions necessary or
appropriate (subject to such directors' fiduciary duties) to
approve and effectuate the consummation of a business
combination between Eaton and the Company, including, among
other things, taking action to execute an agreement and plan
of merger.
On March 13, 1996, Eaton commenced litigation
against the Company and its directors in the federal district
court in the Eastern District of Michigan in connection with
Eaton's proposal set forth in the March 13 Letter. Eaton's
litigation seeks both declaratory and injunctive relief.
Eaton's complaint seeks to require the Company to redeem the
preferred stock purchase rights (the "Rights") issued pursu-
ant to the Rights Agreement between the Company and Harris
Trust and Savings Bank, as Rights Agent, and to prevent the
Company from changing the May 14, 1996 date for its annual
meeting of shareholders or the March 20 record date for that
meeting, and requests the court to declare that the Company
is not subject to the provisions of certain Michigan anti-
takeover statutes. The Eaton complaint also seeks to prevent
the Company from acting to become covered by these statutes.
Copies of the complaint filed by Eaton and the Eaton press
release issued on March 14, 1996 announcing the filing of the
complaint are attached hereto as Exhibits 3 and 4 and are
incorporated herein by reference. The foregoing description
of the litigation and the press release is qualified in its
entirety by reference to Exhibits 3 and 4.
On March 18, 1996, Eaton announced that it will be
commencing a cash tender offer to purchase all of the Com-
pany's outstanding Shares (and the associated Rights), at a
-2-<PAGE>
price of $11.00 per Share (the "Offer"). In addition, Eaton
also said that after consummation of the Offer it intends to
acquire any remaining Shares in a cash merger at the same
price as paid in the Offer. A copy of the press
release issued by Eaton is attached hereto as Exhibit 5 and
is incorporated herein by reference.
Upon consummation of the business combination pro-
posed by Eaton, the Company would become a wholly owned sub-
sidiary of Eaton. Except in connection with the proposed
business combination (including the Offer) and the nomination
of director candidates as described above, Eaton has no cur-
rent plans or proposals which relate to or would result in
any of the events described in Items (a) through (j) of Item
4 of Schedule 13D. Eaton does, however, expect to evaluate
on an ongoing basis its intentions with respect to the Com-
pany and may determine to pursue one or more of the actions
specified in Items (a) through (j) in order to facilitate a
business combination with the Company and Eaton reserves the
right to change its plans and intentions at any time, and to
take any action, with respect to the Company or the Shares,
in any manner permitted by law.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a)-(b) Eaton has sole power to vote, direct the vote of,
dispose of, or direct the disposition of all 805,000 Shares
beneficially owned by Eaton. These shares comprise
approximately 7.3% of the outstanding Shares. No director or
executive officer of Eaton is the beneficial owner of any of
the 805,000 Shares owned by Eaton or of any other Shares.
(c) During the past 60 days, Eaton effected purchases
of Shares as set forth in Schedule II hereto, which is hereby
incorporated herein by reference.
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELA-
TIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER.
Not applicable.
-3-<PAGE>
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1 Letter Dated March 13, 1996, from Stephen R.
Hardis, Chairman and Chief Executive Officer of
Eaton, to F. Edmir Bertolaccini, Chairman and
Chief Executive Officer of the Company.
Exhibit 2 Eaton Press Release, dated March 13, 1996.
Exhibit 3 Complaint filed by Eaton in the federal district
court in the Eastern District of Michigan.
Exhibit 4 Eaton Press Release, dated March 14, 1996.
Exhibit 5 Eaton Press Release, dated March 18, 1996.
-4-<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this state-
ment is true, complete and correct.
Dated: March 18, 1996
EATON CORPORATION
By:/s/ Gerald L. Gherlein
Name: Gerald L. Gherlein
Title: Executive Vice President
and General Counsel
By:/s/ Earl R. Franklin
Name: Earl R. Franklin
Title: Secretary
-5-<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF EATON
The name, business address, present principal occupa-
tion or employment of each of the directors and executive offi-
cers of Eaton are set forth below. Unless otherwise indicated,
the business address of each such director and each such execu-
tive officer is Eaton Center, 1111 Superior Avenue, Cleveland,
Ohio 44114. Unless otherwise indicated below, each occupation
set forth opposite an individual's name refers to employment
with Eaton. Unless otherwise indicated below, all directors
and executive officers listed below are citizens of the United
States.
DIRECTORS
POSITION WITH EATON; BUSINESS ADDRESS;
PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME 5-YEAR EMPLOYMENT HISTORY
NEIL A. ARMSTRONG DIRECTOR SINCE 1981. Former Chairman
of Computing Technologies for
Aviation, Inc., a computer systems
company, a position he held from 1982
until 1992. He is a director of
Cincinnati Milacron, Inc., Cinergy
Corp., RMI Titanium Co., Thiokol
Corporation and USX Corporation.
ERNIE GREEN DIRECTOR SINCE 1995. Founder,
President and Chief Executive Officer
of EGI, Inc., a manufacturer of auto-
motive components. The business
address of EGI, Inc. is 1785 Big Hill
Road, Dayton, Ohio 45439. He is also
President of Florida Production
Engineering, Inc., subsidiary of EGI.
He is a director of Acordia, Inc.,
Bank One, Dayton, N.A., DP&L Inc. and
Duriron Company, Inc.
A. WILLIAM REYNOLDS DIRECTOR SINCE 1987. Chief Executive
Officer of Old Mill Group, a private
investment firm. The business address
of Old Mill Group is 1696 Georgetown
Road, Unit E, Hudson, Ohio 44236.
Former Chairman of GenCorp Inc., a
technology-based company with posi-
tions in aerospace, automotive and
polymer products. Mr. Reynolds'
association with GenCorp began in
September, 1984, as President and
Chief Operating Officer. He was Chief
Executive Officer from August, 1985 to<PAGE>
July, 1994 and served as Chairman from
January, 1987 through March, 1995.
Mr. Reynolds is a director of Boise
Cascade Corporation, Boise Cascade
Office Products Corp. and Stant Corp.
and Chairman of the Federal Reserve
Bank of Cleveland.
CHARLES E. HUGEL DIRECTOR SINCE 1978. Former Chairman
and Chief Executive Officer of
Combustion Engineering, Inc., a pro-
vider of products and services for the
power, process, automation, environ-
mental control and other markets. Mr.
