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IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION VAPOR POINT, L.L.C.; KEITH NATHAN; And KENNETH MATHESON Plaintiffs, v. ELLIOTT MOORHEAD and NANOVAPOR FUELS GROUP, INC., Defendants.

Civil Action No. 4:11-cv-04639 Judge Vanessa Gilmore

Jury Demand

DEFENDANT ELLIOTT MOORHEADS AND NANOVAPOR FUEL GROUP, INC.S ORIGINAL ANSWER AND ORIGINAL COUNTERCLAIM COMES NOW, Defendant Elliott Moorhead (Moorhead) and NanoVapor Fuel Group Inc.s (NanoVapor) (collectively referred to as Defendants) and files this their Original Answer to Plaintiffs Original Complaint, denying all of Vapor Point, L.L.C.s (VaporPoint), Keith Nathans (Nathan) and Kenneth Mathesons (Matheson) (collectively referred to as Plaintiffs) claims 1, and files this their Original Counterclaim and complaining of Plaintiffs and others as follows: I. ORIGINAL ANSWER

1. Defendants are without knowledge or information sufficient to form a belief as to the truth of the allegations contained in paragraph 1 of Plaintiffs Complaint and, therefore, deny the same.

Each paragraph of Defendants Original Answer refers to the paragraph of the same number in Plaintiffs Original Complaint.

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2. Defendants are without knowledge or information sufficient to form a belief as to the truth of the allegations contained in paragraph 2 of Plaintiffs Complaint and, therefore, deny the same. 3. Defendants are without knowledge or information sufficient to form a belief as to the truth of the allegations contained in paragraph 1 of Plaintiffs Complaint and, therefore, deny the same. 4. Denied. Defendant Moorhead is a resident of the State of Maine and cannot be served in California. 5. Admitted. 6. Defendants are without knowledge or information sufficient to form a belief as to the truth of the allegations contained in paragraph 6 of Plaintiffs Complaint and, therefore, deny the same. 7. Defendants are without knowledge or information sufficient to form a belief as to the truth of the allegations contained in paragraph 7 of Plaintiffs Complaint and, therefore, deny the same. 8. Denied. 9. Denied. 10. Denied. 11. Denied. 12. Denied. 13. Denied. 14. Denied. 15. Denied.

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16. Denied. 17. Admitted in as far as Gary Wilkinson (Wilkinson) of NanoVapor Fuels Group, Inc. (NanoVapor) met Matheson in Dallas, Texas in July of 2007, but Wilkinson only discussed using Matheson for further product development, as the absorption technology developed by Defendant Moorhead was already commercially viable. In fact, Matheson joined NanoVapor seven (7) months after Moorheads provisional patent application was filed. Denied as to the reminder of the allegations. 18. Admitted in as far as Matheson was given a reciprocal confidentiality agreement (NDA) with NanoVapor, which Matheson signed. Denied as to the remainder because Wilkinson signed the NDA on July 11, 2007, and returned a copy to Matheson. (See Exhibit 1, signed NDA). 19. Denied. 20. Denied. 21. Denied. 22. Denied. 23. Denied. 24. Denied. Barry Rabons baseless letter is dated January 17, 2008. (See Exhibit 8, letter from Rabon to Moorhead). Edwards Olivers baseless letter is dated April 7, 2008. (See Exhibit 9, letter from Oliver to Wilkinson). 25. Denied. On December 21, 2007, Nathan sent an e-mail to Moorhead offering to license Moorheads 416 Application and any patent that may issue therefrom. (See Exhibit 10, December 21, 2007 e-mail from Nathan to Moorhead attaching a proposed license agreement). However, after NanoVapor would not license its technology, Nathan,

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Matheson, Alford and St. Amant began anew company named VaporPoint, utilizing technology, equipment, trade secrets, and the like from NanoVapor. 26. Admitted. 27. Defendants are without knowledge or information sufficient to form a belief as to the truth of the allegations contained in paragraph 27 of Plaintiffs Complaint and, therefore, deny the same. Nathan and Matheson had an obligation to assign all inventions to NanoVapor during their respective employments with NanoVapor, which ended on or about December 21, 2007. 28. No response is required. 29. Denied. 30. Denied. 31. Denied. 32. Denied. 33. Denied because Nathan and Matheson are not inventors of the claims of the 416 Application. Defendants counterclaim alleges that Matheson has acted with deceptive intent with respect to US 7,740,816 (the 816 patent, attached as Exhibit 2) and US 7,803,337 (the 337 patent, attached as Exhibit 3) in not naming Moorhead as at least a co-inventor, if not the sole inventor. 34. Admitted that Moorhead is the sole inventor of the claims of the 416 Application and the claims of the 310 patent. Denied as to the remaining allegations. 35. Denied. 36. Denied. 37. No response is required.

