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Archive for November, 2010

Article from SFGate.

“If Facebook were a country, it would be the third largest in the world, so it figures that the social networking giant is trying to develop its own currency – Facebook Credits. Already, those credits can buy virtual goods from more than 200 applications on the Facebook platform, like special crop seeds or enhanced tractors in the otherwise free-to-play social game FarmVille. But credits have moved into the physical world as well. Last week, Safeway Stores joined Target, Best Buy and Walmart in selling Facebook Credit gift cards, just in time for them to become a stocking stuffer for the onrushing holiday shopping season. “We want Facebook Credits to be the virtual currency on Facebook,” said product marketing manager Deborah Liu for the Palo Alto firm. Analysts say Facebook Credits also have the potential to become a universal online currency that crosses both applications and country borders, not to mention a multibillion-dollar revenue source for Facebook, which takes a 30 percent cut of each transaction. Credits, for example, could be the future currency used by publishers of digital content like news and video, said analyst Atul Bagga of the investment research firm Think Equity LLC. For now, “Facebook is only taking baby steps,” Bagga said. “But you can see that Facebook Credits can go far.”

Positioned to win

Indeed, online payment systems are a key component of the main theme for the Web 2.0 Summit that begins today at the Palace Hotel in San Francisco. The convention will focus on “a battle to gain the upper hand in crucial ‘points of control’ across the Internet Economy,” entrepreneur and tech journalist John Battelle wrote earlier this year in a blog post setting up the theme for this year’s conference. And with more than 500 million active members, Facebook is already positioned to become a winner in that battle. “As Facebook Credits increases in usage, Facebook will begin to look and feel like its own economy,” said Augie Ray, a senior analyst at Forrester Research Inc. The privately held Facebook isn’t disclosing how many of its members now use Facebook Credits, which grew out of a Gift Shop feature that closed Aug. 1. Earlier this month, Wedbush Securities projected Facebook will generate more than $1 billion in sales from virtual goods this year, and approach $2 billion next year. Currently, there are more than 200 games and applications from 75 developers that accept Facebook Credits for those virtual goods, including 22 of the 25 most popular social games. On Nov. 2, Facebook signed a five-year deal with Redwood City video game giant Electronic Arts to use Facebook Credits as its exclusive payment method for its social games, such as Pet Society, Restaurant City and FIFA Superstars. That followed a similar deal earlier this year with San Francisco’s Zynga Game Network Inc., maker of popular social games like FarmVille. But there are non-game apps, such as Family Tree and Hallmark Social Calendar, that also accept Facebook Credits for virtual gifts such as digital birthday cards. And charitable organizations like Stand Up to Cancer and the anti-malaria Nothing But Nets have accepted Facebook Credits donations. The payment system could become especially important since Facebook is also pushing its Connect program to directly bridge the social network’s members with millions of other websites.

Making it easy

The system works in a way that’s similar to real-world transactions such as using a BART transit card. Facebook members use a regular credit card, PayPal account or mobile phone account to buy a certain value of Facebook Credits, starting with 15 credits for $1.50. Facebook Credits accepts payments using 15 currencies, including dollars, euros and yen. Like BART cards, which deduct fares based on the distance of travel on the system, a Facebook Credits account is charged for the value of a virtual item that in real currency might cost only a few cents each. It’s the basic concept used by Apple Inc. to sell 99-cent songs on iTunes at a time when downloading songs for free was all the rage, said Alex Rampell, chief executive officer of Trial Pay Inc. “How did Apple get everybody to pay? They just made it very easy,” said Rampell, whose Mountain View company offers an advertising system that entices social game players to try a real product like pizza or cosmetics in exchange for Facebook Credits. Indeed, Facebook’s Liu said the company sees a “sweet spot” for making a frictionless micro-payment system. The company is slowly expanding its list of developers who can “just plug into Facebook Credits” and not have to worry about creating their own payment system, she said. Social gaming is just the first industry to be affected, “but we think a number of verticals will break through,” Liu said.

Potential markets

Airline tickets or other big-ticket purchases may not be practical for Facebook Credits. But news site publishers, for example, could use Facebook Credits to get readers to buy access to an important story or a special video, Bagga said. “And music is a very social phenomenon,” he said. “There are so many industries that can have disruptions due to the social networking phenomenon.” Facebook, however, is based on the proposition that members make the network work by sharing their personal information, so it has also sparked numerous controversies over privacy. Facebook Credits might bring even more scrutiny. “As Facebook becomes a bigger part of the user’s shopping and purchasing activities as well as an even greater part of their communications activities, there’s going to be a greater focus on the part of government as to what Facebook is doing,” Ray said. Read more here

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SALE OF ASSETS OF EMERGENT GAME TECHNOLOGIES, INC.

Gerbsman Partners (www.gerbsmanpartners.com) has been retained by Venture Lending & Leasing V, Inc. (“WTI”), the senior secured lender to Emergent Game Technologies, Inc., (“EGT”), (www.emergent.net) to solicit interest for the acquisition of all or substantially all of EGT’s assets, including its Intellectual Property (“IP”), in whole or in part (collectively, the “EGT Assets”).

Please be advised that the EGT Assets are being offered for sale pursuant to Section 9-610 of the Uniform Commercial Code. Purchasers of the EGT Assets will receive all of EGT’s right, title, and interest in the purchased portion of WTI’s collateral, which consists of substantially all of EGT’s assets, as provided in the Uniform Commercial Code.

The sale is being conducted with the cooperation of WTI and EGT. EGT has advised WTI that it will use its best efforts to make its employees available to assist purchasers with due diligence and assist with a prompt and efficient transition at mutually convenient time.

IMPORTANT LEGAL NOTICE:

The information in this memorandum does not constitute the whole or any part of an offer or a contract.

The information contained in this memorandum relating to the EGT Assets has been supplied by third parties and obtained from a variety of sources.  It has not been independently investigated or verified by WTI or Gerbsman Partners or their respective agents.

Potential purchasers should not rely on any information contained in this memorandum or provided by WTI or Gerbsman Partners (or their respective staff, agents, and attorneys) in connection herewith, whether transmitted orally or in writing (the “information”), as a statement, opinion, or representation of fact.  Please further note that all information provided herein relating to the operations of EGT’s business and its market positions relates to periods on or prior to October 31, 2010.  Interested parties should satisfy themselves through independent investigations as they or their legal and financial advisors see fit.

