f •• • •1

STA1E2 tO uora01.1THEIN Darnimr OF TE

FILED

FEB 6 1998UNITED STATES DISTRICT 'Any, Clerk of Cou

SOUTHERN DISTRICT OF TEXAS

• HOUSTON DIVISION

JOHN W. ROBERTSON, JOYCE BERK, S No.KREGG BERK, and RODNEY BERNAT, On 'SBehalf of Themselves and Al]. Others 5 cuss Similarly Situated, I 98- 0 1:6 4

Tlaintiffs,

Vs.

1. DAVID B. STRASSNER, DOUGLAS H. S •

KIESEWETTER, DAVID R. ALBIN,NATURAL GAS PARTNERS, T.. P. and S • •OFFSHORE ENERGY DEVELOPMENTCORPORATION,

5Defendants. 5 Plaintiffs Demand A !

5 Trial By Jury ••

COMPLAINT FOR V1OLAT/OMS OF THESECURITIES EXCHANGE ACT OF 1934

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aummARY OP THE ACTION

1. This is a securities Class action on behalf o . all

purchasers of the common stock of Offshore Energy Devel.ment

Corporation ("OEDc" or the "Company") between November 1, 196 and

April 18, 1997 (the "Class Period"), seeking to remedy viola ions

of the federal securities . laws arising Out of defendants' mis '-pre-

sentations and omissions regarding OEDC's natural gas opera ions

and its future prospects.

2. In November 1996, OHDC completed an initial P •lic

offering ('1E10" or the "Offering") of common stock pursua't to

false and misleading Roadshow presentations and Registction

Statement and Prospectus, selling more than 4.2 million sha r -s at

$12 per share for proceeds of more than $50 million, 2 ON0 rg

President David n. Strassner ("Strassner"), its Chief Ope %ting

Officer Douglas H. Kiesiwetter ("Kiesewetter") and director l'avid

R. Albin ("Albin") sold 68,250, 48,860 and 4,554 shares of OEDC

stock, respectively, in the Offering at $22 per share, for pro eeds

of $819,000, $586,200 and $54,648, respectively. OEDC use l i ; $12

million of the proceeds to payoff loans from Natural Gas Part -rs,

L. p . ("NGP"), a limited partnership that Albin controlled.i NGP

itself sold 20,150 shares of OEDC stock in the Offering at per

share for additional proceeds of over $2.4 million. Afte the

offering, defendants inflated OEDC'e stock price to as high a- , $16

per share by making false and misleading statements aboui the

status of and prospects for OEDC's natural gas operations as well

This includes the 3.68 million OEDC shares price- onNovember 1, 1996 as well as another 550,000 shares sold pursu-. t toan overallotment option or "green-shoe."

as the Company's ability to achieve strong cash flow and ea ings

per share ("EPS") growth during 199? and 1998, assuring in L-stor

that OEDC would generate 1997 cash flow and EPS of at lealt $26

million and $0.65, respectively. Defendants represent l-d to

investors that OEDC would quadruple its positive cash flidw in

fiscal 1997 alone. As late as April I, 1997 -- less than three

weeks before defendants were forced to disclose the precario snese

of OEDC's business operations and after the Company d in

desperation secretly arranged to hire investment advisors t4 sell

of the Company or its assets -- the defendants continu-d to

maintain that the Company's operations were "in lint" with

expectations and that OEDC would 'loather momentum" in 1997,

3. Then on A.pril 19, 1957, defendants finally began to admit

that OEDC was a financial disaster, disclosing: (i) that cert in. of

the Company's wells, including South Timb -alier B-8, one o the

Company's ptimary wells, had ceased production months earlier (ii)

that OEDC's South Dauphin II Limited Partnership progra was

experiencing cost overruns of 20%; (iii) that OEDC was -ving

substantial difficulties in obtaining federal regulatory pv its

for certain of its wells which had been drilled in shall* and

environmentally sensitive waters; and (iv) that production at! outh

Timbalier D-5 (a well whose production the defendants had been

speaking positively about just weeks before) would produce little

or no economic benefit to OEDC. This news stunned G DC's

investors. Adding insult te injury, the defendants revealed that

instead of the substantial cash flow and EPS gains promi., d by

defendants, ORDC would generate huge losees in 1997 and would, at

best, break even in 199s. The cumulative effect_of . 1 hese

,

disclosures was COO mt/Qh fox QEDC'a Dacce.rd aharatia/aerm ct bear

and the price of OEDC stock reacted accordingly, dropping b over

50% to 43.25 per share, a decline of more than 75% from its 1 Claes

Period high. While defendants were able to personally prOfi 1i from

their wrongdoing by selling over $46 million of OEDC Stock o the

public at artificially inflated prices as high as $12 per -'hare,

OEDC's shareholders lost millions of dollars. Once OEDC's istock

dropped to $3.25 per share on April 18, 1997, defendants 14—an

trying to sell the Company and hired advisors to seek hut a

purchaser. These efforts proved successful as Titan Expi .or j ion,

Inc. ("Titan"), another company controlled by NGP, acquired OEDC

effective December 12, 1997 with Titan stock then worth $6.4. for

each OEDC share.

4. The chart below shows the price movement of OEDCI-tock

during 2996 and 1997 as defendants pursued their unlawful couse of1business by concealing the Company's true condition, while selling

more than $46 million of their (MC stock. The chart belovil also

shows the reaction of OEDC's stock price as the truth about! OEDC

began to reach the marketplace:

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J.

OfhChOavi Energy Devoloproserrat Ca•rp..

November 1, 1996 - April 30, 1997Daily Stook Prices

18

16—26197 411197

Zgarre PepPactfue VEDC should gather

E 14 — irm"jmi997.. "we'. bY

so1- 12—

1.+139nfisibtlity Or 1997 production

unusually

a 10 — Ntdcort Ryly 0.1:4181 ewe

1 Vie8 OEDC sells 195 million

shame for proceeds of 4119117$418 million. relirmaSnCill riVirmn 11111 Worcid met8 Incividual Defendants and

aNSF 322,804 shamfor 53.8

anzeciiiiietitiexceiallve kvi:WFIZ=110101, the.

. 4 — NOtil=tvilis WI mfr* pe 'Mint*

21 1 . 1 1/01/96 12/06/96 01/13/97 02114197 03/21/97 oymen

11/1896 12124/96 - 01/29/97 03/0597 04/0097

1INTROW TION AND OVERVIEW

5. OEDC is an energy company that focuses on the

acquisition, exploration, development.and production of natural

gas. Prior to the Company's IPO in late 1996, OEDC had experienced

substantial operating losses and required tens of millions of

dollars to fand its substantial ongoing development efforts.

Consequently, in order to avoid having to continue to fund OEDC's

operating losses and development and production expenditares,!

OEDC's insiders hatched a plan pursuant to which they would take

02DC public. The sale of OEDC shares to the public was designed

to (i) allow OEDc's controlling shareholder NC?, a lilnited

partnership controlled by Albin and world renowned investor Rlichard

Rainwater, to receive an immediate payout of $12 million in lloans;

(ii) allow NGP to obtain an additional $2+ million via the sdle of -

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shares in the Offering; (iii) allow OEDC to obtain huge amou l s of

new capital; (iv) allow OEDC I s other insiders, including deferid-nts

Kieeewetter, Strassner and Albin, to sell more than $1.4,mAllion

worth of their own OEDC shares; (v) create a liquid trading erket

for the defendants' remaining holdings of more than 4 milli° OEDC

shares; and (1.01) allow defendants to avoid bearing the burci-n of

ORDC's operating losses going forward.