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38. Denied in as far Nathan and Matheson invented anything. Nathan and Matheson were under a duty to assign to NanoVapor anything they invented while employed at NanoVapor. Admitted in as far as Nathans employment agreement offered Nathan $250,000 of restricted common stock subject to a 2.5 year vesting period beginning May 1, 2007. (See, Exhibit 4, Nathan Employment Agreement, 7). However, as further explained herein, Nathan materially breached the terms of his Employment Agreement and failed to continue employment with NanoVapor for the vesting period. Admitted in as far as Mathesons employment agreement offered Matheson $200,000 of restricted common stock subject to a 2.5 year vesting period beginning August 1, 2007. (See, Exhibit 5, Matheson Employment Agreement, 7). However, as further explained herein, Matheson materially breached the terms of his Employment Agreement and failed to continue employment with NanoVapor for the vesting period. 39. Denied that Nathan and Matheson disclosed the Invention to Defendants and denied because compensation was paid to both Nathan and Matheson. Nathan was compensated for testing work he performed for NanoVapor on Moorheads invention, later issued as US 7,727,310 (the 310 patent). (See Exhibit 6, check stubs from NanoVapor to Nathan for wages). Matheson was compensated by NanoVapor through payment for Mathesons air travel to and from Hawaii and reimbursement of expenses. (See Exhibit 29, Expense Report of Matheson to NanoVapor). 40. Denied. 41. Denied. 42. Denied. 43. Denied.

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44. No response is required. 45. Admitted that Moorhead is the sole inventor of the claims of the 416 Application that eventually issued as the 310 Patent. Denied that Nathan and Matheson were inventors of any element of any claim of the 416 Application and the 310 Patent. Further denied that Defendants Moorhead or NanoVapor concealed either of the 416 Application or the assignment of the 310 Patent from Nathan and Matheson. 46. Denied. 47. Denied. 48. Denied. The filing of the 416 Application was discussed with Nathan on at least December 22, 2006. (See Exhibit 7, December 22, 2006 e-mail from Moorhead to, among others, Nathan). 49. Denied. 50. Denied. 51. Denied. Defendants disclosed all relevant information to both Nathan and Matheson. Defendants are without knowledge or information sufficient to form a belief as to the truth of the remaining allegations contained in paragraph 51 of Plaintiffs Complaint and, therefore, deny the same. 52. Denied. 53. No response is required. 54. Denied that Plaintiffs have any rights in the 310 Patent, the Invention, or the proceeds therefrom. 55. Denied. 56. No response is required.

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57. Admitted that NanoVapors 310 Patent is very valuable. Denied as to the remainder of the allegations. 58. Denied. 59. Denied. 60. Denied. 61. Denied. 62. Denied. 63. No response is required. 64. Denied. 65. Denied. 66. Denied. 67. Denied. 68. No response is required. 69. Denied. 70. Denied. 71. Denied. 72. Denied. II. GENERAL DENIAL

73. Pursuant to Rule 8(b)(3), of the Federal Rules of Civil Procedure, Defendants generally deny all of Plaintiffs allegations contained in each paragraph. III. AFFIRMATIVE DEFENSES

