<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 7)
HORSEHEAD RESOURCE DEVELOPMENT COMPANY, INC.
(Name of Issuer)
COMMON STOCK, $.01 PAR VALUE
(Title of Class of Securities)
440699
(CUSIP Number)
GARY APFEL, ESQ.
KAYE, SCHOLER, FIERMAN, HAYS & HANDLER, LLP
425 PARK AVENUE
NEW YORK, NEW YORK 10022
(212) 836-7055
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
JUNE 24, 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 [ ]. (A fee
is not required only if the reporting person: (1) has a previous statement 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 subsequent
thereto reporting beneficial ownership of less than five percent of such class.
See Rule 13d-7.)
Page 1 of 10
Exhibit Index on Page 10
<PAGE> 2
SCHEDULE 13D
CUSIP No. 440699 Page 2 of 10
------------ -------- --------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
B.U.S ENVIRONMENTAL SERVICES, INC.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
AF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 0
SHARES --------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 16,250,000
REPORTING --------------------------------------------------------------
PERSON WITH 9 SOLE DISPOSITIVE POWER
0
--------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
16,250,000
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
16,250,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/ /
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
44.8%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 3
SCHEDULE 13D
CUSIP No. 440699 Page 3 of 10
------------ -------- --------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
B.U.S BERZELIUS UMWELT-SERVICE AG
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC, AF, BK
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
GERMANY
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 0
SHARES --------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 16,250,000
REPORTING --------------------------------------------------------------
PERSON WITH 9 SOLE DISPOSITIVE POWER
0
--------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
16,250,000
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
16,250,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/ /
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
44.8%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 4
AMENDMENT NO. 7 TO SCHEDULE 13D
This Amendment No. 7 dated June 25, 1996 (filed on behalf of
B.U.S Environmental Services, Inc. ("B.U.S") and B.U.S Berzelius Umwelt-Service
AG ("B.U.S AG")) to the Schedule 13D dated August 3, 1990 filed on behalf of
B.U.S, B.U.S AG and Metallgesellschaft AG ("MG"), as amended by Amendment No. 1
dated July 8, 1994, Amendment No. 2 dated April 18, 1995, Amendment No. 3 dated
September 11, 1995, Amendment No. 4 dated October 30, 1995, Amendment No. 5
dated June 14, 1996 and Amendment No. 6 dated June 21, 1996 (the "Schedule
13D"), relates to the common stock, $.01 par value ("Common Stock"), of
Horsehead Resource Development Company, Inc., a Delaware corporation ("HRD").
Capitalized terms used and not defined herein shall have the meanings ascribed
to them in the Schedule 13D.
Item 4, Item 6 and Item 7 of the Schedule 13D are hereby
amended and restated in their entirety to read as follows:
ITEM 4. PURPOSE OF TRANSACTION.
The 9,750,000 shares of Common Stock acquired on July 24, 1990
as described in Item 5(a) below were acquired for investment purposes and to
utilize, through HRD, MG's and B.U.S AG's environmental services capabilities
and technologies in the United States. On May 16, 1996, HRD commenced an issuer
tender offer (the "Tender Offer") for up to 1,751,600 shares of Common Stock to
all holders of Common Stock. By letter, dated June 10, 1996, B.U.S (a) informed
Horsehead Industries, Inc. ("HII") that B.U.S desires to tender 2,885,000 shares
of Common Stock pursuant to the Tender Offer and (b) requested that HII inform
B.U.S whether (1) HII believes it is entitled to purchase these shares instead
of HRD, and (2) HII does in fact elect to purchase the shares at the price and
on the terms and conditions set forth in the Tender Offer. A copy of the June
10, 1996 letter is filed herewith as Exhibit 3. By letter dated June 13, 1996
(the "June 13 Letter"), HII responded to B.U.S's June 10, 1996 letter by
advising B.U.S that the proposed tender by B.U.S of 2,885,000 shares of Common
Stock pursuant to the Tender Offer is subject to the restrictions in the
Shareholders Agreement (as defined in Item 6 below), which purportedly prevents
B.U.S from transferring any of its shares of Common Stock until the applicable
provisions of the Shareholders Agreement are met. A copy of the June 13 Letter
is filed herewith as Exhibit 4. On June 13, 1996, B.U.S tendered such 2,885,000
shares of Common Stock pursuant to the Tender Offer. On June 24, 1996, B.U.S
filed a complaint in the United States District Court for the Southern District
of New York (the "Complaint") seeking equitable relief which, if granted, will
enable B.U.S either to participate in the Tender Offer or to sell its shares of
HRD Common Stock to HII. For a complete description of the allegations of and
relief sought by the Complaint, see Item 6.
Page 4 of 10
<PAGE> 5
As a public company with the obligation to act in its
stockholders' best interests, B.U.S AG reserves the right to take appropriate
actions in the furtherance of such interests in the future, directly or through
B.U.S, if circumstances so require, including actions of the kind described in
clauses (a) through (j) of Item 4 of Schedule 13D to the extent permitted by law
and contract, including the Shareholders Agreement.
Except as otherwise indicated in this statement, neither B.U.S
nor B.U.S AG has any plans or proposals with respect to HRD that relate to or
would result in any of the actions specified in clauses (a) through (j) of Item
4 of Schedule 13D.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE
ISSUER.
B.U.S, HRD, HII and HIMC (each a "Shareholder" and
collectively, the "Shareholders") are parties to the Shareholders Agreement
dated July 26, 1988, a copy of which is attached hereto as Exhibit 2(a), as
amended by the Amendment to the Shareholders Agreement dated July 24, 1990, a
copy of which is attached hereto as Exhibit 2(c) (as amended, the "Shareholders
Agreement"). The Shareholders Agreement prohibits transfers of Common Stock by a
Shareholder except: (i) in a cash sale in compliance with the right of "first
refusal" and "tag-along" rights of the other Shareholders; (ii) to an affiliate,
as defined in the Shareholders Agreement, (iii) in sales in "brokers
transactions" of up to 1% of the outstanding Common Stock during any 90-day
period; and (iv) pursuant to certain registration rights.
Pursuant to the Shareholders Agreement, the By-laws of HRD
were amended to provide that the minimum number of directors of HRD shall be
five. Until June 30, 1998, each of B.U.S and HII will have the right under the
Shareholders Agreement, so long as it owns at least 20% of the outstanding
Common Stock, to propose two nominees to HRD's Board of Directors and, so long
as it owns less than 20% but at least 5% of the outstanding Common Stock, to
propose one nominee. Each of B.U.S and HII have agreed to vote their shares and
shares controlled by them for the election of the other's nominees in the
circumstances described in the preceding sentence.