6. By July 1996, the defendants began the formal proce-s of

preparing to take OEDC public. First, OEDC's ?resident and hief

Operating Officer encouraged G. Alan Rafts to join OEDC's Bo d of

Directors. OEDC also retained Mr. Rafte's law firm to assi j. the

Company in preparing for the Offering, By having Mr. , Rafts o the

Board of Directors and having Rafte's partner John Brantley co duct

the "due diligence" ' investigation, which is required by der-

writers who undertake to sell stock to the public, the defe ts

were assured that they could complete the Offering without .-ing

subjected to a truly objective and vigorous due dilitence

investigation, thereby avoiding disclosure of the truth 1.,..out

OEDC's condition and prospects, including the fact that a majj,mrity

of the Company's wells which were then in production were sufi-ring

from declining production rates and that OEDC's proj.cted

production growth was based upon the baseless assumption that

certain Nngmnpleted wells would produce 5 MMcf/d„ an assu ition

that lacked any basis in fact, ognc also retained inves ment

banking firms Morgan Keegen & Company, Inc. ("Morgan Keegen" and

principal Financial Securities, Inc. ("Principal") (collect vely

"the Underwriters") to assist the Company in merchandizin- and

selling OEDC stock to public investors. .

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7. On August 30, 1996, OEDC filed a Form S-1 Regist.-tion

Statement with the SEC for the stated purpose of selling 3.182!

million OEDC shares. During the last two weeks of October 196, to

foment interest in OEDC stock, OEDC's President; Strassne and

Chief Operating Officer, Kiesewetter, joined Principal a l lyst

David Garcia and other investment banking professionals emplo I ed by

the Underwriters in orchestrating Roadshow presentationi for

potential investors throughout the United States. Defe

arranged in-person and telephonic presentations for investd s in1

various cities around-the country, including Boston, New Yo ' and

Dallas. The defendants' selling efforte were so success?, 1 at

fomenting investor interest, that the size of the Of ten was

ultimately increased to over 3.6 million shares.

S. The Roadshow presentations, Registration Statemed and

Prospectus were rousing successes as defendants represented that

1997 would see OEDC: (i) "gj,:j1ILMMILY_JIIMMN.CaLq" natura l gaS

production; (ii) more than quadruple its gas producti c! to

approximately 60 million cubic feet per day; and (iii) ge-rate

substantial growth in cash flow and EPS. Defendants emph4ized

that because OEDC would generate huge production gains in 199 , the

Company would generate 1997 cash flow and EPS of $2.50-$3.01 and

$0.65-$0.75, respectively. Based upon these representatione, the

defendants successfully completed the Offering. In fact, be ause

defendants were so successful in creating interest in OEDC the

defendants also were able to sell out the Underwrii era'

overallotment option of more than 550,000 shares.

9. OEDC's stock price was artificially inflated as a r-sultof the false and misleading statements defendants ma.- in

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connection with the Offering. Strasaner, Kiesewetter, Albin and

• NGP took advantage of this artificial inflation to sell off 322,804

shares of their OEDC stock for proceeds of more than $3.8 million.

The table below shows defendants' stock sales made in the Offering

while OEDC's stock was artificially inflated:

Shares Sale NetName Position Sold Price Proceeds

. Albin Director 4,554 $12 $ $4,40

Kiesewetter Executive Vice President 48,850 $12 $ 5s6,00Chief Operating Officer

Nop Control/ing Shareholder 201,150 $12 $2,413,0)0

Strassner President 68,250 $12 819,C00

TOTAL 222..8I4 $3,873,648

10. Subsequent to the Offering, the defendants manipulated

the price of OEDC stock to as high as $16 per share aSI they

continued to issue false and misleading statements. For example,

defendants claimed that OEDC was generating substantial growth in

earninga and cash flow, assuring investors that OEDC would c4oduce

60 million cubic feet per day in 1997 and that visibility on!these

production increases was "unusually crisp," i.e., could be

predicted with a high degree of confidence.

11. In February 1997, the defendants made minor reductions in

the Company's 1997 production estimates. Although this H pusA cut'.

in production estimates had an immediate adverse impact on the

price of OEDC stock, the price of OEDC stock continued to trde at

artificially inflated levels throughout the remainder of the Class

Period as defendants concealed the truth about the problems

affecting OEDC's operations, including the fact that ohe ciE the

Company's more promising wells had . already ceased producig gas

altogether. Ultimately, on April 18, 1997, the defendants finally

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began to reveal the true extent of ORDC's woes and admitted that

they would be selling off the Company's assets. The market so

stunned by these announcements that the price of OEDC stock dr.pped

to less than $4 per share.

12. The positive statements made by the defendants dun i • the

Class Period, including defendants' statements that OEDC ould

generate significant production, earnings and cash flow gai . s in

1997 and 1998 and that OEDC's results could be " •redi ed wit hi-h

degrees of confide/1m " were false and misleading when made asi they

misrepresented and/or omitted to state facts necessary to mak- the

statements made not misleading, including; inter alia:

(a) That, at the time of the Offering, OEDC had no i•asis

to expect early 1997 production for Viosca Knolls wells V1(33, 5,

v1(122 and VK123, as OEDC had not yet even approached the compli:tion

of the administrative permit process;

(b) That the permit process for OEDC's Viosca * .11s

wells was lengthy because of the federal government's riT.rous

analysis of wells drilled in shallow and environmentally sens tive

waters;

(c) That the. defendants had no basis to expect an did

not expect that each of the wells OEDC planned to complete iril 1996

and 2.997 would generate production of 5 MMcf/d as those re=ults

cannot be predicted accurately;

(d) That certain of the wells for which the defen.;ants

Projected 1997 production of 5 MMcf/d, including wells in .outh

Timbalier 161 and viosca Knoll, bad not yet even been dril1e4;(e) That OEDC had not successfully completed 92% 0 the

wells drilled by it, as a number of the wells drilled • the

Company had ceased production prior to the Offering w.thout

producing material amounts of gas;

(f) That OEDC's public offering had been plann-u and

undertaken to permit NGP to bail out of a poor investment;

(g) That OEDC's offering price did not fairly r Elect

the Company's growth prOspects, business potential or e ected

operating results, but rather, was fixed at an arbitra and

unfairly high level and unfairly benefitted OBDC, NGP a :; the

individual defendants;

(h) That defendants lacked a reasonable basis for heir

positive forecasts and projections regarding OEDC's producti and

earnings growth for 1997 and 1998 which statements were, in 'act,

false as they were inconsistent with (a)-(e) above;

(i) That, as a result of the foregoing, defen.=nts'

forecasts that OEDC would quadruple its gas production and ge rate

strong cash flow and EPS growth during 1997 were false, as such

growth was impossible to achieve in light of these undisclosed

problems; and

(j) The defendants forecasts of EFS for OEDC in 1-97 of

$0.60-$0.75 were false, as they were contradicted by the a • rse

facts as set forth above. •

JpRisDICTION AND VENUE

13. The claims asserted herein arise under §§10(b) and ,0(a)

of the Securities Exchange Ant of 1934 ("Exchange Act"), 15 U.S.

