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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
SCHEDULE 13D
(Amendment No.3)
Under the Securities Exchange Act of 1934
EXCAL ENTERPRISES, INC.
(Name of Issuer)
Common Stock, par value $.004 per share
(Title of Class of Securities)
300902103
(CUSIP Number)
Steven C. Koegler, Esq.
Walker & Koegler, P.A.
10151 Deerwood Park Blvd.,
Building 100, Suite 200
Jacksonville, Florida 32256
(904) 998-9800
(Name, Address and Telephone Number of Person
Authorized to
Receive Notices and Communications)
June 20, 1996
(Date of Event which Requires Filing of this
Statement)
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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 the 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).
EXCAL ENTERPRISES, INC.
Schedule 13D Amendment No. 3
The Reporting Persons, consisting of David J. Smith, Jonathan E. Humphrey, Kyle
K. Krueger, Apollo Capital Management Group, L.P., a Delaware limited
partnership, J. Steven Emerson, SEAF Ltd, a California limited partnership and
MCM Partners, a California general partnership hereby amend their statement on
Schedule 13D relating to the common stock, par value $.004 per share, of Excal
Enterprises, Inc. (the "Issuer"), as set forth herein to disclose certain
developments since the filing of the previous amendment to Schedule 13D.
Unless otherwise indicated, capitalized terms contained herein shall have the
meaning ascribed to them in the Reporting Persons' prior statement on Schedule
13D.
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Item 4. Purpose of Transaction.
Item 4 is hereby amended to add the following:
Demand for Meeting.
Since the demand for meeting was made by Cede & Co. on behalf of the Reporting
Persons, as reported in the Reporting Persons' previous Amendment to Schedule
13D (Amendment No. 2), the Reporting Persons have received a letter dated June
19, 1996 from Timothy R. Barnes on behalf of Excal. In that letter, Excal
rejected the Reporting Persons' demand for a special meeting in lieu of the
annual meeting of shareholders and asserts that the demand for meeting is
"improper." Excal contends that Excal has held its annual meeting for the
fiscal year ended June 30, 1995, such meeting having been held on May 31, 1995.
Essentially, the letter takes the position that the Company is permitted, under
its Bylaws, to hold its annual meeting PRIOR to the end of the fiscal year to
which such meeting relates. The letter also contends that the demand is
"improper" because the demand requested that the meeting be held at a particular
date and location and requested a particular record date. The text of Excal's
letter to the Reporting Persons is set forth as Exhibit 6 hereto.
The Reporting Persons vigorously disagree with the Company's position concerning
the demand for meeting. In response to the company's refusal to call a meeting,
David J. Smith, on behalf of the Reporting Persons, sent to the Board of
Directors of Excal a letter dated June 20, 1996. Mr. Smith's letter set forth
certain opinions and concerns, concerning the company and its responses to the
Reporting Persons' concerns to date. Set forth as Exhibit 7 hereto is a copy of
the letter transmitted by David J. Smith on behalf of the Reporting Persons to
the Company on June 20, 1996.
On July 3, 1996, David J. Smith, through counsel, filed a Motion for Leave to
file a counterclaim against Excal in response to the Complaint previously
described in the Second Amendment to Schedule 13D (Case No. 96-764-CIV-T-23-
E)(the "Litigation"). The Motion essentially seeks leave to file a counterclaim
in the Litigation (i) alleging that Excal has wrongfully failed to schedule and
conduct an annual meeting of the shareholders and seeking an injunction
requiring that such a meeting be held pursuant to Section 211(c)of the Delaware
corporation laws and (ii) seeking an injunction preventing Excal, R. Park
Newton, III or W. Carey Webb from purporting to implement the Rights Plan and
further preventing the dilution of the shares of stock held by Smith until the
issues presented in the Litigation can be properly resolved by the Court. A
copy of the Motion for Leave together with the proposed Counterclaim is attached
to this Schedule 13D as Exhibit 8.
Item 7. Material to be filed as Exhibits. Item 7 is hereby amended to add the
following:
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Exhibit 6. Text of letter dated June 19, 1996 sent to the Reporting Persons by
Excal in response to Demand for Special Meeting in Lieu of the Annual Meeting of
Shareholders.
Exhibit 7. Letter sent by David J. Smith to the Board of Directors of Excal
dated June 20, 1996.
