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        Joseph A. Katarincic, David Borkovic, Kirkpatrick & Lockhart, Edward B. Wood, Koppers Co. Law Dept., Pittsburgh, Pa., for plaintiff Koppers, Co., Inc.

        William M. Wycoff, Ralph Scalera, Thorp, Reed & Armstrong, Pittsburgh, Pa., for defendants BNS Partners, BNS, Inc., Bright Aggregates, Inc., and Beazer, PLC.

        James D. Morton, Stanley Yorsz, Buchanan Ingersoll P.C., Pittsburgh, Pa., Stephen Greiner, Willkie, Farr & Gallagher, New York City, for defendants American Exp. Co., Shearson Lehman Bros. Holdings, Inc., Shearson Lehman Hutton, Inc., and SL-Merger, Inc.

                                  TABLE OF CONTENTS

INTRODUCTION .................................................................  1375
   I.  THE PARTIESTHE TENDER OFFERTHE BACKGROUND ...........................  1376
       A.  Plaintiff .........................................................  1376
       B.  The Shearson Interests ............................................  1376
       C.  The Beazer Interests ..............................................  1376
       D.  The NatWest Interests .............................................  1377
       E.  The Acquisition Vehicles ..........................................  1377
       F.  Transactions in Target Stock Prior to March 3, 1988 ...............  1377
       G.  The Tender Offer and Koppers' Response ............................  1378
       H.  Other Litigation ..................................................  1379
           1.  The Delaware Action ...........................................  1379
           2.  The California Action .........................................  1379
  II.  CLAIMS PRESENTED IN THIS ACTION .......................................  1380
       A.  Plaintiff's Complaint .............................................  1380
       B.  Counterclaim Brought by BNS Inc., BNS Partners, Bright Aggregates,
             and Beazer ......................................................  1381
       C.  The Law of Preliminary Injunctions ................................  1381

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       D.  The Williams Act ..................................................  1382
 III.  FINANCIAL INTERESTS OF BRIGHT AGGREGATES, SL-MERGER,
         SPEEDWARD, AND THEIR PARENT COMPANIES ...............................  1384
       A.  BNS Partners ......................................................  1384
       B.  BNS Inc. ..........................................................  1385
           1.  Allocation of Common Shares, Voting Rights, and Other Rights     1385
           2.  Bright Aggregates' Capital Contribution .......................  1385
           3.  Shearson Holdings' Capital Contribution .......................  1386
           4.  Bank Financing ................................................  1386
           5.  Call and Put Options ..........................................  1387
           6.  Summary .......................................................  1387
  IV.  DISCLOSURE OF INFORMATION REGARDING THE SHEARSON ENTITIES .............  1387
       A.  Shearson as a Bidder ..............................................  1387
       B.  The Williams Act Vis-a-Vis Shearson ...............................  1390
           1.  Shearson and Schedule 14D-1Item 10(b) ........................  1391
       C.  Analogous Rules and Regulations ...................................  1391
       D.  Shearson Must Disclose Financial Information ......................  1392
   V.  DISCLOSURE OF PLANS TO REPAY FINANCIAL OBLIGATIONS AND
         CONTRIBUTIONS .......................................................  1393
       A.  Plans Described in the Tender Offer ...............................  1393
       B.  Incomplete Relevations Regarding the Sale of Assets ...............  1394
  VI.  DISCLOSURE OF ALLEGED VIOLATIONS OF THE MARGIN REQUIREMENTS ...........  1395
       A.  Standing of the Plaintiff .........................................  1397
       B.  Bank Syndicate Borrowings .........................................  1397
       C.  Shearson Holdings and the Margin Requirements .....................  1398
           1.  Applicable Margin Regulations .................................  1398
           2.  The Notes .....................................................  1399
           3.  The Series B Preferred Stock ..................................  1402
 VII.  DISCLOSURE OF ALLEGED VIOLATIONS OF THE BANK HOLDING
         COMPANY ACT .........................................................  1403
VIII.  DISCLOSURE OF ALLEGEDLY UNTIMELY HART-SCOTT-RODINO
         NOTIFICATION VIOLATIONS .............................................  1404
  IX.  DISCLOSURE OF INFORMATION REGARDING KOPPERS' ENVIRONMENTAL
         LIABILITIES .........................................................  1405
       A.  The Arguments of the Commonwealth of Pennsylvania and the
             Governor of Pennsylvania as Amici Curiae ........................  1405
       B.  The Arguments of Koppers ..........................................  1406
   X.  DEFENDANTS' COUNTERCLAIMS ALLEGING VIOLATIONS OF THE
         WILLIAMS ACT BY PLAINTIFF ...........................................  1406
  XI.  CONCLUSION ............................................................  1407

        COHILL, Chief Judge.

        Presently before the Court are cross-motions for preliminary injunctions. The plaintiff, Koppers Company, Inc. ("Koppers") brought this action to enjoin a hostile tender offer attempt commenced by defendant BNS, Inc. on March 3, 1988. In its request for a preliminary injunction, Koppers argues that there is a great likelihood that the tender offer violates federal securities and other laws and that irreparable harm will be caused its shareholders if the offer is not enjoined. Defendant BNS, Inc. requests a preliminary injunction ordering Koppers to correct allegedly misleading statements in its Schedule 14D-9 statement, a statement which is required to be filed with the Securities and Exchange Commission ("SEC") by a target company which is the subject of a tender offer. 15 U.S.C. § 78n(d)(4).

        INTRODUCTION

        This is a difficult case. The facts are intricate and complicated; the law is fuzzy. Because of the unusual posture of the American Express/Shearson interests, apparently as broker-dealer-investment banker-advisor-owner

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in this takeover transaction, we have had to find the way by looking at cases, statutes and regulations which merely give us clues as to the direction the court should take. We have found little to serve as an actual roadmap.

        The facts are similarly muddled because of the intricate arrangements of the tender offerors. This is demonstrated by the fact that more than the first one-third of this document is devoted to a description of those arrangements.

        The polestar for us, therefore, has been what we perceive to be the purpose and intent of Congress as reflected in the various securities laws and related statutes, regulations and cases interpreting them. Their overriding purpose was perhaps best-stated recently by Harvard Professor, Louis Loss:

        As the Supreme Court has since [1933] put it, the SEC statutes embrace a "fundamental purpose * * * to substitute a philosophy of full disclosure for the philosophy of caveat emptor and thus to achieve a high standard of business ethics in the securities industry." In short, Congress did not take away from the citizen "his inalienable right to make a fool of himself." It simply attempted to prevent others from making a fool of him.

        L. Loss, Fundamentals of Securities Regulation 32-33 (2nd ed. 1988).

        With this philosophy and clear legislative intent in mind, we have analyzed the facts of this case and concluded that it is more prudent to err on the side of disclosure than obfuscation.

        After consideration of the documents filed with the SEC, the briefs filed by the parties, and the arguments of the parties and other evidence of record provided to us at a hearing held April 4, 5, and 6, 1988, we now make the following findings of fact and conclusions of law in accordance with Fed.R.Civ.P. 52(a).

        I. THE PARTIESTHE TENDER OFFERTHE BACKGROUND

        A. Plaintiff

        Plaintiff, Koppers Company, Inc. ("Koppers") is a corporation organized under the laws of the State of Delaware with its principal place of business in Pittsburgh, Pennsylvania. Koppers' common and preferred stocks are registered pursuant to section 12(g) of the Securities Exchange Act of 1934, 15 U.S.C. § 78g, and are listed and traded on the New York, Midwest and Pacific Stock Exchanges. Koppers has two divisions: (1) Construction Materials and Services, and (2) Chemical and Allied Products.

        B. The Shearson Interests

        Defendant American Express Company ("American Express") is a corporation organized under the laws of the State of New York and has its principal place of business in New York City.

        Defendant Shearson Lehman Brothers Holdings, Inc. ("Shearson Holdings") is a corporation organized under the laws of the State of Delaware and has its principal place of business in New York City. American Express owns over 60% of the equity interest in Shearson Holdings.

        Defendant Shearson Lehman Hutton, Inc. ("Shearson Lehman") is a corporation organized under the laws of the State of Delaware with its principal place of business in New York City. Shearson Lehman is a wholly owned subsidiary of Shearson Holdings.

        Defendant SL-Merger, Inc. ("SL-Merger") is a corporation organized under the laws of the State of Delaware and has its principal place of business in New York City. SL-Merger is a wholly owned subsidiary of Shearson Lehman and an indirect subsidiary of Shearson Holdings. SL-Merger has engaged in no activities other than those incident to its organization and the tender offer.

        C. The Beazer Interests

        Defendant Beazer PLC ("Beazer") is an English public limited company with its principal place of business at Beazer House, Lower Bristol Road, Bath, Avon BA2 3EY, United Kingdom.

        Defendant Bright Aggregates Inc. ("Bright Aggregates") is a corporation organized under the laws of the State of

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Delaware with its principal place of business in Dallas, Texas. Bright Aggregates is a wholly-owned indirect subsidiary of Beazer. Brian Beazer is Chairman and Chief Executive of Beazer and President and Director of Bright Aggregates.

        D. The NatWest Interests

        Defendant National Westminster Bank PLC ("NatWest") is an English banking company that is registered in the United States under the Bank Holding Company of 1956, 12 U.S.C. § 1841.

        Speedward Limited ("Speedward") is a company organized under the laws of the United Kingdom and is a wholly-owned direct subsidiary of NatWest Investment Bank Limited ("NatWest Limited"), also an English company. NatWest Limited is a wholly-owned subsidiary (and the investment banking arm of) NatWest.

