Agile Equity: Transactions
Agile Equity Advises SAL, INC. on Acquisition by JMAR (OTC:JMARE)
San Diego, CA
August 9, 2001
JMAR Technologies, Inc. (Nasdaq NM: JMAR), a provider of precision micro- and nanotechnology products, today announced that it had completed the purchase of all the outstanding equity of Vermont-based Semiconductor Advanced Lithography, Inc. (SAL), the world's most experienced provider of X-ray lithography (XRL) stepper systems. SAL's XRL systems have already demonstrated the ability to image sub-100 nanometer (nm) circuit patterns. At the closing, SAL was merged into JMAR/SAL NanoLithography, Inc., or "J-SAL", a California corporation that is a wholly-owned subsidiary of JMAR Technologies, Inc.
By integrating JMAR's leading-edge laser plasma X-ray sources with SAL's X-ray steppers and other supporting technologies, the new J-SAL unit, created by this acquisition, will become one of only two remaining U.S.-owned lithography system companies. The new entity's first strategic target is to provide manufacturers of high-speed gallium arsenide (GaAs) semiconductors an integrated XRL processing capability before the end of 2002. J-SAL believes that it will subsequently be able to provide more affordable sub-0.13 micron silicon chip processing on an earlier timescale than currently projected for alternative NGL developmental technologies.
"This acquisition is one that will truly benefit all parties concerned," emphasized JMAR Chairman and CEO John S. Martinez, Ph.D. "The employees and shareholders of both our companies will get a stronger, more competitive company, and the semiconductor and microelectronics industries will obtain, we are convinced, what they have long been seeking: an advanced, but relatively low-risk, low-cost alternative approach to Next Generation Lithography (NGL) with a visible and unobstructed roadmap to near-term commercial viability."
By implementing already identified technology upgrades, JMAR believes that its integrated X-ray source/stepper technology has the relatively straight-forward potential to increase the production throughput of sub-0.13 micron semiconductor circuits by more than 50 times. In so doing, it expects to position its point-source-driven lithography systems to compete for high-volume silicon processing applications in the future," he said.
Under the terms of the transaction, the sellers agreed to retire all of the long-term debt of SAL, Inc. The purchase price consisted of a combination of $1,200,000 cash, $1,200,000 in promissory notes, and 603,051 shares of JMAR common stock, paid at the closing, plus certain future contingent "Earnout" payments payable upon the successful achievement by SAL of several significant technical and marketing performance milestones. Based on the closing price of JMAR shares on Nasdaq on Tuesday, August 7, 2001, the market value of the total consideration paid by JMAR at the Closing was $4.5 million.
To satisfy the "debt-free" terms of the transaction, SAL's former shareholders allocated a significant portion of the Closing proceeds to retire approximately $8,000,000 in SAL debt, thereby leaving SAL with a balance sheet free of long-term debt. The JMAR shares and notes payable in the transaction have been allocated among a total of 60 former SAL shareholders and noteholders.
The contingent technical performance-based Earnout payments consist of two $500,000 notes, separately issuable upon satisfactory completion of certain demonstrations by the SAL Model 5 stepper system. The first note payment requires a confirmation, by no later than March 31, 2002, of the stepper's ability to process semiconductor wafers at certain minimum commercial throughput rates. The second note payment is based on certain precision X-ray lithography system demonstrations, by no later than September 30, 2002, using JMAR's X-ray source.
In addition, upon receipt of an unconditional order from a commercial product manufacturer, by no later than December 31, 2002, for an integrated stepper system containing a JMAR source, the SAL shareholders will earn the right to receive an additional 354,736 JMAR shares and another $1,200,000 note upon timely customer acceptance of that system.
If all of the technical and marketing performance goals are met by these deadlines, the total final consideration paid to the SAL shareholders and creditors would be about $8 million, based on the value of JMAR's shares on August 7th, and could be much higher or lower based on the market price of JMAR stock at the time that such payments, if any, are made.
The JMAR shares issued in this transaction are restricted shares that cannot be publicly traded until they are included in a registration statement declared effective by the SEC. JMAR has agreed to file a registration statement covering these shares within 90 days after the closing date. The holders of the new JMAR shares have agreed to certain restrictions on their trading of those shares, including an agreement not to sell more than 25% of such shareholder's shares in any 90-day period and an agreement to refrain from selling any shares for a thirty-day period after notice from JMAR that it is engaged in negotiations for an underwritten offering of its shares.