Exhibit 8. Motion of David J. Smith for Leave to File and Serve a Supplemental
Pleading (Counterclaim) and Memorandum in Support.
After reasonable inquiry and to the best of the knowledge and belief of each of
the undersigned, each of the undersigned certifies that the information set
forth in this statement on Schedule 13D concerning the common stock, par value
$.004 per share, of Excal Enterprises, Inc., a Delaware corporation, is true,
complete and correct.
Date: 7/08/96 Signature: /s/ David J. Smith
-------------------------
David J. Smith
Date: 7/08/96 Signature: /s/ Jonathan E. Humphreys
-------------------------
Jonathan E. Humphreys
Date: 7/08/96 Signature: /s/ Kyle K. Krueger
-------------------------
Kyle K. Krueger
Date: 7/08/96 Signature: /s/ J. Steven Emerson
-------------------------
J. Steven Emerson
Date: 7/08/96 Apollo Capital Management Group, L.P.,
a Delaware limited partnership
By: Apollo Capital Corp.,
a Delaware corporation
its General Partner
By: /s/ Kyle K. Krueger
-------------------------
Kyle K. Krueger
Date: 7/08/96 Apollo Capital Corp.,
a Delaware corporation
By: /s/ Kyle K. Krueger
-------------------------
Kyle K. Krueger
Date: 7/08/96 SEAF, Ltd.,
a California limited partnership
By: /s/ J. Steven Emerson
-------------------------
J. Steven Emerson,
Its General Partner
Date: 7/08/96 MCM Partners
By: /s/ Jonathan E. Humphreys
-------------------------
Jonathan E. Humphreys
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EXHIBIT 6
Text of Letter From Excal Enterprises, Inc.
[Excal Enterprises, Inc. letterhead]
June 19, 1996
Steven C. Koegler, Esquire
Walker & Koegler
Building 100, Suite 200
10151 Deerwood Park Boulevard
Jacksonville, Florida 32256-0959
RE: DEMAND FOR SHAREHOLDERS MEETING OF EXCAL ENTERPRISES, INC.
Dear Mr. Koegler:
I am in receipt of the letters from Cede & Co. dated May 31, 1996 which your
law firm forwarded to me on June 3, 1996 requesting that Excal Enterprises, Inc.
("Excal") "call a special meeting of Shareholders in lieu of the annual
meeting." Section 2.2 of Excal's Bylaws requires that the annual meeting of
shareholders be held "within 120 days following the close of the corporation's
fiscal year." The By-laws do not require that the annual shareholders meeting
be held after the fiscal year end. The corporation's fiscal year ends on June
30. Therefore, annual shareholders meetings must be held by October 28. Excal
held its 1994 annual shareholders meeting on June 30, 1994 and held its 1995
annual shareholders meeting on May 31, 1995 where it, among other things,
elected directors. Excal intends to hold its 1996 annual shareholders meeting
this fall pursuant to Section 2.2 of its Bylaws. At that time, the shareholders
will have the opportunity to elect directors. Therefore, your demand that the
company call a Special Meeting in lieu of the Annual Meeting of the Shareholders
is rejected.
Your demand is improper for several reasons. First of all, since the 1995
annual shareholders meeting has already been held, any demand for Special
Meeting would need to be to remove directors, not elect them. Secondly, Excal's
Bylaws do not permit a shareholder to demand that a meeting be held on a
specific date, at a specific location, nor permit the shareholder to set a
record date.
Sincerely,
Timothy R. Barnes
Corporate Secretary
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EXHIBIT 7
EXCAL SHAREHOLDERS COMMITTEE
c/o 10151 Deerwood Park Boulevard
Building 100, Suite 200
Jacksonville, Florida 32256
July 10, 1996
The Board of Directors of
Excal Enterprises, Inc.
100 North Tampa Street
Tampa, Florida 33602
Gentlemen:
We have received your letter dated June 19, 1996 rejecting our call for an
annual meeting. We disagree with the conclusions in that letter and intend to
respond accordingly. Frankly, we are surprised at the reaction of this Board
and its lack of legitimate response to our concerns. We believe that this
approach is contrary to the Board's stated desire to maximize the value of Excal
stock.
As shareholders, our primary objective is to see that the intrinsic value of the
company is represented by its stock price and that such value is not put to
unwarranted risk. That is not a "hostile" or "completely outrageous" desire.
