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Further to Gerbsman Partners e-mail of November 19, 2012 regarding the sale of certain assets of Cambridge NanoTech, Inc., Inc., I attach the draft legal documents (Purchase and Sale Agreement and Secured Party’s Bill of Sale) that we will be requesting of bidders for certain Assets and Intellectual Property of Cambridge NanoTech, Inc.  All parties bidding on the assets are encouraged, to the greatest extent possible, to conform the terms of their bids to the terms and form of the attached agreement.  Any and all of the assets of Cambridge NanoTech, Inc. will be sold on an “as is, where is” basis and will be subject to “The Bidding Process for Interested Buyers”, outlined below.  

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

I would also encourage all interested parties to have their counsel speak with Donald Rothman, Esq. and/or Alexander Rheaume, Esq., counsel to Silicon Valley Bank.

For additional information please contact Donald Rothman, Esq, 617 880 3556 and/or Alexander Rheaume, Esq. 617 8808 3492.  drothman@riemerlaw.com – arheaume@riemerlaw.com

Please review in detail, the “Bidding Process for Interested Buyers” below.

The key dates and terms include:

The Bidding Process for Interested Buyers

Due Diligence:
Interested and qualified parties will be required to sign a nondisclosure agreement in the form attached hereto as Exhibit A to have access to 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 Cambridge NanoTech 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 SVB or Gerbsman Partners, 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 SVB or Gerbsman Partners (and their respective, staff, agents, or attorneys) do not make any representations as to the accuracy or completeness of the same.

Qualifying to Bid at Auction:
The Cambridge NanoTech Assets will be sold pursuant to a secured party’s public auction sale.  In order to qualify to bid at the public auction sale, interested parties must submit initial bids for the Cambridge NanoTech Assets so that they areactually received by Gerbsman Partners via email to steve@gerbsmanpartners.com no later than Thursday, December 12, 2012 at 3:00 p.m. Eastern Standard Time (the “Initial Bid Deadline”) with a copy to Riemer and Braunstein LLP, 3 Center Plaza, Boston, MA, 02108. Attention: Donald E. Rothman, Esq. and via email to drothman@riemerlaw.com.

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.  In order to qualify to bid at the public auction sale, all initial bids must be accompanied by a refundable deposit in the amount of $200,000 which shall be paid to Riemer & Braunstein LLP as escrow agent (the “Escrow Agent”) in accordance with the wire instructions attached hereto as Exhibit “B”. All deposits shall be held in a non-interest bearing account.  Non-successful bidders will have their deposit returned to them within five (5) business days following the completion of the public auction sale. The deposit of the Successful Bidder (as defined below) shall be held by the Escrow Agent pending the consummation of the sale in accordance with the terms and conditions of the sales agreement to be executed by SVB and the Successful Bidder.

Initial bids should identify those assets being tendered for and in a specific and identifiable way. The attached Cambridge NanoTech fixed asset list (Exhibit “C”) may not be complete.

SVB shall be deemed to be a qualified bidder.

Public Auction Sale:
On Friday December 14, 2012, a public auction sale (the “Auction”) of the Cambridge NanoTech Assets will be conducted among all qualified bidders commencing at 11:00am Eastern Standard Time at the offices of Riemer & Braunstein LLP, 3 Center Plaza, Boston, MA, 02108.  Qualified bidders shall appear in person at the Auction or participate by telephone conference.  The dial in numbers are Domestic – 888 640-4172, International 913 227-1228, participation code 617 880 3556

SVB reserves the right to cancel, postpone, or adjourn the Auction to such other time or times as the Secured Party may deem proper by announcement made at the Auction, and any subsequent adjournment thereof, either before or after the commencement of bidding, without written notice or further publication.  The Auction may be resumed without further notice or publication at the time and place at which such Auction may have been adjourned.

Prior to the start of the Auction, the auctioneer will advise all qualified bidders of what SVB believes to be the highest or otherwise best qualified bid(s) with respect to the sale (each a “Stalking Horse Bid”).  Only qualified bidders are eligible to participate in the Auction.  Bidding at the Auction shall begin initially with the Stalking Horse Bid(s) and shall subsequently continue in such minimum increments as the auctioneer determines.

