The Ravenswood Investment Company, L.P.,

Exhibit (g)


IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO


Civil Action No.


THE RAVENSWOOD INVESTMENT COMPANY, L.P.,


Plaintiff,


v.


HALLWOOD ENERGY CORPORATION, HALLWOOD GROUP, INC., ANTHONY J. GUMBINER, WILLIAM L. GUZZETTI, BRIAN M. TROUP, HANS-PETER HOLINGER, REX A. SEBASTIAN and NATHAN C. COLLINS,


Defendants.


COMPLAINT


Plaintiff, The Ravenswood Investment Company, L.P. ("Ravenswood" or "Plaintiff"), individually, and on behalf of others similarly situated, by its attorneys, Wolf & Slatkin, P.C., for its complaint against Defendants, alleges as follows: PRELIMINARY STATEMENT AND NATURE OF CLAIM This class action is brought by Ravenswood on behalf of itself and the other minority public stockholders of Defendant Hallwood Energy Corporation ("HEC" or "the Company"), for injunctive and other equitable relief enjoining the completion of a two-step tender offer/merger transaction that will buy out the minority stockholders for grossly inadequate consideration, and allow HEC's 81.6 percent stockholder,


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Hallwood Group, Inc. ("Hallwood") to further its own financial interests at the expense of the minority stockholders, in breach of its fiduciary duties of good faith, fidelity, candor and loyalty to each of the minority stockholders. Hallwood and its Board of Directors, by virtue of their domination and control of HEC, have wrongfully misappropriated proprietary information for their own use and benefit, and have timed the two-step tender offer/merger to take advantage of not only the Company's significant turnaround in financial performance, but also the substantial tax benefits available using the Company's net operating loss carryforwards without paying just compensation to the minority shareholders. Hallwood has additionally structured the two-step tender offer/merger to deprive the minority stockholders of a meaningful opportunity to investigate the fairness of the tender offer.


I. JURISDICTION AND VENUE


1. This section arises under section 14(e) of the Securities Exchange Act of 1934 (the "1934 Act"), as amended, 15 U.S.C. Section 78n(e), and the rules and regulations promulgated thereunder by the Securities and Exchange Commission, and the statutory and common law of the state of Texas. Section 14(e) of the 1934 Act (15 U.S.C. Section 78n(e)) is referred to and incorporated by this reference as if set forth at length.


2. Jurisdiction is conferred on this Court under 28 U.S.C. Section 1331 (federal question), 28 U.S.C. Section 1332 (diversity of citizenship), and principles of pendent jurisdiction.


3. Venue is proper in the District of Colorado pursuant to Section 27 of the 1934 Act, 15 U.S.C. Section 78aa and 28 U.S.C. Section 1391, since HEC's principal operating office is located at 4582 South Ulster Street, Denver, Colorado 80237, and a substantial portion of the events or acts giving rise to the claims asserted herein occurred in the District of Colorado.


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4. The events and acts giving rise to the claim occurred in connection with a tender offer made by Hallwood by the use of the instrumentalities and means of interstate commerce, and of the mails.


II. THE PARTIES


5. Plaintiff Ravenswood is a New York limited partnership, with its principal offices located at 104 Gloucester Road, Massapequa, New York.


6. Ravenswood is the beneficial owner of 6,343 shares of HEC.


7. Defendant HEC is a Texas corporation with principal offices located at 4582 South Ulster Street, Denver, Colorado 80237. There are 777,126 common shares of HEC stock outstanding. HEC is engaged in the development, production and sale of oil and gas through its ownership of oil and gas properties and its investments in entities with oil and gas activities. HEC is the general partner of Hallwood Energy Partners, L.P., a publicly traded oil and gas limited partnership, which conducts business through two operating partnerships. HEC is also the general partner of HEP Operating Partners, L.P., and an HEC wholly-owned subsidiary is the general partner of EDP Operating, Inc. HEC does not engage in any other line of business and has no employees.


8. Defendant Hallwood is a Delaware corporation with its principal office located at 3710 Rawlins Street, Suite 1500, Dallas, Texas 75219. Hallwood is the majority and controlling shareholder of HEC, owning 81.6% of the shares. Hallwood, its operating subsidiaries and associated companies are currently engaged in commercial and industrial real estate, energy, textile products, and the hotel and restaurant businesses.


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9. Defendant Anthony J. Gumbiner ("Gumbiner") is chairman of the board of directors of HEC and HEC's chief executive officer. Gumbiner is also chairman of the board of directors and chief executive officer of Hallwood. Gumbiner is sued herein in his capacity as a director of HEC and Hallwood.


10. Defendant William L. Guzzetti ("Guzzetti") is a director of HEC and HEC's president and chief operating officer. Guzzetti is also an executive vice-president of Hallwood. Guzzetti is sued herein in his capacity as a director of HEC and Hallwood.


