<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)
------------------------
GROW GROUP, INC.
(Name of Subject Issuer)
GGI ACQUISITION, INC.
THE SHERWIN-WILLIAMS COMPANY
(Bidders)
SHARES OF COMMON STOCK
(Title of Class of Securities)
39382-010
(Cusip Number of Class of Securities)
------------------------
LOUIS E. STELLATO, ESQ.
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
THE SHERWIN-WILLIAMS COMPANY
101 PROSPECT AVENUE, N.W.
CLEVELAND, OHIO 44115-1075
(216) 566-2000
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidders)
------------------------
Copy to:
JOHN A. HEALY, ESQ.
ROGERS & WELLS
200 PARK AVENUE
NEW YORK, NEW YORK 10166
(212) 878-8000
------------------------
<PAGE> 2
This Amendment No. 1 amends and supplements the Tender Offer Statement on
Schedule 14D-1 originally filed with the Commission on May 8, 1995 (the
"Schedule 14D-1") by GGI Acquisition, Inc. (the "Purchaser"), a New York
corporation and a wholly-owned subsidiary of The Sherwin-Williams Company, an
Ohio corporation (the "Parent"), relating to the tender offer of the Purchaser
to purchase all of the outstanding shares of Common Stock, par value $0.10 per
share (the "Shares"), of Grow Group, Inc., a New York corporation (the
"Company"), and, unless and until the Purchaser declares that the Rights
Condition (as defined in the Offer to Purchase) is satisfied, the associated
Common Stock Purchase Rights (the "Rights") issued pursuant to the Rights
Agreement, dated as of February 11, 1988, as amended and restated as of August
7, 1992, and as further amended on April 30, 1995, between the Company and The
Bank of New York, as Rights Agent, at a purchase price of $19.50 per Share (and
associated Right), net to the seller in cash, without interest thereon, upon the
terms and subject to the conditions set forth in the Offer to Purchase, dated
May 8, 1995 (the "Offer to Purchase") and in the related Letter of Transmittal
(which, together with any supplements or amendments, collectively constitute the
"Offer"). Unless the context otherwise requires, terms not otherwise defined
herein have the meanings ascribed to them in the Schedule 14D-1 and the Offer to
Purchase.
ITEM 10. ADDITIONAL INFORMATION.
(e) On Monday, May 8, 1995, the Parent filed a lawsuit against the
Company, the Company's directors, Imperial Chemical Industries PLC ("ICI") and
GDEN Corporation ("GDEN") in the Supreme Court of the State of New York, New
York County (the "State Action"), and also commenced an action against the
Company, ICI and GDEN in the United States District Court, Northern District of
Ohio, Eastern Division (the "Federal Action"). Copies of the Parent's complaints
in the State Action and the Federal Action have been filed as Exhibits (c)(1)
and (c)(2), respectively, to this Amendment No. 1.
The State Action
----------------
The complaint in the State Action alleges, among other things, that the
Company and its directors breached their fiduciary duties in several respects,
including their failure to negotiate with the Parent in order to ensure the best
price for the Company's shareholders, their execution of provisions in the ICI
Merger Agreement designed to impede competing bids, and their removal of certain
legal impediments to the ICI Offer without affording similar benefits to
competing bidders. The complaint also alleges that ICI and GDEN aided and
abetted the Company's directors in breaching their fiduciary duties to the
Company's shareholders. The complaint seeks injunctive and other relief.
On Monday afternoon, the court in the State Action (i) scheduled a hearing
for May 25, 1995 on the Parent's motion for a preliminary injunction against the
ICI Offer, (ii) deferred any decision on the Parent's motion for an order that
the Company furnish its stockholder list to the Parent, based on the Company's
representation to the court that its board of directors will meet Tuesday night
(May 9) to consider the Offer and the Parent's request for a stockholder list,
and (iii) denied the Parent's request for a temporary restraining order
prohibiting ICI from exercising certain aspects of the Corimon Option with
respect to Corimon's 25% block of the Company's stock, but agreed to consider
that issue at the May 25 preliminary injunction hearing on May 25, 1995.
The foregoing description of the State Action is qualified in its entirety
by reference to the text of the complaint in that action, a copy of which has
been filed as Exhibit (c)(1) to this Amendment No. 1 and is incorporated herein
by reference in its entirety.
The Federal Action
------------------
The complaint in the Federal Action alleges, among other things, that the
Tender Offer Statement on Schedule 14D-1 (including the Offer to Purchase
contained therein) filed by ICI and the Statement on Schedule 14D-9 filed by the
Company with the Commission contain misstatements and omissions of material
facts in violation of Section 14(e) of the Exchange Act. The complaint seeks
injunctive and other relief.
The foregoing description of the Federal Action is qualified in its
entirety by reference to the text of the complaint in that action, a copy of
which has been filed as Exhibit (c)(2) to this Amendment No. 1 and is
incorporated herein by reference in its entirety.
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(f) The information contained in the press release filed as Exhibit
(a)(10) to this Amendment No. 1 is incorporated herein by reference in its
entirety.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
(a)(10) Text of press release issued by the Parent on May 9, 1995.
(c)(1) Complaint, dated May 8, 1995, captioned The Sherwin-Williams Company v. Grow
Group, Inc., et al., filed in the Supreme Court of the State of New York,
County of New York.
(c)(2) Complaint, dated May 8, 1995, captioned The Sherwin-Williams Company v.
Imperial Chemical Industries PLC, et. al., filed in the United States
District Court, Northern District of Ohio (Eastern Division).
(z)(1) Power of Attorney (contained on Signature Page to original Schedule 14D-1,
filed with the Commission on May 8, 1995).
</TABLE>
3
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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: May 9, 1995
GGI ACQUISITION, INC.
By: /s/ L.E. Stellato*
-------------------------------
L.E. Stellato
Secretary
THE SHERWIN-WILLIAMS COMPANY
By: /s/ L.E. Stellato*
-------------------------------
L.E. Stellato
Vice President, General Counsel
and Secretary
*By: /s/ Jeffrey P. Cohen
-------------------------------
Jeffrey P. Cohen
Attorney-in-fact
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<TABLE>
EXHIBIT INDEX
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
(a)(10) Text of press release issued by the Parent on May 9, 1995.
(c)(1) Complaint, dated May 8, 1995, captioned The Sherwin-Williams Company v. Grow
Group, Inc., et al., filed in the Supreme Court of the State of New York, County
of New York.
(c)(2) Complaint, dated May 8, 1995, captioned The Sherwin-Williams Company v. Imperial
Chemical Industries PLC, et. al., filed in the United States District Court,
Northern District of Ohio (Eastern Division).
(z)(1) Power of Attorney (contained on Signature Page to original Schedule 14D-1, filed
with the Commission on May 8, 1995).
</TABLE>
5
<PAGE> 1
THE SHERWIN-WILLIAMS COMPANY
Contact: Conway G. Ivy
Vice President -- Corporate Planning and Development
(216) 566-2140
FOR IMMEDIATE RELEASE
May 9, 1995
Cleveland, Ohio, May 9, 1995 -- The Sherwin-Williams Company (NYSE: SHW), which
yesterday announced a tender offer at $19.50 per share for all the common stock
of Grow Group, Inc., reported today that on Monday a state court judge in New
York scheduled a hearing for May 25, 1995 on Sherwin-Williams' motion for a
preliminary injunction against the $18.10 per share tender offer for Grow
Group's shares being made by Imperial Chemical Industries PLC ("ICI"). The same
judge deferred his decision on Sherwin-Williams' motion for an order that Grow
Group furnish its stockholder list to Sherwin-Williams, based on Grow Group's
representation to the court that its board of directors will meet Tuesday night
(May 9) to consider Sherwin-Williams' tender offer and its request for a
stockholder list. The court also denied Sherwin-Williams' request for a
temporary restraining order prohibiting ICI from exercising certain aspects of
an option granted by Corimon Corporation to ICI with respect to Corimon's 25%
block of Grow Group's stock, but agreed to consider that issue at the May 25
preliminary injunction hearing.
<PAGE> 1
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
- - - - - - - - - - - - - - - - - - - - x
THE SHERWIN-WILLIAMS COMPANY, :
Plaintiff, : Index No. _________/95
- against - : COMPLAINT
GROW GROUP, INC., RUSSELL BANKS, :
HAROLD G. BITTLE, ARTHUR W. BROSLAT,
PHILIPPE ERARD, LLOYD FRANK, :
JOHN F. GLEASON, PETER L. KEANE,
ANGUS N. MACDONALD, ROBERT J. MILANO, :
TULLY PLESSER, WILLIAM TURNER,
JOSEPH M. QUINN, IMPERIAL CHEMICAL :
INDUSTRIES PLC, and GDEN CORPORATION,
Defendants. :
- - - - - - - - - - - - - - - - - - - - x
Plaintiff THE SHERWIN-WILLIAMS COMPANY ("Sherwin-Williams"),
by its counsel, alleges, upon knowledge as to itself and upon information and
belief as to all other matters, as follows:
NATURE OF THE ACTION
1. This case arises out of two competing all cash tender
offers for Grow Group, Inc. ("Grow"), a New York corporation. Sherwin-Williams
has offered to acquire all of the outstanding common stock of Grow for $19.50
per share. Sherwin-Williams' offer is scheduled to expire on June 5, 1995 and
is not contingent on financing. Defendant Imperial Chemical Industries, Inc.
("ICI"), through a subsidiary, has offered to acquire all of the outstanding
common stock of Grow for an average price of approximately $17.95 per share in
cash. (As explained below,
<PAGE> 2
Grow's Board of Directors approved a two-tier transaction, in which one
stockholder would receive $17.50 per share, and the remaining stockholders
$18.10.) The ICI offer is scheduled to expire on June 1, 1995. Grow and its
directors have agreed to accept and recommend to Grow's shareholders the ICI
offer, and have refused even to negotiate with Sherwin-Williams.
Sherwin-Williams therefore has no recourse but to seek the assistance of this
Court to compel Grow and its directors to carry out their fiduciary duties and
negotiate with Sherwin-Williams, the higher bidder. If Sherwin-Williams'
efforts to acquire Grow are impeded by the breaches of duty described herein,
Sherwin-Williams will lose the opportunity to have its offer considered on its
own merits -- that is, considered without impermissible impediments imposed by
Grow. It will lose forever the opportunity to have its proposal fairly
considered by the Grow directors and will lose the irreplaceable opportunity to
create a new combined Sherwin-Williams/Grow entity with unique business
strengths. In addition, Sherwin-Williams, like all Grow shareholders, will be
denied the opportunity to receive a substantially higher value for its Grow
stock.
2. In recommending the ICI offer, Grow's board has
agreed and recommended that Grow's separate existence be dissolved, and its
stockholders give up the entirety of their equity stakes in Grow for cash.
Even though Grow is for sale, however, it is not for sale to the highest
bidder, or for the highest price. From the outset, the Grow board has firmly
resolved to deal with only one bidder, ICI, to the exclusion of the other
bidder; Sherwin-Williams has been prevented from having any opportunity to bid
for Grow. On
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the other hand, ICI has been allowed access to confidential information about
Grow and has been allowed to negotiate a definitive agreement to buy Grow. Grow
has agreed to pay ICI an enormous "termination" fee of $8 million if ICI's bid
fails.
3. Further, Grow's board has resolved to permit a highly
favorable option agreement between ICI and Grow's largest stockholder, Corimon
Corporation (the "Option Agreement"). Pursuant to the Option Agreement, ICI
has the irrevocable option to acquire Corimon Corporation's 25% interest in
Grow for $17.50 per share, $.60 per share less than ICI's tender offer price of
$18.10 per share, thereby locking up a substantial amount of Grow's stock to
the detriment of any competing bidder. These actions were designed not to
obtain the highest price for Grow's stockholders, but to deter a competing,
potentially higher bid. Sherwin-Williams repeatedly has indicated its
interest in acquiring Grow, yet Sherwin-Williams has not even been allowed to
talk to Grow.
