EX-99.77ELEGAL 2 texnex1.txt COMPLAINT IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS FORT WORTH DIVISION 21st CENTURY TECHNOLOGIES, INC. and TRIDENT TECHNOLOGIES, INC., Plaintiffs, V. Civil Action No. 401-CV-0338-Y DOUG SPRING and BUREN PALMER, II Defendants. PLAINTIFFS' COMPLAINT AND APPLICATION FOR INJUNCTIVE RELIEF Plaintiffs 21st Century Technologies, Inc. ("21st Century") and Trident Technologies, Inc. ("Trident") (collectively "Plaintiffs"), for their Complaint and Application for Injunctive Relief against Defendants Doug Spring ("Spring") and Buren Palmer, II ("Palmer") (collectively "the Defendants"), allege and state as follows: PARTIES 1. Plaintiff 21st Century is a Nevada Corporation with its principal place of business in Haltom City, Tarrant County, Texas. 21st Century is therefore a citizen of Nevada and Texas. 2. Plaintiff Trident is a wholly-owned subsidiary of 21st Century with its principal place of business in Virginia Beach, Virginia and its manufacturing facility in Fort Worth, Tarrant County, Texas. Trident is therefore a citizen of Virginia and Texas. 3. Defendant Spring is an individual residing in Denham Springs, Louisiana. Spring is amenable to the jurisdiction of this Court and to service of process under TEX. CIV. PRAC. & REM. CODE 17.041-045 (the "Texas Long- Arm Statute"). At all times relevant to this action, Spring conducted business in the State of Texas as provided in the Texas Long-Arm Statute. Spring has committed torts in whole or in part in Texas, as set out more fully in this Complaint. Spring also contracted with 21st Century and Trident and those agreements required Spring to perform his obligations in whole or in part in Texas. This proceeding arises out of the business done in Texas by Spring. Accordingly, the Secretary of State of Texas is an agent for service of process upon Spring. The Secretary of State of Texas may forward the Citation and this Complaint to Spring at his home or home office address, 10320 Lonepine Road, Denham Springs, Louisiana. 4. Defendant Palmer is an individual residing in Walker, Louisiana and is therefore a citizen of Louisiana. Palmer is amenable to the jurisdiction of this Court and to service of process under TEX. CIV. PRAC. & REM. CODE 17.041-045 (the "Texas Long-Arm Statute"). At all times relevant to this action, Palmer conducted business in the State of Texas as provided in the Texas Long-Arm Statute. Palmer has committed torts in whole or in part in Texas, as set out more fully in this Complaint. Palmer also contracted with 21st Century and Trident and those agreements required Palmer to perform his obligations in whole or in part in Texas. This proceeding arises out of the business done in Texas by Palmer. Accordingly, the Secretary of State of Texas is an agent for service of process upon Palmer. The Secretary of State of Texas may forward the Citation and this Complaint to Palmer at his home or home office address. 12857 Elaine Drive, Walker, Louisiana 70785. JURISDICTION AND VENUE 5. This Court has original subject matter jurisdiction over this action because the amount in controversy exceeds the sum or value of $75,000.00, exclusive of interest and costs, and is between citizens of different states. 28 U.S.C. 1332. 6. Venue is proper in this Court because a substantial part of the events or omissions giving rise to the claims asserted herein occurred in this district and division. 28 U.S.C. 1391(a)(2). 7. The Defendants are subject to personal jurisdiction at the time this action commenced in this district and division. Accordingly, venue is proper in the Northern District of Texas, Fort Worth Division under 28 U.S.C. 1391(c). FACTS APPLICABLE TO ALL CAUSES OF ACTION 8. 21st Century is a publicly-traded technology holding company. Continually expanding, 21st Century currently has six active wholly-owned subsidiaries. One of these subsidiaries is Trident. 9. Trident was formed by 21st Century in June 1995. 21st Century incorporated Trident for the purpose of licensing an existing patent held by the Los Alamos National Laboratory ('Los Alamos'). The patent described certain magnet-controlled technology. Trident became the operating company to develop modifications and/or improvements to the patented technology licensed from Los Alamos, as well as to manufacture, market and sell the enhanced technology. 10. In or about July 28, 1999, 21st Century employed Doug Spring ('Spring') and Buren Palmer, II ('Palmer') to serve as officers of Trident. Spring's and Palmer's employment was memorialized in separate written agreements. True and correct copies of the employment agreements are attached hereto as Exhibit '1.' Under the terms of the employment agreement executed by Spring, Spring agreed to serve as President of Trident for a one-year term. He was responsible for the marketing and product development of the technologies licensed by Trident from Los Alamos. 21st Century employed Palmer as the Senior Vice President of Trident for a one-year term. Like Spring, Palmer was also responsible for the marketing and product development of the licensed technologies. Trident paid Spring and Palmer an annual salary and issued 600,000 warrants to each individual for 21st Century's stock for $.10 per share. Spring and Palmer subsequently exercised these warrants. Spring currently owns 700,000 shares of 21st Century common stock; Palmer owns 600,000. 21st Century reposed special confidence in Spring and Palmer and entrusted these employees with Trident's most sensitive proprietary information relating to the licensed technology. 11. At or about the time Spring became the President of Trident, Spring was appointed as a Director of 21st Century. 12. While Spring and Palmer served as officers, Trident invested considerable energy in the research, development, testing and manufacturing of improvements to the licensed technology. These efforts resulted in the development of the magnetic patch devices known as the 'SeaPatch' and 'ProMag' products. These devices are used to stop leaks on such objects as ships, barges, storage tanks, pipelines and railcars. 13. 21st Century's and Trident's proprietary improvements to the licensed technology afford Trident a competitive advantage in the marketplace because the existing technology for patching leaks takes a greater amount of time to install and therefore causes a greater volume of leakage of substances potentially harmful to the environment. 14. While in the course and scope of their duties, Spring and Palmer worked on improvements to the licensed technology. Additionally, Spring and Palmer, through outside counsel retained and paid for by 21st Century, assisted with the preparation of two provisional patent applications for filing with the United States Patent Office relating to the improved technology. The patent applications were filed on July 3, 2000 and August 16, 2000. Spring and Palmer also were intimately involved in developing and producing marketing materials relating to the newly-developed technologies. Trident compensated Spring and Palmer for their technology development and marketing in the form of salary and stock. 