Document:

f8k062310ex10vi_mbeach.htm

Exhibit 10.6

 

 

	  	
WARRANT

	  
	
NO.  ___

	
mBeach Software, Inc.

	  
	  	  	  

WARRANT TO PURCHASE COMMON STOCK

 

VOID AFTER 5:30 P.M.

ON THE EXPIRATION DATE

 

THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED, DONATED OR OTHERWISE TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM.

 

FOR VALUE RECEIVED, mBeach Software, Inc., a corporation established in the State of Florida (the “Company”), hereby agrees to sell upon the terms and on the conditions hereinafter set forth, but no later than 5:30 p.m. on the Expiration Date (as hereinafter defined), to H&H Group Associates LLC or registered assigns (the “Holder”), under the terms as hereinafter set forth, for 11,278,193 fully paid and non-assessable shares of the Company’s ordinary shares (the “Warrant Stock”), at a purchase price of $500,000, or $0.04433 per share (the “Warrant Price”), pursuant to this warrant (this “Warrant”).  The number of shares of Warrant Stock to be so issued and Warrant Price are subject to adjustment in certain events as hereinafter set forth.  The term “Common Stock” shall mean, when used herein, unless the context otherwise requires, the stock and other securities and property at the time receivable upon the exercise of this Warrant.

 

1. Exercise of Warrant.

 

a. The Holder may exercise this Warrant according to its terms by (i) surrendering this Warrant, properly endorsed, to the Company at the address set forth in Section 10, (ii) the subscription form attached hereto having then been duly executed by the Holder (the “Form of Exercise”), and (iii) payment of the purchase price being made to the Company for the number of shares of the Warrant Stock specified in the subscription form, or as otherwise provided in this Warrant, prior to 5:30 p.m. on June 23, 2013 (the “Expiration Date”).  Such exercise shall be effected by the surrender of the Warrant, together with a duly executed copy of the Form of Exercise, to Company at its principal office and the payment to the Company of an amount equal to the aggregate Warrant Price for the number of shares of Warrant Stock being purchased in cash, certified check or bank draft.

 

 

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b. This Warrant may be exercised in whole or in part so long as any exercise in part hereof would not involve the issuance of fractional shares of Warrant Stock.  If exercised in part, the Company shall deliver to the Holder a new Warrant, identical in form, in the name of the Holder, evidencing the right to purchase the number of shares of Warrant Stock as to which this Warrant has not been exercised, which new Warrant shall be signed by the Chairman, Chief Executive Officer or President and the Secretary or Assistant Secretary of the Company.  The term Warrant as used herein shall include any subsequent Warrant issued as provided herein.

 

c. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant.  The Company shall pay cash in lieu of fractions with respect to the Warrants based upon the fair market value of such fractional shares of Common Stock (which shall be the closing price of such shares on the exchange or market on which the Common Stock is then traded) at the time of exercise of this Warrant.

 

d. In the event of any exercise of the rights represented by this Warrant, a certificate or certificates for the Warrant Stock so purchased, registered in the name of the Holder, shall be delivered to the Holder within a reasonable time after such rights shall have been so exercised.  The person or entity in whose name any certificate for the Warrant Stock is issued upon exercise of the rights represented by this Warrant shall for all purposes be deemed to have become the holder of record of such shares immediately prior to the close of business on the date on which the Warrant was surrendered and payment of the Warrant Price and any applicable taxes was made, irrespective of the date of delivery of such certificate, except that, if the date of such surrender and payment is a date when the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of such shares at the opening of business on the next succeeding date on which the stock transfer books are open. The Company shall pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Common Stock on exercise of this Warrant.

 

e. Notwithstanding the provisions of this Warrant, in no event shall the Warrant be exercisable to the extent that the issuance of Common Stock upon the exercise thereof, after taking into account the Common Stock then owned by the Holder and its affiliates, would result in the beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding Common Stock of the Company.  For purposes of this paragraph, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act.

 

2. Disposition of Warrant Stock and Warrant.

 

a. The Holder hereby acknowledges that this Warrant and any Warrant Stock purchased pursuant hereto are, as of the date hereof, not registered: (i) under the Securities Act of 1933, as amended (the “Act”), on the ground that the issuance of this Warrant is exempt from registration under Section 4(2) of the Act as not involving any public offering or (ii) under any applicable state securities law because the issuance of this Warrant does not involve any public offering; and that the Company’s reliance on the Section 4(2) exemption of the Act and under applicable state securities laws is predicated in part on the representations hereby made to the Company by the Holder that it is acquiring this Warrant and will acquire the Warrant Stock for investment for its own account, with no present intention of dividing its participation with others or reselling or otherwise distributing the same, subject, nevertheless, to any requirement of law that the disposition of its property shall at all times be within its control.

 

 

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The Holder hereby agrees that it will not sell or transfer all or any part of this Warrant and/or Warrant Stock unless and until it shall first have given notice to the Company describing such sale or transfer and furnished to the Company either (i) an opinion, reasonably satisfactory to counsel for the Company, of counsel (skilled in securities matters, selected by the Holder and reasonably satisfactory to the Company) to the effect that the proposed sale or transfer may be made without registration under the Act and without registration or qualification under any state law, or (ii) an interpretative letter from the Securities and Exchange Commission to the effect that no enforcement action will be recommended if the proposed sale or transfer is made without registration under the Act.

 

b. If, at the time of issuance of the shares issuable upon exercise of this Warrant, no registration statement is in effect with respect to such shares under applicable provisions of the Act, the Company may at its election require that the Holder provide the Company with written reconfirmation of the Holder’s investment intent and that any stock certificate delivered to the Holder of a surrendered Warrant shall bear legends reading substantially as follows:

 

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF THIS CERTIFICATE THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.”

 

In addition, so long as the foregoing legend may remain on any stock certificate delivered to the Holder, the Company may maintain appropriate “stop transfer” orders with respect to such certificates and the shares represented thereby on its books and records and with those to whom it may delegate registrar and transfer functions.

 

3. Reservation of Shares.  The Company hereby agrees that at all times there shall be reserved for issuance upon the exercise of this Warrant such number of shares of its Common Stock as shall be required for issuance upon exercise of this Warrant.  The Company further agrees that all shares which may be issued upon the exercise of the rights represented by this Warrant will be duly authorized and will, upon issuance and against payment of the exercise price, be validly issued, fully paid and non-assessable, free from all taxes, liens, charges and preemptive rights with respect to the issuance thereof, other than taxes, if any, in respect of any transfer occurring contemporaneously with such issuance and other than transfer restrictions imposed by federal and state securities laws.

 

4. Exchange, Transfer or Assignment of Warrant.  This Warrant is exchangeable, without expense, at the option of the Holder, upon presentation and surrender hereof to the Company or at the office of its stock transfer agent, if any, for other Warrants of different denominations, entitling the Holder or Holders thereof to purchase in the aggregate the same number of shares of Common Stock purchasable hereunder.  Upon surrender of this Warrant to the Company or at the office of its stock transfer agent, if any, with the Assignment Form annexed hereto duly executed and funds sufficient to pay any transfer tax, the Company shall, without charge, execute and deliver a new Warrant in the name of the assignee named in such instrument of assignment and this Warrant shall promptly be canceled.  This Warrant may be divided or combined with other Warrants that carry the same rights upon presentation hereof at the office of the Company or at the office of its stock transfer agent, if any, together with a written notice specifying the names and denominations in which new Warrants are to be issued and signed by the Holder hereof.

 

 

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5. Capital Adjustments.  This Warrant is subject to the following further provisions:

 

a. If and whenever on or after the date hereof, the Company issues or sells, or is deemed to have issued or sold, any shares of Common Stock or any Common Stock Equivalents entitling any person to acquire shares of Common Stock (other than Excluded Securities) for a consideration per share less than a price equal to the Warrant Price in effect immediately prior to such issuance or sale, then immediately after such issue or sale the Warrant Price then in effect shall be reduced to an amount equal to such consideration per share.  Upon each such adjustment of the Warrant Price hereunder, the number of shares of Warrant Stock issuable upon exercise of this Warrant shall be adjusted to the number of shares determined by multiplying the Warrant Price in effect immediately prior to such adjustment by the number of shares of Warrant Stock issuable upon exercise of this Warrant immediately prior to such adjustment and dividing the product thereof by the Warrant Price resulting from such adjustment.

 

“Common Stock Equivalents” shall mean any securities of the Company or any of its subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock

 

“Excluded Securities” shall mean the issuance of: (a) securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Warrant, provided that such securities have not been amended since the date of this Warrant to increase the number of such securities or to decrease the exercise, exchange or conversion price of such securities; and (b) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, including without limitation, the transaction contemplated with Skin Cancer Scanning, Ltd., provided that any such issuance shall only be to a person which is either an owner of, or an entity that is, itself or through its subsidiaries, an operating company in a business synergistic with the business of the Company and in which the Company receives benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.

 

 

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b. If any recapitalization of the Company or reclassification of its Common Stock or any merger or consolidation of the Company into or with a corporation or other business entity, or the sale or transfer of all or substantially all of the Company’s assets or of any successor corporation’s assets to any other corporation or business entity (any such corporation or other business entity being included within the meaning of the term “successor corporation”) shall be effected, at any time while this Warrant remains outstanding and unexpired, then, as a condition of such recapitalization, reclassification, merger, consolidation, sale or transfer, lawful and adequate provision shall be made whereby the Holder of this Warrant thereafter shall have the right to receive upon the exercise hereof as provided in Section 1 and in lieu of the shares of Common Stock immediately theretofore issuable upon the exercise of this Warrant, such shares of capital stock, securities or other property as may be issued or payable with respect to or in exchange for a number of outstanding shares of Common Stock equal to the number of shares of Common Stock immediately theretofore issuable upon the exercise of this Warrant had such recapitalization, reclassification, merger, consolidation, sale or transfer not taken place, and in each such case, the terms of this Warrant shall be applicable to the shares of stock or other securities or property receivable upon the exercise of this Warrant after such consummation.

