AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 14 , 1997
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 2
TO
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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GIDDINGS & LEWIS, INC.
(Name of Subject Company)
GIDDINGS & LEWIS, INC.
(Name of Person Filing Statement)
Common Stock, Par Value $0.10 Per Share
(including the associated preferred share purchase rights)
(Title of Class of Securities)
375048-10-5
(CUSIP Number of Class of Securities)
------------------------------------------
Todd A. Dillmann, Esq.
Corporate Counsel and Secretary
142 Doty Street
Fond du Lac, Wisconsin 54935
(414) 921-4100
(Name, address and telephone number of
person authorized to receive notices and
communications on behalf of the person(s) filing statement)
------------------------------------------
With a Copy to:
Charles W. Mulaney, Jr., Esq.
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 W. Wacker Drive
Chicago, Illinois 60606
(312) 407-0700
This Statement amends and supplements the
Solicitation/Recommendation Statement on Schedule 14D-9 filed with the
Securities and Exchange Commission on May 8, 1997, as amended (the
"Schedule 14D-9"), relating to the offer by DSFA Corporation, a Delaware
corporation (the "Purchaser") and a wholly owned subsidiary of
Harnischfeger Industries, Inc., a Delaware corporation ("Parent"), to
purchase all outstanding shares of common stock, par value $.10 per share
(the "Common Stock" or the "Shares"), together with the associated
preferred share purchase rights (the "Rights"), of Giddings & Lewis, Inc.,
a Wisconsin corporation (the "Company"), at a price of $19 per Share, net
to the seller in cash, without interest thereon, upon the terms and subject
to the conditions set forth in the Offer to Purchase, dated April 28, 1997
(the "Offer to Purchase"), and in the related Letter of Transmittal (the
"Letter of Transmittal") (which, as either may be amended from time to
time, together constitute the "Offer"). Capitalized terms used and not
defined herein shall have the meanings assigned such terms in the Offer to
Purchase and the Schedule 14D-9.
Item 8. Additional Information To Be Furnished.
On May 13, 1997, a derivative and individual action was
filed against the Company's directors and the Company as
nominal defendant in the United States District Court for
the Eastern District of Wisconsin entitled Charles Miller,
et al. v. Isles, et al., No. 97-C-0561 (the "Second Federal
Action"). The complaint in the Second Federal Action
contains six counts and alleges, among other things, that
the director defendants breached their fiduciary duties to
the public shareholders of the Company by (i) failing to
properly consider the HII Offer, (ii) trying to entrench
their positions with the Company, and (iii) failing to
disclose all material facts to the Company's shareholders in
connection with the election of directors at the Annual
Meeting. The complaint also alleges that the director
defendants violated the Exchange Act and Rule 14a-9
promulgated thereunder by making false or misleading
statements or omissions in connection with the Company's
Annual Proxy Statement. As relief, the complaint seeks,
among other things, (a) a determination that the action be
certified as a proper derivative action; (b) a declaration
that the director defendants breached their fiduciary du-
ties; (c) injunctive relief requiring that the director
defendants take all appropriate steps to maximize
shareholder value; and (d) damages, costs, and attorneys'
fees.
This summary is qualified by reference to the text of the
complaint, a copy of which is filed as Exhibit 16 hereto.
Item 9. Material To Be Filed As Exhibits.
Exhibit 16 Complaint seeking Declaratory and Injunctive Relief filed in
the United States District Court for the Eastern District of
Wisconsin on May 13, 1997.
SIGNATURE
After due inquiry and to the best of its knowledge and belief,
the undersigned certifies that the information set forth in this statement
is true, complete and correct.
GIDDINGS & LEWIS, INC.
BY: /s/ DOUGLAS E. BARNETT
Name: Douglas E. Barnett
Title: Vice President and Corporate
Controller
Dated: May 14, 1997
EXHIBIT INDEX
Exhibit No. Description
*Exhibit 1 Excerpts from the Company's Proxy Statement, dated March 21,
1997, relating to the Company's 1997 Annual Meeting of
Shareholders
*Exhibit 2 Form of Amended and Restated Key Executive Employment and
Severance Agreement
*Exhibit 3 Company's Management Stock Purchase Program, as Amended and
Restated, dated April 30,1 1997
*Exhibit 4 Amendment to Company's 1989 Stock Option Award Agreement,
dated April 30, 1997
*Exhibit 5 Amendment to Company's 1989 Restricted Stock Award Agreement,
dated April 30, 1997
*Exhibit 6 Form of Amendment to Company's 1993 Restricted Stock Award
Agreement, dated April 30, 1997
*Exhibit 7 Text of Letter to Shareholders of the Company, dated May 8,
1997
*Exhibit 8 Text of Press Release issued by Giddings & Lewis, Inc., dated
May 8, 1997
*Exhibit 9 Opinion of Credit Suisse First Boston Corporation, dated May
7, 1997
*Exhibit 10 Complaint seeking Declaratory and Injunctive Relief filed in
the United States District Court for the Eastern District of
Wisconsin on April 25, 1997
*Exhibit 11 Class Action seeking Declaratory and Injunctive Relief filed
in the Circuit Court of Milwaukee County, Wisconsin, on May 6,
1997
*Exhibit 12 Text of Press Release issued by Giddings & Lewis, Inc., dated
May 8, 1997
*Exhibit 13 Resolutions Authorizing Amendment of the Supplemental
Executive Retirement Plan, dated April 30, 1997
*Exhibit 14 Text of Press release issued by Giddings & Lewis, Inc., dated
May 12, 1997
*Exhibit 15 Text of Letter from Marvin L. Isles to Jeffrey T. Grade, dated
May 12, 1997
Exhibit 16 Complaint seeking Declaratory and Injunctive Relief filed in
the United States District Court for the Eastern District of
Wisconsin on May 13, 1997
- ------------------------------
* Previously Filed.
