SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: March 16, 2000
(Date of earliest event reported)
MEDISYS TECHNOLOGIES, INC.
(Exact name of Registrant as specified in charter)
Utah 0-21441 72-1216734
(State or other juris- (Commission (IRS Employer
diction of incorporation) File No.) Identification No.)
144 Napoleon Street, Baton Rouge, Louisiana 70802
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone no., including area code: (225) 343-8022
N/A
(Former Name or Former Address, if Changed Since Last Report)
Item 5. Other Events.
On March 16, 2000, Medisys Technologies, Inc. (the
"Registrant") filed a Complaint against Brett Phillips, Elbert Carl
Anderson, William H. Morris, Marilyn Morris and Barbara Larkins in
the United States District Court in and for the Middle District of
Louisiana alleging various securities law violations and related
claims in connection with the 1998 acquisition by the Registrant
from the defendants of Phillips Pharmatech Labs, Inc. (the "Legal
Proceeding"). The Registrant is seeking recission of the
acquisition damages and other relief. A copy of the Complaint is
filed as Exhibit 99.1 and is incorporated herein by reference.
The Registrant is a diversified medical company which employs
a multi-divisional integrated business strategy. The Registrant
owns 19 patents covering safety devices and other products. The
Registrant believes that the Legal Proceeding is in its
shareholders' best interest and should not have any material
adverse impact on the Registrant's ongoing efforts to develop and
market commercial applications for its technology.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
Exhibit No. Description Page No.
99.1 Complaint filed on March 16, 2000 with
the United States District Court in and
for the Middle District of Louisiana Filed Herewith
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
MEDISYS TECHNOLOGIES, INC.
Dated: March 22, 2000 By: /s/ Kerry M. Frey
KERRY M. FREY, President and
Chief Operating Officer
INDEX TO EXHIBIT
Exhibit No. Description Page No.
99.1 Complaint filed on March 16, 2000 with
the United States District Court in and
for the Middle District of Louisiana Filed Herewith
UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF LOUISIANA
MEDISYS TECHNOLOGIES, INC. Case No:
Plaintiff, HON.
v.
BRETT PHILLIPS, ELBERT CARL JURY TRIAL DEMANDED
ANDERSON, WILLIAM H. MORRIS,
MARILYN MORRIS and BARBARA
LARKINS,
Defendants.
______________________________________________________________________________
COMPLAINT
______________________________________________________________________________
NOW COMES the plaintiff, Medisys Technologies, Inc., by and
through its attorneys, Worsfold Macfarlane McDonald, PLLC and Jones
Fussell, L.L.P., and for its Complaint against the defendants under
federal securities law and under state law, states as follows:
JURISDICTIONAL ALLEGATIONS
1. That the plaintiff, Medisys Technologies, Inc.,
("Medisys"), is a Utah corporation and maintained, at all
relevant times, its primary place of business in
Louisiana and continued to do business in the State of
Louisiana, and engages in the manufacturing and sale of
women's healthcare products and medical safety devices.
2. That the defendant, Brett Phillips, is the former
President of Phillips Pharmatech Labs, Inc., ("PPL"), and
a former shareholder of PPL, a resident of the County of
Pinnellas, State of Florida.
3. That the defendant, Elbert Carl Anderson is the former
secretary of PPL, and a former shareholder of PPL, and is
a resident of the County of Pinnellas, State of Florida.
4. That the defendant, William H. Morris, is a resident of
the County of Pinnellas, State of Florida, and was
intimately involved in the dealings and transactions
involving PPL up through December of 1998.
5. That the defendant, Marilyn Morris, is a resident of the
County of Pinnellas, State of Florida, and the spouse of
defendant, William H. Morris, and was one of the
shareholders of PPL, leading up to and through December,
1998.
6. That the defendant, Barbara Larkins, is a resident of the
County of Pinnellas, State of Florida, and was a
shareholder of PPL, leading up to and through December,
1998.
7. That jurisdiction and venue are proper before this Court
pursuant to 28 USC. 1331 and 28 USC. 1332 (a)
8. That certain causes of action set forth herein arise
under federal securities law and additional claims
emanate from the same nucleus of operative facts and are
part of the same case and controversy.
9. That the acquisition of the shares of PPL, giving rise to
Plaintiff's claims, took place in Louisiana and was
consummated in Louisiana.
10. That the matter in controversy is between citizens of
different states and the relief sought exceeds the sum of
$75,000.
GENERAL ALLEGATIONS
11. That the plaintiff's claims set forth herein arise out of
a stock for stock purchase of
PPL by Medisys.