74. Defendants hereby incorporate paragraphs 1-73, as if fully set forth herein.

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75. While not admitting the validity of any of Plaintiffs claims, regardless of Plaintiffs pleadings, Plaintiffs cannot prevail because Plaintiffs are barred by the doctrines of laches and estoppel. 76. While not admitting the validity of any of Plaintiffs claims, regardless of Plaintiffs pleadings, Plaintiffs cannot prevail because Defendants had a license through both common law, the Shop Right Doctrine, and contract law, to practice any invention of Plaintiffs, as Plaintiffs were employees of NanoVapor. Defendants do not admit that Plaintiffs invented anything. 77. While not admitting the validity of any of Plaintiffs claims, regardless of Plaintiffs pleadings, Plaintiffs cannot prevail because Defendants paid Plaintiffs for any invention of Plaintiffs. Defendants do not admit that Plaintiffs invented anything. 78. While not admitting the validity of any of Plaintiffs claims, regardless of Plaintiffs pleadings, Plaintiffs cannot prevail because the statute of limitations bars Plaintiffs claims, which claims would have accrued on or before December 22, 2006. 79. While not admitting the validity of any of Plaintiffs claims, regardless of Plaintiffs pleadings, Plaintiffs cannot prevail because Plaintiffs waived any cause of action against Defendants due at least to the length of time between when the alleged causes of action accrued and when Plaintiffs filed suit. 80. While not admitting the validity of any of Plaintiffs claims, regardless of Plaintiffs pleadings, Plaintiffs cannot prevail because of Plaintiffs fraud in alleging that Nathan and/or Matheson are inventors of the 310 Patent.

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81. While not admitting the validity of any of Plaintiffs claims, regardless of Plaintiffs pleadings, Plaintiffs cannot prevail because Plaintiffs actions were calculated to place Wilkinson and/or Moorhead under duress. IV. COUNTERCLAIM

COMES NOW Counter-plaintiffs NanoVapor Fuels Group, Inc. and Elliott Moorhead and files this Counterclaim against Counter-defendants Vapor Point, L.L.C., Jeffrey St. Amant, Don Alford, Keith Nathan, and Kenneth Matheson, seeking correction of inventorship for US Patent Nos. 7,740,816 and 7,803,337 under 35 U.S.C. 256, and damages for patent infringement, misappropriation of trade secrets, fraud, breach of a fiduciary duty, tortious interference, tortious interference with prospective contractual relationship, breach of contract, and unjust enrichment, showing this Court as follows: A. Parties 82. Counter-plaintiff NanoVapor Fuels Group, Inc. (NanoVapor) is a corporation existing under the laws of the State of Delaware and with a principal place of business at 18135 Delta Estates Court, Cypress, Texas 77429. 83. Counter-plaintiff Elliott Moorhead (Moorhead) is an individual and a resident of the State of Maine. 84. Counter-defendant Vapor Point, L.L.C. (VaporPoint) is a limited liability company organized under the laws of the State of Louisiana with its principal place of business at 1400 South 16th Street, LaPorte, Texas 77571. VaporPoint may be served with process by serving its attorney Michael D. Pegues at Bracewell & Giuliani, LLP, 1445 Ross Avenue, Suite 3800, Dallas, Texas 75202.

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85. Counter-defendant Jefferey St. Amant (Amant) is an individual and a resident of the State of Texas. Amant may be served with process at his place of business at 1400 South 16th Street, LaPorte, Texas 77571. 86. Counter-defendant Don Alford (Alford) is an individual and a resident of the State of Texas. Alford may be served with process at his place of business at 1400 South 16th Street, LaPorte, Texas 77571. 87. Counter-defendant Kenneth Matheson (Matheson) is an individual and a resident of the Kingdom of Jordan. Matheson may be served with process by serving his attorney Michael D. Pegues at Bracewell & Giuliani, LLP, 1445 Ross Avenue, Suite 3800, Dallas, Texas 75202. 88. Counter-defendant Keith Nathan (Nathan) is an individual and a resident of the State of Texas. Nathan may be served with process by serving his attorney Michael D. Pegues at Bracewell & Giuliani, LLP, 1445 Ross Avenue, Suite 3800, Dallas, Texas 75202. B. Jurisdiction and Venue 89. This Court has jurisdiction over this action pursuant at least to 28 U.S.C. 1331, 1338, and 1367. 90. Venue is proper in this judicial district pursuant to 28 U.S.C. 1391(b) and (c) and 28 U.S.C. 1400(b). C. Relevant Factual Background 91. NanoVapor is an industry leader in the field of Volatile Organic Compound Containment. In 2006, NanoVapor products and processes included technologies for the suppression of combustible and toxic gases in fuel storage and transfer operations, using a specially designed Vapor Suppression System (VSS) to effectively control or nearly

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eliminate the creation of vapors during these processes. The VSS was solely developed by Elliott Moorhead. 92. NanoVapor products and processes had wide degassing applicability in the fields of: Cleaning degassed tanks Refilling of fuel tanks Frac tanks & vacuum trucks Oil field collection tanks Floating roof storage tanks Ship-to-shore terminals Ship-to-ship transfer Aviation Military Rail cars

