Exhibit 99.5
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
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MIRIAM SARNOFF and FREDERICK
RAND, ON BEHALF OF THEMSELVES AND : Index No.
ALL PERSONS SIMILARLY SITUATED,,
:
Plaintiffs,
:
-against-
:
GROW GROUP, INC., RUSSELL BANKS, CLASS ACTION COMPLAINT
HAROLD G. BITTLE, ARTHUR W. : ----------------------
BROSLAT,, PHILIPPE ERARD, LLOYD
FRANK, JOHN F. GLEASON, PETER L. :
KEANE, ANGUS N. MACDONALD, ROBERT
J. MILANO, TULLY PLESSER, JOSEPH :
M. QUINN and WILLIAM H. TURNER,
:
Defendants.
:
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Plaintiffs, by their attorneys, allege upon information and belief, except
as to the allegations set forth in paragraph 4, which are alleged upon personal
knowledge, as follows:
NATURE OF THE ACTION
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1. This is a class action lawsuit on behalf of the stockholders of Grow
Group, Inc. ("Grow Group" or the "Company") who have been and continue to be,
deprived of the opportunity to fully realize the benefits of their investment in
Grow Group as a result of the defendant's breach of fiduciary duty in connection
with the proposed acquisition of Grow Group by Imperial Chemicals Industries PLC
("Imperial").
2. Plaintiffs seek relief with regard to the breaches of fiduciary duty by
the individual defendants in connection with a buy-out agreement (the "buy-out")
between Grow Group and Imperial announced by defendant Grow Group on May 2,
1995, pursuant to which its public shareholders will receive only $18.10 per
share even though the Company has been valued at between $22 to $24 a share.
3. The defendants have deliberately or recklessly pursued a wrongful
course of conduct designed to prevent Grow Group shareholders from receiving the
benefits of a buy-out and change in control of Grow Group. This course of
conduct has, thus far, consisted of agreeing to sell Grow Group under terms
which prevent Grow Group's public shareholders from receiving a takeover premium
and discouraging better offers and attempting to confuse shareholders into
cooperating by withholding material information from the marketplace.
4. The individual defendants' authorization to pursue the transaction was
given in breach of their fiduciary duties owed to Grow Group's public
stockholders to take all necessary steps to ensure that the stockholders will
receive the maximum value realizable for their shares in any acquisition of the
Company.
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5. In the context of this action, the Board of Directors and Officers of
Grow Group must take all reasonable steps to assure the maximization of
stockholder value, including the implementation of a bidding mechanism to foster
a fair auction of the Company to the highest bidder or the exploration of
strategic alternatives which will maximize value to the plaintiffs and the
class.
6. This action seeks preliminary and permanent injunctive relief and other
equitable remedies to protect Grow Group public shareholders from defendants'
breaches of fiduciary duty and failure to maximize shareholder value.
PARTIES
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7. Plaintiffs Miriam Sarnoff and Frederick Rand are and at all relevant
times have been the owners of shares of Grow Group common stock.
8. Grow Group is a corporation duly organized and existing under the law
of the State of New York, which maintains its principal executive offices at 200
Park Avenue, New York, New York.
9. Grow Group is a producer of specialty chemical coatings and
architectural paints, and detergents and maintenance cleaning products for
household, professional and industrial use.
10. As of February 1, 1995, Grow Group had approximately 16,102,713 shares
of common stock outstanding and hundreds of
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stockholders of record. Grow Group's stock trades on the New York Stock
Exchange.
11. Defendant Russell Banks is the President and Chief Executive Offer,
and Director of Grow Group. According to an SEC Form 4, filed on March 10,
1995, Banks beneficially owned approximately 424,950 outstanding shares of Grow
Group common stock.
12. Defendant Harold G. Bittle is a director of Grow Group.
13. Defendant Arthur W. Broslat is a director of Grow Group. He also
holds the positions of Executive Vice President and Chief Financial Officer of
Corimon, the Venezuelan firm which owns about 25% of the outstanding shares of
Grow Group.
14. Defendant Philipe Erard is a director of Grow Group. He also holds
the positions of Chairman, President and Chief Executive Officer of Corimon.
15. Defendant Lloyd Frank is a director of Grow Group.
16. Defendant John F. Gleason is an Executive Vice President of Grow
Group, as well as a director of the Company.
17. Defendant Peter L. Keane is a director of Grow Group.
18. Defendant Angus N. MacDonald is a director of Grow Group.
19. Defendant Robert J. Milano is a director of Grow Group.
20. Defendant Tully Plesser is a director of Grow Group.
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21. Defendant Joseph M. Quinn is a director of Grow Group, as well as
Executive Vice President and Chief Operating Officer of the Company.
22. Defendant Williams H. Turner is a director of Grow Group.
23. By reason of their corporate positions and because of their ability to
control the business and internal affairs of Grow Group, the officer and
director defendants owed to Grow Group's public shareholders, including
plaintiffs and all others similarly situated, fiduciary obligations of fidelity,
trust, loyalty and due care. Accordingly, said defendants were, and are,
required to use their utmost ability to control and manage the Company in
furtherance of the best interests of the Company's stockholders.
