amended complaint against ncdncr & the friends of queen anne's revenge by intersal

7/24/2019 Amended Complaint Against NCDNCR & the Friends of Queen Anne's Revenge by Intersal

1/58

NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE

SUPERIOR COURT DIVISION

WAKE COUNTY File No. 15-CvS-9995

Intersal, Inc.,

Plaintiff,

v.

Susan Kluttz, Secretary, North Carolina

Department of Cultural Resources

(NCDCR), North Carolina Department ofCultural Resources (NCDCR), and State of

North Carolina,

Defendants.

MOTION FOR LEAVE TO FILE FIRST

AMENDED COMPLAINT

Plaintiff, by and through the undersigned counsel, moves the Court, pursuant to Rule 15 of

the North Carolina Rules of Civil Procedure, for leave to file its First Amended Complaint. In

support hereof, Plaintiff shows the Court the following:

1. Plaintiff filed this action on July 27, 2015.

2.

Defendants were properly served with the Summons and Complaint.

3. Defendants transferred this action to Business Court on September 4, 2015.

4. Subsequent to the filing of this action, the North Carolina General Assembly

enacted, Session Law 2015-218 on August 11, 2015, the same being signed by the Governor on

August 18, 2015.

5. SECTION 4.(a) of Session Law 2015-218 attempts to undermine Plaintiffs claims

for relief, creating serious constitutional issues.

6. Defendants filed their Answer on October 7, 2015, raising allegedly public policy

issues in part precipitated by the enactment of SECTION 4.(a) of Session Law 2015-218.


2/58

2

7. The Joint Case Management Report was submitted to the Court on October 26,

2015.

8. Rule 15 provides that leave [to amend a complaint] shall be freely given when

justice so requires.

9. Plaintiff should be granted leave to amend as there is no apparent reason to deny

leave to amend and no prejudice that can be demonstrated that would result from grant of such

leave.Madry v. Madry, 106 N.C.App. 34, 415 S.E.2d 74 (1992).

10. It is well established that denying leave to amend is limited to the following

justifications: (1) undue delay; (2) bad faith or dilatory tactics; (3) undue prejudice; (4) futility of

amendment; and (5) repeated failure to cure defects by previous amendments. Isenhour v.

Universal Underwriters Ins. Co., 345 N.C. 151, 478 S.E.2d 197 (1996) (motion for leave to amend

denied after more than five years from filing of the original complaint); Smith v. McRary, 306 N.C.

664, 295 S.E.2d 444 (1982) (no error in denying motion to amend when facts sought to be added

were irrelevant to the cause and denial created no prejudice); United Leasing Corp. v. Miller, 60

N.C. App. 40, 298 S.E. 2d 409 (1982) (denying plaintiffs right to amend to add a new claim for

relief on the date of defendants motion to dismiss after completed discovery when trial was only

one month away).

11. None of the aforestated bases for denial exists.

12. The amendment is contemplated in the Joint Case Management Report

13. Amendment is necessary to add a necessary party Defendant and add additional

necessary claims for relief.

14. The amendment will have no effect on the timely disposition of this matter.

15. There is no prejudice to the Defendants if Plaintiffs Motion is granted.


3/58

3

16. Attached hereto as Exhibit A, is the proposed First Amended Complaint for

Plaintiff.

WHEREFORE, the Plaintiff respectfully requests that the Court grant the Plaintiff Leave

to file its First Amended Complaint as set forth on Exhibit A, pursuant to Rule 15 of the North

Carolina Rules of Civil Procedure.

This the 2ndday of November, 2015.

/s/______________________________

David H. Harris, Jr.State Bar No. 9841

Linck Harris Law Group, PLLC

2530 Meridian Parkway, Suite 300Durham, North Carolina 27713

919-806-4220

866-274-0756 (Fax)[email protected]

Counsel for Plaintiff
mailto:[email protected]:[email protected]:[email protected]


4/58

EXHIBIT 1

NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE

SUPERIOR COURT DIVISIONWAKE COUNTY File No. 15-CvS-9995

Intersal, Inc.,

Plaintiff,

v.

Susan Kluttz, Secretary, North CarolinaDepartment of Cultural Resources, North

Carolina Department of Cultural Resources,State of North Carolina, and Friends ofQueen Annes Revenge,

Defendants.

FIRST AMENDED COMPLAINT AND

MOTION FOR RULE 65 RELIEF

JURY TRIAL DEMANDED

AMEND

INTRODUCTION

1. This is an action for breach of contract, infringement of intellectual property rights

and civil conspiracy, as well as constitutional claims precipitated by Legislative action taken and

arguments already raised by Defendants. Intersal is seeking declaratory and injunctive relief and

damages. All Exhibits to this Complaint are incorporated herein by reference as if fully set out.

JURISDICTION AND VENUE

2. The Court has jurisdiction over the subject matter of this action pursuant to, inter

alia, N.C. Gen. Stat. 7A-240, 7A-243, 7A-245 and 7A-248.

3. The Court has jurisdiction over the persons of Defendants pursuant to one or more

provisions of N.C. Gen. Stat. 1-75.4.

4. Venue lies in the Court pursuant to N.C. Gen. Stat. 1-82 and 7A-45.4(b).


5/58

2

PARTIES

PLAINTIFF

5. Plaintiff Intersal, Inc. (Intersal) is a corporation duly incorporated in and validly

existing pursuant to the laws of the State of Florida and is duly registered in North Carolina.

STATE DEFENDANTS

6. Defendant Susan Kluttz is Secretary of the North Carolina Department of Natural

and Cultural Resources, and is being sued in her official capacity.

7. Defendant North Carolina Department of Natural and Cultural Resources, formerly

North Carolina Department of Cultural Resources,

1

hereinafter referred to as DNCR or DCR

or Department, is an Executive Agency of the State of North Carolina pursuant to Chapter 143B,

Article 1, of the North Carolina General Statutes.

8.

Defendant State of North Carolina (State) is a State of the United States of

America and, as such, is subject to the Constitution of the United States and the Constitution of

North Carolina. References to the State, as the context requires, include actions by the North

Carolina General Assembly and the Governor.

9. Susan Kluttz, DNCR and the State of North Carolina, shall hereinafter be

collectively referred to as the State Defendants.

NON-STATE DEFENDANT

10. Defendant Friends of Queen Annes Revenge (FoQAR) is a nonprofit

corporation duly organized and existing pursuant to the laws of the State of North Carolina.

1Pursuant Session Law 2015-241, SECTION 14.30.(a), ratified and approved on September 18, 2015, the NorthCarolina Department of Cultural Resources was renamed the North Carolina Department of Natural and CulturalResources.


6/58

3

11. All references to each Defendant or Defendants includes their respective officials,

officers, employees, agents, attorneys and contractors pursuant to the doctrine of Respondeat

Superior.

NON-PARTIES

12. Nautilus Productions, LLC (Nautilus) is a limited liability company duly

organized and existing pursuant to the laws of the State of North Carolina. Rick Allen is the Owner

of Nautilus.

FACTUAL ALLEGATIONS

13.

Intersal is a successful and well-respected marine research and recovery

corporation.

14. On November 21, 1996, operating under a valid search permit (96BUI585) issued

to it by DNCR, Intersal discovered what is believed to be Pirate Blackbeards Flagship, Queen

Annes Revenge(QAR), near Beaufort Inlet, North Carolina, just over a mile off Bogue Banks.

The identity of the site was confirmed by the number and size of the cannon and anchors exposed

on the sand bottom, and by examination and dating of the various artifacts recovered.

15. Intersals discovery of QARwas based on historical research provided by Intersals

then-president, Philip Masters, as well as trade secret survey data and other information gathered

and developed by Intersal.

16. Rather than immediately securing its rightful claim to three-quarters of any QAR

treasure found as specified in Intersals QARsearch permit, or file an In Remaction in federal

court in Admiralty, Intersal, being more interested in exclusive possession QARProject2media

and replica rights and continued renewal of theEl Salvadorsearch permit (DCR BUI584), Intersal

2 The term "Project" or QAR Project or project refers all survey, documentation, recovery, preservation,conservation, interpretation and exhibition activities related to any portion of the shipwreck of QARor its artifacts.


7/58

4

negotiated with the State Defendants, and, on September 1, 1998, twenty (20) months after the

initial discovery of QAR, executed an Agreement with the State Defendants (hereinafter referred

to as the 1998 Agreement). Exhibit 1, pp. 11-23.

17. The 1998 Agreement, inter alia, granted Intersal the commercial rights to:

A. Partner in all aspects of the QARProject, including oversight and exhibition

activities;

B. Produce high quality exact or miniature replicas of any Blackbeard artifacts

of Intersals choosing (each of these replicas must be numbered as part of a limited edition);

and

C. Exclusive right to all commercial narrative of the Project, including all

operational and exhibition activities; and right to produce, co-produce or commission a

documentary film (or series of films) detailing the story of the research, search for,

discovery, and salvage of QAR.

