<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 15, 2000
JMAR TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
STATE OF DELAWARE
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(State or other jurisdiction of incorporation)
1-10515 68-0131180
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(Commission File No.) (IRS Employer Identification No.)
3956 SORRENTO VALLEY BLVD., SAN DIEGO, CALIFORNIA 92121
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (858) 535-1706
--------------
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(Former name of or former address, if changed since last report)
<PAGE> 2
Item 5. OTHER EVENTS
1. On February 15, 2000, JMAR Technologies, Inc. (the "Company")
issued a Press Release announcing that it has exercised its right
to call for redemption of its outstanding Redeemable Common Stock
Purchase Warrants which trade under the symbol "JMARW" (the
"JMARW Warrants"). As of February 11, 2000, a total of 2,402,138
JMARW Warrants were outstanding. On or after February 15, 2000, a
Notice of Redemption and related materials will be mailed to all
holders of the JMARW Warrants. As a result of the call, each
JMARW Warrant will continue to be exercisable at $5.50 per
warrant until 5:00 p.m. (Eastern Standard Time) on March 20,
2000. If a JMARW Warrant is exercised, the holder will receive
one share of JMAR Common Stock. After 5:00 p.m. (Eastern Standard
Time) on March 20, 2000, the JMARW Warrants will no longer be
exercisable, and holders will have the right to receive only the
redemption price of $0.05 per warrant. A copy of the Press
Release announcing the foregoing is attached as Exhibit 99.1
hereto. A copy of the Letter of Transmittal and Notice of
Redemption to be sent to holders are attached as Exhibits 99.2
and 99.3, respectively.
2. The Company's original Warrant Agreement which it entered into
with its underwriters in 1993 provided for the payment of a fee
of 5% of the warrant exercise proceeds to a warrant solicitation
agent. The Company has appointed Auerbach, Pollak & Richardson,
Inc. ("Auerbach") to act as warrant solicitation agent pursuant
to a Warrant Solicitation Agreement, dated February 9, 2000,
between the Company and Auerbach (the "Solicitation Agreement").
Pursuant to the Solicitation Agreement, in consideration for a
broad range of services and advice related to the solicitation of
exercises of the JMARW Warrants and the redemption call, the
Company has agreed to pay Auerbach a cash fee of 5% of the total
proceeds received from exercises of JMARW Warrants from and after
February 15, 2000. The Solicitation Agreement also provides that
the Company will issue Auerbach a Warrant (the "Solicitor's
Warrant") to purchase shares of the Company's Common Stock equal
to eight percent (8%) of the JMARW Warrants exercised after
February 9, 2000. The Solicitor's Warrants will have an exercise
price of $5.50 per share, are not exercisable for at least six
months following the issuance of the Notice of Redemption and are
only exercisable thereafter on the first trading day after one of
the following has occurred following said six month period: (x)
if the closing price (regular session) of the Company's Common
Stock as reported on NASDAQ has exceeded $9.50 for any ten
trading days in any twenty trading day period or (y) the average
of the closing price (regular session) of the Company's Common
Stock as reported on NASDAQ for any ten consecutive trading day
period exceeds $9.50. The Solicitor's Warrant will have a term of
three years and a provision allowing for a cashless exercise. The
Company has agreed to file a registration statement to include
the shares issuable under the Solicitor's Warrant no later than
the six month period after the
2
<PAGE> 3
Redemption Date. A copy of the Warrant Solicitation Agreement is
attached as Exhibit 99.4 hereto.
3. In connection with the mailing of a Notice of Redemption to the
holders of the JMARW Warrants, the Company will deliver the
original Prospectus, dated June 28, 1993 and a Prospectus
Supplement, dated February 15, 2000, relating to the issuance of
the shares of Common Stock pursuant to the JMARW Warrants. The
Prospectus Supplement is being filed with the Securities and
Exchange Commission concurrently with this Form 8-K to supplement
certain of the information contained in the 1993 Prospectus. An
updated set of Risk Factors related to an investment in the
Company is attached as Exhibit 99.5 hereto.
Item 7. EXHIBITS
The following exhibits are filed as part of this report:
<TABLE>
<S> <C>
99.1 Press Release, dated February 15, 2000, reporting the Company's
call for redemption of its JMARW Warrants.
99.2 Letter of Transmittal, dated February 15, 2000.
99.3 Notice of Redemption, dated February 15, 2000.
99.4 Warrant Solicitation Agreement, dated February 9, 2000, between
the Company and Auerbach, Pollak & Richardson, Inc.
99.5 Risk Factors Affecting the Company, its Business and its Stock
Price.
</TABLE>
3
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DATE: February 15, 2000 JMAR TECHNOLOGIES, INC.
(Registrant)
BY: /s/ Dennis E. Valentine
------------------------------------
Dennis E. Valentine
Chief Financial Officer
4
<PAGE> 5
INDEX TO EXHIBITS
<TABLE>
<S> <C>
99.1 Press Release, dated February 15, 2000, reporting the Company's
call for redemption of its JMARW Warrants.
99.2 Letter of Transmittal, dated February 15, 2000.
99.3 Notice of Redemption, dated February 15, 2000.
99.4 Warrant Solicitation Agreement, dated February 9, 2000, between
the Company and Auerbach, Pollak & Richardson, Inc.
99.5 Risk Factors Affecting the Company, its Business and its Stock
Price.
</TABLE>
5
<PAGE> 1
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
JMAR TECHNOLOGIES, INC. ANNOUNCES CALL FOR WARRANTS
- PROCEEDS WILL BE USED TO ACCELERATE DEVELOPMENT OF HIGH-VALUE
SEMICONDUCTORS FOR RAPIDLY GROWING INTERNET AND TELECOM MARKETS
SAN DIEGO, CALIFORNIA (FEBRUARY 15, 2000) - JMAR TECHNOLOGIES, INC. (NASDAQ/NMS:
JMAR) announced today that its Board of Directors has called for redemption of
its Redeemable Common Stock Purchase Warrants (NASDAQ:JMARW). The 2,402,138
Warrants outstanding on February 11, 2000 represent approximately $13 million of
new capital for the Company, should they all be exercised. Each Warrant will
continue to be exercisable for one share of common stock at $5.50 until 5:00
p.m. (Eastern Standard Time) on March 20, 2000. After that time, the Warrants
will no longer be exercisable, and holders will have the right to receive only
the redemption price of $0.05 per Warrant.
