<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 1 )*
---------
ERLY INDUSTRIES, INC.
--------------------------------------------------------
(Name of Issuer)
Common Stock
--------------------------------------------------------
(Title of Class of Securities)
26883910
--------------------------------------------------------
(CUSIP Number)
Michael L. Tenzer
11400 West Olympic Boulevard, Suite 1040
Los Angeles, California 90064 Tel: (310) 820-6000
--------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
April 3, 1995
--------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box / /.
Check the following box if a fee is being paid with this statement / /. (A
fee is not required only if the reporting person: (1) has a previous statement
on file reporting beneficial ownership of more than five percent of the class
of securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.
(See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
(Continued on following page(s))
Page 1 of 38 Pages
<PAGE>
CUSIP No. 26883910 13D Page 2 of 38 Pages
--------- --- ---
- -------------------------------------------------------------------------------
(1) Names of Reporting Persons. S.S. or I.R.S. Identification Nos. of Above
Persons
KINGWOOD LAKES SOUTH, L.P.
- -------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member (a) / /
of a Group* (b) /X/
- -------------------------------------------------------------------------------
(3) SEC Use Only
- -------------------------------------------------------------------------------
(4) Source of Funds*
00
- -------------------------------------------------------------------------------
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e)
- -------------------------------------------------------------------------------
(6) Citizenship or Place of Organization
- -------------------------------------------------------------------------------
Number of Shares (7) Sole Voting
Beneficially Owned Power 333,333 shares
by Each Reporting --------------------------------------------------
Person With (8) Shared Voting
Power
--------------------------------------------------
(9) Sole Dispositive
Power 333,333 shares
--------------------------------------------------
(10) Shared Dispositive
Power
- -------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
333,333 shares
- -------------------------------------------------------------------------------
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares*
- -------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
9.0%
- -------------------------------------------------------------------------------
(14) Type of Reporting Person*
PN
- -------------------------------------------------------------------------------
*SEE INSTRUCTION BEFORE FILLING OUT!
<PAGE>
CUSIP No. 26883910 13D Page 3 of 38 Pages
--------- --- ---
- -------------------------------------------------------------------------------
(1) Names of Reporting Persons. S.S. or I.R.S. Identification Nos. of Above
Persons
TENZER COMPANY, INC.
- -------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member (a) / /
of a Group* (b) /X/
- -------------------------------------------------------------------------------
(3) SEC Use Only
- -------------------------------------------------------------------------------
(4) Source of Funds*
00
- -------------------------------------------------------------------------------
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e)
- -------------------------------------------------------------------------------
(6) Citizenship or Place of Organization
Delaware corporation
- -------------------------------------------------------------------------------
Number of Shares (7) Sole Voting
Beneficially Owned Power
by Each Reporting --------------------------------------------------
Person With (8) Shared Voting
Power 333,333 shares
--------------------------------------------------
(9) Sole Dispositive
Power
--------------------------------------------------
(10) Shared Dispositive
Power 333,333 shares
- -------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
333,333 shares
- -------------------------------------------------------------------------------
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares*
- -------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
9.0%
- -------------------------------------------------------------------------------
(14) Type of Reporting Person*
CO
- -------------------------------------------------------------------------------
*SEE INSTRUCTION BEFORE FILLING OUT!
<PAGE>
CUSIP No. 26883910 13D Page 4 of 38 Pages
--------- --- ---
- -------------------------------------------------------------------------------
(1) Names of Reporting Persons. S.S. or I.R.S. Identification Nos. of Above
Persons
MICHAEL L. TENZER
- -------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member (a) / /
of a Group* (b) /X/
- -------------------------------------------------------------------------------
(3) SEC Use Only
- -------------------------------------------------------------------------------
(4) Source of Funds*
00
- -------------------------------------------------------------------------------
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e)
- -------------------------------------------------------------------------------
(6) Citizenship or Place of Organization
- -------------------------------------------------------------------------------
Number of Shares (7) Sole Voting
Beneficially Owned Power
by Each Reporting --------------------------------------------------
Person With (8) Shared Voting
Power 333,333 shares
--------------------------------------------------
(9) Sole Dispositive
Power
--------------------------------------------------
(10) Shared Dispositive
Power 333,333 shares
- -------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
333,333 shares
- -------------------------------------------------------------------------------
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares*
- -------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
9.0%
- -------------------------------------------------------------------------------
(14) Type of Reporting Person*
IN
- -------------------------------------------------------------------------------
*SEE INSTRUCTION BEFORE FILLING OUT!
<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
This Statement relates to the Schedule 13D (the "Schedule 13D") filed by
Kingwood Lakes South, L.P., Tenzer Company, Inc. and Michael L. Tenzer with
regard to beneficial ownership of common stock, par value $1.00 per share
(the "Common Stock") of ERLY Industries, Inc. (the "Company"). Terms used
herein and not otherwise defined have the meaning set forth in the Schedule
13D.
ITEM 4. PURPOSE OF TRANSACTION.
Item 4 is hereby amended by adding the following:
On April 3, 1995, the Limited Partnership, the General Partnership and a
limited partner of the Limited Partnership brought suit (as amended, the
"Lawsuit") in state court in Houston, Texas (the "Court") against Gerald D.
Murphy and Douglas A. Murphy (collectively, the "Murphys") arising from the
Murphys' failure to make agreed capital contributions to the Limited
Partnership in the amount of $5,000,000, including Gerald Murphy's capital
contribution indebtedness of $1,500,000 represented by the Note and secured
by the Shares. KINGWOOD LAKES SOUTH, L.P. ET AL. V. GERALD D. MURPHY, ET AL.,
No. 95-016749 (151st Judicial District, Harris County Texas). The Lawsuit
was amended on September 26, 1995 to also allege a cause of action against
the Company and American Rice, Inc., both of which are controlled by the
Murphys, for tortiously interfering with their contractual relations by
inducing the Murphys not to perform pursuant to their agreement to make the
capital contributions. The Limited Partnership, the General Partnership and
Mr. Tenzer seek recovery of damages from all of the named defendants arising
from the failure by the Murphys to make their $5,000,000 capital contribution
to the Limited Partnership, including the present value of lost anticipated
profits of approximately $16,000,000, punitive damages in an amount to be
determined by the jury, pre-judgment interest and attorneys' fees. The
defendants have asserted various defenses to these claims and have made
certain counterclaims. The foregoing description of the Lawsuit is qualified
in its entirety by reference to Plaintiffs', Intervenors' and Third Party
Defendants' Fifth Amended Original Petition and Third Amended Original
Counterclaim, a copy of which is filed as EXHIBIT 1 hereto and incorporated
herein in its entirety by reference.