24. In addition, each of the officer and director defendants owes to Grow
Group's public shareholders the fiduciary duty to exercise due care and
diligence, as well as the highest obligations or good faith and fair dealing.
25. Each of the officer and director defendants owes to the Company and
its stockholders the fiduciary duty to assure that all reasonable offers or
overtures to purchase the Company are conveyed to the full board of directors,
to entertain, encourage, evaluate and pursue any bona fide offers or expressions
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of inter-
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est to purchase the Company's outstanding stock or other merger transactions in
a manner that will maximize shareholder value.
26. Each defendant herein is sued individually as an aider and abettor, as
well as in his/her capacity as an officer and/or director of the Company, and
the liability of each arises from the fact that he has engaged in all or part of
the unlawful acts, plans, schemes, or transactions complained of herein.
CLASS ACTION ALLEGATIONS
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27. Plaintiffs bring this case on their own behalf, and as a class action
on behalf of all stockholders of the Company, except defendants herein, and any
person firm, trust, corporation, or other entity related to or affiliated with
any of the defendants, or any of the Company's principal stockholders, who will
be threatened with injury arising from defendants' actions as is described more
fully below.
28. This action is properly maintainable as a class action.
29. The class is so numerous that joinder of all members is impracticable.
The Company has at least hundreds of stockholders who are scattered through the
United States.
30. There are questions of law and fact common to the class that
predominate over questions affecting any individual class member. The common
questions include, inter alia, whether:
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(a) The defendants have breached their fiduciary duties owned by them
to plaintiffs and the other members of the
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Class by failing and refusing to attempt in good faith to maximize shareholder
value in connection with the sale of control of Grow Group;
(b) Grow Group's Poison Pill was defensively enacted and implemented
to entrench defendants in their office and give them the power to sell control
only to an entity that will provide management with continued perquisites;
(c) The defendants have breached or aided and abetted the breach of
the fiduciary duties owed by them to plaintiffs and other members of the Class;
(d) The defendants engaged in a plan and scheme to thwart and reject
offers and proposals from third parties other than Imperial; and
(e) Plaintiffs and the other members of the Class are being and will
continue to be injured by the wrongful conduct alleged herein, and, if so, what
is the proper remedy and/or measure of damages.
31. Plaintiffs are committed to prosecuting this action and have retained
competent counsel experienced in litigation of this nature, Plaintiffs' claims
are typical of the claims of the other members of the Class and plaintiffs have
the same interests as the other members of the Class. Plaintiffs are adequate
representative of the Class.
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SUBSTANTIVE ALLEGATIONS
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32. In February 1988, Grow Group adopted what it called a Shareholder
Rights Plan but what is more appropriately called a Poison Pill. The Poison
Pill has the effect of making it extraordinarily difficult, expensive and/or
impossible for any potential acquiror not approved by the individual defendants
to acquire control of Grow Group.
33. Under the plan, each Right issued to shareholders under the plan
entitles that shareholder to purchase the Company's common stock at a 50%
discount upon the acquisition by an Acquiring Person of 30% or more of the then
outstanding shares of common stock of the Company or a greater than 20% of Grow
Group common stock if the acquiror is deemed to be an "Adverse Person" by the
Board of Directors. The plan further provides that the Company is entitled to
redeem the Rights, under certain conditions, at $.01 per Right.
34. The Poison Pill has the effect of precluding successful completion of
even the most attractive offers for Grow Group unless the Grow Group board
acquiesces, thus deterring bona fide bids to purchase the Company for adequate
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consideration and denying the Company's shareholders an opportunity to make
their own choice as to the fate of the Company that they own.
35. As reported by the Dow Jones/News Retrieval Service on May 2, 1995,
the proposed transaction calls for the acquisition
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of Grow Group by Imperial for about $290 million, or $17.50 cents per share for
the 25% stake in Grow Group held by the Venezuelan firm Corimon and $18.10 per
share for those shares held by all other shareholders.
36. The proposed transaction is grossly unfair to Grow Group's public
shareholders:
(a) According to article in the New York Post dated May 2, 1995, an
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analyst from Gerard Klauer Mattison & Co. valued the Company at between $22 to
$24 per share earlier this year.
(b) On February 3, 1994, analyst J. Putterman of Stephens Inc. issued
a report in which the Company was valued at $24 - $25 per share.
(c) On January 25, 1994, analyst J. Melin of Gerard Klauer Mattison &
Co. issued a report in which the Company was valued at $22 - $26 per share.
37. Defendants have failed to disclose why they have accepted such a low
bid. However, the New York Post reported, on May 2, 1995, that defendant
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Russell Banks, age 75, stated that he did not plan on "moving anywhere" and had
no plans to retire. Therefore, the reasonable inference may be drawn that the
buy-out agreement was reached in order to allow the all of the defendants to
keep their positions as directors as well as to permit Banks to maintain his
position as President and Chief Executive Officer, Gleason to maintain his
position as Executive Vice Presi-
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dent, and Quinn to maintain his position as Executive Vice President and Chief
Operating Officer.