18. Additionally, pursuant to the 1998 Agreement, Intersal agreed to forego entitlement

to its share of any coins and precious metals recovered from the QARsite so that all QARartifacts

remain as one intact collection, and to permit DNCR to determine ultimate disposition of the

artifacts.

19. Also, in the 1998 Agreement, DNCR stated its belief that Intersals efforts

connected to QAR and El Salvador are of benefit to the historical heritage of the State, and

recognized Intersals efforts and participation in the QAR Project as sufficient to satisfy any

performance requirements associated with annual renewal of IntersalsEl Salvadorsearch permit

(DCR BUI584), and for the life of this agreement, renewal of said permits cannot be denied

without just cause. 1998 Agreement, 33.


8/58

5

20. Further, the 1998 Agreement provided in pertinent part that:

Intersal shall have the exclusive right to make and market all commercialnarrative (written, film, CD Rom, and/or video) accounts of Project relatedactivities undertaken by the Parties.All Parties agree to cooperate in the making

of a non commercial educational video and/or film documentary, or series of suchdocumentaries, as long as there is no broadcast originating outside of NorthCarolina, and there is no distribution or dissemination for sale of the saideducational documentary without Intersals written permission. Intersal shallhave the exclusive rights to make (or have made) molds or otherwise reproduce (orhave reproduced) any QARartifacts of its choosing for the purpose of marketingexact or miniature replicas.

21. In 2004, the QAR became a federally protected site when it was listed on the

National Register of Historic Places, Federal Site Number 31CR314.

22.

The 1998 Agreement was renewed pursuant to Paragraph 36 of the 1998

Agreement, exercised in writing to DNCR by QARProject 1998 Agreement partners, via letters

dated 10/28/12 and 12/4/12, respectively, and was amended at least once (Exhibit 1, pp. 24-25).

23. For more than a decade, Nautilus and Intersal have maintained a contractual

relationship in which Nautilus acts as Intersals QAR Video Designee, for both the 1998

Agreement and the QARSettlement Agreement. Nautilus performs this service on a volunteer

basis, and receives no remuneration from Intersal. Nautilus Productions owns all the digital media

and the copyright to the footage it shoots as Intersals QARVideo Designee. Intersal receives 25%

of gross proceeds from Nautilus licensing of QAR footage gathered while serving as Intersals

QARVideo Designee. By definition, Nautilus is an independent contractor, not a subsidiary or

joint partner with Intersal in the QARProject.

24.

DNCR violated the 1998 Agreement in a number of respects, including, without

limitation:

A. Failure to recognize the validly executed 1998 Agreement contract renewal

option, 1998 Agreement 36;


9/58

6

B. Violation of 1998 Agreement conflict of interest provisions, by DNCR

employees with specific responsibility for oversight of QAR Project and Intersals El

Salvador search permit (DCR BUI584), by serving on the FoQAR board of directors,

including the FoQAR Treasurer, whose spouse received ten thousand dollars ($10,000)

from FoQAR as part of a contract with an independent media company, which was

executed by the FoQAR board (1998 Agreement 23);

C. Undertaking a pattern of obstruction, delay, and failure to follow established

procedure, by the same DNCR employees with specific oversight responsibility referenced

in subparagraph B above, concerning permit renewal process for Intersals El Salvador

search permit (DCR BUI584), which renewal was referenced in and affected by provisions

of the 1998 Agreement, 33; and

D.

Violation of Intersals QAR1998 Agreement exclusive media rights, via

FoQAR contract with an independent media company as referenced in subparagraph B

above, representing a clear tortious interference of contractual relations by FoQAR, and

directly conflicting with the 1998 Agreement exclusive media rights and/or provisions for

dissemination of educational documentaries, 1998 Agreement 16 and 17, respectively.

25.

On July 26, 2013, Intersal filed Petition for a Contested Case, with the North

Carolina Office of Administrative Hearings (OAH), Intersal v. N.C. Dept of Cultural

Resources, 13DCR15732, seeking a remedy to the State Defendants violations of the 1998

Agreement and violations of Intersals contractual and intellectual property rights.

26. The Department of Justice (DOJ) represented DNCR in this matter.

27. OAH ordered mediation in the matter. DOJ represented DNCR during negotiations.


10/58

7

28. As a result of mediation, a new agreement was executed on October 15, 2013

among Intersal and DNCR, as well as Rick Allen and Nautilus (collectively, Nautilus),3relating,

inter alia, to media rights arising out of the discovery of QAR (QARSettlement Agreement).

Exhibit 1, pp. 1-10.4

29. The QARSettlement Agreement lacks of a savings clause.

30. In addition, 1 of the QAR Settlement Agreement states, This Agreement

supersedes the 1998 Agreement, attached as Attachment A, and all prior agreements between

DCR, Intersal, and Nautilus regarding the QARProject.

31.

However, the QARSettlement Agreement make does not repeat provisions related

to title to QAR, such as 14 of the 1998 Agreement, which states: Subject to their rights under

this Agreement, Intersal and MRI hereby assign to the Department, and the Department hereby

accepts, on behalf of the People of North Carolina, the interests of Intersal and MRI in the title and

ownership of QARand its artifacts.

32. The QARSettlement Agreement provides in pertinent part:

16. Media and Access Passes.

a. Procedure.

1) DCR agrees to establish and maintain access to a website forthe issuance of Media and Access Passes to QAR-Project related artifactsand activities.

2) DCR shall manage the issuance of Media and Access Passesafter receiving access requests from third parties via the website.

3) The website shall be the primary means of access forrequests, and shall include, at a minimum:

3Rick Allen and Nautilus was brought into the negotiations at the request of DOJ.

4One of the terms of the QARSettlement Agreement was the voluntary dismissal of Intersals contested caseIntersalv. N.C. Dept of Cultural Resources, 13DCR15732.


11/58

8

(a) An Intersal terms of use agreement, to beelectronically submitted;

(b) The QARmedia fact sheet; and

(c) Links to DCR, Intersal, and Nautilus Productionswebsites.

4) Upon electronic submission of requests and terms of use, ifapplicable, electronic notice shall be sent to DCR and Intersal or its designeeshowing acceptance or nonacceptance of the terms of use.

5) Intersal shall bear the sole responsibility for managing andenforcing its terms of use.

6) For requests for access that are not received through the

website, DCR shall provide the requestor with substantially the sameinformation contained on the website.

b. Non-commercial Media.

1) All non-commercial digital media, regardless of producingentity, shall bear a time code stamp, and watermark (or bug) of Nautilusand/or DCR, as well as a link to DCR, Intersal, and Nautilus websites, to beclearly and visibly displayed at the bottom of any web page on which thedigital media is being displayed.

2) DCR agrees to display non-commercial digital media onlyon DCRs website.

. . .

32. Effect of Breach of Agreement. In the event DCR, Intersal, or Nautilusbreaches this Agreement, DCR, Intersal, or Nautilus may avail themselves of allremedies provided by law or equity.

33. Despite the new QAR Settlement Agreement and prior agreements, the State

Defendants continued and continues to violate the QAR Settlement Agreement and Intersals

intellectual property rights. A summary of significant violations include:

A. Displaying over two thousand (2,000) QARdigital media images (including

thirty (30) images taken and improperly copyright claimed by Special Deputy Attorney


12/58

9

General Karen Blum, the DOJ counsel who represented DNCR during mediation) and over

two hundred (200) minutes of QARdigital media video on websites other than DNCRs

own website, without watermark and/or without time code stamp, or website links, in

violation of QARSettlement Agreement, 16.b.2 and 16.b.1, respectively;

B. Undertaking a pattern of obstruction, delay, and failure to follow established

procedure concerning permit renewal process and special conditions for Intersals El

Salvador search permit (DCR BUI584) (by the same state employees mentioned in

subparagraphs 24 B and C above), which process is specifically referenced in and affected

by provisions of the QARSettlement Agreement, 3;

C. Failing to implement specific mandates of the QARSettlement Agreement,

including changes to QARProject media policy ( 16.a) and the QARProject Business

panel ( 19, 6,8);

D. Upon information and belief, failing to properly inform QARSettlement

Agreement partners, contractors and members of the press of QARProject activities and

opportunities covered under the collaborative commercial narrative opportunity and/or

media procedure language of the QARSettlement Agreement, 15, 16;

E.