EXHIBIT 16
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
CHARLES MILLER, individually and )
derivatively, on behalf of )
Giddings & Lewis, Inc. )
)
Plaintiff, )
)
v. ) Civil Action No.
)
MARVIN L. ISLES, BEN R. STUART, ) COMPLAINT
JOHN A. BECKER, JOHN W. GUFFEY, )
JR., RUTH M. DAVIS, and BENJAMIN F. )
GARMER, III, )
)
Defendants, )
)
and )
)
GIDDINGS & LEWIS, INC., )
a Wisconsin corporation, )
)
Nominal Defendant. )
Plaintiff, individually for equitable and declaratory relief
and derivatively on behalf of Giddings & Lewis, Inc. ("Giddings" or the
"Company"), alleges the following upon information and belief, except for
those allegations that pertain to plaintiff, which are alleged upon
personal knowledge. Plaintiff's information and belief is based upon, inter
alia, the investigation made by and through counsel, including counsel's
review of the public filings of the Company, articles in the financial news
media, court filings, and other publicly available information.
NATURE OF THE ACTION
1. Plaintiff brings Counts I and II individually, and
Counts III-VI derivatively, pursuant to Rule 23.1 of the Federal Rules of
Civil Procedure, on behalf and for the benefit of Giddings. The individual
defendants have breached their fiduciary obligations to Giddings and its
shareholders by reason of, inter alia, their wrongful refusal to properly
consider a bona fide offer for the Company from Harnischfeger Industries,
Inc. ("Harnischfeger"), and their manipulation of the corporate machinery
for the primary purpose of entrenching themselves in their positions of
control over the Company.
2. As described more fully below, the actions of the
individual defendants lack any legitimate corporate or business purpose
and were, and are, designed to defeat any uninvited acquisition effort or
other unsolicited bid for the Company.
3. On April 25, 1997, Harnischfeger announced its intention
to acquire through a tender offer all of Giddings' outstanding shares for
$19 per share, or approximately $630 million. The consideration offered --
$19 in cash per share -- represents more than a 40% premium over the
closing price of Giddings' shares the day before the announcement of the
proposed tender offer.
4. Harnischfeger's decision to commence the proposed tender
offer followed Giddings' refusal to engage in meaningful discussions for a
consensual transaction. According to the complaint filed by Harnischfeger
in the action styled, Harnischfeger Industries, Inc., et al. v. Isles, et
al., Civil Action No. 97-CV-488 (E.D. Wis. 1997) (the "Harnischfeger
Action"), in the days preceding the April 25 announcement, defendant
Marvin Isles ("Isles"), Giddings' President and Chief Executive Officer,
refused, after a series of conversations with Harnischfeger's Chairman and
Chief Executive Officer, to engage in a meaningful discussion about a
combination of the two companies. Isles' refusal to meet with Harnischfeger
comes at a time when Giddings would benefit most from a business
combination with a stronger company. Harnischfeger has reported successful
financial results during the past few years, while Giddings' reported
results have declined or remained flat. Moreover, during this period,
Giddings' stock has lost nearly half its value. On May 8, 1997, it was
announced that defendants rejected the Harnischfeger offer.
5. In light of defendants' failure and refusal to engage in
discussions with Harnischfeger for a consen-sual transaction, Harnischfeger
stated in the Harnischfeger Action and in public filings that it will
conduct a proxy solicitation pursuant to the SEC Proxy Rules, 17 C.F.R.
240.14a et seq., to obtain written demands sufficient to call a special
meeting of Giddings' shareholders at which time they will decide whether to
replace the entrenched incumbent board with directors willing to effectuate
the Harnischfeger offer.
6. Moreover, defendants made materially false and misleading
statements and omissions in the proxy statement, dated March 21, 1997 (the
"Proxy Statement"), disseminated by the board of directors (the "Board") to
solicit proxies for the April 30, 1997 Annual Meeting of Shareholders (the
"Annual Meeting). The misrepresentations and omissions in the Proxy
Statement involve, inter alia:
(a) the details and potential financial costs of the
"Management Stock Purchase Program" adopted by defendants on March 13,
1997, as detailed hereinbelow; and
(b) the interplay between the Company's By-laws and the
election of directors at the Annual Meeting.