Our objectives are entirely rational and for the benefit of ALL shareholders.
In mid-January, 1996, I sent a complimentary letter lauding the company for its
operational achievements, but suggesting a number of options that could increase
shareholder value with minimum risk to its existing assets. Apparently, this
letter was perceived as hostile. (The letter is attached; you might reread it
for clarification.) Apparently, the company did not value the contents of the
letter and never acknowledged its receipt. In addition, calls to CEO, Carey
Webb, went unanswered.
Upon further consideration we shareholders resolved to form a group in order to
gain the ear of the company. Rather than listen to the group's concerns, the
Board elected to file a lawsuit (using the Company's money) which wrongfully
attempted to trigger the poison pill.
As a group, we wish to reiterate our concerns and justification for those
concerns.
1. We believe the company's stock is significantly undervalued relative to its
underlying assets. That under-valuation stems principally from the cloud of the
ongoing SEC investigation, lack of confidence in management, the spending on
general and administrative expenses, the notion that present management intends
to "leverage up" known assets to buy "yet to be determined" businesses
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and/or compete in the commercial real estate market with existing REITS. We
believe this strategy to be inappropriate and not in the best interests of
shareholders.
As to the SEC investigations, we are convinced that the SEC can be convinced to
make a quick settlement and one that is favorable to all shareholders. However,
we believe Park Newton's presence on the Board of Directors prevents this
closure. This with the board authorized indemnification advances have a serious
impact on the company and all shareholders. The litigation costs over the past
years are substantial with close to $1.5 million (31 cents per share) already
spent plus the reserve for settlement of $744,000 dollars (16 cents per share),
the majority of which we believe is for the chairman's SEC settlement. These
dollars belong to shareholders. As shareholders we have a hard time connecting
tangible contribution to shareholder value from these legal proceedings.
2. As to management of the company, we believe that the management has done a
reasonable job of renting a building through brokers and reducing a hemorrhaging
business to slightly cash flow positive. What is disturbing is that revenues
from the tire business have dropped dramatically with the continued loss of
customers. It appears that this management cannot manage its core business and
refuses to shut it down. The revenues of this business have gone from $6.5
million in FY93 revenues to less than $1.0 million in FY96, an over 80 percent
drop in revenues. And another customer has quit. Something is wrong!
It is difficult for us as shareholders to accept the management view that they
are uniquely qualified to "leverage up" assets to buy unknown businesses. In
addition, public records indicate several million dollars in various judgements
against the chairman of the company, and the last company the CEO worked for
went bankrupt. It is difficult to support an aggressive real estate or business
acquisition strategy with this track record.
As shareholders, we are concerned that the assets of this company are being put
to undue risk given the present board and managerial makeup.
3. In addition, we are concerned that the G & A for this company is way out of
line with other real estate companies. The G & A totals over 20 percent of
revenues from a triple net lease building. That represents a major cost to
shareholders. In addition, the largesse of options, bonuses and employment
contracts are at best outrageous for a money losing business and a self-running
real estate subsidiary.
Although the above mentioned concerns are general, we could be a great deal more
specific about Board qualifications, compensation, indemnification, lack of
shareholder concern and SEC allegations. We chose not to in hope that we may
solve the issues that concern us as shareholders through a constructive dialogue
with management.
Let us be clear, WE ARE INTERESTED IN VALUE AND STOCK PRICE ONLY, NOT RUNNING
COMPANIES, and our remedy for that is the following.
We are willing to work with the Board in a manner that preserves and enhances
shareholder value.
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There are financial devices that can be implemented that will preserve the
STATUS QUO and allow Mr. Newton to retire as chairman which would, in our
opinion, pave the way for a major stock appreciation for all shareholders. We
are prepared to offer him the following package for his retirement from the
Board:
We would like Mr. Newton to convert his voting stock and options into a non-
voting convertible mortgage instrument guaranteed by the building in
Jacksonville. The stock would convert to common stock upon sale of the company
at $2.00 a share and bear interest at 8.0% on the face value of the issue. In
addition the new Board would honor; within the law, the previously authorized
indemnification agreements and employment packages, for all management, until
the company is sold. Finally, we would agree not to file shareholder derivative
action lawsuits against the now sitting Board members.
The new Board course of action would be the following;
1. Begin an immediate company stock repurchase program.
2. Settle with the SEC and all pending lawsuits.
3. Sell off or discontinue the automotive business and extract as much cash as
possible from the business.