4. This action seeks declaratory and injunctive relief
against the implementation of (a) an Agreement and Plan of Merger dated as of
April 30, 1995 (the "Merger Agreement") among Grow, ICI, GDEN Corporation, a
New York corporation and an indirect wholly owned special purpose subsidiary of
ICI and (b) the Option Agreement between ICI and Corimon Corporation, which was
approved by the Grow Board of Directors, and (c) other impediments defendants
have imposed to block Sherwin-Williams' bid. As set forth below, the Merger
Agreement and Option Agreement are designed to favor ICI's clearly inferior bid
and to deter a higher, all- cash bid. The Merger Agreement and Option
Agreement are the product of
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a process that is impermissible under New York law -- because the process is
not designed to achieve the best available transaction for Grow's stockholders,
but rather to deliver Grow into the hands of ICI cheaply, and entrench Grow's
current management.
4a. The Merger Agreement provides that Grow and its Board
of Directors will take a series of actions to eliminate various legal
impediments ("Shark Repellents") to ICI's Tender Offer and Merger, including
modifying Grow's "Poison Pills" rights plan; giving the Board approvals
required under Grow's charter and the New York Anti-Takeover Statute; and
appointing ICI's representative to Grow's Board when ICI completes its tender
offer. The Merger Agreement further provides, subject to certain limited
fiduciary outs, that the same accommodations will not be extended to any other
bidder, presumably including Sherwin-Williams. This grossly disparate
treatment of two competing bidders is impermissible under New York law.
5. While Sherwin-Williams repeatedly has sought to meet
with Grow to discuss acquiring all of the common stock of Grow in an all-cash
transaction, Grow consistently has refused to do so, even though such
discussions were necessary for the Board of Directors of Grow to comply with
its fiduciary duties. In spite of these fiduciary duties, Grow never once
agreed to begin, or even to schedule, discussions with Sherwin-Williams. Grow
declined to enter into a confidentiality agreement with Sherwin-Williams
providing for the sharing of confidential business information necessary for
Sherwin-Williams to make its best and highest offer for Grow, even though
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Sherwin-Williams sent Grow such an agreement executed by Sherwin-Williams.
Instead, two weeks before announcing its merger with ICI, Grow told
Sherwin-Williams that Sherwin-Williams was to be excluded from the bidding
process. Grow subsequently refused to talk with Sherwin-Williams even after
Grow announced that it was in negotiations to be acquired at $18.10 per share in
cash, and Sherwin-Williams then offered to negotiate with Grow for an all-cash
offer.
6. Grow and ICI have conspired to have Grow's directors
not merely ignore, but actually to breach, the duties owed by directors who
sell a New York corporation. Grow's board had a duty:
(a) not to act unreasonably in response to a bidder
seeking to explore a higher, all-cash offer to acquire the company;
(b) a duty to inform itself fully before agreeing to the
Merger Agreement or the Option Agreement;
(c) a duty not to deter or obstruct (and indeed, a duty
to encourage) other, higher bids for Grow when the sale of the company is
occurring;
(d) a duty to determine upon a reasonable and fully
informed basis that the ICI transaction was, in fact, the best available to
Grow stockholders; and
(e) a duty to make full and fair disclosure to its
stockholders about all of these matters. Each of these duties has been
breached by the Board of Directors of Grow. For these reasons and others set
out below, the Merger Agreement and the Option Agreement are unreasonable,
unlawful, and unenforceable, and should
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be enjoined, and Grow and its Board of Directors should be directed to dismantle
or otherwise neutralize the Shark Repellents in the same way they have agreed to
do for ICI, so that Sherwin-Williams successfully may present its superior offer
to Grow's stockholders.
THE PARTIES
7. Plaintiff Sherwin-Williams is an Ohio corporation
with its principal place of business in Cleveland, Ohio. Sherwin-Williams is
engaged in the manufacture, distribution and sale of paint, coatings, and
related products to professional, industrial, commercial and retail customers
throughout North America. Sherwin-Williams is the beneficial owner of 700,000
shares of Grow.
8. Defendant Grow is a New York corporation with its
principal executive offices in New York, New York. Grow produces coatings,
paints and household products. There are approximately 16.1 million Grow
shares outstanding. Grow's stock is registered with the Securities and
Exchange Commission and is traded on the New York Stock Exchange. Grow has
significant business operations located in New York and at least 10% of Grow's
voting stock is owned beneficially by residents of New York.
9. Defendant Russell Banks is President and Chief
Executive Officer and a director of Grow.
10. Defendant Joseph M. Quinn is Executive Vice President
and Chief Operating Officer and a director of Grow.
11. Defendant John F. Gleason is Executive Vice President
and a director of Grow.
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12. Defendant Lloyd Frank is Secretary and a director of
Grow.
13. Defendants Harold G. Bittle, Arthur W. Broslat,
Philippe Erard, Peter L. Keane, Angus N. MacDonald, Robert J. Milano, Tully
Plesser, and William H. Turner are directors of Grow (together with Banks,
Quinn, Gleason and Frank, the "Grow directors").
14. Defendant ICI is a corporation organized under the
laws of England with its principal place of business in London, England. ICI
and its subsidiaries form one of the major chemical companies in the world.
15. Defendant GDEN Corporation is a New York corporation
and an indirect, wholly owned special purpose subsidiary of ICI formed for the
purpose of facilitating ICI's acquisition of Grow.
CORIMON
16. Corimon S.A.C.A. is an industrial company organized
under the laws of Venezuela, with its principal place of business in Caracas,
Venezuela. Corimon Corporation is a Delaware corporation and a subsidiary of
Corimon S.A.C.A. (Corimon S.A.C.A. and Corimon Corporation are collectively
referred to herein as "Corimon"). Corimon owns 4,025,841 shares, which
constitutes approximately 25%, of Grow's common stock (the "Corimon Shares").
17. When Corimon acquired its stock in Grow it was
required by Grow to enter into a Standstill Agreement dated July 21, 1992 (the
"Standstill Agreement"). Pursuant to the Standstill Agreement, three designees
of Corimon have been elected
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to the Board of Directors of Grow. Those designees are defendant Phillipe
Erard, Chairman, President and Chief Executive Officer of Corimon C.A.
S.A.C.A., defendant Arthur Broslet, Executive Vice President and Chief
Financial Officer of Corimon C.A. S.A.C.A., and defendant Harold Bittle, who
serves as a consultant to Corimon C.A. S.A.C.A.
18. The Standstill Agreement, as amended, will remain in
effect until, in general, October 1996. Under the Standstill Agreement,
Corimon is prohibited from acquiring more than 28% of the voting common stock
of Grow, and (subject to very narrow exceptions) Corimon may not sell its block
of Grow stock to a third party without the approval of Grow's Board of
Directors who are not designees of Corimon. The Standstill Agreement contains
numerous other provisions designed to entrench Grow's management including, for
example, prohibitions against Corimon voting its shares for any nominee to
Grow's board not approved by Grow's incumbent directors, and against Corimon
even discussing with third parties any change of control transaction involving
Grow.
BACKGROUND OF THE ACTION
The Active Buyout Interest in Grow
19. In January 1995, Grow announced that it had retained
Wertheim Schroder & Co. ("Wertheim"), an investment bank, to assist Grow in
reviewing its strategic alternatives, signaling that the company would be for
sale.
20. On February 3, 1995, Sherwin-Williams placed a
telephone call to Grow after Grow issued the press release
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concerning its retention of Wertheim. The following week, Sherwin-Williams
telephoned Mr. Banks to express Sherwin-Williams' interest in acquiring Grow if
Grow determined that a sale was strategically attractive. Mr. Banks replied
that any decisions about Grow's future would be made by the Board of Directors
of Grow, thereby implying that Mr. Banks was effectively not involved in that
process. Mr. Banks stated that he would ask a Wertheim representative, Ian
Kaufthal, to call Sherwin-Williams, but Sherwin-William received no call from
Mr. Kaufthal or any other Grow representative.
21. In mid-March 1995, Sherwin-Williams telephoned
defendant Russel Banks and informed him that no one from Wertheim had contacted
Sherwin-Williams as had been promised. Mr. Banks explained that no one had
called because Mr. Banks understood that Sherwin-Williams only wanted to
acquire Grow's coatings business. Sherwin-Williams corrected Mr. Banks'
misperception by stating that Sherwin-Williams was interested in acquiring Grow
as a whole. Mr. Banks suggested that Sherwin-Williams contact Wertheim.
22. Sherwin-Williams called Wertheim and stated that
Sherwin-Williams would like to discuss acquiring Grow. Sherwin-Williams
thereafter received a confidentiality agreement and telephoned Grow to discuss
it. A tentative agreement was reached subject to further review by Grow.
23. By late March 1995, Grow's availability for sale, and
Sherwin-Williams' interest, in particular, were common knowledge. On March 29,
1995, for example, financial analyst Dan Dorfman reported on the CNBC
television news segment "The Dorfman
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Report" that "at least three companies" -- ICI, Sherwin-Williams, and Pratt &
Lambert United Inc. -- were discussing the prospects of buying Grow.
Mr. Dorfman also reported that "[t]alk is [Grow] could go for $19 to $21 a
share, or about $320 millon," and that Wertheim had indicated to one money
manager that "there's active buyout interest".
24. Grow never called or sent a revised confidentiality
agreement to Sherwin-Williams and never returned Sherwin-Williams' telephone
calls. Finally, an attorney with Skadden, Arps, Slate, Meagher & Flom, counsel
to Grow, telephoned Sherwin-Williams to discuss the confidentiality agreement.
Sherwin-Williams then received a revised confidentiality agreement on March 31,
1995. Sherwin-Williams executed the agreement and returned copies to Grow for
delivery on April 3, 1995.
25. Sherwin-Williams never received a signed
confidentiality agreement from Grow. Grow refused to discuss the agreement
with Sherwin-Williams and suggested that Sherwin-Williams speak with Wertheim.
All of Sherwin-Williams' phone calls to Wertheim went unanswered.
26. On April 17, 1995, Sherwin-Williams telephoned
Mr. Bank who informed Sherwin-Williams that Sherwin-Williams would be excluded
from the bidding process for Grow. In response, Sherwin-Williams revoked its
offer to enter into a confidentiality agreement with Grow. Following Grow's
April 17 rejection of Sherwin-Williams, Sherwin-Williams' financial advisor,
Lazard, continued to be in contact with Grow through Wertheim and expressed
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Sherwin-Williams' continued interest in pursuing a transaction with Grow.
27. On April 28, 1995, Grow publically announced that it
was in talks with an unidentified party who would buy 100% of Grow's stock for
$18.10 per share in cash. According to Grow, the buyer had "substantially
completed" its due diligence review.
28. Later that same day, April 28, Sherwin-Williams sent
Russell Banks, President and Chief Executive Officer of Grow, a letter by
facsimile, overnight and hand delivery. The letter stated, among other things,
that Sherwin-Williams was "troubled to learn" that Grow was in the process of
negotiating a sale of Grow to another party. Sherwin-Williams expressed
"concern" that despite Sherwin-Williams' "repeated indications of serious
interest" in a transaction with Grow, Grow had decided to negotiate a
definitive agreement with another bidder "without giving [Sherwin-Williams]
access to the information that would allow [Sherwin-Williams] to present [its]
best possible proposal." After recounting the recent efforts by
Sherwin-Williams to pursue a transaction with Grow, the letter stated:
Given [Sherwin-Williams'] financial strength,
financing will not represent an impediment to the consummation
of a transaction on an all-cash basis. . . .
We urge you not to enter into or to agree to any
merger or other significant transaction or agreement, or to
take any additional defensive measures (including "no shop",
break-up fee or similar arrangements) or other actions, that
would adversely affect the ability of your stockholders to
receive the MAXIMUM value for their shares.
