IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No. PROPEL LABS, INC.

, a Colorado corporation, Plaintiff, v. JOHN L. SCHENK, Defendant.

COMPLAINT AND JURY DEMAND

COMES NOW the Plaintiff, Propel Labs, Inc., by and through its counsel, Erik G. Fischer, P.C., and asserts the following Complaint against the above named Defendant, stating as follows: Parties 1. Plaintiff, Propel Labs, Inc., is a corporation organized pursuant to the laws of the State

of Colorado with its principal address at 131 Lincoln Avenue, Fort Collins, Colorado 80524. 2. Defendant, John L. Schenk, is an individual residing at 1906 Constitution Avenue,

Fort Collins, Colorado 80526. Jurisdiction and Venue 3. Jurisdiction and venue are appropriate in the Federal Court in the District Court of

Colorado as all parties are citizens of the State of Colorado and that the action involves substantial issues concerning Federal patent law thus mandating that the Federal Courts have exclusive jurisdiction over this claim pursuant to 28 U.S.C. 1338.

General Allegations 4. In February of 2010, Plaintiff, Propel Labs, Inc., entered into an agreement with

Defendant to assign all rights in various inventions relating to the magnetic sperm enrichment process. 5. On October 1, 2010, Plaintiff entered into a subsequent agreement with Defendant

wherein Defendant agreed to assign all rights to these inventions to Plaintiff for valuable consideration. 6. Further, Defendant had entered into a non-disclosure agreement with Plaintiff dated

January 26, 2010 wherein Defendant agreed not to disclose any confidential information for a period of three years concerning the issues related to the magnetic sperm enrichment invention. 7. The Defendant has violated, or threatened to violate, all three of these agreements by

words and conduct wherein Defendant has threatened to disclose information relating to the magnetic sperm enrichment process to Sexing Technologies, a known competitor of Propel Labs, Inc. 8. In addition, Defendant has further contacted and influenced or attempted to influence

a consultant of Plaintiff, Kristie Melnik. 9. That based upon the Defendants contacts with Ms. Melnik, Ms. Melnik has refused

to continue her consultation with Plaintiff regarding the magnetic sperm enrichment process. 10. That Plaintiff has filed a Patent Application PROP.04USP1 Sperm Enrichment

Using Continuous Magnetic Flow Sorting that is directly based upon these agreements and its work, as well as the work of the Defendant, in this process.

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That substantial rights concerning the Patent and the existing Patent Application will

be affected by the Defendants breach of the various agreements as asserted herein. First Claim for Relief (Breach of Contract) 12. 13. Plaintiff incorporates the above paragraphs as though fully set forth herein. Pursuant to the three agreements identified above, the Defendant had certain

contractual duties to Propel Labs, Inc. of Fort Collins, Colorado. 14. That the Defendant has breached his contracts with Plaintiff, or has threatened to

breach is contract, with Propel Labs, Inc. by disclosing confidential information or threatening to disclose confidential information to known competitors of Plaintiff. 15. That Defendant has further breached his contract by failing to assign rights to the

Patent to Plaintiff as agreed to between by the parties. 16. That Defendant has also breached his contract with Plaintiff by contacting Kristie

Melnik and through words or communications with Ms. Melnik has caused Ms. Melnik to discontinue her relationship with Plaintiff. 17. Plaintiff is entitled to an amount of damages to be proven at trial based upon said

breaches of the agreements. Second Claim for Relief (Preliminary Injunction) 18. 19. Plaintiff incorporates the above paragraphs as though fully set forth herein. There is a serious risk of immediate, irreparable injury to Plaintiff through the

unauthorized and improper actions of Defendant.

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The injury which is threatened to Plaintiff can be avoided only by granting a

preliminary injunction against Defendant, and/or his employees, agents and/or representatives, to cease and desist from making any use of Plaintiffs confidential and trade secret information, asserting any right, title or interest in any of Plaintiffs proprietary information, records or patents, taking any other actions that may interfere with Plaintiffs right, title and interest in its contacts and business relationships with its customers, contractors, employees or others, or taking any other action in violation of Plaintiffs rights in its trade secrets. 21. The preliminary injunction Plaintiff seeks against Defendant would require Defendant

only to do what he agreed to do in his contracts with Plaintiff and that Defendant is prohibited from doing under applicable law and would not prevent Defendant from taking any action he has a right to take. 22. Therefore, the potential for damages or injury to Defendant resulting from a

preliminary injunction is minimal and the security for the preliminary injunction should be in a minimal amount. 23. That Plaintiff has no adequate remedy at law and Plaintiffs damages, if proprietary

information should be disclosed to others, would be incalculable. Third Claim for Relief (Misappropriation of Trade Secrets) 24. 25. Plaintiff incorporates the above paragraphs as though fully set forth herein. The trade secret provisions of the contracts entered into between the parties properly

describe Plaintiffs confidential and proprietary information and are valid and enforceable under Colorado law.

