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SUPREME COURT OF THE STATE OF NEW YORK

COUNTY OF NEW YORK

HIGHMOUNT OLYMPIC FUND, LLC,

Plaintiff,
Index No. __________
-against-
COMPLAINT
PIPE EQUITY PARTNERS, LLC, PIPE SELECT FUND,
LLC, and HULL CAPITAL MANAGEMENT, LLC,

Defendants.

Plaintiff Highmount Olympic Fund, LLC (“Highmount”), for its Complaint

herein, upon personal knowledge as to matters relating to itself and upon information and belief

as to all other matters, alleges as follows against Defendants PIPE Equity Partners, LLC (“PIPE

Equity”), PIPE Select Fund, LLC (“PIPE Select”) (together with PIPE Equity, the “PIPE

Funds”), and Hull Capital Management, LLC (“Hull”).

NATURE OF ACTION

This is a classic case of “buyers’ remorse” on the part of Defendants, who now —

in an unjustified and lawless manner — seek to break the express agreement between the parties

and thereby deprive Highmount of its legitimate interest in two investment funds, PIPE Equity

and PIPE Select, which are managed by Hull. Under the direction of Hull, PIPE Equity was a

significant investor in another fund, AJW Qualified Partners II, LLC (“AJW”), and sought to

increase its stake in AJW even further in early 2009. To that end, in January 2009, PIPE

Equity acquired Highmount’s interest in AJW — which was significantly smaller than PIPE

Equity’s own interest at the time — in exchange for Highmount obtaining an interest in the PIPE

Funds. The purchase price was based upon the value of Highmount’s AJW interest as

determined and communicated by AJW as of December 31, 2008, and, consistent with fund
industry practice, was “subject to any adjustments arising from AJW’s annual audit”, which had

not been completed. Defendants, however, have not waited for AJW’s audit to be completed, let

alone any principled re-valuation based on audit results. Instead, they simply have proclaimed

— in breach of both contractual and fiduciary duties — that they unilaterally are forcing

Highmount out of the PIPE Funds, unwinding the parties’ transaction, and segregating for

Highmount its originally purchased AJW interest. Despite repeated requests, Defendants have

also refused for many months to provide to Highmount the financial information that Highmount

is contractually obligated to receive, and that is provided to all other investors, concerning its

investment in the PIPE Funds. No lawful, legitimate basis exists for Defendants to take such

unilateral action in contravention of Highmount’s rights as a participant in the PIPE Funds.

Defendants are not only liable to Highmount for actual and punitive damages for their

misconduct, but immediate injunctive relief is warranted to address the irreparable harm to

Highmount from its exclusion as a participant in the ongoing activities of the PIPE Funds and the

effect of these actions on Highmount’s ongoing business operations.

THE PARTIES

1. Highmount is a limited liability company organized under the laws of the

State of Delaware, with its registered office at 12 East 49th Street, New York, New York, 10017,

with its principal place of business located at the same address. Highmount is an investment

fund that invests capital from members under the direction of its manager, Highmount Capital,

LLC (“Highmount Capital"), which exercises authority, among other things, to make investment-

related decisions, to take legal action, and otherwise administer business affairs on behalf of

Highmount.

2. PIPE Equity is a limited liability company organized under the laws of the

State of Delaware, with its registered office at 350 Madison Avenue, 11th Floor, New York, New

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York 10017, and with its principal place of business located at the same address. PIPE Equity is

an investment fund that invests capital from members under the direction of its manager Hull.

3. PIPE Select is a limited liability company organized under the laws of the

State of Delaware, with its registered office at 350 Madison Avenue, New York, New York

10017, and with its principal place of business located at the same address. PIPE Select is an

investment fund that invests capital from members under the direction of its manager Hull.

4. Hull is a limited liability company organized under the laws of the State of

Delaware, with its registered office at 350 Madison Avenue in New York, New York, 10017,

and with its principal place of business located at the same address.

JURISDICTION AND VENUE

5. Jurisdiction is proper as each Defendant resides in the state of New York.

6. Venue is proper in this county pursuant to CPLR § 503(a).

FACTUAL BACKGROUND

A. Overview of Relationship between Parties


7. At the end of 2008, PIPE Equity, under Hull’s management, held a

substantial stake in AJW. Based on its own investment strategy and plan, PIPE Equity in

conjunction with Hull was desirous of increasing its holding in AJW. At the time, Highmount

held an interest in AJW that was smaller than the interest that PIPE Equity held. In furtherance

of its investment strategy, PIPE Equity negotiated a transaction with Highmount in order to

acquire Highmount’s interest in AJW. For their part, Hull and PIPE Equity had sophisticated

knowledge about AJW independent of Highmount.

