3 Witisid Cliw 2 6 V. civil Actin No. _

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1 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF TENNESSEVAP 11 3'4(7. V 'S7 JOHN PISACRETA, Individually and on behalf) BY CP11,4 L RK of all others similarly situated, ) ) Plaintiff, ) ) E, 3 Witisid Cliw 2 6 V. civil Actin No. _ ) 1/4i-tw 11 nu.mtei ) CLASS ACTION RONALD BERKOVITZ, INFINITY ) INVESTORS LIMITED, DAN DOTAN, ) JURY TRIAL DEMANDED FAIRWAY CAPITAL LIMITED, ) LAKE MANAGEMENT LDC, ) LAUREL ANGELA MACDONALD, ) SEACREST CAPITAL LIMITED, ) MOHAMED GHAUS KHALIFA, ) ) Defendants. ) COMPLAINT JURISDICTION AND VENUE I. This Court has jurisdiction over the subject matter of this action pursuant to Section 27 of the Securities Exchange Act of 1934, as amended, 15 U.S.C. 78aa ("the Exchange Act"), Section 22(a) of the Securities Act of 1933, 15 U.S.C. 77(a) (the "Securities Act"); under 28 U.S.C. 1331; and under principles of supplemental jurisdiction pursuant to 28 U.S.C The claims asserted herein arise under Section 12(1) of the Securities Act, 15 U.S.C. 771(1); Section 10(b) of the Exchange Act, 15 U.S.C. 78j(b), Rule 10b-5, 17 C.F.R. Section b-5, promulgated under the Exchange Act by the Securities and Exchange Commission (the "SEC"); and the common law.

2 2. Venue is proper in this District pursuant to Section 27 of the Exchange Act and 28 U.S.C. 1391(b) and 15 U.S.C. 77v and 78aa. Many relevant documents and key witnesses relating to the claims asserted in this action are located in this District. In addition, many of the acts and transactions constituting the violations of law alleged herein, including the preparation, issuance and dissemination of materially false and misleading information to the investing public, have occurred in this District. The principal executive offices of United Petroleum Corporation ("UPET" or the "Company"), the issuer of the securities which are the subject of this action, are located in this District. 3. In connection with the acts, common course of conduct and the plan and scheme alleged herein, defendants used, directly and indirectly, the means and instrumentalities of interstate commerce, including the United States mails, interstate wire and telephone facilities, and facilities of a national securities exchange THE PARTIES 4. Plaintiff John Pisacreta is a resident of Massachusetts who purchased 98,000 shares of UPET common stock at various times during the Class Period as set forth in detail in Exhibit A attached hereto, and has sustained damages as a result thereof. 5. Defendant Ronald Berkovitz ("Berkovitz") is an individual who, throughout the Class Period acted as the principal promoter of UPET common stock, the principal financial adviser to UPET and a financial adviser to TAJ Global Equities (the primary market maker for UPET common stock). Berkovitz sold and caused UPET to issue convertible debentures to the other defendants named herein. Berkovitz acted as an intermediary between UPET, market makers for UPET stock, and the other defendants named herein and used various fraudulent and manipulative means to artificially inflate the price of UPET common stock throughout the Class Period as described in more detail below. In doing so, Berkovitz is 2

3 liable as a primary violator of Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder by the SEC. Berkovitz earned substantial fees in connection with the placement and sale of UPET convertible debentures to the other named defendants as set forth below. 6. Each of the other defendants named herein (the "Reg S Defendants") are purportedly "offshore" entities or individuals that purchased convertible debentures of UPET during the Class Period in reliance upon the transaction exemption afforded by Regulation S ("Reg S") as promulgated by the Securities and Exchange Commission ("SEC") under the Securities Act of 1933, and pursuant to substantially similar Offshore Debenture Securities Subscription Agreements (the "Reg S Agreements"). During the Class Period, each of the Reg S Defendants: a. acquired unregistered UPET securities in private placement Reg S transactions with a view toward distribution and sale to the public in U.S. trading markets; b. misrepresented that they were acquiring UPET securities for "investment purposes" and that they had no intention to sell said securities in the United States or for the account or benefit of a U.S. person; c. executed sales of UPET common stock at artificially inflated prices in the U.S. while in possession of material non-public information concerning UPET and the market for UPET securities; and d. breached the terms of the Reg S Agreements by (i) maintaining short positions in UPET common stock and/or (ii) selling UPET common stock in the United States to a U.S. person, or for the account or benefit of a U.S. person. 7. In doing so, each of the Reg S Defendants named herein is liable as a primary violator of Section 10(b) of the Exchange Act, Rule 10b-5 promulgated thereunder by the SEC and Section 12(1) of 3