Hugel became President and Chief Exe-
cutive Officer of Combustion
Engineering, Inc., in April, 1984 and
Chairman and Chief Executive Officer
in July, 1988. He was Chairman of
Asea Brown Boveri Inc. from January,
1990 to February, 1991 and, until his
retirement in December, 1991, was
advisor to the Chief Executive Offi-
cer. Mr. Hugel is a director of
Pitney Bowes Inc.
JOHN R. MILLER DIRECTOR SINCE 1985. President and
Chief Executive Officer of TBN
Holdings Inc., an environmental com-
pany engaged primarily in the resource
recovery and recycling business. The
business address of TBN Holdings Inc.
is Lander Center, Suite 110, 3550
Lander Road, Pepper Pike, Ohio 44124.
He was President, Chief Operating
Officer and a director of The Standard
Oil Company from August, 1980 through
March, 1986. Mr. Miller formerly
served as Chairman of the Federal
Reserve Bank of Cleveland and is a
director of American Waste Services,
Inc.
FURMAN C. MOSELEY DIRECTOR SINCE 1975. Chairman of
Sasquatch Publishing Company. The
business address of Sasquatch
Publishing Company is c/o Simpson
Investment Company, 1201 Third Avenue,
Suite 4900, Seattle, Washington 98101.
Former president of Simpson Investment
Company, holding company for Simpson
Paper Company and Simpson Timber Com-
pany. He was Chairman of Simpson
Paper from 1969 to January, 1995 and
-2-<PAGE>
retired as President of Simpson
Investment Company in July, 1995. Mr.
Moseley is a director of Owens-Corning
Fiberglas Corporation.
VICTOR A. PELSON DIRECTOR SINCE 1994. Executive Vice
President of AT&T and Chairman of
AT&T's Global Operations Team. The
business address of AT&T is 295 North
Maple Avenue, Basking Ridge, New
Jersey 07920. Mr. Pelson began his
career with AT&T in 1959 and has
served in many executive positions,
most recently as Group Executive and
President responsible for AT&T's
Communications Services Group. He is
a director of AT&T, as well as a mem-
ber of its Management Executive
Committee, and a director of United
Parcel Service. Mr. Pelson will
retire from AT&T at the end of March,
1996.
ALEXANDER M. CUTLER DIRECTOR SINCE 1993. President and
Chief Operating Officer of Eaton. Mr.
Cutler joined Cutler-Hammer, Inc. in
1975, which was subsequently acquired
by Eaton, and became President of
Eaton's Industrial Group in 1986. Mr.
Cutler was named President of the Con-
trols Group in 1989, Executive Vice
President - Operations in 1991, and
was elected Executive Vice President
and Chief Operating Officer - Controls
in September, 1993 and assumed his
current position in September, 1995.
PHYLLIS B. DAVIS DIRECTOR SINCE 1991. Former Senior
Vice President, Corporate Affairs of
Avon Products, Inc., a manufacturer
and marketer of cosmetics, toiletries
and jewelry. Mrs. Davis joined Avon
in 1968, advanced to Group Vice Presi-
dent (U.S.) in 1977 and was head of
its sales and distribution from 1985
to 1988. She became Corporate Senior
Vice President of Business Development
in 1989 and served as Senior Vice
President, Corporate Affairs from 1990
until her retirement in September,
1991. Mrs. Davis is a director of
BellSouth Corporation and The TJX Com-
panies, Inc., and a trustee of various
-3-<PAGE>
open-end mutual funds in the Fidelity
Group.
STEPHEN R. HARDIS DIRECTOR SINCE 1983. Chairman and
Chief Executive Officer of Eaton. Mr.
Hardis served as Executive Vice Presi-
dent - Finance and Administration pri-
or to April, 1986, was elected Vice
Chairman in 1986 and designated Chief
Financial and Administrative Officer,
and became Chief Executive Officer in
September, 1995 and Chairman in
January, 1996. He joined Eaton in
1979. Mr. Hardis is a director of
First Union Real Estate Investments
Trust, KeyCorp, Nordson Corporation
and Progressive Corporation.
GARY L. TOOKER DIRECTOR SINCE 1992. Vice Chairman
and Chief Executive Officer of
Motorola, Inc., a manufacturer of
electronics equipment. The business
address of Motorola, Inc. is 1303 East
Algonquin Road, Schaumburg, Illinois
60196. Mr. Tooker joined Motorola in
1962 and advanced to the position of
Senior Executive Vice President and
Chief Corporate Staff Officer in 1986.
He became Chief Operating Officer in
1988, President in 1990 and Vice
Chairman and Chief Executive Officer
in December, 1993.
EXECUTIVE OFFICERS
Stephen R. Hardis Chairman (January 1, 1996) and Chief
Executive Officer (September 1, 1995);
Director.
Alexander M. Cutler President and Chief Operating Officer
(September 1, 1995); Director.
Gerald L. Gherlein Executive Vice President and General
Counsel (September 4, 1991).
Brian R. Bachman Senior Vice President--Semiconductor
and Specialty Systems (January 1,
1996).
-4-<PAGE>
Joseph L. Becherer Senior Vice President--Cutler-Hammer
(September 1, 1995). The business
address of Mr. Becherer is Five
Parkway Center, 875 Greentree Road,
Pittsburgh, PA 15220.
Robert J. McCloskey Senior Vice President--Controls and
Hydraulics (September 1, 1995).
Thomas W. O'Boyle Senior Vice President--Truck
Components (September 1, 1995).
Larry M. Oman Senior Vice President--Automotive
Components (September 1, 1995). The
business address of Mr. Oman is 26101
Northwestern Highway, Southfield,
Michigan 48076.
John M. Carmont Vice President and Treasurer (December
1, 1981). (Citizen of United
Kingdom.)
Susan J. Cook Vice President - Human Resources
(January 16, 1995).
Adrian T. Dillon Vice President - Chief Financial and
Planning Officer (September 1, 1995).
Patrick X. Donovan Vice President - International (April
27, 1988).
Earl R. Franklin Secretary and Associate General
Counsel (September 1, 1991).
John W. Hushen Vice President - Corporate Affairs
(August 1, 1991).
Stanley V. Jaskolski Vice President - Technical Management
(October 1, 1990).
Ronald L. Leach Vice President - Accounting (December
1, 1981).
William T. Muir Vice President - Manufacturing
Technologies (April 1, 1989).
Derek R. Mumford Vice President - Information
Technologies (April 1, 1992).
(Citizen of United Kingdom.)
Billie K. Rawot Vice President and Controller (March
1, 1991).
