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`INDEX NO. 654056/2019
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`Plaintiff,
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`SUPREME COURT OF THE STATE OF NEW YORK
`COUNTY OF NEW YORK
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`GMX TECHNOLOGIES, LLC,
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`f/k/a KGS AGRO GROUP, LLC,
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`-against-
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`PEGASUS CAPITAL ADVISORS, L.P., a foreign entity,
`and THE LEIBER GROUP, INC., a foreign corporation,
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`Defendants.
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`TO THE ABOVE-NAMED DEFENDANTS:
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`Index No.:
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`SUMMONS
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`YOU ARE HEREBY SUMMONED, to answer the Verified Complaint in this action
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`and to serve a copy of your Answer, or if the Verified Complaint is not served with this
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`Summons, to serve a Notice of Appearance, on the Plaintiffs’ attorneys within twenty (20) days
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`after the service of this Summons, exclusive of the date of service (or within thirty (30) days
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`after the service is complete if this Summons is not personally delivered to you within the State
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`of New York); and in case of your failure to appear or answer, judgment will be taken against
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`you by default for the relief demanded in the Verified Complaint. The action will be heard in the
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`Supreme Court for the State of New York in the County of New York. Venue is proper pursuant
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`to C.P.L.R. Section 501.
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`Dated: New York, New York
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`July 15, 2019
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`Zumpano Patricios & Popok, PLLC
`Attorneys for the Plaintiff
`100 Wall St – 10th Fl.
`New York, New York 10005
`(212) 542-2564
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`By: /s/ Michael S. Popok
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` Michael S. Popok
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`FILED: NEW YORK COUNTY CLERK 07/15/2019 06:15 PM
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`INDEX NO. 654056/2019
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`RECEIVED NYSCEF: 07/15/2019
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`DEFENDANTS’ ADDRESSES:
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`PEGASUS CAPITAL ADVISORS, L.P.
`C T Corporation System
`28 Liberty Street
`New York, New York 10005
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`THE LEIBER GROUP, INC.
`The Corporation Trust Company
`Corporation Trust Center 1209 Orange Street
`Wilmington, Delaware 19801
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`FILED: NEW YORK COUNTY CLERK 07/15/2019 06:15 PM
`NYSCEF DOC. NO. 1
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`INDEX NO. 654056/2019
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`RECEIVED NYSCEF: 07/15/2019
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`Plaintiff,
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`Index No.
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`VERIFIED COMPLAINT
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`-against-
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`SUPREME COURT OF THE STATE OF NEW YORK
`COUNTY OF NEW YORK
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`GMX TECHNOLOGIES, LLC,
`f/k/a KGS AGRO GROUP, LLC,
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`PEGASUS CAPITAL ADVISORS, L.P., a foreign entity,
`and THE LEIBER GROUP, INC., a foreign corporation,
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`Defendants.
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`---------------------------------------------------------------------x
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`Plaintiff GMX Technologies, LLC, f/k/a KGS Agro Group, LLC (“Plaintiff” or “GMX”),
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`by and through its undersigned counsel, hereby sues Defendants Pegasus Capital Advisors, L.P.
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`(“Pegasus”) and its subsidiary, The Leiber Group, Inc. (“Leiber,” and collectively, the “Pegasus
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`Defendants”) on this Verified Complaint, for a declaratory judgment and injunctive relief, and
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`for breach of contract, tortious interference, and promissory estoppel, seeking resulting damages
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`in excess of $75 million, and alleges as follows:
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`I.
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`NATURE OF THE ACTION
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`1.
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`This case arises out of a private equity firm’s (the Pegasus Defendants) attempts
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`to take control of an agricultural products company (GMX) through the improper exercise of a
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`Put Option (defined below) concerning Leiber’s 12.5% minority stake in Plaintiff, all in violation
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`of the parties’ operating agreement and prevailing Delaware law. Left unchecked by this suit,
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`the Pegasus Defendants will succeed in implementing their nefarious strategy to raise and invest
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`no money in GMX, rendering GMX prone and financially vulnerable, and then to improperly
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`exercise a contract provision that they claim compels GMX to pay them $8 million to buy-out
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`their interest. The Pegasus Defendants seek money that GMX does not have because of the
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`Pegasus Defendants’ failures to raise any capital for the company.
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`2.