12. That Medisys and PPL entered into a letter of intent on
October 1, 1998, wherein Medisys set forth its intended
acquisition of PPL in exchange for Medisys common stock
totaling 50% of the outstanding shares of Medisys.
13. That on December 22, 1998, Medisys and PPL entered into
the Acquisition and Share Exchange Agreement (Exhibit 1),
wherein it was agreed that Medisys would acquire all of
the issued and outstanding shares of PPL in exchange for
15,602,147 shares of Medisys common stock. At the time
of the acquisition, the Medisys common stock exchanged
for the shares of PPL had a value in excess of $3
million.
14. That on December 22, 1998, pursuant to a special meeting
of shareholders of Medisys, the shareholders ratified the
proposed Acquisition and Share Exchange Agreement.
15. That at the time of the ratification of the Acquisition
and Share Exchange Agreement by the shareholders of
Medisys the identified "shareholders" of PPL were the
defendants, Brett Phillips, Elbert Carl Anderson, Barbara
Larkins and Marilyn Morris.
16. That the Acquisition and Share Exchange Agreement was
signed by William Morris, as attorney in fact for his
spouse, Marilyn Morris, one of the shareholders of PPL.
17. That the defendant, Elbert Carl Anderson executed the
Acquisition and Share Exchange Agreement, on his own
behalf, and as attorney in fact for his former spouse,
Barbara Larkins.
18. That at the present time, the defendants, Brett Phillips,
Elbert Carl Anderson and William H. Morris are members of
the Board of Directors of Medisys and have remained as
directors of PPL.
19. That in addition to being shareholders and/or officers
and directors of PPL, Elbert Carl Anderson, Brett
Phillips and William H. Morris, were at all relevant
times, "controlling persons" as that phrase is defined in
15 USC 78t, and directly influenced and controlled
persons whose acts constitute violations of state and
federal law.
20. That the acquisition of PPL by Medisys was predicated
upon oral and written information provided by and
representations, warranties, and certifications made by
the defendants and shareholders of PPL, including Barbara
Larkins, Marilyn Morris, William Morris, Brett Phillips
and Elbert Carl Anderson, as to various matters,
including but not limited to the financial statements and
condition of PPL, the personal background information
regarding each of the shareholders, officers and
directors of PPL, the history and status of PPL's
regulatory compliance, PPL's manufacturing capabilities,
and the business prospects of PPL.
21. That certain representations made by each of the
defendants pertaining to PPL were false and misleading,
thereby resulting in the plaintiff, Medisys, overpaying
for the acquisition of PPL.
22. That the defendants provided financial statements of PPL
for the first nine months of 1998 which the defendants
knew or should have known misrepresented sales and
revenue, interest expense, accounts receivable, and
accounts payable.
23. That the defendants subsequently revised the financial
statements without advising Medisys or its
representatives.
24. That subsequent material adverse changes in the PPL
business operations, assets, properties, prospects or
conditions (financial or otherwise) existed and were
intentionally not disclosed to Medisys or its
representatives.
25. That the defendants intentionally withheld information
and further misrepresented the dealings of PPL with the
Food and Drug Administration, and specifically failed to
disclose to Medisys or its representatives action
undertaken by the Department of Health & Human Services,
Food and Drug Administration with regard to PPL.
26. That the defendants further represented that there was no
litigation, arbitration, proceedings or investigation
pending or threatened to which PPL was to be a party or
which may result in any material change in the business
or condition, financial or otherwise, of PPL or any of
its properties or assets, or which might result in any
liability on the part of PPL. Defendants misrepresented
not only the status of litigation pending or threatened
against PPL, but further misrepresented and intentionally
withheld information pertaining to claims that might
result in liability on the part of PPL.
27. That the defendants further withheld information
regarding the status of litigation, claims, or threatened
claims, and other administrative and regulatory actions
taken against the defendants in that William H. Morris
had been under investigation by the Federal Trade
Commission which then resulted in a Complaint being filed
against William H. Morris, and the William H. Morris
Company and National Dietary Research, Inc., two
corporations owned, operated and maintained by William H.
Morris. On May 4, 1995, the Federal Trade Commission
announced that a Consent Agreement was entered into
whereby William H. Morris, both individually and on
behalf of National Dietary Research, Inc. and the William
H. Morris Company, paid $100,000 to the Federal Trade
Commission in exchange for a dismissal of the Complaints
previously filed.
28. That the defendants, William H. Morris and Marilyn
Morris, are husband and wife, and failed to disclose
material information and further misrepresented the
status of litigation which they were involved in leading
up to and at the time of the December, 1998 acquisition
of PPL by Medisys.
29. That the defendants misrepresented the manufacturing
capabilities of PPL.
