EXHIBIT 22
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
GROW GROUP, INC., JOHN F. GLEASON, : COMPLAINT
RUSSELL BANKS and JOSEPH M. QUINN, :
:
Defendants. : JURY DEMAND
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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. SECTION78aa, 28 U.S.C.
SECTION1331. The claims alleged herein arise under Sections 10(b) and
20(a) of the Exchange Act, 15 U.S.C. SECTIONSECTION78g(b) and 78t(a),
and Rule 10b-5 promulgated thereunder by the Securities and Exchange
Commission ("SEC"), 17 C.F.R. SECTION240.10b-5.
2. Venue is proper in this District under Section 27
of the Exchange Act and 28 U.S.C. SECTION1391(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
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
shares outstanding held by approximately 4,000 shareholders of
record.
7. Defendant Russell Banks ("Banks") is and was, at
all relevant times, the Company's President and Chief Executive
Officer.
8. Defendants John F. Gleason ("Gleason") is and was,
at all relevant times, a director and Executive Vice President of
Grow.
9. Defendant Joseph M. Quinn ("Quinn") is and was, at
all relevant times, a director and Executive Vice President and
Chief Operating officer of Grow.
CLASS ALLEGATIONS
10. Plaintiffs bring this action as a class action
pursuant to Rules 23(a) and 23(b)(3) of the Federal Rules of
Civil Procedure on behalf of themselves and all other persons
similarly situated (the "Class") who sold Grow securities during
the period from April 29, 1995 to May 4, 1995, inclusive (the
"Class Period") and who sustained damages as a result of such
transactions. Excluded from the Class are the defendants herein,
members of the immediate families of and persons affiliated with
each defendant, the legal representatives, heirs, and successors
or assigns of any of the defendants.
11. There are over 16 million shares of Grow common
stock publicly outstanding, roughly 2 million of which were
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:
(a) whether the federal securities laws were
violated by defendants' acts as alleged herein;
(b) whether representations made to the investing
public and the shareholders of Grow during the Class Period
omitted and/or misrepresented material facts about the Company's
efforts to sell itself to a third party;
(c) whether defendants failed to timely disclose
material facts necessary in order not to mislead the investing
public; and
(d) whether the members of the Class have
sustained damages and, if so, what is the proper measure of such
damages.
SUBSTANTIVE ALLEGATIONS
16. In late January 1995, defendant Grow issued a
press release stating that the Grow board of directors had
unanimously authorized Grow's financial advisor, Wertheim
Schroder & Co., Inc., ("Wertheim") to assist the Company in
considering and reviewing alternatives to enhance shareholder
value.
17. On April 28, 1995, defendants issued a press
release which stated that Grow:
. . . has entered into negotiations with a
third party concerning an acquisition of
Grow. The third party, which has
substantially completed its due diligence
review, has proposed to acquire 100% of
Grow's common 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
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 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
representations 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 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
members of the Class for all losses and injuries suffered as a
result of the acts and transactions complained of herein,
together with prejudgment interest on all of the aforesaid
damages which the Court shall award from the date of said wrongs
to the date of judgment herein at a rate the Court shall fix;
D. Awarding plaintiffs the costs of this action,
including reasonable attorneys' fees and expert fees and
disbursement; and
E. Granting such other and further relief as this
Court may deem just and proper.
JURY DEMAND
Plaintiffs demand trial by jury.
Dated: May 9, 1995
ABBEY & ELLIS
By: _____________________________
Judith L. Spanier (JS-5065)
212 East 39th Street
New York, New York 10016
(212) 889-3700
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