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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
(WITH RESPECT TO THE TENDER OFFER BY THE SHERWIN-WILLIAMS COMPANY)
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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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
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Grow Group, Inc., a New York corporation
(the "Company"), and the address of the principal executive offices of the
Company is 200 Park Avenue, New York, New York 10166. The title of the class of
equity securities to which this statement relates is the common stock, par
value $0.10 per share (the "Common Stock" or the "Shares") of the Company
(including the related Common Stock Purchase Rights (the "Rights") issued
pursuant to the Rights Agreement, dated as of February 11, 1988, as amended and
restated as of August 7, 1992, and as further amended on April 30, 1995 (the
"Rights Agreement"), between the Company and The Bank of New York).
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to the tender offer by GGI Acquisition, Inc. ("GGI"),
a New York corporation and a wholly-owned subsidiary of The Sherwin-Williams
Company, an Ohio corporation ("Sherwin-Williams"), disclosed in a Tender Offer
Statement on Schedule 14D-1, dated May 8, 1995 (the "Schedule 14D-1"), to
purchase all outstanding Shares at a price of $19.50 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 8, 1995 (the "Sherwin-Williams Offer to
Purchase"), and the related Letter of Transmittal (which together with the
Sherwin-Williams Offer to Purchase constitute the "Sherwin-Williams Offer").
As set forth in the Schedule 14D-1, the principal executive offices of
Sherwin-Williams and GGI are 101 Prospect Avenue, N.W., Cleveland, Ohio 44115.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b) Certain contracts, agreements, arrangements and understandings and actual
or potential conflicts of interest between the Company or its affiliates and
its executive officers, directors or affiliates are described below in this
Item 3 and under the heading "Item 3. Identity and Background" of the Company's
Schedule 14D-9 Solicitation/Recommendation Statement pursuant to Section
14(d)(4) of the Securities Exchange Act of 1934, dated May 4, 1995 (the "May 4
Schedule 14D-9"), and in the attached Schedule I thereto, mailed to the
Company's shareholders in response to the tender offer by GDEN Corporation, a
New York corporation ("GDEN") and an indirect wholly owned subsidiary of
Imperial Chemical Industries PLC, a corporation organized under the laws of
England ("ICI"), to purchase all outstanding Shares, 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 GDEN's Offer to Purchase, dated May 4, 1995 (the "GDEN Offer to
Purchase"), and the related Letter of Transmittal (which together with the GDEN
Offer to Purchase constitute the "ICI Offer"). A copy of the May 4 Schedule
14D-9 is filed as Exhibit 1 hereto and Item 3(b) and Schedule I thereto are
incorporated by reference herein in their entirety.
ESOP
Effective as of May 11, 1995, Messrs. Russell Banks, Lloyd Frank and Peter
Keane (each of whom is a director of the Company) resigned from their positions
as trustees of the Company's Employee Stock Ownership and Savings Plan ("ESOP")
and the Company appointed an independent financial institution as successor
trustee. Pursuant to the applicable documents governing the ESOP, the successor
trustee of the ESOP, who is required to act in accordance with its fiduciary
obligations under the Employee Retirement Income Security Act of 1974, as
amended, has the authority to determine whether to tender or otherwise dispose
of the Shares held in the ESOP.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) POSITION OF THE BOARD OF DIRECTORS
The Board of Directors has unanimously determined, in light of all the
relevant circumstances, to express no opinion and remain neutral at this time
with respect to the Sherwin-Williams Offer. The Board's position
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is subject to change as events unfold that may clarify whether a transaction
with Sherwin-Williams is or is not in the shareholders' best interest.
A form of letter to shareholders of the Company communicating the Board of
Directors' determination is filed as Exhibit 13 hereto, and is incorporated
herein by reference.
(b) BACKGROUND; REASONS FOR THE BOARD'S POSITION
Background. On January 26, 1995, the Company issued a press release stating,
among other things, that the Company's Board of Directors had unanimously
authorized Wertheim Schroder & Co., Incorporated, the Company's financial
advisor ("Wertheim Schroder"), to assist the Company in reviewing alternatives
to enhance shareholder value.
In early February 1995, Mr. John G. Breen, Chairman and Chief Executive
Officer of Sherwin-Williams, contacted Mr. Russell Banks, President and Chief
Executive Officer of the Company, and indicated that Sherwin-Williams would be
interested in considering a possible business combination with the Company. Mr.
Banks suggested that it would be appropriate for Mr. Breen or other
representatives of Sherwin-Williams to speak with representatives of Wertheim
Schroder.
On March 15, 1995, representatives of Sherwin-Williams contacted
representatives of the Company and indicated an interest in considering a
possible acquisition of the entire Company. The Company promptly sent Sherwin-
Williams a form of confidentiality agreement.
On March 17, 1995, a representative of Sherwin-Williams contacted Mr. Lloyd
Frank, an officer of the Company, to discuss the terms of the proposed
confidentiality agreement. Negotiation of the confidentiality agreement was
completed on March 30, 1995, and on that date the Company's legal counsel sent
a revised confidentiality agreement to Sherwin-Williams in form for execution.
On March 31, 1995, Sherwin-Williams sent the Company by Federal Express
executed copies of the confidentiality agreement for countersignature by the
Company.
On April 3, 1995, Mr. Banks had meetings in London with representatives of
ICI. The Company had been engaged in discussions with ICI since November 1994,
and during the period between February 7, 1995 and February 10, 1995,
representatives of ICI had conducted business and legal due diligence with
respect to the Company at the offices of Wertheim Schroder in New York.
Prior to the April 3, 1995 meetings in London between Mr. Banks and
representatives of ICI, ICI had indicated that it had valued the Company at a
price of $17.50 per Share, and was not prepared to improve its $17.50 per Share
valuation. At the April 3, 1995 meetings with Mr. Banks, ICI for the first time
indicated that it was prepared to consider the possibility of improving its
$17.50 per Share valuation if justified by further due diligence. As a result,
Mr. Banks agreed to permit ICI to conduct additional due diligence, including
on-site due diligence at locations outside of the Company's New York
headquarters.
On April 4, 1995, Mr. Banks returned to New York from London, and the Company
commenced preparations for ICI's due diligence review which was scheduled to
begin on April 10, 1995. During the period from April 10, 1995 through April
19, 1995, representatives of ICI conducted business and legal due diligence,
including on-site due diligence at various of the Company's plants and
facilities.
In view of the significant progress which had been made in discussions
between the Company and ICI at the meetings in London on April 3, 1995 and
thereafter, the Company determined not to execute the proposed confidentiality
agreement with Sherwin-Williams at that time. On or about April 17, 1995, Mr.
Breen telephoned Mr. Banks, and Mr. Banks advised Mr. Breen that the Company
would not enter into the proposed confidentiality agreement.
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On April 17, 1995, Mr. Conway G. Ivy, Vice President, Corporate Planning and
Development of Sherwin-Williams, sent the following letter to Mr. Frank, with
copies to Mr. Breen, Mr. Banks and the Company's financial advisor and outside
counsel:
April 17, 1995
VIA FEDERAL EXPRESS
Mr. Lloyd Frank, Esq.
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036-8735
Dear Mr. Frank:
The Sherwin-Williams Company hereby revokes its offer to enter into the
Confidentiality Agreement with Grow Group, Inc. dated March 30, 1995, which
was forwarded to you on March 31, 1995 via Federal Express.
After repeated attempts to obtain an executed copy from Grow Group, Inc.,
this offer is being revoked due to Grow Group, Inc.'s failure to accept and
execute the Confidentiality Agreement. In addition, it is our
understanding, based upon a telephone conversation earlier today between
Mr. Jack Breen and Mr. Russell Banks, that Grow Group, Inc. does not desire
to engage in discussions with, nor furnish confidential information to, The
Sherwin-Williams Company regarding a potential acquisition by us of Grow
Group, Inc.
Please return the four originally executed copies previously forwarded to
you.
Sincerely,
/s/ Conway G. Ivy
During the period from April 21, 1995 through April 27, 1995, representatives
of the Company and representatives of ICI engaged in discussions concerning (i)
the per Share price at which ICI would be prepared to make a proposal to
acquire the Company, (ii) ICI's request which was rejected by the Company for a
"lock-up" on the 4,025,841 Shares of the Company's common stock (constituting
approximately 25% of the Company's outstanding shares) owned by Corimon
S.A.C.A. ("Corimon"), and (iii) ICI's request for a termination fee in the
event the Company were to terminate a merger agreement with ICI (the "ICI
Merger Agreement") in order to accept a competing offer.
On the evening of April 24, 1995, counsel for ICI delivered to the Company
and its counsel a draft of the ICI Merger Agreement which had been prepared by
counsel to ICI.
Starting on April 28, 1995, Company representatives and ICI representatives
and their respective counsel and financial advisors negotiated the terms of the
ICI Merger Agreement and related matters. Such negotiations continued through
April 30, 1995.
On the afternoon of April 28, 1995, the Company, as a result of market
activity in the Shares, issued the following press release:
NEW YORK, NEW YORK, April 28, 1995 -- Grow Group, Inc. (NYSE:GRO), which
previously announced that it had authorized Wertheim Schroder & Co.
Incorporated to assist the Company in considering and reviewing
alternatives to enhance shareholder value, said today that it has entered
into negotiations with a third party concerning an acquisition of Grow. The
third party, which has substantially completed its due diligence review,
has proposed to acquire 100% of Grow's common stock and has indicated a
willingness to pay Grow's public stockholders $18.10 per share in cash. Any
such transaction would be subject to negotiation and execution of a
definitive agreement and approval of Grow's Board of
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Directors. There can be no assurance that any such agreement will be
reach[ed], or if an agreement is reached that any transaction will be
consummated.
Grow Group is a leading producer of specialty chemical coatings and
paints and household products. Grow operations include manufacturing
facilities, sales offices and licensees throughout the world.
On the night of April 28, 1995, Mr. Ivy sent the following letter to Mr.
Banks, with copies to members of the Company's Board of Directors, financial
advisor and outside counsel:
April 28, 1995
Mr. Russell Banks
President and Chief Executive Officer
Grow Group, Inc.
200 Park Avenue
New York, New York 10166
Dear Mr. Banks:
We at The Sherwin-Williams Company were troubled to learn from the press
release you issued today that you are in the process of negotiating a sale
of your company to another party. Our concern arises from the fact that,
despite Sherwin-Williams' repeated indications of serious interest in a
transaction with Grow Group, you apparently have decided to negotiate a
definitive agreement with another bidder without giving us access to the
information that would allow us to present our best possible proposal.
On March 17, 1995 we offered to enter into a confidentiality agreement
with Grow Group. After repeated delays on Grow Group's part to finalize
such agreement, we forwarded an executed copy of that agreement to Lloyd
Franks on March 31, 1995. However, that agreement was never executed by
Grow Group. On April 17, 1995, you informed us that Sherwin-Williams was to
be excluded from the bidding process. Consequently, by letter dated April
17, 1995, we had no alternative but to revoke our offer to enter into the
confidentiality agreement with Grow Group. Since that time and despite your
actions, our financial advisors have been in contact with Wertheim Schroder
and have expressed our continued interest in pursuing a transaction with
Grow Group.
Given our financial strength, financing will not represent any impediment
to the consummation of a transaction on an all-cash basis. In addition,
based upon our preliminary analysis, we are extremely confident that the
antitrust laws would not impede our ability to consummate a transaction
with Grow Group. This matter has been discussed at length with the members
of our senior management and with our Board of Directors. We have also
retained Lazard Freres & Co. and Rogers & Wells to provide financial and
legal counsel regarding this matter.
We urge you not to enter into or to agree to any merger or other
significant transaction or agreement, or to take any additional defensive
measures (including "no shop", break-up fee or similar arrangements) or
other actions, that would adversely affect the ability of your stockholders
to receive the maximum value for their shares.
We wish to obtain immediate access to the information which you have
refused to furnish to us. We are also prepared to enter into immediate
discussions with you and your directors, management and advisors about a
transaction with Sherwin-Williams. In Mr. Breen's absence, you may contact
me over the weekend either at my home at (216) 247-4936 or at my office
(216) 566-2102. If you are unable to contact me, you can contact Larry J.
Pitorak, Senior Vice President--Finance, Treasurer and Chief Financial
Officer, at (216) 729-3840 or (216) 566-2573.
We hope that you and your Board of Directors will give this matter prompt
and serious consideration.
Sincerely,
/s/ Conway G. Ivy
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Starting in the afternoon of April 30, 1995, the Company's Board of Directors
met to consider ICI's offer of $18.10 per Share. The terms of the proposed
transaction and related ICI Merger Agreement were presented to and reviewed by
the Company's Board of Directors. Wertheim Schroder and legal counsel made
presentations to the Board of Directors. Wertheim Schroder delivered its
opinion as to the fairness, from a financial point of view, of the $18.10 per
Share cash consideration offered by ICI to the public shareholders of the
Company. The full Board of Directors discussed the proposed ICI Merger
Agreement and related matters.
After discussion and further analysis, the Company's Board of Directors
unanimously decided to proceed with the sale of the Company and to accept ICI's
offer for the reasons described in Item 4(b) of the May 4 Schedule 14D-9,
previously furnished to the Company's shareholders in connection with the ICI
Offer. The Company's Board of Directors also unanimously approved the ICI
Merger Agreement and the transactions contemplated thereby and unanimously
recommended that shareholders accept the ICI Offer and tender their Shares
pursuant thereto. The Board of Directors unanimously (with the representatives
of Corimon abstaining) voted to waive the restrictions under Corimon's
standstill agreement with the Company to permit Corimon to enter into and
perform its obligations under an Option Agreement between Corimon and ICI (the
"Corimon Option Agreement"). See Item 6 below.
The Company and ICI entered into the ICI Merger Agreement on the night of
April 30, 1995.
Prior to the opening of business on May 1, 1995, the Company issued a press
release announcing that it had entered into the ICI Merger Agreement. Later in
the day on May 1, 1995, Mr. Arthur Broslat, a member of the Company's Board of
Directors, received two telephone calls from a representative of Sherwin-
Williams' financial advisor, and such representative indicated to Mr. Broslat
that Sherwin-Williams would seek to acquire the Company.
On May 4, 1995, GDEN commenced a tender offer to purchase all outstanding
Shares (and associated stock purchase rights) 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 GDEN Offer to Purchase and the ICI Offer.
On May 8, 1995, Sherwin-Williams, through its wholly-owned subsidiary GGI,
commenced an unsolicited tender offer to purchase all outstanding Shares (and
associated stock purchase rights) at a price of $19.50 per Share, net to the
seller in cash, upon the terms and subject to the conditions set forth in the
Sherwin-Williams Offer to Purchase and the Sherwin-Williams Offer.
Also, on May 8, 1995, Sherwin-Williams commenced litigation against the
Company and the members of its Board of Directors, as described in Item 8 below
under the caption "Certain Litigation."
The Company's Board of Directors met on the night of May 9, 1995 to review
and discuss the Sherwin-Williams Offer. Representatives of Wertheim Schroder
and the Company's legal counsel attended the meeting.
On May 10, 1995, the Company issued a press release announcing that its Board
of Directors, at the meeting held on May 9, 1995, had authorized management of
the Company and the Company's legal and financial advisors to engage in
discussions and negotiations with, and disclose certain non-public information
concerning the Company to, Sherwin-Williams. Such actions were taken based on
the Board's determination of its fiduciary duties under applicable law as
advised by counsel and in accordance with applicable provisions of the ICI
Merger Agreement.
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On May 10, 1995, representatives of the Company met with representatives of
Sherwin-Williams to discuss the Sherwin-Williams Offer and, in particular,
issues relating to the conditionality of the Sherwin-Williams Offer. At that
meeting, Sherwin-Williams' representatives stated that Sherwin-Williams was
prepared to enter into a merger agreement with the Company at a price of $19.50
per Share without conducting a due diligence review of the Company, but that
Sherwin-Williams was requesting a due diligence review in order to be in a
position to consider increases in the price it would be prepared to pay to
acquire the Company. This was confirmed to the Company in a letter dated May
10, 1995 from a representative of Sherwin-Williams.
On May 11, 1995, Sherwin-Williams delivered to the Company and its counsel a
draft merger agreement proposed by counsel to Sherwin-Williams.
Also, on May 11, 1995, the Company's counsel and Sherwin-Williams' counsel
negotiated the terms of a Confidentiality Agreement, and the Confidentiality
Agreement was executed by Sherwin-Williams on the morning of May 12, 1995. See
Item 7 below for a description of the Confidentiality Agreement. Upon execution
of the Confidentiality Agreement, representatives of Sherwin-Williams commenced
business and legal due diligence with respect to the Company at the Company's
New York headquarters. On May 15, 1995, Sherwin-Williams extended its due
diligence to an on-site review at various of the Company's plants and
facilities.
On May 12, 1995, the Company's legal counsel sent a letter to Sherwin-
Williams' legal counsel suggesting that on May 13, 1995 representatives of the
Company and representatives of Sherwin-Williams discuss the draft merger
agreement furnished by Sherwin-Williams. The Company's legal counsel made the
same request to Sherwin-Williams' legal counsel by telephone later in the day
on May 12, 1995. Representatives of Sherwin-Williams did not respond to such
request and, accordingly, no discussions concerning the draft merger agreement
prepared by Sherwin-Williams have yet been held.
On May 15, 1995, the Company's Board of Directors met to consider the
Sherwin-Williams Offer. The terms of the Sherwin-Williams Offer, which had been
reviewed and discussed by the Board of Directors at its meeting on May 9, 1995,
were again reviewed and discussed. Representatives of Wertheim Schroder and the
Company's legal counsel attended the meeting and discussed the Sherwin-Williams
Offer with the directors.
After discussion and further analysis, the Company's Board of Directors
unanimously decided to express no opinion and remain neutral towards the
Sherwin-Williams Offer for the reasons described below.
Prior to the opening of business on May 16, 1995, the Company issued a press
release announcing the position of the Board of Directors with respect to the
Sherwin-Williams Offer.
Reasons for the Board's Position; Factors Considered by the Board. In
reaching its current conclusion with respect to the Sherwin-Williams Offer as
set forth in Item 4(a) above, the Board of Directors considered a number of
factors including:
1. the Board of Directors' determination made on May 8, 1995 that, in
furtherance of its fiduciary duties under applicable law as advised by counsel
and in accordance with the applicable provisions of the ICI Merger Agreement,
senior management of the Company and the Company's financial and legal advisors
should engage in discussions and negotiations with Sherwin-Williams; the Board
of Directors' belief that in light of all current circumstances and based upon
all reasonably available material information, until such discussions and
negotiations are completed and further events unfold, the Board should express
no opinion and remain neutral with respect to the Sherwin-Williams Offer;
2. the Board's belief that, under the circumstances, the best way to maximize
value for the Company's shareholders is to continue to recommend the ICI Offer
while at the same time continuing discussions and
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negotiations with Sherwin-Williams, and to urge both ICI and Sherwin-Williams
to improve their current offers; in this regard, the Board discussed the fact
that it could establish a formal competitive bidding process at a time of its
choosing if it concluded that such a process would be the best way to maximize
value for the Company's shareholders;
3. the Board's understanding, based on discussions between representatives of
the Company and representatives of ICI, that ICI has indicated a willingness to
increase the price offered in the ICI Offer to an amount in excess of $19.50
per Share, although no proposal has been made by ICI at this time;
4. the Board's view, based on advice of counsel that, although it is unlikely
that antitrust issues would prevent the consummation of the Sherwin-Williams
Offer, there may be greater antitrust risks associated with a merger between
the Company and Sherwin-Williams than with a merger between the Company and
ICI, such as a delay in consummation of the Sherwin-Williams Offer as a result
of a request for additional information by the Federal Trade Commission or a
possible required divestiture of certain operations;
5. the fact that entering into, or publicly announcing an intention to enter
into, an agreement or an agreement in principle in connection with an
acquisition of the Company by Sherwin-Williams, would, pursuant to the ICI
Merger Agreement, obligate the Company to promptly pay to ICI an amount in
immediately available funds equal to $8,000,000;
6. the fact that any withdrawal or material modification of the Board of
Directors' approval and recommendation of the ICI Offer and the ICI Merger
Agreement, other than as a result of ICI's breach of the Merger Agreement,
would, pursuant to the ICI Merger Agreement, obligate the Company to promptly
pay to ICI an amount in immediately available funds equal to $8,000,000;
7. the Board's view that it would not be in the best interests of the Company
or its shareholders to take any action that could cause the Company to become
obligated to pay the $8,000,000 "break-up" fee to ICI until such time that the
Company may determine to enter into a definitive agreement with a third party
relating to the acquisition of the Company, since the Company did not want to
be in a position of paying $8,000,000 and not securing a transaction which
would benefit the Company's shareholders;
8. the fact that although as presently stated the Sherwin-Williams Offer is
highly conditional, Sherwin-Williams has stated in the Sherwin-Williams Offer
that it is prepared to enter into a definitive merger agreement with the
Company on substantially the same terms and conditions as the ICI Merger
Agreement; in this regard, the Board noted that a merger agreement which was
acceptable to the Company had not been negotiated between the Company and
Sherwin-Williams and certain issues still needed to be resolved in connection
with the negotiation of such a merger agreement;
9. the fact that the Company and Sherwin-Williams entered into a
Confidentiality Agreement on May 12, 1995 pursuant to which, commencing May 12,
1995, the Company has disclosed to Sherwin-Williams certain non-public
information relating to the Company and afforded Sherwin-Williams access to the
properties, books and records of the Company and its subsidiaries (the
"Information"); and the fact that Sherwin-Williams has not completed its review
of the Information and that the Board of Directors does not know whether
Sherwin-Williams would, following completion of its review of such Information,
modify, improve or withdraw the Sherwin-Williams Offer;
10. the fact that Sherwin-Williams has stated that its review of the
Information, which has not been completed, may enable Sherwin-Williams to
consider increases in the price it would be prepared to pay to acquire the
Company; and
11. the Board of Directors' familiarity with the business of the Company, its
prospects, financial condition, results of operations, employees, customer
base, current business strategy and industry position.
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The Board of Directors did not assign relative weights to the factors or
determine that any factor was of particular importance. Rather, the Board of
Directors viewed their position as being based on the totality of the
information presented to it and considered by it.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Wertheim Schroder was retained to assist the Company in considering and
reviewing alternatives to enhance shareholder value, including a sale of the
Company (a "Sale Transaction"). In addition, and at no additional expense,
Wertheim Schroder agreed to render a financial opinion letter with respect to
the consideration to be received in a Sale Transaction by the shareholders of
the Company. Wertheim Schroder rendered a fairness opinion to the Company's
Board of Directors in connection with the ICI Offer, a copy of which was
included in the May 4 Schedule 14D-9. The Company agreed to pay Wertheim
Schroder a fee of $50,000 on the date the letter agreement was signed and an
additional fee of 1% of the aggregate consideration (as defined in the letter
agreement with Wertheim Schroder) if the Company consummates a Sale
Transaction, against which the $50,000 fee will be credited; accordingly, if
the Sherwin-Williams Offer is consummated, the Company would be obligated to
pay Wertheim Schroder a fee of approximately $3.2 million. The Company has also
agreed to reimburse Wertheim Schroder for its out-of-pocket expenses, including
fees of its legal counsel and other advisors who may be retained with the
Company's consent and to indemnify Wertheim Schroder (and its officers,
directors, employees, controlling persons and agents) against certain
liabilities arising out of or in connection with Wertheim Schroder's
engagement. The terms of the Company's engagement of Wertheim Schroder are set
forth in a letter agreement dated April 27, 1995.
In addition, the Company has agreed to pay Wertheim Schroder its full
compensation in the event that within eighteen months after the termination of
their engagement, a Sale Transaction is consummated with a party with which
contact was made by Wertheim Schroder during its engagement.
Except as disclosed herein, neither the Company nor any person acting on its
behalf currently intends to employ, retain or compensate any other person to
make solicitations or recommendations to security holders on its behalf
concerning the Sherwin-Williams Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Except for the Corimon Option Agreement and as set forth in Schedule I
hereto, no transactions in the Shares have been effected during the past 60
days by the Company or, to the best of the Company's knowledge, by any
executive officer, director, affiliate or subsidiary of the Company.
CORIMON OPTION AGREEMENT
The following is a summary of the Option Agreement, dated as of April 30,
1995, among ICI, GDEN, Corimon Corporation, a Delaware corporation
("Stockholder"), and Corimon, S.A.C.A., a Venezuelan corporation ("Corimon")
(the "Corimon Option Agreement"). Such summary is qualified in its entirety by
reference to the text of the Corimon Option Agreement, a copy of which is filed
as Exhibit 3 hereto and is incorporated by reference.
Exercise of Option. Pursuant to the Corimon Option Agreement, Stockholder
granted to ICI an option (the "Option") to purchase 4,025,841 Shares
beneficially owned by Stockholder (the "Corimon Shares") at a purchase price of
$17.50 per Share (the "Corimon Purchase Price"). The Corimon Option Agreement
provides that the Option may be exercised by ICI in whole but not in part at
any time prior to the earlier of (i) November 5, 1995 and (ii) five business
days after August 31, 1995 (or if a Hart-Scott-Rodino authority requests
additional information ICI may elect under the ICI Merger Agreement to change
the August 31, 1995 date to no later than October 31, 1995); provided that ICI
may exercise the Option only if the "Corimon Minimum Condition" is satisfied.
For purposes of the Corimon Option Agreement, the "Corimon Minimum Condition"
shall have been satisfied only if (i) ICI has paid for or accepted for payment
all Shares properly
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tendered and not withdrawn pursuant to the ICI Offer (the "Tendered Shares") in
accordance with the terms of the ICI Offer and the ICI Merger Agreement and
(ii) the Tendered Shares plus the Corimon Shares constitute not less than a
majority of the outstanding Shares on a fully diluted basis. In the event the
consideration per Share paid by ICI pursuant to the ICI Offer or the ICI Merger
Agreement is increased, the Corimon Purchase Price shall be increased by an
amount equal to the amount of such increase.
The Corimon Option Agreement provides that Stockholder will not, and will not
agree to, sell, assign, transfer, tender or otherwise dispose of any Shares to
any person or group that has commenced a tender offer for, or proposed to
acquire, at least 50% of the outstanding Shares, except pursuant to, and at the
price per share payable in, such offer or proposal.
ICI may allow the Option to expire without purchasing the Shares thereunder;
provided however that once ICI has delivered to the Stockholder notice that ICI
will exercise the Option (the "Exercise Notice"), Buyer will be bound to effect
the purchase as described in such Exercise Notice; and provided further that if
the Corimon Minimum Condition is satisfied, ICI shall thereafter be bound to
exercise the Option within two business days following the date of such
satisfaction.
Conditions to the Stockholder's Obligations. The obligation of the
Stockholder to sell its Shares is subject to the following conditions: (i) all
waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder applicable to
the exercise of the Option shall have expired or been terminated; and (ii)
there shall be no preliminary or permanent injunction or other order, decree or
ruling issued by a court of competent jurisdiction or by a governmental,
regulatory or administrative agency or commission having authority with respect
thereto, nor any statute, rule, regulation or order promulgated or enacted by
any such governmental authority, prohibiting or otherwise restraining the
exercise of the Option or the sale of the Corimon Shares pursuant thereto.
No Disposition or Encumbrance of Shares. Pursuant to the Corimon Option
Agreement, except for any Lien (as defined above) existing as of the date of
the ICI Merger Agreement, Stockholder will not offer or agree to, sell,
transfer, tender, assign, hypothecate or otherwise dispose of, or create or
permit to exist any security interest, lien, claim, pledge, option, right of
first refusal, agreement, limitation on Stockholder's voting or dispositive
rights, charge or other encumbrance of any nature whatsoever (collectively,
"Liens") with respect to the Corimon Shares. Stockholder agreed that it will
not tender the Shares into the ICI Offer unless directed to do so by ICI;
provided that if it is so directed by ICI, Stockholder will, to the extent
permitted by certain permitted Liens, properly tender or cause to be tendered
the Corimon Shares into the ICI Offer and, so long as the Option is
outstanding, not withdraw such Shares; and provided further that if the Corimon
Shares are purchased pursuant to the ICI Offer, Stockholder will pay, subject
to applicable law, to ICI a fee in cash equal to $.60 multiplied by the number
of such Shares.
No Solicitation of Transactions. Pursuant to the Corimon Option Agreement,
Stockholder and Corimon agree that they will not permit any affiliate to,
directly or indirectly, through any agent or representative or otherwise, (i)
take any action to solicit, initiate or encourage any Acquisition Proposal (as
defined below); (ii) except as may be required by Arthur Broslat, Philippe
Erard and Harold Bittle (the "Corimon Directors") in the exercise of their
fiduciary duties in their capacity as members of the Board of Directors of the
Company, engage in negotiations with, or disclose any nonpublic information
relating to the Company or any subsidiary of the Company or afford access to
the properties, books or records of the Company or any subsidiary of the
Company to, any person that may be considering making, or has made, an
Acquisition Proposal; or (iii) except as may be required by the Corimon
Directors in the exercise of their fiduciary duties in their capacity as
members of the Board of Directors of the Company, otherwise cooperate in any
way with, or assist or participate in or facilitate or encourage, any effort or
attempt by any person to do or seek any of the foregoing. Except as may be
required by the Corimon Directors in the exercise of their fiduciary duties in
their capacity as members of the Board of Directors of the Company, both
Stockholder and Corimon agree that they shall
9
<PAGE>
cease and cause to be terminated all existing discussions or negotiations in
which they or any of their agents or other representatives are or have been
engaged with any person with respect to any of the foregoing. The term
"Acquisition Proposal" means any offer or proposal for, or any indication of
interest in, a merger or other business combination involving the Company or
any subsidiary or the acquisition of any equity interest in, or a substantial
portion of the assets of, the Company or any subsidiary, other than the
transactions contemplated by the ICI Merger Agreement.
Stockholder and Corimon have agreed to notify ICI promptly after receipt of
any Acquisition Proposal or any indication that any person is considering
making an Acquisition Proposal or any request for nonpublic information
relating to the Company or any subsidiary of the Company or for access to the
properties, books or records of the Company or any subsidiary of the Company by
any Person that may be considering making, or has made, an Acquisition Proposal
and will keep ICI fully informed of the status and details of any such
Acquisition Proposal, indication or request.
Voting Agreement. Pursuant to the Corimon Option Agreement, Stockholder has
agreed that prior to the time, if any, that the ICI Merger Agreement is
terminated, at any meeting of the shareholders of the Company, however called,
and in any action by consent of the shareholders of the Company, Stockholder
will vote the Corimon Shares: (a) in favor of the ICI Merger, the ICI Merger
Agreement (as amended from time to time) or any of the transactions
contemplated by the ICI Merger Agreement; and (b) against any proposal for any
recapitalization, merger, sale of assets or other business combination between
the Company and any person (other than the ICI Merger) or any other action or
agreement that would result in a breach of any covenant, representation or
warranty or any other obligation or agreement of the Company under the ICI
Merger Agreement or which could result in any of the conditions to any party's
obligations under the ICI Merger Agreement not being fulfilled.
Certain Claims. The ICI Merger Agreement further provides that Corimon and
Stockholder will not assert that the Board of Directors of the Company has
breached its fiduciary duties to Corimon and Stockholder if, at any time prior
to the termination of the ICI Merger Agreement, the Board of Directors of the
Company refuses to accept or recommend an offer by a third party to acquire any
or all of the outstanding Shares for consideration not in excess of $18.10 per
share. Subject to the consummation of the ICI Offer, Corimon and Stockholder
agree to waive any claims they may have against the Company or any of its
officers or directors with respect to the ownership interest represented by the
Corimon Shares to the extent such claims (i) arise under any contract or
agreement with the Company or (ii) relate to an alleged breach of a fiduciary
duty.
(b) To the best knowledge of the Company, none of its executive officers,
directors, affiliates or subsidiaries presently intends to tender any Shares
which are owned beneficially or held of record by such person into the Sherwin-
Williams Offer. The foregoing does not include any Shares over which, or with
respect to which, any such executive officer, director affiliate or subsidiary
acts in a fiduciary or representative capacity or is subject to instructions
from a third party with respect to such tender.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except for the ICI Offer and the Company's efforts to urge both ICI and
Sherwin-Williams to improve their current offers and as set forth in this
Schedule 14D-9, the Company is not engaged in any negotiation in response to
the Sherwin-Williams Offer which relates to or would result in (i) an
extraordinary transaction, such as a merger or reorganization, involving the
Company or any subsidiary of the Company; (ii) a purchase, sale or transfer of
a material amount of assets by the Company or any subsidiary of the Company;
(iii) a tender offer for or other acquisition of securities by or of the
Company; or (iv) any material change in the present capitalization or dividend
policy of the Company.
(b) The response to Item 3(b) is incorporated herein by reference in its
entirety.
At the May 15, 1995 Board meeting, the Company's Board of Directors adopted a
resolution directing that the management of the Company need not disclose in
any Schedule 14D-9 or amendment thereto, the
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<PAGE>
possible terms of any transaction or proposal or the parties thereto until an
agreement in principle is reached which relates to or would result in one or
more of the matters referred to in Item 7(a) of Schedule 14D-9 under the
Securities Exchange Act of 1934 (the "Exchange Act"), including any agreement
in principle with respect to modifications of the ICI Merger Agreement, the ICI
Offer or the Sherwin-Williams Offer.
CONFIDENTIALITY AGREEMENT
On May 12, 1995, the Company and Sherwin-Williams entered into a
Confidentiality Agreement (the "Sherwin-Williams Confidentiality Agreement").
The following is a summary of certain provisions of the Sherwin-Williams
Confidentiality Agreement, a copy of which is filed as Exhibit 2 hereto and is
incorporated herein by reference. Pursuant to the Sherwin-Williams
Confidentiality Agreement, Sherwin-Williams agreed, among other things, to keep
confidential certain information furnished to it by the Company, provided that
Sherwin-Williams is permitted to disclose such of the information as it is
advised by counsel is legally required to be disclosed under the federal
securities laws.
Sherwin-Williams has further agreed that, except as provided in the next
paragraph, for a period of three years, neither Sherwin-Williams nor any of its
affiliates will, without the prior written consent of the Company: (i) acquire,
offer to acquire, or agree to acquire, directly or indirectly, by purchase or
otherwise, any voting securities or direct or indirect rights to acquire any
voting securities of the Company or any subsidiary thereof, or any assets of
the Company or any subsidiary or division thereof; (ii) make, or in any way
participate in, directly or indirectly, any solicitation of proxies to vote, or
seek to advise or influence any person or entity with respect to the voting of,
any voting securities of the Company; (iii) make any public announcement with
respect to, or submit a proposal for, or offer of (with or without conditions)
any extraordinary transaction involving the Company or any of its subsidiaries
or their securities or assets; (iv) form, join or in any way participate in a
"group" (as defined in Section 13(d)(3) of the Exchange Act) in connection with
any of the foregoing; (v) seek to acquire control of the Company or influence
the Board of Directors, management or policies of the Company; (vi) induce any
other person or entity to do any of the foregoing; or (vii) request the Company
or any of its representatives, directly or indirectly, to amend or waive any of
the foregoing provisions.
Notwithstanding the foregoing restrictions, Sherwin-Williams or any direct or
indirect wholly-owned subsidiary of Sherwin-Williams is permitted to acquire
Shares pursuant to the pending cash tender offer commenced on May 8, 1995 by
Sherwin-Williams' wholly-owned subsidiary for all outstanding Shares at a price
not less than $19.50 net per Share in cash to the seller or such higher price
in cash that Sherwin-Williams or one of its direct wholly-owned subsidiaries
may offer to pay for Shares pursuant to such pending cash tender offer;
provided, however, Sherwin-Williams is permitted to acquire Shares pursuant to
a cash tender for all outstanding Shares by Sherwin-Williams or any direct or
indirect wholly-owned subsidiary of Sherwin-Williams made in accordance with
Regulation 14D under the Exchange Act at the amount per Share offered (or any
greater amount per Share offered) in any merger, tender offer or similar
transaction that shall have been approved by the Company's Board of Directors
within 90 days prior to the commencement of such cash tender by Sherwin-
Williams or its direct or indirect wholly-owned subsidiary, except that this
proviso is not applicable to approval by the Company's Board of Directors of
the ICI Offer.
Except as described above and in Item 4 (the provisions of which are hereby
incorporated by reference), there are no transactions, board resolutions,
agreements in principle or signed contracts in response to the Sherwin-Williams
Offer which relate to or would result in one or more of the matters referred to
in paragraph (a) of this Item 7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
RIGHTS AGREEMENT
In connection with the execution of the ICI Merger Agreement, the Board of
Directors of the Company authorized an amendment (the "Rights Amendment") to
the Rights Agreement. The Rights Amendment
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<PAGE>
prevents ICI and its wholly owned subsidiary GDEN from becoming an Acquiring
Person or Adverse Person (each as defined in the Rights Agreement) and prevents
a Stock Acquisition Date or Distribution Date (each as defined in the Rights
Agreement) from occurring, in each case as a result of the ICI Offer, the ICI
Merger or the Corimon Option Agreement or the other transactions contemplated
by the ICI Merger Agreement. The Rights Amendment also provides that the Rights
will expire and be of no force or effect upon consummation of the ICI Merger. A
copy of the Rights Amendment is filed as Exhibit 18 hereto and is incorporated
herein by reference.
At a special meeting of the Board of Directors held on May 9, 1995, the Board
unanimously adopted a resolution that notwithstanding anything in the Rights
Agreement, the Distribution Date (as defined in the Rights Agreement) of the
Rights was postponed until May 31, 1995 or such later date as may be determined
by the Board of Directors or a committee thereof consisting of Messrs. Banks,
Frank and Keane.
CERTAIN LITIGATION
On May 1, 1995, a class action entitled General Color Company Pension Plan v.
Grow Group, Inc. et al., was filed in the Supreme Court of the State of New
York, New York County (the "General Color State Action") purportedly on behalf
of the class of all the Company's current shareholders. In addition to the
Company, all members of the Company's Board of Directors are named as
defendants in the General Color State Action. The complaint in the General
Color State Action alleges that the $18.10 per Share pursuant to which ICI will
offer to purchase all the outstanding Shares is insufficient and that the
proposed ICI Offer is unfair to the Company's shareholders and represents an
attempt by the defendants to enrich themselves at the expense of the plaintiff
class. The plaintiff in the General Color State Action asserts that defendants
violated their fiduciary duties to the Company's shareholders by allegedly
failing adequately to evaluate the Company as a potential acquisition
candidate; to take adequate steps to enhance the Company's value as an
acquisition candidate; and to create an active and open auction for the
Company. The complaint in the General Color State Action further alleges that
the defendants have wrongfully decided not to solicit proposals or initiate
discussions with third parties for the acquisition of the Company, instead of
seeking the highest possible price for the Shares of the plaintiff class. The
complaint in the General Color State Action seeks, among other relief, a
preliminary and permanent injunction barring defendants from taking any steps
to accomplish the proposed merger with ICI at a price that is not fair and
equitable to the plaintiffs and restraining the defendants' ability to use
their alleged voting control of the Company to effect the transaction with ICI.
The complaint also seeks unspecified damages for losses suffered and to be
suffered by the plaintiff class as a result of the acts alleged in the
complaint.
On May 4, 1995, the Company learned that a purported class action entitled
Miriam Sarnoff and Frederick Rand v. Grow Group, Inc. et al., was filed on May
2, 1995 in the Supreme Court of the State of New York, New York County (the
"Sarnoff State Action") on behalf of the Company's shareholders. In addition to
the Company, all members of the Company's Board of Directors are named as
defendants (the "Individual Defendants") in the Sarnoff State Action. The
complaint in the Sarnoff State Action alleges that the proposed transaction
with ICI is grossly unfair and detrimental to the Company's shareholders. The
complaint asserts that the Individual Defendants agreed to the proposed
transaction with ICI in order to enable the Individual Defendants to maintain
their positions as directors and officers of the Company, and to benefit
Corimon, which allegedly had an incentive to accept a low bid because it needed
to raise cash quickly in order to fund its recently announced acquisition of
"Standard Paints" in California. The complaint further alleges that the ICI
Merger Agreement prohibits defendants from negotiating with third parties, and
that as a result, there was no possibility that competition between ICI and
other companies could have driven up the purchase price. The complaint in the
Sarnoff State Action seeks, among other relief, an order requiring defendants
to announce their intention to cooperate with any entity having a bona fide
interest in proposing a transaction that would maximize shareholder value,
undertake an evaluation of the Company's worth as a merger/acquisition
candidate, and act independently to protect the shareholders' interests. The
complaint also seeks an accounting for damages allegedly suffered by
shareholders as a result of the acts and transaction alleged in the complaint.
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<PAGE>
On May 5, 1995, a purported class action entitled Martin Appelbaum and
Rosalyn Younger v. Grow Group, Inc., et al., was filed in the Supreme Court of
the State of New York, New York County (the "Appelbaum State Action") on behalf
of the Company's shareholders against the Company, the Individual Defendants,
and ICI. The complaint alleges that the Individual Defendants have breached and
are breaching their fiduciary duties to the purported class of the Company's
shareholders by, among other things, failing to respond in a reasonable and
informed manner to Sherwin Williams' expression of interest in the Company; and
to inform themselves as to other potential acquirors or merger partners so as
to maximize shareholder value.
The complaint in the Appelbaum State Action seeks, among other things, an
order: requiring the defendants to carry out their fiduciary duties to
plaintiffs and other members of the purported class; enjoining the transaction
between the Company and ICI, and rescinding any transactions effected by the
defendants in an unfair manner and for an unfair price; damages suffered as a
result of the acts and transactions alleged in the complaint; an accounting for
all profits realized as a result of the complained of transaction; and costs,
disbursements, and reasonable attorneys' and experts fees.
On May 5, 1995, a purported class action entitled Samuel Pill v. Grow Group,
Inc., et al., was filed in the Supreme Court of the State of New York, New York
County (the "Pill State Action") on behalf of the Company's shareholders,
against the Company and the Individual Defendants. The complaint alleges that
the Individual Defendants breached their fiduciary duties to the purported
class of the Company's shareholders by agreeing to the transaction with ICI at
a price which they knew was grossly unfair, inadequate and not representative
of the true and present value of the Company. The complaint also alleges, among
other things, that the Individual Defendants have breached their fiduciary
duties to the purported class by failing to auction the Company to the highest
bidder. The complaint further alleges that the option granted to ICI to
purchase Corimon's 25% interest in the Company is a breach of the fiduciary
duties owed by defendant Broslat, who is a director of the Company and the
Chief Financial Officer of Corimon.
The complaint in the Pill State Action seeks, among other things, an order
declaring that the Individual Defendants have breached their fiduciary duties;
enjoining defendants from proceeding with the transaction with ICI; damages in
an unspecified amount; and costs, disbursements and counsel and expert fees.
On May 8, 1995, an action entitled The Sherwin-Williams Company v. Imperial
Chemical Industries PLC et al., was filed in the United States District Court
for the Northern District of Ohio, Eastern Division by Sherwin-Williams against
ICI, GDEN and the Company (the "Sherwin-Williams Federal Action"). The
complaint alleges, among other things, that the GDEN Offer to Purchase is
materially false and misleading, in that it (i) falsely describes the break-up
fee provisions of the ICI Merger Agreement; (ii) misrepresents the terms and
nature of the Corimon Option Agreement; and (iii) misrepresents ICI's ability
to consummate with the Company the merger provided for in the ICI Merger
Agreement (the "ICI Merger") 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 May 4
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 ICI Merger with GDEN 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 ICI and all other
persons acting in concert with it, from acquiring or attempting to acquire the
Shares or continuing the ICI Offer; (ii) that ICI, GDEN and the Company make
appropriate disclosures to correct the alleged false and misleading statements
described above, and prohibiting ICI 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
13
<PAGE>
Company and all other persons acting in concert with them, from taking any
steps to assist or facilitate the completion of the ICI Offer. The complaint
also seeks costs, disbursements and reasonable attorney's fees. The Court in
the Sherwin-Williams Federal Action has scheduled a hearing on Sherwin-
Williams' motion for a preliminary injunction for May 26, 1995.
The Company has filed a motion to transfer the Sherwin-Williams Federal
Action from the United States District Court for the Northern District of Ohio
to the United States District Court for the Southern District of New York based
on the convenience of the witnesses and parties.
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 "Sherwin-Williams New York Action") against the Company, ICI,
GDEN and members of the Company's Board of Directors (collectively, the
"Defendants"). The complaint in the Sherwin-Williams 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 ICI 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 ICI Merger
Agreement and proposed merger with ICI violate Section 912 of the BCL, which,
according to the complaint, prevents the merger between ICI and the Company for
five years. The complaint further alleges that the Company's Board of Directors
breached its fiduciary duty to make truthful and complete disclosures by (i)
misleadingly stating that the transaction and proposed merger with ICI 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 with ICI violate Section 912 of the BCL.
The complaint in the Sherwin-Williams New York Action seeks, among other
things, an order declaring that the ICI 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 of
Directors of the Company to provide Sherwin-Williams a fair and equal
opportunity to acquire the Company; and enjoining any further conduct by ICI
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
ICI 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 ICI Offer; (ii) enjoining and invalidating the Break Up Fee; and
(iii) directing the Company and the Board of Directors of the Company to
investigate and explore all bona fide offers and proposals to acquire the
Company, including the Sherwin-Williams Offer, and to remove all impediments to
the Sherwin-Williams Offer.
On May 8, 1995, Sherwin-Williams also moved by order to show cause for a
temporary restraining order, pending the Hearing, (i) enjoining ICI from
exercising any right under the Corimon Option Agreement to prevent Corimon from
withdrawing any Shares that Corimon may tender into the ICI 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.
On May 8, 1995, a purported class action entitled A.D. Gilhart & Co., Inc.,
v. Grow Group, Inc. et al., was commenced in the Supreme Court of the State of
New York, New York County (the "Gilhart Action") against the Company and
members of the Company's Board of Directors. The complaint in the Gilhart
Action alleges, among other things, that the defendants breached their
fiduciary duties owed to the
14
<PAGE>
Company's shareholders in connection with the proposed ICI Merger by failing to
pursue discussions with Sherwin-Williams about a possible acquisition of the
Company by Sherwin-Williams.
The complaint in the Gilhart Action seeks, among other things, an order (i)
enjoining defendants from enforcing the Company's "anti-takeover procedures";
(ii) requiring defendants to explore third party interest and accept the
highest bid obtainable for the Shares; and (iii) awarding the plaintiffs' costs
and disbursements, including attorneys' fees.
