January 5, 2012 – Richmond, British Columbia, Canada – Further to the November 9, 2011 and the December 1, 2011 news releases, Empower Technologies Corporation (TSX.V: EPT) (“Empower”) and Northstar Electronics, Inc. (OTCBB: NEIK) (“Northstar Electronics”) have signed a Letter of Extension to the Binding Letter of Intent on December 22, 2011 to extend the completion date of the definitive purchase agreement from December 31, 2011 to January 15, 2012.
Based on the original Binding Letter of Intent, Empower and Northstar Electronics have been working closely together to find a mutually beneficial and transaction efficient business structure for a merger. After considerable research and keeping within Empower’s growth strategy and time frame, Empower has agreed to acquire Northstar Electronics’ only defense contracting business unit operating as a wholly owned revenue producing subsidiary under the name Northstar Network, Inc. (“Northstar Network”). As a result, Empower and Northstar Electronics have signed an Addendum Letter to the Binding Letter of Intent (“Addendum Letter”) for Empower to purchase Northstar Network outright from its parent Nortstar Electronics instead.
Under the terms of the Addendum Letter, Empower will purchase 100% of Northstar Network from its parent Northstar Electronics for $800,000 and 3.8 million Empower shares (if fully granted it represents 6.7% of Empower’s total outstanding shares of 56.3 million at the time) subject to the following terms and conditions:
A. For the first $400,000 of the $800,000 payment:
a. At least 30 days prior to closing, Empower and Northstar Electronics must agree on which Northstar Network liability Empower will assume that will add up to the maximum of $1 million (“Approved Liability”) and the remaining Northstar Network liability will then be transferred to Northstar Electronics on closing (“Transfer Liability”). At least 15 days prior to closing, all the creditors of the Transfer Liability must agree to sign the transfer of debt from Northstar Network to Northstar Electronics. If the Transfer Liability is accepted by all creditors then Empower will pay Northstar Electronics $400,000 cash on closing; or,
b. Failing (a) above, Northstar Electronics must warrant Northstar Network total liability is $3 million or less for Empower to inherit, any amount above $3 million must be taken back by Northstar Electronics. On closing, Empower will purchase $400,000 non-brokered private placement of Northstar Electronics’ unit offering – each unit consist of one (1) Northstar Electronics share and one (1) five (5) years full warrant with strike price set at 20% premium over the unit purchase price (“Financing Term”). The Northstar Electronics unit will be priced based on 10 days trading average of Northstar Electronics shares on OTCBB. Furthermore:
i. Empower is open to discussion on the Financing Term if Northstar Electronics wish to have the Empower $400,000 private placement to become the lead subscriber/investor of a concurrent Northstar Electronics financing of $600,000 or more and the financing must be closed at least $600,000 or more.
ii. Empower is willing to assign its shares voting right to Empower Lawyer for 6 months from the date the $400,000 private placement of unit or the concurrent financing is completed except for any votes involved change of control or sales of Northstar Electronics
B. For the remaining $400,000 of the $800,000 payment, Empower will pay Northstar Electronics $200,000 cash in 6 months after closing and the remaining balance $200,000 in 12 months after closing as long as in both cases the newly acquired Northstar Network 6 months and 12 months audited financial achieve positive EBITDA.
C. Empower will also issue 2,000,000 Empower shares to Northstar Electronics under the following condition:
1. In 2013 Q1 – 1.000,000 Empower shares (subject to TSX Venture escrow release schedule) if newly acquired Northstar Network 2012 audited financial statement achieve revenue of at least $4.5 million and EBITDA is 5% of revenue.
2. In 2014 Q1 – 1,000,000 Empower shares (subject to TSX Venture escrow release schedule) if newly acquired Northstar Network 2013 audited financial statement achieve revenue of at least $6 million and EBITDA is 5% of revenue.
D. As a condition for Northstar Electronics to provide support from Dr. Russell to help transition Northstar Network defense contracting business, relationships and contacts to Empower, 1.8 million Empower shares will be issued under the following performance schedule:
i. In 2013 Q1 – 600,000 shares if newly acquired Northstar Network 2012 audited financial achieve revenue of $4.5 million and EBITDA is 5% of revenue or above
ii. In 2014 Q1 – 600,000 shares if newly acquired Northstar Network 2013 audited financial achieve revenue of $6 million and EBITDA is 5% of revenue or above
iii. In 2015 Q1 – 600,000 shares if newly acquired Northstar Network 2014 audited financial achieve revenue of $8 million and EBITDA is 5% of revenue or above
The transaction is subject to customary closing conditions including completion of satisfactory due diligence, Empower obtaining adequate financing and receipt of regulatory approval. The Empower acquisition of Northstar Electronics’ subsidiary Northstar Network is still scheduled to complete on or before March 31, 2012 or such later date as agreed by both parties. Empower will also retain the right to use the name “Northstar” in its newly acquired subsidiary Northstar Network. All monies in this News Release are expressed in Canadian funds except as noted.
“This is a win win business arrangement for Northstar Electronics and Empower. Northstar Electronics will be able to remain as an OTCBB public company in the US. Upon completion, Northstar Electronics will be able to recapitalize and relaunch itself to the marketplace with new idea and exciting opportunity. At the same time, Northstar Electronics can share Empower’s success over time.” Said Dr. Wilson Russell, Founder and CEO of Northstar Electronics.
“Empower is very pleased to reach this alternate arrangement to fast track the acquisition of Northstar Electronics’ defense contracting business even though it delayed the completion of the definitive agreement. However, the saving in time and money are big relative to the size of the transaction. We look forward to have the new defense contracting revenue to come into Empower’s top line and bottom line in a relatively short time. This is a huge win for both Empower and Northstar Electronics shareholders.” Said Paul Leung, Founder and CEO of Empower.
Performance Capital, Principal Gordon Monk, is acting as the advisor to Empower on the Acquisition.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
About Empower Technologies™
Founded in 2000, Empower Technologies (TSX.V: EPT) is an innovative company that brings the power and flexibility of the LEOs® (Linux Embedded Operating System) to the dynamic embedded computing Industry and the emerging Intelligent Appliance Market, through their development of Linux-based operating software, embedded system technologies and solutions.
The products and services that form the base of its business activities include an embedded system development platform for LEOs®, based on Texas Instruments™ embedded CPU platform, that fulfill the needs and demands of developers and the embedded computing Industry. Empower is continuing to develop LEOs® and newer versions of embedded CPUs in line with Texas Instruments™.
By uniting top professionals from within the computer industry and developing quality partnerships and strategic alliances, Empower is committed to being the leading developer of Linux-based operating software and embedded system technologies and solutions for electronics manufacturers and developers.
Empower’s brands are “LEOs®”, “LinuxDA™”, Linux-based embedded operating systems, “BullsEye” Video Imaging Technology, “PowerPlay™”, smart consumer electronics.