AGREEMENT
THIS
AGREEMENT (this “Agreement”)
is
made and entered into on March 31, 2008, by and among POWERSAFE TECHNOLOGY
CORP., a Delaware corporation (“Parent”),
POWERSAFE ACQUISITION CORP., a Delaware corporation (“Acquisition
Corp.”),
which
is a wholly-owned subsidiary of Parent, and AMPLIFICATION TECHNOLOGIES, INC.,
a
Delaware corporation (the “Company”).
WITNESSETH:
WHEREAS,
the Board of Directors of each of Acquisition Corp., Parent and the Company
have
determined that it is fair and in the best interests of their respective
stockholders for Acquisition Corp. to be merged with and into the Company (the
“Merger”)
upon
the terms and subject to the conditions set forth herein;
WHEREAS,
the Board of Directors of each of Parent, Acquisition Corp. and the Company
have
approved the Merger in accordance with the General Corporation Law of the State
of Delaware (the “DGCL”)
and
upon the terms and subject to the conditions set forth herein and in the
Certificate of Merger attached as Exhibit
A
hereto
(the “Certificate
of Merger”);
WHEREAS,
the requisite stockholders of the Company (the “Stockholders”)
have
approved by written consent pursuant to Section 228(a) of the DGCL this
Agreement, the Certificate of Merger and the transactions contemplated and
described hereby and thereby, including, without limitation, the Merger, and
Parent, as the sole stockholder of Acquisition Corp., has approved by written
consent pursuant to Section 228(a) of the DGCL this Agreement, the Certificate
of Merger and the transactions contemplated and described hereby and thereby,
including, without limitation, the Merger;
WHEREAS,
pursuant to the terms and conditions of this Agreement, all of the issued and
outstanding common stock of the Company immediately prior to the Effective
Time
(as hereinafter defined), other than the common stock held by stockholders
who
are entitled to demand and properly demand an appraisal of their shares
(“Dissenting
Stockholders”),
shall
exchange the shares owned by them in accordance with the provisions contained
herein for newly issued restricted shares of common stock of Parent (the
“Exchange
Shares”);
WHEREAS,
the parties hereto intend that the Merger contemplated herein shall qualify
as a
reorganization within the meaning of Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended (the “Code”),
by
reason of Section 368(a)(2)(E) of the Code.
NOW,
THEREFORE, in consideration of the covenants, promises and representations
set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE
I
DEFINITIONS
Section
1.1 Certain
Definitions.
As used
in this Agreement and the schedules hereto, the following terms have the
respective meanings set forth below.
(a)
“Action”
means
any administrative, regulatory, judicial or other proceeding by or before any
Governmental Authority or arbitrator.
(b)
“Affiliate”
means,
with respect to any Person, any other Person that, directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, such Person. The term “control” means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise, including the ability to elect the members
of the board of directors or other governing body of a Person, and the terms
“controlled” and “controlling” have correlative meanings.
(d)
“Claims”
means
any and all claims, demands or causes of action, relating to or resulting from
an Action.
(e)
“Contract”
means
any contract, agreement, indenture, deed of trust, license, note, bond,
mortgage, lease, guarantee and any similar understanding or arrangement, whether
written or oral.
(f)
“Employees”
means
individuals who provide employment or employment-type services to Parent as
of
the date hereof, other than any such individuals who cease such employment
prior
to the Closing, but including any such individuals hired after the date hereof
and prior to the Closing.
(g)
“Employee
Benefit Plan”
means
any employee benefit plan, program, policy, practices, or other arrangement
providing benefits to any current or former employee, officer or director of
Parent or any beneficiary or dependent thereof that is sponsored or maintained
by Parent or contribute or are obligated to contribute, whether or not written,
including without limitation any employee welfare benefit plan within the
meaning of Section 3(1) of ERISA, any employee pension benefit plan within
the
meaning of Section 3(2) of ERISA (whether or not such plan is subject to ERISA)
and any bonus, incentive, deferred compensation, vacation, stock purchase,
stock
option, severance, employment, change of control or fringe benefit plan, program
or policy.
(h)
“Employment
Agreement”
means
a
written Contract or offer letter with or addressed to any Employee or Former
Employee pursuant to which Parent shall, directly or indirectly, have any actual
or contingent liability or obligation to provide compensation and/or benefits
on
or after the Closing Date in consideration for past, present or future services.
2
(i)
“Encumbrances”
means
security interests, liens, Claims, charges, title defects, deficiencies or
exceptions (including, with respect to Real Property, defects, deficiencies
or
exceptions in, or relating to, marketability of title, or leases, subleases
or
the like affecting title), mortgages, pledges, easements, encroachments,
restrictions on use, rights of-way, rights of first refusal, conditional sales
or other title retention agreements, covenants, conditions or other similar
restrictions (including restrictions on transfer) or other encumbrances of
any
nature whatsoever.
(j)
“Environmental
Laws”
means
all Laws relating to pollution or protection of human health and safety or
the
environment (including ambient air, surface water, groundwater, land surface,
natural resources or subsurface strata), including all such Laws relating to
Releases or threatened Releases of Regulated Substances into the environment
or
work place, or otherwise relating to the environmental or worker health and
safety aspects of manufacturing, processing, distribution, importation, use,
treatment, storage, disposal, transport or handling of Regulated Substances,
including, but not limited to, chemical inventories in all relevant
jurisdictions, and all such Laws relating to the registration of products of
Parent under the Federal Insecticide, Fungicide and Rodenticide Act, the Food
Drug and Cosmetic Act, the Toxic Substances Control Act, the European List
of
Notified Chemical Substances, the European Inventory of Existing Commercial
Chemical Substances or similar Laws.
(k)
“Environmental
Permit”
means
any permit, registration, approval, identification number, license or other
authorization or filing required under or issued pursuant to any applicable
Environmental Law.
(l)
“ERISA”
means
the Employee Retirement Income Security Act of 1974, as amended.
(m)
“ERISA
Affiliate”
means
any entity which would be aggregated with Parent under Section 414 of the Code
or Section 4001(b) of ERISA.
(n)
“Former
Employee”
means
individuals who, prior to the Closing, provided employment or employment-type
services to Parent.
(o)
“GAAP”
means
United States generally accepted accounting principles.
(p)
“Governmental
Authority”
means
any supranational, national, federal, state or local government, foreign or
domestic, or the government of any political subdivision of any of the
foregoing, or any entity, authority, agency, ministry or other similar body
exercising executive, legislative, judicial, regulatory or administrative
authority or functions of or pertaining to government, including any authority
or other quasi-governmental entity established by a Governmental Authority
to
perform any of such functions.
3
(q)
“Indebtedness”
of
any
Person means, without duplication, (i) all obligations of such Person for money
borrowed; (ii) all obligations of such Person evidenced by notes, debentures,
bonds or other similar instruments for the payment of which such Person is
responsible or liable; (iii) all obligations of such Person issued or assumed
for deferred purchase price payments associated with acquisitions, divestments
or other transactions; (iv) all obligations of such Person under leases required
to be capitalized in accordance with GAAP, as consistently applied by such
Person, (v) all obligations of such Person for the reimbursement of any obligor
on any letter of credit, banker's acceptance, guarantees or similar credit
transaction, excluding in all cases in clauses (i) through (v) current accounts
payable, trade payables and accrued liabilities incurred in the ordinary course
of business.
(r)
“IRS”
means
the Internal Revenue Service of the United States of America.
(s)
“Laws”
means
all United States federal, state or local or foreign laws, constitutions,
statutes, codes, rules, regulations, ordinances, executive orders, decrees
or
edicts by a Governmental Authority having the force of law.
(t)
“Leased
Real Property”
means
any real property leased or subleased to the Parent and set forth (and
designated as leased) in Schedule
4.08.
(u)
“Liabilities”
means
any and all debts, liabilities, commitments and obligations, whether or not
fixed, contingent or absolute, matured or unmatured, direct or indirect,
liquidated or unliquidated, accrued or unaccrued, known or unknown, whether
or
not required by GAAP to be reflected in financial statements or disclosed in
the
notes thereto.
(v)
“Material
Adverse Effect”
means,
with respect to a Person, any change, effect, event, occurrence or state of
facts which would reasonably be expected to be materially adverse to the
business, operations or financial condition of such Person, and its
Subsidiaries, taken as a whole, or on the ability of such Person to consummate
the transactions contemplated by this Agreement, other than any change, effect,
event, occurrence or state of facts (1) that is generally applicable in the
economy of the United States, (2) that is generally applicable in the United
States securities markets, (3) generally affecting the industry in which the
Company operates, (4) arising from or related to an act of international
terrorism, or (5) relating to the announcement or disclosure of this Agreement
and the transactions contemplated hereby.
(w)
“Person”
means
an individual, partnership, corporation, limited liability company, joint stock
company, unincorporated organization or association, trust, joint venture or
Governmental Authority.
(x)
“Regulated
Substances”
means
any substance which is listed, defined or regulated as a pollutant, contaminant,
hazardous, dangerous or toxic substance, material or waste, or is otherwise
classified as hazardous, dangerous or toxic in or pursuant to any Environmental
Law or which is or contains any explosives, radon, radioactive materials,
asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls,
petroleum and petroleum products (including waste petroleum and petroleum
products) as regulated under any applicable Environmental Law.
4
(y)
“Release”
means
any release, spill, emission, discharge, leaking, pumping, injection, deposit,
disposal, dispersal, leaching or migration into the indoor or outdoor
environment (including ambient air, surface water, groundwater and surface
or
subsurface strata) or into or out of any property, including the movement of
Regulated Substances through or in the air, soil, surface water, groundwater
or
property.
(z)
“Required
Consents”
means,
collectively, (1) each consent or novation with respect to any Contract to
which
the Parent, Acquisition Corp. or Company is a party or by which any of its
assets are bound required to be obtained from the other parties thereto by
virtue of the execution and delivery of this Agreement or the consummation
of
the transactions contemplated hereby in order to avoid the invalidity of the
transfer of such Contract, the termination or acceleration thereof, giving
rise
to any obligation to make a payment thereunder or to any increased, additional
or guaranteed rights of any person thereunder, a breach or default thereunder
or
any other change or modification to the terms thereof, and (2) each
registration, filing, application, notice, transfer, consent, approval, order,
qualification and waiver required from any third party or Governmental Authority
by virtue of the execution and delivery of this Agreement or the consummation
of
the transactions contemplated hereby.
(aa)
“SEC”
means
the Securities and Exchange Commission.
|
(bb)
|
“Securities
Act”
means the Securities Act of 1933, as amended.
|
(cc) “Subsidiaries”
of
any
entity means, at any date, any Person (a) the accounts of which would be
consolidated with those of the applicable entity in such entity's consolidated
financial statements if such financial statements were prepared in accordance
with GAAP as of such date, or (b) of which securities or other ownership
interests representing more than 50% of the equity or more than 50% of the
ordinary voting power or, in the case of a partnership, more than 50% of the
general partnership interests or more than 50% of the profits or losses of
which
are, as of such date, owned, controlled or held by the applicable entity or
one
or more subsidiaries of such entity.
(dd)
“Tax”
means
any federal, state, local or foreign taxes, including but not limited to any
income, gross receipts, payroll, employment, excise, severance, stamp, business,
premium, windfall profits, environmental (including taxes under section 59A
of
the Code), capital stock, franchise, profits, withholding, social security
(or
similar), unemployment, disability, real property, personal property, sales,
use, service, service use, lease, lease use, transfer, registration, value
added
tax, or similar tax, any alternative or add-on minimum tax, and any estimated
tax, in each case, including any interest, penalty, or addition thereto, whether
disputed or not.
(ee)
“Tax
Benefit”
means
the Tax effect of any item of loss, deduction or credit or any other item
(including increases in Tax basis) which decreases Taxes paid or required to
be
paid, including any interest with respect thereto or interest that would have
been payable but for such item.
(ff)
“Tax
Returns”
means
all returns, declarations, reports, estimates, information returns and
statements required to be filed in respect of Taxes.
5
(gg)
“Taxing
Authority”
means
any Governmental Authority having jurisdiction over the assessment,
determination, collection or other imposition of Taxes.
Section
1.2 References and Title. All references in this Agreement to articles,
sections, subsections and other subdivisions refer to the articles, sections,
subsections and other subdivisions of this Agreement unless expressly provided
otherwise. Titles appearing at the beginning of any section or subdivision
are
for convenience only and do not constitute any part of such subdivisions and
shall be disregarded in construing the language contained in such subdivisions.
The words “this Agreement,” “this instrument,” “herein,” “hereof,” “hereby,”
“hereunder” and words of similar import refer to this Agreement as a whole and
not to any particular subdivision unless expressly so limited. The phrases
“this
Section” and “this subsection” and similar phrases refer only to the sections or
subsections hereof in which such phrases occur. Pronouns in masculine, feminine
and neutral genders shall be construed to include any other gender, and words
in
the singular form shall be construed to include the plural and vice versa,
unless the context otherwise requires.
ARTICLE
II
THE
MERGER
Section
2.1 Merger.
Subject
to the terms and conditions of this Agreement and the Certificate of Merger,
Acquisition Corp. shall be merged with and into the Company in accordance with
Section 252 of the DGCL. At the Effective Time (as defined below), the separate
legal existence of Acquisition Corp. shall cease, and the Company shall be
the
surviving corporation in the Merger (sometimes hereinafter referred to as the
“Surviving
Corporation”)
and
shall continue its corporate existence under the laws of the State of Delaware
under the name “Amplification Technologies, Inc.” At and after the Effective
Time, the Company shall become a wholly-owned subsidiary of Parent.
Section
2.2 Effective
Time.
The
Merger shall become effective upon the filing of the Certificate of Merger
with
the Secretary of State of the State of Delaware in accordance with Section
252
of the DGCL. The time at which the Merger shall become effective as aforesaid
is
referred to hereinafter as the “Effective
Time”.
The
Effective Time shall not occur until and unless the Current Report on Form
8-K
required as a result of the Closing is completed and ready to be filed with
the
SEC.
Section
2.3 Closing. The
closing of the Merger (the “Closing”)
shall
occur with the filing of the Certificate of Merger (the “Closing
Date”).
The
Closing shall occur at the offices of Xxxxx Xxxxx & Associates, PLLC at the
address referred to in Section 10.1 hereof. At the Closing, all of the
documents, certificates, agreements, opinions and instruments referenced in
this
Article II will be executed and delivered as described therein. At the Effective
Time, all actions to be taken at Closing shall be deemed to be taken
simultaneously.
6
Section
2.4 Deliveries.
At or
prior to the Closing: (a) the Company shall deliver to Parent financial
statements as required under the rules of the SEC for purposes of inclusion
in
Parent’s filing of a Current Report on Form 8-K disclosing the Merger; and such
other documents as may be required under applicable law or requested by Parent,
including without limitation, any Company Required Consents and (b) Parent
will
deliver to the Company any documents as may be required under applicable law
or
requested by the Company, including without limitation, any Parent Required
Consents.
Section
2.5 Deliveries
after Closing.
Promptly after the Closing, representatives of the Parent and the Company shall
coordinate the exchange of certificates evidencing all the shares of common
stock of the Company (the “Company’s
Common Stock”)
beneficially owned by the Stockholders of
the
Company, duly endorsed in blank or accompanied by stock powers duly executed
in
blank, in proper form for transfer to Acquisition Corp. or an affidavit and
indemnification in form reasonably acceptable to counsel for Parent stating
that
such Stockholder has lost its certificate or certificates or that such have
been
destroyed. The Exchange Shares issued upon the surrender of the Company’s Common
Stock in accordance with the terms hereof shall be deemed to have been issued
in
full satisfaction of all rights of each of the respective Stockholders
pertaining to their rights in and to their respective shares of the Company’s
Common Stock.