        Cutting through the maze of the corporations, partnerships and the individual just described, these defendants represent three interests united in attempting to take over KoppersBeazer, Shearson and NatWest.

        E. The Acquisition Vehicles

        On October 16, 1987, Beazer, NatWest, and Shearson Holdings formed BNS Partners under the Delaware Uniform Partnership Act. The partnership consisted of Bright Aggregates, Speedward, and SL-Merger each of which jointly contributed $50 million in capital.

        Beazer, through Bright Aggregates, has contributed $24.5 million in capital and received a 49% interest in the partnership; Shearson, through SL-Merger, contributed $23.05 million and received a 46.1% interest in the partnership; and NatWest, through Speedward, contributed $2.45 million and obtained a 4.9% interest. The sole purpose of the partnership was to acquire shares of Koppers prior to the tender offer, which was not made until March 3, 1988. Bright Aggregates, with Mr. Beazer as its President, is the managing partner of BNS Partners and has sole authority to manage the partnership's affairs.

        Defendant BNS, Inc. ("BNS Inc.") is a corporation organized under the laws of the State of Delaware and has its principal place of business in Dallas, Texas. The shareholders of BNS Inc. are Bright Aggregates, Speedward, and SL-Merger. These three shareholders own stock in BNS Inc. in apparent direct proportion to the capital contributions of their progenitors; the relationship is somewhat obscured, however, by the fact that each of the three owns a fraction of one share of a different class of stock, with the three holdings coming to a total of one share.

        Thus, Bright Aggregates owns .490 shares of Class A common stock, which is all the Class A common stock outstanding; SL-Merger holds .461 shares of Class B common stock; Speedward holds .024 shares of Class B common stock and .025 shares of Class C common stock. We will discuss this unusual arrangement later.

        BNS Inc. was formed for the sole purpose of acquiring the shares of Koppers from the tender offer.

        F. Transactions in Target Stock Prior to March 3, 1988

        Bright Aggregates began purchasing Koppers' stock through Shearson prior to the tender offer. As of October 21, 1987, Bright Aggregates had accumulated 343,400 common shares of Koppers stock. Bright Aggregates now owns 458,100 shares of common stock which it purchased in the open market.

        Between October, 1987, and March 3, 1988, BNS Partners used its $50 million in capital and an additional $21 million in margin loans to purchase 1,636,000 shares of Koppers stock in the open market through its broker, Shearson Lehman. In order to comply with the stock purchasing notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C. § 18a(a), BNS Inc. filed their Hart-Scott-Rodino Notification and Report forms with the SEC on March 3, 1988, the same day it commenced its tender offer. The timing of the purchases relative to the infusion of capital was called into question at the hearing.

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        G. The Tender Offer and Koppers' Response

        On March 3, 1988, BNS Inc., Bright Aggregates, and Beazer each filed a Schedule 14D-1 with the Securities and Exchange Commission ("SEC"), as required by 15 U.S.C. § 78n(d)(1), and commenced an unsolicited tender offer for Koppers' common stock at a price of $45.00 per share and its cumulative preferred stock 4% series at a price of $107.75 per share. The stated purpose of the tender offer is to acquire all the stock of Koppers and to seek to have Koppers consummate a merger or similar business combination transaction with BNS Inc., or an affiliate of BNS Inc. The tender offeror was identified as BNS Inc. There have since been at least 20 amendments to the original Schedule 14D-1.

        No entity identified with the Shearson interestsSL-Merger, Shearson Lehman, American Express, or Shearson Holdings filed a Schedule 14D-1 relating to the tender offer. In addition to its part ownership of BNS Inc. through SL-Merger, Shearson is the financial advisor for BNS Inc. and one of the dealer-managers for the tender offer.

        To complete the tender offer, the BNS Inc. tender offer statement reveals that financing of approximately $1.7 billion is needed. Shearson is to provide approximately $570 million; a syndicate of banks led by Citibank is to lend approximately $864 million, and Beazer is to contribute $298 million for preferred stock issued by BNS Inc. and the 458,100 common shares of Koppers that it holds. Beazer's contribution is largely financed by NatWest. The financial arrangements are discussed more fully at Part III of this Opinion.

        Upon completion of the tender offer, BNS Partners will transfer its shares of Koppers to BNS Inc.; the partnership will be dissolved, and BNS Inc. will assume the liabilities and obligations of BNS Partners. BNS Inc., will, in turn, issue common shares to be distributed among the partners of BNS Partners, so that immediately after the distribution Bright Aggregates will hold 490 shares of Class A Common Stock, SL-Merger will hold 461 shares of Class B Common Stock, and Speedward will hold 24 shares of Class B Common Stock and 25 shares of Class C Common Stock.

        The stated purpose of the tender offer is to acquire control of Koppers through the purchase of common and preferred shares of Koppers. The tender offer states in part:

        as soon as practicable following completion of the Offer, to seek maximum representation on the Company's [Koppers'] Board of Directors and to propose the Merger, pursuant to which each outstanding Common Share (other than Shares held by the Purchaser [BNS, Inc.], the Partnership [BNS Partners] or Bright [Bright Aggregates], Shares held in the treasury of the Company and Shares held by stockholders who properly perfect appraisal rights under Delaware law) would be converted into the right to receive an amount in cash equal to the price per Share paid pursuant to the Offer. Prior to consummating the Merger, the Purchaser intends to cause the Company to redeem all Preferred Shares not purchased pursuant to the Offer for $107.75 per Preferred Share (plus accrued and unpaid dividends) or, in the case of a Short-Form Merger ..., to cause each Preferred Share ... to be converted in the Short-Form Merger into the right to receive such amount.

        Tender Offer, at 29.

        The exact timing and details of the Merger will depend upon a variety of factors and legal requirements and the number of Shares acquired by the Purchaser pursuant to the Offer.... Although it is the Purchaser's intention ... to propose and seek to consummate the Merger, the Purchaser can give no assurance that the Merger will be consummated or as to the timing of the Merger.

        Tender Offer, at 35.

        On March 16, 1988, the Koppers Board of Directors ("The Board") declared the $45 per share offer of March 3 to be inadequate. The Board did conclude, however, that the offer price of $107.75 for the preferred stock was adequate. As required by

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15 U.S.C. § 78n(d)(4), Koppers filed a Schedule 14D-9 with the SEC.

        On March 21, 1988, defendants increased their tender offer proposal to $56 per share of common stock. On March 22, 1988, the Board declared the $56 per share offer to be inadequate.

        On March 25, 1988, the defendants increased their offer to $60 per share of common stock. On April 5, 1988, The Board met to consider the $60 offer, and announced that it was unable to take a position as to the adequacy of the offer, although Mr. Charles Pullin, Chairman and Chief Executive Officer of Koppers, indicated in his testimony at the hearing before this court that he feels the offer is inadequate.

        The original offer of $107.75 per share of preferred stock has not been modified.

        The tender offer is scheduled to expire April 15, 1988.

        H. Other Litigation

        There are two actions related to this tender offer proceeding in the United States District Courts in the District of Delaware and in the Central District of California. There have been significant rulings in each of those courts which put our case in an almost contingent posture. See this Court's Temporary Restraining Order of April 6, 1988. Nevertheless, counsel indicated during our preliminary injunction hearing that they wish to pursue their respective requests for preliminary injunctions, and we see no reason to delay our consideration of the matters before us.

        1. The Delaware Action

        The laws of State of Delaware have an important presence in this case. Among other conditions, the tender offer was predicated on:

        (3) the purchaser being satisfied that the restrictions on business combinations contained in section 203 of the Delaware General Corporation Law are invalid, unenforceable, or otherwise inapplicable to the proposed merger (as a result of board action, the tender of a sufficient number of shares, court action or otherwise); (4) the purchaser being satisfied that the proposed merger can be consummated without the need for a supermajority vote of the company stockholders pursuant to Article Eighth of the company's certificate of incorporation (as a result of board action, the tender of a sufficient number of shares, or otherwise).

        Tender Offer, at 1.

        Accordingly, on March 3, 1988, the same day it commenced the tender offer, defendant BNS Inc. filed an action against Koppers, and its individual directors, the Attorney General and the Secretary of State of the State of Delaware in the United States District Court for the District of Delaware, docketed at Civil Action No. 88-130. BNS Inc. sought a declaratory judgment that the Delaware takeover statute is unconstitutional, and a preliminary injunction preventing the activation of the rights ("poison pill") plan previously adopted by Koppers' board of directors.

        On April 1, 1988, the Delaware court filed an opinion holding that the Delaware statute is most likely not unconstitutional and that Koppers' rights plan most probably will not immediately irreparably injure BNS Inc., and denying BNS Inc.'s motion for a preliminary injunction.

        Pursuant to the Delaware statute, the validity of which the court upheld, the defendants must obtain 85% of the voting stock of Koppers in order to avoid the restrictions of that statute. In such event, the rights plan of Koppers would also be inapplicable because its 80% supermajority requirement would be satisfied. The only other manner in which the tender offer's conditions can be satisfied is by action of Koppers' board of directors.

        2. The California Action

        The Beazer interests have an aggregate construction materials business in California, which competes with a plant owned by Koppers in California. The United States District Court for the Central District of California issued a preliminary injunction on April 4, 1988, indefinitely enjoining the tender offer on antitrust grounds. Although the Ninth Circuit Court of Appeals

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has agreed to hear BNS Inc.'s appeal on an expedited basis the week of May 9, 1988, the preliminary injunction is still in effect.

