SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________
AMENDMENT NO. 3
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. 3 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 8. ADDITIONAL INFORMATION TO BE FURNISHED.
CERTAIN LITIGATION.
On May 8, 1995, an action entitled The Sherwin-Williams
Company v. Imperial Chemical Industries PLC et. al., (Case Number
1:95 CV 1017) was filed in the United States District Court for
the Northern District of Ohio, Eastern Division by Sherwin-
Williams against Parent, Purchaser and the Company (the "Sherwin-
Williams Federal Action"). The complaint alleges, among other
things, that the Purchaser's Offer to Purchase, dated May 4, 1995
(the "Offer to Purchase") is materially false and misleading, in
that it (i) falsely describes the break-up fee provisions of the
Merger Agreement; (ii) misrepresents the terms and nature of the
Corimon Option Agreement; and (iii) misrepresents Parent's
ability to consummate a Merger with the Company which, according
to the complaint, cannot be consummated for five years under
Section 912 of the New York Business Corporation Law ("BCL").
The complaint also alleges that the Company's Schedule 14D-9 is
materially false and misleading in that it (i) impliedly
represents that the Board of Directors of the Company had an
informed basis upon which to recommend the Merger with Purchaser
when, in fact, the Board did not have such an informed basis;
(ii) contains misrepresentations and omissions concerning
Sherwin-Williams' repeated indications of interest in negotiating
and consummating an acquisition of the Company; and (iii)
misrepresents the terms and nature of the Corimon Option
Agreement.
The complaint in the Sherwin-Williams Federal Action
seeks, among other things, an order: (i) preliminarily and
permanently enjoining Parent and all other persons acting in
concert with it, from acquiring or attempting to acquire the
Company's Shares or continuing the Offer; (ii) that Parent,
Purchaser and the Company make appropriate disclosures to correct
the alleged false and misleading statements described above, and
prohibiting Parent from purchasing or making any tender offer for
Shares for an appropriate period to allow full dissemination of
such disclosures to the marketplace and to the Company's
shareholders; (iii) enjoining the Company and all other persons
acting in concert with them, from taking any steps to assist or
facilitate the completion of the tender offer for the Company by
Purchaser or Parent. The complaint also seeks costs,
disbursements and reasonable attorney's fees.
On May 8, 1995, Sherwin-Williams commenced an action
entitled The Sherwin-Williams Company v. Grow Group, Inc., et al.
in the Supreme Court of the State of New York (the "New York
Action") against the Company, Parent, the Purchaser and members
of the Company's Board of Directors (collectively, the
"Defendants"). The complaint in the New York Action alleges,
among other things, that the Company and its Board of Directors
breached their fiduciary duties to the Company's shareholders by,
among other things, entering into the Merger Agreement and
agreeing to the Corimon Option Agreement and the "Break Up Fee"
without first negotiating with Sherwin-Williams or adequately
considering potential alternative transactions available to the
Company. The complaint also alleges, among other things, that
the Merger Agreement and proposed merger violate Section 912 of
the BCL, which, according to the complaint, prevents the merger
between Parent and the Company for five years. The complaint
further alleges that the Company's Board breached its fiduciary
duty to make truthful and complete disclosures by (i)
misleadingly stating that the transaction and proposed 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;
and (ii) failing to disclose that the transaction and proposed
merger violate Section 912 of the BCL. The complaint in the New
York Action seeks, among other things, an order declaring that
the Merger Agreement and the Corimon Option Agreement are null
and void and unlawful and were entered into in breach of the
fiduciary duties of the Company's Board; requiring the Company
and the Board to provide Sherwin-Williams a fair and equal
opportunity to acquire the Company; and enjoining any further
conduct by Parent intended to cause, or having the effect of
causing, the Company to forego the opportunity to enter into an
economically more favorable transaction than the Merger. The
complaint also seeks costs and disbursements, including
attorneys' fees.
On May 8, 1995, Sherwin-Williams moved by order to show
cause for a hearing (the "Hearing") on a motion for a preliminary
injunction, among other things, (i) enjoining defendants from
taking any further steps to facilitate or consummate the Offer;
(ii) enjoining and invalidating the Break Up Fee; and (iii)
directing the Company and the Board to investigate and explore
all bona fide offers and proposals to acquire the Company,
including the Sherwin-Williams tender offer, and to remove all
impediments to the Sherwin-Williams tender offer.