30. That each of the defendants made untrue statements,
misrepresented facts, and further failed to disclose
significant and material information, which if known,
would have materially affected the value of PPL and the
decision by Medisys to proceed with the transaction.
COUNT I
VIOLATION OF SECTION 10 (b) of the SECURITIES EXCHANGE ACT OF 1934
31. The plaintiff, Medisys, hereby adopts and realleges
paragraphs 1-30 above, as if fully set forth herein.
32. That the defendants materially misrepresented the value
of PPL to Medisys, through several affirmative
falsehoods, misrepresentations and omissions, and further
caused PPL to engage in accounting fraud with regard to
the dissemination of financial information and data
provided to Medisys, with the intent of inflating the
value of PPL.
33. Specifically, the defendants over stated the amount of
sales in the September, 1998 financial statement
resulting in a misrepresentation of approximately $92,000
in sales and revenue. That as early as October, 1998,
the defendants knew that there was a gross overstatement
of sales in the September, 1998 revenue figures, and made
a partial adjustment to the financial statement, but
failed to disclose this adjustment to Medisys or its
representatives prior to entering into the Acquisition
and Share Exchange Agreement.
34. That the defendants further overstated Accounts
Receivables in the September, 1998 financial statements,
and such overstatement was not adjusted, corrected or in
any way revised by the defendants prior to entering into
the December 22, 1998 Acquisition and Share Exchange
Agreement.
35. That the defendants further understated Accounts Payable
and misrepresented the gross amount of Accounts Payable
in the September, 1998 financial statements, and failed
to make any adjustments or further disclosures regarding
the misrepresented Accounts Payable figure prior to the
signing of the December 22, 1998 Acquisition and Share
Exchange Agreement.
36. That the defendants further misrepresented and misstated
the Interest Expense of PPL in the September, 1998
financial statements, and failed to properly adjust or
make the requisite disclosures regarding the true and
accurate figures to Medisys prior to entering into the
December 22, 1998 Acquisition and Share Exchange
Agreement.
37. That from September 30, 1998 to December 31, 1998, PPL's
Income Statement went from a $195,000 profit to a $13,000
loss, a change of $208,000 in one quarter when the gross
sales figures for September and December only indicated
a decline of less than 2%. Such a drastic and material
change in the PPL Income Statement from quarter to
quarter was due to the misrepresentation of the income of
PPL with the intent of overstating and exaggerating the
financial well-being of PPL.
38. That the defendants, through the material
misrepresentations and omissions set forth above,
knowingly and intentionally engaged in accounting fraud
by misrepresenting the value of PPL's asset and value as
an ongoing company. Each of the defendants were
shareholders, officers, directors or affiliates of PPL,
who knowingly and intentionally prepared, approved of,
and submitted the false and misleading materials
regarding PPL's true value for the purpose of inducing
Medisys to merge and acquire PPL, and to pay and
artificially high and inflated price for PPL.
39. That in addition to the misrepresentations and omissions
pertaining to financial statements, the defendants, as
officers, directors or affiliates of PPL, represented,
certified and warranted the following:
Phillips and Shareholders each individually warranting
their personal affairs only, hereby represent that,
unless otherwise disclosed herein or by written
attachment hereto, no officer, director or affiliate of
Phillips nor any principal Shareholder or any other
person receiving a portion or all of the Medisys shares
to be issued hereunder, shall have been, within the past
five years; . . . subject to any order, judgment or
decree, not subsequently reversed, suspended or vacated,
of any court of competent jurisdiction, permanently or
temporarily enjoining, barring, suspending, or otherwise
limiting their involvement in any type of business . . .
(Exhibit 1, Section 4.12).
40. That the failure of the defendants to disclose that
William H. Morris, both individually and as owner of two
separate corporate entities, was investigated and charged
by the Federal Trade Commission in an administrative
complaint with making deceptive and unsubstantiated
claims for products being produced by William H. Morris
and his companies, and further failing to disclose the
$100,000 paid pursuant to a consent judgment by William
H. Morris and his two companies, constitutes a violation
and breach of Section 4.12.
41. That the defendants, William H. Morris and Marilyn
Morris, are further involved in, subject to, and parties
in several other litigation matters, not previously
disclosed to Medisys, nor its representatives.
42. That the defendants further represented the status of PPL
with regard to litigation wherein the defendants stated:
There is no litigation, arbitration, proceeding or
investigation pending or threatened to which Phillips is
a party or which may result in any material change in the
business or condition, financial or otherwise, of
Phillips or any of its properties or assets, or which
might result in any liability on the part of Phillips, or
which questions and (sic) validity of this agreement or
any action taken or to be taken pursuant to or in
connection with the provisions of this agreement, and to
the best knowledge of Phillips, there is no basis for any
such litigation, arbitration, proceeding or
investigation. (Exhibit 1, Section 4.7).