15. On several occasions, 21st Century requested that Spring and Palmer sign a written agreement assigning all intellectual property rights and designs, inventions and trade secrets developed by or learned by Spring and Palmer during their employment. A true and correct copy of one such Assignment is attached hereto as Exhibit '2.' Despite repeated demands for their execution of an assignment agreement, neither Spring nor Palmer executed any assignment. 16. As officers responsible for marketing and product development of Trident's technology, Spring and Palmer were also responsible for making sales calls and furnishing Trident's financial information to 21st Century on a regular basis. Although Spring and Palmer initially conducted these activities to the satisfaction of Trident and 2l~~ Century, Spring and Palmer ceased to make sales calls or provide financial information commencing in approximately January 2001. 17. While serving as officers of Trident, both Spring and Palmer regularly traveled to 21st Century's offices located in Tarrant County, Texas for board meetings and to provide status reports relating to Trident business. Spring had to attend 21st Century's board meetings because he was a Director. Additionally, Spring and Palmer made numerous telephone calls on a weekly basis to 21st Century's offices in Fort Worth, Texas to discuss business matters relating to Trident's research, development and testing of the technology improvements. Further, as discussed above, Spring and Palmer mailed Trident's financial and other proprietary information to 21st Century's offices in Tarrant County, Texas so that 21st Century could monitor Trident's activities. 18. After the preparation and filing of the patent application, Spring and Palmer met with Alan Drake. Mr. Drake is the managing partner of 21st Century Funding, L.P. I and II. During their meeting with Mr. Drake, Spring and Palmer represented that they had complete and unrestricted rights to the technologies developed by Trident. According to Spring and Palmer, their rights in the improved technologies included unfettered ownership of the patent application and the right to develop, market, sell, and convey the improvements. Further, Spring and Palmer offered to sell their alleged rights in the improved technologies, as well as their combined ownership of 1,200,000 shares in 21st Century, to Drake for the purchase price of $5,000,000. During their solicitation of Drake, Spring and Palmer represented that they had previously met with persons and/or entities on the 'East Coast' and had attempted to sell their alleged rights to the technology and their 21st Century shares for the purchase price of $10,000,000. 19. In an attempt to preclude Spring and Palmer from wrongfully conveying the Trident technologies to anyone else, Mr. Drake signed an 'Agreement To Sell Personal Property' dated January 26, 2001 (the 'Agreement') which purported to convey the Trident technologies and the sellers' 21st Century stock. A true and correct copy of the Agreement is attached hereto as Exhibit '3.' 20. After he signed the Agreement, Mr. Drake contacted 21st Century's Chief Executive Officer and President, Ken Wilson. Mr. Drake relayed the discussions he had with Spring and Palmer and provided a copy of the Agreement to Mr. Wilson for his review. 21. After Mr. Drake informed Mr. Wilson of the Agreement, Mr. Wilson subsequently flew to Baton Rouge, Louisiana to personally meet with Spring and Palmer on March 2, 2001. During the meeting, Mr. Wilson advised Spring and Palmer that they did not have any ownership interests in the improved technologies and that all intellectual property rights belonged to Trident and/or 21st Century. Additionally, Mr. Wilson made repeated demands that they cease and desist from attempting to solicit the sale of the improved technologies to any person or entity, and again insisted they assign the intellectual property rights to Trident. 22. At that time, Spring gave Mr. Wilson two letters dated March 2, 2001 resigning as President of Trident and as a Director of 21st Century effective March 5, 2001. True and correct copies of the letters dated March 2, 2001 are attached hereto as Exhibit '4.' Palmer never formally resigned as Senior Vice President of Trident. However, as a result of his conduct, Trident requested Palmer's resignation on March 16, 2001. 23. In an attempt to amicably resolve this dispute without the need for court intervention, Mr. Wilson has had numerous conversations with both Spring and Palmer. On April 20, 2001, Spring insisted in a telephone conversation with Mr. Wilson that he and Palmer owned the enhanced technologies developed at the expense of 21st Century and Trident. Further, Spring stated that he and Palmer would immediately commence to sell their alleged rights to the enhanced technologies to third parties. 24. On April 25, 2001, five days after Mr. Wilson's conversation with Spring and Palmer, 21st Century's and Trident's counsel addressed a letter to Spring's and Palmer's attorney, Jack E. Morris, Esq., summarizing 21st Century's and Trident's rights to Trident's enhanced technologies. A true and correct copy of the letter dated April 25, 2001 is attached hereto as Exhibit 5.' 25. In response to the letter, Morris contacted counsel for 21st Century by telephone on April 26, 2001. Mr. Morris represented that Spring and Palmer maintained that they own Trident's technologies and will resolve this dispute upon payment of a substantial amount of money. 26. Both 21st Century and Trident will suffer immediate and irreparable harm if Spring and Palmer are not enjoined immediately from attempting to sell the enhanced technologies to third parties. It is difficult for 21st Century and Trident to calculate the value of the proprietary `Seapatch' and 'ProMag' technologies, but the bulk of Trident's net worth consists of the proprietary technology relating to these two products. These magnetic patch devices and related magnetic patch applications are Trident's only products. Injunctive relief will therefore assist Trident and 21st Century from losing its key intellectual property. Additionally, immediate injunctive relief is necessary to avoid any potential litigation that might ensue between 21st Century, Trident and any third party that might purchase the technology from Spring and Palmer. 27. 21st Century and/or Trident are willing to post a bond or cash deposit in an amount set by the Court which shall be available to compensate Spring and/or Palmer in the unlikely event it is found that a temporary restraining order and/or preliminary injunctive relief was improvidently issued. FIRST CLAIM FOR RELIEF: BREACH OF CONTRACT 28. Plaintiffs incorporate and reallege paragraphs 1- 27 above as if fully set forth herein. 29. Spring and Palmer materially breached their employment agreements by failing to make sales calls or otherwise market Trident's technologies, failing to supply financial information to 21st Century so that it could monitor Trident's business activities, attempting to convey Trident's technologies to persons and/or entities without authorization, and refusing to assign to Plaintiffs any and all inventions or other intellectual property developed while serving as officers of Trident. 