Failing to return to Intersals QAR Project Video Designee Nautilus all

Nautilus-produced video in their possession as required by the QARSettlement Agreement,

.21;

F. Setting arbitrary, discriminatory and capricious standards and requirements

for, and restrictions on the participation of Intersals QARProject Video Designee Nautilus

in 2014 and 2015 QARrecovery operations, which were not required of or imposed on all

other non-DNCR employees, volunteers, etc.;


13/58

10

G. Interference with Intersals QARSettlement Agreement collaborative media

rights, by DNCR allowing FoQAR filming of QARrecovery operations via independent

media company Zion Consulting Group on September 14, 2015 (without completing

existing QAR commercial narrative request form or giving Nautilus its right of first

refusal, QARSettlement Agreement, 20), footage from which was posted to Facebook

by FoQAR on October 28, 2015 without time code stamp, watermark or website links,

despite FoQAR board members being aware of the provisions of the QAR Settlement

Agreement, which actions represent clear tortious interference with contractual relations

by FoQAR, and directly conflict with Intersals QARSettlement Agreement collaborative

media rights and/or provisions for dissemination of QARdigital media for commercial use

documentaries, QARSettlement Agreement 15, 16.b.2 and 16.b.1, respectively;

H.

Continued failure by DNCR to implement the QARSettlement Agreement

media policy, via DNCR allowing FoQAR to bring Raeford Brown and crew, from the talk

radio show Live and Local with Raeford and Friends) to dive the QARshipwreck shoot

footage aboard the 2015 QARrecovery vessel on September 9, 2015, upon information and

belief, without disseminating the Intersal terms of service document or advising said Press

representatives of changes to the QAR media policy found in the QAR Settlement

Agreement ( 16); and

I. Committing numerous additional violations of the QAR Settlement

Agreement before and after receipt of Intersals Demand Letter dated September 23, 2014,

which when added to the major violations listed above and herein, represent a continued

pattern of egregious, retaliatory and discriminatory agency action against Intersal, and a

continued attempt to deny Intersal rightful access toQAR Project revenue streams and


14/58

11

commercial narrative opportunities, including a percentage of planned admission fees for

public viewing of QARartifacts and ancillary proceeds from related activities, in violation

of QARSettlement Agreement, 15.

34. On March 2, 2015, Intersal filed a second Petition for a Contested Case, with the

North Carolina Office of Administrative Hearings (OAH), Intersal v. N.C. Dept of Cultural

Resources, 15DCR 016102, seeking a remedy to the State Defendants violations of the QAR

Settlement Agreement and violations of Intersals contractual and intellectual property rights.

35. After DOJ moved to dismiss, alleging lack of OAH subject matter jurisdiction to

hear contractual claims, an allegation not raised in the earlier OAH Petition, making clear that DOJ

was more interested in making case law than resolving the issue, Intersal dismissed the Petition

without prejudice on May 26, 2015 and proceeded to prepare to file this present action.

ILLEGALITY BY THE NORTH CAROLINA GENERAL ASSEMBLY

36. Subsequent to the initial filing of this action, the North Carolina General Assembly,

upon information and belief, at the behest of Defendants, enacted Session Law 2015-218 on

August 11, 2015, the same being signed by the Governor on August 18, 2015.

37. SECTION 4.(a) of Session Law 2015-218, inter alia, amends N.C. Gen. Stat. 121-

25 by adding a subsection (b) which reads as follows:

(b) All photographs, video recordings, or other documentary materials of a derelictvessel or shipwreck or its contents, relics, artifacts, or historic materials in thecustody of any agency of North Carolina government or its subdivisions shall be apublic record pursuant to G.S. 132-1. There shall be no limitation on the use of orno requirement to alter any such photograph, video recordings, or otherdocumentary material, and any such provision in any agreement, permit, or licenseshall be void and unenforceable as a matter of public policy.

Session Law 2015-218, SECTION 4.(a).


15/58

12

38. This provision was added on July 23, 2015, after Intersal dismissed its second OAH

Petition, and after Intersal made clear that it was planning to take this matter to Superior Court or

federal court. It is clear that the State Defendants, by this amendment, intended to deprive Intersal

of any legal remedy for breaching of two contracts.

FURTHER ACTS OF RETALIATION

39. DNCR, through its Office of State Archaeology (OSA) violated the QAR

Settlement Agreement, 3, by adding to IntersalsEl Salvadorsearch permit renewal (14BUI584)

new language that directly contradicts and subverts existing permit language retained per the QAR

Settlement Agreement, 3.

40. The existing permit language retained per the QARSettlement Agreement (which

language originated in the 1998 Agreement) insures that Intersals continued efforts connected to

the QARProject remain sufficient to satisfy any performance requirements associated with renewal

of theEl Salvadorsearch permit (BUI584). Intersal has been a contributing QARProject partner

without pause since 1998, and DNCR has issued BUI584 permit renewals to Intersal based on this

existing permit language since 1998.

41. In 2013 and 2014, OSA failed to follow proper and established procedure connected

to BUI584 renewal, by failing to acknowledge on time receipt of or perform oversight of BUI584

report drafts, followed by unwarranted delays in granting renewal. These actions are part of the

continuing pattern of DNCR contract violations and retaliatory behavior towards Intersal described

above and herein.

42. After Intersals September 2014 Demand Letter was dispatched to DNCR, in

November 2014, OSA sent Intersal a renewal of theEl Salvadorpermit (14BUI584) containing


16/58

13

specific language that immediately follows, directly contradicts and subverts the letter and spirit

of the existing permit language retained as a requirement of the QARSettlement Agreement.

43. DNCR rejected Intersals request that the offending language be removed from the

renewal document.

44. These actions are part of the continuing pattern of DNCR contract violations and

retaliatory behavior towards Intersal described above and herein.

45. On October 20, 2015, OSA sent a letter to Intersal, seeking to suddenly impose

upon Intersal requirements and standards that DNCR does not now, nor has ever followed or

imposed upon itself.

46. This letter is part of the continuing pattern of DNCR retaliatory behavior towards

Intersal described above and herein,

47.

In further acts of retaliation, Intersal has not been formally approved of the pending

commercial salvage operation.

48. Intersal has been informed and discussed the operation with DNCR, but has not

received an acknowledgement as required by the permit.

DAMAGES

49.

All actions taken by Defendants were taken with the clear intent to deprive Intersal

is its of its contractual rights (including media rights), commercial opportunities, income, revenue

streams, commercial narrative opportunities (including a percentage of planned admission fees for

public viewing of QARartifacts), and ancillary proceeds from related activities, and to remove

Intersal from the QARProject, in favor of third parties, including, without limitation, FoQAR.


17/58

14

50. Intersal, upon information and belief, has been damaged in the amount of at least

EIGHT MILLION SIX HUNDRED THIRTEEN THOUSAND SEVEN HUNDRED FIFTY

DOLLARS ($8,613,750).

WAIVER OF SOVEREIGN IMMUNITY

51. Defendants Kluttz and DNCR are authorized officer and agency of the State of

North Carolina.

52. The 1998 Agreement and the QAR Settlement Agreement are purportedly valid

contracts between Intersal and DNCR, authorized by the duly authorized officer and agency of the

State of North Carolina.

53. [W]henever the State of North Carolina, through its authorized officers and

agencies, enters into a valid contract, the State implicitly consents to be sued for damages on the

contract in the event it breaches the contract. Smith v. State, 289 N.C. 303, 320, 222 S.E.2d 412,

423-24 (1976).

54. Sovereign immunity is also waived with respect to the constitutional and federal

law violations noted herein.

FIRST CLAIM FOR RELIEF AS TO THE STATE DEFENDANTSVIOLATION OF

THE CONTRACTS CLAUSEArticle I, Section 10 of the United States Constitution

55. Plaintiff restates and incorporates the foregoing paragraphs of this Complaint.

56. Article I, Section 10 of the United States Constitution provides: No state shall . . .

pass any . . . Law impairing the Obligation of Contracts . . . .

57. The 1998 Agreement and the QARSettlement Agreement each create an obligation

of contracts by the State towards Intersal.


18/58

15

58. The enactment of Session Law 2015-218, SECTION 4.(a) by the General Assembly

impairs the States obligation of contracts by attempting to render ineffective those sections of the

1998 Agreement and the QARSettlement Agreement relating to Intersals contractual rights.

59. The States action of attempting to render ineffective those sections of the 1998

Agreement and the QAR Settlement Agreement relating to Intersals contractual rights is an

impairment that was not reasonable or necessary to serve any important public purpose.

60. The 1998 Agreement and the QARSettlement Agreement each create enforceable

contract rights in Intersal that the State seeks to unconstitutionally abrogate by the enactment of

Session Law 2015-218, SECTION 4.(a).

61. The States action of attempting to render ineffective those sections of the 1998

Agreement and the QARSettlement Agreement relating to Intersals contractual rights, by the

enactment of Session Law 2015-218, SECTION 4.(a), is unconstitutional as a violation of the

Contracts Clause of the United States Constitution.

SECOND CLAIM FOR RELIEF AS TO THE STATE DEFENDANTS VIOLATION

OF THE BILL OF ATTAINDER PROHIBITION

Article I, Section 10 of the United States Constitution


63.

Article I, Section 10 of the United States Constitution provides: No State shall . .