John S. Martinez, Ph.D., Chairman and CEO of JMAR commented, "The anticipated
capital from the Warrant exercise will enable us to significantly accelerate the
establishment of our JMAR Semiconductor division as an important supplier of
chips to the fast growing advanced Internet switching and telecommunications
market. We plan to invest a significant portion of those proceeds in the
purchase of certain high-value intellectual property which, when combined with
the proprietary "cores" already developed at JSI, will give us the means to
expedite the development and commercialization of our advanced
telecommunications semiconductors for computer and Internet network processing
and switching applications. We also plan to use these funds to: 1) expand and
intensify our own in-house intellectual property development efforts and other
related R&D tasks for advanced telecom; 2) complete certain licensing and
complementary business arrangements in order to broaden our semiconductor
product and customer base; and 3) further augment and upgrade our already
comprehensive stable of advanced, high-performance semiconductor design
software.
"In addition, we expect to use some of the Warrant proceeds to help "seed" the
creation of one, or more, industrial alliances to complete the prototyping,
demonstration and commercialization of certain high performance semiconductor
manufacturing systems powered by JMAR's proprietary Britelight(TM) laser-driven
advanced x-ray sources", Dr. Martinez added. "These new compact, high precision
systems promise to play an important role in future semiconductor manufacturing
processes involving next generation lithography and advanced imaging and
metrology."
more
<PAGE> 2
JMAR TECHNOLOGIES ANNOUNCES CALL FOR WARRANTS/2
The Company has named Auerbach, Pollak & Richardson, Inc. to act as Warrant
Solicitation Agent and to manage the Warrant exercise and redemption program.
Founded in 1908, Auerbach is a full-service investment bank specializing in
meeting the needs of emerging growth companies like JMAR.
Questions and requests for information or assistance in connection with the
Warrant exercise and redemption program should be directed to any of the
following:
Auerbach, Pollak & Richardson, Inc.
Michael P. Considine (212) 508-1315
Dana Maxey (212) 508-1355
Fax: (212) 508-1376
JMAR Technologies, Inc.
Dennis E. Valentine, Chief Financial Officer
Joseph G. Martinez, General Counsel
(858) 535-1706
Fax: (858) 535-1835
JMAR Technologies, Inc. is a semiconductor industry-focused company. Through its
JMAR Semiconductor division, it is a provider of custom and standard high
performance semiconductors for the broad electronics market. Operating under a
highly efficient "fabless" strategy, JSI maintains key foundry relationships
worldwide that allow the company to offer a full range of capabilities in
digital, analog and mixed signal technologies to the burgeoning world
communications market. Through its JMAR Precision Systems division, it provides
a full range of measurement and inspection systems for high-precision,
sub-micron manufacturing applications and through its JMAR Research division, it
is a leading developer of proprietary advanced laser and X-ray light sources for
high-value microelectronics manufacturing and metrology applications. It has
also transitioned some of its key semiconductor manufacturing technology to the
biochip manufacturing industry. Please visit JMAR's web site at www.jmar.com for
additional information on the company.
The statements regarding JMAR's expectations of the successful 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, delays in shipment or
cancellation of orders, failure of acceptance of new products, failure of
advanced technology to perform as predicted and the other risks detailed in the
company's Form 8-K filed on February 15, 2000, its Form 10-K and other reports
filed with the SEC.
###
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EXHIBIT 99.2
[LOGO]
IMPORTANT - IMMEDIATE ACTION REQUIRED
February 15, 2000
Dear JMARW Holder:
Enclosed is a Notice of Redemption stating that JMAR Technologies, Inc. will
redeem all Redeemable Common Stock Purchase Warrants ("JMARW") for $.05 per
JMARW on March 20, 2000. Because the average closing price of JMAR's common
stock has exceeded $7.00 for a period of 10 consecutive trading days, our
warrant agreement allows us to redeem the warrants.
As a warrant holder you may take one of the following actions:
- - TAKE NO ACTION: If you take no action, we will redeem your Warrants at $.05
per Warrant and we will mail you a check after March 20, 2000.
- - EXERCISE WARRANTS: You may exercise your warrants at $5.50 per JMARW for one
share of JMAR common stock. The deadline for exercising your warrants is
March 20, 2000.
- - SELL WARRANTS: You may sell your JMARWs in the open market until March 20,
2000.
To assist you in your decision about exercising the warrants or allowing them to
be redeemed, we have provided the following information about the recent
performance of JMAR (common stock) and JMARW (warrant):
JMAR recent market performance: The closing price of JMAR common stock as
reported on the Nasdaq National Market System ranged from a high of $11.06
to a low of $1.50 during the period from December 1, 1999 through February
14, 2000.
JMARW recent market performance: The closing price of the JMAR warrants as
reported by the Nasdaq National Market System ranged from a high of $5.63
to a low of $0.06 during the period from December 1, 1999 through February
14, 2000.
Holders of JMARW should be advised that many factors, including this redemption
call, can affect the future trading price of JMARW and should be considered in
making a decision whether to purchase or sell JMARW. Current market quotations
are available from Nasdaq or from your broker. If you choose to sell your JMARW
rather than
<PAGE> 4
JMARW Holder
February 15, 2000
Page 2
exercise them, you should consult your broker as to the procedure for selling
JMARW and for current market quotations.
INSTRUCTIONS FOR EXERCISE:
If you decide to exercise your warrants, you may either complete the
documentation yourself or direct your broker to complete it for you. The
procedures for exercise are listed below.
- - Broker Directed Exercise: Direct your broker to exercise your JMAR warrants.
The complete procedures for exercise of the JMAR warrants are set forth in
the enclosed Notice of Redemption.
- - Warrant Holder Exercise:
1. Sign the subscription form on the back of the warrant.
2. Send the signed warrant with the full amount of the exercise price
($5.50 per JMARW exercised) to American Stock Transfer & Trust
Company, at the address below.
3. Refer to the complete procedures for exercise in the enclosed Notice of
Redemption.