30. Spring's and Palmer's breaches of their respective agreements have damaged Plaintiffs. Plaintiffs have performed all conditions precedent to recovery under the employment agreements. Therefore, Plaintiffs seek all damages caused by these Defendants, including, but not limited to, disgorgement of any proceeds received by Spring and Palmer for their wrongful attempt to convey Trident's enhanced technologies. SECOND CLAIM FOR RELIEF: CONVERSION 31. Plaintiffs incorporate and reallege paragraphs 1- 30 above as if fully set forth herein. 32. Spring and Palmer wrongfully exercised dominion and control over 21st Century's and/or Trident's intellectual property rights in the enhanced technologies. Additionally, these Defendants refused to return and/or disclaim any rights to the improved technologies. As a proximate result of Spring's and Palmer's conversion of Trident's enhanced technologies, for which they are jointly and severally liable, 21st Century and/or Trident have been damaged. 33. Moreover, the aforementioned conduct of Spring and Palmer in converting Plaintiffs' property was done with malice, as that term is defined in Texas Civil Practice & Remedies Code 41.001. Accordingly, Plaintiffs are entitled to exemplary damages in an amount sufficient to punish Spring and Palmer and deter similar conduct. THIRD CLAIM FOR RELIEF: MISAPPROPRIATION OF TRADE SECRETS 34. Plaintiffs incorporate and reallege paragraphs 1- 33 above as if fully set forth herein. 35. Plaintiffs expended reasonable efforts to keep the information relating to the enhanced technologies a secret. This proprietary and confidential information relating to the improved technologies derives independent economic value from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use. 36. Plaintiffs have taken reasonable efforts to maintain the secrecy of this intellectual property. Spring and Palmer misappropriated, through disclosure or use of the information, inevitable or otherwise, all or substantial portions of the proprietary information relating to the enhanced technologies. 37. Spring's and Palmer's misappropriation is willful, malicious and has caused Plaintiffs to suffer actual damages. The Defendants' misappropriation violates Texas common law. Spring and Palmer should be required to pay Plaintiffs' actual damages, including, but not limited to, disgorgement of any proceeds received related to the sale of Trident's technologies. 38. Moreover, Spring's and Palmer's theft of Plaintiffs' intellectual property was done with malice, as that term is defined in Texas Civil Practice & Remedies Code 41.001. Accordingly, Plaintiffs are entitled to exemplary damages against the Defendants in an amount sufficient to punish Spring and Palmer and deter similar conduct. FOURTH CLAIM FOR RELIEF: TEXAS THEFT LIABILITY ACT 39. Plaintiffs incorporate and reallege paragraphs 1- 38 above as if fully set forth herein. 40. Spring and Palmer unlawfully appropriated Plaintiffs' intellectual property. These Defendants have retained possession of Plaintiffs' intellectual property despite demand for the return of the property. 41. Spring's and Palmer's unlawful appropriation of Plaintiffs' intellectual property, for which they are jointly and severally liable, has proximately caused damages to Plaintiffs. Consequently, the Defendants are liable for the damages resulting from the theft of Plaintiffs' property. 42. Moreover, Plaintiffs are entitled to recover additional damages from Spring and Palmer as allowed under section 134.005 of the Texas Civil Practice and Remedies Code. FIFTH CLAIM FOR RELIEF: BREACH OF FIDUCIARY DUTY 43. Plaintiffs incorporate and reallege paragraphs 1- 42 above as if fully set forth herein. 44. At all times material to this civil action Spring and Palmer were employed as corporate officers of Trident. Further, Spring served as a director 21st Century. 45. Plaintiffs reposed a special confidence in Spring and Palmer and entrusted these employees with their most sensitive proprietary information. Indeed, the confidential and proprietary information relating to the enhanced technologies was the single most important asset of Trident. 46. Accordingly, Spring and Palmer owed fiduciary duties to Plaintiffs. The Defendants breached their fiduciary obligations by, inter alia: a. refusing to assign to Trident any inventions and other intellectual property which they developed while officers of Trident; b. failing to return confidential and proprietary information upon termination of employment and in response to demands for the return thereof; c. disclosing Plaintiffs' trade secrets relating to the enhanced technologies; d. attempting to financially benefit by selling Plaintiffs' intellectual property rights to third parties without authorization; e. failing to use reasonable efforts to provide Plaintiffs information relevant to affairs entrusted to Spring and Palmer and which Plaintiffs would desire to receive; and f. failing to conduct themselves with propriety such that Spring and Palmer did not bring disrepute upon Plaintiffs. 47. Spring's and Palmer's breaches of their fiduciary obligations have caused Plaintiffs to suffer damages. 48. Moreover, the Defendants' breaches of their fiduciary obligations causing Plaintiffs' damages resulted from Spring's and Palmer's conscious indifference, gross negligence, fraud or malicious conduct. Accordingly, Plaintiffs seek exemplary damages for the Defendants' breaches of their fiduciary obligations in an amount sufficient to punish Spring and Palmer and deter similar conduct. SIXTH CLAIM FOR RELIEF: CIVIL CONSPIRACY 49. Plaintiffs incorporate and reallege paragraphs 1-48 above as if fully set forth herein. 50. Spring and Palmer conspired to conduct an unauthorized and purported sale of Plaintiffs' intellectual property for their own personal benefit. From the inception of the agreement between the Defendants to commit the unauthorized sale, it was Spring's and Palmer's intent to cause injury to Plaintiffs. 51. Spring's and Buren's collaboration in attempting to sell Plaintiffs' intellectual property has caused Plaintiffs to suffer damages. 52. Moreover, Spring's and Palmer's conspiracy to harm Plaintiffs was done with malice, as that term is defined in Texas Civil Practice & Remedies Code 41.001. Accordingly, Plaintiffs are entitled to exemplary damages in an amount sufficient to punish the Defendants and deter similar conduct. SEVENTH CLAIM FOR RELIEF: ATTORNEYS' FEES 53. Plaintiffs incorporate and reallege paragraphs 1- 52 above as if fully set forth herein. 54. As a result of the Defendants breaches of their respective employment agreements, as described herein, Plaintiffs employed the undersigned attorneys to prosecute this action. Plaintiffs agreed to pay a reasonable fee for the services of the undersigned counsel. 