SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 5
to
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Hills Stores Company
(Name of Issuer)
Common Stock, $.01 par value
(Title of Class of Securities)
431692102
(CUSIP Number)
David P. Levin, Esq.
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
919 Third Avenue
New York, New York 10022
(212) 715-9100
(Name, Address and Telephone Number of
Person Authorized to Receive Notices
and Communications)
August 23, 1994
(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: /_/
Page 1 of 21 pages
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Amendment No. 5 to Schedule 13D
This Statement amends the Schedule 13D, dated May 6,
1994, as amended on July 22, 1994, July 28, 1994, August 11, 1994
and August 17, 1994 (the "Schedule 13D"), filed by Dickstein &
Co., L.P., Dickstein International Limited, Dickstein Focus Fund
L.P., Dickstein Partners, L.P., Dickstein Partners Inc. and Mark
Dickstein with respect to the Common Stock, $.01 par value (the
"Common Stock"), of Hills Stores Company, a Delaware corporation
(the "Company"). Notwithstanding this Amendment No. 5, the
Schedule 13D speaks as of its date. Capitalized terms used
without definition have the meanings ascribed to them in the
Schedule 13D.
I. Item 4 of the Schedule 13D, "Purpose of Transaction," is
amended by adding the following paragraphs:
"On August 29, 1994, Dickstein Partners Inc. issued
the press release attached hereto as Exhibit 3 (see Item 7
below).
On August 23, 1994, the Reporting Persons were served
with a Complaint in the United States District Court for the
District of Massachusetts, filed on behalf of Hills Stores
Company, alleging certain federal securities laws violations.
The Complaint is attached hereto as Exhibit 4 (see Item 7 below).
The Reporting Persons believe that the allegations in the
Complaint are without merit and intend to vigorously defend the
action."
II. Item 7 of Schedule 13D, "Material to be Filed as Exhibits,"
is amended by adding the following language:
"Exhibit 3 Press Release dated August 29, 1994.
Exhibit 4 Complaint filed on August 23, 1994 in the
United States District Court for the District
of Massachusetts."
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SIGNATURE
After reasonable inquiry and to the best knowledge and
belief of the undersigned, the undersigned certifies that the
information set forth in this Statement is true, complete and
correct.
Date: August 30, 1994
DICKSTEIN & CO., L.P.
By: Alan Cooper, as Vice President
of Dickstein Partners Inc., the
general partner of Dickstein
Partners, L.P., the general partner
of Dickstein & Co., L.P.
/s/ Alan Cooper
Name: Alan Cooper
DICKSTEIN INTERNATIONAL LIMITED
By: Alan Cooper, as Vice President
of Dickstein Partners Inc., the
agent of Dickstein International
Limited
/s/ Alan Cooper
Name: Alan Cooper
DICKSTEIN FOCUS FUND L.P.
By: Alan Cooper, as Vice President
of Dickstein Partners Inc., the
general partner of Dickstein
Partners, L.P., the general partner
of Dickstein Focus Fund L.P.
/s/ Alan Cooper
Name: Alan Cooper
DICKSTEIN PARTNERS, L.P.
By: Alan Cooper, as Vice President
of Dickstein Partners Inc., the
general partner of Dickstein
Partners, L.P.
/s/ Alan Cooper
Name: Alan Cooper
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DICKSTEIN PARTNERS INC.
By: Alan Cooper, as Vice President
/s/ Alan Cooper
Name: Alan Cooper
/s/ Mark Dickstein
Name: Mark Dickstein
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EXHIBIT INDEX
EXHIBIT DESCRIPTION PAGE
3 Press Release dated August 29, 1994 6
4 Complaint filed on August 23, 1994 8
in the United States District Court
for the District of Massachusetts.
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EXHIBIT 3
News Release MACKENZIE
PARTNERS, INC.
