February 10, 2012 – Richmond, British Columbia, Canada – Further to the news release dated November 1, 2011 Empower Technologies Corporation (TSX.V: EPT) (“Empower”) announces that as of October 1, 2011, the Company has shareholder loans (the “Loans”) outstanding in the aggregate amount of $2,724,457 to Paul Leung and Amy Chan, the President and Chief Financial Officer of the Company, respectively (the “Lenders”). Currently, the Loans must be renewed annually, as each comes due during the year. The Board of Directors and the Lenders have negotiated a consolidation of the outstanding Loans and accrued interest into a five-year convertible promissory note in the principal amount of $2,724,457, bearing interest at 10% per annum, compounded annually with an option at the discretion of the Lender to renew any remaining balance of the debt at the end of the five (5) years term for another three (3) years or five (5) years under the same terms and conditions (the “Convertible Note”).
Under the terms of the Convertible Note, the outstanding principal amount may be converted in whole or in part at any time at the discretion of the Lenders at a conversion price of $0.0675. Interest accrued on the principal amount of the Convertible Note may be converted in whole or in part at the discretion of the Lenders at the maximum discount off the market price of the Company’s common shares on the Exchange at the time of conversion. As a condition to the Lenders agreeing to the consolidation of the Loans, the Company will grant to the Lenders a security interest in all of the Company’s present and after acquired personal property (the “Security”).
The Board of Directors of the Company believes that the proposed consolidation of the Loans will improve the Company’s balance sheet, provide long term stability over the debt, increase confidence in the Company’s long term prospects and aid in accessing future financing.
Issue of the Convertible Note is subject to the approval of the Exchange. In accordance with Exchange policies, the Exchange’s acceptance of the issue of the Convertible Note is subject to the Company obtaining disinterested shareholder approval of the grant of the Security and the creation of a new Control Person.
“Control Person” means any person that holds or is one of a combination of persons that holds a sufficient number of any of the securities of an issuer so as to affect materially the control of that issuer, or that holds more than 20% of the outstanding voting shares of an issuer.
Assuming full conversion of the principal amount of the Convertible Loan at $0.0675, Mr. Leung and Ms Chan would together acquire an aggregate of 40,362,325 common shares of the Company. This figure excludes any shares issued on any conversion of accrued interest. Mr. Leung and Ms Chan currently hold together an aggregate of 1,658,501 common shares. On a fully diluted basis, Mr. Leung and Ms Chan would therefore hold an aggregate of 42,020,826 common shares, representing 45% of the Company’s then issued and outstanding common shares.
Accordingly, upon the issuance of the Convertible Note, Mr. Leung and Ms Chan will become a new Control Person of the Company under the rules of the Exchange. Consequently, the Board is seeking disinterested shareholder approval of the Convertible Loan.
“Disinterested Shareholder Approval” means that while shareholder approval may be obtained by ordinary resolution at the Meeting, the votes attached to the common shares held by the new Control Person and its associates and affiliates are excluded from the calculation of any such approval. Accordingly, Mr. Leung and Ms Chan will abstain from voting on the proposed resolution.
Pursuant to the policies of the Exchange, disinterested shareholders will be asked at a Meeting to approve a resolution on this proposed convertible loan(the “Convertible Loan Resolution”).
In order to be effected, the Convertible Loan Resolution must be approved by a majority of the votes cast by disinterested shareholders.
By way of directors’ consent resolutions in writing dated October 31, 2011, the Board approved the submission of the Convertible Loan Resolution to the shareholders for approval. The Board, with Mr. Leung abstaining, unanimously concluded that the Convertible Loan and the related grant of Security is in the best interests of the Company and the shareholders, and recommends to shareholders that they vote in favour of approval of the Convertible Loan Resolution.
The renewal price and the converting of the accrued interest will be based on the maximum discount off the market price at the time of settlement. The price reservation, the conversion of the long term loan to a convertible loan, and the renewal of the loan after 5 years are subject to TSX Venture Exchange approval.
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.