S781(b) and 78t(a), and Rule 10b-5, 17 C.F.R. 5240.10b-5.

• 14. Jurisdiction is conferred by 527 of the Exchange Ac , 15

U.S.C. 578aa, and 28 U.S.C. 51331.

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15. Venue is proper in this District pursuant to S27 f the

Exchange Act and 28 U.S.C. S1391(b). Certain of the act: and

transactions, giving rise to the violations of law compIai d of

occurred in this District, where ORDC's operations were ce tered

and headquartered.

THE PARTIES

16. (a) Plaintiff John W. Robertson purchased 300 OEDC

shares from defendants on November 1, 1996 at $12 per share, and

was damaged thereby.

RO Plaintiff Joyce 18erk purchased 1,000 OEDC ares

from defendants on December 18, 1996 at $14.375 per share, - • was

damaged thereby.

(c) Plaintiff Kregg Berk purchased 1,200 OEDC s area

from defendants on December 12, 1996 at $15.125 per share, - • was

damaged thereby.

(d) Plaintiff Rodney Bern.at purchased 1,000 OEDC s area

from defendants on February 20, 1997 at $10.25 per share, an. was

damaged thereby.

17. Defendant OEDC is a Delaware corporation which h-: its

executive offices and principal place of business at 1400 woo.loch

Forest Drive, Suite 200, The Woodlands, Texas. OEDC is the itsuer

of the shares acquired by plaintiffs and the C2ass. OEDC's ares

began trading on November 2, 1996 on the NASDAQ National :rket

System. OEDC was actively traded during the Class Period, with

average daily trading volume of more than 99,000 shares. 1

18. (a) Defendant Strassner was, at all times rell-vant

hereto, President and a member of the Board of Directors of IkEDC.

Because of Strassner's position with the Company a ./or

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participation in the Offering process, he knew or reckii-esly

disregarded the adverse non-public information about DC's

operations and its present and future business prospects via j. cess

to internal corporate documents (including the Company's opd:ting

plans, budgets and forecasts and reports of actual opera ions

compared thereto and OHDC's reports on the Company's develo• nt,

exploratory and productive wells, proved reserves, ge01-) ica1

reports for the areas on which the Company's wells were loc=ted,

inter alia), communications with other corporate officers an' the

Company's 17 employees, attendance at management and/or Bo- . d of

Directors' meetings and committees thereof and via report i, and

other information provided to him in connection there ith.

Strassner sold 68,250 OEDC shares in the Offering at $12 per -hare

for proceeds of $819,000.

(b) Defendant Kiesewetter was, at ail times rel.' vent

hereto, Executive Vice President,. Chief Operating Officer nd a

member of the Board of Directors of OEDC. Because of clef- dant

Kiesewetter's positions with the Company and/or participati .in in

the Offering process, he knew or recklessly .disregarded the a• eras

non-public information about OEDc/13 operations and its preset1 and

future business prospects via access to internal corp•rate

documents (including the Company's operating plans, budget and

forecasts and reports of actual operations compared thereto and

OEDC' s reports on the Company's development, explorato and

productive wells, proved reserves, geological reports for the :reas

on which the Company' s wells were located, inter - I ia)

communications with other corporate officers and the Company s 17

employees, attendance at management and/or Eoard of Direc ors'

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meetings and committees thereof and via reports and other

information provided to him in connection therewith. Kiese'-tter

mold 48,850 OEDC shares in the Offering at $12 per sha for

proceeds of $586,200.

(c) Defendant Albin was, at all times relevant here o, a

director of OEDC and a member/manager of defendant NOP, a firm

which held a large equity position in, and exercised control aver,

OEDC. Albin's beneficial - holdings of OEDC stock at the time ; f the

Offering were approximately 2.4 million shares, or 47%. Becase of

defendant Albin's positions with NOP and OEDC and/or partici n - Lion

in the Offering process, he knew or recklessly. disregard-.- . the

adverse non-public information about OEDC's operations aria its

present and future business prospects via access to int-rnal

corporate documents (including the Company's operating :fans,

budgets and forecasts and reports of actual operations co ' (.ared

thereto and OEDC's reports on the Company's develop -nt,

exploratory and productive wells, proved reserves, geo1.2ical

reports for the areas on which the Company's wells were loC.ted,

inter communications with other corporate officers a the

Company's 17 employees, attendance at management and/or Bo- I d of

Directors' meetings and committees thereof and via report;

other information provided to him in connection therewith', In

November 1996, Albin, through NOP, sold 201,150 shares of f OEDC

stock in the Offering pursuant to a "green shoe" optio'? for

proceeds of more than $2.4 million. Albin also sold 4,554 4 res

of his OEDC stock in the Offering at $12 per share, pock-ting

$54,648.

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(d) Defendants Strassner, Kiesewetter and Albin (the

"Individual Defendants") each participated in the prepar tion,

. review and/or dissemination of the false statements alleged h=rein,

including the Registration Statement and Prospectus, 'pbrees

releases, analyst reports and/or oral statements by which OEDC

shares were sold to the public.

19. Defendant NGP is a limited partnership which inve-ts in

energy-related companies. Albin is a member/manager of NG . and

controlled NGP. NGP held 2.4 million OEDC shares or 47* in!erest

in OEDC prior to the Offering. NOP received $12 million 8. the -i

Offering proceeds to repay a loan it had made to OBDC, as w i ll as

an additional $2.4 million from the sale of OEDC ato'ik in

connection with the Offering.

DEFENDANTS' FRAUDULENT SCHEME ANDCOURSE OF BUSINESS, MOTIVE, OPPORTUNITY AND KNOWLgDGE

20. Each defendant had the opportunity to commi and

participate in the violations of law described herein. The

Individual Defendants were top officers and directors of OEDC hich

had only 17 employees who were "leased" from Kieewetter's lolly

owned company, CSA Financial Services, Inc. The Indi idualDefendants controlled OEDC' s press releases, corporate report, SEC

filings and its communications with analysts. Thus, they

controlled the public dissemination of, and could falsity the

information about OEDC's business, products and finances ! that

reached the public and impacted the price of OEDC stock.

21. Each of the Individual Defendants and NOP had the '.tive

to commit and participate in the violations of law des ibed

herein. These defendants wanted to and did conceal the pr.1.1.1ems!

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with OEDC's business to make it appear that OEDC's operation were

succeeding and growing,. so that OBDC could accomplish a huge

initial offering of OEDC stock which would raise millions in ieeded

capital to fund OEDC's development efforts and provide OED 6 with

gas production to offset the declining production then P.-ing

experienced at a majority of OEDC's wells. Defendants Stra -ner,

Kiesewetter, Albin and NGP also sought to sell off over $3.8

million dollars of their own. ORDC shares in the Offering and • n the

open market, as well as create a trading market so that they ould

be able to register and sell millions of additional lares

thereafter at artificially inflated prices before the truth t

OEDC's .business became known. After the Offering, these defe ts

continued to be the largest and controlling shareholders, ing

49% of the outstanding stock. The Offering increased the lii ':dity

of their stock and increased the book value of their r=tock

dramatically from $1.01 per share to $5.09 per share, a $14 million

windfall for these defendants.

