SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________
AMENDMENT NO. 4
TO
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
______________________
GROW GROUP, INC.
(Name of Subject Company)
GROW GROUP, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $0.10 PER SHARE
(Title of Class of Securities)
399820 10 9
(CUSIP Number of Class of Securities)
Lloyd Frank, Esq.
Secretary
Grow Group, Inc.
200 Park Avenue
New York, N.Y. 10166
(212) 599-4400
(Name, address and telephone number of person authorized to receive
notice and communication on behalf of the person(s) filing statement).
With a Copy to:
Daniel E. Stoller, Esq.
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, N.Y. 10022
(212) 735-3000
This Amendment supplements and amends as Amendment No. 4 the
Solicitation/Recommendation Statement on Schedule 14D-9,
originally filed on May 4, 1995 (the "Schedule 14D-9"), by Grow
Group, Inc., a New York corporation (the "Company"), relating to
the tender offer by GDEN Corporation, a New York corporation (the
"Purchaser") and an indirect wholly owned subsidiary of Imperial
Chemical Industries PLC, a corporation organized under the laws
of England ("Parent"), initially disclosed in a Tender Offer
Statement on Schedule 14D-1, dated May 4, 1995, to purchase all
outstanding shares of common stock, par value $0.10 per share
(the "Common Stock" or the "Shares"), of the Company at a price
of $18.10 per Share, net to the seller in cash, upon the terms
and subject to the conditions set forth in the Offer to Purchase,
dated May 4, 1995 and the related Letter of Transmittal.
Capitalized terms used and not otherwise defined herein shall
have the meanings set forth in the Schedule 14D-9.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT
COMPANY.
On May 10, 1995, the Company issued a press release
announcing that its Board of Directors has authorized management
of the Company and the Company's financial and legal advisors to
engage in discussions and negotiations with, and disclose certain
non-public information concerning the Company to, The Sherwin-
Williams Company ("Sherwin-Williams") in connection with Sherwin-
Williams' unsolicited tender offer to acquire, subject to certain
conditions, all outstanding Shares at a price of $19.50 per
Share. A copy of such press release is attached hereto as
Exhibit 21 and is incorporated herein by reference. Discussions
between representatives of the Company and representatives of
Sherwin-Williams commenced on May 10, 1995. The foregoing
actions were taken based on the Board's determination of its
fiduciary duties under applicable law as advised by counsel and
in accordance with the applicable provisions of the Merger
Agreement as described in Item 3 of the Schedule 14D-9.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
CERTAIN LITIGATION.
On May 9, 1995, the Company issued a press release
announcing the denial of Sherwin-Williams' application for a
temporary restraining order in the New York Action. A copy of
such press release is attached hereto as Exhibit 20 and is
incorporated herein by reference.
On May 8, 1995, a purported class action entitled A.D.
Gilhart & Co., Inc., v. Grow Group, Inc. et al., was commenced in
the Supreme Court of the State of New York, New York County (the
"Gilhart Action") against the Company and members of the
Company's Board of Directors. The complaint in the Gilhart
Action alleges, among other things, that the defendants breached
their fiduciary duties owed to the Company's shareholders in
connection with the proposed Merger between the Company and
Parent by failing to pursue discussion with Sherwin-Williams
about a possible acquisiton of the Company by Sherwin-Williams.
The complaint in the Gilhart Action seeks, among other
things, an order (i) enjoining defendants from enforcing the
Company's "anti-takeover procedures"; (ii) requiring defendants
to explore third party interest and accept the highest bid
obtainable for the Company's Shares; and (iii) awarding the
plaintiffs' costs and disbursements, including attorneys' fees.
On May 9, 1995, a purported class action entitled Kim J.
Hammond and Jeffrey Dell v. Grow Group, Inc., et al. (the
"Hammond Action") was commenced in the United States District
Court for the Southern District of New York against the Company
and certain members of the Company's Board of Directors
(collectively, the "Defendants") on behalf of all persons who
sold the Company's securities during the period from April 29,
1995 to May 4, 1995 and who sustained damages as a result of such
sale. The complaint alleges violations of Section 10(b) of the
Exchange Act and Rule 10b-5 promulgated thereunder for, among
other things, issuing the statements contained in press releases
dated April 28, 1995 and May 1, 1995 which allegedly were
materially false and misleading for failing to adequately
disclose all material facts concerning Sherwin-Williams' contacts
with the Company regarding a proposed acquisition by Sherwin-
Williams; and for falsely creating the impression that the Board
of Directors had "shopped" the Company. The complaint further
alleges that the above mentioned disclosures artificially
affected the market price of the Company's securities.
The complaint in the Hammond Action seeks, among other
things, monetary damages against the Defendants in an unspecified
amount for all losses suffered by the plaintiffs as a result of
the allegedly improper activity of the Defendants and costs,
reasonable attorneys' fees and expert fees and disbursements.
RIGHTS PLAN.
