-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J3svWQOcvB8sygmdHC/Iseor2U7MhFEVSIOPDtyZ87cyYrVR9Nt2tzGDrgwLpNWx 3HRVn55GWpniI06rOmFspA== 0000898822-96-000086.txt : 19960320 0000898822-96-000086.hdr.sgml : 19960320 ACCESSION NUMBER: 0000898822-96-000086 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19960318 SROS: NYSE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CAPCO AUTOMOTIVE PRODUCTS CORP CENTRAL INDEX KEY: 0000919549 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 382428856 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-43365 FILM NUMBER: 96535942 BUSINESS ADDRESS: STREET 1: 300 S ST LOUIS BLVD STREET 2: STE 202 CITY: SOUTH BEND STATE: IN ZIP: 46617 BUSINESS PHONE: 2192802085 MAIL ADDRESS: STREET 1: PO BOX 208 CITY: SOUTH BEND STATE: IN ZIP: 46624-9998 FORMER COMPANY: FORMER CONFORMED NAME: CLARK AUTOMOTIVE PRODUCTS CORP DATE OF NAME CHANGE: 19940228 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: EATON CORP CENTRAL INDEX KEY: 0000031277 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 340196300 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: EATON CTR STREET 2: 1111 SUPERIOR AVE CITY: CLEVELAND STATE: OH ZIP: 44114-2584 BUSINESS PHONE: 2165235000 FORMER COMPANY: FORMER CONFORMED NAME: EATON YALE & TOWNE INC DATE OF NAME CHANGE: 19710822 SC 13D 1 SCHEDULE 13D SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934* CAPCO AUTOMOTIVE PRODUCTS CORPORATION ______________________________________________________________________________ (NAME OF ISSUER) COMMON STOCK, PAR VALUE $0.01 PER SHARE ______________________________________________________________________________ (TITLE OF CLASS OF SECURITIES) 139168 10 8 ______________________________________________________________________________ (CUSIP NUMBER) GERALD L. GHERLEIN, ESQ. EATON CORPORATION EATON CENTER 1111 SUPERIOR AVENUE CLEVELAND, OHIO 44114 (216) 523-5000 ______________________________________________________________________________ (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS) MARCH 8, 1996 ______________________________________________________________________________ (DATE OF EVENT WHICH REQUIRES FILING OF THIS STATEMENT) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ]. Check the following box if a fee is being paid with this statement [X]. (A fee is not required only if the reporting person: (1) has a previous state- ment on file reporting beneficial ownership of more than five percent of the class of securities described in Item 1; and (2) has filed no amendment subse- quent thereto reporting beneficial ownership of less than five percent of such class. See Rule 13d-7.) Note: Six copies of this statement, including all exhibits, should be filed with the Commission. See Rule 13d-1(a) for other parties to whom copies are to be sent. *The remainder of this cover page should be filled out for a reporting per- son's initial filing on this form with respect to the subject class of securi- ties, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). CUSIP NO. 139168 10 8 _______________________________________________________________________________ (1) Names of Reporting Persons S.S. or I.R.S. Identification Nos. of Above Persons Eaton Corporation 34-0196300 _______________________________________________________________________________ (2) Check the Appropriate Box if a Member of a Group (a) [ ] (b) [ ] _______________________________________________________________________________ (3) SEC Use Only _______________________________________________________________________________ (4) Source of Funds 00 _______________________________________________________________________________ (5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) [ ] ______________________________________________________________________________ (6) Citizenship or Place of Organization Ohio ______________________________________________________________________________ Number of (7) Sole Voting Power 805,000 shares Shares Bene- _______________________________________________________________ ficially (8) Shared Voting Power 0 shares Owned by _____________________________________________________________ Each Report- (9) Sole Dispositive Power 805,000 shares ing Person _______________________________________________________________ With (10) Shared Dispositive Power 0 shares ______________________________________________________________________________ (11) Aggregate Amount Beneficially Owned by Each Reporting Person 805,000 shares _______________________________________________________________________________ (12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares [ ] _______________________________________________________________________________ (13) Percent of Class Represented by Amount in Row (11) 7.3% _______________________________________________________________________________ (14) Type of Reporting Person (See Instructions) CO ITEM 1. SECURITY AND ISSUER. This Statement on Schedule 13D relates to shares of Common Stock, par value $.01 per share (the "Shares"), of CAPCO Automotive Products Corporation, a Michigan corporation (the "Company"). The principal executive offices of the Com- pany are located at 300 S. St. Louis Boulevard, P.O. Box 208, South Bend, Indiana 46624. ITEM 2. IDENTITY AND BACKGROUND. (a)-(c),(f) This Statement is being filed by Eaton Corpo- ration ("Eaton"), an Ohio corporation principally engaged in the manufacture of highly engineered products which serve the vehicle, industrial, construction, commercial and aerospace markets. The principal offices of Eaton are located at Eaton Center, 1111 Superior Avenue, Cleveland, Ohio 44114. The name, business address, present principal occupation or employment and citizenship of each of the directors and exe- cutive officers of Eaton are set forth in Schedule I hereto and are incorporated herein by reference. (d)-(e) During the last five years, neither Eaton nor any of its directors or executive officers (i) has been convicted in a criminal proceeding (excluding traffic violations and similar misdemeanors), or (ii) has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. Eaton has purchased 805,000 Shares on the open mar- ket for an aggregate purchase price of $5,803,300. Funds provided by Eaton's ongoing commercial paper program were used to purchase the 805,000 Shares. ITEM 4. PURPOSE OF TRANSACTION. (a)-(j) Eaton acquired the Shares in order to facilitate a possible business combination between Eaton and the Company. On March 13, 1996, Stephen R. Hardis, Chairman and Chief Executive Officer of Eaton, sent a letter to F. Edmir Bertolaccini, Chairman and Chief Executive Officer of the Company, proposing an acquisition of the Company by Eaton at $11 per share in cash (the "March 13 Letter"). A copy of the March 13 Letter is attached hereto as Exhibit 1 and is incor- porated herein by reference. On March 13, 1996, Eaton issued a press release with respect to the March 13 Letter. A copy of the press release is attached hereto as Exhibit 2 and is incorporated herein by reference. The foregoing description of the March 13 Letter and the press release is qualified in its entirety by reference to Exhibits 1 and 2. On March 13, 1996, Eaton delivered a notice to the Company nominating seven individuals for election as direc- tors at the Company's annual meeting of shareholders sched- uled for May 14, 1996. On March 14, 1996, Cede & Co., at the request of Eaton, delivered a similar notice to the Company (the Eaton notice and the Cede & Co. notice, collectively the "Nomination Notices"). In the Nomination Notices, Eaton stated that all of its nominees were committed to supporting the proposal made by Eaton to acquire the Company in a transaction pursuant to which the