FALSE AND MISLEADING STATEMENTSMADE IN COMECTION WITH THE _SALE OF OEDC STOCK

22. On November 1, 1996, the Company and the Under :;ters

sold and/or arranged the sale of more than 4.2 million OEDC ares

to the public in connection with the Offering, including mor! than1

550,000 shares sold by the defendants and other selling i are-

holders pursuant to an overallotment option. The $12 of

price of OEDC's shares supposedly fairly reflected ci DC's

achievements and its future business prospects. According t. the

Prospectus:

The initial public offering price of the common stoc'will be negotiated between the Company and th-_

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representatives of the Underwriters. 1!.monct the factors.to be considered in determinina the initial public offering price of the Common Stgals, in addition tcprevailing market conditions, are . . . reserve andproduction quantities for the Company's oil and naturalgas properties, the history of, and prospects for, theindustry in which the Company operates, . . . he cashflow and earnings of :env and comparable companiesin recent PeriOds and the CompAnyLp business RptentiAland cash flow and earnings prospects.

23. In addition to the written statements used by the

defendants to sell OEDC stock, defendants conducted a nationwide

Roadshow during the last two weeks of October 1996. OEDC, through

Strassner and Kiesewetter and with the help of the Underwriters',

arranged and/or conducted in-person and telephonic Roadshow

presentations in New York City, Boston, Minneapolis, Houston and at

Principal's main office in Dallas, Texas during the last twolweeks

of October 1996, in order to distribute very favorable info/mdtion

about OEDC and stimulate demand for the OEDC shares to be sold in

the Offering. During the Roadshow presentations, the defendants,

including Strassner, conducted scripted presentations after which

they answered questions posed by investors. As part of the

Roadshow presentations, defendants made oral statements, used elide

presentations and disseminated written statements, representing

that

• OEDC's business was exceptionally profitable and wouldsustain a pre-tax margin of 35%.

• OEDC had an excellent track record and had succesdfullycompleted 24 of the 25 wells drilled by the Company.

• OBDC production would exceed SO MMcf/d by the second halfof 1997.

• OEDC would generate 1997 cash flow and earnings of $2.50-$3.00 and $0.65-$0.75, respectively.

/c •

•

The information disseminated during the Roadshow was part .f the

total mix of information affecting 0EDC's Offering on Nave ier 1,

1996 and the price at which its shares were sold and then t4ded.

24. The selling sheet disseminated by the defendants fur the

purpose of selling OEDC stock stated that OEDC was "in the ini:st of

a 4r...ram which should si.nificantl increase u -as

volumes_produced_by the end of 1996." The selling sheet emph-sized

several "selling points" including:

• Since June 30, 1996 the Company has drilled an-•completed four exploratory wells offshore Alaba -and offshore Louisiana. The Company has drille•and logged a fifth exploratory well offshor.-Alabama that is scheduled to be completed latethis year. •

• Since 1588, the Company has completed 24 of the 2wells it has drilled.

25. The selling eheet also indicated that, at an Off-ring;Price of $12 per share, OEDC would achieve 1997 after-tax cast flow

of over $26 million, stating!

PEER GROUP COMPARISONSmow on latest available infOrmatiOn.t

Market CAP Market Cap v tiemarket Cap of Or AMU est OW Assets

Recent Common of tu to t-

Stock Shares Oil & Cas RtOved PV104

Ticker Price Outstanding ASSete l Reserves of Proved ReserVes After' CF[A(iounts in thousands except per share aatal

prØ Forme OffshoreEnergy Deveigmlent QEDC 521.00 8,052

$64,572 62_64 1,4sx 2x

Offshore Gulf ofMexico Producers

Cairn Anerly COOS $10.38 /7,560 6213,662 $2.16 2.85x 3:'xFlores A Reek* MR 840.13 19,555 $919,925 $247 3.92x 6- XForecenezgy Sae

Exploration MO $25.13 16,20 8642,461 $1.39 1.19x 2..xNewfield Exploration NM $45.25 17,471 8800,660 1.1AZ 2.10x

Average $2.20 2.28x 5.

(1) Market cap of OW assets defined as Common Stock Market Value plus Lono-Tero Debt. plus Preferre. Stook,less sinking Capital and Rstimseed Value of Other Assets.

(2) Pro Forma for the COmbiNstion and the Offering.

26. (a) Page 3 of the Registration Statement and Pros-ctus

discussed OZDC' s ExDloration and.De yel pmerit in aurnmary faei ion,

stating:

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From January 1 through October 7, 1996, the Compan'. drilled and completed four exploratory wells offshor;Alabama and offshore Louisiana. The Company has drilleia fifth exploratory well offshore Alabama that was logge.in October. The one well drilled offshore Louisiana i-currently producing and the Company anticipates thaiconstruction of necessary production facilities offshorz.Alabama and connection of the Alabama wells to suefacilities will be completed by the end of the firsdquarter of 1997.

(17) The Registration Statement and Prospectus f' ther

discussed OEDC's g_lpration and Development, stating:

Exploration and Development•

* * *

Mobile 959/960 Cluster. In late 1994, the Compaft:acquired an undivided 50% interest in Mobile 959/960 jusieast of the Mobile Bay entrance and south of Fort Margepeninsula. . . The Company now owns a 100% workin.'interest in the property and is currently producing aboutseven MMcf/d from four wellboras with one additionalrecompletion scheduled in 1997 to access additionalproved reserves behind pipe.

* * *

Proposed VK Clusters. The Company owns 10additional lease blocks in VK, encompassing over 54,726gross (47,808 net) acres, on. which it has identified fivegoophysically defined Miocene exploratory prospects andone proved undeveloped location that it is scheduled todrill and develop by the end of 1997. In addition, theCompany has four wells an these blocks, which were .drilled since June 30, 1996, that the Company isscheduled to connect to platforms by the end of 1997,'The Company estimates that the combined cost for theseprojects will be approximately $25 million.

* * *

Three wells were drilled by the Company duringAugust, September and. October 1996 on the center cluster.These wells encountered potentially productive sands attotal vertical depths of 1,290, 1,190 and 1,380 feet,respectively. The Company anticipates installing allunmanned platform on this cluster by the end of the firstquarter of 1997.

* *

- 11 -

VK 24 Development. The Company acquired VK 241993 as a producing property. The development is locate.due south of Paecagoula, Mississippi and production ha-declined to less than one MMcf/d with produced water.The Company has recently evaluated a proprietary higresolution seismic grid over the property and ha:identified an updip proved undeveloped drilling location.The Company commenced drilling on. this locationOctober, 2996. The Company is drilling this well from aexisting braced caisson which, if the well is successful;will allow production to commence immediately upocompletion. The Company has budgeted approximately $1.0million for expenditure on this well prier to the end 0.i1996.

27. The Registration Statement and Prospectus con'-ined

certain generic warnings which were designed to conceal the fact

that at the time of the Offering the defendants had alread been

apprised by rig operators that completion of a number of OSDC .ells

would be delayed due to adverse weather conditions in the G if of

Mexico and, therefore, OEDC would not be able to generate a 4001s

increase in production in 1997. Purthermore, OEDC conceale. the

fact that it was not even close to completing the administ 1.1tive

permit process for certain of its Viosca Knolls wells prior t. the

second quarter of 1997. Although the defendants were aw-: e of

these problems, they intentionally omitted the permit delays from

the Registration Statement and Prospectus andrepresented 1 hese

problems, which OEDC was then facing, as contingent risks, st;ting

merely that ninio assurance may- be given that the drillin. of ',hesewells will be completed or that delays and increased costs wil not

reduce the attractiveness of.these wells."