On May 9, 1995, a purported class action entitled Kim J. Hammond and Jeffrey
Dell v. Grow Group, Inc., et al., (the "Hammond Action") was commenced in the
United States District Court for the Southern District of New York against the
Company and certain members of the Company's Board of Directors (collectively,
the "Hammond Defendants") on behalf of all persons who sold the Company's
securities during the period from April 29, 1995 to May 4, 1995 and who
sustained damages as a result of such sale. The complaint alleges violations of
Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder for,
among other things, issuing the statements contained in press releases dated
April 28, 1995 and May 1, 1995 which allegedly were materially false and
misleading for failing to adequately disclose all material facts concerning
Sherwin-Williams' contacts with the Company regarding a proposed acquisition by
Sherwin-Williams; and for falsely creating the impression that the Board of
Directors had "shopped" the Company. The complaint further alleges that the
above mentioned disclosures artificially affected the market price of the
Company's securities.
The complaint in the Hammond Action seeks, among other things, monetary
damages against the Hammond Defendants in an unspecified amount for all losses
suffered by the plaintiffs as a result of the allegedly improper activity of
the Hammond Defendants and costs, reasonable attorneys' fees and expert fees
and disbursements.
On May 9, 1995, a purported class action entitled Steiner v. Grow Group,
Inc., et al., was filed in the Supreme Court of the State of New York, New York
County (the "Steiner State Action") on behalf of the Company's shareholders
against the Company, certain members of the Company's Board of Directors, and a
former director of the Board (the "Director Defendants"). The complaint alleges
that the Director Defendants breached their fiduciary duties to the purported
class in connection with the proposed ICI Merger by failing to adequately
respond to expressions of interest from bona fide purchasers, such as Sherwin-
Williams, thereby failing to maximize shareholder value.
The complaint in the Steiner State Action seeks, among other things,
preliminary and permanent relief, including injunctive relief, as follows:
declaring that the Company and the Director Defendants have breached their
fiduciary duties to plaintiff and other members of the class; enjoining the
purchase of the Company by ICI pursuant to the ICI Merger Agreement; requiring
the Company and the Director Defendants to negotiate with Sherwin-Williams
and/or other potential acquirors in a manner designed to maximize shareholder
value and to utilize the rights plan to benefit the members of the class and
maximize the value of their holdings; and awarding costs, disbursements, and
reasonable attorneys' and experts' fees.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO.
-----------
<S> <C>
Exhibit 1 Schedule 14D-9 Solicitation/Recommendation Statement Pursuant to
Section 14(d)(4) of the Securities Exchange Act of 1934, dated May
4, 1995, relating to the tender offer by GDEN Corporation, a New
York corporation and indirect wholly-owned subsidiary of Imperial
Chemical Industries PLC.
Exhibit 2 Confidentiality Agreement, dated May 12, 1995, between Grow Group,
Inc. and The Sherwin-Williams Company.
Exhibit 3 Option Agreement, dated as of April 30, 1995, among Imperial Chemical
Industries PLC, GDEN Corporation, Corimon Corporation and Corimon
S.A.C.A.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO.
-----------
<S> <C>
Exhibit 4 Complaint entitled General Color Company Pension Plan v. Grow Group,
Inc., et al., filed in the Supreme Court of the State of New York,
New York County.
Exhibit 5 Complaint entitled Miriam Sarnoff and Frederick Rand v. Grow Group,
Inc. et. al., filed in the Supreme Court of the State of New York,
New York County.
Exhibit 6 Class Action Complaint entitled Martin Appelbaum and Rosalyn Younger
v. Grow Group, Inc. et. al., filed in the Supreme Court of the State
of New York, New York County.
Exhibit 7 Class Action Complaint entitled Samuel Pill v. Grow Group, Inc. et
al., filed in the Supreme Court of the State of New York, New York
County.
Exhibit 8 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 9 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 10 Class Action Complaint entitled A. D. Gilhart & Co. Inc. v. Grow
Group, Inc. et. al., filed in the Supreme Court of the State of New
York, New York County.
Exhibit 11 Class Action Complaint entitled Kim J. Hammond and Jeffrey Dell v.
Grow Group, Inc. et. al., filed in the United States District Court
for the Southern District of New York.
Exhibit 12 Class Action Complaint entitled Steiner v. Grow Group, Inc., et al.,
filed in the Supreme Court of the State of New York, New York
County.
Exhibit 13 Letter to Shareholders of Grow Group, Inc., dated May 16, 1995.*
Exhibit 14 Press Release, dated May 8, 1995, issued by Grow Group, Inc.
Exhibit 15 Press Release, dated May 9, 1995, issued by Grow Group, Inc.
Exhibit 16 Press Release, dated May 10, 1995, issued by Grow Group, Inc.
Exhibit 17 Press Release, dated May 16, 1995, issued by Grow Group, Inc.
Exhibit 18 Amendment to Rights Agreement, dated as of April 30, 1995, to the
Amended and Restated Rights Agreement, dated as of August 7, 1992,
between Grow Group, Inc. and The Bank of New York.
Exhibit 19 Consulting Agreement, dated as of April 30, 1995, between Grow Group,
Inc. and Russell Banks.
Exhibit 20 Amendment and Extension Agreement, dated as of April 27, 1995,
between Grow Group, Inc. and Russell Banks.
Exhibit 21 Severance Agreement, dated April 27, 1995, between Grow Group, Inc.
and John F. Gleason.
Exhibit 22 Severance Agreement, dated April 27, 1995, between Grow Group, Inc.
and Lloyd Frank.
Exhibit 23 Amendment of Employment Agreement, dated as of April 27, 1995,
between Grow Group, Inc. and Frank Esser.
</TABLE>
- --------
* Included in copies of the Schedule 14D-9 mailed to shareholders.
16
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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 16, 1995
GROW GROUP, INC.
By /s/ Lloyd Frank
----------------------
Title: Secretary
17
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SCHEDULE I
CERTAIN TRANSACTIONS IN SHARES OF COMMON STOCK OF
GROW GROUP, INC. EFFECTED DURING THE PAST 60 DAYS
The following purchases of Shares were credited to the accounts of the below
listed executive officers pursuant to the Company's monthly investment plan:
<TABLE>
<CAPTION>
SHARES
NAME DATE PURCHASED PRICE
---- ------- --------- --------
<S> <C> <C> <C>
Frank V. Esser................................. 3/28/95 4.2118 $14.2456
4/25/95 3.6931 $16.2465
Joseph H. Quinn, Jr. .......................... 3/28/95 4.2118 $14.2456
4/25/95 3.6931 $16.2465
John F. Gleason................................ 3/28/95 7.7217 $14.2456
4/25/95 6.7707 $16.2465
Henry W. Jones................................. 3/28/95 4.2118 $14.2456
4/25/95 3.6931 $16.2465
</TABLE>
<PAGE>
Exhibit 99.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
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
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Grow Group, Inc., a New York corporation
(the "Company"), and the address of the principal executive offices of the
Company is 200 Park Avenue, New York, New York 10166. The title of the class of
equity securities to which this statement relates is the common stock, par
value $0.10 per share (the "Common Stock" or the "Shares") of the Company
(including the related Common Stock Purchase Rights (the "Rights") issued
pursuant to the Rights Agreement, dated as of February 11, 1988, as amended and
restated as of August 7, 1992, as thereafter amended (the "Rights Agreement"),
between the Company and The Bank of New York, which will become inoperative in
connection with the Merger (as defined below)).
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates 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"), disclosed in a Tender Offer Statement on Schedule 14D-1,
dated May 4, 1995 (the "Schedule 14D-1"), to purchase all outstanding Shares,
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
(the "Offer to Purchase"), and the related Letter of Transmittal (which
together with the Offer to Purchase constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated as
of April 30, 1995 (the "Merger Agreement"), among Purchaser, Parent and the
Company. The Company understands that pursuant to the Merger Agreement, Parent
has assigned to Purchaser its rights to purchase Shares pursuant to the Offer
to Purchase, although such assignment does not relieve Parent of its
obligations under the Offer or prejudice the rights of tendering shareholders
to receive payment for Shares validly tendered and accepted for payment
pursuant to the Offer. The Merger Agreement provides, among other things, that
as soon as practicable after the satisfaction or waiver of the conditions set
forth in the Merger Agreement, Purchaser will be merged with and into the
Company (the "Merger"), and the Company will continue as the surviving
corporation (the "Surviving Corporation"). A copy of the Merger Agreement is
filed herewith as Exhibit 1 and is incorporated herein by reference.
As set forth in the Schedule 14D-1, the principal executive offices of Parent
are located at 9 Millbank, London SW1P, 3JF, England and the principal
executive offices of Purchaser are located c/o ICI American Holdings Inc., 3411
Silverside Road, P.O. Box 15391, Wilmington, Delaware 19850.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b) Each material contract, agreement, arrangement and understanding and
actual or potential conflict of interest between the Company or its affiliates
and: (i) the Company, its executive officers, directors or affiliates or (ii)
the Purchaser, its executive officers, directors or affiliates, is described in
the attached Schedule I (which information is incorporated herein by reference)
or is set forth below.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements (the "Employment
Agreements") with Russell Banks, President and Chief Executive Officer of the
Company, and with the following executive officers of the Company: Joseph M.
Quinn, Stephen L. Dearborn, Frank V. Esser and Henry W. Jones.
The Employment Agreement with Mr. Banks (entered into effective as of October
31, 1992), originally scheduled to expire on October 31, 1995, was extended
until October 31, 1996 by the Company's Board of Directors (the "Board") on
December 16, 1994. In the event of the termination of employment (including
1
<PAGE>
termination by Mr. Banks for Good Reason, as defined in the Employment
Agreement) within two years after a Change in Control (as defined in the
Employment Agreement) of the Company, Mr. Banks will (except if termination is
for cause) be entitled to receive a lump sum payment equal in amount to the sum
of (i) Mr. Banks' base salary and average three-year bonus for the remainder of
the term of the Employment Agreement and (ii) three times the sum of such
salary and bonus. In addition, the Company must in such circumstances continue
Mr. Banks' then current welfare benefits for the remainder of the term of the
Employment Agreement. In no case, however, may Mr. Banks receive any payment or
benefit in connection with a Change in Control in excess of 2.99 times his
"base amount" (as that term is defined in Section 280G of the Internal Revenue
Code of 1986, as amended, and hereafter referred to as the "Code"). In the
event of disability of Mr. Banks, the Employment Agreement provides for
continued payment of 50% of his base salary for the remainder of the term of
the Employment Agreement. An amendment to Mr. Banks' Employment Agreement was
approved by the Board on April 27, 1995. Such amendment (i) memorialized the
action of the Board taken on December 16, 1994 to extend the agreement until
October 31, 1996, (ii) amended the provision setting forth the calculation of
the severance benefit to include bonuses in the portion of the severance
formula that is multiplied by three (as described above), (iii) provided that
the benefit payable upon Mr. Banks' death need not be provided solely through
life insurance, and (iv) clarified that "Good Reason" includes a determination
by Mr. Banks that, as a result of a Change in Control, he is unable to
discharge his duties effectively. The Company has obtained insurance policies
on Mr. Banks' life, as to which the Company is the beneficiary, in the
aggregate face amount of $400,000. The aggregate premium paid by the Company
during the fiscal year ended June 30, 1994 with respect to those policies was
$9,852. Pursuant to the Employment Agreement, Mr. Banks has the right to
purchase such insurance policies from the Company at a purchase price equal to
the amount at which the Company carries such policies on its books, which is
estimated to be less than $50,000. The Purchaser and Parent have agreed to
honor, and cause the Surviving Corporation to honor, Mr. Banks' Employment
Agreement, as amended, and have acknowledged that the consummation of the Offer
will constitute a Change in Control as defined in the Employment Agreement. It
is estimated that Mr. Banks would receive approximately $2.3 million under the
Employment Agreement upon a qualifying termination of employment following the
consummation of the Offer.
The Employment Agreement with Mr. Quinn (entered into effective as of
September 15, 1988 and amended effective as of July 1, 1994) is for a term
presently expiring on June 30, 1996, subject to automatic annual renewals until
age 65 unless notice of non-renewal is given on or before April 1 preceding the
scheduled termination date. In the event of the termination of employment
(including termination by Mr. Quinn for Good Reason, as defined in the
Employment Agreement) within two years after a Change in Control (as defined in
the Employment Agreement) of the Company, Mr. Quinn will (except if termination
is for cause) be entitled to receive a lump sum payment equal in amount to
three times the sum of his salary (based upon his annual base salary at the
date of termination) and average three-year bonus payments. In addition, the
Company must in such circumstances continue Mr. Quinn's then current welfare
benefits for a period of three years. In no case, however, may Mr. Quinn
receive any payment or benefit in connection with a Change in Control in excess
of 2.99 times his "base amount" (as that term is defined in Section 280G of the
Code). The Purchaser and Parent have agreed to honor, and cause the Surviving
Corporation to honor, Mr. Quinn's Employment Agreement and have acknowledged
that the consummation of the Offer will constitute a Change in Control as
defined in the Employment Agreement. It is estimated that Mr. Quinn would
receive approximately $1.1 million upon a qualifying termination of employment
following the consummation of the Offer.
The Employment Agreement with Mr. Esser (entered into effective as of
September 15, 1988) is for a term presently expiring on September 14, 1995,
which term is subject to automatic annual renewal until age 65 unless notice of
non-renewal is given on or before July 1 preceding the scheduled termination
date. In the event of the termination of employment (including termination by
Mr. Esser for Good Reason, as defined in the Employment Agreement) within two
years after a Change in Control (as defined in the Employment Agreement) of the
Company, Mr. Esser will (except if termination is for cause) be entitled to
receive a
2
<PAGE>
lump sum payment equal in amount to three times the sum of his salary (based
upon his annual base salary at the date of termination) and average three-year
bonus payments. In addition, the Company must in such circumstances continue
Mr. Esser's then current welfare benefits for a period of three years. In no
case, however, may Mr. Esser receive any payment or benefit in connection with
a Change in Control in excess of 2.99 times his "base amount" (as that term is
defined in Section 280G of the Code). An amendment to Mr. Esser's Employment
Agreement was approved by the Board on April 27, 1995 to increase the payout
period from two years to three years and to provide that the bonuses to be
taken into account in computing the termination payments would be the bonuses
paid to him in respect of the Company's prior three full fiscal years instead
of bonuses for the 1986-1988 fiscal years. The Purchaser and Parent have agreed
to honor, and cause the Surviving Corporation to honor, Mr. Esser's Employment
Agreement and have acknowledged that the consummation of the Offer will
constitute a Change in Control as defined in the Employment Agreement. It is
estimated that Mr. Esser would receive approximately $485,000 upon a qualifying
termination of employment following the consummation of the Offer.
The Employment Agreement with Mr. Dearborn (entered into effective as of June
2, 1994) is for a term presently expiring on May 31, 1997, which term is
subject to automatic annual renewal until age 65 unless notice of non-renewal
is given on or before November 30 preceding the scheduled termination date. In
the event of the termination of employment (except if termination is for
cause), Mr. Dearborn will be entitled to receive his base salary for the
remainder of the term of the Employment Agreement (but not less than one year).
In addition, the Company must in such circumstances continue Mr. Dearborn's
then current welfare benefits for the remainder of the term of the Employment
Agreement. The Purchaser and Parent have agreed to honor, and to cause the
Surviving Corporation to honor, Mr. Dearborn's Employment Agreement. It is
estimated that Mr. Dearborn would receive approximately $450,000 upon a
qualifying termination of employment following the consummation of the Offer.
The Employment Agreement with Mr. Jones (entered into effective as of March
1, 1995) is for a term presently expiring on February 29, 1996, subject to
automatic annual renewals until age 65 unless notice of non-renewal is given on
or before December 1 preceding the scheduled termination date. In the event of
the termination of employment (including termination by Mr. Jones for Good
Reason, as defined in the Employment Agreement) within two years after a Change
in Control (as defined in the Employment Agreement) of the Company, Mr. Jones
will (except if termination is for cause) be entitled to receive a lump sum
payment equal in amount to one times the sum of his salary (based upon his
annual base salary at the date of termination) and average three-year bonus
payments. In addition, the Company must in such circumstances continue Mr.
Jones' then current welfare benefits for a period of one year. In no case,
however, may Mr. Jones receive any payment or benefit in connection with a
Change in Control in excess of 2.99 times his "base amount" (as that term is
defined in Section 280G of the Code). The Purchaser and Parent have agreed to
honor, and to cause the Surviving Corporation to honor, Mr. Jones' Employment
Agreement and have acknowledged that the consummation of the Offer will
constitute a Change in Control as defined therein. It is estimated that Mr.
Jones would receive approximately $96,000 upon a qualifying termination of
employment following the consummation of the Offer.
SEVERANCE AGREEMENTS
The Company currently is a party to severance agreements ("Severance
Agreements") with approximately 90 employees. Approximately 55 of the severance
agreements were either adopted or modified to increase the benefits thereunder
by the Board on April 27, 1995, including adoption of new agreements for two
executive officers, John F. Gleason and Lloyd Frank. The Severance Agreements
provide for the payment of certain severance and other benefits to employees
who are terminated within two years of a Change in Control of the Company (as
defined in the Severance Agreements). In the event of the termination of
employment (including termination by the employee for Good Reason, as defined
in the Severance Agreement) within two years after a Change in Control (as
defined in the Severance Agreement) of the Company, the employee will (except
if termination is for cause) be entitled to receive a lump sum payment equal in
amount to the sum of his salary (based upon his or her annual base salary at
the date of termination)
3
<PAGE>
and average three-year bonus payments multiplied by the number of months
specified in the applicable Severance Agreement, and shall continue the
employee's welfare benefits for the same period. In the case of Mr. Frank, the
applicable period will be 36 months and in the case of Mr. Gleason, the
applicable period will be 24 months and will be based upon annual base salary
only. In no case, however, may the employee receive any payment or benefit in
connection with the consummation of the Offer in excess of 2.99 times his "base
amount" (as that term is defined in Section 280G of the Code). The Severance
Agreements with Messrs. Gleason and Frank, as well as the agreements with the
other employees of the Company, were approved by the Board on April 27, 1995.
The Purchaser and Parent have agreed to honor, and to cause the Surviving
Corporation to honor, the Severance Agreements and have acknowledged that the
consummation of the Offer will constitute a Change in Control as defined in the
Severance Agreements. It is estimated that Mr. Gleason would receive
approximately $440,000 and Mr. Frank would receive approximately $300,000, upon
a qualifying termination of employment following the consummation of the Offer.
CONSULTING AGREEMENT WITH MR. BANKS
On April 30, 1995, in connection with entering into the Merger Agreement, the
Company entered into a consulting agreement with Mr. Banks (the "Consulting
Agreement"). The term of the Consulting Agreement begins on the date on which
Mr. Banks ceases to be a full-time employee of the Company following
consummation of the Offer (the "Commencement Date") and ends on the first
anniversary of the Commencement Date (the "Term"). The Consulting Agreement (i)
requires Mr. Banks to provide such consulting and advisory services to the
Company as are reasonably requested by the Company's Chief Executive Officer or
Board of Directors and (ii) subjects Mr. Banks to nondisclosure and
noncompetition restrictions during the Term and for one year thereafter. Mr.
Banks will be paid at an annual rate of $400,000 for his services under the
Consulting Agreement. In the event of the death of Mr. Banks during the Term,
Mr. Banks' spouse will receive the remainder of the consulting fee in monthly
installments. During the Term and, in some instances, for a specified period
thereafter, the Company will provide Mr. Banks with medical and health
coverage, an automobile and other specified personal benefits, including two
club memberships, and reimbursement for financial planning, which reimbursement
for financial planning shall not exceed $25,000 in the aggregate.
STOCK OPTIONS
The Company maintains the 1976 Stock Option Incentive Plan (the "1976 Option
Plan") and the 1990 Stock Option Incentive Plan, as amended (the "Option
Plan"). The Option Plan provides for grants of stock options ("Options") to
certain key employees and non-employee directors of the Company. The aggregate
number of authorized Shares available pursuant to the Option Plan is 500,000.
The Option Plan provides for the granting of non-qualified options or options
qualifying as incentive stock options under Section 422 of the Code. The
exercise price of the Shares covered by each Option may not be less than 100%
of the fair market value of such Shares on the date the Option is granted. The
Option Plan also provides that each non-employee director who is elected to the
Board for the first time at any special or annual meeting of stockholders of
the Company is to receive, on such date, an Option to purchase 10,000 Shares,
which becomes exercisable in each of the six years commencing two years after
the date of grant to the extent of one-sixth of the Shares subject to such
Option. The Option Plan and the 1976 Option Plan provide that outstanding
Options become exercisable immediately upon the occurrence of a Change in
Control of the Company (as defined in such Plans). For purposes of the Option
Plan and the 1976 Option Plan, the consummation of the Offer will constitute a
Change in Control.
In connection with the Merger, all outstanding Options will become fully
exercisable and vested. Each Option will then be cancelled and the holder of
the Option will receive an amount equal to the product of
4
<PAGE>
(A) the excess, if any, of $18.10 over the exercise price per Share of each
such Option and (B) the number of Shares relating to such Option.
Set forth below is a table indicating the treatment in the transaction of
currently outstanding Options held by executive officers and non-employee
directors of the Company. For purposes of the table, it has been assumed that
outstanding Options will not be exercised.
<TABLE>
<CAPTION>
AMOUNTS PAYABLE WITH RESPECT TO COMPANY OPTIONS
IN THE MERGER
-------------------------------------------------------
NUMBER OF OPTIONS/ AMOUNT PAYABLE UPON
EXERCISE PRICE CANCELLATION OF OPTIONS
------------------------- --------------------------
<S> <C> <C>
NON-EMPLOYEE DIRECTORS
Harold G. Bittle........ 10,000/$14.00 $41,000.00
Tully Plesser........... 10,000/$14.00 41,000.00
Arthur W. Broslat....... 10,000/$12.00 61,000.00
Philippe Erard.......... 10,000/$11.81 62,900.00
William H. Turner ...... 10,000/$18.13 0.00
EXECUTIVE OFFICERS
Russell Banks........... 423/$10.54 3,197.88
23,712/$10.54 79,262.72
10,000/$14.75 33,500.00
Joseph M. Quinn......... 5,000/$7.25 54,250.00
25,000/$9.81 07,250.00
15,000/$14.75 50,250.00
John F. Gleason......... 4,500/$14.75 15,075.00
Stephen L. Dearborn..... 10,000/$14.75 33,500.00
Lloyd Frank............. 7,875/$10.54 59,535.00
4,000/$14.75 13,400.00
Frank V. Esser.......... 5,250/$10.54 39,690.00
2,000/$14.75 6,700.00
Henry W. Jones.......... 3,500/$14.75 11,725.00
</TABLE>
NON-EMPLOYEE DIRECTOR FEE CONTINUATION PAYMENTS
Pursuant to the Company's existing Non-Employee Director Fee Continuation
Plan ("Fee Continuation Plan") (adopted effective as of September 16, 1988),
each person who serves as a non-employee director of the Company for at least
five years and who ceases to serve as a director after age 70, or before age 70
if such director is not re-elected or is removed as a director within three
years of a Change in Control (as defined in the Fee Continuation Plan), will
receive $20,000 per year for each of the ten years following the cessation of
his service as a director. In the event of death during this ten year period,
payments will continue to the director's designated beneficiary. The Company,
and in the event of a Change in Control, the director, may elect to receive the
amount to which he is entitled under the Fee Continuation Plan in a discounted
lump sum. The Purchaser and Parent have agreed to honor, and cause the
Surviving Corporation to honor, the Fee Continuation Plan and have acknowledged
that the consummation of the Offer will constitute a Change in Control as
defined therein. As a result of the Merger, each of Messrs. Angus MacDonald and
Peter Keane will receive $20,000 per year for ten years under the Fee
Continuation Plan. In addition, Parent and the Purchaser have agreed to honor,
and cause the Surviving Corporation to honor, the fee continuation agreement
between the Company and Mr. Robert Milano, which provides for the payment of
$20,000 per annum for life following his cessation of service as a director.
5
<PAGE>
EMPLOYEE SUPPLEMENTAL RETIREMENT
AND DEATH BENEFIT ARRANGEMENTS
The Company is a party to Supplemental Retirement and Death Benefit
Agreements effective September 15, 1988 which amend and restate agreements
entered into in 1983, as amended, with Messrs. Banks, Quinn, Gleason and Frank
(as amended and restated, the "SERP Agreements"). Each SERP Agreement provides
for the payment in each year for 15 years following cessation of employment at
age 65 or thereafter, or prior to age 65 if terminated by the Company (except
if termination is for cause) or by the employee for Good Reason (as defined in
the SERP Agreements) within three years after any Change in Control of the
Company (as defined in the SERP Agreements), of an amount equal to 30% of his
base salary for fiscal 1982. In the event of death during the 15-year period,
payments will continue during the remainder of the period to his designated
beneficiaries. In the event of death prior to cessation of employment, there
shall be payable in each year for 15 years following his death, in lieu of the
foregoing amount, an amount equal to 20% of his base salary for fiscal 1982. At
the Company's option, supplemental retirement benefits which become payable may
be paid in a discounted lump sum. However, for employees under the age of 65
who become entitled to payments upon a Change in Control, such amounts shall be
paid to the employee in an undiscounted lump sum. Each such employee is also
entitled to a post-termination death benefit in an amount equal to the lesser
of $500,000 or three times his base salary for fiscal 1982. Fiscal 1982 base
salaries for Messrs. Banks, Quinn, Gleason and Frank were $250,000, $83,841,
$140,000 and $100,000, respectively. No decision has been made as to whether
the supplemental retirement benefits will be paid in lump sums. The Purchaser
and Parent have agreed to honor, and cause the Surviving Corporation to honor,
the SERP Agreements and have acknowledged that the consummation of the Offer
will constitute a "Change in Control" as defined in the SERP Agreements. In the
event of lump sum payments, the estimated amounts of such payments to Messrs.
Banks, Quinn, Gleason and Frank would be $620,830, $377,285, $347,665 and
$248,332, respectively.
BONUS PLAN
For the fiscal year of the Company ending June 30, 1995, the Company will
determine the bonus pools for the short term bonus arrangements of the Company
using the same objective criteria that were used to determine such bonus pools
for the fiscal year of the Company ended June 30, 1994. Parent shall, to the
extent said bonus arrangements call for a discretionary allocation of the bonus
pool, allocate the entire bonus pool and consult with Messrs. Banks, Frank and
Keane (the current Chairman of the Compensation Committee of the Board) to
ascertain their views with respect to the appropriate allocation of said bonus
pool. Assuming net income per share for fiscal 1995 of $.62 (which is the
Company's current projection for net income per share for fiscal 1995), the
aggregate bonus pool available for discretionary allocation to corporate
headquarters (which would include approximately 35 persons, among whom are
Messrs. Banks, Quinn, Gleason, Dearborn, Frank, Jones and Esser) would be
approximately $590,000. To the best knowledge of the Company, Parent has not
made any determination as to how any discretionary bonuses would be allocated
among the possible recipients.
ESOP
Most Company employees (including all the executive officers) are
participants in the Company's Employee Stock Ownership and Savings Plan
("ESOP"), which holds approximately 560,600 Shares as of May 1, 1995. As
permitted by the Merger Agreement, it is the intention of the Company to make a
contribution to the ESOP of approximately $2.6 million prior to the
consummation of the Offer in order to permit the ESOP to repay its remaining
debt. Such a contribution would permit allocation of additional Shares to the
ESOP accounts of all participants in accordance with the provisions of the ESOP
and applicable law. As of the Effective Time (as defined below), the ESOP will
be terminated and each ESOP participant will be given the opportunity to
receive his or her account balance under the ESOP in a lump sum distribution or
to have such account balance transferred to an individual retirement account.
While individual allocations will vary, it is estimated that, as a result of
the repayment of the ESOP's debt, Shares having a value of approximately
$20,000 would be allocated to each of the Company's executive officers.
6
<PAGE>
The trustees for the ESOP are Messrs. Russell Banks, Lloyd Frank and Peter
Keane ("Trustees"). Pursuant to the applicable documents governing the ESOP,
the Trustees have the authority to determine whether ESOP Shares will be
tendered in the Offer. The Trustees, who are required to act in accordance with
their fiduciary duties under the Employee Retirement Income Security Act of
1974, as amended, have indicated their intention to tender all ESOP Shares.
SAVINGS PLAN
The Company also maintains an Employee Stock Ownership and Savings Plan (the
"Savings Plan"), which holds approximately 128,000 Shares as of December 31,
1994. Pursuant to the applicable documents governing the Savings Plan, the
trustee of the Savings Plan, as independent third party institution, has the
authority to determine whether to tender the Savings Plan Shares in the Offer.
CERTAIN EMPLOYEE PROVISIONS IN THE MERGER AGREEMENT
The Merger Agreement provides that, during the six-month period following the
Effective Time, employees who continue to be employed by the Company following
the Effective Time will either continue to participate in the same employee
benefit plans and arrangements as those in which they were participating
immediately prior to the Effective Time or be provided with benefits that are
no less favorable in the aggregate than the existing benefit plans and
arrangements. With respect to such benefits during such six-month period,
service accrued by Company employees during employment with the Company prior
to the Effective Time will be recognized to the extent and for the purposes
such service was recognized prior to the Effective Time by the applicable
employee plan or benefit arrangements. The Surviving Corporation has reserved
the right to terminate the employment of any employee after the Effective Time.
None of Parent, the Purchaser or the Surviving Corporation will be required to
recognize service with the Company prior to the Effective Time after the end of
such six month period except as required by law; provided that with respect to
Company employees who are participants in a nonunion employee plan, Parent and
the Purchaser have agreed to cause its nonunion employee benefit plans to
recognize, for purposes of vesting and eligibility to participate only, service
which is recognized for such purposes by the comparable employee benefit plan
of the Company with respect to employees who otherwise become eligible to
participate in an employee benefit plan of Parent or its subsidiaries. In
addition, (i) the Purchaser and Parent will honor, in accordance with their
terms, all employment and severance agreements in effect or authorized by the
Company's Board of Directors on or before the date of the Merger Agreement, as
well as the above-described retirement obligations to certain members of the
Board of Directors, and (ii) short-term bonuses for the current fiscal year
generally will be determined on the basis of the same criteria used for such
purpose for the immediately prior fiscal year (see "Bonus Plan" above).
THE MERGER AGREEMENT
The summary of the Merger Agreement contained in the Offer to Purchase, which
has been filed with the Securities and Exchange Commission (the "Commission")
as an exhibit to the Schedule 14D-1, a copy of which is enclosed with this
Schedule 14D-9, is incorporated herein by reference. Such summary should be
read in its entirety for a more complete description of the terms and
provisions of the Merger Agreement. A copy of the Merger Agreement has been
filed as Exhibit 1 hereto and is incorporated herein by reference. The
following is a summary of certain portions of the Merger Agreement which relate
to arrangements among the Company, Purchaser, Parent and the Company's
executive officers and directors and certain other significant provisions.
Board Representation. The Merger Agreement provides that, effective upon the
acceptance for payment by Parent of any Shares, Parent shall be entitled to
designate the number of directors, rounded up to the next whole number, on the
Company's Board of Directors that equals the product of (i) the total number of
directors on the Company's Board of Directors (giving effect to the election of
any additional directors pursuant to such provision) and (ii) the percentage
that the number of Shares owned by Parent (including Shares accepted for
payment and, assuming the number of Shares owned by Parent or accepted for
payment
7
<PAGE>
constitute at least a majority of the outstanding Shares on a fully diluted
basis, the 4,025,841 Shares owned by Corimon Corporation (the "Corimon
Shares")) bears to the total number of Shares outstanding. The Company is
required to take all action necessary to cause Parent's designees to be elected
or appointed to the Company's Board of Directors, including, without
limitation, increasing the number of directors and seeking and accepting
resignations of incumbent directors. At such times, the Company will use its
best efforts to cause individuals designated by Parent to constitute the same
percentage as such individuals represent on the Company's Board of (x) each
committee of the Board (other than any committee of the Board established to
take action under the Merger Agreement), (y) each board of directors of each
subsidiary of the Company and (z) each committee of each such board. The Merger
Agreement provides that, notwithstanding the foregoing, until the effective
time of the Merger (the "Effective Time"), the Company shall retain as members
of its Board of Directors at least two directors who are directors of the
Company on the date of the Merger Agreement.
The Merger Agreement provides that from and after the time, if any, that
Parent's designees constitute a majority of the Company's Board of Directors,
any amendment of the Merger Agreement, any termination of the Merger Agreement
by the Company, any extension of time for performance of any of the obligations
of Parent or the Purchaser thereunder, any waiver of any condition to the
obligations of the Company or any of the Company's rights thereunder or other
action by the Company thereunder may be effected only by the action of a
majority of the directors of the Company then in office who were directors of
the Company on the date of the Merger Agreement, which action shall be deemed
to constitute the action of the full Board of Directors; provided, that if
there shall be no such directors, such actions may be effected by majority vote
of the entire Board of Directors of the Company.
The Merger Agreement provides that the Company's obligation to appoint
Parent's designees to the Company's Board is subject to Section 14(f) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), which
requires the Company to mail to its shareholders the Information Statement
containing the information required by Section 14(f) of the Exchange Act and
Rule 14f-1 promulgated thereunder. A copy of the Information Statement is
attached as Schedule I hereto and is incorporated herein by reference.
Director and Officer Indemnification and Insurance. The Merger Agreement
provides that for six years after the Effective Time, Parent will, and will
cause the Surviving Corporation to, (i) indemnify and hold harmless the present
and former officers, directors, employees and agents of the Company in respect
of acts or omissions occurring prior to the Effective Time (including, without
limitation, in respect of acts or omissions in connection with the Merger
Agreement and the transactions contemplated thereby) and (ii) advance to such
persons expenses incurred in defending any action or suit with respect to such
matters, in each case to the extent such persons are entitled to
indemnification or advancement of expenses under the Company's or any
subsidiary's certificate of incorporation and bylaws in effect on the date of
the Merger Agreement and subject to the terms of such certificates of
incorporation and bylaws. In the event any claim or claims are asserted or made
within such six year period, all rights to indemnification in respect of any
such claim or claims shall continue until disposition of any and all such
claims. The Merger Agreement provides that all rights to indemnification and
all limitations on liability existing in favor of any such officer, director,
employee or agent as provided in the Company's Certificate of Incorporation and
By-laws as in effect as of the date of the Merger Agreement will survive the
Merger and will continue in full force and effect. The Merger Agreement
provides that any determination required to be made with respect to whether
such person is entitled to indemnification will be made by independent legal
counsel selected mutually by such person and Parent.
The Merger Agreement provides that for six years after the Effective Time,
Parent will cause the Surviving Corporation to use its best efforts to provide
officers' and directors' liability insurance in respect of acts or omissions
occurring prior to the Effective Time covering each such person currently
covered by the Company's officers' and directors' liability insurance policy on
terms with respect to coverage and amount no less favorable than those of such
policy in effect on the date of the Merger Agreement; provided that in
satisfying its obligation, Parent shall not be obligated to cause the Surviving
Corporation to pay premiums in
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excess of $400,000 per annum; provided further that if the premiums would
exceed $400,000 in a given year, the Surviving Corporation shall use its best
efforts to purchase coverage that in the opinion of the Surviving Corporation
is the best available for $400,000 per year. The Merger Agreement provides that
Parent will cause the Surviving Corporation to continue to indemnify in
accordance with the Company's past practices certain employees in respect of
certain identified lawsuits.
No Solicitation of Offers. From the date of the Merger Agreement until the
termination thereof, the Company and its subsidiaries and the officers,
directors, employees or other agents of the Company and its subsidiaries have
agreed not to, directly or indirectly, (i) take any action to solicit, initiate
or encourage any Acquisition Proposal (as defined below) or (ii) subject to the
fiduciary duties of the Board of Directors under applicable law as advised by
counsel, engage in negotiations with, or disclose any nonpublic information
relating to the Company or any subsidiary or afford access to the properties,
books or records of the Company or any subsidiary to, any person that may be
considering making, or has made, an Acquisition Proposal. The Company has
agreed to promptly notify Parent after receipt of any Acquisition Proposal or
any indication that any person is considering making an Acquisition Proposal or
any request for nonpublic information relating to the Company or any subsidiary
or for access to the properties, books or records of the Company or any
subsidiary by any person that may be considering making, or has made, an
Acquisition Proposal and has agreed to keep Parent fully informed of the status
and details of any such Acquisition Proposal, indication or request. The term
"Acquisition Proposal" means any offer or proposal for, or any indication of
interest in, a merger or other business combination involving the Company or
any subsidiary or the acquisition of any equity interest in, or a substantial
portion of the assets of, the Company or any subsidiary, other than the
transactions contemplated by the Merger Agreement. Such restriction will not
prohibit the Company or its Board of Directors from taking and disclosing to
the Company's shareholders a position with respect to a tender or exchange
offer by a third party pursuant to Rules 14d-9 and 14e-2(a) promulgated under
the Exchange Act or from making such disclosure to the Company's shareholders
or otherwise which, in the judgment of the Board of Directors with the advice
of independent legal counsel, may be required under applicable law or rules of
any stock exchange. The Merger Agreement provides that references therein to
the "fiduciary duties" of the members of the Board mean the fiduciary duties of
such members to the holders of Shares other than Corimon Corporation.
Break-up Fee. The Company has agreed to pay Parent 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 any of the
following events (a "Trigger Event"):
(i) the Company shall have entered into, or shall have publicly announced
its intention to enter into, an agreement or an agreement in principle with
respect to any Acquisition Proposal other than the transactions
contemplated by the Merger Agreement;
(ii) the Board of Directors of the Company shall have withdrawn or
materially modified its approval or recommendation of the Offer or the
Merger Agreement other than as a result of Parent's breach of the Merger
Agreement; or
(iii) any person or group (as defined in Section 13(d)(3) of the Exchange
Act) (other than Parent 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 the Company
(including the Shares), or shall have acquired, directly or indirectly, at
least 25% of the assets of the Company 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.
CORIMON OPTION AGREEMENT
The following is a summary of the Option Agreement, dated as of April 30,
1995, among Parent, the Purchaser, Corimon Corporation, a Delaware corporation
("Stockholder"), and Corimon, S.A.C.A., a Venezuelan corporation ("Corimon")
(the "Corimon Option Agreement"). Such summary is qualified in its entirety by
reference to the text of the Corimon Option Agreement, a copy of which is filed
as Exhibit 2 hereto and is incorporated herein by reference.
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Exercise of Option. Pursuant to the Corimon Option Agreement, Stockholder
granted to Parent an option (the "Option") to purchase 4,025,841 Shares
beneficially owned by Stockholder (the "Corimon Shares") at a purchase price of
$17.50 per Share (the "Corimon Purchase Price"). The Corimon Option Agreement
provides that the Option may be exercised by Parent in whole but not in part at
any time prior to the earlier of (i) November 5, 1995 and (ii) five business
days after August 31, 1995 (or if a Hart-Scott-Rodino authority requests
additional information, Parent may elect to change the August 31, 1995 date to
no later than October 31, 1995); provided that Parent may exercise the Option
only if the "Corimon Minimum Condition" is satisfied. For purposes of the
Corimon Option Agreement, the "Corimon Minimum Condition" shall have been
satisfied only if (i) Parent has paid for or accepted for payment all Shares
properly tendered and not withdrawn pursuant to the Offer (the "Tendered
Shares") in accordance with the terms of the Offer and the Merger Agreement and
(ii) the Tendered Shares plus the Corimon Shares constitute not less than a
majority of the outstanding Shares on a fully diluted basis. In the event the
consideration per Share paid by Parent pursuant to the Offer or the Merger
Agreement is increased, the Corimon Purchase Price shall be increased by an
amount equal to the amount of such increase.
The Corimon Option Agreement provides that Stockholder will not, and will not
agree to, sell, assign, transfer, tender or otherwise dispose of any Shares to
any person or group that has commenced a tender offer for, or proposed to
acquire, at least 50% of the outstanding Shares, except pursuant to, and at the
price per share payable in, such offer or proposal.
Parent may allow the Option to expire without purchasing the Shares
thereunder; provided however that once Parent has delivered to the Stockholder
notice that Parent will exercise the Option (the "Exercise Notice"), Parent
will be bound to effect the purchase as described in such Exercise Notice; and
provided further that if the Corimon Minimum Condition is satisfied, Parent
shall thereafter be bound to exercise the Option within two business days
following the date of such satisfaction. The Corimon Option Agreement
terminates upon the termination of the Merger Agreement.
Conditions to the Stockholder's Obligations. The obligation of the
Stockholder to sell its Shares is subject to the following conditions: (i) all
waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder applicable to
the exercise of the Option shall have expired or been terminated; and (ii)
there shall be no preliminary or permanent injunction or other order, decree or
ruling issued by a court of competent jurisdiction or by a governmental,
regulatory or administrative agency or commission having authority with respect
thereto, nor any statute, rule, regulation or order promulgated or enacted by
any such governmental authority, prohibiting or otherwise restraining the
exercise of the Option or the sale of the Corimon Shares pursuant thereto.
No Disposition or Encumbrance of Shares. Pursuant to the Corimon Option
Agreement, except for any Lien (as defined below) existing as of the date of
the Merger Agreement, Stockholder will not offer or agree to, sell, transfer,
tender, assign, hypothecate or otherwise dispose of, or create or permit to
exist any security interest, lien, claim, pledge, option, right of first
refusal, agreement, limitation on Stockholder's voting or dispositive rights,
charge or other encumbrance of any nature whatsoever (collectively, "Liens")
with respect to the Corimon Shares. Stockholder agreed that it will not tender
the Shares into the Offer unless directed to do so by Parent; provided that if
it is so directed by Parent, Stockholder will, to the extent permitted by
certain permitted Liens, properly tender or cause to be tendered the Corimon
Shares into the Offer and, so long as the Option is outstanding, not withdraw
such Shares; and provided further that if the Corimon Shares are purchased
pursuant to the Offer, Stockholder will pay, subject to applicable law, to
Parent a fee in cash equal to $.60 multiplied by the number of such Shares.
No Solicitation of Transactions. Pursuant to the Corimon Option Agreement,
Stockholder and Corimon agree that they will not permit any affiliate to,
directly or indirectly, through any agent or representative or otherwise, (i)
take any action to solicit, initiate or encourage any Acquisition Proposal (as
defined above); (ii) except as may be required by Arthur Broslat, Philippe
Erard and Harold Bittle (the "Corimon Directors") in the exercise of their
fiduciary duties in their capacity as members of the Board of Directors of the
Company, engage in negotiations with, or disclose any nonpublic information
relating to the Company or any subsidiary
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of the Company or afford access to the properties, books or records of the
Company or any subsidiary of the Company to, any person that may be considering
making, or has made, an Acquisition Proposal; or (iii) except as may be
required by the Corimon Directors in the exercise of their fiduciary duties in
their capacity as members of the Board of Directors of the Company, otherwise
cooperate in any way with, or assist or participate in or facilitate or
encourage, any effort or attempt by any person to do or seek any of the
foregoing. Except as may be required by the Corimon Directors in the exercise
of their fiduciary duties in their capacity as members of the Board of
Directors of the Company, both Stockholder and Corimon agree that they shall
cease and cause to be terminated all existing discussions or negotiations in
which they or any of their agents or other representatives are or have been
engaged with any person with respect to any of the foregoing.
Stockholder and Corimon have agreed to notify Parent promptly after receipt
of any Acquisition Proposal or any indication that any person is considering
making an Acquisition Proposal or any request for nonpublic information
relating to the Company or any subsidiary of the Company or for access to the
properties, books or records of the Company or any subsidiary of the Company by
any Person that may be considering making, or has made, an Acquisition Proposal
and will keep Parent fully informed of the status and details of any such
Acquisition Proposal, indication or request.
Voting Agreement. Pursuant to the Corimon Option Agreement, Stockholder has
agreed that prior to the time, if any, that the Merger Agreement is terminated,
at any meeting of the shareholders of the Company, however called, and in any
action by consent of the shareholders of the Company, Stockholder will vote the
Corimon Shares: (a) in favor of the Merger, the Merger Agreement (as amended
from time to time) or any of the transactions contemplated by the Merger
Agreement; and (b) against any proposal for any recapitalization, merger, sale
of assets or other business combination between the Company and any person
(other than the Merger) or any other action or agreement that would result in a
breach of any covenant, representation or warranty or any other obligation or
agreement of the Company under the Merger Agreement or which could result in
any of the conditions to any party's obligations under the Merger Agreement not
being fulfilled.
Certain Claims. The Corimon Option Agreement further provides that Corimon
and Stockholder will not assert that the Board of Directors of the Company has
breached its fiduciary duties to Corimon and Stockholder if, at any time prior
to the termination of the Merger Agreement, the Board of Directors of the
Company refuses to accept or recommend an offer by a third party to acquire any
or all of the outstanding Shares for consideration not in excess of $18.10 per
Share. Subject to the consummation of the Offer, Corimon and Stockholder agree
to waive any claims they may have against the Company or any of its officers or
directors with respect to the ownership interest represented by the Corimon
Shares to the extent such claims (i) arise under any contract or agreement with
the Company or (ii) relate to an alleged breach of a fiduciary duty.
NON-DISCLOSURE AGREEMENT
The following is a summary of certain provisions of the Non-Disclosure
Agreement between the Company and Parent, filed as Exhibit 3 hereto and
incorporated herein by reference. The summary is qualified in its entirety by
reference to the Non-Disclosure Agreement. Pursuant to the Non-Disclosure
Agreement, Parent agreed, among other things, to keep confidential certain
information furnished to it by the Company (the "Information") and to use the
Information solely for the purpose of evaluating a possible transaction with
the Company. Parent has further agreed that (i) it will be entitled to maintain
for investment purposes only any common stock of the Company as listed on the
New York Stock Exchange provided always that such interest is no greater than
15% of all the issued securities of the Company; and (ii) for a period of two
years from the date of the Non-Disclosure Agreement, neither Parent nor any of
its affiliates, including any person or entity directly or indirectly through
one or more intermediaries, controlling Parent or controlled by or under common
control with Parent, will purchase, offer or agree to purchase any securities
or assets of the Company, enter or agree to enter into any acquisition or other
business combination, relating to the Company, or make, or induce any other
entity to make or negotiate or otherwise deal with others for a tender or
exchange offer of common stock of the Company, solicit proxies, votes or
consents other than for nominees
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selected by the Company's Board of Directors, or otherwise seek to acquire
control of the Company unless such purchase, transaction, offer, agreement or
proposal shall have previously been approved by the Company's Board of
Directors. The Non-Disclosure Agreement will survive any termination of the
Merger Agreement.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) RECOMMENDATION OF THE BOARD OF DIRECTORS.