93. Moorhead, in addition to being the Chief Executive Office of NanoVapor, is renowned in his field as an expert with numerous publications and patents to his name. 94. Seeking to locate itself in the Houston marketplace, Moorhead contacted an old acquaintance of his, Keith Nathan. In 2006, Nathan operated a warehouse in League City, Texas, where he rehabilitated used heat exchangers. In September of 2006,

NanoVapor, through Moorhead, began further development of its suppression technology in Nathans warehouse. 95. Moorhead previously met Nathan at an industry conference in circa. 2005. Nathan disclosed to Moorhead that he worked for the Continuum Chemical Corporation and that he was involved in a lawsuit with Continuum concerning various contract and tort causes of action, including the misappropriation of Continuums trade secrets by Nathan. 2 96. Nathan called Moorhead repeatedly over the next several months as the lawsuit against him proceeded, disclosing all facts related to the lawsuit to Moorhead.

The lawsuit was filed by Continuum on or about April 21, 2004.

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97. To settle the lawsuit, in or about July of 2006, Nathan paid a monetary damage award to Continuum and agreed that the technology in dispute was a trade secret of Continuum and that he was prohibited from using the trade secret methods, processes and systems. 98. While the lawsuit was pending, Nathan opened the heat exchanger rehabilitation warehouse in League City. While being somewhat wary of Nathan, given his legal troubles, Moorhead sought the space at Nathans warehouse for NanoVapor in an effort to expand the company. 99. However, even with the space in League City, Moorhead still needed testing assistance. Therefore, reluctantly, Wilkinson engaged Nathan for the testing services. To protect NanoVapor, Wilkinson had Nathan sign a Confidentiality Agreement, which was executed by all parties on August 31, 2006. (See Exhibit 24, August 31, 2006 CDA between Nathan and NanoVapor). In March of 2007, Wilkinson required Nathan to sign the NanoVapor Prospective Hire Acknowledgement which affirmatively states that Nathan will not use any property or trade secrets of his former employer while employed at NanoVapor. (See Exhibit 25, Prospective New Hire Form with Nathan). 100. Over the next several months, NanoVapor provided significant funding to Nathan

to purchase equipment, such as tanks and supplies in October and December of 2006, for the suppression technology. (See Exhibit 12, balance sheet for Nathans account). 101. In early December of 2006, Moorhead independently conceived of and reduced to

practice an absorption method for removing VOCs from hydrocarbon tanks. Moorhead memorialized his invention in provisional patent application 60/871,766, filed on December 22, 2006, with the United States Patent and Trademark Office (Moorheads Provisional Patent Application).

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102.

During the drafting of Moorheads Provisional Patent Application, Moorhead met

with Nathan and others regarding the confidentiality of his invention. As well, both potential investors and employees of NanoVapor were kept apprised of the progress of Moorheads Provisional Patent Application. (See Exhibit 7). 103. On December 21, 2006, NanoVapor began to purchase supplies for further

developing the new process memorialized in Moorheads Provisional Patent Application. (See Exhibit 28, NanoVapor Financial). Moorhead used Nathans technical skills solely for testing of the new and improved processes and systems disclosed in Moorheads Provisional Patent Application was filed. 104. In April of 2007, NanoVapor memorialized its employment of Nathan as the chief

Operating Officer. (See Exhibit 26, Employment Agreement with Nathan). However, Nathan never signed the Agreement. Moreover, as Nathan was underutilized as An employee at NanoVapor, he was only paid 40% of his salary. (See Exhibit 27, note from Wilkinson to Nathan). 105. To help with the sales and marketing, NanoVapor hired Don Alford in April of

2007 as Vice President of Business Development. (See Exhibit 13, e-mail from Alford to Wilkinson and Moorhead accepting position with NanoVapor). In June of 2007,

Wilkinson required Alford to sign the NanoVapor Prospective Hire Acknowledgement which affirmatively states that Alford will not use any property or trade secrets of his former employer while employed at NanoVapor. (See Exhibit 14, Prospective New Hire Form with Alford).

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106.