Pursuant to an agreed temporary injunction issued by the Court on May 9,
1995, the Limited Partnership is prohibited from disposing of the Shares
pending disposition of the Lawsuit on the merits. Trial of the Lawsuit on
the merits is currently scheduled to begin on May 13, 1996. The foregoing
description of the agreed temporary injunction is qualified in its entirety
by reference to such agreed temporary injunction, a copy of which is filed
as EXHIBIT 2 hereto and incorporated herein in its entirety by reference.
5
<PAGE>
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
EXHIBIT 1. Plaintiffs', Intervenors' and Third Party Defendants' Fifth
Amended Original Petition and Third Amended Original Counterclaim
in KINGWOOD LAKES SOUTH, L.P. ET AL. V. GERALD D. MURPHY, ET AL.,
No. 95-016749 (151st Judicial District, Harris County Texas)
EXHIBIT 2. Agreed Temporary Injunction entered by the District Court of
Harris County, Texas on May 9, 1995.
6
<PAGE>
SIGNATURE.
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete
and correct.
KINGWOOD LAKES SOUTH, L.P., a
Texas Limited Partnership
By: TENZER COMPANY, INC., a
Delaware corporation, as General Partner
March 29, 1996 By: /s/ Michael L. Tenzer
- --------------------------- ---------------------------
Date Michael L. Tenzer
Title: President
TENZER COMPANY, INC., a Delaware
corporation
March 29, 1996 By: /s/ Michael L. Tenzer
- --------------------------- ---------------------------
Date Michael L. Tenzer
Title: President
MICHAEL L. TENZER
March 29, 1996 /s/ Michael L. Tenzer
- --------------------------- ---------------------------
Date Michael L.Tenzer
7
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION PAGE
- ------- ----------- ----
EXHIBIT 1. Plaintiffs', Intervenors' and Third Party Defendants' Fifth
Amended Original Petition and Third Amended Original Counterclaim
in KINGWOOD LAKES SOUTH, L.P. ET AL. V. GERALD D. MURPHY, ET AL.,
No. 95-016749 (151st Judicial District, Harris County Texas)
EXHIBIT 2. Agreed Temporary Injunction entered by the District Court of
Harris County, Texas on May 9, 1995.
8
<PAGE>
EXHIBIT 1
<PAGE>
NO. 95-016749
KINGWOOD LAKES SOUTH, L.P. ) IN THE DISTRICT COURT OF
)
V. ) HARRIS COUNTY, TEXAS
)
GERALD D. MURPHY, ET AL. ) 215TH JUDICIAL DISTRICT
PLAINTIFFS', INTERVENORS' AND THIRD PARTY
DEFENDANTS' FIFTH AMENDED ORIGINAL PETITION
AND THIRD AMENDED ORIGINAL COUNTERCLAIM
TO THE HONORABLE TEXAS DISTRICT JUDGE:
Plaintiffs KINGWOOD LAKES SOUTH, L.P., and Intervenors and Third-Party
Defendants TENZER COMPANY, INC. and ANTHONY M. FRANK, file this their Fifth
Amended Original Petition and Third Amended Original Counterclaim, and hereby
complain of Defendants GERALD D. MURPHY, DOUGLAS A. MURPHY, AMERICAN RICE,
INC. and ERLY INDUSTRIES, INC., and for cause of action respectfully show as
follows:
PARTIES
1. Kingwood Lakes South, L.P. ("KLS") is a Texas Limited Partnership,
with its principal place of business in Los Angeles, California.
2. Tenzer Company, Inc. ("Tenzer Co.") is a Delaware corporation, with
its principal place of business in Los Angeles, California, and is the
General Partner of KLS.
3. Anthony M. Frank ("Mr. Frank") is a resident of Belvedere,
California, and is a limited partner in KLS.
<PAGE>
4. Defendant Gerald D. Murphy ("Gerald") is a resident of Los Angeles,
California, and a limited partner of KLS. He is also the Chairman of the
Board of Directors of both ARI and ERLY. Gerald has appeared and answered
herein.
5. Defendant Douglas A. Murphy ("Douglas") is a resident of Kingwood,
Texas and a limited partner of KLS. He is also the President, Chief
Executive Officer and a director of ARI, and the President and a director of
ERLY. Douglas has appeared and answered herein.
6. Defendant American Rice, Inc. ("ARI") is a Texas corporation,
approximately eighty-one percent (81%) of which is owned by ERLY. ARI has
previously appeared herein.
7. Defendant ERLY Industries, Inc. ("ERLY") is a California
corporation, which owns approximately eighty-one percent (81%) of ARI. ERLY
has previously appeared herein. Approximately forty-two percent (42%) of
ERLY is owned collectively by Gerald and Douglas.
BACKGROUND FACTS
8. The president of Tenzer Co., Mr. Michael L. Tenzer, is a nationally
renowned developer of active adult residential communities and single family
subdivisions. Over the past 32 years, Mr. Tenzer has served as president and
chief executive officer of two major companies in this industry, and he has
been integrally involved in the development and construction of more than 65
thousand residences throughout the United States. In particular, Mr.
Tenzer's expertise lies in the development of large scale active adult
communities and single family and multi-family residential developments.
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<PAGE>
9. Friendswood Development Company ("Friendswood") is a substantial
real estate developer, headquartered in Houston, Texas. One of Friendswood's
successful developments in the Houston area is Kingwood, a large scale master
planned community.