-5-<PAGE>
SCHEDULE II
EATON PURCHASES OF SHARES
(ALL PURCHASES WERE MADE FOR CASH ON THE OPEN MARKET
ON THE NEW YORK STOCK EXCHANGE)
DATE NUMBER OF SHARES PRICE PER SHARE
February 5, 1996 200,000 $7.25
March 5, 1996 20,000 $7.25
March 6, 1996 100 $7.25
March 6, 1996 49,900 $7.375
March 7, 1996 31,400 $7.375
March 7, 1996 18,600 $7.25
March 7, 1996 95,500 $7.125
March 7, 1996 34,500 $7.00
March 8, 1996 37,800 $6.875
March 8, 1996 16,000 $7.00
March 8, 1996 10,000 $7.125
March 8, 1996 165,900 $7.25
March 8, 1996 100 $7.25
March 11, 1996 50,000 $7.125
March 12, 1996 53,200 $7.25
March 12, 1996 2,500 $7.125
March 12, 1996 11,500 $7.375
March 13, 1996 8,000 $7.50
TOTAL 805,000 <PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT
1 Letter Dated March 13, 1996, from
Stephen R. Hardis, Chairman and Chief
Executive Officer of Eaton, to F. Edmir
Bertolaccini, Chairman and Chief Execu-
tive Officer of the Company.
2 Eaton Press Release, dated March 13,
1996.
3 Complaint filed by Eaton in the federal
district court in the Eastern District
of Michigan.
4 Eaton Press Release, dated March 14,
1996.
5 Eaton Press Release, dated March 18,
1996.
EXHIBIT 1
EATON CORPORATION
Eaton Center
Cleveland, OH 44114-2584
216/523-5000 [EATON LOGO]
March 13, 1996
Mr. F. Edmir Bertolaccini
Chairman and Chief Executive Officer
CAPCO Automotive Products Corporation
Rua Clark, 2061
P.O. Box 304
13279-400 Valinhos
Sao Paulo, Brazil
Dear Mr. Bertolaccini:
As you are aware, we have expressed to you on a number of
occasions over the past several months Eaton
Corporation's strong interest in acquiring CAPCO
Automotive Products Corporation. The logic of such a
business combination is compelling.
First, Eaton and CAPCO present an excellent business fit
from the standpoint of product lines, manufacturing
capability, geographic coverage, and developments in the
worldwide motor vehicle industry. Vehicle manufacturers
are increasingly seeking Tier 1 suppliers capable of
partnering with the OEMs to provide products and services
on a worldwide basis. Even suppliers such as CAPCO, with
your excellent regional manufacturing base and talented
management, will be at a serious and increasing
disadvantage as the trend to global consolidation
continues. Combined with Eaton, however, CAPCO would
have access to the resources, scale and global automotive
presence necessary to succeed in an era of increasingly
pervasive global competition. Together, we could realize
significant opportunities for expansion within Brazil, in
the rest of the Mercosul trade area, and throughout the
world.
Second, our companies have had a long history of working
together successfully. CAPCO's sales to Eaton as contract
manufacturer of medium duty mechanical transmissions under
our sales and technology licensing arrangements represent
approximately 40% of CAPCO's revenues. CAPCO has been an
excellent supplier to Eaton and, we trust, <PAGE>
it has been a successful relationship for you as well. The
relationship has been well-suited to address the market
place of the past ten years.
Moving forward, Eaton believes there are significant
advantages to our having control of all of the elements
required for competitive success in this important
product line. We believe that the best approach to take
full advantage of the new opportunities for the business
in the industrializing world is to combine our
technological and manufacturing capabilities and focus
our joint resources on the worldwide market potential.
Third, Eaton and CAPCO are an extraordinarily good fit
from the perspectives of management and business
philosophy. We share a common heritage of operating
excellence. Your management has performed extremely well
in meeting the varied and difficult challenges facing
your business -- whether due to the cyclicality of the
automotive business, the special circumstances of
operating in Brazil, or the loss of revenues associated
with cessation of Chevette production. You and your
management team have shown resourcefulness and creativity
in meeting these and other challenges, and have compiled
a track record of performance of which you can be
justifiably proud. As we have tried to make clear, the
quality of CAPCO's management and employees is a major
part of Eaton's interest in the company.
Our sales in Brazil last year reached about $200 million.
Brazil is a market of strategic importance to Eaton, both
as a production source to satisfy worldwide demand and as
a growing market for our products. Together, sales of
Eaton and CAPCO this year could reach well over $300
million. Combined, our businesses would provide an
extraordinary foundation for profitable growth in Brazil
and Latin America.
As you know, Eaton strongly desires to complete a
negotiated merger with CAPCO. Such a merger will provide
great benefits for both of our businesses, our employees,
our customers and suppliers, and the communities that we
serve.
Therefore, I am making the following proposal which has
been approved by the Board of Directors of Eaton and is
hereby submitted to the Board of Directors of CAPCO.
1 - PRICE. We propose to acquire CAPCO in a
transaction in which all shareholders
will receive $11 per share in cash. We
believe that $11 per share is a
compelling price, representing about a
55% premium above the average closing
price of the past 30 trading days. It
fairly reflects the benefits we envision
for the combination of our businesses,
and will be financed from available
internal cash <PAGE>
sources. The transaction we are
proposing has no significant
contingencies and can be completed very
quickly.
2 - CONTINUITY OF MANAGEMENT. We propose to
offer all of CAPCO's management the
opportunity to continue in their current
positions, consistent with the
discussions between our companies.
We strongly desire the support of CAPCO's management in
this matter and hope that our proposal will receive the
prompt approval of CAPCO's Board of Directors. Of
course, we would expect CAPCO to remain exempt from
Michigan's anti-takeover statutes and to render its
"Shareholder Rights Plan" inapplicable to this
transaction.
After several months of cordial discussions concerning a
negotiated acquisition, we are extremely disappointed by
the recent refusal of your Board to allow Eaton to
continue these discussions with you. This is
particularly so in light of our repeatedly expressed
willingness to negotiate terms of a business combination
which are mutually beneficial to your shareholders and
ours.
Thus, we have been left without any reasonable option
other than to proceed as we are now doing. Accordingly,
we are today announcing our proposal publicly so that all
shareholders of CAPCO are made aware of it. In addition,
we will shortly be providing you notice nominating a full
slate for election as CAPCO directors at CAPCO's May 14,
1996 annual meeting of shareholders. You should also
know that Eaton now owns approximately 7.3% of the
outstanding common stock of CAPCO Automotive Products
Corporation. While we would very much prefer to
negotiate a merger supported by your Board, we reserve he
right to go directly to your shareholders with a cash
offer for CAPCO.
