'",

/ .,

-:J. 707

~.

NO.

;- ..

.

...

"",.

~

'.

CCNNIE C. ~~STRONG,

:~dividual~v, and

§

IN

THE

DISTRICT

COURT

§

~n the Riqhc Of ~PrJVl~,

S

r~c. and PJL~ILTON-TAf~ &

CC~ANY I

~~=cugh a~ Laast Febr~ary 9,

1989, as Q Shareholde~ in

§

§

u.s.

§

v

ARMSTRONG

CR94-0276

_

CAL

FOWLES

I

§

y-~ P HARJ-4_~ I

1: !lC . I

§

161

GOVERNMENT

EXHIBIT

§

?laint::fs,

§

§

v.

§

§

~_~_XP?-A.R.I,.(_~, INC.; !-iA:~!:

r8N-7MT

§

CHRISTIANA

& C~~ANY;

§

E!IERGY

C8RPORATION;

:r! S ION I

§

elC.

i

KEYSTONE

F INANC :.;L

S

JUDICIAL

DISTRICT

C:RPORATIONi

CR

ACCU:S!T:ONS,

§

l:~~C.;

C. ~AYNE Lr~C~FIELD; ?£G~Y f.

CA:T£1L; TI~OTHY w. =EL~;

UwRENCE

8.

C:S:::'::LLO i

§

§

§

..

~~~SAD; and JOHN H. ~CeERTS, JR.;

e~c~ respec~~vely CCt~

i~=ividual!y and as

~C::

A

..

v.EQ

A.

F.AOIOj

CR.

?S.

§

§

§

§

S~~==hclde=s of ~~~?~~~~,

§

ana

ce:.-ivac':":el.y

therefrom

S

:~:C. I

~~c as d

result of

cant=ol

S

:~2

~~=~=ot,

c~nc=~ll~~~ :harenalders

§

~:

~~~!:~ON-TAFT & C:., thr~ugn

§

dc'

laase

Febr'

lary

9,

:989

§

S

Defendants.

§

DA.L.:.-;S

COUNTY,

TEXAS

-

PLAINTIFFS'

ORIGINAL

PETITION,

APPLICATION FOR

T~ORARY

RESTRAINING

ORDER,

EX

PARTE,

APPLICATION

FOR

TEMPORARY

AND

PERMANENT

INJUNCTION,

AND

APPLICATION

FOR

IMPOSITION

OF

CONSTRUCTIVE

TRUST

HONORABLE

JUCGZ

OF

SAID

COURT:

~c T~£

COMES

~OW,

CCNN I E

C,

ARMSTRONG

(

AR.-'!STRONG - ) I

Indi v iduall y

and

in

the

:-ight.

;::E

~

..

AXPH

...

~R!-'

A,

INC.

and

HAMILTON-TAFT

&

CO.

I

t.;;==u.gh

at.

leas~

:ebruary

9 I

1989,

and

as

Shareholder

of

PLAINTIFFS'

ORIGINAL

PETITION,

APPLICATION

FOR

RESTRAINING

ORDER,

EX

PARTE,

APPLICATION

T~~ORARY

FOR TEMPORARY

AND

INJUNCTION,

AND

PE~~ENT

APPLICATION

fOR

IMPOSITION

OF

CONSTRUCTIVE

TRUST

page

1

INC;. ?laint.iff ("ARMSTRONG"), and for , Pet.~tion, Application for Temporarj Res~raining Order, Original Ex Par~e,
Applicat:ion for	Temporary				and		Permanent.		Injunct.ion,		and
Applicat.ion for	ImposiT:ion of Const:=uc~ive Trust.,									respeccfully
shc~s the Cour~ in suppor~ t.hereof as							follows:
				I	.
				PARTIes
1. ?laint.:'::, . A.R						is	an indi'/idual		and	shareholder
cr >!,,;X;:tA R.'-!A, INC.,	residing			in	Dallas C:Junt:y,			Texas.
2. Decendant,		LAWRENCE				B.	COSTELLO	("COSTELLO") I is			an
indivicual resid:ng	in				Caunt.y, Texas,			and	is	current.ly	the
Presi.dent. of			INC.		COSTE:'~O may be			served		wit.h pr::;cess
her e i:1 by s e !:"v in g	h i 1T1	a t.	his	p r inc i ? a 1 ? 1 ace				a f	bus	in e s s lac a t 2 d
dt. 200 C=escent		Suite		1300,			Dallas, Texas 75201.