43. That at the time that the defendants made this
representation and certification, PPL was either involved
in, or had threatened against it, numerous lawsuits which
have resulted and continue to result in the material
change in the business and financial condition of PPL.
44. That the defendants each warranted, guaranteed and
certified that:
Phillips, is in compliance with all applicable statutes,
regulations, decrees, orders, restrictions, guidelines,
standards, whether mandatory or voluntary, affecting its
properties and operations imposed by the United States of
America, and any state or foreign country or government
to which Phillips is subject. (Exhibit 1, Section 4.6).
45. That the defendants violated Section 4.6 of the
Acquisition and Share Exchange Agreement by knowingly
misrepresenting the status of the Department of Health
and Food and Drug Administration's inspections and
regulatory actions taken against them, resulting in the
issuance of Warning Letters, Recalls, Field Corrections
and other actions taken by the Food and Drug
Administration against PPL, thereby leading to various
sanctions imposed upon PPL leading up to and/or at the
time of the December 22, 1998 Acquisition and Share
Exchange Agreement.
46. That the defendants made such materially false and
misleading statements and omissions in connection with
the purchase of PPL by Medisys through a stock for stock
transaction, thereby involving the sale of a security.
47. That the defendants intended to induce, and in fact did
induce, a justifiable reliance by Medisys. Medisys
believed that the defendants' representations were
accurate and true and properly and accurately reflected
PPL's true value and was completely ignorant of the fact
that the defendants had materially misrepresented the
value of PPL's assets, and further engaged in fraud and
material misstatements regarding PPL's actual value.
48. That in determining whether to proceed with the
Acquisition and Share Exchange Agreement with the
shareholders of PPL, Medisys relied upon the financial
statements provided, as well as the other information set
forth in the Acquisition and Share Exchange Agreement,
including certifications by each of the shareholders, the
corporation, and their affiliates.
49. That if Medisys had been aware that the defendants had
materially misrepresented PPL's true value, then Medisys
would not have consummated the acquisition, nor exchanged
shares of Medisys for PPL, or, would have paid a
significantly lower price for PPL.
50. That as a result of the defendant's material
misrepresentations, fraudulent conduct, and/or omissions,
Medisys, has suffered damages in excess of $2.5 million,
which is the difference between the value of the Medisys
stock paid to the defendants, and the approximate fair
value of PPL at the time of the transaction.
51. That the conduct of the defendants, set forth above, is
in direct violation of Section 10 (b) of the Securities
Exchange Act of 1934, 17 CFR Section 240.10 (b) (5); 15 USC
Section 78J. Alternatively, defendants are liable as
controlling persons within the meaning of Section 20 (a)
of the Securities Exchange Act of 1934; 15 USC Section 78t (a).
COUNT II
FRAUD/CONSPIRACY TO DEFRAUD
52. That the plaintiff, Medisys, hereby adopts and realleges
paragraphs 1-51 above, as if fully set forth herein.
53. That the defendants knowingly engaged in fraudulent
representations as to the financial status of PPL, and
further misrepresented and concealed the true financial
worth and value of PPL, which, based upon information
subsequently obtained, was substantially less than what
was reflected in the financial statements provided by the
defendants to the plaintiff, Medisys, and in documents
filed with the Securities and Exchange Commission.
54. That the defendants engaged in such accounting fraud and
misrepresentation for the purpose of inducing Medisys to
acquire PPL at an artificially inflated price.
55. That the defendants, through their ownership of the
company and through their offices held with PPL,
knowingly and intentionally prepared, approved of, and
caused PPL to provide to Medisys financial information
and data which the defendants knew to be false and
misleading.
56. That the false and misleading financial statements and
additional information set forth in the Acquisition and
Share Exchange Agreement, was material to the plaintiff,
Medisys, in evaluating PPL.
57. That the defendants further misrepresented and
fraudulently stated the actual financial condition and
liabilities of PPL and its individual shareholders.
58. That the defendants intentionally misrepresented the
status of its officers and affiliates and the history of
such shareholders and affiliates, including those acting
as officers of PPL.
59. That based upon information and belief, the defendants
knowingly and deliberately concealed material facts
regarding not only the financial well-being of PPL, but
also the litigation history and potential exposure of PPL
and its individual shareholders.
60. That the concealed facts were material, and if revealed,
would have shown not only PPL's actual value, which would
have been substantially less than the price paid by
Medisys, but would also have disclosed enormous
liabilities which were facing PPL through threatened
litigation, or future potential claims.
