19890227a Maxpharma Original Petition

/ ....
,
'",
-:J. ;-707 ~.
NO. "",. . ~ '. .
CCNNIE C. ~~STRONG, § IN THE DISTRICT COURT

:~dividual~v, and §
~n the Riqhc Of ~PrJVl~, S
r~c. and PJL~ILTON-TAf~ & §
CC~ANY I §
~~=cugh a~ Laast Febr~ary 9, § u.s. v ARMSTRONG
CR94-0276 _ CAL I FOWLES
1989, as Q Shareholde~ in §
y-~ P HARJ-4_~ I 1: !lC . I §
§
GOVERNMENT EXHIBIT 161
?laint::fs, §
§
v. §
§
~_~_XP?-A.R.I,.(_~, INC.; !-iA:~!:..r8N-7MT §
& C~~ANY;CHRISTIANA §
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.; UwRENCE 8. C:S:::'::LLO i §
C. ~AYNE Lr~C~FIELD; ?£G~Y f. §
CA:T£1L; TI~OTHY w. =EL~; §
~C::..A..v.EQ A. F.AOIOj CR. ?S. §
~~~SAD; and JOHN H. ~CeERTS, JR.; §
e~c~ respec~~vely CCt~ §
i~=ividual!y and as §
S~~==hclde=s of ~~~?~~~~, §
:~:C. ana ce:.-ivac':":el.y therefrom
I S
~~c as d result of :~2 cant=ol S
~~=~=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
~c T~£ HONORABLE JUCGZ OF SAID COURT:

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

T~~ORARY RESTRAINING ORDER, EX PARTE, APPLICATION
FOR TEMPORARY AND PE~~ENT INJUNCTION, AND
APPLICATION fOR IMPOSITION OF CONSTRUCTIVE TRUST page 1
~!AXPHAR~, INC;. , ?laint.iff ("ARMSTRONG"), and for Original
Pet.~tion, Application for Temporarj Res~raining Order, 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..~STRCUG, 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 Da~las Caunt.y, Texas, and is current.ly the

Presi.dent. of ~A_a....,(P::_;R.\4_~, 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 CCU=~, 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.
Detendan~, :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
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 ~cre 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.
!~e 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. ~D:D'S breach of his dur.y t.o ~ay 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 ~as (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 ~A..A.X P P.AR."'..A • Accordingly, ~rD may be
c.:.:.ea by sar':ing t.he Secret-ary of State of Texas provided chat

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 ~...AXPHARMA 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 ~n 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 ~o acquire
~~~p~~~~~ as a cor?orate shell through ~hich to acquire ~~~ILTON-
:'.!.?:' ~r.=. ::-.e::-ea::er dissipace the aSS2t.s of f-Ll~\!ILTON-T.~fT, ant
(tl t~E subsequen~ :ailure ~o 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.
,
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:
Cour~, 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
~;e~~ ~~ :~e 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
,
Tf~ORARY RESTRAINING ORDER, EX PARTE I APPLICATION
, •• 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. ~-!aYI 567 Golden Gat.e Avenue, San Francisco, California
9~l02, 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 ~exas, 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. CATTEL~,
at. its ~eg:st.ered office, 200 Crescent. Cour~, 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 ~a.;..rs :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
~~-.e 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
Cd.~las, Dallas Caunt.y, Texas. Thac not.e is the crux of the

FOR TEMPORARY AND PERMANeNT INJUNCTION, AND
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 en~ity. cont.rolled by
RCEERTS t.hrough which HAMILTON-TAFT CONCENTRATION ACCOUNT FtTNOS
have ~een 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 fo:r.... 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 S I r . . t d • I Co f fee Ru n

?=c:essional Cenere, r..ancas~er Pike & Loveville, R.O., Hockessin,
Ce~aware 19i07, by cer~ified mail, ret~rn receipt. requestea.

:2. Cetendanc, :'::':YSTCNE F!NANC:.ll CORPORATION ("KEYSTONE~),
!-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 requla~ business in Texas and has no designaced agent
::: :~e 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
.... _-- . -..

", '
------
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
~C=::R.TS and j accordingly, may have access to the shares of
Acco~dinglYI Deiendanc, cELL, ~ay be cited by serling

:.:-:e St:c=etary of State of -:'exas provi:ied ~hat the citati::n and
pe':':'~:':Jn are forwarded to BELL'S pr!.nci?al place of business, 133
C=escent Avenue, Spo~swood, 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

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
~5- This case concerns the claims by a shareholder,
indi-Jidually and derivacivelYI a.gainst: ot- /..:.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 ~he 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
whic~ ROBERTS arranged for HADID, an individual with whom he had

busi.:less dealings, to assist. :he majority shareholder of
!-!.a..x?:-u\. R.\(_~ ("PRASAD") with :-egard to refinancing the i.ndebt.edness
af ::~SAD associated with t.he initial acquisition by PRASAD of
his inc.erest in l"'..AXPHARMA, in exchange for which financial
,
TEMPORARY RESTRAINING ORDER, ex PARTE, APPLICATION
FOR TEMPORARY AND PE~ENT INJUNCTION, AND
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 ~he means by which ~~XPHAR~A, as a con'trolled entity af
RCc'£:tTS I could purchase :tA.'1ILTON-TAFT u~ilizing the asset.s of
HA."!IL70N-TAFT. In 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

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. ~ayment, is entitled co earn
int.erest. on ~hose 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 !-'..AX?~.AR."!A
or di=ect.ly to affiliat.ed en~ir:.!.es wit.h which R08ERTS did
busi~ess, all for t.he benefit of the interests of ROBERTS and all
contra~1 to the in~erest.s of ~he shareholders of MAXP~~.
PLAlNTIPPS' ORIGINAL PETITION, APPLICATION POR

FOR TnO?ORARY AND PERMAlfENT INJUNCTION, AND
APPLICATION FOR IMPOSITION OP CONSTRUCTI~ TROST Page 11
¢sa
22. As d consequence of the "loo'Cing" of HAMILTON-rUT at
the direc~ion of ROBERTS, HAMILTON-TAFT was placed in jeopardy of

being una.ble co meet. it.s obligations. As a resul t. 0 f this
j eOFardy, 1-'..A.XPH.A.RJof..A was required t:) at campI: some means by whic h
t.c obtain funds to a.ssure accom~lishmenc. of that. shor't:-ter:m

purpose. ROBERTS engaged t.he serJices of a goad friend and San
Ant::nio act:crney I Stanley O. Rosencerg (ROSENBERG), to ob'Cain a
loan in a face value of 5625,000.00, ~s to which approxirnat.ely
s:oo,OOO.OO ·,..ras actually excended ("FIRST ROSENBERG NOTE"). This

loa n was use d t. a me e t. s h art - t e rIll 0 b 1 i gat i Q nS 0 f ~x P HA~"!A
cerivative from the inability of its wholly-owned subsidiary,

HA~ILTON-TAFT, t.o fulfill it.s cbligat.ions. As part 0 f this
t:-a.nsact.ion, ROBERTS caused one hundred percenc (100\) of che
sha~e5 of ~~~ILTON-TAFT LO be pledged as collateral on :~e FIRST

!i.OSENEERG NOTE. No shareholder a£=~roV'al rias obtained for th.LS
:.=.ansac::.:on.
23. In Sept:emcer I 1988, for t.he purpose of crea~ing the
appearance of a good faich effort. co eniorce it.s ri<;hts wit.h

respecc t.o loans which had bee~ macie, MAXPHARMA inicia~ed suit in
Dallas Councy, Texas, styled !w!axcnarma, Inc. v. Visicn, Inc' l
C!'-.::-:'stiana Enercrv Cor:)orat.icn, :-toha.'1led A. Hadid, an rr.c!i·.ridual l
and John H. Robert:s, Jr. r an I ndi'l idual [the .. MAXPHARl-'.AI ROBERTS
SUIT~J" seeking colleccion on indebt:edness owed by ROBE~TS which
PLAJNTIFPS' ORIGINAL PETITION, APPLICATION POR

TEMPORARY RESTRAINING ORDER I EX PARTE, APPLICATION
APPLICATION FOR IMPOSITION OF CONSTROCTIVE TRUST Page 12
c;
was ~hen in default. Had ROBERTS repaid the amounc which was due
and owing, !-'AXPHAR.MA would have been in the position to sacisfy
the FIRST ROSENBERG NOTE, effect:uate the reacquisition of t.he
transferred pledged collat:eral on the FIRST ROSENBERG NOTE, and
begin to replenish the funds which had been diverced from
KAMILTCN-TAfT in the form of loans. T~e pleadings in the lawsuit
fail to fully and completely z:-elat.e the relationship of the
~art~es :0 cne another and the facts associated with the c:eation
of the various indebtednesses which hac, as of that time, ?laced
!-'.AXPr:..A.R.JJ_~ and H.A.MI LTON-TAFT , as its ',Jholly-owned subsidiary, i.n
subst.antial financial danger.
24. In December, 1988, ROBERTS sought. the imposi~:"on of
injunct.love =elief z:-eStrainlng MAXpr...AR.."!A from c.ransferr:..:tq any
assets to sat.isfy the FIRST ROSENBERG NOTE. Although ROEE~TS was
a £::::'€nd. of ROSENBERG 1 the ?osition :..aken in the pleac.i..:-.gs ",Jas
that ~C5ERTS had developed a business opport.unity which ~aQ :hen

been :.rans tarred to :-!AXPH.A.R."!A ~nd that., subsequent.ly I y,.;..x?fi.AR.Y.A.
had mismanaged t.he business oppor'Cunit.y to the pctent.!a.l
detri.:nenr. of ROBERTS. What ROBERTS tailed to acc:..!rately
z:-epresent to the Cour't. in that lawsuit was (a) t.he nat'.Jre and
extent of cancrol ·...rhich ROBERTS axercised over t.he -!ari.ous
enti. ties, (b) the nature and extent. to ..,hich the act.':'ons and
cOl}duct. of ROBERTS had themselves ~=eated t.he finane .tal hazard

for
,
~~?HA~~, and (e) the fact that. the management of ~~PHARMA
PLAINTIPFS' ORIGINAL PETITION, APPLICATION fOR

TE.MPORARY RESTRAINING ORDER, EX PARTE, APPLICATION
FOR 'l.""EKPORARY AND PERM.AHENT INJUNCTION 1 AND
"",. ~ - ... ..
~ ---.. . ..
and HAMILTON-TAFT under the direc~ion and conerol of ROBERTS had
been such as to ~ loot" HAMILTON-TAFT in such a way as to crea~e
the appearance that the diminucion of the value of KAMILTON-TAFT
had been the result. of mismanagement. by MAXPHA.RHA and, thereby,
enable ROBERTS to (i) obtain large quantities of cash from
HAMILTON-TAFT under the ruse and guise that the acquisition of
t.hese a.ssets had l in fact, occurred as a result of !{AXPHAR-'-1..A'S
ac-:::ion and (ii) as a result. of that. =-use, to then orchest:.rate a
process whereby ROBERTS could aCq'..li=e the shares of HAMILTON-

TAFT, a viable entity with exisc!..:-.g client: base, and leave
MAX?H.ARMA as the shell it ha.d been before t.he acquisition of
HAMILTON-TAFT, without any assets and. to the detriment. of t:.he
shareholders of the publicly held MAX?KARMA.
25. P 1 a i n t iff AR."!STRONG, through Dresner Corpora t ion, had
~resent.ed a proposa 1 to MA.XPH.A.,R1J~ fc~ the purchase 0 f ~?~-A.fL\,l..A
shares and c=~trol of the ~PHAR¥_~ coard in consideration f~r 53

.• 1 .
m~l._!.on, which swn •... ould have readily (a) sat.i.sfied the :IRST
ROSENBERG NOTE dnd (b) pro\Tided approximately S2.5 million in
operating capical for MAXPHARMA. COSTELLO, still as de faceo
nominee and controlled person of ROBERTS, =efused to accepc this
business oppor-c.unit.y to sust.ain the operations of !-tA.XPHA.R!~.A and
HAMILTON-TAFT, and inscead proceeded en a course to seek to cause
R08;:RTS to repay the oucscandi:lg debts due and owing to
MAX P H.A.Rlwf~ •
J

T£MPORARY RESTRAINING ORDER, ex PARTE, APPLICATION
FOR TEMPORARY AND peRMANENT INJUNCTION, AND
APPLICATION FOR IMPOSITION OF CONSTROCTIVE TROST Page 14
..
26. In lat.e December, 1988 1 ROBERTS represent.ed t.o t.he
Cour-c in the XAXPHARMA/ROBERTS SUIT t.hat. ROBERTS had developed
t.he corporate opport:unity for MAXPHARMA, t.ransferred t.he
corporate opport:unit.y to MAXPHARMA, and that MAXPHARMA was
mismanaging t.he business apport.unit.y -.. hieh ROBERTS had
transferred, for all of which ROSERTS t.hensouqht. to have ehe
prior eransact.ians rescinded and concrol of HAMILTON-TAFT
retur:ted t.o ::t08ERTS. -. In conjunct.ion with t.his effor't, ROSERTS
succesz fully obtained a Temporary Rescraining Order rest:.raining
MAXPP..A..RJwf..A frem ut.ilizinq from using any HAMILTON-TAFT assets t.o
satis ty the FIRST ROSENBERG NOTE. foreclosure on the FIRST
ROSESBERG NaT~ was set. for January 27, 1989.
27. ~~STRQNG acquired 500 shares of MAXPHARMA on or about.