 

c. If the Company at any time while this Warrant remains outstanding and unexpired shall subdivide or combine its Common Stock, the number of shares of Warrant Stock purchasable upon exercise of this Warrant and the Warrant Price shall be proportionately adjusted.

 

d. If the Company at any time while this Warrant is outstanding and unexpired shall issue or pay the holders of its Common Stock, or take a record of the holders of its Common Stock for the purpose of entitling them to receive, a dividend payable in, or other distribution of, Common Stock, then (i) the Warrant Price shall be adjusted in accordance with Section 5(f) and (ii) the number of shares of Warrant Stock purchasable upon exercise of this Warrant shall be adjusted to the number of shares of Common Stock that the Holder would have owned immediately following such action had this Warrant been exercised immediately prior thereto.

 

e. If the Company shall at any time after the date of issuance of this Warrant distribute to all holders of its Common Stock any shares of capital stock of the Company (other than Common Stock) or evidences of its indebtedness or assets (excluding cash dividends or distributions paid from retained earnings or current year’s or prior year’s earnings of the Company) or rights or warrants to subscribe for or purchase any of its securities (excluding those referred to in the immediately preceding paragraph) (any of the foregoing being hereinafter in this paragraph called the “Securities”), then in each such case, the Company shall reserve shares or other units of such securities for distribution to the Holder upon exercise of this Warrant so that, in addition to the shares of the Common Stock to which such Holder is entitled, such Holder will receive upon such exercise the amount and kind of such Securities which such Holder would have received if the Holder had, immediately prior to the record date for the distribution of the Securities, exercised this Warrant.

 

 

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f. Except as otherwise provided herein, whenever the number of shares of Warrant Stock purchasable upon exercise of this Warrant is adjusted, as herein provided, the Warrant Price payable upon the exercise of this Warrant shall be adjusted to that price determined by multiplying such Warrant Price immediately prior to such adjustment by a fraction (i) the numerator of which shall be the number of shares of Warrant Stock purchasable upon exercise of this Warrant immediately prior to such adjustment, and (ii) the denominator of which shall be the number of shares of Warrant Stock purchasable upon exercise of this Warrant immediately thereafter.

 

g. The number of shares of Common Stock outstanding at any given time for purposes of the adjustments set forth in this Section 5 shall exclude any shares then directly or indirectly held in the treasury of the Company.

 

h. The Company shall not be required to make any adjustment pursuant to this Section 5 if the amount of such adjustment would be less than one percent (1%) of the Warrant Price in effect immediately before the event that would otherwise have given rise to such adjustment.  In such case, however, any adjustment that would otherwise have been required to be made shall be made at the time of and together with the next subsequent adjustment which, together with any adjustment or adjustments so carried forward, shall amount to not less than one percent (1%) of the Warrant Price in effect immediately before the event giving rise to such next subsequent adjustment.

 

i. Following each computation or readjustment as provided in this Section 5, the new adjusted Warrant Price and number of shares of Warrant Stock purchasable upon exercise of this Warrant shall remain in effect until a further computation or readjustment thereof is required.

 

6. Notice to Holders.

 

a. In case:

 

(i) the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time receivable upon the exercise of this Warrant) for the purpose of entitling them to receive any dividend (other than a cash dividend payable out of earned surplus of the Company) or other distribution, or any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right;

 

(ii) of any capital reorganization of the Company, any reclassification of the capital stock of the Company, any consolidation with or merger of the Company into another corporation, or any conveyance of all or substantially all of the assets of the Company to another corporation; or

 

(iii) of any voluntary dissolution, liquidation or winding-up of the Company;

 

then, and in each such case, the Company will mail or cause to be mailed to the Holder hereof at the time outstanding a notice specifying, as the case may be, (i) the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (ii) the date on which such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up is to take place, and the time, if any, is to be fixed, as of which the holders of record of Common Stock (or such stock or securities at the time receivable upon the exercise of this Warrant) shall be entitled to exchange their shares of Common Stock (or such other stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, conveyance, dissolution or winding-up.  Such notice shall be mailed at least thirty (30) days prior to the record date therein specified, or if no record date shall have been specified therein, at least thirty (30) days prior to such specified date, provided, however, failure to provide any such notice shall not affect the validity of such transaction.

 

 

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b. Whenever any adjustment shall be made pursuant to Section 5 hereof, the Company shall promptly make a certificate signed by its Chairman, Chief Executive Officer, President, Vice President, Chief Financial Officer or Treasurer, setting forth in reasonable detail the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated and the Warrant Price and number of shares of Warrant Stock purchasable upon exercise of this Warrant after giving effect to such adjustment, and shall promptly cause copies of such certificates to be mailed (by first class mail, postage prepaid) to the Holder of this Warrant.

 

7. Loss, Theft, Destruction or Mutilation.  Upon receipt by the Company of evidence satisfactory to it, in the exercise of its reasonable discretion, of the ownership and the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, of indemnity reasonably satisfactory to the Company and, in the case of mutilation, upon surrender and cancellation thereof, the Company will execute and deliver in lieu thereof, without expense to the Holder, a new Warrant of like tenor dated the date hereof.

 

8. Warrant Holder Not a Stockholder.  The Holder of this Warrant, as such, shall not be entitled by reason of this Warrant to any rights whatsoever as a stockholder of the Company.

 

9. Notices.  Any notice required or contemplated by this Warrant shall be deemed to have been duly given if transmitted by registered or certified mail, return receipt requested, or nationally recognized overnight delivery service, to the Company at its principal executive offices located at ____________, or to the Holder at the name and address set forth in the Warrant Register maintained by the Company.

 

10. Choice of Law.  THIS WARRANT IS ISSUED UNDER AND SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.

 

11. Jurisdiction and Venue.  The parties hereby irrevocably consent to the in personam jurisdiction and venue of in a court in the State of New York. If there is any litigation regarding the arbitration or otherwise relating to this section 11, the parties hereto irrevocably consent to the jurisdiction of the courts of the State of New York and of any federal court located in such State in connection with any action or proceeding arising out of or relating to this Warrant.  EACH PARTY HERETO WAIVES TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF THIS WARRANT.

 

12. Registration of Shares.  Within 30 business days from the date the Warrant is issued, the Company shall file with the Securities and Exchange Commission a registration statement registering for resale the sale of the Warrant Stock as well as the shares of common stock issuable upon the conversion of the 5% Convertible Note being issued by the Company as of the date hereof

 

 

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IN WITNESS WHEREOF, the Company has duly caused this Warrant to be signed on its behalf, in its corporate name and by its duly authorized officer, as of this 23rd day of June, 2010.

 

mBeach Software, Inc.

 

By: /s/ Yossi Biderman

 Name: Yossi Biderman

 Title:  Director

 

 

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FORM OF EXERCISE

(to be executed by the registered holder hereof)

 

 

The undersigned hereby exercises the right to purchase _________ ordinary shares (“Common Stock”), of mBeach Software, Inc. evidenced by the within Warrant Certificate for a Warrant Price of $______ per share and herewith makes payment of the purchase price in full of $__________ in cash.  Kindly issue certificates for shares of Common Stock (and for the unexercised balance of the Warrants evidenced by the within Warrant Certificate, if any) in accordance with the instructions given below.

 

 

 

Dated:____________________ , 20___ .

 

 

 

______________________________

 

Instructions for registration of stock

 

 

_____________________________

           Name (Please Print)

 

Social Security or other identifying Number:

 

Address:__________________________________

                      City/State and Zip Code

 

 

Instructions for registration of certificate representing

the unexercised balance of Warrants (if any)

 

_____________________________

Name (Please Print)

Social Security or other identifying Number: ___________

 

Address:____________________________________

                      City, State and Zip Code

 

9f8k061710ex10i_datastorcorp.htm

Exhibit 10.1

 

ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement (this “Agreement”) is entered into this 17th day of June, 2010 (the “Effective Date”), between SafeData, LLC, a Delaware limited liability company (the “Seller”), and Data Storage Corporation, a Delaware corporation (the “Purchaser”).

WITNESSETH:

WHEREAS, Purchaser desires to acquire the Assets (as hereinafter defined) and shall assume the Assumed Liabilities (as hereinafter defined) of Seller related to Seller’s business of data protection, recovery and secure storage (the “Business”) and Seller desires to sell such Assets and transfer such Assumed Liabilities to Purchaser.

NOW, THEREFORE, in consideration of the promises, the mutual covenants and agreements contained herein, and for other good and valuable consideration, the mutual receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

ARTICLE I

SALE OF ASSETS TO PURCHASER

Section 1.1.                      Description of Assets and Assumed Liabilities.  (a) At the Closing (as hereinafter defined), Seller shall sell, transfer, assign and deliver to Purchaser, and Purchaser shall purchase and acquire from Seller, all right, title and interest of Seller in and to the end-user customer base of the Business and all related current and fixed assets and contracts related thereto used in connection therewith, including but not limited to all of Seller’s cash, accounts receivable and Intellectual Property (as hereinafter defined) related to and/or arising out of the Business (including but not limited to all rights to the name “SafeData” and all derivations thereof to the extent of Seller’s rights and interest therein), all licenses, permits and authorizations necessary to conduct the Business (to the extent transferable), customer contracts and any and all security deposits made in connection with the Business, all as specifically listed on Schedule 1.1(a)(i) attached hereto and made a part hereof (collectively, the “Assets”).  Additionally, Seller shall transfer and Purchaser shall assume those (and only those) current liabilities of Seller (as classified by GAAP (as hereinafter defined)) to the extent arising out of or relating to the Business or the Assets (including the Equipment Leases (as hereinafter defined)) and a lease on Seller’s offices, but expressly excluding any Excluded Liabilities (as hereinafter defined) (for clarity purposes, Purchaser shall not assume any current portions of liabilities included in the Excluded Liabilities) all as listed on Schedule 1.1(a)(ii) attached hereto and made a part hereof (collectively, the “Assumed Liabilities”).