28. Prior to December 2, 1996, defendants Strassne:. and

Kiesewetter provided to Principal analyst David Garcia ("Gard.'a"),

information about OEDC, intending and expecting that he 1 ould

distribute that information to the market. As planned, t=rcia

10

issued a "booster shot" based upon his discussions with defeiadants

Strassner and Kiesewetter. The report issued on December 2 1996

rated OEDC a "Buy," projected 1997 and 199$ EPS of $0.75 and $1.68,

respectively and stated:

• Strong profitability. Over a full business cycle',OEDC has taken over 30 of each revenue dollar to theearnings before interest and taxes (EBIT). The con12.4.6:should be a:be to suain its imaprpfj.tAbilISLY_SIOX_IlleLl=g2ggAta0J1fari2on.

• Quantum volumetric increases. Early in the 4Q96,OEDC' s production rate was approximately 22 million cubicfeet of natural gau per day. In therates are nticipt1to approach GO million cic fea . day. Hence in less than one year. volume is

* * *

PRODUCTION

Offshore Enemy Development Corp.'s 1997 productiiiiiprofile takes aconsessution that drillingwill stop on or about June 30, 1997,, when all of thecurrently scheduled sites have been drilled orrecompleted.

Visibilitv'on 1997 production gaips_i4 uppsuallv crisp:As of October 1996, OEDC had essentially all of itsproduction coming from six wells. Part of theincremental production will come from a total of 12 wellconnections and recompletions, where results can be p_redictedlillra.of confidence. The remainderwill come from seven identified and scheduled drillsitesiCistrcOEDrdvithsimirosects'ssuccesses out of 25 wells drilled.

The production profile assumes no new drilling after Jun30, 1997. However, this is not due to lack ofopportunity. The company has 22 shallow prospects invarious stages of assessment, including a dozen in theViosca Knoll area offshore Alabama. Cash flow fromrising Dr/Iduaugn and a debt-tree balance. sheet will accelerate the cycle of data acauisition and prospectevaluation.

* * *

FINANCIAL PROJECTIONS

t• •

The overwhelming driver in OEDC's immediate future is the rapid ramp UD in -production. Average daily ProdUCtien inthe 409 ip estimated to be 12 million cubic feet per day, which is expected to iump to. 58.3 million cubic feet a day by the 3097. In less ..than_a_y_e.ar, volume_i$ anticipated to' grow by a factor of nearly five times.

* * * •

In 1997, our official cash flow estimate is $2.64 pershare. Plausible but more optimistic assumptions couldquickly boost cash flow to over $3.00 per share. Eve/taking the low-end number, OEDC's stock is selling at thebottom of the peer group based on a cash flow multiple:

* * *

As OEDC grows and becomes more visible, we wouldanticipate that the cash flow multiple will migratetoward a , central value in the peer group. For 1998, weproject a volume growth of approximately 30%, and expectpartial year contributions from gas processing and gasgathering to arrive at a cash flow estimate of $4.32 pershare. . . .

SUMMARY

The Offshore Energy Development Corp. storystraightforward: 1) with pretax profit margins running at35%, the comnany is extraordinarily profitable; 2) withnatural gas volumes scheduled to iump by a factor.otnearly five times by the 3097, the company is goingthrough a steen ramzup; 3)__on a cash flow multiple basis, QEDC stock sells at a discount to its peer group. Our target price is S25. BUY.

29, Defendants Strassner and Kieeewetter also provided

information regarding OEDC to Morgan Keegan and on DecembeE- 10,

1996, Morgan Keegen followed with its "booster shot," issuing a

report written by analyst J.J. Myers which confirmed that OEDC's

production would "nearly quadruple" in 19974 Defendants Strassner

and Kiesewetter intended and expected that Morgan Keegan :would

distribute the information they to the market. The deport

rated OEDC a °buy" and projected 1997 EPS of $0.65, stating:

More important to _us is the dramatic projectedincrease in the numbers in 1997 bas .ed upon__lanamproduction volume increase. . OveralL we_exoect gas

production to nearly cmacir pl.e_ p..j..ut over 1&5.cL. EverNbased on weaker overall commodity markets, this would.increase oil and gas revenues from just under $10 milliorto about $33 million_ Expenses should grow at muchslower rates. While it is hard to forecast depreciation,depletion, and amortization rates (due to limitedreserves booked because of limited production history)and .exploration expenses, we are forecasting_ 192/earnings of $0.65 Der share and discretionary cash -flogof $3.00 per share. Discretionary cash flow beforefinancina costs and domestic taxes (EBITD) is estimatedat roughly $25 million.

Table 2Formai:Med Production Growth by Field

008 Procuction (44)Nat Prod.Revenue LevelInterest tunex/e0 1096 2096 3096 4096 1097 2097 1097 4097 TR96 T8971

0.T1mbalier 1424-7 0.469 10.0 0.43 0.43 0.34 0.40 0.29 0.38 0.27 0.14 1.69 1.50;S.Timba11er 1528-8 0.625 5.0 0.09 0.00 0.01 0.12 0.26 0.28 0.27 0.25 0.13 1.20S.Tiabalier 161 11 0.400 5.0 0.00 0.00 0.00 0.00 0.00 0.18 0.18 0.17 0.00 0.53.s.Timbaliar 161 42 0.200 5.0 0.00 0.00 0.00 0.00 0.00 0.06 0.09 0.09 0.00 0.23:S.Timba1ier 161 53 0.200 5.0 0.00 0.00 0.00 0.00 0.00 0.00 049 0.09 0,00 0.10 •MObilt Nay 959/960 0.900 5.6 0.57 a.72 0.59 0,54 0.49 0.47 0.46 0.45 2.75 1.87Ifiede& Knoll-Neat . 0.803 15.0 0.00 0.00 0.00 0.00 0.00 0.80 1.10 1.10 0.00 2.99!Vioaca Knoll-Nast 0.803 15.0 0.00 0.00 0.40 0.00 1.00 1.10 1.10 1.07 0.00 4.26E17/oksoa Kno11117/1180.757 5.0 0,00 0.00 0.00 0.00 0.00 0.34 0.34 0,34 0.00 2,02!vinoca Kn011298/2000.303 10.0 0.00 0.00 0.00 0.00 040 0.00 0.55 0.70 0.00 1.25'Vide= 95%01124 0.803 5.4 0.00 0.00 0.04 0.07 0.37 0.37 0.36 0.35 0.11 1.43Mafia 0.142 15.11 0.00 0.00 0.00 0.00 0.00 0.14 0.20 0.20 9.00 0.54!N. Padre 0.498 10.0 0.00 0.00 0.00 0.00 0.00 0.30 0.45 0,10 .0,0.Q 2:40

Total 1.30 2.15 0.98 1.17 2.53 4.41 5.55 5-52 4.60 18.111

30. The statements made by the defendants between Octobe.tr and

December 1996 that ORtic would generate significant and "r1Jsing"

". natural gas and oil production volume rates, :rong

profitability," earnings and cash flow gains in 1997 and 190 and

that °MC's 1997 gains could be "Dredigted with_high clegrees of

confidence," were false and misleading when made. The true facts,

which were then known to or recklessly disregarded by defendants

based upon their access to internal OEDC data and reports, Were;