January 13 , 1989, and cont.inued wit.h effor'Cs to negotiate for
sat..:.sfact':"cn of the firsc Rosencerq r.ot.e and i.nfus.:.cr. .of
adc:~:~nal c~erating capieal as ou~lined above.
28. On or about. Janua.ry 23 1 1989, AR.l,{STRONG sold his sha=es
fer valuable censiderat.ion to Pat.t.i C. ~ont.aque, his sec=et.a.ry,
!,Jhe t.hen filed suit in Collin Counl:.Y, Texas, st.yled Pacty
1-!ontaQue t Individually and Shareholder of MAXPH.A.RJ'.A, INC. V'.
LA"rtENCE B. COSTELLO, C. WAYNE LITCHFIELD. JOHN H. ROBERTS ( ;~.,
anc :-!OHAMED A. RADIO, bat.h Indivic!uallv and as Shareholders of
l-f.A.XPP_h...R.a.tA c I!IC., HA..'iILTON-TAFT r INC. and VIS ION r INC., as Pa.rty
PLAINTIPFS' ORIGINAL PETITION, APPLICATION FOR

FOR TE.HPORARY AND PER.MA..tfENT INJUNCTION, AND
APPLICATION POR IMFOSITIOH O~ CONSTROCTlVE TRUST Page 15
-
De fendant:s, and obtained a Temporary Restraining Order
restraining ROBERTS from fur~her ac~ion. This Temporary
Restraining Order .was dissolved the next day upon a Plea In

Abatement with respect to the Dallas County case.
29. At 9:55 a.m. on the morning of foreclosure, and with
the offer of ARMSTRONG outstanding, the FIRST ROSENBERG NOTE was

sa tis f ied through payment via the Dallas, Texas, law fir:n of
Gardere & Wynne usi~ a trust fund check, the sources of ·,.rhich
was then unknown.
30. On January 30 I 1989, and for valuable consideration,
~~STRONG reacquired the MAXPKARMA shares which he had p~eviausly
held.
31 . As a f February 14, 1989, A.RHSTRONG learned for the
first time from Ms. Fran Bartlett, president of HAMILTON-TAFT for
many years, that:
d. Due to threat.s by COSTELLO that bankr'Jpt::::y ·.... ould
be init.':'at.ed in order to preserve the stock int.erest of
MAXP~~ in HAMILTON-TAFT due to t.he fac~ ~hat. ROBERTS had

obt.ained a Temporary Injunction against. MAXPHARMA utilizing
the H.A.MILTON-TAET asset.s to sat.isfy the FIRST ROSENBERG
NOTE, the president: of HAMILTON-TAFT caused some personal
funds and approximately $560 I 000.00 in HAMILTON-TAFT funds
tQ be trans ferred to Gardere & Wynne in Dallas, Texas, for
. the purpose of satisfying the FIRST ROSENEERG NOT!:. This

I
P~NTIFFS' ORIGINAL PETITION, APPLICATION POR

FOR ~ORARY AND PERMANENT INJUNCTION, AND
transac1:ion was e f fect.ua t.ed in order ~o (a) protect. t.he
client. int.erests of HAMILTON-TAFT and (bJ avoid the
destruct.ion of HAMILTON-TAFT business as a result of being
involved in a bankrupt.cy.
b. The funds obtained by Gardere & Wynne I as
at t.o rnsys for ROBERTS, were then used to fund an esc:r-;:·..1
transacc.ion ·,..,hereby ROSENBERG afforded ROBERTS an
opport.unity to "buy back" the H.A.M!LTON-TAFT st.ock;
c. On February 10, 1989, l.Iichouc not.ice t.o or
aut.hority from any of t.he MAXPHAR.~ shareholders, COSTELLO
and ROBERTS eneered inco a less chan arm 's :engt.h
t::ansact. ':'on whereby COSTELLO caused !t'.AXPHARMA to t::-ansfer
all c f the shares of HAMILTON-TAfT t.o ROBERTS and t.hen I in
e:..lrn, ROBERTS forgave the indebt:eciness of MAXPP..A.Rl-'.A t.o
c;_~,{ILTC~ -TAFT. Thus, as a cesul:. at :!'l.is t.ransac:..:.:::n , dnci
·",i.:.hout. knowledge t.o any c£ ~he shareholders of the
publicly held MAXP~.A, MAXPH.A.Rl'.A :,ad divest.ed i:.self of
P.,A.\!ILTON-TAFT to ROBERTS and, ef:ect.::.:,ely, had no asset.s as

of February 10, 1989.
]2. On February 14, 1989, AR.."'..5TRONG fur't.her learned t.hat.
ROBER.TS, as of February 1';, 1989, ::ad d':'=ected and ins-cructed
represent.aelves of HAMILTON-TAFT to .ire transfer t.o HADIO an
additional 52 million for purposes as yet: unknown but ~resumably
to either furt.her assis~ RADIO in project.s in which he is engaged

J
PLAINTIPPS' ORIGINAL PETITION, APPLICATION FOR

TE..."!l?ORARY RESTRAINING ORDER, EX PARTE, APPLICATION
FOR TE.KPORARY AND P!RH.AN'ENT INJUNCTION, AND
APPLICATION POR IMPOSITION OP CONSTRUCTIVE TROST Page 11
and in con~ideraLion for which HAOIO will reciproca~e to ROBERTS
by giving ROBERTS financial suppor't:. in ot:her t.ran::sact:ions; or,
alt.er:1at.ively, for a ··st:.rawman" transfer of funds to ROSENBERG in
order t.o effect.uat.e a release of HAMILTON-TAFT stQck held as
sec l! r i t Y j and # ROBERTS has given ins t.ruc~ion5 fa r anot. her
Sl/OSO,OOO.OO to be wire transferred in accordance wit.h
inst:.=~ct:ions to be given on February 15 or February 16, 1989.
33. As the out.lined fac1:.s reveal, t.he ongoing loot:ing of
l-4..AXPHAR..1.iA and it.s primary asset., CS...AMILTON-TAFT, had cont.inued
from Janua"ry, 1988 t t.hrough at. least. February .10, 1989; ~nd,
fur~her, t.o t.he ext.ent. that. ROBERTS has wrongfully acquired t.he
~~I~TON-TAFT ent.it.y, a construct.ive t:ust needs t.o be imposed in
order to preserve and prot.ect. t.he int.erest.s of t.he !-'AXPH.ARM.A
'sharehoLders as to whom the HAMILTON-TAfT asset. had been the
pr.:':-:tary asset. af ~PH.A.R..\fA prior co its wrongful t.ransfer to
RCBER.'!:'S.
DETA1LED FACTUAL BACKGROUND
ACQUIS ITION OF KAXPf!AR.KA AND RAKILTON-TAFT
34. HAMILTON-TAFT was incort;:orated in California in 1979
a.nd is in t.he business of providing tax computing services for
payment and filing of employment tax returns. In this capacity,
cl ient.s of HAMILTON-TAfT pay to HAMILTON-TAFT swns of money
egu-ivalent t.o t.he tax withholdings required as of respective
,
P~NTIFFS' ORIGINAL PETITION, APPLICATION POR
FOR TEMPORARY AND PERMAN"EHT INJUNCTION, AND
APPLICATION POR IMPOSITION OF CONSTRUCTIVE TROST Page 18
payroll periods, which said sums HAMILTON-TAfT then holds in
accoun~s (~RAMILTON-TAET CONCENTRATION ACCOUNTS·). In accordance

with the agreements between HAMILTON-TAFT and i-cs clients/
H.A.IoiILTON-TAFT is entitled to invest t.he monies cont:ained in the
HA.'iILTON-TAfT CONCENTRATION ACCOUNTS from the time af receipt:
until the time of payment: and have t:he use of the interest earned
~hereon (with various variations of such ag=eement existing with
different clients). Prior to the acquisition of HAMILTON-TAFT by
MAXPHAR..'iA, HA.'iILTON-TAFT had only invesced monies from the
H..A.MILTON-TA.fT CONCENTRATION ACCOUNTS in secure invest:.mencs such
as tonds or treasury notes.
3S. Pr ior to t.he purc~ase of H.A..'1ILTON-TAfT by MAXP:!A.R.'iA,
HA..~ILTaN-TAfT was o\olned by a wholly-owned affilia.te of C!GNA
Car;orat.ian. During 1986, and as a resul7. af substant.ial losses
ex;:e!' :enced in the proper't.y and casual. r.y area, CIGNA dec iced co
c~ncer.t.=.3t:.e :ts busi:1ess port:folio in ir.surance-relat.ed mat.~2rs
and, accordingly, t.o sell any non-insurance relar.ed ent:i':.':"es,
including without: limitat.ion HAMILTON-TAfT. During early 1997,
prospect.ive purchasers of HAMILTON-7AfT included, without.
limitation, ADF Corporation and Cont:rol Dat.a Corporat.ion.
36. As a mat.ter of coincidence, ~n ~arc~, 1987, ROBERTS met.
Ms. Fran Bar'tlet.t, then President. and CEO of H~'iIL':'CN-TA..FT
("BARTLETT"), on an airplane t.raveling (,0 washingt.on, D.C. As a.
result
,
of discussions about. the operat.ions of HAMILTON-TUT,
PLAlNTIFFS' ORIGINAL PETITION, APPLICATION POR

TE..'fPORARY RESTRAINING ORDER, EX PARTE, APPLICATION
FOR TE.KPORARY AND PERMANENT INJUNCTION, AND
RO BE RT S (a ) indica ted t.o BARTLETT t.ha t ROBERTS had t.he where-
wit.h-all and interest. to acquire HAMILTON-TAFT through a
corpcration known as VISION, which :tOBERTS claimed to can'Crol,
(b) that ROBERTS would be int.erested in continuing the operat.ions

of HA..'1ILTON-TAFT in the same manner as had previously been
perior:ned, and (c) ROBERTS would immediacely begin t.o under'Cake
st.eps necessary to present. a proposal t.o HAI'iIlTON-TAFT for the

acqu~si~ion by VISION or some other entity cont.rolled by ROBERTS.
3i . Bet:ween Ma.rch I 1987 I and July f 1987, ROBERTS conducted
disc~ssions with CIGNA regarding the possibility of the purchase
of ~JL~ILTCN-TAFT.
38. In July of 1987 I VISrO!-l and ROBERTS executed a
cant i.dent.iality agreement with C~GNA in order t.o acquire
ir.f::~ation concerning HAMILTON-TAfT. On or abou t December 2I
198'7 I CIGNA, H.A..'1ILTON-TAFTJ and HT !-!oldlngs, inc. I ent.8r-ed int.:;) a.
··~.c .:5hopping agreement." so that CIGNA would r:.ot: solici.t. H.JL"tILTON-
HT Holdings, Inc., was a wholly owned subsidiary of VISION
which had been for.med to purchase ~~ILTON-TAFT.
39. Between approximar.ely August., 1981, and December, 1987,

ROBE R-TS made repeat.ed represent.ations that, r.hrough VIS ION I he
was r;:repared to close the acquis i t':":::n of HA.'1!LTON-TA..FT; and, on
at. ~east four (") occasicns closir:g c:!ac.es were set. only to be
t.hereafter negat.ed due to the inability of ROBERTS to close the
transact.ion.
,
PLAINTIfFS' ORIGINAL PETITION, APPLICATION POR
TEXPORARY RESTRAINING ORDER, EX PARTE, APPLICATION
FOR TEMPORARY AND PERKA.NENT INJUNCTION, AND
APPLICATION FOR IMPOSITION OF CONSTROCTlVE TROST Page 20
40. Neither ROBERTS nor VISION were involved in any fashion
with MAXPHARHA from the eime of first;. cont.ac'C with BARTLETT
t.hrough late 1987, at. which time discussions with MAXPHA.R..'"!A

initiated.
41. During the period of approximately July I 1987, through
lat.e December, 1987, ROBERTS was at:"Cempcinq t.o locate sources of

financing which would be available to enable him to effect.uaee
the acquisit.ion of HAMILTON-TAfT. ROBERTS did not have an
independent financial base upon which to close such a transact.ion.
42. ROBERTS locat.ed !{AXPHAR!-!.A as a pot.ent.ial corporat.e
vehicle t.hrough which acquisit.ion of HAMILTON-TAFT could be
effectuaeed. MAXPHARMA is a publicly owned corporation

ir.ccr?0rat.ed in t.he State of Tennessee, t.he shares af which were
being traded an the American Stock Exchange.
43. Through a process prec isely unknown I ROEERTS proceeded
to ccnduct negot.iat.ions for t.he acquisit.ion for ~~p~~ as t.~e
corr;::orat:e ent'.i ty through which H.I\."!.ILTON-TAFT would be acquired

in t:he following respec~s:
a. Be~ween July, 1987 I and December, 1988, and in a

manner presen~ly unknown, ROBERTS est:ablished a relacionship
with RADID, a Saudi na~ional of purpor~ed subst:antial wealth
who, additionally, supposedly had banking cannec~ions with a
,
National Bank of Washingt'.on:

~ORARY RESTRAINING ORDER, EX PARTE, APPLICATION
FOR n:KPORARY AND PERMANENT INJUNCTION I AND
b. A concrolling block of st:.ock in MAXPHA.RMA was
owned by PRASAD and, on informacion and belief, PRASAD had a
substant~al loan guaranteed by T. Bert Lance at the National
Bank of Washingt:.on, where HADIO had significant influence,
said loan believed to be associated ·Jit.h and const:.ituting
funding for the acquisit:.ion by PRASAD of his int:.erest:. in
c. Either: as a result: of sheer coincidence, personal
int:.errelacianship bet:.ween PRASAD and HAOlD, or t.hrough the
f~nancial link at. t.he National Sank of Washingt:.on, ROBERTS
learned that PRASAD ·..,.as in financial difficult.y with t.he
loan of PRASAD at t.he' National Bank of Washington;
d. ROBERTS and/ or HADID approached PRASAD wi th t.he
pr::Jposition that:. ROBERTS and/or H.AOID, either individually
::r ty ar.d t.hrouc;h ccntralled or aff.:.l':'ated ent.it.ies, would
acquire a controlling interest:. in ~~p~~~ and, thereafter,

utilize !-!.A.XPHARl-'.A as t.he corporat:.e ent.i.t:.y which would then
acquire HAMILTON-TAFT;
e. The considerat.ion con~ernplaced for the acquisicion
by ROBERTS and/or HADID of the int.erest:. of PRASAD in
~XPHAR.MA included che fact:. chat. (i) favorable t.erms of
extension would be neqot.iat.ed for PRASAD wi~h ehe National
Bank of Washing~on, (ii) ROBERTS and HADID would provide

POR TEMPORARY AND PERl1ANENT INJUNCTION, AND
APPLICATION FOR IMFOSITION OF CONSTROCTIVE TRUST Page 22
personal quaran~ies on the loan of PRASAD with the National
Sank of Washing~on, (iii} HADID would be provided a loan of

approximately S3 million from the asset:s of HAMILTON-TAFT,
once it had been acquired, which said funds HADID would then
utilize with respect to a convention projec~ in which he was
involved in Aspen/Colorado, and (iv) ROBERTS and/or H:A.DIO
would receive 750,000 shares of ~~P~~.
-i4. In accordanc'e wit.h t.he foregoing, and dS evidenced by
the cont.ents of a Schedule 13-D filed wit.!1 the Securities and
Exchange Commiss ion en behal f of MAXPHARl-f.A by ROBERTS on behalf

of VISION on Decern!:er 20, 1987, in November and December 1987,
ROBERTS and HADID execut.ed t.he i:- personal guarancies to t.he
Nat.icnal Bank of washington in favor of PRASAD and ROBERTS, by

and t.!1.rough VISION, :NC. ("VISION") I a Delaware corporat.ion wit.h
ir-t: princi9al place cf business in Dalla.s, :;allas Couney, Texas,
acq'Ji=ed r.he con:=::lling i.nr.eresc. of ~...AXPHAR~.A t:hrough a.n
assig~enr. from PRASAD of 3).3% of r.he cammon S1:ock of MAXP~~.
At. the time of t.he assignment, PRASAD was t.he Chief Execur.ive
Officer and President. of MAXPHARMA. [As discussed more fully
below·, ROBERTS, t.h:-ough his cont:rol of 'IIsrON asser-r.ed con'torol
over !-!.AXPH.ARJof.A dnd '~sed ~..A.XP[-l....a...R..."1.A as an ':':1sr.rument. or r.ool to
acquire ~ILTON-TAFT. 1
45. Once ROBERTS, t.hraugh VISION, had acquired t.he
ccint.rolling int.eres\: in MAXPHA.RMA, VISION assigned co MAXPH.A..R.MA
its ri9h~ to purchase KkMILTON-TAFT.