WTI and Gerbsman Partners, and their respective staff, agents, and attorneys, (i) disclaim any and all implied warranties concerning the truth, accuracy, and completeness of any information provided in connection herewith and (ii) do not accept liability for the information, including that contained in this memorandum, whether that liability arises by reasons of WTI’s or Gerbsman Partners’ negligence or otherwise.

Any sale of the EGT Assets will be made on an “as-is,” “where-is,” and “with all faults” basis, without any warranties, representations, or guarantees, either express or implied, of any kind, nature, or type whatsoever from, or on behalf of, WTI and Gerbsman Partners.  Without limiting the generality of the foregoing, WTI and Gerbsman Partners, and their respective staff, agents, and attorneys, hereby expressly disclaim any and all implied warranties concerning the condition of the EGT Assets and any portions thereof, including, but not limited to, environmental conditions, compliance with any government regulations or requirements, the implied warranties of habitability, merchantability, or fitness for a particular purpose.

This memorandum is not to be supplied to any other person without Gerbsman Partners’ prior consent.  The information contained herein is not subject to the Non-Disclosure Agreement, however any additional requested information will require execution of the attached NDA attached hereto as Exhibit A.


SUMMARY OF HISTORICAL INFORMATION

Emergent Game Technologies (“Company” or “”Emergent”) is a technology company that directly licenses and supports its products, Gamebryo® and Gamebryo LightSpeed®, to customers around the world.  Founded in 2000 with a mission of developing tools and technologies for 3D interactive entertainment, Emergent merged with NDL in 2005, the company that created the Gamebryo game development engine and tools.

The Company’s assets are well-positioned to capitalize on several industry trends – largely around online games and online distribution – which enable the potential for game developers to reach customers more effectively through direct relationships online and more efficiently by constantly developing new content.  Online game consumers have a rapidly growing appetite for progressive content.  Emergent’s products can help accelerate the demand for 3D content by providing a higher quality of supply in less time and with less risk.

Best known for its industry-leading 3D game engines, Gamebryo and Gamebryo LightSpeed, Emergent’s assets and intellectual property have been selected by studios around the globe to bring over 350 titles across more than 15 game genres to market. At any given time, Emergent is supporting over 100 projects in development and has sold over 490 licenses in the past five years. Titles using Emergent’s technology  include Game of the Year award-winning titles like Fallout 3, The Elder Scrolls IV: Oblivion, as well as critically acclaimed titles like Warhammer Online: Age of Reckoning, Civilization Revolution, QQ Speed, Divinity II – Ego Draconis, Dance on Broadway, LEGO Universe, Epic Mickey, Bully and more. Emergent’s assets and intellectual property allow studios to focus on creating innovative gameplay by enabling rapid prototyping and rapid iteration, and delivers proven production pipelines with real-time on-target updates for Microsoft’s Xbox 360, Sony’s PlayStation 3 system, Nintendo’s Wii and PC. As part of the international development community, Emergent provides world class support and technologies evolved from deep relationships with its developer partners.

Emergent is a privately-held, venture-backed company.  Some of Emergent’s investors include well-known organizations such as Worldview Technology Partners, Jerusalem Venture Partners, Hopewell Ventures and Cisco Ventures.  To date, Emergent has secured over $40 million in equity financing and raised over $4 million in venture debt financing from WTI.

Emergent is headquartered in Calabasas, California, and has offices in North Carolina, Texas, Tokyo, China and Korea. More information is available on Emergent’s website at http://www.emergent.net.

Great games in less time and with less risk:
Emergent expresses this goal in its incubation program aptly named the Game Team Initiative (“GTI”).  GTI is designed to fuel the burgeoning independent game development community, which was reinvigorated by the economic downturn in 2009, with the fundamental resources needed to compete on the world stage.   Emergent’s assets provide the best and the brightest developers a platform that allows new and innovative games to get on screen in less time and with less risk than ever before.  This intimate relationship is beneficial  in two ways as it continually builds a customer base, and adds the context and focus required to keep production processes on the cutting edge.  Emergent’s efforts have been successful in creating new customers both central to Los Angeles, CA – where such notable up and coming game teams as Big Red Button, Kung-Fu Factory, Killspace Entertainment and GameMechanic have all participated; and international, touching teams around the globe, such as Coldwood in Sweden, Bedlam in Canada, Epiphany in Australia, Acquire in Japan and Firehose in Boston.

Target Market:
The video game industry continues to be a growth markets with 7 percent compounded annual growth from 2009 to 2013 reaching $70.9B.  Important segmentation across online and traditional retail products, new device platforms, as well as western and eastern markets, provides the unique opportunity for an opportunistic buyer to use Emergent’s intellectual property  to apply its common underlying technologies across multiple sales opportunities. According to Niko Partners, a leading market intelligence firm, China game revenue CAGR will exceed 20 percent growing from $3.7B in 2009 to $9.2B in 2014.

Customers:
Emergent’s clients range across a broad set of industries, covering traditional video games, to online persistent worlds, to academic environments, military simulations and large scale virtual worlds.  The installed base of users represents a valuable platform for future revenue streams.  The majority of Emergent’s revenue has been generated in video games, however approximately 14% has derived from other channels without substantial incremental product investment.  A customers overview includes:

·      Video games: Electronic Arts, Activision, THQ, Ubisoft, Sony, Bethesda, 2K, Atari, Disney

·      Online games: Tencent, Shanda, TheNine, NineYou, NC Soft, Kingsisle, EA Mythic, Trion

·      Military simulation:  USC ITC, Total Immersion, IP Keys, Lockheed

·      Education: USC, University of Pennsylvania, UNC, Nanyang Polytechnic

·      Other: Rio Tinto, Tacx, WMS, GTech

The accounts receivable base of Emergent is traditionally diverse, as no client historically represented over 10% of Emergent’s accounts receivable balance.

Proprietary Technology – Intellectual Property:
Gamebryo LightSpeed (“LightSpeed”) is the newest leap forward in game development technology delivering the only professional technology for start-to-finish multi-genre/multi-platform game development.  The Gamebryo LightSpeed game development system enables rapid prototyping, rapid iteration and real-time updates, simplifying game development through a data driven framework that opens doors to exciting gameplay possibilities.