The foregoing is a summary of the Shareholders Agreement, a
copy of which is attached hereto as Exhibits 2(a) and (c), and is qualified by
reference to the full text of the Shareholders Agreement which is incorporated
by reference herein.
In the June 13 Letter, HII claimed that, pursuant to the
Shareholders Agreement, it is entitled to a right of first refusal, which it has
30 days to exercise with respect to the HRD shares tendered by B.U.S pursuant to
the Tender Offer described in Item 4. B.U.S understands that HII believes it has
until July 10, 1996 to decide whether
Page 5 of 10
<PAGE> 6
to exercise this purported right of first refusal; by that date, HRD may
purchase the shares of HRD Common Stock tendered by the other HRD stockholders
and, in such case, HRD's Tender Offer will have been consummated. As a result,
B.U.S would be forced to maintain ownership of the HRD shares which it would
otherwise be entitled to tender. Therefore, on June 24, 1996, B.U.S filed a
Complaint against HRD and HII claiming that the structure of the Tender Offer is
intentionally designed to prevent B.U.S from participating in the Tender Offer
in violation of the Securities Exchange Act of 1934, as amended. As a result,
B.U.S is seeking an order (i) compelling HRD to either accept the HRD shares
tendered by B.U.S pursuant to the Tender Offer or, alternatively, requiring HII
to exercise the right of first refusal to which HII claims it is entitled under
the Shareholders Agreement, and to purchase the shares tendered by B.U.S
pursuant to the terms and conditions of the Tender Offer; and (ii) preliminarily
enjoining HRD from accepting or rejecting any HRD shares tendered pursuant to
the Tender Offer or making payment for such shares until HII first decides
whether to exercise its purported right of first refusal. A copy of the
Complaint is filed herewith as Exhibit 5 and is incorporated herein by
reference. On June 24, 1996, the Court, by Order to Show Cause, set a hearing
date on B.U.S's motion for a preliminary injunction for Thursday, June 27, 1996
at 4:30 p.m.
Page 6 of 10
<PAGE> 7
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1: Joint Filing Agreement among B.U.S and B.U.S AG, dated April
17, 1995.
Exhibit 2: (a) Shareholders Agreement among B.U.S, HRD and HII,
dated July 26, 1988.
(b) Letter Agreement among B.U.S, HRD and HII, dated May
30, 1990.
(c) Amendment to the Shareholders Agreement among B.U.S,
HRD, HII and HIMC, dated July 24, 1990.
Exhibit 3: Letter, dated June 10, 1996, from B.U.S to HII.
Exhibit 4: Letter, dated June 13, 1996, from HII to B.U.S.
Exhibit 5: Complaint, dated June 24, 1996, B.U.S Environmental Services,
Inc. v. Horsehead Resource Development Company, Inc. and
Horsehead Industries, Inc.
Page 7 of 10
<PAGE> 8
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: June 25, 1996
B.U.S ENVIRONMENTAL SERVICES, INC.
By: /s/ G. OKON
-------------------------------
Name: DR. G. OKON
Title: PRESIDENT
Page 8 of 10
<PAGE> 9
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: June 25, 1996
B.U.S BERZELIUS UMWELT-SERVICE AG
By: /s/ G. OKON
------------------------------
Name: DR. G. OKON
Title: MEMBER OF THE BOARD
By: /s/ R. KOLA
------------------------------
Name: R. KOLA
Title: MEMBER OF THE BOARD
Page 9 of 10
<PAGE> 10
EXHIBIT INDEX
Exhibit 1: Joint Filing Agreement among B.U.S and Previously filed
B.U.S AG, dated April 17, 1995.*
Exhibit 2: (a) Shareholders Agreement among B.U.S, Previously filed
HRD and HII, dated July 26, 1988.*
(b) Letter Agreement among B.U.S, HRD and Previously filed
HII, dated May 30, 1990.*
(c) Amendment to the Shareholders Agreement Previously filed
among B.U.S, HRD, HII and HIMC, dated
July 24, 1990.*
Exhibit 3: Letter, dated June 10, 1996, from B.U.S to HII.* Previously filed
Exhibit 4: Letter, dated June 13, 1996, from HII to B.U.S* Previously filed
Exhibit 5: Complaint, dated June 24, 1996, B.U.S
Environmental Services, Inc. v. Horsehead
Resource Development Company, Inc. and Horsehead
Industries, Inc.*
- -----------
* Exhibit referenced hereby is incorporated by reference herein.
Page 10 of 10
<PAGE> 1
EXHIBIT 5
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
- --------------------------------------x
B.U.S. ENVIRONMENTAL SERVICES, INC. :
Plaintiff, :
-against- : Civ. Action No.
96 Civ. 4754 (DC)
HORSEHEAD RESOURCE DEVELOPMENT : COMPLAINT
COMPANY INC. and HORSEHEAD
INDUSTRIES, INC., :
Defendants.
- --------------------------------------x
Plaintiff B.U.S. Environmental Services, Inc. ("B.U.S."), by and
through its attorneys Kaye, Scholer, Fierman, Hays & Handler, LLP, for its
complaint against defendants allege upon knowledge as to plaintiff and otherwise
upon information and belief as follows:
NATURE OF THE ACTION
1. This action seeks injunctive relief to remedy violations of
the federal securities laws, and breaches of fiduciary and contractual
obligations committed by defendant Horsehead Resource Development Company, Inc.
("HRD"), acting in concert with its controlling shareholder, defendant Horsehead
Industries, Inc. ("HII"). As detailed more fully below, HRD and HII have
unlawfully and coercively structured the terms and manipulated the timing of a
tender offer by HRD for shares of its common stock in order to deprive B.U.S. --
which is an owner of HRD common stock -- of the opportunity to participate in
the tender offer, in violation of the Williams Act and state common law.
2. Defendants' conduct in connection with the tender offer is a
naked attempt to "whipsaw" B.U.S. into being left holding its HRD stock by (i)
structuring the tender offer so that HRD can reject a tender by B.U.S. because
of an alleged right of first refusal in favor of HII;
<PAGE> 2
and (ii) then, after the tender offer closes, having HII decline to exercise the
right of first refusal. Thus, HRD and HII have structured a tender offer for HRD
stock that expires before the time within which HII and HRD claim that HII's
purported right of first refusal expires, thereby allowing HRD to reject a
tender by B.U.S. of its HRD shares because those shares are supposedly
"encumbered" by the right of first refusal.
3. Defendants' discriminatory intent in this regard is made
crystal clear in the tender offer itself: HRD (and HII) have unabashedly
reserved the right to rescind the offer altogether if B.U.S. were to tender any
shares in response to the offer. This so-called "condition" of the tender offer
makes clear that HRD and HII mean to defeat B.U.S.'s participation in the tender
offer altogether -- even at the cost of terminating an offer that HRD and HII
have concluded is in the "best interests" of the public shareholders.