. pass any Bill of Attainder . . . .

64. Article I, Section 10 of the United States Constitution prohibits the State from

enacting bills of attainder, defined as bills of pains and penalties which are legislative acts inflicting

punishment on a person without a trial, and serves as a general safeguard against legislative

exercise of the judicial function, or more simply trial by legislature.

65. The bill of attainder prohibition also protects private corporations, such as Intersal.


19/58

16

66. Session Law 2015-218, SECTION 4.(a) is a Bill of Attainder in that it singles out

Intersal for punishment without a trial, by attempting to abrogate Intersals contractual rights

circumventing the judiciary.

67. As such Session Law 2015-218, SECTION 4.(a) is unconstitutional, inter alia, to

the extent it attempts to abrogate Intersals contractual rights.

THIRD CLAIM FOR RELIEF AS TO THE STATE DEFENDANTS TAKING

WITHOUT JUST COMPENSATION

Amendments V and XIV of the United States Constitution

Article I, Section 19 of the Constitution of North Carolina


69.

Amendment V of the Constitution of the United States provides in pertinent part

nor shall private property be taken for public use, without just compensation.

70. Amendment V of the Constitution of the United States is made applicable to the

State by Amendment XIV of the Constitution.

71. Article I, Section 19 of the Constitution of North Carolina provides in pertinent part

No person shall be . . . in any manner deprived of his life, liberty, or property, but by the law of

the land.

72. The execution of the 1998 Agreement and the QARSettlement Agreement, gives

contract rights, property rights and liberty rights to Intersal.

73. The Takings Clause of the Fifth Amendment of the United States Constitution,

incorporated to the State by the Fourteenth Amendment of the United States Constitution, and the

Law of the Land Clause of the North Carolina Constitution require that Intersals property,

contractual and liberty rights created by the 1998 Agreement and the QARSettlement Agreement

cannot be taken without a public purpose and without just compensation.


20/58

17

74. Session Law 2015-218, SECTION 4.(a), on its face, violates the Federal and State

Constitutions, as it fails to state a public purpose for attempting to render ineffective those sections

of the 1998 Agreement and the QARSettlement Agreement relating to Intersals contractual rights.

75. Session Law 2015-218, SECTION 4.(a) violates the Federal and State Constitutions

in that it fails to specify the just compensation to be paid to Intersal for the loss of those sections

of the 1998 Agreement and the QARSettlement Agreement relating to Intersals contractual rights

or specify any procedure for the determination of just compensation. Session Law 2015-218,

SECTION 4.(a) bypasses all statutory mechanisms and simply abrogates those sections of the 1998

Agreement and the QARSettlement Agreement relating to Intersals contractual rights, thereby

taking property without just compensation.

76. Session Law 2015-218, SECTION 4.(a) fails to state a public purpose for the

taking.

77. There is no public purpose for the taking required by Session Law 2015-218,

SECTION 4.(a).

78.

Session Law 2015-218, SECTION 4.(a) is unconstitutional as a violation of the

Takings Clause of the Fifth Amendment of the United States Constitution, incorporated to the

State by the Fourteenth Amendment of the United States Constitution, and the Law of the Land

Clause of the North Carolina Constitution, to the extent that it abrogates Intersals contractual

rights created by the 1998 Agreement and the QAR Settlement Agreement.

FOURTH CLAIM FOR RELIEF AS TO STATE DEFENDANTS DENIAL OF DUE

PROCESS

Amendments XIV of the United States Constitution

Article I, Section 19 of the Constitution of North Carolina



21/58

18

80. Amendment XIV of the Constitution of the United States provides in pertinent part

nor shall any State deprive any person of life, liberty, or property, without due process of law . .

. .

81. Article I, Section 19 of the Constitution of North Carolina provides in pertinent part

No person shall be . . . in any manner deprived of his life, liberty, or property, but by the law of

the land.

82. Intersal was never given notice of Session Law 2015-218, SECTION 4.(a) relating

to Intersals contractual rights and was never given an opportunity to be heard

83.

Session Law 2015-218, SECTION 4.(a) provides no adversary proceeding to

determine judicially, with right of appeal, whether those sections of the 1998 Agreement and the

QARSettlement Agreement relating to Intersals contractual rights and should be declared void.

84.

No public hearings were held with respect to Session Law 2015-218, SECTION

4.(a), to provide Intersal with any opportunity to debate whether those sections of the 1998

Agreement and the QARSettlement Agreement relating to Intersals contractual rights should be

voided, for what reasons, and/or any just compensation to Intersal for its loss that it bargained for

by giving up other rights relating to the QARand the loss of its investment in time, energy and

funds, and the future loss associated with the lost contractual rights.

85. Session Law 2015-218, SECTION 4.(a) is unconstitutional on its face as a violation

of due process as encapsulated in the Fourteenth Amendment of the United States Constitution

and the Law of the Land Clause of the North Carolina Constitution, to the extent that it abrogates

Intersals contractual rights created by the 1998 Agreement and the QAR Settlement Agreement.


22/58

19

FIFTH CLAIM FOR RELIEF AS TO THE STATE DEFENDANTS VIOLATION OF

SEPARATION OF POWERS

Article I, Section 6 of the North Carolina Constitution

Article IV of the North Carolina Constitution

86.

Plaintiff restates and incorporates the foregoing paragraphs of this Complaint.

87. Article I, Section 6 of the North Carolina Constitution states: The legislative,

executive, and supreme judicial powers of the State government shall be forever separate and

distinct from each other.

88. Article IV of the North Carolina Constitution clearly states:

a. The judicial power of the State shall . . . be vested . . . in a General Court of

Justice. The General Assembly shall have no power to deprive the judicialdepartment of any power or jurisdiction that rightfully pertains to it as a co-ordinate department of the government . . . .

89. To any extent that the State alleges any justification for by attempting to abrogate

those sections of the 1998 Agreement and the QARSettlement Agreement relating to Intersals

contractual rights, the General Assembly violated the State Constitution by acting as its own

judiciary and attempting to deprive the courts of the opportunity to resolve the dispute.

90.

Session Law 2015-218, SECTION 4.(a) is unconstitutional as a violation of the

separation of powers clauses of the North Carolina Constitution, to the extent that it abrogates

Intersals contractual rights created by the 1998 Agreement and the QAR Settlement Agreement.

SIXTH CLAIM FOR RELIEF AS TO THE STATE DEFENDANTS BREACH OF

CONTRACT


92.

The 1998 Agreement and the QAR Settlement Agreement constitutes valid

contracts between Intersal and the State Defendants, an authorized officer and agency of the State

of North Carolina.


23/58

20

93. The State Defendants actions described above constitute several breaches of the

terms of said valid contracts.

94. Intersal has been monetarily damaged by the State Defendants breach of contract.

95. Intersal is entitled to monetary damages from the State Defendants in an amount

greater than TWENTY-FIVE THOUSAND DOLLARS ($25,000.00).

SEVENTH CLAIM FOR RELIEF AS TO THE STATE DEFENDANTSUNJUST

ENRICHMENT AND QUANTUM MERUIT


97. In the alternative, to the extent that all or part of the 1998 Agreement and/or the

QARSettlement Agreement are declared unenforceable, to prevent unjust enrichment, Intersal is

entitled to recover in quantum meruiton an implied contract theory for the reasonable value of

services rendered to and accepted by Defendants.

98. Therefore, Intersal is entitled to monetary payment from the State in an amount


EIGHTH CLAIM FOR RELIEF AS TO THE STATE DEFENDANTSFRAUD


100. State Defendants actions, as described above, constitute fraud in that: (1) the State

made several material misrepresentations of a past or existing facts; (2) the misrepresentations

were be definite and specific; (3) the misrepresentations were made with knowledge of their falsity

or in culpable ignorance of their truth; (4) the misrepresentations were made with intention that

they should be acted upon; (5) Intersal, as the recipient of the misrepresentations, reasonably relied

upon them and acted upon them; and (6) the misrepresentations resulted in damage to Intersal.

101. Specifically, the State Defendants TWICE negotiated agreements with Intersal, the

1998 Agreement and the QARSettlement Agreement, providing contractual rights to Intersal. Now


24/58

21

the State Defendants are opining that said provisions are void as against public policy. While

Session Laws 2015-218, SECTION 4.(a) has only been recently enacted, the State Defendants are

also opining that Chapter 132 of the North Carolina General Statutes prohibit enforcement of

Intersals contractual rights created by the aforesaid agreements.

102. Assuming, arguendo, that the State Defendants position is correct, State

Defendants knew or should have known this fact, but engaged in allegedly arms length two

agreements with Intersal.

103. The State Defendants actions meets the elements of fraud.

104.

Intersal is entitled to monetary damages from the State Defendants in an amount


NINTH CLAIM FOR RELIEF AS TO THE STATE DEFENDANTSBAD FAITH

105.