LightSpeed is built on top of Gamebryo, the multiplatform engine and foundational technology with more than 350 game productions worldwide across every genre. LightSpeed adds a game framework, scripting system, tools, and extensible infrastructure.

LightSpeed provides a pipeline and runtime solution that allows programmers, artists, and designers to quickly stand up content; then rapidly and continuously iterate on game design, level design, gameplay mechanics, core logic, and game assets; transition to full production; and ship. LightSpeed’s functionality is designed to support two principal objectives of today’s game developers:

·      Rapid iteration:  change the art, entities, levels, and behaviors and see the effect in your game without recompiling or restarting. This minimizes the need for game restarts and reduces development delays.

·      Rapid prototyping and production:  quickly move game content into a playable form, enabling you to evaluate technology and gameplay mechanics and assess the look and feel of levels and assets, and build on that work throughout the production cycle.

Aimed to empower innovation, LightSpeed gives developers the tools to quickly realize ideas and be free to iterate throughout the development process.  From first construction through final polish, developers can iterate faster and get their playable design into the team’s and publishers’ hands faster.

THE FOLLOWING FINANCIAL DATA IS PRESENTED FOR INFORMATIONAL PURPOSES ONLY.  PAST PERFORMANCE MAY NOT BE INDICATIVE OF FUTURE RESULTS.  THIS INFORMATION SHOULD NOT BE RELIED UPON TO MAKE FUTURE PERFORMANCE PROJECTIONS OF ANY KIND.

Summary

·      Strong Growth in Profitability

USD   2005 PF 2006 Audited 2007 Audited 2008 Audited 2009 Audited 2010 YTD

Bookings       $3,423,000   $6,728,209    $10,696,682       $8,873,585       $11,912,613      $6,983,583

Revenue         3,423,000     6,276,083       9,491,308         8,617,604          12,213,826        5,901,836

COS                  410,760        496,383          358,155          1,909,690            2,550,689          669,574

GP                  3,012,240     5,779,700       9,133,153          6,707,914            9,663,137       5,232,262

OPEX             6,408,240   11,706,045      17,039,322        16,706,065         13,243,563       4,822,368

EBITDA         (3,396,000)  (5,926,345)    (7,906,169)         (9,998,151)          (3,580,426)        409,894

·      Attractive Industry – The fastest growing segment of video games is the online segment.  By 2014 it is predicted that over half the games sold will be downloaded.  Emergent is well-positioned to capitalize on major shifts in game design strategies, continuous production pipelines and online product delivery due to its technology and customer base with online games.

·      Market Leader in Asia – Emergent is the market leader in China and Korea, growth rates are consistently exceeding 20 percent annually.

·      Best in Class Technology – Emergent’s proven technologies are delivered in products that game developers know and trust all over the world.  Our code has been evolved over fifteen years, with over $40 million invested in USA software engineering efforts.

·      Proprietary Data Base of over 6,200 profiled developers with over 14,775 contacts.

·      Diversified International Client Base with Low Concentration

·      Excellent Relationships with major publishers and independent game development community – long-standing relationships with key players such as THQ, Disney, Ubisoft, Electronic Arts, Tencent, NC Soft, Shanda and other leading companies

·      Opportunity for Future Growth and Margin Improvement as the Company has already invested heavily (over 400 man years) in its core product architecture which can easily be extended into future platforms.  Further advancements can be done in the context of making games making additional investment recoupable through the revenues stream of games and traditional product licensing.


The reasons why Emergent’s assets are attractive are:

Emergent has historically experienced strong growth and is one of the leaders in the video game engine space. Recent working capital constraints and an overly leveraged balance sheet have created the opportunity for the company’s assets to be purchased.  The acquisition of these assets can enable the purchaser to realize significant short and long term value from Emergent’s assets and maintain the ability to quickly scale within the context of sufficient working capital and a stronger balance sheet.

Robust Growth: Since inception, the Company has grown very impressively, with revenues increasing from $3.4 million to $12.2 million between 2005 and 2009.

Market Position: The Company’s Gamebryo LightSpeed product was awarded the #2 game engine in the world by Develop Magazine in 2009 and remains one of the leaders among five major players in the game engine space in terms of market size and presence. Emergent’s dominance in China and Korea translates to a bold future in the west as our superior technology and proven success with eastern online games take shape in the west and influence the burgeoning online marketplace.

Gamebryo LightSpeed Benefits:
With Gamebryo LightSpeed, Emergent continues a long heritage of dedication to genre and platform diversity, truly enabling our customers’ visions.  Some of the benefits to using LightSpeed include:

·       Rapid Prototyping and Production:  Build a prototype quickly and easily – then build upon it.  When you build your prototype with Gamebryo LightSpeed, you’re building your game. Everything you develop for your demo moves directly into your game, making Gamebryo LightSpeed your prototype and your production solution.

·       Rapid Iteration:  Workflow enablers, real-time updates, and tools usability and functionality unblock artists and designers and increase production efficiency. Streamline the creation of scenes, levels, and worlds. Iterate with gameplay mechanics, look-and-feel, and art assets in more detail with less time, to get your game looking and playing the way you want.

·       Multi-Platform:  All of Emergent’s products are built on a common architecture, but are have targeted for optimization on features and functionality for each specific platform. So even if a studio “only” develops a single PC, Xbox 360, PS3, or Wii title, the studio can rest assured that it’s choosing a proven technology solution optimized for that specific particular platform. Whether you are developing serially or concurrently, Gamebryo LightSpeed maximizes your investment, allowing cross platform games to cost less and deliver faster! Using LightSpeed gives you more options for maximizing your commercial return by giving you the technical option to target multiple platforms – and minimizes risk and cost if the decision happens to be made late in the project.

·       Modular and Extensible: Middleware is not a “one-size fits all” technology, and it’s not “your game in a box” (otherwise, everyone would be making your game out-of-the-box). Take the pieces of the tech you want, jettison the rest, extend it for your particular genre, your game, your implementation. Because it’s middleware, you’re starting with a deep technology layer, and you can spend the bulk of your production time differentiating your game – not fighting to make the technology support it.