!.:-,'::':".'-:';:uc2. :-esid':'~.g ~:1 Oklahcrna City, Ck.!.ahcma, and is c:1===ntly

d

·::.:.=ec,;;::-

2r

:!

..

AX?:t.AR.lA

A, INC.,

and

a

member

af

it.s

Board

of

LITC~:~ELD may

be

ser'.red

;

rich process

herein

by

ser:ir.g him at: his ~rincipal place of business, located dt: 200

C=e5cen~ Court:, Suite			1300,		~allas, Texas			75201.
			:OHN				ROBER.7:S,	JR.	("ROBERTS"),	is	an
irlc!.vicual residing			':"n	Dallas			County, ':'exas,		wit.h his principal
~lcce of	business	in	Dallas,			Dallas County,			Texas. ROBERTS		may
be ~e~Jed with process				dt	his	princi~al place of business				at	200
	,
PLAINTIFPS'	ORIGINAL		PETITION,			APPLICATION		FOR
TEMPORARY	RESTRAINING		ORDER,			EX	PARTE, APPLICATION
FOR TEMPORARY AND		PERMANENT			INJUNCTION, AND
APPLICATION FOR IMPOSITION					OF	CONSTRUCTIVE		TRUST	Page	2

C.=escent:. Cour~, Sui-.:.e 13i5, Dallas, Dallas Count:y, Texas 75201,

<.O.=-

at.

his

.=-esidence

at.

3737

Pot.emae,

Dallas,

Dallas

Count.y,

Texas 75205:>.

5.

Derendanr.,

~OHA.\{ED A.

HADIO

("HADIO-), at.

a.ll

t.imes

mar.erial

herei.n,

has

engaged

in

business

in t.he

Stat.e

of

Texas,

as

parr.icularly

described

below.

HADID does

nor.

maint:a.in

a

regular

place

of

business

or

residence

in

t.he

Stat.e of

Texas,

and

has ~o desl;~aced agent. on .hom service of cieat.ion may be made

i:t

:.:-.1 s

cause.

l-I

l,.DID

is

nor.

a

=esident.

of the

St.at.e

of

Texas.

causes or

dc:.icn

assert.ed

herein

arose

from

or are

connect.ed

;.;i:::

?u=~ose['.ll ac:

..

s

ccmmi ..

:.:.ed

by

r:

.. ADID

in Texas because

P

... ADID

en:.ered

lnt.o

a

t=r::rnissory

:1oce

while

in

Callas,

Dallas

Ccunr.y,

Texas I

and i:.::dt.

noce

i.s

noy

due

and

payable

in

Dallas,

Dallas

C::t.::-'.:y,

':'exes.

breach

of

his

dur.y

t.o

t.he

p=omissory

:-'::'2

' ,;ne!1.

C.:"':'2

::::-::is

a

;:a=:.

of

che

::asis

c: :::he

causes

c:

accion

:n

addit:ion,

P.ADID

is

a

Fe.:-:::cn

-",no

(a)

facilicat.ed

t.he

acquisicion

by

ROBERTS

of

c:::-.:.=ol

aver

JR.

?S.

PRASAD,

(b}

through

effecr.uat.ion

of

mc::.i:':"c:.t.ions

co

the

lending

agreements

bet"Jeen

OR.

P.S.

PRASAD

a:t-=.

:ne

National

Bank

of

tlashing't.::Jn,

as

..

,e11

as

having

received

=-=-:'~·!:::'CN-TAf:' £.

CJ.

C8NCENTRAT!ON

;

CCOUNT

FUNDS

as a

::-esulc

oE

.:. s

::: :: n t:. in u i :-. gin t: e !' est.

i n

P P.AR."' ..