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(Emphasis added). The letter concluded by repeating Sherwin-Williams' desire
to obtain immediate access to the information which Grow had refused to provide
to Sherwin-Williams, and stated that Sherwin-Williams was "prepared to enter
into immediate discussions with you and your directors, management and advisors
about a transaction with Sherwin-Williams." The letter included the names and
the business and home telephone numbers where Sherwin-Williams senior
executives could be reached over the weekend. Copies of the letter were sent
to Lloyd Frank, Grow's General Counsel, to Wertheim, to Grow's outside legal
counsel, and to each member of Grow's Board of Directors.
29. Neither Grow, its Board of Directors nor any of its
advisors ever responded in any manner to Sherwin-Williams' April 28 letter.
THE PROPOSED ICI MERGER
30. On Monday, May 1, 1995, Grow and ICI announced that
they and GDEN had entered into the Merger Agreement pursuant to which ICI would
offer to purchase all of the outstanding shares of Grow for $18.10 per share,
and that ICI and Corimon had entered into the Option Agreement, with the
consent of Grow, pursuant to which ICI was granted an irrevocable option to
purchase Corimon's 25% interest in Grow for $17.50 per share.
31. The Merger Agreement and the Option Agreement contain
provisions plainly designed to "lock up" the transaction for ICI.
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32. Under the Merger Agreement, Grow is to be merged into
ICI's subsidiary, GDEN. Grow and ICI agreed that as soon as practicable ICI
would commence a tender offer pursuant to which ICI will offer to pay Grow
stockholders $18.10 in cash for each of their shares of common stock. The
Merger Agreement provides that Grow and its Board of Directors will take a
series of actions to neutralize the various "shark repellant" provisions
applicable to Grow through its charter, its by-laws and by Statute:
(a) it obligates Grow to amend its "poison pill", which
would otherwise trigger the stock deletion provisions of the Rights Plan, to
allow the merger to proceed;
(b) it requires Grow to use its best efforts to secure
stockholder approval for the Merger Agreement;
(c) it purports to reflect the Board of Director
approvals required under the New York Anti-Takeover Statute (Section 912 of the
New York Business Corporation Law) and under Section 11 of Grow's Certificate
of Incorporation; and,
(d) it provides that upon completion of ICI's tender
offer ICI's representatives will become a majority of the Board of Directors of
Grow. (Absent this last provision, Grow's staggered board and other charter
and by-law provisions could prevent ICI from gaining control of the Board, and
thereby could prevent ICI from completing its crucial second-stage, "cash-out"
merger.)
33. The Merger Agreement contains a "no-shop" provision,
Section 6.04, which prohibits Grow and the director defendants from (i) taking
any action to solicit, initiate or encourage a competing bid for Grow, or (ii)
subject to the Grow Board of Directors'
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fiduciary duties as advised by counsel, engaging in any negotiations with a
competing bidder or providing any prospective bidder with any non-public
information about Grow or with access to Grow's books, records or properties.
34. Section 11.04 of the Merger Agreement provides that
Grow will pay ICI an $8 million fee (the "Break-Up Fee") if Grow is acquired by
a competing bidder. This $8 million Break-Up Fee is payable if (i) Grow agrees
to be acquired by an entity other than ICI, (ii) the Grow board withdraws or
materially modifies its recommendation of the ICI Offer or the Merger Agreement
to stockholders, or (iii) any person or group (other than Corimon) acquires
more than 25% of Grow's common stock. Astonishingly, the Break-Up Fee
purportedly is payable whatever ICI's conduct might be -- including if it
defaults in its obligations under the Merger Agreement or simply walks away
from the transaction, so long as one of the three triggering events described
above occurs. If ICI's bid fails for any reason, and Grow is ever acquired by
any other entity at any time, ICI is purportedly entitled, under the express
terms of the Merger Agreement, to receive the $8 million Break-Up Fee.
Clearly, no careful, prudent Board of Directors possibly could approve such a
provision. Compounding the misconduct here, ICI's and Grow's documents
delivered to Grow's stockholders fraudulently misrepresent the scope and
substance of the Break-Up Fee.
35. The Option Agreement provides that Corimon
irrevocably grants to ICI an option (the "Option") to purchase the 4,025,841
Corimon Shares, which constitute approximately 25% of
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Grow's outstanding common stock, for $17.50 per share (the "Option Price").
ICI may exercise the Option provided (i) ICI accepts for payment all shares of
Grow that have been validly tendered and not withdrawn pursuant to ICI's tender
offer, and (ii) the number of shares accepted for payment by ICI, together with
the Corimon Shares, constitutes over 50% of the outstanding shares of Grow.
35a. This arrangement between Corimon and ICI, as approved
by Grow, effectively precludes any competing offer against ICI's bid. As the
beneficial owner of the 25% of Grow common stock formerly owned by Corimon, ICI
may vote these shares in addition to the 4% owned by Grow's management and
3 1/2% owned by Grow's Employee Stock Ownership and Savings Plan and thereby
block any competing bid. Because a competing bid would need 66 2/3 of the
shares to be successful, the Option Agreement renders any competing offer, no
matter how high, futile.
36. Further, under the Option Agreement, ICI may compel
Corimon to tender the Corimon Shares into ICI's tender offer (in which event,
Corimon must kick back $.60 per share to ICI to preserve ICI's discriminatory
discount) and ICI may prohibit Corimon from subsequently withdrawing such
tendered shares until the Option expires, thereby effectively preventing a
competing bidder from acquiring Corimon's Grow Shares. The defendants
structured and imposed these provisions on Corimon even though there are very
serious doubts as to their legality under the Williams Act provisions of the
federal securities laws. The Williams Act rules require among other things
that tendered shares
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may be withdrawn at any time through completion of a tender offer, and that all
tendering stockholders must receive the same price.
37. As required by the Standstill Agreement between Grow
and Corimon, Grow's directors who are not designees of Corimon have adopted a
resolution permitting Corimon to enter into and perform its obligations under
the Option Agreement. The $.60 per share and other concessions extracted from
Corimon by Grow's insiders for this required consent apparently troubled even
them, because they required Corimon in Section 2.4 of the Option Agreement to
waive all fiduciary duty claims against Grow's directors.
38. ICI and Corimon agreed or reached an arrangement or
understanding, at least orally, to enter into the Option Agreement before Grow
Board of Directors approved the Merger Agreement or the Option Agreement.
Thus, at the time Grow's Board of Directors approved the ICI Merger and the
Option Agreement, ICI was already the "beneficial owner" of more than 20% of
Grow's stock (within the meaning of the New York Anti-Takeover Statute and of
Section 11 of Grow's Certificate of Incorporation).
39. The Break-Up Fee, the Option Agreement and the
provisions of the Merger Agreement which neutralize the Shark Repellents for
the ICI merger (collectively, the "Lockups") are designed to block competing
bids for Grow by dramatically tilting the playing field in ICI's favor.
Regardless of how they are exercised, the Lockups would: (a) impose a massive
economic burden upon any competing offer, by having Grow give away $8 million;
and (b) force a competing bidder to pay at least an additional $2.4 million
more than ICI to acquire Corimon's 25% interest in Grow --
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<PAGE> 17
if the competing bidder can acquire Corimon's shares at all. If Grow is
acquired by anyone other than ICI, the costs imposed by these Lockups will be
borne by that acquiror.
40. Grow's motive in agreeing to the Lockups is to
entrench and enrich Grow's management, including defendants Banks, Quinn and
Gleason, in their current positions as executives of Grow. Banks, Quinn and
Gleason have apparently concluded that ICI is the company most likely to permit
their continuance in office.
41. In connection with Grow's management's efforts to
entrench themselves through the ICI merger, the Board of Directors of Grow
failed adequately to inform themselves of the relevant facts and circumstances.
As a result, Banks, Quinn and Gleason were able to secure the approval of
Grow's directors for the Lockups in breach of the directors' fiduciary duties.
42. The Lockups are unlawful because they were entered
into in breach of the fiduciary duties owed by Grow's directors to Grow's
stockholders. The Lockups cannot be justified as needed to induce a bidder to
make an offer for Grow; cannot be justified as needed to secure an enhanced
price in an ongoing bidding contest; and cannot be said to impose only a scant
burden on other bidders when in fact the burden is substantial.
43. Grow entered into the Lockups (a) despite knowing
that potential acquirors other than ICI (including Sherwin-Williams) were
interested in making offers to acquire Grow; (b) after refusing to obtain
indications whether such alternative buyers would offer terms more attractive
to Grow stockholders than those offered by ICI; (c) without being under any
necessity to
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agree to the Lockups to induce ICI to agree to acquire Grow; and (d) despite
knowing that ICI's proposed all-cash transaction would end the Grow
stockholders' ability to receive a premium for relinquishing control of their
company to ICI. No reasonable basis existed for a Grow director to conclude
that the Lockups would achieve for Grow's stockholders the highest price for
their Grow shares.
44. To the contrary, the very structure of the Lockups
makes clear that they encourage just the opposite. The Lockups not only punish
higher competing bids; they actually reward ICI for having made a lowball bid
and deter it from making a superior one.
45. In the SEC Schedule 14D-1, ICI states that "THE BOARD
OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT THE OFFER AND THE
MERGER DESCRIBED HEREIN ARE FAIR TO, AND IN THE BEST INTEREST OF, THE COMPANY'S
SHAREHOLDERS". This statement implicitly represented that the Board of
Directors of Grow had an informed basis upon which to reach this conclusion.
The Grow Board of Directors plainly did not have such an informed basis having
never engaged in discussions with Sherwin-Williams and having never made any
investigation as to whether Sherwin-Williams could or would in fact offer a
better alternative to ICI's bid.
THE SHERWIN-WILLIAMS TENDER OFFER
46. After Grow refused to open discussions with
Sherwin-Williams, Sherwin-Williams, on May 8, 1995, commenced a tender offer
for all of Grow's stock. Sherwin-Williams announced that it would offer $19.50
per share for each share of Grow's outstanding common stock, and its intention
to subsequently merge Grow into a
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subsidiary of Sherwin-Williams. The Sherwin-Williams offer is far more
attractive than the ICI proposal. Sherwin-Williams is offering to pay $314
million for Grow -- at least $25 million more than ICI and $1.40 more per share
of Grow stock than the $18.10 price payable by ICI to the Grow shareholders
other than Corimon.
47. The Sherwin-Williams tender offer is conditioned
upon, among other things, (a) obtaining at least 66 2/3% of the common stock of
Grow; (b) invalidation of the $8 million Break-Up Fee; (c) approval by the
Board of Directors of Grow of a memorandum of understanding with respect to the
merger, pursuant to Section 11 of Grow's Certificate of Incorporation; (d)
approval by the Board of Directors of Grow of either the purchase of shares
pursuant to the offer or the merger, pursuant to New York Anti-Takeover
Statute; (e) an agreement by Grow and its Board of Directors that upon
consummation of the offer, the Board of Directors of Grow will be reconstituted
such that the percentage of the Board represented by Sherwin-Williams'
designees will be as nearly as practicable the same as the percentage of
outstanding shares owned by Sherwin-Williams, and in any event at least a
majority of the Board; and, (f) modification of Grow's "poison pill" Rights
Agreement.
48. Sherwin-Williams hereby reaffirms its readiness to
meet with Grow representatives to discuss Sherwin-Williams' tender offer and
the terms of a merger.
IRREPARABLE INJURY TO SHERWIN-WILLIAMS
49. Absent relief from this Court, ICI and Grow may
succeed in causing a merger to be consummated that is less
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favorable to Grow's stockholders than an alternative transaction currently
available, and one that is the product of the gross abuse of the fiduciary
duties of the director defendants. Damages for these losses cannot readily be
calculated and, in any event, could not compensate for the unique loss that
would have been suffered by Sherwin-Williams.
50. In addition to the harm Sherwin-Williams will
encounter in its role as a competing bidder, Sherwin-Williams will also suffer
irreparable harm as a shareholder of Grow. As a result of the Grow directors'
breaches of their fiduciary duties, Sherwin-Williams, like all other Grow
shareholders, will not receive the best available price for its Grow shares.