106. Every contract or agreement, including the 1998 Agreement and/or the QAR

Settlement Agreement, implies good faith and fair dealing between the parties to it, and a duty of

cooperation on the part of both parties.

107. The facts shown above, and as will be shown through discovery and trial, show that

the State Defendants breached their duty of good faith and fair dealing.

108. Intersal was damaged by the State Defendants breach.

109. Intersal is entitled to monetary damages from the State Defendants in an amount


TENTH CLAIM FOR RELIEF AS TO THE STATE DEFENDANTS UNCLEAN

HANDS



25/58

22

111. The State has acted inequitably and with unclean hands in that it committed various

acts inconsistent with or in breach of the spirit and letter of the 1998 Agreement and the QAR

Settlement Agreement, erected obstacles to the QARProject implementation and documentation,

interfered with Intersals rights and/or obligations to be shown through discovery and at trial.

112. The State Defendants unclean hands bars any equitable claim or defense the State

Defendants may raise.

ELEVENTH CLAIM FOR RELIEF AS TO STATE DEFENDANTS 42 U.S.C. 1983


114.

The collective and separate actions of the State Defendants as noted above,

constitute violations of 42 U.S.C. 1983.

115. Intersal is entitled to damages from the State Defendants, jointly and severally, in

an amount greater than TWENTY-FIVE THOUSAND DOLLARS ($25,000.00).

TWELFTH CLAIM FOR RELIEF AS TO FoQARTORTIOUS INTERFERENCE

WITH CONTRACTUAL RELATIONS


117. The actions of FoQAR, described above, constitute tortious interference with

contractual relations.

118. As a direct and proximate result of FoQARs actions, Intersal was damaged,

including, but not limited to, pecuniary loss and inconvenience.

119. FoQAR is liable to Intersal in an amount greater than TWENTY-FIVE

THOUSAND DOLLARS ($25,000.00).

120. FoQARs actions were fraudulent, willful, wanton and malicious, and in total

disregard of the truth and the rights of Intersal.


26/58

23

121. FoQAR should be required to respond in punitive damages on account of said

actions, to Intersal, in an amount greater than TWENTY-FIVE THOUSAND DOLLARS

($25,000.00).

THIRTEENTH CLAIM FOR RELIEF AS TO ALL DEFENDANTSCIVIL

CONSPIRACY

122.


123. All Defendants have engaged in a conspiracy to undercut and diminish Intersals

contractual rights for monetary gain.

124. The wrongful acts complained of above were agreed upon by Defendants and

performed by the co-conspirators in furtherance of that conspiracy.

125. Intersal was injured as a result of that conspiracy.

126. The actions of Defendants described above constitute civil conspiracy.

127. As a direct and proximate result of Defendants actions, Intersal was damaged,

including, but not limited to, pecuniary loss and inconvenience.

128. Defendants are jointly and severally liable to Intersal in an amount greater than

TWENTY-FIVE THOUSAND DOLLARS ($25,000.00).

129. FoQARs actions were fraudulent, willful, wanton and malicious, and in total

disregard of the truth and the rights of Intersal.

130. FoQAR should be required to respond in punitive damages on account of said

actions, to Intersal, in an amount greater than TWENTY-FIVE THOUSAND DOLLARS

($25,000.00).

FOURTEENTH CLAIM FOR RELIEFDECLARATORY JUDGMENT

Article 26, Chapter 1, General Statutes of North Carolina

Rule 57 of the North Carolina Rules of Civil Procedure



27/58

24

132. Intersal is entitled to Declaratory Judgment as follows:

A. Declare Session Law 2015-218, SECTION 4.(a) unconstitutional as a

violation of the Contract Clause of the United States Constitution to the extent that it

abrogates Intersals contractual rights created by the 1998 Agreement and the QAR

Settlement Agreement;

B. Declare Session Law 2015-218, SECTION 4.(a) unconstitutional as a Bill

of Attainder, to the extent that it abrogates Intersals contractual rights created by the 1998

Agreement and the QAR Settlement Agreement;

C.

Declare Session Law 2015-218, SECTION 4.(a) unconstitutional as a

violation of the Takings Clause of the Fifth Amendment of the United States Constitution,

incorporated to the State by the Fourteenth Amendment of the United States Constitution,

and the Law of the Land Clause of the North Carolina Constitution, to the extent that it

abrogates Intersals contractual rights created by the 1998 Agreement and the QAR

Settlement Agreement;

D.

Declare Session Law 2015-218, SECTION 4.(a) unconstitutional on its face

as a violation of due process as encapsulated in the Fourteenth Amendment of the United

States Constitution and the Law of the Land Clause of the North Carolina Constitution, to

the extent that it abrogates Intersals contractual rights created by the 1998 Agreement and

the QAR Settlement Agreement;

E. Declare Session Law 2015-218, SECTION 4.(a) unconstitutional as a

violation of the separation of powers clauses of the North Carolina Constitution, to the

extent that it abrogates Intersals contractual rights created by the 1998 Agreement and the

QAR Settlement Agreement;


28/58

25

F. Declare Chapters 121 and 132 of the North Carolina General Statutes, to the

extent that said provisions abrogate Intersals contractual rights created by the 1998

Agreement and the QAR Settlement Agreement, unenforceable;

G. In the alternative, declare that the QARSettlement Agreement is void and

the provisions of the 1998 Agreement continue to be in effect;

H. In the alternative, declare that both the 1998 Agreement and the QAR

Settlement Agreement are void, and as such, based on Fla. Dept of State v. Treasure

Salvors, 458 U.S. 670, 102 S.Ct. 3304 (1982), title to the QAR is vested in Intersal;

I.

Declare the State Defendants actions constitute breach of contract by an

executive agency of the State and violates Intersals intellectual property rights;

J. Declare that the incorrect language in the El Salvador search permit

(15BUI584) must be removed; and

K. Make further declarations a warranted by the State Defendants actions as

shown above and as is just and proper.

FIFTEENTH CLAIM FOR RELIEFRULE 65 RELIEF


134.

Defendants continue to violate the 1998 Agreement and the QAR Settlement

Agreement.

135. Intersal has no adequate remedy at law; monetary damages are incapable of fully

compensating Intersal for the losses incurred from DNCRs continued violations of the QAR

Settlement Agreement.

136. Thus, in the absence of immediate action, imminent and irreparable harm will be

inflicted upon Intersal.


29/58

26

137. For the foregoing reasons, Intersal requests that this Court enter a temporary

restraining order, preliminary injunction, and permanent injunction enjoining DNCR from further

violation of the QARSettlement Agreement and further recovery of artifacts from the QARsite.

PRAYER FOR RELIEF

WHEREFORE, Plaintiff respectfully requests the Court to enter Judgment as follows:

1. Accept this Verified Complaint as an Affidavit;

2. Enter Declaratory Judgment as prayed for in the FourteenthClaim for Relief;

3. Enter a temporary restraining order, preliminary injunction, and permanent

injunction enjoining Defendants from further violation of the Intersals contractual rights, as

specified in the 1998 Agreement and the QAR Settlement Agreement and further recovery of

artifacts from the QARsite;

4.

Enter Judgment against Defendants, as prayed above, in an amount greater than

TWENTY-FIVE THOUSAND DOLLARS ($25,000), to be determined by the Jury, plus

prejudgment and post judgment interest.

5.

Enter an order directing Defendants to renew theEl Salvador permit without the

language that is in violation of the QAR Settlement Agreement.

6.

Award to Intersal its cost, expenses, and fees, including reasonable attorneys fees,

pursuant to applicable statutory and common law;

7. Direct a trial by jury on all issues so triable; and

8. Grant such other and further relief as the Court deems just and proper.

MOTION FOR RULE 65 RELIEF



30/58

27

2. Upon information and belief, Defendants continue to violate Intersals contractual

rights, as specified in the 1998 Agreement and the QARSettlement Agreement.

3. Intersal has no adequate remedy at law; monetary damages are incapable of fully

compensating Intersal for the losses incurred from Defendants continued violations of the QAR

Settlement Agreement.

4. Thus, in the absence of immediate action, imminent and irreparable harm will be

inflicted upon Intersal.

5. For the foregoing reasons, Intersal requests that this Court enter a temporary

restraining order, preliminary injunction, and permanent injunction enjoining Defendants from

further violation of Intersals contractual rights, as specified in the 1998 Agreement and the QAR

Settlement Agreement, and further recovery of artifacts from the QARsite.

This the ______ day of November 2015.

______________________________David H. Harris, Jr.Counsel for PlaintiffState Bar No. 9841Linck Harris Law Group, PLLC2530 Meridian Parkway, Suite 300Durham, North Carolina 27713919-806-4220866-274-0756 (Fax)[email protected]
mailto:[email protected]:[email protected]


31/58

28

NORTH CAROLINA IN THE GENERAL COURT OF JUSTICESUPERIOR COURT DIVISION

WAKE COUNTY File No. 15-CvS-9995

Intersal, Inc.,

Plaintiff,

v.