8. Highmount and PIPE Equity entered into the “Agreement of Assignment

and Transfer” (the “Agreement”) effective as of January 1, 2009. Under the Agreement,

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Highmount contributed and transferred its right, title and interest in AJW to PIPE Equity “in

exchange for a membership interest in the Assignee [PIPE Equity].” As a material part of the

bargain between the parties, the Agreement establishes that the value of the AJW interest being

acquired by PIPE Equity (the “Contributed Property”) is based on AJW’s own valuation of the

interest at the time as communicated by AJW. Specifically, the agreement provides that the

AJW interest or Contributed Property being acquired by PIPE Equity has a value equal to

$4,629,500, and is “(based on the unaudited value of the Assignor’s [Highmount’s] interest in

AJW Qualified Partners, LLC (“AJW”) as of December 31, 2008), subject to any adjustments

arising from AJW’s annual audit” for 2008. The provision making the valuation “subject to” a

future adjustment if, and only if, warranted thereafter by specific AJW annual audit results, is

consistent with custom and practice in the fund industry where audit findings take varying times

to complete. The Agreement imposes no deadline by which AJW’s annual audit will be issued.

Nor does the Agreement require an AJW annual audit to be issued as a condition of the

enforceability of, or performance under, the Agreement.

9. The valuation set forth in the Agreement was based on valuation data

received by both parties from AJW, which had issued a completed audit for 2007 that itself

provided the parties with financial data concerning AJW.

10. In recognition that PIPE Equity was a member of AJW prior to the

execution of the Agreement and therefore had access to information from, and direct knowledge

of AJW, the Agreement accordingly states:

The Assignee [PIPE Equity] is a sophisticated purchaser who of its own


accord elected to accept the transfer of the Contributed Property. The
Assignee hereby acknowledges and affirms that Assignee is a current
investor in the Company and has access to extensive information about the
Company. The Assignee further acknowledges and affirms that it has
made its own due diligence investigation into the Company [AJW] and

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acknowledges and affirms the sufficiency thereof. In entering into this
Assignment Agreement, Assignee has not been induced by nor has it
relied upon any representations, warranties or statements, whether express
or implied, made by Assignor [Highmount] or any agent, employee or
other representative of the Assignor or any broker or other person
representing or purporting to represent Assignor, whether or not any
representations, warranties or statements were made in writing or orally,
other than those set forth herein.

11. The Agreement contains no provision that provides Hull with the

unilateral right to unwind the transaction and redeem Highmount’s interest in PIPE Equity.

12. After a restructuring of PIPE Equity effected by Hull in or around July

2009, Highmount’s interest in PIPE Equity was divided between the PIPE Funds. At around the

time of the restructuring, a cash distribution was made to Highmount as a result of the

transaction (as well as to all other investors who elected the same restructuring option as

Highmount), which confirmed the parties’ performance under the Agreement and the validity of

Highmount’s interests in the PIPE Funds.

B. Without Basis or Justification, Hull Takes Steps to Unwind the Parties’ Transaction
and Redeem Highmount’s Interest in the PIPE Funds

13. By March 2010, Defendants sought to take advantage of the absence of a

completed audit of AJW as an excuse to force Highmount out of the PIPE Funds. In the course

of several communications in which Hull claimed to Highmount Capital that it could unwind the

transaction and in essence extinguish Highmount’s interest in the PIPE Funds on the grounds that

no AJW audit had yet been issued for 2008, Highmount through its manager made clear that Hull

and the PIPE Funds had no lawful basis for such action. For example, Highmount objected to

Hull’s threat in a letter dated March 17, 2010 to Defendants:

Pursuant to the Agreement, the agreed-upon valuation of the Contributed


Property was U.S.$4,629,500, based on AJW’s unaudited financial
statements, as set forth in the Agreement. This valuation was subject to
adjustment only if AJW’s annual audited financial statement for 2008
differed from the 2008 unaudited financial statements used for the

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purposes of determining the value of the Contributed Property pursuant to
the Agreement. The fact that no audited financial statements have been
issued confirms that the agreed-upon valuation under which Olympic
received its interest in PIPE Equity and its subsequent interest in both of
the Hull Funds, stands and is not currently subject to adjustment. Hull has
no grounds whatsoever to rescind the Agreement or otherwise interfere in
any way with Olympic’s interest in the Hull Funds.