7. By their conduct, the individual defendants have abused
the control reposited in them by virtue of their directorial positions, all
to the detriment of Giddings and its public shareholders.
JURISDICTION AND VENUE
8. Plaintiff Charles Miller is a resident and citizen of the
State of New York. None of the individual defendants are citizens or
residents of the State of New York. Therefore, pursuant to 28 U.S.C.
Section 1332, complete diversity exists between the parties.
9. Additionally, one of the claims arises pursuant to
Section 14(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
and Rule 14a-9 promulgated thereunder by the Securities & Exchange
Commission ("SEC"), pursuant to the principles of common law.
10. This Court has jurisdiction over this action pursuant to
28 U.S.C. ss.ss. 1331, 1332, and 1367. Plaintiff seeks monetary and
equitable relief as set forth herein.
11. Venue is properly laid in this District because many of
the acts complained of herein occurred in this District. The Annual Meeting
of shareholders took place in this District. Further, the Company maintains
its principal executive offices in this District.
PARTIES
12. Plaintiff Charles Miller, a resident and citizen of the
State of New York, is and, at all relevant times, has been the owner of
shares of Giddings common stock.
13. Giddings is a corporation duly organized and existing
under the laws of the State of Wisconsin. The Company maintains its
principal place of business at 142 Doty Street, Fond Du Lac, Wisconsin
54935. Giddings designs and produces large, high-precision industrial
automation systems, including automated machine tools, smart manufacturing
systems, and related products. As of September 29, 1996, Giddings had
approximately 33.12 million shares of common stock outstanding and
approximately 2,352 shareholders of record. Giddings' stock trades on the
NASDAQ National Market System.
14. Defendant Isles served as president and Chief Operating
Officer of the Company since 1976. On March 17, 1997, Isles was appointed
Chief Executive Officer of Giddings. Isles has served as the Chairman of
the Board of Directors since April 30, 1997.
15. Defendants Ruth M. Davis, Benjamin F. Garmer, III, Ben
R. Stuart, John A. Becker, and John W. Guffey, Jr. are directors of
Giddings.
16. The individuals identified in paragraphs 14 and 15 are
collectively referred to as the "Individual Defendants."
17. The Individual Defendants, by reason of their corporate
directorship and/or executive positions, stand in a fiduciary position
relative to the Company and its shareholders, which required them to
exercise their best judgment; act in good faith, loyalty, and due care; and
in the best interests of the Company and its shareholders.
DERIVATIVE ALLEGATIONS
18. Plaintiff brings Counts III-VI on behalf and for the
benefit of Giddings as a derivative action pursuant to Rule 23.1 of the
Federal Rules of Civil Procedure to remedy the wrongdoing alleged herein.
19. Plaintiff will fairly and adequately represent the
interests of Giddings and its shareholders in enforcing and prosecuting the
rights of the Company, and has retained competent counsel experienced and
successful in securities and derivative litigation of this nature to
prosecute this action.
20. Plaintiff brings this action to remedy violations of
state common law.
21. This action is not a collusive one to confer
jurisdiction on the Court, which it would not otherwise have.
DEMAND ALLEGATIONS
22. Pursuant to Wis. Bus. Corp. Law ss. 180.0742(1), which
applies under application of Rule 23.1, plaintiffs served a demand upon the
Board on May 8, 1997.
23. However, because the Company will incur irreparable
injury (as alleged below) if plaintiff were to wait for the expiration of
the 90 days required in Wis. Bus. Corp. Law ss. 180.0742(2), plaintiff is
filing this Complaint in and for the right of Giddings.
SUBSTANTIVE ALLEGATIONS
24. On April 25, 1997, after a failed attempt to negotiate a
transaction directly with Giddings' management, Harnischfeger announced
that it would immediately commence an all-cash tender offer for all the
outstanding shares of Giddings (the "Tender Offer"). On April 28, 1997,
Harnischfeger filed its preliminary solicitation statement with the SEC.
25. The Tender Offer was priced at $19.00 for each
outstanding share of Giddings stock. The terms of Tender Offer also
provided that Harnischfeger would assume $116 million of Giddings' debt.
The Tender Offer has a total transaction value of approximately $746
million; it is not subject to any financing contingencies.
26. The $19.00 per share offering price represents a 40%
premium over the Company's price of $13.65 per share on the day prior to
the announcement of the Tender Offer. The premium offered by Harnischfeger
is even more attractive in light of the steady erosion of the Company's
earnings during the 1996 fiscal year, and the $64.1 million charge that
Giddings took relating to equipment problems at two of its largest
customers' plants.
27. Since Harnischfeger's offer was premised upon publicly
available information, Harnischfeger stated that it would like to continue
to negotiate with the Board to formulate a mutually agreeable transaction,
and invited the Board to commence immediate negotiations to execute a
definitive agreement.
28. On May 8, 1997, the Board rejected the offer and urged
shareholders not to tender any shares, arguing that the true value of
Giddings' stock was not accurately reflected in the marketplace.
