shl Doc 218 Filed 02/19/15 Entered 02/19/15 17:16:04 Main Document Pg 1 of 10

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1 Pg 1 of 10 William R. Baldiga, Esquire R. Benjamin Chapman, Esquire BROWN RUDNICK LLP 7 Times Square New York, NY (212) Counsel for the Debtor and Debtor-in-Possession UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re Chapter 11 AEREO, INC. Case No (SHL) Debtor. NOTICE OF SALE OF DE MINIMIS ASSETS The above-captioned debtor and debtor-in-possession (the Debtor ), by and through its undersigned counsel, in accordance with the Debtor s Motion Pursuant To 11 U.S.C. 105(a) And 363 For An Order Authorizing The Sale Of Certain De Minimis Assets, dated February 10, 2015 (the Motion ), and with the approval and support of the Official Creditors Committee, presents this Notice of Sale of De Minimis Assets (the Proposal ) outlining the Proposed Transaction 1 between the Debtor and Alliance Technology Solutions ( Alliance ) for (i) wiping the Recording Drives in accordance with the NIST Guidelines, and (ii) purchasing the wiped Recording Drives from the Debtor Following further discussions with the third party vendors that (a) can completely erase or wipe all data from the Recording Drives i.e., the Legacy Recordings, and (b) has 1 Capitalized terms not otherwise defined herein shall have the meaning assigned to them in the Motion. 2 A copy of the purchase quote received from Alliance, detailing the terms of the Proposed Transaction, is attached hereto as Exhibit B.

2 Pg 2 of 10 expressed interest in purchasing the wiped Recording Drives from the Debtor, the Debtor has determined that Alliance has supplied the Debtor with the highest and best bid for the Recording Drives. The general terms of the Proposed Transaction are as follows Alliance, with the supervision of FTI Consulting, Inc. ( FTI ), the Debtor s data preservation professionals (subject to the Court s approval), will remove the Recording Drives from the Debtor s facilities in Brooklyn, New York, safely package and arrange for secure shipment of the Recording Drives to the facilities of CNE Direct, Inc. ( CNE ), with whom Alliance has contracted to wipe the Recording Drives in accordance with the DoD Practice; Alliance and CNE will provide an audit of the wiped Recording Drives and a certificate affirming that drives have been fully and completely wiped in accordance with the DoD Practice, and to the extent that any drives fail the wiping process, CNE will provide certification that such drive s destruction, and that drive will not be provided to Alliance for purchase; and Only once these steps have been completed, Alliance will purchase approximately 6150 wiped Recording Drives from the Debtor for $40.25 per drive, and 55 JBOD units for $ per unit, for a total of approximately $247,537, subject to an increased amount of up to $80,500 if 2000 additional Recording Drives are received from the Debtor s colocation facilities outside New York and included in the terms of the Proposed Transaction. 2. Alliance is an information technology and professional services firm located in North Reading, Massachusetts. It was formed in June 1, 2014, as a spin off from URS Information Systems ( URS ). Tom McHugh Jr., Alliance s president and CEO, was one of three partners at URS who left to form Alliance. Mr. McHugh has over 25 years of experience in providing information technology and computing services and support, with a specific focus of used technology and equipment. Alliance provides data destruction services for a number of clients in the Boston area, including in the medical, legal and banking industries. Clients for whom Alliance has provided data destruction and hard drive wiping services include, among others, Lahey Clinic Hospital, BJ s Wholesale Club, Boston Medical Center and CBS Boston (Channel 4). 2

3 Pg 3 of CNE is an Information Technology Asset Disposition ( ITAD ) firm based in Peabody, Massachusetts. See (last visited Feb. 17, 2015). Founded in 2002, CNE also has offices in Korea, Taiwan, China, India, and the Netherlands. CNE regularly wipes hardware according to the industry-standard NIST Guidelines. CNE will wipe the Recording Drives in accordance with the NIST Guidelines. If any drive cannot be wiped, CNE will shred the drive in accordance with industry practice and recycle the shredded material. Alliance believes it can, and will use its best efforts to, have all of the Recording Drives wiped within 4-6 weeks, and will provide a certificate to the Debtor affirming that the Recording Drives have been fully and completely wiped. 4. After (i) the drives are wiped in accordance with the NIST Guidelines and (ii) the Debtor has received the certificate affirming the full and complete wiping, Alliance would purchase the wiped drives and the JBODs from the Debtor for approximately $253,037 (which amount may be increased by up to $80,500 depending on whether additional Recording Drives are removed from the Debtor s colocation facilities in Bluffdale, Baltimore and Atlanta, and subsequently provided to CNE for wiping and, after wiping, purchase by Alliance). The amount offered by Alliance is net of the cost of wiping the Recording Drives in accordance with the NIST Guidelines. 5. The Debtor has preliminarily retained FTI in the ordinary course of business, subject to the Court s approval, to provide advice and consultation regarding the Debtor s data preservation activities and efforts. See Verified Statement of FTI Consulting, Inc., Pursuant to Federal Rule of Bankruptcy Procedure 2014, filed simultaneously herewith; see also Declaration Of Brett D. Harrison In Support Of Debtor s Expedited Motion Pursuant To 11 U.S.C. 105(a) And 363 For An Order Authorizing The Sale Of Certain De Minimis Assets [Docket No. 193] 3

