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UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS __________________________________________ ) DROPFIRE, INC. ) Plaintiff, ) ) v. ) ) JAMES A. CARSON, INDIVIDUALLY, ) SUZANNE M. CARSON, INDIVIDUALLY, ) MAXCF, INC., and ) SMJ OF GREENWICH L.L.C., ) Defendants. ) __________________________________________) COMPLAINT Plaintiff, DropFire, Inc. (hereinafter “Plaintiff” or “Dropfire”), by and through its attorneys of record, alleges as its Complaint against James A. Carson, Suzanne M. Carson, MaxCF, Inc., and SMJ of Greenwich, L.L.C. (collectively the “Defendants”), the following: NATURE OF ACTION 1. This is an action for monetary damages arising out of Defendants’ breach of contract pursuant to a binding Letter of Intent (hereinafter “LOI”) and Defendants’ manifestations of intent to contract following execution of the LOI. Defendants are bound by the LOI because all material terms were contained in the LOI and because Defendants manifested their intent to be bound by the LOI both prior to and following its execution. Plaintiff seeks monetary damages because Defendants breached the contract, failed to act in good faith, intentionally misrepresented their intentions and/or ability to contract, and because Defendants

Civil Action No. _________

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engaged in unfair and deceptive business practices prohibited by Massachusetts General Law c. 93A §11. PARTIES 2. Plaintiff is a corporation organized and existing under the laws of the State of Delaware and registered to do business in the Commonwealth of Massachusetts as a foreign corporation. Plaintiff conducts business in this District of the

Commonwealth of Massachusetts, and maintains a principal place of business at 1264 Main Street, Waltham, Middlesex County, Massachusetts 02451. 3. Upon information and belief, Defendant James A. Carson (“Carson”) is an individual with a principal place of residence at 2 Farley Street, Greenwich, Fairfield County, Connecticut 06830. 4. Upon information and belief, Defendant Suzanne M. Carson is an individual with a principal place of residence at 2 Farley Street, Greenwich, Fairfield County, Connecticut 06830. 5. Upon information and belief, Defendant MaxCF, Inc. (“MaxCF”) is a corporation organized and existing under the laws of the State of Delaware, conducts business in Massachusetts, Connecticut and elsewhere, and has a principal place of business at 2 Farley Street, Greenwich, Fairfield County, Connecticut 06830. 6. Upon information and belief, Defendant SMJ of Greenwich, LLC (“SMJ”) is a corporation organized and existing under the laws of Connecticut, conducts business in Connecticut and elsewhere, and has a principal place of business at 2 Farley Street, Greenwich, Fairfield County, Connecticut 06830.

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JURISDICTION 7. This Court has original subject matter jurisdiction over this Complaint pursuant to 28 U.S.C. §1332 (action between citizens of different states with an amount in dispute exceeding $75,000.00, exclusive of interest and costs, as to each Defendant). 8. Venue is properly laid in this District pursuant to 28 U.S.C. §1391 (b)(2) and (c) because Defendants are subject to personal jurisdiction in this District. 9. This Court has personal jurisdiction over each of the Defendants because each Defendant regularly conducts business in this District of the Commonwealth of Massachusetts and therefore has substantial and continuous contacts within this judicial District; because each Defendant has purposefully availed itself of the privileges of conducting business in this judicial District and reasonably should expect their conduct to have consequences in the Commonwealth of Massachusetts; because each Defendant solicits business in the Commonwealth of Massachusetts; and/or because each Defendant engaged in conduct harmful to Plaintiff inside and outside the Commonwealth of Massachusetts causing injury to Plaintiff in the Commonwealth of Massachusetts. FACTS A. The Business of DropFire, Inc. 10. Plaintiff’s principal business consists of developing software and platforms for the transmission of image-rich data between disparate computer operating systems over various networks.