10. For a number of years, Friendswood considered its various options
concerning prime property located in Kingwood, comprising approximately 196
acres, and situated contiguous to Kingwood Country Club and its prestigious
golf courses. In fact, the property is totally surrounded by nine of the
eighteen holes of the Lakes Course. In 1993 Friendswood approached Tenzer
Co. concerning the feasibility of developing the 196 acre property as an
active adult residential community. This is a type of development which is
very different from typical single family developments, or even retirement or
senior citizen communities. Thereafter, at great cost and expense, Tenzer
Co. investigated the potential for such a project and, in coordination with
and through the assistance of Friendswood, created a viable plan for the
development of the property into an active adult community which would not
only satisfy the specific requirements of Friendswood, but which would hold
out the potential for significant profits to Tenzer Co.
11. On July 1, 1994, Tenzer Co., as purchaser, entered into a Sale and
Purchase Agreement with Friendswood (and King Ranch, Inc., a venturer with
Friendswood in Kingwood), as seller. The Sale and Purchase Agreement
provided for a purchase price of $3.5 million, to be paid in cash at closing,
which was to occur on or before December 29, 1994.
12. Tenzer Co. knew that the development of the property would require
a substantial investment of capital. Based upon Mr. Tenzer's experience in
the industry and the input of highly qualified, third party professionals, a
capital structure, which was necessary
-3-
<PAGE>
for the successful development of the property, was formulated. As part of
this process, it was determined that the financial success of the project
would require approximately $6 million of equity, in addition to all of the
substantial sums already expended by Tenzer Co. in investigating the project
and assuring that all permits, regulatory approvals, and the like would be
available, so that the development could proceed in a legal and practical
fashion. After learning of what the necessary capital structure would be,
Tenzer Co. began searching for one or more investors to furnish the necessary
equity capital. In that regard, Tenzer Co. engaged the services of The
Harlan Company, Inc., a New York investment banking firm, to raise equity
capital for the project. At the same time, Mr. Tenzer approached various
contacts and former business associates who he felt might be interested in
investing in the project.
13. Mr. Tenzer had previously served for 18 years as the chief
executive officer and board chairman of Leisure Technology, Inc., a New York
Stock Exchange Company, which was a nationwide developer of numerous
award-winning active adult residential communities. Until 1984 Defendant
Gerald was a major shareholder in Leisure Technology, Inc., and served for 12
years on its Board of Directors. Gerald's investment in Leisure Technology
was highly profitable to him.
14. In July 1994, Mr. Tenzer contacted Gerald to see if he might be
interested in investing in Tenzer Co.'s proposed active adult residential
community, which Tenzer Co. was then referring to as Kingwood Lakes South. By
coincidence, it turned out that Gerald's son, Douglas, lived in Kingwood in the
very vicinity of Kingwood Lakes South. Upon learning that both Gerald and
Douglas were very interested in the project, Mr. Tenzer met with the Murphys and
provided them detailed information, including but not limited to economic
-4-
<PAGE>
projections, financial models and projections and Tenzer Co.'s development
plan for an active adult community at Kingwood Lakes South.
15. Both Gerald and Douglas committed themselves to invest in the
project. Although Mr. Tenzer and Gerald and Douglas discussed the possible
participation of other equity investors, the Murphys consistently assured Mr.
Tenzer that the Murphys desired to provide all of the additional $6 million
in equity necessary for the Kingwood Lakes South project. Thereafter, Tenzer
Co. and the Murphys informed The Harlan Co., Inc. that the Murphys had
committed to make the necessary investment of equity, thereby discouraging
The Harlan Co., Inc.'s further efforts to obtain equity investors.
16. Between August and December 1994, Tenzer Co. and the Murphys
negotiated concerning the various rights and obligations they would have with
one another in the development of the project. They mutually agreed to
consult with lawyers and accountants concerning financial, tax and legal
issues. It was determined that a limited partnership would be formed, with
Tenzer Co. as general partner and the Murphys as limited partners. This
limited partnership would be called Kingwood Lakes South, L.P. Although the
parties briefly considered the possibility of forming two distinct business
entities, one to acquire and develop the property, install roads, utilities
and common areas (site improvements) and the other to construct residential
improvements for sale to the public, it was determined and mutually agreed
that it would be best to have the one limited partnership conduct both the
acquisition and development of the project and the construction of all of the
homes for sale to the public.
-5-
<PAGE>
17. In early December 1994, the Murphys advised Tenzer Co. that,
because of other pressing business matters, they had delayed taking steps to
arrange the liquidity necessary to make the full amount of their committed
investment of $6 million cash by the scheduled December 29, 1994, closing
date with Friendswood. As a result, the parties met with representatives of
Friendswood to renegotiate the terms upon which the real property could be
acquired. In that regard, Friendswood agreed to modify the Purchase and Sale
Agreement, so that the purchase price would not be required to be paid in a
lump sum cash amount at closing. The amended Purchase and Sale Agreement
provided for payment of the purchase price with a downpayment in the cash
amount of $1 million plus the delivery of a promissory note in the amount of
$2.22 million, which would be secured by a first lien upon the property. In
addition, Friendswood offered to modify the Purchase and Sale Agreement so as
to reduce the amount of the purchase price and to contribute 30,000 cubic
yards of qualified fill (soils) material at no cost, to offset additional
unanticipated site improvement costs, in connection with the land
development, as a result of an October 1994 flood.
18. In December 1994, with the concurrence of the Murphys, Tenzer Co.
contacted Mr. Frank, who also was formerly on the board of Leisure
Technology, concerning the opportunity to invest in Kingwood Lakes South. In
that regard, Mr. Frank was provided with detailed information concerning the
proposed project, which included economic projections and financial models
and projections. Thereafter, Mr. Frank agreed to invest the sum of $500,000
cash toward the required aggregate equity of $6.6 million (including the
$600,000 invested by Tenzer Co.), and that he would receive a proportionate
limited partner interest in KLS for his equity investment.
-6-
<PAGE>
19. Tenzer Co. prepared new financial projections, referred to as
Financial Run 7.0, based upon the modified sales contract, and these
projections were provided to the Murphys and Mr. Frank.