POR TEMPORARY AND PERMANENT INJUNCTION I AND
46. According t.o - BARTLETT J ROBERTS and COSTELLO met. on an
ai=?lane during the early part of December, 1987. COSTELLO, who

was the president: for C&H Trucking Company J was att:empting t.o
locate a Source of financing to assist him in the purchase of
C&H , which was being sold by its parent. ROBERTS reached an
agreement with COSTELLO whereby ROBERTS would arrange for
ccsr:::!..LO to be inves'ted as the Chai.::nan , presidenc a.nd CEO af
~P~JULU~, INC., and 'Chairman of ~~ILTON-TAfT, plus the payment
of a Sl million bonus, the quid pro quo consideration for which

was (a.) the obedience of COSTELLO -ith the desires of ROBERTS
regarding the opera tions 0 f !-!AXPHARl-'..A and HAMILTON-TAFT and ( b)
COSTELLO effectuating the acquisition by MAXPHARl-C..A of C&H
Trucking Company.
~7. RCEERTS a.dvised =epresentacives of H.A..."1ILTON-TAFT late
in Cecember, 1987, fer the first. time of -=.he intent. of ROBERTS,
by =.nd :.hrough VISION, :0 ut.ilize !".AXPHAR."'..A as the corporace
o/ehi.cle through which to effec-cuat.e t.he acquisit.ion of the
p~!L:aN-TAfT st.ock.
48. Furt.hermore, lace in December, 1987, or early in
Januar/, 1988, ROEERTS for the first: t.ime proposed t.o HAMILTON-
TAr'!' a financial funding struct:';.1re orchestrated by COSTELLO
whereby a "reverse repo" lending t.ransaction would be st.ruc:t:ured,
said "reverse repo~ being c:onst.icut:ed essent.ially as follows:
,
P~NTIPPS' ORIGINAL PETITION, APPLICATION FOR
T'OD?ORARY RESTRAINING ORDER, EX PART!, APPLICATION
fOR TI2!FORARY AND FfRHAHENT INJUNCTION I AlID
• :esc:
a. SS million in cash was t:aken from the HAMILTON-
TAFT CONCENTRATION ACCOUNT FUNDS and deposit:ed with Howard
Weil Labouisse Friedriche Invest;nent SecuritYI 'Inc.,
(~HoWARD WElL-), with which funds HOWARD WEIL then obtained
a treasury note to be held as security for repayment of a
promissory note to be executed by MAXP~~ in consideration
for S4.1 million in cash to be paid to CIGNA. Thus I the
MAXPHARMA note was secured by treasury bills in t.he
aggregace amount of 5S million owned by HAMILTON-TAFT and
purchased with HAMILTON-TAFT CONC~NTRATION ACCOUNT FUNDS;
b. Although the total" pur=hase price was staced to be

5-1.1 million, of whic~ S500,OOO.00 ftras to be paid on or
about:. December 30, 1987, and 53.6 million of which was Co be
paid at the closing of the transdc~icn en or about January
29, 1588, an additional 5900,000.00 was funded by t.he
t=ansac~~cn and, ultimately, drawn down by ~p~~~ agains~
operat~ng expenses.
49. On or about. January 29, 1988, ~PHARl-'.A ent.ered int.o a
st.ock purchase agreemen~ with the affiliate of CIGNA to purchase

HAMILTON-TAfT. The entire .. reverse repo ,. loan trans act.ion
required several hours t.Q consummat.e wi~h respect. to the exchange
of funds. Upon cone ius ion I however, ROBERTS, by and through
PLAlNTIPFS' ORIGINAL PETITION, APPLICATION FOR

FOR TEMPORARY AND PER.MANENT INJUNCTION, AND
APPLICATION POR IMPOSITION OP CONSTRUCTIVE TRUST Page 25
con~=olled eneicies and individuals, including without limitacic
COSTELLO, had effec~ively purchased and acquired cont.rol 0
HAMILTON-TAFT with the asseC$ and funds of HAMILTON-TAfT.

50. While not direct.ly involved in the transact.ion~
relat.ive t.o the acquisition by MA.XPHARMA of H.AMILTON-TAFT, of
some significance is a transaction bet:ween MAXPHARMA and a
corporat.ion known as INTERPHARM, to the ext:ent. t.hat: t.he
concl~sion of said t.ransac~ion (a) coincided at or about: t.he eime
when !-!AXPH..A.R..M.A I under the new con ero 1 a f ROBERTS was at t.empt. ing
t.o conclude che acquisit.ion of HAMILTON-TAFT and (b) the fact
t.hat. the INTERPHAR...'"f. t:.ransaction resulted in the forgiveness by
MAX?~~ of 51,231,500.00 in loans from ~~PHARMA to INTERPHARM,
with respect. to which significance is deemed to occur as said
forq':".reness of debt. (i) evidences t.hat. MAX:PHARMA had a
Sl:;::!.:5..cant liabilit.y to INTE:tPB..AR.M derivative from t.he inability
af ~_!.X?}-f..A..R.l"..A to conswnmat:.e a preV'iously cont.ract.ed transact-ion
wit:t !NTERPHARM and (ii) t.he ext.ent. to which the forgiveness of
t.he indebt:.edness neqacively impacted upon the financial
operations of MAXPHARMA, the outline of transact.ions with respect
t.~ which is as follows:
a. In March of 19871 ~XPHARM.A purchased eight:y
percent. (aO\) of the stock in INTERPH.A.RH. At the t.ime 0 f
the sale, PRASAD was INTERPH.A.R.M' S controllinq shareholder I
- ~Presidene and CEO. Likewise, PRASAD was also the President.

J
PLAlKTIFFS 6
ORIGINAL PETITION, APPLICATION FOR
FOR TEMPORARY AND PER.M.ANEN'T INJUNCTION, AND
and CEO of MAXPH.AR."!A. In accordance wi t.h t.he acquis it: ic
ag-reement, MAXPHARl-'..A exchanged 487,95l shares of newl:
is sued common s t.ae k of t.he compa.ny on March 31 t 1987, fat
eight.y percent. (BO\) ownership of INT£RPHARM. An addit.ional
521,227 shares of MAXP?~'S common stock .as issued on or

about. July 15, 1987, for no addit.iona1 considerat.ion.
b. INTERPH.AR..'i incurred large losses and proved t.o be

d sign if ic an 1: . dr a. i n on M..A..X PHARMA · S available cash. In
October of 1987, ~.>..x.PH.A.RHA executed an agreement. for t.he
sale of INTERPHAR.."1 back to PRASAD. Pursuant: t.o t.he
rese is s ion agreement. 1 !iAXPH.A.Rl".A agreed. to ret:urn co PRASAD
all 144 shares of INTERPH.A.RH st.ock owned by MAXPHAR..\o!A, and
?RASAD agreed to surrender back to !'!AXPHAR.MA all of t.he
l,009,178 shares of its st.ock that.. PRASAD received in
connec~!.on wich che original transac::.':'on. The agreement
also :;eleased INTERPH.ARM from repayment: of Sl,231,500 in
loans f=cm MAXPHARMA plus accr~ed interest:.

c. Closing under the rescission agreement. occurred on
or about. February 8,1988. However, PRASAD failed to

deliver 100}000 shares of MAXPHARMA/S s~ock, which had been
pledged t.o American National Bank of Jacksonville, Florida,
as security for cer-=.ain personal indebt.edness of PRASAD.
Based upon information and belief, PRASAD has still not made
,- delivery of t.he 100,000 shares of st.ock to MAXPHARHA.
PLAINTt7FS· ORIGINAL PETITION, APPLICATION FOR

TEKPORARY RESTRAINING ORDER, EX PARTE, APPLICATION
FOR TE:KPORARY AND PER.MAHENT INJUNCTION I AND
~
51. 0 uri n g 1 9 a 8, HAL'i I L T QN- TA.F T pro v ide d net. fun d s af
approximately S14,510,581.00, const.itut.ing loans or transfers of
funds to or for the benefit. of individuals or ent.ities cant.rolled
by or affiliated with ROBERTS, including without limit.at.ion the
following (dat.es and transac~ions being approximate):
a. 1/31/98: S5 million to HOWARD-WElL. Funds of
HA..'1!LTON-TAFT were actually used to enable l"..AXP~..A to
pu==~ase HAMILTON-TAFT. In this transact.ion, S5 million of
cash was taken from the HAMILTON-TAFT client tax t.rust. funds
and used to purchase securities which were issued in the
na.rne of HAMILTCN-TA.FT and, on informat.ion and belief, were
pledged by COSTELLO act.ing in his capacity as Chairman of
HA~!r..TON-TAFT, for t:he benefit of MAXFH.AR."iA and held or
pLedged by HOWARD-WElL as security for a loan t.o ~~PHARMA,
54.1 ~illion of which ~as paid to CIGNA for the purchase by
!-!.AX?!-!ARM.A from CIGNA of HAMILTON-TAFT, and the :::-emaining
5900 I 000.00 of which was to be ut.ilized as working capital
:~r HAMILTON-TAFT. The remaining S900 1000.00 was, in fact.,
dissil;lat.ed at. the control and direct.ion of ROBERTS for the
benefit of entit.ies or affiliat.es cont.rolled by ROBERTS, and

no~ for working capital.
b. 2/26/88: $1 mlllion to MAXPHARMA.

? OR TE.KPO R.A.R Y AND P ERKA.NENT I NJUNCTI ON, AND
APPLICATIaN FOR IMPOSITION OF CONSTRUCTIVE TRDST Page 28
c. 3/8/88: $1 million ~o Hadid Development Co.
d. 3/11/88: $2 million to Hadid Development Co ..
e. 3/23/88: 5815,000.00 to CHRISTIANA, INC.
f . 4/21/88: S2 million to ro International
Corooration. These funds were provided as part: a f a down
payment. Ear t.he acquisit.ion of C&H Nat:.ionwide, Inc., a
t.=ucking company of which COSTELLO had been t.he former
president.. The t.ransact.ian cculd not. close due to t.he fac~
that. ROBERTS could noc arrange far financing suff':"::ien'C to
pay far a tract of real estat.e associated wit.h the sale of
the trucking company. Approximately 51,500,000.00 in
::rlnci~al and interest: has been repaid, with t.he present.
talance on this loan being 5662,000.00.

g. 5/88-10/88: $1 million in manaaement. fees.
During t.he referenced period of time, approximat.ely 51
:ni 11 ion was trans ferred from the accounts 0 f HAMILTON-TAfT
':0 MAXPHARMA for the purpor't.ed purpose of sat.isfying
~anagement. fees and related pur;ort.ed expenses.
J
~~ORARY RESTRAINING ORDER, EX PARTE, APPLICATION
FOR TE.KPORARY AND PER.M.AHENT INJUNCTION, AND
h. .11/88-12/88: $411,000.00 representing transfers
to H..AXPHARKA for operating expenses. The following

amount.s were trans fer::-ed from HAMILTON-TAFT CONCENTRATION
ACCOUNT FUNDS to ~..AXPHARMA for the purpose of !-iA.XPH.A.R..ltf..A
operating expenses:
i. 11/9 - S35,000.00;
ii. 11/16 - S22,000.00;
iii. 11/21 - S228,000.00;
iVa i2/2 Si2,OOO.00i
v. 12/22 - 574,000.00;
vi. 12/28
52. The fund transfers referenced in numerical paragraph
51, 5 upra, were all unsecured fund trans fers made from the
HAMILTON-TAFT CONCENTRATION ACCOUNT FUNDS.
LAWSUITS
5]. On September 13 I 1988, MAXFH.AR.."!A, rNC. brought suit. in
t.r.e 134th Dist.rict. Court., Dallas Count.y, Dallas, Texas (the
··~_U?HJUt."!A/ ROBERTS SUIT") against. VISION I INC. I CHRISTIANA ENERGY
CORPORAT ION, MOHaMED A. HAOID, and JOHN H. ROBERTS, JR. In
per~~nent part the pleadings allege the following mat.t.ers:

d. That HADIO and ROBERTS, t.hrough VISION, acquired
common st.ock of !-'.J...xPHA.R.."!A sufficient: to give t.hem a
con~rolling int.eres~ t.herein;

APPLICATION FOR IMPOSITION OF CONSTRUCTIVE TRDST Page 30
b. That. 'lISrON and ROBERTS exercised their cont.rol
positions and caused l-'...A.XPHARMA to loan to VISION
5625,OOQ.00 as evidenced by two promissory no~es in the

amount af SlOO,OOO.OO and 5525,000.00, each of which
not:es has come due and is current:ly in defaultj
c. T~a~ VISION, RADID, and ROBERTS exercised their con~rol
to cause HAMILTON-TAF'!.', the then wholly-owned
subsidiary-- of MAXPHA.RMA, :0 loan HAOlD $],000,000.00
ev idenced by a promissory not:e given from HAOID to
HA...~ILTON-TAFT, which not:e has come due and is in
default;
::i. Tha t. ROBERTS and VIS ION caused HMiILTON-TAF'!' to loan
$875,000.00 to CHRISTIANA ENERGY CORPORATION, a company
c::nt:ralled by ROBERTS, as evidenced by a promissory
ncc.a from CHRISr:ANA E~lERGY CORPOR..~TION signed on
:;eha 1 f 0 f CHRISTIANA ENERGY CORPORATION by ROSERTS as
Chair:nan, which not:.e has come due and is current:.ly in
default.;
a. Tha t ROBERTS and VIS ION had breached t.heir : iduc iary
due y not ~ a dis pro par t: ion a t. ely pro fit. f ra m the
corporation or i~s subsl.diaries l by syst.emat:ically
loot:ing the assets of l"..AXPHARMA a.nd its subsidiaries,

TEHPORARY RESTRAINING ORDER, EX PARTE, APPLICATION
FOR TEMPORARY AND PER.MA.NENT INJUNCTION, AND
said loot.ing h.aving consisced ::Jf the borrowing of
corporat.e assets which MAXP~ asser~s the Defendan~s
t.herein ~ever incended to repay;
f. Tha t. the funds loaned to t.he Defendants therein had
been used by the Defendant.s therein for cheir own
personal gain, such as for payment. of a Jaguar car and

a personal home for ROBERTS.
S4. Gn January. 15, 1989, VISION, and ROBERTS filed a
ccunt.e==laim sus~ained in par~ through t.he Affidavits on file of
JOHN !i. ROBERTS I JR. I in the MAXPHARl'f..A/ROBERTS SUIT against.
M.A..'·C?::_~=--\,(.A and che t.·""o execut.ive members of !-tA.XPHA.RM.A's Board of
Di.rect.ors I COSTELLO and LITCHFIELD, seeking rescission of an
agreement. bet.ween VISION, ROBERTS and ld..AXPHARli..A regarding the
acq~is!.:.!.on of H.A.~ILTON-TAFT by z.r..AX.PH.A..R.'IwiA and injunct:ive relief
aga:.:i.s:, ~~XPHARU,. INC., COSTELLO, and LITCHFIELD to res't.rain
:.~em ::-::lil ce:r-:.ain act.s relat.ing to ?..AMILTON-TA.FT and !-'_UFHA.RM.A's
cwne~snip thereof. The count.erclaim alleges, among o~her things:
a. That although MAXPHAR¥..A had agreed to award VISION
an.d ROBERTS opt.ions to acquire 475, 000 shares of !-'..AXPHARMA
at cert:ain specified prices in excha.nge for VISION and
ROEERTS' right to purchase ~~ILTON-TAFT, VISION and ROBERTS
we!:'e not. awarded their opt:'ons as allegedly agreed to by
P~NTIFPS' ORIGINAL PETITION, APPLICATION POR