Company's shareholders will receive $11 per share in cash. Following the filing of preliminary solicitation materials with the Securities and Exchange Commission, Eaton intends to solicit proxies from the Company's shareholders for the purpose of electing to the Board of Directors of the Company the director candidates nominated by Eaton in order to insure that the Company's Board of Directors will take all such actions necessary or appropriate (subject to such directors' fiduciary duties) to approve and effectuate the consummation of a business combination between Eaton and the Company, including, among other things, taking action to execute an agreement and plan of merger. On March 13, 1996, Eaton commenced litigation against the Company and its directors in the federal district court in the Eastern District of Michigan in connection with Eaton's proposal set forth in the March 13 Letter. Eaton's litigation seeks both declaratory and injunctive relief. Eaton's complaint seeks to require the Company to redeem the preferred stock purchase rights (the "Rights") issued pursu- ant to the Rights Agreement between the Company and Harris Trust and Savings Bank, as Rights Agent, and to prevent the Company from changing the May 14, 1996 date for its annual meeting of shareholders or the March 20 record date for that meeting, and requests the court to declare that the Company is not subject to the provisions of certain Michigan anti- takeover statutes. The Eaton complaint also seeks to prevent the Company from acting to become covered by these statutes. Copies of the complaint filed by Eaton and the Eaton press release issued on March 14, 1996 announcing the filing of the complaint are attached hereto as Exhibits 3 and 4 and are incorporated herein by reference. The foregoing description of the litigation and the press release is qualified in its entirety by reference to Exhibits 3 and 4. On March 18, 1996, Eaton announced that it will be commencing a cash tender offer to purchase all of the Com- pany's outstanding Shares (and the associated Rights), at a -2- price of $11.00 per Share (the "Offer"). In addition, Eaton also said that after consummation of the Offer it intends to acquire any remaining Shares in a cash merger at the same price as paid in the Offer. A copy of the press release issued by Eaton is attached hereto as Exhibit 5 and is incorporated herein by reference. Upon consummation of the business combination pro- posed by Eaton, the Company would become a wholly owned sub- sidiary of Eaton. Except in connection with the proposed business combination (including the Offer) and the nomination of director candidates as described above, Eaton has no cur- rent plans or proposals which relate to or would result in any of the events described in Items (a) through (j) of Item 4 of Schedule 13D. Eaton does, however, expect to evaluate on an ongoing basis its intentions with respect to the Com- pany and may determine to pursue one or more of the actions specified in Items (a) through (j) in order to facilitate a business combination with the Company and Eaton reserves the right to change its plans and intentions at any time, and to take any action, with respect to the Company or the Shares, in any manner permitted by law. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. (a)-(b) Eaton has sole power to vote, direct the vote of, dispose of, or direct the disposition of all 805,000 Shares beneficially owned by Eaton. These shares comprise approximately 7.3% of the outstanding Shares. No director or executive officer of Eaton is the beneficial owner of any of the 805,000 Shares owned by Eaton or of any other Shares. (c) During the past 60 days, Eaton effected purchases of Shares as set forth in Schedule II hereto, which is hereby incorporated herein by reference. (d) Not applicable. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELA- TIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. Not applicable. -3- ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. Exhibit 1 Letter Dated March 13, 1996, from Stephen R. Hardis, Chairman and Chief Executive Officer of Eaton, to F. Edmir Bertolaccini, Chairman and Chief Executive Officer of the Company. Exhibit 2 Eaton Press Release, dated March 13, 1996. Exhibit 3 Complaint filed by Eaton in the federal district court in the Eastern District of Michigan. Exhibit 4 Eaton Press Release, dated March 14, 1996. Exhibit 5 Eaton Press Release, dated March 18, 1996. -4- SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this state- ment is true, complete and correct. Dated: March 18, 1996 EATON CORPORATION By:/s/ Gerald L. Gherlein Name: Gerald L. Gherlein Title: Executive Vice President and General Counsel By:/s/ Earl R. Franklin Name: Earl R. Franklin Title: Secretary -5- SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF EATON The name, business address, present principal occupa- tion or employment of each of the directors and executive offi- cers of Eaton are set forth below. Unless otherwise indicated, the business address of each such director and each such execu- tive officer is Eaton Center, 1111 Superior Avenue, Cleveland, Ohio 44114. Unless otherwise indicated below, each occupation set forth opposite an individual's name refers to employment with Eaton. Unless otherwise indicated below, all directors and executive officers listed below are citizens of the United States. DIRECTORS POSITION WITH EATON; BUSINESS ADDRESS; PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME 5-YEAR EMPLOYMENT HISTORY NEIL A. ARMSTRONG DIRECTOR SINCE 1981. Former Chairman of Computing Technologies for Aviation, Inc., a computer systems company, a position he held from 1982 until 1992. He is a director of Cincinnati Milacron, Inc., Cinergy Corp., RMI Titanium Co., Thiokol Corporation and USX Corporation. ERNIE GREEN DIRECTOR SINCE 1995. Founder, President and Chief Executive Officer of EGI, Inc., a manufacturer of auto- motive components. The business address of EGI, Inc. is 1785 Big Hill Road, Dayton, Ohio 45439. He is also President of Florida Production Engineering, Inc., subsidiary of EGI. He is a director of Acordia, Inc., Bank One, Dayton, N.A., DP&L Inc. and Duriron Company, Inc. A. WILLIAM REYNOLDS DIRECTOR SINCE 1987. Chief Executive Officer of Old Mill Group, a private investment firm. The business address of Old Mill Group is 1696 Georgetown Road, Unit E, Hudson, Ohio 44236. Former Chairman of GenCorp Inc., a technology-based company with posi- tions in aerospace, automotive and polymer products. Mr. Reynolds' association with GenCorp began in September, 1984, as President and Chief Operating Officer. He was Chief Executive Officer from August, 1985 to July, 1994 and served as Chairman from January, 1987 through March, 1995. Mr. Reynolds is a director of Boise Cascade Corporation, Boise Cascade Office Products Corp. and Stant Corp. and Chairman of the Federal Reserve Bank of Cleveland. CHARLES E. HUGEL DIRECTOR SINCE 1978. Former Chairman and Chief Executive Officer of Combustion Engineering, Inc., a pro- vider of products and services for the power, process, automation, environ- mental control and other markets. Mr. Hugel became President and Chief Exe- cutive Officer of Combustion Engineering, Inc., in April, 1984 and Chairman and Chief Executive Officer in July, 1988. He was Chairman of Asea Brown Boveri Inc. from January, 1990 to February, 1991 and, until his retirement in December, 1991, was advisor to the Chief Executive Offi- cer. Mr. Hugel is a director of Pitney Bowes Inc. JOHN R. MILLER DIRECTOR SINCE 1985. President and Chief Executive Officer of TBN Holdings Inc., an environmental com- pany engaged primarily in the resource recovery and recycling business. The business address