29. Though Giddings has since stated that other companies
have expressed interest in the Company, as reported in the May 9, 1997
edition of The Wall Street Journal, analysts, however, believe that an
alternative buyer is "going to be tough to come by."
30. Previously, in 1995, Giddings adopted a Preferred Stock
Purchase Rights Plan ("Poison Pill"), which makes it prohibitively
expensive for a third party to acquire Giddings without the blessing of its
present management. Under the plan, shareholders have the right ("Right")
to purchase one preferred stock purchase right for each common share held
if a person or group of persons acquires more than 20% of the Company's
stock. In a transaction involving a merger or business combination, the
holder of the Right would be entitled to buy a number of the acquiring
company's common shares having a market value of twice the exercise price
of each purchase right.
31. Pursuant to the terms of the Poison Pill, the Rights can
be rendered inapplicable to an acquisition offer from Harnischfeger (or any
other bona fide bidder) either by the current Board or by their duly
elected successors. To date, the Board has refused to waive the Poison Pill
even if the public properly tenders their shares to Harnischfeger or any
other potential acquiror. In fact, as discussed below, following the April
20, 1997 meeting, the Board took further action to make any acquisition of
the Company prohibitively expensive.
32. Because defendants have not waived the Poison Pill,
Harnischfeger (or any other bona fide bidder) must conduct and win a
proxy contest to replace the Board if Harnischfeger is to be successful in
its effort to consummate the proposed tender offer. At the special meeting
of shareholders, which Harnischfeger has publicly stated it intends to
convene, Harnischfeger's proposed nominees will be pledged to render the
rights inapplicable to Harnischfeger's proposed offer.
33. For the reasons set forth above, the Poison Pill is a
powerful defensive weapon. It permits the incumbent board to entrench
themselves and prevent the consummation of Harnischfeger's offer (or the
offer of any other bona fide offeror), even if the Company's public
shareholders wish to maximize the value of their investment by selling
their shares at a premium. Further, it permits the Individual Defendants
to continue their wasteful policies, which have elevated management's
personal economic interests ahead of Giddings and its public shareholders.
The Management Stock Purchase Program
34. On March 13, 1997, the Board adopted a Management Stock
Purchase Program, which protects management from the same risks of owning
stock in Giddings that the public shareholders bear. Pursuant to the
Management Stock Purchase Program, certain of the Company's executives were
granted and exercised options to purchase 282,355 shares of common stock.
35. Under the terms of the Management Stock Purchase
Program, the Company is required to guarantee loans obtained by its
executives so that they could purchase Giddings' stock. The Company is also
obligated to pay the interest on the individual's loans. The Management
Stock Purchase Program permits the participating executives to reap 100% of
any gain in stock value, while suffering only 50% of any losses, only if
the executive held the stock for at least three years.
36. On May 8, 1997, the Dow Jones News Wire reported that
the Board amended the stock plan on April 30, 1997, to provide for
accelerated vesting of stock options and restricted stock in the event of a
change of control in the Company. Significantly, the amendment came on the
heels of Harnischfeger's non-public acquisition overtures, and just five
days after the April 25th announcement. As such, defendants breached their
fiduciary duties to Giddings and its shareholders by taking a reactive
defensive measure designed to entrench themselves in their positions of
control and to make it prohibitively expensive to acquire the Company.
37. The description of the Management Stock Purchase Program
in the Proxy Statement fails to state certain material facts concerning the
program, including a quantification of the interest on the bank loans taken
out by the individuals; the cost of paying 50% of any losses on the shares
incurred by the individuals, or the cost to Giddings if it is required to
pay the principal of the loans if one of the executives defaults.
38. As set forth in the Harnischfeger Action, defendants
also failed to disclose that:
(a) the Management Stock Purchase Program includes a
"gross-up" provisions under which Giddings will reimburse the executives
for certain taxes paid by them on account of Giddings' indemnification of
their losses;
(b) certain of the payments authorized under the Management
Stock Purchase Program may not qualify as deductible compensation expense,
thus imposing an additional burden on the corporate treasury and the
interest of Giddings' shareholders other than the Management Stock Purchase
Program participants;
(c) because of the economic interest of Giddings in the
shares nominally owned by its executives, including Giddings' shared
interest in potential losses on the stock, the 282,355 shares of Giddings
stock, which have been "purchased" by the individuals, are not "issued and
outstanding shares" for certain purposes. Thus, these 282,355 shares are
"treasury stock" and may not be voted, counted towards certain calculations
(such as the 20% threshold contained in Giddings' shareholders rights
plan), including the calculation of the number of votes necessary to remove
members of the Giddings' Board; and used in calculating earnings per share;
and
(d) since the 282,355 options granted in connection with the
Management Stock Purchase Program are subject to the share option
provisions of the 1993 Stock Incentive Plan ("1993 Plan"), the Management
Stock Purchase Program effectively modifies the 1993 Plan. Defen-dants'
unilateral amendment is invalid because the 1993 Plan can be amended in
this respect only by a shareholder vote, which has not been obtained or
sought.