4. HRD's and HII's manipulation of the structure and timing of
the tender offer is simply an end-run around the "All Holders Rule," a provision
of the Williams Act expressly designed to protect shareholders from
discriminatory treatment by the tender offeror. Under the All Holders Rule, a
tender offeror may not discriminate among the same class of stockholders; in
other words, all shareholders of the same class of stock must be treated
equally. Here, B.U.S.'s common stock will be treated drastically different from
the common stock of all the HRD shareholders. Thus HRD and HII have unlawfully
structured the self tender in such a way as to eviscerate the protections of the
"All Holders Rule," and their conduct is a breach of the Shareholders Agreement
and the covenant of good faith and fair dealing thereunder. In addition, HRD's
refusal to accept the HRD shares tendered by B.U.S. violates B.U.S.'s
contractual rights under the terms of the tender offer, and HII's conduct has
clearly breached its fiduciary duty, as
2
<PAGE> 3
HRD's majority shareholder, to B.U.S., a minority shareholder. Finally, HII's
conduct has tortiously interfered with B.U.S.'s contractual right to receive the
benefits of the tender offer.
5. Unless injunctive relief is granted now, B.U.S. will lose its
ability to exchange its shares pursuant to the terms of the tender offer. That
is so because by the time that HII decides whether or not to exercise its
purported right of first refusal -- which does not apply here but, nonetheless,
HII claims it has 30 days to exercise -- the tender offer will have been closed
and consummated. While HII takes its purported full 30 days to announce the
foregone conclusion that it will not exercise its right of first refusal, the
tender offer -- and B.U.S.'s right to sell into it -- will have come and gone.
And subsequently when HII ultimately announces its decision not to exercise its
right of first refusal, that decision will be meaningless, since B.U.S.'s shares
will have already been rejected and be deemed ineligible to participate in the
tender offer, and there will be no further opportunity to re-tender in a closed
offer.
6. Moreover, B.U.S. will be irreparably harmed if it is excluded
from participating in the tender offer because, if defendants are successful in
preventing B.U.S. from participating in the tender offer, B.U.S. will be left
with shares in a company with no public shareholders. HRD has already admitted
that it "intends to delist the shares from the Nasdaq Stock Market National
Market" and deregister the company from the reporting requirements under the
Securities Exchange Act of 1934. Delisting HRD's shares, by itself, constitutes
irreparable harm because, with no public market for HRD's shares, B.U.S. will
have no ability to sell its stock to another buyer without the consent of HII,
the very party which dictated the discriminatory terms and conditions of this
tender offer; B.U.S. will have forever lost the right
3
<PAGE> 4
to sell its stock at this time for these terms. Moreover, in the absence of a
liquid market for the trading of HRD's shares, it will be difficult to assess
the value of B.U.S.'s HRD shares.
7. By this action, B.U.S. seeks only to ensure that either HRD or
HII buy the HRD shares tendered by B.U.S. pursuant to the terms of the tender
offer. If HII truly believes that it has a right of first refusal, then it
should either exercise or decline that right. If the "right" is exercised, then
HII is the buyer of B.U.S.'s tendered shares; if the "right" is declined, then
HRD is the purchaser of the shares pursuant to the terms of the tender offer.
8. Accordingly, B.U.S. seeks judgment either (i) compelling HII
to purchase, pursuant to the so-called right of first refusal, the shares of HRD
stock that B.U.S. validly tendered pursuant to the terms of the tender offer or,
alternatively, (ii) compelling HRD to purchase those shares pursuant to the
tender offer. To maintain the status quo, plaintiff seeks a temporary
restraining order enjoining HRD from accepting or rejecting the tender of any
HRD shares pursuant to its tender offer or making payment for such shares,
including giving notice to Chemical Mellon Shareholder Services, L.L.C., the
depositary for the Offer, until HII first provides B.U.S. with written notice of
its decision whether or not to exercise its purported right of first refusal
under the Shareholders Agreement.
THE PARTIES
9. Plaintiff B.U.S. Environmental Services, Inc. ("B.U.S.") is a
corporation organized and existing under the laws of the State of Delaware, with
its principal place of business in Germany. Since July 1990, B.U.S. was the
owner of 16,250,000 shares, or approximately 44.9% of the outstanding shares, of
HRD.
4
<PAGE> 5
10. Defendant Horsehead Resource Development Company, Inc. ("HRD")
is a corporation organized and existing under the laws of Delaware, with its
principal place of business in New York. HRD is a public corporation, with more
than 50% of HRD's shares beneficially owned by defendant HII and approximately
4.8% of HRD's shares owned by public shareholders. The shares of HRD are
publicly traded on the NASDAQ Stock Market.
11. Defendant Horsehead Industries, Inc. ("HII") is a corporation
organized and existing under the laws of the State of Delaware, with its
principal place of business in New York. At all times relevant herein, HII has
dominated and controlled HRD. In addition to HII's majority stock ownership, HII
has also appointed 6 of the 8 current members of HRD's Board of Directors, HII's
chairman and chief executive officer, William E. Flaherty, is the chairman of
HRD's Board of Directors, and a number of HII's other officers and directors are
officers or directors of HRD.
JURISDICTION AND VENUE
12. This Court has jurisdiction over this action under Section 27
of the Securities Exchange Act of 1934, 15 U.S.C. Section 78aa, under principles
of federal question jurisdiction, 28 U.S.C. Sections 1331 & 1337, and
under principles of supplemental jurisdiction.
13. Venue is proper in this district pursuant to Section 27 of the
Securities Exchange Act of 1934, 15 U.S.C. Section 78aa, and 28 U.S.C. Section
1391.
FACTS RELEVANT TO ALL CLAIMS
14. HRD was formed in 1986 as a wholly-owned subsidiary of HII. In
1988, B.U.S. acquired 20% of the common stock of HRD pursuant to a Stock
Purchase Agreement. At the time of this purchase, HRD was a "private" company,
whose stock was not publicly traded on any stock market.
5
<PAGE> 6
THE SHAREHOLDERS AGREEMENT
15. At or about the time of this acquisition, HRD, HII and B.U.S.
entered into a Shareholders Agreement, dated July 26, 1988 (the "Shareholders
Agreement"). That agreement expressly contemplated a future initial public
offering of HRD stock, at which time B.U.S. would be entitled to purchase a
number of HRD shares sufficient to obtain a percentage ownership equal to that
of HII.