Section
2.6 Dissenters’
Rights. Any
Dissenting Stockholder shall not be entitled to receive Exchange Shares, as
applicable, with respect to the shares of common stock owned by such Dissenting
Stockholder unless and until such Dissenting Stockholder shall have failed
to
perfect or shall effectively withdrawn or lost such holder’s right to dissent
from the Merger under the DGCL. Each Dissenting Stockholder shall be entitled
to
receive only the payment provided by Section 262 of the DGCL with respect to
the
shares of common stock owned by such Dissenting Stockholder and as to which
dissenters’ rights have been properly perfected. The Company shall give Parent
notice of any written demands for appraisal, attempted withdrawals of such
demands, and any other instruments served pursuant to applicable Law received
by
the Company relating to stockholders’ rights of appraisal.
Section
2.7 Restrictive
Legends. Certificates
evidencing the Exchange Shares pursuant to this Agreement may bear one or more
of the following legends, including without limitation, any legend required
by
the laws of any jurisdiction in which a holder of Exchange Shares resides,
and
any legend required by applicable law, including without limitation, any legend
that will be useful to aid compliance with Regulation D or other regulations
adopted by the SEC under the Securities Act:
“THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE
ABSENSE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED OR UNLESS TRANSFERRED PURSUANT TO A VALID EXEMPTION
FROM REGISTRATION AVAILABLE UNDER SUCH ACT.”
“THESE
SECURITIES ARE SUBJECT TO A LOCK-UP ARRANGEMENT BETWEEN THE COMPANY AND THE
HOLDER THEREOF.”
7
Section
2.7 Certificate
of Incorporation, Bylaws, Directors and Officers..
(a) The
Certificate of Incorporation of the Company, as in effect immediately prior
to
the Effective Time, attached as Exhibit
B
hereto,
shall be the Certificate of Incorporation of the Surviving Corporation from
and
after the Effective Time until amended in accordance with applicable law and
such Certificate of Incorporation.
(b) The
Bylaws of the Company, as in effect immediately prior to the Effective Time,
attached as Exhibit
C
hereto,
shall be the Bylaws of the Surviving Corporation from and after the Effective
Time until amended in accordance with applicable law, the Certificate of
Incorporation of the Surviving Corporation and such Bylaws.
Section
2.8 Assets
and Liabilities. At
the
Effective Time, the Surviving Corporation shall possess all the rights,
privileges, powers and franchises of a public as well as of a private nature,
and be subject to all the restrictions, disabilities and duties of each of
Acquisition Corp. and the Company (collectively, the “Constituent
Corporations”);
and
all the rights, privileges, powers and franchises of each of the Constituent
Corporations on whatever account, as well as all other things in action
belonging to each of the Constituent Corporations, shall be vested in the
Surviving Corporation; and all property, rights, privileges, powers and
franchises, and all and every other interest shall be thereafter as effectively
the property of the Surviving Corporation as they were of the several and
respective Constituent Corporations, and the title to any real estate vested
by
deed or otherwise in either of such Constituent Corporations shall not revert
or
be in any way impaired by the Merger; but all rights of creditors and all liens
upon any property of any of the Constituent Corporations shall be preserved
unimpaired, and all debts, liabilities and duties of the Constituent
Corporations shall thenceforth attach to the Surviving Corporation, and may
be
enforced against it to the same extent as if said debts, liabilities and duties
had been incurred or contracted by it.
Section
2.9 Operation
of Surviving Corporation.
The
Company acknowledges that upon effectiveness of the Merger, and the material
compliance by Parent and Acquisition Corp. with their respective duties and
obligations hereunder, the Surviving Corporation shall become a wholly-owned
subsidiary of Parent.
Section
2.10 Further
Assurances. From
time
to time, from and after the Effective Time, as and when reasonably requested
by
Parent, the proper officers and directors of the Company as of the Effective
Time shall, for and on behalf and in the name of the Company or otherwise,
execute and deliver all such deeds, bills of sale, assignments and other
instruments and shall take or cause to be taken such further actions as Parent,
Acquisition Corp. or their respective successors or assigns reasonably may
deem
necessary or desirable in order to confirm or record or otherwise transfer
to
the Surviving Corporation title to and possession of all of the properties,
rights, privileges, powers, franchises and immunities of the Company or
otherwise to carry out fully the provisions and purposes of this Agreement,
the
Certificate of Merger and the Articles of Merger.
8
Section
2.11 Tax
Consequences. It
is
intended by the parties hereto that the transactions contemplated by this
Agreement shall constitute a tax-free reorganization within the meaning of
Section 368 of the Code. The parties hereto adopt this Agreement as a “plan of
reorganization” within the meaning of Sections 1.368-2(g) and 1.338-3(a) of the
regulations promulgated under the Code.
ARTICLE
III
THE
EXCHANGE SHARES
Section
3.1 Investment
Amount.
As
of the
date of this Agreement, the shareholders of the Company have invested an
aggregate of $2,000,000 (the “Investment Amount”) to obtain control of Parent,
recapitalize the Company and merge the Company with Acquisition Corp. as
contemplated herein. The Investment Amount not used to purchase control of
the
Parent and pay for transaction expenses , after setting aside appropriate
reserves, shall be utilized by Parent to purchase newly created and issued
shares of Series C Preferred Stock of the Company which will be contributed
by
Parent to Acquisition Corp; said preferred stock shall be senior to all other
securities of the Company and shall prohibit the Company from incurring any
indebtedness. Said Series C Preferred shall be retired at the Closing.
Section
3.2 Amount
of Exchange Shares.
The
aggregate amount of Exchange Shares to be issued to the Stockholders upon
Closing, and to be reserved for shares of the Company to be issued pursuant
to
its capital structure obligations as of the date hereof , shall be $10,000,000
minus the Preferred Stock Adjustment, divided by the Parent Per Share Value.
The
outstanding non-voting common stock of the Company shall be treated as 0.9
share
of the common stock of the Company.
The
Preferred Stock Adjustment shall be the amount of (a) the liquidation preference
of the Series B Preferred Stock of the Company issued and outstanding as of
January 15, 2008 (the “Valuation Date”) less (b) the actual exercise price of
options of the Company exercised from the Valuation Date through the date of
this Agreement and less (c) the exercise price of any options which expire
within the one year anniversary of the date of this Agreement.
The
number of shares to be reserved for shares of the Company to be issued does
not
include any shares to be issued in lieu of payments under registration rights
agreements to which the Company is subject to which have accrued subsequent
to
the Valuation Date.
The
Parent Per Share Value shall be determined by multiplying the Investment Amount
by 1.0525 and dividing said product by 7,075,000 (the number of issued and
outstanding shares of Parent).
Section
3.3 Shares
Post-Closing. Upon
the
Effective Time, all outstanding options of the Company shall become obligations
of Parent. All outstanding preferred stock of the Company shall be exchanged
for
preferred stock of parent with like terms.
Section
3.4 Lockup.
Half of
the Exchange Shares issued to shareholders of the Company shall be
non-transferable (with certain limited exceptions) until December 1, 2008 and
the other half until January 15, 2009.
9
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF PARENT
As
an
inducement to the Company and the Stockholders to enter into this Agreement
and
to consummate the transactions contemplated herein, Parent represents and
warrants, as of the date of this Agreement and as of the Closing Date, unless
stated otherwise below, to the Company and Stockholders as follows:
Section
4.1 Organization.
Parent
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Delaware. Parent has all requisite power to own,
operate and lease its business and assets and carry on its business as the
same
is now being conducted.
Section
4.2 Capital
Structure.
As of
the Closing, Parent’s authorized capital will consist of (a) 100,000,000 shares
of common stock, $.0001 no par value per share, authorized, of which 7,075,000
shares are issued and outstanding, 6,000,000 of which are freely tradable
without any restrictions or Encumbrances and 1,075,000 of which are restricted
under the Securities Act, (i) with each holder thereof being entitled to cast
one vote for each share held on all matters properly submitted to the
shareholders for their vote; and (ii) there being no pre-preemptive rights
and
no cumulative voting; and (b) no shares of preferred stock or any other class
of
security. The recent cancellation of 8 million shares of common stock by Parent
was duly authorized. Parent has no shares reserved for issuance pursuant to
a
stock option plan or pursuant to securities exercisable for, or convertible
into
or exchangeable for shares of common stock. All of the issued and outstanding
shares of capital stock of Parent are duly authorized, validly issued, fully
paid and nonassessable. No shares of capital stock of Parent are subject to
preemptive rights or any other similar rights. There are (i) no outstanding
options, warrants, scrip, rights to subscribe for, puts, calls, rights of first
refusal, agreements, understandings, claims or other commitments or rights
of
any character whatsoever relating to, or securities or rights convertible into
or exchangeable for any shares of capital stock of Parent or arrangements by
which Parent is or may become bound to issue additional shares of capital stock
of Parent, (ii) no agreements or arrangements under which the Parent is
obligated to register the sale of any of its or their securities under the
Securities Act, and (iii) no anti-dilution or price adjustment provisions
contained in any security issued by Parent (or any agreement providing any
such
rights).
Section
4.3
Corporate
Power and Authority.
Parent
has all requisite power and authority to enter into and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution, delivery,
and performance of this Agreement by Parent and the consummation by it of the
transactions contemplated hereby, and the execution, delivery and performance
of
the other agreements, documents and instruments to be executed and delivered
in
connection with this Agreement by Parent and the consummation of the
transactions contemplated thereby, have been duly authorized by all necessary
action on the part of Parent and no other action or corporate proceeding on
the
part of Parent is necessary to authorize the execution, delivery, and
performance by Parent of this Agreement and the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Parent and constitutes the legal, valid and binding obligation of Parent,
enforceable against Parent in accordance with its terms.
10
Section
4.4 Conflicts;
Consents and Approvals.
Neither
the execution and delivery by Parent of this Agreement and the other agreements,
documents and instruments to be executed and delivered by any of them in
connection with this Agreement, nor the consummation of the transactions
contemplated hereby and thereby, will:
(a)
conflict
with, or result in a breach of any provision of, the organizational documents
of
Parent;
(b)
violate,
or conflict with, or result in a breach of any provision of, or constitute
a
default (or an event that, with the giving of notice, the passage of time or
otherwise, would constitute a default) under, or entitle any Person (with the
giving of notice, the passage of time or otherwise) to terminate, accelerate,
modify or call a default under, or give rise to any obligation to make a payment
under, or to any increased, additional or guaranteed rights of any Person under,
or result in the creation of any Encumbrance upon any of the properties or
assets of Parent or the Exchange Shares under any of the terms, conditions
or
provisions of (1) the organizational documents of Parent, (2) any Contract
to
which Parent is a party or to which any of their respective properties or assets
may be bound which, if so affected, would either have a Material Adverse Effect
or be reasonably likely to prevent the consummation of the transactions
contemplated herein, or (3) any permit, registration, approval, license or
other
authorization or filing to which Parent is subject or to which any of its
properties or assets may be subject;
(c)
require
any action, consent or approval of any non-governmental third party, other
than
the Company Required Consents listed on Schedule
4.4;
(d)
violate
any order, writ, or injunction, or any material decree, or material Law
applicable to Parent or any of its, business, properties, or assets;
or
(e)
require
any action, consent or approval of, or review by, or registration or filing
by
Parent with any Governmental Authority other than the filing of the Certificate
of Merger with the Secretary of State of the State of Delaware and compliance
with applicable rules of the SEC.
Section
4.5 Exchange
Shares.
As of
the Closing, all of the Exchange Shares shall be duly authorized, validly
issued, fully paid and nonassessable, and not issued in violation of any
preemptive or similar rights. Upon delivery to the Company of the certificates
representing the Exchange Shares, the Stockholders will acquire good and valid
title to such shares, free and clear of any Encumbrances, other than
restrictions under applicable securities laws.
Section
4.6 Subsidiaries.
Other
than Acquisition Corp., Parent does not own, directly or indirectly, nor have
entered into any agreement, arrangement or understanding to purchase or sell
any
capital stock or other equity interests in any Person or is a member of or
participant in any Person or have any Subsidiaries.
11
Section
4.7 No
Material Adverse Effect.
As of
the date of this Agreement, (a) Parent has (1) maintained its books and records
in accordance with past accounting practice, and (2) used all reasonable
commercial efforts to preserve intact the assets and the business organization
and operations of Parent, to keep available the services of its employees and
to
preserve its relationships with customers, suppliers, licensors, licensees,
contractors and other persons with whom Parent have business relations, (b)
no
Material Adverse Effect on Parent has occurred, and (c) there has been no event,
occurrence or development that has had, or would reasonably be expected to
have,
a material adverse effect on the ability of the Company or Parent to timely
consummate the transactions contemplated hereby.
Section
4.8 Title
to Properties.
Schedule
4.8
lists
all properties and assets of Parent. Parent has good and marketable title to
all
of its properties and assets, real and personal, free and clear of all
Encumbrances. All equipment used by Parent is generally in good operating
condition and repair, and is adequate for the uses to which it is being
put.
Section
4.9 Taxes.
Parent
has (a) duly and timely filed all Tax Returns relating to Parent that it was
required to file (taking into account any extensions of the filing deadlines
which have been validly granted) and (b) paid all Taxes that are shown thereon
as owing or that are otherwise due and payable by it. Such filed Tax Returns
are
true, correct and complete in all material respects. There are no outstanding
agreements or waivers extending the statutory period of limitation applicable
to
any Taxes of Parent for any period. Parent (v) has not filed a consent to the
application of Section 341(f) of the Code, (w) has not been a “distributing
corporation” or a “controlled corporation” in a distribution intended to qualify
under Section 355(a) of the Code within the past five years, (x) is not a party
to any Tax sharing, allocation or indemnification agreement or arrangement,
(y)
is not required to make any adjustments under Section 481(a) of the Code (or
any
similar provision of state, local or foreign Tax law) for any taxable year
ending after the Closing Date, and (z) has not been a member of an affiliated
group filing a consolidated, combined or unitary Tax Return or has any liability
for the Taxes of any Person (other than Parent) under Treasury Regulation
§1.15026 (or any similar provision of state, local or foreign law).
Section
4.10 Compliance
with Law.
Parent
and each of the officers, managers, directors, employees and agents of Parent
has complied in all respects with all Laws applicable to Parent and its products
and operations. Neither Parent nor any of its officers, managers, directors,
employees, or agents has received any notice from any Governmental Authority
that Parent has been or is being conducted in violation of any applicable Law
or
that an investigation or inquiry into any noncompliance with any applicable
Law
is ongoing, pending or threatened.
12
Section
4.11 Intellectual
Property.
(a)
For
the
purposes of this Agreement, the following terms have the following
definitions:
“Intellectual
Property”
shall
mean any or all of the following and all rights in, arising out of, or
associated therewith: (i) all patents and applications therefor throughout
the
world, and all reissues, divisions, renewals, extensions, provisionals,
continuations and continuations-in-part thereof; (ii) all inventions (whether
patentable or not), invention disclosures, improvements, trade secrets,
proprietary information, know how, technology, technical data and customer
lists, and all documentation relating to any of the foregoing; (iii) all
copyrights, copyrights registrations and applications therefor, and all other
rights corresponding thereto throughout the world; (iv) all industrial designs
and any registrations and applications therefor throughout the world, (v) all
trade names, logos, URLs, common law trademarks and service marks, trademark
and
service xxxx registrations and applications therefor throughout the world;
(vi)
all databases and data collections and all rights therein throughout the world;
(vii) all moral and economic rights of authors and inventors, however
denominated, throughout the world, and (viii) any similar or equivalent rights
to any of the foregoing anywhere in the world.
“Registered
Intellectual Property”
means
all: (i) registered patents and applications for patent registration (including
provisional applications); (ii) registered trademarks, applications to register
trademarks, intent-to-use applications, or other registrations or applications
related to trademarks; (iii) registered copyrights and applications for
copyright registration; and (iv) any other Intellectual Property that is the
subject of an application, certificate, filing, registration or other document
issued, filed with, or recorded by any state, government or other public legal
authority.