38. Moreover, Corimon, holder of a 25% stake in Grow Group is under
pressure to quickly raise $18 million dollars in order to fund its acquisition
of Standard Paints in California, announced early this year. Defendants Arthur
W. Broslat and Philippe Erard, who hold key positions in that Company, had an
incentive to accept a low bid now rather than to wait for a higher offer.
39. The existence of Grow Group's Poison Pill plan prevents competing
bids. Thus, Imperial had no incentive to make its best possible offer and every
incentive to make a low offer.
40. Because the terms of the merger agreement prohibit defendants from
negotiating with third parties, there was no possibility that competition
between Imperial and other companies could have driven up the purchase price.
41. The interests of the public shareholders are best served by a deal
which provides for the acquisition of Grow Group shares at the highest possible
price.
42. The defendants owe fiduciary obligations to the Company's shareholders
to take all necessary and appropriate steps to maximize the value of Grow
Group's shares. In addition, the individual defendants have the responsibility
to act independently so that the interests of Grow Group's public stockholders
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will be protected, to seriously consider any bona fide offers for the Company,
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and to conduct fair and active bidding procedures or other mechanisms for
checking the market to assure that the highest price is achieved.
43. The existence of a Poison Pill heightens this duty and requires the
individual defendants to pursue a third party's interest in acquiring the
Company and to negotiate in good faith with a bidder on behalf of the Company's
shareholders.
44. The individual defendants must adequately ensure that no conflict of
interest exists between their own interests and their fiduciary obligations to
maximize shareholder value or, if such conflicts exist, to ensure that all such
conflicts will be resolved in the best interests of the Company's public
stockholders.
45. The individual defendants have breached their fiduciary and other
common law duties owed to plaintiffs and other members of the class in that they
have not and are not exercising independent business judgment and have acted and
are acting to the detriment of the Class in order to benefit themselves, Grow
Group's senior management, and Corimon.
46. As a result of defendants' actions, plaintiffs and the other members
of the Class have been, and will be, damaged in that they have not and will not
receive their fair proportion of the value of Grow Group's assets and businesses
and/or have been
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and will be prevented from obtaining a fair and adequate price for their shares
of Grow Group's common stock.
47. Plaintiffs seek preliminary and permanent injunctive relief and
declaratory relief preventing defendants from inequitably and unlawfully
depriving plaintiffs and the Class of their rights to realize a full and fair
value for their stock at a material premium over the market price and to compel
defendants to carry out their fiduciary duties to maximize shareholder value in
selling Grow Group.
48. Only through the exercise of this Court's equitable powers can
plaintiffs be fully protected from the immediate and irreparable injury which
the defendants' action threaten to inflict.
49. Unless enjoined by the Court, defendants will continue to breach their
fiduciary duties owed to plaintiffs and the members of the class, and/or aid and
abet and participate in such breaches of duty, and will prevent the outright
sale of Grow Group at a material premium, all to the irreparable harm of
plaintiffs and the other members of the Class.
50. Plaintiffs and the Class have no adequate remedy at law.
WHEREFORE, plaintiffs demand judgment as follows:
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A. Declaring this to be a proper class action and certifying plaintiffs
as class representative and their counsel as class counsel;
B. Ordering the individual defendants to carry out their fiduciary duties
to plaintiffs and the other members of the Class by announcing their intention
to:
1. cooperate fully with any entity or person having a bona fide
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interest in proposing any transaction that would maximize shareholder value,
including but not limited to, a full buy-out or takeover of the Company;
2. immediately undertake an appropriate evaluation of Grow Group's
worth as a merger/acquisition candidate;
3. take all appropriate steps to enhance Grow Group's value and
attractiveness as a merger/acquisition candidate;
4. take all appropriate steps effectively to expose Grow Group to the
marketplace in an effort to create an active auction of the Company;
5. act independently so that the interests of the Company's public
shareholders will be protected; and
6. adequately ensure that no conflicts of interest exist between the
individual defendants' own interest and their fiduciary obligation to maximize
shareholder value or, in the event such conflicts exist, to ensure that all
conflicts of
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interest are resolved in the best interests of the public shareholders of the
Grow Group;
C. Ordering the individual defendants jointly and severally to account to
plaintiffs and the Class for all damages suffered and to be suffered by them as
a result of the acts and transaction alleged herein;
D. Declaring that Grow Group aided and abetted and substantially
participated in the individual defendants' breach of fiduciary duties;
E. Awarding plaintiffs the cost and disbursements of this action,
including a reasonable allowance for plaintiffs' attorneys' and experts' fees;
and
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F. Granting such other and further relief as may be just and proper.
DATED: New York, New York
May 3, 1995
Yours, etc.,
STULL, STULL & BRODY
6 East 45th Street
New York, New York 10017
Telephone: (212) 687-7230
LAW OFFICES OF JOSEPH H. WEISS
319 Fifth Avenue
New York, New York 10016
(212) 532-4171
Attorneys for Plaintiffs
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