16. The Shareholders Agreement included a limited restriction on
HII's and B.U.S.'s ability to transfer their HRD shares. Thus, Section 1.2 of
the Shareholders Agreement provides for a "right of first refusal" in certain
circumstances, as follows:
Right of First Refusal. (a) If a Shareholder (a "Selling
Shareholder") desires to transfer Shares at any time pursuant to a bona
fide written offer (an "Offer") to purchase some or all of its shares
for cash, the Selling Stockholder shall give written notice thereof
(the "Notice") to the other Shareholders, attaching a copy of such
Offer. Each of the other Shareholders may elect, by written notice
given to the Selling Shareholder within 30 days after the date of the
Notice, to purchase (and/or, if a member of the Horsehead Group is the
Selling Shareholder, subject to Section 1.2(c), cause a nominee
approved by the Selling Shareholder to purchase, which approval shall
not be unreasonably withheld) all of the Shares proposed to be sold
pursuant to the Offer at the same price per Share and on the same terms
and conditions set forth in the Offer. If the other shareholders do not
elect to purchase (and/or have their nominees purchase) all of the
Shares referred to in the Notice within such 30-day period, the Selling
Shareholder shall have the right to sell all of such Shares to the
party making the Offer, at the price and on the terms set forth in the
Notice, at any time within 60 days after expiration of the 30-day
option period. It shall be a condition to the purchase of such Shares
that the transferee execute an agreement to be bound by the provision
of this Agreement, including, but not limited to, this Section 1,
whereupon such transferee shall be deemed a Shareholder for all
purposes of this Agreement.
6
<PAGE> 7
17. The right of first refusal contained in the Shareholders
Agreement only applies to transfers of HRD shares to third parties, i.e.,
non-signatories to the Shareholders Agreement.
18. As HII recently conceded in a New York state court litigation,
the restriction on the transfer of the HRD shares was to permit the transfer of
HRD shares within the signatories to the Shareholders Agreement, including
"Affiliates" of the signatories, but, in the event one side wanted to dispose of
its shares to a third party, to give the other side the opportunity to maintain
control over the identity of the owner of the shares by purchasing the shares
for itself.
19. The right of first refusal provision was not intended to apply
- -- and does not apply -- to transactions in HRD stock among the signatories to
the Shareholders Agreement, including, but not limited to, a tender offer for
HRD shares by HRD.
20. On or about June 29, 1990, HRD issued a prospectus for the
initial public offering of 3,250,000 shares of common stock. Following
completion of the offering, HII and B.U.S. each owned approximately 45% of HRD,
with the remaining 10% being publicly held. B.U.S. and HII continued to hold
equal amounts of HRD's stock until July 1995, when HII purchased additional HRD
shares, increasing its present beneficial ownership to 50.3% of HRD's common
stock.
HII'S HISTORY OF DOMINATING AND CONTROLLING HRD
21. HII has historically dominated and controlled the operations,
management, and day-to-day affairs of HRD. This is true today, and was true even
when HII and B.U.S. each owned approximately 45% of HRD's stock.
7
<PAGE> 8
22. Thus, even though HII and B.U.S. were then equal shareholders,
HII controlled four of HRD's six seats on the Board of Directors through August
1994, when the Board was expanded.
23. In fact, even though a proxy fight was averted by HII agreeing
to expand the HRD board to nine members, HII continued to dominate and control
HRD and its board; of the nine, HII appointed four of its own officers and two
supposed "independent" directors, totaling six of the nine members.
24. And to make clear its control, in March 1996 HII unilaterally
removed the one independent director appointed by B.U.S. This removal violated
agreements among HRD and its shareholders, and, as described below, was part of
HII's efforts to force -- with utter disregard to fairness of price or process
- -- certain transactions upon HRD.
25. The domination and control of HRD is also evidenced by the
fact that, throughout its involvement with HRD, HII, its principals and
affiliates have entered into a series of contractual relationships with HRD
which have provided clear benefits to HII at the expense of HRD and its other
shareholders, including a sales agreement between HRD and one of HII's
divisions, Zinc Corporation of America ("ZCA").
HII'S LONG-STANDING SCHEME TO REACQUIRE 100% CONTROL OF HRD
26. In the latter part of 1993, HII's motivation for its direction
and control of HRD's affairs became clear -- HII wanted to re-acquire 100%
ownership of HRD at an artificially deflated price.
27. In a December 7, 1993 presentation to the full board, the
directors appointed by HII made a proposal to acquire the public stock of HRD at
the low stock price for HRD shares
8
<PAGE> 9
- -- a low price they had created through their management of HRD's affairs. The
presentation stated:
At the current stock valuation, HRD derives no benefit from being
public . . . . Current valuation represents a 10 multiple on planned
1994 net income of 13.5 million (@ 42(cent) LME), suggesting that the
stock is a good investment, with substantial upside potential when
stock prices recover . . . [o]nce HRD has been "redesigned" and zinc
prices recover, HRD could re-emerge as a public company either through
a direct public offering or a merger with an existing public company.
28. This 1993 "going private" transaction was created "with the
express but undisclosed intention of going public again through a direct public
offering of HRD shares or a merger with a publicly-owned company when the price
of zinc increased." Thus, HII urged that HRD take advantage of the low stock
prices to buy HRD's public stock at a bargain price with every intention of
going back to the public once HRD's problems had been "redesigned" or abated.
29. B.U.S. opposed HII's stock repurchase plan because it was not
in the best interests of HRD shareholders, and informed the HII representatives
on the HRD board that it would vote against the plan.
30. When B.U.S.'s opposition to the plan was made known, HII
attempted to pressure B.U.S. by unilaterally causing HRD to issue a press
release stating that HRD was contemplating a going private transaction in which
the public shareholders would receive a cash distribution in exchange for their
shares. The press release stated that the board was considering this move
because of the "uncertainty of [HRD's] prospects in the current industry
environment and the relative illiquidity of its public held shares." This
statement contradicted that of HRD's Chief Financial Officer Robert Hoguet in a
press release less than a year previously, where he
9
<PAGE> 10
stated that the long term outlook for HRD was good because studies showed that
mini mills, which use the arc furnace whose dust HRD recycles, are expected to
represent up to 60% of U.S. steel production by the end of the decade, rather
than the current 37%.
31. In addition to pressuring B.U.S., the February 1994 press
release had the additional effect of painting a negative portrait of HRD,
thereby conditioning the public shareholders to accept any forthcoming offer to
exchange their shares for cash.
32. In March 1994, HRD was forced to retract its February 1994
press release after BUS told HII that it would not approve a going private
transaction. Although HII was thereby forced to withdraw its going-private
plans, those plans were not forgotten -- they were recently resurfaced by the
vehicle of the tender offer that HII caused HRD to make.
