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WITH IOS, LTD. Commonwealth United, headquartered in Beverly Hills, California was intro duced to IOS, Ltd. ("IOS”) through a former law partner of a firm which had represented a subsidiary of Commonwealth prior to this subsidiary being purchased by Commonwealth. IOS thereafter became the catalyst in arranging all the following transactions: In January 1969, F.O.F. Proprietary Fund, an IOS affilate; Investors Bank Luxembourg, also an IOS affiliate ; Banque Rothschild (of France); and Guiness Mahon & Co., Ltd. (England) co-managed the placement of $30,000,000 of 534 % debentures issued by Commonwealth Overseas N.V., a wholly-owned foreign subsidiary of Commonwealth. Subsequently, in March 1969, the same grup of bankers arranged a short-term loan of $10,000,000 to Commonwealth at the then prime Eurodollar rate of 842%. As a fee for both these placements, this banking group received warrants to purchase 150,000 shares of common stock at $17.25 per share; of this amount, the affiliates of IOS acquired 112,500 of these warrants. Comparable warrants were then selling at approximately $8 on the American Stock Exchange.

The company was unable to obtain additional financing elsewhere and in order to make a $10,000,000 escrow deposit required on June 30, 1969 under an existing contract to purchase the Rexall operations of Dart Industries, a commitment for a loan in that amount was obtained from FOF in consideration of a five year note, to be issued by an affiliate of Commonwealth, convertible into common stock at $10 per share, and guaranteed by Commonwealth, bearing interest at the then prime Eurodollar rate of 1034%. On June 30, 1969, the terms of this financing were finalized and the money was placed in escrow for and pending completion of the Rexall acquisition. The contract to purchase Rexall was term,inated, but had this escrow fund been needed for the acquisition, Commonwealth would have been obligated to issue to FOF 300,000 shares of common stock and warrants for 250,000 shares of common stock (exercisable to November 15, 1978 at $17.25 per share) and to pay IOS $1,350,000 in fees and costs.

In addition, Commonwealth undertook, if so requested by IOS, during a period of thirteen months after the closing of this contract to make an offer to exchange the $10,000,000 note described above and the $30,000,000 of Commonwealth Overseas Convertible Debentures for $40,000,000 of new debentures bearing interest at 77%

After the termination of the contract to purchase Rexall, the company was unable to arrange the satisfactory long or short-term financing required to maintain operations and meet maturing obligations. On July 25, 1969, the company sought additional financial and other assistance from IOS. From July 31, 1969 to October 27, 1969, IOS provided the company with interim financial assistance aggregating approximately $9,000,000. Said borrowings were required to be collateralized by the shares of the Seeburg Corporation of Delaware, a subsidiary of CUC, and certain other company assets having an aggregate net book value in excess of $40,000,000.

On October 3, 1969, the SEC filed a civil action against CUC in the District of Columbia alleging that a February 1969 registration statement and June 24, 1969 proxy statement were false and misleading, partly because they omitted to state fully and accurately certain proposed financing arrangements with IOS and its affiliates. The company consented to this injunction when issued and was enjoined from further filing false and misleading documents with the Commission. On August 1, 1969, the SEC ordered the suspension of trading in the company's securities. Similar action was taken by the American Stock Exchange.

In connection with the aforementioned interim financing, and by reason of its substantial involvement in the company, IOS also extended management assistance to Commonwealth. Three IOS designees, Howard Stamer, Mortion I. Shiowitz and Robert F. Sutner were elected to the Board of Directors in August 1969, and Stamer and Schiowitz constituted two-thirds of the Executive Committee of Commonwealth United until October 27, 1969.

In consideration of the services then provided to the company, in September 1969, the Board of Directors agreed to grant Shiowitz and Sutner options to purchase 300,000 shares of common stock at $2 per share. This right was later assigned to IOS by Shiowitz and Sutner, who were paid by IOS for their services at Commonwealth. Also in September 1969, the Board of Directors agreed to grant Stamer and his law partner, Robert Haft, similar options to purchase 75,000 shares each.