4. Questions or assistance regarding exercise of JMARW should also be
directed to JMAR's transfer agent:
American Stock Transfer & Trust Company
12039 West Alameda Parkway, Suite Z-2,
Lakewood, Colorado 80228
Telephone: 303-984-4100
Attention: John Harmon
We encourage you to carefully review all of the documentation that has been
provided to you, as well as all publicly available information. You may read and
copy any document that JMAR has filed at the SEC's Public Reference Room at 450
Fifth Street, N.W., Washington, DC, 20549 or at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, DC,
20006. JMAR's SEC filings since May, 1996 are also available to you free of
charge at the SEC's web site at http://www.sec.gov. You may also obtain copies
of these documents by contacting JMAR at (858) 535-1706.
<PAGE> 1
EXHIBIT 99.2
[LOGO]
IMPORTANT - IMMEDIATE ACTION REQUIRED
February 15, 2000
Dear JMARW Holder:
Enclosed is a Notice of Redemption stating that JMAR Technologies, Inc. will
redeem all Redeemable Common Stock Purchase Warrants ("JMARW") for $.05 per
JMARW on March 20, 2000. Because the average closing price of JMAR's common
stock has exceeded $7.00 for a period of 10 consecutive trading days, our
warrant agreement allows us to redeem the warrants.
As a warrant holder you may take one of the following actions:
- - TAKE NO ACTION: If you take no action, we will redeem your Warrants at $.05
per Warrant and we will mail you a check after March 20, 2000.
- - EXERCISE WARRANTS: You may exercise your warrants at $5.50 per JMARW for one
share of JMAR common stock. The deadline for exercising your warrants is
March 20, 2000.
- - SELL WARRANTS: You may sell your JMARWs in the open market until March 20,
2000.
To assist you in your decision about exercising the warrants or allowing them to
be redeemed, we have provided the following information about the recent
performance of JMAR (common stock) and JMARW (warrant):
JMAR recent market performance: The closing price of JMAR common stock as
reported on the Nasdaq National Market System ranged from a high of $11.06
to a low of $1.50 during the period from December 1, 1999 through February
14, 2000.
JMARW recent market performance: The closing price of the JMAR warrants as
reported by the Nasdaq National Market System ranged from a high of $5.63
to a low of $0.06 during the period from December 1, 1999 through February
14, 2000.
Holders of JMARW should be advised that many factors, including this redemption
call, can affect the future trading price of JMARW and should be considered in
making a decision whether to purchase or sell JMARW. Current market quotations
are available from Nasdaq or from your broker. If you choose to sell your JMARW
rather than
<PAGE> 2
JMARW Holder
February 15, 2000
Page 2
exercise them, you should consult your broker as to the procedure for selling
JMARW and for current market quotations.
INSTRUCTIONS FOR EXERCISE:
If you decide to exercise your warrants, you may either complete the
documentation yourself or direct your broker to complete it for you. The
procedures for exercise are listed below.
- - Broker Directed Exercise: Direct your broker to exercise your JMAR warrants.
The complete procedures for exercise of the JMAR warrants are set forth in
the enclosed Notice of Redemption.
- - Warrant Holder Exercise:
1. Sign the subscription form on the back of the warrant.
2. Send the signed warrant with the full amount of the exercise price
($5.50 per JMARW exercised) to American Stock Transfer & Trust
Company, at the address below.
3. Refer to the complete procedures for exercise in the enclosed Notice of
Redemption.
4. Questions or assistance regarding exercise of JMARW should also be
directed to JMAR's transfer agent:
American Stock Transfer & Trust Company
12039 West Alameda Parkway, Suite Z-2,
Lakewood, Colorado 80228
Telephone: 303-984-4100
Attention: John Harmon
We encourage you to carefully review all of the documentation that has been
provided to you, as well as all publicly available information. You may read and
copy any document that JMAR has filed at the SEC's Public Reference Room at 450
Fifth Street, N.W., Washington, DC, 20549 or at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, DC,
20006. JMAR's SEC filings since May, 1996 are also available to you free of
charge at the SEC's web site at http://www.sec.gov. You may also obtain copies
of these documents by contacting JMAR at (858) 535-1706.
<PAGE> 3
JMARW Holder
February 15, 2000
Page 3
Questions and requests for assistance regarding the exercise or redemption of
your JMAR warrants or any other matters should also be directed to us at the
number above.
Very Truly Yours,
JMAR TECHNOLOGIES, INC.
/S/ JOHN S. MARTINEZ
John S. Martinez
Chairman and Chief Executive Officer
Enclosures:
Notice of Redemption
June 28, 1993 Prospectus registering the JMAR warrants
February 15 2000 Prospectus Supplement updating the warrant registration
SEC Reports (10-K, 10-Qs and 8-K)
<PAGE> 1
EXHIBIT 99.3
NOTICE OF REDEMPTION
OF
REDEEMABLE COMMON STOCK PURCHASE WARRANTS
("JMARW")
February 15, 2000
To the Holders of Outstanding
Redeemable Common Stock Purchase Warrants of
JMAR Technologies, Inc.
JMAR Technologies, Inc. ("JMAR") hereby gives notice that it is
redeeming all of JMAR's outstanding Redeemable Common Stock Purchase Warrants on
March 20, 2000. JMAR is exercising this right pursuant to the terms of the
Warrant Agreement, dated as of February 16, 1993, governing the JMARW Warrants,
as amended by the Consent Solicitation Statement, dated April 14, 1998.
TERMS OF REDEMPTION; CESSATION OF RIGHTS
Exercise Deadline: March 20, 2000 at 5:00 p.m. (Eastern Standard Time)
Redemption Date: March 20, 2000
Redemption Price: $.05 per JMARW Warrant
THE RIGHTS OF THE JMARW WARRANT HOLDERS TO EXERCISE THEIR JMARW WARRANTS
WILL TERMINATE AT 5:00 P.M. EASTERN STANDARD TIME ON MARCH 20, 2000. After 5:00
p.m. Eastern Standard Time on March 20, 2000, holders of JMARW Warrants will
have no rights except to receive, upon surrender of their JMARW Warrants, the
Redemption Price. As of the close of business on February 14, 2000 (the business
day immediately preceding this Notice of Redemption), the Redemption Price ($.05
per JMARW Warrant) was substantially less than either (i) the difference between
the market price of the Company's Common Stock and the $5.50 exercise price of
the JMARW Warrants or (ii) the price that could be obtained upon the sale of the
JMARW Warrants in the open market. We urge you to seek a current quotation for
the Common Stock and JMARW Warrants.