20. It was agreed among the parties that, at the time of the
acquisition of the property from Friendswood by KLS in late December 1994,
Mr. Frank would fund his entire cash commitment of $500,000.00, the Murphys
would fund $2 million of their aggregate cash commitment of $5.5 million
(with the balance of $3.5 million being funded within several months of the
closing of the acquisition of the property), and Tenzer Co. would contribute
the Purchase and Sale Agreement and all appurtenant rights to the contract,
including all entitlements which had been obtained by Tenzer Co. The lawyers
selected by the Murphys for the venture, Nathan, Wood & Sommers (who are also
attorneys for ARI), then prepared another revision to a draft of the proposed
limited partnership agreement (which had been the subject of active
negotiation between the parties for several months), to show the new capital
contribution schedule. This revised draft of the proposed limited partnership
agreement was circulated to all of the parties by the lawyers. On or about
December 18, 1994, Mr. Frank inquired of Gerald whether he was committed to
the project and whether he and Douglas were in fact going to make their
capital contribution. Gerald represented to Mr. Frank that he and Douglas
had conducted "due diligence" and were convinced that the project, as
proposed by Tenzer Co., was sound. Gerald assured both Mr. Frank and Tenzer
Co. that he and Douglas were firmly committed to the project and that the
initial portion of their capital contribution, in the amount of $2 million,
would be funded in cash at the upcoming closing, scheduled several days
later, as agreed.
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<PAGE>
21. On or about December 20, 1994, Mr. Tenzer and Ms. Melanie May,
executive vice-president of Tenzer Co., traveled to Houston from Los Angeles
to finalize the execution of the Agreement of Limited Partnership, so as to
evidence the agreement reached by Tenzer Co., the Murphys, and Mr. Frank, as
well as to close the acquisition of the real property. Mr. Tenzer and Ms.
May arrived in Houston on December 21, 1994, the day before the closing with
Friendswood was scheduled. The day before arriving in Houston, they had been
requested by Gerald to meet with the Murphys at the corporate headquarters of
ARI early on December 22, 1994, the date scheduled for the closing with
Friendswood. When Mr. Tenzer and Ms. May arrived at the early morning
meeting, the Murphys informed them for the first time that, notwithstanding
their numerous confirmations of their commitment to furnish cash for the
closing of the land purchase, they did not, in fact, have in available and
ready funds the initial $2 million cash portion of their total equity capital
commitment of $5.5 million.
22. The failure by the Murphys to arrange to have their committed funds
available placed Tenzer Co. in an exigent situation. Unless a solution could
be reached, insufficient funds would be available to pay the cash downpayment
to Friendswood and to cover the projected operational costs during the first
months of the project. Without the Murphys' promised funds, Tenzer Co.'s
Purchase and Sale Agreement with Friendswood would expire a few days later on
December 30, 1995, causing Tenzer Co. to lose all of the benefit and value
which had been created by its hard work and expenditure of substantial sums
of money. This urgent situation was created solely because of the failure of
the Murphys to contribute their committed funds, in accordance with their
agreements, and their abject failure to disclose the truth of the situation
at any time prior to the day of closing.
-8-
<PAGE>
23. After Mr. Tenzer signed all final closing documents, with Gerald in
attendance, at an escrow closing at the title company, Friendswood agreed to
a short delay in the actual funding. Douglas agreed to contribute $500,000,
no later than the following week so as to cover, when combined with Mr.
Frank's contribution, the $1 million downpayment required to close with
Friendswood. Douglas also agreed to contribute an additional sum of
$500,000.00 within several weeks of closing, so as to enable KLS to continue
with ongoing engineering and architectural services, among other operations,
within the time frames included in the development plan of Tenzer Co. and
financial projections for the project as prepared by the outside financial
consultants.
24. Because of the disconcerting, unanticipated last minute disclosure
by the Murphys of their inability to honor their financial commitments to the
project, notwithstanding Mr. Tenzer's prior good relationship with Gerald,
Tenzer Co. became concerned with whether the Murphys could be trusted to
honor their commitments. In order to assure Tenzer Co., and to induce it to
contribute the Purchase and Sale Agreement to a venture to include the
Murphys, Gerald agreed to execute and deliver to KLS his unconditional
Promissory Note in the amount of $1.5 million, payable on or before March 22,
1995. Additionally, Gerald agreed to secure payment of such Promissory Note
with an unconditional pledge to KLS of 333,333 shares owned by him in ERLY, a
public company. Gerald also executed a stock power for the entire block of
shares of ERLY, so that upon a default in payment of the Promissory Note, KLS
could immediately sell the shares, which it was holding as collateral, for
cash to maintain operations of KLS. ERLY's legal counsel provided KLS with a
written opinion that KLS would be entitled to enforce the Pledge
-9-
<PAGE>
Agreement in accordance with its terms. Moreover, both of the Murphys acted
apologetic and continued to assure Tenzer Co. that they were firmly committed
to the project, that they had the financial wherewithal and intent to fund
all their financial obligations, and that their current failure was simply
the result of further delays and inattention by them, resulting from
unrelated business and personal occurrences.
25. Based upon these excuses, as well as the continued assurances by
the Murphys that they would honor their agreement, and the evidence thereof
demonstrated by the execution by Gerald of the Promissory Note, Pledge
Agreement, and Stock Power, Tenzer Co. joined with Mr. Frank in entering into
a written Limited Partnership Agreement, Mr. Frank contributed $500,000, and
Tenzer Co. contributed the Purchase and Sale Agreement and all the property
entitlements to KLS, the resulting limited partnership.
26. The Agreement of Limited Partnership of KLS (the "Partnership
Agreement"), was executed on or about December 22, 1995. In paragraph 3.1(b)
of the Partnership Agreement, the Murphys agreed that: (a) Gerald would
deliver the Promissory Note in the amount of $1.5 million to KLS; (b) Douglas
would make the initial $500,000 cash contribution, which was required to
close the acquisition of the property; and (c) Douglas and Gerald would
"collectively commit, covenant, and agree to contribute . . .,
[an additional] $3,500,000.00" (or such lesser amount as Tenzer Co. and the
Murphys might agree would be necessary) "as and when called for by
[Tenzer Co.], but in any event prior to the closing of the Acquisition and
Development Loan." The partnership agreement includes Exhibit "D", commonly
known as Run 7.0. In the alternative, Exhibit "D" was not an essential part
of the partnership agreement, or Run 7.0 was not included as a part of the
partnership agreement
-10-
<PAGE>
because of mutual mistake and/or accident, and the agreement should be
reformed to include Run 7.0 as Exhibit "D".