FIRST CAUSE OF ACTION
(Breach of Fiduciary Duty
Against the Grow Directors)
51. Sherwin-Williams repeats and realleges paragraphs 1
through [50] of this Complaint.
52. Directors of a corporation are fiduciaries. They owe
duties of care and loyalty to the corporation and its shareholders. When
directors determine to put a corporation up for sale, their duty is to act in a
fair and disinterested manner, placing the interest of the shareholders in
receiving the best price for their shares above all other considerations.
53. The director defendants have flagrantly disregarded
their duties of care and loyalty by placing the interests of Grow management
above those of Grow shareholders in selling the corporation. They have favored
the lower ICI offer because that
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offer is favored by Grow management, and have attempted to deprive shareholders
of their prerogative to choose a superior bid by refusing to remove the
obstacles to Sherwin-Williams' bid, which is for all shares in cash at a higher
price. As a result, Grow's shareholders and Sherwin-Williams are threatened
with substantial and irreparable injury.
54. The directors of Grow have breached their duties of
care and loyalty by, among other actions:
-- approving the Merger and Lockups without making any
attempt to determine whether those agreements, as
opposed to any other offer or potential offer for
control of Grow, including Sherwin-Williams'
proposal, were in the best interests of the Grow
stockholders;
-- approving a transaction designed to preclude any
other proposal for acquisition of Grow, without
determining or evaluating what other proposals were
available;
-- failing adequately to inform themselves of, or
adequately to consider, potential transactions
available to Grow before voting upon and approving
the Merger and Lockups;
-- failing adequately to inform themselves, or
adequately to consider, the effect of the Merger and
Lockups upon Grow's ability to obtain better offers
and upon the interests of Grow's stockholders;
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-- even if the Corimon lock up option were justifiable
(which it is not), failing properly to narrow and
define the scope of that provision;
-- failing adequately to inform themselves as to the
probable illegality of several provisions of the
Merger Agreement and the Option Agreement; and
-- failing adequately to provide for the protection of
Grow's remaining public stockholders if ICI completes
its tender offer with insufficient shares to complete
its proposed merger, as permitted under the Merger
Agreement.
55. Accordingly, the execution of the Merger and Option
Agreements violated the Grow directors' fiduciary duties of loyalty and due
care, and those agreements are thereby unenforceable.
56. Plaintiff has no adequate remedy at law.
SECOND CAUSE OF ACTION
(Breach of Fiduciary Duty
Against Grow and the Grow Directors)
57. Plaintiff repeats and realleges the allegations of
paragraphs 1 through [56] of this Complaint.
58. In agreeing to be acquired by ICI, Grow determined to
cease its independent corporate existence. The nature of the ICI transaction
is such that control of Grow would shift to ICI and its stockholders, and Grow
stockholders, having exchanged their Grow shares for cash, would have no
further interest in the merged entity and no other opportunity to obtain a
premium for
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relinquishing their control of Grow. Because of these factors, before agreeing
to the Lockups in the agreement with ICI which would impede all other offers
the Board of Directors of Grow had a duty to determine if the bid made by ICI
offered the best available price and other terms, and to make this decision
after obtaining adequate current information about such matters as to the state
of the acquisition market for its shares, and whether more valuable bids were
actually or likely to be available.
59. The fact that Sherwin-Williams made a proposal to
acquire all of the stock of Grow on an all-cash basis the business day before
the ICI transaction was announced, demonstrated that ICI's offer is inadequate,
and that Grow's directors acted in breach of their duties by accepting it and
allowing ICI to lock it up. The inadequacy of ICI's offer is confirmed by
Sherwin-Williams' tender offer to acquire all of the outstanding capital stock
of Grow for a price of $19.50 per share in cash. Grow's swift acceptance of
ICI's bid, without even engaging in discussions with Sherwin-Williams,
demonstrates that Grow's directors failed to take steps to ensure that Grow's
stockholders would receive the best possible transaction for their shares.
Despite Grow's knowledge that Sherwin-Williams was a competing bidder for Grow,
and Grow's lack of knowledge as to whether ICI's bid represented the best
possible transaction, Grow entered into the Merger Agreement and Lockups with
the purpose and intent of foreclosing or unreasonably burdening any higher bid
(by Sherwin-Williams or anyone else). By entering into the Merger Agreement
and Lockups without a proper base of knowledge and information to reasonably
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<PAGE> 24
conclude that ICI's bid was the best available offer, and by impeding
Sherwin-Williams' proposal by refusing to negotiate with Sherwin-Williams,
Grow's directors breached their duties under applicable law, and the Merger
Agreement and the Lockups are thereby unenforceable.
60. Plaintiff has no adequate remedy at law.
THIRD CAUSE OF ACTION
(Breach of Fiduciary Duty Against
Grow and the Grow Directors)
61. Plaintiff repeats and realleges the allegations of
paragraphs 1 through [60] of this Complaint.
62. In considering the ICI merger, which involves a
change in control, the Grow directors were required to act in accordance with
their fiduciary duties of care and loyalty. Accordingly, they were required to
act reasonably under the circumstances. In treating different bidders
unequally in the ways stated above, the directors could comply with their
duties only if their conduct was reasonably related to achieving the best price
available to stockholders.
63. Here there was no basis for a disinterested and
well-motivated Grow director to conclude that, if the transaction contemplated
in the Merger Agreement were to close, it would represent the best available
alternative for Grow and its stockholders. There was and is no basis for a
Grow director to conclude that the unequal treatment of Sherwin-Williams and
ICI is or was reasonably related to achieving the best price available.
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<PAGE> 25
The fact that no such basis existed is amply demonstrated by (among many other
facts):
-- the existence of Sherwin-Williams as a serious, bona
fide bidder attempting to negotiate an alternative
transaction, and Grow's refusal to attempt to
determine (through good faith discussions) whether
Sherwin-Williams would offer a transaction superior
to ICI's;
-- the nature, structure and massive size of the Lockups
and the burden they place on competing bids;
-- the fact that Grow and its directors made no effort
to contact Sherwin-Williams about a possible
transaction with Grow, even though Grow had been told
of Sherwin-Williams' interest in such a transaction;
-- the fact that Grow made no effort to see if
Sherwin-Williams (or anyone else) would make a bid
superior to ICI's;
-- the fact that Grow nonetheless agreed to relinquish
control of Grow; and
-- Grow's continuing refusal to engage in discussions
with Sherwin-Williams.
In view of these facts, the execution of the Merger and Lockup Agreements was a
violation of the fiduciary duties of care and loyalty owed by the Grow
directors, and those agreements are thereby unenforceable. For the same
reasons, the other measures
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<PAGE> 26
Grow has taken in treating Sherwin-Williams and ICI unequally, including with
respect to the rights plan, supermajority provision and other structural
defenses, are breaches of duty.
64. Plaintiff has no adequate remedy at law.
FOURTH CAUSE OF ACTION
(Breach of Fiduciary Duty
Against Grow and the Grow Directors)
65. Plaintiff repeats and realleges paragraphs 1 through
[64] of this Complaint.
66. Grow's directors have at all items been under a
fiduciary duty of disclosure to ensure that their statements to Grow
stockholders are true and complete in all material respects and are not
materially misleading. The Board of Directors of Grow has breached this duty
by misleadingly stating that the offer and Merger "are fair to, and in the best
interest of, the company's shareholders" when in fact it had no informed basis
to make such a statement. Accordingly, approving the entry into the Merger and
Option Agreements are breaches of fiduciary duties of the Grow directors, and
those agreements are unenforceable.
67. Plaintiff has no adequate remedy at law.
FIFTH CAUSE OF ACTION
(Against Grow and ICI for
Violation of BCL Section 912)
68. Plaintiff repeats and realleges paragraphs 1 through
[67] of this Complaint.
69. New York Business Corporation Law Section 912
prohibits the "beneficial owner" of 20% or more of the outstanding shares of
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a New York corporation from consummating a merger or other business combination
with the corporation for five years following the date the shareholder became a
20% shareholder unless prior to that date the business combination or the
shareholder's acquisition of stock was previously approved by the directors of
the corporation. The same statute provides that a person becomes a "beneficial
owner" of stock for this purpose when he "has any agreement, arrangement or
understanding . . . for the purpose of acquiring, holding . . . or disposing"
of that stock with the owner of that stock.
70. ICI and Corimon entered into an "agreement,
arrangement or understanding" whereby Corimon would grant ICI an irrevocable
option to purchase the Corimon Shares on or prior to April 30, 1995, the date
that the Grow directors approved the ICI Merger and the Option Agreement, and
in any event before the time the Grow directors approved the Option Agreement
or the ICI Merger. Thus, under BCL Section 912, the Merger between ICI and
Grow cannot be consummated for five years.
71. ICI and Grow have stated their intention, in the
Merger Agreement and in their Tender Offer documents, to consummate the Merger
"as soon as practicable" and, in any event, in less than five years, in
violation of BCL Section 912.
72. Plaintiff has no adequate remedy at law.
SIXTH CAUSE OF ACTION
(Breach of Fiduciary Duty
Against Grow and the Director Defendants)
73. Plaintiff repeats and realleges paragraphs 1 through
[72] of this Complaint.
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74. By entering into a Merger Agreement and proposed
Merger that would violate BCL Section 912 and therefore are unlawful, Grow and
the director defendants have breached their fiduciary duty of due care.
75. By failing to disclose to Grow's stockholders that
the Merger Agreement and proposed Merger violate BCL Section 912, Grow and the
director defendants have breached their fiduciary duty of disclosure.
76. Plaintiff has no adequate remedy at law.
SEVENTH CAUSE OF ACTION
(Breach of Fiduciary Duty Against
Grow and the Director Defendants)
77. Plaintiff repeats and realleges paragraphs 1 through
[77] of this complaint.
78. Grow and the Director Defendants breached their
fiduciary duties described hereinabove and in plaintiff's First, Second, Third,
and Fourth Causes of Action. Defendants approved entry of provisions in the
Merger Agreement stating that Grow and its Board of Directors will take a
series of actions to eliminate various legal impediments to ICI's tender offer
and merger, including amending its "poison pill" to proceed; requiring Grow to
use its best efforts to secure stockholder approval for the Merger Agreement;
reflecting Board of Director approvals required under the New York
Anti-Takeover Statute and Grow's Certificate of Incorporation; and, providing
that upon completion of ICI's tender offer ICI's representatives will become a
majority of the Board of Directors of Grow.
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EIGHTH CAUSE OF ACTION
(Against Defendants ICI and GDEN
For Aiding and Abetting Breaches
of Fiduciary Duty)
79. Plaintiff repeats and realleges paragraphs 1 through
[78] of this Complaint.
80. Defendants ICI and GDEN knowingly aided and abetted
Grow's directors in the breach of their duties described hereinabove and in
plaintiff's First, Second, Third, Fourth and Seventh Claims for Relief. ICI
had knowledge of the fact that other bidders were potentially interested in
making a higher bid for Grow, and had the intention to block or forestall such
offers. ICI and GDEN accordingly aided and abetted the Grow defendants in
structuring a transaction that it knew was unreasonable, and in breach of the
duties of Grow's officers and directors, in that the Lockups would either
result in ICI acquiring Grow at a bargain-basement price (if the Lockups
successfully prevented other bids from emerging) or (if higher bids did
prevail) give ICI an enormous financial windfall for having done nothing more
than agree to buy Grow at a giveaway price and in any event deter competing
bidders from paying Grow's shareholders a higher price. The Merger and Option
Agreements are accordingly unenforceable.
81. Plaintiff has no adequate remedy at law.
WHEREFORE, plaintiff Sherwin-Williams respectfully requests
that this Court:
A. Declare and decree that the Merger Agreement is
unlawful and was entered into in breach of the fiduciary duties of the Grow
directors;
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B. Declare and decree that the Option Agreement is
unlawful and was approved in breach of the fiduciary duties of the Grow
directors.