4 Pg 4 of FTI has analyzed the process proposed by CNE for wiping the drives, is familiar with that process, and has advised the Debtor that such process will ensure that all data on the Recording Drives will be permanently wiped. FTI has also had conversations with Mr. McHugh of Alliance, and has advised the Debtor that it believes Alliance is a reputable vendor, and that CNE is capable of wiping the Recording Drives to ensure that none of the Legacy Recordings are transferred to any third party. 6. Based on the experience Alliance and CNE have in handling sensitive data for its customers, including the destruction of such sensitive data, the Debtor believes Alliance and CNE are qualified to perform the obligations under the Proposal. 7. The Debtor has consulted with the Official Creditors Committee regarding the offers received, and for the reasons set forth in the Motion and the Proposal, the Official Creditors Committee supports the Debtor s decision that the Proposed Transaction would be in the best interests of the Debtor s estate and its creditors. WHEREFORE, the Debtor respectfully requests that the Court enter an order substantially in the form attached hereto as Exhibit A, and grant such other and further relief as is appropriate. 4

5 Pg 5 of 10 Dated February 19, 2015 BROWN RUDNICK LLP /s/ R. Benjamin Chapman William R. Baldiga, Esquire R. Benjamin Chapman, Esquire BROWN RUDNICK LLP 7 Times Square New York, NY (212) Counsel for the Debtor and Debtor-in-Possession 5

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7 Pg 7 of 10 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re Chapter 11 AEREO, INC. Case No (SHL) Debtor. ORDER APPROVING DEBTOR S EXPEDITED MOTION FOR AN ORDER AUTHORIZING THE SALE OF CERTAIN DE MINIMIS ASSETS Upon the Debtor s Expedited Motion for an Order Authorizing the Sale of Certain De Minimis Assets (the Motion ), and the Debtor s Notice Of De Minimis Asset Sale (the Proposal ), 3 pursuant to 11 U.S.C. 105 and 363, and it appearing that proper and adequate notice has been given and that no other or further notice is required; and upon the record herein; and after due deliberation thereon; and sufficient cause appearing therefore; it is hereby ORDERED that the Motion is granted as set forth herein, and it is further ORDERED that the Proposed Transaction is approved in all respects; and it is further ORDERED that the Proposed Transaction shall take the form outlined in the Proposal, specifically, that 1. Alliance shall, at Alliance s sole cost and expense, remove the Recording Drives and JBOD units from the Debtor s facilities and transport them to CNE s facilities; 2. Alliance shall take the Recording Drives as is, where is and with all faults from the Debtor s facilities; 3. CNE shall wipe the Recording Drives in accordance with the NIST Guidelines; 4. Any Recording Drive that cannot be wiped according to the NIST Guidelines shall be shredded; 5. CNE shall provide a certificate to the Debtor affirming that the drives have been fully and completely wiped in accordance with the NIST Guidelines, and that any drive not so wiped has been shredded; 3 Capitalized terms used herein and not defined shall have the meanings ascribed to them in the Motion or the Proposal.

8 Pg 8 of Only once these steps 1 through 5 have been completed, Alliance shall pay the Debtor the purchase price listed in the Proposal for the Recording Drives, and the Debtor shall transfer title to the Recording Drives to Alliance; and 7. Alliance shall assume the risk of any loss or defect in chain of title for the wiped Recording Drives from the time the Recording Drives are removed from the Debtor s facilities until such time as payment is rendered to the Debtor for the wiped Recording Drives and title to the wiped Recording Drives is transferred to Alliance; and it is further ORDERED that the Debtor is authorized to transfer the Recording Drives to Alliance for wiping by CNE, and then to sell the wiped Recording Drives to Alliance; and it is further ORDERED that the title transferred by the Debtor to Alliance shall be transferred free and clear of any lien, charge, encumbrance, obligation, defect, or other interest of an entity other than the Debtor s estate, in accordance with 11 U.S.C. 363(f); and it is further ORDERED that this Court shall retain jurisdiction to determine any and all disputes concerning the interpretation or implementation of this Order or the Proposed Transaction. Dated February, 2015 The Honorable Sean H. Lane United States Bankruptcy Judge 7

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10 Pg 10 of 10 Please accept this as formal notification of the bid of Alliance Technology Solutions, located at 18 Jamers Millen Road, North Reading, MA for 3TB drives located at Aereo in New York City. The drives are labeled as Seagate Part Number ST3000NC002 or ST3000DM001. My bid is for $40.25 per drive, and that includes either an NIST level wipe, or a DOD wipe with a certificate provided to the party that requests that certification. I am making this bid with an estimated quantity of 8150 drives, and understand that that count may be subject to change. Alliance also is making an offer $ each on approximately 55 JBOD units. These units are enclosures that house some of these 3TB drives Alliance Technology also acknowledges that we are responsible solely for the costs associated with the packaging, logistics, and shipping of these drives and JBOD s. Submitted by Thomas G. McHugh Jr President Alliance Technology Solutions, Inc 18 James Millen Road North Reading, MA