of TBN Holdings Inc. is Lander Center, Suite 110, 3550 Lander Road, Pepper Pike, Ohio 44124. He was President, Chief Operating Officer and a director of The Standard Oil Company from August, 1980 through March, 1986. Mr. Miller formerly served as Chairman of the Federal Reserve Bank of Cleveland and is a director of American Waste Services, Inc. FURMAN C. MOSELEY DIRECTOR SINCE 1975. Chairman of Sasquatch Publishing Company. The business address of Sasquatch Publishing Company is c/o Simpson Investment Company, 1201 Third Avenue, Suite 4900, Seattle, Washington 98101. Former president of Simpson Investment Company, holding company for Simpson Paper Company and Simpson Timber Com- pany. He was Chairman of Simpson Paper from 1969 to January, 1995 and -2- retired as President of Simpson Investment Company in July, 1995. Mr. Moseley is a director of Owens-Corning Fiberglas Corporation. VICTOR A. PELSON DIRECTOR SINCE 1994. Executive Vice President of AT&T and Chairman of AT&T's Global Operations Team. The business address of AT&T is 295 North Maple Avenue, Basking Ridge, New Jersey 07920. Mr. Pelson began his career with AT&T in 1959 and has served in many executive positions, most recently as Group Executive and President responsible for AT&T's Communications Services Group. He is a director of AT&T, as well as a mem- ber of its Management Executive Committee, and a director of United Parcel Service. Mr. Pelson will retire from AT&T at the end of March, 1996. ALEXANDER M. CUTLER DIRECTOR SINCE 1993. President and Chief Operating Officer of Eaton. Mr. Cutler joined Cutler-Hammer, Inc. in 1975, which was subsequently acquired by Eaton, and became President of Eaton's Industrial Group in 1986. Mr. Cutler was named President of the Con- trols Group in 1989, Executive Vice President - Operations in 1991, and was elected Executive Vice President and Chief Operating Officer - Controls in September, 1993 and assumed his current position in September, 1995. PHYLLIS B. DAVIS DIRECTOR SINCE 1991. Former Senior Vice President, Corporate Affairs of Avon Products, Inc., a manufacturer and marketer of cosmetics, toiletries and jewelry. Mrs. Davis joined Avon in 1968, advanced to Group Vice Presi- dent (U.S.) in 1977 and was head of its sales and distribution from 1985 to 1988. She became Corporate Senior Vice President of Business Development in 1989 and served as Senior Vice President, Corporate Affairs from 1990 until her retirement in September, 1991. Mrs. Davis is a director of BellSouth Corporation and The TJX Com- panies, Inc., and a trustee of various -3- open-end mutual funds in the Fidelity Group. STEPHEN R. HARDIS DIRECTOR SINCE 1983. Chairman and Chief Executive Officer of Eaton. Mr. Hardis served as Executive Vice Presi- dent - Finance and Administration pri- or to April, 1986, was elected Vice Chairman in 1986 and designated Chief Financial and Administrative Officer, and became Chief Executive Officer in September, 1995 and Chairman in January, 1996. He joined Eaton in 1979. Mr. Hardis is a director of First Union Real Estate Investments Trust, KeyCorp, Nordson Corporation and Progressive Corporation. GARY L. TOOKER DIRECTOR SINCE 1992. Vice Chairman and Chief Executive Officer of Motorola, Inc., a manufacturer of electronics equipment. The business address of Motorola, Inc. is 1303 East Algonquin Road, Schaumburg, Illinois 60196. Mr. Tooker joined Motorola in 1962 and advanced to the position of Senior Executive Vice President and Chief Corporate Staff Officer in 1986. He became Chief Operating Officer in 1988, President in 1990 and Vice Chairman and Chief Executive Officer in December, 1993. EXECUTIVE OFFICERS Stephen R. Hardis Chairman (January 1, 1996) and Chief Executive Officer (September 1, 1995); Director. Alexander M. Cutler President and Chief Operating Officer (September 1, 1995); Director. Gerald L. Gherlein Executive Vice President and General Counsel (September 4, 1991). Brian R. Bachman Senior Vice President--Semiconductor and Specialty Systems (January 1, 1996). -4- Joseph L. Becherer Senior Vice President--Cutler-Hammer (September 1, 1995). The business address of Mr. Becherer is Five Parkway Center, 875 Greentree Road, Pittsburgh, PA 15220. Robert J. McCloskey Senior Vice President--Controls and Hydraulics (September 1, 1995). Thomas W. O'Boyle Senior Vice President--Truck Components (September 1, 1995). Larry M. Oman Senior Vice President--Automotive Components (September 1, 1995). The business address of Mr. Oman is 26101 Northwestern Highway, Southfield, Michigan 48076. John M. Carmont Vice President and Treasurer (December 1, 1981). (Citizen of United Kingdom.) Susan J. Cook Vice President - Human Resources (January 16, 1995). Adrian T. Dillon Vice President - Chief Financial and Planning Officer (September 1, 1995). Patrick X. Donovan Vice President - International (April 27, 1988). Earl R. Franklin Secretary and Associate General Counsel (September 1, 1991). John W. Hushen Vice President - Corporate Affairs (August 1, 1991). Stanley V. Jaskolski Vice President - Technical Management (October 1, 1990). Ronald L. Leach Vice President - Accounting (December 1, 1981). William T. Muir Vice President - Manufacturing Technologies (April 1, 1989). Derek R. Mumford Vice President - Information Technologies (April 1, 1992). (Citizen of United Kingdom.) Billie K. Rawot Vice President and Controller (March 1, 1991). -5- SCHEDULE II EATON PURCHASES OF SHARES (ALL PURCHASES WERE MADE FOR CASH ON THE OPEN MARKET ON THE NEW YORK STOCK EXCHANGE) DATE NUMBER OF SHARES PRICE PER SHARE February 5, 1996 200,000 $7.25 March 5, 1996 20,000 $7.25 March 6, 1996 100 $7.25 March 6, 1996 49,900 $7.375 March 7, 1996 31,400 $7.375 March 7, 1996 18,600 $7.25 March 7, 1996 95,500 $7.125 March 7, 1996 34,500 $7.00 March 8, 1996 37,800 $6.875 March 8, 1996 16,000 $7.00 March 8, 1996 10,000 $7.125 March 8, 1996 165,900 $7.25 March 8, 1996 100 $7.25 March 11, 1996 50,000 $7.125 March 12, 1996 53,200 $7.25 March 12, 1996 2,500 $7.125 March 12, 1996 11,500 $7.375 March 13, 1996 8,000 $7.50 TOTAL 805,000 INDEX TO EXHIBITS EXHIBIT NUMBER EXHIBIT 1 Letter Dated March 13, 1996, from Stephen R. Hardis, Chairman and Chief Executive Officer of Eaton, to F. Edmir Bertolaccini, Chairman and Chief Execu- tive Officer of the Company. 2 Eaton Press Release, dated March 13, 1996. 3 Complaint filed by Eaton in the federal district court in the Eastern District of Michigan. 4 Eaton Press Release, dated March 14, 1996. 5 Eaton Press Release, dated March 18, 1996. EX-99 2 EXHIBIT 1 EXHIBIT 1 EATON CORPORATION Eaton Center Cleveland, OH 44114-2584 216/523-5000 [EATON LOGO] March 13, 1996 Mr. F. Edmir Bertolaccini Chairman and Chief Executive Officer CAPCO Automotive Products Corporation Rua Clark, 2061 P.O. Box 304 13279-400 Valinhos Sao Paulo, Brazil Dear Mr. Bertolaccini: As you are aware, we have expressed to you on a number of occasions over the past several months Eaton Corporation's strong interest in acquiring CAPCO Automotive Products Corporation. The logic of such a business combination is compelling. First, Eaton and CAPCO present an excellent business fit from the standpoint of product lines, manufacturing capability, geographic coverage, and developments in the worldwide motor vehicle industry. Vehicle manufacturers are increasingly seeking Tier 1 suppliers capable of partnering with the OEMs to provide products and services on a worldwide basis. Even suppliers such as CAPCO, with your excellent regional manufacturing base and talented management, will be at a serious and increasing disadvantage as the trend to global consolidation continues. Combined with Eaton, however, CAPCO would have access to the resources, scale and global automotive presence