John T. Preston and C Change Investments, LLC v. Emjo Investments, Ltd. and H.J. Von Der Goltz

Case Information

FILED IN 1st COURT OF APPEALS HOUSTON, TEXAS 6/12/2015 9:25:40 PM CHRISTOPHER A. PRINE Clerk

ACCEPTED 01-15-00390-CV FIRST COURT OF APPEALS HOUSTON, TEXAS 6/12/2015 9:25:40 PM CHRISTOPHER PRINE CLERK No. 01-15-00390-CV _______________________________________________________________ IN THE FIRST COURT OF APPEALS HOUSTON, TEXAS _______________________________________________________________ JOHN T. PRESTON and C CHANGE INVESTMENTS, LLC, Appellants, v. EMJO INVESTMENTS, LTD. and H.J. VON DER GOLTZ, Appellees. _______________________________________________________________ On Appeal from the 215th District Court of Harris County, Texas, Hon. Elaine H. Palmer, presiding Trial Court Cause No. 2011-44058

____________________________________________________________________ BRIEF OF APPELLANT JOHN T. PRESTON ____________________________________________________________________ Jane Langdell Robinson Texas Bar No. 24062970 Monica Uddin Texas Bar No. 24075195 Jamie A. Aycock Texas Bar No. 24050241 A HMAD , Z AVITSANOS , A NAIPAKOS ,

A LAVI & M ENSING 1221 McKinney Street, Ste. 3460 Houston, Texas 77010 Telephone: (713) 655-1101 Facsimile: (713) 655-0062 jrobinson@azalaw.com muddin@azalaw.com

Counsel for Appellant Oral Argument Requested No. 01-14-00703-CV JOHN T. PRESTON and C CHANGE INVESTMENTS, LLC, Appellant, v. EMJO INVESTMENTS, LTD. and H.J. VON DER GOLTZ, Appellees.

IDENTITY OF PARTIES AND COUNSEL

Appellants: John T. Preston and C Change Investments, LLC Trial counsel for Sean Gorman , Texas Bar No. 08218100 appellants: sgorman@azalaw.com

Jamie A. Aycock , Texas Bar No. 24050241 jamieaycock@azalaw.com A HMAD , Z AVITSANOS , A NAIPAKOS , A LAVI & M ENSING 1221 McKinney St., Ste. 3460, Houston, Texas 77010 Telephone: (713) 655-1101; Facsimile: (713) 655-0062

Appellate counsel Jane Langdell Robinson , Texas Bar No. 24062970 for appellants: jrobinson@azalaw.com

Monica Uddin , Texas Bar No. 24075195 muddin@azalaw.com A HMAD , Z AVITSANOS , A NAIPAKOS , A LAVI & M ENSING 1221 McKinney St., Ste. 3460, Houston, Texas 77010 Telephone: (713) 655-1101; Facsimile: (713) 655-0062

2 Appellees: Emjo Investments, Ltd. H.J. von der Goltz Trial counsel for F. Eric Fryar , Texas Bar No. 07495770 appellees: eric@fryarlawfirm.com

Matthew Buschi , Texas Bar No. 24064982 mbuschi@fryarlawfirm.com Christina Richardson , Texas Bar No. 24070495 crichardson@fryarlawfirm.com Fryar Law Firm, P.C. 1001 Texas Ave., 14th Floor, Houston, Texas 77002 Telephone: (281) 715-6396; Facsimile: (281) 715-6397

Trial and appellate Kelley M. Keller , Texas Bar No. 11198240 counsel for kkeller@ellison-keller.com appellees: Tracey N. Ellison , Texas Bar No. 15054720

tellison@ellison-keller.com E LLISON K ELLER 5120 Woodway Dr., Ste. 6019, Houston, Texas 77056 Telephone: 713-266-8200; Fax: 713-266-8201

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TABLE

OF CONTENTS IDENTITY OF PARTIES AND COUNSEL ......................................................... 2 TABLE OF CONTENTS ........................................................................................ 4 INDEX OF AUTHORITIES ................................................................................... 7 INDEX OF RECORD REFERENCES ................................................................ 10 STATEMENT OF THE CASE ............................................................................. 11 STATEMENT ON ORAL ARGUMENT ............................................................ 12 ISSUE PRESENTED ............................................................................................. 12 I.

INTRODUCTION .................................................................................. 13

II.

STATEMENT OF FACTS .................................................................... 14

A. The lawsuit arises out of a failed coal gasification startup. ..................... 14 B. The bankruptcy court dismisses all but two causes of action. ................. 16 C. Only two claims remain against Preston. ................................................. 18 D. Appellees do not allege a single act taken in Texas by Preston, much less

any act in Texas that is connected to their surviving misrepresentation claims. ....................................................................................................... 18

E. Preston does no individual business and maintains no presence in Texas. ....................................................................................................... 23 1. Preston does not do business in Texas in his individual capacity. .... 23 2. Preston does not maintain any presence in Texas. ............................. 25

F. After two years and jurisdictional discovery, Appellees fail to allege a single act by Preston in Texas that gives rise to their surviving claims, and fail to show systematic and continuous Texas contacts that render Preston “at home” in Texas. ..................................................................... 25

III.

SUMMARY OF THE ARGUMENT .................................................... 30

IV.

STANDARD OF REVIEW ................................................................... 33

A. De novo review applies. ........................................................................... 33 B. Jurisdiction over nonresidents requires allegations or proof of purposeful

availment. ................................................................................................. 34 4 1. The plaintiff bears the initial burden to plead allegations showing jurisdiction over the defendant. ........................................................ 34 2. The long-arm statute is limited by due process considerations. ........ 34 3. When the plaintiff fails to meet its initial burden of alleging sufficient

purposeful minimum contacts, the fact that the defendant is a nonresident defeats personal jurisdiction. ........................................ 35

V.

ARGUMENT .......................................................................................... 38 A. Appellees failed to meet their initial burden of pleading facts to show that Preston is subject to personal jurisdiction in Texas. ................................ 38 B. Because Appellees do not allege that any of Preston’s alleged contacts with Texas give rise the surviving claims and no evidence suggests any link, there is no specific jurisdiction as a matter of law. .......................... 40 1. Specific jurisdiction requires that the alleged jurisdictional contacts

give rise to the plaintiff’s alleged injury. .......................................... 42 2. There are no allegations in the intervenors’ petition that could give rise to specific jurisdiction over Preston. .......................................... 44 3. There are no allegations or evidence in Appellees’ special appearance briefing that could give rise to specific jurisdiction over Preston. ............................................................................................. 45

4. Appellees’ claim that Preston “could reasonably foresee that NC12 and its shareholders and investors would suffer direct economic injury” because of his alleged misrepresentations is not a basis for specific jurisdiction as a matter of law. ............................................ 53

C. Because Preston’s alleged contacts with Texas are not substantial, continuous, or systematic, there is no general jurisdiction as a matter of law. ........................................................................................................... 54 1. General jurisdiction requires the defendant to have substantial,

continuous, and systematic contacts with Texas. ............................. 54 2. The sporadic contacts with Texas in a representative capacity that Appellees allege are nothing like the substantial, continuous, and systematic contacts required to establish general jurisdiction. ......... 56

5 3. Preston lacks any substantial, continuous, or systematic contact that would render him at “at home” in Texas. ......................................... 68

VI.

CONCLUSION AND PRAYER ........................................................... 70 6

INDEX

OF AUTHORITIES Cases Access Telecom, Inc. v. MCI Telecom. Corp ., 197 F.3d 694 (5th Cir. 1999) ............................................................................... 69 All Star Enter., Inc. v. Buchanan , 298 S.W.3d 404 (Tex. App.—Houston [14th Dist.] 2009, no pet). .............. 36, 59 Am. Type Culture Collection, Inc. v. Coleman , 83 S.W.3d 801 (Tex. 2002) .................................................................................. 57 Ashdon, Inc. v. Gary Brown & Assocs., Inc ., 260 S.W.3d 101 (Tex. App.—Houston [1st Dist.] 2008, no pet.) ....................... 69 BMC Software Belgium, N.V. v. Marchand , 83 S.W.3d 789 (Tex. 2002) ............................................................... 33, 43, 46, 54 Frank A. Smith Sales, Inc. v. Atl. Aero, Inc. , 31 S.W.3d 742 (Tex. App.—Corpus Christi 2000, no pet.) ................................ 39 Garza v. Alviar , 395 S.W.2d 821(Tex. 1965) ................................................................................. 68 Glencoe Capital Partners II, L.P. v. Gernsbacher , 269 S.W.3d 157 (Tex. App.—Fort Worth 2008, no pet.) .................................... 43 Goodyear Dunlop Tires Operations, S.A. v. Brown , 131 S. Ct. 2846, 180 L. Ed. 2d 796 (2011) ............................................. 34, 42, 55 Guardian Royal Exch. Assur., Ltd. v. English China Clays, P.L.C. , 815 S.W.2d 223 (Tex. 1991) .......................................... 51, 55, 62, 64, 65 Helicopteros Nacionales de Colombia, S.A. v. Hall , 466 U.S. 408, 104 S. Ct. 1868 (1984) ............................. 51, 52, 62, 64, 65, 69, 70 Hoffmann v. Dandurand , 180 S.W.3d 340 (Tex. App.—Dallas 2005, no pet.) .................................... 58, 59

7 Howell v. Hilton Hotels Corp ., 84 S.W.3d 708 (Tex. App.—Houston [1st Dist.] 2002, pet. denied) .................. 67 International Shoe Co. v. Washington , 326 U.S. 310, 66 S. Ct. 154, 90 L. Ed. 95 (1945) ................................................ 35 Johnston v. Multidata Sys. Intern. Corp ., 523 F.3d 602 (5th Cir. 2008) ............................................................................... 70 Kelly v. Gen. Interior Const., Inc. , 301 S.W.3d 653 (Tex. 2010) ........................................................................ passim Kulko v. Cal. Super. Ct. , 436 U.S. 84, 98 S. Ct. 1690 (1978) ......................................................... 62, 64, 65 Michiana Easy Livin’ Country, Inc. v. Holten , 168 S.W.3d 777 (Tex. 2005) ................................................................... 35, 36, 54 Moki Mac River Expeditions v. Drugg , 221 S.W.3d 569 (Tex. 2007) ............................................................. 34, 35, 37, 42 Nat'l Indus. Sand Ass’n v. Gibson , 897 S.W.2d 769 (Tex. 1995) ................................................................................ 44 Perkins v. Benguet Consol. Mining Co.,

42 U.S. 437, 72 S. Ct. 413 (1952) ................................................................ 69, 70 PHC-Minden, L.P. v. Kimberly-Clark Corp. , 235 S.W.3d 163 (Tex. 2007) ........................................................................ passim Retamco Operating, Inc. v. Republic Drilling Co. , 278 S.W.3d 333 (Tex. 2009) ......................................................................... 35, 43 Seiferth v. Helicopteros Atuneros, Inc. , 472 F.3d 266 (5th Cir. 2006) ............................................................................... 43 Serv. Corp. Intern. v. Guerra , 348 S.W.3d 221 (Tex. 2011) ................................................................................ 68

8 Shaffer v. Heitner , 433 U.S. 186, 97 S. Ct. 2569, 53 L. Ed. 2d 683 (1977) ................................ 45, 57 Siskind v. Villa Found. for Educ., Inc., 642 S.W.2d 434 (Tex. 1982) ................................................................... 40, 44, 58 Stuart v. Spademan , 772 F.2d 1185 (5th Cir. 1985) ............................................................................. 58 Tryco Enter., Inc. v. Robinson , 390 S.W.3d 497 (Tex. App.—Houston [1st Dist.] 2012, pet. dism’d) ................ 60 Vosko v. Chase Manhattan Bank, N.A. , 909 S.W.2d 95 (Tex. App.—Houston [14th Dist.] 1995, writ denied) ........ 40, 59 Washington DC Party Shuttle, LLC v. IGuide Tours , 406 S.W.3d 723 (Tex. App.—Houston [14th Dist.] 2013, pet. denied) ....... 38, 58 Waterman Steamship Corp. v. Ruiz , 355 S.W.3d 387 (Tex. App.—Houston [1st Dist.] 2011, pet. denied) ... 39, 43, 69 Wright v. Sage Eng’g, Inc. , 137 S.W.3d 238 (Tex. App.—Houston [1st Dist.] 2004, pet. denied) ................ 58 Statutes T EX . C IV . P RAC . & R EM . C ODE § 17.042 .................................................................. 35 Rules T EX . R. C IV . P. 45 ..................................................................................................... 41 T EX . R. C IV . P. 120a .......................................................................................... 41, 67 Other 4 Wright & Miller, F EDERAL P RACTICE & P ROCEDURE § 1067.5 ............................ 55

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INDEX

OF RECORD REFERENCES CR Clerk’s Record filed May 21, 2015 Citation to documents included in the Appendix are noted by “Tab #.”

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STATEMENT

OF THE CASE Nature of Case: This is a case alleging “common law and statutory securities fraud” by investors in a failed technology startup.

Course of Proceedings: The intervenors, including Appellees, intervened in an original petition against Preston and other defendants. Preston specially appeared and asserted that he was not subject to personal jurisdiction in Texas because he is a nonresident, and does not have sufficient minimum contacts with Texas for the exercise of personal jurisdiction. Because the claims involved a corporation, NC12, Inc., that subsequently declared bankruptcy, defendants removed the case to bankruptcy court. The bankruptcy court dismissed or abated all the claims in the original petition and all the claims in the intervenors’ petition but two: fraud and conspiracy to commit fraud with respect to alleged misrepresentations regarding the value of NC12 shares. The bankruptcy court remanded these remaining two claims to the district court.

Trial Court Disposition: Of the intervenors, only Appellees opposed Preston’s special appearance. Preston filed his special appearance on September 28, 2011. The court denied the special appearance on November 17, 2014. Preston appeals from that order.

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STATEMENT

ON ORAL ARGUMENT If upheld, the trial court’s ruling will significantly broaden the reach of Texas long-arm jurisdiction over foreign defendants. The trial court’s ruling departed considerably from existing precedent by asserting jurisdiction over a nonresident not alleged to have conducted any activity in Texas giving rise to the claims in the lawsuit, and whose only alleged contacts with Texas consists of periodic business trips on behalf of other entities over the last 25 years. This is an important issue and Appellant believes oral argument could assist the panel in considering it. Appellant therefore requests oral argument.

ISSUE

PRESENTED Sole issue: The trial court erred by denying Preston’s special appearance because Appellees failed to plead sufficient allegations to establish personal jurisdiction and because Preston is not subject to specific or general jurisdiction in Texas.

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I.

INTRODUCTION This lawsuit was brought by disgruntled investors in a failed technology startup in an attempt to recover their investments from the now-bankrupt company’s directors and officers. The investors’ claims related almost exclusively to harms to the company, and when the bankruptcy court dismissed these claims as belonging to the bankruptcy trustee, the investors were left with a detailed petition that has little to do with the surviving claims, and nothing to do with any action taking place in Texas.

It is difficult to see how Texas courts have any interest in this case, much less personal jurisdiction over Preston. There is no allegation that Preston took any action in Texas connected in any way to the surviving claims. Preston is a Massachusetts resident who has never conducted business in Texas in his personal capacity, and none of the intervenors (the only plaintiffs remaining in this lawsuit) are Texas residents either. The only Texas contacts Appellees allege concern Preston’s mere status as a board member in Nevada corporations with offices in Texas, and Preston’s periodic business trips to Texas on behalf of a variety of other entities.

There are no facts that could give rise to specific jurisdiction because there are no allegations that any of the surviving claims arise from or relate to any action by Preston in Texas. There is no basis for general jurisdiction because almost all

13 of Preston’s alleged contacts with Texas took place in his representative capacity and still come nowhere close to the continuous and systematic contacts with Texas that would render Preston at home here.

The mere fact that a startup with some Texas operations went out of business does not warrant the exercise of personal jurisdiction over a Massachusetts resident in a fraud suit brought by nonresident investors who do not allege he did anything in Texas that gives rise to their claims. The trial court’s order overruling Preston’s special appearance runs contrary to both Texas and federal law limiting the exercise of personal jurisdiction over nonresidents. It should be reversed.

II. STATEMENT OF FACTS 1 A. The lawsuit arises out of a failed coal gasification startup. This suit arises out of a developmental technology intended to produce synthetic natural gas and other fuels from coal, also known as coal gasification. CR 114–16 (Tab 2). 2 A Nevada corporation, Texas Syngas, Inc. (“TSI”), acquired the technology and began seeking investors in 2007. CR 116 (Tab 2). In 2009 another Nevada corporation, NC12, Inc. (“NC12”), acquired the technology from TSI. CR 122 ¶ 63 (Tab 2). Despite extensive efforts and the partial development of a test reactor in Massachusetts, NC12 did not succeed. CR 118–19, 127–29 (Tab 2); CR 138; CR 208 (Tab 3).

As often happens when businesses fail, litigation ensued. The original plaintiffs, primarily NC12 shareholders, sued several of NC12’s directors and officers on July 26, 2011, including directors Michael Sydow, Christoph Henkel, and John Preston. CR 6. NC12 declared bankruptcy in October 2011. CR 208 (Tab 3).

In November 2011, several NC12 investors, including Appellees, intervened in the lawsuit. CR 102–08 (Tab 2). The intervenors had invested variously in convertible notes and shares of TSI and NC12. CR 104–08 (Tab 2). When NC12 acquired the gasification technology and attracted more investment, the intervenors’ TSI shares and notes converted into NC12 shares. Accordingly, all of the intervenors 3 are now shareholders in NC12. Id .

Both the original plaintiffs’ and the intervenors’ petitions attacked the defendants’ management of TSI and NC12. See CR 28–37; CR 129–33 (Tab 2). The original plaintiffs alleged breach of fiduciary duty and conversion claims. CR 35–37. The intervenors alleged four causes of action: (1) breach of fiduciary duty against Sydow, Henkel, and Preston; (2) shareholder oppression by Sydow, Henkel, and Preston; (3) “Knowing Participation/Civil Conspiracy” against all 10 defendants; and (4) “Securities Fraud—Common Law Fraud and Statutory 4 Fraud” against Sydow and Preston. CR 109–10, 129–33 (Tab 2). B. The bankruptcy court dismisses all but two causes of action.

The defendants removed the case to the bankruptcy court on December 15, 2011 on the grounds that the plaintiffs’ and intervenors’ claims alleging mismanagement of TSI / NC12 belonged to the bankruptcy estate. CR 198–205. The intervenors moved to remand the case to state court. CR 206–07 (Tab 3).

On August 31, 2012, Bankruptcy Judge Marvin Isgur granted in part and denied in part the motions to remand, significantly limiting the claims that remain in this case. CR 207, 237 (Tab 3). Judge Isgur dismissed all of the original plaintiffs’ and intervenors’ claims relating to harms to TSI 5 and NC12, holding that these claims belonged to the bankruptcy estate. See CR 198–205. Judge Isgur reasoned that any claims based on the defendants’ alleged asset-stripping, self- dealing, dilution of corporate value, and misappropriation of corporate assets stemmed from harm to NC12 and, accordingly, may only be asserted by the bankruptcy trustee on behalf of the bankruptcy estate. CR 237 (Tab 3).

The bankruptcy court dismissed or abated all of the original plaintiffs’ claims. CR 237, 225–27, 234–35 (Tab 3). As a result, none of the original plaintiffs’ claims were remanded to state court and those claims are not at issue here. CR 237 (Tab 3).

With respect to the intervenors’ claims, the bankruptcy court held that the intervenors’ shareholder oppression and breach of fiduciary duty claims belonged to the estate and therefore dismissed those claims. CR 221–27, 237 (Tab 3). The court also dismissed the intervenors’ conspiracy claim to the extent it related to the dismissed causes of action. CR 235–37 (Tab 3). This left only causes of action for fraud and conspiracy to commit fraud. CR 237 (Tab 3). In remanding the fraud and conspiracy claims, the court instructed:

Because the Intervenors are shareholders, their fraud claim is based on the alleged difference between the price they paid in reliance on the alleged misrepresentations and the actual value of NC12’s shares at the time of their investment . The Intervenors may not recover damages for the difference between the price they paid for the shares and what the shares would have been worth if not for the alleged post-purchase misconduct in the operation of the corporation.

CR 228 (Tab 3) (emphasis added). 17 C. Only two claims remain against Preston. The only remaining causes of action against Preston are “Securities Fraud— Common Law Fraud and Statutory 6 Fraud” asserted against Preston and Sydow, and “Knowing Participation/Civil Conspiracy,” 7 asserted against all 10 defendants. CR 237 (Tab 3); CR 132–33 ¶¶ 89–90 (Tab 2). Significantly, these claims survive only to the extent they deal with the alleged misrepresentation of NC12’s value at the time of the intervenors’ investment (hereinafter, the “surviving claims” or “misrepresentation claims”). CR 228 (Tab 3). The last alleged investment by any intervenor occurred in August 2010. CR 104–08, 105 ¶ 8 (Tab 2). D. Appellees do not allege a single act taken in Texas by Preston, much less

any act in Texas that is connected to their surviving misrepresentation claims. The only basis for jurisdiction over Preston in the intervenors’ petition are

the generic allegations that “Preston has engaged in business in Texas” and “the tortious conduct alleged herein occurred in or was directed at the State of Texas.” CR 110 ¶ 33, 114 ¶ 44 (Tab 2).

The intervenors explicitly plead that Preston is a Massachusetts resident who is employed in Cambridge, Massachusetts. CR 110 ¶ 33 (Tab 2). Yet in their petition, the intervenors fail to allege any act performed by Preston in Texas, much less an act involving the intervenors’ surviving misrepresentation claims. This is perhaps unsurprising, as none of the intervenors are Texas residents who might have relied on misrepresentations in Texas. See CR 105–08 (Tab 2) (showing intervenors reside in Luxembourg, Guatemala, the British Virgin Islands, Panama, Germany, New York, the Bahamas, Montana, Tennessee, the Cayman Islands, and Florida, but not Texas).

The few allegations in the intervenors’ petition that relate to Preston say nothing to indicate a Texas connection, as shown below:  In fall 2007, Preston “approached the shareholders of Atomic Ordered Materials (AOM), another company in which Preston was involved” and “brought Sydow and Collins to an AOM shareholders’ meeting,” where Sydow presented the [TSI] technology and “solicited investments in that company.” CR 116 ¶ 51 (Tab 2).

The intervenors do not allege that any of Preston’s representations to AOM 8 or its shareholders were made in Texas.

 After the AOM meeting, Preston “approached” intervenor von der Goltz, who had been in attendance. CR 117 ¶ 52 (Tab 2). Preston “informed von der Goltz that [Preston] had negotiated a $100 million pre-money investment valuation for [TSI] and was trying to raise $12 million to build a demonstration reactor . . . .” Id .

 “Preston represented that the value of the technology was in excess of $100 million but suggested that von der Goltz meet with Collins and Sydow to negotiate a discounted valuation to put together an initial investor group for the $12 million needed. Preston represented that he was assisting [TSI], but never disclosed that he owned or controlled any equity interest in [TSI].” Id .

The intervenors do not allege that Preston’s representations to von der Goltz were made or relied on in Texas. Nor is there any basis to make such an inference. Von der Goltz is a Florida resident. CR 108 ¶ 23 (Tab 2).

 “In November 2007, von der Goltz met with Collins and Sydow in Houston. Collins and Sydow agreed to accept new investors based on a pre-money valuation of $78 million and a post-money valuation of $90 million.” CR 117 ¶ 52 (Tab 2).

 Von der Goltz “brought the opportunity to friends, family, and business associates, who ultimately invested $11.75 million . . . . Among this group were the Shareholder Intervenors. Sydow and Preston represented to the Shareholder Intervenors, both directly and through Mr. von der Goltz, that the value of the technology exceeded $100 million and that the money being raised would be used primarily for building the demonstration reactor.” CR 117 ¶ 53 (Tab 2).

The intervenors do not allege that Preston attended the November 2007 Houston, Texas meeting or even that any misrepresentation was made to von der Goltz at this meeting. There are no allegations, or basis for any inference, that any Preston representation was made or relied on in Texas—whether directly or “through von der Goltz.” Neither Preston nor any intervenor, including the Shareholder Intervenors, are residents of Texas. CR 105–08 (Tab 2). None of the intervenors’

20 detailed allegations include any suggestion that any of the alleged representations or “promises” were made in Texas:

 Preston made various representations in 2008 to “[TSI] shareholders” that the value of the company was now $300 million as a result of a gas utility contract; representations regarding new financing, and representations regarding the company’s purchase of Fall River, Massachusetts property. CR 118 ¶ 55 (Tab 2).

 Preston and Sydow “had no intention of using shareholder money as represented to the shareholders,” squandered shareholder money, and engaged in self-dealing. CR 119 ¶ 58 (Tab 2).

 “Despite his numerous promises and despite being compensated to do so Preston failed to raise additional funds for [TSI] in 2009, and by mid-year [TSI] desperately needed funding.” CR 120 ¶ 60 (Tab 2).

Moreover, these alleged representations, as the intervenors themselves plead, were addressed to TSI’s shareholders and were thus made after their investment in TSI. These allegations are thus relevant only to the intervenors’ dismissed claims concerning the management of TSI, not their surviving misrepresentation claims. See CR 223–28 (Tab 3).

 “Preston and Sydow again turned to Mr. von der Goltz for assistance.” CR 120 ¶ 60 (Tab 2). Von der Goltz raised $6.1 million in investment from the Note Holder Intervenors. Id . “Preston and Sydow, both directly and through their statements to von der Golz, represented to the Note Holder Intervenors that [TSI] was worth $300 million as of 2009, based on the value of the technology and the [gas utility] and Turkish contracts. However, Preston and Sydow failed to disclose that the [gas utility] contract had been canceled.” CR 121 ¶ 61 (Tab 2).

21  “Preston and Sydow also represented [to the Note Holder Intervenors] that the money would be used primarily to build the test reactor; however, their later conduct and misuse of the funds demonstrate that they had no intention of using the money for that purpose.” Id .

The intervenors do not allege that any Preston representation to any Note Holder Intervenor or to von der Goltz (or to anyone) was made or relied on in Texas. And any representations regarding the ultimate use of the solicited investment funds are beyond the scope of the surviving claims. CR 223–28 (Tab 3).

Similarly, every subsequent reference to Preston in the remaining 14 pages of the intervenors’ petition concerns political infighting on the TSI / NC12 board of directors, alleged mismanagement and asset-stripping of the entity, and alleged self-dealing. CR 121–29 (Tab 2). These allegations only relate to the fiduciary duty, shareholder oppression, and shareholder fraud claims that have been dismissed from this matter. The remaining references to Preston do not support any surviving claim against him. See CR 223–28 (Tab 3). And still, none of the remaining allegations state or suggest any action taken by Preston in Texas.

In sum, not a single allegation in the intervenors’ petition—the only petition containing any live claims—connects Preston to Texas. 22 E. Preston does no individual business and maintains no presence in Texas. Preston filed a special appearance on September 28, 2011 objecting to the court’s exercise of personal jurisdiction over him. 9 CR 74 (Tab 1). 1. Preston does not do business in Texas in his individual capacity. Preston is a resident of Massachusetts and is employed in Massachusetts.

CR 86–87 ¶¶ 3, 8 (Tab 1); CR 110 ¶ 33 (Tab 2). He has not been a resident of Texas for the last 60 years. 10 In the last 60 years, Preston has not travelled to or visited Texas in his individual capacity. CR 86 ¶ 4 (Tab 1).

In the last 30 years, Preston has visited Texas exclusively on behalf of entities for whom he served as a director, principal, or managing partner, including a Delaware nonprofit, Molten Metal Technologies, Inc. (“MMT”), Quantum Catalytics, LLC (“Quantum”), C Change Investments, LLC (“C Change”), NC12, and Transformative Energy & Materials Capital, Inc. (“TEM Capital”), or on behalf of the Massachusetts Institute of Technology (“MIT”), where he was a faculty member and Director of Technology and Licensing, and retains an appointment. See CR 87 ¶¶ 5–6 (Tab 1); CR 330–31, 356 at 63:18–23 (Tab 4); CR 672–73 ¶¶ 3–8 (Tab 6); CR 118 ¶ 53 (Tab 2). Preston served as a director of two Texas entities, one from 2004–2006 and the other from 2012–2014 and has otherwise never been a director, officer, or employee of a Texas person or company. CR 330, 388 (Tab 4); CR 87 ¶ 8 (Tab 1).

While Preston was an officer of TSI and NC12, both Nevada corporations with a Texas office, Preston participated in board meetings from Massachusetts, Switzerland, or Germany, but never Texas. 11 See CR 86–87 ¶¶ 2, 7 (Tab 1); CR 325, 328 (Tab 4).

Preston has never done business in Texas in his individual capacity. CR 86 ¶ 4 (Tab 1). Preston has never maintained an office in Texas, or employed any person who either resides or regularly travels to Texas in connection with his or her business. CR 87 ¶¶ 8, 9 (Tab 1). Preston has never engaged in routine sales or other profit-making activities in Texas. Id . ¶ 8. Preston owns no private Texas businesses. Id . In his individual capacity, Preston has never entered into any contracts in Texas or with Texas residents, contracts calling for performance in Texas, or contracts with mandatory venue provision in Texas, other than contracts with his defense counsel. Id .

Because Preston does not do business in Texas, he does not maintain a registered agent in Texas and is not required to do so. Id. As he does not work or own property in Texas, Preston has never personally incurred or paid any taxes in Texas, nor filed a personal tax return in Texas. CR 87 ¶ 9 (Tab 1).

2. Preston does not maintain any presence in Texas. As Preston’s Texas ties consist exclusively of his status as director of

predominantly foreign entities and business trips to Texas in his representative capacity, Preston has no presence in Texas. He has never maintained an office or any other facility, telephone listing, post office box, or mailing address in Texas. CR 87 ¶ 9 (Tab 1). Preston has never rented, owned, or possessed any real property or personal property in Texas. Id . He does not hold a mortgage or other lien on any real or personal property in Texas. Id. He does not have any investments or assets in Texas. Id. Preston has never taken out a loan in Texas or guaranteed any debt owed to a Texas resident. Id. F. After two years and jurisdictional discovery, Appellees fail to allege a single

act by Preston in Texas that gives rise to their surviving claims, and fail to show systematic and continuous Texas contacts that render Preston “at home” in Texas. The intervenors had two years and the opportunity to conduct jurisdictional

discovery between the bankruptcy court’s remand order and the hearing on Preston’s special appearance. CR 102 (Tab 2); CR 206 (Tab 3); CR 613. Yet they never amended their petition to add any allegations connecting any aspect of their surviving claims to Texas. This is because no such connection exists.

25 To evade this problem, Appellees concocted a tornado of smoke and innuendo in response to Preston’s special appearance. They doggedly conflate the two distinct types of personal jurisdiction (specific and general), jumble allegations about dismissed claims in discussing surviving claims, confuse individual with representative actions by Preston, and mix diverse assertions of Preston’s tangential links to Texas: business trips for other entities, decade-old business calls with original plaintiff and former TSI director Collins, a personal check, and a convoluted story about a 2012 Texas corporation that is allegedly an alter-ego of Preston’s, allegedly created to pursue claims against Collins in a different lawsuit.

These attenuated links to Texas have nothing to do with any of the surviving claims, and fall far short of establishing the continuous contact with Texas that is otherwise required to support general personal jurisdiction.

Appellees alleged the following forum contacts by Preston: (a) Director of foreign entities. Preston served as a director of

three foreign entities which registered to do business in Texas. CR 287 (“MMT”), CR 281 (Texas Syngas, Inc. (“TSI”)), CR 284 (NC12) (Tab 4). There are no allegations that Preston did anything in Texas in connection with these entities that gives rise to any of the intervenors’ claims.

(b) Business trips to Texas. In the past 25 years, Preston has allegedly made the following brief business trips to Texas: 26 o 1990s: Five board meetings in Texas for a Delaware nonprofit and three board meetings for MMT. CR 87 ¶ 5 (Tab 1).

o 1990s: Approximately three business trips for MMT. 12 CR 408 ¶ 4, CR 409 ¶ 12, CR 260 (Tab 4). o 2004: Three trips on behalf of Quantum. CR 409 ¶¶ 6–8 (Tab 4); CR 673 ¶ 8 (Tab 6). o 2008–11: Five one-day trips on behalf of C Change. 13 CR 319 at 25:3–28:21, 335–38, 343–48 (Tab 4); CR 672–73 ¶¶ 5–6 (Tab 6).

o 2009–10: One trip on behalf of C Change or MIT. CR 262, 323 at 49:13-24 (Tab 4). o 2010: One trip on behalf of NC12 to testify in Sydow’s divorce proceeding. CR 352–70, 339–42 (Tab 4). o 2011: One two-day trip on behalf of TEM Capital for a foreclosure sale and to inspect a cement plant. CR 349– 50 (Tab 4); CR 673 ¶ 7 (Tab 6). 14

There is no allegation that any of these trips relate to the claims in this lawsuit.

(c) 2004: Phone calls and mail. Collins claims that in 2004, Preston telephoned him and shipped him “records regarding MMT and its patented technology” following Preston’s 2004 business trips to meet with Collins. CR 409 ¶ 9 (Tab 4). These trips and communications concerned catalytic energy processing (“CEP”) technology patents belonging to Quantum. Id. ¶¶ 5–8; CR 673 ¶ 8 (Tab 6). There are no allegations linking these communications to the claims in the lawsuit.

(d) 2006: Alleged address at TSI office for foreign entity Metal Catalyst Ventures. Preston was listed as a director of Nevada corporation Metal Catalyst Ventures, Inc. in June 2006. CR 315 (Tab 4). Preston’s “address” was the same as TSI’s. See id. ; CR 281 (Tab 4). Preston did not prepare the document. CR 315 (Tab 4); CR 673 ¶ 9 (Tab 6). The intervenors allege no other facts regarding Metal Catalyst Ventures, and there are no allegations linking Metal Catalyst Ventures to the surviving claims.

(e) 2008: Personal check to foreign entity BOS, Inc. In 2008, Preston allegedly wrote a personal check to BOS, Inc., a Turks and Caicos corporation with, allegedly, an office and bank account in Texas. CR 387 (Tab 4); CR 25 ¶ 2. In 2010, BOS, Inc. wired Preston back the same sum. CR 384 (Tab 4). There are no allegations linking these payments to the claims in the lawsuit.

(f) 2012: Alleged purchase of claims in unrelated Kaiser Litigation via alleged alter ego JK Claims. JK Claims was formed by Quantum to purchase the plaintiffs’ claims in Cause No. 2007-38533, Jeffrey B. Kaiser v. Texas Syngas LLC, Michael A. Collins, Michael D. Sydow and M. Sameer Ahmed , in the 152nd District Court of Harris County, Texas (the “Kaiser Litigation”). 15 CR 432, 495 at 57:2–3, 498 at 66:19– 67:20 (Tab 5). After Kaiser filed for bankruptcy, JK Claims purchased the Kaiser Litigation claims from the bankruptcy estate with the approval of the bankruptcy trustee. CR 534–41, 545–47 (Tab 5). In a supplemental response to the special appearance, Appellees assert that JK Claims is Preston’s alter ego and that JK Claims’ contacts with Texas should be imputed to Preston. CR 414 (Tab 5). Appellees’ own evidence shows that Quantum, not Preston, is the sole owner of JK Claims. CR 495 at 57:2–3, 498 at 66:19–67:20 (Tab 5). See also CR 673 ¶ 10. Yet Appellees never allege that Quantum is an alter ego of Preston. There are no allegations linking these actions to the claims in the lawsuit. Most significantly , all alleged JK Claims actions took place after this lawsuit was filed and are therefore outside of the relevant jurisdictional period, as discussed below.

Almost none of these tenuous forum contacts are pleaded in the intervenors’ petition. See section II.D, supra. None have anything to do with any alleged misrepresentation to TSI or NC12 investors, and none demonstrate continuous and systematic contacts that would establish that Preston is “at home” in the state of Texas.

After briefing and argument, however, the trial court denied Preston’s special appearance. CR 674–75 (Tab 7). Preston timely appealed to this Court.

CR 678–80; CR 681–83.

29

III.

SUMMARY OF THE ARGUMENT There is no basis for asserting personal jurisdiction over Preston. Appellees, neither of whom reside in Texas, bring claims of fraud and conspiracy to commit fraud in relation to representations about TSI / NC12’s value. Appellees do not allege that any representations were made or relied on in Texas. The petition does not contain a single allegation that places Preston in Texas or describes any act that Preston is alleged to have done in Texas, much less any act in Texas that gives rise to the claims in this case. Appellees have never amended their petition to include such allegations because no such facts exist.

Appellees failed to meet their burden to plead sufficient allegations to establish personal jurisdiction over Preston. It is the plaintiff’s initial burden to plead sufficient allegations to allege personal jurisdiction over a defendant. Because Appellees have failed to do so, Preston needed only to establish that he does not reside in Texas to negate personal jurisdiction. There is no dispute: Preston resides in Massachusetts and is not a Texas resident. The trial court erred in overruling Preston’s special appearance on this basis alone.

Appellees’ special appearance evidence supports neither specific nor general jurisdiction. Texas courts can exercise personal jurisdiction over a nonresident only if the plaintiff’s claims arise out of the defendant’s contacts with the forum (specific jurisdiction) or if the defendant has continuous and systematic

30 contacts with the forum (general jurisdiction). Though it is not clear from their briefing below, Appellees appear to argue that there is both specific and general jurisdiction over Preston. See CR 270 (Tab 4). Appellees are wrong on both counts.

There is no specific jurisdiction because Appellees fail to link any alleged action by Preston giving rise to their claims to Texas. Appellees contend there is specific jurisdiction over Preston because “[t]he acts and events complained of in this litigation all arise directly from Preston’s activities as a director of and fund raiser for TSI and NC12 – both Texas companies” and because “[i]n raiding funds for TSI and NC12, through fraudulent misrepresentations and then denuding the companies of their assets, Preston . . . could reasonably foresee that NC12 and its shareholders and investors would suffer direct economic injury.” CR 269–70 (Tab 4).

The mere fact that Preston was a director of a corporation with a Texas office while allegedly making misrepresentations to nonresident investors outside of Texas is insufficient to establish that any alleged misrepresentation relates to Preston’s contacts with Texas . The “reasonable foreseeability” test has been rejected by the Texas Supreme Court. And Appellees’ “denuding” claims are not germane: the bankruptcy court dismissed all claims relating to harms to TSI and NC12. The only surviving claims regard alleged misrepresentations made by

31 Preston in connection with the value of TSI / NC12 at the time of the intervenors’ investment, and conspiracy to commit those misrepresentations. For jurisdictional purposes, the relevant location for fraudulent misrepresentation is the place where the misrepresentation was made.

There are no allegations that Preston committed any acts giving rise to these claims in Texas, either in the petition or in Appellees’ voluminous briefing below. As a matter of black-letter law, there is no specific jurisdiction over Preston.

There is no general jurisdiction because all of Preston’s forum contacts were in his representational capacity and still do not amount to continuous and systematic contacts with Texas. Preston is a Massachusetts resident who lives and works in Massachusetts. Other than periodically traveling to Texas on business trips on behalf of foreign entities, Preston has no Texas ties at all. Preston’s contacts with Texas on behalf of corporations do not subject him to general jurisdiction absent a showing either that these contacts themselves were tortious or that the corporations were his alter ego. While Appellees claim one corporation, JK Claims, is Preston’s alter ego, JK Claims’ alleged contacts with Texas began in June 2012—one year after the Appellees filed their suit—and are thus outside of the relevant period to determine jurisdictional contacts. There is no evidence of any purposeful contacts with Texas so substantial that it would render

32 Preston “at home” in the state of Texas. There is no general jurisdiction over Preston as a matter of law.

For all of these reasons, the trial court erred in overruling Preston’s special appearance. IV. STANDARD OF REVIEW 16 A. De novo review applies. Whether a court can exercise personal jurisdiction over a nonresident defendant is a question of law reviewed de novo by this Court. Kelly v. Gen. Interior Const., Inc. , 301 S.W.3d 653, 657 (Tex. 2010) (Tab 8). When, as here, a trial court does not issue findings of fact and conclusion of law with its special appearance ruling, this Court implies all the facts necessary to support the judgment as long as those facts are supported by the evidence. Id. ; CR 678–80; CR 684–86. The appellant can challenge the sufficiency of the evidence to support the implied facts. BMC Software Belgium, N.V. v. Marchand , 83 S.W.3d 789, 794 (Tex. 2002) (Tab 9). B. Jurisdiction over nonresidents requires allegations or proof of purposeful

availment. 1. The plaintiff bears the initial burden to plead allegations showing

jurisdiction over the defendant. In suits involving a challenge to personal jurisdiction, the Texas Supreme Court has “consistently held that the plaintiff bears the initial burden to plead sufficient allegations to bring the nonresident defendant within the reach of Texas’s long-arm statute.” Kelly , 301 S.W.3d at 658 (Tab 8). “When the pleading is wholly devoid of jurisdictional facts, the plaintiff should amend the pleading to include the necessary factual allegations.” Id. at 659.

2. The long-arm statute is limited by due process considerations. The exercise of personal jurisdiction “exposes defendants to the State’s

coercive power” and therefore it must comply with the Fourteenth Amendment’s due process clause. Goodyear Dunlop Tires Operations, S.A. v. Brown , 131 S. Ct. 2846, 2850, 180 L. Ed. 2d 796 (2011). “A nonresident defendant is subject to the personal jurisdiction of Texas courts if (1) the Texas long-arm statute authorizes the exercise of jurisdiction, and (2) the exercise of jurisdiction does not violate federal and state constitutional due process guarantees.” Kelly , 301 S.W.3d at 657 (Tab 8). The critical inquiry is whether the exercise of jurisdiction comports with due process because the Texas long-arm statute reaches “as far as the federal constitutional requirements of due process will allow.” Id. (quoting Moki Mac

34 River Expeditions v. Drugg , 221 S.W.3d 569, 575 (Tex. 2007); T EX . C IV . P RAC . & R EM . C ODE § 17.042. Because the due process requirement arises out of federal constitutional law, the Texas Supreme Court relies on precedent from the United States Supreme Court and other federal courts in evaluating the exercise of personal jurisdiction. PHC-Minden, L.P. v. Kimberly-Clark Corp. , 235 S.W.3d 163, 166 (Tex. 2007) (Tab 10).

The exercise of personal jurisdiction over a nonresident defendant is consistent with due process when the defendant “has established minimum contacts with the forum state, and the exercise of jurisdiction comports with traditional notions of fair play and substantial justice.” Kelly , 301 S.W.3d at 657 (Tab 8) (quoting Moki Mac , 221 S.W.3d at 575 and International Shoe Co. v. Washington , 326 U.S. 310, 316, 66 S. Ct. 154, 90 L. Ed. 95 (1945).

3. When the plaintiff fails to meet its initial burden of alleging sufficient purposeful minimum contacts, the fact that the defendant is a nonresident defeats personal jurisdiction.

A defendant establishes minimum contacts with a state “when it purposefully avails itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws.” Kelly , 301 S.W.3d at 657–58 (Tab 8) (quoting Retamco Operating, Inc. v. Republic Drilling Co. , 278 S.W.3d 333, 338 (Tex. 2009). There are “three parts to a ‘purposeful availment’ inquiry.” Moki Mac , 221 S.W.3d at 575 (quoting Michiana Easy Livin’ Country,

35 Inc. v. Holten , 168 S.W.3d 777, 784–85 (Tex. 2005)). First, only the defendant’s contacts with the forum are relevant, “not the unilateral activity of another party or a third person.” Id. Second, the contacts relied on “must be purposeful rather than random, fortuitous, or attenuated.” Id. And third, the “defendant must seek some benefit, advantage, or profit by ‘availing’ itself of the jurisdiction.” Id. (quoting Michiana , 168 S.W.3d at 785).

It is not enough, however, merely to take any purposeful action in Texas. The defendant’s actions must satisfy the requirements of either general or specific jurisdiction. All Star Enter., Inc. v. Buchanan , 298 S.W.3d 404, 412 (Tex. App.— Houston [14th Dist.] 2009, no pet.) (“There are two types of personal jurisdiction: specific and general.”); PHC-Minden , 235 S.W.3d at 166 (United States Supreme Court has “adopted the terms ‘specific’ and ‘general’ to describe the differing types of personal jurisdiction”) (Tab 10). Specific jurisdiction is “based on contacts arising from the dispute at issue,” while general jurisdiction is “predicated on a party’s ‘continuous and systematic’ contacts with the forum.” PHC-Minden , 235 S.W.3d at 165 (Tab 10).

The plaintiff has the initial burden of pleading that a nonresident defendant made purposeful minimum contacts with the state. Kelly , 301 S.W.3d at 658 (Tab 8). For the minimum contacts analysis, the plaintiff must allege that its claims arose out of or are substantially related to the defendant’s contacts with Texas, or

36 that the defendant has continuous and systematic contacts with the state. Id .; Moki Mac , 221 S.W.3d at 585; PHC-Minden , 235 S.W.3d at 165 (Tab 10).

Only if the plaintiffs meet the initial burden—by making specific allegations sufficient to establish general or specific jurisdiction—must the defendant respond by negating all grounds of jurisdiction. Kelly , 301 S.W.3d at 658 (Tab 8). “Because the plaintiff defines the scope and nature of the lawsuit, the defendant’s corresponding burden to negate jurisdiction is tied to the allegations in the plaintiff’s pleading.” Id.

When the plaintiffs do not meet their burden of alleging purposeful minimum contacts, the defendant need only submit an affidavit stating that it is not a Texas resident to defeat personal jurisdiction. Id. at 658–59 (“If the plaintiff fails to plead facts bringing the defendant within reach of the long-arm statute ( i.e. , for a tort claim, that the defendant committed tortious acts in Texas), the defendant need only prove that it does not live in Texas to negate jurisdiction.”).

Even where the plaintiffs do allege purposeful minimum contacts, the defendant can negate jurisdiction either factually or legally. Id . at 659. Factually, it can present evidence that it has no contacts with Texas, thus disproving the plaintiff’s allegations. Id. The plaintiff “risks dismissal of its lawsuit if it cannot present the trial court with evidence establishing personal jurisdiction.” Id. Legally, “the defendant can show that even if the plaintiff’s alleged facts are true,

37 the evidence is legally insufficient to establish jurisdiction.” Id. In other words, the defendant prevails if it shows the claims do not arise from the contacts or that its contacts with the state are not continuous and systematic. Id. ; PHC-Minden , 235 S.W.3d at 165 (Tab 10).

V.

ARGUMENT Sole issue: The trial court erred by denying Preston’s special appearance because Appellees failed to plead sufficient allegations to establish personal jurisdiction and because Preston is not subject to specific or general jurisdiction in Texas. A. Appellees failed to meet their initial burden of pleading facts to show that

Preston is subject to personal jurisdiction in Texas. Though it was not addressed in the intervenors’ petition and not clear from

their briefing, Appellees have claimed that Preston is subject both to specific and general personal jurisdiction in Texas court. CR 269–70 (Tab 4). The allegations in the petition and evidence offered in Appellees’ responses to Preston’s special appearance, 17 however, were insufficient to establish either.

In their petition, the intervenors failed to allege that Preston committed any act in Texas, much less any act that gave rise to their claims. As discussed in detail above, while the intervenors pleaded generally that Preston misrepresented the value of TSI/NC12 to potential investors and “all Defendants conspired to commit fraud,” not a single allegation connects any misrepresentation or act in furtherance of any conspiracy to Texas. See CR 132 ¶ 89 (Tab 2); section II.D , supra . None of the intervenors are even Texas residents. CR 105–08 (Tab 2).

Instead, the only pleaded basis for personal jurisdiction over Preston are the generic allegations that “Preston has engaged in business in Texas” and “[p]ersonal jurisdiction over all defendants is proper in the state of Texas because NC12 is headquartered in Houston, Texas and the tortious conduct alleged herein occurred in or was directed at the State of Texas.” CR 110 ¶ 33, 114 ¶ 44 (Tab 2). This type of generalization is insufficient to meet the pleading burden. Waterman Steamship Corp. v. Ruiz , 355 S.W.3d 387, 398, 403–04 (Tex. App.—Houston [1st Dist.] 2011, pet. denied). See also Frank A. Smith Sales, Inc. v. Atl. Aero, Inc. , 31 S.W.3d 742, 747 (Tex. App.—Corpus Christi 2000, no pet.) (The “third-party petition stated only that [the defendant] had committed acts of negligence, without specifying what those negligent acts were, or where they occurred. Therefore, [the] petition fell well short of pleading sufficient allegations to show jurisdiction in Texas.”). The intervenors failed to plead any facts showing that Preston in fact engaged in business, or committed any tort, in Texas. Indeed, the petition fails to allege a single action taken by Preston in Texas. See, e.g., CR 114–33 (Tab 2).

Because the intervenors failed to plead facts showing that Preston made misrepresentations or conspired to make misrepresentations in Texas, or any facts 39 showing that Preston had any continuous and systematic contacts with this state, Preston needed only prove that he is not a Texas resident to defeat personal jurisdiction. See Kelly v. Gen. Interior Const., Inc. , 301 S.W.3d 653, 658–59 (Tex. 2010) (Tab 8) (“If the plaintiff fails to plead facts bringing the defendant within reach of the long-arm statute (i.e., for a tort claim, that the defendant committed tortious acts in Texas), the defendant need only prove that it does not live in Texas to negate jurisdiction.”); Vosko v. Chase Manhattan Bank, N.A. , 909 S.W.2d 95, 99 (Tex. App.—Houston [14th Dist.] 1995, writ denied) (citing Siskind v. Villa Found. for Educ., Inc., 642 S.W.2d 434, 437–38 (Tex. 1982)) (When “the plaintiff does not allege that the defendant performed a specific act in Texas, the defendant's evidence that he is a nonresident is enough to carry his burden of proof.”).

Preston’s unrefuted affidavit establishes he is a Massachusetts resident and not a Texas resident. CR 87 ¶ 5 (Tab 1). The intervenors affirmatively plead that Preston is a Massachusetts resident. CR 110 ¶ 33 (Tab 2). The trial court erred by denying Preston’s special appearance on this basis alone. B. Because Appellees do not allege that any of Preston’s alleged contacts with

Texas give rise the surviving claims and no evidence suggests any link, there is no specific jurisdiction as a matter of law. Although nearly two years passed between the bankruptcy court’s order

dismissing all other causes of action and Appellees’ two briefs in opposition to 40 Preston’s special appearance, Appellees never amended their petition to include any jurisdictional facts relating to the claims remanded by the bankruptcy court. CR 237 (Tab 3); CR 257 (Tab 4); CR 413 (Tab 5). See also Kelly , 301 S.W.3d at 659 n.6 (Tab 8) (If “the plaintiff’s evidence does not fall within the scope of the factual allegations in the pleading, then the plaintiff should amend the pleading for consistency.”). Appellees tried to overcome their failure to plead jurisdictional facts by including more detail in their response and supplemental response opposing Preston’s special appearance, but the evidence considered by trial court in addition to the petition must comply with the requirements of Rule 120a, and even then, it “merely supports or undermines the allegations in the pleadings.” Id. at 658 n.4; T EX . R. C IV . P. 120a, 45(a) (defining pleadings as petitions and answers).

Regardless, there is no allegation, much less any evidence, that Preston’s alleged misrepresentations of TSI / NC12’s value to investors, or any act in furtherance of his alleged conspiracy to commit these misrepresentations, were made in Texas. The intervenors do not make any such allegation in their petition or in their response or supplemental response to Preston’s special appearance.

Rather, Appellees assert that there is specific jurisdiction over Preston because: “[t]he acts and events complained of in this litigation [] arise directly from Preston’s activities as a director of and fundraiser for TSI and NC12 – both

41 Texas companies” and because “[i]n raiding funds for TSI and NC12, through fraudulent misrepresentations and then denuding the companies of their assets, Preston . . . could reasonably foresee that NC12 and its shareholders and investors would suffer direct economic injury.” CR 269–70 (Tab 4).

Appellees mistake the law. Preston’s mere status as a director of even a “Texas corporation” would be insufficient to support Texas jurisdiction for misrepresentation claims that were not made or relied on in Texas. The “reasonable foreseeability” analysis for personal jurisdiction has been explicitly rejected by the Texas Supreme Court. All claims relating to the “denuding” of corporate assets have been dismissed by the bankruptcy court. There is no allegation, much less any evidence, that any of Preston’s contacts with Texas give rise to the surviving claims. There is no specific jurisdiction as a matter of law.

1. Specific jurisdiction requires that the alleged jurisdictional contacts give rise to the plaintiff’s alleged injury. Specific jurisdiction exists when the defendant purposefully avails himself of conducting activities in the forum and “the cause of action arises from or is related to those contacts or activities.” Kelly , 301 S.W.3d at 658 (Tab 8). See also Moki Mac River Expeditions v. Drugg , 221 S.W.3d 569, 576 (Tex. 2007) (“liability must have arisen from or related to those contacts.”). Specific jurisdiction depends on an “activity or an occurrence that takes place in the forum State and is therefore subject to the State’s regulation.” Goodyear Dunlop Tires Operations, S.A. v.

42 Brown , 131 S. Ct. 2846, 2851, 180 L. Ed. 2d 796 (2011) (citation omitted). In a specific jurisdiction analysis, the court thus focuses on “the relationship among the defendant, the forum[,] and the litigation.” Kelly , 301 S.W.3d at 658 (Tab 8) (quoting Retamco Operating, Inc. v. Republic Drilling Co. , 278 S.W.3d 333, 338 (Tex. 2009)) (alteration in original) .

Jurisdiction for each claim must stand on its own merits. Id. at 660. (performing claim-by-claim analysis to determine whether each claim arose out of alleged forum contacts); Seiferth v. Helicopteros Atuneros, Inc. , 472 F.3d 266, 274–75 (5th Cir. 2006) (specific jurisdiction is a claim-specific inquiry). This is especially significant here, as all of the original plaintiffs’ claims, and the intervenors’ shareholder oppression, fiduciary duty, and related conspiracy claims, have been dismissed. CR 237 (Tab 3).

For a tort claim, the plaintiff must plead that the defendant committed a tortious act in Texas. Waterman Steamship , 355 S.W.3d at 403. For misrepresentation claims, the relevant location for jurisdiction is the place where the misrepresentation was made. BMC Software Belgium, N.V. v. Marchand , 83 S.W.3d 789, 796–97 (Tex. 2002) (Tab 9); Kelly , 301 S.W.3d at 660 (Tab 8); Glencoe Capital Partners II, L.P. v. Gernsbacher , 269 S.W.3d 157, 167 (Tex. App.—Fort Worth 2008, no pet.). “[D]ue process will not permit the plaintiff to use insignificant acts in the forum to assert jurisdiction over all co-conspirators.”

43 Nat’l Indus. Sand Ass’n v. Gibson , 897 S.W.2d 769, 773 (Tex. 1995) (quoting Siskind v. Villa Found. for Educ., Inc., 642 S.W.2d 434, 438 (Tex. 1982)). Nor can the acts of co-conspirators be imputed to a nonresident defendant for the purposes of personal jurisdiction. See id.

2. There are no allegations in the intervenors’ petition that could give rise to specific jurisdiction over Preston. As discussed at length above, there is no allegation in the intervenors’ petition that Preston’s alleged misrepresentations of NC12’s value to investors, or any act in furtherance of his alleged conspiracy to commit these misrepresentations, occurred in Texas.

Appellees do not attempt to remedy this problem in their special appearance briefing or the evidence attached thereto. Rather, Appellees compile a list of Preston’s alleged business trips and director positions on behalf of a variety of entities over the last 25 years. See, e.g., CR 260–64, 269 (Tab 4). Appellees make no attempt to link any of Preston’s alleged forum contacts to Preston’s alleged misrepresentations of the value of TSI / NC12 to potential investors, or to any conspiracy to commit such a misrepresentation.

44 3. There are no allegations or evidence in Appellees’ special appearance briefing that could give rise to specific jurisdiction over Preston.

Appellees refer to the same set of alleged forum contacts to support both specific and general jurisdiction over Preston. CR 260–64, 269 (Tab 4). See section II.F, supra . Each is examined in turn below.

a) Service as a director of foreign entities. Appellees assert generally that their claims against Preston “arise directly from Preston’s activities as a director of and fundraiser for TSI and NC12 – both Texas companies.” 18 CR 269–79 (Tab 4). The United States Supreme Court has held that service as a director of a corporation, by itself, does not create personal jurisdiction over that director—even when the corporation is organized in the forum state. Shaffer v. Heitner , 433 U.S. 186, 215–16, 97 S. Ct. 2569, 53 L. Ed. 2d 683 (1977) (in shareholder derivative suit against Delaware corporation’s directors and officers alleging that defendants “misus[ed] their power,” Delaware court did not have personal jurisdiction over defendants because plaintiffs did not allege any acts by the defendants in Delaware, and service as a director did not show that defendants purposefully availed themselves of conducting activities in Delaware). There is even less of a basis to claim that Preston’s service as a director of a Nevada corporation with an office in Texas created personal jurisdiction over him.

This is because the real locus of Appellees’ harm is the place where the misrepresentations were made . BMC Software , 83 S.W.3d at 796–97 (Tab 9) (“Here, Marchand alleges that his fraud and negligent misrepresentation claims arise from the alleged Watson–Ordelheide conversation in Texas. But they do not. The nature of the claims demonstrate that they can only arise from BMCB’s contact with Marchand, which all occurred outside of Texas. … BMCB made no representations to Marchand in Texas, and he did not rely to his detriment on the conversation in Texas.”) (citation omitted). See also Kelly , 301 S.W.3d at 660 (Tab 8) (in order to establish specific jurisdiction for fraud, the plaintiff must allege that the fraudulent acts occurred in Texas).

BMC Software involved an alleged fraudulent misrepresentation made in Europe. 83 S.W.3d at 796–97 (Tab 9). The plaintiff claimed that jurisdiction was proper in Texas because the defendant’s officers met in Texas and, during that meeting, planned to defraud the plaintiff. Id. at 796. The Texas Supreme Court disagreed, however, noting that even if the defendant’s officers discussed the plan to defraud the plaintiff in Texas, it was the misrepresentations themselves —made in Europe—that gave rise to the cause of action. Id. at 796–97.

46 Here, Appellees have neither pleaded nor offered evidence to show that any of the alleged misrepresentations giving rise to their claims took place in Texas. See sections II.D, II.F , supra . Further, there is no allegation or evidence that Preston ever even did business out of the TSI or NC12 Texas office. Preston participated in board meetings from Massachusetts, Switzerland, or Germany, never Texas. See CR 86–87 ¶¶ 2, 7 (Tab 1); CR 325, 328 (Tab 4). Appellees do not allege that Preston made any representation or undertook any action supporting any conspiracy while participating in these board meetings.

Preston is not subject to specific jurisdiction on the bare fact of his status as director for corporations with Texas offices. b) Business trips to Texas. Appellees spill much ink describing the business trips Preston took in a representative capacity over the last 25 years. CR 260–64 (Tab 4). For the most part, these trips fall well before or well after the relevant window for investment into TSI or NC12, making it impossible that they give rise to the Appellees’ remaining claims. Most significant, however, is Appellees’ conspicuous failure to allege any connection between a single one of these business trips and the alleged misrepresentations or conspiracy.

Board meetings and business trips in the 1990s. Appellees never allege that Preston’s 1990s-era Texas business trips give rise to their claims. CR 87 ¶ 5 (Tab 47 1); CR 260 (Tab 4). Nor could they. Appellees themselves state that MMT’s business in Texas concerned a waste recycling project using MMT’s catalytic extraction processing (“CEP”) technology, not potential investors in TSI or NC12. CR 260–61, 408–09 (Tab 4). TSI would not be formed until 2006, or do business in Texas until 2008. CR 281 (Tab 4). Preston’s MMT business trips do not form a basis for specific jurisdiction.

Business trips with Quantum in 2004. Appellees never claim that Preston’s alleged three business trips to Texas in 2004 to meet with Collins 19 give rise to their claims that Preston allegedly misrepresented the value of NC12 to potential investors. CR 408–09, 261 (Tab 4). Indeed, TSI still would not exist for another two years or do business for another four. CR 281 (Tab 4). Preston’s Quantum business trips do not form a basis for specific jurisdiction.

Business trips with C Change between 2008–2011. Appellees never allege that any of Preston’s business trips with C Change related in any way to misrepresentations to investors about the value of TSI / NC12. CR 262–64, 319 at 25:3–28:21, 323 at 49:13-24, 335–38, 343–48 (Tab 4); CR 672–73 ¶¶ 5–6 (Tab 6).

Appellees do not claim that Preston’s 2008 meeting in Houston with Collins and Sydow related to any alleged misrepresentations to investors. CR 262, 269, 319 at 25:3–28:21, 339–42 (Tab 4). With respect to the meeting in 2009 or early 2010, Preston’s C Change colleague Russell Read testified that he and Preston 20 travelled to Texas during that period for one meeting with Russian technology partners for the formation of a joint venture MIT was exploring with the Russian government. CR 323 at 49:13–50:4 (Tab 4). Preston gave evidence of four other approximately one-day trips for C Change between 2009–2011. 21 There is no evidence, nor even any allegation, that any of these trips related in any way to the Appellees’ surviving claims.

Business trip to testify regarding NC12 in divorce proceeding. Preston traveled to Texas in October 2010 to testify in Sydow’s divorce proceeding. CR 339–42 (Tab 4). Preston testified exclusively about NC12 assets and financial operation. See CR 352–70 (Tab 4). But there can be no connection between any alleged post-August 2010 contacts with Texas and misrepresentations to potential investors in NC12, including this testimony, because August 2010 is the last alleged investment giving rise to the surviving claims, and there is no allegation or evidence that this or any post-August 2010 Preston contact relates in any way to any conspiracy claim. CR 104–08 (Tab 2). Indeed, Appellees never allege any link between this trip to Texas and any surviving claim. CR 269 (Tab 4). Preston’s October 6, 2010 trip to Texas to give testimony in Sydow’s divorce proceeding does not give rise to specific jurisdiction.

Business trip with TEM Capital. Appellees never allege that Preston’s May 2–4, 2011 business trip to Texas to attend a foreclosure sale and cement plant inspection for TEM Capital relates in any way to their surviving claims. See CR 673 ¶ 7 (Tab 6); 263–64, 269, 349–50 (Tab 4); CR 414, 427 (Tab 5); CR 673 ¶ 7 (Tab 6). Again, the last relevant investment occurred nearly a year before, and no evidence suggests this trip was related to any conspiracy to defraud NC12’s investors regarding the value of NC12’s shares. CR 104–08 (Tab 2).

In sum, not a single one of Preston’s business trips give rise to the Appellees’ surviving claims. Thus, not a single one supports specific jurisdiction. c) 2004: Phone calls and mail to Collins. As discussed above, Preston’s 2004 business trips to Texas to meet with Collins did not relate to the surviving claims. As Collin himself states, Preston’s subsequent telephone calls and shipment of records related to the same purposes as his business trips: the commercial development of the CEP technology, not plans

50 to mislead investors of TSI two years later about the value of TSI. CR 409 ¶ 9 (Tab 4). These alleged contacts do not provide a basis for specific jurisdiction.

d) 2006: Metal Catalyst Ventures’ designation of address as TSI address. A 2006 Nevada state record shows someone named Linda Kulik listed Preston as a director of Nevada corporation Metal Catalyst Ventures, Inc. CR 315 (Tab 4). Kulik listed TSI’s Houston address as Preston’s address. See id. ; CR 281 (Tab 4). Appellees allege no other facts regarding Metal Catalyst Ventures, not even in their briefing. See CR 262 (Tab 4). Appellees never allege any link between Metal Catalyst Ventures to the claims in the lawsuit, nor do they provide any evidence that Preston actually resided at or did business at TSI’s address. See section II.D, II.F, supra.

Preston submitted an unrefuted affidavit stating that he never served as a director of Metal Catalyst Ventures and never listed the TSI address as his own. CR 673 ¶ 9. (Tab 6). Preston has never maintained an office in Texas. CR 87 ¶ 8 (Tab 1). This is not a purposeful minimum contact supporting jurisdiction over Preston because it is not a contact by Preston. See Guardian Royal Exch. Assur., Ltd. v. English China Clays, P.L.C. , 815 S.W.2d 223, 227 (Tex. 1991) (“the contact must have resulted from the nonresident defendant's purposeful conduct and not the unilateral activity of the plaintiff or others”). See also Helicopteros Nacionales de Colombia, S.A. v. Hall , 466 U.S. 408, 417, 104 S. Ct. 1868, 1873

51 (1984) (the “unilateral activity of another party or a third person is not an appropriate consideration when determining whether a defendant has sufficient contacts with a forum State to justify an assertion of jurisdiction.”). This alleged “contact” provides no basis for specific jurisdiction over Preston.

e) 2008: Personal check. In 2008, Preston allegedly wrote a personal check to BOS, Inc., a Turks and Caicos corporation with an alleged bank account in Texas. CR 387 (Tab 4); CR 25 ¶ 2. Two years later, BOS, Inc. wired Preston back the same sum. CR 384 (Tab 4). There is no indication that Preston purposefully availed himself of any Texas- related benefits by writing a personal check to a foreign entity, or that this transaction has any relationship to the litigation. See Helicopteros , 466 U.S. at 416–17 (“Common sense and everyday experience suggest that, absent unusual circumstances, the bank on which a check is drawn is generally of little consequence to the payee and is a matter left to the discretion of the drawer.”) (footnote omitted). The BOS, Inc. payments are not a minimum contact with Texas and do not give rise to specific jurisdiction.

f) 2012: Alleged alter-ego JK Claims’ purchase of litigation claims in the Kaiser Litigation. Appellees’ fantastical story of Preston secretly purchasing the claims in the Kaiser Litigation through alleged alter-ego JK Claims still does not relate in any way to any potential misrepresentation to investors of NC12—the last of which

52 invested two years prior—or give any conceivable support to a conspiracy to defraud potential investors in NC12. CR 414–24 (Tab 5).

The Kaiser Litigation concerned disputes between the members of Texas Syngas LLC , not misrepresentations to potential investors in TSI or NC12 of TSI or NC12’s value. CR 432–40 (Tab 5). The first action intervenors allege relating to JK Claims, an application to reserve its name, occurred in June 2012, two years after the last investor invested in NC12. CR 527, 414–24 (Tab 5). Even if taken as true—which they should not be—the intervenors’ conspiracy theories regarding JK Claims have nothing to do with the claims at issue in this matter and do not form a basis for specific jurisdiction.

In sum, none of Preston’s alleged contacts with Texas relate to the claims in this case. Appellees’ allegations and evidence do not support the exercise of specific jurisdiction. Kelly , 301 S.W.3d at 659 (Tab 8).

4. Appellees’ claim that Preston “could reasonably foresee that NC12 and its shareholders and investors would suffer direct economic injury” because of his alleged misrepresentations is not a basis for specific jurisdiction as a matter of law.

Appellees claim that Preston is subject to specific jurisdiction because “[i]n raiding funds for TSI and NC12, through fraudulent misrepresentations and then denuding the companies of their assets, Preston . . . could reasonably foresee that NC12 and its shareholders and investors would suffer direct economic injury.” CR 269 (Tab 4). This argument echoes the intervenors’ general allegation in the

53 petition that there is personal jurisdiction because tortious conduct “was directed at the State of Texas.” CR 114 ¶ 44 (Tab 2).

The Texas Supreme Court has unequivocally rejected the notion that jurisdiction can arise purely because actions caused harm to Texas residents or because a tort is “directed” at Texas residents. Michiana Easy Livin’ Country, Inc. v. Holten , 168 S.W.3d 777, 788–92 (Tex. 2005) (surveying case law and constitutional considerations). And in this case, because there are no claims belonging to the original plaintiffs, and no intervenor is a Texas resident (including Appellees), the only conceivable Texas harm Appellees allege is harm to NC12, a Nevada corporation—but the bankruptcy court dismissed those claims.

There is thus no basis in the pleadings, the evidence, or the law for specific jurisdiction over Preston. C. Because Preston’s alleged contacts with Texas are not substantial,

continuous, or systematic, there is no general jurisdiction as a matter of law. 1. General jurisdiction requires the defendant to have substantial,

continuous, and systematic contacts with Texas. General jurisdiction exists “when a defendant’s contacts in a forum are continuous and systematic so that the forum may exercise personal jurisdiction over the defendant even if the cause of action did not arise from or relate to activities conducted within the forum state.” BMC Software Belgium, N.V. v. Marchand , 83 S.W.3d 789, 796 (Tex. 2002) (Tab 9). For general jurisdiction, the

54 plaintiff must show the nonresident defendant engaged in “substantial activities” in Texas. Guardian Royal Exch. Assur., Ltd. v. English China Clays, PLC , 815 S.W.2d 223, 230 (Tex. 1991).

A general jurisdiction inquiry “involves a ‘more demanding minimum contacts analysis’” than a specific jurisdiction inquiry, with a “substantially higher threshold.” PHC-Minden, L.P. v. Kimberly-Clark Corp. , 235 S.W.3d 163, 168 (Tex. 2007) (Tab 10). “Usually, ‘the defendant must be engaged in longstanding business in the forum state, such as marketing or shipping products, or performing services or maintaining one or more offices there; activities that are less extensive than that will not qualify for general in personam jurisdiction.’” Id . (quoting 4 Wright & Miller, F EDERAL P RACTICE & P ROCEDURE § 1067.5).

The defendant’s activities must be so extensive that it is essentially at home in the state, and therefore should be subject to suit there for any claim—regardless of where the claim occurred—as a resident would be. Goodyear Dunlop Tires Operations, S.A. v. Brown , 131 S. Ct. 2846, 2853–54, 180 L. Ed. 2d 796 (2011) (“For an individual, the paradigm forum for the exercise of general jurisdiction is the individual’s domicile; for a corporation, it is an equivalent place, one in which the corporation is fairly regarded as at home.”). As general jurisdiction is “dispute- blind,” the alleged actions underlying the lawsuit “should not be the focus in assessing continuous and systematic contacts—contacts on which jurisdiction over

55 any claim,” not just the one at issue, may be based. PHC-Minden, 235 S.W.3d at 169 (Tab 10). The relevant period for consideration of forum contacts for general jurisdiction ends at the time the suit is filed. Id.

Because it is so easy to let case-specific facts improperly weight a general jurisdiction analysis, the Texas Supreme Court has suggested a test that “properly frames the issue”: would the nonresident’s contacts with Texas “support jurisdiction even for a hypothetical cause of action arising from its sale of a product in Germany that injured a German citizen?” Id. (citation omitted). In other words: are Preston’s Texas activities in Texas so pervasive that he should be sued in Texas in a case where none of the operative facts relate to Texas? The answer here is no.

2. The sporadic contacts with Texas in a representative capacity that Appellees allege are nothing like the substantial, continuous, and systematic contacts required to establish general jurisdiction.

Appellees refer to the same set of alleged forum contacts to support both specific and general jurisdiction over Preston. CR 260–64, 269 (Tab 4); section II.F, supra . The vast majority of alleged contacts cannot be considered contacts for purposes of establishing general jurisdiction over Preston, either because they do not demonstrate that Preston availed himself of the privilege of conducting activities in Texas (service as a director of a foreign entity) or they were made in a representative capacity (business travel). Each is examined again in turn below in

56 the context of general jurisdiction. See Am. Type Culture Collection, Inc. v. Coleman , 83 S.W.3d 801, 809 (Tex. 2002) (for general jurisdiction, all alleged forum contacts in the relevant time period must be “carefully investigated, compiled, sorted, and analyzed for proof of a pattern of continuing and systematic activity.”). The quality, not quantity, of the contacts is relevant, and the relevant period ends at the date of filing of the suit—here, July 26, 2011. Id. ; CR 6.

a) Director of foreign entities. The mere fact of service as a director of corporations which reside in Texas, without more, is insufficient as a matter of law to create general jurisdiction over Preston in Texas. Shaffer v. Heitner , 433 U.S. 186, 215–16, 97 S. Ct. 2569, 53 L. Ed. 2d 683 (1977) (fact that defendants were directors and officers of Delaware corporation did not demonstrate that they had purposefully availed themselves of the privilege of conducting activities in Delaware in a way that would justify bringing them before a Delaware tribunal).

Preston participated in TSI and NC12 board meetings from Massachusetts, Switzerland, or Germany, never Texas. See CR 86–87 ¶¶ 2, 7 (Tab 1); CR 325, 328 (Tab 4). Indeed, Appellees allege no acts taken by Preston in Texas in connection with his service as a director for TSI and NC12, or any other entity. Even if they had, as discussed in detail below, any such acts would not be sufficient to subject him to general jurisdiction in Texas as an individual because

57 he did not do them in his individual capacity. Wright v. Sage Eng’g, Inc. , 137 S.W.3d 238, 250 (Tex. App.—Houston [1st Dist.] 2004, pet. denied). 22

b) Business trips to Texas. Preston’s contacts with Texas in his representative capacity do not qualify as contacts for general jurisdiction because there is no allegation that these contacts involved tortious activities or that the entities were Preston’s alter ego. Under Texas law, corporations are presumed to be separate entities from their directors, officers, and shareholders. See Washington DC Party Shuttle, LLC v. IGuide Tours , 406 S.W.3d 723, 738–39 (Tex. App.—Houston [14th Dist.] 2013, pet. denied). An individual's transaction of business within the state solely as a corporate officer does not create personal jurisdiction over that individual though the state may have personam jurisdiction over the corporation. Stuart v. Spademan , 772 F.2d 1185, 1197 (5th Cir. 1985). An individual’s representative contacts are not their own absent other evidence that the contact was independently tortious, or proof sufficient to pierce the corporate veil. Siskind v. Villa Found. for Educ., Inc., 642 S.W.2d 434, 438 (Tex. 1982); Hoffmann v. Dandurand , 180 S.W.3d 340, 347 (Tex. App.—Dallas 2005, no pet.).

This Court has held that general jurisdiction over an individual may not be based on jurisdiction over an entity with which an individual is associated unless the entity is his or her alter ego. Vosko v. Chase Manhattan Bank, N.A. , 909 S.W.2d 95, 99 (Tex. App.—Houston [14th Dist.] 1995, writ denied). See also Hoffmann, 180 S.W.3d at 347. The alter ego doctrine applies only when there is such unity between the corporation and the individual that the separateness of the corporation has ceased. Vosko , 909 S.W.2d at 99. Courts consider evidence such as (1) the payment of alleged corporate debts with personal checks or other comingling of personal and corporate funds; (2) representations that the individual will financially back the corporation; (3) diversion of company profits to the individual for personal use; (4) inadequate capitalization; (5) other failures to keep corporate and personal assets separate. Hoffmann, 180 S.W.3d at 347.

Because personal jurisdiction involves due-process considerations that may not be overridden by statutes or case law, jurisdictional veil-piercing and substantive veil-piercing involve different elements of proof. All Star Enter., 298 S.W.3d at 422; PHC-Minden , 235 S.W.3d at 174 (Tab 10). For jurisdictional purposes, the factors considered must relate to the actor’s forum contacts. See PHC Minden , 235 S.W.3d at 174 (Tab 10) (observing that common veil-piercing factors such undercapitalization and common names between entities do “not

59 affect whether each has sufficient contacts with the forum for jurisdictional purposes.”).

Notably, while Appellees occasionally suggest Preston “controls” certain entities, with the exception of JK Claims (discussed below), Appellees never allege nor present any evidence that the various entities Preston represented in his contacts with Texas were Preston’s alter ego. Mere status as an officer, director or majority shareholder of an entity alone is insufficient to support a finding of alter ego. Tryco Enter., Inc. v. Robinson , 390 S.W.3d 497, 525 (Tex. App.—Houston [1st Dist.] 2012, pet. dism’d). Yet nearly all of Preston’s alleged Texas contacts relate to business trips to Texas on behalf of entities for whom Preston was a director or manager:

Business trips with a nonprofit and MMT in the 1990s. Appellees never allege the nonprofit or MMT were alter-egos of Preston’s, or that Preston committed any torts on his trips that would give rise to jurisdiction over Preston in his personal capacity. CR 288–89 (Tab 4); CR 87 ¶ 5 (Tab 1). Preston’s 1990s-era Texas trips or Texas-related projects on behalf of the nonprofit and MMT do not constitute contacts supporting general jurisdiction over Preston as a matter of law.

60 Business trips with C Change between 2008–2011. 23 With C Change, Preston allegedly visited Texas in November 2008 with Read to attend a meeting with Collins and Sydow; in “2009 or early 2010” with Read regarding a joint venture with MIT and Russian technology partners; and four other times between 2009–2011 for one-day business trips. CR 319 at 25:3–28:21, 323 at 49:13-24, 335–48 (Tab 4); CR 672–73 ¶¶ 5–6 (Tab 6). Appellees do not dispute that Preston took these trips in his representative capacity on behalf of C Change. CR 262–64 (Tab 4). Nor do Appellees allege that C Change is an alter ego of Preston’s, or that Preston committed fraud or any other tort in the course of his contacts with Texas through C Change. Preston’s Texas trips on behalf of C Change between do not constitute contacts supporting general jurisdiction as a matter of law.

Business trip in 2010 to testify regarding NC12 in divorce proceeding . It is undisputed that Preston traveled to Texas on October 6, 2010 to testify about NC12’s assets and operations in Sydow’s divorce proceeding. CR 331–70 (Tab 4). While Appellees complain that the hearing transcript does not say “corporate representative,” it is indisputable that Preston’s testimony exclusively concerned NC12 assets and NC12’s financial operation. See CR 357 (discussing purpose of Preston’s testimony as whether Sydow or NC12 owned a particular asset, or whether Sydow was receiving money from NC12). The transcript contains no questions whatsoever regarding Preston’s personal relationship with Sydow—or indeed, anything other than NC12 financial operations and NC12 assets. CR 331– 70 (Tab 4).

Even if Preston had testified in his personal capacity, it would not be evidence of purposeful availment of the benefits of acting in Texas. Preston did not file for divorce in Texas, Sydow did. See Guardian Royal Exch. Assur., Ltd. v. English China Clays, P.L.C. , 815 S.W.2d 223, 227 (Tex. 1991) (“the contact must have resulted from the nonresident defendant's purposeful conduct and not the unilateral activity of the plaintiff or others”). See also Helicopteros Nacionales de Colombia, S.A. v. Hall , 466 U.S. 408, 417–18, 104 S. Ct. 1868, 1873 (1984) (the “unilateral activity of another party or a third person is not an appropriate consideration when determining whether a defendant has sufficient contacts with a forum State to justify an assertion of jurisdiction.”); Kulko v. Cal. Super. Ct. , 436 U.S. 84, 93, 98 S. Ct. 1690, 1697 (1978) (holding it arbitrary to subject one parent to suit in any state where other parent chooses to spend time while having custody of child).

One isolated trip to give testimony in a divorce proceeding is no evidence of any continuous and systematic relationship with Texas. Preston’s October 6, 2010 business trip does not support general jurisdiction.

62 Business trip with TEM Capital. Again, there is no dispute that Preston made his May 2–4, 2011 trip to Texas to attend a foreclosure sale and inspect a cement plant in connection with that sale as a representative of TEM Capital. CR 673 ¶ 7 (Tab 6); CR 349–51 (Tab 4). And again, there is simply no allegation, much less any evidence, that TEM Capital is an alter ego of Preston’s or that Preston did anything tortious on his trip that would support individual jurisdiction over him.

In sum, not a single one of Preston’s business trips support general jurisdiction over Preston individually. c) 2004: Business trips, phone calls, and shipment of records with Quantum. While Collins disputes whether Preston acted as a representative of Quantum during their 2004 interactions, 24 there is no dispute that these 2004 contacts pertained to the development of MMT’s patented CEP technology. CR 408–09 ¶¶ 3–9 (Tab 4); CR 673 ¶¶ 6–8 (Tab 6). The intervenors affirmatively assert that Quantum, not Preston, acquired MMT’s CEP technology in 1999 and that Quantum, not Preston, licensed the CEP patents CR 115–16 ¶¶ 48, 50 (Tab 2).

While intervenors allege Quantum is “controlled” by Preston, there are no allegations or evidence that Quantum is Preston’s alter ago. See, e.g., CR 115 ¶ 48 (Tab 2); CR 673 ¶ 10 (Tab 6) (Preston is one of 21 shareholders of Quantum). There are no allegations or evidence, for example, that Preston comingled his funds with Quantum, or personally diverted Quantum’s assets, or used Quantum’s corporate form for his personal benefit. Despite Collins’ claims about his beliefs, there is no evidence Preston was acting in anything other than his representative capacity in his dealings with Collins in 2004, and there are no allegations that Preston committed any tortious acts in the course of these 2004 dealings.

Moreover, none of the alleged 2004 contacts indicate Preston purposefully availed himself of the privileges of acting within Texas. Even if Preston were acting in his individual capacity, nothing indicates that Collins’ state of residence was anything but incidental. Collins, not Preston, chose to reside in Texas. See Guardian Royal Exch. , 815 S.W.2d at 227; Helicopteros , 466 U.S. at 417–18; Kulko, 436 U.S. at 93.

Even if these limited 2004 contacts—three trips, some telephone calls, and one shipment of technical records—were included in a general jurisdiction analysis, they hardly support the continuous and systematic contacts necessary to give rise to general jurisdiction. See Helicopteros , 466 U.S. at 417–18.

64 d) 2006: Metal Catalyst Ventures’ designation of business address at TSI address The fact that an unrelated individual listed TSI’s Texas office address as Preston’s address on a Nevada document regarding a Nevada corporation is not minimum contact with Texas, much less one that would support general jurisdiction. CR 315, 281 (Tab 4); CR 673 ¶ 9 (Tab 6). See Guardian Royal Exch. , 815 S.W.2d at 227; Helicopteros , 466 U.S. at 417–18; Kulko, 436 U.S. at 93.

e) 2008: Personal check Appellees present no evidence regarding the context surrounding the personal check Preston allegedly wrote to BOS, Inc., a Turks and Caicos corporation. CR 387 (Tab 4); CR 25 ¶ 2. Certainly, they present no explanation as to why Preston would know the foreign entity had a Texas bank account, or how Preston could be said to have purposefully availed himself of benefits of doing business in Texas by writing a check to such an entity. Guardian Royal Exch. , 815 S.W.2d at 227; Helicopteros , 466 U.S. at 417–18; Kulko, 436 U.S. at 93. This is not the type of purposeful, continuous, and systemic contact with Texas that gives rise to general jurisdiction.

65 f) 2012: Alleged alter-ego JK Claims’ purchase of litigation claims in the Kaiser Litigation As a matter of law, Preston’s alleged Texas contacts in connection with JK Claims occur too late to qualify for a general jurisdiction analysis in this case. PHC-Minden , 235 S.W.3d at 169 (“the relevant period ends at the time suit is filed.”) (Tab 10). Not only do Appellees fail to establish that JK Claims is an alter ego of Preston’s, most significantly, they ignore the damning fact that the earliest of JK Claims’ alleged activities, its application for name reservation with the Texas Secretary of State, dates back to June 2012. CR 417, 527 (Tab 6). This is over a year after the original plaintiffs filed suit, and nearly a year after Appellees themselves filed their suit in intervention. CR 6; CR 102 (Tab 2).

Appellees’ convoluted alter-ego story amounts to nothing more than an allegation that JK Claims kept poor records. Appellees fail entirely to establish JK Claims as an alter ego of Preston’s. Preston’s declaration and Sydow’s deposition testimony are unrefuted and establish that Quantum is the sole owner of JK Claims. CR 432, 495 at 57:2–3, 498 at 66:19–67:20 (Tab 5); CR 673 ¶ 10 (Tab 6). Appellees do not allege that Quantum is an alter ego of Preston. Rather, Appellees simply assert that JK Claims is Preston’s alter ego on the bases that: half of the funds for the Kaiser claims purchase came “from Boston” and half from Sydow; certain JK Claims corporate documents are unsigned; and certain JK Claims

66 corporate documents do not reflect the ownership of shares in JK Claims (though others do). CR 415–24, 529–31 (Tab 5).

There is no evidence that Preston personally supplied any funds for JK Claims. Rather, Sydow testified the funds came from Quantum. CR 495 at 57:2– 3, 498 at 66:19–67:20 (Tab 5). And failure to comply with corporate formalities is not a factor in considering whether alter ego exists. Howell v. Hilton Hotels Corp ., 84 S.W.3d 708, 714 (Tex. App.—Houston [1st Dist.] 2002, pet. denied).

There is no evidence that Preston comingled his personal debts or assets with JK Claims or any of the others indicia of an alter ego entity. There is no evidence that Preston personally funded the acquisition of the Kaiser litigation and no evidence that the bankruptcy trustee would have objected if he had. 25 There is no evidence that Preston (or JK Claims or Quantum) did anything improper with respect to JK Claims’ formation, or its acquisition or management of the Kaiser claims. T EX . R. C IV . P. 120a(3) (requiring the trial court to consider the pleadings and the evidence, not speculation and inference).

Therefore, even if the alleged JK Claims activity were not too late to support jurisdiction of a matter of law, there would still be insufficient evidence to support any finding that JK Claims was Preston’s alter ego. Serv. Corp. Intern. v. Guerra , 348 S.W.3d 221, 228 (Tex. 2011) (evidence is legally insufficient if there is there is a complete absence of evidence of a vital fact, or the evidence offered to prove a vital fact is no more than a mere scintilla); Garza v. Alviar , 395 S.W.2d 821, 823 (Tex. 1965) (evidence is factually insufficient if it is so weak that the finding should be set aside).

3. Preston lacks any substantial, continuous, or systematic contact that would render him at “at home” in Texas. Standing against these tenuous Texas contacts are the following facts: Preston has not lived in Texas since his infancy; has never done business in Texas in his individual capacity; has never maintained an office in Texas; has never engaged in any routine sales or other profit-making activities in Texas; does not rent, own, or possess any real or personal property in Texas; has never taken out a loan in Texas or guaranteed a debt owed to a Texas resident; does not maintain a telephone, post office box, or other address in Texas; does not employ any persons who live in or regularly travel to Texas for work; and has never incurred or paid taxes in Texas. CR 86–89 ¶¶ 2–14, 74–85 (Tab 1). An out-of-state defendant who merely does business with Texas businesses or customers will not be subject to general jurisdiction if he does not have a lasting physical presence in the state.

68 Access Telecom, Inc. v. MCI Telecom. Corp ., 197 F.3d 694, 717 (5th Cir. 1999). Preston indisputably does not.

The Texas and United States Supreme Courts have made clear that brief, sporadic trips to a forum state are insufficient to create general jurisdiction, particularly when they are made in a representative capacity. PHC-Minden , 235 S.W.3d at 170 (Tab 9); Ashdon, Inc. v. Gary Brown & Assocs., Inc ., 260 S.W.3d 101, 113 (Tex. App.—Houston [1st Dist.] 2008, no pet.) (Florida business owner’s 20+ sales meetings in Texas over 13-year period insufficient to establish general jurisdiction); Waterman Steamship , 355 S.W.3d at 406 (18 port calls over a seven- year period “is better characterized as sporadic rather than ‘continuous and systematic’ contacts”).

In Helicopteros , the United States Supreme Court overturned the Texas Supreme Court, holding that because Helicol lacked any place of business in Texas, lacked a license to do business in Texas, took only sporadic trips to Texas through its CEO and employees, purchased products in Texas, and accepted checks drawn on Texas bank accounts, Helicol’s Texas contacts were insufficient for general personal jurisdiction. Helicopteros , 466 U.S. at 416–19.

By contrast, in Perkins v. Benguet Consol. Mining Co., the nonresident defendant’s mining properties were located in the Philippines, but its operations were stopped by the Japanese occupation of the islands. 42 U.S. 437, 446–49, 72

69 S. Ct. 413, 419–20 (1952). During the occupation, the president and general manager returned to his home in Ohio and operated his business from there. See id. The United States Supreme Court determined that the company’s Ohio contacts supported a finding of general jurisdiction because the company’s president and general manager maintained an Ohio office, maintained company files in Ohio, corresponded from Ohio, drew and distributed salary checks from his Ohio office, used two Ohio bank accounts for company funds, had an Ohio bank act as transfer agent for the company’s stock, held directors’ meetings in Ohio, and supervised company Philippines property from Ohio. Id.

Preston’s brief, sporadic, and representative contacts with Texas do not approach the level of forum contacts in Helicopteros , much less those in Perkins . Preston’s forum contacts are not so substantial that Preston “should have reasonably expected to be sued in Texas on any matter, however remote” from those contacts. Johnston v. Multidata Sys. Intern. Corp ., 523 F.3d 602, 613 (5th Cir. 2008). There is no basis for general jurisdiction over Preston as a matter of law.

VI.

CONCLUSION AND PRAYER Appellees, disgruntled out-of-state investors in TSI and NC12, have not demonstrated why Texas courts should entertain their claims seeking to recover their lost investment against a Massachusetts resident who is not alleged to have

70 done anything in Texas connected to their claims. Appellees failed to meet their initial pleading burden, and there is no basis for the exercise of specific or general jurisdiction. Therefore, Preston requests that this Court reverse the trial court’s order overruling his special appearance, render a judgment granting his special appearance, and order that he be dismissed from the lawsuit.

Respectfully submitted,

AHMAD, ZAVITSANOS, ANAIPAKOS,

ALAVI & MENSING, P.C. By: /s/ Jane Langdell Robinson Jane Langdell Robinson Texas Bar No. 24062970 Monica Uddin Texas Bar No. 24075195 Jamie A. Aycock Texas Bar No. 24050241 1221 McKinney Street, Suite 3460 Houston, Texas 77010 Telephone: 713-655-1101 Fax: 713-655-0062 ATTORNEYS FOR APPELLANT JOHN T. PRESTON

71

CERTIFICATE

OF COMPLIANCE I certify that this brief complies with the typeface and word-count requirements set forth in the Rules of Appellate Procedure. This brief has been prepared, using Microsoft Word, in 14-point Times New Roman font for the text and 12-point Times New Roman font for any footnotes. This brief contains 14,507 words, as determined by the word count feature of the word processing program used to prepare this document, excluding those portions exempted by T EX . R. A PP . P. 9.4(i)(1).