4 the Securities Act. The Reg S Defendants and their investments in UPET convertible debentures during the Class Period are as follows: a. Infinity Investors Limited ("Infinity") is purportedly an "offshore" corporate entity not acting for the account or benefit of U.S. persons within the meaning of Reg S, having an address of 27 Wellington Road, Cork Ireland Infinity was represented in the U.S. through principals and affiliates of Unity Hunt, Inc. in Dallas, Texas. On or about August 4, 1996, Infinity entered into a Reg S Agreement to acquire $7,100,000 principal face amount of UPET Convertible Debentures bearing a 7% annual interest rate and a maturity date of July, 1998; b. Dan Dotan ("Dotan") is purportedly an "offshore" individual not acting for the account or benefit of U.S. persons within the meaning of Reg S, having an address of 12 Frishman Street, Apartment 1, Tel Aviv, Israel. On or about October 3, 1996, Doltan entered into a Reg S Agreement to acquire $1,000,000 principal face amount of UPET Convertible Debentures bearing a 6%, and a maturity date of September, 1998; c. Fairway Capital Limited ("Fairway") is purportedly an "offshore" corporate entity not acting for the account or benefit of U.S. persons within the meaning of Reg S, having an address of 27 Wellington Road, Cork Ireland. On or about September 11, 1996, Fairway entered into a Reg S Agreement to acquire $1,250,000. principal face amount of UPET convertible debentures bearing a 6% annual interest rate and a maturity date of August, 1998; d. Lake Management LDC ("Lake") is purportedly an offshore corporate entity not 4

5 acting for the account or benefit of U.S. persons within the meaning of Reg S, having an address of P.O. Box 705 F.T., Butterfield House, Fort Street, Grand Cayman, Cayman Islands, B.W.I. On or about May 1, 1996, Lake entered into two Reg S Agreements to acquire in separate transactions: (i) $2,500,000 principal face amount UPET convertible debentures bearing a 6% annual interest rate (ii) $700,000. principal face amount of UPET convertible debentures bearing a 7% annual interest rate, each having a maturity date of 1998; e. Laurel Angela MacDonald ("MacDonald") is purportedly an offshore individual not acting for the account or benefit of U.S. persons within the meaning of Reg S, having an address of 1 Douglas Avenue, Toronto, Ontario Canada. On or about September 30, 1996, MacDonald entered into a Reg S Agreement to acquire $300,000 principal face amount of UPET convertible debentures bearing a 6% annual interest rate and a maturity date of 1998; f. Seacrest Capital Limited ("Seacrest") is purportedly an offshore corporate entity not acting for the account or benefit of U.S. persons within the meaning of Reg S, having an address of 27 Wellington Road, Cork, Ireland. On or about September 11, 1996, Seacrest entered into a Reg S Agreement to acquire $1,250,000. principal face amount of UPET convertible debentures bearing a 6% annual interest rate and a maturity date of August 1, 1998; g. Mohamed Ghaus Khalifa ("Khalifa") is purportedly an offshore individual not acting for the account or benefit of U.S. persons within the meaning of Reg S. On or about October 1, 1996, Khalifa entered into a Reg S Agreement to acquire $2,000,000. 5