Bidding will continue with respect to the Auction until SVB determines that it has received the highest or otherwise best bid(s) for the Cambridge NanoTech Assets.  After SVB so determines, the auctioneer will close the Auction, subject, however, to SVB’s right to re-open the Auction if necessary.  SVB will then determine and announce which bid(s) has/have been determined to be the highest or otherwise best bid(s) (each a “Successful Bid”) and the holder of each Successful Bid shall be deemed to be a “Successful Bidder”.

SVB reserves the right to (i) determine in its reasonable discretion which bid is the highest or best bid and (ii) reject at any time prior to the execution of a purchase agreement, any offer that SVB in its reasonable discretion deems to be (x) inadequate or insufficient, or (y) contrary to the best interests of SVB.  In determining which bid(s) is/are a Successful Bid, economic considerations shall not be the sole criterion upon which SVB may base its decision and SVB shall take into account all factors it reasonably believes to be relevant in an exercise of its business judgment.

Each Successful Bidder will then be required to immediately execute and deliver a purchase agreement to SVB in the form attached hereto as Exhibit “D”. SVB will require each Successful Bidder at the Auction to close within 7 days after the Auction. Any or all of the assets of Cambridge NanoTech will be sold on an “as is, where is” basis, with no representation or warranties whatsoever.

SVB reserves the right at any time to (i) extend the deadlines set forth herein and/or adjourn the Auction without further notice, (ii) offer any portion of the Cambridge NanoTech Assets to be sold separately at the Auction if SVB determines to do so, (iii) withdraw any of the Cambridge NanoTech Assets at any time prior to or during the Auction, to make subsequent attempts to market the same, (iv) reject any or all bids if, in SVB’s reasonable business judgment, no bid is for a fair and adequate price, and (v) otherwise modify the sale procedures in its reasonable discretion.

All sales, transfer, and recording taxes, stamp taxes, or similar taxes, if any, relating to the sale of the Cambridge NanoTech Assets shall be the sole responsibility of the applicable Successful Bidder.

For additional information, please see below and/or contact:

Steven R. Gerbsman                                                          
Gerbsman Partners
(415) 456-0628                                                          
steve@gerbsmanpartners.com                         
 
James McHugh
Gerbsman Partners
(978) 239-7296
Jim@mchughco.com

Donald Rothman, Esq.
Riemer Braunstein LLP
(617) 880-3556
drothman@riemerlaw.com

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Article from Techcrunch.

Cisco has announced it plans to acquire Cloupia for $125 million. The software company helps customers automate their data centers.

Cisco sees Cloupia’s infrastructure management software enhancing its Unified Computing System (UCS) and Nexus switching portfolio. Cisco expects Cloupia will help better manage the automation of compute, network and storage as well as virtual machine and operating system resources.

Cisco UCS is a converged infrastructure play. Cisco has made a big bet on providing converged infrastructures that consolidates compute, storage and networking into one box. IT wants to decrease its data center dependency. Vendors like Cisco, EMC and IBM see converged infrastructures as a way to sell their hardware into the enterprise.

Investing in these systems has its costs for IT. The systems are pricey and create a lock-in with one vendor.

Cisco wrote a blog post about the acquisition today. Here’s a snippet:

Cisco’s acquisition of Cloupia benefits Cisco’s Data Center strategy by providing single “pane-of-glass” management across Cisco and partner solutions including FlexPod, VSPEX, and Vblock. Cloupia’s products will integrate into the Cisco data center portfolio through UCS Manager, UCS Central, and Nexus 1000V, strengthening Cisco’s overall ecosystem strategy by providing open APIs for integration with a broad community of developers and partners.

The post is a window into Cisco’s data center strategy. Like other big enterprise software companies, Cisco partners with companies such as NetApp and VMware to sell its solutions through its extensive sales channels.

Read more here.

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Further to Gerbsman Partners e-mail of July 10, 2012 regarding the sale of certain assets of LumaTherm, Inc., I attach the draft legal documents that we will be requesting of bidders for certain assets of LumaTherm, Inc.  All parties bidding on the assets are encouraged, to the greatest extent possible, to conform the terms of their bids to the terms and form of the attached agreements.  Any and all of the assets of LumaTherm, Inc. will be sold on an “as is, where is” basis.  I would also encourage all interested parties to have their counsel speak with Stephen O’Neill, Esq., counsel to LumaTherm, Inc.