C. Enjoin, temporarily, preliminarily and permanently,
any steps to carry out, implement, or effectuate the Merger Agreement, or to
modify or replace the Merger Agreement or to consummate the ICI Merger, unless
and until (i) the Lockups are either invalidated or waived by ICI, (ii) the
other impediments to Sherwin-Williams' proposals (such as the Grow "poison
pill" rights plan, supermajority provisions and other structural defenses) are
invalidated, made inapplicable, or waived, and (iii) Corimon is permitted to
sell without limitation to the bidder of its choice;
D. Declare and decree the Lockups are unlawful and were
entered into in breach of the fiduciary duties of the Grow directors;
E. Enjoin, temporarily, preliminarily and permanently,
the exercise of the Lockups or any payment of money pursuant to the terms of
the Lockups;
F. Declare and decree that Grow's refusal to negotiate
in good faith with Sherwin-Williams toward the execution of a merger agreement
with Sherwin-Williams is a breach of the fiduciary duties of the Grow
directors, and declare and decree that any action taken or to be taken by Grow
with the intent or effect of impeding the acceptance of a better offer than
ICI's is a breach of the fiduciary duties of the directors of Grow;
G. Enjoin, temporarily, preliminarily and permanently,
any action taken or to be taken by Grow with the intent or effect
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of impeding the operation of market forces in an open bidding contest for the
acquisition of Grow;
H. Require Grow and the director defendants to take all
steps necessary to provide Sherwin-Williams a fair and equal opportunity to
acquire Grow, including furnishing to Sherwin-Williams the same information and
access to information as was provided to ICI;
I. Declare and decree that any rights purportedly
acquired by ICI in the Merger Agreement or Option Agreement were procured by
aiding and abetting a breach of fiduciary duty, and that the Merger Agreement
and Option Agreement are null and void and of no further effect;
J. Enjoin, temporarily, preliminarily and permanently,
any further conduct by ICI intended to cause, or having the effect of causing,
Grow to forego the opportunity to enter into an economically more favorable
transaction than the Merger Agreement;
K. To the extent that the ICI Merger or the Lockups are
performed or consummated prior to the entry of this Court's final judgment,
rescind such transaction or transactions and declare and decree such
transaction or transactions to be null and void;
L. If the ICI Merger or Lockups are performed or
consummated prior to the entry of this Court's final judgment, award plaintiff
damages in an amount to be determined at trial;
M. Award plaintiff the costs and disbursements of this
action, including reasonable attorneys' fees; and
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N. Grant such other and further relief as the Court may
deem just and proper.
Dated: New York, New York
May 8, 1995
ROGERS & WELLS
200 Park Avenue
New York, NY 10166
(212) 878-8000
Attorneys for Plaintiff
The Sherwin-Williams Company
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<PAGE> 1
IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
THE SHERWIN-WILLIAMS COMPANY, 101 )
Prospect Avenue, Cleveland, Ohio ) Case No. ____________
44115, )
) Judge _______________
Plaintiff, )
)
- against - ) COMPLAINT FOR
) PRELIMINARY AND
IMPERIAL CHEMICAL INDUSTRIES PLC, 9 ) PERMANENT
Millbank, London SW1p 3JF, England; ) INJUNCTIVE RELIEF
GDEN CORPORATION, 645 5th Avenue, New )
York, New York 10022; and GROW GROUP, )
INC., 200 Park Avenue, New York, New )
York 10166, )
)
Defendants. )
Plaintiff, The Sherwin-Williams Company ("Sherwin-Williams")
by and through its undersigned attorneys, states as follows:
NATURE OF THE ACTION
1. Sherwin-Williams brings this action against
defendants Imperial Chemical Industries, PLC ("ICI") and its indirect wholly
owned subsidiary GDEN Corporation ("GDEN") to enjoin their coercive, materially
misleading tender offer (the "ICI Tender Offer") to acquire all of the common
stock of defendant Grow Group, Inc. ("Grow").
2. Grow is a publicly held New York corporation with
over 3,650 shareholders. Grow's stock is listed and publicly traded on the New
York Stock Exchange.
<PAGE> 2
3. Sherwin-Williams is a substantial shareholder in Grow
as the beneficial owner of 700,000 shares of Grow Common Stock.
4. On May 4, 1995, ICI announced a tender offer to
purchase all of the outstanding shares of common stock of Grow at $18.10 per
share (the "ICI Tender Offer").
5. Beginning in February, 1995, Sherwin-Williams made
numerous attempts to obtain non-public information in order to pursue an
acquisition of Grow. After repeatedly stalling, Grow finally advised
Sherwin-Williams that Sherwin-Williams was to be excluded from the bidding
process Grow purportedly was conducting. Even after being rebuffed,
Sherwin-Williams continued to express its strong interest in pursuing a
transaction with Grow.
6. As late as April 28, 1995, Sherwin-Williams wrote to
Grow confirming its desire to obtain information and pursue an acquisition of
Grow and urging that Grow not enter into an agreement with a third party,
especially not one containing so-called "no-shop" or "lock-up" provisions.
7. Grow never even responded to the April 28 letter.
Instead, on April 30, 1995, Grow, ICI and GDEN entered into that agreement
Sherwin-Williams had previously cautioned against -- a merger agreement
containing no-shop, break-up fee and other provisions which seek to lock up
Grow for ICI alone.
8. The ICI Tender Offer is made pursuant to that merger
agreement, with the contemplation that it will be promptly followed by a
second-stage, cash-out merger in which Grow's non-
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<PAGE> 3
tendering shareholders would receive the same, $18.10 per share price paid in
that tender offer.
9. In response to this outrageous series of events,
Sherwin-Williams today has commenced a competing tender offer to purchase all
of Grow's outstanding stock at a single price of $19.50 per share -- a price
which substantially exceeds the $18.10 price offered by ICI.
10. Sherwin-Williams stands ready, willing and able to
offer Grow's public shareholders more money than ICI is offering them for their
shares. Sherwin-Williams and Grow's public shareholders will suffer
irreparable harm for which there is no adequate remedy at law, however, if
defendants are permitted to effectuate their "sweetheart deal" to acquire Grow
through their fraudulent tender offer documents because, among other things:
(a) Defendants' false and misleading tender offer
documents are depriving Grow's shareholders of the
information they need fairly to consider the merits
of ICI's and Sherwin Williams' competing tender
offers, thereby inducing Grow's shareholders into
making uninformed investment decisions without the
full and fair disclosure to which they are entitled
under the Securities Exchange Act of 1934 (the
"Exchange Act"); and
(b) Defendants' false and misleading tender offer
documents are creating confusion in the market place,
thereby depriving Sherwin-Williams of the
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<PAGE> 4
opportunity to acquire Grow, a unique business asset.
8. The purpose of this action is to seek injunctive and
other relief against ICI's materially misleading tender offer and thereby level
the playing field so that the public shareholders of Grow can fairly evaluate
the competing tender offers and thereby receive the best price available for
their shares.
Jurisdiction and Venue
9. This Court has jurisdiction over this action pursuant
to Section 27 of the Exchange Act, 15 U.S.C. Section 78(aa), and 28 U.S.C.
Sections 1331.
10. Venue is proper in this District pursuant to Section
27 of the Exchange Act, 15 U.S.C. Section 78(aa), and 28 U.S.C. Section 1391.
The principal offices of Sherwin-Williams are in this District. ICI directly
or indirectly transacts business in this District, and Grow also transacts
business in this District.
The Parties
11. Plaintiff Sherwin-Williams is an Ohio corporation
with its principal place of business at 101 Prospect Avenue, Cleveland, Ohio
44115. Sherwin-Williams is one of the nation's largest manufacturers of paints
and coatings, with more than $3 billion in revenues. It is also the beneficial
owner of 700,000 shares of Grow.
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<PAGE> 5
12. Defendant ICI is a corporation organized under the
laws of England with its principal place of business at 9 Millbank, London,
SW1p 3JF, England.
13. Defendant GDEN Corporation is a New York corporation.
It is an indirect wholly owned special purpose subsidiary of ICI which was
formed for the purpose of facilitating ICI's acquisition of Grow. It is
located at 645 5th Avenue, New York, New York 10022.
14. Defendant Grow is a New York corporation with its
principal executive offices at 200 Park Avenue, New York, New York 10166.
Grow's common stock is registered pursuant to Section 12 of the Exchange Act,
15 U.S.C. Section 78l, and is listed on the New York Stock Exchange. There are
approximately 16.1 million Grow shares outstanding. Grow manufactures
specialty chemical coatings and paints and household products.
15. Corimon Corporation ("Corimon"), which is not a party
this action, is a Delaware corporation and a wholly owned subsidiary of
Corimon, S.A.C.A.. Corimon, S.A.C.A. is a corporation organized under the laws
of Venezuela, with its principal place of business in Caracas, Venezuela.
According to Grow's Proxy Statement, dated September 26, 1994, Corimon is the
beneficial owner of 4,025,341 shares of Grow, or approximately 25 per cent of
Grow's outstanding common stock.
BACKGROUND OF THE ACTION
Events Leading to the ICI Merger Agreement
5
<PAGE> 6
16. As early as November, 1994, Grow's chairman and CEO,
Russell Banks, decided to sell Grow, and contacted ICI. Banks and Grow's
management decided early on that they were interested only in a deal with ICI,
a large British conglomerate. In January 1995, Grow announced that it had
retained Wertheim Schroder & Co. ("Wertheim Schroder"), an investment bank, to
explore ways to increase stockholder value.
17. In February, 1995, Sherwin-Williams contacted Grow
and Wertheim Schroder to discuss the possibility of Sherwin-Williams making an
offer to acquire Grow. Sherwin-Williams repeatedly attempted to express its
serious interest in acquiring Grow. Sherwin-Williams also repeatedly requested
access to information from Grow, including sales projections and earnings
forecasts, that would enable Sherwin-Williams to present its best possible
proposal. In each instance, Grow delayed responding to Sherwin-Williams, often
ignoring Sherwin-Williams' phone calls and other attempts to initiate
negotiations altogether.
18. On March 17, 1995, Sherwin-Williams offered to enter
into a confidentiality agreement with Grow in order to obtain the information
about Grow necessary for Sherwin-Williams to formulate its best possible
proposal. After repeated delays on Grow's part to finalize that agreement, on
March 31, 1995, Sherwin-Williams sent Grow a copy of the confidentiality
agreement which had been executed by Sherwin-Williams. However, Grow never
executed that agreement and it was subsequently rescinded on April 17, 1995.
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19. By late March 1995, Grow's availability for sale, and
Sherwin-Williams' interest, in particular, were common knowledge. On March 29,
1995, for example, financial analyst Dan Dorfman reported on the CNBC
television news segment "The Dorfman Report" that "at least three companies" --
Imperial Chemical Industries PLC, Sherwin-Williams, and Pratt & Lambert United
Inc. -- were discussing the prospects of buying Grow. Sherwin-Williams and its
advisors continued to make their interest in acquiring Grow for cash known to
Grow and its advisors.
20. On April 17, 1995, Grow informed Sherwin-Williams
that Sherwin-Williams would be excluded from the bidding process for Grow. In
response, Sherwin-Williams revoked its offer to enter into a confidentiality
agreement with Grow. Sherwin-Williams' financial advisors still continued to
express to Grow Sherwin-Williams' ongoing serious interest in pursuing a
transaction with Grow.
21. On April 28, 1995, Grow publicly announced that it
was in talks with an unidentified party who would buy 100% of Grow's stock for
$18.10 per share in cash. According to Grow, the buyer had "substantially
completed" its due diligence review.