TE:.MPORARY RESTRAINING ORDER, EX PARTE, APPLICA!rIOH
FOR TE...'1PORARY AND PERl'!AN'EHT INJUNCTION, AND
APPLICATION POR IMPOSITION OY CONSTROCTI~ TROST Page 32
b. Tha~ COSTELLO, and other officers and direc~ors of
!-!AXPHARMA I may have been ., upscreaming" funds out:. of
HAMILTON-TAFT co MAXPH.A.RMA in order co pay cert:ain debts I
obligations, and operacing expenses of MAXPHAR.."!A, as a
result of which HAMILTON-TAFT's st:ock may have been in an
immediate danger of loss and/or diminucion in value;
C. Tha~ MAXP~A and COSTELLO, and/or a~her officers
and cirectors of MAXP~~ were in the process of at:.~empting
t.o obt.ain and/or fund a loan from Caprock Savings
Association and in an at:t:empc to pledge the St:.OCK of
P.A.\ULTON-TA.FT, which suc:" actions were assert:ed to pose a
pot.ant.i.al risk of subst.ant:ial harm, injury, and d.i.minut.ion
value to the HAMILTON-TAFT's st:.ock, as a consequence of
which a Temporary Rest:.:::-aining Order rest:raining !-!A.XPHA.R.l"..A,
I~tC. and its office!:'s and di=ec-:ors, from direc-:ly and
~ndirec~ly obt:aining, acqui=ing, or ocher.ise trans terring
C!.ny funds I by loan or ot.her""ise, fr::m H.A.MILTON-TAFT, and
f rom as signing t.ransferring, pledging or grant:ing or
at:~empt:.ing to grant:. to any third-party a security int:eresc
in HAMILTON-TAFT stock pending a hearing on the Temporary

rnjunc'tion.
54. an January 19 I 1989 I a hearing was held on che request.
for a Temporary Injunct:.ion by VIS ION and ROBERTS in connection
with the Councerclaim filed, at: the conclusion of which the Cour~
J
PLAlNTIPFS' ORIGINAL PETITION, APPLICATION POR
POR TE.MPORARY AND PERMANENT INJUNCTION, AND
ent.ered an Ord-er that. the request: of VISION and ROBERTS for
Temporary Injunction be granted and t.hat MAXPHARMA, its officers
and direct.ors be restrained and enjoined from direct.ly or
indirect:ly obtaining, acquiring, or ot:herJise transferring dny
funds by loan or ot.herwise, from HAMILTON-TAFT and from
assigning, t=ansferring, or any ot.her enc'..lmbrance in or on the
~~ILTON-TAFT st.ock pending a final t=~al on the merits.
55. On January 24, 1989, Patt.i Montague, individually and
as a shareholder of MAXPHAFJ-f.A, INC. ("!iONTAGUE") I brought. suit in
the 199th Judicial District Court, Collin Count.y, Texas, against.
COST::LLO, LI'rCHFIELD, ROBERTS, HADIO, bot.h individually and as
shareholders of MAXPH.AR.MA, INC., HA."!ILTON-TAFT, INC. and VISION,
INC. and joined !"1AXPH.AR.MA, INC., HAMILTON-TAFT, INC. and VISION,
INC. as par~y Defendants (t.he "~ONTAGUE SUIT'"). !o!ONTAGUE,
~u=:: ::aser :0= cons idera t. ion 0 f the shares 0 f ARMSTRONG, brough t.
che ac:.ion :'0 enjoin and rest.rain the Defendant.s from cert.ain
aces relat.ed t.o MAXFHARMA's ownership of HAMILTON-TAFT & COMPANY,
as a wholly-owned subsidiary of MAXPHA.R.M.A, alleging in ~aterial
respect.:
a. That in July, 1988, MAXl?HARMA execuced and
delivered t:a Sta.nley D. Rosenberg its original promissory
nOLe in t.he original princ:pal amount of $615,000. 00 I
( .. ROSENBERG NOTE") and in order t.o secure the ROSENBERG
.' NOTE, ~XPHARHA executed and delivered to ROSE~B£RG a
,
P~NTIFFS' ORIGINAL PETITION, APPLICATION FOR
FOR nKPORARY AND PERMANENT INJUNCTION, AND
APPLICATION ~OR IMPOSITION OF CONSTRDCTIVE TROST Page 34
s ecur i ty int.eres t. and 1 ien upon all the shares 0f Common
5 t:ock 0 f HAMILTON-TAFT I as we 11 as possession of the
HAMILTON-TAFT s~ock;
b. That. t.he ROSENBERG NaT~ was current.ly in default
dnd as a result., the HAMILTON-TAFT st.ock may' be in Urnmedia~e
danger of loss and/or diminut.ion in value;
c. That: MAXPHARMA and COSTELLO were pocent:ially
··ups creaming" funds out. of HA.MILTQN-TAFT t.o MAXPHARMA in
order co pay cert.ain debt: obligacions and operat.ing
expenses;
d. Tha t. MAXPH..A..R."'.A and COSTELLO and/or ocher off ieers
or direct.ors of MAXP~~ were in t.he process of a~~empt.inq
to obt.ain or fund a. Loan from Caprock Savings Associacion
and were pot.ent.ially at.tempt:.ing co pledge che stock of
P~~ILTON-TAFT in cannec~ion wit~ said loan;
e. Tha c such c:loduct. warranted impos ition of an
injunct.ion enjoining the Defendancs from at.tempt..ing to
pledge the HAMILTON-TAFT st.ock.
57. On January 24, 1989, a Temporary Restraining Order was
gran ced in t.he MONTAGUE SUIT. However I an January 26, 1989,
ROBERTS filed a Plea in Abatement: s'tdtinq that. the counterclaim
asserced by VISION and ROBERTS in the .r-..AXPHAR.MA/R08ERTS SUIT was
the same as the claim asserted and t:he relief requested in the
,
PLAlHTIFFS· ORIGINAL PETITION, APPLICATION FOR
TE.l1:POR.A.RY RESTRAINING ORDER, EX PARTE, APPLICATION
FOR TE.K.PORARY AND P ER.M.AN'ENT INJUNCT ION, AND
pending MONTAGUE SUIT and that'., by vir'tue of the foregoing I the
Dallas Count.y Court: had acquired dominant. jurisdict.ion and t.he
Collin County case should be abat:ed. ROBERTS and VISION'S Plea

in Abatement was grant:ed on or about January 27, 1989, and the
Collin County case was ordered to be cansolldat'.ed with the Dallas
count.y case.
DIVESTMENT OF RAKILTON-TAFT STOClt
TO CR ACQOISITIONS, INC.
58. CR ACQUISITIONS was incorporaced November 91 1988, by
CA.TTELL (the secret.ary for ROBERTS) I who is also the Registered

~gent for service of process, and which cc~pany has a regist'.ered
address of 200 Crescent. Cour-:., Suit:e 1375, Dallas, Texas 7·5201
(the address of ROBERTS). No officers or direccors are present.ly
listed with resgect :0 this corporation.
59. On or a.bout. February la, 1989 , in a transact.ion the
details of wh~ch are nac. presently f~lly ~nown, the cer~ifica~es
or =i.C;ht.s t.hereto c f t.he 2,059 I 000 shares of stock in P..AMILTON-
T A.fT prey ious 1 yawned by ~XPHARM.A .. ere crans ferred to CR
ACq".Jisitions, wit.h VISION being involved in the transact.ion in a
respect. presen~ly unknown.

60. SELL is understood t.o own approximat.ely twenty percent
(20\) of CR ACQUISITIONS, plus various options therein. On
further informat.ian and 1::elief, BELL also cont.rols Comstock, a
subs idiary of Ewing Oil, and has been providing 5ul:;)st.antial
PLAlNTIYFS' ORIGINAL PETITION, APPLICATION FOR

POR TEMPORARY AND PER.KAH'EHT INJUNCTION I AND
financial sypporc and sustenance co ROBERTS (i.e '/ Nkeeping
ROBERTS al i ve ") for a period 0 fat. leas't. t.wo (2) man t:.hs prior co
February 10, 1989.
61, On or about. February la, 1989, ROBERTS ca.used a
cransaccion t.o be effec~uaced wherein t.he s~ock of KAMILTON-TAFT
therecofore owned by MAXP~~ was transfer=ed co CR ACQUISITIONS.
[ .. 2/10 ~x(PHAR.J.!A/CR ACQUISITIONS HAMILTON STOCK TRANSFER"]
62 . Al though the' det:.ails 0 f :.he MAXPHAR..."'!A/CR ACQUIS ITIONS
~~ILTON-TAFT STOCK TRANSFER are unknown, some of the informat.ion
which is known is as follows:
a. On February 10, 1989, ROS ENBERG agreed co loan CR
ACQUISITIONS 1:he amount. of S600,OOO.OO const.icut.ing t.he
purcha.se price, exercise price and relat.ed cost.s of t.he
loan, the proceeds of which CR ACQU!SITIONS has agreed 1:0
pay a purchase 9r ':'ce to VIS leN and an ., exerc is e pr ice -, to
HA.MILTON-TA..FT. Addicionally J CR ACC:UIS:L:TIONS has ag=eed t.c
pledge the 2,059,000 shares of st:ock purchased by CR
ACQUIS ITIONS (presumably f rom VISiON) co Rosenberg, and
addit.ionally t.o execut:e a security agreement: in favor of
Rosenberg;
b. VISION, CR ACQUISITIONS, ~JL~ILTON-TAFT, ~p~~,
ROBERTS and Fran Barr:le't.t. ("BARTLET'!'- I a California resident
who has been t.he princi~al person managing t.he affairs of
P~HTIFYS' ORIGINAL PETITION, APPLICATION FOR

POR TEMPORARY AND PElUiA..NENT INJUNCTION, AND
APPLICATION paR IMPOSITION OF CONSTROCTlVE TRUST Page 37
'---'~.f4 _ ...._._.
HAMILTON-TAFT pursuan~ co che instructions and directions of
ROBERTS and COSTELLO) entered inca an assignment. of option

I
rights, the details of which are unknown;
c. A direct.ors' meet.ing of CR ACQUISITIONS was
convened ac which time ROBERTS, SELL, and a person
ident.ified and known only as "Claire", who is believed to be
a girlfriend or other social acquaintance of ROBERTS
( "CLAIRE") were· made the direc~ors in charge of HAMILTON-

'''--
'~T affairs, or affairs with respect. t::l the previous assets
---.
of HAMI:c-1'ON-TAFT.
.. ~
"
63. On Februarr ,14, 1989, BART!.ETT advised A.RJof.5TRONG of the

"
following activit.ies -..thich had cccur~ed with respect to the
operations of HAMILTON-TAFT:
a. BELt. is the person ..... ho has been des ignated by
RcaERTS as ehe person ·..rho is cve~5eeing the present:
~~erations of ~~~!LTON-TAFT;
b. ._At----t.he inst.ruction and dir~'=t.ion af ROBERTS, the
sum 0 f S2 mi llion was trans ferred f=om the HAMILTON-TAFT
CONCENTRATION ACCOUNT to Amerimac, a corporation cont.rolled
by RADIO. KADIO is believed to be presently outside of the

United Stat.es. It is unknown, but on informat.ion and
belief, the funds transferred t.o HADID at Ameri.mac are
intended for transfer to some other account;
PLAlNTIPPS' ORIGINAL PETITION, APPLICATION FOR

TEMPORARY RESTRAJNING ORDER, EX PARTE, APPLICATION
FOR TEMPORARY AND PER.KAN'£NT INJUNCTION, AND
APPLICATION FOR IMPOSITION OF CONSTRUCTIVE TRUST Page JB
C. Also on February 14, 1989, ROBERTS stat.ed to
HAMILTON-TAFT staff members that on February 15, ·1999, or

I
Fe brua ry 16, 1989 , further direct:ions would be given by
ROBERTS or his designated represent.ative for a transfer of
an addi t iana 1 S1 , a 5 0,000. a0 to a des tination and account
presently unknown;
d. Based u~on the expressed concern of BARTLETT
c~ncerning the !....."pr~pr iety 0 f the distributions which were
being made, and confr:Jnted by :.he insistence of ROBERTS and
3ELL that. the transfers be effect:lated·, BARTLETT resigned.
54. BARTLETT was one 0 f the founding persons of HAMILTON-
TAFT r had been wi th the company for more than ten (10) years,
incl~ding the time period prior to t.he ownership of HAMIL~ON-TAFT
by C:GNA, is acutely knowledgeable of the client: base of
HA~!:'" :ON -TAFT, ha 5 es t:abl ished and maincai!ied the acc::unr.s of
HA..~!:::JN-TAFT clients prior to febr".lary 10,1989, in a level of
ccn::~ence and trus~, and maintained proper accounting prccedures
at all times during her presence at HAMILTON-TAFT, subject,
part':'cularly, to any restrictions thereon incidental to the
ac~..!isition of cont=ol of rtAMILTON-TAFT by ROBERTS and COSTELLO
as c: Januar/ , 198B.
65" The nature of tr.e HAMILTON-TAFT business is such that
the key components or assets of t.he business operations are (1)
inr.eqrity with clients, (2) efficient. management and (3) computer
PLAJNTIFFS' ORIGINAL PETITION, APPLICATION FOR

FOR TE.MPORARY AND PE~NT INJUNCTION, AND
APPLICATION FOR IMPOSITION OF CONSTROCTrvE TROST Page 39
data bases utilized to properly account: for t.ax payments which
will be due. Thus, the principal asset.s from fa monetary
standpoint are the funds of clients, as t.o which has previously

been expressed it has been the right of HAMILTON-TAFT to invest
properly and utilize interest earned.
66. One of the agreements of H:AMILTON-TAFT during
management 0 f the f ir1n under BARTLETT ·... as that HAMILTON-TAFT
would pay any penalties which ar~se from the failure to properly
and timely pay any tax obligations of clients. In 1988,
HAMILTON-TAFT paid a sum of S5,000.00 in t~is re~pect based on a
pool of cust.omer funds in ~xcess of S~ billion.- Accordingly,
this attest.s to the proper management of KAHILTON-TAFT under the
auspices of management overseen by BARTLEr~.
67. On February 14, 1989, BARTLEIT advised ARMSTRONG of the
f~i~~~i~g development.s wh~ch had occu~=ed as of that dat.e:
a. Not~ithstanci~g the fact. that ~he true reasons far
the resignation by BARTLETT due to her refusal to perform
improper dis t.r ibu t. io ns af funds as directed by BELL and
ROBERTS on February 14, 1989, BELL had announced t.o
management st.aff at HAMILTON-TAFT ~hat (a) SARTLE:TT was
,:aking a long-needed vacat.ion, (b) was no longer '""ith t.he
fir.n and (C) was suffering from drug problems attendant. t.o
emot.ienal stress, none of which was accurate:

TEMPORARY RESTRAINING ORDER, EX PARTE, APPLIo..TION
FOR 'l'"eKPORARY AND PERMANENT INJUNCTION, AND
APPLICATION FOR IMPOSITION OF CONSTROCTI~ TRUST Page 40
b. Emp 1 oyee S 0 f HAMILTON-TAFT are concerned and
fearful of the improper management of the firm which appears
to be ongoing and increasing:
c. We'lls Fargo Bank, one of the principal financial
inst:itutions with which HAMILTON-TAFT has done business in
the pas t, (i) reported an overdraft of H.A.MILTON-TAFT
aCC::lunts in the amount. of S2. 5 million, (ii) upon being told
t hat. BARTLETT wa s no 1 onge r a t HAMILTON-TAFT, contacted
8ARTLETT independen~ly to inquire of the status of accounts,
expressing concern in that regard over the continued banking
o~erations between Wells Fargo and HAMILTON-TAfT I and (iii)
expressed a desire to be provided with some level of
assurance that checks of HAMILTON-TAFT should continue to be
honored.
:0. BARTLETT has advised that several HAMILTON-TAFT clients
have c::lntacted her very =ecent.ly expressing concern over her
absence from the company, and several client.s have indicated an
intent:on to terminate their business relations with HAMILTON-
TAFT cue to the recent change in management.