CONTACTS: 156 FIFTH AVENUE
Jeanne M. Carr NEW YORK, NY 10010
212-929-5916 212 929-5500
FAX 212 929-0308
FOR IMMEDIATE RELEASE:
DICKSTEIN TO SEEK CASH OPTION FOR
PROPOSED HILLS EXCHANGE OFFER
New York, New York, August 29, 1994 -- Dickstein Partners
Inc. today announced that it intends to begin discussions with
investment banks for the purpose of seeking to arrange for a cash
option for the new Hills Stores bonds which would be issued in
Dickstein's proposed Hills stock buyback. Dickstein Partners
Inc. has initiated a consent solicitation to remove and replace
four of Hills Department Stores eight directors. Dickstein
Partners Inc. has proposed that if its nominees are placed on
Hills Department Stores board they will seek to implement an
exchange offer, whereby $27 principal amount per share of a new
12% twelve-year holding company bond is offered for up to 5.5
million shares of Hills stock.
Although no assurances can be given, Dickstein Partners Inc.
believes that if it is successful in placing its candidates on
the board, it should be feasible for Hills to arrange for a
standby purchaser for the new bond at less than a ten percent
discount to par. As a result, Dickstein Partners Inc. stated
that if its nominees are placed on the board they will use their
best efforts to arrange for a standby purchaser of the new bonds
subject of course to their fiduciary obligations as directors.
Notwithstanding this desire to provide a cash option,
Dickstein Partners Inc. believes that the new bonds will trade at
materially less than a ten percent discount to par.
Dickstein Partners Inc. also announced that as a result of
input from other Hills shareholders its nominees now intend that
the new bonds pay interest only in cash and have covenants
regarding debt incurrence and dividend restrictions similar to
those of the Hills existing public senior debt.
Dickstein Partners Inc. also reiterated that its current
intention is not to tender any of its shares into the exchange
offer because it believes that the intrinsic value of the Company
is materially in excess of $27 per share.
Mark Dickstein said "We are seeking to provide a cash option
and we are eliminating the PIK option and would agree to tight
covenants on the new bond in an attempt to be responsive to
the desires of the Hills shareholders."
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Mr. Dickstein further said "We urge each Hills shareholder
to expeditiously sign and return our consent materials. It seems
that every week the existing Hills board erects another obstacle
to shareholder democracy. We are particularly outraged that in
response to our consent solicitation the board has announced that
it has changed senior management employment agreements so that if
we are successful in placing our candidates on the board, Hills
senior management, which we highly value, can simply quit, yet
still receive huge golden parachute payments."
Mr. Dickstein added: "We believe this act to be an
incredibly abusive entrenchment tactic which appears to be a
classic example of a board of directors forgetting that it is not
they, but the shareholders who own the company. We believe these
actions to have been a breach of duty by the existing board and a
waste of corporate assets. We believe that it is in the best
interests of all of Hills shareholders for our nominees to be
placed on the board as soon as possible before the existing board
takes additional steps that might further permanently impair
shareholder value."
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EXHIBIT 4
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
HILLS STORES COMPANY,
Civ. No._____
Plaintiff,
COMPLAINT
- against -
DICKSTEIN PARTNERS, L.P., DICKSTEIN
PARTNERS, INC., DICKSTEIN & CO., L.P.,
DICKSTEIN FOCUS FUNDS, L.P., DICKSTEIN
INTERNATIONAL LIMITED, MARK B.
DICKSTEIN, MARK D. BRODSKY, MARK L.
KAUFMAN, and RICHARD I. WRUBEL,
Defendants.
Plaintiff Hills Stores Company ("Hills" or "the
Company") for its complaint herein, alleges upon knowledge as to
itself and its actions and upon information and belief as to all
other matters, as follows:
Nature of the Action
1. This is an action for preliminary and permanent
injunctive relief to remedy and prevent defendants' unlawful
conduct in connection with their acquisition of Hills stock and
their solicitation of written consents from Hills stockholders.
As more specifically alleged below, defendants are engaging in
deceptive conduct designed to manipulate the market for shares of
Hills stock and unfairly influence the consent solicitation.
2. Defendants have announced their intention to
seek written consents from Hills stockholders to take action
without a stockholders' meeting, including replacing four of the
eight incumbent directors with the four individual defendants.
To enhance their chances of succeeding in their consent
solicitation, defendants have publicly disseminated false and
misleading material statements in violation of the federal
securities laws.
3. Defendants have stated in public filings that
they were considering acquiring "all of the outstanding shares"
of Hills stock. They have publicly represented that they had
requested and obtained government clearance "to acquire in excess
of 50 percent" of the shares. These public statements were
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designed to and did foster the impression that an effort by
defendants is under way to acquire majority control of the
Company. In fact, defendants did not have any interest in or
expectation of acquiring more than 50 percent of the shares, or
anything close to 50 percent.