(b)           Excluded Liabilities.   Notwithstanding anything to the contrary, Purchaser does not and, by this Agreement, any agreement related hereto or the transactions contemplated by either, will not, assume or agree to pay, perform, defend or discharge any liabilities or obligations of Seller other than the Assumed Liabilities.  Purchaser shall assume no responsibility for, relating to and/or arising from, any third party interest-bearing debt undertaken in connection with the Business or the Assets, including but not limited to any line of credit, subordinated debt or loan payable to Peter Briggs (“Briggs”) or Larry Putterman (“Putterman”) (whether or not any such loans to either individual are interest-bearing or not), or any taxes, penalties, fines, assessments, late charges, interest or similar charges or any other payments due related to the Business or the Assets  (collectively with any and all liabilities other than the Assumed Liabilities, the “Excluded Liabilities”); provided, however, that Excluded Liabilities shall expressly exclude the Equipment Leases.

 

  

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ARTICLE II

PURCHASE PRICE

Section 2.1.                      Purchase Price; Payment of Purchase Price.

(a)           In addition to Purchaser’s assumption of the Assumed Liabilities, the aggregate purchase price to be paid by Purchaser for the Assets is equal to Three Million Dollars ($3,000,000), subject to adjustment as set forth in this Agreement:  the sum of Two Million Dollars ($2,000,000) to be paid in cash and One Million Dollars ($1,000,000) in shares of the common stock (par value $0.001 per share) (the “Shares”) of the Purchaser’s parent, Data Storage Corporation, a Nevada corporation (the “Parent”), valued at an amount per Share (the “Per Share Purchase Amount”) equal to thirty five cents ($0.35) per share (or Two Million Eight Hundred Fifty Seven Thousand One Hundred Forty Two (2,857,142) Shares) (the “Purchase Price”), subject to adjustment pursuant to Section 2.2.

(b)           At Closing, Purchaser shall deliver to the Seller, (i) One Million Three Hundred Thousand Dollars ($1,300,000) (the “Closing Cash Amount”) in cash by wire transfer of immediately available funds to an account designated by Seller prior to the Closing, (ii) Eight Hundred Fifty Thousand Dollars ($850,000) in Shares valued at the Per Share Purchase Amount and (iii) minus the amount, if any, described in Section 2.1(d) below.

                (c)           At Closing, delivery of the following portions of the Purchase Price shall be deferred for the purchase price adjustment, such amounts to be paid to the Seller, as applicable, in accordance with Section 2.2: (i) the sum of Seven Hundred Thousand Dollars ($700,000) to be paid in cash (the “Renewal Holdback Amount”) and (ii) One Hundred Fifty Thousand Dollars ($150,000) in Shares valued at the Per Share Purchase Amount (the “Assignment Contingency Holdback Amount”, and, together with the Renewal Holdback Amount, collectively, the “Holdbacks”).

(d)           At Closing, the outstanding balance (the “Line of Credit Balance”) of Seller's line of credit financing facility, after taking into account all checks written on such line of credit (which checks shall have been delivered or mailed to their respective payees prior to Closing in satisfaction of Seller’s outstanding liabilities) and reducing the Line of Credit Balance by any negative cash balance in Seller’s accounts, shall be equal to no less than Three Hundred Fifty Thousand Dollars ($350,000).  To the extent that the Line of Credit Balance at the Closing is less than Three Hundred Fifty Thousand Dollars ($350,000), then an adjustment shall be made to reduce the Closing Cash Amount by the amount of such difference. 

Section 2.2.                      Purchase Price Adjustment.

(a) Classifying Customer Contracts.  The parties acknowledge and agree that payment of the Holdbacks is contingent on certain performance thresholds being satisfied, as described herein, by the customer counterparties to such contracts.  The Assets comprised of the customer contracts are categorized initially on Schedule 2.2(a)(i) and Schedule 2.2(a)(ii) as either or both: (i) “Assignment Contingency Contracts” which are all customer contracts (x) having customer termination rights within some prescribed timeframe of a notice of assignment of the customer contract being furnished to the customer or (y) requiring the customer’s affirmative consent to the assignment of the customer contract from Seller to Purchaser (as listed with a reasonable estimate of the annual revenue beside each Assignment Contingency Contract on Schedule 2.2(a)(i) attached hereto and made a part hereof) or (ii) “Renewal Contracts” which are all of Seller’s customer contracts and may initially include the Assignment Contingency Contracts (as listed with a reasonable estimate of the annual revenue beside each Renewal Contract on Schedule 2.2(a)(ii) attached hereto and made a part hereof), subject to potential removal of certain Assignment Contingency Contracts from such schedule pursuant to the terms of Section 2.2(b).

 

  

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(b)           Assignment Contingency Contract Review.  On the three (3) month anniversary of the Closing Date (the “Assignment Contingency Contract Review Date”), the Purchaser shall evaluate the Assignment Contingency Contracts and if on the Assignment Contingency Contract Review Date, (i) an Assignment Contingency Contract is still in force and performing (and, if applicable, any required written consent received) with no then existing customer breach (and it will not be considered a breach if such customer brings its entire account current within ten (10) days of the Renewal Contract Review Date if such customer’s payment history generally reflects a pattern of such late payments), notice of customer dispute or notice of termination received or pending and (ii) the gross revenues associated with such contract as set forth on Schedule 2.2(a)(i) are being received on a timely basis, then each such Assignment Contingency Contract satisfying such criteria shall remain on Schedule 2.2(a)(ii) as a Renewal Contract to be further evaluated on the Renewal Contract Review Date (as hereinafter defined).  In the event that, as of the Assignment Contingency Contract Review Date, an Assignment Contingency Contract has been terminated, or a customer breach has occurred under an Assignment Contingency Contract, or a notice of customer dispute or notice of termination has been received or is pending with respect to an Assignment Contingency Contract, or the gross revenues associated with an Assignment Contingency Contract as set forth on Schedule 2.2(a)(i) are not being received on a timely basis (unless the sole reason for the delay in payment is due to a Purchaser Action (as hereinafter defined)) (in each case, a “Problematic Assignment Contingency Contract”), then the Assignment Contingency Holdback Amount and the Purchase Price shall be reduced by the portion of the Assignment Contingency Holdback Amount set forth on Schedule 2.2(a)(i) with respect to each such Problematic Assignment Contingency Contract (and the Shares corresponding to the reduction of the Assignment Contingency Holdback Amount retained by Purchaser).  Any Assignment Contingency Holdback Amount remaining after reducing the Purchase Price in accordance with the immediately preceding sentence shall be delivered by Purchaser to Seller within ten (10) business days of the Assignment Contingency Contract Review Date.  In the event that the amount of annual revenue associated with the Problematic Assignment Contingency Contracts exceeds the Assignment Contingency Holdback Amount, then the amount of such excess shall be offset against the amount of Recurring New Sales Revenue to which Seller is entitled under Section 2.2(d) and retained by the Purchaser.  If by the Renewal Contract Review Date, all of the annual revenue associated with the Problematic Assignment Contingency Contracts has not either reduced the Purchase Price through a reduction of the Assignment Contingency Holdback Amount or been offset against the amount of Recurring New Sales Revenue to which Seller is entitled under Section 2.2(d), then any remaining amount (except for amounts relating to any delinquent customer contracts resulting solely from a Purchaser Action for which no reduction shall be made) shall be offset against the Renewal Holdback Amount otherwise due and payable pursuant to Section 2.2(c).  Effective on the Assignment Contingency Contract Review Date, Schedule 2.2(a)(ii) shall be deemed revised, without further act by any party, to delete any Problematic Assignment Contingency Contract.  Purchaser shall provide Seller with regular periodic reports showing assignment and renewal activity as well as details concerning problems encountered.   On reasonable prior written notice, during normal business hours, and at the sole cost and expense of the Seller, Seller shall have the right to examine and audit the books and records of the Purchaser at the Purchaser’s principal office relating to the Assignment Contingency Holdback Amount.   Such right to audit may be exercised only once and may only be exercised within five (5) months following the Closing Date.  If such audit discloses that any payments associated with release (or extinguishment) of a portion of the Assignment Contingency Holdback Amount were not correct, then the Purchaser shall pay to the Seller the amount of any undisputed underpayment disclosed by the audit within ten (10) business days of such audit, and the Seller shall pay to the Purchaser the amount of any undisputed overpayment disclosed by the audit within ten (10) business days of such audit and the parties will further amend Schedule 2.2(a)(ii), if necessary, to correct any error.