61. That the defendants intended to induce Medisys into
relying upon the false and misleading misrepresentations
and material omissions regarding the value of PPL, and
regarding the background and history of the shareholders
and officers of the company.
62. That the fraudulent misrepresentations and intentional
omissions of material facts were not discoverable through
reasonable diligence on the part of Medisys
63. That had Medisys known of the true facts and financial
well-being of PPL, Medisys would not have entered into
the Acquisition and Share Exchange Agreement, or,
alternatively would have paid a significantly lower price
for PPL.
64. That the defendants conspired with each other to induce
Medisys, through the fraudulent misrepresentations and
intentional omissions of materials facts, to enter into
the Acquisition and Share Exchange Agreement, and to
cause Medisys to pay an artificially inflated price for
PPL.
65. That the defendants intended to induce Medisys into
relying upon the fraudulent financial statements and
further rely upon the absence of material disclosures
pertaining to litigation, threatened litigation, past
governmental inspection and disciplinary proceedings, as
well as past governmental complaints brought against
certain defendants.
66. That the defendants' conduct was fraudulent and each of
the defendants conspired to defraud Medisys in violation
of the law.
67. That as a result of the defendant's conspiracy to commit
fraud and the actual fraudulent misrepresentations and
intentional refusal to disclose material facts, the
plaintiff, Medisys, suffered damages and injury amounting
in excess of $2.5 million.
COUNT III
RACKETEER INFLUENCED AND CORRUPT ORGANIZATION ACT VIOLATION
68. That the plaintiff, Medisys, hereby adopts and realleges
paragraphs 1-67 above, as if fully set forth herein.
69. That the defendants engaged in numerous acts of fraud,
and knowingly misrepresented the status of PPL as well as
the background and history of the shareholders and
affiliates.
70. That the defendants further utilized the United States
Postal Service and interstate phone lines to perpetuate
the fraudulent misrepresentations and material omissions
of significant and material facts to Medisys.
71. That PPL, a Florida corporation, leading up to the time
of the Acquisition and Share Exchange Agreement of
December 22, 1998, had consistently engaged in interstate
commerce through the activities of the defendants, as
shareholders and officers of the corporation.
72. That the defendants repeatedly engaged in the
dissemination of fraudulent information regarding PPL and
further transmitted information utilizing the United
States Post Office and long distance telephone lines,
both for telephone and facsimile transmissions, in an
effort to further induce Medisys to convey 50% of its
outstanding and issued shares for the full interest and
ownership of PPL.
73. That the defendants caused the to be transmitted to the
plaintiff, the September, 1998 financial statements
regarding PPL.
74. That after its transmission of the September, 1998
financial statements, the defendants caused the December
31, 1998 financial statements to be transmitted to the
officers of Medisys, in both New Jersey and in Louisiana.
75. That the defendants further caused to be transmitted the
representations, statements, warranties and guarantees,
set forth in the Acquisition and Share Exchange Agreement
of December 22, 1998.
76. That all of these activities were performed by the
defendants to further the fraud being perpetuated upon
Medisys with the intent to obtain 50% of the outstanding
common shares of Medisys.
77. That the repeated dissemination of fraudulent information
as well as information which failed to make requisite
disclosures, constituted a pattern of activity, as that
term is defined by the Racketeer Influenced and Corrupt
Organizations Act, 18 USC 1961, et. seq.
78. That the defendants operated as an enterprise to conduct
its fraudulent and misleading activities, and further
achieved its goal of inducing the plaintiff, Medisys, to
transfer 50% of its then outstanding common shares to the
shareholders of PPL.
79. That the defendants in fact received 15,602,147 shares of
Medisys common stock, which at the time of the
transaction, had a value of approximately $3 million, and
which has since increased substantially in its value.
80. That the plaintiff, Medisys, has been damaged in an
amount in excess of $2.5 million, and continues to incur
damages due to the increasing value of the stock
improperly and fraudulently obtained by the defendants.
COUNT IV
BREACH OF CONTRACT
81. That the plaintiff, Medisys, hereby adopts and realleges
paragraphs 1-80 above, as if fully set forth herein.
82. That the defendants set forth certain representations,
commitments and warranties within the Acquisition and
Share Exchange Agreement (Exhibit 1).
83. That PPL and its shareholders represented and warranted
that the financial statements and statement of assets and
liabilities of PPL, submitted to Medisys, were true and
complete in all material respects and further fairly
represented the financial condition of PPL and the result
of its operations. (Exhibit 1, Section 4.3).
84. That the defendants further represented and warranted
that PPL was in compliance with all laws and government
regulations, applicable statutes, decrees, orders,
restrictions, guidelines and standards, whether mandatory
of voluntary, affecting its properties and operations
imposed by the United States of America, and any state or
foreign country, or government to which PPL is subject.