Alfords employment began with NanoVapor on May 1, 2007. However, Alford

did not execute the Employment Agreement sent to him. (See Exhibit 15, Employment Agreement with Alford). 107. Seeking to grow NanoVapors staff, Wilkinson met with Kenneth Matheson in

July of 2007 in Dallas, Texas. Matheson ran a company named Sabre Services in Hawaii. While Sabre Services was involved in the same general field of technology as NanoVapor, neither Sabre Services nor Matheson was working on the absorption process developed by Moorhead prior to Mathesons employment with NanoVapor. (See Exhibit 17, Sabre Service information sheet). After being shown the technology, Matheson was excited to join the NanoVapor team, even commenting that Moorheads technology was amazing. (See Exhibit 16, e-mail from Matheson to NanoVapor, 1st ). 108. Moorhead and Wilkinson hired Kenneth Matheson in August of 2007, to help

further refine the commercial embodiment of Moorheads invention. 109. In August of 2007, NanoVapor was quickly developing a commercially viable

embodiment of Moorheads invention that included numerous NanoVapor trade secrets. Several venture capital and private equity companies began to court NanoVapor for a capital infusion. 110. Upon information and belief, Nathan, Alford and Matheson also began to see the

value of NanoVapor and Moorheads technology and began a plot to steal the technology and wreck NanoVapors business, business plans and marketing plans. However,

Moorhead and Wilkinson were unaware of the nefarious intentions of Nathan, Alford, and Matheson.

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111.

A final commercial embodiment was developed by Moorhead, Wilkinson,

Nathan, and Matheson in October of 2007. The product was finally ready to be sold in the marketplace. (See Exhibit 18, pictures of commercial embodiment). 112. Discussions with the private equity firms were focused on a $5-10 million capital

investment resulting in a valuation of NanoVapor between $10 and $20 million. The private equity firms due diligence included lengthy interviews with each of NanoVapor executives, including Moorhead, Wilkinson, Nathan, Alford, and Matheson. During the interviews, each of Nathan, Alford and Matheson held themselves out as employees of NanoVapor. 113. Due to the sensitive nature of the negotiations and due diligence with the private

equity firm, it was decided that all communications, other than the personal interviews would go through Wilkinson. Each of Wilkinson, Moorhead, Nathan, Matheson, and Alford knew that it was vitally important that a cohesive management structure be presented to the private equity firm. 114. One aspect of the due diligence by the private equity firm was process and system

testing. The private equity firm used Flint Hills for the testing. The results of the testing showed that the processes and systems included in Moorheads Provisional Patent Application produced efficiency ratings of 98%, exceeding everyones expectations. (See Exhibit 1, Flint test results). Marvin Kirk of Flint Hills praised the results, clearly voicing his opinion that the process worked. (See Exhibit 20, November 15, 2007, e-mail from Kirk to Matheson). 115. On information and belief, Nathan, Alford and Matheson decided it was time to

act and steal the technology for their own purposes. Each of Matheson, Alford and

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Nathan contacted the private equity firm raising doubts about the technology and raising doubts about the cohesiveness of the management team at NanoVapor. 116. When Alford presented his market size forecast to NanoVapor, on information

and belief, each of Alford, Matheson and Nathan intended to steal NanoVapors technology and trade secrets in an attempt to usurp business opportunities with at least ExxonMobil, Flint Hills Resources, Chevron, Marathon Petroleum, ConocoPhillips, Valero, Citgo, Valero, Lubrizol, Total, BP, and others. (See Exhibit 21, Houston, market size forecast). 117. As a last effort to ruin NanoVapors business opportunities, at the December

2007, TCEQ meeting, each of Alford, Matheson and Nathan informed Wilkinson that they wanted twenty (20) percent equity stake each in NanoVapor. (See Exhibit 22, PDF from December 2007 TCEQ Meeting). Wilkinson declined to extend the twenty (20) percent equity stake in NanoVapor to each of Nathan, Matheson and Alford. December 21, 2007, each of Alford, Matheson and Nathan resigned from NanoVapor. 118. Immediately upon leaving, Alford, Matheson and Nathan formed VaporPoint to On

directly compete with NanoVapor, using NanoVapors technology, trade secrets, and equipment, including the frac tank scrubber at Proco. (See Exhibit 23, e-mail from Matheson to Wilkinson acknowledging that VaporPoint took NanoVapor equipment). D. Causes of Action a. Count I, Correction of Inventorship For US Patent Nos. 7,740,816 (The 816 Patent) Under 35 U.S.C. 256 119. herein. Counter-plaintiffs hereby incorporate paragraphs 1-118, as if fully set forth

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120. 121.

