<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-9
(AMENDMENT NO. 5)
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
RELIANCE ELECTRIC COMPANY
(Name of Subject Company)
RELIANCE ELECTRIC COMPANY
(Name of Person(s) Filing Statement)
Class A Common Stock, $.01 Par Value Per Share,
Including the Associated Series A Preferred Stock Purchase Rights
(Title of Class of Securities)
759458102
(CUSIP Number of Class of Securities)
William R. Norton, Esq.
Vice President, General Counsel and Secretary
Reliance Electric Company
6065 Parkland Boulevard
Cleveland, Ohio 44124
(216) 266-5800
(Name, address and telephone number of person(s) authorized
to receive notice and communications on behalf
of the person(s) filing statement)
Copies to:
Michael L. Miller, Esq. Joseph B. Frumkin, Esq.
Calfee, Halter & Griswold Sullivan & Cromwell
800 Superior Avenue, Suite 1800 125 Broad Street
Cleveland, Ohio 44114 New York, New York 10004
(216) 622-8200 (212) 558-4000
<PAGE> 2
This Amendment No. 5 amends and supplements the Solicitation/Recommendation
Statement on Schedule 14D-9, dated November 3, 1994, as amended (the "Schedule
14D-9"), filed by Reliance Electric Company, a Delaware corporation (the
"Company"), relating to the tender offer disclosed in the Schedule 14D-1, dated
October 21, 1994, as amended (the "Schedule 14D-1"), of the bidder, ROK
Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary
of Rockwell International Corporation, a Delaware corporation ("Rockwell"), to
purchase all of the outstanding Shares upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated October 21, 1994, and the
related Letters of Transmittal (together, the "Offer"). Capitalized terms used
and not defined herein shall have the meanings set forth in the Schedule 14D-9.
ITEM 3. IDENTITY AND BACKGROUND
Item 3 is hereby amended and supplemented by adding thereto the following:
The Company's Board of Directors adopted a resolution authorizing an
amendment to the Severance Plan entitling the participants thereunder to the
severance benefits previously described in this Item 3 if their employment is
terminated within two years of the consummation of any merger, consolidation or
other business combination involving the Company and its subsidiaries or the
acquisition of all or substantially all of the assets or capital stock of the
Company.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
Item 7 is hereby amended and restated in its entirety as follows:
(a) On November 17, 1994, the Company entered into an agreement (the
"Amendment Agreement") with General Signal and Rockwell permitting the Company
to discuss the terms of a business combination with Rockwell. The Amendment
Agreement gives the Company until noon on Monday, November 21 to negotiate with
Rockwell, and gives the Company a right to terminate the Reliance-General
Signal Merger Agreement if the Company reaches an agreement with Rockwell and
pays General Signal a $50 million termination fee and $5 million in expenses.
The Amendment Agreement also provides for mutual releases among the Company,
General Signal and Rockwell upon any execution of a merger agreement between
Rockwell and the Company. Copies of the Amendment Agreement (including the
mutual releases) and a press release of the Company dated November 17, 1994
announcing the Amendment Agreement are filed as Exhibits 26 and 99(a),
respectively, hereto and are incorporated herein by reference.
The Company has commenced discussions with representatives of Rockwell
concerning the terms of the Offer and a possible merger involving the Company.
These discussions are being conducted in accordance with the Amendment
Agreement. The Board of Directors of the Company has determined that
additional disclosure at this point with respect to the possible terms of any
transactions or proposals with Rockwell of the type referred to in the
instructions to Item 7(a)(1), (2), (3) or (4) of Schedule 14D-9 might
jeopardize the continuation of any discussions or negotiations that the Company
may conduct. Accordingly, the Board adopted a resolution at its November 16,
1994 meeting instructing management not to disclose the possible terms of any
such transactions or proposals, or the parties thereto, unless and until an
agreement relating thereto has been reached. A copy of the Board resolution is
filed as Exhibit 99(b) hereto and is incorporated herein by reference.
2
<PAGE> 3
(b) Except as set forth in this Item 7, the Company has not entered into any
transaction, board resolution, agreement in principle or signed contract in
response to the Offer which relates to or would result in one or more of the
enumerated matters referred to in the instructions to Item 7(a)(1), (2), (3) or
(4) of Schedule 14D-9.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
Item 8 is hereby amended and supplemented by adding to subparagraph (e)
thereunder captioned "Litigation" the following:
On November 16, 1994 both the Friedman Complaint and the Keim Complaint were
amended (together, the "Amended Complaint") to, among other things, add General
Signal as a defendant and to allege that the directors of the Company breached
their fiduciary duties to the stockholders of the Company as a result of the
$50 million termination fee set forth in the Reliance-General Signal Merger
Agreement. The Amended Complaint seeks to enjoin the Company and General
Signal from, among other things, completing the Reliance-General Signal Merger.
A copy of the Amended Complaint is filed as Exhibit 99(c) hereto and is
incorporated herein by reference.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
Item 9 is hereby amended and supplemented by adding thereto the following:
Exhibit No. Exhibit Page No.
----------- ------- --------
Exhibit 26 -- Amendment Agreement, dated November
17, 1994, between the Company, General
Signal and Rockwell
Exhibit 99(a) -- Press release of the Company, dated
November 17, 1994
Exhibit 99(b) -- Resolution of the Company's Board
of Directors, adopted November 16,
1994
Exhibit 99(c) -- Amended Complaint relating to Nancy
S. Friedman, IRA v. Morley, and
Keim V. Morley, previously filed as
Exhibits 16 and 17, respectively.