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11. Plaintiff’s core business consists of three separate platforms: “Blaze,” “Fusion” and “Ignite.”1 12. On January 22, 2009, Plaintiff entered an agreement with Context Mediation Technologies, Inc. (“CMT”), which held the exclusive license to utilize for commercial purposes three patents owned by the Massachusetts Institute of Technology (“MIT”). CMT was formed as a holding company by the MIT professor holding the license to the technology. 13. As part of the agreement, CMT would sub-license the three patented technologies to Plaintiff for its use in commerce. 14. Pursuant to the extremely favorable agreement with CMT and MIT, Plaintiff would pay a certain percentage of its revenues to CMT once it earned $5,000,000.00 (Five Million US Dollars) in revenues so that Plaintiff, a start-up, would not be overly-encumbered in its early years. 15. Plaintiff used the patents to develop its core products; namely, IGNITE. B. The Business of Jim and Suzanne Carson, MaxCF, Inc., and SMJ of Greenwich, LLC 16. According to MaxCF’s website, Jim Carson is a private equity investor and/or a venture capitalist. Exhibit 1. 17. Upon information and belief, the Carsons coordinate and solicit private individuals to invest in companies Jim Carson is involved with, namely MaxCF, Inc., SMJ of Greenwich, LLC, and Storr Investment.
1

“Blaze” is a mobile application hosting platform offering wireless accessibility to any computer system on any device. “Fusion” is a

data cleansing system offering users the ability to gather data from incompatible systems and to share the cleansed and enhanced data with third party systems. “Ignite” is a data exchange system that streamlines data exchange from disparate systems by eschewing central data exchange mapping in favor of direct mappings.

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18. According to its listing on the Bloomberg BusinessWeek website, MaxCF, Inc. develops, manufactures, and markets operation management solutions for the hospitality and restaurant industries; offers supply chain, inventory, business intelligence, and cash flow management solutions; and provides costing and reporting solutions. See Exhibit 2. 19. Upon information and belief, SMJ is a private equity and/or venture capital entity. 20. Upon information and belief, Carson and his wife, Suzanne Carson, are officers, directors, managers and/or shareholders in MaxCF and SMJ. C. The Conduct Giving Rise to this Suit 21. Beginning in 2008, Plaintiff retained the services of multiple investment banks, including Mirus Capital Advisors, Inc., Sharp Hill Capital, Stage 1 Ventures, LLC and Kern Suslow Securities, to locate venture capital or private equity funding for Plaintiff as it sought to finish development of IGNITE and to begin sales, marketing and promotion of IGNITE. See Exhibit 3. 22. With the assistance of the investment banking firms, Plaintiff was introduced to numerous private investors and investment funds for the purpose of generating interest in investment in DropFire. See id. 23. In or about November of 2009, Eric Theilen, a friend of Plaintiff’s CEO, Scott Cohen (“Cohen”), introduced Cohen to Defendant James A. Carson, who held himself out to Cohen as a venture capitalist or private equity investor. See id. 24. After being introduced by Eric Theilen, Cohen engaged Carson in preliminary discussions concerning DropFire and its technologies as well as the potential for Carson’s investment in DropFire. See id.

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25. DropFire and Carson executed a Non-Disclosure Agreement concerning their business discussions on or about November 13, 2009. See Exhibit 3. 26. After their initial discussions, Cohen and Carson engaged in more formal discussions concerning Carson’s investment in DropFire and, at Carson’s request, Cohen forwarded DropFire’s financial statements to Carson for review. See id. 27. Over the course of the next several months, from January 2010 to March 2010, Cohen and Carson engaged in continuous and increasingly formal negotiations concerning investment in DropFire. See id. 28. On March 12, 2010, Carson forwarded to Cohen a term sheet, outlining the general parameters of the investment deal they negotiated. See Exhibit 4. 29. After discussing the term sheet and agreeing to its parameters, Carson expressed his intent to proceed to Closing, stating to Cohen, “I am very excited at the opportunity to work with you and the entire DropFire team and look forward to a very prosperous partnership.” Exhibit 5. 30. Nine days later, on March 23, 2010, Carson forwarded to Cohen the first draft of a LOI. See Exhibit 6. 31. Between March 23, 2010 and April 6, 2010, Cohen and Carson negotiated the terms of the LOI, and on April 6, 2010, the parties executed a final LOI. See Exhibit 7, Exhibit 8, Exhibit 9, Exhibit 10, Exhibit 11, and Exhibit 12. 32. Pursuant to the LOI, MaxCF would “acquire 25% of the fully diluted capital stock of DropFire in consideration of a cash investment of Two Million Dollars U.S. ($2,000,000.00). . . .” Exhibit 12.