necessary to succeed in an era of increasingly pervasive global competition. Together, we could realize significant opportunities for expansion within Brazil, in the rest of the Mercosul trade area, and throughout the world. Second, our companies have had a long history of working together successfully. CAPCO's sales to Eaton as contract manufacturer of medium duty mechanical transmissions under our sales and technology licensing arrangements represent approximately 40% of CAPCO's revenues. CAPCO has been an excellent supplier to Eaton and, we trust, it has been a successful relationship for you as well. The relationship has been well-suited to address the market place of the past ten years. Moving forward, Eaton believes there are significant advantages to our having control of all of the elements required for competitive success in this important product line. We believe that the best approach to take full advantage of the new opportunities for the business in the industrializing world is to combine our technological and manufacturing capabilities and focus our joint resources on the worldwide market potential. Third, Eaton and CAPCO are an extraordinarily good fit from the perspectives of management and business philosophy. We share a common heritage of operating excellence. Your management has performed extremely well in meeting the varied and difficult challenges facing your business -- whether due to the cyclicality of the automotive business, the special circumstances of operating in Brazil, or the loss of revenues associated with cessation of Chevette production. You and your management team have shown resourcefulness and creativity in meeting these and other challenges, and have compiled a track record of performance of which you can be justifiably proud. As we have tried to make clear, the quality of CAPCO's management and employees is a major part of Eaton's interest in the company. Our sales in Brazil last year reached about $200 million. Brazil is a market of strategic importance to Eaton, both as a production source to satisfy worldwide demand and as a growing market for our products. Together, sales of Eaton and CAPCO this year could reach well over $300 million. Combined, our businesses would provide an extraordinary foundation for profitable growth in Brazil and Latin America. As you know, Eaton strongly desires to complete a negotiated merger with CAPCO. Such a merger will provide great benefits for both of our businesses, our employees, our customers and suppliers, and the communities that we serve. Therefore, I am making the following proposal which has been approved by the Board of Directors of Eaton and is hereby submitted to the Board of Directors of CAPCO. 1 - PRICE. We propose to acquire CAPCO in a transaction in which all shareholders will receive $11 per share in cash. We believe that $11 per share is a compelling price, representing about a 55% premium above the average closing price of the past 30 trading days. It fairly reflects the benefits we envision for the combination of our businesses, and will be financed from available internal cash sources. The transaction we are proposing has no significant contingencies and can be completed very quickly. 2 - CONTINUITY OF MANAGEMENT. We propose to offer all of CAPCO's management the opportunity to continue in their current positions, consistent with the discussions between our companies. We strongly desire the support of CAPCO's management in this matter and hope that our proposal will receive the prompt approval of CAPCO's Board of Directors. Of course, we would expect CAPCO to remain exempt from Michigan's anti-takeover statutes and to render its "Shareholder Rights Plan" inapplicable to this transaction. After several months of cordial discussions concerning a negotiated acquisition, we are extremely disappointed by the recent refusal of your Board to allow Eaton to continue these discussions with you. This is particularly so in light of our repeatedly expressed willingness to negotiate terms of a business combination which are mutually beneficial to your shareholders and ours. Thus, we have been left without any reasonable option other than to proceed as we are now doing. Accordingly, we are today announcing our proposal publicly so that all shareholders of CAPCO are made aware of it. In addition, we will shortly be providing you notice nominating a full slate for election as CAPCO directors at CAPCO's May 14, 1996 annual meeting of shareholders. You should also know that Eaton now owns approximately 7.3% of the outstanding common stock of CAPCO Automotive Products Corporation. While we would very much prefer to negotiate a merger supported by your Board, we reserve he right to go directly to your shareholders with a cash offer for CAPCO. Our objective is to work with you in a professional and constructive manner to complete this transaction so that its full potential can be realized and the best interests of all of our shareholders can be served. I am available to discuss these important matters with you at any time. Clearly, this situation has the highest priority for all of us at Eaton, and we look forward to hearing from you soon. Sincerely, /s//Stephen R. Hardis Stephen R. Hardis Chairman and Chief Executive Officer xc: Board of Directors of CAPCO Automotive Products Corporation EX-99 3 EXHIBIT 2 EXHIBIT 2 NEWS RELEASE EATON CORPORATION Eaton Center Cleveland, OH 44114-2584 216/523-5000 DATE March 13, 1996 CONTACT Renald M. Romain (216) 523-4736 - Media William E. Hartman (216) 523-4501 - Financial Community FOR RELEASE IMMEDIATELY EATON CORPORATION PROPOSES TO ACQUIRE CAPCO FOR $11 PER SHARE CLEVELAND, OH....Eaton Corporation announced today that it has sent a letter to the Chairman and to the Board of Directors of CAPCO Automotive Products Corporation proposing to acquire all of the outstanding shares of CAPCO for $11 a share in cash, about a 55 percent premium over the average closing price of the past 30 trading days. Eaton currently owns approximately 7.3 percent of CAPCO's outstanding shares. CAPCO manufactures medium duty truck transmissions at its facility near Sao Paulo, Brazil. The company has about 2,400 employees and had sales of $176 million in 1995. In explaining the strategic logic of a combination between the two companies, Eaton's Chairman and CEO, Stephen R. Hardis, cited: - The ideal business fit of the two companies from the standpoint of product lines, manufacturing capability and geographic coverage. He also cited developments in the worldwide motor vehicle industry, in which auto manufacturers are increasingly seeking suppliers capable of partnering on a worldwide basis, as a significant factor; - The long and successful working history between the two companies, noting that sales to Eaton account for 40 percent of CAPCO's annual revenues; - The quality of CAPCO's management; and, - The significance of Brazil and Latin America as key markets for Eaton's products. Under the proposal, CAPCO would become part of Eaton's Truck Components business, headed by Senior Vice President Thomas W. O'Boyle, and all CAPCO management would be given the opportunity to continue in their current positions. Hardis noted Eaton's strong desire to complete the acquisition. He indicated that the two companies had been engaged in discussion since last November, but that CAPCO's Board recently refused to allow Eaton to continue these discussions. As a result, Eaton has decided to publicly announce its proposal and is providing CAPCO notice that it is nominating a full slate for election as directors at CAPCO's May 14, 1996 annual meeting. The complete text of Hardis' letter to CAPCO Chairman F. Edmir Bertolaccini follows: "March 13, 1996 "Mr. F. Edmir