 

  

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(c)           Renewal Contract Review.  On the one (1) year anniversary of the Closing Date (the “Renewal Contract Review Date”), the Purchaser shall evaluate the Renewal Contracts and if at least ninety percent (90%) of the Renewal Contracts (as measured by annual dollar value as set forth on Schedule 2.2(a)(ii)) are still in force and performing on the Renewal Contract Review Date on economic terms and conditions no less favorable than the terms and conditions of such contract in effect on the Effective Date, with no then existing customer breach (and it will not be considered a breach if such customer brings its entire account current within ten (10) days of the Renewal Contract Review Date if such customer’s payment history generally reflects a pattern of such late payments), notice of customer dispute or notice of termination pending and the gross revenues associated with such contract are being received on a timely basis (collectively, the “Renewal Contract Requirements”), then Purchaser shall pay to Seller one hundred percent (100%) of the Renewal Holdback Amount within thirty (30) days of such date (the “Renewal Payment Date”).   If any Renewal Contracts fail to meet the Renewal Contract Requirements on the Renewal Contract Review Date solely as a result of any Purchaser Action (and the rationale for such renewal failure is sufficiently documented by the Seller to the reasonable satisfaction of the Purchaser), such Renewal Contract shall be removed from Schedule 2.2(a)(ii) but included in the calculations set forth below so as to avoid unfairly reducing payments made to Seller.  If on the Renewal Contract Review Date, less than ninety percent (90%), but greater than fifty percent (50%), of the Renewal Contracts (as measured by annual dollar value as set forth on Schedule 2.2(a)(ii)) are still in force and meet the Renewal Contract Requirements, then Purchaser shall pay to Seller on the Renewal Payment Date a portion of the Renewal Holdback Amount equal to a fraction calculated as follows:

The numerator shall equal the difference between (x) the percentage of the Renewal Contracts (as measured by annual dollar value as set forth on Schedule 2.2(a)(ii)) that meet the Renewal Contract Requirements (plus the portion removed due to Purchaser Action) and (y) fifty percent (50%), and the denominator shall equal forty (40).  For example, if the percentage of Renewal Contracts meeting the Renewal Contract Requirements (plus the portion removed due to Purchaser Action) is sixty two percent (62%), Purchaser shall pay to Seller (62 – 50 or 12)/40, or 30% of the Renewal Holdback Amount.  Similarly, if the percentage of Renewal Contracts meeting the Renewal Contract Requirements (plus the portion removed due to Purchaser Action) is fifty four percent (54%), Purchaser shall pay to Seller (54 – 50 or 4)/40, or 10% of the Renewal Holdback Amount.

Purchaser shall provide Seller with regular, periodic reports showing renewal activity as well as details concerning problems encountered.  On reasonable prior written notice, during normal business hours, and at the sole cost and expense of the Seller, Seller shall have the right to examine and audit the books and records of the Purchaser at the Purchaser’s principal office relating to the calculation of the amount of the Renewal Holdback Amount being released pursuant to this Section 2.2(c). Such right to audit may be exercised only once and may only be exercised within fourteen (14) months following the Closing Date.  If such audit discloses that any payments associated with release of a portion of the Renewal Holdback Amount were not correct, then the Purchaser shall pay to the Seller the amount of any undisputed underpayment disclosed by the audit within ten (10) business days of such audit, and the Seller shall pay to the Purchaser the amount of any undisputed overpayment disclosed by the audit within ten (10) business days of such audit.  In the event that an audit discloses that the Renewal Holdback Amount was actually understated by more than five percent (5%), Purchaser shall reimburse Seller for an additional amount equal to the reasonable cost of such audit; notwithstanding the foregoing, Purchaser shall not be obligated to reimburse Seller for any costs or expenses arising out of an audit if the person or entity performing such audit is being compensated on a contingent fee basis.

Any Renewal Holdback Amount to which Seller is not entitled to be paid by the Renewal Payment Date shall be deemed a reduction of the Purchase Price and deemed paid under the Promissory Note (as hereinafter defined) along with the Renewal Holdback Amount actually paid to Seller and the Promissory Note shall be cancelled and returned to Purchaser marked “PAID IN FULL/CANCELLED” within fourteen (14) months following the Closing Date unless the Seller is disputing the amount of the Renewal Holdback Amount paid.

 

  

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For purposes of this Section 2.2(c), “Purchaser Action” shall mean (1) Purchaser’s material increase in pricing beyond the existing contract rate with allowances for reasonable market-standard increases and/or standard cost of living increases of a service offering that constitutes a material element of service offerings provided to a customer, (2) Purchaser’s abandonment of a service offering that constitutes a material element of service offerings provided to a customer or (3) material adverse changes affirmatively caused by Purchaser in key service or technology functions, protocols or software that constitute a material element of a customer’s service offerings.  For purposes of clarity, the parties understand and agree that the Seller shall have the burden of proof in evidencing that payment delays and/or renewal failure of any applicable customer contract is the sole result of a Purchaser Action.

(d)           New Sales; Additional Purchase Price.  For any new customer contracts for the Business with no less than a one (1) year contract term entered into by Seller after the Term Sheet Date for sales of services that Seller provided prior to the Closing Date that (i) are memorialized in writing and fully executed by the Seller and the counterparty to such contract(s) prior to the Closing Date and (ii) result in recurring revenue (i.e., based on regular monthly or quarterly fees) to Purchaser (net of sales, use, excise, telecommunications and other similar taxes, but not income taxes) for such contract(s) that is actually collected on or before April 30, 2011 (the “Recurring New Sales Revenue”), Seller shall receive twenty five percent (25%) of the Recurring New Sales Revenue.  The Purchaser shall be entitled to the remaining seventy five percent (75%) of the Recurring New Sales Revenue for all revenue collected on and after the Closing Date.  Any such contract satisfying such requirements shall be referred to as a “Recurring New Sales Contract”.  Seller shall be entitled to all revenue collected on Recurring New Sales Contracts that is collected prior to the Closing Date so long as recognition of such collections as revenue is consistent with generally accepted accounting principles (“GAAP”); if recognition of such revenue on or before April 30, 2011 under GAAP is appropriate, such revenue shall be shared twenty five percent (25%) and seventy five percent (75%) by Seller and Purchaser, respectively; and if recognition of such revenue after April 30, 2011 under GAAP is appropriate, Purchaser shall be entitled to all such revenue.  Any monies payable by the Purchaser to the Seller on account of Recurring New Sales Revenue shall be paid on the first day of the eighth (8th) full calendar month and the fourteenth (14th) full calendar month following the Closing Date.  The eighth (8th) month payment shall be based on Recurring New Sales Revenue actually collected by Purchaser before the six (6) month anniversary of the Closing Date; provided, however, that, if on the six (6) month anniversary of the Closing Date it is determined that any Recurring New Sales Contract has a delinquency of one (1) month’s revenue or more (or the monthly revenue for such contract has been reduced from its original terms), the customer of such Recurring New Sales Contract has routinely failed to pay its monthly fee on a timely basis or such Recurring New Sales Contract has been terminated (collectively, the “Recurring New Sales Disqualification Events”), no New Sales Revenue shall be paid to Seller for such contract.  The fourteenth (14th) month payment shall be based on Recurring New Sales Revenue actually collected by Purchaser between the six (6) month anniversary of the Closing Date and April 30, 2011; provided, however, that, if on April 30, 2011 it is determined that any Recurring New Sales Contract has a Recurring New Sales Disqualification Event, (A) no New Sales Revenue shall be paid to Seller for such contract with the fourteenth (14th) month payment, if any, and (B) any monies paid to Seller based on Recurring New Sales Revenue generated by such contract before the six (6) month anniversary of the Closing Date shall be offset against any monies otherwise due to Seller on the fourteen (14) month anniversary of the Closing Date based on all New Sales Revenue.  On reasonable prior written notice, during normal business hours, and at the sole cost and expense of the Seller, Seller shall have the right to examine and audit the books and records of the Purchaser at the Purchaser’s principal office relating to the calculation of the Recurring New Sales Revenue and payment of the amounts due under this Section 2.2(d) with respect thereto. Such right to audit may be exercised only once and may only be exercised within two (2) months of the fourteenth (14th) month payment.  If such audit discloses that any payments associated with the Recurring New Sales Revenue were not correct, then the Purchaser shall pay to the Seller, the amount of any undisputed underpayment disclosed by the audit within ten (10) business days of such audit, and the Seller shall pay to the Purchaser the amount of any undisputed overpayment disclosed by the audit within ten (10) business days of such audit.  The Seller covenants that the terms and conditions of any Recurring New Sales Contract shall be (1) in conformance with the customary and historical terms of Seller’s prior customer contracts (with reasonable adjustments for current market conditions) and (2) developed within the ordinary course of the Business.

 

  

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Section 2.3.   Promissory Note.  The Renewal Holdback Amount shall be evidenced by the Purchaser’s delivery to Seller on the Closing Date of an interest free Promissory Note, the form of which is attached hereto as Exhibit A (the “Promissory Note”).

Section 2.4.   Transfer Tax.  Any sales, use, excise, ad valorem or any other similar taxes resulting from the sale of the Assets pursuant to this Agreement shall be the responsibility of Seller and Seller shall indemnify Purchaser against any such taxes wherever assessed.   The indemnity obligations of this Section 2.4 shall survive indefinitely the Closing hereunder.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER

Section 3.1.    Seller represents and warrants to Purchaser that:

(a)           Company Status.  Seller is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware, with full power and authority to own its properties and assets and carry on its businesses as and where now owned or conducted.

(b)           Authorization of Agreement; No Conflict.  Seller has all requisite power and authority to enter into, execute and deliver this Agreement, fulfill its obligations hereunder and consummate the transactions contemplated hereby; such execution and delivery, performance of obligations and consummation of the transactions have been duly authorized and approved by all requisite limited liability company action by or in respect of Seller; and this Agreement constitutes the legal, valid and binding obligation of Seller enforceable in accordance with its terms.