“Parent
Intellectual Property”
shall
mean any Intellectual Property or Registered Intellectual Property that is
owned
by, or licensed to Parent.
(b)
No
Parent
Intellectual Property or product or service of Parent is subject to any Action
or Claim, agreement, or stipulation restricting in any manner the use, transfer,
or licensing thereof by Parent, or which may affect the validity, use or
enforceability of such Parent Intellectual Property.
(c)
Schedule
4.11
is a
complete and accurate list of all the Parent Intellectual Property and
specifies, where applicable, the jurisdictions in which each such item of the
Registered Intellectual Property has been issued or registered or in which
an
application for such issuance and registration have been filed, including the
respective registration or application numbers. Each item of the Parent
Intellectual Property is valid and subsisting, all necessary registration,
maintenance and renewal fees currently due in connection with such Intellectual
Property have been made and all necessary documents, recordations and
certificates in connection with such Parent Intellectual Property have been
filed with the relevant patent, copyright, trademark or other authorities in
the
United States or foreign jurisdictions, as the case may be, for the purposes
of
maintaining such Parent Intellectual Property.
(d)
Parent
owns and has good and exclusive title to, or has license (sufficient for the
conduct of its business as currently conducted and as proposed to be conducted)
to, each item of the Parent Intellectual Property free and clear of any
Encumbrances (excluding licenses and related restrictions).
13
(e) Schedule
4.11
lists
all Contracts to which Parent is a party (i) with respect to the Parent
Intellectual Property licensed or transferred to any Person or (ii) pursuant
to
which a Person has licensed or transferred any Intellectual Property to
Parent.
(f) All
Contracts relating to the Parent Intellectual Property are in full force and
effect. The consummation of the transactions contemplated by this Agreement
will
neither violate nor result in the breach, modification, cancellation,
termination, or suspension of such Contracts. Parent is in compliance with,
and
has not breached any term of such Contracts and, to the knowledge of Parent,
all
other parties to such Contracts are in compliance with, and have not breached
any term of, such Contracts. Following the Closing, Parent will be permitted
to
exercise all the rights under such Contracts to the same extent Parent would
have been able to had the transactions contemplated by this Agreement not
occurred and without the payment of any additional amounts or consideration
other than ongoing fees, royalties or payments.
(g)
Parent
possesses all the Intellectual Property rights necessary to effectuate its
business and operations. Parent has
not
infringed or misappropriated any Intellectual Property of any third Person
or
engaged in unfair competition or any unlawful trade practice. Parent has not
received notice from any third party that the operation of its business, or
any
act, product or service of Parent, infringes or misappropriates the Intellectual
Property of any third party or constitutes unfair competition or trade practices
under the laws of any jurisdiction. No Person has infringed or misappropriated
or is infringing or misappropriating any of the Parent Intellectual
Property.
(h)
Parent
has taken all necessary steps to protect the rights of Parent in its
confidential information and trade secrets that it wishes to protect or any
trade secrets or confidential information of third parties provided to
Parent.
Section
4.12 Environmental
Matters.
(a)
Parent
is
in compliance with, and has at all times complied with, all applicable
Environmental Laws, and there are no facts, circumstances or conditions,
including requirements of current Environmental Laws that have been adopted
but
are not yet effective, for which reserves or accruals would be required under
GAAP, as consistently applied.
(b)
Parent
is
not subject to any existing, pending, or threatened Action or Claim by any
Person under any Environmental Laws.
(c)
The
Environmental Permits that are required for the conduct of Parent’s business are
valid, in full force and effect and enforceable according to their terms, no
proceeding is pending or threatened, to revoke, modify or terminate such
permits, and Parent is in compliance with, and have at all times complied with,
all such Environmental Permits.
14
Section
4.13 Litigation.
There
is no Action pending or threatened against Parent, or any executive officer,
member, manager or director thereof in each case that (a) relates to Parent,
its
assets, or its business, or (b) as of the date hereof, seeks, or could
reasonably be expected, to prohibit or restrain the ability of Parent to enter
into this Agreement or to timely consummate any of the transactions contemplated
hereby, and there is no reasonable basis for any such Action. There are no
judgments, decrees, agreements, memoranda of understanding or orders of any
Governmental Authority outstanding against Parent.
Section
4.14 Contracts.
Schedule
4.14
contains
a complete list, as of the date hereof, of all Contracts to which Parent is,
or
will be at Closing, a party or bound, or that otherwise relate to its business
or assets. Parent has made available to the Company or its representatives
correct and complete copies of all such Contracts with all amendments thereof.
Each such Contract is, and will at Closing be, valid, binding, and enforceable
against Parent and the other parties thereto in accordance with its terms,
and
is, and will at Closing be, in full force and effect. Parent is not in default
under or in breach of or is, or as of the Closing will be, otherwise delinquent
in performance under any such Contract, and no event has occurred, or will
as of
the Closing occur, that, with notice or lapse of time, or both, would constitute
such a default. Each of the other parties thereto has performed in all respects
all of the obligations required to be performed by it under, and is not in
default under, any such Contract and no event has occurred that, with notice
or
lapse of time, or both, would constitute such a default. There are no disputes
pending or threatened in writing with respect to any such Contracts. Neither
Parent nor any other party to any such Contract has exercised any option granted
to it to terminate or shorten or extend the term of such Contract, and Parent
has not given notice or received notice to such effect. All of such Contracts
will continue to be valid, binding, enforceable and in full force and effect
on
substantially identical terms following the consummation of the transactions
contemplated hereby.
Section
4.15 Labor
and Employment Matters.
(a)
There
are
no collective bargaining agreements, union contracts or similar agreements
or
arrangements in effect that cover any Employee or Former Employee (each, a
"Collective
Bargaining Agreement").
With
respect to any Employee, (a) there is no labor strike, dispute, slowdown,
lockout or stoppage pending or threatened against Parent or with respect to
any
Employees, and Parent has not experienced any labor strike, dispute, slowdown,
lockout or stoppage; (b) there is no unfair labor practice charge or complaint
against Parent or threatened before the National Labor Relations Board or before
any similar state or foreign agency; (c) there is no grievance or arbitration
arising out of any Collective Bargaining Agreement or other grievance procedure;
and (d) no charges are pending before the Equal Employment Opportunity
Commission or any other agency responsible for the prevention of unlawful
employment practices.
(b)
Parent
is
in compliance in all respects with all Laws, regulations and orders relating
to
the employment of labor, including all such Laws, regulations and orders
relating to wages, hours, and any similar state or local "mass layoff" or "plant
closing" Law, collective bargaining, discrimination, civil rights, safety and
health, workers' compensation and the collection and payment of withholding
and/or social security taxes and any similar tax.
15
Section
4.16 Permits;
Compliance. Parent is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances, exemptions, consents,
certificates, approvals and orders necessary to own, lease and operate its
properties and assets and to carry on its business as it is now being conducted
and as it will be conducted through to the Closing (collectively, the
“Permits”). There is no Action pending, or threatened, regarding any of
the Permits and each such Permit is in full force and effect. Parent is not
in
conflict with, or in material default (or would be in default with the giving
of
notice, the passage of time, or both) with, or in violation of, any of the
Permits.
Section
4.17 Debts and Guaranties. As of the Closing, Parent has no debts,
liabilities, obligations, direct, indirect, absolute or contingent, whether
accrued, vested or otherwise, whether known or unknown. In addition, Parent
is not directly or indirectly (a) liable, by guarantee or otherwise, upon or
with respect to, (b) obligated to provide funds with respect to, or to guarantee
or assume, any Indebtedness or other obligation of any Person.
Section
4.18 Full Disclosure. No representation or warranty of Parent in
this Agreement omits to state a material fact necessary to make the statements
herein, in light of the circumstances in which they were made, not misleading.
There is no fact known to Parent that has specific application to the Company
or
Stockholders and that materially adversely affects or, as far as can be
reasonably foreseen, materially threatens, the assets, business, prospects,
financial condition, or results of operations of Parent that has not been set
forth in this Agreement.
Section
4.19 SEC Documents. Parent has timely filed all reports, schedules,
forms, statements and other documents required to be filed by it with the SEC
pursuant to the reporting requirements of the Securities Exchange Act of 1934,
as amended (the “1934 Act”) (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements and schedules
thereto and documents (other than exhibits to such documents) incorporated
by
reference therein, being hereinafter referred to herein as the “SEC
Documents”). As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. None of the statements made in any such SEC Documents is, or has
been, required to be amended or updated under applicable law (except for such
statements as have been amended or updated in subsequent filings prior the
date
hereof). Parent has not received any communication from the SEC, NASD or any
other regulatory authority regarding any SEC Document or any disclosure
contained therein. As of their respective dates, the financial statements of
Parent included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have
been
prepared in accordance with United States generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as
may
be otherwise indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements) and fairly present
in all material respects the financial position of Parent as of the dates
thereof and the results of their operations and cash flows for the periods
then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments).
16
ARTICLE
V
REPRESENTATIONS
AND WARRANTIES OF ACQUISTION CORP.
As
an inducement to the Company and the
Stockholders to enter into this Agreement and to consummate the transactions
contemplated herein, Parent, the Principals and Acquisition Corp. represent
and
warrant, as of the date of this Agreement and as of the Closing Date, to the
Company and Stockholders as follows:
Section
5.1 Organization. Acquisition Corp. is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware.
Acquisition Corp. has all requisite power to own, operate and lease its business
and assets and carry on its business as the same is now being conducted.
Section
5.2 Capital Structure. All of the issued and outstanding
capital stock of Acquisition Corp. is, and at the Effective Time will be, owned
by Parent or a direct or indirect wholly-owned Subsidiary of Parent. Acquisition
Corp. has not conducted any business prior to the date hereof and has no, and
prior to the Effective Time will have no, assets, liabilities or obligations
of
any nature other than those incident to its formation and pursuant to this
Agreement and the Merger and the other transactions contemplated by this
Agreement.
Section
5.3 Corporate Power and Authority. Acquisition Corp. has all
requisite corporate power and authority to enter into and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution, delivery,
and performance of this Agreement by Acquisition Corp. and the consummation
of
the transactions contemplated hereby, have been duly authorized by all necessary
action and no other corporate action or corporate proceeding on the part of
Acquisition Corp. is necessary to authorize the execution, delivery, and
performance by Acquisition Corp. of this Agreement and the consummation by
Acquisition Corp. of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by Acquisition Corp. and constitutes the legal,
valid and binding obligation of Acquisition Corp., enforceable against
Acquisition Corp. in accordance with its terms.
Section
5.4 Conflicts; Consents and Approvals. Neither the execution and
delivery by Acquisition Corp. of this Agreement and the other agreements,
documents and instruments to be executed and delivered by any of them in
connection with this Agreement, nor the consummation of the transactions
contemplated hereby and thereby, will:
(a) conflict
with, or result in a breach of any provision of, the organizational documents
of
Acquisition Corp.;
17
(b) violate,
or conflict with, or result in a breach of any provision of, or constitute
a
default (or an event that, with the giving of notice, the passage of time or
otherwise, would constitute a default) under, or entitle any Person (with the
giving of notice, the passage of time or otherwise) to terminate, accelerate,
modify or call a default under, or give rise to any obligation to make a payment
under, or to any increased, additional or guaranteed rights of any Person under,
or result in the creation of any Encumbrance upon any of the properties or
assets of the Acquisition Corp. under any of the terms, conditions or provisions
of (1) the organizational documents of Acquisition Corp., (2) any Contract
to
which Acquisition Corp. is a party or to which any of their respective
properties or assets may be bound which, if so affected, would either have
a
Material Adverse Effect or be reasonably likely to prevent the consummation
of
the transactions contemplated herein, or (3) any permit, registration, approval,
license or other authorization or filing to which Acquisition Corp. is subject
or to which any of its properties or assets may be subject;
(c) require
any action, consent or approval of any non-governmental third party other than
the Acquisition Corp. Required Consents listed in Schedule
5.4;
(d) violate
any order, writ, or injunction, or any material decree, or material Law
applicable to the Company or any of its, business, properties, or assets;
or
(e) require
any action, consent or approval of, or review by, or registration or filing
by
Acquisition Corp. with any Governmental Authority other than the filing of
the
Certificate of Merger with the Secretary of State of the State of Delaware
and
compliance with applicable rules of the SEC.
Section
5.5 Subsidiaries. Acquisition Corp. does not own, directly or
indirectly, nor have entered into any agreement, arrangement or understanding
to
purchase or sell any capital stock or other equity interest in any Person or
is
a member of or participant in any Person. Acquisition Corp. does not have any
subsidiaries.
ARTICLE
VI
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
As
an
inducement to Parent to enter into this Agreement and to consummate the
transactions contemplated herein, the Company represents and warrants, as of
the
date of this Agreement and as of the Closing Date, to the Parent as
follows:
Section
6.1 Organization. The Company is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware.
The Company has all requisite power to own, operate and lease its business
and
assets and carry on its business as the same is now being conducted.
Section
6.2 Corporate Power and Authority. The Company has all requisite
corporate power and authority to enter into and deliver this Agreement and
to
consummate the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement by the Company and the consummation of the
transactions contemplated hereby, have been duly authorized by all necessary
action and no other corporate action or corporate proceeding on the part of
the
Company is necessary to authorize the execution, delivery, and performance
by
the Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its
terms.
18
Section
6.3 Conflicts; Consents and Approvals. Neither the execution and
delivery by the Company of this Agreement and the other agreements, documents
and instruments to be executed and delivered by any of them in connection with
this Agreement, nor the consummation of the transactions contemplated hereby
and
thereby, will:
(a) conflict
with, or result in a breach of any provision of, the organizational documents
of
the Company;
(b) violate,
or conflict with, or result in a breach of any provision of, or constitute
a
default (or an event that, with the giving of notice, the passage of time or
otherwise, would constitute a default) under, or entitle any Person (with the
giving of notice, the passage of time or otherwise) to terminate, accelerate,
modify or call a default under, or give rise to any obligation to make a payment
under, or to any increased, additional or guaranteed rights of any Person under,
or result in the creation of any Encumbrance upon any of the properties or
assets of the Company or the Exchange Shares under any of the terms, conditions
or provisions of (1) the organizational documents of Company, (2) any Contract
to which the Company is a party or to which any of their respective properties
or assets may be bound which, if so affected, would either have a Material
Adverse Effect or be reasonably likely to prevent the consummation of the
transactions contemplated herein, or (3) any permit, registration, approval,
license or other authorization or filing to which the Company is subject or
to
which any of its properties or assets may be subject;
(c) require
any action, consent or approval of any non-governmental third party, other
than
the Company Required Consents listed in Schedule
4.4;
(d) violate
any order, writ, or injunction, or any material decree, or material Law
applicable to the Company or any of its, business, properties, or assets;
or
(e) require
any action, consent or approval of, or review by, or registration or filing
by
the Company with any Governmental Authority.
Section
6.4 Information. Parent has received all documents, records, books
and other information pertaining to the Company that has been requested by
Parent. Parent makes such representation notwithstanding its express
acknowledgment that the information about Amplification Technologies, Inc.
attached as Exhibit D is not in the form and is not as extensive as that which
would be required in a registration statement filed with the SEC. Parent
acknowledges that the Company has prepared such information in good faith but
nevertheless is not warranted by the Company.