Moorhead made conceptual contributions to each of claims 1-8 of the 816 patent. Upon information and belief, Moorhead was unintentionally left off of the 816

patent as an inventor of the claimed subject matter of claims 1-8. 122. intent. 123. Moorhead is without knowledge or information sufficient to form a belief as to Upon information and belief, Moorheads non-joinder was without deceptive

whether St. Amant or Matheson are correctly named as inventors of the 816 patent. 124. As a result of being left off the inventorship of the 816 patent, Moorhead has

been damaged. 125. As a result of Moorhead being left off the inventorship of the 816 patent,

NanoVapor has been damaged and continues to suffer damages. 126. Pursuant to 35 U.S.C. 256, Moorhead seeks a Certificate of Correction naming

himself as an inventor of the 816 patent and providing for all other needed corrections of inventorship. b. Count II, Correction of Inventorship For US Patent Nos. 7,803,337 (The 337 Patent) Under 35 U.S.C. 256 127. herein. 128. 129. Moorhead made conceptual contributions to each of claims 1-9 of the 337 patent. Upon information and belief, Moorhead was unintentionally left off of the 337 Counter-plaintiffs hereby incorporate paragraphs 1-126, as if fully set forth

patent as an inventor of the claimed subject matter of claims 1-9. 130. Upon information and belief, Moorhead non-joinder was without deceptive intent.

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131.

Moorhead is without knowledge or information sufficient to form a belief as to

whether St. Amant or Matheson are correctly named as inventors of the 337 patent. 132. As a result of being left off the inventorship of the 337 patent, Moorhead has

been damaged. 133. As a result of Moorhead being left off the inventorship of the 337 patent,

NanoVapor has been damaged and continues to suffer damages. 134. Pursuant to 35 U.S.C. 256, Moorhead seeks a Certificate of Correction naming

himself as an inventor of the 337 patent and providing for all other needed corrections of inventorship. c. Count III, Infringement of US 7,727,310 135. herein. 136. On June 1, 2010, United States Patent No. 7,727,310 B1 (the 310 Patent), Counter-plaintiffs hereby incorporate paragraphs 1-134, as if fully set forth

entitled System and Method for Removing Volatile Vapors from Containers, was duly and legally issued by the United States Patent and Trademark Office. A true and correct copy of the 310 Patent is attached as Exhibit 30 to this Complaint. 137. Counter-plaintiff NanoVapor is the assignee and owner of the right, title, and

interest in and to the 310 Patent, including the right to assert all causes of action arising under said patent and the right to any remedies for infringement of it. 138. Without license or authorization, Counter-defendant VaporPoint is and has been

infringing the 310 Patent, in the United States, including in this district, by making, using, selling, offering for sale or license, advertising and/or importing in the United States, including within this judicial district, its products and services and using systems,

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methods and instrumentalities that embody the inventions claimed in the 310 Patent. Such acts constitute infringement under at least 35 U.S.C. 271(a). Among such infringing products and services is the VaporPoint VaporLock process advertised at www.vaporpoint.net. 139. NanoVapor has been damaged by VaporPoints infringing activities with respect

to the 310 patent and continues to suffer damages. 140. Counter-defendants infringement is willful and Counter-plaintiff is entitled to a

trebling of damages and attorneys fees. d. Count IV, Misappropriation of Trade Secrets 141. herein. 142. NanoVapor has developed and owns numerous trade secrets related to Volatile Counter-plaintiffs hereby incorporate paragraphs 1-140, as if fully set forth

Organic Compound Containment, including, without limitation, system plans, customer lists, process diagrams, process characteristics, pricing lists, and the like. 143. NanoVapor took appropriate steps to keep such trade secrets as confidential

including, at least, but not limited to, making all employees sign confidentiality agreements and contractual relationships. 144. Counter-defendants Alford, Matheson and Nathan obtained NanoVapors trade

secrets in violation of certain employment agreements and confidentiality agreements. 145. Counter-defendants Alford, Matheson and Nathan used NanoVapors trade

secrets, in at least, but not limited to, the formation and marketing of VaporPoint. 146. As a result of Counter-defendants Alfords, Mathesons and Nathans actions,

NanoVapor has been damaged and continues to suffer damage.

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147. 148.