In addition to the option discussed above, and in further consideration of services rendered for the period of July 31, 1969, to October 27, 1969, the company agreed in September 1969 to pay Stamer $65,000 per annum on a pro rata basis for the amount of time he spent with the company. Sutner and Shiowitz received their expenses for the managerial and consulting services they are rendering to the company.

On October 27, 1969, CUC entered an agreement with IOS and Exeter International Corporation, (“Exeter”), a Boston financial holding company, pursuant to which Exeter agreed to cause a new bank loan in the amount of $3,000,000 to be made to the company. Exeter also agreed to provide managerial and financial assistance to Commonwealth but there was no commitment on the part of Exeter to stay in the company for any definite period of time. In consideration of this agreement Commonwealth agreed to give Exeter warrants to purchase 500,000 shares of common stock at $2 per share and 500,000 at $8, and agreed to pay $3000 per week plus expenses under a five year management consulting agreement. In addition Commonwealth was obligated to pay IOS similar warrants for an aggregate of 1,000,000 shares if $17,500,000 were not paid back to IOS by January 27, 1970 in reduction of the company's aggregate indebtedness to IOS and its affiliates.

The Commission's staff learned of these agreements and arrangements in connection with the company's preliminary proxy material filed in October 1969. At the time the staff raised serious questions about the accuracy of the proxy and the compensation to be received by IOS and Exeter. This caused the company to expand substantially the information disclosed in the proxy and reduce the compensation to be received under the agreements described above. As part of this reduction, IOS agreed to forego the warrants to purchase 1,000,000 shares which it was to receive under the Exeter agreement.

As a result of the entrance of the Exeter group, IOS is giving up active management of the company, while maintaining two representatives on the Board of Directors.

FOREIGN FINANCING OF THE TENDER OFFER BY LIQUIDONICS FOR UMC CORP. The tender offer by Liquidonics for UMC Corp. apparently had its genesis when, in the early part of June 1968, it came to the attention of Liquidonics that 805,700 shares of UMC Corp. held by United Corp. were for sale. Liquidonics initially did not actively seek the purchase of these shares since it did not have the cash available; later, however, it decided to make a private placement of approximately $25,000,000 worth of convertible debentures and use the proceeds to pay for these shares. Thereafter Liquidonics purchased an additional 135,600 shares on the open market. Subsequently, Liquidonics decided to make a cash tender offer for sufficient additional shares to enable it to acquire control of UMC. On January 31, 1969, the Board of Directors of Liquidonics authorized the company to make an offer to purchase 1,158,700 shares of UMC at $30 per share, to give the company an expected 40% control of UMC.

On February 5, 1969 Liquidonics made a filing pursuant to Section 14d of the Securities Exchange Act of 1934 indicating a public offer to purchase at a minimum 1,158,700 shares of common stock of UMC Industries, Inc. at $30 cash per share net, which was to expire on February 14, 1969, unless extended.

The offer stated that the funds required to purchase the shares covered by it were to be obtained pursuant to a Credit Agreement between Liquidonics and Banque de Paris et des Pays-Bas (Suisse) S.A. Of Geneva, Switzerland dated February 3, 1969, under which Liquidonics was entitled to borrow up to 40 million dollars U.S., of which 27 million was to become due on October 31, 1969 and the balance of 13 million was to become due on February 27, 1970. The loan was conditioned upon Liquidonics obtaining, pursuant to the offer, at least the 1,158,700 shares covered by the offer, which would constitute not less than 22% of the then outstanding shares of UMC. The offer listed Ladenberg, Thalmann & Co. and Paribas Corporation as dealers-managers in connection with the offer. Irving Trust Co. was listed as the tender agent.