Our objective is to work with you in a professional and
constructive manner to complete this transaction so that
its full potential can be realized and the best interests
of all of our shareholders can be served. I am available
to discuss these important matters with you at any time.
Clearly, this situation has the highest priority for all
of us at Eaton, and we look forward to hearing from you
soon.
Sincerely,
/s//Stephen R. Hardis
Stephen R. Hardis
Chairman and Chief Executive Officer
xc: Board of Directors of CAPCO Automotive Products
Corporation
EXHIBIT 2
NEWS RELEASE
EATON CORPORATION
Eaton Center
Cleveland, OH 44114-2584
216/523-5000
DATE March 13, 1996
CONTACT Renald M. Romain (216) 523-4736 - Media
William E. Hartman (216) 523-4501 - Financial
Community
FOR RELEASE IMMEDIATELY
EATON CORPORATION PROPOSES TO ACQUIRE CAPCO
FOR $11 PER SHARE
CLEVELAND, OH....Eaton Corporation announced today that it has
sent a letter to the Chairman and to the Board of Directors of
CAPCO Automotive Products Corporation proposing to acquire all
of the outstanding shares of CAPCO for $11 a share in cash,
about a 55 percent premium over the average closing price of
the past 30 trading days. Eaton currently owns approximately
7.3 percent of CAPCO's outstanding shares.
CAPCO manufactures medium duty truck transmissions at its
facility near Sao Paulo, Brazil. The company has about 2,400
employees and had sales of $176 million in 1995.
In explaining the strategic logic of a combination between the
two companies, Eaton's Chairman and CEO, Stephen R. Hardis,
cited:
- The ideal business fit of the two companies from the
standpoint of product lines, manufacturing capability
and geographic coverage. He also cited developments
in the worldwide motor vehicle industry, in which
auto manufacturers are increasingly seeking suppliers
capable of partnering on a worldwide basis, as a
significant factor;
- The long and successful working history between the
two companies, noting that sales to Eaton account for
40 percent of CAPCO's annual revenues;
- The quality of CAPCO's management; and,
- The significance of Brazil and Latin America as key
markets for Eaton's products.
Under the proposal, CAPCO would become part of Eaton's Truck
Components business, headed by Senior Vice President Thomas W.
O'Boyle, and all CAPCO management would be given the
opportunity to continue in their current positions.
Hardis noted Eaton's strong desire to complete the acquisition.
He indicated that the two companies had been engaged in
discussion since last November, but that CAPCO's Board recently
refused to allow Eaton to continue these discussions. As a
result, Eaton has decided to publicly announce its proposal and
is providing CAPCO notice that it is nominating a full slate
for election as directors at CAPCO's May 14, 1996 annual
meeting.
The complete text of Hardis' letter to CAPCO Chairman F. Edmir
Bertolaccini follows: <PAGE>
"March 13, 1996
"Mr. F. Edmir Bertolaccini
Chairman and Chief Executive Officer
CAPCO Automatic Products Corporation
Rua Clark 2061
P.O. Box 304
13279-400 Valinhos
Sao Paulo, Brazil
"Dear Mr. Bertolaccini
"As you are aware, we have expressed to you on a number of
occasions over the past several months Eaton Corporation's
strong interest in acquiring CAPCO Automotive Products
Corporation. The logic of such a business combination is
compelling.
"First, Eaton and CAPCO present an excellent business fit from
the standpoint of product lines, manufacturing capability,
geographic coverage, and developments in the worldwide motor
vehicle industry. Vehicle manufacturers are increasingly
seeking Tier 1 suppliers capable of partnering with the OEMs to
provide products and services on a worldwide basis. Even
suppliers such as CAPCO, with your excellent regional
manufacturing base and talented management, will be at a
serious and increasing disadvantage as the trend to global
consolidation continues. Combined with Eaton, however, CAPCO
would have access to the resources, scale and global automotive
presence necessary to succeed in an era of increasingly
pervasive global competition. Together, we could realize
significant opportunities for expansion within Brazil, in the
rest of the Mercosul trade area, and throughout the world.
"Second, our companies have had a long history of working
together successfully. CAPCO's sales to Eaton as contract
manufacturer of medium duty mechanical transmissions under our
sales and technology licensing arrangements represent
approximately 40% of CAPCO's revenues. CAPCO has been an
excellent supplier to Eaton and, we trust, it has been a
successful relationship for you as well. The relationship has
been well-suited to address the marketplace of the past ten
years.
"Moving forward, Eaton believes there are significant
advantages to our having control of all of the elements
required for competitive success in this important product
line. We believe that the best approach to take full advantage
of the new opportunities for the business in the
industrializing world is to combine our technological and
manufacturing capabilities and focus our joint resources on the
worldwide market potential.
"Third, Eaton and CAPCO are an extraordinarily good fit from
the perspectives of management and business philosophy. We
share a common heritage of operating excellence. Your
management has performed extremely well in meeting the varied
and difficult challenges facing your business -- whether due to
the cyclicality of the automotive business, the special
circumstances of operating in Brazil, or the loss of revenues
associated with cessation of Chevette production. You and your
management team have shown resourcefulness and creativity in
meeting these and other challenges, and have compiled a track
record of performance of which you can be justifiably proud.
As we have tried to make clear, the quality of CAPCO's
management and employees is a major part of Eaton's interest in
the company.
"Our sales in Brazil last year reached about $200 million.
Brazil is a market of strategic importance to Eaton, both as a
production source to satisfy worldwide demand and as a growing
market for our products. Together,
-2-<PAGE>
sales of Eaton and CAPCO this year could reach well over $300
million. Combined, our businesses would provide an
extraordinary foundation for profitable growth in Brazil and
Latin America.
"As you know, Eaton strongly desires to complete a negotiated
merger with CAPCO. Such a merger will provide great benefits
for both of our businesses, our employees, our customers and
suppliers, and the communities that we serve.
"Therefore, I am making the following proposal which has been
approved by the Board of Directors of Eaton and is hereby
submitted to the Board of Directors of CAPCO.
"1 - PRICE. We propose to acquire CAPCO in a transaction
in which all shareholders will receive $11 per share in cash.