19
ARTICLE
VII
ADDITIONAL
AGREEMENTS AND COVENANTS
Section
7.1 Access and Information. Prior to the Closing, except to the
extent prohibited by applicable Law, Parent, on one hand, and the Company,
on
the other hand, shall permit representatives of the other to have reasonable
access during normal business hours and upon reasonable notice to all premises,
properties, personnel, books, records, Contracts, commitments, reports of
examination and documents of or pertaining to, as may be necessary to permit
the
other to, at its sole expense, make, or cause to be made, such investigations
thereof as the other reasonably deems necessary or advisable in connection
with
the consummation of the transactions contemplated by this Agreement, and Parent
and the Company shall reasonably cooperate with any such investigations. No
investigation by a party or its representatives or advisors prior to or after
the date of this Agreement (including any information obtained by a party
pursuant to this Section 7.1) shall diminish, obviate or cure any breach of
any
representation, warranty, covenant or agreement contained in this Agreement
nor
shall the conduct or completion of any such investigation be a condition to
any
of such party's obligations under this Agreement.
Section
7.2 Confidentiality. Each of the parties shall use reasonable
efforts to cause their respective Affiliates, officers, directors, employees,
auditors, attorneys, consultants, advisors and agents, to treat as confidential
and hold in strict confidence, unless compelled to disclose by judicial or
administrative process or, in the opinion of its counsel, by other requirements
of Law, and after prior written notice to the other parties, all confidential
information of Parent or the Company, as the case may be, that is made available
in connection with this Agreement, and will not release or disclose such
confidential information to any other Person, except their respective auditors,
attorneys, financial advisors and other consultants, agents, and advisors in
connection with this Agreement. If the Closing does not occur (a) such
confidence shall be maintained by the Parties and each Party shall use
reasonable efforts to cause its officers, directors, Affiliates and such other
Persons to maintain such confidence, except to the extent such information
comes
into the public domain (other than as a result of an action by such Party,
its
officers, directors or such other Persons in contravention of this Agreement),
and (b) upon the request of any Party, the other Party shall promptly return
to
the requesting Party any written materials remaining in its possession, which
materials it has received from the requesting Party or its representatives,
together with any analyses or other written materials based upon the materials
provided.
Section
7.3 Conduct
of Business.
From
and after the date hereof until the Closing, except as otherwise expressly
contemplated by this Agreement, each of Parent and the Company
shall:
(a) use
reasonable commercial efforts to preserve its business, operations, physical
facilities, working conditions and its business relationships with customers,
suppliers, licensors, licensees, contractors and other persons with whom it
has
significant business relations;
(b) not
take
any action that would cause a material breach of the representations and
warranties contained here.
20
(c) not
amend
its Articles of Incorporation or Bylaws (or other similar governing
instrument);
(d) not
split, combine or reclassify any of its shares, declare, set aside or pay any
dividend or other distribution (whether in cash, stock or property or any
combination thereof) in respect of its equity interests, make any other actual
or constructive distribution in respect of its interests or otherwise make
any
payments to holders in their capacity as such, or redeem or otherwise acquire
any of its securities or any other securities;
(e) not
adopt
a plan of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization or otherwise permit
its
corporate existence to be suspended, lapsed or revoked;
(f) not
create or form any Subsidiary (other than Acquisition Corp.);
(g) other
than in the ordinary course of its business, (1) incur or assume any Liability
in excess of $10,000; (2) assume, guarantee, endorse or otherwise become liable
or responsible (whether directly, contingently or otherwise) for the obligations
of any other Person; (3) make any loans, advances or capital contributions
to or
investments in any other Person; nor (4) pledge or otherwise Encumber its
shares;
(h) not
acquire, sell, lease, license, transfer or otherwise dispose of any assets
in
any single transaction or series of related transactions having a fair market
value in excess of $1,000 in the aggregate or that are otherwise material to
it
other than in the ordinary course of business;
(i) not
(1)
acquire (by merger, consolidation or acquisition of stock or assets) any
corporation, partnership or other entity or division thereof or any equity
interest therein; (2) amend, modify, waive or terminate any right under any
material contract in any material way; nor (3) authorize any new capital
expenditure or expenditures that individually is in excess of $1,000 or in
the
aggregate are in excess of $3,000;
(j) not
enter
into any Contract; or
(k) not
make
any change with respect to the compensation or benefits of any officer, director
or Employee or Former Employee.
Notwithstanding
anything contained herein to the contrary, the transactions to be taken by
the
Company contemplated and pursuant to the terms of this Agreement, and otherwise
in accordance with its plan of operations and capital structure obligations
as
described in the information memorandum attached hereto as Exhibit D, are
excluded from the restrictions provided above.
Section
7.4 Efforts
to Consummate.
Subject
to the terms and conditions of this Agreement, each party hereto shall use
all
reasonable commercial efforts to take, or to cause to be taken, all actions
and
to do, or to cause to be done, all things necessary, proper or advisable as
promptly as practicable to satisfy the conditions set forth in Article VIII,
and
to consummate the transactions contemplated hereby.
21
Section
7.5 No-Shop.
From
the date hereof until the later of the Closing Date or the date of the Effective
Time of this Agreement in accordance with the terms hereof, Parent nor its
officers, managers, directors, employees, agents, representatives and
Affiliates, shall, directly or indirectly, make, solicit, initiate or encourage
submission of proposals or offers from any Persons relating to an Acquisition
Proposal (as defined below). As used herein, “Acquisition Proposal” means any
proposal or offer involving a liquidation, dissolution, re-capitalization,
merger, consolidation or acquisition or purchase of all or substantially all
of
the assets of, or equity interest in, Parent or any other similar transaction
or
business combination involving the same. Parent shall immediately cease and
cause to be terminated all discussions or negotiations with third parties with
respect to any Acquisition Proposal, if any, exiting on the date hereof.
Section
7.6 Notification
by the Parties.
Each
party hereto shall use its reasonable commercial efforts to as promptly as
practicable inform the other parties hereto in writing if, prior to the
consummation of the Closing, it obtains knowledge that any of the
representations and warranties made by such party in this Agreement ceases
to be
accurate and complete in any material respect (except for any representation
and
warranty that is qualified hereunder as to materiality or Material Adverse
Effect, as to which such notification shall be given if the notifying party
obtains knowledge that such representation and warranty ceases to be accurate
and complete in any respect). Each party hereto shall also use its reasonable
commercial efforts to promptly inform the other parties hereto in writing if,
prior to the consummation of the Closing, it becomes aware of any fact or
condition that constitutes, in its reasonable judgment, a breach of any covenant
of such party as of the date of this Agreement or that would reasonably be
expected to cause any of its covenants to be breached as of the Closing Date.
Any such notification shall not be deemed to have cured any breach of any
representation, warranty, covenant or agreement made in this Agreement for
any
purposes of this Agreement.
Section
7.7 Cooperation
with Respect to Financial Reporting.
After
the date of this Agreement, the Company shall reasonably cooperate with Parent
in connection with Parent’s preparation of historical financial statements and
other information as required for Parent’s filings under the 1934
Act.
ARTICLE
VIII
CONDITIONS
TO CLOSING
Section
8.1 Conditions to Company’s Obligation to Close. All obligations of
the Company to consummate the transactions contemplated hereunder are subject
to
the fulfillment or waiver prior to or at the Closing of each of the following
conditions:
(a) All
representations and warranties of Parent contained in this Agreement shall
be
true and correct in all respects when made and shall be deemed to have been
made
again at and as of the Closing and shall then be true and correct in all
respects (except that representations and warranties made as of a specified
date, shall be true and correct only as of such specified date);
22
If
requested by the Company, it shall have received a certificate, executed by
the
President of Parent, dated as of the Closing Date, to the foregoing effect
and
as to such other matters as may be reasonably requested by the
Company.
(b) Prior
to
or at the Closing, Parent shall have delivered to the Company the items to
be
delivered pursuant to Section 2.4;
(c) Parent
shall have performed in all material respects each obligation and agreement
to
be performed by it, and shall have complied in all material respects with each
covenant required by this Agreement to be performed or complied with by it
at or
prior to the Closing; and
(d) The
Company shall have completed to its reasonable satisfaction its business and
legal due diligence investigation of Parent, shall not have discovered any
facts, circumstances, liabilities or conditions that, in the Company’s
reasonable discretion, may adversely affect the value or prospects of Parent
or
that may expose Parent to any liability not heretofore fully disclosed to the
Company.
(e) The
Company shall have provided to Parent a certificate of good standing from the
Secretary of State of Delaware and certified copies of its Articles of
Incorporation;
(f) The
Parent shall have prepared the Current Report on Form 8-K required as a result
on the consummation of the transactions contemplated hereby.
Section
8.2 Conditions
to Parent’s Obligations to Close.
All
obligations of Parent to consummate the transactions contemplated hereunder
are
subject to the fulfillment or waiver prior to or at the Closing of each of
the
following conditions:
(a) All
representations and warranties of the Company contained in this Agreement shall
be true and correct in all respects when made and shall be deemed to have been
made again at and as of the Closing and shall then be true and correct in all
respects (except that representations and warranties made as of a specified
date, shall be true and correct only as of such specified date);
Parent
shall have received a certificate, executed by the President of the Company,
dated as of the Closing Date, to the foregoing effect and as to such other
matters as may be requested by Parent.
(b) Prior
to
or at the Closing, the Company shall have delivered to Parent the items to
be
delivered pursuant to Section 2.4;
(c) The
Company shall have performed in all respects each obligation and agreement
to be
performed by it, and shall have complied in all respects with each covenant
required by this Agreement to be performed or complied with by it at or prior
to
the Closing;
(d) The
Company shall have provided to Parent a certificate of good standing from the
Secretary of State of Delaware and certified copies of its Articles of
Incorporation;
23
(e) Parent
shall have completed to its reasonable satisfaction its business and legal
due
diligence investigation of the Company, its property, business and subsidiaries,
shall not have discovered any facts, circumstances, liabilities or conditions
that, in Parent’s discretion, may adversely affect the value or prospects of the
Company or that may expose the Company to any liability not heretofore fully
disclosed to Parent; and
(f) Parent
shall have received any agreements, instruments, certificates and any other
documentation requested.
(g) The
Company shall have prepared the Current Report on Form 8-K required as a result
on the consummation of the transactions contemplated hereby.
ARTICLE
IX
TERMINATION
Section
9.1 Termination.
This
Agreement may be terminated at any time prior to the consummation of the Closing
under the following circumstances:
(a) by
mutual
written consent of Parent and the Company or a majority of the
Stockholders;
(b) by
Parent, the Company or by a majority of the Stockholders, if the Closing Date
shall not have been consummated on or before December 31, 2008; provided that
the right to terminate this Agreement under this Section 9.1 shall not be
available to a party if such party's or such party's Affiliate's willful act
or
willful failure to act has been the cause of or resulted in the failure of
the
Closing to be consummated on or before such date;
(c) by
any
party, if there shall be in effect a final, non-appealable order of a court
or
government administrative agency of competent jurisdiction permanently
prohibiting the consummation of the transactions contemplated hereby.
Section
9.2 Termination
Procedure.
Written
notice of any termination (“Termination
Notice”)
pursuant to this Article IX shall be given by the party electing termination
of
this Agreement (“Terminating
Party”)
to the
other parties (collectively, the “Terminated
Party”),
and
such notice shall state the reason for termination. The party or parties
receiving Termination Notice shall have a period of ten (10) days after receipt
of Termination Notice to cure the matters giving rise to such termination to
the
reasonable satisfaction of the Terminating Party. If the matters giving rise
to
termination are not cured as required hereby, this Agreement shall be terminated
effective as of the close of business on the tenth (10th) day following the
Terminated Party’s receipt of Termination Notice.
24
Section
9.3 Effect
of Termination.
Upon
termination of this Agreement prior to the consummation of the Closing and
in
accordance with the terms hereof, this Agreement shall become void and of no
effect, and none of the parties shall have any liability to the others, except
that nothing contained herein shall relieve any party from liability for its
intentional breach of any representation, warranty or covenant contained herein,
or its intentional failure to comply with the terms and conditions of this
Agreement or to perform its obligations hereunder. If it shall be finally
judicially determined that termination of this Agreement was caused by an
intentional and deliberate breach of this Agreement, then, in addition to other
remedies at Law or equity for breach of this Agreement, the party so found
to
have intentionally and deliberately breached this Agreement shall indemnify
and
hold harmless the other parties hereto for their respective out-of-pocket costs,
including the reasonable fees and expenses of their counsel, accountants,
financial advisors and other experts and advisors, as well as reasonable fees
and expenses incident to the negotiation, preparation and execution of this
Agreement and related documentation.
Section
9.4 Expenses.
The
parties shall each bear their own respective expenses incurred in connection
with this Agreement and the contemplated Merger.
Section
9.5 Liquidated
Damages.
The
parties hereby agree that upon receipt of Termination Notice, the Terminated
Party shall be entitled to purchase, and the Terminating Party shall be required
to sell to the Terminated Party, 20% of the outstanding equity of the
Terminating Party for $1.00. The parties further hereby agree that said purchase
is fair and equitable since the damages caused by the Terminating Party are
difficult to ascertain.
ARTICLE
X
INDEMNIFICATION;
SURVIVAL
Section
10.1 Indemnification
by Parent.
The
Parent shall indemnify and hold harmless the Company and its Affiliates,
officers, directors, stockholders, employees and agents and the successors
and
assigns of all of them (the “Company
Indemnified Parties”),
and
shall reimburse the Company Indemnified Parties for, any loss, liability, claim,
damage, expense (including, but not limited to, costs of investigation and
defense and attorneys’ fees) (collectively, “Damages”),
arising from or in connection with (a) any inaccuracy or breach of any of the
representations and warranties of Parent and/or Acquisition Corp. in this
Agreement or in any certificate or document delivered by or on behalf of Parent
pursuant to this Agreement, or any actions, omissions or statements of fact
inconsistent with in any respect any such representation or warranty, (b) any
inaccuracy, misstatement, or omission in any disclosures documents made
available to or filed by Parent with the SEC, (c) any failure by Parent to
perform or comply with any agreement, covenant or obligation in this Agreement
or in any certificate or document delivered by or on behalf of Parent pursuant
to this Agreement to be performed by or complied with by or on behalf of Parent,
(d) any claims made by a third Person against a Company Indemnified Party based
upon a Contractual obligation of Parent and/or Acquisition Corp. for services
performed prior to the Effective Time, (e) any claims made at any time arising
out of, or in connection with, any Environmental Laws or environmental
conditions which are based upon conditions existing prior to the Effective
Time,
(f) Taxes attributable to the ownership of Parent prior to the Effective Time,
(g) Taxes attributable to the conduct by Parent of the business of Parent and/or
Acquisition Corp. or the operation or ownership of its assets, (h) any claims
for severance or any other compensation made by an Employees or Former Employee,
(i) any claim made at any time by any Governmental Authority in respect of
the
business of Parent for all periods prior to the Effective Time, (j) any
Liability or obligation of Parent arising or relating to the periods prior
to
the Effective Time or (k) any Action or investigation by any Person relating
to
or arising out of the business or operations of Parent prior to the Effective
Time.
25
Section
10.2 Survival.
All
representations, warranties, covenants and agreements of the parties contained
herein or in any other certificate or document delivered pursuant hereto shall
survive the Closing until the expiration of the applicable statute of
limitations.
ARTICLE
XI
MISCELLANEOUS
Section
11.1 Notices.
All
notices or other communications required or permitted hereunder shall be in
writing. Any notice, request, demand, claim or other communication hereunder
shall be deemed duly given (a) if by personal delivery, when so delivered,
(b)
if mailed, three (3) Business Days after having been sent by registered or
certified mail, return receipt requested, postage prepaid and addressed to
the
intended recipient as set forth below, or (c) if sent through an overnight
delivery service in circumstances to which such service guarantees next day
delivery, the day following being so sent:
| (1) |
If
to Parent:
|
Powersafe
Technologies, Inc.
00
Xxxx
Xxxxxxxxx Xxxxxx
Xxxxxx
Xxxxxx, XX 1152
Attn:
Xxxxx Xxxxx, Esq.
| (2) |
If
to the Company:
|
Amplification
Technologies, Inc.