/s/ Jane Langdell Robinson Jane Langdell Robinson 72

CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of this document was served on all counsel of record in this case, identified below, on June 12, 2015, by the electronic filing manager and/or via email: Kelley M. Keller F. Eric Fryar State Bar No. 11198240 State Bar No. 07495770 kkeller@ellison-keller.com eric@fryarlawfirm.com Tracey N. Ellison Matthew Buschi State Bar No. 15054720 State Bar No. 24064982 E LLISON K ELLER mbuschi@fryarlawfirm.com 5120 Woodway Dr., Suite 6019 Christina Richardson Houston, Texas 77056 F RYAR L AW F IRM , P.C. Telephone: 713-266-8200 State Bar No. 24070495 Fax: 713-266-8201 912 Prairie, Suite 100 Attorneys for Appellees Emjo Houston, Texas 77002-3145 Investments, Ltd. and Fax: 281-605-1888 H.J. von der Goltz Attorneys for all Intervenors/

Plaintiffs Asher Griffin Chris Sileo Sean Flammer S COTT , D OUGLASS & M C C ONNICO , LLP 600 Congress Ave., Ste 1500 Austin, Texas 78701-2589 Fax: 512-474-0731 Attorneys for Appellees Chalsys, MET, and Lo

/s/ Jane Langdell Robinson Jane Langdell Robinson

4834-5746-0004, v. 7 73 Filed 11 September 28 P2:44 Chris Daniel - District Clerk Harris County

ED101J016518693

By: jeanetta spencer

CAUSE NO. 2011-44058

MICHAEL COLLINS. ELLEN COLLINS. IN THE DISTRICT COURT OF § BOS, TNC.. ENVEN, INC., § METAL CATALYST VENTURES, INC., § FALL RNER REALTY. LTD. , § M. SAMEER AHMED, AND §

TSBC SOUTH TEXAS INVESTORS. L.P.,

~ §

Plaintiffs, § § v. HARRIS COUNTY, TEXAS § ~ MICHAEL SYDOW, JOHN T. PRESTON. § CHRISTOPH HENKEL. C. CHANGE §

INVESTMENTS. LLC, SONIA LO. CHALSYS

~ CAPITAL PARTNERS, L.L.P., § BRILLIANT NOVELTY , LL.C.. § and MELIORA ENERGY § TECHNOLOGTES, S.A.R.L., §

§ § 2 15™ JUDICIAL DISTRICT Defendants. DEFENDANT JOHN T. PRESTO 'S AMENDED SPECIAL APPEARANCE AND, SUBJECT THERETO, ORIGINAL ANSWER Pursuant to Texas Rule of Civil Procedure 120a. Defendant John T. Preston (''Preston") files this Amended Special Appearance, and Subject Thereto, Original Answer. objecting to this Court's personal jurisdiction over him, and in support states as foll ows:

PRESTON'S SPECIAL APPEARANCE

Plaintiffs have sued eight defendants in Texas even though there is no basis for 1. personal jurisdictio n over all of them. Specifically. Preston does not belong in this la wsuit because he has not had contact with the state of Texas in his individual capacity in the past 60 years. nor has he ever done husiness in Texas in his indi vidual capacity. Preston· s limi ted contacts with Texas have been made on behalf of companies for which he is a director. T he contacts of these companies cannot be imputed to Preston to subject him to personal jurisdiction

74 in Texas. Thus, Preston does not have the requisite minimum contacts required by Texas and fe deral law to exercise personal jurisdiction over him. Similarly, because Preston has had no contact with Texas in the past 60 years, subjecting him to the jurisdiction of a Texas court would not comport with notions of fair play and justice. There fore. Preston respectfull y requests that this Court fmd that asserting jurisdic tion over him in Texas is improper and dismiss all claims againsl him.

Argument and Authorities I. Texas law requires that the exercise of personal jurisdiction be consistent with t'ederaJ due process.

2. A Texas court may only exercise pet sonaljudsdiction over a defendant if it would be consistent with Cederal constitutional requirements of due process. Guardian Royal Exch. Assurance. Ltd. v. English China Clays, P.L. C. , 8 15 S.W.2d 223, 226 (Tex. 199 1). The Texas long-aJm statute authorizes the exercise of j urisdiction over nonresidents who are "doing business" in Texas, but this statute can only reach as far as the federal constitutional requirements of due process will a llow. TEX. CIV. PRAC. & REM. CODE§ 1 7.042 ~ Guardian Royal. 815 S .W.2d at 226 . Thus, Texas courts must look to due process requirements to determine if personaljul'isdiction is proper. Guardian Royal, 8 15 S. W.2d at 226.

3. Personal jurisdiction is consistent with due process if 1) the defendant has purposely established ·'minimum contacts, with Texas: and 2) the exercise of personal jurisdiction comports with " fair play and substantial justice." Nat '[Indus. SOJzd Ass 'n v. Gibson. 897 S.W.2d 769, 772 (Tex. 1995); Guardian Royal, 815 S.W.2d at 226. 48 12-3575·8602. v. I

75 II. Preston does not have the requisite minimum contact., with Texas to give rise to personal jurisdiction.

4. The essential goal of the minimum contacts test is to protect the defendant. Schlobohm v. Schapiro. 784 S.W.2d 355, 357 (Tex. 1990). Thus. the defendant's minimum contacts must constitute a "substantial connection" between lhe defendant and Texas. Guardian Royal, 8 15 S .W.2d at 23 1. A defendant is not subject to ju1·isdiction if his Texas contacts are random. fortuitous or attenuated. Am. Type Culture Collection. Inc. v. Colenum . 83 S.W.3d 801. 806 (Tex. 2002). Instead. to be subject to personal jurisdiction the defcnd<mt must have sufficient minimum contacts with Texas such thm he could reasonably anticipate lhat his activities would subject him to the jurisdiction of a Texas com·L Nat'/ Indus. Sand Ass'n. 897 S.W .2d at 772.

5. Moreover. an indi vidual defendant's contacts with Texas on behalf of a corporation or company cannot be the basis for personal juiisdiction over the person. absent a showing that the company is the alter ego of the individual defe ndant. Stuart v. Spademan, 772 F.2d 1185, 11 97 (5th Cir. 1985) (applying Texas law in a diver ity action a nd refusing to impute the company 's jurisdictional contacts with Texas to the individual defendant who was president of the company); Leon Ltd. v. Albuquerque Commons P'ship , 862 S.W.2d 693. 708 (Tex. App.- El Paso 1993. no w rit) (holding there was no personal j mi sdiction over individual defendant after fi nding that the corporation was not his alter ego. and thus. jurisdiction over him could not be predicated upon jmisdiction over the corporation).

6. If a defendant has had purposeful minimum contacts with Texas. then he can be subject to specific or general jurisdiction. Guardian Royal. 8 15 S.W.2d at 227-28. Specific j urisdiction arises when: l) the defendant '·purposefully avails" himself of conducting activities in Texas; and 2) the cause of action "mises from or is related to those contacts or activilies." 4812-3575·8602. v. I

76 Kelly v. Gen. Interior Constr .. Inc .. 301 S.W.3d 653, 658 (Tex. 2010). General jurisdiction arises if the defendant's contacts with Texas are so "continuous and systematic" that the defendant can fair) y be said to be present in Texas. /d. at 227.

A. Because PJaintiffs do not alle ge that Preston has bad any contacts with Texas. Preston ne gates all bases for personal jurisdiction by establishing that he is a nonresident of Texas. 7. The plaintiff has the initial burden of pleading sufficient allegations to bti ng the

nomesident defendant within the pi'Ovisions of the Texas long-ann statute. C-Loc Retention Sys., Inc. v. Hendrix. 993 S.W .2d 473.476 (Tex. App.- Houston [1 4th Dist.]l 999, no pet.); Frank A. Srnith Sales, /11c. v. Atlantic Aero. Inc .• 3 1 S.W.3d 742. 747 (Tex. App.-Corpus Clu-isti 2000. no pet.) (holding that because the petition staled only that defendant had committed acts of negligence, without specifying where the acts occurred or alleging that they were committed in Texas. the petition ·•fell well short of pleading sufficient allegations to show j urisdiction in Texas .. ).

8. At his special appearance. the defendant bears the blU'den of negating all bases of personal jurisdict ion. C-Loc Retention Sys., Inc., 993 S.W.2d at 476 (citing Nat'/ Indus. Sand Ass 'n, 897 S.W .2d at 772). But if the pla intiff does not plead that the defendant committed any act in Texas, the defend::Ult can negate all base of personal jurisdiction by presenting evidence that he is a nonresident. C-Loc Retention Sys .. Inc .. 993 S.W.2d at 476; Hotel Partners v. KPMG Peat Mearwick, 847 S.W.2d 630, 634 (Tex. App.- Dallas 1993, w1·it denied).

9. In their First Amended Petition (''Petition"), Plainti ffs do not plead that Pl'eston committed any acts in Texas nor do they make any specific allegations that Preston engaged in business in Texas. Instead. in the Statement of Facts. Plaintiffs state that Preston "wrote a check to BOS" and that BOS later re tumed this amount to Preston. See First Am. Pe t. ~~ 25. Plaintiff 4812-3575·8602. v. I

77 BOS. Inc. is a Turks and Caicos corporation. See First Am. Pet. <J[ 2. Thus. Plaintiffs merely allege that Preston transacted with a foreign corporation and do not allege that this activity occurred in Texas. Thu s, this act cannot constitute "doing business" in Texas. TEx. C IV. PRAC. & REM. CODE§ 17.042.

10. Plaintiffs also allege that Preston ··engineered the trans fer of assets and liabilities" from Texas Syngas. Inc. ("TSI") lo NC12. Inc . See First Am. Pet. ~[ 28. TSI is a Nevada corporation . See Fitst Am. Pet. ~[21. NC12, lnc . is al so a Nevada corporation. Exh. A, Preston Aff. at 2. Thus, Plaintiffs only allege that Preston t1·ansl'en ed assets hetween two Nevada corporations - an act tl1at also does not involve Texas. much less constitute "doing business" in Texas.

11. Plaintiffs allege that Pteston removed Plaintiff Michael Collins as a director of NC1 2, Inc. and that he. along with other defendants, "systematically strip[ped] NC 12 of its assets and transfer[ed] the assets" to a company in Luxembourg. See First A m. Pet. <J[ 30. Plaintiffs present no evidence or allegations that these acts occmTed in Texas or that Preston ~ommiHed any of these acts in Texas.

12. Moreover. Plaintiffs summari ly state in the " Part ies" and "Jmisdiction" sections of the Petition that the Preston and the other defendant have engaged in or done business in Texas. without providing any basis for this statement or alleging any acts that constitute business in Texas. See Fil'st Am. Pet. <Jl~l 9, 16.

13. To meet their burden of pleading a sufficient basis for personal jurisdiction. Plaintiffs must allege Preston conunitted a specific act in Texas. See Siskind v. Villa Found. for Educ., Inc .. 642 S.W.2d 434 (Tex. 1982) (finding no personal jmisdiction over nonresident defendants bec~use there were no al legations of specific acts in Texas). Thus, Plaintjffs' pet.ltion 4812-3575-8602. V. I

78 falls ''well short of pleading sufficient allegat ions to show jurisdiction in Texas." Frank A. Smith Sales, Inc., 31 S.W.3d at 747.

14. Because Plaintiffs have not pled that Preston commiued an y act in Texas, P1·eston can negate all hases of personal jurisdiction by presenting evidence that he is a nonresident of Texas. C-Loc Retention Sys., Inc. , 993 S.W.2d at 476 ~ Temperature Sys., Inc. v. Bill Pepper. Inc., 854 S.W .2d 669.673 (Tex. App. -Dallas 1993, writ dism' d by agr.) (holding that proof that a defendant is a nomesident is sufficient to meet the defendant' s burden of negating jurisd iction when a plaintiff pleads onl y conclusory jmisdictional allegations in the peti tion).

15. Preston is indeed a nonresident of Texas~ he is a resident of Massachusetts. Exh. A. Presion Aff. at 3. Thus, Preston has negated all bases for personal jurisdiclion and has sat isfied his burden regarding his special appearance. Temperature Sys., Inc., 854 S.W.2d at 673. Th is Court should therefot•e grant Preston's special appearance and dismiss all clai ms against him.

B. Preston has not purposely availed himself of conducting activities in Texas to give rise to specific jurisdiction. 16. Even if Plaintiffs had alleged that Preston committed acts in Texas, he is no t

subject to specific jurisdiction because he has not purposefully avaj led himself of conducting activities in Texas. Specific jurisd iction ari ses when: 1) the defendant " purposefull y avail s'· himself of conducting activities in Texas ~ and 2) the cause of action •·arises from or is related to those contacts or activities." Kelly. 301 S.W .3d at 658.

17. Preston has never done business in Texas in his individual capac ity. Exh. A, Preston AlT. at 4. He has not travelled to or visited Texas in hi s individual capacity in the past 60 years. ld. 4812-3575-8602. v. I

79 18. Preston has only had limited contacts with Texas. and aJl of these contacts were made in his representative capacity and on behalf of a company for which he was a board member, director or a principaL /d. at 5. 6. Specifically, Preston visited Texas approximately 8 times 20 years ago. as a representative board me mber for two different compan ies. /d. at 5. In the 1ate 1980's. Preston attended no more than 5 board meet ings in Texas as a representative and boa1·d member of a nonprofit organization. /d. at 5. In the early 1990's. Preston attended no mo t·e than 3 board meetings in Texas as a representative of a Delaware company of which he was a boatd member. /d. at 5.

19. In the past 5 years, Preston has visited Texas a very limited number of times. and again only as a representative and on behalf of a company for which he was a director or principal. Jcl. at 6. Preston visited Texas approximately 3 times in the past 5 years on behalf of TEM Capital. a company for which he is managing partner. /d. at 6. These visits consisted of touring facilities in which TEM Capital invests. ld. at 6. Preston 's only other acti vity in Texas has been to appear as a witness in Michael Sydow 's divorce proceedings in 2010. ld. at 6. He appeared as a rept·esentative or NC 12, Inc. and testified regarding an asset (a building) owned by NC 12, Inc. /d. at 6.

20. Preston's contacts with Texas on behalf of these companies cannot be the basis for personal jurisdiction over him absent a showing that these companies are his alter egos. Stuart, 772 F.2d at 1197; Leon Ltd., 862 S.W.2d at 708. PlainWTs do not, and cannot, aJlege that any of the companies that Preston has travelled to Texas on behalf of are his alter egos. Thus. none of the visits or contacts with Texas that Preston has had with Texas in the past 60 years can be athibuted lo him for jw·isdictionaJ purposes. 4812-3575-8602. V. I

80 2 1. Other than these limited contacts with Texas on behalf of these companies, Preston has had no o ther contacts with Texas. Preston has never maintained an office in Texas, and has never employed any person or company located in Texas. /d. at 8. Preston has never been engaged in routine sales or other pro fit making activities in Texas. /d. Preston does not maintain a register ed agent on whom service of process can be made in Texas. ld. Other than engaging defense counsel in the present action. Preston has never entered inlo any contracls in Texas: with any Texas residents, any contracts calling fm per[ormllllce in Texas, or a11y contracts that contain a mandatory venue provision in Texas. /d. Preston does not rent. own, or possess any real or personal property in Texas. nor

22. /d. at 9. does he hold a mortgage or other lien on any real or personal property in Texas. Preston does not have any investments in Texas, and he has never taken out a loan in Texas or guaranteed any debt owed to a Texas resident. /d.

23. Preston docs not maintain a telephone listing. post office box. or registered address in Texas . Id. at 10. Preston does not employ any persons who reside in Texas, or who regularly travel to Texas in connection with their individual business. /d. at ll. Preston has never incuned or paid any taxes in Texas. /d. at 12.

24. Except for this lawsuit. Preston has never been a party to litjgation in any state or federal court in Texas. !d. at 13. Preston has never committed a tort in whole or in part in Texas. ld. at 14. Because Preston has had no contacts with Texas in the past 60 years that can he

25. attributed to him personally, Preston c~umot plausibly be found to have •·purposefully availed" himself of conducting activities in Texas. Moreover. because Preston has not had contact with Texas in his individual capacity, Pl aintiffs' alleged causes of action could not "arise from or be 4812-3575-8602. v. I

81 related to .. ~my contacts Preston had with Texas. Thus. Preston cannot be subject to specific j urisdiction in Texas.

C. Preston has not had any contacts with Texas to give rise to general jurisdiction. 26. Because Preston has had no contact with Texas in the past 60 years. he similarl y

does not have ·'continuous and systematic" contacts with Texas that would subject hjm to general j w·isdiction. Grwrdicm Royal. 815 S.W.2d at 227. To assert general j w·isdiction over a defendant. usually the defendant must be engaged in longstanding business in Texas. such as regularly marketing or shipping products to Texas or maintaining one or more offices here. PHC-Minden. L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163. 168 (Tex. 2007). Less extensive activities will not qualify for general jurisdiction. /d. As stated in paragraphs 17 - 24 above. Preston has had no contact wilh Texas in the past 60 years ; thus, there is no basis for general jurisdiction.

27. Moreover. Preston has not. had sufficient minimum contacts with Texas such that he could reasonably anticipate being subject to the jmi scliction of a Texas court. Nat 'l lndus. Sand Ass 'rl. 897 S.W.2d at 772. Due to a complete lack of contact with Texas in the past 60 years. Preston is not subject to either specific or general personal jmisdiction, and hi s special appearance should be granted. Nat '! Indus. Sand Ass'n, 897 S.W.2d at 776 (conditionally granting wlit of mandamus and holding that trial court. abused its discretion in denying a defendant's special appearance where the defendant lacked the minimum contacts necessary for the nial com1 to exercise either specific or general personal ju1isdiction). III. Exercising jurisdiction over Preston would not comport with fair play a11d justice.

28. Because of Preston's lack of contact with Texas. exercising personal jurisdiction over him would not comport " with traditional noti ons of fajr play and substant ial justice." 4812-3575·8602. v. I

82 Guardian Royal. 8 15 S.W.2d at 228. Only after a court determines that a nomesident defendant has purposefully established minimum contacts with the forum state - and Preston has not - then the Court evaluates these contacts in light of other factors to determine whether the assertion of personal jurisdiction comports with fair play and justice. /d. These factors include: I ) the burden on the defendant. 2) the interests of the forum state in adjudicating the dispute. 3) the plaintiffs interest in obtaining convenient and effective relief. 4) the interstate j udicial system's interest in obtaining the most effic ient resolution of controversies, and 5) the shared interest of the several States in fm1hering fundam ental substantive social policies. /d.

29. In addition to Preston not having minimum contacts with Texas. these 5 factors also dictate against the exercise of jmisdiction over Preston. As lO the first factor. the burden to Preston in defendin g this case is substantial. Preston would be l'equired to travel to Texas to attend cout1 proceedings and stay there. perhaps for extended periods of time. Exh. A, Preston Aff. at 15. The costs and time associated with such travel <U"e considerable. I d.

30. As to fac tors 2 and 3. Texas has little interest in providing a forum to litigate any alleged injuries that occurred outside of Texas (First Am. Pet. ~[<Jl 25, 28, 30, 3 1 ), and further, evidence in this litigation related to Preston is likely outside the subpoena power of a Texas court, which would greatly compromise Plaintiffs' ability to obtain convenient and effective relief. Lonza AG v. Blum, 70 S.W.3d 1&4. 193 (Tex.. App.- S<m Anton io 2001 , pet. denied) (holding that the exel'cise of long-arm jurisdict ion would not comport with fair play and justice after noting that evidence existed outside the subpoena power of the court ). Al so, any interests of factors 4 and 5 do not outweigh the mandate from factors I, 2, and 3 to not exercise j urisdiction over Pres ton. 48 12-3575· 8602. v. I

83 3 1. Thus, this Court would offend traditional notions of fair play and substantial justice if it asserted jurisdiction over Preston, and further, would deprive Preston of due process. As such, Plaintiffs' claims against Preston should be dismissed. Guardian Royal, 815 S.W.2d at 233 (finding that it would offend traditional notions of fair play and justice to subject a nomesident defendant to personal jurisdiction in Texas because it would be burdensome for the defendant to submit to a foreign judicial system when the alleged acts occmTed outside of Texas).

SUBJECT TO SPECIAL APPEARANCE, PRESTON'S ORIGINAL ANSWER

Defendant John T. Preston, subject to and without waiver of his special appearance, files this Original Answer to Plaintiffs' First Amende-d Oliginal Petition and shows the Court as follows:

General Denial Preston denies generally every a11egation contained in Plaintiffs' petition and demands strict proof of the allegations in accordance with the Texas Rule of Civil Procedure and the Texas Constitution. Preston reserves the right to plead further and with greater patticularity as this case progresses.

THEREFORE, Defendant John T. Preston respectfully requests that the Court dismiss Plaintiffs' claims against him, assess all costs against Plaintiffs. and grant him such other and fm1her relief as is just and proper. 481:!-3575-8602. V. J

84 Respectfully submitted, Is/ Arnir Alavi Amir Alavi State Bar No. 00793239 Ashley Frankson State Bar No. 24059776 AHMAD, ZAVITSANOS, ANAIPAKOS, ALAVI &

MENSJNGP.C

3460 One Houston Center 1221 McKinney Street Houston, Texas 77010 Telephone: (713) 655-1101 Telecopier: (713) 655-0062 ATTORNEYS FOR DEFENDANTS MICHAEL SYDOW, JOHN T. PRESTON, C CHANGE INVESTMENTS, LLC and BRILLIANT NOVELTY, LLC

CERTIFICATE OF SERVICE I hereby certify that on this 28th day of September, 2011, I sent by facsimile transmission, by first class mail, postage prepaid, or by email, a true and correct copy of the above and foregoing document to counsel as follows: Randall 0 . SetTels Clyde J. ''Jay" Jackson, ill 800 Commerce Street Houston , Texas 77002 Facsimile: 713-225-0827 Brent C. Pen y 800 Commerce Street Houston, Texas 77002 Facsimile: 713-237-0415 Asher Griffin ChJ.is Sileo Scott, Douglass & McConnico, L.L.P. 600 Congress A venue, Suite 1500 Austin, Texas 78701-2589 Facsimile: 512-474-0731

Is/ Amir Alavi Amir Alavi

4812-3575-8602, v. ^[1] 85

CAUSE NO. 2011-44058

MlCilAEL COLLINS, ELLEN COLLiNS, § fN THE DISTRICT COURT OF BOS, INC., ENVEN, INC., § METAL C/\TALYSTVENTUR ES, INC., § FAT.L RIVER REALTY, LTD., § M. SAMEER AHMED, AND § TSBC SOUTH TEXAS INVESTORS, L.P.. §

§ Plaintiffs, § .. ...

§

;~ v. IlARRIS COUNTY, TEXAS § ~.!! ~0 A N t) .... ':/ Qi 'E M f: MICHAEL SYDOW, JOHN T. PRESTON, § ~cS ~ ~ CHRISTOPH HENKEL, C. CHANGE § -[...:~~~ INVESTMENTS, LLC, SONlA LO, CHALSYS § ~ ·~ ~~~ CAPITAL PARTNERS, L.L.P., § -oo..., l; BI:ULLlANT NOVELTY, L.L.C., § - U ) - ·~ and MEL! ORA ENERGY § '0 .~ ·c ^[0] Cll ~ ...... . § ii:5~~~ TECHNOLOUIES, S.A.R.L.,

§ 715T 11 .I UO IClAL DISTRICT Defendants. §

AFFIDAVIT OF .JOHN T. PRESTON

STATE OF MASSACHUSETTS § § COUNTY OF MIDDLESEX § BEFORE ME, the undersigned ofticial, on tlus day personally appeared John T. Pre.ston, who is personally known to me, and who fi rst being sworn by me, according to Jaw, upon his oath deposed and stated the following:

1. My name is John T. Preston. 1 am over the age of2 J. 1 have never been convicted of a felony or crime involving moral turpitude. I am of sow1d mind and am fu lly compelem to make this affidavit.

2. I am a Director of NC12, Inc, a Nevada corporation. l have personal knowledge of all of the facts stated herein, and they are all true and correct now, and for all applicable time rrames involving the Plaintills' allegations in thi s c.:ase.

3. I am a resident of Massachusetts. I am not a Texa~ resident. 4. I have never done business in Texas in my individual capacity. ln the past

sixty years, I have not travell ed to or visited Texas in my indivi dual capacity. As a11 infant, I lived in Texas for less than one year.

EXHIBIT A

86 1 visited Texas a limited number of times approximately twenty years ago, 5. and each of these visits was made in my representative capacity and on behalf of a company for which I was a board member. Specifically, in the 1990's, J attended no more than tive board meetings in Texas us a representative and hoard member of a nonprofit organization. Also in the 1990's, I attended no more Lhan three board meetings in Texas as a representative of a Delaware con.lpany of which T was a board member. These visits were not made by me in my individual c ~ac ity, hut a~ a reprc.-;entative and board member of these companies.

G. In the past approxirnately five years, I have visited Texas a very limited number of times, and again on ly as a representative and on behalf of a company for whi ch I was a director or plincipal. 1 visi ted Texas appl'oxl matcly three rimes in the past five years on behalf of TEM Capital. a oompany for which J om managing partner. These visits consisted of touring facilit ies in which TEM Capital invests. My only other activity in Texas has been to appear as a witness in Michud Sydow's divorce proceedings in 2010. I appeared as a representative of NC12, lnc. and testi fied regarding an asset (a building) owned by NC12, Inc.

7. Any buard meetings J have attended related to NC12, Inc. have occurred in Massachusetts. 8. J am employed outside of Texas. have never maintained an o t1icc in Texas, and ha ve never been employed by a•lY person or company located in Texas. 1 have never been engaged in routine sales or other profit making ac tivities in Texas, '-!nd T do no£ own any private Texas business. I am not required to nor do I maintain a registered agent on whom scrvioe of process can be made in Texas. Other than engaging defense counsel in the present action, I have never entered into any contracts individually in Texas: w ith any Texas residents, any contracts call ing for pcrformuncc in Texas, or any contracts with a mandatory venue provision in Texas.

9. I do not rent, own, or possess any real or personal prop~rty in Texas, nor do I hold a mortgage or other lien on any real or personal property in Texas. J do nut have any investments or assets in Texas, and I have never taken out a loan in Texas or guaranteed any debt owed to a Texas resident.

I 0. I do not maintain '-In indi vidual telephone listing, post office box, or registered address in Texas. II . I do not employ nny persons who reside in Texas, or who •·cgularly travel to Texas in cormection with their individm1l business. 4!Wl 7!.41 09S4, v. l 8 7 12_. .I ·_b<)ve .never personally incurr~d or pCli:d any ta;xt.'S. in Te~as. or filed a persomu tax1~turn in T.eX'as. :Except tot. this lawsuit, 1 baye nevet been ·a party to 1itigat\on in oi1y state 13. or fedetal court hi T(}xas. .I havez ne~er ootnmitte{} a tort in whole or in part in Tex..a.s . 14. .15, If tbts lilWSlJit Wel ^[1] e allowed to qotltinue. in r~xa.s, I WO:tlld be. fot=ced to

t!flvel ro Texas and ·stay there_, perhB:ps fot exit';!ntlw peri-ods <.tftitn:e. The .cqsts and time a~ociated with $UCh traveJ are. <?Ons1d'9t.a'ble. As a r~ult, there· wouid be nwnerous practieal and logistkal problems associated wlfh dcf¢;ildlng :Plaintiffs' clainis ·i·n Texas. Dncle,t· the :circumstances~ tl1e ¢outinued pro-secution of P.htinti.;f:fs' clai·ms again~t .me in T~x~ will b:e. r~nd,t,rly- bu~'QensQme, extremely <Uffic~H. 'very Ome C'Ql1St'ft11ing, ~n<,i e1\pensive.

Fvrther, a.ffhrnt sayeth :oot. SwQrn tQ and .S}lb~cri,ped hefor.e lt\e this&_ day 9f September, 201 L 4829·l54l-0954, v. ~

88 Filed 11 November 11 A 11 :27 Chris Daniel - District Clerk Harris County

ED101J016589121

By: Kyndria Perkins

Cause o. 20 l l-44058 MICHAEL COLLJNS, ET AL ., § IN THE DISTRICT COURT §

PLAINTIFFS,

§ vs. § OF HARRIS COUNTY, TEXAS § § MICHAEL SYDOW, ET AL , § 2 15th JUDICIAL DISTRICT

DEFENDANTS.

AKILA FINANCE, S.A.; BOSQUES DEL MOLINO, § IN THE DISTRICT COURT S.A.; CENTRANS ENERGY SERVICES, INC .; § CHESTER MESTER HOLDINGS, LTD.; DELTEC § BANK & TRUST, LTD.; EMJO INVESTMENTS, § LTD.; WTLLIAM END; EVANS & PETREE 401K § PLAN; FIRST BAY INTERTRADE, GM PARTNERS, § MARAIR CORP.; W .L. NICHOL, IV; § § PANORAMA INVESTMENT, LTD.; PCO l VERMOEGENS VERW. ; ALEJANDRO SANTO § § DOMINGO; SINCHI INVESTMENT; VENTURI GLOBAL INVESTMENTS, LTD , and H.J. VON DER § GOLTZ, §

§

TNTERVENORSIPLAINTIFFS,

§ vs. § OF HARRIS COUNTY, TEXAS § § MICHAEL SYDOW; JOHN PRESTON; CHRISTOPH § HENKEL; C CHANGE INVESTMENTS, L.L.C.; § CHALSYS CAPITAL PARTNERS, L.L.P.; SONIA

s s

LO;. BRILLIANT NOVELTY, L.L.C.; OSCURA, INC .;

MELIORA ENERGY TECHNOLOGIES, S.a.r.l; and § FALL RIVER REALTY, LTD. , §

§ 2 15th JUDICIAL DISTRICT DEFENDANTS. ORIGINAL PETITION IN INTERVENTION TO THE HONORABLE DISTRICT COURT: COME NOW Intervenors Akila Finance, S.A., Bosques del .Molino, S.A., Centrans Energy Services, Inc., Chester Mester Holdings, Ltd., Deltec Bank & Trust, Ltd., Emjo Investments, Ltd., William End, Evans and Petree 40 I K Plan, First Bay Intertrade, GM Partners, Marair Corporation, W.L. Nichol, IV, Panorama Investment, Ltd., PC 0 1 Yennoegens Yerw.,

l of 3 ~ ORIGl'NAl. P l-7JTT'ION I N TNTI:.IWF.NTION 102 Alejandro Santo Domingo, Sinchj lnvestment, Venturi Global Investments, Ltd., and H.J. von der Goltz, and file this Original Petition in Intervention to intervene as parties plajntiff in this action. and in support thereof, would show the Court the following

l. Nature of Thjs Action I . This is a fraud and shareholder oppression action. Intervenors are minority shareholders ofNC 12, Inc .• a Nevada corporation headquartered in Houston, Texas. Intervenors assert claims and seek remedies based solely on their indi vidual ri ghts. J't now appears that the entire corporate enterprise of NC 12 was a massive fraudulent scheme perpetrated by John Preston, Michael Sydow, and others who conspired with them. The story begins with a multi-million dollar research facility and a technology portfolio created with investor dollars by a110ther Preston company in the 1990s. When that company failed and went bankrupt, its investors lost everythjng. Preston purchased the assets out of the bankruptcy for a fraction of their value and sold some of the acquired intellectual property later to NC 12' s corporate predecessor- a company founded by Sydow and Michael Collins and later controlled by Sydow and Preston. 2. Between late 2007 and early 20 10, Intervenors invested more than $11 mi lli on in NC12 and its corporate predecessor, Texas Syngas. This money was squandered and misappropriated by Sydow and Preston. When the NC 12 Board of Directors attempted to stop the mismanagement and theft. Defendants proceeded to elimina te all independent oversight on the board of directors by removi ng Mr. H.J. von der Goltz and Dr. Aydin Mudeni soglu as directors. Defendants then divested the corporation of its principal assets: the research faci lity worth millions of dollars and the patented technology worth hundreds of millions of dollars. These assets were sold for a fraction of their true worth to ent1ties in which Defendants had personal interests. NC12 became a defunct shell and is now in bankruptcy.

?. of .H 103

3. Thus, the story ends much as it began. The shareholders are left with nothjng but a bankrupt and empty shell. Preston and Sydow abused their control over the corporation, misappropriated the bulk of the vaJue in the company for their own benefit. and Sydow, Preston, and their co-conspirators wind up with ownership of the technology and physical facilities. The shareholders, however, have notrung to show for their millions of dollars other tha n ownership of diluted stock in a worthless., bankrupt shell. Intervenors seek equitable relief from the Court as a result of Defendants' oppressive conduct, who consthute the controlling shareholders, the indi vi duals who seized control of the NC12 Board of Directors on August 13, 2010, and those acting with them. Intervenors al so seek monetary damages resulting from fraud and breaches of fiduciary duties owed directly to the shareholders by the directors and controlling shareholders and by those Defendants who aided , abetted, and conspired widl them.

II. Discovery Control Plan 4. Intervenors intend that discove1y be conducted under Level 3. Ill. Parties 5. The Intervenors compnse two groups of investors 111 NC12. The "Shareholder Intervenors'' invested $5,250,000 in cash from late 2007 until early 2008. These Intervenors were issued prefen-ed shares in Texas Syngas, Inc., a Nevada corporation and the corporate predecessor of NC 12. The "Note Holder Intervenors" invested $6,104,000 milli on from late 2009 until mid-201 0. These Intervenors were issued promissory notes that were automatically converti ble into common shares if at least a. $5 million additional investment was obtained from an investor by September 30,20 10. In late 2009, Texas Syng.a.s, Inc. was liquidated, and all of its assets and liabilities were assumed by NC12, Inc. The Texas Syngas, Inc. preferred shares were exchanged for common stock in NC 12. The Convertible Notes were assumed by NC 12. On O RIGI}.I\1. P t::l'n'ION IN TNTJ:.RVEN I !ON

104 September 28, 20 10, the Note Holder Intervenors were informed that their promissory notes had converted into common shares. Therefore, all Intervenors are currently common shareholders of NC 12, lnc. A. Shareholder Intervenors 6. Intervenor Akita Finance, S.A. is a Luxembourg corporation with its principal place of business located in Luxembourg. Akila Finance, S.A invested $2,500,000 on or about December 19, 2007, and received preferred shares in Texas Syngas, Inc., which were exchanged for common shares in NC12. Inte1venor Aki la Finance, S.A. futther invested $500,000 on April 30, 2010, for which equity was supposed to be issued; however, no shares were issued, and NC J2 treated Akita Finance, S.A as a note holder. 7 Intervenor Centrans Energy Services, Inc. is a Grand Cayman corporation with its princi pal place of business located in Guatemala. Centrans Energy Service, Inc. invested $1 mill ion on or about January 3, 2008, and received prefen·ed shares in Texas Syngas, Inc., which were exchanged for common shares in NC 12. 8 Intervenor Emjo Investments., Ltd. is a British Virgin Islands corporation, whose principal place of business is located in Panama. Emjo Investments, Ltd. invested $500,000 in .January 2008 and $400,000 in July 2008 and received preferred shares in Texas Syngas, Inc., whi ch were exchanged for common shares in NC12. Emjo Investments, Ltd. also invested $200,000 in Texas Syngas, Inc. on September 15, 2009, and received a Convertibl e Note, w hich was assumed by NC 12 and converted into NC I2 comm on shares on September 28, 2010. Emjo Investments, Ltd. also invested an additional $ 160,000 in May 20 10 and $ 100,000 in August 2010, for which demand notes were issued. Additionally, the following NC 12 shareholders have assigned Emjo Investm ents, Ltd. their shares, claims, and causes of action: Dr. Aydin O RtGINAl. P1:7JTT'f0N lN lm-T:.RVF..NT!ON

105 Muderrisoglu, who invested $ 100,000 in Texas Syngas, Inc. and received preferred shares of Texas Syngas, Inc., whi ch were exchanged for shares ofNC12 common stock; Ilona Graefin von Krockow, who invested $250,000 and received preferred shares of Texas Syngas, Inc., which were exchanged for shares ofNC I 2 comm011 stock; Dr. Lawrence Cohn , who invested $100,000 in Te..xas Syngas, Inc. on or about November 11, 2009, and received a Convertible Note, which was assumed by NC 12 and converted into NCI2 common shares on September 28, 20 10; and Vendome Enterpri ses, Ltd., a British Virgin Islands corporation., which invested $250,000 and recei ved preferred shares in Texas Syngas, Inc. that were exchanged for common shares in

NC 12.

9. Intervenor PC 0 1 Vermoegens Verw. is a German corporation with its principal place of business located in Thumby, Germany. PC 0 1 Vermoegens Verw. invested $100,000 on or about December 12, 2007, and received prefened shares in Texas Syngas, lnc., which were exchanged for common shares in NC12. 10. Intervenor Alejandro Santo D omingo is a natural person residing in New York, New York. Mr Santo Domingo invested $250,000 on or about September 24, 2008, and received preferred shares in Texas Syngas, Inc., which were exchanged tbr common shares in NC'l2. B. Note Holder lntea·venors 11 . Intervenor Basques del Molino, S. A. is a corporation with its principal pl ace of business located in Guatemala. Basques del Moli no, S.A. invested $ 1,000,000 in NC12, Inc. on March 31, 20'10, and received a Convertible Note, which was converted into NC 12 common sha res on September 28, 2010. Intervenor Chester Mester Holdings, Ltd. is a British Virgin Isi Md s corporation with its 12. principal place of business located in the British Virgin Islands. Chester Mester Holdi ngs, Ltd. 5 of .H 0Rl(:J'NAL PI!'J'n'fON IN TNTERVF.N ^[1] !ON

106 invested $500,000 in NC 12, Inc. on June 29, 2010, a nd received a Convertible Note, which was converted into NC 12 common shares on September 28, 20 10. 13 . Intervenor Deltec Bank & Trust. Ltd., is a Bahamian bank and trust corporation with its principal place of business located i11 the Bahamas. Deltec Bank & Trust, Ltd. invested $500,000 in Texas Syngas, Inc. and received a Convertibl e Note, which was assumed by NC J2 and converted into NC12 common sha.res on September 28, 2010. 14. Intervenor William End is a natural person residing in Montana. Mr. End invested $504,000 in NC12, Inc. on Januaty 20, 2010, and recei ved a Converti ble Note, which was converted into NC I2 common shares on September 28, 2010. Intervenor Evans & Petree 401K Plan (Evans & Petree 401K Pl an FBO Woods 15. Weathersby and Evans & Petree 40 1K Plan FBO W.L. Nichol IV) is a Tennessee trust with its principal pl ace of business located in Tennessee, the beneficiaries of which are natural persons residing in Tennessee. Evans & Petree 401K Plan invested a total of$300,000 in NC 12, Inc. on December 24, 2009, and received three Convertible Notes, which were converted into NC12 common shares on September 28, 20 I 0 16. Intervenor First Bay Intertrade is a British Virgin Islands corporation with its principal place of business located in the British Virgin Islands. First Bay Intertrade invested $200,000 in NC 12, Inc. on June 29, 20 10, and received a Convertible Note, which was converted into NC 12 common shares on September 28, 2010 17. Intervenor GM Pattners is a Tennessee general partnership with its p1i ncipal pl ace of business located in Memphis, Tennessee. GM Partners invested $60,000 in NC12, Inc. on December 24. 2009, a.nd received a Convertible Note, which was converted into NC 12 common shares on September 28,20 10

(.of .H 0R tG!NAL Pt-71'n'ION IN TNTI:.RVEN t !ON 107 18. Intervenor Marair Corporation is a Panamanian corporation with its pJincipal place of business located in Guatemala. Marair Corporation invested $200,000 in Texas Syngas, Inc. on November 16, 2009, and received a Convertible Note, which was assum ed by NC 'I 2 and cmwerted into NC12 common shares on September 28,2010. 19. Intervenor W .L. Nichol, IV is a natural person residjng in Memphis, Tennessee. Mr. Nichol invested $50,000 in NC 12, Inc. on Decernber 24, 2009, and received a Convertible Note, which was converted into NC 12 common shares on Set)tember28, 20 10 20. Intervenor Panorama Investment, Ltd. is a Cayman Islands corporation wi th its principal place of business located in the Cayman Islands. Panorama Investment, Ltd. invested $300,000 in NC 12, Inc. on December 30, 2009, and received a Convertible Note, which was converted into NC 12 common shares on September 28, 20 10 21. Intervenor Sinchi Investment is a Panamanian company with its principal pl ace of business located in Panama . Sinchl Investment invested $1,000,000 in Texas Syngas, Inc. on or about September 15, 2009, and received a Convertible Note, which was assumed by NC 12 and converted into NC 12 common shares on September 28, 2010. 22. Intervenor Venturi Global Investments. Ltd. is a Bahamian international business company with its principal place of business located in the Bahamas. Venturi Global Investments, Ltd. invested $300,000 in NC 12, Inc. on December 30, 2009, and received a Convertible Note, which was converted into NC 12 common shares on September 28, 20 I 0. 23. Intervenor H.J. von der Goltz is a natural person residing in Fl orida. Mr. von der Goltz invested $ 130,000 in March 20 10, for which he received a prom issory note from NC 12. 24. Sharehol der Intervenors Aki la Finance, S.A. and Emjo Investments, Ltd. are also Note Holder Intervenors, as all eged above.

·· of .H ORlGfNAL Pt-:1Tl'ION IN TNT!:.RVEN'I!ON 108 C. Plaintiffs in Original Action 25. Plaintiffs Michael Collins and Ellen Collins reside in The Woodlands, Texas. 26. PJajntiff BOS, Inc. is a Turks & Caicos corporation having its principal place of business in Harris County, Texas. 27. PJajntiti En Yen, Inc. is a Nevada corporation having its principal place of business in Harris County, Texas. 28. Plaintiff Metal Catalyst Ventures, lnc. is a Nevada corporation having its principal place ofbusiness in Hanis County, Texas. 29. Plaintiff Fall River Realty, Ltd. is a foreign corporation with its principal place of business in Fall River, Massachusetts. Plaintiffs in the Original Action allege that Plaintiff Fall River is an entity in which Michael Collins is the largest shareholder. Intervenors have named as a defendant Fall River Realty, Ltd., an e11tity JnterveJ1ors believe is owned and controlled by M ichael Sydow. It is not kJ1own presently whether these two entities are the same. All references to " Fall River Realty" in this Petition in Intervention hereafter refer only to the entity named as a. defendant by Intervenors. 30. Plaintiff Sameer Ahmed is an individual residing in Edinburg, Te.'<as. 31. Plaintiff TSBC South Texas Investors, L.L.P. is a Texas limited liability patinership having its principal place of business in Edinburg Texas. D. The Contt·oUing Shareholder Defendants 32. Defendant Michael Sydow, an individual and a resident of the state of Texas, may be served with process at his place of employment: 1980 Post Oak Blvd., Suite 2 l 00, Houston, Texas 77056. Sydow is a. Houston attorney and businessman. Sydow was at all relevant times the CEO, secretary, and director of Texas Syngas, Inc., and tJ1en the president, CEO, and director of ORlGl'NAI. P l-7l'n'fON TN T't'm:.RVf.NTlON

109 NC 12, and represented that he exercised control 69% of the common stock of NC 12 as of August 13, 20 10. Upon information and belief, Sydow is an offi cer and director of Defendant Fall River Realty, Ltd.; is a director of Defendant Meliora Energy Technologies, S.a r.l; and is an officer and di rector of Defendant Oscura, Inc. Sydow is named as a defendant in the 01iginal Action and has entered an appearance. All service will be through hi s counsel of record. 33. Defendant John Preston, an individual and a resident of the state of Massachusetts, may be served with process by serving the Texas Secretary of State, 10 19 Brazos St , Austin, Texas, 7870 I , as Defendant' s agent for service of process because Defendant Preston has engaged in business in Texas but has not designated or mruntained a resident agent for service of process in Texas. Tex. Civ. Prac. & Rem . Code § I 7.044(b). Service may be forwarded to hi s place of employment: C Change Investments. LL.C., One Main Street, 14tll Floor, Cambridge, Massachusetts, 02 142. Preston is an internati onally known business leader and stock promoter. Preston was at various relevant times a director of Texas Syngas, Inc. and of NC12 as of August 13, 2010. Upon information and belief, Preston was aJso at all relevant times a manager of Defendant Brilliant Novelty, L.L.C.: a managing partner of Defendant C Change Investments. L.L.C., and a director of Defendant Meli ora Technologies, S.a. r.t. Preston is named as a defendant in the Otiginal Action and has entered an appearance. All service will be through his counsel of record. 34. Defendant Christoph Henkel, an individual and citizen of Germany, may be served with process by serving the Texas Secretaty of State, 1019 Brazos St. , Austin, Texas 7870 1, as Defendant's agent for service of process because Defendant Henkel has engaged in business in Texas, but has not designated or mainta.ined a resident agent tor service of process in Texas. Tex. Civ. Prac. & Rem Code§ 17,044(b). Service may be forwarded to his residence at 2-4 Lambton O RtGI}. AL Pl:71"11'f0~ TN TNii·.RVEN i !ON

110 Place, London W 11 2SH, Great Britain. At vatious relevant times, Henkel served on the board of di rectors of Texas Syngas, Inc. and later on the board of directors of NC 12. Upon information and belief. Henkel is or has been a director of Defendant Meliora Technologies. S.a.r.l . Henkel is named as a defendant in the Original Action and has entered an appearance. All service will be through his counsel of record. E. The Co nspiracy Defendants 35. Defendant C Change lnvesnnents, L L. C. is a Delaware limited liability company with its principal place of business in the state of Massachusetts. and may be served with process by serving the Texas Secretary of State, 1019 Brazos St., Austin, Texas, 7870 1, as Defendant ' s agent for service of process because Defendant C Change has engaged in busi ness in Texas but has not designated or maintained a resident agent for service of process in Texas Tex. Civ. Prac & Rem . Code§ 17.044(b). Service may be forwarded to its registered agent Corporation Service Company, 271 1 Centervill e Road, Suite 400, Wilmington, Delaware, 19808. Upon information and belief, C Change is controlled by Defendant Preston and is an equity owner of Defendant Meliora Technologies., S.a. r.l. C Change is named as a defendant in the Original Action and has entered an appearance. All service will be through its counsel of record. 36. Defendant Chalsys Capital Partners, L.L.P. is a limited liability partnership organized under the laws of the United Kingdom with its principal office in London, England. Chalsys Capital Partners, L.L.P. may be served with process by serving the Texas Secretary of State, 1019 Brazos St., Austin, Texas, 78701 , as Defendant's agent for service of process because Defendant Chalsys has engaged in business in Texas but has not designated or maintained a resident agent for service of process in Texas. Tex. Civ. Prac. & Rem. Code§ 17.044(b). Service may be forv.•arded to its principal offi ce located at 1 Regent St., London, SW I 4NS, Uni ted ORIGINAL Pi-71-n'fO~ TN TNii:.R\•l:.N i !ON

111 Kingdom. Upon infom1ation and bel ief, Defendant Chalsys is an equity owner of Defendant Meliora Technologies, S.a.r.l . Chalsys is named as a defendant in the Original Action and ha!) entered an a ppearance. All service will be through its counsel of record. 37. Defendant Sonia Lo is an individual resi ding in California. She may be served with process by serving the Texas Secretary of State, 1019 Brazos St., Austin, Texas, 7870 1, as Defendant' s agent for service of process be<:ause Defendant has engaged in business in Texas but has not designated or maintained a resident agent for service of process in Texas Tex Civ. Prac & Rem. Code§ 17.044(b). Service may be forwarded to her place of business, Chalsys Capital Partners, LLP, 1 Regent St., London, SW I 4NS, United Kjngdom. Upon informati on and b eliet~ Defendant Lo controls Defendant Chalsys and is a director of Defendant Meliora Technologies, S.A.r.l. Lo is named as a defendant in the Original Action and has entered an appearance. All serv ice will be through her counsel of record. 38. Defendant Brilliant Novelty, L.L.C. is a Massachusetts limited liability company with its principal place of business in Cambridge, Massachusetts. Brilliant Novelty may be served wi th process by serving the Texas Secretary of State, 10 19 Brazos St ., Austin, Texas 78701 , as Defendant's agent tbr service of process because Defendant has engaged in business in Texas but has not designated or maintained a resident agent for service of process in Texas. Tex. Civ. Prac. & Rem. Code § 17.044(b). Service may be forwarded to its principal office, 75 Cambridge Pkwy. Ste 100, Cambridge, Massachusetts 02142. Brilliant Novelty is named as a defendant in the Original Action and has entered an appearance. All service will be through its counsel of record. 39. Defendant. Meliora Energy Technologies, S.a.r.l, (MET) is a private limited ljability company organized under the laws of the Grand Duchy of Luxembourg, with its principal place ORlGJ'NAL Pl:::.Tn'fON TN TNTJ:.RVf.l\1 !0"

112 of business in Luxembourg. Defendant !VIET may be served with process by serving the Te.xas Secretary of State, 1019 Brazos St. , Austi n, Texas 7870 1, as Defendant's agent for service of process because Defendant has engaged in business in Texas but has not designated or maintained a resident agent for service of process in Texas. Tex. Civ. Prac. & Rem . Code § 17.044(b). Service may be forwarded to its principal offi ce, L ~2540 Luxembourg, 15, rue Edward Steichen. R.C.S. Luxembourg B 155.708. Defendant MET may also be served through its offi cer and director, Mi chael Sydow, 1980 Post Oak Blvd., Suite 2 100, Houston, Texas, 77056 and its di rector John Preston. Upon infonnation and belief, Defendant MET is controlled by Sydow, Lo, and Preston and is owned 50% by Defendant C Change and SO% by Defendant Chaisys. MET is named as a defendant in the Original Action and has entered an appearance. All service will be tJuough its counsel of record. 40. Defen dant Oscura, Inc. is a Delaware corporation whose principal office is located in Houston, Texas. Defendant Oscura may be served at its principal offi ce, 4400 Post Oak Parkway, Ste. 2360, Houston, Texas, 77027. Defendant Oscura may also be served through its oflicer and director, Michael Sydow, 1980 Post Oak Blvd, Suite 2 100, Houston, Texas, 77056. 4 1. Defendant Fall River Realty, Ltd. is a Turks & Caicos Islands corporation whose principal office is located in the Turks & Caicos Islands. Fall River Realty may be served with process through its officer and director, Michael Sydow, 1980 Post Oak Blvd., Suite 2100, Houston, Te..xas, 77056.

IV. Original Action and Basis for Intervention 42. On July 27, 20 11 , Michael Collins and other original plaintiffs tiled the Original Action, suing Michael Sydow and the other original defendants named herein. The Original Action asserts claims arising out of the Defendants' control and misconduct relating to NC 12 and its 0 Rt<i i'N AL Pl!'Jn'fON TN TNTERVEN i !ON

113 predecessors and relating to the share ownership of the original plaintiffs in NC 12 and its predecessors. Intervenors file this Petition in Intervention pursuant to Rules 40 and 60 of the Texas Rules of Civil Procedure. Intervenors have shareholders and investors in the same corporations and assert interests in the same relief sought by the original plaintiffs. The claims asserted by Intervenors arise out of the same transactions and occurrences as the Original Action and present common questions of Jaw and fact.

V. Subject Matte1· Jw·isdiction 43. The court has jurisdiction over the lawsuit because the matter in controversy is within this court's general jurisdiction and the amount in controversy exceeds thi s couti's minimum jurisdictional limits.

VI. Personal Jurisdiction and Venue 44. Personal jurisdiction over all defendants is proper in the state of Texas because NC12 is headquartered in Houston, Texas, and the tortious conduct alleged herein occurred in or was directed at the State of Texas. 45. Venue is proper in Harris County because a substantial part of the transactions, acts, and omissions giving rise to the claims occurred in Harris County. See Tex. Civ. Prac. & Rem . Code § 15.002(a)(L). Venue is also proper in Harris County because the principal office of Defendant NC12 is in Harris County. See id. at§ 15.002(a)(3).

VTT. Facts A. Formation of Texas Syngas 46. This case involves revolutionary new energy technology developed by Texas inventor and businessman Michael Collins for producing synthetic natural gas and other fuels from coal ORIGINAL PP.TI'I'JON t~ TNTf!.RVF.NTlON

114 Collins worked for almost a decade in South Africa during the 1970s and became familiar with Sasol' s Lurgi fluidized bed gasification process-a technology that dates back to World War ll. 47, In 1989, Molten Metal Technology, lnc. was founded in Massachusetts. Defendant John Preston, a fonner Director of Technology Development at the Massachusetts Institute of Technology, was instrume ntal in founding that company. Preston widely promoted its stock and served as one of its directors throughout its existence. Molten Metal Technology developed Catalyti c Extracti on Processing technology, which used high-temperatures and molten metals to dispose of hazardous waste. In large part due to Preston 's effort s, Molten Metal Technology raised millions of investment dollars., and in 1992, the company built and completed 86,000 square foot facility in Fall River, Massachusetts, at a cost of approximately $25 million. 48. Molten Metals Technology impl oded in 1997 under an avalanche of investor lawsuits, many ofwhich named Preston individuall y. The company was put into bankruptcy in 1998 and was ultimately liquidated . In 1999, Quantum Catalytics, L.L. C., an entity controlled by Preston, purchased the patents, technology, and intellectual property portfolio of Molten Metals Technology out of bankruptcy Molten Metals Technology's $25 million facility in Fall River was also purchased out of the bankruptcy by the Meissner Trust, an entity owned by Preston and Paul Lohnes. 49. In the late 1990s, Collins began researching new technological approaches to the process of creating synthetic fuels. In 2001, Collin s approached Preston to gain access to the catalytic technology developed by Molten Metal Technology. Collins developed improvements on the molten metal catalytic processes to be used in converting carbon-based feedstock into synthetic natural gas and other fu els. CoJJ ins ultimately created a totally new process involving high temperatures and high pressures to create clean-burning syntJ1eti c fu els from coal, petroleum ORIGINAL Pl:-~l"n'fON TN TNTI:.RVl:.t--.1 !0"

115 coke, and biomass. An independent consulting engineer later described the new technology as "substantially difl'erent in theory of operation and design from more common entrained flow systems (such as the Chevron-Texaco process, Shell gasifier, etc.) or the fi xed bed (Lurgi) systems.'' Collins, along with retired Univer sity of Maryland professor Robert Bach, tbnnally patented the process in 2009. 50. In 2004, Collins met Houston lawyer Michael Sydow, who persuaded Collins that he had the legal and business e--xpertise Collin s needed to exploit the new technoloov)' commercially. In October 2004, Collins, Preston , and Sydow agreed to create Texas Syngas, L.L. C., a Texas limi ted liability company to be headquartered in Houston, Texas. The business was reorgani zed as a new Nevada corporation, Texas Syngas, Inc., in May 2006. Preston, through Quantum Ca.talytics, licensed the Molten Metals Technology, Inc. patents and intellectual property to Texas Syngas, Inc. in exchange for 10% of the shares. Sydow became the chief executive officer and received 5% of the shares. Collins contributed his intellectual property and e-xperti se to the company and received approximately 75% of the shares. Preston, Collins, and Sydow served as d1e Texas Syngas, Inc. board of directors. B. Investment by the Shareholder Intervenors 5 1. In the fall of 2007, Preston and Sydow began serious efforts to raise capital for Te,-xas Syngas. Preston approached the shareholders of Atomic Ordered Materials (AOM), another company in which Preston was involved and in which a number of the Intervenors had invested. Preston brought Sydow and Collins to an AOM shareholders' meeting, where Sydow made a presentation on the Texas Syngas technology and soli cited investments in the company. This green ener!,'Y startup company, with what seemed to be a technology ripe for success in a time

116 when the world was embracing environmental conservation and carbon reduction, offered a compelling investment opportunity. 52. After d1is meeting Preston approached Mr H.J . von der Goltz, who had been present at the meeting. Preston informed Mr. von der Goltz that he had negotiated a $100 million pre money investment valuation for Texas Syngas and was trying to rai se $ 12 million to build a demonstration reactor to prove and implement the technology. Preston represented that the value of the technology was in excess of $100 mill ion, but he suggested that von der Goltz meet with Collins and Sydow to negotiate a discounted valuation to put together an initial investor group for the $12 million needed. Preston represented that he was assisting Texas Syngas in raising money, but never disclosed that he owned or controll ed any equity interest in the company. In November 2007, von der Goltz met with Collins and Sydow in Houston . Collins and Sydow agreed to accept new investors based on a pre-money valuation of $78 mitlion and a post-money valuation of$90 million. 53. Mr. von der Goltz brought the opportunity to friends, family, ami business associates, who ultimately invested $ 11 75 million in excha11ge for which they received preferred shares in Texas Syngas, representing approximately 13% of the company. Among thi s group were the Shareho lder Intervenors. Sydow and Preston represented to the Shareholder Intervenors, both directly a.nd through Mr. von der Goltz, that the value of the technology exceeded $100 million and that d1e money being raised would be used primari ly for building the demonstration reactor The Shareholder Tntetvenors relied on these representations in making their investments and, more importantly, trusted in Preston's integrity and technical expertise, as Preston had pre existing relationships with Mr. von der Goltz and with many of the Shareholder Intervenors and

117 who held himself out as having special expertise in val uing new technologies, based largely on his fanner position on the faculty a.nd as Director of Licensing at MIT. C. Growth ofT ex as Syngas 54. After the Shareholder lntervenors' funds were received, it was agreed that one of these new shareholders, Gennan businessman Christoph Henkel, would serve on the board of directors as the representative of the new investors, along with existing di rectors Collins. Preston, and Sydow. Furthermore, Sydow agreed to become a full-time officer of Texas Syngas at an annual salary of $360,000 and agreed to stop practicing law and to devote himself fu ll time to building Texas Syngas. Colli ns was to focus his efforts on selecting a suitable faci lity and building the demonstration reactor. 55. In early 2008, Texas Syngas negoti ated a deal with Central Louisiana El ectric Company (CLECO), a New Orleans gas utility company, for a 1 0-reactor plant to begin operations in the fall of 2012. Based on these developments, Preston now represented to Texas Syngas shareholders that the company was worth $300 milli on, and in the sum mer of 2008, Preston claimed that he had secured financing through hi s venture capital group C Change Investments. C Change made a written $30 million commitment to Texas Syngas at a $100 million valuation. The committed money from C Change was repeatedly delayed and ultjmately never materialized. 56. In September 2008, Preston and Sydow represented to the shareholders that Texas Syngas had purchased the Fall Ri ver facili ty where the test reactor would be built. The Fall River faci lity had originally been built by Molten Metal Technoloov)' and had been purchased out of bankruptcy by the Meissner Realty Tmst, a Preston-controlled entity . Texas Syngas paid the Meissner Realty Trust, a n entity owned by Preston and Paul Lohnes, $3 .5 mill ion cash. The deed re<:or<led with the Bristol County, Fall River Register of Deeds, however, shows that the property

;·· nr' ... ~ OR!G I'NAL Pl!'l'n'fON TN l 'l>ITERVEN l !ON 118 was never actually transferred to Texas Syngas. In September 2008, the property was put in the name of FaJJ River Realty, Ltd., an entity in whi ch Sydow owned an individual interest, and for which Sydow served as the managing director Defendants never disclosed to the shareholders that Texas Syngas (and later NC12) did not own the building. Title to the building remained in FaJI River Realty, Ltd., which then proceeded to charge Texas Syngas a monthly rent of $28,000 for use of the facility it should have owned. 57. ln February 2009, MPR, an independent engineering firm, concluded its review of the Texas Syngas technology. MPR confirmed the viability of the reactor' s science and theoretical basis, its design, and the gasification process chemistry. On or about May 14, 2009, Collins and Robert Bach formally assigned the patented technology to Texas Syngas in the records of the United States Patent and Trademark Office. D. Fraud on Texas Syngas and Its Shareholders 58. On infonnation and belief, Preston and Sydow had no intentjon of using shareholder money as represented to the shareholders. Preston is a classic stock promoter and has rai sed (and spent) millions upon millions of shareholder dollars, but has never actually built a commercially successful company. Sydow is a lawyer skilled at hiding assets ami corporate manipulation. During the t}me that Preston and Sydow controlled the board of directors, they made sure that the bulk of the money actually went to them or to several of their related entities, rather than to build the demonstration reactor. In addition to the fraudulent acquisition of the Fall River facility, on infom1ation and belief, C Change was apparently paid a $40,000 per month consuJtjng fee. Additionally, Sydow and Preston had the company pay tens of thousands of dollars evety month to lawyers and consultants and as well as other expenses that did not benefit the shareholders or

119 the corporation, but actually provided benefit for Sydow and his law fim1 and was apparently used by Preston to solicit investors for C Change . 59. Ow-ing 2009, Sydow moved the Texas Syngas corporate headquarters in Houston from 4900 Woodway to more luxwious accommodations on Post Oak Boulevard. Sydow never devoted his full attention to Texas Syngas as promised, but relocated his law practice to the Texas Syngas office space, spent most of his time on his own law practice, and used Texas Syngas employees to do work for hi s firm . Two of Sydow's children worked full time as lawyers in Sydow's law firm at Texas Syngas' expense. Texas Syngas was not compensated for use of its space, suppli es, resources, or personnel. Texas Syngas also paid for the maintenance, storage, and cleaning for Sydow' s airplane. When Texas Syngas was finally ready to construct the test reactor, Sydow and Preston had largely squandered the money raised for that purpose E. Investment by tbe Note Holder Intervenors 60 Despite his numerous promises and despite being compensated to do so, Preston faj led to rai se additim1al funds for Texas Syngas in 2009, and by mid-year Texas Syngas desperately needed funding. In 2009, Preston and Sydow again turned to N[r. von der Goltz for assistance. Mr. von der Goltz was able, through mid-2010, to raise a total of$6,104,000 in additional funds from friends, family, and business assodates. These investors, the Note Holder Intervenors, were issued convertible promissmy notes, which provided for automatic conversion into common shares at a 20% discount of the new investor' s valuation if Texas Syngas obtained qualified financing from a single investor of at least $5 million on or before September 30, 20 10. If no qualified financing occurred, the notes would become due and payable within five days after a demand was made on or after the September 30, 20 10, maturity date. 0Rt(il};Al. PE'l-n'fO~ TN TNiERVl:.l\'l !Oh

120 6 1. Preston and Sydow, both di rectly and through their statements to von der Goltz, represented to the Note Holder Intervenors that Texas Syngas was worth $300 million as of 2009, based on the value of the technology and the CLECO and Turkish contracts. However, Preston and Sydow fai led to di sclose that the CLECO contract had been cancelled. Preston and Sydow also represented that the money would be used prima1ily to build the test reactor; however, their later conduct and misuse of the funds demonstrate that they had no intention of using the money for that purpose. F. Formation of NC12 62. During 2009, Sydow, Henkel, and Preston became increasingly at odds with Collins, who still owned o r controll ed over 60% of the shares. By the end of 2009, Preston, Sydow, and Henkel att.empted to wrest control of the company from Colli ns through a scheme to dilute his interest C Change had received an investment of $15 million from Corinna von Schoenau, which was intended for investment in Texas Syngas; however, Preston withheld $10 million of these funds and proposed that C Change would invest $5 milli on at a pre-money valuati on of $10 million and post-money valuation of $ 15 milli on in exchange for a 33% interest in the company . Collins, as the majmity shareholder, blocked thi s effort, and tension among the board members reached a boiling poi nt- to tJ1e poi nt where moving the business forward seemed impossible. Collins and Sydow approached Mr. von der Goltz to mediate a settlement to save the company . Ultimately. Preston, Sydow, and Collins agreed that Texas Syngas would be reorganized and that a new three-person board of directors compri sed of Sydow and two new directors acceptable to Collins would govern the t1ew corporation. Collins was very hesitant to relinquish hi s position as a director, but agreed to a new board on the conditions that the new board members retained their positions for two years and that no funds would be accepted from C Change. (Preston ultimately O Rt<il};Al. P m-n-re>~ TN TmP.RVl:.N 1 !ON

121 took von Schoenau 's $ 15 million intended for Texas Syngas and invested it in a different Preston scheme). 63. In late 2009, as part of the reorganizati on, Sydow li quidated Texas Syngas before a new board was named. Sydow transfen-ed Texas Syngas' assets to a new Nevada corporation, NC 12, Inc. The preferred shares of the Shareholder Intervenors in Texas Syngas were convet1ed to common shares in NC12 and the convertible promissory notes held by the Note Holder Intervenors were assumed by NC 12. With Collins' agreemetlt, Sydow remajned as CEO of NC 12 and was joined on the board of directors by Mr. H.J. von der Goltz and Dr. Aydin Muderrisoglu. Von der Goltz was elected to serve as n on~executi ve chairman of the board of directors. Von der Goltz hoped the reorganization would relieve tension between Sydow and Collins, allowing Collins to focus on building the reactor at the Fall River, Massachusetts, facility that supposedly had been purchased by Texas Syngas, and allowi ng Sydow to focus on managi ng the company from the Houston headquat1ers and negotiating contracts with potential customers. 64. Sydow apparently believed that he would be able to manipul ate the new board members and assume greater control. When the new board members made clear their independence and intent to act in the best interest of the corporation and its shareholders, Sydow enl isted Preston and immediately began to undercut the authority of the new board members and to withhold infom1ation from them until they could be removed. Sydow maintained sole signatory authority over all NC 12 bank accounts and refused requests by von der Goltz that certain expenditures require two signatures. 65. Mr. von der Goltz took seriously his new role as a chairman of the board of directors. 1'-Ie met personally with all the Houston and Fall Ri ver employees in January 20 10 and sought to ORlGJNAl. Pt-7Jn'fON TN TNTI:.RVEN'Y'lON

122 clean up NC 12's finances, streamline operations based on his vast operational experience, and above all, see that the demonstration reactor wa.s built. Collins, in the meantime, had moved full time to Massachusetts and made meaningful progress on constructing the reactor and purchasing necessary equipment with the funds rai sed by von der Goltz. Sydow retained control of the corporation's money and continued his rni sappropriation and profligate spending, which included approxi mately $46,000 that he spent during a nine-day trip to London in mid-2010, a $20,000 per month lease payment that Sydow charged NC 12 for Sydow's private aircraft. and other wasteful personal e-xpenses and benefits, whi ch w-ere never divulged to the board of directors . While Sydow saw that all of the expenses incurred for hjs benefit were paid immediately, he refused to pay for the actual expenses incurred for building the reactor in Fall River, resulting in numerous disputes with vendors, work stoppages, and delays. 66. Sydow continuall y blamed Collins for NCI2' s financial problems and shortages offunds. Sydow vehemently opposed any review or financial controls over his own handling of corporate funds and never supplied financial statements to the board of directors. With board approval, von der Goltz engaged Elder, Gaffey & Paine, P.C. (EGP), a Boston-based accounting firm, to review both Fall RiveT ^[1] S and Houston' s book s and fiscal procedures. EGP ^[1] s investigation showed that adequate oversight measures were in place at Fall River and that all expenditures were supported by approved purchase orders sent to the Houston office for payment and tiling. 67. Sydow stonewalled and delayed providing EGP the accounting records and QuickBooks files relating to operations in Houston for almost eight weeks in mid-201 0. After tin ally obtaining records from the Houston office, EGP discovered numerous excessive expenditures for travel, professional fees, outside consultants, and the undisclosed lease payments for Sydow·s airplane-all expenses neither known to nor appr-oved by NC12's board of di rectors EGP ' s 0R t<ii'NAL P1:71'1Tf0~ TN TNTl·.RVEN l !ON

123 report issued in August 2010 recom mended that a forensic accountant review records from the Houston office to sort out the discrepancies. 68. In response to the discovery of financial mismanagement and misappropriatjon, von der Goltz wrote to Sydow on August 3, 2010, stating that he had ''never been associated wi th a company with so many nebulous and secret transactions." Von der Goltz demanded that Sydow provide a correct and complete accounti ng of Sydow's handling of the company's funds. and subsequentJy set a board of di rectors' meeting for August 20 to address these issues, to retain a forensic accountant to audit Sydow's books, to vote on closing the Houston office, and to remove Sydow as CEO. 69. Also during 201 0, Preston brought in Sonia Lo and her investment holding company, Chalsys Capital Part11ers, L L.P., as potential investors. In fact, Lo and Chal sys were Preston 's new partners for the next stage of the fraud in which the research faci lity and the technology would wind up in another Presto n~controlled entity once the NC 12 investors had lost all their money. In early 2010, Preston and Sydow pushed for a deal in which Chalsys would obtain a security interest in NC 12's technology in exchange for a $ 10 mill ion loan Von der Goltz and Muderrisoglu revised the terms of the proposed deal with Chalsys, and after numerous discussions, the NC 12 Board directed Sydow to negotiate the tina! transaction so that Chalsys would pay NC1 2 royalties on the exclusive use of its technology in Europe. While Sydow repeatedly represented to von der Goltz and Muderrisoglu that Lo and Chalsys had no connection to Preston and C Change, it later became clear that Lo and Chalsys had conspi red with Sydow and Preston from the beginning to divest NC12 of its technology assets and to put them into a corporate entity in Luxembourg in which Sydow and Preston and their co-conspirators (but not NC 12 or its shareholders) would have an interest. 0RtGI'NAL Pt:~l'n'fON TN TNTI:.RVEN t !ON

124 G. Ouster of von der Goltz and Moderrisoglu 70. In response to the NC 12's board of directors' demand for an audit of Sydow' s books and an investigation of Sydow's mismanagement and misappropriatjon, Sydow moved quickly to obtain complete control of the corporation. Sydow secretly created a ''Wtitten Consent of Shareholders" purp011edly executed by 69% of the ·'voting power" of the corporation. Sydow has never shown this document to any of the affected parties, but if the document exists, it is believed that the majority of the 69% that Sydow clajmed to control was actually Collins' shares, over whi ch Sydow claimed to hold the voting power- although Sydow acted without Collins' consent and against Collins' interests-and contrary to the prior agreements governing the corporate reorganization. Sydow also enlisted Preston and Henkel, who agreed to support the ouster of von der Goltz and Muderrisoglu, and agreed individuaJ ly to serve as replacement di rectors and to vote in favor of Sydow' s takeover of the company, w hich resulted in the theft of its assets. 71 . Based on his claim to control 69% of the shareholder votes, Sydow secretly and unilaterally removed von der Goltz and Muderrisoglu from the board of directors and replaced them with Preston and Henkel. Then, Sydow, Preston, and Henkel, as a board, voted to fire Collins and bar him from compMy property. The new board also revoked all access that von der Goltz and Muderrisoglu had to corporate bMk accounts Md records . As president and CEO, Sydow specificall y ordered corporate counsel Tim Maguire not to permit von der Goltz or Muderrisoglu or any other minority shareholder to have access to the corporate minutes, bank accounts, or other records- and later ordered him to retum aJI corporate records to Sydow and to destroy all copies. Sydow also attempted to force NC 12' s financial advisor, EGP, which was to

125 take over the accounting for NC12, to destroy all financial records it received during the investigation of mismanagement and mi sappropriation in the Houston office. 72. Preston sent employees of one of his other companies to raid the Fall River facility on the evening of August 12, 2010, w here they copied electronic records containing NC12 intellectual property and took technical drawings and other paper records out of the facility . Early the next moming, on August 13, 20 10, Sydow and Preston appeared at the Fall River facility accompanied by police offi cers. Sydow announced that he had been empowered by a written resolution signed by 69% of the shareholders to take over the board of di rectors, to fire Collins and hi s son, and to remove them from all corporate offi ces. Collins and his son (also an NC J2 employee) were locked out of their company-provided apartment and barred from the company premises. Sydow went so far as to have Collins' son arrested when he appeared and entered onto company property to report to work that moming. H. Loss of Contrncts in Turkey 73. Outing the tim e that von der Goltz and Muderri soglu were on the NC 12 Board of Directors, they both worked extremely hard on an initiative to obtain contracts with TKI, the Turkish national coal company. Muderrisoglu is a prominent Turki sh businessman wi th extensive contacts in the Turkish government,. and von der Goltz' s great-uncle was a German Field Marshall who commanded Turkish troops in World War I and was an extremely important and well-loved fi gure in Turkish hi story. With the efforts and assistance of von der Goltz and Muderrisoglu, who both made two trips to Turkey, NC 12 obtained a commitment from TKl to buy 40 reactors to be install ed in Turkey. A delegation from TKT visited the Fall River facility in 2010 to inspect the progress being made on the demonstration reactor and confitmed the first 0R tGI}. AL P ETITfO~ TN TNiF.RVEI\1 !0/1.

126 contract to build the first reactor. As a result of the Sydow~Preston~Henkel takeover, and the failure to compl ete the Fall River reactor, NC 12 lost the Turkish contracts. I. Loss of Valuable Technology 74. On August 26, 20 l 0, in a last attempt to find a solution to the problems caused by the Sydow-Preston-Henkel takeover, von der Goltz fl ew with hi s personal counsel to Houston to attempt to negotiate an agreement between Sydow and Collins that would resolve the di sputes and allow for the corporation's survival. Initially, Sydow and Coll ins reached an agreement for the buyout of Collins' stock on terms favorable to NC 12 and which would allow NC12 to finish tJ1e reactor and exploit t11e technology. Preston and Henkel vetoed the settlement Whether Sydow was ever acting in good faith regardi ng the settlement or not, Preston undoubtedl y was putting into play the same stratet,ry from which he had benefitted at Molten Metals and other companies- raise money, bilk the company and its shareholders, run the company into the ground, buy the assets for pennies on the dollar, and start over with another company. 75. Immediately after the takeover, Sydow, Preston, and Henkel agreed to the deal with Chalsys and Sonia Lo that von der Goltz and Mude rri soglu had opposed, except on tem1s much less favorable to NC 12 than originally proposed. Sometime prior to the takeover, Sydow, Preston, Henkel, and Lo had created Meliora Energy Technologies, S.a rJ (MET), a Luxembourg corporation controlled by the four of them and owned by C Change, Chalsys, and Henkel. The new NC 12 board, Sydow, Preston, and Henkel, represented to the NC 12 sharehol ders that MET had provided NC 12 with a $ 1.5 million bridge loan and a commitment for an additjonal investment of $5 million in equity in exchange for the license to use the technology in Europe, Asia and Africa- a license that was exclusive and did not provide for MET to pay any royalties toNC l2. ORiGINAl. PI.!TITIO~ TN TNiF.RVEI\1 !Oh

127 76. On September l, 2010, Sydow, Preston, and Henkel assigned all ofNCl2' s technology to a company called Oscura, Inc. Upon inf01mation and belief, Sydow created and controlled Oscura, Inc., as that company has the same Houston address as NC12 and Sydow' s law practice Oscura then assigned the patents to Defendant MET via a security agreement. Additionally, tvt:ET began paying Sydow a monthly fee of$15,000. 77. The supposed MET financing for $5 million a.Jso resulted in the automatic conversion of the l>romissory notes into common shares. The NC12 boal'd of di rectors, consisting of Preston, Henkel, and Sydow, infom1ed the Note Holder lnterve11ors on September 28, 20'10, that they were now common shareholders with 39.4% ownership, whjle MET owned 30.3% for its $5 million investment, and the " old" shareholder group would be diluted to 30.3%-<lown from 100% 78. MET never made the $5 million investment; rather, it is bel ieved that the Defendants transferred NC 12 's most valuabl e asset, the patented technology worth potentially hundreds of millions of dollars, to MET and that NC12 received no more than $500,000- whi ch was exhausted paying NC12 personnel and otlter expenses, which largely benefited Sydow and Preston. ln December 20 10, all employees were terminated and all business operations ofNC12 ceased. Because the MET financing never took place and because Sydow, Preston, and Henkel transferred all of the assets out of NC 12, both the Shareholder Intervenors and the Note Holder Intervenors now own stock in a defunct and worthless shelL J. Loss of Fall River Property and Reactor 79. NC 12's other valuable assets were the buildi ng, the partially completed reactor, and the extensive equipment that had been purchased for the reactor- all located in Fall River, Massachusetts. While von der Goltz and Muderrisoglu were on the NC12 board of directors and ORIGINAL Pt'"rn'fON TN TNii:.RVEN i !ON

128 Collins worked full time in Fall River on building the reactor, NC 12 paid approximately $2 million of the money invested by the Note Holders to vendors for work on the reactor, and substantial progress had been made on its construction. Prior to the ouster of von der Goltz and Muderrisoglu, NC12 had reached an agreement with its vendor, Hub Technologies, for the completion and installation of the reactor in Fall River by September 30, 2010. A shareholder meeting had been scheduled for the end of October 2010 so that the shareholders could inspect the progress tJ1at had been made At the tjme of the Sydow-Preston takeover, a payment schedule was in place with NC 12's vendors, and an outstanding balance of on ly about $300,000 remained. Immediately after Sydow, Preston, and Henkel took over control of NC 12 and fired Collins, all progress on the reactor halted, and the new board refused to pay the outstanding bills. The vendor subsequently repossessed the reactor and sold it for scrap. 80. On or about May 20, 2011, Fall Ri ver Real ty, Ltd. sold the building and transferred the deed to Brilliant Novelty, L.L.C. for $2.6 million. Upon information and belief, NC 12 never received any proceeds from this sale. Paul Lohnes and John Preston signed the deed as managers of Brilliallt Novelty, L.L.C. K. Bankruptcy and Destruction of the Company 81. On October 14, 20 1 l, Sydow filed a Voluntary Petition placing NC 12 into Chapter 11 bankruptcy in the United States Bankruptcy Court for the Southern District of Texas. The bankruptcy petitjon states that NC 12 has no assets.

VHI. Causes of Action A. Contl'olling Shareholder Defendants' Breach of F iduciary Duty to Shareholders 82. Intervenors incorporate by reference and re-assert each and every allegation above, as though full y set forth herein ORlGJ'NAL Pt-7JTT'ION IN lm-T:.RVF..NTiON

129 83 . Directors' power to act on the corporati on's behalf is governed by the directors' tiduciary relationship with the corporation and its shareholders, which imparts upon the directors the duties of care and loyalty. Shoen v. SAC Holding Corp. , 137 P 3d 1171 , 1178 (Nev. 2006) (citing Foster v. Arata, 325 P.2d 759, 765 (Nev . 1958)); see Nev . Rev. Stat. § 78.138. The Controlling Shareholder Defendants violated and breached their fiduciary duties to the shareholde rs of care, loyalty, reasonable inquiry, oversight, and good fai th. Horwitz v. Southwest Forest indus., 604 F.Supp. 11 30, 11 34 (D. Nev. 1985). These breaches involved intentional misconduct and fraud Nev. Rev. Stat. § 78 .138(7). These acts include:

a. Sydow's theft and mi sappropriation of corporate assets, including but not limited to use of corporate funds to pay for his private plane, use of corporate resources for hi s law practice without compensation to the company. the use of corporate funds for personal expenses, and bogu s fees for lawyers, co11Sultants, and services that did not benefi t NC12;

b. Failure to transfer title of the Fall River property to the corporation and instead transferring it to an entity in which Sydow and Preston held an individual interest, and charging the corporati on rent for use of its own property;

c. Transfer of the technolot,'Y of the corporation- its most valuable asset, worth hundreds of millions of dollars-for grossly inadequate consideration to an entity in w hich Sydow, Preston, and other Defendants had individual interests.

84. Each of the Controlling Shareholder Defendants authorized, or by abdication of duty, permitted and allowed these bad acts to occur. These acti ons were not a good faith exercise of prudent business judgment to promote and protect NC l2's corporate interests. See Nev. Rev. Stat. § 78 138; i n re Western World Funding. Inc .• 52 B.R. 743, 764 (Bkrtcy. D. Nev. 1985 ) ORtG!'NAL PI:'.'Tn'fON TN T"l>rH:.RVEN l !ON

130 ("An officer who or director who participates, ratifies, aids or approves of the breach of duty of a co-fiduciary, or fails to repudi ate the wrongdoing, may be jointly liable for the violation."). 85. Intervenors arc entitled to their actual damages for this breach of fiduciary duty and funher equitable rel ief including buy-out, disgorgement, and constructive trust. White NC12 may also have claims arising out of the same conduct, Intervenors do not seek to assert any claims owned by NC l2 or to asseit any remedy on behalf of NC12. Intervenors asseit only their individual claims for violati ons of fiduciary duties owed directl y to them as shareholders and seek only those damages for injuries suffered by lntetvenors di rectly as shareholders. Because the Controlling Shareholder Defendants acted knowingly, intentionally, mal iciously, and with reckless disregard of Intervenors' rights, Intervenors are further entitled to exemplary damages. B. Shareholder Oppression 86. The Controlling Shareholder Defendants are subject to legal duti es to Intervenors, including fiduciary duties, duties not to oppress, and duties of good faith and fair dealing. Defendants committed a continuing pattern of oppressive acts that have the purpose and effect of substantially defeating Intervenors' objectively reasonable expectations of share ownership, of systematically violating their rights and interests as shareholders, and of denying them the economic value of share ownership and return on thei r investment. 87. Examples of but a few of these oppressive acts include, but are not limited to: instituting a plan to gain unfettered control of the company with the intent of stealing its assets.. stripping the company of its most valuable assets for their own personal gain, and the secretive and questionable removal of directors von der Goltz and :rv·Iuderrisoglu, who were reputable, independent of Preston and Sydow, and trusted by the shareholders. Sydow thwarted these di reclors' investigative efforts into the company's accountjng practices. Sydow, Preston, and ORtGI'l\AL PETI1'fON TN T'l>ITI:.RVl::.N I !ON

131 Henkel illegally exerci sed dominion and control over the corporation by removing these directors in direct violation of a previous agreement among a super-majority of the shares. Sydow also misappropriated corporate assets fo r personal expenses, and engaged in numerous undi sclosed self-dealing tran saction s at the expense of NC12 shareholders. Defendants' conduct rendered Intervenors' share ownership worthl ess, meaningless, and financially punitive. Defendants' burdensome, harsh, and wrongful conduct visibly departs from standard s of fair dealing and constjtutes shareholder oppression 88. Jntervenors are e11titled to equitable relief to remedy the oppressive conduct, including but not limited to, having the Court order a buy-out at a fair price, together with actual and exemplary damages, disgorgement, restitution, and other equitable relief. Furthermore, Defendants' conduct was committed willfully and maliciously and Intervenors are entitled to punitive damages. Intervenors are without adequate remedy at law. C. Knowing Participation/Civil Conspiracy 89. As alleged herein, all Defendants conspired to commit fraud and breaches of their fid udary duties. and thus are jointly and severally liable for all actual damages and equitabl e rel ief. Furthermore, all Defendants acted knowingly, intentionall y, maliciously, and with reckless disregard of Intervenors' rights and the company' s ri ghts, and Intervenors are entitled to exemplary damages. D. Securities Fraud-Common Law Fraud and Statutory Fraud 90. Sydow and Preston committed common law and statutory fraud on each of the Interv enors in connection with the sale and purchase of the shares and conve11ible notes. As a lleged herein, Sydow and Preston solicited the Intervenors' investments and directly or indirectly communi cated false representations of fact to the Intervenors- including that the ORlf: l'NAl. Pl.::'ln'ION TN T'!>ITERVENT!ON

132 company was worth $ 100 million or later $300 million, that the corporation would use the investment money primarily to build the reactor (when Sydow and Preston intended to utilize the money primarily for other purposes or to misappropriate it and to delay the construction of the reactor), and that the CLECO deal was in place when in fact it had been cancelled. Addi tionally, Sydow and Preston fajled to disclose facts that they were under a duty to disclose to new investors-including the cancellation of the CLECO deal. Sydow and Preston made the misrepresentations, false promi ses, and omissions with knowledge of the falsity, with the intent to deceive, and with the intent that the Interven ors rel y on those misrepresentations. The Intervenors did in fact reasonably rely on the fraudulent representations and non-disclosures of Preston and Sydow by investing in Texas Syngas and NC12. Intervenors suffered actual damages proximately caused by Preston and Sydow' s fraud . Furthermore, Preston and Sydow acted willfully, intentionall y, and maliciously and are liable for exempl ary damages.

IX. Jury Demand 9 1. Intervenors wish to exercise their right to trial by jury . X. P1·ayer 92. For these reasons, Intervenors request that the Defendants be cited to appear and answer and that Intervenors have judgment agajnst the Defend ants for the following:

a. Actual and exemplary damages as allowed by law; b. Equitable reli ef including buy-out or return of investment; c. Prejudgment and post-judgment interest as allowed by law; d. Attorney fees and expenses; e. Costs of suit;

ORIGINAl. P P.TITJON I~ TNTF!.RVF.NTION 133 f All other relief, general and special, legal and equitable, to which Intervenors may be entitled. Respectfully Submitted, FRYAR LAW Fl.RNI, P.C.

F. Eric Fcyar Texas Bar No. 07495770 Email: eric@fryarlawfirm.com Matthew Buschi Texas Bar No. 24064982 Email: mbuschi@fryarlawfirm.com Christina Richardson Texas Bar No. 24070495 1001 Texas Ave. , 14th Floor Houston, Texas 77002-3194 Tel. (281) 715-6396 Fax (281) 715-6397

ATTORNEYS FOR INTERVENORS

0RfGJNA.L PETITION IN lNTf.'RVl'{NTfON 134

CERTIFICATE OF SERVICE

I certify that a copy of the foregoing instrument was served on all parties and counsel of record pursuant to the Texas Rules of Civil Procedure as indicated below: []Telephonic document transfer on 11 November 2011 before 5:00p.m . []Email or eservice by agreement on 11 November 201 1. [X] First Class United States Mail, CMRRR, on 11 November 2011. Randall 0 . Sorrels Brent C. Perry Clyde J. "Jay'' Jackson, ill Law Offices of Brent C. Perry Abraham Watkins, Nichols, Sorrels, Matthews 800 Commerce Street & Friend Houston, Texas 77002 800 Commerce Street Fax: 713-237-0415 Houston, Texas 77002-1776 Attorney for Original Plaintiffs Fax: 713-225-0827 Attorneys.for Original Plainti:ffs Asher Griffin Amir Alavi Ashley Frankson Chris Sileo Sean Flammer Ahmad, Zavitsanos, Anaipakos, Alavi & Scott, Douglass & McConnico, LLP Mensing P.C. 3460 One Houston Center 600 Congress Ave., Ste 1500 Austin, Texas 78701-2589 1221 McKinney Street Fax: 512-474-0731 H ouston, Texas 770 lO Attorneys for Defendants Clwlsys, At/ET, and Fax: 713-658-0062 Lo Attorneys for Defendants Sydow, Preston,

Henkel, C Change, and Brilliant Novelty OR!GlNALPf.TJTJON IN INTH.RVF.NTION 135 ~~-~~

];'

l ' /Jf:?hfif-D ~ h

IN THE UNITED STATES BANKRUPTCY COURT

' 81 rlct an;~/ .U

FOR THE SOUTHERN DISTRICT OF TEXAS

77,.,., 4UG J C!erlr

HOUSTON DMSION

J 20;; !Jr INRE; § !'~......, .' '·u,;~·~ .. CASE NO: 11-38794 ~~ ... ~~ .,._,."' ".'~ ;.. . ._. § .... - .. ~ ()·· CHAPTER 7 NC12, INC. § ~r>'·il"- _ . - --....___ . - ·--,------

§

Debtor(s). § JUDGEISGUR § § §

MICHAEL COLLINS, et al § §

Plaintiff(s), § §

vs. ADVERSARY NO. 11-3634 § § SYDOW, eta/ § §

Defendant(s).

MEMORANDUM OPINION

The Plaintiffs and Intervenors assert claims against fonner officers and directors of NC12, the debtor in the underlying bankruptcy case. NC12 was a technology company engaged in developing catalytic gasification processes. Plaintiffs and Intervenors allege that the Defendants stripped NC 12 of assets, misappropriated corporate assets, engaged in self-dealing, and improperly removed other directors from NC12's board. The Plaintiffs sue for breach of fiduciary duty, and Plaintiff Michael Collins sues for conversion. The Intervenors sue for breach of fiduciary duty, shareholder oppression, statutory and common law securities fraud, and conspiracy.

The Court grants, in part, and denies, in part, the Intervenors' motion to remand. The Court remands the Intervenors' securities fraud claims, including the aiding and abetting and conspiracy to commit fraud claims, as they are the Intervenors' property; the Court declines to 1 I 3l

206 exercise subject matter jurisdiction over the claims. The remainder of the Intervenors' claims are the estate's property, and the Court dismisses them for lack of standing.

The Court denies, in part, and abates, in part, the Plaintiffs' motion to remand. Plaintiff Michael Collins' conversion claim is arguable property of the estate. lf the claim belongs to Collins, the Court may lack subject matter jurisdiction or the claim's potential effects on the estate may be so remote that the Court should discretionarily abstain. If the claim is property of the estate, Collins lacks standing to assert the claim. Until the issue is decided, the Court cannot remand the claim; Collins' pursuit of the conversion claim in state court would violate the automatic stay. The remainder of the Plaintiffs' claims are property of the estate, and the Court dismisse~ them for lack of standing.

Background This proceeding involves numerous Plaintiffs, Defendants, and Intervenors. The Plaintiffs are Michael Collins, individually and on behalf of NC12, Inc. and Fall River Realty, Ltd.; Ellen Collins, on behalf of BOS, Inc., EnVen, Inc. and Metal Catalyst Ventures, Inc.; BOS, Inc., as a shareholder ofNC12; EnVen, lnc., as a shareholder ofNC12; Metal Catalyst Ventures, lnc., as a shareholder of NC12; M. Sameer Ahmed, individually and on behalf of NC12 and TSBC South Texas Investors, L. P., as a shareholder ofNCI2.

The Defendants are Michael Sydow; John T. Preston; Christoph Henkel; C Change Investments, L.L.C.; Sonia Lo; Chalsys Capital Partners L.L.P.; Oscura, Inc.; Brilliant Novelty, L.L.C.; and Meliora Energy Technologies. S.A.R.L. The Plaintiffs sued the Defendants in Harris County District Court on July 26, 2011. ECF No. l-1.

The Plaintiffs assert claims for breach of fiduciary duty, alleging that Sydow, Preston, and Henkel breached their fiduciary duty to the Plaintiffs as shareholders of NCl2 by 2 / 31

207 misappropriating corporate funds. They seek ''their proportionate share of economic injuries" as shareholders ofNC12. The Plaintiffs sue the other Defendants for aiding and abetting breach of fiduciary duty. The Plaintiffs sue Sydow, Preston, C Change Investments, and Brilliant Novelty for conversion of Collins' interest in Fall River Realty.

The Intervenors filed a petition in intervention on November 1 1, 2011 . The Intervenors are Akila Finance, S.A.; Bosques del Molino, S.A.; Centrans Energy Services, Inc.; Chester Mester Holdings, Ltd.; Deltec Bank & Trust, Ltd.; Emjo Investments, Ltd.; William End; Evans and Petree 401K Plan; First Bay Intertrade; GM Partners; Marair Corporation; W.L. Nichol, IV; Panorama Investment, Ltd.; PC 01 Vermoegens Verw.; Alejandro Santo Domingo; Sinchi investment; Venturi Global Investments, Ltd.; and H.J. von der Goltz. ECF No. 1-3.