14. Without addressing the merits of Highmount’s position, Hull reiterated its

intention to unwind the transaction effected by the Agreement by letter dated March 29, 2010.

According to the letter, Hull stated that it planned to cause the AJW interest contributed to PIPE

Equity by Highmount to be segregated from the investment portfolio of PIPE Equity, thereby

extinguishing Highmount’s participation in the PIPE Funds. Recognizing the illegality of this

threat, Hull alternatively stated that, apart from formally rescinding the Agreement, it would

nonetheless seek to reach a similar result by unilaterally redeeming Highmount’s interest in PIPE

Equity, effected by “segregat[ing] and [holding]” Highmount’s original AJW interest. In

response to Hull’s March 29, 2010 letter to Highmount, Highmount again objected to Hull’s

threat in an April 2, 2010 letter to Defendants:

In your letter, Hull Capital Management, LLC (“Hull”) threatens (i) to rescind the
Agreement of Assignment and Transfer between Highmount Olympic and PIPE
Equity Partners, LLC (“PIPE Equity”), dated as of January 1, 2009 (the
“Assignment Agreement”), or (ii) to involuntarily redeem in kind Highmount
Olympic from PIPE Equity as of April 3, 2010. In either case, it appears that Hull
intends to segregate the interests in AJW Qualified Partners II, LLC (“AJW”)
contributed by Highmount Olympic under the Assignment Agreement and hold
them in trust for Highmount Olympic’s benefit. For the reasons set forth below,
Highmount Capital and Highmount Olympic demand that you refrain from
pursuing either course of action, as each is unlawful. The Assignment Agreement
is an enforceable, fully executed contract under which both Highmount Olympic
and PIPE Equity performed.

In the same letter of April 2, 2010, Highmount further noted that Hull’s March 29, 2010 letter

omitted the fact that PIPE Equity was a member of AJW prior to the execution of the Agreement

and that “therefore, each party had access to the same information from AJW.”

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15. During the period since Defendants have been seeking to exclude

Highmount from its rightful participation in the PIPE Funds, Defendants have denied Highmount

— in disregard of contractual obligations —basic financial information about its interest in the

PIPE Funds, including their performance. To that end, Defendants also have terminated

Highmount’s access to information available on a website used by other investors. Highmount’s

repeated requests to Defendants for financial information have been to no avail, which is

significantly detrimental to Highmount’s ability to carry out its own business affairs.

16. As part of Defendants’ wrongful scheme, distributions from the PIPE

Funds have been made to investors other than Highmount. For example, in January 2010,

Highmount was entitled to receive cash distributions in excess of $315,000, but Defendants

failed to make any payments to Highmount while other investors received distributions.

17. Although Defendants have sought to excuse their misconduct on the

grounds that the AJW audit remains outstanding and public disclosures have been made about

alleged “kick backs” and other activities by AJW personnel subject to governmental

investigation, no circumstances have occurred that justify Defendants’ unilateral action to

extinguish Highmount’s interest in the PIPE Funds. Defendants have never shown that any

alleged activities that have been subject to investigation have a bearing, let alone a material

bearing, on the value of the AJW interests acquired from Highmount by the PIPE Funds.

18. On July 9, 2010, Hull audaciously sent an email to Highmount that it was

“moving forward” in implementing its threats to usurp Highmount’s interest in the PIPE Funds.

Immediately, Highmount objected yet again in writing and stated that Hull’s conduct in

unilaterally unwinding the transaction and extinguishing Highmount’s interest in the PIPE Funds

is unlawful and in breach of the Defendants’ various duties. But Defendants have refused to

alter their unlawful course of action.

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C. Highmount Will Be Irreparably Harmed Absent Injunctive Relief

19. In the face of Defendants’ unlawful activities to extinguish Highmount’s

interest in the PIPE Funds, Highmount faces irreparable injury. For example, without injunctive

relief, Highmount faces the risk of not being able to fully account for its own interest in the PIPE

Funds. Thus, as investors enter and exit Highmount’s investment portfolio in the ordinary course

of business, they are redeeming and receiving interests without a confirmed participation in, and

important financial information (including valuation information) about their indirect investment

in the PIPE Funds. This could affect Highmount’s accounting and inventory, causing ongoing

harm resulting from Hull’s actions.