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33. Pursuant to the LOI, Carson stated that “MaxCF seeks to complete this transaction on or before May 25, 2010. The closing date may be extended by either party without prejudice until a date not later than June 25, 2010. Any additional continuations of the date of closing must be by mutual consent of DropFire and MaxCF.” Id. 34. Pursuant to the LOI, Carson required that DropFire “present a plan for comprehensive patent rights for approval by MaxCF.” See id. at ¶10(b). 35. As part of the “comprehensive patent rights” plan, Carson required that DropFire renegotiate the terms of the licensing agreement with MIT and CMT in order that DropFire would begin a structured royalty payment plan beginning on May 25, 2010, the Closing date of the Series A investment. See Exhibit 3. 36. Pursuant to the negotiations with CMT and MIT, DropFire agreed to repay all royalties to M.I.T. over the course of the five years following the Closing date, as opposed to beginning royalty payments once DropFire achieved $5,000,000.00 in revenues as called for in the original agreement. See id. 37. Following execution of the LOI, Carson worked closely with Cohen and several members of DropFire management, including Tom Racca (“Racca”), as he performed due diligence in advance of the Closing. See Exhibit 13, Exhibit 14, and Exhibit 15. 38. Carson continued to speak with Cohen and Racca on a daily basis, and on April 21, 2010 Carson proposed drafting a Senior Secured Convertible Note to “allow MaxCF to advance funds to DropFire prior to the formal closing of the Series A financing.” Exhibit 16.

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39. The parties agreed that the closing for the Senior Secured Convertible Note would occur on May 12, 2010 at DropFire’s offices in Waltham, Massachusetts. See Exhibit 17. 40. On May 1, 2010, Racca proposed foregoing the Senior Secured Convertible Note because the “Series A funding [was to close] in just 12 days after the [Senior Secured Convertible Note] bridge.” Exhibit 18. 41. Mr. Racca proposed, instead, that the parties firmly commit to the Series A Funding Closing date on May 25, 2010. See id. 42. Carson agreed with Racca, stating “[a]t this point [foregoing the Senior Secured Convertible Note funding] may be easier and we have no problems from our side with scheduling [the Closing] hard for the 25th.” Id. 43. Between May 1, 2010 and the scheduled Closing date of May 25, 2010, the parties continued to exchange minor revisions to the Closing Documents. 44. The Series A Closing did not occur on May 25, 2010 because of a last-minute conflict with Carson’s schedule. See Exhibit 3. 45. On May 27, 2010, two days after the scheduled Closing, Carson asked to reschedule the Closing for June 11, 2010, when Carson next expected to be in the Boston area on separate business. See Exhibit 19. 46. That same day Carson assured Cohen that “[t]here will be no delay [to the Closing] beyond [June] 11th.” Exhibit 20. 47. The parties continued to exchange minor revisions to the Closing documents between May 27 and June 11. See Exhibit 3.

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48. After seeking additional clarification on several Closing documents, Carson assured Cohen and his attorney, John Melthaus (“Melthaus”), that “[i]f our thinking on these [sic] matter is aligned and confirmed there is little change [sic] we will make to any of the closing documents and they will be ready to proceed.” Exhibit 21. 49. After some minor revisions from Melthaus, Carson stated “Thanks John I think we are very close to finished on these docs.” Exhibit 22. 50. On June 7, 2010, Melthaus forwarded to Cohen the updated loan agreement and Note, along with the additional security agreements for Carson’s final review. See Exhibit 23. 51. On June 8, Carson began reviewing the final Closing documents. See Exhibit 24. 52. On June 9, 2010 at 6:07 P.M., after reviewing the final Closing documents, Carson emailed Cohen and his attorneys and, agreeing to the contract terms, stated, “[t]he documents are ok for final printing.” Exhibit 25. 53. The next day at 3:52 P.M., Carson emailed Cohen and stated that, “MaxCF is withdrawing from all investment considerations and will not be closing any investments or considering new investments.” Exhibit 26. 54. On a phone call following Carson’s unexpected email, Carson informed Cohen that he withdrew from investment considerations because he had been diagnosed as suffering from colon cancer, and needed to focus on recovering his health as opposed to the investment in DropFire. See Exhibit 3. 55. Cohen empathized with Carson’s situation, and the two agreed to talk in the future concerning investment in DropFire. See Exhibit 27.