The Intervenors sue Sydow, Preston, and Henkel for breach of fiduciary duty to shareholders and for shareholder oppression. They also sue all Defendants for knowing participation/civil conspiracy to commit fraud and breach of fiduc iary duties. The intervenors sue Sydow and Preston for common law fraud and statutory fraud.

NC12 filed for chapter 11 bankruptcy on October 14, 201 I. On December 22, 2011, the Court granted the United States Trustee's motion to appoint an examiner in the case. ECF No. 28. Walter Bissex was appointed examiner. ECF No. 30. Bissex filed a status report on February JS, 2012. ECF No. 41.

The Defendants removed this proceeding on December 15, 2011. The Intervenors filed a motion to remand or abstain on January 17, 2012, arguing that they asserted only direct claims against the Defendants. ECF No. 6. The Plaintiffs joined in the motion to remand on the same day. ECF No. 7. 3/31

208 At a hearing on February 2, 2012, the Court required parties to file briefs on whether the estate owned the claims asserted in this proceeding. The Intervenors and Defendants Sydow, Preston, Henkel, C Change Investments, LLC, and Brilliant Novelty, LLC (collectively, "Sydow Defendants") filed briefs on March 2, 2012. ECF Nos. 12 & 14. The Sydow Defendants also filed a response to the motion to remand on the same day, arguing that the claims were property of the estate. ECF No. 13. The Sydow Defendants also argue that the existence of a joint directors and officers insurance policy with a maximum coverage limit of $1 ,000,000.00 for defense costs provides another basis for "related to" jurisdiction. ECF No. 13, at 21 -22. Additionally, the Intervenors' requested relief of a forced buy-out, they argue. would affect the bankruptcy estate by affecting ownership of the debtor and rearranging bankruptcy priorities. ECF No. 13, at 23. Finally, mandatory abstention does not apply, they argue, because remand would violate tbe automatic stay. ECF No. 13, at 23.

Defendants Sonia Lo; Chalsys Capital Partners, LLP, and Meliora Energy Technologies, S.A.R.L. (collectively, " Lo Defendants") filed a joinder with the Sydow Defendants' briefing on March S, 2012. ECF No. IS. The Lo Defendants filed a joinder with the Sydow Defendants' response to the motion to remand on March 7, 2012. ECF No. 17. The Intervenors filed a reply to the Sydow Defendants' brief on March 9, 2012. ECF No. 18.

In NC12's main bankruptcy case, the United States Trustee filed a motion to convert tbe case to a chapter 7 case on February 28, 2012. No. 11-38794, ECF No. 43. The intervenors joined in the motion on March 22, 2012. No. 11-38794. ECF No. 51 . NC12 filed a response on March 22. 2012, opposing the conversion to chapter 7. No. 11-38794, ECF No. 52. The Court held a hearing on the motion to convert on March 26,2012 and March 27,2012. After hearing testimony from Bissex, Sameer Ahmed, Sydow, and Preston, the Court concluded that NC12 4 / 31

209 was not operating in a meaningful way and had limited assets of an unknown value. The Court granted the motion to convert, and Janet S. Casciato-Northrup was appointed chapter 7 Trustee.

The Court set a hearing on the ownership of the claims in this advers1lry proceeding for May 15, 2012. Prior to the hearing, the Trustee and the Intervenors filed briefs. ECF Nos. 25 & 26. At the May 15, 2012 hearing, lhe Court heard arguments as to the ownership of the claims. The lntenrenors filed an additional brief on May 25, 2012. ECF No. 27.

The Trostee filed a separate adversary proceeding against Michael Collins, Ellen Collins, and BOS, lnc. on June 5, 2012, seeking a detennination ofthe extent and validity of the estate's interest in real property in Fall River, Massachusetts and a determination that the property was subject to either a resulting or a constructive trust. The Trustee also sued Michael Collins for breach of fiduciary duty. Adv. No. 12·3266, ECF No. 1.

The Trustee filed another adversary proceeding against Michael Collins on August 13, 2012. Adv. No. 12-3376, ECF No. I. In Adv. No. 12-3376, the Trustee sues for a declaratory judgment that Collins does not own any interest in U.S. Patent Application No. 12/363,398 and the underlying technology; breach of fiduciary duty; and unjust enrichment.

On August 21, 2012, the Court ordered the parties to this adversary proceeding to file a copy of NC12's Philadelphia Indemnity Insurance Company policy and to stipulate whether the copy was true and correct. ECF No. 28. The Trustee filed a copy of the policy on August 27, 2012, with a stipulation signed by the Trustee, the Plaintiffs, the Intervenors, Sydow, Preston. Henkel, and the other Defendants. ECF No. 30. The Trustee, the Plaintiffs, the Intervenors, Sydow, Preston, and Henkel stipulate that the copy of the policy is a true and correct copy. ECF No. 30, at 1. The other Defendants have no basis either to dispute the authenticity of the policy or to stipulate that the copy is true and correct. ECF No. 30, at 2. 5 I 31

21 0 The Plaintiffs' and Intervenors' Allegations The Plaintiffs and Intervenors allege that the Defendants, who were directors and officers of NC 12, engaged in self-dealing and mismanagement with the ultimate result of stripping NC 12 of its most valuable assets. For context, the Court summarizes the allegations made by the Plaintiffs and Intervenors. By summarizing the allegations, the Court does not fmd that the allegations are meritorious. Nevertheless, the Court must assume that the allegations are true for the purpose of ruling on the pending motions.

NC12 was involved in the development of catalytic gasification technology. ECF No. 1- 2, at 6. The technology was developed by Plaintiff Michael Collins for producing synthetic natural gas and other fuels from coal. ECF No. 1-3, at 14. Collins' technology involved using high temperatures and high pressures to create clean-burning synthetic fuel~ from coal, petroleum coke, and biomass. ECF No. 1-3, at 15-16. Collins. along with retired University of Maryland professor Robert Bach, patented the process in 2009. ECF No. 1-3, at 16.

NC12 began as a Texas limited liability company named Texas Syngas, LLC. ECF No. 1-2, at 7-8. Texas Syngas was fonned jn October 2004 to exploit the technology portfolio of a defunct company called Molten Metal Technology, Inc., which had been founded and promoted by Defendant John Preston. ECF No. 1-2, at 7; ECF No. 1-3, at 15. Quantum Catalytic&, Inc., another entity controlled by Preston, purchased Molten Metal Technology's portfolio in l999. ECF No. 1-2, at 7; ECF No. 1-3, at 15. In May 2006, Quantum Catalytics licensed its technology to Texas Syngas in return for 10% of the available shares. ECF No. 1-2. at 8. Collins agreed to contribute his intellectual property to Texas Syngas in exchange for 754,500 shares {approximately 75%) of Texas Syngas. ECF No. 1-2, at 8; ECF No. 1-3, at 16. Collins 6 I 31

211 kept I 00,000 shares personally and transferred the other shares to En Ven, Inc. and Metal Catalyst Ventures, Inc., Nevada companies owned by his wife, Ellen Collins. ECF No. 1-2. at 8.

Texas Syngas was reorganized as a new Nevada CQrporation, Texas Syngas. Inc .• in May 2006. ECF No. 1-3, at 16. Texas Syngas began raising significant capital in 2007. ECF No. l -2. at 9; ECF No. 1-3, at 16. Through Preston and his contact Johan von der Goltz, Texas Syngas raised at least $12 million from European investors. ECF No. 1-2, at 9. Von der Goltz's friends, family, and business associates invested $11.75 million in exchange for approximately 13% ofthe comp110y. ECF No. 1-3, at I 7. These investors included some of the Intervenors ("Shareholder Intervenors''). ECFNo. 1-3, at 17.

Sydow and Preston represented to the Shareholder Intervenors that the value of the technology exceeded $100 million and that the funds would be used for building a demonstration reactor. ECF No. 1-3, at 17.

The funds were also intended to be used to acquire a research and development facility in Fall River, Massachusetts. EFC No. 1-2, at9. The facility was formerly owned by Molten Metal Technology and was acquired by the Meissner Trust, an entity owned by Preston and Paul Lohnes. ECF No. 1-3, at 1 S. Texas Syngas structured the acquisition of the facility by Fall River Realty, Ltd. ECF No. 1-2, at 9. Preston and Lohnes retained an ownership interest in Fall River Realty. ECF No. 1-2, at 9-10. Preston and Lohnes, through a complex transaction, transferred to Collins an interest in Fa11 River Realty in exchange for $3.5 million and Texas Syngas shares. ECF No. 1-2, at 10.

Preston and Sydow told the shareholders that Texas Syngas had purchased the Fall River facility, but the property was never actually transferred to Texas Syngas. ECF No. 1-3, at 18-19. 7 I 31

212 Sydow became the Chief Executive Officer of Texas Syngas with an annual salary of $360,000. ECF No. 1-2, at 9. Sydow, a lawyer, agreed to stop practicing law and devote his full efforts to building Texas Syngas. ECF No. 1-2. at 9. Sydow worked from office space in Houston, paying salaries to officers and employees and pursuing execution of Texas Syngas's business plan. ECF No. 1-2, at 9.

Collins began working at the Fall River facility to build a full scale gasification system prior to commercial development, retaining the necessary consultants and employees. ECF No. 1-2. at 10. Collins and Bach assigned the patented gasification technology to Texas Syngas on May 14, 2009. ECF No. 1-3, at 19.

Texas Syngas negotiated a deal with the Central Louisiana Electric Company (CLECO) in early 2008, for a tO-reactor plant to begin operations in the fall of20l2. ECF No. 1·3. at 18. In the summer of 2008, Preston claimed that he had secured .$30 million in financing through C Change, but the money never materialized. ECF No. 1-3, at 18.

By 2009, Texas Syngas needed additional funding. Von der Goltz raised a total of $6,104,000.00 from friends, family, and business associates. ECF No. 1-3, at 20. These investors, who included the remainder of the Intervenors ("Note Holder Intervenors"), were issued convertible promissory notes, which provided for automatic conversion into common shares at a 20% discount if the oompany obtajned qualified financing from a single investor of at least $5 million on or before September 30, 20 I 0. ECF No. 1·3, at 20. Preston and Sydow represented to the Note Holder Intervenors that the company was worth $300 million as of2009, based on the value of the technology and the CLECO contract and prospective contracts with the Turkish national coal company. ECF No. 1-3, at 21, 26. The prospective Turkish contracts were 8/31

2 13 to be obtained through the efforts of von der Goltz and Dr. Aydin Muderrisoglu. ECF No. 1-3, at 26.

However, the CLECO contract had already been canceled. Preston and Sydow did not disclose the cancellation of the contract. ECF No. 1-3, at 21. Preston and Sydow represented that the money would be used primarily to build the test reactor. ECF No. 1-3, at 21 .

The Intervenors allege that Preston and Sydow had no intention of using shareholder money as represented to the shareholders. ECF No. 1-3, at 19. While they controlled the board of directors, they "made sure that the bulk of the money actually went to them or to several of their related entities, rather than to build the demonstration reactor." ECF No. 1-3, at 19. C Change, Preston's company, was "apparently" paid a $40,000 per month consulting fee. ECF No. 1-3, at 19. Sydow and Preston had the company pay tens of thousands of dollars every month to lawyers and consultants and for other expenses that did not benefit the shareholders or the corporation, but instead benefited Sydow and Preston. ECF No. 1-3, at 19-20.

Although Sydow had agreed to devote all ofhis time to Texas Syngas when he was hired as CEO, he continued practicing law, spending most of his time on his own law practice and using Texas Syngas employees to do work for his firm. ECF No. 1-3, at 20.

Also in 2009, Texas Syngas became NC12. ECF No. 1-2, at 11. Sydow and Preston managed the transfer of assets and liabilities to the new entity. ECF No. 1~2. at 11. TSl was dissolved. ECF No. 1-2, at 11. Sydow remained as CEO and was joined on the board of directors by von der Goltz and Muderrisoglu. ECF No. 1-3, at 22.

In March 2009, C Change Investments, Preston's investment company, acquired a small interest in NC12. Through 2009, Preston and Sydow developed the prospects for a Louisiana 9 I 31

214 production facility, and Collins oversaw research and development of the reactor in Fall River. ECF No. 1-2, at 11.

Collins began having problems with contractors at the Fall River facility by late .2009. ECF No. 1-2, at 11. One contractor placed a stop on all work until NC12 paid over $1.2 million in past due invoices.

Von der Goltz began investigating the funding issues, contacting an accountant to review NC J2's financial records. ECF No. 1-2, at 12. The accountant did a limited review of the Fall River accounting process and then requested a set of books for NC12. ECF No. 1-2, at 12. After obtaining the Quickbooks file, the accountant raised concerns about NC12's use of funds, including large amounts ofprofesstonal fees and expenses. ECF No. 1-2, at 12. The accountant recommended a forensic audit and noted that very linle of the money raised had been spent on developing the reactor at the Fall River facility. ECF No. l -2, at 12. Instead, much of the money had been spent on travel, offices, professional fees, outside consultants, and undisclosed lease payments for an airplane. ECF No. 1-2, at 12; ECF No. 1-3, at 23 .

Collins and von der Goltz were aligned. After von der Goltz delivered the audit request to Sydow, Sydow obtained an injunction in Montgomery County against Collins. ECF No. 1-2, at 12. Sydow removed Collins from all company operations in August 2010 and closed off access to company records. ECF No. 1-2, at 12. Sydow and Preston removed Collins, von der Goltz, and Muderrisog1u as directors and named Christoph Henkel as a director. ECF No. 1-2, at 12; ECF No. 1-3, at 25. Sydow, Preston, and Henkel, as a board, voted to ftre Collins and bar him from company property. ECF No. 1-3, at 25. The board also revoked all access to company bank accounts and records for von der Goltz and Muderrisoglu. ECF No. 1-3, at 25. As a result of Preston, Sydow, and Henkel's takeover, NC121ost the Turkish contracts. 10 I 31

215 About $300,000 remained to be paid to vendors for the cost of the reactor. After Sydow. Preston, and Henkel fired Collins, all progress on the reactor halted, and the board refused to pay the outstanding bills. A vendor repossessed the reactor and sold it for scrap. ECF No. 1-3, at 29.

Preston, Sydow, and Henkel, along with their companies, worked with Sonia Lo and Chalsys Capital Partners, LLP, to strip NC12 of its assets and transfer the assets to Meliora Energy Technologies, S.A.R.L., a Luxembourg limited liability company established on September 14, 2010 and controlled by Sydow, Preston, Henkel and Lo and owned by C Change, Chalsys, and Henkel. ECF No. 1-2, at 12-13; ECF No. 1·3, at 27. Sydow, Preston, and Henkel represented to shareholders that Meliora would provide a $1.5 million bridge loan to NC12, along with a commitment of an additional $5 million investment, in exchange for the license to use NCI2's technology in Europe, Asia, and Africa. ECF No. 1-3, at 27.

However, Sydow, Preston, and Henkel assigned all ofNC12's technology to Oscura, Inc. , a company believed to have been created and controlled by Sydow, on September I, 2010. ECF No. 1·3, at 28. Oscura assigned the patents to Meliora via a security agreement. ECF No. 1·3, at 28. Meliora began paying Sydow a monthly fee of$15,000. ECF No. 1-3, at 28.

Meliora 's supposed $5 million financing resulted in the automatic conversion of the promissory notes into common shares. The conversion diluted the "old" shareholder group's ownership from 100% to 30.3%. ECF No. 1-3, at 28. However, Meliora never made the $5 million investment. ECF No. 1·3, at 28. According to the Intervenors, it is believed that NC12 received no more than $500,000 for its patented technology. ECF No. 1-3, at 28.

In December 2010, all employees of NC12 were terminated and all business operations ceased. ECF No. 1-3, at 28. 11 /31

216 In May 2011, Fall River Realty sold the Fall River facility to Brilliant Novelty, LLC for $2.6 million. Lohnes and Preston are members and managers of Brilliant Novelty, and Brilliant Novelty obtained a $2.6 million mortgage on the property. ECF No. 1-2, at 13. Sydow fi led a certificate of vote stating that the Fall River Realty shareholders had approved the transaction. However, Collins, the majority shareholder in Fall River Realty, was never consulted about the sale. ECF No. 1-2, at 13.

On October 14, 201 1, Sydow caused a voluntary chapter 11 petition to be filed on behalf ofNC12. The petition states that NC12 has no assets. ECF No. 1-3, at 29. Ana lysis If a cause of action belongs to the estate, then the Trustee has exclusive standing to assert the claim. Schertz-Cibolo-Universal City, Jndep. Sch. Dist. (In re Educators Grp. Health Trust), 25 F.3d 1281, 1284 (5th Cir. 1994). If, on the other hand, a cause of action belongs to the Plaintiffs and Intervenors, the Court must consider whether it has subject matter jurisdiction over the claims. lf the Court lacks subject matter jurisdiction over claims because the claims do not relate to NC12's bankruptcy, then the Court must remand the claims.

lf the Plaintiffs and lntervenors lack standing to bring claims, the Court must dismiss the claims for Jack of subject matter jurisdiction. See Highland Capital Mgmr. LP v. Chesapeoke Energy Corp. (In re Seven Seas Petroleum), 522 F.3d 575, 583 (5th Cir. 2008) ("If the claims belong to the estate, then it was not error for the bankruptcy court to deny remand (because it has jurisdiction over all property of the estate) and dismiss the claims (because the trustee has exclusive standing to assert claims belonging to the estate).")~ Cobb v. Cent. States, 461 f .3d 632, 63 5 (5th Cir. 2006) ("[T]he issue of standing is one of subject matter jurisdiction."). 12 /31

21 7 Whether a particular cause of action belongs to the estate depends on whether under applicable state Jaw the debtor could have raised the claim as of the commencement of the case. Educators Grp., 25 F.3d at 1284. If a cause of action alleges only indirect hann to a creditor (i.e., an injury that derives from hann to the debtor), and the debtor could have raised a claim for its direct injury under the applicable law,then the cause of action belongs to the estate. ld

NC12 is incorporated under Nevada Jaw. Nevada law therefore governs the internal affairs of NCJ2. Tex. Bus. Org. Code § 1.102 ("[T]he law of the state (in which an entity is fonned] . . . governs the fonnation and internal affairs of the entity.''); Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97 (1941) (holding that a federal court sining in diversity applies the conflict of laws rules of the forum state); Hollis v. Hill, 232 F.3d 460, 465 (5th Cir. 2000) (applying Texas choice of law rules and concluding that Nevada law governs internal affairs of corporation incorporated in Nevada); Reed v. Linehan (In re Soporex, Inc.), 463 B.R. 344, 396 (Bankr. N.D. Tex. 2011) (applying Texas choice of law rules, which provide that internal affairs of a foreign corporation a governed by the law of the state of incorporation).

Although the Court first considers whether NC12 could have raised claims outside of bankruptcy, the Coun also looks at the underlying injury for which relief is sought. (S)ome claims that are usually brought by creditors outside of bankruptcy (and thus in a sense may be said to "belong to" the creditors and not the debtor) are nonetheless vested exclusively in the trustee in bankruptcy. This is so not merely because the claims are common to a number of creditors, but because they ultimately seek to recover assets of the estate that are not under the debtor' s control-by reason of a fraudulent transfer, for instance, or because of the existence of separate corporate entities that are a sham.

Seven Seas, 522 F.3d at 589. 13/31

2 18 The Trustee's exclusive standing protects the Bankruptcy Code's djstribution scheme. ''Since one of the goals of the Bankruptcy Code is to preserve property of the bankruptcy estate and ensure that similarly situated creditors receive equal distributions, if a cause of action belongs to the debtor, only the trustee or debtor in possession may pursue it." In re Cabrini Med Ctr., 2012 WL 2254386., at *6 (Bankr. S.O.N.Y. June 15, 2012) (citing S.I. Acquisition, Inc. v. Eastway Delivery Serv., Inc. (In re S.I. Acquisition, Inc.), 817 F.2d 1142. 1152 (5th Cir. 1987)) (citations omitted).

If claims are not owned by the bankruptcy estate, the Court must consider whether it bas subject matter jurisdiction over the claims. The Bankruptcy Court's subject matter jurisdiction is limited to bankruptcy cases and proceedings that arise under the Bankruptcy Code, arise in a bankruptcy case, or are related to a bankruptcy case. 28 U.S.C. § 1334. The Court therefore has subject matter jurisdiction only over claims that arise under the Bankruptcy Code, arises in the NCI2 bankruptcy case, or are related to NC12's bankruptcy case.

A proceeding arises under the Bankruptcy Code when a plaintiff asserts a right created by the Bankruptcy Code. Wilborn v. Wells Fargo Bank (In re Wilborn), 609 F.3d 748, 752 (5th Cir. 2010). When a plaintiff asserts a claim that could not exist outside of bankruptcy, tbe proceeding arises in a bankruptcy case. Id

An action is related to a bankruptcy case if the outcome could conceivably affect the bankruptcy estate. Edge Petroleum Operating Co. v. GPR Holdings, LLC (In re TXNB Internal Case), 483 f .3d 292, 298 (5th Cir. 2007). "Certainty is unnecessary; an action is 'related to' bankruptcy if the outcome could alter, positively or negatively, the debtor's rights, liabilities, options, or freedom of action or could influence the administration of the bankruptcy estate." /d. 14/31

219 If the Court has only "related-to" jurisdiction over a claim, the claim may be subject to mandatory abstention. Mandatory abstention applies when a proceeding: (i) is based upon a state law claim or state law cause of action; (ii) is related to a bankruptcy case but not arising under the Bankruptcy Code or arising in the bankruptcy case; (iii) could not have been commenced in a federal court other than through bankruptcy jurisdictjon; and (iv) was commenced and can be timely adjudicated in a state court. 28 U.S.C. § 1334(c)(2).

Even if the requirements for mandatory abstention are not met, the Court may discretionarily abstain from hearing a proceeding "in the interest of justice, or in the interest of comity with State courts or respect for State law." 28 U.S.C. § l334(c)(l). "Nothing ... prevents a court from permissively abstaining under§ 1334(c)(l) where some, but not all, of the requirements for mandatory abstention are met. The decision to abstain or not to abstain is committed to the discretion of the district court[.]" Gober v. Terra + Corp. (In re Gober), 100 F.3d 1195, 1207 (5th Cir. 1996). ln exercising its "broad discretion" to decide whether to abstain under§ 1334(c)(l), a court may consider the following non-exclusive factors:

(1) the effect or lack thereof on the efficient administration of the estate; the extent to which state law issues predominate over bankruptcy issues; (2) the difficult or unseuled nature of applicable law; (3) (4) the presence of related proceeding commenced m state court or other

oonbankruptcy proceeding; the jurisdictional basis, ifany, other than§ 1334; (5) the degree of relatedness or remoteness of proceeding to main bankruptcy case; (6) the substance rather than the fonn of an asserted core proceeding; (7) the feasibility of severing state law claims from core bankruptcy matters to allow (8)

judgments to be entered in state court with enforcement left to the bankruptcy court;

lS I 31 22 0 (9) the burden of the bankruptcy docket; (10) the likelihood that commencement of the proceeding in bankruptcy court involves

forum shopping by one of the parties; ( 11) the existence of a right to a jury trial; (12) the presence in the proceeding of non-debtor parties; ( 13) comity; and (14) the possibility of prejudice to other parties in the action.

Shipley Garcia Enters .. LLC v. Cureton, 2012 WL 3249544, at •12 (S.D. Telt. Aug. 7, 2012) (quoting Ramirez v. Rodriguez (In re Ramirez), 413 B.R. 621. 631·32 (Bankr. S.D. Tex. 2009)).

Intervenors' Shareholder Oppression Claim To detennine whether the shareholder oppression claim is property of the estate, the

Court looks at whether, under state law, the claim could have been asserted by NC12 and whether, under the test set forth in Educators Group and Seven Seas, the Intervenors assert an injury that is not merely derivative of injury to NC12.

NC12 could have asserted any claims that, under Nevada state law, enforced the corporation's rights. This is true both for rights nonnally enforced directly by the corporation or nonnally enforced through a shareholder derivative action. See San Mateo Plaintiffs v. At Home Corp. (In re At Home Corp.), 154 F. App'x 666, 668 (9th Cir. 2005) ("A bankruptcy court may enjoin a derivative claim brought by shareholders because the claim is the property of the bankrupt estate."); Jn re AgriBioTech, 319 B.R. 216, 223 (D. Nev. 2004) (holding that, pre· bankruptcy, a breach of fiduciary duty claim had belonged to the corporation, because the claim was enforceable directly by the corporation or through a derivative action) (citing Pepper v. Litton, 308 U.S. 295, 306-07 (1939)); Sobchak v. Am. Nat '/ Bank & Trust Co. of Chicago (In re 16 I 31

22 1 Ionosphere Clubs, Inc.), 17 F. 3d 600, 604 (2d Cir. 1994) (holding that claims that were classified as derivative under Delaware law, the governing law, belonged exclusively to the bankruptcy estate). Therefore, the Court ftrst examines Nevada Jaw.

Under Nevada law, allegations of generalized injury to the corporation give rise to a derivative claim, not a direct claim. See Cohen v. Mirage Resorts, Inc., 62 P.3d 720, 734 (Nev. 2003) ("This is hann to the corporation, shared by all stockholders and not related to an individual stockholder. To the ext.ent these allegations were intended to state a cause of action, the district court was correct in dismissing the allegations as derivative claims barred by lack of standing."). The Court therefore looks at the nature of the injury alleged to detennine whether the action was derivative under Nevada law-and thus, assuming it was a valid claim, could have been asserted by NC12.

The parties have extensively argued the issue of whether Nevada Jaw recognizes a claim for shareholder oppression and whether such a claim would be a direct claim. Two federal cases-one from the Fifth Circuit and one from the District ofNevada-predict that the Nevada Supreme Court would recognize a claim for shareholder oppression. Hollis, 232 F.3d at 468 (holding that there was ''strong indication that the Nevada Supreme Court would find fiduciary obligations between shareholders in a corporation such as FFUSA operated by shareholder· djrectors''); Simon v. Mann, 373 F.2d 1196, 1199- 1200 (D. Nev. 2005) (holding that shareholders of a closely-held corporation could assert a direct suit against majority shareholders). In 2011, however, the Nevada Supreme Court stated in dicta that "Nevada does not recognize a cause of action for abuse of control, and in the case to which appellants cite, claims for abuse of control are essentially claims for breach of the fiduciary duty of loyalty." In re Amerco Deriv. Lirlg., 252 P.3d 681,700 n. ll (Nev. 2011). 17/31

2 2 2 It is unclear whether the "abuse of control" cause of action referred to in Amerco is the same cause of action that the courts in Hollis and Simon predicted the Nevada Supreme Court would recognize. Because this area of Nevada law is uncertain, the Court does not make an Ullllecessary pronouncement of whether there is a shareholder oppression claim under Nevada law and, if so, whether such a claim is available to shareholders of NC12. The Court merely conclude.s that under Cohen, the specific injuries pleaded by the Intervenors in this case should be classified as derivative, not direct.

The EdrJcators Group and Seven Seas test produces the· same result. If the nature of the alleged injury is purely derivative of injury to NC12, the claims are property of the estate even if they could nonnally be asserted by creditors outside of bankruptcy. Seven Seas, 522 F.Jd at 589; see Schimmelpenninck v. Byrne (In re Schimme/penninck), 183 F.3d 347, 355 (Stb Cir. 1999) (holding that even though alter ego and veil-piercing claims are typically brought by a creditor, corporations can bring such claims on their own behalf and in bankruptcy, the claims may be asserted only by the estate) (ching S./. Acquisition, 817 F.2d at 1152).

The Intervenors' shareholder oppression claim in this case is property of the estate. ln their statement of the shareholder oppression cause of action, the Intervenors assert that the Defendants oppressed them as shareholders by:

• Taking control of the corporation, stripping it of its assets for their own personal gain, misappropriating corporate assets, and self-dealing;

• Secretly and questionably removing von der Goltz and Muderrisoglu, who were reputable, independent of Preston and Sydow, and trusted by the shareholders, in direct violation of a previous agreement among a super-majority of the shares; and

• Thwarting investigative efforts into the company's accounting practices. 18 I 31 223 E C F N o . 1 · 3 , a t 31 - 32 . T h e I n t e r v e no r s s ee k t h e f o ll o w i ng r e m e d i e s : • A c ou r t - o r d e r e d buy - ou t o f t h e i r s h a r e s a t a f a i r p r i ce ; • A c t u a l a nd e x e m p l a r y d a m a g e s ; • D i s go r g e m e n t; • R e s tit u ti on ; • O t h e r e qu it a b l e r e li e f ; a nd • P un it i v e d a m a g e s .

E C F N o . 1 - 3 , a t 32 . E v e n i f N e v a d a J a w a ll o w s a c l a i m f o r s h a r e h o l d e r o p p r e ss i on , a ny c l a i m b a s e d on t h e D e f e n d a n t s ' a ll e g e d s t r i p p i n g o f c o r po r a t e a ss e t s i s p r o p e r t y o f t h e e s t a t e . A n y i n j u r y s u ff e r e d by t h e a ll e g e d m i s a p p r op r i a ti o n , a ss e t - s t r i p p i n g , a nd s e l f- d ea li ng w a s d e r i v a ti v e o f t h e h a r m t o N C 12 . T h e I n t e r v e n o r s m a y s ee k d a m a g e s f o r t h e v i o l a ti on o f t h e i r s h a r e h o l d e r r i gh t s , b u t on l y f o r d a m a g e s no t d e r i v a ti v e o f d a m a g e s t o t h e c o r po r a ti on ; t h e y m a y no t s ee k d a m a g e s f o r d il u ti o n o f c o r po r a t e v a l u e du e t o t h e a ll e g e d s t r i p p i n g o r m i s a p p r o p r i a ti o n o f c o r p o r a t e a ss e t s . A ny c l a i m f o r d a m a g e s d u e t o s t r i pp i n g o r m i s a pp r op r i a ti o n o f c o r po r a t e a ss e t s b e l on g s t o t h e e s t a t e a nd m a y b e a ss e r t e d on l y by t h e T r u s t ee .

T h e a ll e g e d v i o l a ti o n o f t h e s h a r e ho l d e r s ' r i gh t s by t h e r e m o v a l o f von d e r G o lt z a nd M ud e n i s og l u a nd t h e a ll e g e d t h w a r ti ng o f s h a r e ho l d e r s ' r i gh t s t o i nv e s ti g a t e acc oun ti ng p r ac ti ce s do no t g i v e r i s e t o d i r ec t c l a i m s . A lt hough it i s po ss i b l e t h a t a l o s s o f s h a r e ho l d e r i n f l u e n ce o r t h e v i o l a ti on o f s h a r e ho l d e r s ' i nv e s ti g a ti v e r i gh t s c ou l d r e s u lt i n a d i r ec t i n j u r y t o s h a r e ho l d e r s , t h e I n t e r v e no r s h a v e no t s t a t e d s u c h c i r c u m s t a n ce s h e r e . T h e I n t e r v e no r s do no t a ll e g e a ny p a r ti c u l a r i ze d i n j u r y a r i s i ng fr o m t h e r e m ov a l o f von d e r G o lt z a nd M ud e n i s og l u i nd e p e n d e n t o f t h e h a nn c a u s e d t o t h e c o r p o r a ti on - e . g . , t h r oug h t h e a l l e g e d l o s s o f t h e T u r k i s h 19 / 31

2 24 contracts. Because all injuries allegedly caused by the removal of von der Goltz and Muderrisoglu were incurred by the corporation, and any injury to the shareholders was derivative of the injury to NC12, the claim belongs to the estate.

Similarly, the alleged injury from the thwarting of investigative efforts was the inability to discover and remedy banns to the corporation caused by the misappropriation of assets and self--dealing. This injury is derivative of the injury to the corporation and therefore belongs to the estate.

The shareholder oppression claim is property of the estate. Therefore, it is dismissed for lack of standing. Plaintiffs' and Intervenors' Breach of Fiduciary Duty Claims

The Plaintiffs and Intervenors allege that the Defendants breached their fiduciary duties to NC12 by self-dealing and mismanagement. The Plaintiffs refer to their general allegations of mismanagement and assert that the Plaintiffs are, "as shareholders of NCl2, . . . entitled to recover from [the Defendants] their proportionate share of economic injuries in an amount in excess of the jurisdictional minimum of this court." ECF No. 1-2, at 14 (emphasis added).

The Intervenors refer to their general allegations of mismanagement and also allege three specific breaches of fiduciary duty: • Sydow's theft and misappropnatlon of corporate assets, including but not limited to use of corporate funds to pay for hjs private plane, use of corporate resources for his law practice without compensation to the company, the use of corporate funds for personal expenses, and bogus fees for lawyers, consultants, and services that did not benefit NCI2;

• Failure to transfer title of the Fall River property to the corporation and instead transferring it to an entity in which Sydow and Preston held an individual interest, and charging tbe corporation rent for use of its own property;

20 I 3 I 225 • T r a n s f e r o f t h e t ec hno l ogy o f t h e c o r po r a ti on - it s m o s t v a l u a b l e a ss e t , w o r t h hund r e d s o f m illi on s o f do ll a r s - f o r g r o ss l y i n a d e qu a t e c on s i d e r a ti on t o a n e n tit y i n w h i c h S ydo w , P r e s t on , a nd o t h e r D e f e nd a n t s h a d i nd i v i du a l i n t e r e s t s .

E C F N o . 1 - 3 , a t 30 . N e it h e r t h e P l a i n ti ff s ' g e n e r a l a ll e g a ti on s o f m i s m a n a g e m e n t no r t h e I n t e r v e no r s ' s p ec i f i c a ll e g e d b r eac h e s o f f i du c i a r y du t y i nvo l v e a ny a ll e g e d i n j u r y d i r ec tl y t o t h e s h a r e ho l d e r s . A ll o f t h e P l a i n ti ff s ' a nd I n t e r v e no r s ' a ll e g a ti on s p e r t a i n t o i n j u r i e s t o N C 12 . T h e g e n e r a li ze d a l l e g a t i o n s o f m i s m a n a g e m e n t a nd s e l f- d e a li n g , w h i c h r e f e r b ac k t o t h e P l a i n ti ff s ' a nd I n t e r v e no r s ' ov e r a ll n a rr a ti v e o f N C 12 ' s c o ll a p s e , a ll r e l a t e t o i n j u r i e s t o t h e c o r po r a ti on . T h e r e i s no i nd i ca ti on o f a ny h a n n t o s h a r e h o l d e r s o t h e r t h a n t h e h a nn t o t h e c o r p o r a ti o n .

S i m il a r l y , t h e s p ec i f i c a ll e g e d b r eac h e s o f f i du c i a r y d u t y do no t s t a t e a ny i n j u r y t o s h a r e ho l d e r s o t h e r t h a n t h r o u g h t h e c o r po r a ti on . T h e a ll e g e d t h e n a nd m i s a pp r op r i a ti o n o f c o r po r a t e a ss e t s i s a n a ll e g e d i n j u r y t o N C 12 , no t t h e s h a r e h o l d e r s . S i m il a r l y , t h e a ll e g e d f a il u r e t o t r a n s f e r titl e o f t h e F a ll R i v e r p r o p e r t y t o N C I 2 i s a n a ll e g e d i n j u r y d i r ec tl y t o N C 12 . F i n a ll y , t h e a ll e g e d t r a n s f e r o f N C I 2 ' s t ec hn o l o gy i s a n a ll e g e d h a n n t o N C 1 2 ; t h e on l y h a n n t o t h e s h a r e h o l d e r s i s d e r i v a ti v e o f t h e a ll e g e d h a nn t o N C 12 .

T h e e ss e n ce o f P l a i n ti ff s ' a nd ( n t e r v e no r s ' b r eac h o f f i d u c i a r y d u t y c l a i m s i s t h a t t h e D e f e n d a n t s s t r i p p e d N C 12 o f a ss e t s t o t h e d e t r i m e n t o f N C 12 ' s c r e d it o r s a nd s h a r e h o l d e r s . T h e c l a i m s a r e f und a m e n t a ll y d e r i v a ti v e , p r e d i ca t e d on i n j u r y t o N C 12 , no t on i n j u r y t o i nd i v i du a l P l a i n ti ff s o r I n t e r v e no r s . T h e P l a i n ti ff s ' c o m p l a i n t s t a t e s t h a t t h e s h a r e ho l d e r s ' i n j u r y a s a r e s u lt o f t h e ec ono m i c h a nn t o N C 12 i s '' p r opo r ti on a t e . " S u c h p r opo r ti on a t e i n j u r i e s m u s t b e r ec ov e r e d t h r ough t h e e s t a t e . 21 I 31

2 2 6 The breach of fiduciary duty claim is property of the estate. Only the Trustee has standing to assert the claim, and therefore the Court dismisses the claim for lack of subject matter jurisdiction.

The Plaintiffs' claim for aiding and abetting breach of fiduciary duty is dependent on the underlying breach of fiduciary duty claim. Because the breach of fiduciary duty claim is property of the estate, the aiding and abetting claim is also property of the estate. Deep Marine Holdings, Inc. v. FLI Deep Marine LLC (In re Deep Marine Holdings, Inc.), 2011 WL 2420274, at •t 0 (Bankr. S.D. Tex. June 13, 20 11) (''The aiding and abetting claims are derivative claims to the extent that the actions that were aided and abetted resulted in derivative injuries[.]"). Intervenors' Statutory and Common Law Fraud Claim

The Intervenors allege that the Defendants made false representations upon which the Intervenors relied when they invested in NCI2. ECF No. 1-3, at 21, 32-33. The Intervenors allege that the Defendants solicited investments by fal sely representing that the company was worth $I 00 mill ion and, later, $300 million, that the corporations would use the investment money to build the reactor, and that the CLECO deal was in place when it had been cancelled. ECF No. 1-3. at 32-33. The Intervenors allege that they .. suffered actual damages proximately caused by Preston and Sydow's fraud ."

The Trustee concedes that the securities fraud claims, as pleaded, are direct claims owned by the Intervenors. The Court agrees. The Fifth Circuit held in Seven Seas that a conspiracy to defraud claim based on allegations thnt defendants employed material misrepresentations to induce potential investors to acquire unsecured notes was "a direct injury to the bondholders that was independent of any injury to Seven Seas." 522 F.3d at 586. The Fifth Circuit further noted that it "doubt[ed] that, 22/31

2 2 7 under applicable state law, Seven Seas could have raised either claim as of the conunencement of the bankruptcy case." /d. The bondholders' fraud claims were therefore property of the bondholders, not the bankruptcy estate.

The Intervenors' fraud claims are similar; the only material distinction is that the Seven Seas claims were brought by bondholders and the Intervenors are shareholders of NC12. Because the lntevenors are shareholders, their fraud claim is based on the alleged diffe.rence between the price they paid in reliance on the alleged misrepresentations and the actual value of NC12's shares at the time of their investment. The Intervenors may not recover damages for the difference between the price they paid for the shares and what the shares would have been worth if not for the atleged post-purchase misconduct in the operation of the corporation. However, they may recover damages for the amount they allegedly overpaid as a result of Sydow and Preston's alleged misrepresentations.' With these Limitations, the Intervenors' claims for harm due to fraudulently induced investment are independent of any harm directly to NC12; indeed, NC12 benefited from the Intervenors' investments by having their cash.

Because the Intervenors' fraud claims allege an injury to the Intervenors that is not merely derivative of the alleged harm to NC12, the Intervenors own the claims resulting from fraud or misrepresentations that occurred at the time that they made their investment.

The Court discrctionarily abstains from hearing the Intervenors' fraud claim because it is only remotely related to the NC12 bankruptcy case. The Defendants argue that the claim is related to the bankruptcy case because the Intervenors' p-otential recovery may draw from NC12's directors and officers' Liability policy. ^[1] The Intervenors do not state, and this Court does not decide, which jurisdiction's law govern¥ their fraud claims. The Court's ruling regarding the recoverable damages relates $Oiely to the Issue of which injuries give rise to claims belonging to the Intervenors. The Court does not rule on the ap·propriate measure of damages for the Intervenors' frilud claims. 23/31

228 NC12's insurance policy with Philadelphia Indemnity Insurance Company covers both the corporation and its directors and officers against losses due to claims against the directors and officers or against NC12 relating to alleged malfeasance by directors and officers. ECF No. 30, at 31. The policy's proceeds are capped at $1,000,000.00, with an additional $1,000,000.00 available for defense fees. ECF No. 30, at 15, 56. Because the proceeds are capped at $1,000,000.00, the Defendants argue, any recovery by the Intervenors will reduce the amount available to NCI2 for its own claims against directors and officers.

Insurance proceeds that are applied to a claim against directors and officers are not property of the estate, and actions to collect such proceeds are not barred by the automatic stay. See Unsecured Creditors Disbursement Commilfee v. Antill Pipeline Con.str. Co. (In re Equinox Oil Co.), 300 F.3d 614, 618 (5th Cir. 2002) (" An insurance policy owned by the debtor is generally considered property of the estate. But, whether the proceeds of a particular insurance policy is property of the estate depends on the nature of the policy.") (citing In re Edgeworth, 993 F.2d 51, 55 n. I 3 (5th Cir. 1993)). "The overriding question when determining whether proceeds are property of the estate is whether the debtor would have a right to receive and keep those proceeds when the insurer paid on a claim. When a payment by the insurer cannot inure to the debtor's pecuniary benefit, then that payment should neither enhance nor decrease the bankruptcy estate." Edgeworth, 993 F.2d at 55.

The Philadelphia Indemnity policy applies to claims against the directors and officers or against NC12. ECF No. 30, at 31. The policy provides liability coverage for the directors and officers and NCl2 and indemnity coverage for NCI2 for claims against the directors and officers. Although NC12 could be the beneficiary of the indemnity coverage, any payment to the directors and officers for liability coverage would offset a potential indemnification claim. See 24 I 31

229 Louisiana World Exposition. Inc. v. Federal Ins. Co. (Ln re Louisiana World Exposition, Inc.), 832 F.2d 1391, 1400 (5th Cir. 1987) (holding that proceeds were not property of the estate, despite cap on the total of liability and indemnity coverage, where ''any payment under the liability coverage reduces the amount of the potential indemnification claim to the same extent that policy amounts available for indemnification are thus reduced. There is not the potential for increasing the estate's exposure by payment of liability proceeds due.").

NCI2 would not have a right to receive and keep the proceeds of claims against the liability coverage for losses caused to third parties (such as the Intervenors) by the directors and officers. See Edgeworth, 993 F.2d at 56 (''[U]nder the typical liability policy, the debtor will not have a cognizable interest in the proceeds of the policy. Those proceeds will normally be payable only for the benefit of those harmed by the debtor under the tenns of the insurance contract.'').

The estate could have a right to receive proceeds on account of its own claims against the directors and officers. However, the estate has only a contractual right to recover if certain conditions are met; the proceeds do not become property of the estate until the contractual conditions are met. MOXlve/1 v. Meglioga (Jn re mard1FIRST, Inc.), 288 B.R. 526, 530 (Ban.kr. N.D. 111. 2002) ("The Debtors had and the Trustee has contractua1 rights governed by the terms of the insurance policies. Unless and until the terms are met, which they may never be, the proceeds are not property of the estate.'').

The directors and officers' liability proceeds are not the kind of proceeds that Edgeworth holds may be included as property of the estate. 993 F .2d at 56 ("E~amples of insurance policies whose proceeds are property of the estate include casualty, collision, life, and fire insurance policies in which the debtor is a beneficiary. Proceeds of such insurance policies, if made 25 I 31

23 0 payable to the debtor rather than a third party such as a creditor, are property of the estate and may inure to all bankruptcy creditors."). The policies listed in Edgeworth are those for which the debtor is the designated beneficiary and the party to whom proceeds would be paid. This is not the case with the NC12's directors and officers' liability coverage. 'The estate may be entitled to proceeds from the policy, but so may other parties. If the estate recovers from the directors and officers' liability coverage, its recovery will be on the same tenns as other injured parties' recovery. The estate's owners.hip of the policy does not affect the outcome. The estate does not have a greater interest in the proceeds than any other person suing on an indemnified claim, See Boles v. Turner (In re Enivid, Inc.), 364 B.R. 139, 157 (Bankr. D. Mass. 2007) (denying liquidating trustee's motion for an injunction to prevent shareholders from entering into a settlement of fraud claims against directors and officers where the settlement was payable from the directors and officers' liability policies and might affect trustee's ability to recover); Reliance Acceptance Grp .. Inc. v. Levin (In re Relianct Acceptance Grp .• lnc.), 235 B.R. 548, 561 (D. Del. 1999) ("The difficulty the Debtors have is in identifying a right to the relief: tbat is, they have been unable to identify a legal principle tbat stands for the proposition that the Estate's claims for relief should take precedence over the Sbarebol~ers• claims.").

Because the estate does not own the proceeds, the Court must consider whether the potential diminution of the proceeds is sufficient to establish related-to jurisdiction. The burden is on the Defendants, as the removing pames. to establish federal jurisdiction. DaimlerChrysler Corp. v. Cuno, 541 U .S. 332, 342 n.3 (2006) ("[T]he party asserting federal jurisdiction when it is challenged bas the burden of establishing it."). Even if the Jntervenors prevrul and collect against the insurance proceeds, their claim will affect the estate only if (i) there are not sufficient funds remaining under the insurance policy to satisfy the estate's claims; 26 / 31

2 3 1 and (ii) the estate successfully asserts claims against directors and officers; ^[1] and (ill) the directors or officers have insufficient assets to satisfy the claims.

The Court recognizes the possibility that (i) the Intervenor's claim could exhaust the insurance policy; and (ii) the estate could prevail against the Defendants; and (iii) the Defendants could have inadequate other resources to pay a judgment. Should these events occur, the outcome of the shareholder oppression claim could affect the amount of proceeds available to the estate for its own claims against officers and directors. This remote effect is, at most, on the outer fringes of the Court's related-to jurisdiction. SeeFeld v. Zale Corp. (In re Zale Corp.), 62 F.3d 746, 752 (5th Cir. 1995) (noting that a bankruptcy court's related-to jurisdiction "cannot be limitless'' and stating that an action "is related to bankruptcy if the outcome could alter the debtor's rights, liabilities, options. or freedom of action (either positively or negatively) and ... in any way impacts upon the handling and administration of the bankruptcy estate.") (quoting Walker v. Cadle Co. (In re Walker), 51 F.3d 562, 569 (5th Cir. 1995)). However, a related proceeding's effect on the bankruptcy estate may be contingent. See TXNB Internal Case, 483 F.3d at 298 (holding that court had related-to jurisdjction over a dispute between two non-debtor parties when, depending on the outcome, either the defendant or the debtors owed money to the plaintiff).

The Court cannot conclude that the outcome of the fraud claims could have no "conceivable effect" on the estate. See Randall & Blake. lnc. v. Evans (In re Canion), I 96 F.3d 579, 587 (5th Cir. 1999) ([nhe law is well established in this Circuit, as in others, that, when tt:sting 'related to' jurisdiction, an effect is not required to a certainty. Rather, jurisdiction will attach on a finding of any conceivable effect."). Contingent or tangential effects may be ^[2] The Trustee has sued Michael Collins in a separate adversary proceeding. Jt is unclear whether the claim against Collins would be covered by the Philadelphia Indemnity policy. 27 / 31

232 sufficient in the Fifth Circuit to establish related-to jurisdiction. /d. at 587 n.30 ("[E]ven a proceeding which portends a mere contingent to tangential effect on a debtor's estate meets the broad jurisdictional test[.]") (quoting National Union Fire Ins. Co. v. Titan Energy, Inc. (In re Titan Energy, inc.), 837 F.2d 325, 330 (8th Cir. 1988)).

The Court does not apply mandatory abstention, because there is no evidence before the Court as to whether the fraud claims could be timely adjudicated before the state court. See Carriage Credit Corp. v. Flanagan (In re Draper), 2010 WL 4736168, at *3 (Bankr. S.D. Tex. Nov. 15, 2010) C'A party moving for mandatory abstention must provide the court with more than a 'naked assertion' that the action can be timely adjudicated in state court.") (quoting Mugica v. Helena Chern. Co. (ln re Mugica), 362 B.R. 782, 793 (Bankr. S.D. Tex. 2007)).

Nevertheless, the Court discretionarily abstains from hearing the fraud claims. See Shipley Garcia Enters., 2012 WL 3249544, at *12 (listing non-exclusive factors a court may consider in exercising its "broad discretion'' to abstain under 28 U.S.C. § 1334(c)(l )). The fraud claims, at most, remotely relate to the bankruptcy proceedings, and the efficient administration of the estate will not be affected by the remand. The estate is not a party to the litigation. It is true that the depletion of the insurance proceeds may affect the estate; however, the Court does not have the authority to prevent this effect. There is no jurisdictional basis other than bankruptcy related-to jurisdiction, and the claim involves solely state law issues. Moreover, this Court's constitutional authority to enter a final judgment with respect to the fraud claim is doubtful under Stern v. Marshall, 131 S.Ct. 2594, 2620 (20 11 ). The Court therefore remands the Intervenors' fraud claims. 28 I 3J

233 Collins' Conversion Cl11im Michael Collins' conversion claim against Sydow, Preston, C Change Investments, and Brilliant Novelty may be either direct or derivative, depending on whether Collins has an interest in Fall River Realty. Collins alleges that he suffered damages from the sale of the real property as an owner of Fall River Realty. Collins seeks actual and exemplary damages.

The Trustee concedes that Collins' conversion claim, as currently pleaded, is a direct claim. ECF No. 25, at 9. If Collins is an owner of Fall River Realty, this conclusion is correct. However, the Trustee contends in Adv. No. 12-3266 that lOO% of Fall River Realty is owned by the estate. In that adv.ersary proceeding, the Trustee seeks declaratory judgment against Michael Collins, Ellen Collins, and BOS, Inc. stating that no Defendant owns an interest in Fall River Realty or the Fall River property. The Trustee also seeks a judgment that the Fall River property is subject to a resulting trust in favor of the Trustee for the benefit of the bankruptcy case.

Jf the estate is the owner of I 00% of Fall River Realty, any claim for conversion of an interest in Fall River Realty belongs to the estate. Property that is "arguable property" of the estate is protected by the automatic stay from unilateral action by creditors. Brown v. Chesnut (In re Chesnut), 356 F. App' x 732, 734 (5th Cir. 2009) (citing Brown v. Chesnut (In re Chesnut), 422 F.3d 298, 303-04 (Stb Cir. 2005)). Because the TnJstee's compJajnt asserts a plausible claim, as between the estate and Collins, to ownership of Fall River Realty, Fall River Relllly is arguable property of the estate. Claims for conversion of interests in Fall River Realty are therefore also arguable property of the estate.

The Court will not presently remand the conversion claim, because Collins' pursuit of the conversion claim in state court would violate the automatic stay. At the same time, if the claim 29 I 31

2 34 i s ac t u a ll y o w n e d by C o lli n s , t h e C ou r t m a y l ac k s ub j ec t m a tt e r j u r i s d i c ti on o r t h e c l a i m m a y b e s o r e m o t e l y r e l a t e d t o t h e N C 12 b a nk r up t c y t h a t t h e C ou r t s hou l d d i s c r e ti on a r il y a b s t a i n . T h e C ou r t t h e r e f o r e a b a t e s c on s i d e r a ti on o f t h e c onv e r s i on c l a i m o r i t s r e m a nd p e nd i ng t h e r e s o l u ti on o f A dv . N o . 12 - 3266 . I n t e r ve no rs ' C on s p i r a cy C l a i m s

T h e I n t e r v e no r s ' c l a i m f o r c on s p i r ac y t o c o mm it fr a ud a nd b r eac h o f f i du c i a r y du t y i s d e p e nd e n t on t h e und e r l y i ng c l a i m s . B e ca u s e t h e und e r l y i ng b r eac h o f f i du c i a r y du t y c l a i m i s p r op e r t y o f t h e e s t a t e , t h e c on s p i r ac y t o c o mm it b r eac h o f f i du c i a r y du t y c l a i m i s a l s o p r o p e r t y o f t h e e s t a t e . S ee D ee p M a r i n e H o l d i ng s , 2011 W L 2420274 , a t • t o ( ho l d i ng t h a t a i d i ng a nd a b e n i ng c l a i m s w e r e p r op e r t y o f t h e e s t a t e w h e r e t h e und e r l y i ng c ondu c t g a v e r i s e t o a c l a i m t h a t w a s p r op e r t y o f t h e e s t a t e ) . T h e C ou r t d i s m i ss e s t h e c on s p i r ac y t o c o mm it b r eac h o f f i du c i a r y du t y c l a i m f o r l ac k o f s t . a nd i ng .

B eca u s e t h e r e m a nd e d fr a ud c l a i m i s t h e I n t e r v e no r s ' p r op e r t y , t h e I n t e r v e no r s o w n t h e c l a i m f o r c on s p i r ac y t o d e fr a ud . S ee S eve n S e a s , 522 F . 3d a t 585 ( ho l d i n g t h a t c on s p i r ac y t o d e fr a ud c l a i m w a s o w n e d by bondho l d e r s , no t e s t a t e ) ; D ee p M a r i n e H o l d i ng s , 2011 W L 2420274 , a t • t 0 ( ho l d i ng t h a t a i d i n g a nd a b e tti ng c l a i m s w e r e no t p r op e r t y t h e e s t a t e w h e r e und e r l y i ng c ondu c t d i d no t g i v e r i s e t o a c l a i m t h a t w a s p r op e r t y o f t h e e s t a t e ) . T h e C ou r t l ac k s s ub j e c t m a tt e r j u r i s d i c t i on ov e r t h e I n t e r v e no r s ' c on s p i r ac y t o c o mm it fr a ud c l a i m . T h e r e f o r e t h e C ou r t r e m a nd s t h e c on s p i r ac y t o c o mm it fr a ud c l a i m .

C on c l u s i on T h e C ou r t d i s m i ss e s t h e f o ll o w i ng c l a i m s f o r l ac k o f s t a nd i ng : • P l a i n ti ff s ' a nd I n t e r v e no r s ' c l a i m s f o r b r eac h o f f i du c i a r y du t y ; I n t e r v e no r s ' c l a i m f o r s h a r e ho l d e r op p r e ss i on ; a nd •

30 / 31 23 5 I n t e r v e no r s ' c l a i m f o r c on s p i r ac y t o c o mm it b r eac h o f • f i du c i a r y du t y . T h e C ou r t r e m a nd s t h e f o ll o w i ng c l a i m s : I n t e r v e no r s ' c l a i m s f o r c o mm on l a w a nd s t a t u t o r y s ec u r iti e s • fr a ud a nd c on s p i r ac y t o c o mm it fr a ud ; a nd I n t e r v e no r s ' a i d i ng a nd a b e tti ng c l a i m r e l a t e d t o t h e c o mm on • l a w a nd s t a t u t o r y s ec u r iti e s fr a ud . P l a i n ti ff M i c h ae l C o lli n s ' c onv e r s i on c l a i m a nd t h e r e m a nd o f t h e c onv e r s i on c l a i m a r e a b a t e d p e n d i n g r e s o l u t i on o f A d v . N o . 1 2 · 3 26 6 . S I GN E D A u g u s t 28 , 2012 . a~--- M a r v i n l s ; ! ;i c = UN I TE D S T A TE S B ANK R U P T C Y J UDG E 31 / 31 236 IN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION INRE: § § CASE NO: 11-38794 NC12,1NC. § CHAPTER 7 § Debtor(s). § JUDGEISGUR § § §

MICHAEL COLLINS, et aJ § § PlalntlfT(s), § vs. §

ADVERSARY NO. 11-3634

§ § SYDOW, eta/ § §

Defendant(s).

ORDER

The Court djsmisses the following claims: • Plaintiffs' and Intervenors' claims for breach of fiduciary duty; • Intervenors' claim for shareholder oppression; and • Intervenors' claim for conspiracy to commit breach of fiduciary duty.

The dismissals are without prejudice to the Trustee's ability to assert the dismissed claims on behalf of the Estate. The Court remands the following claims to 215th Judicial District Court of Harris County, Texas: • Intervenors' claims for common law and statutory securities fraud and conspiracy to commit fraud; and • Intervenors' aiding and abetting claim related to the common law and statutory securities fraud. Michael Collins' conversion claim and the remand of the conversion claim are abated pending resolution of Adv. No. 12-3266. SIGNED August 28,2012. Marvin lsgur

UNITED STATES BANKRUPTCY JUDGE

Ill ~?PY 1 CERTIFY u,P~:~of~

~Oar .. 23 7 ^[7] / ^{[31201] [4] [12]} : ^[01] . ^[33] A M C h r i s D an i e l - D i s t r i c t C l e r k H a rr i s C oun t y E n v e l ope N o . ^[1717873] B y · G AY L E F U LL E R C a u s e N o . 2011 - 44058 § I N T il E D I S T R I C T C OU R T M I C HA EL C O LL I N S ; ET A L ., § P L A I N T I FFS , § O F HA RR I S C OUN T Y , TE XA S v s . § M I C HA EL S YDO W ; ET A L ., § 215 t h J UD I C I A L D I S T R I C T § D E F E NDAN T S . I N T H E D I S T R I C T C OU R T AK I L A F I NAN C E , S . A . ; ET A L ., § § I N TE R V E NO R S / P L A I N T I FFS , § O F HA RR I S C OUN T Y , T EXAS v s . § § M I C HA EL S YDO W ; ET A L ., § 2 1 5 t h J UD I C I A L D I S T R I C T D E F E ND AN T S . I N TE R V E NO R S ' R E SP ON S E T O T H E SP E C I A L A PP E A R AN C E S O F J OHN D . P R E S T ON , BR I LL I AN T NOV ELT Y , L . L . C ., A ND C CH A N G E I NV E S T M E N T S . LL C I . I N T R ODU C T I ON I n t e r v e no r s s u e d J ohn P r e s t on ( " P r e s t on " ) a ll e g i ng , a m ong o t h e r t h i ng s , t h a t P r e s t on fr a udu l e n tl y i ndu ce d i nv e s t m e n t s i n T e x a s S yng a s , I n c . ( " T S l '' ) a nd N C 12 , I n c . ( " N C 12 " ) w h il e s y s t e m a ti ca ll y m i s a pp r op r i a ti ng t h e i nv e s t e d f und s a nd c o m p a ny a ss e t s f o r h i s p e r s on a l g a i n . P r e s t on ' s s e r v i ce a s a d i r ec t o r o f a nd pu r po r t e d f und . r a i s e r f o r T S I a nd N C 12 unqu e s ti on a b l y i n v o l ve d T ex a s a nd c on s tit u t e d do i ng bu s i n e ss i n t h i s s t a t e - a lt hough i n c o r po r a t e d i n N e v a d a , T S I a nd N C 12 h a v e a t a ll ti m e s ca ll e d H ou s t on , T e x a s ho m e . T h e i m p ac t i n T e x a s o f P r e s t on ' s fr a udu l e n t s c h e m e , i n w h i c h h e w a s a i d e d by h i s c o m p a n i e s C C h a ng e I nv e s t m e n t s , LL C ( " ' C C h a ng e j a nd B r illi a n t N ov e lt y , L . L . C . ( " B r illi a n t N ov e lt y " ) , i s e v i d e n t - N C 12 i s no w t h e d e b t o r i n a c h a p t e r 7 b a nk r up t c y p e nd i ng i n a f e d e r a l b a nk r up t c y c ou r t i n H ou s t on .

P r e s t on , C C h a ng e , a nd B r illi a n t N ov e lt y ( c o ll ec ti v e l y , t h e " P r e s t on D e f e nd a n t s " ) h a v e pu r po s e f u ll y e s t a b li s h e d s u ff i c i e n t m i n i m u m c on t ac t s w it h T e x a s , t h r ough t h e i r c on t a c t s w i t h T S I a nd / o r N C 12 a s w e ll a s o t h e r T e x a s r e s i d e n t s , s u ff i c i e n t t o p e nn it t h e e x e r c i s e o f p e r s on a l

257 jurisdiction over them in this Court. Moreover, the Preston Defendants• Special Appearances are unverified, and so fail to comply with TEx. R. C1v. P. 120a. Accordingly, the Preston Defendants' Special Appearance should be denied.

II. BACKGROUND

A. The Parties. NC12, Inc. ("NC12") was incorporated in Nevada in April 2008. Nevada Secretary of State records reflect that the original directors of NC12 were Preston, Michael D. Sydow (''Sydow") and Michael Collins ("Collins"). (See Exhibit A-l 1 ) . Sydow is also identified as the president ofNC12. (/d). The address given for Sydow and CoUins in the initial list of officers and directors is 4900 Woodway, Suite 900, Houston, Texas n056. (/d). Sydow, Preston, and Collins are identified as the NC12 directors again in NC12's May 2009 filing with the Nevada Secretary of State. (Id ).

In 2009, NC12 acquired the assets of Texas Syngas. Inc. ("TSI''). TSJ was incorporated under the laws of the S1ate of Nevada in May 2006 and registered to do business in the State of Texas in June 2008. (See Exhibit A-2). TSI identified Preston, Sydow, Collins, and Christoph Henkel ("Henkel") as its directors in its Application for Registration filed with the Texas Secretary of State. (/d). TSI identified its principal office as 4900 Woodway. Suite 900, Houston, Texas 77056. (!d).

NC12 registered to do business in Texas on August 28, 2009. (See Exhibit A-3). The company's principal office address is identified as 4400 Post Oak Parkway, Suite 2360, Houston, Texas 77027. (/d). The company directors identified in the Texas registration in 2009 were Sydow, Preston, and Collins. (/d). Both Sydow and Collins are Texas residents.

The Affidavit of Kelley M. Keller, dated July 2, 2014, is attached hereto as Exhibit A and incorporated herein by reference. 2 25 8 NC12 filed for bankruptcy protection on October 14, 2011, under chapter 11. On February 28, 2012, the United States Trustee filed a motion to convert the case to chapter 7. On March 22, 201 2, NCI2 filed a response opposing the oonversion to chapter 7. The Bankruptcy Court granted the motion to convert on March 27, 2012.

C Change and Brilliant Novelty are Preston's companies and participated in certain of the fraudulent acts of Preston. 2 (See Pet. in lnterv. ~ 33). B. The Lawsuit.

This action was filed in 2011 as a fraud and shareb.older oppression action by shareholders ofNC12. Intervenors joined the litigation, asserting claims based solely on their individual rights as investors in NC12. The Intervenors assert that Sydow and Preston, along with others conspiring with them, engaged in a fraudulent scheme to raise millions in investment dollars on behalf of TSI and then NC12 for the development of revolutionary new energy technology that Collins had developed for producing synthetic natural gas and other fuels from coal, while denuding the company of its assets- i1S valuable tecb.nology, research and development facility, and cash. Intervenors were left holding only their cLaims in the bankruptcy proceedings, after Sydow and Preston enjoyed years of cash rolling in to TSI and NC12 which they used to their personal benefit. C. Preston's Contacts with Texas.

By Preston•s own admission, his contacts with Texas are long-standing, reaching back at least 20 years. However, Preston has misrepresented the extent and nature of his contacts with Texas in his attempt to avoid the exercise of personal jurisdiction over him by this Court. ^[2] Brilliant Novelty has not denied the allegation that Preston was at all relevant times a manager of Brilliant Novelty, and C Change has not denied the allegation that Preston was a manag.ing partner of C Change and controlled that company.

3 2 5 9 Whether inadvertently or intentionally, Preston has failed to disclose purposeful continuous and on-going contacts with and activity in Texas.

In his affidavit filed in support of his Special Appearance, Preston identifies his "only [ ] activity in Texas" as (I) a "limited number'' of visits approximately 20 years ago; (2) a "very limited number'~ of visits to Texas in the past five years on behalf ofTEM Capital; and (3) a visit to Texas in 2010 to testify in the divorce proceedings of Michael D. Sydow ("Sydow•/. (See Preston Aff. at,, 5-6 3

). The evidence) however, reflects much more than the "limited" activity that Preston has selectively disclosed. The following is a chronology of Preston's contacts with Texas- including those to which he admits and those which he has neglected to disclose.

• Preston claims that he visited Texas ''a limited number of timesn approximately 20 years ago, allegedly in a representative capacity on behalf of a company for which he was a board member. (Preston Aff. at~ 5). o Preston does not identify that company in his Affidavit, but states, "specifically.,

that he made up to eight visits to Texas - five for board meetings of a nonprofit organization and .. no more than three'' for board meetings of a Delaware corporation. (Preston Aff. at ~ 5).

• Preston failed to disclose meetings he attended in Texas in the late 1990s on behalf of Molten Metal Technology, Inc. (''MMT"), a Delaware corporation, registered to do business in Texas. 5 Preston was a board member of MMT, and the company's chief executive officer. (See Exhibit A-4) . o Preston visited Texas on numerous occasions to negotiate a contract between

MMT and Hoescht Celanese to develop and operate a waste recycling facility for Hoescht Celanese. (See Exhibit B at, 1 2~.

l Affidavit of John T. Preston, submitted as Exhibit A to Preston•s Amended Special Appearance, filed September 28. 20 I I.

Affidavit of John T. Preston, submitted as Exhibit A to Preston•s Amended Special Appearance. ftled September 28. 2011. MMTs Texas existence was forfeited in 1999. (See Ex. A-4). ^[6] The Affidavit of Michael Collins, dated Juty 2. 2014. is attached hereto as Exhibit B and incorporated herein by reference.

4 2 6 0 o MMT had developed certain technology called Catalytic Extraction Processing (''.Qgf''). CEP is a process for breaking down hazardous and radioactive waste and recycling them into marketable products. (See Ex. B at~ 3).

o MMT filed for bankruptcy protection in 1997. Preston and/or his company, Quantum cataiyti~ LLC ("Quantum,.), acquired MMT•s patents from the MMT bankruptcy estate. (See Ex. A-S at VI 15-17; ExhibitA-15 at pp. 4-5).

• (n 2004, Preston flew to Houston, Texas to meet with Collins near Collins's home in The Woodlands. (Ex. B at 1 6). Owing that meeting, Preston touted the patented technology that he had acquired from MMT and encouraged Comns•s participation in the commercial development of that technology. (/d.). o Preston flew to Texas to meet with Collins again a few months after that first

meeting in The Woodlands. (Ex. Bat 1{7). During that second meeting, Preston and Comns travelled to Bay City, Texas to meet with Hoescht Celanese to continue discussions regarding the development an-d operation of a CEP facility for Hoescht Celanese that had begun with MMT. (/d).

o Preston returned to Texas again about two months later, when Preston and Collins met with Hoescht Celanese in Baytown, Texas. (Ex. Bat 1 7). o During these three meetings in Texas, Preston and Collins discussed the commercial opportunities possible utilizing the MMT technology and the technology that Collins had developed. (Ex. B at~ 8).

o Preston continued to talk with Collins by telephone over the COW'Se of the ensuing months. Preston initiated a number of those caJls, either to Collins at his home in The Woodlands, Texas, or to Houston offices where Collins would occasionally work, including the law offices of Sydow, McDonald, Kaiser & Ahmed, on Bagby Street in Houston, Texas. Preston also shipped records to Collins at the Bagby Street office for Collins's review and use in connection with the work he was undertaking with Preston. (Jd ).

o At all times during Collins's discussions and business relationship with Preston, Collins was a resident of The Woodlands, Texas. (Ex. B at ~ 12). In his discussions with Preston, Collins learned that Preston had been to Texas on multiple occasions prior to their introduction. Preston advised Collins that he had previously travelled to Texas on numerous occasions for meetings with Hoescht Celanese and with Flour Daniel in Clear Lake, Texas. Preston also told Collins that he had made numerous visits to the Houston Area Research Center, or HARC, on Research Forrest Drive in The Woodland~ Texas to study new technologies in the late 1990s. As a result, Preston was very familiar with The Woodlands. (/d.).

[n July 2004, Collins fonned Texas Syngas LLC ("Syngas LLC") for the purpose of • e)(pJoiting his technology. Collins was the original sole member of Syngas LLC. (Ex. 5 261 B at ~ 2). Preston joined Syngas LLC as a member after his discussions with Collins. (Ex. B at 11 1 0, 11; Exhibit A-6 at ~ 3 '). Although Preston ultimately executed the Syngas LLC Operating Agreement on behalf of Quantum, the investment was clearly Preston's. (See id; Ex. Bat~ 11).

• On June 19, 2006, Metal Catalyst Ventures, Inc. (''Metal C-atalys~') filed Articles of Incorporation with the Nevada Secretary of State. (Exhibit A-7). The Metal Catalyst Articles of Incorporation identify only one director -Preston- and lists his address as 4900 Woodway, Suite 900, Houston, Texas 77056.

• On November 10, 2008, Preston traveled to Houston, Texas to meet with Collins to discuss a financing proposal by Preston's company C Change. (See Ex. B at, 13; Exhibit A-8 at 25:8-26:4, 30:4-15; Exhibit A-9 at p. 13).

• On November 10, 2008, Preston wrote a personal check in the amount of$1,100,000, payable to BOS, Inc. ("BOS"). (See Exhibit A-13 at 01158). o BOS is identified in its banldng records as officing at 4900 Woodway Dr., Suite

900, Houston, Texas 77056 - the same address as NCl2ffSI. (See Ex. A· l3 at 00448, 00501). That same banking record reflects a wire transfer from BOS's Texas bank account to Preston in the amount of$1,100,000 on January 15, 2009. (Jd at 00448, 01142).

o TSI apparently _paid for the incorporation of BOS. (See Ex. A-13 at 0050 1-502). • On April2, 2009 and May 3, 2009. Preston traveled to Houston, Texas. (See Ex. A-9 at p. 13; Exhibit A-10). o Preston contends that his travel to Texas on those occasions was uas a

representative on behalf of TEM Capital." (See Ex. A-9 at p. 12). However, according to Russell Read ("Read.,), Preston's former partner in C Change and TEM Capital, TEM Capital was not formed until 201 1. (See Ex. A-8 at 33 :2-12). Accordingly, Preston•s travel to Texas in April and May of2009 would not have been as a representative and on behalf ofTEM Capital.

• Preston traveled to Texas with Read in "either 2009 or early 201 ou allegedly "for meetings with Russian technology partners for the fonnation of a joint venture M.J.T. was entering into with the Russian government. ~· (See Ex. A-8 at 49: 13-50:4). ^[7] ?reston submitted an Affidavit dated December 6, 2013, in Cause No. 2007-38533, Kaiser v. Collins, pending in the 152 Judicial District Court, Harris County, Texas, in support of Plaintiff's Opposition to Collins's Motion for Summary Judgment. In that Affidavit, Preston discusses his decision to invest in "Te:x.as Syngas and to beoome a member in the Texas Limited Liability Company into which it ultimately was formed!'

6 262 o Preston did not disclose this visit to Texas in his Affidavit filed in support of his Special Appearance or in the discovery responses he served in this action. (See Ex. A·9 at pp. 12-13). 8 In the summer of 2009, Preston' s C Change was looking at another company with

• operations in Texas, EMC Cement BV eEMe'). o In its Original Complaint recently filed in the United States District Court for the

Western District of Texas, Waco Division, under Civil Action No. 6:14-cv-149 (the '~EMC Litigation, ), against Preston 9 and others, EMC alleges that in August 2010, Preston visited a cement plant in Jewett, Texas operated by Texas EMC Products, EMC's exclusive licensee for the use of EMC's patents in the state of Texas. (See Exhibit A-11 at 1 36}. • Preston did not disclose a visit to Texas in August 2010 in his Affidavit filed

in support of his Special Appearance or in the discovery responses he served in this action. (See Ex. A-9 at pp. 12-13).

• On October 6, 2010, Preston appeared as a witness on behalf of Sydow in the divorce proceedings flled by Sydow in the 308m Judicial District Court. Harris County, Texas. (Exhibit A-12). o Although Preston contends that his testimony in the Sydow divorce proceedings

was "as the corporate representative for NC12," 10 there is nothing in the record of those proceedings indicating that Preston appeared as a "corporate representative." Rather, it appears he simply traveled to Texas to support his colleague and co-conspirator Michael Sydow.

• EMC alleges that Preston visited Texas again in January 2011 to discuss a potential investment by C ChangeffEM Capital in EMC's line of business and technology. (Ex. A-ll at~ 48). o Preston did not disclose a visit to Texas in January 2011 . (See Ex. A-9 at pp. 12-

13). • EMC alleges that Preston appeared at a foreclosure sale in Texas on May 3,. 2011 , on behalf of the defendants in the EMC Litigation during which the EMC Defendants are alleged to have acquired the cement plant in Jewett, Texas, that Preston had visited a year earlier. (Ex. A-11 at 53).

Preston was asked to identify ''all" travel to Texas since 2000. (Ex. A-9 at p. 14). ^[9] Preston asserts in his Affidavit filed in support of his Special Appearance that "[e]xcept for this lawsuit, [he has] never been a party to litigation in any state or federal court in Texas." The lawsuit filed by EMC on May 5, 2014, now changes that fact. to

See Ex. A-9 at p.l3. 7 263 o Preston did not disclose tbjs visit to Texas in May 2011 in response to the Intervenors• interrogatories. (See Ex. A-9 at pp. 12-13). However, Preston produced flight records that confinn a flight to Dallas/Fort Worth on May 2, 2011, with a return flight to Boston, Massachusetts on May 4, 2011 . (Su Ex. A- 10 at Preston 000025-26).

o Preston claims that his visit to Texas in May 2011 was for the purpose of testifying "as the corporate representative for NC12, Inc. regarding an asset owned by the company in Michael Sydow•s divorce proceedings." (Ex. A-9 at p. 13). However, as noted, above, Preston came to Houston (not Dallas/Fort Worth as the flight records for May 2011 reflect) to testify for Sydow in October 2010. Accordingly, Preston's travel records for May 2011 , likely reflect this visit to attend the foreclosure sale reJated to the EMC Cement property.

• EMC alleges that Preston visited Jewett, Texas again within days of the May 3, 2011 , foreclosure sale to inspect the cement plant. (Ex. A-11 at, 53). • On August 22, 2012, JK Claims Investment Corporation ( .. JK Claims") filed a Certificate of Formation with the Texas Secretary of State as a domestic for-profit cotporation. (Exhibit A-14). Preston is identified in the Texas Secretary of State records as the sole director of JK Claims. 11 (I d.). o JK Claims purchased from the bankruptcy estate of Jeffery Kajser ("Kaiser') the

claims asserted by Kaiser in Cause No. 2007-38533. Kaiser v. Collins, pending in the 152 Judicial District Court, Harris County, Texas (the ''Kaiser Litigation").

o Preston is now pursuing relief in a Texas state court, under the guise of JK Claims and Quantum, through an amended petition in the Kaiser Litigation reframing the complaint to one complaining about alleged misrepresentations by Collins regarding his educational background and professional licensing to induce the plaintiffs' investment in Syngas LLC.

Ill. ARGUMENT AND AUTHORITIES Tbe Preston Defendants• Special Appearances Fail to Comply with Rule 120a. A. A defendant desiring to challenge the exercise of personal jurisdiction over him in a Texas court must file a sworn motion challenging jurisdiction. TEX. R. Ctv. P. 120a Although ^[11] Note that Preston asserted in response to Interrogatories served in this matter tbat ^[14] Texas Syngas LLC is the only company with its principal place of business in Texas or incorporated in Texas for which Preston was a director, officer, or employee.•• (Ex. A-9 at p. 12). According to the records of the Texas Secretary of State, Preston's statement is incorrect.

8 2 64 the Preston Defendants' have each submitted an affidavit in support of their special appearance, the special appearances themselves are not verified and so fail to comply with Rule 120a. B. State and Federal Due Process Considerations and "Minimum Contacts."

Courts sitting in Texas may assert personal jurisdiction over a nonresident if the Texas Long-Ann statute authorizes jurisdiction and the exercise of jurisdiction .. is consistent with the state and federal due process standards." Am. Type Culture Co/lee/ion. Inc. v. Coleman, 83 S.W.3d 801, 806 (rex. 2002). The Texas Long-Ann statute authorizes the exercise of jurisdiction over "those who do business in Texas, which includes contracting with a Texas resident where either party is to perform the contract in whole or in part in Texas." Jones v. Petty-Ray Geophysical Geosource, Inc., 954 F.2d 1061, 1067 (5th Cir. 1992) (emphasis added); see TEx. Crv. PRAC. & REM. CODE ANN. at§ 17.042.

Texas courts have generally held that the "broad language of the [Texas] long-ann statute permits an expansive reach, limited only by the federal constitutional requirements of due process." Daimler-Benz Akliengesellschaft v. Olson, 21 S.W.3d 707, 714 (Tex. App.-Austin 2000, pet. dism'd w.o.j.). Accordingly, the court may consider solely ''whether it is consistent with federal due process for Texas courts to assert personal jurisdiction over'' the foreign defendant. Daimler-Benz, 21 S.W.3d at 714.

Federal due process considerations ask whether the nonresident defendant bas "purposefully established minimum contacts with the forum state" such that the exercise of personal jurisdiction over the nonresident "comports with traditional notions of fair play and substantial justice." Daimler-Benz, 21 S.WJd at 714.

9 26 5 Jurisdiction will be proper "where the contacts proximately result from actions by the defendant himself that create a 'substantial connection' with the forum State., Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985).

"The ultimate test of minimum contacts is whether the defendant purposefully availed itself of the privilege of conducting activities in Texas, thereby invoking the benefits and protection of Texas laws:• Daimler-Benz, 2 1 S.W.3d at 714. When a defendant has deliberately engaged in "significant'' activities with a state. "or has created 'continuing obligations' between himself and residents of the forum," he has availed himself of the privilege of conducting business in that state. Burger King. 471 U.S. at 475-76 (emphasis added). " [B]ecause his activities are shielded by 'the benefits and protections' of the forum's laws it is presumptively not unreasonable to require him to submit to the burdens of Litigation in that forum as well., /d.

Accordingly, a finding of "minimum contacts•• requires a "substantial connect between the nonresident defendant and the forum state, brought about "by action or conduct of the nonresident defendant purposefully directed toward the forum state:• Guardian Royal Exchange Assur., Ltd v. English China Clays, P.L.C., 815 S.W.2d 223,226 (Tex. 199l);see also Carllidge v. Hernandez, 9 S.W.3d 341, 347 (Tex. App. -Houston (14th Dist.] 1999, no pet.) ("The exercise of personal jurisdiction is proper when the contacts proximately result from actions of the nonresident defendant which create a substantial connection with the forum state."). Requiring that the non-resident's actions be (<purposeful" ensures that a nonresident defendant ''will not be haled into a jurisdiction based solely upon 'random,• 'fortuitous' or 'attenuated' contacts or the 'unilateral activity of another party or a third person.',. Guardian Royal, 815 S.W.2d at 226 (quoting Burger King. 471 U.S. at 475).

10 266 Implicit in the requirement of a pwposeful action and a ·~substantial connection, is the concept of''foreseeability., Guardian Royal, 815 S.W.2d at 227. "Indeed, so long as it creates a substantial coMection with the forum State, even a single act can support jurisdiction., Carrlidge, 9 S.W.3d at 348; see also Wes/ernGeco L.L.C. v. Ion Geophysical Corp., 776 F. Supp. 2d 342, 355 (S.D. Tex.. 2011) (same).

The Supreme Court in Burger King instructs that personal jurisdiction does not tum on "'mechanical' tests, or "'conceptualistic . . . theories of the place of contracting or of performance., Burger King, 471 U.S. at 479. Instead, the court "must review the quality and nature of the defendant' s activities in the forum in their totality to decide whether the defendant purposefully availed itself of the privileges offered by the forum state." Microseismic, Inc. v. TRAC Charitable Remainder Trust, No. H-12-0118, 2012 U.S. Dist. LEXIS 101108, •19-20 (S.D. Tex.. July 20, 2012).

Fair play and substantial justice factors include: "(1) the burden on the defendant, (2) the interests of the forum state in adjudicating the dispute, (3) the plaintifrs interest in obtaining convenient and effective relief, (4) the interstate judicial system's interest in obtaining the most efficient resolution of controversies, and (5) the shared interest of the several States in furthering fundamental substantive social policies." Villagomez v. Rockwood Specialties, Inc., 210 S.W.3d 720, 742 (Tex. App.-Corpus Christi-Edinburg 2006, pet. denied). C. General and Specific Jurisdiction.

A defendant's contacts with a forum can support the exercise of either specific or general jurisdiction. J.D. Fields & Co., Inc. v. W.H Streil, Inc., 21 S.W.3d 599, 602 (Tex. App. Houston (1st Dist.] 2000, no pet.).

11 267 Under a specific jurisdictional analysis, the court will focus on "the relationship among the defendants, the forum, and the litigation." J.D. Fields, 21 S.W.3d at 603 (citations omitted). "This analysis requires courts to inquire •(t) whether the defendant has purposefully directed his activities at residents of the forum; and (2) whether the litigation results from the alleged injuries that arise out of or relate to those activities.'' ReedHycalog UK Ltd v. United Diamond Drilling Servs., No. 6:07 CV 251, 2009 U.S. Dist. LEXIS 77654, •9-10 (E.D. Tex. Aug. 31, 2009). AcoordJ.ngly, even if the defendant has relatively few contacts with a forum, " the court may still exercise personal jurisdiction over that party if the suit ... arises out or or is related to the defendant's contacts with the forum."' Microseismic, 2012 U.S. Dist. LEXIS 101108 at •ts.

The Court may exercise general jurisdiction over a nonresident defendant when the

"nonresident defendant's contacts are continuous and systematic, .. regardless of whether the alleged liability arises from those contacts. J.D. Fields, 21 S.\V.3d at 602; see also Twister B. V. v. Newton Research Partners, LP, 364 S.W.3d 428, 434 (fex. App.-Dallas 2012, no pet.). "General jurisdiction can be assessed by evaluating contacts of the defendant with the forum over a reasonable number of years, up to the date the suit was filed." Villagomez, 210 S.W.3d at 729.

A defendant objecting to the exercise of jurisdiction bears the burden of presenting "a compelling case that the presence of some other consideration would render jurisdiction unreasonable.'' Burger King, 471 U.S. at 477; see also Jones, 954 F.2d at 1068. "Only in rare cases will the exercise of personal jurisdiction not comport with fair play and substantial justice when a nonresident defendant has purposefully availed itself of the privilege of conducting business with a forum." Critin Holdings, UC v. Minnis, 305 S.W.3d 269, 280 (Tex. App. -14tb Dist. 2009, no pet.). This case does not present that rare circwnstance.

12 2 6 8 D. The Preston Defendants Have PurposefuUy Availed Themselves of the Privilege of Conducting Business With Texas and Are Subject to This Court's Jurisdiction. As demonstrated above, Preston has purposefully availed himself of the privilege of

doing business in Texas by, among other things: • Actively engaging in business with MMT to pursue a business opportunity in Bay City Texas· ,

'

• Actively engaging in business with Collins, a Texas resident, for the development of a business based in Texas~ • Shipping materials to Collins in Texas for his use in connection with business with Preston; • Serving as a director of TSI and NC 12, companies having their principal place of business in Texas; • Visiting Texas on numerous occasions as he worked to build business relationships with Collins as well as with the parties involved in the EMC Litigation; • Engaging in a million dollar financial transaction with BOS, Inc.; • Appearing as a witness in the personal divorce proceedings of his business coJleague

Michael Sydow; and • Forming a Texas corporation to purchase litigation claims out of Kaiser's Texas bankruptcy estate to pursue those claims in a Texas court. All of the contacts identified herein directly resulted from Preston's own purposeful conduct which created a substantial connection with the State of Texas. Preston and his controlled companies cannot reasonably contend that they have not availed themselves of the privilege of conducting business in Texas or that they couJd not have reasonably anticipated that they could he baled into a Texas court as a result of their own purposeful activities in or directed to Texas.

The acts and events complained of in this litigation all arise directly from Preston•s activities as a director of and fund raiser for TSI and NC12- both Texas companies. In raising funds for a TSI and NC12, through fraudulent misrepresentations and then denuding the

13 269 companies of their assets, Preston, C Change, Brilliant Novelty (which took title to the companys research facility), could reasonably foresee that NC12 and its shareholders and investors would suffer direct economic injury. Accordingly, Presto~ C Change, and Brilliant Novelty are subject to the exercise of personal jurisdiction by this Court under a specific jurisdictional analysis.

Additionally, the Court may exercise general jurisdiction over Preston and C Change as a result of their continuous and systematic business dealings in Texas with TSI, NC12, and EMC. E. Preston Is Not Protected by the Fiduciary Shield.

The fiduciary shield doctrine is expressly limited in application to questions of general jurisdiction and will not protect an individual from the exercise of specific jurisdiction to shield the individual from a claim for intentional torts or fraudulent acts for which he may be held individually liable. Wright v. Sage Eng 'g, Inc., 137 S.W.3d 238, 250 (Tex. App. -Houston [1st Dist.] 2004, pet. denied). Accordingly, if the claims asserted against individual defendants are ones for v.rhich they may be held individually liable, the fiduciary shield doctrine wiU not preclude the exercise of specific persona) jurisdiction over them. Wright, 137 S.W.3d at 251.

"It is well-settled that a corporate agent can be held individually liable for fraudulent statements or knowing misrepresentations even when they are made in the capacity of a corporate representative." Wright, 137 S.W.3d at 250. Accordingly, regardless of whether Preston's allegedly fraudulent conduct was made in the capacity of an officer or director of TSI, NC12, C Change, or Brilliant Novelty, Preston is subject to personal liability for his actions and may not hide behind the fiduciary shield to avoid this Court's jurisdiction.

14 2 70 F. Traditional Notions of Fair Play and Substantial Justice Support tbe Exercise of Jurisdiction Over the Preston Defendants. The Preston Defendants contend that it would be burdensome for them to participate in

this litigation in Texas. By way of example, the Preston Defendants complain that a representative of C Change and Brilliant Novelty and Preston "would be required to travel to Texas to attend court proceedings.'' (See C Change Spec. App. at~ 21, Brilliant Novelty Spec. App. at~ 22, Preston Spec. App. at 29). However, as noted above, Preston was at all relevant times a manager of Brilliant Novelty and was a managing partner of and controlled C Change. In reality, only Preston will need to travel to Texas.

Moreover, in any multi-state dispute, "someone will always be inconvenienced." Tobasso v. Bearcom Group, Inc., No. 05-11-01674-CV, 2013 Tex. App. LEXIS 7866, *11 (fex. App.- Dallas June 26, 2013, no pet.). Accordingly, the argument is frequently rejected as a basis for denying jurisdiction. ld

The Preston Defendants further claim that Texas has little interest in providing a forum for this litigation, asserting that the "injury occurred outside of Texas." (See Brilliant Novelty Spec. App. at~ 23). The argument is simply wrong. NC12- the company driven into bankruptcy by the Preston Defendants • fraudulent conduct - was doing business in Texas and is now a chapter 7 debtor in a federal court here in this state. Accordingly, this Court has an interest in adjudicating the claims asserted herein which arise from NC12's operations in this state. See Tobasso. 2013 Tex. App. LEXIS 7866, at *11 .

Although the Preston Defendants complain about the restrictions on the subpoena power of this Court, they have failed to identify any witnesses or evidence that would be necessary for the litigation of this matter beyond the range of this Court•s subpoena power. Moreover, given

15 271 the pending bankruptcy proceedings, the logical presumption, is that the books and Tecords of the company and other evidence relevant to these proceed1ngs reside here in Houston.

lV. CONCLUSION AND J>l{.l-\ YER The PTeston Defendants have established sufficient minimum contacts with Texas to support fhe exercise of Jurisdiction over tltem by this Court Accordio¥1Y) intervenors Ernjo hwestments, Ltd. and ILT. von der Goltz respectfully reqqest th<\t this Court deny the SpeCi~;tl Appearances filed by Jolm T , Pre~ton, C Change _ln.V,est~ents, LLC, and Brilfiant Novelty~ L.L.C. a~d gr:ant ltltetvenw.'s $u.ch .othet ~nd fijrther r·eliefto which they may be entitled.

Respectfully su~m1tted, ELLISON •KELLER, P;C. I' . ~ .. { l e ''At 6r~-l,-- ·-i..i:vt (~ :!' -~;~ . ) ..... ., !<' ..

,I';· .. ~ 1(i ,t • 1'----./) !.; ^[1] • ' .... ~,. .:'t . . . t

. . . . .. . . , .. ; "" ~~fl~r ti. ~fikr. . . / St(;lte But ~\d. 1 U9.$240 T~~accy N. Elli.son State Bar No.. 1.50541'720 5120 Wood~:vay Dtive.~ Su1te :6.019 f:k)tJstotlfTe.xas 770.56 :rdephon,e: 713 -:26(};.~2~0 I~acsl:mi'le: 713-266~?801

' ' ~ .. ' ' ·,, ,, . ' ' ' •, Allonu~.y ... f.for l.nte.n•enrH•:;iPtaintiffo- Ett~io l~;tre#m~/.~.1$,. Ltd ~mc.I .PL.l von der-Goltz.,

272

CERTIFICATE OF SERVICE

'l11e 1mdersigned hereby certifies that on this 2nd day of July, 2014 a true and correct ~opy of the above Response to the Special Appearances filed by John T. Preston, Brilliant Novelty, L.L.C., ru1d C Change Investments LLC was served on all interested parties) by and through their attorney of recoTd indicated below via emaiL Randall 0. Sorrels Brent C. Pen·y Clyde J. "Jay" Jackson.llJ Law Offices of Brent C. Perry Abraham W~tk.ins. Nichols~ Sorreis, 800 Commerce Street

Matthews & Friend Hou~ton. Texas 770CJ2 son Commerce Street Facsimile: 713,.237-0415 Aam·neyjor Original Plain:tijfs Houston, Texas 77002~ 1770 Facsimile: 713-225-0827 Attorneys for Original Plainrijj.;· Asher Griffin Amir Alavi Chris Sile.o Ashley Frankson Sean FJanuner Ahmad. Zavitsanos, Anaipakos, Alavi & Scott. boug1ass & McCounico, LLP Mensing P.C. 600 Congress Ave.~ St-e 1500 3460 One Houston Center Al!Stin, Texas 78701-2589 1221 M~Kinney Street Facs.imile: 512A74-073 I Houston._ Texas 770tO Atrorneys for Dejendmus Facsimile: 713-658-0062 Cha/sys, AI/E.T, and Lo Attorneysji:Jr Defendants ~ydow. Preston,

Henkel, C Change, and Brilliant Jllovel~v F. Eric Fryar State Bru· ·No. 07495770 eric@fryarlawfi rm .. com Matthew Buschl State Bar No. 24064982 mbuscht~arlawfinn.com Chrlstin~ Richardson FRYAR LA'" FJJt\1, P. c.