HII HAS REFUSED TO SHARE RELEVANT
INFORMATION WITH NON-HII DIRECTORS
33. HII has further abused its control over HRD, and the HRD
directors appointed by HII have breached their fiduciary duties to HRD, by
impeding HRD directors appointed by B.U.S. from properly discharging their
fiduciary duties as directors of HRD.
34. Following a Board meeting on July 14, 1995, and in an effort
to fulfill his fiduciary obligations as directors of HRD, Rolf Kola, a director
of HRD appointed by B.U.S., wrote to William E. Flaherty, the chairman of HRD's
Board, and requested that HRD's directors receive documents relevant to the
EnviroSource litigation. Mr. Kola wrote:
The only issue of yesterday's Board meeting was the EnviroSource
lawsuit against HRD. We have briefly discussed the problems of the
lawsuit. In order for us as Directors to be able to develop an educated
opinion on the issues, we request again that HRD submit to all
directors:
10
<PAGE> 11
- a listing of the contracts for the treatment of EAF-
dust that HRD has entered into (names may be deleted)
with the following specifics:
- number of contracts
- length of individual contracts
- specific terms of contracts (that might have a
bearing on the issue of the lawsuit)
- a sample of an HRD contract for EAF-dust disposal.
35. Despite his clear right to such information, and despite the
reasonableness of the request, director Kola's request was rejected by Flaherty,
who wrote in response simply that "[t]here is no purpose served by sending
Directors information on HRD contracts."
HII HAS FURTHER MISUSED HRD'S CORPORATE COUNSEL
AND FUNDS IN AN EFFORT TO BENEFIT HII AT THE EXPENSE OF B.U.S.
36. On July 28, 1995, five days after the expiration of a
Standstill Agreement between HII and B.U.S., which precluded the acquisition of
shares in HRD by either party, HII caused HRD's corporate counsel, Martin
Nussbaum, to write a letter to Kurt N. Schacht, the General Counsel for the
State of Wisconsin Investment Board ("SWIB"), regarding a proposed auction of
HRD common shares owned by SWIB to B.U.S. or HII. Representing that he discussed
the potential impact of the action with HRD's "independent directors", Nussbaum
wrote:
I understand that a number of HRD senior managers have expressed deep
concerns over a change of control of HRD and may very well resign if
B.U.S. becomes controlling shareholder. I believe that this concern may
be the result of a total lack of information about the new principal
stockholders of B.U.S. These people have done nothing to inform the
public shareholders or senior management of their intention with
respect to HRD. No one knows whether, if it obtains control of HRD,
B.U.S. will seek to liquidate HRD, curtail its operations or use it as
a source of liquidity to meet its substantial debt (including,
acquisition debt). As you can imagine, these issues are of concern to
directors of HRD. Indeed, I believe no amended Schedule 13D has ever
been filed by B.U.S. which
11
<PAGE> 12
gives any meaningful disclosures concerning the principal stockholders
of B.U.S.
37. Nussbaum's letter contains numerous misrepresentations, and
fails to discuss the potentially serious consequences if SWIB sold its HRD stock
to HII, a competing bidder, which had substantial debt of its own. Thus, while
ostensibly written on behalf of HRD -- which was at the time owned 45% each by
B.U.S. and HII -- Nussbaum was clearly doing HII's bidding -- at HRD's expense
- -- regardless of the best interests of HRD and its shareholders as a whole.
38. While HRD paid for the services of Nussbaum, the clear
benefactor of his services has been HII, and not HRD. As a result of Nussbaum's
efforts, SWIB subsequently sold its shares to HII, thereby rewarding HII's
misuse of HRD's corporate funds and counsel at the expense of HRD and its other
shareholders.
HII'S 1995 PURCHASE OF HRD SHARES WAS CONTRARY TO LAW
39. On August 7, 1995, after B.U.S. learned of HII's bid for the
purchase of HRD common stock owned by SWIB, HII was requested to make "full
disclosure of the terms and conditions of HII's arrangements with SWIB and HII's
intentions with respect to further acquisitions by it of HRD shares, as well as
whatever actions it is planning or considering with respect to HRD."
40. Despite this reasonable demand -- and directly contrary to the
position only one week earlier taken by Nussbaum on behalf of HRD (at HII's
bidding) -- HII and HRD again simply refused to provide the information
requested.
41. Between July 25, 1995 and August 3, 1995, HII purchased
1,860,900 shares of Common Stock in HRD, which, together with the 16,250,000
shares HII previously owned,
12
<PAGE> 13
constitutes 49.98% of the HRD Common Stock outstanding. In addition, during this
period, William E. Flaherty, David O. Carpenter, David N. Judelson and Tinkham
Veale II -- the controlling shareholders and directors of HII -- acquired
125,000 shares of HRD's common stock, causing the HII "group's" aggregate
holdings in HRD to exceed 50%.
42. Although HII and its individual directors and principal
shareholders beneficially own more than 50% of the stock in HRD, they have
failed to comply with applicable notification requirements as required by the
Hart-Scott-Rodino Act and the rules promulgated thereunder and have, in fact,
structured their purchases of HRD stock to avoid Hart-Scott-Rodino notification
requirements, all of which has had a potentially negative effect on the company.
43. These purchases of HRD shares were in breach of HII's and its
affiliates' fiduciary duties and constituted a misappropriation of a corporate
opportunity.
HII RECYCLES ITS
GOING-PRIVATE PLANS
44. By early 1996, HII had resolved to try once again to take HRD
private -- this time with or without B.U.S.'s consent.
45. HII's scheme to take HRD private resumed by a letter dated
January 4, 1996, in which HRD requested that B.U.S. consider a transaction
whereby HRD would acquire ZCA from HII for approximately $350 million. The
transaction was proposed by HRD -- at HII's direction -- as a means by which
"numerous challenges" supposedly facing HRD could be overcome.
46. In fact, HII caused HRD to send the January 4, 1996 letter as
the first step in HII's plan to take HRD private. Moreover, HII knew that the
$350 million price for ZCA was drastically excessive.
13
<PAGE> 14
47. B.U.S. neither accepted nor rejected the January 4 proposal,
but requested certain specific information necessary to evaluate a purchase of
ZCA and combination of ZCA and HRD. B.U.S. also requested to be informed whether
there were any other transactions planned for HRD -- which would include a
going-private transaction. True to its prior history, no information was
provided and HRD did all it could to dodge providing answers to these perfectly
appropriate questions.
48. Also in response to the January 4 letter, B.U.S. advised HII
that, under Section 4.4 of the Shareholders Agreement, any transaction between
HRD and HII -- such as the purchase of ZCA proposed by HRD -- required the
approval of HRD's independent directors, which the Shareholders Agreement
defines as those directors not nominated by (or affiliated with) HII.