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 the Company and its shareholders, has approved and adopted the
Merger Agreement and the transactions contemplated thereby, including the Offer
and the Merger, and recommends that all holders of Shares accept the Offer and
tender their Shares pursuant to the Offer.
A letter to the Company's shareholders communicating the Board's
recommendation and a press release announcing the Merger Agreement and related
transactions are filed herewith as Exhibits 4 and 5, respectively, and are
incorporated herein by reference.
(b) BACKGROUND; REASONS FOR THE BOARD'S RECOMMENDATION.
Background. On November 4, 1994, following a contact with Parent initiated by
a representative of Wertheim Schroder Co. Incorporated, the Company's financial
advisor ("Wertheim Schroder"), Mr. Russell Banks, President and Chief Executive
Officer of the Company, met in London with Mr. John Dewhurst, the General
Manager of Planning and Acquisitions of Parent, to discuss on a preliminary
basis whether Parent would be interested in considering a possible acquisition
of the Company or a significant portion of its assets. On November 22, 1994,
Mr. John Thompson, the Chief Planner of the paints division of Parent, met in
New York with Mr. Banks to further discuss on a preliminary basis Parent's
interest in the Company.
On December 1, 1994, Parent and the Company entered into a Non-Disclosure
Agreement (the "Non-Disclosure Agreement") pursuant to which Parent agreed to
keep confidential non-public information to be furnished by the Company to
Parent. During December 1994, the Company furnished Parent with certain non-
public information pursuant to the Non-Disclosure Agreement and Mr. Banks met
with Mr. Thompson to discuss possible alternative structures for an acquisition
by Parent of the Company or a significant portion of its assets.
In late December 1994, a representative of Wertheim Schroder met with Mr.
Thompson near London and there was a discussion concerning the possibility of
Parent acquiring the entire Company.
On January 16, 1995, Parent sent a letter to the Company stating that based
on its preliminary, non-binding evaluation, Parent valued the Company's
Coatings and Chemicals Group for purposes of an asset acquisition in the range
of $250-$275 million. Parent's letter also stated that while Parent's
preference was to purchase the assets of the Company's Coatings and Chemical
Group, it was prepared to consider a transaction based on a purchase of the
Company's Shares. The letter further stated that Parent was prepared to
commence negotiations with the Company, and Parent requested further due
diligence and a 90-day exclusive negotiating period.
On January 19, 1995, Mr. Banks met in New York with Mr. Thompson and Mr.
Herman Scopes, the Chief Executive Officer of the paints division of Parent, to
conduct further discussions concerning Parent's interest in the Company. Mr.
Banks stated that the Company would not be interested in pursuing a sale of the
assets of its Coatings and Chemicals Group because, among other reasons,
Parent's proposal did not contemplate an assumption of liabilities and the sale
of assets would have resulted in a substantial tax liability to the Company.
Mr. Banks also advised Messrs. Scopes and Thompson that the Company would not
agree to grant Parent exclusive negotiating rights, but would permit Parent to
conduct further due diligence.
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On January 26, 1995, the Company issued a press release stating, among other
things, that the Company's Board of Directors had unanimously authorized
Wertheim Schroder to assist the Company in considering and reviewing
alternatives to enhance shareholder value.
During the period between February 7, 1995 and February 10, 1995,
representatives of Parent conducted business and legal due diligence with
respect to the Company at the offices of Wertheim Schroder in New York. On
February 8, 1995, the Board of Directors of the Company met and Mr. Banks
reviewed with the Board the status of discussions between the Company and
Parent.
On February 21, 1995, Mr. Banks and another officer of the Company met with
Mr. Thompson in New York. At that meeting, Mr. Thompson discussed Parent's
valuation of the Company based on its due diligence review to date and stated
that Parent had a preliminary interest in negotiating an acquisition of all
Shares at a price in the range of $17.50 to $18.50 per Share. Mr. Banks
informed Mr. Thompson that the Company would not be interested in entering into
negotiations with Parent on that basis at that time. Mr. Thompson also stated
that Parent's Board of Directors would be meeting the following day and, at
such meeting, Parent's Board would consider Parent's valuation of the Company.
Later in the day of February 21, 1995, Mr. Thompson met with representatives of
Wertheim Schroder to discuss Parent's valuation of the Company.
On February 22, 1995, Mr. Thompson informed Mr. Banks that Parent's Board of
Directors had determined that Parent would not be interested in acquiring the
Company at a price in excess of $17.50 per Share. By letter dated February 22,
1995, Mr. Thompson confirmed to Mr. Banks that the Board of Directors of Parent
had indicated that its non-binding valuation for an acquisition of the Company
through a cash offer for all Shares was $17.50 per Share. The letter stated
that this valuation was based on the information supplied by the Company to
Parent as of such date and was subject to (i) completion of due diligence, (ii)
approval by the Boards of Directors of Parent and the Company of a mutually
acceptable Merger Agreement, (iii) the Company dealing exclusively with Parent
for a period of 60 days, (iv) appropriate governmental and regulatory
approvals, and (v) the Company maintaining the confidentiality of the letter.
Following receipt of Mr. Thompson's February 22, 1995 letter, Mr. Banks and
representatives of Wertheim Schroder again informed Parent that the Company was
not prepared at that time to enter into negotiations based on the $17.50 per
Share valuation and requested Parent to review its valuation analysis with a
view toward increasing the price which it would be prepared to pay to acquire
the Company. The Company's representatives also declined to grant Parent
exclusive negotiating rights.
The Company understands that on March 6, 1995, Mr. Thompson met in Miami with
Mr. Arthur Broslat, Executive Vice President of Corimon and a member of the
Company's Board of Directors, to discuss whether Corimon would be willing to
sell its Shares to Parent in the event of a bid from Parent to acquire the
Company. The Company understands that Mr. Broslat confirmed such willingness,
subject to a satisfactory offer.
On March 8, 1995, Mr. Banks and other representatives of the Company and
Wertheim Schroder met with Mr. Scopes in New York, and Mr. Scopes requested
that Parent be permitted to conduct additional due diligence, including on-site
due diligence at locations other than the Company's New York headquarters. Mr.
Banks stated that the Company would not permit on-site due diligence unless
Parent indicated a willingness to consider an acquisition of the Company at a
price in excess of $17.50 per Share.
Following the issuance of the Company's press release on January 26, 1995,
the Company and representatives of Wertheim Schroder engaged in discussions
with several third parties to determine whether they had an interest in
acquiring the Company. Certain of these third parties were furnished with
confidential information. None of these contacts with parties other than Parent
led to substantive negotiations.
On March 21, 1995, Mr. Banks, other officers of the Company and a
representative of Wertheim Schroder met in New York with Mr. Scopes to discuss
Parent's valuation of the Company and its request for additional due diligence.
On March 22, 1995, Mr. Scopes sent a letter to Mr. Banks setting forth Parent's
additional due diligence requests.
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On April 3, 1995, Mr. Banks met in London first with Mr. Scopes and Sir
Ronald Hampel, Chief Executive and Chairman of the Board-designate of Parent,
and subsequently with Messrs. Scopes and Thompson. At such meetings, Parent's
representatives advised Mr. Banks that Parent was prepared to consider the
possibility of improving its $17.50 per Share valuation if justified by further
due diligence and, as a result, Mr. Banks agreed to permit Parent to conduct
additional due diligence, including on-site due diligence at locations outside
of the Company's New York headquarters. During the period between April 10,
1995 through April 19, 1995, representatives of Parent conducted additional
business and legal due diligence, including on-site due diligence at various of
the Company's plants and facilities.
On April 13, 1995, Mr. Banks and another officer of the Company met in New
York with Mr. Thompson and Mr. John Danzeisen, President of The Glidden
Company, a subsidiary of Parent. Mr. Banks described the Company's preliminary
estimate of results for the third fiscal quarter ended March 31, 1995 and the
Company's revised estimates for the full fiscal year.
On April 21, 1995, Mr. Banks and another officer of the Company met with
Messrs. Thompson and Danzeisen in New York. Messrs. Thompson and Danzeisen
expressed concern regarding the Company's performance in the third quarter. Mr.
Thompson also stated that based on Parent's additional due diligence review,
Parent continued to believe that $17.50 was the appropriate per Share valuation
for the Company. Mr. Banks again requested that Parent reconsider its valuation
of the Company with a view towards improving its proposal.
On the evening of April 24, 1995, counsel for Parent delivered to the Company
and its counsel a draft Merger Agreement proposed by Parent.
On April 26, 1995, Mr. Banks and another officer of the Company, together
with representatives of Wertheim Schroder, met with Mr. Thompson. Mr. Thompson
again stated that Parent was not prepared to increase its proposed $17.50 per
Share price. Mr. Thompson further stated that as part of any transaction,
Parent would expect to receive a "lock-up" on the 4,025,841 Shares of the
Company's common stock (constituting approximately 25% of the Company's
outstanding shares) owned by Corimon, and a termination fee in the event the
Company were to terminate the Merger Agreement in order to accept a competing
offer. The Company's representatives again requested that Parent consider
improving its $17.50 per Share proposal. They also stated that the Company was
not prepared to consent to a "lock-up" by Parent of Corimon's Shares and that
the Company would be unwilling to agree to any termination fee in a transaction
at $17.50 per Share. The Company's representatives also noted that pursuant to
a pre-existing standstill agreement between the Company and Corimon, Corimon
was not permitted to sell its Shares to Parent without the Company's prior
approval.
During the meeting held on April 26, 1995, there was a discussion as to
whether Parent would be willing to increase its proposed price of $17.50 per
Share to shareholders other than Corimon if Corimon would agree to sell its
Shares to Parent for $17.50 per Share. Mr. Banks stated he would discuss this
possibility with representatives of Corimon.
Later in the day of April 26, 1995, Mr. Banks and other representatives of
the Company met with Mr. Broslat and Mr. Philippe Erard, Chairman and Chief
Executive Officer of Corimon and a member of the Company's Board of Directors,
to inquire whether Corimon would be willing to sell its Shares at a price of
$17.50 per Share while the other shareholders of the Company would receive a
higher price. The Corimon representatives indicated a general willingness to
sell Corimon's Shares at a price of $17.50 per Share in order to facilitate a
transaction between Parent and the Company.
The Company understands that on the same day, Messrs. Scopes, Thompson and
Danzeisen also met with Messrs. Broslat and Erard to discuss the same issue.
The Company's Board of Directors met during the evening of April 26, 1995,
and Mr. Banks and a representative of Wertheim Schroder advised the Board as to
the status of the discussions with Parent. The Company's outside counsel also
attended the Board meeting.
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In the early morning of April 27, 1995, Mr. Thompson advised Mr. Banks in a
telephone conversation that Parent was prepared to increase its proposed price
from $17.50 per Share to $18.10 per Share based on Corimon's stated willingness
to sell its Shares at a price of $17.50 per Share. Mr. Thompson also advised
Mr. Banks that Parent's proposed price of $18.10 per Share was conditioned upon
the receipt by Parent of a "lock-up" on Corimon's Shares and a termination fee
equal to 2% of the aggregate purchase price. Mr. Banks stated that he would
discuss Parent's proposal with the Company's Board of Directors which was
scheduled to meet again that morning.
At the Company's Board of Directors' meeting on April 27, 1995, Mr. Banks
reviewed the proposal made by Mr. Thompson earlier that morning. After a
lengthy discussion with representatives of Wertheim Schroder and outside
counsel, the directors expressed concern about the proposed "lock-up" on the
Corimon Shares. The Board instructed Wertheim Schroder to request Parent to
improve its proposed purchase price and to advise Parent that the Board
requested that there be no "lock-up" on the Corimon Shares.
On April 27, 1995, following the meeting of the Company's Board of Directors,
representatives of Wertheim Schroder met with Mr. Thompson and advised him with
respect to the position of the Company's Board of Directors. Mr. Thompson
responded that Parent would not increase its proposed price of $18.10 per
Share, but would reconsider its request for a "lock-up" on the Corimon Shares.
Later in the day of April 27, 1995, Mr. Thompson advised representatives of
Wertheim Schroder that Parent would agree to eliminate the "lock-up" it had
requested on Corimon's Shares provided that the termination fee was increased
from 2% of the aggregate purchase price (approximately $5.8 million) to $12
million. The Company's representatives and Mr. Thompson then reached an
understanding that Parent could enter into an option agreement with Corimon so
long as it provided that Parent could only acquire Corimon's Shares if Parent
consummated the Offer and that Parent's right to purchase the Corimon Shares
would terminate if the Merger Agreement terminated.
Mr. Banks, together with representatives of Wertheim Schroder, considered Mr.
Thompson's proposal concerning a $12 million termination fee, and advised Mr.
Thompson that the Company would be unwilling to agree to a termination fee in
that amount. Following further discussions during the afternoon of April 27,
1995, Mr. Thompson stated that Parent would agree to reduce the proposed
termination fee from $12 million to $8 million.
Starting on April 28, 1995, Company representatives and Parent
representatives and their respective counsel and financial advisors negotiated
the terms of the Merger Agreement and related matters. Such negotiations
continued through April 30, 1995.
On the afternoon of April 28, 1995, the Company, as a result of market
activity in the Shares, issued the following press release:
NEW YORK, NEW YORK, April 28, 1995--Grow Group, Inc. (NYSE:GRO), which
previously announced that it had authorized Wertheim Schroder & Co.
Incorporated to assist the Company in considering and reviewing
alternatives to enhance shareholder value, said today that it has entered
into negotiations with a third party concerning an acquisition of Grow. The
third party, which has substantially completed its due diligence review,
has proposed to acquire 100% of Grow's common stock and has indicated a
willingness to pay Grow's public stockholders $18.10 per share in cash. Any
such transaction would be subject to negotiation and execution of a
definitive agreement and approval of Grow's Board of Directors. There can
be no assurance that any such agreement will be reach[ed], or if an
agreement is reached that any transaction will be consummated.
Grow Group is a leading producer of specialty chemical coatings and
paints and household products. Grow operations include manufacturing
facilities, sales offices and licensees throughout the world.
15
<PAGE>
On the night of April 28, 1995, Mr. Conway G. Ivy, Vice President, Corporate
Planning and Development, of The Sherwin-Williams Company ("Sherwin-Williams")
sent the following letter to Mr. Banks, with copies to members of the Company's
Board of Directors, financial advisor and outside counsel:
April 28, 1995
Mr. Russell Banks
President and Chief Executive Officer
Grow Group, Inc.
200 Park Avenue
New York, New York 10166
Dear Mr. Banks:
We at The Sherwin-Williams Company were troubled to learn from the press
release you issued today that you are in the process of negotiating a sale
of your company to another party. Our concern arises from the fact that,
despite Sherwin-Williams' repeated indications of serious interest in a
transaction with Grow Group, you apparently have decided to negotiate a
definitive agreement with another bidder without giving us access to the
information that would allow us to present our best possible proposal.
On March 17, 1995 we offered to enter into a confidentiality agreement
with Grow Group. After repeated delays on Grow Group's part to finalize
such agreement, we forwarded an executed copy of that agreement to Lloyd
Franks on March 31, 1995. However, that agreement was never executed by
Grow Group. On April 17, 1995, you informed us that Sherwin-Williams was to
be excluded from the bidding process. Consequently, by letter dated April
17, 1995, we had no alternative but to revoke our offer to enter into the
confidentiality agreement with Grow Group. Since that time and despite your
actions, our financial advisors have been in contact with Wertheim Schroder
and have expressed our continued interest in pursuing a transaction with
Grow Group.
Given our financial strength, financing will not represent any impediment
to the consummation of a transaction on an all-cash basis. In addition,
based upon our preliminary analysis, we are extremely confident that the
antitrust laws would not impede our ability to consummate a transaction
with Grow Group. This matter has been discussed at length with the members
of our senior management and with our Board of Directors. We have also
retained Lazard Freres & Co. and Rogers & Wells to provide financial and
legal counsel regarding this matter.
We urge you not to enter into or to agree to any merger or other
significant transaction or agreement, or to take any additional defensive
measures (including "no shop", break-up fee or similar arrangements) or
other actions, that would adversely affect the ability of your stockholders
to receive the maximum value for their shares.
We wish to obtain immediate access to the information which you have
refused to furnish to us. We are also prepared to enter into immediate
discussions with you and your directors, management and advisors about a
transaction with Sherwin-Williams. In Mr. Breen's absence, you may contact
me over the weekend either at my home at (216) 247-4936 or at my office
(216) 566-2102. If you are unable to contact me, you can contact Larry J.
Pitorak, Senior Vice President--Finance, Treasurer and Chief Financial
Officer, at (216) 729-3840 or (216) 566-2573.
We hope that you and your Board of Directors will give this matter prompt
and serious consideration.
Sincerely,
/s/ Conway G. Ivy
16
<PAGE>
On the morning of April 29, 1995, Mr. Banks advised Mr. Thompson that the
Company had received the above letter from Sherwin-Williams. Also, on April 29,
1995, Mr. Thompson rejected a request from a representative of the Company that
Parent increase the proposed purchase price and Mr. Banks rejected Parent's
request that the Company increase the termination fee from $8 million to $10
million. Mr. Thompson advised the Company on April 29, 1995 that it was
Parent's expectation that negotiations with the Company would be completed
prior to the opening of business on May 1, 1995.
Starting in the afternoon of April 30, 1995, the Company's Board of Directors
met to consider Parent's offer of $18.10 per Share. The terms of the proposed
transaction and related Merger Agreement were presented to and reviewed by the
Company's Board of Directors. Wertheim Schroder and legal counsel made
presentations to the Board of Directors. Wertheim Schroder delivered its
opinion as to the fairness, from a financial point of view, of the $18.10 per
Share cash consideration offered by Parent to the public shareholders of the
Company. The full Board of Directors discussed the proposed Merger Agreement
and related matters.
After discussion and further analysis, the Company's Board of Directors
unanimously decided to proceed with the sale of the Company and to accept
Parent's offer for the reasons described below, and it approved the Merger
Agreement and the transactions contemplated thereby and unanimously recommended
that shareholders accept the Offer and tender their Shares pursuant thereto.
The Board of Directors also unanimously (with the representatives of Corimon
abstaining) voted to waive the restrictions under Corimon's standstill
agreement with the Company to permit Corimon to enter into and perform its
obligations under the Corimon Option Agreement.
The Company and Parent entered into the Merger Agreement on the night of
April 30, 1995.
Prior to the opening of business on May 1, 1995, the Company issued a press
release announcing that it had entered into the Merger Agreement. Later in the
day on May 1, 1995, Mr. Broslat, a member of the Company's Board of Directors,
received two telephone calls from a representative of Sherwin-Williams'
financial advisor, and such representative indicated to Mr. Broslat that
Sherwin-Williams would seek to acquire the Company.
Reasons for the Transaction; Factors Considered by the Board. In approving
the Merger Agreement and the transactions contemplated thereby and recommending
that all holders of Shares tender their Shares pursuant to the Offer, the Board
of Directors considered a number of factors including:
1. the presentation of Wertheim Schroder at the April 30, 1995 Board of
Directors' meeting and the opinion of Wertheim Schroder to the effect that,
as of the date of its opinion and based upon and subject to certain matters
stated therein, the $18.10 per Share cash consideration to be received by
the holders of Shares pursuant to the Offer and the Merger is fair, from a
financial point of view, to the public shareholders of the Company. (As
used in the Wertheim Schroder opinion and as used herein, "public
shareholders" means all shareholders other than Corimon.) The full text of
Wertheim Schroder's written opinion, which sets forth the assumptions made,
matters considered and limitations on the review undertaken by Wertheim
Schroder, is attached hereto as Exhibit 6 and is incorporated herein by
reference. SHAREHOLDERS ARE URGED TO READ THE OPINION OF WERTHEIM SCHRODER
CAREFULLY IN ITS ENTIRETY;
2. the fact that the proposed structure of the Offer and Merger involves
an immediate cash tender offer for all outstanding Shares to be followed by
a merger for the same consideration, thereby enabling the Company's public
shareholders to obtain cash for their Shares at the earliest possible time;
3. the fact that the Merger Agreement, which prohibits the Company, its
subsidiaries or its affiliates from initiating, soliciting or encouraging
any potential Acquisition Proposal (as defined in the Merger Agreement),
does permit the Company to furnish non-public information to, allow access
by and participate in discussions and negotiations with, any third party
that has submitted an Acquisition Proposal to the Company, if the Board of
Directors under applicable law as advised by counsel determines that it is
advisable to do so in the exercise of its fiduciary duties;
17
<PAGE>
4. the fact that in the event that the Board decided to accept an
Acquisition Proposal by a third party, the Board may terminate the Merger
Agreement and pay Parent a termination fee of $8 million (or approximately
$.50 per Share). The Board, after considering the advice of Wertheim
Schroder, did not believe that such termination provision would be a
significant deterrent to a higher offer by a third party interested in
acquiring the Company;
5. the terms and conditions of the Merger Agreement, including the fact
that the obligations of Parent and Purchaser to consummate the Offer and
the Merger is not conditioned upon financing;
6. the fact that on January 26, 1995, the Company issued a press release
stating that the Board of Directors had authorized Wertheim Schroder to
assist the Company in considering and reviewing alternatives to enhance
shareholder value; and the fact that since such time the Company had
preliminary discussions with certain third parties regarding an acquisition
of the Company but none of such preliminary discussions led to substantive
negotiations for the acquisition of the Company;
7. the fact that the Company was in negotiations with a third party to
acquire the Company at a price of $18.10 was publicly disclosed on April
28, 1995, that the Offer and the Merger would be publicly disclosed on May
1, 1995, that the earliest date that the Offer could be consummated is May
30, 1995 and that, based on the advice of Wertheim Schroder, it was highly
likely that third parties which might be interested in making a competitive
offer for the Company would learn of the Offer and Merger very promptly and
would likely have sufficient time to make such an offer should they wish to
do so;
8. the letter received by the Company on April 28, 1995 from Sherwin-
Williams, including the fact that 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. The Board also considered the advice from its financial
and legal advisors that the terms of the Merger Agreement and Corimon
Option Agreement should not unduly discourage Sherwin-Williams or other
third parties from making bona fide proposals subsequent to signing the
Merger Agreement and, if any such proposal was made, the Company, in the
exercise of its fiduciary duties, could determine to provide information to
and engage in negotiations with Sherwin-Williams or any other third party.
In addition, the Board considered Wertheim Schroder's advice that, based on
their analyses, the price of $18.10 per Share was towards the high end of
the range of fairness;
9. the historical market prices of, and recent trading activity in, the
Shares, particularly the fact that the Offer and the Merger will enable the
shareholders of the Company to realize a significant premium (30.45%) over
the closing price of the Shares on the last trading day prior to the public
announcement on January 26, 1995 that the Company was reviewing
alternatives to enhance shareholder value, and a premium (6.77%) over the
closing price of the Shares on the last trading day prior to the public
announcement on April 28, 1995 that the Company was in negotiations
relating to the proposed transaction;
10. information with regard to the financial condition, results of
operations, cash flow, competitive position, business and prospects of the
Company, as reflected in the Company's projections, as well as the risks
involved in achieving those prospects especially in light of the recent
decrease in earnings of the Company (as described in paragraph 15 below),
current economic and market conditions (including current conditions in the
industries in which the Company is engaged) and the going concern value of
the Company; the Board did not consider the liquidation of the Company as a
viable course of action, and, therefore, no appraisal or liquidation values
were sought for purposes of evaluating the Offer and the Merger;
11. the possible alternatives to the Offer and the Merger, including,
without limitation, continuing to operate the Company as an independent
entity and the risks associated therewith;
12. the fact that Corimon, a 25% shareholder of the Company with three
representatives serving on the Company's Board of Directors, has indicated
that it desires to liquify its position in the Company and was in favor of
the Offer and the Merger;
18
<PAGE>
13. the fact that in order to facilitate the Offer and Merger, Corimon
has agreed to sell its Shares for $17.50 per Share so that the public
shareholders may receive $18.10 per Share in the Offer and Merger;
14. the terms and conditions of the Corimon Option Agreement, including
the fact that 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;
15. the familiarity of the Board of Directors with the business, results
of operations, properties and financial condition of the Company and the
nature of the industries in which it operates, based, in part, upon
presentations by management of the Company, including the prospects if the
Company were to remain independent; in particular, the Board noted that the
recent results of operations for the Company's third fiscal quarter ended
March 31, 1995 reflected a net loss of approximately $868,000 (or a loss of
($.05) per Share) as compared to net income of $1,278,000 (or $.08 per
Share) for the comparable period of the prior fiscal year, reflecting a
significant decrease, and that net income for fiscal 1995 was projected,
based on current information, to be approximately $10,046,000 ($.62 per
Share) compared to $14,056,000 ($.87 per Share) for fiscal 1994, reflecting
a projected decrease of approximately 28.5%;
16. the compatibility of the business and operating strategies of Parent
and the Company regarding, among other things, geographic areas, services,
planned expansion and distribution and the potential efficiencies and
synergies expected to be realized by combining the operations of the
Company and Parent;
17. the representation of Parent and the Purchaser that they have
sufficient funds available to them to consummate the Offer and the Merger;
and
18. the regulatory approvals required to consummate the Merger,
including, among others, antitrust approvals, and the prospects for
receiving such approvals.
The Board of Directors did not assign relative weights to the factors or
determine that any factor was of particular importance. Rather, the Board of
Directors viewed their position and recommendation as being based on the
totality of the information presented to and considered by it.
The financial projection set forth in paragraph 15 above has been prepared by
the Company based on information available to it, but such projection was not
prepared for publication or with a view to complying with the published
guidelines of the Securities and Exchange Commission regarding financial
projections or with the AICPA Guide for Prospective Financial Statements. While
presented with numerical specificity, the financial projection necessarily
reflects numerous assumptions with respect to industry performance, general
business and economic conditions, the availability and cost of capital and
other matters, many of which are inherently uncertain, difficult or impossible
to predict or are beyond the Company's control. Accordingly, such financial
projection is inherently imprecise and there can be no assurance that it can be
realized. Also, it is expected that there will be a difference between actual
and projected results, and actual results may vary materially from those
contained in the financial projection. Presentation of this information should
not be regarded as an indication that the Company or anyone else considers it a
reliable prediction of future events or actual results and this information
should not be relied on as such.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Wertheim Schroder was retained to assist the Company in considering and
reviewing alternatives to enhance shareholder value, including a sale of the
Company (a "Sale Transaction"). In addition, and at no additional expense,
Wertheim Schroder agreed to render a financial opinion letter with respect to
the consideration to be received in a Sale Transaction by the public
shareholders of the Company. The Company agreed to pay Wertheim Schroder a fee
of $50,000 on the date the letter agreement between the Company and Wertheim
Schroder was signed and an additional fee of 1% of the aggregate consideration
(as defined in
19
<PAGE>
the letter agreement with Wertheim Schroder) if the Company consummates a Sale
Transaction, against which the $50,000 fee will be credited; accordingly, if
the Offer and Merger are consummated, the Company will pay Wertheim Schroder a
fee of approximately $2.9 million. The Company has also agreed to reimburse
Wertheim Schroder for its out-of-pocket expenses, including fees of its legal
counsel and other advisors who may be retained with the Company's consent and
to indemnify Wertheim Schroder (and its officers, directors, employees,
controlling persons and agents) against certain liabilities arising out of or
in connection with Wertheim Schroder's engagement. The terms of the Company's
engagement of Wertheim Schroder are set forth in a letter agreement dated April
27, 1995.
In addition, the Company has agreed to pay Wertheim Schroder its full
compensation in the event that within eighteen months after the termination of
their engagement, a Sale Transaction is consummated with a party with which
contact was made by Wertheim Schroder during its engagement.
Except as disclosed herein, neither the Company nor any person acting on its
behalf currently intends to employ, retain or compensate any other person to
make solicitations or recommendations to security holders on its behalf
concerning the Offer or the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Except for the Corimon Option Agreement and as set forth in Schedule II
hereto, no transactions in the Shares have been effected during the past 60
days by the Company or, to the best of the Company's knowledge, by any
executive officer, director, affiliate or subsidiary of the Company.
(b) To the best knowledge of the Company, except for Corimon as described
above under Item 3--Corimon Option Agreement, all of its executive officers,
directors, affiliates and subsidiaries currently intend to tender pursuant to
the Offer all Shares held of record or beneficially owned by them (other than
Shares issuable upon exercise of stock options and Shares, if any, which if
tendered could cause such persons to incur liability under the provisions of
Section 16(b) of the Exchange Act).
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in this Schedule 14D-9, the Company is not engaged in
any negotiation in response to the Offer which relates to or would result in
(i) an extraordinary transaction, such as a merger or reorganization, involving
the Company or any subsidiary of the Company; (ii) a purchase, sale or transfer
of a material amount of assets by the Company or any subsidiary of the Company;
(iii) a tender offer for or other acquisition of securities by or of the
Company; or (iv) any material change in the present capitalization or dividend
policy of the Company.
(b) Except as described in Item 3(b) and Item 4 above (the provisions of
which are hereby incorporated by reference), there are no transactions, board
resolutions, agreements in principle or signed contracts in response to the
Offer which relate to or would result in one or more of the matters referred to
in paragraph (a) of this Item 7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
RIGHTS AGREEMENT AMENDMENT.
In connection with the execution of the Merger Agreement, the Board of
Directors of the Company authorized an amendment (the "Rights Amendment") to
the Rights Agreement. The Rights Amendment prevents Parent and Purchaser from
becoming an Acquiring Person or Adverse Person (each as defined in the Rights
Agreement) and prevents a Stock Acquisition Date or Distribution Date (each as
defined in the Rights Agreement) from occurring, in each case as a result of
the Offer, Merger or Corimon Option Agreement or other transactions
contemplated by the Merger Agreement. The Rights Amendment also provides that
the Rights will expire and be of no force or effect upon consummation of the
Merger. A copy of the Rights Amendment is filed as Exhibit 7 hereto and is
incorporated herein by reference.
20
<PAGE>
CERTAIN LITIGATION.
On May 1, 1995, a purported class action entitled General Color Company
Pension Plan v. Grow Group, Inc. et al., was filed in the Supreme Court of the
State of New York, New York County (the "State Action") on behalf of the class
of all the Company's current shareholders. In addition to the Company, all
members of the Company's Board of Directors are named as defendants in the
State Action. The complaint in the State Action alleges that the $18.10 per
Share price which Parent is offering for all the outstanding Shares is
insufficient and that the proposed Offer is unfair to the Company's
shareholders and represents an attempt by the defendants to enrich themselves
at the expense of the plaintiff class. The plaintiff in the State Action
asserts that defendants violated their fiduciary duties to the Company's
shareholders by allegedly failing adequately to evaluate the Company as a
potential acquisition candidate; to take adequate steps to enhance the
Company's value as an acquisition candidate; and to create an active and open
auction for the Company. The complaint in the State Action further alleges that
the defendants have wrongfully decided not to solicit proposals or initiate
discussions with third parties for the acquisition of the Company, instead of
seeking the highest possible price for the Shares of the plaintiff class. The
complaint in the State Action seeks, among other relief, a preliminary and
permanent injunction barring defendants from taking any steps to accomplish the
proposed Merger at a price that is not fair and equitable to the plaintiffs and
restraining the defendants' ability to use their alleged voting control of the
Company to effect the transaction with Parent. The complaint also seeks
unspecified damages for losses suffered and to be suffered by the plaintiff
class as a result of the acts alleged in the complaint.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO.
-----------
<S> <C>
Exhibit 1 Agreement and Plan of Merger, dated as of April 30, 1995, among Grow
Group, Inc., Imperial Chemical Industries PLC and GDEN Corporation.
Exhibit 2 Option Agreement, dated as of April 30, 1995, among Imperial Chemical
Industries PLC, GDEN Corporation, Corimon Corporation and Corimon
S.A.C.A.
Exhibit 3 Non-Disclosure Agreement, dated December 1, 1994, between Grow Group,
Inc. and Imperial Chemical Industries PLC.
Exhibit 4 Letter to Shareholders of Grow Group, Inc., dated May 4, 1995.*
Exhibit 5 Press Release, dated May 1, 1995, issued by Grow Group, Inc.
Exhibit 6 Opinion of Wertheim Schroder & Co. Incorporated dated April 30,
1995.*
Exhibit 7 Amendment to Rights Agreement, dated as of April 30, 1995, to the
Amended and Restated Rights Agreement, dated as of August 7, 1992,
between Grow Group, Inc. and The Bank of New York.
Exhibit 8 Consulting Agreement, dated as of April 30, 1995, between Grow Group,
Inc. and Russell Banks.
Exhibit 9 Amendment and Extension Agreement, dated as of April 27, 1995,
between Grow Group, Inc. and Russell Banks.
Exhibit 10 Severance Agreement, dated April 27, 1995, between Grow Group, Inc.
and John F. Gleason.
Exhibit 11 Severance Agreement, dated April 27, 1995, between Grow Group, Inc.
and Lloyd Frank.
Exhibit 12 Amendment of Employment Agreement, dated as of April 27, 1995,
between Grow Group, Inc. and Frank Esser.
Exhibit 13 Complaint entitled General Color Company Pension Plan v. Grow Group,
Inc., et al. filed in the Supreme Court of the State of New York,
New York County.
</TABLE>
- --------
* Included in copies of the Schedule 14D-9 mailed to shareholders.
21
<PAGE>
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 4, 1995
GROW GROUP, INC.
By /s/ Lloyd Frank
-----------------------
Title: Secretary
22
<PAGE>
SCHEDULE I
GROW GROUP, INC.
200 Park Avenue
New York, New York 10016
----------------
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about May 4, 1995 as part of
the Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-
9") to holders of record of the Shares at the close of business on or about May
4, 1995. You are receiving this Information Statement in connection with the
possible election of persons designated by Parent to a majority of the seats on
the Board of Directors of the Company. The Merger Agreement requires the
Company to take all action necessary to cause the Parent Designees (as defined
below) to be elected to the Board of Directors under the circumstances
described therein. This Information Statement is required by Section 14(f) of
the Exchange Act and Rule 14f-1 thereunder. See "General Information Regarding
the Company". You are urged to read this Information Statement carefully. You
are not, however, required to take any action. Capitalized terms used and not
otherwise defined herein shall have the meaning set forth in the Schedule 14D-
9.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on May 4,
1995. The Offer is scheduled to expire at 12:00 Midnight on June 1, 1995,
unless the Offer is extended.
The information contained in this Information Statement (including
information incorporated by reference) concerning Parent, the Purchaser and the
Parent Designees has been furnished to the Company by Parent, and the Company
assumes no responsibility for the accuracy or completeness of such information.
Certain capitalized terms used but not defined in this Information Statement
have the meanings ascribed to them in the Schedule 14D-9.
GENERAL INFORMATION REGARDING THE COMPANY
GENERAL
The Shares are the only class of voting securities of the Company
outstanding. Each Share has one vote. As of April 29, 1995, there were
16,101,712 Shares outstanding and 318,699 Shares reserved for issuance upon the
exercise of certain options outstanding.
RIGHT TO DESIGNATE DIRECTORS; PARENT DESIGNEES
Pursuant to the Merger Agreement, promptly upon the acceptance for payment of
the Shares by Parent pursuant to the Offer, Parent shall be entitled to
designate the number of directors, rounded up to the next whole number, on the
Company's Board of Directors that equals the product of (i) the total number of
directors on the Company's Board (giving effect to the election of any
additional directors designated by Parent pursuant to this sentence) and (ii)
the percentage that the number of Shares owned by Parent (including Shares
accepted for payment and, assuming the number of Shares owned by Parent or
accepted for payment constitutes at least a majority of the outstanding Shares
on a fully diluted basis, the Corimon Shares) bears to the total number of
Shares outstanding. The Merger Agreement requires that the Company shall take
all action necessary to cause Parent's designees (the "Parent Designees") to be
elected or appointed to the Company's Board of Directors including, without
limitation, increasing the number of directors and seeking and accepting
resignations of incumbent directors. The Merger Agreement provides that the
Company will use its best efforts to cause individuals designated by Parent to
constitute the same percentage as such individuals represent on the Company's
Board of Directors of (x) each committee of the Board (other than any committee
of the Board established to take action under the Merger Agreement), (y) each
board of directors of each Subsidiary and (z) each committee of each such
board. Notwithstanding the foregoing, until the Effective Time, the Company
shall retain as members of its Board of Directors at least two directors who
are directors of the Company on the date of the Merger Agreement.
<PAGE>
Parent has informed the Company that each of the Parent Designees listed
below has consented to act as a director.
It is expected that the Parent Designees may assume office at any time
following the purchase by Parent of a majority of the Shares pursuant to the
Offer, which purchase cannot be earlier than June 2, 1995, and that, upon
assuming office, the Parent Designees will thereafter constitute at least a
majority of the Board of Directors of the Company.
The Board of Directors is divided into three classes serving staggered terms
in accordance with the Company's Restated Articles of Incorporation.
Biographical information concerning each of the Parent Designees, directors
and executive officers is presented below.
PARENT DESIGNEES
Parent may designate the following individuals to the Board of Directors of
the Company. Such individual's name, age as of the date hereof, present
principal occupation or employment and five-year employment history are set
forth below.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AGE AND FIVE-YEAR EMPLOYMENT HISTORY
---- --- -----------------------------------------------
<C> <C> <S>
John K. Thompson........ 54 Chief Planner of ICI Paints, a division of
Parent, since February 1987.
Stanley A. Lockitski.... 47 Director of The Glidden Company (and its
predecessor company), a subsidiary of Parent
("Glidden"), since November 1986; Vice
President, General Counsel and Secretary since
July 1986.
Norman Schueftan........ 42 Treasurer and Tax Director of ICI Americas
Inc., a subsidiary of Parent ("ICI Americas"),
since December 1992; Assistant Taxation
Controller (of predecessor company) from
February 1990 to November 1992.
John R. Danzeisen....... 47 President of Glidden since April 1991; Finance
Director of ICI Paints from January 1987 to
March 1991; Chairman of the Board of Directors
of ICI Americas.
William J. Thornton..... 55 Director of Glidden since November 1986; Vice
President--Finance since July 1986.
Thomas C. Osborne....... 44 Executive Vice President of Glidden since
January 1994; Vice President--Branch
Operations from April 1992 to January 1994;
Vice President--Planning and Acquisitions from
August 1989 to April 1992.
</TABLE>
DIRECTORS
Arthur W. Broslat, 49, has been an Executive Vice President and the Chief
Financial Officer of Corimon S.A.C.A., a Venezuelan industrial corporation
("Corimon"), since November 1989. Prior thereto, Mr. Broslat served as a Vice
President of the Bank of America in Caracas, Venezuela. Mr. Broslat also serves
as a director of Corimon. He became a director of the Company in 1992.
Lloyd Frank, 69, has served as Secretary of the Company since 1963. Mr. Frank
is also an attorney admitted to practice in the State of New York and has been
a member of the law firm of Parker Chapin Flattau & Klimpl for more than the
past five years. Mr. Frank also serves as a director of Metro-Tel Corp. and
Park Electrochemical Corp. He became a director of the Company in 1987.
I-2
<PAGE>
Angus N. MacDonald, 68, has served as President of Angus MacDonald & Company,
Inc., a financial consulting firm, for more than the past five years. Mr.
MacDonald is a Life Trustee of the Massachusetts Institute of Technology. He
became a director of the Company in 1984.
William H. Turner, 54, has been a Senior Executive Vice President of Chemical
Banking Corporation (a bank holding company) since December 1991, when Chemical
Banking Corporation merged with Manufacturers Hanover Corporation. From August
1990 until he assumed his present position, Mr. Turner was Vice Chairman of
Chemical Bank, a banking subsidiary of Chemical Banking Corporation. Prior to
August 1990, he was responsible for the Middle Market Banking Group of Chemical
Bank. In addition, he is Chairman and Chief Executive Officer of Chemical New
Jersey Holding Inc. (a holding company for two New Jersey banking companies).
He is also a director and member of the Executive Committee of the Paterson
Economic Development Corporation, and a director of Franklin Electronic
Publishers, Incorporated and Standard Motor Products, Inc. Mr. Turner became a
director of the Company in 1994.
Harold G. Bittle, 66, retired in 1989 as a Vice President--International of
the Coatings and Resins Group of PPG Industries, Inc., a manufacturer of
paints, coatings and glass, and is currently Managing Director of Adhesive
Coatings Company, which develops polymer technologies in the adhesive, coating
and ink markets. Mr. Bittle also serves as a consultant to Corimon. From 1951
to 1989, Mr. Bittle served in various executive capacities with PPG Industries,
Inc. Mr. Bittle became a director of the Company in 1993.
John F. Gleason, 66, has been an executive officer of the Company since 1976
and has, for more than the past five years, served as an Executive Vice
President of the Company. Mr. Gleason became a director of the Company in 1976.
Robert J. Milano, 82, served as Chairman and Chief Executive Officer of
Millmaster Onyx Group, Inc., a manufacturer of chemical specialties, from
December 1982 until December 1986. Mr. Milano serves or has served as Chairman
of the State of New York Mortgage Agency and of the Council of Governing Boards
for Colleges and Universities in New York State; Vice Chairman of the New
School for Social Research; and Director of the New York State Urban
Development Corporation. Mr. Milano served as a director of the Company from
1978 to 1981 and has served continuously as a director since 1983.
Tully Plesser, 61, has, for more than the past five years, served as
president of Dataplan Inc., a national marketing, public opinion and
communications research consulting firm, which serves as a consultant to many
major U.S. corporations. Mr. Plesser is also a political research consultant.
He was formerly a consultant to the Republican National Committee and the
National Republican Senatorial Committee, and is presently an advisor to
certain United States Senators. Mr. Plesser became a director of the Company in
1993.
Russell Banks, 75, has been President and Chief Executive Officer of the
Company since 1962 and a director since 1960. Mr. Banks is a past president of
the National Paint & Coatings Association and he also served on the Executive
Committee of the Board of Directors of the American Management Association and
is presently on its General Management Council. He is also on the Advisory
Boards of the Fordham University Graduate School of Business Administration,
the Washington Legal Foundation and the International Trade Development
Council.
Philippe Erard, 45, was appointed Chairman of Corimon in 1992 and has been
President and Chief Executive Officer of Corimon since 1988. For more than
three years prior thereto, Mr. Erard served as Executive Vice President of
Corimon. Mr. Erard also serves as a director of Corimon. Mr. Erard is a member
of the Business Advisory Board of the World Bank's International Finance
Corporation, the South America Advisory Board of General Electric Co. and the
Advisory Board of the World Economic Forum. He became a director of the Company
in 1992.
Peter L. Keane, 77, an attorney admitted to practice in the State of New
York, is a Senior Advisor to the law firm of Morgan, Lewis & Bockius. He was
counsel to the law firm of Lord Day & Lord, Barrett Smith from 1991 to 1993 and
for more than five years prior thereto, was a member of such firm. Mr. Keane
has served as Chairman of the Catholic Network of Volunteer Service since 1992.
He became a director of the Company in 1969.
I-3
<PAGE>
Joseph M. Quinn, 57, has been an executive officer of the Company since 1981.
Since August 1991, Mr. Quinn has served as Executive Vice President of the
Company and from August 1991 until January 1995 served as Chief Operating
Officer of the Company; for two and one-half years prior thereto, he served as
Executive Vice President in charge of the Coatings and Chemical Group; and, for
more than five years prior thereto, he served as Group Vice President of the
Company and President of the Company's Devoe Marine Coatings Co. Division. Mr.
Quinn also served as President of the Company's Devoe & Raynolds Company
Division from January 1988 until August 1992. He became a director of the
Company in 1989.
EXECUTIVE OFFICERS OF THE COMPANY
Russell Banks, age 75, President and Chief Executive Officer of the Company
since 1962. See information set forth above under "Directors".
Joseph M. Quinn, age 57, executive officer of the Company since 1981. See
information set forth above under "Directors".
John F. Gleason, age 66, executive officer of the Company since 1976. See
information set forth above under "Directors".
Stephen L. Dearborn, age 39, has served as Senior Vice President, Strategic
Planning and Operations of the Company since June 1994. For the 17 years prior
thereto, Mr. Dearborn served in a number of management capacities at PPG
Industries, Inc. involving international and domestic strategic business
planning, marketing and operations.
Henry W. Jones, age 46, was appointed Vice President, Regulatory Affairs of
the Company in June 1994. For one year prior thereto, Mr. Jones served as
Director, Environmental Safety and Health Compliance of the Company. He also
served as Corporate Manager, Environmental Affairs of the Company from August
1985 to April 1993.
Frank V. Esser, age 55, has served as an executive officer of the Company
since 1981 and was elected Treasurer and Chief Financial Officer of the Company
in 1989. Mr. Esser is a certified public accountant.
Lloyd Frank, age 69, has served as Secretary of the Company since 1963. See
information set forth above under "Directors".
There are no family relationships among any of the Company's executive
officers or directors. There are no arrangements or understandings between any
executive officer and any other person pursuant to which such person was
selected as an officer (although certain executive officers are parties to
employment agreements with the Company).
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has standing Audit, Compensation and
Pension Committees. The Board of Directors does not have a standing nominating
committee but acts as a committee of the whole with respect to nominations.
The members of the Audit Committee are Messrs. Milano, Keane, Broslat,
Plesser and Bittle. This committee is authorized to examine and consider
matters related to the financial affairs and accounts of the Company; the
internal and external audit of the Company's accounts, including the selection
of independent auditors, subject to approval of the Board of Directors; the
scope of the independent auditors' engagement; the effect on the Company's
financial statements of any proposed changes in generally accepted accounting
principles; disagreements, if any, between the Company's independent auditors
and management; the quality of the Company's system of internal accounting
controls and its internal audit program; matters of concern
I-4
<PAGE>
to the independent auditors resulting from audits, including the results of the
independent auditors' review of the system of internal accounting controls and
suggestions for improvements; and to report to the Board of Directors with
respect to each of the foregoing. This committee held two meetings during the
year ended June 30, 1994.
The members of the Compensation Committee are Messrs. Keane, Erard,
MacDonald, Milano and Turner. This committee is authorized to examine,
administer and approve salaries of top management of the Company and its
subsidiaries, bonuses to such persons and all grants to employees of options to
purchase shares under the Company's stock option plans; to review employee
benefit plans (other than retirement plans); and to report to the Board of
Directors with respect to each of the foregoing. This committee held four
meetings during the year ended June 30, 1994.
The members of the Company's Pension Committee are Messrs. MacDonald,
Broslat, Plesser, Bittle and Turner. This committee is authorized to examine,
administer, approve and review the retirement plans of the Company and its
subsidiaries and to report to the Board of Directors with respect thereto. This
committee held five meetings during the year ended June 30, 1994.
