In the Matter of COOPER LABORATORIES, INC.

3145 Porter Drive, Palo Alto, California

June 26, 1985

Release No. 34-22171

June 26, 1985

Administrative Proceeding File No. 3-6535

ORDER INSTITUTING PROCEEDINGS PURSUANT TO SECTION 15(c)(4) OF THE SECURITIES EXCHANGE ACT OF 1934, AND FINDINGS AND ORDER OF THE COMMISSION

The Commission deems it appropriate and in the public interest, that proceedings be, and hereby are, instituted pursuant to Section 15(c)(4) of the Securities Exchange Act of 1934 ("Exchange Act") with respect to Cooper Laboratories, Inc. ("Cooper"), to determine whether Cooper failed to amend promptly a Schedule 13D, filed with the Commission on August 20, 1984 as required by Section 13(d)(2) of the Exchange Act and Rule 13d-2 thereunder.

Simultaneously with the institution of these proceedings, Cooper has submitted an Offer of Settlement for purposes of disposing of the issues raised in these proceedings. Under the terms of the Offer of Settlement, Cooper, solely for the purpose of this proceeding or any other proceeding brought by or on behalf of the Commission or in which the Commission is a party involving Cooper, without trial of any issue of law or fact and without admitting or denying any of the matters set forth herein, consents to the issuance of this Order Instituting Proceedings Pursuant to Section 15(c)(4) of the Securities Exchange Act of 1934, and Findings and Order of the Commission ("Order"). In its Offer of Settlement Cooper has made certain undertakings, as more fully set forth herein and in its Offer of Settlement.

The Commission has determined that it is appropriate and in the public interest to accept the Offer of Settlement of Cooper and the Undertakings contained therein and, accordingly, issues this Order.

I.

INTRODUCTION

A. Respondent

Cooper is incorporated in the state of Delaware and maintains its principal offices at 3145 Porter Drive, Palo Alto, California. The common stock of Cooper was registered with the Commission pursuant to Section 12(b) of the Exchange Act, and was traded on the New York and Pacific Stock Exchanges at all times relevant herein. ¹

On June 28, 1984 Cooper stockholders adopted a voluntary plan of corporate liquidation. This plan called for the dissolution of Cooper and the distribution of Coopers assets to its shareholders prior to June 28, 1985. The distribution of Coopers assets commenced on June 17, 1985. In this connection, pursuant to its plan for liquidation, Cooper established a liquidating trust ("Liquidating Trust") to meet certain liabilities that mature after the date of the filing of its Certificate of Dissolution. Effective June 24, 1985, Cooper also changed its name to Cooper Holdings, Inc.

B. Issuer

Frigitronics is incorporated in the state of Delaware and maintains its principal offices at 770 River Road, Shelton, Connecticut. The common stock of Frigitronics is registered with the Commission pursuant to Section 12(b) of the Exchange Act and is traded on the New York Stock Exchange. During the time period relevant to this matter, Frigitronics had approximately 3,160,000 shares of common stock outstanding.

C. Summary

This matter concerns whether Cooper promptly amended a Schedule 13D filed with the Commission on August 20, 1984, relating to Coopers acquisition of 11.1% of the common stock of Frigitronics between May 22 and August 9, 1984.

In order to comply with the prompt amendment requirement imposed by Rule 13d-2, ² the Commission has concluded that Cooper, in the instant matter, was required to amend its August 20 Schedule 13D as soon as practicable after September 6, 1984, in order to disclose Coopers sales, between August 29 and September 6, 1984, of one percent of Frigitronics outstanding common stock and certain information concerning such sales.

Since Cooper failed to file the required amendment until after it had sold its holdings of Frigitronics stock, persons who purchased Frigitronics stock in the marketplace between the time after which Cooper should have amended its Schedule 13D and September 13, 1984, did not have all of the information which should have been disclosed under Rule 13d-2 concerning Coopers position in Frigitronics stock. The disclosure of Coopers sale of 1% of its position would have affected the market price for the stock at a time when Cooper still held approximately 10% of Frigitronics outstanding common shares.

II.