0000
Xxxxx Xxxxxx Xxxxxx
Xxxxxxxx,
XX 00000
Attn:
Xxxx Xxxxx
Any
party
may change the address to which notices and other communications hereunder
are
to be delivered by giving the other parties notice in the manner herein set
forth.
Section
11.2 Choice
of Law.
This
Agreement shall be governed, construed and enforced in accordance with the
laws
of the State of New York, without giving effect to principles of conflicts
of
law.
Section
11.3 Jurisdiction.
The
parties hereby irrevocably consent to the in personam jurisdiction of the state
or federal courts located in the State of New York, in connection with any
action or proceeding arising out of or relating to this Agreement or the
transactions and the relationships established thereunder. The parties hereby
agree that such courts shall be the venue and exclusive and proper forum in
which to adjudicate such matters and that they will not contest or challenge
the
jurisdiction or venue of these courts.
26
Section
11.4 Applicable
Law; Arbitration; Jurisdiction.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York, without giving effect to conflicts of law principles. Any
dispute between or, action or proceeding against any of the parties hereto
under, arising out of or in any manner relating to, this Agreement and the
transactions contemplated herein shall be submitted to and adjudicated by
binding arbitration in a Rabbinical Court in Brooklyn, New York under the
principal of ZABLU (whereby each party picks one arbitrator and the two selected
arbitrators pick a third arbitrator). If there is any litigation regarding
the
arbitration or otherwise relating to this Section 11.4, 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 Agreement, any document or
instrument delivered pursuant to, in connection with or simultaneously with
this
Agreement, or a breach of this Agreement or any such document or instrument.
In
any such action or proceeding, each party hereto waives personal service of
any
summons, complaint or other process and agrees that service thereof may be
made
in accordance with Section 11.1. Within 30 days after such service, or such
other time as may be mutually agreed upon in writing by the attorneys for the
parties to such action or proceeding, the party so served shall appear or answer
such summons, complaint or other process. EACH
PARTY HERETO WAIVES TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING ARISING
OUT
OF THIS AGREEMENT OR ANY BREACH OR ALLEGED BREACH HEREOF.
Section
11.5 Entire
Agreement.
This
Agreement and such other agreements related to this transaction executed
simultaneously herewith set forth the entire agreement and understanding of
the
parties in respect of the transactions contemplated hereby and supersedes all
prior agreements, arrangements and understandings of the parties relating to
the
subject matter hereof. No representation, promise, inducement, waiver of rights,
agreement or statement of intention has been made by any of the parties which
is
not expressly embodied in this Agreement, such other agreements, notes or
instruments related to this transaction executed simultaneously herewith, or
the
written statements, certificates, schedules or other documents delivered
pursuant to this Agreement or in connection with the transactions contemplated
hereby.
Section
11.6 Assignment.
Each
party's rights and obligations under this Agreement shall not be assigned or
delegated, by operation of law or otherwise, without the other party's prior
consent, and any such assignment or attempted assignment shall be void, of
no
force or effect, and shall constitute a material default by such party.
Section
11.7 Amendments.
This
Agreement may be amended, modified, superseded or cancelled, and any of the
terms, covenants, representations, warranties or conditions hereof may be
waived, only by a written instrument executed by Parent and the Company or
a
majority of the Stockholders, in the case of a waiver, by the party waiving
compliance.
27
Section
11.8 Waivers.
The
failure of any party at any time or times to require performance of any
provision hereof shall in no manner affect the right at a later time to enforce
the same. No waiver by any party of any condition, or the breach of any term,
covenant, representation or warranty contained in this Agreement, whether by
conduct or otherwise, in any one or more instances shall be deemed to be or
construed as a further or continuing waiver of any such condition or breach
or a
waiver of any other term, covenant, representation or warranty of this
Agreement.
Section
11.9 Counterparts.
This
Agreement may be executed simultaneously in two or more counterparts and by
facsimile, each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
Section
11.10 Brokers.
The
parties hereto, covenant, represent, and warrant that they have not dealt with
any broker or finder in connection with this Agreement or the transactions
contemplated hereby, and no broker is entitled to receive any brokerage
commission, finder's fee, or similar compensation in connection with this
Agreement or the transactions contemplated hereby. Each of the parties shall
indemnify and hold the other parties harmless from and against all liability,
claim, loss, damage, or expense, including reasonable attorney's fees,
pertaining to any broker, finder, or other person with whom such party has
dealt.
Section
11.11 Severability.
If any
term, provisions, covenant or restriction of this Agreement is held by a court
of competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner in order
that the transactions contemplated hereby be consummated as originally
contemplated to the fullest extent possible.
Section
11.12 Interpretation.
The
parties agree that this Agreement shall be deemed to have been jointly and
equally drafted by them, and that the provisions of this Agreement therefore
shall not be construed against a party or parties on the ground that such party
or parties drafted or was more responsible for the drafting of any such
provision(s). The parties further agree that they have each carefully read
the
terms and conditions of this Agreement, that they know and understand the
contents and effect of this Agreement and that the legal effect of this
Agreement has been fully explained to its satisfaction by counsel of its own
choosing.
[Remainder
of Page Intentionally Omitted; Signature Pages to Follow]
28
IN
WITNESS WHEREOF, the parties have duly executed this Agreement as of the date
first above written.
|
By:
|
/s/
Xxxx Xxxxx
|
|
Name:
Xxxx Xxxxx
|
|
|
Title: President
|
|
|
POWERSAFE
ACQUISITION CORP.
|
|
|
By:
|
/s/
Xxxx Xxxxx
|
|
Name:
Xxxx Xxxxx
|
|
|
Title: President
|
|
|
AMPLIFICATION
TECHNOLOGIES, INC.
|
|
|
By:
|
/s/
Xxxx Xxxxx
|
|
Name:
Xxxx Xxxxx
|
|
|
Title: Executive
Chairman
|
|
29
SCHEDULES
TO
MERGER
AGREEMENT
Dated
March
31,
2008
by
and
among
POWERSAFE
ACQUISITION CORP.
And
AMPLIFICATION
TECHNOLOGIES, INC.
Schedule
4.08
Leased
Real Property
Lease
for
0000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxx, XX
Schedule
4.4
Company’s
Required Non-Governmental Consents
Written
consent of the director of the Company and written consent of the holders of
the
majority of the issued and outstanding capital stock of the Company
Schedule
4.8
Properties
and Assets of Parent
Patent
Sale and Transfer Agreement, dated March 26, 2007, between the Company and
Xxxxxxx Liner.
Schedule
4.11(c)
Parent
Intellectual Property
|
United
States Patent number: 5,708,554, titled a
power outlet box with special protection logic,
including: all computer programs, technical, engineering and manufacturing
information, know
|
Schedule
4.11(e)(i)
Parent
Intellectual Property licensed or transferred to any Person
None
Schedule
4.11(e)(ii)
Intellectual
Property licensed or transferred to Parent
Patent
Sale and Transfer Agreement, dated March 26, 2007, between the Company and
Xxxxxxx Liner relating to United States Patent number: 5,708,554.
Schedule
4.14
Contracts
See
Schedule 4.11(e)(ii)
Schedule
5.4
Non
Governmental Consents and Approvals Required by Acquisition
Corp.
| 1. |
Joint
Written Consent of the Sole Director and the Sole Shareholder of
Acquisition Corp.
|
Exhibit
A
Certificate
of Merger
Exhibit
B
Certificate
of Incorporation of Surviving Corporation
Exhibit
C
Bylaws
of Surviving Corporation
Exhibit
D
Information
Memorandum of the Company
CONFIDENTIAL
|
Name
of recipient:
|
|
Number:
|
AMPLIFICATION TECHNOLOGIES,
INC.
INFORMATION
MEMORANDUM
Subject
to correction and completion
March
13, 2008
As
Amended
Contact:
Amplification
Technologies, Inc.
0000
Xxxxx Xxxxxx Xxxxxx, Xxxxxxxx, XX 00000
(000)
000-0000 (phone) (000) 000-0000 (fax)
xxx.xxxxxxxxxxxxxxxxxxxxxxxxx.xxx
Xxxx
X.
Xxxxx
(000)
000-0000 (mobile)
Xxxxx@xxxxxxxxxxxxxxxxxxxxxxxxx.xxx
CONFIDENTIAL
INFORMATION MEMORANDUM
AMPLIFICATION
TECHNOLOGIES, INC.
(a
Delaware corporation)
3D
field
profile for a photodetector based on internal discrete
amplification
All
persons who receive this Confidential Information Memorandum (“Memorandum”)
agree that they will hold the contents of this Memorandum and all enclosures
and
related documents in the strictest confidence. Recipients of this Memorandum
agree that they will not copy, reproduce or distribute to others this Memorandum
or enclosures or related documents in whole or in part, or utilize the contents
hereof for any other purpose other than to evaluate the operations of
Amplification Technologies, Inc., and will return this Memorandum at the request
of Amplification Technologies, Inc.
 |
PAGE
2
|
CONFIDENTIAL
|
THIS
MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, WITH RESPECT TO ANY SECURITIES BY ANY PERSON IN ANY JURISDICTION.
THE
COMPANY’S SECURITIES HAVE NOT BEEN REGISTERED WITH OR APPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE.
ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
THIS
MEMORANDUM INCLUDES CERTAIN STATEMENTS, ESTIMATES AND PROJECTIONS PROVIDED
BY
AMPLIFICATION WITH RESPECT TO THE OPERATIONS OF AMPLIFICATION AND OTHER FORWARD
LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT
OF
1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED. THESE
STATEMENTS RELATE TO FUTURE EVENTS OR THE COMPANY'S FUTURE FINANCIAL
PERFORMANCE, AND ARE IDENTIFIED BY WORDS SUCH AS "MAY," "WILL," "SHOULD,"
"EXPECT," "SCHEDULED," "PLAN," "INTEND," "ANTICIPATE," "BELIEVE," "ESTIMATE,"
"POTENTIAL," OR "CONTINUE" OR THE NEGATIVE OF SUCH TERMS OR OTHER SIMILAR WORDS.
YOU SHOULD READ THESE STATEMENTS CAREFULLY BECAUSE THEY DISCUSS THE COMPANY'S
FUTURE EXPECTATIONS, AND THE COMPANY BELIEVES THAT IT IS IMPORTANT TO
COMMUNICATE THESE EXPECTATIONS TO INVESTORS. HOWEVER, THESE STATEMENTS ARE
ONLY
PREDICTIONS. ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY. IN EVALUATING
THESE
STATEMENTS, YOU SHOULD SPECIFICALLY CONSIDER VARIOUS FACTORS, INCLUDING THE
FACTORS DISCUSSED UNDER "RISK FACTORS.”
THESE
FORWARD-LOOKING STATEMENTS ARE BASED ON ASSUMPTIONS AND OPINIONS CONCERNING
A
VARIETY OF KNOWN AND UNKNOWN RISKS. THE EXPECTATIONS OF AMPLIFICATION TO REALIZE
WHAT IT BELIEVES TO BE THE OPPORTUNITIES CREATED BY ITS NEW TECHNOLOGY ARE
BASED
ON THE VIEWS OF ITS MANAGEMENT AND SCIENTISTS RATHER THAN ON INDEPENDENT
RESEARCH OR STUDIES. THE STATEMENTS, ESTIMATES AND PROJECTIONS MADE HEREIN
REFLECT VARIOUS ASSUMPTIONS MADE BY AMPLIFICATION BASED UPON INFORMATION THOUGHT
TO BE BELIEVABLE AT THE TIME AND ITS OWN PROJECTIONS OF HOW AMPLIFICATION MIGHT
CAPITALIZE ON THE OPPORTUNITIES IT BELIEVES ARE AVAILABLE, WHICH MAY OR MAY
NOT
PROVE TO BE ACCURATE OR CORRECT. ACTUAL RESULTS OF AMPLIFICATION ARE SUBJECT
TO
SIGNIFICANT BUSINESS, ECONOMIC AND COMPETITIVE UNCERTAINTIES AND CONTINGENCIES,
MANY OF WHICH ARE BEYOND THE CONTROL OF AMPLIFICATION. ACCORDINGLY, THERE CAN
BE
NO ASSURANCE THAT SUCH STATEMENTS, ESTIMATES AND PROJECTIONS WILL BE REALIZED.
THE FORECAST AND ACTUAL RESULTS WILL LIKELY VARY, AND THOSE VARIATIONS MAY
BE
MATERIAL. AMPLIFICATION IS UNDER NO OBLIGATION TO (AND EXPRESSLY DISCLAIMS
ANY
OBLIGATION TO) UPDATE OR ALTER THIS MEMORANDUM AND THE FORWARD LOOKING
STATEMENTS CONTAINED HEREIN WHETHER AS A RESULT OF NEW INFORMATION, FUTURE
EVENTS OR OTHERWISE. AMPLIFICATION MAKES NO REPRESENTATIONS AS TO THE ACCURACY
OR COMPLETENESS OF SUCH STATEMENTS, ESTIMATES AND PROJECTIONS OR REPRESENTS
THAT
ANY FORECASTS WILL BE ACHIEVED.
BY
ACCEPTING THISMEMORANDUM, THE RECIPIENT ACKNOWLEDGES AND AGREES THAT (i) ALL
OF
THE INFORMATION CONTAINED HEREIN IS CONFIDENTIAL INFORMATION; (ii) THE RECIPIENT
WILL NOT DISTRIBUTE OR REPRODUCE THIS MEMORANDUM, IN WHOLE OR IN PART; (iii)
THE
RECIPIENT WILL NOT USE THIS MEMORANDUM, OR ANY INFORMATION CONTAINED HEREIN,
FOR
ANY PURPOSE OTHER THAN THE EVALUATION OF AMPLIFICATION; (iv) IF THE RECIPIENT
DOES NOT WISH TO PURSUE THIS MATTER, OR AT THE REQUEST OF AMPLIFICATION, THE
RECIPIENT WILL RETURN THIS MEMORANDUM TO AMPLIFICATION AS SOON AS PRACTICABLE,
TOGETHER WITH ANY OTHER MATERIAL RELATING TO AMPLIFICATION WHICH THE RECIPIENT
MAY HAVE RECEIVED FROM AMPLIFICATION; AND (v) ANY PROPOSED ACTIONS BY THE
RECIPIENT WHICH MAY BE INCONSISTENT IN ANY RESPECT WITH THE FOREGOING WILL
REQUIRE THE PRIOR WRITTEN CONSENT OF AMPLIFICATION.
|
|
PAGE
3
|
CONFIDENTIAL
|
TABLE
OF CONTENTS
|
Executive
Summary
|
5
|
|||
|
Overview
|
7
|
|||
|
Technology
Advantages
|
8
|
|||
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Market
Opportunity
|
9
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Technology
Developement
|
10
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Photodetectors
with discrete amplification
|
11
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Principle
of discrete amplification
|
11
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Photodetector
Design and Modeling
|
12
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Intellectual
Property
|
13
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Products
and Markets
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14
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Applications
of the Technology
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14
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Strategy
and Implementation
|
16
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Product
development strategy
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17
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Pricing
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18
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Competitive
Landscape
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19
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CompetItive
Advantages
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19
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Competitors
|
19
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Competing
semiconductor technologies
|
20
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Personnel
|
22
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Management
Team
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22
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Financial
projections
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24
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Corporate
Information
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24
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Additional
Technical Information
|
27
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Risk
Factors
|
28
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PAGE
4
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CONFIDENTIAL
|
EXECUTIVE
SUMMARY
The
introduction of solid state devices has revolutionized technology. One of the
few areas which have not gone largely solid state is highly sensitive
photodetection. Sensitive photodetectors are essential components of numerous
commercial products. Amplification Technologies, Inc. has invented an extremely
sensitive photodetector technology that has significant performance and cost
advantages over traditional technology and is positioned as the next generation
solid state technology for low level light detection. The Company’s platform
semiconductor technology, which allows the amplification with very low noise
of
weak signals, is applicable to, and has been patented to encompass, detection
of
signals other than light, and can in principle be used to create biological,
radiological, electrical, and chemical sensors. This new semiconductor
technology has the potential to transform a multitude of industries, from
medical diagnostics and drug development to telecommunications and defense.