49. HII rejected B.U.S.'s assertion of rights underSection 4.4 of
the Shareholders Agreement, and remarkably took the position that B.U.S. "has no
rights per se" under that section.
50. However, to avoid the potential pit-falls of Section 4.4, HII
took the opportunity to remove unilaterally -- without any prior notice to, or
discussion with, B.U.S. or the other HRD shareholders -- the only independent
director not appointed by HII. This removal was entirely without cause, contrary
to law, and undertaken in an effort at vitiating protections afforded B.U.S. by
the Shareholders Agreement.
14
<PAGE> 15
HII SEEKS TO TAKE HRD
PRIVATE VIA AN ISSUER TENDER OFFER
51. When it appeared that the proposed ZCA transaction would not
be approved, HII elected to have HRD make a tender offer for its public shares
in order for HRD to go private.
52. The proposal to have HRD make a tender offer was literally
sprung on B.U.S., and its directors on the HRD board, with virtually no notice
or real opportunity for B.U.S. and its directors to participate in a meaningful
review of the proposed transaction. Thus, the agenda for the April 30, 1996
meeting of the HRD Board of Directors that was circulated to B.U.S. did not
include a reference to any tender offer proposal.
53. Further, HII orchestrated the April 30 meeting to ensure that
B.U.S. would be omitted from any real participation and review of the tender
offer proposal. Thus, HII scheduled the Board meeting for a time when HII knew
full well that B.U.S.'s directors were not able to be present, and even refused
to provide these directors with materials -- available to the other directors --
when B.U.S.'s directors were able to make themselves available to participate in
the meeting via telephone.
54. At the April 30 meeting, the HRD Board of Directors --
dominated and controlled by HII -- approved a resolution (presented for the
first time at that meeting) to make a tender offer for the purchase of 1,751,600
shares of HRD held by the public shareholders at a price of $5.75 per share. The
two HRD directors appointed by B.U.S. voted against the resolution.
15
<PAGE> 16
HRD'S TENDER OFFER
55. On or about May 16, 1996, HRD made a formal tender offer to
purchase 1,751,600 shares of its common stock.
56. The tender offer makes clear its purpose, which is the very
same plan long ago proposed by HII: to take HRD private. Thus, the introduction
to the tender offer advises:
Upon termination of the Offer, the Company intends to delist the Shares
from the NASDAQ Stock Market National Market (the "NNM") and to cease
to be a reporting company under the Securities Exchange Act of 1934, as
amended ("Exchange Act"). Accordingly, no public market for the Shares
will exist after the Offer.
57. Moreover, the tender offer is unambiguously and unabashedly
discriminatory towards B.U.S. For example, HII and HRD have reserved the right
to rescind the tender offer if B.U.S. were to tender any shares in response.
Thus, HII and HRD have imposed a "condition" of the Offer, which provides HRD
with the right to terminate the offer if B.U.S. shall have tendered any of its
shares. In other words, HRD has contrived to reserve to itself the discretion to
terminate an offer that HII and HRD have themselves concluded is "in the best
interests of the public stockholders" if B.U.S. did so little as tender some of
its HRD shares.
58. Moreover, HII and HRD structured the tender offer to require
that all shareholders must tender their shares within 29 days of the initial
notice. Thus, the terms of the tender offer, which were issued on May 16,
required a selling shareholder to tender his or her shares by no later than June
14, 1996. This timing provision was inserted by HRD and HII in an effort to set
up a basis on which they can argue that B.U.S. literally was not able to tender
its shares because of an argument HII would make pursuant to the right of first
refusal and Section 1.2 of the Shareholders Agreement.
16
<PAGE> 17
59. Put succinctly, HII and HRD structured the tender offer to be
open for exactly 29 days, until June 14,1996, which would provide HII and HRD
with the purported basis that B.U.S. cannot participate in the tender offer
because its HRD shares are subject to a right of first refusal that provides HII
with a 30-day option on any shares B.U.S. would desire to sell in response to
the tender offer. Thus, according to HII and HRD, B.U.S. would not be able to
participate in the tender offer because its HRD shares would be "encumbered" by
the right of first refusal -- an encumbrance that HII and HRD would argue does
not expire until after the termination date they set for the tender offer.
60. HII and HRD structured the tender offer in an effort to keep
B.U.S. from participating in the tender offer.
61. Section 3 of the tender offer provides for certain withdrawal
rights of tendering shareholders. That section states that a tender of shares in
response to the offer is "irrevocable," and may not be withdrawn between the
expiration date of the offer and July 16, 1996. The tender may be withdrawn as
of July 16 only if HRD fails to accept for payment the tendered shares by that
date.
62. This withdrawal provision effectively "locks up" any tendered
shares through July 16, 1996; HRD need do nothing in connection with these
shares except, if it determines that it will accept the tendered shares, HRD
must accept the shares for payment by no later than July 16.
63. On June 13, 1996, HRD announced that only approximately
320,000 shares had been tendered in response to the offer as of the close of
business on June 12. As a result, HRD announced that it was extending the tender
offer through June 21, 1996.
17
<PAGE> 18
B.U.S. TENDERS HRD SHARES AFTER HII
REFUSES TO ADVISE WHETHER IT BELIEVES
THE RIGHT OF FIRST REFUSAL IS APPLICABLE
64. Although the tender offer is dated as of May 16, 1996, B.U.S.
did not receive a copy of the tender offer documents until on or about May 18,
1996.
65. Upon receipt of the tender offer, B.U.S. began consideration
of whether to tender any of its HRD shares in response to the offer and, if so,
the amount of shares it would tender.
66. B.U.S. promptly put HII on notice that it was considering
tendering some of its HRD shares in response to the tender offer. Thus, by
letter dated May 24, 1996, B.U.S. advised HII that it was considering accepting
the tender offer.
67. Also, because B.U.S. was aware that HII might assert a right
to purchase any shares tendered by B.U.S. -- even though the right of first
refusal in the Shareholders Agreement is not applicable to the tender offer by
HRD -- B.U.S. requested that HII advise B.U.S. of whether HII believes "it is
entitled to purchase those shares instead of HRD, and does it in fact wish to
purchase [B.U.S.'s] shares at the tender offer price?"
68. HII, continuing its cat-and-mouse game, refused to provide any
substantive response to B.U.S.'s reasonable request. Rather, HII asserted that
it was "a little confused" regarding the simple question raised in B.U.S.'s May
24 letter, stated that it "will not respond to a hypothetical question" and --
acting as if it somehow were unaware of the HRD tender offer --asserted that it
would only respond if B.U.S. "has a specific proposal or intention with regard
to its HRD shares."