• (a) That certain of the wells for which the defendants

projected 1997 production of 5 MMcf/d, including wells in 'south

Timbalier 161 and • Viosca Knoll, had not yet even been drilled, thus

increased production volume rates could not be achieved;

(b) That defendants' forecasts of "rising" produbtion

volume rates lacked a reasonable_ basis and were,.in . fact, :false .

since defendants knew that the production volume rates for 4EDC's

wells that were producing at the time of the IPO we • all

declining;

(c) That defendants had no basis to expect and d'd not

expect that each of the wells OEDC planned to complete in 19-6 and

1997 would generate production of 5 MMcf'd as those results .annot

be predicted accurately under any accepted methods or proce.ures;

• (d) That production from the 4 Mobile 959/960 wel 1.ores

that were then producing were generating dramatically' less

production than the 7 Mmcf/d claimed by defendants;

(e) That OEDC had not successfully completed 92% f the

wells drilled by it as a number of the wells drilled had n• amed

production prior to the Offering without producing material a l - nts

of gas;

(f) That the federal permit process required an ex.-nded

public notice period, which necessarily meant that inci-ased

production volume rates via "rapid ramp up" could not take pl:ce in

early 1997;

(g) That OEDC had not even completed the administHtive

permit process with respect to viosda Knolls wells v1C33, 1 35,

VK122 and VK123 -- the four wells which defendants assured ha. been

drilled in the second half of 3.996 and would commence product'on by

the first quarter of 1997;

(h) That 08DC's Offering price did not fairly rilect.

the Company's growth prospects, business potential or expi-cted

operating reOults,•but rather, was fixed at an arbitra and

unfairly high level and unfairly benefitted OEDC, NOP a the

Individual Defendants; , .

(i) That defendants lacked a reasonable basis for their

positive forecasts and projections regarding OEDC's profitab lity,

revenues and earnings growth during 1997 and 1958 which stat_ments

were, in fact, false as they were inconsistent with the above

negative factors; •

(j) That, as a result of the foregoing, defen.ants'

forecasts that OEDC would quadruple production and generate Itrong

cash flow and EPS growth during 1997 were false, as such go . 11 was

impossible to achieve in light of these undisclosed proble and1(k) That the defendants' forecasts of EPS and cas . flow

per share for OEDC in .1997 of $0.65-$0.75 and $2.50+, respeclively

were false, as the defendants had no reasonable basis to bllieve

and did not in fact believe their statements, as they were

contradicted by the adverse facts set forth above.;

31. In January 1997, the price of OEDC stock beg: r n to

decline, causing the defendants serious concern since they just

completed the IPO and had obtained more than $46 million the -from

based upon their dissemination of false and misleading state -nts.

Consequently, in a concerted effort to avert a total, collari.e inthe inevitable price of OEDC shares and the scrutiny that , ould

result therefrom, the defendants furthered their wrongdoil,g by

orchestrating a "soft landing," i.e,, revealing over time the ruth

about the problems then impacting OEDC.

32. After Strassner and Kiesewetter again pra ided

information regarding OEDC to Garcia, on February 6, 1997, d.rciaissued a report which pliqhtiv reduced 1997 cash flow an'. EPS

estimates to $2.00 and $0.60, respectively, but maintainedi 1998

cash flow and earnings estimates of $4.32 and $1.68, respecti j ely.

1

The report confirmed that after an n extensiv- review sessio with

OEDC management" investors could rest . assured that there ha. been

"nO change" in the Company's operations. The report note. that

althongh minor weather-related delays would push some of

planned production increases into the second half, "ftlh'- bigH

33. On or about March 4, 1997, OEDC issued an "u.!.ate"

designed to allay market concerns about the Company's 1997 an 1998

gas production and earnings. The release announced the adoption by

OEDC of a $38.6 million 1997 capital expenditure budget. The

release stated:

Internally generated _OaSh_ flow toget er witsproceeds from th_e_Comany's initial Public offeriu

Operations Update •

The Company has successfully completed 7 of 8 VioscaKnoll wells it has drilled in recent months: Six of these are awaiting hook UD but have experienced somedelava due to offshore_weather conditions. eauipmentavailabity_arid ac1nini.atrative peimittiq delays. A rigis currently in the field, 3 months later than expected,,connecting the Enron Oil and Gas platform which willprocess and compress two OEDC wells. OEDC's other_Ifiosc Knoll develonments are presentlY_Proaressing on thepriginal coristrctichedule. The Atlantaof1ice ofthe EPA expects to grant_iroduction permits .fC_Tlej:JR_SDViosca litnoll blocks within 60 days-

* * *

"TheAelasihas experienced thiS winter are trustrating but not unusual or substantive the context of our total business," said David Strassner,;president and CEO of the company. The delays willreduce our 1997 cash flow and net income figures, buthave very limited effect on the net present value of our;assets. On the other hand. OEDC is seeina_ drilliriqopportunities unprecedented in its hispary."

34. Based on communications with Strassner and Kiesew,tter,

on March 5, 1997, Garcia issued a report which again prowi.ed a

"Production Outlook Undate." The report reiterated a "Buy" .ating

on OEDC stock, but decreased 1997 caeh flow and EPS estima'-s by

20%. 'Asserting that OEDC would still earn $0.54 per share in11997,

the report stated that ORDC's production estimates were 'Ireing

affected by circumstances nbeyond the company's Control." The

report further stated:

Taking this updated information into account, thtproduction wedge has again slipped down the timeline.!The "Old" and revised numbers are shown below. Note thatQ3 and Q4 estimates remain approximately level; it is th-L

• first half of the year that suffers.•

• "Old" Revised

Production Estimates Production Est ,=te

01:97 17 mmcf/d 12.5 Mmcf/d

02• . 97 33 Mmcf/d 25.5 MMcf/d

Q3:97 42 MMcf/d 44.9 mmcf/d

04:97 52 MMcf/d 52.3 mmcf/d

Plugging the new production forecast into theequation diminishes our 1997 financial estimates. Cas'flow per share estimate for 1997 is being reduced fro'$2.00 to $1.84. The big-picture perspective remainsintact; 1998 cash flow estimate stays at $4.32 per share)

35. On April 1, 1997, OEDC issued a news release conta.'ning

the Company's results for the year ended December 31, 1996. ! OEDC

reported net income of $3.8 million, including a one-time p--tax

gain of $10.8 million from the sale of a partial interest if the

Dauphin Island Gathering System. Commenting on OEDC's opera:one,1

Strasaner stated: • 1

"[Y]ear end results were basically in line with• expectations and do not yet reflect the impetus to growthprovided by the public offering. While the tight rigmarket, difficult offshore winter weather and permittingdelays may slow the progress early in the year, OEDC

new capital is put to work."

• .

36. The positive statements issued by the defendants he ween

February 6, 1997 and April 1, 1997 about there being no chan 2 -" in!

OEDC's operations, the successful completion of Viosca Knoll: ells

and "unprecedented" drilling opportunities were each fals and

mdsleading when made. The true facts, which were then known o or

recklessly disregarded by defendants based upon their acce . s to

confidential non-public information about OEDC, were:

(a) That VK122 still required substantial remedial work

prior to going into production;

(Jo) That the VK123 well was suffering from operat onal

difficulties and flow test problems;

(c) That two of the Company's four Viosca Knolls ells

were tested materially below the defendants' publicly repres nted

production numbers;

(d) That 0BDC's south Timbalier wells were suff-ring

from operational defects, including the B-8 well which had al eady

"watered out" in February 1997 and produced only 7 days that .nth;

(e) That the administrative permit process for the four

wells which had been drilled by defendants in the second haif.of

1996 and which defendants assured investors would co i ence

production by January 1997, had not yet even been completed;!