EXERCISE PROCEDURE
Until 5:00 p.m. (EST) on March 20, 2000 (the Exercise Deadline), holders
of the JMARW Warrants may exercise their JMARW Warrants to purchase JMAR Common
Stock.
1
<PAGE> 2
Each JMARW Warrant entitles the holder to purchase one share of JMAR Common
Stock at a price of $5.50 per JMARW Warrant exercised.
THOSE WHO HOLD THEIR JMARW WARRANTS IN "STREET NAME" SHOULD IMMEDIATELY
CONTACT THEIR BROKERS TO DETERMINE THEIR BROKER'S PROCEDURE FOR EXERCISING THEIR
JMARW WARRANTS. Persons who are owners of record of their JMARW Warrants may
exercise them by delivery of the JMARW Warrant certificates to American Stock
Transfer & Trust Company, JMAR's Transfer Agent, at the address set forth below,
accompanied by a bank or certified check made payable to JMAR Technologies, Inc.
for the full amount of the Exercise Price ($5.50 for each JMARW Warrant
exercised). Your signature on the subscription form on the reverse side of each
JMARW Warrant must be guaranteed by an eligible institution. The method of
delivery of the JMARW Warrant certificates is at the option and risk of the
holder, but if mail is used, registered mail properly insured is suggested. The
JMARW Warrant Certificate should be delivered to:
American Stock Transfer & Trust Company
12039 West Alameda Parkway
Lakewood, Colorado 80228
303-984-4042
Attention: John Harmon
THE JMARW WARRANT CERTIFICATE AND THE PAYMENT OF THE EXERCISE PRICE MUST
BE RECEIVED BY JMAR'S TRANSFER AGENT PRIOR TO 5:00 P.M. EASTERN STANDARD TIME ON
MARCH 20, 2000. JMARW Warrants which are received after such date will not be
exercised, but will be redeemed. Provided that a notice of exercise and payment
is received by JMAR's Transfer Agent prior to 5:00 p.m. Eastern Standard Time on
March 20, 2000, broker-dealers shall have three business days to deliver JMARW
Warrant certificates to the Transfer Agent.
Any JMARW Warrant received which is not accompanied by payment of the
Exercise Price or which is received without the subscription form having been
completed and signed will be deemed to have been delivered for redemption (at
$0.05 per JMARW Warrant), and not for exercise.
REDEMPTION PROCEDURE
Payment of the amount to be received on redemption ($0.05 per JMARW
Warrant) will be made by JMAR upon the presentation and surrender of the JMARW
Warrants for payment at any time on or after the Redemption Date. To surrender
JMARW Warrants for redemption, holders should deliver certificates representing
their JMARW Warrants to American Stock Transfer & Trust Company, JMAR's Transfer
Agent, at the following address:
2
<PAGE> 3
American Stock Transfer & Trust Company
12039 West Alameda Parkway
Lakewood, Colorado 80228
Attention: John Harmon
INFORMATION
You can receive additional information regarding exercise or redemption
of the JMARW Warrants by contacting JMAR at:
JMAR Technologies, Inc.
3956 Sorrento Valley Boulevard
San Diego, CA 92121
(858) 535-1706
Attention: Dennis E. Valentine
or Joseph G. Martinez
PAYMENT OF FEES TO SOLICITATION AGENT
The Company has appointed Auerbach, Pollak & Richardson, Inc. to act as
Warrant Solicitation Agent and to manage the warrant exercise and redemption
program. The Company has agreed to pay Auerbach a cash fee to act as warrant
solicitation agent equal to 5.0% of the proceeds received upon exercise of the
JMARW Warrants from and after the date hereof and has agreed to issue Auerbach a
Warrant (the "Solicitor's Warrant") to purchase shares of the Company's Common
Stock equal to 8% of the number of JMARW Warrants exercised after February 9,
2000. The Solicitor's Warrant will have an exercise price of $5.50 per share.
The Solicitor's Warrant will not be exercisable for a minimum of six months and
thereafter will become exercisable on the first trading day after one of the
following has occurred following said six month period: (x) the closing price
(regular session) of JMAR Common Stock as reported by NASDAQ has exceeded $9.50
for any ten trading days in any twenty trading day period, or (y) the average of
the closing price (regular session) of JMAR Common Stock as reported by NASDAQ
for any ten consecutive trading day period exceeds $9.50. The Solicitor's
Warrant will have a term of three years and a provision allowing for cashless
exercise.
DELIVERY OF PROSPECTUS
A Prospectus and related materials are being delivered herewith to JMARW
Warrant Holders.
3
<PAGE> 1
EXHIBIT 99.4
WARRANT SOLICITATION AGREEMENT
THIS WARRANT SOLICITATION AGREEMENT ("Agreement") is dated as of
February 9, 2000, by and between JMAR TECHNOLOGIES, INC. (the "Company") and
AUERBACH, POLLAK & RICHARDSON, INC. ("Auerbach").
RECITALS
WHEREAS, the Company desires to retain Auerbach to act as the warrant
Solicitation Agent in connection with the solicitation of the exercise of the
Company's publicly traded warrants; and
WHEREAS, as of February 7, 2000, the Company has outstanding 2,411,585
Redeemable Common Stock Purchase Warrants, trading on the NASDAQ National Market
System under the symbol "JMARW" (the "Public Warrants"); and
WHEREAS, each Public Warrant entitles the holder to purchase one share
of the Company's Common Stock for $5.50 per share; and
WHEREAS, the Company desires Auerbach to act on behalf of the Company,
and Auerbach is willing to do so in connection with the exercise of the Public
Warrants;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
1. Appointment of the Solicitation Agent. The Company hereby
appoints Auerbach to act as the exclusive Solicitation Agent for the Company in
connection with the exercise of the Public Warrants and Auerbach hereby accepts
such appointment. The services to be provided by Auerbach shall consist of the
following:
(a) Advice to the Company regarding the timing and other
financial considerations related to the solicitation of exercises by the
holders of the Public Warrants and the exercise by the Company of its
right to issue a notice of redemption of the Public Warrants ("Notice of
Redemption");
1
<PAGE> 2
(b) The development of a comprehensive action plan and strategy
in connection with the solicitation of the exercise of the Public
Warrants and the retention of the shares purchased by the holders
following exercise of the Public Warrants;
(c) Its reasonable best efforts to maximize the number of Public
Warrants which are exercised, including appropriate communications with
the record owners and beneficial owners of the Public Warrants, as well
as with said owners' brokers, agents or other representatives;
(d) Reasonably assisting the holders of the Public Warrants in
the processing of their Public Warrant exercises in a timely manner;
(e) Providing financial advice to the Company in connection with
the possible uses of the proceeds received from the exercise of the
Public Warrants; and
(f) Providing the Company with such additional advice and
services related to the Warrant Solicitation as the Company may
reasonably request during the effectiveness of this Agreement.