On May 10, 1995, the Company issued a press release
announcing that it has extended the distribution date of the
stock purchase rights (the "Rights") associated with the Shares
until May 31, 1995 or such later date as may be determined by the
Company's Board of Directors. Until such date, the Rights will
continue to trade together with the Shares. A copy of such press
release is attached hereto as Exhibit 21 and is incorporated
herein by reference.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit No.
Exhibit 20 Press Release issued by the Company on May 9,
1995
Exhibit 21 Press Release issued by the Company on May
10, 1995
Exhibit 22 Class Action Complaint entitled Kim J.
Hammond and Jeffrey Dell v. Grow Group, Inc.
et. al., filed in the United States District
Court for the Southern District of New York.
Exhibit 23 Class Action Complaint entitled A. D. Gilhart
& Co. Inc. v. Grow Group, Inc. et. al., filed
in the Supreme Court of the State of New
York, New York County.
SIGNATURE
After reasonable 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 10, 1995 GROW GROUP, INC.
By /s/ Lloyd Frank
Title: Secretary
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
20 Press Release issued by the Company on May 9, 1995
21 Press Release issued by the Company on May 10,
1995
22 Class Action Complaint entitled Kim J. Hammond and
Jeffrey Dell v. Grow Group, Inc. et. al., filed in
the United States District Court for the Southern
District of New York.
23 Class Action Complaint entitled A. D. Gilhart &
Co. Inc. v. Grow Group, Inc. et. al., filed in the
Supreme Court of the State of New York, New York
County.
EXHIBIT 20
FOR IMMEDIATE RELEASE
NEW YORK COURT REJECTS SHERWIN-WILLIAMS APPLICATION
FOR TEMPORARY RESTRAINING ORDER
New York, New York, May 9, 1995... Grow Group,
Inc. ("Grow") (NYSE: GRO) announced today that a Justice
of the New York State Supreme Court, after a hearing
yesterday afternoon, rejected Sherwin-Williams'
application for a temporary restraining order. Sherwin-
Williams had sought an order enjoining Imperial Chemical
Industries PLC ("ICI") from exercising certain rights
under an agreement between ICI and Corimon, a 25%
shareholder of Grow. The agreement between ICI and
Corimon was entered into in connection with the
previously announced Merger Agreement between ICI and
Grow.
A hearing on Sherwin-Williams' preliminary
injunction motion in its New York State court action has
been set for May 25, 1995.
EXHIBIT 21
FOR IMMEDIATE RELEASE
New York, New York, May 10, 1995... Grow Group,
Inc. ("Grow") (NYSE: GRO) announced today that its Board
of Directors has authorized management of Grow and Grow's
financial and legal advisors to engage in discussions and
negotiations with The Sherwin-Williams Company in
connection with Sherwin-Williams' unsolicited tender
offer to acquire, subject to certain conditions, all
outstanding shares of Grow Common Stock at a price of
$19.50 per share.
On May 1, 1995, Grow announced that it entered
into a definitive merger agreement with Imperial Chemical
Industries, PLC, an English company ("ICI"), pursuant to
which ICI has offered to purchase all outstanding shares
of Grow Common Stock for $18.10 per share.
In addition, Grow announced that it has
extended the distribution date of its Stock Purchase
Rights until May 31, 1995 or such later date as may be
determined by Grow's Board of Directors. Until such
date, the Stock Purchase Rights will continue to trade
together with the Company's Common Stock.
Grow also stated that it believes the lawsuits
filed by Sherwin-Williams and by certain shareholders as
purported class actions are without merit. Russell
Banks, President and Chief Executive Officer of Grow,
said, "The Grow Board of Directors is acutely aware of
its fiduciary responsibilities. The Board has acted at
all times in the interests of the Company and its
shareholders and will continue to do so."
EXHIBIT 22
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
- - - - - - - - - - - - - - - - - -x
KIM J. HAMMOND and JEFFREY DELL,, :
:
Plaintiffs, : Index No.
:
-against- :
: CLASS ACTION
GROW GROUP, INC., JOHN F. GLEASON, : COMPLAINT
RUSSELL BANKS and JOSEPH M. QUINN, :
:
Defendants. : JURY DEMAND
- - - - - - - - - - - - - - - - - -
Plaintiffs, for their complaint against defendants,
allege as follows upon information and belief based upon their
counsel's investigation of news reports, public filings and other
materials, except as to those allegations pertaining to
themselves which are based upon plaintiff's personal knowledge.
JURISDICTION AND VENUE
1. This court has jurisdiction over the subject
matter of this action under Section 27 of the Securities Exchange
Act of 1934 (the "Exchange Act"), 15 U.S.C. SECTION78aa, 28 U.S.C.
SECTION1331. The claims alleged herein arise under Sections 10(b) and
20(a) of the Exchange Act, 15 U.S.C. SECTIONSECTION78g(b) and 78t(a),
and Rule 10b-5 promulgated thereunder by the Securities and Exchange
Commission ("SEC"), 17 C.F.R. SECTION240.10b-5.