We believe that $11 per share is a compelling price,
representing about a 55% premium above the average closing
price of the past 30 trading days. It fairly reflects the
benefits we envision from the combination of our businesses,
and will be financed from available internal cash sources. The
transaction we are proposing has no significant contingencies
and can be completed very quickly.
"2 - CONTINUITY OF MANAGEMENT. We propose to offer all of
CAPCO's management the opportunity to continue in their current
positions, consistent with the discussions between our
companies.
"We strongly desire the support of CAPCO's management in this
matter and hope that our proposal will receive the prompt
approval of CAPCO's Board of Directors. Of course, we would
expect CAPCO to remain exempt from Michigan's anti-takeover
statutes and to render its 'Shareholder Rights Plan'
inapplicable to this transaction.
"After several months of cordial discussions concerning a
negotiated acquisition, we are extremely disappointed by the
recent refusal of your Board to allow Eaton to continue these
discussions with you. This is particularly so in light of our
repeatedly expressed willingness to negotiate terms of a
business combination which are mutually beneficial to your
shareholders and ours.
"Thus, we have been left without any reasonable option other
than to proceed as we are now doing. Accordingly, we are today
announcing our proposal publicly so that all shareholders of
CAPCO are made aware of it. In addition, we will shortly be
providing you notice nominating a full slate for election as
CAPCO directors at CAPCO's May 14, 1996 annual meeting of
shareholders. You should also know that Eaton now owns ap-
proximately 7.3% of the outstanding common stock of CAPCO
Automotive Products Corporation. While we would very much
prefer to negotiate a merger supported by your Board, we
reserve the right to go directly to your shareholders with a
cash offer for CAPCO.
"Our objective is to work with you in a professional and
constructive manner to complete this transaction so that its
full potential can be realized and the best interests of all of
our shareholders can be served. I am available to discuss
these important matters with you at any time. Clearly, this
situation has the highest priority for all of us at Eaton, and
we look forward to hearing from you soon.
"Sincerely,
/s/ Stephen R. Hardis
Stephen R. Hardis
Chairman and Chief Executive Officer
xc: Board of Directors of CAPCO Automotive Products
Corporation"
-3-<PAGE>
Eaton Corporation is a global manufacturer of highly engineered
products which serve vehicle, industrial, construction,
commercial and aerospace markets. Principal products include
truck transmissions and axles, engine components, hydraulic
products, electrical power distribution and control equipment,
ion implanters and a wide variety of controls. Headquartered
in Cleveland, the company has 52,000 employees and 150
manufacturing sites in 23 countries around the world. Sales
for 1995 were $6.8 billion.
-4-
EXHIBIT 3
UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
EATON CORPORATION,
Plaintiff,
vs. Civil Action No. 96-
Hon.
CAPCO AUTOMOTIVE PRODUCTS
CORPORATION, FRANCISCO EDMIR
BERTOLACCINI, HAROLD L.
BOWMAN, DAVID A. BROCKWAY,
C.E. CHEESBROUGH, THOMAS C.
CLARKE, WILLIAM N. HARPER and
JOSE ROBERTO MORATO,
Defendants.
/
J. THOMAS LENGA (P16551)
Attorney for Plaintiff
CLARK HILL, P.L.C.
1600 First Federal Building
Detroit, Michigan 48226
(313) 965-8886
Of Counsel:
PAUL ROWE
WACHTELL, LIPTON, ROSEN & KATZ
51 West 52nd Street
New York, New York 10019
/
COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF
Plaintiff, by its undersigned attorneys, as its
Complaint for declaratory and injunctive relief, alleges the
following upon personal knowledge as to itself and its own
acts, and upon information and belief as to all other
matters.<PAGE>
NATURE OF THE ACTION
1. This action arises out of plaintiff Eaton
Corporation's ("Eaton") effort to acquire defendant CAPCO
Automotive Products Corporation ("CAPCO"), a Michigan
corporation. On March 13, 1996, plaintiff Eaton announced a
proposal to acquire CAPCO at a price of $11.00 per share in
cash, a premium of approximately 50% over the price of
CAPCO's shares traded in the marketplace prior to the
announcement. A copy of Eaton's letter proposal is annexed
hereto as Exhibit A.
2. Despite the fact that Eaton's proposal represents
an opportunity for the shareholders of CAPCO to sell their
shares for cash at a substantial premium to the prices at
which CAPCO has recently traded, the defendant directors of
CAPCO have indicated their opposition to any sale of CAPCO
and, in breach of their fiduciary duties, have left CAPCO's
takeover defenses in place, thus blocking Eaton's proposal
and preventing the public shareholders of CAPCO from deciding
for themselves whether to accept Eaton's proposal.
3. Thus, in response to Eaton's previous acquisition
proposals (and current proposal) CAPCO has kept in place the
CAPCO "Shareholder Rights Plan," a type of corporate
defensive mechanism that is sometimes called a "poison pill."
The effect of the Rights Plan is that an acquiror such as
Eaton cannot purchase more than 20% of CAPCO's shares
directly from shareholders, without obtaining prior approval
from the CAPCO board. The Rights Plan imposes financially
unacceptable dilution upon any acquiror who purchases more
than 20% of CAPCO's shares without such board approval.
-2-<PAGE>
4. Eaton has accordingly brought this action in order
to insure that CAPCO is not permitted to continue to impede
Eaton's proposal, and to insure that CAPCO's shareholders are
permitted to choose whether to sell their shares to Eaton or
not. As alleged below, under the circumstances here, CAPCO's
refusal to make the Rights Plan inapplicable to the Eaton
proposal is unlawful and violates the fiduciary duties of
CAPCO director defendants.
5. In addition, in connection with its March 13 offer
Eaton is giving notice to CAPCO that it will nominate
candidates to CAPCO's board of directors so that the public
shareholders of CAPCO will have the opportunity to vote for a
slate of candidates committed (subject to their fiduciary
duties) to completing a merger with Eaton. CAPCO has already
set a record date of March 20, 1996 for the 1996 CAPCO annual
stockholders' meeting to be held May 14, 1996. If the CAPCO
stockholders support the Eaton slate, all the incumbent
directors of CAPCO can be defeated for re-election on May 14
and can be replaced by the Eaton nominees. Eaton seeks a
declaration that the CAPCO board cannot alter or delay the
meeting date now that a slate of Eaton nominees competing
with the incumbents is being nominated.