A

•

Accordingly,

may

be

c.:.:.ea by

sar':ing

t.he

Secret-ary

of

State

of Texas provided

chat

J

PLAINTIFFS' ORIGINAL

PETITION,

APPLICATION

FOR

TEMPORARY

RESTRAINING

ORDER,

EX

PARTE,

APPLICATION

FOR

TEMPORARY

AND PER."f.ANENT

INJUNCTION,

AND

APPLICATION FOR

IMPOSITION

OF

CONSTRUCTIVE

TROST

Page

3

t.r.e

c:ication anQ

pecit.ion

are

for-

;arded

t.o

HADID'S

home office

addres s

at 1300

N.

17th

Street,

Suite

1100,

Rosslyn,

Virginia

122209, by cer~ified mail, ret.urn receipt: reques~ed. I

6.

Deiendant.,

DR.

P.S. PRASAD ("PRASAD"),

was

at

all

times

material

hereto and

is

believed

t.o

cur::-ent:ly

be

a member of

the

Beard

of

Directors

of

and,

at

all

times

material

here in,

has engaged

in

bus iness

in

Dallas

County,

Texas,

as

mare

par~ic~larly desc=~bed below.

PRASAD

does

not. mainr.ain

a

place

of

=egular

business

Texas

and

has no

agent

on

whom

service of

cit.ation

:nay be

made

in

chis

cause.