FACTS

A. Coopers Accumulation of the Frigitronics Position

1. Coopers Purchases of Frigitronics Stock May 22 Through June 13, 1984

By early 1984, Cooper had been studying Frigitronics for several years as part of its regular review of its competitors to determine its competitive industry position and to identify investment opportunities and potential merger and acquisition candidates. In May 1984, Cooper retained the New York brokerage firm of Schaenen, Jacobs & Ethredge ("Schaenen, Jacobs") and directed them to purchase Frigitronics common stock for Cooper for less than $22 per share until Cooper had acquired 4.9% of Frigitronics outstanding common stock. This order was filled by Schaenen, Jacobs on the New York Stock Exchange between May 22 and June 13, 1984 by the purchase for Cooper of 150,000 shares of Frigitronics common stock.

2. Discussions Between Cooper and Frigitronics

While Schaenen, Jacobs was filling Coopers order, representatives of Cooper and Frigitronics met, Cooper, in Item 4 of its August 20, 1984, Schedule 13D, described certain discussions and meetings between representatives of Cooper and Frigitronics and described its purpose in acquiring Frigitronics common stock as follows: ³

Coopers purpose in purchasing the Shares is to acquire a significant investment position in Frigitronics.

On June 6, 1984, senior officers and directors of Cooper and Frigitronics met and reviewed the possibility of participating with the employees of Frigitronics in a leveraged buy-out of Frigitronics. On June 27, 1984, in a telephone call, Cooper proposed a possible combination of the two companies by exchange of shares, and suggested that, if the proposal was not acceptable, the two companies renew consideration of a leveraged buy-out. At a late date, Frigitronics indicated that it did not wish to pursue the proposals. Cooper does not presently intend to renew these discussions.

CooperVision does not own beneficially any Shares. However, on August 8, 1984, a representative of CooperVision met with a senior officer of Frigitronics to discuss a possible combination of Frigitronics with CooperVision. No decisions were reached at such meeting, and no additional meetings are presently planned.

As noted under Item 3, Cooper did not purchase any Shares after June 13, 1984 until it acquired the unsolicited block on August 9, 1984. Cooper does not presently intend to buy additional Shares, in the open market or otherwise. However, it may review its position from time to time and reserves the right to increase its investment in Frigitronics or to dispose of Shares, as it sees fit.

Cooper Vision may also review its plans with respect to Frigitronics from time to time and may, in the future, suggest resumption of discussions with Frigitronics or decide to acquire Shares on the open market for investment, or by tender with a view of gaining control.

If Cooper Vision should decide to acquire any Shares, Cooper and Cooper Vision might be deemed to constitute a group, although each would act in its own interests. Cooper and Cooper Vision have certain common officers and directors, and Mr. Parker G. Montgomery is Chairman of the Board of Directors of each such Company.

3. The August 9 Purchase by Cooper of Frigitronics Stock and the Crossing of the Schedule 13D Filing Threshold

On August 9, 1984, the day after the meeting between representatives of Cooper Vision and Frigitronics, Coopers broker at Schaenen, Jacobs received an unsolicited offer to sell 200,000 shares of Frigitronics common stock at $24 1/4 per share. This offer was transmitted by Schaenen, Jacobs to Coopers CEO, who accepted it on behalf of Cooper on the same day. As a result of that purchase, Coopers beneficial ownership of Frigitronics common stock increased from 4.9% to 11.1% of the outstanding shares, thereby triggering the requirement under Section 13(d)(1) of the Exchange Act for Cooper to file a Schedule 13D. A Schedule 13D was filed by Cooper on August 20, 1984. ⁴

4. Market Activity in Frigitronics Stock Between May and August 29, 1984

From late May until early August 1984, Frigitronics stock rose slowly but steadily in price, on a volume of approximately 5,000 to 10,000 shares per day, from $22 per share on May 22 to over $24 per share on August 8. In the three weeks following August 9, 1984, the price of Frigitronics stock on the New York Stock Exchange rose to as high as $34, on average trading volumes which were ten times the average volume of the previous month.

During the period between August 9 and August 29, 1984, there was speculation in the market respecting the purchase by Cooper of shares of Frigitronics stock. In this regard, prior to the filing of the August 20 Schedule 13D by Cooper, the Dow Jones News Service reported on August 15, 1984, that Cooper had accumulated a large Frigitronics position. Dow Jones reported that "Cooper Labs may soon tender to buy Frigitronics with a bid in the high 30s or low 40s."

B. Coopers Sale of the Frigitronics Stock

1. Coopers Commencement of Sales

Nine days after the filing of its August 20 Schedule 13D, Cooper engaged in sales of part of its Frigitronics position. Coopers CEO has attributed the decision to engage in such sales to: (1) the upswing in the market for Frigitronics and the existence of a sufficient demand for Frigitronics stock to lend depth to the market; and (2) the apparent lack of interest on the part of Frigitronics to continue consideration of a possible business combination with Cooper.