·       Proven and Reliable: Emergent’s products have been part of over 350 games worldwide in every genre. You don’t have to question whether LightSpeed can be used to create a game in a particular genre – it’s been done. And you can look at commercial examples, talk to game teams in the community, and re-use technology and lessons learned from the thousands of folks who have gone before you. Deeper integrations with other best-of-breed game technologies so you can further leverage the investments you’ve already made.

World-Class Product Support & Community (Pulse):
The Pulse community content and support web site includes IP in the form of knowledge base articles, support responses, forum contents, and other materials. This information is necessary for maintaining future support of customers, and is highly valuable in training future support staff and maintaining customer relations.

Extensive Bug Tracking System & Library (DevTrack):
The DevTrack bug database is valuable for its historic information on issues and fixes that have been applied, and its insight into future planned features and known issues with the product. For example, it could be used to estimate the time necessary to reduce a found defect count by a certain amount.  Years of customer support and testing have generated a massive knowledgebase.

Diversified Client Base:
The Company has over 400 past and 40 active support clients engaged in a wide variety of consumer and business-oriented 3D interactive projects. This allows the Company to maximize the revenue and profitability of the products it creates by delivering a flexible system that is appropriate to a wide client base.  In addition, by establishing a diverse customer base, the Company can avoid fluctuation in its revenues caused by adverse changes affecting any particular client industry category.

Certified Partners:
The Company is a licensed tools and middleware provider for Sony, Microsoft and Nintendo enabling it to create and license products that run on these platform holders closed environments.  Emergent also has strategic relationships with Intel, NVIDIA and AMD where research and development efforts push the boundaries of PC related graphics and computer processing.  Finally, the Company has 88 partner integrations, enabling large and small complementary products from other middleware providers to easily integrate into its products.

Trademarks and Patents:
The Company holds trademarks for Emergent, Gamebryo, LightSpeed, and Floodgate, in the US and various territories around the world. The Company holds on patent for Floodgate.

Management Team at Emergent (for information purposes only)

Scott M. Johnson, President & CEO:  Scott has worked with Emergent since 2006 and has driven the company’s growth four-fold, expanding the business world wide. Since taking over as Emergent’s CEO in 2009, he led the company to four consecutive quarters that exceeded financial expectations and seen strong continued growth in revenues worldwide. Scott’s strong relationships have forged licensing deals with the industry’s leading developers and publishers such as THQ, Disney Interactive, Electronic Arts, Square Enix, Tencent, Shanda,  Ubisoft and Atari.

Prior to joining Emergent, Scott was co-founder and CEO of Mobility Entertainment (MENT), a successful mobile entertainment developer that was purchased by Foundation 9 and delivered more than 20 mobile games to market. Before launching MENT, he spent seven years in various executive positions with Vivendi, serving as vice president of Vivendi Universal Games, as vice president and chief financial officer for Universal Interactive, managing core franchises like Crash Bandicoot, Lord of the Rings and Spyro the Dragon, and helping to launch Vivendi’s Black Label Games. Scott began his career in finance at Deloitte & Touche LLP.  He is a Certified Public Accountant and an alumnus of Harvard Business School.

Katie Morgan, Consultant: Katie managed the sales, support and marketing staff and was responsible for all customer relationships, as well as defining the company’s distribution strategies, including pricing, licensing models, customer support and marketing communications. Katie holds a Bachelor of Science in Operations Research and Industrial Engineering from Cornell University and a Master of Business Administration from Stanford University.

David Brame, Vice President of Sales in Asia:  David is a very creative negotiator with 45 years of success in finding solutions for customers and articulating those solutions with a resultant close in business.  He has served Emergent for eight years, is a shareholder in the company, and is highly knowledgeable in large company organizations, purchasing practices and contract requirements selling to game companies and publishers in Asia.  He has a history of meeting or exceeding revenue targets for the Company, most recently exceeding quota in Asia (2009) and successfully maintaining on target performance through 3Q 2010, contributing over 50% of the company’s revenue.  David has years of experience building rep channels including a very productive channel in Korea (Gamebase) and a team in China which provides the ability to access the fastest growing game market in the world. David holds an undergraduate degree in Industrial Technology with a concentration in Electronic Design from East Carolina University and a Masters in Industrial Technology from East Carolina University.

Tim Page, Director of Sales Americas & EMEA: Tim has over 10 years experience selling technology products in the videogame business.  His long-standing relationships with developers and publishers have forged licensing deals with the industry’s leading developers and publishers such as Disney, Ubisoft, 2K, IP Keys, and Sony.  Prior to Emergent, Tim held various sales positions with Criterion Software (a subsidiary of Electronic Arts).  During Tim’s tenure in the middleware business, he has been responsible for selling technology solutions that include audio, physics, visibility, graphics, compilers, and A.I.  Tim holds a Bachelor of Business Administration in Marketing from Texas Tech University.

Marc Levy, Director of Finance: Marc manages the daily financial, accounting and human resources areas. Before joining Emergent, Marc worked at Indymac Securities Corp and Countrywide Securities Corp as Vice President Credit Risk Management.  He was responsible for trading controls as well as counterparty risk.  As Vice President at Countrywide Securities, he established and created the Credit Department.  He is also a part time instructor at Los Angeles City College.   Marc holds a Bachelor of Science in Finance from California State University, Los Angeles and a NASD Series 27 license.

Board of Directors for Emergent (for information purposes only)

Scott M. Johnson, President and CEO
Thomas E. Parkinson, Hopewell Ventures
Mathew J. McCue, Hopewell Ventures
Pete Goettner, Worldview Technology Partners
Gadi Triosh, Jerusalem Venture Partners
Gina Dubbe, Walker Ventures

WTI is seeking a buyer of the Emergent’s Assets.  Interested parties may bid on Emergent’s assets, which include its products, core technologies, customer support systems, bug fix library and customer contracts, enabling the purchaser to leverage Emergent’s assets and relationships to obtain new sales, enhance revenue streams or accentuate or augment their existing business.