55. Plaintiffs presented Spring and Buren with notice of a claim under Tex. Civ. Prac. & Rem. Code 38.001, et seq, and are therefore entitled to recover their reasonable attorneys' fees incurred in presenting and prosecuting the claims asserted herein. In the event of an appeal, Plaintiffs will be entitled to their reasonable attorneys' fees incurred in taking or defending such an appeal. 56. Additionally, Plaintiffs are entitled to recover their reasonable attorneys' fees incurred in presenting and prosecuting its claims against Spring and Palmer under Chapter 134 of the Texas Civil Practice and Remedies Code. In the event of an appeal, Plaintiffs will be entitled to their reasonable attorneys' fees incurred in taking or defending such an appeal. APPLICATION FOR TEMPORARY RESTRAINING ORDER, PRELIMINARY INJUNCTION & PERMANENT INJUNCTION 57. Plaintiffs incorporate and reallege paragraphs 1- 56 above as if fully set forth herein. 58. As indicated by the Declaration of Ken Wilson filed in support of Plaintiffs' Application for Entry of Temporary Restraining Order, Spring and Palmer threatened to wrongfully sell Trident's magnetic patch technology as recently as Friday, April 20, 2001. Spring and Palmer continue to assert that they own the Trident magnetic patch technologies and can freely assign this technology, which constitutes the single most valuable asset of Trident, to any third party. They further claim that the proceeds of any such sale would belong to them. Temporary, preliminary, and permanent injunctive relief will therefore be necessary to prevent the Defendants' wrongful attempts to sell Trident's proprietary technology. 59. 59. Because any such sale or attempted sale will necessarily involve disclosure or use of Trident proprietary technology, a temporary restraining order, preliminary and permanent injunctive relief will also be necessary to prevent the irreparable harm created by the attempted sale and disclosure of Trident's valuable proprietary technology. Monetary damages will be difficult to calculate and will necessarily be an inadequate remedy. 60. Plaintiffs' separate Application for Entry of Temporary Restraining Order establishes that (1) Plaintiffs have a probable right of recovery of their claims against the Defendants; (2) Plaintiffs will suffer immediate and irreparable harm if Spring's and Palmer's conduct are not restrained by a temporary restraining order, preliminary injunction, and, ultimately, a permanent injunction; (3) the threatened harm to Plaintiffs from the Defendants' conduct outweighs any potential harm to the Defendants resulting from the issuance of injunctive relief; (4) there is no countervailing hardship upon Spring and Palmer as a result of being restrained from what they are legally forbidden to do; and (5) public policy favors the use of injunctive relief to protect trade secrets and fair competition. 61. Plaintiffs are willing to post a bond or cash deposit in an amount set by the Court which shall be available to compensate Spring and Palmer in the unlikely event it is found that the temporary restraining order and preliminary injunction were improvidently issued. 62. Plaintiffs therefore seek a temporary restraining order and preliminary injunction restraining Spring, Palmer, their agents, and those persons in active concert or participation with them from: (a) transferring, disclosing or using Plaintiffs' proprietary' information, products and property, including Trident's magnetic patch technologies, to any person or entity; (b) attempting to transfer or disclose Plaintiff's proprietary information, products and property, including Trident's magnetic patch technologies, to any person or entity; (c) transferring, selling, otherwise conveying Plaintiffs' products and property, including Trident's magnetic patch technologies, to any person or entity; and (d) concealing, altering, removing or destroying any documents concerning or relating to Plaintiffs' magnetic patch technologies, including without limitation, the patent application, blueprints, diagrams, product specifications, customer lists, marketing and sales plans, financial information, and cost and pricing information. 63. Plaintiffs further seek mandatory injunctive relief, including a temporary, preliminary and permanent injunction order requiring Spring, Palmer, their agents, and those persons in active concert with them, to: (a) execute an assignment agreement assigning to Trident or 21st Century any and all intellectual property rights relating to the Trident magnetic patch technologies, including any patents, patent applications, or other property which Spring and Palmer purport to own or control; (b) return and place in to the registry of the Court the $15,000 down payment received from Alan Drake as consideration for the purported sale of the Trident magnetic patch technologies; and (c) return all of the Plaintiffs' property within the possession, custody or control of Spring and Palmer to Trident and 21st Century. 64. Plaintiffs further pray that, following trial of this case, a permanent injunction embodying the terms of the temporary injunction order be entered. PRAYER WHEREFORE, Plaintiffs pray that Spring and Palmer be cited to appear and answer, and that upon final hearing Plaintiffs have judgment against these Defendants as follows: (1) for damages resulting from Spring's and Palmer's breaches of the employment agreements as set forth above; (2) Plaintiffs' actual damages incurred as a result of Spring's and/or Palmer's actions as referenced above; (3) exemplary damages against Spring and Palmer as permitted by law; (4) statutory damages against Spring and Palmer as permitted by law; (5) the entry of a temporary restraining order, preliminary injunction and permanent injunction restraining Spring, Palmer, their agents and those persons in active concert with them, from: (a) transferring, disclosing or using Plaintiffs' proprietary information. products and property, including Trident's magnetic patch technologies, to any person or entity; (b) attempting to transfer or disclose Plaintiff's proprietary information, products and property, including Trident's magnetic patch technologies, to any person or entity; (c) transferring, selling, using or otherwise conveying Plaintiffs' products and property, including Trident's magnetic patch technologies, to any person or entity; and (d) concealing, altering, removing or destroying any documents concerning or relating to Plaintiffs' magnetic patch technologies, including without limitation, the patent application, blueprints, diagrams, product specifications, customer lists, marketing and sales plans, financial information, and cost and pricing information. (6) the entry of a mandatory injunction, including a temporary, preliminary and permanent injunction order requiring Spring, Palmer, their agents and those persons in active concert with them, to: (a) execute an assignment agreement assigning to Trident or 21st Century any and all intellectual property rights relating to the Trident magnetic patch technologies, including any patents, patent applications, or other property which Spring and Palmer purport to own or control; (b) return and place in to the registry of the Court the $15,000 down payment received