On May 8, 1995, Sherwin-Williams also moved by order to
show cause for a temporary restraining order, pending the
Hearing, (i) enjoining Parent from exercising any right under the
Corimon Option Agreement to prevent Corimon from withdrawing any
Shares that Corimon may tender into the Offer; and (ii) enjoining
and directing the Company to provide Sherwin-Williams by 10:00
a.m. on May 10, 1995 with a record of the names and addresses of
the Company's shareholders, and the number and class of Shares
held by each.
At a hearing on May 8, 1995, the Court denied Sherwin-
Williams' motion for a temporary restraining order. The Court
also scheduled a hearing for May 25, 1995 at 4:00 p.m. on
Sherwin-Williams' motion for a preliminary injunction.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit No.
Exhibit 18 Complaint entitled The Sherwin-Williams
Company v. Imperial Chemical Industries PLC
et. al., filed in the United States District
Court for the Northern District of Ohio of
the Eastern Division.
Exhibit 19 Complaint entitled The Sherwin-Williams
Company 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 9, 1995 GROW GROUP, INC.
By /s/ Lloyd Frank
Title: Secretary
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
18 Complaint entitled The Sherwin-Williams Company v.
Imperial Chemical Industries PLC et. al., filed in
the United States District Court for the Northern
District of Ohio of the Eastern Division.
19 Complaint entitled The Sherwin-Williams Company v.
Grow Group, Inc. et. al., filed in the Supreme
Court of the State of New York, New York County.
EXHIBIT 18
IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
THE SHERWIN-WILLIAMS COMPANY, 101 )
Prospect Avenue, Cleveland, Ohio 44115,) Case No. 1:95 CV 1017
)
Plaintiff, ) Judge Matia
)
- against - )
) COMPLAINT FOR
IMPERIAL CHEMICAL INDUSTRIES PLC, 9 ) PRELIMINARY AND
Millbank, London SWlp 3JF, England; ) PERMANENT
GDEN CORPORATION, 645 5th Avenue, ) INJUNCTIVE RELIEF
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.
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-
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 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. SECTIONSECTION 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.
12. Defendant ICI is a corporation organized under the
laws of England with its principal place of business at 9
Millbank, London, SWlp 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 781, 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
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.
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 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.
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
(c) 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 Agreement
requires Grow to amend its "poison pill" to allow the
merger to proceed;
(d) requires Grow to use its best efforts to
secure stockholder approval for the Merger Agreement;
(e) 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
(f) 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) 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.
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 withdrawing 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
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.
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.
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 Rule 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.)
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 SECTION10.02.)
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.
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 kickback $.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
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 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
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. Brosiat 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 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 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 1 (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.
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' 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
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 SherwinWilliams' 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.
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 breakup 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 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 Grow's 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
-- 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.
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 fall 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.
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.
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:
(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 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
EXHIBIT 19
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
("SherwinWilliams"), 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.
SherwinWilliams' 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, 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, Growls board has
agreed and recommended that Growls 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 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 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 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 SherwinWilliams 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 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.
SherwinWilliams is engaged in the manufacture, distribution and
sale of paint, coatings, and related products to professional,
industrial, commercial and retail customers throughout North
America. SherwinWilliams 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.
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 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 Broslat,
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
concerning its retention of Wertheim. The following week,
SherwinWilliams 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.
SherwinWilliams 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
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 million," 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,
SherwinWilliams 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 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.
(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.
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' 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 sill 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 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 31/2% owned by
Grow's Employee Stock Ownership and Savings Plan and thereby
block any competing bid. Because a competing bid would need 66
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 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 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 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
SherwinWilliams, 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 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 % 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 SherwinWilliams, 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
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,
SherwinWilliams, 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 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;
-- 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 [561] 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
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 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. 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's 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
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 [641] 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 [671] of this Complaint.
69. New York Business Corporation Law SECTION 912 prohibits
the "beneficial owner" of 20% or more of the outstanding shares
of 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.
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.
EIGHTH CAUSE OF ACTION
(Against Defendants ICI and GDEN
For Aiding and Abetting Breaches
of Fiduciary Duty)
79. Plaintiff repeats and realleges paragraphs I
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;
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 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
SherwinWilliams 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
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