(c)           Ownership of Assets/Absence of Claims.  Seller is the sole owner of the Assets and such Assets are, except for liens and encumbrances that lenders will release at the time of Closing, free and clear of any and all liens, pledges, security interests, options, encumbrances, charges, agreements or claims of any kind whatsoever except certain capital leases that Seller has entered into as set forth on Schedule 3.1(c) attached hereto and made a part hereof, which capital leases currently encumber Seller’s servers, and all the documentation, correspondence, notices, files and other materials related thereto have been furnished to Purchaser (the “Equipment Leases”).  The Seller does not own, nor has it agreed or has an option to purchase or sell, or is it obligated to purchase or sell, any real property, but does lease its office facility, the lease for which shall be assigned to Purchaser and included in the Assumed Liabilities.

(d)           Defaults.  Seller is not in default or breach under or in violation of any contracts, leases or agreements to which Seller is a party with respect to the Assets and/or the Assumed Liabilities.  All such contracts, leases and agreements are now in full force and effect and Seller is not aware of any violation or notice of termination or intent to terminate, with respect to any such contracts, leases or agreements.

(e)           Litigation.  Seller is not subject to any unsatisfied judgment, order, decree, stipulation, injunction or charge with respect to the Assets and/or the Assumed Liabilities and is not a party nor to its knowledge is threatened to be made a party to any charge, complaint, action, suit, proceeding, hearing or investigation of or in any court or quasi-judicial or administrative agency of any federal, state, local or foreign jurisdiction or before any arbitrator with respect to the Assets and/or the Assumed Liabilities.

 

  

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(f)           Taxes.  Seller has filed all federal, state and local tax returns required to be filed by it as of the date of this Agreement with respect to the Business, the Assets and/or the Assumed Liabilities and has paid, or made provision for payment, of all (i) taxes due for the periods covered by such returns, (ii) all payments of estimated taxes and (iii) all deficiencies assessed as a result of any examination of such returns.  Seller has not been granted any extension of the limitation period applicable to any claim for taxes or assessments with respect to the Business, the Assets and/or the Assumed Liabilities.

(g)           Compliance with Laws.  Seller and the Business have complied with all applicable laws and regulations and all orders of any governmental authority having jurisdiction over Seller, the Assets and/or the Business.  Seller has all licenses, permits and authorizations necessary to conduct the  Business and/or own the Assets.

(h)           Material Adverse Effect.  Except as fully disclosed to the Purchaser, the Seller has incurred no material liabilities that would have a material adverse effect on the Business and/or the Assets, and no contingency exists which could reasonably be expected to result in or cause a material adverse effect on the Business and/or the Assets.

(i)           Condition of Assets.  All equipment (whether or not covered by  an Equipment Lease), hardware, software and other tangible assets included as Assets (collectively, the “Tangible Assets”) are free of material defects and are in good working order (ordinary wear and tear excepted), and have been maintained in a manner consistent with the standards generally followed in the industry to which such items relate and all applicable laws, permits and contracts to which they are or may be subject.   In amplification and not limitation of the foregoing, all equipment, hardware and software constituting the operating Tangible Assets (e.g., servers, computers and copiers vs. desks and filing cabinets) are (i)  currently in service by Seller and (ii) regularly maintained pursuant to a service contract having a term of one (1) year or more and meeting industry standards for such type of equipment and, in all cases, in accordance with any manufacturer and/or warranty requirements.

(j)           Consents.  Except as set forth on Schedule 2.2(a)(i), neither the execution nor the performance of this Agreement, any agreement related hereto or the transactions contemplated hereunder requires the consent, approval, authorization of or other action by, or filing with, any third party (including any governmental authority) (collectively, the “Required Consents”) or if required, the Required Consents have been obtained, filing has been accomplished or the requisite action has been taken.

(k)           Intellectual Property.

i.           The Seller owns, or is licensed or otherwise possesses legally enforceable rights to use, all intellectual property (including the goodwill associated therewith) that is used, and/or is necessary, to conduct the Business as currently conducted or planned to be conducted.  Schedule 3.1(k) lists (by separate categories): (1) trademarks, trade names, and service marks that have been used in connection with the Business either in the United States or elsewhere, including but not limited to the name “SafeData”, and whether those trademarks, trade names, or service marks are registered or unregistered; (2) copyrighted or copyrightable materials (including but not limited to computer programs or applications, databases, manuscripts, audiovisual works, artwork and translations thereof) prepared by the Seller or others for the Seller, that were created, obtained or modified in furtherance of the Business, whether or not those materials were prepared in the United States or elsewhere, and whether or not such copyrights have been registered; (3) all Letters Patents, patent applications, divisions, continuations, continuations-in-part, substitutions, reissues, reexaminations, and extensions to be obtained therefor, that relate to the Business, whether in the United States or elsewhere; (4) all material written licenses, sublicenses and other agreements relating to the Business to which the Seller, its employees, Briggs or Putterman is a party and pursuant to which any other party is authorized to use any Intellectual Property (as hereinafter defined) rights; and (5) all written licenses, sublicenses and other agreements relating to the Business to which the Seller, its employees, Briggs or Putterman is a party and pursuant to which any of the Seller, its employees, Briggs or Putterman is authorized to make, use or sell an article or process patented by another or to exercise any of the exclusive rights reserved under a copyright or trademark owned by another, including software (such Section 3.1(k)(i)(5) rights being the “Third Party Intellectual Property Rights”); and, not listed separately on Schedule 3.1(k) but included in the Intellectual Property (and in the Assets), (6) trade secrets, schematics, technology, know-how, methods, processes, non-copyrightable computer software programs or applications, and other proprietary materials that were created, obtained or modified in furtherance of the Business, and whether or not those materials were prepared in the United States or elsewhere that are used in the Businesses or that form a part of any Seller’s product or as used in Seller’s services (collectively, the “Intellectual Property”). None of the Seller, its employees, Briggs nor Putterman is a party to any oral license, sublicense or agreement relating to the Business which, if reduced to written form, would be required to be listed in Schedule 3.1(k) under the terms of this Section 3.1(k)(i) and/or constitutes Intellectual Property.

 

  

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ii.           None of the Seller, its employees, Briggs or Putterman is, nor will any of the foregoing be as a result of the execution and delivery of this Agreement or the performance of Seller’s obligations under this Agreement, in breach of any license, sublicense or other agreement relating to the Intellectual Property or Third Party Intellectual Property Rights.

iii.           None of the Seller, its employees, Briggs or Putterman has been named in any suit, action or proceeding that involves a claim of infringement of any intellectual property rights of any third party.  None of the Seller, its employees, Briggs or Putterman infringe on any intellectual property right of any third party; and the Intellectual Property is not, to the knowledge of Seller, Briggs or Putterman, being infringed by activities, products or services of any third party.

iv.           The Seller has taken all reasonably necessary measures to safeguard and maintain its rights in, and the proprietary and confidential nature of, the Intellectual Property, including, but not limited to, including in or showing on any applicable products of Intellectual Property all necessary and/or appropriate copyright, patent, trademark or attribution notices.  All officers, managers, employees, consultants and contractors of the Seller (including but not limited to Briggs and/or Putterman) who have access to or were involved in the development of Intellectual Property have executed and delivered to the Seller, as applicable, an agreement regarding the protection of such Intellectual Property, and the assignment to or ownership by the Seller, of any and all rights, title and interest in the Intellectual Property arising from the services performed for the Seller, by such individuals or entities and such assignment documentation, if appropriate given the nature of the Intellectual Property in question, has been fully effected and recorded at the United States Patent and Trademark Office, Copyright Office and/or any other agencies necessary for the Seller and the Purchaser to fully protect their rights, title and interest in such Intellectual Property as of the Closing Date.   No current or prior officer, manager, employee or consultant of the Seller claims, and the Seller is not aware of any grounds to assert a claim to, or any ownership interest in, any such Intellectual Property as a result of having been involved in the development, creation or design of such property while employed or engaged by or consulting to the Seller unless all such ownership interests, if any, have been fully and properly assigned to the Seller as required pursuant to this Section 3.1(k)(i).

(l)           Absence of Liabilities.  The Seller has no debts, liabilities or obligations of any nature (whether accrued or unaccrued, absolute or contingent, direct or indirect, known or unknown, choate or inchoate, perfected or unperfected, liquidated or unliquidated, or otherwise, and whether due or to become due), other than those liabilities: (i) included in the unaudited balance sheet dated as of June 15, 2010 (the “Latest Balance Sheet”) or (ii) incurred in the ordinary course of business since the date of the Latest Balance Sheet consistent with past practices with unrelated third parties.   The Seller has no indebtedness for borrowed money, other than the Excluded Liabilities.

 

  

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(m)           Customer Contracts.

(i)           Schedule 1.1(a)(i) contains a true, correct and complete list of all Customer Contracts.

(ii)           The Seller has provided the Purchaser with true and correct copies of all Customer Contracts, including all amendments, waivers and other written modifications thereof and there are no oral agreements relating to the Customer Contracts.  All of the Customer Contracts are in full force and effect and are valid and enforceable in all respects in accordance with their terms and no event has occurred or circumstance exists that would give any individual or entity the right (with or without notice or lapse of time) to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate or modify, any such Customer Contract and Seller has performed all its current obligations to be performed under the Customer Contracts.

 

 

(iii)           Except as listed on Schedule 1.1(a)(i) by separate notation, there are no pending renegotiations of any of the Customer Contracts.

(iv)           The Seller enjoys peaceful and undisturbed possession of all leased personal or movable property under all such leases set forth, or required to be set forth, on Schedule 1.1(a)(i) or Schedule 1.1(a)(ii), including but not limited to the Equipment Leases, and all of such leases are valid and in full force and effect and are enforceable against the Seller and against all other parties thereto.  Neither the Seller nor any other party thereto is in default under any of such leases and no event has occurred which with the giving of notice or the passage of time or both could constitute a default under any of such leases.