69. The developments of recent events with respect to
depietion of assets fram the HAMILTON-TAFT CONCENTRATION ACCOUNT
FUNDS and the change of management. have (1) confirmed the

TIKPORARY RESTRAINING ORDER, EX PARTE, APPLICATION
FOR TE..KPORARY AND PERHA.HENT INJUNCTION, AND
allegations co~~ained in the ~~PHARMA/ROBERTS SUIT and MONTAGUE
SUIT respecting the alleged past conduct and futu,re intent of
ROBERTS with respect to depletion of H.AMILTON-TAFT assets" and (2)
resulted in endangerment of the relations with, or termination of

the relations of, six (6) major clients.
70. On February 15, 1989, ROBERTS and BELL caused Sl.S
mi 11 ion to be trans ferred from the HAMILTON-TAFT CONCENTRATION
ACCOUNT FUNDS to an accoun~ in the name of the Dallas, Texas, law

f:~ of Petit & Martin.
TEXAS SECRETARY OF STATE RECORDS

71. In addition t.o t.he foregoing facts evidencing the
ccmplexit.y and int.eract.ion of acti·.rity among the Defendants and

their proclivity t.o utilize corporat.e entities, searches of the
data published by the Texas Secretary of State corporace records

c! i 'J i 5 ion 5 h a '.II S t. he f a 1 2. 0 '"J i ng a f f i 1 i a t ion s ( i . e ., s e r'J ice as
officer, direct.or or regist.ered agent) of the fo11owin<;
Defendants with the following corporations which are eithe!'

i~corporated or authorized to do business in the State of Texas:
ROBERTS
Standing of
Cor:Joration Name Affiliation Cornoration
Nor~hlake Corporation President Active-not in g'ood

standing
Roberts Interests, Inc, Presidencl Inact.ive as of

Director 1/18/88 due to
non-payment 0 f
franchi!e tax

TEKPORARY RESTRAINING ORDeR, EX PARTE, APPLICATION
FOR TEKPORAAY AND PERMA.NENT INJUNCTION I AND
~*o Plus ~~O, Inc. President Inactive as of
12/01/85 dUF to
non-payment of
franchise tax
Mac=~, Inc. President! Inactive as of
Registered 1/18!88 due to
Agent non-payment of
franchise tax
The faust Company President. Act.ive - not in
of San Antonio good standing
Mac=~ Construction, Inc. Secretary! Inactive as of
Treasurer 1/20/87 due to
non-payment.-of
franchise t.ax
Spor~s Cup, Inc. secretary! Inact.ive as of
"r.~easurer 1/18/88 due to
Regist.ered non-payment. of
Agent franchise tax
Macro Realty, Inc. Presidentl Inactive as of
Regist.ered 1/18/88 due to
f:r-anchise tax
Mac:-:! I:1vestment: Presidentl Inac't.ive as of
~rGpert.ies, Inc. Regist.ered 1/18/88 due to
Agent. non-payment. of
franchise tax
Rober'ts Aspen President.1 Inactive as of

Propert.ies, Inc. Regist.ered 1/20/87 due to
franchise tax
JHR ~n~erprise5, Inc. President.1 Inactive as of

Regist.ered 1/18/88 due to
Agent. non-payment. of
franchise tax
Downhill Associates, Vice Inactive as of

Inc. ' President 1/09/89 due to
non-payment of
franchise tax
PLAiNTIFPS' ORIGINAL PETITION, APPLICATION FOR

TEMPORARY RESTRAINING ORDER, ~X PARTE, APPLICATION
FOR TEMPORARY AND PER.M.ANENT INJUNCTION, AND
APPLICATION FOR IKPOS ITION OF CONSTRUCTIVE TROST P.:!lge 43
Ci ty M.ini, Inc. PrE!!iidentl Inactive as of
Regis1:ered 1/18/8s due "to
Agent non-payment 0 f
franchise tax
CATTELL
Standing of
Corcoracion Name Affiliation Cor;Joration
HT Holdings, rnc. Registered Acti'J"e -
Agen't. Good Standing
KV Holdings, Inc. Reqistered Active -
Agent: Good Standing
VISION, INC. Registered Inactive as 0 f
Agen't. 12/5/88 due to
non-payment of
franchise tax
CR Acquisitions, Inc. Registered Active -
Agent: Good Standing
Nar~hlake Corporacion secretary Active -
Not in goed standing
Roter~s Interescs, Inc. ~i~e President! :nac-:.ive as of
Sec=etary 1/18/88 due c=:)
non-payment C f
franchise t.ax
~~O Plus ~~o, Inc. Sec!'e cary I Inacti ve as 0 f
non-payment 0 f
franchise tax
~acro, !nc. secretaryl Inactive as of
non-payment. 0 f
franchise tax
The Faust Company secretary Inactive as of
of San Antonio 1/18/88 due to
non-payment: of
franchise tax
P~NTIFPsr ORIGINAL PETITION, APPLICATION POR

FOR T'EXPORARY AND PER19.NENT INJUNCTION, AND
Mac~o Realty, Inc. Sec~et.aryl Inact:ive as 0 f
non-payme~t of
franchise tax
~dC=~ rnves~ment Secretaryl Inacti ve as 0 f
Properties, Inc. Treasurer 1/18/88 due to
non-payment 0 f
franchise tax
Robert:s Aspen Sec::-etaryl Inact:ive as of
P:-:::pp.rt.ies, Inc. Treasurer 1/20/81 due to
non-payment 0 f
franchise tax
Downhill Associates, Assist:ant:. Inactive as of
Inc. Sec~et.ary 1/09/89 due to
non-payment 0 i
franchise tax
Ci~y !-!ini, Inc. Vice Presiden~/ Inactive as of
Sec=etary 1/18/88 due t.o
non-payment: 0 f
franchise tax
COSTELLO
Standing of
C =:: ::-:: c rat i:: n Name Af::"liation Comara tion
~.AX?~V..A, INC. Registered Activ'e -
Agenc In good standing
HRC Consultant.s, Inc. President:. Inactive as of
1/09/89 due to
non-payment of
franchise tax
PRASAD
Standing af
Cc:-::aration Name Aff:'liatian Corooration
P.S.P. Investment
Co., Inc. President Activel
good st.anding

nXPORARY RESTRAINING ORDER, EX PARTE, APPLICATION
FOR ttKPORARY AND PERJI...AHENT INJUNCTION, AND
·CONSENT OP BARTL.ETT TO SERV!CE
AS INJUNCTION MONITOR
i2. On FebruC! 7Y 16, 1989 , BARTLETT advised ARMSTRONG

, tha t
BAA'!'tETT WQuld be willing to serve as a Court-appointed monitor

concerning the operations of HAMILTON-TAFT in accordance with the
ter::!\s and provisions of any injunctive relief which t:.his Court

migh~ i~pose until such t~e as fur~her protective measures could
be art.iculat.ed and imple!'llented concerning the operat:.ions -:f
III.
COUNT ONE
Derivative Suit 8ased Uoon Breach of Fiduciary Duties

By Officers, Directors and Controllina Shareholders
73. Pursuant to Tex.R.Civ.P. 58, ~~STRONG incorporat.es and
r-ea';'leges by reference numerical paragraphs 1 thrcugh and
-:- ~. The actions and ccnduct. af the Defendant.s as :':J which
~~S7RONG c:Jmpiains constit.ut.e and manifest. an ongoing c=urse and
pa~t.er~ cE conduct, continuing through the date of the filing of
Plai~tiffs I Original Petiticn herein, whereby and through which
AfL,!S:'~ONG is be ing damaged as a shareholder 0 f MAXPH.A.R1-'.A, and as
a ~::uble derivative shareholder of HAMILTON-TAFT, as a
cor-sequence of the means and manner in which the conduc~ of the
Defendants as to which complaint is made constit.ute a breach ot

T~ORARY RESTRAINING ORDER, ~X PARTR, APPLICATION
FOR TEKPORJ\.RY AND PERMANENT INJUNCTION, AND
fiduciary dutres owed by officers, directors and ~ontrolling
shareholders of M.AXPHARHA and HAMILTON-TAFT at1 all times

per-:':':1ent heret.o as evidenced by the fact.s set fonh herei.n",
is. At the time of the ongoing transac~ions made the basis
of ~his suit and at the present t~e, ARMSTRONG was and continues
to be a record owner of SOO shares of the Defendant MA.XPHARMA.
Fur:.he!"J\ore, during the ongOing t=ansac<c.ions made the !:::>asis of
th':'s suit, MAXP~~" was the parent corporation and sale owner of
one hundred percen~ (100\) of the oucstanding shares of P-AHILTON-
TAFT :.hrough at least Februarl 9, 1989.
is. At all times mat.erial and pertinent heret.o, PRASAD and
CCS:ELLO were the direct.ors and officers of the defendant

cor;:orat.ion ~..AXPH..A..R!-!A, and ROBERTS was a controlling shareholder
I I. As evidenced by the fac,:ual recitat.ions set. fort.h
he~ein, the Defendants have engaged and are engaging in a course

and ?attern of conduct conscituc':"n.g a scheme and art.':":ice to
unia·..,fully deprive, deny or defraud the shareholders of
z.t...A.X?F_AR.HA of t.he true and fair value of their respect.ive equit.y
interests in MAXPHA.RJof..A derivative ~rom t.heir shareholder status
the rei n , a!l we 11 as de r i vat. i v e =

f c m the rig h t f u 1 i n t ere s t S 0 f
~.J\Xr:tARM.A in and to HA.MILTON-TAFT as of at. least. February 9,
1989, by effectuat.ing and causing the dissipation, conversion,

FOR TE..'.KPORAR Y A.ND P ERHA.N'E.NT I NJUNCTI ON, AND
APPLICATION FOR IMPOSITION OF CONSTRUCTI~ TROST Page 47
misappropriation, and waste of corporate business opportunit.ies
and corporat.e relationships exis~ing as a result of int.er-
co=porat.e stock ownership.
i 8. Wit h out 1 im ita t ion, the f act. s a s s e t. for ~ h abo v e
evicence that. ROBERTS, COSTELLO, RADIO, BELL, CHRISTIANA, VISION,
CR "cours IT!ONS I MAXPHARl-'..A and HA..'iILTON-TAFT have bene f i ted to
the det.riment of shareholders of !-!AXPHAR..'{A through the aboV'e-
out.li.:led scheme and artifice to dissipate and '...7aste the capital
of ~UPP.AR1'..A and HAMILTON-TAFT as a consequence of t.he series of
loans t.o the various entities and afEiliateg of ROBERTS,
cosr::Lt.o, HADID and SELL, as ·,..rell as t.he forqi'Jeness of
incebtednesses to the ext.ent said forgioJeness of indebt:edness
c rea t.es inc iden ts 0 f income, tax 1 iabil i ty and / or reduc ~ ion in
asseo:s in :.!1e form of accounts receivable.
'79. Furt.her wi thout 1 imi ta tian to the Eacts as se~ :or-:h
r.e=~i.nabove, the evidence reflect.s that ROBERTS, via ·..-IS~CN as
h is alter ego, caused MAXPHARMA to loan VIS ION the total amount
of ~ix Hundred and Twenty Five Thousand and No/lOO Dollars
(56:£::,000.00) in March 1988, via t-..IO (2) PromiSSOry ~ot.es each of
whic~ were due on June 1, 1988. Although MAXP~~ made ~ritten
de!'r.ana on VISION for paymen~ of bot.h notes, VISION failed and
ref'Jsed to tender payment in principal, while making .!.nterest:
pa:rments; and, on informacion and belief, has now forgiV'en said
indebtedness.

T"eKPORARY RESTRAINING ORDER, EX PARTE, APPLICATION
POR TEMPOR.A.R Y AND PERKANEHT I NJUNCTI ON, AND
•
80. Fur~thermore, and without. limitation to the fact.s
referenced hereinabove, on or about:. March B, 198~, HADID,

I
ROBERTS, and COSTELLO caused HAMILTON-TAFT to loan HADID the sum
of Three ~~llion and No/laO Dollars (53,000,000.00) which was due
and payable on or before April 4, 1988. Although written demand

was been made by MAXP~~ on RADIO, the principal amoun~ of the
Not.e was not. been paid; and on information and belief, despite
the fac:. that. HADIO 'was in default under the terms of the Note,
said Not.e was forgi".ren by ~XPHArt:tA in a transac1:.':'on which
damaged the equity interest of the shareholders of ~PH.A.R.MA
s~cck. Thus, KAnIO is in default under the t.erms of the Not.e.