MEETINGS OF THE BOARD OF DIRECTORS
During the Company's last fiscal year, its Board of Directors held twelve
meetings. Each director attended at least 75% of the total number of meetings
of the Board of Directors and committees on which he served which were held
during the period he served as a director in that fiscal year.
COMPENSATION OF DIRECTORS
Directors (except those who are also employees of the Company) receive a
retainer at the rate of $20,000 per annum for serving on the Board of Directors
and committees thereof and a fee of $750 for each meeting of the Board of
Directors and committees thereof attended except Chairmen of committees receive
$1,000 per meeting. Directors who are also employees of the Company receive a
fee of $250 for each meeting of the Board of Directors attended.
The Company has a Non-Employee Director Fee Continuation Plan which covers
each person who serves as a non-employee director of the Company for at least
five years and who was less than 70 years of age both at the time of becoming a
director and at the time of adoption of this plan. The plan provides, in
general, that each non-employee director who ceases to serve as a director at
age 70 or thereafter (or prior to age 70, under certain circumstances, in the
event he is not re-elected or is removed as a director within three years of a
change in control of the Company, as defined) is to receive $20,000 per annum
for each of the ten years following his ceasing to serve as a director. In the
event of death during the ten-year period, payments will continue to the
director's designated beneficiaries during the remainder of the period. In the
event an eligible director otherwise ceases to serve as a director prior to age
70 (other than as a result of a change in control), payments may be reduced or
terminated in the discretion of the Board of Directors. At the Company's option
or, in the event amounts become payable as a result of a change in control of
the Company under certain circumstances, at the option of the non-employee
director entitled thereto, amounts which become payable under the Non-Employee
Director Fee Continuation Plan may be paid in a discounted lump sum.
The Company has entered into a fee continuation agreement with Robert J.
Milano, who was over 70 years of age at the time of his election to the Board
in 1983 and thus not eligible to participate in the Non-Employee Director Fee
Continuation Plan, which provides for the payment of $20,000 per annum for life
following his cessation of service as a director.
Each current non-employee director and each person who becomes a non-employee
director (other than Mr. Milano and those who become a director after attaining
the age of 70) is entitled to a $100,000 death
I-5
<PAGE>
benefit under the Company's group life insurance policy in the event of death
while serving or after ceasing to serve as a director (subject, in the latter
case, to reduction or termination in the discretion of the Board of Directors
in the event of his ceasing to serve as a director prior to age 70, except
that, under certain circumstances, there shall be no reduction or termination
in the event he is not re-elected or is removed as a director within three
years of a change in control of the Company).
The Company has purchased life insurance coverage on the lives of the non-
employee directors eligible to participate in the Non-Employee Director Fee
Continuation Plan. As described in "Executive Compensation--Employee
Supplemental Retirement and Death Benefit Arrangements" below, said insurance
(in combination with the other insurance coverage described therein) is
intended to offset the Company's future liabilities under the arrangements
described above (other than the Fee Continuation Agreements with Mr. Milano and
another former non-employee director) and those described under "Executive
Compensation--Employee Supplemental Retirement and Death Benefit Arrangements"
below, including the cost of providing the above described group life insurance
benefits to non-employee directors. Premiums for group life insurance provided
to non-employee directors as described above aggregated $12,792 for the year
ended June 30, 1994.
Under the Company's 1990 Stock Option Incentive Plan, non-employee directors
are automatically granted non-qualified stock options to purchase 10,000 shares
of the Company's Common Stock upon their initial election to the Board. Such
options are exercisable at the rate of 16 2/3% per annum commencing two years
after the date of grant and terminating ten years after the date of grant. The
exercise price is 100% of the greater of the fair market value of the Company's
Common Stock on the date of grant or the book value per share of the Company's
Common Stock as of the end of the quarter immediately preceding the date of
grant.
Dataplan, Inc., a consulting firm controlled by Tully Plesser, provided
marketing research services to the Company during its 1994 fiscal year (for
which the Company paid Dataplan, Inc. approximately $39,000) and such firm is
providing marketing research services to the Company during its current fiscal
year.
I-6
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as to the beneficial ownership of
shares of the Company's Common Stock, as of May 1, 1995, with respect to (a)
each director, (b) each executive officer named in the Summary Compensation
Table under the caption "Executive Compensation" below (other than Mr. W.
Horton Russell who retired effective July 1, 1994) and (c) all directors and
executive officers of the Company as a group. The Company understands that,
except as noted below, each beneficial owner has sole voting and investment
power with respect to all shares attributable to such owner.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER OWNERSHIP(1) CLASS
- ---------------- ------------ ----------
<S> <C> <C>
Russell Banks.................................... 425,431(2)(3)(4) 2.6%
Harold G. Bittle................................. -- --
Arthur W. Broslat................................ 1,667(5)(6) *
Stephen L. Dearborn.............................. 1,500 *
Philippe Erard................................... 1,667(5)(6) *
Frank V. Esser................................... 12,429(2)(4) *
Lloyd Frank...................................... 12,949(2)(4)(7) *
John F. Gleason.................................. 64,444(4) *
Henry Jones...................................... 1,130 *
Peter L. Keane................................... 27,326(4) *
Angus N. MacDonald............................... 164 *
Robert J. Milano................................. 46,035 *
Tully Plesser.................................... 2,000(8) *
Joseph M. Quinn.................................. 37,195(2)(4) *
William H. Turner................................ 1,000 *
All directors and executive officers as a group
(15 persons)..................................... 634,937(9) 3.9%
</TABLE>
- --------
(1) An asterisk indicates that the Percent of Class is under one.
(2) Includes 24,135, 5,250, 7,875 and 13,333 shares of the Company's Common
stock as to Messrs. Banks, Esser, Frank and Quinn, respectively, which were
not outstanding but which were issuable upon exercise of key employee
options to the extent those options were exercisable on, or were to become
exercisable within sixty days after, May 1, 1995.
(3) Includes 9,868 shares of the Company's Common Stock owned by a trust of
which Mr. Banks is the trustee. Excludes 23,851 shares owned by Mr. Banks'
wife as to which Mr. Banks disclaims beneficial ownership.
(4) Includes 197, 1,274, 1,109, 1,720, 466 and 1,884 shares allocated to the
accounts of Messrs. Banks, Esser, Frank, Gleason, Jones and Quinn,
respectively, held in trust under the Company's Employee Stock Ownership
Plan (no allocation has been made relating to fiscal 1995 contributions)
and the Employee Stock Ownership and Savings Plan. Excludes 560,592 shares
(3.5% of the class) held in trust under the Employee Stock Ownership Plan.
As to 310,241 of such shares (which are not yet allocated to plan
participants), Messrs. Esser and Frank, as the members of the
Administrative Committee of said Plan, share the power to direct the vote;
as to 250,351 shares, they may share the right to direct the vote to the
extent they receive no voting directions from plan participants; and, as to
all of such shares, Messrs. Frank, Banks and Keane, as trustees of said
Plan, may, under certain circumstances, share the right to direct the
disposition. Also excludes 127,817 shares (less than 1.0% of the class)
held in trust under the Company's Employee Stock Ownership and Savings Plan
which Messrs. Esser, Frank and Keane, as members of the Administrative
Committee of such Plan, may share the right to direct the vote and, under
certain circumstances, may share the right to direct the disposition.
(5) Excludes 4,025,841 shares owned by Corimon Corporation, which shares may be
deemed beneficially owned indirectly by its parent, Corimon S.A.C.A., a
publicly-held company, of which Messrs. Erard
I-7
<PAGE>
and Broslat are executive officers and directors. Messrs. Erard and Broslat
disclaim beneficial ownership of such shares. See "Security Ownership of
Management--Corimon Agreements" below.
(6) Includes 1,667 shares of the Company's Common Stock as to each of Messrs.
Broslat and Erard which were not outstanding but which were issuable upon
the exercise of non-employee director options to the extent those options
were exercisable on, or were to become exercisable within sixty days after,
May 1, 1995.
(7) Excludes 7,259 shares of the Company's Common Stock owned beneficially by
Mr. Frank's wife as to which shares Mr. Frank disclaims beneficial
ownership.
(8) Such shares are owned by a retirement trust of which Mr. Plesser is the
principal beneficiary.
(9) Includes (i) 53,927 shares which were not outstanding but which were
issuable upon exercise of options held by such persons to the extent those
options were exercisable on, or were to become exercisable within sixty
days after, May 1, 1995, (ii) 9,868 shares owned by a trust of which an
officer and director of the Company is the trustee, and (iii) 2,000 shares
owned by a trust of which a director is the principal beneficiary. Excludes
(i) 31,110 shares owned by the spouses of two officers and directors, (ii)
except for 6,650 shares underlying units allocated to the accounts of
executive officers, the shares held by the Company's employee benefit plans
reflected in footnote (4) above, and (iii) the shares held by Corimon whose
designees, Philippe Erard, Arthur W. Broslat and Harold G. Bittle, are
members of the Company's Board of Directors.
The Company believes that, during the 1994 fiscal year, all filing
requirements required under Section 16(a) of the Securities Exchange Act of
1934 were timely complied with by its directors, officers and beneficial owners
of greater than 10% of the Company's Shares.
CORIMON AGREEMENTS
On August 7, 1992, the Company sold 2,312,000 newly issued Shares to Corimon
Corporation, a wholly owned subsidiary of Corimon, for $16.75 per share, or an
aggregate of $38,726,000. Corimon's subsidiary has subsequently acquired
1,713,841 additional shares of the Company's Common Stock in open market and
private transactions, raising its ownership to approximately 25% of the
Company's Shares at May 1, 1995.
Pursuant to an agreement entered into when the Shares were purchased from the
Company, Corimon is currently entitled to designate three persons to serve on
the Company's Board of Directors. At the Company's 1992 Annual Meeting of
Shareholders, two designees of Corimon, Philippe Erard and Arthur W. Broslat,
were elected to the Board of Directors of the Company as Class III and Class II
directors, respectively. Harold G. Bittle, Corimon's third designee, was
elected to the Board of Directors of the Company as a Class I director at the
1993 Annual Meeting of Shareholders. Subject to certain exceptions, the
agreement with Corimon will remain in effect until the earlier of the Company's
1996 Annual Meeting of Shareholders or October 31, 1996 (the "Standstill
Period").
During the Standstill Period, Corimon and its affiliates are permitted to
acquire additional voting securities of the Company only through open market or
privately negotiated transactions and only so long as such acquisition does not
cause Corimon and its affiliates to beneficially own more than 28% of the
Company's outstanding voting securities. As of May 1, 1995, Corimon and its
affiliates owned 4,025,841 shares, constituting approximately 25% of the
Company's outstanding Common Stock.
The agreement with Corimon also provides that, during the Standstill Period,
Corimon and its affiliates will vote all Shares owned by them in favor of the
slate of nominees proposed by the Board of Directors to stand for election as
directors.
I-8
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The table set forth below contains information for the Company's last three
fiscal years concerning the compensation of the chief executive officer and
other four most highly compensated executive officers of the Company.
Subsequent to the Company's 1994 fiscal year, options were granted to the chief
executive officer and three of the executive officers listed below. See
"Options Granted Under 1990 Option Plan" below.
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
----------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1)
- --------------------------- ---- -------- -------- ---------------
<S> <C> <C> <C> <C>
Russell Banks
President and Chief Executive Officer.. 1994 $400,000 $200,000 $21,672
1993 391,667 250,000 25,011
1992 375,000 220,000
Joseph M. Quinn
Executive Vice President and Chief Op- 1994 $245,833 $100,000 $ 5,901
erating Officer........................ 1993 225,000 175,000 6,518
1992 222,493 165,275
John F. Gleason
Executive Vice President............... 1994 $220,000 $ 50,000 $ 8,006
1993 220,000 72,000 10,798
1992 220,000 60,000
Frank V. Esser
Treasurer and Chief Financial Officer.. 1994 $153,331 $ 36,000 $ 1,821
1993 145,000 45,000 4,158
1992 143,301 37,500
W. Horton Russell(2)
Vice President, Manufacturing, Safety,
Health and Environment................. 1994 $ 98,000 $ 32,260 $ 2,897
1993 93,333 39,775 6,653
1992 90,164 32,525
</TABLE>
- --------
(1) "All Other Compensation" for fiscal 1994 includes: (i) the dollar value of
term life insurance premiums for the benefit of the named executive
officers (Mr. Banks--$19,204, Mr. Quinn--$3,035, Mr. Gleason-- $4,990, Mr.
Esser--$862, and Mr. Russell--$2,212); (ii) the value of shares of the
Company's Common Stock represented by the estimated number of units to be
allocated to the named executive officers under the Company's Employee
Stock Ownership Plan (Mr. Banks--$668, Mr. Quinn--$1,216, Mr. Gleason--
$1,216, Mr. Esser--$959, and Mr. Russell--$685); and (iii) fees paid to
directors who are also employees of the Company for attending meetings of
the Board of Directors (Mr. Banks--$1,800, Mr. Quinn-- $1,650 and Mr.
Gleason--$1,800). In accordance with the transitional provisions under the
revised compensation disclosure rules of the Securities and Exchange
Commission, amounts in this column for fiscal 1992 are omitted.
(2) Mr. Russell retired from employment with the Company effective July 1,
1994.
I-9
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END VALUES
The following table contains information concerning the exercise of stock
options during the Company's fiscal year ended June 30, 1994 by the executive
officers named in the Summary Compensation Table and the fiscal year-end values
of unexercised options held by such executive officers. No options were granted
to any of the executive officers during the fiscal year ended June 30, 1994.
The only options granted during fiscal 1994 under the 1990 Plan were options to
purchase 10,000 Shares which were automatically granted to each of three
outside Directors who joined the Board during that fiscal year.
AGGREGATED OPTION EXERCISES IN FISCAL 1994
AND 1994 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS AT FISCAL YEAR- THE-MONEY OPTIONS AT
SHARES END FISCAL YEAR-END(2)
ACQUIRED ON VALUE ------------------------- ------------------------
NAME EXERCISE(#) REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCIABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Russell Banks........... -- -- 24,135 0 $167,979 $ 0
Joseph M. Quinn......... -- -- 8,334 21,666 74,755 168,744
John F. Gleason......... 17,364 $93,939 0 0 0 0
Frank V. Esser.......... 5,788 28,563 5,250 0 36,540 0
W. Horton Russell....... 1,000 8,120 0 0 0 0
</TABLE>
- --------
(1) Market value (the mean between the highest and lowest quoted selling prices
of the Company's Common Stock as reported by the New York Stock Exchange)
on the exercise date, less the exercise price.
(2) Market value (the mean between the highest and lowest quoted selling prices
of the Company's Common Stock as reported by the New York Stock Exchange)
on June 30, 1994, less the exercise price.
OPTIONS GRANTED UNDER 1990 OPTION PLAN
The grant of options is within the discretion of the Committee of the Board
which administers the Option Plan. Accordingly, the Company is unable to
determine future options, if any, that may be granted to the named persons or
groups in the following table. The following table sets forth the number of
shares underlying options that were granted under the 1990 Plan since July 1,
1994, the beginning of the Company's current fiscal year, to (i) the chief
executive officer and the other executive officers named in the Summary
Compensation Table in "Executive Compensation", above, (ii) all current
executive officers as a group, (iii) all current directors who are not
executive officers and (iv) all other employees, including current officers who
are not executive officers:
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING
NAME OR CATEGORY OF OPTIONEE OPTIONS GRANTED
- ---------------------------- ----------------
<S> <C>
Russell Banks.................................................. 10,000
Joseph M. Quinn................................................ 15,000
John F. Gleason................................................ 4,500
Frank V. Esser................................................. 2,000
Henry Jones.................................................... 3,500
Stephen Dearborn............................................... 10,000
Executive Officers as a group (7 persons)...................... 45,000
Non-executive officer directors as a group..................... 0
Other employees as a group (34 persons)........................ 103,500
</TABLE>
Each of the foregoing options are for a term of ten years and are
exercisable, on a cumulative basis, as to one-fifth of the number of shares
originally subject to the option in each year commencing two years after the
date of grant. Certain of the options provide that they will be exercisable, on
a cumulative basis, as to one-third of the number of shares originally subject
to the option in each year commencing two years after the date of grant.
I-10
<PAGE>
All options were granted at 100% of the fair market value of the underlying
shares on the date of grant.
PENSION PLAN
The Company has a non-contributory trusteed pension plan covering employees
of the Company and certain subsidiaries (the "Pension Plan"). The following
table sets forth the estimated annual benefits payable upon retirement under
the Pension Plan for participants in various remuneration classifications after
the indicated periods of credited service, assuming (i) payment commences at
age 65, (ii) the election of a life annuity without survivor benefits and (iii)
annual primary social security insurance benefits based on the assumptions that
the remuneration upon which a participant's social security benefits are
determined is equal to his or her covered remuneration under the Pension Plan,
remuneration increases have been at a rate of 5% per annum and primary social
security benefit rates have continued at current levels. The following table
gives effect to the limitations under the Internal Revenue Code of 1986, as
amended (the "Code"), on annual covered compensation ($235,840 for 1993 and
$150,000 for each of 1994 and 1995) as well as the current limitation on
aggregate qualified employee benefits:
<TABLE>
<CAPTION>
ESTIMATED ANNUAL PENSION BENEFITS PAYABLE AT AGE 65
FOR THE
NUMBER OF YEARS OF CREDITED SERVICE SHOWN
-----------------------------------------------------------
AVERAGE ANNUAL 15
REMUNERATION YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- -------------- ----- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 90,000 $15,023 $20,030 $20,030 $25,038 $25,038
125,000 21,848 29,130 29,130 36,413 36,413
150,000 26,723 35,630 35,630 44,538 44,538
175,000 31,273 41,805 41,805 52,338 52,338
200,000 35,823 47,980 47,980 60,138 60,138
225,000 40,373 54,155 54,155 67,938 67,938
235,840 or greater 42,346 56,833 56,833 71,320 71,320
</TABLE>
Once computed, benefits payable under the Pension Plan are not further
reduced by social security benefits. Covered compensation is a participant's
annual compensation, exclusive of bonuses, directors' fees and certain other
items. The years of credited service under the Pension Plan at June 30, 1995
for Messrs. Quinn, Gleason, Esser and Russell, the only executive officers of
the Company named in the Summary Compensation Table above who participated in
the Pension Plan, will be 19.1, 19.1, 12.8 and 18.08, respectively. Accrued
benefits as of June 30, 1989 are computed as 35% of average compensation less
50% of social security benefits reduced proportionately for years of credited
service which are less than twenty. In order to comply with the Code, the
benefit formula under the Pension Plan was amended effective as of July 1,
1989. Benefits on or after July 1, 1989 are computed as .65% of average
compensation plus .65% of average compensation in excess of social security
covered compensation multiplied by years of credited service up to 27.
Estimated annual benefits for Messrs. Gleason, Quinn, Esser and Russell under
the new formula are $53,104, $48,305, $20,711 and $19,930, respectively.
EMPLOYEE SUPPLEMENTAL RETIREMENT AND DEATH BENEFIT ARRANGEMENTS
The Company is a party to Supplemental Retirement and Death Benefit
Agreements effective September 15, 1988 which amend and restate agreements
entered into in 1983, as amended, with Messrs. Banks, Quinn, Gleason and Frank
(as amended and restated, the "SERP Agreements"). Each SERP Agreement provides
for the payment in each year for 15 years following cessation of employment at
age 65 or thereafter, or prior to age 65 if terminated by the Company (except
if termination is for cause) or by the employee for Good Reason (as defined in
the SERP Agreements) within three years after any Change in Control of the
Company (as defined in the SERP Agreements), of an amount equal to 30% of his
base salary for fiscal 1982. In the event of death during the 15-year period,
payments will continue during the remainder of the period to his designated
beneficiaries. In the event of death prior to cessation of employment, there
shall be payable in each year for 15 years following his death, in lieu of the
foregoing amount, an amount equal to 20% of his base salary for fiscal 1982. At
the Company's option, supplemental retirement benefits which become payable
I-11
<PAGE>
may be paid in a discounted lump sum. However, for employees under the age of
65 who become entitled to payments upon a Change in Control, such amounts shall
be paid to the employee in an undiscounted lump sum. Each such employee is also
entitled to a post-termination death benefit in an amount equal to the lesser
of $500,000 or three times his base salary for fiscal 1982. Fiscal 1982 base
salaries for Messrs. Banks, Quinn, Gleason and Frank were $250,000, $83,841,
$140,000 and $100,000, respectively. No decision has been made as to whether
the supplemental retirement benefits will be paid in lump sums. The Purchaser
and Parent have agreed to honor, and cause the Surviving Corporation to honor,
the SERP Agreements and have acknowledged that the consummation of the Offer
will constitute a "Change in Control" as defined in the SERP Agreements. In the
event of lump sum payments, the estimated amounts of such payments to Messrs.
Banks, Quinn, Gleason and Frank would be $620,830, $377,285, $347,665 and
$248,332, respectively.
The Company has purchased whole-life insurance policies on the lives of these
executive officers and certain other executive officers in amounts that, in the
aggregate (in combination with insurance coverage purchased by the Company, and
payable to it, with respect to the arrangements described under "Compensation
of Directors" above), are intended to offset the Company's future liabilities
under the employee supplemental retirement and death benefit arrangements and
the non-employee director fee continuation and death benefit arrangements,
other than the Fee Continuation Agreement with non-employee director Robert J.
Milano described under "Compensation of Directors" above (and a similar
agreement with one former non-employee director). Premiums paid on such
policies for the year ended June 30, 1994 amounted to $342,880 (before giving
effect to increases in cash surrender value of $504,173). The SERP Agreements
and such other arrangements were designed so that, if assumptions as to
mortality experience, policy dividends, tax effects and other factors are
realized and if no benefits are payable by reason of a change in control of the
Company, as defined, the Company would eventually recover, from the proceeds of
the whole-life insurance, the costs attendant to the SERP Agreements and such
other arrangements, including the premiums for such whole-life insurance, the
premiums payable with respect to the group life insurance benefits payable to
non-employee directors (as described above) and a factor for the use of Company
funds. However, benefits payable under the SERP Agreements and such other
arrangements are not limited or governed in any way by the amount of proceeds
received by the Company under such whole-life insurance policies and there is
no assurance that amounts paid by the Company will be fully recovered. The
Company is the owner and sole beneficiary of the whole-life insurance policies,
and the officers and directors participating in such arrangements and the
beneficiaries will have no claim against the policies.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements (the "Employment
Agreements") with Russell Banks, President and Chief Executive Officer of the
Company, and with the following executive officers of the Company: Joseph M.
Quinn, Stephen L. Dearborn, Frank V. Esser and Henry W. Jones.
The Employment Agreement with Mr. Banks (entered into effective as of October
31, 1992), originally scheduled to expire on October 31, 1995, was extended
until October 31, 1996 by the Company's Board of Directors (the "Board") on
December 16, 1994. In the event of the termination of employment (including
termination by Mr. Banks for Good Reason, as defined in the Employment
Agreement) within two years after a Change in Control (as defined in the
Employment Agreement) of the Company, Mr. Banks will (except if termination is
for cause) be entitled to receive a lump sum payment equal in amount to the sum
of (i) Mr. Banks' base salary and average three-year bonus for the remainder of
the term of the Employment Agreement and (ii) three times the sum of such
salary and bonus. In addition, the Company must in such circumstances continue
Mr. Banks' then current welfare benefits for the remainder of the term of the
Employment Agreement. In no case, however, may Mr. Banks receive any payment or
benefit in connection with a Change in Control in excess of 2.99 times his
"base amount" (as that term is defined in Section 280G of the Internal Revenue
Code of 1986, as amended, and hereafter referred to as the "Code"). In the
event of disability of Mr. Banks, the Employment Agreement provides for
continued payment of 50% of his base salary for the remainder of the term of
the Employment Agreement. An amendment to Mr. Banks' Employment
I-12
<PAGE>
Agreement was approved by the Board on April 27, 1995. Such amendment (i)
memorialized the action of the Board taken on December 16, 1994 to extend the
agreement until October 31, 1996, (ii) amended the provision setting forth the
calculation of the severance benefit to include bonuses in the portion of the
severance formula that is multiplied by three (as described above), (iii)
provided that the benefit payable upon Mr. Banks' death need not be provided
solely through life insurance, and (iv) clarified that "Good Reason" includes a
determination by Mr. Banks that, as a result of a Change in Control, he is
unable to discharge his duties effectively. The Company has obtained insurance
policies on Mr. Banks' life, as to which the Company is the beneficiary, in the
aggregate face amount of $400,000. The aggregate premium paid by the Company
during the fiscal year ended June 30, 1994 with respect to those policies was
$9,852. Pursuant to the Employment Agreement, Mr. Banks has the right to
purchase such insurance policies from the Company at a purchase price equal to
the amount at which the Company carries such policies on its books, which is
estimated to be less than $50,000. The Purchaser and Parent have agreed to
honor, and cause the Surviving Corporation to honor, Mr. Banks' Employment
Agreement, as amended, and have acknowledged that the consummation of the Offer
will constitute a Change in Control as defined in the Employment Agreement. It
is estimated that Mr. Banks would receive approximately $2.3 million under the
Employment Agreement upon a qualifying termination of employment following the
consummation of the Offer.
The Employment Agreement with Mr. Quinn (entered into effective as of
September 15, 1988 and amended effective as of July 1, 1994) is for a term
presently expiring on June 30, 1996, subject to automatic annual renewals until
age 65 unless notice of non-renewal is given on or before April 1 preceding the
scheduled termination date. In the event of the termination of employment
(including termination by Mr. Quinn for Good Reason, as defined in the
Employment Agreement) within two years after a Change in Control (as defined in
the Employment Agreement) of the Company, Mr. Quinn will (except if termination
is for cause) be entitled to receive a lump sum payment equal in amount to
three times the sum of his salary (based upon his annual base salary at the
date of termination) and average three-year bonus payments. In addition, the
Company must in such circumstances continue Mr. Quinn's then current welfare
benefits for a period of three years. In no case, however, may Mr. Quinn
receive any payment or benefit in connection with a Change in Control in excess
of 2.99 times his "base amount" (as that term is defined in Section 280G of the
Code). The Purchaser and Parent have agreed to honor, and cause the Surviving
Corporation to honor, Mr. Quinn's Employment Agreement and have acknowledged
that the consummation of the Offer will constitute a Change in Control as
defined in the Employment Agreement. It is estimated that Mr. Quinn would
receive approximately $1.1 million upon a qualifying termination of employment
following the consummation of the Offer.
The Employment Agreement with Mr. Esser (entered into effective as of
September 15, 1988) is for a term presently expiring on September 14, 1995,
which term is subject to automatic annual renewal until age 65 unless notice of
non-renewal is given on or before July 1 preceding the scheduled termination
date. In the event of the termination of employment (including termination by
Mr. Esser for Good Reason, as defined in the Employment Agreement) within two
years after a Change in Control (as defined in the Employment Agreement) of the
Company, Mr. Esser will (except if termination is for cause) be entitled to
receive a lump sum payment equal in amount to three times the sum of his salary
(based upon his annual base salary at the date of termination) and average
three-year bonus payments. In addition, the Company must in such circumstances
continue Mr. Esser's then current welfare benefits for a period of three years.
In no case, however, may Mr. Esser receive any payment or benefit in connection
with a Change in Control in excess of 2.99 times his "base amount" (as that
term is defined in Section 280G of the Code). An amendment to Mr. Esser's
Employment Agreement was approved by the Board on April 27, 1995 to increase
the payout period from two years to three years and to provide that the bonuses
to be taken into account in computing the termination payments would be the
bonuses paid to him in respect of the Company's prior three full fiscal years
instead of bonuses for the 1986-1988 fiscal years. The Purchaser and Parent
have agreed to honor, and cause the Surviving Corporation to honor, Mr. Esser's
Employment Agreement and have acknowledged that the consummation of the Offer
will constitute a Change in Control as defined in the Employment Agreement. It
is estimated that Mr. Esser would receive approximately $485,000 upon a
qualifying termination of employment following the consummation of the Offer.
I-13
<PAGE>
The Employment Agreement with Mr. Dearborn (entered into effective as of June
2, 1994) is for a term presently expiring on May 31, 1997, which term is
subject to automatic annual renewal until age 65 unless notice of non-renewal
is given on or before November 30 preceding the scheduled termination date. In
the event of the termination of employment (except if termination is for
cause), Mr. Dearborn will be entitled to receive his base salary for the
remainder of the term of the Employment Agreement (but not less than one year).
In addition, the Company must in such circumstances continue Mr. Dearborn's
then current welfare benefits for the remainder of the term of the Employment
Agreement. The Purchaser and Parent have agreed to honor, and to cause the
Surviving Corporation to honor, Mr. Dearborn's Employment Agreement. It is
estimated that Mr. Dearborn would receive approximately $450,000 upon a
qualifying termination of employment following the consummation of the Offer.
The Employment Agreement with Mr. Jones (entered into effective as of March
1, 1995) is for a term presently expiring on February 29, 1996, subject to
automatic annual renewals until age 65 unless notice of non-renewal is given on
or before December 1 preceding the scheduled termination date. In the event of
the termination of employment (including termination by Mr. Jones for Good
Reason, as defined in the Employment Agreement) within two years after a Change
in Control (as defined in the Employment Agreement) of the Company, Mr. Jones
will (except if termination is for cause) be entitled to receive a lump sum
payment equal in amount to one times the sum of his salary (based upon his
annual base salary at the date of termination) and average three-year bonus
payments. In addition, the Company must in such circumstances continue Mr.
Jones' then current welfare benefits for a period of one year. In no case,
however, may Mr. Jones receive any payment or benefit in connection with a
Change in Control in excess of 2.99 times his "base amount" (as that term is
defined in Section 280G of the Code). The Purchaser and Parent have agreed to
honor, and to cause the Surviving Corporation to honor, Mr. Jones' Employment
Agreement and have acknowledged that the consummation of the Offer will
constitute a Change in Control as defined therein. It is estimated that Mr.
Jones would receive approximately $96,000 upon a qualifying termination of
employment following the consummation of the Offer.
SEVERANCE AGREEMENTS
The Company currently is a party to severance agreements ("Severance
Agreements") with approximately 90 employees. Approximately 55 of the severance
agreements were either adopted or modified to increase the benefits thereunder
by the Board on April 27, 1995, including adoption of new agreements for two
executive officers, John F. Gleason and Lloyd Frank. The Severance Agreements
provide for the payment of certain severance and other benefits to employees
who are terminated within two years of a Change in Control of the Company (as
defined in the Severance Agreements). In the event of the termination of
employment (including termination by the employee for Good Reason, as defined
in the Severance Agreement) within two years after a Change in Control (as
defined in the Severance Agreement) of the Company, the employee will (except
if termination is for cause) be entitled to receive a lump sum payment equal in
amount to the sum of his salary (based upon his or her annual base salary at
the date of termination) and average three-year bonus payments multiplied by
the number of months specified in the applicable Severance Agreement, and shall
continue the employee's welfare benefits for the same period. In the case of
Mr. Frank, the applicable period will be 36 months and in the case of Mr.
Gleason, the applicable period will be 24 months and will be based upon annual
base salary only. In no case, however, may the employee receive any payment or
benefit in connection with the consummation of the Offer in excess of 2.99
times his "base amount" (as that term is defined in Section 280G of the Code).
The Severance Agreements with Messrs. Gleason and Frank, as well as the
agreements with the other employees of the Company, were approved by the Board
on April 27, 1995. The Purchaser and Parent have agreed to honor, and to cause
the Surviving Corporation to honor, the Severance Agreements and have
acknowledged that the consummation of the Offer will constitute a Change in
Control as defined in the Severance Agreements. It is estimated that Mr.
Gleason would receive approximately $440,000 and Mr. Frank would receive
approximately $300,000, upon a qualifying termination of employment following
the consummation of the Offer.
I-14
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
William H. Turner, a director of the Company, is an executive officer of
Chemical Banking Corporation and Chemical New Jersey Holding Inc., subsidiaries
of which, together with two unrelated banks, are parties to a Credit Agreement
which provides the Company with a revolving credit and a letter of credit
facility in an amount not to exceed $75,000,000, of which Chemical Bank New
Jersey, N.A. has a 40% share.
During the Company's 1994 fiscal year, the Company entered into a letter of
intent to execute an agreement with one of Corimon's wholly-owned subsidiaries
for the distribution of the Company's industrial maintenance and marine
coatings products in select markets in South America. Under the letter of
intent, Corimon paid the Company a fee in the amount of $200,000. The Company
is also a party to license agreements with Corimon granting Corimon rights to
use the Company's architectural coatings technology and industrial maintenance
and marine coatings technology and under which the Company received an initial
fee and is receiving royalties based on net sales. During fiscal 1994, the
Company received royalties from Corimon in the amount of $100,000. Corimon
Corporation owns approximately 25% of the Company's outstanding Common Stock.
Philippe Erard and Arthur W. Broslat, directors of the Company, are executive
officers and directors of Corimon. Harold G. Bittle, a director of the Company,
is a consultant to Corimon.
During the Company's 1994 fiscal year, the Company retained the law firms of
Lord Day & Lord, Barrett Smith, to which Peter L. Keane, a director of the
Company, was counsel, and Parker Chapin Flattau & Klimpl, of which Lloyd Frank,
a director and officer of the Company, is a partner. The Company has retained
Parker Chapin Flattau & Klempl and Morgan, Lewis & Bockius, of which Mr. Keane
is a Senior Advisor, during the current fiscal year.
OWNERSHIP OF VOTING SECURITIES
The following table sets forth information, as of May 1, 1995, as to each
person (including any "group" as that term is used in Section 13(d)(3) of the
Exchange Act) who is known to the Company to be the beneficial owner of more
than five percent of the Company's Common Stock, its only class of voting
securities:
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE PERCENT
TITLE OF CLASS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
-------------- ----------------------------------- ----------------------- --------
<S> <C> <C> <C>
Common Stock............ Corimon Corporation 4,025,841(1) 25%
Corimon International Holdings Ltd.
Corimon S.A.C.A.
Edif. Corimon, Calle Hans Neuman
Los Cortijos de Lourdes
Caracas 1071, Venezuela
</TABLE>
- --------
(1) Based upon information provided to the Company by Corimon. See "Security
Ownership of Management--Corimon Agreements."
I-15
<PAGE>
SCHEDULE II
CERTAIN TRANSACTIONS IN SHARES OF COMMON STOCK OF
GROW GROUP, INC. EFFECTED DURING THE PAST 60 DAYS
The following purchases of Shares were credited to the accounts of the below
listed executive officers of the Company pursuant to the Company's monthly
investment plan:
<TABLE>
<CAPTION>
SHARES
NAME DATE PURCHASED PRICE
---- ------- --------- --------
<S> <C> <C> <C>
Frank V. Esser................................. 3/28/95 4.2118 $14.2456
4/25/95 3.6931 $16.2465
Joseph H. Quinn, Jr. .......................... 3/28/95 4.2118 $14.2456
4/25/95 3.6931 $16.2465
John F. Gleason................................ 3/28/95 7.7217 $14.2456
4/25/95 6.7707 $16.2465
Henry W. Jones................................. 3/28/95 4.2118 $14.2456
4/25/95 3.6931 $16.2465
</TABLE>
<PAGE>
Exhibit 99.2
GROW GROUP, INC.
200 Park Avenue
New York, NY 10166
May 11, 1995
Mr. Conway G. Ivy
Vice President Corporate Planning
& Development
The Sherwin-Williams Company
101 Prospect Avenue N.W.
Cleveland, OH 44115
CONFIDENTIALITY AGREEMENT
-------------------------
Dear Mr. Ivy:
The Sherwin-Williams Company has requested that Grow Group, Inc. (the "Company")
furnish it with certain information relating to the Company which is non-public,
confidential and proprietary in nature in connection with its proposed
acquisition of the Company (the "Transaction"). All such information (whether
written or oral) furnished (whether before or after the date hereof) by the
Company or its directors, officers, employees, affiliates, representatives
(including, without limitation, financial advisors, attorneys and accountants)
or agents (collectively, "our Representatives") to you or your directors,
officers, employees, affiliates, representatives (including, without limitation,
financial advisors, attorneys and accountants) or agents (collectively, "your
Representatives") and all analyses, compilations, forecasts, studies or other
notes or documents prepared by you or your Representatives which contain or
reflect, or are generated from, any such information or which
<PAGE>
Mr. Conway Ivy
Page 2
reflect you or your Representatives review of, or your interest in, the
Transaction (other than any documents prepared by you or your Representatives in
connection with any public tender offer for the shares of the Company's common
stock) is hereinafter referred to as the "Information." The term Information
will not, however, include information which (i) is or becomes publicly
available other than as a result of a disclosure by you or your Representatives
in breach of this Agreement or (ii) is or becomes available to you on a
nonconfidential basis from a source (other than the Company or our
Representatives) which, to the best of your knowledge after due inquiry, is not
prohibited from disclosing such information to you by a legal, contractual,
fiduciary or other obligation to the Company.
As a condition to, and in consideration of the Company providing you with
Information, you acknowledge and agree as follows:
1. You and your Representatives for a period of five (5) years from the date
hereof (i) will keep the Information confidential and will not (except as
required by applicable law, regulation or legal process, and only after
compliance with paragraph 3 below), without our prior written consent,
disclose any Information in any manner whatsoever, and (ii) will not use
any Information other than in connection with the Transaction. You further
agree to disclose the Information only to your Representatives (a) who need
to know the Information in connection with negotiating the Transaction, (b)
who are informed by you of the confidential nature of the Information and
(c) who agree to be bound by the terms of this letter agreement.
Notwithstanding any provision to the contrary contained herein, you shall
be permitted to disclose such of the Information as you are advised by
counsel is legally required to be disclosed under the federal securities
<PAGE>
Mr. Conway Ivy
Page 3
laws. You agree that you will be responsible for any breach of this letter
agreement by any of your Representatives.
2. In the event that you or any of your Representatives are requested or
required (by oral questions, interrogatories, requests for information or
documents, subpoena, civil investigative demand, any informal or formal
investigation by any government or governmental agency or authority or
otherwise ) to disclose any of the Information, you will notify the Company
promptly in writing so that we may seek a protective order or other
appropriate remedy or, in our sole discretion, waive compliance with the
terms of this letter agreement. You agree not to oppose any action by the
Company to obtain a protective order or other appropriate remedy. In the
event that no such protective order or other remedy is obtained, or that
the Company waives compliance with the terms of this letter agreement, you
will furnish only that portion of the Information which you are advised by
counsel is legally required.
3. You shall keep a record of each location of the Information. You agree,
immediately upon a request from the Company, to return to the Company all
Information, and no copies, extracts or other reproductions of the
Information shall be retained by you or your Representatives, except that
one copy may be kept by your legal Representatives solely for the purpose
of monitoring your obligations hereunder. Any portion of the Information
that consists solely of analyses, compilations, forecasts, schedules or
other notes or documents prepared by you or your Representatives, in lieu
of being returned to the Company, may be destroyed by you, in which event
one of your authorized officers shall provide certification to the Company
that materials have in fact been so destroyed. Any oral Information that
is retained
<PAGE>
Mr. Conway Ivy
Page 4
by you or your Representatives will continue to be subject to this letter
agreement.
4. You acknowledge that none of the Company, nor our Representatives, nor any
of our or their respective officers, directors, employees, agents or
controlling persons within the meaning of Section 20 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), makes any express or
implied representation or warranty as to the accuracy or completeness of
the Information, and you agree, to the fullest extent permitted by law,
that no such person will have any liability to you or any of your
Representatives on any basis (including, without limitation, in contract,
tort, under federal or state securities laws or otherwise) with respect to
the Transaction as a result of this letter agreement, your participation in
evaluating the Transaction, your review of the Company, the use of the
Information by you or your representatives, any errors therein or omissions
from the Information, or otherwise. Nothing in the foregoing provision
shall be deemed to waive or limit in any respect any rights or claims you
may have based on any actual or alleged breaches of the fiduciary duties
owed by the Company's board of directors to the Company and its
stockholders. You further agree that you are not entitled to rely on the
accuracy or completeness of the Information and that you will be entitled
to rely solely on such representations and warranties as may be included in
any definitive agreement with respect to the Transaction, subject to such
limitations and restrictions as may be contained therein.
5. You are aware, and you will advise your Representatives who are informed
of the matters that are the subject of this letter agreement, of the
restrictions imposed by the United States securities laws on the purchase
or sale of securities by any person
<PAGE>
Mr. Conway Ivy
Page 5
who has received material, non-public information from the issuer of such
securities and on the communication of such information to any other
person.
6. (a) Except as otherwise expressly provided in paragraph 6(b) below,
you agree that, for a period of three years from the date of this
letter agreement, neither you nor any of your affiliates will, without
the prior written consent of the Company: (i) acquire, offer to
acquire, or agree to acquire, directly or indirectly, by purchase or
otherwise, any voting securities or direct or indirect rights to
acquire any voting securities of the Company or any subsidiary
thereof, or of any successor to or person in control of the Company,
or any assets of the Company or any subsidiary or division thereof or
of any such successor or controlling person; (ii) make, or in any way
participate in, directly or indirectly, any "solicitation" of
"proxies" (as such terms are used in the rules of the Securities and
Exchange Commission) to vote, or seek to advise or influence any
person or entity with respect to the voting of, any voting securities
of the Company; (iii) make any public announcement with respect to, or
submit a proposal for, or offer of (with or without conditions) any
extraordinary transaction involving the Company or any of its
subsidiaries or their securities or assets; (iv) form, join or in any
way participate in a "group" (as defined in Section 13(d)(3) of the
Exchange Act) in connection with any of the foregoing; (v) seek to
acquire control of the Company or influence the Board of Directors,
management or policies of the Company; (vi) induce any other person or
entity to do any of the foregoing; or (vii) request the Company or any
of our Representatives, directly or
<PAGE>
Mr. Conway Ivy
Page 6
indirectly, to amend or waive any provision of this paragraph.
(b) Notwithstanding paragraph 6(a) above, you or any direct or indirect
wholly-owned subsidiary of yours shall be permitted to acquire shares
of Company common stock pursuant to the pending cash tender offer
commenced on May 8, 1995 by your wholly-owned subsidiary for all
outstanding shares of Company common stock, at a price not less than
$19.50 net per share in cash to the seller or such higher price in
cash that you or one of your direct wholly-owned subsidiaries may
offer to pay for shares of the Company's common stock pursuant to such
pending cash tender offer; provided, however, you shall be permitted
to acquire shares of the Company's common stock pursuant to a cash
tender for all outstanding shares by you or any direct or indirect
wholly-owned subsidiary of yours made in accordance with Regulation
14D under the Exchange Act at the amount per share offered (or any
greater amount per share offered) in any merger, tender offer or
similar transaction that shall have been approved by the Company's
Board of Directors within 90 days prior to the commencement of such
cash tender offer by you or your direct or indirect wholly-owned
subsidiary, except that it is understood and agreed that this proviso
shall not be applicable to approval by the Company's Board of
Directors of the tender offer commenced by Imperial Chemical
Industries PLC on May 4, 1995.
7. (a) You agree that the Company could be irreparably injured by a
breach of this letter agreement by you or your Representatives, that
monetary remedies might be inadequate to protect us against any
actual or threatened
<PAGE>
Mr. Conway Ivy
Page 7
breach of this letter agreement by you or by your Representatives.
(b) It is further agreed that no failure or delay in exercising any
right, power or privilege hereunder will operate as a waiver thereof,
nor will any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any right, power or
privilege hereunder.
(c) This letter agreement will be governed by and construed in accordance
with the laws of the State of New York, without regard to the
principles of conflict of laws thereof.
(d) This letter agreement contains the entire agreement between you and
us concerning the subject matter hereof and supersedes all previous
agreements, written or oral, relating to the subject mater hereof.
No modifications of this letter agreement or waiver of the terms and
conditions hereof will be binding upon you or us, unless approved in
writing by each of you and us.
(e) If any provision of this letter agreement shall, for any reason, be
adjudged by any court of competent jurisdiction to be invalid or
unenforceable, such judgment shall not affect, impair or invalidate
the remainder of this letter agreement but shall be confined in its
operation to the provision of this agreement directly involved in the
controversy in which such judgment shall have been rendered.
(f) This letter agreement may be executed in counterparts, each of which
shall be deemed
<PAGE>
Mr. Conway Ivy
Page 8
to be an original, but both of which shall constitute the same
agreement.
(g) This letter agreement shall inure to the benefit of and be binding
upon our respective successors and assigns, as well as any person
that may acquire, after the date hereof, any subsidiary of division
of either of us with respect to Information concerning the business
or affairs of such subsidiary or division.
Please confirm your agreement with the foregoing by signing and returning to the
undersigned the duplicate copy of this letter enclosed herewith.
Very truly yours,
GROW GROUP, INC.
By:/s/ Lloyd Frank
-------------------
Name: Lloyd Frank
Title: Secretary
Accepted and Agreed
as of the date first
written above:
THE SHERWIN-WILLIAMS COMPANY
By:/s/ Conway G. Ivy
------------------------
Name: Conway G. Ivy
Title: Vice President Corporate Planning
& Development
<PAGE>
Exhibit 99.3
OPTION AGREEMENT
OPTION AGREEMENT, dated as of April 30, 1995 (this "Agreement"), among
Imperial Chemical Industries PLC, a corporation organized under the laws of
England ("Buyer"), GDEN Corporation, a New York corporation and an indirect
wholly owned subsidiary of Buyer ("Merger Subsidiary"), Corimon Corporation, a
Delaware corporation ("Stockholder" or "Corimon Corp."), and Corimon, S.A.C.A.,
a Venezuelan corporation ("Corimon").