2. Venue is proper in this District under Section 27
of the Exchange Act and 28 U.S.C. SECTION1391(b). The acts giving rise
to the violations of law complained of herein occurred, at least
in part, in this District. In addition, defendant Grow Group,
Inc. ("Grow" or the "Company") is a corporation organized under
the laws of the state of New York and maintains offices and
conducts its business in this District; its financial and legal
advisors also maintain offices and conduct business in the
District.
3. In connection with the acts, conduct and other
wrongs complained of herein, defendants, directly and indirectly,
used the means and instrumentalities of interstate commerce and
the United States mails, and the facilities of the national
securities markets.
THE PARTIES
4. Plaintiff Kim J. Hammond sold 10,300 shares of
Grow common stock on May 2, 1995 at a price of $17 7/8 per share.
5. Plaintiff Jeffrey Dell sold 15,000 shares of Grow
common stock on May 2, 1994 at a price of $17 3/4 per share.
6. Defendant Grow Group is a corporation organized
and existing under the laws of the State of New York with offices
at 200 Park Avenue, New York, New York. Grow Group manufactures
and markets trade paints and coatings, chemical automotive and
industrial products, including thinners, adhesives and
plastisols, high gloss urethane coatings and chemical coatings.
The Company had, as of February 1, 1995, approximately 16 million
shares outstanding held by approximately 4,000 shareholders of
record.
7. Defendant Russell Banks ("Banks") is and was, at
all relevant times, the Company's President and Chief Executive
Officer.
8. Defendants John F. Gleason ("Gleason") is and was,
at all relevant times, a director and Executive Vice President of
Grow.
9. Defendant Joseph M. Quinn ("Quinn") is and was, at
all relevant times, a director and Executive Vice President and
Chief Operating officer of Grow.
CLASS ALLEGATIONS
10. Plaintiffs bring this action as a class action
pursuant to Rules 23(a) and 23(b)(3) of the Federal Rules of
Civil Procedure on behalf of themselves and all other persons
similarly situated (the "Class") who sold Grow securities during
the period from April 29, 1995 to May 4, 1995, inclusive (the
"Class Period") and who sustained damages as a result of such
transactions. Excluded from the Class are the defendants herein,
members of the immediate families of and persons affiliated with
each defendant, the legal representatives, heirs, and successors
or assigns of any of the defendants.
11. There are over 16 million shares of Grow common
stock publicly outstanding, roughly 2 million of which were
actively traded during the Class Period. Thus, the members of
the Class are so numerous that joinder of all members is
impracticable. While the exact number of Class members can only
be determined by appropriate discovery, plaintiffs believe that
Class members number in the thousands because Grow common stock
was actively traded on the New York Stock Exchange, an efficient
market, during the Class Period.
12. The representative plaintiffs, claims are typical
of the claims of the members of the Class. Plaintiffs and all
Class members sustained damages as a result of defendants'
wrongful conduct complained of herein.
13. Plaintiffs will fairly and adequately protect the
interests of the Class members and have retained counsel
competent and experienced in class and securities litigation.
14. A class action is superior to other available
methods of the fair and efficient adjudication of this
controversy. Since the damages suffered by individual Class
members may be relatively small, the expense and burden of
individual litigation make it virtually impossible for the Class
members individually to seek redress for the wrongful conduct
alleged.
15. Common questions of law and fact exist as to all
Class members and predominate over any questions affecting solely
individual Class members. Among the questions of law and fact
common to the Class are:
(a) whether the federal securities laws were
violated by defendants' acts as alleged herein;
(b) whether representations made to the investing
public and the shareholders of Grow during the Class Period
omitted and/or misrepresented material facts about the Company's
efforts to sell itself to a third party;
(c) whether defendants failed to timely disclose
material facts necessary in order not to mislead the investing
public; and
(d) whether the members of the Class have
sustained damages and, if so, what is the proper measure of such
damages.
SUBSTANTIVE ALLEGATIONS
16. In late January 1995, defendant Grow issued a
press release stating that the Grow board of directors had
unanimously authorized Grow's financial advisor, Wertheim
Schroder & Co., Inc., ("Wertheim") to assist the Company in
considering and reviewing alternatives to enhance shareholder
value.
17. On April 28, 1995, defendants issued a press
release which stated that Grow:
. . . has entered into negotiations with a
third party concerning an acquisition of
Grow. The third party, which has
substantially completed its due diligence
review, has proposed to acquire 100% of
Grow's common stock and has indicated a
willingness to pay Grow's public stockholders
$18.10 per share in cash. Any such
transaction would be subject to negotiation
and execution of a definitive agreement and
approval of Grow's Board of Directors.
18. On the morning of May 1, 1995, defendants issued a
press release, stating that Grow:
has entered into a definitive merger
agreement pursuant to which Imperial Chemical
Industries, PLC, an English Company ("ICI"),
would offer to purchase all the outstanding
shares of Grow for $18.10 per share.