4. By convincing the market that a control
acquisition was underway, defendants hoped to induce the purchase
of shares by short-term investors and to improperly influence the
outcome of the consent solicitation.
Jurisdiction And Venue
5. This action arises under Sections 9(a), 10(b),
13(d), and 14(a) of the Securities Exchange Act of 1934 (the
"1934 Act"), 15 U.S.C. Sections 78i(a), 78j(b), 78m(d), and
78n(a), and the applicable rules and regulations promulgated
thereunder by the Securities and Exchange Commission ("SEC").
6. Jurisdiction over the subject matter of this
action is based upon 28 U.S.C. Section 1331 and Section 27 of the
1934 Act, 15 U.S.C. Section 78aa. The amount in controversy
herein exceeds $50,000, exclusive of interest and costs.
7. Venue is proper in this District pursuant to
Section 27 of the 1934 Act, 15 U.S.C. Section 78aa, and 28 U.S.C.
Section 1391. Acts and transactions constituting the violations
of law complained of herein have occurred and are occurring in
this District and have been carried out by use of the
instrumentalities of interstate commerce.
Parties
8. Plaintiff Hills is a corporation organized and
existing under the laws of the State of Delaware with its
principal office at 15 Dan Road, Canton, Massachusetts. Hills is
a leading regional discount retailer. Hills's common stock
("Hills Common") and its Series A convertible preferred stock
("Hills Preferred") (sometimes collectively referred to herein as
the "Shares") are, and at all relevant times were, registered
pursuant to Section 12(b) of the 1934 Act, 15 U.S.C. Section 781,
and publicly traded on the New York Stock Exchange. Holders of
Hills Common and Hills Preferred are entitled to one vote per
share on any matter submitted to the shareholders for a vote and,
except as otherwise provided by law, vote together as a class.
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9. Defendant Dickstein & Co., L.P. ("Dickstein &
Co.") is a limited partnership organized and existing under the
laws of the State of Delaware with its principal office at 9 West
57th Street, New York, New York.
10. Defendant Dickstein Focus Fund, L.P.
("Dickstein Focus") is a limited partnership organized and
existing under the laws of the State of Delaware with its
principal office at 9 West 57th Street, New York, New York.
11. Defendant Dickstein International Limited
("Dickstein International") is an open end investment fund
incorporated as an international business company under the laws
of the Territory of the British Virgin Islands, with its
principal office at 129 Front Street, Hamilton, Bermuda.
12. Defendant Dickstein Partners, L.P. ("Dickstein
Partners") is a limited partnership organized and existing under
the laws of the State of Delaware with its principal office at 9
West 57th Street, New York, New York. Dickstein Partners is a
general partner of defendants Dickstein & Co. and Dickstein
Focus.
13. Defendant Dickstein Partners, Inc. ("Dickstein
Inc.") is a corporation organized and existing under the laws of
the State of Delaware with its principal office at 9 West 57th
Street, New York, New York.
14. Defendant Mark Dickstein ("Mark Dickstein") is
the president and sole director of Dickstein Inc. Mark Dickstein
is also the Managing Partner of defendant Dickstein Partners and
is primarily responsible for the investment decisions and
operations of the entities which bear his name.
15. Until 1991, Mark Dickstein was a registered
commodities broker. In September 1991, the Commodities Futures
Trading Commission ("CFTC") revoked Mark Dickstein's broker
registration and barred him from appearing on or about any
trading floor of any contract market for three years. In re
Dickstein, CFTC Docket No. 90-29, 1991 CFTC LEXIS 350 (Sept. 9,
1991). The CFTC Order embodied a settlement in a proceeding
alleging that Mark Dickstein committed numerous violations of the
Commodity Exchange Act, including various manipulative practices
(e.g., engaging in fictitious transactions and "wash sales",
filing false reports) and aiding and abetting fraud. See In Re
Dickstein, CFTC Docket No. 90-29, 1990 CFTC LEXIS 446 (Sept. 25,
1990). Pursuant to the CFTC Order, Mark Dickstein was ordered to
"cease and desist from further violations" of the Commodity
Exchange Act and "to pay a civil penalty in the amount of
$150,000". 1991 CFTC LEXIS 350.