4. At the appropriate time market the company to a series of already
identified real estate investment trust public companies. (We believe the peak
shareholder value resides in a REIT purchasing the Company for publicly traded
stock. This should be a tax free transaction to a strategic buyer and
shareholders and yield a significant dividend post transaction, up to 8.0%.)
Finally, as shareholders, we are eager to find a sound business solution to our
concerns. However, we also resolutely believe in the remedies we have suggested
and will pursue those remedies vigorously until the stock price reflects the
value of the underlying assets of this public company. If that means pursuing
proxy alternatives then so be it. If we win a proxy contest we will make every
attempt to improve G & A, limit litigation spending, seek reimbursement to the
company for all monies not spent on increased shareholder value and thoroughly
research all other available recourse for any malfeasance by the Board of
Directors.
We ask again that you consider and implement our recommendations without the
necessity of further litigation or proxy battles. By using such an approach,
everyone wins.
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David J. Smith
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EXHIBIT 8
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
EXCAL ENTERPRISES, INC.,
Plaintiff,
v. Case No. 96-764-CIV-T-23E
DAVID J. SMITH and JOHN DOES 1-10,
Defendants. /
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MOTION OF DEFENDANT FOR LEAVE TO
FILE AND SERVE A SUPPLEMENTAL PLEADING
AND MEMORANDUM IN SUPPORT
Defendant, David J. Smith ("Smith"), by and through his undersigned
counsel and pursuant to the provisions of Rule 15 of the Federal Rules of Civil
Procedure, moves the Court for the entry of an order permitting him to serve a
supplemental pleading in the form of a counterclaim against Excal Enterprises,
Inc. In support of this motion Smith says:
1. On May 21, 1996, Smith served his Answer and Defenses.
2. Smith could not file a counterclaim until after the last day on which
a timely, annual meeting of the shareholders must take place. That day was June
30, 1996.
3. No such shareholder's meeting has taken place and Smith's counterclaim
is now ripe.
4. The counterclaim sought to be filed is a claim which matured after
Smith filed his Answer and Defenses, and Smith requests leave of court to file a
counterclaim pursuant to Rule 13(e), F.R. Civ. P.
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MEMORANDUM OF LAW
Pursuant to Rule 15(a), F.R. Civ. P., the last day on which Smith may have
asserted a counterclaim without leave of court was June 10, 1996. Rule 13(e)
and Rule 15(d), F.R. Civ. P., allow service of a counterclaim which matured
after an original pleading was served as a supplemental pleading, with the
permission of the court. Because the Counterclaim relies upon a statutory right
to have an shareholders' annual meeting conducted, which statutory right did not
accrue until after June 30, 1996, the claim to be asserted complies with the
requirements of both Rule 13(e) and Rule 15(d), and therefore permission to file
and serve the Counterclaim should be granted.
WHEREFORE, Defendant, David J. Smith, requests entry of an order allowing
him to file a Counterclaim against Plaintiff, Excal Enterprises, Inc., in the
form attached hereto as Exhibit 1.
MICHAEL C. ADDISON
Attorney at Law
Post Office Box 2175
Tampa, Florida 33601-2175
Tel: (813) 223-2000
Fax: (813) 228-6000
Florida Bar No. 145579
-----------------------------------
Attorney for Defendants
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CERTIFICATE OF SERVICE
I HEREBY CERTIFY that a true copy of the foregoing was furnished by United
States mail to the person listed below, this ______ day of July, 1996.
----------------------------------------
Michael C. Addison
James M. Landis, Esq.
Foley & Lardner
P.O. Box 3391
Tampa, FL 33601-3391
(813) 229-2300 FAX (813) 221-4210
Attorneys for Plaintiff
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UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
EXCAL ENTERPRISES, INC.,
Plaintiff,
v. Case No. 96-764-CIV-T-23E
DAVID J. SMITH and JOHN DOES 1-10,
Defendants. /
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COUNTERCLAIM
Counterplaintiff, DAVID J. SMITH, by and through his undersigned counsel
and pursuant to the provisions of the Federal Rules of Civil Procedure, files
this Counterclaim against Counterdefendants, EXCAL ENTERPRISES, INC., R. PARK
NEWTON III, and W. CAREY WEBB, and states as follows:
1. The Court has subject matter jurisdiction of this Counterclaim because
it is brought in response to the Complaint in this action.