Bertolaccini Chairman and Chief Executive Officer CAPCO Automatic Products Corporation Rua Clark 2061 P.O. Box 304 13279-400 Valinhos Sao Paulo, Brazil "Dear Mr. Bertolaccini "As you are aware, we have expressed to you on a number of occasions over the past several months Eaton Corporation's strong interest in acquiring CAPCO Automotive Products Corporation. The logic of such a business combination is compelling. "First, Eaton and CAPCO present an excellent business fit from the standpoint of product lines, manufacturing capability, geographic coverage, and developments in the worldwide motor vehicle industry. Vehicle manufacturers are increasingly seeking Tier 1 suppliers capable of partnering with the OEMs to provide products and services on a worldwide basis. Even suppliers such as CAPCO, with your excellent regional manufacturing base and talented management, will be at a serious and increasing disadvantage as the trend to global consolidation continues. Combined with Eaton, however, CAPCO would have access to the resources, scale and global automotive presence necessary to succeed in an era of increasingly pervasive global competition. Together, we could realize significant opportunities for expansion within Brazil, in the rest of the Mercosul trade area, and throughout the world. "Second, our companies have had a long history of working together successfully. CAPCO's sales to Eaton as contract manufacturer of medium duty mechanical transmissions under our sales and technology licensing arrangements represent approximately 40% of CAPCO's revenues. CAPCO has been an excellent supplier to Eaton and, we trust, it has been a successful relationship for you as well. The relationship has been well-suited to address the marketplace of the past ten years. "Moving forward, Eaton believes there are significant advantages to our having control of all of the elements required for competitive success in this important product line. We believe that the best approach to take full advantage of the new opportunities for the business in the industrializing world is to combine our technological and manufacturing capabilities and focus our joint resources on the worldwide market potential. "Third, Eaton and CAPCO are an extraordinarily good fit from the perspectives of management and business philosophy. We share a common heritage of operating excellence. Your management has performed extremely well in meeting the varied and difficult challenges facing your business -- whether due to the cyclicality of the automotive business, the special circumstances of operating in Brazil, or the loss of revenues associated with cessation of Chevette production. You and your management team have shown resourcefulness and creativity in meeting these and other challenges, and have compiled a track record of performance of which you can be justifiably proud. As we have tried to make clear, the quality of CAPCO's management and employees is a major part of Eaton's interest in the company. "Our sales in Brazil last year reached about $200 million. Brazil is a market of strategic importance to Eaton, both as a production source to satisfy worldwide demand and as a growing market for our products. Together, -2- sales of Eaton and CAPCO this year could reach well over $300 million. Combined, our businesses would provide an extraordinary foundation for profitable growth in Brazil and Latin America. "As you know, Eaton strongly desires to complete a negotiated merger with CAPCO. Such a merger will provide great benefits for both of our businesses, our employees, our customers and suppliers, and the communities that we serve. "Therefore, I am making the following proposal which has been approved by the Board of Directors of Eaton and is hereby submitted to the Board of Directors of CAPCO. "1 - PRICE. We propose to acquire CAPCO in a transaction in which all shareholders will receive $11 per share in cash. We believe that $11 per share is a compelling price, representing about a 55% premium above the average closing price of the past 30 trading days. It fairly reflects the benefits we envision from the combination of our businesses, and will be financed from available internal cash sources. The transaction we are proposing has no significant contingencies and can be completed very quickly. "2 - CONTINUITY OF MANAGEMENT. We propose to offer all of CAPCO's management the opportunity to continue in their current positions, consistent with the discussions between our companies. "We strongly desire the support of CAPCO's management in this matter and hope that our proposal will receive the prompt approval of CAPCO's Board of Directors. Of course, we would expect CAPCO to remain exempt from Michigan's anti-takeover statutes and to render its 'Shareholder Rights Plan' inapplicable to this transaction. "After several months of cordial discussions concerning a negotiated acquisition, we are extremely disappointed by the recent refusal of your Board to allow Eaton to continue these discussions with you. This is particularly so in light of our repeatedly expressed willingness to negotiate terms of a business combination which are mutually beneficial to your shareholders and ours. "Thus, we have been left without any reasonable option other than to proceed as we are now doing. Accordingly, we are today announcing our proposal publicly so that all shareholders of CAPCO are made aware of it. In addition, we will shortly be providing you notice nominating a full slate for election as CAPCO directors at CAPCO's May 14, 1996 annual meeting of shareholders. You should also know that Eaton now owns ap- proximately 7.3% of the outstanding common stock of CAPCO Automotive Products Corporation. While we would very much prefer to negotiate a merger supported by your Board, we reserve the right to go directly to your shareholders with a cash offer for CAPCO. "Our objective is to work with you in a professional and constructive manner to complete this transaction so that its full potential can be realized and the best interests of all of our shareholders can be served. I am available to discuss these important matters with you at any time. Clearly, this situation has the highest priority for all of us at Eaton, and we look forward to hearing from you soon. "Sincerely, /s/ Stephen R. Hardis Stephen R. Hardis Chairman and Chief Executive Officer xc: Board of Directors of CAPCO Automotive Products Corporation" -3- Eaton Corporation is a global manufacturer of highly engineered products which serve vehicle, industrial, construction, commercial and aerospace markets. Principal products include truck transmissions and axles, engine components, hydraulic products, electrical power distribution and control equipment, ion implanters and a wide variety of controls. Headquartered in Cleveland, the company has 52,000 employees and 150 manufacturing sites in 23 countries around the world. Sales for 1995 were $6.8 billion. -4- EX-99 4 EXHIBIT 3 EXHIBIT 3 UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION EATON CORPORATION, Plaintiff, vs. Civil Action No. 96- Hon. CAPCO AUTOMOTIVE PRODUCTS CORPORATION, FRANCISCO EDMIR BERTOLACCINI, HAROLD L. BOWMAN, DAVID A. BROCKWAY, C.E. CHEESBROUGH, THOMAS C. CLARKE, WILLIAM N. HARPER and JOSE ROBERTO MORATO, Defendants. / J. THOMAS LENGA (P16551) Attorney for Plaintiff CLARK HILL, P.L.C. 1600 First Federal Building Detroit, Michigan 48226 (313) 965-8886 Of Counsel: PAUL ROWE WACHTELL, LIPTON, ROSEN & KATZ 51 West 52nd Street New York, New York 10019 / COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF Plaintiff, by its undersigned attorneys, as its Complaint for declaratory and injunctive relief, alleges the following upon personal knowledge as to itself and its own acts, and upon information and belief as to all other matters. NATURE OF THE ACTION 1. This action arises out of plaintiff Eaton Corporation's ("Eaton") effort to acquire defendant CAPCO Automotive Products Corporation ("CAPCO"), a Michigan corporation. On March 13, 1996, plaintiff Eaton announced a proposal to acquire CAPCO at a price of $11.00 per share in cash, a premium of approximately 50% over the price of CAPCO's shares traded in the marketplace prior to the announcement. A copy of Eaton's letter proposal is annexed hereto as Exhibit A. 2. Despite the fact that Eaton's proposal represents an opportunity for the shareholders of CAPCO to sell their shares for cash at a substantial premium to the prices at which CAPCO has recently traded, the defendant directors of CAPCO have indicated their opposition to any sale of CAPCO and, in breach of their fiduciary duties, have left CAPCO's takeover defenses in place, thus blocking Eaton's proposal and preventing the public shareholders of CAPCO from deciding for themselves whether to accept Eaton's proposal. 