6 principal face amount of UPET convertible debentures bearing a 6% annual interest rate and a maturity date of August 1, CLASS ACTION ALLEGATIONS 8. This action is brought as a class action pursuant to Rule 23(a) and 23(b)(3) of the Federal Rules of Civil Procedure, on behalf of a class (the "Class") consisting of all other persons and entities who purchased UPET common stock from May 1, 1996 through the close of business on January 16, 1997, both dates inclusive (the "Class Period"). Excluded from the Class are the defendants herein, members of the immediate family of the defendants, any entity in which any of the defendants has a controlling interest, and the legal representatives, heirs, successors or assigns of any of the defendants. 9. This action is properly maintainable as a class action for the following reasons: a. although the exact number of class members cannot be ascertained, they are so, numerous and geographically dispersed that joinder of all class members is impracticable. Plaintiff believes that there are at least several hundreds of members of the Class. As of December 3, 1996, more than 7 6 million shares of common stock were outstanding common stock traded nationally on NASDAQ. b. There are common questions of law and fact involved herein which predominate over any questions affecting only individual members of the Class. These common questions of law and fact include: i. Whether defendants, during the Class Period, misrepresented, omitted, and/or concealed from the Plaintiff, other Class members and the investment public material facts relating to UPET; Whether defendants violated Section 10(b) of the Exchange Act an Rule 10b- 6

7 5 promulgated thereunder; Whether the acts and omissions of defendants constitute violation of the common law; iv. Whether the market price for UPET common stock was artificially inflated during the Class Period as a result of defendants' violations; and v. Whether Plaintiffs and the other members of the Class sustained damages, and, if so, the proper measure thereof; c. The claims of Plaintiff are typical of those of the Class in that Plaintiff is a member of the Class and has no known interests that are antagonistic to or contrary to the interests of the Class. d. Plaintiff will fairly and adequately protect the interests of the members of the Class and has retained competent counsel experienced in class and securities litigation to vigorously prosecute this action. e. A class action is superior to other available methods for the fair and efficient adjudication of this controversy. Plaintiff knows of no difficulty to be encountered in the management of this action which would preclude its maintenance as a class action. Furthermore, since the damages suffered by individual class members may be relatively small, the expense and burden of individual litigation make it impracticable for the Class members to seek redress individually or the wrongs they have suffered. 10. Plaintiff will rely, in part, upon the presumption of reliance established by the fraud-on-themarket doctrine in that: a. defendants made public misrepresentations during the Class Period, as alleged herein; 7

8 b. the misrepresentations were material; c. shares of UPET common stock were traded on a developed national stock exchange, namely the NASDAQ, which is an efficient market within the meaning of that context utilized herein; d. Plaintiff and the other members of the Class purchased their UPET shares during the time of defendants' violations and prior to the time when the truth began to be publicly revealed, without knowledge of the falsity of defendants' misrepresentations. 11. Based upon the foregoing, Plaintiff is entitled to a presumption of reliance upon the integrity of the market for the purposes of class certification. In addition, Plaintiffs are also entitled to a presumption of reliance with respect to defendants' material omissions which resulted in UPET common stock trading at artificially inflated prices as alleged herein. FACTUAL ALLEGATIONS APPLICABLE TO ALL CLAIMS Background 12. UPET is a Delaware corporation with its principal place of business located at 4867 North Broadway, Knoxville, Tennessee. UPET's business activities are conducted primarily through its subsidiaries, Calibur Systems, Inc., which operates various convenience stores and automobile lubrication, detail, washing and gasoline service operations, and Jackson-United Petroleum Corporation, a developer of oil and gas properties. 13. In early 1996, defendant Berkovitz approached UPET's President, Chief Executive Officer and Chairman of the Board, Michael F. Thomas ("Thomas") in Miami, Florida about raising capital for UPET to expand its business operations. In doing so, Berkovitz touted his purported financial expertise and experience in raising funds for growing companies, his extensive contacts in the international investment community, his access to capital markets, and his ability as a promoter to attract private and 8