3
<PAGE> 4
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: November 18, 1994
RELIANCE ELECTRIC COMPANY
By: /s/ John C. Morley
------------------------
Name: John C. Morley
Title: President and Chief
Executive Officer
373\10226HBA.461
4
<PAGE> 1
Exhibit 26
General Signal Corporation
One High Ridge Park
Stamford, CT 06904
Reliance Electric Company
6065 Parkland Boulevard
Cleveland, OH 44124
November 17, 1994
Gentlemen:
By this letter, you agree with us to amend the Agreement and Plan of
Merger by and between Reliance Electric Company ("Reliance") and General Signal
Corporation ("General Signal") dated as of August 30, 1994 (the "Merger
Agreement") as follows: (i) Reliance shall be entitled, after Rockwell
International Corporation ("Rockwell") has indicated its acceptance of the
terms hereof by executing a copy of this agreement and returning it to us, to
furnish or disclose non-public information to, and negotiate, explore and
otherwise communicate with, Rockwell and its legal and financial advisors
regarding Rockwell's cash tender offer for shares of Reliance or other possible
business combination between Reliance and Rockwell from the time of
execution of this letter agreement until noon Eastern Standard Time on November
21, 1994 ("Grace Period Actions") and such Grace Period Actions shall not
constitute a breach of the Merger Agreement or entitle General Signal to
terminate the Merger Agreement pursuant to Section 9.02 thereof or receive any
payment pursuant to Section 9.05 thereof; (ii) in the event that Reliance and
Rockwell come to an arrangement for a business combination between Reliance and
Rockwell on or before noon Eastern Standard Time on November 21, 1994, clause
(i) hereof shall be of no further force and effect and General Signal and
Reliance agree that the Merger Agreement shall be terminated pursuant to
Sections 9.02(c) and (d) thereof, effective upon Reliance's payment by wire
transfer in immediately available funds to the account of General SIgnal at
Chase Manhattan Bank, N.A., New York, N.Y., (Account Number: 035-1-78688;
ABA Number: 021-000-021) (a) $50 million, (b) $5 million with respect to
General Signal's expenses directly related to the Merger Agreement and the
transactions contemplated thereby, and (c) $150,000 with respect to expenses
payable to General Signal by Reliance pursuant to Section 4.12 of the Merger
Agreement and General Signal shall be entitled to no further payments pursuant
to the Merger Agreement; (iii) upon payment of the amounts specified in clause
(ii) and the effectiveness of any termination of the Merger Agreement pursuant
to
<PAGE> 2
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clause (ii) hereof, the mutual release set forth as Annex A hereto shall become
effective; and (iv) if Reliance and Rockwell do not come to an arrangement for
a business combination between Reliance and Rockwell on or before noon Eastern
Standard Time on Novemebr 21, 1994, the Merger Agreement shall remain in full
force and effect and no breach or right of termination shall have occured
thereunder as a result of actions taken in compliance with clause (i) hereof.
In the event that (a) the Merger Agreement is terminated pursuant to
clause (ii) hereof and the arrangement for a business combination between
Reliance and Rockwell is terminated (other than to permit Reliance to enter
into a business combination with a third party) on or prior to April 1, 1995
and not reinstated, and (b) Rockwell has neither purchased shares of Reliance
capital stock pursuant to a tender offer nor otherwise effected a business
combination involving Reliance or its subsidiaries, General Signal and Reliance
within three business days after termination of the arrangement with Rockwell
shall re-execute the Merger Agreement with the same representations and
warranties being made as of the date of such re-execution and on and subject to
the same terms and conditions as if the Merger Agreement had never terminated.
Simultaneously with such re-execution General Signal shall repay to Reliance
$55 million in immediately available funds.
PLease indicate your agreement to the foregoing by executing this
letter in the space below.
Very truly yours,
GENERAL SIGNAL CORPORATION
By: Edgar J. Smith, Jr.
---------------------------
Name: EDGAR J. SMITH, JR.
Title: VICE PRESIDENT,
GENERAL COUNSEL AND
SECRETARY
Accepted and agreed: Accepted and agreed:
RELIANCE ELECTRIC COMPANY ROCKWELL INTERNATIONAL
CORPORATION
By:/s/ John C. Morley By:/s/ Charles H. Harff
---------------------------- ---------------------------
Name: John C. Morley Name: Charles H. Harff
Title: President/CEO Title: Senior Vice President
and Special Counsel
<PAGE> 3
Annex A
MUTUAL RELEASE
--------------
WHEREAS, General Signal Corporation, a New York corporation ("General
Signal"), and Reliance Electric Company, a Delaware corporation ("Reliance"),
are parties to an Agreement and Plan of Merger By and Between Reliance Electric
Company and General Signal Corporation dated August 30, 1994 (the "Merger
Agreement"); and
WHEREAS, Rockwell International Corporation, a Delaware corporation,
("Rockwell") through a wholly-owned subsidiary has commenced a tender offer to
purchase all the outstanding capital stock and related preferred stock purchase
rights of Reliance (the "Tender Offer"); and
WHEREAS, General Signal, Reliance and Rockwell have entered into a
letter agreement (the "Letter Agreement") dated November 16, 1994; and
WHEREAS, General Signal and Reliance wish to resolve any actual or
potential controversies or disputes between them arising out of or relating to
the Merger Agreement if the Merger Agreement is terminated in accordance with
the terms of clause (ii) of the Letter Agreement:
NOW, THEREFORE,
1. In consideration of the release of General Signal by Reliance and
Rockwell contained herein, (i) General Signal for itself, its predecessors,
successors and assigns (ii) does hereby remise, release and forever discharge
and covenant not to sue (iii) Reliance and Rockwell and each's corporate
predecessors, successors, subsidiaries, affiliates, parents and divisions, as
well as the present and former officers, partners, directors, advisory
directors, employees, agents, stockholders, servants, advisors (including
without limitation, financial advisors) and attorneys of the foregoing and
their heirs, executors, administrators, and representatives (collectively, the
"Reliance/Rockwell Releasees") , (iv) of and from all manner of actions, causes
of action, suits, debts, dues, sums of money, accounts, reckonings, bonds,
bills, specialties, covenants, contracts, controversies, agreements, promises,
variances, trespasses, damages, judgments, executions, rights, claims, and
demands whatsoever, in law, in admiralty, or in equity, whether known or
unknown, suspected or unsuspected, (v) which against the Reliance/Rockwell
Releasees, or any of them, General Signal or General Signal's predecessors,
successors, or assigns or any of the present or former officers, directors,
employees, agents, servants, advisors, (including without limitation, financial
advisors) or attorneys or the foregoing, or any of their heirs, executors,
administrators, representatives,
<PAGE> 4
-2-
successors or assigns, acting in any capacity, ever had or now has or hereafter
can, shall, or may have, (vi) arising out of or relating to the Merger
Agreement (including without limitation the negotiation, execution, amendment
or termination of the Merger Agreement) or the Tender Offer or the transactions
contemplated thereby (including any claim for tortious interference with the
Merger Agreement or the transactions contemplated thereby), (vii) subject to
the exception provided in Paragraph 3 of this Mutual Release).