2. Warrant Solicitation Fee.
(a) Amount of Solicitation Fee. The Company shall pay Auerbach a
fee consisting of the following (the "Solicitation Fee"):
(i) A non-refundable deposit of $30,000, to be credited against
any other cash fees received, which shall become due and payable upon
execution of this Agreement; plus
(ii) A cash payment equal to five percent (5%) of the total
proceeds received from all exercises of the Public Warrants occurring
after the date of issuance of a Notice of Redemption by the Company;
plus
(iii) Warrants to purchase shares of the Company's Common Stock
("Solicitor's Warrants"), with an exercise price of $5.50 per share, a
term of 3 years, with the number of shares purchasable under the
Solicitor's Warrants equal to eight percent (8 %) of the Public Warrants
which are exercised during the term of this Agreement. The Solicitor's
Warrants will contain a vesting provision which provides that the
Solicitor's Warrants are not exercisable prior to six months after the
Redemption Date (defined as thirty days after the issuance of the Notice
of Redemption) and thereafter shall only become exercisable on the first
trading day after one of the following has occurred: (x) the closing
price (regular session) of the Company's Common Stock as reported by
NASDAQ has exceeded $9.50 for any ten trading days in any twenty trading
day period, or (y) the average of the closing price (regular session) of
the Company's Common Stock as reported by NASDAQ for any ten consecutive
trading day period exceeds $9.50. The Solicitor's Warrants shall also
contain protection against dilution due to stock splits, stock
2
<PAGE> 3
combinations and stock dividends in accordance with NASD rules, as well
as cashless exercise provisions, and will be exercisable immediately in
the event of a change of control in the Company. The Company agrees to
include the resale of the shares issuable under the Solicitor's Warrants
in a Form S-3 Registration Statement or other appropriate form of
registration statement to be filed by the Company no later than upon the
expiration of the six month period after the Redemption Date.
(b) Conditions to Payment of Solicitation Fee. The Company shall
only be obligated to pay the Warrant Solicitation Fee to Auerbach if all
of the following conditions are met: (i) the actions of Auerbach in
soliciting the exercise of the Public Warrants have been consistent with
the guidelines of the National Association of Securities Dealers and
applicable SEC rules and regulations, including Regulation M; (ii)
disclosure of the Company's compensation arrangement with Auerbach is
made in documents provided to the holders of the Public Warrants.
(c) Timing of Payment of Solicitation Fee. Within ten (10)
business days after the earlier of (i) the Redemption Date, in the event
that the Company has issued a Notice of Redemption, or (ii) the
expiration of the Public Warrants, the Company will deliver a notice to
Auerbach setting forth the number of Public Warrant certificates which
have been properly completed for exercise by holders of the Public
Warrants, together with payment of the Solicitation Fee with respect to
the Public Warrants so exercised and any documentation requested by
Auerbach.
(d) Entire Solicitation Fee. The amounts to be paid to Auerbach
under Section 2(a) above represent the entire amount payable by JMAR to
Auerbach, its agents, brokers or representatives in connection with the
services described under Section 1 of this Agreement and shall also
include any amounts which are adjudicated to be owed to any third
parties as a result of Auerbach's commitments to such third parties.
3. Representations and Warranties of the Company. The Company
represents and warrants as follows:
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has
full corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. All corporate
proceedings on the part of the Company necessary to authorize this
Agreement and the transactions contemplated hereby have been duly and
validly taken. This Agreement has been duly and validly authorized,
executed and delivered by the Company, constitutes the legal, valid and
binding agreement and obligation of the Company, enforceable against it
in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting
creditors' rights generally, including, without limitation laws
regarding fraudulent or preferential transfers, or by the principles
governing the availability of equitable remedies.
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(b) The Company's Registration Statement ("Registration
Statement") on Form S-3 (File No. 33-47390), registering, among other
transactions, the sale of the Public Warrants and the sale of the shares
of Common Stock issuable upon exercise of the Public Warrants (the
"Warrant Shares"), was declared effective by the Securities and Exchange
Commission (the "Commission") on February 16, 1993. The Registration
Statement is effective and will continue to remain effective during the
effectiveness of this Agreement. The Commission has not issued any
orders preventing or suspending the use of the Prospectus contained in
the Registration Statement and the Prospectus (as modified or
supplemented by information incorporated by reference into such
Prospectus) as well as the Company's other public filings (the "SEC
filings") conforms, and during the effectiveness of this Agreement will
conform, in all material respects with the requirements of the
Securities Act of 1933 and the Securities Exchange Act of 1934, as
amended, and do not, and during the effectiveness of this Agreement will
not, include any untrue statement of material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading. At the time of the filing with the SEC of the
"Post-Effective Amendment No. 1 to Form S-1 Registration Statement on
Form S-3," the Company met the Registrant Requirements and Transaction
Requirements of Form S-3 to cover the exercise of the Public Warrants
and will continue to meet such requirements during the effectiveness of
this Agreement.
(c) The Public Warrants have been duly authorized and are validly
issued, fully paid and non-assessable. The Warrant Shares have been duly
authorized, have been duly reserved for issuance and upon exercise of
the Public Warrants and payment to the Company of the exercise price
therefor, the Warrant Shares will be validly issued, fully paid and
non-assessable. In addition, the Solicitor's Warrants will be duly
authorized and validly issued, fully paid and non-assessable. The
Solicitor's Warrant Shares will be duly authorized, duly reserved for
issuance and, upon exercise of the Solicitor's Warrants, will be validly
issued, fully paid and non-assessable.