9 public investors to UPET stock. 14. Berkovitz represented to Thomas that he could immediately raise up to $20 million for UPET in private placement transactions in a manner which would not adversely affect the market price of UPET common stock. Berkovitz explained to Thomas that in order to do so, Thomas and UPET would need to (a) retain Berkovitz as UPET's financial adviser entrusting to him the function of raising capital for UPET, and (b) authorize UPET to issue convertible debentures to be offered and sold by Berkovitz on UPET's behalf in various private placements transactions. Thomas agreed to both conditions. On or about April 17, 1996 UPET's Board of Directors authorized the issuance of convertible debentures for this purpose. The Convertible Debentures 15. From May 1, 1996 through October 1, 1996, UPET issued convertible debentures in the aggregate face amount of approximately $27.5 million in a series of substantially similar private placement transactions which were sold without SEC registration in reliance upon the transaction exemption afforded by Reg S of the Securities Act of Each such transaction was negotiated and arranged in the United States between Berkovitz and U.S. representatives and affiliates of the Reg S Defendants, was sold through a U.S. underwriter in Atlanta, Georgia (i.e. Global Capital), and was sold and subscribed to based upon substantially similar Reg S Agreements. 16. Pursuant to the Reg S Agreements, each of the aforementioned convertible debentures (including those purchased by the Reg S Defendants as set forth in 7 above) possessed similar contractual terms and conditions such as an annual interest rate of 6% or 7% and a maturity of approximately 2 years. The conversion price at which UPET convertible debentures were to be converted into shares of UPET common stock was based upon the average reported market prices for said stock for a certain number of 9

10 trading days on NASDAQ immediately prior to any given conversion. Generally, the lower that UPET stock prices dropped, the greater that the corresponding number of shares would be into which the debentures could be converted. 17. In each convertible debenture sale, the purchaser paid approximately 75% of the face value (i.e. a 25% discount). An addition of 10% of the face value was paid in commissions. UPET, the issuer, thus received approximately 65% of the total face value of each of the convertible debentures sold. Of the $27.5 million in total convertible debentures issued by UPET, purchasers paid approximately $20.6 million, the Company received funds of approximately $17.9 million, and approximately $2 7 million was paid in commissions, a substantial portion of which was paid to Berkovitz. 18. Each of the convertible debentures were sold pursuant to Reg S Agreements which contained certain terms which were specifically drafted and included by UPET for the intended purpose of protecting UPET share prices for UPET's shareholders and prospective purchasers by preventing selling pressure from Reg S convertible debenture purchasers to be executed on UPET's common stock in U.S. trading on the NASDAQ system. 19. Each of the Reg S Agreements provided that the purchasers of the UPET convertible debentures agreed to acquire these securities for "investment purposes", and not for short-term sales. This particular term was set forth in the following alternative clauses, one of which was included in each of the Reg S Agreements: HOLDER understands that in the view of the SEC the statutory basis for the exemption claimed for this transaction would not be present if the offering of Securities, although in technical compliance with Regulation S, is part of a plan or scheme to evade the registration provisions of the 1933 Act. HOLDER is acquiring the Securities for investment purposes and has no present intention to sell the Securities in the United States or to a U.S. person or for the account or benefit of a U.S. person. 10

11 or The HOLDER of this Debenture, by execution of the Subscription Agreement and acceptance hereof, agrees that this Debenture is being acquired for investment purposes and that such HOLDER will not offer, seller otherwise dispose of this Debenture of the shares of common stock issuable upon conversion thereof except under circumstances which shall not result in a violation of the Act or any applicable state Blue Sky law or similar laws relating to the sale of securities. 20. Each of the Reg S Agreements provided that the purchasers of the UPET convertible debentures agreed to not sell UPET common stock short per the following clause: HOLDER represents and warrants that neither it nor any of its affiliates will directly or indirectly maintain any short position in Securities of the ISSUER from closing through the applicable Conversion Dates. Defendants' Fraudulent and Manipulative Scheme 21. At least as early as May 1, 1996, defendants embarked upon a fraudulent and manipulative scheme to undermine the integrity of the market for UPET stock and to circumvent and evade the terms of the Reg S Agreements in order to enrich themselves at the expense of plaintiff and the class. 22. Central to defendants' scheme was the ability of the Reg S Defendants to: (a) execute sales transactions (including short sales) in UPET stock in the United States at artificially inflated prices, (b) cover their short sales by acquiring UPET common stock at lower prices through converting UPET convertible debentures into said stock, and (c) conceal the existence, nature and purpose of their scheme from plaintiff, the Class, and the investment public. 23. Each of the Reg S Defendants named herein misrepresented that they were acquiring UPET securities for investment purposes, without an intention to sell said securities in the United States or to a U.S. person or for the account or benefit of a U.S. person. 24. Each of the Reg S Defendants named herein misrepresented that neither they nor any of 11