from Alan Drake as consideration for the purported sale of the Trident magnetic patch technologies; and (c) return all of the Plaintiffs' property within the possession, custody or control of Spring and Palmer to Trident and 21st Century. (7) attorneys' fees through trial and any appeal; (8) prejudgment interest on all compensatory damages awarded herein. and post-judgment interest on all sums awarded herein, all at the rate provided by law, (9) Plaintiffs' costs of court; and (10) for such other and further relief at law or in equity, to which Plaintiffs may be entitled. Respectfully submitted, By: /s/ Mark D. Taylor Mark D. Taylor State Bar No.19713250 Clayton E. Bailey State Bar No.00796151 BAKER & MCKENZIE 2300 Trammell Crow Center 2001 Ross Avenue Dallas, Texas 75201 Tel: 214/978-3000 Fax: 214/978-3099 ATTORNEYS FOR PLAINTIFFS 21st CENTURY TECHNOLOGIES CORPORATION & TRIDENT TECHNOLOGIES, INC. IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS FORT WORTH DIVISION 21st CENTURY TECHNOLOGIES, INC. and TRIDENT TECHNOLOGIES, INC., Plaintiffs, V. Civil Action No. 401- CV-0338-Y DOUG SPRING and BUREN PALMER, Defendants. DECLARATION OF KEN WILSON - I, Ken Wilson, declare as follows: 1. "My name is Ken Wilson. I am the Chairman of the Board, President, and Chief Executive Officer of 21st Century Technologies, Inc. ('21st Century'). I am also a Director of 21st Century's wholly-owned subsidiary, Trident Technologies, Inc. ('Trident'). I have personal knowledge of the matters set forth herein, and, if called as a witness, I could and would testify competently thereto. 2. 21st Century is a Nevada corporation that has its principal place of business and headquarters located at 5050 E. Belknap Street, Haltom City, Tarrant County, Texas 76117. 21st Century is a publicly-traded technology holding company. Continually expanding, 21st Century currently has six active wholly-owned subsidiaries. One of these subsidiaries is Trident. 3. Trident was formed by 21st Century in June 1995. 21st Century incorporated Trident for the purpose of licensing an existing patent held by the Los Alamos National Laboratory ('Los Alamos'). The patent described certain magnet-controlled technology. Trident became the operating company to develop modifications and/or improvements to the patented technology licensed from Los Alamos, as well as to manufacture, market and sell the enhanced technology. 4. In or about July 28,1999, 21st Century employed Doug Spring ('Spring') and Buren Palmer ('Palmer') to serve as officers of Trident. Spring's and Palmer's employment were memorialized in separate written agreements. True and correct copies of the employment agreements are attached hereto as Exhibit '1. Under the terms of the employment agreement executed by Spring, Spring agreed to serve as President of Trident for a one-year term. He was responsible for the marketing and product development of the technologies licensed by Trident from Los Alamos. 21st Century employed Palmer as the Senior Vice President of Trident for a one-year term. Like Spring, Palmer was also responsible for the marketing and product development of the licensed technologies. Trident paid Spring and Palmer an annual salary and issued 600,000 warrants to each individual for 21st Century's stock to each individual for $.10 per share. Spring and Palmer subsequently exercised these warrants. Spring currently owns 700,000 shares of 21st Century common stock; Palmer owns 600,000. 21st Century reposed special confidence in Spring and Palmer and entrusted these employees with Trident's most sensitive proprietary information relating to the licensed technology. 5. At or about the time Spring became the President of Trident, Spring was appointed as a Director of 21st Century. 6. While Spring and Palmer served as officers, 21st Century (through Trident) and Trident invested considerable energy in the research, development, testing and manufacturing of improvements to the licensed technology. These efforts resulted in the development of the magnetic patch devices known as the 'SeaPatch' and ProMag' products. These devices are used to stop leaks on such objects as ships, barges, storage tanks, pipelines and railcars. 7. 21st Century's and Trident's proprietary improvements to the licensed technology afford Trident a competitive advantage in the marketplace because the existing technology for patching leaks takes a greater amount of time to install and therefore causes a greater volume of leakage of substances potentially harmful to the environment. 8. While in the course and scope of their duties, Spring and Palmer worked on improvements to the licensed technology. Additionally, Spring and Palmer, through outside counsel retained and paid for by 21st Century, assisted with the preparation of two provisional patent applications for filing with the United States Patent Office relating to the improved technology. The patent applications were filed on July 3, 2000 and August 16, 2000. Spring and Palmer also were intimately involved in developing and producing marketing materials relating to the newly-developed technologies. Trident compensated Spring and Palmer for their technology development and marketing in the form of salary and stock. 9. On several occasions, 21st Century requested that Spring and Palmer sign a written agreement assigning all intellectual property rights and designs, inventions and trade secrets developed by or learned by Spring and Palmer during their employment. A true and correct copy of one such Assignment is attached hereto as Exhibit '2.' Despite repeated demands for their execution of an assignment agreement, neither Spring nor Palmer executed any assignment. 10. While serving as officers of Trident, both Spring and Palmer traveled to 21st Century's offices located in Tarrant County, Texas at least once a month for board meetings and to provide status reports relating to Trident business. Spring had to attend 21st Century's board meetings because he was a Director. Additionally. Spring and Palmer made numerous telephone calls on a weekly basis to 21st Century's offices in Fort Worth, Texas to discuss business matters relating to Trident's research, development and testing of the technology improvements. Further, Spring and Palmer mailed Trident's financial and other proprietary information to 21st Century's offices in Tarrant County, Texas so that 21st Century could monitor Trident's activities. 11. Subsequent to the preparation and filing of the patent application, Spring and Palmer met with Alan Drake. Mr. Drake is the managing partner of 21st Century Funding, L.P. I and II. During their meeting with Mr. Drake, Spring and Palmer represented that they had complete and unrestricted rights to the technologies developed by Trident. According to Spring and Palmer, their rights in the improved technologies included unfettered ownership of the patent application and the right to develop, market, sell, and convey the improvements. Further, Spring and Palmer offered to sell their alleged rights in the improved technologies, as well as their combined ownership of 1,200,000 free trading shares in 21st Century, to Drake for the purchase price of $5,000,000. During their solicitation of Drake, Spring and Palmer represented that they had previously met with persons and/or entities on the 'East Coast' and had attempted to sell their alleged rights to the technology and their 21st Century shares for the purchase price of $10,000,000. 