For additional information please contact Stephan O’Neill, Esq., of Murray & Murray counsel to LumaTherm, Inc.  He can be reached at 408 907-9200  and/or at      soneill@murraylaw.com

Following an initial round of due diligence, interested parties will be invited to participate with a sealed bid, for the acquisition of the LumaTherm Assets. Sealed bids must be submitted so that the bid is actually received by Gerbsman Partners no later than Thursday, August 23, 2012 at 5:00pm Central Daylight Time (the “Bid Deadline”) at LumaTherm, Inc.’s office, located at 12600 Northborough Drive, Suite 220, Houston, TX  77067.  Please also email steve@gerbsmanpartners.com with any bid.

For your convenience, I have restated the description of the Updated Bidding Process.

The key dates and terms include:

The Bidding Process for Interested Buyers

Interested and qualified parties will be expected to sign a Confidential Disclosure Agreement (attached hereto as Appendix B) to have access to key members of management and intellectual capital teams and the due diligence “war room” documentation (“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 had an opportunity to inspect and examine the LumaTherm, Inc. 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, ortheir respective staff, agents, or attorneys; and (iv) 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 LumaTherm, Inc. assets. Each sealed bid must be submitted so that it is received by Gerbsman Partners no later than Thursday, August 23, 2012 at 5:00pm Central Daylight Time (the “Bid Deadline”) at LumaTherm, Inc.’s office, located at 12600 Northborough Drive, Suite 220, Houston, TX  77067.  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 attached LumaTherm, Inc. fixed asset list may not be complete and bidders interested in the LumaTherm, Inc. 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.  All bids must be accompanied by a refundable deposit in the amount of $200,000 (payable to LumaTherm, Inc.).  The deposit should be wired to LumaTherm, Inc.’s attorneys Murray & Murray, A Professional Corporation.  The winning bidder will be notified within 3 business days of the Bid Deadline. The deposit will be held in trust by LumaTherm’s counsel.  Unsuccessful bidders will have their deposit returned to them within 3 business days of notification that they are an unsuccessful bidder.

LumaTherm, Inc. reserves the right to, in its sole discretion, accept or reject any bid, or withdraw any or all 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 andbidders may not have the opportunity to improve their bids after submission.

LumaTherm Inc. will require the successful bidder to close within a 7 day period. Any or all of the assets of LumaTherm, Inc. 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 LumaTherm, Inc. assets shall be the sole responsibility of the successful bidder and shall be paid to LumaTherm, Inc. 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

Philip Taub
Gerbsman Partners/Foundation Ventures
(917) 650-5958
phil@gerbsmanpartners.com   ptaub@foundationventures.com

Stephen O’Neill, Esq.
Murray & Murray
(408) 907-9200
soneill@murraylaw.com

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Article from GigaOm.

“I meet a lot of owners of midmarket IT services companies who almost immediately ask me, “What is my company worth?” Even those who don’t ask want to know often ask.

It’s a fair question, with a complicated answer. I can do a back of the envelope calculation and determine the enterprise value of a company today based on 12 months trailing revenue or perhaps a multiple of EBITDA (earnings before interest, taxes, depreciation and amortization). But the real value of a company is based less on its past performance than on its potential worth to a future owner. What the buyer can bring to the party and how well its management believes it can execute the acquisition and business strategy going forward is where a company’s true value resides and where the domain expertise or strategy comes into play.

Case in point: In 1996, IBM bought Tivoli Systems for $743 million, paying about 10 times trailing revenue. Many analysts concluded at the time of the sale that IBM grossly overpaid for the asset. Within a year, IBM was able to leverage Tivoli into almost a billion dollars in revenue. Just like beauty, value is in the eye of the beholder. Tivoli had more value to IBM than Tivoli had to itself at the time. So did IBM pay 10 times revenue or less than one times revenue for Tivoli?

Unfortunately, I don’t have a crystal ball. So I don’t know what potential buyers can do to leverage a company’s value. And a calculation on the back of an envelope almost always fails to satisfy.

Here is something else the owners I talk with really don’t want to hear: Chances are they have taken actions that over time have eroded — or even destroyed — the value of their company without even realizing it. In my last post for GigaOM, I wrote about “5 things that destroy a company’s value.” In this post and in future posts, I’m going to examine these value killers one at a time in greater detail.

Today, my topic is opportunistic acquisitions. And to be clear, my message is for owners of midmarket companies who are interested in making acquisitions designed to increase their own value. In doing so, they hope to become attractive acquisition candidates to buyers in the future.