3. Thus, in response to Eaton's previous acquisition proposals (and current proposal) CAPCO has kept in place the CAPCO "Shareholder Rights Plan," a type of corporate defensive mechanism that is sometimes called a "poison pill." The effect of the Rights Plan is that an acquiror such as Eaton cannot purchase more than 20% of CAPCO's shares directly from shareholders, without obtaining prior approval from the CAPCO board. The Rights Plan imposes financially unacceptable dilution upon any acquiror who purchases more than 20% of CAPCO's shares without such board approval. -2- 4. Eaton has accordingly brought this action in order to insure that CAPCO is not permitted to continue to impede Eaton's proposal, and to insure that CAPCO's shareholders are permitted to choose whether to sell their shares to Eaton or not. As alleged below, under the circumstances here, CAPCO's refusal to make the Rights Plan inapplicable to the Eaton proposal is unlawful and violates the fiduciary duties of CAPCO director defendants. 5. In addition, in connection with its March 13 offer Eaton is giving notice to CAPCO that it will nominate candidates to CAPCO's board of directors so that the public shareholders of CAPCO will have the opportunity to vote for a slate of candidates committed (subject to their fiduciary duties) to completing a merger with Eaton. CAPCO has already set a record date of March 20, 1996 for the 1996 CAPCO annual stockholders' meeting to be held May 14, 1996. If the CAPCO stockholders support the Eaton slate, all the incumbent directors of CAPCO can be defeated for re-election on May 14 and can be replaced by the Eaton nominees. Eaton seeks a declaration that the CAPCO board cannot alter or delay the meeting date now that a slate of Eaton nominees competing with the incumbents is being nominated. 6. Finally, CAPCO's public filings state that CAPCO believes that it has the ability to cause the Michigan Business Combination Act, Chapter 7A of the Michigan Business Corporation Act ("the Business Combination Act"), and the Michigan Control Shares Act, Chapter 7B of the Michigan Business Corporation Act (the "Control Shares Act"), to become applicable to CAPCO. The Business Combination Act prevents, for a -3- five year period, any merger between a company subject to its provisions and a company acquiring more than 10% of its shares except under onerous conditions, such as a 90% stockholder vote, absent board approval. Under the current circumstances, where Eaton has made a premium all cash proposal to acquire CAPCO, it would be a breach of fiduciary duty for CAPCO's board to now seek to have the Business Combination Act apply to CAPCO, while it has never done so previously. 7. The Control Shares Act imposes burdens and delay upon the ability of an acquiror such as Eaton to buy control of a corporation to which the Act applies, by restricting the circumstances under which the acquiror can obtain voting rights with respect to its shares. However, the Control Shares Act applies only to corporations that (in addition to meeting other criteria) own "substantial assets" in Michigan. As alleged below, CAPCO -- although incorporated in Michigan -- does not have substantial assets in Michigan. Accordingly, Eaton seeks a declaration from this Court that, contrary to CAPCO's public statements, CAPCO is not and cannot be subject to the provisions of the Control Shares Act. In the alternative, Eaton seeks a declaration that the Control Shares Act, if interpreted to apply to a corporation without substantial assets in Michigan, would be unconstitutional and invalid under the Commerce Clause of the United States Constitution. PARTIES AND JURISDICTION 8. Plaintiff Eaton Corporation is an Ohio corporation with its principal place of business in Cleveland, Ohio. Eaton is engaged in the manufacture and sale of -4- vehicle equipment and controls. In 1995, Eaton had revenues of approximately $6 billion. Eaton shares are traded on the New York Stock Exchange ("NYSE"). Eaton's market capitalization is approximately $4.5 billion. Eaton is the beneficial owner of approximately 800,000 shares of CAPCO, representing more than 7% of CAPCO's shares. 9. Defendant CAPCO is incorporated under the laws of Michigan. CAPCO's principal place of business is in Valinhos, State of Sao Paulo, Brazil. CAPCO's principal executive offices in the United States are located in South Bend, Indiana. 10. CAPCO has been a public company since mid-1994. Previous to that time it was an indirect wholly-owned subsidiary of Clark Equipment Company. CAPCO has approximately 11 million common shares outstanding, which are traded on the NYSE. When initially sold to the public in mid-1994, CAPCO's shares were priced at $12 per share, but the stock price has since declined substantially. On March 12, 1996, the closing price for CAPCO's shares traded on the NYSE was $7.50. CAPCO has approximately 1,600 shareholders of record. 11. The individual defendants constitute the board of directors of CAPCO. Defendants Bertolaccini, Cheesbrough and Morato are employees of CAPCO. The remaining director defendants are each former employees of Clark Equipment Company. Collectively, CAPCO's directors own less than 1% of the shares of CAPCO. -5- 12. Plaintiff is a citizen of Ohio. None of the defendants is a citizen or resident of Ohio. Defendants Bertolaccini and Morato are aliens; defendant Bowman is a citizen of Arizona; defendant Brockway is a citizen of Michigan; defendant Cheesebrough is a citizen of Michigan; defendant Clarke is a citizen of Maryland; and defendant Harper is a citizen of Indiana. CAPCO is a citizen of Michigan and has its principal place of business in Brazil. Accordingly, complete diversity exists pursuant to 28 U.S.C. Section 1332. 13. This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. Sections 1331 (federal question) and 1332 (diversity), and pursuant to 28 U.S.C. Section 1367 (supplemental jurisdiction). The matter in controversy herein exceeds the sum or value of $50,000.00, exclusive of interest and costs. 