39. In view of the foregoing, defendants' statement in the
Proxy Statement that the purpose of the Management Stock Purchase Program
is to "align more closely the interests of management and shareholders" is
false and misleading. The public shareholders, however, were not given the
opportunity to buy Giddings' stock with Company-guaranteed loans, interest
payments, or indemnification against loss and against tax liability.
Giddings' By-laws and the Annual Meeting
40. Giddings' By-laws provide that the directors are to be
divided into three classes, with staggered terms of three years each.
Section 3.01(b) of the By-laws provides that "(t)he number of the
Corporation shall be eight (8), divided into three (3) classes of three
(3), three (3) and two (2) directors, respectively."
41. Despite the mandate of the Company's Bylaws, defendants
informed shareholders that they were being asked to elect only two
nominees; the terms of two other directors were to expire after the Annual
Meeting. However, following the Annual Meeting, there are only six
directors comprising the Board, instead of the eight required by the
By-laws.
42. Thus, the Proxy Statement failed to disclose that
defendants' plan for a six-person board violated Giddings' By-laws.
Defendants failed to disclose the reason for nominating only two directors.
The Proxy Statement further fails to disclose that the By-laws empower the
Board to fill vacancies and whether defendants have filled or plan to
fill the two vacancies existing after April 30, 1997.
43. Under the foregoing circumstances, Giddings' public
shareholders were deprived of material information upon which they were
asked to vote. Shareholders were asked to vote for nominees to a board
that defendants structured in violation of the By-laws.
Additional Defensive Measures
44. On May 8, 1997, the Dow Jones News Wire reported that on
April 30, 1997, the Board amended its severance agreements with 12 of its
executives. The severance agreements provide for benefits to be paid under
terminations occurring within five years of a change in control of the
Company, including the acquisition of 20% or more of the shares under the
Harnischfeger offer. These changes include: (a) an added one-time payment,
in addition to prior benefits, equal to the present value of benefits the
executive would have received if he had continued to participate in the
Company's retirement plans until age 65; (b) removal of a ceiling on the
benefits that was designed to avoid excise taxes; (c) a requirement that
Giddings' Chairman and Chief Executive Officer remain in those positions or
be eligible for termination benefits; (d) additional relocation benefits,
and for the Chairman the right to purchase a Company car for $1.00 and be
reimbursed for legal and tax planning assistance; and (e) reduction from
three times the executive's annual base salary and highest annual bonus for
the three most recent years for all executives to one to three years,
depending on the executive.
45. The May 8, 1997 Dow Jones New Wire also reported that
the Board eliminated a forfeiture provision under the Management Stock
Purchase Program relating to changes in control, amended stock plans to
provide for accelerated vesting of stock options and restricted stock in
the event of a change in control, and created a new employment agreement
for one executive.
46. The Board's response to the Harnischfeger offer
demonstrate that defendants are entrenched in their corporate offices and
intend to obstruct the appropriate and proper consideration of the
Harnischfeger offer, or any other bona fide merger or acquisition offer. By
so entrenching themselves, defendants have violated and are continuing to
violate their fiduciary duties.
DEFENDANTS' VIOLATION OF THEIR FIDUCIARY DUTIES
47. At all relevant times, defendants operated as a
collective entity through periodic meetings held either in person or
telephonically where they discussed matters affecting Giddings' businesses
and reached collective and consensual decisions regarding actions taken.
Giddings' corporate business at the board level was conducted through,
inter alia, formal resolutions passed by its directors acting collectively,
as is reflected in the minutes of the board of directors' meetings. Pursu-
ant to other consensual agreements, on the basis of, inter alia,
recommendations of Giddings' senior executives, the Board acted
collectively to issue Giddings' public filings, including the Proxy
Statement, which were presented to and approved by the Board either before
their issuance or shortly thereafter. Thus, because the Board acted as a
unit, conducted Giddings' business pursuant to consensual agreements and
formal resolutions and received collectively and/or disseminated the same
information about Giddings' business at or about the same time, it is
appropriate to treat the Individual Defendants as a collective group for
the purposes of this Complaint.
48. Each officer and/or director of the Company owed to
Giddings and its shareholders the duty to exercise loyalty, due care, and
diligence in the management and administration of the affairs of the
Company and in the use and preservation of its property and assets.
Further, Giddings' officers and directors owed a duty to Giddings and its
shareholders to ensure that Giddings did not engage in any practice that
would result in a waste of Giddings' corporate assets.
49. To discharge these duties, defendants were required to
exercise reasonable and prudent supervision over the management, policies,
practices, controls, and financial and corporate affairs of the Company. By
virtue of this obligation, defendants were required, among other things,
to:
(a) take all steps necessary to maximize the value of the
Company for the benefit of the Company and its shareholders;
(b) refrain from placing their interests ahead of those of
the Company and its shareholders;
(c) ensure the prudence and soundness of policies and
practices, and transactions undertaken or proposed to be undertaken by the
Company; and
(d) preserve and enhance Giddings' reputation as befits a
public corporation and to maintain public trust and confidence in Giddings
as a prudently managed institution fully capable of meeting its duties and
obligations.