27. After Tenzer Co. assigned to KLS the Purchase and Sale Agreement,
KLS acquired the real estate from Friendswood by paying the downpayment and
executing the purchase money promissory note. Thereafter, Tenzer Co. began
the process of obtaining an Acquisition and Development Loan for KLS. To
facilitate the acquisition of such debt capitalization, additional
engineering and architectural work was necessary. The Murphys were fully
apprised on numerous occasions of this situation by Tenzer Co. and of the
adverse consequences which would result from delays in that regard. It was
anticipated that such professional costs would be funded out of the $500,000
which Douglas stated would be available within a few weeks after closing.
28. After the passage of several weeks after closing, the Murphys still
had not delivered the $500,000 portion of their aggregate, agreed capital
contribution so as to enable KLS to proceed in a timely manner with the ongoing
professional work necessary to enhance KLS's ability to obtain an Acquisition
and Development Loan. Mr. Tenzer placed numerous telephone calls to Douglas,
who failed and refused to return any of such calls. Moreover, Tenzer Co.
advised both of the Murphys in writing of KLS' urgent need for cash, and that
the lack thereof would bring about dire consequences to KLS. Finally, on
February 8, 1995, Douglas wrote Mr. Tenzer, acknowledging the urgency of the
liquidity problem and informing him of Douglas' efforts to borrow the agreed
capital contribution. Douglas also inquired at that time concerning the status
of KLS' efforts to obtain an Acquisition and Development Loan. Upon receipt of
such request, Tenzer Co. immediately provided both of
-11-
<PAGE>
the Murphys with a full and complete written report detailing the status of
negotiations with various possible acquisition and development lenders.
Tenzer Co. also reiterated that the equity to be provided by the investors
was essential to the loan application process.
29. Ultimately, Tenzer Co. called upon Gerald and Douglas to make the
full amount of their additional agreed capital contribution of $5.0 million,
which was needed by KLS in order to obtain an Acquisition and Development
Loan. Notwithstanding this, the Murphys failed to make their agreed capital
contributions or any further portion thereof. The $5 million is the total of
the $3.5 million commitment of Gerald and Douglas jointly, plus the $1.5
million Promissory Note executed by Gerald and which matured on March 22,
1995.
30. The failure by the Murphys to make their agreed capital
contributions caused KLS to be unable to obtain an Acquisition and
Development Loan and a Construction Loan by June 30, 1995. The Murphys were
well aware of this fact. Moreover, they knew that, pursuant to paragraph 10.1
of the Partnership Agreement, their failure to contribute the agreed capital
could bring about a dissolution of KLS.
31. In fulfilling its fiduciary duties, Tenzer Co. brought suit on behalf
of KLS against Gerald, upon his default in payment of the Promissory Note when
it matured on March 22, 1995. Immediately thereafter, the Murphys, ARI, and
ERLY brought suit in Brazoria County, Texas (the "Brazoria County Suit"), a
jurisdiction which had no relationship to any of the parties or the project, and
obtained an ex parte order restraining KLS from selling the ERLY stock which had
been pledged as collateral for Murphy's Promissory Note. The involvement by ARI
and ERLY was part of these corporations' desire and plan that the Murphys not
make their agreed capital contributions to KLS. The Murphys, ARI and ERLY
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also brought suit against Tenzer Co. and Mr. Tenzer, individually. ARI and
ERLY had no standing to complain of any conduct or anticipated conduct by
KLS, Tenzer Co. or Mr. Tenzer. The Brazoria County Suit was an abuse of
process designed to interfere with KLS' ability to enforce its Pledge
Agreement. ARI and ERLY's willingness to file such a lawsuit (and to assist
Gerald Murphy in obtaining an order stopping the foreclosure sale) induced
the Murphys not to perform their obligations to pay the capital contributions
owing to KLS. In order to avoid the cost and inconvenience of a
multiplicity of suits, and possible unfair prejudice resulting from a
proceeding in an unrelated, rural county, KLS elected to agree to the entry
of a temporary injunction as a trade-off to a transfer of the Brazoria County
Suit to Harris County.
32. In the Brazoria County Suit, the Murphys first revealed that the
foreclosure by KLS of the ERLY stock securing payment of Gerald Murphy's
Promissory Note would adversely affect ARI and ERLY. According to the Original
Petition filed by ARI, ERLY and the Murphys, and sworn to by Douglas Murphy,
"the sale of said stock would place American Rice, Inc. in technical default of
its financing and it would materially interfere with the ongoing re-financing
which would cost American Rice, Inc. over $9 million a year." As directors
and/or officers of ERLY and ARI, the Murphys knew about the effect of a
foreclosure sale of the stock upon ERLY and ARI, and they knew that they and ARI
and ERLY would resist the enforcement of Gerald Murphy's pledge of the stock.
In the Pledge Agreement, Gerald Murphy represented that the pledged stock was
not subject to any restriction on transfer or assignment, and that he had the
unrestricted right to pledge the stock (See Section 2.01 of the Pledge
Agreement). In addition, Gerald Murphy represented
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that the Pledge Agreement created a first priority perfected security
interest in the stock, and that there were no conditions precedent to the
effectiveness of the agreement that had not been fully and permanently
satisfied (see Section 2.04 of the Pledge Agreement). Both the Murphys knew
that their partners believed Gerald Murphys' pledge to be both enforceable
and effective, and that the partnership could rely upon the pledge to secure
Gerald Murphy's obligation. The Murphys had a duty to disclose that they,
along with ARI and ERLY, would oppose any foreclosure sale by filing suit and
seeking an order stopping the sale. If the statements in the Brazoria County
Suit were true, the Murphys had a conflict of interest between their duties
to ARI and ERLY (to oppose any foreclosure sale) and their duties to the
Partnership (to permit a foreclosure sale, pursuant to their agreement) which
they should have disclosed to KLS and to their partners. Apparently, Gerald
Murphy pledged the stock without any intent to perform his obligations
thereunder. The Murphys' failure to disclose their conflict of interest and
the difficulty KLS would have in enforcing the pledge constitutes fraud.