14. Venue is proper in this judicial district pursuant to 28 U.S.C. Section 1391(a)(3) and (b)(3), and under the provisions of Section 1391(d). BACKGROUND OF THE ACTION 15. Eaton is a substantial customer of CAPCO. According to CAPCO's public filings, "[a]pproximately 30% of [CAPCO's] revenues in 1994 were derived from sales into the United States to Eaton pursuant to a long-term manufacturing arrangement entered into in 1987 and extended in February 1994." In November 1995, a representative of Eaton contacted defendant Bertolaccini, the chief executive officer of CAPCO, and requested the opportunity to meet with Bertolaccini to discuss a potential acquisition by Eaton of CAPCO. A meeting was scheduled. -6- 16. In the interim, lawyers and investment bankers representing CAPCO contacted Eaton and informed Eaton that a prerequisite to any acquisition discussions would be Eaton's agreement to maintain the confidentiality of any non-public information CAPCO made available to Eaton, and Eaton's agreement not to make an unsolicited acquisition offer, under any circumstances, for a three-year period. Although Eaton was willing to agree to the proposed confidentiality provisions, Eaton was unwilling to agree to prohibit itself for a three-year period from making any acquisition offer. 17. Following Eaton's refusal to sign the "standstill" agreement in the form insisted upon by CAPCO's professional advisors, a representative of Eaton contacted defendant Bertolaccini in early December 1995. In the course of the conversation, Bertolaccini expressed disappointment that, in essence, discussions between the two companies had met an apparent obstacle. Bertolaccini invited representatives of Eaton to visit CAPCO's plant in Brazil and to meet CAPCO's operational management there. 18. In January 1996, representatives of Eaton visited CAPCO's plant in Brazil pursuant to Bertolaccini's invitation, and were introduced to additional members of CAPCO's senior management. 19. In late January, Eaton contacted Bertolaccini to arrange a meeting in the United States for the purpose of making an acquisition proposal. Bertolaccini agreed to the meeting, which took place on February 3, 1996 in Orlando, Florida. At this meeting, Eaton told Bertolaccini that Eaton was prepared (subject to obtaining approval -7- from the boards of both companies, including the CAPCO board's agreement to make the CAPCO poison pill and the Control Shares Act inapplicable to the transaction) to offer $10 per share cash for all shares of CAPCO. Eaton also indicated that it was prepared to consider improvements in the terms of its proposal once negotiations were commenced with CAPCO. 20. Bertolaccini informed Eaton on February 3 that CAPCO's board would not accept an offer priced at $10 per share. 21. On February 14, 1996, Eaton received a telephone call from CAPCO's financial and legal advisors informing Eaton that the CAPCO board was disappointed with the progress of the discussions, and that a $10 per share offer was not a basis for further discussions. 22. On March 6, 1996, Eaton again contacted CAPCO and repeated its interest in negotiating a transaction at $10 per share. 23. On March 8, Eaton was informed by representatives of CAPCO that the CAPCO board had met and rejected Eaton's offer, and had determined that CAPCO was not for sale. 24. Eaton was disappointed by CAPCO's reversal of its previous interest in pursuing a business combination and by its adoption of a "not for sale" posture. On March 13, 1996, Eaton delivered the attached letter proposal to CAPCO, which was publicly disclosed, and announced it would nominate its own slate of candidates in -8- connection with the election of directors at CAPCO's 1996 annual meeting. Subject to the terms and conditions set forth in the letter, Eaton is offering $11.00 per share for CAPCO. FIRST CLAIM FOR RELIEF 25. Plaintiff repeats and realleges the allegations contained in paragraphs 1 through 24. 26. On March 8, 1996, the CAPCO board rejected Eaton's previous proposal for a merger transaction and determined that it would not entertain any offers for the purchase of CAPCO. This decision is unsupported by a legitimate business rationale, and contradicts representations and acknowledgments previously made to Eaton by representatives of defendant. 27. While a "poison pill" rights plan is lawful and appropriate under certain circumstances, the CAPCO board has breached and is breaching its fiduciary obligations by using the Rights Plan to stand in the way of Eaton's offer under the circumstances here, since the CAPCO defendants cannot legitimately believe that Eaton's offer is unfair and cannot demonstrate that Eaton's offer of $11.00 per share is unfair. Thus, the Eaton offer represents an approximate 50% premium over the previous trading price of CAPCO's stock on the NYSE; and Eaton has not engaged in, and is not threatening to engage in, any unfair or coercive takeover tactics. -9- 28. If defendants are not declared to be in breach of their fiduciary duties by failing to redeem the CAPCO Shareholder Rights ("poison pill"), and, if defendants are not enjoined from using the Rights to frustrate Eaton's proposal, Eaton will suffer irreparable injury in that Eaton will lose the unique opportunity to acquire CAPCO. The public shareholders of CAPCO will also lose the unique opportunity to sell their shares to Eaton at a premium price. 29. Plaintiff has no adequate remedy at law. SECOND CLAIM FOR RELIEF 30. Plaintiff repeats and realleges the allegations contained in paragraphs 1 through 29 above. 31. The entire CAPCO board must stand for re-election at the 1996 CAPCO annual stockholders' meeting. Defendants are aware that, when the shareholders of CAPCO are given the opportunity to vote for the nominees of Eaton (and thus in support of Eaton's proposal) rather than the incumbents, the strong likelihood is that the Eaton nominees will be elected. The individual incumbent directors, as a group, currently own less than one percent of the shares of CAPCO, while plaintiff owns more than 7% of such shares. 32. Defendants are considering changing the schedule that is currently in place for the CAPCO 1996 annual meeting. Any delay of such meeting, or any change in the existing record date, threatens to deprive plaintiff of the unique opportunity to take -10- control of the CAPCO board on May 14, 1996. There is no reason for any change in the current schedule (which was set by the CAPCO board after it was informed of Eaton's interest in acquiring the company) other than delaying Eaton's ability to win the election contest and/or increasing the incumbent CAPCO board's chances of defeating the Eaton acquisition proposal. Any such change, motivated by such an improper purpose, would violate defendants' fiduciary duties. Eaton is entitled to a "level playing field" in the election contest. Any delay beyond the May 14 meeting date will irreparably damage Eaton and impede its efforts to acquire CAPCO, by damaging its chances of prevailing in a proxy contest and impeding the free exercise of the corporate franchise that Eaton and the other shareholders of CAPCO are entitled to as a matter of equity. 33. Plaintiff has no adequate remedy at law. THIRD CLAIM FOR RELIEF 34. Plaintiff repeats and realleges the allegations contained in paragraphs 1 through 33 above. 35. The Michigan Control Shares Act, Chapter 7B of the Michigan Business Corporation Act, M.C.L. Section 450.1790- 99, provides that an acquiror without board approval of more than 20% of the shares of a company subject to the Act shall not have voting rights with respect to such shares unless, at a meeting called pursuant to the provisions of the Act, the other shareholders by majority vote determine to confer such voting rights upon the acquiror. The Act thus functions as significant deterrent to -11- unwelcome share acquisitions, since a prospective acquiror may be denied the very valuable voting rights that an acquiror normally seeks to obtain by purchasing shares. 