22. Later that same day, April 28, Sherwin-Williams sent
a letter to Russell Banks, President and Chief Executive Officer of Grow, by
facsimile, overnight and hand delivery. The letter stated, among other things,
that Sherwin-Williams was "troubled to learn from the [Grow] press release
issued today that [Grow was] in the process of negotiating a sale of [Grow] to
another party." Sherwin-Williams expressed "concern" that
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<PAGE> 8
despite [Sherwin-Williams'] repeated indications of serious interest in a
transaction with [Grow], [Grow] . . . decided to negotiate a definitive
agreement with another bidder without giving [Sherwin-Williams] access to the
information that would allow [Sherwin-Williams] to present [its] best possible
proposal." After recounting the recent efforts by Sherwin-Williams to pursue a
transaction with Grow, the letter stated:
Given [Sherwin-Williams'] financial strength,
financing will not represent any impediment to the
consummation of a transaction on an all-cash basis. . . .
[Sherwin-Williams] urge[s] you not to enter into or
to agree to any merger or other significant transaction or
agreement, or to take any additional defensive measures
(including "no shop", break-up fee or similar arrangements) or
other actions, that would adversely affect the ability of your
stockholders to receive the maximum value for their shares.
23. The letter concluded by repeating Sherwin-Williams'
desire to obtain immediate access to the information which Grow had refused to
provide to Sherwin-Williams, and stated that Sherwin-Williams was "prepared to
enter into immediate discussions with you and your directors, management and
advisors about a transaction with Sherwin-Williams." The letter left the names
and business and home telephone numbers where Sherwin-Williams senior
executives could be reached. Copies of the letter were sent to Grow's General
Counsel, to Wertheim Schroder, to Grow's outside legal counsel, and to each
member of Grow's Board of Directors. Neither Grow, its Board of Directors nor
any of its advisors ever responded to Sherwin-Williams' April 28 letter.
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24. Instead, despite Sherwin-Williams' strong indication
of interest in pursuing a transaction that would provide Grow's public
shareholders greater value than the $18.10 price being negotiated with ICI, on
Monday, May 1, 1995, Grow and ICI announced that they and GDEN had entered into
a merger agreement pursuant to which ICI would offer to purchase all of the
outstanding shares of Grow for $18.10 per share. They also announced that ICI
and Corimon had entered into an Option Agreement, with the consent of Grow,
pursuant to which ICI was granted an irrevocable option to purchase Corimon's
25% interest in Grow for $17.50 per share. The average price per share to be
paid by ICI for Grow was thus $17.95. The press release announcing the
proposed Merger contained no mention of the Sherwin-Williams letter or
Sherwin-Williams' repeated expressions of interest in acquiring Grow.
25. The Merger Agreement and the Option Agreement contain
a number of provisions plainly designed to "lock up" the transaction for ICI.
26. Under the Merger Agreement, dated April 30, 1995,
Grow is to be merged into ICI's subsidiary, GDEN. Grow and ICI agreed that as
soon as practicable ICI would commence a tender offer pursuant to which ICI
will offer to pay Grow stockholders $18.10 in cash for each of their shares of
common stock. The Merger Agreement
(a) obligates Grow to take a series of actions to
neutralize the various "shark repellant" provisions applicable
to Grow through its charter, its by-laws and by statute.
Specifically, the ICI Merger
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Agreement requires Grow to amend its "poison pill" to allow
the merger to proceed;
(b) requires Grow to use its best efforts to
secure stockholder approval for the Merger Agreement;
(c) purports to reflect the Grow Board of
Director approvals required under the New York Takeover
Statute (Section 912 of the New York Business Corporation Law)
and under Section 11 of Grow's Certificate of Incorporation;
and
(d) provides that upon completion of ICI's tender
offer ICI's representatives will become a majority of Grow's
Board of Directors. (Absent this last provision, Grow's
staggered Board and other Charter and By-law provisions could
prevent ICI from gaining control of the Board, and thereby
could prevent ICI from completing its crucial second-stage,
"cash-out" merger.)
27. The Merger Agreement contains a "no-shop" provision,
Section 6.04, which prohibits Grow and the director defendants from (i) taking
any action to solicit, initiate, or encourage a competing bid for Grow, or (ii)
subject to the Grow Board of Directors' fiduciary duties as advised by counsel,
engaging in any negotiations with a competing bidder or providing any
prospective bidder with any non-public information about Grow or with access to
Grow's books, records or properties.
28. Section 11.04 of the Merger Agreement requires Grow
to pay ICI an $8 million fee (the "Break-Up Fee") if Grow is acquired by any
competing bidder. This $8 million Break-Up Fee is payable, among other
circumstances, if (i) Grow agrees to be acquired by an entity other than ICI,
(ii) the Grow Board withdraws or materially modifies its recommendation of the
ICI Tender Offer or the Merger Agreement to stockholders, or (iii)
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any person or group (other than Corimon) acquires more than 25% of Grow's
common stock. Astonishingly, the Break-Up Fee purportedly is payable
irrespective of ICI's conduct -- including if ICI defaults in its obligations
under the Merger Agreement or simply walks away from the transaction, so long
as one of the three triggering events described above occurs. If ICI's bid
fails for any reason, and Grow is ever acquired by any other entity at any
time, ICI is purportedly entitled under the express terms of the Merger
Agreement to receive the $8 million Break-Up Fee.
29. The Option Agreement, which is also dated April 30,
1995, provides that Corimon irrevocably grants to ICI an option (the "Lock-Up
Option") to purchase the 4,025,841 Corimon Shares, constituting approximately
25% of Grow's outstanding common stock, for $17.50 per share (the "Option
Price"). ICI may exercise the Lock-Up Option provided (i) it accepts for
payment all shares of Grow that have been validly tendered and not withdrawn
pursuant to ICI's tender offer, and (ii) the number of shares accepted for
payment by ICI, together with the Corimon Shares, constitutes over 50% of the
outstanding shares of Grow.
30. The Lock-Up Option effectively "locks up" the Corimon
Shares for ICI. The Lock-Up Option prohibits Corimon from selling the Corimon
Shares to any bidder other than ICI for less than the price per share in the
competing bidder's offer. ICI thus obtains an exclusive $.60 per share price
advantage in acquiring 25% of Grow's stock from Corimon.
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<PAGE> 12
31. Further, under the Option Agreement ICI may compel
Corimon to tender the Corimon Shares into ICI's tender offer (in which event,
Corimon must kick back $.60 per share to ICI to preserve ICI's discriminatory
discount) and ICI may prohibit Corimon from subsequently withdraw such
tendered shares until the Option expires, thereby effectively preventing a
competing bidder from acquiring Corimon's shares in Grow.
32. ICI and Corimon agreed or reached an arrangement or
understanding, at least orally, to enter into the Lock-Up Option before Grow's
Board of Directors approved the Merger Agreement or the Lock-Up Option. Thus,
at the time Grow's Board of Directors approved the ICI Merger and the Lock-Up
Option, ICI was already the "beneficial owner" of more than 20% of Grow's stock
within the meaning of Section 912 of the New York Business Corporation Law and
Section 11 of Grow's Certificate of Incorporation.
33. The Break-Up Fee, the Lock-Up Option and the
provisions of the Merger Agreement which provide for neutralizing the shark
repellents for the ICI merger (collectively, the "Lockups") are designed to
block competing bids for Grow by dramatically tilting the playing field in
ICI's favor. Regardless of how they are exercised, the Lockups would impose a
massive economic burden upon any competing offer, by having Grow give away $8
million plus forcing a competing bidder to pay at least an additional $2.4
million more than ICI to acquire Corimon's 25% interest in Grow -- if it can
acquire Corimon's Grow shares at
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all. If Grow is acquired by anyone other than ICI, the cost of these Lockups
is borne by that acquirer.
34. Grow's motive in agreeing to the Lockups is to
entrench and enrich Grow's management in their current positions as executives
of Grow. Grow's management has apparently concluded that ICI is the company
most likely to permit current management's continuance in office.
35. The Lockups are unlawful because they were entered
into in breach of the fiduciary duties owed by Grow's directors to Grow's
stockholders. The Lockups cannot be justified as needed to induce a bidder to
make an offer for Grow or to secure an enhanced price in an ongoing bidding
contest. Nor can they be said to impose only a scant burden on other bidders
when, in fact, the burden is substantial.
36. Grow entered into the Lockups (a) despite knowing
that potential acquirers other than ICI (including Sherwin-Williams) were
interested in making offers to acquire Grow; (b) after refusing to obtain
indications whether such alternative buyers would offer terms more attractive
to Grow's stockholders than ICI's offer; (c) without being under any necessity
to agree to the Lockups to induce ICI to agree to acquire Grow; and (d) despite
knowing that ICI's proposed all-cash transaction would eliminate the ability of
the Grow shareholders to receive a premium for their shares of stock. No
reasonable basis existed for a Grow director to conclude that the Lockups would
achieve for Grow's stockholders the highest price for their Grow shares.
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<PAGE> 14
37. To the contrary, the very structure of the Lockups
makes clear that they encourage just the opposite: The Lockups (a) punish
higher competing bids; (b) they actually reward ICI for having made a lowball
bid; and (c) deter competing bidders from making a superior bid.
ICI's OFFER TO PURCHASE
38. On May 4, 1995, ICI commenced its tender offer (the
"ICI Tender Offer") for Grow by filing its Tender Offer Statement on Schedule
14D-1 with the SEC and mailing its Offer to Purchase (the "ICI Offer to
Purchase") to Grow's stockholders. The Offer to Purchase, which is the
principal document setting forth the terms and conditions of the ICI Tender
Offer, was filed as an exhibit to the ICI 14D-1. To further insure that Grow's
shareholders not be given the opportunity to take advantage of Sherwin-
Williams' superior offer, ICI intentionally omitted or misrepresented numerous
material facts in its Offer to Purchase.
39. ICI was aware that the terms of the Merger Agreement
it had concocted together with Grow were fundamentally flawed and improper --
if not outright illegal -- and ICI took steps to conceal from Grow's
stockholders the true implications of those flaws and improprieties in ICI's
Offer to Purchase.
Misrepresentations Concerning the Break-Up Fee
40. The Offer to Purchase materially misrepresents
preconditions to payment by Grow of a Break-Up Fee to ICI pursuant to the
Merger Agreement.
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41. The Offer to Purchase falsely describes the break up
fee as follows:
Fees and Expenses. Pursuant to the Merger Agreement, in the
event that the Merger Agreement is terminated as a result of
the occurrence of any of the events described in clause (d)
under the "Termination" above, [Grow] shall pay [ICI] in
respect of its expenses an amount in immediately available
funds equal to $8,000,000 promptly, but in no event later than
two business days, after the occurrence of such event.
Except as described in the preceding paragraph, the Merger
Agreement provides that all costs and expenses incurred in
connection with the transactions contemplated thereby shall be
paid by the party incurring such costs and expenses. (ICI
Offer to Purchase at 22-23, emphasis added.)
42. Section 11.04 of the Merger Agreement, however,
actually provides that:
(B) [Grow] agrees to pay [ICI] in respect of its expenses
an amount in immediate available funds equal to $8,000,000
promptly, but in no event later than two business days, after
the occurrence of any of the events set forth below (a
"Trigger Event"):
(i) [Grow] shall have entered into, or shall have
publicly announced its intention to enter into, an agreement
or an agreement in principal with respect to any Acquisition
Proposal other than the transaction contemplated by this
Agreement;
(ii) The Board of Directors of [Grow] shall have
withdrawn or materially modified its approval or
recommendation of the Offer or this Agreement other than as a
result [ICI's] breach of this Agreement; or
(iii) Any person or group (as defined in Section
13(d)(3) of the Exchange Act) (other than [ICI] or any of its
Affiliates) shall have become the beneficial owner (as defined
in Role 13d-3 promulgated under the Exchange Act) of at least
25% of any class or series of capital stock of [Grow]
(including the Shares), or shall have acquired, directly or
indirectly, at least 25% of the assets of [Grow] other than
acquisitions of securities for bona fide arbitrage purposes
only and other than Corimon or its affiliates; or Corimon and
its affiliates shall beneficially own more than 28% of the
Shares. (Merger Agreement Section 11.04.)