6. Finally, CAPCO's public filings state that CAPCO
believes that it has the ability to cause the Michigan
Business Combination Act, Chapter 7A of the Michigan Business
Corporation Act ("the Business Combination Act"), and the
Michigan Control Shares Act, Chapter 7B of the Michigan
Business Corporation Act (the "Control Shares Act"), to
become applicable to CAPCO. The Business Combination Act
prevents, for a
-3-<PAGE>
five year period, any merger between a company subject to its
provisions and a company acquiring more than 10% of its
shares except under onerous conditions, such as a 90%
stockholder vote, absent board approval. Under the current
circumstances, where Eaton has made a premium all cash
proposal to acquire CAPCO, it would be a breach of fiduciary
duty for CAPCO's board to now seek to have the Business
Combination Act apply to CAPCO, while it has never done so
previously.
7. The Control Shares Act imposes burdens and delay
upon the ability of an acquiror such as Eaton to buy control
of a corporation to which the Act applies, by restricting the
circumstances under which the acquiror can obtain voting
rights with respect to its shares. However, the Control
Shares Act applies only to corporations that (in addition to
meeting other criteria) own "substantial assets" in Michigan.
As alleged below, CAPCO -- although incorporated in Michigan
-- does not have substantial assets in Michigan.
Accordingly, Eaton seeks a declaration from this Court that,
contrary to CAPCO's public statements, CAPCO is not and
cannot be subject to the provisions of the Control Shares
Act. In the alternative, Eaton seeks a declaration that the
Control Shares Act, if interpreted to apply to a corporation
without substantial assets in Michigan, would be
unconstitutional and invalid under the Commerce Clause of the
United States Constitution.
PARTIES AND JURISDICTION
8. Plaintiff Eaton Corporation is an Ohio corporation
with its principal place of business in Cleveland, Ohio.
Eaton is engaged in the manufacture and sale of
-4-<PAGE>
vehicle equipment and controls. In 1995, Eaton had revenues
of approximately $6 billion. Eaton shares are traded on the
New York Stock Exchange ("NYSE"). Eaton's market
capitalization is approximately $4.5 billion. Eaton is the
beneficial owner of approximately 800,000 shares of CAPCO,
representing more than 7% of CAPCO's shares.
9. Defendant CAPCO is incorporated under the laws of
Michigan. CAPCO's principal place of business is in Valinhos,
State of Sao Paulo, Brazil. CAPCO's principal executive
offices in the United States are located in South Bend,
Indiana.
10. CAPCO has been a public company since mid-1994.
Previous to that time it was an indirect wholly-owned
subsidiary of Clark Equipment Company. CAPCO has
approximately 11 million common shares outstanding, which are
traded on the NYSE. When initially sold to the public in
mid-1994, CAPCO's shares were priced at $12 per share, but
the stock price has since declined substantially. On March
12, 1996, the closing price for CAPCO's shares traded on the
NYSE was $7.50. CAPCO has approximately 1,600 shareholders
of record.
11. The individual defendants constitute the board of
directors of CAPCO. Defendants Bertolaccini, Cheesbrough and
Morato are employees of CAPCO. The remaining director
defendants are each former employees of Clark Equipment
Company. Collectively, CAPCO's directors own less than 1% of
the shares of CAPCO.
-5-<PAGE>
12. Plaintiff is a citizen of Ohio. None of the
defendants is a citizen or resident of Ohio. Defendants
Bertolaccini and Morato are aliens; defendant Bowman is a
citizen of Arizona; defendant Brockway is a citizen of
Michigan; defendant Cheesebrough is a citizen of Michigan;
defendant Clarke is a citizen of Maryland; and defendant
Harper is a citizen of Indiana. CAPCO is a citizen of
Michigan and has its principal place of business in Brazil.
Accordingly, complete diversity exists pursuant to 28 U.S.C.
Section 1332.
13. This Court has jurisdiction over the subject matter
of this action pursuant to 28 U.S.C. Sections 1331 (federal
question) and 1332 (diversity), and pursuant to 28 U.S.C.
Section 1367 (supplemental jurisdiction). The matter in
controversy herein exceeds the sum or value of $50,000.00,
exclusive of interest and costs.
14. Venue is proper in this judicial district pursuant
to 28 U.S.C. Section 1391(a)(3) and (b)(3), and under the
provisions of Section 1391(d).
BACKGROUND OF THE ACTION
15. Eaton is a substantial customer of CAPCO.
According to CAPCO's public filings, "[a]pproximately 30% of
[CAPCO's] revenues in 1994 were derived from sales into the
United States to Eaton pursuant to a long-term manufacturing
arrangement entered into in 1987 and extended in February
1994." In November 1995, a representative of Eaton contacted
defendant Bertolaccini, the chief executive officer of CAPCO,
and requested the opportunity to meet with Bertolaccini to
discuss a potential acquisition by Eaton of CAPCO. A meeting
was scheduled.
-6-<PAGE>
16. In the interim, lawyers and investment bankers
representing CAPCO contacted Eaton and informed Eaton that a
prerequisite to any acquisition discussions would be Eaton's
agreement to maintain the confidentiality of any non-public
information CAPCO made available to Eaton, and Eaton's
agreement not to make an unsolicited acquisition offer, under
any circumstances, for a three-year period. Although Eaton
was willing to agree to the proposed confidentiality
provisions, Eaton was unwilling to agree to prohibit itself
for a three-year period from making any acquisition offer.
17. Following Eaton's refusal to sign the "standstill"
agreement in the form insisted upon by CAPCO's professional
advisors, a representative of Eaton contacted defendant
Bertolaccini in early December 1995. In the course of the
conversation, Bertolaccini expressed disappointment that, in
essence, discussions between the two companies had met an
apparent obstacle. Bertolaccini invited representatives of
Eaton to visit CAPCO's plant in Brazil and to meet CAPCO's
operational management there.
18. In January 1996, representatives of Eaton visited
CAPCO's plant in Brazil pursuant to Bertolaccini's
invitation, and were introduced to additional members of
CAPCO's senior management.
19. In late January, Eaton contacted Bertolaccini to
arrange a meeting in the United States for the purpose of
making an acquisition proposal. Bertolaccini agreed to the
meeting, which took place on February 3, 1996 in Orlando,
Florida. At this meeting, Eaton told Bertolaccini that Eaton
was prepared (subject to obtaining approval
-7-<PAGE>
from the boards of both companies, including the CAPCO
board's agreement to make the CAPCO poison pill and the
Control Shares Act inapplicable to the transaction) to offer
$10 per share cash for all shares of CAPCO. Eaton also
indicated that it was prepared to consider improvements in
the terms of its proposal once negotiations were commenced
with CAPCO.