(d) Neither the execution and delivery of this Agreement by the
Company nor the consummation of the transactions contemplated hereby
will (i) conflict with or result in any breach of any provision of the
Certificate of Incorporation or Bylaws of the Company, each as amended
to date; (ii) require any consent, approval, authorization or permit
from, or filing with or notification to, any United States or foreign
governmental or regulatory authority or other third party, except for
any such consents, approvals, authorizations, permits, filings or
notifications, the absence of which would not have a material adverse
effect on the Company or the Public Warrants; (iii) result in a breach
of the terms, conditions or provisions of, constitute a default (or an
event which, upon notice or lapse of time or both, would constitute a
default) under or cause, permit or give rise to any right of
termination, cancellation or acceleration under any of the terms,
conditions or provisions of any material agreement or other material
instrument or obligation to which the Company is a party or by which the
Company is bound; or (iv) conflict with or result
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in a violation of any provision of (A) any statute, rule, regulation or
ordinance which conflict or violation might have a material adverse
impact on the Company or the Public Warrants, or (B) any material order,
writ, injunction, judgment, award, decree, permit or license applicable
to the Company or any of the Company's properties or assets.
4. Representations and Warranties of Auerbach. Auerbach represents
and warrants as follows:
(a) Auerbach is a corporation duly organized, validly existing
and in good standing under the laws of the State of New York and has
full power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. All proceedings on the
part of Auerbach necessary to authorize this Agreement and the
transactions contemplated hereby have been duly and validly taken. This
Agreement has been duly and validly authorized, executed and delivered
by Auerbach, constitutes the legal, valid and binding agreement and
obligation of Auerbach, enforceable against it in accordance with its
terms, except as enforceability may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting creditors' rights
generally, including, without limitation laws regarding fraudulent or
preferential transfers, or by the principles governing the availability
of equitable remedies.
(b) Neither the execution and delivery of this Agreement by
Auerbach nor the consummation of the transactions contemplated hereby
will (i) conflict with or result in any breach of any provision of the
governing instruments of Auerbach, each as amended to date; (ii) require
any consent, approval, authorization or permit from, or filing with or
notification to, any United States or foreign governmental or regulatory
authority or other third party, including the Securities and Exchange
Commission and the National Association of Securities Dealers by
Auerbach; (iii) result in a breach of the terms, conditions or
provisions of, constitute a default (or an event which, upon notice or
lapse of time or both, would constitute a default) under or cause,
permit or give rise to any right of termination, cancellation or
acceleration under any of the terms, conditions or provisions of any
material agreement or other material instrument or obligation to which
Auerbach is a party or by which Auerbach is bound; or (iv) conflict with
or result in a violation of any provision of (A) any statute, rule,
regulation or ordinance which conflict or violation might have a
material adverse impact on Auerbach, including the Rules of the National
Association of Securities Dealers and the Rules and Regulations of the
Commission or (B) any material order, writ, injunction, judgment, award,
decree, permit or license applicable to Auerbach or any of Auerbach's
properties or assets. Notwithstanding the above, no breach will be
deemed to occur unless it materially adversely affects the transactions
contemplated by this Agreement.
(c) Auerbach is familiar with the terms of the Public Warrants as
set forth in the Company's public filings.
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5. Indemnification. Recognizing that transactions of the type
contemplated by this engagement sometimes result in litigation and that
Auerbach's role is limited to acting as the Company's financial advisor, the
Company agrees to indemnify Auerbach (and its directors, officers, agents,
employees and controlling persons), whether currently employed or formerly
employed, to the fullest extent against any and all claims, losses and expenses
as incurred individually or as a group, however, no such indemnification shall
apply if the events giving rise to a claim for indemnification are adjudicated
to be the result of the gross negligence or willful misconduct of Auerbach.
Auerbach agrees to indemnify the Company (and its directors, officers, agents,
employees and controlling persons), whether currently employed or formerly
employed, to the fullest extent against any and all claims, losses, and
expenses, as incurred individually or as a group, if the events giving rise to a
claim for indemnification are adjudicated to be the result of the gross
negligence or willful misconduct of Auerbach. The indemnifying party is
obligated to advance to the indemnified party all counsel fees and reasonable
out-of-pocket expenses relating to the defense of any claim or lawsuit for which
the indemnifying party is providing indemnification. The foregoing agreement
shall be in addition to any rights that any indemnified party may have at common
law.
6. Termination. Notwithstanding anything in this Agreement to the
contrary, this Agreement may be terminated by the Company at any time and for
any reason effective ten (10) days after delivery of written notice of
termination to the other party. If this Agreement is terminated pursuant to this
Section 6, this Agreement shall thereafter have no effect except for (i) the
Company's obligation to pay the Solicitation Fee for exercises of Public
Warrants which result from Auerbach's actions prior to the effectiveness of said
termination and (ii) both parties' indemnification obligations under Section 5
above, all of which shall survive the termination of this Agreement.
7. Miscellaneous.
(a) Survival of Representations and Warranties. The parties'
respective representations and warranties contained in this Agreement
shall survive until three years after the termination of this Agreement
at which time they shall expire and be deemed terminated and thereafter
neither party may claim any damage for breach thereof.
(b) Amendment and Waiver. Any term or provision of this Agreement
may be waived at any time by the party which is entitled to the benefits
thereof, but only in a writing signed by such party, and this Agreement
may be amended or supplemented at any time, but only by written
agreement of the Company and Auerbach. Any such waiver with respect to a
failure to observe any such provision shall not operate as a waiver of
any subsequent failure to observe such provision unless otherwise
expressly provided in such waiver.
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(c) Expenses. Except as otherwise provided in this Agreement, the
Company and Auerbach shall pay their respective fees, commissions,
costs, and other expenses, separately incurred in connection with the
preparation and execution of this Agreement and the consummation of the
transactions contemplated hereby.