WHEREAS, Buyer and Merger Subsidiary have entered into an Agreement
and Plan of Merger, dated as of the date hereof (the "Merger Agreement"), with
Grow Group, Inc., a New York corporation (the "Company"), which provides, among
other things, for the acquisition by Buyer or its assignee of all the
outstanding shares of Common Stock, par value $0.10 per share, of the Company
(the "Company Common Stock") through (a) a tender offer (the "Offer") for all
shares of the Company Common Stock for $18.10 per share, net to the sellers
thereof in cash (the "Per Share Amount"), subject to any amounts required to be
withheld under applicable federal, state, local or foreign income tax
regulations and (b) a second-step merger pursuant to which Merger Subsidiary
will merge with and into the Company (the "Merger") and all outstanding shares
of the Company Common Stock other than shares of the Company Common Stock held
by the Company as treasury stock or owned by Buyer, Merger Subsidiary or any
other subsidiary of Buyer will be converted into the right to receive the Per
Share Amount in cash, subject to any amounts required to be withheld under
applicable federal, state, local or foreign income tax regulations; and
WHEREAS, as of the date hereof, Stockholder owns beneficially
4,025,841 shares of Company Common Stock (the "Shares");
WHEREAS, as a condition to the willingness of Buyer and Merger
Subsidiary to enter into the Merger Agreement, Buyer and Merger Subsidiary have
required that the Stockholder agree, and in order to induce Buyer and Merger
Subsidiary to enter into the Merger Agreement, the Stockholder has agreed, to
grant Buyer an option to purchase the Shares in accordance with the terms of
this Agreement; and
WHEREAS, members of the Board of Directors of the Company who are not
designees of Corimon, in accordance with the Standstill Agreement between the
Company, Corimon and Stockholder, dated July 21, 1992, as amended, have adopted
a resolution permitting Stockholder and Corimon to enter into and perform their
obligations under this Agreement;
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto agree as follows:
ARTICLE I
OPTION
Section 1.1. Grant of Stock Option. Stockholder hereby irrevocably
---------------------
grants to Buyer an option (the "Option") to purchase the Shares at a purchase
price of $17.50 per Share (the "Purchase Price").
Section 1.2. Exercise of Option. (a) Subject to the satisfaction of
------------------
the conditions set forth in Section 1.4 hereof, the Option may be exercised by
Buyer in whole but not in part at any time prior to the earlier of (i) November
5, 1995 and (ii) five business days after the Outside Termination Date (as
defined in the Merger Agreement); provided that Buyer may exercise the Option
only if the Minimum Condition has been satisfied. Upon exercise of the Option,
Buyer shall send a written notice (the "Exercise Notice") to Stockholder
specifying the places, the dates (which (a) in the case of 2,173,362 Shares,
shall be two business days after the date of the Exercise Notice; (b) in the
case of 1,336,360 Shares, shall be a business day not less than 10 calendar
days, nor more than 15 calendar days after the date of the Exercise Notice; and
(c) in the case of 516,129 Shares, shall be a business day not less than 15
calendar days nor more than 20 calendar days after the date of the Exercise
Notice), and the times for the closings of such purchases. The closings of the
purchases of the Shares (the "Closings") shall take place in New York, New York
at the places, on the dates and at the times designated by Buyer in its Exercise
Notice, provided that if, at the date of any Closing herein provided for, the
--------
conditions set forth in Section 1.4 shall not have been satisfied or waived by
Stockholder, Buyer may postpone such Closing until a date within two business
days after such conditions are satisfied. For purposes of this Agreement, the
"Minimum Condition" shall have been satisfied only if (i) Buyer has paid for or
accepted for payment all shares of Company Common Stock properly tendered and
not withdrawn pursuant to the Offer (the "Tendered Shares") in accordance with
the terms of the Offer and the Merger Agreement and (ii) the Tendered Shares
plus the Shares constitute not less than a majority of the outstanding Shares of
Company Common Stock on a fully diluted basis.
(b) Buyer shall not be under any obligation to deliver any Exercise
Notice and may allow the Option to
2
<PAGE>
expire without purchasing the Shares hereunder; provided however that once Buyer
--------
has delivered to the Stockholder an Exercise Notice, subject to the terms and
conditions of this Agreement, Buyer shall be bound to effect the purchase as
described in such Exercise Notice; and provided further that if the Minimum
--------
Condition is satisfied, Buyer shall thereafter be bound to exercise the Option
within two business days following the date of such satisfaction.
(c) Stockholder shall not, and shall not agree to, sell, assign,
transfer, tender or otherwise dispose of any Shares to any Person or group that
has commenced a tender offer for, or proposed to acquire, at least 50% of the
outstanding Shares of Company Common Stock, except pursuant to, and at the price
per share payable in, such offer or proposal.
Section 1.3. Closing. At each Closing, (a) the Stockholder shall
-------
deliver or cause to be delivered to Buyer a certificate or certificates (the
"Certificates") representing the number of Shares to be purchased at such
Closing duly endorsed, or accompanied by stock powers duly executed in blank,
with all required transfer tax stamps affixed thereto and (b) Buyer shall
deliver to the Stockholder or its designee(s) a certified or bank cashier's
check or checks payable to or upon the order of the Stockholder, or, at the
option of Stockholder, a wire transfer to an account in the United States
designated by Stockholder, in an amount equal to (i) the number of Shares to be
purchased at such Closing multiplied by (ii) the Purchase Price (the "Purchase
Amount").
Section 1.4. Conditions to the Stockholder's Obligations. The
-------------------------------------------
obligation of the Stockholder to sell Shares at any Closing is subject to the
following conditions:
(i) All waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the "HSR Act") applicable to the exercise of the
Option shall have expired or been terminated.
(ii) There shall be no preliminary or permanent injunction or other
order, decree or ruling issued by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission having
authority with respect thereto, nor any statute, rule, regulation or order
promulgated or enacted by any such governmental authority, prohibiting or
otherwise restraining the exercise of the Option or the sale of the Shares
pursuant thereto.
3
<PAGE>
Section 1.5. Adjustment Upon Certain Changes. (a) In the event of
-------------------------------
any change in the Company's capital stock by reason of stock dividends, stock
splits, mergers, consolidations, recapitalizations, combinations, conversions,
exchanges of shares, extraordinary or liquidating dividends, or other changes in
the corporate or capital structure of the Company, which would have the effect
of diluting or changing the Buyer's rights hereunder, the number and kind of
shares or securities subject to the Option and the purchase price per Share
shall be appropriately and equitably adjusted so that the Buyer shall receive
upon exercise of the Option the number and class of shares or other securities
or property that the Buyer would have received in respect of the Shares
purchasable upon exercise of the Option if the Option had been exercised
immediately prior to such event.
(b) In the event the consideration per Share paid by Buyer pursuant
to the Offer or the Merger Agreement is increased, the Purchase Price shall be
increased by an amount equal to the amount of such increase.
ARTICLE II
COVENANTS OF THE STOCKHOLDER
Section 2.1. No Disposition or Encumbrance of Shares. Except as
---------------------------------------
contemplated by Article I above, and except for any Lien (as defined below)
existing as of the date hereof, Stockholder hereby covenants and agrees, that,
except as contemplated by this Agreement, it shall not, and shall not offer or
agree to, sell, transfer, tender, assign, hypothecate or otherwise dispose of,
or create or permit to exist any security interest, lien, claim, pledge, option,
right of first refusal, agreement, limitation on Stockholder's voting or
dispositive rights, charge or other encumbrance of any nature whatsoever
(collectively, "Liens") with respect to the Shares. For the avoidance of doubt,
Stockholder hereby agrees that it will not tender the Shares into the Offer
unless directed to do so by Buyer; provided that if it is so directed by Buyer,
--------
Stockholder will, to the extent permitted by the Permitted Liens (as defined
below), properly tender or cause to be tendered the Shares into the Offer and,
so long as the Option is outstanding, not withdraw such Shares; and provided
--------
further that if the Shares are purchased pursuant to the Offer, Stockholder will
pay, subject to applicable law, to Buyer a fee in cash equal to $.60 multiplied
by the number of Shares (such fee to be paid by Stockholder upon payment by
Buyer of the consideration for the Shares).
4
<PAGE>
Section 2.2. No Solicitation of Transactions. (a) Each of
-------------------------------
Stockholder and Corimon agrees that it shall not, and shall not permit any
affiliate to, directly or indirectly, through any agent or representative or
otherwise, (i) take any action to solicit, initiate or encourage any Acquisition
Proposal (as defined below); (ii) except as may be required by Arthur Broslat,
Philippe Erard and Harold Bittle (the "Corimon Directors") in the exercise of
their fiduciary duties in their capacity as members of the Board of Directors of
the Company, engage in negotiations with, or disclose any nonpublic information
relating to the Company or any subsidiary of the Company or afford access to the
properties, books or records of the Company or any subsidiary of the Company to,
any Person (as defined below) that may be considering making, or has made, an
Acquisition Proposal; or (iii) except as may be required by the Corimon
Directors in the exercise of their fiduciary duties in their capacity as members
of the Board of Directors of the Company, otherwise cooperate in any way with,
or assist or participate in or facilitate or encourage, any effort or attempt by
any Person to do or seek any of the foregoing. Except as may be required by the
Corimon Directors in the exercise of their fiduciary duties in their capacity as
members of the Board of Directors of the Company, each of Stockholder and
Corimon agrees that it shall cease and cause to be terminated all existing
discussions or negotiations in which it or any of its agents or other
representatives is or has been engaged with any Person with respect to any of
the foregoing. Stockholder and Corimon shall notify Buyer and the Company
promptly after receipt of any Acquisition Proposal or any indication that any
Person is considering making an Acquisition Proposal or any request for
nonpublic information relating to the Company or any subsidiary of the Company
or for access to the properties, books or records of the Company or any
subsidiary of the Company by any Person that may be considering making, or has
made, an Acquisition Proposal and will keep Buyer fully informed of the status
and details of any such Acquisition Proposal, indication or request.
For the purposes of this Agreement, (i) "Person" means an individual,
a corporation, limited liability company, a partnership, an association, a trust
or any other entity or organization, including a government or political
subdivision or any agency or instrumentality thereof other than Buyer or any of
its affiliates and (ii) "Acquisition Proposal" means any offer or proposal for,
or any indication of interest in, a merger or other business combination
involving the Company or any subsidiary of the Company or the acquisition of any
equity interest in, or a substantial portion of the assets of, the Company or
any subsidiary of the Company, other than the transactions contemplated by the
Merger Agreement.
5
<PAGE>
(b) If there shall be a conflict between the terms of this Agreement
and the terms of the Merger Agreement with respect to the actions that may or
shall be taken by any person pursuant to such person's fiduciary duties, the
terms of the Merger Agreement shall supersede the terms of this Agreement.
Section 2.3. Voting Agreement. Stockholder hereby agrees that prior
----------------
to the time, if any, that the Merger Agreement is terminated, at any meeting of
the stockholders of the Company, however called, and in any action by consent of
the stockholders of the Company, Stockholder shall vote the Shares: (a) in favor
of the Merger, the Merger Agreement (as amended from time to time) or any of the
transactions contemplated by the Merger Agreement; and (b) against any proposal
for any recapitalization, merger, sale of assets or other business combination
between the Company and any Person (other than the Merger) or any other action
or agreement that would result in a breach of any covenant, representation or
warranty or any other obligation or agreement of the Company under the Merger
Agreement or which could result in any of the conditions to any party's
obligations under the Merger Agreement not being fulfilled. Stockholder
acknowledges receipt of a copy of the Merger Agreement.
Section 2.4. Certain Claims. Each of Corimon and Stockholder agrees
--------------
that it will not assert that the Board of Directors of the Company has breached
its fiduciary duties to Corimon and Stockholder if, at any time prior to the
termination of the Merger Agreement, the Board of Directors of the Company
refuses to accept or recommend an offer by a third party to acquire any or all
of the outstanding shares of Company Common Stock for consideration not in
excess of $18.10 per share. Subject to the consummation of the Offer, Corimon
and Stockholder agree to waive any claims they may have against the Company or
any of its officers or directors with respect to the ownership interest
represented by the Shares to the extent such claims (i) arise under any contract
or agreement with the Company or (ii) relate to an alleged breach of a fiduciary
duty.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1. Representations and Warranties of Corimon and
---------------------------------------------
Stockholder.
- -----------
(a) Each of Stockholder and Corimon hereby jointly and severally represents and
warrants that:
6
<PAGE>
(i) it is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and it
has all corporate power, authority, capacity and right to enter into
this Agreement and to consummate the transactions contemplated hereby;
(ii) the execution and delivery of this Agreement and the performance by it
of its obligations hereunder are within its corporate powers and have
been duly authorized by all necessary corporate action on its part;
this Agreement has been duly executed and delivered by it and
constitutes a valid and binding agreement enforceable by Buyer and
Merger Subsidiary against it in accordance with its terms, except as
the enforceability hereof may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting the enforcement of
creditors' rights generally and except for limitations imposed by
general principles of equity;
(iii) assuming compliance with the matters set forth in subsection (iv), no
approval, authorization, consent or filing is required in connection
with the execution, delivery and performance of this Agreement by it;
(iv) assuming the applicable waiting periods under the HSR Act have expired
or been terminated and assuming compliance with the Exchange Act and
the Permitted Liens, the execution, delivery and performance of this
Agreement by it does not and will not contravene or conflict with or,
with the passage of time, the serving of notice or both, violate or
constitute a default under any agreement, contract or other
instrument, or any law, rule, regulation, order or decree, binding
upon or applicable to it;
(v) Stockholder is the sole beneficial owner of the Shares subject to no
Liens except as set forth on Schedule A hereto (the "Permitted
Liens"), and the Shares are the only shares of Company Common Stock
which Stockholder or Corimon owns, has any rights to acquire or over
which Stockholder or Corimon exercises control or direction either
alone or in concert with third parties;
(vi) Shareholder has provided Buyer with a true and correct copy of all
agreements relating to the Permitted Liens;
7
<PAGE>
(vii) Stockholder has the right to dispose of and vote its Shares as
provided in this Agreement subject to the Permitted Liens; and,
(viii) at each Closing, Stockholder will convey to Buyer good and valid title
to the Shares to be purchased at such Closing free and clear of any
Liens, including without limitation, the Permitted Liens.
Section 3.2. Representations and Warranties of Buyer. Buyer hereby
---------------------------------------
represents and warrants that Buyer and Merger Subsidiary are each corporations
duly incorporated and validly existing under the laws of their jurisdictions of
incorporation, Buyer and Merger Subsidiary each has all necessary corporate
power, authority, capacity and right to enter into this Agreement and to
consummate the transactions contemplated hereby and this Agreement has been duly
executed and delivered by Buyer and Merger Subsidiary and constitutes a valid
and binding agreement enforceable by Stockholder and Corimon against Buyer and
Merger Subsidiary in accordance with its terms except as the enforceability
hereof may be limited by bankruptcy, insolvency, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and except for
limitations imposed by general principles of equity.
ARTICLE IV
MISCELLANEOUS
Section 4.1. Expenses. Except as otherwise provided herein or in the
--------
Merger Agreement, all costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses.
Section 4.2. Further Assurances. Subject to any applicable limits on
------------------
Buyer's and Merger Subsidiary's obligations under the Merger Agreement, each of
Stockholder, Corimon, Buyer and Merger Subsidiary will execute and deliver all
such further documents and instruments and take all such further action as may
be necessary in order to permit the consummation of the transactions
contemplated hereby and to coordinate a mutually convenient closing. Stockholder
and Corimon agree to use their best efforts to take all necessary actions, and
to obtain all necessary consents and amendments, with respect to the Permitted
Liens (i) to permit each of the Closings to take place as promptly as possible
after the satisfaction of the Minimum Condition and (ii) if requested by Buyer,
to permit Stockholder to tender the Shares into the Offer in accordance with
Section
8
<PAGE>
2.1; Buyer agrees to cooperate with and assist Stockholder and Corimon with
respect to the foregoing.
Section 4.3. Specific Performance. The parties hereto agree that
--------------------
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
Section 4.4. Entire Agreement. This Agreement constitutes the entire
----------------
agreement among Buyer, Merger Subsidiary, Stockholder and Corimon with respect
to the subject matter hereof and supersedes all prior agreements and
understandings, both written and oral, among Buyer, Merger Subsidiary,
Stockholder and Corimon with respect to the subject matter hereof.
Section 4.5. Assignment. This Agreement shall not be assigned,
----------
except that Buyer may assign all or any of its rights and obligations hereunder
to any affiliate of Buyer, provided that no such assignment shall relieve Buyer
--------
of its obligations hereunder if such assignee does not perform such obligations.
Section 4.6. Parties in Interest. This Agreement shall be binding
-------------------
upon, inure solely to the benefit of, and be enforceable by, the parties hereto
and the Company and their respective successors and permitted assigns. Nothing
in this Agreement, express or implied, is intended to or shall confer upon any
other person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.
Section 4.7. Amendment; Waiver. This Agreement may not be amended
-----------------
and no provision of this Agreement may be waived except by an instrument in
writing signed by the parties hereto and the Company.
Section 4.8. Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of this Agreement is not affected in any manner materially adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that the
terms of this Agreement remain as originally contemplated to the fullest extent
possible.
9
<PAGE>
Section 4.9. Notices. All notices, requests and other communications
-------
to any party hereunder shall be in writing (including telecopy or similar
writing) and shall be given,
if to Buyer or to Merger Subsidiary, to:
Imperial Chemical Industries PLC
9 Millbank
London SW1P 3JF
England
Telecopy: 011-44-171-798-5878
Attention: The Secretary
with a copy to:
Paul R. Kingsley, Esq.
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopy: (212) 450-4800
if to Stockholder or Corimon, to:
Corimon, S.A.C.A.
Calle Hans Neumann Edf. Corimon
Los Cortijos de Lourdes
Caracas, Venezuela 0171
Telecopy: 582-203-5707
Attention: Arthur Broslat
with a copy to:
David M. Kies, Esq.
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Telecopy: (212) 558-3588
In addition, copies of all notices hereunder shall be given to the Company in
accordance with Section 11.01 of the Merger Agreement.
Section 4.10. Termination; Survival. This Agreement shall terminate
---------------------
upon termination of the Merger Agreement, provided that a party will not be
relieved from liability for any breach of this Agreement. All representations
and warranties contained in this Agreement shall survive delivery of and payment
for the Shares.
Section 4.11. Corimon Guaranty. Corimon hereby confirms the
----------------
representations and warranties of Stockholder contained herein and irrevocably
and unconditionally
10
<PAGE>
guarantees to Buyer and Merger Subsidiary the prompt and full discharge by
Stockholder of all of Stockholder's covenants, agreements, obligations and
liabilities under this Agreement (collectively, the "Stockholder Obligations"),
in accordance with the terms hereof, in each case as if the Stockholder
Obligations were direct and primary obligations of Corimon. If Stockholder
shall default in the due and punctual performance of any Stockholder
Obligations, Corimon will forthwith perform or cause to be performed such
Stockholder Obligation at its sole cost and expense. The guaranty evidenced
hereby is a guaranty of payment and performance and not a guaranty of
collection. Corimon agrees to pay the expenses and costs (including, without
limitation, reasonable attorneys' fees and expenses) incurred by Buyer in
connection with any action, suit or proceeding brought or maintained against
Corimon to enforce this guaranty. Corimon hereby agrees that its obligations
under this guaranty shall be unconditional, irrespective of (a) any change in
the time, manner or place of payment, time or manner of performance or any other
term of the Stockholder Obligations or (b) any other circumstance that might
otherwise constitute a legal or equitable discharge or defense of a guarantor,
other than payment or satisfaction of the Stockholder Obligations in full.
Section 4.12. Governing Law. This Agreement shall be governed by,
-------------
and construed in accordance with, the laws of the State of New York applicable
to contracts executed in and to be performed in that State.
Section 4.13. Jurisdiction. Any suit, action or proceeding seeking
------------
to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby shall
only be brought in the United States District Court for the Southern District of
New York or any other New York State court sitting in New York City, and each of
the parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient form. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 4.9 shall be deemed
effective service of process on such party.
11
<PAGE>
Section 4.14. Headings. The descriptive headings contained in this
--------
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
Section 4.15. Counterparts. This Agreement may be executed in one of
------------
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
12
<PAGE>
IN WITNESS WHEREOF, Buyer, Merger Subsidiary, Corimon and Corimon
Corp. have caused this Agreement to be executed by their duly authorized
officers as of the date first written above.
Imperial Chemical Industries PLC
By: /s/ John Thompson
------------------
Name: John Thompson
Title: Attorney in Fact
GDEN Corporation
By: /s/John Danzeisen
------------------
Name: John Danzeisen
Title: Attorney-in-Fact
Corimon, S.A.C.A.
By: /s/ Philippe Erard
-------------------
Name: Philippe Erard
Title: President
By: /s/ Arthur Broslat
-------------------
Name: Arthur Broslat
Title: Executive Vice
President
Corimon Corporation
By: /s/ Arthur Broslat
-------------------
Name: Arthur Broslat
Title: President
By:
--------------------------
Name:
Title:
13
<PAGE>
Schedule A
----------
Stock Purchase Agreement, dated July 21, 1992, among Corimon Corporation,
Corimon, S.A.C.A. and Grow Group, Inc.
Standstill Agreement, dated July 21, 1992, among Corimon Corporation, Corimon,
S.A.C.A. and Grow Group, Inc., as amended on February 14, 1995
Credit Agreement, dated as of August 10, 1994, between Corimon Corporation and
The Chase Manhattan Bank (National Association), as amended in February 1995
(the only material effect of such amendment is that it extended the termination
of the Credit Agreement to May 10, 1995)
Stock and Note Purchase Agreement, dated as of February 14, 1995, among Corimon,
S.A.C.A., Corimon Corporation and Fidelity Capital & Investment Fund
Certificate of Designations of Series A Preferred Stock of Corimon Corporation,
filed on February 13, 1995
Put Note due 2000 issued on February 14, 1995
Escrow Agreement, dated February 14, 1995, between Corimon Corporation and
United States Trust Company of New York
Pledge Agreement, dated as of February 14, 1995, between Corimon Corporation and
United States Trust Company of New York.
Collateral Agent Agreement, dated February 14, 1995, among Corimon Corporation,
Fidelity Capital & Income Fund and United States Trust Company of New York
Security Agreement, dated as of August 10, 1994, between Corimon Corporation and
the Chase Manhattan Bank (National Association)
14
<PAGE>
Exhibit 99.4
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
- - - - - - - - - - - - - - - - - - x
GENERAL COLOR COMPANY PENSION : Index No.
PLAN, ON BEHALF OF ITSELF and ALL
OTHERS SIMILARLY SITUATED, :
Plaintiff, : CLASS ACTION COMPLAINT
----------------------
-against- :
GROW GROUP, INC., RUSSELL BANKS, :
JOSEPH M. QUINN, JOHN F. GLEASON,
PETER L. KEANE, PHILIPPE ERARD, :
TOLLY PLESSER, ROBERT J. MILANO,
ARTHUR W. BROSLAT, LLOYD FRANK, :
ANGUS N. MACDONALD, WILLIAM H.
TURNER, and HAROLD G. BITTLE, :
Defendants. :
- - - - - - - - - - - - - - - - - - x
Plaintiff, by its attorneys, alleges upon information and belief (said
information and belief being based, in part, upon the investigation conducted by
and through its undersigned counsel), except with respect to its ownership of
Grow Group, Inc. common stock, and its suitability to serve as a class
representative, which is alleged upon personal knowledge, as follows:
PARTIES
-------
1. Plaintiff General Color Company Pension Plan is the owner of 100 shares
of defendant Grow Group Inc. ("Grow" or the "Company").
<PAGE>
2. Defendant Grow is a corporation organized and existing under and by
virtue of the laws of the State of New York. Defendant Grow maintains its
principal offices at 200 Park Avenue, New York, New York, which is in the City,
County and State of New York. Defendant Grow also operates its extensive
business from its headquarters in the City, County and State of New York. In
addition, defendant Grow's shares are actively traded on the New York Stock
Exchange ("NYSE"), which is located in the City, County and State of New York.
3. Defendant Russell Banks ("Banks") is the President, Chief Executive
Officer and a Director of defendant Grow.
4. Defendant Joseph M. Quinn ("Quinn") is Executive Vice President, Chief
Operating Officer and a Director of defendant Grow.
5. Defendant John F. Gleason ("Gleason") is an Executive Vice President
and a Director of defendant Grow.
6. Defendant Peter L. Keane ("Keane") is a Director of defendant Grow.
7. Defendant Philippe Erard ("Erard") is a Director of defendant Grow.
8. Defendant Tolly Plesser ("Plesser") is a Director of defendant Grow.
9. Defendant Robert J. Milano ("Milano") is a Director of defendant Grow.
2
<PAGE>
10. Defendant Arthur W. Broslat ("Broslat") is a Director of defendant
Grow.
11. Defendant Lloyd Frank ("Frank") is a Director of defendant Grow.
12. Defendant Angus N. MacDonald ("MacDonald") is a Director of defendant
Grow.
13. Defendant William H. Turner ("Turner") is a Director of defendant
Grow.
14. Defendant Harold G. Bittle ("Bittle") is a Director of defendant Grow.
15. Defendants Banks, Quinn, Keane, Erard, Plesser, Milano, Gleason,
Bittle, Turner, MacDonald, Frank and Broslat are collectively referred to herein
as the Defendant Directors.
CLASS ACTION ALLEGATIONS
------------------------
16. Plaintiff brings this action on his own behalf and as a class action,
pursuant to Section 901 of the CPLR, on behalf of all shareholders of defendant
Grow (except defendants herein and any person, firm, trust, corporation or other
entity related to or affiliated with any of the defendants) or their successors
in interest, who have been or will be adversely affected by the conduct of
defendants alleged herein.
3
<PAGE>
17. This action is properly maintainable as a class action for the
following reasons:
(a) The class of shareholders for whose benefit this action is brought
is so numerous that joinder of all class members is impracticable. As of
February 1, 1995, there were over 16,100,000 shares of defendant Grow's common
stock outstanding owned by more than 4,000 shareholders of record scattered
throughout the United States and foreign countries.
(b) There are questions of law and fact which are common to members of
the class and which predominate over any questions affecting any individual
members. The common questions include, inter alia, the following:
----- ----
i. Whether one or more of the defendants has engaged in a plan
and scheme to enrich themselves at the expense of defendant Grow's public
stockholders;
ii. Whether the Defendant Directors have breached their
fiduciary duties owed by them to plaintiff and members of the Class, and/or
have aided and abetted in such breach, by virtue of their participation
and/or acquiescence and by their other conduct complained of herein;
iii. Whether defendants have failed to fully disclose the true
value of defendant Grow's
4
<PAGE>
assets and earning power and the future financial benefits which they
expect to derive from the merger with Imperial Chemical Industries, PLC
("ICI");
iv. Whether the Defendant Directors have wrongfully failed and
refused to seek a purchaser of Grow at the highest possible price, and
instead have sought to chill potential offers and acquire the valuable
assets of defendant Grow for defendant ICI at an unfair and inadequate
price;
v. Whether plaintiff and the other members of the Class will be
irreparably damaged by the transactions complained of herein;
vi. Whether defendants have breached or aided and abetted the
breach of the fiduciary and other common law duties owed by them to
plaintiff and the other members of the Class; and
vii. Whether defendants are pursuing a scheme and course of
business designed to eliminate the public shareholders of defendant Grow in
violation of the laws of the State of New York.
18. Plaintiff is committed to prosecuting this action and has
retained competent counsel experienced in litigation of this nature. The claims
of plaintiff are typical of the claims of the other members of the Class and
plaintiff has the same
5
<PAGE>
interest as the other members of the Class. Accordingly, plaintiff is an
adequate representative of the Class and will fairly and adequately protect the
interests of the Class.
19. Plaintiff anticipates that there will not be any difficulty in
the management of this litigation.
20. For the reasons stated herein, a class action is superior to
other available methods for the fair and efficient adjudication of this action.
FACTUAL BACKGROUND
------------------
21. Defendant Grow manufactures and markets trade paints and
coatings, chemical automotive and industrial products, including thinners,
adhesives and plastisols, high-gloss urethane coatings and chemical coatings
designed for maritime and industrial users.
22. On May 1, 1995, it was announced that Grow and ICI, an English
company, entered into a definitive merger agreement pursuant to which ICI would
offer to purchase all the outstanding shares of Grow for $18.10 per share. The
tender offer would be followed by a second-step cash merger in which each share
of Grow not acquired in the tender offer or otherwise, would be converted into
the right to receive $18.10 in cash.
23. The $18.10 offer provides little or no premium over the trading
price of Grow common stock which closed at $17-3/8 per share on April 26, 1995,
prior to the announcement of the
6
<PAGE>
tender offer. In fact, in June 1994, Grow traded at more than $19 per share.
24. In addition to the fact that the offer does not provide a
sufficient premium for Grow shareholders, it also appears that the offer was
structured to allow Grow management to maintain its positions.
25. The proposed tender offer is wrongful, unfair and harmful to
Grow's minority stockholders, the Class members, and represents an attempt by
defendants to aggrandize their personal and financial positions and interests
and to enrich themselves at the expense of and to the detriment of the minority
stockholders of the Company. The proposed transaction will deny plaintiff and
other Class members their rights to share proportionately in the true value of
the Company's assets and future growth in profits and earnings, while usurping
the same for the benefit of defendant Grow at an unfair and inadequate price,
while permitting certain of the individual defendants to reap enormous profits
from their small initial investments in the Company without the consequences
described above which would make the price being paid unacceptable to these
defendants.
CAUSE OF ACTION AGAINST ALL DEFENDANTS
--------------------------------------
26. Defendants, acting in concert, have violated their fiduciary
duties owed to the public shareholders of Grow and put their own personal
interests and the interests of ICI ahead of
7
<PAGE>
the interests of the Grow public shareholders and have used their control
positions as officers and directors of Grow all as alleged herein, and all for
the purpose of reaping high personal profits at the expense of Grow's public
shareholders.
27. The Defendant Directors failed to (1) undertake an adequate
evaluation of Grow's worth as a potential merger acquisition candidate; (2) take
adequate steps to enhance Grow's value and/or attractiveness as a
merger/acquisition candidate; (3) effectively expose Grow to the marketplace in
an effort to create an active and open auction for Grow; or (4) act
independently so that the interests of public shareholders would be protected.
Instead, defendants have arbitrarily set an exchange ratio for the publicly held
shares of defendant Grow without an appropriate premium or recognition of the
added value of Grow that will result from it being wholly-owned by ICI.
28. Furthermore, in contemplating and implementing their plan to
obtain immediate financial rewards for themselves the Defendant Directors have
failed to (1) undertake an adequate evaluation of Grow's worth as a potential
merger/acquisition candidate; (2) adequately insure that no conflicts of
interest existed, and, instead, have resolved such conflicts in favor of
themselves and ICI, rather than ensure that all conflicts were resolved in the
best interest of Grow and its public shareholders; or (3) acted independently or
in any other way to ensure
8
<PAGE>
that the interests of Grow's public shareholders will be protected.
29. Defendants have reached understandings among themselves that they
will not solicit a proposal or initiate any discussions with any person or
entity regarding any offer or proposal for the acquisition of the business of
Grow by merger, asset sale, stock sale or otherwise, while Grow is still a
publicly-held company. While the defendant directors of Grow should seek out
other possible purchasers of the assets of Grow or its stock in a manner
designed to obtain the highest possible price for Grow's shareholders, or seek
to enhance the value of Grow for all its current shareholders, they have instead
resolved to wrongfully obtain the valuable assets of Grow for ICI at a bargain
price, which, under the circumstances here, disproportionately benefits them.
These understandings have been reached in violation of the Defendant Directors'
fiduciary duties.
30. These tactics pursued by the defendants are, and will continue to
be, wrongful, unfair and harmful to Grow's public shareholders, serve no
legitimate business purpose of Grow, and are an attempt by the defendants to
aggrandize their personal positions, interests and finances at the expense of
and to the detriment of the public stockholders of Grow. These maneuvers by the
defendants will deny members of the Class their
9
<PAGE>
right to share in the true value of Grow's valuable assets, future earnings and
profitable businesses to the same extent as they would as Grow shareholders.
31. In contemplating, planning and/or doing the foregoing specified
acts and in pursuing and structuring the transaction, the defendants are not
acting in good faith toward plaintiff and the Class, and have breached, and are
breaching, their fiduciary duties to plaintiff and the Class.
32. Because the Defendant Directors dominate and control the business
and corporate affairs of Grow and because they are in possession of private
corporate information concerning Grow's businesses and future prospects, there
exists an imbalance and disparity of knowledge and economic power between the
defendants and the public shareholders of Grow which makes it inherently unfair
to Grow's public shareholders. The proposed transaction will ensure that
defendants disproportionately benefit from the value and future financial
prospects of Grow, in contravention of defendants' fiduciary duties to assure
that Grow's shareholders receive the highest value for their shares.
33. By reason of the foregoing acts, practices and course of conduct,
the Defendant Directors have failed to use ordinary care and diligence in the
exercise of their fiduciary obligations toward Grow and its public shareholders.
10
<PAGE>
34. The acts complained of here above were willful, malicious, and
oppressive, in that the defendants, and each of them, know that their actions as
complained of herein, involve improper and illegal practices, violations of law
and other acts completely alien to the duties of officers and directors to carry
out corporate affairs in a fair, just, honest, and equitable manner. By reason
of the foregoing, the Class is entitled to exemplary damages.
35. As a result of the actions of the defendants, plaintiff and the
Class have been and will be damaged in that they will not receive the fair value
of Grow's assets and business in exchange for their Grow shares, and have been
and will be prevented from obtaining a fair price for their shares of Grow
common stock.
36. Unless enjoined by this Court, the Defendant Directors will
continue to breach their fiduciary duties owed to plaintiff and the Class, and
will exclude the Class from receiving fair value for their proportionate share
of Grow's valuable assets and businesses, all to the irreparable harm of the
Class, as aforesaid.
37. Plaintiff has no adequate remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
(a) Declaring that this action may be maintained as a class
action pursuant to CPLR 901 et seq.;
-- ---
11
<PAGE>
(b) Declaring that defendants' attempts to freeze-out Grow's
public shareholders was unfair, unjust and inequitable to plaintiff and the
other members of the Class;
(c) Enjoining preliminary and permanently the defendants from
taking any steps necessary to accomplish or implement the proposed merger of
defendant Grow with defendant Grow at a price that is not fair and equitable;
(d) Imposing a voting trust upon the shares of Grow owned or
controlled by defendants to restrain their ability to use their voting control
of the Company to effect the transaction;
(e) Requiring defendants to compensate plaintiff and the members
of the Class for all losses and damages suffered and to be suffered by them as a
result of the acts and transactions complained of herein, together with
prejudgment interest from the date of the wrongs to the date of the judgment
herein .
(f) Awarding plaintiff the costs and disbursements of this
action, including reasonable attorneys', accountants', and experts' fees; and
12
<PAGE>
(g) Granting such other and further relief as may be just and
proper.
Dated: New York, New York
May 1, 1995
WOLF HALDENSTEIN ADLER
FREEMAN & HERZ LLP
270 Madison Avenue
New York, New York 10016
(212) 545-4600
LAW OFFICES OF
CHARLES J. PIVEN
The Legg Mason Tower, Ste 2700
111 S. Calvert Street
Baltimore, MD 21202
(410) 332-0030
13
<PAGE>
Exhibit 99.5
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
- - - - - - - - - - - - - - - - - - x
MIRIAM SARNOFF and FREDERICK
RAND, ON BEHALF OF THEMSELVES AND : Index No.
ALL PERSONS SIMILARLY SITUATED,,
:
Plaintiffs,
:
-against-
:
GROW GROUP, INC., RUSSELL BANKS, CLASS ACTION COMPLAINT
HAROLD G. BITTLE, ARTHUR W. : ----------------------
BROSLAT,, PHILIPPE ERARD, LLOYD
FRANK, JOHN F. GLEASON, PETER L. :
KEANE, ANGUS N. MACDONALD, ROBERT
J. MILANO, TULLY PLESSER, JOSEPH :
M. QUINN and WILLIAM H. TURNER,
:
Defendants.
:
- - - - - - - - - - - - - - - - - - x
Plaintiffs, by their attorneys, allege upon information and belief, except
as to the allegations set forth in paragraph 4, which are alleged upon personal
knowledge, as follows:
NATURE OF THE ACTION
--------------------
1. This is a class action lawsuit on behalf of the stockholders of Grow
Group, Inc. ("Grow Group" or the "Company") who have been and continue to be,
deprived of the opportunity to fully realize the benefits of their investment in
Grow Group as a result of the defendant's breach of fiduciary duty in connection
<PAGE>
with the proposed acquisition of Grow Group by Imperial Chemicals Industries PLC
("Imperial").
2. Plaintiffs seek relief with regard to the breaches of fiduciary duty by
the individual defendants in connection with a buy-out agreement (the "buy-out")
between Grow Group and Imperial announced by defendant Grow Group on May 2,
1995, pursuant to which its public shareholders will receive only $18.10 per
share even though the Company has been valued at between $22 to $24 a share.
3. The defendants have deliberately or recklessly pursued a wrongful
course of conduct designed to prevent Grow Group shareholders from receiving the
benefits of a buy-out and change in control of Grow Group. This course of
conduct has, thus far, consisted of agreeing to sell Grow Group under terms
which prevent Grow Group's public shareholders from receiving a takeover premium
and discouraging better offers and attempting to confuse shareholders into
cooperating by withholding material information from the marketplace.
4. The individual defendants' authorization to pursue the transaction was
given in breach of their fiduciary duties owed to Grow Group's public
stockholders to take all necessary steps to ensure that the stockholders will
receive the maximum value realizable for their shares in any acquisition of the
Company.
2
<PAGE>
5. In the context of this action, the Board of Directors and Officers of
Grow Group must take all reasonable steps to assure the maximization of
stockholder value, including the implementation of a bidding mechanism to foster
a fair auction of the Company to the highest bidder or the exploration of
strategic alternatives which will maximize value to the plaintiffs and the
class.
6. This action seeks preliminary and permanent injunctive relief and other
equitable remedies to protect Grow Group public shareholders from defendants'
breaches of fiduciary duty and failure to maximize shareholder value.
PARTIES
-------
7. Plaintiffs Miriam Sarnoff and Frederick Rand are and at all relevant
times have been the owners of shares of Grow Group common stock.
8. Grow Group is a corporation duly organized and existing under the law
of the State of New York, which maintains its principal executive offices at 200
Park Avenue, New York, New York.
9. Grow Group is a producer of specialty chemical coatings and
architectural paints, and detergents and maintenance cleaning products for
household, professional and industrial use.
10. As of February 1, 1995, Grow Group had approximately 16,102,713 shares
of common stock outstanding and hundreds of
3
<PAGE>
stockholders of record. Grow Group's stock trades on the New York Stock
Exchange.
11. Defendant Russell Banks is the President and Chief Executive Offer,
and Director of Grow Group. According to an SEC Form 4, filed on March 10,
1995, Banks beneficially owned approximately 424,950 outstanding shares of Grow
Group common stock.
12. Defendant Harold G. Bittle is a director of Grow Group.
13. Defendant Arthur W. Broslat is a director of Grow Group. He also
holds the positions of Executive Vice President and Chief Financial Officer of
Corimon, the Venezuelan firm which owns about 25% of the outstanding shares of
Grow Group.
14. Defendant Philipe Erard is a director of Grow Group. He also holds
the positions of Chairman, President and Chief Executive Officer of Corimon.
15. Defendant Lloyd Frank is a director of Grow Group.
16. Defendant John F. Gleason is an Executive Vice President of Grow
Group, as well as a director of the Company.
17. Defendant Peter L. Keane is a director of Grow Group.
18. Defendant Angus N. MacDonald is a director of Grow Group.
19. Defendant Robert J. Milano is a director of Grow Group.
20. Defendant Tully Plesser is a director of Grow Group.
4
<PAGE>
21. Defendant Joseph M. Quinn is a director of Grow Group, as well as
Executive Vice President and Chief Operating Officer of the Company.
22. Defendant Williams H. Turner is a director of Grow Group.
23. By reason of their corporate positions and because of their ability to
control the business and internal affairs of Grow Group, the officer and
director defendants owed to Grow Group's public shareholders, including
plaintiffs and all others similarly situated, fiduciary obligations of fidelity,
trust, loyalty and due care. Accordingly, said defendants were, and are,
required to use their utmost ability to control and manage the Company in
furtherance of the best interests of the Company's stockholders.
24. In addition, each of the officer and director defendants owes to Grow
Group's public shareholders the fiduciary duty to exercise due care and
diligence, as well as the highest obligations or good faith and fair dealing.
25. Each of the officer and director defendants owes to the Company and
its stockholders the fiduciary duty to assure that all reasonable offers or
overtures to purchase the Company are conveyed to the full board of directors,
to entertain, encourage, evaluate and pursue any bona fide offers or expressions
---- ----
of inter-
5
<PAGE>
est to purchase the Company's outstanding stock or other merger transactions in
a manner that will maximize shareholder value.
26. Each defendant herein is sued individually as an aider and abettor, as
well as in his/her capacity as an officer and/or director of the Company, and
the liability of each arises from the fact that he has engaged in all or part of
the unlawful acts, plans, schemes, or transactions complained of herein.
CLASS ACTION ALLEGATIONS
------------------------
27. Plaintiffs bring this case on their own behalf, and as a class action
on behalf of all stockholders of the Company, except defendants herein, and any
person firm, trust, corporation, or other entity related to or affiliated with
any of the defendants, or any of the Company's principal stockholders, who will
be threatened with injury arising from defendants' actions as is described more
fully below.
28. This action is properly maintainable as a class action.
29. The class is so numerous that joinder of all members is impracticable.
The Company has at least hundreds of stockholders who are scattered through the
United States.
30. There are questions of law and fact common to the class that
predominate over questions affecting any individual class member. The common
questions include, inter alia, whether:
----- ----
(a) The defendants have breached their fiduciary duties owned by them
to plaintiffs and the other members of the
6
<PAGE>
Class by failing and refusing to attempt in good faith to maximize shareholder
value in connection with the sale of control of Grow Group;
(b) Grow Group's Poison Pill was defensively enacted and implemented
to entrench defendants in their office and give them the power to sell control
only to an entity that will provide management with continued perquisites;
(c) The defendants have breached or aided and abetted the breach of
the fiduciary duties owed by them to plaintiffs and other members of the Class;
(d) The defendants engaged in a plan and scheme to thwart and reject
offers and proposals from third parties other than Imperial; and
(e) Plaintiffs and the other members of the Class are being and will
continue to be injured by the wrongful conduct alleged herein, and, if so, what
is the proper remedy and/or measure of damages.
31. Plaintiffs are committed to prosecuting this action and have retained
competent counsel experienced in litigation of this nature, Plaintiffs' claims
are typical of the claims of the other members of the Class and plaintiffs have
the same interests as the other members of the Class. Plaintiffs are adequate
representative of the Class.
7
<PAGE>
SUBSTANTIVE ALLEGATIONS
-----------------------
32. In February 1988, Grow Group adopted what it called a Shareholder
Rights Plan but what is more appropriately called a Poison Pill. The Poison
Pill has the effect of making it extraordinarily difficult, expensive and/or
impossible for any potential acquiror not approved by the individual defendants
to acquire control of Grow Group.
33. Under the plan, each Right issued to shareholders under the plan
entitles that shareholder to purchase the Company's common stock at a 50%
discount upon the acquisition by an Acquiring Person of 30% or more of the then
outstanding shares of common stock of the Company or a greater than 20% of Grow
Group common stock if the acquiror is deemed to be an "Adverse Person" by the
Board of Directors. The plan further provides that the Company is entitled to
redeem the Rights, under certain conditions, at $.01 per Right.
34. The Poison Pill has the effect of precluding successful completion of
even the most attractive offers for Grow Group unless the Grow Group board
acquiesces, thus deterring bona fide bids to purchase the Company for adequate
---- ----
consideration and denying the Company's shareholders an opportunity to make
their own choice as to the fate of the Company that they own.
35. As reported by the Dow Jones/News Retrieval Service on May 2, 1995,
the proposed transaction calls for the acquisition
8
<PAGE>
of Grow Group by Imperial for about $290 million, or $17.50 cents per share for
the 25% stake in Grow Group held by the Venezuelan firm Corimon and $18.10 per
share for those shares held by all other shareholders.
36. The proposed transaction is grossly unfair to Grow Group's public
shareholders:
(a) According to article in the New York Post dated May 2, 1995, an
-------------
analyst from Gerard Klauer Mattison & Co. valued the Company at between $22 to
$24 per share earlier this year.
(b) On February 3, 1994, analyst J. Putterman of Stephens Inc. issued
a report in which the Company was valued at $24 - $25 per share.
(c) On January 25, 1994, analyst J. Melin of Gerard Klauer Mattison &
Co. issued a report in which the Company was valued at $22 - $26 per share.
37. Defendants have failed to disclose why they have accepted such a low
bid. However, the New York Post reported, on May 2, 1995, that defendant
-------------
Russell Banks, age 75, stated that he did not plan on "moving anywhere" and had
no plans to retire. Therefore, the reasonable inference may be drawn that the
buy-out agreement was reached in order to allow the all of the defendants to
keep their positions as directors as well as to permit Banks to maintain his
position as President and Chief Executive Officer, Gleason to maintain his
position as Executive Vice Presi-
9
<PAGE>
dent, and Quinn to maintain his position as Executive Vice President and Chief
Operating Officer.
38. Moreover, Corimon, holder of a 25% stake in Grow Group is under
pressure to quickly raise $18 million dollars in order to fund its acquisition
of Standard Paints in California, announced early this year. Defendants Arthur
W. Broslat and Philippe Erard, who hold key positions in that Company, had an
incentive to accept a low bid now rather than to wait for a higher offer.
39. The existence of Grow Group's Poison Pill plan prevents competing
bids. Thus, Imperial had no incentive to make its best possible offer and every
incentive to make a low offer.
40. Because the terms of the merger agreement prohibit defendants from
negotiating with third parties, there was no possibility that competition
between Imperial and other companies could have driven up the purchase price.
41. The interests of the public shareholders are best served by a deal
which provides for the acquisition of Grow Group shares at the highest possible
price.
42. The defendants owe fiduciary obligations to the Company's shareholders
to take all necessary and appropriate steps to maximize the value of Grow
Group's shares. In addition, the individual defendants have the responsibility
to act independently so that the interests of Grow Group's public stockholders
10
<PAGE>
will be protected, to seriously consider any bona fide offers for the Company,
---- ----
and to conduct fair and active bidding procedures or other mechanisms for
checking the market to assure that the highest price is achieved.
43. The existence of a Poison Pill heightens this duty and requires the
individual defendants to pursue a third party's interest in acquiring the
Company and to negotiate in good faith with a bidder on behalf of the Company's
shareholders.
44. The individual defendants must adequately ensure that no conflict of
interest exists between their own interests and their fiduciary obligations to
maximize shareholder value or, if such conflicts exist, to ensure that all such
conflicts will be resolved in the best interests of the Company's public
stockholders.
45. The individual defendants have breached their fiduciary and other
common law duties owed to plaintiffs and other members of the class in that they
have not and are not exercising independent business judgment and have acted and
are acting to the detriment of the Class in order to benefit themselves, Grow
Group's senior management, and Corimon.
46. As a result of defendants' actions, plaintiffs and the other members
of the Class have been, and will be, damaged in that they have not and will not
receive their fair proportion of the value of Grow Group's assets and businesses
and/or have been
11
<PAGE>
and will be prevented from obtaining a fair and adequate price for their shares
of Grow Group's common stock.