2. In consideration of the release of Reliance and Rockwell by General
Signal contained herein, (i) Reliance and Rockwell each for itself, its
predecessors, successors and assigns (ii) does hereby remise, release and
forever discharge and covenant not to sue (iii) General Signal and its
corporate predecessors, successors, subsidiaries, affiliates, parents and
divisions, as well as the present and former officers, partners, directors,
advisory directors, employees, agents, stockholders, servants, advisors
(including, without limitation, financial advisors) and attorneys of the
foregoing and their heirs, executors, administrators, and representatives
(collectively, the "General Signal Releasees"), (iv) or and from all manner of
actions, causes of actions, suits, debts, dues, sums of money, accounts,
reckonings, bonds, bills, specialties, covenants, contracts, controversies,
agreements, promises, variances, trespasses, damages, judgments, extensions,
rights, claims, and demands whatsoever, in law, in admiralty, or in equity,
whether known or unknown, suspected or unsuspected, (v) which against the
General Signal Releasees, or any of them, Reliance or Rockwell or each's
predecessors, successors, or assigns or any of the present or former officers,
directors, employees, agents, servants, advisors (including, without
limitation, financial advisors) or attorneys of the foregoing, or any of their
heirs, executors, administrators, representatives, successors or assigns, acting
in any capacity, ever had or now has or hereafter can, shall, or may have, (vi)
arising out of or relating to the Merger Agreement (including without
limitation the negotiation, execution, amendment or termination of the Merger
Agreement) or the Tender Offer (or the transactions contemplated thereby).
3. Nothing in this Mutual Release shall affect General Signal's rights
or claims to payments from Reliance pursuant to clause (ii) of the Letter
Agreement, or the rights of Reliance and General Signal pursuant to the
penultimate paragraph of the Letter Agreement.
4. This Mutual Release shall inure to the benefit of and shall be
binding upon the heirs, executors, administrators and successors of General
Signal, the General Signal Releasees, Reliance and Rockwell and the
Reliance/Rockwell Releasees.
<PAGE> 5
-3-
5. This Mutual Release shall be governed and construed in accordance
with the substantive law of the State of New York without regard to principles
of choice or conflict of laws.
6. The person who enters into and executes this Mutual Release on
behalf of General Signal warrants and represents that he or she has been duly
authorized by General Signal to do so. The person who enters into and executes
this Mutual Release on behalf of Reliance warrants and represents that he or
she has been duly authorized by Reliance to do so. The person who enters into
and executes this Mutual Release on behalf of Rockwell warrants and represents
that he or she has been duly authorized by Rockwell to do so.
7. This Mutual Release may be modified only by a writing signed by the
Releasees.
8. This Mutual Release shall only be effective after the Merger
Agreement has been terminated in accordance with the terms of clause (iii) of
the Letter Agreement.
IN WITNESS WHEREOF, General Signal, Reliance and Rockwell have executed
this Mutual Release by their duly authorized officers as of the 16th day of
November 1994.
GENERAL SIGNAL CORPORATION RELIANCE ELECTRIC COMPANY
By: Edgar J. Smith, Jr. By: /s/ John C. Morley
-------------------------- --------------------------
Name: EDGAR J. SMITH, JR. Name: JOHN C. MORLEY
Title: VICE PRESIDENT Title: PRESIDENT/CEO
GENERAL COUNSEL
AND SECRETARY
ROCKWELL INTERNATIONAL
CORPORATION
By: /s/ Charles H. Harff
--------------------------
Name: CHARLES H. HARFF
Title: SENIOR VICE PRESIDENT
AND SPECIAL COUNSEL
<PAGE> 1
Exhibit 99(a)
[LOGO]
NEWS RELEASE
For More
Information Stephen A. Van Oss
Contact:
News Release No. 94-17
Release Date: November 17, 1994
- -----------------------------------------------------------------------------
Reliance Electric, General Signal and Rockwell Agree to Grace Period
--------------------------------------------------------------------
Cleveland, Ohio - November 17, 1994 - Reliance Electric Company (NYSE:REE)
announced today that it has entered into an agreeement with General Signal
Corporation (NYSE:GSX) and Rockwell International Corporation (NYSE:ROK) that
will permit Reliance to discuss the terms of a business combination with
Rockwell. The agreement gives Reliance until noon on Monday November 21, 1994 to
negotiate with Rockwell, and gives Reliance a right to terminate its merger
agreement with General Signal if Reliance reaches an agreement with Rockwell
and pays Genaral Signal a $50 million termination fee and $5.15 million in
expenses. If no arrangement is reached with Rockwell on or before November 21,
1994, the Reliance/General Signal merger agreement shall remain in full force
and effect. The agreement also provides for mutual releases among Reliance,
General Signal and Rockwell upon any execution of a merger agreement between
Rockwell and Reliance.