Acquisitions fail 70 to 90 percent of the time

If you search for the phrase “acquisition failure rates,” you’ll be treated to study after study that peg failure rates at somewhere between 70 percent and 90 percent. Dig a little deeper, and you’ll find articles enumerating the many reasons most acquisitions don’t work.

Nearly all of these reasons can be boiled down to two:

  1. The acquisition was a bad match between what the seller had and what the buyer could do to create value. The bad match often occurs because the buyer was fooled, misled, or overlooked key points of the deal, or the buyer simply suffered from hubris.
  2.  The buyer did a poor job of integrating the acquisition and executing on the business strategy designed for its new asset.

In both situations, acquisitions fail because the buyer doesn’t really know what or why it’s buying — let alone what to do with the acquisition.

Think about when HP bought Compaq or when Time Warner bought AOL.

Of course there are companies that are successful with acquisitions. Cisco has acquired 150 companies since its first acquisition in 1993. In fact, acquisitions are a core competency of Cisco — few companies are better at it.

Cisco’s purchases are fueled by the desire to speed up the rate at which the company can offer new technologies in a market that is hyper-competitive and evolving rapidly.

Not all of Cisco’s acquisitions are hits. Remember the Flip video camera that Cisco shut down in 2011? But many were successful, especially in the early days. At the peak of its acquisition activity in 2001, Cisco’s purchases were widely credited with laying the foundation for about half of its business at the time.

The secret to Cisco’s fruitful acquisitions is its ability to successfully onboard companies. Cisco employs a full-time staff solely focused on integrating new companies into the fold — instead of haphazardly assembling part-time transition teams whose members are all busy with their regular jobs.

In terms of strategy and execution, Oracle is even better at acquisitions. The company has spent billions on about 90 companies since its acquisition of PeopleSoft closed in 2005. Oracle’s chief skills are identifying companies that fit well into its longterm business strategy at the front end of the process, and its ability to integrate and act on these strategies at the back end. In 2011, readers of The Deal Magazine recognized Oracle’s track record with an award for most admired corporate dealmaker in information technology for deals completed from 2008 to 2010.

Until late in 2011, Oracle’s acquisition drive was to create the broadest portfolio of traditional enterprise software applications in the industry. With the company’s $1.5 billion acquisition of SaaS CRM applications provider RightNow Technologies (announced in September 2011 and completed in January 2012), Oracle now hopes to work its magic in the SaaS market. Oracle paid more than seven times trailing revenue for RightNow. I bet that in the next year or two, Oracle will make that multiple look like a bargain — just like when IBM bought Tivoli.

Still, Cisco, Oracle and other exceptions to the rule underscore the difficulty of making acquisitions work. It’s even harder when an acquisition happens because a buyer is presented with an unexpected “opportunity” and management decides it’s just “too good to pass up.” These so-called “opportunistic” acquisitions often lead to disappointment or disaster.

The reasons for failure are obvious. Acquirers lured by such a passive approach often have no clearly defined goals, have not thought through the attributes of ideal acquisition candidates, have done little or no pre-acquisition planning, and suffer from a lack of choice.

It reminds me of people who go to Las Vegas for the weekend and end up married. Getting married in Nevada is quick, easy and relatively inexpensive. All you need is a marriage license — no blood tests and no waiting period. And there is a wedding chapel on every corner.

Of course, when you wake up the next morning, there may be hell to pay.

I know. I’ve been there. Not in Las Vegas on the morning after, but at an organization that for many years only bought companies that showed up on its doorstep. We had no strategy and no process for integrating acquisitions into the mothership. I’m convinced that if the owner of the neighborhood car wash had offered us a “good” deal, we’d have taken it.

So here’s my advice for owners of companies seeking to enhance their value through opportunistic acquisitions. Acquisitions can do a lot of good. They can add to your growth and earnings, speed your entry into new markets, allow you to acquire human capital or intellectual property more quickly, and lower your costs through economies of scale. All of these things have the potential to increase the value of your company to a prospective buyer.

But just like marriage, acquisitions should never be decided on a whim. And you should never buy a company just because it’s for sale. Frankly, companies that are not for sale offer juicier profits and are likely a better strategic fit. Better to take some of that money and go have fun with it in Las Vegas.

And if you go there, don’t get married.”

Read more here.