State Bar No. 24070495

9 J 2 Prairie. Suite 1 00 Houston, Texas 77002-3 145 Fa~imile: 281-605-1888 Attorneysfor all lntervenors,Plaintfff.i:j

273 Cause No. 20 ll-44058 MICHAEL COLLINS; ET AL., § IN TilE DISTRICT COURT § PLAINTIFFS, vs. § OFHAJUUSCOUNTY,TEXAS § MICHAEL SYDOW; ET AL., § § 215th JUDICIAL DISTRICT DEFENDANTS. AKILA FINANCE, S.A.; ET AL., § IN THE DISTRICf COURT § INTER VENORs!PLAINTlFFS, vs. § OF HARRIS COUNTY, TEXAS § § MICHAEL SYDOW; ET AL., § 215th JUDICIAL DISTRICT DEFENDANTS.

AFFIDAVIT OF KELLEY M. KELLER

Before me, the undersigned notary, on this day personally appeared KELLEY M. KELLER, who is personally known to me, and first being duly sworn to law upon her oath deposed and said: 1. My name is Kelley M. Keller. I am over the age of 19 years old and am fully competent to make this affidavit. I am an attorney licensed to practice law in the state of Texas. I am lead counsel for Johan von der Goltz in the above referenced action. The infonnation contained herein is true and correct and is based on my personal knowledge as it relates to my representation of Mr. Von der Goltz.

2. Attached to the Intervenors' Response to the Special Appearance of John T. Preston (the ~'Response~') as Exhibit A-1 is a true and correct copy of the Initial List of Officers, Directors, and Registered Agent of NC12, Inc. \'NC12''), filed with the Nevada Secretary of State on July 29, 2008 and the Annual List of Officers, Directors and Registered Agent ofNC12, filed with the Nevada Secretary of State on May 20, 2009.

3. Attached to the Response as Exhibit A-2 is a true and correct copy of the Application for Registration of a Foreign For-Profit Corporation filed by Texas Syngas, Inc. ( ^[44] TSI1 with the Texas Secretary of State on June 19, 2008.

4. Attached to the Response as Exhibit A-3 is a true and correct copy of the Application for Registration of a Fo.reign For-Profit Corporation filed by NC12 with the Texas Secretary of State on August 28, 2009.

5. Attached to the Response as Exhibit A-4 is a true and correct copy of the Business Organizations Inquiry - View Entity for Molten Metal Technology, Inc. ("MMT"),

EXHIBIT A

274 reflecting the '"'Filing History" and ''Management," which includes John T. Preston, Director and Chief Executive Offer, 238 Main Street, Suite 20 I, Cambridge. MA.

6. Attached to the Response as Exhibit A-5 is a true and correct copy of the First Amended Complaint filed January 9, 2009 under Case No. 1 :08-cv-11456, Quantum Catalytics, LLC and Texas Syngas, Inc. v. Ze-Gen, Inc., eta/, in the United States District Court of Massachusetts, Eastern Division. Attached to the Response as Exhibit A-6 is a true and correct copy of the Affidavit of

7. John T. Preston, dated December 6, 2013, filed in Cause No. 2007-38533, Kaiser v. Collins, pending in the 152 Judicial District Court, Hanis County, Texas, (the "Kaiser Litigation") in support of Plaintiff's Opposition to CoJlins's Motion for Summary Judgment.

8. Attached to the Response as Exhibit A-7 is a true and correct copy of the Articles of Incorporation for Metal Catalyst Ventures, lnc., filed with the Nevada Sec~ of State on June 19, 2006.

9. Attached to the Response as Exhibit A-8 is a true and correct copy of excerpts from the deposition of Russell Read, taken April 21, 2014 in the Kaiser Litigation. 10. Attached to the Response as Exhibit A-9 is a true and correct copy of excerpts from the Amended Answers of John T. Preston to Intervenors' First Set of Interrogatories. 1 1. Attached to the Response as Exhibit A-10 are true and correct copies the documents produced by Preston in response to Intervenors' Request for Production. 12. Attached to the Response as Exhibit A-1 I is a true and correct copy of the Original Complaint filed May 5, 2014, under Case No. 6:14-cv-149, Procedo Enterprises Establishment and EMC Cement, BV v. Quadrant Management~ Inc. , e/ a/., in the United States District Court for the Western District of Texas, Waco Division.

13. Attached to the Response as Exhibit A-lZ is a true ~d correct copy of excerpts from the transcript of the proceedings held October 6. 201 o. in Cause No. 20 I 0..()271 0. Sydow v. Sydow, In the 308th Judicial District Court, Harris County, Texas.

14. Attached to the Response as Exhibit A- 13 are true and correct copies of excerpts from the document production of BBVA Compass in Cause No. 2010-02710, Sydow v. Sydow, In the 308th Judicial District Court, Harris County, Texas.

15. Attached to the Response as Exhibit A· l3 is a true and correct copy of the Business Organizations Inquiry - View Entity for JK Claims Investment Corporation, a Texas domestic for-profit corporation, reflecting the following HManagement": John T. Preston, Director, 421 Currant Rd., Fall River, MA 02720 USA.

t 6. Attached to the Response as Exhibit A-15 is a true and correct copy of a Memorandum filed by Quantum Catalytics, LLC, John Preston, and Christopher Nagel in Case No. 05- 10077-RGS, in the United States District Court of Massachusetts.

2 275 Dated: Ju1y 2, 2014. § STATEOFTEXAS

§ COUNTY OF HARRIS § BEFORE ,ME, the undersig.tied authority, on this day personally appeared Kelley M, Keller, known to me to be the person w11ose nmne is subscr_.tbed to the foregoing instrument, and acknowledged to me that she read the Ai1idavit of Kelley tvL Keller and that the facts stated therein were wi:thi11 her personal knowiedge and were true. and correct.

e BARBARAOAVIS My Commls$fon E.xplr&a 1 OTARY PUBLIC IN AND FOR No.vember 14 • .2015 THE STATE ()p tEXAS MY COM1vHSSION EXPLRES: 3 276 (PROH I) lNII1AL LIST OF OFRCERS, OIREC'I'ORS AND REGJSTERED AGBO' OF

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St AOCAESS ClTY

......... '4!U> WOODWAY, SUITE 900 , USA 'HOUSTON TX I 1-."..lso. ^[10] lho~tef IT' I' it'X.w"f:C9"~ ~~!!ltv O! ;x>o:.v.t. N.t l!•b~ :ne.~::'l«! o-"Cfy l"t ~~ w<t- L'oFJ!J"'~Jtr.!$ '.1 N!=i~ ~:100 ~ll a.:ln:.W'e<!qc.lh~ ru!ul:l·l ~ S1'.3 z.!P~'CI. llit "ULC$101'/C~icr.t!:l ;...,._"?P-fft~'<s'!JlY tl:ito:: o• i!l'!l<lH~"..mcz:-trc>'ii~>!I :!!L~ Ctf.:le(l ;•~~o• ~~ './&!t:O.•

ll11o ;PRI:SIDENT : O~trof &291Z0096.15~10 LA.M ........ . . .. . 27 9 RU!NUIIBEJI (PROFIT) ANNUAL UST OF OFFICERS, DIRECTORS AND REGISTERED AGENT OF ~-iiic12."iiiic : ··· ··· ................................................................................. · ................................ , .............................. ___ ............... - ............... _-; ' E027 44a2Q06.{I ^[00] •·-. ~~t• •to• · ... ~~t••• • o • H~ ~··~tOtH<'"'''' .. ''"h*OOt••• oo . . o ~ . . + Ot o o •o••••oH .... Ot . . ~"'OtO"t••o•••••oHoto'O..- ot• • t• l o• o ' ' " ' ' t •ool!tH••••to ... o-t•• ••• • •• -'"""••o• •••••••• ••...-..••-•• ••••••••• • - 0 1 - • 0000 • 00000 • ' ' ' '.iOiiN .. r;;·R-Esrort ..... ·-.............. _ . .................. -- .. ~ ............... ....... --....... NAME _ .. r.n:~.gs)

= DIRECTOR . .-...~!?~~ ........................................ _ ,, ....... ........... . ........... .. ~!f. .. Cf\Y ............... . ........................ , .. ~ ............ . i ;MA ~ FAll RIVER :421 CURRAI'JT FDAO , USA 12721J ···~·················~L ...... . :.H~··· · ·· · >-•oh'"~ •• • ••• ,,,, ... ,, .. ,, , .... - NAME TrT\EIS)

'MICHAEL 0 SYDOW

: DIRECTOR .J!.!:!P..~~ ....................................................................... - - ...................................... Cir.( ........................... _ - ....... , ,.§1 .................. .. .. ?:!!". ..... "''-'"""""

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.... ................. ......... ......................... ......................................... crrv ...... ... ··· ··· ... --... · .... -.... r r§J: ..... .. ADDRESS ~If. ...... -·-· ....... . /_ • " " ' " ' ' " ' ., """""''44 0 ooo to " """' ' "'"~o u~ " ' '""''"''" . ' ''' ' "' ~ '"""" "'

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. . . . . . . . .. •• . . .. . . . . . . . . .. . ,H~-H~ . , . . . . . . . . . . . . . .. • . . • ' . , , , , . , , , ,_ ,_ , , . , . . . . . . . .. . . . • • . . . . . . . . . :

GOLTZ0775

280 . .

Form301

. (Revised l106) Retum m duplic8te to: lnrf1Leo SecreW'y or State Secreta,: ~ce ot the fnte of Texas P.O. Box 13697 Application for lUN 19 2008

Austin. TX 7871 1·3697

Registration of a 512 463-SSSS Corporations Section Foreign For-Profit FAX: SIV463-S709 Co ration Fi1in Fee: $750 l. The entity is a foreign for-profit corpOJation. The name of the entity is: Teus Syngas, Inc. 2A. The name of the corporation in its jurisdiction of formation does not contain tbe word .. corporation." "company ... "incorporated," or "limited" (or an abbreviation thereof). 1be name of the corporation with lhe word or abbreviation that it eleclS to add for use in Texas is: 2B. The corporation name is not available in Texas. The assumed name under which the corporation will qualify and transacr business in Texas is: T}I.Syn, Inc. 3. Its federal employer identification number is: .;:2;:.0-..::::8=-24.:..:649~3;....._ _ _________ _ 0 Federal employer identification nwnber information Is not available at this time. 4. It is incorporated under the laws of: CUt fotthat .. aorfo~igncountry} .:.N.:.:e..:...:va=da=---------- and the date of its fonnation in that jurisdiction is: 05122.12006

mmfdd/rm S. A!. of the date of filing, the undersigned certifies th8t the foreign corporation CW'I'Ctll.ly exists as a valid corporation under the laws of the jurisdiction of its formation. 6. The purpose or pW'poses of the corporation that it proposes to pursue in the transaaioo of business in Texas are set forth below. The C<HpOration also certifies that it is authorized to pursue such stated purpose or purposes in the slate or country under which it is inoorpora!ed. Transact any business permitted by taw. 1. The date on which the foreign entity intend$ to transact business in Texas, Of" the date on which abe foreign entity fust transacted business in Texas is: ..;.04/....;,;,;;1,;;,.;,512008_..;.,;;,;,_ ____ _______ _

~ 8. The principal office address of tllc corporation is; TX us nOS6 Houston 4900 Woodway, Suite 900 Slate CII'J A.tUr~u

EXHIBIT A-2

281 . .

~lUllft~~~_R~IU~- ~~~9C.

0 '91\~. the jnjtW teabtered agettt is u:n ~~(~be entity nm1c:tl ubove-) by th~: mune ()~ oli. ((I 9:$, 1m~~ .regi4b!(e(1 ~gent i~ an ittdiv~ ~\dent t>f 11w swe WI!C\s~ rutme J~ Mkltac!: C. ·Collins ~?~tm~~~. --------------~~~~L~----~l~~~~-~. ----·· .. ·---··-·--· ----, .. -. ... ~«-~~~·~-~~~·---

9C. tnehu'l~~ {'ldd.ru$ oftflt.:~gistem:f asem ~d:U<~~.m:noo addtt5.\ i.~ -rx 77G.S6 4~ w~~ Suite 900 Hp~p IQ. ~~en herebJ IJppolniS the:·~. of~ DfT-exas as its •li· fCH strliee of process ~tne·~ set fextb in sectiPtJ5:Z!l ~f.~ Tc.usBtiSiness Org~~ l f. 'The name and ~s of ea<;b pel'SQU Qn tr4·~.Pf ~CIS is:

I 2 8 2 J : . , _ ^[1] ' f r :~t:'F,, .. _,~.:f'I .. T : r ' .. ,~ ·· "'\~\ < ·:: s · ~':'':''~ftr~¥mR;t~WWl1jffi:i\~;tm~~1itMrrhk~HHi'. · · · · ' > • · • ·· , _ . _ . " ' · · - · ,., ... - ,..... " ' ' " " ' ' ' ~Ala. . ~ &l~addi:nd$ ~fAA).,J$,~~~ l w l :t i £1 b y te:€'~1 1 ' A . I ll T h i S : d < x : u m e h t b e oo m e s ~tiye w h e n ' t h e ® c l m t e f lt i s f il e d :, b y t h e . ti f . t: r e t u e y o f s t a t e . B . · p Tht~ dtx.~ment 'becom~ e ff e tti v c a t a li n : r d~. \ V b i c li:i s . no t m <> r e ~ n i n e t y { 90 ) da ys . l r o m · t he da~ O J S t g r ung . 1~ ~h\yed e f t ec ti v e ,. l a l e , i . l ) : C . D T h i s d Q c un l e n t m i r e s i: ff ee t . up~n. t b e ooou rr e n ; - o f a · f u . t u r e c~ ~ri to r f a c t • . 4 ili e r t hn , n J h e . ___________ , _ __ p r u ; s a . g e ()f tim~- ' T he w d ) d a y · $ r tlt e , da t e q f . : s i gn i ng j g :

... ' . ' n1e f o U G w i ng e v !!- n t o r ' f i t c t w ! ll ~anse U i e d e ¢ . u m t m t t Q t a k e e ff oo t - i n m e m ~~ d . e . w . n ' h e d bdo \ v ;

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• • lSD 1. 11zo ._II a blip bwprofil aqcasdw. '111DIIIIU of the aalily is: N'Cl2,Iaa.. 2A. n. Jl8ll18 ot cu COipOIIJdan m .tt. JarldcMaD ot fimnatlcm &Ma JUJt CCIIdll&l t~~a -"' "uutpn~ • -., u P4: '1wutjiGUIIII:id." ar '1imiiBif" (or 8D ~ tiMnof). 1be JIIIIICofdlc wqollliaawilhdle"tnd ar~111atit ckdi1D aadfbruo Ia Ta. is: a. 11m c:upcaidiau..,.taJJOt md1ah1e mT-. 1ha -.mod . . DIIUr wJWm t.CCIIJICftli= wJil quaJif1 ad ~tmsia1L'81 ill Taaafa: 1 n. &daat1 aplOJIIrid•"i&•t~.:m 1111111b11r ~c ... .:n,.;;..;... .. _Oll4....;._.o ...... ~~c:, .... M_.._ __ ___ _ (il Jtelrn1 'diiJI1oJtt fdcntlkafoza D1IIDbar infhmgtfgn u JUillmlilablo al tia 1bDa. ... :afllucaipollled11D!l«lbD t..... oe ._...,.....,. • ...,..__, _s_bdll_atH_emm _____ _ ad., diD of ill fbaaldfoD iD Cblt~ Ia;

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S. AI. of G. diJe of fila& 0. •mdmf&nrd =tifies 11Jat111e enJp CCIIpa&Giwi rurcasd,J ai8la a1 I Yllid. cqp....tm adtrtb laws of G. Jnzltd'«Jma otilu fbm.rio~L 6. 'meJGJlOIP C.:JNIIIIU6C* ottut oa~pa•ticm 1battt Jll'GPC*I w pamum t.o ~ ~ m,... aro • 116 Wow. ~ ootpa&atian a11o c.edfllll Y 1t 1a cdbndm1 to pamao l\l:h -..ar1 paiJJCIR ar plllpCIIel ill Cba ataiD or c:oaa!l:yuadcr wlddl it ia iliQQl)I<IUdtd. ,......, anzbueiaaa ,.,itW"' Law. ~I

EXHIBIT A-3 28 4 ~-!IA«!IB.blrllllt'bl6. CaalpiDI8D9C. 0 9A 1be initial registured agent is an OlpDization (CIIDilCJt be emily named above) by the name o£ oa liZJ 9B. Tho iDilial~ aged ia an iDdiWiual re9ideDt of&e &tam wbose oamo is; Sydow Midaacl D.

31/k M.l. JMrHal• l'rfll.l'i41M 9C. 1'be 1Juaineaa a.ddrea oftbo zqfatered agent aDd 1he reglallsted oflice addrese is: 4400 PostOakPadr.way, Ste2360 HDuaton 'IX 71027 ..,Mila .... Zfpc.Nr

~ 10. 'I1Ic cocpondialt. hen:by rppaints the Socnury of state ofTcua as its agent ihr aerril:o of pmc:crss GDdar 6c circumstanrea set fbdh ill aecdon s~s 1 ofdlil Tau Busineas Orpaizaticms Code. 11. Tho Dime 8Dd address of ced1 pc1B011 co.lhe board of direct.am is:

. . .. . .... . . . ... . . .. . . . ... . : ~· D. Mldlael

I Sydow M.l. L4sfN.aale &fllx Jllnt~ 4400 Poll Oak Paa.ww,-. Ste 2360 HCJUIIOn 'IX USA 77fm

a. as ~ -Carle

lbador...._Mt/nlll

. . . " .. .. .. . . .... . .. ... . . DJ:atai~ •. · . Midaaet Co1J.ills

.. Cltslitlry ZopCodlt ll.l Jl'lallltatJ IAtNtrlu ·~ Houston TX USA 17ffl1 4400 PostOUP~"•:, SIB2360

ay ._cr.&&IJDtc~ . ... .... · .. . .. . . . • .. .· . . . . 1~:1 ·' John. Preato&l KL lli:fQm Finlt~ IIAIIN•~ .w Cammt RDad

Fall River USA 02720 MA . . .. a.tcrJiaDIIr .,..._ Qt, Sl\:laf CGIJ!l/17 Jli)Cllil8 . ·. .· . . · . .. . . .. Dlrc:dQr4 • . . JllmN.• All LllllNtltJttl .std/lz

a. ..,,~..,.,.,_ CArurl17 ZIDC'oia . ~ Jlaml.301

6 285 - . . . . . , _ . _ _ , . , . , . .. • • . S

· · ~ $ · ) ; · ·

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286 BlJ:SlNESS OR{.iA.'iJlZATIONS lNQU lRY - VIEW ENTITY TEXAS SECRETARY of STATE

NANDITA BERRY

UCC I ftt!~.~J~'iJiL~nb~~rm.s I Tra~~~mm·k~. I !1~~.1.~ I !~&:!1QWJ.~ l !.~.t~I1ff~~J! l .Br'ieft:ta~ I !-..&.~>.)Ut BUSINESS ORGANFZATIONS INQUIRY- VtEW ENTUY Filing Number~ 9112306 Entity Type: Foreign Fot~Protil Corporation Original Oate of Filing: Forf~ited existence April 3, 1992 Entity Status~ f'omudion nate:

N!A

Tax 10: •1 5216599595 FEIN: MOL TEN METAL TECMNOLOGY, lNC. Name: Adtlress: 400-2 TOTIEN POND RD

Waltham. MA 02'154 USA fictitious Name: NIA DE, USA Juris~iiction : Foreign formation Date: NJA !nstructiqns; ~ To plac~ an order for additional informahon about a ffling press the 'Order' butl(Jrt.

EXHI.BIT .A.-4·

287 BUSINESS OR<:W41ZATIONS IN<~UIRY • Vl'C.W ENfiTY TEXAS SECRETARY of STATE

NAN01TA BERRY

BUSINESS ORGANIZATIONS INQU~RY ~VIEW ENTITY Filing Number-: 9112306 foretgn For-Profit Corporation Entity Type: Aprif 3, 1992 Origina l Oats of Filing: Entity Status

Forfeited existence Formation Date: NfA 15216599595 Tax ID: FEIN: Name: MOL TEN METAL TECHNOLOGY, INC. Address: 400-2 TOTIEN P OND RO

\tlallhaf'1, MA 02154 USA NIA Fictiti ous Name:

DE, USA

Jurisdi ction: Foreign Fonnation Date: NIA :::=··-~~~~· .................... ~:~:~~;,_~~~,:L~--············;~·~·~·'x~~ .. :~:·.···········~~~;t~;;·······-.1 , L~~~-~~.:~:S.~-::~·········.:·.~·.·~·:;~ . .-.:.·.l~:·.~.·~~:::.:.·.···········-. ^[7] ~ ;-:::::::::::::::•••••••••••••••••••••••••••••::::::::h·: ..... :.::•••••••••••••··•••••••••••••••••••-••••••_::::::::::::::::::::::::::::::·..,..,.,..••·,o-oo.•••••••v•••••...,.•••••....,••••••- .............. -..... . .;1..._._.. .......... _:=:::·:::·::·:·:::::!':::·:·::·:~:::::'::·:::~::·::•:::~~ ; !Last Update N.1m4\ Title Address

ll

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Jui'OOS B Anderson O:rectot ONETO'lllffiSQ.U . .O.RE ~ l Hanford, CT 05183 U~.l\ 11 &Jger\:e Bet'tl'\$n VP 400-2 TOTIEN ROAD ·.::::}t : !,':, Waltham, MA Ct2154 USA ~ f\cnj~urin T Dow riG T 400.2 TOTTEN ROAD !: ;:;l1. Waltham, MA 02154 USA : ; :: StJI C':A?rner VP 400-2 TOTTEN ROAD ~ ~ ~~

W~ham. Ml\ 02154 USA ,, ^[1] : ..

j~ ::~:~: ~~~~~~: ^[111] : : : : : : : : :: i,:_i., l ... · ~~ ·11 Walthal'rf,. 1\tA. OZ154 liSA

·H

B llan J<lci<s VP 400.2 TO~ ROAD <> ~ ~-·~. Wafiham. MA: Q2154 US.>\ ^[1] ; l .; r F.1l I fll(;A..o c:l e 1 VP 100.2 TOTIEN ROAD

lflalnarn. 1\~ o-2~ 54 USA ~1 • n '' . 1 tlroctcr 30 ROCKEfH.H:R r..tfi!ffi ·;1 .; ~tcr A Lewis

ll ~be~ A ~ .ms~ ~r~cto! : : ~~;:~ :~J~~. sunE~7.~~

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San Ma.tes, CA !M-dO'l VSA ~ 1 :::::·~~::·· ;::~::lf~' sunt510

II ::·"'" Waltham M>\ 02~ S-1 USA {! : ,; r ~~~~ Kr.thy Sttnto~(>

VP

400-2 TOTTEN ROAD Waltham, ~ 02~54 USA <l ~.!"~.~~·~~~~

JohnTihSion p .',,,!',,, 1,_,,:! 238 ~ .. t<\N SW.EE!< sum: 201 John T ~~s1or1 Orector • Qsni)tidg~, MA 0214 t U.SA ~l ii ., .lulu) r f•)--P.~ton \~ ^[1] 238 M!\~'IJ STREET, SUITE 201 U:O !, !, . , Carmridge, MA O:l'l4'l USA

i,· i i hi'PS :1/dtr tx:t.sos.&tai!l.ilf,.l)$1.-u'f.l..l(ltl ulr ')(cVf D-' I'!Clt~l~y- ~:1 ty.a:>~f?tlf)(I!Je ~~~'9 tllt&,:S'pas; ufrll!w=l!a:SftU ~-~~~~= ^[91] f 2306&f'~doa;rrer.l._ ~fli{)()r= 5S ~ ~i4ll13e0':!1&.. . 11<. 288 7/112014 BUSINESS ORGANIZATIONS INQUIRY- VIEW ENTITY John T Preston llrector 238 MAN STRB:T, SUITE 201 carrtJridge, MA 02141 USA NAGS., OiRISTOA-IER .rsrn SRVP 40~2 TO'Tlm ROAD Waltham, MA 02154 USA NAGS., Q-iRISTO~ .rsrn llrector 40~2 TOne.! ROAD Waltham, MA 02154 USA NAGS., OfRJSTOFtffi J•srn llrector 40~2 TOTlB'II ROAD Waltham. MA. 02154 USA Bhan Jacks GENCSL 40~2 TO'Tlm ROAD Waltham, MA. 02154 USA CEO VW!Iam M Haney Ill 40~2 TOTlB'II ROAD Waltham, MA 02154 USA \Nilliam M Haney Ill Director 40~2 TOTlB'II ROAD Waltham. MA. 02154 USA GA TIO, VICTOR E"EDD VP 40~2 TOTlB'II ROAD Waltham, MA. 02154 USA Benjarrin T Downs VPFIN 40~2 TOTTEN ROAD Waltham. MA. 02154 USA -· ... ··- .... -···- - -·· -·-· . - -· •. - - . . . -. ·- . --· . . I Order I I Return to Search I

Instructions:

iTo place an order for additional information about a filing press the 'Order' button.

https://direclsos.state.tx.us/corp_inquil)lcorpjnq ul~entity.asp?spage=mg mt&:Spag efTOtTF&:Siiling_number=9112306&:Ndocurrent_runber=551530130002&... 212 289 Case 1:08-cv-11456-JGD Document 74 Filed 01109/09 Page 1 of 20

UNITED STATES DISTRJCT COURT

DISTRJCf OF MASSACHUSETTS Eastern Division - - - -- - ---·- - --- -- --·- -- --

QUANTUMCATALYTICS, LLC, and

TEXAS SYNGAS, INC., C.A. No. I :08-cv-11456

Plaintiffs, FIRST AMENDED COMPLAINT V. AND JURY DEMAND ZE-GEN, INC.; WILLIAM ("BILL"} DAVIS; NEW BEDFORD WASTE SERVICES, (Leave to file granted December 18, 2008)

LLC; VANTAGE POINT VENTURE

PARTNERS; FLAGSHIP VENTURES 2004 FUND LLC~ and IRV MORROW.

Defendants. Plaintiffs Quantum Catalytics, LLC (formerly referred to as Quantum Catalytics, Inc.), and Texas Syngas, lnc. (collectively "Plaintiffs,.) bring this complaint against Defendants Ze- Gen, Inc.: William ("Bill'') Davis; New Bedford Waste Services, LLC; Vantage Point Venture Partners, Flagship Ventures 2004 Fund LLC; and lrv Morrow (collectively "Defendants"). alleging as follows:

THE PARTIES l. Quantum Catalytics, LLC (hereinafter "Quantum") is a Delaware limited liability company with its principal place of business in Fall River, Massachusetts. 2. Texas Syngas, lnc. (hereinafter ''TSI", and collectively with Quantum. "Plaintiffs"), is a Nevada corporation with its principal place of business in Houston, Texas. 3. On information and belief. Ze-Gen, Inc. (herein "Ze-Gen") is a Delaware corporation with its principal place of business in Boston, Massachuset1s and may be located for service of process through its president:

EXHIBIT A-5

29 0 STATE Of MASSACHU$E11'S COUNTY OF MlDDLESEX

AFFlD.t~ VlT Before me. the undersigned authority~ (H1 this day persnnally appeared John T. Preston who bein~ by me fitst duly swot1l upon oath did deptJSe :and say; 'My mmH~ iS john Preston. t .atn over the age of2.1, am under t:IQ leg~tl 1. . disability, and an1 wmpetent to make t1'lis :.)flfdavit. Th~! fucrs recited herein lre true based upotl rny·p.er.sonal km)wierlge. l <mt Pres.ident oi"Piaintiff Quantum Catalytic.<;

2. 1 previously noted in. an affida<Jit l'hat begi.nn.ing in the tnidd!e nf2004 Miclme1 A. C. GoJJins solicited Quantum Catafytks to Jicen$e tod.mology to a company he harl fnrmed cane~ Texas Syngas. in at:lctition Mr. Cotuns soH cited me to assist him ~sa 'Direct<) I' of Texas Syn~as~ He otJ'ered (iuantum Cata lytics an interest in the .rt~presentf.'!d to nH::· thi.H' he held engjneering degrees in· electrical and me.cha~ni<;at

. ' ' ' ~

EXHIBIT A-6

310 gas}. '~ ·.

l·-~.

·· .. ..,..· 311 '-~utho tiz~tion was not gramed, no (X.tndush:ms COl1kl be drawn n:~ whether or not ~.;!r. Collins had a degrf.'f~ from Carnegie M{:!11on ~t that thne.

Si milzlrly, j t app~ared ti1Jt Ft<~'man dH~t:J.a~d a d (}tabasc, but did no~ 7. 11m~ Collins as n graduate:. Acr:ot'{lingly, the Kr9H ~·~~ports w~.m;- inconclusive ~md equiVOC41L

H. Shortly ;:~t'ter the ~t:Ct)tU.I nfthe f{fc.ll1 ·r~-:!pm·ts~ l cot~h.mte<.l Collins (>rl his ed~l{:(IQOllal background. C~1JHnH en:pht:~tic~i!y Sf<.~t.\~~1 that he had gntdU<lted from bnth s·chools <.~nd prtHntsed to gE:-nenm~ prol'Jf Hi~ re pt':a tt~d an ea1·lier ~·t·~ttentent. th~t bce<1use Furman and Clmnson had a john MBA program~ he w;;tS cen~Jn th~-tt his r~con1s \vere somewhere i·wt.\•Vee.n Cls..~mson dJH.l Furman. but in any ca-sette would str .. 1ig.hten out the matte:·, l took hhr: at his word and assumed t~l(Jt pn·wf w(.Juld bt~ fortbcmning. Later in 2009, l !eft tl1~: Bn~rd ofNC12 and d!d. uotlmow untH early

9. 2010 t.11.Ur comns hi-ld nol hJllowr:d thnhtgh on. providing proof of his ch~grees to NCl2. ln early 201.0, l btiC<H~lt cmWt1rm~d over ~mottwrtr~tns~v.:ti on at NC:t.2 1nv<1Jving the ptll·rhr~tsl! l')f ~.sed wmpute.r t.'4Uiprmml ~~t wh<Jt. apfH.':·m~d 1.-n be~\ highly l.H~hH.t;d prkt~ .. When l check~d on wh£:ther Coil ilH\' bu~:kground had been v;;~lidatt\tl; l f1Hmd out tiH~t })(~.never ~H·ovidt~d dw proof of h i~rd.egre•e:s. I as ~~ed .:1 !>tudent ilt C<n·n(}gir· Mdlon i.f h~~ \-V{mld check tl)ff r,ll~;.tiHli dat;1bi~~·E~ f'ot' Mid-;..;.~~l Collins. Tht~ dwr.k t\h(">wed no t'ecqrt~ of Mr. Collh:s being .1 gt·<.ldtl<~h'~ of C(lrn!;gi~ Me<Hon.

HL Confront·ed with rhl$ add~d evidence of pc"~t(~ntial misrepn~st'.mations by Collin~ and his faihm:: 1·o provid~ the pro<>f t)f his dt~gn!~!s that iw promised. i 31 2 development effort. and f W<k1 now bt.~t.:oming (Oncerned th~t Collins might nut be rrvst'.>vorthy. to t:he Board nf l'.>il"ect.CJr~ of NC:\.2 on Tvl<;y 5, 2010 (Mt::tchment 1). Oircctnrs and l tcjoined th(.~ 13o~~rd. lnnnediately the new Board baf;kt;d UJ.t an computer !\)"stems and stttrted <.H: <HUly~~.ls of the vl~bilit:y of the r~xhnoiogy dev~·!opmen t eftot {. By Nov\1.mber 2010, wt• m;~l i'led rhat il <:ri tical experiment h~

~-{:;·/.· ·--- di:limed to h<-we (.'Oltductcd,by Collins had not occ~Jtn~rl We <:ondL~ctcti the , .. unwotkabie. Jn addition. on-e oftht:! investm·s in NC t2, Meliora. conducted ib own 13. inves~igations and shared lh~ n~sdts wi;.h m e in late Noveml!er- 2010 >:u:.d early ~ j ~ . . , ! : ~ ' ·h ~.1(-~,

·, 'l \ \ ~,3 ,, 31 3 . :vt Bv th~ end of Nov~mher :w 10, I \:VoS tota\ly convin-ced that CoHlns had . ~ 3 1 4 "" . .. ~ ~.~H H5ll;$~ avaro~tY ot St3'f() 2~:6 ~rttt C~f$on ~~t.e~t C.at'$Cn'OifY, N~lr~da 8910~-4~0~ tr-t~·as.rs'to~ · . . WqbsltQ;. $tlft~tary()f<...>tat~.b~ )11-;;.TTtl.tl{ti.~ln~ tit ~.~~t<t.r~m~Xr . ---¥·1-

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~ ~~ ..... =-~~~~"::r;~~~::~ 'Transcript of the Testin1ony

of

Russell Read 1 CFA, Ph .. DI$

Vo4ume: I

Date of Deposition: ApriJ 21 ^[1] 2014 Case: Jeffrey B. Kaiser v. Texas Syngas, LCC contlo~ntlal communications Int. Ltd. Phone: 713.365.0777 Fax: 713.365.0808 EmaH: schedul'lng@recordsdlscovery .co.m. ·Iiltemet: www.:recards.discovery:.com 4777

316

Russell Read/ CFA1 Ph.D. 4777 Page 1 Page 3 VoiiiDiel 1 I NDEX f'o&<t l to ,9 2 bltibilll

WITNESS

DIRECT CROSS REDIRECT RECROSS C&-.. No. ~007~).) 3 ............................. _,. RUSSELL READ, CFA l,h.D. 4 JE~1'11BV a M!Sillt lluolll!h IIi> IN mE DISTRitT s DY MR. HUNTER 6 56 -s-> Jl( C\.AIMS ~DIT' COURT OORI'ORATION, indivldllllly 111d : 6 BY MS. KELLER 29 <kriw6vcly; QU;\HtUM 7 CATJIL YTJCS, LLC. fndividllllly ..,d deriw~~vesr. """~uctw;t. ·

8 SYDoW, UWY1dllllly and : IHND JU.DICIAL •••• deri111bVcly. : OISTlUCT 9 l'llinlim, : 10 EX HIBI TS Yf, : 11 NO. DESCRll>TION PAGE TfXASSYNOAS, LLCIIIId MICIJAEI. : OFIIARR~C()UNl"Y, 12 1 l)ocument entitled "Notice of 6 A. COl..LINS, : TElCAs

Intention to Take 01111 DcJl(lsition of Dotmdl:n!J. ; 13 Russel Read" . . . . . . . ..... . . . .. « VIOOOfAPF.l> DI!I'OSITION OF RUSSf.J.t. Rf.Af), Cf'A, H l'll.D .• • lriln ... call«< oo.bdWI' old\~ flo.iatill't, ••• • 15 ~ pl>mW>t ro the Fedcnll Rulto ofCivil ~ . bofo"' ).,.. M. WiUi.amoon, R(8illleftd Capital, m fofcnl s-. Booton. M.--.... 16 Merit RqJcrlorund "'"lory I'UI>Ii~ in and for the c;.,.,.mO«weoltb ofM~ II Ole Olli<a oM1!M

17 18

on Monlloy, Aprilll, 2.014. commmc:i"8 al 11:2.la m 19 20

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24 :llli.76R .• 74() 25 Page 2 Page 4 PROCEED ING S 1 2 TilE VIDEOGRAPHER: We are now recording and 3 on the record. My nwne is Jason Martin. 1 run u 4 legal video specialist for Confidential 5 Communications. 6 TOday is April 21 , 20 14. llte time is 11 :23 7 a.m. This is the deposition of Russell Read in Ute matter of Kaiser, et at., Plaintiffs, versus Texos 8 Syngas, LCC, et al., Defendants, in the District 9

PRESENT: (Continued} 10 Court, 152nd Judicial District ofHarris County, Texas. Case No. 2007-38533. 11 (Via teleconference) 12 This deposition is being taken at 175 Ellison Keller, P.C. 13 Federal Street, Boston, Mass. The court reportc:.r is (by Kelly M. Keller, Esq.) 14 Jonc Williamson. 15 5 120 Woodway Drive. Suite6019. Houston, TX Counsel will state their appearances, and 77056, for the Defendant Michael Collins. I 16 the court reporter \\ill administer the oath.

17 MR. HUNTER: All right. This is Charles kkeller@ellison-keller.com 18 Hunter ot'Reich & Binstock LI..P. Jam at 4265 San

7 I 3.266.8218

19 Filipe Street, Suite 1000, in Houston, Tex.a.~ 77027. rm present with counsel for the 20 21 defendants, who will state her appearance.

Also Present: Jason Martin, National Video 22 MS. KELLER: KeUy KelJer, present tor Reporters, loc. 23 Mic.Juwt CoUins. 2 4 MR. HUNTER: Ms. Keller is of the law finn

••••• 25 Ellison Keller of Houston, Tcx:as. 1 (Pages 1 to 4) Confidential Communications Int. Ltd. 317 Russell Read , CFA, Ph.D. 4777 .Page 7 P<lgc 5 1 The lawsuit for which this deposition is 1 other depositions these guidelines. Let me review 2 2 being takeo has already been described by the some things with you before we get started. 3 videographer. This deposition is taken pursuant to 3 Fmm this point forward, the stenographer 4 notice. Mr. Read hns not been subpoenaed~ but 1 will write down everything that is said during the 5 instead, appe-ars voluntarily. 5 deposition. 6 Can you bear us on this end? 6 Do you undersUlnd that you ate under o-ath 7 THE WITNESS: J can hear you perfectly. 7 and must tell dte truth? 8 MR. HUNTER: Okay, great. 8 A. Yes. 9 All parties entitled co notice under the 9 Q. Do you understand that the transcript and

10 Texas Rules ofCivH Procedure have been notified 1 0 video recording of your testimony may be osed at 11 11 and are present. The has tho witness has been trial and read or played to the jury? 12 1 2 A. Ido. sworn, correct? 13 THE COURT REPORTER: No. 13 Q. Js there any reason, such as a medical 14 MR. HUNTER: Will the reporter swear 1M 14 condition, that you cannot testify truthfully today? 15 16

wilness, please. 1 5 A. No, there is none. 1 6 1 7 Q. I'm goins to ask you questions that you 17 must answer with audible answers, so that the court 16 18 reporter can write your answers down. 1 9 1 9 Please do not respond to my questions wilh 20 20 a nod or shake of your head, because I can't see 21 21 that, and the coUJ1 reporter is not allowed to 22 22 interpret it. So juSl spoken l\'Ords. And, please, 23 23 no "uh-hum" or "uh-huh,• for the same reason. 24 2 4 Do you understand that? 25

25 A. I ttnderstand.. Page 6 Page 8 RUSSELL READ. Cf A. Ph.D. 1 Q. Wlwl is your residence. please? a witness called for exummalion by counsel for the 2 A. My U.S. residence is 38 Mercer Street, Plaintiff~ having been satisfactorily identified by 3 Jersey City, New Jerst!y, 07302. the production of his driver's license and being 4 Q. Thank you. And wttat is yout work address? first duly sworn by the Notary Publie. wDS examined 5 A. I work in Kuwait City for Gulf lnv~tm~:nt 811d testified as follows: 6 Corporntion. P.O. Dox 3402 Safat. S-A-F-A-T, Kuwait

DIRECT EXAMJNA TION 7 City, 13035~ CoUlltry ofKuwail, BY MR. HUNTER: 8 Q. Thank you. After this dcpc>sition, which Q. Thank you, Mr. Read. address or whut method mould lhe co.111 n:porter 9

MR. HUNTBR: Ms. Williamsoot do you have a 1 0 ~nd you your l~:Stimony? copy of the deposition notice? lnsk lh"t you mark 11 A. My prefem:d method of T\:10Clp4 is by emnil it as Exhibit l of Ibis deposition. 1 don't have 12 1'hc second would be to mail at my work addccss in 13 lillY additionaJ exhibits. Kuwait

(Document marked as Rc:ad 14 Q. Can you give us - 0! give the court 15 Exhibit 1 for identification) reporter your email address-

Q. Mr. RQd, y;·ould you please stole your full 16 A. My email address is IT88.d, the No. 5, at k:pl name Cot the record. 1 7 Yahoo.com. 18 A. RusscU Read. 18 Q. Thank you. Mr. Rct1d. 19 Q. I thank you for taking time Lodoy. Mr. 19 Wbc:n you receive the tnmscript. it will 20 Read, from your day and from your stay i.J) the United 20 eitbc:r be in a booklet or in an electronic fonnal 21 States to give the Coun 111\d the Jury )'OUr testimony 21 Ptt:aSe n:vicw your testimony and com:ct any 22 in this actioo. 2 2 d~ricu l crron; und return the tnmsc~ to me. 23 Have you ever been deposed before? 23 Will you do that for me, please? 24 24 A. 1 have been. A. Yes, I will 2 5 Q. J am sure that you will roo11ll from your 25 Q. Do you understand that if you mak~ uny

.,... . . - . . ... -··· - - ··~ 2 {Pages 5 to 8) Confidenti a l Communications Int . Ltd . 318 · . - . - - T . . . . . ~ .

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319 Russell Read, CFA, Ph.D. 4777 Page 29 Page 31 1 officer was replaood. 811d Norm t cBla!lc was rcpUtced about five minw~l 1 2 MS. KELLER: Sounds goocL Okay, thruU: you. 2 by Gina foote, F -0-0- T .£. In addition. we blld 3 MR. HilJNTSR: OfT the record. 3 anoth4!r operational per.;on who carne on, who was Joe THtl VtOI!OORAPHE:R: 1ne tlmu •:s 12 fl.m •. md S>'~ldMa. each of U1em were junior~ 4 4 Q. Is C Chllnge ln\~"1mcnt.<~ still in operation? 5 we Q1\! uiT l.h.t: tcX.'OOO 5 (Rcoess taken from 12:00 to 12:06) 6 6 A. C Change lnv~ents is not opc::mting now. 7 TiiE VTDEOGRAPHER: The time is l 2:06 p.m., 7 I l \\ras d Ycctivcly merged into a n-=w company . calJ~

a 8 1111d we are <>;n the record. "'Tra.osform31ive Enefgy and M~terials Capital, which was fonnc:d as a combination or C Change and a group 9 CROSS EXAMINATION 9 10 BY MS. KalER: 1 0 out of New YorX City. ~lied "Quadrant Capital. M l l Q. Mr. R~. my name is Kclly Keller, arid you 11 Q. Wt:re you uffiliatt:d with Quadrant Capital?

understand I represent the defendant in this ca~, 12 A. l\lo, J had no relationship or affiliation Michael Collins, correct? 13 with QuSldrant CapitaL

A. I d<>. 14 Q. Oo you know if Mr. Preston has an Q, r want to go briefly - just some brief 1 S uflili<tlion wilh Quadrunt Cup1tal?

questions about your background 16 A. He is now n partnc:r with Quu.dnmt Copitttl 17 When d~d you le.we Ca.IPERS? with respect to the Transfonnativc Energy and A I left CalPERS Jwte 30, 2008. 18 Materirus Fund. Q. And Y.ttat was your re3Son for teavins? 19 Q. Do you know how lnrgc U1e Transformath •e A It was to move on to another opportunity, 20 Energy and Materials Fund is now?

one that f SSW as partiwJarly interesting, to start 2 1 A. My understanding is that tiM: initial mise a fund with John Preston. ll was dcdicaled to 22 was $100 million. and there was likely on the order investing in ltan$fonnative en~gy ISild matc;;ials 23 of $50 million invested additionally in related 24 oppo.rtunil.ics. oppo11un itic.<~.

Q. Was that a fuU·time position when you left 25 Q. Oo you know what !hat initial l 00 million Page 30 Page 32 1 to join Mr. Preston? l was invested in? A. Ye~ rt was. 2 A. ft's a little bit beyond when l was there. 2 Q. Who was your employer? 3 3 But oerwin1y, Olere were SC\•en~ l irwcsunents which 4 A. So after employment from C3fP ERS, we fotmed we had in our pipeline, One was a power from a 4 s

a new compan)'. called •c Chang_e lnvestment..'l," SoC 5 biomass company or a project in l lawaii. A second 6 Change Investments was my employer. 6 was a cement oompanyj to be able to activate cemettt 7 Q. And were there any otller principals in C mote qujckty than is convcntjonally ~bJe. A 7

a 8 Change othc:nhan you and Mt. ~ton? Uurd hsd lo uo with housing. the creation of vt:ry 9 A.. When we founded C C~e lm·cstmcnls, John 9 rapidly built, low inoome housins ior the emerging

10 Preston and l were the founders and the only 10 markets. And of COun!C, lhc invcs1mcnl in Texas 1 1 principals. 11 Syng~q would have- I be!ievc would have been an 1 2 Q. Did any ol.bcr prindpals uJlimatcly JOin C 12 investment if it hadn't have been X'd.out in 2009. 13 Q. Do you know if any of the initial capitnl Change? 13 14 A. We hired some senior people who were jumor 14 or the additional 50 million was ln\'c:-1cd in any 15 pattnen. who cover low nnd op erations. 15 entities with which John ?reston was affiliated? 1 6 Q. And who -are they9 16 A. I'm nrn aware of any invcsuncnts in whicll

that fund invested m a John Preston-related enti1)'. 17 17 A.. They included David Bro\Vn, who ~:rvcd as 18 our general counsel. They included Norm LeBlanc. 19 Q. How long were you as C Chsugc? 19 Norm LeBlanc was our chief operating oftioct" They 19 A. I was with C Chan~ a:s a pru1ner and 20 also included Mr . .)ohn SyJvia, an in,•esoncnt 20 urn ploy~ from July l:st, 2008 until I jointxf as chicl' 21 professional out of San Francisco. 21 investment officer and depu'Y cllief cxecu~ive of the 22 22

Q. An)' otberi? Gulf Investment Corporation in the summer of 20 I I. 1'bal being .said, because or difficulties lD 2 3 A. Later on, we also hired someone who became 23 a partner, who was Roger Berry, BrEwR· R- Y. I 211 ft1nd-rnising beginning in 20 I 1. 1 ceased to take 2 ~ 25 25 believe. And later on, also our chief operating :salary beginning on Jtln\181}' I l>1 o( 20 I l and Sought

8 (Pages 29 t o 32) Confidential Communications Int . Lt d. 320 4 77 i P~gc .l~ (lW...:i op!X•rtwutics. i~~u:uing in ~Ill: st unu~ A Th.: amount reech.ed from I'Jipi' \: tQ fund C 2 Q. l'm ... m; , \\ i;"! w:t:- ll:c n:.lsmt yuu :-~ur.pttv Chaugc wa) S25 uulliuu. Q. Aud \\ llltl \\:tS the ntnount rt:<.~tvcd fn:nu ~k J l(lklllg " s..~l<·~·"? 4 Kcnl-cf> A JIO~cth•e!} , w•~ wcm ttMllk: tv rtH:O:\: 11U1 5 tum! tt ''•<AS a \'CI)' dtiYtcultli.md~l!itng A To tll) fC.{;OIIcction. if~ amotull was OTIC and u half mi llion doll:lrs. environment nficc the linotNiltl ~ris1s in l(JO~. An:J to J<•hn Prcs:orfs ._.,~:,;,, irL' ~.~s t:t·k t.• tc::.d: ,,

Q. Sn of the 26 5 million. did you ~ty clmt I a 8 million \\:ts warclt{)U!'cd. and tfu1t \'\~ts ulliuuttcl) {!tifm.::~l!lp .3(-l!".::.:r.tcn! in 1011 K' m.; r~~~· { · (;l;;..ua·c n.t<> ,. :::: m~t.t.."<1 ror TS I ~ is thut com:cl'? 9 a u~w mtlit~, ~n~:rl • I'EM Ct)!1lll11. · - , r:m~I.Ir;;m;ll\'~ l(l ,\ 1 million \\1tS act1tally ch rc<,1t:d to :md !.0 . .. Eaw/l!;. ~nd ,\.iatcntds t .:upitul," in ~mhumtir.u \\!th Qtt.~t;rtlt L'.3pilt!l \)Ut {)f !,..,,, V mlo. <. i!) I '.\iJ:I rt~>l bwestoo into Te:-.us Sy n~;JS at {ll(; re<.tuc;;t or Tripe~ . .. ': 1:0..

12 Q Oka~ pitrl (•( tlwt t !li;l'f!\.'T . .!.2 13 (J. At tlt..: time yNt l.;f; in tht! ~\ttltt~r ,,f ~•ll, A Ok.a~ . Que miUron \\~lS invested. Tile oth.cr .. 1 H ttWCSlfilCOb .. the Hl\'esllUcUl!i juto FA~~ I: Africa. &)tc l :. hi>\~ ml~h i~,c~ln;..:~tt funu.; bd C (...huu~ nn~~'? 1 ~} suslaiuabk ngticulturc wvcstntent "as :ii·hiO.OOO. A Eftc"'tivciy. <.. Chnngc ont} l"t!is.:d its 16 A1t<; tlr.! uM~sltuenl mt<> tl~ biorunss etccttlctty lnt>lll!). thnt HJO milli(~t, lor u fumJ in\ cstm.:m i:r tl n projc(;l mlO H;\w'.lll was arc" ouUion dollars. Tlr~ !';nll!C~nir- ~~~N;.'1:'1Cill \\ i!h Qtw,~:utl f~rt>~l.:ll <>l!lllf .,..,wet amount. i do not recall. New 'f'.;uk Cit;. . Sn ;rt thtll f'\lml, I \Hltt!d ·~} 1h;ll 19 Q . And 11us was mase<l and used iJl some wa~ :fl.:; numl>-.:r was$ f(~~ 1mlhNl itnJ tt <.~ :~~ pwdJco.tcJ u~xm *' n:cc~~:r<'f C Cl-.t:n~~ mto TI·.M Cl!pi·'<\1. dwiug - wus it Jununty of 'Ol; :, ott ~Y yau JOined

2(l ..,.

;md tanned the cnlity'! ~· ·"•J prior to tb:11. ·~mr;ttl. th~l m~;.Jtt'.:i' .. .!. I formed the cnJity on J uly I st. 200K

A

ili111 von r-clhrcd tr) Wl th '-)tudmm. ho'' wus (.' Chang~: Q So in rmtght~· tlu-c:c yenrs, (' (1~mgc had t' -· ray n1~ !L~ o!ficct,. ancl cmph~e~~ fi>r tt11: fw.l.it" raised appm.X"imatcl\ l(l 5 million· is ttral <:oi"W:t'~ /\ ~\trt> . \v~ tel;.,,vcd onr<::1~h Cl:flital /\ ln t.ltc tltre£ )•cnrs. T look. at it usC tn\·e~m~m~ mlc C C:htmt>.C 1ivu1 I npex C()f1~r,llt<>n ('htm~~ 1;3(1 r:us..'\! 1ts c::.p11slnf $211 m-ui tt h:ti£" o\>t ,al ''~lhl:r!imd. P,"'intanlv. <t:: w~tl ~~~ from ~m

2 utw,;lmcnt trom Clmstot' HenkeL miUi"ll f~ IU.,. lhc }fX) milil,,ll ;n Cl.lmi'>innittm With 0. s,, b. it ~rrc-ct t<! s.a.Y that .at lcn:>t trrun 3 Q•ta-tihtot Cttpilili •lOl n( N\!" Y <11·}; Cit} . 4 2(/):8, lmm 1ntct'.(i~'ll UJ' until thl' f<lin; t»i~'f tv Tb~ 10{1 nHtli,)]1 tenU~ W;ls aprmrtrntc.:! I'd

·~ s tlt~ ag~o\em tlmt '\;Js r~:~ct;.cd " 'tth r,)tr.Jd~m. hw.l {; ' ' ' i1) ih~ ll\.~1 • · "'' thl~ Ulf~ 1 eil~ thlll ~no 6 111(;1tti;)I1C{I 1h.:11 ilim: vc-.11 p e1 iod fmm thu middle (:f C!t.mgc only :m~etdcd. I Site~, iu ~::r~in~ ~tt<~l!~d· i .;~pill! I :<> pa.~ offtct."Th ~md i.:!l'lp!oy~s or ww: ~or,_~ lt• tl~ nuJdlc oflfsl l , tl-.c JOV miUilm \:trmc ~m

~ld.hw~l fWlds raised tl!!ll '''e!\.: :sctu..~Hy lll,-est~o:d? .-l the ='·'CfW in th.o1t l::"Sl) ~,-;-r !-..1it HU~'TE~ · ObJ~i!tia:t, f6nu l.l 01aJ' So of lh·.> 26 5 miJJK•Il \\~!\: tWI A. ~t• «)r thl! mvncy dt:~t w:ss iJt\'eSt<:o h\ i ti~ lwking at the lw miUitm. Uul l+f 1 .b.c 26 5 <.~nll til.s<} (;hrilitol'llcnkcl, \\~ \\'l:re e~blc ln mukc •• ,.,.c minion. 1 million \\~ l lu] Sl, t.'llm.'>~.:l'? \\CC\: ab!u to bc~h Pll)' cmpluj c-:s am! i!ll.O p.ay r~lf A Cun-cc1 ~~ru~ctmg partr.l..'n> t~ h~lp us lc- ;Jcn:t!)· Q. A t\.'\•· milhon to !he hl-'ma"-q ~1..-ct m mstitut1o:ml m\.;:~·w~ . 'UtJ ulli(•, \\C dld mo.kc :tOnic I !.nvmi, cot~·>

:r. im ..:slnwnl~ 1(1 '''"n:n(~Jo'\.' -· ''~ m:t~~: ,.,,nc m\ ""Sinlcr.<.i A Yt.~ lEi •Hl tx.~lv.:lf \l!' <; <..1\iln~e f(l "1m:hou-s.c f<~r., pntcnlltll 0 . ·10U,OGO lc u pw~-cl m A frica oomx:t'! fimd inw~llt\CI)t. .. 7

1\. Y~."' flfu: Of ftl(I:IU tn'\L":->1ltll"TJ[~ \\.'?!~Of (J.. And {.J' th•>!l".: - f'v~ ! USt llllt~ Om:~ J.~ 9 ~liiiiM ... inll:u irwelilUWill imo l~~i'" Syn~a~l\t: 11 ltlYL":\tnlcuts. Were there 1my otik!r inv~tm.:nls tha! .:r. V/~ ;illi(t t()nde sumc ~d1tiom.1L mn:SimcniS. ''h;ch we~ mr.dc with the).[,, - willi<)ll c,r did 1h.: rcrn:r in,h:;r ?. 1 mciU<~•Ithc "orehou·m1g nl Ure in'·cstiJICnl Jhr .(Nl to rutllling dt.:: <)pcn:titmsor (. Cilt:ll~C'! hiOltl:t~}. h1 uk~lJ;-:sl~ iu l t;rw<~ir. U$ .,, d l as o ^[11] MU t £UN1 ER. Oh;tX:ti()n form.

' ' ."! . 111\ ~l~l<ml ill A fr'i.:.'l l\1r IOtll'5l,ltlUilll\t: ;rnd A. Jlriml'lri!y. ~h~: rest \\em into lhc :Sl..~11mab~ ttgrit:ullutc in the Sulh~th~ra. op-:mli,m:; runt mnrkcllll~ of C Outn.-g~· und ils fttoU.. !r i:c fl•>~~~blc 1 an. nli~te~;t~ill~i'ut~ ~~ ~·ociifl~ (}, ~;.H w~li ~:c atnt>Uill n.;crci,~: from 11 i}.t.~Y 9 (?ages 33 to 3~> C<:;~ f i den i.: :i. ~J l Commu 11 i r;a ~ i ·:>ns Tnt , J .. t d. 321 gu,j,:.;ol.l R~v:J, ('!•'A, Ph.D. 4777 fl~ 9 ~t ~·~ ., s, ;;~N ~~ l'l hH1t."<<l1lt1~lll lhnl llttghl hiiVc· hc.:1>11 tnmh' '' tlh 1 ~'"JI<.~t lv I .J ~) ~~~~l'V.. lxs~; ^[01] u til( tt N(' 12 ut lhr limo'/ :>. A Wh~m J rir:.t m..:l wtlh thetll, m.' rc<!<,ll!Cdl\m 2 ~:4:Utt:l~l ~tl IO th1: ^[1] 11l'<llllllt1hh. h~JU~Ih!;. l\'l.hi\<\)O~i\':1. nut,JIIhllt j'VI111 in tim~ 1 \)1\ lllll h~Ji~o:\ \' ~~ 1• ltaJ :) ill ll~~tt 11 ~' :u. :;hl1 1l:tllc<l " 1'\'\llh Syue,11~" lw,:muil' ,:j r uflll~;lh~: i:t'<(·~lm~:tll'~ ll,cli ... ·w t111•~ 1.:11111\'I.Jh:r f ;s~;tuully thinl.: lhul :.lllrU\~ UU: :~lltJIII.llfll.'cttll~. 'l •1 S Q Wtt"'.lh~ !\tlll<i ) rmllil1:1 c:clthllh . ..:.,nMII\1\~l 6 l\ 111<:11 ~vn~ot, 1~1 m.\ :~~:1•lk~~d~·n :!h"' lh

e f. Ill "")Ill<.: l'ot lll I.)IIIIIOI)H!I thnftl~h (J)tt'l aiitHI:II \)\(ldl'!\' Ml1«1t~htl~(:tl~ tluJI \\'{1:1 \\ h~'ll lhl.l) ()f(\pt~:<~~l th\.• llc\'. "I ur \~ 11:1 tho.!tt• ;;t\liK mnount r •• mutHllll[t wh~:n tlll: 'l 1111111~ ~)~ ''N<. tl."

ll';llh(t()l lll l\ \\tell (}\ltldt ,1111 ¢ll't~Vd't (,> Whu psopv:t,' l.l lhl.i IIU\1 llilllll.''.' ~ ~~ £t A I bVIi\t\ ~Jilml (' CiHIUl\'-' lrtV~:ibtMll~' :it\11 A. ( hdi11\ 1~ lfll.l lhJ\\ lhl!IH:. ,j( ITI)' 111~llii~IV :~

l n u>;,~l:cll!t'lllh . J rhh1l< u ~~ llt'<!lllhYt~l,· . I il 0 .'<1:1\ c:., <:.nne lrum Mr l \IHin~. h:l'l~.:tlng ~•111'1 <•t :1 i l

tlUT* li11~r~·~ ll tdu!l\.!h "(!11'111 UllftHittlt\:I";HIIllll' m;\\ 1'!11 hwt I ) •• uuv. ~<II h\m I 2 dwntr'~lt~· ll ^[11] ;I'( 'l l 12 hut I ll<:h<:v~ lhli-1.'11\il)' 1'\:nJIUil'> llllll lhlit lh~hS '" l (. 1111\!mkd •~· I·~ '' <lk\ o:.r llQNilyn, !i,r ;sn~aw ~b\:rni',(tf\' <J 01.11~' So l•nck tn th\~ 1'11 ~t tn1'<!dft~, httcl I .~ :1 '3 ~~'111<: ,;mnlii'O~ili\ ~ fiiYIOIInl . ,,n lhu1tlll~ $'u ~Hd 11 ,:. a I IIIli' lllilliou \\ tt'i 1\'il:d r~u· thu ,,,~~~· ulivn,, dtiC ) 1 ) nu ulr~ltdy 1\.'\ 1~w~.:J ~W\1\hll'lh~ prinHif7V, \\IH.llb~r

ltlurk~Lil\~ <If<' Ch.ll\gc J)lh~ tit~!\\ :lt~hulu .. ltiH ul th,,,.,, 15 .i.:} th.,;;~ '1~ )lriiiUU)l(lfflllt!UIII:lr:,!» ftH<:~t'llllljltJ 11\:th'nal,.a, •'II 'I ~1 ^[11] f. f; ~ ( 111h<•ltll\"tll5 I'< II '"" runJ i."l Q ,\ud hy "\\ul'di(III~>!O!l '' whut '·'4\"lht.: f1 I tll,l. llttlw .. l. ~.'i 1 :J wurvll,>lll>luv.'' Th'1"11 fhr~X lhul \' v chf'\,;11t<~~~·r "! ~ (,l I !:ld \' HIJ (\'ltd bH>}!III~tht\;."S l'vl' Hllol ~·lill~)lJIII!I 1 :.t .a. I} 1\ YU'1

ptiur 1<1 Yt>III fie 'it lllt.'\' till!!.'/ t\ . I <l4tll't n."C .,u if I hmf nmd tltc ··<' lltc1~\ u''' !ll>lll<' ntlwr ~111111 1)1' ~~ 'rho lSl ,z(t l(J (ll(lj.!rttplttc•t •It' hfltf h\'~trd thi.'ITI wrh:cliy wtwn we f ll"ll ''-'t 21 llwtwy lnv,'~~l\'<1 Jll i!(lfH~ (}llwr \lw~"iilll~·ru ~··~n~ct? r :~

A T<> Ill~ 1\.'Cvll~o~ctilm unJ kll\:IIWY)' , 1\1' m..:l .;~ ~ Q O~:lY. I '<.1 JU,~: t1' IJ.O luwk !ll yc llit What t!llud. ml! i,. thflltl Wtt'~ u \~1'\ 2) ~~ conv~r~nthm:o~ with Mr c.,Hitl:l. ;! t, ~ •I ,. polclltlnll) h rlfl\lh!Yil:ll l \ \! IL'<.hllnlo~~. h\.'\:(IU~ II hupt\1\ ~d th1.: ~,l'fil!tvli~;V ~~r ~;t~;r'll'''·\ lll)ltld t'•tvl f:um .c:s .. 111\:lk'-'nt•,, rt;ltll thm >•·••llud lht\~· . . ·2 ~

\lwW.A\~,,;;. ••• -~ •• r.•~· ........... ____ •• ___ _ ______ --- ••••••••• ... ._h • , , , . . , , . . . . . . . . , , . , , , , . . _ , . , , . . . . . . . . . . . . , .__ . . . , ,_, , P:l•; -:: 3~ !i~I<P~ 40 ., ''lCclHIIlll wH)I Mr ( ulhnt inth,·litll ~,n,l '' tn1~;f Ctl l \'<1:'11 ct:ul l'f<,nl olttct <'lith<•" o•)llt~~' ~~~ a l'IVIIIfl~tltll

,L

... i,t)(\~, W:ur tiwtlll)t ~~~tt? 2 }lt,)li;Ctr~lf'~: 1\wJ ihii\ ^[1] R \\IIIli J '.\ll1111< ^[1] '1( illfl."''lillll.'tl ,(. :) A. To JXt~ nx~olkcr.imt, that i:s <"tlH\JCI. :l in 4 (}. I \Willi to ~l!lrt \\lth th"' \'~rv ftT::t So ttl tho1t ttnlr) during tht~ ttr:Jlll'IL~tin~

~ 5 Tll~<:Utltl Wh~·u rhd \ (1\t t\r ~t t\ll.'¢1 Mt' Cvllm"" .5 "''~u't ~~~lf l'lltlt• 1\11. the c:n:d~:ntlal:. <•f 1hc {. A. M~· IIMI\Ui'\' t!< thul I lit11l nrcr ~ cllt Mil.hnd psim .. cpal~. bot wtl:t u~:tunlly , ,~nu kti•H' , I ~ 'I 1 l!l.'fttunly had heard \ csy fl''"d thing" uhuut lllt•il' Cltllith; Jnd Michu~l f\vdo\\. alonA \\ iUt Jl1hn Pre\!<'"· a e

tf I ~~:ull o~om:o11\ tl Wn:' th~ hdllt\.' ~,r Mr bsii)I..HwunJ:; unu ~rcJtbiltt.' fe·nrn "') rwnnt:r . . l•lhll ^[111] g ~\ ,1<1\l lti \!d!'h :11.1tum~t 2C.lf)S ~ PrL~t1H1 .lO ·u (.!. Atld tJMI':; HI I hlll"IOII, <:t •ITJ.'(:I'; 10 Q ~'' lo ~ '"'· tt wm; th~ 1~dm•'f1lt(~. Ut•~ ~ ^[1] 1\ . N,, A•lllt:llly, Mtch~tt;l ~\·rl(,w'·) ~~~~~ld<~tl~': 111 1.1 llht~~~ lhC.: fl~,;Op1~' ^[1] 1 ~ ,_ MH T 1\ JN'rH<. OhJI.'<:lct•ll t<1 tolltl l\•J <IWlil<~htH\'lt.C, h(' 'll lh\' faCthli\•S of ft.' ^[1] 1H~ .~\ \ll::i~ I ' • •6 lJ I J ^[111] liMl RiV\.'T. Mn11«u~hu~U:\. I :; !hill Cill'rl.!<.:l'! ~· f 1\0IIId '~~:~ thfll }1111\' I \< ti:\l't..'\1 ll Ulltl~ lft (~. Attd whut \\' II<; the J'lllllllhl.! of' that tnL~tmu·· ,,\

L~

H1 hlr\1~ \I"" ll>UIIII) JIHri\M Ui (:11111 t!\~ 11f lJH' lt'\:hunl•lit,~ A. 'l'lwlrth;c.:llu~· \~ n'l >UI iUIJ1 ;<lucltntt •n~:;~hllt~ f(l 1~ 11) 1\l~l '' ilh th~o; f""llvil>trl,., ,,,.'In:\,.. •{, tJ~~ws. ,lulm J L it~·~· ~'llll(' !II. l~))\CJ f'lll?o((11), 1\ Uti \'Col y illlpl r.'iiM:Il fl> lhl/ 17 1,'1 h:dUJI~~~~~~' 1\lld hl' 11\11 pl~<JJ)IiJ ill\'t:IIVt.oJ. J {\' \'l(I\Wii l't\"1<tl•n had <tlmtl)l.t'l.i rJu,; mrclifltt .l••hn Pn;.~t<•Jl \\it:: 2u

1P

it. I'm ll<'ctmu whu1 I pi<:licdup wr~i thm thi:; n1) f){lttfl.:t uf t' Chlliii;O lnW~ihm:ctl" And il \\1\', ^[111] Jttli'.•~IJC\1 lhC' prino1p11b 1~1 wlwl ht: C"n:<id~:r~.:~lln h..: \HIS the/\ lt•lfJil itJ tCI'Ill!i c) I' lh~ flt'II'\Ci!mfl; ht\'01\'cd

1~ ~ ~ 20 ., \ '"11 Cvlllf'!.!llin~ uml im~:r\;':'ltin~ itl\'l!.'lmcnt ttrul "' knnx nl' tlw lwhoulot?.~ II '' nl,j, 1u my ntllt,l ·~Q ·~ · ...... ?l

~tt)J)I'tlllmit\ in .1 111du'')lr'll' tl111t .:l,uld tr,m .:I~Hm un t:C}I~>tl lln<l :.lmup ..t<Jl) ~) Mt !'rc11l(ll) \\ .rtlllcN:.Ih· ,1 11tll1 \11'111111 NJ~"T!:'IY ut u VC:I'J itti)Wt1unt tinw fm \ ,,u knvw , lnr

~~

2J

)'h.'\1' ¢lh.'lJ\Y 11\lh.th\li'i 11.'11111 at Ill~ huw. " ' 'HUll . ht~•lll'i\1 It~ \Ht!'l <llllll1io;;rr <). At lhllllhtit' ltnll ) nt1 hlr~ad) r.t\ i~woo ~ •!111.' '14 l )n o:\ll;i ~:vnw~. .. ·.' 25 uf ''"' hucl<t~I\JIIIIU llll.lh:.nuL11ilr . \\' U' it T~'Mt:< Mit 11\INlEI< Ohj1.:~:wm form Conf .id(, fl t ;l ;:d, (Wrt\TI\t,lld,t;:i.l !,;,),(H)f$ .tnt . Ltd . 322 - - .. _ , .

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) ; - ~ ~ . . . . . : - . . . . . .

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N " ) ~ I I ! f I 323 9 . .Preston expressly incorporates each of the above objections to the extent appHcable1n each specific respvnse to the interrogatories set forth below~ as if fully set furth in the answef to each specific interrogatory.

SPECIFIC RESPONSES AND OBJECTIONS

INTERROGATORY NO. l State the dates of service for your service on the board of directors ofTSL Subject to and \\~thout waiving Preston's objections. Preston responds as follows: Preston served on the board of directors ofTSl between the end of 2004 and on or about May4, 2009.

INTERROGATORY NO.2 Describe in detail tl1e nature of your service Of.l the board of directors ofTSI.

ANSWER:

Pre5tnn objoc.ts to. this interrogat{)ry as ~:wefly broad arl.d undllly burdensome in requestin~ that Pn!stO:n.d'Cscribe "'in detaw~ his $et:\ll(~. Preston ~so .~b.jects t9 this interr()gat~ry as va;gu~ and a.mbigu<.lU$ i~~ requ~sti,ng that Prestoo describe ~'the n.ature ·of'~ his $ervice .. P~ton ,,.,,.ill intecpret thi$ to be a request for Preston to. describe his serVice on tJ)e board of dh:ectors . .S'Ubjeet to and ·'rvitbout wnivi~ Prcston.•s objections, Preston. respond$ ·~s follows:.

The board of dire.ctor$ played· a.· roi~ :h'J. t.tle· ·~QVtmtW,'lW~ ·ot ' TSI~ · :wh,ieh · i:ncl.uderJ .respoQsibility fQt. tlw· ~iring amLnrlilg of the 'CEO~ :'P.tes.to~·h~<fpe~ pravid:e.:go:Verrt<m~e. ldentify each board meetit)g ·of TSl i.~;t ·wl~ich you .. P~:ticipat~ . and ~blte (l) where Sl.l9h

mee~ing )v·as held, · t) · wherJ. ~uqh nw~ting was hdct aml 3) \Vhether your. p~ttkipatlotJ w~ ilJ pe~~)n, hy Wlepnone, or b;t·som~ other· ~lectronic m~a.ns.

6 324

ANSWER:

Preston is not subject to the jurisdiction of this court. Accordingly, Preston objects to this request to the extent it does not seek .infonnation that relates to or is reasonably calculated to lead to admissible evidence regarding whether this court has jurisdiction over Preston. Preston objects to this interrogatory as overly broad and unduly burdensome in requesting that Preston identify "each" board meeting regardless of whether it has any connection to Texas. Subject to and \~ithout waiving Preston's obj~tions., Preston responds as fo llows:

Preston is not aware which meetings constituted TSI board meetings. He participaled in meetings or cans related to TSJ, however, that may have constituted TSJ board meetings on the following dates and locations, but Preston was never in Texas for any such m eetings or cal1s: Date : ;~ ; .~·~; .. : ~.:· - Location

Means I In Person I Telephone March 6, 2006 Massachusetts March 20, 2006 Massachusetts

I Telephone April 21, 2006 MassachusetlS June 19, 2006 Massachusetts In Person January l l-1 5,2007 Lugano, Switzerland In Person October 22, 2008 MassachusetlS Telephone

INTERROGATORY NO.4

Identify all payments you received of any nature from TSL

ANS\\'ER!

Preston is not subject to the j urisdiction of this court. Accordingly, Preston objects to this interrogatory on the grounds that it docs not seek infonnation that relates to or is reasonably calculated to lead to admissible evidence regarding whether this court has jurisdiction over Preston. Preston further objects on the grounds that this infonnation may be obtained directly from other entities that are subject to this court's jurisdiction, which would be tlte least intrusive and most efficient method for Intervenors: to obtain the infonnation they seek. Preston aJso objects to this request to tl1e extent it seeks proprietary infonnation, trade secrets or other confidential infonnation, disclosure of which would hann Preston or is protected fiom disclosure by confidentiality agreements.

7 325

INTERROGATORY NO.5

IdentifY all docwnents which you signed as an office or director ofTSL

ANSWER:

Preston is not subject to the jurisdiction of this court. Accordingly, Preston objects to this interrogatory on the grounds that it does not seek infonnation that relates to or is reasonably calculated to lead to admissible evidence regarding whether this court has jurisdiction over Preston. Preston also objects to this interrogatory on the grounds that it is overly broad and unduly burdensome is seeking "all documents" Preston signed without any limits, regardless of their connection to Texas. Preston further objects on the grounds that this infonnation may be obtained directly from other entities that are subject to this court's jurisdiction, which would be the least intrusive and most efficient method for Intervenors' to obtain the information they seek. Preston also objects to this request to the extent it seeks proprietary information, trade secrets or other confidential information, disclosure of which would harm Preston or Quantum Catalytics or is protected from discloS\lfe by confidentiality agreements.

INTERROGATORY NO. 6

Identify all investments that you made in TSI, whether such investment was made in money or services. Include in your response, 1) the date of such investment; 2) the amount of such investment; 3) the nmnber of share or other interest received on such investment; and 4) the returns, if any, received on such investment.

ANSWER:

Preston is not subject to the jurisdiction of this court. Accordingly, Preston objects to this interrogatory on the grounds that it does not seek infonnation that relates to or is reasonably calculated to lead to admissible evidence regarding whether this court bas jurisdiction over Preston. Preston further objects on the grounds that this information may be obtained directly from TSI. which would be tbe least intrusive and most efficient method for Interveoo~ to obtain the information they seek. Preston also objects to this request to the emnt it seeks proprietary information, trade secrets or other confidential infonnation, disclosure of which would bann Preston or is protected from disclosure by confidentiality agreements.

8 3 2 6 I N TE RR OGA T O R Y NO . 7 S t a t e t h e d a t e s o f s e r v i ce f u r you r s e r v i ce on t h e bo a r d o f d i r ec t o r s o f N C l 12 . AN S W E R : S ub j ec t t o a nd w it hou t V v a i v i ng P r e s t on ' s ob j ec ti on s , P r e s t on r e s pond s a s f o ll o w s :

. ? r e s t on s e r v e d o~1 t h e bo a .. ' " ( j o f d i r ec t o r s o f N C t 2 b e t w ee n M a y 2009 a nd S e p t e m b e r . 2 . 009 a nd aga i n b e t w ee n A ugu s t 2010 a nd a r ound M a r c h 2012~ w h c r t t h e t r u s t ee w a s a ppo i n t e d b y t he b a nk r up t c y j udg e f o r N C 12 .

I N T E RR O G A T O R Y N O . 8 D e s c r i b e i n d e t a il t h e n a t u r e o f you r s e r v i ce on t h e bo a r d o f d i r ec t o r s o f N C l 2 . A N S W E R : P r e s t on ob j ec t s t o t h i s i n t e rr og a t o r y a s ov e r l y b r o a d a nd undu l y bu r d e n s o m e i n r e qu e s ti ng t h a t P r e s t on d e s c r i b e ' • i n d e t a il » h i s s e r v i ce . P r e s t on a l s o obj~ts t o t h i s i n t e rr og a t o r y a s v a gu e a nd a m b i guou s i n r e qu e s ti ng t h a t P r e s t on de~cribe "" t h e n a t u r e o r • h i s s e r v i ce . P r e s t on w ill i n t e r p r e t t h i s t o b e a r e qu e s t f o r P r e s t on t o de..~cribe h i s s e r v j ce on t h e bo a r d o f d i r ec t o r s . S ub j ec t t o a nd w it hou t w a i v i ng P r e s t on · s ob j ec ti < ,. m s , P r e s t on r e s pond s a s f o ll < . ) W S ;

T h e bo a r d o f d i r ec t o r s p l a y e d a r o . l e i n t h e govem~mcc o f N C 12 , w h i c h i n c l ud e d r e s pon . ( ji b ilit y f o r t h e h i r i ng and f i r i ng o f t h e C E O . P r e s t on h e l p t > d p r ov i d e gov e m a n ce .

f N T E RR OG A T Q R V N O . 9 I d e n ti f y eac h bo a r d m ee ti ngo f N C l l i n w h i c h you p a r ti c i p a t e d a nd s t a t e (I) w h e r e s u c h m ee ti ng w a s h e l d , 2 ) w h e n s u c h m e e ti ng w a s h e l d . a nd 3 ) w h e t h e r you r p a r ti c i p a t i o n w a s i n p e r s on , by t e l e p ho n e , o r by s o m e o t h e r e l ec t r on i < : m ea n s .

9 3 2 7

ANSWER:

Preston is not subject to the j urisdiction of this court. Accordingly, Preston objects to this request to the extent it does not seek infonnation that relates to or is reasonably calculated to lead to admissible evidence regarding whether thjs court has jurisdiction over Preston. Preston objects to this interrogatory as overly broad and unduly burdensome in requesting that Preston identify " each" board meeting regardless of whether it has any connection to Texas. Subject to and without waiving Preston·s objections. Preston responds as follows:

Preston is not aware which meetings constituted NC12 board meetings. He participated in meetings or calls related to NC12, however, that may have constituted NC1 2 board meetings on the following dates and locations. but Preston was never in Texas for any such meetings or calls:

- Lcu::ation Date .· Means : In Person May 1, 2009 Massachusetts September 1 4, 201 0 Massachusetts In Person October 17, 201 0 Munich, Gennany Telephone November 24,2010 Massachusetts In Person November 29, 2010 Massachusetts In Person January 4, 2011 Massachusetts In Person In Person January 7. 2011 · Massachusetts February 21 , 2011 Massachusetts Telephone Frankfurt., Gennany TeleJ:>hone February 25, 201 t

INTERROGATORY NO. 10

Identify all payments you reocived of any nature from NC 12.

ANS\VER:

Preston is not subject to the jurisdiction of this court. Accordingly) Preston objects to thi s interrogatory on the grounds that it does not seek infonnation that relates to or is reasonably calculated to lead to admissible evidence regarding whether this court has jurisdiction over Preston. Preston further objects on the grounds that this information may be obtained directly from other entities that are subject to this court' s jurisdiction, which would be the Jeast intrusive and most efficient method for Intervenors ' to obtain the infonnation they seek.

10 328 P r e s t on a l s o ob j ec t s t o t h i s r eque s t t o t h e e x t e n t it s ee ks p r op r i e t a r y i n f o i D l a ti on , t r ade s e c r e t s o r o t h e r c on f i d e n ti a l i n f o r m a ti on , d i s c l o s u r e o f w h i c h w ou l d ha r m P r e s t on o r Q u a n t u m C a t a l y ti c s o r i s p r o t ec t e d f i o m d i s c l o s u r e by c on f i d e n ti a lit y a g r ee m e n t s . I N TE RR OGA T O R Y NO . ll

I d e n ti f y a ll do c u m e n t s w h i c h you s i gn e d a s a n o ff i ce r o r d i r ec t o r o f N C 12 . AN S W E R : P r e s t on i s no t s ub j ec t t o t h e j u r i s d i c ti on o f t h i s c ou r t . A cc o r d i ng l y , P r e s t on ob j ec t s t o t h i s i n t e rr og a t o r y on t h e g r ound s t ha t it do e s no t s ee k i n f o r m a ti on t h a t r e l a t e s t o o r i s r ea s on a b l y ca l c u l a t e d t o l ea d t o a d m i ss i b l e e v i d e n ce r ega r d i ng w h e t h e r t h i s c o w t h a s j u r i s d i c ti on ov e r P r e s t on . P r e s t on a l s o ob j ec t s t o t h i s i n t e rr og a t o r y on t he g r ound s t ha t it i s ov e r l y b r o a d a nd undu l y bu r d e n s o m e i s s ee k i ng " a ll do c u m e n t s " P r e s t on s i gn e d w it hou t a ny li m it s , r e g a r d l e ss o f t h e i r c onn ec ti on t o T e x a s . P r e s t on f u r t he r ob j ec t s on t h e g r o l D l d s t h a t t h i s i n f o r m a ti on m a y b e ob t a i n e d d i r ec tl y fr o m N C 12 , w h i c h w ou l d b e t h e l ea s t i n t r u s i v e a nd m o s t e ff i c i e n t m e t hod f o r I n t e r V e no r s ' t o ob t a i n t he i n f o r m a ti on t h e y s ee k . P r e s t on a l s o ob j ec t s t o t h i s r e qu e s t t o t h e e x t e n t it s ee k s p r op r i e t a r y i n f o r m a ti on , t r a d e s ec r e t s o r o t h e r c on f i d e n ti a J i n f o r m a ti on , d i s c l o s u r e o f w h i c h w ou l d h a nn P r e s t on o r i s p r o t ec t e d fr o m d i s c l o s u r e by c on f i d e n ti a lit y a g r ee m e n t s . U I TE RR OGA T O R YNO . U

I d e n ti f y a ll i nv e s t m e n t s t h a t you m a d e i n N C 12 , w h e t h e r s u c h i nv e s t m e n t w a s m a d e i n m on e y o r s e r v i ce s . I n c l ud e i n you r : r e s pon s e , 1 ) t h e d a t e o f s u c h i nv e s t m e n t; 2 ) t h e a m o W lt o f s u c h i nv e s t m e n t; 3 ) t h e nu m b e r o f s h a r e o r o t h e r i n t e r e s t r ece i v e d on s u c h i nv e s t m e n t; a nd 4 ) t h e r e t u r n s , i f a ny , r ece i v e d on s u c h i nv e s t m e n t . A N S W E R : P r e s t on i s no t s ub j ec t t o t h e j u r i s d i c t i on o f t h i s c ou r t . A cc o r d i ng l y , P r e s t on ob j ec t s t o t h i s i n t e rr og a t o r y on t h e g r ound s t h a t i t do e s no t s ee k i n f onn a t i on t h a t r e l a t e s t o o r i s r ea s on a b l y ca l c u l a t e d t o l ea d t o a d m i ss i b l e e v i d e n ce r e g a r d i ng w h e t h e r t h i s c ou r t h a s j u r i s d i c t i on ov e r P r e s t on . P r e s t on f u r t h e r ob j ec t s on t he g r ound s t ha t t h i s i n f o r m a ti on m a y b e ob t a i n e d d i r ec tl y fr o m T S I , w h i c h w ou l d b e t h e l e a s t i n1 J ' U S i v e a nd m o s t e f f i c i e n t m e t hod f o r l n t e r v e no r s ' t o ob t a i n t h e i n f o r m a ti on t h e y s ee k .

11 329 Preston also objects to this request to the extent it seeks proprietary information, trade secrets or other confidential infonnation~ disclosure of whjcb would harm Preston Ol' is protected fi·om disclosure by «>nfidentiali ty agreements. !NTKRROGATORYNO.l3

Identify aU companies, whether public or privat€; wifu offices in Texas, for which you have served on tbe board of directors or as 1m officer or etnpJoyee. Include in your response 1) the dates of such service, 2) the location from wb.ich you worked/served; 3) the compensation received; and 4) the position in which you served and/or were ~'l'lployed.

ANSWER:

Preston is not subject to the jurisdiction of tlus court. Acoording1y, Preston objects to this interrogatory to the extent that it does not seek iuformation tl1at relates to or is reasonably calculated to lead to admissible evidence regarding whether this oou.rt has jurisdiction over !>reston. Subject to and vvithout waiving Prestnn~s. o'bjections.l,reston responds as foUows:

Texas Syngas LLC }s the only company Vrith its principal place of business in Texas or incorporated in Texas for which 1 ^[1] reston was a <iirector) officer, or employee. Preston was a director of Texas Syngas LLC between 2004 and 2006. Describe in detail ~.ll of your truvel to Texas since 2000, IncltJde in yo"Ur response, 1) the

date of sucb travel~ 2) the purpose of such travel; and the aetivities YQU undertook white in Texas.

ANSWER:

Preston objects to this interrogatory to the extent it is overly broad Md unduly burdensome in seeking detailed information about travel that oc~urred so long ago that it (a) does not relate to specific jurisdiction, and (b) cann{)t be used ~s !i basis to support general jl.uisdic:tion, Subject to end w-ith()ut waiving Preston, s objections., Pre~ion responds as follows:

Preston trsvc1ed 10 T~xas on the foJiowiog Qecas:ions as a representative on behalf of ..

TB-1 Capital between 2006 and the date this suit was filed:

12 330 2009 A p r il 2 - 3 2009 M a y3 - 4 20 ) 0 D ece m b e r 30 .. 31 2011 ' M a r c h 16 - 1 7

I n a dd iti on , P r e s t on t r a ' v e l e d t o T e x a s on N ov e m b e r 10 , 2008 o . n b e h a l f o f h i s f o r m e r e m p l oy e r C - C h a ng e Inv~tm~~ts. P r e s t on m e t w it h M i c h ae l C o lli n s on t h i s t r i p . P r e s t on a l s o t: n : r v e l e d t o ' l e x a s i n M a y 2011 I D t c s tii ) ' a s t h e c o t po r e t e r e p r e s e n t a ti v e f Q r N C 12 , I n c . r e g a r d i ng a n a s s e t o w n e d b y t h e o o m p a ny h1 M i c h ae l S y d o w ' s d i vo r ce proc-eedings~

I N T E RR OG A T O R Y N O . 15 S t a t e w h e t h e r un y c o m p A n y ~Nl10lly O \ V I l e d by you r [ s i c ] o r a ll e n tit y c on t r o ll e d by you o w n s o r c on t r o l s a ny r ea l p r op e r t y i n T e x a s o r h a s a ny bu s i n e ss op e r a ti on s i n T ex a s < If s o . i n c l ud e i n you r r e s pon s e ) 1 ) t h e i d e n tit y o f s ll c h company~ 2 ) d e s c r i b e t h e r ea l p r op e r t y c r w n e d o r c on t r o ll e d ; a nd 3 } d e s c r i b e i n d e t a il t .. * l e n a t u r e o f s u c h bu s i n e ss . A N S W E R : P r e s t on i . s no t s ub j ec t t o t h e j u r i s d t e ti ( l n o f t h i s c ou r t . A cc o r d i ng l y , P r e s t t ) n ob j ec t s t o t h i s . i m e rr og a t o r y on t h e g r ound s t h a t it do c s no t s ee k i n f on m r ti on t h a t r e l a t e s t o o r i . s r ea s on a b l y ca l c u l a t e d t o l ea d t o a d m i ss i b l e e v i d e n ce r e g a r d i ng w h e t h e r t h i s c ou r t bu s j u r i s d i c ti on ov e r P r e s t on , S ub jt: c t t o a r i d w it hou t w a i v i ng l > r e m nn ' s : ob j ec ti on s . P r e s t on r e s pond s a s follo~'S:

N o c o m p a ny o r e n tit y w ho ll y o w ned o r cc m t r o H c d b y P r e s t o ll d i r ec tl y o w n s o r c on t r o l s a . ll y r ea l p r ope r t y i n " f e . x a s o r h a s an y bu s i n e ss op e r a ti o . n s i n T e x . a s .

1 N T E RR OG A T O R Y N O • . 16 S t a t e w h e t h e r a ny c o m p a ny i n w h i c h you ho l d ~ m a j o r it y i n t e r e s t o w n s o r c on t r o l s a ny r ea l pro~rty itl T e x a s o r h a . s f \ ny bu s i n e ss op e r n ti on s i n T e x a s . If s o ) i ndud e i n y () u r r e s pon s e ; l ) t h e i d e n tit y o f s n c h t ¥ l m p : , ny ; Z ) d e s c r i b e t h e r w 11 p r op ( .. ' T i y o w ned o r c on t r o l J e d ; M d ~} d e . < ) c r i b e i n d e t a il t h e n a t u r e o f s u c h bu s i n e ss .

331

ANSWER:

Preston is not subject to the jurisdiction of this court. Accordingly, Preston objects to this interrogatory on the groWids that it does not seek information that relates to or is reasonably calculated to lead to admissible evidence regarding whether this court has jurisdiction over Preston. Preston further objects to this interrogatory to the extent it is duplicative of Interrogatory No. 15. Subject to and without waiving Preston's objections. Preston responds as follows:

No company or entity in which Preston holds a majority interest directly owns or controls any real property in Texas or has any business operations in Texas.

INTERROGATORY NO. 17

Identify each investment you have made within the last 10 years in any company incorporated in Texas or having a principal office in Texas. Includ.e in yow- response the amount of yow- investment and the nature of such investment.

ANSWER:

Preston is not subject to the jurisdiction of this court. Accxmlingly, Preston objects to this interrogatory on the grounds that it does not seek information that relates to or is reasonably calculated to lead to admissible evidence regarding whether this court bas jurisdiction over Preston. Preston objects to this interrogatory as overly broad and \Dlduly burdensome in seeking detailed infonnation about events that OOCWTed so long ago that: (a) do not relate to specific jurisdiction. and (b) cannot be used as a basis to support general jmisdjction.

INTERROGATORY NO. 18

Describe in detail all communications which you have had with any pmon or entities located in Texas within the last five years. Include in your response the dates of such communications, the pwpose of such communications, and the means by which such communications were made.

ANSWER:

Preston objects to this intem>gatory as overly broad and unduly bmdensome in seeking detailed information about "all commtmications" over a fiv~yea:r period.

14 332 Subject to and without waiving Preston~s objections~ Preston responds as follows: Preston communicated by telephone with Michael Sydow on occasion during the last five years in relation to TSI and NC12. As a representative of TEM Capital, Preston communicated regularly with various individuals in Texas on behalf ofTEM Capital over the last five years.

15 3 33

VERIFICATION

My name is John Preston, my date of birth is March 18, 1950, and my address is 9 Martins Cove Lane, Hingham, MA 02043. I declare under penalty ofperjwy that the answers in the foregoing John Preston's First Amended Objections and Answers to Intervenor's First Set of Interrogatories are 1rue and correct to the best of my own personal knowledge and belief.