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16. Defendant Mark D. Brodsky is a Vice President
of defendant Dickstein Inc.
17. Defendant Mark L. Kaufman is a Vice President
of defendant Dickstein Inc. and is a partner of defendant
Dickstein Partners.
18. Defendant Richard I. Wrubel is the owner and
President of Richard Wrubel Associates.
19. Defendants are hereinafter sometimes
collectively referred to as "Dickstein."
20. Mark Dickstein and the entities which bear his
name are known to invest primarily in risk arbitrage transactions
and in the securities of companies that are financially
distressed or have recently emerged from bankruptcy; they are
investors commonly referred to in the securities market as
"vultures."
Background
21. Hills emerged from bankruptcy protection in
October 1993. Defendants first acquired a total of 338,100
Shares in exchange for pre-bankruptcy trade payables that
defendants had acquired from Hills's creditors.
22. On or about April 26, 1994, defendants
commenced a program of purchasing Shares. By April 29, 1994,
defendants had acquired 5.8 percent of Hills Common.
23. As of July 28, 1994, defendants Dickstein &
Co., Dickstein Focus and Dickstein International owned 1,218,462
Shares, constituting approximately 9.4% of the outstanding voting
power of the Shares. The aggregate value of those Shares,
calculated pursuant to rules promulgated by the Federal Trade
Commission (the "FTC"), was in excess of $22.2 million. The
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR
Act"), provides that no person (which includes all entities
controlled directly or indirectly by that person) may acquire the
voting securities of any issuer having an aggregate value in
excess of $15 million without first filing a notification of such
acquisition with the FTC and awaiting the termination of the
statutory waiting period.
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24. Defendant Dickstein & Co. filed a Notification
and Report Form (the "Notification") under the HSR Act on July
29, 1994, when it, Dickstein Focus and Dickstein International
together already held far in excess of $15 million worth of
Shares. The relationship between Dickstein & Co. and the other
defendants has not been sufficiently disclosed in defendants'
public filings for plaintiff to determine whether Dickstein & Co.
together with some or all of the Dickstein defendants should be
considered one "person" for HSR Act purposes and therefore to
have violated the HSR Act by not filing a Notification before
acquiring more than $15 million worth of Shares.
Defendants' Public Filings
25. On or about May 6, 1994, defendants filed with
the SEC a Schedule 13D relating to their acquisition of Hills
Common, purporting to set forth the information required by
Section 13(d) of the 1934 Act and the rules and regulations
promulgated thereunder (the "May 6 13D"). Defendants filed
amendments to this Schedule 13D on or about July 22, 1994 (the
"July 22 Amendment"), July 28, 1994 (the "July 28 Amendment"),
August 11, 1994 (the "August 11 Amendment"), and August 17, 1994
(the "August 17 Amendment"). In addition, defendants filed a
Schedule 13D relating to their acquisition of Hills Preferred on
July 28, 1994 (the "July 28 13D").
26. The May 6 13D affirmatively represented that
none of the defendants "has been a party to a civil proceeding of
a judicial or administrative body" that led to "a judgment,
decree or final order enjoining future violations of, or
prohibiting . . . activities subject to, federal or state
securities laws". Defendants failed to disclose the CFTC Order
which revoked Mark Dickstein's broker registration and imposed
injunctive and monetary sanctions as part of a settlement of an
administrative proceeding brought by the CFTC alleging that Mark
Dickstein had engaged in manipulative trading practices on a
registered contracts market. See Paragraph 15 supra. In light
of the similarities between the standards and practices of the
public securities exchanges and the commodities exchanges,
failure to disclose the CFTC Order constitutes a material
omission of fact.
27. The July 22 Amendment, although asserting that
"no course of action has been decided upon," stated that
defendants "may seek to acquire . . . all of the outstanding
shares" of the Company.
28. In fact, defendants had no interest in or
expectation of acquiring all of the Shares.
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29. The July 28 13D again stated that defendants
"may seek to acquire . . . all of the outstanding shares" of the
Company. It further represented that:
"Dickstein & Co., on July 29, 1994, will be making the
requisite filing under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 with respect to the
acquisition of in excess of 50% of the voting
securities of the Company. Early termination of the
applicable waiting period will be requested."