        II. CLAIMS PRESENTED IN THIS ACTION

        A. Plaintiff's Complaint

        At the outset, we note that this Court has jurisdiction pursuant to Section 27 of the Securities Exchange Act of 1934, 15 U.S.C. § 78a et seq. (the "Exchange Act") and 28 U.S.C. §§ 1331 & 1337. Furthermore, venue is proper in the Western District of Pennsylvania pursuant to Section 27 of the Exchange Act, 15 U.S.C. § 78aa, and 28 U.S.C. § 1391.

        On March 11, 1988, Koppers filed this action, alleging that the defendants had committed various violations of the Williams Act, 15 U.S.C. § 78n(d)(1) & (e), in connection with the tender offer. The same day, defendants BNS Partners, BNS Inc., Bright Aggregates, and Beazer PLC filed a Motion to Transfer the Koppers' action to the United States District Court for the District of Delaware on the grounds (1) that venue more properly lies in Delaware for the convenience of the parties and witnesses, and in the interests of justice, pursuant to 28 U.S.C. § 1404(a); and (2) that this action belongs in the Delaware court as a compulsory counterclaim to the Delaware action, see Fed.R.Civ.P. 13. In my absence, Judge Diamond of this court heard arguments on an expedited basis, and denied the motion to transfer pursuant to section 1404(a). On March 17, 1988, after hearing additional arguments, I issued an Opinion and Order denying the defendant's Motion to Transfer, holding that the action filed in the Western District of Pennsylvania is not a compulsory counterclaim to the issues presented in the Delaware action.

        Koppers alleges that the defendants are soliciting tenders of Koppers' stock through a materially false and misleading Offer to Purchase that fails to disclose information required by the Securities Exchange Act of 1934.

        Count 1 of Koppers' Amended Complaint alleges that the defendants violated Sections 14(d) and 14(e) of the Williams Act, 15 U.S.C. § 78n(d) and (e), and the rules and regulations of the Securities Exchange Commission by (1) failing to provide adequate information regarding the role of the Shearson entities; (2) failing to disclose that a subsidiary of Shearson, E.F. Hutton & Company, Inc., has pled guilty to certain criminal charges and that certain of its former employees face legal actions and SEC investigations; (3) failure to file financial information with respect to "bidders" Shearson Lehman and NatWest; (4) failure to file other material information concerning the bidders; and (5) failure to state which jurisdictions are encompassed in a disclaimer that tenders will not be accepted from jurisdictions in which the making of the offer would not be in compliance with state securities laws.

        Count 2 alleges that the Schedule 14D-1 fails to disclose (1) the conditional and speculative nature of the financing; (2) that the terms of the financing would violate Section 7 of the Exchange Act; (3) that Shearson purchased and sold Koppers' securities between the date on which BNS Partners was formed and the date the tender offer commenced; (4) that Shearson Lehman contacted Koppers in February, 1988, and offered to assist Koppers in any defense of a tender offer; and (5) that significant criminal, civil, and administrative investigations have been undertaken.

        Count 3 alleges that the Schedule 14D-1 fails to disclose that the transaction contemplated by the tender offer violates Section 7 of the Exchange Act, 15 U.S.C. § 78g, and Federal Reserve Board Regulations G, T, U, and X, 12 C.F.R. §§ 207, 220, 221, and 224, in that the banks and broker-dealers involved in this transaction are prohibited from lending more than 50% of the funds used to purchase stock if such stock is to be used to secure a loan. It is further alleged that BNS Inc. is a shell corporation that will incur debt as a result of the tender offer which will exceed the 50% limitation.

        Count 4 alleges that the Schedule 14D-1 fails to disclose that the transaction contemplated by the tender offer violates Section 4(a)(1) of the Bank Company Holding

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Act, 12 U.S.C. § 1843(a)(1), which prohibits a bank holding company from acquiring "direct or indirect ownership or control of any voting shares of a company which is not a bank," in that NatWest is a bank holding company which will acquire 4.9% indirect ownership of Koppers' stock if the tender offer is successful.

        On the basis of these four counts, Koppers seeks a preliminary and permanent injunction against the defendants' solicitation and/or purchase of Koppers' stock by means of the tender offer, an order requiring correction of false and misleading statements, an order prohibiting future false and misleading statements, damages, and other just and proper relief.

        Count 5 alleges that Shearson Holdings and/or Shearson Lehman violated Section 10(b) of the Exchange Act, 15 U.S.C. § 78j, and the rules and regulations promulgated thereunder by executing transactions in Koppers' stock from October 17, 1987, through March 2, 1988, during which period Koppers repurchased 476,000 shares of its stock. Koppers alleges that the stock price was artificially inflated and manipulated during that period and seeks a judgment for all damages it sustained as a result of Shearson Holdings' and/or Shearson Lehman's actions.

        In its Second Amended Complaint, Koppers added Count 6, alleging that defendants violated the Williams Act by failing to disclose that BNS Inc. had violated the Hart-Scott-Rodino Antitrust Improvements Act, 15 U.S.C. 18a(a) & (d) by its transaction in Koppers stock prior to commencement of the tender offer. The relief requested for Count 6 is the same as that requested for Counts 1 through 4.

        On March 25, 1988, defendants BNS Partners, BNS Inc., Bright Aggregates, and Beazer, filed an answer and counterclaim setting forth affirmative defenses challenging the good faith of Koppers' responses to the tender offer and charging that the Schedule 14D-9 filed by Koppers violated the Williams Act in several respects.

        B. Counterclaim Brought by BNS, Inc., BNS Partners, Bright Aggregates and Beazer

        BNS Inc., BNS Partners, Bright Aggregates, and Beazer PLC have filed a counterclaim alleging that the Schedule 14D-9 filed by Koppers in response to the tender offer is materially false and misleading and is therefore in violation of the Williams Act, in that Koppers has failed to disclose material information about: (1) its rejection of the original tender offer price of $45 a share; (2) the terms of Koppers' suggested plan of recapitalization and proposed substantial cash dividend or distribution; (3) the terms for financing Koppers' suggested plan of recapitalization; (4) the sale of Koppers' stock to its employee stock ownership plan; (5) the potential sale of all or part of Koppers' construction materials and service business; (6) the effect of Koppers' proposed plans on the price of Koppers' stock; (7) how Koppers will service the debt it will incur if its plan is executed; and (8) how Koppers' plan is more advantageous than BNS Inc.'s offer.

        The defendants asserting this counterclaim request an order dismissing Koppers' complaint, granting a preliminary and permanent injunction ordering Koppers to correct its Schedule 14D-9 to comply with the Williams Act, and granting fees and costs.

        C. The Law of Preliminary Injunctions

        Under the law established by the Third Circuit Court of Appeals, a party seeking preliminary injunctive relief must establish four essential elements: (1) that it has a reasonable probability of success on the merits of its underlying claim, (2) that it will be irreparably injured by denial of the requested injunctive relief, (3) that the denial of the preliminary relief will result in greater harm for the moving party than that experienced by the non-moving party, and (4) that the granting of preliminary relief will be in the public interest. SI Handling Systems, Inc. v. Heisley, 753 F.2d 1244, 1254 (3d Cir.1985); Moteles v. University of Pennsylvania, 730 F.2d 913,

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918 (3d Cir.1984), cert. denied, 469 U.S. 855, 105 S.Ct. 179, 83 L.Ed.2d 114 (1984).

        The four elements for preliminary injunctive relief constitute mixed questions of fact and law. Gearhart Industries, Inc. v. Smith Int'l, Inc., 741 F.2d 707, 710 (5th Cir.1984).

        While a preliminary injunction should be issued only with great care, Hanson Trust PLC v. SCM Corp., 774 F.2d 47, 60 (2d Cir.1985), preliminary injunctive relief is a particularly useful remedy to prevent potential violations of the disclosure requirements of securities laws. As the Third Circuit Court of Appeals has stated:

        Prior to consummation of the offer the court still has a variety of methods available to it for correction of the misstatements or omissions. But once the tender offer has been consummated it becomes difficult, and sometimes virtually impossible to "unscramble the eggs." On the other hand, preliminary relief does not, in assuring that the offer will be lawfully made, sacrifice the legitimate desires of shareholders to accept the offer. If the offeror is subsequently vindicated after a trial on the merits, the offer may be renewed. Thus, in the normal situation, when it appears likely that the offer may contain materially misleading statements or omissions as made, the interest of the shareholders and of the public in full disclosure of relevant circumstances renders preliminary injunctive relief an appropriate method of remedying the deficiencies in disclosure before the offer is consummated.

        Ronson Corp. v. Liquifin Aktiengesellschaft, 483 F.2d 846, 851 (3d Cir.1973), cert. denied, 419 U.S. 870, 95 S.Ct. 129, 42 L.Ed. 2d 108 (1974) (citations omitted). See also Sonesta 483 F.2d 247, 250 (2d Cir.1973)'>Int'l Hotels Corp. v. Wellington Associates, 483 F.2d 247, 250 (2d Cir.1973).

        Proper judgment requires a delicate balancing of all of these elements. Eli Lilly & Co. v. Premo Pharmaceutical Laboratories, 630 F.2d 120, 136 (3d Cir.1979), cert. denied, 449 U.S. 1014, 101 S.Ct. 573, 66 L.Ed.2d 473 (1980).