 

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SALE OF ASSETS OF ACTIVE RESPONSE GROUP INC.
Gerbsman Partners (www.gerbsmanpartners.com) has been retained by Hercules Technology Growth Capital (“Hercules”), the senior secured lender to Active Response Group, Inc., (“ARG”), (www.activeresponsegroup.com) to solicit interest for the acquisition of all or substantially all of ARG’s assets, including its Intellectual Property (“IP”), in whole or in part (collectively, the “ARG Assets”).

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

The sale is being conducted with the cooperation of Hercules and ARG. ARG has advised Hercules 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 ARG Assets has been supplied by third parties and obtained from a variety of sources. It has not been independently investigated or verified by Hercules or Gerbsman Partners or their respective agents.

Potential purchasers should not rely on any information contained in this memorandum or provided by Hercules 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 ARG’s business and its market positions relates to periods on or prior to March 31, 2009. Interested parties should satisfy themselves through independent investigations as they or their legal and financial advisors see fit.

Hercules 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 Hercules’s or Gerbsman Partners’ negligence or otherwise.

Any sale of the ARG 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, Hercules and Gerbsman Partners. Without limiting the generality of the foregoing, Hercules and Gerbsman Partners, and their respective staff, agents, and attorneys, hereby expressly disclaim any and all implied warranties concerning the condition of the ARG 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 contains confidential information and is not to be supplied to any person without Hercules or Gerbsman Partners’ prior consent.

SUMMARY OF HISTORICAL INFORMATION[1]

ARG is an online marketing solutions company specializing in lead generation and customer acquisition. ARG leverages deep vertical knowledge, a database of 20 million consumer records and a proprietary technology platform to deliver qualified leads and closed transactions to advertisers on a pay for performance basis. ARG employs a ‘wide-net’, promotional approach to generate consumer registrations from over 400 proprietary websites. These registrations are converted into qualified leads and sales. At its apex, the company generated over 1.5 million consumer registrations each month.

The company is well-positioned to capitalize on several industry trends – the migration of direct marketers from offline to online; the increased emphasis on accountability and ROI which has fueled the growth of the pay for performance space; and the increased focus on targeting and segmentation.

ARG is a privately held company. ARG (founded in 2000 as eWOMP, Inc.) is headquartered in New York, New York, with Technology offices in Boulder Colorado. To date, ARG has secured over $5 million in equity financing. $2.6 in a Series A secured by eWOMP with the remainder funded by the Company’s CEO, CFO, Board of Directors and a group of sophisticated private investors. The company also raised over $10MM in venture debt financing from Hercules Technology Growth Capital.

Target Market:
Per the IAB, lead generation is the fastest growing segment of the online advertising industry. Lead generation is estimated to grow to $3.7 billion by 2011, up from $1.8 billion in 2007.

Customers:
ARG’s clients range across a broad set of industries, covering over 80 distinct product and service categories. ARG operates a performance driven marketplace and its customer base is vertically agnostic, which allows it to maximize revenue across its strong client base of direct clients, agencies and networks, such as ValueClick, AOL, Q Interactive, IAC, Pfizer, Glaxo Smith Kline, R.J. Reynolds, and Netflix. The accounts receivable base of ARG is diverse, as no client represents over 10% of its accounts receivable balance.

Proprietary Lead Generation Technology – Intellectual Property
ARG’s internally developed software platform, Active Marketing Platform (“AMP”) is a scalable technology solution that enables the company to execute its business model with tremendous efficiency. ARG’s technology dynamically optimizes ROI by measuring the difference between attracting customers to ARG’s sites and the revenue generated from media sources – at a granular level – enabling real time media decisions. The company’s technology is customizable for individual clients to meet specific needs in order strike the optimal balance between quantity and quality. The company’s platform was designed with an open architecture to be both flexible and expandable. An example of the expandability of the platform is a recent development of a module that powers call centers. This enables ARG to utilize an outsourced call center, but maintain operational visibility and manage risk.

ARG technology platform is differentiated from its competitors such as Web Clients, World Avenue, Q Interactive in that AMP takes a consumer centric approach focused on maximizing the value of every customer interaction by serving the optimal ‘basket of offers’ to a distinct consumer based on user-generated, behavioral and attributed data. This data fuels a genetic algorithm that gets smarter over time to maximize the number of times a registrant opts in to an offer.