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56. In early July of 2010, Cohen and Carson revived discussions concerning MaxCF’s investment, and the two discussed the possibility of MaxCF extending a $1,000,000.00 bridge loan to DropFire. See Exhbit 3. 57. On August 25, 2010, Carson again expressed interest in investing in DropFire, and informed both Cohen and Melthaus that he was reorganizing his businesses under the umbrella of a new entity, SMJ. See Exhibit 28. 58. That same day, Melthaus responded that the Closing documents were ready for printing, so long as no major changes were needed. See Exhibit 29. 59. Over the course of the next month, Cohen and Carson continued their discussions concerning the investment deal, and Carson again manifested his intent to close the investment deal. See Exhibit 30. 60. In late September, Carson again stated that he and his company intended to proceed to Closing. See Exhibit 31. 61. In early October, Carson stated to Melthaus that he intended to Close the investment deal in early November. See Exhibit 32. 62. On November 8, 2010, Carson notified Melthaus of all required changes to the Closing documents concerning Carson’s new entity, SMJ, and committed to a Closing date in late November. See Exhibit 33. 63. On November 12, 2010, Melthaus emailed Carson to confirm that the loan documents the parties agreed to execute in June were still the operative loan documents. See Exhibit 34.

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64. On November 22, 2010, Carson emailed Melthaus and informed him that the parties were in agreement with all terms of the deal and asked to schedule the Closing for December 2, 2010 at DropFire’s offices. See Exhibit 35. 65. The parties continued talking leading up to the December 2 Closing. 66. Carson, after again manifesting his intent to close the investment deal, again failed to show for the closing. See Exhibit 3. 67. Explaining his reasons for again failing to close the investment deal, on December 3 Carson stated “[w]ill be a while recovering. Waiting to see if additional

treatment is needed. Give you a call Tuesday [December 7] next week.” Exhibit 36. 68. Carson never called Cohen on December 7, and the parties agreed to speak on Tuesday, December 21. See Exhibit 3. 69. Carson missed the December 21 call, and asked to reschedule until the following Tuesday, December 28. See id. 70. Carson continued to evade calls and emails from Cohen for the next several weeks. See id. 71. Finally, Cohen asked his attorney to write Carson to demand that the parties close the deal as they had agreed. See id. 72. Carson, in turn, wrote to Cohen and stated that he would not invest in DropFire. COUNT I – Breach of Contract – (As to James A. and Suzanne M. Carson, as Individuals) 73. Plaintiff incorporates paragraphs 1 through 72 of its Complaint as if fully set forth herein.

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74. Defendants James A. and Suzanne M. Carson, in their capacity as individual investors, reached an agreement with Plaintiff whereby they would purchase 25% of Plaintiff’s fully diluted equity in consideration of payment of $2,000,000.00. 75. Carson entered a valid contract with Plaintiff pursuant to the LOI, which was binding upon Carson. 76. In the alternative, Carson entered a valid contract with Plaintiff pursuant to the LOI, which became binding upon Carson by virtue of his statements and actions following its execution. 77. Carson made numerous statements to Plaintiff, upon which Plaintiff relied, manifesting his unequivocal intent to proceed to close the investment deal. 78. Carson’s statements to Plaintiff induced Plaintiff to cease working with the various investment banks and venture capital firms Plaintiff hired to locate investors for Plaintiff. 79. Pursuant to the LOI, Carson required that Plaintiff renegotiate the terms of the licensing agreement with MIT and CMT. 80. Based on Carson’s requirement in the LOI, Plaintiff renegotiated the terms of the licensing agreement with MIT and CMT and agreed to begin a structured royalty payment plan beginning on May 25, 2010, the Closing date, as opposed to beginning royalty payments once Plaintiff achieved $5,000,000.00 in revenues per the original agreement. 81. Because Carson did not close the investment deal, Plaintiff was unable to make the structured royalty payments to CMT and, as a result, the royalty agreement

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with CMT was voided which resulted in Plaintiff losing the use of the patent related to its product, IGNITE. 82. Plaintiff has made demand upon Carson to proceed to closing of the investment deal. 83. Following Plaintiff’s demand, Carson made statements to Plaintiff in which he refused to close the investment deal. 84. The facts set forth above establish a breach of contract and, as a direct and proximate result of Defendants’ breach of contract, Plaintiff has suffered damages. COUNT II – Breach of Contract – (As to MaxCF, Inc.) 85. Plaintiff incorporates paragraphs 1 through 84 of its Complaint as if fully set forth herein. 86. Defendant James A. Carson, in his capacity as officer, director and manager of MaxCF, reached an agreement with Plaintiff whereby MaxCF would purchase 25% of Plaintiff’s fully diluted equity in consideration of payment of $2,000,000.00. 87. Carson, in his capacity as officer, director and manager of MaxCF, entered a valid contract with Plaintiff pursuant to the LOI, which was binding upon MaxCF. 88. In the alternative, Carson, in his capacity as officer, director and manager of MaxCF, entered a valid contract with Plaintiff pursuant to the LOI, which became binding upon MaxCF by virtue of Carson’s statements and actions following its execution.