81. Additionally I upon infoGlation and belief, but. wit.hout
limitat.ion co the fact:s alleged in det.ail herein, on or about
Mar::h 23, 1988, ROBERTS, while acting as a controlling
s h a :- e h old e r e f ~..AX P HARM and, de r i vat. i 'J' ely 0 f the :. nee res t
~hereaf in and to fJ...A.MIL:'ON-TAFT, caused H.A..HILTON-TAFT :'0 loan
CH:i:ST:A.NA the sum of Eight Hund~ed Sevent.y Five' Thousand and
No/lOO Dollars ($875,000.00), the Note evidencing which was
execu1:ed and delivered by ROBERTS as chairman of CHRISTIANA:
however, upon information and belief, CHRISTIANA is merely the
alt.e!:' ago of ROBERTS, acting solely as a conduit for the
per:or:nanc:e of his business interest.s and as a device :0 cause
harm or prejudice to those dealing wit.h it. Oespit.e mul t.iple
PLAINTIFFS· ORIGINAL PETITION, APPLICATION FOR

T!.}(PQRARY RESTRAINING ORDER, EX PARTE, APPLICATION
FOR T!...l{PORARY AND PERMANENT INJUNCTION,. A..ND
demands for payment, no par~ af the CHRISTIANA Note has ye~ been
paid, and the principal amount of Eight. Hundred Seventy Five

I
Thousand and No/lOO Dollars (5975,000.00), together with inter~s~
thereon from March 23, 1988, remains due and owing, alt:hough
demand has been made: although, on information and belief,
ROSERTS and COSTELLO may have recen~ly caused the indebtedness to
be fcrgi\Ten, as fur~her damage to the interests of the
shareholders in and to t.he stack of :-'.AXPHARJ1A and HAHIL':rON-TMT I
as ar~iculated hereinabove.
82. Also, upon information and belief, but W'ithout
limitaticn to the allegations set fo:~h herein, on or about ~uly
14, 1988, ~XPHARMA execut.ed and delive!'ed to ROSENBERG its
Promissory Nate in the original pr':':'lcipal amount of Six !iundred
and :~:teen Thousand and No/IOO Dollars (S61S,OOO.OOl ~-h.ich ·""as
secu=ed by '!'"..ro !-!.lllion F i f-:y Nine :~cusand (2,059,000) shares c f
cc~cn s~ock of PAMILTON-TAFT, whic~ had ceen theretofore held by
ROBERTS executed and deli'Jered to ROSEN8ERG his
personal Guaranty, guarantying the obligations of MAXP~V~ under
the FIRST ROSENBERG NOTE. As of Oecember 15, 1988, MAXP~~~ was
in default under the terms of -::.he P'!RST ROSENBERG NOTE.
R 0 S E: N a ERG no 1:: i fie d ROB E R T S 0 f the de f au 1 t I and RO BER:- S I U po n
info:-:nation and belief aided and abetted by ROSENBERG, has
caused the indebtedness due and awing on the FIRST ROSENBERG NOTE
to be discharged in such a fashion as to result in the 2,059,000
PLAINTIFFS' ORIGINAL PETITION, APPLICATION fOR

T'£HPORARY RESTRAlNING ORDER, EX PART!, APPLICATION
POR T'!..HPORARY AND P£RM.ANENT INJUNCTION, AND
I
shares ·of common stock 0 f HAMILTON-TAFT previously held bli
l
MAXPH.A..Rl-'.A to have been trans ferred to ROBERTS I who now holds OnE!
hundred percent (100%) of the HAMILTON-TAFT shares through ani
i
en~ity .hich ROBERTS controls.
83. ~~TRONG would show that such transactions were merely'

I
an attempt by the Defendants, acting in concert with one another
or as cont::-olled and influenced by ROBERTS, COSTELLO, PRASAD,
RADID, VISICN, CHRISTIANA, KEYSTCNE, CR ACQUISITIONS, ~PHARHA,
H..AMILTSN-TAFT, and BELL, to deplete and dissipate the assets of

MAXP~JUL~ and HAMILTON-TAFT in order to gain control of HAMILTON-
TAFT as the major asset of ~~p~~ for an amount of Six Hundred
and Fifteen Thousand and No/lOa Dollars (5615,000.00), less the
fai= market value for such stack.
84. ~~StRONG would further and alternatively show :~at, at
t:::e :'':''::'1e of the loans and t.ransfers of stock alleged herein,

RGcER7S, CCSTELLO and HADlD, in ~heir respect.ive or ':arious
capac.!.~.!.es as director, officer or c:lnt=olling sharehclder of
~PHA.R.U..Af as alleged herein, were conspiring :'0 dissipate and
loot ~he corporate assets of MAXP~~ and its subSidiaries, and
did so through a scheme of f~aud, breaches of their fiduciary and

scat~~cry duties and obligations to ~~e shareholders of ~~?~~
and a civil conspiracy, intent.ionally deceiving MAX?HARMA,
~~ILTCN-TAFT and their respective Eoards of Director9.
PLAlNTIFFS' ORIGINAL PETITION, APPLICATION FOR

n.KPORARY RESTRAINING ORDER, EX PARTE, APPLICATION
FOR TE.KPORARY AND PERKA..NENT INJUNCTION t AND
APPLICATION FOR IMPOSITION OF CONSTRUCTIVE TRUST _ _~age~~_~
L----.~--
85. Furt:her and alternatively, and without limit.ation of
f
the facts as alleged hereinabove, the various Notes were made in
an attempt for RADIO to loot the amount of Three Million and
No/lOO Dollars {S3,QOO,OOO.OO} from HAMILTON-TAFT and for VISION
to loot Six Hundred Twenty Five Thousand and No/IOO Dollars
(5625,000.00) from MAXPHA.R.!-f.A in the guise of loans to an officer
i!nd director of t.he corporat.ion, and an alter ego of a
corporation controlled by the controlling shareholder, all in
fraud upon the corporations. Upon information and belief,
VISION and RADIO never intended to repay the amounts dUB
!'!AXPHA..R."'.A and HAMILTON-TAFT. The fIRST ROSENBERG NOTE was also
an attempt. to loot the sole corporate asse~ of MAXP~~ (to wit:
H.A..."tILTON-TAFT) and to essentially purchase such corporacion for
~he amount af Six Hundred Fifteen T~ousand and Nol100 Dollars
(5515,000.00), nor.'Jw'ithstanding t.he faco: that the fair and
::-eascnable market value of the 2,059, coo out:standing shares of
~~ILTaN-TAFT so intended for conversion f=om HAXPHARMA was well
in excess of such amount, 50 that. the ulti.mat.e divesc.rnent. from
!-!AXPHARMA of the HAMILTON-TAFT shares const.itutes a substant:ial
damage and injury to ~~PHARMA.
86. ARMSTRONG would fur,,:her and addi.t:"onally show t.hat: the
De Ee ndan t.s brE! ac had the i.r f iduc i ary du ties to H..A.XP HARMA in
receiving, directly or through cont=olled ent.ities or affiliates,
P~NTIFPS' ORIGINAL PETITION, APPLICATION POR

TE..M.PORARY RESTRAINING ORDER, EX PARTE, APPLICATION
FOR n:.MPORARY AND P£RM.ANENT INJUNCTION, AND
APPLICATION FOR IMPOSITION OF CONSTRUCTIVE TRUST - - - Page 52 ~ ... ~-
pers anal loans from MAXPHARHA and RA.M.IL'I'ON-TAFT, which the
Defendants never intended to repay, usurpinq corporate
oppor't:unities, and convert:ing the major asset of MAXPHA:RHA for
less than fair market value.
87. AR~STRONG has made no effor't:s to, and should be
relieved from any requirement:, to have t.his sui t brought for the
consideration of the respective 80ards of Directors of ~~p~~
and HAMILTON-TAFT,· since the facts as outlined above clearly
demonstrate :.hat. any such effor-=. '..Iould be futile, in that:
ROBERTS, as a controlling shareholder of ~PHARHA and ?~ILTON-
TMT, either directly or derivat.ively arising from the control
e x ere i 5 ed by ROB ERT Sup 0 n per son s who s e rv e as 0 f f ice r 0 r
directors of such corporations, and now, upon informat:ion and
be 1 ie f. t.he sale shareholder of P.AMILTON-TAFT, and accordingly
c=nt~ol5 t~e 80ards of Direc:.ars of any ccr;orations or corporat.e
of::ce~s and directors as to ~hich or whom decisions with respect
to .=-esponse to the allegations contained in this Original
Peti~ian c=uld other",ise be resolved than through suit. The
Defendants, would not have taken aCl:.ions against themselves or
ot~er~ise admitted to their conversion of corporate proper~y for
less t~an fair market value, breaches 0 f f iduc iary duties 1 and
fraud in obtaining personal loans :rom the Corpora ticn, wi thcut.
ever intending to repay such loans.

~RARY RESTRAINING ORDER, EX PARTE, APPLICATION
POR ttKPORARY AND PER.MANENT INJUNCTION, AND
88. The facts as se~ forth hereinabove further evidence thE
breach of fiduciary duties owed to the :ninority sha~eholders ot
HAXP~..A including without limitation ARMSTRONG, to the" extent
that ROBERTS, individually and in collusion and concer~ with the
ocher Defendants, has effectuated a transfer af the primary asset
of MAXPHARMA (viz., HAMILTON-TAFT) ·.Jithout notice of the
int.ention to do so being provided to shareholders and ",olithout
affording shareholders not otherwise exc~~ded from vot.ing on said
mat.ter as a result and consequence of :he exiscence of a vested
int.e~est in the proposed transaccion ':0 vote on the sale or
transfer of the prinCipal asse~ of ~P~JUL~.
89. Based on the foregoing, since t.he Defendants hold t.he
power to appropriate and distribut.e the asset.s of ~...A.XPP..ARM.A and
HA~ILTON-TAFT, which AR!-!STRONG r-easc:;ably fears :hey will
C:::1 c. inue to do, l"f.AX?P..A.RMA and H.A..~!~TCN -TMT will concinue to be

deprived cf their assets if and to the ex~enc. ROBERTS, COSTELLO,
aELL, HADID, PRASAD, CHRISTIANA, VIS:ON, KEYSTONE, and CR
ACCUISITIONS are not stopped entirely, thereby causing shares in
bot.h "'~PHARHA and HAMILTON-TAFT, includi~g those shares owned by

~~TRONG, to be greatly depreciated in value or rendered totally
·.ralueless.
90. The future suc::ess of ~..AXPHAR.\I.A and HAMILTON-TAFT,
under management exercising sensible :,usiness jUdgment and
circumstances following rest.oraticn and disgorgement. of assets

TE:KPORARY RESTRAINING ORDER, ex pun, APPLICATION
APPLICATION fOR IMPOSITION OF CON5TRUCTI~ TROST Page S4
·.... rongfully divested, will be successful and will -appreciat:e
accordingly. However,
,
the conduct of the Defendants, including
-'
specifically without limitation ROBERTS, COSTELLO, RADID, SELL,
VISION, CHRISTIANA, KEYSTONE, and Crt ACQUISITIONS, unless now
prevented by injunctive decree, will des~~~y the gro~h prospects
of each of MAXPHARMA and HAMILTON-TAFT, thereby causing
ir=eparable injury to A.RMSTRONG, inci·. . icually and in right. of
~~?~~ and HAMILTON-TAFT, MAXP~v~ and HAMILTON-TAFT and all

of their shareholders, far ·.... hich t.here :'s no adequate remedy at
1aw bee a. use i tis imp 0 s sib 1 e to c: a 1 c u 1 ate d ama 9 e S IN i ~h
specificity.
91 . Fur~hermore, and not by ·.... ay 0 f 1 imi ta t ion to ~ther or
addi~ional relief, ARMSTRONG would seek, by way af equitable
injunctiV'e relief from this Cou=~, ·..·h.:.ch would incl:Jde the
establishmen1: of a construct.i'Je tr:.!s~ ~:> hold in tr".J.St:. the T"..ro
:iillion Fi::y Nine Thousand (2,O:9,COO) shares of P..Al'!.ILTON-
TAFT now held by ROBERTS, direc~ly cr through CR ACQUISITIONS, or

to temporarily restrain the Defendants f:=om transferri.:1g such
stock, if such transfer has not as yet :ranspired, given that
such stock is or was the main asset. of !{AXPHARMA, a.nd was
wrongfully convert.ed for les 5 than fai= market value by the
cont=ollinq shareholder of ~P~~. Also, by way of equitable

relief, ARMSTRONG seeks disgorgement. of HAMILTON-TAFT steck held
P~NTIFFSf ORIGINAL PETITION, APPLICATION FOR

T'E.KPORARY RESTRAINING ORDER, E:X PARTE:, APPLICATION
FOR TEJWORARY AND PERKA.NEN'l' INJUNCTION, AND
by ROBERTS or any individual corporation or entity ~it.h which
ROBERTS is affiliat.ed or associated, t.hat this Court set. aSide
any such conveyance of the KAMILTON-TAFT stock.
92. ARMSTRONG'S successful prosecut.ion of this acti.on will
result in a subst.antial benefit to bot:h XAJePH.ARM.A and HAHILTON-
TA..FT, and therefore, AR.."!STRONG is ent:itled to reimbursement of
expenses, includi.ng reasonable attorneys' fees. In this
connect.ion, AR!-!STRONG would show t.hat a reasonable fee to
compensat.e c~e undersigned at.t.orneys for preparation for t.rial of

this cause in t.he amount. of One Hundred "r",..tent.y-Five Thousand and.
No/lOO Dollars ($125,000.00) and t.hat:. t.he expenses incurred in
the 9rosecut.ion of this suit are expect.ed to total in excess of

Ten Thousand Dollars (S 10 I 000. 00) I for which further sums
A.R."'!S'!'RCNG seeks recc'Jery.
COUNT TWO
Breach of Fiduciary Dutv
93. Pursuant to Tex.R.Civ.P. 58, ARMSTRONG incorporat.es and

realleges by reference !'lumerical paragraphs 1 through and
including 72.
94. Que to t~e incorporat.ion cf ~~PHARMA in Tennessee, and
the incorporation of rJL~ILTON-TAFT in California, Defendant.s must
adhere to the fiduciary dut.ies and responsi~ilities imposed upon
t.hem as prescribed by Tennessee and California law. The duties

TEMPORARY RESTRAINING ORDER, ex PARTE, APPLI~'TION
POR TE..KPORARY AND PERKANENT INJUNCTION, AND
and responsibilities imposed by Tennessee law would. apply not
only to MAXPHARHA, as a Tennessee corporation, but.l also as to
HAMILTON-TAfT as a wholly-owned subsidiary of HA..XPHAR...MA.
S i mil a r 1 Y I t. h e d uti e s a n d res po n sib i lit i e 5 1m po 9 e dun d e r
California law WQuld apply not only to HAMILTON-TAFT, as a
California corporation, but also to ~PJi.ARlof.A, its controlling
parent corporation.
95. Specificaliy, Defendants, CaSTELLO, LITCHFIELD, and
PRASAD have violated those duties and :-esponsibilities imposed
upon them as prescribed by Tenne!!see Cede Annotated S48 -18-30 1,
in that while act.ing as direct.ors of ~PHAR...~ they did not
discharge their duties in good faith, nor with the care an
ordinarily prudent person in a like posit~on would exercise under
similar ci=c'..l.Instances: and did not act in a manner reasonably
!:e 1 i eved t.o be in :::.he bes t. int.eres t. cf t.he corpora tion. In
addit.ion, Defendant.s, COSTELLO, LI7CHFI~!..D and PRASAD violat.ed
Tennessee Code Annotated S4B-lS-3Q2, ion that these directors
pa r"t ic ipa ted in transact.ions in which t.hey had a conf lict of
int.erest. but. did not meet the following duties:
a. The material facts of the transaction and the
direct.ors or of:icers interests were noe disclosed or known
to the Board of Di=ectors or committee of the Soard of
Directors and the Board 0 f Directors or committee did not
authorize, approve or ratify such transactions;

FOR TRXPORARY AND PER.MAN"eNT INJUNCTION, AND
APPLICATION FOR IMPOSITION OF CONSTROCTIVE TROST Paqe 51
b. The material fac':.s of the transaction and
directors or officers interes~s were not disclosed or known
to the shareholders ent.itled to vote, and they., d'id not

authorize, approve or ratify t~e transaction; and
c. The transact.ions were unfair to the corporation.
96. Defendant.s CaSTELLO, L::'C~F!::LD and PRASAD violat.ed
Tennessee Code Annotated §49-1B-}032 (1988) by not. follcwing

t.hose requirement.s set. :orth in suc~ Code as it relat.es to loans
to directors and officers. Acc==dingly, Defendants COSTELLO,

LITCHFIELD and PRASAD would ::e liable for the unlawful
distribut.ions as set forth in Tennessee Code Annotated S48-18-304
(1988). Defendants COSTELLO I :':'l"C:t:F!ELD and PRASAD violated
Tennessee Code §48-18-403 (1988) :":1 that they were officers of