2. Venue is proper in this District because the Counterclaim is brought
in response to the Complaint in this action.
3. Counterplaintiff, DAVID J. SMITH, is a stockholder of
Counterdefendant, EXCAL ENTERPRISES, INC. ("EXCAL").
4. Counterdefendant, EXCAL, formerly known as Assix International, Inc.,
is a Delaware corporation with its principal place of business in Tampa,
Hillsborough County, Florida.
5. Counterdefendant, R. PARK NEWTON, III ("NEWTON") is an individual
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who is a citizen and resident of the State of Florida, who is currently serving
as Chairman of the Board of Directors of EXCAL.
6. Counterdefendant, W. CAREY WEBB ("WEBB"), is an individual who is a
citizen and resident of the State of Florida, who is currently serving as
President and CEO of EXCAL.
COUNT I
7. Plaintiff realleges paragraphs 1 through 6 above as if they were fully
set forth.
8. The Bylaws of EXCAL require that the annual meeting of shareholders of
the corporation be held within 120 days after the close of EXCAL's fiscal year.
EXCAL's fiscal year ends on June 30 of each year. A true and correct copy of
pages 1 and 2 of the Bylaws of Assix International, Inc., is attached hereto as
Exhibit A.
9. The latest annual meeting of the shareholders of EXCAL was held on May
31, 1995, and that annual meeting was for the fiscal year ending June 30, 1994.
10. No annual meeting has been held for the fiscal year which ended June
30, 1995.
11. EXCAL has failed to comply with the provisions of Section 2.2 of its
own Bylaws by failing to schedule and conduct an annual meeting of the
shareholders of the corporation as required in the Bylaws.
12. Section 211(c) of the Delaware Corporation Law requires that EXCAL
schedule and conduct an annual meeting of the shareholders of the corporation
within 13 months of the date of the last annual meeting of the corporation.
Even if the annual meeting conducted on May 31, 1995, was considered to be the
last annual meeting of the shareholders of EXCAL (although it was actually for
the fiscal year ending June 30, 1994),
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EXCAL is in violation of the provisions of Section 211(c) of the Delaware
Corporation Law because it has failed to schedule and conduct an annual meeting
within 13 months of the previous annual meeting. A true and correct copy of
Section 211 of the Delaware Corporation Law is attached as Exhibit B.
13. The annual meeting typically results in the election of the board of
directors of the corporation, among other items of business.
14. As a result of the failure to conduct the annual meeting, the
shareholders of EXCAL have been prevented for voting on the identity of the
board of directors, and the existing directors have continued to conduct the
business of EXCAL as if they have the right to do so notwithstanding the lack of
an election to that office since May of 1995, and that meeting was for the
fiscal year which ended June 30, 1994.
15. Sections 2.3 and 2.4 of the Bylaws of EXCAL and Section 211(d) of the
Delaware General Corporation Law permit the shareholders having ten percent of
the authorized issued and outstanding shares of the corporation to call a
special meeting of the shareholders in lieu of the annual meeting. That
provision is in place in the event the management of EXCAL, for whatever reason,
fails or refuses to call an annual meeting as required by Section 2.2 of the
Bylaws. (See Exhibit A).
16. On May 31, 1996, Cede & Co., as record holder of in excess of ten
percent (10%) of the outstanding shares of Common Stock of EXCAL submitted its
written request for a special meeting of the shareholders in lieu of the annual
meeting required by the Bylaws. One of the written demands submitted by Cede &
Co. was prepared and submitted on behalf of SMITH. True and correct copies of
the letters from Cede & Co. are attached as Composite Exhibit C.
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17. The written request submitted to EXCAL demanded the scheduling of the
meeting on July 17, 1996, at 1 Imeson Park Blvd., Building 100, Jacksonville,
FL, and to establish the record date of June 7, 1996, for ownership of the
shares in order to permit the solicitation of proxies in connection with the
meeting.
18. EXCAL has failed and refused to respond to the demand for a special
shareholders meeting in a timely manner, necessitating the filing of this action
to compel the scheduling and conduct of the special meeting of the shareholders
in lieu of the annual meeting required by the Bylaws of EXCAL.