18
<PAGE> 19
69. On June 10, 1996, B.U.S. sent a formal letter to HII
indicating that B.U.S. desired to sell 2,885,000 shares of its HRD stock
pursuant to the tender offer. Again, even though the right of first refusal was
inapplicable, and in an effort at avoiding litigation, B.U.S. renewed its
request that HII advise whether it wished to purchase the tendered shares at the
price and on the terms and conditions set forth in the tender offer.
70. On June 13, 1996, HII sent B.U.S. a letter that failed to
respond to the June 10 letter. Thus, HII refused to say whether it was
interested in purchasing B.U.S.'s tendered shares. Instead, HII asserted that
B.U.S.'s tender should be subject to the right of first refusal of the
Shareholders Agreement.
71. This June 13 letter was sent by HII to set up the argument by
HRD that it could reject B.U.S.'s tender because the tendered shares were
"encumbered," since they were allegedly subject to the right of first refusal in
favor of HII. The June 13 letter was also sent at a time when HII had already
concluded that it would not purchase the shares tendered by B.U.S.
72. On June 13, 1996, B.U.S. tendered 2,885,000 of its HRD shares
pursuant to the tender offer.
73. On June 24, 1996, HRD announced that it had extended its
tender offer to expire at midnight on June 28, 1996. HRD reported that, as of
June 21, 1,172,000 shares "had been tendered in response to the offer."
74. This announcement was false and misleading because it excluded
the 2,885,000 shares tendered by B.U.S. in response to the offer.
75. This press release also clearly indicates that HRD, at HII's
direction, will reject the shares tendered by B.U.S.
19
<PAGE> 20
CLAIMS FOR RELIEF
FIRST CLAIM FOR RELIEF
(VIOLATION OF THE ALL HOLDERS RULE, 17 C.F.R. 13E-(D)(8)
AGAINST ALL DEFENDANTS)
76. Plaintiff repeats and realleges the allegations contained in
Paragraphs 1 through 75 of this Complaint as if set forth fully herein.
77. 17 C.F.R. 240.13e-(d)(8), known as the All Holders Rule,
provides that an issuer's tender offer must be open to all security holders of
the class of securities subject to the tender offer.
78. B.U.S. is a security holder of the class of securities subject
to the tender offer.
79. As described above, HII, acting in concert with HRD,
structured and timed the making of HRD's tender offer in such a way as to
deprive B.U.S. of the opportunity of participating in the tender offer in
violation of the All Holders Rule.
80. HRD and HII conspired with one another, aided and abetted one
another and directly participated together in a scheme to violate the All
Holders Rule and deprive B.U.S. of the opportunity to participate in the HRD
tender offer.
81. Plaintiff has been injured by reason of defendants' violation
of the All Holders Rule.
82. Plaintiff has no adequate remedy at law.
20
<PAGE> 21
SECOND CLAIM FOR RELIEF
(BREACH OF CONTRACT AGAINST DEFENDANT HRD)
83. Plaintiff repeats and realleges the allegations contained in
Paragraphs 1 through 82 of this Complaint as if set forth fully herein.
84. HRD's offer to purchase shares constituted an offer.
85. B.U.S.'s tender of shares in response to the HRD offer
constituted an acceptance of the offer and created a binding, enforceable
contract.
86. HII has improperly asserted that it has a right of first
refusal with respect to the HRD shares tendered by B.U.S. and that HRD's
acceptance of shares would be unlawful.
87. HII, through its stock ownership and board domination of HRD
control HRD.
88. HRD's rejection of B.U.S.'s tender of HRD shares will breach
its contract with B.U.S.
89. Plaintiff has been injured by reason of HRD's breach of
contract.
90. Plaintiff has no adequate remedy at law.
THIRD CLAIM FOR RELIEF
(BREACH OF IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING IN
TENDER OFFER CONTRACT AGAINST HRD)
91. Plaintiff repeats and realleges the allegations contained in
Paragraphs 1 through 90 of this Complaint as if set forth fully herein.
92. Every contract contains an implied covenant of good faith and
fair dealing.
93. HRD's failure to accept the tender of HRD shares by B.U.S. or
failure to extend the tender offer until such time as its majority and
controlling shareholder, HII, decides
21
<PAGE> 22
whether or not to exercise its purported right of first refusal with respect to
the HRD shares held by B.U.S. will constitute a breach of the implied covenant
of good faith and fair dealing in the contract with B.U.S.
94. Plaintiff has been injured by reason of HRD's breach of the
implied covenant of good faith and fair dealing.
95. Plaintiff has no adequate remedy at law.
FOURTH CLAIM FOR RELIEF
(BREACH OF IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING IN
SHAREHOLDERS AGREEMENT AGAINST HRD AND HII)
96. Plaintiff repeats and realleges the allegations contained in
Paragraphs 1 through 95 of this Complaint as if set forth fully herein.
97. Every contract contains an implied covenant of good faith and
fair dealing.
98. HII and HRD's structuring and manipulation of the terms and
timing of the tender offer, and HRD's failure to accept the tender of HRD shares
by B.U.S. or failure to extend the tender offer until such time as its majority
and controlling shareholder, HII, decides whether or not to exercise its
purported right of first refusal with respect to the HRD shares held by B.U.S.
constitutes a breach of the implied covenant of good faith and fair dealing in
the Shareholders Agreement with B.U.S.
99. Plaintiff has been injured by reason of HRD's breach of the
implied covenant of good faith and fair dealing.
100. Plaintiff has no adequate remedy at law.
22
<PAGE> 23
FIFTH CLAIM FOR RELIEF
(TORTIOUS INTERFERENCE WITH CONTRACT AGAINST HII)
101. Plaintiff repeats and realleges the allegations contained in
Paragraphs 1 through 100 of this Complaint as if set forth fully herein.
102. As described above, a contract exists between HRD and BUS
because HRD has made an offer for the tender of shares and BUS has accepted that
offer by tendering its HRD shares to HRD.
103. HII is aware of the existence of the contract between HRD and
B.U.S. and is further aware that BUS has tendered its shares in response to the
HRD tender offer.
104. Through its control of HRD, HII has timed and structured the
HRD tender offer so as to deprive B.U.S. of the opportunity to participate in
the tender offer.
105. HII has intentionally structured the HRD tender offer to
ensure that HRD cannot accept the B.U.S. tender of shares within the applicable
tender offer period because of its purported claim to the HRD shares owned by
B.U.S. pursuant to the terms of a Shareholders Agreement.
106. Under the Shareholders' Agreement, HII is claiming that it has
a right of first refusal with respect to the tender of HRD shares by B.U.S.
pursuant to the tender offer.