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89. Carson, in his capacity as officer, director and manager of MaxCF, made numerous statements to Plaintiff, upon which Plaintiff relied, manifesting his unequivocal intent to proceed to close the investment deal on behalf of MaxCF. 90. Carson’s statements to Plaintiff induced Plaintiff to cease working with the various investment banks and venture capital firms Plaintiff hired to locate investors for Plaintiff. 91. Pursuant to the LOI, Carson, in his capacity as officer, director and manager of MaxCF, required that Plaintiff renegotiate the terms of the licensing agreement with MIT and CMT. 92. Based on Carson’s requirement in the LOI, Plaintiff renegotiated the terms of the licensing agreement with MIT and CMT and agreed to begin a structured royalty payment plan beginning on May 25, 2010, the Closing date, as opposed to beginning royalty payments once Plaintiff achieved $5,000,000.00 in revenues per the original agreement. 93. Because MaxCF did not close the investment deal, Plaintiff was unable to make the structured royalty payments to CMT and, as a result, the royalty agreement with CMT was voided which resulted in Plaintiff losing the use of the patent related to its product, IGNITE. 94. Plaintiff has made demand upon MaxCF to proceed to closing of the investment deal. 95. Following Plaintiff’s demand, Carson made statements to Plaintiff in which he refused to close the investment deal.

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96. The facts set forth above establish a breach of contract and, as a direct and proximate result of Defendant’s breach of contract, Plaintiff has suffered damages. COUNT III – Breach of Contract – (As to S.M.J. of Greenwich, LLC) 97. Plaintiff incorporates paragraphs 1 through 96 of its Complaint as if fully set forth herein. 98. James A. Carson informed Plaintiff that he entered the agreement with Plaintiff on behalf of SMJ, whereby SMJ would purchase 25% of Plaintiff’s fully diluted equity in consideration of payment of $2,000,000.00. 99. Carson, in his capacity as officer, director and manager of SMJ, entered a valid contract with Plaintiff pursuant to the LOI, which was binding upon SMJ. 100. In the alternative, Carson, in his capacity as officer, director and manager

of SMJ, entered a valid contract with Plaintiff pursuant to the LOI, which became binding upon SMJ by virtue of Carson’s statements and actions following its execution. 101. Carson, in his capacity as officer, director and manager of SMJ, made

numerous statements to Plaintiff, upon which Plaintiff relied, manifesting his unequivocal intent to proceed to close the investment deal on behalf of SMJ. 102. Carson’s statements to Plaintiff induced Plaintiff to cease working with

the various investment banks and venture capital firms Plaintiff hired to locate investors for Plaintiff.

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103.

Pursuant to the LOI, Carson, in his capacity as officer, director and

manager of SMJ, required that Plaintiff renegotiate the terms of the licensing agreement with MIT and CMT. 104. Based on Carson’s requirement in the LOI, Plaintiff renegotiated the terms

of the licensing agreement with MIT and CMT and agreed to begin a structured royalty payment plan beginning on May 25, 2010, the Closing date, as opposed to beginning royalty payments once Plaintiff achieved $5,000,000.00 in revenues per the original agreement. 105. Because SMJ did not close the investment deal, Plaintiff was unable to

make the structured royalty payments to CMT and, as a result, the royalty agreement with CMT was voided which resulted in Plaintiff losing the use of the patent related to its product, IGNITE. 106. Plaintiff has made demand upon SMJ to proceed to closing of the

investment deal. 107. Following Plaintiff’s demand, Carson made statements to Plaintiff in

which he refused to close the investment deal. 108. The facts set forth above establish a breach of contract and, as a direct and

proximate result of Defendant’s breach of contract, Plaintiff has suffered damages. COUNT IV – Breach of Covenant of Good Faith and Fair Dealing – (As to James A. Carson, Individually) 109. Plaintiff incorporates paragraphs 1 through 108 of its Complaint as if fully

set forth herein.