* * *
Grow also stated that Corimon, a Venezuelan
corporation which owns approximately 25% of
Grow's shares, had entered into a separate
Option Agreement with ICI in which Corimon
agreed to sell its Grow shares to ICI at a
price of $17.50 per share.
* * *
The Board of Directors of Grow unanimously
approved the transaction based upon, among
other things, an opinion as to the fairness
of the offer and the merger from Wertheim
Schroder & Co., Incorporated.
* * *
In announcing the execution of the Merger
Agreement, Russell Banks, President and Chief
Executive Officer of Grow, said, 'We are
extremely pleased to be able to propose to
shareholders what we believe represents an
attractive opportunity . . . .'
19. The foregoing statements were materially false and
misleading and/or omitted to state material facts necessary to
make the statements made, in the light of the circumstances under
which they were made, not misleading, in at least the following
respects:
(a) defendants failed to disclose that as early
as March 17, 1995, The Sherwin-Williams Company ("SherwinWilliams")
had offered to enter into a confidentiality agreement with Grow in
order to permit Sherwin-Williams to enter into a definitive agreement
for 100% of Grow, and Sherwin-Williams had sent Grow a fully executed
confidentiality agreement on March 31, 1995 which agreement was never
executed by Grow;
(b) defendants failed to disclose that, on April
17, 1995, defendant Banks informed Sherwin-Williams that it was
to be excluded from any bidding process for Grow;
(c) defendants failed to disclose that since
April 17, 1995 and despite its exclusion from any bidding
process, Sherwin-Williams' financial advisors had been in contact
with Grow's financial advisor and had expressed Sherwin-Williams'
continued serious interest in pursuing a transaction with Grow;
(d) defendants failed to disclose that on the
evening of April 28, 1995, Sherwin-Williams sent a letter to
defendant Banks, with copies to each of the other individual
defendants, to all of Grow's directors and to Grow's financial
and legal advisors. The April 28th letter stated that
SherwinWilliams was still seriously interested in a transaction
with Grow, that financing an all-cash transaction would not
represent "any impediment" given Sherwin-Williams' financial
strength, that Sherwin-Williams was "extremely confident that the
antitrust laws would not impede [its] ability to consummate a
transaction," and that Sherwin-Williams had retained the
investment banking firm of Lazard Freres & Co. and the law firm
of Rogers & Wells to provide Sherwin-Williams financial and legal
counsel in connection with an acquisition by Grow. The April
28th letter further 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. A copy of the April 28th letter is annexed hereto as
Exhibit A; and
(e) Defendant Banks' statement that the board was
"extremely pleased to be able to propose what we believe
represents an attractive opportunity" was materially false and
misleading in that it created the false impression that the
Company had been fully "shopped" by defendants, with the
assistance of Wertheim, and that defendants had obtained the best
available transaction for the Company and its public
shareholders.
20. By means of the aforesaid misrepresentations and
omissions (and failure to correct same), set forth above, and/or
with reckless disregard of the facts, defendants unlawfully and
artificially affected the market price of Grow securities. In
ignorance of the false and misleading nature of the
representations discussed above, plaintiffs and the members of
the Class relied, to their detriment, on the integrity of the
market and/or the above-cited representations of the defendants.
21. By reason of the foregoing, defendants violated
and/or aided and abetted violations of Section 10(b) of the
Exchange Act and Rule l0b-5 promulgated thereunder in that they:
(a) employed devices, schemes and artifices to defraud; (b) made
untrue statements of material fact or omitted to state material
facts necessary in order to make the statements set forth in
paragraph 18 hereof, in light of the circumstances under which
they were made, not misleading; and (c) engaged in acts,
practices and/or a course of business which would and did operate
as a fraud and deceit upon the plaintiffs and other owners of
Grow securities who sold their securities during the Class
Period.
22. Had plaintiffs and the members of the class known
that Grow had received repeated serious indications of interest
from Sherwin-Williams culminating in the April 28th letter, they
would not have sold their securities during the Class Period.
Following the belated disclosure of the April 28th letter on May
4, 1995, the price of Grow common stock traded above ICI's $18.10
offering price. Thus, on May 5, 1995, Grow common stock closed
at $19 1/2 per share. On May 8, 1995, the second trading day
following the disclosure of the April 28th letter,
SherwinWilliams commenced a tender offer for all shares of Grow
at a price of $19.50 per share cash. On May 8, 1995, Grow common
stock traded as high as $20 3/8 per share.
23. Defendants, by virtue of their offices and
directorships, were at the time of the wrongs alleged herein,
controlling persons of Grow within the meaning of Section 20(a)
of the Exchange Act. Defendants had the power and influence
which they exercised to cause Grow to engage in the conduct and
practices complained of herein. Their position within the
Company made them privy to, and provided them with, actual
knowledge of the material facts concealed from plaintiffs and the
Class.