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`Consequently, the Pegasus Defendants, through improper means including but not
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`limited to breach of contract, misrepresentations, and tortious interference, are attempting to
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`leverage their slim minority stake to effectively take over GMX. By these improper acts, the
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`Pegasus Defendants have also directly and proximately caused GMX tens of millions of dollars
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`in damages. GMX brings this action to be made whole and to be compensated for the damages it
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`has suffered at the Pegasus Defendants’ hands.
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`II.
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`THE PARTIES, JURISDICTION, AND VENUE
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`3.
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`Plaintiff GMX is a Delaware company with its principal place of business in
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`Florida. GMX is an agricultural supplement company that develops and distributes organic, non-
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`toxic crop treatment products, including Greenamax, a natural, sustainable product, which
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`enhances agricultural yield growth. GMX’s main product is a non-toxic, crop yield enhancing
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`technology based on proprietary and patented nano-molecular biosciences research. It is used in
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`conjunction with nearly all crops, including grains, vegetables, and fruits.
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`4.
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`GMX is owned and controlled by Arnold Simon (“Mr. Simon”), a leading
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`business executive in the “agro” products industry, and a well-known leader in the apparel
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`industry by virtue of his prior ownership and successful management of the Calvin Klein Jeans
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`brand.
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`5.
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`Defendant Pegasus is a Delaware company that maintains and operates an office
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`at 850 Third Avenue, New York, New York. Pegasus is registered in New York to do business
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`as a foreign entity, and is owned and controlled by Craig Cogut (“Cogut”).
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`6.
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`According to its website, Defendant Pegasus claims to be a “private alternative
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`asset management firm providing strategic growth capital to middle-market companies focused
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`on sustainability and wellness sectors, with over $1.5B in assets under management, comprised
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`of 5 private equity funds,” which, upon information and belief, includes its “portfolio company,”
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`Leiber. It is through Leiber that Pegasus entered into a series of transactions with GMX that
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`constitute the basis of this suit.
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`7.
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`Defendant Leiber, upon information and belief, manufactures ladies’ handbags,
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`has no background or experience in the agricultural products business, and is owned by Pegasus.
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`Leiber was formerly known as “Pegasus Apparel Group, Inc.” and changed its name to “The
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`Leiber Group, Inc.” in May 2001. Leiber is based in New York, operates out of the same
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`location as Pegasus in New York, and conducts business within the State of New York.
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`8.
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`The Pegasus Defendants’ conduct and business transactions originating from their
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`New York offices are the subject of this action.
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`9.
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`10.
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`Venue in this Court is proper pursuant to C.P.L.R. Section 501.
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`Leiber has consented to personal jurisdiction and venue in this Court pursuant to
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`Section 10.06 of the Second Amended and Restated Operating Agreement of KGS Agro Group,
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`LLC (the “SOA”) (Ex. A, Section 10.06 at p. 37).
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`11.
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`Section 10.06 of the SOA, entitled “Jurisdiction,” provides that:
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`[t]he parties hereby agree that any suit, action or proceeding seeking to enforce
`any provision of, or based on any matter arising out of or in connection with,
`this Agreement or the transactions contemplated hereby, whether in contract,
`tort, or otherwise, shall be brought . . . in the Supreme Court of the State of
`New York, New York County . . . and that any cause of action arising out of
`this Agreement shall be deemed to have arisen from a transaction of business
`in the State of New York. Each of the parties hereby irrevocably consents to
`the jurisdiction of such courts . . . in any such suit, action or proceeding . . .
`and irrevocably waives . . . any objection . . . to the laying of the venue in any
`such suit, action, or proceeding . . . .
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`(Id., emphasis added).
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`12.
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`The parties’ SOA also contains a “choice of law” provision providing that the
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`substantive law of Delaware will govern the SOA and any dispute arising out of it. Specifically,
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`Section 10.05 of the SOA provides that “[t]his Agreement shall be construed and enforced in
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`accordance with the laws of the state of Delaware without giving effect to conflicts of laws
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`principles thereof.” (Id., p. 37).
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`III. GENERAL ALLEGATIONS
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`13. Mr. Simon, a world-renowned apparel executive, owned a company, Satz
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`International LLC (“Satz”), that sold closed-out merchandise in retail stores throughout North
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`America, such as TJ Maxx, Ross, and Marshalls.
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`14.