20. To its ongoing detriment, Highmount was required to write down its PIPE

Funds investments due to the uncertainty created by Defendants’ wrongful actions. Except for

Defendants’ misconduct, this accounting writedown is otherwise unwarranted and has affected

Highmount’s ability to record and collect certain fees, to proceed to completion with its own

audit activities, and to issue certain fund-related tax and other information to Highmount

investors.

21. If allowed to proceed, Defendants’ actions to extinguish Highmount’s

interest in the PIPE Funds would be difficult – if not impossible – to fully remedy. Thus,

Highmount could not be returned fully by monetary damages alone to the position it previously

occupied – the very position for which the parties bargained.

FIRST CAUSE OF ACTION


(Declaration of Rights Against All Defendants)

22. Plaintiff repeats and re-alleges each and every allegation contained in

paragraphs 1-21 above as if fully set forth herein.

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23. The value of Highmount’s membership interest in the PIPE Funds is based

on the value of the AJW interest contributed to PIPE Equity by Highmount as of January 1, 2009

(known as the Contributed Property), which the parties agreed was $4,629,500 as of

December 31, 2008. No event has occurred that has altered the value of the Contributed

Property as of December 31, 2008, and its valuation at such amount for purposes of

administering Highmount’s interest in the PIPE Funds.

24. Accordingly, the Court should declare that Highmount has a continuing

interest in the PIPE Funds, based on the value of its interest in AJW acquired by the PIPE Funds

under the Agreement, at the valuation of $4,629,500 as of the time of the effective date of the

Agreement.
SECOND CAUSE OF ACTION
(Breach of Contract Against the PIPE Funds)

25. Plaintiff repeats and re-alleges each and every allegation contained in

paragraphs 1-24 as if fully set forth herein.

26. The Agreement is an enforceable, fully executed contract under which

both Highmount and PIPE Equity performed. In extinguishing the interest of Highmount in the

PIPE Funds, PIPE Equity and PIPE Select have failed to comply with the terms of their

contractual obligations under the Agreement, thereby preventing Highmount from obtaining the

rights for which it bargained. The failure and refusal to provide financial information to

Highmount is in further breach of their obligations. In addition, the failure to make distributions

and/or other payments to Highmount and to treat Highmount discriminatorily constitutes

separate contractual breaches.

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27. Defendants have no legal or factual basis to justify Hull’s unilateral action

of extinguishing Highmount’s interest in the PIPE Funds and denying distributions and requested

financial information to Highmount.

28. As a direct result of their unlawful actions, PIPE Equity and PIPE Select

are liable for damages in an amount to be determined at trial, but which is believed to be in

excess of $5,000,000.
THIRD CAUSE OF ACTION
(Tortious Interference with Contract Against Hull)

29. Plaintiff repeats and re-alleges each and every allegation contained in

paragraphs 1 though 28 as if fully set forth herein.

30. Hull intentionally caused the interest of Highmount to be extinguished

from the PIPE Funds, thereby preventing Highmount from obtaining the rights for which it

bargained. Among other things, Hull’s conduct has prevented Highmount from obtaining

distribution payments and financial information to which Highmount is entitled under the

Agreement.

31. Hull’s wrongful actions toward Highmount were a significant factor in

PIPE Equity’s breach of the Agreement. Hull has no legitimate justification for acting to

extinguish Highmount’s interest in the PIPE Funds.

32. As a direct result of its unlawful actions, Hull is liable for damages in an

amount to be determined at trial, but which is believed to be in excess of $5,000,000.

FOURTH CAUSE OF ACTION


(Breach of Duties Against Hull)

33. Plaintiff repeats and re-alleges each and every allegation contained in

paragraphs 1-32 as if fully set forth herein.

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34. As manager, Hull assumed and is subject to continual fiduciary and other

extra-contractual obligations to Highmount. Hull breached its fiduciary duty to Highmount by

acting in a manner that places its own and other interests above the interests of Highmount and

thereby is depriving Highmount of its rightful value of interests and benefits.

35. Should Highmount — which has been treated discriminatorily by Hull —

not have its interest in the PIPE Funds fully restored, then Highmount will be deprived of its

value of the interest in the funds, which it bargained for and received pursuant to the Agreement.

36. As a direct result of its unlawful actions, Hull is liable for damages in an

amount to be determined at trial, but which is believed to be in excess of $5,000,000.

FIFTH CAUSE OF ACTION


(Breach of the Implied Covenant of Good Faith and Fair Dealing Against All Defendants)

37. Plaintiff repeats and re-alleges each and every allegation contained in

paragraphs 1 through 36 as if fully set forth herein.