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43. Section 10.1 of the ICI Merger Agreement provides for
seven different ways in which the ICI Merger Agreement can be terminated. They
include among others a default by ICI or GDEN under the Merger Agreement and a
failure to consummate ICI Tender Offer by a specified "drop-dead" date (August
31, 1995, subject to extension in limited circumstances to October 31, 1995).
44. Section 10.02 of the ICI Merger Agreement provides:
"If this is terminated pursuant to Section 10.01,
this Agreement shall become null and void and of no
effect with no liability on the part of any party
hereto, except that the agreements contained in
Section 11.04.... shall survive the termination
hereof." (Merger Agreement Section 10.02.)
In other words, the Break-Up Fee provision contained in
Section 11.04 survives any termination of the ICI Merger Agreement, for any
reason.
45. ICI's fraudulent omission of these material facts
concerning the breakup fee provisions in the Merger Agreement conceal the
plainly unreasonable character of the breakup fee as negotiated and agreed to
by ICI and Grow.
Misrepresentations Concerning the Corimon Lock Up
46. The Offer to Purchase also fails to disclose that ICI
entered into and Grow consented to the Lock Up Option, despite the fact that it
violates Rules 14d-7 and 14d-10 under the Williams Act as a matter of law.
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47. Section 2.1 of the Lock Up Option provides that "if
it is directed to do so by [ICI], [Corimon] will... properly tender... the
shares into the [ICI Tender] Offer and, so long as the [Lock-up] Option is
outstanding, not withdraw such Shares...".
48. The Offer to Purchase fails to disclose that Section
2.1, precluding Corimon from withdrawing the Corimon Shares if tendered,
plainly contravenes Securities Exchange Act Rule 14d-7, promulgated by the SEC.
Rule 14d-7 provides that "any person who has deposited securities pursuant to a
tender offer has the right to withdraw any such securities during the period
such offer, request or invitation remains open."
49. Section 2.1 also provides that "if the [Corimon]
Shares are purchased pursuant to the [ICI Tender] Offer, [Corimon] will pay...
to [ICI] a fee in cash equal to $.60" per share. In other words, if ICI elects
to lock up Corimon's Grow shares by requiring Corimon to tender into the ICI
Tender Offer, Corimon will be required to kick-back $.60 per share to ICI,
thereby preserving ICI's discriminatory discount.
50. The ICI Offer to Purchase nowhere discloses that this
kick-back provision violates Securities Exchange Act Rule 14d-10, promulgated
by the SEC, the "all-holders rule". Rule 14d-10 requires that "the
consideration paid to any security holder pursuant to the tender offer is the
highest consideration paid to any other security holder during such tender
offer."
51. Thus, the ICI Offer to Purchase fails to disclose the
illegality of two provisions of the Lock-up Option under the
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Williams Act, and the participation by the defendants in that illegality.
Misrepresentations Concerning ICI's
Obligation to Complete its Merger with Grow
52. The Offer to Purchase also fails to explain the
implications of ICI's right to waive the "Minimum Condition." This provision
conditions the ICI Tender Offer on ICI receiving tenders of the two-thirds of
the outstanding shares of Grow which are needed to approve a merger under New
York law.
53. The Offer to Purchase repeatedly states that the ICI
Tender Offer is conditioned upon the valid tender, without withdrawal, of a
sufficient number of shares such that, together with the locked-up Corimon
Shares, ICI would have at least two-thirds of the outstanding shares of Grow
(the "Minimum Condition"). The Offer to Purchase also discloses (although with
rather less prominence) that ICI may waive the Minimum Condition if, together
with the Corimon Shares, ICI would have more than 50 percent of the outstanding
Grow Shares.
54. What the Offer to Purchase does not disclose is that
ICI has the right to modify the Minimum Condition to a bare majority of Grow
shares. This means that there is a substantial possibility that a
second-stage, cash-out merger of Grow and GDEN will not occur. This would mean
that Grow's non-tendering public shareholders, instead of receiving the merger
consideration, would continue to own stock of Grow. Not only is this
possibility not even alluded to in the Offer to Purchase, but no disclosure
whatsoever is made of what ICI would do to or
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with the remaining public stockholders. If ICI might seek to buy out the
remaining shareholders at a higher price, that is surely material. If ICI
might seek to dilute the remaining shareholders by causing Grow to issue ICI
additional Grow shares, and then vote through a cash-out merger at a price
below the tender price, that also is material.
55. This material omission conceals ICI and Grow's
flagrant disregard for the effect that the ICI Tender Offer could have upon
Grow's shareholders.
Misrepresentations Concerning ICI's
Ability to Consummate a Merger with Grow
56. The Offer to Purchase also misrepresents ICI's
ability to complete its second-stage, cash-out merger with Grow promptly after
completion of its tender offer, as provided in the ICI Merger Agreement. In
fact, ICI has failed to comply with the technical but nonetheless critically
important provisions of New York Law which govern the merger, specifically,
Section 912 of the New York Business Corporation Law (the "NYBCL"). Because of
that failure, ICI is prohibited from completing its merger for five years.
57. The Offer to Purchase falsely states that:
the provisions of Section 912 of [The NYBCL] have
been satisfied with respect to the [ICI Tender] Offer
and the Merger and such provisions will not delay the
consummation of the merger. (ICI Offer to Purchase
at 35.)
58. Section 912 of the NYBCL prohibits an "interested
shareholder" (i.e., the "beneficial owner" of 20% or more of the outstanding
shares of a New York corporation) from consummating a
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merger or other business combination with the corporation for five years
following the date the person became an "interested shareholder", unless prior
to that date the business combination or the person's becoming an interested
shareholder was approved by the directors of the corporation. The same statute
provides that a person becomes a "beneficial owner" of any stock for this
purpose when the person "has any agreement, arrangement or understanding . . .
(whether or not in writing) . . . for the purpose of acquiring, holding . . .
or disposing" of that stock with the owner of that stock. As explained below,
the defendants' own SEC filings reveal that ICI had an agreement, arrangement
or understanding with Corimon about acquiring Corimon's 25% block of Grow
shares before Grow's Board gave the requisite approval.
59. According to ICI's Offer to Purchase, on April 26,
1995, representatives of ICI:
met in New York with Mr. Broslat and Mr. Philippe Erard,
President of Corimon Parent and a member of [Grow's] Board of
Directors, to discuss a proposal by which Corimon Parent would
agree to sell the Corimon Shares to [ICI] at a price of $17.50
per Share, such sale to be consummated immediately following
the consummation of a tender offer for all the other Shares,
provided that the Board of Directors of [Grow] waive certain
provisions of a certain standstill agreement between [Grow]
and Corimon Parent in order to permit such sale. (ICI Offer
to Purchase at 16.)
60. Thus, ICI and Corimon entered into an "agreement,
arrangement or understanding" whereby Corimon would grant ICI an irrevocable
option to purchase the Corimon Shares no later than April 26, 1995 -- at least
four days before the date that the
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Grow directors approved the ICI Merger and the Option Agreement, and in any
event before the time the Grow directors approved the Option Agreement or the
ICI Merger.
61. As a result, and contrary to ICI's misrepresentations
described above, NYBCL Section 912 is triggered by the Corimon Option.
Furthermore, contrary to ICI's misrepresentations, no merger of ICI or its
affiliates with Grow is possible for five years.
62. In addition, the Offer to Purchase misrepresents
ICI's ability to complete a merger under the provisions of Grow's Certificate
of Incorporation.
63. As disclosed in ICI's Offer to Purchase:
Section 11(a) of [Grow's] Certificate of
Incorporation provides that the affirmative vote of
the holders of at least 80% of the outstanding shares
of capital stock of [Grow] shall be required to
authorize: (1) any merger or consolidation of [Grow]
or any of its subsidiaries with or into any other
corporation; or (ii) any sale, lease, exchange or
other disposition by [Grow] or any of its
subsidiaries of assets constituting all or
substantially all of the assets of [Grow] and its
subsidiaries taken as a whole to or with any other
corporation, person or other entity; if, in the case
of (i) or (ii) above as of the record date for the
determination of shareholders entitled to notice
thereof and to vote thereon, such other corporation,
person or entity is the "Beneficial Owner" (as
defined), directly or indirectly of 10% or more of
the outstanding shares of capital stock of [Grow]
entitled to vote in the election of directors. (ICI
Offer to Purchase at 30.)
64. The Offer to Purchase also discloses that, pursuant
to Section 11(c) of Grow's Certificate of Incorporation:
The foregoing 80% approval requirement does not apply
to a transaction referred to in Section
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11(a) [of Grow's Certificate of Incorporation] if the
Board of Directors of [Grow] shall by resolution have
approved in memorandum of understanding with such
other corporation, person, or entity with respect to
and substantially consistent with, such transaction
prior to the time such other corporation, person,
entity becomes the [beneficial] owner of 10% or more
of the outstanding shares of capital stock of the
company.... (ICI Offer to Purchase at 30.)
65. The Offer to Purchase misleadingly asserts that "[a]s
a result of the approval of [Grow's] Board of Directors [of the Merger
Agreement on April 30, 1995], the 80% approval requirement set forth in Section
11(a) will not apply to the [ICI] Merger."
66. In fact, because, as set forth in paragraph 60,
supra, ICI became the beneficial owner of Corimon's Grow shares at least by
April 26, 1995 -- four days before the Board's approval of the Merger
Agreement. As a result ICI beneficially owned 25% of Grow's shares prior to
the Board's approval of the Merger Agreement, subjecting it to the provisions
of Section 11(a).
67. ICI's Offer to Purchase fails to disclose the true
effect of the ICI Tender Offer and Merger Agreement by concealing the fact that
even if ICI obtains the two-thirds of Grow's shares generally needed to
complete a merger under New York law, it is possible that unless ICI acquires
80% of Grow's shares, ICI and its affiliates will be permanently prohibited
from completing ICI's proposed merger with Grow.
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GROW'S SCHEDULE 14D-9
68. When a tender offer is commenced, the target company
is required to file a response to the tender offer. This response is filed on
Schedule 14D-9. In response to the ICI Tender Offer, Grow filed and
disseminated to its shareholders a Schedule 14D-9 recommending that Grow's
shareholders accept ICI's inadequate offer. Like ICI's Offer to Purchase,
Grow's Schedule 14D-9 contains a number of material misstatements and
omissions.
Misrepresentations Concerning the Board's Recommendation
69. The 14D-9 states that:
The Board of Directors has unanimously determined that the
consideration to be paid for each Share in the offer and the
Merger is fair to the shareholders of the company and that the
offer and the Merger are otherwise in the best interests of
[Grow] and its shareholders. . . . (14D-9 at 12.)
70. This statement is false and misleading because Grow's
14D-9 impliedly represents that the Grow Board of Directors had an informed
basis upon which to reach this conclusion. However, the Board plainly did not
have such an informed basis. Indeed, Grow refused to negotiate with
Sherwin-Williams and never even asked Sherwin-Williams whether it could or
would in fact offer a better deal.
Misrepresentations Concerning Sherwin-Williams'
Serious Interest in Purchasing the Company
71. The 14D-9 also contains material misrepresentations
and omissions concerning Sherwin-Williams'
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repeated indications of interest in negotiating and consummating an acquisition
of Grow, and Grow's inadequate response thereto.
72. The 14D-9 states that:
Following the issuance of [Grow's] press release on January
26, 1995, [Grow] and representatives of Wertheim Schroder
engaged in discussions with several third parties to determine
whether they had an interest in acquiring [Grow]. Certain of
these third parties were furnished with confidential
information. None of these contacts with parties other than
[ICI] led to substantive negotiations. (14D-9 at 13).