30. In fact, defendants had no interest in or
expectation of acquiring all of the Shares. Nor did defendants
have any intention of acquiring more than 50 percent of the
Shares, or anything close to 50 percent.
31. Defendants' July 28 13D and July 28 Amendment
stated that defendants were seeking approval under the HSR Act to
acquire "in excess of 50% of the voting securities of the
Company." Dickstein & Co.'s non-public Notification filed with
the FTC stated a "good faith intention" to acquire only such
additional Shares as would increase the value of their total
holdings to in excess of $15 million -- the minimum applicable
reporting threshold. Defendants omitted from their 13D filings
the fact of the Notification's reference to the $15 million
threshold, thereby leaving the market with the erroneous
impression that they intended to acquire more than 50 percent of
the Shares.
32. The August 17 Amendment disclosed that the FTC
had passed on defendants' "request for clearance to acquire in
excess of 50% of the voting securities of the Company," signaling
that Dickstein now had government approval to pursue majority
control of the Company. Again, defendants failed to disclose the
Notification's reference to the $15 million threshold.
33. With the August 17 Amendment defendants also
disclosed preliminary materials (the "Consent Solicitation
Materials") which they had filed with the SEC in a proxy
statement pursuant to Section 14(a) of the 1934 Act, to enable
defendants to "solicit written consents to remove and replace
four of the Company's eight directors with its own nominees." In
those materials defendants stated that in order "to avoid
triggering the change of control provisions" in the Company's
debt, defendants were only proposing to replace four of the eight
directors. Under the terms of the Company's bank debt, any
change of control would constitute an event of default. Under
the terms of the Company's public indebtedness, any change of
control would give rise to an option on the part of the debt
holders to cause the Company to repurchase the debt at 101% of
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the principal, plus accrued interest. Defendants were well aware
that the Company's debt instruments define "change of control" to
include the acquisition by a third party such as Dickstein "of
more than fifty percent of the Voting Stock of the Company" as
well as the election of a third party's nominees to majority
control of the board.
34. Defendants failed to disclose that the change-
of-control provisions would also be triggered through "the
acquisition of in excess of 50 percent of the voting securities
of the Company." Defendants' 13D filings do not mention the
change-of-control provisions in connection with their asserted
intention to seek the acquisition of more than 50 percent of the
Shares. The omission of that material information makes the
statements that were made misleading.
35. Defendants' 13D filings were carefully drawn to
give the impression that they intended to acquire a majority of
the Shares. As defendants anticipated, their 13D filings
resulted in press reports to the effect that defendants were
seeking majority control of Hills. For example:
- On July 29 Reuters reported that "A group led by
Dickstein & Co. . . . said it is seeking
government approval to acquire more than a 50
percent stake in Hills Stores."
- The New York Times reported that Dickstein had
"threatened to take control" of Hills (Aug. 12,
1994, at D-1, col. 1) and that it sought "to buy
as much as 50 percent" of the Company (Aug. 17,
1994, at D-3, col. 3).
- The Chicago Sun-Times reported that Dickstein had
"launched" a "takeover bid" (Aug. 17, 1994, at 4,
col. 1).
- The Wall Street Journal reported on the "moves by
Dickstein & Co., L.P. to acquire control" of the
Company and "to acquire more than 50% of its
Shares." (Aug. 18, 1994, at B-5, col. 1).
36. Despite this impression fostered by their
misrepresentations, defendants' actions and admissions make it
clear that they did not have any intention to make a takeover bid
for Hills, take control of Hills or reach the 50 percent
threshold, or anything close to 50 percent.
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37. Defendants' Consent Solicitation Materials
describe their proposal to have the Company make an "exchange
offer" for up to 5.5 million Shares, in essence to buy back
Shares with the issuance of junk bonds. Defendants failed to
disclose whether or not they intend to exchange their own Shares
for the junk bonds in the event of such an offer. Failure to
disclose that information is a material omission.
Count I:
Violation of Section 9(a) of the 1934 Act
38. Hills realleges and incorporates by reference
paragraphs 1-37.