        As a remedy for defects in tender offers, injunctions may often play a supporting role, and the courts will not hesitate to enjoin the tender offer until compliance with the securities laws can be determined. Pacific Realty Trust v. APC Investments, Inc., 685 F.2d 1083, 1086 (6th Cir.1982). As alternative remedies, a court may also require curative disclosure, a permanent injunction in order to punish and deter intentional violations of the securities laws, or a permanent injunction if there are manipulative acts that cannot be cured through disclosure. Id.

        In cases in which it is alleged that a tender offeror has failed to meet disclosure requirements, a showing of a material omission or misstatement in a tender offer prospectus does not of itself satisfy the requirement that the movant for preliminary injunctive relief show irreparable harm; the disputed tender offer must result in a situation which would be difficult to unravel, or the plaintiffs must identify specific injuries resulting from continuation of the offer in its present form for which monetary award or other legal remedy would not adequately compensate them. Schmidt v. Enertec Corp., 598 F.Supp. 1528, 1543 (S.D.N.Y.1984).

        Defendants maintain that the only injunctive relief available under the Williams Act is for corrective disclosure. See, e.g., Hubco, Inc. v. Rappaport, 628 F.Supp. 345 (D.N.J.1985); Energy Ventures, Inc. v. Appalachian Co., 587 F.Supp. 734 (D.Del. 1984), and that no further relief is available.

        D. The Williams Act

        Congress added the Williams Act to the system of federal securities regulation to fill a gap in the disclosure scheme of the 1933 and 1934 securities laws. The Williams Act is designed to insure that stockholders confronted with a tender offer, whether hostile or friendly, are provided with sufficient information about the transaction to make an informed investment decision. Bolton v. Gramlich, 540 F.Supp. 822, 836 (S.D.N.Y.1982); Texasgulf, Inc. v. Canada Development Co., 366 F.Supp. 374, 420 (S.D.Texas 1973).

        The House Interstate and Foreign Commerce Committee explained the purpose of

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the Williams Act as follows: "The persons seeking control ... have information about themselves and about their plans which, if known to investors, might substantially change the assumptions on which the market price is based. This bill is designed to make the relevant facts known so that shareholders have a fair opportunity to make their decision." H.Rep. No. 1711, 90th Cong., 2d Sess., reprinted in 2 U.S. Code & Admin.News, 1968, pp. 2811, 2813.

        Congress intended to assure basic honesty and fair dealing, not to impose an unrealistic requirement of laboratory conditions that might make the new statute a potent tool for incumbent management to protect its own interests against the desires and welfare of the stockholders. Sonesta, 483 F.2d at 255. Congress did not intend the Act to be a weapon with which to defeat tender offers. Gray Drug Stores, Inc. v. Simmons, 522 F.Supp. 961, 964 (N.D.Ohio 1981). "The Williams Act is not intended to favor either tender offerors or incumbent management. Congress recognized that while tender offers serve a useful purpose in providing a check on entrenchment and inefficient management, target management is in the best position to evaluate the offer and oppose a bid that is not in the best interests of the target's shareholders. Congress therefore attempted to preserve a neutral setting in which the contenders could fully and fairly present their arguments." Comment, A Critical Survey of Target Company Disclosure Obligations Under the Williams Act, 59 Temple Law Quarterly 1189, 1195 (1986).

        Section 14(d)(1) is codified at 15 U.S.C. § 78n(d)(1) and provides in relevant part:

        (d)(1)It shall be unlawful for any person, directly or indirectly, by use of the mails or by any means or instrumentality of interstate commerce or of any facility of a national securities exchange or otherwise, to make a tender offer for, or a request or invitation for tenders of, any class of any equity security which is registered pursuant to section 781 of this title, ... if, after consummation thereof, such person would directly or indirectly, be the beneficial owner of more than 5 per centum of such class, unless at the time copies of the offer are first published or sent to security holders such person has filed with the Commission a statement containing the information specified in section 78m(d) and such information as the Commission by rules and regulations prescribe as necessary or appropriate in the public interest or to protect investors. The rest of this provision states in sum that all documents used to solicit the tender offer must follow the regulations of the Commission and must be filed with the Commission.

        Section 14(e) is codified at 15 U.S.C. § 78n(e) and provides:

        (e) It shall be unlawful for any person to make any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or to engage in any fraudulent, deceptive, or manipulative acts or practices, in connection with any tender offer, request, or invitation. The Commission shall, for the purposes of this subsection, by rules and regulations define, and prescribe means reasonably designed to prevent, such acts and practices as are fraudulent, deceptive, or manipulative.

        SEC Rule 14d-6, 17 C.F.R. § 240.14d-6, and SEC Schedule 14D-1, 17 C.F.R. § 240.14d-100, set forth the minimum disclosure requirements that must be satisfied for a tender offer to comply with Section 14(d)(1). These include, inter alia:

        (1) the identity and background of the bidder, including information regarding civil and criminal lawsuits involving the bidder and its affiliates during the past five years, Schedule 14DItem 2,

        (2) Any borrowings by the bidder for the purpose of the tender offer, Schedule 14D Item 4,

        (3) The purpose or purposes of the tender offer and any plans or proposals regarding, among other things, the sale of a material amount of assets of the company or its subsidiaries, changes in the present board of directors or management,

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and changes in the present capitalization, Schedule 14DItem 5,

        (4) Any contracts, arrangements or understandings between the bidders and any other person with respect to the target's securities, Schedule 14DItem 7,

        (5) Financial statements of the bidder where those statements are material to a decision whether to sell, tender or hold securities, Schedule 14DItem 9.

        The Williams Act "does not require that the offeror disclose all information that it possesses about itself or the target company," Weeks Dredging & Contracting, Inc. v. American Dredging Co., 451 F.Supp. 468, 482 (E.D.Pa.1978), but only those "material objective factual matters" which a reasonable stockholder would consider important in deciding whether to tender his shares. Data Probe Acquisition Corp. v. Datatab, Inc., 722 F.2d 1, 6 (2d Cir.1983), cert. denied, 465 U.S. 1052, 104 S.Ct. 1326, 79 L.Ed.2d 722 (1984).

        Under the Williams Act, a target corporation has a private cause of action to obtain corrective disclosures from a tender offeror who has disseminated allegedly false and misleading tender offer materials. Florida Commercial Banks v. Culverhouse, 772 F.2d 1513 (11th Cir.1985).

        Some courts have held that to be successful on the merits of its claim, the target must prove four elements: (1) that a misleading statement or omission was made in connection with a tender offer, (2) the misstatement or omission was material, (3) the defendants knew or should have known of the duty to disclose or that the statement was misleading; some mental culpability more than negligence, and (4) that the misstatement or omission caused the plaintiff's injuries. Lowenschuss v. Kane, 520 F.2d 255, 268 (2d Cir.1975); Chris-Craft Industries v. Piper Aircraft Corp., 480 F.2d 341, 362 (2d Cir.1973), cert. denied, 414 U.S. 910, 94 S.Ct. 231, 38 L.Ed.2d 148 (1973).

        For the purposes of the Williams Act, facts are deemed to be material if there is a substantial likelihood that a reasonable investor would consider them important or significant in making an investment decision. Berg v. First American Bankshares, Inc., 796 F.2d 489, 495 (D.C. Cir.1986). The materiality requirement does not require proof of substantial likelihood that disclosure of the omitted fact would have caused a reasonable investor to change his vote, but rather a showing that under all the circumstances the omitted fact would have assumed actual significance in deliberations of the reasonable shareholder. Riggs National Bank v. Allbritton, 516 F.Supp. 164, 172 (D.D.C.1981). Put another way, there must be a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the "total mix" of information made available. TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 449, 96 S.Ct. 2126, 2132, 48 L.Ed.2d 757 (1976).

        The issue of materiality is deemed an issue of fact, but in the last analysis it remains an objective question and may be resolved as a matter of law when reasonable persons could not differ as to the importance of the facts under scrutiny. SEC v. Savoy Indust., Inc., 587 F.2d 1149, 1166 (D.C.Cir.1978), cert. denied, 440 U.S. 913, 99 S.Ct. 1227, 59 L.Ed.2d 462 (1979). Osofsky v. J. Ray McDermott & Co., Inc., 725 F.2d 1057, 1059 (2d Cir.1984) (materiality is question of fact).

        III. FINANCIAL INTERESTS OF BRIGHT AGGREGATES, SL-MERGER, SPEEDWARD, AND THEIR PARENT COMPANIES

        The issues underlying plaintiff's Williams Act allegations in this case stem in part from the financial structure of the tender offer and the transaction it contemplates. The nominal tender offeror is BNS Inc., which was formed for the sole purpose of acquiring the shares of Koppers through the tender offer. The three shareholders of BNS Inc. are Bright Aggregates (the Beazer interests), SL-Merger (the Shearson interests) and Speedward (the NatWest interests).

        A. BNS Partners

        Bright Aggregates, SL-Merger, and Speedward comprise a general partnership, BNS Partners. As previously explained,

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Bright Aggregates has a 49% interest in BNS Partners, SL-Merger a 46.1% interest, and Speedward a 4.9% interest. The partners have contributed $50 million, and have borrowed another $21 million on margin against Koppers shares, to enable the partnership to buy additional Koppers shares; this is a small fraction of the capital required for the tender offer.

        Prior to the commencement of the tender offer, BNS Partners had already acquired 1,636,000 shares of Koppers common stock, or 5.82% of the outstanding shares of Koppers. Bright Aggregates independently owned another 458,100 common shares, or 1.63% or the outstanding shares. Together the common stock owned by BNS Partners and Bright Aggregates constitute 7.45% of the total outstanding common stock, and 7.34% of the fully diluted common stock. Tender Offer, at 2.