Executed on the.?.oday of March, 2014 JtLr~

ohnPreston

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May 16 Othert

Status' Confi .ra\ed , Information:VISIT WWW·EXECTBAVEL.CQM

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eTicket Receipt(s); 2797962668075 • PREST/J For your convenience, a text version of your itinerary is included in this e-mail and was current as of the time the e·mail was sent Please click on the link above or contact Your Travel Arranger for the most current infonnation. Virtually There® allows you to review or print your n:servations, as well as:

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VISIT US ON THE WEB AT WWW.EXECTRA VEL.COM

1 raESTONOOODl2 346 From: JUQX PALION To: Katbedne Frisina Trawl Reservation December JO rOf JOHN THOMAS PRESTON Subjec:t; Tuesday, December 28, 201B JO:U:37 AM Date: Your Travel Arranger is pleased to deliver your complete travel itinerary through Sabre® Virtually There®. Click here to access your reservation on the web or a mobjle deyjce Itinerary

JOHN THOMAS PRESTON

Reservation code: KPUDSE Travel Arranger Priority comments:

ETA/HRG OFFERS 24/7 IN-HOUSE EMERGENCY SERVICE

Thu, Dec 30 Flights: AMERICAN AIRLINES, AA 1365

From: BOSTON, MA (BOS) Departs: 8:40am Departure Terminal: TERMINAL B To : DAL NORTH, TX (OFI-1) Arrives: 12:1Spm Class: REDACTED Seat(s) TON/JOHN THOMAS - 18F Status: Confirmed Airline confirmation : KPUDSE Meal: Food for Purchase Smoking: No Aircraft: BOEING 757 JET Distance (in Miles): 1556 Duration: 4hour(s) and 35minute{s) Frequent Flyer: AMERICAN AIRLINES NR\'16022 Please verify flight times prior to departure

Thu, Dec 30 - Fri, Dec 31 Flights: AMERICAN AIRL1NES, AA 2282

From: DALLAS FT \>IORTH, TX ( DFW) Departs: 7:45pm - December 30 To: BOSTON, MA {BOS) Arrives : 12:10am -December 31 Arrival al: TERMINAL B Class: REDACTED . Seat(s) Status: Confirmed TON/JOHN THOMAS - 13A

Airline Confirmation: KPUDSE Meal: Food for Purchase Smoking: No Aircraft: BOEING 757 JET Dis tance (in Miles): 1556 Duration: 3hour(s) and 25minute(s) Frequent Flyer: ANERICAN At RLINES NRW6022 Please verify flight times prior to departure

Ma.rch 01 Other:

Status: Confirmed Infoilllation : VISIT WWN. EXECTRAVEL. COM

ARRANGER REMARKS:

VISIT US ON THE WEB AT WW~I. EXECTRAVEL.COM

•--MY DIRECT PHONE IS 202·496-2791•• •--AFTER HRS EMERGENCY SVC 202-828-0090 ..

eTicket Receipt(s):

0017943995686 - PREST/J

For your convenience, a text version of your itinerary is included in this e-mail and was current as of the time the e-mail was sent. Please click on the link above or contact Your Travel Arranger for the most current information.

PRESTONOIIn023 347 Virtually There® allows you to review or print your reservations, as well as: • Register for trip reminders and cancellation/delay notifications • View maps & driving directions • Review city guides & restaurant recommendations • Get up-to-date weather and much more!

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EXECUTIVE TRAVEL AS SOCIA TESIHR.G

VISIT US ON 11m WEB AT WWW.EXECTRA VEL.COM

PRESTOI'IOOOOZ4

3 48 From: JUQX DALTON To: l<i!!fletlne Ertsjoa subJect: Travel Reservauoa May ^[02] rcr JOHN lllOMAS PRESTON Date: Monday, May 02, 2011 9:10:55 AM Your Travel Arranger is pleased to deliver your complete travel itinerary through Sabre® Virtually There®. Click here to access your reservation on the web or a mobile device Itinerary

JOHN THOMAS PRESTON

Reservation code : CHMDGB Travel Arranger Priority Comments:

ETA/HRG OFFERS 24/7 IN-HOUSE EMERGENCY SERVICE

Mon, May 02 Flights: AMERICAN AIRLINES, AA 1771

From: BOSTON, MA {80S) Departs: 5:20pm Departure Terminal: TERMINAL B To : DAL 1-lORTH, TX (DF'.\') Arrives: 8:35pm Class: REDACTED Seat(s} Stacus: Confirmed TON/JOHN THOMAS - 21F

Airline Confirmation: CHMDGB Meal: Food for Purchase Smoking: No Aircraft: BOEING 757 JET Distance (in Miles): 1556 Duration: 4hour(s) and 15minute(s) Frequent Flyer: AMERICAN AIRLINES NRW6022 Please verify flight times prior to departure

y 03

REDACTED

PRESTOl'i00002S 349 REDACTED Wed, May 04 Flights: AMERICAN AIRLINES, AA 1466

From: DALLAS FT WORTH, TX (DFW) Departs: 6:35am To: BOSTON, MA (BOS) Arrives : ll :OOam al: TERMINAL 8 Arrival Cla 811 : REDACTED Seat(a) TON/JOKN THOMAS - 09F Status: Confi~ed Airline Confirmation: CHHDGB Heal: Food for Purchase SmoUng: No Aircraft: BOEING 737 - 800 JET Distance (in Hiles ): 15S6 Duration: Jhour(a) and 2Sminute(s) Fr~quent Flyer: AMERICAN AIRLINES HRW6022 Notes: II I II SEAT 9F Please verify flight times ,prior to departure

July 03 Other:

Statu.: Confirmed Information:VISIT WWW . EX&CTRAVEL.COH

ARMNGER REMIUU<S : VISIT OS ON TH& WEB AT WWW . EXECTRAVEL.COH

•--MY

DJRBCT PHONE IS 202-496-2791**

•-- AFTER HRS EMERGENCY SVC 202-828-0090••

eTicket Receipt(s) :

0018641721904 - PREST/J

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22 ~ ... C o un t y , T e x a s ; 23 P r o c ee d i ng s r e p o r t e d b y m a c h i n e s h o r t h a n d . 2 4 25

C

h e r y l L . P i e r ce , C S R E XH I B I T A - 12 3 5 2 2 A P P E A R A N C E S 1 2 F O R M I C HA EL D . S YDO W :

B O BB Y K I NG N E W M AN 3 S B O T NO . 00791347 L ill y , N e w m a n & V a n N e ss , L . L . P . 4 3355 W . A l a b a m a H ou s t on , T e x a s , 77098 5 F O R M I C HA EL D . S YDO W : 6

DAV I D J . W UKO S ON 7 S B O T NO . 22085600 A tt o r n e y a t l a w 8 4801 W ood w a y , S u1 t e 300 E H ou s t on , T e x a s , 77056 9 10 F O R M I C HA EL D . S YDO W : S HANNON L . B OUD R E AUX 11 S B O T NO . 24040550 A tt o r n e y a t l a w 12 O n e R i v e r w a y , S u it e 1700 H ou s t on , T e x a s , 77056 13 F O R K ELL I M C DONA L D S YDO W : 14

D

E NN I S BR I AN K ELL Y S B O T NO . 11217500 15 A tt o r n e y A t L a w 602 S a w y e r , S u it e 700 16 H ou s t on , T e x a s , 77007 17 F O R K ELL I M C DONA L D S YDO W : 18

LE ON EL F A R I A S , II S B O T N O . 2 40 5 0 58 3 19 A tt o r n e y A t L a w 202 T r a v i s S t r ee t , S u it e 210 20 H ou s t on , T e x a s , 77 002 21 ~ F O R K ELL I M C DONA L D S YDO W : 22 J E D E D I AH D . M O FF ETT S B O T NO . 24 051 06 9 23 A tt o r n e y A t L a w 101 0 L a m a r , S u i t e 8 6 0

24 H ou s t on , T e x a s , 77002 25 C h e r y l L . P i e r ce , C S R 35 3 3 1 F O R N C 12 , I N C . : A S H E R B . G R I FF I N S B O T NO . 24036684

2 S c o tt , D oug l a ss & M c C onn i c o , l . L . P . O n e A m e r i ca C e n t e r , 15 t h F l oo r 3 600 C ong r e ss A v e nu e A u s ti n , T e x a s , 78701

.., ij

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17 g :II .. a :: w ~

18 Q . 1 9 ( ~ w t r

20 ^[0] Q .

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21 a : w ~

22 $ u ~ . . .

23 2 4 2 5

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e r y l L . P i e r ce , C S R 35 4 W I T N E SS I ND E X D i r ec t C r o ss R e d i r ec t R ec r o ss J ohn P r e s t on 63 80 100 15 16 17 18 19 20 21 22 23 24 25

C h e r y l L . P i e r ce , C S R 3 5 5 63 B e s ea t e d .

J

OHN P R E S T ON w a s ca ll e d a s a w it n e ss a nd h a v i ng b ee n f i r s t du l y s w o r n , t e s ti f i e d a s f o ll o w s :

D

I R E C T E XA M I NA T I ON QU E S T I ON S B Y H R . N E W M AN : W ill you s t a t e you r n a m e , p l ea s e . Q . A . J ohn I . P r e s t on .

A n d , H r . P r e s t o n , g i v e t h e c o u r t , i f you Q . w ou l d , a t hu m bn a il s k e t c h o f you r e du ca ti on . A . I w e n t t o t h e U n i v e r s it y o f W i s c on s i n f o r phy s i c s . I go t a M a s t e r ' s i n phy s i c s a nd N o r t h w e s t e r n U n i v e r s it y f o r a n M DA . a . A nd i f you c ou l d , w e r e you t h e d i r ec t o r o f 15 t ec hno l ogy a ny w h e r e? A . Y e s , I w a s . 16 Q . W h e r e w e r e you t h e d i r ec t o r o f t ec hno l ogy ? 17 A . I w a s t h e d i r ec t o r o f t ec hno l ogy , d e v e l op m e n t 18 ^[4] ff i o f t ec hno l og y li ce n s e d a t H I T . i

19

I

Q . A nd w h e n w a s t h a t , s i r ? 20 I s t a r t e d a t H I T -- I h a v e h a d m a ny r o l e s a t A . 21 M I T ; bu t I s t a r t e d i n 1977 , D ece m b e r o f 1977 ; a nd I 22 s till h a v e a n a ppo i n t m e n t a t H I T . 23 Q . A nd h a v e you r ece i v e d a ny a ppo i n t m e n t s t o 24 2 5 a dv i s o r y p o s iti o n s ?

C h e r y l L . P i e r ce , C S R 356 T H E C OU R T : A r e you ca lli ng t h i s m a n a s a n e xp e r t ? M R . N E W M AN : W e ll , j udg e , 1n p a r t , y e s . T H E C OU R T : E xp e r t on w h a t ? H R . N E W M AN : W e ll , b a s i ca ll y a s it

r e l a t e s t o t h e i r c l a i m w it h r e g a r d t o t h e F a ll R i v e r R ea lit y e n tit y . I b e li e v e , t h e r e i s a n a ll e g a ti on - i f t h e r e i s no t go i ng t o b e a n a ll e g a ti on t h a t t h a t i s s o m e a s s e t t h a t M r . S ydo w o w n s f o r pu r po s e s o f t h i s h ea r i ng - -

T H E C OU R T : I t hough t t h a t t h i s a r gu m e n t w a s ov e r w h e t h e r o r no t M r . S ydo w w a s s till g e tti ng $30 , 000 . 00 fr o m N C 12 .

M R . N E W M AN : T h a t i s . I w ill o ff e r t h a t t e s ti m ony , t oo ; bu t I don ' t w a n t t h e m t o s a y t h a t 15 I t h e r e i s s o m e a dd i ti on a l s ou r ce o f m on e y f o r M r . 16 S ydo w . S o I a m j u s t go i ng t h r ough t h a t . I ca n s p ee d 17 g d

18 it up . ~ ^[4] ~ ~ i

T H E C OU R T : Q u i c k l y . 19 ^[0] !

M R . N E W M AN : T h a nk you , j udg e . ~ « 20 f !

Q . ( B y M r . N e w m a n ) Y ou h a v e s i gn i f i ca n t 21 c w ~

e xp e r i e n ce i n e n titi e s w h i c h o w n r ea l e s t a t e a nd / o r 22 ~ ^[2] g

p a t e n t s a nd t h i ng s o f t h a t n a t u r e? 23 ~ 24 A . Y e s . s i r . Q . A nd a r e you on t h e bo a r d o f d i r ec t o r s o f 25 C h e r y l L . P i e r ce , C S R 3 5 7 65 N C 1 2 ? A . I a m . Q . A nd w h a t do e s N C 12 do ? A . N C 12 i s a d e v e l o p m e n t s t a g e c o m p a ny t h a t i s

t r y i ng t o d e v e l op a r eac t o r t h a t c onv e r t s c o a l i n t o n a t u r a l g a s o r s yn t h e ti c n a t u r a l g a s .

Q . D o e s N C 12 o w n s i gn i f i ca n t li ce n s e s a nd li ce n s u r e f o r p a t e n t s ? A . I t t ook a li ce n s e f o r s o m e o f t h e c o r e b ac kg r oun d p a t e n t s on h i gh t e m p e r a t u r e li qu i d m e t a l c h e m i s t r y . S o , y e s ; a nd it h a s d e v e l op e d it s o w n p a t e n t a pp li ca ti on s t h a t a r e i n v e n ti on s t h a t I don ' t t h i nk a r e f il e d y e t .

a . A nd w it h r e g a r d t o t h e li ce n s e s t h a t N C 12 h a s o r h a d a r i gh t t o , w h a t e n tit y o w n s t h e p r i m a r y c o r e 15 I p a t e n t li ce n s e s ? 16 M R . K E LL Y : I a m ob j e c ti ng t o h ea r s a y , 17 g ! . ? .. C E : .., Y ou r H ono r .

18 : ^[1] ! T H E C OU R T : O v e rr u l e d . 1 9 ~ " ' li

I f you kno w . 2 0 f ~ T H E W I T N E SS : Y e s , s i r .

21 ~ ~

A . S o t h e p a t e n t t h a t w e r e li ce n s e d w e r e 2 2 ~ u ~ ^[0] ...

li ce n s e d fr o m a c o m p a ny ca l l e d Q u a n t u m C a t a l y ti c s 2 3 w h i c h i s a c o m p a ny t h a t I h e l p e d c r e a t e . 2 4 Q . ( B y M r . N e w m a n ) A nd N C 12 h a s b ee n i n 25

C h e r y l L . P i e r ce , C S R 358 66 e x i s t e n ce f o r a littl e ov e r a y ea r ? 1 2 A . T h a t i s c o rr ec t .

a . S o it i s k i nd o f a s t a r t - up c o m p a ny ? 3 A . T h a t i s c o rr ec t . 4

a . N o w , ho w m u c h h a s N C 12 ea r n e d ? H o w m u c h i n r e v e nu e a nd ea r n i ng s h a s N C 12 h a d s i n ce it s i n ce p ti on ? A . T o t h e b e s t o f m y kno w l e dg e ze r o . a . N o t o n e p e n ny ? A . T h a t i s c o rr ec t . Q . H o w i s it t h a t N C 12 h a s p a i d s a l a r i e s a nd it s

o ff i ce r s a nd / o r e m p l oy ee s ? A . N C 12 r a i s e d s o m e v e n t u r e ca p it a l i nv e s t m e n t s fr o m i nd i v i du a l s , a nd it h a s b ee n u s i ng t h a t m on e y t o 15 s uppo r t it s e l f . .. a . H a s t h e r e b ee n d i ff i c u lt y i n ob t a i n i ng f und s i 3

16 I fr o m i nv e s t o r s t o c on ti nu e t h e f i n a n c i ng f o r N C 12 ? 17 g .. a : M R . K ELL Y : ~ I w ill ob j ec t t o h ea r s a y , 18 " ' i

19 Y ou r H on o r . w m T H E C OU R T : S u s t a i n e d . 20 ~ M R . N E W M AN : Y ou s a i d s u s t a i n e d it .

21 ~ T H E C OU R T : I s u s t a i n e d · t h e ob j ec ti on . 22 ~

I

^[0] ... T h e on l y w a y t h a t h e i s go i ng t o kno w t h a t i s w h a t 23

24 s o m e body e l s e t o l d h i m . a . ( B y M r . N e w m a n ) Y ou ce r t a i n l y a r e a c r iti ca l 2 5 C h e r y l L . P i e r ce , C S R 359 67 p a r t y i n ob t a i n i ng f und s f o r N C 12 ? T H E W I T N E SS : I h a v e b ee n t h e p r i m a r y f und r a i s e r f o r t h e c o m p a ny ov e r t h e l a s t f e w y ea r s , Y ou r H ono r .

a . ( B y M r . N e w m a n ) A nd ho w m u c h m on e y h a s b ee n r a i s e d f o r N C 12 ? M R . K ELL Y : O b j ec t t o h ea r s a y , a nd ob j ec t t o r e l e v a n ce . T H E C OU R T : O v e rr u l e d . A . N on e . If you go b ac k t o N C 12 ' s p r e d ece ss o r c o m p a ny w h i c h w a s ca ll e d T e x a s S yng a s . M R . K ELL Y : O b j ec ti on t o non r e s pon s i v e . a . ( B y M r . N e w m a n ) I a m j u s t t a l k i ng a bou t N C 12 r i gh t no w . 14 A . I w i ll h a v e t o r e v i e w t h e r ec o r d s . 15 ... T H E C OU R T : A ll r i gh t . S o you don ' t ~

16

I

kno w . 17 g ~ T H E W I T N E SS : I don ' t kno w e x ac t l y , no ,

18 ~ • a : ! r s i r .

19 ! I

a . ( B y M r . N e w m a n ) S o you don ' t kno w e x ac tl y . 20 D o you h a v e a b a ll p a r k f i gu r e , s i r ? 21 a : ~ ~

M R . K ELL Y : I ob j ec t t o a s k e d a nd 22 ~ f j ~ a n s w e r e d , Y ou r H ono r .

23 T H E C OU R T : O v e rr u l e d . 2 4 G i v e u s you r b e s t gu e ss t i m a t e . 25 C h e r y l L . P i e r ce , C S R 3 6 0 68 A . B e s t gu e ss ti m a t e f o r N C 12 i s a bou t $5 . 2 m illi on a s c onv e r ti b l e d e b t . a . ( B y M r . N e w m a n ) A nd w h a t i s c onv e r ti b l e d e b t ? A . C onv e r ti b l e d e b t m ea n s t h a t it w a s g i v e n t o t h e c o m p a ny a s d e b t w h i c h m ea n s t h e c o m p a ny w a s ob li g a t e d t o r e p a y it .

a . A s a p r o m i ss o r y no t e? A . A s a p r o m i ss o r y no t e t h a t w ou l d m a t u r e a s o f

S e p t e m b e r 3 0 t h o f t h i s y ea r , s o a w e e k a nd a h a l f a g o . a . A nd w h e n t h a t m a t u r e d , w a s it e nough m on e y i n N C 12 t o p a y t h e p r o m i ss o r y no t e b ac k ? A . N o , s i r . S o w h a t w a s don e w it h r e g a r d t o t ho s e no t e s ? Q . M R . K ELL Y : Y ou r H ono r , I a m no t go i ng t o 14 g e t t h e s u s t a i n p r ob a b l y ; bu t I w a n t t o h a v e a r unn i ng 15 ., ij

ob j ec ti on on h ea r s a y . E v e r y t h i ng t h a t h e 1 s t a l k i ng 16 I 17 a bou t i s h ea r s a y . 8 ~ .. C l ( B y M r . N e w m a n ) D o you h a v e p e r s on a l

18 Q . II: I

k no w l e d g e o f w h a t I a m a s k i ng you a bou t ? 19 ~ w .. a : & : A . Y e s , s i r . 20 ~

H R . M O FF ETT : Y ou r H ono r , ca n w e t a k e t h e 21 a : ~ . i : w it n e s s on vo i r d i r e? 22 t l ~ .. . T H E C OU R T : N o .

23 M R . N E W M AN : A nd I w ou l d li k e on e l a w y e r , 2 4 25 j udg e .

C h e r y l L . P i e r ce , C S R 36 1 69 T H E C OU R T : T h a t w ill b e M r . K e ll y . M R . N E W M AN : A ll r i gh t .

a

.

( B y M r . N e w m a n ) W it h r e g a r d t o -- I t h i nk m y qu e s ti on w a s : D i d N C 12 h a v e s u ff i c i e n t f und s t o m ee t t h e ob li g a ti on t o p a y t h e p r o m i ss o r y no t e b ac k ?

A . N o , s i r . T H E C OU R T : W e ll , no w ho l d on j u s t a m i nu t e . H e m a y b e a f und r a i s e r , bu t y o u h a v e n o t m a d e t h e ti e t h a t h e kno w s e nough a bou t t h e d a y - t o - d a y m a n a g e m e n t o f N C .

H R . N E W M AN : Y e s , s i r . 12 a . ( B y M r . N e w m a n ) Y ou a r e a bo a r d m e m b e r o f 13 14 N C 12 ? H R . K ELL Y : O b j ec t t o l ea d i ng , Y ou r 15 H ono r . 16

T H E C OU R T : S u s t a i n e d . 17 a . ( B y M r . N e w m a n ) A r e you a bo a r d m e m b e r o f 18 N C 12 ? 1 9 A . Y e s , s i r . 20

a . A s a bo a r d m e m b e r o f N C 12 , a r e p a r t o f you r 21 du ti e s a nd ob li g a ti on s t o r e v i e w t h e m a j o r f i n a n c i ng 22 s it u a ti on s o f N C 12 ? 23 24 A . Y e s , s i r .

a . A nd h a v e you don e t h a t ? 25 C h e r y l L . P i e r ce , C S R 3 6 2 70 A . Y e s , s i r . Q . A nd a s p a r t o f t h a t ob li g a ti on a nd you

ca rr y i ng ou t you r du ti e s , d i d you c o m e t o t h e d e t e r m i n a ti on w h e t h e r N C 12 h a d t h e a b ilit y t o p a y b ac k t h e p r o m i ss o r y no t e s t h a t a r e du e?

M R . K ELL Y : O b j ec ti on , Y ou r H ono r . T h e qu e s ti on i s b a s e d on h ea r s a y . T h e s e a r e do c u m e n t s t h a t I h a v e a n i ss u e w it h b eca u s e I ca n ' t g e t t o t h e m , Y o u r H o n o r , t o s a y w h e t h e r t h e y a r e r i gh t o r t h e y a r e w r ong .

M R . N E W M AN : I d i dn ' t a s k h i m a ny t h i ng a bou t a do c u m e n t , j udg e . H R . K ELL Y : W e ll , I kno w bu t t h a t i s w h a t t h e qu e s ti on i s b a s e d on . 14 T H E C OU R T : A r e you t h e c h i e f f i n a n c i a l 15 ~ g o ff i ce r f o r t h e c o m p a ny ? 16 $

§

T H E W I T N E SS : N o , s i r .

17 g ~ T H E C OU R T : W h a t i s you r i nvo l v e m e n t w it h

18 ^[2] • ~

t h e c o m p a ny d a y - t o - d a y ? 19 ! !

T H E W I T N E SS : I h a v e b ee n w o r k i ng w it h ~ w 20 ~

t h e c o m p a ny r e a ll y a l m o s t d a y - t o - d a y t r y i ng t o r a i s e 21 ~ m on e y a nd t r y i ng - - ~ 22 ~ u l

T H E C OU R T : B u t you a r e no t i nvo l v e d i n ^[0] 23 ~

t h e d a y - t o - d a y m a n a g e m e n t: i n o t h e r w o r d s , t h e h i r i ng ? 24 T H E W I T N E SS : N o , s i r . 25 C h e r y l L . P i e r ce , C S R 363 71 T H E C OU R T : I w ill s u s t a i n t h e h ea r s a y ob j ec ti on . a . ( B y M r . N e w m a n ) M r . P r e s t on , a lt hough you a r e no t i nvo l v e d i n t h e d a y - t o - d a y i nvo l v e m e n t w it h t h e h i r i ng a nd t h e f i r i ng o f e m p l oy ee s , a r e you i nvo l v e d w i t h v i r t u a ll y t h e d a y - t o - d a y i nvo l v e m e n t w it h t h e f i n a n ce s r e l a t e d t o t h e c o m p a ny ; i n o t h e r w o r d s , m on i e s a v a il a b l e t o p a y d e b t a nd m on i e s a v a il a b l e t o p a y s a l a r i e s ?

M R . K ELL Y : O b j ec ti on , a s k e d a nd a n s w e r e d . I t p r e s uppo s e s t h a t h i s r e s pon s e i s go i ng t o b e b a s e d on s o m e do c u m e n t . S o m y ob j ec ti on i s h ea r s a y .

M R . N E W M AN : Y ou r H ono r , 1 t i s no t 14 h ea r s a y . I a m no t a s k i ng a bou t a do c u m e n t . I a m 15

" ii a s k i ng w h e t h e r h e kno w s a bou t t h e f i n a n c i a l c o nd iti o n 16 i i

o f t h e e n tit y .. 17 g c

T H E C OU R T : W e ll , l e t ' s j u s t p l a y t h a t .. 18 ~ i

ou t a littl e b i t . H e i s o n t h e bo a r d o f d i r e c t o r s . 19 I ll a : I

W ou l dn ' t d i r ec t o r s ' m i nu t e s , m e m o r a nd a , 20 ~ a ll o f t h o s e t h i ng s t h a t p a ss b ac k a nd f o r t h b e t w ee n 21 ~ c t c o m p a n i e s a nd t h e i r op e r a ti ng o ff i ce r s a nd bo a r d o f

22 I ll u f ... d i r ec t o r s b e r e l e v a n t t o t h i s ? 23

M R . N E W M AN : A b s o l u t e l y r e l e v a n t , Y ou r 24 H ono r , a nd a b s o l u t e l y w ill r ec o r d w h a t t h e p a r ti e s 25 C h e r y l L . P i e r ce , C S R 36 4 f"L did ; but Mr . Kelly's proposit i on is in reverse . They meet, they discuss it , they figure out what the situation is, he has personal knowledge of the situation; and that is documented in some minut e s somewhere and in the financial documents somewhere .

I am not asking him about the financial document . I am asking him about his specific knowledge ; and, judge , they are sword and shield i ng it. What they say is , "Either gi ve us the documents which we have not requested . " They acknowledge they have not requested appropriately . They have never requested the documents, judge , from NC12 like they were required to do .

13 And now they are saying , "Well, si nee 14 they didn't produce document that weren ' t reques ted 15

I

properly, this witness can ' t testify to what he 16 i

personally knows because it also happens to be

17 g 12 .. a:: contained in the documents somewhere .u

18

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l!'

THE COURT : He has already testified that 19

I

Ill ~ they invested - - that he got about $5.5 million in

20 ~ ....

II:

venture capital , that on September the 30th, 2010 , the

21 ei ~ .. «: Ill debt came due ; and it wasn't paid .

22

(J

:! a: ... (By Mr . Newman) Mr . Preston , does Mr. Sydow Q. ^[0] 23

set his salary or does t he board set his salary? 24 A. The board of directors s ets the salary for 25 Cheryl L. Pierce, CSR 3 6 5 73 t h e C E O . a . A r e you on t h e bo a r d o f d i r ec t o r s ? A . I a m . a .

I s M r . S ydo w on t h e bo a r d o f d i r e c t o r s ? A . Y e s . a . W ho e l s e i s on t h e bo a r d o f d i r ec t o r s ? A . C h r i s t oph e r H e nk l e .

T H E C OU R T : I s M r . S ydo w t h e C E O ? T H E W I T N E SS : H e i s t h e C E O , y e s .

a . ( B y M r . N e w m a n ) B e i ng t h e C E O , ca n h e un il a t e r a ll y s e t w h a t h i s s a l a r y i s ? A . N o , t h e bo a r d s e t s h i s s a l a r y . a . I s t h e r e s u ff i c i e n t f und s no w i n N C 12 t o

c on ti nu e p a y i ng M r . S ydo w t h e s a l a r y ? M R . K ELL Y : O b j ec ti on , Y ou r H ono r . T h e r e i s no b a s i s f o r h i m kno w i ng t h a t . T H E C OU R T : I w ill t a k e h i s op i n i on a nd g i v e it t h e w e i gh t t h a t I t h i n k it d e s e r v e s . A . T h e bo a r d do e s r e v i e w f i n a n c i a l - - T H E C OU R T : I s it s u ff i c i e n t m on e y t o p a y M r . S ydo w ' s s a l a r y ? T H E W I T N E SS : N o , s i r . T H E C OU R T : I n you r op i n i on ? T H E W I T N E SS : N o , s i r .

a . ( B y M r . N e w m a n ) A r e you t r y i ng t o s ec u r e C h e r y l L . P i e r ce , C S R _ . . . 3 6 6 78 1 s a l a r y ? 2 A . Y e s . 3 Q . W it h r e g a r d t o t h e r e h a s b ee n a n i ss u e o f 4 F a ll R i v e r R ea lit y . 5 I s t h e r e a n e n tit y t h a t you a r e a w a r e

M R . K ELL Y : O b j ec ti on , Y ou r H ono r , 6 7 r e l e v a n ce .

T H E C OU R T : O v e rr u l e d . 8 M R . N E W M A N : W e l l , j ud g e 9 T H E C OU R T : I h a v e ov e rr u l e d . Y ou ca n 10 11 p r o cee d . M R . N E W M AN : J udg e , I m i gh t ca n c u t t h1 s 12 13 s ho r t i f I ca n a dd r e ss t h e p r e s e n t c oun s e l f o r t w o 14 s ec ond s . 15 A r e you a ll go i ng t o b r i ng up a ny t h i ng

a bou t F a ll R i v e r R ea lit y ? 16 M R . K ELL Y : E v e n t u a ll y , s u r e . 17 M R . N E W M AN : W e ll , I a m t a l k i ng a bou t i n 18 t h1 s h e a r i ng . 1 9 M R . K ELL Y : O t h e r t h a n w h a t you a ll s a i d , 20 you kno w , t h a t h e o w n s it; a nd I m i gh t b r i ng t h a t up 21 w it h M r . S ydo w o r s o m e body bu t no t w it h t h i s guy . 22 M R . N E W M AN : O k a y . 23 a

.

( B y M r . N e w m a n ) H r . P r e s t on , w ho o w n s F a ll 24 25 R i v e r R ea lt y ?

C h e r y l L . P i e r ce , C S R 3 67 79 A . N C 12 t o t h e b e s t o f m y kno w l e dg e o w n s F a ll R i v e r R e a lt y . Q . W h a t do e s F a ll R i v e r R ea lt y o w n ? A . F a ll R i v e r R ea lt y o w n s a p i ece o f p r op e r t y

l o ca t e d a t 421 C u rr e n R o a d i n F a ll R i v e r , M a ss ac hu s e tt s .

Q , W h e r e d i d t h e m on e y c o m e fr o m t o pu r c h a s e t h a t r ea l p r op e r t y ? A . F r o m N C 1 2 . Q . N C 12 c u t a c h ec k ? A . Y e s . Q . W a s F a ll R i v e r R ea lt y -- w hy w ou l d N C 12 , f o r

12 e x a m p l e , p a y m on e y f o r a no t h e r c o r po r a ti on t o o w n a 13 p a r ce l o f p r op e r t y ? 14

M R . K ELL Y : Y ou r H ono r , I ob j ec t t o t h e 15 I r e l e v a n ce . I ob j ec t t o h ea r s a y , t oo . 16 a T H E C OU R T : O v e r r u l e d . 17 g d ~ .. ( B y M r . N e w m a n ) W hy m i gh t you s e t up a Q .

18 c r d i ff e r e n t c o m p a ny ? 1 9 f 12 ...

A . I t i s no r m a l t o p u t p r op e r t y i n a s e p a r a t e 2 0 ~ c o m p a ny a nd t h e r ea s on f o r do i ng t h a t i s t h a t it 21 c r ~

e n a b l e s you t o g e t a m o r t g a g e on t h e p r op e r t y . I t i s & i : 22 r J ~ ...

a no r m a l bu s i n e ss op e r a ti on . If you h a v e a bu s i n e ss 23 ov e r i n C o m p a ny A ; a nd you h a v e go t t h e r ea l e s t a t e i n 24 C o m p a ny B ; a nd t h e r ea s on f o r do i ng t h a t i s you ca n 25 C h e r y l L . P i e r ce , C S R 36 8 82 S ydo w , h a v e n ' t you , s i r ? A . Y e s , s i r . A s I s a i d , I w a s on t h e bo a r d o f T e x a s S yng a s . Q . A nd T e x a s S yng a s w a s a n o r g a n i za ti on t h a t d i d e ss e n ti a ll y t h e s a m e t h i ng s t h a t N C 12 do e s ? A . T e x a s S yng a s r e - o r g a n i ze d i n t o N C 12 . Q . A nd do you k no w t h a t M i c h ae l S ydo w m ov e d h i s

s t o c k ou t o f T e x a s S yng a s i n t o a no t h e r c o r po r a ti on n a m e d Z yg o m e t a?

H R . N E W M AN : O b j ec ti on . T h a t a ss u m e s f ac t s t h a t a r e no t i n e v i d e n ce . T H E C OU R T : O v e rr u l e d . 12 D o you kno w t h a t ? 13 T H E W I T N E SS : Y e s . 14 ( B y H r . K e ll y ) T h a t h e m ov e d h i s s t o c k ou t o f Q . 15 I Z ygo m a t a i n t o N C 1 2 , do you k no w t h a t ? 16 § A . Z ygo m a t a w a s a n e n tit y 17 g T H E C OU R T : D o you kno w t h a t . t h a t i s a ~ 18 • II; I

y e s o r no a n s w e r . 1 9 .. ..

II;

T H E W I T N E SS : Y e s , s i r . ~

20 ~ " ' a :

( B y H r . K e ll y ) W e r e you on t h e bo a r d o f 21 Q . ~ ti: d i r ec t o r s o f T e x a s S yng a s ?

22 : 3 ~ e

A . Y e s . 23 Q . H o w m a ny p e op l e w e r e w it h T e x a s S yng a s , s i r ? 24 A . H o w m a ny p e op l e ? 25 C h e r y l L . P i e r ce , C S R 3 6 9 108

REPORTER'S CERTIFICATE

THE STATE OF TEXAS ) )

COUNTY OF HARRIS

I, Cheryl L. Pierce, Deputy Official Court Reporter in and for th e 308th District Court of Harris County , State of Texas , do hereby certify that the above and foregoing contains a true and correct transcription of all portions of evidence and other proceedings requested in writing by counsel for the parties to be included in this volume of the Reporter's Record, in the above-styled and numbered cause, all of which

12 occurred in open court or in chambers and were 13 reported by me .

fr' ... _ 14 I further certify that this Reporter's Record of the proceedings truly and correctly reflects the 15 exhibits, if any, admitted by the respective parties . 16 I further certify that the total cost for the 17

preparation of this Reporter's Record is $648.00 and 18 was paid by the Respondent. 19 20 WITNESS MY OFFICIAL HAND this the 26th ~ay of 21 October, 2010 .

ffi Ul s

22 23

CHERYL PIERCE, Texas CSR 2711 Expirat '· n Date: 12/31/2010 24 c

Deputy Official Court Reporter

25 308th District Court Houston , Harris County, Texas Cheryl L. Pierce, CSR 370 No. 2010-027!0 In the Mauer or the Marriage or

IN THE DISTRICT COURT OF

Michael D. Sydow and KeUi McDonald Sydow HARRISCOU~7Y,TEXAS and in the interest of Micbael Wyatt Sydow, n minor child

308TH JUDICIAL DISTRfCT

DIRECT QUESTIONS TO BE PROPOUNDED TO THE WITNESS

Custodian of Records for: Compass Bank, Brokerage Dept. C/0 CT Corporation System Rtcords Pertaining To: See Exhibit A Type of Records: Any and all records as describ~od on the auachecJ Exhibit 'A' 2. Please state by whom you are employed and tbc business address.

Answer: 13B i /4 C:~rn(:Ls S '/0 I - 3 ~n(~ ~~e:t- ~uft J5•fte,i;J(.s,r.)~.5 l. What is lh¢ title of your position or job'? Answer: I.Je.r,> :=Ro C i'S'So v:Jt 41. Arc these memoranda, reports, records, or data compilations, outlined in the subpoena duces tecum, penaining t<J the above· named person, in your custody or subject to your control, supervision or direction? Answer. __ ~~~---------------------------------------------------------------------------------------------

3. Arc you able to identify these aforementioned records as the originals or true and correct copies of the originals'? 6. !"lease hand to the Otlieer taking this deposition copies of the memoranda, repons, records, or daru compilations, mentioned

in Question No. 4. Have you complied? lfnoc. why? Am:"'er: Se,, &. by Y'Y \ ~ ~ L.,

7. Are lhe copies which you ha\'e handed to the Officer taking this deposition true and correct copies of such memoranda, reports, records. or data compilations. ( · "f Answer: ~~~------------------------------------------------------------------------------- Order No. 03-6270-liOl

EXHIBIT A-13

-- - -- ---

3 7 1 8. Were such memoranda, reports. records, or data compii:Jtions kept in the regu;ar course of business of this facility"! Answer: Yf~ ^[1] 9. Was it in the regular course of busintJ!ols uf thi!\ facility for a person with knowledge of the acLc;, events, conditions, upmi\)tl. or diagnoses, recorded ro mak~: the record or to transmit information thereof to be included in such re.cord? Answer: ---:,..:...~_f....;S::::.._ _________________________ _

10. Were the entries on th:se records made nt or shonly after the time of the rransaetion recorded'! l r- ,o\nswer: ) II. Was the method of preparation of the~e records trustworthy'? 't'S

Answer:

WINES$ (Custodian of Records) Before me, the undersigned authority, on this day personally appeared--- -- - -- -- - - - - - - known to me to be the person whose name is subscribed to the forego ing instrument in the capacity therein stated, who being first duly sworn. stated upon his/her oath that the answers to the foregoing questions ore true and correcL I further certify th:1r the records artached hereto are euct duplicates of the original records.

SWORN TO AND SUBSCRIBED before me this f) {o /-Vl day of J ~flt)D.(t) , 20 I { MY COMMISSION EXPl~ My Commission Expires: __ _ O_N_21_ 1 _5120 __ 1 _ 2 __ _ Order ~o. 03-6270-00l : 3 72

AFFIDAVIT OF SERVICE.

Deposition Subpoena To Testify Or Produce Documents or Things, Attached Notice Case Number. 2010-02710 Plaintiff: In The Matter of the Marriage of Michael D. Sydow and vs. Defendant: Kelll McDonald Sydow and In the lnteres to Michael Wyatt Sydow a minor child Received by Smart Choice Process Service. Inc. on the 15th day of December. 2010 at 3:00pm to be served on Compass Bank, Brokerage Dept. c/o CT Corporation System It's Registered Agent, 350 North St. Paul Street, Ste .• 2900, Dallas, TX 75201 . I, Michael E. Wigginton. being duly swom. depose and sey that on the 16th day of December, 2010 at 2:51 pm, 1: served a AUTHORIZED AGENT by delivering a true copy of the Deposition Subpoena To Testify Or Produce Documents or Things, Attached Notice with the date and hour of service endorsed thereon by me, to: Neshka Tay lor as Authorized Person to Accept, at the address of: 360 North St. Paul St.reet, Ste.·2900, Dallas, TX 75201 on behalf of Compass Bank, Brokerage Dept., and informed said person of the contents therein. J am over eighteen {18} years of age and not a party to nor Interested in the outcome of the above numbered suit am authorized to serve citations and other notices in this cause by The Texas Supreme Court. Subscribed and Sworn to before me on the 16th day Michael E. SCH-3613 of December, 2010 by the affiant who is personally l<nown to me.

Smart Choice Proce ~ocvrua e.~ P.O. Box 862188 NORYPUBLIC Mesquite, TX 75185-2188 (214} 742-3100 Our Job Serial Number: LJW-201 0001703 .,..,. MELANIE A. LOCKEt lUIS /-> •• ~~ . ..'~!'~~ NotarY Public. ~tate of Tes C miss1on EltP' ^[18] - · - Jc ..... ~~ Mv J ^[0] :ne 30, 20\4

~!.~.~,\" .. '.. ·- · .., Cowi;!11 0 11182-2010 g, t;obu• S..W.a, Int. · P1ocau S.,.er'5 Toolllax V!i.<lg 3 73 No. 201~02710 In tbll Matter of tb~ Marriage of

IN THE DISTRICT COURT OF

Mic:bael D. Sydow and Kelli Mc:Donald Sydow

~SCOUNTY,TEXAS

and Jn the hllerett of Michael Wyatt Sydow, a minor c:hild

308TH JUDICIAL DISTRICT NOTICE OF DELIVERY RE: Compass Bank, Brokerage Dept. C/0 cr Corporation System (Any &: AU Records) 1, Shelia Edwards , Notaty Public in and f<>r the State ofTexas, hereby certify pursuant to the Rule 206, Texas Rules of Civil Procedure, I. That this Deposition by Written Questions of Patricia D. Custard, the Custodian of Records for the above named is a true

and exact duplicate of the records pertaining to See Exhibit A, given by the witDess named herein, after said witness was duly sworn by Anneetress D. Walker

2. That the U'IU\SCript is a true record of the testimony given by the witness; 3. That $1,406.15 is the charge for the preparation of the completed Deposition by Written Questions and any copies of

exhibits, charged to Anomey for Respondent, Dennis B. KeUy, TBA # 11217500; 4. That the deposition transcript was submitted on the l6tb day of January, lOll , to the witness for examination, signature and return to the officer b:y a specified date; S. That chana~. it any made by the witness, in th~; transcript and otherwise are auached thereto or incorporated therein; 6. That the witness returned the transcript; 7. That the original depositio~ by Written Questions and a copy thereof, together with copies of all exhibitS was delivered to the

anomey or party who Noticed the first questions for safekeeping and use at uial; 8. That pul'$uant to information made a part of the records at the time said testimony was taken. the following includes all parties of record: Asher B .. Griffin Joseph lodelka.to,lr. David J . Wukosoo. Attoraey For Petitioner

and 9. A copy of this Notice of Delivery was served o_n all panies shown herejn, MerriU Corporation 315 Capitol Suite 210 Houston, TX 77002 (713) 868-1919 Fax (713) 315-1158

SHEUA ANN EDWARDS

Order No. 03-6170-001 MV COl.IMISSION EXPIRES OIIC8mber 2. 2011 374 P . E P O S l T I ON S~OENA T O TE S l ]f Y O R P f t . ODY C E DO C U M J f N T S O R T lll NG S

T

H E S T A TE O F T EXAS T o a ny S h e r i ff o r C on s t a b l e o f t he S t a t e o f T e x a s o r O l h rr p e r s on a u r ho r i ze d t o s e r v e s ubpo e n a s und e r R U LE 176 O F TE XA S R U LE S O F C I V I L P R O C E DU R E . - G R EET I NG S - Y ou a r e ~b) · c o mm a nd e d t o s ubp O e n a a nd s u mm on t h e f o ll o w i ng w i t n e s . s ( e s ) : C u s t od i a n o f R e < : o r d s f o r :

C o m p a ss B a nk , B r ok e r a g e D e p t . C I O C T C o r po r a l J oo S y s t e m 350 N o r t h S r . P au l S t r ee t D a ll a s , T X 75201

t o be and appea r b e f o r e a N o t a r y P ub li c o r m y d c s i gn a ti oo f o r M~rrill C o r po r a don ( 713 ) 868 - 2929 315 C a p it o l S u it e 210 , H o ll $ t on , T X 77002

o r ii . S d e s i gn a t e < ! a g e n t . 24 d a y s a f t e r t h e d a t e o f s e r v i ce : a t 1 M o ff ace o f l h e c u S t O d i a n a nd t h e r e und e r o a t h 10 m a k e a n . ' l w e r s o f ce r t a i n w r itt e n qu e s ti on s t o b e p r opound e d t o t h e w it n e ss a nd t o b r i ng and p r od U ce f o r i n s p ec ti on a nd pho c o c opy i ng

A ny a nd a ll r ec o r d s a s d e s c r i b e d on t h e a tt ac h e d E xh i b it ' A ' a nd a ny o c h e r s u c h r ec o r d i n t h e po ss e ss i on . c u s t ody o r c oo r r o l o f r b e S 3 i d w i c o c ss . a nd e v e r y s u c h r ec o r d t o w h i c h t he w i t~ m a y b a v e a cc e s s . penainin~ 10 : S ee E xh i b it A a t a n ) • and a U ti m e s w h a t s o e v e r , t h e n a nd t h e r e t o g i v e e v i d e n ce ^[11] t h e i n$ t . a J l () e o f t h e RC ! S pond e n t , K e lli M c D on a l d S ydo w . np r e s e n ce d by D ea n i s B . K e U v , A no r ne y o r R ec o r d . i n I P .. a t C c r t a j n C a u s e N o . 201 () .. { ) 2710 , p e nd i ng on t h e do c k e t o f t h e D i s t r i c t C ou r t o f ' t b e 308 t b J ud i c i a l D i s t r i c t o r H a rr i s C oun w • . T e x a s . T h i s S ubpo e n a I s i ss u e d und e r a nd b y v i nu e o f R u l e 200 a nd N o c i ce o f D e po s iti on U pon W r itt e n Q u e s ti on s on f il e w it h t h e a bov e n a m e d c~m. s t y l e d

l o t b t M a tt e r o f ' t h e M a . rr i . a g e o r M i c h ae l D . S ydo w a D d K e lli M c D on a l d S ydo w a nd l n t h e l n t u e s t o r M i c h ae l W y a tt S ydo w , a m l oo r c h D d

and t h e r e r e m a i n fr o m d a y t o d a y a nd L i m e t o ti m e un til dischar~ acc o r d i n a t o l a w . W I T N E SS M Y HAND , t h i s t S t h d a y o f D ece m b e r . ~ .

.... . •• .

···~o

176 . 8 E n f ' o r ce m c n t o f ' S ubpo e n a . ( a ) C on t e m p t . F a il u r e by a n ) ' p e r s on w il hou t a d e qu a t e ex~ t f ob e y ' t . 1 & C ) e upon t h a t p e r s on m a y be dee m ed a c on t e m p r o f t b t c o u n f r o m w h i c h t be s ubpo e n a I s i s s u e d <> € & d~~ w h i c h t h e s ubp o e n a L 5 s e r v e d , and m a y b e pu n i s h e d by f i n e o r c on f i o e m t n t , o r bo t h . ~ ••• ":'~

~ •;..,.~ . .... ^[0] : , .~-~~ .. ~ . · .... " • . ) ~ ~ • ;! 'iF ~ •• ••

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.

• 20 _ _ • a nd e x ec u t e d t h t s t he __ da y o f , 20_ . C a m e t o h a nd t h i s d a y o f - - - - - - - ' a t r u e c opy b e r e o f . i n l b t r o ll o w l n g m a nn e r : B y d e li v e r i ng 10 t h e w it n e ss - - - - - - - - - R e t u r n e d t h i s ___ d . a y o f - - - - - - · 20_ .

P

R O C ESS SE R VE R O r l kc 1 ' \ o . 0 3 - 6 27 0 - 0 01 375

COMPASS BANK - EXHIBIT A

The terms udocuments,, "writings," and "records" are used in t his ex hibit in their c ustomary broad sense and incl ude without lim itation the following items, regardless of origin or location, whether printed, recorded, filmed, or rep roduced by any other mechanical process or written or produced by hand; and whether an original, master, or copyj namely: 1. All acGOunt statements. deposit records. withdrawal records, transfer records, cancelled

checks, partnership agreements, funding lines of credit, financing statements, pt·omissory notes and loan documents for tbe period from April 15, 2010, to the present date. for all checking accounts, savings accounts, certificates of deposit, and all other types of financial accounts. whether personal or for businesses in which the parties, Michael D. Sydow (alk/a Michael D. Sydow. Sr., Michael David Sydow, Michael David Sydow, Sr., Michael Sydow, or Michael Sydow~ Sr.) or KelU McDonald Sydow (or either of them), have any interest and that are maintained in the name of the parries (or either of them). in the narne(s) of their business(es). including but not limited to NCJ2, Inc., Texas Syngas. Zagometa, Daedelus Air, The Michael and Kelli Sydow Irrevocable Insurance Trust, Chippendale Park, Loki Investments, Loki Services, American Inte rn atio nal Helicopters , Inc., No Peanuts. or Woden Enterprises. and any other entity on behalf of the parties (or either of them), or on which the parties (or either of them) has or has had the right to draw. includi ng but not limited to each of 'th e fallowing accounts: a.

Joint (Kelli Sydow and Michae~ Sydow) Account #xxx8347 b. Amegy Bank Loan CoUateral FBO Michael D. Sydow Accou nt #xxx8347-1 c. ATM Joint (Kelli Sydow and Michael Sydow) Checking Account #xxx4380 d. Money Market Joint (Kelli Sydow and Michael Sydow) Account #xxx1016 e. Bill Payer Joint (Kellf Sydow and Michael Sydow) Checking Account

#xxx7863 Kelli Sydow C/F Michael Wyatt Sydow UTMAITX Account #xxx3919 f. g. VCSP/CollegeAmerica 529 Account for Michael Wyatt Sydow h. Kelli McDonald Sydow Account #xxx6212 i. Kelli Sydow and Michael Sydow Tenants in Common Account #xxx8662 j. Michael Wyatt Sydow (Kelli McDonald Sydow Custodian} A ccount

#x.xx3511 k. NC12 Account #xxx8791 I. Texas Syngas Account #xxx8791 m. Airplane Account.

2. AH cashier's checks purchased by or on behalf of Michael D. Sydow (alk/a M ichael D. Sydow, Sr., Michael Da,i d Sydow, M;cbael David Sydow, Sr., Michael Sydow. or Michael Sydow~ Sr.) or any of his businesses, including but not limited to NC 12, Inc .. Texas Syngas, Zagometa, Oaedelus Air, The Michael and Kell i Sydow Irrevocable Insurance Trost, Chippendale Park, loki Investments. l oki Services. Am erican International Helicopters. Inc., No Peanuts, or Woden Enterprises. from April 15,

... 376 2010, to the present date. 3. All financial sratements in your possession prepared by or on behalf of Michael D. Sydow (alk/a Michael D. Sydow, Sr. ~ Michael David Sydow, Michael David Sydow. Sr .• Michael Sydow. or Michael Sydow, Sr.} or any of his businesses, including but not limited to NCI2. Inc .. Texas Syngas. Zagometa. Daedelus Air, The Michael and Kelli Sydow Irrevocable Insurance Trust, Chippendale Park, Loki Investments, Loki Services, American International Helicopters, Inc., No Peanuts. or Woden Enterprises, from April 15, 2010, to the present date.

4. AJI checks and other financial instruments negotiated for cash paid by your institution to Michael D. Sydow (alk.'a Michael D. Sydow, Sr., Michael David Sydow, Michael David Sydow, Sr., Michael Sydow, or Michael Sydow, Sr.) or any of his businesses, including but not limited to NCI2, Inc., Texas Syngas, Zagometa, Daedelus Air, The Michael and Kelli Sydow Irrevocable Insurance Trust, Chippendale Park, Loki Investments, Loki Services, American International Helicopters, Inc., No Peanuts, or Woden Enterprises. from April15, 2010, to the present date.

5. All witinglrouting instructions, information and transactions for Michael D. Sydow (alk/a Michael D. Sydow, Sr., Michael David Sydow, Michael David Sydow, Sr., Michael Sydow, or Michael Sydow, Sr.) or any of his businesses, including but not limited to NC12, Jnc., Texas Syngas, Zagometa, Daedelus Air, The Michael and Kelli Sydow Irrevocable Insurance Trust, Chippendale Park, Loki Investments. Loki Services, American International Helicopters, Inc., No Peanuts, or Woden Enterprises, from April 15, 2010, to the present date, including but not limited to ABA wiring/routing #113011258.

6. All account statements, deposit records, withdrawal records, transfer records, cancelled checks, partnership agreements, funding lines of credit, financing statements, promissory notes and Joan documents for the period from April 15, 2010, to the present date, for th~ following account: a. Account #1013572 with. Compass Bank (formerly Southwest Bank of Texas)

... 377 N o . 2010~2710 I N T H E D I S T R I C T C OU R T O F I n t h e M a tt e r o f tlt e M a rr i a g e o f M i c h ae l D . S yd o w a nd H A RR J S C O U l ' t T Y , T EXAS ' K e lli M c D on a J d S ydo w a n d u • t h e i n t e r e s t o f M i c h ae l W y a tt S~ · do w, a m i no r e h J i d

308 T H J UD I C I A L D I S T R I C T

NO

T I C E O F I N TE N T I ON T O T AK E D E P O S I T I ON B Y WRITIE~ QU E S T I ON S T o P e t i ti o n e r by a nd t h r ou gh t h e i r a no m e y ( s ) o f r ec o r d : D a v i d J . W u k o s o n T o o m e r p a r t y / p a r ti e s by a nd t h r ou gh t h e i r a u o m e y ( s ) o f r ec o r d : A s h e r B . G r i ff i n a nd J o s e ph I nd e li ca t o , J r . Y ou w ill p l ea s e tak~ no ti ce t h a t a w e n t y -f o w ( 24 ) d a y s fr o m t h e servi~ o f a c o py b e r e o f w it h a tt ac h e d q u e s ti on s , a d e po s iti on b y w r i u e n q u e s ti o n s w ill be t a k e n o f C u s t od i a n o f R ec o r d s f o r : C o m p a ss B a nk , B r ok e r a g e D e p t . C / 0 C T C o r po r a ti on S y s t e m ( A ny & A ll R ec o r d s )

350 N o r t h S t . P a u l S t r ee t D a ll a s , T X 75201 b e f o r e a N o w y P ub li c f o r M e rr ill C o r po r a ti on ( 713 ) 868 - 2929 F a x ( 713 ) 315 - 2158 315 Capitol~ S u it e 21 O , R ou s t o n , T X 77002 o r 1 l S d e s i g n a t e d a g e n l . w h i c h d e po s iti on w it h a tt ac h e d qu e s ti on s m a y b e u s e d i n e v i d e n ce upon t he t r i a l o f t h e a bov e · s t y l e d a nd nu m b e r e d ca u s e p e nd i ng i n t h e a bov e n a m e d c oun . N o ti ce i s f u r t h e r g i v e n t h a t r e qu e s t 1 S he r eb y m a d e a s a u t ho r it . e d und e r R u l e 200 . T e x a s R u l e s o r C i v il P r o ce du r e , t o t h e o ff~eer r a k i ng t h i s d e po s iti on t o i ss u e a s ubpo e n a du ce s t ec u m a nd ca u s e it t o b e s e r v e d on t h e w it n e ss t o p r odu ce a ny a nd a ll r ec o r d s a s d e s c r i b e d on t h e a u ac h e d qu e s ti on s a nd f o r E xh i b it ( S ) a nd a ny o t h e r s u c h r ec o r d i n t h e po ss e ss i on , c u s t ody o r c on t r o l o f t h e s a i d w it n e ss . a nd e v e r y s u c h r ec o r d t o w h i c h t h e w it n e ss m a y h a v e acce ss , p e r t a i n i ng t o : S ee E xh i b il A a nd t o t u m a ll s u c h r ec onh i ov e r t o t h e o ff i ce r a u t ho r i: z . e d t o t a k e t h i s d e po s iti on s o t h a t ph o t og r a ph i c r e p r odu c ti o n s o f t h e s a m e m a y b e m ade and ana c hed t o s a i d d e po s iti on .

D e nn l s 8 . K e ll y L a w O ff i ce s o f D e nn i s B . K e ll y 6 0 2 S a w y e r , S u it e 700 H ou s t on , T X 77007 - 7524 ( 7 13 ) 868 - 2700 F a x ( 7 1 3 ) 86$ - 6054 A tt o r n e y f o r ~'PQndent S B A # 11217 . 500

1 h e r e by ce r ti f y t h a t a t r u e a nd c o rr ec t c op y o f t h e f o r e go i ng i n s uu m e n t h a s b ee n f o r w a r d e d t o a ll C oun s e l o f R ec o r d b y b a nd j d e li v e r y . F AX . a nd / o r ce r ti f i e d m a j J , r e t u r n r ece i p t r e qu e s t e d . on t h i s d a y . . by D g 44 4~.8 · t : . £ . W A , _ . , Da~£d : D ece m b e r I S . 2010 .

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NANDtTA BERRY

FHing Num1rer. Entity Type: Dnmasti{; Fo-r:.Proffi (';t,"rporfltion 801644546 Original Date of Filing: &'ltity Status: August 22, 2012 Fotfeited existence Formation Date: N/A 32048819349 Tax 10: FEN: Duration: Perpetual JK Claims h"~trnent Cor~10fation Name: Add ross: 360 N SAJk'T PAUL ST tHE 2900

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~· Tp p!ace an Otxler for ~.ltit!Itional rntotrrH~tiotl €.d:;.out a f;lin~r pm~s the 'Ord~~r' button. EXHIBIT A~14 388 BWSIN8>SO~GlJ'-lllA110NS INQUlRY • VJEVVENTITY TEXAS SECRETARY of STATE

NANOITA BERRY

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~:tH;y Stalu~ formation Date: N!A Tax 10: 3.2048819349 FEH\1; :Ouration:

P'erpetua! .Jl\ Claims trl"Vestrne.nt Corporation Name: 35{1 N SAiNT Pl\UL ST STE 2900 Ad~ros...~

DALLAS) TX75201-4234 USA

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._. ,,_,...._ • ......;44;; .. 4~4~ .. 44444444:~4~~~~~~~ .. ~~~:.~;,~~:.~~::~:::~~~~:~~4 ... ~.~~~~;,,:,,~~:.,~~~.:~4 •• : •• : •• :: ........... _.. . .,,, .. uuuu•-.o.,o••••~O~~~ •• :~.:J} ..... ~-----·-······-·--··"''-"''"'''"···-·----·--~··- .. -········----- - insm.rGt!ons: ~' To place an order for aodtlon~;l Jnfon·n~tion aboul t.l Mtng pr~~ss the 'Ordet' buttort 389 Case 1:05-cv-10077-RGS Document 24 Filed 06/02/05 Page 1 of 18 UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETJ'S ROBERTJ. HANFIJNG,CHAPTERll ) TRUSTEE FOR ATG, INC. AND ) ) CATALYfiCS LLC

) Plaintiff, ) v. ) C.A. No. 05-10077-RGS ) EPSTEIN BECKER & GREEN, P.C. )

JOHN PRESTON, CHRISTOPHER NAGEL, )

EUGENE BERMAN, ETHAN JACKS, ) QUANTUM CATALYfiCS LLC, ABC ) CORPS 1 through 5 and JOHN DOES ) 1 through 5, )

) Defendants. ) MODIFIED MEMORANDUM OF LAW IN SUPPORT OF DEFENDANTS QUANTUM CATAL YI'ICS, LLC, JOHN

PRESTON, AND CHRISTOPHER NAGEL'S MOTION TO DISMISS Defendants Quantum Catalytia LLC ("Qoantmn"), lolm Preston and Christopher Nagel (colledively, the "Qaantmn Defendants"), pwsuant to Roles 9(b) and 12(b)(6) of the Federal Rules of Civil Protedllft, respedfully move 1his Comt to dismi« the Complaiut in the above-refer-enced dvfl adion with prejudice for failure to state a dalm upon which relief can be granted. The Quantum Defendants also respedfully move this Comt to dismiss the claims auetted agaimt them bocav.se tho.se claims are bamd by the appUcahle statute of lhnltatiom.

PROCEDURAL BACKGROUND

The Quantum Defendants timely filed a Motion To Dismiss Or In The Alternative To Abstain with the llnited States Bankruptcy Comt for the Nol1hem District of California on March 22, 2004. Pursuant to the Bankroptcy Court Lotal Role 7003-l(b), Plalntifrs

-1-

EXHIBIT A-15

390 Cause No. 2011-44058 MICHAEL COLLINS; ET AL., § IN THE DISTRICT COURT PLAINTIFFS, § vs. § OF HARRIS COUNTY, TEXAS § MICHAEL SYDOW; ET AL., § § 215th JUDICIAL DISTRICT DEFENDANTS. AKJLA FINANCE, S.A.; ET AL .• § IN THE DISTRICT COURT § INTERVEl\!QRSIPLAINTfFFS, vs. § OF HARRIS COUNTY, TEXAS §

MICHAEL SYDOW; ET AL. ^[1] § § 215th JUDICIAL DISTRICf D EPENDANTS.

AFFIDAVIT OF MICHAEL COLLINS

Before me, the undersigned notary, on this day personally appeared MICHAEL COLLINS, who is personally known to me, and frrst being duly sworn to law upon his oath deposed and said: 1. My name is Michael Collins. I am over the age of 19 years old and am fulJy competent to make this affidavit. I am a former member of Texas Syngas, LLC ("Svngas LLC'), former officer and director of Texas Syngas, Inc. ("TSI"), and a former employee of NC12, Inc. ("NC12"). The information contained herein is true and correct and is based on my personal knowledge gained through my association with Syngas LLC, TSL and NC12, as well as the business relationships I developed with John T. Preston ("Preston'') and Michael D Sydow ("Sydow'l

2. In July 2004, I formed Syngas LLC for the purpose of exploiting technology that I had developed to create environmentally friendly, low-cost energy through a gasification process. I was the original sole member of Syngas LLC. Shortly after forming Syngas LLC, I was introduced to Preston, who I understood held

3. patents on certain technology called Catalytic Extraction Processing ("CEP"). CEP is a process for breaking down hazardous and radioactive waste and recycling them into marketable products.

4. The CEP technology was formerly owned by a company called Molten Metal Technology Inc. (HMMf"). Before I met Preston, he had been active in attempting to put together a project between MMT and Hoescht Celanese for the development of a facility in Bay City, Texas to process waste water byproducts generated at Hoescht Celanese's OulfCoast chemical plants.

I EXHIBIT B 408 5. Ultimately MMT went into bankruptcy, and Preston effectively acquired MMT's patents through the bankruptcy proceeding. 6. My first meeting with Preston oc~urred in 2004 when Preston flew to Houston to meet with me near my home in The Woodlands. During this meeting~ Preston touted the patented technology that he had acquired from MMT and encouraged my participation in the commercial development of that technology. Preston came to Texas to meet with me again a few months after that first meeting in

7. The WoodJands. This 1ime, we travelled to Bay City ^[1] Texas to meet with Hoescht Celanese to continue discussions regarding the development and operation of a CEP facility for Hoescht Celanese. Preston returned to Texas again about two months later, when Preston and I met with Hoescht Celanese~ this time in Baytown, Texas.

8. During these three meetings in Texas, Preston and I discussed the commercial opportunities possible utilizjng the MMT technology and the technology I had developed. 1 believed that a viable business could be developed using my technology, along with the patented technology held by Preston.

9. Preston and I continued to talk by telephone over the course of the e11suing months. Preston initiated a number of those calls, either to me at my home in The Woodlands, Texas, or to me at an office I used at the law offices of Jeffrey Kaiser ( .. Kaiser") on TC Jester and later at the offices of Sydow, McDonald, Kaiser & Ahmed, on Bering Street in Houston, Texas and later Bagby Street in Houston. Preston also shipped records regarding MMT and its patented technology to me: at the Bagby Street office for my review and use in the business I was undertaking with Preston.

10. Ultimately, Preston decjded to join me as a member of Syngas LLC. Preston later requested that his name on the Syngas LLC records be changed to Quantum Catalytics LLC (''QuAAt.Umn), a company owned by Preston. Preston led us to believe that he was the sole owner, officer,and employee of Quantum.

11. When we began our discussions and negotiations in 2004, Preston did not represent himself to be negotiating and planning with me on behalf of any corporate entity. Accordingly, I understood at all times that I was doing business with John Preston, and not Quantum. In fact, after our introduction, it was Preston that solicited me, inducing me to work with him to develop my technology and the technology he had acquired from MMT.

12. At all times during my discussions and business relationship with Preston, I was a resident of The Woodlands, Texas. In my discussions with Preston, I learned that Preston bad been to Texas on multiple occasions prior to our introduction. He told me that he had previously travelled to Texas on numerous occasions for meetings with Hoescht Cel.anese and with Flour Daniel in Clear Lake, Texas. Preston also told me that he had made numerous visits to the Houston Area Research Center, or HARC, on Research Forrest Drive in The Woodlands, Texas to study new technologies in the mid and late 1990s. As a result. Preston was very familiar with The WoodJands. It was my

2 409 understanding that his visits to HAllC were for his personal benefit and not done tluough MIT or any corporation.

l3. ln November 2008~ Preston invited me to dinner at the Houston.ian in Houston, Texas. Dw·.ing this diJ'lner, Preston pl'essed me to consent to a proposal for t1nancing fur NC12 that he was attempting to put together through his company C Change. Investments {"C Change''). However, it appeared tJ1at the prop<;>sal was simply Preston's (lttempt to cut a deal for himselfduough C Change, and not a genuine eff<nt to raise funding for NC l2.

; a ' As 1 understood the transaction, the only pa.rti~s that wonld bene11t would be Preston and companies sole:ly un:der his coutrol, including C Chan.ge, at the expense of NC 12 and its existing ilwestors and shareholders.

~tveP~-

Michael Collins ·

STATE OF TExAS

COUNTY OF HARRIS.

13l~FORE ~.E .. the t.mdersignecl ~uthn.d(y~ q~~.:· thJs dl,\y pel·sonaHy appeared Michael C61lii1si know11 to me to he· the person whose name. is subscl'i.bed to. the· fbregpfug .insfrume1'1t~ and -acknowledged ·to nie that. he re~td the Alllduvit <:>f Michael Collin$ and .that the fact~ stated therein were w.ithhi lus. pet-soual.k11ovoilecige ;.md we.te true and. corre.ct.

GIVEN UNDER MY I:! AND AND SEAL OF OFPICE this thc~duy ·of J~me:20 14. ""NOTAl~YPOB.tJC lN ANP FOR THE STATE OF TEXAS 410

8/8/2014 5 :43:24 PM

Chris Daniel • District Clerk Harris County Envelope No. ^[2104187] By. GAYLE FULLER Cause No. 2011-44058 § MICHAEL COLLINS, ET AL .• IN THE DISTRICT COURT §

PLAINTIFFS,

§ OF HARRIS COUNTY, TEXAS vs. § . MICHAEL SYDOW, ET AL., § § 215th JUDICIAL DISTRICT

DEFENDANTS.

AKILA FINANCE, S.A.; BOSQUES DEL MOLINO, IN TilE DISTRICT COURT § S .A. ~ CENTRANS ENERGY SERVICES, INC.; § § CHESTERMESTERHOLDINGS. LTD.; DELTEC BANK & TRUST, LTD.; EMJO INVESTMENTS, § LTD.; WILLIAM END; EVANS & PETREE 40 JK § PLAN; FlRST BAY INTERTRADE; GM PARTNERS; § MARAlR CORP.; W.L. NICHOL, IV; PANORAMA § INVESTMENT, LTD.; PCOI VERMOEGENS VERW.; § ALEJANDRO SANTO DOMINGO; SINCHI § INVESTMENT; VENTURI GLOBAL § INVESTMENTS., LTD., and HJ. von der GOLTZ § §

lNTERVENORSIPLAJNTIFFS, vs. § OF HARRIS COUNTY, TEXAS § MICHAEL SYDOW; JOHN PRESTON; CHRISTOPH § HENKEL; C CHANGE INVESTMENTS, LLC; § CHALSYS CAPITAL PARTNERS, LLP; SONIA LO; § BRILLIANT NOVELTY, L.L.C.; OSCURA, INC.; § MELIORA ENERGY TECHNOLOGIES, S.a.r.l; and § FALL RIVER REALTY. LTD., § § 215th JUDICIAL DISTRICT

DEFENDANTS. INTERVENORS' SUPPLEMENTAL RESPONSE TO THE SPECIAL APPEARANCE OF JOHN T. PRESTON l. INTRODUCTION Intervenors file this Supplemental Response to the Special Appearance filed by John T. Preston ("Preston") further addressing Preston's contacts with Texas through JK Claims Investment Corporation C'JK Claims .. ) and allegedly through Transformative Energy & Materials Capital, Jnc. ("TEM Capital"). The evidence confirms that:

413 • JK Claims is merely a shell corporation and the alter ego of Preston. Accordingly, JK Claims' contacts with Texas are contacts of Preston for purposes of the personal jurisdictional analysis.

• TEM Capital was not yet incorporated at the time Preston travelled to Texas, allegedly on behalf of TEM CapitaL Accordingly, Preston is not entitled to the fiduciary shield as to those visits.

D. BACKGROUND

Preston Established Minimum Contacts with Texas Under the Guise of JK Oaim. A. The available evidence confirms that Texas corporatjon JK Claims is merely a front for and the alter ego of Preston and his co-conspirator Michael Sydow ("Sydow, ), created for the purpose of purchasing and then dismissing claims pending against them individually in the 152"d Judicial District Court in Harris County, Texas. 1

The Kaiser Litigation. 1. On June 26, 2007, Jeffery B. Kaiser (''Kaiser") filed a lawsuit against Texas Syngas LLC

("Syngas LLC"), Michael Collins ("Co11ins, ), M. Sameer Ahmed, Sydow, and all other similarly situated officers and directors of "Texas Syngas LLC alk/a Texas Syngas, Inc." in the 1 52"d District Court, Harris County, Texas. under cause number 2007-38533 (the "Kaiser Litigation,). On May 5, 2008, Kaiser filed his Second Amended Petition, adding Preston as a named defendant. (Exhibit B at ~ 1 0). As reflected in the Second Amended Petition, Kaiser sought to recover against Preston, Sydow, and others for what he alleged to have been fraud in the creation ofT exas Syngas, Inc. ("TSI") and the transfer of Syngas LLC' s assets to TSI in violation of his rights as a member of Syngas LLC. Kaiser asserted a number of causes of action against all of the defendants including breach of fiduciary duty. fraud, and violations of the Texas Securities Act. (/d. at ~~ 23 through 68).

Attached hereto and incorporated herein by reference is the Affidavit of Kelley M. Keller. 2 414 2. Preston~s a nd Sydow's Response to the Kaiser Litigation. On August 17, 2007, Preston intervened in the Kaiser Litigation through Quantum

Catalytics LLC ("Quantum"). (Exhibit C). Preston is the president of Quantum. (See Exhibit D at Ex. D). Quantum asserted that Kaiser did not represent the interests of Quantum and was not entitled to bring any action on its behalf. (Ex. C at ~ 8). Quantum also sought affumative re1ief against Kaiser for alleged breaches of fiduciary duty, negligence, and breach of contract. (ld at m!9, 10). Sydow signed Quantum's petition in intervention as counsel for Quantum. (/d.).

On June 20, 2008, Sydow filed an amended answer and counterclaim against Kaiser, asserting that Kaiser brought the Kaiser Litigation for purposes of harassment, in bad faith, and without support in fact or in law. (Exhibit E) .. The same day, Sydow filed an amended motion for summary judgment on the claims asserted by Kaiser, asserting:

At its core, this lawsuit concerns Kai ser's anger over the fact that Collins has not offered Kaiser any stock in Texas Syngas, Inc. Of course, Collins has no legal obligation to offer his Texas Syngas, Inc. stock to Kaiser or anyone else. Consequently, Kaiser's second amended petition is a lengthy artful dodge asserting causes of action that would purport to create damages where none exist.

(Ex. D at p. 4). Preston submitted an affidavit in support of Sydow' s motion, asserting that u(t]he majority of the members of Texas Syngas, L.L.C. have approved the acts taken by Michael C. Collins in the management of the company." (See Ex. D at Ex. D).

3. The Kaiser Bankruptcy and the Assignment to JK Claims. On August 8, 2008, Kaiser filed for bankruptcy under Chapter 7 of Title II of the United

States Code in the Southern District of Texas, Houston Division, under Case Number 08-35261- Hl-7. Ronald J. Sommers was appointed Chapter 7 Trustee (the ... Kaiser Trustee").

Upon commencement of the Kaiser bankruptcy, the claims owned by Kaiser and asserted in the Kaiser Litigation became the property of Kaiser' s b-ankruptcy estate and the Kaiser Trustee became the real party in interest. See l l U.S.C. § 541 (a).

3 415 The Kaiser Trustee attempted to find couns.el to pursue Kaiser's claims on behalf of the Kaiser bankruptcy estate or to find a purchaser for the claims. On March 14, 2012, Gretchen McCord r·~ceord.,), counsel for the Kaiser Trustee, forwarded a draft motion to sell and order to Kelly Stephens ("Stephens"), of Stephens & Domnitz, PLLC, for his review. (Exhibit F 2

at 38:6-39:7 and Ex. 11 ). Stephens represented the purchaser in connection with the purchase of Kaiser's claims from the Kaiser bankruptcy estate. (Ex. F at 40:3-7, 4 1:3-42:5 and Exs. 11-13). In an email to McCord on June 15, 20 12, Stephens refers to his "clients" without identifying the clients. (Ex. Fat Ex. 13).

On June 19, 2012, the Kaiser Trustee filed a motion in the bankruptcy court seeking authority to sell Kaiser' s claims to JK Claims for $25,000. (Exhibit G). Tn the motion to sell, the Kaiser Trustee describes the assets to be sold as follows:

Any and call causes of action owned by the Debtor as of the date of his Bankruptcy filing and now owned by the bankruptcy Estate against Texas Syngas, LLC, Texas Syngas, Inc. and their officers. directors, shareholders, agents, attorneys and/or against any predecessor, successor, or affiliated companies, including but not lim ited to the following individuals: Michael Sydow, Michael Collins, John T. Preston, Quantum Catalytics, Inc., and M. Sameer Ahmed. These claims would include specifically all those claims that were owned by the Debtor and that were pled, or that could have been pled, in the Lawsuit with Cause Number 2007-38533, and styled Jeffery B. Kaiser, el. a/ v. Texas Syngas. LLC alkla Texas Syngas, Inc., et a/., currently pending in the 1 52'1d Judicial District Court of Harris County ("Claims .. ).

(Ex. Gat~ 15). The Trustee described the value of the Kaiser Litigation as "tentative at best' and noted that of ''utmost importance in the Trustee's analysis is that he believes that there is little chance of recovery if he were to pursue'' the litigation. (Ex. Gat~ 23) (emphasis added).

Coli ins requested the deposition of the corporate representatjve of JK Claims in the course of the Kaiser Litigation. JK Claims designated Sydow as the corporate representative. Sydow·s deposjtion in such capacity was taken on February 25, 2014. That deposition is attached hereto and incorporated herein as ExlUbit F.

4 416 The Kaiser Trustee described the purchaser as follows: The purchaser is JK Claims Investment Corporation, or its assigns, which the Trustee has been informed is being funded by Paul Lohnes ("Purchaser"). The Trustee has been informed that the Purchaser is a business associate of the Defendants.

(Jd at~ 16). As reflected below, JK Claims had not yet been incorporated at this time. (Ex. Fat Ex. 3).

The bankruptcy court granted the Kaiser Trustee's motion to sell on July 13, 2012. (Exhibit H). On July 26, 2012, Stephens & Domnitz, PLLC, wired $24,970 to the Kaiser Trustee as payment for the claims purchased from the Kaiser Trustee (the ''Kaiser Claims''). (See Exhibit I at 103).

4. The Formation of JK Claims. On June 15, 2012, Sydow filed an Application for Reservation of an Entity Name with

the Texas Secretary of State (the " Application"}, reserving the name JK Claims Investment Corporation for the exclusive use of Preston. (Ex. F at 27:23-28:24, 29:3-1 9 and Ex. 6). An applicant for a name reservation may be either an organized entity or an individual. (See Ex. F at Ex. 6). The Application reflects that the applicant is an individual- Preston. (/d). Sydow also prepared JK Claims' Certificate of Formation and filed same with the Texas Secretary of State on August 22, 20 12. (Ex. Fat 17: 5-9~ 21 : 17-22:13 and Ex. 3). 3

Sydow signed the Application and paid the $30 fee for the name reservation. (Ex. F at 27:23-28:24, 29:20-24 and Exs. 6, 8). Michael David Sydow, Jr., Sydow' s son employed with Sydow at the time, paid the $300 filing fee for incorporating JK Claims. (Ex. F at 20:15-21 :4, 23:23-25:25 and Ex. 4). ^[3]

Sydow contends that he is ··corporate counsel" for JK Claims and has been since the company's fonnation. (Ex. Fat 6: 18-7:8). Sydow could not say how much he charged for his services in forming JK CJaims and could not even say if he sent JK Claims an invoice for his services. (/d. at 67:2 J-68:4).

5 417 Although Sydow contends that Quantum would have paid for both the name reservation and the incorporation, he could not identify any records confirming same - the only available documentary evidence is that Sydow and his son paid to incorporate JK Claims. (See Ex. F at 20: 15-21 :4, 26: 1-6 and Exs. 4, 6, and 8)."

Sydow contends that he also prepared the bylaws for JK Claims (the "Bylaws"). (Ex. F at 10:3-10, 11:1-1 2). However. JK Claims failed to produce a signed and dated copy of its Bylaws. (Ex. Fat Ex. 2). According to Sydow, there is not likely a signed and dated copy. (Ex. F at 12:24-1 3:4, 13: 15-19, 14:10-13, 15:8-12). The Bylaws Sydow did produce appear to have been hastily prepared from bylaws previously prepared for a Nevada corporation, using a search and replace feature to include the corporation's name and to substitute the word "Texas'' iu place of the word .. Nevada.,. While the Bylaws purport to invoke Texas Jaw. they refer to the "General Corporation Law" throughout - a reference to Nevada law - and refer to specific provisions of the General Corporation Law of Nevada. (See Ex. Fat Ex. 2 at pp. 2 ^[1] 5, 7)

The only other corporate records that Sydow produced for JK Claims are similarly lacking in marks of authenticity. Neither the Written Consent in Lieu of Meeting, by which Quantum consented to the appointment of Preston as the sole director on August 22, 2012, nor the Wrilten Consent in Lieu of Meeting. by which Quantum reelected Preston as the sole director on August 22, 2013 , are signed. (Ex. fat Ex. 9, pp. l , 2).s However, the Bylaws require that written consents in lieu of shareholder meetings be signed by I he stockholders holding at least a majority of the voting power of the company. (EJt. Fat Ex. 2 at p. 6).

The Bylaws further provide that any action required or permitted to be taken by the JK Sydow testified that he docs not advance payment for the fonnation of entities. (Ex . fat 33 :4~7) .

Accordingly. if the payments were not advances, they were payments made by and on behalf of Sydow and/or Preston. for whom the company name was reserved.

Sydow testified that he prepared these documents at Preston· s request. (Ex. Fat 34:11-36: 1). s 6 418 Claims board of directors may be taken without a meeting if. .. before or after the action. a written consent thereto is signed by all/he members of lhe Board." (Ex. Fat Ex. 2 at p. 9) (emphasis added). However, the document entitled .. JK Claims Action by Director, by which some unnamed director purportedly approved the purchase of the Kaiser Claims 6 is neither signed nor dated. (ld at p. 3).

5. Officen, Directors, and Ownership of JK Claims. The JK Claims Certificate of Formation identifies Preston as the sole director and is

signed by Sydow as the organizer. (Ex. Fat 21 :17-22:3 and Ex. 3 at p. 7-9). Preston is and has always been JK Claims' sole officer (president, secretary, and treasurer) and director. (Ex. F at 7:9-25). According to Sydow, Preston was his sole point of contact on the incorporation of JK Claims. (Ex. Fat 11 : 17-24).

Sydow contends that JK Claims is wholly owned by Quantum. (Ex. F at 8:1-6. 56:21- 57•3). Sydow initially testified that Quantum held 1,000 shares in JK Claims. (Ex. Fat 8:1-6). However, there are no share certificates evidencing ownership by Quantum. (Ex. F at 55:2-6, 57:14-19). Later in the deposition, Sydow testified that JK Claims does not have any shareholders. (Ex. Fat 56:21-57:3).

In fact, there do not appear to be a ny documents evidencing the ownership of JK Claims. According to Sydow, because JK Claims is an "uncertificated" company under applicable Texas law, there are no records that identify JK Clajms ' shareholder(s). {See Ex. Fat 57:2-19, 58:3- 59:5). However, "uncertificated" corporations are merely relieved of the obligation to issue "certificates" to their shareholders evidencing share ownership. See Tex. Bus. Org. Code § 3.201. Ownership of corporatjons electing ·~uncertificated" status is still represented by ^[6]

The Bylaws state that the business and affairs of the company shall be managed by the board of directors. (Ex. F at Ex. 2 at p. 7). 7 4 1 9 shareholders. In the event the corporatjon elects to issue ''uncertificated" shares, it nonetheless "issues" shares 7 and must deliver to the shareholder a ''notice for uncenificated ownership interest" notifying the shareholder of the infonnation required to be stated on the share certificate, unless such information is reflected in the governing documents of the entity and the shareholder has been provided with such governing documents. Tex. Bus. Org. Code § 3.205 e•after issuing or transferring an tmc.erlijicaled ownership interest, a domestic entity shall notify the owner of the ownership interest in writing of any information required onder thi s subchapter to be stated on a certificate representing the ownership interesf') (emphasis added). Accordingly, corporations electing to be "uncertificated" must issue notice to each of their shareholders that includes, among other things. the name of the shareholder and the number and class of ownership interests held by such shareholdeTS, unless refl ected in the corporate governing documents. Tex. Bus. Org. Code§§ 3.202(c) and 3.205(a). This information- the identity of the shareholder and number and class of shares held - is not included in JK Claims' governing documents.g (See Ex. F at Ex. 2). Accordingly, JK Claims was required to provide the prescribed notice to its shareholder(s) and, apparently, has failed to do so.

Preston and Sydow Purchased tbe Kaiser Claims, Not JK Claims. 6~ Although the Kaisu Trustee was led to understand that Paul Lohnes, an alleged business

associate of a defendant in the Kaiser Litigation, would be funding the purchase of the Kaiser Claims, according to Sydow. Mr. Lohnes is not connected to JK Claims in any way. (Ex. F at 66: 12-18). Sydow contends instead that Quantum funded the purchase. (Ex. F at 6 1 :25-62:23, ,

The T exas Business Organizations Code defmes a ··sbare" as ''a unit into which the ownership interest in a for-profit corporation, . . . is divided, regardless of whether the share Is cerfljicoted or uncertiflcated." Te.~ . Bus. Org . Code § l.002(80) (emphasis added). Accordingly. ownership in uncertificated corporations is still evidenced by shares.

Intervenors challenge whether the documents produced by Sydow arc in fact "governing documents" as tJtey are neilher signed nor dated. (See Ex. F at Ex. 2). 8 420 63: 11-23). However, Sydow was not able to produce any records confinning that Quantum funded the purchase. (See Ex. Fat 61 :25-<>2:23, 63: 11 -23).

Records subpoenaed from JK Claims~ former counsel Kelly Stephens reflect that Sydow and Preston split the cost of the claims purchase - with $12,500 coming ufrom Boston" 9 and $12,500 from Sydow. (See Ex. I at 0060). Stephens received the funds for the purchase on June 12,2012. (/d.).

As counsel for JK Claims, Stephens negotialed me purchase of the Kaiser Claims with the Kaiser Trustee•s counsel Gretchen McCord. The following communications between Stephens and McCord confirm that Stephens was negotiating on behalf of Preston and Sydow- defendants in the Kaiser Litigation motivated to dismiss the Kaiser Claims - not JK Claims - a corporation not then in existence.

• On September 13,201 1, Stephens emailed the Kaiser Trustee, regarding his prior offer to purchase the Kaiser Claims for $25.000. Stephens indicated that he was making another off~r to purchase, this time at $1 0,000, because he understood that Kaiser was going to attempt to acquire the claims from the bankruptcy estate. (Ex. I at 0001 ).

o This email indicates that the purchaser wished to keep Kaiser from pursing the claims. • Later the same day, Stephens emailed the Trustee, raising the offer to purchase back up to $2Si000 and stating that the purchase price was based on a ..,cost of defense' evaluation." Moreover, Stephens' email goes on to explain the weaknesses in Kaiser's claims, concluding that they are "wort hless!• (Ex. I at 0002-3).

o The valuation method and conclusion that the claims are worthless reflects settlement discussions, not negotjations by a bona fide purchaser for whom "cost of defense'' would not have been an issue.

• Stephens confirmed in an email to McCord on September 19, 2011 , that the offer was "based on the cost of defense of the clajms made in the prior lawsuit" and stated that the buyer had come forward "because Kaiser has filed a couple of motions to retain." Stephens stated that the purchasers had let the first offer lapse when they "thought the suit would die of natural causes.,, Stephens also confirmed that "we may be interested in ^[9] Preston is a resident of Boston. 9 42 1 maintaining the claims in the original derivative suit depending on the terms of mty settlemellf." (Ex. I at 00 12) (emphasis added).

o A bona fide purchaser wouJd not be interested only because Kaiser had filed a motion to retain, as the purchaser could have filed its own motion to retain. Only a defendant would have an interest in obtaining control of the plaintiff's claims if Kaiser filed the motion to retain. Moreover, Stephens' email confirmed that the nature of the purchase is a settlement.

• On December 21, 2011 , McCord emailed Stephens asking if he was around " to discuss the settlement offer." When Stephens responded that he was, he did not correct McCord' s characterization of the offer as a "settlement offer." Later that same day, Stephens emailed McCord, advising her that he clients were "discussing what vehicle to purchase through." (Ex. I at 0021-23) (emphasis added).

• On December 27, 2011, Stephens emailed McCord advising her that his client bad "decided to make the offer/purchase through one of the individual s involved, Paul Lohnes." (Ex. l at 0024).

• In an email to McCord on January 17, 2012, Stephens indicated that his client is a "he." (Ex. I at 0032). o We now know through Sydow' s testimony that the "he" was not Lohnes. (Ex. Fat 66:12-18). • On February 7, 2012, Stephens emaited McCord and advised her that his client was ''forming a company to purchase this asset. •• (Ex. I at 0040). o We know from Sydow that Sydow formed JK Claims at Preston' s instruction. (Ex. Fat 11 :17-24, 17:5-9. 2 1:17-22:13). • On March 14, 2012, McCord emailed Stephens stating that she had defined the "purchaser'' as ~• Paul Lohnes or his assignee . . . a business associate of the Defendants," and asked for "some explanation as to why [Lohnes] is buying these claims." She stated "I assume he is a business association of Mr. Sydow. But, l need clarification on that issue." (Ex. l at 0042).

• Later that day, Stephens confirmed the purchaser definition, but did not explain why Lohnes would be purchasing the claims. (Ex. 1 at 0044). • On March 29, 2012, McCord asked for confirmation that the purchase funds were in Stephens• IOL T A account, and again asked about the purchaser. Stephens responded that he had been ')lnable to speak with Lohnes or Sydow." (Ex. I at 0047).

• On June 7, 2012, McCord emailed Stephens to "take one more stab at contacting'' Stephens. McCord adv1sed Stephens that the Trustee had her engaging special counsel to 10 422 take the litigation on a contingency fee basis "so we can reach some resolution'' and asked if Stephens' client was stiiJ interested in purchasing the claims. (Ex. I at 0049).

• Later that day~ Stephens emailed McCord, advising her that he had been assurod that the money would be in his trust account the following week. (Ex. I at 0051 ). • On June 12, 2012, Stephens emailed McCord advising her that he had received notice of a wire transfer of $12,500 "from Boston" and had received "a check in the amount of $12,500.00 from Mr. Sydow.'' (Ex. I at 0060).

• On June 15, 2012, Stephens advised McCord that the name ofthe purchaser would be JK Claims Investment Corporation. (Ex. I at 0067). • On June 27. 2012, Stephens forwarded to McCord a copy of the June 20 12 order from the 152nd District Court dismissing the Kaiser Litigation. Stephens asked McCord how the order wouJd affect "what we are supposed to be purchasing." (Ex. I at 0069). McCord responded that she did not think it would. (Ex. I at 0070).

• Later that same day, Sydow emailed Stephens the following: lf the case has been dismissed and the statute of limitations has run there is nothing left to purchase. A dismissal for want of persecution [sic] used to be subject to reinstatement within a certain time. However, if 1 recall correcely the reinstatement was discretionary with the Court. If so, either the trustee needs to have it reinstated to sell it or the buyer is purchasing yet another problem. 1 fail to understand how she thinks the dismissal has no bearing. Perhaps she can explain in just a bit more detail.

(Ex. I at 0071 ). • McCord emailed Stephens on June 28, 2012. stating that she would need a written commitment from the purchaser that .. if the Trustee reinstates the lawsuit, we still have a deal" or a written statement from the buyer that they were no longer interested in going forward. She further advised that she was meeting with someone to discuss the cost to reinstate the lawsuit. (Ex. I at 0075).

• Stephens confirme<l to McCord that the buyer was still interested if the case was reinstated retroactively "so that only limitations defenses available at the time the suit was filed are now available" and the court approved the saJe. (Ex. I at 0076).

• On July 3, 2012, McCord emailed Stephens asking that they make the motion to reinstate a joint motion. (Ex. I at 0086). Receiving no response. McCord emailed Stephens on July 10, 2012 asking if she could uat least represent that [the defendants] are unopposed." (Ex. I at 0088).

• On July 11, 2012, Stephens responded to McCord,s request for a joint motion to reinstate. According to Stephens. Mike,s reply to joining the motion was (paraphrased) I 11 423 am buying this thing to prevent further problems with Kaiser, why would I (the defendant) join in a motion to reinstate." (Ex. I at 0089) (emphasis added). Sydow also refused to represent that he was unopposed. (Ex. I at 0090).

• On July 12, 2012, McCord wrote to Stephens asking that he conf~rm that ''Mike Sydow is the one who is having the purchaser buy the claims." (Ex. I at 0095). Stephens responded that he could "confirm that Mike Sydow is [his] primary contact" and that Sydow was ''consulting with" the purchaser regarding the claims. (/d.).

o As noted above, Sydow testified that Preston was his sole contact on the formation of JK Claims. (Ex. Fat 1 1: 17-24). • According to McCor~ the transfer was effective as of July 27, 2012. (Ex. I at 0102). o This transfer was negotiated and effected before JK Claims was incorporated. (Ex. F. at Ex. 3). The Dismissals. 7. Not surprisingly, JK Claims' first order of business as Kaiser's assignee was to nonsuit

with prejudice the claims asserted against Sydow. (See Exhibit J). In return, Sydow nonsuited his counterclaim agajnst Kaiser. (/d.). On January 14, 2013, Quantum nonsuited its intervention against Kaiser. JK Claims non-suited Preston through the Third Amended Petition which dropped Preston as a defendant. (/d). These actions confirm that the Kaiser Claims were purchased by and solely for the benefit of Sydow and Preston to effectuate a dismissal of the c1aims asserted against them in the Kaiser Litigation. B. Pr~ton's Travels to Texas Prior to April 2011 are Contacts for the Jurisdictional

Inquiry. In his affidavit filed in support of his Special Appearance, Preston identified his "only [ )

activity in Texas" as (1) a .. limited number" of visits approximately 20 years ago; (2) a "very limited number~· of visits to Texas in the past five years on behalf ofTEM CapitaJ ~ and (3) a visit to Texas in 2010 to testify in the Sydow divorce proceedings. (See Preston Aff. at mJ 5.6''1. In ^[10]

Affidavit of John T. Preston, submitted as Exhibit A to Preston's Amended Special Appearance, filed September 28, 20 ll _ 12 424 responses to Interrogatories, Preston stated that he traveled to Texas ••as a representative on behalf ofTEM Capital between 2006 and the date this suit was filed." (See Exhibit Kat p. 12). Specifically, Preston stated that he traveled to Texas on April 2, 2009, May 3, 2009, December 30, 201 0, and March 16, 201 1, as a representative of and on behalf of TEM Capital. (ld. at pp. 12-13).