36. The Control Shares Act applies only to corporations that, among other requirements, have "substantial assets" in the State of Michigan or have their principal place of business or executive offices there. CAPCO does not have its principal place of business or executive offices in Michigan. Defendant CAPCO does not have "substantial assets" in the State of Michigan. All of CAPCO's operating assets, including all of its manufacturing operations, are located in Brazil. Aside from approximately 2,300 square feet of leased office space in Indiana, CAPCO does not have any U.S. assets other than cash and receivables. In particular, CAPCO has no tangible assets in Michigan. Nonetheless, defendants have declared in public documents distributed to investors that they have the ability to cause CAPCO to be covered by the provisions of the Control Shares Act. 37. An actual controversy, within the meaning of 28 U.S.C. Section 2201 and the United States Constitution, Art. III, exists between plaintiff and defendants concerning the applicability of the Control Shares Act and the Business Combination Act to CAPCO. 38. If the Control Shares Act is construed to apply to CAPCO despite the fact that its only U.S. offices are in Indiana, all its manufacturing facilities are in Brazil, and it does not report ownership of any assets in Michigan in its public filings, then the Act as applied to extend coverage to CAPCO is an unconstitutional burden upon -12- interstate commerce that violates the provisions of the Commerce Clause of the United States Constitution, Art. I, Section 8. The mere fact that CAPCO is incorporated under the laws of the State of Michigan is an insufficient basis for the burdens and regulations of interstate commerce imposed by the Act, in the absence of the subject corporation having "substantial assets" within Michigan. The interstate commerce being burdened is Eaton's interstate purchase of CAPCO's shares for millions of dollars. 39. CAPCO is not currently subject to the Michigan Business Combination Act, M.C.L. Sections 450.1775-84. That statute provides that an acquiror of more than 10% of a subject company's shares may not, except pursuant to a 90% vote of all shareholders, and a two-thirds vote of shareholders other than those defined as "interested" under the statute, consummate a merger with the subject company for a five-year period. Defendants have declared in public documents distributed to investors that they have the ability to cause CAPCO to be covered by the provisions of the Business Combination Act. Any action by CAPCO's board of directors to cause CAPCO to now become subject to the provisions of the Business Combination Act would be a breach of fiduciary duty, since there can be no lawful, legitimate purpose served by CAPCO choosing to become subject to the statute as a reaction to Eaton's proposal, which is at a fair price and does not rely on any unfair or coercive tactics. 40. The application of either the Business Combination Act or the Control Shares Act, or both, will irreparably harm Eaton and its efforts to acquire control of CAPCO by imposing onerous burdens upon Eaton's ability to acquire shares of -13- CAPCO and/or to consummate a merger with CAPCO, all in violation of defendants' fiduciary duties and the United States Constitution. 41. Plaintiff has no adequate remedy at law. WHEREFORE, plaintiff demands judgment against defendants: A. Declaring and decreeing that defendants have breached their fiduciary duties by rejecting Eaton's acquisition proposals and by maintaining the "poison pill" shareholder rights plan in place in response to Eaton's merger proposal; B. Requiring defendants to redeem the CAPCO Shareholder Rights pursuant to their terms with respect to the Eaton merger proposal; C. Enjoining defendants from taking steps to alter, or altering, the existing May 14, 1996 annual meeting date or the March 20, 1996 record date for such meeting; and from taking steps to adjourn, or adjourning, the May 14, 1996 meeting (except pursuant to a majority vote of the shares present or voting by proxy at such meeting); D. Declaring and decreeing that CAPCO is not subject to the provisions of the Michigan Control Shares Act, Business Corporation Act Section 7B, M.C.L. Sections 450.1790-99 inclusive, or, in the alternative, declaring and decreeing, that application of said statute to CAPCO would violate Art. I, Section 8 of the United States Constitution, and enjoining defendants, temporarily, preliminarily, and permanently, from enforcing the provisions of said statute with respect to CAPCO; -14- E. Declaring and decreeing that any action by the board of directors of CAPCO to cause CAPCO to become subject to the provisions of the Michigan Business Combination Act, M.C.L. Sections 450.1775-84, would be a breach of fiduciary duty, and enjoining defendants, temporarily, preliminarily and permanently, from enforcing the provisions of said statute with respect to CAPCO; and F. Granting such other and further relief as the Court may deem just and proper. CLARK HILL P.L.C. By: /s/ J. Thomas Lenga (P16551) 1600 First Federal Building Detroit, Michigan 48226 (313) 965-8300 Attorneys for Plaintiff, Eaton Corporation Date: March 13, 1996 -15- EX-99 5 EXHIBIT 4 EXHIBIT 4 NEWS RELEASE EATON CORPORATION Eaton Center Cleveland, OH 44114-2584 216/523-5000 DATE March 14, 1996 CONTACT Renald M. Romain (216) 523-4736 - Media William E. Hartman (216) 523-4501 - Financial Community FOR RELEASE IMMEDIATELY EATON CORPORATION COMMENCES LITIGATION AGAINST CAPCO IN MICHIGAN FEDERAL COURT CLEVELAND, OH....Eaton Corporation announced today that it had commenced litigation against CAPCO Automotive Products Corporation in the federal district court in Detroit, Michigan in connection with Eaton's proposal to acquire all of CAPCO outstanding common stock for $11 per share in cash. Eaton's complaint seeks to require CAPCO to redeem its Shareholder Rights Plan and to prevent CAPCO from changing the May 14, 1996 date for its annual meeting of stockholders or the March 20 record date for that meeting, and requests the court to declare that CAPCO is not subject to the provisions of certain Michigan anti-takeover statutes. The suit also seeks to prevent CAPCO from acting to become covered by these statutes. Eaton Corporation is a global manufacturer of highly engineered products which serve vehicle, industrial, construction, commercial and aerospace markets. Principal products include truck transmissions and axles, engine components, hydraulic products, electrical power distribution and control equipment, ion implanters and a wide variety of controls. Headquartered in Cleveland, the company has 52,000 employees and 150 manufacturing sites in 23 countries around the world. Sales for 1995 were $6.8 billion. EX-99 6 EXHIBIT 5 EXHIBIT 5 NEWS RELEASE EATON CORPORATION Eaton Center Cleveland, OH 44114-2584 216/523-5000 DATE March 18, 1996 CONTACT Renald M. Romain (216) 523-4736 - Media William E. Hartman (216) 523-4501 - Financial Community FOR RELEASE IMMEDIATELY EATON CORPORATION ANNOUNCES TENDER OFFER FOR CAPCO CLEVELAND, OH....Eaton Corporation announced today that it will be commencing a cash tender offer at a price of $11 per share for all of the outstanding shares of common stock, and the associated preferred stock purchase rights, of CAPCO Automotive Products Corporation. In addition, Eaton also said that after consummation of the tender offer it intends to acquire any remaining CAPCO shares in a cash merger at the same price as paid in the tender offer. Eaton Corporation is a global manufacturer of highly engineered products which serve vehicle, industrial, construction, commercial and aerospace markets. Principal products include truck transmissions and axles, engine components, hydraulic products, electrical power distribution and control equipment, ion implanters and a wide variety of controls. Headquartered in Cleveland, the company has 52,000 employees and 150 manufacturing sites in 23 countries around the world. Sales for 1995 were $6.8 billion. -----END PRIVACY-ENHANCED MESSAGE-----