~.P?'~..A but did not. exercise thei.!:- cuties in good faith; nor
·... it.h the care an crdinarily pruce!".t. ;::erson in a like position

would exercise under similar circ~-:st.ances ~ and did not. exercise
thei= dut.ies in a manner r€asonably believed to be in the best
int.erest of the corporation.
97. Additionally, and in :.he alt.ernative t Defendant.s
caSTELLO, LITCHFIELD and PRASAD have ·.. iolated California Corp.
Cede §309 with respect :0 ~he dut~es ot ~ood faith for direct.ors
and officers of California corpora':.ions. These Defendant.s did

TEKPORARY RESTRAINING ORDER, EX PART"!, APPLICATION
FOR T'EXPQRARY AND PER.K.A.NENT INJUNCTION I AND
APPLICATION FOR IMPOSITION OP CONSTROCTIVE TROST Page 58
not ac~ in good faith or in a manner ~hich they believed to be in
the best interest of the corporation or its sh~eholdersf
including reasonable inquiry, as an ordinarily prudent person in

a like position would use under similar circumstances.
98. Likewise, Defendants violated California Corp. Code

S310. Defendants participated in or were present at a Board of
Di=ec:.ors meet.ing .. herein contracts or transactions bet~een t.he
corporat.ion and one or more of i-:'5 Directors, cont=ollinq
shareholder or of:icers had a material financial interest:. The
direc~~rs additionally failed to fully disclose or make known the
direct-ors I financ:"al interest to the shareholders and seek
approval of the transaction by the shareholders, while excluding

f rom the vote t:hose shares owned by interested directers,
officers of ccnt::-olling shareholders. Additionally, upon
i:1f:Jr::'lacion and ::el.iei, the Defendant. directors failed t~ f".llly
disc~ose t:hei: in:eres~ in the transac~ion and par~icipated in a
vote by the Board. of Di=ectors approving such cont.ract. or

transact:ion while count.ing the vote of the interest.ed direc":or,
cont~olling shareholder or officer, and such t.ransaction was not
just. and reasonable or for the benefit of the corporation.
99. Defendan:s, COSTELLO, LITCHFIELD and PRASAD also
violated California Corp. ~ode §31S, in that. they did not. follow
t:hose presc::ibed dueies imposed ..... it:h respect to loans to or

TEMPORARY RESTRAINING ORDER, EX PART!, APPLICATION
FOR T'EMPORARY AND P ER.MAN"EN'l' IN JUHCTI ON, AND
APPLICATION FOR IMPOSITION OF CONSTRUCTIVE TROST Page S9
guaranties of obligat.ions of direct.ors or officers, or an
security of corporate shares. Specifically, the Def£ndants while
acting as directors and officers of t.he corporation approved
loans of the corporat.ion to various direct:.ors, officers and
c:lnt:.rollinq shareholders without disclosure of the transactions
and approval of the shareholders and/or the direct.ors as required
under California law.
100. The 0 e f eon dan t s, as dam ina n t a n d / 0 r con t:. r 0 11i ng
shareholders and/or officers and direct.ors of M..AXPH.A~~ or
ent.it.ies or indi\1iduals controlled by or in concert. ·..rith said
entities or indiV'iduals, have a fiduciary responsibility to the
minority shareholders of !iAXPHAR~ t.o use their ability to
control ~~PHARMA and its wholly-owned subsidiary, HAMILTON-TAFT,

in a fair, just. and equitable manne!:". The dominant:. and/or
C~iu::.::-olling shareholders and/or off':'cers and directors of
l-f..A.XrHAR...\I..A may not. use t:teir power to control corporat.e acti'J'i':.ies
to benefit:. themselves alone or in a manner detriment.al to t.he
minority shareholders of MAXP~~.
101. Oefendanc5 have breached thei= fiduciary dut.y by
systematically looting t.he assets of ~PRAAMA and its wholly-
o ......"ned subsidiary t H.A.MILTON-T.AFT, ':"hat. loot.ing consisted of the
borrowing and/or misappropriation of corporate assets which
Plaintiffs believe Defendant.s never intended to repaYt and which
were misappropr iat.e through the knowing and intentional use 0 f

TEMPORARY RESTRAINING ORDER, EX P~TE, APPLICATION
FOR TEMPORARY AND PER.KA..N'ENT INJUNCTION AND I

•
fraudulent. misrepresent.ar.ions. In addition, [Jefendant.s,

f
COSTELLO, LITCHFIELD and PRASAD failed properly to dist;:harge
their duties as direct.ors and/or officers in MAXPH.A..Rl"..A. Such
duties included, but are not. limited to, the duty to act in good
faith and with the care an ordinarily prudent person in a like
pOSition would exercise under similar ci.rcumst.ances and in a
manner he reasonably I:elieves to be in t.he best interest of the
corporation. Defendant.s COSTELLO, LITCHFIELD and PRASAD did not
meet these st.andards and breached their fiduciary dut.ies to
Plaintiffs ~Pf1.AFLU.A and A.R..H5TRONG, bot.h individually and as a
shareholder of ~~PPJJl~. Furthermore, these Defendants breached
their fiduciary dut.ies, in ~hat t.hey participated in transactions

concerning the corporation in which a director or officer of the
cor;:orat.ion had a direct. or indirect. int.erest.. COSTELLO,
LITC:::IELD and PRASAD breached their ficuciary duties, Ln t.hat

the material fact.s of :.ne transactions concerning VISION,
CHRISTIANA, ROBERTS, and HADID. were not. disclosed or known t.o t.he
shareholders ent.itled t.o vote. In addition, t.hese shareholders

did not aut.horize, appro'J'e or ratify such transact.ions. In
addition, such transactions were unfair to the corporation.
Last.ly, Defendants breached their fiduciary duties because t.hey
had an indirect int.erest. in the t.ransact.ions stated above t and
such indirect interests were not made known to the shareholders
PLAlNTIPFS' ORIGINAL PETITION, APPLICATION POR

T!.KPORARY RESTRAINING ORDER, EX PARTE, APPLICATION
FOR TE..KPORAR Y AND PER.M.AN'EN'T I NJtTNCT I ON, AND
APPLICATION
, FOR IMPOSITION OP CONSTRCCTIVE TRUST
entitled to vote in MAXFHARMA. As a direct and proximate result,
the Plaintiffs have suffered actual damages in e~ce5s of 514
million for which Plaintiffs seek recovery.
102. By vir~ue of the willfull and malicious fraudulent acts
of the Defendan~s and their breach of thei~ fiduciary duties owed
c:y ~hem to the Plain~iffs and it.s subsidiaries, Plaintiffs are
e!ltitled to recover exemplary damages. P lainti f fs show tha t an
award of substant.ial exemplar! damages is necessary to serJe as a
det=iment to such unconscionable conduct. Accordingly,
Plaintiffs hereby seek recovery of exemplarj damages in an amount
in excess of the minimum ju~isdic~ional l~its of the Court.
COUNT THREE
Conspiracy
103. Pursuant. ':0 Tex.R.Civ.P. 58, A.R..~TP.ONG incorporates and
=~~lleges by reference numerical paragraphs 1 t.hrough and 72.
L04. De fendants ent.ered into a conspiracy to diminish the

'.ral'.Je of Plaintiff AR..I.f.STRONG'S invest.:nen~ in MAXPHARHA and also
entered into a conspiracy to loot the assets of MAXPHARKA and its
who lly-owned subs idiary, HAMILTON-TAFT, for the personal g~in 0 f
Plaintiffs, all to the damage and detr':"'rnent. of MAXFHA1U-'..A and to
Ail'-!STRONG, both individually and as a shareholder of ~..AXPHAR.MA.
Defendant.s acted in a CO!tUTlon design in concerted action to loot

the assets of MAXP~~ and its subsidiaries. This common design
was carried out in overt acts by Defendants through

TEMPORARY RESTRA.INING ORDER, EX PARTE, APPLICATION
POR TEMPORARY AND peRMAN'eNT INJUNCTION, AND
APPLICATION POR IMPOSITION OP CONSTRUCTTVE TRUST Page 62
systematically making personal loans to Defendants. In addition,
Defendants I common designs were carried out. in ov,r1; acts by
divestment and alienation from MAXPRARMA of HAMILTON-TAfT_shares

and forgiveness of no~es payable. Defendants' actions caused the
val ue 0 f ARMSTRONG'S shares in MAXPHARHA to dec 1 i ne . In
addi tion, De fendan ts I actions caused damage and detriment: to
~..AX?H.AR-'{A and its subsidiary in an amount: in excess of the
minima I j ur isdictions.. 0 f this Cour"t.
105. Specifically, pursuant to Tennessee common law, the
Defe~dants committed a civil conspiracy to diminish .the value af
P 1 a i n ~ iff A RJof..5TRONG • S inves t:nent. in MAXPHA.R.MA and to loot. the
assets of ~~PHARMA and its wholly-owned subsidiary ~~ILTON-TAFT
for personal gain, in that the Defendants conspired to commit an
unlawful pu=?ose, that of looting the assets of ~~p~~ and its
Sl!::S id':'ary, or sought to accomplish a legitimate purpose by

unia.t,."ful means, in that the Defendants conspired to c::mrnit an
un~awiul ~urpcse, that of looting the assets of ~~p~~ and its

subsidiary, HAMILTON-TAFT, for personal gain, in that the
De i e ndan ts c onsp ired to comm i t a n unlawful purpose, that of
loo~ing the assets of MAXPHARMA and its subsidiary, or sought to
acc::mplish a legitimate purpose by unlawful means, in ·.."iolating
t.he Tennessee corporate law and acted in a concert of action,
cc~~it.ting overt ac~s and for a common design.

FOR TEMPORARY AND PERHANE1n' INJUNCTION', AND
APPLICATION FOR IMPOSITION OF CONSTRUCTrvE TRUST Page 63
106. In addition and in the alternative, the Defendants
ccmrnitted a civil conspiracy under California law, fn agreeing

and conspiring and combining to do a civil wrong, that of
conspiring to loot. the assets of MAXPH.AJUI.A and its wholly-owned
subs idiary I HAMILTON-TAFT, for personal gain of the Def endants I
all to the damage and detriment: of H.AXPHARMA and Plaintiff
~~TRONG in violating California corporate laws regarding loans
to officers, direct.ors anc cont.rolling shareholders wit.hout. the
specific approval of the shareholders or non-int.erested
di=ectors I and by other. . . ise looting the corporat.ion and paying
exorbitant. salaries and bonuses of officers, direct.ors arid
controlling sha.reholders, all to the damage and detri.rnenr. of
XAX?~~, KAMILTON-TAYT and ARMSTRONG.
COUNT FOUR
Fraud
107. ?ursuant t.~ Tex.R.Civ.P. 58, ~~STRONG incorporat.es and
realleges :Jy reference numerical paragraphs 1 through and
including 106.
108. As set for~h above, Defendants committed fraud pursuant.

to Tennessee common la~, in committing fraudulent acts, omissions
and concealments which involved a breach of their legal and
equitable duties, that as directors, officers and controlling
shareholders of M.AXPHAR.M.A" and/or breached the trust. and/or

TEMPORARY RESTRAlNING ORDER, EX PARTE, APPLICATION
FOR tt.KPORARY AND PERMANENT INJUNCTION, AND
confidence placed upon such Defendan~s as director!, officers and
cent.rolling shareholders of MAXPHJ\..Rlo4'..A, which resultf!d in injury
to !iAXPHARMA and ARMSTRONG, both individually and as a
5 hareholder of l'f-AXPHAR..1.!A. Specifically, Defendant.s, through
va r ious ac t.!, S ys terna t. ic a 11 y 100 t.ed the co rpora t.e as set.s of
~XPHARM.A and its subsidiary, HAMILTON-TAFT resulting in an
undue and unconscient.ious advant.age being taken of ~PP.A.RJof..A,
HAMILTON-TAFT and AR!-!STRONG, both individually and as a
shareholders of ~AXPHA.RJ-f..A. All such act.s, omissions and
c::mcealments resulted in injury to the Plaintiffs in excess at

t~e minimal jurisdictional limits of this Cour1:..<
r09. Additionally under Tennessee law, the Defendants
ccmmitted actual fraud, ;..Thereby by t.heir acts, omissions and
c::!1cealment.s, they systematically looted the corporate assets of
~-!..~X?HAR!-tA and its subsidiary, HAMILTON-TAFT, and intent.ionally
c::::1cea led their act.ions, thereby inducing and caus ing the
remaining officers, direceors and shareholders of MAXPP..A.R..1-tA not
t:::l ac":., all to the injury of ~PHARMA, HAMILTON-TAFT and
Plaintiff ARMSTRONG, both individually and on behalf of
~ ?HAR.."tA •
110. In the alternative and in addition, the Defendants
committed a fraud under California law, in that the material
misrepresent.acions regarding their ac'Cs and omissions regarding
va=:ous loans t.o directors, officers and cont.rolling shareholders

~ORART RESTRAINING ORDER, EX PART!, APPLICATION
FOR TI!MPORA...R Y AND PER.M..AN'ENT I NJUNCTI ON, AND
APPLICATION FOR IMPOSITION OF CONSTROCTrvE TROST Page 65
cf making false representac.ions and conce'alinq such
!-'.A.X?HARM.A,
,
loans +,.;hich resul ted in the looting of the assets of l"f-A.XPRA.RMA
and its subs idiary I HAMILTON-TAFT I and in violation of their
fiduciary du~ies, failing to disclose such fraudulent acts, with
knowledge of such fraud, with the intent to cause the inducement

and reliance of the shareholders of MAXP?'..A.RMA, t.o rely upon the
good :ait.h ac~ions of t.he Defendant.s, and upon ~hich ~he
s hareho lde rs 0 f 1"..AXPHARM.A... did re ly, =esu 1 t.ing in damage to

~..AXPHAR.v..A, HAMILTON-TAFT and ARMSTRONG, bot.h indi v iduall y and as
a s harsno Ider 0 E MAXPF...A.R.l-{A, in an amoun t in exces S 0 f the minimai'
jcrisd:ct~anal limits of t.his Cour~.
::1. By vir~ue of the willful and malicious fraudulent. acts
of t:.he Defendant.s and their breach of the fiduciary duties owed
cy t.he~ to the Plaint.iffs and thai= subsiciaries, Plaint.~ffs are
er::i':'!'ed t.o ['eeever exemplary damages. Plaintif:s would show
t=--.at:. a!1 award of substantial exemplary damages is necessary to
serve as a deterrent to such unconscionable conduct.
Ac=~rc~~glYl Plaintiffs hereby seek recovery of exemplary damages
i:1 an amount in excess of t.he minimal jurisdict.ional li.!nit.s of
the C~~!'t:.
l::2. In addition, the Defendants tJiolat:.ed Tennessee Code
Annot.at.ed S48-22-102, in selling, leasing, exchanging or
ot.he~~ise disposing of all or subst:antially all of the assets of
~~PHA~~ ot.her than in the usual and regular course of business,

TR..\{PORARY RESTRA.lNING ORDER, EX PARTE, APPLICATION
FOR T"eHPORARY AND PERKAN'ENT INJUNCTION, AND
•
in failing to propose and presen~ to all of the shareholders of
1"...AXPHAR1'...A for a vote the proposed dispos ition 01 MAXPHARHA 'S