The holders of the notes being issued in the deal have agreed to provide the notes as security to guarantee the representations made by SAL in the Merger Agreement for a period of 18 months after the Closing.
Among the larger new holders of JMAR stock, as a result of the acquisition, are Charles Dickinson, Chairman of the Board of SAL, Inc., and a current director and former Chairman of the Board of Solectron Corporation, an S&P 500 company and a leading worldwide manufacturer and assembler of computer components. Mr. Dickinson currently serves on the Boards of a number of public and privately-held corporations and is expected to be elected to fill an existing vacancy on JMAR's Board of Directors within the near future.
Commenting on the merger, Charles Dickinson said, "SAL and JMAR have been making excellent progress toward an integrated x-ray lithography system and supporting technology. I welcome this merger of efforts as an important step in strengthening its commercialization potential."
Other former SAL shareholders and/or creditors who have acquired significant stock positions in JMAR as a result of this transaction are: Suss Microtec, a leading international manufacturer of microelectronic production and test devices; several individual members of the Suss family; Infidar Investment Advisory Ltd., a leading asset management company in Switzerland with more than four billion Swiss francs under management; and Green Mountain Capital, a Vermont-based venture capital firm specializing in financing small, growing New England companies, including SAL.
The transaction was facilitated by Agile Equity, a New York investment banking firm engaged by SAL, Inc.
Daniel J. Fleming, Ph.D., President and CEO of SAL, Inc. joins the JMAR organization as the President of J-SAL. Commenting on the transaction, he said, "SAL and its predecessor organization, Karl Süss of Germany, have built and installed 16 XRL systems, worldwide, more than all other X-ray stepper manufacturers combined. SAL is convinced that XRL provides a simpler, more affordable NGL solution. We look forward with enthusiasm to joining the JMAR organization, which we believe is committed to implementing the commercialization of X-ray lithography for the semiconductor industry."
The market for semiconductor lithography equipment is several billion dollars per year. JMAR estimates that the new integrated J-SAL XRL systems will sell from $6 million to $10 million each, depending on system configuration and level of performance. That compares with estimates ranging as high as $40 million, each, for EUV systems currently in development for high-throughput silicon wafer processing applications.
JMAR's XRL technology offers several potential advantages when compared with other lithography methods. Foremost among these advantages is the simplicity of proximity mask technology, which makes use of relatively inexpensive collimators to intensify and direct the short wavelength X-rays onto the mask/wafer target. This technique avoids the need for the extremely complex and expensive focusing optics that have become inbred in all types of advanced optical lithography techniques, including Deep Ultra Violet (DUV) and EUV. Furthermore, the intrinsic nature of collimated X-ray light produces an image with large depth of field enabling lithographers to readily manufacture certain critical high performance circuit features that otherwise are very difficult, or impossible, to make with current or envisioned future optical lithography systems based on focused light beams.
"SAL brings to JMAR a wealth of experience in the lithography engineering and technology arenas, as well as an abundance of sophisticated technology investors," Dr. Martinez said. "We welcome these new technology and microelectronics industry-savvy investors to JMAR's family of shareholders and trust that they will find their association with JMAR to be both intellectually exciting and financially rewarding."
"By combining SAL's technical and professional talent with JMAR's world-class advanced light technology and past experience in the public and private financial markets throughout the world," he added, "we intend to position J-SAL as the world's premier provider of high-performance next generation lithography systems for both the silicon and compound semiconductor industries."
JMAR Technologies, Inc., a semiconductor industry-focused company, is a leading developer of proprietary advanced laser and X-ray light sources for high-value microelectronics manufacturing and metrology. It is also a fabless provider of high performance integrated circuits for the rapidly growing broadband communications market and other microelectronics applications. In addition, JMAR manufactures precision measurement, positioning, and light-based manufacturing systems for inspection and repair of semiconductors and continues to play an important role in adapting its precision semiconductor manufacturing technology to the fabrication of advanced biomedical and optical communications products.
The statements regarding JMAR's expectations for the successful development and introduction of new products and future sales and potential business opportunities are forward-looking statements based on current expectations that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements. These risks include the failure of future orders to materialize as expected, competition from existing or new alternative lithography technologies or otherwise, delays in shipment or production, parts and labor shortages, cancellation or re-scheduling of orders, delay in funding of third-party contracts, failure of acceptance of new products or technologies, failure of advanced technology and new intellectual property to perform as predicted, the failure of pending patents to be issued, and the other risks detailed in the company's 2000 Form 10-K and other reports filed with the SEC.