Susan Kluttz, Secretary, North CarolinaDepartment of Cultural Resources, NorthCarolina Department of Cultural Resources,State of North Carolina, and Friends ofQueen Annes Revenge,

Defendants.

CORPORATE AFFIDAVIT

The undersigned, being duly sworn, states the following:

1. I am the Chairperson of the Board of Plaintiff Intersal, Inc., a corporation duly

incorporated in and validly existing pursuant to the laws of the State of Florida and duly registered

as a foreign corporation with the North Carolina Secretary of State.

2.

I am duly authorized to execute this Affidavit on behalf of Intersal, Inc.

3. I have read the foregoing First Amended Complaint and know the contents thereof.

4. The allegations set forth in the First Amended Complaint are true and of my own

knowledge, except for those allegations set forth upon information and belief, and as to those

allegations, I believe them to be true.


32/58

29

Further affiant sayeth not.

______________________________John Masters

Signed and sworn to before me this day by John Masters.

Date: __________________

______________________________Notary Public

(Official Seal)

______________________________

Notary Publics Printed Name

My commission expires: ___________________


33/58

Settlement Agreement

This Settlement Agreement, made this the 15 thday of October, 2013, by and between the North

Carolina Department of Cultural Resources (DCR), Intersal, Inc. (Intersal), and Rick Allen and NautilusProductions, LLC (collectively, Nautilus):

WHEREAS, Intersal, a private research firm, operating under a valid permit issued to it by DCR,discovered the site believed to be Queen Annes Revenge (QAR) on 21 November 1996. QAR waslocated near Beaufort Inlet, North Carolina, by Intersals director of operations, Michael E. Daniel, whoused historical research provided by Intersals president, Phil Masters. Daniel now heads up MaritimeResearch Institute (MRI), the non-profit corporation formed to work on the project in cooperation withState archaeologists and historians of the North Carolina Department of Cultural Resources, Office of

Archives and History; and

WHEREAS, DCR, MRI, and Intersal previously executed a Memorandum of Agreement on 1

September 1998 (1998 Agreement); and

WHEREAS, as a result of the 1998 Agreement, Intersal and Michael E. Daniel agreed to foregoentitlement to their share of any coins and precious metals recovered from the QAR site in order that all

QAR artifacts remain as one intact collection, and in order to permit DCR to determine ultimatedisposition of the artifacts;

WHEREAS, Nautilus has been filming underwater and other footage of the QAR project forapproximately fifteen (15) years as the projects videographer;

WHEREAS, various disputes and uncertainties have arisen between DCR, Intersal, and Nautilusregarding the terms of the 1998 Agreement and related issues; and

WHEREAS, Intersal and DCR currently are in administrative appeal litigation regarding the termsof the 1998 Agreement, and desire to fully settle such litigation and related issues; and

WHEREAS, DCR, Intersal, and Nautilus desire to resolve fully their differences and continue theirmutual efforts to promote the history of Blackbeard the Pirate, and continue the archaeological recoveryand conservation of his flagship, the Queen Annes Revenge(QAR).

NOW, THEREFORE, DCR, Intersal, and Nautilus contract, settle and agree as follows:

I. GENERAL

1. Prior Agreements. This Agreement supersedes the 1998 Agreement, attached as AttachmentA, and all prior agreements between DCR, Intersal, and Nautilus regarding the QAR project.

2. No Admission of Liability. DCR, Intersal, and Nautilus mutually agree that this Agreement isentered into for the purpose of compromising all disputed claims, grievances, or allegations, and is

not to be construed as an admission by DCR, Intersal, or Nautilus regarding the merit or lack ofmerit of DCRs, Intersals, or Nautiluss contentions, nor an admission of any wrongdoing by the

same.

II. EL SALVADORPERMIT

3. El SalvadorPermit. In consideration for Intersals significant contributions toward the discoveryof the QAR and continued cooperation and participation in the recovery, conservation, andpromotion of the QAR, DCR agrees to continue to issue to Intersal an exploration and recovery

EXHIBIT 1

Exh. 1 Page 1


34/58

2

permit for the shipwreck El Salvador in the search area defined in the current permit dated 9August 2013. DCR agrees to continue to issue the permit through the year in which the QARarchaeology recovery phase is declared complete so long as the requirements contained in thepermit are fulfilled. Subject to the provisions of Article 3 of Chapter 121 of the North CarolinaGeneral Statutes, entitled, Salvage of Abandoned Shipwrecks and Other UnderwaterArchaeological Sites, and the North Carolina Administrative Code, DCR agrees to recognizeIntersals efforts and participation in the QAR project as sufficient to satisfy any performancerequirements associated with annual renewal of Intersals permit for the El Salvador. DCR expectsto complete recovery of the QAR shipwreck by the end of 2016. The Secretary of DCR shall havethe exclusive authority to determine when recovery of QAR is complete. The Secretary shall timelynotify Intersal in writing of DCRs determination that recovery is complete. If the recovery phase iscomplete prior to 2016, DCR agrees to renew the permit through at least the end of 2016.

III. EXACT AND MINIATURE REPLICAS AND COLLECTIBLES

4. Artifact Replicas. DCR and Intersal may make, or have made, molds or otherwise reproduce, orhave reproduced, replicas of QAR artifacts for educational, scientific, retail sale, or other

commercial purposes. All aspects of the conservation of artifacts, including whether or not to

conserve the artifact, shall be at the sole discretion of DCR.

5. Types of Replicas. DCR and Intersal may make two types of replicas:

a. Miniature or Exact Replicas. Miniature or exact replicas shall be museum or archival qualityand shall be produced on a limited edition basis, be individually numbered, or otherwiseuniquely identified to facilitate authentication.

b. Collectibles. Collectibles shall be true representations of artifacts. Collectibles do not have to

be miniatures or exact replications, and may be constructed of materials that do not rise tothe level of museum or archival quality, and may be mass produced without being

individually identifiable.

6.

Selection of Miniature or Exact Replicas to Produce. Up to ten (10) QAR artifacts may be inthe replication process at any given time. DCR and Intersal shall select one artifact each, takingalternate turns, until each has selected up to five (5) artifacts for possible replication. DCR andIntersal must present a separate business plan for the production, marketing, and sale of each of

its selected replicas. The Business Panel must review and approve the business plan. Once aprototype is made, the Business Panel must review and approve the prototype, and accompanying

packaging, marketing, or audio, visual, or literary materials (e.g., booklets, DVDs, etc.) forreplication quality and historical accuracy. The Business Panel will issue its decisions in writing andprovide the same to Intersal and DCR. Upon approval by the Business Panel, the entity seeking to

reproduce the artifact may proceed with production, marketing, sales, and distribution. If, two (2)years after the written approval of the prototype by the Business Panel, the replica has not beenoffered for sale or distribution, the artifact will be placed back into the available pool of artifacts to

replicate. The replication, sale, or distribution of replicas (as opposed to selection) need not be onalternating bases, but may be done according to DCRs and Intersals respective plans andschedules.

Intersal agrees that the sword hilt it currently plans to produce as a miniature or exact replica shall

be Intersals first selection and shall fall under the terms of thisAgreement.

7. Production of Subsequent Miniature or Exact Replicas. DCR and Intersal may, individuallyor collectively, produce more than one artifact replica at a time. When either DCR or Intersalcompletes a replica and has offered it for sale or distribution, it may begin producing another

EXHIBIT 1

Exh. 1 Page 2


35/58

3

artifact according to the approval process in III.6. Once DCR or Intersal has offered an artifactfor sale and distribution, it may choose another artifact from the artifact pool so that it has up tofive (5) artifacts eligible for replication at any given time. If either DCR or Intersal decides torelinquish an artifact before the end of two (2) years, the artifact will be placed back into theavailable pool of artifacts to replicate. DCR and Intersal may enter into a written agreement as tothe further selection of artifacts after the first ten (10) have been selected.

Except by written agreement, neither Intersal nor DCR may select additional artifacts until theyhave produced, or the Business Panel has declined, all five (5) of its initially-selected artifacts.

8. Collectibles. Either DCR or Intersal may propose the reproduction, marketing, sales, anddistribution of collectible replicas as defined above. The reproduction, marketing, sales, and

distribution of collectible artifacts shall be approved in advance by DCR and Intersal, or, ifconsensus cannot be reached between them, by the Business Panel.

9. Replicas to be Used in Exhibits, Scientific Study, or Educational Tools. Understanding thatthere may be times when original artifacts cannot be used, DCR may make, or have made, moldsor otherwise reproduce, or have reproduced, any QAR artifacts of its choosing for use in museums

or traveling exhibits, as educational props in its exhibits, museums or laboratories, as scientifictools, or for scientific study. These replicas shall not be sold.