12. In an attempt to preclude Spring and Palmer from wrongfully conveying the Trident technologies to anyone else, Mr. Drake signed an 'Agreement To Sell Personal Property' dated January 26, 2001 (the 'Agreement') which purported to convey the Trident technologies and the sellers' 21st Century warrants. A true and correct copy of the Agreement is attached hereto as Exhibit '3.' 13. After he signed the Agreement, Mr. Drake contacted me. Mr. Drake relayed the discussions he had with Spring and Palmer and provided a copy of the Agreement to me for my review. 14. After Mr. Drake informed me of the Agreement, I subsequently flew to Baton Rouge. Louisiana to personally meet with Spring and Palmer on March 2, 2001, advised Spring and Palmer that they did not have any ownership interests in the improved technologies and that all intellectual property rights belonged to Trident and/or 21st Century. Additionally, I made repeated demands that they cease and desist from attempting to solicit the sale of the improved technologies to any person or entity, and again insisted they assign the intellectual property rights to Trident. 15. At that time, Spring gave me two letters dated March 2, 2001 resigning as President of Trident and as a Director of 21st Century effective March 5, 2001. True and correct copies of the letters dated March 2, 2001 are attached hereto as Exhibit '4.' Palmer never formally resigned as Senior Vice President of Trident. However, as a result of his conduct, Trident requested Palmer's resignation on March 16, 2001. 16. In an attempt to amicably resolve this dispute without the need for court intervention, I have had numerous conversations with both Spring and Palmer. On April 20, 2001, Spring insisted in a telephone conversation with me that Palmer and he owned the enhanced technologies developed at the expense of 21st Century and Trident. Further, Spring stated that he and Palmer would immediately commence to sell their alleged rights to the enhanced technologies to third parties. 17. On April 25, 2001, five days after my conversation with Spring, 21st Century's and Trident's counsel addressed a letter to Spring's and Palmer's attorney, Jack E. Morris, Esq., summarizing 21st Century's and Trident's rights to Trident's enhanced technologies. A true and correct copy of the letter dated April 25, 2001 is attached hereto as Exhibit '5.' 18. In response to the letter, Morris contacted counsel for 21st Century by telephone on April 26, 2001. Mr. Morris represented that Spring and Palmer maintained that they own Trident's technologies and will resolve this dispute upon payment of a substantial amount of money. 19. Both 21st Century and Trident will suffer immediate and irreparable harm if Spring and Palmer are not enjoined immediately from attempting to sell the enhanced technologies to third parties. It is difficult to calculate the value of the proprietary 'SeaPatch' and 'ProMag' technologies, but I can represent that the bulk of Trident's net worth consists of the proprietary technology to these two products. These magnetic patch devices and related magnetic patch applications are Trident's only products. Injunctive relief will therefore assist Trident and 21-" Century from losing its key intellectual property. Additionally, immediate injunctive relief is necessary to avoid any potential litigation that might ensue between 21st Century, Trident and any third party that might purchase the technology from Spring and Palmer. 20. 21st Century and/or Trident are willing to post a bond or cash deposit in an amount set by the Court which shall be available to compensate Spring and/or Palmer in the unlikely event it is found that a temporary restraining order and/or preliminary injunctive relief was improvidently issued. 21. I declare under penalty of perjury that the foregoing is true and correct." Executed this 26th day of April, 2001. /s/ Ken Wilson Ken Wilson EXHIBIT 1 TO DECLARATION OF KEN WILSON EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement") made and entered into as of July 28, 1999, by and between 21st CENTURY TECHNOLOGIES, INC., a Nevada corporation (the "Company" ) and DOUG SPRING ("Spring") for and in consideration of the mutual promises herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows; 1. DUTIES. During the term of this Agreement, Spring will be responsible for marketing and product development of Trident Technologies Inc. ("Trident") as its President. 2. TERM. The term of this Agreement shall be for a term of One (1) year commencing as the date first written above and renewable after the end of every year. 3. COMPENSATION. (a) The Company will pay Spring a base salary of $65,000 per year paid weekly subject to all applicable federal and state withholding taxes and other requirements. (b) The Company will pay Spring a three percent (3%) sales commission on goods sold by him payable at the time of receipt of payment by the Company in the following, increments: 1.5% in cash and 1.5% in stock. (C) The Company will issue to Spring 600,000 warrants @ .10 per share. 4. EMPLOYEE BENEFITS. The Company will provide Spring with such employee benefits, including but not limited to, dental and medical, as it provides to members of its Board of Directors. 5. TERMINATION. Tile Company may terminate Spring for "Cause" (as hereinafter defined) . The term "Cause" as used herein, shall mean a material breach of this Agreement by Spring, an act of fraud, dishonesty or willful conduct detrimental to the Company. Upon termination, the Company's obligation to Spring shall cease. However, Spring will be bound by the terms of a Confidentiality and Non-Disclosure Agreement which must be entered into by him as a condition of employment herein. 6 NOTICES. Any notices hereunder shall be made by certified first class mail with return receipt requested to the Company at its corporate headquarter address and to Spring at his residence. 7. MISCELLANEOUS. If any part of this Agreement is deemed to be invalid than the remaining parts of this Agreement shall survive as if the invalid provision did not exist. 8. LAW. This Agreement shall be construed in accordance with the laws of the State of Texas. 9- MODIFICATION. This Agreement may not be modified except in writing signed by all of the parties. 10. COMPLETE AGREEMENT. This Agreement is the complete agreement of the parties and supercedes and replaces any and all oral and/or written understandings of the parties if any. ACCEPTED AND AGREED TO: 21st Century Technologies, Inc. ACCEPTED AND AGREED TO: Doug Spring BY: /s/Patricia Wilson BY:/s/Doug Spring Patricia Wilson, President DATED: July 28,1999 DATED: July 28, 1999 EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement") made and entered into as of July 28, 1999, by and between 21st CENTURY TECHNOLOGIES, INC, a Nevada corporation (the "Company") and BUREN PALMER ("Palmer") for and in consideration of the mutual promises herein contained, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. DUTIES. During the term of this Agreement, Palmer will be responsible for marketing and product development of Trident Technologies Inc. ("Trident") as its Senior Vice President. 