24. By reason of the conduct described herein,
defendants are liable to plaintiffs and the other members of the
Class for the substantial damages which they suffered in
connection with their sales of Grow securities.
WHEREFORE, plaintiffs demand judgment against
defendants, as follows:
A. Certifying this action as a class action,
certifying plaintiffs as class representatives thereof, and
plaintiffs' counsel as class counsel;
B. Declaring and determining that defendants violated
the federal securities laws by reason of the deceptive conduct
and misstatements and omissions as alleged herein;
C. Awarding money damages against the defendants,
jointly and severally, and in favor of plaintiffs and the other
members of the Class for all losses and injuries suffered as a
result of the acts and transactions complained of herein,
together with prejudgment interest on all of the aforesaid
damages which the Court shall award from the date of said wrongs
to the date of judgment herein at a rate the Court shall fix;
D. Awarding plaintiffs the costs of this action,
including reasonable attorneys' fees and expert fees and
disbursement; and
E. Granting such other and further relief as this
Court may deem just and proper.
JURY DEMAND
Plaintiffs demand trial by jury.
Dated: May 9, 1995
ABBEY & ELLIS
By: _____________________________
Judith L. Spanier (JS-5065)
212 East 39th Street
New York, New York 10016
(212) 889-3700
EXHIBIT A
April 28, 1995
Mr. Russell Banks
President and Chief Executive Officer
Grow Group, Inc.
200 Park Avenue
New York, New York 10166
Dear Mr. Banks:
We at The Sherwin-Williams Company were troubled to learn
from the press release you issued today that you are in the
process of negotiating a sale of your company to another party.
Our concern arises from the fact that, despite Sherwin-Williams'
repeated indications of serious interest in a transaction with
Grow Group, you apparently have decided to negotiate a definitive
agreement with another bidder without giving us access to the
information that would allow us to present our best possible
proposal.
On March 17, 1995 we offered to enter into a confidentiality
agreement with Grow Group. After repeated delays on Grow Group's
part to finalize such agreement, we forwarded an executed copy of
that agreement to Lloyd Franks on March 31, 1995. However, that
agreement was never executed by Grow Group. On April 17, 1995,
you informed us that Sherwin-Williams was to be excluded from the
bidding process. Consequently, by letter dated April 17, 1995,
we had no alternative but to revoke our offer to enter into the
confidentiality agreement with Grow Group. Since that time and
despite your actions, our financial advisors have been in contact
with Wertheim Schroder and have expressed our continued interest
in pursuing a transaction with Grow Group.
Given our financial strength, financing will not represent
any impediment to the consummation of a transaction on an all-
cash basis. In addition, based upon our preliminary analysis, we
are extremely confident that the antitrust laws would not impede
our ability to consummate a transaction with Grow Group. This
matter has been discussed at length with the members of our
senior management and with our Board of Directors. We have also
retained Lazard Freres & Co. and Rogers & Wells to provide
financial and legal counsel regarding this matter.
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.
We wish to obtain immediate access to the information which
you have refused to furnish to us. We are also prepared to enter
into immediate discussions with you and your directors,
management and advisors about a transaction with Sherwin-
Williams. In Mr. Breen's absence, you may contact me over the
weekend either at my home at (216) 247-4936 or at my office (216)
566-2102. If you are unable to contact me, you can contact Larry
J. Pitorak, Senior Vice President--Finance, Treasurer and Chief
Financial Officer, at (216) 729-3840 or (216) 566-2573.
We hope that you and your Board of Directors will give this
matter prompt and serious consideration.
Sincerely,
/s/ Conway G. Ivy
EXHIBIT 23
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
__________________________________________
:
A.D. GELHART & CO., INC., :
ON BEHALF OF ITSELF AND ALL OTHERS :
SIMILARLY SITUATED, :
: INDEX NO. 95/111517
PLAINTIFF, :
:
: CLASS ACTION COMPLAINT
-AGAINST - :
:
GROW GROUP, INC., RUSSELL BANKS, :
JOSEPH M. QUINN, JOHN F. GLEASON, :
PETER L. KEANE, PHILIPPE ERARD, :
TOLLY PLESSER, ROBERT J. MILANO, :
ARTHUR W. BROSLAT, LLOYD FRANK, :
ANGUS N. MACDONALD, WILLIAM :
H. TURNER, AND HAROLD G. BITTLE, :
:
DEFENDANTS. :
:
__________________________________________
Plaintiff, individually and on behalf of all others
similarly situated, by its undersigned attorneys, for its
complaint, alleges based upon personal knowledge as to itself and
its own acts, and upon information and belief as to all other
matters, based upon, inter alia, the investigation made by and
through its attorneys, which investigation included, among other
things, a review of public documents, published reports and news
articles:
NATURE OF THE ACTION
1. Plaintiff A.D. Gilhart & Co., Inc. brings this
class action on behalf of itself and the public stockholders of
Grow Group, Inc. ("Grow Group" or the "Company") against
defendants herein for failing to insure that the shareholders of
the Company receive maximum value for their shares of the common
stock of the Company.