Amplification
Technologies is currently introducing its first products to the market and
expects them to be available for commercial sale towards the end of 2008. The
Company believes that the ultimate market addressed by its products is in the
multi-billion dollar range.
The
Company has received government grants and has sold products to NASA/JPL and
NIST for research applications.
The
Company predecessor was formed in 2000. Approximately $6.5 million has been
invested in the Company to date. The Company has no funded debt.
Market
Opportunity
The
Company anticipates that its earliest sales will be to the scientific market.
Homeland
security is
another key market. The Company expects that the availability of its detectors
will expand existing markets and create new ones. Ultimately, the Company
estimates an overall addressable market in the multi-billion dollar range.
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5
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CONFIDENTIAL
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Intellectual
Property
|
The
Company fully owns its intellectual property. In April 2005 the Company
was issued its cornerstone patent, United States Patent # 6,885,827
titled
“High sensitivity, high resolution detection of signals.” Another patent,
US #7,085,502, was granted in August 2006. The Company has filed
one more
patent application and plans to file additional patent applications
to
further protect its intellectual property. International patent
applications have been filed as well.
|
 |
| Validation | |
 |
In
2004, 2005, and 2006, the Company made presentations at the
Optoelectronics International Symposium and published papers on the
technology in SPIE Proceedings. In 2008, the Company made a presentation
at the SPIE Medical Imaging conference. At all the conferences, the
technology generated very strong interest. The Company has been awarded
three US Government SBIR grants:
|
| · |
NASA
grant - “High Sensitivity Photon Counting Detectors for Deep Space Optical
Communications” (January 2004 and October
2005)
|
| · |
Department
of Energy grant - "UV-Sensitive Solid State Photodetector for Dark
Matter
Detection Using Liquid Xenon" (June
2005)
|
| · |
Department
of Energy grant - "Novel Solid State Photodetector to Enable Future
Scintillating Fiber Detection Experiments" (June
2005)
|
Team
The
Company’s management is led by President and COO X.
X.
Xxxxxxxxxxxx
who
brings to the Company very extensive business development experience (MRC,
Veeco, Agave). The company’s scientific team is headed by its two founding
scientists, Dr. V.E. Xxxxxx and Xxxxxx Xxxxxxxxx, who have done pioneering
work
in, and are world leading experts in, the field of sensors and photo-detectors.
The Company employs 9 PhDs.
Financial
Projections
The
Company estimates that over a 5 year period the Company will reach a run rate
of
$80+ million per annum in revenue and of $30+ million per annum, in pre tax
net
income with substantial growth thereafter, that it will attain some revenue
from
sales by late ’08/early ‘09 and profitability in 2011, that it will continue to
obtain grant revenue in ’08 and beyond, and that after the date of this
Memorandum, it will require additional equity financing of about $4 million
in
’08, about $6 million in each of ’09 and ’10 and additional equity financing in
‘11.
Please
see page 26 for additional information.
|
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6
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CONFIDENTIAL
|
OVERVIEW
Amplification
Technologies, Inc. has invented an extremely sensitive photodetector that is
less expensive to produce than, and has many performance advantages over,
classic devices. Much as the microchip revolutionized electronics, this new
semiconductor technology has the potential to transform a multitude of
industries, from medical diagnostics and drug development to telecommunications
and defense. Amplification Technologies is currently introducing its first
products to the market and expects them to be available for commercial sale
later in 2008. The Company believes that the ultimate market addressed by its
products is in the multi-billion dollar range. Several commercial companies
have
already expressed an interest in the technology.
The
Company has already produced prototypes that exhibit superior characteristics.
Initially, all of the Company’s manufacturing was done in Russian semiconductor
facilities. These have been largely adequate for research purposes and the
Company has recently produced a product that it is using for initial marketing.
Commercial quality product will need to be manufactured in the US, which the
Company expects will facilitate the resolution of certain technical issues.
The
Company has just completed an initial fabrication run with Xxxxxxx, a high
quality US fab and is awaiting test results over the coming weeks. Results
from
preliminary tests of a very limited number of chips have been very encouraging,
with the chips exhibiting certain primary parameters,
including photodetection efficiency, gain and dark count
rate, generally matching those of the photodetectors previously produced in
Russia. While devices previously produced in Russia that ultimately performed
acceptably exhibited certain initial degradation of performance within a few
hours of operation, we have not observed any such instability (reliability)
issues in the US devices over a 12 hour period. The
Company expects that a 2nd or 3rd run at Xxxxxxx will produce commercial quality
chips, and expects to have generic, commercial quality, reliable, fully tested
chips and modules available towards the end of 2008. Specific applications
will
likely require future optimization/customization.
In
November 2004 NASA announced that it awarded the Company a grant to develop
an
extremely sensitive photo-detector for optical communications. In 2005, NASA
awarded the Company Phase II of the same grant based on the successful
completion of the Phase I work. The work on this grant is continuing and is
expected to be successfully completed by mid ‘08. The critical objective of the
work is demonstrating that the Company’s technology can be implemented on
InGaAs, not only on silicon. The preliminary results we just received are
very encouraging.
|
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7
|
CONFIDENTIAL
|
As
described in the “Competition” section below, there has recently been a fair
amount of interest and commercial activity seeking to introduce new solid state
products into the field of low-level light detection. The new devices of
competitors are based fundamentally on unpatented technology that has been
in
the public domain for many years. The Company believes that these products
have
yet to achieve significant commercial penetration. As set forth and qualified
below, the Company believes its patented technology to be the next generation
in
the field, significantly superior to, and more flexible than, other solid state
technologies. The advantages of the Company’s devices over these competing
devices are set forth and qualified in the “Competition” section below.
Statements about and comparisons with existing technology in other sections
of
this Memorandum, unless otherwise specified, refer to classical existing
technologies. The Company believes that its technology will, over a period
of
years, become the dominant one in its field.
A
photodetector’s ability to discriminate between signal and noise is a critical
parameter that differentiates various technologies. The most sensitive
photodetectors can detect very low levels of light, even a single photon -
the
smallest unit of light. Applications that need high sensitivity require devices
that do not give false readings and have low noise. Medical scanners,
homeland
security
and
communications are some areas where this quality is critical. In that respect,
as well as in other measures of performance, the Company’s detector has
qualities significantly superior to those of existing solutions. In many
applications this results in a multiplicative increase in detector sensitivity
The increase in sensitivity, coupled with the detector’s low cost and simplicity
of design, will drive adoption of this new technology in products requiring very
low light level detection and also allow the Company to enter new markets where
competitive technologies have proven either too expensive or
inadequate.
TECHNOLOGY
ADVANTAGES
Photomultiplier
tubes (PMTs), vacuum tube based devices, have provided the primary technological
solution for highly sensitive light detection in numerous applications for
over
half a century. Semiconductor alternatives such as avalanche photodiodes (APDs)
have never been able to achieve performance parameters comparable to those
of
PMTs and other vacuum devices in most settings.
The
Company’s proprietary technology allows the creation of a semiconductor-based
sensitive photo-detector that has performance parameters similar to those of
a
PMT but with all of the advantages of a solid state device. It enables the
creation of detectors, amplifiers and other microelectronic components with
the
following characteristics:
| § |
very
high sensitivity and amplification
gain
|
| § |
low
cost
|
|
§
|
exceptionally low internal noise |
|
|
PAGE
8
|
CONFIDENTIAL
|
| § |
all
solid state (no vacuum tubes)
|
| § |
small
size, rugged, portable, able to withstand magnetic
fields
|
| § |
low
power consumption
|
| § |
high
level of reproducibility
|
| § |
easy
to manufacture
|
| § |
mass
production capability
|
| § |
ease
of integration with other electronic
devices
|
In
addition to enabling the replacement of current sensitive photo-detector devices
and components, these characteristics should allow the technology to become
a
platform for the creation of numerous new detectors, amplifiers, and
microelectronic components. The technology is broadly applicable, and is not
restricted to the amplification of signals generated by light. It affords
substantial technological advantages across a broad range of significant
markets.
MARKET
OPPORTUNITY
Amplification
Technologies, Inc. will target
|
§
|
the
existing photo-detector market for PMTs and APDs
and
|
|
§
|
the
markets for sensor devices that will be created to take advantage
of the
benefits of the detectors developed by the
company.
|
The
Company expects to establish the dominant position in the existing market for
highly sensitive photo-detectors, which is estimated to be in excess of $250
million and growing. The Company believes that the introduction of its
technology will accelerate the growth of that market. The Company believes
that
the size of the markets for sensor devices generally that are amenable to the
introduction of its technology, is several
billion
dollars
Potential
applications of the technology include
| § |
Nuclear
Medicine (photodetectors for PET scanners, gamma cameras,
etc.)
|
| § |
Advanced
Scientific Instrumentation
|
| § |
Homeland
Security
|
| § |
Advanced
Scientific Instrumentation
|
| § |
Chemical
Sensors
|
| § |
Radiation
Detectors
|
| § |
Multifunction
Sensors such as ‘Lab on a Chip’
|
| § |
Environmental
Monitoring (LIDAR)
|
| § |
Communications
|
|
|
PAGE
9
|
CONFIDENTIAL
|
Specific
devices for each of these applications require customization of specific
characteristics (wavelength sensitivity, amplification, etc.).
The
Company has developed a solid-state photomultiplier for photon counting for
which there is an immediate use, primarily in biological applications. The
Company is developing a photo-detector that could replace PMTs in positron
emission tomography (PET) scanners. The Company hopes to work with OEMs in
various industries to develop specialized sensors for their needs.
While
initially our R&D work produced designs that were focused on specific
wavelengths, in a major development, we have come up with a chip design that
has
very desirable operating characteristics across a relatively broad spectrum
of
wavelengths of light, including the ones that are most critical to PET scanner
manufacturers. The Company’s near term work will focus on continuing the
transfer of its current designs to the US, making necessary modifications,
and
successfully manufacturing chips in the US. Future development includes
optimizing the technology generally, as well as specifically for various
applications, extending the technology from silicon to other semiconductor
materials, primarily InGaAs, and creating various physical configurations such
as linear and two-dimensional arrays.
TECHNOLOGY
DEVELOPEMENT
The
Company has developed and successfully tested its core technology - discrete
amplification of signals. It is currently engaged in research and development
needed to commercialize as well as further develop this technology. It has
designed products based on the technology, and these products are in the process
of commercialization.
Detection
of low levels of light involves:
|
(a)
|
the
process of photons generating electrons and
|
|
(b)
|
the
subsequent amplification (multiplication) of these
electrons.
|
The
result is an electrical signal that can be measured by electronic equipment.
While the Company’s invention concerns both of these parts of the photodetection
process, the primary innovation is in the way electron amplification is
conducted. The Company’s technology permits a very high degree of signal
amplification without introducing appreciable distortion (noise). The foundation
of the technology is a new principle of independent amplification of each of
the
electrons that comprise a signal, transformation (amplification) of each such
electron into a charge packet, and subsequent registration of these charge
packets. The amplification is done using the process of controlled avalanche
that allows the attainment of high levels of amplification without adding any
significant noise to the signal.
|
|
PAGE
10
|
CONFIDENTIAL
|
This
technology is broadly applicable and is not restricted to the amplification
of
signals generated by light. Accordingly, the Company believes that its
technology can be used for creating chemical, biological and other types of
sensors, and affords the Company potential access to a broad range of
significant markets. The technology is universal in that it can be realized
on a
wide range of semiconductor materials and integrated into numerous semiconductor
sensors, transducers, and detectors. Further, the technology requires only
standard technological and fabrication processes of semiconductor electronics.
These processes have high yield, thus creating the potential for mass
manufacturing of low-cost devices.
Jet
Propulsion Lab (NASA) has purchased and tested a photodetector prototype
produced by the Company and confirmed its key performance characteristics.
In
April 2005, the US Department of Energy awarded two research and development
grants to the Company for the development of highly sensitive photodetectors
for
specialized applications. In November 2004, in recognition of the unique
potential of this technology, the Company was awarded a research and development
grant from NASA to develop a highly sensitive photodetector on InGaAs for
optical communications. Based on the successful completion of Phase I of this
grant, NASA made a Phase II award to the Company in 2005. The Company expects
to
successfully complete Phase II in mid ‘08.
In
2004,
2005, and 2006, the Company made presentations at the Optoelectronics
International Symposium and published papers on the technology in SPIE
Proceedings. In 2008, the Company made a presentation at the SPIE Medical
Imaging conference. At all the conferences, the technology generated very strong
interest.
PHOTODETECTORS
WITH DISCRETE AMPLIFICATION
The
unique combination of high gain, high speed and extremely low noise allows
one
to use discrete amplification to develop photodetectors capable of both photon
counting and analog detection. These detectors have single photon level
sensitivity. It enables the creation of devices that can measure the amplitude
of light pulses with unprecedented accuracy in analog mode, and count the number
of individual photons at a low light intensity.
Besides
the substantial advantages arising from being solid-state, the photodetectors
have other advantages over PMTs. Due to the lower noise factor, and potentially
significantly higher quantum efficiency, they have much better threshold
sensitivity, which is limited only by the statistics of the optical signal
itself.
PRINCIPLE
OF DISCRETE AMPLIFICATION
The
Company’s technology is based on the discrete amplification of signals that
forms the foundation of the Company’s cornerstone patent.
|
|
PAGE
11
|
CONFIDENTIAL
|
When
applied to photodetection, the discrete amplification works in the following
way. At the first stage, the electric signal (photoelectrons generated in the
photo conversion process) to be amplified is spatially divided into N equal
charge components (in this case elementary charges - electrons or holes). Each
individual elementary charge is directed into an individual channel of a
multichannel threshold amplifier with the number of channels K > N. In each
channel of the threshold amplifier the elementary charge is then amplified
by a
factor of M (gain) so that at the output of each individual amplification
channel we have a charge packet of M elementary charges. Gain M is made the
same
for all channels by introducing a special threshold element that switches off
the amplification process after a required number of elementary charges M has
been accumulated in the charge packet. This way the charge packets at the
multi-channel amplifier are calibrated. Finally, all charge packets are
aggregated (summed up) into a single amplified output signal containing M x
N
elementary charges. This output signal is large enough to be recorded by
standard electronic equipment. The discretization of the input signal into
equal
charge components, and subsequent calibration of a charge package in each
channel of the threshold amplifier, results in little variation in the gain
levels of each charge package. As the noise factor results from the degree
of
variation in these gain levels, it is possible to attain an extremely low noise
factor.
PHOTODETECTOR
DESIGN AND MODELING
The
Company’s software suite (mostly internally developed over several years) allows
device modeling including highly sophisticated simulations of the discrete
amplification mechanism. This allows the Company to utilize computer modeling
as
a method to develop new devices in an efficient manner. The use of simulation
technology to develop new devices is critical to this fabless semiconductor
company.
The
Company starts a design with the use of a combination of internally developed
proprietary software and commercial software (see examples on Fig. 1, 2 and
3).
This allows it to define and optimize production parameters that would provide
given characteristics of the absorption and multiplication regions, to model
leakage current, transient and I-V characteristics, and other parameters
critical to the actual fabrication of a physical device. The figures below
are
meant to demonstrate the Company’s general modeling approach. The ability to
perform 3D modeling is particularly important at every step of the process.