47. Plaintiffs seek preliminary and permanent injunctive relief and
declaratory relief preventing defendants from inequitably and unlawfully
depriving plaintiffs and the Class of their rights to realize a full and fair
value for their stock at a material premium over the market price and to compel
defendants to carry out their fiduciary duties to maximize shareholder value in
selling Grow Group.
48. Only through the exercise of this Court's equitable powers can
plaintiffs be fully protected from the immediate and irreparable injury which
the defendants' action threaten to inflict.
49. Unless enjoined by the Court, defendants will continue to breach their
fiduciary duties owed to plaintiffs and the members of the class, and/or aid and
abet and participate in such breaches of duty, and will prevent the outright
sale of Grow Group at a material premium, all to the irreparable harm of
plaintiffs and the other members of the Class.
50. Plaintiffs and the Class have no adequate remedy at law.
WHEREFORE, plaintiffs demand judgment as follows:
12
<PAGE>
A. Declaring this to be a proper class action and certifying plaintiffs
as class representative and their counsel as class counsel;
B. Ordering the individual defendants to carry out their fiduciary duties
to plaintiffs and the other members of the Class by announcing their intention
to:
1. cooperate fully with any entity or person having a bona fide
---- ----
interest in proposing any transaction that would maximize shareholder value,
including but not limited to, a full buy-out or takeover of the Company;
2. immediately undertake an appropriate evaluation of Grow Group's
worth as a merger/acquisition candidate;
3. take all appropriate steps to enhance Grow Group's value and
attractiveness as a merger/acquisition candidate;
4. take all appropriate steps effectively to expose Grow Group to the
marketplace in an effort to create an active auction of the Company;
5. act independently so that the interests of the Company's public
shareholders will be protected; and
6. adequately ensure that no conflicts of interest exist between the
individual defendants' own interest and their fiduciary obligation to maximize
shareholder value or, in the event such conflicts exist, to ensure that all
conflicts of
13
<PAGE>
interest are resolved in the best interests of the public shareholders of the
Grow Group;
C. Ordering the individual defendants jointly and severally to account to
plaintiffs and the Class for all damages suffered and to be suffered by them as
a result of the acts and transaction alleged herein;
D. Declaring that Grow Group aided and abetted and substantially
participated in the individual defendants' breach of fiduciary duties;
E. Awarding plaintiffs the cost and disbursements of this action,
including a reasonable allowance for plaintiffs' attorneys' and experts' fees;
and
14
<PAGE>
F. Granting such other and further relief as may be just and proper.
DATED: New York, New York
May 3, 1995
Yours, etc.,
STULL, STULL & BRODY
6 East 45th Street
New York, New York 10017
Telephone: (212) 687-7230
LAW OFFICES OF JOSEPH H. WEISS
319 Fifth Avenue
New York, New York 10016
(212) 532-4171
Attorneys for Plaintiffs
15
<PAGE>
Exhibit 99.6
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
- - - - - - - - - - - - - - - - - - x
MARTIN APPELBAUM and :
ROSALYN YOUNGER,
:
Plaintiffs,
: Index No. 95-111346
-against-
: CLASS ACTION COMPLAINT
GROW GROUP, INC., ARTHUR BROSLAT, ----------------------
LLOYD FRANK, ANGUS MACDONALD, :
WILLIAM TURNER, HAROLD BITTLE,
JOHN GLEASON, ROBERT MILANO, :
TULLY PLESSER, RUSSELL BANKS,
PHILIPPE ERARD, PETER KEANE, :
JOSEPH QUINN and IMPERIAL
CHEMICAL INDUSTRIES P.L.C., :
Defendants. :
- - - - - - - - - - - - - - - - - - x
Plaintiffs, by their attorneys, allege upon information and belief,
except as to paragraph 4 which is alleged upon knowledge, as follows:
1. Plaintiffs bring this action as a class action on behalf of
themselves and all other similarly situated stockholders of Grow Group, Inc.
("Grow Group" or the "Company") against defendants for failing to take adequate
steps to insure that Grow Group shareholders receive maximum value for their
shares of Grow Group stock.
2. In particular, defendants have improperly responded to a bona fide
---- ----
expression of interest by Sherwin-Williams
<PAGE>
Company ("Sherwin-Williams") to enter into a business combination with Grow
Group by refusing to communicate with Sherwin-Williams.
3. The individual defendants are abusing their fiduciary positions of
control over Grow Group to thwart legitimate attempts to acquire the Company, to
prevent Grow Group's shareholders from knowing of, receiving, and/or acting upon
bona fide offers for the Company. The actions of the Individual Defendants
- ---- ----
constitute a breach of their fiduciary duties to maximize shareholder value, to
not consider their own interests over that of the public shareholders, and to
refrain from interfering with the voting rights of the public shareholders.
THE PARTIES
-----------
4. Plaintiffs are and have been, at all relevant times, the owner of
Grow Group common stock.
5. Defendant Grow Group is a corporation organized and existing under
the laws of the State of New York with offices at 200 Park Avenue, New York, New
York. Grow Group manufactures and markets trade paints and coatings, chemical
automotive and industrial products, including thinners, adhesives and
plastisols, high gloss urethane coatings and chemical coatings. The Company had,
as of February 1, 1995, approximately 16 million shares outstanding held by 4
thousand stockholders of record.
2
<PAGE>
6. Defendant Russel Banks ("Banks") is and has been at all relevant
times the Company's President and Chief Executive Officer.
7. Defendants Arthur Broslat, Lloyd Frank, Angus MacDonald, William
Turner, Harold Bittle, John Gleason, Robert Milano, Tully Plesser, Philippe
Erard, Peter Keane and Joseph Quinn are and have been at all relevant times
directors of Grow Group.
8. By virtue of their position as directors and/or officers of Grow
Group, the defendants referred to in paragraphs 6 and 7 above (collectively
referred to herein as the "Individual Defendants") were and are in a fiduciary
relationship with plaintiffs and the other public stockholders of the Company,
and owe to plaintiffs and the other members of the Class the highest obligations
of good faith, complete candor and fair dealing.
9. Imperial Chemical Industries, PLC ("Imperial" is named herein as
an aider and abettor of the breach of fiduciary duties with which the Individual
Defendants have been charged. Imperial is a British corporation which is subject
to jurisdiction in this state as a result of the business activities conducted
in this state.
3
<PAGE>
CLASS ACTION ALLEGATIONS
------------------------
10. Plaintiffs bring this action for declaratory, injunctive and
other relief on their own behalf and as a class action pursuant to CPLR (S) 901
et seq. and on behalf of all common stockholders of Grow Group (except
defendants herein and any person, firm, trust, corporation or other entity
related to or affiliated with any of the defendants) or their successors in
interest, who are being deprived of the opportunity to maximize the value of
their Grow Group shares by the wrongful acts of the defendants as described
herein.
11. This action is properly maintainable as a class action for the
following reasons:
(a) The class of stockholders for whose benefit this action is
brought is so numerous that joinder of all class members is impracticable. There
are approximately 16 million common shares of Grow Group outstanding, owned by 4
thousand of stockholders of record. Members of the Class are scattered
throughout the United States.
(b) There are questions of law and fact which are common to
members of the Class and which predominate over all questions affecting only
individual members, including whether the defendants have breached or aided and
abetted a breach of the fiduciary duties owed by them to plaintiffs and members
of the Class by reason of the acts described herein.
4
<PAGE>
(c) The claims of plaintiffs are typical of the claims of the
other members of the Class and plaintiffs has no interests that are adverse or
antagonistic to the interests of the Class.
(d) Plaintiffs are committed to the vigorous prosecution of this
action and have retained competent counsel experienced in litigation of this
nature. Accordingly, plaintiffs are adequate representatives of the Class and
will fairly and adequately protect the interests of the Class.
(e) The prosecution of separate actions by individual members
of the Class would create a risk of inconsistent or varying adjudications with
respect to individual members of the Class and establish incompatible standards
of conduct for the party opposing the Class.
(f) Defendants have acted and are about to act on grounds
generally applicable to the Class, thereby making appropriate final injunctive
or corresponding declaratory relief with respect to the Class as a whole.
FACTUAL BACKGROUND
------------------
12. On May 1, 1995, it was announced that defendant Grow Group had
entered into an agreement to be acquired by Imperial. Under the terms of the
acquisition, plaintiffs and
5
<PAGE>
other Class members will receive $18.10 per share for an aggregate value of
approximately $290 million.
13. The merger agreement calls for Imperial to make a cash tender
offer promptly for all outstanding common shares of Grow Group at $18.10 per
share. The tender offer will be followed as soon as possible by a second-step
cash merger in which each share of Grow Group not acquired in the tender offer
will be converted into the right to receive $18.10 in cash.
14. Corimon S.A.C.A., the Venezuelan firm which owns about 25% of
Grow Group's shares, entered a separate agreement to sell its Grow Group shares
to Imperial for $17.50 a share.
15. Imperial's purchase of the shares owned by Corimon is conditioned
upon Imperial's prior completion of the tender offer.
16. Grow Group said its board unanimously approved the merger based
on, among other things, an opinion as to the fairness of the offer and the
merger from investment advisor Wertheim Schroder & Co.
17. Imperial's tender offer is conditioned on, among other things,
the valid tender of at least two-thirds of Grow Group's shares on a fully
diluted basis, including the Corimon shares. The tender offer is scheduled to
start later this week.
18. On May 4, 1995 it was publicly reported, for the first time, in a
filing with the Securities and Exchange Commis-
6
<PAGE>
sion that Grow Group had received an expression of interest from Sherwin-
Williams.
19. According to the filing, the Company received a letter on April
29 and phone calls on May 1 from Sherwin-Williams' representatives reiterating
its interest.
20. Sherwin-Williams said in the letter that it had offered to enter
into a confidentiality agreement with Grow Group on March 17 and forwarded a
copy of the agreement on March 31 but that Grow Group never executed the
agreement.
21. In the letter, Sherwin-Williams said it was informed on April 17
that it was to be excluded from any bidding process.
22. The Individual Defendants have entered into the merger agreement
without properly exposing Grow Group for sale. By failing to publicly expose
Grow Group for sale, the Individual Defendants remain essentially uniformed of
the true value of Grow Group and/or whether some other potential transaction
partner is willing, or in a better position, to maximize the value of Grow
Group's equity. Indeed, the Individual Defendants have affirmatively
discouraged a bona fide bidder.
---- ----
23. Despite Sherwin-Williams' evident seriousness of purpose,
defendants have acted without regard to the fiduciary duty they owe Grow Group's
shareholders and have cavalierly failed to enter into any discussion with
Sherwin-William to
7
<PAGE>
inform themselves about Sherwin Williams' intentions. Instead, defendants
entered into the agreement with Imperial.
24. The Individual Defendants have breached their fiduciary duties of
due care to Grow Group stockholders by failing to take all reasonable steps to
maximize shareholder value and prematurely entering into a merger agreement with
Imperial which will have the effect of chilling the emergence of expression of
interest by other potential suitors.
25. Potential acquirors could present Grow Group with a broad range
of alternatives for Class members which need to be analyzed by independent
directors and advisors who are unfettered by concerns for the interests the
conflicted directors or any other affiliated shareholders who may have interests
which conflict with other Class members.
26. As members of the Board of Directors, Grow Group and the
Individual Defendants owe to Grow Group stockholders certain fiduciary duties,
including the highest obligations of due care, good faith, loyalty, candor and
to maximize shareholder value. The Individual Defendants must act independently
so that the interests of the Class are adequately protected, and take steps to
avoid or neutralize any conflicts of interest in connection with discussions and
negotiations concerning a sale of Grow Group or some other extraordinary
transaction involving the Company.
8
<PAGE>
27. The defendants have breached, are breaching, and will continue to
breach their fiduciary duties by at least the following:
(a) By failing to respond in a reasonable and informed manner to
Sherwin-Williams' announcements regarding its interest in a business combination
with the Company; and
(b) By failing to inform themselves as to other potential
acquirors or merger partners for the Company so as to maximize stockholder
value.
28. The actions taken by the Individual Defendants are in breach of
those fiduciary duties owed to plaintiffs and the other members of the Class.
Defendants have failed to take steps to avoid or neutralize any conflicts of
interest in connection with negotiations leading up to a sale or other
extraordinary transaction involving Grow Group.
29. As a result of the foregoing, Grow Group and the Individual
Defendants have breached their fiduciary duties of good faith, fair dealing,
loyalty and candor, and have failed to maximize shareholder value owed to
plaintiffs and the Class.
30. Plaintiffs and the Class have no adequate remedy at law.
WHEREFORE, plaintiffs demand judgment as follows:
A. Declaring this to be a proper class action;
9
<PAGE>
B. Ordering defendants to carry out their fiduciary duties to
plaintiffs and the other members of the Class, including those of due care
and candor;
C. Rescinding any transactions effected by the defendants in an
unfair manner and for an unfair price and in the event such transaction is
consummated prior to trial, awarding rescissory damages;
D. Enjoining the complained of transaction or any related
transactions;
E. Ordering defendants, jointly and severally, to pay to plaintiffs
and the Class all damages suffered and to be suffered by them as a result
of the acts and transactions alleged herein;
F. Ordering defendants, jointly and severally, to account to
plaintiffs and the Class for all profits realized and to be realized by
them as a result of the transaction complained of and pending such
accounting to hold such profits in a constructive trust for the benefit of
plaintiffs and the other members of the class;
G. Awarding plaintiffs the costs and disbursements of the action,
including allowance for plaintiffs' reasonable attorneys' and experts'
fees; and
10
<PAGE>
H. Granting such other and further relief as may be just and proper
in the premises.
Dated: New York, York
May 5, 1995
Yours, etc.,
ABBEY & ELLIS
212 East 39th Street
New York, New York 10016
(212) 889-3700
LAW OFFICES OF JAMES V. BASHIAN
500 Fifth Avenue
Suite 2800
New York, New York 10110
(212) 921-4110
Attorneys for Plaintiffs
11
<PAGE>
Exhibit 99.7
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
- - - - - - - - - - - - - - - - - - - - x
SAMUEL PILL,
: COMPLAINT
Plaintiff, ---------
-against- : CLASS ACTION
------------
GROW GROUP, INC., HAROLD G. :
BITTLE, JOHN F. GLEASON, ROBERT Index #95-111439
J. MILANO, TULLY PLESSER, RUSSELL :
BANKS, PHILIPPE ERARD, PETER L.
KEANE, JOSEPH M. QUINN, ARTHUR W. :
BROSLAT, LLOYD FRANK, ANGUS N.
MacDONALD, and WILLIAM H. TURNER, :
Defendants. :
- - - - - - - - - - - - - - - - - - - - x
Plaintiff, by his attorneys, alleges upon information and belief,
except as to paragraph 2 which plaintiff alleges upon knowledge:
1. Plaintiff brings this action on behalf of himself and all other
stockholders of defendant Grow Group, Inc. ("Grow Group" or the "Company" and
the "Class", respectively) to enjoin defendants from continuing their approval
of the $18.10 per share acquisition bid and for damages sustained as a result of
defendants' failure to auction the Company to the highest bidder and for
defendants' failure to bargain in good faith with a potential other bidder.
Plaintiff and the Class are entitled to the relief prayed for herein because the
acts, as alleged herein, constitute
<PAGE>
a breach of fiduciary duties owed to the Grow Group stockholders by the
defendants.
2. Plaintiff Samuel Pill owns 300 shares of Grow Group and has been
a stockholder at all relevant times.
3. Grow Group is a New York corporation, with its principal offices
located at 200 Park Avenue, New York, NY 10166. Grow Group manufactures chemical
coatings and household products. The Company produces paints, stains, varnishes
and related equipment and decorating accessories. Grow Group's coatings are sold
through over 1,000 retail outlets in the United States. The Company also makes
swimming pool chemicals, household and industrial cleaning products, polymers
for painting and aerosol products. Grow Group's stock is listed and actively
traded on the New York Stock Exchange.
4. Defendant Russell Banks, is president and CEO of the Company.
5. Defendant Joseph M. Quinn is Chief Operating Officer and Executive
Vice-President of the Company.
6. Defendant John F. Glenn is an Executive Vice President of the
Company.
7. Defendant Harold G. Bittle is a Director of the Company.
8. Defendant Robert J. Milano is a Director of the Company.
2
<PAGE>
9. Defendant Tully Plesser is a Director of the Company.
10. Defendant Philippe Erard is a Director of the Company.
11. Defendant Peter L. Keane is a Director of the Company.
12. Defendant Arthur W. Broslat is a Director of the Company.
13. Lloyd Frank is the Secretary and a Director of the Company.
14. Angus N. MacDonald is a Director of the Company.
15. William H. Turner is a Director of the Company.
16. The individuals named in paragraphs 4 through 15, inclusive may
be hereinafter referred to as the "Individual Defendants."
17. By reason of their positions with Grow Group, the Individual
Defendants are in fiduciary relationships with plaintiff and the Class and
accordingly, owe them the highest obligations of good faith and fair dealing.
CLASS ACTION ALLEGATIONS
------------------------
18. Plaintiff brings this case on his own behalf and as a class
action, pursuant to Article 9 of the Civil Practice Law & Rules of New York, on
behalf of all stockholders of Grow
3
<PAGE>
Group (except the defendants herein and any person, firm, trust, corporation, or
other entity related to or affiliated with any of the defendants) and their
successors in interest, who are or will be threatened with the deprivation of
their equity interest in Grow Group through the unlawful scheme of the
acquisition as described herein.
19. This action properly maintainable as a class action for the
following reasons:
(a) The class is so numerous that joinder of all members is
impracticable. While the exact number of class members is unknown to plaintiff
at this time and can only be ascertained through appropriate discovery, there
are more than 16 million shares of Grow Group's common stock outstanding held by
thousands of shareholders. The holders of these shares are believed to be
geographically dispersed throughout the United States. Grow Group's common stock
is listed and actively traded on the New York Stock Exchange.
(b) There are questions of law and fact which are common to the
class and which predominate over questions affecting any individual class
member. The common questions include, inter alia, the following:
----- ----
a. whether defendants have engaged in a plan and scheme to
enrich themselves at the expense of Grow Group's public
4
<PAGE>
stockholders by the merger through fraudulent, deceptive and coercive means and
devices;
b. whether defendants have breached their fiduciary and common
law duties owned by them by agreeing to an acquisition by Imperial Chemical
Industries Plc of Great Britain for $18.10 a share or a total of $290 million;
c. whether defendants have breached their fiduciary and other
common law duties by refusing to enter into a confidentiality agreement or an
acquisition agreement with Sherwin William;
d. whether defendants have breached their fiduciary and other
common law duties by not auctioning off the Company to the highest bidder; and
e. whether plaintiff and the other members of the class as it
was were damaged by the acts complained of herein.
20. Plaintiff is committed to prosecuting this action and has
retained competent counsel experienced in litigation of this nature. The claims
of plaintiff are typical of the claims of other members of the class and
plaintiff has the same interests as the other members of the class. Plaintiff
is an adequate representative of the class and will fairly and adequately
protect the interests of the class.
5
<PAGE>
21. The likelihood that individual members of the class will prosecute
separate individual actions is remote due to the burden and expense of
prosecuting litigation of this nature and magnitude. Plaintiff anticipates that
there will not be any difficulty in the management of this litigation.
22. For the reasons stated herein, a class action is superior to other
available methods for the fair and efficient adjudication of the controversy and
the requirements of Article 9 of the New York Civil Practice Law and Rules are
satisfied.
SUBSTANTIVE ALLEGATIONS
-----------------------
23. On May 4, 1995, the Bloomberg Business News reported that Grow Group
agreed to be acquired by Imperial Chemical Industries Plc of Great Britain
("Imperial") in a transaction that values the company at $18.10 a share, or a
total of $290 million (the "Acquisition").
24. Grow Group agreed to be acquired by Imperial despite an April 28,
letter from Sherwin Williams Co. ("Sherwin") imploring Grow Group not to sign an
acquisition agreement with another firm ("Sherwin Letter").
25. After receiving the Sherwin letter, Grow Group asked Imperial to
raise its $18.10 a share offer, but Imperial declined.
6
<PAGE>
26. Corimon C.A. SACA ("Corimon") a Venezuelan industrial corporation has
a 25% stake in Grow Group. Defendant Broslat serves as the Chief Financial
Officer of Corimon.
27. Corimon granted Imperial an option to buy its 25% stake, but that
option terminates if Imperials merger agreement with Grow Group's falls through.
28. The consideration of $18.10 per share proposed to be paid to public
stockholders, as defendants are aware, is grossly unfair, inadequate and not
representative of the true and present value of Grow Group because as set forth
above, at least one bidder, Sherwin, had expressed an interest in the Company.
29. On March 17, 1995 Sherwin offered to enter into a confidentiality
agreement with Grow Group, that would enable Sherwin, a potential acquirer to
inspect Grow Group's financial records in order to prepare a bid, and on March
31, 1995 forwarded a signed copy of such confidentiality agreement to the
Company.
30. On April 17, 1995 Grow Group told Sherwin that it would be excluded
from bidding for the Company.
31. When asked why Imperial's overtures were rebuffed Sherwin's President
Ivy responded "I don't have any idea."
32. By failing to auction the Company to the highest bidder, defendants
have breached their fiduciary duties to the plaintiff and the Class.
7
<PAGE>
33. Apparently on rumors of Sherwin's interest in the Company, the
Company's stock climbed to $19 3/8.
34. By the acts, transactions and courses of conduct alleged herein,
the defendants individually and as part of a common plan or scheme and/or aiding
and abetting one another, in total disregard of their fiduciary duties and in
bad faith to plaintiff and the Class, are pursuing a plan to deprive plaintiff
and the Class of their investments in Grow Group's at a grossly inadequate
price.
35. The option granted to Imperial by Corimon to purchase Corimon's
25% interest in the Company is also a breach of the fiduciary duties owed by
defendant Broslat.
36. As a result of the foregoing, defendants herein have engaged in,
and knowingly or recklessly and substantially assisted in and aided and abetted
each other in a breach of their fiduciary and other common law duties to the
plaintiff and to the class.
37. As a result of the actions of the defendants, plaintiff and the
class have been and will be damaged in that they have not and will not receive
their fair value of their investment in Grow Group.
38. Unless enjoined by this Court, defendants will continue to breach
their fiduciary duties owed to plaintiff and
8
<PAGE>
the class, and will consummate the acquisition to the irreparable harm of the
class.
39. Plaintiff and the class have no adequate remedy at law.
WHEREFORE, plaintiff prays for judgment and relief as follows:
(1) Declaring this action to be a proper class action;
(2) Declaring that the Individual Defendants and each of them have
breached their fiduciary duties to Grow Group and its stockholders;
(3) Preliminarily and permanently enjoining defendants and their counsel,
agents, servants, employees and all persons acting under, in concert with, or
for them, from proceeding with, consummating or closing the acquisition;
(4) In the event the Acquisition is consummated, granting plaintiff and
the Class appropriate damages;
(5) Granting compensatory damages in an amount to be determined upon the
proof submitted to the Court;
(6) Granting costs and disbursements;
(7) Granting plaintiff's counsel and expert fees; and
9
<PAGE>
(8) Providing for such other and further relief as may be necessary and
appropriate.
Dated: May 5, 1995
--------------------------------------
WOLF POPPER ROSS WOLF
& JONES, L.L.P.
845 Third Avenue
New York, New York 10022
(212) 759-4600
Attorneys for Plaintiff
10
<PAGE>
Exhibit 99.8
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.
<PAGE>
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
2
<PAGE>
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.
3
<PAGE>
Jurisdiction and Venue
----------------------
9. This Court has jurisdiction over this action pursuant to Section
27 of the Exchange Act, 15 U.S.C. (S) 78(aa), and 28 U.S.C. (S)(S) 1331.
10. Venue is proper in this District pursuant to Section 27 of the
Exchange Act, 15 U.S.C. (S) 78(aa), and 28 U.S.C. (S) 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. (S)
781, and is listed on the
4
<PAGE>
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.
5
<PAGE>
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
SherwinWilliams' 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.
6
<PAGE>
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
7
<PAGE>
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;
8
<PAGE>
(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
9
<PAGE>
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
10
<PAGE>
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.
11
<PAGE>
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.
12
<PAGE>
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
13
<PAGE>
(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 (S) 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 (S)10.02.)
In other words, the Break-Up Fee provision contained in Section 11.04
survives any termination of the ICI Merger Agreement, for any reason.
--- ---
45. ICI's fraudulent omission of these material facts concerning the
breakup fee provisions in the Merger Agreement conceal the plainly unreasonable
character of the breakup fee as negotiated and agreed to by ICI and Grow.
Misrepresentations Concerning the Corimon Lock Up
- -------------------------------------------------
46. The Offer to Purchase also fails to disclose that ICI entered
into and Grow consented to the Lock Up Option, despite the fact that it violates
Rules 14d-7 and 14d-10 under the Williams Act as a matter of law.
14
<PAGE>
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 "allholders 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.
15
<PAGE>
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.
16
<PAGE>
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'
17
<PAGE>
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 (S) 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
18
<PAGE>
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).
19
<PAGE>
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.
20
<PAGE>
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
21
<PAGE>
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.
22
<PAGE>
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.)
---
23
<PAGE>
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.
24
<PAGE>
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.
25
<PAGE>
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. (S) 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.
26
<PAGE>
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 SherwinWilliams 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
27
<PAGE>
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
28
<PAGE>
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
29
<PAGE>
Exhibit 99.9
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,
<PAGE>
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
2
<PAGE>
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
3
<PAGE>
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
4
<PAGE>
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
5
<PAGE>
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.
6
<PAGE>
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
7
<PAGE>
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.
8
<PAGE>
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.
9
<PAGE>
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, Sherwin-
10
<PAGE>
Williams revoked its offer to enter into a confidentiality agreement with Grow.
Following Grow's April 17 rejection of Sherwin-Williams' Sherwin-Williams'
financial advisor, Lazard, continued to be in contact with Grow through Wertheim
and expressed 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. . . .
11
<PAGE>
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.
12
<PAGE>
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.)
13
<PAGE>
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
14
<PAGE>
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 3 1/2% owned
by Grow's Employee Stock Ownership and Savings Plan and thereby block any
competing bid. Because a competing bid would need 66 2/3 of the shares to be
successful, the Option Agreement renders any competing offer, no matter how
high, futile.
36. Further, under the option Agreement, ICI may compel Corimon to
tender the Corimon Shares into ICI's tender offer (in which event, Corimon must
kick back $.60 per share to ICI to preserve ICI's discriminatory discount) and
ICI may prohibit Corimon from subsequently withdrawing such tendered shares
until the Option expires, thereby effectively preventing a competing
15
<PAGE>
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
16
<PAGE>
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;
17
<PAGE>
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
18
<PAGE>
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 2/3% of the common stock of Grow; (b)
invalidation of the $8 million Break-Up Fee; (c) approval by the Board of
Directors of Grow of a memorandum of understanding with respect to the merger,
pursuant to Section 11 of Grow's Certificate of Incorporation; (d) approval by
the Board of Directors of Grow of either the purchase of shares pursuant to the
offer or the merger, pursuant to New York Anti-Takeover Statute; (e) an
agreement by Grow and its Board of Directors that upon consummation of the
offer, the Board of Directors of Grow will be reconstituted such that the
percentage of the Board represented by Sherwin-Williams' designees will be as
nearly as practicable the
19
<PAGE>
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.
20
<PAGE>
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
21
<PAGE>
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.
22
<PAGE>
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.
23
<PAGE>
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
24
<PAGE>
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;
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<PAGE>
-- 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
26
<PAGE>
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 (S) 912)
68. Plaintiff repeats and realleges paragraphs 1 through [671] of
this Complaint.
69. New York Business Corporation Law (S) 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
27
<PAGE>
Merger. Thus, under BCL (S) 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 (S)
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 (S) 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 (S) 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.
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<PAGE>
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 unrea-
29
<PAGE>
sonable, 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
30
<PAGE>
(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
31
<PAGE>
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
32
<PAGE>
N. Grant such other and further relief as the Court may deem just
and proper.
Dated: New York, New York
May 8, 1995
ROGERS & WELLS
200 Park Avenue
New York, NY 10166
(212) 878-8000
Attorneys for Plaintiff
The Sherwin-Williams Company
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<PAGE>
Exhibit 99.10
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
__________________________________________
:
A.D. GELHART & CO., INC., :
ON BEHALF OF ITSELF and ALL OTHERS :
SIMILARLY SITUATED, :
: Index No. 95/111517
Plaintiff, :
:
: CLASS ACTION COMPLAINT
: ----------------------
:
:
-against - :
:
GROW GROUP, INC., RUSSELL BANKS, :
JOSEPH M. QUINN, JOHN F. GLEASON, :
PETER L. KEANE, PHILIPPE ERARD, :
TOLLY PLESSER, ROBERT J. MILANO, :
ARTHUR W. BROSLAT, LLOYD FRANK, :
ANGUS N. MACDONALD, WILLIAM :
H. TURNER, and HAROLD G. BITTLE, :
:
Defendants. :
:
__________________________________________
Plaintiff, individually and on behalf of all others similarly
situated, by its undersigned attorneys, for its complaint, alleges based upon
personal knowledge as to itself and its own acts, and upon information and
belief as to all other matters, based upon, inter alia, the investigation made
by and through its attorneys, which investigation included, among other things,
a review of public documents, published reports and news articles:
<PAGE>
NATURE OF THE ACTION
--------------------
1. Plaintiff A.D. Gilhart & Co., Inc. brings this class action on
behalf of itself and the public stockholders of Grow Group, Inc. ("Grow Group"
or the "Company") against defendants herein for failing to insure that the
shareholders of the Company receive maximum value for their shares of the common
stock of the Company.
2. The Company is supporting a tender offer (the "Tender Offer") by
GDEN Corporation, a New York corporation and a wholly owned subsidiary of
Imperial Chemical Industries PLC, a company organized under the laws of England
("ICI"), to purchase all of the outstanding common stock of the Company, for the
grossly inadequate price of $18.10 per share. Moreover, defendants, through the
use of a shareholder rights plan or "poison pill" and a lock-up and bust up fee
granted to ICI, have effectively impeded competing bids for the Company's shares
and removed the possibility of the Company's shareholders receiving the best
possible valuation of their shares. Plaintiff seeks to recover damages from the
Director Defendants, as defined below, for breach of fiduciary duty to maximize
shareholder value in connection with the Tender Offer.
3. The Company and the Director Defendants owe to the Company's
stockholders the highest fiduciary obligations of fidelity, trust, loyalty and
due care and to act in furtherance of the best interests of the Company and its
stockholders. In an effort to entrench themselves in their positions with the
Company, and to earn potential profits of in excess of $6.5 million, by forcing
potential acquirors to pay for their cooperation, the Director Defendants are
2
<PAGE>
using fiduciary positions of control over the Company to aid ICI in their Tender
Offer. The actions taken or intended to be taken by defendants to aid the
proposed takeover of the Company constitute self dealing, deception, unfair
dealing, overreaching and a breach of their fiduciary duty to maximize
shareholder value.
THE PARTIES
-----------
4. Plaintiff A.D. Gilhart & Co., Inc. owns shares of the Company's
common stock and has held such stock up to and including the time of the
announced Tender Offer.
5. Defendant Company is a corporation organized and existing under
the laws of the State of New York since 1950, with its principal executive
offices located at 200 Park Avenue, New York, New York 10166. The Company and
its subsidiaries purport to formulate and produce a complete line of
architectural coatings, including paints, and a diverse line of chemical
products for the automotive industry and maritime and industrial users.
6. As of April 29, 1995, the Company had approximately 16,420,411
shares of common stock outstanding, which shares are traded on the New York
Stock Exchange.
7. The below named defendants (the "Director Defendants") constitute
the entire Board of Directors of the Company as of September, 1994:
(a) Defendant Russell Banks, has been President and Chief
Executive Officer of the Company since 1962 and a director since 1960.
If the Tender Offer is completed, defendant Banks will reap a windfall
of $2.1 million pursuant to an employment agreement; $400,000 pursuant
to a consulting agreement; $115,000
3
<PAGE>
pursuant to a stock option agreement; and up to $620,000 pursuant to a
supplemental retirement and death benefit agreement.
(b) Defendant Philippe Erard, has been a director of the Company
since 1992. Defendant Erard is also Chairman of Corimon C.A.S.A.C.A.,
a Venezuelan industrial corporation ("Corimon") which has agreed to
sell its 25% stake of the Company's common stock to ICI for $70.5
million. Defendant Erard is acting in the best interests of Corimon,
not the other public shareholders of the Company. If the Tender Offer
is completed, defendant Erard will personally reap a $62,900 windfall
pursuant to a stock option agreement.
(c) Defendant Arthur W. Broslat, has been a director of the
Company since 1992. Defendant Broslat is also an Executive Vice
President and the Chief Financial Officer of Corimon. If the Tender
Offer is completed, defendant Broslat will reap a $61,000 windfall
pursuant to a stock option agreement.
(d) Defendant Joseph M. Quinn is an Executive Vice President,
Chief Operating Officer and director of the Company. If the Tender
Offer is completed, defendant Quinn will reap of windfall of $1.03
million pursuant to the terms of an employment agreement; $350,000
pursuant to a stock option agreement; and up to $377,285 pursuant to a
supplemental retirement and death benefit agreement.
(e) Defendant John F. Gleason, is an Executive Vice President and
director of the Company. Defendant Gleason became a director of the
Company
4
<PAGE>
in 1976. If the Tender Offer is completed, defendant Gleason will
reap a $15,000 windfall pursuant to a stock option agreement; and up
to $347,665 pursuant to a supplemental retirement and death benefit
agreement.
(f) Defendant Peter L. Keane has been a director of the Company
since 1969. If the Tender Offer is completed, defendant Keane will
reap a windfall of $20,000 for 10 years under a director fee
continuation plan.
(g) Defendant Harold G. Bittle, became a director of the Company
in 1993. Defendant Bittle also has served as a consultant to Corimon
from 1951 to 1989. If the Tender Offer is completed, defendant Bittle
will reap a $41,000 windfall pursuant to a stock option agreement.
(h) Defendant Robert J. Milano, has been a director since 1983.
If the Tender Offer is completed, defendant Milano will reap a
windfall of $20,000 a year for life under a director fee continuation
plan.
(i) Defendant Tully Plesser became a director of the Company in
1993. If the Tender Offer is completed, defendant Plesser will reap a
$41,000 windfall pursuant to a stock option agreement.
(j) Defendant Lloyd Frank is Secretary and a director the
Company. If the Tender Offer is completed, defendant Frank will reap
a windfall of $20,000 for 10 years under a fee director fee
continuation plan; $72,000 pursuant to a stock
5
<PAGE>
option agreement; and up to $248,332 pursuant to a supplemental
retirement and death benefit agreement.
(k) Defendant Angus N. MacDonald has been a director of the
Company since 1984. If the Tender Offer is completed, defendant
MacDonald will reap a windfall of $20,000 for 10 years under a fee
director fee continuation plan.
(l) Defendant William H. Turner has been a director of the
Company since June 1994.
8. The Director Defendants as a group stand to personally reap a
windfall of in excess of $6.5 million if the Tender Offer is consummated.
9. By reason of their relationships and offices, the Director
Defendants are in a fiduciary relationship with the plaintiff and the other
public shareholders of the Company and owe to them the highest obligations of
good faith, loyalty and fair dealing. They are sued herein because they have
breached these fiduciary duties.
CLASS ACTION ALLEGATIONS
------------------------
10. Plaintiff brings this action on its own behalf and as a class
action pursuant to CPLR (S) 901, seeking declaratory, injunctive and other
relief, on behalf of all current common stockholders of the Company (the
"Class') (excluded from the Class are defendants herein and any person, firm,
trust, corporation or other entity related to or affiliated with defendants) who
are or will be deprived of their equity interest in the Company at an unfair
price under the proposed Tender Offer of the Company's public stockholders
through the wrongful acts described herein.
6
<PAGE>
11. This action is properly maintainable as a class action pursuant
to Rule 901 of the New York Civil Practice Law and Rules for the following
reasons:
a. The Class of stockholders for whose benefit this action is
brought is so numerous that joinder of all Class members is
impracticable. There are approximately 16,420,411 shares of the
Company's common stock outstanding, held by approximately 4,000
shareholders of record and thousands more beneficial owners, all
widely dispersed. Furthermore, as the damages suffered by individual
Class members may be small, the expense and burden of individual
litigation makes it virtually impossible for the Class members on an
individual basis to address wrongs done to them.
b. There are questions of law and fact which are common to
members of the Class and which predominate over any questions
affecting only individual members, including whether the defendants
have breached their fiduciary duties to plaintiff and the Class by
reason of:
(1) their efforts to entrench themselves in office and
prevent the Company's public shareholders from maximizing the
value of their holdings;
(2) engaging in unlawful plans and schemes to thwart valid
offers and proposals to acquire the Company at terms more
favorable to the Company's shareholders;
7
<PAGE>
(3) approving and causing the Company to adopt and retain
various provisions designed solely to discourage competing tender
offers, including a poison pill and lockup fee, without regard to
the best interests of the Company's shareholders; and
(4) damaging shareholders by preventing them from the
financial benefits of a tender offer for their shares at terms
more beneficial than those offered by ICI.
c. The claims of plaintiff are typical of the claims of the
other members of the Class and Plaintiff has no interests that are
adverse or antagonistic to the interest of the Class.
d. Plaintiff is a member of the Class, has sustained and will
sustain damages as a result of the misconduct alleged herein, and is
committed to prosecuting this action and has retained competent
counsel experienced in litigation of this nature. Accordingly,
plaintiff is an adequate representative of the Class and will fairly
and adequately protect the interests of the Class.
e. The prosecution of separate actions by individual members of
the Class would create a risk of inconsistent or varying adjudications
with respect to individual members of the Class which would establish
incompatible standards of conduct for the party opposing the Class.
8
<PAGE>
f. A class action is superior to the other available methods for
adjudication of this controversy. There will be no difficulty in the
management of this case as a class action.
FACTUAL BACKGROUND
------------------
12. On May 1, 1995, Imperial Chemical Industries announced that it
had agreed to buy Grow Group for $290 million; that it had reached an agreement
with the Company's biggest shareholder, Corimon, to sell its 25 percent stake
for $17.50 per share; and that the Company's directors had agreed to a tender
offer for the rest of the Company's shares at $18.10 each.
13. The Board of Directors of the Company, in the Company's Form 14D-
9 filed with the Securities and Exchange Commission on May 4, 1995, stated that
they had unanimously determined that the offer and merger are fair and in the
best interest of the Company's shareholders, and recommended that the
shareholders accept the offer and tender their shares.
14. The merger agreement calls for ICI to make a cash Tender Offer
for all outstanding shares of the Company for $18.10 per share. The Tender
Offer will be followed as soon as possible by a second-step cash merger in which
each share of the Company's common stock not acquired in the merger would be
converted into the right to receive $18.10 in cash.
15. Corimon, the Company's largest shareholder which is represented
by three of its officers on the Company's Board of Directors, has entered into a
separate agreement with
9
<PAGE>
ICI to sell its 25% stake of the outstanding common stock of the Company to ICI
for $70.5 million.
16. On May 4, 1995, it was publicly reported for the first time that
the Company had received a credible and serious expression of interest from
Sherwin-Williams Company ("Sherwin-Williams") to acquire the Company. It was
reported that the Company, on April 28, 1995, received a letter from Sherwin-
Williams stating that they were interested in pursuing a transaction to purchase
the Company, but that the Company had notified Sherwin-Williams on April 17,
1995 that Sherwin-Williams would be excluded from bidding on the Company.
SUBSTANTIVE ALLEGATIONS
-----------------------
17. The Director Defendants, by virtue of the acts and conduct
alleged herein, are carrying out a preconceived plan and scheme to entrench
themselves in office and to thwart legitimate offers to acquire the Company on
terms more beneficial than those offered by ICI and supported by defendants,
regardless of the benefit to the Company's public shareholders. In so doing,
the Director Defendants are acting in total disregard of their fiduciary duties
to Plaintiff and the other members of the Class.
18. The Director Defendants have entered into the merger agreement
without properly exploring other offers and rejecting possible offers out of
hand. By failing to properly expose the Company for sale, the Director
Defendants remain uninformed of the true value of the
10
<PAGE>
Company and unaware if another suitor is in a better position to put forth an
offer which would serve to maximize shareholder value.
19. The Director Defendants have acted without regard to their
fiduciary duties to the shareholders by rejecting Sherwin-Williams, a serious
and reportedly very financially able suitor, without informing themselves about
Sherwin-Williams' intentions.
20. If the poison pill and lockup fee granted to ICI designed to
discourage a competing takeover attempt are permitted to survive, the Company's
shareholders who wish to avail themselves of bona fide other offers to purchase
their shares for fair value would be deprived of the ability to do so.
21. By adopting and retaining the poison pill and other procedures,
the Director Defendants, without shareholder approval, caused a fundamental
shift of power from the shareholders to themselves. These actions permit the
Company's directors to act as the primary negotiators of -- and, in effect, to
preclude -- any and all other offers to acquire the Company that do not provide
unfair and unreasonable compensation for the directors or permit them to stay in
power over the Company.
22. By assuming power to consider or reject potential takeovers of
the Company, the Director Defendants had also assumed a heightened fiduciary
obligation to consider all third-party bids in good faith, without regard to
personal interests but with regard only to the interests of the public
shareholders, and to negotiate in good faith with bidders on behalf of the
public shareholders. Moreover, to fulfill their fiduciary obligations, the
Director Defendants
11
<PAGE>
cannot merely accept a third-party offer that satisfies their interests, but
must pursue third party interest in acquiring the Company so as to maximize the
value to the shareholders.
23. In order to entrench themselves in office and to continue
receiving their compensation, fees and emoluments of office, the Director
Defendants have not acted in good faith toward plaintiff and the Class; have
breached and are breaching their fiduciary duties to plaintiff and the Class;
and have willfully participated in unfair dealing toward plaintiff and the
Class.
24. As a result of the actions of the Director Defendants, plaintiff
and their members of the Class have been and will be damaged in that they are
the victims of unfair dealing and are not receiving the fair value of their
interests in the Company.
25. Unless enjoined by this Court, the Director Defendants will
continue to breach their fiduciary duties owed to plaintiff and the Class, and
succeed in their plan to entrench themselves in their corporate offices, all to
the irreparable harm of the plaintiff and the Class.
26. The plaintiff and the Class have no adequate remedy at law.
WHEREFORE, plaintiff, on behalf of itself and the Class, prays for
judgment and relief as follows:
A. Declaring that this action is properly maintainable as a Class action
and certifying the plaintiff as the representative of the Class;
12
<PAGE>
B. Declaring that the Director Defendants have committed a gross abuse of
trust and have breached their fiduciary duties to plaintiff and the Class;
C. Preliminarily and permanently enjoining defendants and their counsel,
agents, employees and all persons acting under, in concert with, or for them,
from enforcing the challenged anti-takeover procedures or otherwise violating
their fiduciary duties to plaintiff and the Class;
D. Requiring defendants to fulfill their fiduciary duties to maximize
shareholder values by exploring third party interest and accepting the highest
offer obtainable for the public shareholders or by permitting the shareholders
to make that decision free from any coercion;
E. Awarding plaintiff and the Class compensatory damages, together with
appropriate prejudgment interest at the maximum rate allowable by law;
F. Awarding plaintiff and the Class their costs and expenses for the
litigation including reasonable attorneys' fees and other disbursements; and
G. Granting such other and further relief as this Court deems to be just
and proper.
Dated: May 8, 1995
POMERANTZ HAUDEK BLOCK & GROSSMAN
Stephen P. Hoffman
Michael A. Schwartz
100 Park Avenue
New York, New York 10017
212/661-1100
Attorneys for Plaintiff
13
<PAGE>
Exhibit 99.11
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
- - - - - - - - - - - - - - - - - - - x
KIM J. HAMMOND and JEFFREY DELL,, :
:
Plaintiffs, : Index No.
:
-against- : CLASS ACTION
: COMPLAINT
GROW GROUP, INC., JOHN F. GLEASON, : ------------
RUSSELL BANKS and JOSEPH M. QUINN, :
: JURY DEMAND
Defendants. : -----------
- - - - - - - - - - - - - - - - - - -
Plaintiffs, for their complaint against defendants, allege as follows
upon information and belief based upon their counsel's investigation of news
reports, public filings and other materials, except as to those allegations
pertaining to themselves which are based upon plaintiff's personal knowledge.
JURISDICTION AND VENUE
----------------------
1. This court has jurisdiction over the subject matter of this action
under Section 27 of the Securities Exchange Act of 1934 (the "Exchange Act"), 15
U.S.C. (S)78aa, 28 U.S.C. (S)1331. The claims alleged herein arise under
Sections 10(b) and 20(a) of the Exchange Act, 15 U.S.C. (S)(S)78g(b) and 78t(a),
and Rule 10b-5 promulgated thereunder by the Securities and Exchange Commission
("SEC"), 17 C.F.R. (S)240.10b-5.
2. Venue is proper in this District under Section 27 of the Exchange
Act and 28 U.S.C. (S)1391(b). The acts giving rise
<PAGE>
to the violations of law complained of herein occurred, at least in part, in
this District. In addition, defendant Grow Group, Inc. ("Grow" or the
"Company") is a corporation organized under the laws of the state of New York
and maintains offices and conducts its business in this District; its financial
and legal advisors also maintain offices and conduct business in the District.
3. In connection with the acts, conduct and other wrongs complained
of herein, defendants, directly and indirectly, used the means and
instrumentalities of interstate commerce and the United States mails, and the
facilities of the national securities markets.
THE PARTIES
-----------
4. Plaintiff Kim J. Hammond sold 10,300 shares of Grow common stock
on May 2, 1995 at a price of $17 7/8 per share.
5. Plaintiff Jeffrey Dell sold 15,000 shares of Grow common stock on
May 2, 1994 at a price of $17 3/4 per share.
6. Defendant Grow Group is a corporation organized and existing under
the laws of the State of New York with offices at 200 Park Avenue, New York, New
York. Grow Group manufactures and markets trade paints and coatings, chemical
automotive and industrial products, including thinners, adhesives and
plastisols, high gloss urethane coatings and chemical coatings. The Company had,
as of February 1, 1995, approximately 16 million
2
<PAGE>
shares outstanding held by approximately 4,000 shareholders of record.
7. Defendant Russell Banks ("Banks") is and was, at all relevant
times, the Company's President and Chief Executive Officer.
8. Defendants John F. Gleason ("Gleason") is and was, at all relevant
times, a director and Executive Vice President of Grow.