26. secrets as

Plaintiffs confidential information about its patent pending technology are also trade defined and protected by the Colorado Uniform Trade Secrets Act,

C.R.S. 7-74-101-110. 27. Plaintiff has rights in its confidential and proprietary information that Plaintiff may

enforce against Defendant under the Colorado Uniform Trade Secrets Act. 28. Defendant has misappropriated and threaten to continue to misappropriate Plaintiffs

trade secrets which include, but are not limited to, confidential proprietary information about Plaintiffs patents, financial and business information, manufacturing of products, and other confidential and proprietary information relating to Plaintiffs business. 29. Defendant is a person who has, within the meaning of C.R.S. 7-74-102,

misappropriated Plaintiffs trade secrets by acquiring trade secrets of Plaintiff knowing or with reason to know he acquired the trade secrets by improper means or by disclosing or using Plaintiffs trade secrets without its express or implied consent and, at the time of disclosure or use, Defendant knew or had reason to know that he acquired the trade secrets by improper means or that he acquired Plaintiffs trade secrets under circumstances giving rise to a duty to maintain their secrecy. 30. Plaintiff derives economic value from its trade secrets and has made reasonable

efforts to keep such information secret. 31. Defendants misappropriation and misuse of Plaintiffs trade secrets are malicious,

willful, wanton and done with full knowledge and intent to injure Plaintiff in its trade or business. 32. Plaintiff will suffer immediate and irreparable damage unless and until Defendant

is required by a court order to comply with the requirements of the contracts entered into between

the parties and Defendant is required by a court order to cease and desist with his violations of Plaintiffs rights in its trade secrets. 33. There is no adequate remedy at law for Defendants violation of Plaintiffs rights in

its trade secrets. 34. In addition to damages, injunctive relief against Defendant is appropriate because

monetary damages will be impossible to calculate if they continue to misappropriate Plaintiffs trade secrets. Fourth Claim for Relief (Breach of Fiduciary Duty) 35. 36. 37. Plaintiff incorporates the above paragraphs as though fully set forth herein. A relationship of trust and confidence existed between Defendant and Plaintiff. Defendant owed fiduciary duties to Plaintiff by virtue of the agreements entered into

between the parties under which Defendant accepted responsibilities to Plaintiff in exchange for monetary consideration. 38. Defendants fiduciary duties required him to act with an extreme measure of candor,

unselfishness and good faith toward Plaintiff. 39. 40. Plaintiff justifiably reposed trust and confidence in Defendant. Through his acts and omissions described above, Defendant breached his fiduciary

duties to Plaintiff. 41. fiduciary duty. Plaintiff has been damaged as the direct and natural result of Defendants breach of

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Plaintiff is entitled to an award of damages equal to the damages Plaintiff has

incurred and is reasonably likely to incur in the future as the direct and natural result of Defendants breach of fiduciary duty. Fifth Claim for Relief (Tortious Interference With Business Relations) 43. 44. Plaintiff incorporates the above paragraphs as though fully set forth herein. Plaintiff had a contract with Kristie Melnik in which Ms. Melnik agreed to provide

consulting services to Plaintiff. 45. 46. The Defendant knew, or reasonably should have known, that the contract existed. The Defendant, by words or conduct or both, intentionally caused Ms. Melnik not

to perform/to terminate her contract with Plaintiff. 47. The Defendants interference with the contract was improper and the Defendants

interference with the contract has caused Plaintiff damages in an amount to be proven at trial. WHEREFORE, Plaintiff respectfully requests this Honorable Court enter judgment in favor of Plaintiff and against Defendant as follows: A. For actual damages that Plaintiff is entitled to recover as a result of Defendants breach of contract and violation of the Colorado Trade Secrets Act. For incidental, consequential, and exemplary and/or punitive damages as permitted by the Colorado Trade Secrets Act. For equitable and/or injunctive relief as permitted by the Colorado Trade Secrets Act. For Plaintiffs attorney fees and costs as permitted by the Colorado Trade Secrets Act and contract. Interest on said damages at the statutory rate 7

B.

C.

D.

E.

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For any such other relief as the Court deems appropriate.

THE PLAINTIFF HEREBY DEMANDS A JURY TRIAL.

Dated this 1st day of July, 2011.

Erik G. Fischer, P.C.

/s/ Erik G. Fischer Erik G. Fischer, #16856 Erik G. Fischer, P.C. 125 S. Howes Street, Suite 900 Fort Collins, CO 80521 Telephone: (970) 482-4710 Facsimile: (970) 482-4729 efischer@egfpclaw.com Attorney for Plaintiff

Cochran Freund & Young LLC

/s/ William W. Cochran William W. Cochran 2026 Caribou Drive, Suite 201 Fort Collins, CO 80525 Telephone: 970-492-1100 Facsimile: 970-492-1101 Email: billc@patentlegal.com Co-counsel for Plaintiff