The

causes

of

ac'C.ion

asser'ted

herein

arese from

or dre

connect:ed

with

che

purposeful·

ac~s comrnit~ed by PRASAD in Texas because (a) he has facilitat.ed

through

his origlnal

conduct

in

assist:ing

ROBERTS

acquire

~~~p~~~~~ as a cor?orate

shell through

~hich to

acquire

:'.!.?:'

::-.e::-ea::er

dissipace

the

aSS2t.s

of

f-Ll~\!ILTON-T.~fT, ant

(tl

t~E subsequen~ :ailure

exerc:se

in

good

faith

and ~l:~ due

di':".: gence

the

fiduciary

dut.ies

of a

direct.or

and can~rolling

shareholder

of :-tA.XPH

A.R.}(.A,

as more

fully

descr.:.bed below

is

t:he

basis

of

Plaintiff's cause

of

action.

Accordingly,

De fendan t:

P R ..

!

.. S; o ...

I

may be c i t:ed

by

s erv ing

t.he Sec ret.ary

of

S ta t.e

of

Texa 5

r; =::: 'J i.oed

t.ha t. the c i ~a t. ion and pe t. i:. io n are

forwarded

to

PRASAD' 5

ci.;al

place oc business, KEYSTONE

FINANCIAL

CORPORATION,

400 (Jest. Fifch Street, Greenville, Nort.h Carolina 27834, by

ce~~ified mail, return receipt requested.

,

PLAINTIFFS'

ORIGINAL

PETITION, APPLICATION

FOR

TEMPORARY

RESTRAINING

ORDER,

EX

PARTE,

APPLICATION

FOR

TEMPORARY AND

PERMANENT

INJUNCTION,

AND

APPLICATION FOR IMPOSITION

OF CONSTRUCTIVE

TROST

page 4

7.

Defendant:,

PEGGY

f. CATTELL

("CATTELL"},

is

an

indi v idual

res iding

in

Dallas

Count:y I

Texas I a.nd

may

be

served

wit:h

cit.at.ion a.t.

her

principal

place

of

business,

200

Crescent:

Suit.e 1375,

Dallas, Dallas County,

Texas iSlOl.

8.

Defendan1:,

MAXPHARMA,

INC.

("MAXPHARMA"),

is

a

ccr;o=at.icn duly

fo~ed and

existing

under

t.he laws

of

t.he

Stace

of Tennessee and

duly

au'thorized

t:o

t=ansact

business

in

t.he

Stace

of

':'axas,

and: may

be

served

',./it.h

cit.at:ic:l

by

serring

it.s

regi.s~c=ed aqent:,

i:

!.WRENCE

3.

COST::UO,

al:

200

Crescenc

Cour1:,

Suit.e

:JOO, Jallas,

Dallas Count.y, Texas 75201.

9,

Derendanc,

HA

"1IL:'ON-TAFT

&

CO}!FANY ('·H.A.'1ILTON-TAFT'"),

i.s d c:::-::orat:.ion duly for:ned and exist:.inq under t.he ~dWS of t.he

Stat.e

ot Calif:rnla.

HA.!-!ILTON-TAFT,

at:

0.1:"

t.imes mdt-erial

he=e.!

;.,

has

engaged

in business

in Texas

and !':as

no

des ic;nat:ed

Stace

cf Texas

an

whcm service

Cl:a1:10n

may

be

made

::use.

The causes

of

act.ion

assart:ed

herei:1

a<;dins't

~!."':·:::::~i-:.;.r,!, arose

from

or

are

ccnneet:ed

·, rith t=urposei:.Jl

acts

c ~;n~.: ~ ~ed

=y HAMILTON-TAFT

in

Texas

because

~XPHARM.A and

f-t_~~! :':CN-:'AFT engaged in loan t.ransact:ion I through nominees I the

e:e!'::: =::lance

wi t:h

res pee t:

'Co

which

·,

..

ras

due,

in

part:,

in

Texas;

ar.c.

:'.!r~!1er,

because

P

A

.. ..

'1IL:'ON-TA.FT

permit.:.ed

itse1 f

t.::l

be,

and

~as, ~::~ized by ROBERTS and COSTELLO as a vehicle for f~nding of

i:1s.:.':e= ~~ans may be cit.ed by serving t:he Seere1:ary of State of

,

PLAINTIFPS'

ORIGINAL

PETITION,

APPLICATION

FOR

Tf~ORARY RESTRAINING ORDER, EX PARTE I APPLICATION

FOR TEMPORARY AND	PERMANENT	INJUNCTION,	AND
APPLICATION FOR	IMPOSITION	OF CONSTRUCTIVE		TRUST

Page

5

,

•• w

--

______ ......

Texas

provided

t:ha t.

the

c i t:a cion

and

pet.i t:ion are

forvarded

to

HA

'1ILTON-TAFT'S

reqist.ered

agent.

in

the State of Ca.lifornia,

Alber-c

L.

567

Golden Gat.e

Avenue,

San Francisco, California

by cart.ified

mail,

return receipt.

request.ed.

lO.

De fencant. I

VIS ION I

INC.

