Exhibit 99.11
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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KIM J. HAMMOND and JEFFREY DELL,, :
:
Plaintiffs, : Index No.
:
-against- : CLASS ACTION
: COMPLAINT
GROW GROUP, INC., JOHN F. GLEASON, : ------------
RUSSELL BANKS and JOSEPH M. QUINN, :
: JURY DEMAND
Defendants. : -----------
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Plaintiffs, for their complaint against defendants, allege as follows
upon information and belief based upon their counsel's investigation of news
reports, public filings and other materials, except as to those allegations
pertaining to themselves which are based upon plaintiff's personal knowledge.
JURISDICTION AND VENUE
----------------------
1. This court has jurisdiction over the subject matter of this action
under Section 27 of the Securities Exchange Act of 1934 (the "Exchange Act"), 15
U.S.C. (S)78aa, 28 U.S.C. (S)1331. The claims alleged herein arise under
Sections 10(b) and 20(a) of the Exchange Act, 15 U.S.C. (S)(S)78g(b) and 78t(a),
and Rule 10b-5 promulgated thereunder by the Securities and Exchange Commission
("SEC"), 17 C.F.R. (S)240.10b-5.
2. Venue is proper in this District under Section 27 of the Exchange
Act and 28 U.S.C. (S)1391(b). The acts giving rise
to the violations of law complained of herein occurred, at least in part, in
this District. In addition, defendant Grow Group, Inc. ("Grow" or the
"Company") is a corporation organized under the laws of the state of New York
and maintains offices and conducts its business in this District; its financial
and legal advisors also maintain offices and conduct business in the District.
3. In connection with the acts, conduct and other wrongs complained
of herein, defendants, directly and indirectly, used the means and
instrumentalities of interstate commerce and the United States mails, and the
facilities of the national securities markets.
THE PARTIES
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4. Plaintiff Kim J. Hammond sold 10,300 shares of Grow common stock
on May 2, 1995 at a price of $17 7/8 per share.
5. Plaintiff Jeffrey Dell sold 15,000 shares of Grow common stock on
May 2, 1994 at a price of $17 3/4 per share.
6. Defendant Grow Group is a corporation organized and existing under
the laws of the State of New York with offices at 200 Park Avenue, New York, New
York. Grow Group manufactures and markets trade paints and coatings, chemical
automotive and industrial products, including thinners, adhesives and
plastisols, high gloss urethane coatings and chemical coatings. The Company had,
as of February 1, 1995, approximately 16 million
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shares outstanding held by approximately 4,000 shareholders of record.
7. Defendant Russell Banks ("Banks") is and was, at all relevant
times, the Company's President and Chief Executive Officer.
8. Defendants John F. Gleason ("Gleason") is and was, at all relevant
times, a director and Executive Vice President of Grow.
9. Defendant Joseph M. Quinn ("Quinn") is and was, at all relevant
times, a director and Executive Vice President and Chief Operating officer of
Grow.
CLASS ALLEGATIONS
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10. Plaintiffs bring this action as a class action pursuant to Rules
23(a) and 23(b)(3) of the Federal Rules of Civil Procedure on behalf of
themselves and all other persons similarly situated (the "Class") who sold Grow
securities during the period from April 29, 1995 to May 4, 1995, inclusive (the
"Class Period") and who sustained damages as a result of such transactions.
Excluded from the Class are the defendants herein, members of the immediate
families of and persons affiliated with each defendant, the legal
representatives, heirs, and successors or assigns of any of the defendants.
11. There are over 16 million shares of Grow common stock publicly
outstanding, roughly 2 million of which were
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actively traded during the Class Period. Thus, the members of the Class are so
numerous that joinder of all members is impracticable. While the exact number
of Class members can only be determined by appropriate discovery, plaintiffs
believe that Class members number in the thousands because Grow common stock was
actively traded on the New York Stock Exchange, an efficient market, during the
Class Period.
12. The representative plaintiffs, claims are typical of the claims
of the members of the Class. Plaintiffs and all Class members sustained damages
as a result of defendants' wrongful conduct complained of herein.
13. Plaintiffs will fairly and adequately protect the interests of
the Class members and have retained counsel competent and experienced in class
and securities litigation.
14. A class action is superior to other available methods of the fair
and efficient adjudication of this controversy. Since the damages suffered by
individual Class members may be relatively small, the expense and burden of
individual litigation make it virtually impossible for the Class members
individually to seek redress for the wrongful conduct alleged.
15. Common questions of law and fact exist as to all Class members
and predominate over any questions affecting solely individual Class members.
Among the questions of law and fact common to the Class are:
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(a) whether the federal securities laws were violated by
defendants' acts as alleged herein;
(b) whether representations made to the investing public and the
shareholders of Grow during the Class Period omitted and/or misrepresented
material facts about the Company's efforts to sell itself to a third party;
(c) whether defendants failed to timely disclose material facts
necessary in order not to mislead the investing public; and
(d) whether the members of the Class have sustained damages and,
if so, what is the proper measure of such damages.