The offer stated that the interest rate on the loan was to be 842% per year and, in addition, disclosed that Liquidonics had paid the bank a commitment fee of $185,000 and would, upon the making of the loan, pay an additional placement fee of $2,944,750 and issue to the lender, or persons designated by the lender, warrants entitling the holders thereof to purchase a total of up to

1 The S.D.N.A. Guide indicates that Paribas is the U.S. affiliate of Banque de Paris.

75,000 shares of the common stock of Liquidonics at a price of $75 per share through February 28, 1974, subject to certain adjustments. Liquidonics also agreed to pay an additional placement fee of $175,125 at the time of payment of the notes which were to mature on October 31, 1969. After deducting from the 40 million dollar loan the amount of the commitment fee and the portion of the placement fee payable upon the making of the loan, the net proceeds available for the offer were to be $36,870,250.

The shares purchased by Liquidonics pursuant to the offer through the use of the proceeds of the loan and other available corporate funds were to be pledged to the bank as security for the loan together with certain additional collateral comprised of securities of a subsidiary of Liquidonics. The offer further reported that Liquidonics (together with a wholly owned Netherland Antilles subsidiary) owned beneficially 941,300 shares of common stock of UMC which was approximately 18% of the outstanding stock. The offer advised that, assuming the purchase by Liquidonics of 1,158,700 shares pursuant to the offer, it would then own approximately 40% of all the UMC common stock outstanding and that it intended to vote such shares with a view to obtain control of UMC.

Pursuant to this offer, 2,300,000 shares of UMC stock were actually tendered. On February 25, 1969 Liquidonics announced that it would purchase 1,674,900 of the shares tendered, which required additional financing. Liquidonics then obtained a loan from Irving Trust Company for $15,000,000 after Banque de Paris agreed to subordinate its position in the UMC shares. The loans made to Liquidonics were not collateralized to the extent which would have been required had the loans been made by domestic lenders. The first $27,000,000 of the bank loans came due on October 31 and was not paid. Under the terms of the loan agree ments, the UMC shares, representing 51% control of that company, stood as collateral for the loans.

On December 29, 1969, Liquidonics announced that it sold its entire interest in UMC to Overseas International Corp., S. A., Luxembourg, a subsidiary of the Banque de Paris for $57.8 million, representing a $16.6 million loss. Liquidonics stated that it needed the money from the sale to repay short-term loans that had been used to finance the aforementioned tender offer for the UMC shares. It is obvious that control of UMC has shifted to the Banque de Paris, however it is not clear whether the Banque de Paris has purchased the stock for itself as principal or is acting as an agent for undisclosed interests. It remains a possibility that some or all these shares could be sold by the Banque de Paris, with possible adverse consequences to the minority stockholders.



On Monday, September 22, 1969, Gulf and Western Land Corporation (“Land") issued a press release stating its intention to purchase 400,000 shares of the $1,303,242 outstanding shares of the common stock of Roosevelt Raceway (“Roosevelt”) by means of a public tender offer at a net cash price of $46.50 per share. At the time of Land's announcement, Madison Square Garden Corp. ("Madison”) owned approximately 344,300 shares of Roosevelt. Madison, aided by other parties (Goldman Sachs, and Harbill Associates), immediately began to purchase and induced others to purchase Roosevelt shares on the AMEX.

By an amendment dated September 26 to its previous Schedule 13D filing, Madison disclosed that it had an agreement in principle with Goldman, Sachs & Co. whereby that firm and certain of its institutional clients would hold for one year up to 120,000 shares of Roosevelt stock purchased by them. At the end of the year, the purchasers would have the right to "put" the stock to Madison either for cash, in the amount of 120% of their purchase price, or for Madison stock. Madison has not amended its Schedule 13D to reflect whether this agreement in principle was ever consummated or acted upon. However, in a complaint filed in October in Federal court, the Commission alleged that on September 24, 1969, Irving Felt, Chairman and President of Madison, offered Goldman Sachs an arrangement whereby it and certain institutional clients could purchase on the AMEX a substantial number of shares of Roosevelt and hold them for one year, at which time they would have an option to “put” such shares to Madison at a price equal to 120% of the purchase price. It was further alleged that, as a result of this offer, Goldman Sachs immediately undertook to locate persons who would participate in the acquisition, and by September 25 had lined up seven foreign institutional investors. Finally, it was alleged that, on September 25, Goldman Sachs purchased 18,000 shares of Roosevelt on the AMEX for these investors, and additional shares were purchased on subsequent dates. During the period of the tender offer, the price of Roosevelt rose as a result of these and other purchases, and public investors were dissuaded from tendering their shares to Land,