2. The Company is supporting a tender offer (the
"Tender Offer") by GDEN Corporation, a New York corporation and a
wholly owned subsidiary of Imperial Chemical Industries PLC, a
company organized under the laws of England ("ICI"), to purchase
all of the outstanding common stock of the Company, for the
grossly inadequate price of $18.10 per share. Moreover,
defendants, through the use of a shareholder rights plan or
"poison pill" and a lock-up and bust up fee granted to ICI, have
effectively impeded competing bids for the Company's shares and
removed the possibility of the Company's shareholders receiving
the best possible valuation of their shares. Plaintiff seeks to
recover damages from the Director Defendants, as defined below,
for breach of fiduciary duty to maximize shareholder value in
connection with the Tender Offer.
3. The Company and the Director Defendants owe to the
Company's stockholders the highest fiduciary obligations of
fidelity, trust, loyalty and due care and to act in furtherance of
the best interests of the Company and its stockholders. In an
effort to entrench themselves in their positions with the Company,
and to earn potential profits of in excess of $6.5 million, by
forcing potential acquirors to pay for their cooperation, the
Director Defendants are using fiduciary positions of control over
the Company to aid ICI in their Tender Offer. The actions taken
or intended to be taken by defendants to aid the proposed takeover
of the Company constitute self dealing, deception, unfair dealing,
overreaching and a breach of their fiduciary duty to maximize
shareholder value.
THE PARTIES
4. Plaintiff A.D. Gilhart & Co., Inc. owns shares of
the Company's common stock and has held such stock up to and
including the time of the announced Tender Offer.
5. Defendant Company is a corporation organized and
existing under the laws of the State of New York since 1950, with
its principal executive offices located at 200 Park Avenue, New
York, New York 10166. The Company and its subsidiaries purport to
formulate and produce a complete line of architectural coatings,
including paints, and a diverse line of chemical products for the
automotive industry and maritime and industrial users.
6. As of April 29, 1995, the Company had approximately
16,420,411 shares of common stock outstanding, which shares are
traded on the New York Stock Exchange.
7. The below named defendants (the "Director
Defendants") constitute the entire Board of Directors of the
Company as of September, 1994:
(a) Defendant Russell Banks, has been President
and Chief Executive Officer of the Company since 1962
and a director since 1960. If the Tender Offer is
completed, defendant Banks will reap a windfall of $2.1
million pursuant to an employment agreement; $400,000
pursuant to a consulting agreement; $115,000 pursuant to
a stock option agreement; and up to $620,000 pursuant to
a supplemental retirement and death benefit agreement.
(b) Defendant Philippe Erard, has been a director
of the Company since 1992. Defendant Erard is also
Chairman of Corimon C.A.S.A.C.A., a Venezuelan
industrial corporation ("Corimon") which has agreed to
sell its 25% stake of the Company's common stock to ICI
for $70.5 million. Defendant Erard is acting in the
best interests of Corimon, not the other public
shareholders of the Company. If the Tender Offer is
completed, defendant Erard will personally reap a
$62,900 windfall pursuant to a stock option agreement.
(c) Defendant Arthur W. Broslat, has been a
director of the Company since 1992. Defendant Broslat
is also an Executive Vice President and the Chief
Financial Officer of Corimon. If the Tender Offer is
completed, defendant Broslat will reap a $61,000
windfall pursuant to a stock option agreement.
(d) Defendant Joseph M. Quinn is an Executive Vice
President, Chief Operating Officer and director of the
Company. If the Tender Offer is completed, defendant
Quinn will reap of windfall of $1.03 million pursuant to
the terms of an employment agreement; $350,000 pursuant
to a stock option agreement; and up to $377,285 pursuant
to a supplemental retirement and death benefit
agreement.
(e) Defendant John F. Gleason, is an Executive
Vice President and director of the Company. Defendant
Gleason became a director of the Company in 1976. If
the Tender Offer is completed, defendant Gleason will
reap a $15,000 windfall pursuant to a stock option
agreement; and up to $347,665 pursuant to a supplemental
retirement and death benefit agreement.
(f) Defendant Peter L. Keane has been a director
of the Company since 1969. If the Tender Offer is
completed, defendant Keane will reap a windfall of
$20,000 for 10 years under a director fee continuation
plan.
(g) Defendant Harold G. Bittle, became a director
of the Company in 1993. Defendant Bittle also has
served as a consultant to Corimon from 1951 to 1989. If
the Tender Offer is completed, defendant Bittle will
reap a $41,000 windfall pursuant to a stock option
agreement.
(h) Defendant Robert J. Milano, has been a
director since 1983. If the Tender Offer is completed,
defendant Milano will reap a windfall of $20,000 a year
for life under a director fee continuation plan.