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`At some point, Satz sought additional capital to expand its operations, which led
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`Mr. Simon to contact an executive at Pegasus, whom he knew from his days at Calvin Klein
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`Jeans, in order to discuss an investment. Specifically, Mr. Simon sought a $4 million equity
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`investment by Pegasus in Satz.
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`15.
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`At that time, it was widely-reported that Pegasus’s apparel fund, Leiber, was
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`struggling.
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`16.
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`Pegasus indicated to Mr. Simon that it needed Mr. Simon’s strategic guidance to
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`improve Leiber’s fortunes. Pegasus also informed Mr. Simon that Leiber had a $4 million loan
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`coming due that needed to be paid off in order for Leiber to succeed.
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`17.
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`Pegasus proposed a strategic business relationship in which Pegasus would lend
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`Mr. Simon’s company, Satz, $8 million in total, but that $4 million would be immediately used
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`by Leiber to pay off its loan coming due. In return, Mr. Simon was to receive a small equity
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`stake (7%) in Leiber (the “Leiber Investment”) and a role as a company strategist, with the
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`remaining $4 million to be invested in Satz (the “Satz Investment.”)
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`18.
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`Thereafter, Pegasus invested another $4 million in a second company owned by
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`Mr. Simon (Designer Holdings) that owned the Bill Blass brand (the “Designer Holding
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`Investment”), on the condition that Mr. Simon personally guaranty the earlier Leiber Investment
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`and Satz Investment totaling $8 million.
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`19.
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`The relationship between Mr. Simon and Pegasus subsequently deteriorated, and
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`Mr. Simon (along with Satz and others) ultimately brought an action in New York State Supreme
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`Court against Leiber and one of Pegasus’ funds for breach of contract, misrepresentation and
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`concealment, rescission, and other related claims (hereinafter, the “Prior Action”).
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`20. While the Prior Action was being litigated, Mr. Simon turned his attention to a
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`new agricultural products business, GMX.
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`21.
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`As part of the resolution of the Prior Action, the parties reached an agreement in
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`which the case was settled, the parties released any claims against each other, and Mr. Simon
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`was released from the personal guaranty concerning the earlier Leiber Investment and Satz
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`Investment.
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`22.
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`23.
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`In return, Pegasus, through Leiber, received a minority equity interest in GMX.
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`Pegasus, through its principal, Cogut, also made material representations to Mr.
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`Simon that Pegasus would raise substantial capital to invest in GMX (just as it had done for Mr.
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`Simon’s two other companies, Satz and Designer Holdings.) Relying upon these representations,
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`Mr. Simon entered into agreements with Pegasus and Leiber that gave them a stake in GMX.
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`24.
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`Specifically, the parties to the Prior Action (Pegasus Partners II, L.P. and The
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`Leiber Group, Inc. on one hand; and Satz International LLC, Mr. Simon, and others on the
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`other), entered into a series of agreements all dated February 24, 2016 including: (a) a Release
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`Agreement; (b) a Purchase Agreement; and (c) the SOA, (collectively, the “Pegasus-KGS
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`Agreements.”), all of even date.
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`25.
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`Pursuant to the Pegasus-KGS Agreements, Leiber obtained a 12.5% membership
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`interest in GMX (the “Membership Interest”).
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`26.
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`The SOA also contains a “put option” (the “Put Option”) in favor of Leiber,
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`related to Leiber’s Membership Interest. Pursuant to the terms of the SOA, Leiber may exercise
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`the Put Option during certain defined anniversary dates, if and only if—the exercise of the Put
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`Option complies with both applicable Delaware law, and the terms of the SOA governing
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`limitations on the company’s Distributions.
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`27.
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`Section 5.06(a) of the SOA provides that:
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`following (i) the 30-month anniversary . . . or the 42-month anniversary of the
`date of this Agreement, [Leiber], in its sole an absolute discretion, shall have the
`right . . . to resell to the Company, at [Leiber’s] sole and absolute discretion (each
`the “Put Option”), all or a pro-rated portion of the Membership Interest. . . . The
`purchase price for the Put Interests under the Put Option (the “Put Price”) shall
`be equal to eight million dollars ($8,000,000) . . . .
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`(Ex. A, Section 5.06(a) (bold in the original)).
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`28.
