Narragansett

"ADVICE: Ifyou've raised capital with a public offering, be certain that you review frequently your statement of business purposes to avoid the careless mistake we made in the Bevis case. After the derivative action was brought, we even went to the expense of calling a special meeting of the Narragansett stockholders to give us retroactive approval of the transaction. Even though we got overwhelming approval, the court refused to dismiss the case. If we had not obtained the assistance of Abe Pomerantz in dealing with Mr. Garwin, this action could have been far more expensive. If we had not settled the case, the directors and officers could have been found guilty of hav- ing violated one of the i(Stated Business Purposes" in the original registration statement, and would have been required to pay the company $2 million. The Bevis investment was a dilly! In derivative suits it is usually advisable to make a reasonable court-ap- proved settlement that permits the corporate defendants to have the company reimburse them for all legal expenses. Otherwise you run the risk of having to pay not only the judgment but also all your legal expenses out ofyour own pocket."

"someone like Narragansett set up a new corporation to buy all of their assets and liabilities for tax basis net worth, they can reinvest in the same enterprise as minority stockholders, and manage it for the new owners. They can have "a piece of the action" with a relatively small investment in a highly leveraged* company, and yet get complete liquidity in their original business."

"It is interesting to look back and see how Narragansett became so heavily involved in many situations by repeatedly putting up more and more money without realizing that we would ultimately reach our maximum before the venture was successful."

"ADVICE: When you invest in a situation that really gets into difficulty, it is far better to take the first loss instead of struggling as we have in Bevis for fifteen years to try to recoup our original investment. As a result of our attempt to make a success out of this one bad investment, Narragansett invested an ad- ditional $2,340,000 and Narragansett stockholders, through subscribing for rights at $10 per share, put up another $1,000,000 of equity capital. The stockholders, creditors, and Narragansett lost close to $10,000,000 in Bevis. We should have written off that $1,100,000 loan when the company went into receivership. The grief we are going through is unbelievable!"