(v)           Assuming receipt of the Required Consents and except for certain counterparties’ rights to terminate a Customer Contract on notice of assignment as listed on Schedule 2.2(a)(i), no Customer Contract is subject to termination, modification or acceleration as a result of the transactions contemplated by this Agreement.

(vi)           No written notice of default has been given or received by Seller or, to the knowledge of Seller, given by the applicable customer to a Customer Contract but not yet received by Seller with respect to its Customer Contract.

(vii)           No customer to any Customer Contract is in monetary default or, to the knowledge of Seller, in material non-monetary default under its applicable Customer Contract.

(viii)           Except as set forth on Schedule 3.1(m)(viii), no customer to any Customer Contract has deposited or paid for services for one (1) month or more in advance.

(n)           The financial statements, including but not limited to the Latest Balance Sheet, submitted by the Seller to the Purchaser (collectively, the “Financial Statements”) have been prepared in accordance with the Seller’s books and records and with GAAP, consistently applied throughout the periods indicated, and fairly and accurately present the financial position of the Seller, including but not limited to disclosure of all material liabilities, direct or contingent, of the Seller required to be disclosed by GAAP, as of the date of the Latest Balance Sheet, and the results of its operations for the respective periods then ended, subject, in the case of the unaudited Financial Statements, to normal year-end adjustments and the absence of footnotes required by GAAP.

 

  

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(o)           Books and Records; Accuracy of Information Provided.  The Seller’s books and records accurately and completely reflect its assets and liabilities.  The Seller maintains internal accounting controls that are sufficient to provide reasonable assurance that: (i) transactions are executed only in accordance with management’s authorization; (ii) transactions are recorded as necessary to permit preparation of the financial statements of the Seller in accordance with GAAP and to maintain accountability for the assets and liabilities of the Seller; (iii) receipts and expenditures of the Seller are executed only in accordance with management’s authorization; (iv) unauthorized acquisition, disposition or use of assets is prevented or timely detected; and (v) accounts, notes and other receivables are recorded accurately, and proper and adequate procedures are implemented to effect the collection thereof on a current and timely basis.  There are no weaknesses in the design or operation of such internal accounting controls that will adversely affect the ability of the Seller to initiate, record, process and report financial data. The Seller has provided complete, accurate and correct copies of all documentation requested by Purchaser in connection with the transactions contemplated hereunder, including but not limited to the Financial Statements, books of account and other records of the Seller.

(p)           Disclosure.  All material facts relating to the Business have been disclosed to the Purchaser in or in connection with this Agreement.  No representation, warranty or statement concerning the Seller, Assets, Business or Assumed Liabilities set forth in this Agreement or in any written statement or certificate furnished to the Purchaser pursuant to the transactions contemplated hereby, contains any untrue statement of a material fact or, when taken together, omits to state a material fact necessary to make the statements made herein or therein, in light of the circumstances under which they were made, not misleading.

(q)           Affiliate Transactions.  Except as listed on Schedule 3.1(q), no officer, manager, member, director, employee or affiliate of the Seller or any entity in which any such entity or individual is an officer, director, manager or the owner of five percent (5%) or more of the beneficial ownership interests, is a party to any contract (written or oral) with the Seller or has any interests in any property used in the Business or has any claim or right against the Seller, other than, with respect to officers, directors and managers, relating to their employment by the Seller, and with respect to members, relating to their respective membership interests in the Seller.  Each affiliate transaction, if any, was effected on terms equivalent to those which would have been established in an arm’s-length negotiation.  None of the Seller or any of its affiliates has any direct or indirect interest in any competitor of the Seller, except for passive ownership of less than five percent (5%) of the outstanding capital stock of any competing business that is publicly traded on any recognized exchange or in the over-the-counter market.

(r)           Securities Act Acknowledgements, Representations, Warranties and Covenants.

(i)           Acknowledgments.  The Seller agrees and acknowledges that: (1) no federal or state agency has made any finding or determination as to the fairness of the distribution of the Shares for investment, or any recommendation or endorsement of the Shares; (2) the Shares have not been registered under the Securities Act of 1933, as amended (the “Act”), or the securities acts of any state and, as a result, the Seller must bear the economic risk of the investment indefinitely because the Shares may not be sold unless subsequently registered under the Act and the securities laws of any appropriate states or an exemption from such registration is available, and that such registration under the Act and the securities laws of any such states is unlikely at any time in the future; (3) the Parent does not have any present intention and is under no obligation to register the Shares, whether upon initial issuance or upon any transfer thereof under the Act and applicable state securities laws, and Rule 144 and/or Rule 145 may not be available as a basis for exemption from registration; and (4) unless and until registered under the Act, all certificates evidencing the Shares, whether upon initial issuance or upon any transfer thereof, will bear a legend, prominently stamped or printed thereon, reading substantially as follows:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS.  SUCH SECURITIES MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, OR PURSUANT TO AN EXEMPTION FROM THE REGISTRATION PROVISIONS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS.”

 

  

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(ii)           Representations, Warranties and Covenants.  (1) The Shares are being acquired for the Seller’s own account for investment and not for distribution or resale to others and the Seller will not sell or otherwise transfer the Shares, whether by dividend or other distribution or upon liquidation or dissolution or otherwise, unless they are registered under the Act and the securities acts of any appropriate state or unless an exemption from such registration is available and the Parent is satisfied that such exemption is available; (2) the acquisition of the Shares by the Seller hereunder is consistent with its general investment objectives and the Seller understands that the acquisition of the Shares is a speculative investment involving a high degree of risk, including the risk of total loss of such investment, and there is now no established market for the Parent’s capital stock and there is no assurance that any public market for such stock will develop; (3) the Seller has adequate means of providing for its current needs and possible personal contingencies and it has no need for liquidity in this investment and can bear the risk of losing its entire investment in the Shares; (4) the Parent  has made available to the Seller at a reasonable time prior to its investment the opportunity to ask questions and receive answers concerning the Shares and to obtain any additional information which the Parent possesses or can acquire without unreasonable effort or expense that is necessary in connection with the investment but the Seller agrees and acknowledges, however, that it has relied solely upon this Agreement and its own independent investigation in making the decision to invest in the Shares; (5) the Seller understands that the distribution of the Shares is limited solely to “accredited investors,” as that term is defined under Regulation D of the Securities Act and the Seller is an “accredited investor” (as so defined); (6) the Seller is a sophisticated investor and has such knowledge and experience in financial and business matters that it is capable of understanding the merits and risks inherent in the proposed acquisition of the Shares; (7) the Seller is acquiring the Shares without having been furnished any specific offering literature or prospectus but has relied generally upon information filed by Parent with the Securities and Exchange Commission and acknowledges that no representations or warranties have been made to the Seller or its representatives by the Parent or the Purchaser, or any officer, employee, agent or affiliate of the Parent or the Purchaser other than as contained in this Agreement and the Seller must independently seek advice from its own tax and other advisor(s) and is not relying on any tax or other advice received from the Parent or the Purchaser in connection with the transactions contemplated by this Agreement; and (8) the Seller has neither relied upon nor seen any form of advertising or general solicitation in connection with the distribution of the Shares.

(s)           Accounts Receivable.  The accounts receivable of the Seller that comprise part of the Assets being acquired hereunder (i) represent valid and bona fide claims of the Seller against the account debtors associated with such receivables, (ii) have arisen in the ordinary course of the Business, and (iii) have not been and are not subject to set-off, counterclaim or any future performance obligation on the part of the Seller.

 

(t)           Accounts Payable.  The accounts payable of the Seller (both those accounts that comprise part of the Assumed Liabilities being assumed hereunder and the accounts payable that are being paid by Seller post-Closing pursuant to Section 5.9) represent vendors of the Seller that will continue to extend credit to the Purchaser until at least the one (1) year anniversary of the Closing Date so long as the Purchaser pays such vendors on a schedule of payments no more frequently than Seller paid such vendors within the ninety (90) days period prior to the Closing Date.

 

Section 3.2.   Survival.  Notwithstanding any investigation made by Purchaser or any representative thereof with respect to the subject matter of any representation or warranty of Seller, all of the representations and warranties set forth in Section 3.1, as updated by the certificate of Seller to be delivered to Purchaser at Closing in accordance with Section 6.2(a)(ii), hereof shall survive the consummation of any and all transactions contemplated hereby for a period of fifteen (15) months from and after the Closing Date.

 

  

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PURCHASER

Section 4.1.    Purchaser hereby represents and warrants to Seller that:

(a)           Corporate Status.  Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.  Parent is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada.

(b)           Authorization of Agreement.  Purchaser has all requisite power and authority to enter into, execute and deliver this Agreement, fulfill its obligations hereunder and consummate the transactions contemplated hereby; such execution and delivery, performance of obligations and consummation of the transactions have been duly authorized and approved by all requisite corporate action by or in respect of Purchaser; and this Agreement constitutes the legal, valid and binding obligation of Purchaser enforceable in accordance with its terms.   Parent has all requisite power and authority to fulfill its obligations in distributing the Shares hereunder; such performance of obligations have been duly authorized and approved by all requisite corporate action by or in respect of Parent.

Section 4.2.   Survival.  Notwithstanding any investigation made by Seller or any representative thereof with respect to the subject matter of any representation or warranty of Purchaser, all of the representations and warranties set forth in Section 4.1, as updated by the certificate of Purchaser to be delivered to Seller at Closing in accordance with Section 6.2(b)(i) hereof, shall survive the consummation of any and all transactions contemplated hereby for a period of fifteen (15) months from and after the Closing Date.