However, according to Russell Read ("Read"), Preston's fonner partner inC Change and TEM Capital. TEM Capital was not fanned until 2011. (See Exhibit L at 33:2-12; see also Exhibit M 11

). Accordingly, Preston's four trips to Texas between April of2009 and March 2011 could not have been as a representative and on behalf ofTEM Capital.

10. A RGUMENT AND AUTHORITI ES

A. JK Claims is Preston's Alter Ego. JK Claims was the mere tool or conduit used by Preston and Sydow to purchase the Kaiser Claims and is the alter ego of Preston and Sydow. See Castleberry v. Branscum, 721 S. W.2d 270, 272 (Tex. 1986) (the corporate veil may be pierced "where a corporation is organized and operated as a mere tool or business conduit of another"). Such ••alter ego'' status may be shown " from the total dealings of the corporation and the individual, including the degree to which corporate formalities have been followed and corporate and individual property have been kept separately, the amount of financial interest, ownership and control the individual maintains over the corporationJ and whether the corporation has been used for personal purposes." ld; see also Tryco Enters. v. Robinson, 390 S.W.3d 497, 508 (Tex. App. -Houston [1st Dist.] 2012, pet. disrn' d); Stauffacher v. Lone Star Mud Inc .• 54 S.W.3d 810, 816 (fex. App.- Texarkana 2001, no pet.).

II

The Delaware Secretary of State records reflect that Transfonnative Energy & Materials Capital, Inc.- referred to as TEM Capital- was incorporated on April 12, 201 I. 13 4 25 As noted above, JK Claims failed to follow any corporate formalities and was used merely for the personal purpose of Preston and Sydow to purchase the Kaiser Claims pending against them individuaJly to "prevent further problems with Kaiser." (See Ex. I at 0089). Sydow further confinned the following:

• JK Claims does not maintain a stock ledger reflecting issued shares. (Ex. F at 55:2-6). • JK Claims has no shareholder or director meeting minutes. (Ex. F at 56:7-56: 13). • JK Claims has no documents reflecting the financial condition of the company. (Ex. F

at 59: 12-22). • JK Claims has no documents reflecting any outstanding financial obligations. (Ex. F at 60:25-6 1 :5). • JK Claims does not maintain any type of account with any financial institution. (Ex. F at 61:7-13). • JK Claims has no employees. (Ex. F at 61: 14-18). • JK Claims has no investments or business interests other than its interest in the Kaisel'

Claims. (Ex. Fat 66:19-67:7). • JK Claims was formed solely for the purpose of purchasing the Kaiser Claims and has no other business. (Ex. F at 66:1 9-67:7). Texas Jaw prohibits a settling tortfeasor from accepting an assignment of a plaintiff's cause of action against other defendants as against public policy. See Beech Aircraft Corp. v. Jinkins, 739 S. W.2d 19, 21 (Tex. 1987); BDO Seidman, L.L.P. v. Bracewell & Pauerson, L.L.P .• No. 05-02-006360-CV, 2003 Tex. App. LEXIS 337, *13 (fex. App.- Dallas 2003, pet. denied). Accordingly, Preston and Sydow were moti vated to hide their purchase behind the corporate face - that is to use the corporate fonn to perpetrate a fraud - to avoid the settling tortfeasor bar to their continued pursuit of the Kaiser Litigation against Collins.

Moreover, the negotiations for and purchase of the Kaiser Claims on behalf of Preston and Sydow- which occurred in Te.xas among Texas residents- occurred before Preston and 14 426 Sydow inc.oq>orated J,K Claims. Accordingly, regardless of whclher .I K Claims is the alter ego of Prm.i.on, Preston is not afforded the protections of the fiduciary shield doctrine in purchasing tbe KaiseT Oairns. ,)'tN Cappm;t.:i/li 11. Gu!f l11dus. Prrxlr .. 1m·., 222 ~ .W. Jd 468, 485·86 (Tex: App.--Houston [ lst Dist.] 2007, n<.) pet.) C"'A promoter cannot ac-t as an agem of a corporation tlu.tt does not yet exist; the.rc.tbre~ th~ corppration c<mn<)t !)(; transacting husi 1\es~ througlt the pr~m~)ter, and the Ji duci~1ry shiel.d .doctrine caqnqt nppty to him.~). :a. J~J:-es.t•m~s Travel to Te~as \)efor~ April ~O l l is. ~ot Yr.o~e.c.ted by the t·1dudary

S.hi~li-1. 'Bt!catlse TEM C~lpital ~Nas JH:>.t incorporated. during the. t~eriod C)f:Prest:on's:rr.a.vel to Texa~

IV·.. CONCLGS(ON ANO .PRA Yl~:B: Am).rn(:~Wifb.r lntt~rHinor,~~/Pk7:in:,tf!<~ Bnf;~.:; lnW:}StJm1/'JtS; Lul. ·t:md .. .!L.f. wm deJ· ()()/tfi.

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427 CERTIFlCATE 01" SEUVlCE The undersigned hereby certifies tlmt on this 8th day of August, 2014 a true and correct copy of 1he ~lbove Supplemental Response t<.) the Special .A.,ppearance med by John ·r. .t.>f(}StQU wM serve~ on all intere~ted panics, by and through their attorneys of record indicated below· via emaiL Brent C. P~rry R~mdall 0 . Svrrels Clyde J. ~~ J.ai~ Jacks<.m. 1.1 f LHw .011-l-ce.s ofHrent C, Perry AbraJ1am \V.atkins. Mchol8, Sorrehv, 800 Commerce Street

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t , .• ...,. Hi 428 Cause No. 2011-44058 MICHAEL COLUNS, ET AL., § IN THE DISTRICT COURT § PLAINTIFFS, vs. § OF HARRIS COUNTY, TEXAS § MICHAEL SYDOW, ET AL .• § § 215th JUDICIAL DISTRICT DEFENDANTS. AKILA FINANCE, S.A.; BOSQUES DEL MOLINO. § IN THE DISTRICT COURT S.A.; CENTRANS ENERGY SERVICES, INC.; § CHESTER MESTER HOLDINGS, L TO.; DEL TEC § BANK & TRUST, LTD.; EMJO INVESTMENTS, § LTD.; WILLIAM END; EVANS & PETREE 401 K § PLAN; FIRST BAY INTERTRADE; GM PARTNERS; § MARAIR CORP.; W.L. NICHOL. IV ~ PANORAMA § INVESTMENT. LTD.; PCOl VERMOEGENS VERW.; § ALEJANDRO SANTO DOMINGO; SINCHI § INVESTMENT; VENTURI GLOBAL § INVESTMENTS .~ LTD., and H.J. von der GOLTZ §

§ INTER VENORSIPLA INTI f'FS, § OF HARRIS COUNTY t TEXAS vs. § MICHAEL SYDOW; JOHN PRESTON; CHRISTOPH § HENKEL; C CHANGE INVESTMENTS, LLC; § CHALSYS CAPITAL PARTNERS. LLP; SONIA LO; § BRILLIANT NOVELTY, L.L.C.; OSCURA, INC.; § MELIORA ENERGY TECHNOLOGIES, S.a.r.l; and § FALL RIVER REALTY, LID .• §

§ 215th JUDICIAL DISTRICT DEFENDANTS. AFFIDAVIT OF KELLEY M. KELLER Before me, the undersigned notary, on this day personaUy appeared KELLEY M. KELLER, who is personally known to me, and first being duly sworn to law upon her oath deposed and said: 1. My name is Kelley M . Keller. I am over the age of 19 years old and am fully competent to make this affidavit. 1 am an anomey licensed to practice law in the state of Texas. I am lead counsel for Intervenors H.J. von der Goltz and EMJO Investments, Ltd. (collectively, " Intervenors") in the above referenced action. The infonnation contained herein is true and correct and is based on my personal knowledge as it relates to my representation of Intervenors.

2. Attached to the Intervenors' Supplemental Response to the Special Appearance of John T. Preston (the "Supplemental Response") as Exhibit B and incorporated therein is a 429 true and correct copy of the Plaintiffs~ Second Amended Petition filed in the Kajser Litigation (without exhibits).

3. Attached to the Supplemental Response as Exhibit C and incorporated therein is a troe and correct copy of a Petition in Intervention of Quantum Catalytics, LLC filed in the Kaiser Litigation. Attached to the Supplemental Response as Exhibit D and incorporated therein is a true

4. and correct copy of the Motion for Summary Judgment, without exhibits. filed by Sydow in the Kaiser Litigation. Attached to the Supplemental Response as Exhibit E and incorporat<XI therein is a true

5. and correct copy of the Amended Answer and Counterclaim filed by Michael D. Sydow (••sydowj in the Kaiser Litigation.

6. Attached to the Supplemental Response as Exhibit F and incorporated therein is a true and correct copy of the deposition of Michael D. Sydowt as corporate representative of JK Claims Investment Corporation, taken February 25, 2014 in Cause No. 2007-38533, Jeffiry B. Kaiser, et al. v. Texas Syngas, LLC, et a/, in the 152nd Judicial District Court, Harris County, Texas (the ••Kaiser Litigation), with exhibits. Attached to the Supplemental Response as Exhibit G and incorporated therein is a true

7. and correct copy of the Trustee's Motion for Authority to Sell Estate•s Interest in Claims, filed by the U.S. Trustee in Case No. 08-35261-Hl-7, pending in United States Bankruptcy Court for the Southern District of Texas Houston Division (the .. Kaiser Bankruptcy,'), which I obtained from the Pacer case search system.

8. Attached to the Supplemental Response as Exhibit H and incorporated therein is a true and correct copy of an Order entered by the court in the Kaiser Bankruptcy on July 13. 20 1 2~ which I obtained from the Pacer case search system. Attached to the Supplemental Response as Exhibit l and incorporated therein are true

9. and correct copies of documents produced by KeJly Stephens under subpoena in the Kaiser Litigation.

I 0. Attached to the Supplemental Response as Exhibit J and incorporated therein are true and correct copies of the Non-Suits filed by JK Claims , Sydow. and Quantum in the Kaiser.

II . Attached to the Supplemental Response as Exhibit K and incorporated therein is a true and correct copy of excerpts from the Interrogatory Responses of John Preston. 12. Attached to the Supplemental Response as Exhibit L and incorporated therein is a true and correct copy of excerpts from the deposition of Russell Read taken April 21, 2014. 13. Attached to the Supplemental Response as Exhibit M and incorpordted therein is a true and correct c~py of the Entity Details for Transformative Energy & Materials Capital, Inc., which I obtained from the website of the Delaware Secretary of State.

2 430 Dated; August 8, 2DJ4. STATE OF TEXAS COUNTY OF HARRIS

BEFORE ME; the tmctersigned authority, o:n this day personaHy appeared Kelley \t Ketier, km:nvu t() me to be the -p(;.rson '~thO-'K~ mune is. subscribed tc' the forego1ng instrui1RWt, and ad\.:nO\vtedged to rne that she read the i\f11davit Qf Kelley l\,1. Keller atld that the facts stated therein were wjthin her perso1)al knowledge and were true and correct

CHVEN UNDER MY HAND AND SEAL OF OFFICE on August 8. 2014, ... .....-·-'-~ ./~ / ' / ~~---' BARBARA DAVIS i> NOTARY PUBLrC TN Al\TD FOR My Comm!ss!on Expires November 14, 2015 THE STATE OF TEXAS wJY COM:MJSSJDN EXPIRES: _ ..... .t.~~:z:.1f'~---·········-······--·-····----- l """ ... ,)

431 !

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f li e d

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08 M a y & P 4 : M =~ H a m s D l s t r f c t l

I NO . 2007 - 38533 J E FF E R Y B . KA I S E R . I ND I V I DUA LL Y . § I N T H E D I S T R I C T C OU R T O F

I

D E R J V A I EL Y , AND ON B E HA L F O F § ! A LL S I M I L A R L Y S II UA TE D § S T O C KHO L D E R S AND M E M B E R S O F § TE XA S S YNGA S , LL C a / k l a TE XA S

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S YNGA S , I N C , P l a i n ti ff s , ~~ § § HA RR I S C O ~, I E XA S §

v . ~ ~~~

§

TE XA S S YNGA S , LL C a l k / a TE XA S § @a~

Q~~

S YNGA S , I N C ., M I C HA EL A . C O LL I N S , § M I C HA EL D . S YDO W , M . S A M EE R AH M E D , § ~'V ANDA LL O I H E R S I M I L A R L Y S I T UA TE D § o ~

§ ~ O FF I C E R S AND D I R E C T O R S O F TE XA S S YNGA S . L L C a l k / a TE XA S § ~(o/j

§ ~ S YNOA S , I N C ., ~ 152nd J UD I C I A L D I S T R I C T D e f e nd a n t s . P~'SECO~NDEDPETnnON C O M E S NO W , J e ff e r y B . K a i s e r , ~v iduall y a nd D e r i v a ti v e l y on B e h a l f o f T e x a s .

~

S yng a s , LL C a nd I e x a s S yng a s . In~~laintitfs"), a nd f il e s t h i s S ec ond A m e nd e d P e titi on , c o m p l a i n i ng o f M i c h ae l A . C o J l m G , c h ae l D . S ydo w , M . S a m ee . r A h m e d , a nd T e x a s S yng a s , LL C a nd I e x a s S yng a s . I n c . @ \ po r t o f t b i s S ec ond A m ended P e titi on , P l a i n ti ff s s ho w t be

~ Q f o ll o w i ng : 0~

D

I S C OV E R Y ~ 1 . ~"\,ay i s i n t e nd e d t o be c ondu c t e d und e r L e v e l 3 o f R u l e 194 o f t h e I e x a s R u l e s o f C i v i l ~ u r e .

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I PA R T I ES I I I I i

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E XH I B I T B 432 Jetfe~y B. Kaiser, r'Kaiser''), is a membe1 of Texas Syngas, LLC, owning 7 5 2 percent ownership intere~ and resides in HaJJis County, Texas_ 3. Fred Sembeta is an individual member and shaJeholder in Texas Syngas. LLC & Texas Syngas Inc., and resides in Hanis County, Texas. Texas Syngas, LLC is a Texas Limited Liability Company. ~se articles of 4. organi.zation was filed on July 30, 2004, and whose Operating AgJee.m~ signed by its ~ members ou October 4, 2004, and has been served with citation and~swered herein. Texas Syngas, Inc. is a Nevada co1poration, i~ted on May 22, 2006, and 5. has been served with citation and lw answered herein. o-il M"ocllael A CoUins ("CoUins"), is ~er of Texas Syogas L.L.C. and 6. CbaiJman of the Board of Direcwts and Senior Vi~esident of I exas Syngas Inc., and owner of seventy-eight (78%) percent of the owne~~e1ests and stock in each of fex.as Syngas L.L.C. and Texas Syngas Inc ; and. is an in~ual resident ofMootgome~y County, Texas, has been smved with cibllion aad has ODS~ min.

7 Michael D. Sydoaydow") is the Chief Execurive Officer of I exas Syngas L.L.C. and Texas Syogas ilw@"\dividual resident of Hauls Coo111ty, Texas, bas been smved with citatioo and bas ans~ hetein.

of{@ M.~r Ahmed, !he Project Development Office.- of Texas Syogos L.L.C. 8 and Texas Syng~~-. an individual resident ofFou Bend County, Texas has been setved with citation and ~d herein. Quantum Catalytics, LLC, is a DelawaJe limited liability company which bas its

9 . principal office at 421 Cunant Road, Fall River. MA 02720, and bas intetvened in this lawsuit . 2 4 3 3 1ohn L Preston is the manager of Quantum Catalytics L.L C. and may be seaved 10. with citation at% Quantum Catalytics L L-C., 42 t Cwrant Road, F alJ River, MA 02720.

DERIVATIVE ACJ'ION

1 t. Kaiset brings this suit individually, and derivatively oo behalf of Texas Syngas, ~~~~~~ ~ r()(/j VENUE ~ Venue is proper in this case pumuant to lexas ~~thereodants have their 12. business addresses, personal residences., and principal places of~ in Hauis County. lexas and the caDSe of action occurred in Hauis County, ot all 01 apntial part of the events giving rise to this claim occwred in Hartis County, I exas. QtF'

JURIS»Ip 13. The cowt has jurisdiooon ov4 lawsuit because the amount in conuoversy 'sd' - ~

__ ,_ thi

t • • • ex~ s cowt s mmunwn JUll •ction ·~tements ~

~ FACTS

Beginning in a~~ately 2004 and continuing through present, Collins, 14. Sydow, and Ahmed. and oth~ and di.rectolS of I exas Syngas. LLC and I exas Syngas Inc. solicited and, upon~ation and belie£ obtained in excess of one miUion dollazs in

0~ investment fimds ~ividual residents of the State ofT exas I exas Syngas, LLC and Texas Syngas Inc., Col~~dow, and Ahmed. and otbez officers and directors, without full discloswe to Plaintiffs,~ oth.et members and stoclcholde~ thereafter participated in concealing the plaruting, organization, tegistration. creation and expenditure of the approximately one million dollars of the investors' monies by Collins, Sydow, and Ahmed. and o1ber'S to deceive and hide Texas Syngas, LLC and Texas Syngas, Inc.'s true financiaJ condition from Plaintiffs to further

3 434 l h e f i n a o c i a l i n t c x e s t s o f C o lli n s , S ydo w , A h m e d , a nd t h a t o f t h e d i r ec t o r s a nd o ff i ce r s a t t h e e xp e n s e , a nd i n b r eac h o~ D e f e od a n J . s ' statu~ry, c on t r ac t u a l , f i du c i S i y , and c o mm on l a w ob li g a ti on s a nd du ti e s o w e d t o P l a i n ti ff s a nd o t h e r m e m b e l - s t o c . kho l d e r s , ca u s i ng d a m a g e s t o P l a i n ti ff s a nd T e x a s S yng a s , LL C , a nd I e x a s S yog a s , I n c

O n o r a bou t A ugu s t 10 , 2004 , K a i s : a ' s l a w f u m a nd Sydow~ f i r m e n t e r e d 15 . i i n t o a r e t a i n e r a g r ee m e n t w it h M i c h ae l C o lli n s a nd I e x . a s S yng a s LL C . b~ch l h e y a g r ee d t o

I

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~ p r ov i d e l e g a l s e r v i ce s f o r C o lli n s a nd T e x a s S yng a s LL C inch~ a s t o a ll . a s p ec t s o f f i

C o lli n s / S yng a s ' e ff on s t o e xp l o it t h e C o . llii W S yng a s proprie~logy. K a i s e t r ece i v e d 7 . 5 l p e s ce n t o f t h e o w n e r s h i p i n t e r e s t s i n T e x a s S yng a s LL C for~fessional s e t v i ce s . M r . . [( a j s e r I l j

c on ti nu e d h i s t e p J C S OD l a ti on i n a ll a s p ec l s o f Collins~ S yng a s LL C ' s bu s i JJ e ss e ff o r t s t o I

I

I I u tili ze t b e ii ' p r op1 i e t a r y t ec ll no l ogy K a i s e1 du l y ~ a s Oene~aJ C oun s e J f o t T e x a s S yng a s ! LL C , un til t h e d i ss o l u ti on o f K a i s e r a n . d Sydo~ f u m i n F e bnuuy 2006 . l O n o r a bou t O c t ob e r 4 , 2oo & e O p e r a ti ng A g r ee m e n t o f I e x a s Syn~, L . L . C 16 . ~ w a s s i gn e d by it s m e m b e r s , Michael~· Q u a n t u m C a t a . l y ti c s . LL C by . J ohn P r e s t on . M i c h ae l S ydo w and J e ff K a i s e r , a c opy of~ i s a tt ac h e d a s E xh i b it L

C o lli n s deve l ~ v o l u a b le i n t e ll ec t u a l p t op t r t y t o i m p r ov e a nd e n lt a n ce t he 17 . t ec hno l ogy o f M o lt e n ~Techno logy, I n c ., w ho s e a ss e t s w e r e p w c h a s e d by J ohn P r e s t on 0~ • a nd o t he t s a ft e r M~"f-telab w a s p l ace d i n c h a p l e t II b a nk r up t c y p r o cee d i t J a . s a nd C M a t < d Q u a n t u m Catal~LLC t o t e qu i 1 e t ho s e a ss e t s . T e x a s S yng a s , LL C ob t a i n e d e x c l u s i v e li ce n s e s f t o m Quantmn~ytics f ox T e x a s LL C ' s u s e o f t h e i n t e ll ec t u a l p t op e r t y i n c o lij un c ti on w it h C o l li n s p r op ti e t a r y e nh a n ce m e n t s t o Q u a n t u m C a t a l y t i c ' s t ec hno l ogy , a nd t h e li ce n s e s a nd M I . C o lli e r ' s i n t e ll ec t u a l p r op e ny r i gh t s and t r a d e s ec r e t s w e r e p l ace d i n T e x a s S yng a s .. LL C .

4 435 18 On May 22, 2006, Defendants caused to be incorporated a Nevada corporation, with tbe name of "Texas Syn.~ Inc." in Texas. TheJeafte1, without Kaiser's knowledge or consen~ Defendants transfeued, without consideration. all of the assets, ot a substantial part. of Texas Syngas, L.L.C., to the new COipOtation, Texas Syngas, Inc, thereby illegally and fiaudulently denuding and stripping I exas Syngas, L.L.C of all of its as~~ violation of Defendants' statutory, contractual, fiduciEUy, and common law obligatio~d duties owed to

~ Plaintiffs and owed to the legal entities of Texas Syngas. L L.C ~ Syngas, Inc., and other membeJ-stockholdets, and creditors of these legal entiti~add.ition to othet statutory violations, Defendant Collins and Defendant officets vie~ section 101 .255 of Business Organization Code in that it was a b8DS8dion ~- Syngas, L.L.C. and ao entity owned. controlled and operated by Collins and o~cers, whete that transaction was unfair to Texas Syngas, L.L.C., the transaction was ~pproved by a disinterested governing body, and there was no disclosure oftelevant tac& was a violation of section 101.356 oftbat Code

~ in that the transfer of assets in effect ~own the operations of I exas Syngas, LLC , yet there was no vote of all the members ~ as Kaiser did not Ieceive notice of this uaosaction and had uo opportunity to vo~"\. traDsfer that made his OWIIC!ship inii:Jest in Texas Syngas, L.L C wotthless. ~ (J

0 ~

19. By' of DecembeT 19, 2006, KaiseJ inquired of Collins why Kaisa had ~er received ~betship certificate for tus 7.5% ownership interest in Texas Syngas. LLC and the status ~the business and future ptospects of its business. Collins ne-ver responded to the inqliliy

5 43 6 fwther, despite demand, Defendants have failed, and continue to fail and refuse, 20. in violation of the Operating Agreement Section 8 01, to provide Plaintiffs the oppo1tunity to examine the boob and records oflexas Syngas, LLC and Texas Syngas, Inc. Despite deman~ Defendants have failed, and continue to fail and refuse, to

2 L malre an aa:ollllling f01 the investors' funds and interests . A true and~ copy of the December 19, 2006 demand letteJS are attached as Exhibit "2" and Exhibit ~

~ Plaintiff K.aiset is a member of Texas Syngas, r;J!fnd by the Opetating 22 . Agreement, and by operation of law, ·he is also a stockholder o~ Syngas. Inc. The actions of the Defendants constitute bleaches of fiduciary duty ofoiJajority stockholder by Michael Collins, common law fiaud, breach of colllract, ~illes liawl, aiding and abettiog, conspiracy and Joint ente~prise liability under ~~ of the State of Texas, tesulting in damages to the Plaintiffs exceeding the julisdic@ limits of this Court.

~ONE ~

BREACH OF FIDU<PUTY AND FRAUD BY FIDUCIARY Plaintiffs hereby 1~ege and incorporate herein by tefeteoce ParagJaphs 1 23. duough 22 of !his Petition r@.~ Collins ~ority shareholder in Iexas Syngas LLC, and as the sole Managet 24. o(@ in Texas Syngas ~d as partner and joint venturer with Kaiser, Sydow and Quantum Catalytics, ,o~~uciary duty to the minority shareholders in the circumstances of this case, to the other m~rs, to the othec partners and joint ventwms, including Kaiser, including (i) a duty ofloyalty to the joint concern, (ii) a duty of utmost good faith. fairness and hooesty, (iii) a duty of full disclosure of all mattets affecting the <:ommon enteJpise, (iv) a duty to account foi

6 43 7 all property of the common eotetprise, and (v) a duty to refrain fu>m competition with the couunon entetprise Collins breached his 6duciaty duties owed to Kaiser- as to minority sbateholdeJs,

25 . member, partner and joint venturer, through oppressive conduct and through domi:nat.ed contJol oveJ lbe business, by dissipation of all the assets of tbt: commoo enterprise s;:lr conversion of the assets to his own use and benefit, thus destroying the object for which ~int eotcJprise was

~ created and rendering it impossible for the joint entetpxise to co~ its business Collins' conduct destroyed Kaiset's reasonable expectations lhat were ~to hi.s decision to join and participate in the ventwe. Collins conduct rendered the~ enterptise incapable of the continued business for which it was es1ablisbed. Coll~bed his duty of loyalty to the joint concern, his duty of utmost good faith, fait ness ~oesty, his duty of full d.iscloswe of all mattets affecting the common entetprise. his ~to account for all pJopetty of the common eotetp!ise, and his duty to Jetiain from com~on with the common entetJ)Jise.

Detendants knew ~~lins' conduct constituted a wroog!UI ad qaiost 26. Plaintiffs and with intent to assist ~ins in the wrongful acts., defendants substantiaJiy assis~ and eocouJaged Collins by ~ a<:Ca of assjslaDCe and encouragement as alleged beleio. Defendants' assistance ~cowagement was a suh!tllntial factor in causing the wrongful

ofjg conduct. AJtemativ~fendonts were engaged in a joint ente!prise. Plaiotiffs aocl Defendants had an agreem~ common pwpose, a community of pecuniary interest in that common pwpose, and ~ual tight to direct and connol the enterprise. AI the time of defendants' acts as alleged herein they were acting within the scope of the enterprise. Aftematively, defendants wett engaged in a conspiracy, in that there was a combination among the co-coospiratoas for an r

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I

unlawful pmpose as alleg~ herein ^[01] lawful pwpose by unlawful means. Defendants knew that / 7 I I I

4 3 8 the agreed acts would result in bairn to Plaintiffs. To accomplish the object of their agreement Defendants engaged in the overt acts described herein. The agreement to engage in the above described acts proximately caused injwy to Plaintiffs.

27. Defendants' breach of fiduciary duty injured Plaintiffs by deptiving Plaintiffs of the value of their property, the loss of their reasonable expectations fm ~~ en~prise and their investment and loss of business opportunities, in damages ind~g the full market

~ ~ry value of their ownership interest in the common enterprise 28. Defendants, breach of fiducimy duty benefited ~ts in that the conversion of the assets of Texas Syng.as, LLC for use in Texas Syn~~c substantially bene . .fited and ~ emiched Defendants to the dettiment of the Plaintiffs ~~ PlaintiffS injwy resulted from de~~ts· gross negligence, malice. or actual 29. fraud, which entitles Plaintiffs to exemplmy 4 under the Texas Civil Pr:actice & Remedies ~ Code section 41.003(a). ~ ~~UNT TWO F-CH OF CONTRACI' Plaintiffs het~reai.lege and inco1porate herein by reference Pmagraphs t 30. tlttough 22 of this Petitio~ Q

0~

On~~beJ 10, 2004, Plaintiffs and Defendants executed a valid and 31. enforCeable wri~ating Agreement of Texas Syngas, LLC, attached as Exhibit "1" and incorporated ~ference herein

32. The Operating Agreement provides in Section 5.07 that "no member or Manager shall engage in 01 possess any interest, legal, equitable, or otherwi~ in any business venture that competes in any way with the Company W\Jess such participation sball be app:t'Oved by a vote of

8 4 39 ... - .. ... ...... ...... __

... ;~-~~S:·SSEO ~ CAUSE NO. 2007-38533 JEFFERY 8. KAISER, INOJVIDUALL Y §

DERIVATIVELY, AND ON BEHALF OF

§ ALL SlMILARLY SITUATED § STOCKHOLDERS AND MEMBERS OF § TEXAS SYNGAS, LLC A/K/ A TEXAS § SYNGAS, INC.,

~ ~ Plaintiff, ~ , · § v. § HARRIS CO" "Y) TEXA" ~ <:7 · ~ ^[0] ~ ,.] ~ . I § § §

TEXAS SYNGAS, LLC A/KIA TEXAS

~t~ ~v - ~ ~) ... · _:::s -:. SYNGAS, INC~, MICHAEL A. COLLINS, Q.fi : ~ _: ~~~~~L~~:~~~~~~~~~;:A~~~D, §§ 1+ 3 o ~ OFFICERS AND DIRECTORS OF § ·::, § ~ ~·. ~." TEXAS SYNGAS, LLC A/KJA TEXAS SYNGAS, INC., . § ;:~

§ 'V 190 ^[1] Defendants. h JUDICIAL DISTRICT

T~

INTERVENTION OF QUAN~-.. - CATALYTICS, L.L.C. TO THE HONORABLE JUDGE OF SAI~QURT:

COMES NOW, Quantum Ca1a' a?: L.L.C., and in support of iiS Intervention under

Rule 60 of the Texas Rules of Civil ~ure would respectfully show the following: o~- --

FACTS

~. ~' . Quantum C~cs, L.L.C. (hereinafter ''Quantum Catalytics .. ). is one of four l . members of Texo.s S~. L.L.C. The four members are Michael C. Collins, Quantum Catalytics., Michae~~dow, and Jeffery Kaiser.

jQ 2. ~ther members o fTexas Syngas, L.L.C. are parties to this sui t Jeffery Ka!ser (hereinafter ·•Kaiser.,) is a Plaintiff, and he has sued Michael C. Colli ns and Michael D. Sydow. 3. The operating agreement, signed by a\1 four members, provides that the company is to be managed by a majority of its members. All of the corporation•s members other than Kaiser, who owns a minority interest, agree that it is being managed in the best i.nterests of_the

1

EXHIBIT C

452 Flied 08 June 20 P4:20 Theresa Chang Olstrfct cterk Hams District

CAUSE NO. 2007-38533

JEFFERY B. KAISER, INDIVIDUALLY, § IN THE DISTRICT COURT OF DERIVATELY,AND ON BEHALF OF § ALL SI.MILARtY SITUATED § STOCKHOLDERS AND MEMBERS OF § § : TEXAS SYNGAS, LLC A/KIA TEXAS

SYNGAS, INC.,

~

Plaintiffs,

_e_~. § v. § HARRIS C~rY, TEXAS § ~ /[} TEXAS SYNGAS, LLC AIK/A TEXAS § ~ SYNGAS, INC., MICHAEL A. COLLINS, § o ~ MICHAEL D. SYDOW, M. SAMEER § .(~- ~ ,¥ AHMED, AND ALL OTHER SIMILARLY § § SITUATED OFFICERS AND

,flJ~ ()~'0 DIRECTORS OF TEXAS SYNGAS, LLC § ..,_~~ § A/KIA TEXAS SYNGAS, INC., ~?!) § ~ 152Dd JUDICIAL DISTRICT Defendants. .,@?'1

DEFENDANT

MIC~L SYDOW'S AMENDED" MOTION ~~tJMMARY JUDGMENT Defendant Michael D. Sydow her~les his Amended Motion for Summary Judgment, in suppo~ of which he would r~w the Court as follows: - ~~ INTRoDUCI'ION 0 ~ \ We have been down~~ once before. In April 2008, Defendant Michael Sydow -fJ~ ("Sydow,) moved for~ judgment on all claims asserted against him by Jeffery Kaiser ~- (" Kaiser''). Sydow'~gtion was based on purely legal issues and undisputed facts (e.g., t Sydow did not induce him to acquire an interest in Texas Synp LLC). Kaiser's admissi#

-'~ Rather than ~ond to Sydow's motion, Kaiser claimed that he needed a 45-day continWUlce in order to review additional documents. The Court gave Kaiser one week (until May 9) to file a response.

But Kaiser's gamesmanship continued. On May 5, Kaiser attempted to side-step summary judgment by filing a second amended petition. Although the new petition asserts

EXHIBIT D

456 p ., c ^[101] . l " ' f U ' ^[90] -r . ; ) : I R T D D J R I » I C Y O O l ll l ' l ' O P ' J D I .I I O U ' B . ~JSD.IlQ)IVJDUALLY . DD J V ' ADV B L Y ,. AKD O l f B I C I J A I . B 0 ' 1 j L l , III W · ' W · Y m ' UADD 8 ' i ' o aa l O L DD 8 A ND M B M J II R 8 O l P T R J 1 . 8 SY m . W I, LL C ; A / J C / A .. T l;j ' A S

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D e f ea d a n t ' s E~jt - ~ 4 7 5 ·· - · -- --- · ---- .. · -- . · - ~~ . . ..

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M i c h ae l D . S y do w 1188 ao t ed a s f il e a d a f B aaa bvo o m . - o f t b o oo m p m y u m J a r 1h e · c D m adou 8 ll d GO D ! m 1 o f M J c b a d C .. C a lli D s : M l a b ae l D . S y do w b a s D e v e r b a d a uy aa t hod t y c m r t bo e xpnnd lt u r e o r d tt b i u w : m ea t o f a J i bud a b i D T aa a ~ L . L . C . M l ob • c l D . S ydo w h a s mm : r s l ped , o r baa au t bad z ed t o t dp . G il If ill ba t o r a f J & a r ' O C f ' ! ' l n f s G f T e x a s ~ L l .. C . a

2 476 A r ed 08 J une 20 P 4 : 04 T he r e s a C h a ng D l s t l f c t C f e r t c H a m s O l a t r f c t

C AU S E NO . 2007 - 38533 J E FF E R Y B . KA I S E R , I ND I V I DUA LL Y , § I N T H E D I S T R I C f C OU R T O F D E R I V A TEL Y , AND ON B E HA L F O F § A LL S I M I L A R L Y S I T U A TE D § S T O C KHO L D E R S AND M E M B E R S O F § TE XA S S YNGA S , LL C A / K I A TE XA S § S YNGA S , I N C ., § :

P l a i D till ' s , ~ HA RR I S CO ~ , TE XA S v . : f ~ TE XA S S YNGA S , LL C A I K / A TE XA S ~ · S YNGA S , I N C ., M I C HA EL A . C O LL I N S , § § M I C HA EL D . S YDO W , M . S A M EE R o~c.?e) AH M E D , ANDA LL O T H E R S I M I L A R L Y §

<{J~ § S I T U A T E D O FF I C E R S AND ~ D I R E C f O R S O F TE XA S S YNGA S , LL C § o~ § ~ A I J ( J A TE XA S S YNGA S , I N C . ,

< f.; } l f @ 1 . sz • ^[4] J UD I C I A L D I S T R I C T § D e f e nd a n t s . D E F E NDAN I ' MI~ S YDO W ' S F I R S T A M E ND E D AN S w p» C OUN f E RC L A I M M i c h ae l D . S ydo w ('•Sydow'~. files~~ A m e nd e d A n s w e r a nd C o w tt e r c l a i m . © . ( e t p I. -'~ ~~ AN S W E R { ) Sydow::_~~~ally t h e a ll e g a ti on s o f t h e P e titi on pu r s u a n t t o R u l e 92 o f t he

I . T e x a s R u l e s o f C iv i l~ & ~ .... o~

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L ~~ A FF I R M A T I V E D E F E N S E S ~

2 . ~tiff ha s no s t a nd i ng t o b r i ng t h e ac ti on pu r s u a n t t o t h e l a w s o f t h e S t a t e o f T e x a s . P l a i n ti ff ha s no r i gh t t o m a i n t a i n t h e ac ti on b eca u s e h e h a s f a il e d t o c o m p l y w i t h 3 . s t a t u t o r y c ond iti on s p r ece d e n t t o t h e f i li ng o f t he ac ti on . A l t e r n a t i v e l y , S ydo w i nvok e s h i s r i g h t s u n d e r § § 10 1 . 4 5 4 ( a )( 3 ) , 1 0 1 . 4 5 4 { b ) , a n d 4 .

E

X H I B I T E 477 Oral Deposition of Michael D. Sydow, Sr. Page 1 CAUSE NO. 2007-38533 JEFFERY B. KAISER, IN THE DISTRICT COURT OF INDIVIDUALLY, DERIVATELY, AND ON BEHALF OF ALL SIMILARLY SITUATED STOCKHOLDERS AND MEMBERS OF: TEXAS SYNGAS, LLC a/k/a

TEXAS SYNGAS, INC. ,

Plaintiff , vs .

HARRIS COUNTY,

TEXAS TEXAS SYNGAS, LLC A/K/A TEXAS SYNGAS, INC., MICHAEL A. COLLINS, MICHAEL D. SYDOW, M. SAMEER: AHMED, AND ALL OTHER SIMILARLY SITUATED OFFICERS: AND DIRECTORS OF TEXAS SYNGAS, LLC A/K/A TEXAS SYNGAS, INC. 152ND JUDIC I A.L DISTRI CT

Defendants . ************************************************** ORAL DEPOSITION OF MICHAEL D. SYDOW, SR. FEBRUARY 25, 2014 ************************************************** 9438 Data scope 713-688-9300

EXHIBIT F

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a nd nv m b m d ea u s c O ft t h e 2S t h ^[4] A y ofF~bnwy, 2014 , ^{[4] [4]} 10 · J S - 12 . ....... .. ................. - . - .......... 30 fr o m ! 0 : 26 a . m . t o 11 : 46 a . m •• bef~ D o nn a W o r l e y . C S R 8 T e x B S S ec r e uuy o f S t a t e P a y m e n t form.~ I 5 · 12 .. - 31 ~ ^[5] 9 J K C l a i m $ W r itt e n C on s e n t i n L i e u o r Me-etlt~g. ^[6] i n a nd ( O f t k S t a tt o f T C J U 18 .. t C f ^[1011] c d b y ^[11] m opph l c ^[6] f ll dhod , llltll e otrlccsof~ i c:h .t 8 i n s 1o c k . 4265 S ou l 8 - 22 - 12 a nd 8 - 22 - J 3 , R e s o l u ti on o f A c ti on B y S o l e ^[7] 7 ^[8] ~d i pe. S u il e ^{[1] [0] [0] [0]} , H~ T c u s , p tll ' u : a n1 t o t J i c ^[8] Di~tt.or ............................... - ................ 34 9 T uu R u l e s o f C i v il P l - o«dv t e a nd t h e P f O " i $ i o M s w c d 10 E - m a il & o m B ea u B e duu t o A m b e r P o l ac b . 9 r e g : ud i ng 8 - 22 - 12 Rq~ A g e n t f o r J K C l a i m s ^{[1] [0]} Oft~ r eeon l ^[01] M t K h e d h e f tt o . 1 0 )) 11 l n v e s c m e n t , da t ed 8 - 22 - 12 .. _ , _ ... ............. 36 12 II E - m a i J fr o m G r e t . c : h e n M e C o r d t o K e ll y S t e ph e n s , ^[12] r e g a r d i ng K a i S J e t , 3 - 14 -I L _ , _ ,, _ .... .... 37 13 ^[1] ) 12 E - m a il fr o m G r e t c h e n M~ord t o K e ll y S t e ph e n s , l ^[4] 14

15 r e g a r d i ng K a i s e r · S a l e O r d e r , 6 - 15 - 1 2 . ......... . 41 1~ 13 E - m a il fr o m K e ll y S t e ph e n s t o G r e t c h e n M c : C o r d . 16 16 17 r e g a t d i ng K o i s e r • S a l e O r d e r , 6 · 1 5 · 12 ... - ...... 41 ^[17] ) 8 1 8 ^[19] I 19

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AG E F O R T H E P I .. AOO I FF J K C L A I M S I NV E S T M E N T C O R P O R A T I ON . A pp ea t a n Q e $ . - · - ·· - ·· - ·········· ..... - .. - · - ... 5 ^[3] M l C h a r l ea C l i n1011 H un l e l R E I C H . t . B J N S T O C K . L . l - P M I C HA EL 0 . S YDO W , S R . • I • ^[426] S S an f d i p e , S u ilt ^[1000] E x a m i n a ti on by M s . K e ll e y M . K c li C f ... - .. - .... . 6 ll o U $10n . T c w ^[77027] C h a ng e s a nd S i gn a t u r e P && e . .. - ........ _ , _ .. _ , _ . 74 P hone : ( ^[7] t . J . ) ^[62] l - n7 t R e p < X 1 e r ' s C c n i f i ca t e ..................... w ....... 76 F a~ ~ : ( ^[71] l ) t . ^[2] J . ^[872] A ^[6] F O R T I- l E D E F E NDAN T M I C HA EL C OU I N S : E XH I B I T S M s . K e ll e y M . K dk t P AG E N O . O E S CR J P T I ON E lli S ON ^[4] t . K E J . LE R , P . C . S ^{[1] [20]} Wood~ )' O r i v t . S v i t c ^{[60] [1]} t ^[8] D e f e nd a n t M i c h ae l C o lli n s ' A m e nd e d N o ti ce o f I ^[1] C ili $ I O ft. T c u s ~ J n t e n t t o T a k e T h e : D e p o s i ti o n o f J K C l a i m s 1 2 ^[9] P ho ne : ( 7 1 } ) l ^[66] - ll t a I nv e s t m e n t C o r po r a ti on .... ... .. .. , _ .... - . 6 F . a ; ( 713)~1 1 3 ^[10] 14 2 B y l a w s o f J K C l a i m s l nv e J U n c n l C o r po r a ti on ... - .. I 0 11 J T C " J C a s S ec r e t A r y o f S t a t e B u s i n e ss O r ca n i u ti on s 15 ^[12] I nqu i r y , J K C l a i m s l nv c s t m e n c C O f ' J ) O m ti o n 31 \ d 13 1 6 l ^[4] o t h e r do c : u m e n t . s . . ......... - . _ . ........ _ , _ , .. 1 S 17 ^[1] ! i 4 T e x a s 5eae t a t y o f S t a t e P a y m e n t F o r m , 8 · 22 · 12 ... 22 18 ^[16] S T e l ec opy c ov e r s h ee t fr o m M i c h~ l S ydo w t o t h e 17 19 ^[18] TcxasSccrewyors~a~ , S - 22 - 12 , r e go r d i ng 20 u C c n i f l a lt c o ff onm~tion F o r- P r on e C o r po r a ti on 21 ^[20] f o r 1 K O a i m s l nv c s t m c r lt C o r po r a ti on , _ ...... - .. 26 22 ^[21] 22 6 O ff i ce o f S cc m a r y o r S w c P ac k i ng S li p , 2 3 23 6 - 20 . 12 , r e g a r d i ng A pp li a ti on f o r N a m e 24 24 R e s c r v a ti o l\ . .... . - ................ , .... _ .. _ , : 27 2 5 ^[2] S -- ' " - ·. - · - · - · - ··- - ~ -- · -- · 2 ( P a g e s 2 t o 5 ) D a t a s c op e 713 - 688 - 9300 9438

4 82 Oral Deposition of Michael D. Sydow, Sr. Pa9c 54 Page 56 10 Reque$1 No. 3. yellina a~ me. and I'm aired oflhat. 1 1 2 Q. So is it correct. then. that there are no Q. Yeah. 2 3 Artides ori~orporation for JK Oaims? A. Evety time I $lOt you. you sealhi$ wny. 3 A. Of course, there are. They've bem produocd. You'n: no11he patty. J~tSt calm down end ask 4 4 5 Q. They're not here in ~ I have 5Cal. Js that 5 straig)llforward questioos and get Shighlforw»"d the Cmificale ofF~ion? answer$. 6 6 7 Q. l asked 111e question. an: lhcre any A . Yes. ^[1] Q. Okay. We'veseenaCertlficateofFomration. shardloldcr mceling minutes? 8 8 Are there Articles oflncorporation7 A. TI11:1e are wriaen coMCnts in lieu of 9 9 meeaings.

10 A. All the documents·- 10 Q. Th•k you. So chen: are no actual meeting l l Q. lji&St want to know - 11 minuteS, conetl?

A. - that exist ~ here. 12 Q. -are there Ardcle$ of Incorporation? You 13 A. Corm:t

said them Articles of lnc:OfJ)(>ralioo. I WWII you to Q. lllank )'OU. 14 find those in the materials we reviewed today. Corpc:~r.Ue resolutions. have you prodoood 15 ~II or the eorporaw: resolutions of JK Cbims? A. Bates NO$. 36 throv&J! 38. 16 A. Yes.. Q. Okay. And what is !he titk of thai docomeol 17 Q. Otll)'. And -cain. the one$ we've seen are

18 yo~eref~nsto7 A. Certifu:aac: ofFormillioo For-Profit un1i~, conut? 1 9 2 o A They doo't 113vc to be srBJW!. Corporation. Q. Okay. So there'SI Certificate or Formation. Q. Oluly. ~lder COMents. have )'OU prodO<:Cd 21 all of lhe sh'mholdet collSalts of JK Clairru? Have you found anything idcntiftcd as A nlc:les of 2 2 A. There af'Cfl't any sflan:holders. Incorporation for JK Claims? ^[23] A. Thll($ wtusttbis i.s. Q. Okty. So ~re's ~ sb~boldcrs.. WOO arc 24 the owner.~·- Q. Okay . 25 Pb(JC 57

Page A. Jfs uncertirl.c:ated. 1 A. It's the some thing. Q. Who arc the ownm o( JK Cl~ims? 2 Q. Okay. S4oct ledgers. are tbcre any st<d A. Quan1um ~talytks. 3 ledeers for JK Claims? .. Q. And how is their ownership acknowtedJed?

A. It's an ··ownership is un«rtificalcd under 4 s the B~ncss Of8;niwions Code, so cherc is no stock. A. It's unccrtiracatcd under the DOC. 5 Q. If somcooc: wanted to flnd out who the owner o( Hen«, tbc:re woukt be no stodc ledgers. 6 6 JK Claims is rrom $0me type of record. wlliat record Q. Dlrtt;tor and shlltd.older meeting nllrtutcs7 ^[7] 1 would they loot to - 8 8 A. Produced. g A. The-

Q. I ho~n·• Sttn mlnuacs. I've seen consents 9

I

Q. •• lind the owACr of JK Claims? tlH'II were unsl~. Wf!f'C &here any dircctOt and 10 110 A. Its unccr1ificatcd, so lhere aren't rcr:orch. 11 11 .shatdloldcr - , j 12 Q. So anybody could be ovmu off JK Cloims. 12 A. You jUSt need to read - 113 correct7 Q. -meeting minutes? 13 t u A. Ownership interests are unoc:stific:ated under A. YoujiJSI need to read the Business l4 tS 15 Orgallizations COde. tbeBOC. Q. And what I'm ask.lng. Is thc:re any odlcJ type Q. I undmtand lhaL 16 16 of record that ~one would loot to to f111d out who 17 A. l'm not here to ~vc you a- 17 18 ahc owner of JK Ctalnu ls? Q. And I undentand - 1 8 A. Not that I'm aware of. 19 A. - semJnar on fonnin3 oorpor.:lliOI¢ 19 Q. Olcay. So you c;ould ~actually say anyone is 111e Q. Mr. Sydow, I un6er$Wid the diif'ercnce bel~n 2 0 20 owner of JK Claims lllld there's no way to verify thlll> necclin&- 2 1 21 22 A. And if you cSon't quiet down and set out of my 22 is &hat correct? face, I'm walking out. 2 J MR. HUNTER: Objcaion> form. 23 2.

Q. YWI. I'm noc In your faoc:. A. JK Claims is incorporated as an uncer1ifi~ed 2 4 A. You arc. vou•re leanJng across the coblc and oompany- 25 2 5 • -:;J""- .. . 15 (Pages 54 to 57) Data scope 713-688 - 9300 9438 49 5 Oral Deposition of Michael D. Sydow, Sr . Page 58 Pa ge 60 Q. (BY MS. KELUR) I've hcatd tha.t. 1 1 A. It's not filed if it's re~. A. -through the BOC. 2 2 Q. OkAy. But It was flied and th.en rejected. Q. Wh3e rm eskiJlg is. is lhcre any other way 3 corn:c:t? Jus1 filed. but not ~ted'? 3 ..

oth.cr than your testimony today 10 verify the ownership A. )I WIIS wbmitted, OOt not fi)cd bcca.w'c it 4

I

of JK Claims? 5 5 ~properly filled out. A. I'm~ awan: of any clocumet~~tlon- well 6 6 Q. Do yoo bve :a copy of Ill~?

attualty tha'c m~t be: some documenwion thai may 7 7 A. No. 8 exist. Q. Who prepared lhar? 8 Q. Okay. Wbal would IIIII documc:nlalion be:? 9 A. Some DCCOUnWII in Mus:\dwSdts.. 9

1 o A. J believe the consent in lieu of mcell"£,5 Q. So does JK Claims have: any profJt and loss 10 l l clc:atl)' sfl.ows who the owner is. 1 1 scatc:ITICfiiS? 12 MR. HUl'fTER: I think tha'c's a B:aiC$ 12 A. No.

No. so. 13 13 Q. Docs JK Ct3lms have a tJ.I~ sheer? 14 A. Q&~~twn Catalytics, l .l..C., being llle holder l 4 A. No.

of the majority or the shares of JK Claims docs ~by 1 5 l S Q. Does JK Claims have any inc:omc: Slalc:ments? consent tO the ac>polntmcnl of John Preston ll$ so~ J 6 A. No. dii'CQO: of the company. Q. Oocs JK C1aims have any oilier type of documen.l 17

Q. (BY MS. KEllER) Otay. thai might rellcct the current finOVlcial ClOilditio«< or 18 A. Exhibit 9. 19 JK Claims'? A. No. Q. Ok:s.y. Anythi~ eiSIC? 20 Q. Rc:quc~ No. 6 t\Sk:s for ;!:tly and all loan A. Bate.s No. OSO, QIIIUlfUm Catalybc:s. l..l.C., 2 1

be&!~ the bolder of the majoriry of the snares or Jl< 22 appiK:ations prepared by or on behalf or IK Caaims. Claims dues hereby redcct John Prescot~ as the sole 23 Has JK Claims pre~ any loan apptic:atioM? di~ of the company. Exhibit 9, Bates No. S l . 2 4 A. No.

J2S

Q. All documc:nlS re_rlccti11g any ouiSianding Q. Okly. 59 1 Page 61 Page l ) flnanc:inl obliption held by JK Claims, inc:ludinJ but A. So, yes. lllere are dQCumc:JIIS that reOCCI the l not limited lO. loorl sta1cmc:nts, credit card account ownersfljp. 2 2 stalc:mcnts, promissofy notes, and scc:ID'ity instrvmcnu. Q. Okay. Would there be: any other doa!mct1LS 3 3 H&\"C you soc:n eny suc-h documeMS? otller than E)(hibit No. 9? ^[4] 4

A. Thctt aren'\ any. 5 A. N04IIIal I'm aw1re of. 5 6 Q. There an: none? 6 Q. OQ)'. Request No. 4 asks ror an

RcqYC:St No. &. all ~rds reflccti,.,; the cmployment·tclatcd agrcemenlS ccea.ted by JK Claims 1 ^[1] from Jamwy 2012 10 lhe present, including but!)()( e:xiscence of all ""oourns held by JK Claim¥ at any type I 8 8 9 of fin:~r~Ct.llnsdMion, inc:ludine but nocllmJted to. limited to. con.sultina qreements and employment 9 10 ~opening docwnenlS, si!:Jtarute 11.11horizaliom, ~LS. Are there any document$? 10 and 1t1e last six moatbs of statements. Docs JK Claims 1 1 A. No.. \1 hold any rypc: of banking or savings finllnCial ac:oooot? Q. Request No. 9 asks for all do<ltJmei\IS 1 2 12 1 3 A. No. 13 rerlcc:tirt3 the fUWic:ial condition of JK Claims from 14 Jamwy I, 2011, to the p~t, including but not 14 Q. All poytOll records for JK Cl.1ims. Does limlfed 10. profit and lou SLatemcnts, boJlll\ClC stu:cts, '\5 JK Cbims maiMnin any ~ I ~Ids? 1S A. No. and income SUtemt11ts. Do yoo have an)' docLtJncms 16 1 6 Q. Docs JK Cllims ha"t-c any ~loyees'? rc:spon;ivc to this requc:st? 17 l l •n its fmalil.ed Dd filed. A. ~ would only be a francbisc tax n~pon 18 A. No. 18 Q. RequtSt No. 10, all contracts, ~nu, 0t 19 19

undas1311dlng bc:"''CCII or amons U>Mes, Preston, 8liCV« Q. HAS JK C1alms flied any franchix tax ~pons 20 2 0 Sydow regat<fing the etca~ioo or inoorpor11ion or 21 before? 11 business of JK Claims. A.re theTe any documents 22 A. Evidently noL 4! 2 23 responsive 1o th3l request? 2 3 Q. Well. earlier you re(Med to a =tifia.4c: lhM was filled with something thai was noc c:tlccked. So 24 24 A. No. 25 is~ ocawly a ftanehiSIC- 25 Q. Request No. II , nil d~ rd!ectlngot

. ---- '"' 16 (Pages 58 to 61) Data s c ope 713-68 8 - 9300 9438

496 Ora l Deposition of Michael D. Sydow, Sr. Paqe 62 1 Page 64 . 1 n:tlled to the soui"CC$ of the JlS.OOO used by JK Claims 1 A. NOihins. ~ 2 to purchast the claims owned by the bankruptcy of 2 Q. Ju~tlhat Q\!Mt\lm Catalytlcs paicf? I! Jeffery Kaiser. What docwncrus lla~e you brouslu 3 3 A. Yes.

n:~.nsiw: to RcqUit:St No. I I? 4 4 Q. 'Jlut's it? 5 A. No.ne. 5 A. Yes. Q. I'm Sl>rry'! 6 6 Q. Request No. 12, all documents reO~ or A. None. 7 rdatc:d to CX~mmuniCil.ions between IK Clai~m or it$ ^[1] repn:scntativcs and the tNStee of the~ regardint 8 Q. Okay. I ass~Umc thallhere wouid be documents 8 te.flectiB3 the sourte ofth1t funding. H1111e you made the pu:d\ase. Thilf$ c:ssmtially these dwc ~rds 9 9 811Y effort to locate doaunents responsivc 10 Exhibit l 0 you produced as Exhibit No. I I thto~tp 13?

1 0 11 No. ll - 11 A. Those ue the doQwcr11s that exi~. 12 A. Yes. 12 Q. Is t.hc:re an)'lhin& ebe, any other 13 Q. - exa.rse me- Request No. I I? communications related to the discussioM betwmll.bc \3 1' A. Y~

t.rustee of the Ka.iser c:Sl:lll! and my per$00 on hd!o.l f 1~ Q. Wbal errOrts 113ve you made? 1 S ofJK a.Jms? 1 5 A. t..'q. No. no! lhlll I've been able eo determine:. 1 6 A. I have dooe an investigolion. 16 Q. Were )'OU a puty to lilY of th~ 1 7 Q. Wha1 wus that i:nv.estiantion? Who did )'OU 1 7 18 reque;u n:eoord$ from? 18 tornt1WI1i<:.cions? A. Jobn Pn:Sioll. A.. No. l 9 l 9 Q. When did you make tN.t request? Q. Request No. 13. all e--mails, notes. 20 20 COrre$J)Qildcrlce, and other dC)CWQCIIts reOectillg 21 A. I d 01t1't recall. 2 1 Q. And~ wns the: rc:sponlrC from Mr. P~n? 22 convnunk:.uions by and between or 8mOC'IS Lobnc:s. ~on. 22 A. JK Claims doesn't have any suc:b n:eotds. 2 3 andfor Sydow n:gmding lhc dailn$ znd the pwdaiiSC of 2 3 Q. Regarding the sour(e ofchdunds of the the same: ffOm the: cswe. Art there ~ documents 2 4 2 4 2.S,000 purthast money for the claims? 2 5 2 S I'CSJ)OrtSi\-e IO No. 13?

--------------------------------------1

Page 63

A. No. 1 A. Right 1 Q. Ob,y. rd like to focus now on con¥erS~Ui011$ Q. Do you know wha1 souroc of funding for ihe 2 2 p1Rhll$e - whllt w~ the funding source for the becween you M~d Mr. Preston n:~arding the plli'Chase of 3 3

priase or JX Claims- excuse me - Kaiser claims? Mr. KaiSCf's claims out of lbc K4i$Cr bankruptcy ^{[4] [4]} s

MR. HUNTER: Objection; fonn. 5 C$tliC. A. r understand it was from QIW!rum Catalytics. When do you n:call you rms spoke with 6 6 Q. (BY MS. KEU .. ER) And how did you make Chat 7 Mr. P~ regardlng some entity pun:twing those 7

e claims? Wldmu.nding? 8 A Through an internal investiption thnt I 9 A. l don't recall. 9 conducted to pn:pru-e for th.e dc:pQsition. 1 0 Q. How oWly times wootd you say )'OU spoke with

10 Q. And what did you lcam in cbal intef'nll 11 l l Mr. Preston n:g~d ing that matter'? investigation rqarding the payment for Mr. K<~isets 12 A. I don't rec::tll. 12 13 claim'? ^[1] 3 Q. Whose proposal was it that some entity 14 A. QU13t1rum Ca~alytics transmitted the money to 14 pUidlose Mr. Kaiscts clAims (rom the bankl\lptcy l S pay for the claims. 1 5 c$latc? Q. In "Ail# form? Was it a check or win: llanSfct 16 A. I don't recall. 16 17 rcc:ord? Q. Was it your su~ion l~ somebody pllrdlase 17 A. I don't know. 18 those claimJ? 18

Q. fm S!Orr/1 19 MR. HUNTER: Objedion; foml. 19 2() A. I don"t know. 20 A. No. Q. And wbo told you that Qu~cum Cnta!Y'ic:s Q. (BY MS. K.ELI.£R) Wz it Mr. ~n'$ 21 21 22 lnnSmilkd the money? susges1lon? i 2 2 23 A. John Pn:stoll. 2 3 A. I don't recall.

~ Q. What else djd he say abolJI the fund.ing. of the 2 ^[4] Q. Could it hnvc been )'OIIr sugscstilon Olo&C the: 24 i 25 plltdl&$t of Kaiser dalms? 2 S claims be purcllased by somec:ruit)'? ~. --~~-~~-~.-=-~-~- ~~- ~-~--~~-~. ~-~~~--~---~-~- .. ~. -~.~ ... ~- ~- ~.-~. -~ .. ~- ~- ~- ~~-~~~ .. ~.-~~ 17 (Pages 62 to 65 ) Data scope 7 1 3-688-9300 9438 497 Oral Deposition of Michael D. Sydow, Sr. Page 66 Page 68 l A. No. 1 A. f dorft know. Q. Wa$ i1 Mr. t.olwles- suucstion? 2 2 Q. Would )'OU have a copy oftlle bill for services 3 A No. 3 if you did?

Q. Do you la!ow if Mr. Lohne$ provided lllc: money 4 A. Yes. ~ ~ WI was wed to purdlo.se the claims from the Kaiser Q. Okay. 5 6 e:sQtc:? 6 MS. KELLER: Mf make a reqUICSt for A. No. lhaL 7 7 Q. Do you blow ~Y the: bank.ruptcy trustee would Q. (BY MS. KELLER} Do you know the sources of ~ 8 8 9 have 5t.alc:cl thai the money was ~ng &om Mr. Lohnes? 9 funds for the: capit:lli&~~Jjon other th311 yout testimony A. I don't know tint the barlkruptcy tJuMe so

1 0 1 0 Lhat lr came from Quanrum C.1alytics'? 1 1 staled. ll A. Thllt is the JOuru. Q. Oby. f f tlle bo.nkruptey uustcc st~d <that Q. Olc.ay. Docs JK Claims derive any income from 12 12 13 Mr. ~ was afflllaa~ \\ith or fundifll ll purcJttse or 13

any source? A. I as:sumc it hopes 10. 1 4 Mr. Kaisefs claiw, would tbat be iaeomct? 14 A. Yes. Q. And wfl31 SO\Itee woold that be? 15 1~ A. R~ry on the claims m.t it purchased. 16 Q. Oby. 1s Mr. LoMcs affiliated in any way 16 Q. Ok.y. Anyothc:rpot.end.al sourotsof incomc 17 with JK Oldms l nYestment Corponllion? 17 A No. for JK Claims? 18 18 Q. Okay. Do you know wbat- docs JK Clo.ims have 19 19 A. No. ' Q. Does JK Chums have My assets other than the 2 o ;ny other business other than holdil1s tlle claims 2 0 pud!ascd from the K.ai:>cr bankruptcy estate? eloims it putdlased from tbe Koisa' blntrvptcy1 21 21 22 A No. 22 A. No. Q. Doc$ JK Claims have any liobilrucs? 2 3 Q. Thai's the onl)' busina-s that J K Ctaims bas 2 3 2 4 ~done was to purchase those dalms ond pum~C t.hosc 2 4 A. No. Q. As c:mpor.Jte eou.n:sel for JK Claims, ""'C'C >'0'1 2 5 in co~ oom:et'? 2 ~ Page 69

Pa qe 67 responsible for obUinifll litiptio.n counsel 10 pursue A. That's correct. 1 l Q. Okay. fs that Lhe put'p(Ule oftbe formotion or the claims Olat were purchased from lhe Kaiser estate? 2 2 MR. HUNTER: Objection; privileged. 3 JK Clllims? J Q. (BY MS. KELLER,) I'm going to ask you acain; 4 A. Yes. 4 Q. Okay. Wh3l Other - so is it l.n.lc, lhel\ that and if you rt:fusc to answer it on the basis of advice ~ ~ of oounstl, ~ me know. 6 JK Ollim$ has ftO ocher inv~c:nt:s? 6 As corpoi"Dk counsel fo~ JK Claims. ~ 7 A. No. it docs not. 7 Q. Okay. Does JK Claims have g.ny lnvestotS otbc:r you respDn$lble for retaining ClOIJtiSCI tO purme the 8 8 cl31ms f« bank:rupecy? Lhllll its sole shareholder Quanl\lm Ca.talytics? 9 9

A. J refuse 1o llll$Wtr on the advic:c of ~unscl. 10 A. No. 10 Q. Olc.ay. Goins ba.ck to RcqiJCSt for Production. Q. ~. Did QuMtwn CatalytiC$ provide Any 1 1 11 12 money for the c:aphafizalion or JK Cl~ims oa Its 1 2 lhc: ones relaJod to the funding of the P"'rehase. the ronnalion? ~UC:Sl specifically osk$ ror dlcdcs, witt transfer l J 1 3 records, en&. or any loan doeumentation. anythins

A. Ofcourse. H 14 Q. How much did Quancum Catalytics provide for 1 ~ relakd to the p~rc:base for the claims. Wert: you able 15 ^[10] obaln any of lhaa from Mr. Pre$t0n? 16 Lhe capit.aliz::a.don ol'lhc company? 16 A. No. 1 7 A. Enough to buy the claims and organke the 17 1 e comJllllly. Q. Did you asic fo: ttuu from Mr. f>Rs1on7

1e A. Yes. 19 Q, How much was thai? 19 Q. And what was his response? A. Somewflere between 25- 0.11d $26,000. 20 20 A. JK Claims doesn't h;ave .,Y $UCh docwnents. 21 Q. And how mvd! did you c~ JK Clalms as 21 Q. Oby. Do you know why th31 would be -if 2 2 <lOq)Onlte counsel for JK Claims for the fonnation or 2 2 i

I

JK Claims made the pufdl~ why would they not have 23 the company? 23 A. J don'• kn;ow. ~re~m? 2 4 24 ' ._2~.~~- ~. "=ZIQ~-.I"J",or::O-~i~:O:::;o;~:':' •• ,.,..,~,.., . ~,....d-=~~-e=m:o:- .. 8.~. m....,.:...,"_~f~:o:-.-~!"="~-::: .. r-~~~rv=-iccs?-:;_-._:"""":'.---:-!:-2=S=-=·-=-A-=. =I~t's~m,...y"'f!:unclcnundJ~ -==-:.-.-;v=: .. ~~~~. Lh...,,,...lll-;:.~,..e:m,.,.._o....,.~"':". ~.~-for=~~-~,.....':"'.J~.i 18 (Pages 66 to 69) Data scope 713-688-9300 9438

498 • Corponsflons Section Hope Andrade P.O.Box 13697

..

Secretaty of State

Austin, Texas 78711·3697 Office of the Secretary of State Paek:ln~ SUp June 20, 2012 Pago 1oft R ECEXVID

Attn: Michael D\ Sydow

lU The Sydow Pfrm, LLP JUN ~ 6 2012 1980 Post Oak BJvd. Suite 2100 tfouston, TX 17056 ~ateh Number: 42636919 Batch Dete: 06.15--2012 CJient ID: 387134096 Return Method: Mail Document Page Document Detail Number I Name Count Fee Number 426369190002 Applleatlon for Name JK Claims Investment 0 $40.00

Reaervation Corpor.atfon Total Fees: s-40.00 ' ! -

I

Payment Reference Payment Type Payment Status Amount l I I ············7812 $40.00

Credit Card Received Total: $40.00 Total Amount Charged to Client AccoUDt: $0.00 {Applies to docwuents or orders where Client Account Is the payment method) Note lo Cullomers Paying by Client Acc011111: This is ~t a bill. Payments to your client account should be based on the monthly statement and not this packing slip. Amounts credited to your client account may be refunded upon request. Refunds (ifappJicable) will be processed within 10 business days. There is a 2.7Yo convenience fee on c.redit card payments. This additional amount will be computed and shown on your credit card statement when the ored.it card transaction is settled. User ID: RARREU.ANO

1 EXHIBIT ~~

Come villi ur on lhB,/tt~'fk@JHHzi!www.loUIDIB,tx.JUI Pbooe: (.512) 463-SSSS Dial: 7-1-t for Relay Services F~"'(S12r.J&3~S709 524 i Hope Andrade CosporatioDa Secdoo I I

P.O.Box 13697 Sccrecary of State Austin. Texas 7S7ll~697 I j Office of the Secretary of State . I June2~ 2012 Atto: ~~ID.Sydow The Sydow Finn. LLP 1980 Post Oak Blvd. Suite 2100 Ho~n, TX 77056 USA RB: 1K. Claims Investment Corporation File Nwnber: 801614039 Enclosed is the certificate of reservation for the referenced entity name. Tho name is reserved for a period of 120 days from the date shown on the certificate. This name reservation can be used to organize a domestic filing entity. to change the name of a filing entity, or to make an application for registration of a foreign filing entity 'to transact business in Texas. The right to use this reservation may be transferred to another person by filing with this office a notice of transfer. During the period of reservation. a registrant may tenninate the reservation by filing a withdrawal of the reservation. This reservation may be renewed by filing an application for oame reservation in tbe manner prescribed for the filiDg of an original applicati~ 'The renewal application may be filed during. the thirty (30) days preceding the expitation date of the reservation period. If no action has been taken Jo renew the reservation or to file an instrument using the above name during the 120-day period, the reservation will expire and other requests, if any, for the name will be honored. When submitting 8 filing instrument utilizing this ~ation, please submit 8 copy of this reservation. If we can be of further service at any time, please let us know. Sincerely, Corporations Section Business & Public Pilings Division (5~2) 463-SSSS Bncloswe

Come v/.fit VI on the lntUMI ttl hltp:/lwwt'M03.~IQ/e.bt..W Phone: (S 12) 463-SSSS Dial: 7-J-1 tor Relay Services Jl\()Q~~109 Prepared by: Ron Anell.Dno TID: 10290 Document: 426369190002 5 25 .u.v .t"' .r~.uw a.u"' \AII)NIIUIUWI &)CNO&VU P.O.Box 13697

Secretary of State Austin, Texas 78111-3697 Office of the Secretary of State CERTIFICATE OF RESERVATION OF ENTITY NAME OF JK Claims Investment Corporation The undersigned, as Sectetary ofS.tate ofTexas, hereby "certifies that the above entity name has been reserved in this office pursuant to the provisions of Section 5.1 OJ of"the Texas Business Organizations Code for the exclusive use of ·

John T Preston 421 Currant Road, Fall River, MA 02720 for a period of one hundred twenty days after the date hereof. i . i . • I

I

This name reservation does not au~orize the use {)fa name in this state in violation of the rights of I • ' . . another under the federal Trademark Act of 1946, the Texas trademark Jaw, the Assumed Business or Professional Name Act, or the common law. Dated: 06/20/2012

Hope Andrade Secretary of State

Come vls/J us on the /nlernet at hllp:llwww.803.stale.tx..fJ3/ Phone: (512)463·5555 Dial: 7-1-J for Relay Services ~~~2~709 Prepared by: llosa Arrcllano TID: 10317 Document 426369190002 526 , . . . . . , j r _ ~ . . : : ~ ~ - ~ . · - t ~ · ^[9] , . . ' " : ^[8] i ) : . ~ ~ ~ ^[0] ! < : i J < . , . " t ^[1] < f t " . ' - · ~ ~ ~ · ~ ; . " r

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Q u a n t u m C a t a l y ti c s , LL C b e i ng t h e bo l d e r o f a m a j o r it y o f t h e s h a r e s o f J K .

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C l a i m s , do e s h e r e by c on s e n t t o t h e a ppo i n t m e n t o f J ohn P r e s t on a s t h e s o l e d i r ec t o r o f t h e t c o m p a ny . J ohn P r e s t on , M a n a g i ng M e m b e r A ugu s t 22~ 2012

EX

H I B I T i

-

4b - .. . ... . J K C l a i m s 000050 529 JK. CLAIMS WRl1TEN CONSENT IN LIEU OF MEETING Quantum Catalytics LLC being the holder of a majority of the shares of JK. Claims, does hereby re-elect John Preston as the sole director of the company. John T. Preston, Managing Member August22, 2013

I I l • r f r !

JK Claims 000051 53 0

J

K C L A I M S A C T I ON B Y D I R E C T O R T h e und e r s i gn e d d i r ec t o r do e s h e r e by a pp r ov e t h e pu r c h a s e o f a l l c l a i m s o f J e ff e r y K a i s e r fr o m t h e t r u s t ee o f h i s C h a p t e r 7 b a nk r up t c y . J K C l a i m s ^[000052] 531 From: gmcoord@natbansommers.com · · To: keOy .stepbens@hotmail.com Subject: Kaiser Date: Wed, 14 Mar2012 14:13:25 +0000 I am sending you a motion to sell today with a an order for your review. Do you have the money in your aooount? And, do you. have the name of the entity set up to purchase the claims? ~Oiuer McCord

r Neshan Sommen Jacob! A ProfosdoceJ Corporation I I

2800 Post Oak Boulevard

I

6btPioor ' I Hoostoa, Texas 71056 i

Voice: (713) 892.-4816

Fax: (713) 892.-4800

i r pccord@oatbaD8o111111Gn.COIII www.nadumsommcrs.oom

.. ' I I

tBIS B-MAJL MBSSAOB AHD 1HB AlTA<mmn'S HBRlflO. 1P ANY. ARB IHTl!NOBD ONLY POll USE BY niB SBNDBR.'S JN'I'BNDliD I IUIC.IPJI!NI'(3). IF YOU ARE NOT niB SBND&'S IN'J'I!NDilD lU!aPlBNTOP 1HIS JI.MAIL MP3&A.OBOI. YOUJIBCBM!I) nos~ MSSSAOI! OR I THB ATI'Aan.mKTS TO lJ JN BRA0R. OR. 1HI! SWJL NBSSA05 OR SAlD ATrAaDdi!NTS <X»n'Anfll!OALL Y PllVlLl!GBD OR OONPID.BNIJAL INFOJIMATION AND YOU·ARBN01'1111tsBNDBil'S JNTI!HDJIDRBCIPJIINTOHOCitl:BOALLYI'RML80BDOR a>NPJDI!NTIAl•lNPORMAnoN. · niB Dl8SIIhfiNA1lON, DJSllUBUJTON, PUBLICATION, DI.Sa..OSt.IRB OR \JliB OP SAID B-NAIL Ml!SSACJB, ATl'.AaiMBNTS AND INI'ORMATlOH AND S'IR1C1LY PROHIBI1BD AND YOU ARB INS"DUJC1ED TO DdMSDJA1ELY (A) NOTIPY niB SI!NIEltBY 'IBI.l!PHONH AT 713.960.1003 a: YOUJl RBCEIPT 01' THIS &NAIL MBSSAGB AND SAID A1TAOIMI3NTS, AND (B) DI!LBlB THJ8 'S-MAIL NJ!SSAGB AND TRB ATr AawBNJS 10 rr. AND DBSTROY ALL OOPfB3 AND P.RDn'OUTS 'T'HJIRE(F.

EXHIBIT II dow

"' JK Claims 000013 532 · · · - - ---·· . . · · · - · · · - - · · - - - - · -· . . . ..,...,. ____ .. _ . . , , , . __ ._ - · · - -- ¥ • _ . . _ - . .. . _ · ·- ·- - • • • · · · - - · · ... · - · - INPORMAnOH AHD STJUcn.Y PltOHIBITt!D AND YOU ARIIINSTRUCTIID TO IMMEDIATI!I..Y (A) HOT1FY llfB S.BNDER BY Tl!LI!PtJONB AT 713.96Q.m03 OP YOUR JIBCiilPT OP THIS &MAIL MBSSAOB .AND SAID .ATTACHMSNTS, .AND (B) DElETE 11US S-MAIL MliSSAOE AND TJUi ATTACHMENTS TO rr,AND DllS'J"RRY ALLCOPlES AND Pflllfi'OlTI'Snn!ROOP. J'rom: Kelly Slcphens [mallto:kclly .stepheos@hotmail.com] Seol: Friday, June 15,2012 10:24 AM To: Orctchcu McConi SUbject: RE: Kai&eT- Salo Order Gretchen,

I l l

I

my clients inform me that they would like to make some changes in the valuation language of the order. f they are supposed to get me their suggestions today. I will forward upon receipt. t Kelly D. Stephens Stephcos & DomniU. PU.C P .0. Box 79734 Hoaaton, TX 77Z79-9734 281-394-3287 832-476-5460 Fax From: gma:ord®natbaoso111mcru:om To: kclly.stephens@hotmftll.com Subject Kaiser- Sale Order Dato: Wcd,13 Juo 2012 20:2S:OS -+0000 Attached is a form of order tbat wlll be filed with tho motion. The trustco hnd a few revisioos. I hAve put a signature blank to sign as ao agreed order. but did not blow if you or somcoae else would be algnjag. Pleosc Jet me know asap. Tbanlcs. GRU:hcn Gauer McCord Nalhan Somnlm Jacobs A Prdeaslonal Corpotalloa 2800 Fbat Oak Boulevard 6Jst Roor Houston, Teus770S6

l EXHIBIT

Vok« (713) 892-4816

(713) 892.4800 Fax:

s~?w

www.nathaMOmmoll.com

JK Claims 000053 5 3 3 Case 08-35261 Document 51 Filed in TXSB on 06/19/12 Page 1 of 11 IN THE 1JNlTED STATES BANKRUPTC'f COURT

FOR THE SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISIO~ INRE: § § JEFFERY B. KAISER § CASE NO. 08-35261-Bl-7 24Zl Wordsworth § Boustoo, TX 77030 (CBAPTER7) § § SS#: ux-n-7148

§ DEBTOR(S) § TRUSTEE'S MOJION FORAUTHORrtY TO SELL

ESTATE'S

INTEREST IN CLAIMS PUISuantto Local Rule 9013:

THIS MOTION SEEKS

AN ORDER THAT MAY ADVERSELY AFFECT

YOU. IF YOU OPPOSE THE M0110N,.YOU SHOULD

IMMEDIATELY CONTACfTBE MOVING PARTY TO RESOLVE THE DISPUTE. IF YOU AND THE MOVING PARTY CANNOT AGREE, YOU MUST FILE A RESPONSE AND SEND A COPY TO THE MOVING PARTY. YOU MUST FILE AND SERVE YOUR RESPONSE WITBIN 21 DAYS OF THE DATE TBIS WAS SERVED ON YOU. YOUR RESPONSE MUST STATE WHY THE MOTION SHOULD NOT BE GRANTED. IF YOU DO NOT FILE A TIMELY RESPONSE, THE RELIEF MAY BE GRAN.I'ED WITHOUT FURTBERNOTICETOYOU.IFYOUOPPOSETHEMOTIONANDBAVE NOT REACHED AN AGREEMENT, YOU MUST ATTEND THE BEARING. UNLESS THE PARTIES AGREE OTHERWISE, THE COURT MAY CONSIDER EVIDENCE AT THE BEARING AND MAY DECIDE THE

\

MOHONAT~~

REPRESENTEDPARTIESSBOULDACTTBROUGB 'rBEIRATTORNEY. COMES NOW, Ronald J. Sommers in his capacity as the Chapter 7 Trustee ("Trusteej for

the above-captioned baDlauptcy estate ("Estate") and files this his Motion for Authority to Sell Estate's Im.erest in Claims ("'Motionj and would show as follows:

1

EXHIBIT G

534 Case 08-35261 Document 52 Filed in TXSB on 07/13/12 Page 1 of 3 IN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTIUCT OF TEXAS ENTERED HOUSTON DIVISION 07/llllOll INRE: § § JEFFERY B. KAISER § CASE NO. 08-35261-Bl-7 2411 Wordsworth § Roustoa, TX 77030 § (CIIAPTER. 7) SS#: xu-n-7148 §

§ DEBTOR(S) § ORDER GRANTING TRUSTEE'S MOTION FOR AUTHORITY TO SELL . ESTATE'S INTEREST IN CLAIMS ONnDSDAYcameonforconsiderationtheTrustee'sMotionforAuthoritytoSellEstate•s Interest in Claims (the "Motion'') filed by Ronald J. Sommers, the chapter 7 trustee in the above- . ' captioned bankruptcy estate (the '"Trusteej, pursuant to 11 U.S.C. § 363. The Court, after c:onsiderini the Motion, the argument of couusel and any evidence presented, finds that

I. · This is an action filed under Fedtmil Rule of Bankruptcy Procedure 6004 and the coaesponding local rules for the Southern District of Texas and under 11 U.S.C. §§ 363 to sen the estate's interest in property.

2. This Court has jurisdiction over this matter. The sale approved herein is in the best interests of the creditors and the abov&- 3.

captioned bankru~ estate \Esfatej. 4. The Trustee is exercising reasonable business judgment. The sale approved herein is free and clear of liens. 5. 6. The Trustee and the bvyer nogotiated the sale at arms length and in good f8ifh.

1

EXHIBIT H

545 Case 08-35261 Document 52 Filed in TXSB on 07/13/12 Page 2 of 3 7. Adequate notice of the Motion and any hearing on the Motion has been given to all creditors and parties-in-interest. 8. The sale of the Claims is a sale of the Estate's interest in such Claims. The Trustee has not made any n:presentations or wmanties with rospect to the sale 9.

or ownership of the Claims. · ... 10. Any and all objections have been withdmwn or are ovenulod. Acc.ordingly t it is ORDERED that the Trustee is authorized to sell the Estate's interest, if any~ in the following claims to JK Claims Investment Corporation, or its assigns (""Buyer"), for twenty-five thousandandno/100 dollars (S2S,OOO.OO) ('"Sale Price") in accordance with the teuns of this order:

Any and all causes of action owned by the Debtor as of the date of his Bank.ruptc:y filing and now owned by the bankruptcy Estate against Teus Syngas, LLC, Texas Syngas, Inc. and their officers, directors. shareholdcm, age11ts, attomcya and/or against any predecessor, successor, or affiliated companies, including but not limited to the following individuals: Michael Sydow, Michael Collins, John T. Preston, Quan1mn Catal.ytics, Inc., and M. Sameer. Ahmed. These claims would include specifically all those claims that were owned by the Debtor and that were pled, or that could ~ve been pled, in the Lawsuit with Cause Number 2007-38533, and styled Jeffery B. Kmser, et a1 v. Texas Syngas. LLC alkla Teras Syngas, Inc. et al, currently pending in the 1 S2nd Judicial District Coort ofH.anis County ('Oaimsj.

Further, it i$ ORDERED that within three days ofthe entry of this order, Bu~rmustdelivertheenti.rety of the Sale Price to the Trustee in good funds. Further, it is. ORDERED fh:at, upon receive of the Sale Proceeds in good funds. the Trustee will provid~ to Buyer a receipt of such funds in writing. Further, it is 2 546 Case 08-35261 Document 52 Filed in TXSB on 07/13/12 Page 3 of 3 ORDERED that the sale of the Claims shall be effective immediately upon the c~ons

in 1bis Order being met without further Older of this Court or fUrther docum~tation and~ Order shall be sufficient evidence of the assignment and sale of the Claims. Further, it is

ORDERED that 1he sale of the Claims is free and clear of any liens, claims or interests. It is . ORDERED that the Trustee is authorized to execute all documents and take all other actions necessary to complete the compromise and the sale of the Claims. It is further ORDERED that the Trustee bas made no wmanties or representations as to the sale or ownership of the Claims. It is further ORDERED that the sale of the Claims is a sale of the Estate's intetest therein, and tbatthe Court makes no finding that the Estate bas any actual interest in the Claims, ownmhip of.wbich is disputed.

Signed: July 13, 2012 ·United States Bankruptcy Judge 547 311<4/2014 QIU~con Print au;ege

I

I _,- .

In re: Kaiser and

In

re: Jorden

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From KeUy Stephens (keDy.stephens@hotrnail.com) Sent: Tue 9/13/11 2:23PM To: r.;onuners@natbansormners.com Ron. I need to discuss two ~sues with you. I) Cause No. 08-35261, In Re: Jeffery B. Kaiser. On tim case, you may rem:mbcr that I made a written offi:r to p~base the Estate's interest in aD cases and/or causes of action whi:h JeffKa.i<;erfibe Estate had a claim against Texas Syngas, lLC, Texas Syngas, Inc., Michael Sydow etc. We oBCred you $25,000.00 cash fur those claims. You never n:~onded. Keer has recently (this year) tiled two rrotions to retain in the existing laws~ claiming to have acq d or tbat he is about to acquire from you the right to go furward in this case. I can still offer you$ J 0,000.00 fur those cJairm assuming they ha not been abandoned. Please !et me know your position on this rmtter. 2) lDlSU1'e about the cause but I believe that the case is In Re: Ro ert Jordan. I received a call from Artice Allen yesterday n:questing that I rep~nt bim in th5 matter and his deposition. Based on our conversation, ~ bas been noticed for ~day o is week. 1 am requesting a postponement of that deposition to give me a c ce to meet with him, get the doct.Dll!nts concerning the property in band and to get a grasp on your clairm. please call me asap to discuss. KeDy D. Stephens Stephens & Do~ PILC P.O. Box 79734 Houston, TX 77279-9734 281-394-3287 832-476-5460 Fax

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Cause No. 08-35261, In Re: Jeffery B. Kaiser From: Kelly Stephens (kelly.stephcns@hotml..il.com) Sc:nC: The 9/13/1 1 6~0 PM To: Ronald SorTI't)ers (rsommcts@nathansoi'l:IIllers.com) Bee: ~haelsydow@lbesydowfirm.com; Amber Polach (amb .potach@tbesydowfitm.com) Ron, I am contacting you in reference to my offer to purchase rights/ca es of action of the estate ofJeftery Kaiser. ln my earlier email, l offered $10,000.00 fur those ri&hts. As we discussed this afternoon, I am renewing that ofler at S2S,

0.00. My client would hlce to purchase any a.ad aD causes of action held by the estate against Texas Syngas, , Texas Syngas, Inc., Michael Sydow, Michael Collins, John T. Preston, Quann.un CataJytics., lnc., and . Samecr Ahmed. These wouH include specifically aD those claims !llldc in Cause 2 !'7-38533, Jeffery B. Kaiser, et aJ v. Texas Syngas, LLC a/kla Texas Syngas, Inc. er aL, currently p iog in the I 90th Judicial District Co\D1 of Harri; CoLilty. (n that case, Mr. Ka~er bas filed a derivative action as a shareho and is allc~g loss oflm "iwe.~tn'le.m" and/or o~ irerest io Texas Syngas, ILC. Mr. K~ did t co.atribute any real rmney fur his ownership ~st, rather it was predicated on ~ contrinltion as officer and prorroter of the con;>an)'. A partial S\m'Dil8J}' judg,mnt was issued ~h decJared that Te Syngas, Inc., was not a contim.ration o( subsidiary of or a substftution corporation for Texas Syngas., LLC Mr. Kaiser had no affiliaEX>n will or ownership in Texas Syngas, Inc. Therefore he has no cla.irrs or s nding to make derivative claim; regarding tim entity. My client is rmking tim otrer based on a "cost of defenw" cvatua · n I might point out that Mr. Kaiser filed this banknlptcyon the eve ofsumnary judgment~ being h on behalfofaDderendants io that suit. It 6 my belief that lOOse tiX>ti>ns woukl havclwill be granted. Mr. Kais s claims are refuted by over 75% oflhe shareholders of the COJ11>any. Additionally, in deposition, Mr. K · was ur.ablc to detail even a singfe instance ofmSrepresentation or omission on behalfofthe officers directors oftbe cornpany. "''e believe that Mr. Kaiser's b~tcy W8$ directly and predoroillately pred ated on 1m inability to sobstan~Dy respond to those motions or to provide any evidence to support the clemen ofhis claims. As you may be aware, both Texas Syngas, ILC and Texas Synga j Inc., are now defunct non-operating companies with no assets. tbe mibe ofTexas S}'Df}lS, LLC wasp

icated on a severe lack of funding. The fit.Wre of the new company (with subsLantiaJ new investors and gement) Texas Syngas, Inc., was brought about by tbe inabaity of the COfl1)any to rmke the synthesis proces coll'lrrerCiaDy viable.

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212 . K . D S 0003 5 5 0 311~4 RE: Kaiser Bankruptcy From: KeUy Stephens (kclJy.stephens@hotrmil.com) Sent Moo 9/19/11 12:06 AM To: gmccord@nathansoiJllrers.com Grethen, our offi:r is the same we made a couple ofyears ago. it~ based· n the cost ofderense ofthe claims made in the prior lawsuit we came forward becal.lSe Kaiser has filed a couple of motions t retain. the one early in ttm year was made wiihout notice to myself or my client. the last one was noticed an promted the re up of the otrer. the first offer was not responded to, so we thought the suit would die of nattn"al causes. at any rate, we rmy be interested in maintaining the c)ajms in the o 'ginal derative suit depending on the tenTlS of any settlerrent you should know that according to Sydow, he has oot been serve with the suit you furwarded. Kelly D. Stephens Stephens & Domnitz, PLLC P.O. Box 79734 Houston, TX 77279-9734 281-394-3287 832-476-5460 Fax

__ ___ .. ______ _ ! __ __ __ _ __ __ _ Subject Kaiser Bankruptcy Date: Fri, 16 Sep 2011 14:05:45 -0500 From: gmccord@nathansommers.corn To: kelly.stephens@hotmail.com Kelly:

htlos:lltM7l.rnlil.li~e.cxmc#rreli.IT1ICJPrir-.M as sao es?ITN=an-us

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5 51 ^{[311412014] [8]} RE: Cause No. 08-35261, In Re: Jetfe

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B. Kaiser From: Gretchen McCord (gmccord@nathansommers.com) Sent: Wed 12121/11 7:47AM To: 'KeOy Stephens' (kelly.stcphens@hotrmilcom) Kelly: Are you around this week to discuss the settlement offer? Gretchen Gauer McCord Nathan Sommers Jacobs A Professional Corporation 2800 Post Oak Boulevard 61stFioor Houston, Texas 77056 Voice: (713) 892-4816 Fax: (713) 892-4800 qmccord@nathansommers.com www.na!hansom mers.cqm THIS E-MAIL MESSAGE AND THE ATTACHMENTS HERETO, IF ANY. ARE INTE~OED ONLY FOR USE BY THE SENDER'S INTENDED

RECIPIENT($). IF YOU ARE NOT THE SENDER'S INTENDED RECIPIENT OF

THI~ E-MAIL MESSAGE OR YOU RECEIVED THIS E-MAIL MESSAGE OR THE ATTACHMENTS TO IT IN ERROR, OR THIS E-MAIL MES~AGE OR SAID ATTACHMENTS CONTAIN LEGALLY PRIVILEGED OR CONFIDENTIAL INFORMATION AND YOU ARE. NOT THE SE~DER'S ll'lTENDEO RECIPIEI'lT OF SUOi LEGALLY PRIVILEGED OR CONFIDENTIAL INFORMATION. THE DISSEMINATION. DISTRIBtiON, PUBLICATION, DISCLOSURE OR USE OF SAlD

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RE: Cause No. 08-35261, In Re: Jeffet B •. Kaiser_

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From: KeDy Stephens (kelly.stephcns@hotmail.com) Sent: Wed 12121/1 I 10:54 AM To: grn:cord@nathansoJTD'l'X:rs.com lam Kelly D. Stephens Stephens & Dornnitz, PLLC P.O. Box 79734 Houston, TX 77279-9734 281-394-3287 832-476-5460 Fax

- ---- --·----·- ··- -- From: gmccord@nathansommers.com To: kelly.stephens@hotmailcom Subject RE: Cause No. OR-35261, In Re: Jeffery B. Kaiser Date: Wed, 21 Dec 2011 12:47:47 +0000 Kelly: Are you around this week to discuss the settlement offer? Gretchen Gauer McCord Nathan Sommers Jacobs A Professional Corporation 2800 Post Oak Boulevard 118

hflns:/~u173.m:lil.ll\eCa~Vcf/nal.m.o9rintMessao es'?ni«=erH5 KDS 0022 5 5 3 ^[311412014] OuiJocP.com Print M esaage RE: Cause No. 08-35261, In Re: Jeffery B. Kaiser From: KeUy Stephens (kelly.stephens@hotrnail.com) Sen!: Wed 12/21111 12:57 PM To: grrocord@nathansom:rrers.com

I attacmnt OrderRetaining09232011.PDF ( 135.3 KB)

Gretchen, attached are the orders regarding retention ofthe case by Judge Schaffer. I talked with the coordinator a minute or so ago. no action has been taken or will be taken fur a week or so at least my clients are interested in going forward with the asset purchase as discussed and will be available for testinxmy if needed. I will furward more precise language on the offer shortly, my clients are discussing what vehicle to purchase through etc. Kelly D. Stephens Stephens & Doi11Ilil4 PUC P.O. Box 79734 Houston, TX 77279-9734 281-394-3287 832-476-5460 Fax from: gmccord@nathansommers.com To: keDy.stephens@botrnail.com Subject: RE: Cause No. 08-35261, In Re: Jeftery B. Kaiser Date: Wed, 21 Dec 2011 12:47:47 +0000 Kelly: Are you around this week to discuss the settlement offer? ^[118] KDS 0023 55 4 31t4120t4 OUUoaltcom Print Message Kaiser estate From: KeUy Stephens (kelly.stephens@hotmail.com) Sen!: Tue 12127/11 10:39 AM To: gmccord@nathansommers.com Gretchen, sony for the delay. I know we need to get th5 in. my client has decided to make the oiler/purchase through one the individuals involved, Paul Lohnes. I am renewing the offer of $25,000.00. My dient would like to purchase any and all causes of action or potential causes of action held by the estate against Texas Syngas, LLC, Texas Syngas, Inc., their officers, directors, shareholders, agents, attorneys, etc. (or any predecessor, successor, or related companies), including but not limited to the following individuals: Michael Sydow, Michael Collins, John T. Preston, Quantum Catalytics, Inc.; and M. Sameer Ahmed. These would include spedfically all those claims made or that could have been made in Cause 2007-38533, Jeffery B. Kaiser, et al v. Texas Syngas, LlC a/1</a Texas Syngas, lnc. et al., currently pending in the 152nd Judicial District Court of Harris County. this would include any other claims that estate may have against any of these entities their predecessors, successors, related companies, agents etc. In addition, we would like to purchase as a part of this transaction any equity interest or claim of interest the Estate has in any of the above entities. Kelly D. Stephens Stephens & Domnitz, PLLC P.O. Box 79734 Houston, TX 77279-9734 281 -394-3287 832-476-5460 Fax ^[111] htta;:/11:iu173.mail.ll..e.~l.m.c/PrintMassaoes?!TH=en-us KDS 0024 555 R

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: K a i s er F r o m : K e U y S t e ph e n s ( k e O y . s t e ph c n c ; @ ho t r n a il . c o m ) S e n t : T u e 1 / 17 / 12 10 : 2 7 A M T o : g m : c o r d @ o a t h a n s o11111 rr s . c o m no w o r d , M i k e w a s i n d e po s iti on a ll d a y a nd d i d no t r e t u r n m y ca ll K t: D y D . S t e ph e n s S t e ph e n s & D o m n it z , P LL C P . O . B ox 79734 H ou s t on . T X 77279 - 9734 281 - 394 - 3287 832 - 476 - 5460 F a x F r o m ; g m : c o r d @ n a t h a n s o llll n !r s . c o m T o : k e ll y . s t e ph e n s @ bo t m a . il c o m S ub j ec t K c m e r D a t e : T u c , 17 J a n 20 12 15 : 09 : 5 5 + 0000 K e ll y : A n y w o r d? G r e t c hen G aue r M c C o r d N a t han S o mm e r s J a c ob s A P r o f e ss i ona l C o r po r a t i on ^[2800] P o s t O a k B ou l e .. e r d 61 s l F l oo r

hUD1! :/ /tl.u173.rmiiJ I ~oa.<DWollmllll . mc/Prin1M eu aoes?r<H:zeo-us K D S 0029 55 6 ~14120'14 RE: Kaiser From: Kelly Stephens (kelly.stephens@hottmilcom) Sent: Tue 1117/12 4:47PM To: ~cord@nathansommers.com Gretchen, left you a voi;e mail, but just in case. Have conmunicat:i>n from my client he is Wllting to put the rroney in my IOLTA account pending approval He wants rre to hold. assuming that is sufficient I woukJ give you notice of the deposit and hold pending approval lctm: know. Kelly D. Stephens Stephens & Do~ PLLC P.O. Box 79734 Ho~ton, TX 77279-9734 281-394-3287 832-476-5460 Fax From: gm:;cord@nalhansoiJ'II'DCrs. com To: keDy.stephens@hotmail.com Subject Kaiser Date: Tue, 17 Jan 2012 15:09:55 +0000 Kelly: Any word?