The
dark current and field distribution simulation outputs are just a small sample
of the many modeling outputs used by the scientists in the development of the
actual products.
|
|
PAGE
12
|
CONFIDENTIAL
|
Figure
1:
Modeling of 3D field profile for a discrete amplification device
Figure
2:
Modeling of dark current-reverse bias voltage characteristics
Figure
3:
Modeling of electric field distribution in a photodetector cell. Vectors show
the field direction.
|
|
PAGE
13
|
CONFIDENTIAL
|
INTELLECTUAL
PROPERTY
|
The
Company fully owns its intellectual property. In April 2005 the Company
was issued its cornerstone patent, United States Patent 6,885,827
titled
“High sensitivity, high resolution detection of signals.” Another patent,
US # 7,085,502, was granted in August 2006. The Company has filed
one more
patent application and plans to file additional patent applications
to
further protect its intellectual property. International patent
applications have been filed as well.
|
 |
The
Company believes that numerous additional patents may be obtainable on various
embodiments and specific applications of the technology.
PRODUCTS
AND MARKETS
 |
Initially,
the Company will be developing sensitive photodetectors. Additionally,
the
Company plans to develop integrated sensor chips for use in chemical,
biological, radiological and other detection
applications.
|
Photo-detectors
are used in numerous medical, scientific, security, industrial, and other
applications. PMTs have provided the primary technological solution for highly
sensitive light detection in numerous applications for over half a century.
Semiconductor alternatives to PMTs, such as APDs, have never been able to
achieve performance parameters comparable to those of PMTs, and still do not
present viable competition to the old vacuum tube technology in most settings.
The Company’s proprietary technology allows the creation of a
semiconductor-based sensitive photo-detector that has performance parameters
similar to those of a PMT but with all of the advantages of a solid state
device.
APPLICATIONS
OF THE TECHNOLOGY
The
following are brief descriptions of some of the applications of the Company’s
technology.
Nuclear
imaging detector / Medical instrumentation
(PET
scanners, gamma cameras, CT scanners, etc.)
Currently,
almost all commercial PET systems and virtually all gamma cameras utilize vacuum
photomultiplier tubes. APDs have not been utilized because of their poor
performance and the high cost of the quantity of APDs needed to cover the
detection area.
|
|
PAGE
14
|
CONFIDENTIAL
|
Developing
a detector for PET medical imaging systems is one of the priorities for the
Company. A significant milestone in the development of this detector is
attaining sufficient detector efficiency at the wavelengths between 400 and
500
nm (“blue light”) of interest to PET scan system manufacturers. The Company has
already produced a research prototype functioning at these wavelengths. The
results of the first stage of the development process are expected to be of
sufficient interest to PET scanner manufacturers so that the Company will
continue the development in partnership with one of these companies, resulting
in a PET detector that will be incorporated in a major commercial PET system.
The Company has had discussions with the world’s leading PET system
manufacturers and is seeking, in the next generation of scanners, to replace
the
photomultiplier tubes currently used, with the Company’s new detectors. We are
in discussions with one of those leading commercial companies in the world
that
has a strong interest in using solid state photodetector technology in its
medical scanners. It is our understanding that the chips we expect to have
in
mid 2008 should generally meet their requirements for a first generation chip.
The
current size of the market for sensitive photo-detectors used in medicine is
estimated to be close to $100 million a year. The market is growing very rapidly
as new diagnostic devices are developed and as insurance reimbursement for
PET
and other scan procedures becomes standard for many diagnoses. The market could
grow even faster if the cost of the equipment were lower. Detector modules
are
the single most expensive element of large scanners. The Company believes that
its high performance, relatively low cost detectors will ultimately replace
the
PMT-based modules leading to the overall expansion of the market.
The
Company’s detectors have another important advantage over the currently used PMT
detectors. The new detectors are unaffected by magnetic fields, making it
possible in principle to combine MRI and PET scanners in a single instrument.
The medical community has long sought a device that has the ability to combine
these two imaging modalities, and indeed one major PET manufacturer has filed
a
patent covering aspects of such a combined device.
The
Company also believes that its technology has the potential to enable better
discrimination among various types of body tissue in next generation CT
scanners. The CT scanner market appears to be much larger than the PET market.
Scientific
Instrumentation
Numerous
scientific applications require detecting very low levels of light. The
Company’s technology has several advantages in applications such as fluorescence
detection, time of flight measurements, spectroscopy, and others.
Biochip
devices
While
biochips were first developed for genome analysis and are playing a major role
in gene identification in human DNA, their applications are rapidly expanding
into other areas such as toxicological, protein, and biochemical research and
diagnostics. They can also be used for rapid detection of biological and
chemical agents in biological and chemical warfare. The Company’s technology
allows the creation of multi-element detector arrays with internal
amplification, making the technology ideal for biochip devices.
|
|
PAGE
15
|
CONFIDENTIAL
|
Biochips
could be extremely useful in environmental monitoring, public health, and
homeland security applications such as diagnosis of infectious diseases in
minutes rather than days, rapid identification of crime suspects, and
on-the-spot categorization of biological warfare agents. Examples of potential
commercial products include small portable kits for testing for microorganisms
in dairy products or for food pathogens such as E. coli
and
salmonella.
The
overall biochip market is estimated to be in excess of $500 million and is
projected to grow at 50% per year for several years. The Company’s technology
may have the potential to contribute to the growth of this market and create
low-cost electronic sensor devices for mass consumer use.
Chemical
lab-on-a-chip analytical instruments
Small
inexpensive sensor arrays could replace current analytical laboratories in
many
applications. They could be portable and provide analytical results almost
immediately. Significant advancements have already been made in this field.
Our
technology has the potential to create even more sensitive and cheaper chemical
lab-on-a-chip devices. In addition to traditional chemical analysis, examples
of
applications include breath alcohol testing and pipeline leak
monitoring.
Environmental
monitoring
(LIDAR)
The
vacuum tubes currently utilized in LIDAR (Light Detection and Ranging)
applications are expected to be replaced by the rugged, solid-state devices
based on the Company’s technology. Due to its high sensitivity, the operation of
a photo-detector based on the technology will be less susceptible to particle
interference. The emergence of low-cost detectors with superior performance
could lead to the substantial growth of this market.
Security
devices
The
ability to sense very weak sub-nanosecond impulses is valuable in many security
applications. Our technology has the potential to create the most sensitive
security devices, including active pixel arrays for automatic
monitoring.
STRATEGY
AND IMPLEMENTATION
The
Company intends to develop its technology to be positioned as the next
generation solid state technology for low level light detection at the component
level. It will be marketed for existing applications for low light level
detection as well as for use in entirely new detection systems.
The
Company’s technology does not require any especially sophisticated semiconductor
fabrication processes. The Company intends to outsource the manufacturing of
its
products but will likely seek to have an assembly and testing facility. A
critical step on the road to commercialization will be perfecting manufacturing
processes recently begun in the US, to enable better reproducibility and
improved performance parameters and reliability.
|
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16
|
CONFIDENTIAL
|
The
Company’s unique technology enables the development of highly specialized
detector components optimized for specific applications and systems that meet
the needs of OEMs. Development of detector components for OEMs will require
continuing collaboration with system developers. Significant resources will
be
devoted to this effort.
In
order
to more easily market Company products to OEMs and alleviate some of the fears
commonly experienced by first adopters, the Company will seek public exposure
and continue the validation process. The Company intends for its scientists
to
write feature articles in industry publications and to arrange for its products
to be reviewed in order to help build awareness of the technology. In addition,
the Company expects to present at industry tradeshows. Products will be
exhibited at events such as Photonics West and IEEE NSS-MIC. A website has
been
established. As first adopters are often scientists, presentations of technology
at scientific conferences will be made.
The
Company will aggressively market to the R&D centers of major manufacturers
in the field. It is expected that specialized marketing expertise will be
required for some of the markets; the Company plans to seek out top talent
to
fill this need.
The
Company might enter into a joint venture or agreement with another company
in
order to gain access to a distribution network, manufacturing capability, or
expertise in electronic system integration in specific fields. It is expected
that strategic alliances will be established with original equipment
manufacturers in several markets. Currently, there are no such joint ventures
or
agreements under discussion.
Distribution
will be initially done directly to first adopters, including large medical
OEMs.
Physicists and engineers at universities and national laboratories will serve
as
initial qualifiers of the technology for use in various projects.
For
non-OEM products, the Company will utilize independent sales representatives
and
develop its own technical sales staff.
PRODUCT
DEVELOPMENT STRATEGY
The
Company plans to develop products and introduce them to the marketplace in
a
gradual manner. This approach is natural as it allows the development of simpler
products first, and then building on these results to perform more advanced
R&D needed for the development of other products.
Single
element silicon photodetectors
The
first
products of the Company are solid-state photomultipliers for photon counting
and
analog detection. The product has already been developed and evaluation samples
are available; currently, additional design improvements are being made.
Improving performance and long term reliability is the primary R&D direction
for the Company in the short term. The results of this R&D program are also
going to be utilized in the development of other products. The Company has
produced a prototypes of photodetector chips for PET scanning applications
and
scientific applications and is involved in their evaluation and improvement.
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In
addition, the Company is developing a number of models of a detector module
packaged with electronics to make it easier to use and take full advantage
of
its capabilities. The models will appeal to different categories of customers.
The Company believes the photodetector module has the potential to become a
leader in the small, but rapidly growing field that is fueled by demands of
extremely low light level detection. The product is expected to find use in
flow
cytometry, luminescence measurement, multi-photon spectroscopy, and other
scientific and manufacturing applications.
Besides
PET scanners, there are several other medical instruments that use vacuum PMT’s;
of particular interest is the gamma camera (SPECT) application. Amplification
Technologies expects to be able to develop solid state detectors for all of
these applications.
Infrared
detectors
The
Company has initiated development of an infrared detector as part of its work
under the NASA grant to develop a sensitive photodetector for optical
communications. This development involves work with InGaAs semiconductor
material as opposed to the silicon traditionally used in electronics. Infrared
photodetectors are also of significant interest to the Homeland Security
market.
Linear
detector array
A
linear
detector array is expected to be the first multi-element detector based on
our
technology of internal discrete amplification. It will combine several detector
elements, each of which will read signals independently of the others. The
market for such devices includes time-resolved spectroscopy, LIDAR remote
sensing, biological and chemical detection, and machine vision. The Company
intends to commence an extensive R&D program to develop linear detector
arrays.
Imaging
array
Several
commercial markets are searching for large size arrays for low light level
imaging. The primary applications are night vision equipment, automobile night
vision systems, and bio-agent detection.
The
Company believes that its technology could potentially be used to create imaging
arrays with superior performance parameters and low cost, and plans to start
an
R&D program to develop imaging arrays. It is expected that the first stage
of this program will yield results sufficient to choose the overall focus and
identify the applications that are the most natural fit with our technology
and
capabilities. One particular R&D challenge will be to create arrays of a
size sufficient for obtaining a quality image.
Detectors
for biochip, chemical sensor, and environmental monitoring
applications
The
Company’s internal research and work with outside consultants lead it to believe
that the unique amplification mechanism we developed would be of strong interest
in the fields of biochips, chemical sensors, and environmental monitoring.
In
fact, our technology has the potential to revolutionize some of these fields
and
to create the next generation of the products.
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PRICING
The
Company intends to compete primarily based on the performance characteristics
of
its products and less so on price. The Company also expects to produce products
not offered by its competitors. In any event, the Company expects its
manufacturing costs to be low, giving it the flexibility to employ various
pricing strategies. Should the Company compete on price, the low cost of
production should help preserve profit margins.
In
markets such as PET scanners, Amplification Technologies’ detectors expect to
compete with PMTs that are sold at an average of $100 to $200 per tube. The
Company understands that for large PET systems the cost of PMTs is approximately
25% of the total material cost. The combination of the superior performance
and
the expected low production cost will afford the Company significant pricing
flexibility in this market.
COMPETITIVE
LANDSCAPE
Current
competition to Amplification Technologies is primarily from PMT and APD
manufacturers. Amplification Technologies will directly compete with established
players such as Hamamatsu (Japan), PerkinElmer (US), Photonis (France), Electron
Tubes (UK), and ITT. All of them produce vacuum tube-based photo- and
radiation-sensitive devices. These devices include various PMTs, image
intensifier tubes, and light detector modules.
COMPETITIVE
ADVANTAGES
|
The
Company’s key competitive advantages are its unique intellectual property,
its technical expertise, and its exceptional team. The
Company fully owns its intellectual property. In April 2005 the Company
was issued its cornerstone patent, United States Patent 6,885,827
titled
“High sensitivity, high resolution detection of signals.” Another patent,
US # 7,085,502 was granted in August 2006. The Company has filed
for one
more patent application and plans to file additional patent applications
to further protect its intellectual property. International patent
applications have been filed as well. The Company’s patented intellectual
property covers not only light detection but also the much larger
market
of high precision electron signal amplification and digital processing
That could be applicable to the detection of other types of
signals
|
 |
As
a
result of the flexibility of its technology and the experience of its team,
Amplification Technologies has strong R&D capabilities to optimize its
sensors and amplifiers to specifications of OEMs and develop products and
technological solutions that in many cases will be unmatched in their superior
performance, flexibility, integration, and cost-effectiveness. The Company
expects that its competitive advantages will be sustainable for an extended
period.
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COMPETITORS
Hamamatsu
is the
leader in the low-level light detection market, having the largest market share,
range of products, and distribution system. In the fiscal year 2007, Hamamatsu
Photonics, which offers a broad range of photonics products, had consolidated
net sales of $838 million. While the company started out as a PMT manufacturer,
many of its products are now based on semiconductor technologies. The strengths
of Hamamatsu are its reputation, current market position, and the high quality
of its products. Hamamatsu focuses mainly on phototube applications in nuclear
medicine, biological and pharmaceutical research, physics experiments sector,
and government research. Hamamatsu has developed several vacuum tube
technologies, including miniature PMTs, multichannel PMTs, and microchannel
plate PMTs that are used extensively in life science and drug discovery
instrumentation. Examples of the applications include chemiluminescence, flow
cytometry, immunofluorescence, and microtiter plate readout. These rapidly
growing application areas are all target markets for Amplification Technologies,
Inc. Hamamatsu has also developed a line of semiconductor products for
photodetection.
Photonis
(formerly Philips Photonics) manufactures primarily photomultiplier tubes and
image intensifiers. The total sales in 2007 were about $200 million. Photonis
is
believed to have the largest fraction of the PET OEM market as a major supplier
to Philips, GE Medical Systems and Siemens.
Electron
Tubes,
a UK
manufacturer, focuses on photodetector tubes for physics projects and scientific
applications, offering complete PMT modules and assemblies including voltage
supplies and processing electronics. It does not have any solid state
products.
Xxxxxx-Xxxxx
manufactures primarily solid-state products including APDs and APD-based
photon-counting modules.
JDS
Uniphase
produces
solid-state photo-detectors for use in fiber-optic telecommunications.
ITT
produces
night vision devices for a variety of applications.
Others
There
are
also several boutique APD photo-detector developers. Their focus is on detectors
for certain specialized applications, which has allowed them to develop
significant niche expertise.
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It
is
important to note that in the field of low level light detection there is very
limited vertical integration. Companies such as Hamamatsu remain component
suppliers to original equipment manufacturers (OEMs) and do not produce complete
systems. The only major exception is PerkinElmer which produces medical
instruments through a separate division.
COMPETING
SEMICONDUCTOR TECHNOLOGIES
APDs
used
in the standard analog mode of operation have inherent limitations that prevent
them from detecting very low-level light signals. At the level of gain required
for such detection, excess noise factor increases to the degree that makes
signal detection virtually impossible. They can, however, be used for stronger
signals. APDs can also be used in a mode of operation known as Xxxxxx-mode.
In
this mode high gain is achievable, but only the existence of a signal, as
opposed to signal strength, can be measured. Hamamatsu, PerkinElmer, and
Advanced Photonics, are some of the companies producing APDs. Additionally,
there are a number of new companies that have built Xxxxxx-mode APDs which
compete primarily in the single photon counting market. Generally, the Company
believes that the development of APDs is reaching a point where further
development will not result in significant performance improvements.