If an agreement between Reliance and Rockwell is reached and prior to April 1,
1995, Rockwell has neither purchased shares of Reliance stock pursuant to a
tender offer nor effected a business combination with Reliance, Reliance and
General Signal will re-execute the merger agreement and General Signal will
repay to Reliance the $50 million termination fee and $5.15 million in
expenses, and then proceed to obtain shareholder approval of the merger.
John C. Morley, President and Chief Executive Officer of Reliance said, "While
our Board of Directors has made no decision to sell Reliance, the Board has a
duty to examine all proposals the Company receives. Accordingly, we appreciate
the constructive approach General Signal has taken in permitting Reliance to
explore with Rockwell their latest acquisition proposal. We are making
arrangements to meet promptly with Rockwell's representatives. There can be
no assurance that any agreement acceptable to the Reliance Board will be
reached with Rockwell. The Reliance Board continues to believe the General
Signal merger provides an attractive transaction for Reliance shareholders and
if agreement cannot be reached with Rockwell, we will proceed with great
optimism to build value for our shareholders through the General Signal merger."
<PAGE> 1
Exhibit 99(b)
-------------
RESOLUTION
----------
WHEREAS, the Board of Directors of the Company has determined that
disclosure at this point with respect to the parties to, and the possible terms
of, any transactions or proposals of the type referred to in the instructions
to Item 7(a)(1), (2), (3) or (4) of Schedule 14D-9 might jeopardize the
continuation of any discussions or negotiations that the Company may conduct.
RESOLVED, the officers of the Company are hereby instructed not to
disclose the possible terms of any such transactions or proposals, or the
parties thereto, unless and until an agreement relating thereto has been
reached.
373/10226HCA.RES
<PAGE> 1
Exhibit 99(c)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ------------------------------
NANCY FRIEDMAN, I.R.A., )
)
Plaintiff, )
)
v. ) Civil Action No. 13823
)
JOHN C. MORLEY et al., )
)
Defendants. )
- ------------------------------
HANS KEIM, )
)
Plaintiff, )
)
v. ) Civil Action No. 13827
)
JOHN C. MORLEY et al., )
)
Defendants. )
- ------------------------------
NOTICE OF FILING AMENDED
CLASS ACTION COMPLAINT
----------------------
TO: Samuel A. Nolen, Esquire
Richards, Layton & Finger
One Rodney Square
P.O. Box 551
Wilmington, DE 19899
PLEASE TAKE NOTICE that plaintiffs herewith file the within Amended
Class Action Complaint as of course pursuant to Rule 15(a).
In compliance with Rule 15(aa), plaintiffs aver that the within Amended
Complaint is in full substitution for the Complaints filed on October 21, 1994
in C.A. Nos. 13823 and 13827.
ROSENTHAL, MONHAIT, GROSS
& GODDESS, P.A.
By /s/ Norman M. Monhait
-----------------------------
First Federal Plaza
P.O. Box 1070
Wilmington, DE 19801
Attorneys for Plaintiffs
<PAGE> 2
CERTIFICATE OF SERVICE
----------------------
I, Norman M. Monhait, do hereby certify that on November 16, 1994, I
caused copies of the foregoing Notice of Filing Amended Class Action Complaint
to be served by hand on defendants' counsel as follows:
Samuel A. Nolen, Esquire
Richards, Layton & Finger
One Rodney Square
Wilmington, DE 19801
/s/ Norman M. Monhait
--------------------------------
Norman M. Monhait
<PAGE> 3
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ------------------------------------
NANCY FRIEDMAN, I.R.A., )
)
Plaintiff, )
)
v. ) Civil Action No. 13823
)
JOHN C. MORLEY, H. VIRGIL SHERRILL, )
ANTHONY C. HOWKINS, )
ALFRED M. RANKIN, JR., )
DUDLEY P. SHEFFLER, E. MANDELL )
DEWINDT, RELIANCE ELECTRIC )
COMPANY and GENERAL SIGNAL )
CORPORATION, )
)
Defendants. )
- ------------------------------------
HANS KEIM, )
)
Plaintiff, )
)
v. ) Civil Action No. 13827
)
JOHN C. MORLEY, H. VIRGIL )
SHERRILL, ANTHONY C. HOWKINS, )
ALFRED M. RANKIN, JR., DUDLEY )
P. SHEFFLER, E. MANDELL DEWINDT, )
GENERAL SIGNAL CORPORATION and )
RELIANCE ELECTRIC COMPANY, )
)
Defendants. )
- ------------------------------------
AMENDED CLASS ACTION COMPLAINT
------------------------------
Plaintiffs, by their attorneys, for their Complaint allege upon
information and belief, except as to the allegations contained in paragraph 1,
which plaintiffs allege upon knowledge, as follows:
<PAGE> 4
PARTIES
-------
1. Plaintiffs own shares of the common stock of Reliance Electric
Company ("Reliance" or the "Company") and have owned those shares at all
relevant times.
2. Defendant Reliance is a Delaware corporation with principal
executive offices located at 6055 Parkland Boulevard, Cleveland, Ohio 44124. As
of June 30, 1994, the Company had 41,305,221 shares of common stock
outstanding. For the fiscal year ended December 31, 1993, the Company reported
net earnings of $25 million, or $0.50 per share, on revenues exceeding $1.6
billion. At the close of fiscal 1993, Relinace reported assets of $1.195
billion against liabilities of $814 million.
3. Defendant General Signal Corporation ("General Signal") is a
manufacturer of electrical conduits, fire detection systems and radio frequency
transmission equipment. As more fully alleged herein, General Signal has
knowingly sided and abetted various breaches of fiduciary duty committed by the
individual defendants.
4. At all revelant times herein, defendant John C. Morley ("Morley")
was President and Chief Executive Officer of the Company, as well as a member
of its Board of Directors (the "Board"), and the Board's executive committee.