("VISION")

is

a corporat.ion

duly fo~ed and

exist.ing

under

the

laws

of

che

Stat.e

of Delaware.

VISION

has

cbtained

a Cer~ificat.e of Aut.hority

from

the Secret.ary

a:

State

ct

Texas,

is duly aut.horized t.o t:~ansact. business

in

t.he

5cat.e cf

and

may

be served with

citat.ion in

this act.ion

by

se~~ice ar

cit:atLan

upon

it.s

regist.ered

agent.,

PEGGY

F.

at.

its

~eg:st.ered office,

200

Crescent.

Suite

lJi5,

Dallas,

Callas Count.y, Texas 75201.

11.

Defendant,

CHRISTIANA

ENERGY

CORPORA.TION

i ··:::RiSTL.;,1IA,'·) I

is

a corporation

duly

for.ned

and

exist.ing

uncer

:'::2

:f. t.he

State

of

Delaware.

CHRISTIANA,

at. all

t::.imes

:na:,e~ia.l ::e.::-ein,

has

engaged

in

busir.ess

in Texas,

as mare

~a=-::cu.!.a=-~y desc::ibed below.

CHRISTIANA

does noe.

maint.ain

a

~~ace af

=egular

business

in

Texas

and

has

no

designat.ed

aqenc

in

5 tat.e

0

E Texas

on

whom

serv ice

0 f

c i cat.ion may

be

ma.de

in

:.::':'s cause.

Despite t.he fact:

t.hat. it.

was

not licensed

t.o

do

=~s~r.ess in the

Stat.e of

Texas,

CHRISTIANA

execut::.ed

and delivered

a

;:romissory not::.a

in Dalla.s I

Dallas Couney,

Texas,

payable

in

Dallas

Caunt.y,

Texas.

Thac

not.e

is the

crux

of

the

J

PLAINTIFFS'

ORIGINAL PETITION,

APPLICATION FOR

TEMPORARY

RESTRAINING ORDER,

EX

PARTE, APPLICATION

FOR

TEMPORARY AND

PERMANeNT

INJUNCTION,

AND

APPLICATION

FOR

IMPOSITION OF

CONSTRUCTIVE TRUST

Page

6

causes of action ass~~ed herein against

CHRISTIANA.

The

causes

of d.ct.ian asserted arose fram or are

connect.ed

wit.h

purposeful

dC':S ccrnmi:.t.ed by CHRIST!ANA in Texas

because

CHRISTIANA

is

a

nominee for ROBERTS I and is a corporate

cont.rolled

by

RCEERTS t.hrough which HAMILTON-TAFT

CONCENTRATION

ACCOUNT

FtTNOS

have dist.ribut.ed to individuals or

encities

affiliat.ed

with

RC:E;:tTS. AccordinglYI CERISTIANA. :nay

ce

cit.ed

by

ser-J'ing

t.he

Sec:-etary of Stat.e af Texas provided

:.!:at

the

cieat.ian

and

pec:': :on drs arded t.o CHRISTIANA' S

reg is t.ered

agent:

in

the

S : Co :. e a fOe 1 a war e I The r nco r pc!:" a tar SIr

..

t

d •

I

Co f fee

Ru n

?=c:essional Cenere, Pike r Ce~aware 19i07, by cer~ified mail,

& Loveville, ret~rn receipt.

R.O., Hockessin, requestea.

:2. Cetendanc, :'::':YSTCNE F!NANC:.ll

CORPORATION

!-3 a fot'e.!.";:1 c-orporaticn, the scate c:

Ecr:na'tion

and exiscence

of

.... 1:-.:.::: is ;:resencly unknown 'to Plai:1t:!.Ef,

although

a

principal

~_:_= ~c t~sLness is known and is allaged

hereinbelow.

KEYSTONE,

a: ~~l :.i 'nes macerial herein, has

ang.:lged

:':1

business

in

Texas,

as ~cre ~ar~icularly descri~ed belew.

KEYSTCNE

does

not: main1:ain

a ;ldce of business in Texas

and has

no

designaced

agent

::: State of Texas on whom service

of cit.acion

may

be

made

in

_= cause. The causes of acticn

assert.ed

arose

f=om

or

are

c=::::ected it.h purposeful ae'!:s ccrrunit.'t:ed

by

KEYSTONE

in

Texas

cecause KEYSTONE is the nominee shareholder

af

record

for

shares

c"";i.ec by PRASAD and MAXPIi.A.R1J.A.

Accordingly,

KEYSTONE

may

be

J

PLAINTIFFS' ORIGINAL PETITION, APPLICATION POR

TEXPORARY RESTRAINING ORDER, EX PARTE,

APPLICATION

FOR TEMPORARY AND PERMANENT INJUNCTION,

AND

APPLICATION FOR IMPOSITION OF CONSTRUCTIVE TROST

Page

7

",

' -..------

cited

=y serving the ~ Secret.ary of State

of

Texas

provided