ARTICLE V

ADDITIONAL AGREEMENTS OF THE PARTIES

Section 5.1.   Ordinary Course.  Prior to the Closing, Seller covenants that it has not in the past one (1) year nor shall it enter into any transaction or take any other action with respect to the Assets other than in the ordinary course of business consistent with past custom and practice of the Business and of other businesses similar to the Business.

Section 5.2.   Regulatory and Other Authorizations. Purchaser shall obtain or make, and/or shall cooperate fully in obtaining or making, all governmental, regulatory and third-party approvals, orders, qualifications, waivers, consents, filings, authorizations, certifications or other actions necessary in order to consummate the transactions contemplated hereby.  The parties shall not take any action that will have the effect of delaying, impairing or impeding the receipt of any of the foregoing and will use all reasonable efforts to secure the same as promptly as possible.  Seller shall obtain all Required Consents and prepare all notices of assignment necessary to inform the counterparties of the Customer Contracts (and other Assets where such notice may be required, including but not limited to the Equipment Leases).  The forms used to obtain consent and provide notice of assignment shall be subject to Purchaser’s prior approval (not to be unreasonably withheld, conditioned or delayed).  Seller shall also provide Purchaser, in response to Purchaser’s request from time to time, with regular updates as to the status of the Required Consents and delivery of required notices.  Seller agrees to use its commercially reasonable efforts to obtain any Required Consent, including but not limited to individual additional contact with such counterparty via telephone, email and/or additional mailings.  These efforts to obtain Required Consents and provide required notices shall not be part of the Transition Services (as hereinafter defined) and shall be provided as part of the Seller’s obligations hereunder without any additional cost or expense except for the payment of the Purchase Price.

 

  

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Section 5.3.   Indemnification. Purchaser hereby indemnifies and holds harmless Seller, its officers, directors, shareholders, agents and representatives from and against any damages, losses, claims, liabilities, demands, charges, suits, penalties, costs or expenses, whether accrued, absolute, contingent or otherwise including but not limited to court costs and reasonable attorneys’ fees (“Losses”), which any of the foregoing may incur or to which any of the foregoing may be subjected, arising out of or otherwise based on (i) any misrepresentation or breach of warranty or representation by Purchaser or any breach or default by Purchaser under any of the covenants or other provisions of this Agreement or (ii) circumstances occurring with respect to the Assets on and after the Closing Date. Seller hereby indemnifies and holds harmless Purchaser, its officers, directors, shareholders, agents and representatives from and against any Losses, which any of the foregoing may incur or to which any of the foregoing may be subjected, arising out of or otherwise based on (x) any misrepresentation or breach of warranty or representation by Seller or any breach or default by Seller under any of the covenants or other provisions of this Agreement or (y) circumstances occurring with respect to the Assets prior to the Closing Date.  Regardless of the theory of recovery upon which a claim is made, Seller shall not be responsible to provide indemnification in an amount that exceeds the amount of the Purchase Price actually received by Seller under this Agreement.  In the event of any claim for indemnification hereunder, the indemnified party shall give the indemnifying party notice of the alleged Loss and sixty (60) days to cure the circumstances giving rise to such alleged Loss before initiating any action, litigation or other proceeding.  The obligations of this Section 5.3 shall survive for a period of one (1) year from and after the Closing Date.

Section 5.4.   Employment Agreement.  Briggs shall enter into an employment agreement with the Purchaser for a term of three (3) years, in the form attached hereto as Exhibit E, such agreement to become effective as of the Closing (the “Employment Agreement”).

Section 5.5.   Purchaser’s Board of Directors.   Purchaser shall arrange for the election of Putterman to Parent’s Board of Directors for a period of one (1) year from the Closing Date, continuing thereafter until such time as the Purchase Price is paid in full and, in such position, Putterman shall be entitled to all of the benefits and compensation, if any, granted to all other Board members based on their Board membership.

Section 5.6.   Transition Services.  Commencing on the Closing Date and for up to ninety (90) days after Closing, Seller shall cause Putterman to be available to provide Purchaser with management and transition services, including but not limited to customer care, billing, collection and trouble reporting regarding the Assets and facilitating the smooth transition of the Business to Purchaser (collectively, the “Transition Services”).   Engaging Putterman for such Transition Services, if at all, is subject to the sole discretion of Purchaser.  In the event Purchaser requests such services, Putterman shall be paid a fee of One Hundred Seventy Five Dollars ($175.00) per hour as an independent contractor and not as an employee or agent of the Purchaser and such reasonable out-of-pocket expenses that shall be approved in advance by Purchaser and sufficiently documented by Putterman (which expenses shall be reimbursed in accordance with Purchaser’s applicable policies and procedures).  As an independent contractor, Putterman shall be solely responsible for the withholding and payment of all federal, state and local income, social security, payroll, unemployment or other taxes and charges required to be made by him in accordance with applicable law in connection with the rendering of any Transition Services.  The Transition Services are to be provided based upon the needs and desires of the Purchaser but are expected to be provided for no more than three (3) days per week for a period of twenty-six (26) weeks following the Closing Date.

Section 5.7.   Notification Letters; Press Release.  Within ten (10) days after the Closing Date, Purchaser and Seller shall send each of the customers of the Seller and counterparties to each of the contracts included in the Assets a joint notification letter in a mutually agreeable form.  No later than the execution and delivery of this Agreement, the Purchaser and Seller shall mutually agree on a joint initial press release concerning this Agreement and the transactions contemplated hereby, which shall be disseminated as promptly as reasonably practicable after the Closing Date.

 

  

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Section 5.8.   Name Change.    Within one (1) business day after the Closing Date, the Seller will file with the Delaware Secretary of State an amendment to the Seller’s Certificate of Formation  (and with any other jurisdictions where Seller is registered to do business under the name “SafeData”), changing the Seller’s name from SafeData, LLC to another name that is not confusingly similar to the name “SafeData” and promptly shall change all company documentation such as its operating agreement to reflect the new name.

Section 5.9.   Payment of Certain Aged Accounts Payable.    The accounts payable of the Seller that comprise part of the Excluded Liabilities shall be paid in full within seven (7) days of the Closing Date, and Seller shall promptly provide Purchaser with evidence of such payments as Purchaser may reasonably require from time to time.

Section 5.10.   Tangible Assets.    All equipment, hardware and software constituting Tangible Assets (including but not limited to such Tangible Assets on-site at Seller’s premises or maintained off-site and those in Seller’s data centers and currently used for Seller’s service offerings as well as for its operations) shall remain within normal primary vendor product life cycles for no less than one (1) year from the Closing Date and Seller promptly shall replace any such Tangible Assets that fail to meet this requirement.  Seller shall have provided Purchaser with “End of Support/End of Life (EOS/EOL)” notifications (stating when such Tangible Assets shall no longer have “general availability”) and the “normal” life cycle process relating to all equipment, hardware and software constituting Tangible Assets from the vendors from which such Tangible Assets were purchased or leased.  For example, vendors may state that the normal life cycle of a particular piece of hardware purchased in year 1 is no longer offered for sale (i.e., no longer generally available) in year 3 with such hardware’s EOL occurring in year 5 and thereafter such vendor would only provide a maximum of six (6) months of solely service support, as opposed to replacement (i.e., its EOS is at the expiration of such six (6) month period).  Seller also shall have provided adequate information regarding recommendations, costs and alternatives to transition the Tangible Assets once they are subject to the EOS/EOL point in their usage.

Section 5.11.   Non-Compete Agreements.    The Assets include all of Seller’s right, title and interest in all of its agreements with its employees that include non-competition covenants, whether styled “Invention Assignment and Non-Competition Agreement” or otherwise.  Seller acknowledges that following Closing it shall have no further rights under any such agreements, including but not limited to any rights to enforce any non-competition covenants thereunder.

ARTICLE VI

CLOSING OF TRANSACTIONS

Section 6.1.                      The Closing.  The closing of the transactions contemplated by this Agreement (the “Closing”) and all deliveries to be made at such time shall take place on the date determined in accordance with this Section (the “Closing Date”) at the offices of Kelley Drye & Warren LLP, 3050 K Street, N.W., Suite 400, Washington, DC 20007 at 10:00 a.m., local time, or at such other place, date or time as may be agreed in writing by Seller and Purchaser.  Unless otherwise agreed, the Closing Date shall be June 17, 2010, to be effective at 11:59 p.m. on June 15, 2010.

Section 6.2.                      Deliveries at Closing.

(a)           Deliveries by Seller.  At the Closing, Seller shall execute and deliver to Purchaser:

(i)           Such documents conveying, transferring and assigning to Purchaser all of the Assets, together with such information concerning the Assets so as to give effect to the transactions contemplated by this Agreement;

 

  

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(ii)           An officer’s certificate certifying that all of Seller’s representations and warranties contained herein are true, correct and complete in all material respects as of the Closing Date, and that Seller has performed all of its obligations hereunder;

(iii)           A bill of sale in the form attached hereto as Exhibit C and an assignment and assumption agreement in the form attached hereto as Exhibit D;

(iv)           The Employment Agreement, executed by Briggs, in the form attached hereto as Exhibit E;

(v)           Substantiation acceptable to Purchaser in its reasonable discretion showing the Line of Credit Balance and cash balances in Seller’s various checking and savings accounts as of the time of Closing; and

(vi)           Where appropriate, any other separate instruments of sale, assignment or transfer, in form suitable for filing or recording with any appropriate office or agency, where the same are necessary or desirable in order to vest or evidence title thereto in Purchaser, including but not limited to any further instruments or documents required to record any Intellectual Property and evidence that any rights of Briggs, Putterman and/or any current or former employee or consultant of the Seller or its predecessors in any Intellectual Property have been assigned to the Seller.