For the fiscal year ended December 11, 1993, Morley received cash compensation
totalling $827,000.
5. At all relevant times herein, defendant Dudley P. Sheffler
("Sheffler") was Vice President of the Company, as well as
2
<PAGE> 5
a member of the Board. For the fiscal year ended December 31, 1993, Shaffler
received cash compensation totalling $392,000.
6. At all relevant times herein, defendant H. Virgil Sherrill
("Sherrill") was Chairman of the Board and a member of the Board's executive,
compensation, and nominating committees.
7. At all relevant times herein, defendant Anthony C. Howkins
("Howkins") was a member of the Board, as well as its audit, compensation and
nominating committees.
8. At all relevant times herein, defendant Alfred M. Rankin, Jr.,
("Rankin") was a member of the Board, as well as its audit and compensation
committees.
9. At all relevant times herein, defendant E. Mandell DeWindt was a
member of the Board, as well as its audit, compensation and nominating
committees.
CLASS ACTION ALLEGATIONS
------------------------
10. Plaintiffs bring this action pursuant to Rule 23 of the Rules of
the Court of Chancery, for declaratory, injunctive and other relief on their
own behalf and as a class action, on behalf of all common stockholders of
Reliance (except 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.
11. This action is properly maintainable as a class action for the
following reasons:
3
<PAGE> 6
a. The class of stockholders for whose benefit this action is
brought is so numerous that joinder of all class members is impracticable. As
of June 30, 1994, Reliance had approximately 32.9 million Class A shares, 3.2
million Class B shares, and 5.3 million Class C shares of common stock, duly
issued and outstanding, which traded on the New York Stock Exchange and were
owned by thousands of shareholders. Members of the Class are scattered
throughout the United States.
b. There are questions of law and fact which are common to the
members of the Class including the following:
(1) whether the individual defendants have engaged in
conduct constituting unfair dealing to the detriment of the
public stockholders of Reliance;
(2) whether the proposed merger of Reliance and
General Signal more fully described below, unfairly favors
General Signal over other parties interested in acquiring
Reliance, in particular, Rockwell International Corporation
("Rockwell"); and
(3) whether the individual defendants, aided and
abetted by General Signal, have breached their fiduciary and
common law duties owed by them to plaintiffs and the other
members of the Class.
c. The claims of plaintiffs are typical of the claims of the
other members of the Class, and plaintiffs have no
4
<PAGE> 7
interests that are adverse or antagonistic to the interests of the Class.
d. Plantiffs 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, which would establish incompatible
standards of conduct for defendants.
f. Defendants have acted or refused to act on grounds
generally applicable to the Class, thereby making appropriate preliminary and
final injunctive or corresponding declaratory relief with respect to the Class
as a whole.
SUBSTANTIVE ALLEGATIONS
-----------------------
A. Rockwell's Interest In A Business Combination With Reliance
-----------------------------------------------------------
12. Reliance designs, manufactures, sells, and services a broad range
of industrial and telecommunications equipment. Through its industrial segment,
Reliance manufactures, sells and services a range of industrial motors and
related controls, generators, transformers, and mechanical power transmission
products and systems. The industrial segment accounted for 73% of the Company's
net sales in fiscal 1993, and is organized into
5
<PAGE> 8
groups that allow Reliance to provide a comprehensive line of products and
systems to meet its customers' industrial needs. The balance of the Company's
1993 sales was derived from Reliance's telecommunications division, which
produces power connection, protection and distribution devices, along with
transmission products and systems.
13. Since 1991, Rockwell has expressed serious interest in entering
into a business combination with and/or acquiring Reliance. In the summer of
1991, Reliance explored with Rockwell a sale of the Company. In connection
therewith, Rockwell and Reliance entered into a so-called "standstill"
agreement, expiring August 13, 1993. In late September 1991, Rockwell
terminated activities in connection with its consideration of a possible
acquisition of Reliance.
14. Beginning in 1992, Rockwell, through its wholly-owned subsidiary,
Allen-Bradley, began discussing and developing various cooperative activities
between Allen-Bradley and the Company, including joint development of new
products and reciprocal product branding. In October 1993, Rockwell had the
impression that Reliance wanted to go beyond their existing cooperative
activities. On May 23, 1994, Don H. Davis, Jr., Rockwell's Executive Vice
President and Chief Operating Officer adivsed defendant John C. Morley,
President and Chief Executive Officer of Reliance, that Rockwell was interested
in acquiring the Company. On July 12, 1994, Rockwell's two senior executives
met with Mr. Morley and informed him that Rockwell was extremely interested in
6
<PAGE> 9
acquiring the Company. The individual defendants did not in any way pursue
discussions with Rockwell and almost a month later, on August 11, 1994, Mr.
Morley adivised Mr. Davis that he had discussed Rockwell's interest in a
proposed acquisition of the Company with its Board of Directors, but that he
could not give Rockwell a definitive response at that time.
B. Reliance Secretly Deals With General Signal.
--------------------------------------------
15. Notwithstanding Rockwell's professed and profound interest
in acquiring Reliance, on or about August 30, 1994, Reliance announced that it
had entered into a definitive merger agreement with General Signal (the
"Reliance/General Signal Merger Agreement"). Pursuant to the terms of the
agreement, each Reliance shareholder would receive .739 shares of General
Signal common stock in exchange for each Reliance share held in a merger in
which General Signal would be the surviving corporation. Reliance shareholders
would have a minority interest in the surviving corporation and General Signal
shareholders would have a majority interest.
16. Based on the closing price of General Signal common stock on
August 30, 1994 -- the date of ther merger announcement -- Reliance
shareholders would receive General Signal stock in the transaction valued at
approximately $26.23 per Reliance share.