Gerald Murphy's misrepresentations in the Pledge Agreement, along with his
execution of the Pledge Agreement without any intent to perform it, also
constitute fraud. The Murphys' fraud induced Tenzer Co. to accept the
Promissory Note in lieu of the previously agreed cash contribution, and to
accept the stock as security for the Promissory Note. The Murphys' duty to
disclose these facts arose because of their relationship to Tenzer Co. and
Frank as partners, because of their knowledge of the assumptions of KLS with
regard to the enforceability and effectiveness of the Pledge Agreement, and
because of the matters actually stated by Gerald Murphy.
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33. The Murphys also failed to disclose certain ongoing investigations
against ARI, which could substantially impact the market price of the ERLY
stock given as security for Gerald's promissory note payable to KLS. After
formation of the partnership, Tenzer Co. learned that ARI was again under
investigation by the federal government. On information and belief, the
gravamen of such investigation is that ARI may have violated laws of the
United States by trading with its enemies, including the countries of Iran
and/or Iraq.
34. When KLS was formed in late December 1994, it was agreed that an
annual operating plan for 1995 would be submitted to the partners by the end
of March 1995. Such plan was to include, among other things, an operating
budget for 1995. It was originally contemplated that, as a result of
post-formation engineering and architectural work, Tenzer Co. would be in a
position to further quantify the cost estimates contained within Financial
Run 7.0 which was delivered to the prospective partners in December 1994.
When it became apparent that the Murphys were not going to honor their
contractual financial commitments, in March 1995 Tenzer Co. prepared a 1995
operating plan, based upon the original cost estimates contained in Financial
Run 7.0, and distributed it to the Murphys and Mr. Frank. Thereafter, the
Murphys purported to raise numerous objections to the 1995 operating plan and
informed Tenzer Co. that they did not approve of it. Mr. Frank made no
objections.
35. The Murphys' purported disapproval of the 1995 operating plan
submitted by Tenzer Co. was in bad faith and in breach of their fiduciary
duties owed to KLS and their partners. The purported objections raised by
the Murphys were spurious, as indicated by the fact that many of such
objections went to fundamental and integral facets of the project which had
existed since the very first day on which Tenzer Co.'s development plan was
submitted
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to the Murphys for consideration. The Murphys made these objections to hide
the fact that they were unwilling to meet their financial obligations to KLS,
which they were unable to do without selling their stock in ERLY. Because
this might result in a harmful change of control of the ownership of ARI and
ERLY, ARI and ERLY induced the Murphys to default in their obligations to KLS
and helped the Murphys attempt to justify such default with bad faith
objections to the 1995 operating plan.
36. The Murphys have claimed that KLS has dissolved according to the
terms of the Partnership Agreement, and that their liability is therefore
limited so as not to include post dissolution lost profits. If it is found
that the Partnership dissolved, then the dissolution was wrongful, caused by
the Murphys' breaches of the Partnership Agreement. The Murphys are
therefore estopped from relying upon the dissolution in order to limit their
damages.
37. In the Pledge Agreement, Gerald Murphy also promised to forward any
stock dividends from the pledged stock to KLS, are of Tenzer Company. Gerald
Murphy has since received a 15% stock dividend, which he has failed to send
to KLS. Under the provisions of the Pledge Agreement, ERLY should have sent
the stock dividend to KLS, as requested by KLS. The actions of ERLY and
Gerald Murphy were taken in concert with one another, and constitute breach
of contract by Gerald Murphy, tortious interference with contract by ERLY,
and both conspiracy and conversion by both Gerald Murphy and ERLY.
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CAUSES OF ACTION
BREACHES OF CONTRACT
38. Paragraphs 1 through 35 above are incorporated herein by reference
for all purposes. Gerald and Douglas have breached their contractual
obligations, which are oral, contained within the partnership agreement, and
contained within the Promissory Note. Plaintiff and Counterclaimants have
been damaged by such breaches in an amount far in excess of the minimum
jurisdictional limits of this court. All such damages were proximately
caused by the breaches of the contracts and were foreseeable by the Murphys.
Judgment for such damages is requested from the Murphys, jointly and
severally.
39. The written and oral agreements on which this suit is brought are
unambiguous and entitle Plaintiff and Counterclaimants to the relief
requested herein.
BREACHES OF FIDUCIARY DUTIES
40. Paragraphs 1 through 35 above are incorporated herein by reference
for all purposes. As a result of their partnership relationship, the Murphys
owed Plaintiff and Counterclaimants the highest of fiduciary duties. In
addition, a special relationship of trust and confidence existed, which
imposed upon the Murphys the duty of utmost good faith and loyalty, the duty
of full disclosure and fair dealing, and the duty of placing the interests of
KLS and their fellow partners above their own interests or those of ERLY and
ARI. In wanton violation of their duties, the Murphys concealed and
misrepresented material information about their financial circumstances and
the potential for a conflict of interest with respect to ERLY and ARI.
Moreover, the Murphys made false promises and falsely represented that they
would participate in the Kingwood Lakes South project and provide the
necessary
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equity capital. Specifically, but not by way of limitation, the Murphys
refused to carry out their duty to provide equity capital, while at the same
time refusing to cooperate with the efforts of Tenzer Co. to advance the
interests of KLS by raising spurious, bad faith objections to the 1995
operating plan. This conduct by the Murphys unreasonably and unfairly
impaired efforts to obtain an Acquisition and Development Loan, which was
necessary to the ultimate success of the venture. The Murphys placed their
own interests before those of KLS and their fellow partners. The breaches by
the Murphys of their duties to Plaintiff and Counterclaimants have
proximately caused damages which are substantially in excess of the
jurisdictional limits of this court, and for which recovery is requested from
the Murphys jointly and severally.
ACTUAL AND/OR CONSTRUCTIVE FRAUD (STATUTORY AND COMMON LAW)
41. Paragraphs 1 through 35 above are incorporated herein by reference
for all purposes. By their misrepresentations, false promises, failures to
disclose material information, and by their other wrongful conduct in taking
advantage of and breaching the obligations of their confidential and
fiduciary relationships, the Murphys have committed actual and/or
constructive frauds upon Plaintiff and Counterclaimants, which have
proximately caused damages for which recovery is requested from the Murphys
jointly and severally. Without limitation, the Murphys specifically
misrepresented their intent and ability to provide at least $5.5 million in
equity capital. Furthermore, as set forth in paragraph 32, although owing a
duty to do so, the Murphys omitted and failed to disclose the fact that a
sale of Gerald's stock in ERLY would be adverse to the interests of ERLY and
ARI and thereby place Gerald and Douglas in a conflict of interest position.