ARG is further differentiated by its ability to quickly deploy multiple lead generation websites with different and unique branding elements, extend into a call center environment and maximize media dollars spent/minimize risk based on performance at a granular level. ARG has developed several proprietary tools that enables dialing-up or dialing down media sources based on quality and ROI metrics. This ability to ‘feed the winners and starve the losers’ on the fly, yields higher revenue per registrant, produces higher quality for advertisers and results in lower fraud.

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 Historical Growth

· Attractive Industry – Fastest growing segment of the online advertising market, well-positioned to capitalize on major shifts in marketing strategies and media budgets

· Best in Class Technology – AMP platform provides a turn key lead generation and transactional marketing solution, which can also be extended to power call center operations

· Proprietary Data Base of over 20 million fully profiled consumers with over 2 billion data points

· Diversified Client Base with Low Concentration

· Excellent Relationships with Media Publishers and Advertisers – long-standing relationships with key players such as Value Click, Advertising.com, Q Interactive and other leading companies

· Opportunity for Future Growth and Margin Improvement – company has made moves to reduce fixed costs and improve marginal profitability making the company poised to scale.

The reasons why the ARG’s assets are attractive are:

ARG has historically experienced strong growth and has been among the leaders in the lead generation space. However, recent working capital constraints and an overly leveraged balance sheet have created the opportunity for all or a portion of ARG’s assets to be sold. The acquisition of these assets can enable the purchaser to realize significant short and long term value from the ARG assets as ARG maintains 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 $1 million to $32 million between 2004 and 2008.

Market Position: The Company is one of the five major players in the online lead generation space in terms of market size and presence. While ARG is the youngest of the five, it has the critical mass, superior technology and operational expertise to be highly successful in the marketplace, which is not true of its smaller competitors.

Proprietary Technology Platform That Can Be Bolted On or Run On a Standalone Basis: The Company’s proprietary technology platform (AMP) provides superior functionality relative to competitive solutions. The platform’s robustness handles extreme traffic loads, offer volatility, and “tech stress” created by many high-volume clients with many different consumer registration profiles simultaneously. Employing sophisticated advertising targeting and dynamic registration path optimization, the AMP possesses integrated additional functionality and analytical tools that support e-commerce, market research and affiliate marketing activities. Furthermore, the platform is capable of accommodating new non-Web communication devices (such as cell phone messaging) as consumer penetration and acceptance of added mobile functionality increases.

Extensive and Diversified Creative Library: To date ARG has developed thousands of websites and customer acquisition creative assets. AMP’s flexible architecture allows for rapid implementation or augmentation of brand and creative design allowing ARG’s creative inventory to be rapidly transplanted to complement existing or newly developed brands or lead generation properties and initiatives.

Diversified Client Base: The Company has over 400 clients engaged in a wide variety of consumer-oriented industries. This allows the Company to maximize the revenue and profitability of the leads it generates by delivering them to the most appropriate client based on expected yield as determined by AMP. In addition, by establishing a diverse customer base, the Company can avoid fluctuation in its revenues caused by adverse changes effecting any particular client industry category.

Agency Approvals: The Company is in compliance with the Interactive Advertising Bureau’s (IAB) newly established standards, which defines online lead generation best practices for US-based advertisers and publishers. The Company is a member of the IAB and sits on its lead generation committee, and it is also a member of the Online Lead Generation Association (OLGA) and the Direct Marketing Association (DMA).

Strong Regulatory Positioning: The Company invested hundreds of thousands of dollars in 2007 to completely overhaul its privacy policies and consumer disclosures to be ahead of the regulatory curve. Since the lead generation space continues to attract regulatory scrutiny, the Company is well-positioned to be operationally unaffected and to benefit, from a competitive standpoint, if any new regulations are initiated with respect to the lead generation business.

Hercules is seeking a buyer of the ARG’s Assets, in whole or in part. Interested parties may bid on all or any part of ARG’s core technology, creative library and customer contracts, enabling the purchaser to leverage ARG’s core technology, creative library, client and vendor relationships and to obtain new sales, enhance revenue streams or accentuate or augment lead generation and performance marketing business unit.