On October 7, the date following the filing of the complaint by the Commission, Madison announcd the acquisition of additional shares of Roosevelt on the AMEX, bringing its total holdings to 431,930 shares. It also indicated that corporate funds used to purchase shares since the announcement of Land's offer had been replaced by a loan of $2,500,000 from the Banque de 1,Union Parisienne of Paris. The loan has an interest rate of 1212% and matures initially on April 7, 1970; it is secured by Roosevelt stock and other securities in such a manner that the market value of this stock is always equal to 200% of the outstanding principal amount of the loan. In addition, Madison granted the lender an option to purchase 20,000 of its shares.

On November 17, Madison filed an amendment to its Schedule 13D indicating that it has begun discussions with Land concerning the possibility of a point enterprise with regard to their separate holdings of Roosevelt.



Resorts International, Inc. (“Resorts”), whose executive offices are located at 375 Park Avenue, New York, New York, was until June, 1968, named Mary Carter Paint Company. It was incorporated in Delaware on October 24, 1958. Resorts common stock is traded on the American Stock Exchange (“AMEX"). As a result of a series of corporate changes, Resorts has evolved into a company primarily engaged in operating resort facilities. In conjunction with six subsidiaries, Resorts conducts operations on two islands in the Bahamas which include gambling activities (the primary source of Resorts' income), the ownership and management of hotels and restaurants, and real estate development and sale,

On February 18, 1969, Reports mailed proxy soliciting material to its shareholders requesting the authorization of an additional 20,000,000 shares of the company's Class A common stock, and the confirmation and approval of two agreements to purchase large blocks of Pan American World Airways, Inc. (Pan Am”) common stock from Gulf and Western Industries, Inc. ("G&W”) and from the Chase Manhattan Bank N.A. (“Chase Bank”) as trustee for 123 employee benefit trusts. Pan Am had 34,044,718 shares outstanding at the time of this mailing. The Resorts agreement with G&W, dated January 9, 1969, provided, in pertinent part, for Resorts to purchase 900,000 shares of Pan Am for $16,000,000 and 500,000 shares of Resorts Class A common. The agreement between Resorts and Chase Bank, dated February 7, 1969, provided for the purchase by Resorts of 1,500,000 shares of Pan Am common for $15,000,000 principal amount of 5% subordinated twenty-five year notes and 15 year warrants to purchase 3 million shares of Resorts Class A common, half exerciseable at $40 per share and half exerciseable at $60 per share. Both agreements required Resorts to obtain shareholders approval on or before April 12, 1969.

The Commission conducted an investigation into the circumstances surrounding this agreement to purchase a large block of stock of Pan Am. While we were thwarted in our injuiry with respect to determining the extent of the ownership of Resorts by foreign financial entities because of secrecy laws we did develop information which indicated that the company had engaged in certain violative conduct. As a result on March 31, 1969, the Commission filed a complaint against Resorts alleging violation of certain proxy rules in the aforementioned solicitation. Resorts entered into a consent judgment to this complaint which in effect, stipulated that it would not vote proxies previously received and would include all pertinent and required information in all future proxy materials to be distributed. On the same day, Resorts announced by separate agreement with G&W and the Chase Bank, that it would proceed to re-solicit proxies from stockholders for the approval of the purchase of one-half of the amount of Pan Am stock originally contemplated. Resorts reaffirmed its intention not to seek control of Pan Am or engage in a proxy contest or tender for additional shares. On April 14, 1969, stockholders of Resorts approved this new agreement to purchase 1,200,000 shares of Pan Am.