9. Defendant Joseph M. Quinn ("Quinn") is and was, at all relevant
times, a director and Executive Vice President and Chief Operating officer of
Grow.
CLASS ALLEGATIONS
-----------------
10. Plaintiffs bring this action as a class action pursuant to Rules
23(a) and 23(b)(3) of the Federal Rules of Civil Procedure on behalf of
themselves and all other persons similarly situated (the "Class") who sold Grow
securities during the period from April 29, 1995 to May 4, 1995, inclusive (the
"Class Period") and who sustained damages as a result of such transactions.
Excluded from the Class are the defendants herein, members of the immediate
families of and persons affiliated with each defendant, the legal
representatives, heirs, and successors or assigns of any of the defendants.
11. There are over 16 million shares of Grow common stock publicly
outstanding, roughly 2 million of which were
3
<PAGE>
actively traded during the Class Period. Thus, the members of the Class are so
numerous that joinder of all members is impracticable. While the exact number
of Class members can only be determined by appropriate discovery, plaintiffs
believe that Class members number in the thousands because Grow common stock was
actively traded on the New York Stock Exchange, an efficient market, during the
Class Period.
12. The representative plaintiffs, claims are typical of the claims
of the members of the Class. Plaintiffs and all Class members sustained damages
as a result of defendants' wrongful conduct complained of herein.
13. Plaintiffs will fairly and adequately protect the interests of
the Class members and have retained counsel competent and experienced in class
and securities litigation.
14. A class action is superior to other available methods of the fair
and efficient adjudication of this controversy. Since the damages suffered by
individual Class members may be relatively small, the expense and burden of
individual litigation make it virtually impossible for the Class members
individually to seek redress for the wrongful conduct alleged.
15. Common questions of law and fact exist as to all Class members
and predominate over any questions affecting solely individual Class members.
Among the questions of law and fact common to the Class are:
4
<PAGE>
(a) whether the federal securities laws were violated by
defendants' acts as alleged herein;
(b) whether representations made to the investing public and the
shareholders of Grow during the Class Period omitted and/or misrepresented
material facts about the Company's efforts to sell itself to a third party;
(c) whether defendants failed to timely disclose material facts
necessary in order not to mislead the investing public; and
(d) whether the members of the Class have sustained damages and,
if so, what is the proper measure of such damages.
SUBSTANTIVE ALLEGATIONS
-----------------------
16. In late January 1995, defendant Grow issued a press release
stating that the Grow board of directors had unanimously authorized Grow's
financial advisor, Wertheim Schroder & Co., Inc., ("Wertheim") to assist the
Company in considering and reviewing alternatives to enhance shareholder value.
17. On April 28, 1995, defendants issued a press release which stated
that Grow:
. . . has entered into negotiations with a
third party concerning an acquisition of Grow.
The third party, which has substantially
completed its due diligence review, has proposed
to acquire 100% of Grow's common
5
<PAGE>
stock and has indicated a willingness to pay Grow's
public stockholders $18.10 per share in cash. Any
such transaction would be subject to negotiation and
execution of a definitive agreement and approval of
Grow's Board of Directors.
18. On the morning of May 1, 1995, defendants issued a press release,
stating that Grow:
has entered into a definitive merger agreement
pursuant to which Imperial Chemical Industries,
PLC, an English Company ("ICI"), would offer to
purchase all the outstanding shares of Grow for
$18.10 per share.
* * *
Grow also stated that Corimon, a Venezuelan
corporation which owns approximately 25% of Grow's
shares, had entered into a separate Option
Agreement with ICI in which Corimon agreed to sell
its Grow shares to ICI at a price of $17.50 per share.
* * *
The Board of Directors of Grow unanimously approved
the transaction based upon, among other things, an
opinion as to the fairness of the offer and the
merger from Wertheim Schroder & Co., Incorporated.
* * *
In announcing the execution of the Merger Agreement,
Russell Banks, President and Chief Executive Officer
of Grow, said, 'We are extremely pleased to be able
to propose to shareholders what we believe represents
an attractive opportunity . . . .'
19. The foregoing statements were materially false and misleading
and/or omitted to state material facts necessary to
6
<PAGE>
make the statements made, in the light of the circumstances under which they
were made, not misleading, in at least the following respects:
(a) defendants failed to disclose that as early as March 17, 1995,
The Sherwin-Williams Company ("SherwinWilliams") had offered to enter into a
confidentiality agreement with Grow in order to permit Sherwin-Williams to enter
into a definitive agreement for 100% of Grow, and Sherwin-Williams had sent Grow
a fully executed confidentiality agreement on March 31, 1995 which agreement was
never executed by Grow;
(b) defendants failed to disclose that, on April 17, 1995,
defendant Banks informed Sherwin-Williams that it was to be excluded from any
bidding process for Grow;
(c) defendants failed to disclose that since April 17, 1995 and
despite its exclusion from any bidding process, Sherwin-Williams' financial
advisors had been in contact with Grow's financial advisor and had expressed
Sherwin-Williams' continued serious interest in pursuing a transaction with
Grow;
(d) defendants failed to disclose that on the evening of April 28,
1995, Sherwin-Williams sent a letter to defendant Banks, with copies to each of
the other individual defendants, to all of Grow's directors and to Grow's
financial and legal advisors. The April 28th letter stated that SherwinWilliams
was still seriously interested in a transaction with
7
<PAGE>
Grow, that financing an all-cash transaction would not represent "any
impediment" given Sherwin-Williams' financial strength, that Sherwin-Williams
was "extremely confident that the antitrust laws would not impede [its] ability
to consummate a transaction," and that Sherwin-Williams had retained the
investment banking firm of Lazard Freres & Co. and the law firm of Rogers &
Wells to provide Sherwin-Williams financial and legal counsel in connection with
an acquisition by Grow. The April 28th letter further stated that Sherwin-
Williams was prepared to "enter into immediate discussions with you and your
directors, management and advisors about a transaction" with Sherwin-Williams.
A copy of the April 28th letter is annexed hereto as Exhibit A; and
(e) Defendant Banks' statement that the board was "extremely
pleased to be able to propose what we believe represents an attractive
opportunity" was materially false and misleading in that it created the false
impression that the Company had been fully "shopped" by defendants, with the
assistance of Wertheim, and that defendants had obtained the best available
transaction for the Company and its public shareholders.
20. By means of the aforesaid misrepresentations and omissions (and
failure to correct same), set forth above, and/or with reckless disregard of the
facts, defendants unlawfully and artificially affected the market price of Grow
securities. In ignorance of the false and misleading nature of the representa-
8
<PAGE>
tions discussed above, plaintiffs and the members of the Class relied, to their
detriment, on the integrity of the market and/or the above-cited representations
of the defendants.
21. By reason of the foregoing, defendants violated and/or aided and
abetted violations of Section 10(b) of the Exchange Act and Rule l0b-5
promulgated thereunder in that they: (a) employed devices, schemes and artifices
to defraud; (b) made untrue statements of material fact or omitted to state
material facts necessary in order to make the statements set forth in paragraph
18 hereof, in light of the circumstances under which they were made, not
misleading; and (c) engaged in acts, practices and/or a course of business which
would and did operate as a fraud and deceit upon the plaintiffs and other owners
of Grow securities who sold their securities during the Class Period.
22. Had plaintiffs and the members of the class known that Grow had
received repeated serious indications of interest from Sherwin-Williams
culminating in the April 28th letter, they would not have sold their securities
during the Class Period. Following the belated disclosure of the April 28th
letter on May 4, 1995, the price of Grow common stock traded above ICI's $18.10
offering price. Thus, on May 5, 1995, Grow common stock closed at $19 1/2 per
share. On May 8, 1995, the second trading day following the disclosure of the
April 28th letter, SherwinWilliams commenced a tender offer for all shares of
Grow at a
9
<PAGE>
price of $19.50 per share cash. On May 8, 1995, Grow common stock traded as
high as $20 3/8 per share.
23. Defendants, by virtue of their offices and directorships, were at
the time of the wrongs alleged herein, controlling persons of Grow within the
meaning of Section 20(a) of the Exchange Act. Defendants had the power and
influence which they exercised to cause Grow to engage in the conduct and
practices complained of herein. Their position within the Company made them
privy to, and provided them with, actual knowledge of the material facts
concealed from plaintiffs and the Class.
24. By reason of the conduct described herein, defendants are liable
to plaintiffs and the other members of the Class for the substantial damages
which they suffered in connection with their sales of Grow securities.
WHEREFORE, plaintiffs demand judgment against defendants, as follows:
A. Certifying this action as a class action, certifying plaintiffs
as class representatives thereof, and plaintiffs' counsel as class counsel;
B. Declaring and determining that defendants violated the federal
securities laws by reason of the deceptive conduct and misstatements and
omissions as alleged herein;
C. Awarding money damages against the defendants, jointly and
severally, and in favor of plaintiffs and the other
10
<PAGE>
members of the Class for all losses and injuries suffered as a result of the
acts and transactions complained of herein, together with prejudgment interest
on all of the aforesaid damages which the Court shall award from the date of
said wrongs to the date of judgment herein at a rate the Court shall fix;
D. Awarding plaintiffs the costs of this action, including
reasonable attorneys' fees and expert fees and disbursement; and
E. Granting such other and further relief as this Court may deem
just and proper.
JURY DEMAND
-----------
Plaintiffs demand trial by jury.
Dated: May 9, 1995
ABBEY & ELLIS
By:
-----------------------------
Judith L. Spanier (JS-5065)
212 East 39th Street
New York, New York 10016
(212) 889-3700
11
<PAGE>
Exhibit A
April 28, 1995
Mr. Russell Banks
President and Chief Executive Officer
Grow Group, Inc.
200 Park Avenue
New York, New York 10166
Dear Mr. Banks:
We at The Sherwin-Williams Company were troubled to learn from the
press release you issued today that you are in the process of negotiating a sale
of your company to another party. Our concern arises from the fact that,
despite Sherwin-Williams' repeated indications of serious interest in a
transaction with Grow Group, you apparently have decided to negotiate a
definitive agreement with another bidder without giving us access to the
information that would allow us to present our best possible proposal.
On March 17, 1995 we offered to enter into a confidentiality agreement
with Grow Group. After repeated delays on Grow Group's part to finalize such
agreement, we forwarded an executed copy of that agreement to Lloyd Franks on
March 31, 1995. However, that agreement was never executed by Grow Group. On
April 17, 1995, you informed us that Sherwin-Williams was to be excluded from
the bidding process. Consequently, by letter dated April 17, 1995, we had no
alternative but to revoke our offer to enter into the confidentiality agreement
with Grow Group. Since that time and despite your actions, our financial
advisors have been in contact with Wertheim Schroder and have expressed our
continued interest in pursuing a transaction with Grow Group.
Given our financial strength, financing will not represent any
impediment to the consummation of a transaction on an all-cash basis. In
addition, based upon our preliminary analysis, we are extremely confident that
the antitrust laws would not impede our ability to consummate a transaction with
Grow Group. This matter has been discussed at length with the members of our
senior management and with our Board of Directors. We have also retained Lazard
Freres & Co. and Rogers & Wells to provide financial and legal counsel regarding
this matter.
We urge you not to enter into or to agree to any merger or other
significant transaction or agreement, or to take any additional defensive
measures (including "no shop", break-up fee or similar arrangements) or other
actions, that would adversely
<PAGE>
affect the ability of your stockholders to receive the maximum value for their
shares.
We wish to obtain immediate access to the information which you have
refused to furnish to us. We are also prepared to enter into immediate
discussions with you and your directors, management and advisors about a
transaction with Sherwin-Williams. In Mr. Breen's absence, you may contact me
over the weekend either at my home at (216) 247-4936 or at my office (216) 566-
2102. If you are unable to contact me, you can contact Larry J. Pitorak, Senior
Vice President--Finance, Treasurer and Chief Financial Officer, at (216) 729-
3840 or (216) 566-2573.
We hope that you and your Board of Directors will give this matter
prompt and serious consideration.
Sincerely,
/s/ Conway G. Ivy
<PAGE>
Exhibit 99.12
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
- - - - - - - - - - - - - - - - - - x
KENNETH STEINER,
: Civil Action No.
Plaintiff,
: CLASS ACTION
-against- COMPLAINT
: ------------
GROW GROUP, INC., JOSEPH M.
QUINN, JOHN F. GLEASON, J.J. :
APOSTOLAKIS, PETER L. KEANE,
ARTHUR W. BROSLAT, ANGUS :
MACDONALD, ROBERT J. MILANO,
WILLIAM H. TURNER, HAROLD G. :
BITTLE, TULLY PLESSER, and
PHILLIPPE ERARD, :
Defendants. :
- - - - - - - - - - - - - - - - - - x
Plaintiff, by and through his attorneys, alleges as follows:
1. Plaintiff brings this action as a class action on behalf of
himself and all other stockholders of Grow Group, Inc. ("Grow" or the "Company")
who are similarly situated, against the directors of Grow to enjoin certain
actions of the defendants related to the purchase of the outstanding shares of
Grow.
PARTIES
-------
2. Plaintiff Kenneth Steiner is the owner of Grow common stock, and
has owned such stock at all relevant times.
<PAGE>
3. (a) Defendant Grow, a New York corporation based in New York, New
York, formulates and produces a complete line of architectural coatings and
chemicals for automotive use such as thinners, solvents, adhesives paint
strippers and sealants. The Company also produces detergents and cleaning
products for household use.
(b) As of April, 1995, Grow had over 16.1 million shares of
common stock outstanding, which shares are traded on the New York Stock
Exchange.
4. (a) Defendant Russell Banks ("Banks") is and has been at all
relevant times President and Chief Executive Officer of the Company. Banks is
the beneficial owner of 2.7% of the Company's outstanding stock.
(b) Defendant Joseph M. Quinn ("Quinn"), is and has been at all
relevant times Executive Vice President, Chief Operating Officer and director of
the Company.
(c) Defendant John F. Gleason ("Gleason") is and has been at all
times relevant Executive Vice President and a director.
(d) Defendants J.J. Apostolakis, Peter L. Keane, Arthur W.
Broslat, Angus N. MacDonald, Robert J. Milano, William H. Turner, Harold G.
Bittle, Tully Plesser and Phillippe Erard are and have been at all relevant
times directors of Grow.
2
<PAGE>
(e) The defendants referred to in subparagraph 4(a)-(c) are
collectively referred to as the "individual defendants."
5. By virtue of the individual defendants' positions as directors and
officers of Grow, said defendants were and are in a fiduciary relationship with
plaintiff and the other public stockholders of the Company, and owe to plaintiff
and the other members of the Class the highest obligations of good faith and
fair dealing.
CLASS ACTION ALLEGATIONS
------------------------
6. Plaintiff brings this action for declaratory, injunctive and other
relief on their own behalf and as a class action, pursuant to CPLR (S) 901 et
seq. and on behalf of all common stockholders of Grow (except defendants herein
and any person, firm, trust, corporation or other entity related to or
affiliated with any of the defendants) or their successors in interest, who are
being deprived of the opportunity to maximize the value of their Grow shares by
the wrongful acts of the defendants as described herein.
7. This action is properly maintainable as a class action for the
following reasons:
(a) The Class of stockholders for whose benefit this action is
brought is so numerous that joinder of all Class members is impracticable. There
are over 16.1 million common
3
<PAGE>
shares of Grow outstanding, owned by over four thousand stockholders. Members
of the Class are scattered throughout the United States.
(b) There are questions of law and fact which are common to
members of the Class and which predominate over all questions affecting only
individual members, including whether the defendants have breached the fiduciary
duties owed by them to plaintiff and members of the Class by reason of the acts
described herein.
(c) The claims of plaintiff is typical of the claims of the other
members of the Class and plaintiff has no interests that are adverse or
antagonistic to the interests of the Class.
(d) Plaintiff is committed to the vigorous prosecution of this
action and has retained competent counsel experienced in litigation of this
nature. Accordingly, plaintiff is adequate representative of the Class and will
fairly and adequately protect the interests of the Class.
(e) The prosecution of separate actions by individual members of
the Class would create a risk of inconsistent or varying adjudications with
respect to individual members of the Class and establish incompatible standards
of conduct for the party opposing the Class.
4
<PAGE>
(f) Defendants have acted and are about to act on grounds
generally applicable to the Class, thereby making appropriate final injunctive
or corresponding declaratory relief with respect to the Class as a whole.
FACTUAL BACKGROUND
------------------
8. On April 28, 1995, Grow announced that it was discussing
undertaking an agreement pursuant to which an unidentified third party would
acquire 100% of the common stock of Grow in an exchange for $18.10 a share for
Grow Common Stock.
9. On April 30, 1995, Grow entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Imperial Chemical Industries PLC ("ICI")
and an affiliate of ICI, GDEN Corporation ("GDEN"), pursuant to which GDEN
offered to purchase in a tender offer (the "tender offer") all shares of Grow
(other than those held by Coriman SA ("Coriman") at a price of $18.10 per share,
and upon consummation of the tender offer, merge GDEN into the Company, and
convert each remaining share into the right to receive $18.10 per share (the
"merger"). On the same date, ICI and GDEN entered into an option agreement with
Coriman (the "option agreement"), pursuant to which, subject to certain
conditions, ICI has the right to acquire 4,025,841 Company shares owned by
Coriman at a price of $17.50 per share.
10. The individual defendants, having decided to sell the Company,
had an obligation to maximize shareholder value. In
5
<PAGE>
fact, the individual defendants have not properly sought to maximize shareholder
value and instead have failed to adequately respond to expressions of interest
from bona fide purchasers, such as, Sherwin Williams Co. ("Sherwin Williams").
11. Sherwin Williams disclosed on May 8, 1995 that they had
approached Grow on March 17, 1995 about entering a confidentiality agreement in
order to undertake a due diligence investigation of Grow. Sherwin Williams
forwarded the agreement to Grow on March 31, 1995, but Grow never executed the
agreement, effectively excluding Sherwin Williams from the bidding process. On
April 17, Grow told Sherwin Williams that it would be excluded from bidding for
the Company.
12. On May 8, 1995 Sherwin Williams commenced a tender offer of
$19.50 for each share of outstanding Grow stock (the Sherwin William offer").
13. The Sherwin Williams offer is conditioned upon, inter alia, the
----- ----
defendants removing certain barriers to the acquisition of the Company including
a shareholder rights plan adopted in February 1988 (the "right plan"), and a $8
million lock-up fee (the "lock-up fee") granted to ICI pursuant to the Merger
Agreement in the event that the merger is not consummated.
14. The amount of consideration offered Company shareholders is
inadequate in view of the Sherwin Williams offer as well as the inherent value
of the Company. In that regard,
6
<PAGE>
analysts have valued the Company at amounts significantly in excess of $18.10
per share.
15. As members of the Board of Directors of Grow, the individual
defendants owe to Company stockholders fiduciary duties. These duties include
the highest obligations of due care, good faith, loyalty, candor and to maximize
shareholder value.
16. The actions taken by the individual defendants to exclude Sherwin
Williams from bidding and their failure to seek other bona fide bids was in
gross disregard of the fiduciary duties owed to plaintiff and the other members
of the Class. The individual defendants have failed to take adequate steps to
maximize shareholder value.
17. Plaintiff and the other members of the Class will suffer injury
unless the unlawful transactions complained of herein are enjoined.
18. Plaintiff and the Class have no adequate remedy at law.
WHEREFORE, plaintiff demand judgment and preliminary and permanent
relief, including injunctive relief, in his favor and in favor of the Class and
against defendants as follows:
A. Declaring that this action is properly maintainable as a class action,
and certifying plaintiff as class representatives;
7
<PAGE>
B. Declaring that the defendants and each of them have committed a gross
abuse of trust and have breached their fiduciary duties to plaintiff and the
other members of the Class;
C. Enjoining the purchase of Grow by ICI pursuant to the Merger Agreement;
D. Requiring defendants to negotiate with Sherwin Williams and/or other
potential acquirers in a manner designed to maximize stockholder value and to
utilize the rights plan to benefit the members of the Class and maximize the
value of their holdings;
E. Awarding plaintiff and the Class compensatory damages;
F. Awarding plaintiff and the Class the costs and disbursements of this
action, including reasonable attorneys' and experts' fees; and
G. Granting such other and further relief as this Court may deem just and
proper.
GOODKIND LABATON RUDOFF
& SUCHAROW LLP
100 Park Avenue
New York, New York 10017
(212) 907-0700
WECHSLER SKIRNICK HARWOOD
HALEBIAN & FEFFER LLP
805 Third Avenue
New York, New York 10022
(212) 935-7400
Attorneys for Plaintiff
8
<PAGE>
Exhibit 99.13
[Grow Group Letterhead]
May 16, 1995
Dear Shareholder:
In the last few weeks, there have been several major developments
concerning Grow Group, Inc. ("Grow"). On April 30, 1995, Grow entered into a
Merger Agreement with Imperial Chemical Industries, PLC ("ICI") pursuant to
which GDEN Corporation, an indirect wholly-owned subsidiary of ICI, has offered
to purchase all outstanding shares of Grow's common stock for $18.10 per share
in cash. By now, you should have received ICI's tender offer materials as well
as Grow's Solicitation/Recommendation Statement on Schedule 14D-9 pursuant to
which Grow recommended that shareholders tender their shares into the ICI offer.
On May 8, 1995, The Sherwin-Williams Company ("Sherwin-Williams") through
its wholly-owned subsidiary, GGI Acquisition, Inc., commenced an unsolicited
tender offer to purchase all outstanding shares of Grow's common stock at a
price of $19.50 per share in cash. In response to this development, your Board
of Directors acted promptly, as was permitted under the Merger Agreement with
ICI, to authorize Grow's senior management and legal and financial advisors to
commence discussions and negotiations with Sherwin-Williams regarding its $19.50
per share offer. In addition, at Sherwin-Williams' request, Grow has permitted
Sherwin-Williams to conduct a due diligence review of Grow so that
Sherwin-Williams may be in a position to increase its $19.50 offer, should it
choose to do so.
Discussions with both ICI and Sherwin-Williams are continuing at this time
and we, of course, have urged both parties to improve their current offers.
<PAGE>
Exhibit 99.14
GROW GROUP RECEIVES UNSOLICITED BID
-----------------------------------
NEW YORK, NEW YORK, May 8, 1995... Grow Group, Inc. ("Grow")
(NYSE:GRO) announced today that The Sherwin-Williams Company has commenced an
unsolicited tender offer to acquire, subject to certain conditions, all
outstanding shares of Grow Common Stock at a price of $19.50 per share. The
Sherwin-Williams Offer is scheduled to expire on June 5, 1995.
Grow said that it will study Sherwin-Williams' offer and its Board of
Directors will consider the Sherwin-Williams offer and advise Grow shareholders
as to its recommendation.
Last week, Grow announced that it entered into a definitive merger
agreement with Imperial Chemical Industries, PLC, an English company ("ICI"),
pursuant to which ICI offered to purchase all outstanding shares of Grow Common
Stock for $18.10 per share. ICI's cash tender offer commenced on Thursday, May
4, 1995 and is scheduled to expire on Thursday, June 1, 1995.
In connection with the Merger Agreement with ICI, Corimon, S.A.C.A.,
which owns approximately 25% of Grow's shares, entered into a separate Option
Agreement with ICI at a price of $17.50 per share. ICI's purchase of the shares
owned by Corimon is conditioned upon ICI's prior consummation of its tender
offer.
Grow Group is a leading producer of specialty chemical coatings and
paints and household products. Grow operations include manufacturing
facilities, sales offices and licensees throughout the world.
<PAGE>
Exhibit 99.15
FOR IMMEDIATE RELEASE
NEW YORK COURT REJECTS SHERWIN-WILLIAMS APPLICATION
- ---------------------------------------------------
FOR TEMPORARY RESTRAINING ORDER
- -------------------------------
New York, New York, May 9, 1995... Grow Group, Inc. ("Grow") (NYSE:
GRO) announced today that a Justice of the New York State Supreme Court, after a
hearing yesterday afternoon, rejected Sherwin-Williams' application for a
temporary restraining order. Sherwin-Williams had sought an order enjoining
Imperial Chemical Industries PLC ("ICI") from exercising certain rights under an
agreement between ICI and Corimon, a 25% shareholder of Grow. The agreement
between ICI and Corimon was entered into in connection with the previously
announced Merger Agreement between ICI and Grow.
A hearing on Sherwin-Williams' preliminary injunction motion in its
New York State court action has been set for May 25, 1995.
<PAGE>
Exhibit 99.16
FOR IMMEDIATE RELEASE
New York, New York, May 10, 1995... Grow Group, Inc. ("Grow") (NYSE:
GRO) announced today that its Board of Directors has authorized management of
Grow and Grow's financial and legal advisors to engage in discussions and
negotiations with The Sherwin-Williams Company in connection with Sherwin-
Williams' unsolicited tender offer to acquire, subject to certain conditions,
all outstanding shares of Grow Common Stock at a price of $19.50 per share.
On May 1, 1995, Grow announced that it entered into a definitive
merger agreement with Imperial Chemical Industries, PLC, an English company
("ICI"), pursuant to which ICI has offered to purchase all outstanding shares of
Grow Common Stock for $18.10 per share.
In addition, Grow announced that it has extended the distribution date
of its Stock Purchase Rights until May 31, 1995 or such later date as may be
determined by Grow's Board of Directors. Until such date, the Stock Purchase
Rights will continue to trade together with the Company's Common Stock.
Grow also stated that it believes the lawsuits filed by Sherwin-
Williams and by certain shareholders as purported class actions are without
merit. Russell Banks, President and Chief Executive Officer of Grow, said, "The
Grow Board of Directors is acutely aware of its fiduciary responsibilities. The
Board has acted at all times in the interests of the Company and its
shareholders and will continue to do so."
<PAGE>
Exhibit 99.17
FOR IMMEDIATE RELEASE
GROW GROUP ANNOUNCES NEUTRAL POSITION
ON SHERWIN-WILLIAMS OFFER
NEW YORK, NEW YORK -- May 16, 1995 -- Grow Group, Inc. (NYSE: GRO)
announced today that, in light of the uncertainties of the current circumstances
and given that both The Sherwin-Williams Company ("Sherwin-Williams") and
Imperial Chemical Industries, PLC ("ICI") are interested in acquiring Grow, the
Board of Directors has determined to express no opinion and remain neutral at
this time with respect to Sherwin-Williams' $19.50 per share cash tender offer
for all outstanding shares of Grow Common Stock.
Grow stated that discussions with both ICI and Sherwin-Williams are
continuing at this time, and Grow has urged both parties to improve their
current offers.
Grow also said that, at Sherwin-Williams' request, Grow has permitted
Sherwin-Williams to conduct a due diligence review of Grow so that it may be in
a position to increase its $19.50 per share offer should it choose to do so.
Today Grow is publicly filing and mailing to Grow's shareholders a
Solicitation/Recommendation Statement on Schedule 14D-9 which sets forth, among
other things, the reasons for Grow's determination to remain neutral at this
time with respect to Sherwin-Williams' tender offer.
As previously announced, Grow has entered into a definitive merger
agreement with ICI pursuant to which ICI has commenced a tender offer to
purchase all outstanding shares of Grow's Common Stock for $18.10 per share.
ICI has separately agreed to purchase the Grow shares owned by Corimon, a 25%
shareholder, for $17.50 per share. ICI's purchase of the shares owned by Corimon
is conditioned upon ICI's prior consummation of its tender offer.
<PAGE>
EXHIBIT 99.18
AMENDMENT TO RIGHTS AGREEMENT
AMENDMENT, dated as of April 30, 1995, to the Amended and Restated Rights
Agreement, dated as of August 7, 1992, between Grow Group, Inc., a New York
corporation (the "Company"), and The Bank of New York, a New York banking
corporation, as Rights Agent (the "Rights Agent") (the "Rights Agreement").
WHEREAS, the Company and the Rights Agent entered into the Rights Agreement
specifying the terms of the Rights (as defined therein); and
WHEREAS, the Company and the Rights Agent desire to amend the Rights
Agreement in accordance with Section 27 of the Rights Agreement;
THEREFORE, in consideration of the premises and mutual agreements set forth
in the Rights Agreement and this Amendment, the parties hereby agree as follows:
1. Section 1(a) is amended by adding the following at the end of said
Section:
; provided, however, that none of Imperial Chemical Industries plc., a
-------- -------
corporation organized under the laws of England ("ICI"), GDEN Corporation,
a New York corporation and an indirect wholly-owned subsidiary of ICI (the
"Purchaser") and their Affiliates (the "ICI Persons") shall be deemed to be
an Acquiring Person by virtue of (x) the execution of the Agreement and
Plan of Merger, dated as of April 30, 1995 (the "Merger Agreement," which
term shall include any amendments thereto) by and among the Company, ICI
and the Purchaser, or (y) the consummation of any of the transactions
contemplated thereby or by the Corimon Option Agreement (as defined
therein), including, without limitation, the publication or other
announcement of the Offer (as defined therein), the consummation of the
Offer and the Merger (as defined therein) or the entering into, or the
consummation of, the transactions contemplated by the Corimon Option
Agreement; (the items set forth in (x) and (y) are referred to herein as
the "ICI Transactions").
2. Section 1(b) is amended by adding the following at the end of said
Section:
<PAGE>
;provided that none of the ICI Persons shall be declared an Adverse
Person as a result of the announcement or consummation of the ICI
Transactions.
3. Section 1(q) is amended by adding the following at the end of said
Section:
; provided, however that the public announcement of any of the ICI
Transactions shall not constitute a Stock Acquisition Date.
4. Section 1(s) is amended by adding the following at the end of said
Section:
Notwithstanding anything to the contrary contained in this Agreement,
none of the ICI Transactions shall constitute a Triggering Event or an
event described in Section 11(a)(ii) or Section 13.
5. Section 3(a) is amended by adding the following at the end of said
Section:
Notwithstanding anything to the contrary contained in this Agreement,
neither the announcement nor the consummation of any of the ICI
Transactions shall constitute or result in the occurrence of a Distribution
Date.
6. Section 13 is amended by adding the following at the end of said
Section:
Notwithstanding any other provision of this Agreement, nothing herein
shall preclude the consummation of the ICI Transactions, and upon
consummation of the Merger pursuant to, and in accordance with, the terms
of the Merger Agreement, all Rights shall expire and be of no further force
or effect.
7. The term "Agreement" as used in the Rights Agreement shall be
deemed to refer to the Rights Agreement as amended hereby.
8. The foregoing amendment shall be effective as of the date first
above written, and, except as set forth herein, the Rights Agreement shall
remain in full force and effect and shall be otherwise unaffected hereby.
9. This Amendment may be executed in two or more counterparts, each
of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of this 30th day of April, 1995.
GROW GROUP, INC.
By: /s/ Russell Banks
----------------------------
Name: Russell Banks
Title: President
THE BANK OF NEW YORK
By: /s/ Richard Hanrahan
----------------------------
Name: Richard Hanrahan
Title: Assistant Vice
President
3
<PAGE>
EXHIBIT 99.19
CONSULTING AGREEMENT
--------------------
CONSULTING AGREEMENT, dated as of April 30, 1995, between GROW GROUP,
INC., a New York corporation (the "Company"), and Russell Banks (the
"Consultant").
WHEREAS, the Consultant is currently employed by the Company as
President and Chief Executive Officer;
WHEREAS, pursuant to the Agreement and Plan of Merger by and among the
Company, Imperial Chemical Industries PLC, a corporation organized under the
laws of England ("Parent"), and GDEN Corporation, a New York corporation and an
indirect, wholly owned subsidiary of Parent (the "Subsidiary"), dated as of
April 30, 1995 (the "Merger Agreement"), the Parent will or will cause
Subsidiary to commence a tender offer (the "Offer") for all outstanding shares
of common stock, par value $.10 per share, of the Company (the "Shares") and
will thereafter merge with the Company in a merger in which the Company will be
the surviving corporation; and
WHEREAS, the Company desires to induce the Consultant following the
termination of his full-time employment with the Company to act as a consultant
to the Company and the Consultant desires to commit himself to act as a
consultant to the Company.
NOW THEREFORE, in order to effect the foregoing, the Company and the
Consultant wish to enter into a consulting agreement upon the terms and subject
to the conditions set forth below. Accordingly, in consideration of the
premises and the respective covenants and agreements of the parties herein
contained, and intending to be legally bound hereby, the parties hereto agree as
follows:
1. Term and Services to be Provided.
--------------------------------
(a) Commencing on the date on which the Consultant ceases to be a
full-time employee of the Company following consummation of the Offer (the
"Commencement Date") and continuing until the first anniversary thereof (the
"Term"), the Consultant agrees to provide consulting services to the Company
from time to time upon reasonable notice and at the reasonable request
<PAGE>
of the person then serving as Chief Executive Officer of the Company or by the
Board of Directors of the Company. The Consultant will make himself available
to consult and cooperate with and advise the Chief Executive Officer and other
members of senior management of the Company with respect to such matters
involving the business of the Company as may be requested. The Consultant, at
his discretion, may perform his duties hereunder from the office space provided
to him by the Company pursuant to Section 2(e) hereof, from his place of
residence, or from another location of his choosing.
(b) During the Term, the Consultant may pursue other personal or
business interests, provided, however, that such interests do not interfere with
his duties as set forth in Section 1(a) hereof.
2. Compensation.
------------
(a) During the Term, the Company shall pay the Consultant consulting
fees at the rate of $400,000 per annum, payable on a monthly basis.
(b) During the Term, the Company shall provide or make available to
the Consultant and his spouse at the Company's expense the same medical and
health plans or coverage as the Consultant currently enjoys, or plans or
coverage providing the Consultant and his spouse with at least substantially
equivalent benefits, with the understanding that (i), to the extent the
Consultant or his spouse is eligible for Medicare, Medicare shall be the assumed
primary medical coverage provided to Consultant, (ii) the Company shall
reimburse the Consultant for any Medicare payments he or his spouse is required
to make, and (iii) the Consultant shall have the responsibility of enrolling for
any Medicare coverage for which he is eligible, including Medicare Parts A and
B. In addition, on the last day of the Term, the Company shall pay the
Consultant, in a lump sum, an amount equal to the actuarial equivalent of the
cost of the continuation for the lives of the Consultant and his spouse of
coverage under the AARP Medcap program, or a similar plan selected by the
Consultant providing supplemental Medicare coverage. Such actuarial equivalent
shall be determined by using an 8.25% interest assumption and the mortality
tables set forth in the regulations issued under Section 79 of the Internal
Revenue Code of 1986, as
2
<PAGE>
amended. The coverage provided during the Term and payment of the above-
described lump sum shall relieve the Company of the obligation of providing
Consultant and his spouse with medical and health benefits under the employment
agreement referred to in Section 10 hereof.
(c) During the Term, the Company shall continue to provide the
Consultant with the automobile currently provided to the Consultant by the
Company (such automobile to contain a car phone and to be leased or purchased by
the Company, as it may elect). With the exception of gasoline, the Company
shall pay for all expenses relating to the operation of the automobile
including, without limitation, the cost of repairs, insurance and garaging the
automobile in New York City. At the end of the Term the Consultant shall have
the option to purchase said automobile from the Company at a price of $1.
(d) During the Term and for the immediately following two-year period,
the Company shall reimburse the Consultant for (i) dues for membership in the
Metropolitan Club and the Sky Club, and (ii) reasonable expenses, not to exceed
$25,000 in the aggregate, incurred by the Consultant in connection with
obtaining professional financial counseling, including but not limited to tax,
financial planning and estate planning.
(e) During the Term, the Company shall provide the Consultant with
suitable office space at the Company's executive offices, a secretary and
related support services for so long as the Company maintains executive offices
in the City of New York.
(f) During the Term, the Company shall promptly reimburse the
Consultant for all reasonable expenses incurred by him in performing services
pursuant to the terms hereof, provided he properly accounts therefor in
accordance with Company policy as in effect from time to time and of which the
Consultant is made aware. To the extent that the Consultant is required to
travel on behalf of the Company, he shall be entitled to use first class
accommodations.
(g) Any payments made hereunder shall be made subject to applicable
federal, state and local withholding obligations. All payments and other
benefits
3
<PAGE>
hereunder (including pursuant to Section 3 hereof) shall be made without set-off
for any reason whatever.
3. Termination.
-----------
(a) Death. If the Consultant dies during the Term, the Consultant's
-----
consulting relationship with the Company hereunder shall terminate upon his
death, provided that the Company shall pay to the Consultant's spouse (or to
such other beneficiary as may be designated by the Consultant by written notice
to the Company), the compensation provided in Section 2(a) hereof that would
have been paid to Consultant hereunder for the remainder of the Term. Such
compensation shall be paid in monthly installments of substantially equal
amounts.
(b) Disability. If, as a result of the Consultant's incapacity due to
----------
physical or mental illness, Consultant shall be unable to perform the consulting
services described herein for a continuous period of six months, the Company may
terminate the Consultant's consulting relationship with the Company. In such
event, Company shall continue to pay to the Consultant the compensation provided
in Section 2(a) hereof in monthly installments of substantially equal amounts
through the end of the Term.
4. Noncompetition; Confidentiality.
-------------------------------
(a) The Consultant agrees that during the Term and for one year
following termination of his services as a consultant hereunder, he will not:
(i) directly or indirectly, either as owner, partner, officer,
employee, agent or consultant or in any other capacity, engage in or be
employed in any way by any business that is in material competition with
the business of the Company and its subsidiaries wherever conducted;
provided, however, that the Consultant may own up to five percent of any
-------- -------
class of stock of a publicly traded company;
(ii) whether for his own account or for the account of any other
person, willfully and intentionally interfere with the relationship of the
Company or any of its subsidiaries) with any person
4
<PAGE>
who at any time during the Term was an employee, customer or supplier of
the Company, and/or any of its subsidiaries;
(b) The Consultant recognizes and acknowledges that, either during or
after the Term, the Consultant will not, except as may otherwise be required by
law, directly or indirectly, willfully or knowingly disclose or make available
to any person, firm, corporation, association or other entity for any reason or
purpose whatsoever, or willfully or knowingly use or cause to be used in any
manner adverse to the interests of the Company any Confidential Information (as
defined below). The Consultant agrees that, upon termination of services as a
consultant of the Company, all Confidential Information in his possession that
is in written or other tangible form (together with all copies or duplicates
thereof) shall forthwith be returned to the Company and shall not be retained by
the Consultant or furnished to any third party, either by sample, facsimile,
film, audio or video cassettes, electronic data, verbal communication or any
other means of communication; provided, however, that the Consultant shall not
-------- -------
be obligated to treat as confidential, or return to the Company copies of, any
Confidential Information that (1) was publicly known at the time of disclosure
to the Consultant, (2) becomes publicly known or available thereafter other than
by action of the Consultant in violation of this Consulting Agreement, or (3) is
lawfully disclosed to the Consultant by a third party.
(c) In the event that the Consultant is requested or required (by oral
questions, interrogatories, requests for information or documents, subpoena,
Civil Investigative Demand or similar process) to disclose any Confidential
Information, it is agreed that the Consultant will provide the Company with
prompt notice of such request(s) so that it may seek an appropriate protective
order and/or waive the Consultant's compliance with the provisions of this
Consulting Agreement. It is further agreed that if, in the absence of a
protective order or the receipt of a waiver hereunder, the Consultant is
nonetheless, in the reasonable opinion of his counsel, compelled to disclose
information concerning the Company to any court or governmental agency or
authority or to a civil litigant or any other party or else stand liable for
contempt or suffer other censure or penalty,
5
<PAGE>
the Consultant may disclose such information to such tribunal without liability
hereunder.
(d) As used in this Consulting Agreement the term "Confidential
Information" means information disclosed to Consultant or known by the
Consultant as a consequence of or through his relationship with the Company not
generally known about the Company or the Company's clients, business methods,
organization, procedures or finances, including, without limitation, information
of or relating to contracts, arrangements, research, trade secrets, information
regarding trademarks or other intellectual property rights, customer lists,
product and service lines, marketing data and any related or other technical,
corporate or trade information.
(e) The Consultant understands that the agreements contained in this
Section 4 are necessary to protect, among other things, the trade secrets,
proprietary information, confidential information, customer and supplier lists
and know-how by preventing the Consultant from engaging in activities that would
inherently create a risk of the Consultant engaging in unfair trade practices.
5. Remedies; Cessation of Payment Obligation.
-----------------------------------------
In the event of a claimed breach by a party to this Consulting
Agreement of the terms of this Consulting Agreement, the other party shall,
after giving notice and a reasonable opportunity to cure such claimed breach, be
entitled to institute legal proceedings to obtain damages for any such breach,
or, in case of a claimed breach by the Consultant of Section 4 of this
Consulting Agreement, to enforce the specific performance of Section 4 of this
Consulting Agreement and to enjoin any further violation of Section 4.
6. Notice. For the purposes of this Consulting Agreement, notices,
------
demands and all other communications provided for in this Consulting Agreement
shall be in writing and shall be deemed to have been duly given when delivered
or (unless otherwise specified) mailed by United States certified mail, return
receipt requested, postage prepaid, addressed as follows:
6
<PAGE>
If to the Consultant:
Mr. Russell Banks
14 East 75 Street
New York, New York 10021
If to the Company:
Grow Group, Inc.
MetLife Building
200 Park Avenue
New York, New York 10166
Attention: Chief Executive Officer
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
7. Consultant's Independence and Discretion.
----------------------------------------
(a) Nothing herein contained shall be construed to constitute the
parties hereto as partners or as joint venturers, or either as agent of the
other, or as employer and employee. By virtue of the relationship described
herein, the Consultant's relationship to the Company during the Term shall only
be that of an independent contractor and the Consultant shall perform all
services pursuant to this Consulting Agreement as an independent contractor.
(b) Subject only to such specific limitations as are contained in
this Consulting Agreement, the manner, means, details or methods by which the
Consultant performs his obligations under this Consulting Agreement shall be
solely within his discretion.
8. Modifications; Waiver Discharge. This Consulting Agreement is
-------------------------------
entered into between the Company and the Consultant for the benefit of each of
the Company and the Consultant. No provisions of this Consulting Agreement may
be modified, waived or discharged unless such waiver, modification or discharge
is agreed to in writing signed by the Consultant and the Company's Chief
Executive Officer or such other officer as may be specifically designated by the
Board of Directors of the Compa-
7
<PAGE>
ny. No waiver by any party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Consulting
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
9. Validity. The invalidity or unenforceability of any provision or
--------
provisions of this Consulting Agreement shall not affect the validity or
enforceability of any other provision of this Consulting Agreement, which shall
remain in full force and effect; provided, however, that if any one or more of
-------- -------
the terms contained in Section 4 hereto shall for any reason be held to be
excessively broad with regard to time, duration, geographic scope or activity,
that term shall not be deleted but shall be reformed and construed in a manner
to enable it to be enforced to the extent compatible with applicable law.
10. Entire Agreement. This Consulting Agreement sets forth the
----------------
entire agreement of the parties hereto in respect of the subject matter
contained herein and supersedes all prior agreements, promises, covenants,
arrangements, communications, representations or warranties whether oral or
written, by any officer, employee or representative of any party hereto;
provided, however, nothing in this Consulting Agreement shall, except as
specifically set forth in Section 2(b) hereof, affect the validity or the terms
of (a) the employment agreement first executed effective October 31, 1992
between the Consultant and the Company, which agreement has since been amended
and extended and which continues in full force and effect in accordance with its
terms and (b) any provision of the Merger Agreement.
11. Assignment. This Consulting Agreement may not be assigned by the
----------
Consultant, but may be assigned by the Company to any successor to its business
and will inure to the benefit and be binding upon any such successor.
12. Counterparts. This Consulting Agreement may be executed in
------------
several counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
8
<PAGE>
13. Headings. The headings contained herein are for reference
--------
purposes only and shall not in any way affect the meaning or interpretation of
this Consulting Agreement.
14. Governing Law. The validity, interpretation, construction and
-------------
performance of this Consulting Agreement shall be governed by the laws of the
State of New York without regard to principles of conflicts of laws.
IN WITNESS WHEREOF, the parties have executed this Consulting
Agreement on the date and year first above written.
GROW GROUP, INC.
By: /s/ Lloyd Frank
-------------------------------
Name: Lloyd Frank
Title: Secretary
/s/ Russell Banks
-------------------------------
Russell Banks
9
<PAGE>
EXHIBIT 99.20
AMENDMENT AND EXTENSION AGREEMENT
---------------------------------
AGREEMENT made as of April 27, 1995, between GROW GROUP, INC., a New
York corporation (the "Company"), and Russell Banks ("Mr. Banks").
Mr. Banks is employed by the Company as its President and Chief
Executive Officer pursuant to an employment agreement first executed effective
October 31, 1992, which agreement, as extended, currently expires October 31,
1996 (such agreement, as so extended, being hereinafter referred to as the
"Current Agreement").
The parties desire to memorialize such extension of the Current
Agreement and to amend the Current Agreement in certain respects. Capitalized
terms used herein shall, unless otherwise defined herein, have the meanings
ascribed to such terms in the Current Agreement.
NOW, THEREFORE, in consideration of the foregoing,
the parties hereby agree as follows:
1. Employment Period. The Employment Period is extended to October 31, 1996.
-----------------
Each reference in the Current Agreement to "October 31, 1995" shall be deemed a
reference to October 31, 1996.
2. Insurance. Section 6 of the Current Agreement shall be restated in its
---------
entirety to read as follows:
The Company shall provide Mr. Banks with a death benefit equal to Mr.
Banks' annual Fixed Compensation. Such death benefit shall be paid to the
person or persons designated by Mr. Banks, or, in absence of any such
designation, to Mr. Banks' spouse. The death benefit described herein
shall be considered "life insurance coverage" referred to in Section
9.03(c)(ii).
3. Termination for Good Reason. Notwithstanding anything in the Current
---------------------------
Agreement to the contrary, Mr. Banks may voluntarily terminate his employment
during the period commencing on the day after the occurrence of a Change in
Control and terminating six months after such Change in Control, upon a
determination by him that, as a result of the Change in Control, he is unable to
discharge his duties effectively. Such termination shall for all purposes of
the Current Agreement be treated as termination of employment pursuant to
Section 9.02(a)(iv) of the Current Agreement. The Termination Date in such
circumstances shall be the date Mr. Banks gives the Notice of Termination
hereunder.