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 ARG 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 Hercules, Gerbsman Partners, or ARG, 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 Hercules, ARG, 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 ARG’s Assets. Sealed bids must be submitted so that it is actually received by Gerbsman Partners no later than July 23, 2009 at 3:00 p.m. (Eastern Time) (the “Bid Deadline”) at ARG’s office, located at 104 W 27th St, 2nd Floor, New York, NY 10011. Please email all bids to steve@gerbsmanpartners.com and sharvey@herculestech.com

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 $200,000 (payable to Hercules Technology Growth Capital, Inc.). The winning bidder will be notified within 48 hours of the Bid Deadline. Non-successful bidders will have their deposit returned to them. Hercules reserves the right to, in its sole discretion, accept or reject any bid, or withdraw any or all assets from sale.

Hercules will require the successful bidder to close within a 7-day period. Any or all of the assets of ARG 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 ARG Assets shall be the sole responsibility of the successful bidder and shall be paid to Hercules 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

[1] All information provided herein relating to the operations of ARG’s business and the market positions relates to periods on or prior to March 31, 2009. 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 ARG is included for information purposes only. Although this sale is being conducted with ARG’s cooperation, this sale is strictly an asset sale offered by Hercules as ARG’s senior lender pursuant to Article 9 of the Uniform Commercial Code. HERCULES HAS NO ARRANGEMENT PURSUANT TO WHICH BUYER OF THE ARG ASSETS COULD BE ASSURED OF THE FUTURE SERVICES OF ANY ARG OFFICERS OR EMPLOYEES.

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Gerbsman Partners www.gerbsmanpartners.com has been retained by Pegasus Biologics, Inc. www.pegasusbio.com to solicit interest for the acquisition of all, or substantially all, Pegasus Biologics Inc.’s (“Pegasus”) assets.

Pegasus Biologics, headquartered in Irvine, California, is an emerging growth regenerative medicine company focused on the manufacturing and commercialization of advanced bio-surgical solutions for soft tissue repair and regeneration.

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 Pegasus Biologics’ Assets has been supplied by Pegasus. 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 Pegasus’ or Gerbsman Partners’ negligence or otherwise.

Any sale of the Pegasus Biologics’ 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 Pegasus Biologics and Gerbsman Partners. Without limiting the generality of the foregoing, Pegasus and Gerbsman Partners and their respective staff, agents, and attorneys,  hereby expressly disclaim any and all implied warranties concerning the condition of the Pegasus Biologics’ 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 contains confidential information and is not to be supplied to any person without Gerbsman Partners’ prior consent. This memorandum and the information contained herein are subject to the non-disclosure agreement attached hereto as Exhibit A.

Pegasus believes its assets are attractive for a number of reasons

·       Privately-held regenerative medicine, medical device company – capitalized in Jan 2005.

·       $31.8MM raised through Three Arch Partners, Onset Ventures, Frazier Healthcare Partners, Affinity Capital and others.

·       Has developed and is commercializing a revolutionary bioscaffold comprised of highly organized collagen, sourced from equine pericardium that encourages the healing process by addressing the demands of a challenging biological environment.

·       Core product technology is based on a proprietary processing and sterilization method resulting in a sterile, structurally sound, biologically conductive scaffold that complements soft tissue repair and adds strength to the repair over time. .

·       Known as “flexible crosslinking”, the technology maintains the native collagen architecture, which supports cellular ingrowth and resists enzymatic degradation – ideal for both soft tissue reinforcement as well as chronic wounds.

·       Has obtained exclusive worldwide licenses for the processing and sterilization of biological tissue for use in orthopedic, oral/dental, spinal and neurological, abdominal and thoracic, breast and wound applications.

·       Technology has 6 issued US patents, 5 pending US patent applications and associated International filings.

·       A revenue model consistent with other medical devices that are invoiced at the time of application (surgery).  Current ASP holding at $2200 with attractive gross margins
·       To date, over 10,000 patients have been treated with Pegasus’ products in various orthopaedic and chronic, complex wound applications

·       Received four FDA 510(k) approvals:  For Unite® Biomatrix as a collagen wound dressing (Sept. 26, 2007), for Orthadapt® as a surgical mesh for the repair, reinforcement and augmentation of soft tissues repaired by sutures or suture anchors during tendon repair surgery (Aug 5, 2005 and May 4, 2007), for Duradapt ® as a dural substitute under an IDE, and for Orthadapt® PR (Peek Reinforced), also for the repair, reinforcement and augmentation of soft tissues repaired by sutures or suture anchors during tendon repair surgery (May 5, 2009).

·       Received 1 FDA Investigational Device Exemption (IDE) to evaluate the safety and procedural success of a product called Duradapt® (a version of Orthadapt) for the repair/replacement of cranial dura mater.