(Exhibit 1, Section 4.6)
85. That the defendants further represented and warranted
that there was no litigation, arbitration, proceeding or
investigation pending or threatened to which PPL was a
party, or which would result in any material change in
the business or condition, financial or otherwise, of
PPL, or in any of its properties or assets, or which
might result in any liability on the part of PPL, and
further warranted that there was no basis for any such
litigation, arbitration, proceeding or investigation.
(Exhibit 1, Section 4.7).
86. That the defendants further represented and warranted
that PPL and its shareholders, each individually for
their own personal affairs, represented that no officers,
director, or affiliate of PPL, nor any principal
shareholder or any other person receiving a portion of or
all of the Medisys shares to be issued pursuant to the
Acquisition and Share Exchange Agreement, shall have been
within the past five years subject to any order,
judgment, or decree not subsequently reversed, suspended
or vacated. (Exhibit 1, Section 4.12).
87. The defendants further represented and warranted that
none of the representations and warranties made by PPL
within the Acquisition and Share Exchange Agreement, were
in any exhibit, certificate or memorandum furnished, or
to be furnished, to Medisys, contained or would contain
any untrue statement and material fact, or omit any
material fact, the omission of which would be misleading.
(Exhibit 1, Section 4.17).
88. That the defendants have breached all such
representations and warranties, as set forth above, and
are therefore in breach of the Acquisition and Share
Exchange Agreement, dated December 22, 1998. (Exhibit 1).
89. That the plaintiff, Medisys, have complied with all of
its obligations and as met all of its responsibilities of
the Acquisition and Share Exchange Agreement.
90. That as a result of the defendants' acts and/or
omissions, resulting in the material breach of the
Acquisition and Share Exchange Agreement, the plaintiff
is entitled to damages including, but not limited to, the
return of its common stock issued in exchange for PPL,
and is further entitled to other monetary damages and
equitable relief.
COUNT V
CONVERSION/MISAPPROPRIATION/GRAFT
91. That the plaintiff, Medisys, hereby adopts and realleges
paragraphs 1-90 above, as if fully set forth herein.
92. That the fraudulent representations and failure to fully
disclose material facts by the defendants resulted in the
plaintiff, Medisys, tendering and transferring ownership
of 15,602,147 shares of its common stock to the
defendants with the understanding that Medisys, would be
receiving an asset of equal or greater value of the
shares exchanged.
93. That obtaining the shares of Medisys common stock through
false and misleading representations and omissions of
material fact, constituted conversion of the plaintiff's
stock.
94. That the defendants knowingly obtained valuable shares of
stock in exchange for a company of far lesser value, and
only perpetuated this conversion, misappropriation and/or
graft, upon the plaintiff, by misrepresenting PPL to the
plaintiff, and further misrepresenting the share holders
and officers of PPL to the plaintiff.
95. That as a result of the conversion and obtaining the
Medisys, common stock through false pretenses, the
plaintiff has been damaged in an amount in excess of $2.5
million, which was the difference between the value of
the plaintiff's common stock obtained by the defendants
and the actual value of PPL at the time of the exchange.
COUNT VI
UNJUST ENRICHMENT
96. That the plaintiff, Medisys, hereby adopts and realleges
paragraphs 1-95 above, as if fully set forth herein.
97. That as a result of the defendants' misrepresentations
pertaining to the requisite disclosures as set forth in
the Acquisition and Share Exchange Agreement, the
defendants obtained a valuable asset, while at the same
time transferred an asset of significantly less, if any,
value.
98. That the obtaining of the Medisys common stock, valued at
that time at approximately $3 million, resulted in the
defendants being unjustly enriched, as the value of PPL
was significantly less than what was represented and
warranted by the defendants.
99. That the obtaining of the Medisys common stock through
the misrepresentation and failure to properly disclose
material facts, was unjust and the plaintiff could not,
through due diligence, discover the numerous
misrepresentations, fraudulent conduct and failure to
properly disclose material facts.
100. That as a result of the transfer of the $3 million worth
of Medisys, common stock in exchange for PPL, the
defendants have been unjustly enriched in an amount in
excess of $2.5 million.
COUNT VII
BREACH OF FIDUCIARY DUTIES AND RESPONSIBILITIES
101. That the plaintiff, Medisys, hereby adopts and realleges
paragraphs 1-100 above, as if fully set forth herein.
102. That following the completion of the Acquisition and
Share Exchange Agreement contingencies, and following the
transfer of the Medisys, common stock to the defendants,
the defendants, Brett Phillips, Elbert Carl Anderson and
William H. Morris, all were appointed to the Board of
Directors of Medisys.