112 KDS 0032 557 3/1412014 0\Alook.com Pfin\ Message RE: Kaiser

From: Kelly Stephens (kefly.stephens@hobnail.com)

Sent: Tue 2/07/ 12 12:01 PM To: gm:oord@nathansoouners.com Gretchen, a couple ofthings. I . My clienl5 furming a company to purchase th.5 asset. should have that infO mid day totrorrow. 2. S hould have the rmney by Thursday. 3. His lawyer in Boston is asking to review the tran!ifer doclDTICnts. do you use a standard fur fur asset purchase? if so, can I get a copy to give them so that we speed up the process. Kelly D. Stephens Stephens & Donmitz, PLLC P.O. Box 79734 Houston, TX 77279-9734 281-394-3287 832-476-5460 Fax From: gux:cord@nathansommers.com To: kelly.stephens@hotmait.com CC: rsormrers@nathansorruners.com Subject Kaiser Date: Thu, 2 Feb 2012 17:01 :45 +0000 Kelly: I wanted to file the motion to sell this week. Do you helVe the funds in your lolta account? Also, did you send the email I requested that I can attach to the motion to sell as the offer? ^[112]

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5 5 8 3/1412014 Ot.Cicdtoom Print Message Kaiser Front Gretchen McCord (gm:cord@nathansommers.com) Sent Wed 3/14/12 12:08 PM Tn: Kelly Stephens (kelly.sl<.:phcn<>@hotmail.com) (kcUy.stephcns@hotmail.com) Since I never heard who the purchaser was, I defined it as follows : The purchaser is Paul Lohnes or his assignee ("Purchaser"). The Purchaser is a business associate of the Defendants. There needs to be some explanation as to why he is buying these claims . I assume he is a business associate of Mr. Sydow. But, I need clarification on that issue. Gretchen Gauer McCord Nathan Sommers Jacobs A Professional Corporation 2800 Post Oak Boulevard 61st Roor Houston, Texas 77056 Voice: (713) 892-4816 FalC (713) 892-4800 gmccord@nalhansommers .com www.nathansommers.com THIS E·MAIL MESSAGE ANO THE ATTACHMENTS HERHO. 1r ANY. ARE INTENDED ONLY FOR USE BY THE SENDER'S INTENDED

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Fmm: Kelly 0 Stephens (kelly.stephens@hotrnail.com) Sent: Wed 3/l4/12 1 :04l,M To: Grelchen McCord (gmccord@nathansormncrs.com) I am out of the ottlc ~c unt i J Monday. The definition is acr.ually 90ad as he has not yet i nforrned me either. r-Mobile, America's .First Nat.i,,nwide o1G Network Sent by Samsung Mobile Gretchen M<:Cor:d <gmccord@nathansommers.com> wrot:e: >Since I never heard who the purch~H~~ was, defined i t as follows: > >The purchaser i~ Paul Lohnes or h i s assi9nee ("Purchaser"). The Purchaser is a busin~ss associate of the Defendants. > >There needs to be some explal'lation as to why he is buying these clalms. r assume hP. i~ a business associate of l'tr. Syd~. But, I lHWd c i~t" l fication on t.hat issue . > > >Grel~c h en Gauer McCord >Nathan Sommers Jacobs >A Professional Co cporaL ion >2B OO Post Oak Roulevard >6lst rloor >Houst on, Texas 77056 >Voice : (7131 892 - 48Ui >Fax: (713) 892-4800 >gmccord@oathansommers. com<ma i 1 to: gmr:<~(lnJ@nathansomrners. com> >www. nathansommers . com<lt: t.r; : / 'W\o;w. na r.h§ns nrr.r.1ers . .-::omi> > >TIIIS E-MAlL MESSAGE hNO TH~ ATTACHMENTS HERETO, I f ANY, ARE INTENDED ONLY FOR USE BY THE SENDER'S INTENDED RECI l'IENT (S) • IF YOU A~ N0'1' THE SENOE~' S INTENDED RECIPIENT Of THIS E-MAl~ M~SSAG~ OR YOU RF.CEIVF.O THIS E-MAIL MESSAGE OR THE ATTACHMENTS TO 1'1' .TN ERROR, OR THIS E-MAIL ME:SSAGE OR SJI.IO A'1"1'ACHMENTS CONTAIN f,EGALLY PRIVILEGED OR CONFIDEN'l' IAL IN F'ORMA'l'ION AND YOU ARE NOT THE SENDER'S INTENDED RECIPIENT 01-· SUCH LI::GA.LLY PRIVILEGED OR CONFIDENTIAL INfORMATION, THE DISSEMINATION, DISTRTBUTION, PUBLICATION, DI~CLOSURE OR OSE Cr SAID !::-MAIL MESSAGE, 7\T'rACHMENTS AND I Nf'ORMA'flON AND STRl C'rL't I:'ROH1lH'l'ED J',ND YOU ARE INSTRUCTED TO IMMEDIATELY (A) NOTlfY THt:: SENDF.R BY TEI.EPHONE AT 713.960.0303 OF YOUR RECEIPT Of' l'HlS E-MAIL MESSAGf. AND SAl D ATTACHMENTS, AND (B) DBL.£'1'£ '!'hlS E-MAIL MESSME J\ND THE J\Tl'ACHMENTS TO IT, AND DES'l'I{OY AI~L COPIES J\ND PRTN'l'OU'J"S THEREOF . > ^[111]

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560 311412()14 C\JI/ookcan Print Message RE: Kaiser Front Kelly Stephens (kciJy.steplx:ns@hotJnailcom) Sent: Tue 4/03/ 12 10:08 AM To: gmccord@natbansommers.com Gretchen, j l.l.'it wanted to let you know, J urn not ignoring your request I have been tmable to speak with Lohnes or Sydow. I do not have the money as ofyet KeUy D. Stephen" Stephens & Do~ PLLC P.O. Box 79734 Houston. TX 77279-9734 28 1 ~394-3287 832~476-5460 Fax > From gm:cord@nathansommers.com > To: kelly. stephe~hotimilcom > Subject RE: Kaiser > Date: Thu, 29 Mar 2012 16:01 :12 +0000 > > KeDy: > > Can you confirm that you have the rmney in your JOLT A account? That the buyer still wants to trove furward? > > Also, per my request can you give me a short explanation of the identity of the buyer? (per my question below) If there bas not yet been an entity set up, then J will use the definition below. > > Gretchen Gauer McCord > Nathan Sommers Jacobs > A Professional Corporation > 2800 Post Oak Boulevard

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5 61 :Y1412014 OUUookcom Pril'lt Mesuge Kaiser From: Gretcben McCord (gm:cord@nalhansommers.com) Sent: Tiw6/07/12 2:56PM To: Kelly Stephens (kclly.slcphens@hoiJm.ilcom) (kelly.stephens@hotmail.com) Kelly: I thought I would take one more stab at contacting you. Ron has me engaging special counsel to take this on an contingency fee basis so we can reach some resolution. Is your client still interested in purchasing the claims? We had reached an understanding, but your client was required to pay·the money into your t rust account. Last we spoke, they had still not done this. If 1 do not hear back from you by tomorrow morning, I will assume that your client is no longer interested in purchasing the claims. Gretchen Gauer McCord Nathan Sommers Jacobs AProfessional Corporation 2800 Post Oak Boulevard 61slFioor Houston, Tellas 77056 Voice: (713)892-4816 Fax: (713)892-4800 gmCCQrd@na!hansommers .com www.nathansommers.com

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56 2 31141'.!014 OU!c:dtccm Pr~nt Message RE: Kaiser From: Kelly Stephens (keDy.stephen~hotmail.com) Scn1: Thu 6107/ 12 3:23 PM To: gm:cord@nathansommers.com Gretchen, I am again assured that the money wiD be in my trust accoWlt mid next week. Kelty D. Stephens Stephens & Do~ PT.l.C P.O. Box 79734 Houston, TX 77279-9734 281 -394-3287 832-476-5460 Fax From: gm:cord@nathansollllll:rs.com To: kclly.stephens@botmail.com Subject: Katier Date: Thu, 7 JlUl 20 I 2 18:56:48 +0000 Kelly: I thought I would take one more stab at contacting you. Ron has me engaging special counsel to take this on an contingency fee basis so we can reach some resolution. Is your client still interested in purchasing the daims? We had reached an understanding, but your client was required to pay the money Into your trust account. last we spoke, they had still not done this. If I do not hear back from you by tomorrow morning, I will assume that your client is no longer interested in purchasing the claims.

112 KDS OOSJ 5 6 3 ^[311412014] OUtlockcan Print Message Kaiser Estate From: Kelly Stephens (kelly.stephens@hotmail.com) Sent: Tue 6/12/12 5:53PM To: gm:cord~natbansoiJ:mErs.com Gretchen, this DX>ming. I received notice of a wire transfer of$12,500.00 from Boston this afternoon, I received a check in the amounl of$12,500.00 from Mr. Sydow. I deposited S<~Ire around 4:15p.m tim afternoon. I guess I can say that 1 have the money in my trust account Kelly D. Stephens Stephens & Donmitz, PLLC P.O. Box 79734 Houston, TX 77279-9734 281-394-3287 832-476-5460 Fax

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56 4 Oullockc.cm Prfnt Message RE: Kaiser- Sale Order

From: Kelly Stephens (kelly.stephens@hotmJ.il.com)

Sent: Fri 6/15/12 11:23 AM To: gm:cord@nathansommers.com Gretchen, my clients infurm Ire that they would like to make some changes in the valuation lan!,'lUlgc of the order. they are supposed to get rre their suggestions today. I will forward upon receipt Kelly D. Stephens Stephens & Dorrm~ PLLC P.O. Box 79734 Houston, TX 77279-9734 281-394-3287 832-476-5460 Fax From: grrecord@nathansommers.com To: keDy.stephens@hotrmil.com Subject: Kaiser- Sale Order Date: Wed, 13 Jun 2012 20:25:05 +0000 Attached is a form of order that will be filed with the motion . The trustee had a few revisions. I have put a signature blank to sign as an agreed order, but did not know if you or someone else would be signing. Please let me know asap. Thanks. Gretchen Gauer McCord Nathan Sommers Jacobs AProfessional Corporation 1l2

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: K a i s er - S a l e O r d er F r o m : G re t c h e n M c C o r d ~cord@nathanc;ommers.com) S e n t F r i 6 /l 5 / 12 ll J 2 A M T o : K e ll y S t e ph e m ( k e ll y . s t e ph e n s @ ho t r m il . c o m ) I a m p r e tt y m u c h m a rr i ed t o t ha t l anguage . I w ill l oo k a t w ha t t he y s end , bu t t he l anguage i s a l r ead y b r oade r t han I t h i n k it s hou l d be . G r e t c hen G aue r M c C o r d N a t han S o mm e r s J a c ob s A P r o f e ss i ona l C o r po r a t i on 2800 P o s t O a k B ou l e v a r d 61 s t F l oo r H ou s t on , TeJ~as 77056 V o i c e : ( 713 ) 892 - 4816 F a l C ( 713 ) 892 · 4600 g m c oo r d @ na t han s o m m e r s . c o m www . na l han s o mm e r s . c o m T H I S E - M A I L M ESSA G E A ND T H E A TT A CH M E N T S H E R E T O . I F A N Y , A R E I N T E ND E D O N L Y F O R U SE BY T H E SE ND E R ' S I N T E ND E D RECIP IEN T(S ~ I F Y O U A R E N O T T H E SE ND E R ' S I N T E ND E D R E C I P I E N T O F T H I S E - M A I L M ESSA G E O R Y O U R E C S I VE D T H I S E ~ \!AIL M ESSA G E O R T H E A T I A CH M E N T S T O I T I N E RR O R . O R T H I S E - M A I L M ESSA G E O R SA I D A TT A CH M E N T S C O N T A I N L E G A l L Y P H I V I L E G E D O R C O N F I D E N T I A L I N F O R M A T I O N A ND Y O U A R E N O T T H E SE ND E R ' S I N T E ND E D R E C I P I E N T O F S UCH L E G A L L Y P R I V I L E G E D O R C O N F I D E N T I A L I N F O R M A T I O N . T H E D I SSE M I N A T I O N . D I S T R I B U T I O N . P U B L I C A T I O N , D I S C l O S UR E O R U SE O F SA I D E - M A I L M ESSA G E . A T I A CH M E N T S A ND I N F O R M A T I O N A ND S T R I C T L Y P R O H I B I T E D A ND Y O U A R E I N S T RUC T E D T O I MM E O I A T E L Y ( A ) N O T I F Y T H E SE N O E R BY T E L EP H O N E A T ^[713] . ^[960] . ^[0303] O F Y O UR R E C E I P T O F T H I S E · M A I L M ESSA G E A ND SA I D A TT A CH M E N T S . A ND ( B ) O E L E T E T H I S E - M A I L M ESSA G E A ND T H E A TT A CH M E N T S T O I T , A ND D ES T R O Y A ll C O P I ES A ND P R I N T O U T S T H E R E O F . ^[113]

lltt n < l:llti u173 . rr a il . l h e . r . m l dh r e ii . I T II C I P r l n1 M M s aoe s ? rr i c t - oen - u s KD S 0065 566 :Y14r.!Ut4 Oullook.com Print Massag u FW: Kaiser- Sale Order From: Kelly Stephens (keDy.stephens@hotmliLcom) Sent: Fri6115/12 3:45PM To; grn;cord@nathansoirfl'l:rs.com Kelly D. Stephens Stephens & DomniiL; PLLC P.O. Box 79734 Homton, TX 77279-9734 28l-394-3287 832-476-5460 Fax Date: Fri, 1 S Jun 2012 12:45:07 -0700 From: michaelsydow@thesydowfirmcom Subject Re: Kaiser- Sale Order To: keDy.stephens@honmiJ.com After consulting his Boston lawyers , I hey can live with the language. From: Kelly Stephens <kelly.stephens@hotmail.com> To: Michael Sydow <michael.sydow@thesydowfirm.com> Sent Wednesday, June 13, 2012 3:57PM Subject: FW: Kaiser- Sale Order Mace, see the attached. we have a window to make suggestions. Kelly D. Stephens Stephens & Donmitz, PLLC P.O. Box 79734 ^[112]

KDS 0066

56 7 ^{[31] [1] [412014]} O I J U oo l t c o m P r il ' ll M e ss ag o F

W

: K a i s er - S a l e O r d er F r o m : K e B y S t e ph e n s ( k e ll y . s t e ph e n s @ ho t m lil . c o m ) S e n t : F r i 6 / 15 / 12 4 : 09 P M T o : g m cc o r d @ n a t h l l n s o i T I F T 1 : r s . c o m H e r e ~ t h e il u s i v e n a m e . K e ll y D . S t e ph e n s S t e ph e n s & D o m n i t z , P LL C P . O . B o x 797 34 H ou s t on , T X 77279 - 9734 281 - 394 - 3287 832 - 476 - 5460 F a x D a t e : F r i , 15 1 lll 20 12 12 : 54 : 56 - 0700 F r o m : ~haelsydow@th:sydowfinncom S ub j ec t R e : K a i s e r- S a l e O r d e r T o : k c ll y . s t e ph e n s @ ho t r m il . c o m T h e n a m e o f t h c pu r c h a s e r w ill b e J K C l u i rr ti l n v c s m . : n t C ' . o r po r a ti on . --

·

· -- · - - F r o m : K e U y S t ephen s < k e ll y . s t ephen s @ ho t m a il . c o m > T o : " m d s y do w @ y a hoo . c o m • < m d sy do w @ y aho o . c o m > ; M i c h ae l S y d o w < m l c h a e l . sy do w @ t h e sy do w f i nn . c o m > S en t F r i da y , J une 1 5 , 2012 11 : 33 A M S ub j e c t: F W : K a i s e r- S a l e O r de r K e D y D . S t e ph e n s Stephe~ & Do~ P LL C P . O . B ox 79734 H ou s t on , T X 7 7 27 9 - 9 7 34 28 1 - 394 - 32 87 ^[113] K D S 0067 568 D

i

s m i ss a l o f S t a t e C o u r t A c t i o n F ' r on r K e U y S t e pb e m ( k c ll y . s t e ph e n c ; @ ho t m a u c o m ) S e :: n l: W e d 6 ! J . 7112 10 : 08 A M T o : gnx : c o r d @ n a t h a n s o iilll E r s . c o m B t: c : M i c h a e l S ydo w ( m i c h ae l . s ydo w @ t h e s ydo w f i r m . c o m ) ; A m b e r P o l ac h

( a m b e r . po t ac h @ t h e s ydo w f i nn c o m ) 1 a tt ac h m e n t O r d e r O i . o m li s s i ng ca s e 06 - 12 - 2012 . pd f( I 8 . 5 K B J

G r e t c h e n . h a v e yo u s ee n t h s o r d e r , ho w do e s t h i s a O C c t w h a t w e a r e s uppo s e d t o b e pu r c h a s i ng . K c D y D . S t e ph e n s S t e ph e n s & D o m n it z , P LL C P . O . B o x 79734 H ou s t on , T X 77279 - 9734 28 1 - 394 - 3287 832 - 476 - 5460 F a x

t ' G m :// h l ^[11] \ ^[73] . n w ll . f l\ e . c o r n l dhn lil . m d ' r l r A M e s l; a o O S ' ? rr ii: P . f l . t A ^[1] /t KD S 0069 5 6 9 O u t l od ( . o c m P r i n l M e ss age R

e

: D i s m i ss a l o f S t a t e C o u r t A c t i o n F r o m : G r e t c b e o M c C o r d ( g m ;: c o r d @ n a t h a n s o mm e r s . c o m ) S e n t: W e d 6 f l . 7 / 12 10 : 12 A M T o : k e ll y . s t e p h e n s @ ho t m a il c o m ( k e ll y . s t e ph e n s @ ho t m a il c o m ) l don ' t t h i nk i t do e s . S e n t fr o m m y H T C on t he N o w N e t w o r k fr o m S p r i n t ! ----- R e p l y m e ss a g e ----- F r o m : " K e U y S t e ph e n s " < k e l l y . s t c p h e n s @ h o t n m i l . c o m > D a t e : W e d , J un 27 , 2012 9 : 08 a m S ub j ec t D~missal o f S t a t e C ou r t A c ti on T o : " G r e t c h e n M c C o r d " <grocco rd @natbamo~rs.com> G r e t c h e n , h a v e you s ee n t h f ; o r d e r , ho w do c s l h . i s a ff ec t w h a t w e a r c s up po s e d t o b e pu r c h a s i ng . K e D y D . S t e ph e n s S t e ph e n s & D o r m tit z , P LL C P . O . B ox 79734 Holl~on, T X 77279 - 9734 28 1 - 394 - 3287 832 - 47 6 - 5460 F a x ^[11] ! K D S 0070 57 0 31141'..'014 Oullockcom Pl'inl Message FW: Dismissal of State Court Action

rrom: KeUy Stephe.os (kclly.stephens@hotrnail.com)

Sent: Thu 6128/12 II :16 AM To: gm:cord@nathansomrrers.com Gretchen, see the question below. Kelly D. Stephens Stephens & Oomnitz, PLLC P.O. Box 79734 Ho~ton, TX 77279-9734 281-394-3287 832-476-5460 Fax

_____ , __ _ - -·· ·--·-·-·-··-·-------------·-·· . ---· . - ------------ --·- - -- -···------------- Date: Wed, 27 Jun 2012 13:54:42 -0700 From: michaelsydow@thcsydowfirm.com Subject Re: Dismissal of State Cowt Action To: kelly.stepbens@hotmailcom If the case has been dismissed und the s tatute of limitations has run there is no tbing left to purchase. A dismissal for want of persecution used to be subject to reinstatement within u certain time. However, ifl recall correctly the reinstatement was d iscretionary with the Court. If s o, either the trustee needs to have it re instated to :;ell it or the buyer is purchasing yet another problem. I fail to understand how s he thinks the dismissal ha:; no beuring. Perhaps she can explain in just a bit rrore detail.

111 li!Ds:/~u173.mail.lile.cc:rM:UrrBI.rnrA'riniMessaoes?rrk=en-us

KDS 0071

571 K

a

i s er F r o m : G r e t c h e n M c C o r d ( g m : c o r d @ n a t b a o s o r m n e r s . c o m ) S e n t : T hu 6 / 28 / 12 11 : 56 A M T o : K e ll y Stepbe~ ( k c ll y . s t c ph e n s @ ho tl m il . c o m ) ( k e D y . s t e ph c n s @ ho t m a il . c o m ) C : c : R on S o r n rr e r s ( r s o mm e r s @ n a t h a n s o r n m e r s . c o m ) I need a w r i tt en c o mm i t m en t f r o m t he pu r c ha s e r t ha t i f t he T r u s t ee r e i n s t a t e s t he l a w s u i t, w e s t ill ha v e a dea l and t he pu r c ha s e m one y need s t o be pa i d t o t he t r u s t ee t o ho l d i n t r u s t pend i ng app r o v a l o f t he m o t i on . O r , I need a w r i tt en s t a t e m en t f r o m t he bu y e r t ha t t he y a r e no l o nge r i n t e r e s t ed i n go i ng f o r w a r d be c a u s e t he c a s e ha s no w been d i s m i ss ed . P l ea s e l e t m e k no w t oda y . I a m m ee t i ng w i t h s o m eone t o d i s c u ss t he c o s t t o r e i n s t a t e t h e l a w s u i t. G r e t c hen G aue r M c C o r d N a t han S o mm e r s J a c ob s A P r o f e s s i ona l C o r po r a t i on 2800 P o s t O a l c B ou l e v a r d 61 s t F l oo r H ou s t on , T e x a s 7705 6 V o i c e : ( 71 3 ) 892~816 F a x :

(713)892~8 ^[00] g m Q C O r d @ na t han s o mm e r s . c o m www . na l han s o mm e r s . c o m T H I S E · M A I L M ESSA G E A N O T H E A TT A C H M E N T S II E R E T O . I F A N Y . A R E I N T E ND E D O N L Y F O R U SE ^[8] Y T H E SE ND E R ' S I N T E ND E D

1 12 ht!Da :J ~ u 173.mail.l h e.c:mial l mai l . rrM1Pr l nll\Aessanes'?n1t=rn- us KD S 0075 5 72 F

W

: K a i s er F r o m : K e O y S t e ph e n s ( k c U y . s t c pb c n s @ ho tl ' m i c o m ) S e n t: T hu 6 / 28 / 12 2 : 52 P M T o : g m : c o r d @ n a t h a n s o lllt 1 l !r s . c o m h e r e i s t h e r e s pon s e . K e D y 0 . S t e p h e n s S t e ph e n s & Do~ P LL C P . O . B o x 797 34 H ou s t on , T X 77279 - 9734 281 - 394 - 3287 832 - 476 - 5460 F a x D a t e : T hu , 28 J un 2012 J 0 : 45 : 23 - 0700 F r o m : m i c h ae l s ydo w @ t h e s ydo w f i r m c o m S ub j ec t R e : K ~er T o : k e tl y . s t e ph e r 6 @ ho t m a . il . c o m I h a v e ! > f l O k c n t o t h e pu r c h a s e r . H e i s O K w it h t h e t m s l ee ho l d i ng L h e ~roncy I N T R U S T , a m i w ill go t h r ough w it h t h e pu r c h a s e i t :

I. T h e c u e i 11 r c i n 11 t a l e d r e t r o ac ti v e l y s o t h a t o n l y li m it a ti on s d e f e n s e s a v a il a b l e a l t h e ti u10 t h e s u it w a t > f i l e d a r c no w a v a il a b l e ; a nd 2 . T h e C ou r t a pp r ov e s t h e s a l e o f t h e ca u s e o f ac t i o n i n s ub s t a n ti a l l y t h e f onn a g r ee d . -- --- · -- - · - -- - - · .. - · .. - . - - - - · , __ __ .. ___ __ __ - · - - - - -- - - - ^[111] hllll& :ll blu173 . mlli.Hif ux rn'dhnll l ~ntMesslllles?miP~us KD S 0076 57 3 K

a

i s e r F r o m : G r e t c h e n M c C o r d ( g m : c o r d @ n a t h a n s o rr u r e r s . c o m ) S e n t: T u e 7 / 03 / 12 12 : 28 P M T o : K e ll y S t e ph e n s ( k e ll y . s t e ph e n s @ m t m aa . c o m ) ( k e ll y . s t c ph c n s @ ho t m a il c o m ) C : c : R . X ; k K . i n c h e l o e ( r k i o c h e J o c @ n a t h a n s on m e r s . c o m )

2 a tt a c h m en t s m l n r c i n ' i t m e . v 2 . pd f ( 68 . 4 K B ) . m t n r c i n s t . a h . ! . v2 . w pd ( 2 1 . 5 KH )

K e ll y : I a sk ed abou t M i c hae l S y do w be c au s e I t h i n k t ha t w e s hou l d pe r hap s m a k e t h i s a j o i n t m o t i on . S ee t he d r a ft a tt a c hed he r e t o ( w e w ill ha v e t o c hange , a s I t hough t M i c hae l w a s c oun s e l t o s o m e de f endan t s , i n c l ud i ng h i m s e l f ) . B u t s ee w ha t I w an t t o do and ge t ba ck w i t h m e . T he r e a s on I w ou l d li k e t o m a k e i t j o i n t , i s t ha t I don ' t w an t t o r un i n t o a p r ob l e m w i t h t he c ou r t s a y i ng t he t r u s t ee ne v e r i n t e r v ened . T he r e a r e t w o sc hoo l s o f t hough t· one t ha t t he t r u s t ee j u s t s t ep s i n w i t hou t t he ne c e ss i t y t ha t a m o t i on f o r i n t e r v en t i on i s ne c e ss a r y and t w o t ha t t he t r u s t ee ha s t o f o r m a ll y i n t e r v ene . I j u s t don ' t w an t i t t o be an i ss ue and t hen ha v e t he c ou r t s a y t he t r u s t ee had no s t and i ng t o f il e t he m o t i on t o r e i n s t a t e . G r e t c hen G aue r P v t eo r d N a t han S o mm e r s J a c ob s A P r o f e ss i ona l C o r po r a U on 2800 P o s t O a k B ou t e w r d 6 1 s t A oo r H o u s t o n , T e l C B s 77056

112 KD S 0086 574 ~14.'2014 K

a

i s er F r o m : G r e t c h e n M c C o r d ( g m c c o r d @ n a t h a n s o ll 111 l !r s . c o m ) S e n t: T u e 7 / 10 / 12 6 : 14 P M T o : K e U y S t e ph e n s ( k e ll y . s t e ph e n s @ ho ti m il c o m ) ( k c ll y . s t c ph c n o ; @ ho t m a it c o m ) C c : lti: k K i r K : h e l o c (r k i n c h e l o e @ n a t h a n c ; o mm e r s . c o m ) K e ll y : If t h e y a r e no t g o i n g t o j o i n i n t he m o t i on , c a n I a t l ea s t r e p r e s e n t t h a t t h e y a r e u no p p o s e d . I n ee d a n a n s w e r a s a p . G r e t c hen G aue r M c C o r d N a t han S o mm e r s J a c ob s A P r o f e ss i ona l C o r po r a t i on 2800 P o s t O a k B ou l e v a r d 61 s l A oo r H ou s t on , T e x a s 77056 V o i c e : ( 71 3 ) 892 - 4816 F a x : ( 713 ) 892 - 4800 g m cc o r d @ na ! han s o mm e r s . c o m www . na ! han s o mm e r s . c o m T H I S E - M A I L M ESSA G E A N O T H E A TT A CH M E N T S H E R E T O . I F A N Y . A R E I N T E ND E D O N l Y F O R U SE BY T H E SE ND E R ' S I N T E ND E D RECIPIENT(S~ I F Y O U J \ R E N O T T H E SE ND E R ' S I N T E ND E D R E C I P I E N T O F T H I S E - M A I L M ESSA G E O R Y O U R E C E I VE D T H I S E - M A I L M ESSA G E O R T H E A TT A CH M E N T S T O I T I N E RR O R . O R T H I S E - M A I L M ESSA G E O R SA I D A TT A CH M E N T S C O N T A I N L E G A LL Y P R I V I L E G E D O R C O N F I D E N T I A L I N F O R M A li O N A ND Y O U A R E N O T T H E SE ND E R ' S I N T E ND E D R E C I P I E N T O F S UCH L E G A L L Y P R I V I L E G E D O R C O N F I D E N T I A L I N F O R M A T I O N . T H E D I SSE M I N A T I O N . D I S T R I B U T I O N . P U B L I C A T I O N . D I S C L O S UR E O R U SE O F SA I D E - M A I L M ESSA G E . A TT A CH t A E N T S A ND I N F O R M A T I O N A ND S T R I C T L Y P R O H I B I T E D A N O Y O U A R E I N S T RUC T E D T O I MM E D I A T E L Y ( A ) N O T I F Y T H E SE ND E R BY T E L EP H O N E A T ^{[7] [13]} . ^[960] . ^[0303] O F Y O UR R I: C E I P T O F T H I S E - M A I L M ESSA G E A ND SA I D A TT A CH M E N T S .

1 12 l e l s :/ l b l u173 m lll . ll w , c a r l d l rr f i , l . m d ' r i r C M e ss a a e s ? ! T H = eo - u s KD S 0 0 8 8 5 7 5 ^[311412014] OUIJook.am Prlnl Message RE: Kaiser From: Kelly Stephem (kelly.stephcns@hotmail.com) Sent: Wed 7/ll /12 10:17 AM To: grnccord@nathansol'l'llJI:rs.com Gretchen. we're back to please don't shoot the m:ssengec. Mike's reply to joining the Jrolion was (paraphrased): I am buying this thing to prevent further problem; with Kaiser, why would I (the defendant) join in a motion to reinstate. I have fOrwarded your request below to him, but have not heard hack yet I am about to get on the road fur Duval County fur a hearing th~ afternoon. my cen is 713-252-4945. please caU IR! around noon. my hearing is at I :30. I'll try to reach Mike while I am on !he road. Kelly D. Stephens Stephens & Domnitz, PLLC P.O. Box 79734 Houston, TX 77279-9734 281-394-3287 832-476-5460 Fax

·-- - --·--·- - - From: gmccord@nathansomrners. com To: keDy.stephenc;@hotmail.com CC: rkincheloc@natharmmmers. com Subject: Ka~er Date: Tue, tO Jul2012 22:14:53 +0000 Kelly:

112 l-.ms:JftAut73.maii.IM.cc:rrld/mail.rnciPrintMessaoos~en-us

KDS 0089

57 6 ^[3] f ^[1412014] R

E

: K a i s er F r o m : K e D y S t e ph e m (kelly.stephen~hotmailcom) S e n t: W e d 7 / 11 / 12 11 : 01 A M T o : g m cc o r d @ n a t h a n s onnn e r s . c o m G r e t c h e n , f i r s t , m y h ea r i ng i n D uv a l go t ca n ce ll ec . ll a l e y e s t e r d a y a nd I j u s t f uund ou t . s ec ond : I l ook e d a t t h e c ou r t r ec o r d s r e g a r d i ng d t e p a r ti e s i n t h i s liti gd li on :

J e ff K a i s e r r e p r e s e n t e d b i m s c U : no w y ou r po s iti on . 1 r e p r e s e n t e d J ohn P r e s t on , T e x a s S yng a s , I n c . a nd Q u a nh a n C a l a l y ti c s , LL C S t e v e D a \ 16 ( D a v i s & D a v i < ; ) r e p r e s e n t e d S a m ee r A h m e d . T e r e s a S c hn i ee r ( W i n s t ea d ) r e p r e s e n t e d M i c h ae l C o tli n s , M i c h ea l S ydo w a nd T e x a s S yng a s , l L C S h e w i t hd r e w l ea v i ng eac h o f t h e s e p r o s e . O n b e h a l f o f J ohn P r e s t on , T e x a s S yng a s , l n c . a nd Q u a n t u m C a t a J y ti c s , U £ , I h a v e r e qu e s t e d a u t ho r it y bu t

h a v e no t r ece i v e d i t t o r e p r e s e n t t . b a tl h e y a r c \ D l O ppo s e d . M i k e S ydo w ' s po s iti on i s t h a t h e ca nno t r m k e t h a t r e p r e s e n t a ti on f o r an y o f t h e o t h e r d e f e nd a n t s , and w ill no t on h i s o w n b e h a l f . I h a v e no t b ee n a b l e t o r eac h S t e v e D a v i s , bu t I r e p r e s e n t S a m : e r A h m e d i n o t h e r t m tt e r s ( a nd h a v e m a d e h i m a w a r e of~) and h e w a n t s t h i s t h i ng d ea d s o I doub t i f h e w ouk i a g r ee . I ha v e no c on m c l w i t h M i c h ae l C o lli n s . 1 r ea li ze t h i s c o rr p li ca t e s thin~, bu t il s t h e b e s t I ca n do a t t h i s po i n l K e D y D . S t e p h e m S t e ph e n s & O o m n it z , P LL C P . O . B ox 79734 H o u s t o n , T X 77279 - 9 7 34 281 - 39 4 - 3287 8 3 2 - 4 7 6 - 5 4 60 F a x

113 h ii D ti J /t J u t 73.rrei1Jiw.am'dmal . ~ n t M ^[01111] . ^[10] II ' : ? rr i ( : m - ' ^[15] KD S 00 90 5 7 7 Oudoollccm Prml Message 311~4 RE: Kaiser From: KeUy Stephens (kelly.stephens@hot:rmilcom) Sent: 11w 7/12/12 5:29PM To: gmccord@nathan.c;omrners.com Gretchen, I can confirm that Mike Sydow is my primary contact My Wlderstanding i.<> that the purchaser is consulting with Mike regarding the claim; (their merits etc under Texas Law), but not that he is "having" someone purchase the claim. Kelly D. Stephens Stephens & Do~ PLLC P.O. Box 79734 Houston, TX 77279-9734 281-394-3287 832-476-5460 Fax From: gnx:cord@nathansommers.com To: keDy.stephens@hotmtilcom Subject: RE: Kaiser Date:Thu, 12 Jul2012 21:07:34 +0000 Please confirm for me t hat Mike Sydow is the one who is having the purchaser buy t he claims. Gretchen Gauer McCord Nathan Sommers Jacobs A Professional Corporation 2800 Post Oak Boulevard 1/4

h!UI&:IIbluf73.mlll.lhe.carrldlmaii.ITIICiPrintMessaoes'?lriFen-us KDS 0095 5 7 8 ^[311412014] OuUcx:Kc<m Print Message Kaiser Fronr Gretchen McCord (gnx;cord@nathansoll'll'rern.com) Sent: Thu 1 J/01/12 5:09PM Tu: Kel)y Stephens (kelly.stephens@hotmlil.com) (kelly.stephens@hotrnail.com)

J attachment Assigtuncnt (0817 J 2)V.2 .. dncx (19.3 KB)

I have not run this by the Trustee. Accordingly, it is subject to his approval. I still assert this is unnecessary and the transfer of the claims was effective as of July 27, 2012, when the order reinstating the state court lawsuit was entered and It would appear that filing that order would be sufficient. Having said that, if a separate assignment is going to be entered into It needs to incorporate the sale order, the sale order needs to control any conflict, and the Trustee cannot assign things other than what is owned by the estate . I think the language needs to be identical to that of the sale order. I also do not know the reason that the Assignee would ever give a release for the Trustee . And, the Trustee does not own the claims any longer so is not going to settle the pending lawsuit. Having said all of this, I made some possible changes. See if you are ok with them. Grelcllen Gauer IVcCord Nathan Sommers Jacobs A Professional Corporation 2800 Post Oak Boulevard 61stFioor Houston, Te~s 77056 Voice: (713) 892-4816 Fax: (713) 892-4800 gmccord@nalhansommers .com YfWW .n@lhansgmmers .com

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P l a i n ti ff a s k s t h e C o u r t l o s i gn a r . o r de r o f non s u it w it h p r e j ud i ce on a ll o f P l a i n ti ff ' s c l a i m s a g a i n s t D e f e nd a n t , M i c h ae l D . S ydo w . P l t f N o n s u it w / P r e j ud i ce

E X H I B I T J 5 8 1 Plaintiff asks that all cl<:jms against Defendant, Michael D. Sydow, be dismissed with prejudice. Plaintiff asks that all costs of court be assessed against the party incurring same.

III.

WHEREFORE, PREMISES CONSIDERED, Plainti ff respectfully requests that this motion for Nonsuit With Prejudice be f:ranted; that the Court d ismiss wi_.~t prej:Jdice all ~(7/!'> ;'~:~~· claims against Defendant. Michael D. Syd·)W; that all costs of (:ourt be a~~'cd against the party ~ incurring same; and for such other relief, at law or in equity, to whic!'~~!ntiff is entitled. ,~)' ~: ..t.::;; ./~~- Respectfully subnjrt~a. STEPHENS ~~bMNITZ, P

.Jt ~ .... kelly.stcphcns@hotmail .com . Attorneys for Plaintiff, JK Clainrs Jm,estment ~ F)) !' Corporation, Defendants, Texas Syngas·, LLC and ·0:1 ~ Texas Syngas, /11c. and Intervenor, Quantum . -=~ Cata/ytics, LLC. '!-...._.) r.,; ~,.+.-. §i;~,; Certificate of Service '~· (~

I her~~rtify that a tn:.e and correct copy of the foregoing document has been served on this l ^[51] d~t>f October, 2012. on the following: Via Telecopier No. (713) 781-2235 Mr. Steven Ray Davis Davis & Davis 440 Louisiana, Suite 1850 Houston, Texas 77002 Attorneys for Sameer Ahmed Pltf Nonsuit w/Prejudice

582 V i a T e l ec op i e r N o . ( 713 ) 552 - 1949 M r . M i c h ae l D . S ydov . 1980 P o !: l 1 O a k O ou l e v a r d , S u jt e 2 1 00 H ou s t o n . T e x a s 77056 D e f e nd a n t P r o S c r . *n V i a C e r tifi e d M a il , R e t u r n R ece i p t R e qu e 5 t e d #70 JJ 1570 0000 9065 3472 ~ M r . M i c h ae l A . C o lli n s

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C A U S E N O . 2007 - 38533 3 P lt f N o n s u it w / P r e j ud i cc 58 3 Flied 13 Jan~ 11 P5:09 Chris Daniel - Dla1rlct Cleric Hania County

ED101J017268621

By. Marcella D. HRI

Cause No. 2007-3 8533 JEFFERY B. KAlSER, INDlVIDUALL Y, § IN THE DISTRICT COURT OF s

DERIV A TEL Y, AND ON BEHALF OF

STOCKHOLDERS AND MEMBERS OF § TEXAS SYNGAS, LLC a/k/a TEXAS

~

SYNGAS, INC.,

~ Plaintiffs, § § § v. § TEXAS SYNGAS, LLC a/k/a TEXAS § § SYNGAS, rNC., MICHAEL A. COLLINS, MICHAEL D . SYDOW, M. SAMBER § AHMED, ANDALLOTHERSIMILARL Y § SITU A TED OFFICERS AND DfRECTORS § -:8•

~ ·~DJ

OF TEXAS SYNGAS, LLC a/k/a TEXAS ~"'~ § SYNGAS, lNC., ~ ~(w

Defendants.

§,. G;~2nd JUDICIAL DJSTRlCT ·'\.~'""

.~- ,J DEFEND ANT Ml~l:L D. SYDOW'S MOTION TO NONSUrf CAUSE OF ACTION _© TO THE HONORABLE JUDGE OF ~ COURT : r~ ,ir..Jf-·J; NOW C O MES Defendant ~'Chael D . Sydow, and requests this Honorable Court to j( )

~!J

nonsuit the counterclaim he fil~.against Plaintiff Kaiser in Cause Number 2007-38533 for the

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. r),':'s ground set forth herem. ..;:-~ \.-!'

T.

,r . ., ~ ... ~'} A. De~t requests nonsuit of his counterclaim in Cause Number 2007-38533 for (.~ -~

the followin~~n: " Kaiser has dismissed his claims against Mr. Syuuw in exchange for tht; 1. nonsuit ofMr. Sydow's bad faith claim against Kaiser. WHERE FORE, Defendant requests this Honorable Court to nonsuit his counlerclajm against Kaiser in Cause Number 2007-38533 and for such other and further relief that may be 5 84 a w a r d e d a t l a w o r i n e qu it y . R e s p ec t f u J i y s ub m itt e d , ~ I s / M i c h ae l D . S ydo w M i c h ae l D . S ydo w ~" T e x a s B a r N o . 19592000 ( ; - 19 80 P o s t O a k B ou l e v a r d , 5 \ti . t e 2100 H ou s t on , T e x a s 17056 ~~-- ( 713 ) 622 - 9700 [ Tel ~ p~e] ( 7 13 ) 55 2 - 1949 [ T ~ ~ t er J A tt o r n e y f o r Oef ~ dadt , M i c h ae l D . Sygqw. ~

" - ^[41] - .., ~~ h~~l..~r C E R T I F I CA TE Olf ; ~ RVICE

A

N ~· -- · - v I ce r ti f y t h a t on J a nu a r y ll , 20 13 ~~ouston, T e x a s a t r u e a nd c o rr ec t c opy o f t o N on s u it w a s ~~ed on K e ll e y M . K e ll e r e l ec t r on i ca ll y a t D e f e nd a n t ' s M o ti on kk c ll e r @ c lli s on . k e ll e r . c o m , a nd t h e e l ec t r o t ' f u a n s m i ss i on w a s r e po r t e d a s c o m p l e t e .

( l > n _ , , r ~. ~\~1 ~~ I s ! M i c h ae l D . S ydo w (--:::-.~ y M i c h ae l D . S ydo w \ E - m a il: m i c h ae l . s ydo w @ t h e s ydo w f i r m . c o m ... ~ \ -o-~ f\

_

A

2

58 5 01 / 14 / 2013 02 : 32 : 33 P M 713 - 755 - 1451 P age2 / 5 F il ed 13 J anua r y 14 P 2 : 33 C h r i s D an i e l · D i s t r i c t C l e r k H a rr i s C oun t y F AX 15387276

C a u s e N o . 2007 - 38533 J E FF E R Y B . KA I SE R . I ND I V I DUA LL Y . § I N T H E D J S T R I C f C OU R T O F D E R I V A TEL Y , A ND O N BE H A L F O F § S T O C KHO L D E R S AND M E M B E R S O F § TE XA S S YNGA S . LL C a l kJ a TE XA S § : S YNGA S , I N C .,

~ P l a i n ti ff s , J t 0~ ~ ~- (( ~ ~ §

' II . § HA . RR l S CO~TEXAS ~ ,, t TE XA S S YNOA S . LL C a / k l a TE XA S § .r.~ S YNGA S , I N C ., M I C HA EL A . C O LL I N S , § ~~"

~~:· M I C H A E L D . S Y D O W , M . S A M B E R § A H M E D , AN D A LL O T II E R S I M I L A R L Y § ~"Y · @ S m J A TE D O FF I C E R S AN D D I R E C T O R S § ..

~~ O F TE XA S S YNGA S , LL C a l k l a TE XA S ~ ""' § r :: J ¥ S YNG A S , I N C ., '

-

J · D e f e nd a n t s . § § . .., • 52nd J UD J C I A L D f S T R I C T

< ... ~<~ ' . J ND a y E N O R O U A N I U M C A T 4 \ t 1 c . LL C ' S M O D Q N F O B N O N S U I T r- ~

T O n f E HONO R A B LE J UDG E 0~ ~ ~ C OU R T : t . AV > NO W C O M E S Intcrven~~tum C a t a l y ti c ., U .. C . a nd r e qu e s t s t h i s H ono r a b l e C ou r t ·~.// t o non s u it t he c oun t e r c l a i m he ~ a g a i n s t P t a i n t i ff K a i s e r i n C au s e N u m be r 2007 - 38533 f o r t h e ~l' (~ g r ound s e t f o r t h h e r e i n . P ~· ~ < Y t [. ~ =_,~ In ~ or r e qu e s t s non s u it o f it s c l a i m i n C a u s e N u m b e r 2007 - 38533 f o r t h e A . ~.) r , .... - ·:: > ·~ following~ J K C l a i m s I nv e s t m e n t C o r po r a ti on ha s ac qu i r e d t he ca u s e o f ac ti on o f l . K a i s e r , a nd I n t e r v e no r i s no t a dv e r s e t o J K C l a i m s I nv e s t m e n t C o r po r a ti on . I n t e r v e no r w i U a l i gn it s i n t e r e s t s w it h t ho s e J K C l a i m I nv e s t m e n t C o r p o r a ti on i n a n a m e n d e d p e titi on .

5 8 6 P age 3 / 5 713 - 755 - 1 451 01 / 14 / 2013 02 : 32 : 33 P M W H E . R E F O R E . I n t e r v e no r r e qu e s t s t h i s H ono r a b l e C ou r t t o non s u it h i s c l a i m a g a i n s t K a i s e r i n C a u s e N u m b e r 2007 - 38533 a nd f o r s u c h o t h e r a nd f u r t h e r r e li e f t h a t m a y b e a w a r d e d a t l a w o c i n e qu it y .

R e s p ec t f u ll y s ub m i tt ed , 587 01 / 14 / 2013 02 : 32 : 33 P M 713 - 755 - 1451 P a g e 4 / 5

C

E R T I F I C A TE O F S E R V I C E I ce r ti f y t h a t on J a nu a r y 11 , 2013 a t H ou s t on , T e x a s a t r u e a nd c o rr ec t c opy o f D e f e nd a n t ' s M o ti on t o D i s m i ss wa.~ s e r v e d on K e ll e y M . K e ll e r e l ec t r on i ca ll y a t kk e ll ec @ e lli s on . k . e ll c r . c o m , a nd t h e e l ec t r on i c t r a n s m i ss i on w a s r e po r t e d a s c o m p l e t e .

58 8 'Transcript of the Testin1ony of Russell Read_, CfA, Ph .. DI$ Vo.4ume: I Date Qf Deposition:

ApriJ 21,

2014 Case: Jeffrey B. Kaiser v. Texas Syngas, LCC Contlo~ntlal Comm.un·ications Int. Ltd. Phone:. 71.3.365.0177 Fax: 713.365:0808 E.maH: schedul'lng@recordsdlscovery .co.m. Internet: www .. :records.distovery:. corn 47TJ EXHIBIT L 600 817 / 201 4 D i l o i s i on o f C c r po r a t i c : n s - O n li ne S en i c e s D e l a w a r e . go v I T e x t O n l y G o .. e r no r I G ene r a l A ss e m b l y I C ou r t s I E l e c t ed O ff i c i a l s I S t a t e ~enr • t' c O epa r 1 m en t o f S t a t e : O l v ili on o f C o r po r a t i o n s P n v a cv :: > o ft cy F r equen t l y As!..~' O u csv oo s V j o w S ea r c h R e s u l t s H O M E /! bou t ~en cy S e c r e t a r y ' s Le tt e r

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W ou l d y ou l i k e S t a t u s , T a x & H i s t o r y I n f o r m a t i on S ub m i t S t a t u s B a ck t o E n t i t y S ea r c h c i t e !.. he r e s i t e m ap I abou t t h i s s i t e I c on t a c t u s I t r an s l a t e I de l a w a r e . go v 1 / 1

E

XH I B I T M 608

10/27/2014 9:26:29 AM

Chris Daniel · District Clerk Harris County Envelope No. ^[2958109] By: GAYLE FULLER Filed : 10/24/2014 7:28:31 PM

CAUSE NO. 2011-44058

MICHAEL COLLINS, ET AL .. § IN THE DISTRICT COURT Plaintiffs § § §

vs. OF HARRIS COUNY § § f\ s

MICHAEL SYDOW, ET AL. § Defendants § 215 rn JUDICIAL DISTRICT AKILA FINANCE, S.A. , ET AL. , § TN THE DISTRICT COURT § Intervenors/Plaintiffs § vs. § OF HARRIS COUNTY, TEXAS § MlCHAEL SYDOW; ET AL. § § 215TH JUDICIAL DISTRICT Defendants . DEFE NDANTS JOHN T. PRESTON, BRILLIANT NOVELTY, L.L.C., AND C CHANGE I NVESTMENTS, LLC'S REPLY IN SUPPORT OF THEIR SPECIAL APPEARA NCES AND

MOTION TO STRIKE HEARSAY STATEMENTS Pursuant to Texas Rule of Civil Procedure 120a. Defendants John T. Preston. Brilliant Novelty, L.L.C. ("Bdlliant Novelty"), and C Change Investments, LLC ("C Change" ) (together "Massachusetts Defendants") fi le this Reply in Support of Their Special Appearances and Motion to Strike Hearsay Statements, and in support state as follows:

PRELIMINARY STATEMENT

At issue here is whether claims filed by foreign corporations and individuals-none of whom are Texas residents- against a Masachusetts resident and two Massachusetts companies should be allowed to go forward even though after three years of litigation there still is no evidence for assertingjurisdiclion over any of the Massachusetts Defendanls in a Texas court.

617 The Massachu etts Defendants established in the ir Special Appearances that personal j urisdiction cannot be asserted over them. Neither the lcnglhy response or supp lcm~nt al response submiued by the Intervenors should be considered in this case because both are untimely. 1 Jn a ny event. nothing in either brief c hanges the fact that there is no specific or general jurisdiction over any of the Mas achusetts Defendants. First. there is no specific jtu·isdiction because Ute Intervenors do not even allege that the Massachusetts Defendants conunitted any act in Texas that gives rise to the claims in t11i s lawsuit. The Texas Supteme Court has explicitly rejected the theory on which the Intervenors rely for specific jurisdiction. Jt i not enough to allege that a t01t was ·'directed" at Texas. Second. there i no general j urisdiction over any of these defendants. Preston has not lived in Texas since he was an infant over sixty years ago and the handful of visits he has made to Texas since the n are not jurisdictional contacts because they were made in a t'ept'esentative capacity. The handful of contacts by C Change with Texas through Preston were not o ··continuou and systematic" to render C Change "essentially at home" in Texas as the U.S. Supreme Cmu1 requires. Finally. Intervenors have not cited any specifi.c contacts by Brilliant Novelty with Texas. J. THE MASSACHUSETTS DEFENDANTS COMPURD WITH RULE 120A.

The Intervenors claim that d1c Massachusetts Defendants' special appearances do not comply with Rule 120a on the grounds that the special appearances themselves arc not verified. But as the Intervenors acknowledge, affidavits were attached to each of the special appearances. Resp. at 8-9. These affidavits swear to the truth of every statement of fact in the mot ions. Jt ^[1] Despite the fact that Defendants agreed to several extensions of the deadline for Intervenors' response briet~ Intervenors fajJed to meet the agreed July 2, 2014 deadline for flli ng tfleir Response Brief. Ex. A, Rule 1 t Agreement (June 29. 2014); Intervenors' Resp. at 1 (July 3, 20l4). More significantly. Intervenors subsequently filed an additional S\ipplemental response brief on AugustS, 2014. despite being bound by the Rule 11 Agreement reqmring that any resJlonse by the Intervenors must be fi led by July 2. 2014. Intervenors' Supp. Resp. (Aug. S, 2014).

2 618 makes no sense to argue they are not sworn motions as Rule 120a requires. In any event, even if there were a technical defect- which there is not- the Texas Supreme Court has made clear that a special appearance can be veri fied after the hearing. ^[2] ll.

INTERVENORS DID NOT MEET TH~IR BURDEN OF PLEADING S UFFICIENT

JURISDICTIONAL ALLEGATIONS OVER NON-RESIDENTS.

The1·e is no allegation that any acts by the Massachusetts Defendants giving rise lo the

Intervenors claims took place in Texas. That means it is enough to establish that the Massachusetts Defendants m·c not residents and the Court does not need to go any further. "The plaintiff has the initial burden of pleading sufficient allegations to bring the nomesident de fendant within the provisions of the Texas long-aJ:m statute. . .. If the plaintjff docs not plead jurisdictional allegati ons, i.e .. that the defendant has committed any act in Texas, the defendant can satisfy its burden by presenting evidence that it is a nonresident. '' 3 Ill.

THERE IS NO SPECII<IC JURISDICTION OVER ANY OF THE MASSACHUSETTS

DEFENDANTS.

Here, none of the legal requirements for asser1ing specific jurisdiction are met for any of

the Massachusetts Defendants. To assert specific jmisdiction over a defendant that defendant "must have made minimum contacts with Texas by purposefully a.vaj ling itself of the privilege of conducting activities here" and "liahility must have atisen from or related to those contacts.'.4 Moreover. there has to be ··a substantjal connection between [the defendant 's forum] contacts and the operative facts of the litigation.'.s ~ Dawson-Austin v. Austin. 968 S. W .2d 31 9, 322 (Tex. 1998). ^[3] C·Lnr· Reremiofl Sys .. fnc. v. Hendrix. 993 S.W.2d 473,476 (Tex. App.- Houston [14th Oist.J 1999. no pet.): see t1lso Hmel Panners v. KPMG Pem Manvick. 847 S.W.2d 630, 634 (Tex.App.·Oallas 1993. writ denied) (granting special appe.arance prorer where the defe ndant established it wa.~ a non-resident and the plaintiff's ''pleadings contained no a llegatio ns that [the defendant] committed any acts in Te:~:as'l * M oki M ac Ri1•er E.qJeditions v. Drugg. 22.1 S. W .3d 569. 576 (Tex. 2007). ^[5] fd. at SSS.

3 619 A. No Allegations in the Intervenors' Petition Support Specific Jurisdiction. The Jntervenors do not make a single fact ual allegation in their petition that any conduct

by the Massachusetts Defendants actuaJly took place in Texas. Without specific allegations regarding acts by the Massachusetts Defendants in Texas, there can be no specific jurisdiction. 6

B. None of the Contacts Alleged by the Intervenors in Their Briefing Support the Exercise of Specific Jurl~di c tion. The Tntervet1ors argue that specific jurisdiction may be asserted over the Massachusetts Defendants based on .. Preston' s activities as a director of and fund raiser for TS J and NC12- both Texas companies" and on the grounds that they "could reasonably foresee that NC12 and its shareholders and investors would suffer direct economic iJljury." ^[7] T his argument echoes Intervenors· ge neral claim in their petition that jlllisdiction is proper simply because tortious conduct '·was directed at the State of Texas:·S But the Texas Supreme Court unequivocally rejected the ru·gument that j urisdiction can arise just because actions caused harm to a Texas .resident.Y "Several pmblems arise if jurisdiction rums not on a defendant's contncls, bur on where it 'directed a tort.''' ^[11]

) Here, the Intervenors· allegations are even further removed given that none of the Intervenors ru·c Texas residents ~md TSJ ru1d NC 12 ru·c Nevada corporations. not. Texas corporations. ^[11] Vosko v. Chase Manharran Bank. N.A .• 909 S.W.2d 95. 99 (Tex.Arp.-Houston [14th Oist.J 1995. writ denied) (" if the plainriff does not allege that the defendant performed a specific act in Texas. the defendant's evidence ttl at he is a nonresident is enough to cany his burden of pmof): Olympia Capita( A.~sors .. LP. v. Jackson. 247 S.W.Jd 399, 407 (Tex.App.-Dallas 2()08, no pet.) ('"absent allegations of any specific. purposeful act through which the defend am can he snid to have sough t a benefit by ' availing itself of the ,jurisdiction.' . .. evidence that a defendant is a nonresident is suffic ient to me~t.s its burden"). ^[7] Inletvenors' Resp. at 13. REx. B. Orig. Pet. in Intervention ut ~144 (Nov. 1 I. 2011). '~ Michiana Easy Livin' Cmmtry. Ttw. v. llofum, 168 S. W.3d 777 (Tex. 2005). ^[10] lei. at 790.

4 620 Because the general allegations by the Intervenors do not point to any activities in Texas, they also fail to show that Preston " purposely avail[ed] [him]self of the privilege of conducting activities" in Texas. 11 Nor do the actual facts related to Preston's involvement with NC12 show a connection to Texas. Preston is a shareholder and di rector of NC 12. but the only board meeting he attended physically took place in Massachusetts. not Texas. and the only tirne he ever traveled to Texas in relation to NC1 2 was to serve as a witness in a representative capacity for the company for the limited purpose o f testifying about an asset in a divorce proceeding. 1 z

The Intervenors argue that Preston is not protected by fiduciary shield docttine for purposes of specific j urisdiction. 13 But thi s does not change the fact that there are no allegations here of contacts with Texas that g ive rise to specific jUli sdiction. Intervenors simply have no t pointed to any specific conduct that took place in Texas that gives rise to the claims asserted in this case. IV. T HERE IS NO GENRRAL J URISDICTION OVER THE MASSACHUSETTS DEFENDANTS.

There can be no question that none of the Massachusetts Defendants have the s ubstantial continuous and syste mat ic contacts with Texas that are necess<ll'y to suppol't general jurisdiction. Th is should be clear based on the fact that for the last 60 years Preston has not lived in Texas and has not had an y contact with the state in his personal capacity. Brill iant Novelty has had no contacts with Texas. and contacts by C Change have been extremely limited . General jmisdiction can only be asserted over nonresident defendants that have contacts with the forum that are "so 'continuo us and syste matic· as to render them essentially at home in the forum ^[11] Moki Mac River E\peditions. 22 1 S . W.3d at 576. ^[12] Ex. C, Preston Dec. U6. 7 (Sept. 26, 20 11 ). Ex. 0 , Preston Supp. Dec. Cf.~[ 3 ·8 (Oct. 23. 2014). ^[13] Ex. B. Resp. at 14.

5 621 State." ^[14] General jurisdiction, therefore. is "dispute-blind," inquiring only whether a nonresident defendant's contacts with the forum are substantial enough that they would support jurisdiction over a hypothetical dispute that has no connection whatsoever to Texas. ^[15] " Usually, ' the derendant must be engaged in longstanding business in the forum state, such as marketing or shipping products. or performing services or maintaining one or more offices there" and "activities that are less extensive than thal will not qualify for general in personam j m·isdiction." 16 The Massachusetts Defendants ' almost complete lack of contact with Texas does not meet this standard.

1. Preston is not a Texas resident and does not do business in Texas in his individual capacity. Preston is not subject to general jUJisdiction because he is not a resident and is not ·'engaged in longstanding business" as is required to support general jurisdiction. ^[17] He has not been a resident of Texas for the last 60 years. but rather is a res ident of Massachusetls. 18 His few visils to Texas have all been in a representative capacity. 19 P1·eston is employed outside of Texas and has never been employed in Texas or maintained an orfice in Texas? ^[0] PTeston does not employ anybody who resides in Texas. or who regu larly travels to Texas in connection with l1is or her business? ^[1] Because Preston does not reside in or conduct business in Texas. he has never ^[14] Goodyear Dunlup Tires Operation~, S.A. v. Brown. 131 S. Ct. 2846. 2851 (2011). ^[15] PJ-JC-Minden. 235 S.W.3d at 169. ^[16] Itl. ar 168 (quoting 4 W1ighr & Millet, Federal Practice and Procedm-e § 1067.5). ^[17] [(/_ ^[18] Ex . C, Preston Dec. l4. ^[19] ltl. t'K 4-6: Ex. D, Preston Supp. Dec. <t'l[J-8. ^[20] Ex. C. Preston Dec. ~ 8. Zl /d.!fll.

6 622 incurred or paid any taxes in Tex,as. 22 Preston is not required to and does not maintain any agent in Texas who is authorized to receive service of process. ^[23]

2. Preston does not maintain any presence in Texas. Preston cannot be consideted "essentially at home" in Texas because he does not maintain any presence in Texas. ^[24] Preston is not engaged in any husiness in his indi vidual capacity in Texas and has never maintained an office or any other facility, telephone listing. post office box, or mailing address in Texas. ^[25] Nor has he ever rented. owned. or possessed any real or personal property in Texas.:!~ Preston is a Director of NC 12, lnc., but that company was not incorporated in Texas and the only board meeting Pteston eve1· physically attended did not take place in Texas. but in Massachusetts. ^[27]

Fw·ther. the Intervenors' sugges1ion that tangential contact with Texas by Preston based on his mle as a directot or investor in companies that operate in Texas fails as a matter of law to demonstrate any genuine contact with Texas for jmisdictional purposes. Mere "investor status'' is not sufficient to impute contacts by NC12 with Texas to Preston for purposes of jurisdiction. ^[28] In any event, the Intervenors admit that lt was Quantum Catalytics that invested in TSL not ^[12] ltL '1 12. !3 Jd_ 1(8. !.1 Goodyear Dunlop Tires Operations. S.A .• 131 S. Ct. at 2851 (requiring that a nonresident defeJldant must have "continuous and systematic" contacts with the fonun that are "so 'continuous and systematic' as to render them essentially at home in the fomm State" to exercise general jurisdiction). ^[2] ~ Ex. C, Preston Dec. <(i1 5-10. ~ ^[6] /d. (I 9. ^[27] Id. n 2. 6 -7. ^[18] See. e.g .. PHC- Mi11den v. Kimberly- Clark Corp., 235 S.W.3d 163. 176 (Tex. 2007) : Mikuni Corp. v. Fvster. No. 01-11-00383-CV, 2012 WL 170603. *5 (Tex. App.-Hot•ston fi st Dist.l Jan 19.201 2. no pet.).

7 623 Preston.'2 9 Also, notwithstanding the Intervenors' claims, Preston was not involved with Metal Catalyst Venture. Inc. 30

intervenors also claim that certain visits to Texas by Preston that he initially stated were on behalf of TEM Capital must have been made in a personal capacity because the visits preceded the formation of TEM Capital. 31 As Preston explained in his supplemental declaration. however, these contacts were made on behalf of C Change. an entity affiliated with TEM Capita1. 32

Even if the handful of visits Preston made to Texas in hi s representative capacity were j urisdictional contacts- which they are not-"[o]ccasionaltravel to Texas is insufficient by itself to establish continuous and systematic contact." ^[33] Here. like the defendant in Gamer v. Furmanite Australia Pty., Ltd., Preston' s handful of visits to Texas in a representational capacity cannot give 1ise to general jurisdiction. ^[34]

3. Intervenors Have Not Shown that Preston is the Alter Ego for JK Claims. Knowing the weakness of their argument for general jurisdiction over Preston, lntervenots filed an untimely supplemental response in a last ditch effort to create nonexistent connections between Preston and Texas. In this desperate supplemental brief. Intervenors argue that contacts by JK Claims Investment Corporation ("JK Claims") with Texas should be imputed to Preston. ^[9] Intervenors' Resp. at 6. ! Jo Ex . 0. Preston Supp. Oec. ~[ 9. 3 1 Intervenors ' Resp. at 6. ^[32] Ex. 0. Pre~ton Supp. Oec. ~11 5-6. ^[33] PrettSSag AkTiengesellscha.fi. v. Colmwn. 16 S. W .3d II 0, 124 (Te~. App.-Hous ton (I st Oist.J 2000. pet. denied). ^[34] 966 S.W .2d 798. 803 (Tex. App.-Houston [lst Dist.] 1998. pet. denied) (holding no general Jmisdictwn over individual who made eight to 10 visits to Texas on behalf of company).

8 624 Absent a showing that a company is the alter ego of an ind ividual defendant, an individual defendant's contacts witl1 Texas on behalf of a corporation or company cannot be the basis fot genetaljudsdict ion over a person. 35

Because Intervenors· attempt to assert that contacts hy JK Clai ms should he considered contacts of Preston for pw-poses of general j urisdiction:i 6 Intervenors must prove-not simply allege- that Preston is the alter ego of JK Claims for the Court to consider these contacts in its j m·isdictional analysis. The convoluted suing of hearsay statements presented in the Intervenors' untimely Supple mental Response falls far short of the sttingent requirements for showing that JK Claims is the alter ego of Preston. Moreover. Quantum Catalytics-not Preston- is the sole shareholder of JK Claims and Preston is only one of the 21 shareholders in Quantum Catalytics. ^[37] Thus, there is no basis for concluding that Preston is the alter ego of JK Claims and that its contacts should be imputed to Preston.

And even if these contacts were imputed to Preston-though there is no reason for them lo be-Preston's contacts with Texas still would fall fru· shorr of the contacts required to demonstrate th at he is "essentially at home" in Texas as the U.S. Supteme Court made clear is required in Goodyear. ^[3] ~ SJTQ E.U., Inc. v. Reata Rests., /n(' .. 111 S.W.3cl 638. 65 1 (Tex. App.-Fmt Worth 2003. pet. denied): Brown v. Gen. Brick Sales Co .. 39 S.W.3d 29 1. 300 (Tex. App.-Fort Worlh 2001 . no pet.); cj: Ganwr 1'. Fumwnite Australia Pty .. Ltd .. 966 S.W.2cl 798. 803 (Tex . App.-Houston [1 st Dist.] 1998. pet. denied) (ho lding rbut fid uciary shield doctrine protected Australian resident from trial court's exercise o f general jurisdiction becuuse hi.s only contacts with Texas were on his employer's business). ^[36] T here ill no question that Intervenors' allegatio ns related to .IK Claims cannot fonn the basis for asserting specific jlllisdicrion because the claims in this case are not related in any way to rhe,<;e allegations. ^[37] Ex. D. Preston Supp. Dec. ~I 10.

9 625 V. THF. COURT SHOULD STRIKE HF.ARSA Y STATEMENTS IN THE COLLINS AFFIDAVIT. T he Mass~chu setts Defendants object to and move to strike the following statements in

lhe Collins affidavit U1at was attached as Exhibit B lo the Intervenors' Response for the following reasons: There is no evidence tJult the

4 Before I met Preston, he had been active in attempting to put together a project between declarant has personal MMT and Hoescht Celanese for the developmenl knowledge. TEX. R. Evm. of a faci lity in Bay City, Texas to process waste 602. water bypmducts generated at Hoescht

This statement constitutes Celanc c · s Gulf Coa t. chemical plants. inadmissible hearsay under TEX. R . Evm. 802 because this information is clearl y based on s t~tement s alleged to have been made by another person.

6 During thi s meeting, Preston touted the patented This statement constitutes technology that he had acquired from MMT and inadmissible hearsay under encoW'aged my participat ion in the commercial TEX. R. EVID. 802 becau e this development of that technology. information is clearly based on

statements alleged to have been made by another person.

10 Preston later requested that his name on the This statement constilutes Syngas LLC record be changed to Quantum inadmj ssible hearsay under Catalytics LLC ("Quant um"), a compa ny owned TEX. R. EVID. 802 bec~use this by Preston. Preston led us to believe that he was information is clearly based on the sole owner. officer. and employee of statements alJeged to have QuantunL been made by another person. When we began our discussions and negotiations This statement constitutes

11 in 2004. Preston did not represent himself to be inadmissible hearsay under negotiating and planning wllh me on behalf of TEX. R. Evm. 802 because this any corporate entity. information is clearly based on

statements alleged to have been made by another person.

10 626 12 In my discussions with Preston. I learned that This statement constitutes Preston had been to Texas on multiple occasions inadmissible hearsay under prior to our introduction. He lold me that he had TEX. R. EviD. 802 because this previously travelled to Texas on numerous information is clearly based on occasions for meeting with Hoescht Celanese and sr~rement s alleged to have with Flour Daniel in Cleru· Lake. Texas. Preston been made by another person. also told me that he had made numerous visits to the Housto n Area R e~earc h Center, or HARC. on Research Fon cst Drive in The Woodlands. Texas to study new technologies in the mid and late 1990s. As a result Presto n was very famili~u· with The Woodlands. It was my understanding that hi s visits to HARC were for his personal benefit and not done through MIT or any corporation. During this dinner. Preston pressed me to consent · This statement constitutes

13 to a proposal for fi nru1cing for NC l2 that he was inadmi ssible hearsay under attempting to put together through his company C T EX. R. EVlD. 802 because this Change lnvestments ("C Change"). However. it information is cle~ul y based on appeared that the proposal was simply Preston· s statements aiJeged to have attempt to cut a deal for himself through C been made by another person. Change, and not a gcnujne effort to raise fu nding

T here is no evidence that the for NC12. As I understood the tran saction. the declara nt has personal only parties that would hene fit would he Preston

knowledge of the statements in and companies solely under hi controL including the second two sentences. C Change, at the expense of NC 12 and its TEX. R. Evm. 602. existing investors and shareholders.

CONCLUSION

This Court should rejecl the aUempt by the Intervenors- none of whom urc Texas residents- to have this Court assert personal j urisdiction over nonresidents with practically no contact with Texas in a case in which they assert c laims related to activities involving Nevada corporations. T here is no specific jurisdiction over any of the Massachu ctts Defendants because this dispute docs not arise from or re la te to any acl they performed in Texas. There is no general jurisdiction over the Massachusetts DefendanLS because none of the m have continuous and

11 627 systematic contacts with Texas. Preston is not a Texas resident, does not conduct business in Texas in his personal capacity, and has no presence in Texas. Btilliant Novelty has no connection to Texas whatsoever and C Change only a handful of contacts with Texas that fall far short of the contact that are necessary to support general jurisdiction.

Respectfully submitted,

AHMAD, ZA VITSANOS, ANAIPAKOS, ALA VI

& MENSING P.C. By: Is/ Jamie A. Aycock Sean Gorman Texas Bar No. 08218100 Jamie A. Aycock Texas Bar No. 24050241 1221 McKinney St., Suite 3460 Houston, Texas 77010 Telephone: (713) 655-1101 Telecopier: (713) 655-0062

ATIORNEYS FOR D EFENDANTS MICHAEL

SYDOW, JOHN T. PRESTON, CHRISTOPH HENKEL, c CHANGE INvEsTMENTS , LLC, AND BRILLIANT NOVELTY, L.L.C.

12 628

CERTIFICATE OF SERVICE

I hereby ce11ify that on the 24th day of October 2014, a true and correct copy of the above and foregoing document was served by E-File.TxComts.Gov. or facsimile on the following counsel of record in accordance with the Texas Rules of Civil Procedme:

Kelley M. Keller State Bar No. 11198240 Tracey N. Ellison State Bar No. 15054720 5120 Woodway Dr., Suite 6019 Houston, Texas 77056 Telephone: 713-266-8200 Fax:713-266-8201 )f.J:&~U~x@ellison-keller .corn Attonzeys for Intervenors/Plaintiffs Em:io Investments, Ltd. and H.]. von der Goltz Asher Griffin Chris Sileo Sean Flammer SCOTT, DOUGLASS & MCCONNICO, LLP 600 Congress Ave., Ste 1500 Austin, Texas 78701-2589 Fax:512-474-0731 Attorneys fort Defendants Chalysys, MET, and Lo F. Eric Fryar State Bar No. 07495770 eri~~@ f:r.xarlawfirm.com. Matthew Bus chi State Bar No. 24064982 mbuschi@ti'yar1 awfirm.com Christina Richardson FRYAR LAW FIRM, P.C. State Bar No. 24070495 912 Prairie, Suite 100 Houston, Texas 77002-3145 Fax:281-605-1888 Attorneys for all Intervenors/Plaintiffs

Is/ Jamie A. Aycock Jamie A. Aycock

629

CAUSE NO. 2011-44058

MICHAEL COLLINS, ET .t\.L, rN THE DISTH ICT COURT P l a im1 m~ § OF HARRIS COCNY §

YS.

§ §

MICHAEL SYDOW, ETAL. § f)(;;f'emhmt.s § 215TH JUD1C IAL DfSTRlCT AKILA FINANCE, S.A., ET AL., IN ·nrE DISTRICT COURT lnterve11urs/PJni.riliffs OF HARRlS COUNTY. -n~:XAS VS. MICHAEL SYDOW. ET AL. 2 15TH J1JD1CIAL DISTRfCT

Defendants. § .JOHN T. ])RESTON'S SlJPl>LEMENT AL DF.CLARATION IN SUl}PORT OF HlS

SPECIAL APPEARANCE

l. My name is .loJ.m T. Pl·~s'lbrt. My date of birth is MarCJ) 18, 1950, and r.ny address is 9 Martins Cove Lane, Hingham, MA 02043. l deciate under penalty of perjury that the statements ~n tllis declaration are true ~nd con'CcL 1 am l.rver the age of 21. [ have neve.r been convi~ted or a felony or crime invotving ^[1] nHn·al turpitude. 1 a.tll of {)OUnd mind a.ud am fully competent to make this declaration. 3. As I previously d1sdos~d in this case, l traveled to rcxas in the 1 990s on a handful of occssions. None of those trips wei'e in111y personal ca}}acity. l keep dct.ailed reconis of my tJ:a.v~l. i\fter reviewing my traveJ reco.rds, T iden1.ified Bll of 4. roy trips to Texas in the five years beforf~ this lawsuit was filed for which I could locaLe travel in1orm<lti(ln or that I could remember. 'I previously identUied tt·ips that I took to Texas that I .st.at'ed w~re ()ll behalf of TEM

5. Capital. an afHlia1.ed emily ll:iat was crer.•.rted by C Change Investment~. At the lime of my statement, I believed these ttips were rnade on behalf of TEM Capital. ·n~e three trips I took to Texas heforc fEM Caplta:l was fo·rmed in April 2011. howe-vt.-r, were ru.adt.? HOt on behalf of TEM Capital but on behaif of C Change Inv-estments, which was formed on or about May 2008.

672 1 prl:~viously identified another trip to Texas in 2008 on behalf of C Cba:t1ge Investmet1ts. 6. Russell Read traveJed '"'ith me on that t.t'ip. l do not recall any other trip~ tt') Texc:_.., with Mr. Read. I previously identHkd ~ trip to Texas in May 201 i. My records did not indicate the

7. pnr.posc of this trip. 1 mistaket1iy assumed that this nip was for testimony in Mjcbael Sydow's divort:(.~ proceeding-s. l appear~d at a t:Ored<lSHre sale in Texas on behalf of TEM CapitaL 1 also inspected a cement plant in Jewett, Tcgas in relation to this foreclosure sale. In addition to the specific trips f pr~wions.ly identit1cd that. l made to Texas in the five

8. years before this lawsuit wa~ Hied, r also traveled to Texas in 2004 in a representative tapatity on behalf of Quanhun Cataly-tics, LLC. Al.l of my meetings aud discussion.~ with Michael Collins during this time wen; .in tny representative capacity.

9. ·r understand 1.hat representations ha·ve been ,made abcnn my involvement with Metal Catalyst Venture. Inc. l did not agree to nor an1 r avvare of evet serving as a director for this entity . l did not submit a Texas address as being my addres-s for this entity or for other purposes.

I 0. JK Claims Investment Corporation is a Texas general:corpot:ation. Qtum1.um Caw:lytks is the sole sha1 eholder t)f J K Claims. I am one of 21 shareholders of Quantum Catalytics. Executed in Cambridge, Massachtt.'k~tts l)l'J the J, 3 day of October, 20 14. ~'"b::_

~'\hcf·~ "~. -m~\~

C::xnn·\,~-:>)Q-" ~~~ ~ <O 2.0\{0 4fH7-()2~H1592 , v. I 673 Cause No. 2011-44058 MICHAEL COLLINS, ET AL., § IN THE DISTRICT COURT § PLAINTIFFS, § OF HARRIS COUNTY, TEXAS VS. § MICHAEL SYDOW, ET AL., § § 215th JUDICIAL DISTRICT DEFENDANTS. AKILA FINANCE, S.A; BOSQUES DEL MOLINO, § IN THE DISTRICT COURT S.A.; CENTRANS ENERGY SERVICES, INC.; § CHESTER MESTER HOLDINGS, LTD.; DELTEC § BANK & TRUST, LID.; EMJO INVESTMENTS, § LID.; WILLIAM END; EVANS & PETREE 401 K § PLAN; FIRST BAY INTERTRADE; GM PARTNERS; § MARAIR CORP.; W.L. NICHOL, IV; PANORAMA § INVESrNffiNT, LTD.; PCOl VERMOEOENS VERW.; § ALEJANDRO SANTO.DOMJNGO; SINCID §

INVESTMENT;

VENTURI GLOBAL

§ INVESTMENTS., LTD., and H.J. von der GOLTZ § § lNTERVENORSIPLAINTJFFS, vs. § OF HARRIS COUNTY, TEXAS §

MICHAEL SYDOW; JOHN PRESTON; CHRISTOPH § HENKEL; C CHANGE INVESTMENTS, LLC; § CHALSYS CAPITAL PARTNERS, LLP; SONIA LO; § BRILLIANT NOVELTY, LL.c.; OSCURA, INC.;

§ MELIORA ENERGY TECHNOLOGIES, S.a.r.l; and § FALL RIVER REALTY, LID., § 215th JUDICIAL DISTRICT §

DEFENDANTS.

ORDER DENYING SPECIAL APPEARANCES OF JOHN T. PRESTON,

BRILLIANT NOVELTY, L:L.e. AND C CHANGE INVESTMENTS, LLC On. this day came on for consideration the Special Appearances of John T. Preston,

Bri:Hiam W~velty, L.L.C. and C Change Investments, LLC. The Court, having considered same, the Petition in Intervention, tile Intervenors' Response to the Special Appearances, and any further replies and responses, and the argument of counse4 the Court

OVERRULES the special appearances of John T. Preston, QriUiaat "Novelty, L.L.~ and C Change Investments, LLC and retains this suit on the Coutt•s docket.

RECORDER'S MEMORANDUM

Th!s 10strument1s of poor ~a lily

at the lime of imaging 674 Signed this }~

2

675 Kelly v. General Interior Const., Inc., 301 S.W.3d 653 (2010) 53 Tex. Sup. Ct. J. 247 301 S.W.3d 653 Supreme Court of Texas. Dan KELLY and Laura Hofstatter, Petitioners, v. GENERAL INTERIOR CONSTRUCTION, INC., Respondent. No. 08–0669. | Argued Nov. 18, 2009. | Delivered Jan. 15, 2010. Synopsis Background: Hotel corporation sued Arizona general contractor for claims arising from renovation of hotel in Texas. Subcontractor filed cross-claims against general contractor for breach of contract, violation of Texas Trust Fund Act, and fraud. The 125th District Court, Harris County, John A. Coselli, Judge, denied general contractor's motion for special appearance. General contractor appealed, and the Court of Appeals, 262 S.W.3d 79, affirmed denial. [Holding:] On general contractor's petition for review, the Supreme Court, Guzman, J., held that trial court lacked personal jurisdiction over Arizona general contractors. Judgment of cap reversed in part; judgment rendered dismissing cross-claims. Attorneys and Law Firms *655 David C. Holmes and Leymon L. Solomon, The Solomon Law Firm, Houston, TX, for Petitioners. Ross A. Sears II, Sears Crawford, L.L.P., Houston, TX, for Respondent. Opinion Justice GUZMAN delivered the opinion of the Court. [1] To establish personal jurisdiction in Texas courts over nonresident defendants, plaintiffs must plead a connection between the defendants' alleged wrongdoing and the forum state. Asserting statutory and common law claims, General Interior Construction, Inc. (GIC), a Texas corporation, sued Daniel Kelly and Laura Hofstatter (collectively, the Officers), both Arizona residents. Absent from GIC's pleadings, however, is any allegation that Kelly and Hofstatter committed any acts giving rise to these claims in Texas. Because the Officers filed a special appearance proving that

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1 Kelly v. General Interior Const., Inc., 301 S.W.3d 653 (2010) 53 Tex. Sup. Ct. J. 247 they do not live in Texas, they successfully negated all alleged bases for personal jurisdiction in Texas courts. We accordingly reverse in part the court of appeals and render judgment dismissing GIC's claims against the Officers for lack of personal jurisdiction.

I. Background Kelly and Hofstatter are the sole shareholders and officers of Diva Consulting, Inc., an Arizona- based general contractor that Meristar Hospitality Corporation, a non-Texas entity, hired to renovate a Houston hotel. Diva then entered into subcontracting agreements with various companies, including Texas-based GIC, to perform the work. During construction Kelly made several trips to Houston to oversee the project. Diva also sent change orders and payments to and received invoices from these Texas companies, while receiving funds from Meristar to pay for the work. Disputes arose between Diva and GIC, with the former claiming that GIC did substandard work requiring substantial expenditures *656 to remedy, and the latter claiming that Diva did not pay the entire contract amount. Meristar ultimately filed a lawsuit against Diva and various subcontractors, including GIC. GIC filed cross-claims against Diva and third-party claims against the Officers, asserting claims for breach of contract, violations of Chapter 162 of the Texas Property Code (Texas Trust Fund Act), 1 and fraud. 1

Texas law provides that payments made to a contractor or its officers, agents, or directors are trust funds if made under a contract for the improvement of real property in this state. See TEX. PROP.CODE § 162.001(a). The contractor or its officers, agents, or directors who receive or control the funds are trustees thereof. Id. § 162.002. The beneficiaries of the trust funds are persons who provide labor or materials for the project. See id. § 162.003. A trustee who acts, inter alia, with intent to defraud by using, disbursing, or otherwise diverting “trust funds without first fully paying all current or past due obligations incurred by the trustee to the beneficiaries” misapplies the trust funds. Id. § 162.031. “Intent to defraud” means, as relevant here, that the trustee so used trust funds obtained by means of an affidavit under Texas Property Code § 53.085 containing false information relating to the trustee's payment of the obligations. Id. § 162.005(1)(C); see also id. § 53.085 (requiring the affiant, upon request of the payor, to aver that subcontractors, laborers, and materialmen have been paid in full).

Regarding the trust-fund claims, GIC alleged that the Officers “were the trustee[s] of all payments made to [Diva] by [Meristar]”; that GIC was “a beneficiary of the trust money paid to the trustees”; and that the Officers “provided affidavits to [Meristar] stating that all subcontractors (including [GIC] ) were paid or would be paid” when in fact those statements were “untrue.” In its fraud claim, GIC referred to its trust-fund allegations and alleged that “the material representations made by [Diva] were false and were made with the intention that GIC would rely thereon.” The only mention of Texas in GIC's pleading is the incorporation by reference of Diva's contract with GIC, which identifies the Houston hotel as the job site. GIC did not allege that the Officers lived in Texas, that they conducted business in Texas, or that any of the operative facts of the trust-fund and fraud claims occurred in Texas.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 2 Kelly v. General Interior Const., Inc., 301 S.W.3d 653 (2010) 53 Tex. Sup. Ct. J. 247 The Officers filed a special appearance, stating they were residents of Arizona, did not own property in Texas, did not employ anyone in Texas, and did not conduct business in Texas in their personal capacities. The trial court denied the special appearance, and a divided court of appeals affirmed in part, reversing only as to the breach-of-contract claim. 2 2

GIC has not sought review of the court of appeals' judgment regarding the breach-of-contract issue. The majority reasoned that the Texas Trust Fund Act reaches past the corporation to hold its officers personally liable for violations of the Act: “[W]e must focus only on whether [GIC] has pleaded that the Officers, regardless on behalf of [Diva] or in their individual capacities, controlled and directed funds received for the [hotel] project.” 262 S.W.3d 79, 86. Finding that GIC had so pleaded, the court upheld the trial court's order. The court used similar reasoning regarding the fraud claim, concluding that “[t]he Officers' alleged fraud sufficiently ‘relates to’ conduct purposefully directed toward Texas.” Id. at 86–87. In response to the dissent's claim that the Officers had no connection with Texas, the majority pointed to the following facts: “The record reveals that performance under the construction contract was to be performed exclusively in Texas. The Officers sent and directed payments to [GIC] in Texas. Kelly made site visits to the Texas work site. The Officers received *657 numerous invoices from Texas regarding the [hotel] project.” Id. at 86 n. 5. The dissent found no connection between the Officers and Texas for either claim:

In its third-party petition, [GIC] alleges that the Officers acted with intent to defraud by providing false affidavits to Meristar and that the Officers violated section 162.005(1)(C) of the Texas Property Code. [GIC] also asserts that the Officers fraudulently represented that [GIC] would be paid in full under its contract with Diva. Notably, [GIC] does not allege that any of these acts occurred in Texas. Moreover, in its third-party petition, [GIC] does not allege that the Officers committed any act whatsoever in Texas or that they conducted any business whatsoever in Texas. Therefore, [GIC's] third-party petition lacks sufficient allegations to invoke the trial court's personal jurisdiction over the Officers, and the Officers, thus, could satisfy their burden of negating all bases of personal jurisdiction merely by presenting evidence that they are not residents of Texas.

Id. at 93 (Frost, J., dissenting). Because the Officers established that they do not live in Texas, the dissent would have reversed the trial court's denial of the Officers' special appearance.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 3 Kelly v. General Interior Const., Inc., 301 S.W.3d 653 (2010) 53 Tex. Sup. Ct. J. 247 The Officers petitioned this Court for review, which we granted. 52 Tex. Sup.Ct. J. 792 (June 5, 2009). We have jurisdiction because there is a dissent in the court of appeals. See TEX. GOV'T CODE § 22.225(c); BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 793 (Tex.2002).

II. Standard of Review [2] [3] Whether a court can exercise personal jurisdiction over nonresident defendants is a question of law, and thus we review de novo the trial court's determination of a special appearance. Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 574 (Tex.2007); BMC Software, 83 S.W.3d at 794. “When [as here] a trial court does not issue findings of fact and conclusions of law with its special appearance ruling, all facts necessary to support the judgment and supported by the evidence are implied.” BMC Software, 83 S.W.3d at 795 (citing Worford v. Stamper, 801 S.W.2d 108, 109 (Tex.1990); Zac Smith & Co. v. Otis Elevator Co., 734 S.W.2d 662, 666 (Tex.1987); In re W.E.R., 669 S.W.2d 716, 717 (Tex.1984)).

III. Discussion A. In Personam Jurisdiction [4] [5] [6] [7] A nonresident defendant is subject to the personal jurisdiction of Texas courts if (1) the Texas long-arm statute authorizes the exercise of jurisdiction, and (2) the exercise of jurisdiction does not violate federal and state constitutional due process guarantees. Schlobohm v. Schapiro, 784 S.W.2d 355, 356 (Tex.1990). The broad “doing business” language in Texas's long-arm statute allows the trial court's jurisdiction to “reach as far as the federal constitutional requirements of due process will allow.” Moki Mac, 221 S.W.3d at 575 (quoting Guardian Royal Exch. Assurance, Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 226 (Tex.1991)). Personal jurisdiction is consistent with due process “when the nonresident defendant has established minimum contacts with the forum state, and the exercise of jurisdiction comports with traditional notions of fair play and substantial justice.” Id. (internal quotation marks omitted) (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945)). “A defendant establishes minimum contacts with a state when it purposefully avails itself of the privilege of conducting activities within the forum *658 state, thus invoking the benefits and protections of its laws.” Retamco Operating, Inc. v. Republic Drilling Co., 278 S.W.3d 333, 338 (Tex.2009) (internal quotation marks omitted) (quoting Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958)).

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 4 Kelly v. General Interior Const., Inc., 301 S.W.3d 653 (2010) 53 Tex. Sup. Ct. J. 247 [8] [9] GIC argues that the trial court had only specific jurisdiction over its claims against the Officers. “Specific jurisdiction ... arises when (1) the defendant purposefully avails itself of conducting activities in the forum state, and (2) the cause of action arises from or is related to those contacts or activities. In a specific jurisdiction analysis, we focus ... on the relationship among the defendant, the forum[,] and the litigation.” Id. (alteration in original) (citations and internal quotation marks omitted).