2. TERM. The term of this Agreement shall be for a term of One (1) year commencing as the date first written above and renewable after the end of every year. 3. COMPENSATION. (a) The Company will pay Palmer a base salary, of $46,800 per year paid weekly subject to all applicable federal and state withholding taxes and other requirements. (b) The Company will pay Palmer a three percent (3%) sales commission on goods sold by him payable at the time of receipt of payment by the Company in the following increments: 1.5% in cash and 1.5% in stock. (c) The Company will issue to Palmer 600,000 warrants @ .10 per share. 4. EMPLOYEE BENEFITS. The company will provide Palmer with such employee benefits including but not limited to, dental and medical, as it provides to members of its Board of Directors. 5. TERMINATION. The Company may terminate Palmer for "Cause" (as hereinafter defined). The term "Cause" as used herein, shall mean a material breach of this Agreement by Palmer, an act of fraud, dishonesty or willful conduct detrimental to the Company. Upon termination, the Company's obligation to Palmer shall cease. However, Palmer will be bound by the terms of a Confidentiality and Non-Disclosure Agreement which must be entered into by him as a condition of employment herein. 6. NOTICES. Any notices hereunder shall be made by certified first class mail with return receipt requested to the Company at its corporate headquarter address and to Palmer at his residence. 7. MISCELLANEOUS. If any part of this Agreement is deemed to be invalid than the remaining parts of the Agreement shall survive as if the invalid provision did not exist. B. LAW. This Agreement shall be construed in accordance with the Laws of the State of Texas. 9. MODIFICATION. This Agreement may not be modified except in writing signed by all of the parties. 10. COMPLETE AGREEMENT. This Agreement is the complete agreement of the parties and supercedes and replaces any and all oral and/or written understandings of the parties if any. ACCEPTED AND AGREED TO: ACCEPTED AND AGREED TO: Buren Palmer 21st Century Technologies, Inc. BY:/s/Patricia Wilson BY:/s/Buren T. Palmer II Patricia Wilson, President DATED: July 26, 1999 EXHIBIT 2 TO DECLARATION OF KEN WILSON ASSIGNMENT This Assignment is executed this________ _________________________________ day of 2001 by Douglas Spring, hereinafter referred to as "Assignor." Whereas, Assignor has been employed as an officer of Trident Technologies, Inc., hereinafter referred to as "Assignee", pursuant to an Employment Agreement with Assignee's parent corporation, 21st Century Technologies, Inc., hereinafter referred to as "21st Century" and has additionally served as a Director of 21st Century; and Whereas, while employed in such capacities Assignor has developed intellectual properties, including new and useful improvements in methods and apparatuses for rapidly plugging leaks in containers which include, without limitation, improvements which are the subject of currently pending patent applications, and improvements which include suction cup and adhesive technology ("the technology"); and Whereas, Assignor recognizes that Assignee and 21st Century have a legitimate interest and expectancy in all such technology which was developed while Assignor was employed as an officer, director or employee of Assignee and/or 21st Century, and wishes to hereby assign any and all rights to Assignee that he may have in the technology. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Assignor hereby assigns to Assignee all of the technology, and any and all intellectual properties created during the term of Assignor's employment with Assignee and/or 21st Century, including any patented material, patentable material, copyrightable material, trademarks, and any and all such similar inventions creations, or devices. Assignor hereby relinquishes and grants to assignee any and all rights, title and interest that he may have, possess, or become legally entitled to, in the technology and intellectual property herein covered. This Assignment shall be construed in accordance with the laws of the State of Texas. In the event that litigation is commenced to enforce any of the terms of this Agreement, the prevailing party shall be entitled to recover from the other party all costs associated with such litigation, including reasonable attorneys' fees. EXECUTED on the date first written above, by the undersigned parties, who hereby acknowledge that they have read and understand this document, and that they execute it of their own free will. ______________________________________________ DOUGLAS SPRING, ASSIGNOR SUBSCRIBED AND SWORN TO BEFORE ME, the undersigned Notary Public, by the said Douglas Spring on this the______ day of , 2001, to certify which witness my hand and seal of office. _______________________________________________________ NOTARY PUBLIC STATE OF LOUISIANA EXHIBIT 3 TO DECLARATION OF KEN WILSON AGREEMENT TO SELL PERSONAL PROPERTY JANUARY 26th, 2001 THUS DOCUMENT IS A PURCHASE AND SALES AGREEMENT BETWEEN DOUGLAS SPRING OF DENHAM SPRINGS LOUISIANA AND BUREN PALMER OF WALKER, LOUISIANA (SELLERS), AND ALLEN DRAKE OF VIRGINIA BEACH, VIRGINIA (PURCHASER). WHEREAS, DOUGLAS SPRING AND BUREN PALMER (SELLERS) REPRESENT THAT THEY SHARE EQUALLY [N ALL RIGHTS TO THE "SEA PATCH" AND "THE NON MAGNETIC ADHESIVE PATCHING SYSTEM"(THE TECHNOLOGIES), AND WHEREAS. DOUGLAS SPRING AND BUREN PALMER (SELLERS) REPRESENT THAT THEY INTEND TO LEAVE THE EMPLOY OF TRIDENT TECHNOLOGIES INC. DURING THE YEAR 2001 SO AS TO DEVELOP, OR SELL THE TECHNOLOGIES, AND WHEREAS, ALLEN DRAKE (THE PURCHASER) DID NOT SOLICIT THE SELLERS SO AS TO ACQUIRE RIGHTS TO THE TECHNOLOGIES, AND WHEREAS, ALLEN DRAKE (THE PURCHASER) UNDERSTANDS THE HIGH LEVEL OF RESOLVE THAT THE SELLERS HAVE TO DEVELOP AND OR SELL THE SEA TECHNOLOGIES, AND WHEREAS, ALLEN DRAKE (THE PURCHASER) HAS PRIOR FINANCIAL INTEREST IN THE PARENT COMPANY OF TRIDENT TECHNOLOGIES, AND THUS HAS A PRIOR FINANCIAL INTEREST IN THE DEVELOPMENT OF THESE TECHNOLOGIES, AND WHEREAS. ALLEN DRAKE (THE PURCHASER) DESIRES TO PROTECT THE FINANCIAL INTERESTS OF HIMSELF AND INVESTORS THAT HE REPRESENTS, AND WHEREAS, ALLEN DRAKE (THE PURCHASER) HAS TENDERED CONSIDERATION IN THE AMOUNT OF $7,500 TO DOUGLAS SPRING, AND $7,500 TO BUREN PALMER, THE SELLERS AGREE TO SELL THE TECHNOLOGIES, AND THE BUYER AGREES TO BUY THE DESCRIBED TECHNOLOGIES. THE BUYER AGREES TO PAY TO THE SELLERS AND THE SELLERS AGREE TO ACCEPT AS A TOTAL PURCHASE PRICE 5 MILLION DOLLARS, PAYABLE AS FOLLOWS: $15,000 PAYABLE ON JANUARY 26th, 2001 $985,000 PAYABLE ON MARCH 1st, 2001 $800,000 PAYABLE ON APRIL 1st, 2001 $800,000 PAYABLE ON MAY 1st, 2001 $800,000 PAYABLE ON JUNE 1st, 2001 $800,000 PAYABLE