73. This statement is clearly false and misleading in
that it fails to disclose, among others, the following material facts:
(1) that Sherwin-Williams made repeated requests both
directly and through Grow's financial advisors
seeking an opportunity to negotiate a merger with
Grow, and that those requests repeatedly were
rejected or ignored by Grow;
(2) that Sherwin-Williams sought to negotiate a
confidentiality agreement with Grow to obtain access
to Grow's non-public information so that
Sherwin-Williams could make its best and highest
offer to Grow's shareholders, and that Grow refused
to sign any agreement with Sherwin-Williams;
(3) that, on April 17, 1995, Grow informed
Sherwin-Williams that Sherwin-Williams would be
excluded from the bidding process for Grow and would
not even be given an opportunity to present
Sherwin-Williams' offer to Grow or its shareholders;
and
(4) that, but for Grow's outright refusal even to speak
with representatives of Sherwin-Williams, Sherwin-
Williams stood ready, willing and able to enter into
substantive negotiations.
74. The 14D-9 further states that the Grow Board of
Directors disregarded Sherwin-Williams' April 28 letter because
"Sherwin-Williams' interest in pursuing a transaction with the
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Company was subject to due diligence and that such letter did not state that
Sherwin-Williams was prepared to pay in excess of $18.10 per share." (14D-9 at
18.)
75. The statement is materially misleading and incomplete
because the only reason Sherwin-Williams had not performed due diligence was
Grow's repeated refusal to provide access to information. In this light, the
stated excuse for not pursuing Sherwin-Williams' letter is truly contrived and
pathetic. Those limitations on the quality of the Grow Board approach are
material and must be disclosed. The 14D-9 further fails to explain why neither
Grow nor any of its representatives or advisors even so much as tried to
contact Sherwin-Williams after receiving the April 28 letter to ascertain, for
example, the amount of time that Sherwin-Williams would need to complete its
due diligence or what price it was prepared to offer. Clearly, since those
types of inquiries were such an obvious course of action for a responsible
Board and were so easy to do, there must have been another, so-far
unarticulated reason for the Grow Board's astonishing refusal to respond to the
April 28 letter. Until that unarticulated reason is disclosed, Grow's
disclosure is incomplete and misleading.
76. These Statements also misleadingly imply that the
April 28 Letter represented a late, conditional attempt by Sherwin-Williams to
initiate negotiations on the eve of the Grow/ICI merger by failing to disclose
the significant prior attempts by Sherwin-Williams to enter into negotiations
with Grow.
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Misrepresentations Concerning the Lock Up Option
77. The 14D-9 also misrepresents the nature of the Lock
Up Option granted to ICI.
78. The 14D-9 states that in a meeting on April 26, 1995,
ICI's chief negotiator "stated that as part of any, transaction, [ICI] would
expect to receive a `lock-up' on" the Corimon Shares. The 14D-9 further states
that representatives of Grow purportedly responded that Grow "was not prepared
to consent to a "lockup" of the Corimon Shares by ICI. (14D-9 at 14.)
79. According to the 14D-9, on April 27 ICI increased its
offer from $17.50 to $18.10 conditioned upon, inter alia a lock-up on the
Corimon Shares. Grow again supposedly rejected any lock-up. ICI then
purportedly offered to eliminate the lock-up in exchange for an increase in the
size of the termination fee.
80. While creating the misleading impression that Grow
repeatedly rejected ICI's demand for a lock-up option, the 14D-9 fails to
disclose that the final terms of the Corimon Option in fact grant to ICI the
very lock-up it sought on the Corimon Shares, thereby contradicting the
purported rationale for Grow's Board giving ICI such a large break-up fee.
81. Although the 14D-9 describes ICI's repeated demands
for a lock up option with respect to the Corimon Shares, and repeatedly states
that "the Company was not prepared to consent to a `lock up' of Corimon's
share," nowhere does the 14D-9 disclose that the option ultimately granted to
ICI was, in effect, a lock up because it permits ICI to require Corimon to
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tender its shares into the ICI Tender Offer and subsequently require that
Corimon cannot thereafter withdraw its compulsorily-tendered shares. (See
14D-9 at 13-14.)
82. Furthermore, the 14D-9 misleadingly states that:
"[The] Corimon Option Agreement should not unduly discourage
Sherwin-Williams or other third parties from making bona fide
proposals subsequent to signing the Merger Agreement." (14D-9
at 18.)
"Corimon would be free to sell its Shares to a competing
bidder in the event that the Company's Board of Directors
decided to accept an Acquisition Proposal from such competing
bidder." (14D-9 at 19.)
83. To the contrary, Section 2.1 of the Lock-up Option
actually grants ICI the power at its sole discretion, to compel Corimon to
tender its shares into the ICI Tender Offer at any time, without regard to the
value of any other offer, and that once so tendered, Corimon loses the ability
to withdraw those shares, effectively giving ICI the power to block any other
offerors from acquiring 25% of Grows' stock.
84. The representations in the 14D-9 are materially false
and misleading insofar as they conceal the fact that, as structured, the
purpose and effect of the Lock-Up Option is to ensure that ICI has the power to
prevent any competing bidder -- including Sherwin-Williams -- from obtaining
the Corimon Shares, which represent 25% of the outstanding shares of Grow.
* * *
85. ICI's Offer to Purchase and the 14D-9, together with
Grow's press releases and other public statements, are intended to mislead
Grow's shareholders into believing their best
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- -- and only -- alternative is the ICI Tender Offer, when, in fact defendants
knew that Sherwin-Williams was able and has been willing to consider offering
Grow's shareholders substantially more.
86. Defendants' materially false and misleading tender
offer documents are simply one more part of their scheme to protect their
favored transaction with ICI and prevent Grow's shareholders from being given
complete information and thus the opportunity to test ICI's "sweetheart deal"
in the open marketplace in a fair auction.
87. Sherwin-Williams hereby reaffirms its readiness to
meet with Grow representatives to discuss the terms of a merger.
IRREPARABLE INJURY
88. Defendants' unlawful conduct is causing irreparable
harm to Sherwin-Williams, as well as Grow's public shareholders in that, among
other things:
(1) Defendants' false and misleading tender offer
documents are depriving Grow's shareholders of the
information they need fairly to consider the merits
of ICI's and Sherwin Williams' competing
transactions, thereby inducing Grow's shareholders
into making uninformed investment decisions without
the full and fair disclosure to which they are
entitled under the Exchange Act;
(2) Defendants' false and misleading tender offer
documents are creating confusion as to the merits of
Sherwin-Williams competing Tender Offer, depriving
Sherwin-Williams of the opportunity to acquire Grow,
a unique business asset.
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89. Absent relief from this Court, ICI and Grow may
succeed in causing a merger to be consummated that is less favorable to Grow's
shareholders than the alternative transaction currently being offered by
Sherwin-Williams. Defendants' unlawful conduct will induce Grow's shareholders
and the investing public into making uniformed decisions regarding Grow stock
without the benefit of full and fair disclosure they are entitled to under the
Exchange Act. Such actions irreparably harm Sherwin-Williams by impeding its
efforts to acquire Grow.
90. Absent relief from this Court, Sherwin-Williams will
lose the opportunity to have its offer to Grow's shareholders considered fairly
on its own merits. Sherwin-Williams will lose forever the opportunity to have
its proposal fairly considered by the Grow stockholders and will lose the
irreplaceable opportunity to create a new combined Sherwin-Williams/Grow entity
with unique business strengths. Damages for these losses cannot readily be
calculated and, in any event, could not compensate for the unique loss that
would have been suffered by Sherwin-Williams.
CLAIM FOR RELIEF
[For Material Misrepresentations and Omissions in
Violation of Section 14(e) of
the Exchange Act and the SEC Regulations
Promulgated Thereunder]
91. Sherwin-Williams repeats and reallege the allegations
in paragraphs 1 through 90 of the Complaint as if fully set forth herein.
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92. Section 14(e) of the Exchange Act, 15 U.S.C. Section
78n(e), provides that "it shall be unlawful for any person to make any untrue
statement of material fact necessary in order to make the statements made, in
the light of the circumstances under which they are made, not misleading, or to
engage in any fraudulent, deceptive, or manipulative acts or practices, in
connection with any tender offer. . . ."
93. As set forth above, ICI's and Grow's tender offer
documents, press releases and statements to the public, contain numerous untrue
statements of fact and omit to state facts necessary to render such statements,
in the light of the circumstances in which they were made, not misleading.
Each untrue statement and omission is material to Grow shareholders.
94. Such material misrepresentations and omissions were
made by ICI and Grow intentionally and with knowledge of their false and
misleading character for the purpose of protecting ICI's favored transaction
and defeating any superior offer by Sherwin-Williams or any other competing
bidder.
95. Defendants' acts and conduct in connection with ICI's
tender offer, including the untrue statements and misleading omissions set
forth above, constitute fraudulent, deceptive or manipulative acts in
connection with a tender offer, in violation of Section 14(e) of the Exchange
Act.
96. By reason of the foregoing, defendants have violated
and are in violation of Section 14(e) of the Exchange Act, and the rules and
regulations promulgated thereunder.
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97. A primary purpose of the Exchange Act and the SEC
rules and regulations promulgated thereunder is to assure that stockholders are
provided with complete and accurate information necessary to make an informed
decision when faced with a tender offer. By virtue of defendants' Exchange Act
violations, Grow's shareholders are being forced to make these critical
decisions in a market wrongly distorted by defendants' false, misleading and
incomplete statements with respect to ICI's Tender Offer for Grow's shares.
98. Unless the injunctive relief sought in this action is
granted, plaintiff and Grow's shareholders will be irreparably harmed in that
defendants will attempt to acquire control of Grow without providing Grow's
shareholders the information necessary to make informed decisions regarding the
disposition of their shares.
99. Absent the injunctive relief requested herein,
Sherwin-Williams will forever lose the opportunity to acquire Grow. The harm
flowing from such a result far outweighs the minimal harm, if any, to
defendants from a short delay of the misleading ICI Tender Offer.
100. In addition, the public interest favors granting the
relief requested herein. Absent injunctive relief, the ICI's materially
misleading Tender Offer may close as soon as June 1, 1995.
101. Plaintiff has no adequate remedy at law.
WHEREFORE, plaintiff demands:
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(1) An order preliminarily and permanently enjoining
defendant ICI, its respective officers, agents, servants, employees, attorneys,
affiliates and partners and all other persons acting in concert with them or on
their behalf, directly and indirectly, from:
(a) acquiring or attempting to acquire any shares
of Grow stock;
(b) soliciting or arranging for the solicitation
of orders to sell any shares of Grow stock;
(c) making or continuing or attempting to make
any tender offer or request or invitation for tenders of any
shares of Grow stock, including pursuant to the purported
tender offer commenced by defendant on May 4, 1995;
(d) making or disseminating any false or
misleading statements in connection with ICI's purported
tender offer;
(2) an order that defendants make appropriate disclosures
to correct all of the false and misleading statements and omissions made in
their public filings and otherwise concerning Sherwin-Williams and its bid for
control of Grow, and concerning ICI's Tender Offer for Grow, and thereafter
prohibiting ICI from purchasing or making any tender offer for shares of Grow
for an appropriate period to allow full dissemination of such disclosures to
the marketplace and to Grow's shareholders;
(3) enjoining defendant Grow, its officers, agents,
servants, employees, attorneys, affiliates, partners and all
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other persons acting in concert with them, from taking any steps to assist or
facilitate the completion of the tender offer for Grow by GDEN or ICI; and
(4) any other and further relief as this Court may deem
just and proper, including costs, disbursements and reasonable attorney's fees.
Dated: May 8, 1995
Cleveland, Ohio
Respectfully submitted,
By:____________________________
Hugh E. McKay
PORTER, WRIGHT, MORRIS & ARTHUR
925 Euclid Avenue
Cleveland, Ohio 44115
(216) 443-9000
James N. Benedict
Martin L. Seidel
Christopher J. O'Rourke
ROGERS & WELLS
200 Park Avenue
New York, New York 10166
(212) 878-8000
Attorneys for Plaintiff
The Sherwin-Williams Company
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