NanoVapor is entitled to recover exemplary damages and court costs. NanoVapor is entitled to injunctive relief based upon Counter-defendants

misappropriation of trade secrets. e. Count V, Texas Theft Liability Act 149. herein. 150. Counter-defendants Alfords, Mathesons, St. Amants and Nathans conduct Counter-plaintiffs hereby incorporate paragraphs 1-148, as if fully set forth

constitutes a violation of the Texas Theft Liability Act, TEX. CIV. P. & REM. CODE 134.001-134.005, as Counter-defendants Alfords, Mathesons, St. Amants and Nathans conduct constitutes a theft and communication of trade secrets. 151. Counter-plaintiff NanoVapor has certain possessory rights to property,

specifically the above referenced trade secrets, stolen by Counter-defendants. With full knowledge of Counter-plaintiffs superior possessory rights, Counter-defendants unlawfully appropriated, secured, and stole the subject property. 152. By using NanoVapors technology, trade secrets, and equipment, including the

frac tank scrubber from Proco. Counter-defendants unlawfully appropriated Counterplaintiff NanoVapors property. Counter-defendants unlawful taking was accomplished with the intent to deprive NanoVapor of its right in and to the property, and caused NanoVapor to suffer damages as a result of the theft. 153. NanoVapor is entitled to its attorneys fees when it prevails on these claims. f. Count VI, Fraud 154. herein. Counter-plaintiffs hereby incorporate paragraphs 1-153, as if fully set forth

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155.

Counter-defendants Alford, Nathan and Matheson made material representations

to NanoVapor concerning at least, but not limited to, their employment with NanoVapor in that Counter-defendants intended to steal NanoVapors trade secrets, technology and equipment. In fact, Nathan has a history of misappropriation of trade secrets. 156. The material representations made by Counter-defendants were known by

Counter-defendants to be false. 157. Counter-defendants intended for NanoVapor to rely upon and act upon the

misrepresentations by hiring Counter-defendants. 158. NanoVapor did in fact act upon and rely upon the misrepresentations and hired

Counter-defendants. 159. NanoVapor was injured by the misrepresentations both directly and

consequentially, including at least the lost private equity firm capital infusion. 160. In addition to actual and compensatory damages, NanoVapor is further entitled to

collect exemplary damages. g. Count VII, Breach of Fiduciary Duty 161. herein. 162. As Executives and corporate officers of NanoVapor, Matheson, Nathan and Counter-plaintiffs hereby incorporate paragraphs 1-160, as if fully set forth

Alford had a fiduciary duty to NanoVapor that included at least a duty not to compete with NanoVapor, duty to act with candor toward NanoVapor, duty to refrain from selfdealing, duty not to usurp NanoVapors business opportunities, duty not to steal NanoVapors trade secrets, duty to act with fair and honest dealing, duty to act with integrity, duty to fully disclose, duty of loyalty, and the like.

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163.

Counter-defendants Matheson, Nathan and Alford breached one or more fiduciary

duties as disclosed herein. 164. NanoVapor is entitled to its actual damages, exemplary damages and for a

constructive trust on the assets of VaporPoint. h. Count VIII, Tortious Interference With Business Relationships 165. herein. 166. Counter-plaintiff NanoVapor had a valid contract with at least Otto Ewer of Counter-plaintiffs hereby incorporate paragraphs 1-164, as if fully set forth

Proco, and others. 167. Counter-defendants Alford, Nathan, St. Amant, and Matheson willfully and

intentionally interfered with the contract such that Otto Ewer will no longer do business with NanoVapor and to such an extent that NanoVapor was deprived of their equipment. 168. Counter-defendants Alfords, Nathans, St. Amants, and Mathesons conduct

proximately caused Counter-plaintiff NanoVapors injuries. 169. NanoVapor incurred actual injury at least to the measure of the lost capital

infusion from the private equity firm. 170. NanoVapor is entitled to recover actual damages and exemplary damages. i. Count IX, Tortious Interference With Prospective Business Relationships 171. herein. 172. There was a reasonable probability that NanoVapor would have entered into a Counter-plaintiffs hereby incorporate paragraphs 1-170, as if fully set forth

business relationship with at least ExxonMobil, Flint Hills Resources, Chevron,

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Marathon Petroleum, ConocoPhillips, Valero, Citgo, Valero, Lubrizol, Total, BP, and others. 173. Counter-defendants Alford, St. Amant, Matheson and Nathan intentionally

interfered with NanoVapors relationship with the prospective parties. 174. Counter-defendants Alfords, St. Amants, Mathesons and Nathans conduct was

independently tortious. 175. Counter-defendants Alfords, Nathans, St. Amants, and Mathesons conduct