The Bidding Process for Interested Buyers

Interested and qualified parties will be expected to sign a nondisclosure agreement (attached hereto as Exhibit A) to have access to key members of the management and intellectual capital teams and the due diligence “war room” documentation (the “Due Diligence Access”).  Each interested party, as a consequence of the Due Diligence Access granted to it, shall be deemed to acknowledge and represent (i) that it is bound by the bidding procedures described herein; (ii) that it has an opportunity to inspect and examine the EGT Assets and to review all pertinent documents and information with respect thereto; (iii) that it is not relying upon any written or oral statements, representations, or warranties of WTI,  Gerbsman Partners, or EGT, or their respective staff, agents, or attorneys; and (iv) all such documents and reports have been provided solely for the convenience of the interested party, and WTI, EGT, and Gerbsman Partners (and their respective, staff, agents, or attorneys) do not make any representations as to the accuracy or completeness of the same.

Following an initial round of due diligence, interested parties will be invited to participate with a sealed bid, for the acquisition of the EGT Assets.  Sealed bids must be submitted so that they are actually received by Gerbsman Partners no later than Friday, December 10, 2010 at 3:00 p.m. Pacific Time (the “Bid Deadline”) at EGT’s office, located at 5016 N. Parkway Calabasas, Suite 210, Calabasas, California 91302.  Please also email steve@gerbsmanpartners.com with any bid.

Bids should identify those assets being tendered for in a specific and identifiable way.

Any person or other entity making a bid must be prepared to provide independent confirmation that they possess the financial resources to complete the purchase where applicable.  All bids must be accompanied by a refundable deposit check in the amount of $250,000 (payable to Venture Lending & Leasing V, Inc.).  The winning bidder will be notified within 3 business days of the Bid Deadline.  Unsuccessful bidders will have their deposits returned to them within 3 business days of notification that they are an unsuccessful bidder.

WTI reserves the right to, in its sole discretion, accept or reject any bid, or withdraw any or all of the assets from sale.  Interested parties should understand that it is expected that the highest and best bid submitted will be chosen as the winning bidder and bidders may not have the opportunity to improve their bids after submission.

WTI will require the successful bidder to close within a 7 day period.  Any or all of the assets of EGT will be sold on an “as is, where is” basis, with no representation or warranties whatsoever.

All sales, transfer, and recording taxes, stamp taxes, or similar taxes, if any, relating to the sale of the EGT Assets shall be the sole responsibility of the successful bidder and shall be paid to WTI at the closing of each transaction.For additional information, please see below and/or contact:


Steven R. Gerbsman
Gerbsman Partners
+1 415 456-0628
steve@gerbsmanpartners.com

Dennis Sholl
Gerbsman Partners
+1 415 457-9596
dennis@gerbsmanpartners.com

Kenneth Hardesty
Gerbsman Partners
+1 408 591-7528
ken@gerbsmanpartners.com

[1] All information provided herein relating to the operations of EGT’s business and the market positions relates to periods on or prior to October 31, 2010.  Interested parties should satisfy themselves through independent investigations as they or their legal and financial advisors see fit.

[2] The biographical information concerning the current management of EMERGENT is included for information purposes only.  Although this sale is being conducted with EMERGENT ‘s cooperation, this sale is strictly an asset sale offered by WTI as EMERGENT ‘s senior lender pursuant to Article 9 of the Uniform Commercial Code.  WTI HAS NO ARRANGEMENT PURSUANT TO WHICH BUYER OF THE EMERGENT ASSETS COULD BE ASSURED OF THE FUTURE SERVICES OF ANY EMERGENT OFFICERS OR EMPLOYEES.

[3] The biographical information concerning the current Board of Directors of EMERGENT is included for information purposes only.  Although this sale is being conducted with EMERGENT ‘s cooperation, this sale is strictly an asset sale offered by wti as EMERGENT ‘s senior lender pursuant to Article 9 of the Uniform Commercial Code.  WTI HAS NO ARRANGEMENT PURSUANT TO WHICH BUYER OF THE EMERGENT ASSETS COULD BE ASSURED OF THE FUTURE SERVICES OF ANY EMERGENT board members.

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Article from SFGate.

“A gleaming array of mirrors tucked behind a Sonoma County winery promises a new wrinkle in renewable energy – solar power without all the waste.

Solar panels convert into electricity just a fraction of the energy the sun throws at them, typically 15 to 20 percent. The rest is wasted as heat.

But the solar array nestled next to the Sonoma Wine Co. captures the heat as well. The winery gets electricity for its lights and bottling machinery as well as hot water – up to 165 degrees – for cleaning barrels.

The array is the brainchild of the Mountain View startup Cogenra Solar. Backed by $10.5 million from clean-tech venture capitalist Vinod Khosla, the year-old company aims to make renewable power more cost-competitive with fossil fuels. Cogenra will own the solar arrays it installs, charging its customers for the electricity and hot water rather than the equipment.

“Practically any location we’ve looked at, we can beat their utility rates,” said Chief Executive Officer Gilad Almogy.

Cogenra claims its arrays produce five times the total energy output of comparably sized traditional solar systems, one reason the company can offer attractive rates. The other reason – Cogenra pieces its arrays together using pre-existing solar equipment rather than inventing all its own gear from scratch.

Almogy “said to me, ‘Derek, you could go down to the hardware store and get most of this stuff yourself,’ ” said Derek Benham, who owns the winery in the small town of Graton. “It looks kind of Avatar-like, but you take a close look at it and think, ‘Hey, this looks like siding.’ ”

Benham and Almogy unveiled the system last week at an event packed with curious representatives from other wine-makers such as Bogle Vineyards and Kendall-Jackson. The event also drew former British Prime Minister Tony Blair, an adviser to Khosla Ventures, who praised the technology’s potential for lowering greenhouse gas emissions and fighting global warming. Cogenra arrays cut the amount of natural gas customers burn to heat water, in addition to replacing electricity from fossil-fuel power plants.

“We won’t win this unless business is our ally,” Blair told the crowd. “What is really important right now is that instead of losing interest in this issue or pushing it back, we need to pay attention.”

Cogenra’s arrays combine elements of other, older forms of solar power.

A curved trough of mirrors, similar to those used in large-scale solar power plants, focuses sunlight on a narrow strip of common solar cells. Behind the cells runs a tube filled with a liquid chemical. The liquid absorbs heat from the solar cells and transfers that heat to water. The trough, mounted on a beam about 7 feet off the ground, pivots to track the sun across the sky.”

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Sale of MyWire, Inc.

Gerbsman Partners (www.gerbsmanpartners.com) has been retained by MyWire, Inc. (www.mywire.com) to solicit interest for the acquisition of all, or substantially all, of MyWire’s assets.