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110.

Carson entered a valid contract with Plaintiff pursuant to the LOI, which

was binding upon Carson. 111. In the alternative, Carson entered a valid contract with Plaintiff pursuant to

the LOI, which became binding upon Carson by virtue of his statements and actions following its execution. 112. Carson failed to honor the covenant of good faith and fair dealing by

negotiating the investment deal with Plaintiff in a dishonest manner and conscious of his wrongdoing, by making numerous false statements to Plaintiff following execution of the LOI, by stringing Plaintiff along, and by failing to proceed to the Closing. 113. As a direct and proximate result of Carson’s breach of the covenant of

good faith and fair dealing, Plaintiff has suffered damages. COUNT V – Breach of Covenant of Good Faith and Fair Dealing – (As to MaxCF) 114. Plaintiff incorporates paragraphs 1 through 113 of its Complaint as if fully

set forth herein. 115. Carson, in his capacity as officer, director and manager of MaxCF, entered

a valid contract with Plaintiff pursuant to the LOI, which was binding upon MaxCF. 116. In the alternative, Carson, in his capacity as officer, director and manager

of MaxCF, entered a valid contract with Plaintiff pursuant to the LOI, which became binding upon MaxCF by virtue of Carson’s statements and actions following its execution.

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117.

MaxCF, through its officer, director and manager Carson, failed to honor

the covenant of good faith and fair dealing by negotiating the investment deal with Plaintiff in a dishonest manner and conscious of his wrongdoing, by making numerous false statements to Plaintiff following execution of the LOI, by stringing Plaintiff along, and by failing to proceed to the Closing. 118. As a direct and proximate result of MaxCF’s breach of the covenant of

good faith and fair dealing, Plaintiff has suffered damages. COUNT VI – Breach of Covenant of Good Faith and Fair Dealing – (As to SMJ) 119. Plaintiff incorporates paragraphs 1 through 118 of its Complaint as if fully

set forth herein. 120. Carson, in his capacity as officer, director and manager of SMJ, entered a

valid contract with Plaintiff pursuant to the LOI, which was binding upon SMJ. 121. In the alternative, Carson, in his capacity as officer, director and manager

of SMJ, entered a valid contract with Plaintiff pursuant to the LOI, which became binding upon SMJ by virtue of Carson’s statements and actions following its execution. 122. SMJ, through its officer, director and manager Carson, failed to honor the

covenant of good faith and fair dealing by negotiating the investment deal with Plaintiff in a dishonest manner and conscious of his wrongdoing, by making numerous false statements to Plaintiff following execution of the LOI, by stringing Plaintiff along, and by failing to proceed to the Closing.

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123.

As a direct and proximate result of SMJ’s breach of the covenant of good

faith and fair dealing, Plaintiff has suffered damages. COUNT VII – Intentional Misrepresentation – (As to James A. Carson, Individually) 124. Plaintiff incorporates paragraphs 1 through 123 of its Complaint as if fully

set forth herein. 125. Defendant James A. Carson, as an individual, reached an agreement with

Plaintiff whereby he would purchase 25% of Plaintiff’s fully diluted equity in consideration of payment of $2,000,000.00. 126. Carson made a false statement – namely that he was a party to the

contract, would purchase 25% of Plaintiff’s fully diluted equity in consideration of payment of $2,000,000.00, and had sufficient funds to make such an investment. 127. Carson made the false statement to induce Plaintiff to negotiate the

investment deal with him. 128. Carson knew or should have known that statements were false at the time

he made the statements. 129. Plaintiff was harmed by Carson’s false statements when Plaintiff ceased

working with the various investment banks, which Plaintiff hired to locate investors, and began to negotiate exclusively with James A. Carson. 130. Plaintiff was also harmed when it lost its patent rights to Ignite, a result

which was caused by Carson’s insistence that Plaintiff renegotiate the terms of the licensing agreement with MIT and CMT and agree to begin a structured royalty