proximately caused Counter-plaintiff NanoVapors injuries. 176. NanoVapor incurred actual injury at least to the measure of the lost capital

infusion from the private equity firm. 177. NanoVapor is entitled to recover actual damages and exemplary damages. j. Count X, Breach of Contract 178. herein. 179. NanoVapor entered into valid and binding contracts, namely confidentiality Counter-plaintiffs hereby incorporate paragraphs 1-177, as if fully set forth

agreements with Alford, Nathan and Matheson. 180. 181. NanoVapor substantially performed its obligations under the contracts. Counter-defendants Alford, Nathan and Matheson breached their terms of the

contracts by at least opening VaporPoint. 182. Counter-plaintiff is entitled to actual damages and its attorneys fee. k. Count XI, Unjust Enrichment 183. herein. Counter-plaintiffs hereby incorporate paragraphs 1-182, as if fully set forth

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184.

Counter-defendants have retained, or are in the process of retaining, for their own

use and benefit, NanoVapors rights in and to the technology, trade secrets, and equipment, including the frac tank scrubber at Proco, and any proceeds therefrom. 185. As a direct and proximate result of Defendants acts, Plaintiffs have been

damaged and Defendants have been unjustly enriched. If Defendants are allowed to continue to retain rights in and to and/or practice the technology, trade secrets, and equipment, including the frac tank scrubber at Proco, they will continue to be unjustly enriched to the further detriment of NanoVapor. 186. Counter-defendants Alfords, Nathans, St. Amants, and Mathesons conduct

proximately caused Counter-plaintiff NanoVapors injuries. 187. NanoVapor incurred actual injury at least to the measure of the lost capital

infusion from the private equity firm. 188. NanoVapor is entitled to recover actual damages and exemplary damages. V. PRAYER FOR RELIEF AND JURY DEMAND

WHEREFORE, PREMISES CONSIDERED, Moorhead and NanoVapor respectfully pray that the Court render judgment that the Plaintiffs claims be denied, that a take-nothing judgment be entered in favor of Defendant, Defendants recover their reasonable and necessary attorneys' fees and court costs from Plaintiffs for defending these baseless allegations, and that Defendants be awarded such other and further relief to which he may be justly entitled. As Counter-plaintiffs, Moorhead and NanoVapor respectfully pray that the Court enter an Order and Final Judgment, as follows: a. An Order and Certificate correcting the inventorship of both the 816 patent and the 337 patent by adding Elliott Moorhead as an inventor;

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b. Actual damages for VaporPoints infringing activities with respect to the 310 patent; c. Trebling of damages and attorneys fees for VaporPoints willful infringement of the 310 Patent; d. Actual and exemplary damages for Counter-defendants misappropriation of trade secrets; e. injunctive relief based upon Counter-defendants misappropriation of trade secrets; f. actual damages to compensate for Counter-defendants liability under the Texas theft liability act and attorneys fees; g. actual and exemplary damages to compensate for Counter-defendants liability for fraud; h. actual and exemplary damages to compensate for Counter-defendants liability for breach of a fiduciary duty; i. actual and exemplary damages to compensate for Counter-defendants liability for tortious interference; j. actual and exemplary damages to compensate for Counter-defendants liability for tortious interference with prospective business relationships; k. actual and attorneys fee to compensate for Counter-defendants breach of contract; l. actual and exemplary damages to compensate for Counter-defendants liability for unjust enrichment; and, m. Court costs; and, n. All other relief in the law and equity for which Defendants/Counter-plaintiffs

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show themselves to be justly entitled. Respectfully submitted, /s/ William P. Ramey, III William P. Ramey, III Texas State Bar No. 24027643 Federal Bar No. 27206 william.ramey@novakdruce.com Ramey & Browning, PLLC 2200 North Loop West, Suite 106 Houston, Texas 77018 713-426-3923 (Telephone) 832-900-4941 (Facsimile) Attorney for Defendants Elliott Moorhead and NanoVapor Fuels Group, Inc. CERTIFICATE OF SERVICE I hereby certify that on the 5th day March, 2012, a true and correct copy of the foregoing has been served on all counsel of record listed below:

Michael D. Pegues Bracewell & Giuliani, LLP 1445 Ross Avenue, Suite 3800 Dallas, Texas 75202 Via ECF system Attorney for Plaintiffs

/s/ William P. Ramey, III