(i) Defendant Tully Plesser became a director of
the Company in 1993. If the Tender Offer is completed,
defendant Plesser will reap a $41,000 windfall pursuant
to a stock option agreement.
(j) Defendant Lloyd Frank is Secretary and a
director the Company. If the Tender Offer is completed,
defendant Frank will reap a windfall of $20,000 for 10
years under a fee director fee continuation plan;
$72,000 pursuant to a stock option agreement; and up to
$248,332 pursuant to a supplemental retirement and death
benefit agreement.
(k) Defendant Angus N. MacDonald has been a
director of the Company since 1984. If the Tender Offer
is completed, defendant MacDonald will reap a windfall
of $20,000 for 10 years under a fee director fee
continuation plan.
(l) Defendant William H. Turner has been a
director of the Company since June 1994.
8. The Director Defendants as a group stand to
personally reap a windfall of in excess of $6.5 million if the
Tender Offer is consummated.
9. By reason of their relationships and offices, the
Director Defendants are in a fiduciary relationship with the
plaintiff and the other public shareholders of the Company and owe
to them the highest obligations of good faith, loyalty and fair
dealing. They are sued herein because they have breached these
fiduciary duties.
CLASS ACTION ALLEGATIONS
10. Plaintiff brings this action on its own behalf and
as a class action pursuant to CPLR SECTION 901, seeking declaratory,
injunctive and other relief, on behalf of all current common
stockholders of the Company (the "Class') (excluded from the Class
are defendants herein and any person, firm, trust, corporation or
other entity related to or affiliated with defendants) who are or
will be deprived of their equity interest in the Company at an
unfair price under the proposed Tender Offer of the Company's
public stockholders through the wrongful acts described herein.
11. This action is properly maintainable as a class
action pursuant to Rule 901 of the New York Civil Practice Law and
Rules for the following reasons:
a. The Class of stockholders for whose benefit
this action is brought is so numerous that joinder of
all Class members is impracticable. There are
approximately 16,420,411 shares of the Company's common
stock outstanding, held by approximately 4,000
shareholders of record and thousands more beneficial
owners, all widely dispersed. Furthermore, as the
damages suffered by individual Class members may be
small, the expense and burden of individual litigation
makes it virtually impossible for the Class members on
an individual basis to address wrongs done to them.
b. There are questions of law and fact which are
common to members of the Class and which predominate
over any questions affecting only individual members,
including whether the defendants have breached their
fiduciary duties to plaintiff and the Class by reason
of:
(1) their efforts to entrench themselves in
office and prevent the Company's public
shareholders from maximizing the value of their
holdings;
(2) engaging in unlawful plans and schemes to
thwart valid offers and proposals to acquire the
Company at terms more favorable to the Company's
shareholders;
(3) approving and causing the Company to
adopt and retain various provisions designed solely
to discourage competing tender offers, including a
poison pill and lockup fee, without regard to the
best interests of the Company's shareholders; and
(4) damaging shareholders by preventing them
from the financial benefits of a tender offer for
their shares at terms more beneficial than those
offered by ICI.
c. The claims of plaintiff are typical of the
claims of the other members of the Class and Plaintiff
has no interests that are adverse or antagonistic to the
interest of the Class.
d. Plaintiff is a member of the Class, has
sustained and will sustain damages as a result of the
misconduct alleged herein, and is committed to
prosecuting this action and has retained competent
counsel experienced in litigation of this nature.
Accordingly, plaintiff is an adequate representative of
the Class and will fairly and adequately protect the
interests of the Class.
e. The prosecution of separate actions by
individual members of the Class would create a risk of
inconsistent or varying adjudications with respect to
individual members of the Class which would establish
incompatible standards of conduct for the party opposing
the Class.
f. A class action is superior to the other
available methods for adjudication of this controversy.
There will be no difficulty in the management of this
case as a class action.
FACTUAL BACKGROUND
12. On May 1, 1995, Imperial Chemical Industries
announced that it had agreed to buy Grow Group for $290 million;
that it had reached an agreement with the Company's biggest
shareholder, Corimon, to sell its 25 percent stake for $17.50 per
share; and that the Company's directors had agreed to a tender
offer for the rest of the Company's shares at $18.10 each.
13. The Board of Directors of the Company, in the
Company's Form 14D-9 filed with the Securities and Exchange
Commission on May 4, 1995, stated that they had unanimously
determined that the offer and merger are fair and in the best
interest of the Company's shareholders, and recommended that the
shareholders accept the offer and tender their shares.
14. The merger agreement calls for ICI to make a cash
Tender Offer for all outstanding shares of the Company for $18.10
per share. The Tender Offer will be followed as soon as possible
by a second-step cash merger in which each share of the Company's
common stock not acquired in the merger would be converted into
the right to receive $18.10 in cash.