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payment plan beginning on May 25, 2010, the Closing date, as opposed to beginning royalty payments once Plaintiff achieved $5,000,000.00 in revenues per the original agreement. 131. Carson made a numerous additional false statements– namely, that he

agreed to all terms contained in the LOI and Closing documents and that he intended to proceed to close the investment deal. 132. Carson made the false statements to induce Plaintiff to continue

negotiating exclusively with him. 133. Carson knew or should have known that the statements were false at the

time he made the statements. 134. As a direct and proximate result of Carson’s intentional

misrepresentations, Plaintiff has suffered damages. 135. Carson is individually liable for the intentional misrepresentations he

committed. COUNT VIII – Intentional Misrepresentation – (As to MaxCF, Inc.) 136. Plaintiff incorporates paragraphs 1 through 135 of its Complaint as if fully

set forth herein. 137. Pleading in the alternative, Defendant MaxCF, utilizing the services of its

officer, director and manager, James A. Carson, reached an agreement with Plaintiff whereby MaxCF would purchase 25% of Plaintiff’s fully diluted equity in consideration of payment of $2,000,000.00.

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138.

Carson, in his capacity as officer, director and manager of MaxCF, made a

false statement – namely that MaxCF was a party to the contract, would purchase 25% of Plaintiff’s fully diluted equity in consideration of payment of $2,000,000.00, and had sufficient funds to make such an investment. 139. Carson, in his capacity as officer, director and manager of MaxCF, made

the false statement to induce Plaintiff to negotiate the investment deal with him. 140. Carson knew or should have known that statements were false at the time

he made the statements. 141. Plaintiff was harmed by Carson’s false statements when Plaintiff ceased

working with the various investment banks, which Plaintiff hired to locate investors, and began to negotiate exclusively with Carson. 142. Plaintiff was also harmed when it lost its patent rights to Ignite, a result

which was caused by Carson’s insistence that Plaintiff renegotiate the terms of the licensing agreement with MIT and CMT and agree to begin a structured royalty payment plan beginning on May 25, 2010, the Closing date, as opposed to beginning royalty payments once Plaintiff achieved $5,000,000.00 in revenues per the original agreement. 143. Carson made a numerous additional false statements– namely, that he

agreed to all terms contained in the LOI and Closing documents and that he intended to proceed to close the investment deal. 144. Carson made the false statements to induce Plaintiff to continue

negotiating exclusively with him.

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145.

Carson knew or should have known that the statements were false at the

time he made the statements. 146. As a direct and proximate result of Carson’s intentional

misrepresentations, Plaintiff has suffered damages. 147. MaxCF is liable for the intentional misrepresentations committed by

Carson, its officer, director and manager. COUNT IX – Intentional Misrepresentation – (As to SMJ of Greenwich, LLC) 148. Plaintiff incorporates paragraphs 1 through 147 of its Complaint as if fully

set forth herein. 149. Pleading in the alternative, Defendant SMJ, utilizing the services of its

officer, director and manager, James A. Carson, reached an agreement with Plaintiff whereby SMJ would purchase 25% of Plaintiff’s fully diluted equity in consideration of payment of $2,000,000.00. 150. Carson, in his capacity as officer, director and manager of SMJ, made a

false statement – namely that SMJ was an organized and existing corporate entity, was a party to the contract, would purchase 25% of Plaintiff’s fully diluted equity in consideration of payment of $2,000,000.00, and had sufficient funds to make such an investment. 151. Carson, in his capacity as officer, director and manager of SMJ, made the

false statement to induce Plaintiff to negotiate the investment deal with him. 152. Carson knew or should have known that statements were false at the time

he made the statements.

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153.

Plaintiff was harmed by Carson’s false statements when Plaintiff ceased

working with the various investment banks, which Plaintiff hired to locate investors, and began to negotiate exclusively with Carson. 154. Plaintiff was also harmed when it lost its patent rights to Ignite, a result

which was caused by Carson’s insistence that Plaintiff renegotiate the terms of the licensing agreement with MIT and CMT and agree to begin a structured royalty payment plan beginning on May 25, 2010, the Closing date, as opposed to beginning royalty payments once Plaintiff achieved $5,000,000.00 in revenues per the original agreement. 155. Carson made a numerous additional false statements– namely, that he

agreed to all terms contained in the LOI and Closing documents and that he intended to proceed to close the investment deal. 156. Carson made the false statements to induce Plaintiff to continue

negotiating exclusively with him. 157. Carson knew or should have known that the statements were false at the

time he made the statements. 158. As a direct and proximate result of Carson’s intentional

misrepresentations, Plaintiff has suffered damages. 159. SMJ is liable for the intentional misrepresentations committed by Carson,

its officer, director and manager.