Such representations were false,
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made with knowledge of their falsity, and to induce Counterclaimants to enter
into a limited partnership agreement with the Murphys. Counterclaimants
reasonably and justifiably relied upon these representations to their
detriment and were damaged thereby. Likewise, the failures by the Murphys to
disclose material information was relied upon reasonably and justifiably by
Counterclaimants to their detriment and damage. Counterclaimants seek
recovery for the Murphys' actions pursuant to both common law fraud and
Chapter 27 of the Texas Business and Commerce Code, regarding fraud in
connection with real estate transactions.
PROMISSORY ESTOPPEL
42. Paragraphs 1 through 35 above are incorporated herein by reference
for all purposes. In addition or alternatively to the foregoing, Plaintiff
and Counterclaimants have reasonably relied to their detriment on the
continuing agreements, promises and representations of the Murphys, including
without limitation, the representation and promise that the Murphys would
provide the equity capital needed by KLS in the amount of $5.5 million. The
Murphys are equitably estopped by their representations and conduct from
denying their obligation to participate in the Kingwood Lakes South project
and their duty to provide the equity capital needed therefor or otherwise
from denying their liability for all of the losses, damages, expenses,
interests and benefits as claimed herein. Injustice can only be avoided by
enforcing these promises.
KNOWING PARTICIPATION IN BREACHES OF FIDUCIARY DUTIES
43. Paragraphs 1 through 35 above are incorporated herein by reference
for all purposes. Defendants ARI and ERLY had knowledge of the partnership
and fiduciary
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relationships between Counterclaimants and the Murphys. In fact, the Murphys
consulted with legal counsel to ARI and ERLY in connection with furnishing a
legal opinion as to the validity of Gerald's Pledge Agreement. Despite
knowledge of the fiduciary relationship, Defendants ARI and ERLY actively and
knowingly assisted in the breach of the fiduciary obligations owed by the
Murphys.
44. In addition or in the alternative, Defendants ARI or ERLY knew that
Counterclaimants and the Murphys shared a relationship of trust and
confidence which generated a fiduciary obligation. Despite knowledge of this
relationship and these fiduciary obligations, Defendants ARI and ERLY
actively and knowingly assisted in the breach of the fiduciary obligations
owed by the Murphys.
45. Because of the active and knowing assistance provided by ARI and
ERLY in the breaches by the Murphys of their fiduciary obligations, ARI and
ERLY are liable for all damages sustained.
TORTIOUS INTERFERENCE WITH
CONTRACT AND BUSINESS RELATIONS
1. Paragraphs 1 through 35 above are incorporated herein by reference
for all purposes. In an effort to further their own interests, ARI and ERLY
wilfully, intentionally, and deliberately interfered with the contractual
and/or business relationships between Plaintiff and Counterclaimants and the
Murphys. ARI and ERLY were successful in inducing the Murphys to breach their
contracts with Plaintiff and Counterclaimants, or in making performance of
those contracts more difficult. As a proximate result of this interference,
Plaintiff and Counterclaimants suffered damages in excess of the minimum
jurisdictional limits of this court.
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CIVIL CONSPIRACY
2. Paragraphs 1 through 35 above are incorporated herein by reference for
all purposes. Through the concerted actions of Defendants Gerald, Douglas, ARI,
and ERLY, the partnership agreement, Gerald's Promissory Note, and duties owed
by the Murphys were violated. These actions were done to further a common
design to benefit ARI and ERLY and to harm Plaintiff and Counterclaimants.
Defendants ARI and ERLY received the benefits of such conspiracy. Moreover, the
actions of Defendants were done with full knowledge that they would result in
harm to Plaintiff and Counterclaimants. Accordingly, Defendants ARI and ERLY
and the Murphys are jointly and severally liable for the damages caused to
Plaintiff and Counterclaimants, resulting from their civil conspiracy.
CONVERSION
3. Paragraphs 1 through 35 above are incorporated herein by reference for
all purposes. By failing to send KLS the stock dividend issued by ERLY in
connection with the stock pledged by Gerald Murphy, both ERLY and Gerald Murphy
converted the stock dividends. As a proximate result of this conversion,
Plaintiff and Counterclaimants suffered damages in excess of the minimum
jurisdictional limits of this Court.
ACTUAL AND/OR CONSEQUENTIAL DAMAGES
4. The wrongful conduct of Defendants set forth above has resulted in
substantial damages to Plaintiff and Counterclaimants. Gerald Murphy owes
the $1.5 million note, and both of the Murphys owe the $3.5 million capital
contribution. Tenzer Co. has been damaged because the wrongful conduct of
Defendants has rendered it impossible for KLS to reimburse Tenzer Co. for
expenses and fees to which it would have been entitled but for such wrongful
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conduct. The expenses incurred by the partnership and the net profits which
would have been distributable to the partners are in excess of $15 million,
all of which has been lost as a result of the wrongful conduct of Defendants.
Counterclaimants would have been entitled to approximately 60% of such
profits which have been lost. Accordingly, the damages sought herein from
Defendants are substantially in excess of the minimum jurisdictional limits
of this Court.
PUNITIVE DAMAGES
5. Defendants Gerald, Douglas, ARI, and ERLY are all guilty of conduct
which was knowing, intentional, malicious and/or in wanton disregard of the
rights of Plaintiff and Counterclaimants. Due to the egregious nature of
their conduct and considering the financial status of such parties, punitive
damages should be awarded against each of them, in an amount to be set by the
trier of fact, sufficient to fulfill the public policies of deterring them
from similar conduct in their relations with others and of setting an example
to others similarly situated that such conduct will not be tolerated in the
market place. In that regard, all causes of action (except those relating to
the stock dividend) giving rise to such an award accrued prior to September
1, 1995.
ATTORNEYS' FEES
6. Pursuant to Article 38 of the Texas Civil Practice and Remedies
Code, Chapter 27 of the Texas Business and Commerce Code, and the terms of
the various agreements (the $1.5 million Promissory Note and the Pledge
Agreement), Plaintiff and Counterclaimants are entitled to recover from the
Murphys their reasonable and/or necessary attorneys' fees.