that

the

ci:.at.ion

and petition

a.re

forwarded

to

KEYSTONE'S

principa.l

place

of business,

400 West

fifth St=eet,

Greenville,

Nort:h

Caroli~a 27834, by cer~ified mail,

~eturn =eceipt

requested.

lJ.

Defendant J TIMOTHY

w.

BELL ("8ELL~),

is

an

individual

resid:~g in Plano, Collin Count.y,

Texas.

SELL

does not maintain

a

place

af

regular business

in

Texas anc.

has

no

agent on

whom

serlics

of cit.ation 'may

be

made

i.n :his

cause.

The

causes

0 f

ac:.:on

asser~ed arose

frcm

cr

are connec:.ad

with purposeful

acts

c::m.rni ~ :ed by

BELL in

Texas

because (a)

he

is

a

twenty percent

( 2 a ~)

shareholder I wi th

adci t iana 1 options,

in

CR ACQU~SrT! ONS I

INC.,

the current controll:":1g

shareholce.!"

of HAMILTON-TAFT,

and

(b)

is

one

0

f the present.

princi.;:a.l

sources

of

financing

for

and j

accordingly,

may

have

access

to

the

shares

of

Deiendanc, cELL,

~ay be

cited

by serling

:.:-:e

St:c=etary

of State

of

-:'exas

provi:ied

the

citati::n

and

pe':':'~:':Jn are

forwarded

to BELL'S

pr!.nci?al

place

of

business,

133

C=escent

Avenue,

New

Jersey 08884,

by cer~ified mail,

retu=n receipt reques~ed.

1';.

De fendant I CR

ACQUISITIONS, rNC.

("CR ACQUISITIONS") I

is

d

ccmpany duly fo~ed No~ember 9, 1988,

and

existing

under

the

laws

at

the

State of

Texas

~ith its prinCipal

place

of business

in

Dallas, Dallas Count.y, Texas,

and may

be

served

with citation

J

PLAINTIFFS'

ORIGINAL PETITION, APPLICATION

FOR

TE

1oI.:PORARY RESTRAINING

ORDER,

EX

PART!, APPLICATION

FOR TE.HFORARY

AND PERM.ANENT

INJUNCTION I AND

APPLICATION POR

IMPOSITION

OF CONSTRUCTIVE

TRUST

Page

8

--

in chis	ac~ion by service	of cication upon its			registered		agent,
?EGG-{	f. CATTELL, at	its registered office,			200	Crescent:.	Court.,
Suice	1375, Dallas,	Dallas Count:.y,	Texas	75201.
		CASE OVERVIEW
concerns indi-Jidually and derivacivelYI a.gainst: This case the claims -/:' ot .. by a shareholder, .lcers , direc't.ors and

cont.=olling persons who have engaged in conduct conseitueing

tctal abandonment:.

and'disregard

of :iduciar/ duties,

co initially

"lace"

the asset:s

of.

t:.he

wholly-owned

corporate

subsidiary which

cor.st.:"cuees

the

primary

asset

of

ehe publicly traded parent

ccmpany

of which

Plaint:.iff is

a

shareholder and,

mose recencIy,

di'/esc

chat:. corporate

subSidiary

""it:~out:. shareholder a~9r:::val and

in suc~ a

fashion

as

co

conscicute an

abdicat:.ion

and

violation

of

f.i.c.·

.. ;:::.3

! dut:ies

owed

\:.0

the

minorit.y

shareholders

of

parent

put::.=~y held and traded ccrporation.

:5.

Defendant

ROBERTS,

th=cugh

nominees

a.nd

cC:1t.=::::llled

inc:":lduals

or

a.ffiliates,

obtained

cent.rol

of

:-'.AXPHAR

"!A,

a.

puc.!.':'c ly

held

corporat.ion, through a

series 0 f

transac-::":ons

in

ROBERTS

arranged for HADID,

an

individual

with

whom he

had

busi.:less

dealings,

to

assist. :he majority shareholder of

!-!.a

x?:-u\..

("PRASAD")

with

:-egard

to

refinancing

the

i.ndebt.edness

af

associated

with t.he

initial

acquisition

by PRASAD

of

his

inc.erest

in

l"'

AXPHARMA,

in

exchange for

which financial

,

PLAINTIFFS' ORIGINAL PETITION,

APPLICATION FOR

TEMPORARY

RESTRAINING

ORDER,

ex

PARTE,

APPLICATION

FOR TEMPORARY AND

PE~ENT

INJUNCTION,

AND

APPLICATION

FOR

IMPOSITION OF CONSTRUCTIVE TROST

Page

9