        The partnership agreement contemplates that BNS Partners will be dissolved if BNS Inc. purchases the partnership's shares pursuant to the tender offer. BNS Partners will transfer its shares and its liabilities to BNS Inc., leaving BNS Inc. as the sole vehicle for the interests of Bright Aggregates, SL-Merger, and Speedward.

        B. BNS Inc.

        1. Allocation of Common Shares, Voting Rights, and Other Rights

        Currently, Bright Aggregates holds 0.490 shares of Class A common stock, which is all of the BNS, Inc. Class A common stock outstanding. SL-Merger holds 0.461 shares of the Class B common stock, and Speedward holds another 0.024 shares of the Class B common stock. Thus, 4.9% of the outstanding Class B common stock is allocated to Speedward, and the remainder to SL-Merger. Speedward holds all the outstanding shares of Class C common stock, or 0.025 shares. The Class C common shares have no voting rights. Holders of Class A and Class B common shares each elect two directors. The directors elected by the holders of the Class A shares cast three votes to the single vote of the directors elected by the holders of the Class B shares. Thus, Bright Aggregates' directors control 6 of 8 votes on the BNS Inc. Board of Directors.

        For all matters other than the election and removal of directors and certain amendments to the certificate of incorporation and by-laws, each share of Class A common stock is entitled to four votes, and each share of Class B common stock is entitled to one vote. On matters other than the election or removal of directors, the Class B and Class C common shares must vote in the same manner as the majority of Class A shares. In any event, Bright Aggregates holds approximately 80% of the voting power of the common stock. Tender Offer, at 16. SL-Merger and Speedward have agreed to waive their right to enforce any fiduciary duty on the part of Bright Aggregates or Bright Aggregates' directors for at least six years. Tender Offer, at 20.

        BNS Inc. owned no Koppers shares prior to the commencement of the Tender Offer. At the completion of the tender offer, BNS Partners will transfer its shares of Koppers to BNS Inc., the partnership will be dissolved, and more shares in BNS Inc. will be distributed. Immediately after the distribution Bright Aggregates will hold 490 shares of Class A Common Stock, SL-Merger will hold 461 shares of Class B Common Stock, and Speedward will hold 24 shares of Class B Common Stock and 25 shares of Class C Common Stock.

        2. Bright Aggregates' Capital Contribution

        To help finance the purchase, Bright Aggregates is to make a capital contribution of $298 million plus the Koppers shares it currently owns. Schedule 14D-1 (Amendment No. 12), at 2. Bright Aggregates' capital contribution is to be largely funded by loans from NatWest to Beazer PLC. Tender Offer, at 22. NatWest will loan $100 million to Beazer PLC; it will also use its best efforts to syndicate another $100 million, and will issue a $100 million letter of credit to Beazer PLC.

        In return for Bright Aggregates' capital contribution, BNS Inc. is to issue its Series A Preferred Stock to Bright Aggregates.

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The Series A Preferred Stock carries a 20% cumulative dividend, is non-voting, and is redeemable at any time. See Tender Offer 21-22. NatWest's loan to Beazer PLC is to be "repaid from funds generated internally by Beazer PLC." Tender Offer, at 28. However, up to $100 million from Part B of the bank syndicate Merger Facility may be used to redeem a portion of Bright Aggregates' Series A Preferred Stock. Schedule 14D-9, Amendment No. 12, Exhibit 39, at 3.

        3. Shearson Holdings' Capital Contribution

        Shearson Holdings is to make a capital contribution totalling $570 million. Shearson Holdings' contribution may take one of two forms, as determined at the discretion of BNS Inc. BNS Inc. may request Shearson Holdings to either (1) contribute $570 million in return for unsecured senior subordinated notes (the "Notes") from BNS Inc.; or (2) contribute $540 million in return for Series B Preferred Stock in BNS Inc., in which case Shearson Holdings will make an additional $30 million loan at the time of the merger. Schedule 14D-1, Amendment No. 12, at 2. The Notes are to be unsecured. The tender offer gives no indication of the criteria by which the choice between Notes and Series B Preferred Stock is to be made. If Shearson Holdings takes Notes, rather than the Series B Preferred Stock, then the tender offer anticipates that "the Notes will be refinanced, in part by the sale of Refunding Securities." Tender Offer, at 28.

        If Shearson Holdings does take Notes rather than the Series B Preferred Stock, then BNS Inc. will issue, and Shearson will underwrite, up to $570 million of senior subordinated debentures (the "Refunding Securities") to refinance the Notes. Tender Offer, Amendment No. 12, Exhibit 39, at 2-3. The original tender offer stated that the Notes would be partially refinanced by funds from Part B of the Merger Facility, Tender Offer, at 28, but the most recent agreement indicates that this source will not be available to refinance the Shearson Notes. Amendment No. 12, Exhibit 39, at 3 ("the `Incremental Amount' will be eliminated").

        The Series B Preferred Stock carries a 15% cumulative annual dividend, and would have very limited voting rights. The Series B Preferred Stock may be redeemed at par 10 years from date of issuance, or at par plus accrued dividends after 5 years. Tender Offer, at 25. Shearson Holdings may exchange the Series B Preferred Stock for Notes upon the merger of Koppers and BNS Inc. We note that, while Bright Aggregates will take the Series A Preferred Stock, it is Shearson Holdings, and not SL-Merger, which would take the Series B Preferred Stock.

        Upon consummation of the Merger, Shearson Holdings will also be granted warrants to purchase up to 10% of each class of the Borrower's outstanding equity securities. Amendment No. 12, Exhibit 39, at 2.

        4. Bank Financing

        The remainder of the financing for the tender offer is to be provided by borrowings from a syndicate of banks led by Citibank. The terms of the bank syndicate loan are rather intricate.

        First, $864 million will be made available by the bank syndicate to finance the purchase of shares pursuant to the tender offer. This tender offer loan is referred to in the tender offer as the "Tender Offer Facility." After purchasing Koppers' shares pursuant to the tender offer, the offerors intend to cause a merger between Koppers and BNS Inc. or a subsidiary of BNS Inc. At that time, the bank syndicate will also provide further funds "to repay the Tender Offer Facility and to finance the Merger and related transactions." Tender Offer, at 25. This second borrowing is referred to as the "Merger Facility," and will be as high as $1.187 billion. "Part A" of the Merger Facility is a $543 million 18-month term loan. "Part B" of the Merger Facility is a $644 million eight-year term loan, made available on a revolving basis. $422 million of the Part B loan will be funded upon consummation of the merger. $100 million of Part B will be used to redeem Series A Preferred Stock held by Bright Aggregates, $165 million will be

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used to refinance existing Koppers' debt. Part B will not be made available for repayment of outstanding Notes held by Shearson Holdings. Tender Offer, at 25, Amendment No. 12, Exhibit 39, at 2.

        Citibank's own contribution to the bank syndicate loan is $320 million.

        The bank syndicate loan is secured by a perfected first lien security interest in the assets of BNS Inc. (i.e. the shares of Koppers' stock). The bank syndicate loan is to be repaid:

        from funds generated internally by the Purchaser (including, after the Merger, funds generated by the Company), the sale of the Company's Chemical and Allied Products business and other, as yet unidentified, assets or other sources, which may include the proceeds of the sale of debt or equity securities.

        Tender Offer, at 28.

        5. Call and Put Options

        According to the tender offer, Bright Aggregates is to receive an option (the "Call Option") to purchase all its shares in BNS Inc. at a fixed price, described as the "Option Price." Tender Offer, at 20. SL-Merger and Speedward are each to receive options to sell all of their BNS Inc. shares to Bright Aggregates (the "Put Options"). The tender offer explains in some detail how the exercise price for the options is to be determined.¹ Apparently, the Call and Put Options are limited to the common stock of BNS Inc.

        One significant feature of the Option Price is that it provides for a generous 25% compound annual return on the investments of SL-Merger and Speedward. The chief contributions of SL-Merger and Speedward apparently consist of their capital contributions to BNS Partners to purchase Koppers stock which will be transferred to BNS Inc.

        The terms of these options tend to discourage the transfer of Shearson Lehman's and NatWest's interests in their subsidiaries, SL-Merger and Speedward, as well as any potential litigation by SL-Merger and Speedward against BNS Inc. The Stockholders' Agreement, in turn, severely restricts the transfer of SL-Merger's and Speedward's interests in BNS Inc. Under the Stockholders' Agreement, SL-Merger and Speedward waive their rights to enforce Bright Aggregates' fiduciary duties.

        6. Summary

        In summary, the tender offer explains that the financing for the initial acquisition of Koppers' stock by BNS Inc. is to be provided by (1) NatWest, through a loan to Beazer PLC, in return for which Bright Aggregates will receive Series A Preferred Stock; (2) Shearson Holdings, which will receive warrants, and either Notes (to be partially refinanced by "Refunding Securities"), or Series B Preferred Stock; and (3) a secured loan from a syndicate of banks led by Citibank.

        IV. DISCLOSURE OF INFORMATION REGARDING THE SHEARSON ENTITIES

        A. Shearson as a Bidder

        Plaintiff alleges that the Shearson defendants are "bidders," as that term is

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defined by 17 C.F.R. § 240.100. Plaintiff therefore asserts that as bidders, the Shearson entities must file with the SEC and disclose to Koppers' shareholders the information listed in 17 C.F.R. § 240.14d-6, and that required in a Schedule 14D-1. We agree.