17. The Reliance/General Signal Merger Agreement provides that the
board of directors of the surviving corporation shall be composed of each of
the 10 members of the current General
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<PAGE> 10
Signal Board of Directors plus each of the six members of the current Reliance
Board of Directors, plus two new members. Thus, the current members of the
General Signal Board of Directors will control the Board of Directors of the
surviving corporation. The current members of the Board of Directors of
Reliance will lose control of Reliance and will not have control of the
surviving corporation. In addition, the Reliance/General Signal Merger
Agreement provides that Edmund M. Carpenter, currently the Chairman of the
Board and Chief Executive Officer of General Signal, will retain those
positions in the surviving corporation, while defendant John C. Morley,
currently President, Chief Executive Officer and a Director of Reliance, will
be Vice Chairman of the surviving corporation and will serve "under the
direction of the Chairman of the Board" of the surviving corporation, Edmund M.
Carpenter. Defendant H. Virgil Sherrill, who is Chairman of the Reliance Board
of Directors, will only be a regular member of the Board of Directors of the
surviving corporation.
C. Reliance Stifles Bidding With An Illegal Penalty And A Biased
Poison Pill.
-------------------------------------------------------------
18. Under the Reliance/General Signal Merger Agreement, Reliance
will suffer a $50 million penalty (the "$50 Million No-Talk Penalty") if its
directors furnish or disclose non-public information to or negotiate, explore
or even communicate in any way with a financially capable unsolicited third
party with respect to an acquisition transaction that contains no financing
condition. In that event, General Signal can terminate the Reliance/General
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<PAGE> 11
Signal Merger Agreement and Reliance is required to pay $50 million by wire
transfer to General Signal in two business days. The penalty is in addition to
a $2.5 million expense reimbursement obligation to General Signal.
19. The $50 Million No-Talk Penalty is illegal and unenforceable
beause it unduly penalizes Reliance directly and its stockholders indirectly if
the individual defendants dare to fulfill their fiduciary
duties as Reliance directors to, at a minimum, inform themselves with respect
to an unsolicited merger or business combination proposal involving Reliance.
20. The $50 million No-Talk Penalty severly harms Reliance's
shareholders. If Reliance merely provides non-public information to, or
communicates with, a third party in response to a BONA FIDA proposal, Reliance
can be compelled to pay General Signal $50 million, or $1.22 for each of
Reliance's 41 million shares outstanding. The damages to Reliance's
shareholders will be even greater if the Reliance Board of Directors refuses to
communicate with, or provide non-public information to a third party. The
Reliance Board of Directors cannnot discuss or negotiate with a third party a
transaction that might be or is superior to the General Signal transaction, and
cannot provide non-public information to a third party which might lead to
obtaining the best transaction. Moreover, any transaction proposal by a third
party will necesarily be discounted by $50 million (or $1.22 per share) because
the acquirer would acquire an enterprise with $50 million lesss in cash.
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<PAGE> 12
21. Further, to thwart Rockwell's expressed interest in May and July,
1994 in acquiring the Company (or the interest of any suitor other than General
Signal) and to favor General Signal, on or about August 29, 1994, the day
before Reliance announced its agreement to be acquired by General Signal, the
Company adopted a rights plan ("Poision Pill") designed to discourage
acquisition proposals unfavored by Reliance's management. According to the
terms of the Poison Pill, each Reliance shareholder would gain the right to
receive, upon exercise, additional shares of Reliance common stock having a
market value of two times the exercise price of each right held. The efffect of
the Poison Pill is to virtually preclude any other person or entity from
obtaining through a merger or tender offer a controlling interest in Reliance
unless the Reliance Board of Directors approves of such a transaction and
redeems the rights granted under the Poison Pill with respect to such a
transaction (as it is empowered to do). The acquisition of Reliance by General
Signal is excluded as a triggering event under the Poison Pill.
D. Rockwell Counters With a $30 Per Share Tender Offer.
----------------------------------------------------
22. On October 19, 1994, Rockwell commenced a tender offer for all
outstanding shares of Reliance common stock for $30 per share in cash,
representing a premium of approximately 14% above the value of General Signal's
offer on the date of the merger announcement, and 50.9% above the closing price
of Reliance common stock on the day before the Merger Agreement was announced.
In a
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<PAGE> 13
letter sent to the Board of Reliance, Donald R. Beall, Rockwell's Chairman and
Chief Executive Officer, noted Rockwell was "surprised" and disappointed that
[it] was not afforded an opportunity to further pursue [the earlier]
discussions before Reliance and General Signal announced a definitive Merger
Agreement at the end of August."
23. Beall's letter to the Reliance Board also stressed the advantages
of an acquisition by Rockwell rather than General Signal. Specifically, the
letter noted that the all-cash tender offer was not subject to any financing
contingencies, and that a combination "represents a particularly attractive
oportunity to build a combined enterprise uniquely positioned for continued
leadership in both the control and power segment of the industrial automation
business . . . around the world."
E. RELIANCE RESPONDS TO ROCKWELL'S PROPOSAL.
-----------------------------------------
24. On November 2, 1994, Reliance filed with the Securities and
Exchange Commission a Schedule 14D-9 in response to Rockwell's offer, The
individual defendants could have, but chose not to reject the Rockwell offer in
favor of the General Signal merger. Instead, the individual defendants stated
in the Schedule 14D-9 that they would not make a recommendation to Reliance's
shareholders at that time with regard to the Rockwell offer, in part because
Rockwell's offer was subject to "significant uncertainties and contingencies".
One of the principal purported reasons for this determination was the
individual defendants'
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concern about antitrust and regularity "impediments" to a merger with Rockwell.
Defendants further stated in the Schedule 14D-9 that the $50 Million No-Talk
Penalty weighted against a recommendation of the Rockwell offer because the
penalty would be triggered if defendants recommended the Rockwell offer.