IMPORTANT LEGAL NOTICE:

The information in this memorandum does not constitute the whole or any part of an offer or a contract.

The information contained in this memorandum relating to MyWire’s Assets has been supplied by MyWire. It has not been independently investigated or verified by Gerbsman Partners or their respective agents.

Potential purchasers should not rely on any information contained in this memorandum or provided by Gerbsman Partners (or their respective staff, agents, and attorneys) in connection herewith, whether transmitted orally or in writing as a statement, opinion, or representation of fact.  Interested parties should satisfy themselves through independent investigations as they or their legal and financial advisors see fit.

Gerbsman Partners, and their respective staff, agents, and attorneys, (i) disclaim any and all implied warranties concerning the truth, accuracy, and completeness of any information provided in connection herewith and (ii) do not accept liability for the information, including that contained in this memorandum, whether that liability arises by reasons of MyWire’s or Gerbsman Partners’ negligence or otherwise.

Any sale of the MyWire Assets will be made on an “as-is,” “where-is,” and “with all faults” basis, without any warranties, representations, or guarantees, either express or implied, of any kind, nature, or type whatsoever from, or on behalf of MyWire and Gerbsman Partners.  Without limiting the generality of the foregoing, MyWire and Gerbsman Partners and their respective staff, agents, and attorneys, hereby expressly disclaim any and all implied warranties concerning the condition of the MyWire Assets and any portions thereof, including, but not limited to, environmental conditions, compliance with any government regulations or requirements, the implied warranties of habitability, merchantability, or fitness for a particular purpose.

This memorandum is not to be supplied to any other person without Gerbsman Partners’ prior consent.  The information contained herein is not subject to the Confidential Disclosure Agreement, however any additional requested information would require execution of the attached CDA attached hereto as Exhibit A.

Overview

MyWire is poised to ignite a paid content revolution that will redefine the economics of online content for publishers and consumers.
MyWire’s publisher program includes:

·     MyWire Publisher Network, a market-based platform that links publishers together, creating a pinball effect that keeps users on publisher sites longer.

·     MyWire-branded multi-publication subscriptions comprised of paid content from hundreds of publishers. Content is viewed on originating publishers’ websites, and subscriptions are sold by publishers on their own sites.

·     A single MyWire user account for organizing, interacting with, and purchasing content as the user traverses the Publisher Network.

The transition to digital presents publishers with both a formidable challenge and an enormous opportunity to achieve outcomes similar to those achieved centuries ago with the invention of the printing press – an explosion in knowledge, a better way of life for consumers, and long-term publishing industry expansion.

A privately held company, MyWire (founded in 2002 as KeepMedia, Inc.) is headquartered in Redwood Shores, California.  Over $30 million has been invested to date in MyWire by Mercury Capital Management, an investment group headed by Louis H. Borders.

Publisher Network

·              Publishers have traditionally been focused on content creation.  To be relevant in the digital age, publishers must add curation to their repertoire – being connected to other content has proven to be the key service of the winning digital-only publishers.

·              MyWire’s Publisher Network provides a menu of web-based services that enables connectivity to other content.  The services are easy to implement, and operate independently of publishers’ own content management systems.  As a result, publishers improve their site metrics with new pages, better ad-targeting, and a network effect that recaptures traffic from search engines.  And unlike aggregators and hubs, the MyWire Publisher Network does not draw traffic from publishers’ sites; instead, it supports each publisher’s own retail presence.

Consumers experience the Publisher Network as enhancements to their favorite publisher sites which provide instant access to content from across the web – curated lists of content, high quality related abstracts, and new topic pages.

Multi-Publication Subscriptions

MyWire multi-publication subscriptions make available, for one modest price, paid content from hundreds of publishers.  Packages are designed to fill distinct and universal consumer needs such as news, business, and knowledge (referred to as Universal Packages).  MyWire has launched or is ready to launch three such packages (see drawing) and has designed a collection of packages that would comprise a “basic digital” service similar to a cable offering.

Packages are sold by publishers as co-branded offerings on their own sites.  As has been proven in the cable industry, the simplicity and variety of a package enables each publisher to earn more revenue than it would by selling single publisher subscriptions.  Unlike cable, MyWire packages are easily understood by consumers, and the marketing of the packages leverages existing publisher traffic.
The MyWire subscription program gives publishers complete flexibility to set the pricing of their own content.  Because packages have a higher sell-thru rate than a go-it-alone offer and because of crowd-selling (many publishers selling the same package), MyWire packages are capable of achieving broad adoption and an effective paid content revenue stream for publishers.

Market Opportunity

·     Size According to PWC, $558 billion in non-internet paid content revenue is currently subject to internet competition.  The pace of the transition has been steady and gaining momentum.  With the estimated delivery of 100 million mobile tablet devices in the next three years, the pace of transition is expected to increase dramatically.

·     Need for paid content Many sectors of the publishing industry, such as news, B2B and music, are struggling to successfully transition to a paid digital model.  While they strive to capitalize on a direct retail presence via the internet, they are unable to adequately monetize their content.  For many publishers, an effective paid model is their number one priority.

MyWire Technology Platform – Intellectual Property Assets

MyWire’s end-to-end solution consists of web-based offerings that are easy for publishers to implement, can be used as a menu of services, and work independently of publishers’ content management systems.  The Publisher Network infrastructure has a content engine that ingests and processes content feeds, a set of self-contained web flows to provide end-user services such as subscription forms, and web services invoked by publishers for access control and content delivery.

The main architectural components, focusing on capabilities for publishers, consist of:

·     Content Engine Responsible for ingesting content feeds from publishers and performing the processing necessary to deliver relevant content to users.

·     Loader/Feeder Multi-threaded processes that monitor incoming feeds, preprocess these feeds into a standard format, queue up the feeds for processing, extracting and persisting metadata, write content to the file system, and execute business rules such as price type calculation and duplicate detection.

·     Search Indexer Responsible for adding new and updated items to a scalable pool of search servers.

·     Relatedness algorithms MyWire performs semantic analysis and metadata extraction using a combination of licensed commercial text mining engines and its own proprietary algorithms.  The resulting calculations are used to determine relatedness between content objects and to generate recommendations.