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CONDITIONS PRECEDENT
7. All conditions precedent to the relief requested herein have been
performed or have occurred.
WHEREFORE, Plaintiff and Counterclaimants pray that, after final trial
hereof, they recover judgment against Defendants, jointly and severally, for
all of their actual and consequential damages, for punitive damages, for
reasonable attorneys' fees, for pre-judgment and post-judgment interest, for
costs of court, expert witness fees, deposition copy costs, and for such
other and further relief as to which they may be justly entitled.
Respectfully submitted,
DOW, COGBURN & FRIEDMAN, P.C.
By:
-----------------------------------------
B. Edward Williamson
State Bar No. 21616400
9 Greenway Plaza, Suite 2300
Houston, Texas 77046
(713) 626-5800
(713) 940-6099 (Fax)
ATTORNEYS FOR PLAINTIFF
AND COUNTERCLAIMANTS
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CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the above and foregoing
Plaintiffs' Fifth Amended Original Petition and Third Amended Counterclaim of
Third-Party Defendants Tenzer Company, Inc. and Anthony M. Frank, has been
forwarded via certified mail, return receipt requested to Larry Knippa,
Knippa & Kral, 1221 McKinney, Suite 950, Houston, Texas 77010; and Mr. Brit
T. Brown, Bell & Murphy, 1300 Post Oak Blvd., 20th Floor, Houston, Tx
77056-3095 on this _______ day of __________________, 1996.
_______________________________________
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EXHIBIT 2
<PAGE>
NO. 95-016749
KINGWOOD LAKES SOUTH, L.P. ) IN THE DISTRICT COURT OF
)
VS. ) HARRIS COUNTY, TEXAS
)
GERALD MURPHY AND )
DOUGLAS MURPHY ) 215TH JUDICIAL DISTRICT
AGREED TEMPORARY INJUNCTION
On the below stated date came GERALD MURPHY, DOUGLAS MURPHY, MICHAEL
TENZER, TENZER COMPANY, INC. and KINGWOOD LAKES SOUTH, L.P., parties to the
above cause, and agreed to the following temporary injunction pending final
judgment in this case, pursuant to agreement ("Agreement") as provided by
Rule 11, T.R.C.P., originally filed in Cause No. 95G0912, District Court of
Brazoria County, Texas, which cause was agreed to be transferred and
consolidated herein; and, therefore,
It is ORDERED, ADJUDGED, and DECREED by the Court that MICHAEL TENZER,
TENZER COMPANY, INC., and KINGWOOD LAKES SOUTH, L.P., and their partners,
officers, agents, servants, employees, and attorneys, and those persons in
active concert or participation with any of them who receive actual notice of
the Temporary Injunction, and each and every one of them, from either
directly or indirectly, jointly or severally, singularly or in concert, BE
ENJOINED as follows:
That MICHAEL TENZER, TENZER COMPANY, INC. and KINGWOOD LAKES SOUTH, L.P.
("Enjoined Parties") be restrained from undertaking any act to foreclose upon
the certificates of shares in ERLY INDUSTRIES, INC., or from undertaking any
act to exercise any claimed rights in said certificates, or to convey or
transfer any interest in the shares of ERLY INDUSTRIES, INC., pending further
order of this Court; and
<PAGE>
Attached is a list of the certificates of stock in ERLY INDUSTRIES,
INC., to which this injunction applies.
This Order is without prejudice to the Enjoined Parties from seeking
dissolution or modification of this Order after the expiration of 120 days
from the date of the Agreement, April 17, 1995, and without prejudice to the
other terms and provisions of the Agreement.
It is further ORDERED, ADJUDGED and DECREED by the Court that the trial
on the merits by heard at 9:00 o'clock a.m., on the 11th day of September
1995, in the 215th Judicial District Court of Harris County, Texas.
It is further ORDERED, ADJUDGED and DECREED by the Court that, pursuant
to the Agreement, none of the parties will be permitted to postpone the above
trial date by vacation notices pursuant to local rules of the District Courts
of Harris County or by legislative continuance pursuant to Rule 255, T.R.C.P.
and Section 80.009, Texas Civil Practice and Remedies Code; subject to
Agreement provisions of no trial during the last week in May, 1995, nor the
first week in June, 1995.
SIGNED this 9th day of May, 1995 at 10:50 o'clock a.m.
/S/
---------------------------------
JUDGE PRESIDING
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<PAGE>
APPROVED:
KNIPPA & KRAL
By: /s/
------------------------------
LARRY D. KNIPPA
Texas Bar Number 11614000
1221 McKinney, Suite 1050
Houston, Texas 77010-2004
Telephone: 713/739-1050
Telecopier: 713/739-1056
FUQUA & KEIM
R. Kenneth Keim
Texas Bar Number 11184000
515 Post Oak Blvd., Suite 850
Houston, Texas 77027
Telephone: 713/960-0277
Telecopier: 713/960-1064
ATTORNEYS FOR PLAINTIFFS
DOW, COGBURN & FRIEDMAN, P.C.
By: /s/
------------------------------
EDMUND L. COGBURN
Texas Bar Number 04501000
9 Greenway Plaza, Suite 2900
Houston, Texas 77046
Telephone: 713/626-5800
Telecopier: 713/940-6099
ATTORNEYS FOR DEFENDANTS
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Description of the Shares:
Date of Number of Certificate
Issue Shares Number
- ------- --------- -----------
06/20/77 11,984 LU8348
05/30/80 508 SL4689
06/27/80 14,693 SL4763
08/21/80 500 SL5075
02/10/84 500 SL09435
10/08/84 12,500 SL09758
09/05/86 53,457 SL11396
09/05/86 3,776 SL11399
09/24/87 62,081 SL13865
09/24/87 4,153 SL13868
02/03/88 380 SL15019
01/26/89 25,000 SL16275
01/26/89 21,977 SL16276
12/20/89 41,636 SL17840
12/20/89 40,003 SL17841
03/31/90 6,000 SL17993
10/26/90 5,300 SL19227
10/26/90 5,380 SL19229
10/26/90 10,000 SL19230
11/15/90 13,532 SL19276