(d) Entire Agreement. This Agreement contains the entire
agreement between the Company and Auerbach with respect to the
solicitation of the exercise of the Warrants and the related
transactions and supersedes all prior arrangements or understandings
with respect thereto, and there have been no oral representations or
warranties and neither party has relied on any representation not
contained herein.
(e) Notices. All notices, consents, requests, instructions,
approvals and other communications provided for herein shall be validly
given, made or served, if in writing and delivered personally or sent by
fax (except for legal process) or certified mail, postage prepaid, to:
Company:
JMAR Technologies, Inc.
3956 Sorrento Valley Blvd.
San Diego, CA 92121
Attn: Joseph G. Martinez
Vice President and General Counsel
Fax No: (858) 535-1835
Auerbach:
Auerbach Pollak & Richardson, Inc.
450 Park Avenue
New York, NY 10022
Attn: Michael P. Considine
Executive Vice President
Fax No: (212) 508-1376
or to such other address or fax number as any party hereto may, from
time to time, designate in a written notice given in a like manner.
Notice given by fax shall be deemed delivered on the day the sender
receives confirmation that such notice was received at the fax number of
the addressee, provided that if the faxed notice is transmitted by the
sender after 3:00 p.m. (sender's time), it shall be deemed to have been
delivered the following day. Notice given by mail as set out above shall
be deemed delivered three calendar days after the date the same is
postmarked.
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(f) Assignment. Except as provided in the following sentence,
this Agreement may not be assigned, by operation of law or otherwise,
and any attempt to do so shall be void. This Agreement shall be binding
upon and inure to the benefit of successors and assigns of the parties
hereto.
(g) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument.
(h) Arbitration. Any controversy or claim arising out of or
relating to this Agreement or the breach thereof, shall be settled by
arbitration at the city of San Diego, California, in accordance with the
Commercial Arbitration Rules of the American Arbitration Association,
and judgment upon the award of the arbitrator(s) shall be entered in any
court with appropriate jurisdiction as the final binding judgment. The
arbitrators shall not be permitted to award punitive or other exemplary
damages as a part of such award. In addition to any other relief as may
be granted, the prevailing party shall be entitled to reasonable
attorneys' fees in such arbitration, with the amount thereof to be
determined by the arbitrator or the court.
(i) Governing Law. This Agreement and the rights and obligations
of the parties hereunder shall be governed by and construed in
accordance with the internal laws of the State of California (without
regard to choice of law rules).
(j) Construction of Agreement. Each of the parties hereto
acknowledges and agrees that no provision in this Agreement is to be
interpreted for or against any party because that party or that party's
legal representative drafted the provision.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date and year first above written.
JMAR TECHNOLOGIES, INC. AUERBACH, POLLAK & RICHARDSON, INC.
BY: /s/ JOHN S. MARTINEZ BY: /s/ MICHAEL P. CONSIDINE
----------------------------- -------------------------------
John S. Martinez, Michael P. Considine
Chief Executive Officer Executive Vice President
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EXHIBIT 99.5 - RISK FACTORS AFFECTING THE COMPANY, ITS BUSINESS AND ITS STOCK
PRICE
1. SIGNIFICANT CASH REQUIREMENTS. The Company's cash requirements have been
and will continue to be significant. The Company's cash used in operating
activities for the years ended December 31, 1996, 1997 and 1998 and the nine
months ended September 30, 1999 was $413,687, $1,951,488, $40,580 and
$1,228,982, respectively. These negative cash flows are primarily related to
increases in current assets, primarily accounts receivable and inventories. To
the extent the Company requires additional financing for operations, in
connection with acquisitions or otherwise, there can be no assurance that such
future financings will be available to the Company on acceptable terms. In
addition, for the nine months ended September 30, 1999, the Company incurred a
net loss of $1,296,255, and expects a net loss for the quarter ended December
31, 1999.
2. SHARES ELIGIBLE FOR SALE; OUTSTANDING RIGHTS TO ACQUIRE COMMON STOCK;
MARKET OVERHANG FROM OUTSTANDING RIGHTS. As of February 10, 2000, the Company
had outstanding 19,266,048 shares of Common Stock of which substantially all are
freely transferable without restriction or further registration under the
Securities Act. Shares of Common Stock owned by affiliates may be sold pursuant
to Rule 144, subject to certain notice filing and volume limitations.
As of February 11, 2000, there were 5,390,279 shares of Common Stock subject
to issuance upon exercise of outstanding options and warrants, including
2,402,138 shares of Common Stock issuable upon exercise of the JMARW Warrants.
In addition, as described in this Form 8-K, the Company has agreed to issue its
Warrant Solicitation Agent warrants to purchase shares of the Company's Common
Stock equal to eight percent (8%) of the JMARW Warrants exercised after February
9, 2000, with an exercise price of $5.50. To the extent that outstanding options
and warrants are exercised prior to their expiration dates, additional equity
investment funds will be paid into the Company at the expense of dilution to the
interests of the Company's stockholders. Moreover, the terms upon which the
Company will be able to obtain additional equity capital may be adversely
affected since the holders of outstanding options and warrants and other
securities can be expected to exercise or convert them at a time when the
Company would, in all likelihood, be able to obtain any needed capital on terms
more favorable to the Company than those provided in such securities. The
exercise of the Company's outstanding warrants and options, including the
2,402,138 publicly traded JMARW Warrants, or a substantial portion thereof, and
sale of the shares issued upon exercise could adversely affect the market price
of the Common Stock.
3. GOVERNMENT REGULATION. Portions of the Company's business are subject to
regulation in connection with its government R&D contract work. In addition,
these portions of the Company's business are subject to audit by the U.S.
Government (the "Government") of its costs incurred under Government contracts
and to safety audits by various Government agencies.
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4. POSSIBLE FLUCTUATIONS IN OPERATING RESULTS. The Company's operating
results are likely to vary from period to period as a result of the Company's
sales cycle.
5. LIMITED PRODUCT LINE; UNCERTAINTY OF MARKET ACCEPTANCE AND MARKET
PENETRATION. The markets for certain of the Company's existing products may be
saturated. There can be no assurance that the Company will achieve greater
penetration in such markets. Achieving market acceptance for the Company's new
and proposed products requires substantial marketing and sales efforts and the
expenditure of significant funds to create customer awareness of and demand for
the Company's products. There can be no assurance that recent or future
additions to the Company's product lines will achieve market acceptance or
result in significantly increased levels of revenues.