·     Search MyWire implements full-text search on top of open source systems extended with proprietary business logic to support time slicing, boosting and filtering based on price type, package assignments and other metadata.

·     Page delivery Web pages are built using a standard J2EE MVC model and delivered via caching layers to ensure scale and high performance.

·     Service Calls MyWire uses REST-based APIs, all based on the same Spring/Hibernate infrastructure, to deliver its:

·     Access control service to determine if a specific paid item is available for consumption to a specific user.

·     Paywall service to deliver embedded HTML containing a subscription offer around a specific item or package.

·     Widget-based blocks of relevant content, based on curation, related item calculations, or search results.

·     Data Warehouse A separate data warehouse is populated via daily and weekly ETL jobs and stored procedure-based summarization logic.

·     Performance measurement tools Frameworks to enable MyWire and publishers to effectively measure a system’s performance characteristics, identify bottlenecks under load, and verify successful tuning.

MyWire’s architecture uses a mix of traditional, Java-based enterprise open source frameworks, proprietary modules, and when necessary, enterprise systems, such as Oracle databases for transactional customer information.  Designed as a modular system with efficient schema, carefully tuned queries, and appropriate in-memory data caching, the MyWire platform performs well under heavy load and is horizontally scalable.

Intellectual Property Assets

MyWire product development to date consists of:

·     Almost 100 product releases delivered on an Agile basis in a mix of two-week and three-week product cycles.

·     Over 275K lines of Java code, 9K lines of PL/SQL code, and 200 JSP files.

·     All code delivered since 2008 conforms to a documented set of coding standards and code review checklists.  All existing consumer-facing functionality has been redesigned to meet the coding standards.

·     Over 1,500 unit tests covering 50% of the code base.  The covered code has 78% method level coverage.

·     Over 1,800 documented user stories.

·     190 automated test cases.

·     Automated continuous and daily build systems to apply Java, JSP, CSS, JavaScript, and xHTML linting and perform unit tests, performance regressions, code coverage, documentation generation, and deployable packaging.

·     Modular J2EE deployables for:

·     Consumer and Publisher web experience

·     Partner Network services

·     Content Engine services

·     Content Engine processing

·     Batch processes for search-index updates, related-item calculations, near-duplicate calculation, analytics data capture, and expired-item purging

·     Back-end financial reporting and review

·     Batch messaging services

·     Search engine

·     Executive metrics dashboard

MyWire product architecture:

·     Database schema for content targeted to MySQL 5.0.  Master database is replicated to a read-only cluster and a back-up server.

·     Database schema for customer accounts targeted to Oracle 11g.  Deployed to an active/active two-node configuration.

·     Database schema and stored procedures for data warehouse targeted to Oracle 10g.

·     J2EE deployables for middle-tier business logic and UI client code targeted to Resin 3.0 and JDK 1.5.  Deployed to a cluster of web servers and a cluster of search servers.

·     Frameworks for metric calculation, performance monitoring, reporting, logging and caching.

Supporting development resources:
·     Subversion repository containing version history of code base.

·     Automated continuous and daily build infrastructure using Ant and CruiseControl.

·     Jira database recording release history, use cases, and open and closed issues.

·     Company wiki containing coding standards, requirements, UI and technical design documents, and test cases.

Competitive Advantage

MyWire’s platform uniquely empowers publishers.  Several large-scale, high-profile efforts (Project Alesia, Next Issue and Skiff) have attempted to provide publishers an effective paid model. However, their business models weakened publishers by drawing off their traffic.  Existing services in the digital marketplace similarly weaken publishers (see chart below).  MyWire’s platform connects publishers as a network of equals, provides services to publishers to enhance their sites, and enables their users to conduct media commerce directly on publisher sites.  In addition, MyWire has no advertiser relationships, avoiding disintermediation of publishers from their advertisers.

Why MyWire’s assets are attractive

MyWire’s platform has been tested on a modest scale and is ready to deploy on a large scale.  An acquisition of MyWire’s assets can enable the purchaser to realize significant short and long-term value.

·     End-to-end built platform The MyWire team has proven development expertise with visionary, high performance, large-scale deployments.  The MyWire platform is comprehensive, PCI-compliant and designed for scale, speed and high service levels.

·     Market Position that empowers publishers The MyWire Publisher Network harnesses the power of publishers to shift the momentum to paid content, recapture traffic from search engines and even extract fees from them.        MyWire has conducted hundreds of review meetings with senior executives at leading publishing companies, primarily in the news and B2B sectors (the sectors most amenable and in need of a paid model).  The result is a platform that fits publisher needs and supports their direct consumer relationships.

·     Ease of use for publishers The MyWire platform is designed to operate independently of publishers’ content-management systems.  Publisher participation in the menu-based Network services is as simple as placing widgets (similar to ad widgets) on their sites.  Paid content services are handled by MyWire as embedded services on publishers’ sites (again avoiding integration issues with publishers’ content-management systems).

·     Usability for users Consumers experience the Publisher Network as a variety of unbranded enhancements to their favorite publisher sites, such as curated lists of content, instant access to quality related abstracts, and new topic pages. As a result, consumers will use their favorite publisher sites more frequently.

·     Efficient marketing model MyWire’s Publisher Network leverages publishers’ existing traffic by using related links to broadly market publisher content (free and paid).  MyWire pays a “seller bounty” to publishers that sell a subscription package to which they are contributing paid content.  The bounty is paid as a share of subscription revenue and has the dual benefit of attracting publishers to the MyWire program and eliminating front-end marketing expenses for MyWire.

·     Market dynamics MyWire pays out the largest portion of subscription revenue to publishers based on usage.  Since, in the initial stages of a package launch, a subscriber will likely view mostly free items, paid items earn extraordinarily high revenue per view.  This market-driven dynamic will induce publishers to add paid content to MyWire Universal Packages, initiating a virtuous cycle.

·     Antitrust protection MyWire requested and received a business review letter from the Department of Justice regarding its subscription package program which provides a high degree of comfort that the MyWire program will be compliant with US antitrust law.

·     New Category MyWire defines a new category – the organization of publisher-only content (and high-quality, focused search results) for digital delivery,  distributed on participating publisher sites.