103. That following their appointment to the Board of
Directors of Medisys, the defendants, Brett Phillips,
Elbert Carl Anderson and William H. Morris, all had
specific fiduciary duties and responsibilities to further
the interests of Medisys.
104. That each of the defendants breached their fiduciary
responsibilities and duties to Medisys, and its
shareholders, by failing to disclose the previous fraud,
misrepresentation and lack of disclosure of material
facts leading up to and throughout the acquisition of PPL
by Medisys.
105. That the failure of the defendants, Brett Phillips,
Elbert Carl Anderson and William H. Morris, to correct
the previous misrepresentations and fraudulent
information, and to further provide the necessary
information previously omitted from disclosures, results
in a breach of the fiduciary responsibilities and duties
owed by each of these defendants.
106. That to date, the defendants, Brett Phillips, Elbert Carl
Anderson and William H. Morris, have continued to
perpetuate their fraud committed upon Medisys, and have
failed to correct the previous financial statements,
material disclosures and further provide disclosures
which were previously omitted pertaining to PPL.
107. That the defendants, Brett Phillips, Elbert Carl Anderson
and William H. Morris, have further failed to further the
interests of PPL, by neglecting, breaching and violating
the fiduciary responsibilities and duties they owe to PPL
and Medisys.
108. That as a result of the breach of the fiduciary
responsibilities owed by Brett Phillips, Elbert Carl
Anderson and William H. Morris, the plaintiff, Medisys
continues to incur damages.
COUNT VIII
BREACH OF IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING
109. That the plaintiff, Medisys, hereby adopts and realleges
paragraphs 1-108 above, as if fully set forth herein.
110. That the defendants each represented and expressly stated
a covenant of good faith throughout the acquisition and
exchange of shares.
111. That the Acquisition and Share Exchange Agreement
specifically states defendants will agree to use all
reasonable efforts to take, or cause to be taken, all
action and do, or cause to be done, all things necessary,
proper and advisable under applicable laws and
regulations, to consummate and make effective the
transactions contemplated by the Agreement. (Exhibit 1,
Section 6.3).
112. That defendants further agreed and certified that none of
the representations and warranties made by PPL, or caused
to be made on behalf of PPL, or any representation set
forth in any exhibits, certificates or memorandums
furnished to Medisys, would contain any untrue statements
of material fact, nor omit any material fact, the
omission of which would be misleading. (Exhibit 1,
Section 4.17).
113. That these representations constitute a covenant of good
faith and fair dealing, and further expressly state that
the defendants and PPL will cooperate, under the law, and
make full and complete disclosures of information.
114. That the defendants breached and violated the express
provisions of the Acquisition and Share Exchange
Agreement set forth above pertaining to their
representations and warranties to be made in good faith
with full disclosure, and continue, to this date, to
perpetuate the breach of the covenant of good faith and
fair dealing.
115. That as a result of the defendants' violation and breach
of the covenant of good faith and fair dealing, the
plaintiff has been injured and has sustained damages in
a sum in excess of $2.5 million.
COUNT IX
NEGLIGENT MISREPRESENTATION
116. That the plaintiff, Medisys, hereby adopts and realleges
paragraphs 1-115 above, as if fully set forth herein.
117. That the defendants made certain representations and
warranties within the Acquisition and Share Exchange
Agreement, and further made statements and
representations pertaining to the acquisition, but not
memorialized within the Agreement itself.
118. That the defendants further made numerous statements that
were transmitted to the plaintiff, or the plaintiff's
representatives, which contained false and misleading
information. Additionally, the defendants failed to
disclose material facts, which, if known, would have
materially affected the acquisition and/or the price paid
for PPL.
119. That the defendants made numerous misrepresentations of
fact, and made such representations out of negligent or
careless disregard for the truth of the statements
asserted. Similarly, the defendant made, or caused to be
made, various disclosures which were not true and failed
to set forth, in complete detail, material facts, which,
if known, would have materially affected the acquisition.
120. That said misrepresentations and omissions of fact were
knowingly made, or alternatively, made without the
knowledge as to the truth or completeness of the
statements and representations.
121. That the plaintiff, Medisys, relied upon the
misrepresentations, and further relied upon the
disclosures of information, which are now known to be
inadequate, incomplete and untrue and which omit material
facts.
122. That as a result of the reliance by the plaintiff upon
the defendants' misstatements of fact and material
omissions of fact, the plaintiff has been damaged in a
sum in excess of $2.5 million.
COUNT X
INDEMNIFICATION
123. That the plaintiff, Medisys, hereby adopts and realleges
all of the allegations set forth in paragraphs 1-122
above, as if fully set forth herein.