        SEC Rule 14d-1(b)(1), 17 C.F.R. § 240.24d-1(b)(1), defines a "bidder" as "any person who makes a tender offer or on whose behalf a tender offer is made." Schedule 14D-1General Instruction G(i), 17 C.F.R. § 240.14d-100, provides that the term "bidder" means "any person on whose behalf a tender offer is made." While the SEC's rules do not further define "bidder," in 1979 the SEC issued a Release which stated:

        The terms "bidder" and "subject company" provide shorthand references to the principal participants in a tender offer and avoid certain pejorative terms now commonly used to describe participants in a tender offer. The term "bidder" would mean any person who makes a tender offer or on whose behalf a tender offer is made.

        Securities Exchange Release No. 15548, [1979 Transfer Binder] Fed.Sec.L.Rep. (CCH) Para. 81,935 at p. 81,216 (Feb. 5, 1979).

        One court has observed that the SEC's distinction between "bidders and the rest of humanity is not subtle, but rather is used to make a simple differentiation between those who are central to the offer and those who are not." Van Dusen Air, Inc. v. APL Limited Partnership, et al., Civil No. 4-85-1256, p. 4 (D.Minn.1985).

        Case law addressing the definition of "bidder" is sparse, though a few guiding principles have emerged. A person who merely loans funds to the tender offeror to enable it to carry out the offer, and who receives no rights of any kind enabling it to influence the course of the tender offer, cannot be deemed a bidder. Van Dusen Air, Inc. v. APL Limited Partnership, et al., Civil No. 4-85-1256, slip. op. at 2-6 (D.Minn.1985). Investors who form, with their own shares of the target's stock, a shell corporation as a target acquisition vehicle, and who made no additional commitments to finance an offer, are not bidders, Warnco, Inc. v. Andrew Galef, et. al., Civil No. B-86-146, slip op. at 13-15 (D.Conn.1986).

        Two cases from the United States District Court for the District of Delaware demonstrate the distinction between a bidder and the "rest of humanity." Revlon, Inc. v. Pantry Pride, Inc., 621 F.Supp. 804 (D.Del.1985), the court held that two corporations which had controlling interests in the parent and sole shareholder of the tender offeror were not "bidders" since they had not capitalized the tender offeror with their funds nor had they offered their funds to assist in the purchase. Id. at 814. Thus, the mere status as a majority shareholder in the parent of a tender offeror without financial participation is not enough. However, Pabst Brewing Co. v. Kalmanovitz, 551 F.Supp. 882 (D.Del. 1982), the court held that two individuals who were the "primary motivating force behind the formation and capitalization" of the tender offerors which were formed for the sole purpose of consummating the offer had to disclose the information necessary to give the shareholders an opportunity to make an informed choice. Id. at 891-92.

        In the case before us, thus far only the following entities have identified themselves as "bidders" by filing Schedule 14D-1 statements: BNS Inc., Bright Aggregates, and Beazer PLC. None of the Shearson-related entities (American Express, Shearson Holdings, Shearson Lehman, and SL-Merger) have filed a Schedule 14D-1.

        The precise issue before us is whether there is a reasonable likelihood that Koppers could establish at a trial on the merits that Shearson Holdings, acting on its own, through its direct subsidiary Shearson Lehman, and its indirect subsidiary SL-Merger, Inc., is a person "on whose behalf" BNS Inc. is making the tender offer, thus making it a "bidder" within the meaning of SEC's regulations and consequently subjecting it to Williams Act disclosure requirements.

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        Defendants strenuously argue that Beazer is in complete control of the tender offer, and that the Shearson entities are entirely passive. Koppers contends, however, that Shearson has significant influence over the tender offer, if only by virtue of its huge cash investment of $570 million, and even though Shearson and Bright Aggregates will hold different interests in BNS Inc., Bright Aggregates' (Beazer's) borrowed financial contribution, in contrast, is only $298 million.

        Defendants also argue that Shearson is only nominally involved since Mr. Beazer himself does not regard Shearson as a long-term partner in this transaction and intends to cause Bright Aggregates to exercise its call option to acquire Shearson's interest when circumstances permit it to do so.

        Shearson Holdings became involved in the plan at a very early stage. While the actual origination of the idea to acquire Koppers is in dispute, we find it unnecessary to resolve this conflict in determining whether or not Shearson Holdings is a bidder.

        According to the testimony at the hearing before this Court, Mr. Beazer desired to expand his U.S. holdings and had only a limited number of options. He and his advisor, Shearson Holdings, agreed that Koppers was a suitable target acquisition in May, 1987. Shearson Holdings began advising Mr. Beazer with respect to this acquisition in June, 1987.

        Mr. Beazer testified that there were a very limited number of potential acquisitions in which he was interested, and that Koppers was a rather obvious candidate. Mr. Beazer had previously acquired interests in other construction materials businesses.

        The early negotiations between Shearson and Beazer indicate that Shearson intended from the start to take an active, even an aggressive, role in the takeover. See Plaintiff's Exhibit 25Minutes of Meeting of Mr. Beazer and others with Shearson Lehman representatives at Shearson Lehman Offices on August 20, 1987. On October 16, 1987, BNS Partners was formed. Shearson contributed $23.05 million to BNS Partners so that the partnership could begin purchasing shares of Koppers' stock ($4.610 million in October, 1987, $2.305 million in January, 1988, and $16.135 million in February, 1988). BNS Partners now owns 1,636,000 shares of Koppers' common stock. Should the tender offer be successful, the interests in the partnership would be transferred to BNS Inc.

        Shearson Holdings' indirect subsidiary, SL-Merger, holds a significant equity interest in BNS Inc. SL-Merger currently owns .461 shares of Class B common stock, which represents 95.05% of the Class B common stock; the remaining .024 shares of class B common stock are held by Speedward. Shearson Holdings has also been granted warrants, which it may exercise to obtain 10% of each class of outstanding equity of BNS Inc., or any subsidiaries of BNS Inc.

        The Class B shareholders have the right to elect two directors, but the Class B directors are only entitled to one vote each, compared to three votes for the directors elected by the Class A common shares. For all matters other than the election and removal of directors and certain amendments to the certificate of incorporation and by-laws, each share of Class A stock is entitled to four votes and each share of Class B stock is entitled to one vote. The Class B shares must be voted in the same manner as the Class A shares are voted. The BNS Stockholders Agreement severely restricts the transfer of SL-Merger's interests in BNS Inc.

        Upon completion of the tender offer, BNS Inc. will issue more shares, so that the common stock will be allocated as follows: Bright Aggregates490 shares of class A common stock, SL-Merger461 shares of Class B common stock, Speedward24 shares of Class B common stock and 25 shares of non-voting Class C common stock. Thus, through SL-Merger, Shearson Holdings would hold a significant, though not controlling, interest in BNS Inc.

        Shearson Holdings will also acquire additional interests in BNS Inc. because of its direct contribution to the financing of the

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purchase. Shearson Holdings has committed itself to provide a financial contribution of $570 million to BNS, Inc. and in return will take either (1) unsecured subordinated notes from BNS Inc.; or (2) Series B Preferred Stock in BNS, Inc. The Series B Preferred Stock carries a 15% cumulative divided and limited voting rights. If Shearson Holdings takes Notes, rather than the Series B Preferred Stock, then the tender offer anticipates that "the Notes will be refinanced, in part by the sale of Refunding Securities and the remainder from the [Citibank loan]." Tender Offer, at 28. If this occurs, Shearson Holdings will receive 3.5% of any principal amount of the Refunding Securities. Schedule 14D-1, Amendment No. 12, Exhibit 39, at 3.

        There is more to the Shearson's interests than mere equity holdings, however. Shearson also stands to earn significant brokerage fees by: (1) underwriting the purchase of Koppers stock pursuant to the tender offer (some of which Shearson has already realized, since approximately 1,636,000 shares of Koppers have already been purchased through Shearson); (2) underwriting up to $570 million in Refunding Securities, if Shearson elects to take Notes rather than equity, in which case Shearson would be entitled to a fee payable of $2.5 million. Shearson will also earn a 25% compounded annual return on its equity investment in BNS Inc.'s common stock.

        Thus, the Shearson entities play multiple roles in this complex transaction. They have acted, are acting, and will continue to act, as advisor, underwriter, equity partner, and financier to BNS Inc. In addition to their equity interests, they expect to earn significant fees as broker-dealer and underwriter of various financial offerings and transactions associated with this tender offer and its ensuing restructuring.

        Although the tender offer contains no indication that the financial arrangement between Shearson and Beazer is anything but ordinary, in fact the arrangement is quite novel. There seems to be no dispute that this is the first time that a broker-dealer has become so intimately involved in a tender offer, see Wall St.J., Mar. 4, 1988, at 4. Shearson's role far surpasses that of a typical investment banker. Not only has Shearson assisted Mr. Beazer in developing a financial structure intended to enable him to acquire Koppers, Shearson has agreed to be a major equity participant in the takeover vehicles.

        B. The Williams Act Vis-a-Vis Shearson

        The disclosure requirements of the Williams Act were designed to provide information to the market and to prevent market manipulation. They insure that shareholders have an opportunity to make an informed investment decision and additionally provide federal agencies such as the SEC and the Federal Reserve Board the opportunity to monitor tender offer filings for possible violation of federal securities laws.