10. Costs. DCR and Intersal shall each be responsible for their own costs of making miniature orexact replicas, or collectibles produced by or for them.

11. Profits. DCR and Intersal agree to share the profits generated by the sale of miniature or exactreplicas and collectibles. The entity producing the replica shall receive 80% of the net income aftertaxes; the other entity shall receive the remaining 20%. Where DCR is the entity producing,

selling, and distributing the replica, DCR will account for its marketing and operations indetermining net income. Either DCR or Intersal may request from the other documentation

regarding marketing, distribution, or other costs.

12.

Miniature or Exact Replicas Sold at Auctions or Fundraisers. If DCR or Intersal sells aminiature or exact replica at auction or a fundraiser, the gross/net income shall be based on a fairmarket value and not on the price the replica was sold for at auction or a fundraiser.

13. Termination. After five (5) years, either DCR or Intersal may terminate, with or without cause,this Reproduction Agreement section upon ninety (90) days written notice.

IV. PROMOTION OPPORTUNITIES

14. Commercial Documentaries. Intersal, through Nautilus, has documented approximately fifteen(15) years of underwater and other activities related to the QAR project. For purposes of thisCommercial Documentaries section, Intersal represents to DCR that Nautilus Productions shallremain Intersals designee. Intersal shall have the exclusive right to produce a documentary filmabout the QAR project for licensing and sale. Intersal may partner with DCR if it chooses to do so.

If Intersal chooses to partner with DCR, DCR and Intersal shall negotiate an appropriate cost-sharing agreement, and will agree about the documentary script for historical accuracy, contentand story line. If DCR and Intersal do not partner to make a documentary, the Intersaldocumentary script shall be reviewed by DCR for historical accuracy prior to final release byIntersal or its agents.

EXHIBIT 1

Exh. 1 Page 3


36/58

4

Intersal agrees to allow DCR to use its completed documentary, free of charge, in its museums andexhibits for educational purposes. DCR agrees to recognize Intersals participation in the making ofthe documentary.

Termination. Either DCR or Intersal may terminate this Commercial Documentaries section atany time after four (4) years have passed from the date the Secretary of DCR notifies Intersal in

writing of DCRs determination that recovery is complete. Notice of termination must be given inwriting six (6) months in advance.

15. Other Commercial Narrative. DCR and Intersal agree to collaborate in making othercommercial narrative such as, but not limited to, books and e-books, mini- and full-lengthdocumentaries, and video games. Any profit-sharing agreements shall be based on the amount of

work contributed by each entity. If DCR and Intersal cannot reach an agreement on the sharingand production of any such commercial ventures that they propose to undertake, DCR and Intersal

will refer the issues to a mutually selected, neutral arbitrator for binding arbitration, with arbitrationto be concluded within three (3) months of selection of the neutral arbitrator.

16. Media and Access Passes.

a. Procedure.

1) DCR agrees to establish and maintain access to a website for the issuance of Mediaand Access Passes to QAR-project related artifacts and activities.

2) DCR shall manage the issuance of Media and Access Passes after receiving accessrequests from third parties via the website.

3) The website shall be the primary means of access for requests, and shall include, at aminimum:

(a) An Intersal terms of use agreement, to be electronically submitted;

(b) The QAR media fact sheet; and

(c) Links to DCR, Intersal, and Nautilus Productions websites.

4)

Upon electronic submission of requests and terms of use, if applicable, electronic noticeshall be sent to DCR and Intersal or its designee showing acceptance or non-acceptance of the terms of use.

5) Intersal shall bear the sole responsibility for managing and enforcing its terms of use.

6) For requests for access that are not received through the website, DCR shall providethe requestor with substantially the same information contained on the website.

b. Non-commercial Media.

1) All non-commercial digital media, regardless of producing entity, shall bear a time codestamp, and watermark (or bug) of Nautilus and/or DCR, as well as a link to DCR,

Intersal, and Nautilus websites, to be clearly and visibly displayed at the bottom of anyweb page on which the digital media is being displayed.

2) DCR agrees to display non-commercial digital media only on DCRs website.

EXHIBIT 1

Exh. 1 Page 4


37/58

5

c. Termination. This Media and Access Pass section shall terminate after the 5th anniversaryof the signing of this Agreement. After five (5) years, DCR and Intersal may agree to extendthis provision by mutual written consent.

V. RECORDS

17.

Public Records. Nothing in this Agreement shall prevent DCR from making records available tothe public pursuant to North Carolina General Statutes Chapters 121 and 132, or any otherapplicable State or federal law or rule related to the inspection of public records.

18. Records Management. During the recovery phase of the QAR project, DCR and Intersal agreeto make available to each other records created or collected in relation to the QAR project. Theentity requesting copies bears the cost of reproduction. Within one (1) year after the completion ofthe recovery phase, Intersal shall allow DCR to accession duplicate or original records that werecreated or collected by Intersal during the project and that are related to the site, or the recoveryor conservation of the QAR materials. Such records shall include relevant field maps, notes,drawings, photographic records, and other technical, scientific and historical documentation createdor collected by DCR or Intersal pursuant to the study of the site and the recovery of materials

therefrom. These materials shall become public records curated by DCR. All digital media providedby Intersal under the terms of this paragraph shall include a time code stamp and watermarks (orbugs). It is expressly recognized and agreed that, to the extent Intersal possesses confidentialinformation or documents related to its search for El Salvador, no such documents or information

fall under the terms of this paragraph.

VI. Business Panel

19. Business Panel. Members of the Business Panel shall include a secretary level representative

from DCR, the president of Intersal, the president of Nautilus Productions, one representative fromthe North Carolina Department of Commerce or its successor, and one member of the academic

community.

Business Panel meetings shall be subject to the open meetings laws codified at Article 33 ofChapter 143 of the North Carolina General Statutes.

VII. NAUTILUS PRODUCTIONS

20. Right of First Refusal. Nautilus Productions shall have the right of first refusal on the production

of all commercial and non-commercial digital media for which no time code stamp, and watermarkor bug of Nautilus has been affixed. Nautilus Productions agrees that digital media produced in-house by DCR staff shall not be included in this right of first refusal.

Termination. This Right of First Refusal provision shall terminate after the 5th anniversary of thesigning of this Agreement.

21.

Return of Video. DCR agrees to return to Nautilus Productions all archival footage, stillphotographs, and other media, produced by Nautilus Productions, which do not bear a time codestamp and a Nautilus Productions watermark (or bug). DCR may retain, for research purposes,

archival footage, still photographs, and other media that contain a time code stamp and watermark(or bug), and as to such media, DCR shall provide Nautilus with a current, accurate list.

22. Copyright Violations. DCR agrees to compensate Nautilus Productions by payment of the cashsum of $15,000 for any copyright infringements by DCR or its support groups occurring through thedate of the signing of this contract, including Friends of the Maritime Museum display photograph

EXHIBIT 1

Exh. 1 Page 5


38/58

6

of the pile (central portion of the QAR shipwreck), DCRs Flickr account showing anchor A1 on thepile, DCRs website showing anchor A1 on the pile, DCRs News website showing anchor A2, andFriends of the QAR website showing mapping dividers (artifact). DCR shall pay NautilusProductions $15,000 by 31 January 2014.

VIII. MISCELLANEOUS

23. DCR Agreement and Release. Except as expressly provided in this Agreement, DCR and theState, their successors and assigns hereby release and forever discharge Intersal and Nautilus,

including their officers, agents and employees, from any and all claims, demands, actions, causesof action, rights, damages, costs, attorney fees, expenses and compensation whatsoever, whetherarising out of common law or statute, whether state or federal claim, that DCR or the State now

have, or that were or could have been made relating to their rights under the 1998 Agreement orany other prior agreements related to the Adventure, El Salvador, or Queen Annes Revenge

shipwrecks. DCR expressly represents that it is not aware of any contracts that other Stateagencies have entered into that infringe upon the intellectual property rights of NautilusProductions.

24.

Intersal Agreement and Release. Except as expressly provided in this Agreement, Intersal andits successors and assigns hereby release and forever discharge the State, its officers, agents andemployees, including DCR, from any and all claims, demands, actions, causes of action, rights,damages, costs, attorney fees, expenses and compensation whatsoever, whether arising out of

common law or statute, whether state or federal claim, that Intersal now has, or that were or couldhave been made relating to Intersals rights under the 1998 Agreement or any other prioragreements related to theAdventure, El Salvador, or Queen Annes Revengeshipwrecks.

25. Petition for Contested Case Hearing. Intersal agrees to withdraw its petition for contestedcase hearing in Intersal v. N.C. Dept of Cultural Resources(13DCR15732) within five (5) businessdays of the signing of this Agreement.