~
shares in H.A.MILTON-TAFT. Specifically, the Board of Directors

failed to recommend the proposed transaction to the shareholders
or o~her~ise communicate such transaction to the shareholders to
allcw the shareholders to vote on approval of such transaction.
Add.!..~ianallYI the carporati.cn failed to not.ify each shareholder
of a proposed shareholder's meeting '.Jich requisite notice, in

or::er tn cons ider the sale, lease, exchange or ot.her dispos i t.ion
of ~~e HAMILTON-TAFT stock. Accordingly, t.he sale is void and
t~.e Defendants breached their fiduciary duty to all of the
shareholders of ~p~~ pursuant to 548-22-102 of the Tennessee
C::ce Annotat.ed.
COUNT PIVE
Plaintiffs' Ent.itl~nt to Injunctive Relief
~13. Pursuant to Tex.R.Civ.P. 58, ~~TRONG incorporates and
real leges by reference numerical paragraphs 1 through and
inc!.uding 112.
114. Plaintiffs would show that Defendants have entered into
a c~urse of conduct which has syste~atically looted the co~orate
assecs of AAXPHARMA and its subsidiary, H.AliILTON-TAFT. In
adci':':'on, the looting of the corporate as!et.!! hag been done by

way 0 f loans made to the De fendants for the Defendan~.!!' personal
uses and by way of divestment from MAXPHARMA of its principal
asset (viz., HAMILTON-TAFT).
PLAINTIPFS' ORIGINAL PETITION, APPLICATION FOR

TViPOR.A.RY RESTRAINING ORDER, EX PARTE, APPLICATION
POR TEMPORARY AND PE~ INJUNCTION, AND
115. The conduct of the Defendants, either. in their
capacities as officers, directors, shareholders,' controlling
persons, and entities or individuals in aid and concert thereof,

as manifest and evident: thrcuqh the concerted course of conduct
s inca January 1 19 a8, through and including the present, to loot
and rape ehe assets of MJ\XPHARM.A through a process whereby the
pr~~ary asset of MAXPHARMA (viz" HAMIL~CN-TAFT) has been first

caused to reckless-1y disburse funds :::om the HA.'iILTON-TAFT
CCNCENTRATION ACCOUNT FUNDS and, thereaf~er, to permit it:s shares

to 1:e di·,rested and alienated fram ~PP..A.R.'iA, combined with th~
failure of the Defendants in their capac:ties as set for~h above

to ?roperly account: and protect for the interest of MAXPr~~ and
HA.MILTON-TAFT, patent.ly establishes t.he need for impas ition by

t~e Ccurt of injunctive relief, par~icularly in view of previous
al:egatians which have been asserted in c~her litigation, none of
·.... hi::~ has successfully impaired the :lngaing deliberate and
~lllfall plan and scheme as demonstrated herein.

116. Plaintiffs accordingly show that. the MAXPHAR."!A stock
is in immediate danger of loss and/or diminution in value by
reason of the conduct on the part of the Defendants. The conduct.
on ~ehalf of Defendants as set. fort.h herein poses a c lear and
i:runediate threat of substant.ial harm, injury and diminut.ion and
value to the HAMILTON-TAFT s1:ock, as well as to the .!-"..A.XPHARMA
PLAiNTIFFS' ORIGINAL PETITION, APPLICATION FOR

FOR TE..MPORARY AND PERKANENT INJUNCTION, AND
APPLICATION POR IMPOSITION OF CONSTRUC~rvE TRUST Page 68
st:ack. The potencial loss I harm and injury cannot be. accurat.ely
measured; therefore, Plaint.iffs are without. an adequAte remedy at.
law. rf the Defendants are not restrained and enjoined from
obt:aining funds, by loan or otner"."ise from MAXPHAfL1.!A and/or
HA..H.ILTON-TAFT, and are not enjoined from attempting to pledge
MAX?PJUl~ or HAMILTON-TAFT st.ock, they will cont.inue to take such

ac to ions wh ich are detr imen ta 1 and damaging to MAXPH.A.Rl-t'..A and
AR.."tSTRONG, both individually and as a shareholder of ~PHARMA,
i.ncluding without limitation rendering disgorqement and
replacement. to be impossible to implement: or remedial measure to
rest:ore and preser..re !-!.AXPHARMA and HAMIL':ON-TAFT and t.~e equity
interests of shareholders therein. Such damages and injuries are
continuing and to a large degree are incalculable. Plaintiffs
have no adequate remedy at law.
-;';HEREFORE, PRE~ISES CONS IDERED, :!A.XPHARMA and A.R."!.STRONG,
bQt~ individually and as a shareholder of ~~PHARMA, respect::ully

~ray ~ha~ ~he Courc:
1. Enter an order directing t:hat the Clerk of this Court
shall forchwith issue a Temporary Restraining Order, to continue

i:1 ef fcct until the canclus ion 0 f the hearing on the Temporary
rnj~nc~ion hereinafter sec, or unt:il further Order of this Court,
restraining and enjoining Defendants, their officers, agents,
ser-.rant:s, employees, and at.torneys, and those persons in active
PLAJNTIFFS' ORIGINAL PETITION, APPLICATION FOR

TR.KPORARY RESTRAINING ORDER,EX PARTE, APPLICATION
FOR T'!.KPORARY AND PER..MA.NENT
INJUNCTION, AND
APPLICATION FOR IMPOSITION OF CONSTROCTIVE TRUST Page 69 ~---
concert or partie ipa t ion with such persons or entities who
I
receive actual notice of the Temporary Restraininq Order, from
the :ollowing:
a. Directly or indirectly obtaining, acquiring or
other.,-ise transferring, whether by loan or otherwise,
singularly or in combination, any funds or assets of VISION,

CR ACQUISITIONS, HAMILTON-T:....F~ and/or MAXPHARHA including
'..Ii thou t limitat.ion the HAMIL"!:'CN-TAFT CONCENTRATION ACCOUNT
FUNDS or any funds or assets cist=ibuted from HAMILTON-TAFT
to any of the Defendants s':"nce December 15, 1988 (the'
., FUNDS") other than in the normal and ordinary course of
business and for adequate consideration: and
b. Directly or indirectly aSSigning, transferring,
pledging or granting or attempting to grant to any third

t=a=t.y any security int.erest, :'ien, mortgage or any other
Enr.n of encumbrance on the s~=ck of either MAXP~~ and/or
~~~ILTON-TAFT and/or on the FUNDS.
c . Mandator i1y requiring t:hat: any of the De fendant.s
involved with the distributicn at any time since December
15, 1988, of monies from the HAMILTON-TAFT CONCENTRATION

ACCOUNT for any purpose other ~han the payment of client tax
matters, including without limitation in re~pect thereto the
distributions made on February 14 and February 15, 1989, in
the amoants of 52 million and 51.5 million, respectively, be

POR TEMPORARY AND PERHAHEN1.' INJUNCTION, AND
required to reverse said transac~ions and restore the funds
,
to the HAMILTON-TAFT CONCENTRATION ACCOUNT until further
order of the Court;
d. Mandatorily requiring that. any of the Defendants
involved with the sale or transfer on or about February la,
1989, of any shares of KAMILTON-TAFT stock from ~~PHAR¥A to
any o~her of the Defendants ~~cluding without limitat.ion CR

A.CQUISITIONS, . or third-par-:y individuals or en't.ities be
required to reverse said transactions and restore any such
HAMILTON-TAFT stock to MAXP~~ un~il further or=er of the

Court;
e. Altering, modifying, destroying, concealing,
relocat.ing from their normal location, or in any otherJise

irnpai=ing the discoverabiii:y of any of the records or
documents of the Defendants relat.ive to the receipt or
transfer of any asset.s or ?r:::perty since January 1, 1988,
fro m MA X P HA RMA 0 r HAM I L TON - T AFT , inc 1 u din g \oJ i t. h 0 U t
limitation in respect thereto any funds distributed from the

HAMILTON-TAFT CONCENTRATION ACCOUNT or the st.ock !:"egis~ers
of MAXP~~ or HAMILTON-TAFT, but not by way of limitation
in respect t.heret.o, particula~ly with respect. to accounting
records evidencing t:te distribution of any funds to any of
the Defendants and any enti:y or individual associat.ed or
affiliated ~ith or controlled by any of the Defendan~s.

FOR T"eXPORARY AND PERHAHf!NT INJUNCTION, AND
2. Defendant.s be cited to appear and show cause and thai:
,
upon hearing, a Temporary Injunc'Cion be issued enjoining and
rest.raining Defendant.s their aqen'Cs, at.t:orneys, representatives
from directly or indirectly obtaining r acquiring or otherwise
trans ferring any funds, by loan or o'Cherwise, from MAXPHARMA
and/or HAMILTON-TAFT and from assigning, transferring I pledging
or granting, or attempting to grant. to any third parcy a securi~y
int.eres t., lien, me rcgage, or other encu..-:tbrance on the MAXP'HARl4'..A
s toe k and/ or HAMILTON-TAFT s toe k pend ing a hear i ng on tl1e
P~~anent Injunction:
3. That. De fendant.s be cited to a;:pear and ans·..;er herein
and that. upon final trial hereof eno:er a Judqmen'C against:

Defendant.s r joint.ly and severally, for actual and ccnsequent.ial
damages fcr t.he violat.ion of thei::- fiduciary duties to
Plaint.if:s:
"'. .:udgrnent. againsc Defendan'Cs, jcint.ly and severally, for
aco:ual and consequent.ial damages arising out of Defendancs 1

civil
cons~iracy against Plaint.iffs:
5. Judgment against Defendants for act:ual and
consequent.ial damages result:ing frcm the willfull and :nalicious
fraudulent conduct. of Defendan~s;

FOR TEMPORARY AND P!RM.A.NENT INJUNCTION, AND
6. Judgment. against. Defendant.s, joint.ly and sev.erally, for
exemplary damages resulting from Defendants I fraJdulent act.s,
civil conspiracy, and breach of ::h.eir fiduciary duties' against.
Plaintiffs:
1. Att.orneys' fees in a reasonable amount as dete~ined by
the Court..
8. Cost.s of suit.;
9. Int.erest after Judgment. as provided by law from t.he
dat.e of Jucgment. unt.il paid;
10. Such other and further =,=lie£ to which Plaint.iffs may

be just.ly ent.itled.
Respec~fully submitted,
GJDWIN, CARLTON , MArtlELL
8y:
T' ~7?:
~1::!J~\ill..l--
DAVID N. EVERETT
Bar Card No. 06745500
JOHN C. BUSH
Bar Card No. 034962=Q
3300 NCNB Plaza
901 Main Street.
Dallas, Texas 75202-3714
(214) 939-4400
A'!'TORNEY5 FOR PLAINT!:!

CCNNIE C. ARMSTRONG
PLA1NTIF?S' ORIGINAL PETITION, APPLICATION FOR

TEXPORARY RESTRAlHING ORDER, EX PARTE, APPLICATION
FOR T'E.KPORARY AND PER..M.A.HEHT INJUNCTION, AND
APPLICATION POR IMPOSITION OP CONSTROCTIVE TRUST Page 73
VERIFICATION
STATE OF TEXAS S
S
COUNTY OF DALLAS §
BEFORE ME, the undersigned Notary Public, on this day
personally appeared CONNIE C. ARMSTRONG, known to me, who being
duly sworn on his oath deposed and said that he is over the age
of twent.y one (21) years, of sound mind and competent to make
this Affidavit; that he has read the above and foregoing
Plaintiffs Original Petition, Application for Temporary
Restraining Order, Ex Parte, Applica ticn for Temporary and
Permanent Injunction, and Application for Imposition of
Constructive Trust, and that. based on his review of pertinent
filings by MAXPHARMA in the form of 10-Q's, 13-0'5, 10-K's, and
similar securities filings, as well as conversations with
COSTELLO and BARTLETT, as further augmented by pleadings filed in
the MAXPHA.RMA/ROBERTS SUIT, and including without limitation in
respect thereto the proceedings with regard to injunctive relief
conducted therein and testimony provided pursuant theret.o, in
conjunction with his personal knowledge I the facts contained in
this Petition are within his personal knowledge and are true and
correct.
" ,
/
/ ::" ".":,.
eONNIE C. ARMSTRONG,
" /

TEMPORARY RESTRAINIHG ORDER, EX PARTE, APPLICATION
FOR TEMPORARY AND PERHAHElfT INJUNCTION, AND
SUBSCRIBED AND SWORN TO BEFORE ~, by CONNIE C. ~~TRONG an
this /f.::::::lL day of February, 1989, to certify which witness my
hand and official seal of office.
NOTARY PUBLIC IN AND FOR

T~~ STATE OF TEXAS
~fPed/P~inted Name of ~otary:
My C~mmission Expires:

FOR TEMPORARY AND PER.M.AN!HT INJUNCTION, AND
APPLICATION FOR IMPOSITION OF CONSTROCTIVE TROST Page 1S

19890227a Maxpharma Original Petition

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19890227a Maxpharma Original Petition

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/ ....

CCNNIE C. ~~STRONG, § IN THE DISTRICT COURT

PLAINTIFFS' ORIGINAL PETITION, APPLICATION FOR

~c T~£ HONORABLE JUCGZ OF SAID COURT:

PLAINTIFFS' ORIGINAL PETITION, APPLICATION FOR

Pet.~tion, Application for Temporarj Res~raining Order, 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:

1. ?laint.:'::, . A.R..~STRCUG, 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 Da~las Caunt.y, Texas, and is current.ly the

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 CCU=~, 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

C=e5cen~ Court:, Suite 1300, ~allas, Texas 75201.

Detendan~, :OHN ROBER.7:S, JR. ("ROBERTS"), is an

~lcce of business in Dallas, Dallas County, Texas. ROBERTS may

be ~e~Jed with process dt his princi~al place of business at 200

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 ~cre 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.

!~e 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,

Fe.:-:::cn -",no ~as (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

c.:.:.ea by sar':ing t.he Secret-ary of State of Texas provided chat

PLAINTIFFS' ORIGINAL PETITION, APPLICATION FOR

addres s at 1300 N. 17th Street, Suite 1100, Rosslyn, Virginia

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

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 ~...AXPHARMA and, at all times material

par~ic~larly desc=~bed below. PRASAD does not. mainr.ain a place

of =egular business ~n 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 ~o acquire

~~~p~~~~~ as a cor?orate shell through ~hich to acquire ~~~ILTON-

:'.!.?:' ~r.=. ::-.e::-ea::er dissipace the aSS2t.s of f-Ll~\!ILTON-T.~fT, ant

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:

~=:' .... ci.;al place oc business, KEYSTONE FINANCIAL CORPORATION,

ce~~ified mail, return receipt requested.

wit:h cit.at.ion a.t. her principal place of business, 200 Crescent:

Cour~, Suit.e 1375, Dallas, Dallas County, Texas iSlOl.

8. Defendan1:, MAXPHARMA, INC. ("MAXPHARMA"), is a

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.

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

~p~~~ as a cor?orate shell through ~hich to acquire ~~~ILTON-

~;e :~e Stace cf Texas an whcm service Cl:a1:10n may be made