·     Scale of business opportunity Cable has 95 million subscribers in the US alone with an average subscription rate of $70 per month.  Digital subscriptions can expect US revenues comparable to this $80 billion annual rate.  Even in the nascent digital subscription market, the leading digital multi-publication subscription, Netflix, has already garnered over 15 million subscribers for its movies package.  The MyWire platform is architected for multiple packages that can roll out quickly, and with minimal development effort once the first package reaches scale.  The Publisher Network is also well suited for extensions that support additional publisher monetization efforts, such as mobile delivery, lead generation and their existing commerce.

·     Location MyWire’s location is ideal to build a major internet consumer-branded platform company.  MyWire is located within 30 miles of Google, Facebook, Twitter, Yahoo and eBay.

Executive Development Team

·     Louis H. Borders – Founder and CEO Founder/co-founder of Borders Books & Music, Webvan and Synergy Software.  B.A. in Mathematics from the University of Michigan, graduate studies in mathematics at MIT.

·     Dan Climan – Vice President, Software Engineering 18 years of engineering, media, and retailing experience; Principal at Booz Allen & Hamilton; Webvan.  B.S. in Computer Science from Yale University, M.B.A from Wharton.

·     Daniel Lipkin – Vice President, Architecture 18 years of software architecture and engineering experience; Director of Development at Visible Path; Chief Architect & Director of Development at Saba Software; Oracle.  B.S. in Computer Science from Stanford University.

·     San Mai – Vice President, Product Management 20 years of product management experience; Vice President, Product Management at WorkingPoint, MarketLive and Inktomi Corporation; Netscape.  B.S. in Computer Engineering and M.B.A. from Santa Clara University.

The Bidding Process for Interested Buyers

Interested and qualified parties will be expected to sign a nondisclosure agreement (attached hereto as Exhibit A) to have access to key members of the management and intellectual capital teams and the due diligence “war room” documentation (the “Due Diligence Access”).  Each interested party, as a consequence of the Due Diligence Access granted to it, shall be deemed to acknowledge and represent (i) that it is bound by the bidding procedures described herein; (ii) that it has an opportunity to inspect and examine the MyWire Assets and to review all pertinent documents and information with respect thereto; (iii) that it is not relying upon any written or oral statements, representations, or warranties of Gerbsman Partners, or their respective staff, agents, or attorneys; and (iv) that all such documents and reports have been provided solely for the convenience of the interested party, and Gerbsman Partners (and their respective, staff, agents, or attorneys) do not make any representations as to the accuracy or completeness of the same.

Following an initial round of due diligence, interested parties will be invited to participate with a sealed bid, for the acquisition of the MyWire Assets.  Sealed bids must be submitted so that they are actually received by Gerbsman Partners no later than Friday, December 17, 2010 at 3:00 p.m. Pacific Time (the “Bid Deadline”) at MyWire’s office, located at 275 Shoreline Drive, Suite 100, Redwood Shores, California 94065.  Please also email steve@gerbsmanpartners.com with any bid.

Bids should identify those assets being tendered for in a specific and identifiable way.  In particular, please identify separately certain equipment or other fixed assets.  The MyWire fixed asset list (attached hereto as Exhibit B) may not be complete and bidders interested in the MyWire equipment must submit a separate bid for such assets.

Any person or other entity making a bid must be prepared to provide independent confirmation that they possess the financial resources to complete the purchase where applicable.  All bids must be accompanied by a refundable deposit check in the amount of $250,000 (payable to MyWire, Inc.).  The winning bidder will be notified within 3 business days of the Bid Deadline.  Unsuccessful bidders will have their deposits returned to them within 3 business days of notification that they are an unsuccessful bidder.

MyWire reserves the right to, in its sole discretion, accept or reject any bid, or withdraw any or all of the assets from sale.  Interested parties should understand that it is expected that the highest and best bid submitted will be chosen as the winning bidder and bidders may not have the opportunity to improve their bids after submission.

MyWire will require the successful bidder to close within a 7 day period.  Any or all of the assets of MyWire will be sold on an “as is, where is” basis, with no representation or warranties whatsoever.

All sales, transfer, and recording taxes, stamp taxes, or similar taxes, if any, relating to the sale of the MyWire Assets shall be the sole responsibility of the successful bidder and shall be paid to MyWire at the closing of each transaction.
For additional information, please see below and/or contact:

Steven R. Gerbsman
Gerbsman Partners
(415) 456-0628
steve@gerbsmanpartners.com

Kenneth Hardesty
Gerbsman Partners
(408) 591-7528
ken@gerbsmanpartners.com

Dennis Sholl
Gerbsman Partners
(415) 457-9596
dennis@gerbsmanpartners.com

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Article from SFGate.

“Oracle Corp., the world’s second-largest softwaremaker, agreed to buy Art Technology Group Inc. for about $1 billion in cash to add e-commerce programs.

Art Technology investors will receive $6 per share, Oracle said in a statement Tuesday. That’s 46 percent more than the company’s closing price Monday.

Oracle, building on a run of more than 65 acquisitions during the past five years, is looking to purchase makers of industry-specific software, Chief Executive Officer Larry Ellison said in September. Art Technology of Cambridge, Mass., provides companies such as retailers with technology for online merchandising, marketing, automated recommendations and live-help services.

Oracle, which trails Microsoft Corp. in software sales, had $23.6 billion in cash and short-term investments as of Aug. 31, the end of its fiscal first quarter. Art Technology is the ninth acquisition Oracle has announced in 2010.

The deal price is 33 times earnings before interest, tax, depreciation and amortization, compared with the median multiple of 17 times EBITDA for similar deals in the past six years, according to Bloomberg data.

Art filed for its initial public offering in May 1999, as investors backed startups in the growing market of Internet advertising. Its shares hit a high of $122 in July 2000. Less than a year later, the dot-com bubble burst and the company faced four consecutive years of sales declines through 2004. Its shares plummeted 95 percent in that time period.

Oracle, along with competitors Hewlett-Packard Co. and IBM Corp., are acquiring companies as they bolster their offerings of corporate software and technology within data centers. HP has announced eight deals so far this year, and IBM has announced 15.

This year, Oracle completed its purchase of Sun Microsystems Inc. for $7.4 billion, positioning itself to compete against HP and IBM in the server-computer market. Ellison said in September he’s also on the hunt to purchase semiconductor companies, aiming to follow the approach of Apple Inc. by owning more of the intellectual property behind computer chips.”

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