B. Special Appearance [10] Our special-appearance jurisprudence dictates that the plaintiff and the defendant bear shifting burdens of proof in a challenge to personal jurisdiction. We have consistently held that the plaintiff bears the initial burden to plead sufficient allegations to bring the nonresident defendant within the reach of Texas's long-arm statute. See id. at 337; Moki Mac, 221 S.W.3d at 574; Am. Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801, 807 (Tex.2002); BMC Software, 83 S.W.3d at 793; McKanna v. Edgar, 388 S.W.2d 927, 930 (Tex.1965). Once the plaintiff has pleaded sufficient jurisdictional allegations, the defendant filing a special appearance bears the burden to negate all bases of personal jurisdiction alleged by the plaintiff. E.g., Retamco Operating, 278 S.W.3d at 337. 3 Because the plaintiff defines the scope and nature of the lawsuit, the defendant's corresponding burden to negate jurisdiction is tied to the allegations in the plaintiff's pleading. 4 3

The adoption of the special appearance was a significant development in Texas law. For most of its history prior to 1962, Texas law did not recognize a special appearance, and a nonresident defendant who appeared in a Texas court waived any objection to personal jurisdiction. See Atchison, Topeka & Santa Fe Ry. Co. v. Stevens, 109 Tex. 262, 206 S.W. 921, 921 (1918) (“A special appearance is unknown to our practice. The filing by a defendant of any defensive pleading, though it be only for the purpose of challenging the jurisdiction of the court, constitutes an appearance and a submission to the jurisdiction of the forum.”); see also York v. Texas, 137 U.S. 15, 21, 11 S.Ct. 9, 34 L.Ed. 604 (1890) (holding that Texas's rule disallowing special appearances did not violate due process); E. Wayne Thode, In Personam Jurisdiction; Article 2031B, the Texas “Long Arm” Jurisdiction Statute; and the Appearance to Challenge Jurisdiction in Texas and Elsewhere, 42 TEX. L.REV. 279, 292–97 (1964) (recounting early special- appearance jurisprudence). Thus, a nonresident defendant wishing to challenge personal jurisdiction in Texas had but one choice —default and challenge jurisdiction collaterally when the plaintiff came to enforce the judgment in the defendant's home state. Faced with a waiver of any objection to jurisdiction or a default on the merits, the nonresident defendant had to choose between two unpleasant alternatives. Seeking to remedy this dilemma, this Court promulgated Texas Rule of Civil Procedure 120a, which allows nonresident defendants to specially appear for the sole purpose of challenging the trial court's jurisdiction over them or their property. See TEX.R. CIV. P. 120a.

4 While the pleadings are essential to frame the jurisdictional dispute, they are not dispositive. Rule 120a requires a special appearance to be made by sworn motion, TEX.R. CIV. P. 120a(1), and also requires the trial court to “determine the special appearance on the basis of the pleadings, any stipulations made by and between the parties, such affidavits and attachments as may be filed by the parties, the results of discovery processes, and any oral testimony,” TEX.R. CIV. P. 120a(3). Even so, this additional evidence merely supports or undermines the allegations in the pleadings.

[11] [12] If the plaintiff fails to plead facts bringing the defendant within reach *659 of the long-arm statute (i.e., for a tort claim, that the defendant committed tortious acts in Texas), the

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 5 Kelly v. General Interior Const., Inc., 301 S.W.3d 653 (2010) 53 Tex. Sup. Ct. J. 247 defendant need only prove that it does not live in Texas to negate jurisdiction. See Siskind v. Villa Found. for Educ., Inc. 642 S.W.2d 434, 438 (Tex.1982) (“[T]he only evidence offered to negate jurisdiction was [a defendant's] testimony that she and the other individuals were residents of Arizona.... In view of [the plaintiff's] failure to allege any act by these individuals in Texas, we believe that the [defendants] have sustained their burden.”). 5 When the pleading is wholly devoid of jurisdictional facts, the plaintiff should amend the pleading to include the necessary factual allegations, see TEX.R. CIV. P. 63, thereby allowing jurisdiction to be decided based on evidence rather than allegations, as it should be. 5

See also Perna v. Hogan, 162 S.W.3d 648, 653 (Tex.App.-Houston [14th Dist.] 2005, no pet.) (“If the plaintiff does not plead jurisdictional allegations, i.e., that the defendant has committed any act in Texas, the defendant can satisfy its burden of negating all bases of personal jurisdiction by presenting evidence that it is a nonresident at the special appearance hearing.”); Frank A. Smith Sales, Inc. v. Atl. Aero, Inc., 31 S.W.3d 742, 747 (Tex.App.-Corpus Christi 2000, no pet.) (“[The plaintiff's] third-party petition stated only that [the defendant] had committed acts of negligence, without specifying what those negligent acts were, or where they occurred. Therefore, [the] petition fell well short of pleading sufficient allegations to show jurisdiction in Texas.”).

[13] [14] [15] [16] [17] The defendant can negate jurisdiction on either a factual or legal basis. Factually, the defendant can present evidence that it has no contacts with Texas, effectively disproving the plaintiff's allegations. The plaintiff can then respond with its own evidence that affirms its allegations, 6 and it risks dismissal of its lawsuit if it cannot present the trial court with evidence establishing personal jurisdiction. 7 Legally, the defendant can show that even if the plaintiff's alleged facts are true, the evidence is legally insufficient to establish jurisdiction; the defendant's contacts with Texas fall short of purposeful availment; for specific jurisdiction, that the claims do not arise from the contacts; or that traditional notions of fair play and substantial justice are offended by the exercise of jurisdiction. 8 6

If the plaintiff's evidence does not fall within the scope of the factual allegations in the pleading, then the plaintiff should amend the pleading for consistency.

7 The losing party in the trial court can challenge the factual sufficiency of the evidence in the court of appeals. E.g., BMC Software, 83 S.W.3d at 794.

8 The losing party in the trial court can challenge the legal sufficiency of the evidence in the court of appeals and in this Court. E.g., id. The trial court's legal conclusions are, as noted, reviewed de novo. See id.

C. Analysis [18] Turning to the case at hand, the only relevant prong of the Texas long-arm statute extends jurisdiction over a nonresident who “commits a tort in whole or in part in this state.” TEX. CIV. PRAC. & REM.CODE § 17.042(2). 9 9

We recognize that § 17.042 is non-exclusive, see BMC Software, 83 S.W.3d at 795, but GIC does not separately allege that the Officers conducted business in Texas, and the only remaining claims against them are for tortious activity, making this subsection

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 6 Kelly v. General Interior Const., Inc., 301 S.W.3d 653 (2010) 53 Tex. Sup. Ct. J. 247 directly applicable. Section 17.042(1), regarding performance of a contract in Texas, does not apply as the Officers were not parties to Diva's contract with GIC, nor did they guarantee it.

GIC failed to plead facts within the reach of the long-arm statute because it did not allege that the Officers committed any tortious acts in Texas. As noted, GIC's live pleading contains no allegations *660 that the Officers' wrongdoing occurred in Texas. Regarding the fraud claim, GIC did allege several fraudulent acts (e.g., providing false affidavits to Meristar and misrepresenting to GIC that it would be paid in full), but it did not allege that any fraudulent acts occurred in Texas. Regarding the trust-fund claims, GIC did not allege that the Officers used or retained the trust funds in Texas, nor that they submitted false affidavits to Meristar in Texas. Thus, although GIC has alleged two claims of wrongdoing, it has not alleged that any acts giving rise to these two claims occurred in Texas. Because GIC failed to plead jurisdictional facts, the Officers could, and did, meet their burden to negate all bases of jurisdiction by proving that they do not live in Texas. See Siskind, 642 S.W.2d at 438. GIC did not challenge that fact, nor did it present any responsive evidence establishing the requisite link with Texas. The most relevant piece of evidence is an affidavit of GIC's president stating that Laura Hofstatter promised him payment. But even this affidavit does not state where this conversation occurred or make any connection with Texas. In short, GIC's rebuttal evidence is as silent as its pleadings regarding the Officers' Texas contacts related to its claims. Having met their burden of proof, the Officers' special appearance should have been granted. Although the trier-of-fact may ultimately conclude that Kelly and Hofstatter violated the Texas Trust Fund Act and committed fraud, the mere commission of an act does not grant Texas courts jurisdiction over the actor. Rather, as we have frequently emphasized, the requirements of due process must be upheld, particularly the connection between the defendant, the forum, and the litigation in the specific jurisdiction context. See, e.g., Retamco Operating, 278 S.W.3d at 338. [19] [20] [21] The majority in the court of appeals focused on a corporate officer's potential for individual liability under the Texas Trust Fund Act, finding sufficient GIC's allegations that the Officers controlled and directed funds received under Diva's contract with Meristar. See 262 S.W.3d at 84–86. But the mere existence of a cause of action does not automatically satisfy jurisdictional due process concerns. A state is powerless to create jurisdiction over a nonresident by establishing a remedy for a private wrong and a mechanism to seek that relief. Instead, jurisdictional analysis always centers on the defendant's actions and choices to enter the forum state and conduct business. See, e.g., Int'l Shoe, 326 U.S. at 316, 66 S.Ct. 154 (focusing the inquiry on the defendant's presence in, or contacts with, the forum state); Retamco Operating, 278 S.W.3d at 338 (“We focus on the defendant's activities and expectations when deciding whether it is proper to call the defendant before a Texas court.”); Moki Mac, 221 S.W.3d at 575 (“[O]nly the defendant's contacts with the forum are relevant, not the unilateral activity of another party or a third person.”); Michiana Easy Livin' Country, Inc. v. Holten, 168 S.W.3d 777, 784–85 (Tex.2005) (“[I]t is essential in each case that there be some act by which the defendant purposefully avails

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 7 Kelly v. General Interior Const., Inc., 301 S.W.3d 653 (2010) 53 Tex. Sup. Ct. J. 247 itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.” (quoting Hanson, 357 U.S. at 253, 78 S.Ct. 1228)). The concept of minimum contacts is rooted in the notion that a defendant may reasonably be haled into the forum state's courts when it purposefully, not randomly or fortuitously, engages in activities there. See, e.g., Michiana, 168 S.W.3d at 785. Thus, merely pleading that Kelly and Hofstatter violated the Texas Trust Fund Act is not enough; GIC must also plead and, when *661 challenged by the defendants, present evidence that the Officers' relevant acts (i.e., those connected to GIC's claims) occurred, at least in part, in Texas. The court of appeals also erred by allowing GIC's fraud claim to proceed despite the lack of allegations and evidence that any part of the claim originates from the Officers' conduct in Texas. See 262 S.W.3d at 86–87. The court reasoned that “[t]he Officers' alleged fraud sufficiently ‘relates to’ conduct purposefully directed toward Texas.” Id. But we rejected the concept of directed-a- tort jurisdiction in Michiana, instead affirming the importance of the defendant's contacts with the forum state. See 168 S.W.3d at 788–92. While we noted that “on one occasion the United States Supreme Court found specific jurisdiction based on alleged wrongdoing intentionally directed at a forum resident,” the defendant's conduct in that case still “constituted a substantial ‘presence’ in the state.” Id. at 789 (discussing Calder v. Jones, 465 U.S. 783, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984)). Here, as noted, GIC has not alleged that the Officers engaged in activities that constitute any presence—let alone a substantial presence—in this state.

IV. Conclusion Because GIC's pleadings lack Texas-specific allegations, the Officers negated all jurisdictional bases by proving that they do not live in Texas, and GIC has not presented any evidence to the contrary. 10 Accordingly, we reverse in part the court of appeals and render judgment dismissing GIC's claims against Kelly and Hofstatter for lack of personal jurisdiction. 10

Because we decide this case based on the lack of alleged minimum contacts with Texas, we do not discuss the fair-play-and- substantial-justice prong of personal jurisdiction.

Parallel Citations 53 Tex. Sup. Ct. J. 247 End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 8 BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789 (2002) 45 Tex. Sup. Ct. J. 930 83 S.W.3d 789 Supreme Court of Texas. BMC SOFTWARE BELGIUM, N.V., Petitioner, v. Michel MARCHAND, Respondent. No. 00–1019. | Argued Sept. 5, 2001. | Decided June 27, 2002. | Rehearing Denied Aug. 29, 2002.

Employee sued Houston based corporation and its foreign subsidiary for breach of contract, fraud, negligent misrepresentation, and declaratory relief. The 127th District Court, Harris County, Sharolyn Wood, J., denied foreign subsidiary's special appearance contesting jurisdiction, and foreign subsidiary appealed. The Court of Appeals affirmed and foreign subsidiary petitioned Supreme Court for review. The Supreme Court, James A. Baker, J., held that: (1) trial court did not have specific jurisdiction over foreign subsidiary; (2) trial court did not have general jurisdiction over foreign subsidiary; (3) foreign subsidiary was not the alter ego of its parent for jurisdictional purposes; and (4) trial court did not abuse its discretion in denying employee's request for a continuance of the special appearance hearing. Court of Appeals reversed, and judgment rendered. Attorneys and Law Firms *792 Merritt B. Chastain, III, Thomas H. Wilson, Houston, Vinson & Elkins, for Petitioner. Stuart M. Nelkin, Carol Nelkin, Nelkin & Nelkin, Houston, for Respondent. Opinion Justice BAKER delivered the opinion of the Court. This is an interlocutory appeal from the denial of a foreign corporation's special appearance. A divided court of appeals affirmed the trial court's ruling. 80 S.W.3d 52. We conclude that the foreign corporation's contacts with Texas are insufficient to create either specific or general jurisdiction. We also conclude that the trial court did not abuse its discretion in denying the plaintiff's motion to continue the special appearance hearing. We therefore reverse the court of appeals' judgment and render judgment dismissing the plaintiff's claims against the foreign corporation for want of jurisdiction.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1 BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789 (2002) 45 Tex. Sup. Ct. J. 930

*793 I. BACKGROUND

Michel Marchand, a Belgian citizen, was employed by Platinum Technologies in Belgium. In March 1996, Marchand began negotiating with Gerd Ordelheide and Adri Kok for employment with BMC Software Belgium, N.V. (BMCB). Ordelheide and Kok were directors of BMCB, a wholly-owned subsidiary of BMC Software, Inc. (BMCS), a Delaware corporation headquartered in Houston. On March 29, 1996, Marchand and BMCB signed a letter agreement outlining the terms of Marchand's employment with BMCB, including the offer of options to purchase 20,000 shares of BMCS stock. The agreement did not specify when the options would be granted or when Marchand could exercise them. The letter agreement also referenced a “management agreement” that Marchand had apparently presented to BMCB. On June 13, 1996, BMCB and Marchand executed the management agreement between BMCB and a company called Procurement, N.V., of which Marchand was the sole officer and director. The record shows that Marchand asked BMCB to hire Procurement as a management company so that Marchand could work for Procurement as an independent contractor rather than directly for BMCB. Apparently, this arrangement enabled Marchand to reduce his Belgian tax liability. The management agreement was in German, and it stated that Belgian law applies and the court at Brussels had exclusive jurisdiction. When Marchand actually began working for BMCB is unclear. But it is clear that in July 1997, BMCB discharged Procurement and Marchand. Marchand was never granted any options to purchase BMCS stock. He sued BMCB and BMCS for breach of contract, fraud, negligent misrepresentation, and declaratory relief. Marchand alleged both specific and general jurisdiction over BMCB. BMCB filed a special appearance, which the trial court denied. BMCB appealed the trial court's interlocutory order. See TEX. CIV. PRAC. & REM.CODE § 51.014(a)(7). The court of appeals affirmed, 80 S.W.3d at 55, and BMCB petitioned this Court for review.

II. THIS COURT'S JURISDICTION

Until 1997, a trial court's order denying a special appearance was reviewable only on appeal after trial. Canadian Helicopters Ltd. v. Wittig, 876 S.W.2d 304, 307 (Tex.1994). But the Legislature amended section 51.014 of the Civil Practice and Remedies Code to permit an interlocutory appeal from a trial court's ruling on a special appearance. Typically, a court of appeals judgment in an interlocutory appeal is conclusive and an appeal to this Court is not allowed. See TEX. GOV'T CODE § 22.225(b). However, because there is a

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 2 BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789 (2002) 45 Tex. Sup. Ct. J. 930 dissent in the court of appeals, we may exercise jurisdiction in this case. See TEX. GOV'T CODE § 22.225(c).

III. APPLICABLE LAW A. SPECIAL APPEARANCE—STANDARD OF REVIEW [1] [2] The plaintiff bears the initial burden of pleading sufficient allegations to bring a nonresident defendant within the provisions of the long-arm statute. See McKanna v. Edgar, 388 S.W.2d 927, 930 (Tex.1965). A defendant challenging a Texas court's personal jurisdiction over it must negate all jurisdictional bases. Kawasaki Steel Corp. v. Middleton, 699 S.W.2d 199, 203 (Tex.1985). This Court has never clearly articulated the standard for reviewing a trial court's order denying a special appearance. The Fourth Court of Appeals has held that, because personal jurisdiction involves both legal and factual questions, appellate courts should review *794 the trial court's decision for an abuse of discretion. See, e.g., Klenk v. Bustamante, 993 S.W.2d 677, 681 (Tex.App.-San Antonio 1998, no pet.). However, other courts of appeals review the trial court's factual findings for legal and factual sufficiency and review the trial court's legal conclusions de novo. See, e.g., E.L.M. LeBlanc v. Kyle, 28 S.W.3d 99, 101 (Tex.App.-Texarkana 2000, pet. denied); In re Estate of Judd, 8 S.W.3d 436, 440–41 (Tex.App.-El Paso 1999, no pet.); C–Loc Retention Sys., Inc. v. Hendrix, 993 S.W.2d 473, 476 (Tex.App.-Houston [14th Dist.] 1999, no pet.); Cadle v. Graubart, 990 S.W.2d 469, 471 (Tex.App.Beaumont 1999, no pet.); Ball v. Bigham, 990 S.W.2d 343, 347 (Tex.App.Amarillo 1999, no pet.); Garner v. Furmanite Australia Pty, Ltd., 966 S.W.2d 798, 802 (Tex.App.-Houston [1st Dist.] 1998, pet. denied); Al–Turki v. Taher, 958 S.W.2d 258, 260–61 (Tex.App.-Eastland 1997, pet. denied). [3] [4] [5] [6] [7] We agree with the latter view and disapprove of those cases applying an abuse of discretion standard only. 1 Whether a court has personal jurisdiction over a defendant is a question of law. See Hotel Partners v. Craig, 993 S.W.2d 116, 120 (Tex.App.-Dallas 1994, writ denied) (stating that this Court's decision in Guardian Royal Exch. Assurance, Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 226 (Tex.1991), suggests that personal jurisdiction is a legal question). However, the trial court frequently must resolve questions of fact before deciding the jurisdiction question. See E.L.M. LeBlanc, 28 S.W.3d at 101; C–Loc Retention Sys., 993 S.W.2d at 476. If a trial court enters an order denying a special appearance, and the trial court issues findings of fact and conclusions of law, the appellant may challenge the fact findings on legal and factual sufficiency grounds. See Hotel Partners v. KPMG Peat Marwick, 847 S.W.2d 630, 632 (Tex.App.- Dallas 1993, writ denied). Our courts of appeals may review the fact findings for both legal and factual sufficiency. Ortiz v. Jones, 917 S.W.2d 770, 772 (Tex.1996). This Court's review of the trial court's fact findings is limited to legal sufficiency. Ortiz, 917 S.W.2d at 772.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 3 BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789 (2002) 45 Tex. Sup. Ct. J. 930 1

See Whalen v. Laredo Nat'l Bancshares Inc., 37 S.W.3d 89, 91 (Tex.App.-San Antonio 2000, pet. denied); Joe Guerra Exxon Station v. Michelin Tyre Pub. Ltd., 32 S.W.3d 383, 386 (Tex.App.-San Antonio 2000, no pet.); Case v. Grammar, 31 S.W.3d 304, 307–08 (Tex.App.-San Antonio 2000, no pet.); Jones v. J.P. Sauer & Sohn, 27 S.W.3d 157, 161 (Tex.App.-San Antonio 2000, pet. denied); Eakin v. Acosta, 21 S.W.3d 405, 407–08 (Tex.App.-San Antonio 2000, no pet.); Long Distance Int'l, Inc. v. Telefonos de Mexico, S.A., 18 S.W.3d 706, 711 (Tex.App.-San Antonio 2000), rev'd on other grounds, 49 S.W.3d 347 (Tex.2001); Transportes Aereos de Coahuila, S.A. v. Falcon, 5 S.W.3d 712, 717 (Tex.App.-San Antonio 1999, pet. denied); Jones v. Beech Aircraft Corp., 995 S.W.2d 767, 769–70 (Tex.App.-San Antonio 1999, pet. dism. w.o.j.); Magnolia Gas Co. v. Knight Equip. Mfg. Corp., 994 S.W.2d 684, 689 (Tex.App.-San Antonio 1998, no pet.); Klenk, 993 S.W.2d at 681.

[8] [9] [10] Appellate courts review a trial court's conclusions of law as a legal question. Hitzelberger v. Samedan Oil Corp., 948 S.W.2d 497, 503 (Tex.App.-Waco 1997, pet. denied). The appellant may not challenge a trial court's conclusions of law for factual insufficiency; however, the reviewing court may review the trial court's legal conclusions drawn from the facts to determine their correctness. Templeton v. Dreiss, 961 S.W.2d 645, 656 n. 8 (Tex.App.-San Antonio 1998, pet. denied); Dallas County v. Sweitzer, 881 S.W.2d 757, 763 (Tex.App.-Dallas 1994, writ denied). If the reviewing court determines a conclusion of law is erroneous, but the trial court rendered the proper judgment, the erroneous conclusion of law does not require reversal. Scholz v. Heath, 642 S.W.2d 554, 559 (Tex.App.-Waco 1982, no writ). *795 [11] [12] [13] When a trial court does not issue findings of fact and conclusions of law with its special appearance ruling, all facts necessary to support the judgment and supported by the evidence are implied. See Worford v. Stamper, 801 S.W.2d 108, 109 (Tex.1990); Zac Smith & Co. v. Otis Elevator Co., 734 S.W.2d 662, 666 (Tex.1987); In re W.E.R., 669 S.W.2d 716, 717 (Tex.1984). When the appellate record includes the reporter's and clerk's records, these implied findings are not conclusive and may be challenged for legal and factual sufficiency in the appropriate appellate court. Roberson v. Robinson, 768 S.W.2d 280, 281 (Tex.1989); Zac Smith & Co., 734 S.W.2d at 666. For legal sufficiency points, if there is more than a scintilla of evidence to support the finding, the no evidence challenge fails. Holt Atherton Indus., Inc. v. Heine, 835 S.W.2d 80, 84 (Tex.1992).

B. IN PERSONAM JURISDICTION

[14] The Texas long-arm statute governs Texas courts' exercise of jurisdiction over nonresident defendants. See TEX. CIV. PRAC. & REM.CODE §§ 17.041–.045. That statute permits Texas courts to exercise jurisdiction over nonresident defendants that “does business” in Texas, and the statute lists some activities that constitute “doing business.” TEX. CIV. PRAC. & REM.CODE § 17.042. The list of activities, however, is not exclusive. We have held that section 17.042's broad language extends Texas courts' personal jurisdiction “as far as the federal constitutional requirements of due process will permit.” U–Anchor Adver., Inc. v. Burt, 553 S.W.2d 760, 762 (Tex.1977). Thus, we rely on precedent from the United States Supreme Court and other federal

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 4 BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789 (2002) 45 Tex. Sup. Ct. J. 930 courts, as well as our own State's decisions, in determining whether a nonresident defendant has met its burden to negate all bases of jurisdiction. See Guardian Royal, 815 S.W.2d at 226; U– Anchor Adver., 553 S.W.2d at 762. [15] [16] [17] [18] [19] Personal jurisdiction over nonresident defendants is constitutional when two conditions are met: (1) the defendant has established minimum contacts with the forum state, and (2) the exercise of jurisdiction comports with traditional notions of fair play and substantial justice. International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945). A nonresident defendant that has “purposefully availed” itself of the privileges and benefits of conducting business in the foreign jurisdiction has sufficient contacts with the forum to confer personal jurisdiction. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474–76, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985) (discussing the constitutional boundaries of personal jurisdiction). Although not determinative, foreseeability is an important consideration in deciding whether the nonresident defendant has purposefully established “minimum contacts” with the forum state. Guardian Royal, 815 S.W.2d at 227. However, a defendant should not be subject to a foreign court's jurisdiction based upon “random,” “fortuitous,” or “attenuated” contacts. Burger King, 471 U.S. at 475, 105 S.Ct. 2174. Because of the unique and onerous burden placed on a party called upon to defend a suit in a foreign legal system, the minimum contacts analysis is particularly important when the defendant is from a different country. CSR Ltd. v. Link, 925 S.W.2d 591, 595 (Tex.1996) (citing Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102, 114, 107 S.Ct. 1026, 94 L.Ed.2d 92 (1987)). [20] [21] [22] Personal jurisdiction exists if the nonresident defendant's minimum contacts give rise to either specific jurisdiction or general jurisdiction. *796 Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 413–14, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984); Guardian Royal, 815 S.W.2d at 226. Specific jurisdiction is established if the defendant's alleged liability arises from or is related to an activity conducted within the forum. Guardian Royal, 815 S.W.2d at 228. In contrast, general jurisdiction is present when a defendant's contacts in a forum are continuous and systematic so that the forum may exercise personal jurisdiction over the defendant even if the cause of action did not arise from or relate to activities conducted within the forum state. Guardian Royal, 815 S.W.2d at 228; Schlobohm v. Schapiro, 784 S.W.2d 355, 357 (Tex.1990).

IV. ANALYSIS

In his original petition in the trial court, Marchand alleged the following to support jurisdiction over BMCB: (1) BMCB is operated by and is a wholly owned subsidiary of BMCS; (2) BMCS provides support to and uses its wholly owned subsidiaries such as BMCB to jointly market BMCS's products worldwide; (3) BMCS and BMCB have the same officers; (4) BMCB has continuous

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 5 BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789 (2002) 45 Tex. Sup. Ct. J. 930 and systematic contacts with BMCS; (5) BMCB uses stock in BMCS to entice employees to work for it; and (6) the stock allegedly offered to Marchand is located in Houston, Texas. The court of appeals determined that the trial court could have reasonably concluded that BMCB failed to negate all possible bases for establishing specific jurisdiction. In doing so, the court of appeals explained that the evidence shows that BMCB and BMCS officers discussed Marchand and the stock option offer in Texas. 80 S.W.3d at 59–60. Furthermore, the court of appeals concluded that the record showed that BMCB had sufficient continuous and systematic contacts with BMCS and thus Texas to establish the trial court's general jurisdiction. In so concluding, the court of appeals relied upon alleged conversations in Texas about Marchand between BMCB and BMCS officers, BMCB's selling BMCS's software and services, BMCS's including its subsidiaries' financial performance on annual reports, and BMCB providing its employees BMCS stock options as part of an employee incentive plan. 80 S.W.3d at 58–59. Because the court of appeals determined the trial court could have found specific and general jurisdiction over BMCB, it did not reach BMCB's argument that the evidence is not legally sufficient to establish that BMCB was BMCS's alter ego. 80 S.W.3d at 59.

A. SPECIFIC JURISDICTION

Marchand asserts that the trial court had specific jurisdiction over BMCB because BMCB committed a tort in whole or in part in Texas. See TEX. CIV. PRAC. & REM.CODE § 17.042(2). Specifically, Marchand alleges that Ordelheide and Max Watson, BMCS's chairman and chief executive officer, discussed in Texas the stock-options offer BMCB made to Marchand and, in this conversation, they planned to defraud him. Marchand argues that the discussion Ordelheide and Watson had in Texas forms the basis of his fraud and negligent misrepresentation claims about the stock options. In response, BMCB argues that there is no evidence in the record to support the trial court's implied fact findings to support specific jurisdiction. We agree with BMCB. [23] Here, Marchand alleges that his fraud and negligent misrepresentation claims arise from the alleged Watson–Ordelheide conversation in Texas. See Schlobohm, 784 S.W.2d at 357 (“Where the activities of a defendant in a forum are isolated or disjointed ... jurisdiction is proper if the cause of action arises from a particular activity.”). But they do not. The nature of the claims demonstrate that they can only arise from BMCB's contact *797 with Marchand, which all occurred outside of Texas. Even assuming Watson and Ordelheide talked in Texas about Marchand's employment and the stock options, Marchand was not a party to those conversations. BMCB negotiated with Marchand about his employment, and offered the stock options to Marchand, in Europe. Moreover, Marchand accepted the employment offer in Belgium and worked in Belgium. Consequently, BMCB made no representations to Marchand in Texas, and he did not rely to his detriment on the conversation in Texas. See T.O. Stanley Boot Co. v. Bank of El Paso, 847 S.W.2d

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 6 BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789 (2002) 45 Tex. Sup. Ct. J. 930 218, 222 (Tex.1992) (fraud requires showing that plaintiff acted in reliance on defendant's material misrepresentation); Federal Land Bank Ass'n of Tyler v. Sloane, 825 S.W.2d 439, 442 (Tex.1991) (negligent misrepresentation requires that the plaintiff justifiably rely on the defendant's representation). Therefore, Marchand's alleged damages arose outside of Texas. See, e.g., Primera Vista S.P.R. de R.L. v. Banca Serfin, S.A. Institucion de Banca Multiple Grupo Financiero Serfin, 974 S.W.2d 918, 926 (Tex.App.El Paso 1998, no pet.) (holding that specific jurisdiction did not exist where defendant deposited money in Texas but misrepresentations to plaintiffs about that money occurred elsewhere). There is no evidence to support the trial court's conclusion that BMCB committed a tort in whole or in part in Texas so that specific jurisdiction exists. See Guardian Royal, 815 S.W.2d at 227; TEX. CIV. PRAC. & REM.CODE § 17.042(2); see also Roberson, 768 S.W.2d at 281. Accordingly, we conclude that the trial court lacked specific jurisdiction over BMCB.

B. GENERAL JURISDICTION

Marchand also contends that the trial court has general jurisdiction over BMCB. Marchand relies on the alleged Watson–Ordelheide conversation and BMCB's purchasing products from BMCS in Texas. On the other hand, BMCB asserts that these events are not enough to establish general jurisdiction. We agree and conclude that neither of the events Marchand relies upon are continuous or systematic so as to establish general jurisdiction in Texas. [24] [25] General jurisdiction may only be exercised when the nonresident defendant's contacts in a forum are continuous and systematic. Helicopteros, 466 U.S. at 414–15, 104 S.Ct. 1868; Guardian Royal, 815 S.W.2d at 228; Schlobohm, 784 S.W.2d at 357. Though a single act may be enough to show general jurisdiction in some instances, the alleged conversation between Ordelheide and Watson in Texas is not enough here. See Guardian Royal, 815 S.W.2d at 230 n. 12. We have recognized that “[g]eneral jurisdiction requires a showing that the defendant conducted substantial activities within the forum, a more demanding minimum contacts analysis than for specific jurisdiction.” CSR Ltd., 925 S.W.2d at 595 (citing Guardian Royal, 815 S.W.2d at 228). For the reasons discussed above, the alleged Watson–Ordelheide conversation does not constitute “substantial activities” within the forum to meet the more onerous burden of proving general jurisdiction. See Guardian Royal, 815 S.W.2d at 228. [26] Furthermore, BMCB's purchasing products from BMCS in Texas to distribute in Europe is not enough to establish general jurisdiction. In Helicopteros, the United States Supreme Court examined a Colombian corporation's contacts with Texas to decide if Texas courts could exercise general jurisdiction. Helicopteros, 466 U.S. at 415–16, 104 S.Ct. 1868. The nonresident defendant had purchased helicopters, equipment, and training services from *798 a Texas company, sent

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 7 BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789 (2002) 45 Tex. Sup. Ct. J. 930 its employees to Texas for training, and sent its chief executive officer to Houston for contract negotiation. Helicopteros, 466 U.S. at 416, 104 S.Ct. 1868. The Supreme Court held that these contacts were insufficient to warrant a Texas court's exercising general jurisdiction. Helicopteros, 466 U.S. at 415–16, 104 S.Ct. 1868 (reversing Hall v. Helicopteros, 638 S.W.2d 870 (Tex.1982)). The Court noted that “mere purchases, even if occurring at regular intervals, are not enough to warrant a State's assertion of in personam jurisdiction over a nonresident corporation in a cause of action not related to those purchase transactions.” Helicopteros, 466 U.S. at 418, 104 S.Ct. 1868. This case is analogous to Helicopteros. Marchand's claims against BMCB do not arise from the purchases BMCB made from BMCS. To the contrary, Marchand's claims arise from his employment with BMCB in Belgium and the alleged misrepresentations BMCB made to Marchand concerning his employment. BMCB's unrelated purchases in Texas from BMCS are not the type of contacts that justify a finding that BMCB could have “reasonably anticipate[d] being haled into court” here. World–Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980); see also Helicopteros, 466 U.S. at 418, 104 S.Ct. 1868. There is no evidence to support the trial court's conclusion that BMCB's contacts with Texas were continuous and systematic so that they established general jurisdiction. See Helicopteros, 466 U.S. at 414–15, 104 S.Ct. 1868; Guardian Royal, 815 S.W.2d at 228; Schlobohm, 784 S.W.2d at 357; see also Roberson, 768 S.W.2d at 281. Thus, we conclude that the trial court lacked general jurisdiction over BMCB.

C. ALTER EGO

Marchand's jurisdictional allegations in his original petition can be read to allege that the trial court has general jurisdiction over BMCB because it is BMCS's alter ego. In response, BMCB contends that there is no evidence to support a determination that it is BMCS's alter ego. [27] [28] [29] Personal jurisdiction may exist over a nonresident defendant if the relationship between the foreign corporation and its parent corporation that does business in Texas is one that would allow the court to impute the parent corporation's “doing business” to the subsidiary. Hargrave v. Fibreboard Corp., 710 F.2d 1154, 1159 (5th Cir.1983); Walker v. Newgent, 583 F.2d 163, 167 (5th Cir.1978). The rationale for exercising jurisdiction is that “the parent corporation exerts such domination and control over its subsidiary ‘that they do not in reality constitute separate and distinct corporate entities but are one and the same corporation for purposes of jurisdiction.’ ” Hargrave, 710 F.2d at 1159 (citations omitted); see also Conner v. ContiCarriers & Terminals, Inc., 944 S.W.2d 405, 418 (Tex.App.-Houston [14th Dist.] 1997, no writ). The party seeking to ascribe one corporation's actions to another by disregarding their distinct corporate entities must prove this allegation. Walker, 583 F.2d at 167; Conner, 944 S.W.2d at 418–19; see also Lucas v.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 8 BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789 (2002) 45 Tex. Sup. Ct. J. 930 Texas Indus., Inc., 696 S.W.2d 372, 375 (Tex.1984). This is because Texas law presumes that two separate corporations are indeed distinct entities:

The general rule seems to be that courts will not because of stock ownership or interlocking directorship disregard the separate legal identities of corporations, unless such relationship is used to defeat public convenience, justify wrongs, such as violation of the anti-trust laws, protect fraud, or defend crime.

Bell Oil & Gas Co. v. Allied Chem. Corp., 431 S.W.2d 336, 339 (Tex.1968) (citations omitted). *799 [30] To “fuse” the parent company and its subsidiary for jurisdictional purposes, the plaintiffs must prove the parent controls the internal business operations and affairs of the subsidiary. Conner, 944 S.W.2d at 418–19 (discussing Hargrave, 710 F.2d at 1160; Walker, 583 F.2d at 167). But the degree of control the parent exercises must be greater than that normally associated with common ownership and directorship; the evidence must show that the two entities cease to be separate so that the corporate fiction should be disregarded to prevent fraud or injustice. See Hargrave, 710 F.2d at 1160; Conner, 944 S.W.2d at 419; see also Gentry v. Credit Plan Corp. of Houston, 528 S.W.2d 571, 573 (Tex.1975). [31] We conclude that there is no evidence to support any implied findings by the trial court to support that BMCB was BMCS's alter ego so that general jurisdiction exists in Texas. In Gentry, this Court held that “[a] subsidiary corporation will not be regarded as the alter ego of its parent merely because of stock ownership, a duplication of some or all of the directors or officers, or an exercise of the control that stock ownership gives to stockholders.” Gentry, 528 S.W.2d at 573. Though Gentry dealt with whether a subsidiary corporation should be regarded as its parent's alter ego for purposes of service of process, the Fifth Circuit and our courts of appeals have relied on its alter ego rule in determining personal jurisdiction. See Walker, 583 F.2d at 167; Gutierrez v. Raymond Int'l, Inc., 484 F.Supp. 241, 253 (S.D.Tex.1979); Conner, 944 S.W.2d at 419; 3–D Elec. Co. v. Barnett Constr. Co., 706 S.W.2d 135, 139 (Tex.App.-Dallas 1986, writ ref'd n.r.e.). Accordingly, general jurisdiction does not extend to BMCB to the extent Marchand relies on BMCB and BMCS having duplicate officers. In addition to alleging that BMCB and BMCS share the same officers, Marchand argues that the record shows the following to establish BMCB's alter-ego status: (1) BMCS's SEC documents incorporate BMCB's financial performance, and BMCS's annual report includes BMCB's financial performance on a consolidated basis; (2) BMCS gives BMCB financial assistance; (3) BMCS provides stock options for BMCB's employees; (4) BMCS treats BMCB's offices, employees, and accounts receivable as its own property; (5) BMCS personnel has offices at its subsidiary facilities; (6) BMCS performs human resources, accounting, risk management, and marketing services for BMCB; (7) BMCS recruits employees for BMCB and approves hiring and competition; (8) BMCB and BMCS use the same letterhead and use the terms “BMC” and “BMC Software”

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 9 BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789 (2002) 45 Tex. Sup. Ct. J. 930 interchangeably; and (9) Watson's deposition testimony shows that BMCB is a mere BMCS operation or department. [32] There is no evidence in the record to support Marchand's assertions that BMCB is BMCS's alter ego. There are no SEC filings in the record, and nothing in BMCB's annual report supports a reasonable inference that BMCS considered its subsidiaries' revenue as its own or that it offered BMCB financial assistance. The annual report's listing international sales figures could represent either the subsidiaries' revenue or BMCS's revenue from selling its products to those subsidiaries. Moreover, the annual report's listing Belgium as a location of both International Offices and Independent Agents fails to show that BMCS treated its subsidiaries as mere departments or offices. BMCS's referencing its subsidiaries in its annual report is a common business practice, which the Internal Revenue Service, the SEC, and generally accepted accounting *800 principles recommend. See Calvert v. Huckins, 875 F.Supp. 674, 678–79 (E.D.Cal.1995). Finally, the annual report's stating that BMCS engaged in hedging transactions to protect against the volatility of foreign currency exchange rates is not evidence that BMCS engaged in risk management for

BMCB.

[33] Additionally, the letter agreement between Marchand and BMCB is not evidence that BMCS typically recruits, controls, and approves personnel whom BMCB employs or that BMCS typically compensates BMCB employees with stock options. And, in any event, a parent company's offering a stock option plan to a subsidiary's employees is acceptable under IRS regulations and is not evidence of abnormal control over the subsidiary. See In re Silicone Gel Breast Implants Prods. Liab. Litig. (MDL 926), 837 F.Supp. 1128, 1136 (N.D.Ala.1993), vacated in part on other grounds by, 887 F.Supp. 1455 (N.D.Ala.1995). Further, Watson's deposition testimony that BMCS employees were “from time to time ... in the offices of a variety of our subsidiaries” does not permit a reasonable inference that BMCS exerted such control over BMCB that the two entities ceased to be separate. See Hargrave, 710 F.2d at 1160; Conner, 944 S.W.2d at 418. Moreover, in discussing certain BMCS employees in his deposition, Watson identified a senior vice-president for worldwide marketing and a vice— president for human resources. But the existence of these two positions for BMCS is not evidence that BMCS performed marketing and human resources for its subsidiaries, or that, even if BMCS did perform such services, the subsidiaries were not charged for them. Similarly, BMCS and BMCB having letterhead with “BMC Software” is no evidence that the two entities do not observe corporate formalities, because both entities have “BMC Software” as part of their names. In sum, the record does not reveal any evidence to support the trial court's conclusion that BMCB was BMCS's alter ego. See Hargrave, 710 F.2d at 1160; Walker, 583 F.2d at 167; Conner, 944 S.W.2d at 419; see also Roberson, 768 S.W.2d at 281. We therefore conclude that the trial court did not have general jurisdiction over BMCB based on BMCS's “doing business” in Texas.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 10 BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789 (2002) 45 Tex. Sup. Ct. J. 930

V. OTHER ISSUES

Before the special appearance hearing, Marchand objected to the hearing going forward because of BMCB's and BMCS's alleged failure to cooperate in discovery and requested that the trial court continue the hearing so that he could complete discovery. The trial court overruled the objection and denied the motion for continuance. Marchand asserts that, even if we reverse the court of appeals' judgment, we should remand his claims for further proceedings, because the trial court prevented him from conducting sufficient discovery before the special appearance hearing. [34] [35] [36] This Court will not disturb a trial court's order denying a motion for continuance unless the trial court has committed a clear abuse of discretion. Villegas v. Carter, 711 S.W.2d 624, 626 (Tex.1986). A trial court “abuses its discretion when it reaches a decision so arbitrary and unreasonable as to amount to a clear and prejudicial error of law.” Johnson v. Fourth Court of Appeals, 700 S.W.2d 916, 917 (Tex.1985). Here, the record shows that Marchand had ample time to conduct, and did conduct, discovery. BMCB filed its special appearance on January 29, 1999, and the trial court held the hearing seven months later on September 7, 1999. During that time, Marchand deposed Watson and served numerous written discovery requests on BMCS and BMCB. Although BMCB and BMCS objected to several discovery requests, the record does not reveal that Marchand ever filed a motion to compel *801 or otherwise attempted to obtain any discovery BMCB and BMCS did not provide. Based on the record, we cannot conclude that the trial court abused its discretion in overruling Marchand's objection to the special appearance hearing and denying his motion for a continuance to conduct further discovery.

VI. CONCLUSION

We hold that there is no evidence to support the trial court's conclusion that BMCB's contacts with Texas were sufficient to confer either specific or general jurisdiction. In so holding, we also conclude that there is no evidence to support a finding that BMCB was BMCS's alter ego so that general jurisdiction in Texas exists. Finally, we hold that the trial court did not abuse its discretion in denying its motion to continue the special appearance hearing. Accordingly, we reverse the court of appeals' judgment and render judgment dismissing Marchand's claims against BMC Software Belgium, N.V. for want of jurisdiction. Parallel Citations 45 Tex. Sup. Ct. J. 930

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 11 BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789 (2002) 45 Tex. Sup. Ct. J. 930 End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 12 PHC-Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163 (2007) 50 Tex. Sup. Ct. J. 1153 235 S.W.3d 163 Supreme Court of Texas. PHC–MINDEN, L.P. d/b/a Minden Medical Center, Petitioner, v. KIMBERLY–CLARK CORPORATION, Respondent. No. 05–0823. | Argued Nov. 16, 2006. | Delivered Aug. 31, 2007. Synopsis Background: In context of action against tampon manufacturer brought by representative of consumer's estate for products liability and other claims, tampon manufacturer filed third-party claim against Louisiana hospital for medical malpractice. The County Court at Law #2, Gregg County, F. Alfonso Charles, J., denied hospital's special appearance and determined that court had general jurisdiction. Hospital appealed, and the Tyler Court of Appeals, 202 S.W.3d 193, affirmed. Holdings: On petition for review, the Supreme Court, Wallace B. Jefferson, C.J., held that: [1] hospital's contacts with Texas were not continuous and systematic, so as to establish general jurisdiction; [2] relevant time period for assessing hospital's contacts with Texas ended at time suit was filed, abrogating MedCost, L.L.C. v. Loiseau, 166 S.W.3d 421, Schott Glas v. Adame, 178 S.W.3d 307, and AmQuip Corp. v. Cloud, 73 S.W.3d 380; and [3] hospital and its parent company did not operate as single business enterprise such that parent's contacts with Texas could be imputed to hospital. Reversed and rendered. Attorneys and Law Firms *164 R. Brent Cooper, Diana L. Faust, Devon J. Singh, Cooper & Scully, P.C., Dallas, for petitioner.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1 PHC-Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163 (2007) 50 Tex. Sup. Ct. J. 1153 *165 C. Michael Moore, David G. Cabrales, Locke Liddell & Sapp LLP, Dallas, James K. Horstman, Rodney E. VanAusdal, Iwan Cray Huber Horstman & VanAusdal, LLC, Chicago, IL, for respondent. Mark P. McMahon, Erskine & McMahon, L.L.P., Kenneth Charles Cunningham, Director of Legal Services, Good Shepard Medical Center, Longview, Susan Cassidy Cooley, Schell & Cooley, L.L.P., Timothy D. Ryan, Shell, Mitchel & Cooley, L.L.P., Addison, Mary Olga Lovett, Andrew J. Wupper, Greenberg Traurig LLP, Gracelyn M. Sessions, Texas Children's Hospital, Houston, Stephen A. Madsen, Ryan D. Adair, Cantey & Hanger, Fort Worth, Mark A. Stinnett, Stinnett Thiebaud & Remington L.L.P., Dallas, for other interested parties. Roger Townsend, Alexander Dubose Jones & Townsend LLP, C.W. “Rocky” Rhodes, Houston, for amicus curiae. Opinion Chief Justice JEFFERSON delivered the opinion of the Court. The United States Constitution prohibits a court from exercising jurisdiction over a party that lacks minimum contacts with the forum. Personal jurisdiction has been described as either specific—that is, based on contacts arising from the dispute at issue—or general, predicated on a party's “continuous and systematic” contacts with the forum. Minimum-contacts analysis is easily muddled, however, as courts frequently import contacts relevant to one type of jurisdiction when deciding the other. Additionally, courts sometimes impute contacts of related entities to each other, when mere relatedness is an insufficient basis on which to confer jurisdiction. Today, we must determine whether a Louisiana hospital, either independently or through its parent corporation, has continuous and systematic contacts with Texas. We conclude that it does not.

I

Factual and Procedural Background While traveling through Louisiana on December 10, 2000, Texas resident Jajah Eddington sought medical care at MHC–Minden Hospital (“Minden Hospital”), a 159–bed acute care hospital located in Minden, Louisiana. Medical personnel treated Eddington's flu-like symptoms in the emergency room and advised her to consult her primary care physician if her condition did not improve. Four days later, Eddington was admitted to Good Shepherd Medical Center in Longview, Texas, where she ultimately was diagnosed with toxic shock syndrome. That infection led to her death on December 28, 2000.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 2 PHC-Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163 (2007) 50 Tex. Sup. Ct. J. 1153 DeWayne Eddington, individually and as next friend of Devvyn Eddington, and as representative of Jajah Eddington's estate, sued Kimberly–Clark Corporation asserting product liability, breach of warranty, and negligence claims. He alleged that Eddington's use of Kotex tampons led to the infection that caused her death. On February 28, 2003, Kimberly–Clark filed a third-party petition against PHC–Minden, L.P. (“Minden”), which owns Minden Hospital, asserting that Minden's negligence proximately caused Eddington's death. 1 Minden is a nonresident of Texas and a wholly owned subsidiary of Province Health Care (“Province”). Kimberly–Clark pleaded that Province, whose headquarters is in Tennessee, did business in Texas and that its forum-related acts *166 should be imputed to Minden because: (1) Province owns Minden; (2) Province and Minden share officers, directors, and “common departments or business”; (3) Province and Minden do not differentiate their operations and have failed to erect “formal barriers” between themselves; and (4) Province's officers and directors control Minden's policies. Minden filed a special appearance and, subject thereto, a general denial. The parties conducted extensive discovery relating to the jurisdictional issue. After a hearing, the trial court concluded it had general jurisdiction over Minden and denied the special appearance. 1

Kimberly–Clark also filed third-party claims against Good Shepherd Medical Center; Longview Emergency Medicine Associates; Schumacher Group of Louisiana; Dr. Russell Riggs; Dr. Rodney Slone; Dr. Don Ferguson; D. Lea, R.N.; C. Bennett, R.N.; and C. Coleman, R.N.

The court of appeals affirmed, reasoning that (1) Minden itself had “continuous and systematic contacts with Texas”; and (2) Minden and Province operated as a single business enterprise, and Minden, through Province, did business in Texas. 202 S.W.3d 193, 203–04. We granted Minden's petition for review to decide whether Texas courts have general jurisdiction over Minden. 2 49 Tex. Sup.Ct. J. 950 (Aug. 25, 2006). 2

Charles W. “Rocky” Rhodes and Riata Energy, Inc. submitted amicus curiae briefs.

II

General Jurisdiction [1] [2] [3] The Texas long-arm statute governs Texas courts' exercise of jurisdiction over nonresident defendants. See TEX. CIV. PRAC. & REM.CODE §§ 17.041–.045. That statute permits Texas courts to exercise jurisdiction over a nonresident defendant that “does business” in Texas, and the statute identifies some activities that constitute “doing business.” Id. § 17.042. The list, however, is not exclusive. BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 795 (Tex.2002). We have held that section 17.042's language extends Texas courts' personal jurisdiction “as far as the federal constitutional requirements of due process will permit.” U–

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 3 PHC-Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163 (2007) 50 Tex. Sup. Ct. J. 1153 Anchor Adver., Inc. v. Burt, 553 S.W.2d 760, 762 (Tex.1977). Thus, we rely on precedent from the United States Supreme Court and other federal courts, as well as our own decisions, in determining whether a nonresident defendant has negated all bases of jurisdiction. See BMC Software, 83 S.W.3d at 795–796. Personal jurisdiction over nonresident defendants is constitutional when: (1) the defendant has established minimum contacts with the forum state, and (2) the exercise of jurisdiction comports with traditional notions of fair play and substantial justice. Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945). In Helicopteros Nacionales de Colombia, S.A. v. Hall, the Supreme Court adopted the terms “specific” and “general” to describe the differing types of personal jurisdiction. Helicopteros, 466 U.S. 408, 414, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984) (citing Arthur T. von Mehren & Donald T. Trautman, Jurisdiction to Adjudicate: A Suggested Analysis, 79 HARV. L.REV.. 1121, 1144– 1164 (1966)). The Court defined specific jurisdiction as “arising out of or related to the defendant's contacts with the forum.” Id. at n. 8. By contrast, the Court referred to general jurisdiction as “personal jurisdiction over a defendant in a suit not arising out of or related to the defendant's contacts with the forum.” 3 Id. at n. 9 (citations omitted). 3

The use of the terms “specific” and “general” to connote differing types of personal jurisdiction has been criticized as contributing to the confusion among courts as to the quality and quantity of contacts required for each. See Mary Twitchell, The Myth of General Jurisdiction, 101 HARV. L.REV.. 610, 612–13 (1988) (suggesting that the “general/specific framework” has led to ambiguity and suggesting the terms “dispute-blind” and “dispute-specific” instead). Ironically, Professors von Mehren and Trautman suggested the terms “specific” and “general” to alleviate the confusion associated with the “in rem,” “quasi in rem,” and “in personam” jurisdictional terminology. von Mehren & Trautman, Jurisdiction to Adjudicate, 79 HARV. L.REV.. at 1135–36 (noting that “some of the terminology conventionally employed in Anglo–American discussions of jurisdiction to adjudicate is not very helpful”).

*167 In Helicopteros, the Court concluded that Texas courts did not have general jurisdiction over a Colombian company, Helicol. One of Helicol's helicopters had been involved in a crash in Peru, and the survivors and representatives of the decedents sued Helicol in state district court in Harris County, Texas. Helicol filed a special appearance and moved to dismiss the case, but the trial court denied the motion. The court of appeals, however, agreed with Helicol that in personam jurisdiction over Helicol was lacking. Helicopteros Nacionales De Colombia, S.A. v. Hall, 616 S.W.2d 247 (Tex.App.-Houston 1981). Our Court reversed. Hall v. Helicopteros Nacionales De Colombia, S.A., 638 S.W.2d 870 (1982). The Supreme Court granted certiorari, and it summarized the pertinent jurisdictional facts:

It is undisputed that Helicol does not have a place of business in Texas and never has been licensed to do business in the State. Basically, Helicol's contacts with Texas consisted of sending its chief executive officer to Houston for a contract- negotiation session; accepting into its New York bank account checks drawn on a Houston bank; purchasing helicopters, equipment, and training services from © 2015 Thomson Reuters. No claim to original U.S. Government Works. 4

PHC-Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163 (2007) 50 Tex. Sup. Ct. J. 1153 Bell Helicopter for substantial sums; and sending personnel to Bell's facilities in Fort Worth for training.

Helicopteros, 466 U.S. at 416, 104 S.Ct. 1868. The Court concluded that the CEO's trip to Houston could not be described as a “continuous or systematic” contact. Id. Similarly, it held that Helicol's acceptance of checks drawn on a Houston bank was of “negligible significance.” Id. at 416, 104 S.Ct. 1868. The Court held, relying on a 1923 unanimous opinion written by Justice Brandeis, that “purchases and related trips, standing alone, are not a sufficient basis for a State's assertion of jurisdiction.” Id. at 417, 104 S.Ct. 1868 (citing Rosenberg Bros. & Co. v. Curtis Brown Co., 260 U.S. 516, 43 S.Ct. 170, 67 L.Ed. 372 (1923)). The point at which jurisdictional contacts reach a tipping point, however, has eluded precise formulation. Beyond stating that mere purchases and related travel are not enough, the Supreme Court has given little guidance on the appropriate inquiry for general jurisdiction, although its Helicopteros conclusion that general jurisdiction was improper suggests that the requisite level of contacts is fairly substantial. 16 JAMES WM. MOORE ET AL., MOORE'S FEDERAL PRACTICE § 108.41[3] (3d ed.2007); 4 CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE & PROCEDURE § 1067.5 (2007) (noting that the Court's rejection of each contact and its failure to aggregate contacts “suggests very strongly that the threshold contacts required for a constitutional assertion of general jurisdiction over a nonresident defendant are very substantial, indeed”). Perkins v. Benguet Consolidated Mining Co., the only case in which that court has upheld a finding of general jurisdiction, offers an insight into the nature of the contacts required. Perkins, 342 U.S. 437, 72 S.Ct. 413, 96 L.Ed. 485 (1952). In assessing whether the nonresident defendant's Ohio contacts were sufficient to warrant a finding of general jurisdiction, the Court noted that the company's president, who was also the general manager and principal shareholder, *168 maintained an Ohio office in which he “did many things on behalf of the company.” Id. at 447–48, 72 S.Ct. 413. He maintained company files in Ohio, carried on correspondence from there, drew and distributed salary checks from his Ohio office, used two Ohio bank accounts for company funds and had an Ohio bank act as transfer agent for the company's stock, held directors' meetings in Ohio, supervised policies dealing with the rehabilitation of the corporation's properties in the Philippines there, and dispatched funds from Ohio bank accounts to cover purchases of machinery for such rehabilitation. Id. The Court concluded that the company “carried on in Ohio a continuous and systematic supervision of the necessarily limited wartime activities of the company,” and even though “no mining properties in Ohio were owned or operated by the company, many of its wartime activities were directed from Ohio and were being given the personal attention of its president in that State at the time he was served with summons.” Id. at 448, 72 S.Ct. 413. The Court held that “under the circumstances above recited, it would not violate federal due process for Ohio either to take or decline jurisdiction of the corporation in this proceeding.” Id.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 5 PHC-Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163 (2007) 50 Tex. Sup. Ct. J. 1153 A general jurisdiction inquiry, therefore, is very different from a specific jurisdiction inquiry and involves a “more demanding minimum contacts analysis,” CSR, Ltd. v. Link, 925 S.W.2d 591, 595 (Tex.1996), with a “substantially higher” threshold, 4 WRIGHT & MILLER, FEDERAL PRACTICE & PROCEDURE § 1067.5. Usually, “the defendant must be engaged in longstanding business in the forum state, such as marketing or shipping products, or performing services or maintaining one or more offices there; activities that are less extensive than that will not qualify for general in personam jurisdiction.” 4 WRIGHT & MILLER, FEDERAL PRACTICE & PROCEDURE § 1067.5; see also Hall, 638 S.W.2d at 882 (Pope, J., dissenting) (noting that “substantial and continuous activity” required for general jurisdiction suggests that defendant “must establish some close substantial connection with the state approaching the relationship between the state and its own residents”); 16 MOORE'S FEDERAL PRACTICE § 108.41[3] (stating that general jurisdiction “typically requires the defendant to have an office in the forum state”); Lea Brilmayer, A General Look at General Jurisdiction, 66 TEX. L.REV. 723, 742 (1988) (proposing that “the basic inquiry must be whether the defendant's level of activity rises to the level of activity of an insider, so that relegating the defendant to the political processes is fair”); Charles W. “Rocky” Rhodes, Clarifying General Jurisdiction, 34 SETON HALL L.REV. 807, 811 (2004) (suggesting that a proper general jurisdiction query should evaluate whether the defendant engaged in activities in the forum state similar in frequency and nature to the activities of local businesses); Mary Twitchell, The Myth of General Jurisdiction, 101 HARV. L.REV.. 610, 635 (1988) (noting that “traditional indicia” of general jurisdiction are “a home base, an agent for the service of process, a local office, or the pursuance of business from a tangible locale within the state”). [4] General jurisdiction has been described as “dispute-blind,” an exercise of the court's jurisdiction made without regard to the nature of the claim presented. Twitchell, The Myth of General Jurisdiction, 101 HARV. L.REV.. at 613. It involves a court's ability to exercise jurisdiction over a nonresident defendant based on any claim, including claims unrelated to the defendant's contacts with the state. 16 MOORE'S FEDERAL PRACTICE § 108.40. Some commentators suggest that courts assessing general jurisdiction employ an analytical *169 device to determine whether the jurisdiction is, in fact, dispute-blind. Twitchell, The Myth of General Jurisdiction, at 680; Rhodes, Clarifying General Jurisdiction, 34 SETON HALL L.REV. at 819. They propose that the court construct a hypothetical claim without any forum connection “to insure that any related forum activities of the defendant are not improperly infiltrating the dispute-blind query.” Clarifying General Jurisdiction, 34 SETON HALL L.REV. at 819. For example:

[A]re the corporate defendant's actual activities in California so pervasive and extensive that it should be amenable to the adjudicatory jurisdiction of California for a hypothetical employment discrimination claim filed by a New York citizen employed at corporate headquarters in New York? Or, with respect to a foreign corporation, do the corporation's actual California contacts support jurisdiction © 2015 Thomson Reuters. No claim to original U.S. Government Works. 6

PHC-Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163 (2007) 50 Tex. Sup. Ct. J. 1153 even for a hypothetical cause of action arising from its sale of a product in Germany that injured a German citizen?

Id. at 819–20. Such an inquiry properly frames the issue, as general jurisdiction is based solely on the defendant's “continuous and systematic” contacts with the forum. Helicopteros, 466 U.S. at 416, 104 S.Ct. 1868.

A

Minden's Contacts [5] With this in mind, we turn to an analysis of Minden's Texas contacts, as the court of appeals concluded that Minden had “continuous and systematic contacts with Texas” sufficient to support general jurisdiction. 202 S.W.3d at 204. We first determine the appropriate time period for assessing contacts for purposes of general jurisdiction, an issue on which our courts of appeals are in conflict. Some examine the defendant's forum-related activities up to the time of the occurrence that prompted the suit. See MedCost, L.L.C. v. Loiseau, 166 S.W.3d 421, 434 (Tex.App.-Austin 2005, no pet.); Schott Glas v. Adame, 178 S.W.3d 307, 313–14 (Tex.App.-Houston [14th Dist.] 2005, pet. denied); AmQuip Corp. v. Cloud, 73 S.W.3d 380, 388 (Tex.App.-Houston [1st Dist.] 2002, no pet.). Others focus on contacts up to the time of filing suit. See, e.g., Equitable Prod. Co. v. Canales–Trevino, 136 S.W.3d 235, 237–38, 245 (Tex.App.-San Antonio 2004, pet. denied) (considering corporate defendant's relocation from Texas, which occurred after the cause of action accrued but before suit was filed, for purposes of determining jurisdiction); see also Tuscano v. Osterberg, 82 S.W.3d 457, 467 (Tex.App.-El Paso 2002, no pet.) (holding that jurisdictional contacts were “too attenuated in time,” because such activities occurred more than “three years before service of this suit was effected”). Another—the court of appeals in this case—noted the conflict and assessed contacts under both timetables. 4 202 S.W.3d at 203 (“A relevant continuous contact in this analysis includes those contacts over a period up to the date of injury ... or up to and including the date suit commenced....”). 4

This conflict gives us jurisdiction over this interlocutory appeal. TEX. GOV'T CODE § 22.225(c). [6] We conclude that the relevant period ends at the time suit is filed. As noted above, general jurisdiction is dispute-blind; accordingly, and in contrast to specific jurisdiction, the incident made the basis of the suit should not be the focus in assessing continuous and systematic contacts— contacts on which jurisdiction over any claim may be based. See Charles W. *170 “Rocky” Rhodes, The Predictability Principle in Personal Jurisdiction Doctrine: A Case Study of the Effects of a “Generally” Too Broad, But “Specifically” Too Narrow Approach to Minimum Contacts, 57 BAYLOR L.REV. 135, 238 (2005) (noting that “analyzing the contacts at the time

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 7 PHC-Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163 (2007) 50 Tex. Sup. Ct. J. 1153 of accrual is not appropriate under the proper explanation of general jurisdiction as dispute-blind general adjudicative authority”); see also 4 WRIGHT & MILLER, FEDERAL PRACTICE & PROCEDURE § 1067.5 (noting that “a court should consider all of a defendant's contacts with the forum state prior to the filing of the lawsuit”). We also agree that “a mere one-time snapshot of the defendant's in-state activities” may not be sufficient, see Rhodes, Predictability Principle, 57 BAYLOR L.REV. at 239, and contacts should be assessed over a reasonable number of years, up to the date suit is filed, see Access Telecom, Inc. v. MCI Telecomms. Corp., 197 F.3d 694, 717 (5th Cir.1999). This includes contacts at the time the cause of action arose, and it comports with the Supreme Court's guidance on the issue, as well as our prior caselaw. See Helicopteros, 466 U.S. at 409–11, 104 S.Ct. 1868 (evaluating contacts over the seven-year period before suit was filed); American Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801, 807–08 (Tex.2002) (assessing contacts over the twenty-year period preceding suit). [7] We now turn to Minden's contacts up to the time of suit. A general jurisdiction inquiry can be tedious, as it “demands ... that all contacts be carefully investigated, compiled, sorted, and analyzed for proof of a pattern of continuing and systematic activity.” Schlobohm v. Schapiro, 784 S.W.2d 355, 359 (Tex.1990). In conducting this dispute-blind inquiry, Jajah's Eddington's status as a Texas resident, her treatment in Minden Hospital's emergency room, and her family's choice not to sue Minden are irrelevant. Instead, we focus solely on Minden's contacts with Texas. Minden is a nonresident limited partnership that owns a hospital licensed by the state of Louisiana. Minden's only facility is in Minden, Louisiana, and ninety percent of its patients reside within a twenty-five mile radius of Minden Hospital. Minden does not advertise in Texas. It owns no Texas property and has no Texas office or bank accounts, nor does it maintain a registered agent for service of process here. The court of appeals relied on three categories of contacts in determining that Minden's Texas contacts were continuous and systematic: (1) Minden employees' attendance at seminars in Texas; (2) Minden's purchases from vendors with Texas addresses; and (3) three contracts with Texas entities. We examine each in turn. 1. Texas Trips The evidence showed that, since 1999, Minden employees attended two Province-sponsored meetings in Dallas. These isolated trips fall short of the “continuous and systematic contact” the Supreme Court requires. In Helicopteros, the Supreme Court rejected the notion that multiple trips to Fort Worth supported general jurisdiction, noting that the trips did not “in any way enhance[ ] the company's contacts with Texas.” 466 U.S. at 418, 104 S.Ct. 1868; see also Kulko v. California Superior Court, 436 U.S. 84, 93, 98 S.Ct. 1690, 56 L.Ed.2d 132 (1978) (basing California jurisdiction on 3–day and 1–day stopovers in that State “would make a mockery of” due process limitations on assertion of personal jurisdiction); Nat'l Indus. Sand Ass'n v. Gibson, 897 S.W.2d 769, 774 (Tex.1995) (concluding that attending a meeting in Texas, as well as periodic mailings to Texas members, “presented no evidence of general jurisdiction”). We agree with that analysis.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 8 PHC-Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163 (2007) 50 Tex. Sup. Ct. J. 1153 *171 2. Payments to Texas Vendors Since October 1, 1999, Minden paid $1,508,467.20 to 136 entities with Texas addresses. The largest payment, $515,650.15, was to Alcon Laboratories in Dallas, Texas, and the second largest, $209,997.36, to Centerpoint Energy in Houston, Texas. Most of the remaining payments are for less than $10,000.00 each. In Helicopteros, 466 U.S. at 418, 104 S.Ct. 1868, the Supreme Court held that “mere purchases, even if occurring at regular intervals, are not enough to warrant a State's assertion of in personam jurisdiction over a nonresident corporation in a cause of action not related to those purchase transactions.” And we have recognized that “purchases from Texas vendors will not alone support the exercise of general jurisdiction.” American Type Culture Collection, 83 S.W.3d at 808. We conclude that the payments to Texas vendors do not support general jurisdiction over Minden in Texas. 3. Contracts with Texas Entities The court of appeals also identified three contracts with a Texas connection: (1) a September 23, 2003 contract with Cox Business Services, a Tyler, Texas-based company, for internet service (at a charge of $59.95 per month) and a cable modem; (2) a July 2002 contract with Lone Star Research, located in The Woodlands, Texas, pursuant to which Lone Star Research would conduct a one- time marketing survey of 200 adult residents in Minden Hospital's service area; and (3) an April 2001 professional services agreement with Horizon Radiology, P.A., a Texas company, whereby Horizon would provide specialty coverage (via teleradiology equipment) to Minden Hospital, in exchange for $1600 per month. We agree with the court of appeals that the 2003 Cox contract, entered into after suit was filed, is irrelevant to the jurisdictional inquiry here. 202 S.W.3d at 203. The 2002 Lone Star contract pursuant to which a Texas company conducted a marketing study of residents in Minden Hospital's service area—presumably Louisiana, as ninety percent of the hospital's patients live within twenty- five miles of the hospital—does not establish a continuous and systematic Texas contact. Lone Star agreed to conduct 200 telephone interviews and analyze the data within a week of the survey's completion, in exchange for $5,200. This type of sporadic Texas contact is not substantial enough for general jurisdiction. Of the three contracts, the Horizon agreement has the most substantial connection to Texas. The agreement, signed in 2001 and renewed twice thereafter, required that Louisiana-licensed physicians (located in Texas) provide teleradiology services, for which Minden supplied the necessary equipment, in exchange for $1600 per month. Even this agreement, however, does not support general jurisdiction. Hiring a contractor to perform such limited services in the forum state does not equate to “continuous and systematic contacts.”

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 9 PHC-Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163 (2007) 50 Tex. Sup. Ct. J. 1153 Even when amassed, Minden's Texas contacts simply are not “continuous and systematic general business contacts” sufficient to support general jurisdiction, particularly when compared to the substantial, regular business activities conducted by the nonresident defendant in Perkins. Helicopteros, 466 U.S. at 416, 104 S.Ct. 1868; Perkins, 342 U.S. at 447–48, 72 S.Ct. 413. Instead, the facts here are more like those described in Helicopteros: the nonresident defendant had limited contacts with Texas but none sufficient to support general jurisdiction. Accordingly, the court of appeals erred in holding otherwise.

*172 B

Jurisdictional Veil–Piercing [8] As its second basis for general jurisdiction, the court of appeals imputed Province's Texas contacts to Minden, concluding the two entities operated as a single business enterprise and that Minden, through Province, did business in Texas. In 1925, the Supreme Court of the United States considered whether a North Carolina court had jurisdiction over a nonresident parent corporation whose subsidiary did business in North Carolina. Cannon Mfg. Co. v. Cudahy Packing Co., 267 U.S. 333, 335, 45 S.Ct. 250, 69 L.Ed. 634 (1925). In affirming the district court's dismissal for lack of jurisdiction, the Court held:

Through ownership of the entire capital stock and otherwise, the defendant dominates [its subsidiary], immediately and completely; and exerts its control both commercially and financially in substantially the same way, and mainly through the same individuals, as it does over those selling branches or departments of its business not separately incorporated which are established to market the [defendant's] products in other states. The existence of the [subsidiary] as a distinct corporate entity is, however, in all respects observed. Its books are kept separate. All transactions between the two corporations are represented by appropriate entries in their respective books in the same way as if the two were wholly independent corporations.

Id. The Court concluded that “the corporate separation, though perhaps merely formal, was real. It was not pure fiction.” Id. at 337, 45 S.Ct. 250. The Court has never disavowed Cannon, despite an opportunity to do so. Instead, it essentially echoed the Cannon rule in Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 781 n. 13, 104 S.Ct. 1473, 79 L.Ed.2d 790 (1984). See William A. Voxman, Comment, Jurisdiction over a Parent Corporation in Its Subsidiary's State of Incorporation, 141 U. PA. L.REV. 327, 339 (1992) (noting that Keeton footnote implicitly recognized Cannon's continuing validity). In that case, then-Justice

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 10 PHC-Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163 (2007) 50 Tex. Sup. Ct. J. 1153 Rehnquist, writing for the Court, noted that “jurisdiction over a parent corporation [does not] automatically establish jurisdiction over a wholly owned subsidiary.... Each defendant's contacts with the forum State must be assessed individually.” Keeton, 465 U.S. at 781 n. 13, 104 S.Ct. 1473; see also Voxman, 141 U. PA. L.REV. at 338 (noting that “[t]he clear implication of Rehnquist's assertion is that the nature of the parent-subsidiary relationship may well be a factor in determining whether jurisdiction comports with due process, but the existence of the relationship will not, in and of itself, be dispositive of the issue”). The Fifth Circuit Court of Appeals followed Cannon in Hargrave v. Fibreboard Corp.:

Cannon ... stands for the proposition that so long as a parent and subsidiary maintain separate and distinct corporate entities, the presence of one in a forum state may not be attributed to the other. Cases in this circuit appear to have followed the Cannon rule in applying the Texas long-arm statute, although sometimes without explicit citation. We have noted often that 100% stock ownership and commonality of officers and directors are not alone sufficient to establish an alter ego relationship between two corporations. Generally, our cases demand proof of control by the parent over the internal business operations and affairs of the subsidiary in order to fuse the two for jurisdictional purposes. The degree of control exercised by the parent must be greater than that normally associated with common ownership *173 and directorship. All the relevant facts and circumstances surrounding the operations of the parent and subsidiary must be examined to determine whether two separate and distinct corporate entities exist.

Hargrave, 710 F.2d 1154, 1160 (5th Cir.1983) (citations omitted). The court held that the two corporations at issue “maintained a degree of corporate separation that was more than superficial” and “[t]he policy making authority held and exercised by [the parent] was no more than that appropriate for a sole shareholder of a corporation” and not enough to warrant the extraterritorial exercise of jurisdiction over that shareholder. Id. at 1161. The court concluded: “The Lone Star of Texas may shine brightly throughout the world, but its long arm is not judicially all encompassing.” Id. We recently followed Hargrave (and, by implication, Cannon ) in explaining when the contacts of a related corporate entity may be considered for purposes of determining general jurisdiction. BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 795–796 (Tex.2002). We held that “[p]ersonal jurisdiction may exist over a nonresident defendant if the relationship between the foreign corporation and its parent corporation that does business in Texas is one that would allow the court to impute the parent corporation's ‘doing business' to the subsidiary.” Id. at 798 (citing Hargrave, 710 F.2d at 1159 and Walker v. Newgent, 583 F.2d 163, 167 (5th Cir.1978)). The rationale for exercising jurisdiction is that “the parent corporation exerts such domination and control over its

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 11 PHC-Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163 (2007) 50 Tex. Sup. Ct. J. 1153 subsidiary ‘that they do not in reality constitute separate and distinct corporate entities but are one and the same corporation for purposes of jurisdiction.’ ” Id. (quoting Hargrave, 710 F.2d at 1159 (citations omitted)). We required that the party seeking to ascribe one corporation's actions to another by disregarding their distinct corporate entities prove this allegation, because Texas law presumes that two separate corporations are distinct entities. Id.; accord 4A WRIGHT & MILLER, FEDERAL PRACTICE & PROCEDURE § 1069.4 (noting a “reluctance to exercise personal jurisdiction over a subsidiary merely because its parent corporation is doing business in the forum state”). We concluded that there was no evidence to support the trial court's finding of general jurisdiction over a Belgian subsidiary based on allegations it was the alter ego of its American parent. BMC Software, 83 S.W.3d at 801. 1. Single Business Enterprise Here, the court of appeals held that Province and Minden operated as a single business enterprise— a theory we have never endorsed—and, therefore, Province's Texas contacts could be imputed to Minden. 5 202 S.W.3d at 202; see Southern Union Co. v. City of Edinburg, 129 S.W.3d 74, 86–87 (Tex.2003) (noting that this Court “has never considered the ‘single business enterprise’ concept in any detail” and declining to decide “whether a theory of ‘single business enterprise’ is a necessary addition to Texas law regarding the theory of alter ego for disregarding corporate structure”). In doing so, the court of appeals examined eight factors as they related to Minden and Province: (1) common employees, (2) common offices, (3) centralized accounting, (4) payment of *174 wages by one corporation to another corporation's employees, (5) common business name, (6) services rendered by the employees of one corporation on behalf of another corporation, (7) undocumented transfers of funds between corporations, and (8) unclear allocation of profits and losses between corporations. 202 S.W.3d at 201–02. The court's analysis failed to recognize, however, that veil- piercing for purposes of liability (“substantive veil-piercing”) is distinct from imputing one entity's contacts to another for jurisdictional purposes (“jurisdictional veil-piercing”). 5

The record contains no evidence regarding the structure of Province's ownership of Texas hospitals. That is, there is no evidence regarding whether those hospitals are owned directly by Province or instead by a wholly owned subsidiary like Minden. The parties assume that Province (rather than its subsidiaries) does business in Texas; for purposes of our analysis, we make the same assumption.

[9] Courts have acknowledged that jurisdictional veil-piercing and substantive veil-piercing involve different elements of proof. See, e.g., Wells Fargo & Co. v. Wells Fargo Express Co., 556 F.2d 406, 425 (9th Cir.1977) (noting that undercapitalization, “which is important to deciding whether to pierce the veil raised by a subsidiary corporation in order to hold the parent corporation liable for failure of the subsidiary to meet its debts, may not be relevant to a showing that the two corporations are in fact one so as to establish that the out-of-state corporation—be it parent or subsidiary—is present within the forum for jurisdictional purposes”; instead, “the operative question is whether the two corporations are in fact mere ‘divisions' or ‘branches' of a larger whole”); Daimler–Benz Aktiengesellschaft v. Olson, 21 S.W.3d 707, 721 n. 5 (Tex.App.-Austin 2000, pet. dism'd w.o.j.) (“Although many of the factors relevant to

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 12 PHC-Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163 (2007) 50 Tex. Sup. Ct. J. 1153 [determining whether subsidiaries' contacts should be imputed to parent] may also be relevant in determining whether a parent corporation should be liable for the actions of its subsidiary, the determination whether two corporate entities are one and the same for jurisdictional purposes is distinct.”), cert. denied, 535 U.S. 1077, 122 S.Ct. 1960, 152 L.Ed.2d 1021 (2002); see also 2–32 WILLIAM V. DORSANEO, TEXAS LITIGATION GUIDE § 32.06 (2005). This makes sense in light of the fact that personal jurisdiction involves due process considerations that may not be overridden by statutes or the common law. Cf. City of Monroe Employees Ret. Sys. v. Bridgestone Corp., 399 F.3d 651, 667–668 (6th Cir.2005) (refusing, in case involving jurisdictional allegations based on alleged “control person” under the securities laws, to “substitute our analysis of the securities laws' substantive bases for liability for the required, due-process based personal jurisdiction analysis”); AT & T Co. v. Compagnie Bruxelles Lambert, 94 F.3d 586, 591 (9th Cir.1996) (concluding that “liability is not to be conflated with amenability to suit in a particular forum. Personal jurisdiction has constitutional dimensions, and regardless of policy goals, Congress cannot override the due process clause, the source of protection for non-resident defendants.”); In re Baan Co. Sec. Litig., 245 F.Supp.2d 117, 129 (D.D.C.2003) (noting that liability under the Securities Act “cannot on its own support personal jurisdiction,” as such an approach “impermissibly conflates statutory liability with the Constitution's command that the exercise of personal jurisdiction must be fundamentally fair”); Michiana Easy Livin’ Country, Inc. v. Holten, 168 S.W.3d 777, 790–91 (Tex.2005) (rejecting theory that where defendant “directed a tort” was relevant inquiry for specific jurisdiction, as such a rule improperly “equat [ed] the jurisdictional inquiry with the underlying merits”); Nat'l Indus. Sand Ass'n v. Gibson, 897 S.W.2d 769, 773 (Tex.1995) (observing that “[c]onspiracy as an independent basis for jurisdiction has been criticized as distracting from the ultimate due process inquiry: whether the out-of-state defendant's contact with the forum was such that it should reasonably anticipate being haled into a court in the forum state” and declining to recognize *175 personal jurisdiction based on conspiracy allegation); John A. Swain & Edwin E. Aguilar, Piercing the Veil to Assert Personal Jurisdiction Over Corporate Affiliates: An Empirical Study of the Cannon Doctrine, 84 B.U.L. REV. 445, 453 (2004) (noting that “the principle of limited liability is statutory and does not speak to judicial jurisdiction”). For this reason, fraud—which is vital to piercing the corporate veil under section 21.223 of the Business Organizations Code—has no place in assessing contacts to determine jurisdiction. See TEX. BUS. ORGS.CODE § 21.223. Similarly, some of the factors courts look to in determining whether an entity may be held liable as a “single business enterprise” are irrelevant to an analysis of jurisdictional contacts. For example, the court of appeals examined whether Province and Minden shared a common name and concluded that “[Minden's] partnership name and initials, PHC– Minden, L.P. can be construed as a reference to Province Healthcare Company.” 202 S.W.3d at 201. Whether two related entities share a common name, however, does not affect whether each has sufficient contacts with the forum for jurisdictional purposes.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 13 PHC-Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163 (2007) 50 Tex. Sup. Ct. J. 1153 2. Factors [10] Instead, we recently outlined the relevant factors for jurisdictional veil-piercing:

To “fuse” the parent company and its subsidiary for jurisdictional purposes, the plaintiffs must prove the parent controls the internal business operations and affairs of the subsidiary. But the degree of control the parent exercises must be greater than that normally associated with common ownership and directorship; the evidence must show that the two entities cease to be separate so that the corporate fiction should be disregarded to prevent fraud or injustice.

BMC Software, 83 S.W.3d at 799 (citations omitted). We also relied on our prior precedent, which held that “[a] subsidiary corporation will not be regarded as the alter ego of its parent merely because of stock ownership, a duplication of some or all of the directors or officers, or an exercise of the control that stock ownership gives to stockholders.” Gentry v. Credit Plan Corp. of Houston, 528 S.W.2d 571, 573 (Tex.1975). A leading treatise suggests that in determining whether a subsidiary corporation is subject to the jurisdiction of a forum state because its parent corporation is present or doing business there, courts should determine whether the subsidiary is “separate and distinct from its parent corporation for personal jurisdiction purposes,” taking into account the amount of the subsidiary's stock owned by the parent corporation, the existence of separate headquarters, the observance of corporate formalities, and the degree of the parent's control over the general policy and administration of the subsidiary. 4A WRIGHT & MILLER, FEDERAL PRACTICE & PROCEDURE § 1069.4. Here, the court of appeals cited the following as evidence that Province and Minden were a single business enterprise:

the record shows that Province and [Minden] have at least one common employee and that Province pays certain [Minden] employees, although the salaries are intercompany payables. The names of the two companies are similar, and Province employees provide various services to assist [Minden] in its operations. Province exercises control over [Minden]'s revenues and expenditures and oversees [Minden]'s operations, financial performance, and completion of strategic initiatives. Further, Province audits [Minden]'s financial goals to determine if [Minden] will be able to meet these goals. Considering the totality of *176 this evidence, we conclude that Province and [Minden] have integrated their resources to achieve a common business purpose.

202 S.W.3d at 202. © 2015 Thomson Reuters. No claim to original U.S. Government Works. 14 PHC-Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163 (2007) 50 Tex. Sup. Ct. J. 1153 [11] Upon closer examination, however, it is clear that Province does not exercise the sort of control over Minden that is required to fuse them for jurisdictional purposes. BMC Software, 83 S.W.3d at 799. Much of the evidence cited points to parental involvement —involvement consistent with its investor status—not atypical control. See 16 MOORE'S FEDERAL PRACTICE § 108.42[3][b]. “Appropriate parental involvement includes monitoring the subsidiary's performance, supervision of the subsidiary's finance and capital budget decisions, and articulation of general policies.” Id. What is lacking here is the “plus” factor, “something beyond the subsidiary's mere presence within the bosom of the corporate family.” Dickson Marine, Inc. v. Panalpina, Inc., 179 F.3d 331, 338 (5th Cir.1999); see also Central States, Southeast & Southwest Areas Pension Fund v. Reimer Express World Corp., 230 F.3d 934, 943 (7th Cir.2000) (holding that “constitutional due process requires that personal jurisdiction cannot be premised on corporate affiliation or stock ownership alone where corporate formalities are substantially observed and the parent does not exercise an unusually high degree of control over the subsidiary”); De Castro v. Sanifill, Inc., 198 F.3d 282, 283–84 (1st Cir.1999) (requiring “strong and robust” evidence of parental control over subsidiary, such that subsidiary is “mere shell,” before subsidiary's contacts could be imputed to parent). The two entities maintain separate headquarters, Minden in Louisiana and Province in Tennessee. Minden's Board of Governors approves Minden's budget and oversees day-to-day operations, and Minden alone establishes its policies and procedures for providing health care to patients. Province is not involved in Minden's physician recruitment, and the two entities share no directors. While Minden's chief executive officer, chief nursing officer, and chief financial officer receive their paychecks from Province, their salaries are intercompany payables; that is, the monies come from Minden's revenues. Similarly, while Province provides Minden's general liability insurance and a group health insurance policy for its employees, the policies are funded from Minden's revenues. There is no indication that Minden and Province have disregarded corporate formalities. The court of appeals cited evidence that two Minden employees received Province stock options, but we have said that “a parent company's offering a stock option plan to a subsidiary's employees is acceptable under IRS regulations and is not evidence of abnormal control over the subsidiary.” BMC Software, 83 S.W.3d at 800. Put simply, we find no evidence of control other than that consistent with Province's investor status, and the court of appeals erred in imputing Province's Texas contacts to Minden.

III

Conclusion Minden does not have continuous and systematic contacts with Texas, nor is there any basis for imputing Province's Texas contacts to Minden. We reverse the court of appeals' judgment and

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 15 PHC-Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163 (2007) 50 Tex. Sup. Ct. J. 1153 render judgment dismissing the claims against Minden for want of jurisdiction. TEX.R.APP. P. 60.2(c). Parallel Citations 50 Tex. Sup. Ct. J. 1153 End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 16

NOTES

[1] Sections II.A and II.B are the same in this brief and C Change’s appellant’s brief.

[2] Certain of the plaintiffs’ and intervenors’ allegations are recited in this statement of facts for the Court’s background, but Preston does not concede any of the plaintiffs’ or intervenors’ allegations. 14

[3] One possible exception is appellee H.J. von der Goltz. It is unclear whether von der Goltz is an NC12 shareholder or simply a creditor. CR 105 ¶ 5 (Tab 2) (“all Intervenors are currently common shareholders of NC12, Inc.”); CR 108 ¶ 23 (Tab 2) (stating only that von der Goltz holds an NC12 promissory note). 15

[4] Although the title of the cause of action refers to “Statutory Fraud,” the intervenors do not reference any statute. See CR 132–33 (Tab 2).

[5] The bankruptcy court order treats NC12 as TSI’s successor and thus refers to them collectively as NC12. CR 211 (“NC12 began as a Texas limited liability company named Texas Syngas, LLC.”), CR 212 (“Texas Syngas was reorganized as a new Nevada corporation, Texas Syngas, Inc., in May 2006.”), CR 214 (“Also in 2009, Texas Syngas became NC12.”) (Tab 3). 16

[6] Although the title of the cause of action refers to “Statutory Fraud,” the intervenors do not reference any statute. See CR 132–33 (Tab 2).

[7] Judge Isgur’s Order also mentions “Intervenors’ aiding and abetting claims” relating to fraud. CR 237 (Tab 3). Since the intervenors did not plead an aiding and abetting claim ( see CR 129– 33 (Tab 2)), it is treated here as part of the conspiracy claim. 18

[8] The intervenors do not allege any other facts regarding AOM whatsoever, much less allege that AOM is a Texas entity or has offices in Texas. 19

[9] Preston’s special appearance was filed before the intervenors filed their petition. CR 74 (Tab 1); CR 102 (Tab 2).

[10] Preston, who was 61 years old at the time of his affidavit executed in 2011, resided in Texas for less than one year when he was an infant. See CR 86 ¶ 4 (Tab 1); CR 672 (Tab 6) (showing date of birth). 23

[11] There are no allegations that Preston made any misrepresentation, or any action in furtherance of any conspiracy to make any misrepresentation, while participating in any board meetings. 24

[12] It is not clear from the record whether these trips are distinct from those on which Preston attended MMT board meetings. CR 87 ¶ 5 (Tab 1).

[13] Preston initially mistakenly identified these trips as on behalf TEM Capital, and submitted a correction in a subsequent declaration. See CR 87 ¶ 5; CR 330–31 (Tab 4); CR 672 ¶ 5 (Tab 6). Former C Change director Russell Read testified C Change “effectively merged” into TEM Capital in 2011. CR 320 at 31:5–10 (Tab 4).

[14] In their special appearance briefing, Appellees refer to, but attach no evidence regarding, allegations made by nonparty EMC Cement, BV in an unrelated 2014 lawsuit suggesting that Preston made two other visits to Texas in August 2010 and January 2011 with C Change or TEM Capital. See CR 263–64 (Tab 4) (failing to attach EMC complaint). 27

[15] Kaiser brought suit on behalf of himself and “all similarly situated” members of Texas Syngas LLC. CR 432 (Tab 5). Quantum, a member of Texas Syngas LLC, had intervened in the Kaiser Litigation. CR 452 (Tab 5). 28

[16] Section IV is the same in both this brief and C Change’s appellant’s brief, excluding Section IV.B.4 of C Change’s brief. 33

[17] Appellees also argued that even though Preston supported his special appearance with a sworn affidavit attesting to every material fact, the special appearance was not verified. CR 264–65 (Tab 4). This argument has been explicitly rejected by this court. Washington DC Party Shuttle, LLC v. iGuide Tours, LLC , 406 S.W.3d 723, 731 (Tex. App.—Houston [14th Dist.] 2013, pet. denied) (en banc). 38

[18] Appellees also refer generally to Preston’s status as director of Nevada corporation MMT as supporting personal jurisdiction. CR 260–61, 269–70 (Tab 4). There is no allegation and no basis whatsoever to link Preston’s service as director of Nevada corporation MMT in the 1990s to any claim in this matter. See id. ; CR 287–89 (Tab 4); CR 132 ¶ 89 (Tab 2). 45

[19] Collins is not an intervenor, but an original plaintiff and former TSI/NC12 director whose fiduciary duty and conversion claims against Preston were dismissed and abated by the bankruptcy court. CR 234–37 (Tab 3). 48

[20] Preston does not recall this trip. CR 673 ¶ 6 (Tab 6). Read discusses the matter in context with his work with Preston at C Change. CR 323 at 49:13-24 (Tab 4). While it is not clear from the record whether this alleged trip occurred on behalf of MIT or C Change, either way, there is no evidence that it related in any way to Appellees’ surviving claims.

[21] Preston’s flight records establish these trips occurred April 2–3, 2009 (Houston) (CR 335–38), May 3–4, 2009 (Houston) (CR 343–44), December 30–31, 2010 (Dallas) (CR 347–48), and March 16–17, 2011 (Austin) (CR 345–46) (Tab 4). See also CR 672–73 ¶¶ 5–6 (Tab 6). As the intervenors affirmatively plead, the last intervenor’s investment was in August 2010. CR 104– 08 (Tab 2). Preston thus could not have made any relevant misrepresentations nor furthered the alleged conspiracy to misrepresent NC12’s value to the intervenors on the latter two trips. 49

[22] This rule is sometimes referred to as the fiduciary shield doctrine. Id . Appellees cite Wright for the proposition that Preston’s acts as a director can create personal jurisdiction if it is those acts which give rise to the lawsuit. CR 270 (Tab 4). However, that is only true in the case of specific jurisdiction, not general jurisdiction, as the Wright court explicitly noted. 137 S.W.3d at 250. As already discussed above, Appellees do not allege any acts by Preston in Texas—in his capacity as a director or otherwise—that relate to the claims in this case. 58

[23] Preston’s alleged 2004 contacts with Collins are discussed together in the next subsection. See section V.C.2(c), infra . 61

[24] Preston’s sworn declaration states that all his interactions with Collins during this time period were as a representative of Quantum. CR 673 ¶ 8 (Tab 6). Collins claims he believed Preston to be operating in his personal capacity, rather than as a representative of Quantum during these 2004 meetings and communications. CR 408–09 ¶¶ 3–9, 11 (Tab 4). 63

[25] Appellees rely heavily on documents produced in the Kaiser litigation showing discussions between JK Claims’ counsel and the bankruptcy trustee’s counsel, Gretchen McCord, in connection with the sale. CR 421–24 (Tab 5) (referencing “Ex. I,” at CR 548–80). While one half of the source of the funding is unclear, the other half is explicitly from Sydow. CR 564 (Tab 5). If the trustee objected to a defendant in the Kaiser litigation funding JK Claims’ acquisition of the Kaiser claims, the trustee would have objected to Sydow, who was also a defendant in the Kaiser litigation. CR 432 (Tab 5). 67

Case Details

Case Name: John T. Preston and C Change Investments, LLC v. Emjo Investments, Ltd. and H.J. Von Der Goltz

Court Name: Court of Appeals of Texas

Date Published: Jun 12, 2015

Docket Number: 01-15-00390-CV

Court Abbreviation: Tex. App.