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`Section 5.06(b) of the SOA further requires that as a precondition to Leiber’s
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`exercise of the Put Option:
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`[Leiber] shall give notice (the “Put Notice”) in writing to the Company of its intention to
`sell the Put Interests pursuant to the Put Option within sixty (60) days of the applicable
`anniversary date (the “Put Option Period”). The closing of the purchase and sale
`pursuant to the Put Option shall take place on a date reasonably designated by Leiber but
`no later than thirty (30) days after the Put Notice (the “Put Closing Date”).
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` (Id., Section 5.06(b), p. 23, bold in the original, emphasis added).
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`29.
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`Any contemplated cash payment to Leiber pursuant to the Put Option set forth in
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`Section 5.06 is a Distribution as defined by the SOA. A “Distribution” is defined as “the transfer
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`of Property by the Company to one or more of the Members in his or her capacity as a Member.”
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`(Id., p. 3). Leiber is a Member under the SOA (id., pp. 4–5), and “Property” is defined
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`thereunder as “all real, personal and mixed properties, cash, assets, interests, and rights of any
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`type owned by the Company.” (Id., p. 7).
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`30.
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`Section 6.07 of the SOA expressly limits Distributions to be made by GMX,
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`providing in relevant part:
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`Limitations on Distributions. (a) Notwithstanding any provision to the contrary
`contained in this Agreement, the Company shall not make a Distribution to a
`Member to the extent that, at the time of the Distribution, after giving effect to the
`Distribution, all liabilities of the Company, other than liabilities to Members on
`account of their Membership Interest . . . , exceed the fair market value of the
`assets of the Company[.]
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`(Id., Section 6.07).
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`31.
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`Exercise of the Put Option by Leiber is also subject to Section 18-607 of
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`the Limited Liability Company Act of Delaware (the “Act”), which contains substantially
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`the same requirement as Section 6.07 of the parties’ SOA. Section 18-607 provides, in
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`relevant part:
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`Limitations on distribution. (a) A limited liability company shall not make a
`distribution to a member to the extent that at the time of the distribution, after
`giving effect to the distribution, all liabilities of the limited liability company,
`other than liabilities to members on account of their limited liability company
`interests . . . , exceed the fair market value of the assets of the limited liability
`company[.] (Emphasis added).
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`32.
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` Just as the prior relationship between Mr. Simon’s and Cogut’s companies went
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`off the rails and led to a lawsuit, the current relationship between Plaintiff GMX and the Pegasus
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`Defendants has been marked by turbulence in the form of improper conduct by Pegasus and
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`Leiber.
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`33.
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` As described below, the Pegasus Defendants’ current bad acts take three (3)
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`primary forms. First, the Pegasus Defendants failed to raise and invest needed capital in GMX,
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`despite numerous material representations to GMX and third parties to the contrary, upon which
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`GMX reasonably relied. Second, the Pegasus Defendants have wielded a “Third Operating
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`Agreement,” which they neither funded, nor provided any consideration for, as a bludgeon to
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`scare other potential investors away from GMX and to allow Defendants to gain control over
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`GMX and its valuable patented and proprietary agro products for no money. Third, the Pegasus
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`Defendants tortiously interfered with GMX’s advantageous business relationships, including a
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`major investor based in China, by, inter alia, breaching the parties’ non-disclosure agreement
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`(the “NDA”) and revealing confidential information to the investor, which resulted in the
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`investor walking away and refusing to enter into a proposed Joint Venture relationship with
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`GMX and invest millions of dollars in GMX.
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`34.
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` Since the first discussions leading to the Pegasus Defendants obtaining an equity
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`interest in GMX and the Put Option, the Pegasus Defendants, and their principal owner Cogut,
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`made promises to GMX and Mr. Simon on numerous occasions that they would raise and invest
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`the capital that GMX required to be successful.
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`35.
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`Such promises to raise and invest capital were consistent with the parties’ past
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`pattern and practices, which saw Pegasus invest in Satz and Designer Holdings, two other
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`companies owned by Mr. Simon.
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`36.
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`Leiber, as a Member of the company, was also privy to GMX’s confidential
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`financial and proprietary business information, and therefore was uniquely positioned to
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`understand how dire GMX’s financial position had become, as well as which other investors
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`were in talks with GMX.
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`37.