(f) That OEDC was experiencing substantial cost ove;

in connection with its South Dauphin XI Limited Partnership!

(g) That because 020C had been unable to re- tore

production at the P-6, OEDC was required to take a $3.5 mi lion

write-off;

. . _

(1) That because of (a)-(g) above, the defendants . -d no.

reasonable basis to believe and did not in fact believe tha w OEDC

would increase production in the second half of 1997;

(i) That because of (a)-(g) above, ORDC was a fin.: cial

disaster and the defendants had already agreed to pa l NOP

additional considezation (beyond the $60,000 per year 1_1 was

already paying NOP) to advise OEDC in connection wit the

defendants' planned sale of OEDC or its assets;

(j) That, as a result of the foregoing, OEDC w4=, in

fact, suffering "unusual u and "substantive ,' problems and GIEDC's

forecasts of strong cash flow and earnings growth were the -fOre

false, as such growth was impossible to achieve in light of hese

undisclosed problems; and

(k) That defendants had no reasonable basis to believe

and did not in fact believe their .positive forecasts and

projections regarding OEDC's production volume, cash flo and

earnings growth during 1997 and 1998, which statements well -, in

fact, false as they were inconsistent with the above neg.tive

- factors. . ,

37, On April 18, 1997, OEDC shocked the investment co i ity

and confirmed their prior deceit, admitting that the i.-outh

Timbalier B-8 well had watered out in February 1997, that ChAPC's

Viosca Xnoll wells would encounter "postponed" production, th the

Company's South Dauphin 11 Limited Partnership project hadi been

suffering cost overruns of approximately 20%, and that becaus- the

Company's situation was so dire, OEDC had agreed to pa NOP

additional monies to assist OEDC in engaging a financial a• isor

and/or evaluating a possible sale of the Company. These disas rous

mm

. .

revelations were simply too much for OEDC shareholders to be r and

the price of OEDC shares plummeted by over 50% to $3-$/8 per hare,.

a 70% decline from the price OEDC shares had been sold t. the

public in the Offering.

38. OEDC stock never recovered. On May 16, 1997, OEDC

announced that it had suffered a first quarter net loss of $2.4

million. Thereafter, defendants continued their search for albuyer

to acquire the Company that had gone public just seven .nths

before. In September 1997, defendants announced that OEDC wo id be

acquired for stock of Titan, another company controlled b NGP.

When the male closed, OEDC shareholders received .63 Titan lams

for each OEDC share they held -- effectively receiving $6. ) . per

share for OEDC stook. Defendants had indeed done well, r.-ping

millions for themselves, while public stockholders suffered

enormous losses due to defendants' misrepresentationsl and

concealments.

DEFENDANTS' INSIDER TRADING

39. While defendants were issuing favorable false state ents

about OEDC's business during the Class Period, the Indi 'dual

Defendants and NOP aold 322,804 million shares of OEDC stoc they

owned for proceeds of over $3.8 million to profit fro the

artificial inflation in OEDC's stock price their deliberat and

dishonest acts and fraudulent scheme had created. Notwithsta ding

their access to confidential information as a result of heir

statue as directors, controlling shareholders and/or offic s of

the Company, the Individual Defendants and NOP sold the foll.wing

amounts of OEDC shares at artificially inflated prices i . the

. .

. _

Offering while in possession of material non-public informati Ion and

without disclosing the same. •

SHARES SHAREDErgaDAilT$ SOLD MICR PROCEEDS

Albin 4,554 $12.00 $ 54,648

Kiesewetter 48,850 $12.00 $ 586,200

Natural asPartners 201,150 $12.00 $2,413,800

Straasner 68,250. $12.00 $....819.,000

TOTALSt 322,8114 p3,873.6484

"IRST....cLAI14_7pg AEL;EF

For Vlolation Of §10(b) Of TheExchange Act And Rule 10b-5 Against All Defendants

40. Plaintiffs incorporate 111T39 by reference.

41. Each of the defendants! (a) knew the material, advl-rse,

non-public information about OEDC which was not disclosed; an (b)

participated in drafting, reviewing, and/or approving the

misleading statements, releases, reports and other p

representations of and about °MC.

42. During the Claim Period, defendants know ngly

disseminated or approved the false Statements specified -..cove,iwhich were misleading in that they contained misrepresen.tatio , and

failed to disclose material facts necessary in order to mak, the

statements made, in light of the circumstances under which they

were made, not misleading.

43. Defendants violated §10(b) of the Exchange Act an Rule

10b-5 in that they1(a) gmployed devices, schemes and artifices to def.aud;

(b) Made untrue statements of material facts or o ;tted

to state material facts necessary in order to make statements .-de,

in light of the circumstances under which they were made not

. • misleading; or

• (0) Engaged in acts, practices and a course of bus.'ness

that operated as a fraud or deceit upon plaintiffs and a hers

similarly situated in connection with their purchases of OEDC

common stock during the Class Period.

44. The undisclosed adverse information concealed by d-fen-

dants during the Class Period is the type of information w ich,

because of SEC regulations, regulations of the national =tock

exchanges and customary business practice, is expected by invetors

and securities analysts to be disclosed and is known by co ..rate

officials and their legal and financial advisors to be the t as Of

information which is expected to be and must be disclosed. For

example:

(a) Under Item 303 of Regulation S-IC, promulgated .& the

SEC under the Exchange Act, there is a duty to disclose in periodic

reports filed with the SEC "known trends . or any known de -nds,

commitments, events or uncertainties" that are reasonably lik-ly to

have a material impact on a company's sales revenues, inco - or

liquidity, or cause previously reported financial informatio not

to be indicative of future operating results. 17 C F.R.

§229.303(a)(l)-(3) and instruction 3. In addition to the periodic

reports required under the Exchange Act, management of a ti blic

company has a duty promptly "to make full and prompt announc ents

cif material facts regarding the company's financial conditli'on."

SEC Release No. 34-8995, 3 Fed. Sec. L. Rep. (CCH) 123,120 . , at

-an _

17,095, 17 C.F.R. §241.8995 (October 15, 1970). The SE I has

repeatedly stated that the anti-fraud provisions of the f .eral

securities law, which are intended to ensure that the inveting

public is provided with "complete and accurate information

companies whose securities are publicly traded," apply t. all

public statements by persons speaking on behalf of publicly t,aded

companies "that can reasonably be expected to reach invest° . and

the trading markets, whoever the intended primary audience.'I SEC

Release No. 33-6504, 3 Fed. Sec. L. Rep. (CCH) 123,120B, at 17,096,

. 17 C.F.R. §241.20560 (January 13, 1984). The SEC has emphai2ed

that "fi]nvestore have legitimate expectations that • .lic

companies are making, and will continue to make, prompt.discl.sure

of significant corporate developments." Sharon Steel Coro. SEC

Release No. 18271, [1981-1982 Transfer Binder] Fed. Sec. L. Rep.