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COUNT X - Violation of M.G.L. c. 93A (As to MaxCF, Inc.) 160. Plaintiff incorporates paragraphs 1 through 159 of its Complaint as if fully

stated herein. 161. MaxCF, through its officer, manager and director James A. Carson,

willfully and knowingly engaged in an unfair and deceptive business practices – namely stating that it was a party to the contract, was a valid and existing corporation in good standing, agreed to the terms of the LOI and would proceed to close the investment deal while never intending to do so, stringing Plaintiff along, and that it had sufficient funds to close the investment deal. 162. Plaintiff was harmed by MaxCF’s unfair and deceptive business practices

when Plaintiff ceased working with the various investment banks, which resulted in losing out on other potential investors in its company. 163. Plaintiff was also harmed when it lost its patent rights to Ignite, a result

which was caused by Carson’s insistence that Plaintiff renegotiate the terms of the licensing agreement with MIT and CMT and agree to begin a structured royalty payment plan beginning on May 25, 2010, the Closing date, as opposed to beginning royalty payments once Plaintiff achieved $5,000,000.00 in revenues per the original agreement. 164. As a direct and proximate result of MaxCF’s unfair and deceptive business

practices, Plaintiff has suffered damages. 165. MaxCF liable for its unfair and deceptive business practices.

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Case 1:12-cv-10281-NMG Document 1 Filed 02/13/12 Page 25 of 26

COUNT XI - Violation of M.G.L. c. 93A (As to SMJ of Greenwich, LLC) 166. Plaintiff incorporates paragraphs 1 through 165 of its Complaint as if fully

stated herein. 167. SMJ, through its officer, manager and director James A. Carson, willfully

and knowingly engaged in an unfair and deceptive business practices – namely stating that it was a party to the contract, was a valid and existing corporation in good standing, agreed to the terms of the LOI and would proceed to close the investment deal while never intending to do so, stringing Plaintiff along, and that it had sufficient funds to close the investment deal. 168. Plaintiff was harmed by SMJ’s unfair and deceptive business practices

when Plaintiff ceased working with the various investment banks, which resulted in losing out on other potential investors in its company. 169. Plaintiff was also harmed when it lost its patent rights to Ignite, a result

which was caused by Carson’s insistence that Plaintiff renegotiate the terms of the licensing agreement with MIT and CMT and agree to begin a structured royalty payment plan beginning on May 25, 2010, the Closing date, as opposed to beginning royalty payments once Plaintiff achieved $5,000,000.00 in revenues per the original agreement. 170. As a direct and proximate result of SMJ’s unfair and deceptive business

practices, Plaintiff has suffered damages. 171. SMJ liable for its unfair and deceptive business practices.

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Case 1:12-cv-10281-NMG Document 1 Filed 02/13/12 Page 26 of 26

PRAYER FOR RELIEF WHEREFORE, the Plaintiff, DropFire, Inc., prays as set forth above and requests that the Court grant the following relief: 1. A preliminary and permanent injunction as well as a temporary restraining order enjoining and restraining Defendants from transferring, concealing, encumbering or hypothecating any of their assets until such time as this Honorable Court has conducted a hearing on such motions; Judgment in favor of the Plaintiff and against the Defendants; Ordering Defendants, jointly and severally, to pay Plaintiff for the damages Plaintiff sustained as a result of Defendants wrongful acts alleged hereinabove; Ordering Defendants, jointly and severally, to pay Plaintiff Double or Treble damages pursuant to M.G.L. c. 93A as a result of Defendants wrongful acts alleged hereinabove; Ordering Defendants, jointly and severally, to pay Plaintiff prejudgment and postjudgment interest; Ordering Defendants, jointly and severally, to pay Plaintiff litigation costs; Ordering Defendants, jointly and severally, to pay Plaintiff reasonable attorney’s fees; and Such other and further relief as this Honorable Court deems appropriate and just.

2. 3.

4.

5.

6. 7.

8.

Respectfully submitted, DropFire, Inc. By its Attorneys,

Dated: February 13, 2012

/s/ Timothy F. Fallon Jason Bolio (BBO #654098) Timothy F. Fallon (BBO #674939) Bolio & Fabiano, LLP 26 Norfolk Street Dedham, MA 02026 jsb@boliofabiano.com tfallon@boliofabiano.com Telephone: (781) 326.6800 Facsimile: (781) 326.6828

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