SUBSTANTIVE ALLEGATIONS
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16. In late January 1995, defendant Grow issued a press release
stating that the Grow board of directors had unanimously authorized Grow's
financial advisor, Wertheim Schroder & Co., Inc., ("Wertheim") to assist the
Company in considering and reviewing alternatives to enhance shareholder value.
17. On April 28, 1995, defendants issued a press release which stated
that Grow:
. . . has entered into negotiations with a
third party concerning an acquisition of Grow.
The third party, which has substantially
completed its due diligence review, has proposed
to acquire 100% of Grow's common
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stock and has indicated a willingness to pay Grow's
public stockholders $18.10 per share in cash. Any
such transaction would be subject to negotiation and
execution of a definitive agreement and approval of
Grow's Board of Directors.
18. On the morning of May 1, 1995, defendants issued a press release,
stating that Grow:
has entered into a definitive merger agreement
pursuant to which Imperial Chemical Industries,
PLC, an English Company ("ICI"), would offer to
purchase all the outstanding shares of Grow for
$18.10 per share.
* * *
Grow also stated that Corimon, a Venezuelan
corporation which owns approximately 25% of Grow's
shares, had entered into a separate Option
Agreement with ICI in which Corimon agreed to sell
its Grow shares to ICI at a price of $17.50 per share.
* * *
The Board of Directors of Grow unanimously approved
the transaction based upon, among other things, an
opinion as to the fairness of the offer and the
merger from Wertheim Schroder & Co., Incorporated.
* * *
In announcing the execution of the Merger Agreement,
Russell Banks, President and Chief Executive Officer
of Grow, said, 'We are extremely pleased to be able
to propose to shareholders what we believe represents
an attractive opportunity . . . .'
19. The foregoing statements were materially false and misleading
and/or omitted to state material facts necessary to
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make the statements made, in the light of the circumstances under which they
were made, not misleading, in at least the following respects:
(a) defendants failed to disclose that as early as March 17, 1995,
The Sherwin-Williams Company ("SherwinWilliams") had offered to enter into a
confidentiality agreement with Grow in order to permit Sherwin-Williams to enter
into a definitive agreement for 100% of Grow, and Sherwin-Williams had sent Grow
a fully executed confidentiality agreement on March 31, 1995 which agreement was
never executed by Grow;
(b) defendants failed to disclose that, on April 17, 1995,
defendant Banks informed Sherwin-Williams that it was to be excluded from any
bidding process for Grow;
(c) defendants failed to disclose that since April 17, 1995 and
despite its exclusion from any bidding process, Sherwin-Williams' financial
advisors had been in contact with Grow's financial advisor and had expressed
Sherwin-Williams' continued serious interest in pursuing a transaction with
Grow;
(d) defendants failed to disclose that on the evening of April 28,
1995, Sherwin-Williams sent a letter to defendant Banks, with copies to each of
the other individual defendants, to all of Grow's directors and to Grow's
financial and legal advisors. The April 28th letter stated that SherwinWilliams
was still seriously interested in a transaction with
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Grow, that financing an all-cash transaction would not represent "any
impediment" given Sherwin-Williams' financial strength, that Sherwin-Williams
was "extremely confident that the antitrust laws would not impede [its] ability
to consummate a transaction," and that Sherwin-Williams had retained the
investment banking firm of Lazard Freres & Co. and the law firm of Rogers &
Wells to provide Sherwin-Williams financial and legal counsel in connection with
an acquisition by Grow. The April 28th letter further stated that Sherwin-
Williams was prepared to "enter into immediate discussions with you and your
directors, management and advisors about a transaction" with Sherwin-Williams.
A copy of the April 28th letter is annexed hereto as Exhibit A; and
(e) Defendant Banks' statement that the board was "extremely
pleased to be able to propose what we believe represents an attractive
opportunity" was materially false and misleading in that it created the false
impression that the Company had been fully "shopped" by defendants, with the
assistance of Wertheim, and that defendants had obtained the best available
transaction for the Company and its public shareholders.
20. By means of the aforesaid misrepresentations and omissions (and
failure to correct same), set forth above, and/or with reckless disregard of the
facts, defendants unlawfully and artificially affected the market price of Grow
securities. In ignorance of the false and misleading nature of the representa-
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tions discussed above, plaintiffs and the members of the Class relied, to their
detriment, on the integrity of the market and/or the above-cited representations
of the defendants.
21. By reason of the foregoing, defendants violated and/or aided and
abetted violations of Section 10(b) of the Exchange Act and Rule l0b-5
promulgated thereunder in that they: (a) employed devices, schemes and artifices
to defraud; (b) made untrue statements of material fact or omitted to state
material facts necessary in order to make the statements set forth in paragraph
18 hereof, in light of the circumstances under which they were made, not
misleading; and (c) engaged in acts, practices and/or a course of business which
would and did operate as a fraud and deceit upon the plaintiffs and other owners
of Grow securities who sold their securities during the Class Period.