50. The Individual Defendants breached their fiduciary and
other common law duties owed to Giddings and its shareholders in that they
have not and are not exercising independent business judgment and have
acted and are acting to the detriment of the Company and its shareholders.
51. In connection with the conduct described herein, the
Individual Defendants breached their fiduciary duties by, among other
things:
(a) failing to properly consider the
Harnischfeger Tender Offer without fully
informing themselves about or
intentionally ignoring the future
prospects of a combined
Giddings/Harnischfeger company, or the
intrinsic worth of Harnischfeger;
(b) failing and refusing to meet with
representatives of Harnischfeger;
(c) adopting the Management Stock Pur-
chase Program, which is designed to
elevate the interests of management
above those of the Company and its
shareholders;
(d) structuring a board of directors,
the number and class of which
defendants knew to be, in violation
of Giddings' By-laws;
(e) failing to waive the Poison Pill; and
(f) amending executive severance agreements
for the purpose of, inter alia, making an
acquisition of the Company more expensive
for an interested party, such as
Harnischfeger.
52. The Individual Defendants are acting to entrench
themselves in their offices and positions and maintain their substantial
salaries and perquisites, all at the expense and to the detriment of
Giddings and its public shareholders.
53. As a result of the actions of the Individual Defendants,
Giddings and its public shareholders have been and will be damaged in that
they have not and will not receive their fair proportion of the value of
Giddings's assets and businesses and/or have been and will be prevented
from obtaining a fair and adequate price for their shares of Giddings's
common stock.
IRREPARABLE INJURY
54. Plaintiff seeks preliminary and permanent injunctive
relief and declaratory relief preventing defendants from inequitably and
unlawfully depriving Giddings and its shareholders of their right to
realize a full and fair value for Giddings' stock at a premium over the
market price, by unlawfully entrenching themselves in their positions of
control, and to compel defendants to carry out their fiduciary duties to
maximize Company and shareholder value.
55. Only through the exercise of this Court's equitable
powers can the Company and its shareholders be fully protected from the
immediate and irreparable injury that defendants' actions threaten to
inflict. Defendants are precluding the shareholders' enjoyment of the full
economic value of their investment by failing to proceed expeditiously and
in good faith to evaluate and pursue a premium acquisition proposal that
would provide consideration for all shares at an attractive price.
56. Further, Harnischfeger, in accordance with the Company's
By-laws, is demanding that the Company convene a special meeting. According
to the financial media, Giddings is proposing a record date of May 16,
1997, only eight days after a demand was served on the Board, to determine
the shareholders eligible to vote at that meeting. Giddings' shareholders
will be asked to cast a vote in connection with, among other things,
Harnischfeger's offer. However, to make an informed vote for all matters
raised at that meeting, shareholders must have corrective disclosures
concerning the Poison Pill, the Management Stock Purchase Program, and the
electoral process employed by defendants to select the current members of
the Board.
57. The improperly constituted Board created at the Annual
Meeting has taken and will continue to take actions that will make it
prohibitively expensive for any potential bidder, including Harnischfeger,
to acquire the Company, as described above. Without injunctive relief, this
board of directors will continue to take other actions without the proper
authority under the Company's By-laws.
58. Unless enjoined by the Court, defendants will continue
to breach their fiduciary duties owed to Giddings and its public
shareholders, and/or aid and abet and participate in such breaches of duty,
and will prevent the sale of Giddings at a substantial premium, all to
the irreparable harm of Giddings and its public shareholders.
59. Thus, Giddings and its public shareholders will be
irreparably harmed if forced to wait the 90-day waiting period required
under Wis. Bus. Corp. ss. 180.0742(2).
60. Giddings and its public shareholders have no adequate
remedy at law.
COUNT I
(Individual Claim for Injunctive Relief)
61. Plaintiff repeats and realleges all prior paragraphs,
except paragraphs 18-23, as though fully set forth herein.
62. During their tenure as officers and/or directors of
Giddings, each Individual Defendant owed to the Company and its
shareholders the duty to exercise loyalty, due care, and candor in the
management and administration of the affairs of the Company.
63. Defendants breached their fiduciary duties by, among
other things, (a) failing to accurately present in the Proxy Statement, or
any other communication with the Company's shareholders, the facts
concerning, among other things, the election at the Annual Meeting, and the
terms and effect of the Management Stock Purchase Plan; (b) impairing the
right of shareholders to vote their shares on a fully informed basis; (c)
restricting the right of shareholders to receive a bona fide tender offer,
including Harnischfeger's; (d) interfering with bona fide acquisition
offers by interested third parties, including Harnischfeger; (e) failing to
take those actions necessary to maximize shareholder value; and (f)
entrenching themselves in their positions of control with the Company.
These actions have prevented shareholders from exercising their right to
corporate suffrage and to realize the full value of their investment in the
Company. As a result of the foregoing, defendants have violated, and
continue to violate, their fiduciary duties to Giddings's shareholders.
64. Defendants' conduct was not due to an honest error or
misjudgment, but rather was due to the individual directors' intentional
breach and/or reckless disregard of their fiduciary duties to the Company
and its shareholders.