ON JULY 1st, 2001 $800,000 PAYABLE ON AUGUST 1st, 2001 THE SELLERS AGREE TO TRANSFER TO DRAKE, OR HIS DESIGNEES, ALL RIGHTS, TO THE TECHNOLOGIES UPON FINAL PAYMENT THE SELLERS AGREE TO DELIVER TO DRAKE, OR HIS DESIGNEES 1,200,000 FREE TRADING SHARES OF 2Ist CENTURY TECHNOLOGIES ON OR BEFORE MARCH 1st, 2001. THE SELLERS AGREE TO SHOW GOOD FAITH IN RESPONDING TO ANY RESONABLE REQUEST FOR INFORMATION ON THE TECHNOLOGIES TO DRAKE, OR HIS DESIGNEES. IN THE EVENT OF NON-PERFORMANCE BY ALLEN DRAKE(THE PURCHASER), ALL RIGHTS TO THE TECHNOLOGIES REVERT TO THE SELLERS, AND DRAKE WITH THIS DOCUMENTS COVENANTS TO DELIVER ON AUGUST 1, 2001, 1,200,000 FREE TRADING SHARES OF 21st CENTURY TECHNOLOGIES INC. TO THE SELLERS. /s/ DOUGLAS SPRING /S/ ALLEN DRAKE DOUGLAS SPRING (SELLER) ALLEN DRAKE (PURCHASER) /S/ BUREN T. PALMER II /S TODD RAWLINGS BUREN PALMER (SELLERS TODD RAWLINGS (WITNESS) EXHIBIT 4 TO DECLARATION OF KEN WILSON March 2, 2001 Doug Spring 10320 Lonepine Road Denham Springs, La. 70726 Ken Wilson Chairrnan of the Board 21st Century Technologies Corp 2513 East Loop 820 North Fort Worth, Texas 76118 Ken, This letter is to inform you that I am resigning as President of Trident Technologies Corporation effective March 5, 2001. I feel that my time at Trident has been well spent. We have made a lot of progress, and I am leaving Trident at a time when the company is at its strongest. I fully intend to make the transition in such a way as to benefit 21st Century and its shareholders however possible. I wish nothing but the best for the company and I look forward to seeing it thrive in the future. Sincerely, /s/ Doug Spring Doug Spring March 2, 2001 Doug Spring 10320 Lonepine Road Denham Springs, La. 70726 Ken Wilson Chairman of the Board 21st Century Technologies 2513 East Loop 820 North Fort Worth, Texas 76118 Ken, This letter is to serve as formal notification that I am resigning as a member of the Board of Directors of 21st Century Technologies as of March 5, 2001. I feel that my time on the Board has been a tremendous learning experience, and I am happy to know that I have been able to be somewhat of a service to 21st Century, and its shareholders. Sincerely, /s/ Doug Spring Doug Spring EXHIBIT 5 TO DECLARATION OF KEN WILSON (LETTERHEAD OF BAKER & MCKENZIE) April 25, 2001 Jack E. Morris Via Facsinille (225) 768-7394 Attorney at Law 4051 Veterans Blvd. Suite 208 Metairie, Louisiana 70002 Re: Case law describing the obligation of a corporate officer or director to assign inventions to a corporation Dear Mr. Morris: This letter summarizes the cases supporting the position that Messrs. Spring and Palmer are obliged to assign their inventions to 21st Century. This position is supported by either of two theories: i) Messrs. Spring and Palmer are required to assign their inventions to 21st Century because of their fiduciary duties owed to 21s! Century and Trident Technologies; and ii) Messrs. Spring and Palmer are obliged to assign their inventions to 21st Century because they were hired to invent the Sea-Patch technology. OBLIGATION OF A FIDUCIARY TO ASSIGN INVENTIONS A corporate officer or director is required to assign inventions to a corporation as a result of his fiduciary duty to the corporation. The leading case on this rule is Davis V. Alwac Int'l, Inc., 369 S.W.2d 797 (Tex. Civ. App- Beaumont 1963, writ refd n.r.e.). In Davis v.Alwac, Mr. Davis was an officer and director of a corporation and was also a co-inventor of several patent applications that were pending before the U.S. Patent Office. Davis V. Alwac, 369 S.W.2d at 802. The patent applications related to improvements in monorail equipment, which was the line of business of the corporation. Id. At trial, Mr. Davis alleged that he '~as under no obligation to assign the patent applications to the corporation. The court was unpersuaded by this argument: [Mr. Davis'] name was listed on the applications pending as a co-inventor. This was done while he was serving as an officer and director of said company. Having been so connected with the company, he was in a fiduciary relationship with it and should have exercised the utmost good faith in all transactions touching his duties to it and to its property. Among the obligations which this fiduciary dutv imposes on Mr. Davis is the one that anv inventions which he niav develop while occupving such a position and which relate to the occupation of the corporation must be assigned to the corporation for its benefit. Id. (emphasis added). This proposition has been widely accepted in jurisdictions outside of Texas. See Kennedy y. Wnght, 676 F. Supp. 888, 892 (C.D. Ill. 1988); Lefiell v. US., 162 Ct. Cl. 865 (1963); Mechanical Plastics Corp. v. Thaw, 197 U.S.P.Q. 651,654 (N.Y. Sup. Ct. 1977); and Paul C. Van Slyke & Mark M. Friedman, Employer '5 Rights to Inventions and Patents of Its Officers, Directors and Employees, 18 ALPLA Q.J. 127, 147-54 (1990). Thus, case law clearly dictates that Messrs. Spring and Palmer are obliged to assign their patent applications to 2l~~ Century because of their fiduciary obligations as officers and directors. The employment agreements between Messrs. Spring and Palmer and 21 Century state that they are governed by Texas law. However, even if the agreements are governed by another state's law, such as Louisiana, this will not affect the obligation of a corporate officer or director to assign the patent applications. Louisiana law states that officers and directors are fiduciaries as to their corporations. and are required to discharge the duties of their position in good faith and "with the diligence, care, judgment and skill which ordinarily prudent men would exercise under similar circumstances in like positions." La. Rev. Stat. Ann 12:91; Riverciiy V. American Can Co., 600 F.Supp. 908, 922 (F. D. La. 1984). Accordingly, even if the fiduciary duties of Messrs. Spring and Palmer are governed bv Louisiana law, they will be required to assign the inventions to 21st Century. EMPLOYEES HIRED TO INVENT MUST ASSIGN INVENTIONS The Supreme Court has recognized that when an employee is hired to invent, the employee is obliged to assign any patents that he develops during his employment to the employer. See US. v. Dubilier Condenser Corp., 289 U.S. 178, 187 (1933) ("one employed to make an invention, who succeeds, during his term of service, in accomplishing that task, is bound to assign to his employer any patent obtained. The reason is that he has only produced that which he was employed to invent. His invention is the precise subject of the contract of employment"). Because Messrs. Spring and Palmer were hired for the purpose of developing and marketing the Sea-Patch device, they are required to assign any related patent applications to 21st Century. This letter describes only some of the cases related to the ownership of the patent applications by 21st Century. This letter does not address any other legal remedies or theories which may apply to Messrs. Spring and Palmer's actions. Please call if you have any questions regarding these cases. Very truly yours, /s/ Mark D. Taylor Mark D. Taylor cc: John G. Flaim (firm)