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`Knowing of GMX’s precarious financial position, the Pegasus Defendants, led by
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`Cogut, schemed to leverage their slim 12.5% minority stake to obtain control over GMX for no
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`money, or at the very least to force it into insolvency by calling the Put Option.
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`38.
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` Improperly using their “insider” knowledge of GMX’s finances and potential
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`investors, the Pegasus Defendants then dangled the promise of a capital infusion in front of
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`GMX and Mr. Simon, and induced the execution of a “Third Operating Agreement” to give
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`Defendants up to a 51% controlling equity position in GMX.
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`39.
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`The genesis of the proposed Third Operating Agreement was a contemplated
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`investment in GMX by a Chinese company, who would obtain a 20% equity interest in return for
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`a substantial investment in the Company.
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`40.
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`Pursuant to the Third Operating Agreement, Pegasus obligated itself to “use
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`commercially reasonable efforts to raise sufficient capital . . . to provide a loan or other financing
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`to the Company of up to $5 million . . . .”
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`41.
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` Even by the favorable terms dictated by the Pegasus Defendants, the Pegasus
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`Defendants’ right to exercise the option to acquire up to 51% of the company only sprung to life
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`if the Pegasus Defendants invested $5 million in capital in GMX, which, of course, they never
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`did.
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`42.
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`Despite the fact that in the months since the signing of the Third Operating
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`Agreement the Pegasus Defendants never invested any money in GMX, they nevertheless
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`attempted to “enforce” the agreement by threatening GMX and Mr. Simon on numerous
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`occasions under the terms of the purported agreement.
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`43.
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`The Pegasus Defendants went so far as to falsely inform third parties, including
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`GMX’s potential investors in China, that the Pegasus Defendants had the right to acquire up to
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`51% of the company under the Third Operating Agreement, which warded off GMX’s other
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`suitors. This has left GMX vulnerable to the Pegasus Defendants’ improper efforts to acquire
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`control of GMX through the Put Option.
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`44.
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`It is only in the last few months that the Pegasus Defendants have reversed
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`course, when it suited them, now claiming that the Third Operating Agreement is not
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`enforceable, so that the parties’ operative agreement is the SOA.
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`45.
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`Adding insult to potentially mortal injury, Defendants flew to China and met with
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`GMX’s main potential investor. GMX later learned that during these meetings, Defendants
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`improperly disclosed confidential and proprietary information to the potential investor that
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`Defendants had learned as a Member of GMX, and was protected under the parties’ NDA.
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`46.
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`Upon information and belief, the Pegasus Defendants even went so far as to try to
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`cut Mr. Simon out of a deal and have the Chinese investor deal directly with the Pegasus
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`Defendants.
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`47.
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`As a direct and proximate cause of the above illegal disclosures and improper
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`practices, the potential investor walked away from the proposed Joint Venture, and pulled out
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`and refused to invest in GMX.
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`IV. CAUSES OF ACTION
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`COUNT I – DECLARATORY JUDGMENT CONCERNING THE PUT OPTION
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`48.
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` GMX repeats and realleges each and every allegation contained in Paragraphs 1
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`through 47 above as if fully set forth herein.
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`49.
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`On June 26, 2019, Leiber provided notice in writing purporting to exercise the Put
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`Option in full, seeking a Distribution by GMX of $8 million on a date it unilaterally set less than
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`fourteen (14) business days later—July 15, 2019.
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`50.
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` The attempted exercise of the Put Option is barred by Section 6.07 of the SOA
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`and 18-607 of the Act because, after giving effect to the $8 million Distribution, GMX’s
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`liabilities would exceed the fair market of GMX’s assets.
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`51.
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`On July 15, 2019, GMX informed Leiber that its attempted exercise of the Put
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`Option was invalid on the ground that the $8 million payment is barred by Sections 6.07 of the
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`SOA and 18-607 of the Act. In addition, GMX objected to the short-notice provided by Leiber
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`in its attempt to impermissibly exercise and close on its Put Option.
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`52.
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`Pursuant to Section 10.11(b)(iii) of the SOA, “Material Breach” includes a breach
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`of Section 5.06 (the Put Option). It is reasonably anticipated by GMX that when it refuses to
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`recognize Leiber’s exercise of its Put Option as valid and rejects Leiber’s demand to “close” and
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`have GMX pay $8 million to Leiber, Leiber will claim that Plaintiff has committed a “Material
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`Breach” under Section 10.11 of the SOA.