65. Giddings' shareholders have sustained and will continue
to sustain injury by reason of the Individual Defendants' intentional
breach and/or reckless disregard of their fiduciary duties to the Company's
shareholders.
66. Unless enjoined by this Court, defendants will continue
to breach their fiduciary duties owed to plaintiff, and will succeed in
their plan to exclude plaintiff from the fair proportionate share of
Giddings' valuable assets and businesses, all to plaintiff's irreparable
harm.
67. Plaintiff has no adequate remedy of law.
COUNT II
(Against The Individual Defendants For Declaratory Relief)
68. Plaintiff repeats and realleges all prior paragraphs,
except paragraphs 18-23, as though fully set forth herein.
69. Defendants breached their fiduciary duties by, among
other things, (a) failing to accurately present in the Proxy Statement, or
any other communication with the Company's shareholders, the facts
concerning, among other things, the election at the Annual Meeting, and the
terms and effect of the Management Stock Purchase Plan; (b) impairing the
right of shareholders to vote their shares on a fully informed basis; (c)
restricting the right of shareholders to receive a bona fide tender offer,
including Harnischfeger's; (d) interfering with bona fide acquisition
offers by interested third parties, including Harnischfeger; (e) failing to
take those actions necessary to maximize shareholder value; and (f)
entrenching themselves in their positions of control with the Company.
These actions have prevented shareholders from exercising their right to
corporate suffrage and to realize the full value of their investment in the
Company.
70. Pursuant to 28 U.S.C. ss. 2201, plaintiff requests a
declaration that, the Individual Defendants have breached, and are
continuing to breach, their fiduciary duties to Giddings' shareholders by
failing to take those actions necessary to maximize shareholder value, the
implementation of the Management Stock Purchase Plan is wrongful and
wasteful, and that the present Board was constituted at the Annual Meeting
in violation of the Company's By-laws.
COUNT III
Derivatively Against the Individual Defendants
For Violations of Section 14(a) Of The
Exchange Act And Rule 14a-9 Promulgated Thereunder
71. Plaintiff repeats and realleges all prior paragraphs,
except paragraphs 61-70, as though fully set forth herein.
72. Plaintiff brings this Count derivatively on behalf of
Giddings against the Individual Defendants with respect to the Proxy
Statement and the Annual Meeting, for violations of Section 14(a) of the
Exchange Act and Rule 14a-9 promulgated thereunder.
73. The Individual Defendants caused to be issued or
permitted and acquiesced in the issuance of the Proxy Statement.
74. In the Proxy Statement, the Individual Defendants
requested, among other things, that plaintiff and other Giddings
shareholders vote in person, or by proxy, to elect or re-elect the
Individual Defendants as directors of the Board.
75. The Proxy Statement was materially false and misleading
because, as previously alleged, it failed to disclose material facts and
circumstances concerning the interplay between the Company's By-laws and
the election of directors at the Annual Meeting and the Management Stock
Purchase Program.
76. The disclosure of those facts in the Proxy Statement
would have assumed substantial significance in the deliberations of
Giddings shareholders asked to vote at the Annual Meeting. There was a
substantial likelihood that the shareholders of Giddings would not have
given their proxies to vote for the Individual Defendants who were
nominated as directors of Giddings had they known the truth.
77. As a result, the Individual Defendants have violated
Section 14(a) of the Exchange Act, 15 U.S.C. ss. 78n(a), and Rule 14a-9
promulgated thereunder by the SEC.
78. By reason of the foregoing, Giddings has been damaged,
and unless equitable and declaratory relief is granted, Giddings will
continue to be irreparably injured and damaged. The present directors of
Giddings should be removed and replaced as directors and a new election of
directors should be held because said directors were elected pursuant to
the Proxy Statement that was materially false and misleading.
79. There is no adequate remedy at law for the above
injuries to Giddings.
COUNT IV
Derivatively Against The Individual
Defendants For Breaches of Fiduciary Duty
80. Plaintiff repeats and realleges all prior paragraphs,
except paragraphs 61-70, as though fully set forth herein.
81. Each Individual Defendant is jointly and severally
liable for the wrongdoings alleged herein. Such acts, and/or omissions to
act constitute a breach of the fiduciary duties of loyalty, due care,and
good faith, and, are incapable of ratification by the Board.
82. The Individual Defendants, because of their positions of
control and authority over the Company were able to and did, directly or
indirectly control the conduct of its business. Therefore, each Individual
Defendant identified herein is liable as a direct participant in, a
conspirator and/or an aider and abettor of the egregious wrongs complained
of.
83. This conduct was performed at the expense of Giddings
and its shareholders. Additionally, defendants have committed one or more
acts or omissions that furthered their own personal interests and were not
for the benefit of the Company. As a direct and proximate result of
defendants' failures to exercise good faith, loyalty, and due care in the
performance of their duties as alleged herein, Giddings and its
shareholders have been harmed.
84. Giddings has been seriously and irreparably damaged by
the wrongs alleged herein and is entitled to monetary and equitable relief.