25. On November 7, 1994, one of the principal "uncertainties" with
respect to the Rockwell offer that the individual defendants identified in the
Schedule 14D-9 was resolved. The antitrust division of the United States Justice
Department did not make a second Hart-Scott-Rodino request for additional
information with respect to the Rockwell offer, which means that there will be
no regulatory opposition to the Rockwell offer. Rockwell immediately notified
Reliance of the regualtory approval and delivered to Reliance's counsel a
proposed merger agreement between Rockwell and Reliance. Rockwell told Reliance
"that there are [now] no uncertainties with respect to [Rockwell's $30 per
share offer]. Rockwell urged Reliance to terminate the Reliance/General Signal
Merger Agreement and pay the $50 Million No-Talk Penalty to General Signal.
Rockwell stated that it is committed to acquiring Reliance and would like to do
so as promptly as possible.
26. By letter of November 10, 1994, Rockwell urged Reliance to redeem
the Poison Pill which would enable Rockwell to consummate its tender offer and
a second step merger without liability to General Signal for the $50 million
No-Talk Penalty. Reliance responded publicily on November 11, 1994, relating
its self-imposed concern about taking "any action that might require the
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<PAGE> 15
payment of $50 million as a break-up fee and $2.5 million in expense
reimbursement under the Merger Agreement with General Signal."
27. The individual defendants have wrongfully sought to utilize the
existence of the Reliance/General Signal Merger Agreement, and the restrictive
and onerous provisions they agreed to therein, to preclude discussions with
BONA FIDE third parties. However, before contractually obligating Reliance to a
major corporate transaction which would extinguish its independent corporate
existence, the individual defendants had a fiduciary duty to ascertain and
assure themselves that the negotiations with General Signal resulted in the
best financial and other terms for Reliance's shareholders by fully informing
themselves of and exploring all other available alternatives, including
competing offers and other transactions which would be in the best interest of
shareholders.
28. The individual defendants were and are under a duty:
a. To fully inform themselves before taking, or agreeing to
refrain from taking, action.
b. To elicit, promote, investigate, consider, evaluate and inform
themselves with respect to reasonable alternative transactions and/or BONA FIDE
offers for the Company.
c. To act in the interests of the equity owners.
d. Not to erect unreasonable barriers to perceived threats of an
acquisition of the Company, or of control of the Company, by a third party.
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e. Not to act in their own personal self-interest or in the
personal interest of other board members.
f. To maximize shareholder value.
g. To obtain the best financial and other terms when the
Company's independent existence will be materially altered by a transaction.
h. To establish a process designed to obtain the best possible
transaction; to assure that a "level playing field" exists when more than one
bidder for the Company emerges, and not to favor one bidder over another during
the "auction" process unless it is designed to assure and is reasonably related
to achieving the best possible price.
i. To act with complete candor in communications with the
shareholders and to ensure that their statements are true and complete in all
material respects and are not materially misleading.
j. To act in accordance with their fundamental duties of care
and loyalty.
29. In connection with the conduct described herein, the individual
defendants violated each of their fiduciary duties identified in paragraph 28
above in the following manner:
a. by entering into the Reliance/General Signal Merger
Agreement:
(i) without fully informing themselves about, or
intentionally ignoring other available alternatives (including
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<PAGE> 17
Rockwell's stated interest in acquiring Reliance) for a transaction that is in
the best interests of Reliance shareholders;
(ii) without fully informing themselves about the
value of Reliance;
(iii) and agreeing to terms under which they
contracted away their ability to exercise their fiduciary duties and which were
designed and operated to deter, delay and/or materially disadvantage other BONA
FIDE potential acquirors of, or other transactions involving, Reliance but
neither served nor promoted any reasonable business purpose of Reliance, and
which were deliberately designed to "chill" further bidding for Reliance
including:
(A) the absence of a reasonable "fiduciary
out" provision allowing Reliance: to provide other interested parties with
information and material necessary for them to formulate a proposal to combine
with Reliance; to discuss BONA FIDE offers with potential acquirors; to receive
and entertain BONA FIDE alternative acquisition proposals, and
(B) the $50 Million No-Talk Penalty which
precludes defendants from exercising their fiduciary duties and imposes an
unreasonable economic burden upon any alternative acquisition proposal without
any corresponding benefit to Reliance or its shareholders.
b. in failing to fully inform themselves about alternative
acquisition proposals, including Rockwell's serious interest;
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<PAGE> 18
c. in placing obstacles in the way of alternative acquisition
proposals the purpose, intent and effect of which was to thwart, delay and/or
impede competing proposals;
d. in failing and refusing to meet with representatives of
Rockwell and to otherwise inform themselves of the extent of Rockwell's
interest in Reliance or of a proposed transaction prior to and after entering
into the Reliance/General Signal Merger Agreement;
e. in adopting the Poison Pill for the General Signal
transaction above;
f. by failing and refusing to enter into negotiations or
discussions with BONA FIDE alternative bidders for Reliance.
31. Defendant General Signal knowingly aided and abetted the
individual defendants in the breaches of fiduciary duty described above.
General Signal was aware of the existence of other BONA FIDE potential
acquirors of Reliance with whom General Signal did not want to compete in an
auction process although such process would yield the best financial terms for
Reliance's shareholders. General Signal therefore conspired with, and aided and
abetted, the individual defendants in formulating the Merger Agreement which it
and they knew contained unreasonable terms and conditions which were designed,
intended, and operated to thwart, preclude, deter, impede and delay alternative
acquisition proposals. General Signal's motivation was to keep its acquisition
cost as low as possible by encouraging and urging the individual defendants, in
breach of their fiduciary duties, to agree to terms which would
16
<PAGE> 19
foreclose other potential bidders and not to formulate and implement a fair
process, such as an auction, which would result in Reliance obtaining the
highest possible price for the Company. Additionally, the $50 Million No-Talk
Penalty and $2.5 million expense reimbursement were required by General Signal
in order to preclude the individual defendants from exercising their fiduciary
duties and afforded General Signal terms which, if they did not operate as
planned in deterring or foreclosing competing bids for Reliance, would result
in General Signal receiving an unjust windfall of $50 million above its
expenses.