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`53.
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`Section 10.11 provides that if GMX is in “Material Breach,” and does not cure the
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`“breach” within 30 days to Leiber’s “reasonable satisfaction,” then Leiber may take certain
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`unilateral “self-help” actions as follows:
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`(A)
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`(B)
`(C)
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`to have the Company issue a secured senior note to [Pegasus] in the
`amount of the damages resulting from the Material Breach . . . ;
`to unilaterally exercise [certain] drag-along rights . . . ; and
`to cause the Company to enter into a customary and reasonable
`management agreement . . . .
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`Ex. A, Section 10.11(b)(ii).
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`54.
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`A controversy exists between the parties concerning whether Sections 6.07 of the
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`SOA and 18-607 of the Act bar Leiber’s exercise of the Put Option, and whether by virtue of
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`these provisions, GMX cannot be found to be in Material Breach of the parties’ SOA to permit
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`Leiber to avail itself of the self-help remedies provided for in Section 10.11(b)(ii) of the SOA.
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`55.
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`56.
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`Plaintiff does not have an adequate remedy at law.
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`Plaintiff is entitled to a declaratory judgment finding and declaring that:
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`(a)
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`the exercise of the Put Option is barred by Sections 6.07 of the SOA and
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`18-607 of the Act, and therefore that Leiber is not entitled to exercise the Put Option and
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`GMX is not required to honor it;
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`(b)
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`Leiber’s attempt to exercise the Put Option and any of the remedies
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`contained in Section 10.11(b)(ii) of the parties’ SOA under these circumstances
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`constitutes a prior Material Breach of the SOA, including the implied covenant of good
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`faith and fair dealing concerning Sections 5.06, 6.07, and 10.11 of the SOA, discharging
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`all of GMX’s continued obligations under the SOA;
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`(c)
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`GMX cannot be found to be in Material Breach of the SOA because
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`Leiber’s attempt to exercise the Put Option under the current circumstances is improper;
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`(d)
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`Leiber is not entitled to exercise any of the self-help remedies contained in
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`Section 10.11(b)(ii) of the parties’ SOA; and in any event,
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`(e)
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`Leiber’s notice to purportedly trigger the Put Option is invalid because it
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`is untimely, and the date it provided for the purported “payment” of the Put Option
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`amount is not “reasonable” under prevailing Delaware law.
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`COUNT II – PRIOR BREACH OF CONTRACT, INCLUDING THE IMPLIED
`COVENANT OF GOOD FAITH AND FAIR DEALING
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` GMX repeats and realleges each and every allegation contained in Paragraphs 1
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`57.
`
`through 56 above as if fully set forth herein.
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`58.
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` Leiber’s attempt to exercise its Put Option in violation of Section 6.07 of the
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`parties’ SOA and Section 18-607 of the Act, constitutes a material breach of the parties’ SOA.
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`59.
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` Leiber’s actions concerning the Put Option, under the circumstances alleged
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`herein, also constitute a breach of the implied covenant of good faith and fair dealing under
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`Delaware law, concerning the SOA’s Put Option (Section 5.06), “Limitations on Distribution”
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`(Section 6.07), and “Specific Performance; Breach” (Section 10.11) provisions.
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`60.
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`Further, Leiber’s actions, including but not limited to, seeking enforcement of the
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`Put Option upon unreasonably short notice, without the Pegasus Defendants having raised or
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`invested capital as they promised to, are not faithful to the scope, terms and purpose of Sections
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`5.06, 6.07 or 10.11 of the parties’ SOA.
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`61.
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`As a direct and proximate cause of Leiber’s breaches of contract and breach of the
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`implied covenant of good faith and fair dealing, GMX has been damaged in an amount to be
`
`proven at trial.
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`COUNT III – PERMANENT INJUNCTIVE RELIEF CONCERNING THE PUT OPTION
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`62.
`
`GMX repeats and realleges each and every allegation contained in Paragraphs 1
`
`through 61 above as if fully set forth herein.
`
`63.
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` Section 10.11 of the parties’ SOA (“Specific Performance; Breach”), provides as
`
`follows:
`
`Each of the parties hereto hereby acknowledges and agrees that the failure of any
`party to perform its [sic] or breach by such party of its agreements, obligations
`and covenants hereunder… will cause irreparable injury to the other parties hereto
`for which damages, even if available, will not be an adequate remedy.