12 their affiliates would directly or indirectly maintain any short positions in UPET stock. 25. Each of the Defendants knew that their above-referenced statements (in ) were false when made in that each of the Reg S Defendants fully intended on short-selling and/or selling UPET common stock in the United States upon the closing of their respective UPET convertible debenture purchases, or shortly thereafter, for purposes of generating trading profits for themselves and their affiliates. 26. Each of the Reg S Defendants signed the Reg S Agreements with the knowledge that they were perpetrating a fraud on the market for UPET common stock because they did not intend on complying with the above-referenced terms of said Agreements and their purported agreement to these terms had a direct material impact on the public trading price of UPET common stock in the United States on the NASDAQ system. 27. The Reg S Defendants, in knowingly making these material misrepresentations, defrauded Plaintiff, other class members and the investment public by undermining the integrity of the market for UPET common stock and causing said stock to trade at artificially inflated prices. Nonetheless, the Reg S Defendants, armed with knowledge of these concealed material facts, and in breach of the terms of the Reg S Agreements, executed sales and short sales of substantial quantities of UPET common stock at artificially inflated prices and profited thereby. 28. Had Plaintiff and other class members known (a) the true nature of the market for UPET common stock, (b) the true reasons for increased trading volume in UPET common stock, and (c) that the Reg S Defendants were short-selling or selling substantial quantities of UPET common stock in the United States, they would not have purchased UPET common stock or would not have paid the artificially inflated prices for said stock which they did. 12

13 29. Berkovitz also was an active and direct participant in the fraudulent and manipulative scheme to inflate the market prices for UPET common stock. As such, Berkovitz was motivated by his desire to (a) continue to generate revenues as UPET's financial advisor including substantial commissions in connection with the sale of UPET convertible debentures, (b) satisfy his investor clients' (Le. the Reg S Defendants') desire to profit through executing sales transactions of UPET stock at artificially inflated prices. 30. In his dual capacity as UPETs' financial adviser and stock promoter, Berkovitz spoke regularly throughout the Class Period with the principals and traders at TAJ Global Equities (the primary market makers for UPET common stock) about UPET, its business, operations, finances, capitalization and prospects. Berkovitz knew throughout the Class Period that the Reg S Defendants were unlawfully executing sales transactions, including short sales of UPET common stock in the United States, but failed to disclose any such facts to these parties. 31. Further, throughout the Class Period Berkovitz consistently made affirmative material misrepresentations to principals and traders at TAJ Global Equities, to securities analysts and public relations personnel that were publishing and disseminating information about UPET to the market, and to prospective UPET stock purchasers, that there were no UPET Reg S convertible debenture holders that had sold or were selling any UPET stock. 32. Throughout the Class Period, Berkovitz also misrepresented to the aforementioned parties, without a reasonable basis in fact to do so, that UPET was close to conducting a registered secondary public offering at prices of $8.00 per share or higher in order to induce purchases and dissuade sales of UPET common stock at artificially inflated prices while Berkovitz continued to sell convertible debentures to the Reg S Defendants and while the Reg S Defendants continued to execute sales of UPET common 13