20. Bertolaccini informed Eaton on February 3 that
CAPCO's board would not accept an offer priced at $10 per
share.
21. On February 14, 1996, Eaton received a telephone
call from CAPCO's financial and legal advisors informing
Eaton that the CAPCO board was disappointed with the progress
of the discussions, and that a $10 per share offer was not a
basis for further discussions.
22. On March 6, 1996, Eaton again contacted CAPCO and
repeated its interest in negotiating a transaction at $10 per
share.
23. On March 8, Eaton was informed by representatives
of CAPCO that the CAPCO board had met and rejected Eaton's
offer, and had determined that CAPCO was not for sale.
24. Eaton was disappointed by CAPCO's reversal of its
previous interest in pursuing a business combination and by
its adoption of a "not for sale" posture. On March 13, 1996,
Eaton delivered the attached letter proposal to CAPCO, which
was publicly disclosed, and announced it would nominate its
own slate of candidates in
-8-<PAGE>
connection with the election of directors at CAPCO's 1996
annual meeting. Subject to the terms and conditions set
forth in the letter, Eaton is offering $11.00 per share for
CAPCO.
FIRST CLAIM FOR RELIEF
25. Plaintiff repeats and realleges the allegations
contained in paragraphs 1 through 24.
26. On March 8, 1996, the CAPCO board rejected Eaton's
previous proposal for a merger transaction and determined
that it would not entertain any offers for the purchase of
CAPCO. This decision is unsupported by a legitimate business
rationale, and contradicts representations and
acknowledgments previously made to Eaton by representatives
of defendant.
27. While a "poison pill" rights plan is lawful and
appropriate under certain circumstances, the CAPCO board has
breached and is breaching its fiduciary obligations by using
the Rights Plan to stand in the way of Eaton's offer under
the circumstances here, since the CAPCO defendants cannot
legitimately believe that Eaton's offer is unfair and cannot
demonstrate that Eaton's offer of $11.00 per share is
unfair. Thus, the Eaton offer represents an approximate 50%
premium over the previous trading price of CAPCO's stock on
the NYSE; and Eaton has not engaged in, and is not
threatening to engage in, any unfair or coercive takeover
tactics.
-9-<PAGE>
28. If defendants are not declared to be in breach of
their fiduciary duties by failing to redeem the CAPCO
Shareholder Rights ("poison pill"), and, if defendants are
not enjoined from using the Rights to frustrate Eaton's
proposal, Eaton will suffer irreparable injury in that Eaton
will lose the unique opportunity to acquire CAPCO. The public
shareholders of CAPCO will also lose the unique opportunity
to sell their shares to Eaton at a premium price.
29. Plaintiff has no adequate remedy at law.
SECOND CLAIM FOR RELIEF
30. Plaintiff repeats and realleges the allegations
contained in paragraphs 1 through 29 above.
31. The entire CAPCO board must stand for re-election
at the 1996 CAPCO annual stockholders' meeting. Defendants
are aware that, when the shareholders of CAPCO are given the
opportunity to vote for the nominees of Eaton (and thus in
support of Eaton's proposal) rather than the incumbents, the
strong likelihood is that the Eaton nominees will be elected.
The individual incumbent directors, as a group, currently own
less than one percent of the shares of CAPCO, while plaintiff
owns more than 7% of such shares.
32. Defendants are considering changing the schedule
that is currently in place for the CAPCO 1996 annual meeting.
Any delay of such meeting, or any change in the existing
record date, threatens to deprive plaintiff of the unique
opportunity to take
-10-<PAGE>
control of the CAPCO board on May 14, 1996. There is no
reason for any change in the current schedule (which was set
by the CAPCO board after it was informed of Eaton's interest
in acquiring the company) other than delaying Eaton's ability
to win the election contest and/or increasing the incumbent
CAPCO board's chances of defeating the Eaton acquisition
proposal. Any such change, motivated by such an improper
purpose, would violate defendants' fiduciary duties. Eaton
is entitled to a "level playing field" in the election
contest. Any delay beyond the May 14 meeting date will
irreparably damage Eaton and impede its efforts to acquire
CAPCO, by damaging its chances of prevailing in a proxy
contest and impeding the free exercise of the corporate
franchise that Eaton and the other shareholders of CAPCO are
entitled to as a matter of equity.
33. Plaintiff has no adequate remedy at law.
THIRD CLAIM FOR RELIEF
34. Plaintiff repeats and realleges the allegations
contained in paragraphs 1 through 33 above.
35. The Michigan Control Shares Act, Chapter 7B of the
Michigan Business Corporation Act, M.C.L. Section 450.1790-
99, provides that an acquiror without board approval of more
than 20% of the shares of a company subject to the Act shall
not have voting rights with respect to such shares unless, at
a meeting called pursuant to the provisions of the Act, the
other shareholders by majority vote determine to confer such
voting rights upon the acquiror. The Act thus functions as
significant deterrent to
-11-<PAGE>
unwelcome share acquisitions, since a prospective acquiror
may be denied the very valuable voting rights that an
acquiror normally seeks to obtain by purchasing shares.
36. The Control Shares Act applies only to corporations
that, among other requirements, have "substantial assets" in
the State of Michigan or have their principal place of
business or executive offices there. CAPCO does not have its
principal place of business or executive offices in Michigan.
Defendant CAPCO does not have "substantial assets" in the
State of Michigan. All of CAPCO's operating assets,
including all of its manufacturing operations, are located in
Brazil. Aside from approximately 2,300 square feet of leased
office space in Indiana, CAPCO does not have any U.S. assets
other than cash and receivables. In particular, CAPCO has no
tangible assets in Michigan. Nonetheless, defendants have
declared in public documents distributed to investors that
they have the ability to cause CAPCO to be covered by the
provisions of the Control Shares Act.
37. An actual controversy, within the meaning of 28
U.S.C. Section 2201 and the United States Constitution, Art.
III, exists between plaintiff and defendants concerning the
applicability of the Control Shares Act and the Business
Combination Act to CAPCO.