107. Because the Shareholders' Agreement gives HII thirty days upon
which to decide whether or not to exercise its right of first refusal, and
because HII structured the timing of the HRD tender offer to require that B.U.S.
tender its shares within 29 days of the commencement of the tender offer, HII's
actions have intentionally interfered with B.U.S.'s
23
<PAGE> 24
contractual right to participate in the tender offer. HII's actions will cause
HRD to breach its contract with B.U.S.
108. Plaintiff has been injured by reason of HII's tortious
interference with the contract.
109. Plaintiff has no adequate remedy at law.
SIXTH CLAIM FOR RELIEF
(BREACH OF FIDUCIARY DUTY BY HII, AS MAJORITY SHAREHOLDER OF HRD
TO B.U.S., AS MINORITY SHAREHOLDER OF HRD)
110. Plaintiff repeats and realleges the allegations contained in
Paragraphs 1 through 109 of this Complaint as if set forth fully herein.
111. HII is the owner of 50.3% of the common stock of HRD and
control a majority of the seats on HRD's board of directors, thereby exercising
control over HRD.
112. As a majority and controlling shareholder of HRD, HII owes
fiduciary duties of honesty, loyalty, good faith and fairness to its minority
shareholders, including B.U.S.
113. HII has breached its fiduciary duties to BUS by dictating the
terms and timing of a tender offer made by HRD designed to discriminate against
B.U.S. and to deprive B.U.S. of the opportunity of participating in the tender
offer.
114. Plaintiff has been injured by reason of HII's breach of its
fiduciary duties to B.U.S.
115. Plaintiff has no adequate remedy at law.
24
<PAGE> 25
SEVENTH CLAIM FOR RELIEF
(DECLARATORY JUDGMENT THAT HII HAS NO RIGHT OF FIRST REFUSAL UNDER
SECTION 1.2 OF THE SHAREHOLDERS AGREEMENT)
116. Plaintiff repeats and realleges the allegations contained in
Paragraphs 1 through 115 of this Complaint as if set forth fully herein.
117. Section 1.2 of the Shareholders Agreement gives HII and HRD a
right of first refusal where "a Shareholder (a "Selling Shareholder") desires to
transfer Shares at any time pursuant to a bona fide written offer (an "Offer")
to purchase some or all of its Shares for cash." It further provides: "the
Selling Shareholder shall give written notice thereof (the "Notice") to the
other Shareholders . . . Each of the other Shareholders may elect, by written
notice given to the Selling Shareholder within 30 days after the date of the
Notice, to purchase . . . all of the Shares proposed to be sold pursuant to the
Offer at the same price per Share and on the same terms and conditions set forth
in the Offer."
118. HII has taken the position that the right of first refusal
contained in Section 1.2 applies to B.U.S.'s tender of HRD shares.
119. B.U.S. does not believe that HII has any right of first
refusal with respect to HRD's tender of shares pursuant to the tender offer.
120. There is a substantial controversy between B.U.S. and HII
concerning whether Section 1.2 applies to B.U.S.'s tender of HRD shares pursuant
to the HRD tender offer.
121. Plaintiff seeks a declaration that HII has no right of first
refusal with respect to B.U.S.'s tender of HRD shares pursuant to the HRD tender
offer.
25
<PAGE> 26
IRREPARABLE HARM
122. Unless injunctive relief is granted now, B.U.S. will lose its
ability to exchange its shares pursuant to the terms of the tender offer, a
right guaranteed by provisions of the Williams Act. That is so because by the
time that HII decides whether or not to exercise its purported right of first
refusal -- which does not apply here but, nonetheless, HII claims it has 30 days
to exercise -- the tender offer will have been closed and consummated. While HII
takes its purported full 30 days to announce the foregone conclusion that it
will not exercise its right of first refusal, the tender offer -- and B.U.S.'s
right to sell into it -- will have passed. And subsequently when HII ultimately
announces its decision not to exercise its right of first refusal, that decision
will be meaningless, since B.U.S.'s shares will have already been rejected and
be deemed ineligible to participate in the tender offer, and there will be no
further opportunity to re-tender in a closed offer.
123. Moreover, B.U.S. will be irreparably harmed if it is excluded
from participating in the tender offer because, if defendants are successful in
preventing B.U.S. from participating in the tender offer, B.U.S. will be left
with shares in a company with no public shareholders. HRD has already admitted
that it "intends to delist the shares from the Nasdaq Stock Market National
Market" and deregister under the Securities Exchange Act of 1934 (the "Exchange
Act"). HRD's decision to delist HRD's shares and deregister under the Exchange
Act will leave no public market for the shares. B.U.S. will have no ability to
sell its stock to another buyer without the consent of HII, the very party which
dictated the discriminatory terms and conditions of this tender offer. Moreover,
in the absence of a liquid market for the trading of HRD's shares, it will be
difficult to assess the value of B.U.S.'s HRD shares.
26
<PAGE> 27
124. Plaintiff B.U.S. prays for judgment and relief from defendants
as follows:
(A) That by reason of defendants' violation of the All Holders
Rule, breaches of contract, tortious interference with contract and breach of
fiduciary duty, that this Court:
(i) compel either HRD to purchase the HRD shares tendered
by B.U.S. or, alternatively, require HII to exercise its purported right of
first refusal and purchase the HRD shares tendered by B.U.S. pursuant to the
terms and conditions of the tender offer;
(ii) enjoin defendant HRD, its officers, agents, servants,
employees, and attorneys and those persons in active concert or participation
with them from accepting or rejecting any shares tendered by HRD shareholders
until HII first decides whether or not to exercise its purported right of first
refusal under the Shareholders' Agreement;
(iii) enjoin defendant HRD, its officers, agents, servants,
employees, and attorneys and those persons in active concert or participation
with them from making payment for any shares tendered by HRD shareholders until
HII first decides whether or not to exercise its purported right of first
refusal under the Shareholders' Agreement;
(B) That this Court grant plaintiff such other and further relief
as the Court deems just and proper and provide any and all future relief as this
Court may deem just and proper.
(C) That the Court award plaintiff judgment against defendants
jointly and severally for all sums and amounts expended by plaintiffs as a
consequence of the conduct
27
<PAGE> 28
described in the Complaint, including costs and expenses, and attorneys,
accountants, experts, and other costs of the litigation.
Dated: New York, New York
June 24, 1996
KAYE, SCHOLER, FIERMAN,
HAYS & HANDLER, LLP
By: /s/ JAMES D. HERSCHLEIN
_________________________________
James D. Herschlein (JH-6782)
425 Park Avenue
New York, New York 10022
(212) 836-8000
Attorneys for Plaintiff
28