FIRST CLAIM FOR RELIEF
(Against the Individual Defendants)
-----------------------------------
32. Plaintiffs repeat and reallege the allegations of paragraphs 1
through 31 as if fully set forth herein.
33. By reason of the foregoing the individual defendants have
violated their fiduciary duties to plaintiffs and the Class by failing to act
with due care in an informed and deliberate manner and with undivided loyalty
to the interests of Reliance's stockholders.
34. Plaintiffs have no adequate remedy at law.
SECOND CLAIM FOR RELIEF
(Against the Individual Defendants)
-----------------------------------
35. Plaintiffs repeat and reallege the allegations of paragraphs 1
through 31 as if fully set forth herein.
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<PAGE> 20
36. By reason of the foregoing the individual defendants have
violated their fiduciary duties to plaintiffs and the Class by failing to take
informed and deliberate steps to assure the maximization of shareholder value
or the shareholders' best interests in a major corporate transaction which will
eliminate the separate corporate existence of Reliance including the failure to
authorize and direct that a process designed to obtain the highest value
available for Reliance's shareholders be undertaken.
37. Plaintiffs have no adequate remedy at law.
THIRD CLAIM FOR RELIEF
(Against the Individual Defendants)
-----------------------------------
38. Plaintiffs repeat and reallege the allegations of paragraphs 1
through 31 as if fully set forth herein.
39. By reason of the foregoing the individual defendants have
violated their fiduciary duties to plaintiffs and the Class by approving,
adopting and agreeing to grant, without having a reasonable or rational
business purpose and contrary to the best interests of Reliance's shareholders,
onerous and unnecessary forfeitures to General Signal designed to penalize
Reliance and its shareholders if the individual defendants fulfill their
fiduciary duties to them.
40. Plaintiffs have no adequate remedy at law.
FOURTH CLAIM FOR RELIEF
(Against General Signal)
------------------------
41. Plaintiffs repeat and reallege the allegations of paragraphs 1
through 31 as if fully set forth herein.
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42. By reason of the foregoing defendant General Signal knowingly
aided and abetted the breaches of fiduciary duties described above.
43. Plaintiffs have no adequate remedy at law.
WHEREFORE, Plaintiffs demand judgment and preliminary and permanent
relief, including injunctive relief, in their favor and in favor of the Class
and against defendants as follows:
A. declaring that this action is properly maintainable as a class
action;
B. declaring and decreasing that the Reliance/General Signal Merger
Agreement was entered into in breach of the fiduciary duties of the individual
defendants and is therefore unlawful and unenforceable;
C. enjoining defendants from proceeding with the Reliance/General
Signal Merger Agreement;
D. enjoining defendants from consummating the acquisition of
Reliance, or a business combination with a third party, unless and until the
Company adopts and implements a procedure or process, such as an auction, to
obtain the highest possible price for the Company;
E. invalidating as unlawful and in breach of the fiduciary duties of
the individual defendants the $50 Million No-Talk Penalty;
F. directing the individual defendants to exercise their fiduciary
duties to obtain a transaction which is in the best interests of shareholders
and/or to maintain in effect for all
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potential acquirors of Reliance the "Poison Pill" rights plan until the process
for the sale or auction of the Company is completed and the highest possible
price is obtained;
G. enjoining defendants from exercising or implementing the $50
Million No-Talk Penalty and enjoining Reliance from making any payments
thereof;
H. declaring that the individual defendants' failure and refusal to
negotiate in good faith with all offerors or potential offerors for Reliance,
and the placement of unreasonable obstacles and the adoption of unreasonable
defensive measures are breaches of the directors' respective fiduciary duties;
I. enjoining defendants from taking any action which may impede a
full and fair auction and open bidding process for the acquisition of Reliance;
J. declaring that the Reliance/General Signal Merger Agreement and
all of the terms thereof were obtained by General Signal's aiding and abetting
the individual defendants' breaches of fiduciary duty and that such agreement
is null, void and of no effect, and that General Signal has not secured and is
not entitled to any rights thereunder;
K. enjoining General Signal from taking any action which has the
effect of preventing Reliance or the director defendants from receiving,
considering, or negotiating an agreement financially superior to the General
Signal Merger Agreement;
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L. rescinding, to the extent already inplemented, the Reliance/General
Signal Merger Agreement or any of the terms thereof;
M. awarding plaintiffs and the Class appropriate damages;
N. awarding plaintiffs the costs and disbursements of this action,
including reasonable attorneys' and experts' fees;
O. granting such other and further relief as this Court may deem just
and proper.
Dated: November 16, 1994
ROSENTHAL, MONNAIT, GROSS & GODDESS, F. A.
By: NORMAN M. MONHAIT
-------------------------------------------
First Federal Plaza, Suite 214
P.O. Box 1070
Wilmington, DE 19899
(302) 656-4433
Attorneys for Plaintiffs
OF COUNSEL:
BERNSTEIN LITOWITZ BERGER
& GROSSMANN
Ronald Litowitz
Vincent R. Cappucci
Douglas M. McKeige
1285 Avenue of the Americas
New York, NY 10019
(212) 554-1400
BERGER & MONTAGUE
Sherrie Savett
Stephen A. Whinston
Sudrey A. Kraus
1622 Locust Street
Philadelphia, PA 19103
(215) 875-3000
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CERTIFICATE OF SERVICE
----------------------
I, Norman M. Monhait, do hereby certify that on November 16, 1994, I
caused copies of the foregoing Amended Class Action Complaint to be served by
hand on the following:
Samuel A. Nolen, Esquire
Richards, Layton & Finger
One Rodney Square
Wilmington, DE 19801
NORMAN M. MONHAIT
----------------------------------
Norman M. Monhait