6. RESEARCH AND DEVELOPMENT COSTS. The development of sophisticated laser
and microelectronics manufacturing products is a lengthy and capital intensive
process and is subject to unforeseen risks, delays, problems and costs. There
can be no assurance that the Company will be able to successfully develop any
additional products or enhance existing products, or that unanticipated
technical or other problems will not occur which would result in delays in the
Company's development program. Failure to complete development of a product on a
timely basis could result in the complete loss of the funds committed by the
Company to that product, which could be substantial.
7. PRODUCT DEFECTS. Products as complex as the Company's may contain certain
defects which from time to time become apparent subsequent to commercial use.
Remedying such defects could require significant modifications at substantial
costs to the Company.
8. DEPENDENCE ON SUPPLIERS; NO ASSURANCE OF CONTINUOUS AND TIMELY
PRODUCTION. The Company is dependent upon outside suppliers for components used
in the manufacture of its products. Failure to maintain satisfactory agreements
with suppliers could have a material adverse effect on the Company. There can be
no assurance that in the future its current or alternative sources will be able
to meet all of the Company's demands on a timely basis. Unavailability of parts
or components used in the manufacture of its products could require the Company
to re-engineer its products to accommodate available substitutions, which could
increase costs to the Company or have a material adverse effect on manufacturing
schedules, product performance and market acceptances.
9. COMPETITION; POSSIBLE TECHNOLOGICAL OBSOLESCENCE. The markets for the
Company's products are highly competitive and are characterized by rapid
technological change and evolving industry standards. Development by others of
new or improved products, processes or technologies may make the Company's
products obsolete or less competitive. The ability of the Company to compete is
dependent on the Company's ability to continually enhance and improve its
products and to successfully develop and market new products. Many of the
Company's competitors have greater financial, managerial and technical resources
than the Company. There can be no assurance that the Company will successfully
differentiate itself from its competitors, that the market will consider the
Company's products to be superior to its competitors' products
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or that the Company will be able to adapt to evolving markets and technologies,
develop new products or achieve and maintain technological advantages.
10. PATENTS AND PROPRIETARY RIGHTS. The Company relies, to a significant
extent, on patents, trade secrets and confidentiality agreements to protect its
proprietary technology. There can be no assurance as to the breadth or degree of
protection which existing or future patents, if any, may afford the Company, or
that patents will not be circumvented or invalidated, or that the Company's
products do not and will not infringe on patents or violate proprietary rights
of others. In the event a patent infringement claim is asserted against the
Company, or the Company is required to enforce its rights under an issued
patent, the cost of such actions may be very high, whether or not the Company is
successful. While the Company is unable to predict what such costs, if any, will
be if the Company is obligated to pursue patent litigation, its ability to fund
its operations and to pursue its business goals may be substantially impaired.
11. RELIANCE ON FOREIGN SALES. The Company derives a portion of its revenues
from shipments to foreign markets and expects to continue to be dependent upon
such markets. Revenues from shipments to foreign markets were $3,405,448,
$8,938,375 and $7,955,543 for the years ended December 31, 1996, 1997 and 1998,
respectively. Although the Company denominates its foreign shipments in U.S.
dollars, it is subject to various risks inherent in foreign trade, including
economic or political instability, shipping delays, fluctuations in foreign
currency rates, custom duties and import quotas and other trade restrictions,
all of which could have a significant impact on the Company's ability to deliver
its products on a timely and competitive basis.
12. GOVERNMENT BUDGET CONSTRAINTS. Certain of the Company's research and
development activities are partially dependent on Government sponsorship,
particularly by the U.S. Department of Defense ("DOD"). The DOD's overall
budget, and the Company's participation therein, are subject to reduction based
upon a number of factors and there can be no assurance that the Company will
continue to receive funding from Government sources at similar levels in the
future.
13. PRODUCT LIABILITY. The Company may be exposed to potential product
liability claims arising out of the use of the Company's products. Although the
Company currently maintains product liability insurance, there can be no
assurance that such insurance will be sufficient to cover potential claims or
that the present level of coverage will be available in the future at a
reasonable cost. A partially or completely uninsured successful claim against
the Company could have a material adverse affect on the Company.
14. RELIANCE UPON KEY EMPLOYEES. The success of the Company is substantially
dependent on the efforts of certain key personnel of the Company. The loss of
such key personnel could adversely affect the Company's business and prospects.
In such event, there can be no assurance that the Company would be able to
employ qualified persons on terms favorable to the Company. In seeking qualified
personnel, the Company will be required to compete with companies having greater
financial and other resources than the Company. Since the future
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success of the Company is dependent upon its ability to retain or attract
qualified personnel, the Company's failure to do so could have a materially
adverse impact on the business of the Company.
15. NO DIVIDENDS. The Company has never paid cash dividends and intends, for
the foreseeable future, to retain its earnings, if any, to finance its business.
Future dividend policy will depend on the Company's earnings, capital
requirements, financial condition, debt covenants and other factors considered
relevant by the Company's Board of Directors.
16. UTILIZATION OF NET OPERATING LOSS CARRYFORWARD. Realization of future
tax benefits from utilization of the Company's net operating loss carryforwards
for income tax purposes is limited by changes in ownership in 1990, 1992 and
1993. In addition, the net operating losses of acquired companies are also
subject to separate change of ownership limitations.
17. AUTHORIZATION AND ISSUANCE OF PREFERRED STOCK. The Company's Board of
Directors is authorized to issue up to 5,000,000 shares of Preferred Stock, of
which no shares are currently outstanding. The Board of Directors has the power
to establish the dividend rates, liquidation preferences, voting rights,
redemption and conversion terms and privileges with respect to any series of
Preferred Stock. The issuance of any shares of Preferred Stock having rights
superior to those of the Common Stock may result in a decrease in the value or
market price of the Common Stock. Holders of Preferred Stock may have the right
to receive dividends, certain preferences in liquidation and conversion rights.
The issuance of Preferred Stock could, under certain circumstances, have the
effect of delaying, deferring or preventing a change in control of the Company
without further vote or action by the stockholders and may adversely affect the
voting and other rights of the holders of Common Stock.
4