11. Defendant Brian M. Troup ("Troup") is a director of HEC. Troup is also a director and chief operating officer of Hallwood. Troup is sued herein in his capacity as a director of HEC and Hallwood.


12. Defendant Hans-Peter Holinger ("Holinger") is a director of HEC. Holinger is sued herein in his capacity as a director of HEC.


13. Defendant Rex A. Sebastian ("Sebastian") is a director of HEC, and is sued herein in his capacity as a director of HEC.


14. Defendant Nathan C. Collins ("Collins") is a director of HEC, and is sued herein in his capacity as a director of HEC.


15. By virtue of their executive positions and/or majority ownership of HEC, the individual director defendants (the "Individual Defendants") and Hallwood owe the minority public stockholders the highest fiduciary duties of fidelity, candor and trust.


16. By reason of their positions with HEC, all of the Individual Defendants conduct and transact business within the District of Colorado.


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III. CLASS ACTION ALLEGATIONS


17. Plaintiff brings this action as a class action pursuant to Rule 23 of the Federal Rules of Civil Procedure on behalf of itself and all other persons who owned shares of HEC as of October 15, 1996. Excluded from the class are Hallwood and its directors and officers, the Individual Defendants and members of their immediate families and the officers of HEC.


18. The class of shareholders for whose benefit this action is brought is so numerous that joinder of all class members is impracticable. As of October 15, 1996 there were approximately 667 holders of record of 143,209 minority shares of HEC. The members of the class are located throughout the United States.


19. There are questions of law and fact which are common to members of the class and which predominate over any questions affecting only individual members. These common questions include: (1) Whether the Defendants have violated the Exchange Act. (2) Whether documents prepared and disseminated by Defendants in connection with the tender offer are false and misleading. (3) Whether the Defendants have engaged in plan and scheme which constitutes a breach of fiduciary duty owed to Plaintiff and members of the class. (4) Whether the Defendants engaged in conduct constituting self-dealing and unfair dealing to enrich themselves at the expense of the minority shareholders. (5) Whether the tender offer price is grossly inadequate and unfair to the minority shareholders.


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20. The claims of the Plaintiff are typical of the claims of other members of the class and the Plaintiff has no interests that are antagonistic or adverse to the interests of the other members of the class. Plaintiff will fairly and adequately protect the interests of the class.


21. If the minority shareholders refuse to accede to a tender at the unfair price, their only alternative is to hold their shares and seek appraisal, which may be so costly as to be prohibitive for any one individual shareholder.


22. The Plaintiff has sustained and will continue to sustain damages as a result of the Defendants' wrongful actions and is committed to prosecuting this action and has retained competent counsel experienced in litigation of this nature.


23. Plaintiff envisions no difficulty in either the management of this litigation as a class action or in providing notice to members of the class.


24. The likelihood of individual class members prosecuting individual claims is remote due to the small individual losses to be suffered by each member relative to the loss to be suffered by the class as a whole, and further compared to the burden and expense of prosecuting an action of this nature and magnitude on an individual basis.


25. The prosecution of separate actions by the individual members of the class would create a risk of inconsistent or varying adjudications with respect to individual class members, which would establish incompatible standards of conduct for Defendants.


26. The prosecution of separate actions by individual class members would create a risk of adjudications with respect to them which would, as a practical matter, be dispositive of the interests of other class members not party to the adjudications, and/or would substantially impair or impede such class members' ability to protect their interests.


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27. Defendants have acted, or have refused to act, on grounds generally applicable to the class, thereby making appropriate final declaratory and injunctive relief with respect to the class as a whole.


28. For the above reasons, maintenance of a class action is a method superior to other available methods for the fair and efficient adjudication of this action.


29. Plaintiff demands a trial by jury.


IV. FACTUAL ALLEGATIONS


A. Hallwood's October 15, 1996 Offer to Purchase.


30. On October 15, 1996, Hallwood disseminated a false and misleading Offer to Purchase which relates the following events: a. On June 7, 1996, HEC's board of directors appointed a special committee (the "Special Committee") composed of Defendants Sebastian, Holinger and Collins to assess strategic alternatives for enhancing the value of shares not already held by Hallwood. b. Also on June 7, 1996, HEC issued a news release by which is announced that its board of directors authorized its audit committee to evaluate strategic options for the enhancement of shareholder value. The news release stated:


"Denver, Colorado - Hallwood Energy Corporation (OTC:HWEC) announced
today that its board of Directors has authorized its audit committee to
evaluate strategic options for the enhancement of shareholder value. The
Hallwood Group (NYSE:HWG), which owns approximately 82% of the outstanding
shares of the Company, has indicated that it is not prepared to support a
sale of its shares of the Company to a third party, or a sale of the
Company's assets.


To assist in its evaluation, the audit committee has been authorized
to engage a financial advisor. No specific transaction and no price at
which any transaction may occur has been proposed at this time and ...