At or after the Closing, at any time and from time to time, Seller shall also execute and deliver, at Purchaser’s expense, such further instruments of conveyance, sale, assignment or transfer, and shall take or cause to be taken such other or further actions, as Purchaser may reasonably request, in order to vest, confirm or evidence in Purchaser title to all or any part of the Assets, including but not limited to the Intellectual Property.  Such efforts may include but are not limited to any cooperation by Seller as may be reasonably necessary to protect Purchaser’s rights in and to the Intellectual Property.  In the event that Purchaser elects to seek patent protection for any portion of the Assets that is capable of being patented, the Seller (and Seller shall cause Briggs and/or Putterman, if necessary, to comply) agree to execute any reasonably necessary documentation as inventors of such Intellectual Property, including but not limited to any declarations or assignment of rights related thereto.  The obligations of this Section 6.2(a) shall survive indefinitely the Closing hereunder.

(b)           Deliveries by Purchaser.  At the Closing, Purchaser shall execute and deliver to Seller:

(i)           An officer’s certificate certifying that all of Purchaser’s representations and warranties contained herein are true, correct and complete in all material respects as of the Closing Date, and that Purchaser has performed all of its obligations hereunder;

(ii)           An assignment and assumption agreement in the form attached hereto as Exhibit D;

(iii)           The Employment Agreement in the form attached hereto as Exhibit E; and

(iv)           Where appropriate, any other separate instruments of sale, assignment or transfer, in form suitable for filing or recording with any appropriate office or agency, where the same are necessary or desirable in order to vest or evidence title thereto in Purchaser and are required to be executed by Purchaser.

Additionally, at the Closing, Purchaser shall deliver to Seller the portion of the Purchase Price as required by Section 2.1 above and the Promissory Note as required by Section 2.3 above.

 

  

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ARTICLE VII

GENERAL PROVISIONS

Section 7.1.   Notices.  Any notices, consents or other communications required to be sent or given hereunder by the parties shall in every case be in writing and shall be deemed properly served if and when (a) delivered by hand, (b) transmitted by electronic mail or facsimile with confirmation of transmission, (c) delivered by Federal Express or other express overnight delivery service, or registered or certified mail, return receipt requested, or (d) an attempted delivery by one of the means described in the foregoing clauses, to the parties at the addresses as set forth below:

SELLER:

SafeData, LLC

250 Centerville Road, Building A

Warwick, RI  02886

Attention: Peter Briggs, President

Fax:  (401) 737-2099

with copies to:

Larry Putterman

27 South Fifth Street

P.O. Box 211

Lewisburg, PA  17837

and

McNees Wallace & Nurick LLC

100 Pine Street

Harrisburg, PA 17108-1166

Attention: Michael L. Hund, Esq.

Fax:  (717) 237-5300

PURCHASER:

Data Storage Corporation

401 Franklin Ave. Suite 103

Garden City, NY 11530

Attention: Charles M. Piluso, President

Fax:  (212) 202-7966

with a copy to:

Kelley Drye & Warren LLP

3050 K Street, N.W., Suite 400

Washington, DC 20007

Attention:  Joseph B. Hoffman, Esq.

Fax:  (202) 342-8451

 

  

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or addressed to such other single address in the United States of a party as such party may specify to the others by notice in writing given as provided in this Section 7.1.  Date of service of such notice shall be (i) the date such notice is delivered (or refused) by hand, (ii) on confirmed delivery by electronic mail or facsimile (with a hard copy provided promptly thereafter by hand delivery, express overnight service or certified or registered mail), (iii) the next business day following the deposit of notice with an express overnight delivery service, or (iv) three (3) days after the date of mailing if sent by certified or registered mail.

Section 7.2.   Entire Agreement; Amendment; Waiver.  This Agreement, the schedules and exhibits hereto, the agreements expressly referred to herein and any agreement making specific reference to this Agreement embody the entire agreement and understanding of the parties hereto with respect to the subject matter herein contained, and supersede all prior agreements and understandings relative to the subject matter hereof. This Agreement may not be changed, modified, terminated or discharged, in whole or in part (other than in accordance with the respective terms hereof), except by a writing executed by the parties hereto.  No waiver of any of the provisions or conditions of this Agreement or any of the rights of a party hereto shall be effective or binding unless such waiver shall be in writing and signed by the party claimed to have given or consented to such waiver.

Section 7.3.   Binding Effect.  This Agreement and the various rights and obligations arising hereunder shall be binding on and inure to the benefit of Seller and Purchaser and their respective transferees, successors and permitted assigns; for purposes hereof, Purchaser shall be entitled to assign this Agreement to a wholly-owned subsidiary prior to Closing hereunder without Seller’s consent (but with written notice to Seller), provided that Purchaser shall remain primarily liable hereunder.  Except as provided otherwise in the immediately preceding sentence, nothing herein, express or implied, is intended or shall be construed to confer on or to give to any person, corporation, firm or legal entity other than the parties hereto, any rights, remedies or other benefit, and neither this Agreement nor any right, title and interest herein of either party shall be assignable (by operation of law or otherwise) except with the prior written consent of the other party.

Section 7.4.   Governing Law.  This Agreement and any dispute arising hereunder shall in all respects be construed in accordance with and governed by the laws of the State of New York, without giving effect to any choice or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York to be applied.  The parties agree that any action arising out of this Agreement shall be venued in the federal, state or local courts located in, or otherwise having jurisdiction over New York County, New York, and the parties hereby consent to personal jurisdiction in such courts and waive any objection based on Forum Non Conveniens and any objection to jurisdiction or venue of any action instituted hereunder.

Section 7.5.   Counterparts.  This Agreement may be executed in multiple counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

Section 7.6.   Captions.  The captions in this Agreement are included for purposes of convenience only and shall not be considered a part of this Agreement in construing or interpreting any provision hereof.

Section 7.7.   Invalidity.  The invalidity or unenforceability of any term or provision of this Agreement, or the application of such term or provision to any person or circumstance, shall not impair or affect the remainder of this Agreement and its application to other persons and circumstances, and the remaining terms and provisions hereof shall not be invalidated but shall remain in full force and effect.

 

  

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Section 7.8.   Gender and Number.  Whenever the context requires, words used in the singular shall be construed to mean or include the plural and vice versa, and pronouns of any gender shall be deemed to mean or include any other gender or genders.

Section 7.9.   Expenses.  Each of the parties shall bear its own respective expenses, fees and commissions incurred in connection with the preparation, negotiation and execution of this Agreement and consummation of the transactions contemplated hereby.  Except for Seller’s broker, RLS Associates (“Seller’s Broker”), each of the parties represents and warrants to the other that no broker, agent or other person acting on their behalf is or will be entitled to a fee, commission or other payment as a result of or arising out of this Agreement or the transaction contemplated hereby, and each party shall indemnify and hold harmless the other from any claim for commission and any other claims, fees and expenses arising from or out of any breach of the foregoing representation and warranty.  Seller agrees to be responsible for the payment of any commission owed to the Seller’s Broker in accordance with the terms of a separate commission agreement(s) entered into between Seller and the Seller’s Broker.  The indemnity obligations of this Section 7.9 shall survive the Closing hereunder.

Section 7.10.   Disclosure.  Except as permitted by Section 5.7 above, neither party shall make any press release or other public announcement or communication concerning the terms and conditions of this Agreement unless specifically approved in advance by the Seller. The parties will keep confidential, not disclose and not use for their own benefit (and will cause their affiliates to keep confidential, not disclose, and not use for their own benefit) any confidential and proprietary information obtained with respect to the other party or its business except for the purpose of performing under this Agreement.  The confidentiality obligation set forth in this Agreement shall not apply to (a) information which is in the public domain on the date hereof, enters the public domain after the date hereof (other than by reason of the breach of such obligation), was known by a receiving party or its affiliates prior to its receipt, is independently developed by the receiving party or its affiliates after the date hereof, or provided by a third party not in violation of the proprietary or other rights of the disclosing party or (b) the disclosure of the information (including the existence of this Agreement and the terms and conditions hereof) is required by law, rule, regulation, regulatory inquiry or other judicial or administrative process.  The provisions of this Section 7.10 are in addition to, and in no way limit or waive, any of the provisions of that certain Mutual Non-Disclosure Agreement between the parties (the “NDA”).   In the event of a conflict between this Agreement and the NDA, this Agreement shall control.

[SIGNATURE PAGE TO FOLLOW]

 

  

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective the day and year first above written.

SELLER:                                                                           PURCHASER:

SAFEDATA, LLC                                                                           DATA STORAGE CORPORATION

 

 

	 By: 	 	 	 By:   	 
	 	 Name:    Peter Briggs  	 	 	 Name:    Charles M. Piluso
	 	 Its:         President 	 	 	 Its:          President

 

 

[Signature Page for Asset Purchase  Agreement]

 

  

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SCHEDULE 1.1(a)(i)

Assets

See also Schedule 2.2(a)(ii).

 

  

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SCHEDULE 1.1(a)(ii)

Assumed Liabilities

 

 

  

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SCHEDULE 2.2(a)(i)

Assignment Contingency Contracts

 

  

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SCHEDULE 2.2(a)(ii)

Renewal Contracts

 

  

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SCHEDULE 3.1(k)

Intellectual Property

 

  

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SCHEDULE 3.1(m)(viii)

Customer Contracts with Deposits or Pre-payments of One (1) Month or More

 

  

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SCHEDULE 3.1(q)

Affiliate Transactions

 

  

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EXHIBIT A

Promissory Note

 

  

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EXHIBIT B

INTENTIONALLY DELETED

 

  

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EXHIBIT C

Bill of Sale

 

  

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EXHIBIT D

Assignment and Assumption Agreement

 

  

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EXHIBIT E

Employment Agreement

31

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