COUNT V
Derivatively Against The Individual Defendants
For Breaches Of The Fiduciary of Candor
85. Plaintiff repeats and realleges all prior paragraphs,
except paragraphs 61-70, as though fully set forth herein.
86. Plaintiff brings this claim derivatively on behalf of
Giddings against the Individual Defendants for breaches of their fiduciary
duty of candor.
87. The Individual Defendants owed Giddings and its
shareholders the fiduciary duty of candor to disclose fully and fairly all
material facts within their control that would have a significant effect
upon the voting of Giddings' shareholders.
88. The Individual Defendants breached their fiduciary duty
of candor by failing to disclose all material facts to Giddings'
shareholders in connection with Giddings' solicitation of their votes in
favor of the election of directors at the Annual Meeting.
89. In addition, the Individual Defendants have breached
their fiduciary duty of candor by failing to fully disclose in the Proxy
Statement the effect of the Management Stock Purchase Plan, as set forth
herein.
90. Each of the Individual Defendants rendered substantial
assistance in the accomplishment of the wrongdoing complained of herein.
91. As a result and direct consequence of this wrongful
conduct, Giddings has been irreparably injured and damaged and unless
equitable and declaratory relief is granted, Giddings will continue to be
damaged.
92. There is no adequate remedy at law for the above
injuries to Giddings.
COUNT VI
Derivatively Against The Individual
Defendants For Waste
93. Plaintiff repeats and realleges all prior paragraphs,
except paragraphs 61-70, as though fully set forth herein.
94. Plaintiff brings this Count derivatively on behalf of
Giddings against the Individual Defendants, who committed and/or aided and
abetted in the waste of corporate assets.
95. Giddings has expended unfair amounts of money in
connection with the Individual Defendants' self-entrenching conduct. No
reasonable person would consider the consideration paid by Giddings as a
fair or adequate exchange.
96. Giddings has been irreparably injured and damaged by the
wrongful acts of the Individual Defendants constituting the commission of
or aiding and abetting a waste of corporate assets.
97. There is no adequate remedy at law for the above
injuries to Giddings.
WHEREFORE, plaintiff demands judgment against defendants, as
follows:
A. Determining that this action is a proper derivative
action maintainable under Rule 23.1 of the Federal Rules of Civil
Procedure, and declaring plaintiff to be an adequate representative of the
Company;
B. Declaring that the Individual Defendants, and each of
them, have committed a gross abuse of trust, have breached their fiduciary
duties to plaintiff, Giddings and Giddings' shareholders, and awarding
compensatory damages in an amount to be proved at trial;
C. Declaring that the Individual Defendants, and each of
them, have committed a gross abuse of trust, have breached their fiduciary
duties to Giddings and its shareholders, including plaintiff, and granting
temporary, preliminary and permanent injunctive relief;
1. requiring defendants to take all steps necessary to
maximize shareholder value through a merger or acquisition of the Company;
2. requiring defendants to make full, complete, and
accurate disclosure with respect to, inter alia, the Management Stock
Purchase Program, and the violation of Giddings' By-laws that resulted from
the board structure defendants proposed in the Proxy Statement;
3. requiring defendants to redeem, or cause the redemption
of, the Poison Pill;
4. prohibiting defendants from amending the Poison Pill in
any way other than to cause its withdrawal or redemption, and prohibiting
defendants from issuing any similar or additional rights having the same or
similar characteristics as the existing Rights; and
5. prohibiting defendants from, without shareholder
approval, amending, deleting or modifying any provision of Giddings'
existing By-laws or Restated Articles of Incorporation concerning the right
of shareholders to call a special meeting and/or to take action at a
special meeting to amend Giddings' By-laws or remove members of Giddings'
Board;
D. Declaring and decreeing that any proxies obtained by
defendants through the use of the Proxy Statement are null and void, except
such proxies as may be obtained following correction, supplementation, and
appropriate dissemination of the proxy materials to correct the defects
alleged herein;
E. Declaring that the Individual Defendants and each of them
have committed a gross abuse of trust, have breached their fiduciary duties
to Giddings in connection with the election of directors at the Annual
Meeting, and declaring null and void all actions taken on or after April
30, 1997 by the incumbent directors for violating the Company's By-laws;
F. Awarding plaintiffs' the costs of their suit, including
reasonable attorneys' and accountants' and other experts' fees and other
disbursements; and
G. Granting such other and further relief as the Court may
deem just and proper.
Dated: May 12, 1997
SUSAN LACAVA, S.C.
By:
Susan LaCava
23 North Pinckney Street,
Suite 320
Madison, WI 53703
(608) 258-1335
Attorneys For Plaintiff
OF COUNSEL:
WECHSLER HARWOOD HALEBIAN &
FEFFER LLP
Robert I. Harwood, Esq.
805 Third Avenue
New York, NY 10022
(212) 935-7400
GARWIN, BRONZAFT, GERSTEIN &
FISHER, L.L.P.
Scott W. Fisher, Esq.
1501 Broadway
New York, NY 10036
(212) 398-0055