19. As a result of the conduct of EXCAL, including its failure and refusal
to respond to the written demand for a special meeting of the shareholders in
lieu of the annual meeting required by the Bylaws of the corporation, the
shareholders of EXCAL have been deprived of their right to elect the directors
of the corporation.
20. SMITH would suffer irreparable harm by the refusal of EXCAL to respond
to the written demand for a special meeting of the shareholders in lieu of the
annual meeting required by the Bylaws of EXCAL. In the absence of a special
meeting the existing board of directors will continue in office in perpetuity,
and the shareholders, including SMITH, will be totally deprived of the
opportunity to vote for the election of the directors to manage the affairs of
EXCAL.
21. The issuance of an injunction compelling EXCAL to schedule and conduct
an special meeting of the shareholders, as provided in Sections 2.3 and 2.4 of
the Bylaws and Section 211 of the Delaware General Corporation Law, would be in
the public interest and would not deprive EXCAL of any substantive or procedural
right, but rather would enforce the provisions applicable to EXCAL by both its
own Bylaws and the laws of the State of its
<PAGE>
incorporation.
22. This Court has both subject matter jurisdiction and IN PERSONEM
jurisdiction over EXCAL by virtue of the filing of this action. Section 211(c)
of the Delaware Corporation Law vests this Court with the authority to
"summarily order meeting to be held upon the application of any stockholder or
director."
23. All conditions precedent to the filing and maintenance of this action
have been performed or have occurred.
WHEREFORE, Counterdefendant, DAVID J. SMITH, prays that this Court:
a. Restrain and enjoin all Counterdefendants from refusing to call
and conduct the special meeting of the shareholders as required by the
Bylaws of the corporation and the provisions of Section 211 of the Delaware
Corporation Law;
b. Issue a mandatory injunction to compel the Counterdefendants to
schedule and call the special meeting of the shareholders of EXCAL
ENTERPRISES, INC., as required by the Bylaws of EXCAL and the provisions of
Section 211 of the Delaware General Corporation Law;
c. Award such other and further relief as the Court deems just and
proper under the circumstances.
COUNT II
24. Plaintiff realleges paragraphs 1 through 6 above as if they were fully
set forth.
25. EXCAL filed this action on April 17, 1996, but did not attempt to
serve process on SMITH until approximately May 10. Instead of serving the
summons and complaint upon SMITH, the Counterdefendants EXCAL, NEWTON and WEBB,
arranged for the preparation of a proposed Amended Complaint and sent that
document to five individuals
<PAGE>
and one limited partnership, including three members of the "Reporting Persons"
group to which SMITH belongs, in an effort to intimidate and coerce the
recipients into foregoing their rights as shareholders of EXCAL. A true and
correct copy of the proposed Amended Complaint is attached hereto as Exhibit D
to this Counterclaim.
26. The draft of the proposed Amended Complaint was not forwarded to SMITH
by the Counterdefendants.
27. The draft of the proposed Amended Complaint was accompanied by a
covering memorandum authored by NEWTON which purported to indicate that it was
written as a settlement offer. The precise terminology contained in small
typeface on the bottom of each page of the memorandum was as follows:
This letter is written pursuant to Fla. State. Section
90.408 in an effort to resolve a dispute between Excal
Enterprises, Inc. and the Group identified above.
28. Although there was no dispute between the recipients of that
memorandum at the time it was written, and the alleged dispute was purportedly
between EXCAL and SMITH, the memorandum was not addressed to SMITH in an effort
to resolve a dispute. Instead, the communication authored and disseminated by
NEWTON, with the knowledge and approval of EXCAL and WEBB, was an attempt to
intimidate and coerce the recipients of the memorandum from exercising their
rights as shareholders of EXCAL.
29. The attempt to shield the disclosure of the memorandum as a
"settlement offer" was in bad faith and was merely more evidence of the efforts
by the Counterdefendants to intimidate and coerce the stockholders of EXCAL.
30. In response to the receipt of the memorandum from NEWTON one of the
recipients, Mr. Kyle Krueger, attempted to arrange a meeting with NEWTON and his
<PAGE>
attorney as suggested at the conclusion of page 5 of the memorandum.
31. Although a date and time for the face-to-face meeting was agreed to by
counsel for NEWTON, the face-to-face meeting could not be held because NEWTON
did not stay for the meeting. Instead, he went home and was only able to be
reached by telephone at the time scheduled for the meeting. The telephone call
was concluded in a matter of minutes and nothing substantive was resolved.