There
is
a competing approach to creating sensitive semiconductor photodetectors referred
to as SiPM or Multipixel Photon Counter. In general, SiPM technology and its
variations are largely based on the idea of using an array of Xxxxxx-mode APD
micro-pixels to measure signal strength. The basic design of SiPM has been
developed in Russia, published years ago, and is in the public domain. Some
patents have been issued that cover certain aspects of this technology. The
Company believes that for some time there have been efforts to use such devices
in very large scale high energy physics experiments. The Company believes that
SiPM type technologies are limited to detection of light signals, and, unlike
detectors based on the Company’s technology, cannot be used for detection of
electrical signals either directly or in other types of sensors (mechanical,
thermal, chemical, biochip, etc.).
Hamamatsu
has recently introduced the first SiPM commercial product, sensitive solid
state
detectors with relatively high detection efficiency. Based on the descriptions
contained in Hamamatsu’s marketing literature, which makes specific reference to
SiPM technology, and the analysis of the Hamamatsu product, our technical team
has concluded that this device is based on the traditional SiPM technology.
We
are aware of a patent application related to the SiPM technology that has been
filed by Hamamatsu that appears to relate to specific designs. The analysis
of
the Hamamatsu patent filing by our scientists shows it to be primarily
modifications of the traditional SiPM designs that are different from the
Company’s technology. The Company believes that Hamamatsu’s superior
manufacturing capability contributed greatly to the improvements in its devices
relative to SiPM devices that were previously made in Russia. The Company sees
the introduction of the SiPM-type product by Hamamatsu as an important
validation of the Company’s approach.
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A
number
of smaller companies, some of whom have filed patents related to SiPM
technology, are seeking to proceed in the same direction as Hamamatsu. The
most
notable of these is SensL, which has commercial product available. In general
the company believes that Hamamatsu is the strongest competitor in the group.
We
are also aware of patent applications filed by manufacturers of PET scanners
on
some of the uses of SiPM-type technologies in medical diagnostics. The Company
welcomes the interest of PET scanner manufacturers in solid state technology and
believes that these patent applications do not present a significant competitive
or intellectual property threat to the Company. Finally, a venture stage
Canadian company, Zecotek Laboratories, Inc., has hired a Russian scientist
who
developed some of the SiPM designs, announced that it has filed three patent
applications in the U.S. and has announced commercial products. Based on the
limited information available, including datasheets, the Company believes its
products will be superior to Zecotek’s. It is possible that other companies are
conducting research in this area that the Company is not aware of.
In
general, the Company views the SiPM-type technologies as the previous generation
of the discrete amplification technology developed and patented by the Company.
The Company believes that its patented technological approach is superior and
far more flexible in allowing performance optimization. SiPM-type technologies
can be used in some photodetection applications. However, while SiPM type
technologies do allow one to register low-level light signals, the Company
believes that they have inherent limitations because they lack a number of
important design features that are part of the Company’s technology and are
described in the Company patents. Accordingly the Company believes that in
the
vast majority of applications the technology of discrete amplification is
superior to these other approaches. The Company further believes that the
opportunities to fundamentally improve the Hamamatsu devices are limited.
PERSONNEL
The
Company currently has 25 employees (FTE), 22 in Moscow and 3 in New York,
including 9 PhDs. The Company expects that its US based staff will grow
significantly over time and that it will also add some staff in Moscow. The
Company will make full use of its highly qualified and relatively inexpensive
overseas technical team for its R&D activities. US personnel is expected to
be split between general management and research/production/testing, with some
sales and marketing that will grow as the Company introduces new products.
It is
expected that the Company will continue to use an outsourcing model both in
the
US and overseas, and will require only limited production personnel.
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Management
Team
X.
X. Xxxxxxxxxxxx, President
and COO has
25
years of experience in the high tech industry. As a senior executive with Veeco,
he worked in operation areas ranging from engineering and manufacturing to
marketing and business development. He was involved in an R&D project to
develop sensor technology as well as in numerous other projects. Immediately
prior to becoming President and COO of the Company, he was a vice president
with
Agave Technologies, giving him experience in a startup environment.
A
strong
and dynamic leader, X.X. Xxxxxxxxxxxx has a wealth of experience in managing
people and projects. He also has significant international experience that
is
particularly useful in leading the Company’s efforts.
V.E.
Xxxxxx,
Chief Scientist,
is a
co-founder of the Company. He and Xxxxxx Xxxxxxxxx are the principal
inventors of the Company’s technology. Xx. Xxxxxx is a world-leading expert on
photo-detectors and photonics technology with almost forty years of experience
in the field. He has conducted pioneering research in photonics and
authored over a hundred
scientific papers. Together with Xxxxxx Xxxxxxxxx, he recently authored a broad
overview of avalanche photodetectors for the Encyclopedia of Optical
Engineering. Xx. Xxxxxx’x major scientific achievements include the development
of two new areas in the field of solid-state structures and
optoelectronics: photo-electric structures with memory (PEMS) and
avalanche structures with negative feedback (ANF). Xx. Xxxxxx is actively
involved in both theoretical and experimental aspects of the Company’s
development activities.
Xxxxxx
Xxxxxxxxx,
Head of Product Development,
a
co-founder of the Company, is a leading expert in the field of sensor and
photo-detector development with over 20 years of research and development
experience. Prior to joining Amplification Technologies, Xxxxxx Xxxxxxxxx
conducted research in the field of avalanche silicon structures with negative
feedback in Xx. Xxxxxx’x group at the Lebedev Institute of Physics. He has
authored numerous scientific papers on photo-detectors and sensor technology,
including the development of novel avalanche photodiodes. He also
possesses strong experience in computer modeling of semiconductor processes
and
general design of opto-electronic systems. Xxxxxx Xxxxxxxxx is a
co-developer of the internal discrete amplification mechanism in semiconductors.
He is involved primarily in the modeling and experimental aspects of the
development.
Xxxxx
Xxxxxxxxx, Vice President –
Technology,
has
extensive experience in semiconductor technology and product development, as
well as in working with customers on specific applications. He has designed
semiconductor devices such as Schottky diodes and deep IR photodetectors. As
group leader at Agave Technologies, he participated in all aspects of product
life cycle, from concept and development to field support. As a senior process
engineer and staff scientist at Veeco, he was involved in design, improvements,
and support of processing tools and a number of other technologies. Prior to
joining the industry, Dr. Yevtukhov conducted pure research focusing on the
physics of semiconductor fabrication processes. He has 25 years of overall
high
tech experience.
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23
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Xxxxxx
Xxxxx,
Senior Technology Consultant,
has
almost forty years of experience in detector development and technology
commercialization. His work led to major advances in opto-mechanical imaging
and
IR silicon photo-detector development. He is the author of over a hundred
scientific papers and holds several patents. The emphasis of Xx. Xxxxx’x work in
the last twenty years has been on the commercialization of new technologies
with
a focus on the application of new detector
technologies in medicine. Xx. Xxxxx was previously with Dynamic Imaging,
Inc.
Xxxxxxxx
Xxxxxxx,
Senior
Technology Officer,
has
over thirty years of practical experience in semiconductor device fabrication
technologies. Xx. Xxxxxxx has numerous publications and is a well known expert
in this field.
Xxxx
X. Xxxxx
,
Director,
a
co-founder of the Company is a portfolio manager with Xxxxxxx Capital Corp.
and
has been employed with Xxxxxxx and associated entities for 20 years. Xx. Xxxxx
has a Masters in Mathematics from Columbia University. The Company is not
affiliated with Xxxxxxx.
It
is
expected that Xxxxxx
X. Xxxxxxx
will
join the Board in April. Since November 2004 Xx. Xxxxxxx has been a director
of
Acorn Energy, Inc., a Nasdaq listed company.
Members
of the scientific team include six other PhDs
and
additional highly qualified personnel.
Certain
gaps in the management team will be filled as the Company grows. In particular,
the Company has to acquire specialized technological and marketing expertise
in
the industries that are the end-users of devices built on the
technology.
FINANCIAL
PROJECTIONS
The
Company estimates that over a 5 year period the Company will reach a run rate
of
$80+ million per annum in revenue and of $30+ million per annum, in pre tax
net
income with substantial growth thereafter, that it will attain some revenue
from
sales by late ’08/early ‘09 and profitability in 2011, that it will continue to
obtain grant revenue in ’08 and beyond, and that it will require additional
equity financing of about $4 million in ’08, about $6 million in each of ’09 and
’10 and additional equity financing in ‘11.
No
assurance can be given regarding the attainability of the projections or the
reliability of the assumptions on which they are based. The projections are
subject to change due to market conditions, changes in company strategy, receipt
of additional information, refinement and other factors and the Company has
no
obligation to update such information. The projections are based upon certain
assumptions regarding future events over which the Company has little or no
control and as stated assume significant additional funding. The Company
currently has no arrangements for such additional funding. The projections
are
subject to the uncertainties inherent in any attempt to predict the results
of
operations of an early stage company over a prolonged period, and as such,
results may vary materially and adversely from those projected. The Company’s
management may conduct the business in a manner different from that contemplated
in those assumptions due to changing circumstances.
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24
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Actual
results will likely vary, perhaps materially, from these projections. In light
of the significant uncertainties inherent in the projections included herein,
the inclusion of such information should not be regarded as a representation
by
us or any other person that our objectives or other factors and plans will
be
achieved. The projections were not prepared in accordance with generally
accepted accounting principles, have not been reviewed by an independent
accounting firm, and do not reflect all adjustments necessary for a fair
presentation of the financial position and results of operations of the
Company.
CORPORATE
INFORMATION
Amplification
Technologies, Inc. is a Delaware corporation formed in May 2002 headquartered
in
New York City. It is the successor to Quantum Photonics LLC, a New York limited
liability company formed in 2000 to commercialize the Company’s technology.
APMTI LLC, a Russian limited liability company based in Moscow and formed in
2004, is a wholly owned subsidiary of Amplification Technologies, Inc. The
Company’s bylaws provide that all business of the Company shall be conducted in
conformity with Orthodox Jewish law.
The
Company’s corporate law firm is Xxxxx Xxxxx & Associates, PLLC, 00 Xxxx
Xxxxxxxxx Xxxxxx, Xxxxxx Xxxxxx, Xxx Xxxx 00000, tel. (000) 000-0000, fax (000)
000-0000.
The
Company’s intellectual property law firms are Xxxxxxx Xxxxxxxx & Xxxx LLP,
and Xxxxxx & Xxxxxxxx LLP .
The
authorized capital stock of the Company consists of: (a) 40,000,000 shares
of
common stock, $0.01 par value per share, of the Company (the “Common Stock”),
(b) 2,000,000 shares of non-voting common stock, $0.01 par value per share
(the
“Non-Voting Common Stock”), of the Company, and (c) 1,000,000 shares of
Preferred Stock, $0.01 par value per share, of the Company of which 120,000
shares
have been designated as Series A Preferred Stock, and 200,000 are to be
designated as Series B Preferred Stock.
On
a pro
forma basis as of Jan 31, ’08, the
issued and outstanding capital stock of the Company consists of: (a) 12,735,140
shares of Common Stock, (b) 44,430 shares of Series A Preferred stock, which
are
convertible into 1,652,809 shares of Common Stock and (c) not more than
2,406,010 shares of Common Stock and Non-Voting Common Stock reserved for
issuance to satisfy option awards and similar obligations and (d) $1,061,617
liquidation value of non- convertible Series B Preferred Stock. Holders of
4,376,571 shares of Common Stock receive payments of $.00625/share monthly
until
such shares are registered and have a trading symbol, or can be sold under
Rule
144, and have certain “most favored nation” rights. 93% of such shares have
agreed in principle to take stock in lieu of the monthly cash payment.
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25
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Some
of
the key terms of the outstanding Series A Preferred Stock are summarized below.
|
Liquidation
preference per share:
|
$31.00
|
|
Dividends:
|
PIK,
18% per annum, payable quarterly until December 31, 2006, whereupon
dividends ceased.
|
|
Conversion:
|
Each
share of Series A Preferred Stock is convertible into 37.2 shares
of
Common Stock
|
|
|
|
|
Voting
Rights:
|
The
holders of the preferred vote with the common on an as-if converted
basis.
|
|
Maturity:
|
December
31, 2011.
|
|
Protective
Provisions:
|
The
Company shall not take certain actions, including the creation
of any
security senior to the preferred, without the consent of the holders
of
80% of the outstanding preferred
shares.
|
The
above
summary of the terms of the Series A Preferred is qualified in its entirety
by
reference to the amended Certificate of Designation of the Series A Preferred,
which was filed with the Secretary of State of the State of Delaware and is
available upon request from the Company.
The
Series B pfd stock is senior to the Pfd A, non-convertible, is redeemable at
any
time by the Company, has very restrictive covenants and pays a PIK dividend
of
2% monthly. The Series B are held by Xx. Xxxxx and members of his
family.
The
Company has raised approximately $6.5 million of capital as
follows:
|
Year
|
Amount
|
Price
|
Type
of Security Issued
|
|||||||||
|
'02
|
|
$
|
400,000
|
|
$
|
0.269
|
Common
|
|||||
|
'03
|
|
$
|
420,000
|
|
$
|
0.403
|
Common
|
|||||
|
'04
|
|
$
|
1,045,000
|
|
$
|
0.538
|
Common
|
|||||
|
'05-'06
|
|
$
|
2,185,000
|
|
$
|
31.00
|
Series
A Preferred
|
|||||
|
‘07
|
|
$
|
780,000
|
|
$
|
0.95
|
Common
|
|||||
|
‘07
|
|
$
|
370,000
|
|
$
|
.0625
|
Common
|
|||||
|
’07-’08
|
|
$
|
1,281,200
|
Pfd
B
|
||||||||
|
|
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26
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ADDITIONAL
TECHNICAL INFORMATION
Copies
of
the documents set forth below are available upon request at the Company’s
office. Persons interested in viewing a copy of any such document should contact
Xx. Xxxx X. Xxxxx.
1. Highly
sensitive silicon photodetectors with internal discrete amplification (2004
publication by members of the team)
2.
Ultra
low
noise photodetectors with internal discrete amplification (Paper by members
of
the team - published 2005)
3.
Demonstration
of new sensor technology (Description of experiments)
4.
Solid
state photomultiplier: noise parameters of photodetectors with internal discrete
amplification (2006 publication by members of the team)
5.
Bio-sensing: the use of a novel sensitive optical detector (2006 publication
by
members of the team).
6.
Breakthrough in low light level applications: Novel solid state detectors with
high gain and low noise (Amplification Technologies white paper)
7.
Avalanche
Photodetectors (chapter from The Encyclopedia of Optical Engineering authored
by
members of the team)
8.
Novel
Detector for Quantum Cryptography Applications (Amplification Technologies
white
paper)
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27
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RISK
FACTORS
The
Company is pre-revenue and in a relatively early stage of development. An
investment in the Company involves a high degree of risk and should be
considered only by investors familiar with the risks presented generally by
companies at this stage. Prior to making an investment decision, prospective
investors should carefully consider the following factors in addition to the
other information set forth in this Memorandum
We
will need additional financing to fund further research and development, produce
marketable products and achieve profitability.
Our
products have not been tested in the marketplace.
We
have no relationships with OEMs.
We
may not be able to protect our intellectual property rights in our proprietary
technology and information.
We
may not be able to compete with our competitors, most of whom have greater
resources and experience than we do.
We
have not developed the infrastructure required to manufacture, market, or sell
our product candidates.
The
photo-detector industry is subject to technological change.
We
are highly dependent on our scientific and senior management personnel.
The
risk
factors highlighted above do not purport to be complete and businesses are
often
subject to risks not foreseen or fully appreciated by management. In reviewing
this Confidential Memorandum potential investors should keep in mind the
possibility of other risks that could be important and materially affect their
investment. Investors are urged to make their own evaluation of the Company.
We
encourage potential investors who would like to receive additional information
or clarification of any of the items contained herein to speak with Company
management before investing.
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