A Massachusetts bank's attempt to pull out of a deal to sell two key pieces of equipment could put the future of OLEDWorks LLC in doubt, the local company claims.
A 2-year-old manufacturing startup in Greece formed by ex-employees of Eastman Kodak Co., OLEDWorks is seeking an emergency court order to stop Cambridge Trust Co. from reneging on a promise to sell it two specialized thin-film coating machines.
If the bank is allowed to back out of the deal it agreed to in October, OLEDWorks would take a hit of more than $1 million. But no amount of money would be enough to repay it if Cambridge Trust backs out of the deal, the company maintains in a complaint filed last week in U.S. District Court in Rochester.
The company said it almost certainly will go under if it cannot quickly begin operating at least one machine, a device known as a Phoenix.
OLEDWorks would not comment on the dispute, said the firm's attorney, Robert Calihan of Calihan Law PLLC.
Organic light-emitting diodes, used in lighting panels and flat-panel and mobile phone displays, offer advantages over liquid crystal displays and inorganic LEDs. OLEDs do not need backlighting, use less electricity and can be applied on a variety of substrates, proponents say.
The light-emitting materials used in OLEDs have been around since the 1970s. Kodak developed and patented the first OLEDS in 1987.
OLEDWorks chief operating officer John Hamer and chief technology officer Michael Boroson-both former Kodak scientists who helped develop Kodak's OLED technology-bought rights to Kodak's OLED patents to found OLEDWorks in 2010.
The new company started to gear up for production last year. Partly funded with state and local economic development money, OLEDWorks expected to add as many as 50 staffers this year, Boroson said in December 2011.
After hunting for a coating machine, in October it located a used Phoenix for sale by equipment maker Cambridge NanoTech Inc. OLEDWorks reached an agreement with Cambridge NanoTech to buy the Phoenix for $540,000, shaving some $200,000 off what the coating machine would have fetched new. But before the deal could be concluded, Cambridge Trust foreclosed on Cambridge NanoTech, taking possession of the Phoenix, Boroson states in sworn testimony.
All was not lost, however. The bank agreed to sell the Phoenix and another, larger-capacity coating machine, a Tahiti II, to OLEDWorks. And since the used machines would no longer be guaranteed by Cambridge NanoTech, the price of the two machines would be less than it would have cost OLEDWorks to buy just the Phoenix. The Tahiti II would have sold for upwards of $1.5 million new. Cambridge Trust's price for both specialized coating machines, which OLEDWorks agreed to take as-is, was $350,000.
The purchase arrangements were reached after he and a bank vice president, Jane Mason, hashed out terms in numerous phone calls and emails, Boroson states in court papers.
Included in OLEDWorks' court papers is a copy of a Nov. 21 email from Mason, confirming the $350,000 price. In the email, she cited serial numbers of both machines, offered to send photographs of the equipment and said she would ask another bank employee to try to find operators manuals. Mason instructed Boroson to seal the deal by wiring a $70,000 good-faith deposit.
OLEDWorks sent the required deposit on Nov. 23. But less than two weeks later, on Dec. 6, "we totally unexpectedly received an email from Jane Mason stating the bank would not honor our agreement," states Boroson in sworn testimony.
"We are aware of this action, and the bank is taking this very seriously," Cambridge Trust senior vice president Robert Davis wrote in an email this week. "Our legal counsel is discussing the dispute with OLEDWorks' counsel, and we are actively seeking to find a mutually agreeable solution."
If it cannot immediately take possession of the Phoenix, OLEDWorks maintains, it will be unable to fill orders from its customers, which need OLED panels in time to install them in products they plan to display at a lighting industry trade show opening in late April.
Boroson's sworn testimony says he told Cambridge Trust at the start of negotiations that because of the deadline his company faced, it could not wait to see the outcome of an auction the bank initially had planned to hold in mid-December. OLEDWorks could do the deal with Cambridge Trust only if it could take possession of the Phoenix machine in time to supply its customers with the light panels they would need for the trade show.
In an emergency motion filed simultaneously with its court complaint, OLEDWorks seeks an order barring the bank from selling the Tahiti II and Phoenix to any other buyer.
Calling the trade show, Lightfair International, "the most important trade show in our industry," Boroson's affidavit portrays such an order as a matter of life or death for his company.
The show, being held April 21-25 in Philadelphia, is billed as the world's largest annual architectural and commercial lighting trade show and conference.
"We need OLED panel products to supply our customers so they can use our products in turn to manufacture their own products for display at the April trade show," he states. "If we do not get timely delivery of the Phoenix as agreed to by the bank, we will lose this critical window of opportunity. There is significant risk that if that occurs, our new startup company will fail."
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