·       Inventory of 4000 units valued at $667K based on cost of goods.

Revenue Summary–

Pegasus has been generating revenue since mid 2006 with both Orthadapt and Unite products.  Total revenue summary is as follows:
·     2006 – $2,958,113
·     2007 – $7,323,429
·     2008 – $9,147,515
·     Q1, 2009 – $2,479,987
Pegasus Key Accounts –
·     UCSD Medical Center – San Diego, CA
·     Alexian Brothers Hospital – Arlington Heights, IL
·     Wellstar Cobb Hospital – Marietta, GA
·     Westchester General Hospital – Miami, FL
·     Memorial Hospital of Rhode Island – Pawtucket, RI

Pegasus Biologics Company Profile

Founded in June, 2004, Pegasus is a California based, revenue stage medical device company.  Over the last 4 years, the company has raised $32MM in equity and debt from leading capital venture firms such as Onset Ventures, Frazier Healthcare Partners, Three Arch Partners and Affinity Capital.

Pegasus is becoming recognized as a global leader in bio-surgical solutions for soft tissue repair.  With thousands of successful clinical outcomes, current applications range from the repair, reinforcement and reconstruction of tendons to limb preservation and advanced wound management.

Impact of Technology on the Market
With the growing demand for advanced biologics, Pegasus is well positioned for the future.  An estimated 850,000 orthopedic soft tissue repairs and over 365,000 chronic complex wounds performed annually worldwide support this theory, and the high failure rates of tendon repair reported in the literature indicate an unmet clinical need.  The OrthADAPT® Bioimplant and Unite® Biomatrix collagen-based products are both FDA cleared and CE Marked.

Pegasus Biologics has obtained exclusive worldwide licenses for the revolutionary bio-platform technology developed for the processing and sterilization of biological tissue for use in orthopedic, oral/dental, spinal and neurological, abdominal and thoracic, breast and wound applications.

Pegasus Biologics’ Assets
Pegasus Biologics has developed a portfolio of assets critical to the repair and reinforcement of soft tissues and the treatment of chronic, complex wounds. These assets fall into a variety of categories, including:
·       Patents
·       Product
·       Product designs and prototype
·       Software and control algorithms
·       Manufacturing equipment and fixtures
·       One (1) prospective, multi-center, clinical trial under an FDA investigational device exemption. (Dura)
·       Three (3)  prospective, multi-center clinical studies for marketing purposes (Achilles tendon, arthroscopic rotator cuff, wound)
·       One (1) retrospective study for marketing purposes (open rotator cuff)
·       Current FDA regulatory clearances and CE marks
·       Data from human clinical trials/studies
·       Intellectual capital and expertise
·       Trademarks
·       Domain names

The assets of Pegasus Biologics will be sold in whole or in part (collectively, the “Pegasus Assets”).  The sale of these assets is being conducted with the cooperation of Pegasus. Pegasus and its employees may be available to assist purchasers with due diligence.  Notwithstanding the foregoing, Pegasus Biologics should not be contacted directly without the prior consent of Gerbsman Partners.

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 Pegasus Biologics’ 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) 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 Pegasus Biologics’ Assets. Sealed bids must be submitted so that the bid is actually received by Gerbsman Partners no later than Friday, June 26, 2009 at 3:00 p.m. Pacific Standard Time (the “Bid Deadline”) at Pegasus’ office, located at 6 Jenner Dr, Suite 150 Irvine, CA. 92618.  Please also email steve@gerbsmanpartners.com with any bid.

Bids should identify those assets being tendered for in a specific and identifiable way. The attached Pegasus fixed asset list may not be complete and Bidders interested in the Pegasus Biologics Equipment must submit a separate bid for such assets. Be specific as to the assets desired.

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 $200,000 (payable to Pegasus Biologics, Inc.). The winning bidder will be notified within 3 business days after the Bid Deadline. Non-successful bidders will have their deposit returned to them. Pegasus Biologics reserves the right to, in its sole discretion, accept or reject any bid, or withdraw any or all assets from sale.

Pegasus will require the successful bidder to close within 7 business days.  Any or all of the assets of Pegasus 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 Pegasus Biologics Assets shall be the sole responsibility of the successful bidder and shall be paid to Pegasus at the closing of each transaction.

For additional information, please see below and/or contact:

Steven R. Gerbsman
steve@gerbsmanpartners.com

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