<PAGE>
4. Clarification and Amendment of Termination Compensation. Section
-------------------------------------------------------
9.03(c)(i)(A) of the Current Agreement shall be restated to read as follows:
(A) an amount equal to three times the sum of (a) the Fixed Compensation in
effect at the time his employment is terminated and (b) the higher of the
average annual Additional Compensation paid to Mr. Banks in the three years
preceding that in which the Termination Date occurs or the average annual
Additional Compensation paid in the three years preceding that in which the
Change in Control occurs; and a pro rata portion of Additional Compensation
for the fiscal year in which the termination of employment occurs, computed
as provided in subsection 9.03(b) above, and
5. Clarification of Certain Calculations of Additional Compensation. The
----------------------------------------------------------------
portion of the Termination Compensation described in Section 9.03(c)(i)(B) of
the Current Agreement which refers to "compensation under Section 4 of this
Employment Agreement" is calculated by reference to the higher of the average
annual Additional Compensation paid to Mr. Banks in the three years preceding
that in which the Termination Date occurs or the average annual Additional
Compensation paid in the three years preceding that in which the Change in
Control occurs. The provision of Section 5(a) which refers to the "Additional
Compensation for the full fiscal year during which such termination occurs"
shall be calculated by reference to the average annual Additional Compensation
paid to Mr. Banks in the three years preceding that in which the Termination
Date occurs.
6. Status of Current Agreement. Except as specifically amended hereby, the
---------------------------
terms and conditions of the Current Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals as of the day and year first above written.
GROW GROUP, INC.
By /s/ Grow Group, Inc.
------------------------------
/s/ Russell Banks
------------------------------
Russell Banks
2
<PAGE>
EXHIBIT 99.21
GROW GROUP, INC.
MetLife Building Telephone: 212-599-4400
200 Park Avenue TWX: 710-581-3686
New York, New York 10166 Telecopier: 212-286-0940
April 27, 1995
Lloyd Frank
Corporate Office
Dear Mr. Frank:
Grow Group, Inc. (the "Company") considers it essential to the best
interests of its stockholders to foster the continuous employment of key
management personnel. In this connection, the Board of Directors of the Company
(the "Board") recognizes that, as is the case with many publicly held companies,
the possibility of a change in control of the Company may exist and that such
possibility, and the uncertainty and questions which it may raise, may result in
the departure or distraction of key personnel to the detriment of the Company
and its stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of certain
employees of the Company, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a change in control of the Company.
In order to induce you to remain in the employ of the Company, the
Company agrees that you shall receive the severance benefits set forth in this
letter agreement (the "Agreement") in the event your employment with the Company
is terminated under the circumstances described below subsequent to a Change in
Control (as defined in Section 2) of the Company.
The execution of this Agreement constitutes cancellation of any prior
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employment, severance or termination agreement between you and the Company
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("Prior Agreement"), and the Prior Agreement shall be of no force and effect
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after the date this Agreement is executed by you, as set forth on the last page
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of this Agreement ("Effective Date").
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<PAGE>
1. TERM OF AGREEMENT This Agreement shall commence on the Effective
-----------------
Date and shall continue in effect through December 31, 1995, provided, however,
that commencing on January 1, 1996 and each January 1 thereafter, the term of
this Agreement shall automatically be extended for one additional year unless,
not later than October 1 of the preceding year, the Company shall have given
notice that it does not wish to extend this Agreement; and provided, further,
that if a Change in Control of the Company shall have occurred during the
original or extended term of this Agreement, this Agreement shall continue in
effect for a period of not less than twenty-four (24) months beyond the month in
which such Change in Control occurred.
2. CHANGE IN CONTROL No benefits shall be payable hereunder unless
-----------------
there shall have been a Change in Control of the Company, as set forth below.
For purposes of this Agreement, a "Change in Control" shall have occurred if:
(a) any "person", as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than
the Company, any trustee or other fiduciary holding securities under an employee
benefit plan of the Company or any corporation owned, directly or indirectly, by
the stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 30% or more of the combined voting power
of the Company's then outstanding securities;
(b) during any period of not more than two consecutive years (not
including any period prior to the execution of this Agreement), individuals who
at the beginning of such period constitute the Board, and any new director
(other than a director designated by a person who has entered into an agreement
with the Company to effect a transaction described in clause (a), (c) or (d) of
this Section) whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at the beginning of
the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority thereof;
(c) the stockholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than (i) a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 80% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation or (ii) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in which no
"person" (as hereinabove defined) acquires more than 30% of the combined voting
power of the Company's then outstanding securities; or
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<PAGE>
(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.
3. TERMINATION OF EMPLOYMENT FOLLOWING CHANGE IN CONTROL
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(a) Your employment may be terminated subsequent to a Change in
Control of the Company in the following cases:
(i) Your employment shall terminate on your death.
(ii) The Company may terminate your employment in the event of
your disability; provided, however, that for purposes of this Agreement for the
right of the Company to terminate your employment by reason of disability
("Disability") you must, by reason of illness or physical or mental disability,
be totally unable to perform, or, in the judgment of the Company evidenced by a
resolution adopted in good faith by a majority of the Board, unable adequately
to perform, your duties with the Company for a period of 180 consecutive days,
and provided, further, that at the end of such 180 day period the Company must
have received the certificates of two qualified doctors, one selected by the
Company and one selected by you or on your behalf, stating that in their opinion
you are and will continue to be by reason of such illness or physical or mental
disability totally unable, or unable adequately, to perform your duties with the
Company. If the two doctors so selected are unable to reach agreement on the
question of your ability to perform such services, they shall promptly designate
a third doctor to make such determination and the decision of such third doctor
shall be binding on the Company and you. If the two doctors are unable to agree
upon a third doctor for such purpose, they shall request the Dean of the School
of Medicine of Columbia University to choose such third doctor. The fees of such
doctors shall be borne by the Company.
(iii) The Company may terminate your employment for Cause. For
purposes of this Agreement, Cause is defined to be (A) the willful engaging by
you in misconduct materially and demonstrably injurious to the Company, or (B)
the willful and continued failure by you to substantially perform your duties
(other than any such failure resulting from your incapacity due to physical or
mental illness or any such actual or anticipated failure after the issuance of a
Notice of Termination (as hereinafter defined) by you for Good Reason (as
hereinafter defined) after a written demand for substantial performance is
delivered to you by the Board, which demand specifically identifies the manner
in which the Board believes that you have not substantially performed your
duties, which failure results in demonstrable material injury to the Company, if
you shall have failed to remedy such alleged failure to substantially perform
your duties within 30 days of your receipt of written notice thereof from the
Board. For purposes of this Section 3(a)(iii), no act or failure to act on your
part shall be considered "willful" unless done, or omitted to be done, by you
not in good faith and without reasonable belief that your action or omission was
in the best interests of the Company. Notwithstanding the foregoing, you shall
not be deemed
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to have been terminated for Cause unless and until there shall have been
delivered to you a copy of a resolution duly adopted by the affirmative vote of
not less than three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board (after reasonable notice to you and an opportunity for you,
together with your counsel, to be heard before the Board), finding that in the
good faith opinion of the Board you were guilty of conduct set forth above in
this Subsection and specifying the particulars thereof in detail.
(iv) You may voluntarily terminate your employment for Good
Reason. For purposes of this Agreement, "Good Reason" shall mean, without your
express written consent, the occurrence after a Change in Control of the Company
of any of the following circumstances unless, in the case of paragraphs (A),
(E), (F), (G), or (H) such circumstances are fully corrected prior to the
Termination Date (as hereinafter defined) specified in the Notice of Termination
given in respect thereof:
(A) the assignment to you of any duties substantially
inconsistent with the position in the Company that you held
immediately prior to the Change in Control of the Company,
or a significant adverse alteration in the nature or status
of your responsibilities or the conditions of your
employment from those in effect immediately prior to such
Change in Control; provided however, that a mere change in
job title which does not result in the assignment to you of
substantially inconsistent duties or which does not
constitute a significant adverse alteration in the nature or
status of your responsibilities or the conditions of your
employment, as described herein above, shall not constitute
"Good Reason" hereunder;
(B) a reduction by the Company in your annual base salary as in
effect on the date hereof or as the same may be increased
from time to time except for across-the-board salary
reductions similarly affecting all key personnel of the
Company and all key personnel of any person in control of
the Company;
(C) the relocation of the Company's offices at which you are
principally employed immediately prior to the date of the
Change in Control of the Company to a location more than 35
miles from such location, or the Company's requiring you to
be based anywhere other than the Company's offices at such
location except for required travel on the Company's
business to an extent substantially consistent with your
business travel obligations immediately prior to the Change
in Control;
(D) the failure by the Company to pay to you any portion of your
current compensation or to pay to you any portion of an
install-
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<PAGE>
ment of deferred compensation under any deferred
compensation program of the Company within seven (7) days of
the date such compensation is due;
(E) the failure by the Company to continue to provide you with
benefits substantially similar to those enjoyed by you under
any of the Company's life insurance, medical, accident,
disability or other employee benefit or compensation plans
in which you were participating at the time of the Change in
Control of the Company, the taking of any action by the
Company which would directly or indirectly materially reduce
any of such benefits, or the failure by the Company to
provide you with the number of paid vacation days to which
you are entitled on the basis of years of service with the
Company in accordance with the Company's normal vacation
policy in effect at the time of the Change in Control of the
Company, unless such failure or taking of action similarly
affects all key personnel of the Company and all key
personnel of any person in control of the Company;
(F) the failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to perform
this Agreement, as contemplated in section 8 hereof;
(G) any purported termination of your employment that is not
effected pursuant to a Notice of Termination satisfying the
requirements of Subsection 3(b) hereof (and, if applicable,
the requirements of Subsection 3(a)(iii) hereof), which
purported termination shall not be effective for purposes of
this Agreement; or
(H) a breach by the company of any provision of this Agreement
not embraced in the foregoing clauses (A), (B), (C), (D),
(E), (F) and (G).
(b) Your employment will not be considered to have been terminated by
the Company if the employment is discontinued due to the sale of a facility of
the Company in which you work if you are offered substantially equivalent
employment by the purchaser of the facility (or an affiliated company of the
purchaser); and the purchaser (or an affiliated company) agrees to assume the
Company's responsibilities under this Agreement with respect to you as if the
purchaser (or an affiliated companny) were the Company hereunder and no such
sale had occurred.
(c) Any termination by the Company or by you pursuant to this
Agreement shall be communicated by written Notice of Termination to the other
party hereto
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<PAGE>
in accordance with Section 10. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon, and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
your employment under the provisions so indicated
(d) "Termination Date" shall mean (i) if your employment is terminated
for Disability, thirty (30) days after Notice of Termination is given (provided
that you shall not have returned to the full-time performance of your duties
during such thirty (30)-day period), and (ii) if your employment is terminated
pursuant to Subsections 3(a)(iii) or (iv) hereof or for any other reason (other
than Disability), the date specified in the Notice of Termination (which, in the
case of a termination for Cause shall not be less than thirty (30) days from the
date such Notice of Termination is given, and in the case of a termination for
Good Reason shall not be less than fifteen (15) nor more than sixty (60) days
from the date such Notice of Termination is given); provided, however, that if
within fifteen (15) days after any Notice of Termination is given, or, if later,
prior to the Termination Date (as determined without regard to this proviso),
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, then the Termination Date shall be
the date on which the dispute is finally determined, either by mutual written
agreement of the parties, by a binding arbitration award, or by a final
judgment, order or decree of a court of competent jurisdiction (which is not
appealable or with respect to which the time for appeal therefrom has expired
and no appeal has been perfected); and provided, further, that the Termination
Date shall be extended by a notice of dispute only if such notice is given in
good faith and the party giving such notice pursues the resolution of such
dispute with reasonable diligence. Notwithstanding the pendency of any such
dispute, the Company will continue to pay your full compensation in effect when
the notice giving rise to the dispute was given (including, but not limited to,
base salary) and continue you as a participant in all compensation, benefit and
insurance plans in which you were participating when the notice giving rise to
the dispute was given, until the dispute is finally resolved in accordance with
this Subsection. Amounts paid under this Subsection are in addition to all
other amounts due under this Agreement, and shall not be offset against or
reduce any other amounts due under this Agreement.
4. COMPENSATION AND CERTAIN OTHER PROVISIONS
IN THE EVENT OF TERMINATION OF EMPLOYMENT
--------------------------------------------
If there is any termination of your employment after a Change in
Control, the following provisions shall apply:
(a) During any period that you fail to perform your full-time duties
with the Company as a result of incapacity due to physical or mental illness, or
in the event your employment shall be terminated by reason of disability or
death, your benefits shall be determined under the Company's disability,
retirement, insurance and other compensation programs then in effect in
accordance with the terms of such programs.
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<PAGE>
(b) If your employment is terminated for Cause under subsection
3(a)(iii) above, or by you other than for Good Reason, the Company shall pay you
your base salary (the "Base Salary") through the Termination Date at the annual
rate of compensation in effect immediately prior to the Termination Date, and
shall also pay you any accrued bonuses owing to you for any past fiscal years
and not previously paid. You shall also receive any bonus for the portion of
the Company's fiscal year prior to such termination (but not thereafter) that
may be awarded to you in the discretion of the Board. Such amounts due you
under this subsection 4(b) shall be paid in a lump sum within 10 days after the
Termination Date. After such payments are made, the Company shall have no
further obligation to you under this Agreement.
(c) If the Company shall terminate your employment other than pursuant
to the provisions of subsections 3(a)(i), (ii) or (iii), or if you shall
voluntarily terminate your employment pursuant to the provisions of subsection
3(a)(iv), then the Company, as liquidated damages or severance pay or both,
shall pay to you and provide you and your dependents with the following:
(i) The Company shall pay you (A) your Base Salary through the
Termination Date at the annual rate of compensation in effect immediately prior
to the Termination Date, any accrued bonuses owing to you for any past fiscal
years and not previously paid, and a bonus for the period from the first day of
the fiscal year in which the Termination Date occurs to the Termination Date,
computed at an annual rate equal to the higher of (a) the average bonus paid to
you for the three fiscal years of the Company immediately preceding the fiscal
year in which Change in Control occurs and (b) the average bonus paid to you for
the three fiscal years of the Company immediately preceding the fiscal year in
which the Termination Date occurs (the "Bonus Rate"), and (B) the total Base
Salary and bonuses you would have earned during an additional thirty-six (36)
months of employment (the "Payout Period"), such Base Salary to be at the annual
rate of compensation in effect immediately prior to the Termination Date and
such bonuses to be at the Bonus Rate (the "Termination Compensation"). For the
purposes of the foregoing payments, the annual rate of compensation shall be the
rate paid to you without regard to any purported reduction or attempted
reduction of such rate by the Company. The amount specified in clauses (A) and
(B) shall be payable in a lump sum within ten (10) days after the Termination
Date.
(ii) During the Payout Period, the Company shall arrange to provide
you with life, disability, accident, group health insurance and other employee
benefits substantially similar to those which you were receiving immediately
prior to the Notice of Termination. Benefits otherwise receivable by you
pursuant to this section shall be reduced to the extent comparable benefits are
actually received by you during the Payout Period, and any such benefits
actually received by you shall be reported by you to the Company. In addition,
the remainder of the Payout Period until you reach retirement, or the period
until your death if earlier, shall be considered service with the Company for
the purpose of continued service credits under applicable pension and retirement
plans of the Company.
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<PAGE>
(iii) If and to the extent that benefits or service credits for
benefits provided under clause (ii) above shall not be payable or provided under
any such plans to you and your dependents by reason of you no longer being an
employee of the Company as the result of termination of your employment, the
Company shall itself pay or provide for payment of such benefits and service
credit for benefits to you and your dependents.
(iv) The termination of your employment shall not affect any vested
benefits under the Company's pension plans to which you may be entitled
(including any additional service credits for benefits as provided in
subsections (ii) and (iii) above), and you may receive retirement payments under
such pension plans on any date selected by you, which must be a date on which
retirement payments under such plans may commence.
(v) The Company shall pay the one-time individual conversion fee
required by the carrier in connection with your conversion of any insurance
policies carried by the Company on your life.
(vi) In the event that, by reason of section 280G of the Internal
Revenue Code of 1986 (the "Code"), any payment or benefit received or to be
received by you in connection with a Change in Control of the Company or the
termination of your employment (whether payable pursuant to the terms of this
Agreement ("Contract Payments") or any other plan, arrangement or agreement with
the Company, its successors, any person whose actions result in a Change in
Control or any corporation ("Affiliate") affiliated (or which, as a result of
the completion of the transactions causing a Change in Control will become
affiliated) with the Company within the meaning of section 1504 of the Code
(collectively with the Contract Payments, "Total Payments")), would not be
deductible (in whole or part) by the Company, an Affiliate or other person
making such payment or providing such benefit, the Termination Compensation
shall be reduced (and, if the Termination Compensation is reduced to zero, other
Contract Payments shall first be reduced and other Total Payments shall
thereafter be reduced) until no portion of the Total Payments is not deductible
by reason of section 280G of the Code. For purposes of this limitation, (A) no
portion of the Total Payments the receipt or enjoyment of which you shall have
effectively waived in writing prior to the date of payment of the Termination
Compensation shall be taken into account, (B) no portion of the Total Payments
shall be taken into account which in the opinion of tax counsel selected by the
Company's independent auditors and acceptable to you does not constitute a
"parachute payment" within the meaning of section 280G(b)(2) of the Code
(without regard to subsection (A)(ii) thereof), (C) the Termination Compensation
(and, thereafter, other Contract Payments and other Total Payments) shall be
reduced only to the extent necessary so that the Total Payments (other than
those referred to in clauses (A) and (B)) in their entirety constitute
reasonable compensation for services actually rendered within the meaning of
section 280G(b)(4) of the Code, in the opinion of the tax counsel referred to in
clause (B), and (D) the value of any noncash benefit or any deferred payment or
benefit included in the Total Payments shall be determined by the Company's
independent auditors in accordance with the principles of sections 280G(d)(3)
and (4) of the Code.
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(vii) You shall not be required to mitigate the amount of any
payment provided for in this Section 4 by seeking employment or otherwise, nor
shall the amount of any payment or benefit provided for in this Section 4 be
reduced by any compensation earned by you as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by you to the Company, or otherwise.
(viii) Any reduction in Termination Compensation pursuant to
subsection 4(c)(vi) shall, in the event of any question, be determined jointly
by the independent public accountants of the Company and a firm of independent
public accountants selected by you, and in the event such accountants are unable
to agree on a resolution of the question, such reduction shall be determined by
a third firm of independent public accountants selected jointly by the foregoing
two firms and shall be binding on you and the Company. The expense for any such
determination shall be borne by the Company.
5. ARBITRATION
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(a) If any dispute arises between the Company and you respecting any
provisions of this Agreement, such dispute shall be submitted to arbitration in
the City of New York, State of New York. Arbitration shall be initiated by
written notice given by either party to the other. Within 30 days after such
notice, each party shall appoint an arbitrator and the two arbitrators so chosen
shall appoint a third arbitrator. If either party fails to name an arbitrator,
such arbitrator shall be designated by the then president of the American
Arbitration Association. If any arbitrator becomes disabled, resigns or is
otherwise unable to discharge his duties, his successor shall be appointed in
the same manner as such arbitrator was appointed. Any determination of the
arbitrators shall be binding and conclusive upon the parties hereto but the
arbitrators shall not have the power to add to, alter or modify the terms and
conditions of this Agreement or to decide any issue which does not arise from
the interpretation or application of the provisions of this Agreement. Except
as aforesaid, the arbitration shall be conducted under the rules of the American
Arbitration Association. Application may be made by either party to any court
having jurisdiction thereof for judicial confirmation of any determination by
the arbitrators and/or for an order of enforcement of any such decision.
(b) All legal fees and expenses of the Company and you in connection
with the arbitration or in connection with any other legal proceedings which you
must bring or defend in connection with this Agreement shall be paid by the
Company; provided, however, if any arbitration shall be determined completely
adverse to you and the arbitrators unanimously determine that you had no
reasonable basis for commencing such arbitration, you shall be responsible for
the legal fees and expenses of your own counsel. The Company hereby agrees
to pay interest on any payments to be made to you under this Agreement not paid
when due or on any money judgment of the arbitrators or otherwise obtained by
you, calculated at the rate announced from time to time by Chemical Bank, New
9
<PAGE>
York, as its prime rate, from the date that payments should have been made under
this Agreement to the time of actual payment.
6. NO RIGHT OF SET OFF
-------------------
The Company shall have no right of set off or counterclaim in respect
of any claim, debt or obligation against any payments to you, your dependents,
beneficiaries or estate provided in this Agreement.
7. NON-ASSIGNABILITY OF PAYMENTS
-----------------------------
The provisions of this Agreement are personal in nature and neither of
the parties hereto shall, without the consent of the other, assign or transfer
any rights or obligations hereunder. Without limiting the foregoing, your right
to receive payments hereunder shall not be assignable or transferable, whether
by pledge, creation of a security interest or otherwise, other than a transfer
by your will or by the laws of descent or distribution and in the event of any
attempted assignment or transfer contrary to the provisions of this Section 7,
the Company shall have no liability to pay any amount attempted to be so
assigned or transferred.
8. SUCCESSORS; BINDING AGREEMENT
-----------------------------
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle you to compensation from the Company in the same
amount and on the same terms to which you would be entitled hereunder if you
terminated your employment for Good Reason following a Change in Control of the
Company, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Termination
Date. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
(b) This Agreement shall inure to the benefit of and be enforceable by
you and your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder had you continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or,
if there is no such designee, to your estate.
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9. NOTICE
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For purposes of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by United States certified or
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notice to the Company shall be directed to the attention of the Board
with a copy to the Secretary of the Company, or to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon receipt.
10. MISCELLANEOUS
-------------
No provision of the Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing and signed
by you and such officer as may be specifically designated by the Board. No
waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar of
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not expressly set forth in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of New York without regard to its conflicts of law principles. All
references to sections of the Exchange Act or the Code shall be deemed also to
refer to any successor provisions to such sections. Any payments provided for
hereunder shall be paid net of any applicable withholding required under
federal, state of local law. The obligations of the Company under Section 4
shall survive the expiration of the term of this Agreement.
11. VALIDITY
--------
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
12. COUNTERPARTS
------------
This agreement may be executed in several counterparts, each of which
shall be deemed to be an original but all of which together will constitute one
and the same instrument.
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13. ENTIRE AGREEMENT
----------------
This Agreement sets forth the entire agreement of the parties hereto
in respect of the subject matter contained herein and supersedes all prior
agreements (including the Prior Agreement), promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by an
officer, employee or representative of any party hereto; and any prior agreement
of the parties hereto in respect of the subject matter contained herein is
hereby terminated and cancelled.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter, which
will then constitute our agreement on this subject.
Sincerely,
GROW GROUP, INC.
By: /s/ Russell Banks
-------------------
Russell Banks
President
Agreed to this 27th day
of April, 1995.
/s/ Lloyd Frank
------------------------------
Lloyd Frank
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EXHIBIT 99.22
GROW GROUP, INC.
MetLife Building Telephone: 212-599-4400
200 Park Avenue TWX: 710-581-3686
New York, New York 10166 Telecopier: 212-286-0940
April 27, 1995
John F. Gleason
Corporate Office
Dear Mr. Gleason:
Grow Group, Inc. (the "Company") considers it essential to the best
interests of its stockholders to foster the continuous employment of key
management personnel. In this connection, the Board of Directors of the Company
(the "Board") recognizes that, as is the case with many publicly held companies,
the possibility of a change in control of the Company may exist and that such
possibility, and the uncertainty and questions which it may raise, may result in
the departure or distraction of key personnel to the detriment of the Company
and its stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of certain
employees of the Company, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a change in control of the Company.
In order to induce you to remain in the employ of the Company, the
Company agrees that you shall receive the severance benefits set forth in this
letter agreement (the "Agreement") in the event your employment with the Company
is terminated under the circumstances described below subsequent to a Change in
Control (as defined in Section 2) of the Company.
The execution of this Agreement constitutes cancellation of any prior
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employment, severance or termi-
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<PAGE>
John F. Gleason
April 27, 1995
Page 2
nation agreement between you and the Company ("Prior Agreement"), and the Prior
- --------------------------------------------------------------------------------
Agreement shall be of no force and effect after the date this Agreement is
- --------------------------------------------------------------------------
executed by you, as set forth on the last page of this Agreement ("Effective
- ----------------------------------------------------------------------------
Date").
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1. TERM OF AGREEMENT This Agreement shall commence on the Effective
-----------------
Date and shall continue in effect through December 31, 1995, provided, however,
that commencing on January 1, 1996 and each January 1 thereafter, the term of
this Agreement shall automatically be extended for one additional year unless,
not later than October 1 of the preceding year, the Company shall have given
notice that it does not wish to extend this Agreement; and provided, further,
that if a Change in Control of the Company shall have occurred during the
original or extended term of this Agreement, this Agreement shall continue in
effect for a period of not less than twenty-four (24) months beyond the month in
which such Change in Control occurred.
2. CHANGE IN CONTROL No benefits shall be payable hereunder unless
-----------------
there shall have been a Change in Control of the Company, as set forth below.
For purposes of this Agreement, a "Change in Control" shall have occurred if:
(a) any "person", as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than
the Company, any trustee or other fiduciary holding securities under an employee
benefit plan of the Company or any corporation owned, directly or indirectly, by
the stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 30% or more of the combined voting power
of the Company's then outstanding securities;
2
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John F. Gleason
April 27, 1995
Page 3
(b) during any period of not more than two consecutive years (not
including any period prior to the execution of this Agreement), individuals who
at the beginning of such period constitute the Board, and any new director
(other than a director designated by a person who has entered into an agreement
with the Company to effect a transaction described in clause (a), (c) or (d) of
this Section) whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at the beginning of
the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority thereof;
(c) the stockholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than (i) a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 80% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation or (ii) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in which no
"person" (as hereinabove defined) acquires more than 30% of the combined voting
power of the Company's then outstanding securities; or
(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.
3. TERMINATION OF EMPLOYMENT FOLLOWING CHANGE IN CONTROL
-----------------------------------------------------
(a) Your employment may be terminated subsequent to a Change in
Control of the Company in the following cases:
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John F. Gleason
April 27, 1995
Page 4
(i) Your employment shall terminate on your death.
(ii) The Company may terminate your employment in the event of your
disability; provided, however, that for purposes of this Agreement for the right
of the Company to terminate your employment by reason of disability
("Disability") you must, by reason of illness or physical or mental disability,
be totally unable to perform, or, in the judgment of the Company evidenced by a
resolution adopted in good faith by a majority of the Board, unable adequately
to perform, your duties with the Company for a period of 180 consecutive days,
and provided, further, that at the end of such 180 day period the Company must
have received the certificates of two qualified doctors, one selected by the
Company and one selected by you or on your behalf, stating that in their opinion
you are and will continue to be by reason of such illness or physical or mental
disability totally unable, or unable adequately, to perform your duties with the
Company. If the two doctors so selected are unable to reach agreement on the
question of your ability to perform such services, they shall promptly designate
a third doctor to make such determination and the decision of such third doctor
shall be binding on the Company and you. If the two doctors are unable to agree
upon a third doctor for such purpose, they shall request the Dean of the School
of Medicine of Columbia University to choose such third doctor. The fees of
such doctors shall be borne by the Company.
(iii) The Company may terminate your employment for Cause. For
purposes of this Agreement, Cause is defined to be (A) the willful engaging by
you in misconduct materially and demonstrably injurious to the Company, or (B)
the willful and continued failure by you to substantially perform your duties
(other than any such failure resulting from your incapacity due to physical or
mental illness or any such actual or anticipated failure after the issuance of a
Notice of Termination (as hereinafter defined) by you for Good Reason (as
hereinafter defined) after a written demand for substan-
4
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John F. Gleason
April 27, 1995
Page 5
tial performance is delivered to you by the Board, which demand specifically
identifies the manner in which the Board believes that you have not
substantially performed your duties, which failure results in demonstrable
material injury to the Company, if you shall have failed to remedy such alleged
failure to substantially perform your duties within 30 days of your receipt of
written notice thereof from the Board. For purposes of this Section 3(a)(iii),
no act or failure to act on your part shall be considered "willful" unless done,
or omitted to be done, by you not in good faith and without reasonable belief
that your action or omission was in the best interests of the Company.
Notwithstanding the foregoing, you shall not be deemed to have been terminated
for Cause unless and until there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
(3/4) of the entire membership of the Board at a meeting of the Board (after
reasonable notice to you and an opportunity for you, together with your counsel,
to be heard before the Board), finding that in the good faith opinion of the
Board you were guilty of conduct set forth above in this Subsection and
specifying the particulars thereof in detail.
(iv) You may voluntarily terminate your employment for Good Reason.
For purposes of this Agreement, "Good Reason" shall mean, without your express
written consent, the occurrence after a Change in Control of the Company of any
of the following circumstances unless, in the case of paragraphs (A), (E), (F),
(G), or (H) such circumstances are fully corrected prior to the Termination Date
(as hereinafter defined) specified in the Notice of Termination given in respect
thereof:
(A) the assignment to you of any duties substantially
inconsistent with the position in the Company that you held
immediately prior to the Change in Control of the Company,
or a significant adverse alteration in the nature or status
of your responsibilities or the conditions of your
employment
5
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John F. Gleason
April 27, 1995
Page 6
from those in effect immediately prior to such Change in
Control; provided however, that a mere change in job title
which does not result in the assignment to you of
substantially inconsistent duties or which does not
constitute a significant adverse alteration in the nature or
status of your responsibilities or the conditions of your
employment, as described herein above, shall not constitute
"Good Reason" hereunder;
(B) a reduction by the Company in your annual base salary as in
effect on the date hereof or as the same may be increased
from time to time except for across-the-board salary
reductions similarly affecting all key personnel of the
Company and all key personnel of any person in control of
the Company;
(C) the relocation of the Company's offices at which you are
principally employed immediately prior to the date of the
Change in Control of the Company to a location more than 35
miles from such location, or the Company's requiring you to
be based anywhere other than the Company's offices at such
location except for required travel on the Company's
business to an extent substantially consistent with your
business travel obligations immediately prior to the Change
in Control;
(D) the failure by the Company to pay to you any portion of your
current compensation or to pay to you any portion of an
installment of deferred
6
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John F. Gleason
April 27, 1995
Page 7
compensation under any deferred compensation program of the
Company within seven (7) days of the date such compensation
is due;
(E) the failure by the Company to continue to provide you with
benefits substantially similar to those enjoyed by you under
any of the Company's life insurance, medical, accident,
disability or other employee benefit or compensation plans
in which you were participating at the time of the Change in
Control of the Company, the taking of any action by the
Company which would directly or indirectly materially reduce
any of such benefits, or the failure by the Company to
provide you with the number of paid vacation days to which
you are entitled on the basis of years of service with the
Company in accordance with the Company's normal vacation
policy in effect at the time of the Change in Control of the
Company, unless such failure or taking of action similarly
affects all key personnel of the Company and all key
personnel of any person in control of the Company;
(F) the failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to perform
this Agreement, as contemplated in section 8 hereof;
(G) any purported termination of your employment that is not
effected pursuant to a Notice of Termination satisfying the
requirements of Subsection 3(b) hereof (and, if applica-
7
<PAGE>
John F. Gleason
April 27, 1995
Page 8
ble, the requirements of Subsection 3(a)(iii) hereof), which
purported termination shall not be effective for purposes of
this Agreement; or
(H) a breach by the company of any provision of this Agreement
not embraced in the foregoing clauses (A), (B), (C), (D),
(E), (F) and (G).
(b) Your employment will not be considered to have been terminated by
the Company if the employment is discontinued due to the sale of a facility of
the Company in which you work if you are offered substantially equivalent
employment by the purchaser of the facility (or an affiliated company of the
purchaser); and the purchaser (or an affiliated company) agrees to assume the
Company's responsibilities under this Agreement with respect to you as if the
purchaser (or an affiliated companny) were the Company hereunder and no such
sale had occurred.
(c) Any termination by the Company or by you pursuant to this
Agreement shall be communicated by written Notice of Termination to the other
party hereto in accordance with Section 10. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon, and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of your employment under the provisions so indicated
(d) "Termination Date" shall mean (i) if your employment is terminated
for Disability, thirty (30) days after Notice of Termination is given (provided
that you shall not have returned to the full-time performance of your duties
during such thirty (30)-day period), and (ii) if your employment is terminated
pursuant to Subsections 3(a)(iii) or (iv) hereof or for any other reason (other
than Disability), the date specified in the Notice of Termination (which, in the
case of a termination for
8
<PAGE>
John F. Gleason
April 27, 1995
Page 9
Cause shall not be less than thirty (30) days from the date such Notice of
Termination is given, and in the case of a termination for Good Reason shall not
be less than fifteen (15) nor more than sixty (60) days from the date such
Notice of Termination is given); provided, however, that if within fifteen (15)
days after any Notice of Termination is given, or, if later, prior to the
Termination Date (as determined without regard to this proviso), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, then the Termination Date shall be the date
on which the dispute is finally determined, either by mutual written agreement
of the parties, by a binding arbitration award, or by a final judgment, order or
decree of a court of competent jurisdiction (which is not appealable or with
respect to which the time for appeal therefrom has expired and no appeal has
been perfected); and provided, further, that the Termination Date shall be
extended by a notice of dispute only if such notice is given in good faith and
the party giving such notice pursues the resolution of such dispute with
reasonable diligence. Notwithstanding the pendency of any such dispute, the
Company will continue to pay your full compensation in effect when the notice
giving rise to the dispute was given (including, but not limited to, base
salary) and continue you as a participant in all compensation, benefit and
insurance plans in which you were participating when the notice giving rise to
the dispute was given, until the dispute is finally resolved in accordance with
this Subsection. Amounts paid under this Subsection are in addition to all
other amounts due under this Agreement, and shall not be offset against or
reduce any other amounts due under this Agreement.
4. COMPENSATION AND CERTAIN OTHER PROVISIONS
IN THE EVENT OF TERMINATION OF EMPLOYMENT
--------------------------------------------
If there is any termination of your employment after a Change in
Control, the following provisions shall apply:
9
<PAGE>
John F. Gleason
April 27, 1995
Page 10
(a) During any period that you fail to perform your full-time duties
with the Company as a result of incapacity due to physical or mental illness, or
in the event your employment shall be terminated by reason of disability or
death, your benefits shall be determined under the Company's disability,
retirement, insurance and other compensation programs then in effect in
accordance with the terms of such programs.
(b) If your employment is terminated for Cause under subsection
3(a)(iii) above, or by you other than for Good Reason, the Company shall pay you
your base salary (the "Base Salary") through the Termination Date at the annual
rate of compensation in effect immediately prior to the Termination Date, and
shall also pay you any accrued bonuses owing to you for any past fiscal years
and not previously paid. You shall also receive any bonus for the portion of
the Company's fiscal year prior to such termination (but not thereafter) that
may be awarded to you in the discretion of the Board. Such amounts due you
under this subsection 4(b) shall be paid in a lump sum within 10 days after the
Termination Date. After such payments are made, the Company shall have no
further obligation to you under this Agreement.
(c) If the Company shall terminate your employment other than pursuant
to the provisions of subsections 3(a)(i), (ii) or (iii), or if you shall
voluntarily terminate your employment pursuant to the provisions of subsection
3(a)(iv), then the Company, as liquidated damages or severance pay or both,
shall pay to you and provide you and your dependents with the following:
(i) The Company shall pay you (A) your Base Salary through the
Termination Date at the annual rate of compensation in effect immediately prior
to the Termination Date, any accrued bonuses owing to you for any past fiscal
years and not previously paid, and a bonus for the period from the first day of
the fiscal year in which the Termination Date occurs to the Termination Date,
computed at an annual rate equal to the higher
10
<PAGE>
John F. Gleason
April 27, 1995
Page 11
of (a) the average bonus paid to you for the three fiscal years of the Company
immediately preceding the fiscal year in which Change in Control occurs and (b)
the average bonus paid to you for the three fiscal years of the Company
immediately preceding the fiscal year in which the Termination Date occurs (the
"Bonus Rate"), and (B) the total Base Salary you would have earned during an
additional twenty-four (24) months of employment (the "Payout Period"), such
Base Salary to be at the annual rate of compensation in effect immediately prior
to the Termination Date (the "Termination Compensation"). For the purposes of
the foregoing payments, the annual rate of compensation shall be the rate paid
to you without regard to any purported reduction or attempted reduction of such
rate by the Company. The amount specified in clauses (A) and (B) shall be
payable in a lump sum within ten (10) days after the Termination Date.
(ii) During the Payout Period, the Company shall arrange to provide
you with life, disability, accident, group health insurance and other employee
benefits substantially similar to those which you were receiving immediately
prior to the Notice of Termination. Benefits otherwise receivable by you
pursuant to this section shall be reduced to the extent comparable benefits are
actually received by you during the Payout Period, and any such benefits
actually received by you shall be reported by you to the Company. In addition,
the remainder of the Payout Period until you reach retirement, or the period
until your death if earlier, shall be considered service with the Company for
the purpose of continued service credits under applicable pension and retirement
plans of the Company.
(iii) If and to the extent that benefits or service credits for
benefits provided under clause (ii) above shall not be payable or provided under
any such plans to you and your dependents by reason of you no longer being an
employee of the Company as the result of termination of your employment, the
Company shall itself pay or provide for payment of such benefits
11
<PAGE>
John F. Gleason
April 27, 1995
Page 12
and service credit for benefits to you and your dependents.
(iv) The termination of your employment shall not affect any vested
benefits under the Company's pension plans to which you may be entitled
(including any additional service credits for benefits as provided in
subsections (ii) and (iii) above), and you may receive retirement payments under
such pension plans on any date selected by you, which must be a date on which
retirement payments under such plans may commence.
(v) The Company shall pay the one-time individual conversion fee
required by the carrier in connection with your conversion of any insurance
policies carried by the Company on your life.
(vi) In the event that, by reason of section 280G of the Internal
Revenue Code of 1986 (the "Code"), any payment or benefit received or to be
received by you in connection with a Change in Control of the Company or the
termination of your employment (whether payable pursuant to the terms of this
Agreement ("Contract Payments") or any other plan, arrangement or agreement with
the Company, its successors, any person whose actions result in a Change in
Control or any corporation ("Affiliate") affiliated (or which, as a result of
the completion of the transactions causing a Change in Control will become
affiliated) with the Company within the meaning of section 1504 of the Code
(collectively with the Contract Payments, "Total Payments")), would not be
deductible (in whole or part) by the Company, an Affiliate or other person
making such payment or providing such benefit, the Termination Compensation
shall be reduced (and, if the Termination Compensation is reduced to zero, other
Contract Payments shall first be reduced and other Total Payments shall
thereafter be reduced) until no portion of the Total Payments is not deductible
by reason of section 280G of the Code. For purposes of this limitation, (A) no
portion of the Total Payments the receipt or enjoyment of which you shall have
effectively waived in writing prior to the date of payment of the Termina-
12
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John F. Gleason
April 27, 1995
Page 13
tion Compensation shall be taken into account, (B) no portion of the Total
Payments shall be taken into account which in the opinion of tax counsel
selected by the Company's independent auditors and acceptable to you does not
constitute a "parachute payment" within the meaning of section 280G(b)(2) of the
Code (without regard to subsection (A)(ii) thereof), (C) the Termination
Compensation (and, thereafter, other Contract Payments and other Total Payments)
shall be reduced only to the extent necessary so that the Total Payments (other
than those referred to in clauses (A) and (B)) in their entirety constitute
reasonable compensation for services actually rendered within the meaning of
section 280G(b)(4) of the Code, in the opinion of the tax counsel referred to in
clause (B), and (D) the value of any noncash benefit or any deferred payment or
benefit included in the Total Payments shall be determined by the Company's
independent auditors in accordance with the principles of sections 280G(d)(3)
and (4) of the Code.
(vii) You shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking employment or otherwise, nor shall the
amount of any payment or benefit provided for in this Section 4 be reduced by
any compensation earned by you as the result of employment by another employer,
by retirement benefits, by offset against any amount claimed to be owed by you
to the Company, or otherwise.
(viii) Any reduction in Termination Compensation pursuant to
subsection 4(c)(vi) shall, in the event of any question, be determined jointly
by the independent public accountants of the Company and a firm of independent
public accountants selected by you, and in the event such accountants are unable
to agree on a resolution of the question, such reduction shall be determined by
a third firm of independent public accountants selected jointly by the foregoing
two firms and shall be binding on you and the Company. The expense for any such
determination shall be borne by the Company.
13
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John F. Gleason
April 27, 1995
Page 14
5. ARBITRATION
-----------
(a) If any dispute arises between the Company and you respecting any
provisions of this Agreement, such dispute shall be submitted to arbitration in
the City of New York, State of New York. Arbitration shall be initiated by
written notice given by either party to the other. Within 30 days after such
notice, each party shall appoint an arbitrator and the two arbitrators so chosen
shall appoint a third arbitrator. If either party fails to name an arbitrator,
such arbitrator shall be designated by the then president of the American
Arbitration Association. If any arbitrator becomes disabled, resigns or is
otherwise unable to discharge his duties, his successor shall be appointed in
the same manner as such arbitrator was appointed. Any determination of the
arbitrators shall be binding and conclusive upon the parties hereto but the
arbitrators shall not have the power to add to, alter or modify the terms and
conditions of this Agreement or to decide any issue which does not arise from
the interpretation or application of the provisions of this Agreement. Except
as aforesaid, the arbitration shall be conducted under the rules of the American
Arbitration Association. Application may be made by either party to any court
having jurisdiction thereof for judicial confirmation of any determination by
the arbitrators and/or for an order of enforcement of any such decision.
(b) All legal fees and expenses of the Company and you in connection
with the arbitration or in connection with any other legal proceedings which you
must bring or defend in connection with this Agreement shall be paid by the
Company; provided, however, if any arbitration shall be determined completely
adverse to you and the arbitrators unanimously determine that you had no
reasonable basis for commencing such arbitration, you shall be responsible for
the legal fees and expenses of your own counsel. The Company hereby agrees to
pay interest on any payments to be made to you under this Agreement not paid
when due or on any money judgment of the arbitrators or otherwise obtained by
you, calculated
14
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John F. Gleason
April 27, 1995
Page 15
at the rate announced from time to time by Chemical Bank, New York, as its prime
rate, from the date that payments should have been made under this Agreement to
the time of actual payment.
6. NO RIGHT OF SET OFF
-------------------
The Company shall have no right of set off or counterclaim in respect
of any claim, debt or obligation against any payments to you, your dependents,
beneficiaries or estate provided in this Agreement.
7. NON-ASSIGNABILITY OF PAYMENTS
-----------------------------
The provisions of this Agreement are personal in nature and neither of
the parties hereto shall, without the consent of the other, assign or transfer
any rights or obligations hereunder. Without limiting the foregoing, your right
to receive payments hereunder shall not be assignable or transferable, whether
by pledge, creation of a security interest or otherwise, other than a transfer
by your will or by the laws of descent or distribution and in the event of any
attempted assignment or transfer contrary to the provisions of this Section 7,
the Company shall have no liability to pay any amount attempted to be so
assigned or transferred.
8. SUCCESSORS; BINDING AGREEMENT
-----------------------------
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle you to compensation from the Company in the same
amount and on the same terms to which you would be entitled hereunder if you
terminated your employment for Good
15
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John F. Gleason
April 27, 1995
Page 16
Reason following a Change in Control of the Company, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Termination Date. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any successor to
its business and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
(b) This Agreement shall inure to the benefit of and be enforceable by
you and your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder had you continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or,
if there is no such designee, to your estate.
9. NOTICE
------
For purposes of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by United States certified or
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notice to the Company shall be directed to the attention of the Board
with a copy to the Secretary of the Company, or to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon receipt.
10. MISCELLANEOUS
-------------
No provision of the Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing and signed
by you and such officer as may be specifically designated by the
16
<PAGE>
John F. Gleason
April 27, 1995
Page 17
Board. No waiver by either party hereto at any time of any breach by the other
party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar of dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of New York without regard to its conflicts of law
principles. All references to sections of the Exchange Act or the Code shall be
deemed also to refer to any successor provisions to such sections. Any payments
provided for hereunder shall be paid net of any applicable withholding required
under federal, state of local law. The obligations of the Company under Section
4 shall survive the expiration of the term of this Agreement.
11. VALIDITY
--------
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
12. COUNTERPARTS
------------
This agreement may be executed in several counterparts, each of which
shall be deemed to be an original but all of which together will constitute one
and the same instrument.
13. ENTIRE AGREEMENT
----------------
This Agreement sets forth the entire agreement of the parties hereto
in respect of the subject matter contained herein and supersedes all prior
agreements (including the Prior Agreement), promises, covenants, arrangements,
communications, representations or warran-
17
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John F. Gleason
April 27, 1995
Page 18
ties, whether oral or written, by an officer, employee or representative of any
party hereto; and any prior agreement of the parties hereto in respect of the
subject matter contained herein is hereby terminated and cancelled.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter, which
will then constitute our agreement on this subject.
Sincerely,
GROW GROUP, INC.
By: /s/ Russell Banks
-------------------------
Russell Banks
President
Agreed to this 27th day
of April, 1995.
/s/ John F. Gleason
---------------------------
18
<PAGE>
EXHIBIT 99.23
AMENDMENT OF EMPLOYMENT AGREEMENT
---------------------------------
AGREEMENT made as of April 27, 1995, between GROW GROUP, INC., a
New York corporation (the "Company"), and Frank V. Esser (the "Employee").
The Employee is employed by the Company pursuant to an employment
agreement first executed effective July 1, 1989 (such agreement being
hereinafter referred to as the "Current Agreement"). Capitalized terms
used herein shall, unless otherwise defined herein, have the meanings
ascribed to such terms in the Current Agreement.
The parties desire to amend and clarify the Current Agreement in
certain respects.
NOW, THEREFORE, in consideration of the foregoing, the parties
hereby agree as follows:
1. Clarification and Amendment of Termination Compensation. The portion
-------------------------------------------------------
of the Termination Compensation described in Section 9.03(c)(i)(B) of the
Current Agreement which is calculated by reference to the average bonus paid
to the Employee in respect of Company's fiscal years 1986, 1987 and 1988,
shall instead be calculated based on the higher of (a) the average bonus
paid to the Employee for the three fiscal years of the Company immediately
preceding the fiscal year in which Change in Control occurs and (b) the
average bonus paid to the Employee for the three fiscal years of the Company
immediately preceding the fiscal year in which the Termination Date occurs.
2. Payout Period for Termination Compensation. The Payout Period for
------------------------------------------
Termination Compensation described in Section 9.03 (c)(i)(B)(y) of the
Current Agreement shall be three years instead of two years.
3. Status of Current Agreement. Except as specifically amended hereby,
---------------------------
the terms and conditions of the Current Agreement shall remain in full force
and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their
hands and seals as of the day and year first above written.
GROW GROUP, INC.
By /s/ Grow Group, Inc.
---------------------
/s/ Frank V. Esser
---------------------
Employee
2