38. Defendants’ unwinding of the transaction and extinguishment of

Highmount’s interest in the PIPE Funds — for no legitimate reason — has caused direct and

substantial financial detriment to Highmount and to its investors, both of whom rightfully

accepted the Agreement as creating binding legal obligations. As such, Defendants have failed

to act in good faith and have engaged in unfair dealing with Highmount.

39. As a direct result of its unlawful actions, Hull is liable for damages in an

amount to be determined at trial, but which is believed to be in excess of $5,000,000.

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SIXTH CAUSE OF ACTION
(Injunctive Relief Against All Defendants)

40. Plaintiff repeats and re-alleges each and every allegation contained in

paragraphs 1-39 as if fully set forth herein.

41. As a result of the extinguishment of Highmount’s membership interest in

the PIPE Funds – which it would have possessed but for Defendants’ illegal actions – irreparable

harm will occur, as there is an overwhelming chance that unwinding the transaction effected by

the Agreement would not fully return Highmount to the position it previously occupied. A

failure to do so threatens to materially interfere with Highmount’s ability to fully account for its

interest in the PIPE Funds to its own investors and provide various forms of basic information to

investors necessary to manage both the fund’s affairs and individual investors’ own affairs.

Defendants’ misconduct is causing irreparable harm to Highmount, as its investors either redeem

from or subscribe for interests in Highmount in the ordinary course, because the value of its

interest in the PIPE Funds is not able to be fully accounted for.

42. Defendants’ ongoing misconduct also jeopardizes Highmount’s ability to

take action with respect to its interest in the PIPE Funds, including to redeem or seek to sell its

interest in accordance with its rights in the Funds’ governing documents. Highmount thus faces

irreparable harm from being prevented from exercising these rights in a timely manner.

43. As such, the balance of the equities overwhelmingly favors Highmount.

The requested equitable relief is necessary to force Defendants to meet their contractual and

fiduciary obligations. Accordingly, the Court preliminarily and permanently should enjoin each

of the Defendants and any agents or persons acting on their behalf from taking any actions to

extinguish Highmount’s interest in the PIPE Funds or otherwise interfere with Highmount’s

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continued participation in the PIPE Funds on the terms set forth in the Agreement, and without

adjustment prior to any completed AJW audit result for 2008 as stated in the Agreement.

PRAYER FOR RELIEF

WHEREFORE, Plaintiff demands judgment against Defendants as follows:

(a) On the First Cause of Action, a declaration of rights as to all Defendants

declaring that Highmount has a continuing membership interest in the PIPE Funds, which

is based on the value of the AJW interest contributed by Highmount to the PIPE Funds as

set forth in the Agreement, at the valuation of $4,629,500 as of the effective date of the

Agreement;

(b) On the Second Cause of Action, compensatory damages against the PIPE

Funds in an amount to be proven at trial but believed to be not less than $5,000,000, plus

interest;

(c) On the Third Cause of Action, compensatory damages against Hull in an

amount to be proven at trial but believed to be not less than $5,000,000, plus interest;

(d) On the Fourth Cause of Action, compensatory damages against Hull in an

amount to be proven at trial but believed to be not less than $5,000,000, plus interest;

(e) On the Fifth Cause of Action, compensatory damages again all Defendants

in an amount to be proven at trial but believed to be not less than $5,000,000, plus

interest;

(f) On the Sixth Cause of Action, equitable relief in the form of a preliminary

and permanent injunction ordering all Defendants and any agents or other persons acting

on their behalf from taking any action to unwind, extinguish or interfere with

Highmount’s continuing PIPE Equity’s interest in the PIPE Funds on the terms set forth

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in the Agreement and without adjustment prior to any completed AJW audit results for

2008 as stated in the Agreement;

(g) An award of attorneys’ fees and costs against Defendants to the fullest

extent of the law;

(h) An award of punitive damages against Defendants to the fullest extent of

the law; and

(i) Granting such other and further relief as the Court deems appropriate.

Dated: New York, New York


July 27, 2010 /s/ Hal S. Shaftel
Hal S. Shaftel
Reginald D. Lucas
CADWALADER, WICKERSHAM & TAFT LLP
One World Financial Center
New York, New York 10281
Telephone: (212) 504-6680
Facsimile: (212) 504-6666
Hal.Shaftel@cwt.com

Attorneys for Plaintiff Highmount Olympic Fund,


LLC.

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