        In light of this intention, we find a high probability that Koppers would be successful in establishing at a trial on the merits that Shearson Holdings is a bidder for Williams Act purposes. We believe that Shearson Holdings is playing a central participatory role in this tender offer. Shearson Holdings has unquestionably been a motivating force fueling the formation and capitalization of BNS, Inc., as it now stands, and as it is intended to stand after the purchase.

        We would find it difficult to conclude that as a matter of law, one of the principal planners and players in this transaction is exempt from the disclosure requirements of the Williams Act solely because it would hold slightly less than a 50% interest in the tender offeror after the purchase. Shearson's role here is easily distinguishable from those cases which have found that a particular individual or entity was not a bidder for Williams Act purposes. Shearson's argument that it does not have "control" is not persuasive. Although Shearson argues that its right to vote the stock is overshadowed by the larger number of votes held by Beazer, the limited voting does not change the result that Shearson is one of the entities on whose behalf the tender offer is made.

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        1. Shearson and Schedule 14D-1Item 10(b)

        Since we have concluded that, as proffered, the tender offer most likely will be found to violate the Williams Act due to, inter alia, the lack of any information regarding Shearson Holdings, we will address issues which we believe requires special attention in Shearson Holdings Schedule 14D-1. We want to emphasize that by discussing these particular issues, we do not in any way intend to limit the disclosure required by Shearson. In particular, we call Shearson's attention to Item 3 of Schedule 14D-1 regarding "Past contacts, transactions or negotiations with the subject company."

        Item 10(b) of Schedule 14D-1 provides: that the bidder must disclose, "To the extent known by the bidder after reasonable investigation, the applicable regulatory requirements which must be complied with or approvals that must be obtained in connection with the tender offer" if such information is "material to a decision by a security holder whether to sell, tender or hold securities being sought in the tender offer."

        In light of this disclosure requirement, we believe that Shearson Holdings must fully disclose to Koppers' shareholders what effect Shearson's projected equity position in Koppers would have on its status as a broker/dealer. The relationship between broker/dealers and their clients is not that of an ordinary merchant to his customer; strict standards of a fiduciary must be adhered to by the dealer. S. Jaffe, Broker-Dealers and Securities Markets § 7.01 (1978). By engaging in business, the broker-dealer makes a broad representation to the public at large that he will deal fairly with his customers and handle transactions in the usual manner and in accordance with trade custom. Charles Hughes & Co. v. SEC, 139 F.2d 434, 437 (2d Cir.1943).

        Because of Shearson's identity as a major broker-dealer, and because its role in this tender offer is entirely unprecedented, we believe that knowledge of the ramifications of Shearson's equity involvement in a registered security on its future broker-dealer activities is material to a decision by each Koppers' stockholder. Shearson's multiple roles present it with delicate ethical issues that must be forthrightly addressed; the resolution of these may impact on Shearson's continued role in BNS Inc. While we do not, as a court, profess to be an expert in securities regulation, we do recognize potential conflicts of interest when we see them. Not only would the complexities of such issues be material to the decisions by the shareholders of Koppers, but important to the securities market as a whole. The Senate Report on the Williams Act explained the very broad public policy underlying such disclosure:

        The competence and integrity of a company's management ... are of vital importance to stockholders. Secrecy in this area is inconsistent with the expectations of the people who invest in the securities of publicly held corporations and impairs public confidence in securities as a medium of investment.

        S.Rep. No. 550, 90th Cong. 1st Sess. 2 (1967) (emphasis added).

        A brief review of current SEC Rules reveals that the SEC, acting with the interests of security holders in mind, is quite concerned with potential "double-dealing" by broker-dealers. See SEC v. Roussel, 485 F.Supp. 295, 296-97 (D.Kan.1980) (SEC filed, and was successful in, an action against broker-dealer alleging that broker-dealer defrauded stockholders of a target company by engaging in unlawful scheme to obtain control of the target).

        SEC Rule 10b-6 makes it unlawful for a broker-dealer participating in a distribution of securities to bid for or purchase the security being distributed for any account in which he has a beneficial interest until after the broker-dealer has completed its participation in the distribution. 17 C.F.R. § 240.10b-6.

        C. Analogous Rules and Regulations

        While the issue with which we are wrestling is not directly addressed by SEC rules, there are indications in analogous rules and regulations which provide guidance for the direction we should take. For instance:

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        a) The Exchange Act provides that no broker or dealer shall use any instrumentality of interstate commerce to induce the purchase or sale of over-the-counter stock by means of any "manipulative, deceptive, or other fraudulent device or contrivance." 15 U.S.C. § 78o(c)(1). The SEC has provided that this same prohibition applies to stock which is exempted from registration. 17 C.F.R. § 240.10b-3.

        Pursuant to congressional authority, 15 U.S.C. § 78o(c)(1), the SEC has defined the devices and contrivances that are deemed to be manipulative, deceptive and otherwise fraudulent. SEC Rule 15d1-5 provides:

        The term "manipulative, deceptive, or other fraudulent device or contrivance" as used in section 15(c)(1) of the Act, is hereby defined to include any act of any broker, dealer ... controlled by, controlling, or under common control with, the issuer of any security, designed to effect with or for the account of a customer any transaction in, or to induce the purchase or sale by such customer of, such security unless such broker, dealer ..., before entering into any contract with or for such customer for the purchase or sale of such security, discloses to such customer the existence of such control, and unless such disclosure, if not made in writing, is supplemented by the giving or sending of written disclosure at or before the completion of the transaction.

        17 C.F.R. § 240.15c1-5.

        b) Rule 10b-5 prohibits any person from employing a fraudulent device or engaging in a fraudulent practice in the connection with the sale or purchase of any security. Thus, we find there is a serious question over whether the antifraud prohibitions of Rule 10b-5, which would apply to sales of Koppers' stock, could be construed to cover the actions of the broker-dealer which are expressly prohibited in Rule 15c1-5. It certainly appears possible that an analogy could be drawn.

        We note that a class action lawsuit has already been filed in this court on behalf of customers of Shearson alleging that Shearson violated its fiduciary duties to them and manipulated the market by failing to disclose its role in the Koppers' tender offer while at the same time providing advice with respect to Koppers stock. See Complaint in Hartings v. Shearson Lehman Brothers Holdings, Inc., et. al., Civil Action No. 88-744 (W.D.Pa.1988).

        Lastly, we note that despite the fact that the securities industry is a highly regulated industry, that although it is clear that the principle of clean hands, arms-length dealing and full disclosure permeates, Shearson has yet to voluntarily seek SEC or Federal Reserve Board review of the validity of its role in this transaction.

        Certainly, the market deserves an explanation of the measures (if any) taken by the Shearson interests to protect their many customers from the obvious conflicts of interest which the Shearson position here will engender. On balance, we believe that both the shareholders of Koppers and the securities markets deserve an explanation from Shearson as to how it intends to address the conflict of interest dilemma that its role in the Koppers takeover presents. In light of the unique position which Shearson has in the securities markets and the sheer novelty of this transaction, we construe Item 10(b) of Schedule 14D-1 to require Shearson to undertake an investigation of these issues and fully disclose its findings.

        D. Shearson Must Disclose Financial Information

        There is one final point to address regarding the required disclosure by Shearson. Shearson has argued that even if it is a bidder it does not have to disclose financial information. We disagree.

        Item 9 of Schedule 14D-1 provides that where a bidder is other than a natural person and the bidder's financial condition is material to a decision by a security holder of the subject company on whether to sell, tender or hold securities being sought in the tender offer, adequate financial information concerning the bidder must be disclosed. We believe that a shareholder would find particularly important and material information regarding the financial condition of one of the prime financial contributors to this transaction.

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        While it may be true that those shareholders who have firmly decided to tender their shares will have little interest in the financial position of Shearson Holdings other than its ability to pay, other Koppers' shareholders still face a difficult problem in determining their most advantageous course of action, a problem enhanced by their ignorance of the course other shareholders are adopting. "If the bidder is in a flourishing financial condition, the stockholder might decide to hold his shares in the hope that, if the offer was only partially successful, the bidder might raise its bid after termination of the offer or infuse new capital into the enterprise. Per contra, a poor financial condition of the bidder might cause the shareholder to accept for fear that control of the company would pass into irresponsible hands." Prudent Real Estate Trust v. Johncamp Realty, Inc., 599 F.2d 1140, 1147 (2d Cir.1979).

        Thus, Shearson must fully comply with Item 9 in its Schedule 14D-1.

        V. DISCLOSURE OF PLANS TO REPAY FINANCIAL OBLIGATIONS AND CONTRIBUTIONS

        A. The Plans Described in the Tender Offer

        SEC regulations recognize that the nature and terms of financing arrangements are highly material to the decisions of investors. Schedule 14D-1 requires that the bidder "state the source and the total amount of funds or other consideration for the purchase of the maximum number of securities for which the tender offer is made." 17 C.F.R. § 240.14d-100, Item 4(a). For borrowed funds, it also requires the bidder to provide a summary of "each loan agreement or arrangement containing the identity of the parties, the term, the collateral, the stated and effective interest rates, and other material terms or conditions relative to such loan agreement." Item 4(b)(1).

        Furthermore, Item 5 of Schedule 14D-1 requires "bidders" to disclose "any plans or proposals which relate to or would result in ... a sale or transfer of a material amount of assets of the subject company or any of its subsidiaries." Such plans are considered highly material and their inadequate disclosure has frequently led to the issuance of preliminary injunctions. See Marshall Field & Co. v. Icahn, 537 F.Supp. 413, 416 (S.D.N.Y.1982); Pargas, Inc. v. Empire Gas Corp., 423 F.Supp. 199, 209 (D.Md.1976), aff'd, 546 F.2d 25 (1976). Defendants argue, however, that Item 5 only requires disclosure of those plans or proposals that rise to the level of firm intentions. Elec. Specialty v. Int'l Controls Corp., 409 F.2d 937, 948 (2d Cir.1969).