On July 23, 1969, Tracy Investment Company, whose sole stockholder is Kirk Kerkorian, published a tender offer to purchase 1,000,000 shares of the common stock of Metro-Goldwyn-Mayer Inc. ("MGM") at $35 per share. The price of MGM's common stock on July 18 was 2714 per share. Originally, the financing for this tender offer was to be supplied in major part by a loan of $30,000,000 from a subsidiary of Transamerica Corporation. However, MGM obtained a preliminary injunction enjoining the transaction as then financed on the ground that Transamerica was affiliated with United Artists Corporation, a major competitor of MGM, and that the loan arrangement would violate Section 7 of the Clayton Act because of the possibility of Transamerica's ultimate control over MGM.

On August 4, 1969, Tracy Investment Company filed with the Commission an amendment to its original tender offer reporting a change in the financing. Under these new arrangements, Tracy Investment Company obtained $20,000,000 in Eurodollars from Burkhardt & Co., a German bank, and $12,000,000 in Eurodollars from Burston & Texas Commerce Bank Ltd., a British bank. Both loans were made at the current prime Eurodollar rate of 872% and were secured by pledges of securities in the amount of 150% of the loan principal. Four days following this filling, Tracy Investment Company announced that it would purchase an additional 740,000 shares of MGM stock; the source of funds for the purchase of these additional shares being a $30,000,000 Eurodollar loan from Burkhardt.

MGM filed suit seeking to enjoin this tender offer, (MGM v. Transamerica) 1 contending that this offer violated Regulations T and G promulgated under Section 7 of the Securities Exchange Act of 1934 and therefore the plan of financing for the tender offer was illegal. MGM contended that these loans were not secured by collateral five times the value of the loan and Tracy Investment Company was receiving credit in excess of the loan value of the collateral as prescribed for purchasing securities on margin. Judge Tenney of the Southern District of New York disagreed, stating that Regulation G is not applicable to foreign lending institutions; among other things, he noted that the regulation requires lenders subject thereto to register with the Federal Reserve Bank in whose district they are located and that no such district exists outside the United States.

The court stated that Regulation T was also not applicable as there was no showing that the foreign banks were broker-dealers within the confines of the 1934 Aat.




Bath Industries (“Bath") is a diversified corporation with headquarters in Milwaukee, Wisconsin. It is a major defense contractor, as its principal business for the past thirty years has been the construction of destroyers for the United States Navy. Bath has 2,364,168 outstanding common shares and 870,465 outstanding preferred shares.

The crux of this problem, which is related in a recent decision of the U.S. District Court for Wisconsin ” concerns the attempted takeover of Bath's Board of Directors by a dissident group of minority shareholders. In August 1968, Ernest J. Blot, a director of Bath, expressed his view to selected other board members and interested parties that he would like to appoint a new chief executive officer of the company for the purpose of changing certain managerial policies. He was joined by a group including individuals and the following insti. tutions: Madison Fund, Inc., a closed-end investment company registered with the Commission ; MAD International, Inc., a Swiss Investment company associated with the Madison Fund; Hambro American Bank and Trust Co., a New York banking corporation which is 50% owned by Hambros Bank, Ltd., a merchant banking corporation with principal offices at London, and Banque de Paris et des Pays-Bas (Swiss).

At some point in 1969, upon the direction of Mr. Blot, several of the afore. mentioned parties undertook a plan to pool their voting interest in Bath stock, to acquire additional shares and to obtain the votes of other large shareholders for the purpose of electing a new chief executive officer. Throughout this period,

1 CCH Federal Securities Law Renorter-Paragraph 92471. 2 Bath Industries v. Blot (E.D. Wis., Nov. 3, 1969).

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