2. Coopers Sale of One Percent of Frigitronics Outstanding Common Stock

Pursuant to conversations with representatives of Cooper, Schaenen, Jacobs arranged the sale of 1,300 shares of the Frigitronics stock on Wednesday, August 29, 1984, and 5,000 shares on Friday, August 31, 1984. Due to the Labor Day weekend, trading did not resume until Tuesday, September 4, 1984. Cooper engaged in no sales on September 4, but sold 5,000 shares on September 5. On Thursday September 6, 1984, Cooper sold 40,000 shares of its Frigitronics position. This raised the cumulative amount of Coopers sales of the stock to in excess of 1% of the number of Frigitronics outstanding common shares, thus triggering the requirement in Rule 13d-2 of the Exchange Act to amend promptly a Schedule 13D to report "an acquisition or disposition of beneficial ownership of securities in an amount equal to one percent or more of the class of securities".

3. Subsequent Sales of the Frigitronics Position

After September 6, 1984, Cooper engaged in additional sales of Frigitronics stock. On Friday, September 7, 1984, Cooper sold 30,000 shares of the Frigitronics stock. On Monday, September 10, Cooper sold 80,000 shares of the stock. 5,000 shares of the stock were sold on Tuesday, September 11. On Wednesday, September 12, 1984, Schaenen, Jacobs sold the remaining 183,700 shares of Coopers Frigitronics position.

Prices per share received by Cooper on its sales of Frigitronics stock between August 29 and September 12, 1984, ranged between $31 1/4 and $34 per share. This compares with an average price of approximately $23 per share which Cooper had paid for the stock between May 22 and August 8, 1984.

4. The Filing of the Schedule 13D Amendment

On September 13, 1984, Cooper filed with the Commission an amendment to its August 20 Schedule 13D. The amendment revised Item 5 of the Schedule 13D by listing Coopers sales of Frigitronics stock by date, value, and price, and by disclosing the following:

The response to Item 5 (of the August 20 Schedule 13D) is hereby amended by adding the following: Between August 29, 1984, and September 12, 1984, Cooper Laboratories, Inc. executed trades whereby it sold on the New York Stock Exchange 350,000 shares of the common stock of Frigitronics, Inc., comprising all of such shares owned by it.

The filing of the amendment to the Schedule 13D was publicly reported during the morning of September 13. Frigitronics stock closed on September 13, 1984, at $27 1/4, down $2 7/8 from the close the previous day. ⁵ The closing price on the New York Stock Exchange for Frigitronics stock from August 29 through September 12 consistently had been at or above $30. For the remainder of September 1984, Frigitronics common stock traded on the New York Stock Exchange at between a low of $27 1/4 and a high of $29 5/8.

III.

OPINION

A. Coopers Failure to Amend Promptly its Schedule 13D

Section 13(d) of the Exchange Act was enacted as part of the Williams Act. Generally, the legislative purpose behind Section 13D was to provide a regulatory scheme to alert investors to a potential change in corporate control. See GAF Corporation v. Milstein, 453 F.2d 709, 717 & 718 (2nd Cir. 1971).

Section 13(d)(2) of the Exchange Act, provides, that "if any material change occurs in the facts set forth" in a Schedule 13D ⁶, the Schedule shall be amended in accordance with the Commissions rules.

Rule 13d-217 C.F.R. §240.13d-2 provides, inter alia, that such amendments shall be filed "promptly". Rule 13d-2 also provides that any material change in facts set forth in a Schedule 13D including "any material increase or decrease of the class of equity security beneficially owned" by a reporting person requires the person to file an amendment disclosing the change. The Rule states that an acquisition or disposition of beneficial ownership of securities in an amount equal to one percent or more of the class of securities shall be deemed material for purposes of this rule".

On September 6, 1984, when Coopers sales of Frigitronics stock exceeded one percent of the number of shares of Frigitronics stock outstanding, Cooper was required to amend promptly its August 20 Schedule 13D in order to disclose those sales. Although Cooper stated in its statement of purpose set forth in Item 4 of its original Schedule 13D that it reserved the right to dispose of its Frigitronics shares "as it sees fit, Cooper on September 6, 1984, also was required promptly to amend Item 4 to explain that it had sold Frigitronics shares in a specified price range and was considering making additional sales at prices within, or higher than, such price range.