26. Nautilus Productions/Rick Allen Agreement and Release. Except as expressly provided in

this Agreement, Nautilus and Rick Allen, and their heirs, successors, and assigns, hereby releaseand forever discharge the State, its officers, agents and employees, including DCR, whetherindividually or in their capacity as State employees, and its support groups, including the Friends ofthe Maritime Museum and the Friends of the QAR, from any and all claims, demands, actions,causes of action, rights, damages, costs, attorney fees, expenses and compensation whatsoever,whether arising out of common law or statute, whether state or federal claim, that Nautilus now

has, or that were or could have been made relating to Nautiluss and Rick Allens rights under the1998 Agreement or any other prior agreements related to the Queen Annes Revengeshipwreck orUnited States Copyright Act. Nautilus and Rick Allen agree that, as part of this Agreement andRelease, Nautilus/Rick Allen shall withdraw the public records request it submitted to DCR on 28

August 2013, within five (5) business days of the signing of this Agreement.

27. Binding Effect of Agreement on Successors in Interest.This Agreement shall be binding onand inure to the benefit of the successors and assigns of DCR, Intersal, and Nautilus.

28. Non-disparagement Clause. DCR, Intersal, and Nautilus agree that they will not disparage oneanother professionally or in any public forum regarding any allegations related to this Agreement.

29. Choice of Laws. This Agreement is entered into in the State of North Carolina and shall be

construed and interpreted in accordance with its laws.

EXHIBIT 1

Exh. 1 Page 6


39/58

7

30. Counterparts. This Agreement may be executed in counterparts, any of which shall be deemedto be an original and all of which together shall be deemed the same instrument.

31. Entire Agreement.The foregoing constitutes the entire agreement as specified by DCR, Intersal,

and Nautilus, and the considerations stated herein are contractual and are not mere recitals.

32.

Effect of Breach of Agreement. In the event DCR, Intersal, or Nautilus breaches thisAgreement, DCR, Intersal, or Nautilus may avail themselves of all remedies provided by law orequity.

33. Review and Construction. Intersal, DCR and Nautilus have read and reviewed all of the termsof this Agreement, with the benefit of advice from legal counsel of their choosing. The terms ofthis Agreement have been drafted and revised with input from all of them and, thus, the terms ofthis Agreement shall not be construed for or against any of them as author.

34. Notice. Notices under this Agreement shall be provided as follows:

To DCR: Secretary, North Carolina Department of Cultural Resources, 109 East Jones Street,

Raleigh, NC 27601

To Intersal: Intersal, Inc., c/o Haft Steinlauf & Co., 1200 South Pine Island Road, Plantation,

Florida 33324

To Nautilus:Nautilus Productions, LLC, c/o Mr. Rick Allen, P.O. Box 53269, Fayetteville, NC 28305

Any of the entities named above may change its contact information as stated above by providingwritten notice of the new information to all other entities named above.

[THIS SECTION INTENTIONALLY LEFT BLANK]

EXHIBIT 1

Exh. 1 Page 7


40/58

EXHIBIT 1

Exh. 1 Page 8

~~ ~

~

DATE: 1( 2 .

;2 3 ' I

:3

STATE

OF FLOfilDA. i

COUNTY OF ~e\ttl C\..

Sworn to or affirmed) and subscribed before

me

this ;:> day of

Ocm iC

2013, by David J. Reeder.

Q M ~

N


41/58

EXHIBIT 1

Exh. 1 Page 9

Nautilus Productions

BY:

Frederick Allen, Owner

DATE:

11 /z-

;3

STATE OF NORTH

CAROLINA

COUNlY OF

\; .

R

\ \ f\ ~

-:- -:::>

I G , Jo N ,:\--

0

E ..J

~-,

a Notary Public in

and for the County

of

bu~\-\-- A

~ :h

and State aforesaid, do

hereby certify that Frederick Allen, personally appeared before me this

date and acknowledged the due execution by him of the foregoing

instrument

as

for the purposes therein expressed. 1r....,

WITNESS m hand.. and Notarial Seal, this the Q.~ day of

C

C? f,

2013.

Print Name

9


42/58

EXHIBIT 1

Exh. 1 Page 10

North Carolina Department of Cultural Resources

,;

' _j l:L i __

Ltt ,

BY:

Susan

W. Kluttz, Secretary

DATE:

/();:?_ f-/3

STATE OF NORTH

CAROLINA

COUNTY OF WAKE

- I ( {

A

,--,

I,

, l(J \i li1-o

rvt tonks ,

a Notary

Public in

and for the County of

Lua l(e.,

and State aforesaid, do

hereby certify that

Lt5a.q

W,

I< 11

Hz

,

personally

appeared before me this date and acknowledged the due execution by

her of the foregoing instrument as for the purposes therein expressed.

0

WITNESS

my hand and Notarial

Seal,

this the

.;iq

fl day

of

C mbrr , 2013.

~ di

if

Tu

:fuct1,

No

a Publi

\

:Jenh1tev

N

hlnies

Print Name

My Commission Expires:

lO,~\

lJ

10


43/58

EXHIBIT 1

Exh. 1 Page 11

STATE OF

NORTH

CAROLfNA

COUNTY OF WAKE

AGREEMENT

THIS AGREEMENT

is

entered into this 1st day of Sept.

,

1998, by and among the

State of North Cal'olina represented by the Department of Cultural Resources (hereinafter the

Department ), Intersal, Inc., a

Florida

corporation (hereinafter

Intersal ),

and Maritime

Research Institute, Inc., a North Carolina nonprofit corporation (hereinafter MRI ).

WITNESSETH, THAT

WHEREAS,

under the provisions of

the federal

Abandoned Shipwreck

Act

of

1987 {43

U.S.C. 2101-2106)

and

Article 3

of Chapter

121

of

the General Statutes of North Carolina

(N.C.G.S. 121-22 through 121-28), the title to non-federal abandoned shipwrecks and artifacts

embedded in the submerged lands

of

the State of North Carolina is transferred

by

the United

States to the State of

North

Carolina and all such artifacts are placed under the custody and

control

of

the Department; and

WHEREAS, working

under a

permit

issued

by the

Department, Intersal, under the

direction of Michael

E. Daniel,

located a

shipwreck

site

believed

to be that of the ship QUEEN

ANNE S REVENGE

(hereinafter QAR ) within the State waters

of North

Carolina, and are to be

credited with

the

discovery

of

said vessel;

and

WHEREAS, QAR was

the

flagship of the

pirate

Edward Teach or Thatch (a.k.a.

Blackbeard'') and

was

lost

while

attempt ing to enter Beaufort Inlet in 1718 and is of

inestimable

historical and archaeological value; and


44/58

EXHIBIT 1

Exh. 1 Page 12

2

WHEREAS,

lntersal has been searching

for QAR and

other 18th Century shipwrecks at

Beaufort Inlet

under

permits issued by the

Department since

198 7,

and

has

expended

a

considerable amount ofpersonnel and financial

assets

in

that

effort;

and

WHEREAS, paragraph L of the QAR Pennit (BUI 585) issued to lntersal states that

Any material recovered during Phase Five (the salvage phase] of the project shall

be

divided

between

the

Department and the Permittee, according to a system to be developed, with 25 of

all coins and precious metals retained by the Department, and 75

of

the material awarded to the

Permittee.

The

Department and the Permittee agree that the most appropriate disposition

of

other

artifacts, such as

vessel structure,

ship's fittings,

weapons, personal effects,

and

non-precious

cargo shall be a suitable

facility,

possibly

in

the Beaufort area [the North Carolina Maritime

Museum], where the material can be curated for scientific study and public display; and,

WHEREAS, Intersal and

Michael E. Daniel are willing to forego entitlement

to any

coins

and

precious metals recovered

from the QAR site in

order that

all

QAR

artifacts

remain as one

intact collection and in order to permit

the

Department to determine ultimate disposition

of

the

artifacts; and,

WHEREAS, the Department recognizes MRI, as a partner in the project for the life of

this

Agreement;

and,

WHEREAS, in

order

to facilitate

this Agreement, the Department recognizes Intersal

and

MRI as

partners,

to

work

in

partnership

with

the Department to research, survey, search, recover,

preserve,

protect,

conserve, curate, and

promote the collection for the

life

of this Agreement; and,

WHEREAS, Intetsal, MRI,

and

the Department, in

a spirit of

partnership, are

willing to

establish

a five-member project Advisory Committee

with

the responsibilities set out

in


45/58

EXHIBIT 1

Exh. 1 Page 13

3

paragraph

12 of

this

Agreement; and,

WHEREAS, Intersal has shown in the past, and continues

to

evidence, a strong awareness

of

and commitment to

the

historical significance

of

QAR

through the

quantity and quality

of

Intersal s historicaJ research its willingness to employ state of the rt equipment

in

its

underwater search and recovery efforts, and the prompt reporting

of

its activities to the

Department; and,

WHEREAS, all of

the

amended complaint against ncdncr & the friends of queen anne's revenge by intersal

Documents