15. Corimon, the Company's largest shareholder which is
represented by three of its officers on the Company's Board of
Directors, has entered into a separate agreement with ICI to sell
its 25% stake of the outstanding common stock of the Company to
ICI for $70.5 million.
16. On May 4, 1995, it was publicly reported for the
first time that the Company had received a credible and serious
expression of interest from Sherwin-Williams Company ("Sherwin-
Williams") to acquire the Company. It was reported that the
Company, on April 28, 1995, received a letter from Sherwin-
Williams stating that they were interested in pursuing a
transaction to purchase the Company, but that the Company had
notified Sherwin-Williams on April 17, 1995 that Sherwin-Williams
would be excluded from bidding on the Company.
SUBSTANTIVE ALLEGATIONS
17. The Director Defendants, by virtue of the acts and
conduct alleged herein, are carrying out a preconceived plan and
scheme to entrench themselves in office and to thwart legitimate
offers to acquire the Company on terms more beneficial than those
offered by ICI and supported by defendants, regardless of the
benefit to the Company's public shareholders. In so doing, the
Director Defendants are acting in total disregard of their
fiduciary duties to Plaintiff and the other members of the Class.
18. The Director Defendants have entered into the
merger agreement without properly exploring other offers and
rejecting possible offers out of hand. By failing to properly
expose the Company for sale, the Director Defendants remain
uninformed of the true value of the Company and unaware if another
suitor is in a better position to put forth an offer which would
serve to maximize shareholder value.
19. The Director Defendants have acted without regard
to their fiduciary duties to the shareholders by rejecting
Sherwin-Williams, a serious and reportedly very financially able
suitor, without informing themselves about Sherwin-Williams'
intentions.
20. If the poison pill and lockup fee granted to ICI
designed to discourage a competing takeover attempt are permitted
to survive, the Company's shareholders who wish to avail
themselves of bona fide other offers to purchase their shares for
fair value would be deprived of the ability to do so.
21. By adopting and retaining the poison pill and other
procedures, the Director Defendants, without shareholder approval,
caused a fundamental shift of power from the shareholders to
themselves. These actions permit the Company's directors to act
as the primary negotiators of -- and, in effect, to preclude --
any and all other offers to acquire the Company that do not
provide unfair and unreasonable compensation for the directors or
permit them to stay in power over the Company.
22. By assuming power to consider or reject potential
takeovers of the Company, the Director Defendants had also assumed
a heightened fiduciary obligation to consider all third-party bids
in good faith, without regard to personal interests but with
regard only to the interests of the public shareholders, and to
negotiate in good faith with bidders on behalf of the public
shareholders. Moreover, to fulfill their fiduciary obligations,
the Director Defendants cannot merely accept a third-party offer
that satisfies their interests, but must pursue third party
interest in acquiring the Company so as to maximize the value to
the shareholders.
23. In order to entrench themselves in office and to
continue receiving their compensation, fees and emoluments of
office, the Director Defendants have not acted in good faith
toward plaintiff and the Class; have breached and are breaching
their fiduciary duties to plaintiff and the Class; and have
willfully participated in unfair dealing toward plaintiff and the
Class.
24. As a result of the actions of the Director
Defendants, plaintiff and their members of the Class have been and
will be damaged in that they are the victims of unfair dealing and
are not receiving the fair value of their interests in the
Company.
25. Unless enjoined by this Court, the Director
Defendants will continue to breach their fiduciary duties owed to
plaintiff and the Class, and succeed in their plan to entrench
themselves in their corporate offices, all to the irreparable harm
of the plaintiff and the Class.
26. The plaintiff and the Class have no adequate remedy
at law.
WHEREFORE, plaintiff, on behalf of itself and the Class,
prays for judgment and relief as follows:
A. Declaring that this action is properly maintainable as a
Class action and certifying the plaintiff as the representative of
the Class;
B. Declaring that the Director Defendants have committed a
gross abuse of trust and have breached their fiduciary duties to
plaintiff and the Class;
C. Preliminarily and permanently enjoining defendants and
their counsel, agents, employees and all persons acting under, in
concert with, or for them, from enforcing the challenged anti-
takeover procedures or otherwise violating their fiduciary duties
to plaintiff and the Class;
D. Requiring defendants to fulfill their fiduciary duties
to maximize shareholder values by exploring third party interest
and accepting the highest offer obtainable for the public
shareholders or by permitting the shareholders to make that
decision free from any coercion;
E. Awarding plaintiff and the Class compensatory damages,
together with appropriate prejudgment interest at the maximum rate
allowable by law;
F. Awarding plaintiff and the Class their costs and
expenses for the litigation including reasonable attorneys' fees
and other disbursements; and
G. Granting such other and further relief as this Court
deems to be just and proper.
Dated: May 8, 1995
POMERANTZ HAUDEK BLOCK & GROSSMAN
Stephen P. Hoffman
Michael A. Schwartz
100 Park Avenue
New York, New York 10017
212/661-1100
Attorneys for Plaintiff