        The tender offer contemplates that $543 million of the money borrowed from the syndicate of banks led by Citibank at the time of the merger (Part A of the Merger Facility) is to be repaid within 18 months. The remaining $644 million of the Merger Facility is an eight-year term revolving loan (Part B). There are apparently no specific plans for repayment of Part B of the Merger Facility.

        However, it is the apparent desire of both the Beazer interests and the Shearson interests that Shearson's interests in BNS Inc. should be transferred to Beazer with relative despatch. Of course, BNS Inc. and/or the Beazer interests will require a tremendous amount of capital to both repay the 18-month term portion of the bank loan ($543 million of the $1,187 million Merger Facility), and also repay the contributions of the various Shearson interests ($570 million if Shearson Holdings takes Notes, or $540 million in Series B Preferred Stock along with a $30 million loan, plus $23.05 million contributed by SL-Merger to BNS Partners), not to mention Speedward's relatively minuscule contribution to BNS Partners of $2.45 million. This is in addition to interest owed on the bank loans, dividends due on the preferred stock (20% to Bright Aggregates' Series A Preferred Stock, and 15% to Shearson Holdings' Series B Preferred Stock), and the money borrowed by BNS Partners to purchase Koppers' stock on margin. Furthermore, none of this accounts for Mr. Beazer's borrowings from NatWest (up to $300 million), which will apparently be serviced and repaid from his other holdings. Tender Offer, at 28.

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        The tender offer indicates that part of BNS Inc.'s borrowings are to be repaid with funds generated by the sale of certain Koppers' assets, notably including the Chemical and Allied Products Division (Mr. Beazer has indicated that his interest is primarily in the Construction Materials and Services Division). The tender offer contains the following statements:

        The [bank loan agreement] will provide that, until Part A is repaid in full, the Borrower [the survivor of the merger of BNS Inc. and Koppers] will have an obligation to sell certain assets ("Designated Assets") for cash at fair market value and to use the proceeds to repay Part A. Designated Assets will include the Company's Chemicals and Allied Products business (which is to be sold for net cash proceeds of not less than $400 million before payment of associated taxes, unless the fair market value is determined to be lower) and certain other assets to be specified. In addition, the Borrower will be required to make prepayments of Part B based on a percentage of "consolidated excess cash" (which will be defined), and to apply the proceeds of any sale of assets other than Designated Assets (except to the extent of certain permitted reinvestments in capital assets) and amounts received on account of overfunded pension plans to the prepayment of Part B.

        Tender Offer, at 27.

        It is anticipated that borrowings by Beazer PLC under the NatWest Loan Facility will be repaid from funds generated internally by Beazer PLC. It is anticipated that borrowings by the Purchaser under the Bank Facilities will be repaid from funds generated internally by the Purchaser (including, after the Merger, funds generated by the Company), the sale of the Company's Chemical and Allied Products business and other, as yet unidentified, assets or other sources, which may include the proceeds of the sale of debt or equity securities. It is anticipated that the [Shearson] Notes will be refinanced, in part by the sale of Refunding Securities.

        Tender Offer, at 28.

        Upon consummation of the Merger or, possibly, the Purchaser's earlier acquisition of control of the company's Board of Directors, the Purchaser intends to cause the Company to sell its Chemical and Allied Products business. As discussed in Section 13, the Purchaser may cause the Company to sell an aggregates plant located in Southern California if necessary in connection with certain antitrust considerations. In addition, the Purchaser intends to cause the Company to sell other (as yet unidentified) assets in order to repay Part A of the Merger Facility described above (see Section 10) to the extent proceeds from the sale of the Chemical and Allied Products business and from any such sale of such aggregates plant are not sufficient to make such repayment.

        Tender Offer, at 35.

        B. Incomplete Revelations Regarding the Sale of Assets

        The offeror's intended sale of Koppers' Chemical and Allied Products ("CAP") Division is a required disclosure, under Items 4(b)(1) and 5. While Koppers argues that plans regarding the CAP Division are "buried" in the tender offer and therefore not adequately disclosed, defendants point out that the CAP sale is disclosed at three separate locations in the tender offer, so that this item of information was immediately apparent to Koppers and its shareholders. While the plans to sell the CAP Division might have been more prominently displayed, we do not believe that Koppers has shown a reasonable likelihood of success on its claim that the offerors did not adequately disclose this fact.

        There is a curious aspect of defendants' disclosure with respect to sales of assets, however. There is the fact that after-tax proceeds from the disclosed sales will retire only a fraction of Part A of the Merger Facility, which is $543 million, and which must be retired within 18 months.

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Although there was some conflict in the evidence presented at the hearing, the CAP Division is generally valued at between $375 and $450 million before tax. The after-tax yield from the sale is unknown. BNS Inc. has also agreed to divest the southern California facility, but that will only yield an additional $30-50 million. Thus, additional funds will have to be raised, just to repay the bank loan. Elsewhere, Beazer has indicated that the pretax amount of assets to be sold will be $700 million. Yet the tender offer does not identify any additional specific assets to be sold.

        Defendants maintain that the tender offer's disclosure of BNS Inc.'s intentions with respect to the sale of assets could not be more plain. The tender offer plainly states that the CAP Division will be sold, and that other as yet unidentified assets will also be sold. Tender offerors are not required to make predictions of future behavior in connection with tender offers and need not disclose plans or designs which are necessarily contingent or indefinite. Crane Co. v. Harsco Corp., 509 F.Supp. 115, 119 (D.Del.1981).

        Undoubtedly, significant assets in addition to the CAP business will have to be sold, particularly if Beazer is to buy out the Shearson interests in the near future. BNS Inc. discloses no definitive intention to sell any specific assets other than the CAP business and the mandated sale of the Southern California aggregates business. According to defendants, nothing more need be disclosed.

        We are concerned, however, by the lack of information regarding plans which the defendants may have to sell other significant assets. Obviously, since the sale of the CAP Division will generate only a fraction of the funds necessary to repay the bank loans, BNS Inc. is likely to dispose of other significant portions of Koppers. It is difficult to believe that defendants do not have more definite plans than they have disclosed thus far. They will obviously not be able to make up the difference by the sale of such dispensable luxuries as corporate jets. Defendants allude to "amounts received on account of overfunded pension plans," Tender Offer, at 27, yet give no indication of how much money is available in the "overfunded" pension plans.

        It is clear that a sum of money well in excess of half a billion dollars will be required in order to buy out the Shearson interests. This is more than the sale of the CAP Division is likely to generate pre-tax, and those funds are ear-marked for other purposes. Because of the unusual nature of the Shearson interests in this transaction, the source of the money to buy back the Shearson interests is particularly material, and should be disclosed. Riggs Nat. Bank of Wash. v. Allbritton, 516 F.Supp. 164, 173-75 (D.D.C.1981) (special circumstances requiring offeror to disclose information concerning his ability to repay borrowed principal and interest).

        VI. DISCLOSURE OF ALLEGED VIOLATIONS OF THE MARGIN REQUIREMENTS

        Koppers alleges at Count III of its Second Amended Complaint that the transaction contemplated by the Tender Offer violates Section 7 of the Exchange Act [15 U.S.C. § 78g] and Federal Reserve Board Regulations G, T, U, and X [12 C.F.R. §§ 207, 220, 221, and 224] in that:

        Banks and broker-dealers are prohibited from lending more than 50% of funds used to purchase stock if such stock is to be used to secure the loan, and BNS is a shell company which will incur more than 50% debt if it acquires the stock.

        15 U.S.C. § 78g(a) provides:

        For the purpose of preventing the excessive use of credit for the purchase or carrying of securities, the Board of Governors of the Federal Reserve System shall ... prescribe rules and regulations with respect to the amount of credit that may be initially extended and subsequently maintained on any security (other than an exempted security).

        The margin requirements are intended to maintain the integrity of the credit markets, as explained in the legislative history:

        The main purpose of these margin provisions ... is not to increase the safety of security loans for lenders. Banks and brokers normally require sufficient collateral

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to make themselves safe without the help of law. Nor is the main purpose even protection of the small speculator by making it impossible for him to spread himself too thinlyalthough such a result will be achieved as a byproduct of the main purpose.

        The main purpose is to give a Government credit agency an effective method of reducing the aggregate amount of the nation's credit resources which can be directed by speculation into the stock market and out of other more desirable uses of commerce and industryto prevent a recurrence of the pre-cash situation where funds which would otherwise have been available at normal interest rates for uses of local commerce, industry, and agriculture, were drained by far higher rates into security loans and the New York call market.

        H.R.Rep. No. 1383, 73d Cong., 2d Sess. 709 (1934), cited Walck v. American Stock Exchange, Inc., 687 F.2d 778, 789 (3d Cir. 1982), cert. denied, 461 U.S. 942, 103 S.Ct. 2118, 77 L.Ed.2d 1300 (1983); Daley v. Capitol Bank & Trust Co., 506 F.2d 1375, 1377 (1st Cir.1974); Naftalin & Co., Inc. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 469 F.2d 1166, 1180 (8th Cir. 1972); Panayotopulas v. Chemical Bank, 464 F.Supp. 199, 202 (S.D.N.Y.1979).

        The regulations promulgated by the Board of Governors of the Federal