38. If the Control Shares Act is construed to apply to
CAPCO despite the fact that its only U.S. offices are in
Indiana, all its manufacturing facilities are in Brazil, and
it does not report ownership of any assets in Michigan in its
public filings, then the Act as applied to extend coverage to
CAPCO is an unconstitutional burden upon
-12-<PAGE>
interstate commerce that violates the provisions of the
Commerce Clause of the United States Constitution, Art. I,
Section 8. The mere fact that CAPCO is incorporated under
the laws of the State of Michigan is an insufficient basis
for the burdens and regulations of interstate commerce
imposed by the Act, in the absence of the subject corporation
having "substantial assets" within Michigan. The interstate
commerce being burdened is Eaton's interstate purchase of
CAPCO's shares for millions of dollars.
39. CAPCO is not currently subject to the Michigan
Business Combination Act, M.C.L. Sections 450.1775-84. That
statute provides that an acquiror of more than 10% of a
subject company's shares may not, except pursuant to a 90%
vote of all shareholders, and a two-thirds vote of
shareholders other than those defined as "interested" under
the statute, consummate a merger with the subject company for
a five-year period. Defendants have declared in public
documents distributed to investors that they have the ability
to cause CAPCO to be covered by the provisions of the
Business Combination Act. Any action by CAPCO's board of
directors to cause CAPCO to now become subject to the
provisions of the Business Combination Act would be a breach
of fiduciary duty, since there can be no lawful, legitimate
purpose served by CAPCO choosing to become subject to the
statute as a reaction to Eaton's proposal, which is at a fair
price and does not rely on any unfair or coercive tactics.
40. The application of either the Business Combination
Act or the Control Shares Act, or both, will irreparably harm
Eaton and its efforts to acquire control of CAPCO by imposing
onerous burdens upon Eaton's ability to acquire shares of
-13-<PAGE>
CAPCO and/or to consummate a merger with CAPCO, all in
violation of defendants' fiduciary duties and the United
States Constitution.
41. Plaintiff has no adequate remedy at law.
WHEREFORE, plaintiff demands judgment against
defendants:
A. Declaring and decreeing that defendants have
breached their fiduciary duties by rejecting Eaton's
acquisition proposals and by maintaining the "poison pill"
shareholder rights plan in place in response to Eaton's
merger proposal;
B. Requiring defendants to redeem the CAPCO
Shareholder Rights pursuant to their terms with respect to
the Eaton merger proposal;
C. Enjoining defendants from taking steps to alter, or
altering, the existing May 14, 1996 annual meeting date or
the March 20, 1996 record date for such meeting; and from
taking steps to adjourn, or adjourning, the May 14, 1996
meeting (except pursuant to a majority vote of the shares
present or voting by proxy at such meeting);
D. Declaring and decreeing that CAPCO is not subject
to the provisions of the Michigan Control Shares Act,
Business Corporation Act Section 7B, M.C.L. Sections
450.1790-99 inclusive, or, in the alternative, declaring and
decreeing, that application of said statute to CAPCO would
violate Art. I, Section 8 of the United States Constitution,
and enjoining defendants, temporarily, preliminarily, and
permanently, from enforcing the provisions of said statute
with respect to CAPCO;
-14-<PAGE>
E. Declaring and decreeing that any action by the
board of directors of CAPCO to cause CAPCO to become subject
to the provisions of the Michigan Business Combination Act,
M.C.L. Sections 450.1775-84, would be a breach of fiduciary
duty, and enjoining defendants, temporarily, preliminarily
and permanently, from enforcing the provisions of said
statute with respect to CAPCO; and
F. Granting such other and further relief as the Court
may deem just and proper.
CLARK HILL P.L.C.
By: /s/
J. Thomas Lenga (P16551)
1600 First Federal Building
Detroit, Michigan 48226
(313) 965-8300
Attorneys for Plaintiff,
Eaton Corporation
Date: March 13, 1996
-15-
EXHIBIT 4
NEWS RELEASE
EATON CORPORATION
Eaton Center
Cleveland, OH 44114-2584
216/523-5000
DATE March 14, 1996
CONTACT Renald M. Romain (216) 523-4736 - Media
William E. Hartman (216) 523-4501 - Financial
Community
FOR RELEASE IMMEDIATELY
EATON CORPORATION COMMENCES LITIGATION AGAINST CAPCO
IN MICHIGAN FEDERAL COURT
CLEVELAND, OH....Eaton Corporation announced today that it had
commenced litigation against CAPCO Automotive Products
Corporation in the federal district court in Detroit, Michigan
in connection with Eaton's proposal to acquire all of CAPCO
outstanding common stock for $11 per share in cash.
Eaton's complaint seeks to require CAPCO to redeem its
Shareholder Rights Plan and to prevent CAPCO from changing the
May 14, 1996 date for its annual meeting of stockholders or the
March 20 record date for that meeting, and requests the court
to declare that CAPCO is not subject to the provisions of
certain Michigan anti-takeover statutes. The suit also seeks
to prevent CAPCO from acting to become covered by these
statutes.
Eaton Corporation is a global manufacturer of highly engineered
products which serve vehicle, industrial, construction,
commercial and aerospace markets. Principal products include
truck transmissions and axles, engine components, hydraulic
products, electrical power distribution and control equipment,
ion implanters and a wide variety of controls. Headquartered
in Cleveland, the company has 52,000 employees and 150
manufacturing sites in 23 countries around the world. Sales
for 1995 were $6.8 billion.
EXHIBIT 5
NEWS RELEASE
EATON CORPORATION
Eaton Center
Cleveland, OH 44114-2584
216/523-5000
DATE March 18, 1996
CONTACT Renald M. Romain (216) 523-4736 - Media
William E. Hartman (216) 523-4501 - Financial
Community
FOR RELEASE IMMEDIATELY
EATON CORPORATION ANNOUNCES TENDER OFFER FOR CAPCO
CLEVELAND, OH....Eaton Corporation announced today that it will
be commencing a cash tender offer at a price of $11 per share
for all of the outstanding shares of common stock, and the
associated preferred stock purchase rights, of CAPCO
Automotive Products Corporation. In addition, Eaton also said
that after consummation of the tender offer it intends to
acquire any remaining CAPCO shares in a cash merger at the same
price as paid in the tender offer.
Eaton Corporation is a global manufacturer of highly engineered
products which serve vehicle, industrial, construction,
commercial and aerospace markets. Principal products include
truck transmissions and axles, engine components, hydraulic
products, electrical power distribution and control equipment,
ion implanters and a wide variety of controls. Headquartered
in Cleveland, the company has 52,000 employees and 150
manufacturing sites in 23 countries around the world. Sales
for 1995 were $6.8 billion.