as sis t:ance

ROBERTS

acqu i red

de

f act:o

vat. ing

and

dis position

right.s

of

the majority int.ereses derivative

from

his control

of

the

entit.ies

and

individuals

involved.

17.

At.

or

abou t.

the

t.ime

0 f

.:.he

acquis i tion

by ROBERTS

of

con't=ol of MAXPHARMA,

ROBERTS

was

also

att.emptinq

to effect.uat.e

the

acquisit.ion

of

HAMILTON-TAFT, a

"cash rich"

payroll

services

company

which

had

theret.ofore

been

owned by

CIGNA

Insurance

Ccmpany but.

as

to which

CIGNA

was

seeking

a purchaser,

as CIGNA

was

dives~ing itself of

non-insurance

relat.ed

asse'Cs

during

a

pe!."iod

when

CIGNA.

had

sust.aineci

subs't.antial

losses

in

the

pr=~er~y and casualty

insu=ance

businesses.

18.

COSTELLO arranged Ear

a ~=ansac'tion wherein cash asset.s

of

HAMILTON-TAFT

would

be

used

in

a

"reverse

repossession"

financing

arrangement.

whereby

said

cash

assets

t.hemselves serJed

as

means

by which ~~XPHAR~A,

as a con'trolled entity af

RCc'£:tTS I

could

purchase

:tA.'1ILTON-TAFT

the

asset.s

of

HA."!IL70N-TAFT.

I n

this

t=ans act. ian I

the

cas h

0 f

HAMILTON-TAFT

was

transferred

to

an

investment.

banking

fir.n,

which

in curn

p u!:'c ha s ed

treasury

s ecur i t. ie s

wh ic h

we re chen

he Id

by the

i n v est. men t.

ban kin 9

firm

.,., i

t. h

rig h t. S

0 f

rep 0 sse

s s ion

the reo n

sueject.

to

the

faithful

performance by

!-iAXPHARMA

and

fLa MILTON-

TAFT

of

debt:

sat.isfact.ion

with

:-egard co monies

paid

by

the

investment.

banking

firm t.o

CIGNA

in

satisfac'tion

for

the

purchase

ot P~~ILTON-TAFT by MAXP~~.

I

PLAINTIFfS'

ORIGINAL

PETITION,

APPLICATION

FOR

TEMPORARY

RESTRAINING

ORDER,

EX

PARTE,

APPLICATION

f'OR T~ORARY

AND PERMANENT INJUNCTION,

AND

APPLICATION

FOR

IMPOSITION OP CONSTROCTI~ TROST

Page 10

19.

Once

ROBERTS' had

acquired MAXPHARMA,

and

in t.urn

ar.::anged for

the

acquisition

by

:-!.AXPHARl-'

A

of

HAHILTON-TAFT,

ROSER~S then

proceeded

to

remove

the

existing

Board of Oirec~ors

for each company and replace

them with COSTELLO

and

LITCHFIELD.

20.

f{A

"!ILTON-TAFT

is

a payroll s erv ices company

whic h

receives

tax

withholdings

from

cust:cmer client.s,

retains

t.hose

funds

in

account.s

for

subSequent.

is

entitled

co earn

int.erest.

on

funds,

and

ult.imat.ely prepares

returns

and pays

taxes I

in exc~ange

for

which

fWiIL7CN-TAFT

agrees

to ce

liable

for

any

penalties which

may

resul-c

with

respec't.

to

imprc;:er

filing.

1:1

'Chis

respect,

1-!&.'1ILTON-TMT is

one of

the

natien 's

largest.

companies.

Prior

to

the

acquisit.ion of

cont.=ol

of

HAMILTCN-TAFT

by

R08ERTS,

f~ILTON-TAfT had

no~ ut.ilized

cust.cmer

acc=unt

tunas

for

any

purpose

ot.he~ ~han ac~iring secure assets

(5UC!1

as

government

bones

or

t=easur'j not.es) which c:;ul::'

be

redai~y =edeemed for purposes of mee~~~q clien~ tax obligat.:=r.s.

21. After

the acquisition

0:

control

of

MAXPKAR

'1A

and

P'&"!ILTCN-TAfT

by ROBERTS,

during

1988 approximat.ely S14

:nil.!.ion

in

funds were

caused

to

be

removed from

client. acccuncs

of

HA

.. '1IL:'ON-TAET

and dist.ribut.ed

in

the

for:n

ot

loans to

or

di=ect.ly

to affiliat.ed

en~ir:.!.es wit.h

which R08ERTS

did

all

for t.he benefit

of

the

interests

of

ROBERTS

and

all

contra~1 to the in~erest.s of ~he shareholders of MAXP~~.

I