(CCH) 183,049, at 84,618 (November 19, 1981); and

(b) Schedule D of the National Association of Secur:ties

Dealers ("NASD") Manual, which governs companies whose secuties

are included in the NASDAQ requires a NASDAQ company Co 'make

prompt disclosure to the public through the press of any mat rial

information that may affect the value of its securities or i flu-

ence investors' decisions." NASD Manual, Schedule D, Pa XX, .

§1(c)(13) [11803(c)(13)].

45. Plaintiffs and the Class have suffered damages in hat,

in reliance on the integrity of the market, they paid artific:ally

inflated prices for OEDC stock. Plaintiffs and the Class wou - not

have purchased OBDC stock at the prices they paid, or at al l , if

they had been aware that the market prices had been artific.'ally

. and falsely inflated by defendants' misleading statements.

SECOND CLAIM FOR RELIEF -

For Violation Of Sal(a) Of The Exchange ActAgainst All Defendants

46. Plaintiffs incorporate 111-45 by reference.

47. Strassner, Kiesewetter, Albin and NOP acteY as

controlling persons of OEDC within the meaning of §20(a) j the

Exchange Act. Defendants Strassner, Kiesewetter and Albi l , by

virtue of their positions as directors and/or at' senior offic rs of

OEDC, directly or indirectly controlled MC. Defendants Alb and

NGP controlled OEDC through their beneficial ownership of ov 47%

of OEDC's shares at the time of the Offering. Defendan . NGP

controlled Albin, who functioned as one of NGP's appj.'nted

representative on the OEDC board. These defendants had the .ower

and authority to cause OEDC to engage in the wrongful co duct

complained of herein. OEDC controlled each of the Indimi'dual

Defendants and all of its employees.

48. ay reason of such wrongful conduct, Strasi-ner,

Kieaewetter, Albin, NGP and OEDC are liable pursuant to §20q . ) of

the Exchange Act. As a direct and proximate result of !hese

defendants' wrongful conduct, plaintiffs and the other memb s of

the Class suffered damages in connection with their purchas l, s of

OEDC common stock during the Class Period.

CLASS ACTION ALLEGATIONS

49. Plaintiffs bring this action as a class action pu .uant

to Federal Rules of Civil Procedure 23(a) and (b) (S) on beh, f of

all persons who purchased OEDC stock during the Class Period (the

"Class"). Excluded from the Class are defendants herein, me 'era

of their immediate families, any entity in which a defendant as a

controlling interest, and the legal representatives, eirs,

successors-in-interest or assigns of any excluded party.

SO. The members of the Class are so numerous that join . er of

all members is impracticable. The dispoSitiOn of their cla i ms in

a class action will provide substantial benefits to the parti l.s and

the Court. As of November 13, 1997, the Company had more th'n 8.71million shares of common stock outstanding, owned by hundre . s of

shareholders.

51. There is a well-defined commonality of interest the

questions of law and fact involved in this case. The queati .. a of

law and fact common to the members of the Class which predo 'nate

over questions which may affect individual Class members i r lude

the following:

(a) Whether the federal securities laws were viola .ed by

defendants;

(b) Whether defendants omitted and/or misrepre4 nted

material facts;

(c) Whether defendants' statements omitted ma-rial

facts necessary to make the statements made, in light Oi the

circumstances under which they were made, not misleading;

(d) whether defendants knew or had reasonable grou .s to

believe that their statements were false and misleading;

(e) Whether the price of OEDC stock was artific'ally

inflated during the Class Period; and

(f) The extent of damage sustained by Classmembe- and

the appropriate measure of damages.

52. Plaintiffs' claims are typical of those of the !ClasS

because plain.tiffs and the Class sustained damages from defen ants'

wrongful conduct.

53. Plaintiffs will adequately protect the interests o f the

Class and have retained counsel who are experienced in class -.ction

securities litigation. Plaintiffs have no interests which co 'flit

with those of the Class.

54. A class action is superior to other available methoos for

the fair and efficient adjudication of this controversy.

EMATUTORY SAFE HARBOR

55. The statutory Safe harbor provided for forward-lidooking

statements under certain circumstances does not apply the

allegedly false forward-looking statements pleaded in this

Complaint. None Of the forward-looking statements pleaded at 122-

2, 28, 29, 32, 34 and 35 were identified as a "forward-loking

'statement" when made. Furthermore, none of the forward-1.J.oking

statements pleaded herein were accompanied by a statement that .

actual results n could differ materially from those projected' nor

were they accompanied by meaningful cautionary State . -nts

identifying important factors that could cause actual resul s to

differ materially from those in the forward-looking stat -nts

accompany those forward-looking statements. In any event, ea h of

the forward-looking statements alleged herein was authorized!sy an

executive officer of OEDC and was actually known by each o . the

Individual Defendants to be false when made.

BASIS OF AWJEGATIONS [

56. Because the 15SLIZA. (621D(c) of the Exchange Act (15 1.1. S.C.

§78u-4(c))) requires complaints to be pleaded in conformanC0 with

••

Federal Rules of Civil Procedure 11, plaintiffs have alleg,. the

.foregoing based upon their knowledge or the investigation of:theircounsel, which included a review of OEDC's SEC filings, secu'ities

analysts reports and advisories about them, selling s -ets,

discussions with consultants, and, pursuant to Rule 11( )(3),believe that,' after reasonable opportunity for disc ery,

substantial evidentiary support will likely exist fox theallegations set forth at 1112, 20, 21,'30 and 36.

PRAYER FOR RELIEF

WHEREFORE, plaintiffs pray for judgment as follows:

1. Declaring this action to be a proper class a tion

pursuant to Rules 23(a) and (b)(3) of the Federal Rules of ivil

Procedure on behalf of the Class defined herein;

2. Awarding plaintiffs and the members of the Class co .en-

satory damages, including rescissory damages, where applicati,le;

3. Awarding plaintiffs and the members of the lass

pre-judgment and post-judgment interest, as well as reaso able

attorneys' fees, expert witness fees and other costs;

4. Awarding extraordinary, equitable and/or injun tive

relief as permitted by law, equity and federal statutory provii-ions

sued hereunder, including rescission, the imposition 9f a

constructive trust upon the proceeds of the insider tral.ing,

pursuant to Rules 64, 65, and any appropriate state law reme.ies;

and

5. Awarding such other relief as this Court may deem just

and proper.

JURY DEMAND

Plaintiffs demand a trial by jury.

DATED: February 6, 1990GREENBERG PEDEN SIEGMYER1

& OSHMAN, P.C. •ROGER B. GREENBERGState Bar No. 08390000DAVID E. SHARP

• State Bar No. 18115700 •

ROGER B. GREENBERG'

Tenth Floor12 Greenway PlazaHouston, TX 77046Telephone; 713/627-27201

MILBERG WEISS BERSHADHYNES EL LERACH LLP

WILLIAM S. LERACHALAN SCHULMAN

• HELEN J. HODGESDARREN J. RoBBIksKATHERINE L. BLANCK

•

4111.; .AA

-.14 ALAN IV' F.

600 West Broadway, Suite 11800San Diego, CA 92101Telephone: 619/231-1058!

BONNETT, FAIRBOURN, FRIEDMAN& EALINT, P.C.

FRANCIS J. BALINT, JR. .-4041 N. Central AvenueSuite 1100 1

Phoenix, AZ 85012-3311 !Telephone:• 602/274-1100

Attorneys for Plaintiffsl

OFFSHOREV600416.CP1