No bright line test has been adopted in order to determine when an amendment to a Schedule 13D is "prompt". This determination, for example, cannot be made by reference to the ten-day time period provided in Section 13(d)(1) of the Exchange Act and Rule 13d-1 for filing an initial Schedule 13D. Strong policy considerations indicate that the "prompt" amendment requirement should be construed flexibly in order to comport with the circumstances of the particular case. Thus, the question of whether an amendment is prompt will be determined based on all of the facts and circumstances surrounding both prior disclosures by the filing person and the material changes which trigger the obligation to amend. See, e.g., SEC v. GSC Enterprises, Inc., 469 F. Supp. 907, 914 (N.D. I11. 1977).

Whether an amendment to a Schedule 13D is "prompt" must be judged, at least in part, by the markets sensitivity to the particular change of fact triggering the obligation to amend, and the effect on the market of the filing persons previous disclosures. Although the promptness of an amendment to a Schedule 13D must be judged in light of all the facts and circumstances of a particular situation, "any delay beyond the time the amendment reasonably could have been filed may not be deemed to be prompt." See letter from Division of Corporation Finance to Law, Weathers, Richardson & Dutcher (Feb. 13, 1976).

A prompt amendment by September 7, 1984, of Items 5 and 4 of Coopers August 20 Schedule 13D would have served the purposes of the Williams Act by alerting the market, in a timely fashion, to Coopers sales of Frigitronics stock. Coopers failure to file the amendment until September 13, 1984, allowed Cooper to dispose of its Frigitronics position before the market was apprised of the material change in Coopers holdings of Frigitronics stock. Thus, in the case at hand, "promptly" meant less than the five business days (seven calendar days) which elapsed between when Coopers amendment obligation arose, and when Cooper actually amended its August 20 Schedule 13D. It appears that it would have been reasonably practicable for Cooper to have filed an amendment by September 7, 1984.

B. Consultation with Counsel

Coopers management consulted with legal counsel regarding Coopers obligations in connection with amending its August 20 Schedule 13D. Filing persons are responsible for determining the appropriate timing of an amendment to a Schedule 13D, based upon all of the facts and circumstances of which they are aware. The Commission will not hesitate to bring enforcement actions for untimely Schedule 13D filings, where appropriate, despite the fact that the filing person received and relied upon the advice of counsel.

IV.

FINDINGS

Based on the foregoing, the Commission finds that:

(1) After September 6, 1984, Cooper was required to amend promptly Items 5 and 4 of its August 20 Schedule 13D; and

(2) Cooper failed to comply with Section 13(d)(2) of the Exchange Act and Rule 13d-2 thereunder by failing to amend the August 20 Schedule 13D promptly.

V.

OFFER OF SETTLEMENT AND UNDERTAKINGS

Cooper has submitted an Offer of Settlement, in which, solely for the purpose of this proceeding or any other proceedings brought by or on behalf of the Commission or in which the Commission is a party, without trial and without admitting or denying any of the matters set forth herein, it consents to the issuance of these Findings and this Order. Cooper, in its Offer of Settlement, further agrees to the following undertakings:

1. To maintain, within the Liquidating Trust (established pursuant to Coopers plan of liquidation), assets at least equal to the approximately $2.2 million in profits realized by Cooper on the sale of its Frigitronics stock after September 7, 1984 to provide for potential claims form investors who are able to reduce to judgment claims arising out of Coopers sales of Frigitronics stock after September 7, 1984, or the failure of Cooper to amend its August 20, 1984 Schedule 13D relating to Frigitronics stock until September 13, 1984, provided that such assets need not be maintained in the Liquidating Trust beyond the later of September 13, 1987, or the final disposition of all litigation brought on or prior to September 13, 1987, alleging any claim arising out of the matters set forth above; and

2. To amend the August 20 Schedule 13D by filing a copy of this Order and the accompanying Offer of Settlement.

VI.

In view of the foregoing, the Commission deems it appropriate and in the public interest to accept the Offer of Settlement of Cooper Laboratories, Inc., and accordingly,

IT IS HEREBY ORDERED that Cooper Laboratories, Inc. comply with Section 13(d)(2) of the Exchange Act and Rule 13d-2 thereunder; and

IT IS HEREBY FURTHER ORDERED that Cooper Laboratories, Inc. comply with its undertakings, as set forth in Part V, above.

By the Commission.

John Wheeler

Secretary

[Footnotes]

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