14 stock. Damages 33. As a result of defendants' fraudulent and manipulative conduct and transactions described above, Plaintiff and other class members have suffered substantial damages in the form of (a) monetary losses due to purchasing UPET common stock at artificially inflated prices in ignorance of defendants' concealed scheme and (b) dilution of their UPET shares due to excessive conversions of UPET convertible debentures by the Reg S Defendants at excessive rates caused by Defendants at prices which were ultimately driven down by the Reg S Defendants' selling pressure and the public revelation thereof. 34. As a result of defendants' concealment of their fraudulent and manipulative scheme and transactions during the Class Period, UPET common stock traded at prices at least as high as 5-7/8 per share in national trading on the NASDAQ systems. 35. As the truth began to surface and be publicly revealed concerning defendants' fraudulent and manipulative conduct and as the Reg S Defendants' concealed unlawful selling and short-selling of UPET stock began to take effect on the market, the price of UPET common stock dropped precipitously to prices below $1.00 per share. Plaintiff and other class members, who purchased UPET stock at artificially inflated prices, suffered substantial damages as a result. 36. As prices for UPET common stock continued to plummet, the Reg S Defendants converted substantial amounts of UPET convertible debentures into UPET common stock at excessive conversion rates which were caused primarily by the unlawful selling and short-selling of UPET common stock. As a result, the interests of Plaintiff and other class members in UPET were significantly diluted. The number of UPET shares of common stock outstanding grew by approximately 240% from approximately 4.6 million shares to over 11 million shares thereby diluting the interests of Plaintiff and the Class to under 14

15 42% of the amount of equity that they previously held in the Company. COUNT I (Violations of Sections 10(b) of the Exchange Act and Rule 10b-5 Promulgated Thereunder Against All Defendants) 37. Plaintiff repeats and realleges the allegations contained in paragraphs 1 through 36 of the Complaint as if set forth herein. 38. The Securities described herein are securities, as defined in Section 2(1) of the Securities Act [15 U.S.C. 77b(1)] and Section 3(a)(9) of the Exchange Act [15 U.S.C. 78(a)(10) Defendants, by use of the means or instrumentality of interstate commerce or the use of the mails, engaged in the use of manipulative and deceptive practices in connection with the sale of such securities to Plaintiffs and the members of the Class in violation of Section 10(b) of the Exchange Act, 15 U.S.C. 78j(b), and Rule promulgated thereunder. 40. Such manipulative and deceptive practices included, inter alia, the true or untrue statements of material fact and the omission of material facts particularly alleged above that a reasonable investor would have considered important in making an investment decision in connection with UPET. 41. Such defendants knowingly or recklessly made such untrue statements and omissions of material fact for the purpose of inducing Plaintiff and Class members to purchase such securities. 42. Plaintiff and the members of the Class justifiably relied on such untrue statements and omissions of material fact and on the integrity of the market for UPET in formulating their decisions to purchase UPET common stock during the Class Period. 43. In fact, had Plaintiff and other Class members known of the fraud perpetrated by such defendants in connection with the issuance distribution and sale of the securities described herein such 15

16 securities could not have been sold at any price or at a price substantially below that price paid by Plaintiff and the Class. 44. As a result of such defendants' conduct, the Plaintiff and the Class have suffered damages. 45. By reason of the acts, omissions, practices, and courses of business set forth herein, these defendants have violated Section 10(b) of the Exchange Act [15 U.S.C. 7j(b)], and Rule 10b-5 promulgated thereunder [15 C.F.R b-5]. COUNT II (Violation of Section 12(1) of the Securities Act Against the Reg S Defendants) 46. Plaintiff repeats and realleges each and every allegation in paragraph 1 through 45 as if fully set forth herein. 47. Each of the Reg S Defendants were "sellers" and/or "underwriters" of UPET securities within the meaning of the Securities Act in connection with the sale of unregistered shares of UPET stock in the United States during the Class Period. 48. Each of the Reg S Defendants acquired UPET securities in private placement transactions without registration and with an intent to sell and distribute unregistered shares of UPET stock in the U.S. through public sales. 49. There is no applicable exemption from registration provided under either Section 3 or Section 4 of the Securities Act which would act to relieve the Reg S Defendants from their registration duties in connection with their public sales of UPET stock during the Class Period. 50. The Reg S Defendants sold UPET stock to plaintiffs and other Class members in violation of Section 5 of the Securities Act without an effective registration statement or prospectus. 16