32. When the publication of the memorandum and the proposed Amended
Complaint in this action, which would have had the effect of naming additional
shareholders as defendants, did not have its intended effect of intimidating or
coercing the shareholders who received it, NEWTON wrote another letter dated May
9 to Mr. Kyle Krueger, the shareholder who had attempted to meet with NEWTON to
no avail.
33. The letter of May 9 was not written as an attempt to resolve a
"dispute" between NEWTON and Mr. Krueger, nor was it couched in the same
misleading "settlement proposal" language used in an attempt to prevent the
Court from learning about the prior threat made to Mr. Krueger. Instead, the
letter incorporated by reference the prior memorandum of April 26 and stated
that it "clearly sets forth our [EXCAL'S and NEWTON'S] planned resolution of
this matter." A true and correct copy of the letter of May 9, 1996, from NEWTON
to Mr. Kyle Krueger is attached hereto as Exhibit E. A true and correct copy of
the letter which was incorporated by reference in Exhibit E is attached hereto
as Exhibit F.
34. The letter was clearly a threat against Mr. Krueger in an attempt to
intimidate and coerce him from continuing to participate with SMITH as one of
the "Reporting Persons" under the Schedule 13D previously filed.
<PAGE>
35. Although EXCAL filed the Declaratory Judgment count of this Complaint
as Count I, and in that pleading stated that it was "uncertain of its rights and
obligations under the Rights Plan, specifically section 11(ii) thereof" and has
asked this Court to take jurisdiction of the dispute and declare whether or not
a Triggering Event has occurred, or whether or not the EXCAL shareholders who
are not members of the group it has alleged exists are entitled to all benefits
described in section 11(ii) of the Rights Plan, the facts are that EXCAL, NEWTON
and WEBB have advised various shareholders of EXCAL that it has decided to
proceed with the purported dilution of the rights of SMITH notwithstanding the
absence of any order of this Court.
36. EXCAL, NEWTON and WEBB stated on Friday, May 17, that a Board of
Directors meeting would be called and the Board would take a vote at that time
implementing the Rights Plan and diluting the shareholding of SMITH and the
remaining shareholders who the Counterdefendants have mistakenly described as
the "Smith Group."
37. SMITH would suffer irreparable harm by the implementation of the
illegal and improper provisions of the Rights Plan by the dilution of his
shareholdings in EXCAL notwithstanding the absence of a Triggering Event and the
absence of a ruling by this Court on the very issue which EXCAL stated that it
was in doubt about in Count I of the Complaint.
38. The status quo would be preserved by the issuance of an injunction
preventing EXCAL, NEWTON and WEBB from purporting to implement the Rights Plan,
and further preventing the dilution of the shares of stock held by SMITH in
EXCAL until the issues presented by the Complaint, and specifically Count I
thereof, can be properly resolved by the Court having jurisdiction of the person
of EXCAL by virtue of the filing of this
<PAGE>
Complaint in the first instance.
39. SMITH has a substantial likelihood of success on the merits of Count I
of the Complaint and on the merits of this Counterclaim because the "Reporting
Persons" have only 13.3 percent of the stock of EXCAL, well below the threshold
of 15 percent required for the Triggering Event under the Rights Plan relied
upon by EXCAL.
40. All conditions precedent to the filing and maintenance of this
Counterclaim have been performed or have occurred.
WHEREFORE, Counterdefendant, DAVID J. SMITH, prays that this Court:
a. Restrain and enjoin all Counterdefendants from implementing the
Rights Plan and from purporting to dilute the shareholding of SMITH until
this matter can be heard and decided on the merits; and
b. Award such other and further relief as the Court deems just and
proper under the circumstances.
MICHAEL C. ADDISON
Attorney at Law
Post Office Box 2175
Tampa, Florida 33601-2175
Tel: (813) 223-2000
Fax: (813) 228-6000
Florida Bar No. 145579
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Attorney for Defendants
<PAGE>
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that a true copy of the foregoing was furnished by United
States mail to the person listed below, this _____ day of July, 1996.
-----------------------------------
Michael C. Addison
James M. Landis, Esq.
Foley & Lardner
P. O. Box 3391
Tampa, FL 33601-3391
(813) 229-2300 FAX (813) 221-4210
Attorneys for Plaintiff