22. Had plaintiffs and the members of the class known that Grow had
received repeated serious indications of interest from Sherwin-Williams
culminating in the April 28th letter, they would not have sold their securities
during the Class Period. Following the belated disclosure of the April 28th
letter on May 4, 1995, the price of Grow common stock traded above ICI's $18.10
offering price. Thus, on May 5, 1995, Grow common stock closed at $19 1/2 per
share. On May 8, 1995, the second trading day following the disclosure of the
April 28th letter, SherwinWilliams commenced a tender offer for all shares of
Grow at a
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price of $19.50 per share cash. On May 8, 1995, Grow common stock traded as
high as $20 3/8 per share.
23. Defendants, by virtue of their offices and directorships, were at
the time of the wrongs alleged herein, controlling persons of Grow within the
meaning of Section 20(a) of the Exchange Act. Defendants had the power and
influence which they exercised to cause Grow to engage in the conduct and
practices complained of herein. Their position within the Company made them
privy to, and provided them with, actual knowledge of the material facts
concealed from plaintiffs and the Class.
24. By reason of the conduct described herein, defendants are liable
to plaintiffs and the other members of the Class for the substantial damages
which they suffered in connection with their sales of Grow securities.
WHEREFORE, plaintiffs demand judgment against defendants, as follows:
A. Certifying this action as a class action, certifying plaintiffs
as class representatives thereof, and plaintiffs' counsel as class counsel;
B. Declaring and determining that defendants violated the federal
securities laws by reason of the deceptive conduct and misstatements and
omissions as alleged herein;
C. Awarding money damages against the defendants, jointly and
severally, and in favor of plaintiffs and the other
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members of the Class for all losses and injuries suffered as a result of the
acts and transactions complained of herein, together with prejudgment interest
on all of the aforesaid damages which the Court shall award from the date of
said wrongs to the date of judgment herein at a rate the Court shall fix;
D. Awarding plaintiffs the costs of this action, including
reasonable attorneys' fees and expert fees and disbursement; and
E. Granting such other and further relief as this Court may deem
just and proper.
JURY DEMAND
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Plaintiffs demand trial by jury.
Dated: May 9, 1995
ABBEY & ELLIS
By:
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Judith L. Spanier (JS-5065)
212 East 39th Street
New York, New York 10016
(212) 889-3700
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Exhibit A
April 28, 1995
Mr. Russell Banks
President and Chief Executive Officer
Grow Group, Inc.
200 Park Avenue
New York, New York 10166
Dear Mr. Banks:
We at The Sherwin-Williams Company were troubled to learn from the
press release you issued today that you are in the process of negotiating a sale
of your company to another party. Our concern arises from the fact that,
despite Sherwin-Williams' repeated indications of serious interest in a
transaction with Grow Group, you apparently have decided to negotiate a
definitive agreement with another bidder without giving us access to the
information that would allow us to present our best possible proposal.
On March 17, 1995 we offered to enter into a confidentiality agreement
with Grow Group. After repeated delays on Grow Group's part to finalize such
agreement, we forwarded an executed copy of that agreement to Lloyd Franks on
March 31, 1995. However, that agreement was never executed by Grow Group. On
April 17, 1995, you informed us that Sherwin-Williams was to be excluded from
the bidding process. Consequently, by letter dated April 17, 1995, we had no
alternative but to revoke our offer to enter into the confidentiality agreement
with Grow Group. Since that time and despite your actions, our financial
advisors have been in contact with Wertheim Schroder and have expressed our
continued interest in pursuing a transaction with Grow Group.
Given our financial strength, financing will not represent any
impediment to the consummation of a transaction on an all-cash basis. In
addition, based upon our preliminary analysis, we are extremely confident that
the antitrust laws would not impede our ability to consummate a transaction with
Grow Group. This matter has been discussed at length with the members of our
senior management and with our Board of Directors. We have also retained Lazard
Freres & Co. and Rogers & Wells to provide financial and legal counsel regarding
this matter.
We urge you not to enter into or to agree to any merger or other
significant transaction or agreement, or to take any additional defensive
measures (including "no shop", break-up fee or similar arrangements) or other
actions, that would adversely
affect the ability of your stockholders to receive the maximum value for their
shares.
We wish to obtain immediate access to the information which you have
refused to furnish to us. We are also prepared to enter into immediate
discussions with you and your directors, management and advisors about a
transaction with Sherwin-Williams. In Mr. Breen's absence, you may contact me
over the weekend either at my home at (216) 247-4936 or at my office (216) 566-
2102. If you are unable to contact me, you can contact Larry J. Pitorak, Senior
Vice President--Finance, Treasurer and Chief Financial Officer, at (216) 729-
3840 or (216) 566-2573.
We hope that you and your Board of Directors will give this matter
prompt and serious consideration.
Sincerely,
/s/ Conway G. Ivy