39. Section 9(a) of the 1934 Act prohibits the
"manipulation of security prices" by, among other things,
transactions "creating actual or apparent active trading . . .
for the purpose of inducing the purchase or sale" of a security,
and also makes it unlawful for any person:
"to make, regarding any security registered
on a national securities exchange, for the
purpose of inducing the purchase or sale of
such security, any statement which was at the
time and in the light of the circumstances
under which it was made, false or misleading
with respect to any material fact, and which
he knew or had reasonable ground to believe
was so false or misleading."
40. Defendants violated Section 9(a) in that they
deliberately created the false impression in the marketplace that
defendants intended to acquire more than 50 percent of the
outstanding Shares, as alleged above. The false and misleading
statements made by defendants resulted in purchases and sales of
Shares that would not otherwise have been made.
41. As set forth more fully in paragraph 57,
defendants' violation of Section 9(a) has caused and, unless
enjoined, will continue to cause irreparable injury to Hills, its
stockholders, and the investing public, none of whom has an
adequate remedy at law.
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42. Hills has a valid, legitimate and substantial
interest in preserving the stability and integrity of the market
for its securities and thus in protecting its stockholders and
potential stockholders from a program of manipulation affecting
that market. Hills is the most appropriate party to assert
claims such as this aimed at violations affecting all of Hills'
stockholders and the market for the Shares.
Count II:
Violations of Section 10(b) of the
1934 Act and Rule 10b-5
43. Hills realleges and incorporates by reference
paragraphs 1-37 and 39-42.
44. Section 10(b) of the 1934 Act prohibits "any
manipulative or deceptive device or contrivance" in connection
with the sale or purchase of a security.
45. In violation of Section 10(b) of the 1934 Act
and Rule 10b-5, defendants have engaged in manipulative and
deceptive practices in connection with the purchase and sale of
the Shares for the purpose of deceiving and misleading Hills, its
stockholders and the investing public.
46. Defendants violated Section 10(b) and Rule 10b-
5 in that they deliberately created the false impression in the
marketplace that defendants intended to acquire more than 50
percent of the Shares, as alleged above.
47. Defendants are continuing their scheme to
manipulate the market for the Shares, and to mislead and deceive
Hills, its stockholders, and the investing public, none of whom
has an adequate remedy at law,
48. Hills had a valid, legitimate and substantial
interest in preserving the stability and integrity of the market
for its securities and thus in protecting its stockholders and
potential stockholders from a program of manipulation affecting
that market. Hills is the most appropriate party to assert
claims such as this aimed at violations affecting all of Hills's
stockholders and the market for the Shares.
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Count III:
Violations of Section 13(d) of the 1934 Act
49. Hills realleges and incorporates by reference
Paragraphs 1-37, 39-42 and 44-48.
50. Under Section 13(d) defendants were obligated
to set forth in their 13D filings, among other things, their
plans and intentions with respect to Hills as well as their
purposes in acquiring the Shares.
51. SEC rules require that in addition "there shall
be added such further material information, if any, as may be
necessary to make the required statements, in the light of the
circumstances under which they are made not misleading". 17
C.F.R. Section 240.12b-20.
52. The May 6 13D and the subsequent filings
violated Section 13(d) and the pertinent regulations thereunder.
Rather than clearly stating their purpose in acquiring the
Shares, defendants failed fully to disclose and materially
misrepresented the true purposes of their program of acquisition.
In addition, the May 6 13D, the July 22, July 28 and August 11
Amendments, as well as the July 28 13D, failed to disclose and
materially misrepresented the background of Mark Dickstein by
omitting any reference to the CFTC Order. Defendants have used
their 13D filings as part of their scheme of market manipulation
to the detriment of Hills, Hills stockholders and the investing
public.
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Count IV:
Violation of Section 14(a) of the 1934 Act
and Rule 14a-9
53. Hills realleges and incorporates by reference
paragraphs 1-37, 39-42, 44-48 and 50-52.
54. Section 14(a) of the 1934 Act and Rule 14a-9
make it unlawful to solicit "any proxy or consent" through a
communication
"which, at the time and in the light of the
circumstances under which it was made, is
false and misleading with respect to any
material fact, or which omits to state any
material fact necessary in order to . . .
correct any statement in any earlier
communication with respect to the solicitation
of a proxy for the same . . . subject mater".