17 51. Each of the Reg S Defendants' sales of UPET stock complained of herein occurred within three years of the filing of this action and within one year of the time that plaintiff and the Class could have reasonably discovered said sales. COUNT III (Under the Common Law for Fraud and Deceit Against All Defendants) 52. Plaintiff repeats and realleges each and every allegation in paragraph 1 through 51 as if fully set forth herein. 53. This count is asserted under principles of common law and Tennessee law. 54. During the Class Period, defendants, individually and in concert, directly and indirectly, engaged and participated in, or knowingly a common plan and scheme and continuing course of conduct and conspiracy to conceal adverse material information about the Company's practices and its prior representations to the public about its financing transactions and business and investment payments. Defendants employed devices, schemes and artifices to defraud and engaged in acts, practices and a course of conduct as herein alleged in an effort to maintain an artificially high market price for the securities described herein, which included the making of untrue statements of material facts, omitting to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, and engaging in transactions, practices, and courses of business which operated as a fraud and deceit upon the purchasers of securities described herein during the Class Period. 55. The false and misleading statements and omissions in securities described herein, and in its public announcements, were made with the intent to deceive and/or defraud Plaintiffs and the other Class members, or to aid and abet the deception and defrauding of Plaintiffs and the other Class members, or 17

18 were made with such recklessness or indifference to truth as to constitute intent to deceive and defraud Plaintiffs and the other members of the Class. Said acts by defendants were fraudulent, oppressive, and malicious. Each of the defendants, by acting as described above, did so knowingly or with such recklessness as to constitute a fraud and deceit upon Plaintiff and the other members of the Class. 56. The acts, practices and common course of conduct by defendants operated as a fraud and deceit upon (a) the market in securities described herein and (b) Plaintiff and the other members of the Class who relied on the aforesaid market and the market prices to reflect the true value of the securities described herein based on true, full, fair, and lawful disclosure of material facts. 57. As a result of the foregoing, defendants committed fraud and deceit upon Plaintiff and the Class. Plaintiff therefore prays for an award of compensatory and punitive damages against defendants. COUNT IV (Breach of Contract Against the Reg S Defendants) 58. Plaintiff repeats and realleges every allegation contained in paragraphs 1-57 of the Complaint as if set forth herein. 59. UPET and each of the Reg S Defendants executed the Reg S Agreements containing certain terms and conditions by which UPET convertible debentures were issued and sold during the Class Period. 60. The aforesaid contracts contained express terms and conditions which were intended to benefit holders and prospective purchasers of UPET common stock, including Plaintiff and other members of the Class. 61. By virtue of the facts set forth above, the Reg S Defendants breached their contracts with UPET, which were intended for the benefit of the Plaintiff and other members of the Class. 62. As a proximate result of the Reg S Defendants' breaches of their respective contracts, 18

19 Plaintiff and the Class have sustained damages, suffered mental and emotional distress, and have lost a substantial part of their investments, together with lost interest and general and incidental damages in an amount yet to be determined, and to be proven at trial. WHEREFORE, Plaintiff demands judgment on behalf of himself and the other Class members, as follows: A. Declaring that this action be maintained as a class action pursuant to Rule 23 of the Federal Rules of Civil Procedure; B. Granting judgment in favor of Plaintiff and the other Class members against each of the defendants under Count I for compensatory damages, and, under Count III for compensatory damages and punitive damages, together with prejudgment interest at the maximum rate allowable by law; C. Granting judgment in favor of Plaintiff and other Class members against the Reg S Defendants under Count II and IV for compensatory damages; D. Ordering defendants to make an accounting of transactions which they executed or directed to be executed during the Class Period in UPET securities and to disgorge illicit profits obtained thereby; E. Awarding Plaintiff the costs and disbursements of this action, including attorneys' fees and experts' fees; and F. Granting Plaintiff and the Class such other and further relief as the Court may deem just and proper. 19

20 Submitted this 31st day of March, JOHN PISACRETA, Individually and on behalf of all others similarly situated, Plaintiff WAYNE A. RITCHIE II Jr' 4 RITCHIE, FELS & DILLARD 606 W. Main Street, Suite 300 Knoxville, Tennessee (423) Peter A. Lagorio GILMAN AND PASTOR One Boston Place - 28th Floor Boston, Massachusetts (617) Howard Sirota SIROTA & SIROTA 747 Third Avenue New York, New York (212) Attorneys for Plaintiff and Class W DATMLINDATISATOMPLAIN MAR 20