`Accordingly, each party hereto hereby consents to the issuance of injunctive relief
`by any court of competent jurisdiction to compel performance of its obligations
`hereunder.
`
`Ex. A, Section 10.11.
`
`64.
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`Based on the Pegasus Defendants’ pending demand to exercise the Put Option,
`
`and the likelihood that the Pegasus Defendants will try to exercise the “self-help” remedies
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`provided for under Section 10.11 of the SOA by arguing that GMX is in “Material Breach,” there
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`is a threatened and imminent violation of Plaintiff’s rights under the parties’ SOA.
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`65.
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`No adequate remedy at law exists.
`
`66.
`
`If the Pegasus Defendants are permitted to exercise the Put Option at this time to
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`force GMX into insolvency, and then argue that a purported “Material Breach” allows them to
`
`effectively take control of the Company, GMX will suffer serious and irreparable harm absent an
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`injunction.
`
`67.
`
` The equities are balanced in GMX’s favor.
`
`
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`COUNT IV – TORTIOUS INTERFERENCE
`
`68.
`
`GMX repeats and realleges each and every allegation contained in Paragraphs 1
`
`through 67 above as if fully set forth herein.
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`69.
`
`Despite the financial obstacles posed by the Pegasus Defendants’ conduct and
`
`failure to invest any money in GMX, GMX had success in attracting potential foreign
`
`investments.
`
`70.
`
`By January 23, 2017, GMX had entered into final negotiations with a Chinese
`
`company to create a lucrative Joint Venture to sell and distribute GMX products in China (the
`
`“Joint Venture”). The potential value of the Joint Venture was in excess of $70 million.
`
`71.
`
`As part of the Joint Venture, the Chinese company was to invest at least $5
`
`million in GMX.
`
`72.
`
`GMX’s business opportunity in the Joint Venture was reasonably probable to
`
`succeed, as evidenced by, among other things, an almost 50-page draft agreement between GMX
`
`and the investor.
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`73.
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`Leiber, a minority equity member of GMX, and Pegasus’ Cogut, who also
`
`participated in the negotiations with the Chinese investor, had full knowledge of the existence of
`
`the likely business opportunity presented by the Joint Venture.
`
`74.
`
`Acting without any legitimate business rationale, Defendants intentionally and
`
`without justification interfered with GMX’s prospective business opportunity with the Chinese
`
`investor by, inter alia, (a) meeting with the Chinese company, and (b) improperly disclosing
`
`GMX’s confidential and proprietary business information about its products and financial
`
`information, in violation of the parties’ NDA. During the course of such meeting, upon
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`information and belief, the Pegasus Defendants tried to convince the Chinese investor to cut
`
`GMX and Mr. Simon out of the Joint Venture and have the investor deal directly with the
`
`Pegasus Defendants.
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`75. When all else failed, the Pegasus Defendants threatened to refuse to sign off on
`
`the Joint Venture’s operating agreement, without providing any legitimate basis for such refusal.
`
`76.
`
`As a direct and proximate result of the Pegasus Defendants’ interference with
`
`GMX’s prospective business relations, the Chinese investor backed out of the deal and refused to
`
`invest in GMX.
`
`77.
`
`As a result of the Pegasus Defendants’ tortious acts, GMX has been damaged in
`
`an amount to be determined at trial, but no less than $70 million.
`
`COUNT V – PROMISSORY ESTOPPEL
`
`78.
`
`GMX repeats and realleges each and every allegation contained in Paragraphs 1
`
`through 77 above as if fully set forth herein.
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`79.
`
`The Pegasus Defendants made numerous promises to both GMX and its owner
`
`Mr. Simon, repeated to third parties, that the Pegasus Defendants would invest at least $5 million
`
`in GMX.
`
`80.
`
`It was both reasonable and foreseeable under the circumstances that GMX would
`
`rely upon such promise.
`
`81.
`
` Consistent with the promises made to Mr. Simon and GMX, the Pegasus
`
`Defendants made numerous representations to third parties that they intended to provide capital
`
`to GMX. For example, Defendants arranged for a third party lender, EMIL Capital (“EMIL”),
`
`to provide a $500,000 one-year loan to GMX at a high interest rate (13%).
`
`82.
`
`GMX has subsequently learned from EMIL that