55. As a result of defendants' misleading
representations and material omissions, defendants' Section 14(a)
filings violate the requirements of Section 14(a) and the
pertinent regulations thereunder.
56. Defendants violated Section 14(a) in that they
deliberately created the false impression among Hills
stockholders that defendants intended to acquire more than 50
percent of the Shares, as alleged above. Defendants also failed
to disclose their violations of Section 13(d), as herein alleged,
and failed to disclose their own intentions in respect of their
proposed exchange offer. In light of the circumstances,
defendants' Consent Solicitation Materials are false and
misleading and do not provide the shareholders the information to
which they are entitled.
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IRREPARABLE INJURY ARISING FROM DEFENDANTS'
VIOLATIONS OF FEDERAL SECURITIES LAWS
57. Through their unlawful conduct, defendants have
deprived Hills, its stockholders, and the investing public of
information to which they are entitled under the federal
securities laws and which is necessary in order to make informed
investment decisions. They have manipulated and disrupted the
market for the Shares. Since May 6, 1994, an average of almost
40,000 Shares has traded each trading day. Every day, Hills
stockholders and others who wish to buy Shares are forced to do
so in a market skewed by defendants' continuing, uncorrected
misrepresentations. The market turmoil caused by defendants and
the uncertainty and confusion surrounding their true intentions
has interfered with the management and operation of the Company.
Defendants' ongoing consent solicitation, tainted by their
misrepresentations, threatens to disrupt the management of the
Company directly. Hills has no adequate remedy at law. If
defendants' violations of the federal securities laws are not
enjoined, Hills, its stockholders, and the investing public will
continue to be irreparably harmed in at least the following
respects:
(a) Hills, its stockholders, and the investing
public will continue to be deprived of complete and
truthful information as required to be disclosed under
federal securities laws;
(b) Hills stockholders and others will
continue to be misled into purchasing or selling Shares
on the basis of false and misleading information and
false expectations;
(c) Hills stockholders will continue to be
misled into exercising their consents in response to
defendants' solicitation on the basis of false and
misleading information and false expectations; and
(d) Defendants will continue to threaten the
interests of Hills and its shareholders by diverting
the attention of Hills employees, impairing and
threatening Hills's relations with and reputation in
the financial community and Hills's ability to raise
sufficient capital to finance its business plans,
further interfere with Hills's ongoing expansion plan,
and otherwise interfering with the management and
operation of the company.
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PRAYER FOR RELIEF
WHEREFORE, Hills asks that the Court adjudge and
declare that defendants' actions are in violation of Sections
9(a), 10(b), 13(d), and 14(a) of the 1934 Act and the applicable
SEC rules and regulations thereunder, and, further:
(a) Preliminarily and permanently enjoin
defendants, their officers, directors, employees,
agents, affiliates and partners and all other persons
acting in concert with them or on their behalf,
directly or indirectly, from continuing to disseminate
false, misleading and manipulative statements;
(b) Order that defendants make appropriate
disclosure to correct all of the false and misleading
statements heretofore made by defendants in their public
filings and otherwise regarding Hills;
(c) Order defendants to divest themselves of
ownership and control of the Shares acquired by them
during the period of time their false, misleading and
incomplete Schedules 13Ds have been publicly filed, in
an orderly manner after making corrective disclosure;
(d) Preliminarily and permanently enjoin
defendants from acquiring or attempting to acquire any
Shares; selling or attempting to sell any Shares;
making or continuing or attempting to make any consent
solicitation; voting in person or by proxy any Shares;
otherwise using or attempting to use any Shares as a
means of controlling or affecting the management of
Hills; and exercising or attempting to exercise,
directly or indirectly, any influence upon the
management of Hills;
(e) Retain jurisdiction in order to ensure
that defendants comply fully with this Court's orders;
(f) Issue such other and further relief as may
be appropriate; and
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(g) Award Hills its costs and reasonable
attorneys' fees in this action.
August 23, 1994
HILLS STORES COMPANY
By________________________________
Arnold P. Messing (BBO #343940)
Choate, Hall Stewart
Exchange Place
53 State Street
Boston, Massachusetts 02109
(617) 248-5000
CRAVATH, SWAINE & MOORE
By______________________________
Robert S. Rifkind
A member of the firm
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7415
(212) 474-1000
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