124. That the defendants expressly and impliedly agreed to
indemnify the plaintiff, Medisys, in the Acquisition and
Share Exchange Agreement, and in all dealings leading up
to and arising out of the acquisition of PPL by the
plaintiff.
125. That PPL and the defendants agreed as follows:
Phillips and Shareholders agree to defend and hold
Medisys harmless against and in respect of any and all
claims, demands, losses, costs, expenses, obligations,
liabilities, damages, recoveries and deficiencies,
including interest, penalties, and reasonable attorney
fees, that they shall incur or suffer, which arise out
of, result from, or relate in any material breach of, or
failure by Phillips to perform any of its respective
representations, warranties, covenants and agreements in
this Agreement or in any exhibit or other instrument
furnished or to be furnished by Phillips under this
Agreement. (Exhibit 1, Section 6.4).
126. That the defendants further agreed and warranted that:
Any material, undisclosed obligation or liability of
Phillips will be assumed by Phillips and Shareholders.
(Exhibit 1, Section 4.3).
127. That the defendants further made numerous statements
pertaining to their obligation to stand behind the
representations, disclosures and lack of disclosures, set
forth in the Acquisition and Share Exchange Agreement.
128. That based upon the language of the Acquisition and Share
Exchange Agreement, together with additional statements
and representations, including warranties made by the
defendants, the plaintiff is entitled to full
indemnification by the shareholders and defendants for
all costs, expenses and damages incurred as a result of
the acquisition of PPL by Medisys.
129. That pursuant to the terms of the indemnification
provisions as well as pursuant to the representations and
statements made by the defendants and shareholders of
PPL, the plaintiff is entitled to full indemnification
from the defendants for all costs and damages, which to
date, total more than $2.5 million.
JURY DEMAND
130. Plaintiff demands trial by jury.
PRAYER FOR RELIEF
WHEREFORE, the plaintiff, Medisys, prays that this Court enter
an order in favor of the plaintiff as follows:
a. For money judgment in favor of Medisys for all damages
proven, together with all interest, costs and fees;
b. For an order awarding Medisys all compensatory, exemplary
and punitive damages against the defendants for their
intentional misrepresentations, intentional refusal to
disclose material facts and breaches of various fiduciary
responsibilities and duties owed to Medisys and PPL;
c. For an order requiring defendants to relinquish, disgorge
and return all assets , shares of Medisys and all profits
derived from the defendants' improper and unlawful
conduct;
d. For an order requiring rescissionary relief and full
restitution by all defendants;
e. For an order requiring defendants to pay the plaintiff's
reasonable attorneys fees, costs and expenses, including
all interest incurred thereon, together with any and all
other fees and costs incurred throughout this litigation;
and
f. For any and all other relief this Court deems just.
Respectfully submitted,
Worsfold Macfarlane McDonald, PLLC
Charles H. Worsfold (P26949)
Michael D. Ward, T.A. (P43632)
BUSINESS ADDRESS:
5940 Tahoe Drive, SE, Suite 200
Grand Rapids, MI 49546
Telephone: (616) 977-9200
and
Jones Fussell, L.L.P.
By: ________________________
Calvin P. Brasseaux (1728)
Leland R. Gallaspy (21601)
BUSINESS ADDRESS:
P.O. Box 1810
Covington, LA 70434
Telephone: (504) 892-4801
Attorneys for Medisys Technologies, Inc.
UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF LOUISIANA
MEDISYS TECHNOLOGIES, INC. Case No:
Plaintiff, HON.
v.
BRETT PHILLIPS, ELBERT CARL
ANDERSON, WILLIAM H. MORRIS,
MARILYN MORRIS and BARBARA
LARKINS,
Defendants.
VERIFICATION
STATE OF LOUISIANA
PARISH OF EAST BATON ROUGE
BEFORE ME, the undersigned Notary Public, in and for the
Parish of East Baton Rouge, personally came and appeared:
EDWARD P. SUTHERLAND
appearing on behalf of Medisys Technologies, Inc. ("Medisys"), and
who, after being duly sworn, did depose and state that he is the
Chairman of the Board and the Chief Executive Officer of Medisys,
and, in that capacity is familiar with the facts and circumstances
giving rise to this litigation
<PAGE>
and all of the allegations of fact
contained in the foregoing Complaint and exhibits thereto are true
and correct based upon the personal knowledge of the affiant.
By:________________________________
Edward P. Sutherland
by and on behalf of
Medisys Technologies, Inc.
SWORN TO AND SUBSCRIBED
before me, this 16th day of March, 2000.
_______________________________
NOTARY PUBLIC
